! FACTS: !

LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. vs. CA 249 SCRA 92

Petitioner, now the Jardine-CMG Life Insurance Company, Inc., is a domestic corporation engaged in the life insurance business. It issued shares of stock as stock dividends and paid documentary stamp taxes on each certificate on the basis of its par value. The CIR, held Lincoln liable based on the book value of the shares, and consequently, should be used as basis for determining the amount of the documentary stamp tax. Accordingly, the CIR issued a deficiency documentary stamp tax assessment. Lincoln appealed the Commissioners ruling to the CTA, which held that the amount of the documentary stamp tax should be based on the par value stated on each certificate of stock. In turn, CIR appealed to the Court of Appeals which, reversed the CTAs decision.

! ISSUE: ! ! HELD: !

Whether in determining the amount to be paid as documentary stamp tax, it is the par value of the certificates of stock or the book value of the shares which should be considered.

The par value of the certificates of stock should be the basis for determining the amount to be paid as documentary stamp tax. First, the NIRC Sec. 224 provides that On every original issue, whether on organization, reorganization or for any lawful purpose, of certificates of stock by any association, company or corporation, there shall be collected a documentary stamp tax of one peso and ten centavos on each two hundred pesos, or fractional part thereof, of the par value of such certificates There is no basis for considering stock dividends as a distinct class from ordinary shares of stock since under this provision only certificates of stock are required to be distinguished (into either one with par value or one without) rather than the classes of shares themselves. A stock certificate is merely evidence of a share of stock and not the share itself. (Sec. 63, Corporation Code). Stock dividends are in the nature of shares of stock, the consideration for which is the amount of unrestricted retained earnings converted into equity in the corporations books. There is, therefore, no reason for determining the actual value of such dividends for purposes of the documentary stamp tax if the certificates representing them indicate a par value. Second. The documentary stamp tax here is not levied upon the specific transaction which gives rise to such original issuance but on the privilege of issuing certificates of stock. A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business transacted but is an excise upon the privilege, opportunity or facility offered at exchanges for the transaction of the business

! ! ! FACTS: !

CIR VS Lincoln Philippine Life Insurance Company, Inc. 379 SCRA 423

Prior to 1984, Lincoln Philippine Life Insurance Company, Inc. (now called Jardine-CMA Life Insurance Company, Inc.) used to issue policies called Junior Estate Builder Policy. A clause therein provides for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid by Lincoln Philippine only on the initial sum assured.

When the clause became effective in 1984, the Commissioner of Internal Revenue assessed an additional tax on the increased amount of the coverage of the said policies. Said tax was to cover the deficiency documentary stamps tax for said year. The Court of Appeals ruled that there is only one policy and the automatic increase is not a separate policy; that said increase of coverage is not covered by another documentary stamp tax.

! ! ISSUE: ! Whether or not there is only one policy. ! ! HELD: !

Yes. Section 49, Title VI of the Insurance Code defines an insurance policy as the written instrument in which a contract of insurance is set forth. Section 50 of the same Code provides that the policy, which is required to be in printed form, may contain any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance. It is thus clear that any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of such policy or contract of insurance.

The subject insurance policy at the time it was issued contained an automatic increase clause. Although the clause was to take effect only in 1984, it was written into the policy at the time of its issuance. The distinctive feature of the junior estate builder policy called the automatic increase clause already formed part and parcel of the insurance contract, hence, there was no need for an execution of a separate agreement for the increase in the coverage that took effect in 1984 when the assured reached a certain age.

The said increase however is imposable with documentary stamp taxes. The original documentary stamps tax paid by Lincoln Philippine covers the original amount of the policies without the projected increase. The said increase was already definite at the time of the issuance of the policy. Thus, the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy.

While tax avoidance schemes and arrangements are not prohibited, tax laws cannot be circumvented in order to evade the payment of just taxes. In the case at bar, to claim that the increase in the amount insured (by virtue of the automatic increase clause incorporated into the policy at the time of issuance) should not be included in the computation of the documentary stamp taxes due on the policy would be a clear evasion of the law requiring that the tax be computed on the basis of the amount insured by the policy.

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! FACTS: ! ! ! ! ! ! ! ! ! !

China Banking Corporation vs. Commissioner of Internal Revenue GR No. 172359, Oct. 2, 2009

Petitioner China Banking Corporation, a universal banking corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, was engaged in the transaction of accepting special savings deposits (SSD), otherwise known as Savings plus Deposit. On September 23, 1999, petitioner received a Pre-Assessment Notice (PAN) issued by respondent Commission on Internal Revenue, assessing it for deficiency documentary stamp tax on its Reverse Repurchase Agreements (RRA) and SSDs for the taxable years 1994 and 1995 in the total amount of Php 27,451,844.09 including increments thereon. On October 6, 1999, petitioner sent a letter to respondent whereby it manifested its formal disagreement to the PAN. On November 24, 1999, petitioner filed a formal protest questioning the legality and basis of both the PAN and the FAN. In said protest, petitioner contested the basis of the assessment of deficiency documentary stamp tax on its SSDs On December 20, 1999, petitioner received a Preliminary Agreement Notice dated December 17, 1999, assessing petitioners deficiency documentary stamp taxes on its RRAs and SSDs covering the taxable years 1996 and 1997. Like in the first assessment, petitioner sent a letter manifesting its disagreement thereto. On December 29, 1999, a formal letter of demand was received by petitioner whereby respondent demanded the total amount of P13, 781,350.00, representing deficiency documentary stamp tax on petitioners RRAs and SSDs for the taxable years 1996 and 1997. On January 26, 2000, petitioner sent a letter to respondent reiterating its position that the RRAs and SSDs were not subject to documentary stamp tax. On February 18, 2000, respondent sent a notice to petitioner setting an informal hearing with regard to the protest made by the latter on the assessment of deficiency documentary stamp tax on its RRAs and SSDs. On April 7, 2000, petitioner submitted its final position paper. On January 11, 2002, respondent rendered a Decision resolving to cancel and withdraw the assessments for deficiency documentary stamp tax on petitioners RRAs covering the taxable years 1994, 1995 and 1996. However, said decision affirmed the

assessments for alleged deficiency documentary stamp tax on petitioners RRAs for the year 1997 as well as on its SSDs covering the taxable years 1994 to 1997.

On February 22, 2002, petitioner appealed to the Court of Tax Appeals (CTA) via a Petition for Review, the same was docketed as C.T.A. Case No. 6400.

! On October 14, 2004, the CTA rendered a Decision partially granting the petition ! ! !

On November 9, 2004, petitioner filed a Motion for Partial Reconsideration, specifically assailing the portion of the CTA Decision affirming the assessment of deficiency documentary stamp tax on its SSDs. On February 2, 2005, the CTA issued a Resolution denying petitioners motion for partial reconsideration. Aggrieved with the Decision and Resolution of the CTA, petitioner then filed a petition for review before the CTA en banc.

! On January 3, 2006, the CTA en banc rendered a Decision denying said petition ! !

The CTA en banc ruled that a deposit account which have the same features as a time deposit account, i.e., a fixed term in order to earn a higher interest rate, is subject to the Documentary Stamp Tax imposed in Section 180[27] of the 1997 National Internal Revenue Code. ] Specifically, the CTA en banc held that the SSDs are certificates of deposit drawing interest as contemplated under Section 180. ISSUE: Whether or not Special Savings Deposits are subject to documentary stamp tax

! HELD: ! ! ! !

Yes. The conclusion is certain in that petitioners SSDs are certificates of deposits drawing interest as contemplated in Section 180 of the 1997 National Internal Revenue Code. Petitioners Savings plus Deposit is essentially the same as the Savings Account-Fixed Savings Deposit Stamp tax; certificates drawing interest. China banks special savings deposits (SSD), otherwise known as Savings Plus Deposit, are certificates of deposits drawing interest subject to documentary stamp tax as provided for in Section 180 of the 1997 NIRC. The CTA en banc dissected Section 180 and enumerated the following documents which are subject to documentary stamp tax, to wit: 1. Loan Agreements;

! 2. ! 3. ! ! 5. ! 6. ! 7. !

Bills of Exchange; Drafts;

4. Instruments and Securities issued by the Government or any of its instrumentalities; Certificates of Deposit Drawing Interest; Order for the payment of money otherwise that at sight or on demand; Promissory Notes, whether negotiable or non-negotiable

From said enumeration, the CTA en banc held that petitioners SSDs fall under the category of certificates of deposit drawing interest.

! Savings Plus Deposit Account, which has the following features: ! 1. Amount deposited is withdrawable anytime; ! 2. The same is evidenced by a passbook; ! ! !

3. The rate of interest offered is the prevailing market rate, provided the depositor would maintain his minimum balance in thirty (30) days at the minimum, and should he withdraw before the period, his deposit would earn the regular savings deposit rate; Thus, subject to DST as it is essentially the same as the Special/Super Savings Deposit Account in Philippine Banking Corporation v. Commissioner of Internal Revenue, and the Savings Account-Fixed Savings Deposit in International Exchange Bank v. Commissioner of Internal Revenue, which are considered certificates of deposit drawing interests.

