NOTES IN TAXATION LAW (2014)

By:
Jason R. Barlis
Dean, Saint Louis University School of Law, Baguio City
Current Head of the Department of Remedial Laws & Legal Ethics
Former Head, Department of Commercial Laws and Taxation,
Saint Louis University School of Law, Baguio City
Bar Reviewer in Commercial Laws and Taxation, Albano Bar Review Center
& ChanRobles Internet Bar Review

TAX DECISIONS PENNED BY JUSTICE DIOSDADO PERALTA

The City of Manila v. Hon. Grecia-Cuerdo, G.R. No. 175723, February 4, 2014

Question: Does the CTA have jurisdiction over a special civil action for certiorari assailing an
interlocutory order issued by the RTC in a local tax case?

Answer: Yes. Section 7(a)(3) of RA 9282 provides that the CTA shall have exclusive appellate
jurisdiction to review by appeal, decisions, orders or resolutions of the Regional Trial Courts in local
tax cases originally decided or resolved by them in the exercise of their original or appellate
jurisdiction.

While there is no categorical statement under RA 1125 as well as the amendatory RA

9282, which provides that the CTA has jurisdiction over petitions for certiorari assailing interlocutory
orders issued by the RTC in local tax cases filed before it, Section 1, Article VIII of the 1987
Constitution provides, nonetheless, that judicial power shall be vested in one Supreme Court and in
such lower courts as may be established by law and that judicial power includes the duty of the
courts of justice to settle actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the
power of the CTA includes that of determining whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the RTC in issuing an
interlocutory order in cases falling within the exclusive appellate jurisdiction of the tax court. It, thus,
follows that the CTA, by constitutional mandate, is vested with jurisdiction to issue writs of certiorari
in these cases.

Indeed, in order for any appellate court, to effectively exercise its appellate jurisdiction, it
must have the authority to issue, among others, a writ of certiorari. In transferring exclusive
jurisdiction over appealed tax cases to the CTA, it can reasonably be assumed that the law
intended to transfer also such power as is deemed necessary, if not indispensable, in aid of such
appellate jurisdiction. There is no perceivable reason why the transfer should only be considered
as partial, not total.

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari
petition lies with the CA, this Court would be confirming the exercise by two judicial bodies, the CA
and the CTA, of jurisdiction over basically the same subject matter — precisely the split-jurisdiction
situation which is anathema to the orderly administration of justice.

CIR v. Toledo Power, Inc., G.R. No. 183880. January 20, 2014.

This case is a reiteration of the “120+30” day rule in claims for refund of input tax credits as
mandatory and jurisdictional (See CIR v. San Roque—discussions can be found in Part 2 of these
notes—Updates in Taxation Law)

In a nutshell, the rules on the determination of the prescriptive period for filing a tax refund or credit
of unutilized input VAT, as provided in Section 112 of the Tax Code, are as follows:
(1) An administrative claim must be filed with the CIR within two years after the close of the
taxable quarter when the zero-rated or effectively zero-rated sales were made.
(2) The CIR has 120 days from the date of submission of complete documents in support of the
administrative claim within which to decide whether to grant a refund or issue a tax credit
certificate. The 120-day period may extend beyond the two-year period from the filing of the
administrative claim if the claim is filed in the later part of the two-year period. If the 120-day
period expires without any decision from the CIR, then the administrative claim may be
considered to be denied by inaction.
(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR's decision
denying the administrative claim or from the expiration of the 120-day period without any action
from the CIR.
(4) All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the time of its issuance on
10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010, as an exception
to the mandatory and jurisdictional 120+30 day periods.

Question: Section 4.108-1 of Revenue Regulations No. 7-95 states that all VAT-registered persons
shall, for every sale or lease of goods or properties or services, issue duly registered receipts or
sales or commercial invoices which must show the word "zero-rated" imprinted on the invoice
covering zero-rated sales. Suppose that the words “zero-rated” were merely stamped and not
printed on the receipt, will this suffice?
Answer: In the present case, we agree with the CTA's findings that the words "zero-rated"
appeared on the VAT invoices/official receipts presented by the TPI in support of its refund claim.
Although the same was merely stamped and not pre-printed, the same is sufficient compliance with
the law, since the imprinting of the word "zero-rated" was required merely to distinguish sales
subject to 10% VAT, those that are subject to 0% VAT (zero-rated) and exempt sales, to enable the
Bureau of Internal Revenue to properly implement and enforce the other VAT provisions of the Tax
Code.

Team Energy Corporation (Formerly Mirant Pagbilao Corporation) v. CIR, G.R. No. 197760.
January 13, 2014.

