SUPREME TRANSLINER, INC., MOISES C. ALVAREZ and PAULITA S.

ALVAREZ,

Petitioners, - versus -

BPI FAMILY SAVINGS BANK, INC., Respondent.

G.R. No. 165617 February 25, 2011

Facts as to the tax payer:

On April 24, 1995, Supreme Transliner, Inc. represented by its Managing Director, Moises C. Alvarez, and
Paulita S. Alvarez, obtained a loan in the amount of P9,853,000.00 from BPI Family Savings Bank with a 714-
square meter lot covered by Transfer Certificate of Title No. T-79193 in the name of Moises C. Alvarez and
Paulita S. Alvarez, as collateral

For non-payment of the loan, the mortgage was extrajudicially foreclosed and the property was sold to the
bank as the highest bidder in the public auction conducted by the Office of the Provincial Sheriff
of Lucena City. On August 7, 1996, a Certificate of Sale was issued in favor of the bank and the same was
registered on October 1, 1996. Before the expiration of the one-year redemption period, the mortgagors
notified the bank of their intention to redeem the property.

The mortgagors requested for the elimination of liquidated damages and reduction of attorneys fees and
interest (1% per month) but the bank refused. On May 21, 1997, the mortgagors redeemed the property by
paying the sum of P15,704,249.12. A Certificate of Redemption[4] was issued by the bank on May 27, 1997.

On June 11, 1997, the mortgagors filed a complaint against the bank to recover the allegedly unlawful and
excessive charges totaling P5,331,237.77, with prayer for damages and attorneys fees, docketed as Civil Case
No. 97-72 of the Regional Trial Court of Lucena City, Branch 57.

Facts as to the government:

The bank asserted that the redemption price reflecting the stipulated interest, charges and/or expenses, is
valid, legal and in accordance with documents duly signed by the mortgagors. The bank further contended that
the claims are deemed waived and the mortgagors are already estopped from questioning the terms and
conditions of their contract.

Issues as to the taxpayer:

whether the foreclosing mortgagee should pay capital gains tax upon execution of the certificate of sale, and if
paid by the mortgagee, whether the same should be shouldered by the redemptioner

Issues as to the government:

Whether there is legal basis for the inclusion of the capital gains tax

Ruling:

we find merit in petitioners-mortgagors argument that there is no legal basis for the inclusion of this charge in
the redemption price.Under Revenue Regulations (RR) No. 13-85 (December 12, 1985), every sale or
exchange or other disposition of real property classified as capital asset under Section 34(a)[17]of the Tax
Code shall be subject to the final capital gains tax. The term sale includes pacto de retro and other forms of
conditional sale. Section 2.2 of Revenue Memorandum Order (RMO) No. 29-86 (as amended by RMO No. 16-
88 and as further amended by RMO Nos. 27-89 and 6-92) states that these conditional sales necessarily
include mortgage foreclosure sales (judicial and extrajudicial foreclosure sales). Further, for real property
foreclosed by a bank on or after September 3, 1986, the capital gains tax and documentary stamp tax must be
paid before title to the property can be consolidated in favor of the bank.[18]

Under Section 63 of Presidential Decree No. 1529 otherwise known as the Property Registration Decree, if no
right of redemption exists, the certificate of title of the mortgagor shall be cancelled, and a new certificate
issued in the name of the purchaser. But where the right of redemption exists, the certificate of title of the
mortgagor shall not be cancelled, but the certificate of sale and the order confirming the sale shall be
registered by brief memorandum thereof made by the Register of Deeds upon the certificate of title.In the event
the property is redeemed, the certificate or deed of redemption shall be filed with the Register of Deeds, and a
brief memorandum thereof shall be made by the Register of Deeds on the certificate of title.

It is therefore clear that in foreclosure sale, there is no actual transfer of the mortgaged real property until after
the expiration of the one-year redemption period as provided in Act No. 3135 and title thereto is consolidated in
the name of the mortgagee in case of non-redemption. In the interim, the mortgagor is given the option
whether or not to redeem the real property. The issuance of the Certificate of Sale does not by itself transfer
ownership

Considering that herein petitioners-mortgagors exercised their right of redemption before the expiration of the
statutory one-year period, petitioner bank is not liable to pay the capital gains tax due on the extrajudicial
foreclosure sale. There was no actual transfer of title from the owners-mortgagors to the foreclosing
bank. Hence, the inclusion of the said charge in the total redemption price was unwarranted and the
corresponding amount paid by the petitioners-mortgagors should be returned to them.

