taxation i (full text of additional cases)

7/26/2019 TAXATION I (Full Text of Additional Cases)

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G.R. No. 197525 June 4, 2014

VISAYAS GEOTHERMAL POWER OMPANY,Petitioner,vs.

OMMISSIONER O! INTERNAL REVEN"E,Respondent.Before the Court is a petition for review on certiorari under Rule45 of the Rules of Court assailing the February 7, !""#ecision"and the $une 7, !"" Resolutionof the Court of %a&'ppeals (n Banc )C%' (n Banc* in C%' (B Case +os. 5" and5, which reversed and set aside the 'pril "7, !!- #ecision ofthe C% ' econd #ivision in C%' Case +o. 755-.%he Facts/Petitioner 0isayas 1eother2al Power Co2pany )01PC* is aspecial li2ited partnership duly organi3ed and e&isting under

Philippine aws with its principal office at ilagro, 6r2oc City,Province of eyte. t is principally engaged in the business ofpower generation through geother2al energy and the sale ofgenerated power to the Philippine +ational 6il Co2pany)P+6C*,pursuant to the (nergy Conversion 'gree2ent.01PC filed with the Bureau of nternal Revenue )BR*its6riginal 8uarterly 0'% Returns for the first to fourth 9uarters ofta&able year !!5 on 'pril 5, !!5, $uly 5, !!5, 6ctober 5,!!, and $anuary !, !!, respectively.6n #ece2ber , !!, it filed an ad2inistrative clai2 for refund

for the a2ount of "4,"!,:!7.-5 with the BR #istrict 6ffice+o. :- of 6r2oc City on the ground that it was entitled torecover e&cess and unutili3ed input 0'% pay2ents for the four9uarters of ta&able year !!5, pursuant to Republic 'ct )R.'.*+o. -";,; which treated sales of generated power sub?(R(F6R(, in view of the foregoing considerations, thePetition for Review is hereby P'R%'@ 1R'+%(#.'ccordingly, respondent is 6R#(R(# %6 R(FA+# or, in thealternative, %6 A( ' %' CR(#% C(R%FC'%( in favorof petitioner the reduced a2ount of (0(+ 6+ ?A+#R(# ++(+%@ ++( %?6A'+# %?R((?A+#R(# %@ P(6 '+# ;7"!! )P

7,--,;.;7*representing unutili3ed input 0'% paid on do2estic purchases of

nonDcapital goods and services, services rendered by nonDresidents, and i2portations of nonDcapital goods for the first tofourth 9uarters of ta&able year !!5.6 6R#(R(#.4

%he C%' econd #ivision found that only the a2ount of7,--,;.;7 was duly substantiated by the re9uired evidence.'s to the ti2eliness of the filing of the


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n the assailed February 7, !"" #ecision,7 the C%' (n Bancreversed and set aside the decision and resolution of the C%'econd #ivision, and dis2issed the original petition for review

for having been filed pre2aturely, to wit/>?(R(F6R(, pre2ises considered/i. 's regards C%' (B Case +o. 5, the Petition for Review ishereby #(# andii. 's regards C%' (B Case +o. 5", the Petition for Review ishereby 1R'+%(#.'ccordingly, the #ecision, dated 'pril "7, !!-, and theResolution, dated 6ctober -, !!-, of the C%' For2er econd#ivision are hereby R(0(R(# and (% '#(, and anotherone is hereby entered #+1 the Petition for Review

filed in C%' Case +o. 755- for having been filed pre2aturely.6 6R#(R(#.:

%he C%' (n Banc e&plained that although 01PC seasonablyfiled its ad2inistrative clai2 within the twoDyear prescriptiveperiod, its


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- of the "--7 %a& Code )* 'ichi did not overturn thedoctrine in 'tlas, which upheld the pri2acy of the twoDyearperiod under ection - );* respondent CR is estopped fro2

