Summary of Significant CTA Decisions (January 2015)
Summary of Significant CTA Decisions (January 2015)
Summary of Significant CTA Decisions (January 2015)
January 2015
1. Philippine Airlines Inc. is exempted from payment of excise tax on its importation
of alcohol and tobacco products destined for Duty Free Philippines and the
Freeport zones by virtue of PD 1590, however, its exemption is not automatic,
proof of compliance with the requisites must still be shown.
The Court repeatedly held that Republic Act 9334 did not repeal the franchise
given by virtue of PD 1590 to the Philippine Airlines. Though Section 6 of RA 9334
states the all-encompassing phrase, “The provision of any special or general law to the
contrary notwithstanding’, such phrase alone cannot be considered as an express repeal
of the exemptions granted under petitioner’s franchise because it fails to identify or
designate the acts that are intended to be repealed. Between the provisions under P.D.
no. 1590 as against the provisions under the NIRC of 1997, as amended by RA no.
9334, which is a general law, the former necessarily prevails. However, proof of
compliance with the requisites under PD no. 1590 Section 13 must be satisfied in order
to avail of the exemption. In this case, petitioner could not have determine the availability
of the imported wines or liquors in reasonable quantity, quality or price in the local
marked based solely on the prices list provided by one supplier. Hence, the request for
refund by petitioner cannot be granted. (Philippine Airlines Inc. vs. Commissioner
of Internal Revenue, CTA Case no.8032 & 8075, January 5, 2015)
2. Failure to perfect an appeal within the reglementary period with the Office of the
District Collector is not a bar to file a claim for refund of duties passed-on to a
duly-registered PEZA enterprise.
Respondent DOLE failed to file a Notice of Appeal with the Office of the District
Collector as well as pay the appeal fee within the reglementary period as provided in the
TCCP. For this reason, the Commissioner of Customs and the Bureau of Customs
dismissed its appeal and deny the duty refund claim of DOLE. The Court in ruling the
issue applied the decision of the Supreme Court in the case of Commissioner of
Customs vs. Philippine Phospate Fertilizer Corporation (GR no. 144440, September
1,2004) which provides that the prescriptive periods under the TCCP and other revenue
laws are inapplicable on claims for refund of passed-on customs duties arising from
purchases of supplies brought into the ECOZONE and used, directly or indirectly, by a
duly-registered PEZA enterprise and that the prescriptive periods or procedural
requirements under the TCCP should not serve as a bar for the claim for refund. It
further held that said claims for refund of passed-on customs duties must be
commenced within 6 years from the date of payment pursuant to Section 1145(2) of the
NCC.
Hence, the claim for refund allegedly representing customs duties on petroleum
products which DOLE purchased from Petron Corporation is REMANDED to the Office
of the Commissioner of Customs. (Commissioner of Customs and the Bureau of
Customs vs. DOLE Philippines, Inc., CTA EB Case No. 1142, January 5, 2015)
3. The law does not require the taxpayer to submit the documents prescribed by
RMO 53-98 and the VAT registration requirements under Revenue Regulations 6-
97, in relation to Section 4.107-1(a) of RR 7-95, and Section 236 of the 1997 NIRC,
as amended, as a precondition to the claim for refund of unutilized input VAT
payments.
Petitioner CIR argues that the claim for refund by respondent is premature due to
the fact that the latter failed to submit the required complete documents listed under
RMO 53-98, thus, the 120 –day period has yet to run, which, in effect strips the Court of
jurisdiction over this case. Respondent, however, counters that the Supreme Court
consistently held that the term “relevant supporting documents” is understood as those
documents necessary to support the legal basis in disputing a tax assessment as
determined by the taxpayer, and not dictated by the BIR. The court supports
respondent’s argument. The law does not recognize the documents listed in the said
RMOs in order for a claim of refund to be valid, thus, the claim is not premature.
The 120 day period should be reckoned from November 26, 2010, thus,
petitioner has until March 26, 2011 to act on the refund claim. Since the claim remained
unacted, respondent opted to elevate the matter before the Court within the 30-day
period set by law on March 31, 2011. The judicial claim for refund was timely filed within
the 120+30 day period required under Section 112(C) of the NIRC, as amended.
(Commissioner of Internal Revenue vs. Coral Bay Nickel Corporation, CTA EB No.
1133, January 7,2015)
Presentation before the Court of the subsidiary sales journal and subsidiary
purchase journal is not necessary in refund of input tax attributable to zero-rated
sales
The Court ruled that there is no requirement in the provision of the NIRC of 1997
in regard with the presentation of the subsidiary sales journal and subsidiary purchase
journal in order that a taxpayer may be entitled to a refund, or issuance of tax credit
certificate, of its claimed input tax attributable to zero-rated sales. Absence of these
documents is not sufficient ground to deprive respondent of its right to refund.