PEN:

SEC. 246. Non-Retroactivity of Rulings. Any revocation, modification, or reversal of any of the rules and
regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars
promulgated by the Commissioner shall not be given retroactive application if the revocation, modification,
or reversal will be prejudicial to the taxpayers, except in the following cases:

(a) where the taxpayer deliberately misstates or omits material facts from his return or in any document
required of him by the Bureau of Internal Revenue;

(b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the
facts on which the ruling is based; or

(c) where the taxpayer acted in bad faith.

ING BANK N.V., engaged in banking operations in the Philippines as ING BANK N.V. MANILA BRANCH,
Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

G.R. No. 167679 July 22, 2015

Facts as to the tax payer:

ING Bank, "the Philippine branch of Internationale Nederlanden Bank N.V., a foreign banking corporation
incorporated in the Netherlands[,] is duly authorized by the Bangko Sentral ng Pilipinas to operate as a branch
with full banking authority in the Philippines

On August 9, 2004 CTA held petitioner ING Bank, N.V. Manila Branch (ING Bank) liable for (a) deficiency
documentary stamp tax for the taxable years 1996 and 1997 in the total amount of ₱238,545,052.38 inclusive
of surcharges; (b) deficiency onshore tax for the taxable year 1996 in the total amount of ₱997,333.89 inclusive
of surcharges and interest; and (c) deficiency withholding tax on compensation for the taxable years 1996 and
1997 in the total amount of ₱564,542.67 inclusive of interest. The Resolution denied ING Bank’s Motion for
Reconsideration.

While this case was pending before this court, ING Bank filed a Manifestation and Motion 8 stating that it availed
itself of the government’s tax amnesty program under Republic Act No. 9480 with respect to its deficiency
documentary stamp tax and deficiency onshore tax liabilities.

Facts as to the government:

Respondent Commissioner of Internal Revenue claims that petitioner ING Bank is not qualified to avail itself of
the tax amnesty granted under Republic Act No. 9480 because both the Court of Tax Appeals En Banc and
Second Division ruled in its favor that confirmed the liability of petitioner ING Bank for deficiency documentary
stamp taxes, onshore taxes, and withholding taxes.45

Respondent Commissioner of Internal Revenue asserts that BIR Revenue Memorandum Circular No. 19-2008
specifically excludes "cases which were ruled by any court (even without finality) in favor of the BIR prior to
amnesty availment of the taxpayer" from the coverage of the tax amnesty under Republic Act No. 9480

Respondent Commissioner of Internal Revenue contends that petitioner ING Bank’s act of "claim[ing] [the]
subject bonuses as deductible expenses in its taxable income although it has not yet withheld and remitted the
[corresponding withholding] tax"65 to the Bureau of Internal Revenue contravened Section 29(j) of the 1997
National Internal Revenue Code, as amended. 66 Respondent Commissioner of Internal Revenue claims that
"subject bonuses should also be disallowed as deductible expenses of petitioner."

Issues as to the taxpayer:

whether ING Bank is entitled to the immunities and privileges under Republic Act No. 9480

Issues as to the government:

whether the assessment for deficiency withholding tax on compensation is proper.

Ruling:

[N]either the law nor the implementing rules state that a court ruling that has not attained finality would
preclude the availment of the benefits of the Tax Amnesty Law. Both R.A. 9480 and DOF Order No. 29-07 are
quite precise in declaring that "[t]ax cases subject of final and executory judgment by the courts" are the ones
excepted from the benefits of the law. In fact, we have already pointed out the erroneous interpretation of the
law in Philippine Banking Corporation (Now: Global Business Bank, Inc.) v. Commissioner of Internal Revenue,
viz:

The BIR’s inclusion of "issues and cases which were ruled by any court (even without finality) in favor of the
BIR prior to amnesty availment of the taxpayer" as one of the exceptions in RMC 19-2008 is misplaced. RA
9480 is specifically clear that the exceptions to the tax amnesty program include "tax cases subject of final and
executory judgment by the courts." The present case has not become final and executory when Metrobank
availed of the tax amnesty program.70 (Emphasis in the original, citation omitted)

Moreover, in the fairly recent case of LG Electronics Philippines, Inc. v. Commissioner of Internal
Revenue,71 we confirmed that only cases that involve final and executory judgments are excluded from the tax
amnesty program as explicitly provided under Section 8 of Republic Act No. 9480.72

Thus, petitioner ING Bank is not disqualified from availing itself of the tax amnesty under the law during the
pendency of its appeal before this court.

