TAX REVIEW CASE DIGESTS of death, the net value of the property transferred

LAW 4-A should be ascertained, as nearly as possible, as of

(2nd Sem, A.Y. 2019-2020) that time.

DIZON v. CIR (GR 140944, April 30, 2008) In adopting the US Court’s ruling, the SC reasoned:
1. There is no law, nor do we discern any legislative
Facts: Jose Fernandez died. Thereafter, a petition intent in our tax laws, which disregards the date-of-
for the probate of his will was filed. The probate death valuation principle and particularly provides
court appointed petitioner as administrator of the that post-death developments must be considered in
estate of Jose. determining the net value of the estate. It bears
An estate tax return was filed on which showed emphasis that tax burdens are not to be imposed,
ZERO estate tax liability. Surprisingly, the BIR issued nor presumed to be imposed, beyond what the
deficiency tax assessment demanding payment of statute expressly and clearly imports, tax statutes
Php 66.97M which was subsequently reduced to being construed strictissimi juris against the
Php37.42M. However, the petitioner claims that government.
inasmuch as the valid claims of the creditors of the
estate are in excess of the gross estate, no estate 2. Such construction finds relevance and consistency
tax is due. On the other hand, BIR argues that since in our Rules on Special Proceedings wherein the
the claims of the creditors have been condoned, term "claims" required to be presented against a
such claims may no longer be deducted from the decedent's estate is generally construed to mean
gross estate of the decedent. debts or demands of a pecuniary nature which could
have been enforced against the deceased in his
Issue: whether the actual claims of the estate’s lifetime, or liability contracted by the deceased
creditors may be fully allowed as deductions from before his death.
the gross estate of the decedent despite the fact that
the said claims were reduced or condoned through Therefore, the claims existing at the time of death
compromise agreements entered into by the Estate are significant to, and should be made the basis of,
with its creditors. the determination of allowable deductions.

Ruling:
Yes. "Claims against the estate," as allowable ASIATRUST v. CIR (GR 201530, April 19,
deductions from the gross estate under Section 79 2017)
of the Tax Code, are basically a reproduction of the Facts: In 2000, Asiatrust Development Bank
deductions allowed under Section 89 (a) (1) (C) and received 3 Formal Letters of Demand with
(E) of Commonwealth Act No. 466 (CA 466), Assessment Notices for deficiency internal revenue
otherwise known as the National Internal Revenue taxes for fiscal years 1996 to 1998, respectively.
Code of 1939, and which was the first codification of
Philippine tax laws. Philippine tax laws were, in Asiatrust timely protested the assessment notices.
turn, based on the federal tax laws of the United Due to the inaction of the CIR on the protest,
States. Thus, pursuant to established rules of Asiatrust filed before the CTA division a Petition for
statutory construction, the decisions of American Review praying for the cancellation of the tax
courts construing the federal tax code are entitled to assessments for deficiency income tax, documentary
great weight in the interpretation of our own tax stamp tax (DST) - regular, DST - industry issue, final
laws. withholding tax, expanded withholding tax, and
fringe benefits tax issued against it by the CIR.
The SC followed the US Court’s ruling in Ithaca Trust
v. US applying the date-of-death valuation principle The CIR issued new Assessment Notices against
to enforceable claims against the estate – that post- Asiatrust for deficiency taxes covering the same
death developments are not material in determining fiscal years, and Asiatrust partially paid said
the amount of deduction. In this date-of-death deficiency tax assessments but leaving balances.
valuation rule, an estate tax is interpreted as a tax The CIR approved Asiatrust's Offer of Compromise
imposed on the act of transferring property by will of DST - regular assessments. During the trial,
or intestacy and, because the act on which the tax Asiatrust manifested that it availed of the Tax
is levied occurs at a discrete time, i.e., the instance Abatement Program and Tax Amnesty Law of 2007.
The CTA Division partially granted the Petition and which has been released as of June 30, 2006, by
declared void the tax assessments for fiscal year paying an amount equal to One Hundred Percent
1996 for having been issued beyond the three-year (100%) of the Basic Tax assessed with the
prescriptive period. However, due to the failure of Accredited Agent Bank (AAB) of the Revenue District
Asiatrust to present documentary and testimonial Office (RDO)/Large Taxpayers Service (LTS)/Large
evidence to prove its availment of the Tax Taxpayers District Office (LTDO) that has jurisdiction
Abatement Program and the Tax Amnesty Law, the over the taxpayer. In the absence of an AAB,
CTA Division affirmed the deficiency DST payment may be made with the Revenue Collection
assessments. Officer/Deputized Treasurer of the RDO that has
jurisdiction over the taxpayer. After payment of the
Asiatrust filed an MR attaching photocopies of its basic tax, the assessment for penalties/surcharge
Application for Abatement Program, BIR Payment and interest shall be cancelled by the concerned BIR
Form, BIR Tax Payment Deposit Slip, Improved Office following existing rules and procedures.
Voluntary Assessment Program Application Forms, Thereafter, the docket of the case shall be forwarded
Tax Amnesty Return, Tax Amnesty Payment Form, to the Office of the Commissioner, thru the Deputy
Notice of Availment of Tax Amnesty and Statement Commissioner for Operations Group, for issuance of
of Assets and Liabilities and Networth (SALN). The Termination Letter.1âwphi1 In this case, Asiatrust
CIR, on the other hand, filed a Motion for Partial failed to present a termination letter from the BIR.
Reconsideration of the assessments assailing the Instead, it presented a Certification issued by the
CTA Division's finding of prescription and BIR to prove that it availed of the Tax Abatement
cancellation of assessment notices for deficiency Program and paid the basic tax. It also attached
income, DST and fringe benefit tax for fiscal years copies of its BIR Tax Payment Deposit Slips and a
1997 and 1998. Asiatrust filed a Manifestation letter issued by RDO Nacar. These documents,
informing the CTA Division that the BIR issued a however, do not prove that Asiatrust's application for
Certification that Asiatrust paid the amounts of tax abatement has been approved. If at all, these
₱4,187,683.27 and ₱6,097,825.03 at the DBP in documents only prove Asiatrust's payment of basic
connection with the One-Time Administrative taxes, which is not a ground to consider its
Abatement. Asiatrust insisted that the Certification deficiency tax assessment closed and terminated.
issued by the BIR is sufficient proof of its availment
of the Tax Abatement Program considering that the Thus, the Court finds no error on the part of the CTA
CIR has not yet issued a termination letter. The CTA En Banc in affirming the said tax assessment.
Division did not give credence to this contention and
maintained that it cannot consider Asiatrust's COMMISSIONER OF CUSTOMS vs. MARINA
availment of the Tax Abatement Program in the SALES INC., GR No. 183868, November 22,
absence of a termination letter from the BIR, which 2010
resolution was affirmed by the CTA En Banc CIR vs. CTA (3rd Division) and Wintelecom,
Issue: Whether Asiatrust correctly availed of the Inc. GR No. 203403, November 24, 2018
Tax Abatement CIR vs. LIQUIGAZ PHILIPPINES
Ruling: CORPORATION G.R. No. 215534, G.R. NO.
215557 April 18, 2016
No. An application for tax abatement is considered
approved only upon the issuance of a termination FACTS: Liquigaz Philippines Corporation (Liquigaz)
letter. Section 204(B) of the NIRC empowers the CIR received a copy of Letter of Authority by the
to abate or cancel a tax liability. The BIR issued RR Commissioner of Internal Revenue (CIR),
No. 15-06 prescribing the guidelines on the authorizing the investigation of all internal revenue
implementation of the one-time administrative taxes for taxable year 2005. Liquigaz received an
abatement of all penalties/surcharges and interest undated letter purporting to be a Notice of Informal
on delinquent accounts and assessments Conference (NIC), as well as the detailed
(preliminary or final, disputed or not). Section 4 of computation of its supposed tax liability. It likewise
RR No. 15-06 provides:
received a copy of the Preliminary Assessment
SECTION 4. Who May Avail, - Any person/ taxpayer, Notice (PAN), together with the attached details of
natural or juridical, may settle thru this abatement discrepancies for the calendar year ending
program any delinquent account or assessment December 31, 2005. Upon investigation, Liquigaz
was initially assessed with deficiency withholding tax (1) Yes. The FDDA must state the facts and law on
liabilities, inclusive of interest, in the aggregate which it is based to provide the taxpayer the
amount of P23,931,708.72. opportunity to file an intelligent appeal
Thereafter, it received a Formal Letter of Demand Under Section 228 of the NIRC, a taxpayer shall be
(FLD)/Formal Assessment Notice (FAN), together informed in writing of the law and the facts on which
with its attached details of discrepancies, for the the assessment is made, otherwise, the assessment
calendar year ending December 31, 2005. The total shall be void. The decision of the Commissioner
deficiency withholding tax liabilities, inclusive of or his duly authorized representative shall (a)
interest, under the FLD was P24,332,347.20. state the facts, the applicable law, rules and
regulations, or jurisprudence on which such
On July 25, 2008, Liquigaz filed its protest against
decision is based, otherwise, the decision
the FLD/FAN and subsequently submitted its
shall be void. To rule otherwise would tolerate
supporting documents.
abuse and prejudice. Taxpayers will be unable to file
Then, on July 1, 2010, it received a copy of the FDDA an intelligent appeal before the CTA as they would
covering the tax audit for the calendar year ending be unaware on how the CIR or his' authorized
December 31, 2005. As reflected in the FDDA, the representative appreciated the defense raised in
CIR still found Liquigaz liable for deficiency connection with the assessment. On the other hand,
withholding tax liabilities, inclusive of interest, in the it raises the possibility that the amounts reflected in
aggregate amount of P22,380,025.19. the FDDA were arbitrarily made if the factual and
legal bases thereof are not shown.
Consequently, on July 29, 2010, Liquigaz filed its
Petition for Review before the CTA Division assailing It is undisputed that the FDDA merely showed
the validity of the FDDA issued by the CIR. Liquigaz' tax liabilities without any details on the
specific transactions which gave rise to its supposed
CTA Division partially granted Liquigaz's petition tax deficiencies. While it provided for the legal bases
cancelling the Expanded Withholding Tax (EWT) and of the assessment, it fell short of informing Liquigaz
Fringe Benefit Tax (FBT) assessments but affirmed of the factual bases thereof. Thus, the FDDA as
with modification the Withholding Tax on regards the EWT and FBT tax deficiency did not
Compensation (WTC) assessment. The CTA Division comply with the requirement in Section 3.1.6 of RR
noted that unlike the PAN and the FLD/FAN, the No. 12-99, as amended, for failure to inform Liquigaz
FDDA issued did not provide the details thereof, of the factual basis thereof.
hence, Liquigaz had no way of knowing what items
were considered by the CIR in arriving at the (2) No. A void FDDA does not ipso facto render the
deficiency assessments. On the other hand, it upheld assessment void.
the WTC assessment against Liquigaz. It noted that
An assessment becomes a disputed assessment
the factual bases used in the FLD and the FDDA with
after a taxpayer has filed its protest to the
regard thereto were the same as the difference in
assessment in the administrative level. Thereafter,
the amount merely resulted from the use of a
the CIR either issues a decision on the disputed
different tax rate. Aggrieved, they filed their
assessment or fails to act on it and is, therefore,
respective petitions for review before the CTA En
considered denied. The taxpayer may then appeal
Banc.
the decision on the disputed assessment or the
The CTA En Banc affirmed the assailed decision of inaction of the CIR. As such, the FDDA is not the only
the CTA Division. means that the final tax liability of a taxpayer is
fixed, which may then be appealed by the taxpayer.
Issues: (1) WON the FDDA is void; (2) WON a void Under the law, inaction on the part of the CIR may
FDDA leads to a void assessment. likewise result in the finality of a taxpayer's tax
Ruling: liability as it is deemed a denial of the protest filed
by the latter, which may also be appealed before the
CTA.
A decision of the CIR on a disputed assessment component is subject to excise tax as contemplated
differs from the assessment itself. Hence, the under Section 148 (e) of the NIRC.
invalidity of one does not necessarily result to the
invalidity of the other — unless the law or CIR filed a motion to dismiss on the grounds of lack
regulations otherwise provide. of jurisdiction and prematurity.