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Tambunting Pawnshop Inc v CIR GR No. 171138, April 7, 2009 FACTS: CIR assessed Tambunting pawnshop for deficiency Value-Added Tax for the taxable year 1999. Tambunting was ordered by the BIR to pay P3M+ representing deficiency VAT. Tambunting alleged that it is NOT liable for tax because a pawnshop is not enumerated as one of those engaged in "sale or exchange of services" in Section 108 of the NIRC. The nature of the business of pawnshops does not fall under "service" as defined under the Legal Thesaurus of William C. Burton (accommodate, administer to, advance, afford, aid, assist, attend, be of use, care for, come to the aid of, commodere, comply, confer a benefit, contribute to, cooperate, deservire, discharge one's duty, do a service, do one's bidding, fill an office, forward, furnish aid, furnish assistance, give help, lend, aid, minister to, promote, render help, servire, submit, succor, supply aid, take care of, tend, wait on, work for) ISSUE: Whether Pawnshops are subject to VAT pursuant to Section 108 (A) of NIRC. HELD: Pawnshops are not under 108 of the NIRC but are specifically classified as other Nonbank Financial Intermediaries by RA 9238. Prior to the passage of the EVAT Law in 1994, pawnshops were treated as lending investors subject to lending investor's tax. Subsequently, pawnshops were then treated as VAT-able enterprises under the general classification of "sale or exchange of services" under Section 108 (A) of the Tax Code of 1997, as amended. Finally, R.A. No. 9238 [which was passed in 2004] classified pawnshops as Other Non-bank Financial Intermediaries. At the time of the disputed assessment, that is, for the year 2000, pawnshops were not subject to 10% VAT under the general provision on "sale or exchange of services" as defined under Section 108 (A) of the Tax Code of 1997, which states: "'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration . . . ." Instead, due to the specific nature of its business, pawnshops were then subject to 10% VAT under the category of non-bank financial intermediaries.

The Court finds that pawnshops should have been treated as non-bank financial intermediaries from the very beginning, subject to the appropriate taxes provided by law, thus Under the NIRC of 1977, pawnshops should have been levied the 5% percentage tax on gross receipts imposed on bank and non-bank financial intermediaries under (now) Section 121 of the Tax Code of 1997 With the imposition of the VAT under the EVAT Law, pawnshops should have been subjected to the 10% VAT imposed on banks and non-bank financial intermediaries and financial institutions under (now) Section 108 of the Tax Code of 1997 However, through the years, various laws effectively deferred the levy, collection, and assessment of 10% VAT on services rendered by banks, non-bank financial intermediaries, finance companies, and other financial intermediaries not performing quasi-banking functions from 1994 to December 31, 2002; With no further deferments given by law, the levy, collection and assessment of the 10% VAT on banks, non-bank financial intermediaries, finance companies, and other financial intermediaries not performing quasi-banking functions were finally made effective beginning January 1, 2003; 2004: Finally, with the enactment of R.A. No. 9238 in 2004, the services of banks, nonbank financial intermediaries, finance companies, and other financial intermediaries not performing quasi-banking functions were specifically exempted from VAT, and the 0% to 5% percentage tax on gross receipts on other non-bank financial intermediaries was reimposed under Section 122 of the Tax Code of 1997. Coming now to the issue at hand - Since petitioner is a non-bank financial intermediary: For the tax years 1996-2002 !!it is actually subject to 10% VAT. HOWEVER, with the levy, assessment and collection of VAT from non-bank financial intermediaries being specifically deferred by law !then petitioner is NOT liable for VAT during these tax years. January 1, 2003 !!petitioner is LIABLE for 10% VAT for said tax year with the full implementation of the VAT system on non-bank financial intermediaries starting this date. Beginning 2004 up to the present, by virtue of R.A. No. 9238, petitioner is NO longer liable for VAT but it is subject to percentage tax on gross receipts from 0% to 5%, as the case may be.

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CIR V PASCOR REALTY & DEVT CORP et. al. GR No. 128315, June 29, 1999

!
FACTS: BIR Commissioner Jose Ong authorized Revenue Officers Que, Estorco and Savillano to examine the books of accounts and other accounting records of Pascor Realty, w/c resulted to the recommendation of an issuance of assessments. In 1995, CIR filed a complaint against the president and treasurer of Pascor alleging evasion of taxes before the DOJ. Pascor filed an Urgent Request for Reconsideration/Reinvestigation disputing the said tax assessment. PRDC then received a subpoena from the DOJ with regard to the complaint on March 23, 1995. CIR denied the MR of the said assessment. Pascor elevated the denial to CTA on petition for review. CIR filed a motion to dismiss on the ground that CTA had no jurisdiction over the subject matter since there was no formal assessment issued against PRDC. CTA denied the motion to dismiss and ordered the CIR to file an answer within 30 days from receipt of the notice but the CIR did not comply, nor did they file an MR. Instead, CIR filed a petition in the CA alleging that the CTA acted with GADALEJ. CIR argues that the criminal action is not yet an assessment, based on Sec 205 and 223 of the NIRC w/c provides that remedies for the collection of tax may either be civil or criminal and that in case of failure to file a return, a tax may be assessed OR a proceeding in court may be begun without an assessment. Pascor argues that the joint-affidavit filed by the CIR for criminal action already constitutes an assessment. It argues that an assessment is NOT an action or proceeding for the collection of taxes but a mere notice of and demand for payment of taxes due. ISSUE/S: 1) Whether the criminal complaint for tax evasion can be construed as an assessment NO 2) Whether the assessment is necessary before criminal charges for tax evasion may be instituted. - NO HELD: 1) The criminal complaint for tax evasion is NOT an assessment. An assessment is a notice to the taxpayer containing the amount of taxes due and a demand to pay such taxes within a specific period. It is deemed made only when the CIR releases the mail and sends such notice to the petitioner. The joint-affidavit for the criminal action CANNOT be considered an assessment since: It contained NO DEMAND for payment, there was NO specified period of payment, it is addressed to the Secretary of Justice

and NOT the taxpayer (Pascor), its purpose is merely to support / substantiate the criminal complaint and NOT notify the payer of the tax due. Since there was NO assessment issued yet, no reconsideration / reinvestigation may be asked from the CIR. 2) Sec222 of the NIRC provides that when a false/fraudulent return is filed, an action in court may be commenced WITHOUT an assessment. Sec 205 further provides that civil and criminal actions may be pursued simultaneously by the CIR. THUS, CIR is given discretion to either issue an assessment OR file a criminal complaint or do both. A criminal charge may be supported by only prima facie showing of failure to file return. This fact NEED NOT be proven by an assessment. The issuance of an assessment is DIFFERENT from the filing of a complaint. Before an assessment is issued, there is, by practice, a pre-assessment notice sent to the taxpayer, who is given a chance to submit position papers and documents to prove that the assessment is unwarranted. If the commissioner is unsatisfied, an assessment signed by him or her is then sent to the taxpayer informing the latter specifically and clearly that an assessment has been made against him or her. In contrast, the criminal charge need not go through all these. The criminal charge is filed directly with the DOJ. Thereafter, the taxpayer is notified that a criminal case had been filed against him, not that the commissioner has issued an assessment. It must be stressed that a criminal complaint is instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code.

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Marcos II vs. CA 273 SCRA 47 1997 FACTS: Ferdinand R. Marcos II assailed the decision of the Court of Appeals declaring the deficiency income tax assessments and estate tax assessments upon the estate and properties of his late father despite the pendency of the probate proceedings of the will of the late President. On the other hand, the BIR argued that the States authority to collect internal revenue taxes is paramount. Petitioner further argues that "the numerous pending court cases questioning the late president's ownership or interests in several properties (both real and personal) make the total value of his estate, and the consequent estate tax due, incapable of exact pecuniary determination at this time. Thus, respondents' assessment of the estate tax and their issuance of the Notices of Levy and sale are premature and oppressive." He points out the pendency of Sandiganbayan Civil Case Nos. 0001-0034 and 0141, which were filed by the government to question the ownership and interests of the late President in real and personal properties located within and outside the Philippines. Petitioner, however, omits to allege whether the properties levied upon by the BIR in the collection of estate taxes upon the decedent's estate were among those involved in the said cases pending in the Sandiganbayan. Indeed, the court is at a loss as to how these cases are relevant to the matter at issue. The mere fact that the decedent has pending cases involving ill-gotten wealth does not affect the enforcement of tax assessments over the properties indubitably included in his estate. ISSUE: Is the contention of Marcos correct? HELD: No. The approval of the court, sitting in probate or as a settlement tribunal over the deceaseds estate, is not a mandatory requirement in the collection of estate taxes. There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate settlement court's approval of the state's claim for estate taxes, before the same can be enforced and collected. The enforcement of tax laws and the collection of taxes are of paramount importance for the sustenance of government. Taxes are the lifeblood of government and should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the existence of government itself. It is not the Department of Justice which is the government agency tasked to determine the amount of taxes due upon the subject estate, but the Bureau of Internal Revenue whose determinations and assessments are presumed correct and made in good faith.

The taxpayer has the duty of proving otherwise. In the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed. Even an assessment based on estimates is prima facie valid and lawful where it does not appear to have been arrived at arbitrarily or capriciously. The burden of proof is upon the complaining party to show clearly that the assessment is erroneous. Failure to present proof of error in the assessment will justify the judicial affirmance of said assessment. In this instance, petitioner has not pointed out one single provision in the Memorandum of the Special Audit Team which gave rise to the questioned assessment, which bears a trace of falsity. Indeed, the petitioner's attack on the assessment bears mainly on the alleged improbable and unconscionable amount of the taxes charged. But mere rhetoric cannot supply the basis for the charge of impropriety of the assessments made.

