MERCURY DRUG CORPORATION VS.

COMMISSIONER OF INTERNAL REVENUE- Tax Credit

FACTS: Mercur Dru! !ra"ted #$% &a'e& di&c(u"t t( )ua'i*ied &e"i(r citi+e"& (" t,eir -urc,a&e& (* .edici"e&. T,e &u/&e)ue"t' *i'ed a re*u"d *(r taxa/'e ear& 0112 a"d 0113 !i4e" t,at t,e t,e" -re4ai'i"! ru'e a''(5ed t,at t,e &a'e& di&c(u"t& /e c'ai.ed a& tax credit&. ISSUE: I& t,e c'ai. *(r tax credit t( /e /a&ed (" t,e *u'' a.(u"t (* t,e #$% &e"i(r citi+e" di&c(u"t (r t,e t,e ite. &('d6 ac)ui&iti(" c(&t (*

RULING: T,e tax credit &,(u'd /e e)ui4a'e"t t( t,e actua' #$% &a'e& di&c(u"t !ra"ted t( t,e &e"i(r citi+e"&. T,e -re4i(u& ru'i"! (* t,e CTA t,at t,e tax credit i& /a&ed ("' (" t,e 7c(&t (* t,e di&c(u"t8 5,ic, 5a& i"ter-reted t( c(4er ("' direct ac)ui&iti(" c(&t9 exc'udi"! ad.i"i&trati4e a"d (t,er i"cre.e"ta' c(&t&9 5a& &truc: d(5" / t,e C(urt.

N.;. T,e Marc, 29 #$$< ca&e (* M.E. =('di"!& C(r-(rati(" 4&. CIR > CTA c'ari*ied t,at t,e ru'e 5i'' /e -- ?i@ -ri(r t( Marc, #09 #$$3 ?e**ecti4it (* Ex-a"ded Se"i(r Citi+e"& Act@ t,e di&c(u"t& are treated a& tax creditA ?ii@ a*ter Marc, #09 #$$3 t,e &a.e are treated a& deducti("&.

CIR VS PERF REALTY CORPORATION FACTS: O" A-ri' 039 011<9 PERF *i'ed it& A""ua' I"c(.e Tax Retur" ?ITR@ *(r t,e ear 011B &,(5i"! a "et taxa/'e i"c(.e i" t,e a.(u"t (* PC932$923D.$$ a"d i"c(.e tax due (* P#9#D$9C#0.$$.F(r t,e ear 011B9 it& te"a"t&9 P,i'a.'i*e a"d Read-Rite9 5it,,e'd a"d &u/&e)ue"t' re.itted credita/'e 5it,,('di"! taxe& i" t,e t(ta' a.(u"t (* P29D2090#D.$$.A*ter deducti"! credita/'e 5it,,('di"! taxe& i" t,e t(ta' a.(u"t (* P29D2090#D.$$ *r(. it& t(ta' i"c(.e tax due (*P#9#D$9C#0.$$9 PERF &,(5ed i" it& 011B ITR a" (4er-a .e"t (* i"c(.e taxe& i" t,e a.(u"t (* P09#<$9D$3.$$.O" N(4e./er 29 01119 PERF *i'ed a" ad.i"i&trati4e c'ai. 5it, t,e a--e''ate di4i&i(" (* t,e ;IR *(r re*u"d (* (4er-aid i"c(.e taxe& i" t,e a.(u"t (* P09#<$9D$3.$$.O" Dece./er 29 01119 due t( t,e i"acti(" (* t,e ;IR9 PERF *i'ed a -etiti(" *(r re4ie5 5it, t,e C(urt (* Tax A--ea'& ?CTA@ &ee:i"! *(r t,e re*u"d (* t,e (4er-aid i"c(.e taxe& i" t,e a.(u"t (* P09#<$9D$3.$$. I" a Deci&i(" dated N(4e./er #$9 #$$09 t,e CTA de"ied t,e -etiti(" (* PERF (" t,e !r(u"d (* i"&u**icie"c (* e4ide"ce. T,e CTA "(ted t,at PERF did "(t i"dicate i" it& 011B ITR t,e (-ti(" t( eit,er c'ai. t,e exce&& i"c(.e tax a& a re*u"d (r tax credit -ur&ua"t t( Secti(" C1# ?"(5 BC@ (* t,e Nati("a' I"ter"a' Re4e"ue C(de ?NIRC@.A*ter5ard&9 CA &tated t,at t,e ru'e& .ade / C(urt (* Tax A--ea'& are SET ASIDE. T,e C(..i&&i("er (* I"ter"a' Re4e"ue i& (rdered t( REFUND t( t,e -etiti("er t,e a.(u"t (* P09#<$9D$3.$$ a& credita/'e 5it,,('di"! tax *(r t,e ear 011B.

