Republic v. GST Philippines, Inc., G.R. No.

190872, 17 October 2013

[PERLAS-BERNABE, J.]
FACTS
Respondent GST is a VAT registered domestic corporation primarily engaged in steel
and iron products. During taxable years 2004-2005, GST filed claimed for unutilized
excess input VAT attributable to its zero rated sales.

Period

Date of Filing of
Administrative Claim
For Refund

1st Quarter of year 2004

June 9, 2004

2nd Quarter of year 2004

August 12, 2004

3rd Quarter of year 2004

February 18, 2005

4th Quarter of year 2004

February 18, 2005

1st Quarter of year 2005

May 11, 2005

2nd Quarter of year 2005

November 18, 2005

3rd Quarter of year 2005

November 18, 2005

For failure of CIR to act on its administrative claims, GST filed for a petition for review
before the CTA. The CTA granted the petition. CIR filed an MR but was denied. In a
petition for review before the CTA En Banc, CIR raised that the appeal before the CTA
was filed beyond the reglementary period. GST asserts that under Section 112 (A) of the
Tax Code, the prescriptive period is complied with if both the administrative and judicial
claims are filed within the two-year prescriptive period; and that compliance with the
120-day and 30-day periods under Section 112 (D) of the Tax Code is not mandatory

ISSUE
Whether GSTs action for refund has complied with the prescriptive periods under the
Tax Code.

HELD
NO, as to claims in 2004 and first quarter of 2005.
YES, as to second and third quarter of 2005.
The 120-day period is mandatory and jurisdictional.However, the Supreme Court
categorically held that BIR Ruling No. DA-489-03 dated December 10, 2003 provided a

valid claim for equitable estoppel under Section 246 of the Tax Code. BIR Ruling No.
DA-489-03 expressly states that the taxpayer-claimant need not wait for the lapse of
the 120-day period before it could seek judicial relief with the CTA by way of Petition
for Review.As such, all taxpayers can rely on said ruling from the time of its issuance
on December 10, 2003 up to its reversal by the Supreme Court in Aichi on October 6,
2010, where it was held that the 120+30 day periods are mandatory and jurisdictional.
Therefore, GST can benefit from BIR Ruling No. DA-489-03 with respect to its claims
for refund of unutilized excess input VAT for the second and third quarters of taxable
year 2005 which were filed before the CIR on November 18, 2005 but elevated to the
CTA on March 17, 2006 before the expiration of the 120-day period (March 18, 2006
being the 120th day). BIR Ruling No. DA-489-03 effectively shielded the filing of GSTs
judicial claim from the vice of prematurity.

Commissioner of Internal Revenue v. Dash Engineering Philippines, Inc.

(DEPI), G.R. No. 184145, 11 December 2013
[MENDOZA, J.]
FACTS
Respondent DEPI filed its monthly and quarterly value-added tax (VAT) returns for the
period from January 1, 2003 to June 30, 2003. On August 9, 2004, it filed a claim for
tax credit or refund for the unutilized input VAT attributable to its zero-rated
sales. Because petitioner Commissioner of Internal Revenue (CIR) failed to act upon the
said claim, respondent was compelled to file a petition for review with the CTA on May
5, 2005. CTA ruled in favor of DEPI. CIR elevated the case to CTA En Banc averring that
the claim was filed out of time. DEPI asserts that its petition was seasonably filed before
the CTA in keeping with the two-year prescriptive period provided for in Sections 204(c)
and 229 of the NIRC. CTA En Banc affirmed the CTA division ruling.

ISSUE
Whether respondent DEPIs judicial claim was filed within the prescriptive period under
Sec. 112 of the Tax Code.

HELD
NO.
The two-year period inSec. 112 refers only to administrative claims. Sections 204 and
229 of the NIRC pertain to the refund of erroneously or illegally
collected taxes.Input VAT is not excessively collected as understood under Section 229
because at the time the input VAT is collected the amount paid is correct and

proper. Hence, respondent cannot advance its position by referring to Section 229
because Section 112 is the more specific and appropriate provision of law for claims for
excess input VAT.Petitioner is entirely correct in its assertion that compliance with the
periods provided for in the abovequoted provision is indeed mandatory and
jurisdictional, as affirmed in this Courts ruling in San Roque, where the CourtEn
Banc settled the controversy surrounding the application of the 120+30-day period
provided for in Section 112 of the NIRC and reiterated the Aichi doctrine that the
120+30-day period is mandatory and jurisdictional.
Therefore, in accordance with San Roque, respondents judicial claim for refund must
be denied for having been filed late. Although respondent filed its administrative claim
with the BIR on August 9, 2004 before the expiration of the two-year period in Section l
12(A), it undoubtedly failed to comply with the 120+ 30-day period in Section l l 2(D)
(now subparagraph C) which requires that upon the inaction of the CIR for 120 days
after the submission of the documents in support of the claim, the taxpayer has to file its
judicial claim within 30 days after the lapse of the said period. The 120 days granted to
the CIR to decide the case ended on December 7, 2004. Thus, DEPI had 30 days
therefrom, or until January 6, 2005, to file a petition for review with the CTA.
Unfortunately, DEPI only sought judicial relief on May 5, 2005 when it belatedly filed its
petition to the CTA, despite having had ample time to file the same, almost four months
after the period allowed by law. As a consequence of DEPIs late filing, the CTA did not
properly acquire jurisdiction over the claim.
Commissioner of Internal Revenue v. Visayas Geothermal Power Co. Inc.,
G.R. No. 181276, 11 November 2013
[MENDOZA, J.]
FACTS
Respondent VGPCI incurred input value added tax of P20,213,044.50 on its domestic
purchase of goods and services and importation of goods used in its business for the
third and fourth quarter of 2001 and for the entire year of 2002. Due to the enactment
of Republic Act (R.A.) No. 9136, which became effective on June 26, 2001, VGPCIs sales
of generated power became zero-rated and were no longer subject to VAT at 10%.
On June 26, 2003, VGPCI filed before the BIR a claim for refund of unutilized input
VAT payment in the third quarter of 2001. On December 18, 2003, another claim was
filed for the last quarter of 2001 and the four quarters of 2002. For failure of the BIR to
act upon said claims, VGPCI filed separate petitions for review before the CTA on
September 30, 2003 and December 19, 2003, praying for a refund on the issuance of a
tax credit certificate covering the period from July to September 2001 andfor the period
from October 2001 to December 2002, CTA Case Nos. 6790 and 6838, respectively.

