BELL CORP. VS. CIR GR NO. CIR VS.

PL MANAGEMENT
181298 INTERNATIONAL PHILIPPINES
GR No. 160949
Option to carry-over excess income tax
payments to the succeeding years once National Internal Revenue Code;
made becomes irrevocable irrevocability of option to carry-over excess
Under Section 76 of the 1997 National income tax payments. When the taxpayer
Internal Revenue Code (NIRC), once an opted to carry over its unutilized creditable
option to carry-over excess income tax withholding tax from1997 to taxable year
payments to the succeeding years, it 1998, the carry-over could no longer be
becomes irrevocable. This was what the converted into a claim for tax refund
Supreme Court reiterated in its new because of the irrevocability rule provided
decision in the case of Belle Corporation vs. in Section 76 of the National Internal
Commissioner of Internal Revenue, G.R. Revenue Code of 1997. Thereby, the
No. 181298 promulgated last January 10, taxpayer became barred from claiming the
2011. refund.

The issue passed upon by the Court is National Internal Revenue Code; carrying-
whether petitioner is entitled to a refund of over excess income tax payments;
its excess income tax payments for the prescription. In view of its irrevocable
taxable year 1997 in the amount of choice, taxpayer remained entitled to utilize
P106,447,318.00. that amount of excess creditable
withholding tax as tax credit in succeeding
In denying petitioner Belle Corp.s Petition taxable years until fully exhausted. In this
for Certiorari under Rule 45 of the Rules of regard, prescription did not bar it from
Court, the highest tribunal of the land applying the amount as tax credit
opined that since petitioner already carried considering that there was no prescriptive
over its 1997 excess income tax payments to period for the carrying over of the amount
the succeeding taxable year 1998, it may no as tax credit in subsequent taxable years.
longer file a claim for refund of unutilized
tax credits for taxable year 1997.

The Court explained that Under the new

law, in case of overpayment of income
taxes, the remedies are still the same; and
the availment of one remedy still precludes
the other. But unlike Section 69 of the old
NIRC, the carry-over of excess income tax
payments is no longer limited to the
succeeding taxable year. Unutilized excess
income tax payments may now be carried
over to the succeeding taxable years until
fully utilized. In addition, the option to
carry-over excess income tax payments is
now irrevocable. Hence, unutilized excess
income tax payments may no longer be
refunded.
Co Untian Cases 1
 MERCURY DRUG discount extended by a private
CORPORATION vs. CIR GR establishment to senior citizens in their
No. 164050 purchase of medicines. X x x.

The SC declared that the main issue under We reiterated this ruling in the 2008 case of
this case is to determine whether the claim Cagayan Valley Drug by holding that
for tax credit should be based on the full petitioner therein is entitled to a tax credit
amount of the 20% senior citizens discount for the full 20% sales discounts it extended
or the acquisition cost of the merchandise to qualified senior citizens. This holds true
sold. despite the fact that petitioner suffered a net
loss for than taxable year. We finally
The SC declared: Preliminarily, Republic
affirmed in M.E. Holding that the tax credit
Act No. 7432 is a piece of social legislation
should be equivalent to the actual 20% sales
aimed to grant benefits and privileges to
discount granted to qualified senior
senior citizens. Among the highlights of this
citizens.
Act is the grant of sales discounts on the
purchase of medicines to senior citizens. The SC mentioned that RA No. 7432 has
Section 4 (a) of Republic Act No. 7432 under- gone two amendments. The first was
reads: in 2003 by RA No. 9257and the second by
RA No. 9994 in 2010. The SC stressed that
SEC.4. Privileges for Senior Citizens. The
the 20% sales discount granted by
senior citizens shall be entitled to the
establishments to qualified senior citizens is
following:
now treated as tax deduction and not as a
a) the grant of twenty percent (20%) tax credit.
discount from all establishments relative to
The SC concluded:
the utilization of transportation services,
hotels and similar lodging establishments, Based on the foregoing, we sustain
restaurants and recreation centers and petitioners argument that the cost of
purchase of medicines anywhere in the discount should be computed on the actual
country; Provided, That private amount of the discount extended to senior
establishments may claim the cost as tax citizens. How- ever, we give full accord to
credit; the factual findings of the Court of Tax
Appeals with respect to the actual amount
X x x.
of the 20% sales discount, i.e., the sum of
The foregoing proviso specifically allows P3,522,123.25. for the year 1993 and
the 20% senior citizens discount to be P34,211,769.45 for the year 1994. There- fore,
claimed by the private establishment as a petitioner is entitled to a tax credit equiva-
tax credit and not merely as a tax deduction lent to the actual amounts of the 20% sales
from gross sales or gross income. X x x. discount as determined by the Court of Tax
Appeals.
In Bicolandia, we construed the term cost
as referring to the amount of the 20%
Co Untian Cases 2
 PAGCOR VS. BIR GR No. 172087 Despite this, the Court held that the
portions of real property that are leased to
PAGCOR is subject to income tax but private entities are not exempt from real
remains exempt fromthe imposition of property taxes as these are not actually,
value-added tax. directly and exclusively used for charitable
purposes. (strictissimi juris) Moreover, P.D.
With the amendment by R.A. No. 9337 of
No. 1823 only speaks of tax exemptions as
Section 27 (c) of the National Internal
regards to:
Revenue Code of 1997 by omittingPAGCOR
from the list of government corporations - income and gift taxes for all
exempt for income tax,the legislative intent donations, contributions,
is to require PAGCOR to endowments and equipment and
paycorporateincome tax. However, supplies to be imported by
nowhere in R.A. No. 9337 is it providedthat authorized entities or persons and
PAGCOR can be subjected to VAT. Thus, by the Board of Trustees of the
the provision of RR No. 16-2005, which the Lung Center of the Philippines for
respondent BIR issued to implementthe the actual use and benefit of the
VAT law, subjecting PAGCOR to 10% VAT Lung Center; and
isinvalid for being contrary to R.A. No. - taxes, charges and fees imposed by
9337. the Government or any political
subdivision or instrumentality
thereof with respect to equipment
LUNG CENTER OF THE purchases (expression unius est
exclusion alterius/expressium facit
PHILIPPINES VS. QUEZON CITY
cessare tacitum).
AND CONSTANTINO ROSAS GR
No. 144104

The Court held that the petitioner is indeed

a charitable institution based on its charter
and articles of incorporation. As a general
principle, a charitable institution does not
lose its character as such and its exemption
from taxes simply because it derives income
from paying patients, whether out-patient
or confined in the hospital, or receives
subsidies from the government, so long as
the money received is devoted or used
altogether to the charitable object which it is
intended to achieve; and no money inures
to the private benefit of the persons
managing or operating the institution.