Another reiteration of the “120+30” day rule discussed in Aichi and San Roque cases.

Petitioner filed with the BIR its Quarterly VAT Returns for the first three quarters of 2005 on April
25, 2005, July 26, 2005, and October 25, 2005. On December 20, 2006, petitioner filed an
administrative claim for cash refund or issuance of tax credit certificate corresponding to the input
VAT reported in its Quarterly VAT Returns for the first three quarters of 2005. Due to respondent's
inaction on its claim, petitioner filed a Petition for Review with the CTA on April 18, 2007.

Even if the petitioner did not observe the “120+30” day rule in Aichi, in the case of CIR v. San
Roque Power Corporation (San Roque), the Court clarified that the mandatory and jurisdictional
nature of the 120-30-day rule does not apply on claims for refund that were prematurely filed during
the interim period from the issuance of Bureau of Internal Revenue (BIR) Ruling No. DA-489-03 on
December 10, 2003 to October 6, 2010 when the Aichi doctrine was adopted. The exemption was
premised on the fact that prior to the promulgation of the Aichi decision, there was an existing
interpretation laid down in BIR Ruling No. DA-489-03 where the BIR expressly ruled that the
taxpayer need not wait for the expiration of the 120-day period before it could seek judicial relief
with the CTA.

Bonifacio Water Corporation v. CIR, G.R. No. 175142, July 22, 2013

Petitioner Bonifacio Water Corporation filed a claim for refund of unutilized input tax credits.
Among its documentary evidence for its claim for input VAT are official receipts in the name of
"Bonifacio GDE Water Corporation." It appears, however, that the change of its name was
unauthorized.

The Supreme Court held that the change of petitioner's name to "Bonifacio GDE Water
Corporation," being unauthorized and without approval of the SEC, and the issuance of official
receipts under that name which were presented to support petitioner's claim for tax refund, cannot
be used to allow the grant of tax refund or issuance of a tax credit certificate in petitioner's favor.
The absence of official receipts issued in its name is tantamount to non-compliance with the
substantiation requirements provided by law.

SM Land, Inc. v. City of Manila, G.R. No. 197151, October 22, 2012

May the thirty-day period to file a Petition for Review from the RTC to the CTA be the subject of a
motion for extension of time?

Section 11 of Republic Act No. 9282 and Section 3(a), Rule 8 of the Revised Rules of the CTA
states that an appeal shall be made by filing a petition for review under a procedure analogous to
that provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within thirty (30)
days from the receipt of the decision or ruling or in the case of inaction as herein provided, from the
expiration of the period fixed by law to act thereon.

It is also true that the same provisions are silent as to whether such 30-day period can be extended
or not. However, Section 11 of Republic Act No. 9282 does state that the Petition for Review shall
be filed with the CTA following the procedure analogous to Rule 42 of the Revised Rules of Civil
Procedure. Section 1, Rule 42 of the Revised Rules of Civil Procedure provides that the Petition for
Review of an adverse judgment or final order of the RTC must be filed with the Court of Appeals
within: (1) the original 15-day period from receipt of the judgment or final order to be appealed; (2)
an extended period of 15 days from the lapse of the original period; and (3) only for the most
compelling reasons, another extended period not to exceed 15 days from the lapse of the first
extended period.

Following by analogy, Section 1, Rule 42 of the Revised Rules of Civil Procedure, the 30-day
original period for filing a Petition for Review with the CTA under Section 11 of Republic Act No.
9282, as implemented by Section 3 (a), Rule 8 of the Revised Rules of the CTA, may be extended
for a period of 15 days. No further extension shall be allowed thereafter, except only for the most
compelling reasons, in which case the extended period shall not exceed 15 days.

United International Pictures AB v. CIR, G.R. No. 168331, October 11, 2012

Section 76 of the NIRC provides that a corporate taxpayer may have the option to carry-over and
apply the excess quarterly income tax against income due for the taxable quarters of the
succeeding taxable years. Once a corporation exercises the option to carry-over, such option is
irrevocable "for that taxable period" and no application for cash refund or issuance of a tax credit
certificate shall be allowed therefore.

The question is, is a corporation perpetually barred to refund its tax overpayment for taxable year
once the option is exercised? Or, is the irrevocability limited only to that taxable period when the
option was availed of? What is the meaning of the irrevocability which is “for that taxable period"
under the law?

