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DR. ULPIANO P.
SARMIENTO III
Dean
ATTY. CARLO D. BUSMENTE
Vice Dean
ATTY. MARIA ELIZA CAMILLE B. YAMAMOTO-SANTOS
Prefect of Student Affairs
ATTY. ROBEN B. CADUGO JR.
Administrative Officer
TTY. ROBEN B. CADUGO JR.
A
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J
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eputy Chairpersons, Operations &
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Logistics
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HANZ CHRISTIAN MIRAFLOR KIMBERLY JOY NAPARAN
Commercial Law Political Law
ISABELA SOFIA ELEAZAR ANTHONY JOHN RODRIGUEZ
Legal Ethics Taxation Law
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FELICE LEONAJOY HERNANDEZ ERYL AMRHEIN AGUSTIN
Criminal Law Labor Law
QUENNIE SERENO ENRIC ALCAIDE
Commercial Law Political Law
SOFIA REGINA YASAY ROSCH MANUEL
Legal Ethics Taxation Law
NALA ANOVER HILLARY SANTILLAN
Remedial Law Civil Law
JANNAH ODTUHAN BIANCA VELASCO
Criminal Law Labor Law
MAUI ALVAREZ
ARLA BACERO
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PAMELA GUEVARRA
PATRICK JOSE
JOANNE BENITEZ
KARLA CERA
MEL DEVESA
YEOJ EDUARTE
TOM HERRERA
RUTH MANLONGAT
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OPERATIONS 2024. It is intended solely for the use of the individuals to
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Material includes cases penned by Justice Lopez and recent landmark
cases decided by the Supreme Court.
OPYRIGHT © 2024
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SAN BEDA COLLEGE ALABANG SCHOOL OF LAW
AN BEDA COLLEGE ALABANG SCHOOL OF LAW CENTRALIZED BAR
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OPERATIONS 2024
ALL RIGHTS RESERVED BY THE AUTHORS
2
TABLE OF CONTENTS
TAXATIONLAW............................................................................................................................4
COMPROMISEANDTAXAMNESTY.....................................................................................4
COMPROMISEANDTAXAMNESTY...............................................................................4
KEPCOPHILIPPINESCORP.V.CIR..........................................................................4
VALUE-ADDEDTAX(VAT)......................................................................................................7
ZERO-RATEDTRANSACTIONS.......................................................................................7
CIRV.FILMINERARESOURCESCORP....................................................................7
VALUE-ADDEDTAX(VAT)....................................................................................................10
VATRefundorCredit-Section112.................................................................................10
CIRV.PHILEXMININGCORP..................................................................................10
TAXREMEDIES....................................................................................................................13
Taxpayer’sRemedies......................................................................................................13
NATIONALPOWERCORPORATIONV.THEPROVINCEOFPAMPANGA............13
TAXREMEDIES:Government..............................................................................................15
CriminalActionforCollection...........................................................................................15
PEOPLEV.MENDEZ................................................................................................15
TAXREMEDIES:CivilPenalties............................................................................................19
TaxDelinquency,TaxDeficiency......................................................................................19
CHEVRONHOLDINGS,INC.V.CIR.........................................................................19
LOCALTAXATION(R.A.No.7160,BookII,TitleI)...............................................................23
CommonLimitationsontheTaxingPowersofLocalGovernmentUnits–Section133..23
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM V. CENTRAL
BOARDOFASSESSMENTAPPEALS.....................................................................23
RealPropertyTaxation(R.A.No.7160,BookII,TitleII)........................................................26
ExemptionfromRealPropertyTax-Section234............................................................26
NATIONAL POWER CORPORATION V. PROVINCIAL GOVERNMENT OF
BULACAN..................................................................................................................26
JUDICIALREMEDIES...........................................................................................................29
JurisdictionoftheCTA.....................................................................................................29
CIRV.COMELEC;.....................................................................................................29
COMELECV.CIR......................................................................................................29
JUDICIALREMEDIES...........................................................................................................33
PetitionforReviewonCertioraritotheSC......................................................................33
CIRV.EASTASIAUTILITIESCORP........................................................................33
COMMERCIALLAW...................................................................................................................35
INSURANCELAW.................................................................................................................35
REPRESENTATION........................................................................................................35
INTEGRATEDMICROELECTRONICS,INC.v.STANDARDINSURANCECO.,INC.
35
3
TAXATION LAW
COMPROMISE AND TAX AMNESTY
COMPROMISE AND TAX AMNESTY
KEPCO PHILIPPINES CORP. V. CIR
LOPEZ, M., J.
G.R. NOS. 225750-51 | JULY 28, 2000
DOCTRINE
compromise agreement has the effect of res judicata on the parties.
A
Compromises are generally to be favored and thoseenteredintoingoodfaith
cannotbesetaside,exceptwhenthereismistake,fraud,violence,intimidation,
undue influence, or falsity of documents.
hepoweroftheCIRtoenterintocompromiseagreementsfordeficiencytaxes
T
is explicit in Section 204 (A) of the 1997 National Internal Revenue Code, as
amended (1997 NIRC). The CIR may compromise an assessment when a
reasonable doubt as tothevalidityoftheclaimagainstthetaxpayerexists,or
the financial position of the taxpayerdemonstratesaclearinabilitytopaythe
tax.
FACTS:
epco received aPreliminaryAssessmentNoticeforallegeddeficiencyincome
K
tax,value-addedtax(VAT),expandedwithholdingtax,andfinalwithholdingtax
(FWT) for taxable year (TY) 2006. Thereafter, Kepco received Final Letter of
Demand (FLD) for deficiency VAT in the amount of P159,640,750.79 and for
deficiency FWT in the amount of P124,286,821.11. Kepco filed itsprotesttothe
FLD.
epco filed its petition before the CTA Division.Induecourse,aftertrial,both
K
parties submitted their respective memorandum and the case was submitted
for Decision.
he CTA Division partly granted Kepco's petition and canceled the deficiency
T
FWT assessment and the compromise penalties. Kepco was ordered to pay
deficiency VAT plus interest and surcharges. Kepco and the CIR filed motions
for reconsideration but were denied for lack of merit.
he CTA en banc dismissed Kepco's petition for being filed out of time and
T
granted the CIR's petition. Kepco sought reconsideration but the CTAEnBanc
denied the motion. Thus, Kepco filed the instant petition. The Office of the
Solicitor General (OSG) filed his Comment and Kepco replied.
4
epco filed a Manifestation that it entered intoacompromiseagreementwith
K
theCIRonitstaxassessmentsfortheyears2006,2007and2009.ForTY2006,
whichisthesubjectoftheinstantpetition,KepcopaidatotalofP134,193,534.12.
As proof, Kepco attached the Certificate of Availment issued by the CIR on
December 11, 2017 certifying that the National Evaluation Board (NEB)
approved Kepco's application for compromise settlement for deficiency taxes
for TYs 2006, 2007 and 2009. Thus, Kepco moved that the case be declared
closed and terminated.
he OSG filed its Comment opposing Kepco's manifestation and motion. The
T
OSGaversthatthecompromiseagreementisnotvalidbecausefirst,itfailedto
allegeandproveanyofthegroundsforavalidcompromiseunderSection3of
Revenue Regulations (RR) No. 30-2002; second, the CTA did not yet issue any
adverse Decision against Kepco,hence,thereisno"doubtfulvalidity"tospeak
of as agroundforavalidcompromisepursuanttoSection2ofRRNo.8-2004;
and third, Kepco did not pay in full the compromise amountuponfilingofthe
application in violation of Section 2 of RR No. 9-2013. The OSG positsthatthe
CIR improperly arrogated unto himself the power of the NEBtodecideonthe
offer of compromise when the CIR accepted Kepco's additional payment of
P16,661,759.20 before the NEB could approve or reject Kepco's original
application.
ISSUE
Whether the compromise agreement entered into by the CIR and Kepco is valid.
RULING
YES, the compromise agreement entered into between CIR and Kepco is valid.
hepoweroftheCIRtoenterintocompromiseagreementsfordeficiencytaxes
T
is explicit in Section 204 (A) of the 1997 National Internal Revenue Code, as
amended (1997 NIRC). The CIR may compromise an assessment when a
reasonable doubt as tothevalidityoftheclaimagainstthetaxpayerexists,or
the financial position of the taxpayerdemonstratesaclearinabilitytopaythe
tax.
urthemore,BIRissuedRRNo.30-2002,asamendedbyRRNo.08-2004,which
F
enumerates the bases for acceptance of the compromise settlement on the
ground of doubtful validity, viz.:
SEC. 3. Basis for Acceptance of Compromise Settlement. x x x
1 . Doubtful validity of the assessment. The offer to compromise a delinquent
account or disputed assessment under these Regulations on the ground of
reasonabledoubtastothevalidityoftheassessmentmaybeacceptedwhenit
is shown that:
XXX
5
( e) The taxpayer failed to elevate to the CTA an adverse decision of the
Commissioner, or his authorized representative, in some cases, within 30 days
from receipt thereof and there is reason to believe that the assessment is
lacking in legal and/or factual basis;
XXX
epco's case falls under paragraph e the assessment became final because
K
Kepco failed to appeal the inaction or "deemed denial" of the CIR to the CTA
within30daysaftertheexpirationofthe180-dayperiodandthereisreasonto
believe that the assessment is lacking in legal and/or factual basis.
s to whether the CIR properly accepted Kepco's offer for a compromise
A
because "the assessment is lacking in legal and/or factual basis," the general
rule is that the authority of the CIR tocompromiseispurelydiscretionaryand
the courts cannot interfere with his exercise of discretionary functions, absent
grave abuse of discretion. Here, no grave abuse of discretion exists.
ontrary to theOSG'sclaimthatKepcodidnotpaythefullamountofferedfor
C
compromise upon filing of its application, records show that Kepco paid
representing40%ofthebasictaxassessedforTYs2006,2007and2009whenit
applied for compromise.
heminimumcompromiseamountunderSection204(A)ofthe1997NIRCand
T
Section 4 of RR No. 30-2002 is 40% ofthebasictaxassessed.Kepcocomplied
withtherequirementofpaymentofthecompromiseofferasapreconditionfor
the processing of the application.
compromise agreement has the effect of res judicata on the parties.