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!
Meralco Securities Corporation vs. Savellano GR No. L-36181 FACTS: On May 22, 1967, the late Juan G. Maniago (substituted in these proceedings by his wife and children) submitted to petitioner Commissioner of Internal Revenue confidential denunciation against the Meralco Securities Corporation for tax evasion for having paid income tax only on 25 % of the dividends it received from the Manila Electric Co. for the years 1962-1966, thereby allegedly shortchanging the government of income tax due from 75% of the said dividends. Petitioner Commissioner of Internal Revenue caused the investigation of the denunciation after which he found and held that no deficiency corporate income tax was due from the Meralco Securities Corporation on the dividends it received from the Manila Electric Co. and accordingly denied Maniago's claim for informer's reward on a non-existent deficiency. On August 28, 1970, Maniago filed a petition for mandamus, and subsequently an amended petition for mandamus, in the Court of First Instance of Manila, docketed therein as Civil Case No. 80830, against the Commissioner of Internal Revenue and the Meralco Securities Corporation to compel the Commissioner to impose the alleged deficiency tax assessment on the Meralco Securities Corporation and to award to him the corresponding informer's reward under the provisions of R.A. 2338. Respondent judge granted the said petition and thereafter, denied the motions for reconsideration filed by all the parties. October 23, 1982

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ISSUE/S: (1) Whether or not respondent judge has jurisdiction over the subject matter of the case; (2) Whether or not respondent heirs of Maniago are entitled to informers reward.

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HELD: (1) Respondent judge has no jurisdiction to take cognizance of the case because the subject matter thereof clearly falls within the scope of cases now exclusively within the jurisdiction of the Court of Tax Appeals. Section 7 of Republic Act No. 1125, enacted June 16, 1954, granted to the Court of Tax Appeals exclusive appellate jurisdiction to review by appeal, among others, decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other

charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue. The law transferred to the Court of Tax Appeals jurisdiction over all cases involving said assessments previously cognizable by courts of first instance, and even those already pending in said courts. The question of whether or not to impose a deficiency tax assessment on Meralco Securities Corporation undoubtedly comes within the purview of the words "disputed assessments" or of "other matters arising under the National Internal Revenue Code . . . .In the case of Blaquera vs. Rodriguez, et al, this Court ruled that "the determination of the correctness or incorrectness of a tax assessment to which the taxpayer is not agreeable, falls within the jurisdiction of the Court of Tax Appeals and not of the Court of First Instance, for under the provisions of Section 7 of Republic Act No. 1125, the Court of Tax Appeals has exclusive appellate jurisdiction to review, on appeal, any decision of the Collector of Internal Revenue in cases involving disputed assessments and other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue."

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(2) Considering then that respondent judge may not order by mandamus the Commissioner to issue the assessment against Meralco Securities Corporation when no such assessment has been found to be due, no deficiency taxes may therefore be assessed and collected against the said corporation. Since no taxes are to be collected, no informer's reward is due to private respondents as the informer's heirs. Informer's reward is contingent upon the payment and collection of unpaid or deficiency taxes. An informer is entitled by way of reward only to a percentage of the taxes actually assessed and collected. Since no assessment, much less any collection, has been made in the instant case, respondent judge's writ for the Commissioner to pay respondents 25% informer's reward is gross error and without factual nor legal basis. Petitions granted and the questioned decision of respondent judge and order reversed and set aside.

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SY PO vs. CTA G.R. No. 81446; August 18, 1988 FACTS: Bonifacia is the widow of the late Mr. Po Bien Sing who died in 1980. In taxable year 1964-1972, he was the sole proprietor of Silver Cup Wine factory in Cebu. He was engaged in the business of manufacture and sale of compound liquors, using alcohol and other ingredients as raw materials. Silver Cup was alleged to have committed tax evasion amounting to millions of pesos so Secretary of Finance ordered Finance-BIR-NBI Team to conduct an investigation. A letter and a subpoena duces tecum were issued against Silver Cup requesting production of books and accounting documents. Po Bien Sing, however, did not comply with this. This prompted the team to enter the factory bodega. They seized different brands of alcohol products, a total of 1,555 cases. On basis of the teams investigation, CIR assessed Po Bien Sing deficiency income tax amounting to P12.7M. Fact obtained from the decision: The former employees of the factory testified on the fraudulent practices of Po Bien Sing. The factory personnel manager testified that false entries were entered in the official register book. The assistant factory superintendent also testified that when the storekeeper is not around, illegal operations happen. Untaxed alcohol is brought from Cebu Alcohol plant into the compound of Silver Cup. When the storekeeper returns, he sees nothing because the untaxed alcohol is brought directly to a secret tunnel within the bodega itself. Bonifacia protested the deficiency assessments. A reinvestigation was done but yielded the same results in view of the taxpayers insistent failure to present the books of accounts. Warrants of distraint and levy were issued by CIR but Bonifacia deemed it only as a denial of her protest. ISSUE: Whether or not the assessments have valid and legal bases? Yes. HELD: (Hence, CTA and CIR have not committed errors, CTA decision is affirmed.) 1. Best Evidence Obtainable is applicable in this case. Settled is the rule that factual findings of CTA are binding upon SC and can be disturbed on appeal only if such finding is not supported by substantial evidence. The NIRC also gives the CIR the power to assess the proper tax based on best evidence obtainable when (1) a person fails to file a required return or other documents at the proper time or (2) he files a false or fraudulent return. Rule on Best Evidence Obtainable applies when tax report required by law for assessment is not available or when tax report is incomplete or fraudulent.

2. The tax figures arrived at by CIR is not arbitrary. On the basis of the quantity of wines seized during the raid and sworn statements of former employees, it was ascertained that Silver Cup utilized and consumed in the manufacture of compounded liquors and other products 20k drums of alcohol as raw materials 81,288,787 proof liters of alcohol. Also, surcharges for failure to submit returns or for rendering false returns and Interest on deficiency were also imposed. 3. Burden of proof is on tax payer. It is incumbent upon the tax payer appealing to the tax court to prove what is the correct and just liability through a full disclosure of all pertinent data in his possession. This is the only way he could prove that the tax assessment is wrong. Also, the fraudulent acts detailed in the decision had not been satisfactorily rebutted by petitioner. This, Bonifacia must counteract through substantial evidence.

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CIR vs. CA, CTA and FORTUNE TOBACCO CORP. G.R. No. 119761; August 29, 1996

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FACTS: Fortune Tobacco Corporation ("Fortune Tobacco"), engaged in the manufacture of different brands of cigarettes, registered "Champion," "Hope," and "More" cigarettes. BIR classified them as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies. However, Fortun changed the names of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands from the foreign brand category. A 45% Ad Valorem taxes were imposed on these brands. Then Republic Act ("RA") No. 7654 was enacted 55% for locally manufactured foreign brand while 45% for locally manufactured brands. 2 days before the effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIR saying since there is no showing who the real owner/s are of Champion, Hope and More, it follows that the same shall be considered locally manufactured foreign brand for purposes of determining the ad valorem tax - 55%. BIR sent via telefax a copy of RMC 37-93 to Fortune Tobacco addressed to no one in particular. Then Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93. CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting to P9,598,334.00. Fortune Tobacco filed a petition for review with the CTA. 8 CTA upheld the position of Fortune. CA affirmed. ISSUE: WON it was necessary for BIR to follow the legal requirements when it issued its RMC HELD. YES. CIR may not disregard legal requirements in the exercise of its quasi-legislative powers which publication, filing, and prior hearing. When an administrative rule is merely interpretative in nature, its applicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself has already prescribed. BUT when, upon the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially increases the burden of those governed, the agency must accord, at least to those directly affected, a chance to be heard, before that new issuance is given the force and effect of law. RMC 37-93 cannot be viewed simply as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly, been made in order to place "Hope

Luxury," "Premium More" and "Champion" within the classification of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654 which subjects mentioned brands to 55% the BIR not simply interpreted the law; verily, it legislated under its quasi-legislative authority. The due observance of the requirements of notice, of hearing, and of publication should not have been then ignored.

