CASE DIGEST: 2015 SC TAXATION activities and projects of accredited

CASES non-government organizations

(NGOs) throughout the country.
January 2015
1.) BANCO DE ORO, ET AL., Petitioners,
A zero-coupon bond is a bond
RIZAL COMMERCIAL BANKING
CORPORATION AND RCBC
bought at a price substantially
CAPITAL CORPORATION, CAUCUS lower than its face value (or at a
OF DEVELOPMENT NGO deep discount), with the face value
NETWORKS, Petitioner- Intervenors repaid at the time of maturity. It
VS. REPUBLIC OF THE does not make periodic interest
PHILIPPINES, THE
payments, or have so called
COMMISSIONER OF INTERNAL
REVENUE, BUREAU OF INTERNAL "coupons" hence the term zero-
REVENUE, SECRETARY OF coupon bond. However, the
FINANCE, DEPARTMENT OF discount to face value constitutes
FINANCE, THE NATIONAL the return to the bond holder.
TREASURER AND BUREAU OF
TREASURY, Respondents (G.R. No. The Bureau of Internal Revenue, in
198756, January 13, 2015) reply to CODE-NGOs letters dated
May 10, 15, and 25, 2001, issued
FACTS: BIR Ruling No. 020-2001 on the
By letter dated March 23, 2001, the tax treatment of the proposed
PEACe Bonds, it is signed by then
Caucus of Development NGO
Commissioner of Internal Revenue
Networks (CODE-NGO) with the Ren G. Baez and confirmed that
assistance of its financial advisors, the PEACe Bonds would not be
Rizal Commercial Banking Corp. classified as deposit substitutes and
("RCBC"), RCBC Capital Corp. would not be subject to the
("RCBC Capital"), CAPEX Finance corresponding withholding tax:
and Investment Corp. ("CAPEX")
Thus, to be classified as "deposit
and SEED Capital Ventures, Inc. substitutes", the borrowing of funds
(SEED), requested an approval must be obtained from twenty (20) or
from the Department of Finance for more individuals or corporate lenders
the issuance by the Bureau of at any one time. In the light of your
representation that the PEACe Bonds
Treasury of 10-year zero-coupon will be issued only to one entity, i.e.,
Treasury Certificates (T-notes). CODE-NGO, the same shall not be
considered as "deposit substitutes"
falling within the purview of the above
The T-notes would initially be definition. Hence, the withholding tax
purchased by a special purpose on deposit substitutes will not apply.
vehicle on behalf of CODE-NGO,
repackaged and sold at a premium Meanwhile, in the memorandum
to investors as the PEACe Bonds. dated July 4, 2001, Former
The net proceeds from the sale of Treasurer Eduardo Sergio G. Edeza
the Bonds will be used to endow a (Former Treasurer Edeza) questioned
the propriety of issuing the bonds
permanent fund (Hanapbuhay
directly to a special purpose vehicle
Fund) to finance meritorious considering that the

1
 latter was not a Government The Bureau of Internal Revenue,
Securities Eligible Dealer (GSED). citing three (3) of its rulings rendered
Former Treasurer Edeza in 2004 and 2005, namely: BIR
recommended that the issuance of Ruling No. 007-04 dated July 16,
the Bonds "be done through the 2004; BIR Ruling No. DA-491-04
Automated Debt Auction dated September 13, 2004; and BIR
Processing System (ADAPS)" and Ruling No. 008-05 dated July 28,
that CODE-NGO should get a 2005, declared the following:
GSED to bid in [sic] its behalf.
The Php 24.3 billion discount on the
The Bureau of Treasury announced issuance of the PEACe Bonds should be
that "P30.0B worth of 10-year Zero subject to 20% Final Tax on interest
[-] Coupon Bonds [would] be income from deposit substitutes. It is
auctioned on October 16, 2001. now settled that all treasury bonds
(including PEACe Bonds), regardless of
The notice stated that the Bonds
the number of purchasers/lenders at the
shall be issued to not more than 19 time of origination/issuance are
buyers/lenders. The Auction considered deposit substitutes. In the
Guidelines reiterated that the case of zero-coupon bonds, the discount
Bonds to be auctioned are "[n]ot (i.e. difference between face value and
subject to 20% withholding tax as purchase price/discounted value of the
the issue will be limited to a bond) is treated as interest income of the
maximum of 19 lenders in the purchaser/holder. Thus, the Php 24.3
primary market (pursuant to BIR interest income should have been
Revenue Regulation No. 020 2001). properly subject to the 20% Final Tax as
provided in Section 27(D)(1) of the Tax
Code of 1997.
After the auction, RCBC which
participated on behalf of CODE-
NGO was declared as the winning On October 17, 2011, replying to an
bidder having tendered the lowest urgent query from the Bureau of
bids. Accordingly, on October 18, Treasury, the Bureau of Internal
2001, the Bureau of Treasury Revenue issued BIR Ruling No. DA
issued P35 billion worth of Bonds 378-2011 clarifying that the final
at yield-to-maturity of 12.75% to withholding tax due on the discount
RCBC for approximately P10.17 or interest earned on the PEACe
billion, resulting in a discount of Bonds should "be imposed and
approximately P24.83 billion. withheld not only on RCBC/CODE
NGO but also [on] all subsequent
holders of the Bonds." Also on the
RCBC Capital entered into an
same date, petitioners filed a
underwriting Agreement with
petition for certiorari, prohibition,
CODE-NGO, whereby RCBC
and/or mandamus (with urgent
Capital was appointed as the Issue
Manager and Lead Underwriter for application for a temporary
restraining order and/or writ of
the offering of the PEACe Bonds.
preliminary injunction) before this
RCBC Capital sold the Government
court.
Bonds in the secondary market for
an issue price of
P11,995,513,716.51. Petitioners
October 18, 2011, this court issued
purchased the PEACe Bonds on
a temporary restraining order
different dates.
(TRO)"enjoiningthe

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 implementation of BIR Ruling No. 1. The PEACEBOND Ruling which
370-2011 against the [PEACe held that all treasury bonds are
Bonds,] subject to the condition deposit substitutes is erroneous. The
that the 20% final withholding tax tax ruling disregards the 20-lender
on interest income there from shall rule requirement before a borrowing
be withheld by the petitioner banks may be considered a public
and placed in escrow pending borrowing, hence amounting to the
resolution of [the] petition." issuance of a deposit substitute.

On October 28, 2011, RCBC and 2. The gains referred to in Section 32

RCBC Capital filed a motion for (B) (7) (g) of the Tax Code does
leave of court to intervene and to not include interest which
admit petition-in-intervention dated represents forebearance for the use
October 27, 2011, which was of money. The said gains are (i)
granted by this court on November gains realized from trading of the
15, 2011. bonds before their maturity date
and (ii) the redemption gains of the
On November 27, 2012, petitioners last bondholder who acquired the
filed their "Manifestation with bond at the secondary trading. The
Urgent Reiterative Motion to gains of the last bondholders of the
direct respondents to comply with PEACEBONDS on redemption,
the Temporary Restraining Order. thereof, are redemption gains and
not interest income.
ISSUE:
3. The phrase at any one time in the
Whether or not the PEACe Bonds
below quoted definition of a
are "deposit substitutes" and thus subject
deposit substitute in Section 22 (Y)
to 20% final withholding tax under the
of the Tax Code cannot be given a
1997 National Internal Revenue Code?
Related to this question is the interpretation of restrictive meaning. Section 22 (Y)
the phrase "borrowing from twenty (20) or states:
more individual or corporate lenders at any
one time" under Section 22(Y) of the 1997 The term 'deposit substitutes' shall mean
National Internal Revenue Code, particularly an alternative form of obtaining funds
on whether the reckoning of the 20 lenders from the public (the term 'public' means
includes trading of the bonds in the secondary borrowing from twenty (20) or more
market. individual or corporate lenders at any one
time), other than deposits, through the
issuance, endorsement, or acceptance of
RULING: debt instruments for the borrower's own
account, for the purpose of relending or
The Court ordered the Bureau of purchasing of receivables and other
Treasury (BTr) to immediately release obligations, or financing their own needs
and pay to the eight (8) redeeming or the needs of their agent or dealer.
bondholders of the PEACEBONDS, the
amount corresponding to 20% final The phrase at any one time
withholding tax (FWT) that was applies to the primary and
withheld by the BTr upon the redemption secondary market of debt
of the bonds pursuant to BIR Ruling No. instruments.
370-2011 (PEACEBOND Ruling).
4. It may not be concluded that the
The salient points of the Decision are PEACEBONDS had been issued to
as follows: one singular lender (underwriter)

3
 because the underwriting gas turbine and other power
agreement and term sheet of the generating plants and related
underwriter reflected that there facilities for conversion into
were several undisclosed number electricity, coal, distillate and
of investors to whom the other fuel provided by and under
PEACEBONDS were distributed. contract with the Government,
or any subdivision,
5. Should it be found that the instrumentality or agency
underwriter sold the thereof, or any government-
PEACEBONDS to more than 20 owned or controlled corporations
lenders, the ten-year prescriptive or any entity engaged in the
period for making an assessment development, supply or
under Section 222 of the Tax Code, distribution of energy.
and not the general three-year
prescriptive period, shall apply. In The respondent filed its annual
such case, the appropriate FWT on income tax return (ITR) for
the interest income may still be calendar years 2002 and 2003 on
collected from the April 15, 2003 and April 15,
underwriter/lender. 2004, respectively, reflecting
overpaid income taxes or excess
creditable withholding taxes in
QUESTIONS: a.) Based on the case, what the amounts of P6,232,003.00
is the nature of the deposit substitutes? and P10,134,410.00 for taxable
Cite your legal basis. years 2002 and 2003,
respectively.
b.) If in case the underwriter sold the PEACe
Bonds to more than 20 lenders, what On March 22, 2005, the
prescriptive period for making a tax respondent filed an
assessment should be followed under administrative claim for refund
Section 222 of NIRC? Explain your answer. or issuance of tax credit
certificate with the Bureau of
Internal Revenue (BIR) in the
2.) REPUBLIC OF THE PHILIPPINES total amount of
represented by the COMMISSIONER P16,366,413.00, representing
OF INTERNAL REVENUE, Petitioner
the overpaid income tax or the
VS.
TEAM (PHILS.) ENERGY excess creditable withholding
CORPORATION (formerly MIRANT tax of the respondent for
(PHILS.) ENERGY CORPORATION), calendar years 2002 and 2003.
Respondent (G.R. No. 188016, January
14, 2015)
Due to the inaction of the BIR
and in order to toll the running of
FACTS: the two-year prescriptive period
for claiming a refund under
Respondent, a domestic Section 229 of the National
corporation, is primarily engaged in the Internal Revenue Code (NIRC)
business of developing, designing of 1997, the respondent filed a
,constructing, erecting, assembling, petition for review in the Court
commissioning, owning, operating, of Tax Appeals (CTA) on April
maintaining, rehabilitating, and managing
14, 2005. On May 15, 2008, the
CTA in Division