Co Untian Cases 3
 CIR VS. ST. LUKE'S MEDICAL COMMISSIONER VS. BRITISH
CENTER GR No. 195909 OVERSEAS AIRWAYS CORP. GR
L-65773-74
St. Lukes Medical Center, Inc. (St. Lukes)
was assessed by the BIR for deficiency The source of an income is the property,
income tax under Section 27(B) of the 1997 activity or service that produced the
Tax Code, which imposes 10% income tax
income. For the source of income to be
on the taxable income of proprietary
educational institutions and hospitals which considered as coming from the Philippines,
are non profit. The CTA dismissed the it is sufficient that the income is derived
assessment on the ground that St. Lukes is from activity within the Philippines. Herein,
not subject to income tax under Section the sale of tickets in the Philippines is the
30(E) and (G) of the Tax Code, which activity that produced the income. The
exempts from income tax income received
tickets exchanged hands here and payments
by non-stock corporations organized and
for fares were also made here in Philippine
operated exclusively for charitable purposes
and civic leagues and organizations not currency.
organized for profit and promoting social
welfare. The situs of the source of payments is the
Philippines. The flow of wealth proceeded
Upon appeal to the Supreme Court (SC), the from, and occurred within, Philippine
latter ruled that St. Lukes is subject to tax territory, enjoying the protection accorded
under Section 27(B) of the 1997 Tax Code. In by the Philippine Government. In
arriving at the conclusion, the SC reconciled consideration of such protection, the flow of
the provisions of Sections 27(B) and 30 of
wealth should share the burden of
the 1997 Tax Code. A charitable institution,
while organized and operated supporting the government. PD 68, in
exclusively for charitable purposes, is relation to PD 1355, ensures that
nevertheless allowed to engage in international airlines are taxed on their
activities conducted for profit without income from Philippine sources. The 2 1/2
loosing its tax exempt status. The only %tax on gross billings is an income tax. If it
consequence is that the income of
had been intended as an excise or
whatever kind and character from any of
percentage tax, it would have been placed
the activities conducted for profit,
regardless of the disposition of such under Title V of the Tax Code covering
income, shall be subject to tax. St. Lukes is taxes on business.
a non-stock non-profit corporation.
Nonetheless, services to paying patients are
activities conducted for profit. Such income
is subject to income tax, but not to the 30%
income tax but to 10% under Section 27(B)
of the 1997 Tax Code.

Co Untian Cases 4
 CIR VS. BPI GR No. 178490 Philippine Manufacturing Corporation
(G.R. No. 66838, December 2, 1991, 204
IRREVOCABILITY RULE SCRA 377), a withholding agent was
considered a proper party to file a claim for
There are two options offered by Section 76
refund of the withheld taxes of its foreign
to a taxable corporation whose total
parent company. The CIR was incorrect in
quarterly income tax payments in a given
saying that this ruling applies only when
taxable year exceed its total income tax due.
the withholding agent and the taxpayer are
These are the filing for a tax refund or the
related parties, i.e., where the withholding
availing of a tax credit. These two options
agent is a wholly owned subsidiary of the
are alternative in nature. The choice of one
taxpayer. Although such relation between
precludes the other. The controlling factor
the taxpayer and the withholding agent is a
for the operation of the irrevocability rule is
factor that increases the latters legal interest
that the taxpayer chose an option; and once
to file a claim for refund, there is nothing in
it had already done so, it could no longer
the decision in said case to suggest that such
make another one. Consequently, after the
relationship is required or that the lack of
taxpayer opts to carry-over its excess tax
such relation deprives the withholding
credit to the following taxable period, the
agent of the right to file a claim for refund.
question of whether or not it actually gets to
Rather, what is clear in the decision is that a
apply said tax credit is irrelevant The choice
withholding agent has a legal right to file a
by BPI of the option to carry over its 1998
claim for refund for two reasons. First, he is
excess income tax credit to succeeding
considered a taxpayer under the NIRC as
taxable years, which it explicitly indicated
he is personally liable for the withholding
in its 1998 ITR, is irrevocable. Hence, BPI is
tax as well as for deficiency assessments,
not entitled to a refund.
surcharges, and penalties, should the
amount of the tax withheld be finally found
to be less than the amount that should have
CIR VS. SMART been withheld under law. Second, as an
COMMUNICATIONS GR No. agent of the taxpayer, his authority to file
179045-46 the necessary income tax return and to
remit the tax withheld to the government
SMART, AS WITHHOLDING AGENT, impliedly includes the authority to file a
MAY FILE THE CLAIM FOR REFUND. claim for refund and to bring an action for
recovery of such claim.
The person entitled to claim a tax refund is
the taxpayer [Sections 204(c) and 229 of the Silkair (Singapore) Pte, Ltd. vs.
National Internal Revenue Code (NIRC)]. Commissioner of Internal Revenue (supra),
However, in case the taxpayer does not file cited by the CIR, was inapplicable as it
a claim for refund, the withholding agent involved excise taxes, not withholding
may file the claim. Thus, in Commissioner taxes. In that case, it was ruled that the
of Internal Revenue v. Procter & Gamble proper party to question, or seek a refund

Co Untian Cases 5
of, an indirect tax is the statutory taxpayer, enterprise carries on business in the other
the person on whom the tax is imposed by Contracting State through a permanent
law and who paid the same even if he shifts establishment. The term permanent
the burden thereof to another. establishment is defined as a fixed place of
business where the enterprise is wholly or
As an agent of the taxpayer, it is the duty of
partly carried on. However, even if there is
the withholding agent to return to the
no fixed place of business, an enterprise of a
principal taxpayer what he has recovered.
Contracting State is deemed to have a
Otherwise, he would be unjustly enriching
permanent establishment in the other
himself at the expense of the principal
Contracting State if it carries on supervisory
taxpayer from whom the taxes were
activities in that other State for more than 6
withheld, and from whom he derives his
months in connection with a construction,
legal right to file a claim for refund.
installation or assembly project which is
THE PAYMENTS FOR THE CM AND SIM being undertaken in that other State. In this
APPLICATION AGREEMENTS case, it was established during the trial that
CONSTITUTED BUSINESS PROFITS Prism did not have a permanent
WHICH WERE NOT TAXABLE UNDER establishment in the Philippines. Hence,
THE RP-MALAYSIA TAX TREATY. business profits derived from Prisms
HOWEVER, THE PAYMENT FOR THE dealings with Smart were not taxable.
SDM AGREEMENT CONSTITUTED
Under its agreements with Smart, Prism
TAXABLE ROYALTY UNDER THE
had intellectual property right over the
SAME TREATY. SDM program, but not over the CM and
The RP-Malaysia Tax Treaty defines SIM Application programs as the
royalties as payments of any kind proprietary rights of these programs
received as consideration for: (i) the use of, belonged to Smart. Thus, out of the
or the right to use, any patent, trade mark, payments made to Prism, only the payment
design or model, plan, secret formula or for the SDM program was a royalty subject
process, any copyright of literary, artistic or to a 25% withholding tax; the payments for
scientific work, or for the use of, or the right the CM and SIM Application programs
to use, industrial, commercial, or scientific constituted Prisms non-taxable business
equipment, or for information concerning profits. The BIR should, therefore, refund
industrial, commercial or scientific the erroneously withheld royalty taxes for
experience; (ii) the use of, or the right to use, the payments pertaining to the CM and SIM
cinematograph films, or tapes for radio or Application Agreements.
television broadcasting. They are taxed at
The BIR was ordered to issue a Tax Credit
25% of the gross amount.
Certificate to Prism in the amount of
Under the same Treaty, the business P3,989,456.43.
profits of an enterprise of a Contracting
State is taxable only in that State, unless the