The last sentence of Section 76 of the NIRC of 1997 reads: "Once the option to carry-over and
apply the excess quarterly income tax against income tax due for the taxable quarters of the
succeeding taxable years has been made, such option shall be considered irrevocable for that
taxable period and no application for tax refund or issuance of a tax credit certificate shall be
allowed therefore." The phrase "for that taxable period" merely identifies the excess income
tax, subject of the option, by referring to the taxable period when it was acquired by the
taxpayer. In the present case, the excess income tax credit, which BPI opted to carry over, was
acquired by the said bank during the taxable year 1998. The option of BPI to carry over its 1998
excess income tax credit is irrevocable; it cannot later on opt to apply for a refund of the very same
1998 excess income tax credit.

The Court of Appeals mistakenly understood the phrase "for that taxable period" as a prescriptive
period for the irrevocability rule . . . . The evident intent of the legislature, in adding the last
sentence to Section 76 of the NIRC of 1997, is to keep the taxpayer from flip-flopping on its
options, and avoid confusion and complication as regards said taxpayer's excess tax credit. The
interpretation of the Court of Appeals only delays the flip-flopping to the end of each succeeding
taxable period.

Lascona Land Co., Inc. v. CIR, G.R. No. 171251, March 5, 2012

What is the effect of the failure of a taxpayer to appeal within 30 days from the lapse of the 180-day
period for the BIR to rule on protested assessments?

In RCBC v. CIR, G.R. No. 168498, April 24, 2007, the 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.

PAGCOR v. BIR, G.R. No. 172087. March 15, 2011

Is PAGCOR still exempt from corporate income tax and VAT with the enactment of R.A. No. 9337?

Under Section 1 of R.A. No. 9337, amending Section 27 (c) of the National Internal Revenue Code
of 1977, petitioner is no longer exempt from corporate income tax as it has been effectively omitted
from the list of GOCCs that are exempt from it. In this case, PAGCOR failed to prove that it is still
exempt from the payment of corporate income tax, considering that Section 1 of R.A. No. 9337
amended Section 27 (c) of the National Internal Revenue Code of 1997 by omitting PAGCOR from
the exemption. The legislative intent, as shown by the discussions in the Bicameral Conference
Meeting, is to require PAGCOR to pay corporate income tax; hence, the omission or removal of
PAGCOR from exemption from the payment of corporate income tax. It is a basic precept of
statutory construction that the express mention of one person, thing, act, or consequence excludes
all others as expressed in the familiar maxim expressio unius est exclusio alterius. Thus, the
express mention of the GOCCs exempted from payment of corporate income tax excludes all
others. Not being excepted, petitioner PAGCOR must be regarded as coming within the purview of
the general rule that GOCCs shall pay corporate income tax, expressed in the maxim: exceptio
firmat regulam in casibus non exceptis

However, PAGCOR is exempt from the payment of VAT, because PAGCOR's charter, P.D. No.
1869, is a special law that grants petitioner exemption from taxes.

Republic v. Aquafresh Seafoods, Inc., G.R. No. 170389. October 20, 2010.

While the CIR has the authority to prescribe real property values and divide the Philippines into
zones, the law is clear that the same has to be done upon consultation with competent appraisers
both from the public and private sectors. It is undisputed that at the time of the sale of the subject
properties found in Barrio Banica, Roxas City, the same were classified as "RR," or residential,
based on the 1995 Revised Zonal Value of Real Properties. Petitioner, thus, cannot unilaterally
change the zonal valuation of such properties to "commercial" without first conducting a re-
evaluation of the zonal values as mandated under Section 6 (E) of the NIRC.

Petitioner's act of re-classifying the subject properties from residential to commercial cannot be
done without first complying with the procedures prescribed by law. It bears to stress that ALL the
properties in Barrio Banica were classified as residential, under the 1995 Revised Zonal Values of
Real Properties. Thus, petitioner's act of classifying the subject properties involves a re-
classification and revision of the prescribed zonal values.

Even assuming arguendo that the subject properties were used for commercial purposes, the same
remains to be residential for zonal value purposes. It appears that actual use is not considered for
zonal valuation, but the predominant use of other classification of properties located in the zone.
Again, it is undisputed that the entire Barrio Banica has been classified as residential.

Quezon City v. RCBC, G.R. No. 171033, August 3, 2010

What is the period of redemption of a property sold at public auction to answer for a real property
tax liability?

The owner of the delinquent real property or person having legal interest therein, or his
representative, has the right to redeem the property within one (1) year from the date of sale upon
payment of the delinquent tax and other fees. Verily, the period of redemption of tax delinquent
properties should be counted not from the date of registration of the certificate of sale, as
previously provided by Section 78 of P.D. No. 464, but rather on the date of sale of the tax
delinquent property, as explicitly provided by Section 261 of R.A. No. 7160.