4
 rendered its decision in favor of taxable year is not equal to the total tax
the respondent. It ordered the due on the entire taxable income of that
year, the corporation shall either:
petitioner to refund or to issue a
tax credit certificate in favor of (A) Pay the balance of the tax still due;
the respondent. The CTA in or
Division found that the
respondent had signified in its (B) Carry over the excess credit; or
ITRs for the same years its intent
to have its excess creditable tax (C) Be credited or refunded withthe
withheld for calendar years 2002 excess amount paid, as the case may
be.
and 2003 be
refunded, and that the
respondents administrative and
ISSUE:
judicial claims for refund had
Whether or not the respondent
been timely filed within the two-
proved its entitlement to the refund?
year prescriptive period under
Section 204 (C) in relation to
Section 229 of the NIRC
RULING:

The court denied the petition for

The petitioner then filed a
review on certiorari.
motion for reconsideration, but
the CTA in Division denied the
The requirements for entitlement of
motion on September 5, 2008.
a corporate taxpayer for a refund or the
The petitioner brought a
issuance of tax credit certificate involving
petition for review before the
excess withholding taxes are as follows:
CTA En Banc. On April 15,
2009, the CTA En Banc
rendered a decision dismissing 1. That the claim for refund was
the Petition for Review. filed within the two-year
reglementary period pursuant to
The petitioner asserts the Section 229 of the NIRC;
necessity of submission of the
quarterly return of the 2. When it is shown on the ITR that
respondent to prove its the income payment received is
entitlement to the refund being declared part of the
pursuant to Sec. 76 of the NIRC taxpayers gross income; and
because such quarterly returns
would establish the correctness 3. When the fact of withholding is
of the total amount of payments established by a copy of the
made and the taxes due as withholding tax statement, duly
reported on the adjusted return at issued by the payor to the payee,
the end of the year. Petitioner has showing the amount paid and
brought this appeal. income tax withheld from that
amount.
Section 76. Final Adjusted Return-
Every corporation liable to tax under The court do not expound anymore
Section 27 shall file a final adjustment on the first requirement because even the
return covering the total taxable income petitioner does not contest that the
for the preceding calendar of fiscal
year. If the sum of the quarterly tax
respondent filed its administrative and
payments made during the said

5
judicial claim for refund within the QUESTION: Based on the case, when is
statutory period. the reckoning of the commencement of the
two-year period within which to file a
With regard to the second refund or tax credit of erroneously or
requirement, it is fundamental that the illegally collected taxes? Cite your legal
findings of fact by the CTA in Division are basis.
not to be disturbed without any showing of
grave abuse of discretion considering that 4.) CBK POWER COMPANY
the members of the Division are in the best LIMITED, Petitioner VS.
position to analyze the documents COMMISSIONER OF INTERNAL
presented by the parties. Consequently, we REVENUE, Respondent (G.R. Nos.
193383-84, January 14, 2015)
adopt the findings of the CTA in Division,
which the CTA En Banc cited, as follows: COMMISSIONER OF INTERNAL
REVENUE, Petitioner VS. CBK
that the total amount of Creditable POWER COMPANY
Withholding Tax per Annual ITRs for LIMITED, Respondent (G.R. Nos.
calendar years ended December 31, 2002 193407-08)
and December 31, 2003 agrees with the
total amount of Creditable Withholding FACTS:
Tax presented on petitioners Schedule of
Creditable Withholding Tax Certificates CBK Power is a limited partnership
for the calendar years ended December 31, duly organized and existing under
2002 and December 31, 2003. the laws of the Philippines, and
primarily engaged in the
With respect to the third development and operation of the
requirement, the respondent proved that it Caliraya, Botocan, and Kalayaan
had met the requirement by presenting the
10 certificates of creditable taxes withheld
at source. The petitioner did not challenge
the respondents compliance with the
requirement.

When the respondent was able to

establish prima facie its right to the refund
by testimonial and object evidence, the
petitioner should have presented rebuttal
evidence to shift the burden of evidence
back to the respondent. Indeed, the
petitioner ought to have its own copies of
the respondents quarterly returns on file,
on the basis of which it could rebut the
respondent's claim that it did not carry
over its unutilized and excess creditable
withholding taxes for the immediately
succeeding quarters. The BIR's failure to
present such vital document during the
trial in order to bolster the petitioner's
contention against the respondent's claim
for the tax refund was fatal.

6
hydro electric power generating plants in the Bureau of Internal Revenue
Laguna (CBK Project). (BIR): (a) fifteen percent (15%) for
Fortis-Belgium, Fortis-Netherlands,
To finance the CBK Project, CBK
and Raiffesen Bank; and (b) twenty
Power obtained in August 2000 a
percent (20%) for Industrial Bank of
syndicated loan from several
Japan and Mizuho Bank.
foreign banks, i.e., BNP Paribas,
Dai-ichi Kangyo Bank, Limited,
BANK COUNTRY PREFERENTIA
Industrial Bank of Japan, Limited, OF L RATE
and Societe General (original RESIDENC UNDER THE
lenders), acting through an Inter- E RELEVANT
TAX TREATY
Creditor Agent, Dai-ichi Kangyo
Fortis Belgium 10% (Article
Bank, a Japanese bank that Bank 11[1], RP-Belgium
subsequently merged with the S.A./N.V. Tax Treaty)

Industrial Bank of Japan, Limited Industrial Japan 10% (Article

Bank of 11[3], RP-Japan
(Industrial Bank of Japan) and the Japan Tax Treaty)
Fuji Bank, Limited (Fuji Bank), Raiffesen Austria 10% (Article
with the merged entity being Zentral 11[3], RP-Japan
Bank Tax Treaty)
named as Mizuho Corporate Bank Osterreic
(Mizuho Bank). One of the merged h AG
banks, Fuji Bank, had a branch in Mizuho Japan 10% (Article
the Philippines, which became a Corporate 11[3], RP-Japan
Bank Tax Treaty)
branch of Mizuho Bank as a result
of the merger.
Certain portions of the loan were On April 14, 2003, CBK Power
subsequently assigned by the filed a claim for refund of its
original lenders to various other excess final withholding taxes
banks, including Fortis Bank allegedly erroneously withheld and
(Nederland) N.V. (Fortis- collected for the years 2001 and
Netherlands) and Raiffesen Zentral 2002 with the BIR Revenue Region
Bank Osterreich AG (Raiffesen No. 9. The claim for refund of
Bank). Fortis-Netherlands, in turn, excess final withholding taxes in
assigned its portion of the loan to 2003 was subsequently filed on
March 4, 2005.
Fortis Bank S.A./N.V. (Fortis-
Belgium), a resident of Belgium. CTA Case No. 6699 was filed by
Fortis Netherlands and Raiffesen CBK Power on June 6, 2003 seeking
Bank, on the other hand, are the refund of excess final
residents of Netherlands and withholding tax in the total amount
Austria, respectively. of P6,393,267.20 covering the year
2001 with respect to interest income
In February 2001, CBK Power
derived by [Fortis-Belgium],
borrowed money from Industrial
Industrial Bank of Japan, and
Bank of Japan, Fortis-Netherlands,
[Raiffesen Bank].
Raiffesen Bank, Fortis-Belgium, and
Mizuho Bank for which it remitted CTA Case No. 6884 was filed by
interest payments from May 2001 to CBK Power on March 5, 2004
May 2003. It allegedly withheld final seeking for the refund of the amount
taxes from said payments based on of P8,136,174.31 covering the year
the following rates, and paid the 2002 with respect to interest income
same to the Revenue District Office derived by [Fortis- Belgium],
No. 55 of

7
 Industrial Bank of Japan, [Mizuho No. 469. Said petitions were
Bank], and [Raiffesen Bank]. subsequently consolidated.
CTA Case No. 7166 was filed by CBK Power raised the lone issue of
CBK [Power] on March 9, 2005 whether or not an ITAD ruling is
seeking for the refund of [the required before it can avail of the
amount of] P1,143,517.21covering preferential tax rate. On the other
the year 2003 with respect to hand, the Commissioner claimed
interest income derived by [Fortis that CBK Power failed to exhaust
Belgium], and [Raiffesen Bank]. administrative remedies when it
filed its petitions before the CTA
CTA Case Nos. 6699 and 6884 were
First Division, and that said
consolidated first on June 18, 2004.
petitions were not filed within the
Subsequently, however, all three
two-year prescriptive period for
cases CTA Case Nos. 6699, 6884,
initiating judicial claims for refund.
and 7166 were consolidated in a
Resolution dated August 3, 2005. The CTA En Banc Ruling: The
CTA En Banc affirmed the ruling of
The CTA First Division Rulings:
the CTA First Division that a prior
In a Decision dated August 28,
application with the ITAD is indeed
2008, the CTA First Division
required by Revenue Memorandum
granted the petitions and ordered
Order (RMO) 1-2000, which
the refund of the amount of
15,672,958.42 upon a finding that administrative issuance has the force
the relevant tax treaties were and effect of law and is just as
applicable to the case. The CTA binding as a tax treaty.
First Division categorically CBK Powers motion for partial
declared in the August 28, 2008 reconsiderationandthe
Decision that the required Commissioners motion for
International Tax Affairs Division reconsideration of the foregoing
(ITAD) ruling was not a condition Decision were both denied in a
sine qua non for the entitlement of Resolution dated August 16, 2010
the tax relief sought by CBK for lack of merit; hence, the present
Power, however, upon motion for consolidated petitions.
reconsideration filed by the
Commissioner, the CTA First ISSUE:
Division amended its earlier
decision by reducing the amount of Whether or not the BIR may add a
the refund from P15,672,958.42 to requirement prior application for an ITAD
P14,835,720.39 on the ground that ruling that is not found in the income tax
CBK Power failed to obtain an treaties signed by the Philippines before a
ITAD ruling with respect to its taxpayer can avail of preferential tax rates
transactions with Fortis- under said treaties?
Netherlands.
CBK Power elevated the matter to RULING:
the CTA En Banc on petition for
review, docketed as C.T.A E.B. No. - G.R. Nos. 193383-84: The Court
494. The Commissioner likewise holds that the CTA En Banc committed
filed his own petition for review, reversible error in affirming the reduction
which was docketed as C.T.A. E.B. of the amount of refund to CBK Power
from 15,672,958.42 to P14,835,720.39 to
exclude its transactions with Fortis-