PEN:

Republic Act No. 9480 provides a general grant of tax amnesty subject only to the cases specifically excepted
by it. A tax amnesty "partakes of an absolute. . . waiver by the Government of its right to collect what otherwise
would be due it[.]"75 The effect of a qualified taxpayer’s submission of the required documents and the payment
of the prescribed amnesty tax was immunity from payment of all national internal revenue taxes as well as all
administrative, civil, and criminal liabilities founded upon or arising from non-payment of national internal
revenue taxes for taxable year 2005 and prior taxable years.76
MERCURY DRUG CORPORATION, petitioner v COMMISSIONER OF INTERNAL REVENUE, respondent

G.R. No. 164050 July 20, 2011

Facts as to the tax payer:

Pursuant to Republic Act No. 7432, petitioner Mercury Drug Corporation (petitioner), a retailer of
pharmaceutical products, granted a 20% sales discount to qualified senior citizens on their purchases of
medicines. For the taxable year April to December 1993 and January to December 1994, the amounts
representing the 20% sales discount totalled P3,719,287.68[1] and P35,500,593.44,[2] respectively, which
petitioner claimed as deductions from its gross income.

Realizing that Republic Act No. 7432 allows a tax credit for sales discounts granted to senior citizens,
petitioner filed with the Commissioner of Internal Revenue (CIR) claims for refund in the amount
of P2,417,536.00 for the year 1993 and P23,075,386.00 for the year 1994. Petitioner presented a
computation[3] of its overpayment of income tax

Facts as to the government:

When the CIR failed to act upon petitioners claims, the latter filed a petition for review with the Court of Tax
Appeals. The Court of Tax Appeals favored petitioner by declaring that the 20% sales discount should be
treated as tax credit rather than a mere deduction from gross income. The Court of Tax Appeals however
found some discrepancies and irregularities in the cash slips submitted by petitioner as basis for the tax
refund. Hence, it disallowed the claim for taxable year 1994 and some portion of the amount claimed for 1993
by petitioner. The conclusion of tax liability instead of tax overpayment pertaining to taxable year 1994 has the
effect of negating the tax refund of Petitioner because the basis of such refund is the fact that there is tax
credit. Under the circumstances, instead to tax credit, Petitioner has a tax liability of P5,032,113.72, hence the
refund for the period must fail

Issues as to the taxpayer:

whether the claim for tax credit should be based on the full amount of the 20% senior citizens discount or the
acquisition cost of the merchandise sold.

Issues as to the government:

Whether the claim for tax credit must be based on the actual cost of the medicine and not the whole amount of
the 20% senior citizens discount

Ruling:

Preliminarily, Republic Act No. 7432 is a piece of social legislation aimed to grant benefits and privileges to
senior citizens. Among the highlights of this Act is the grant of sales discounts on the purchase of medicines to
senior citizens. Section 4(a) of Republic Act No. 7432 reads:

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 the utilization of transportation
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 burden imposed on private establishments amounts to the taking of private property for public use with just
compensation in the form of a tax credit.[12]
The foregoing proviso specifically allows the 20% senior citizens' discount to be claimed by the private
establishment as a tax credit and not merely as a tax deduction from gross sales or gross income. The law
however is silent as to how the cost of the discount as tax credit should be construed.

actual 20% sales discount granted to qualified senior citizens.

It is worthy to mention that Republic Act No. 7432 had undergone two (2) amendments; first in 2003 by
Republic Act No. 9257 and most recently in 2010 by Republic Act No. 9994. The 20% sales discount granted
by establishments to qualified senior citizens is now treated as tax deduction and not as tax credit. As we have
likewise declared in Commissioner of Internal Revenue v. Central Luzon Drug Corporation,[19] this case covers
the taxable years 1993 and 1994, thus, Republic Act No. 7432 applies.

