SUMMARY OF SIGNIFICANT CTA DECISIONS (OCTOBER 2011)

1.
Issuance of a preliminary assessment notice (PAN) is part of the due process
requirement in the assessment of taxes.
In this case involving the assessment of withholding taxes, taxpayer denied receiving the
PAN. The Court ruled that the issuance of the PAN is part of the due process requirement in
the assessment of taxes and its indispensability is confirmed when the law and regulations
enumerated the only instances when it may not be issued. The failure to comply with the
notice requirement amounts to denial of taxpayers right to due process, effectively voiding
the assessment issued. The Court further ruled that when the taxpayer denied receiving the
PAN, it is incumbent upon the Commissioner to prove the receipt of the assessment notice.
(Unioil Corporation vs. Commissioner of Internal Revenue, CTA Case No. 8000,
October 4, 2011)
2.
When a city imposes local business tax on a bank or financial institution
pursuant to Section 143(f) of the Local Government Code, the same city may no
longer subject the same bank or financial institution under Section 143(h) of the same
Code.
The taxpayer paid taxes, under protest, as a commercial bank pursuant to Section 19 of
Manila Regulation Code (MRC) and at the same time taxes pursuant to Section 21 of the
same code for its operation for the taxable period of 2006. Section 19 is based on Section
143(f) of the Local Government Code while Section 21 is based in Section 143(h) of the
same Code. The court held that the taxpayer is taxed twice for the same subject matter,
which is the business of operating a bank; by the same taxing authority which is the City of
Manila; by the same jurisdiction, which also the City of Manila; for the same purpose, which
is to generate revenue for the City of Manila; and for the same taxing periods, which are the
first and second quarters of the taxable period of 2006. Thus, there is direct double taxation.
(China Banking Corporation v. Hon Liberty M. Toledo, CTA AC Case No. 69, October
20, 2011)
3.

The issue on prescription may be raised for the first time on appeal.

The taxpayer received the Final Decision on Assessment (FDDA) and Details of
Discrepancies on July 29, 2009, both dated July 22, 2009, for taxable year 2002 stating that
it is the final decision of Commissioner of Internal Revenue and if the taxpayer is not
agreeable, it may appeal with the Court of Tax Appeals (CTA) or to the Office of the
Commissioner of Internal Revenue within thirty (30) days from the date of receipt otherwise
the decision shall become final, executory and demandable. The taxpayer opted to appeal
the FDDA to the CTA within thirty (30) days from receipt and thus, became the only forum for
it to raise the issue of prescription. (Aerotech Industries Philippines, Inc. v.
Commissioner of Internal Revenue, CTA Case No. 7964, October 20, 2011)

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4.
The counting of the two-year prescriptive period is made from the date of filing
of the original final adjustment return and not from the date of filing of the amended
return.
The taxpayer submitted its FY 2006 amended Annual Income Tax Return, which was filed
on January 25, 2007 but failed to offer as evidence its FY 2006 original Annual Income tax
return. The Court held that the original return is important in order for the Court to ascertain
whether the filing of the administrative and judicial claims for refund or issuance of a tax
credit certificate was made within the two-year reglementary period. Absent such document,
the Court has no way of determining whether the claim was timely filed. The said original
return is also necessary for the Court to verify if petitioners original option was to be issued
a tax credit certificate for the unapplied creditable taxes withheld. (Maunsell Philippines,
Inc. v. Commissioner of Internal Revenue, CTA Case No. 7860, October 21, 2011).
5.
The issue of constitutionality or unconstitutionality of a local ordinance may be
invoked as a ground to protest the assessment under Section 195 of the Local
Government Code (LGC).
The City Assessors Office assessed the taxpayer for business taxes pursuant to the
Revised Makati Revenue Code (RMRC). Taxpayer filed a protest which was later denied by
the City Treasurer. The taxpayer filed an appeal before the RTC. The City of Makati argued
that although the taxpayer used the protest against the assessment as basis of its appeal
before the RTC, the latter was actually questioning the legality of the provision of RMRC.
The City asserts that the issue of constitutionality or unconstitutionality of a local ordinance
may not be invoked as a ground to protest assessment under Section 195 of the LGC. The
Court held that Section 195 of LGC does not enumerate nor restrict a protest of assessment
to specific grounds; thus, respondent has the right to raise as an issue the constitutionality of
the tax ordinance, which became the sole basis of the disputed assessment. (Sangguniang
Panglungsod of the City of Makati, Jejomar Binay and Nelia A. Barlis v. Chevron
Holdings, Inc., CTA AC No. 70, October 21, 2011).
6.
Once a taxpayer opted to carry-over its excess income tax payments, it can no
longer seek a refund of the unutilized excess income tax payments.
The Taxpayer paid the minimum corporate income tax in full for taxable year 1998 instead of
deducting prior years (1997) excess credits and creditable taxes withheld in 1998. It filed a
claim for refund contending that it failed to utilize such excess tax credits. The Court held
that Section 76 of National Internal Revenue Code provides that a taxpayer has the option to
file a claim for refund or to carry-over its excess income tax payments. The option to
carryover, however, is irrevocable. Thus, once a taxpayer opted to carry-over its excess
income tax payments, it can no longer seek a refund of the unutilized excess income tax
payments. The taxpayer, however, may apply the unutilized excess income tax payments as
a tax credit to the succeeding taxable years until such has been fully applied pursuant to
Section 76 of the NIRC. These two options under Section 76 are alternative in nature. The
choice of one precludes the other. (Asianbank Corporation v. Commissioner of Internal
Revenue, CTA Case No. 6095, October 21, 2011)