To recapitulate, a "decision" differs from an CTA granted the CIR's motion and dismissed the
"assessment" and failure of the FDDA to state the case. However, on Petron's motion for
facts and law on which it is based renders the reconsideration, it reversed its earlier disposition.
decision void — but not necessarily the assessment. Aggrieved, the CIR sought immediate recourse to
Tax laws may not be extended by implication beyond the Court, through the instant petition, alleging that
the clear import of their language, nor their the CTA committed grave abuse of discretion when
operation enlarged so as to embrace matters not it assumed authority to take cognizance of the case
despite its lack of jurisdiction to do so.
specifically provided.
ISSUE WON the CTA properly assumed jurisdiction
CIR vs. CTA and Petron Corporation G.R. No.
over the petition assailing the imposition of excise
207843, July 15, 2015
tax on Petron's importation of alkylate based on
Section 148 (e) of the NIRC.
FACTS: Petron imports alkylate as a raw material or
blending component for the manufacture of ethanol- RULING: NO. The CTA could not take cognizance
blended motor gasoline. Petron transacted an of the case because the latter's jurisdiction to resolve
aggregate of 22 separate importations for which tax disputes excluded the power to rule on the
petitioner the Commissioner of Internal Revenue constitutionality or validity of a law, rule or
(CIR) issued Authorities to Release Imported Goods regulation and that, in any case, it was premature to
(ATRIGs), categorically stating that Petron's elevate a customs collector's assessment without a
importation of alkylate is exempt from the payment prior protest and an appeal to the COC.
of the excise tax because it was not among those
articles enumerated as subject to excise tax. With Section 4 of the NIRC confers upon the CIR both: (a)
respect, however, to Petron's alkylate importations the power to interpret tax laws in the exercise of her
covering the period September 2011 to June 2012, quasi-legislative function; and (b) the power to
decide tax cases in the exercise of her quasi-judicial
the CIR made a reservation for all ATRIGs issued
function. On the other hand, the CTA is a court of
stating that it is without prejudice to the collection
special jurisdiction, with power to review by appeal
of the corresponding excise taxes, penalties and
decisions involving tax disputes rendered by either
interest depending on the final resolution of the the CIR or the COC. Conversely, it has no jurisdiction
Office of the Commissioner on the issue of whether to determine the validity of a ruling issued by the
this item is subject to the excise taxes under the CIR or the COC in the exercise of their quasi-
NIRC of 1997, as amended. legislative powers to interpret tax laws.

In June 2012, Petron imported alkylate and paid In this case, Petron's tax liability was premised on
value-added tax (VAT). Based on the Final the COC's issuance of CMC No. 164-2012, which
Computation, said importation was subjected by the gave effect to the CIR's June 29, 2012 Letter
Collector of Customs of Port Limay, Bataan, upon interpreting Section 148 (e) of the NIRC as to include
instructions of the Commissioner of Customs (COC), alkylate among the articles subject to customs
to excise taxes of ₱4.35 per liter and consequently, duties, hence, Petron's petition before the CTA
to an additional VAT of 12% on the imposed excise ultimately challenging the legality and
tax. constitutionality of the CIR's aforesaid interpretation
of a tax provision. In line with the foregoing
In view of the CIR's assessment, Petron filed before discussion, however, the CIR correctly argues that
the CTA a petition for review, raising the issue of the CTA had no jurisdiction to take cognizance of the
whether its importation of alkylate as a blending petition as its resolution would necessarily involve a
declaration of the validity or constitutionality of the
CIR's interpretation of Section 148 (e) of the NIRC, ruling, issuance or other matters arising under the
which is subject to the exclusive review by the NIRC and other tax laws administered by the Bureau
Secretary of Finance and ultimately by the regular of Internal Revenue (BIR). As basis, Petron cites for
courts. the first time in its motion for reconsideration the
Court's ruling in The Philippine American Life and
Besides, Petron prematurely invoked the jurisdiction General Insurance Company v. The Secretary of
of the CTA. Under Section 7 of RA 1125, as amended
Finance and the Commissioner of Internal
by RA 9282, what is appealable to the CTA is the
Revenue21 (Philamlife).
decision of the COC over a customs collector's
adverse ruling on a taxpayer's protest. In this case, The SC based its decision in the case of Banco De
there was even no tax assessment to speak of. While Oro v. Republic of the Philippines 26(Banco De
customs collector admitted during the hearing that Oro) wherein it was opined that:
the computation he had written at the back page of
the IEIRD served as the final assessment imposing
excise tax on Petron's importation of alkylate, the Section 7 of Republic Act No. 1125, as
Court concurs with the CIR's stance that the subject amended, is explicit that, except for local
IEIRD was not yet the customs collector's final taxes, appeals from the decisions of quasi-
assessment that could be the proper subject of judicial agencies (Commissioner of Internal
review. It should be stressed that the CTA has no Revenue, Commissioner of Customs,
jurisdiction to review by appeal, decisions of the Secretary of Finance, Central Board of
customs collector. The TCC prescribes that a party Assessment Appeals, Secretary of Trade and
adversely affected by a ruling or decision of the Industry) on tax-related problems must be
customs collector may protest such ruling or decision brought exclusively to the Court of Tax
upon payment of the amount due35 and, if aggrieved Appeals.
by the action of the customs collector on the matter
under protest, may have the same reviewed by the In other words, within the judicial
COC.36 It is only after the COC shall have made an system, the law intends the Court of
adverse ruling on the matter may the aggrieved Tax Appeals to have exclusive
party file an appeal to the CTA. jurisdiction to resolve all tax problems.
Petitions for writs of certiorari against the
acts and omissions of the said quasi-judicial
agencies should thus be filed before the
COMMISSIONER OF INTERNAL REVENUE Court of Tax Appeals.
v. COURT OF TAX APPEALS AND PETRON
CORPORATION G.R. No. 207843, February 14, Republic Act No. 9282, a special and later law
2018 than Batas Pambansa Blg. 129 provides an
exception to the original jurisdiction of the
Facts: This is a a motion for reconsideration filed by Regional Trial Courts over actions
respondent Petron Corporation (Petron) on the questioning the constitutionality or validity of
Court's Decision dated July 15, 2015 which tax laws or regulations. Except for local tax
dismissed the petition for review before the court a cases, actions directly challenging the
constitutionality or validity of a tax law or
quo for lack of jurisdiction and prematurity.
regulation or administrative issuance may be
Issue: WON the Court's July 15, 2015 Decision, filed directly before the Court of Tax Appeals.
which ordered the dismissal of Petron's petition for
review before the CTA on the grounds of lack of Furthermore, with respect to administrative
jurisdiction and prematurity, should be reconsidered. issuances (revenue orders, revenue
memorandum circulars, or rulings), these are
Ruling: Yes. issued by the Commissioner under its power
At the onset, Petron insists that the CTA has to make rulings or opinions in connection
with the implementation of the provisions of
jurisdiction to pass upon the validity of the CIR's
internal revenue laws. Tax rulings, on the
interpretative ruling on alkylate, arguing that the
other hand, are official positions of the
CTA may rule on the validity of a revenue regulation,
 Bureau on inquiries of taxpayers who request A month after the issuance of CMO 27-2003,
clarification on certain provisions of the Hypermix Feeds Corporation filed a Petition for
National Internal Revenue Code, other tax Declaratory Relief with the RTCof Las Piñas City. It
laws, or their implementing regulations. anticipated the implementation of the regulation on
Hence, the determination of the validity its imported and perishable Chinese milling wheat in
of these issuances clearly falls within transit from China. Respondent contended that CMO
the exclusive appellate jurisdiction of
27-2003 was issued without following the mandate
the Court of Tax Appeals under Section
of the Revised Administrative Code on public
7(l) of Republic Act No. 1125, as
amended, subject to prior review by the participation, prior notice, and publication or
Secretary of Finance, as required under registration with the University of the Philippines
Republic Act No. 8424.27 (Emphases Law Center.
supplied)
Respondent also alleged that the regulation
summarily adjudged it to be a feed grade supplier
The En Banc ruling in Banco De Oro has since not without the benefit of prior assessment and
been overturned and thus, stands as the prevailing examination; thus, despite having imported food
jurisprudence on the matter. Accordingly, the Court grade wheat, it would be subjected to the 7% tariff
is prompted to reconsider its ruling in this case with upon the arrival of the shipment, forcing them to pay
respect to the issue of jurisdiction. 133% more than was proper.
Consequently, considering that the CTA had taken
RTC issued a TRO and later on ruled in favor of
cognizance of Petron's claim for judicial refund of tax
Respondent. Petitioner appealed to the CA but
which, under Section 7(a)(l) of RA 1125, is within its
dismissed the appeal. Hence, the petition to the
jurisdiction, the Court finds that these supervening
Supreme Court.
circumstances have already mooted the issue of
prematurity. Thus, in conjunction with the Banco De
ISSUE: Whether or not the CMO 27-2003 conforms
Oro ruling that the CTA has jurisdiction to resolve all
to the mandate of the Tariff and Customs Law in
tax matters (which includes the validity of the CIR's
relation to the duties of the custom’s officer
interpretation and consequent imposition of excise
tax on alkylate), the Court finds it proper to
RULING: No, the CMO 27-2003 did not conform to
reconsider its decision.
the mandate of the Tariff and Customs Law in
WHEREFORE, the motion for reconsideration relation to the duties of the custom’s officer.
is GRANTED.
The Commissioner of Customs went beyond his
COMMISSIONER OF CUSTOMS VS. HYPERMIX powers when the CMO 27-2003 he issued limited the
FEEDS CORPORATION, G.R. NO. 179579 customs officer’s duties mandated by Section 1403
FEBRUARY 1, 2012 of the Tariff and Customs Law, as amended. The law
provides:
FACTS: Petitioner Commissioner of Customs issued
CMO 27-2003. Under the Memorandum, for tariff Section 1403. – Duties of Customs Officer
purposes, wheat was classified according to the Tasked to Examine, Classify, and Appraise
following: (1) importer or consignee; (2) country of Imported Articles. – The customs officer
origin; and (3) port of discharge. The regulation tasked to examine, classify, and appraise
provided an exclusive list of corporations, ports of imported articles shall determine whether
discharge, commodity descriptions and countries of the packages designated for examination
origin. Depending on these factors, wheat would be and their contents are in accordance with the
classified either as food grade or feed grade. The declaration in the entry, invoice and other
corresponding tariff for food grade wheat was 3%, pertinent documents and shall make return
for feed grade, 7%. in such a manner as to indicate whether the
articles have been truly and correctly
 declared in the entry as regard their quantity, brevity) incurred a total income tax deficiency of
measurement, weight, and tariff P9,985,392.15. Upon protest by counsel of ICC, the
classification and not imported contrary to said preliminary assessment was reduced to the
law. He shall submit samples to the amount of P325,869.44.
laboratory for analysis when feasible to do so
and when such analysis is necessary for the ICC received from the BIR an assessment letter
proper classification, appraisal, and/or demanding payment of the abovementioned amount
admission into the Philippines of imported for the taxable period from January 1, 1986 to
articles. December 31, 1986. In a letter filed by Respondent
ICC with the BIR, it requested a reconsideration of
Likewise, the customs officer shall determine the subject assessment. On February 9, 1995, ICC
the unit of quantity in which they are usually received from CIR a Final Notice Before Seizure. In
bought and sold, and appraise the imported said letter, BIR demanded payment of the subject
articles in accordance with Section 201 of this assessment within ten (10) days from receipt
Code. thereof. Otherwise, failure on its part would
constrain Petitioner to collect the subject
Failure on the part of the customs officer to assessment through summary remedies. ICC
comply with his duties shall subject him to considered the said Final Notice Before Seizure as
the penalties prescribed under Section 3604 BIR’s final decision.
of this Code.
Hence, a petition for review was filed with the CTA.
The above provision mandates that the customs The CTA dismissed the petition of Respondent.
officer must first assess and determine the However, CA reversed CTA’s Decision. The CA
classification of the imported article before tariff may considered the final notice sent by petitioner as the
be imposed. Unfortunately, CMO 23-2007 has latter's decision, which was appealable to the CTA.
already classified the article even before the customs The appellate court reasoned that the final Notice
officer had the chance to examine it. In effect, before seizure had effectively denied petitioner's
petitioner Commissioner of Customs diminished the request for a reconsideration of the commissioner's
powers granted by the Tariff and Customs Code with assessment. The CA relied on the long-settled tax
regard to wheat importation when it no longer jurisprudence that a demand letter reiterating
required the customs officer’s prior examination and payment of delinquent taxes amounted to a decision
assessment of the proper classification of the wheat. on a disputed assessment.