9uestioning the


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whether or not such ta&, penalty, or su2 has been paid underprotest or duress.n any case, no such suit or proceeding shall be filed after the

e&piration of two )* years fro2 the date of pay2ent of the ta&or penalty regardless of any supervening cause that 2ay ariseafter pay2ent/ Provided, however, %hat the Co22issioner 2ay,even without a written clai2 therefor, refund or credit any ta&,where on the face of the return upon which pay2ent was 2ade,such pay2ent appears clearly to have been erroneously paid.J(2phases suppliedKt has been definitively settled in the recent (n Banc case of CRv. an Ro9ue Power Corporation )an Ro9ue*, "that it is ection"" of the +RC which applies to clai2s for ta& credit

certificates and ta& refunds arising fro2 sales of 0'%Dregisteredpersons that are 3eroDrated or effectively 3eroDrated, which are,si2ply put, clai2s for unutili3ed creditable input 0'%.%hus, under ection "")'*, the ta&payer 2ay, within yearsafter the close of the ta&able 9uarter when the sales were 2ade,via an ad2inistrative clai2 with the CR, apply for the issuanceof a ta& credit certificate or refund of creditable input ta& due orpaid attributable to such sales. Ander ection "")#*, the CR2ust then act on the clai2 within "! days fro2 the sub2issionof the ta&payerGs co2plete docu2ents. n case of )a* a full or

partial denial by the CR of the clai2, or )b* the CRGs failure toact on the clai2 within "! days, the ta&payer 2ay file a


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in consonance with e9uitable estoppel, e&pressly provides that areversal of a BR regulation or ruling cannot adversely pre


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day periods was first raised in 'ichi, which adopted the verbalegis rule in holding that the "!N;! day periods are 2andatoryand hen ection "")C* states that LtheCo22issioner shall grant a refund or issue the ta& credit withinone hundred twenty )"!* days fro2 the date of sub2ission ofco2plete docu2ents,L the law clearly gives the Co22issioner"! days within which to decide the ta&payerGs clai2. Resort tothe courts prior to the e&piration of the "!Dday period is apatent violation of the doctrine of e&haustion of ad2inistrativere2edies, a ground for dis2issing the


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establishes the conte2poraneous legislative intent of the law.%hus, such interpretation constitutes a part of the law as of thedate the statute is enacted. t is only when a prior ruling of the

Court is overruled, and a different view adopted, that the newdoctrine 2ay have to be applied prospectively in favor of partieswho have relied on the old doctrine and have acted in goodfaith.:

Considering that the nature of the "!N;! day period was firstsettled in 'ichi, the interpretation by the Court of its being2andatory and hen to file a


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ii. >ithin ;! days fro2 the e&piration of the "!Dday periodprovided to the CR to decide on the clai2. %his is 2andatoryand


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R.'. +o. 77 granted the ubic (I incentives rangingfro2 ta& and dutyDfree i2portations, e&e2ption of businessestherein fro2 local and national ta&es, to other hall2arEs of a

liberali3ed financial and business cli2ate.J4K

'nd R.'. +o. 77 e&pressly gave authority to thePresident to create through e&ecutive procla2ation, suballace 'irtation in an Fernando, a Anion, and Ca2p $ohn ?ay.J5K

6n 'ugust ", "--;, BC#' entered into a e2orandu2 of'gree2ent and (scrow 'gree2ent with private respondents

%unte& )B.0..* Co., td )%A+%(* and 'siaworldnternationale 1roup, nc. )''>6R#*, private corporationsregistered under the laws of the British 0irgin slands,preparatory to the for2ation of a


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which 2ay otherwise be collected fro2 real properties of Ca2p$ohn ?ay.J";K%he resolution was intended to intelligently guidethe sanggunian in deter2ining its position on whether Ca2p

$ohn ?ay be declared a (I, it )the sanggunian*being of theview that such declaration would e&e2pt the ca2pGs propertyand the econo2ic activity therein fro2 local or national ta&ation.

ore than a 2onth later, however, the sanggunian passedResolution +o. 55, )eries of "--4*,J"4KseeEing and supporting,sub