BRITISH AMERICAN TOBACCO, vs. JOSE ISIDRO N. CAMACHO, in his capacity as Secretary of the Depart ent of !inance an" #$I%%ERMO %. &ARA'NO, JR., in his capacity as Co issioner of the B(rea( of Interna) Reven(es. Facts: To implement RA 8240, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No !"#$, 2 %hi&h &lassified the e'isting (rands of &igarettes as those dul) registered or a&tive (rands prior to *anuar) !, !##$ Ne% (rands, or those registered after *anuar) !, !##$, shall (e initiall) assessed at their suggested retail pri&e until su&h time that the appropriate surve) to determine their &urrent net retail pri&e is &ondu&ted In *une 200! British Ameri&an To(a&&o introdu&ed into the mar+et ,u&+) -tri+e .ilter, ,u&+) -tri+e ,ights and ,u&+) -tri+e /enthol ,ights &igarettes, %ith a suggested retail pri&e of 0# #0 per pa&+ 1 0ursuant to -e& !42 (&) 3uoted a(ove, the ,u&+) -tri+e (rands %ere initiall) assessed the e'&ise ta' at 08 #4 per pa&+ 5n .e(ruar) !$, 2001, Revenue Regulations No #"2001, amended Revenue Regulations No !"#$ () providing, among others, a periodi& revie% ever) t%o )ears or earlier of the &urrent net retail pri&e of ne% (rands and variants thereof for the purpose of esta(lishing and updating their ta' &lassifi&ation 0ursuant thereto, Revenue /emorandum 5rder No 4"2001 2 %as issued on /ar&h !!, 2001, pres&ri(ing the guidelines and pro&edures in esta(lishing &urrent net retail pri&es of ne% (rands of &igarettes and al&ohol produ&ts -u(se3uentl), Revenue Regulations No 22"2001 4 %as issued on August 8, 2001 to implement the revised ta' &lassifi&ation of &ertain ne% (rands introdu&ed in the mar+et after *anuar) !, !##$, (ased on the surve) of their &urrent net retail pri&e The surve) revealed that ,u&+) -tri+e .ilter, ,u&+) -tri+e ,ights, and ,u&+) -tri+e /enthol ,ights, are sold at the &urrent net retail pri&e of 022 24, 022 4! and 02! 21, per pa&+, respe&tivel) Respondent 6ommissioner of the Bureau of Internal Revenue thus re&ommended the appli&a(le ta' rate of 0!1 44 per pa&+ inasmu&h as ,u&+) -tri+e7s average net retail pri&e is a(ove 0!0 00 per pa&+ Thus filed (efore the Regional Trial 6ourt (RT6) of /a+ati, Bran&h 4!, a petition for in8un&tion %ith pra)er for the issuan&e of a temporar) restraining order (TR5) and9or %rit of preliminar) in8un&tion, do&+eted as 6ivil 6ase No 01"!012 -aid petition sought to en8oin the implementation of -e&tion !42 of the NIR6, Revenue Regulations Nos !"#$, #"2001, 22"2001 and Revenue /emorandum 5rder No 4"2001 on the ground that the) dis&riminate against ne% (rands of &igarettes, in violation of the e3ual prote&tion and uniformit) provisions of the 6onstitution The trial &ourt rendered a de&ision upholding the &onstitutionalit) of -e&tion !42 of the NIR6, Revenue Regulations Nos !"#$, #"2001, 22"2001 and Revenue /emorandum 5rder No 4"2001 Issue ::5N the &lassifi&ation free;e provision violates the e3ual prote&tion and uniformit) of ta'ation &lauses of the 6onstitution " R$%IN#* N5 Ratio: In the instant case, there is no question that the classification freeze provision meets the geographical uniformity requirement because the assailed law applies to all cigarette brands in the Philippines. And, for reasons already adverted to in our August 20, 2008 Decision, the four fold test has been met in the present case. As held in the assailed Decision, the instant case neither involves a suspect classification nor impinges on a fundamental right. !onsequently, the rational basis test "as properly applied to gauge the constitutionality of the assailed la" in the face of an equal protection challenge. It has been held that #in the areas of social and economic policy, a statutory classification that neither proceeds along suspect lines nor infringes constitutional rights must be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis for the classification.# $nder the rational basis test, it is sufficient that the legislative classification is rationally related to achieving some legitimate %tate interest. &etitioner's reliance on (rmoc %ugar !o. is misplaced. In said case, the controverted municipal ordinance specifically named and ta)ed only the (rmoc %ugar !ompany, and e)cluded any subsequently established sugar central from its coverage. *hus, the ordinance "as found unconstitutional on equal protection grounds because its terms do not apply to future conditions as "ell. *his is not the case here. *he classification freeze provision uniformly applies to all cigarette brands "hether e)isting or to be introduced in the mar+et at some future time. It does not purport to e)empt any brand from its operation nor single out a brand for the purpose of imposition of e)cise ta)es.