A
Compromises are generally to be favored and thoseenteredintoingoodfaith
cannotbesetaside,exceptwhenthereismistake,fraud,violence,intimidation,
undueinfluence,orfalsityofdocuments.Noneoftheseexceptionsobtaininthe
present case.
ccordingly, we rule that the compromise settlement between Kepco and the
A
CIR is valid. As such, there is nothing left for us to do but to declarethecase
closed and terminated.
6
VALUE-ADDED TAX (VAT)
ZERO-RATED TRANSACTIONS
CIR V. FILMINERA RESOURCES CORP.
LOPEZ, M., J.
G.R. NO. 236325 | SEPTEMBER 16, 2020
DOCTRINE
roof of actual exportation of goods sold by a VAT-registered taxpayer to a
P
Board of Investments (BOI)-registered enterprise isvitalforthetransactionto
beconsideredaszero-ratedexportsales.Thetaxpayer-claimanthastheburden
of proving the legal and factual bases of its claim for tax credit or refund.
FACTS
ilminera Resources and Philippine Gold Processing and Refining Corporation
F
(PGPRC), a domestic corporation registered with the BOI, entered into an Ore
Sales and Purchase Agreement. For the third and fourth quarters of the fiscal
year (FY) ending June 30, 2010, Filminera Resources' sales were all made to
PGPRC.
ilminera Resources filed its amended quarterly VAT returns for the third and
F
fourth quarters, respectively. On the same dates, Filminera Resources filed
administrative claims for refund or issuance of TCC of its unutilized input
value-added tax (VAT) attributable to its zero-rated sales for the third and
fourth quarters.
hereafter, Filminera Resources filed separate petitions for review before the
T
CTA, which were docketed as CTA Case No. 8528 and CTA Case No. 8576. The
CIRfiledhisanswerinCTACaseNo.8528onOctober23,2012,andinCTACase
No. 8576 on December 12, 2012. The two cases were consolidated, and
thereafter, trial on the merits ensued.
he CTA Division denied Filminera Resources' petitions on the ground of
T
insufficiency ofevidence.TheCTADivisionheldthatFilmineraResourcesfailed
toprovethatitssalestoPGPRCduringthethirdandfourthquartersofFY2010
qualifyasexportsalessubjecttothe0%rateunderSection106(A)(2)(a)(5)of
the 1997 National Internal Revenue Code, as amended by R.A. No. 9337 (1997
NIRC), and Section 4.106-5 (a) (5) of Revenue Regulations (RR) No. 16-2005.
7
he CTA Division amended its Decision on petitioner's motion for
T
reconsideration. Considering that the validity period of the BOI Certification
coveredtheperiodsubjectoftheclaimsforrefund,theCTADivisionconcluded
that Filminera Resources' sales were zero-rated.
ccordingly, the CIR is ORDERED TO REFUND OR ISSUE A TAX CREDIT
A
CERTIFICATE in favor of FilmineraResourcesintheamountofP111,579,541.76,
representing Filminera Resources' unutilized input VAT attributable to its
zero-rated sales for the third and fourth quarters of FY ending June 30, 2010.
heCIR'smotionforreconsiderationwasdeniedonSeptember10,2015.Hence,
T
the CIR elevated the case to the CTAEnBanc.OnNovember16,2017,theCTA
En Banc denied the CIR's motion. Hence, the CIR filed the instant petition
before this Court.
ISSUE
re the sales made by Filminera to PGPRCforthethirdandfourthquartersof
A
the FY ending June 30, 2010zero-ratedexportsalesbasedonthecertification
issued by the BOI.
RULING
o.thecertificationissuedbytheBOIdidnotclearlyshowthatthesalesmade
N
by Filminera to PGPRC for thethirdandfourthquartersoftheFYendingJune
30, 2010 was 100% exported.
o qualify forVATzero-rating,Section3ofRMONo.09-00requirescompliance
T
with the following conditions:
SECTION 3. Sales of goods, properties or services made by a VAT-registered
supplier to a BOI-registered exporter shall beaccordedautomaticzero-rating,
i.e., without necessity of applying for and securing approvaloftheapplication
for zero-rating as provided in Revenue Regulations No. 7-95, subject to the
following conditions:
(1) The supplier must be VAT-registered;
(2) The BOI-registered buyer must likewise be VAT-registered;
( 3)ThebuyermustbeaBOI-registeredmanufacturer/producerwhoseproducts
are 100% exported. For this purpose a Certification to this effect must be
issuedbytheBoardofInvestments(BOI)andwhichcertificationshallbegood
for one year unless subsequently re-issued by the BOI;
( 4) The BOI-registered buyer shall furnish each of its suppliers with a copy of
the aforementioned BOI Certification which shall serve as authority for the
suppliertoavailofthebenefitsofzero-ratingforitssalestosaidBOI-registered
buyers; and
8
( 5) The VAT-registered supplier shall issue for each sale to BOI-registered
manufacturer/exporters a duly-registered VAT invoice with the words
"zero-rated"stampedthereonincompliancewithSec.4.108-1(5)ofRR7-95.The
supplier must likewise indicate in the VAT invoice the name and BOI-registry
number of the buyer.
irst: A plain readingofthecertificationshowsthatPGPRCexportedatotalof
F
3,820,982.5 grams, or 100% of its total sales volume/value, from January1to
December 31, 2009. The claim of Filminera is from January 1 to June 30,
2010.
econd:ThevalidityperiodoftheBOIcertificationshouldnotbeconfusedwith
S
theperiodidentifiedinthecertificationwhenthebuyeractuallyexported100%
of its products.
hird:Thevalidityperiodofthecertificationisintendedtoaccordzero-rating
T
statustosalesmadeduringtheextendedperiod,butnotasproofthatPGPRC
exported its entire products during the same period.
ourth. We stress that the taxpayer-claimant has the burden of proving the
F
legal and factual bases of its claim for tax credit or refund.
nder Section 112 (A) of the 1997 NIRC, the seller may claim a refund or tax
U
credit for the input VAT attributable to its zero-rated sales subject to the
following conditions: (1) the taxpayer is VAT-registered; (2) the taxpayer is
engagedinzero-ratedoreffectivelyzero-ratedsales;(3)theclaimmustbefiled
within two years after the close of the taxable quarter when such sales were
made; (4) the creditable input tax due or paid must be attributable to such
sales,exceptthetransitionalinputtax,totheextentthatsuchinputtaxhasnot
been applied against the output tax; and (5) in case ofzero-ratedsalesunder
Section106(A)(2)(a)(1)and(2),Section106(B)andSection108(B)(1)and(2)
of the 1997 NIRC, the acceptable foreign currency exchange proceeds have
been duly accounted for in accordance with Bangko Sentral ng Pilipinas rules
and regulations.
ilminera Resources failed to prove that its sales to PGPRC for the third and
F
fourth quarters of FY 2010 are export sales. We reiterate that without the
certification from the BOI attesting actual exportation by PGPRC of its entire
products from January 1 to June 30, 2010, the sales made during that period
are not zero-rated export sales.
ence, Filminera Resources Corporation is not entitled to a refund or the
H
issuance of tax credit certificate.
9
VALUE-ADDED TAX (VAT)
VAT Refund or Credit - Section 112
CIR V. PHILEX MINING CORP.
LOPEZ, M., J.
G.R. NO. 230016 | NOVEMBER 23, 2020
DOCTRINE
hilethetaxlawrequiresmandatorycompliancewiththekeepingofsubsidiary
W
journals and the filing of monthly VATdeclarations,theCourtwillnotdenythe
request for refund on the sole basis that the taxpayer failed to comply with
these requirements when the law does not provide for its compliance by the
taxpayertobeentitledforrefund.TheCourtmaynotconstrueastatutethatis
free from doubt; neither can we impose conditions or limitationswhennoneis
provided for.
FACTS
artiestothiscasearePhilexMiningCorporation(PhilexMining),thepetitioner,
P
and the CIR,therespondent.ThenatureofthecaserevolvesaroundaPetition
forReviewonCertiorariunderRule45oftheRulesofCourt,seekingtooverturn
the Decision and Resolution of the Court of Tax Appeals (CTA) En Banc.These
decisions upheld the CTA Division's ruling ordering the CIR to refund Philex
Mining the amount of P51,734,898.99, representing its unutilized input
Value-Added Tax (VAT) attributable to its zero-rated sales for the second and
third quarters of the taxable year 2010.
hilexMining,allegesthatittimelyfileditsadministrativeandjudicialclaimsfor
P
a refund within the period prescribed under the relevant provisions of the
National Internal Revenue Code (NIRC). It asserts that it submitted all
necessary documents to support its claims for refund and that the amount
claimed is justified byitsexcessinputVATarisingfromzero-ratedsalesduring
the specified tax periods.