Co Untian Cases 6
 NPC VS. CBAA GR No. 171470 Time and again, the Supreme
Court has stated that taxation is the
NAPOCORs basis for its claimed rule and exemption is the
exception. The law does not look
exemption Section 234(c) of the LGC is with favor on tax exemptions and
clear and not at all ambiguous in its the entity that would seek to be
terms. Exempt from real property taxation thus privileged must justify it by
words too plain to be mistaken and
are: (a) all machineries and equipment; (b) [that too categorical to be
are] actually, directly, and exclusively used by; misinterpreted. Thus, applying the
(c) [local water districts and] government- rule of strict construction of laws
granting tax exemptions, and the
owned or controlled corporations engaged in rule that doubts should be resolved
the [supply and distribution of water in favor of provincial corporations,
and/or] generation and transmission of electric we hold that FELS is considered a
taxable entity.
power.
The mere undertaking of
We note, in the first place, that the petitioner NPC under Section 10.1
of the Agreement, that it shall be
present case is not the first occasion where
responsible for the payment of all
NAPOCOR claimed real property tax real estate taxes and assessments,
exemption for a contract partner under Sec. does not justify the exemption. The
privilege granted to petitioner
234 (c) of the LGC. In FELS Energy, Inc. v.
NPC cannot be extended to FELS.
The Province of Batangas (that was The covenant is between FELS and
consolidated with NAPOCOR v. Local Board NPC and does not bind a third
of Assessment Appeals of Batangas, et person not privy thereto, in this
case, the Province of Batangas.
al.), the Province of Batangas assessed real
property taxes against FELS Energy, Inc.
We also recognized this strictissimi
the owner of a barge used in generating
juris standard in NAPOCOR v. City of
electricity under an agreement with
Cabanatuan. Under this standard, the
NAPOCOR. Their agreement provided that
claimant must show beyond doubt, with
NAPOCOR shall pay all of FELS real estate
clear and convincing evidence, the factual
taxes and assessments. We concluded in
basis for the claim. Thus, the real issue in a
that case that we could not recognize the tax
tax exemption case such as the present case
exemption claimed, since NAPOCOR was
is whether NAPOCOR was able to
not the actual, direct and exclusive user of
convincingly show the factual basis for its
the barge as required by Sec. 234 (c). In
claimed exception.
making this ruling, we cited the required
standard of construction applicable to tax
exemptions and said:

Co Untian Cases 7
 The records show that NAPOCOR, maintenance thereof. The
project proponent operates
no less, admits BPPCs ownership of the the facility over a fixed term
machineries and equipment in the power during which it is allowed
plant. Likewise, the provisions of the BOT to charge facility users
appropriate tolls, fees,
agreement cited above clearly show rentals, and charges not
BPPCs ownership. Thus, ownership is not a exceeding those proposed
disputed issue. in its bid or as negotiated
and incorporated in the
contract to enable the
Rather than ownership, project proponent to
NAPOCORs use of the machineries and recover its investment, and
operating and maintenance
equipment is the critical issue, since its
expenses in the project. The
claim under Sec. 234(c) of the LGC is project proponent transfers
premised on actual, direct and exclusive the facility to the
government agency or local
use. To support this claim, NAPOCOR
government unit concerned
characterizes the BOT Agreement as a at the end of the fixed term
mere financing agreement where BPPC is which shall not exceed fifty
the financier, while it (NAPOCOR) is the (50) years x x x x.

actual user of the properties.

Under this concept, it is the project

As in the fact of ownership, proponent who constructs the project at its

NAPOCORs assertion is belied by the own cost and subsequently operates and

documented arrangements between the manages it. The proponent secures the

contracting parties, viewed particularly return on its investments from those using

from the prism of the BOT law. the projects facilities through appropriate
tolls, fees, rentals, and charges not
The underlying concept behind a exceeding those proposed in its bid or as
BOT agreement is defined and described negotiated. At the end of the fixed term
in the BOT law as follows: agreed upon, the project proponent
transfers the ownership of the facility to the
Build-operate-and-
transfer A contractual government agency. Thus, the government
arrangement whereby the is able to put up projects and provide
project proponent immediate services without the burden of
undertakes the
the heavy expenditures that a project start
construction, including
financing, of a given up requires.
infrastructure facility, and
the operation and