It is well-settled that rules and regulations, which are Thus, the recourse to the Supreme Court.
the product of a delegated power to create new and
additional legal provisions that have the effect of ISSUE: Whether or not the Final Notice Before
law, should be within the scope of the statutory Seizure against ICC constitutes the final decision of
authority granted by the legislature to the the CIR appealable to the CTA.
administrative agency. It is required that the
regulation be germane to the objects and purposes RULING: Yes, the Final Notice Before Seizure
of the law; and that it be not in contradiction to, but against ICC constitutes the final decision of the CIR
in conformity with, the standards prescribed by law. appealable to the CTA.

COMMISSIONER OF INTERNAL REVENUE vs. In the normal course, the revenue district officer
ISABELA CULTURAL CORPORATION, G.R. No. sends the taxpayer a notice of delinquent taxes. If
135210 July 11, 2001 the taxpayer disagrees with or wishes to protest the
assessment, it sends a letter to the BIR indicating its
FACTS: In an investigation conducted on the 1986 protest. That letter is considered as the taxpayer's
books of account of Respondent had the preliminary request for reconsideration of the delinquent
finding that Isabela Cultural Corporation (ICC for assessment. After the request is filed and received
by the BIR, the assessment becomes a disputed representative shall issue an assessment
assessment on which it must render a decision. based on his findings. Such assessment may
be protested administratively by filing a
That decision is appealable to the Court of Tax request for reconsideration or reinvestigation
Appeals for review. within thirty (30) days from receipt of the
assessment in such form and manner as may
Prior to the decision on a disputed assessment, there be prescribed by implementing rules and
may still be exchanges between the commissioner of regulations. Within sixty (60) days from filing
internal revenue (CIR) and the taxpayer. The former of the protest, all relevant supporting
may ask clarificatory questions or require the latter documents shall have become final.
to submit additional evidence. However, the CIR's
position regarding the disputed assessment must be If the protest is denied in whole or in part, or
indicated in the final decision. It is this decision that is not acted upon within one hundred eighty
is properly appealable to the CTA for review. (180) days from submission of documents,
the taxpayer adversely affected by the
In the instant case, the ICC received an assessment decision or inaction may appeal to the Court
letter stating that it had delinquent taxes due; and it of Tax Appeals within (30) days from receipt
subsequently filed its motion for reconsideration. In of the said decision, or from the lapse of the
support of its request for reconsideration, it sent to one hundred eighty (180)-day period;
the CIR additional documents. The next otherwise the decision shall become final,
communication respondent received was already the executory and demandable."
Final Notice Before Seizure.
In this case, the said period of 180 days had already
In the light of the above facts, the Final Notice lapsed when respondent filed its request for
Before Seizure shall be considered as the reconsideration without any action on the part of the
commissioner's decision disposing of the request for CIR.
reconsideration filed by respondent, who received
no other response to its request. Not only was the Lastly, a final demand letter for payment of
Notice the only response received; its content and delinquent taxes may be considered a decision on a
tenor supported the theory that it was the CIR's final disputed or protested assessment. A final demand
act regarding the request for reconsideration. The letter from the Bureau of Internal Revenue,
very title expressly indicated that it was a final notice reiterating to the taxpayer the immediate payment
prior to seizure of property. The letter itself clearly of a tax deficiency assessment previously made, is
stated that respondent was being given "this LAST tantamount to a denial of the taxpayer's request for
OPPORTUNITY" to pay; otherwise, its properties reconsideration. Such letter amounts to a final
would be subjected to distraint and levy. Thus, it is decision on a disputed assessment and is thus
already appealable to the CTA for review. appealable to the Court of Tax Appeals (CTA). In the
instant case, the second notice received by private
Furthermore, Section 228 of the National Internal respondent verily indicated its nature – that it was
Revenue Code states that a delinquent taxpayer may final. Unequivocably, therefore, it was tantamount to
nevertheless directly appeal a disputed assessment, a rejection of the request for reconsideration.
if its request for reconsideration remains unacted
upon 180 days after submission thereof to wit:
CIR v. AYALA SECURITIES CORPORATION GR
No. L-29483, March 31, 1976
"Sec. 228. Protesting an Assessment. – x x x
Within a period to be prescribed by
FACTS: Respondent Ayala Securities Corporation,
implementing rules and regulations, the
filed its income tax returns with the office of the
taxpayer shall be required to respond to said
petitioner for its fiscal year which ended on
notice. If the taxpayer fails to respond, the
September 30, 1955. Attached to its income tax
Commissioner or his duly authorized
return was the audited financial statements of the right to make the assessment has already
respondent corporation as of September 30, 1955, prescribed, pursuant to the provision of Section 331
showing a surplus of P2,758,442.37. The income tax of the National Internal Revenue Code; and (2) the
due on the return of the respondent corporation was respondent corporation's accumulation of surplus for
duly paid for within the time prescribed by law. the taxable year 1955 was not improper, considering
that the retention of such surplus was intended for
Petitioner advised the respondent corporation of the legitimate business purposes and was not availed of
assessment of P758,687.04 on its accumulated by the corporation to prevent the imposition of the
surplus reflected on its income tax return for the income tax upon its shareholders.
fiscal year. The respondent corporation, on the other
hand, protested against the assessment on its Petitioner in his answer alleged that the assessment
retained and accumulated surplus pertaining to the made by his office on the accumulated surplus of the
taxable year 1955 and sought reconsideration corporation as reflected on its income tax return for
thereof for the reasons (1) that the accumulation of the taxable year 1955 has not as yet prescribed and,
the surplus was for a bona fide business purpose and further, that the respondent corporation's
not to avoid the imposition of income tax on the accumulation of surplus for the taxable year 1955
individual shareholders, and (2) that the said was improper as the retention of such surplus was
assessment was issued beyond the five-year availed of by the corporation to prevent the
prescriptive period. imposition of the income tax upon the individual
shareholders or members of the said corporation.
Petitioner wrote respondent corporation's auditing
and accounting firm with the "advise that your The Court of Tax Appeals reversed the decision of
request for reconsideration will be the subject matter CIR . Hence this appeal.
of further reinvestigation and a thorough analysis of
the issues involved conditioned, however, upon the ISSUE:
execution of your client of the enclosed form for
waiver of the defense of prescription". However, (1) Whether or not the instant case falls within
respondent corporation did not execute the the jurisdiction of the respondent Court of
requested waiver of the statute of limitations, Tax Appeals
considering its claim that the assessment in question
had already prescribed. (2) Whether or not the applicable provision of
law to this case is Section 331 of the National
Respondent corporation received a letter from the Internal Revenue Code, which provides for a
Chief, Manila Examiners, of the Office of the five-year period of prescription of
petitioner, calling the attention of the respondent assessment from the filing of the return, or
corporation to its outstanding and unpaid tax Section 332(a) of the same Code which
requesting for the payment of the said amount provides for a ten-year period of limitation
within five (5) days from receipt of the said letter. for the same purpose
Believing the aforesaid letter to be a denial of its
protest, the herein respondent corporation filed with (3) Whether or not the respondent Court of Tax
the Court of Tax Appeals a Petition for Review of the Appeals committed a reversible error in not
assessment alleging that the assessment made by making any ruling on the reasonableness or
petitioner Commissioner of Internal Revenue is unreasonableness of the accumulated profits
illegal and invalid considering that (1) the or surplus in question of the private
assessment in question, having been issued only on respondent corporation.
February 21, 1961, and received by the respondent
corporation on March 22, 1961, the same was issued RULING:
beyond the five-year period from the date of the
filing of respondent corporation's income tax return (1) YES. It is to be noted that the respondent
on November 29, 1955, and, therefore, petitioner's Court of Tax Appeals is a court of special
 appellate jurisdiction created under R.A. No. merely relies on the provisions of Section 25
1125. Thus under Section 7(1), R.A. 1125, of the National Internal Revenue Code,
the Court of Tax Appeals exercises exclusive violation of which, according to petitioner,
appellate jurisdiction to review by appeal presupposes the existence of fraud. Fraud is
"decisions of the Collector of Internal a question of fact and the circumstances
Revenue in cases involving disputed constituting fraud must be alleged and
assessments, refunds of internal revenue proved in the court below. The finding of the
taxes, fees or other charges, penalties trial court as to its existence and non-
imposed in relation thereto, or other matters existence is final and cannot be reviewed
arising under the National Internal Revenue here unless clearly shown to be erroneous.
Code or other law or part of law administered Fraud is never lightly to be presumed
by the Bureau of Internal Revenue". because it is a serious charge.