I n response, the CIR, argued that Philex Mining's judicial claim forrefundwas
premature, citing non-compliance with certain requirements such as the
submission of a checklist of documents to the Department of Finance's
One-Stop Shop Center (DOF-OSS). Additionally, they claim that Philex Mining
failed to adhere to accounting requirements, specifically regarding the
maintenance of subsidiary sales and purchase journals, as well as thefilingof
monthly VAT declarations. The defendants contend that such non-compliance
should disqualify Philex Mining from being entitled to a refund of its claimed
excess input tax.
10
he procedural history of this case indicates that Philex Mining filedamended
T
quarterlyVATreturnsforthesecondandthirdquartersofthetaxableyear2010,
reflectingitsexcessinputtaxfromzero-ratedsales.Followingthis,itfiledclaims
for refund with the DOF-OSS and subsequently lodged petitions for review
before the CTA Division. After a series of proceedings, including the
commissioning of an Independent Certified Public Accountant (ICPA) and a
trial,theCTADivisionpartiallygrantedPhilexMining'spetitions.UpontheCIR's
motion for reconsideration being denied, the case was elevated to theCTAEn
Banc,whichaffirmedtheDivision'sdecision.Dissatisfiedwiththisoutcome,the
CIR, through the Office oftheSolicitorGeneral,lodgedthecurrentpetitionfor
review with the Supreme Court, raising the issue of whether Philex Mining is
entitled to the refund of its claimed excess input VAT.
ISSUE
re the presentation of subsidiary journals and the filing of monthly VAT
A
declarations necessary requirements for the grant of tax credit or refund.
RULING
o, the presentation of subsidiary journals and the filing of monthly VAT
N
declarations are not necessary requirements for the grant of tax credit or
refund.
ection 112(A) of the Tax Code outlines the conditionsunderwhichataxpayer
S
engaged in zero-rated sales may apply for the issuance of a tax credit
certificateorrefundofexcessinputtaxdueorpaid,attributabletothesale.The
conditions are as follows:
(1) The taxpayer must be VAT-registered.
( 2) The taxpayer must be engaged in sales which are zero-ratedoreffectively
zero-rated.
( 3) The claim must be filed within two (2) years after the close of the taxable
quarter when such sales were made.
( 4) The creditable input tax due or paid must be attributable to such sales,
exceptthetransitionalinputtax,totheextentthatsuchinputtaxhasnotbeen
applied against the output tax;
( 5) In case of zero-rated sales under Section 106 (A)(2)(a)(1), the acceptable
foreign currency exchange proceeds have been duly accounted for in
accordance with Bangko Sental ng Pilipinas rules and regulations.
ections 4.110-8, 4.113-1 (A) and (B) of Revenue Regulations (RR) No. 16-2005
S
specify the documents required and informationthatmustappearontheface
of the official receipt to substantiate the input tax on importation of goods
other than capital goods and on domestic purchases of services.
11
he language used in Section 110 is plain, clear, and unambiguous. To be
T
creditable, theinputtaxesmustbeevidencedbyvalidlyissuedinvoicesand/or
officialreceiptscontainingtheinformationenumeratedinSections113and237.
Thelawdoesnotrequirethatsubsidiaryjournalswherethesalesandpurchases
(and the output taxes and their corresponding input taxes)wererecorded,are
also kept. Failure to comply with invoicing requirements is a sufficient ground
for denial of a refund claim.
he presentation of subsidiary journals and the filing of monthly VAT
T
declarations are not necessary requirements for the grant of tax credit or
refund. The plain language of the Tax Code and relevant revenue regulations
doesnotmandatesuchrequirementsforthesubstantiationofinputtaxclaims.
For one, the subject of the claim for refund is input tax on the importation of
goods other than capital goods and domestic purchases of services. CTA was
able to determine the existence of Philex Mining's valid creditable input VAT
attributable to itszero-ratedsalesbyprobingalltheofficialreceipts,quarterly
VAT returns, and the import entry declarations submitted. The CTA evaluated
the ICPA's report and concluded that Philex Mining incurred input taxes in
connection with its zero-rated sales and the input taxes were not applied
against any of its output tax liability.
herefore, based on the law and the absence of statutory provisionsrequiring
T
the submission of subsidiary journals or monthly VAT declarations, the
taxpayer's failure to maintain subsidiary journals or file monthly VAT
declarations should not result in the outright denial of its claim for refund or
credit of unutilized input VAT.
12
TAX REMEDIES
Taxpayer’s Remedies
NATIONAL POWER CORPORATION V. THE PROVINCE OF
PAMPANGA
LOPEZ, M., J.
G.R. NO. 230648 | OCTOBER 6, 2021
DOCTRINE
ax assessmentsissuedinviolationofthedueprocessrightsofataxpayerare
T
null and void and of no force and effect. The taxpayer must not only be
informed of what taxes it is liable to pay and under what authority the
obligation to pay is based. Equally important is that it must be advised how
much is the pending tax liability and the period covered. Without these
particulars, taxpayers would be deprived of adequate opportunity to prepare
for an intelligent appeal as they would have no way of determining what was
considered by the taxing authority in making the assessment.
FACTS
his is a Petition for Review on Certiorari assailing thedecisionandresolution
T
of the CTA En Banc, which affirmed the decision and resolution of the CTA
SecondDivision,whichsetasidethedecisionoftheRTC-Branch47oftheCity
of San Fernando, Pampanga andruledthatNationalPowerCorporation(NPC)
is liable for franchise tax relative to its missionary electrification function.
PC, agovernmentownedandcontrolledcorporation,receivedanAssessment
N
Letter from the Provincial Treasurer of the Province of Pampanga demanding
payment of local franchise tax. NPC protested the assessment, arguing that,
with the effectivity of R.A. No. 9136 or the Electric Power Industry Reform Act
(EPIRA Law) in 2001, its power generation is no longer required as a public
utility operation requiring a franchise. The ProvincialTreasurerfailedtoacton
theprotest;hence,NPCappealedtotheRTC.NPCinvokeditsexemptionunder
theEPIRALawandpointedoutinitsReplythattheAssessmentLetterfailedto
comply with the formal requirements under the LGC as it does not bear any
computation of the alleged franchise tax liability.
13
heRTCrenderedadecisioninfavorofPampangaanddeclaredNPCliablefor
T
the franchise tax. Aggrieved, NPC filed a petition for review with the CTA
prayingthattheassessmentbenullifiedandthatNPCbedeclaredexemptfrom
franchisetax.TheCTAobservedthattheProvincialTreasurerdidnotindicatein
the Assessment Letter the amount ofthefranchisetaxandtheperiodcovered
by the assessment. The CTA, therefore, could not determine with certainty the
amount of franchise tax due from NPC. Hence, the CTA found it proper to
remand the case totheRTCforfurtherproceedings.TheCTAEnBancissueda
Decision upholdingtheCTASecondDivision'sfindingsandconclusionthatNPC
is liable for franchise tax
ISSUE
I sthelocaltaxassessmentissuedbyPampangavoidasitfailedtoobservethe
due process requirement in issuing deficiency local tax assessments.
RULING
es,thelocaltaxassessmentissuedbyPampangaisvoidasitfailedtoobserve
Y
the due process requirement in issuing deficiency local tax assessments.
ection 195 of the LGC provides that when the local treasurer or his duly
S
authorized representative finds that correct taxes, fees, or charges have not
been paid, he shall issue a notice of assessment stating the nature ofthetax,
fee, or charge, the amount of deficiency, the surcharges, interests and penalties.
axpayersmustbeinformedofthenatureofthedeficiencytax,fee,orcharge,
T
as well as theamountofdeficiency,surcharge,interest,andpenalty.Failureof
the taxing authority to sufficiently inform the taxpayer of the facts and law
used as bases for the assessment will render the assessment void. Tax
assessments issuedinviolationofthedueprocessrightsofataxpayerarenull
and void and of no force and effect.
he taxpayer must not only be informed of what taxes it is liable to pay and
T
underwhatauthoritytheobligationtopayisbased.Equallyimportantisthatit
must be advised how much isthependingtaxliabilityandtheperiodcovered.
Without these particulars, taxpayers would be deprived of adequate
opportunity to prepare for an intelligent appeal astheywouldhavenowayof
determining what was considered by the taxing authority in making the
assessment.
I nthepresentcase,NPCwasdeprivedofitsrighttodueprocessoflawbecause
the AssessmentLetterdoesnotstatetheamountoftheallegeddeficiencytax,
surcharges, interest, and penalties. The period covered bytheassessmentwas
not also indicated. Thenoticedidnotevenindicatethetaxableperiodcovered
by the assessment.
ence, the local tax assessment issued by Pampanga is void for failing to
H
observe due process in issuing deficiency local tax assessments.
14
TAX REMEDIES: Government
Criminal Action for Collection
PEOPLE V. MENDEZ
LOPEZ, M., J.
G.R. NOS. 208310-11, 208662 | MARCH 28, 2023
DOCTRINE
Civil Liability for Unpaid Taxes from Criminal Action on Tax Law Violations
( 1) When a criminal action for violation of the tax laws is filed, a prior
assessment is not required. Neither is a final assessment a precondition to
collecting delinquent taxes in the criminal tax case. The criminal action is
deemed a collection case. Therefore, the government must prove two things:
one, the guilt of the accused by proof beyond reasonable doubt, and two,the
accused's civil liability for taxes by competent evidence other than the
assessment.