ISSUE
Whether VGPCI failed to observe the proper prescriptive period required by law for the
filing of an appeal before the CTA because it filed its petition before the end of the 120day period granted to the CIR to decide its claim for refund under Section 112(D) of the
National Internal Revenue Code (NIRC).

HELD
YES, to CTA Case No. 6790.
NO, to CTA Case No. 6838.
The judicial claim filed on September 30, 2003 (CTA Case No. 6790) was prematurely
filed and cannot be taken cognizance of because respondent failed to wait for the
requisite 120 days after the filing of its claim for refund with the BIR before elevating
the case to the CTA. However, the judicial claim filed on December 19, 2003 (CTA Case
No. 6838), which was made after the issuance of BIR Ruling DA-480-03, can be
considered by the CTA despite its hasty filing only one day after the application for
refund was first lodged with the BIR.
Applied Food Ingredients Company, Inc. v. Commissioner of Internal
Revenue, G.R. No. 184266, 11 November 2013
[SERENO, CJ.]
FACTS
Petitioner is a Value-Added Tax (VAT) taxpayer engaged in the importation and
exportation business, as a pure buy-sell trader. Petitioner alleged that from September
1998 to December 31, 2000, it paid an aggregate sum of input taxes for its importation
of food ingredients.Subsequently, these imported food ingredients were exported
between the periods of April 1, 2000 to December 31, 2000, from which the petitioner
was able to generate export sales amounting to P114,577,937.24. The aforestated export
sales which transpired from April 1, 2000 to December 31, 2000 were zero-rated sales,
pursuant to Section 106(A (2)(a)(1) of the NIRC of 1997.Petitioner alleged that the
accumulated input taxes for the period of September 1, 1998 to December 31, 2000 have
not been applied against any output tax.
On March 26, 2002 and June 28, 2002, petitioner filed two separate applications for the
issuance of tax creditcertificates.On July 24, 2002, in view of respondents inaction,
petitioner elevated the case before this Court by way of a Petition for Review, docketed
as C.T.A. Case No. 6513.Trial ensued and the CTA First Division rendered a Decision on
13 June 2007. It denied petitioners claim for failure to comply with the invoicing
requirements prescribed under Section 113 in relation to Section 237 of the National

Internal Revenue Code (NIRC) of 1997 and Section 4.108-1 of Revenue Regulations No.
7-95.On appeal, the CTA En Banc likewise denied the claim of petitioner citing violation
of the invoicing requirements.
ISSUE
Is the petitioner is entitled to the issuance of a tax certificate or refund representing
creditable input taxes attributable to zero-rated sales?

HELD
NO.
The Commissioner of Internal Revenue (CIR) had one hundred twenty (120) days from
the date of submission of complete documents in support of the application within
which to decide on the administrative claim.Counting 120 days from 26 March 2002,
the CIR had until 24 July 2002 within which to decide on the claim of petitioner for an
input VAT refund attributable to the its zero-rated sales for the period April to
September 2000.On the other hand, the CIR had until 26 October 2002 within which to
decide on petitioners claim for refund filed on 28 June 2002, or for the period covering
October to December 2000.
In this case, the judicial claim of petitioner was filed on 24 July 2002. Petitioner clearly
failed to observe the mandatory 120-day waiting period. Consequently, the premature
filing of its claim for refund/credit of input VAT before the CTA warranted a dismissal,
inasmuch as no jurisdiction was acquired by the CTA. In accordance with the ruling
in San Roque and considering that petitioners judicial claim was filed on 24 July 2002,
when the 120+30 day mandatory periods were already in the law and BIR Ruling No.
DA-489-03 had not yet been issued, petitioner does not have an excuse for not
observing the 120+ 30 day period. Failure of petitioner to observe the mandatory 120day period is fatal to its claim and rendered the CT A devoid of jurisdiction over the
judicial claim.
CIR v. AICHI FORGING COMPANY OF ASIA, INC.
G.R. No. 184823 October 6, 2010
Del Castillo, J.
Doctrine:
The CIR has 120 days, from the date of the submission of the complete documents
within which to grant or deny the claim for refund/credit of input vat. In case of full or
partial denial by the CIR, the taxpayers recourse is to file an appeal before the CTA
within 30 days from receipt of the decision of the CIR. However, if after the 120-day
period the CIR fails to act on the application for tax refund/credit, the remedy of the
taxpayer is to appeal the inaction of the CIR to CTA within 30 days.
A taxpayer is entitled to a refund either by authority of a statute expressly granting
such right, privilege, or incentive in his favor, or under the principle of solutio
indebiti requiring the return of taxes erroneously or illegally collected. In both cases,