Based on the foregoing, we sustain petitioners argument that the cost of discount should be computed on the
actual amount of the discount extended to senior citizens.However, we give full accord to the factual findings of
the Court of Tax Appeals with respect to the actual amount of the 20% sales discount, i.e., the sum
of P3,522,123.25. for the year 1993 and P34,211,769.45 for the year 1994. Therefore, petitioner is entitled to a
tax credit equivalent to the actual amounts of the 20% sales discount as determined by the Court of Tax
Appeals. A new computation for tax refund is in order

PEN:

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 the utilization of transportation
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 burden imposed on private establishments amounts to the taking of private property for public use with just
compensation in the form of a tax credit
UNITED INTERNATIONAL PICTURES AB, Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE,Respondent

G.R. No. 168331 : October 11, 2012

Facts as to the tax payer:

On April 15, 1999, petitioner filed with the Bureau of Internal Revenue (BIR) its Corporation Annual Income Tax
Return for the calendar year ended December 31, 1998 reflecting, among others, a net taxable income from
operations in the sum of P24,961,200.00, an income tax liability of P8,486,808.00, but with an excess income
tax payment in the amount of P4,325,152.00 arising from quarterly income tax payments and creditable taxes
withheld at source. Petitioner opted to carry-over as tax credit to the succeeding taxable year the said
overpayment by putting an "x" mark on the corresponding box. On the face of the 1999 return, petitioner
indicated its option by putting an "x" mark on the box "To be refunded." On April 28, 2000, petitioner filed with
the BIR an administrative claim for refund in the amount of P9,309,292.00. As respondent did not act on
petitioners claim, the latter filed a petition for review before the Court of Tax Appeals (CTA) to toll the running
of the two-year prescriptive period.

Facts as to the government:

Respondent argued that petitioner is not entitled to the refund awarded by the CTA, because it failed to present
sufficient proof that the subject taxes were erroneously or illegally collected. Respondent maintains that
petitioner is not entitled to the refund awarded by the CTA, because it failed to present sufficient proof that the
subject taxes were erroneously or illegally collected. It asserts that the 1999 certificate of withholding tax is
defective, since petitioner failed to file the same together with the 1999 corporate return and include in its
return income payments from which the taxes were withheld.

Issues as to the taxpayer:

whether petitioner is perpetually barred to refund its tax overpayment for taxable year 1998 since it opted to
carry-over its excess tax;

Issues as to the government:

whether petitioner has proven its entitlement to the refund.

Ruling:

petitioner asserts that there is nothing in the law which perpetually prohibits the refund of carried over excess
tax. It maintains that the option to carry-over is irrevocable only for the next "taxable period" where the excess
tax payment was carried over.

We are not convinced.

In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid,
the excess amount shown on its final adjustment return may be carried over and credited against the estimated
quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to
carry-over and apply the excess quarterly income tax against income due for the taxable quarters of the
succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period
and no application for cash refund or issuance of a tax credit certificate shall be allowed therefore. (Emphasis
supplied)

From the aforequoted provision, it is clear that once a corporation exercises the option to carry-over, such
option is irrevocable "for that taxable period." Having chosen to carry-over the excess quarterly income tax, the
corporation cannot thereafter choose to apply for a cash refund or for the issuance of a tax credit certificate for
the amount representing such overpayment.

Hence, the controlling factor for the operation of the irrevocability rule is that the taxpayer chose an option; and
once it had already done so, it could no longer make another one. Consequently, after the taxpayer opts to
carry-over its excess tax credit to the following taxable period, the question of whether or not it actually gets to
apply said tax credit is irrelevant. Section 76 of the NIRC of 1997 is explicit in stating that once the option to
carry over has been made, "no application for tax refund or issuance of a tax credit certificate shall be allowed
therefor

PEN:

In claiming for the refund of excess creditable withholding tax, petitioner must show compliance with the
following basic requirements:

(1) The claim for refund was filed within two years as prescribed under Section 229 10ςrνll of the NIRC of 1997;

(2) The income upon which the taxes were withheld were included in the return of the recipient (Section 10,
Revenue Regulations No. 6-85);

(3) The fact of withholding is established by a copy of a statement (BIR Form 1743.1) duly issued by the payor
(withholding agent) to the payee showing the amount paid and the amount of tax withheld therefrom (Section
10, Revenue Regulations No. 6-85).

xxxxxxxxxxxxxx

Section 76 of the NIRC of 1997 states

Section 76. Final Adjustment Return. Every corporation liable to tax under Section 27 shall file a final
adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the
quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable
income of that year, the corporation shall either:

(A) Pay the balance of tax still due; or

(B) Carry-over the excess credit; or

(C) Be credited or refunded with the excess amount paid, as the case may be.
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS, Petitioners, v. ARLENE R. SORIANO, Respondent.