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7.
Relevant supporting documents lies on the sound discretion of the taxpayer
filing the protest.
The taxpayer filed a protest to the assessment and submitted relevant and pertinent
documents in support of its protest within the prescribed period. The protest was denied on
the ground that its alleged supporting documents did not substantiate its protest. The Court
believes that what are ' relevant supporting documents' lies on the sound discretion of the
taxpayer filing the protest. The purpose is to prevent the BIR from abusing its power by
always declaring insufficient the documents that petitioner will submit. This will lead to an
unending cycle and the taxpayer's protest will never be decided. In the case at bar, the
February 26, 2004 letter of petitioner showed that it submitted documents which it deemed
relevant to support its protest. Thus, respondent cannot say that petitioner did not submit
documents in accordance with Section 228 of the 1997 Tax Code. (Commissioner of
Internal Revenue v. Sydenham Laboratories, Inc., CTA EB No. 678, October 24, 2011)
8.
In order to qualify for VAT zero-rating under R.A. No. 9136, the taxpayer must
be able to establish that (1) it is a power generation company and (2) it derived sales
from power generation services.
The taxpayer claim that it is entitled for refund or issuance of Tax credit certificate since it is
a power generation company duly registered with and authorized by the Energy regulatory
Commission (ERC), its sales of electricity qualify for VAT zero-rating pursuant to Section 4
(x) in relation to Section (6) of Republic Act No. 9136 (Electric Power Industry reform Act of
2001) and its Rules and Regulations to Implement such law. The court held that in order to
qualify for VAT zero-rating under R.A. No. 9136, the taxpayer must be able to establish that
(1) it is a power generation company and (2) it derived sales from power generation
services. (Panay Power Corporation v. Commissioner of Internal Revenue, CTA EB
Case No. 666, October 24, 2011)
9.
A company is not liable for capital gains tax and donors tax on the exchange
of shares of stock between its stockholders.
In this case, although the exchange transaction pertained to the shares of stock of Shinryo
Philippines, it was never a party to the exchange transaction between Shinryo Japan and Dr.
Cangco. Neither did the exchange transaction benefit or the ownership of the shares of stock
redound to Shinryo Philippines. Moreover, a corporation has a separate personality distinct
from its stockholders and from other corporations to which it may be connected. This feature
flows from the legal theory that a corporate entity is separate and distinct from its
stockholders. This means that the tax liabilities due if any by Shinryo Japan and Dr. Cangco
have nothing to do with Shinryo Philippines. Shinryo Philippines is not bound by the terms of
the exchange transaction between Shinryo Japan and Dr. Cangco; thus, it should not be
liable for CGT and donors tax erroneously imposed by CIR. (Commissioner of Internal
Revenue v. Shinryo Co., Inc., CTA Case No. 7572, October 25, 2011)