Nonetheless, the government of Quezon City, pursuant to the taxing power vested on local
government units by Section 5, Article X of the 1987 Constitution and R.A. No. 7160, enacted City
Ordinance No. SP-91, S-93, otherwise known as the Quezon City Revenue Code of 1993,
providing, among other things, that the one-year redemption period should be counted from the
date of the annotation of the sale of the property at the proper registry.

To harmonize the provisions of the two laws and to maintain the policy of the law to aid rather than
to defeat the owner's right to redeem his property, Section 14 (a), Paragraph 7 of City Ordinance
No. SP-91, S-93 should be construed as to define the phrase "one (1) year from the date of sale"
as appearing in Section 261 of R.A. No. 7160, to mean "one (1) year from the date of the
annotation of the sale of the property at the proper registry."

Republic v. Marcos II, G.R. Nos. 130371 & 130855. August 4, 2009
Is the failure to file a tax return considered as a “crime involving moral turpitude?”

The "failure to file an income tax return" is not a crime involving moral turpitude as the mere
omission is already a violation regardless of the fraudulent intent or willfulness of the individual.
This conclusion is supported by the provisions of the NIRC as well as previous Court decisions
which show that with regard to the filing of an income tax return, the NIRC considers three distinct
violations: (1) a false return, (2) a fraudulent return with intent to evade tax, and (3) failure to file a
return.

However, the filing of a "fraudulent return with intent to evade tax" is a crime involving moral
turpitude as it entails willfulness and fraudulent intent on the part of the individual. The same,
however, cannot be said for "failure to file a return" where the mere omission already constitutes a
violation. Thus, this Court holds that even if the conviction of respondent Marcos II is affirmed, the
same not being a crime involving moral turpitude cannot serve as a ground for his disqualification.

Spouses Montano v. Francisco, G.R. No. 160380. July 30, 2009

Who is entitled to the notice of tax delinquency proceedings, particularly the requirements
regarding the publication and notice of an auction sale?

In Talusan v. Tayag, the Court held that for purposes of the collection of real property taxes, the
registered owner of the property is considered the taxpayer. Hence, only the registered owner is
entitled to a notice of tax delinquency and other proceedings relative to the tax sale.

In this case, the Court of Appeals correctly held that the GSIS, as the registered owner of the
subject property, was the taxpayer that was entitled to the notice of tax delinquency and that of the
auction sale, as well as other related notices. It found that the GSIS was not deprived of its
property without due process and that notice was regularly served. It pointed out that it had already
upheld the validity of the assessment of the real property taxes upon GSIS and the auction sale
proceedings in GSIS v. City Assessor of Iloilo City.

ADDITIONAL UPDATES IN TAXATION LAW

RR 18-2013
• The procedure governing Notice of Informal Conference was removed. This amends RR
12-99
• The PAN, Formal Letter of Demand/Final Assessment Notice (FLD/FAN) and Final
Decision on Disputed Assessment (FDDA) shall be issued only by the CIR or his duly
authorized representative. The term "duly authorized representative" refers to Revenue
Regional Directors, Assistant Commissioner-Large Taxpayers Service, and Assistant
Commissioner-Enforcement and Advocacy Service.

RMC 007-12
• The sale of a real property by a non-stock, non-profit entity is subject to capital gains tax
based on the gross selling price or current fair market value as determined in accordance
with Section 6 (E) of the Tax Code of 1997, whichever is higher. This is pursuant to the
last paragraph of Section 30 of the NIRC in that the income of such tax-exempt corporation
which is considered as income from its properties, real or personal, includes profits from
the sale of property.

RR 10-2010 (as amended by RR 003-14)

Provides the implementing regulation of the Exchange of Tax Information Act (RA 10021)
 • Under Section 3 of RA 10021, the CIR is authorized to obtain any information, including but
not limited to bank deposits and other related information held by financial institutions, as
may be required to respond to a request by a foreign tax authority pursuant to an
international convention or agreement on tax matters to which the Philippines is a signatory
or a party to
• Once information is gathered pursuant to a request for exchange of information under an
international convention or agreement on tax matters, the BIR is likewise authorized to use,
for tax assessment, verification, audit and enforcement purposes, any such information
obtained from financial institutions.
• Notice to the taxpayer that information about him is being requested by a foreign tax
authority should be given within 60 days from receipt of the request. However, if
notification within the said period will undermine the success of the investigation, the
taxpayer shall be notified within six months from request

CIR v. San Roque Power Corporation, G.R. No. 187485. February 12, 2013
Taganito Mining Corporation v. CIR, G.R. No. 196113. February 12, 2013
Philex Mining Corporation v. CIR, G.R. No. 197156. February 12, 2013
(See also: Ruling on the Motion for Reconsideration dated 08 October 2013)

These are cases involving claims for refund of input VAT. In these cases, the Court
explained the seemingly conflicting rulings in connection with the period of filing a claim on input
tax credits.