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private rights, if any, and in consultation and coordination withthe City 1overn2ent of Baguio after consultation with itsinhabitants, and to pro2ulgate the necessary policies, rules, and

regulations to govern and regulate the 3one thru the $ohn ?ayPoro Point #evelop2ent Corporation, which is its i2ple2entingar2 for its econo2ic develop2ent and opti2u2 utili3ation.ec. ;. $nves#men# Clima#einJohn Hay Special Economic Zone.H Pursuant to ection 5)2* and ection "5 of Republic 'ct +o.77, the $ohn ?ay Poro Point #evelop2ent Corporation shalli2ple2ent all necessary policies, rules, and regulationsgoverning the 3one, including invest2ent incentives, inconsultation with pertinent govern2ent depart2ents. '2ongothers, the 3one shall have all the applicable incentives of the

pecial (cono2ic Ione under ection " of Republic 'ct +o.77 and those applicable incentives granted in the (&portProcessing Iones, the 62nibus nvest2ent Code of "-:7, theForeign nvest2ent 'ct of "--", and new invest2ent laws that2ay hereinafter be enacted.ec. 4. %ole of &epar#men#s' "ureaus' (ffices' )gencies and$ns#rumen#ali#ies. H 'll ?eads of depart2ents, bureaus, offices,agencies, and instru2entalities of the govern2ent are herebydirected to give full support to Bases Conversion and#evelop2ent 'uthority andor its i2ple2enting subsidiary or

(R '+#+%(RF(R( >%? %?( 'A%6+6@ 6F %?(C%@ 6F B'1A6 +0'#, (1' '+#A+C6+%%A%6+'.

. PR(#(+%' PR6C''%6+ +6. 4!,(R( 6F "--4 A+C6+%%A%6+' +%?'% % 06'%( %?( RA( %?'% '
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%'( ?6A# B( A+F6R '+#(8A%'B(.

0. %?( (6R'+#A 6F '1R(((+%

(+%(R(# +%6 B@ '+# B(%>((+ PR0'%('+# PABC R(P6+#(+% B'(C6+0(R6+ #(0(6P(+% 'A%?6R%@?'0+1 B((+ (+%(R(# +%6 6+@ B@#R(C% +(16%'%6+ (1'.

0. %?( %(R '+# C6+#%6+ 6F %?((6R'+#A 6F '1R(((+% (+%(R(#+%6 B@ '+# B(%>((+ PR0'%( '+#PABC R(P6+#(+% B'( C6+0(R6+

#(0(6P(+% 'A%?6R%@ )sic* (1'.0. %?( C6+C(P%A' #(0(6P(+% P'+ 6F

R(P6+#(+% +6% ?'0+1 A+#(R16+((+0R6+(+%' P'C% '((+% B(+1 (1'@ C6+#(R(# >%?6A% '0'# (+0R6+(+%' P'C%'((+%.

' te2porary restraining order andor writ of preli2inaryin6R# of the revocation of theirsaid agree2ents.J"-K

n 2aintaining the validity of Procla2ation +o. 4!,respondents contend that by e&tending to the $ohn ?ay (Iecono2ic incentives si2ilar to those en


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are invoEing the e&clusive authority of this Court under ection" of R.'. +o. 77 to enhatever use to which these lands will bedevoted will set a chain of events that can affect one way oranother the social and econo2ic way of life of the co22unitieswhere the bases are located, and ulti2ately the nation in general.

Anderscoring the fragility of Baguio CityGs ecology with its

proble2 on the scarcity of its water supply, petitioners point outthat the local and national govern2ent are faced with thechallenge of how to provide for an ecologically sustainable,environ2entally sound, e9uitable transition for the city in thewaEe of Ca2p $ohn ?ayGs reversion to the 2ass of govern2entproperty.J7K But that is why R.'. +o. 77 e2phasi3es theOsound and balanced conversion of the ClarE and ubic 2ilitary
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reservations and their e&tensions consis#en# wi#h ecologicalandenvironmen#al s#andards.J:Kt cannot thus be gainsaid thatthe 2atter of conversion of the A bases into (Is, in this case

Ca2p $ohn ?ay, assu2es i2portance of a national 2agnitude.Convinced then that the present petition e2bodies crucial

issues, this Court assu2es 6R# are concerned, the legal 9uestionsbeing raised thereon by petitioners have indeed been rendered2oot and acade2ic by the revocation of such agree2ents. %hereare, however, other issues posed by the petition, those whichcenter on the constitutionality of Procla2ation +o. 4!, which

have not been 2ooted by the said supervening event uponapplication of the rules for the


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9uestion involved or an incidental interest,J;4Kfor what is at staEein the enforce2ent of Procla2ation +o. 4! is the veryecono2ic and social e&istence of the people of Baguio City.