Co Untian Cases 8
 A reading of the provisions of the shouldering the huge financial
parties BOT Agreement shows that it fully requirements that the project would entail
conforms to this concept. By its express if it were to undertake the project on its
terms, BPPC has complete ownership own. Its obligation, in exchange, is to
both legal and beneficial of the project, shoulder specific operating costs under a
including the machineries and equipment compensation scheme that includes the
used, subject only to the transfer of these purchase of all the electricity that BPPC
properties without cost to NAPOCOR generates.
after the lapse of the period agreed
upon. As agreed upon, BPPC provided That some kind of financing
the funds for the construction of the power arrangement is contemplated in the
plant, including the machineries and sense that the private sector proponent
equipment needed for power generation; shall initially shoulder the heavy cost of
thereafter, it actually operated and still constructing the projects buildings and
operates the power plant, uses its structures and of purchasing the needed
machineries and equipment, and receives machineries and equipment is
payment for these activities and the undeniable. The arrangement, however,
electricity generated under a defined goes beyond the simple provision of
compensation scheme. Notably, BPPC as funds, since the private sector proponent
owner-user is responsible for any defect not only constructs and buys the necessary
in the machineries and equipment. assets to put up the project, but operates
and manages it as well during an agreed
As envisioned in the BOT law, the period that would allow it to recover its
parties agreement assumes that within the basic costs and earn profits. In other
agreed BOT period, BPPC the investor words, the private sector proponent goes
private corporation shall recover its into business for itself, assuming risks and
investment and earn profits through the incurring costs for its account. If it
agreed compensation scheme; thereafter, it receives support from the government at
shall transfer the whole project, including all during the agreed period, these are pre-
machineries and equipment, to agreed items of assistance geared to ensure
NAPOCOR without additional cost or that the BOT agreements objectives both
compensation. The latter, for its part, for the project proponent and for the
derives benefit from the project through government are achieved. In this sense,
the fulfillment of its mandate of delivering a BOT arrangement issui generis and is
electricity to consumers at the soonest different from the usual financing
possible time, without immediately arrangements where funds are advanced
Co Untian Cases 9
to a borrower who uses the funds to direct, and immediate, while NAPOCORs
establish a project that it owns, subject is contingent and, at this stage of the BOT
only to a collateral security arrangement to Agreement, not sufficient to support its
guard against the nonpayment of the claim for tax exemption. Thus, the CTA
loan. It is different, too, from an committed no reversible error in denying
arrangement where a government agency NAPOCORs claim for tax exemption.
borrows funds to put a project from a
private sector-lender who is thereafter For these same reasons, we reject
commissioned to run the project for the NAPOCORs argument that the
government agency. In the latter case, the machineries and equipment must be
government agency is the owner of the subjected to a lower assessment
project from the beginning, and the lender- level. NAPOCOR cites as support Section
operator is merely its agent in running the 216 of the LGC which provides:
project.
Section 216. Special
Classes of Real Property. - All
If the BOT Agreement under lands, buildings, and other
consideration departs at all from the improvements thereon
actually, directly and
concept of a BOT project as defined by law, exclusively used for
it is only in the way BPPCs cost recovery is hospitals, cultural, or
achieved; instead of selling to facility users scientific purposes, and
those owned and used by
or to the general public at large, the
local water districts, and
generated electricity is purchased by government-owned or
NAPOCOR which then resells it to power controlled corporations
rendering essential public
distribution companies. This deviation,
services in the supply and
however, is dictated, more than anything distribution of water
else, by the structure and usages of the and/or generation and
transmission of electric
power industry and does not change the
power shall be classified as
BOT nature of the transaction between the special.
parties.
in relation with Section 218 (d) of the LGC
Consistent with the BOT concept which provides:
Section
and as implemented, BPPC the owner-
218. Assessment Levels. - The
manager-operator of the project is the assessment levels to be
actual user of its machineries and applied to the fair market
equipment. BPPCs ownership and use of value of real property to
determine its assessed value
the machineries and equipment are actual,
Co Untian Cases 10
 shall be fixed by ordinances properties are not really tax
of the Sangguniang
Panlalawigan, Sangguniang exempt). NAPOCOR argues that if no tax
Panlungsod or Sangguniang exemption will be recognized, the
Bayan of a municipality responsibility it assumed carries practical
within the Metropolitan
Manila Area, at the rates implications that are very difficult to
not exceeding the ignore. In fact, NAPOCORs supplemental
following: petition is anchored on these practical
xxxx
implications the alleged detriment to the
(d) On Special Classes: The
assessment levels for all lands public interest that will result if the levy,
buildings, machineries and other sale, and transfer of the machineries and
improvements;
equipment were to be
Actual Use Assessment Level
completed. NAPOCORs reference is to
Cultural 15% fact that the machineries and
the
Scientific 15%
equipment have been sold in public
Hospital auction
15% and the buyer the respondent

Local water districts Province

10% will consolidate its ownership
over these properties on February 1, 2009.
Government-owned or 10%
controlled corporations
engaged in the supply and We fully recognize these
distribution of water concerns. However, these considerations
and/or generation and are not relevant to our disposition of the
transmission of electric
power issues in this case. We are faced here with
the application of clear provisions of law
and settled jurisprudence to a case that, to
our mind, should not be treated differently
Since the basis for the application of
solely because of non-legal or practical
the claimed differential treatment or
considerations. Significantly, local
assessment level is the same as the claimed
government real property taxation also has
tax exemption, the lower tribunals
constitutional underpinnings, based on
correctly found that there is no basis to
Section 5 of Article X of the
apply the lower assessment level of 10%.
Constitution, that we cannot simply
As our last point, we note that a real ignore. In FELS
concern for NAPOCOR in this case is its
assumption under the BOT agreement of
BPPCs real property tax liability (which in
itself is a recognition that BPPCs real
Co Untian Cases 11
Energy, Inc. v. The Province of
Batangas, earlier cited, we said:

The power to tax is an

incident of sovereignty and is
unlimited in its magnitude,
acknowledging in its very nature
no perimeter so that security
against its abuse is to be found
only in the responsibility of the
legislature which imposes the tax
on the constituency who are to pay
for it. The right of local
government units to collect taxes
due must always be upheld to
avoid severe tax erosion. This
consideration is consistent with
the State policy to guarantee the
autonomy of local governments
and the objective of the Local
Government Code that they enjoy
genuine and meaningful local
autonomy to empower them to
achieve their fullest development
as self-reliant communities and
make them effective partners in
the attainment of national goals.
In conclusion, we
reiterate that the power to
tax is the most potent
instrument to raise the
needed revenues to finance
and support myriad
activities of the local
government units for the
delivery of basic services
essential to the promotion
of the general welfare and
the enhancement of peace,
progress, and prosperity of
the people. [Emphasis
supplied.]

Co Untian Cases 12
CITY ASSESSOR OF CEBU CIR VS. AICHI GR No.
VS. ASSOCIATION OF 184823
BENEVOLA DE CEBU GR
No. 152904 WHETHER OR NOT THE CLAIM FOR
REFUND WAS FILED WITHIN THE
We hold that the new building is an PRESCRIBED PERIOD
integral part of the hospital and should not
be assessed as commercial. Being a tertiary Yes. As ruled in the case of Commissioner
hospital, it is mandated to fully of Internal Revenue v. Mirant Pagbilao
departmentalized and be equipped with Corporation (G.R. No. 172129, September
the service capabilities needed to support 12, 2008), the two-year period should be
certified medical specialist and other reckoned from the close of the taxable
licensed physicians. The fact that they are quarter when the sales were made.
holding office is a separate building does
not take away the essence and nature of In Commissioner of Internal Revenue v.
their services vis-a-vis the overall Primetown Property Group, Inc (G.R. No.
operation of the hospital and to its 162155, August 28, 2007, 531 SCRA 436),
patients. we said that as between the Civil Code,
which provides that a year is equivalent to
Under the Local Government Code, Sec. 365 days, and the Administrative Code of
26: All lands, buildings and other 1987, which states that a year is composed
improvements thereon actually, directly of 12 calendar months, it is the latter that
and exclusively used for hospitals, cultural must prevail being the more recent law,
or scientific purposes and those owned and following the legal maxim, Lex posteriori
used by local water districts shall be derogat priori.
classified as special.
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.

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

Yes. We find the filing of the

judicial claim with the CTA
premature.