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CIR v. Benguet Corp G.R. Nos. 134587 and 134588; January 8, 2005

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FACTS: Benguet Corporation is a domestic corporation engaged in the exploration, development and operation of mineral resources, and the sale or marketing thereof to various entities. It is a VAT registered enterprise. The transactions in question occurred during the period between 1988 and 1991. Under Sec. 99 of NIRC as amended by E.O. 273 s. 1987 then in effect, any person who, in the course of trade or business, sells, barters or exchanges goods, renders services, or engages in similar transactions and any person who imports goods is liable for output VAT at rates of either 10% or 0% (zero-rated) depending on the classification of the transaction under Sec. 100 of the NIRC. In January of 1988, Benguet applied for and was granted by the BIR zero-rated status on its sale of gold to Central Bank. On 28 August 1988 VAT Ruling No. 3788-88 was issued which declared that the sale of gold to Central Bank is considered as export sale subject to zero-rate pursuant to Section 100 of the Tax Code, as amended by EO 273. Relying on its zero-rated status and the above issuances, Benguet sold gold to the Central Bank during the period of 1 August 1989 to 31 July 1991 and entered into transactions that resulted in input VAT incurred in relation to the subject sales of gold. It then filed applications for tax refunds/credits corresponding to input VAT. However, such request was not granted due to BIR VAT Ruling No. 008-92 dated 23 January 1992 that was issued subsequent to the consummation of the subject sales of gold to the Central Ban`k which provides that sales of gold to the Central Bank shall not be considered as export sales and thus, shall be subject to 10% VAT. BIR VAT Ruling No. 008-92 withdrew, modified, and superseded all inconsistent BIR issuances. Both petitioner and Benguet agree that the retroactive application of VAT Ruling No. 008-92 is valid only if such application would not be prejudicial to the Benguet pursuant Sec. 246 of the NIRC. ISSUE/S: (1) WON Benguets sale of gold to the Central Bank during the period when such was classified by BIR issuances as zerorated could be taxed validly at a 10% rate after the consummation of the transactions involved; (2) WON there was prejudice to Benguet Corp due to the new BIR VAT Ruling.

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HELD: (1) NO. At the time when the subject transactions were consummated, the prevailing BIR regulations relied upon by Benguet ordained that gold sales to the Central Bank were zero-rated. Benguet should not be faulted for relying on the BIRs interpretation of the said laws and regulations. While it is true, as CIR alleges, that government is not estopped from collecting taxes which remain unpaid on account of the errors or mistakes of its agents and/or officials and there could be no vested right arising from an erroneous interpretation of law, these principles must give way to exceptions based on and in keeping with the interest of justice and fair play. (then the Court cited the ABS-CBN case). (2) YES. The adverse effect is that Benguet Corp became the unexpected and unwilling debtor to the BIR of the amount equivalent to the total VAT cost of its product, a liability it previously could have recovered from the BIR in a zero-rated scenario or at least passed on to the Central Bank had it known it would have been taxed at a 10% rate. Thus, it is clear that Benguet suffered economic prejudice when it consummated sales of gold to the Central Bank were taken out of the zero-rated category. The change in the VAT rating of Benguets transactions with the Central Bank resulted in the twin loss of its exemption from payment of output VAT and its opportunity to recover input VAT, and at the same time subjected it to the 10% VAT sans the option to pass on this cost to the Central Bank, with the total prejudice in money terms being equivalent to the 10% VAT levied on its sales of gold to the Central Bank.

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Even assuming that the right to recover Benguets excess payment of income tax has not yet prescribed, this relief would only address Benguets overpayment of income tax but not the other burdens discussed above. Verily, this remedy is not a feasible option for Benguet because the very reason why it was issued a deficiency tax assessment is that its input VAT was not enough to offset its retroactive output VAT. Indeed, the burden of having to go through an unnecessary and cumbersome refund process is prejudice enough.

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CIR v Bursmeiters & Wain Scandinavian GR 153205; January 22, 2007

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FACTS: A foreign consortium, parent company of Burmeister, entered into an O&M contract with NPC. The foreign entity then subcontracted the actual O&M to Burmeister. NPC paid the foreign consortium a mixture of currencies while the consortium, in turn, paid Burmeister foreign currency inwardly remitted into the Philippines. BIR did not want to grant refund since the services are not destined for consumption abroad (or the destination principle). ISSUE: Are the receipts of Burmeister entitled to VAT zero-rated status? HELD: PARTIALLY. Respondent is entitled to the refund prayed for BUT ONLY for the period covered prior to the filing of CIRs Answer in the CTA. The claim has no merit since the consortium, which was the recipient of services rendered by Burmeister, was deemed doing business within the Philippines since its 15year O&M with NPC can not be interpreted as an isolated transaction. In addition, the services referring to processing, manufacturing, repacking and services other than those in (1) of Sec. 102 both require (i) payment in foreign currency; (ii) inward remittance; (iii) accounted for by the BSP; AND (iv) that the service recipient is doing business outside the Philippines. The Court ruled that if this is not the case, taxpayers can circumvent just by stipulating payment in foreign currency. The refund was partially allowed since Burmeister secured a ruling from the BIR allowing zero-rating of its sales to foreign consortium. However, the ruling is only valid until the time that CIR filed its Answer in the CTA which is deemed revocation of the previously-issued ruling. The Court said the revocation can not retroact since none of the instances in Section 246 (bad faith, omission of facts, etc.) are present.

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CIR vs. HANTEX TRADING CO., INC. G.R. No. 136975; March 31, 2005

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FACTS: Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale of plastic products, it imports synthetic resin and other chemicals for the manufacture of its products. For this purpose, it is required to file an Import Entry and Internal Revenue Declaration (Consumption Entry) with the Bureau of Customs under Section 1301 of the Tariff and Customs Code. Sometime in October 1989, Lt. Vicente Amoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and Investigation Bureau (EIIB), received confidential information that the respondent had imported synthetic resin amounting to P115,599,018.00 but only declared P45,538,694.57. Thus, Hentex receive a subpoena to present its books of account which it failed to do. The bureau cannot find any original copies of the products Hentex imported since the originals were eaten by termites. Thus, the Bureau relied on the certified copies of the respondents Profit and Loss Statement for 1987 and 1988 on file with the SEC, the machine copies of the Consumption Entries, Series of 1987, submitted by the informer, as well as excerpts from the entries certified by Tomas and Danganan. The case was submitted to the CTA which ruled that Hentex have tax deficiency and is ordered to pay, per investigation of the Bureau. The CA ruled that the income and sales tax deficiency assessments issued by the petitioner were unlawful and baseless since the copies of the import entries relied upon in computing the deficiency tax of the respondent were not duly authenticated by the public officer charged with their custody, nor verified under oath by the EIIB and the BIR investigators. ISSUE: Whether or not the final assessment of the petitioner against the respondent for deficiency income tax and sales tax for the latters 1987 importation of resins and calcium bicarbonate is based on competent evidence and the law. HELD: Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides that the Commissioner of Internal Revenue has the power to make assessments and prescribe additional requirements for tax administration and enforcement. Among such powers are those provided in paragraph (b), which provides that Failure to submit required returns, statements, reports and other documents. When a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by law or regulation or when there is reason to believe that any such report is false, incomplete or erroneous, the

Commissioner shall assess the proper tax on the best evidence obtainable. This provision applies when the Commissioner of Internal Revenue undertakes to perform her administrative duty of assessing the proper tax against a taxpayer, to make a return in case of a taxpayers failure to file one, or to amend a return already filed in the BIR. The best evidence envisaged in Section 16 of the 1977 NIRC, as amended, includes the corporate and accounting records of the taxpayer who is the subject of the assessment process, the accounting records of other taxpayers engaged in the same line of business, including their gross profit and net profit sales. Such evidence also includes data, record, paper, document or any evidence gathered by internal revenue officers from other taxpayers who had personal transactions or from whom the subject taxpayer received any income; and record, data, document and information secured from government offices or agencies, such as the SEC, the Central Bank of the Philippines, the Bureau of Customs, and the Tariff and Customs Commission. However, the best evidence obtainable under Section 16 of the 1977 NIRC, as amended, does not include mere photocopies of records/documents. The petitioner, in making a preliminary and final tax deficiency assessment against a taxpayer, cannot anchor the said assessment on mere machine copies of records/documents. Mere photocopies of the Consumption Entries have no probative weight if offered as proof of the contents thereof. The reason for this is that such copies are mere scraps of paper and are of no probative value as basis for any deficiency income or business taxes against a taxpayer.

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Companies exempt from zero-rate tax

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BPI v CIR G.R No. 139786; October 17, 2005

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FACTS: The BIR issued an Assessment for a deficiency of Documentary Stamp Tax (DST). The petitioner filed a protest letter, requesting for reconsideration with BIR however the latter did not reply. Instead, BIR issued a warrant for distraint/levy against petitioner BPI. The petitioner did not hear from BIR until September 11, 1997 when then Commissioner Liwayway Vinzons-Chado, denied its request for reconsideration. Subsequently, the petitioner filed a petition for review with the CTA, raising the defense of prescription. The CTA denied the petition and held that the period of prescription had not yet prescribed nonetheless, it held that the petitioner was not liable for the deficiency of DST. On appeal, the CA reversed the ruling of CTA on the issue of DST tax and held that the petitioner was indeed liable for DST. ISSUE: Whether or not the right of the respondent to collect from petitioner BPIis barred by prescription? HELD : Yes, the Court ruled that the period to collect has already prescribed. The BIR has three years, counted from the date of actual filing of the return or from the last date prescribed by law for the filing of such return, whichever comes later, to assess a national internal revenue tax or to begin a court proceeding or the collection thereof without an assessment. In case of a false or fraudulent return with intent to evade tax or the failure to file any return at all, the prescriptive period for assessment of the tax due shall be 10 years from discovery by the BIR of the falsity, fraud, or omission. When the BIR validly issues an assessment, within either the three-year or ten-year period, whichever is appropriate, then the BIR has another three years after the assessment within which to collect the national internal revenue tax due thereon by distraint, levy, and/or court proceeding. The assessment of the tax is deemed made and the three-year period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent by the BIR to the taxpayer. In their Decisions, both the CTA and the Court of Appeals found that the filing by petitioner BPI of a protest letter suspended the running of the prescriptive period for collecting the assessed DST. This Court, however, takes the opposing view, and, based on the succeeding discussion, concludes that there is no valid ground for suspending the running of the prescriptive period for collection of the deficiency DST assessed against petitioner BPI.