( 2)Ifbeforetheinstitutionofthecriminalaction,thegovernmentfiled(a)acivil
suit for collection or (b) an answer to the taxpayer'spetitionforreviewbefore
the CTA, the civil action or the resolution of the taxpayer's petition for review
shall be suspended before judgment on the merits until final judgment is
rendered in the criminal action. However, before judgment on the merits is
rendered in the civil action, it maybeconsolidatedwiththecriminalaction.In
such a case, the judgment in the criminal action shall include a finding of the
accused's civil liability for unpaid taxes relative to the criminal case.
Jurisdiction of the CTA
rom the provisions ofR.A.No.9282,boththeCTAandtheregularcourtshave
F
exclusive and original jurisdiction over criminal offenses entailing tax claims
amounting to P1,000,000.00 and above and purely tax collection cases where
the principal amount of claim is also P1,000,000.00 and above. The apparent
conflictingprovisionsofR.A.No.9282andB.P.Blg.129,asamendedbyR.A.No.
11576, are reconciled as follows:
( a) Exclusive original jurisdiction over tax collection cases involving
P1,000,000.00 or more remains with the CTA;
( b) Exclusive original jurisdiction over tax collection cases involving less than
P1,000,000.00 shall be exercised by the proper first-level courts;
( c) Exclusive appellate jurisdiction over tax collection cases originally decided
by the first-level courts shall be exercised by the RTC;
15
( d) Exclusive original jurisdiction over criminal offenses or felonies where the
principalamountoftaxesandfees,exclusiveofchargesandpenalties,claimed
is P1,000,000.00 or more remains with the CTA;
( e) Exclusive original jurisdiction over criminal offenses or felonies where the
principalamountoftaxesandfees,exclusiveofchargesandpenalties,claimed
is less than P1,000,000.00 shall be exercised by the proper first-level courts; and
( f) Exclusive appellate jurisdiction over criminal offenses or felonies originally
decided by the first-level courts remains with the RTC.
owever, the foregoing clarification shall apply to cases filed upon the
H
effectivity of R.A. No. 11576 on August 21, 2021, since jurisdiction over the
subjectmatterincriminalcasesisdeterminedbythestatuteinforceatthetime
of commencement of the action.
FACTS
I n2006,JoelC.Mendezwaschargedintwoseparateinformationwithviolation
ofSection255oftheNationalInternalRevenueCode(NIRC),particularlyfor(1)
not filing his 2002 Income TaxReturn(ITR)intheestimatedamountofP1.52M
and (2) willfully failing to supply correct and accurate information in his 2003
ITR, to the government's prejudice in the estimated amount of P2.11M.
I n its 2011 decision, the CTA Division found Mendez guilty of both criminal
charges
asedonthetotalityoftheevidencepresented. Regardinghiscivilliability,the
b
CTA Division held that a final assessment issued by the Commissioner of
Internal Revenue (CIR) is required under Sec. 205 of the NIRC before the
taxpayercanbeheldcivillyliablefordeficiencytaxes. Inhisdissentingopinion,
Justice Casanova opined that the CTA has no jurisdiction over said criminal
cases because the amounts alleged in the information are mere estimates.
Thus,whichcourthasjurisdictioncannotbeascertained.Bothpartiesmovedfor
reconsideration of the CTA decision.
I nhismotionforreconsideration,Mendezraisedforthefirsttimehisargument
that the CTA has no jurisdiction over the criminal cases. However, the
prosecution contended that an assessment is unnecessary before the civil
liability for unpaid taxes may be imposed, based on Sec. 222 (a) of the NIRC.
The CTA Division denied both motions for reconsideration for lack of merit,
promptingthepartiestofiletheirrespectivepetitionsforreviewbeforetheCTA
En Banc.
he CTA En Banc affirmed Joel's conviction and the non-imposition of
T
deficiencytaxes.Italsodeniedtheparties'motionsforreconsideration.Hence,
these petitions.
16
ISSUES
1. I s the assessment for deficiency tax a prerequisite for the collection of
civil liability in a criminal prosecution for tax law violations.
2. Does the CTA have jurisdiction over the criminal cases.
RULING
1. N o, the assessment for deficiency tax is not a prerequisite for the
collection of civil liability in a criminal prosecution for tax law violations.
precise computation and final determination ofadeficiencytaxisnot
A
required before one is prosecuted for criminal violation oftheTaxCode.
The prosecution needs only to establish probable cause to indict the
taxpayer. The reasonisthatthecrimeiscommittedbythemereconduct
of the taxpayer and not because he had delinquent taxes.
hen a criminal action for violation of the tax laws is filed, a prior
W
assessmentisnotrequired.Neitherisafinalassessmentapreconditionto
collectingdelinquenttaxesinthecriminaltaxcase. Thecriminalactionis
deemed a collection case. Therefore, the government must prove two
things: one, the guilt of the accused by proof beyond reasonable doubt,
and two, the accused's civil liability for taxes by competent evidence
other than the assessment.
I f beforetheinstitutionofthecriminalaction,thegovernmentfiled(a)a
civil suit for collection or (b) an answer to the taxpayer's petition for
review before the CTA, thecivilactionortheresolutionofthetaxpayer's
petitionforreviewshallbesuspendedbeforejudgmentonthemeritsuntil
final judgment is rendered in the criminal action. However, before
judgment on the merits is rendered in the civil action, it may be
consolidatedwiththecriminalaction.Insuchacase,thejudgmentinthe
criminal action shall include a finding of the accused's civil liability for
unpaid taxes relative to the criminal case.
2. Yes, the CTA has jurisdiction over the criminal cases.
romtheprovisionsofR.A.No.9282,boththeCTAandtheregularcourts
F
have exclusive and original jurisdiction over criminal offenses entailing
tax claims amounting to P1,000,000.00 and above and purely tax
collectioncaseswheretheprincipalamountofclaimisalsoP1,000,000.00
and above. The apparentconflictingprovisionsofR.A.No.9282andB.P.
Blg. 129, as amended by R.A. No. 11576, are reconciled as follows:
( a) Exclusive original jurisdiction over tax collection cases involving
P1,000,000.00 or more remains with the CTA;
17
( b)Exclusiveoriginaljurisdictionovertaxcollectioncasesinvolving
less than P1,000,000.00 shall be exercised by the proper first-level
courts;
( c) Exclusive appellate jurisdiction over tax collection cases
originallydecidedbythefirst-levelcourtsshallbeexercisedbythe
RTC;
( d) Exclusive original jurisdiction over criminal offenses or felonies
where theprincipalamountoftaxesandfees,exclusiveofcharges
and penalties, claimed is P1,000,000.00 or more remains with the
CTA;
( e) Exclusive original jurisdiction over criminal offenses or felonies
where theprincipalamountoftaxesandfees,exclusiveofcharges
andpenalties,claimedislessthanP1,000,000.00shallbeexercised
by the proper first-level courts; and
( f)Exclusiveappellatejurisdictionovercriminaloffensesorfelonies
originally decided by the first-level courts remains with the RTC.
owever, the foregoingclarificationshallapplytocasesfiledupon
H
theeffectivityofR.A.No.11576onAugust21,2021,sincejurisdiction
over the subject matter in criminal cases is determined by the
statute in force at the time of commencement of the action.
I nthiscase,thetwoseparateinformationswerefiledin2006,when
R.A. No. 11576 was not yet in force.
18
TAX REMEDIES: Civil Penalties
Tax Delinquency, Tax Deficiency
CHEVRON HOLDINGS, INC. V. CIR
LOPEZ, M., J.
G.R. NO. 215159 | July 5, 2022
DOCTRINE
he CTA, and even the Court, may not, on its own, deduct the input tax
T
attributable to zero-rated sales from the output tax derived from the regular
12%VAT-ablesalesfirstandusetheresultantamountasthebasisincomputing
the allowable amount for refund.
FACTS
his is a Petition for Review on Certiorari assailingtheCTAEnBanc'sDecision
T
which ordered the refund or issuance of tax credit certificate in favor of
Chevron Holdings, Inc. representing unutilized input tax attributable to
zero-rated sales for the period from January 1 to December 31, 2006.
hevron is acorporationorganizedunderthelawsoftheUSA.Itislicensedby
C
the Securities and Exchange Commission (SEC) to transact business in the
Philippines as a Regional Operating Headquarter (ROHQ). It is registeredwith
the BIR as a VAT taxpayer. For the taxable year 2006, Chevron rendered
services to itsaffiliatesinthePhilippines,subjecttotheregulartwelvepercent
(12%) rate, and abroad, subject to the zero percent (0%) rate. It also incurred
input taxes on purchases of goods and services concerning these services.
nMarch28,2008,Chevronfiledanadministrativeclaimforrefundorissuance
O
of ataxcreditcertificateontheunutilizedinputVATattributabletothesaleof
services to its foreign affiliates. The CIR failed to act on the claim; hence, on
April 24, 2008, Chevron filed a Petition for Review before the CTA Division for
therefundorcreditofexcessinputVATforthefirstquarterof2006.OnJuly23,
2008,ChevronagainfiledaPetitionforReviewfortherefundorcreditofexcess
input VAT for the second to fourth quarters. CTA Division denied the two
petitions for being prematurely filed.The CTA En Banc rendered its Decision
reversing the CTA Division and partly granting Chevron'spetitions.TheCTAEn
Banc held that the judicial claims were timely filed.