The letter of February 18, 1963, in the view The applicable provision of law in this case is
of the Court, is tantamount to a denial of the Section 331 of the National Internal Revenue
reconsideration or protest of the respondent Code, to wit:
corporation on the assessment made by the
petition. The letter of February 18, 1963, in "SEC. 331. Period of limitation upon
the view of the Court, is tantamount to a assessment and collection. Except as
denial of the reconsideration or protest of the provided in the succeeding section,
respondent corporation on the assessment internal revenue taxes shall be
made by the petitioner, considering that the assessed within five years after the
said letter is in itself a reiteration of the return was filed, and no proceeding
demand by the Bureau of Internal Revenue in court without assessment for the
for the settlement of the assessment already collection of such taxes shall be
made, and for the immediate payment of the begun after the expiration of such
sum of P758,687.04 in spite of the vehement period. For the purposes of this
protest of the respondent corporation on section, a return filed before the last
April 21, 1961. This certainly is a clear day prescribed by law for the filing
indication of the firm stand of petitioner thereof shall be considered as filed on
against the reconsideration of the disputed such last day: Provided, That this
assessment, in view of the continued refusal limitation shall not apply to cases
of the respondent corporation to execute the already investigated prior to the
waiver of the period of limitation upon the approval of this Code:"
assessment in question.
Under Section 46(d) of the National Internal
This being so, the said letter amounts to a Revenue Code, the Ayala Securities
decision on a disputed or protested Corporation designated September 30, 1955,
assessment and, therefore, the court a quo as the last day of the closing of its fiscal year,
did not err in taking cognizance of this case. and under Section 46(b) the income tax
returns for the said corporation shall be filed
(2) On the issue of whether Sec. 331 or Sec. on or before the fifteenth (15th) day of the
332(a) of the National Internal Revenue fourth (4th) month following the close of its
Code should apply to this case, there is no fiscal year. The Ayala Securities Corporation
iota of evidence presented by the petitioner could, therefore, file its income tax returns
as to any fraud or falsity on the return with on or before January 15, 1956. The
intent to evade payment of tax, not even in assessment by the Commissioner of Internal
the income tax assessment nor in the letter- Revenue shall be made within five (5) years
decision of February 18, 1963, nor in his from January 15, 1956, or not later than
answer to the petition for review. Petitioner January 15, 1961, in accordance with Section
 331 of the National Internal Revenue Code No. There is no such time limit on the right of the
herein above-quoted. As the assessment Commissioner to assess the 25% surtax since there
issued on February 21, 1961, which was is no express statutory provision limiting such right
received by the Ayala Securities Corporation or providing for its prescription. Hence, the collection
on March 22, 1961, was made beyond the of surtax is imprescriptible. The underlying purpose
five-year period prescribed under Section of the surtax is to avoid a situation where the
331 of said Code, the same was made after corporation unduly retains its surplus earnings
the prescriptive period had expired and, instead of declaring and paying dividends to its
therefore, was no longer binding on the shareholders. SC reverses the ruling of the CTA.
Ayala Securities Corporation.
PROVINCE OF ZAMBOANGA DEL NORTE, vs.
(3) This Court is of the opinion that the COURT OF APPEALS and ZAMBOANGA DEL
respondent court committed no reversible NORTE ELECTRIC COOPERATIVE, INC. 396
error in not making any ruling on the Phil 709, 717 (2002)
reasonableness or unreasonableness of the
accumulated profits or surplus of the FACTS: Petitioner Province of Zamboanga del Norte
respondent corporation. For this reason, filed with the RTC a complaint against ZANECO for
after reaching the conclusion that the right of "Illegal Collection Of Power Bills And Preliminary
the Commissioner of Internal Revenue to Injunction With Restraining Order."
assess the 25% surtax had already Petitioner alleged that as per electric bills issued by
prescribed under Section 331 of the National ZANECO, respondent increased the Fuel
Internal Revenue Code, to delve further into Compensating Charge by P0.29 and Interim
the reasonableness or unreasonableness of Adjustment by P0.02, or a total of P 0.31. This
the accumulated profits or surplus of the amount is added to the basic charge of P 1.90 per
respondent corporation for the fiscal year kilowatt. June 1991, ZANECO increased the FCC
ending September 30, 1955, will only be an once more to P1.39 instead of only P0.29. The
exercise in futility. Interim Adjustment also increased to P0.06 instead
of only P 0.02.
Note: SC reversed the decision on November 21,
1980! Petitioner claimed that the increase was arbitrary
and illegal, and that the Energy Regulatory Board
Ayala Securities Corp. (Ayala) failed to file returns of (ERB) did not sanction the collections. As a result,
their accumulated surplus so Ayala was charged with the electric bills of the consumers almost doubled in
25% surtax by the Commissioner of internal amount.
Revenue. The CTA (Court of Tax Appeals) reversed
the Commissioner’s decision and held that the Petitioner alleged that ZANECO cannot increase the
assessment made against Ayala was beyond the 5- bills since the power rate increase from the National
yr prescriptive period as provided in section 331 of Power Corporation (NPC) of P0.17 per kilowatt hour
the National Internal Revenue Code. Commissioner was not implemented yet due to a restraining order
now files a motion for reconsideration of this issued by the Supreme Court.
decision. Ayala invokes the defense of prescription
against the right of the Commissioner to assess the ZANECO filed its answer to the complaint. It assailed
surtax. the jurisdiction of the trial court over the subject of
the case. However, the trial court issued a writ of
ISSUE: Whether or not the right to assess and preliminary injunction ordering respondent to desist
collect the 25% surtax has prescribed after five from imposing, charging, billing and collecting the
years. FCC and other additional charges upon its end-users
in Zamboanga del Norte and the cities of Dipolog and
RULING ON THE APPEAL: Dapitan. The court also ordered respondent to
refrain from cutting off the electric lines of those who
refused to pay the questioned charges, pending Since the complaint is one questioning the
determination of the litigation. increase in the power rates, the proper body
to investigate the case is the NEA. The
Respondent ZANECO filed with the trial court a regulation and fixing of power rates to be
motion requesting the court to set for hearing the charged by electric cooperatives remain
affirmative defenses set in its answer; asking for the within the jurisdiction of the National
dismissal of the case and a third-party complaint Electrification Administration, despite the
against the National Power Corporation praying for enactment of Executive Order No. 172,
the issuance of a writ of preliminary injunction or a creating the Energy Regulatory Board. The
restraining order. The trial court issued an order issue raised in the complaint is the legality of
restraining respondent to refrain from disconnecting the imposition of the FCC or ICC. Despite the
its electric service on March 28, 1992 or any other fact that diesel fuel was used to run its
date, effective until recalled. Respondent ZANECO machinery, the fact is that respondent
alleged that despite NPC’s knowledge of the charged its consumers to compensate for the
restraining order against the collection of the FCC, increase in the price of fuel. Petitioner did not
which later became known as Incremental Cost question the price of diesel fuel. Rather, it
Charge (ICC), NPC sent a demand letter with notice questioned the charges passed on to its end
of disconnection of electric service if ZANECO did not users as a result of increase in the price of
pay the FCC/ICC bills and extra-hydro rates. fuel. And the body with the technical
expertise to determine whether or not the
The trial court denied respondent ZANECO’s motion charges are legal is the NEA.
to dismiss. The court ruled that (1) the nullity of the
charges imposed are matters not capable of NEA, in the exercise of its power of
pecuniary estimation and thus fall within the supervision and control over electric
jurisdiction of the regional trial court; and (2) it is cooperatives and other borrowers,
futile to file a complaint with the National supervised or controlled entities, is
Electrification Administration (NEA) or the NPC empowered to issue orders, rules and
considering that charges imposed by respondent regulations. It may also, motu proprio or
emanated from these agencies. On appeal, CA upon petition of third parties, conduct
reversed trial court decision. investigations, referenda and other similar
actions in all matters, affecting electric
ISSUES: cooperatives and other borrower, or
supervised or controlled entities.
1. Whether or not ERB has jurisdiction over the
case. Thus, a party questioning the rates imposed
2. Whether or not the case qualifies as an by an electric cooperative may file a
exception to the rule on exhaustion of complaint with the NEA as it is empowered
administrative remedies, basing its argument to conduct hearings and investigations and
on the unconstitutionality and arbitrariness issue such orders on the rates that may be
of the imposition of the charges. charged. Consequently, the case does not
fall within the jurisdiction of the ERB.
RULING:
2. The Court in a long line of cases has held that
1. No. The real issue is not the compensation of before a party is allowed to seek the
the cost of diesel fuel used to feed the intervention of the courts, it is a pre-
generating set in Mindanao. Precisely, the condition that he avail himself of all
complaint was for "Illegal Collection of Power administrative processes afforded him.
Bills." Hence, if a remedy within the administrative
machinery can be resorted to by giving the
administrative officer every opportunity to
decide on a matter that comes within his principle of the rule on exhaustion of
jurisdiction, then such remedy must be administrative remedies rests on the
exhausted first before the court’s power of presumption that when the administrative
judicial review can be sought. The premature body, or grievance machinery, is afforded a
resort to the court is fatal to one’s cause of chance to pass upon the matter, it will decide
action. Accordingly, absent any finding of the same correctly.
waiver or estoppel, the case may be
dismissed for lack of cause of action. The premature invocation of the jurisdiction
of the trial court warrants the dismissal of the
The doctrine of exhaustion of administrative case.
remedies is not without its practical and legal
reasons. Indeed, resort to administrative
EDISON (BATAAN) COGENERATION
remedies entails lesser expenses and
CORPORATION vs. CIR/REPUBLIC OF THE
provides for speedier disposition of PHILIPPINES vs. EDISON (BATAAN)
controversies. Our courts of justice for COGENERATION CORPORATION, GR NO.
reason of comity and convenience will shy 201665/GR NO. 201668. AUGUST 30, 2017
away from a dispute until the system of
administrative redress has been completed
and complied with so as to give the MIGUEL OSORIO PENSION FOUNDATION
administrative agency every opportunity to INC. VS CA AND CIR GR NO. 162175, JUNE 28,
correct its error and to dispose of the case. 2010