The statute of limitations on assessment and collection of taxes is for the protection of the taxpayer and, thus, shall be construed liberally in his favor

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ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL vs. CIR GR. No. 155541; January 27, 2004

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FACTS: During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs were managed by the Philippine Trust Company (PhilTrust). The decedent died on April 3, 1979 but two days after her death, PhilTrust filed her income tax return for 1978 not indicating that the decedent had died. The BIR conducted an administrative investigation of the decedents tax liability and found a deficiency income tax for the year 1997 in the amount of P318,233.93. Thus, in November 18, 1982, the BIR sent by registered mail a demand letter and assessment notice addressed to the decedent c/o PhilTrust, Sta. Cruz, Manila, which was the address stated in her 1978 income tax return. On June 18, 1984, respondent Commissioner of Internal Revenue issued warrants of distraint and levy to enforce the collection of decedents deficiency income tax liability and serve the same upon her heir, Francisco Gabriel. On November 22, 1984, Commissioner filed a motion to allow his claim with probate court for the deficiency tax. The Court denied BIRs claim against the estate on the ground that no proper notice of the tax assessment was made on the proper party. On appeal, the CA held that BIRs service on PhilTrust of the notice of assessment was binding on the estate as PhilTrust failed in its legal duty to inform the respondent of antecedents death. Consequently, as the estate failed to question the assessment within the statutory period of thirty days, the assessment became final, executory, and incontestable. ISSUE/S: (1) Whether or not the CA erred in holding that the service of deficiency tax assessment on Juliana through PhilTrust was a valid service as to bind the estate; (2) Whether or not the CA erred in holding that the tax assessment had become final, executory, and incontestable.

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HELD: (1) Since the relationship between PhilTrust and the decedent was automatically severed the moment of the taxpayers death, none of the PhilTrusts acts or omissions could bind the estate of the taxpayer. Although the administrator of the estate may have been remiss in his legal obligation to inform respondent of the decedents death, the consequence thereof merely refer to the imposition of certain penal sanction on the administrator. These do not include the indefinite tolling of the prescriptive period for

making deficiency tax assessment or waiver of the notice requirement for such assessment. (2) The assessment was served not even on an heir or the estate but on a completely disinterested party. This improper service was clearly not binding on the petitioner. The most crucial point to be remembered is that PhilTust had absolutely no legal relationship with the deceased or to her Estate. There was therefore no assessment served on the estate as to the alleged underpayment of tax. Absent this assessment, no proceeding could be initiated in court for collection of said tax; therefore, it could not have become final, executory and incontestable. Respondents claim for collection filed with the court only on November 22, 1984 was barred for having been made beyond the five-year prescriptive period set by law.

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CIR v. Tulio GR139858; October 25, 2005.

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FACTS: This involves the collection of percentage taxes for 1986 and 1987. Tulio did not file tax returns. BIR discovered on September 14 1989. RTC dismissed BIR collection case on the ground of prescription. It counted 3 years from the return was supposed to be filed with the BIR instead of 10 yrs from discovery of omission to file return by the respondent. ISSUE: Whether petitioners cause of action for the collection of deficiency percentage taxes against respondent has prescribed. HELD: The lower court erroneously applied Section 203 of the same Code providing for the three-year prescriptive period from the filing of the tax return within which internal revenue taxes shall be assessed. It held that such period should be counted from the day the return was filed, or from August 15, 1990 up to August 15, 1993. However, as shown by the records, respondent failed to file a tax return, forcing petitioner to invoke the powers of his office in tax administration and enforcement. Respondents failure to file his tax returns is thus covered by Section 223 providing for a ten-year prescriptive period within which a proceeding in court may be filed. Here, respondent failed to file his tax returns for 1986 and 1987. On September 14, 1989, petitioner found respondents omission. Hence, the running of the ten-year prescriptive period within which to assess and collect the taxes due from respondent commenced on that date until September 14, 1999. The two final assessment notices were issued on February 28, 1991, well within the prescriptive period of three (3) years. When respondent failed to question or protest the deficiency assessments thirty (30) days therefrom, or until March 30, 1991, the same became final and executory.

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Oceanic Wireless v. CIR GR NO. 148380, December 9, 2005

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FACTS: On March 17, 1988, petitioner received from the Bureau of Internal Revenue (BIR) deficiency tax assessments for the taxable year 1984 in the total amount of P8,644,998.71. Petitioner filed its protest against the tax assessments and requested a reconsideration or cancellation of the same in a letter to the BIR Commissioner. Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and Billing Division, Mr. Severino B. Buot, reiterated the tax assessments while denying petitioners request for reinvestigation. Said letter likewise requested petitioner to pay within 10 days from receipt thereof, otherwise the case shall be referred to the Collection Enforcement Division of the BIR National Office for the issuance of a warrant of distraint and levy without further notice. Upon petitioners failure to pay the subject tax assessments within the prescribed period, the Assistant Commissioner for Collection, acting for the Commissioner of Internal Revenue, issued the corresponding warrants of distraint and/or levy and garnishment. Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to contest the issuance of the warrants to enforce the collection of the tax assessments. The CTA dismissed the petition for lack of jurisdiction. Petitioner filed a Motion for Reconsideration arguing that the demand letter cannot be considered as the final decision of the Commissioner of Internal Revenue on its protest because the same was signed by a mere subordinate and not by the Commissioner himself. With the denial of its motion for reconsideration, petitioner consequently filed a Petition for Review with the Court of Appeals contending that there was no final decision to speak of because the Commissioner had yet to make a personal determination as regards the merits of petitioners case. The Court of Appeals denied the petition. ISSUE: Whether the demand letter for tax deficiency issued and signed by a subordinate officer who was acting in behalf of the CIR is deemed final and executor and subject to an appeal to the CTA.

HELD: YES. A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. The determination on whether or not a demand letter is final is conditioned upon the language used or the tenor of the letter being sent to the taxpayer. In this case, the letter of demand, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioners request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested its payment. Failure to do so would result in the issuance of a warrant of distraint and levy to enforce its collection without further notice. In addition, the letter contained a notation indicating that petitioners request for reconsideration had been denied for lack of supporting documents. The demand letter received by petitioner verily signified a character of finality. Therefore, it was tantamount to a rejection of the request for reconsideration. This now brings us to the crux of the matter as to whether said demand letter indeed attained finality despite the fact that it was issued and signed by the Chief of the Accounts Receivable and Billing Division instead of the BIR Commissioner. The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted to him under the National Internal Revenue Code (NIRC) enumerated in Section . As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR Commissioner to delegate the powers vested in him under the pertinent provisions of the Code to any subordinate official with the rank equivalent to a division chief or higher, except the following: (a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance; (b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau; (c) The power to compromise or abate under Section 204(A) and (B) of this Code, any tax deficiency: Provided, however, that assessments issued by the Regional Offices involving basic deficiency taxes of five hundred thousand pesos (P500,000) or less, and minor criminal violations as may be determined by rules and regulations to be promulgated by the Secretary of Finance, upon the recommendation of the Commissioner, discovered by regional and district officials, may be compromised by a regional evaluation board which shall be composed of the Regional Director as Chairman, the Assistant Regional Director, heads of the Legal, Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer, as members; and

(d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept. It is clear from the above provision that the act of issuance of the demand letter by the Chief of the Accounts Receivable and Billing Division does not fall under any of the exceptions that have been mentioned as non-delegable. Thus, the authority to make tax assessments may be delegated to subordinate officers. Said assessment has the same force and effect.

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Philam Asset Management, Inc. vs CTA G.R.156637 and 162004; December 14, 2005

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FACTS: Petitioner acts as investment manager of PFI &PBFI. It provides management &technical services and thus respectively paid for its services. PFI & PBFI withhold the amount of equivalent to 5% creditable tax regulation. On April 3, 1998, filed ITR with a net loss thus incurred withholding tax. Petitioner filed for refund from BIR but was unanswered . CTA denied the petition for review. CA held that to request for either a refund or credit of income tax paid, a corporation must signify its intention by marking the corresponding box on its annual corporate adjustment return. ISSUE: Whether or not petitioner is entitled to a refund of its creditible taxes. HELD: Any tax income that is paid in excess of its amount due to the government may be refunded, provided that a taxpayer properly applies for the refund. One can not get a tax refund and a tax credit at the same time for the same excess to income taxes paid. Failure to signify ones intention in Final Assessment Return (FAR) does not mean outright barring of a valid request for a refund Requiring that the ITR on the FAR of the succeeding year be presented to the BIR in requesting a tax refund has no basis in law and jurisprudence. The Tax Code likewise allows the refund of taxes to taxpayer that claims it in writing within 2 years after payment of the taxes. Technicalities and legalism should not be misused by the government to keep money not belonging to it, and thereby enriched itself at the expense of its law-abiding citizens.