a taxpayer must prove not only his entitlement to a refund but also his compliance
with the procedural due process.
As between the Civil Code and the Administrative Code of 1987, it is the latter that
must prevail being the more recent law, following the legal maxim, Lex posteriori
derogat priori.
The phrase within two (2) years x x x apply for the issuance of a tax credit
certificate or refund under Subsection (A) of Section 112 of the NIRC refers to
applications for refund/credit filed with the CIR and not to appeals made to the CTA.
Facts: Petitioner filed a claim of refund/credit of input vat in relation to its zero-rated
sales from July 1, 2002 to September 30, 2002. The CTA 2nd Division partially granted
respondents claim for refund/credit.
Petitioner filed a Motion for Partial Reconsideration, insisting that the administrative
and the judicial claims were filed beyond the two-year period to claim a tax
refund/credit provided for under Sections 112(A) and 229 of the NIRC. He reasoned that
since the year 2004 was a leap year, the filing of the claim for tax refund/credit on
September 30, 2004 was beyond the two-year period, which expired on September 29,
2004. He cited as basis Article 13 of the Civil Code, which provides that when the law
speaks of a year, it is equivalent to 365 days. In addition, petitioner argued that the
simultaneous filing of the administrative and the judicial claims contravenes Sections
112 and 229 of the NIRC. According to the petitioner, a prior filing of an administrative
claim is a condition precedent before a judicial claim can be filed.
The CTA denied the MPR thus the case was elevated to the CTA En Banc for review. The
decision was affirmed. Thus the case was elevated to the Supreme Court.
Respondent contends that the non-observance of the 120-day period given to the CIR to
act on the claim for tax refund/credit in Section 112(D) is not fatal because what is
important is that both claims are filed within the two-year prescriptive period. In
support thereof, respondent cited Commissioner of Internal Revenue v. Victorias
Milling Co., Inc. [130 Phil 12 (1968)] where it was ruled that if the CIR takes time in
deciding the claim, and the period of two years is about to end, the suit or proceeding
must be started in the CTA before the end of the two-year period without awaiting the
decision of the CIR.
Issues:
1. Whether or not the claim for refund was filed within the prescribed period
2. Whether or not the simultaneous filing of the administrative and the judicial claims
contravenes Section 229 of the NIRC, which requires the prior filing of an
administrative claim, and violates the doctrine of exhaustion of administrative remedies
Held:
1. Yes. As ruled in the case of Commissioner of Internal Revenue v. Mirant Pagbilao
Corporation (G.R. No. 172129, September 12, 2008), the two-year period should be
reckoned from the close of the taxable quarter when the sales were made.

In Commissioner of Internal Revenue v. Primetown Property Group, Inc (G.R. No.

162155, August 28, 2007, 531 SCRA 436), we said that as between the Civil Code, which
provides that a year is equivalent to 365 days, and the Administrative Code of 1987,
which states that a year is composed of 12 calendar months, it is the latter that must
prevail being the more recent law, following the legal maxim, Lex posteriori derogat
priori.
Thus, applying this to the present case, the two-year period to file a claim for tax
refund/credit for the period July 1, 2002 to September 30, 2002 expired on September
30, 2004. Hence, respondents administrative claim was timely filed.
2. Yes. We find the filing of the judicial claim with the CTA premature.
Section 112(D) of the NIRC clearly provides that the CIR has 120 days, from the date of
the submission of the complete documents in support of the application [for tax
refund/credit], within which to grant or deny the claim. In case of full or partial denial
by the CIR, the taxpayers recourse is to file an appeal before the CTA within 30 days
from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails
to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal
the inaction of the CIR to CTA within 30 days.
Subsection (A) of Section 112 of the NIRC states that any VAT-registered person, whose
sales are zero-rated or effectively zero-rated may, within two years after the close of
the taxable quarter when the sales were made, apply for the issuance of a tax
credit certificate or refund of creditable input tax due or paid attributable to such
sales. The phrase within two (2) years x x x apply for the issuance of a tax credit
certificate or refund refers to applications for refund/credit filed with the CIR and not
to appeals made to the CTA.
The case of Commissioner of Internal Revenue v. Victorias Milling, Co., Inc. is
inapplicable as the tax provision involved in that case is Section 306, now Section 229 of
the NIRC. Section 229 does not apply to refunds/credits of input VAT.
The premature filing of respondents claim for refund/credit of input VAT before the
CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA.

Lascona Land Co. Inc. v. Commissioner of Internal Revenue, G.R. No.

171251,
[PERALTA, J.]
FACTS
The Commissioner of Internal Revenue (CIR) issued an assessment against Lascona
Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the
year 1993 in the amount of P753,266.56. Consequently, on April 20, 1998, Lascona filed
a letter protest, but was denied by Norberto R. Odulio, Officer-in-Charge (OIC),

Regional Director, Bureau of Internal Revenue, Revenue Region No. 8, Makati City. On
April 12, 1999, Lascona appealed the decision before the CTA. Lascona alleged that the
Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30)
days from the lapse of the 180-day period rendered the assessment final and executory.
The CIR, however, maintained that Lasconas failure to timely file an appeal with the
CTA after the lapse of the 180-day reglementary period provided under Section 228 of
the National Internal Revenue Code (NIRC) resulted to the finality of the assessment.
ISSUE
Whether the subject assessment has become final, executory and demandable due to the
failure of petitioner to file an appeal before the CTA within thirty (30) days from the
lapse of the One Hundred Eighty (180)-day period pursuant to Section 228 of the NIRC.
HELD
NO.
[T]he Court has held that in case the Commissioner failed to act on the disputed
assessment within the 180-day period from date of submission of documents, a taxpayer
can either: (1) file a petition for review with the Court of Tax Appeals within 30 days
after the expiration of the 180-day period; or (2) await the final decision of the
Commissioner on the disputed assessments and appeal such final decision to the Court
of Tax Appeals within 30 days after receipt of a copy of such decision. These options are
mutually exclusive and resort to one bars the application of the other.
Therefore, as in Section 228, when the law provided for the remedy to appeal the
inaction of the CIR, it did not intend to limit it to a single remedy of filing of an appeal
after the lapse of the 180-day prescribed period. Precisely, when a taxpayer protested an
assessment, he naturally expects the CIR to decide either positively or negatively. A
taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on
the protested assessment. More so, because the law and jurisprudence have always
contemplated a scenario where the CIR will decide on the protested assessment.
Philippine Journalists, Inc. v. Commissioner of Internal Revenue, G.R. No.
162852, 16 December 2004
[YNARES-SANTIAGO, J.]
FACTS
The Revenue District Office of the Bureau of Internal Revenue (BIR) issued Letter of
Authority for Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio
Gapasin to examine petitioners books of account and other accounting records for
internal revenue taxes. Revenue District Officer Jaime Concepcion invited petitioner to
send a representative to an informal conference for an opportunity to object and present
documentary evidence relative to the proposed assessment. Petitioners Comptroller,
LorenzaTolentino, executed a Waiver of the Statute of Limitation Under the National