COMMISSIONER O! INTERNA% RE+EN$E, vs. BAN, O! THE &HI%I&&INE IS%ANDS. Facts: 6TA held that respondent Ban+ of the 0hilippine Islands (B0I) alread) e'er&ised the irrevo&a(le option to &arr) over its e'&ess ta' &redits for the )ear !##8 to the su&&eeding )ears !### and 2000 and %as, therefore, no longer entitled to &laim the refund or issuan&e of a ta' &redit &ertifi&ate for the amount thereof 6ourt of Appeals annulled and set aside the <e&ision The 6ourt of Appeals &on&eded that B0I indeed opted to &arr) over its e'&ess ta' &redit in !##8 to !### () pla&ing an ='= mar+ on the &orresponding (o' of its !##8 ITR Nonetheless, there %as no a&tual &arr)ing over of the e'&ess ta' &redit, given that B0I suffered a net loss in !###, and %as not lia(le for an) in&ome ta' for said ta'a(le period, against %hi&h the !##8 e'&ess ta' &redit &ould have (een applied Issue: :5N the Irrevo&a(ilit) Rule under -e& $4 of the NIR6 operate to (ar petitioner from as+ing for a ta' refund- *R$%IN#* >?Ratio: :hen B0I".amil) %as de&ided () this 6ourt, it did not )et have the irrevo&a(ilit) rule to &onsider @en&e, B0I".amil) &annot (e &ited as a pre&edent for this &ase The fa&tual (a&+ground of 0hilam Asset /anagement, In& v 6ommissioner of Internal Revenue, &ited () the 6IR, is &loser to the instant 0etition Both involve ta' &redits a&3uired and &laims for refund filed more than a de&ade after those in B0I".amil), to %hi&h -e&tion $4 of the NIR6 of !##$ alread) appl) The 6ourt, in 0hilam, re&ogni;ed the t%o options offered () -e&tion $4 of the NIR6 of !##$ to a ta'a(le &orporation %hose total 3uarterl) in&ome ta' pa)ments in a given ta'a(le )ear e'&eeds its total in&ome ta' due These options areA (!) filing for a ta' refund or (2) availing of a ta' &redit These t%o options under -e&tion $4 are alternative in nature The &hoi&e of one pre&ludes the other The 6ourt &ategori&all) de&lared in 0hilam thatA =-e&tion $4 remains &lear and une3uivo&al 5n&e the &arr)"over option is ta+en, a&tuall) or &onstru&tivel), it (e&omes irrevo&a(le = It mentioned no e'&eption or 3ualifi&ation to the irrevo&a(ilit) rule @en&e, the &ontrolling fa&tor for the operation of the irrevo&a(ilit) rule is that the ta'pa)er &hose an optionB and on&e it had alread) done so, it &ould no longer ma+e another one 6onse3uentl), after the ta'pa)er opts to &arr)"over its e'&ess ta' &redit to the follo%ing ta'a(le period, the 3uestion of %hether or not it a&tuall) gets to appl) said ta' &redit is irrelevant ,&I itself never denied that its original intention "as to carry over the e)cess income ta) credit it acquired in -..8, and only chose to refund the said amount "hen it "as unable to apply the same to any ta) liability in the succeeding ta)able years. *here can be no doubt that ,&I opted to carry over its e)cess income ta) credit from -..8/ it only subsequently changed its mind 0 "hich it "as barred from doing by the irrevocability rule.

&HI%I&&INE BAN,IN# COR&ORATION .NO/* #%OBA% B$SINESS BAN,, INC.0, vs. COMMISSIONER O! INTERNA% RE+EN$E. 1#.R. No. 234536. Jan(ary 74, 8449.: Facts: .or the ta'a(le )ears !##4 and !##$ offered its =-pe&ial9-uper -avings <eposit A&&ount= (--<A) to its depositors The --<A is a form of a savings deposit eviden&ed () a pass(oo+ and earning a higher interest rate than a regular savings a&&ount 0etitioner (elieves that the --<A is not su(8e&t to <o&umentar) -tamp Ta' (<-T) under -e&tion !80 of the !#$$ National Internal Revenue 6ode (NIR6), as amended 6ommissioner of Internal Revenue (respondent) sent petitioner a .inal Assessment Noti&e assessing defi&ien&) <-T (ased on the outstanding (alan&es of its --<A 0etitioner maintains that the ta' assessments are erroneous (e&ause -e&tion !80 of the !#$$ NIR6 does not in&lude deposits eviden&ed () a pass(oo+ among the enumeration of instruments su(8e&t to <-T Issue: :5N the --<A is su(8e&t to do&umentar) stamp ta'" R$%IN#* >?Ratio: -e&tion !80 of the !#$$ NIR6 imposes a <-T of 00 10 on ea&h 0200 of the fa&e value of an) &ertifi&ate of deposit dra%ing interest As &orre&tl) o(served () the 6TA, a &ertifi&ate of deposit is a %ritten a&+no%ledgment () a (an+ of the re&eipt of a sum of mone) on deposit %hi&h the (an+ promises to pa) to the depositor, to the order of the depositor, or to some other person or his order, %here() the relation of de(tor or &reditor (et%een the (an+ and the depositor is &reated 0etitioner7s --<A has the follo%ing featuresA ! Although the mone) pla&ed in the --<A &an (e %ithdra%n an)time, the mone) is su(8e&t to a holding period in order to earn a higher interest rate 5ther%ise, in &ase of premature %ithdra%al, the depositor %ill not earn the preferred interest ranging from 8C or higher (ut onl) the normal interest rate on regular savings deposit 2 In order to 3ualif) for an --<A, the depositor must pla&e a su(stantial amount of mone) of not less than 020,000 This amount is even larger than %hat is needed to open a time deposit %hi&h is 020,000 Aside from the su(stantial amount of mone) re3uired, this amount must (e maintained %ithin a &ertain period 8ust li+e a time deposit 1 5n the issue of penalt), in an --<A, if the depositor %ithdra%s the mone) and the (alan&e falls (elo% the =minimum (alan&e= of 020,000, the interest is redu&ed This &ondition is identi&al to that imposed on a time deposit that is %ithdra%n (efore maturit) ,ased on these features, it is clear that the %%DA is a certificate of deposit dra"ing interest sub1ect to D%* even if it is evidenced by a passboo+ and non negotiable in character.