8
Netherlands for which no ITAD ruling was Commissioner argues that the failure
obtained. CBK Powers petition in G.R. on the part of CBK Power to give him a
Nos. 193383-84 is therefore granted. reasonable time to act on said claim is
violative of the doctrines of exhaustion of
The obligation to comply with a tax administrative remedies and of primary
treaty must take precedence over the jurisdiction. CBK Power maintains that it
objective of RMO No. 1-2000. Logically, would be prejudicial to wait for the
noncompliance with tax treaties has negative Commissioners ruling before it files its
implications on international relations, and judicial claim since it only has 2 years from
unduly discourages foreign investors. While the payment of the tax within which to file
the consequences sought to be prevented by both its administrative and judicial claims.
RMO No. 1-2000 involve an administrative
procedure, these may be remedied through DISPOSITIVE: The petition in G.R. Nos. 193383-
other system management processes, e.g., 84 is GRANTED. The Decision dated March 29,
the imposition of a fine or penalty. But we 2010 and the Resolution dated August 16, 2010 of
the Court of Tax Appeals (CTA) En Banc in C.T.A.
cannot totally deprive those who are entitled E.B. Nos. 469 and 494 are hereby REVERSED and
to the benefit of a treaty for failure to strictly SET ASIDE and a new one entered
comply with an administrative issuance REINSTATING the Decision of the CTA First
requiring prior application for tax treaty Division dated August 28, 2008 ordering the refund
relief. in favor of CBK Power Company Limited the
amount of Pl5,672,958.42 representing its excess
final withholding taxes for the taxable years 2001
CBK Power could not have applied to 2003, and the petition in G.R. Nos. 193407-08 is
for a tax treaty relief 15 days prior to its DENIED for lack of merit.
payment of the final withholding tax on 6.) WINEBRENNER & IIGO
the interest paid to its lenders precisely INSURANCE BROKERS,
because it erroneously paid said tax on the INC., Petitioner VS.
basis of the regular rate as prescribed by COMMISSIONER OF INTERNAL
the NIRC, and not on the preferential tax REVENUE, Respondent (G.R. No.
rate provided under the different treaties. 206526, January 28, 2015)
As stressed by the Court, the prior
application requirement under RMO No. FACTS:
1-2000 then becomes illogical.
On April 15, 2004, petitioner filed
Since CBK Power had requested for its Annual Income Tax Return for
confirmation from the ITAD on June 8, 2001 CY 2003.
and October 28, 2002 before it filed on April
About two years thereafter or on
14, 2003 its administrative claim for refund
April 7, 2006, petitioner applied
of its excess final withholding taxes, the
for the administrative tax
same should be deemed substantial
credit/refund claiming entitlement
compliance with RMO No. 1-2000.
to the refund of its excess or
unutilized creditable withholding
- G.R. Nos. 193407-08: The petition
tax (CWT) for CY 2003, by filing
of the Commissioner in G.R. Nos. 193407- BIR Form No. 1914 with the
08 is denied for lack of merit. CBK Powers Revenue District Office No. 50 of
administrative and judicial claims for refund the Bureau of Internal Revenue
of its excess final withholding taxes (BIR).
covering taxable year 2003 were filed within
the two-year prescriptive period. There being no action taken on the
said claim, a petition for review was
filed by petitioner before the CTA on
April 11, 2006. The case was
docketed as CTA Case No. 7440 and

9
was raffled to the Special First
Division (CTA Division). CTA
Division partially granted
petitioners claim for refund of
excess and unutilized CWT for CY

10
2003 in the reduced amount of RULING:
P2,737,903.34 in its April 13, 2010
Decision (original decision). CIR is ordered to REFUND to
On July 27, 2011, the CTA-Division
petitioner the amount of P2,737,903.34 as
reversed itself. In an Amended
excess creditable withholding tax paid for
Decision, it denied the entire claim
taxable year 2003. The April 13, 2010
of petitioner. It reasoned out that
Decision of the Court of Tax Appeals
petitioner should have presented as Special First Division is REINSTATED.
evidence its first, second and third
quarterly Income Tax Returns (ITRs) A taxpayer who seeks a refund of
for the year 2004 to prove that the excess and unutilized CWT must:
unutilized CWT being claimed had
not been carried over to the 1) File the claim with the CIR
succeeding quarters. within the two year period from
the date of payment of the tax;
Petitioner elevated the case to the
CTA En Banc praying for the 2) Show on the return that the
reversal of the Amended Decision of income received was declared
the CTA Division. The CTA-En as part of the gross income; and
Banc affirmed the Amended
Decision of the CTA-Division. It 3) Establish the fact of
stated that before a cash refund or an withholding by a copy of a
issuance of tax credit certificate for statement duly issued by the payor
unutilized excess tax credits could be to the payee showing the amount
granted, it was essential for paid and the amount of tax
petitioner to establish and prove, by withheld.
presenting the quarterly ITRs of the
succeeding years, that the excess The irrevocability rule under
CWT was not carried over to the Section 76 of the NIRC means that once
succeeding taxable quarters an option, either for refund or issuance of
considering that the option to carry tax credit certificate or carry-over of CWT
over in the succeeding taxable has been exercised, the same can no longer
quarters could not be modified in be modified for the succeeding taxable
the final adjustment returns (FAR), years.
because petitioner did not present
the first, second and third quarterly The fact of having carried over
ITRs for CY 2004, despite having petitioners 2003 excess credits to
offered and submitted the Annual succeeding taxable year is in issue.
ITR/FAR for the same year, the According to the CTA-En Banc and the
CTA-En Banc stated that the CIR, the only evidence that can
petitioner failed to discharge its sufficiently show that carrying over has
burden, hence, no refund could be been made is to present the quarterly ITRs.
granted. Some members of this Court adhere to the
same view. The Court however cannot.
ISSUE:
Proving that no carry-over has
Whether or not the submission and been made does not absolutely require the
presentation of the quarterly ITRs of the presentation of the quarterly ITRs.
succeeding quarters of a taxable year is
indispensable in a claim for refund? Requiring that the ITR or the FAR
of the succeeding year be presented to the

11
BIR in requesting a tax refund has no basis records, the burden of proof of establishing
in law and jurisprudence. the propriety of the claim for refund has
been sufficiently discharged. Hence, the
Section 76 of the Tax Code does not grant of refund is proper.
mandate it. The law merely requires the
filing of the FAR for the preceding not the The Court does not, and cannot,
succeeding taxable year. Indeed, any however, grant the entire claimed amount
refundable amount indicated in the FAR of as it finds no error in the original decision
the preceding taxable year may be credited of the CTA Division granting refund to the
against the estimated income tax liabilities reduced amount of P2,737,903.34. This
for the taxable quarters of the succeeding finding of fact is given respect, if not
taxable year. However, nowhere is there finality, as the CTA, which by the very
even a tinge of a hint in any provisions of nature of its functions of dedicating itself
the [NIRC] that the FAR of the taxable year exclusively to the consideration of the tax
following the period to which the tax credits problems has necessarily developed an
are originally being applied should also be expertise on the subject.
presented to the BIR. What Section 76
requires, just like in all civil cases, is to QUESTIONS: a.) What is the nature of
prove the prima facie entitlement to a claim, the Final Adjustment Return (FAR)?
including the fact of not having carried over Cite your legal basis.
the excess credits to the subsequent quarters
or taxable year. It does not say that to prove b.) What are the two options available for
such a fact, succeeding quarterly ITRs are taxpayer to settle his income tax liabilities
absolutely needed. if there is excess quarterly income tax
payments? Explain each option.
The absence of any amount written
in the Prior Year excess Credit Tax c.) Are Income Tax Returns (ITRs) the
Withheld portion of petitioners 2004 only evidence that can sufficiently show
annual ITR clearly shows that no prior that carrying over the excess credit has
excess credits were carried over in the first been made? Explain your answer.
four quarters of 2004. And since petitioner
was able to sufficiently prove that excess February 2015
tax credits in 2003 were not carried over to
taxable year 2004 by leaving the item 1.) CHINA BANKING
"Prior Years Excess Credits" as blank in CORPORATION, Petitioner VS.
its 2004 annual ITR, then petitioner is COMMISSIONER OF INTERNAL
REVENUE, Respondent (G.R. No.
entitled to a refund. Unfortunately, the 172509, February 4, 2015)
CTA, in denying entirely the claim, merely
relied on the absence of the quarterly ITRs FACTS:
despite being able to verify the truthfulness
of the declaration that no carry over was
Petitioner, China Banking
indeed effected by simply looking at the
Corporation (CBC) is a universal
2004 annual ITR.
bank duly organized and existing
under the laws of the Philippines.
Verily, with the petitioner having For the taxable years 1982 to 1986,
complied with the requirements for refund, CBC was engaged in transactions
and without the CIR showing contrary involving sales of foreign exchange
evidence other than its bare assertion of the to the Central Bank of the
absence of the quarterly ITRs, copies of Philippines (now Bangko Sentral
which are easily verifiable by its very own ng Pilipinas), commonly known as