Internal Revenue Code (NIRC). Records show that, it did not bear the date of
acceptance, that petitioner was not furnished a copy of the waiver, and the waiver was
signed only by the Revenue District Officer. The tax liability exceeds One Million Pesos
(P1,000,000.00).
ISSUE
Whether the waiver is in accordance with RMO No. 20-90 to validly extend the threeyear prescriptive period under the NIRC.
HELD
NO.
The waiver document is incomplete and defective and thus the three-year prescriptive
period was not tolled or extended and continued to run. Consequently, the
Assessment/Demand was invalid because it was issued beyond the three (3) year period.
In the same manner, Warrant of Distraint and/or Levy which petitioner received
thereafter is also null and void for having been issued pursuant to an invalid
assessment.
The NIRC, under Sections 203 and 222, provides for a statute of limitations on the
assessment and collection of internal revenue taxes in order to safeguard the interest of
the taxpayer against unreasonable investigation. Unreasonable investigation
contemplates cases where the period for assessment extends indefinitely because this
deprives the taxpayer of the assurance that it will no longer be subjected to further
investigation for taxes after the expiration of a reasonable period of time.
A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation
of the taxpayers right to security against prolonged and unscrupulous investigations
and must therefore be carefully and strictly construed. xxx Thus, the law on
prescription, being a remedial measure, should be liberally construed in order to afford
such protection.
The waiver is also defective from the government side because it was signed only by a
revenue district officer, not the Commissioner, as mandated by the NIRC and RMO No.
20-90. The waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral
agreement between two parties to extend the period to a date certain. The conformity of
the BIR must be made by either the Commissioner or the Revenue District Officer. This
case involves taxes amounting to more than One Million Pesos (P1,000,000.00) and
executed almost seven months before the expiration of the three-year prescription
period. For this, RMO No. 20-90 requires the Commissioner of Internal Revenue to sign
for the BIR.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. KUDOS METAL
CORPORATION, Respondent

Facts: Kudos Metal Corporation filed its Annual Income Tax Return (ITR) for the
taxable year 1998. (BIR) served upon respondent three Notices of Presentation of
Records. Respondent failed to comply with these notices, hence, the BIR issued a
Subpeona Duces Tecum dated September 21, 2006, receipt of which was acknowledged
by respondents President, Mr. Chan Ching Bio, in a letter dated October 20, 2000.
Respondent accountant, executed two Waiver of the Defense of Prescription.
BIR issued a Preliminary Assessment Notice for the taxable year 1998 against the
respondent. This was followed by a Formal Letter of Demand with Assessment Notices
for taxable year 1998.
Respondent challenged the assessments by filing its Protest on Various Tax
Assessments on December 3, 2003 and its Legal Arguments and Documents in
Support of Protests against Various Assessments on February 2, 2004.
BIR rendered a final Decision on the matter, requesting the immediate payment of the
Respondents tax liabilities.
Respondent filed a Petition for Review with the CTA. CTA cancelled the assessment
notices issued against respondent for having been issued beyond the prescriptive period.
Petitioner moved for reconsideration but the CTA Second Division denied the
motion. On appeal, the CTA En Banc affirmed the cancellation of the assessment
notices. Petitioner sought reconsideration but the same was unavailing.
Issue:WHETHER THE CTA ERRED IN RULING THAT THE GOVT. RIGHT TO
ASSESS UNPAID TAXES OF RESPONDENT PRESCRIBED.
Held: Section 203 of the National Internal Revenue Code of 1997 (NIRC) mandates the
government to assess internal revenue taxes within three years from the last day
prescribed by law for the filing of the tax return or the actual date of filing of such
return, whichever comes later. Hence, an assessment notice issued after the threeyear prescriptive period is no longer valid and effective. Exceptions however
are provided under Section 222 of the NIRC.
The waivers executed by respondents accountant did not extend the period within
which the assessment can be made. Petitioner does not deny that the assessment notices
were issued beyond the three-year prescriptive period, but claims that the period was
extended by the two waivers executed by respondents accountant.
Section 222 (b) of the NIRC provides that the period to assess and collect taxes may only
be extended upon a written agreement between the CIR and the taxpayer executed
before the expiration of the three-year period.
Conversely, in this case, the assessments were issued beyond the prescribed period.
Also, there is no showing that respondent made any request to persuade the BIR to
postpone the issuance of the assessments.