PetitionersG locus s#andi parallels that of the petitioner andother residents of Bataan, specially of the town of i2ay, in!arcia v. "oard of $nves#men#sJ;5Kwhere this Court characteri3edtheir interest in the establish2ent of a petroche2ical plant intheir place as actual, real, vital and legal, for it would affect notonly their econo2ic life but even the air they breathe.

oreover, petitioners (dilberto %. Claravall and ilia 1.@aranon were duly elected councilors of Baguio at the ti2e,engaged in the local governance of Baguio City and whose

duties included deciding for and on behalf of their constituentsthe 9uestion of whether to concur with the declaration of aportion of the area covered by Ca2p $ohn ?ay as a (I.Certainly then, petitioners Claravall and @aranon, as cityofficials who voted againstJ;K the sanggunian Resolution +o.55 )eries of "--4* supporting the issuance of the nowchallenged Procla2ation +o. 4!, have legal standing to bringthe present petition.

%hat there is herein a dispute on legal rights and interests isthus beyond doubt. %he 2ootness of the issues concerning the

9uestioned agree2ents between public and private respondentsis of no 2o2ent.

OBy the 2ere enact2ent of the 9uestioned law or the approval ofthe challenged act, the dispute is dee2ed to have ripened into a


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Se*'# E*ono'* 3one un-e) Se*%'on 12 o Reu+#'* A*% No.

7227 n- %&o(e #'*+#e 'n*en%'/e( )n%e- 'n %&e Eo)%

P)o*e(('n 3one(, %&e On'+u( In/e(%en% o-e o 1967, %&e

!o)e'n In/e(%en% A*% o 1991, n- ne 'n/e(%en% #(%&% $ &e)e'n%e) +e en*%e-.)(2phasis and underscoringsupplied*

Apon the other hand, ection " of R.'. +o. 77 provides/

& & &)a* >ithin the fra2eworE and sub


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in ection "; of this 'ct 2ay also issue worEing visas renewableevery two )* years to foreign e&ecutives and other alienspossessing highlyDtechnical sEills which no Filipino within the

ubic pecial (cono2ic Ione possesses, as certified by the#epart2ent of abor and (2ploy2ent. %he na2es of aliensgranted per2anent residence status and worEing visas by theubic Bay etropolitan 'uthority shall be reported to theBureau of 22igration and #eportation within thirty );!* daysafter issuance thereof

& & & )(2phasis supplied*

t is clear that under ection " of R.'. +o. 77 it is onlythe ubic (I which was granted by Congress with ta&e&e2ption, invest2ent incentives and the liEe. %here is no

e&press e&tension of the aforesaid benefits to other (Is (%'## %o+e *)e%e- at the ti2e via presidential procla2ation.

%he deliberations of the enate confir2 the e&clusivity toubic (I of the ta& and invest2ent privileges accorded it underthe law, as the following e&changes between our law2aEersshow during the second reading of the precursor bill of R.'. +o.77 with respect to the invest2ent policies that would governubic (I which are now e2bodied in the aforesaid ection "thereof/

& & &Sen%o) M*e-/ %his is what was talEing about. >e get intoproble2s here because all of these following policies arecentered around the concept of free port. 'nd in the 2ainparagraph above, we have declared both ClarE and ubic asspecial econo2ic 3ones, sub


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of business entities therein )paragraphs )b* and )c**, free 2arEetand trade of specified goods or properties )paragraph d*,liberali3ed banEing and finance )paragraph f*, and rela&ed

i22igration rules for foreign investors )paragraph g*. @et, apartfro2 these, Procla2ation +o. 4! also 2aEes available to the$ohn ?ay (I benefits e&isting in other laws such as theprivilege of e&port processing 3oneDbased businesses ofi2porting capital e9uip2ent and raw 2aterials free fro2 ta&es,duties and other restrictionsJ;-K ta& and duty e&e2ptions, ta&holiday, ta& credit, and other incentives under the 62nibusnvest2ents Code of "-:7J4!Kand the applicability to the sub


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of Baguio CityGs local autono2y, obhere part of a statute is void as contrary to the

Constitution, while another part is valid, the valid portion, ifseparable fro2 the invalid, 2ay stand and be enforced. J5K %hisCourt finds that the other provisions in Procla2ation +o. 4!converting a delineated portion of Ca2p $ohn ?ay into the $ohn?ay (I are separable fro2 the invalid second sentence ofection ; thereof, hence they stand.