Petitioner fails to show that the instant case FACTS: Petitioner, a non-stock and non-profit
falls under any of the exceptions. Mere corporation, was organized for the purpose of
allegation of arbitrariness will not suffice to holding title to and administering the employees
vest in the trial court the power that has been trust or retirement funds (Employees Trust Fund)
specifically granted by law to special established for the benefit of the employees of
government agencies. Victorias Milling Company, Inc. (VMC). Petitioner
bought a Madrigal Business Park (MBP) lot through
The doctrine of primary jurisdiction does not VMC. It claims that its share in the MBP lot is
warrant a court to arrogate unto itself the 49.59%. Petitioners investment manager, the
authority to resolve a controversy the Citytrust Banking Corporation (Citytrust), in
jurisdiction over which is initially lodged with submitting its Portfolio Mix Analysis, regularly
an administrative body of special reported the Employees Trust Funds share in the
competence. MBP lot. On 26 March 1997, VMC eventually sold the
MBP lot to Metrobank.Petitioner claims that it is a co-
A long line of cases establishes the basic rule owner of the MBP lot as trustee of the Employees
that the court will not interfere in matters Trust Fund, based on the notarized Memorandum of
which are addressed to the sound discretion Agreement and supported by the excerpts of the
of government agencies entrusted with the minutes and the resolutions of petitioner’s Board
regulation of activities coming under the Meetings. Petitioner further contends that there is no
special technical knowledge and training of dispute that the Employees Trust Fund is exempt
such agencies. from income tax. Since petitioner, as trustee,
purchased 49.59% of the MBP lot using funds of the
In fact, a party with an administrative Employees Trust Fund, petitioner asserts that the
remedy must not merely initiate the Employees Trust Fund's 49.59% share in the income
prescribed administrative procedure to tax paid (or P3,037,697.40 rounded off to
obtain relief, but also pursue it to its P3,037,500) should be refunded.
appropriate conclusion before seeking
judicial intervention. The underlying
The CTA denied petitioner's claim for refund of the real owners because the trust is created
withheld creditable tax of P3,037,500 arising from by force of law. The fact that the title is
the sale of real property of which petitioner claims registered solely in the name of one person
to be a co-owner as trustee of the employees' trust is not conclusive that he alone owns the
or retirement funds. CA agreed with the CTA that property. Thus, this case turns on whether
pieces of documentary evidence submitted by petitioner can sufficiently establish that
petitioner are largely self-serving and can be petitioner, as trustee of the Employees Trust
contrived easily. The CA ruled that these documents Fund, has a common agreement with VMC
failed to show that the funds used to purchase the and VFC and that petitioner, VMC and VFC
MBP lot came from the Employees Trust Fund. shall jointly purchase the MBP lot and put the
title to the MBP lot in the name of VMC for
ISSUES: the benefit of petitioner, VMC and VFC.

We rule that petitioner, as trustee of the

1. Whether petitioner or the Employees Trust
Employees Trust Fund, has more than
Fund is estopped from claiming that the
sufficiently established that it has an
Employees Trust Fund is the beneficial owner
agreement with VMC and VFC to purchase
of 49.59% of the MBP lot and that VMC
jointly the MBP lot and to register the MBP
merely held 49.59% of the MBP lot in trust
lot solely in the name of VMC for the benefit
for the Employees Trust Fund?
of petitioner, VMC and VFC. The CTA ruled
that the documents presented by petitioner
2. If petitioner or the Employees Trust Fund is
cannot prove its co-ownership over the MBP
not estopped, whether they have sufficiently
lot especially that the TCT, Deed of Absolute
established that the Employees Trust Fund is
Sale and the Remittance Return disclosed
the beneficial owner of 49.59% of the MBP
that VMC is the sole owner and taxpayer.
lot, and thus entitled to tax exemption for its
However, the appellate courts failed to
share in the proceeds from the sale of the
consider the genuineness and due execution
MBP lot.
of the notarized Memorandum of Agreement
acknowledging petitioners ownership of the
RULING:
MBP lot. The BIR failed to present any clear
and convincing evidence to prove that the
1. Not estopped. Article 1452 of the Civil Code
notarized Memorandum of Agreement is
provides:
fictitious or has no legal effect. Likewise,
VMC, the registered owner, did not repudiate
Art. 1452. If two or more persons
petitioners share in the MBP lot. Further,
agree to purchase a property and by
Citytrust, a reputable banking institution, has
common consent the legal title is
prepared a Portfolio Mix Analysis for the
taken in the name of one of them for
years 1994 to 1997 showing that petitioner
the benefit of all, a trust is created by
invested P5,504,748.25 in the MBP lot.
force of law in favor of the others in
Absent any proof that the Citytrust bank
proportion to the interest of each.
records have been tampered or falsified, and
For Article 1452 to apply, all that a co-owner the BIR has presented none, the Portfolio Mix
needs to show is that there is common Analysis should be given probative value.
consent among the purchasing co-owners to
put the legal title to the purchased property 2. Yes. Income from Employees Trust Fund is
in the name of one co-owner for the benefit Exempt from Income Tax. Tax exemption
of all. Once this common consent is shown, cannot arise by implication and any doubt
a trust is created by force of law. The BIR whether the exemption exists is strictly
has no option but to recognize such legal construed against the taxpayer. Further, the
trust as well as the beneficial ownership of findings of the CTA, which were affirmed by
 the CA, should be given respect and weight settled that petitioner exists for the purpose
in the absence of abuse or improvident of holding title to, and administering, the tax-
exercise of authority. exempt Employees Trust Fund established
for the benefit of VMCs employees. As such,
Section 53(b) and now Section 60(b) of the petitioner has the personality to claim tax
Tax Code provides: refunds due the Employees' Trust Fund.

SEC. 60. Imposition of Tax. (A) In Citytrust Banking Corporation as Trustee

Application of Tax. - x x x (B) and Investment Manager of Various
Exception. - The tax imposed by this Retirement Funds v. Commissioner of
Title shall not apply to employees Internal Revenue, the CTA granted Citytrusts
trust which forms part of a pension, claim for refund on withholding taxes paid on
stock bonus or profit-sharing plan of the investments made by Citytrust in behalf
an employer for the benefit of some of the trust funds it manages, including
or all of his employees (1) if petitioner. Similarly, in BIR Ruling [UN-450-
contributions are made to the trust by 95], Citytrust wrote the BIR to request for a
such employer, or employees, or both ruling exempting it from the payment of
for the purpose of distributing to such withholding tax on the sale of the land by
employees the earnings and principal various BIR-approved trustees and tax-
of the fund accumulated by the trust exempt private employees' retirement
in accordance with such plan, and (2) benefit trust funds represented by Citytrust.
if under the trust instrument it is The BIR ruled that the private employees
impossible, at any time prior to the benefit trust funds, which included
satisfaction of all liabilities with petitioner, have met the requirements of the
respect to employees under the trust, law and the regulations and therefore qualify
for any part of the corpus or income as reasonable retirement benefit plans within
to be (within the taxable year or the contemplation of Republic Act No. 4917
thereafter) used for, or diverted to, (now Sec. 28(b)(7) (A), Tax Code).
purposes other than for the exclusive
benefit of his employees: Provided, The income from the trust fund investments
That any amount actually distributed is therefore exempt from the payment of
to any employee or distributee shall income tax and consequently from the
be taxable to him in the year in which payment of the creditable withholding tax on
so distributed to the extent that it the sale of their real property. Thus, the
exceeds the amount contributed by documents issued and certified by Citytrust
such employee or distributee. showing that money from the Employees
Trust Fund was invested in the MBP lot
Petitioners Articles of Incorporation state cannot simply be brushed aside by the BIR
that its purpose is to hold legal title to, as self-serving, in the light of previous cases
control, invest and administer in the manner holding that Citytrust was indeed handling
provided, pursuant to applicable rules and the money of the Employees Trust Fund.
conditions as established, and in the interest These documents, together with the
and for the benefit of its beneficiaries and/or notarized Memorandum of Agreement,
participants,the private pension plan as clearly establish that petitioner, on behalf of
established for certain employees of Victorias the Employees Trust Fund, indeed invested
Milling Company, Inc., and other pension in the purchase of the MBP lot. Thus, the
plans of Victorias Milling Company affiliates Employees' Trust Fund owns 49.59% of the
and/or subsidiaries; and The SC has long MBP lot. Since petitioner has proven that the
settled the tax-exemption privilege of income income from the sale of the MBP lot came
derived from employee's trusts. It is also from an investment by the Employees' Trust
 Fund, petitioner, as trustee of the Employees
Trust Fund, is entitled to claim the tax refund The burden of establishing the basis of a claim for
of P3,037,500 which was erroneously paid in refund rests on the tax payer. While the
the sale of the MBP lot. Commissioner of Internal Revenue has the power to
make an examination of the returns and to assess
the correct amount of tax, his failure to exercise such
CIR VS. FAR EAST BANK AND CO (NOW BPI)
powers does not create a presumption in favor of
GR NO. 173854, MARCH 31, 2015
correctness of the return. The taxpayer must still
present substantial evidence to prove his claim for
FACTS: Far East Bank & Trust Company (FEBTC)
refund. There is no automatic grant of tax refund.
filed with the BIR, Corporate Annual Income Tax
Returns for its corporate Banking Unit (CBU) and
A taxpayer claiming for a tax credit or refund of
another for its Foreign Currency Deposit Unit
creditable withholding tax must comply with the
(FCDU). It reflected a refundable amount of income
following requisites:
tax of P12M. This was carried over to 1995. FEBTC
filed its annual income tax return which showed a
1. The claim must be filed with the
total of overpaid income tax amount of P17M. FEBTC
commissioner of Internal Revenue within the two-
sought to refund P13M and applied in the BIR. Due
year period from the date of payment of the tax,
to the failure of the CIR to act on the application of
2. It must be shown on the return that the
tax refund, FEBTC brought the matter to the CTA via
Income received was declared as part of the gross
petition for review. Trial ensued. FEBTC submitted
income
its ITR for 1994 and 1995 for CBU and FCDU,
3. The fact of withholding must be established
Certificates of Creditable tax withheld monthly
by a copy of a statement duly issued by the payor
remittance returns of income taxes issued by various
to the payee showing the amount paid and
withholding agents. BIR did not present any
the amount of tax withheld.
evidence.
Respondent failed to prove that the income derived
CTA rendered a decision denying FEBTC’s claim for
from rentals and sale of real property from which the
refund on the ground that it failed to show that the
taxes were reflected in its 1994 Annual Income Tax
income derived from rentals and sale of property
Return.
form with the taxes were withheld were reflected in
its 1994 annual ITR.
CIR vs. HANTEX TRADING CO. INC., GR NO.
136975, March 31, 2005
FEBTC filed a motion for new trial based on
excusable negligence and to present additional COMMISSIONER OF INTERNAL REVENUE VS.
evidence to support its claim. It was denied by the KUDOS METAL CORPORATION G.R. NO.
CTA. 178087