CIR v Manila Electric Company G.R No. 121666 October 10, 2007 Fact ! The respondent Manila Electric Company filed a refundable amount of P101.897 with the !". Meanwhile# on a yearly routine $etter of %uthority# the petitioner found that respondent was liable for& 1. deficiency income ta' in the amount of P(#)*0#90(.+(, and (. deficiency franchise ta' in the amount of P(#8)8#))+.8*. The respondent amended its final corporate income ta' return and filed for a refund-credit in the amount of P107#.*9#7(9 representin/ o0erpaid income ta'es for the years 1987 and 1988 but the C!" did not act upon such refund-credit. 1ence# the respondent filed a 2udicial claim for refund-credit with the CT%. 3hile the claim was pendin/ with the CT%# the respondent paid the deficiency franchise ta' in the amount of P(#8)8#))+.8*. !t protested the payment of the alle/ed deficiency income ta' and claimed as an alternati0e remedy the deduction thereof from its claim for refund or credit but this was refused by the petitioner. CT% decided in fa0or of the respondent and ordered the petitioner to issue a certificate of credit for the unused credits of the respondent. The petitioner 4uestioned the rulin/ of the CT% and filed an appeal. 5n appeal# the C% affirmed the CT%6s decision. 1ence# this petition. The petitioner contends that a claim for ta' refund is construed strictly a/ainst the claimant as it parta7es of the nature of e'emption from ta'es. I""#E! 3hether or not the respondent is entitled to credit8 $el%! 9es# the respondent is entitled to the credit. :nder ;ec .9 of the <!"C pro0ides E0ery corporation liable to ta' under ;ection (* shall file a final ad2ustment return co0erin/ the total ta'able income for the precedin/ calendar

or fiscal year. I& t'e (m o& t'e )(arterly ta* payment ma%e %(rin+ t'e ai% ta*able year i not e)(al to t'e total ta* %(e on t'e entire ta*able net income o& t'at year the corporation shall either& 1. pay the e'cess due or (. be refunded the e'cess amount paid. % corporate ta'payer6s option to a0ail of ta' credit does not# howe0er# mean that it is ipso facto /ranted. =or petitioner has still to in0esti/ate and ascertain the 0eracity of the claim. !t bears notin/ that the ta' court and the appellate court found respondent6s claim for ta' refund or credit meritorious on the basis of the testimonial and documentary e0idence adduced by the parties. The issue of whether respondent adduced sufficient e0idence to pro0e its entitlement to a refund is a 4uestion of fact which cannot be brou/ht to the supreme court. 1ence# the findin/s of fact by the CT% and the C% will be upheld. BICOLANDIA DRUG CORPORATION, petitioner vs. COMMISSIONER OF INTERNAL REVENUE, respondent. G.R. No. 142299, June 22, 200 ! A"#un$, J. FACTS% Petiti("er c'ai.ed t,e #$% di&c(u"t !ra"ted t( &e"i(r citi+e"& a& a deducti(" *r(. it& !r(&& i"c(.e t,ere/ !i4i"! it a tax re'ie* e)ui4a'e"t t( 2D% ?c(r-(rate i"c(.e tax rate@ (* t,e deducti(". Later i* *i'ed a c'ai. *(r re*u"d (* (4er-aid i"c(.e tax due t( t,e err(r i" c(.-utati(" (* it& tax 'ia/i'it .ai"tai"i"! t,e -(&iti(" t,at t,e di&c(u"t& &,(u'd ,a4e /ee" treated -ur&ua"t t( R.A. N(. B32#. T,e CTA (rdered t,e re*u"d /ut (" 'e&&er a.