G.R. No. 211666, February 25, 2015

Facts as to the tax payer:

On October 20, 2010, petitioner Republic of the Philippines, represented by the Department of Public Works
and Highways (DPWH), filed a Complaint 3 for expropriation against respondent Arlene R. Soriano, the
registered owner of a parcel of land consisting of an area of 200 square meters, situated at Gen. T. De Leon,
Valenzuela City, and covered by Transfer Certificate of Title (TCT) No. V-13790.4 In its Complaint, petitioner
averred that pursuant to Republic Act (RA) No. 8974, otherwise known as “An Act to Facilitate the Acquisition
of Right-Of-Way, Site or Location for National Government Infrastructure Projects and for other Purposes,” the
property sought to be expropriated shall be used in implementing the construction of the North Luzon
Expressway (NLEX)- Harbor Link Project (Segment 9) from NLEX to MacArthur Highway, Valenzuela City.
petitioner alleged that pursuant to a Certification issued by the Bureau of Internal Revenue (BIR), Revenue
Region No. 5, the zonal value of the subject property in the amount of P2,100.00 per square meter is
reasonable, fair, and just to compensate the defendant for the taking of her property in the total area of 200
square meters.

Facts as to the government:

In another Order7 dated June 21, 2011, the RTC appointed the following members of the Board of
Commissioners for the determination of just compensation.However, the trial court subsequently revoked the
appointment of the Board for their failure to submit a report as to the fair market value of the property to assist
the court in the determination of just compensation and directed the parties to submit their respective position
papers.8 Thereafter, the case was set for hearing giving the parties the opportunity to present and identify all
evidence in support of their arguments therein

Issues as to the taxpayer:

Won it is entitled to the legal interest of 6% per annum on the amount of just compensation of the subject
property.

Issues as to the government:

Won respondent is not entitled to the legal interest of 6% per annum on the amount of just compensation of the
subject property.

Ruling:

Notwithstanding the foregoing, We find that the imposition of interest in this case is unwarranted in view of the
fact that as evidenced by the acknowledgment receipt 19 signed by the Branch Clerk of Court, petitioner was
able to deposit with the trial court the amount representing the zonal value of the property before its taking. As
often ruled by this Court, the award of interest is imposed in the nature of damages for delay in payment which,
in effect, makes the obligation on the part of the government one of forbearance to ensure prompt payment of
the value of the land and limit the opportunity loss of the owner. 20 However, when there is no delay in the
payment of just compensation, We have not hesitated in deleting the imposition of interest thereon for the
same is justified only in cases where delay has been sufficiently established.

Effectively, therefore, the debt incurred by the government on account of the taking of the property subject of
an expropriation constitutes a forbearance18 which runs contrary to the trial court’s opinion that the same is in
the nature of indemnity for damages calling for the application of Article 2209 of the Civil Code. Nevertheless,
in line with the recent circular of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP-MB) No. 799,
Series of 2013, effective July 1, 2013, the prevailing rate of interest for loans or forbearance of money is six
percent (6%) per annum, in the absence of an express contract as to such rate of interest.

PEN:

The general rule is that the just compensation to which the owner of the condemned property is entitled to is
the market value. Market value is that sum of money which a person desirous but not compelled to buy, and an
owner willing but not compelled to sell, would agree on as a price to be paid by the buyer and received by the
seller. The general rule, however, is modified where only a part of a certain property is expropriated. In
such a case, the owner is not restricted to compensation for the portion actually taken, he is also
entitled to recover the consequential damage, if any, to the remaining part of the property.
BANCO DE ORO, BANK OF COMMERCE, CHINA BANKING CORPORATION, METROPOLITAN BANK &
TRUST COMPANY, PHILIPPINE BANK OF COMMUNICATIONS, PHILIPPINE NATIONAL BANK,
PHILIPPINE VETERANS BANK AND PLANTERS DEVELOPMENT BANK, Petitioners,