FACTS: On 1999, respondent Kudos Metal

CA ruled that EBTC has duly proven that the income
Corporation filed its Annual Income Tax Return for
derived from rentals and sale of real property upon
the taxable year 1998. Pursuant to a Letter of
which the taxes were withheld were included in the
Authority, the BIR served upon them three Notices
return as part of the gross income.
of Presentation of Records. Having failed to comply
with these notices, the BIR issued a Subpeona Duces
ISSUE: Whether respondent has proven its
Tecum. A review and audit of respondent’s records
entitlement of the refund.
then ensued. On 2001, Nelia Pasco, respondent’s
accountant, executed a Waiver of the Defense of
RULING: No, respondent failed to prove its
Prescription, which was notarized on January 22,
entitlement of the refund. Entitlement of a tax
2002, received by the BIR Enforcement Service on
refund is for the taxpayer to prove and not for the
January 31, 2002 and by the BIR Tax Fraud Division
Government to disprove.
on February 4,2002, and accepted by the Assistant
Commissioner of the Enforcement Service, Percival RULING: No. The CTA en banc did not err in ruling
T. Salazar. On 2003, a second Waiver of Defense of that the government’s right to assess unpaid taxes
Prescription was again executed by Pasco. It was of respondent prescribed.
notarized on February 19, 2003, received by the BIR
Tax Fraud Division on February 28, 2003 and Section 203 of the National Internal Revenue Code
accepted by Assistant Commissioner Salazar. On the of 1997 (NIRC) mandates the government to assess
internal revenue taxes within three years from the
same year, the BIR issued a Preliminary Assessment
last day prescribed by law for the filing of the tax
Notice for the taxable year 1998 against the
return or the actual date of filing of such return,
respondent. This was followed by a Formal Letter of
whichever comes later. Hence, an assessment notice
Demand with Assessment Notices for taxable year issued after the three-year prescriptive period is no
1998, dated September 26, 2003 which was received longer valid and effective. Exceptions however are
by respondent on November 12, 2003. provided under Section 222 of the NIRC.
Respondent challenged the assessments but the BIR
The waivers executed by respondent’s accountant
rendered a decision in favor of the petitioner.
did not extend the period within which the
Believing that the government’s right to assess taxes
assessment can be made. Section 222 (b) of the
had prescribed, respondent filed a petition for review
NIRC provides that the period to assess and collect
with the CTA. The CTA issued a resolution canceling
taxes may only be extended upon a written
the assessment notices issued against respondent
agreement between the CIR and the taxpayer
for having been issued beyond the prescriptive
executed before the expiration of the three-year
period. It found the first Waiver of the Statute of
period. RMO 20-90 issued on April 4, 1990 and
Limitations incomplete and defective for failure to
RDAO 05-01 issued on August 2, 2001 lay down the
comply with the provisions of Revenue
procedure for the proper execution of the waiver, to
Memorandum Order No. 20-90. Thus: First, the
wit:
Assistant Commissioner is not the revenue official
authorized to sign the waiver, as the tax case
involves more than ₱1,000,000.00. Secondly, the 1. The waiver must be in the proper form prescribed
waiver failed to indicate the date of acceptance. by RMO 20-90. The phrase "but not after ______ 19
Such date of acceptance is necessary to determine ___", which indicates the expiry date of the period
whether the acceptance was made within the agreed upon to assess/collect the tax after the
prescriptive period; Third, the fact of receipt by the regular three-year period of prescription, should be
taxpayer of his file copy was not indicated on the filled up.
original copy. The subject waiver is therefore
incomplete and defective. As such, the three-year 2. The waiver must be signed by the taxpayer
prescriptive period was not tolled or extended and himself or his duly authorized representative. In the
continued to run. Petitioner moved for case of a corporation, the waiver must be signed by
reconsideration but the CTA Second Division denied any of its responsible officials. In case the authority
the motion in a Resolution. On appeal, the CTA En is delegated by the taxpayer to a representative,
Banc affirmed the cancellation of the assessment such delegation should be in writing and duly
notices. Although it ruled that the Assistant notarized.
Commissioner was authorized to sign the waiver
pursuant to Revenue Delegation Authority Order 3. The waiver should be duly notarized.
(RDAO) No. 05-01, it found that the first waiver was
still invalid based on the second and third grounds 4. The CIR or the revenue official authorized by him
stated by the CTA Second Division. Petitioner sought must sign the waiver indicating that the BIR has
reconsideration but the same was unavailing. Hence, accepted and agreed to the waiver. The date of such
this petition. acceptance by the BIR should be indicated.
However, before signing the waiver, the CIR or the
ISSUE: Whether or not the Court of Tax Appeals en revenue official authorized by him must make sure
banc erred in ruling that the government’s right to that the waiver is in the prescribed form, duly
assess unpaid taxes of respondent prescribed notarized, and executed by the taxpayer or his duly
authorized representative.
5. Both the date of execution by the taxpayer and 2. pawnshops are not lending investors
date of acceptance by the Bureau should be before whose services are subject to VAT, hence it was not
the expiration of the period of prescription or before liable for deficiency VAT
the lapse of the period agreed upon in case a 3. no deficiency DST was due because
subsequent agreement is executed. Section 180 of the National Internal Revenue Code
(Tax Code) does not cover any document or
6. The waiver must be executed in three copies, the transaction which relates to respondent.
original copy to be attached to the docket of the 4. the issuance of a pawn ticket did not
case, the second copy for the taxpayer and the third constitute a pledge under Section 195 of the Tax
copy for the Office accepting the waiver. The fact of Code
receipt by the taxpayer of his/her file copy must be
indicated in the original copy to show that the
Respondent argues that deposit on future
taxpayer was notified of the acceptance of the BIR
subscription is not subject to DST under Section 175
and the perfection of the agreement.
of the Tax Code. Respondent contends that by
presenting its GIS and financial statements, it had
A perusal of the waivers executed by respondent’s
already sufficiently proved that the amount sought
accountant reveals the following infirmities:
to be taxed is deposit on future subscription, which
is not subject to DST.[34] Respondent claims that it
1. The waivers were executed without the
cannot be required to submit proof of DST payment
notarized written authority of Pasco to sign
on subscription because such payment is non-
the waiver in behalf of respondent.
existent. Thus, the burden of proving that there was
an agreement to subscribe and that certificates of
2. The waivers failed to indicate the date of stock were issued for the deposit on subscription
acceptance. rests on petitioner and his examiners.