The doctrine of estoppel cannot be applied in this case as an exception to the statute of
limitations on the assessment of taxes considering that there is a detailed procedure for
the proper execution of the waiver, which the BIR must strictly follow. As we have often
said, the doctrine of estoppel is predicated on, and has its origin in, equity which,
broadly defined, is justice according to natural law and right. As such, the doctrine of
estoppel cannot give validity to an act that is prohibited by law or one that is against
public policy. It should be resorted to solely as a means of preventing injustice and
should not be permitted to defeat the administration of the law, or to accomplish a
wrong or secure an undue advantage, or to extend beyond them requirements of the
transactions in which they originate.24 Simply put, the doctrine of estoppel must be
sparingly applied.
FELS ENERGY VS. PROVINCE OF BATANGAS

The Provincial Assessor of Marinduque v. Court of Appeals and Marcopper

Mining, G.R. No. 170532, 30 April 2009
[CALLEJO, SR., J.]
FACTS
Petitioner issued against respondent an Assessment Notice, dated March 28, 1994, for
real property taxes due on the latters real properties, including its Siltation Dam and
Decant System which was damaged by typhoon sometime in 1993. Respondent paid the
tax demanded, but appealed the assessment before the Local Board of Assessment
Appeals (LBAA) on the ground that the subject property is exempt from real property
taxation under Section 234(e) of Republic Act (R.A.) No. 7160 or the Local Government
Code of 1991, which provides for exemptions from Real Property Tax for Machinery
and equipment used for pollution control and environmental protection. The LBAA as
well as the Central Board of Assessment Appeals (CBAA) on appeal ruled against tax
exemption. The Court of Appeals reversed the rulings of LBAA and CBAA and held that
the subject property was exempt from real property taxation under Section 91 of R.A.
No. 7942 or the Philippine Mining Act of 1995.
ISSUE
Whether the Siltation Dam and Decant System of Marcopper Mining Corporation is
exempt from real property tax.

HELD
NO.
The disputed assessment notice having taken effect on January 1, 1995, (by virtue of Sec.
221 of R.A. No. 7160) its validity is determined by the provisions of R.A. No. 7160,
effective January 1, 1992. R.A. No. 7942 has no bearing on the matter, for this law came
into effect only on April 14, 1995. Hence, reference to R.A. No. 7942 by the CA and the

respondent are all out of place.Title II of R.A. No. 7160 governs the administration,
appraisal, assessment, levy and collection of real property tax. Section 234 thereof
grants exemption from real property taxation based on ownership, character or usage.
As held in Mactan Cebu International Airport Authority v. Marcos, the exemption
granted under Sec. 234(e) of R.A. No. 7160 to [m]achinery and equipment used for
pollution control and environmental protection is based on usage. The term usage
means direct, immediate and actual application of the property itself to the exempting
purpose. Section 199 of R.A. No. 7160 defines actual use as the purpose for which the
property is principally or predominantly utilized by the person in possession
thereof. It contemplates concrete, as distinguished from mere potential, use. Thus, a
claim for exemption under Sec. 234(e) of R.A. No. 7160 should be supported by evidence
that the property sought to be exempt is actually, directly and exclusively used for
pollution control and environmental protection.
The records yield no allegation or evidence by respondent that the subject property was
actually, directly and exclusively used for pollution control and environmental
protection during the period covered by the assessment notice under
protest. Rather, the finding of the CBAA that said property apparently out of
commission and not apt to its function as would control pollution and protect the
environment stands undisputed; [and] that the siltation dam was damaged in 1993
when a typhoon hit Marinduque.
National Power Corporation v. Central Board of Assessment Appeals et al.,
G.R. No. 171470, 30 January 2009
FACTS
First Private Power Corporation (FPPC) entered into a Build-Operate-Transfer (BOT)
agreement with NAPOCOR for the construction of Bauang Diesel Power Plant and
creation of Bauang Power Plant Corporation (BPPC). The pertinent provisions of the
BOT agreement, include among others:2.03 NAPOCORxxx shall be responsible
for the payment of all real estate taxes and assessments, rates, and other
charges in respect of the Site and the buildings and improvements
thereon. The Municipal Assessor of Bauang issued a Notice of Assessment and Tax
Bill to BPPC. NAPOCOR sought tax exemption on the basis if Sec. 234(c) of R.A. No.
7160.
ISSUE
Under the terms of the BOT, can the GOCC be deemed the actual, direct, and exclusive
user of machineries and equipment for tax exemption purposes? If not, can it pass on its
tax-exempt status to its BOT partner, a private corporation, through the BOT
agreement?
HELD

NO. Neither can NAPOCOR pass its taxexempt status to its BOT partner.
NAPOCORs basis for its claimed exemption Section 234(c) of the LGC is clear and
not at all ambiguous in its terms. Exempt from real property taxation are: (a) all
machineries and equipment; (b) [that are] actually, directly, and exclusively used by; (c)
[local water districts and] government-owned or controlled corporations engaged in
the [supply and distribution of water and/or] generation and transmission of electric
power.
By [BOTs] express terms, BPPC has complete ownership both legal and beneficial of
the project, including the machineries and equipment used, subject only to the transfer
of these properties without cost to NAPOCOR after the lapse of the period agreed upon.
As agreed upon, BPPC provided the funds for the construction of the power plant,
including the machineries and equipment needed for power generation; thereafter, it
actually operated and still operates the power plant, uses its machineries and
equipment, and receives payment for these activities and the electricity generated under
a defined compensation scheme. Notably, BPPC as owner-user is responsible for any
defect in the machineries and equipment.
Consistent with the BOT concept and as implemented, BPPC the owner-manageroperator of the project is the actual user of its machineries and equipment. BPPCs
ownership and use of the machineries and equipment are actual, direct, and immediate,
while NAPOCORs is contingent and, at this stage of the BOT Agreement, not sufficient
to support its claim for tax exemption.
ALLIED BANKING VS. CIR

Taxation Exception to the Rules of Procedure Regarding Protest and Appeal

In April 2004, the Bureau of Internal Revenue (BIR) issued a preliminary assessment
notice (PAN) to Allied Banking Corporation (ABC) demanding payment of P50 million
in taxes. ABC then filed a protest in May 2004. In July 2004, the BIR issued a formal
assessment notice (FAN). The FAN included a formal demand as well as this phrase:
xxx
This is our final decision based on investigation. If you disagree, you may appeal this
final decision within thirty (30) days from receipt hereof, otherwise said deficiency tax
assessment shall become final, executory and demandable.