(u"t. T,e CTA .ade a re-c(.-utati(" (* t,e i"c(.e tax 'ia/i'it (* t,e -etiti("er / a''(5i"! a& tax credit t,e 7c(&t (* t,e di&c(u"t8 ("' 5,ic, i& c(.-uted / !etti"! t,e -erce"ta!e (* c(&t (* &a'e& t( t(ta' &a'e& a"d .u'ti-' i"! it 5it, t(ta' di&c(u"t& !ra"ted. T,i& ru'i"! 5a& a**ir.ed / t,e CA. Issues: E,at i& t,e a.(u"t a''(5ed a& tax credit6 /@ Ca" t,e di&c(u"t /e c'ai.ed / t,e tax-a er a& a tax re*u"d6 RULING: A. Readi"! (* t,e -r(4i&i("& (* Secti(" 3?a@ (* R.A. N(. B32#9 i& a& *(''(5&: 7Sec. 3. Pri4i'e!e *(r t,e Se"i(r Citi+e"& F T,e &e"i(r citi+e"& &,a'' /e e"tit'ed t( t,e *(''(5i"!: a@ T,e !ra"t (* t5e"t -erce"t ?#$%@ di&c(u"t *r(. a'' e&ta/'i&,.e"t& re'ati4e t( uti'i+ati(" (* tra"&-(rtati(" &er4ice&9 ,(te'& a"d &i.i'ar '(d!i"! e&ta/'i&,.e"t&9 re&taura"t& a"d recreati("& ce"ter& a"d -urc,a&e (* .edici"e& a" 5,ere i" t,e c(u"tr : Pr(4ided9 T,at -ri4ate e&ta/'i&,.e"t& .a c'ai. t,e c(&t a& tax credit.8 T,e ter. 7c(&t8 5,e" a--'ied t( t,e di&c(u"t& !ra"ted9 i& &u&ce-ti/'e t( 4ari(u& i"ter-retati("&. T,e ;IR / 4irtue (* RR N(. #-13 i"ter-reted it t( .ea" t,e tax c(&t 5,ic, i& t,e 4er rea&(" 5, it 5a& treated a& a deducti(" *r(. !r(&& i"c(.e. T,e ec("(.ic e**ect (* t,i& treat.e"t i& t,e &a.e a& a''(5i"! 2D% ?tax c(&t@ (* t,e di&c(u"t a& tax credit. T,e CTA9 (" t,e (t,er ,a"d9 i"ter-reted it t( /e t,e c(&t (* t,e !((d& &('d c(rre&-("di"! t( t,e di&c(u"t& t( t,e exte"t t,at t,e c(u'd ,a4e i"crea&ed t,e &a'e& i* "( di&c(u"t& 5ere !ra"ted. Said i" a"(t,er 5a 9 5ere it "(t *(r t,e di&c(u"t& t,ere c(u'd ,a4e /ee" additi("a' &a'e& i" t,e &a.e a.(u"t a& t,e di&c(u"t&9 &( t,e c(&t i& t,e c(&t (* !((d& &('d c(rre&-("di"! t( t,e&e additi("a' &a'e& 5ere it "(t *(r t,e di&c(u"t. T,e CTA9 i" deter.i"i"! t,e a.(u"t a''(5ed a& a tax credit9 ca.e (ut 5it, t,i& *(r.u'a9 4i+: T(ta' C(&t (* G((d& S('d x T(ta' di&c(u"t& !ra"ted G C(&t (* Di&c(u"t T(ta' Sa'e& T,e SC i& "(t c("4i"ced 5it, eit,er (* t,e t5( i"ter-retati("& ad4a"ce&. T,e SC ru'ed t,at t,e e"tit !ra"ti"! t,e di&c(u"t i& e"tit'ed t( c'ai. t,e e"tire a.(u"t (* di&c(u"t. T,e 7c(&t8 re*erred t( i" Secti(" 3?a@ (* R.A. N(. B32# re*er& t( t,e a.(u"t (* t,e #$% di&c(u"t exte"ded t( &e"i(r citi+e"& i" t,eir -urc,a&e (* .edici"e&. T,i& a.(u"t &,a'' /e a--'ied a& a tax credit9 a"d .a /e deducted *r(. t,e tax 'ia/i'it (* t,e e"tit c("cer"ed. I* t,ere i& "( curre"t tax due9 (* t,e e&ta/'i&,.e"t re-(rt& a "et '(&& *(r t,e -eri(d9 t,e credit .a /e carried (4er t( t,e &ucceedi"! taxa/'e ear. (CIR vs. Central Drug Corp. April 15, 2005, 456 SCRA 414)A"e"t t,e &ec("d i&&ue9 t,e SC ru'ed t,at t,e re.ed (* re*u"d i& "(t a4ai'a/'e. T,e 'a5 ex-re&&' -r(4ide& t,at t,e di&c(u"t !i4e" t( &e"i(r citi+e"& .a /e c'ai.ed a& a tax credit9 a"d "(t a re*u"d. T,u&9 5,ere t,e 5(rd& (* a &tatute are c'ear9 -'ai" a"d *ree *r(. a./i!uit 9 it .u&t /e !i4e" it& 'itera' .ea"i"! a"d a--'ied 5it,(ut atte.-ted i"ter-retati(". ( ian!a vs. "eople#s $a% &n'or(e)ent *oar+, ,.R. -o. 10.6/0, 1ar(2 /1, 1..5, 24/ SCRA 165). Acc(rdi"!' 9 t,e SC directed i&&ua"ce (* tax credit certi*icate& t( -etiti("er i"&tead (* t,e re*u"d -ra ed *(r. are''a"( 'a5 T,i& /ri"! u& t( t,e i&&ue (* 5,et,er 5,at i& /ei"! a&:ed t( /e re*u"ded i& t,e 7di&c(u"t8 (r t,e (4er-aid i"c(.e tax. E,ic, i& t( /e a--'ied *ir&t i" -a i"! t,e i"c(.e tax 'ia/i'it (* t,e -etiti("er9 t,e tax credit (r t,e a.(u"t (* .("e te"dered6 It .u&t /e /(r" i" .i"d t,at t,ere 5a& a" (4er-a .e"t (* t,e tax /ecau&e (* t,e re-c(.-utati(" t,at 5a& .ade9 treati"! t,i& ti.e t,e di&c(u"t a& tax credit i"&tead (*