(Commissioner of Internal Revenue vs. Philex Mining Corporation, CTA EB No.
1116, January 7, 2015)
6. Failure to submit VAT returns for the succeeding quarters is necessary in order
that a claim for tax refund of unutilized input taxes can be granted.
Petitioner filed its Quarterly VAT Returns for the four quarters of 2009 with the
BIR. However, the CIR denied its claim due to the fact that it failed to submit its VAT
returns for the succeeding quarters of 2010 as well as failure to substantiate its claim.
The court affirmed the decision because it stated that the VAT returns for the succeeding
quarters are necessary in order to verify with certainty whether the claimed input VAT
was carried over or applied against any output VAT in 2010 or in the succeeding
quarters. (M+W Philippines, Inc., vs. Commissioner of Internal Revenue, CTA EB
No. 1056, January 7, 2015)
In order that the 10% assessment level under Section 218(d) of the LCG be
applied, the properties must first qualify as part of the “Special Classes” under
Section 216.
Under Section 216 of the LGC, in order to qualify for the special
classification, the property must be “owned and used” by the GOCC in the generation
and transmission of electric power. In the discussions provided by the Court, it is already
concluded that LHC, not the NPC, that is the actual user of the subject properties. Thus,
the properties cannot be classified as “Special Classes” (National Power Corporation
vs. Fatima A. Tenoria Capacity as Provincial Assessor of Ilocos Sur, CTA EB No.
1024 &1096, January 7, 2015)
Filing within the Reglementary Periods are necessary in order that the Petition for
Review be given due course.
The subject CBAA Resolution was dated March 21, 2013. LHC alleges that it
obtained a copy of the CBAA Resolution on November 6, 2013, and thus it had “until
December 6, 2013 within which to file its instant Petition for Review. The Court rejects
the contention of LHC that it took 7 months to obtain a copy thereof. It states that the
CBAA holds office at the BSP Complex along Roxas Blvd., Manila while LHC’s counsel
holds office at the PSE in Pasig City. Given that the cities of Manila and Pasig are both
in Metro Manila, it is highly implausible that it would take seven months for mail matter to
travel the distance. Also, a scrutiny of the records show that NPC’s counsel received his
copy of the said resolution on May 8, 2013, the date marked on the Registry Return
Receipt.
As provided by Section 11 of RA 1125, as amended by RA No. 9282, an appeal
should be filed “within thirty (30) days after receipt of such decision or ruling or after the
expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein.
Thus, clearly the filing of the Petition for Review on December 6, 2013, was way beyond
the reglementary period, it was 167 days late.(National Power Corporation vs. Fatima
A. Tenoria Capacity as Provincial Assessor of Ilocos Sur, CTA EB No. 1024 &1096,
January 7, 2015)
8. The Court of Tax Appeals(CTA) have jurisdiction to inquire into the validity of the
undisputed assessment and it is not limited to the timeliness and validity of the
collection procedure.
Petitioner CIR claims that an action to challenge collection procedures on final
and executory assessments should be limited only to collection procedure and that the
validity of assessment is a separate and distinct issue that can no longer be questioned.
The court disagrees. As provided by Section 7(a)(1) of RA 1125, An Act Creating the
Court of Tax Appeals, the jurisdiction of the CTA over “other matters arising under the
NIRC or other laws or part of law administered by the BIR”, is not limited to the
timeliness and validity of the collection procedure itself. Hence, the court can still look
into the validity of the assessment. Clearly, a void assessment bears no fruit and a
warrant of distraint and/or levy issued pursuant to a void assessment is likewise null and
void. (Commissioner of Internal Revenue vs. Alpha Rigging & Moving Systems,
Inc., CTA EB No. 1076, January 8, 2015)
In case of denial of reception of PAN and FAN by the taxpayer, the burden of
proving the same shall be borne by the CIR.
Respondent in this case denies receiving the PAN and FAN allegedly issued to
him by the Commissioner. CIR counters that records show that it was properly
addressed to petitioner. They’ve presented testimonial evidence to strengthen their
case. However, while CIR’s witness made mention of a registry receipt supposedly to
establish the fact of mailing and receipt of the FAN by petitioner, respondent’s witness
failed to properly identify any registry receipt during trial. Moreover, no registry receipt
was marked, offered and admitted as evidence for respondent.
The Court states that it cannot give evidentiary value to pieces of evidence that
were not formally offered. In this case, the testimony of respondent’s witness alone could
not give rise to the presumption that the notices were served and received by petitioner
in the regular course of mail. Since petitioner failed to adduce sufficient evidence, it
cannot be presumed that respondent received them. (Commissioner of Internal
Revenue vs. Alpha Rigging & Moving Systems, Inc., CTA EB No. 1076, January 8,
2015)
10. FAN issued beyond the 3-year prescriptive period is no longer valid.
Assessments made can no longer be collected.