ABC then appealed the FAN with the Court of Tax Appeals (CTA). The Commissioner of
Internal Revenue (CIR) then filed a motion to dismiss on the ground that ABC did not
exhaust all administrative remedies for failing to file a protest against the FAN.
ISSUE: Whether or not the CIR is correct.
HELD: No. It is true that a FAN is not appealable with the CTA. However, this case
holds an exception. The wordings of the FAN issued by the CIR made it appear that the
FAN is actually the CIRs final decision. It even advised ABC to file an appeal instead of
filing a protest. ABC cannot therefore be faulted for filing an appeal with the CTA
instead of filing a protest with the CIR. The CIR as well as his duly authorized
representative must indicate clearly and unequivocally to the taxpayer whether an
action constitutes a final determination on a disputed assessment. Words must be
carefully chosen in order to avoid any confusion that could adversely affect the rights
and interest of the taxpayer.

BPI V. CIR

Taxation Collection Prescriptive Period Reconsideration vs Reinvestigation

On October 20, 1989, the Bureau of Internal Revenue (BIR) issued a formal assessment
notice (FAN) against the Bank of the Philippine Islands (BPI). The FAN demanded BPI
to pay P28k in taxes. In November 1989, BPI filed a protest however the protest did not
specify if it was a request for reconsideration or a reinvestigation. The BIR did not reply
on the protest but on October 15, 1992 (four days before the expiration of the period to
collect or 1095 days [3 years]after issuance of FAN on 10/20/1989), the Commissioner
of Internal Revenue (CIR) issued a warrant of distraint/levy against BPI for the
satisfaction of the assessed tax. The warrant was served to BPI on October 23, 1992
(four days after period has prescribed). In September 1997, the CIR finally sent a letter
to BPI advising the latter that its protest is denied.
ISSUE:
1. Whether or not the filing of the protest by BPI suspended the running of the
prescriptive period.
2. Whether or not the governments right to collect the assessed tax has prescribed.
HELD:

1.

No. The protest did not indicate whether BPI was asking for a reconsideration or
a reinvestigation but since BPI did not adduce additional evidence, it should be treated
as a request for reconsideration. Under the tax code, a request for reconsideration does
not suspend the running of the prescriptive period. Even assuming that the protest is a
request for reinvestigation, the same did not toll the running of the prescriptive period
because the CIR failed to show proof that the request has been granted and that a
reinvestigation has been actually conducted. In fact, BPI never heard from the BIR not
until the CIR decided the protest in September 1997 5 years after the protest has been
filed.

2.

Yes. When it comes to collection, even though the warrant for distraint/levy was
issued within the prescriptive period, it is required that the same should be served upon
the taxpayer within the prescriptive period. This is because it is upon the service of the
Warrant that the taxpayer is informed of the denial by the BIR of any pending protest of
the said taxpayer, and the resolute intention of the BIR to collect the tax assessed. In the
case at bar, BPI received the warrant 4 days after the expiration of the prescriptive
period hence, the right to collect has already prescribed.

Santos. Vs. People et. al.

CIR v. NEXT MOBILE, INC. GR No. 212825. December 7, 2015

FACTS:
Respondent filed with the BIR taxes for 2001. Respondent, through Sarmiento, their
director of Finance, executed several waivers of the statute of limitations to extend the
prescriptive perios of assessment for taxes.
On 2005, respondent received from the BIR a PAN and a formal letter of demand to pay
deficiency income tax. The BIR denied respondent's protest.
With the CTA, it was held that the demand was beyond the three year prescription
period under the NIRC. That the case does not apply the 10 year prescripton period as
there was not false return by the respondent. Also, the waivers did not validly extend the
prescription because of irregularities.
ISSUE: Whether the period to pay has prescribed.

RULING:
NO.
The SC held that a waiver of the statute of limitations must faithfully comply with RMO
No. 20-90 and RDAO 05-01 in order to be valid. Sarmiento failed to show her authority
to the BIR to sign the waivers.
The BIR were also at fault having to neglect their ministerial duties.
Both parties knew the infirmities of the waivers but still continued. Respondents were
held in bad faith as after having benefited by the waivers by giving them more time to
pay, they used the waivers they made themselves when the consequences were not in
their favor.
The BIR's negligence amounts to malice and bad faith as they also knew the waivers did
not conform with RMO 20-90 and RDAO 05-01.
As both parties are in bad faith, the SC granted the petition on the issue of the
nullification of the formal letter of demand to the CTA.

ERICSSON TELECOMMUNICATIONS, INC., vs. CITY OF PASIG, represented by its

City Mayor, Hon. Vicente P. Eusebio, etal (G.R. No. 176667; November 22, 2007)
Facts:
1. Ericsson Telecommunications, Inc. is a corporation engaged in the design,
engineering, and marketing of telecommunication facilities/system with principal
address at Pasig City
2. It was assessed by the City Treasurer of Pasig City of business tax deficiency for the
years 1998 and 1999 and also for 2000 and 2001 based on its
gross revenues.
3. Petitioner filed a Protest arguing that that the local business tax on contractors should
be based on gross receipts and not gross revenue.
Issue: What should be the basis of the local business tax? gross receipts or gross
revenue?
Held: The basis should be gross receipts Paragraph e, Section 143 of the Local
Government Code provides that The municipality may impose taxes on the following
businesses: (e) On contractors and other independent contractors, in accordance with
the following schedule: With gross receipts for the preceding calendar year in the
amount of: Amount of Tax Per Annum The above provision specifically refers to gross
receipts.