treati"! (* it a& deducti(" *r(. !r(&& i"c(.e. T,e a.(u"t (* t,e tax credit ,(5e4er9 i& "(t &u**icie"t t( (**&et -etiti("erH& i"c(.e tax ,e"ce9 a &u/&ta"tia' a.(u"t 5a& a'&( -aid *(r t,e ear& c(4ered. Eere it "(t *(r 5r("! treat.e"t (* t,e di&c(u"t9 t,ere c(u'd ,a4e /ee" "( (4er-a .e"t .ade. Ei'' t,e (4er-a .e"t "(t c("&titute a" err("e(u&' -aid tax t,ere/ !i4i"! t,e tax-a er t,e ri!,t t( *i'e a c'ai. *(r re*u"d u"der Secti(" #$3 a"d ##1 (* t,e NIRC6 A"(t,er i.-(rta"t -(i"t i" t,i& ca&e i& F i* t,e di&c(u"t i& "(t a''(5ed t( /e re*u"ded /ut it i& a''(5ed t( /e re*u"ded /ut it i& a''(5ed t( /e !ra"ted a& a tax credit certi*icate9 a& i" t,i& ca&e9 t,e" t,ere &ee.& t( /e a circu.4e"ti(" (* t,e ru'e 'aid d(5" i" Ce"tra' Dru! ?#$$D@. T,i& i& /ecau&e a tax credit certi*icate ca" "(t /e u&ed *(r -a .e"t (* (t,er tax 'ia/i'itie& (r at t,e (-ti(" (* t,e (5"er ca" &a'e t,e &a.e. Ei'' ,i& "(t /e e)ui4a'e"t t( t,e !ra"t (* c('d ca&, t( t,e tax-a er a"d t,ere*(re t,e e**ect i& t,e &a.e a& t,at (* a re*u"d. E,at i& "(t a''(5ed direct' &,(u'd "(t /e a''(5ed i"direct' . Or it .i!,t /e t,at t,e SC i& (* t,e i.-re&&i(" t,at tax credit certi*icate i&&ued. 5i'' ("' /e u&ed *(r *uture i"c(.e tax 'ia/i'it

5,ic, &ee.& t( /e t,e i"c'i"ati(" i" t,e &ucceedi"! ca&e. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. JULIANE BAIER(NIC)EL, respondent. G.R. No. 1*+,9+, Au-u'. 29, 20 , /n$0e'(S$n.1$-o, J. FACTS: Re&-("de"t i& a "("-re&ide"t Ger.a" citi+e" a"d e.-'( ed a& t,e Pre&ide"t (* Iu/a"itex9 I"c.9 a d(.e&tic c(r-(rati(" e"!a!ed i" .a"u*acturi"!9 .ar:eti"! (" 5,('e&a'e ("' 9 /u i"! (r (t,er5i&e ac)uiri"!9 ,('di"!9 i.-(rti"! a"d ex-(rti"!9 &e''i"! a"d di&-(&i"! e./r(idered texti'e -r(duct&. Re&-("de"t 5a& 'i:e5i&e a--(i"ted a& c(..i&&i(" a!e"t / Iu/a"itex 5,ere/ it 5a& a!reed t,at &,e 5i'' recei4e 0$% &a'e& c(..i&&i(" (" a'' &a'e& actua'' c("c'uded t,r(u!, ,er e**(rt&. Issue: E,et,er (r "(t t,e c(..i&&i("& ear"ed / t,e "("-re&ide"t a'ie"-re&-("de"t are taxa/'e i" t,e P,i'i--i"e&. RULING: T,e SC ru'ed t,at a "("-re&ide"t a'ie" i& taxa/'e i" t,e P,i'i--i"e& ("' (" i"c(.e ear"ed *r(. 5it,i". C(..i&&i(" are c(.-e"&ati(" *(r &er4ice& a"d t,e are c("&idered ear"ed *r(. 5it,i" i* t,e &er4ice& are re"dered 5it,i" t,e P,i'i--i"e& (Se(tion 42, -IRC). T,e i.-(rta"t *act(r t,ere*(re 5,ic, deter.i"ed t,e &(urce (* i"c(.e (* -er&("a' &er4ice& i& "(t t,e re&ide"ce (* t,e -a (r9 (r t,e -'ace 5,ere t,e c("tract *(r &er4ice i& e"tered i"t(9 (r t,e -'ace (* -a .e"t9 but the place where the services were actually rendered. Si"ce t,e re&-("de"t *ai'ed t( -r(4e t,at t,e .ar:eti"! &er4ice& 5,ic, !a4e ri&e t( t,e c(..i&&i("& are re"dered i" Ger.a" 9 &,e c(u'd "(t c'ai. exe.-ti(" *r(. t,e i.