Co Untian Cases 13
Section 112(D) of the NIRC clearly
TOSHIBA VS. CIR GR No. 157594
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 IT IS AXIOMATIC IN PLEADINGS AND
grant or deny the claim. In case of full or PRACTICE THAT NO NEW ISSUE IN A CASE
partial denial by the CIR, the taxpayers CAN BE RAISED IN A PLEADING WHICH BY
recourse is to file an appeal before the DUE DILIGENCE COULD HAVE BEEN RAISED
CTA within 30 days from receipt of the IN PREVIOUS PLEADINGS.
decision of the CIR. However, if after the
120-day period the CIR fails to act on the The CIR did not argue in his Answer that
application for tax refund/credit, the Toshiba had no right to the credit/refund of
remedy of the taxpayer is to appeal the its input VAT payments because the latter
inaction of the CIR to CTA within 30 days. was VAT-exempt and its export sales were
VAT-exempt transactions. The Pre-Trial Brief
Subsection (A) of Section 112 of the NIRC of the CIR was equally bereft of such
states that any VAT-registered person, allegations or arguments. The CIR likewise
whose sales are zero-rated or effectively
chose not to present any evidence at all
zero-rated may, within two years after the
during the trial before the CTA, and also
close of the taxable quarter when the sales
waived the submission of a Memorandum.
were made, apply for the issuance of a tax
credit certificate or refund of creditable The CIR had waited until the CTA already
input tax due or paid attributable to such rendered its Decision before asserting in his
sales. The phrase within two (2) years x x Motion for Reconsideration that Toshiba was
x apply for the issuance of a tax credit VAT-exempt and its export sales were VAT-
certificate or refund refers to applications exempt transactions. Upon the failure of the
for refund/credit filed with the CIR and not CIR to timely plead and prove before the CTA
to appeals made to the CTA. its defenses or objections, the CIR is deemed
to have waived the same.
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.

Co Untian Cases 14
 CIR VS. SM Prime Holdings GR electric and/or telecommunication posts,
No. 183505 poles or towers by pole owners to other
pole users at ten percent (10%) of the annual
THE REPEAL OF THE LOCAL TAX CODE rental income derived from such lease or
BY THE LOCAL GOVERNMENT CODE rental. The City Council, in a letter dated 15
(LGC) OF 1991 IS NOT A LEGAL BASIS March 2005, informed Cagayan Electric
FOR THE IMPOSITION OF VAT ON THE Power and Light Company, Inc.
GROSS RECEIPTS OF CINEMA/THEATER (CEPALCO), through its President and
OPERATORS OR PROPRIETORS DERIVED Chief Operation Manager, Ms. Consuelo G.
FROM ADMISSION TICKETS. Tion, of the passage of the subject
ordinance. On September 30, 2005,
The removal of the prohibition under the
appellant CEPALCO, purportedly on pure
Local Tax Code did not grant nor restore to
question of law, filed a petition for
the national government the power to
declaratory relief assailing the validity of
impose amusement tax on cinema/theater
Ordinance No. 9503-2005 before the
operators or proprietors. Considering that
Regional Trial Court.
there is no provision of law imposing VAT
on the gross receipts of cinema/theater The Court ruled that CEPALCO failed to
operators or proprietors derived from exhaust administrative remedies. Section 5
admission tickets, Revenue Memorandum of said ordinance provided that the
Circular (RMC) No. 28-2001 which imposes Ordinance shall take effect after 15 days
VAT on the gross receipts from admission following its publication in a local
to cinema houses must be struck down. newspaper of general circulation for at least
RMCs must not override, supplant, or three (3) consecutive issues. Gold Star
modify the law, but must remain consistent Daily published Ordinance No. 9503-2005
and in harmony with the law they seek to on 1 to 3 February 2005. Ordinance No.
apply and implement. 9503-2005 thus took effect on 19 February
2005. CEPALCO filed its petition for
CEPALCO VS. CITY OF declaratory relief before the Regional Trial
CAGAYAN DE ORO GR No. Court on 30 September 2005, clearly beyond
191761 the 30-day period provided in Section 187.
CEPALCO did not file anything before the
FAILURE TO APPEAL TO THE Secretary of Justice. Thus, the Court found
SECRETARY OF JUSTICE WITHIN THE that CEPALCO ignored the mandatory
STATUTORY PERIOD OF 30 DAYS FROM nature of the statutory periods.
THE EFFECTIVITY OF AN ORDINANCE
IS FATAL ONES CAUSE. Note though that in this case, the Court
relaxed the rules. It then invalidated
On January 10, 2005, the Sangguniang Ordinance No. 9503-2005 for imposing 10%
Panlungsod of Cagayan de Oro (City tax instead of only 2%, in violation of
Council) passed Ordinance No. 9503-2005 Section 143(h) of the Local Government
imposing a tax on the lease or rental of Code.
Co Untian Cases 15
 CIR VS. YMCA GR No. 124043 Private respondent also invokes Article XIV,
Section 4, par. 3 of the Constitution,
claiming that it is a non-stock, non-profit
educational institution whose revenues and
WHETHER THE INCOME DERIVED assets are used actually, directly and
FROM RENTALS OF REAL PROPERTY exclusively for educational purposes so it is
OWNED BY YMCA SUBJECT TO INCOME exempt from taxes on its properties and
TAX income. This is without merit since the
exemption provided lies on the payment of
Yes. Income of whatever kind and character property tax, and not on the income tax on
of non-stock non-profit organizations from the rentals of its property. The bare
any of their properties, real or personal, or allegation alone that one is a non-stock,
from any of their activities conducted for non-profit educational institution is
profit, regardless of the disposition made of insufficient to justify its exemption from the
such income, shall be subject to the tax payment of income tax.
imposed under the NIRC.
For the YMCA to be granted the exemption
Rental income derived by a tax-exempt it claims under the above provision, it must
organization from the lease of its properties, prove with substantial evidence that (1) it
real or personal, is not exempt from income falls under the classification non-stock, non-
taxation, even if such income is exclusively profit educational institution; and (2) the
used for the accomplishment of its income it seeks to be exempted from
objectives. taxation is used actually, directly, and
exclusively for educational purposes.
Because taxes are the lifeblood of the nation, Unfortunately for respondent, the Court
the Court has always applied the doctrine noted that not a scintilla of evidence was
of strict in interpretation in construing tax submitted to prove that it met the said
exemptions (Commissioner of Internal requisites.
Revenue v. Court of Appeals, 271 SCRA
605, 613, April 18, 1997). Furthermore, a The Court appreciates the nobility of
claim of statutory exemption from taxation respondents cause. However, the Courts
should be manifest and unmistakable from power and function are limited merely to
the language of the law on which it is based. applying the law fairly and objectively. It
Thus, the claimed exemption must cannot change the law or bend it to suit its
expressly be granted in a statute stated in a sympathies and appreciations. Otherwise, it
language too clear to be mistaken (Davao would be over spilling its role and invading
Gulf Lumber Corporation v. Commissioner the realm of legislation. The Court regrets
of Internal Revenue and Court of Appeals, that, given its limited constitutional
G.R. No. 117359, p. 15 July 23, 1998). authority, it cannot rule on the wisdom or
propriety of legislation. That prerogative
Verba legis non est recedendum. The law belongs to the political departments of
does not make a distinction. The rental government.
income is taxable regardless of whence such
income is derived and how it is used or
disposed of. Where the law does not
distinguish, neither should we.