3. The fact of receipt by the respondent of its

file copy was not indicated in the original Petitioner alleged that the assessment was valid and
copies of the waivers. correct and the taxpayer had the burden of proof to
impugn its validity or correctness. Petitioner
maintained that respondent is subject to 10% VAT
Due to the defects in the waivers, the period to
based on its gross receipts pursuant to Republic Act
assess or collect taxes was not extended.
No. 7716, or the Expanded Value-Added Tax Law
Consequently, the assessments were issued by the
(EVAT). Petitioner also cited BIR Ruling No. 221-91
BIR beyond the three-year period are void.
which provides that pawnshop tickets are subject to
DST.
Wherefore the petition is denied and the resolution
of the Court of Tax Appeals are hereby affirmed.
CTA En Banc affirmed respondents liability to pay
COMMISSIONER OF INTERNAL REVENUE vs. the VAT and ordering it to pay DST on its pawnshop
FIRST EXPRESS PAWNSHOP COMPANY, tickets. However, the CTA En Banc found that
INC., G.R. Nos. 172045-46, June 16, 2009 respondents deposit on subscription was not subject
to DST.[
FACTS: In 2001, petitioner issued assessment
notices against First Express Pawnshop Company, ISSUE: Whether respondent is liable to pay DST on
Inc. for deficiency income tax, for deficiency value- deposit on subscription of capital stock?
added tax (VAT) for deficiency documentary stamp
tax (DST) on deposit on subscription and for RULING: NO. In Section 175 of the Tax Code, DST
deficiency DST of P62,128.87 on pawn tickets. is imposed on the original issue of shares of stock.
The DST, as an excise tax, is levied upon the
Respondent contended that : privilege, the opportunity and the facility of issuing
1. petitioner did not consider the supporting shares of stock
documents on the interest expenses and donations
which resulted in the deficiency income tax. In Section 176 of the Tax Code, DST is imposed on
the sales, agreements to sell, memoranda of sales,
deliveries or transfer of shares or certificates of stock or may not happen. The person making a deposit on
in any association, company, or corporation, or stock subscription does not have the standing of a
transfer of such securities by assignment in blank, or stockholder and he is not entitled to dividends,
by delivery, or by any paper or agreement, or voting rights or other prerogatives and attributes of
memorandum or other evidences of transfer or sale a stockholder. Hence, respondent is not liable for the
whether entitling the holder in any manner to the payment of DST on its deposit on subscription for
benefit of such certificates of stock, or to secure the the reason that there is yet no subscription that
future payment of money, or for the future transfer creates rights and obligations between the
of certificates of stock. In Compagnie Financiere subscriber and the corporation.
Sucres et Denrees v. Commissioner of Internal
Revenue, this Court held that under Section 176 of
the Tax Code, sales to secure the future transfer of COMMISSIONER OF INTERNAL REVENUE vs.
due-bills, certificates of obligation or certificates of METRO STAR SUPERAMA, INC.G.R. No.
stock are subject to documentary stamp tax.[42] 185371, December 8, 2010

RMO 08-98, reiterating Revenue Memorandum FACTS: On January 26, 2011, a Letter of Authority
Circular No. 47-97 (RMC 47-97), also states that was issued for the examination Metro Star Superama
what is being taxed is the privilege of issuing shares Inc.’s (Metro Star) books of accounts and other
of stock, and, therefore, the taxes accrue at the time accounting records for income tax and other internal
the shares are issued. RMC 47-97 also defines revenue taxes for the taxable year 1999. For Metro
issuance as the point in which the stockholder Star’s failure to comply with several requests for the
acquires and may exercise attributes of ownership presentation of records and Subpoena Duces
over the stocks. Tecum, an Indorsement dated September 26, 2001
was issued informing Revenue District Officer of
As pointed out by the CTA, Sections 175 and 176 of Legazpi City to proceed with the investigation based
the Tax Code contemplate a subscription agreement on the best evidence obtainable preparatory to the
in order for a taxpayer to be liable to pay the DST. issuance of assessment notice.
A subscription contract is defined as any contract for
the acquisition of unissued stocks in an existing On November 8, 2001, a Preliminary 15-day Letter,
corporation or a corporation still to be formed. [43] A which Metro Star received on November 9, 2001,
stock subscription is a contract by which the was issued stating that a post audit review was held
subscriber agrees to take a certain number of shares and it was ascertained that there was deficiency
of the capital stock of a corporation, paying for the value-added and withholding taxes due from Metro
same or expressly or impliedly promising to pay for Star. On April 11, 2002, Metro Star received a Formal
the same. Letter of Demand dated April 3, 2002 assessing it an
amount for deficiency value-added and withholding
Based on Rosarios testimony and respondents taxes for the taxable year 1999.
financial statements as of 1998, there was no
agreement to subscribe to the unissued shares. Subsequently, a Final Notice of Seizure dated May
Here, the deposit on stock subscription refers to an 12, 2003 was sent to Metro Star, which it received
amount of money received by the corporation as a on May 15, 2003, giving it the last opportunity to
deposit with the possibility of applying the same as settle its deficiency tax liabilities within 10 days from
payment for the future issuance of capital stock. receipt thereof. On February 6, 2004, Metro Star
received a Warrant of Distraint/Levy dated May 12,
Clearly, the deposit on stock subscription as reflected 2003 demanding payment of deficiency value-added
in respondents Balance Sheet as of 1998 is not a tax and withholding tax payment. On July 30, 2004,
subscription agreement subject to the payment of Metro Star filed with the Office of the CIR a MR which
DST. There is no P800,000 worth of subscribed was denied. Denying that it received a
capital stock that is reflected in respondents GIS. Preliminary Assessment Notice (PAN) and
The deposit on stock subscription is merely an claiming that it was not accorded with due process,
amount of money received by a corporation with a Metro Star filed a petition for review with the CTA.
view of applying the same as payment for additional The CTA-Second Division granted Metro Star’s
issuance of shares in the future, an event which may petition for review. A reconsideration was sought by
the CIR but it was denied. On appeal to the CTA-En This is confirmed under the provisions R.R. No. 12-
Banc, the petition was dismissed. 99 of the BIR which pertinently provide:

ISSUE: Whether failure to send the PAN would xxx

render the assessment null and void
3.1.2 Preliminary Assessment Notice (PAN). -
RULING: YES. On the matter of service of a tax If after review and evaluation by the
assessment, a further perusal of our ruling Assessment Division or by the Commissioner
in Barcelon is instructive, viz: or his duly authorized representative, as the
case may be, it is determined that there
Jurisprudence is replete with cases holding that if exists sufficient basis to assess the taxpayer
the taxpayer denies ever having received an for any deficiency tax or taxes, the said Office
assessment from the BIR, it is incumbent shall issue to the taxpayer, at least by
upon the latter to prove by competent registered mail, a Preliminary Assessment
evidence that such notice was indeed received Notice (PAN) for the proposed assessment,
by the addressee. The onus probandi was showing in detail, the facts and the law, rules
shifted to respondent to prove by contrary and regulations, or jurisprudence on which
evidence that the Petitioner received the the proposed assessment is based (see
assessment in the due course of mail. The illustration in ANNEX A hereof). If the
Supreme Court has consistently held that while a taxpayer fails to respond within fifteen (15)
mailed letter is deemed received by the addressee in days from date of receipt of the PAN, he shall
the course of mail, this is merely a disputable be considered in default, in which case, a
presumption subject to controversion and a direct formal letter of demand and assessment
denial thereof shifts the burden to the party favored notice shall be caused to be issued by the
by the presumption to prove that the mailed letter said Office, calling for payment of the
was indeed received by the addressee (Republic vs. taxpayer's deficiency tax liability, inclusive of
Court of Appeals, 149 SCRA 351). the applicable penalties.