-(&iti(" (* t,e i"c(.e tax. T,e SC ,ea4i' re'ied (" t,e *act t,at re&-("de"t -re&e"ted "( e4ide"ce t( -r(4e t,at Iu/a"itex d(e& "(t &e'' e./r(idered -r(duct& i" t,e P,i'i--i"e& a"d t,at ,er a--(i"t.e"t a& c(..i&&i(" a!e"t i& exc'u&i4e' *(r Ger.a" a"d (t,er Eur(-ea" .ar:et&. ;a&ic i& t,e ru'e t,at ,e 5,( c'ai.& exe.-ti(" *r(. a tax /urde" .u&t a&&u.e t,e re&-("&i/i'it (* -r(4i"! t,e &a.e. T,e ru'e a4ai'i"! u"der (ur Juri&dicti(" ,a& a'5a & /ee" t,at9 taxati(" i& t,e ru'e a"d exe.-ti(" i& ("' a" exce-ti(" t( t,at ru'e. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. BAN) OF P2ILIPPINE ISLANDS, respondent. G.R. No. 14,+,*, June 2 , 200 ! T1n-$, J. ISSUE:At i&&ue i& t,e )ue&ti(" (* 5,et,er t,e #$% *i"a' tax (" a /a":H& -a&&i4e i"c(.e9 5it,,e'd *r(. t,e /ac: at &(urce9 &ti'' *(r.& -art (* t,e /a":H& !r(&& i"c(.e *(r t,e -ur-(&e (* c(.-uti"! it& !r(&& recei-t& tax 'ia/i'it . RULING: ;(t, t,e CTA a"d t,e CA a"&5ered i" t,e "e!ati4e /ut t,e SC re4er&ed i" *a4(r (* t,e -etiti("er. T,i& &a.e i&&ue ,a& a'read /ee" ru'ed u-(" / t,e SC i" t,e ca&e& (* C2ina *an3ing Corp., vs. CA, 200/4 CIR vs. Soli+5an3, 200/4 an+ CIR vs. *an3 o' Co))er(e, 2005 a"d t,e SC *i"d& "( c(!e"t rea&(" t( di&tur/ 5,at ,a& /ee" -re4i(u&' &ett'ed. IN a'' (* t,e&e ca&e&9 t,e SC a--'ied t,e (5"er&,i- te&t i" deter.i"i"! t,e c(.-(&iti(" (* !r(&& recei-t&. T,e SC ru.i"ate& i" t,e C,i"a ;a": ca&e a& *(''(5&: 7I" t,e i"&ta"t ca&e9 C;C (5"& t,e i"tere&t i"c(.e 5,ic, i& t,e &(urce (* -a .e"t (* t,e *i"a'
5it,,('di"! tax. T,e G(4er".e"t &u/&e)ue"t' /ec(.e& t,e (5"er (* t,e .("e c("&tituti"! t,e *i"a' tax 5,e" C;C -a & t,e *i"a' 5it,,('di"! tax t( exti"!ui&, it& (/'i!ati(" t( t,e !(4er".e"t. T,i& i& t,e c("&iderati(" *(r t,e tra"&*er (* (5"er&,i- (* t,e .("e *r(. C;C t( t,e !(4er".e"t. T,u&9 t,e a.(u"t c("&tituti"! t,e *i"a' tax9 /ei"! (ri!i"a'' (5"ed / C;C a& -art (* it& i"tere&t i"c(.e9 &,(u'd *(r. -art (* it& taxa/'e recei-t&.8

CIR v. PLDT ?Nature (* Taxati(" Exe.-ti("@

FACTS: K PLDT -aid t( t,e ;IR taxe& *(r t,e *(r e)ui-.e"t9 .ac,i"erie& a"d &-are -art& it i.-(rted *(r it& /u&i"e&&. K A*ter &uc, -a .e"t9 it 5r(te t( t,e ;IR t( &ee: a c("*ir.at(r ru'i"! (" it& exe.-ti(" -ri4i'e!e&. T,e ;IR i&&ued a ru'i"! &tati"! t,at PLDT i& exe.-t *r(. a'' taxe& i"c'udi"! t,e 0$% 4a'ue-added tax ?VAT@ (" it& i.-(rtati("& (* e)ui-.e"t9 .ac,i"erie& a"d &-are -art& "ece&&ar i" t,e c("duct (* it& /u&i"e&& c(4ered / t,e *ra"c,i&e. K ;a&ed (" t,e ;IR ru'i"!9 PLDT *i'ed a c'ai. *(r tax creditLre*u"d (* t,e VAT9 c(.-e"&ati"! taxe&9 ad4a"ce &a'e& taxe& a"d (t,er taxe& it ,ad /ee" -a i"! i" it& i.-(rtati(" (* 4ari(u& e)ui-.e"t9 .ac,i"erie& a"d &-are -art& "eeded *(r it& (-erati("&. K PLDT *i'ed 5it, t,e CTA a -etiti(" *(r re4ie5. CTA !ra"ted t,e creditLre*u"d. ;IRH& M*R de"ied. K ;IR a--ea'ed t( CA 5,ic, a**ir.ed CTA Jud!.e"t. =e"ce t,i& a--ea'. M ISSUE: EONPLDT i& exe.-t *r(. -a i"! VAT9 c(.-e"&ati"! taxe&9 ad4a"ce &a'e& taxe& a"d i"ter"a' re4e"ue taxe& (" it& i.-(rtati("&6 RULING: YES, PLDT exe.-t *r(. -a i"! direct taxe& /ut "(t i"direct taxe& ?ie VAT@. Taxation is the ru e, exe!"tion is the ex#e"tion. Statutes $rantin$ tax exe!"tions !ust %e #onstrue& in strictissimi juris a$ainst the tax"a'er an& i%era ' in (avor o( the taxin$ authorit'. To hi! )ho # ai!s a re(un& or exe!"tion (ro! tax "a'!ents rests the %ur&en o( *usti('in$ the exe!"tion %' )or&s too " ain to %e !ista+en an& too #ate$ori#a to %e !isinter"rete&. Tax exe.