Co Untian Cases 16
 2013 CTA RULINGS 2. Observance of the 120-day period under
Section 12(C) of the Tax Code for the
Commissioner to act on administrative
claims for refund/credit of unutilized
input VAT is crucial in filing an appeal to
VAT REFUND the CTA.

1. In an application for refund of input As to its judicial claim, Petioner belatedly

taxes related to zero-rated sales, filed its Petition for Review before the Court
compliance with the 120-day waiting a quo only on April 20, 207 or 187 days
period is mandatory and jurisdictional, beyond the prescribed 30-day period to
with the exception of the period from appeal before the CTA, reckoned from the
December 10, 203 to December 6, 2010. lapse of the 120-day period fixed by law for
the BIR to act on claim for refund. Clearly
Applying the Supreme Court En Banc then, this case is one of late filing which
decision in the case of Commissioner of renders the Court without jurisdiction to
Internal Revenue vs. San Roque Power entertain the instant petition.
Corporation, G. R. No. 187485; Taganito
Mining Corporation vs. Commissioner of Consequently, petitioner's failure to file its
Internal Revenue, G.R. No. 19613; and judicial claim before the CTA within 30
Philex Mining Corporation vs. days from the lapse of the mandatory 120-
Commissioner of Internal Revenue, G.R. day period under Section 12(C) of the NIRC
No. 197156 promulgated on February 12, of 197, as amended, warrants a dismissal on
2013, compliance with the mandatory and its petition on the ground of absence of
jurisdictional 120+30 day period is jurisdiction to take cognizance of the case.
necessary whether before, during, or after (Chevron Holdings, Inc. vs. CIR, CTA EB
the effectivity of the Atlas and Mirant Case No. 837, May 07, 2013)
doctrine. However, there is an exception -
the period from the issuance of BIR Ruling
No. DA-489-03 on December 10, 203 to
December 6, 2010 when the Aichi doctrine 3. The 120-day period should be reckoned
was adopted, which again reinstated the from the filing of the administrative claim
120+30 day periods as mandatory and for refund should the taxpayer fail or opt
jurisdictional. [Deutsche Knowledge not to submit any document.
Services Pte. Ltd. vs. CIR, CTA EB Case No.
816, May 9, 2013] Petioner filed an administrative claim with
the BIR for the refund of its alleged
unutilized input VAT attributable to its
zero-rated sales for the year 209.
Respondent argues that Petioner must
prove that it submitted the complete
documents required under RMO No.53- 98
before the 120-day audit period shall apply
and before judicial remedies as provided for
in the law may be availed of. Respondent
also alleges that perusal of the petition for
review would show that petitioner never

Co Untian Cases 17
made mention that it submitted documents 4. Unreported input taxes cannot be the
in support of its claim for refund. The subject of refund on the ground of
allegation of submission of complete erroneous payment.
documents is a material fact necessary to
invoke jurisdiction and to justify relief Petioner claims that due to inadvertence,
demanded. Having failed to allege some of its input taxes for the quarter were
submission of complete documents, not declared in its Quarterly VAT Return,
respondent claims that she was evidently and consequently, not charged to the output
deprived of her opportunity to validate tax payable for the same quarter, resulting
petitioner's claim for refund in the to the alleged understatement of VAT
administrative level. overpayment. Petioner filed a claim for
refund of the alleged understatement of
The court disagreed and ruled that the overpayment of VAT liabilities pursuant o
completeness of documents to support a Sections 204(C) and 29 of the amended 197
claim is determined by a taxpayer. Should Tax Code.
the taxpayer decide to submit only certain
documents, or should the taxpayer fail, or The court denied Petitioners claim and
opted not, to submit any document at al, in ruled that the amount being claimed
support of its application for refund under essentially represents undeclared input
Section 12, the 120-day period should be taxes for the second quarter of 208, and not
reckoned from the filing of the said the erroneously paid VAT. The Court ruled
application. Moreover, the alleged non- that for input taxes to be available as tax
submission of complete documents at he credits, they must be substantiated and
administrative level is not fatal to a claim reported in the VAT returns. Moreover,
for refund in the judicial level. (CE Section 12 of the NIRC of 197, as amended,
Casecnan Water and Energy Company, Inc. enumerates the two instances when excess
vs. CIR, CTA Case No 8245, May 10, 2013) input taxes may be claimed for refund: a)
when they are attributable to zero-rated or
effectively zero-rated sales, and b) upon
cancelation of VAT registration due to
retirement from business. The undeclared
input taxes do not fall under any of these
instances. Hence, petioner is not entitled to
refund or issuance of tax credit. (Coca-Cola
Bottlers Philippines, Inc. vs. CIR, CTA Case
No. 8136, May 15, 2013)

Co Untian Cases 18
5. Sale of services to a foreign corporation ASSESSMENTS
with a branch office in the Philippines
cannot qualify for VAT zero-rating.

In claim for refund under Section 12 of the 6. Issuance of Preliminary Assessment

197 Tax Code, the refund/tax credit of Notice (PAN) is part of the due process
unutilized input VAT attributable to zero- and non-issuance of which renders the
rated or effectively zero rated sales is assessment void.
allowed subject o the taxpayer's compliance
with the following requisites: Petioner was issued a Formal Letter of
Demand and Final Assessment Notice for
1. that here must be zero-rated or effectively the year 2005, without prior issuance of a
zero-rated sales; PAN. The Court ruled that the issuance of
PAN is an integral part of procedural due
2. that input axes were incurred or paid; process. The PAN lays down the factual and
legal basis for the assessment. The Court
3. that such input axes are attributable to emphasized the indispensable nature of the
zero-rated or effectively zero- rated sales; PAN in the issuance of assessments and
gave emphasis to the fact that the 197 NIRC
4. that he input axes were not applied provided that the issuance of PAN is
against any output VAT liability; and mandatory in tax assessments except in a
few instances, specifically enumerated by
5. that he claim for refund was filed within law, where it is not required. (CIR vs.
the two-year prescriptive period. Laurence Le V. Luang (CTA EB Case No.
878 May 14, 2013)
Petioner claims that its sales of services to
foreign affiliates which are al engaged in
business conducted outside the Philippines
qualify for VAT zero-rating. But the Court 7. Under-declaration of purchases cannot
ruled that Petioner's reported sales of give rise to income tax and VAT
services to The Manufacturers Life assessments.
Insurance Company cannot qualify for VAT
zero-rating, as it is a corporation organized Petioner received from the CIR assessment
under the laws of the Dominion of Canada on alleged Petitioners deficiency income
but duly licensed and registered with the tax and VAT for taxable year 207. The
SEC to do business in the Philippines assessment arose from the Reconciliation of
through its branch, The Manufacturers Life Listing for Enforcement System (RELIEF),
Insurance Co. (Phils.), Inc. (Manulife Data Tax Reconciliation System (TRS) and Third
Services, Inc. vs. CIR, CTA Case Nos. 8054, Party Matching Bureau of Customs (TPM-
817, and 8139, May 8, 2013) BOC) Data Program. Respondent alleged
that Petioner had under-declaration of
purchases as a result of reconciliation of the
BOC data as against Petitioners purchases
per returns filed. It is on this alleged under-
declaration of purchases that Petioner was
assessed with deficiency income tax and
VAT on the premise that the under-