12
 SWAP transactions. Petitioner did Whether or not the right of the BIR
not file tax returns or pay tax on the to collect the assessed DST from CBC is
SWAP transactions for those barred by prescription?
taxable years.
Petitioner received an assessment
from the Bureau of Internal
Revenue (BIR) finding CBC liable RULING:
for deficiency documentary stamp
tax (DST) on the sales of foreign The court grants the Petition on
bills of exchange to the Central the ground that the right of the BIR to
Bank. collect the assessed DST is barred by the
statute of limitations.
On 8 May 1989, petitioner, through
its vice-president, sent a letter of The Bureau of Internal Revenue
protest to the BIR. On 6 December (BIR) issued the assessment for deficiency
2001, more than 12 years after the DST on 19 April 1989, when the
filing of the protest, the applicable rule was Section 319(c) of the
Commissioner of Internal Revenue National Internal Revenue Code of 1977,
(CIR) rendered a decision as amended. In that provision, the time
reiterating the deficiency DST limit for the government to collect the
assessment and ordered the assessed tax is set at three years, to be
payment thereof plus increments reckoned from the date when the BIR
within 30 days from receipt of the mails/releases/sends the assessment notice
Decision. to the taxpayer. Further, Section 319(c)
CBC filed a Petition for Review states that the assessed tax must be
with the CTA. The CTA Second collected by distraint or levy and/or court
Division denied the Petition of proceeding within the three-year period.
CBC. The CTA ruled that a SWAP
arrangement should be treated as a In this case, the records do not
telegraphic transfer subject to show when the assessment notice was
documentary stamp tax. mailed, released or sent to CBC.
Nevertheless, the latest possible date that
Petitioner appealed to the CTA En the BIR could have released, mailed or
Banc. The appellate tax court, sent the assessment notice was on the same
however, dismissed the Petition for date that CBC received it, 19 April 1989.
Review in a Decision dated 1 Assuming therefore that 19 April 1989 is
December 2005. CBC filed a Motion the reckoning date, the BIR had three years
for Reconsideration on 21 December to collect the assessed DST. However, the
2005, but it was denied in a 20 records of this case show that there was
March 2006 Resolution. The neither a warrant of distraint or levy served
taxpayer now comes to this Court on CBC's properties nor a collection case
with a Rule 45 Petition, reiterating filed in court by the BIR within the three-
the arguments it raised at the CTA year period.
level and invoking for the first time
the argument of prescription.
The attempt of the BIR to collect
the tax through its Answer with a demand
ISSUE: for CBC to pay the assessed DST in the
CTA on 11 March 2002 did not comply
with Section 319(c) of the 1977 Tax Code,
as amended. The demand was made almost

13
thirteen years from the date from which the the case, it cannot be said that the
prescriptive period is to be reckoned. Thus, the running of the three-year prescriptive
attempt to collect the tax was made way beyond period was effectively suspended.
the three-year prescriptive period.
In this case, petitioner may
The running of the statute of have raised the question of prescription
limitations was not suspended by the only on appeal to this Court. The BIR
request for reinvestigation. could have crushed the defense by the
mere invocation of the rule against
The fact that the taxpayer in this case setting up the defense of prescription
may have requested a reinvestigation did not only at the appeal stage. The
toll the running of the three-year prescriptive government, however, failed to do so.
period. Section 320 of the 1977 Tax Code On the contrary, the BIR was silent
states: despite having the opportunity to
invoke the bar against the issue of
Sec. 320. Suspension of running of prescription.
statute.The running of the statute of
limitations provided in Sections 318 or 319 on A new ruling is entered
the making of assessment and the beginning of DENYING respondent's claim for
distraint or levy or a proceeding in court for deficiency DST in the amount of
collection, in respect of any deficiency, shall be P11,383,165.50.
suspended for the period during which the
Commissioner is prohibited from making the QUESTIONS: a.) What is the nature
assessment or beginning distraint or levy or a of the Documentary Stamp Tax?
proceeding in court and for sixty days Cite your legal basis.
thereafter; when the taxpayer requests for a re-
investigation which is granted by the b.) Who are the persons liable to pay
Commissioner; when the taxpayer cannot be the Documentary Stamp Tax? Cite
located in the address given by him in the return your legal basis.
filed upon which a tax is being assessed or
collected: Provided, That if the taxpayer informs June 2015
the Commissioner of any change in address, the
running of the statute of limitations will not be 1.) MACTAN-CEBU
suspended; when the warrant of distraint and INTERNATIONAL
levy is duly served upon the taxpayer, his AIRPORT
AUTHORITY
authorized representative, or a member of his
(MCIAA), Petitioner VS.
household with sufficient discretion, and no CITY
property could be located; and when the OF LAPU-LAPU AND
taxpayer is out of the Philippines. ELENA
T. PACALDO,
Respondents (G.R. No.
A request for reinvestigation alone will 181756, June 15, 2015)
not suspend the statute of limitations.
Two things must concur: there must be a FACTS:
request for reinvestigation and the CIR
Petitioner Mactan-Cebu
must have granted it. In the present case,
there is no showing from the records that the International Airport Authority
CIR ever granted the request for (MCIAA) was created by Congress
reinvestigation filed by CBC. That being on July 31, 1990 under Republic
Act No. 6958 to "undertake the
economical, efficient and effective
control, management and

14
 supervision of the Mactan Upon its creation, petitioner enjoyed
International Airport In the exemption from realty taxes under
the following provision of Republic
Province of Cebu and the Lahug
Act No. 6958: Section 14.
Airport in Cebu City and such Tax Exemptions- The Authority shall be
other airports as may be established exempt from realty taxes imposed by the
National Government or any of its political
in the Province of Cebu." It is
subdivisions, agencies and
represented in this case by the instrumentalities: Provided, that no tax
Office of the Solicitor General. exemption herein granted shall extend to
any subsidiary which may be organized by
the Authority.
Respondent City of Lapu-Lapu is a
local government unit and political On September 11, 1996, however,
subdivision, created and existing this Court rendered a decision in
under its own charter with capacity Mactan-Cebu International Airport
to sue and be sued. Respondent Authority v. Marcos4 (the 1996
Elena T. Pacaldo was impleaded in MCIAA case) declaring that upon
her capacity as the City Treasurer the effectivity of Republic Act No.
of respondent City. 7160 (The Local Government Code
of 1991), petitioner was no longer
exempt from real estate taxes.

On January 7, 1997, respondent

City issued to petitioner a Statement
of Real Estate Tax assessing the lots
comprising the Mactan
International Airport in the amount
of P162,058,959.52. Petitioner
complained that there were
discrepancies in said Statement of
Real Estate Tax.

Upon request of petitioners

General Manager, the Secretary of
the Department of Justice (DOJ)
issued Opinion No. 50, Series of
1998,8 and we quote the pertinent
portions of said Opinion below:

You further state that among the

real properties deemed transferred to
MCIAA are the airfield, runway, taxiway
and the lots on which the runway and
taxiway are situated, the tax declarations of
which were transferred in the name of the
MCIAA. In 1997, the City of Lapu-Lapu
imposed real estate taxes on these properties
invoking the provisions of the Local
Government Code. It is your view that these
properties are not subject to real

15
 property tax because they are exclusively However, upon motion of
used for airport purposes. You said that the respondents, the RTC lifted the writ
runway and taxiway are not only used by the
commercial airlines but also by the
of preliminary injunction. The RTC
Philippine Air Force and other government reasoned as follows:
agencies. As such and in conjunction with
the above interpretation of Section 15 of The respondent City, in the
R.A. No. 6958, you believe that these course of the hearing of its motion,
properties are considered owned by the presented to this Court a certified copy of
Republic of the Philippines. The query is its Ordinance No. 44 (Omnibus Tax
resolved in the affirmative. The properties Ordinance of the City of Lapu-Lapu),
used for airport purposes (i.e. airfield, Section 25 whereof authorized the
runway, taxiway and the lots on which the collection of a rate of one and one-half (1
runway and taxiway are situated) are owned 1/2) [per centum] from owners, executors
by the Republic of the Philippines. or administrators of any real estate lying
within the jurisdiction of the City of Lapu-
Lapu, based on the assessed value as
The City Assessor, therefore, is
shown in the latest revision.
hereby instructed to transfer the
assessment of the subject airfield, It would seem from the foregoing
runway, taxiway and the lots on provisions that once the taxpayer fails to
redeem within the one-year period,
which the runway and taxiway are ownership fully vests on the local
situated, from the "Taxable Roll" to government unit concerned. Thus, when in
the "Exempt Roll" of real the present case petitioner failed to redeem
the parcels of land acquired by respondent
properties. City, the ownership thereof became fully
vested on respondent City without the latter
having to perform any other acts to perfect
Respondent City Treasurer Elena its ownership. Corollary thereto,
Pacaldo sent petitioner a Statement ownership on the part of respondent City
of Real Property Tax Balances up to has become a fait accompli.
the year 2002. Petitioner claimed
WHEREFORE, in the light of the
that the statement again included the foregoing considerations, respondents
lots utilized solely and exclusively motion for reconsideration is granted, and
the order of this Court dated December 28,
for public purpose such as the
2004 is hereby reconsidered.
airfield, runway, and taxiway and the Consequently, the writ of preliminary
lots on which these are built. injunction issued by this Court is hereby
lifted.

