Justice Teresita Leonardo-De Castro Cases (2008-2015) Taxation

SCOPE AND LIMITATIONS OF TAXATION

(Constitutional Limitations)

It is already well-settled that although the power to tax is inherent in the State, the same is
not true for the LGUs to whom the power must be delegated by Congress and must be exercised
within the guidelines and limitations that Congress may provide. In the case at bar,
the sanggunian of the municipality or city cannot enact an ordinance imposing business tax on the
gross receipts of transportation contractors, persons engaged in the transportation of passengers
or freight by hire, and common carriers by air, land, or water, when said sanggunian was already
specifically prohibited from doing so. Any exception to the express prohibition under Section
133(j) of the LGC should be just as specific and unambiguous. Section 21(B) of the Manila Revenue
Code, as amended, is null and void for being beyond the power of the City of Manila and its public
officials to enact, approve, and implement under the LGC. - City of Manila, Hon. Alfredo S. Lim, as
Mayor of the City of Manila, et al. vs. Hon. Angel Valera Colet, as Presiding Judge, Regional
Trial Court of Manila (Br. 43), et al., G.R. No. 120051, December 10, 2014

TAX CREDIT OR REFUND

The tax burden for an indirect tax may be shifted to another. However, the tax liability remains with
the statutory taxpayer. As such, it is the statutory taxpayer who is the proper party to question, or
claim a refund or tax credit of an indirect tax. - Silkair (Singapore) PTE. Ltd., vs. Commissioner
of Internal Revenue, G.R. No. 184398, February 25, 2010

Under the old rule, whether a PEZA-registered enterprise was exempt or subject to VAT depended
on the type of fiscal incentives availed of by the said enterprise. If the PEZA-registered enterprise is
paying the 5% preferential tax in lieu of all other taxes, it cannot claim tax credit/refund for the
VAT paid on purchases. Conversely, if the taxpayer is availing of the income tax holiday, it can claim
VAT credit. However, upon the issuance by the BIR of RMC No. 74-99 on October 15, 1999, the
Cross Border Doctrine was clearly established. In effect, PEZA-registered enterprises are VAT-
exempt and no VAT can be passed on to them. Thus, any sale by a supplier from the Customs
Territory to a PEZA-registered enterprise as export sale should not be burdened by output VAT;
hence, it is now impossible to claim for a tax credit/refund. - Toshiba Information Equipment
(Phils.), Inc. vs. Commissioner Of Internal Revenue, G.R. No. 157594, March 9, 2010

MERGER OR CONSOLIDATION OF CORPORATIONS

When the BIR had ruled that a purchase and sale agreement between two banks did not result in
their merger, and that the CIR had previously ruled that the same two banks are not merged, the
buyer bank is not liable for the deficiency DST of the seller bank. - Commissioner of Internal
Revenue vs. Bank of Commerce, G.R. No. 180529, November 13, 2013

DISSOLUTION OF A CORPORATION

Bangko Sentral ng Pilipinas placed Rural Bank of Tuba (RBTI) under receivership with the
Philippine Deposit Insurance Corporation as the receiver. Accordingly, PDIC filed a petition for
assistance in the liquidation of RBTI which was approved by the trial court. As an incident of the
proceeding, BIR intervened as one of the creditors of RBTI. BIR contends that a tax clearance is
required before the approval of project of distribution of the assets of a bank. In denying their
contention, the Court held that Section 52(C) of the Tax Code of 1997 is not applicable to banks

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 Justice Teresita Leonardo-De Castro Cases (2008-2015) Taxation

ordered placed under liquidation by the Monetary Board, and a tax clearance is not a prerequisite
to the approval of the project of distribution of the assets of a bank under liquidation by the PDIC. -
Philippine Deposit Insurance Corporation vs. Bureau Of Internal Revenue, G.R. No. 172892,
June 13, 2013

VAT (Transitional Input Tax)

The BIR cannot issue a revenue regulation contrary to what the NIRC provides such when the said
regulation limits the coverage of the provision in the NIRC. Such revenue regulation shall not
produce any effect and cannot be source of any right. - Fort Bonifacio Development Corporation
vs. Commissioner Of Internal Revenue, Regional Director, Revenue Region No. 8, and Chief
Assessment Division, Revenue Region No. 8, G.R. No. 158885, October 2, 2009

Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language.
The taxpayer can file his administrative claim for refund or credit at anytime within the two-year
prescriptive period. If he files his claim on the last day of the two-year prescriptive period, his claim
is still filed on time. The Commissioner will have 120 days from such filing to decide the claim. If the
Commissioner decides the claim on the 120th day, or does not decide it on that day, the taxpayer
still has 30 days to file his judicial claim with the CTA. This is not only the plain meaning but also
the only logical interpretation of Section 112(A) and (C). - San Roque Power Corporation vs.
Commissioner of Internal Revenue, G.R. No. 205543, June 30, 2014

