SUMMARY OF SC DECISIONS IN TAXATION (February 2010)

By: Bryan Joseph L. Mallillin

1. There was no need for the actual payment of tax, either the basic corporate income tax or the 2% franchise tax, before respondent PAL could avail itself of the in lieu of all other taxes provision under its Charter. In the present case, Presidential Decree 1590 granted respondent Philippine Airlines (PAL) an option to pay the lower of two alternatives: (a) "the basic corporate income tax based on PALs annual net taxable income computed in accordance with the provisions of the National Internal Revenue Code" or (b) "a franchise tax of two percent of gross revenues." Availment of either of these two alternatives shall exempt the airline from the payment of "all other taxes," including the 20 percent final withholding tax on bank deposits. PAL has the option to choose the alternative that results in lower taxes. It is not the fact of tax payment that exempts it, but the exercise of its option. Republic of the Philippines vs. Philippine Airlines, Inc., G.R. No. 179800, February 4, 2010 2. Estoppel is an exception to the doctrine of exhaustion of administrative remedies, as when the wording of the Formal Letter of Demand with Assessment Notices led petitioner Allied to believe that it was in fact the final decision of the CIR. The BIR issued a Formal Letter of Demand with Assessment Notices (FLD). Contrary to Section 228 of the NIRC, petitioner did not protest the final assessment notices but instead filed a Petition for Review with the CTA. However, a careful reading of the FLD leads to the conclusion that the instant case is an exception to the rule on exhaustion of administrative remedies, i.e., estoppel. Respondent was estopped from invoking the rule on exhaustion, considering that in its Resolution, it said, The opinions promulgated by the Secretary of Justice are advisory in nature ... and any aggrieved party has the court for recourse. The statement of the respondent led the petitioner to conclude that only a final judicial ruling in its favor would be accepted by the Commission. Allied Banking Corporation v. Commissioner of Internal Revenue, G.R. No. 175097, February 5, 2010 3. Revenue Regulations (RR) No. 7-95 required the printing of the word zero-rated on the invoices covering zero-rated sales, which became part of the Tax Code through the amendments introduced by RA 9337. When petitioner made the export sales subject of this case, i.e., from April 1998 to March 1999, the rule that applied was Section 4.108-1 of RR 7-95, otherwise known as the Consolidated ValueAdded Tax Regulations, which the Secretary of Finance issued on December 9, 1995 and took effect on January 1, 1996. It already required the printing of the word zero-rated on the invoices covering zero-rated sales. When R.A. 9337 amended the 1997 NIRC on November 1, 2005, it made this particular revenue regulation a part of the tax code. Panasonic Communication Imaging Corporation v. Commissioner of Internal Revenue, G.R. No. 178090, February 8, 2010

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4. Before the amendment introduced by RA 9337, excess creditable VAT withheld is refundable; hence may be the subject of a claim for refund as an erroneously collected tax under Sections 204(C) and 229 of the Tax Code. Even if the law does not expressly state that Ironcons excess creditable VAT withheld is refundable, it may be the subject of a claim for refund as an erroneously collected tax under Sections 204(C) and 229. It should be clarified that this ruling only refers to creditable VAT withheld pursuant to Section 114 prior to its amendment. After its amendment by R.A. 9337, the amount withheld under Section 114 is now treated as a final VAT, no longer under the creditable withholding tax system. Moreover, considering the CTAs finding in the present case that Ironcon had excess creditable VAT withheld for which it was entitled to a refund, it makes no sense to deny Ironcon the benefit of the BPI ruling (386 Phil. 719 [2000]) that overlooks technicalities in the presentation of evidence. Commissioner v. Ironcon Builders, G.R. No. 1800, February 8, 2010 5. If an international air carrier maintains flights to and from the Philippines, it shall be taxed at the rate of 2 1/2% of its Gross Philippine Billings, while international air carriers that do not have flights to and from the Philippines but nonetheless earn income from other activities in the country will be taxed at the rate of 32% of such income. Sec. 28(A)(1) of the 1997 NIRC is a general rule that resident foreign corporations are liable for 32% tax on all income from sources within the Philippines. Sec. 28(A)(3) is an exception to this general rule. In the instant case, the general rule is that resident foreign corporations shall be liable for a 32% income tax on their income from within the Philippines, except for resident foreign corporations that are international carriers that derive income from carriage of persons, excess baggage, cargo and mail originating from the Philippines which shall be taxed at 2 1/2% of their Gross Philippine Billings. Petitioner, being an international carrier with no flights originating from the Philippines, does not fall under the exception. As such, petitioner must fall under the general rule. South

African Airways v. Commissioner of Internal Revenue, G.R. No. 180356, February 16, 2010
6. The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. It is clear that the proper party to question, or claim a refund or tax credit of an indirect tax is the statutory taxpayer, which is Petron in this case, as it is the company on which the tax is imposed by law and which paid the same even if the burden thereof was shifted or passed on to another. Even if Petron shifted or passed on to petitioner Silkair the burden of the tax, the additional amount which petitioner paid is not a tax but a part of the purchase price which it had to pay to obtain the goods.

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Moreover, evidence already presented and admitted by the court in a previous case cannot be adopted in a separate case pending before the same court without the same being offered and identified anew. Silkair (Singapore) Pte. Ltd. v. Commissioner of Internal Revenue, G.R. No. 184398, February 25, 2010 7. The repeal of the Local Tax Code by the Local Government Code (LGC) of 1991 is not a legal basis for the imposition of VAT on the gross receipts of cinema/theater operators or proprietors derived from admission tickets. The removal of the prohibition under the Local Tax Code did not grant nor restore to the national government the power to impose amusement tax on cinema/theater operators or proprietors. Considering that there is no provision of law imposing VAT on the gross receipts of cinema/theater operators or proprietors derived from admission tickets, Revenue Memorandum Circular (RMC) No. 28-2001 which imposes VAT on the gross receipts from admission to cinema houses must be struck down. RMCs must not override, supplant, or modify the law, but must remain consistent and in harmony with the law they seek to apply and implement. Commissioner of Internal Revenue v. SM Prime Holdings, Inc., G.R. No. 183505, February 26, 2010

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