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Philippine Journalist, Inc. v. CIR G.R. No. 162852; December 16, 2004

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FACTS: In 1995, the Bureau of Internal Revenue (BIR) issued Letter of Authority for two Revenue Officers to examine petitioners books of account and other accounting records for internal revenue taxes for the period January 1, 1994 to December 31, 1994. In 1997, petitioners Comptroller, executed a "Waiver of the Statute of Limitation Under the National Internal Revenue Code (NIRC)". The document "waive[d] the running of the prescriptive period provided by Sections 223 and 224 and other relevant provisions of the NIRC and consent[ed] to the assessment and collection of taxes which may be found due after the examination at any time after the lapse of the period of limitations fixed by said Sections 223 and 224 and other relevant provisions of the NIRC, until the completion of the investigation. In 1998, Revenue Officer submitted his audit report recommending the issuance of an assessment and finding that petitioner had deficiency taxes. Subsequently, the Assessment Division of the BIR issued Pre-Assessment Notices which informed petitioner of the results of the investigation. Thus, BIR issued Assessment/Demand stating the deficiency taxes, inclusive of interest and compromise penalty On March 16, 1999, a Preliminary Collection Letter was sent by Deputy Commissioner Romeo S. Panganiban to the petitioner to pay the assessment within ten (10) days from receipt of the letter. On November 10, 1999, a Final Notice Before Seizure was issued by the same deputy commissioner giving the petitioner ten (10) days from receipt to pay. Petitioner received a copy of the final notice on November 24, 1999. By letters dated November 26, 1999, petitioner asked to be clarified how the tax liability of P111,291,214.46 was reached and requested an extension of thirty (30) days from receipt of the clarification within which to reply. The BIR received a follow-up letter from the petitioner asserting that its (PJI) records do not show receipt of Tax Assessment/Demand. Petitioner also contested that the assessment had no factual and legal basis. On March 28, 2000, a Warrant of Distraint and/or Levy was received by the petitioner. Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) which was amended on May 12, 2000. Petitioner complains: (a) that no assessment or demand was received from the BIR; (b) that the warrant of distraint and/or levy was without factual and legal bases as its issuance was premature; (c) that the assessment, having been made beyond the 3-year prescriptive period, is null and void; (d) that the issuance of the warrant without being given the opportunity to dispute the same violates its right

to due process; and (e) that the grave prejudice that will be sustained if the warrant is enforced is enough basis for the issuance of the writ of preliminary injunction. CTA ruled in favor of PJI. It declared that the deficiency income, value-added and expanded withholding tax assessments issued by the respondent against the petitioner on December 9, 1998, in the total amount of P111,291,214.46 for the year 1994 ANCELLED, WITHDRAWN and WITH NO FORCE AND EFFECT. Likewise, it declared that the Warrant of Distraint and/or Levy No. 33-06-046 NULL and VOID. On appeal CA ruled that Mere assessment notices which have become final after the lapse of the thirty (30)-day reglementary period are not appealable. Thus, the CTA should not have entertained the petition at all. Also, it ruled that there is a valid waiver thus the running of the prescriptive period is tolled. ISSUE/S: (1) whether or not CTA has jurisdiction over the issues in this case. (2) Whether or not the Waiver of the Statute of Limitations is valid and binding on the petitioner HELD: (1) No. The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the Commissioner of Internal Revenue on matters relating to assessments or refunds. The second part of the provision covers other cases that arise out of the NIRC or related laws administered by the Bureau of Internal Revenue. The wording of the provision is clear and simple. It gives the CTA the jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was validly effected. (2) No. As found by the CTA, the Waiver of Statute of Limitations, signed by petitioners comptroller on September 22, 1997 is not valid and binding because it does not conform with the provisions of RMO No. 20-90. It did not specify a definite agreed date between the BIR and petitioner, within which the former may assess and collect revenue taxes. Thus, petitioners waiver became unlimited in time, violating Section 222(b) of the NIRC. The waiver document is being incomplete and defective, the three-year prescriptive period was not tolled or extended and continued to run until April 17, 1998. Consequently, the Assessment/Demand No. 33-1-000757-94 issued on December 9, 1998 was invalid because it was issued beyond the three (3) year period. In the same manner, Warrant of Distraint and/or Levy No. 33-06-046 which petitioner received on March 28, 2000 is also null and void for having been issued pursuant to an invalid assessment.

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Rafael Arsenio S. Dizon, v. CTA and CIR G.R. No. 140944; April 30, 2008

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FACTS: Jose P. Fernandez died in November 7, 1987. Thereafter, a petition for the probate of his will was filed. The probate court appointed Atty. Rafael Arsenio P. Dizon as administrator of the Estate of Jose Fernandez. An estate tax return was filed later on which showed ZERO estate tax liability. BIR thereafter issued a deficiency estate tax assessment, demanding payment of Php 66.97 million as deficiency estate tax. This was subsequently reduced by CTA to Php 37.42 million. The CA affirmed the CTAs ruling, hence, the instant petition. The petitioner claims that in as much as the valid claims of creditors against the Estate are in excess of the gross estate, no estate tax was due. On the other hand, respondents argue that since the claims of the Estates creditors have been condoned, such claims may no longer be deducted from the gross estate of the decedent. ISSUE: Whether the actual claims of creditors may be fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were reduced or condoned through compromise agreements entered into by the Estate with its creditors HELD: YES. Following the US Supreme Courts ruling in Ithaca Trust Co. v. United States, the Court held that post-death developments are not material in determining the amount of deduction. This is because estate tax is a tax imposed on the act of transferring property by will or intestacy and, because the act on which the tax is levied occurs at a discrete time, i.e., the instance of death, the net value of the property transferred should be ascertained, as nearly as possible, as of the that time. This is the date-of-death valuation rule. The Court, in adopting the date-of-death valuation principle, explained that: First. There is no law, nor do we discern any legislative intent in our tax laws, which disregards the date-of-death valuation principle and particularly provides that post-death developments must be considered in determining the net value of the estate. It bears emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the government. Second. Such construction finds relevance and consistency in our Rules on Special Proceedings wherein the term "claims" required to be presented against a decedent's estate is generally construed to mean debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime,

or liability contracted by the deceased before his death. Therefore, the claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable deductions.

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Pilipinas Shell Petrolium Corp v. CIR G.R. No. 172598; December 21, 2007

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FACTS: In 1988, BIR sent a collection letter to Petitioner Pilipinas Shell Petroleum Corporation (PSPC) for alleged deficiency excise tax liabilities of PhP 1,705,028,008.06 for the taxable years 1992 and 1994 to 1997, inclusive of delinquency surcharges and interest. As basis for the collection letter, the BIR alleged that PSPC is not a qualified transferee of the TCCs it acquired from other BOI-registered companies. These alleged excise tax deficiencies covered by the collection letter were already paid by PSPC with TCCs acquired through, and issued and duly authorized by the Center, and duly covered by Tax Debit Memoranda (TDM) of both the Center and BIR, with the latter also issuing the corresponding Accept Payment for Excise Taxes (APETs). PSPC protested the collection letter, but it was denied. Because of respondent inaction on a motion for reconsideration PSPC filed a petition for review before the CTA. In 1999, the CTA ruled that the use by PSPC of the TCCs was legal and valid, and that respondents attempt to collect alleged delinquent taxes and penalties from PSPC without an assessment constitutes denial of due process. Respondent elevated CTA Decision to the Court of Appeals (CA) through a petition for review. Despite the pendency of this case, PSPC received assessment letter from respondent for excise tax deficiencies, surcharges, and interest based on the first batch of cancelled TCCs and TDM covering PSPCs use of the TCCs. All these cancelled TDM and TCCs were also part of the subject matter of the now pending before the CA. PSPC protested the assessment letter, but the protest was denied by the BIR, constraining it to file another case before the CTA. Subsequently, CTA ruled in favor of PSPC and accordingly cancelled and set aside the assessment issued by the respondent. Respondent motion for reconsideration of the above decision which was rejected thus respondent appealed the above decision before the CTA En Banc.

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The CTA En Banc ruled in favor of respondent and ordered PSPC to pay the amount of P570,577,401.61 as deficiency excise tax for the taxable years 1992 and 1994 to 1997, inclusive of 25% surcharge and 20% interest. ISSUE: Whether or not petitioner is liable for the assessment of deficiency excise tax after the validly issued TCCs were subsequently cancelled for having been issued fraudulently

HELD: No. Petitioner is not liable for the assessment of deficiency excise tax. In the instant case, with due application, approval, and acceptance of the payment by PSPC of the subject TCCs for its then outstanding excise tax liabilities in 1992 and 1994 to 1997, the subject TCCs have been canceled as the money value of the tax credits these represented have been used up. Therefore, the DOF through the Center may not now cancel the subject TCCs as these have already been canceled and used up after their acceptance as payment for PSPCs excise tax liabilities. What has been used up, debited, and canceled cannot anymore be declared to be void, ineffective, and canceled anew. Besides, it is indubitable that with the issuance of the corresponding TDM, not only is the TCC canceled when fully utilized, but the payment is also final subject only to a post-audit on computational errors. Under RR 5-2000, a TDM is a certification, duly issued by the Commissioner or his duly authorized representative, reduced in a BIR Accountable Form in accordance with the prescribed formalities, acknowledging that the taxpayer named therein has duly paid his internal revenue tax liability in the form of and through the use of a Tax Credit Certificate, duly issued and existing in accordance with the provisions of these Regulations. The Tax Debit Memo shall serve as the official receipt from the BIR evidencing a taxpayers payment or satisfaction of his tax obligation. The amount shown therein shall be charged against and deducted from the credit balance of the aforesaid Tax Credit Certificate. Thus, with the due issuance of TDM by the Center and TDM by the BIR, the payments made by PSPC with the use of the subject TCCs have been effected and consummated as the TDMs serve as the official receipts evidencing PSPCs payment or satisfaction of its tax obligation. Moreover, the BIR not only issued the corresponding TDM, but it also issued ATAPETs which doubly show the payment of the subject excise taxes of PSPC. Based on the above discussion, we hold that respondent erroneously and without factual and legal basis levied the assessment. Consequently, the CTA En Banc erred in sustaining respondents assessment.