The Court has consolidated these 3 petitions as they involve the same parties, similar facts and
common questions of law. This is not the first time that Fort Bonifacio Development Corporation
(FBDC) has come to this Court about these issues against the very same respondents (CIR), and the
Court En Banc has resolved them in two separate, recent cases that are applicable here. It is of
course axiomatic that a rule or regulation must bear upon, and be consistent with, the provisions of
the enabling statute if such rule or regulation is to be valid. In case of conflict between a statute and
an administrative order, the former must prevail. To be valid, an administrative rule or regulation
must conform, not contradict, the provisions of the enabling law. An implementing rule or
regulation cannot modify, expand, or subtract from the law it is intended to implement. Any rule
that is not consistent with the statute itself is null and void. To recapitulate, RR 7-95, insofar as it
restricts the definition of "goods" as basis of transitional input tax credit under Section 105 is a
nullity. - Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue and
Revenue District Officer, Revenue District No. 44, Taguig and Pateros, Bureau of Internal
Revenue, G.R. No. 175707, November 19, 2014

For failure of Silicon to comply with the provisions of Section 112(C) of the NIRC, its judicial claims
for tax refund or credit should have been dismissed by the CTA for lack of jurisdiction. The Court
stresses that the 120/30-day prescriptive periods are mandatory and jurisdictional, and are not
mere technical requirements. - Silicon Philippines, Inc. (Formerly Intel Philippines
Manufacturing, Inc.) vs. Commissioner of Internal Revenue, G.R. No. 173241, March 25, 2015

DOCUMENTARY STAMPS TAX

JEC contented that it overpaid documentary stamp tax but the court ruled that it failed to prove
such contention. 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. It is an excise upon the facilities used in the

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 Justice Teresita Leonardo-De Castro Cases (2008-2015) Taxation

transaction of the business separate and apart from the business itself. Documentary stamp taxes
are levied on the exercise by persons of certain privileges conferred by law for the creation,
revision, or termination of specific legal relationships through the execution of specific instruments.
- Jaka Investments Corporation vs. Commissioner of Internal Revenue, G.R. No. 147629, July
28, 2010

Documentary stamp tax is a tax on documents, instruments, loan agreements, and papers
evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident
thereto. It is in the nature of an excise tax because it is imposed upon the privilege, opportunity or
facility offered at exchanges for the transaction of the business. It is an excise upon the facilities
used in the transaction of the business distinct and separate from the business itself. -
Commissioner of Internal Revenue vs. Manila Bankers' Life Insurance Corporation, G.R. No.
169103, March 16, 2011

An electronic message containing instructions to debit their respective local or foreign currency
accounts in the Philippines and pay a certain named recipient also residing in the Philippines is not
transaction contemplated under Section 181 of the Tax Code. They are also not bills of exchange
due to their non-negotiability. Hence, they are not subject to DST. - The Hongkong and Shanghai
Banking Corporation Limited-Philippine Branches vs. Commissioner of Internal Revenue,
G.R. No. 166018 & 167728, June 4, 2014

JUDICIAL REMEDIES

The appellate jurisdiction of the Court of Tax Appeals (CTA) is not limited to cases which involve
decisions of the Commissioner of Internal Revenue (CIR) on matters relating to assessments or
refunds. The issue of prescription of the Bureau of Internal Revenue’s (BIR’s) right to collect taxes
may be considered as covered by the term “other matters” over which the Court of Tax Appeals
(CTA) has appellate jurisdiction.

Requisites before the Period to Enforce Collection may be Suspended — (a) that the taxpayer
requests for reinvestigation, and (b) that petitioner grants such request. - Commissioner of
Internal Revenue vs. Hambrecht & Quist Philippines, Inc., G.R. No. 169225, November 17,
2010

PNB has not demonstrated any cogent reason for the SC to take an exception and excuse PNBs
blatant disregard of the basic procedural rules in a petition for review. Furthermore, the timely
perfection of an appeal is a mandatory requirement. One cannot escape the rigid observance of this
rule by claiming oversight, or in this case, lack of foresight. Neither can it be trifled with as a mere
technicality to suit the interest of a party. Verily, the periods for filing petitions for review and for
certiorari are to be observed religiously. Just as the losing party has the privilege to file an appeal
within the prescribed period, so does the winner have the right to enjoy the finality of the decision.
- Philippine National Bank vs. Commissioner Of Internal Revenue, G.R. No. 172458,
December 14, 2011

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