RIZAL COMMERCIAL BANKING CORPORATION AND RCBC CAPITAL CORPORATION, Petitioners,

CAUCUS OF DEVELOPMENT NGO NETWORKS, Petitioner-Intervenor, v. REPUBLIC OF THE

PHILIPPINES, THE COMMISSIONER OF INTERNAL REVENUE, BUREAU OF INTERNAL REVENUE,
SECRETARY OF FINANCE, DEPARTMENT OF FINANCE, THE NATIONAL TREASURER AND BUREAU
OF TREASURY, Respondents.

G.R. No. 198756, January 13, 2015

Facts as to the tax payer:

By letter4 dated March 23, 2001, the Caucus of Development NGO Networks (CODE-NGO) “with the
assistance of its financial advisors, Rizal Commercial Banking Corp. (“RCBC”), RCBC Capital Corp. (“RCBC
Capital”), CAPEX Finance and Investment Corp. (“CAPEX”) and SEED Capital Ventures, Inc.
(SEED),”5requested an approval from the Department of Finance for the issuance by the Bureau of Treasury of
10-year zero-coupon Treasury Certificates (T-notes).6 The T-notes would initially be purchased by a special
purpose vehicle on behalf of CODE-NGO, repackaged and sold at a premium to investors as the PEACe
Bonds.7 The net proceeds from the sale of the Bonds “will be used to endow a permanent fund (Hanapbuhay®
Fund) to finance meritorious activities and projects of accredited non-government organizations (NGOs)
throughout the country.” On October 7, 2011, the Commissioner of Internal Revenue issued BIR Ruling No.
370-20111 (2011 BIR Ruling), declaring that the PEACe Bonds being deposit substitutes are subject to the
20% final withholding tax. Pursuant to this ruling, the Secretary of Finance directed the Bureau of Treasury to
withhold a 20% final tax from the face value of the PEACe Bonds upon their payment at maturity on October
18, 2011

Facts as to the government:

Respondents contend that the discount/interest income derived from the PEACe Bonds is not a trading gain
but interest income subject to income tax. 126 They explain that “[w]ith the payment of the PhP35 Billion
proceeds on maturity of the PEACe Bonds, Petitioners receive an amount of money equivalent to about
PhP24.8 Billion as payment for interest. Such interest is clearly an income of the Petitioners considering that
the same is a flow of wealth and not merely a return of capital – the capital initially invested in the Bonds being
approximately PhP10.2 Billion[.]”

Respondents argue that petitioners’ direct resort to this court to challenge the 2011 BIR Ruling violates the
doctrines of exhaustion of administrative remedies and hierarchy of courts, resulting in a lack of cause of action
that justifies the dismissal of the petition Moreover, they contend that the assailed 2011 BIR Ruling is a valid
exercise of the Commissioner of Internal Revenue’s rule-making power. Respondents further argue that a
retroactive application of the 2011 BIR Ruling will not unjustifiably prejudice petitioners.

Issues as to the taxpayer:

WON The 2011 BIR Ruling is ultra vires because it is contrary to the 1997 National Internal Revenue Code
when it declared that all government debt instruments are deposit substitutes regardless of the 20-lender rule

Issues as to the government:

WON Respondent Commissioner of Internal Revenue did not act with grave abuse of discretion in issuing the
challenged 2011 BIR Ruling

Ruling:

The Bureau of Internal Revenue’s interpretation as expressed in the three 2001 BIR Rulings is not consistent
with law.207 Its interpretation of “at any one time” to mean at the point of origination alone is unduly restrictive.

BIR Ruling No. 370-2011 is likewise erroneous insofar as it stated (relying on the 2004 and 2005 BIR Rulings)
that “all treasury bonds . . . regardless of the number of purchasers/lenders at the time of origination/issuance
are considered deposit substitutes.”208 Being the subject of this petition, it is, thus, declared void because it
completely disregarded the 20 or more lender rule added by Congress in the 1997 National Internal Revenue
Code. It also created a distinction for government debt instruments as against those issued by private
corporations when there was none in the law.