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CIR v. Primetown Property Group GR 161155; August 28, 2007

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FACTS: Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the refund or credit of income tax respondents paid in 1997. The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim a refund or credit commenced on that date. According to the CTA, the twoyear prescriptive period under Section 229 of the NIRC for the filing of judicial claims was equivalent to 730 days. Because the year 2000 was a leap year, respondent's petition, which was filed 731 days after respondent filed its final adjusted return, was filed beyond the reglementary period. On appeal, the CA reversed and set aside the decision of the CTA. It ruled that Article 13 of the Civil Code did not distinguish between a regular year and a leap year. According to the CA, even if the year 2000 was a leap year, the periods covered by April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000 should still be counted as 365 days each or a total of 730 days. A statute which is clear and explicit shall be neither interpreted nor construed. ISSUE: Whether or not the counting of the 2-year prescriptive period for filing claim of refund is governed by the Civil Code. HELD: Counting of 2-year period for filing claim for refund is no longer in accordance with Art 13 of the Civil Code but under Sec 31 of EO 227 - The Administrative Code of 1987. As between the Civil Code, which provides that a year is equivalent to 365 days, and the Administrative Code of 1987, which states that a year is composed of 12 calendar months, it is the latter that must prevail being the more recent law, following the legal maxim, Lex posteriori derogat priori. In the case at bar, there are 24 calendar months in 2 years. For a Final Corporate ITR filed on Apr 14, 1998, the counting should start from Apr 15, 1998 and end on Apr 14, 2000. The procedure is 1st month -Apr 15, 1998 to May 14, 1998 . 24th month Mar 15, 2000 to Apr 14, 2000. National Marketing v. Tecson, 139 Phil 584 (1969) is no longer controlling. The 2-year period should start to run from filing of the final adjusted return.

We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th calendar month from the day respondent filed its final adjusted return. Hence, it was filed within the reglementary period

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CIR vs. Reyes and Reyes vs. CIR GR Nos. 159694 & 163581

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FACTS: Decedent Tancinco left a 1,292 square-meter residential lot and an old house thereon. The heirs of the decedent received a final estate tax assessment notice and a demand letter, both dated April 22, 1998, for the amount of P14,912,205.47, inclusive of surcharge and interest. The CIR issued a preliminary collection letter to Reyes, followed by a Final Notice Before Seizure. Subsequently, a Warrant of Distraint and/or Levy was served upon the estate. Reyes initially protested the notice of levy but then the heirs proposed a compromise settlement of P1,000,000.00. The CIR rejected Reyess offer, pointing out that since the estate tax is a charge on the estate and not on the heirs, the latters financial incapacity is immaterial as, in fact, the gross value of the estate amounting to P32,420,360.00 is more than sufficient to settle the tax liability. As the estate failed to pay its tax liability within the deadline, BIR notified Reyes that the subject property would be sold at public auction on August 8, 2000. Reyes filed a protest with the BIR Appellate Division. Assailing the scheduled auction sale, she asserted that the assessment, letter of demand, and the whole tax proceedings against the estate are void ab initio. She offered to file the corresponding estate tax return and pay the correct amount of tax without surcharge or interest. ISSUE: WON the assessment in this case can be used as a basis for the perfection of a tax compromise. HELD: NO. The 2nd paragraph of Sec. 228 of NIRC is clear and mandatory insofar as taxpayers shall be informed in writing of the law and the facts on which the assessment is made, otherwise the assessment shall be void. RA 8424 has already amended the provisions of Sec. 229 of NIRC on protesting an assessment. The old requirement of merely notifying the taxpayer of the CIRs findings was changed in 1998 of informing the taxpayer of not only the law, but also of the facts on which an assessment would be made, otherwise, the assessment itself would be invalid. Being invalid, the assessment canot be in turn be used as a basis for the perfection of a tax compromise. Hence, it is premature to declare the compromise on the tax liability of the estate perfected and consummated considering that the tax assessment is void. While administrative agencies, like the BIR, were not bound by procedural requirements, they were still required by law and equity to observe substantive due process. The reason behind this requirement, said the CA, was to ensure that taxpayers would be duly apprised of -- and could effectively protest -- the basis of tax assessments against them.

7 Since the assessment and the demand were void, the proceedings emanating from them were likewise void, and any order emanating from them could never attain finality.

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CIR vs. First Express Pawnshop Company, Inc. G.R. Nos. 172045-46; June 16 2009

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FACTS: CIR issued assessment notices against Respondent for deficiency income tax, VAT and documentary stamp tax on deposit on subscription and on pawn tickets. Respondent filed its written protest on the assessments. When CIR did not act on the protest during the 180-day period, respondent filed a petition before the CTA. ISSUE: Has Respondents right to dispute the assessment in the CTA prescribed? HELD: NO. The assessment against Respondent has not become final and unappealable. It cannot be said that respondent failed to submit relevant supporting documents that would render the assessment final because when respondent submitted its protest, respondent attached all the documents it felt were necessary to support its claim. Further, CIR cannot insist on the submission of proof of DST payment because such document does not exist as respondent claims that it is not liable to pay, and has not paid, the DST on the deposit on subscription. The term "relevant supporting documents" are those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submit additional documents and cannot demand what type of supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that a taxpayer cannot submit. Since the taxpayer is deemed to have submitted all supporting documents at the time of filing of its protest, the 180-day period likewise started to run on that same date.

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CIR vs. Enron Subic Power Corp GR No. 166387; January 19, 2009

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FACTS: The BIR assessed Enron which countered by filing a Petition for Review with the CTA stating that the assessment disregarded the provisions of the Tax Code and of RR No. 12-99, when the assessment failed to provide the legal and factual bases of the assessment. The CTA and CA ruled that the assessment notice must not only refer to the supporting revenue laws or regulations for the assessment but must also justify their applicability to the factual milieu of the assessment. ISSUE: Is the disputed assessment valid? HELD: NO. The assessment is not valid. Although the revenue examiners discussed their findings with Respondents representative during the pre-assessment stage, the same, together with the Preliminary Five-Day Letter and Petitioners Annex G, were not sufficient to comply with the procedural requirement of due process. The Tax Code provides that a taxpayer shall be informed (and not merely notified as was the requirement before) in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. The use of the word shall indicates the mandatory nature of the requirement.

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TFS Inc. v. CIR G.R. No. 166829; April 19, 2010 FACTS: The CTA rendered a Decision upholding the assessment issued against petitioner in the amount of P11,905,696.32, representing deficiency VAT for the year 1998, inclusive of 25% surcharge and 20% deficiency interest, plus 20% delinquency interest from February 25, 2002 until full payment, pursuant to Sections 248 and 249(B) of the National Internal Revenue Code of 1997 (NIRC). The CTA ruled that pawnshops are subject to VAT under Section 108(A) of the NIRC as they are engaged in the sale of services for a fee, remuneration or consideration. Petitioner filed before the Court of Appeals a Petition for Review but it was dismissed by the CA for lack of jurisdiction in view of the enactment of Republic Act No. 9282 (RA 9282). Realizing its error, petitioner filed a Petition for Review with the CTA En Banc. The petition, however, was dismissed for having been filed out of time. Petitioner filed a Motion for Reconsideration but it was denied. ISSUE/S: (1) Whether the Honorable court of Tax Appeal en banc should have given due course to the petition for review and not strictly applied the technical rules of procedure to the detriment of justice; (2) Whether or not petitioner is subject to the 10% VAT. HELD: (1) The petition is meritorious. Jurisdiction to review decisions or resolutions issued by the Divisions of the CTA is no longer with the CA but with the CTA En Banc. This rule is embodied in Section 11 of RA 9282. In the instant case, we are constrained to disregard procedural rules because we cannot in conscience allow the government to collect deficiency VAT from petitioner considering that the government has no right at all to collect or to receive the same. Besides, dismissing this case on a mere technicality would lead to the unjust enrichment of the government at the expense of petitioner, which we cannot permit. Technicalities should never be used as a shield to perpetrate or commit an injustice. (2) Petitioner disputes the assessment made by the BIR for VAT deficiency in the amount of P11,905,696.32 for taxable year 1998 on the ground that pawnshops are not included in the coverage of VAT. We agree. x x x Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax years 1996 to 2002; however, with the levy, assessment and

collection of VAT from non-bank financial intermediaries being specifically deferred by law, then petitioner is not liable for VAT during these tax years. But with the full implementation of the VAT system on non-bank financial intermediaries starting January 1, 2003, petitioner is liable for 10% VAT for said tax year. And beginning 2004 up to the present, by virtue of R.A. No. 9238, petitioner is no longer liable for VAT but it is subject to percentage tax on gross receipts from 0% to 5%, as the case may be. Guided by the foregoing, petitioner is not liable for VAT for the year 1998. Consequently, the VAT deficiency assessment issued by the BIR against petitioner has no legal basis and must therefore be cancelled. In the same vein, the imposition of surcharge and interest must be deleted.