-ti(" re-re&e"t& a '(&& (* re4e"ue t( t,e !(4er".e"t a"d .u&t9 t,ere*(re9 "(t re&t (" 4a!ue i"*ere"ce. E,e" c'ai.ed9 it .u&t /e &trict' c("&trued a!ai"&t t,e tax-a er 5,( .u&t -r(4e t,at ,e *a''& u"der t,e exce-ti(". I* a" exe.-ti(" i& *(u"d t( exi&t9 it .u&t "(t /e e"'ar!ed / c("&tructi("9 &i"ce t,e rea&("a/'e -re&u.-ti(" i& t,at t,e &tate ,a& !ra"ted i" ex-re&& ter.& a'' it i"te"ded t( !ra"t at a''9 a"d t,at9 u"'e&& t,e -ri4i'e!e i& 'i.ited t( t,e 4er ter.& (* t,e &tatute t,e *a4(ur 5(u'd /e exte"ded /e ("d di&-ute i" (rdi"ar ca&e&. DISPOSITIVE: CA .(di*ied. PLDT t( !et re*u"d (" ad4a"ce &a'e& tax a"d C(.-e"&ati"! tax it -aid 'e&& t,e VAT due (" t,e i.-(rtati("&. Silkair vs CIR CA GR SP No. 82902, September 13, 2004 a!ts" -il+air, an online international air &arrier, filed %ith the Bureau of Internal Revenue (BIR) a %ritten appli&ation for the refund of 04,24$,420 $# e'&ise ta'es it &laimed to have paid on its pur&hases of 8et fuel from 0etron 6orporation from *anuar) to *une 2000 As the BIR had not )et a&ted on the appli&ation, -il+air filed a 0etition for Revie% (efore the 6TA 5pposing the petition, respondent 6IR alleged that petitioner failed to prove that the sale of the petroleum produ&ts %as dire&tl) made from a domesti& oil &ompan) to the international &arrier 6TA denied -il+airDs petition on the ground that as the e'&ise ta' %as imposed on 0etron 6orporation as the manufa&turer of petroleum produ&ts, an) &laim for refund should (e filed () the latterB and %here the (urden of ta' is shifted to the pur&haser, the amount passed on to it is no longer a ta' (ut (e&omes an added &ost of the goods pur&hased @en&e, this appeal Iss#e" :hether -il+air ma) &laim for the refund of e'&ise ta'es erroneousl) paid R$%ING" N5 As the e'&ise ta' %as imposed on 0etron 6orporation as the manufa&turer of petroleum produ&ts, an) &laim for refund should (e filed () the latterB and %here the (urden of ta' is shifted to the pur&haser, the amount passed on to it is no longer a ta' (ut (e&omes an added &ost of the goods pur&hased Therefore, the right to &laim for the refund of e'&ise ta'es paid on petroleum produ&ts lies %ith 0etron 6orporation %ho paid and remitted the e'&ise ta' to the BIR Respondent, on the other hand, ma) onl) &laim from 0etron the reim(ursement of the ta' (urden shifted to the former () the latter The e'&ise ta' parta+ing the nature of an indire&t ta', is &learl) the lia(ilit) of the manufa&turer or seller %ho has the option %hether or not to shift the (urden of the ta' to the pur&haser :here the (urden of the ta' is shifted

to the pur&haser, the amount passed on to it is no longer a ta' (ut (e&omes an added &ost on the goods pur&hased %hi&h &onstitutes a part of the pur&hase pri&e In sum, the in&iden&e of ta'ation or the person statutoril) lia(le to pa) the ta' falls on 0etron though the impa&t of ta'ation or the (urden of ta'ation falls on another person, %hi&h in this &ase is petitioner -il+air