19
s regards input VAT attributable to zero-rated sales, the CTA En Banc ruled
A
that only a portion qualified for VAT zero-rating of sales of services to
non-resident foreign affiliate clients under Section 108 (B)(2) of the 1997 Tax
Code.TheCTAEnBancheldthatVATofficialreceiptsissuedtoforeignaffiliates
must have the corresponding foreign currency inward remittances and found
that a portion of the sales did not have the required inward remittances.
inally, the CTA En Banc ruled that only a portion of the amount claimed was
F
validinputVAT.ItdisallowedtheotherforhavingnosupportingVATinvoicesor
officialreceiptsandforfailuretocomplywiththeinvoicingrequirementsunder
the Tax Code.
hereafter, the CTA charged the substantiated and validated input taxes
T
against the outputtaxes,andonlyafterfindingthatthereexistedexcessinput
taxes from the output taxes did the CTA conclude that Chevron might be
entitled to a refund.
ISSUE
I s Chevron entitled to refund or issuance of a tax credit certificate on its
unutilized input VAT attributable to its sale of services to its foreign affiliates.
RULING
es, Chevron is entitled to refund or issuance of a tax credit certificate on its
Y
unutilized input VAT attributable to its sale of services to its foreign affiliates,
but only where the requisites for refund were met.
nder Section 112 (A) of the Tax Code, the taxpayer may claim for refund or
U
issuance of tax credit certificate of unutilized input VAT attributable to
zero-rated sales subject to the following conditions: (1) the taxpayer is VAT-
registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated
sales; (3) the claim must be filed within two (2) years after the close of the
taxable quarter when such sales were made; and (4) the creditable input tax
dueorpaidmustbeattributabletosuchsales,exceptthetransitionalinputtax,
to the extent that such input tax has not been applied against the output tax.
oberefundedorissuedataxcreditcertificate,thefollowingmustbecomplied
T
with: (1) the input tax is a creditable input tax due orpaid;(2)theinputtaxis
attributable to the zero-rated sales; (3) the input taxisnottransitional;(4)the
inputtaxwasnotappliedagainsttheoutputtax;and(5)incasethetaxpayeris
engaged in mixed transactionsi.e.,VAT-able,exempt,andzero-ratedsalesand
the input taxes cannot be directly and entirely attributable to any of these
transactions, only the input taxes proportionately allocatedtozero-ratedsales
based on sales volume may be refunded or issued a tax credit certificate.
20
o qualify for VAT zero-rating, Section 108 (B)(2) requires the following
T
conditions: first, the services rendered should be other than "processing,
manufacturing or repacking of goods;" second, the services are performed in
the Philippines; third, the service-recipient is (a) a personengagedinbusiness
conducted outside the Philippines;or(b)anon-residentpersonnotengagedin
a business which is outside the Philippines when the services are performed;
and, fourth, the services are paid for in acceptable foreign currency inwardly
remitted and accounted for in conformity with BSP rules and regulations.
nderthethirdrequisite,theCourtemphasizedthatforsalestoanon-resident
U
foreigncorporationtoqualifyforzero-rating,thefollowingmustbeproved:"(1)
thattheirclientwasnotadomesticcorporation;and(2)thatitisnotengagedin
trade or business in the Philippines.
I n this case, Chevron failed to substantiate that all of its clients was not a
domestic corporation and was not engaged in trade or business in the
Philippines,asChevronfailedtopresent,SECCertificatesofNon-Registration–
to prove that the affiliate is foreign; and theArticlesorCertificatesofForeign
Incorporation, or any similar document – to prove the fact of notengagingin
trade or business in the Philippines at the time the sales are rendered.
As regards the fourth condition, the Court stressed that the certification of
inward remittances proves the fact of payment in acceptableforeigncurrency
and accounted for under the rules and regulations of the BSP. In this case,
however, apart from the JP Morgan Reports, which is a mere "online
application," and VAT zero-rated receipts, Chevron Holdings failed to
substantiate the inward remittance of some proceeds.
owever,theinputtaxattributabletozero-ratedsalesmay,attheoptionofthe
H
VAT-registered taxpayer, be: (1) charged against output tax from regular 12%
VAT-able sales, and any unutilized or "excess" input tax may be claimed for
refund or the issuance oftaxcreditcertificate;or(2)claimedforrefundortax
credit in its entirety.
I t must be stressed that the remedies of charging the input tax against the
output tax and applying for a refund or tax credit are alternative and
cumulative. Furthermore, the option is vested with the taxpayer-claimant. It
goes without saying that the CTA, and even the Court, may not, on its own,
deducttheinputtaxattributabletozero-ratedsalesfromtheoutputtaxderived
from theregulartwelvepercent(12%)VAT-ablesalesfirstandusetheresultant
amount as the basis in computingtheallowableamountforrefund.Thecourts
cannot condition the refund of input taxes allocable tozero-ratedsalesonthe
existence of "excess" creditable input taxes, which includes the input taxes
carriedoverfromthepreviousperiods,fromtheoutputtaxes.Theseprocedures
find no basis in law and jurisprudence.
lltold,itwaserroneousfortheCTAtochargethevalidatedandsubstantiated
A
inputtaxesagainstChevrons'outputtaxesfirstandusetheresultantamountas
thebasisforcomputingtheallowableamountforrefund.TheCTAalsoerredin
requiring Chevron Holdings to substantiate its excess input tax carried over
from thepreviousquarterasitisnotarequirementforentitlementtoarefund
of unused or unutilized input VAT from zero-rated sales.
21
e reiterate that although the burden of proof to establish entitlement to a
W
refund is on the taxpayer-claimant, the Court has consistently held that once
the minimum statutory requirements have been complied with, the claimant
should be considered to have successfully dischargedtheirburdentoproveits
entitlement to the refund. After the claimant has successfully established a
primafacierighttotherefundbycomplyingwiththerequirementslaiddownby
law, the burden is shifted to the opposing party, i.e.,theBIR,todisprovesuch
claim. Otherwise, we would unduly burden the taxpayer-claimant with
additional requirements which have no statutory nor jurisprudential basis. In
the present case, Chevron Holdings sufficiently proved compliance withallthe
requisitesforentitlementtoarefundorcreditofunutilizedinputtaxallocableto
zero-rated sales under Section 112 (A) of the Tax Code.
22
OCAL TAXATION
L
(R.A. No. 7160, Book II, Title I)
Common Limitations on the Taxing Powers of Local Government Units
(Section 133)
ETROPOLITAN WATERWORKS AND SEWERAGE
M
SYSTEM V. CENTRAL BOARD OF ASSESSMENT APPEALS
LOPEZ, M., J.
G.R. NO. 215955 | January 13, 2021
DOCTRINE
ocal governments cannot tax the national government, which merely
L
delegated to local governments the power to tax. While the 1987 Constitution
now includes taxation as one of the powers of local governments, local
governments may only exercise such power “subject to such guidelines and
limitationsastheCongressmayprovide.”Thus,whenlocalgovernmentsinvoke
their power to tax on government instrumentalities, such power is construed
strictly against local governments. The tax exemption under Section234(a)of
the LGC, however, ceases when the beneficial use of the real properties is
allegedandprovedtohavebeengranted,foraconsiderationorotherwise,toa
taxable person.
FACTS
etropolitan WaterworksandSewerageSystem(MWSS)wascreatedbyvirtue
M
of Republic Act No. 6234 to insure an uninterrupted supply and distribution of
potable water for domestic and other purposes and the proper operation and
maintenance of sewerage systems within Metro Manila, Rizal and a portion of
Cavite. In 1997, MWSS entered into a concessionaireagreementwithMaynilad
Water Services, Inc. (Maynilad) to service the West Zone of the Metropolitan
Area that includes Pasay City. The respondents are the Central Board of
AssessmentAppeals(CBAA),thePasayCityLocalBoardofAssessmentAppeals
(LBAA), the Pasay City Treasurer and City Assessor.
23
I n 2008, MWSSreceivedRealPropertyTax(RPT)computationsfromthePasay
City Treasurer for taxable year 2008, demanding payment of RPT in the total
amountofP166,629.36.MWSSfiledaProtestLetteraddressedtothePasayCity
Mayor.MWSSarguedthatitisapublicutilityandagovernmentinstrumentality,
anditspropertiesandfacilitiesareexemptfromRPTanchoreduponthecaseof
Manila International Airport Authority (MIAA) vs. CA that declared a
government instrumentality exercisingcorporatepowersexemptunderSection
133(o)andSection234(a)ofR.A.No.7160ortheLocalGovernmentCode(LGC).
Due to the inaction on the part of the Pasay City Treasurer, MWSS filed an
appeal to the LBAA.
he LBAA observed MWSS’s failure to file a protest with the Pasay City
T
Treasurer as providedforunderSection252oftheLGC.Nonetheless,theLBAA
ruled that theMWSSisagovernment-ownedorcontrolledcorporation(GOCC),
not a government instrumentality. Hence, the doctrine of taxexemptioninthe
caseofMIAAisnotapplicable.Also,whenMWSSenteredintoaconcessionaire
agreement with Maynilad, the actualuseofitsrealpropertieswasturnedover
to a taxable person. Therefore, according to the LBAA, the assessment ofRPT
against the MWSS was reasonable and collectible. Aggrieved, MWSS filed an
appeal to the CBAA.
BAA affirmed the assessment’s finality for failure of MWSS to question the
C
legalityoftheassessmentbeforetheCityAssessorinaccordancewiththeLGC.