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CIR. Commissioner of Internal Revenue v. Fort Bonifacio Development Corporation, G.R. No. 167606, August 11, 2010 FACTS: Petitioner was a real estate developer that bought from the national government a parcel of land that used to be the Fort Bonifacio military reservation. At the time of the said sale there was as yet no VAT imposed so Petitioner did not pay any VAT on its purchase. Subsequently, Petitioner sold two parcels of land to Metro Pacific Corp. In reporting the said sale for VAT purposes (because the VAT had already been imposed in the interim), Petitioner claimed transitional input VAT corresponding to its inventory of land. The BIR disallowed the claim of presumptive input VAT and thereby assessed Petitioner for deficiency VAT. ISSUE: Is Petitioner entitled to claim the transitional input VAT on its sale of real properties given its nature as a real estate dealer and if so (i) is the transitional input VAT applied only to the improvements on the real property or is it applied on the value of the entire real property and (ii) should there have been a previous tax payment for the transitional input VAT to be creditable? HELD: YES. Petitioner is entitled to claim transitional input VAT based on the value of not only the improvements but on the value of the entire real property and regardless of whether there was in fact actual payment on the purchase of the real property or not. The amendments to the VAT law do not show any intention to make those in the real estate business subject to a different treatment from those engaged in the sale of other goods or properties or in any other commercial trade or business. On the scope of the basis for determining the available transitional input VAT, the CIR has no power to limit the meaning and coverage of the term "goods" in Section 105 of the Tax Code without statutory authority or basis. The transitional input tax credit operates to benefit newly VAT-registered persons, whether or not they previously paid taxes in the acquisition of their beginning inventory of goods, materials and supplies. Appeal; right to appeal; Perfection of an appeal in the manner and within the period laid down by law is not only mandatory but also jurisdictional. The right to appeal is not a natural right and is also not part of due process. It is merely a statutory privilege and may be exercised only in the manner and in accordance with the provisions of law. One who seeks to avail of the right to appeal must comply with the requirements for the Rules of Court and failure to do so often leads to the loss of the right to appeal. The failure to timely perfect an appeal is not a mere technicality for it is

jurisdictional. The claim that the government would suffer loss of substantial amount if not allowed to recover the tax refund in the amount of more than fifteen million pesos has been caused by petitioners own doing or undoing. While the Court understands petitioners counsels predicament of being burdened with a heavy case load, it cannot always rule in favor of the government. The failure to timely perfect an appeal cannot simply be dismissed as a mere technicality, for it is jurisdictional. The failure to perfect an appeal as required by the rules has the effect of defeating the right to appeal of a party and precluding the appellate court from acquiring jurisdiction over the case. The dismissal of the petition for review and the denial of the amended petition were premised on: (1) the late filing of the original petition for review by the Commissioner of Internal Revenue (CIR); (2) the absence of a motion for reconsideration of the January 29, 2002 Resolution; and (3) lack of authority of the legal officer of the BIR Region 8, Makati City, to pursue the case on behalf of petitioner CIR.

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Central Luzon Drug Corporation vs. CIR, G.R. No. 181371, March 2, 2011

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FACTS: Central Luzon Drug Corporation is a retailer of medicines and other pharmaceutical products. For the period January 1995 to December 1995, pursuant to the mandate of Section 4(a) of Republic Act No. 7432, otherwise known as the Senior Citizens Act, it granted a twenty percent (20%) discount on the sale of medicines to qualified senior citizens amounting to P219,778.00. It then deducted the same amount from its gross income for the taxable year 1995, pursuant to Revenue Regulations No. 2-94 implementing the Senior Citizens Act, which states that the discount given to senior citizens shall be deducted by the establishment from its gross sales for valueadded tax and other percentage tax purposes. For the said taxable period, Central Luzon Drug reported a net loss of P20,963.00 in its corporate income tax return, thus, it did not pay income tax for 1995. Subsequently, Central Luzon Drug filed a claim for refund in the amount of P150,193.00, claiming that according to Sec. 4(a) of the Senior Citizens Act, the amount of P219,778.00 should be applied as a tax credit. The Commissioner of Internal Revenue (CIR) was not able to decide the claim on time, hence, Central Luzon Drug filed a Petition for Review with the Court of Tax Appeals. The latter dismissed the petition, declaring that even if the law treats the 20% discount granted to senior citizens as a tax credit, the same cannot apply when there is no tax liability or the amount of the tax credit is greater than the tax due. In the latter case, the tax credit will only be to the extent of the tax liability. Also, no refund can be granted as no tax was erroneously, illegally and actually collected. Furthermore, the law does not state that a refund can be claimed by the establishment concerned as an alternative to the tax credit. Central Luzon Drug filed a Petition for Review with the Court of Appeals. The appellate court held that the 20% discount given to senior citizens which is treated as a tax credit is considered just compensation and, as such, may be carried over to the next taxable period if there is no current tax liability.

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ISSUE: Whether or not the 20% discount granted by Central Luzon Drug to qualified senior citizens pursuant to Sec. 4(a) of the Senior Citizens Act may be claimed as a tax credit or as a deduction from gross sales in accordance with Sec. 2(1) of Revenue Regulations No. 2-94

HELD: The petition is denied. Sec. 4(a) of the Senior Citizens Act provides: Sec. 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the following: (a) the grant of twenty percent (20%) discount from all establishments relative to utilization of transportations services, hotels and similar lodging establishments, restaurants and recreation centers and purchase of medicines anywhere in the country: Provided, That private establishments may claim the cost as tax credit. The above provision explicitly employed the term tax credit. Nothing in the provision suggests for it to mean a deduction from gross sales. Thus, the 20% discount required by the law to be given to senior citizens is a tax credit, not a deduction from the gross sales of the establishment concerned. As a corollary to this, the definition of tax credit found in Sect. 2(1) of Revenue Regulations No. 2-94 is erroneous as it refers to tax credit as the amount representing the 20% discount that shall be deducted by the said establishment from their gross sales for value added tax and other percentage tax purposes. When the law says that the cost of the discount may be claimed as a tax credit, it means that the amount, when claimed, shall be treated as a reduction from any tax liability. The law cannot be amended by a mere regulation. Finally, for purposes of clarity, Sec. 229 of the Tax Code does not apply to cases that fall under Sec. 4 of the Senior Citizens Act because the former provision governs exclusively all kinds of refund or credit of internal revenue taxes that were erroneously or illegally imposed and collected pursuant to the Tax Code while the latter extends the tax credit benefit to the private establishments concerned even before tax payments have been made. The tax credit that is contemplated under the Senior Citizens Act is a form of just compensation, not a remedy for taxes that were erroneously or illegally assessed and collected. In the same vein, prior payment of any tax liability is not a precondition before a taxable entity can benefit from the tax credit. The credit may be availed of upon payment of the tax due, if any. Where there is no tax liability or where a private establishment reports a net loss for the period, the tax credit can be availed of and carried over to the next taxable year. DOCTRINE: The twenty percent (20%) discount required by law to be given to senior citizens is a tax credit, not a deduction from the gross sales of the establishment concerned. As a corollary to this, the definition of tax credit found in Section 2(1) of Revenue Regulations 2-94 is erroneous, as it refers to tax credit as the amount representing the 20% discount that shall be deducted by the said establishment from their gross sales for value added tax and other percentage tax purposes. When the law says

that the cost of the discount may be claimed as a tax credit, it means that the amount, when claimed, shall be treated as a reduction from any tax liability. In the same vein, prior payment of any tax liability is not a precondition before a taxable entity can benefit from the tax credit. The credit may be availed of upon payment of the tax due, if any. Withdrawal of an appeal renders the assailed decision final and executory. Taxpayer, a corporation engaged in the retail of medicines and other pharmaceutical drugs, filed a claim for tax credit certificate pertaining to the 20% sales discounts granted to senior citizens for the year 2002. The CTA denied the claim for insufficiency of evidence. Thus, taxpayer filed its petition for review before the Supreme Court. Instead of filing a reply to the comments of the respondent, taxpayer filed a Motion to Withdraw, praying that the case be dismissed without prejudice. According to petitioner, the amount of tax credit being claimed for 2002 would just be included in its future claims for issuance of a tax credit certificate. The Court granted the motion but with prejudice. The Supreme Court said that by withdrawing the appeal, the taxpayer is deemed to have accepted the decision of the CTA. And since the CTA had already denied taxpayers request for the issuance of TCC for insufficiency of evidence, it may no longer be included in taxpayers future claims. Taxpayer cannot be allowed to circumvent the denial a of its request for tax credit by abandoning its appeal and filing a new claim. An appellant who withdraws his appeal x x x must face the consequence of his withdrawal, such as the decision of the court a quo becoming final and executory. In a tax refund case, when the taxpayer opted to file a Motion to Withdraw instead of complying with the courts order to file a reply during an appeal, petitioner is deemed to have accepted the decision of the CTA. And since the CTA had already denied petitioners request for the issuance of a tax credit certificate in the amount of P32, 170,409 for insufficiency of evidence, it may no longer be included in petitioners future claims. When an appeal is withdrawn, the assailed decision becomes final and executory.