Petitioner filed a petition for Court of Appeals promulgated the

prohibition with the Regional Trial questioned Decision on October 8,
Court (RTC) of Lapu-Lapu City 2007, holding that petitioner is a
with prayer for the issuance of a government-owned or controlled
temporary restraining order (TRO) corporation and its properties are
subject to realty tax. Also, the
and/or a writ of preliminary
Court of Appeals held that
injunction. Branch 53 of RTC petitioners airport terminal
Lapu-Lapu City then issued a 72- building, airfield, runway, taxiway,
hour TRO. The RTC issued an and the lots on which they are
Order on December 28, 2004 situated are not exempt from real
granting petitioners application for estate tax reasoning as follows:
a writ of preliminary injunction.
Under the Local Government Code,
enacted pursuant to the constitutional

16
 mandate of local autonomy, all natural However, portions of the Airport
and juridical persons, including Lands and Buildings that MIAA leases to
government-owned or controlled
corporations (GOCCs), instrumentalities
private entities are not exempt from real
and agencies, are no longer exempt from estate tax. For example, the land area
local taxes even if previously granted an occupied by hangars that MIAA leases to
exemption. The only exemptions from private corporations is subject to real estate
local taxes are those specifically provided tax. In such a case, MIAA has granted the
under the Code itself, or those enacted
through subsequent legislation.
beneficial use of such land area for a
consideration to a taxable person and
therefore such land area is subject to real
ISSUE:
estate tax.
Whether or not Petitioner is a
Government Instrumentality exempt from To reiterate, petitioner MCIAA is
paying Real Property Taxes? vested with corporate powers but it is not a
stock or non-stock corporation, which is a
RULING: necessary condition before an agency or
instrumentality is deemed a government-
owned or controlled corporation. Like
The petition is
MIAA, petitioner MCIAA has capital
GRANTED.
under its charter but it is not divided into
Petitioner is an instrumentality of the
shares of stock. It also has no stockholders
government; thus, its properties actually,
or voting shares.
solely and exclusively used for public
purposes, consisting of the airport terminal
building, airfield, runway, taxiway and the We hereby adopt and apply to
lots on which they are situated, are not petitioner MCIAA the findings and
subject to real property tax and respondent conclusions of the Court in the 2006MIAA
City is not justified in collecting taxes case, and we quote: To summarize, MIAA
from petitioner over said properties. The is not a government-owned or controlled
2006 MIAA case governs. A government corporation under Section 2(13) of the
instrumentality like MIAA falls under Introductory Provisions of the
Section 133(o) of the Local Government Administrative Code because it is not
Code, which states: organized as a stock or non-stock
corporation. Neither is MIAA a
SEC. 133. Common Limitations on the government-owned or controlled
Taxing Powers of Local Government Units. - corporation under Section 16, Article XII
Unless otherwise provided herein, the exercise of of the 1987 Constitution because MIAA is
the taxing powers of provinces, cities, not required to meet the test of economic
municipalities, and barangays shall not extend to
viability. MIAA is a government
the levy of the following:
instrumentality vested with corporate
(o) Taxes, fees or charges of any kind on powers and performing essential public
the National Government, its agencies and services pursuant to Section 2(10) of the
instrumentalities and local government units. Introductory Provisions of the
Administrative Code. As a government
There is no question, therefore, that instrumentality, MIAA is not subject to any
unless the Airport Lands and Buildings are kind of tax by local governments under
withdrawn by law or presidential Section 133(o) of the Local Government
proclamation from public use, they are Code. The exception to the exemption in
properties of public dominion, owned by Section 234(a) does not apply to MIAA
the Republic and outside the commerce of because MIAA is not a taxable entity under
man. the Local Government Code. Such

17
exception applies only if the beneficial use of in the total amount of
real property owned by the Republic is given P238,545,052.38 inclusive of
to a taxable entity. surcharges; (b) deficiency onshore
tax for the taxable year 1996 in the
QUESTIONS: a.) What is the nature of the total amount of P997,333.89
Corporate Return? Cite your legal basis. inclusive of surcharges and interest;
and (c) deficiency withholding tax
b.) Can local governments tax the national on compensation for the taxable
government, its agencies, and years 1996 and 1997 in the total
instrumentalities? Explain your answer. amount of P564,542.67 inclusive of
interest. The Resolution denied ING
12.) ING BANK N.V., ENGAGED IN Bank's Motion for Reconsideration.
BANKING OPERATIONS IN
THE PHILIPPINES AS ING ING Bank filed a Manifestation and
BANK N.V. MANILA
BRANCH, Petitioner VS.
Motion stating that it availed itself of
COMMISSIONER OF the government's tax amnesty
INTERNAL program under Republic Act No.
REVENUE, Respondent (G.R. 9480 with respect to its deficiency
No. 167679, July 22, 2015) documentary stamp tax and
deficiency onshore tax liabilities.
FACTS:
ING Bank "paid the deficiency
This is a Petition for Review assessments for the compromise
appealing the April 5, 2005 penalty, 1997 deficiency
Decision of the Court of Tax documentary stamp tax and 1997
Appeals En Banc, which in turn deficiency final tax in the
affirmed the August 9, 2004 respective amounts of P1,000.00,
Decision and November 12, 2004 P1,000.00 and P75,013.25 [the
Resolution of the Court of Tax original amount of P73,752.47 plus
Appeals Second Division. The additional interest]."ING Bank,
August 9, 2004 Decision held however, "protested [on the same
petitioner ING Bank, N.V. Manila day] the remaining ten (10)
Branch (ING Bank) liable for (a) deficiency tax assessments in the
deficiency documentary stamp tax total amount of P672,576,939.18."
for the taxable years 1996 and 1997
ING Bank filed a Petition for
Review before the Court of Tax
Appeals. The Petition was filed to
seek "the cancellation and
withdrawal of the deficiency tax
assessments for the years 1996 and
1997, including the alleged
deficiency documentary stamp tax
on special savings accounts,
deficiency onshore tax, and
deficiency withholding tax on
compensation.

18
 Court of Tax Appeals Second
Division rendered its Decision, 2. Whether or not petitioner
with the following disposition: ING Bank is liable for deficiency
withholding tax on accrued bonuses for the
WHEREFORE, the assessments for taxable years 1996 and 1997?
1996 and 1997 deficiency income tax, 1996
and 1997 deficiency branch profit remittance
tax and 1997 deficiency documentary stamp
RULING:
tax on IBCLs exceeding five days are hereby
CANCELLED and WITHDRAWN. However, 1. The assessments with respect to
the assessments for 1996 and 1997 deficiency petitioner ING Bank's liabilities for
withholding tax on compensation, 1996 deficiency documentary stamp taxes on its
deficiency onshore tax and 1996 and 1997
deficiency documentary stamp tax on special special savings accounts for the taxable
savings accounts are hereby UPHELD. years 1996 and 1997 and deficiency tax on
onshore interest income under the foreign
Both the Commissioner of currency deposit system for taxable year
Internal Revenue and ING Bank filed 1996 are hereby set aside solely in view of
their respective Motions for petitioner ING Bank's availment of the tax
Reconsideration. Both Motions were amnesty program under Republic Act No.
denied through the Second Division's 9480.
Resolution.
Petitioner ING Bank showed that it
ING Bank filed its appeal complied with the requirements set forth
before the Court of Tax Appeals En under Republic Act No. 9480. Respondent
Banc. The Court of Tax Appeals En Commissioner of Internal Revenue never
Banc denied due course to ING Bank's questioned or rebutted that petitioner ING
Petition for Review and dismissed the Bank fully complied with the requirements
same for lack of merit. for tax amnesty under the law. Moreover,
the contestability period of one (1) year
On December 20, 2007, ING from the time of petitioner ING Bank's
Bank filed a Manifestation and Motion availment of the tax amnesty law on
informing this court that it had availed December 14, 2007 lapsed.
itself of the tax amnesty authorized and Correspondingly, it is fully entitled to the
granted under Republic Act No. 9480 immunities and privileges mentioned
covering "all national internal revenue under Section 6 of Republic Act No. 9480:
taxes for the taxable year 2005 and
prior years, with or without SEC. 6. Immunities and Privileges. -
assessments duly issued therefore, that Those who availed themselves of the tax
have remained unpaid as of December amnesty under Section 5 hereof and have fully
complied with all its conditions shall be entitled
31, 2005. ING Bank stated that it filed
to the following immunities and privileges:
before the Bureau of Internal Revenue
its Notice of Availment of Tax a. The taxpayer shall be immune from the
Amnesty under Republic Act No. 9480 payment of taxes, as well as addition
on December 14, 2007. thereto, and the appurtenant civil, criminal
or administrative penalties under the
ISSUE: National Internal Revenue Code of 1997, as
amended, arising from, the failure to pay
any and all internal revenue taxes for
1. Whether or not petitioner taxable year 2005 and prior years.
ING Bank may validly avail itself of the
tax amnesty granted by Republic Act No. b. The taxpayer's Tax Amnesty Returns and
9480? And the SALN as of December 31, 2005 shall
not be admissible as evidence in all

19
 proceedings that pertain to taxable year on compensation for the respective years
2005 and prior years, insofar as such of 1996 and 1997.
proceedings relate to internal revenue
taxes, before judicial, quasi-judicial or
administrative bodies in which he is a Under the National Internal
defendant or respondent, and except for Revenue Code, every form of compensation
the purpose of ascertaining the networth for personal services is subject to income tax
beginning January 1. 2006, the same shall and, consequently, to withholding tax. The
not be examined, inquired or looked into
by any person or government office. term "compensation" means all
However, the taxpayer may use this as a remunerations paid for services performed
defense, whenever appropriate, in cases by an employee for his or her employer,
brought against him. whether paid in cash or in kind, unless
specifically excluded under Sections 32(B)
c. The books of accounts and other records
of the taxpayer for the years covered by
and 78(A) of the 1997 National Internal
the tax amnesty availed of shall not be Revenue Code. The name designated to the
examined: Provided, That the remuneration for services is immaterial.
Commissioner of Internal Revenue may Thus, "salaries, wages, emoluments and
authorize in writing the examination of the honoraria, bonuses, allowances (such as
said books of accounts and other records
to verify the validity or correctness of a
transportation, representation, entertainment,
claim for any tax refund, tax credit (other and the like), [taxable] fringe benefits [,]
than refund or credit of taxes withheld on pensions and retirement pay, and other
wages), tax incentives, and/or exemptions income of a similar nature constitute
under existing laws. compensation income" that is taxable.