Forthisreason,theCBAAdidnotdiscussthemeritsofthecaseforbeingmoot
andacademic.MWSSfiledamotionforreconsideration(MR)butwasdenied.In
denying the MR, the CBAA acknowledged that MWSS is a government
instrumentality and being such,itcannotbesubjectedtolocaltaxes,fees,and
charges as provided under Section 133(o) of the LGC. However, this is not
relevant since the collections involvedareRPT.Besides,MWSS’staxexemption
under Section 18 of its Charter (R.A. No.6234)hadalreadybeenwithdrawnby
Section 234 of the LGC. MWSS appealed the CBAA’s ruling to the CA. The CA
dismissed MWSS’s appeal for failure to exhaust administrative remedies
requiring proof of exemption and payment under protest. MWSS’s MR was
denied. Hence, this petition.
ISSUE
Is Pasay City authorized to assess and collect RPT from MWSS.
RULING
No, Pasay City is not authorized to assess and collect RPT from MWSS.
WSS is agovernmentinstrumentalitywithcorporatepowers,notliabletothe
M
local government of Pasay City for RPT. The tax exemption that its properties
carry,however,ceaseswhentheirbeneficialusehasbeenextendedtoataxable
person.TheliabilitytopayRPTongovernment-ownedproperties,thebeneficial
oractualuseofwhichwasgrantedtoataxableentity,devolvedonthetaxable
beneficial user.
24
he SC declared EXEMPT from Real Property Tax the real properties of MWSS
T
locatedinPasayCityEXCEPTwhentheirbeneficialuseisallegedandprovedto
havebeengrantedtotaxableentities.Alltherealpropertytaxassessmentsand
computations issued in the name of MWSS are declared VOID. The MWSS’s
claim for refund may be pursued in accordance with the LGC within 2 years
from the finality of the Decision.
I n brief, the MIAAcaseexplainedthatthislimitationtothelocalgovernment's
taxing power recognizes the basic principle thatlocalgovernmentscannottax
the national government, which merely delegated to local governments the
power to tax. While the 1987 Constitution now includes taxation as one of the
powers of local governments,localgovernmentsmayonlyexercisesuchpower
"subject to suchguidelinesandlimitationsastheCongressmayprovide."Thus,
when local governments invoke their power to tax on government
instrumentalities, such power is construed strictly against local governments.
he tax exemption under Section 234 (a), however, ceaseswhenthebeneficial
T
use of the real properties is alleged and proved to have been granted, for a
considerationorotherwise,toataxableperson.Beneficialusemeansactualuse
or possession of the property. Actual use refers to the purpose for which the
property is principally or predominantly utilized by the person in possession
thereof.
I n this case, there was an allegation that the beneficial use of MWSS's
properties in Pasay were given to Maynilad by virtue of a concession
agreement. This factual allegation, however,wasnotprovedandmerelybased
on a sweeping conclusion that when MWSS entered into a concession
agreement,allitspropertieswereeffectivelyturnedovertotheconcessionaires
for their operations. At this point, the Court cannot make a judicious
determination of such factual matter due to the insufficiency of evidence on
records. At any rate, the tax-exempt status of agovernmentinstrumentalityis
notlostwhenitgrantsthebeneficialuseofitsrealpropertytoataxableperson;
only the exemption of the real property ceases in such cases. The LGC also
leaves no room for interpretation on the corresponding liability of the taxable
beneficial user for the payment of real property taxes on a government
instrumentality property.
25
eal Property Taxation
R
(R.A. No. 7160, Book II, Title II)
Exemption from Real Property Tax - Section 234
NATIONAL POWER CORPORATION V. PROVINCIAL
GOVERNMENT OF BULACAN
LOPEZ, M., J.
G.R. NO. 207140 | JANUARY 30, 2023
DOCTRINE
claim for exemption from Real Property Tax (RPT), whether full or partial,
A
does not deal withtheauthorityandpowerofthelocalassessortoimposethe
assessmentorthelocaltreasurertocollectthetax.Theissueofexemptionthat
pertainstothereasonablenessorcorrectnessoftheassessmentisaquestionof
factthatadministrativeagenciesshouldresolve.Therefore,compliancewiththe
“payment under protest” requirement in Section 252 (a) of the LGC is
mandatory. Otherwise, the local treasurer will not act on the protest, and the
LBAA will have no authority to take cognizance of the appeal.
FACTS
ational Power Corporation (NPC), a government-owned and controlled
N
corporation (GOCC), is the owner and operator of Angat Hydro-Electric Power
Plant located at Hilltop, San Lorenzo, Norzagaray, Bulacan. In 2006, NPC
received from the Municipal Assessor of the Municipality of Norzagaray a
Notice of Assessment for real property tax (RPT) for January 1, 1996 to
December 31, 2005 for machineries it owned (Machineries Assessment). Two
days thereafter, NPC received another NoticeofAssessmentcoveringJanuary
1, 1997 to December 31, 2006 for the lands it owned (land assessment).
PC and the Municipal Assessor failed to settle amicably; hence, NPC
N
questioned the assessment before the Local Board of Assessment Appeals
(LBAA) on the ground that: (1) the properties listed in the Machineries
Assessment are exempt from RPT under Section 234 (c) of the Local
Government Code (LGC) because these are actually, directly, and exclusively
used in generating and transmitting electricity; and that (2) the assessor
erroneouslyassignedahigherassessmentleveltothelandconsideringthatitis
a GOCC subject to only 10% and not 40%.
26
heMunicipalAssessorsentanewNoticeofAssessmentapplyingthe10%rate
T
andpositedthatthehearingontheMachineriesAssessmentshouldbedeferred
untilNPChadpaidtheassessmentunderprotest.NPCcounteredthatitwasnot
required to pay the tax under protest following the Court’s ruling in Tyv.Hon.
Trampe,whereitheldthattherequirementofpaymentunderprotestintheLGC
does not apply when petitioner is questioning the authority and power of the
assessor,actingsolelyandindependently,toimposetheassessmentandofthe
treasurer to collect the tax as in this case.
he LBAAupheldtheRPTassessmentagainstNPCandruledthatthepayment
T
under protest is a condition sine qua nonbeforefilinganappealtotheBoard.
Further, NPC failed to prove that the machineries were actually, directly, and
exclusively used in the generation or transmission of electric power, and,
therefore, exempt fromRPT.NPCappealedtotheCentralBoardofAssessment
Appeals (CBAA), insisting that it is not liable to pay RPT but this was dismissed.
PC filed a Petition before the CTA En Banc but this was denied. The CTA En
N
Banc likewise denied NPC’s motion for reconsideration. Hence this case.
ISSUES
1. I sthecompliancewiththepaymentunderprotestrequirementinSection
252oftheLGCaconditionsinequanontoquestiontheassessmentofthe
local assessor before the LBAA.
2. A re the properties listed in the Machineries and Land Assessments
exempt from RPT.
RULING
1. Y es, the compliance with the payment under protest requirement in
Section 252 of the LGC is a condition sine qua non to question the
assessment of the local assessor before the LBAA.
s early as in National Power Corporation v. Province of Quezon, this
A
Court ruled thataclaimforexemptionisaquestionoffactthatpertains
to the correctness of an assessment. Hence, payment under protest is
mandatory. Otherwise, there is no valid protest, and the appellate
authority of the LBAA cannot be invoked. The LBAA could not assume
jurisdiction over the Petition. On the other hand, an issue that concerns
the very authority and power of the local assessor to impose the
assessment and the local treasurer to collect the tax is a legal question
that is properly cognizable bythetrialcourt.Insuchacase,Section252
of the LGC will not apply, which states that “no protest shall be
entertained unless the taxpayer first pays the tax.”
27
I n this case, the authority or power of the municipalassessortoimpose
RPT on the NPC’s properties is not being questioned. Nothing in the
Petition filed with the LBAA supported NPC’s claim regarding the
assessor’s alleged lack of authority. Instead, the Petition primarily
involvedfactualquestionsonthecorrectnessoftheassessment.TheNPC
did not pay the tax, negating the perfection of its protest to the local
assessor. LBAA could not have had the authority to act on NPC’s appeal.
2. N o, the properties listed in the Machineries and Assessments are not
exempt from RPT.
he“machineriesandequipment”referredtoinSection234(c)oftheLGC
T
should not be construed as being confined only within the narrow
definition of “machinery” in Article 415 (5) of the New Civil Code. In
determining whether a “machinery” is subject to RPT, the definition
providedinSection199(o)oftheLGC,inrelationtoArticle290(o)ofthe
RulesandRegulationsImplementingtheLGCshallprevail.Therefore,the
property may be considered a “machinery” for purposes of determining
exemption from RPT under Section 234 of the LGC, if: (1) it is actually,
directly, and exclusively used for the exempting purpose; and (2) by its
nature and purpose, the property is necessary or indispensable for the
exempting purpose.
I nthiscase,theelevenpropertiesassessedforRPTundertheMachineries
Assessmentarenotactually,directly,andexclusivelyusedbyNPCforthe
exempting purpose of power generation and transmission of electricity.
They may have some usage in the Angat Hydro-Electric Power Plant
operationbutnotexclusively.Accordingly,theMunicipalityofNorzagaray
properly imposed RPT upon them.
ith regard to NPC’s land assessment, the properties listed in the Land
W
Assessment are likewise not exempt from RPT. In National Power
Corporationv.CityofCabanatuan,thisCourtcategoricallyruledthatthe
exemption from local taxes of NPC, as a GOCC, had been repealed by
Section 193 of the LGC. Therefore, it isincumbentupontheNPCtopoint
outsomeprovisionsoftheLGCthatexpresslyexemptitfromlocaltaxes.
Under Sections 216 and 218 of the LGC, all lands, buildings, and other
improvements owned and used by GOCCs rendering essential public
services in the generation and transmission of electric power are
classified asspecialclassesofrealpropertysubjecttoa19%assessment
level.