The Facts:

CIR v. San Roque Power Corporation, G.R. No. 187485. February 12, 2013:
On 28 March 2003, San Roque filed an amended quarterly VAT return for the year 2001 by
increasing its input VAT. It filed its claim for refund on even date. Due to the BIR’s inaction, it filed
a Petition for Review with the CTA on 10 April 2003.

Taganito Mining Corporation v. CIR, G.R. No. 196113. February 12, 2013:
Taganito filed a written claim for refund of input VAT on 14 November 2006. Ninety two
days later, or nn 14 February 2007, as the BIR did not yet act of the claim for refund, Taganito filed
its Petition for Review with the CTA.

Philex Mining Corporation v. CIR, G.R. No. 197156. February 12, 2013:
On October 21, 2005, Philex filed its Original VAT Return for the third quarter of taxable
year 2005 and Amended VAT Return for the same quarter on December 1, 2005. On March 20,
2006, Philex filed its claim for refund/tax credit. However, due to the CIR's failure to act on such
claim, on October 17, 2007, pursuant to Sections 112 and 229 of the NIRC of 1997, as amended,
Philex filed a Petition for Review with the CTA.

Common Facts:
On 10 December 2003, the BIR, in response to response to a query made by the One Stop
Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance, the government
agency tasked with processing tax refunds and credits, issued Ruling No. DA-489-03. It provides
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." Prior to this ruling, the BIR held that the
expiration of the 120-day period is mandatory and jurisdictional before a judicial claim can be filed.

On 08 June 2007, the Supreme Court promulgated Atlas Consolidated Mining and
Development Corporation v. Commissioner of Internal Revenue. In the said case, it stated that
refundable or creditable input VAT and illegally or erroneously collected national internal revenue
tax are the same, insofar as both are monetary amounts which are currently in the hands of the
government but must rightfully be returned to the taxpayer. Known as the Atlas doctrine, it states
that the two-year prescriptive period to file a claim for refund should be counted from the date of
payment of the output VAT, not from the close of the taxable quarter when the sales involving the
input VAT were made.

On 12 September 2008, the Supreme Court abandoned the Atlas doctrine when it ruled on
the case of the CIR v. Mirant Pagbilao Corporation, G.R. No. 172129, 12 September 2008. The
Mirant doctrine counts the two-year prescriptive period from the "close of the taxable quarter when
the sales were made" as expressly stated in the law, which means the last day of the taxable
quarter.

And on 06 October 2010, the Supreme Court further clarified in CIR v. Aichi Forging
Company of Asia, Inc., G.R. No. 184823, that the failure to await the decision of the Commissioner
or the lapse of 120-day period prescribed in Section 112 (D) amounts to a premature filing. In this
case, the High Court ruled that once the taxpayer files a written claim for refund with the BIR within
the two-year period provided in Section 112, the BIR should be given a period of 120 days to
resolve the matter. Within this 120-day period, if the BIR acts adversely, the taxpayer may appeal
within 30 days from receipt of the adverse decision. But if the BIR does not act, the taxpayer has
30 days from the lapse of the 120-day period to appeal. Failure to appeal within the said 30-day
period will result into the finality of the assessment. This is known as the “120+30” day rule.

Issue: Were the Petitions of San Roque, Taganito and Philex timely filed?

Ruling:
The Court explained the 120+30 day rule held in Aichi and compared this with the Altas
Doctrine and the Mirant Doctrine regarding claims for refund of inputs taxes.

The Atlas doctrine, which held that claims for refund or credit of input VAT must comply
with the two-year prescriptive period under Section 229, should be effective only from its
promulgation on 8 June 2007 until its abandonment on 12 September 2008 in Mirant. The Atlas
doctrine was limited to the reckoning of the two-year prescriptive period from the date of payment
of the output VAT. Prior to the Atlas doctrine, the two-year prescriptive period for claiming refund
or credit of input VAT should be governed by Section 112 (A) following the verba legis rule. The
Mirant ruling, which abandoned the Atlas doctrine, adopted the verba legis rule, thus applying
Section 112 (A) in computing the two-year prescriptive period in claiming refund or credit of input
VAT.