WHERE!ORE, the second sentence of ection ; ofProcla2ation +o. 4! is hereby declared +A '+# 06# andis accordingly declared of no legal force and effect. Publicrespondents are hereby en


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OMMISSIONER O! INTERNAL REVEN"E,Petitioner,vs.

THE INS"LAR LI!E ASS"RANE O. LT8.,Respondent.%he Case%his is a Petition for Review on Certiorariunder Rule 45 of theRules of Court filed by the Co22issioner of nternal Revenue)petitioner* against %he nsular ife 'ssurance Co., td.)respondent*,challenging the #ecision;dated arch "4, !"" andResolution4 dated $une ";, !"" of the Court of %a& 'ppeals)C%'* en banc in C%' (B Case +o. 5:5 )C%' Case +o. 7-*.'ntecedent FactsPetitioner Co22issioner of nternal Revenue is the official dulyauthori3ed under ection 4 of the +ational nternal RevenueCode )+RC* of "--7, as a2ended, to assess and collect internalrevenue ta&es, as well as the power to decide disputedassess2ents, sub


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avail of the e&e2ptions granted under ection "-- of the "--7+RC, as a2ended.Andaunted, petitioner filed a Petition for Review before theJC%'K en banc on $anuary , !"!.5)Citations o2itted*6n arch "4, !"", the C%' en banc denied the petition andrendered the assailed decision, with the dispositive portion asfollows/>?(R(F6R(, the instant Petition for Review is hereby#(+(# for lacE of 2erit. %he assailed #ecision dated 'pril ",!!- and Resolution dated $anuary 4, !"! are 'FFR(#.6 6R#(R(#.

t is the petitionerGs contention that since the respondent is notregistered with the Cooperative #evelop2ent 'uthority )C#'*,it should not be considered as a cooperative co2pany that isentitled to the e&e2ption provided under ection "--)a* of the+ational nternal Revenue Code )+RC* of "--7.7 %hus, theinstant petition.

ssue>?(%?(R 6R +6% %?( C%' (+ B'+C (RR(# +RA+1 %?'% R(P6+#(+% ' C66P(R'%0( '+#JK %?AJ,K ((P% FR6 #6CA(+%'R@ %'P%'.:

Ruling%he Court has pronounced in Republic of the Philippines v.unlife 'ssurance Co2pany of Canada- that LJuKnder the %a&Code although respondent is a cooperative, registration with theC#' is not necessary in order for it to be e&e2pt fro2 thepay2ent of both percentage ta&es on insurance pre2iu2s, underection "" and docu2entary sta2p ta&es on policies ofinsurance or annuities it grants, under ection "--.L"!

ection "-- of the +RC of "--7 provides/

ec. "--. #ocu2ents and Papers +ot ub


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%he C%' observed that the factual circu2stances obtaining inunlife and the present case are substantially the sa2e. ?ence,the C%' based its assailed decision on the doctrine enunciatedby the Court in the said case. 6n the other hand, the petitionersub2itted that the doctrine in unlife should be reconsidered andnot be applied because the sa2e failed to consider ection ;)e*of R.' +o. -;-,"which provides that C#' has the power toregister all cooperatives,";to wit/ection ;. Powers, Functions and Responsibilities. H %he'uthority shall have the following powers, functions andresponsibilities/

& & & &)e* Register all cooperatives and their federations and unions,including their division, 2erger, consolidation, dissolution orli9uidation. t shall also register the transfer of all orsubstantially all of their assets and liabilities and such other2atters as 2ay be re9uired by the 'uthority

& & & &%he petitioner proposed that considering the foregoingprovision, registration with the C#' is necessary for anassociation to be dee2ed as a cooperative and to en