Petitioner filed its income tax return on April 11, 2008. According to the provision
of the NIRC, the CIR have 3 years from the due date for filing of income tax return or the
actual date of filing, whichever is later. In this case, CIR issued the Final Assessment
Notice only on July 25, 2011, which is beyond the prescriptive period.
The same also goes with the Value-Added Tax. The FAN issued by the
respondent was made also beyond the prescriptive period of 3-years. Hence, the court
finds no need to discuss the other issues raised by the parties as the same is already
moot and academic. (Robert Christopher M. Carmona, doing business under the
name SAGA CASTING AND PRODUCTIONS vs. Commissioner of Internal
Revenue, CTA Case No. 8484, January 20, 2015)
11. Assessments made after the time prescribed by the Code are void.
Prescription for assessment of deficiency VAT is three-years which commences
from the last day prescribed by law for filing of the return, which is 25 days following the
close of each taxable quarter. However, if the return was filed beyond the prescribed
period, the three year period shall be counted from the day the return was filed.
As to deficiency EWT, the three-year period to assess the same commences
from ten (10) days after the end of each month except for taxes withheld for the month of
December of each year, which shall be filed on or before January 15 of the following
year.
Accordingly, the right of respondent to assess petitioner for deficiency VAT with
respect to the first, second and third quarters of the taxable year 2007 and for deficiency
EWT for the period from January to September 2007 has prescribed, considering that
the Formal Letter of Demand and Assessment Notices were issued only on November 4,
2010. (Staedtler(Philippines) vs. Commissioner of Internal Revenue, CTA Case No.
8431, January 20, 2015)
13. There is no requirement that the taxpayer must prove that the dividend was
recorded in the books of both the issuing and the recipient stockholder in order to
be spared from tax imposed on inter-corporate dividend.
As provided by Section 27 of the NIRC, dividends received by a domestic
corporation from another domestic corporation are not subject to tax. The Court en banc
did not subscribe to petitioner’s argument that for an inter-corporate dividend to be
spared from tax, the taxpayer must prove that the dividend was recorded in the books of
both the issuing corporation and the recipient stockholders, as required under BIR
Ruling No. DA-583-99, and held in the case of Engtek Philippines, Inc. vs.
Commissioner of Internal Revenue. The Court argued that the Engtek Case cannot be
applied because it had a different issue than the case at bar. Thus, respondent cannot
be held liable for deficiency expanded withholding tax and final withholding
assessments. (Commissioner of Internal Revenue vs. FSM Cinema, Incorporated,
CTA EB No. 1084, January 23, 2015)
14. Settled is the rule that a void assessment bears no fruit and it cannot give rise to
an obligation to pay deficiency taxes.
Petitioner alleges that it sent the Notice of Informal Conference, Preliminary
Assessment Notice and Final Assessment Notice to respondent. However, all of these
allegations was denied by the latter and it invoked that petitioner have violated its right to
due process.
The Court, in this case, agrees with the respondent. It held that petitioner failed
to present any proof that it sent notices to the respondent. It did not support the
argument of petitioner that the notices were sent through registered mail and that in
accordance with Section 3(v) of Rule 131 of the Revised Rules of Court, it is presumed
that said notices were received. It ruled that although it is a presumption, it is still a
disputable presumption which CIR failed to substantiate. Also, evidence shows that the
original copy of the mailing envelope was tucked inside the said folder, still sealed and
unopened which clearly shows that the PAN contained inside the envelope was not
received by the respondent.
Hence, the assessment made is void for violating the right of the respondent to
due process. (Commissioner of Internal Revenue vs. Fabtech Export Industries,
Inc., CTA EB No. 1176, January 28, 2015)
15. The legislative franchise or Charter of NGCP does not grant it exemption from
payment of real property taxes as provided by RA 9511.
NGCP argues that it is exempted from payment of real property taxes because it’s
charter provides “in lieu of all taxes” proviso in addition to the “exclusive of this franchise”
proviso, unlike Digitel’s charter which only have the “exclusive of this franchise” proviso.