The Atlas doctrine has no relevance to the 120+30 day periods under Section 112 (C)
because the application of the 120+30 day periods was not in issue in Atlas. The application of the
120+30 day periods was first raised in Aichi, which adopted the verba legis rule in holding that the
120+30 day periods are mandatory and jurisdictional. The language of Section 112 (C) is plain,
clear, and unambiguous. When Section 112 (C) states that "the Commissioner shall grant a refund
or issue the tax credit within one hundred twenty (120) days from the date of submission of
complete documents," the law clearly gives the Commissioner 120 days within which to decide the
taxpayer's claim. Resort to the courts prior to the expiration of the 120-day period is a patent
violation of the doctrine of exhaustion of administrative remedies, a ground for dismissing the
judicial suit due to prematurity. Philippine jurisprudence is awash with cases affirming and
reiterating the doctrine of exhaustion of administrative remedies. Such doctrine is basic and
elementary.

When Section 112 (C) states that "the taxpayer affected may, within thirty (30) days from
receipt of the decision denying the claim or after the expiration of the one hundred twenty-day
period, appeal the decision or the unacted claim with the Court of Tax Appeals," the law does not
make the 120+30 day periods optional just because the law uses the word "may." The word "may"
simply means that the taxpayer may or may not appeal the decision of the Commissioner within 30
days from receipt of the decision, or within 30 days from the expiration of the 120-day period.
Certainly, by no stretch of the imagination can the word "may" be construed as making the 120+30
day periods optional, allowing the taxpayer to file a judicial claim one day after filing the
administrative claim with the Commissioner.

As to San Roque:
Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly
given by law to the Commissioner to decide whether to grant or deny San Roque's application for
tax refund or credit. It is indisputable that compliance with the 120-day waiting period is mandatory
and jurisdictional. San Roque cannot rely on the Atlas doctrine because San Roque filed its
petition for review with the CTA more than four years before Atlas was promulgated. The Atlas
doctrine did not exist at the time San Roque failed to comply with the 120-day period. Thus, San
Roque cannot invoke the Atlas doctrine as an excuse for its failure to wait for the 120-day period to
lapse.

San Roque, therefore, cannot benefit from BIR Ruling No. DA-489-03 because it filed its
judicial claim prematurely on 10 April 2003, before the issuance of BIR Ruling No. DA-489-03 on
10 December 2003. To repeat, San Roque cannot claim that it was misled by the BIR into filing its
judicial claim prematurely because BIR Ruling No. DA-489-03 was issued only after San Roque
filed its judicial claim.

Failure to comply with the 120-day waiting period violates a mandatory provision of law. It
violates the doctrine of exhaustion of administrative remedies and renders the petition premature
and thus without a cause of action, with the effect that the CTA does not acquire jurisdiction over
the taxpayer's petition. Philippine jurisprudence is replete with cases upholding and reiterating
these doctrinal principles.

As to Taganito:
Taganito, however, filed its judicial claim with the CTA on 14 February 2007, after the
issuance of BIR Ruling No. DA-489-03 on 10 December 2003. Truly, Taganito can claim that in
filing its judicial claim prematurely without waiting for the 120-day period to expire, it was misled by
BIR Ruling No. DA-489-03. Thus, Taganito can claim the benefit of BIR Ruling No. DA-489-03,
which shields the filing of its judicial claim from the vice of prematurity.

As to Philex:
Philex's situation is not a case of premature filing of its judicial claim but of late filing,
indeed very late filing. BIR Ruling No. DA-489-03 allowed premature filing of a judicial claim, which
means non-exhaustion of the 120-day period for the Commissioner to act on an administrative
claim. Philex cannot claim the benefit of BIR Ruling No. DA-489-03 because Philex did not file its
judicial claim prematurely but filed it long after the lapse of the 30-day period following the
expiration of the 120-day period. In fact, Philex filed its judicial claim 426 days after the lapse of the
30-day period.

Question: The general rule pursuant to the Aichi doctrine is that concerning input VAT refunds, the
120-day period is mandatory and jurisdictional. Discuss two exceptions to this rule.

Answer:
There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA does
not acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-day period.
There are, however, two exceptions to this rule. The first exception is if the Commissioner, through
a specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA.
Such specific ruling is applicable only to such particular taxpayer. The second exception is where
the Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code,
misleads all taxpayers into filing prematurely judicial claims with the CTA. In these cases, the
Commissioner cannot be allowed to later on question the CTA's assumption of jurisdiction over
such claim since equitable estoppel has set in as expressly authorized under Section 246 of the
Tax Code.