28
JUDICIAL REMEDIES
Jurisdiction of the CTA
CIR V. COMELEC;
COMELEC V. CIR
LOPEZ, M., J.
G.R. NOS. 244155, 247508 | MAY 11, 2021
DOCTRINE
heCTAhasexclusiveappellatejurisdictiontoreviewbyappealtheDecisionsof
T
the CIR in cases involving disputed assessments. Thus, the CTA has exclusive
jurisdictiontodecidethedisputebetweentheCOMELEC,aconstitutionaloffice,
and the BIR, a national government agency, on the deficiency tax assessment.
FACTS
hiscaseinvolvesconsolidatedPetitionsforReviewonCertiorariunderRule45
T
assailing the CTA En Banc’sDecisionwhichaffirmedtheCTASecondDivision’s
AmendedDecisionwhichupheldthedeficiencybasicExpandedWithholdingTax
(EWT) assessment against COMELEC for the taxable year 2008 amounting to
P30,645,542.62.
I n May 2008, COMELEC entered into a contract with Smartmatic Sahi
Technology Inc. (Smartmatic) and Avante International Technology Inc.
(Avante) for the lease, with option to purchase, electronic voting machines
relative to the conduct of the August 2008 Autonomous Region for Muslim
Mindanao (ARMM)RegionalElection.TheCOMELECdidnotimposeorwithhold
EWTonpaymentstoSmartmaticandAvanteonthebeliefthattheprocurement
of election materials and equipment are “free from taxes and import duties,”
under Section 12 of R.A. No. 8436 (Act authorizing the COMELEC to use an
Automated Election System), as amended by R.A. No. 9369.
29
n April 23, 2010, the COMELEC received a Letter of Authority (LOA) fromthe
O
BIRtoexamineitsbooksofaccountsandaccountingrecordsforallwithholding
taxes for 2008. The investigation yielded a deficiency EWT assessment of
P26,269,583.62 and P4,375,959.00 against COMELEC for failure to deduct,
withhold and remit the required tax onincomepaymentsmadetoSmartmatic
and Avante. The COMELEC then received the Preliminary Assessment Notice
assessing it fordeficiencyEWTofP45,592,340.89.Then,COMELECreceivedthe
Final Assessment Notice and Formal Letter of Demand and the Regional
Director’s denial of its protest and demand to pay the assessed tax. The
COMELEC interposed an administrative appeal to the CIR, which was denied.
Thereafter, the COMELEC filed a Petition for Review with the CTA.
he CTASecondDivisioninitsDecisionpartlygrantedtheCOMELEC’spetition.
T
The CTA Division stressed that the COMELEC’s exemption under Sec. 12 refers
onlytodirecttaxes.Here,thedeficiencyassessmentarosefromtheCOMELEC’s
failuretowithholdEWTontheleasecontractpaymentstoitssuppliers.TheCTA
Division ruled that the COMELEC is not liable for the deficiency interest.
COMELEC sought areconsideration.TheCTADivision,initsAmendedDecision,
reiterated that the COMELEC is not liable for deficiency taxes and hence, the
COMELEC must be ordered to pay only the deficiency basic EWT of
P30,645,542.62.
nly the CIR filed amotionforreconsideration(MR)oftheAmendedDecision.
O
The CIR posited that the COMELEC is liable for the entire amount. The CTA
Division denied theCIR’smotion.Thus,theCIRelevatedthemattertotheCTA
EnBanc.TheCOMELECfileditsownpetitiontotheCTAEnBancandthereafter,
thetwopetitionswereconsolidated.TheCTAEnBancdismissedtheCOMELEC’s
petitionandaffirmedtheCTADivision’sAmendedDecisionholdingthatSection
247(b)oftheTaxCodeappliesregardlessofwhethertheemployeeunjustifiably
refusesorneglectstoperformhisdutytowithholdand/orremitthesubjecttax.
COMELEC's MR was denied. Furthermore, the CTA En Banc clarified that any
dispute,claimorcontroversybetweenaconstitutionaloffice,suchasCOMELEC,
and another government office or agency, such as the BIR, cannot be
administratively settled or adjudicated in the manner provided under PD No.
242 and EO No. 292. Discontented, both the COMELEC and CIR filed their
respective Petitions for Review with the Supreme Court.
heCIR’spetitionraisedasthesoleissuethattheCTADivisionerredinholding
T
that the COMELEC is not liable for deficiency interest. The CIR avers that
Section 247 (b) of the Tax Code, which imposes the personal liability for the
accrued interest and penalty upon the responsible officer, does not apply to
constitutional commissions, such as the COMELEC. Further, the imposition
applies only when the accountable officer unjustifiably refuses or neglects to
perform his duty to withhold and remit the withholding tax. The COMELEC
shouldbemadeliableforthedeficiencyofbasicEWTplusinterestandpenalty
in the amount of P49,082,867.69.
ntheotherhand,theCOMELECclaimsexemptionfromalltaxesrelativetothe
O
conduct of automated elections as authorized by law.
30
ISSUES
1. D oes the CTA have jurisdiction to decide the dispute between the
COMELEC and the BIR on the deficiency tax assessment.
2. Is the COMELEC exempt from the obligation to withhold EWT.
RULING
1. Y es, the CTA has exclusivejurisdictiontodecidethedisputebetweenthe
COMELEC and the BIR on the deficiency tax assessment.
ection 4 of the Tax Code, in relation toSection3,Rule4oftheRevised
S
Rules of Court of Tax Appeals (RRCTA) and Section 7 of R.A. No. 9282,
which defined the exclusive appellate jurisdiction of the CTA shallapply.
Since the issuehereisthedisputedassessmentfordeficiencybasicEWT
for the year 2008 against the COMELEC, arising from its failure to
withhold the tax on income payments made to Smartmatic and Avante
undertheleasecontracts,theCTAhastheexclusiveappellatejurisdiction
to take cognizance of the COMELEC's petition in the CTA Case.
2. No, the COMELEC is not exempt from the obligation to withhold EWT.
I ncome tax is different from withholding tax, with both operating in
distinct systems. Income tax is the "tax onallyearlyprofitsarisingfrom
property,professions,tradesoroffices,orasataxonaperson'sincome,
emoluments,profitsandthelike."Ontheotherhand,withholdingtaxisa
method of collecting income tax in advance, in the operation of the
withholding tax system, the payee is the taxpayer, the person on whom
the tax isimposed,whilethepayor,aseparateentity,actsnomorethan
anagentofthegovernmentforthecollectionofthetaxinordertoensure
its payment.
I ndirect taxes, like VAT and excise tax, are different from withholding
taxes. In indirect taxes, theincidenceoftaxationfallsononepersonbut
theburdenthereofcanbeshiftedorpassedontoanotherperson,suchas
when the tax is imposed upon goods beforereachingtheconsumerwho
ultimatelypaysforit.Ontheotherhand,incaseofwithholdingtaxes,the
incidence and burden of taxation fall on the same entity, the statutory
taxpayer. The burden of taxation is not shifted to the withholding agent
who merely collects, by withholding, the tax due from incomepayments
to entities arising from certain transactions and remits the same to the
government.
here is no doubt that the withholding tax is not an internal revenue or
T
local tax, but a mode of collecting income tax in advance. Simply put,
withholding tax is intended to facilitate the collection of income tax.
Therefore, unless the income recipient is exempt from income tax, the
payor is generally required to deduct and withhold EWT on income
payments made. Here, the lease contract payments to Smartmatic and
31
vantearenotexemptfromtherequirementofwithholdingunderSection
A
2.57.5 of Revenue Regulations (RR) No. 2-98.
martmatic and Avante are notpartofthenationalorlocalgovernment
S
or its instrumentalities. They do not enjoy exemption from payment of
income tax under any provision of law. Well-settled is the rule that
exemption from taxation is never presumed. For tax exemption to be
recognized, the grant must be explicit and express and cannot rest on
vague implications. Meanwhile, the COMELEC's obligation to withhold
taxesisembodiedinSection57(B)oftheTaxCodeandSections2.57.2(N)
and 2.57.3 of RR No. 2-98. Section 251 of the Tax Code makes the agent
personally liable for the tax not withheld, or not accounted for and
remitted,andapplicablepenalties.TheCOMELECadmittedthatitdidnot
withhold EWT on the payments made to Smartmatic and Avanteforthe
lease contracts. It failed to perform its duty as a withholding agent
required to deduct, withhold and remit the tax to the government.
Consequently, theCOMELECbecomespersonallyliablefordeficiencytax
equivalent to the amount not withheld.
ccordingly,theSupremeCourtsustainedthatCOMELECisliableonlyfor
A
deficiency of basic EWT for the year 2008 in the amount of
P30,645,542.62.
32
JUDICIAL REMEDIES
Petition for Review on Certiorari to the SC
CIR V. EAST ASIA UTILITIES CORP.
LOPEZ, M., J.
G.R. NO. 225266 | NOVEMBER 16, 2020
DOCTRINE
he institution or commencement before a proper court of civil and criminal
T
actions and proceedings arising under the Tax Reform Act which "shall be
conductedbylegalofficersoftheBureauofInternalRevenue"isnotindispute.
Anappealfromsuchcourt,however,isnotamatterofright.Section220ofthe
Tax Reform Act must not be understood as overturning the long established
procedure before this Court in requiring the Solicitor General to represent the
interest of the Republic.
