5 Case Digest

Air Philippines Corporation v. Commissioner of Internal Revenue and Commissioner of Customs,

CTA Case No. 7966, 7990, & 8020, April 20, 2016

I. Summary
a. Facts
One Network Bank, Inc. is the result of two rural banks that merged, namely One
Network Rural Bank and Rural Bank of New Corella. It sought the refund of the Gross
Receipts Tax (GRT) it paid, invoking RA 7353. The said law exempts rural banks from
most taxes, including GRT. The refund was denied by the BIR, invoking RMC 66-2012.
The said issuance limits the application of RA 7353, that the tax exemption therein is only
for a period of five (5) years, and may only be applied to consolidated rural banks if the
constituent rural banks were unable to claim the said tax benefit. Also, if any or both of
the constituent banks have not fully utilized the five years, then the consolidated bank
may only claim the tax benefit for the remaining balance. Upon denial, the bank elevated
the same to the CTA, arguing that RMC 66-2012 contravenes RA 7353 and RR 16-93, and
that even if RMC 66-2012 is valid, it should not apply retroactively against the bank.

b. Issue/s

1) Whether or not taxpayer failed to exhaust administrative remedies.

2) Whether or not taxpayer is entitled to the refund.

c. Decision

II. Reaction
III. Recommendation
4.2 Case Digest
Mindanao II Geothermal Partnership v. Commissioner of Internal Revenue , CTA EB No. 1206,
April 20, 2016

IV. Summary
a. Facts
Mindanao Geothermal dissolved as a partnership on the year 2010. Prior to said
dissolution, it was unable to claim its withholding tax payments for the calendar
years 2008 and 2009. Upon dissolution, it filed for a refund of the said unutilized
withholding tax payments. Due to inaction of the BIR, it filed for a refund with
the CTA. The CTA division, however, denied the claim for refund. Mindanao
Geothermal appealed the decision to the CTA en banc, arguing that it is exempt
from the irrevocability rule as it is a dissolved entity

b. Issue/s
1) Whether or not Mindanao Geothermal is entitled to a refund.

c. Decision

No. Although it is true that Mindanao Geothermal falls under the recognized exception to the
irrevocability rule, it failed to prove that it has refundable taxes. To sum up, a qualification to
the application of the exception to the irrevocability rule is the presentation of the short period
return of the dissolved corporation. The short period return is vital to determine whether upon
dissolution (i.e., approval by the SEC of the dissolution), the corporation's excess and unutilized
CWT may still be claimed for refund or will need to be applied to the corporation's outstanding
taxes as of such dissolution. A dissolved corporation claiming refund or issuance of TCC must
present the short period return; otherwise, it will not be able to sufficiently prove that the excess
and unutilized CWT being claimed remained unutilized upon dissolution. Tax refunds are, after
all, construed strictly against the taxpayer.

V. Reaction
VI. Recommendation