A general interpretative rule issued by the Commissioner may be relied upon by taxpayers from
the time the rule is issued up to its reversal by the Commissioner or by the Supreme Court. Section
246 of the NIRC is not limited to a reversal only by the Commissioner because this Section
expressly states, "Any revocation, modification or reversal" without specifying who made the
revocation, modification or reversal. Hence, a reversal by the Supreme Court is covered under
Section 246.

Question: Rulings are generally applicable only to a particular taxpayer. Is this rule applicable to
BIR Ruling No. DA-489-03?

Answer: BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to
a query made, not by a particular taxpayer, but by a government agency tasked with processing tax
refunds and credits, that is, the One Stop Shop Inter-Agency Tax Credit and Drawback Center of
the Department of Finance. This government agency is also the addressee, or the entity responded
to, in BIR Ruling No. DA-489-03. Thus, while this government agency mentions in its query to the
Commissioner the administrative claim of Lazi Bay Resources Development, Inc., the agency was
in fact asking the Commissioner what to do in cases like the tax claim of Lazi Bay Resources
Development, Inc., where the taxpayer did not wait for the lapse of the 120-day period.

Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on
BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by
this Court in Aichi on 6 October 2010, where this Court held that the 120+30 day periods are
mandatory and jurisdictional.

This approach is consistent with Section 246 of the NIRC, as applied with the “doctrine of
operative fact.” Under Section 246, taxpayers may rely upon a rule or ruling issued by the
Commissioner from the time the rule or ruling is issued up to its reversal by the Commissioner or
this Court. The reversal is not given retroactive effect. This, in essence, is the doctrine of operative
fact. There must, however, be a rule or ruling issued by the Commissioner that is relied upon by the
taxpayer in good faith. A mere administrative practice, not formalized into a rule or ruling, will not
suffice because such a mere administrative practice may not be uniformly and consistently applied.
An administrative practice, if not formalized as a rule or ruling, will not be known to the general
public and can be availed of only by those with informal contacts with the government agency.

Question: Is BIR Ruling No. DA-489-03 a binding ruling even if it were issued merely by a Deputy
Commissioner?

Answer: Yes. Although Section 4 of the 1997 Tax Code provides that the "power to interpret the
provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of
the Commissioner, subject to review by the Secretary of Finance," Section 7 of the same Code
does not prohibit the delegation of such power. Thus, "[t]he Commissioner may delegate the
powers vested in him under the pertinent provisions of this Code to any or such subordinate
officials with the rank equivalent to a division chief or higher, subject to such limitations and
restrictions as may be imposed under rules and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner."

RR 10-2012:
A joint venture or consortium formed for the purpose of undertaking construction projects which is
not considered as corporation under Section 22 of the NIRC of 1997 as amended, should be:
(1) for the undertaking of a construction project; and
 (2) should involve joining or pooling of resources by licensed local contractors; that is, licensed as
general contractor by the Philippine Contractors Accreditation Board (PCAB) of the
Department of Trade and Industry (DTI);
(3) the local contractors are engaged in construction business; and
(4) the Joint Venture itself must likewise be duly licensed as such by the Philippine Contractors
Accreditation Board (PCAB) of the Department of Trade and Industry (DTI).
Joint ventures involving foreign contractors may also be treated as a non-taxable corporation only if
the member foreign contractor is covered by a special license as contractor by the Philippine
Contractors Accreditation Board (PCAB) of the Department of Trade and Industry (DTI); and the
construction project is certified by the appropriate Tendering Agency (government office) that the
project is a foreign financed/internationally-funded project and that international bidding is allowed
under the Bilateral Agreement entered into by and between the Philippine Government and the
foreign/international financing institution pursuant to the implementing rules and regulations of
Republic Act No. 4566 otherwise known as Contractor's License Law.

RR 14-2012
1. Government Debt Instruments and Securities, including Bureau of Treasury (BTr) issued
instruments and securities such as Treasury bonds (T-bonds), Treasury bills (T-bills) and Treasury
notes are considered as deposit substitutes, irrespective of the number of lenders at the time of
origination if such debt instruments and securities are to be traded or exchanged in the secondary
market.
2. Interest income derived therefrom is subject to Final Withholding Tax (FWT) at the rate of
twenty percent (20%) pursuant to Sections 24 (B)(1), 25(A)(2), 27(D)(1) and 28(A)(7)(a) or twenty
five percent (25%) pursuant to Section 25(B) or thirty percent (30%) pursuant to Section 28(B)(1) of
the NIRC of 1997, as amended, payable upon original issuance of the deposit substitutes.