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10.
There is no vested right in a tax exemption, more so when the latest
expression of legislative intent renders its continuance doubtful.
Pursuant to Section 206 of Local Government code (LGC) of 1991 and light of the
pronouncement interpreting the phrase exclusive of this franchise in Bayantel and Digitel
cases, GMA Network served a letter with the Assessor, requesting for the exclusion,
cancellation or dropping from the roll of assessments its properties which are being actually,
directly and exclusively used in its TV relay transmission in Cotabato City, in pursuit of its
franchise for the operation of its TV broadcasting station. The Court held that tax exemptions
are never presumed, the burden is on the claimant to establish clearly his right to the
exemption and cannot be made out of inference or implications but must be laid beyond
reasonable doubt. If such is the case, the grant of tax exemption under the Bayantel and
Digitel cases cannot be claimed by GMA as already being vested to it, since it is still
dependent upon a contingency of proving its entitlement thereto, and failing to do so would
mean the denial of the claim. (GMA Network, Inc. v. Engr. Enrique F. Barroga, CTA EB
No. 647, October 25, 2011)
11.
Decision or order which is appealable to the Court of Tax Appeals En Banc is
that which has resolved the case with finality, and which, in effect, terminates or
finally disposes of a case, as it leaves nothing to be done by the court as the case has
finally been decided on the merits.
The Commissioner of Customs filed a Petition for Review before the Court of Tax Appeals
En Banc assailing the Resolution of a division of the Court denying the Bureau of Customs
Motion for Reconsideration, which allowed the posting of a bond. The Court held that the
petition was prematurely filed before the Court of Tax Appeals En Banc for being
interlocutory as it still leaves something to be done by the court a quo and the same may not
be subject of review under the Revised Rules of the Court of Tax Appeals. In fact, Section 1,
Rule 41 of the 1997 Rules of Civil Procedure, as amended, which applies suppletorily to
proceeding before the Court of Tax Appeals, expressly provides that no appeal may be
taken from an interlocutory order. The proper procedure that petitioner should have taken in
this case was to await for the final termination of the proceedings before the Court in
Division, prior to the filing of the instant petition for review, because it is a well-settled rule
that only final orders or judgments on the merits may be the subject of appeal. (Republic of
the Philippines v. NPC Alliance Corporation, CTA EB No. 679, October 25, 2011)
12.
Petition for review (refund of input tax) filed with the CTA is premature if made
before the lapse of 120 days from the filing of the administrative claim.
Taxpayer filed the administrative claim with the BIR on February 13, 2009 for the refund of
input taxes for the year 2007. Taxpayer then filed its petition for review with the Court of Tax
Appeals (CTA) on March 30, 2009. The CTA ruled that from February 13, 2009, the
Commissioner had 120 days or until June 13, 2009 within which to act on the administrative
claim. The judicial claim was prematurely instituted filed on March 30, 2009 or barely 45
days after it filed its administrative claim. (Visayas Geothermal Power Company vs.
Commissioner of Internal Revenue, C.T.A. Case No. 7889, October 19, 20111)
1

The same decision was made in Taganito Mining Corporation vs. Commissioner of Internal Revenue, C.T.A. EB
No. 656, October 19, 2011 (Note that in this case, the Court said that the premature filing rendered the Court

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13.
Petition for review filed with the CTA beyond 30 days from the end of 180 days
is considered filed out of time.
Taxpayers administrative claim for refund of its unutilized input VAT for the four (4) quarters
of 2004 was timely filed on October 28, 2005. Applying subsections (A) and (D) of Section
112 of the 1997 Tax Code, as amended, CIR has one hundred twenty (120) days or until
February 25, 2006 to act on the application. After the lapse of the 120-day period, taxpayer
may appeal the unacted administrative claim within thirty (30) days therefrom or until March
27, 2006. Notwithstanding the timely filing of the administrative claim, the judicial claim was
filed only on April 25, 2006, twenty-nine (29) after the lapse of the prescribed period. Thus
due to the late filing of the Petition for Review, the court has no jurisdiction to act on the said
judicial claim. (Kepco Philippines Corporation v. Commissioner of Internal Revenue,
CTA EB No. 698, October 25, 2011)

without jurisdiction); One-Stop-Shop Inter-Agency Tax Credit and Duty Drawback Center vs. Daicolor
Philippines, Inc., CTA EB No. 660, October 10, 2011; CE Luzon Geothermal Power Company, Inc. vs.
Commissioner of Internal Revenue, CTA EB Nos. 591 and 628, October 4, 2011

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