FACTS
astAsiaUtilitiesCorp.(EastAsiaUtilities)isadomesticcorporationregistered
E
with the Philippine Economic Zone Authority (PEZA) as an ECOZONE Utilities
Enterprise. On July 17, 2009, the CIR issued a Preliminary Assessment Notice
(PAN) assessing East Asia Utilities for deficiency tax for the calendar year
endingDecember2006.EastAsiaUtilitiescontestedthisassessment.Eventually,
the CIR issued a Final Decision on Disputed Assessment, assessing East Asia
Utilities for deficiency income tax in the reduced amount of P2,791,894.70.
Dissatisfied, East Asia Utilities filed a Petition for Review before the CTA
Division.
he CTA Division rendered a Decision finding East Asia Utilities liable for
T
deficiency income tax in the reduced amount of P612,406.94. TheCTADivision
held that only certain expenses directly related to East Asia Utilities' power
generationservicescouldbedeductedfromitsgrossincometocomputethe5%
Gross Income Tax (GIT) by virtue of the amendment of Revenue Regulations
(RR) No. 2-2005 by RR No 11-2005. East Asia Utilities and the CIR separately
filed motions for reconsideration, which were denied.
he CIR, represented by the Bureau of Internal Revenue’s (BIR) Litigation
T
Division,appealedtotheCTAEnBanc.TheCTAEnBancaffirmedtheDivision's
decision, prompting the CIR to seek reconsideration. Meanwhile, the Office of
the SolicitorGeneral(OSG)filedamotionforanextensionoftimeonbehalfof
the CIR before the Supreme Court, which was granted and subsequently
withdrawn.
33
heCIRthenfiledaPetitionforReviewonCertioraribeforetheSupremeCourt.
T
The CIR argues that the expenses allowed as deductions by the CTA are not
directly related to East Asia Utilities' power generation services. East Asia
Utilitiescontendsthatthepetitionshouldbedismissedduetoproceduralissues,
lack of authorityoftheLitigationDivisiontofilemotions,forum-shopping,and
the reiteration of arguments already made before the CTA.
ISSUE
I s there lack of authority on thepartoftheBIR'sLitigationDivisiontofilethe
petition.
RULING
es, the BIR lacks authority because the OSG is the proper partytorepresent
Y
the Republic in appeals before this Court.
he institution or commencement before a proper court of civil and criminal
T
actions and proceedings arising under the Tax Reform Act which "shall be
conductedbylegalofficersoftheBureauofInternalRevenue"isnotindispute.
Anappealfromsuchcourt,however,isnotamatterofright.Section220ofthe
Tax Reform Act must not be understood as overturning the long established
procedure before this Court in requiring the Solicitor General to represent the
interest of the Republic. This CourtcontinuestomaintainthatitistheSolicitor
General who has the primary responsibility to appear for the government in
appellate proceedings. This pronouncement finds justification in the various
laws defining the Office of the Solicitor General, beginning with Act No. 135,
which took effect on 16 June 1901, up to the present Administrative Code of
1987.
lthough the BIR's Litigation Division has traditionally represented the CIR in
A
pleadingsbeforethisCourt,itisessentialtonotethattheOSGwasdulynotified
of the proceedings and has been involved in the case's developments.
Consequently, the interests of the government have been adequately
safeguarded. However, this procedural oversight serves as a reminder to the
BIR to adhere to established protocols to avoid similar incidents in the future.
I nconclusion,whiletherewasaprocedurallapseregardingtheauthoritytofile
the petition, the involvement oftheOfficeoftheSolicitorGeneralensuresthat
the government's interests are properly represented. Therefore, despite this
oversight, the petition may proceed, with a cautionary reminder to the BIRto
observe established procedures diligently.
34
COMMERCIAL LAW
INSURANCE LAW
REPRESENTATION
INTEGRATED MICRO ELECTRONICS, INC. v. STANDARD
INSURANCE CO., INC.
LOPEZ, M., J.
G.R. NO. 210302 | AUGUST 27, 2020
DOCTRINE
ontracts of insurancemustbeconstruedaccordingtothesenseandmeaning
C
ofthetermswhichthepartiesthemselveshaveused.Iftheprovisionsareclear
and unambiguous, they must be taken and understood in their plain, ordinary
and popular sense.
FACTS
ometime in March 2009, a panelofinsurerscomposedofStandardInsurance
S
Co., Inc. (Standard Insurance), together with other insurers, issued a policy in
favor of Integrated Micro Electronics,Inc.(IntegratedMicro),insuringallofits
properties against "all risks of physical loss, destruction of, or damage,
includingfire"fortheperiodMarch31,2009toMarch31,2010.OnMay24,2009,
afirebrokeoutatIntegratedMicro'sbuildingcausingdamagetoitsproduction
equipment and machineries. Thus, on May 25, 2009, Integrated Micro filed a
claim for indemnityfromStandardInsurancebutwasrejectedonFebruary24,
2010 on the ground that the cause of the loss was an excluded peril.
ggrieved, Integrated Micro sought reconsideration. However, Standard
A
Insurance denied the reconsideration. Almost a year thereafter, on April 11,
2011,IntegratedMicrofiledacomplaintforspecificperformanceanddamages
against Standard Insurance before the RTC. Standard Insurance moved to
dismissthecomplaintonthegroundthatmereallegationofoccurrenceoffireis
insufficienttoestablishacauseofaction.Thepolicyrequiresthatthefiremust
beunforeseen,sudden,andaccidental.Inaddition,IntegratedMicro'scauseof
actionhadbeenprescribedbecauseitfiledthecomplaintbeyondthe12-month
period from the rejection of the claim. StandardInsurancenotifiedIntegrated
Micro about the denial of its claim on February 24, 2010. However, Integrated
Micro commenced the complaint on April 11, 2011, abouttwomonthsafterthe
cause of action was prescribed.
35
heRTCdeniedthemotiontodismissanddirectedStandardInsurancetofilea
T
responsive pleading. Dissatisfied, Standard Insurance sought reconsideration
but was denied. Hence, Standard Insurance filed a petition for certiorari with
the CA which the CA granted the petition and ruled that Integrated Micro's
cause of action had prescribed.
ccordingtotheCA,IntegratedMicrohaduntil24Februarytofileacomplaint
A
againstStandardInsurance.However,therecordsrevealthatthecasewasfiled
on 11 April 2011oraperiodofoneandahalfmonthsafterthecauseofaction
has prescribed.
ence, this petition for review on certiorari on the ground that the cause of
H
action only accrues when the insurer finally rejects the claim. Accordingly,
Standard Insurance's Letter dated February 24, 2010 denying Integrated
Micro'sclaimisonlyinitialanddidnotprejudiceanyrequestforreconsideration.
The 12-month-prescriptive period should be reckoned fromApril15,2010when
Integrated Micro received the final rejection of its for reconsideration.
ISSUE
Has the cause of action of Integrated Micro prescribed.
RULING
Yes, The cause of action of Integrated Micro prescribed.
ontracts of insurancemustbeconstruedaccordingtothesenseandmeaning
C
ofthetermswhichthepartiesthemselveshaveused.Iftheprovisionsareclear
and unambiguous, they must be taken and understood in their plain, ordinary
andpopularsense.Thisisconsistentwiththecardinalruleofinterpretationthat
"[i]f thetermsofacontractareclearandleavenodoubtupontheintentionof
the contracting parties, the literal meaning of its stipulations shall control.” In
thecaseofEagleStar.,Co.,Ltd,et.alv.ChiaYu(EagleStar),itwasheldthatthe
accrual of the cause of action for filing an insurance claim shall commence
when there is a finalrejectionbytheinsurancecompanytoavoidunnecessary
suit. The "final rejection" refers to the rejection by the insurance company.
Althoughthe EagleStar caseusedthephrase"finalrejection,"thesamecannot
be taken to mean the rejection of a petition for reconsideration. Thus, in the
subsequent case of Sun Insurance Office, Ltd. v. Court of Appeals, et al.,(Sun
Insurance),itwasheldthattherejectionreferredtoshouldbeconstruedasthe
rejection, in the first instance, for if what is being referred to is a reiterated
rejectionconveyedinaresolutionofapetitionforreconsideration,suchshould
have been expressly stipulated. Thus, to allow the filing of a motion for
reconsideration to suspend the running of the prescriptive period of twelve
months, a whole newbodyofrulesonthemattershouldbepromulgatedsoas
to avoid any conflict that may be brought by it (i.e: once there is a refusal
conveyed by the insurer to the claimant, expressly or impliedly, the 12-month
prescriptive period should commence to run, without awaiting any
reconsideration, lest new body of rules be promulgated to resolve the conflict).
36
I n this case, the insurance policy between Integrated Micro and Standard
Insurance provides:
xxx,"ifaclaimbemadeandrejectedandanactionorsuitbenotcommenced
either in the Insurance Commission[,] or any Court of competent jurisdiction
within twelve (12) months fromreceiptofnoticeofsuchrejection,orincaseof
arbitration taking placeasprovidedhereinwithintwelve(12)monthsafterdue
notice of the award made by the arbitrator or arbitrators or umpire, then the
claim shall for all purposes be deemed to have been abandonedandshallnot
be thereafter be recoverable x x x."
I tisexplicitintheinsurancepolicybetweentheIntegratedMicroandStandard
Insurance that if a claim is made and rejected, an action or suit should be
commenced within a period of 12 months. In the insurance policy, there is no
qualification nor distinction whether it is the insurer's initial or final rejection.
The parties did not agree that the insurer should first deny any request for
reconsideration before a suit for indemnity may be filed.
Therefore, the cause of action of Integrated Micro prescribed.
37
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