The documentary stamp tax and

onshore income tax are covered by the
tax amnesty program under Republic Petitioner ING Bank accrued or
Act No. 9480 and its Implementing recorded the bonuses as deductible expense
77 in its books. Therefore, its obligation to
Rules and Regulations. Moreover, as
to the deficiency tax on onshore withhold the related withholding tax due
interest income, it is worthy to state from the deductions for accrued bonuses
that petitioner ING Bank was assessed arose at the time of accrual and not at the
by respondent Commissioner of time of actual payment.
Internal Revenue, not as a withholding
agent, but as one that was directly Petitioner ING Bank already
liable for the tax on onshore interest recognized a definite liability on its part
income and failed to pay the same. considering that it had deducted as business
expense from its gross income the accrued
Considering petitioner ING Bank's bonuses due to its employees. Underlying its
tax amnesty availment, there is no accrual of the bonus expense was a
more issue regarding its liability for reasonable expectation or probability that the
deficiency documentary stamp taxes on bonus would be achieved. In this sense, there
its special savings accounts for 1996 was already a constructive payment for
and 1997 and deficiency tax on income tax purposes as these accrued
onshore interest income for 1996, bonuses were already allotted or made
including surcharge and interest. available to its officers and employees.

2. Petitioner is still liable for the QUESTIONS: a.) What is the nature of
amounts of P167,384.97 and P397,157.70 tax amnesty? Does Tax Amnesty have
representing deficiency withholding taxes prospective application? Cite your legal
basis.

20
 1997 Tax Code. The case was
b.) Are bonuses to employees allowable docketed as CTA Case No. 8246.
deductions from gross income? Explain
your answer. Respondent filed another judicial
claim for the issuance of a tax
13.) COMMISSIONER OF credit certificate in the amount of
INTERNAL P31,680,290.87, representing
REVENUE, Petitioner VS.
unutilized input taxes on its local
COURT OF TAX APPEALS purchases and importations of
AND CBK POWER goods other than capital goods,
COMPANY local purchases of services,
LIMITED, Respondents (G.R. including unutilized amortized
Nos. 203054-55, July 29, 2015) input taxes on capital goods
exceeding one million for the
period of April 1, 2009 to June 30,
FACTS: 2009, all attributable to the zero
rated sales for the same period. The
Respondent CBK Power Company case was docketed as CTA Case
Limited is a special purpose entity No. 8302.
engaged in all aspects of (1) design,
financing, construction, testing, Respondent filed a motion for
commissioning, operation, consolidation.
maintenance, management, and
ownership of Kalayaan II pumped
The CTA granted the motion for
storage hydroelectric power plant,
consolidation and set the pre-trial
the new Caliraya Spillway in
conference on November 3, 2011.
Laguna; and (2) the rehabilitation,
Atty. Mauricio failed to appear at
expansion,commissioning,
the scheduled pre-trial conference
operation, maintenance and as he was on leave for health
management of the Caliraya,
reasons from October to December
Botocan, and Kalayaan I 2011. The pretrial was reset to
hydroelectric power plants and December 1, 2011. Petitioner's
their related facilities in Laguna. counsel, Atty. Sandico, who was
then assigned to handle the
Respondent filed with the CTA a consolidated cases, filed his
judicial claim for the issuance of a consolidated pre-trial brief on
tax credit certificate in the amount of November 15, 2011. However, on
P17,784,968.91, representing the December 1, 2011 pre-trial
unutilized input taxes on its local conference, Atty. Sandico failed to
purchases and importations of goods appear, thus private respondent
other than capital goods, local moved that petitioner be declared
purchases of services, payment of in default.
services rendered by non-residents,
including unutilized amortized input
Petitioner filed a Motion to Lift
taxes on capital goods exceeding one
Order of Default alleging that the
million for the period of January 1,
failure to attend the pre-trial
2009 to March 31, 2009, all
conference on November 3, 2011
attributable to zero rated sales for the
was due to confusion in office
same period, pursuant to Section 112 procedure in relation to the
(A) of the consolidation of CTA Case No.

21
 8246 with CTA Case No. 8302 since There is no doubt that the CTA Order
the latter was being handled by a dated December 23, 2011 granting private
different lawyer; that when the pre- respondent's motion to declare petitioner as
trial conference was reset to in default and allowing respondent to present
December 1, 2011, petitioner's its evidence ex parte, is an interlocutory
counsel, Atty. Sandico, had to attend order as it did not finally dispose of the case
the hearing of another case in the on the merits but will proceed for the
CTA's First Division also at 9:00 reception of the former's evidence to
a.m., hence, he unintentionally determine its entitlement to its judicial claim
missed the pre-trial conference of the for tax credit certificates. Even the CTA's
consolidated cases. subsequent orders denying petitioner's
motion to lift order of default and denying
CTA issued the second assailed reconsideration thereof are all interlocutory
Resolution denying the motion to orders since they pertain to the order of
lift order of default. default.

Petitioner filed a motion for Since the CTA Orders are merely
reconsideration on April 27, 2012. interlocutory, no appeal can be taken
The CTA denied the motion for therefrom. Section 1, Rule 41 of the 1997
reconsideration. Petitioner files the Rules of Civil Procedure, as amended,
instant petition for certiorari which applies suppletorily to proceedings
before the Court of Tax Appeals, provides:
ISSUE:
Section 1. Subject of appeal. - An
Whether or not there is no plain, appeal may be taken from a judgment or
final order that completely disposes of the
speedy and adequate remedy in the case, or of a paiticular matter therein when
ordinary course of law but the filing of a declared by these Rules to be appealable.
petition for certiorari under Rule 65 of the
No appeal may be taken from:
Rules of Court? xxxx
(c) An interlocutory order
RULING:
Hence, petitioner's filing of the
Private respondent claims that instant petition for certiorari assailing the
petitioner chose an erroneous remedy when interlocutory orders issued by the CTA is
it filed a petition for certiorari with us since in conformity with the above-quoted
the proper remedy on any adverse resolution provision.
of any division of the CTA is an appeal by
way of a petition for review with the CTA en As to the merit of the petition,
bane; that it is provided under Section 2 (a) petitioner argues that the order declaring it
(l) of Rule 4 of the Revised Rules of the as in default and allowing the ex-parte
Court of Tax Appeals (RRCTA) that the presentation of private respondent's
Court en bane shall exercise exclusive evidence was excessive as it has no
appellate jurisdiction to review by appeal the intention of defying the scheduled pre-trial
decision or resolutions on motions for conferences.
reconsideration or new trial of the Court in
division in the exercise of its exclusive The petition for certiorari is
appellate jurisdiction over cases arising from granted. The consolidated cases are
administrative agencies such as the Bureau hereby remanded to the CTA Third
of Internal Revenue. The court is not Division to give petitioner the chance to
persuaded. present evidence.

22
QUESTION: What is the jurisdiction of noted that the CIR was given a
the Court of Tax Appeals? Is it limited period of one hundred twenty (120)
only to tax collection cases? Explain your days within which to either grant or
answer. deny the claim for VAT refund or
credit. ALPI, however, filed its
14.) COMMISSIONER OF judicial claim before the CTA only
INTERNAL 6 days after the filing of the
REVENUE, Petitioner VS. AIR administrative claim for tax credit
LIQUIDE PHILIPPINES,
INC., Respondent (G.R. No.
with the CIR. The failure of ALPI
210646, July 29, 2015) to observe the compulsory 120-day
period warranted the dismissal of
FACTS: its petition.
ALPI moved for reconsideration,
Respondent Air Liquide Philippines, but the motion was denied by the
Inc. (ALPI) is a domestic CTA Division. Aggrieved, ALPI
corporation registered with the filed a petition for review with the
Bureau of Internal Revenue (BIR) as CTA En Banc.
a Value-Added Tax (VAT) entity. It
sells chemical products and renders The CTA En Banc rendered the
certain related services to the assailed decision and reversed the
Philippine Economic Zone Authority ruling of the CTA Division, citing
(PEZA) enterprises. On January 22, the consolidated cases of CIR v. San
2008, ALPI filed with the BIR its Roque, CIR v. Taganito and CIR v.
th Philex (San Roque). In these cases,
Quarterly VAT Return for the 4 the Court recognized the legal effects
quarter of 2007. of BIR Ruling No. DA-489-03,
On December 23, 2009, ALPI filed which stated that the "taxpayer-
with petitioner Commissioner of claimant need not wait for the lapse
Internal Revenue (CIR), through of the 120-day period before it could
BIR Revenue District Office seek judicial relief with the CTA by
(RDO) No. 121, an application for way of Petition for Review." CTA
issuance of a tax credit certificate Case No. 8017 is hereby
for its unutilized input VAT in the REMANDED to the CTA-Second
amount of P23,254,465.64 Division for the proper and
attributable to its transactions with immediate determination of the
PEZA-registered enterprises for the propriety of the claim for refund or
th
4 quarter of 2007. tax credit certificate. Thereafter, the
CTA-Second Division shall make a
Only six (6) days later, ALPI filed
declaration of the specific amount of
its petition for review with the CTA
refund or tax credit certificate to
Division, without awaiting the
which petitioner is entitled to, if any.
resolution of its application for tax
credit certificate or the expiration
of the 120-day period under
Section 112(C) of the National
Internal Revenue Code.
ISSUE:
The CTA Division, instead of ruling
on the merits, dismissed the judicial Whether or not the CTA Division
claim for VAT refund for lack of acquired jurisdiction over Respondents
jurisdiction. The CTA Division Petition for Review?