It may be granted that the interpretation of the Commissioner of Internal Revenue in charge of executing the
1997 National Internal Revenue Code is an authoritative construction of great weight, but the principle is not
absolute and may be overcome by strong reasons to the contrary. If through a misapprehension of law an
officer has issued an erroneous interpretation, the error must be corrected when the true construction is
ascertained

It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of
more specific and less general interpretations of tax laws) which are issued from time to time by the
Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the
executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such
interpretation is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not
countenance administrative issuances that override, instead of remaining consistent and in harmony with, the
law they seek to apply and implement

This court further held that “[a] memorandum-circular of a bureau head could not operate to vest a taxpayer
with a shield against judicial action [because] there are no vested rights to speak of respecting a wrong
construction of the law by the administrative officials and such wrong interpretation could not place the
Government in estoppel to correct or overrule the same.”

Pen:

Tax statutes must be reasonably construed as to give effect to the whole act. Their constituent provisions
must be read together, endeavoring to make every part effective, harmonious, and sensible. 209 That
construction which will leave every word operative will be favored over one that leaves some word, clause, or
sentence meaningless and insignificant.
VISAYAS GEOTHERMAL POWER COMPANY, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

G.R. No. 197525 June 4, 2014

Facts as to the tax payer:

Petitioner Visayas Geothermal Power Company (VGPC) is a special limited partnership duly organized and
existing under Philippine Laws with its principal office at Milagro, Ormoc City, Province of Leyte. It is principally
engaged in the business of power generation through geothermal energy and the sale of generated power to
the Philippine National Oil Company (PNOC),pursuant to the Energy Conversion Agreement.

VGPC filed with the Bureau of Internal Revenue (BIR)its Original Quarterly VAT Returns for the first to fourth
quarters of taxable year 2005 On December 6, 2006, it filed an administrative claim for refund for the amount
of 14,160,807.95 with the BIR District Office No. 89 of Ormoc City on the ground that it was entitled to recover
excess and unutilized input VAT payments for the four quarters of taxable year 2005, pursuant to Republic Act
(R.A.) No. 9136,3 which treated sales of generated power subject to VAT to a zero percent (0%) rate starting
June 26, 2001.

Facts as to the government:

The CTA Second Division found that only the amount of 7,699,366.37 was duly substantiated by the required
evidence. As to the timeliness of the filing of the judicial claim, the Court ruled that following the case of
Commissioner of Internal Revenue (CIR) v. Mirant Pagbilao Corporation (Mirant), 5 both the administrative and
judicial claims were filed within the two-year prescriptive period provided in Section 112(A) of the National
Internal Revenue Code of 1997 (NIRC),the reckoning point of the period being the close of the taxable quarter
when the sales were made.

In its October 29, 2009 Resolution, 6 the CTA Second Division denied the separate motions for partial
reconsideration filed by VGPC and the CIR. Thus, both VGPC and the CIR appealed to the CTA En Banc.

Issues as to the taxpayer:

whether the petitioner’s judicial claim for refund was prematurely filed.

Issues as to the government:

Whether the CTA acted with grave abuse of discretion in denying petitoners claim fo refund

Ruling:

Accordingly, the general rule is that the 120+30 day period is mandatory and jurisdictional from the effectivity
of the 1997 NIRC on January 1, 1998, up to the present. As an exception, judicial claims filed from December
10, 2003 to October 6, 201024 need not wait for the exhaustion of the 120-day period.

A review of the facts of the present case reveals that petitioner VGPC timely filed its administrative claim with
the CIR on December 6, 2006, and later, its judicial claim with the CTA on January 3, 2007. The judicial claim
was clearly filed within the period of exception and was, therefore, not premature and should not have been
dismissed by the CTA En Banc.

PEN:
under Section 112(A), the taxpayer may, within 2 years after the close of the taxable quarter when the sales
were made, via an administrative claim with the CIR, apply for the issuance of a tax credit certificate or refund
of creditable input tax due or paid attributable to such sales. Under Section 112(D), the CIR must then act on
the claim within 120 days from the submission of the taxpayer’s complete documents. In case of (a) a full or
partial denial by the CIR of the claim, or (b) the CIR’s failure to act on the claim within 120 days, the taxpayer
may file a judicial claim via an appeal with the CTA of the CIR decision or unacted claim, within 30 days (a)
from receipt of the decision; or (b) after the expiration of the 120-day period.