Section 131 of the Local Government Code defines gross sales or receipts as follows:
"Gross Sales or Receipts"
- include the total amount of money or its equivalent representing the contract price,
compensation or service fee, including the amount charged or materials supplied with
the services and the deposits or advance payments actually or constructively received
during the taxable quarter for the services performed or to be performed for another
person excluding discounts if determinable at the time of sales, sales return, excise tax,
and value-added tax (VAT);
The law is clear.
Gross receipts include money or its equivalent actually or constructively received in
consideration of services rendered or articles sold, exchanged or leased, whether actual
or constructive.
Gross Revenue
- covers money or its equivalent actually or constructively received, including the value
of services rendered or articles sold, exchanged or leased, the payment of which is yet to
be received. This is in consonance with the International Financial Reporting Standards,
which defines revenue as the gross inflow of economic benefits (cash, receivables, and
other assets) arising from the ordinary operating activities of an enterprise (such as
sales of goods, sales of services, interest, royalties, and dividends), which is measured at
the fair value of the consideration received or receivable
In petitioner's case, its audited financial statements reflect income or revenue which
accrued to it during the taxable period although not yet actually or constructively
received or paid. This is because petitioner uses the accrual method of accounting,
where income is reportable when all the events have occurred that fix the taxpayer's
right to receive the income, and the amount can be determined with reasonable
accuracy; the right to receive income, and not the actual receipt, determines when to
include the amount in gross income. The imposition of local business tax based on
petitioner's gross revenue will inevitably result in the constitutionally proscribed double
taxation taxing of the same person twice by the same jurisdiction for the same thing
Inasmuch as petitioner's revenue or income for a taxable year will definitely include its
gross receipts already reported during the previous year and for which local business tax
has already been paid.
MNTC vs. Municipality of Guiguinto

Drilon vs. CA
Facts:

- In 1973, the private respondents were charged with double murder before Military
Commission No. 34.
- July 27, 1973: the military promulgated a decision acquitting Raul Paredes but
sentencing Rodolfo Ganzon to life imprisonment with hard labor. Paredes was
thereupon released from custody while Ganzon was made to serve sentence until he was
released on March 25, 1978 and placed under house arrest under guard. 3 In 1985,
Ganzon joined the Kilusang Bagong Lipunan (KBL), the party in power, where he was
designated as campaign manager.
- In 1988, administration having changed, then Secretary of Justice Sedfrey Ordoez
directed State Prosecutor Aurelio Trampe to conduct a preliminary investigation against
the private respondents for the above murders. The private respondents moved for
dismissal, in Ganzon's case, on the ground that he, Ganzon, had been extended an
absolute pardon by the President Ferdinand Marcos, and he, having been previously
convicted, can no longer be tried anew, and in Paredes' case, on the ground that he,
Paredes, had been acquitted. Trampe, however, denied both requests and
reconsideration having been likewise denied, the private respondents went to the Court
of Appeals on prohibition.
- The CA granted their petitions.
- The petitioners allege that the Court of Appeals, in granting prohibition, committed a
grave abuse of discretion: (1) Rodolfo Ganzon has not adequately proved the fact of
presidential pardon; (2) there exists no evidence in the files of the Govemment to prove
pardon; (3) Ganzon's copy is a bare machine copy and Ganzon has failed to adequately
establish the loss of the original; (4) the alleged pardon (or copy of it) had not been
properly sealed and authenticated, or executed in official Malacaang stationery; and
(5) the disposition of the murder cases by the military does not preclude the filing of
new informations by the civilian government.

Issue:
WON the Government may proceed criminally against the private respondents despite
verdict earlier rendered by Military Commission No. 34.

Held:

To the mind of the Court, Ganzon has accepted the judgment against him, and as Tan
(case of Tan) asked, "why should [he] who has accepted the justness of the verdict of the
military court who is satisfied that he had a fair hearing, and who is willing to serve his
sentence in full, be dragged through the harrow of another hearing in a civil court to risk
being convicted a second time perchance to serve a heavier penalty?"

Under the 1973 Constitution, as is under the present Cha the "pardoning power" of the
President (that is, to grant reprieves, commutations, and pardons, remit fines and
forfeitures) is final and unappealable so is commutation of sentence, in which the Chief
Executive reduces a sentence. It extinguishes criminal liability partially, and has the
effect of changing the penalty to a lesser one.

The Court does not believe, in Ganzon's case, that commutation of sentence need be in a
specific form. It is sufficient, to mind, that Ganzon was voluntarily released in 1978 wit
terms or conditions, except that he should remain under house arrest. The Court can not
consider Ganzon's house arrest as a continuation of his sentence, first, because in no
way is arrest a penalty, but rather a mere means of "taking ... a person custody in order
that he may be forthcoming to answer for commission of an offense," or, during early
martial law, a means to carry out Proclamation No. 1881, and second, because of the
records own scant condition as the exact terms of his "house arrest" (which,
parenthetically, no longer exists.) Hence, the view of the Court is that irrespective of the
"pardon," Ganzon has served his sentence and to reiterate, he can no longer be
reinvestigated for the same offense, much more undergo further imprisonment to
complete his service.