Interest income from foreign currency deposits in the Philippines shall be subject to tax at a rate of
7.5% if the bank account is in the name of a resident. If a bank account is jointly in the name of a
non-resident citizen such as an overseas contract worker, or a Filipino seaman, and his/her spouse
or dependent who is a resident in the Philippines, fifty percent (50%) of the interest income from
such bank deposit shall be treated as exempt while the other fifty percent (50%) shall be subject to
a Final Withholding Tax (FWT) of seven and one-half percent (7.5%).

RMC 51-2014
Section 30 of the National Internal Revenue Code (NIRC) of 1997, as amended, enumerates the
non-stock and/or non-profit corporations/associations/ organizations that are exempt from income
tax in respect to income received by them as such. "Non-stock" means "no part of its income is
distributable as dividends to its members, trustees, or officers" and that any profit "obtain[ed] as an
incident to its operations shall, whenever necessary or proper, be used for the furtherance of the
purpose or purposes for which the corporation was organized" (Section 87, Corporation Code).
"Non-profit" means that "no net income or asset accrues to or benefits any member or specific
person, with all the net income or asset devoted to the institution's purposes and all its activities
conducted not for profit" (CIR vs. St. Luke's Medical Center, Inc., G.R. Nos. 195909 and 195960
dated 26 September 2012).

Therefore, in order for an entity to qualify as a non-stock and/or non-profit

corporation/association/organization exempt from income tax under Section 30 of the NIRC, as
amended, its earnings or assets shall not inure to the benefit of any of its trustees, organizers,
officers, members or any specific person. The following are considered "inurements" of such
nature:
1. The payment of compensation, salaries, or honorarium to its trustees or organizers;
2. The payment of exorbitant or unreasonable compensation to its employees;
3. The provision of welfare aid and financial assistance to its members. An organization is not
exempt from income tax if its principal activity is to receive and manage funds associated with
 savings or investment programs, including pension or retirement programs. This does not
cover a society, order, association, or non-stock corporation under Section 30 (C) of the NIRC
providing for the payment of life, sickness, accident and other benefits exclusively to its
members or their dependents;
4. Donation to any person or entity (except donations made to other entities formed for the
purpose/purposes similar to its own);
5. The purchase of goods or services for amounts in excess of the fair market value of such
goods or value of such services from an entity in which one or more of its trustees, officers or
fiduciaries has an interest; and
6. When upon dissolution and satisfaction of all liabilities, its remaining assets are distributed to
its trustees, organizers, officers or members. Its assets must be dedicated to its exempt
purpose. Accordingly, its constitutive documents must expressly provide that in the event of
dissolution, its assets shall be distributed to one or more entities formed for the
purpose/purposes similar to its own, or to the Philippine government for public purpose.

RR 5-2011
The following shall be considered as "de minimis" benefits not subject to income tax as well as
withholding tax on compensation income of both managerial and rank and file employees:
(a) Monetized unused vacation leave credits of private employees not exceeding ten (10) days
during the year;
(b) Monetized value of vacation and sick leave credits paid to government officials and employees;
(c) Medical cash allowance to dependents of employees, not exceeding P750 per employee per
semester or P125 per month;
(d) Rice subsidy of P1,500 or one (1) sack of 50 kg. rice per month amounting to not more than
P1,500;
(e) Uniform and Clothing allowance not exceeding P5,000 per annum; (as amended by RR 8-
2012)
(f) Actual medical assistance, e.g., medical allowance to cover medical and healthcare needs,
annual medical/executive check-up, maternity assistance, and routine consultations, not
exceeding P10,000.00 per annum;
(g) Laundry allowance not exceeding P300 per month;
(h) Employees achievement awards, e.g., for length of service or safety achievement, which must
be in the form of a tangible personal property other than cash or gift certificate, with an annual
monetary value not exceeding P10,000 received by the employee under an established written
plan which does not discriminate in favor of highly paid employees;
(i) Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per
employee per annum;
(j) Daily meal allowance for overtime work and night/graveyard shift not exceeding twenty-five
percent (25%) of the basic minimum wage on a per region basis;
All other benefits given by employers which are not included in the above enumeration shall not be
considered as "de minimis" benefits, and hence, shall be subject to income tax as well as
withholding tax on compensation income.

Notes: It appears now that the above enumeration is exclusive. The regulation now
contains the following: “all other benefits which do not fall in the above enumeration shall
not be considered as “de minimis” which is not found in the past regulations.

The previous inclusion of “flowers, fruits, books and similar items of small value given to employees
during special circumstances” was removed from the list.

Daily meal allowance not exceeding 25% of the minimum wage is now considered de minimis
benefits under any of the two situations– on account of overtime work and if given to employees on
night/graveyard shift.