23
RULING: refundable or creditable amount due to
ALPI, if any.
Petition is denied, the case is
remanded to the CTA Second Division for 15.) COMMISSIONER OF
the proper determination of the refundable INTERNAL
or creditable amount due to the REVENUE, Petitioner VS.
STANDARD CHARTERED
respondent, if any.
BANK, Respondent (G.R. No.
192173, July 29, 2015)
To elucidate on the seemingly
conflicting doctrines, San Roque clarified, FACTS:
once and for all, that BIR Ruling No. DA-
489-03 was a general interpretative rule. On July 14, 2004, respondent
Thus, all taxpayers can rely on the said
received petitioners Formal Letter
BIR ruling from the time of its issuance on
December 10, 2003 up to its reversal by of Demand dated June 24, 2004, for
this Court in Aichi on October 6, 2010, alleged deficiency income tax, final
where it was held that the 120+30-day income tax- Foreign Currency
periods are mandatory and jurisdictional. Deposit Unit (FCDU), withholding
In other words, the Aichi ruling was tax compensation (WTC), expanded
prospective in application. withholding tax (EWT), final
withholding tax (FWT), and
In the present case, ALPI can
benefit from BIR Ruling No. DA-489-03. increments for taxable year 1998 in
It filed its judicial claim for VAT credit the aggregate amount of
certificate on December 29, 2009, well P33,326,211.37.
within the interim period from December
10, 2003 to October 6, 2010, so there was On August 12, 2004, respondent
no need to wait for the lapse of 120 days
protested the said assessment by
prescribed in Section 112 (c) of the NIRC.
filing a letter-protest dated August
To reiterate, San Roque, held that 9, 2004 addressed to the BIR
BIR Ruling No. DA-489-03 was a general Deputy Commissioner for Large
interpretative rule because it was a Taxpayers Service stating the
response to a query made, not by a factual and legal bases of the
particular taxpayer, but by a government assessment, and requested that it be
agency tasked with processing tax refunds withdrawn and cancelled.
and credits. Thus, it applies to all
Petitioner at present, has not
taxpayers alike, and not only to one
particular taxpayer. rendered a decision on the
respondents protest, Therefore, in
In the furtherance of the doctrinal view of this inaction, respondent
pronouncements in San Roque, the better filed the present petition for review.
approach would be to apply BIR Ruling No. In its Supplemental Petition for
DA-489-03 to all taxpayers who filed their Review, (respondent) seeks to be
judicial claim for VAT refund within the
fully credited of the payments it
period of exception from December 10, 2003
to October 6, 2010. Consequently, this case made to cover the deficiency
must be remanded to the CTA Division for (WTC) and (FWT). Finding merit
the proper determination of the in respondents motion, the same
was granted.

24
 without an assessment. There are
Thereafter, the parties (petitioner and however exceptions to this rule as the
respondent) were ordered to file their provision authorizes the extension of
simultaneous memoranda, after which, the original three-year prescriptive
the case shall be deemed submitted for period by the execution of a valid
decision. waiver, where the taxpayer and the
Commissioner of Internal Revenue
(CIR) may stipulate to extend the
The CTA in division ruled in favor of
period of assessment by a written
the respondent, granting its petition for agreement executed prior to the lapse
the cancellation and setting aside the of the period prescribed by law, and by
Formal Letter of Demand and subsequent written agreements before
Assessment served upon them on the the expiration of the period previously
ground that petitioners right to assess agreed upon.
as already barred by prescription. It
also denied petitioners motion for Petitioner contends that there is
reconsideration. a valid waiver that effectively extended
the original three-year prescriptive
period. However it was found by the
Petitioner then appealed to the CTA en CTA in division that applying the rules
banc by filing a petition for review and and rulings, the waivers in question
the CTA en banc affirmed in toto both were defective and that the subject
the aforesaid decision and Resolution waivers of the Statute of Limitations
rendered by the CTA in division. were in clear violation of RMO No. 20-
90.
ISSUE:
Therefore, the Formal Letter of
Whether or not Petitioners right to
Demand and Assessment Notices dated
assess respondent for deficiency income tax,
24 June 2004 for deficiency income
final income tax FCDU, and EWT covering
tax, FCDU, and EWT in the aggregate
taxable year 1998 has already prescribed?
amount of P33,076,944.18, including
RULING: increments, were issued by the BIR
beyond the three-
Petition is denied for lack of merit.
year prescriptive period and are
Under Sec. 203 of the NIRC, the period therefore void.
for petitioner to assess and collect an internal
QUESTIONS: a.) Discuss the
revenue tax is limited only to three years. Thus,
prescriptive period for the assessment
in the present case, petitioner only had three and collection of taxes. Cite your legal
years, counted from the date of actual filing of basis.
the return or from the last date prescribed by law
for the filing of such return, whichever comes b.) What are the grounds for the
later, to assess a national internal revenue tax or suspension of the running of the Statute
to begin a court proceeding for the collection of Limitations for the assessment and
thereof collection of taxes? Cite your legal
basis.

25
CASE DIGEST: 2016 SC TAXATION In compliance with his duty to his
CASES home country, Pacquiao filed his
2008 income tax return on April 15,
2009 reporting his Philippine-
April 2016 sourced income. It was
subsequently amended to include
1.) SPOUSES EMMANUEL D. his US-sourced income.
PACQUIAO AND JINKEE J.
PACQUIAO, Petitioners VS. THE
COURT OF TAX APPEALS (1st The controversy began on March
DIVISION) AND THE 25, 2010, when Pacquiao received
COMMISSIONER OF INTERNAL a Letter of Authority from the
REVENUE, Respondents (G.R. No. Regional District Office No. 43 of
213394, April 6, 2016) the Bureau of Internal Revenue for
the examination of his books of
FACTS:
accounts and other accounting
Due to his success, Pacquiao was records for the period covering
able to amass income from both the January 1, 2008 to December 31,
Philippines and the United States of
2008.
America. His income from the US
came primarily from the purses he On April 15, 2010, Pacquiao filed his
received for the boxing matches he 2009 income tax return, which
took part under Top Rank, Inc. On although reflecting his Philippines-
the other hand, his income from the sourced income, failed to include his
Philippines consisted of talent fees income derived from his earnings in
received from various Philippine the US. He also failed to file his
corporationsforproduct Value Added Tax (VAT) returns for
endorsements,advertising the years 2008 and 2009.
commercials and television
appearances. Commissioner on Internal Revenue
issued another Letter of Authority,
authorizing the BIRs National
Investigation Division (NID) to
examine the books of accounts and
other accounting records of both
Pacquiao and Jinkee for the last 15
years, from 1995 to 2009.

The petitioners, through counsel,

wrote a letter questioning the
propriety of the CIR investigation.
According to the petitioners, they
were already subjected to an earlier
investigation by the BIR for the
years prior to 2007, and no fraud was
ever found to have been committed.
They added that pursuant to the
March LA issued by the RDO, they
were already being investigated for
the year 2008.

26
 The NID informed the counsel of
the petitioners that the July LA After denying the protest, the BIR
issued by the CIR had effectively issued its Formal Letter Demand,
cancelled and superseded the finding the petitioners liable for
March LA issued by its RDO. deficiency income tax and VAT
amounting to P766,899,530.62 for
On January 5 and 21, 2011, the taxable years 2008 and
petitioners submitted various income P1,433,421,214.61 for 2009.
tax related documents for the years
2007-2009. As for the years 1995 to The BIR issued its Final Decision
2006, the petitioners explained that on Disputed Assessment (FDDA),
they could not furnish the bureau addressed to Pacquiao only,
with the books of accounts and other informing him that the CIR found
tax related documents as they had him liable for deficiency income
already been disposed in accordance tax and VAT for taxable years 2008
with Section 235 of the Tax Code. and 2009 which, inclusive of
They added that even if they wanted interests and surcharges, amounted
to, they could no longer find copies to a total of P2,261,217,439.92.
of the documents because during
those years, their accounting records Aggrieved that they were being
were then managed by previous made liable for deficiency income
counsels, who had since passed taxes for the years 2008 and 2009,
away. Finally, the petitioners pointed the petitioners sought redress and
out that their tax liabilities for the filed a petition for review with the
said years had already been fully CTA.
settled with then CIR Jose Mario
Buag, who after a review, found no Meanwhile, in a letter, dated
fraud against them. October 14, 2013, the BIR-ARMD
informed the petitioners that they
were denying their request to defer
After conducting its own the collection enforcement action
investigation, the CIR made its for lack of legal basis. The same
initial assessment finding that the letter also informed the petitioners
petitioners were unable to fully settle that despite their initial payment,
their tax liabilities. Thus, the CIR the amount to be collected from
issued its Notice of Initial both of them still amounted to
Assessment-Informal Conference P3,259,643,792.24, for deficiency
(NIC), dated January 31, 2012, income tax for taxable years 2008
directly addressed to the petitioners, and 2009, and P46,920,235.74 for
informing them that based on the deficiency VAT for the same
best evidence obtainable, they were period. A warrant of distraint and/or
liable for deficiency income taxes in levy against Pacquiao and Jinkee
the amount of P714,061,116.30 for was included in the letter.
2008 and P1,446,245,864.33 for
2009, inclusive of interests and Aggrieved, the petitioners filed the
surcharges. subject Urgent Motion for the CTA
to lift the warrants of distraint, levy
The petitioners filed their protest and garnishments issued by the CIR
against the Preliminary Assessment against their assets and to enjoin the
Notice (PAN). CIR from collecting the assessed

27
 deficiency taxes pending the from the arbitrary and bloated assessments
resolution of their appeal. issued by Respondent Commissioner?