The Court therefore need not consider whether or not Rodolfo Ganzon had been
pardoned, and whatever "pardon" the former President may have extended to him did
not erase the fact that as early as 1978, he was a free man. Of course, he was supposed to
have remained under house arrest but as we said, not as a continuation of his sentence,
but pursuant to Marcos' vast arrest and commitment powers during martial rule. The
question of whether or not he should continue to remain under house arrest is also
a moot question as we noted, 28 and arrests except upon lawful judicial orders are no
longer possible. The Court's disposition, it is true, leaves Ganzon to all intents and
purposes "scot-free", yet whatever liberal treatment he may have received is not his fault
either, and in the second place, "worse" people have been better rewarded in this
regime.

Petition denied. Decision of the CA affirmed.

Reyes vs. CA

Lopez v. City of Manila (GR No. 127139; Feb. 19, 1999)

FACTS:
Section 219 of Republic Act 7160 (R.A. 7160) or the Local Government Code of 1991
requires the conduct of the general revision of real property.
The revision of real property assessments prescribed therein was not yet enforced in the
City of Manila. Upon receipt of Memorandum Circular No. 04-95 from the Bureau of
Local Government Finance relating to the failure of most of the cities and municipalities
of Metropolitan Manila, including the City of Manila, to conduct the general revision of
real property and after obtaining the necessary funds from the City Council, the City
Assessor began the process of general revision based on the updated fair market values
of the real properties.
The City Assessors Office submitted the proposed schedule of fair market values to the
City Council for its appropriate action. The council then enacted Manila Ordinance No.
7894 which was approved. With the implementation of the ordinance, the tax on the
land owned by the petitioner was increase hence he filed a special proceeding for the
declaration of nullity of the City of Manila Ordinance No. 7894 for being unjust,
excessive, oppressive or confiscatory.
Manila Ordinance No. 7905 took effect thereafter, reducing by fifty percent (50%) the
assessment levels (depending on the use of property, e.g., residential, commercial) for
the computation of tax due. The new ordinance amended the assessment levels
provided by Section 74, paragraph (A) of Manila Ordinance No. 7794..
Despite the amendment brought about by Manila Ordinance No. 7905, the controversy
proceeded.

The trial court dismissed the case for failure of the petitioner to exhaust administrative
remedies.
ISSUE: W/N the doctrine of exhaustion of administrative remedies may be dispensed
with in the instant case
HELD: NO. As a general rule, where the law provides for the remedies against the
action of an administrative board, body, or officer, relief to courts can be sought only
after exhausting all remedies provided. The reason rests upon the presumption that the
administrative body, if given the chance to correct its mistake or error, may amend its
decision on a given matter and decide it properly. Therefore, where a remedy is available
within the administrative machinery, this should be resorted to before resort can be
made to the courts, not only to give the administrative agency the opportunity to decide
the matter by itself correctly, but also to prevent unnecessary and premature resort to
courts.
One of the reasons for the doctrine of exhaustion is the separation of powers which
enjoins upon the judiciary a becoming policy of non-interference with matters coming
primarily within the competence of other department. x x x
There are however a number of instances when the doctrine may be dispensed with and
judicial action validly resorted to immediately. Among these exceptional cases are: (1)
when the question raised is purely legal, (2) when the administrative body is in estoppel;
(3) when the act complained of is patently illegal; (4) when there is urgent need for
judicial intervention; (5) when the claim involved is small; (6) when irreparable damage
will be suffered; (7) when there is no other plain, speedy and adequate remedy; (8) when
strong public interest is involved; (9) when the subject of controversy is private land;
and (10) in quo-warranto proceeding (citation omitted).
In the courts opinion, however, the instant petition does not fall within any of the
exceptions above-mentioned.
Basco v. PAGCOR
GRN 91649, 14 May 1991)

FACTS:

On July 11, 1983, PAGCOR was created under Presidential Decree 1869, pursuant to the
policy of the government, to regulate and centralize through an appropriate institution
all games of chance authorized by existing franchise or permitted by law. This was
subsequently proven to be beneficial not just to the government but also to the society in
general. It is a reliable source of much needed revenue for the cash-strapped
Government.
Petitioners filed an instant petition seeking to annul the PAGCOR because it is allegedly
contrary to morals, public policy and public order, among others.
ISSUES:
Whether PD 1869 is unconstitutional because:
1.) it is contrary to morals, public policy and public order;
2.) it constitutes a waiver of the right of the City of Manila to improve taxes and legal
fees; and that the exemption clause in PD 1869 is violative of constitutional principle of
Local Autonomy;

3.) it violates the equal protection clause of the Constitution in that it legalizes gambling
thru PAGCOR while most other forms are outlawed together with prostitution, drug
trafficking and other vices; and
4.) it is contrary to the avowed trend of the Cory Government, away from monopolistic
and crony economy and toward free enterprise and privatization.
HELD:
1.) Gambling, in all its forms, is generally prohibited, unless allowed by law. But the
prohibition of gambling does not mean that the government can not regulate it in the
exercise of its police power, wherein the state has the authority to enact legislation that
may interfere with personal liberty or property in order to promote the general welfare.
2.) The City of Manila, being a mere Municipal Corporation has no inherent right to
impose taxes. Its charter was created by Congress, therefore subject to its control. Also,
local governments have no power to tax instrumentalities of the National Government.

3.) Equal protection clause of the Constitution does not preclude classification of
individuals who may be accorded different treatment under the law, provided it is not

unreasonable or arbitrary. The clause does not prohibit the legislature from establishing
classes of individuals or objects upon which different rules shall operate.
4.) The Judiciary does not settle policy issues which are within the domain of the
political branches of government and the people themselves as the repository of all state
power.
Every law has in its favor the presumption of constitutionality, thus, to be nullified, it
must be shown that there is a clear and unequivocal breach of the Constitution. In this
case, the grounds raised by petitioners have failed to overcome the presumption.
Therefore, it is hereby dismissed for lack of merit.

City of Makati vs. Nikon Express