The Court agrees with the CTA that the CIR failed to From the provision quoted above, it is clear that the
discharge its duty and present any evidence to show sending of a PAN to taxpayer to inform him of the
that Metro Star indeed received the PAN assessment made is but part of the “due process
dated January 16, 2002. It could have simply requirement in the issuance of a deficiency tax
presented the registry receipt or the certification assessment,” the absence of which renders nugatory
from the postmaster that it mailed the PAN, but any assessment made by the tax authorities. The
failed. Neither did it offer any explanation on why it use of the word “shall” in subsection 3.1.2 describes
failed to comply with the requirement of service of the mandatory nature of the service of a PAN. The
the PAN. persuasiveness of the right to due process reaches
both substantial and procedural rights and the
failure of the CIR to strictly comply with the
Indeed, Section 228 of the Tax Code clearly requires requirements laid down by law and its own rules is a
that the taxpayer must first be informed that he is denial of Metro Star’s right to due process. Thus, for
liable for deficiency taxes through the sending of a its failure to send the PAN stating the facts and the
PAN. He must be informed of the facts and the law law on which the assessment was made as required
upon which the assessment is made. The law by Section 228 of R.A. No. 8424, the assessment
imposes a substantive, not merely a formal, made by the CIR is void.
requirement. To proceed heedlessly with tax
collection without first establishing a valid
PILIPINAS SHELL PETROLEUM
assessment is evidently violative of the cardinal
principle in administrative investigations - that CORPORATION vs. COMMISSIONER OF
taxpayers should be able to present their case and INTERNAL REVENUE G.R. No. 172598
adduce supporting evidence. December 21, 2007
Facts: In 1988, BIR sent a collection letter to
Petitioner Pilipinas Shell Petroleum Corporation The CTA En Banc ruled in favor of respondent and
(PSPC) for alleged deficiency excise tax liabilities of ordered PSPC to pay the amount of P570,577,401.61
PhP 1,705,028,008.06 for the taxable years 1992 as deficiency excise tax for the taxable years 1992
and 1994 to 1997, inclusive of delinquency and 1994 to 1997, inclusive of 25% surcharge and
surcharges and interest. As basis for the collection 20% interest.
letter, the BIR alleged that PSPC is not a qualified
transferee of the Tax Credit Certificates (TCCs) it ISSUE: Whether or not petitioner is liable for the
acquired from other BOI-registered assessment of deficiency excise tax after the validly
companies. These alleged excise tax deficiencies issued TCCs were subsequently cancelled for having
covered by the collection letter were already paid by been issued fraudulently
PSPC with TCCs acquired through, and issued and
duly authorized by the Center, and duly covered by RULING: No. Petitioner is not liable for the
Tax Debit Memoranda (TDM) of both the Center and assessment of deficiency excise tax.
BIR, with the latter also issuing the corresponding
Accept Payment for Excise Taxes (APETs). In the instant case, with due application, approval,
and acceptance of the payment by PSPC of the
PSPC protested the collection letter, but it was subject TCCs for its then outstanding excise tax
denied. Because of respondent inaction on a motion liabilities in 1992 and 1994 to 1997, the subject TCCs
for reconsideration PSPC filed a petition for review have been canceled as the money value of the tax
before the CTA. credits these represented have been used
up. Therefore, the DOF through the Center may not
In 1999, the CTA ruled that the use by PSPC of the now cancel the subject TCCs as these have already
TCCs was legal and valid, and that respondent’s been canceled and used up after their acceptance as
attempt to collect alleged delinquent taxes and payment for PSPC’s excise tax liabilities. What has
penalties from PSPC without an assessment been used up, debited, and canceled cannot
constitutes denial of due process. Respondent anymore be declared to be void, ineffective, and
elevated CTA Decision to the Court of Appeals (CA) canceled anew.
through a petition for review.
Besides, it is indubitable that with the issuance of
Despite the pendency of this case, PSPC received the corresponding TDM, not only is the TCC canceled
assessment letter from respondent for excise tax when fully utilized, but the payment is also final
deficiencies, surcharges, and interest based on the subject only to a post-audit on computational
first batch of cancelled TCCs and TDM covering errors. Under RR 5-2000, a TDM is a certification,
PSPC’s use of the TCCs. All these cancelled TDM and duly issued by the Commissioner or his duly
TCCs were also part of the subject matter of the now authorized representative, reduced in a BIR
pending before the CA. Accountable Form in accordance with the prescribed
formalities, acknowledging that the taxpayer named
PSPC protested the assessment letter, but the therein has duly paid his internal revenue tax liability
protest was denied by the BIR, constraining it to file in the form of and through the use of a Tax Credit
another case before the CTA. Subsequently, CTA Certificate, duly issued and existing in accordance
ruled in favor of PSPC and accordingly cancelled and with the provisions of these Regulations. The Tax
set aside the assessment issued by the respondent. Debit Memo shall serve as the official receipt from
Respondent motion for reconsideration of the above the BIR evidencing a taxpayer’s payment or
decision which was rejected thus respondent satisfaction of his tax obligation. The amount shown
appealed the above decision before the CTA En therein shall be charged against and deducted from
Banc.
the credit balance of the aforesaid Tax Credit taxes of P2,025 on PSI’s capitalization for 1983 and
Certificate. 1984 and as deficiency expanded withholding tax of
P703.41, thereby bringing the total unsettled tax to
Thus, with the due issuance of TDM by the Center P2,851,805.16.
and TDM by the BIR, the payments made by PSPC
with the use of the subject TCCs have been effected On July 12, 1988, petition paid the P2,025
documentary stamp tax and P703.41 deficiency
and consummated as the TDMs serve as the official
expanded withholding tax. The following day, PSI
receipts evidencing PSPC’s payment or satisfaction
filed its second protest for the 1983 and 1984
of its tax obligation. Moreover, the BIR not only
assessment and included for the first time its protest
issued the corresponding TDM, but it also issued
against the 1985 assessment. On November 9, 1990,
ATAPETs which doubly show the payment of the the BIR denied the protests stating that salaries of
subject excise taxes of PSPC. security guards are part of taxable gross receipts for
determination of contractor’s tax.
Based on the above discussion, the Court hold that
respondent erroneously and without factual and PSI filed a petition for review on December 5, 1990
legal basis levied the assessment. Consequently, the with the CTA averring that assessment for
CTA En Banc erred in sustaining respondent’s documentary stamp and expanded withholding
assessment. taxes and without basis having been paid on July 22,
1988; the period for the first, second and third
quarter of 1984 has lapsed, the assessment letter
BARCELON ROAS SECURITIES INC (now therefore having been sent on December 19, 1987,
known as UBP Securities Inc.) vs. CIR, GR NO. o beyond 3 years from filing of the quarterly returns,
157064, AUGUST 7, 2006 and that the base amount was erroneous since
salaries of security guards, employer’s share of SSS,
SIF and Medicare contributions should not form part
PROTECTOR’S SERVICES, INC., VS CA G.R. of taxable gross receipts.
NO. 118176, APRIL 12, 2000
The CTA dismissed the petition stating that: (1) the
FACTS: Petition Protector’s Services, Inc., (PSI) is a assessment were made within the 3-year
contractor engaged in recruiting security guards for prescriptive period which should be reckoned from
clients. After an audit investigation, the BIR assessed January 20, 1985, the date of filing the final return;
PSI deficiency percentage taxes including (2) receipt of the 1985 assessment cannot be denied
surcharges, penalties and interests of P503,564.39, as all assessments were sent in 1 envelope, as
P831,464.30 and P1,514,047.86 for 1983, 1984 and testified to by BIR personnel; and (3) the protest
1985, respectively. On December 7, 1987, letter having filed only on January 12, 1988 or 33
respondent CIR sent demand letters for payment of days from December 10, 1987, the request for
said assessment for 1983 and 1984 on December 10, reinvestigation was filed out of time. On review by
1987, but denied the notice of deficiency tax for the CA, the CTA’s decision was affirmed.
1985.
ISSUES:
Petitioner PSI, sent a protest letter dated January 1. W/N the CTA has jurisdiction to act on the
12, 1988 regarding the 1983 and 1984 assessment, petition for review filed before it.
claiming that gross receipts subject to percentage 2. W/N the assessments against PSI for
tax should exclude salaries of the security guards, deficiency percentage tax for 1983 and
employer’s share of SSS, State Insurance Fund (SIF) 1984 were made within the prescriptive
and Medicare contributions. Without formally acting period.
thereon, the BIR sent a follow-up letter dated July 3. W/N the period for collection of taxes for
12, 1988 for the settlement of the taxes based on its taxable years 1983, 1984 and 1985 has
computation, plus additional documentary stamp already prescribed.
 4. W/N the assessments are correct. amount received by the prime or principal contractor
as the total price, undiminished receipts could not be
RULING: An assessment maybe administratively diminished by employer’s SSS, SIF and medicare
protested within 30 days from receipt thereof; contributions. Furthermore, it has been consistently
otherwise, the assessment shall become final and ruled by the BIR that the salaries paid to security
unappealable. In this case, PSI received the guards should form part of the gross receipts subject
assessment on December 10, 1987 and protested to tax.
the 1983 and 1984 assessments on January 12,
1988, or 33 days thereafter. Hence, the protests OCEANIC WIRELESS NETWOR VS. CIR, et al
were filed out of time and PSI can no longer dispute GR NO. 148380, April 12, 2000
the correctness of assessment. The CTA correctly
dismissed the appeal for lack of jurisdiction. SAMAR I ELECTRIC COOPERATIVE VS. CIR et
al, GR No. 148380, DECEMBER 21, 2007
Petitioner’s contention that the Government’s right
CIR vs Reyes, 480 SCRA 382, GR No. 159694,
to assess and collect the 1983, 1984 and 1985
January 27, 2006
assessments had already prescribed in view of BP
blg. 700, which reduced the prescriptive period for
assessment and collection of internal revenue taxes FACTS: In 1993, Maria Tancino died leaving behind
to 3 years, lacks merit BP blg. 700 was approved on an estate worth 32 million pesos. In 1997, a tax audit
April 5, 1984. The 3-year prescriptive period for was conducted on the estate. Meanwhile, the
assessment and collection of revenue taxes applied National Internal Revenue Code (NIRC) of 1997 was
to taxes paid beginning 1984. Clearly, the tax passed. Eventually in 1998, the estate was issued a
assessment made on December 10, 1987, for the final assessment notice (FAN) demanding the estate
year 1983 was still covered by the tentative quarterly to pay P 14.9 million in taxes including surcharges
payments. and interest; the estate liability was based on
Section 229 of the [old] Tax Code.
As to the contention that for failure of the BIR to
commence collection of the 1983, 1984 and 1985
Azucena Reyes, one of the heirs, protested the FAN.
deficiency taxes either by judicial action or by
The Commissioner of Internal Revenue (CIR)
distraint and levy, the government’s right to collect
nevertheless issued a warrant of distraint and/ or
tax has prescribed, the court ruled that “the
levy. Reyes again protested the warrant but in March
suspension of the running of the statute of
1999, she offered a compromise and was willing to
limitations for tax collection for the period during
pay P 1 million in taxes. Her offer was denied. She
which the commissioner is prohibited from making
continued to work another compromise but was
the assessment or beginning distraint or levy or a
eventually denied. The case reached CTA where
proceeding in a court and 60 days thereafter.” In the
Reyes was also denied. In the CA Reyes received a
instant case, PSI filed a petition before the CTA to
favorable judgement.
prevent the collection of the assessed deficiency tax.
When the CTA dismissed the case, petitioner
ISSUE: Whether or not the formal assessment
elevated the case to the SC, hoping for a review in
notice (FAN) is valid.
the favor. The actions taken by petitioner before the
CTA and the SC suspended the running of the
RULING: No. The NIRC of 1997 was already in
statute of limitation.
effect when the FAN was issued. Under Section 228
of the NIRC, taxpayers shall be informed in writing
As to the correctness of the assessment, it was held
of the law and the facts on which the assessment
that contractor’s tax on gross receipts imposed on
was made: otherwise, the assessment shall be void.
business agents including private detective
In the case at bar, the Final Assessment Notice
watchman agencies, was a tax on the sale of
(FAN) merely stated the amount of liability to be
services or labor, imposed on the exercise of a
shouldered by the estate and the law upon which
privilege. The term “gross receipts” means all
such liability is based. However, the estate was not the period of January to March 1998 had exceeded
informed in writing of the facts on which the the jurisdiction granted to them by the LOA.
assessment of the estate taxes had been made. The
estate was merely informed of the findings of the Further, the LOA which covered “1997 and
CIR. Sectuon 228 of the NIRC being remedial in unverified prior years” is in violation of the principle
nature can be applied retroactively even though the that a Letter of Authority should cover a taxable
tax investigation was conducted prior to the law's period not exceeding one taxable year. If the audit
passage. Consequently, the invalid FAN (Final of a taxpayer shall include more than one taxable
Assessment Notice) cannot be a basis of a period, the other periods or years shall be specifically
compromise, any proceeding emanating from the indicated in the LOA (as embodied in Section C of
invalid FAN is void including the issuance of the Revenue Memorandum Order No. 43-90 dated
warrant of distraint and/or levy. September 20, 1990).

COMMISSIONER OF INTERNAL REVENUE

VS. SONY PHILIPPINES, INC., G.R. No.
178697. November 17, 2010

FACTS: On November 24, 1998, the CIR issued

Letter of Authority No. 000019734 (LOA 19734)
authorizing certain revenue officers to examine
Sony’s books of accounts and other accounting
records regarding revenue taxes for “the period
1997 and unverified prior years.”

After the examination of said books, the CIR found

out, among others, that Sony Philippines is liable for
deficiency taxes and penalties for value added tax
amounting to P11,141,014.41.

Sony Philippines contested such finding as it argued

that the basis used by the CIR to assess said
deficiency were the records covering the period of
January 1998 through March 1998 which was a
period not covered by the letter of authority so
issued. The CIR countered that the LOA phrase “the
period 1997 and unverified prior years” should be
understood to mean the fiscal year ending on March
31, 1998.
Eventually the case reached the Court of Tax
Appeals and the CTA decided agreed with Sony
Philippines on this one. So did the CTA en banc.

ISSUE: Whether or not the deficiency assessments

against Sony Philippines is valid?

RULING: No. The LOA issued is clear on which

period is covered by the examination to be
conducted. It’s only meant to cover the year “1997
and unverified prior years” not the year 1998. The
revenue officers who examined the records covering