Co Untian Cases 19
declaration of purchases will translate to handling/storage or during the rectification
under-declaration of income. process shall not be allowed or granted."

The court ruled that the assessment has no Section 14 of RR No. 3-206 even expressly
factual or legal basis because under- provides that the "excise tax due on loses
declaration of purchases does not mean shall be paid by the rectifier on or before the
under-declaration of income. The eighth (8th) day of the month immediately
presumption of correctness of assessment following the month of operation." (Avon
being a mere presumption cannot be made Products Manufacturing, Inc. vs. CIR, CTA
to rest on another presumption. The three Case No. 8174, May 16, 2013)
(3) elements in the imposition of income are
1) there must be gain or profit, 2) the gain or
profit is realized or received, actually or
constructively, and 3) it is not exempted by
law or treaty from income tax. In the
imposition of assessment of income tax, it
must be clear that there was an income, and
such income was received by the taxpayer,
not when there is under-declaration of
expenses. Likewise, VAT can be imposed
only when it is shown that the taxpayer
received an amount of money or its
equivalent from its sale, barter or exchange
of goods or properties, or from sale or
exchange of services, and not when there
are un- declared sales. (Agrinurture, Inc. vs.
CIR, CTA Case No. 8345, May 29, 2013)

8. Taxpayer is liable for excise taxes on

distilled spirits on losses incurred in the
transportation and delivery of denatured
alcohol.

On the imposition of excise tax under

Section 141 of the amended 197 NIRC,
loses due to evaporation is covered and
contemplated by the excise tax impositions
because "no claim for excise tax refund or
credit shall be allowed on distilled spirits
that have been lost or destroyed after
removal thereof from the place of
production or released from the customs'
custody", and that "any allowance for losses
or actual losses incurred, whether or not
due to negligence, in-transit,

Co Untian Cases 20
 LOCAL TAXES petioner to pay deficiency franchise tax to
respondent Sorsogon City who had no
9. An entity that was not granted authority to collect the same. (Energy
secondary franchise by the government Development Corporation vs. CIR, CTA
cannot be liable for franchise tax. AC. NO. 90 May 14, 2013)

The term "franchise" for purposes of the

imposition of the franchise tax under
Section 137 of RA No. 7160 is clearly
defined under Section 131(m) as a right or
privilege, affected with public interest DOCUMENTARY STAMP TAX
which is conferred upon private persons or
corporation, under such terms and
10. To prove that DST payments are
conditions as the government and its covered by the exemption under section
political subdivisions may impose in the 19(e) of the Tax Code, taxpayer must show
interest of public welfare, security, and that the DST was paid on instruments
safety. evidencing sale, barter or exchange of
shares of stock listed and traded through
It is clear that no secondary franchise was the local stock exchange.
granted by the Government or its agency in
favor of petioner. First, the grant of such Petioner filed a refund on its alleged
franchise is not required under PD No. 142 erroneous payment of documentary stamp
and RA No. 9513 for the exploration, tax (DST) on the sale of shares of stock
development, and operation of geothermal listed and traded through the Philippine
resources. Second, considering the meaning Stock Exchange (PSE). It argued that it is
of the terms "service contract" and not liable to pay DST on the sale, barter or
"franchise", petitioner's operation of the exchange of shares of stock listed and
Steamfields located within the Geothermal traded through the local stock exchange
Plant is by virtue of a service contract or pursuant to Section 19(e) of the 197 Tax
agreement whereby petioner undertakes to Code as, amended by Republic Act (RA)
perform al the obligations stated under 9648.
Section VI of the Geothermal Service
Contract. Since petioner does not have a The court denied Petitioners claim for
secondary franchise as it is not required by insufficiency of evidence. The Summary of
law to be granted one, there is no basis to Periodic Payments, which was presented by
hold petitioner liable for franchise tax under Petioner to support its claim that it indeed
Section 137 of the LGC and the Sorsogon paid DST does not show that he alleged
City Revenue Code. documentary stamp tax was paid on
instruments, documents, and papers
Accordingly, the Notice of Assessment evidencing sale, barter or exchange of
dated July 26, 2010 issued by the Office of shares of stock listed and traded through
the City Treasurer of Sorsogon, assessing the local stock exchange. (Imperial, De
petioner for deficiency franchise tax in the Guzman, Abalos & Co., Inc. vs. CIR, CTA
amount of P3,71,742 .6, is void for lack of Case No. 8261, May 15, 2013)
legal and factual basis. Being a void
assessment, said Notice of Assessment does
not give rise to an obligation on the part of

Co Untian Cases 21
January 2014 CTA Rulings 2. No taxable income will result from the
difference between the amount of income
payments reported per alpahlist and
expenses per FS and ITR.

ASSESSMENT The BIR compared the expenses reported by

the taxpayer in its FS and ITR with the same
1. Failure to imprint the word VAT- nature of expenses reported in the alphalist.
Exempt Sale or ZERO-Rated Sale With the alpha list showing higher amount,
makes the transaction VATable. the BIR concluded that the taxpayer had
unaccounted sources of cash or undeclared
When a PEZA-registered enterprise engages income.
in activities which are not registered with
PEZA, the income or receipts derived from According to the Court, this conclusion
the unregistered activities shall be subject to lacks merit because assuming that there is
the regular internal revenue taxes, such as unaccounted source of cash or undeclared
VAT. In such case, the PEZA-registered income, there are also payments or
enterprise is obliged to register as a VAT expenses which were unreported. If this is
taxpayer and issue a VAT official receipt or the case, the undeclared income would be
invoice for every sale or transaction which effectively of set with the consideration of
is subject to VAT. Should the PEZA- the related expenses. Consequently, no
registered enterprise use its VAT official taxable income will result from the
receipt or invoice to evidence its VAT- transactions. (East Asia Power Resources,
exempt sale, Section 13 of the NIRC of 197 Corp. vs. Commissioner of Internal
requires it to prominently write or print the Revenue, CTA Case No. 8182, January 15,
term VAT-exempt sale on the VAT 2014)
official receipt or invoice as failure to do so
shall make it liable to account for the VAT
as if the sale is not VAT-exempt.