The CTA issued the first assailed RULING:

resolution granting the petitioners
Urgent Motion, ordering the CIR to Section 11 of R.A. No. 1125, as
desist from collecting on the amended by R.A. No. 9282, embodies the
deficiency tax assessments against rule that an appeal to the CTA from the
the petitioners. In its resolution, the decision of the CIR will not suspend the
CTA noted that the amount sought payment, levy, distraint, and/or sale of any
to be collected was way beyond the property of the taxpayer for the satisfaction
petitioners net worth, which, based of his tax liability as provided by existing
on Pacquiaos Statement of Assets, law. When, in the view of the CTA, the
Liabilities and Net Worth (SALN), collection may jeopardize the interest of
only amounted to the Government and/or the taxpayer, it
P1,185,984,697.00. may suspend the said collection and
require the taxpayer either to deposit the
Considering that the petitioners still amount claimed or to file a surety bond.
needed to cover the costs of their
daily subsistence, the CTA opined Essentially, the petitioners ascribe
that the collection of the total grave abuse of discretion on them part of
amount of P3,298,514,894.35 from the CTA when it issued the subject
the petitioners would be highly resolutions requiring them to deposit the
prejudicial to their interests and amount of P3,298,514,894.35 or post a
should, thus, be suspended bond in the amount of P4,947,772,341.53
pursuant to Section 11 of R.A. No. as a condition for its order enjoining the
1125, as amended. CIR from collecting the taxes from them.

The petitioners sought partial It is clear that the authority of the

reconsideration of the April 22, courts to issue injunctive writs to restrain the
2014 CTA resolution, praying for collection of tax and to dispense with the
the reduction of the amount of the deposit of the amount claimed or the filing of
bond required or an extension of 30 the required bond is not simply confined to
days to file the same. On July 11, cases where prescription has set in. As
2014, the CTA issued the second explained by the Court in those cases,
assailed resolution denying the whenever it is determined by the courts that
petitioners motion to reduce the the method employed by the Collector of
required cash deposit or bond, but Internal Revenue in the collection of tax is
allowed them an extension of thirty not sanctioned by law, the bond requirement
(30) days within which to file the under Section 11 of R.A. No. 1125 should be
same. dispensed with. The purpose of the rule is
not only to prevent jeopardizing the interest
ISSUE: of the taxpayer, but more importantly, to
prevent the absurd situation wherein the
Whether or not Respondent Court court would declare that the collection by the
acted with grave abuse of discretion summary methods of distraint and levy was
amounting to lack or excess of jurisdiction violative of law, and then, in the same breath
when it imposed a bond requirement which require the petitioner to deposit or file a bond
will effectively prevent Petitioners from as a
continuing the prosecution of its appeal

28
prerequisite for the issuance of a writ of QUESTIONS: a.) May the Court of Tax
injunction. Appeals issue an Injunction to enjoin the
collection of taxes by the Bureau of
As the CTA is in a better position to Internal Revenue? Explain your answer.
make such a preliminary determination, a
remand to the CTA is in order. To resolve the b.) May the tax liability of a taxpayer be
issue of whether the petitioners should be compromised during the pendency of an
required to post the security bond under appeal? Explain your answer.
Section 11 of R.A. No. 1125, and, if so, in
what amount, the CTA must take into 2.) COMMISSIONER OF INTERNAL
REVENUE, Petitioner VS. LIQUIGAZ
account, among others, the following: PHILIPPINES CORPORATION,
1. Whether the requirement of a Respondent (G.R. No. 215534, April 18,
Notice of Informal Conference 2016)
was complied with; --------x x x--------
2. Whether the 15-year period LIQUIGAZ PHILIPPINES
CORPORATION, Petitioner VS.
subject of the CIRs COMMISSIONER OF INTERNAL
investigation is arbitrary and REVENUE, Respondent (G.R. No.
excessive; 215557)
3. Whether fraud was duly
established; FACTS:
4. Whether the FLD issued against
the petitioners was irregular; Liquigaz Philippines Corporation is
5. Whether the FDDA, the PCL, a corporation duly organized and
the FNBS, and the Warrants of existing under Philippine Laws. On
Distraint and/or Levy were July 11, 2006, it received a copy of
validly issued. Letter of Authority (LOA) No.
00067824, dated July 4, 2006,
DISPOSITIVE: WHEREFORE, the petition is issued by the CIR, authorizing the
PARTIALLY GRANTED. Let a Writ of Preliminary
Injunction be issued, enjoining the implementation of investigation of all internal revenue
the April 22; 2014 and July 11, 2014 Resolutions of taxes for taxable year 2005.
the Court of Tax Appeals, First Division, in CTA Case
No. 8683, requiring the petitioners to first deposit a
cash bond in the amount of P3,298,514,894.3 5 or On April 9, 2008, Liquigaz received
post a bond of an undated letter purporting to be a
P4,947,772,341.53, as a condition to restrain the
collection of the deficiency taxes assessed against Notice of Informal Conference
them. (NIC), as well as the detailed
computation of its supposed tax
Accordingly, the case is hereby REMANDED to the liability. On May 28, 2008, it
Court of Tax Appeals, First Division, which is
ordered to conduct a preliminary hearing to received a copy of the Preliminary
determine whether the dispensation or reduction of Assessment Notice (PAN), dated
the required cash deposit or bond provided under May 20, 2008, together with the
Section 11, Republic Act No. 1125 is proper to
restrain the collection of deficiency taxes assessed
attached details of discrepancies for
against the petitioners. the calendar year ending December
31, 2005. Upon investigation,
After the posting of the required bond, or if the Court Liquigaz was initially assessed with
of Tax Appeals, First Division, determines that no
bond is necessary, shall proceed to hear and resolve deficiency withholding tax
the petition for review pending before it. liabilities, inclusive of interest, in
the aggregate amount of
P23,931,708.72.

29
 assessments. This was true because
On June 25, 2008, it received a the FDDA reflected a different
Formal Letter of Demand amount from what was stated in the
(FLD)/Formal Assessment Notice FDL/FAN. The taxpayer was not
(FAN), together with its attached notified of the Factual Bases as
details of discrepancies, for the required in the Section 228 of the
calendar year ending December 31, NIRC.
2005.
It upheld the WTC assessment
On July 25, 2008, Liquigaz filed its
against Liquigaz. It noted that the
protest against the FLD/FAN and
factual bases used in the FLD and
subsequently submitted supporting
documents. the FDDA with regard thereto were
the same as the difference in the
amount merely resulted from the
On July 1, 2010, it received a copy
of the Final Decision on Disputed use of a different tax rate.
Assessment (FDDA) covering the
tax audit under LOA No. 00067824 The CTA Division agreed with
for the calendar year ending Liquigaz that the tax rate of
December 31, 2005. As reflected in 25.40% was more appropriate
the FDDA, CIR still found because it represents the effective
Liquigaz liable for deficiency tax compensation paid. It relied on
withholding tax liabilities. the report prepared by the court-
commissioned independent
Consequently, on July 29, 2010, accountant, which found that
Liquigaz filed its Petition for Liquigaz was unable to substantiate
Review before the CTA Division the discrepancy found by the CIR
assailing the validity of the FDDA on its withholding tax liability on
issued by the CIR.
compensation.
CTA Division Ruling: It partially
granted Liquigazs petition
cancelling the EWT and FBT CTA En Banc Ruling: It affirmed
assessments but affirmed with the CTA Division Ruling. It
modification the WTC assessments. reiterated its pronouncement that
It ruled that the portion of the FDDA the taxpayer should be informed in
relating to the EWT and the FBT writing of the law and the facts on
assessment was void. which the assessment was made
applies to FDDA otherwise the
assessment would be void. FDDA
Unlike the PAN and the FDL/FAN,
determined the final tax liability of
the FDDA issued did not provide
the taxpayer, which may be the
the details thereof; hence, liquigaz
subject of an appeal before the
had no way of knowing what items CTA. It emphasized the need for
were considered by the CIR in stating the factual bases as the
arrivingatthedeficiency FDDA reflected different amounts

30
 than that contained in the without due process of law. Merely
FLD/FAN. notifying the taxpayer of its tax liabilites
without elaborating on its details is
ISSUE:
insufficient.
Whether or not the Court of Tax
The Court, however, finds that the
Appeals En Banc erred in partially
CTA erred in concluding that the
upholding the validity of the assessment as
assessment on EWT and FBT deficiency
to the withholding tax on compensation
was void because the FDDA covering the
but declaring invalid the assessment on
same was void. The assessment remains
expanded withholding tax and fringe
valid notwithstanding the nullity of FDDA
benefits tax?
because the assessment itself differs from
RULING: the decision on the disputed assessment.

A void FDDA does not ipso The Court agrees that the FDDA
facto render the assessment void substantially informed Liquigaz of its tax
liabiliities with reggard to its WTC
Where a taxpayer questions an assessment. As highlighted by the CTA, the
assessment and asks the Collector to basis for the assessment was the same for the
reconsider or cancel the same because he FLD and the FDDA, where the salaries
(taxpayer) believes that he is not liable reflected in thhe ITR and the alphalist were
therefor, the assessment becomes a compared resulting in discrepanct
disputed assessment that the Collector withholding taxes on compensation merely
must decide, and the taxpayer can appeal arose from the modification of the tax rates
to the CTA only upon receipt of the of the used in the FDDA. The Court notes it was
decision of the Collector on the disputed Liquigaz which proposed the rate of 25.40%
assessment. as a more appropriate tax rate as it is
From the foregoing, it is clear that represented the effective tax on
what is appealable to the CTA is the compensation paid for the taxable year 2005.
decision of the CIR on disputed As such, Liquigaz was effectively informed
assessment and not the assessment itself. in writing of the factual bases of its
assessment for WTC because the basis for
Clearly, a decision of the CIR on a the FDDa, with regards to the WTC, was
disputed assessment differs from the identical with the FAN which had a detail
assessment itself. Hence, the invalidity of of discrepancy attached to it.
one does not necessarily result to the
invalidity of the other unless the law or QUESTION: A domestic corporation failed
regulations otherwise provide. to withhold and remit the tax on income
received from Philippine sources by
The FDDA must state the facts a non-resident foreign corporation. In
and the law on which it is based to addition to the civil penalties provided for
provide the taxpayer the opportunity to under the Tax Code, a compromise penalty
file an intelligent appeal was imposed for violation of the
The reason for requiring that withholding tax provisions. May the
taxpayers be informed in writing of the Commissioner of Internal Revenue legally
facts and law on which the assessment is enforce the collection of compromise
made is the constitutional guarantee that penalty? Explain your answer.
no person shall be deprived of his property

31
32