However, the court, in a number of cases involving the same petitioner and the
same/similar issues, it consistently rule that petitioner is not exempt from payment of real
property tax on its real estate, buildings and personal property pursuant to the second
paragraph of Section 9 of its Charter (RA 9511). In a similar case of National Grid
Corporation of the Philippines vs. Ofelia M. Oliva, the court ruled that the charter may
have stated the “in lieu of all taxes” clause in favor of petitioner under the first paragraph,
however on the second paragraph, it provides the exception thereof by qualifying that
petitioner shall be liable to pay. The phrase “exclusive of this franchise” is an affirmation
further that in addition to the three percent (3%) franchise tax, petitioner is also liable for
taxes on its real estate, buildings and personal property. (National Grid Corporation of
the Philippines vs. The Central Board of Assessment Appeals, the Local Board of
Assessment Appeals of Cabanatuan, CTA EB No. 1052 and 1053, January 28,
2015)
In order to avail of the Special Tax Rate of 10%, it must be a government-owned or
controlled corporations (GOCC) engaged in the generation and transmission of
electric power.
NGCP alleges that if the subject properties are not exempt from the payment of
real property tax alternatively, it must be classified as “Special Class.” The Court,
however, disagrees. It alleges that in order to avail of the Special Tax Rate, it must be a
government-owned or controlled corporations (GOCC) engaged in the generation and
transmission of electric power. Petitioner is not a GOCC but a privately owned
corporation and is engaged in the transmission of electricity only and not in the
generation thereof. The use of the conjunctive word “and” shows the intent of the law in
granting the tax exemption. Thus, GOCC cannot claim tax exemption if it performs only
one of these two functions. (National Grid Corporation of the Philippines vs. The
Central Board of Assessment Appeals, the Local Board of Assessment Appeals of
Cabanatuan, CTA EB No. 1052 and 1053, January 28, 2015)
16. The claim of input tax should be spread evenly and creditable over a period of 60
months starting from the month of the acquisition or the estimated useful life of
the capital goods whichever is shorter.
NPDC argues that the amortization of input VAT over the useful life of capital
goods imported or purchased whose aggregate value exceeds P1,000,000.00 under
Section 4.110-3 of RR 16-2005 should apply only if the input VAT thereon is credited
against the output VAT, and not in cases of refund claims of input VAT paid on
purchases or importation on capital goods which are directly attributable to zero-rated
sales. The court, however, disagrees. It ruled that Section 4.110-3 does not distinguish
the amortization of input VAT in case of refund or in case it is credited against the output
VAT. Thus, out of the P1,797,810.08 input VAT incurred by NPDC on capital goods for
the third quarter of 2008, only the amount of P167,600.73 is creditable for the third and
fourth quarters of taxable year 2008. (Northwind Power Development Corporation vs.
Commissioner of Internal Revenue, CTA EB Case No. 1132 & 1141, January 29,
2015)
VAT is imposable on gross receipts when the amount of money or its equivalent
for service rendered, is actually or constructively received by the taxpayer.
NPDC argues that the Court in Division erred in excluding from zero-rated sales
of NPDC the amounts of P7,775,084.14 for the third and fourth quarters of 2008 and
P30,634,465.59 for the fourth quarter of 2008.. The basis for the ruling of the Division is
that in case of sale or exchange of service, VAT is imposable on the gross receipts only
when the total amount of money or its equivalent for the service is actually or
constructively received by the taxpayer. In the case given, the first amount was
disallowed because it remains uncollected while the second amount was disallowed
because it was only collected during the first quarter of 2009. (Northwind Power
Development Corporation vs. Commissioner of Internal Revenue, CTA EB Case
No. 1132 & 1141, January 29, 2015)
17. In case the final day for filing falls on a non-working day, or a holiday, the next
following working day would be the last day.
The Petition, in this case, is filed within the prescription period. Records show
that on July 19, 2013, the CIR received the Resolution denying the Motion for
Reconsideration. Thus, it had until August 3, 2013 to file an appeal before the Court. On
July 31, 2013, the CIR filed a Motion for Extension of Time to File the instant petition
from August 3, 2013 or until August 18, 2013. August 18, 2013 was a Sunday. The next
calendar days, August 19 and 20 were declared non-working days due to a typhoon
while August 21, 2013, was a holiday. Hence the last day for the filing of the petition was
on August 22, 2013. The CIR filed, through registered mail, the instant petition on
August 22, 2013. (Commissioner of Internal Revenue vs. Nagase Philippines
Corporation, CTA EB No. 1048, January 29, 2015)
FAN issued beyond the prescriptive period is void. CIR argues that the period is
extended because respondent requested for a reinvestigation was not proven.
CIR argues that Nagase requested for reinvestigation and it was this
reinvestigation which lead to the issuance of the FAN only on September 12, 2007.
However, CIR failed to prove the same. The PAN and Nagase’s protest to the PAN were
not presented in evidence. The record shows that Nagase’s protest letter to the FAN,
which reads in part: “NAGASE received your FAN on September 13, 2007 or more than
3 years from and after April 15, 2004.” Thus, the assessment made by the CIR is void for
being filed out of time. (Commissioner of Internal Revenue vs. Nagase Philippines
Corporation, CTA EB No. 1048, January 29, 2015)