Thus, by reason of taxpayers failure to

indicate the words VAT-exempt sale on
the official receipts that were issued,
taxpayer is liable for the sale of services
which are supported by official receipts that
do not bear the word VAT-exempt sale.
(Commissioner of Internal Revenue vs. First
Sumiden Realty, Inc., CTA EB No. 975,
January 04, 2014)

Co Untian Cases 22
3. The Court of Tax Appeals does not have 4. Eror in the carry-over of prior years
jurisdiction over a petition for review filed excess credits does not give rise to
before it questioning the validity of an deficiency income tax liability because it
assessment that was not protested before does not in any way pertain to an expense
the BIR. or income account which could affect the
income tax due.
On December 14, 2010, taxpayers were
issued Preliminary Assessment Notice In the 206 annual income tax return of
(PAN) assessing them for alleged deficiency taxpayer, it erroneously carried over a prior
donors taxes. On January 18, 201, taxpayers years excess tax credits of P12,785,038,
filed their protest against the PAN. On instead of the correct amount of
March 9, 201, taxpayers received a letter P1,278,461.95. The taxpayer was then
from the Regional Director denying the assessed by the BIR for deficiency income
protest to the PAN. And attached to said tax for the overstatement in the amount of
letter are the Formal Letter of Demand and P1,506,576. The taxpayer explained in its
the Assessment Notice, reiterating the same protest that the discrepancy in the prior
assessment for the donors tax. Without years excess credit was adjusted in the ITR
filing any formal protest letter against the of the year 208 and this had no effect in the
Formal Letter of Demand and Assessment amount to be paid in 206. In the Final
Notice, the taxpayers filed a petition for Decision on Disputed Assessment, the BIR
review with the CTA on March 28, 201. The did not consider the adjustment made in
BIR argued that he CTA is bereft of 208 on the ground that the said adjustment
jurisdiction to try the case on account of the allegedly affected the seceding year 207,
prematurity of filing of the petition for which is under investigation. Taxpayer then
review. appealed to the CTA. The BIR argued that
taxpayer cannot escape liability by
According to the Court, given that the adjusting its 208 ITR to offset the
taxpayers did not file a protest against the erroneously carried-over excess tax credits
final assessment notice, there is no inaction in 206 since an assessment was already
or decision of the BIR Commissioner issued.
appealable before the Court. Thus, the
Court has not acquired jurisdiction over the The Court ruled in favor of the taxpayer.
subject matter of the case. (Castalloy The item involved in the assessment, i.e.,
Technology Corp., Allied Industrial Corp. discrepancy on prior years excess tax
and Alinsu Steel Foundry Corp. vs. Aty. credits claimed, does not pertain to either of
Jose N. Tan, CTA Case No. 824, January 30, the income or cost/expense accounts in the
2014) 206 ITR, which could affect taxpayers
income tax due. Hence, there could be no
deficiency income tax so to speak. In fact,
taxpayer would still have a tax
overpayment after adjustment of prior
years excess credits. (Commissioner of
Internal Revenue vs. Waterfront Cebu City
Hotel & Casino, Inc., CTA EB No. 91,
January 29, 2014)

Co Untian Cases 23
 TAX REFUND 6. To be entitled to VAT zero-rating on
sale of electricity generated from
5. DST on sale of shares of stock is based renewable source of energy, taxpayer must
on par value and not on the selling price of prove that it is a generation company by
the shares. showing its ERC registration and
Certificate of Compliance.
A shareholder sold to another taxpayer its
shares of stock held in another company Taxpayer owns a hydro-electric power
with par value of P93,727,00 for a total plant, which was duly certified by the
consideration of P91,545,00. Taxpayer paid Department of Energy as consistent with
the DST in the amount of P3,418,30 which the Power Development Plan of the
was computed based on the selling price of government. Taxpayer sells its generated
P91,545,00. Realizing that it should have power through hydro-electric power to
paid DST based on the par value, taxpayer Davao Light and Power Company, Inc. For
filed a claim for refund for the excess tax its unutilized input VAT attributable to its
payment. The BIR argued that the DST on zero-rated sales of generated power
sale of shares should be computed based on covering the first quarter of 208, taxpayer
the total purchase price and not on the par filed a claim for refund. Due to inaction of
value. Thus, there was no error in the the BIR, taxpayer filed a petition for review
payment made. before the CTA.

In ruling in favor of the taxpayer, the Court As ruled by the Court, one of the requisites
ruled that in accordance with Section 175 of for claim of refund of input taxes related to
the Tax Code, in computing the DST due on zero-rated sales is that there must be zero-
the sale of shares of stock, the tax base is the rated of effectively zero-rated sales. In this
total par value of the shares and not on the regard, the sale of generated power of fuel
purchase price. (Commissioner of Internal through renewable source of energy is VAT
Revenue vs. Eco Leisure and Hospitality zero-rated under Section 108(B)(7) of the
Holding Company, Inc., CTA EB Case No. NIRC of 197. However, to be qualified for
1013, January 14, 2014) VAT zero-rating, taxpayer must be able to
prove that it is a generation company and
that it is engaged in the sale of power or
fuel generated though renewable source of
energy. To be considered a generation
company, an entity should be authorized by
the Energy Regulatory Commission (ERC).
Without a Certificate of Compliance (COC)
issued by the ERC, a person cannot be said
to be a generation company. Hence, a
taxpayer must be able to prove that it is
issued a COC by the ERC to be entitled to a
refund. (Hedcor Sibulan, Inc. vs.
Commissioner of Internal Revenue, CTA
Case No. 8051, January 29, 2014)

Co Untian Cases 24
REVENUE REGULATIONS NO. 16-
2011
The sale of real properties held primarily
for sale to customers or held for lease in the
ordinary course of trade or business of the
seller shall be subject to the value-added tax
(VAT).

Section 2 of Bureau of Internal Revenue

(BIR) Revenue Regulations (RR) 16-2011,
which further amended RR 16-2005 or the
Consolidated VAT Regulations of 2005,
states that the sale of residential lot with
gross selling price exceeding P1,919,500 and
residential house and lot or other residential
dwellings with gross selling price exceeding
P3,199,200, where the instrument of sale
(deed of absolute sale, deed of conditional
sale or otherwise) is executed on or after
November 1, 2005, shall be subject to a 10
percent output VAT, and starting February
1, 2006, to 12 percent output VAT.

If two or more adjacent residential lots are

sold or disposed in favor of one buyer to
use the lots as one residential lot, the sale
shall be exempt from VAT only if the
aggregate value of the lots do not exceed
P1,919,500.

Co Untian Cases 25