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& & & &)r* ales by agricultural cooperatives duly registered with theCooperative #evelop2ent 'uthority to their 2e2bers as well assale of their produce, whether in its original state or processedfor2, to nonD2e2bers their i2portation of direct far2 inputs,2achineries and e9uip2ent, including spare parts thereof, to beused directly and e&clusively in the production andor processingof their produce)s* ales by electric cooperatives duly registered with theCooperative #evelop2ent 'uthority or +ational (lectrification'd2inistration, relative to the generation and distribution ofelectricity as well as their i2portation of 2achineries ande9uip2ent, including spare parts, which shall be directly used inthe generation and distribution of electricity)t* 1ross receipts fro2 lending activities by credit or 2ultiDpurpose cooperatives duly registered with the Cooperative#evelop2ent 'uthority whose lending operation is li2ited totheir 2e2bers)u* ales by nonDagricultural, nonDelectric and noncreditcooperatives duly registered with the Cooperative #evelop2ent'uthority/ Provided, %hat the share capital contribution of each2e2ber does not e&ceed Fifteen thousand pesos )P"5,!!!* andregardless of the aggregate capital and net surplus ratablydistributed a2ong the 2e2bers

& & & & )(2phasis ours*%his absence of the registration re9uire2ent under ection "--clearly 2anifests the intention of the egislative branch of thegovern2ent to do away with registration before the C#' for acooperative to benefit fro2 the #% e&e2ption under thisparticular section.econd, the provisions of the Cooperative Code of the

Philippines do not apply."-%he history of the Cooperative Codewas a2ply discussed in unlife where it was noted thatcooperatives under the old law, Presidential #ecree )P.#.* +o."75!Lreferred only to an organi3ation co2posed pri2arily ofs2all producers and consu2ers who voluntarily hen the Cooperative Code was enacted years later, allcooperatives that were registered under P# "75 and previouslaws were also dee2ed registered with the C#'. ince

respondent was not re9uired to be registered under the old lawon cooperatives, it followed that it was not re9uired to beregistered even under the new law.& & & 6nly cooperatives to be for2ed or organi3ed under theCooperative Code needed registration with the C#'. & & &.

)(2phasis ours*L%he distinguishing feature of a cooperative enterprise is the
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2utuality of cooperation a2ong its 2e2berDpolicyholdersunited for that purpose. o long as respondent 2eets thisessential feature, it does not even have to use and carry the na2eof a cooperative to operate its 2utual life insurance business.1ratia argu2enti that registration is 2andatory, it cannot depriverespondent of its ta& e&e2ption privilege 2erely because itfailed to register. %he nature of its operations is clear its purposewellDdefined. (&e2ption when granted cannot prevail overad2inistrative convenience.L;

%hird, the nsurance Code does not re9uire registration with theC#'.1wphi1 L%he provisions of this Code pri2arily governinsurance contracts only if a particular 2atter in 9uestion is notspecifically provided for shall the provisions of the Civil Codeon contracts and special laws govern.L4

%here being no cogent reason for the Court to deviate fro2 itsruling in unlife, the Court holds that the respondent, being acooperative co2pany not 2andated by law to be registered withthe C#', cannot be re9uired under RC +o. 4:D-", a 2erecircular, to be registered prior to availing of #% e&e2ption.L>hile ad2inistrative agencies, such as the Bureau of nternalRevenue, 2ay issue regulations to i2ple2ent statutes, they arewithout authority to li2it the scope of the statute to less thanwhat it provides, or e&tend or e&pand the statute beyond itster2s, or in any way 2odify e&plicit provisions of the law.

ndeed, a 9uasiD?(R(F6R(, pre2ises considered, the petition is #(+(#.'ccordingly, the #ecision dated arch "4, !"" and Resolutiondated $une ";, !"" of the Court of %a& 'ppeals en bane in C%'

(B Case +o. 5:5 )C%' Case +o. 7-* are hereby 'FFR(#.6 6R#(R(#.

G.R. No. 160290, Se%e+e) 29, 2014

OMMISSIONER O! INTERNAL REVEN"E,Pe#i#ioner,v.PHILIPPINE NATIONAL AN:,%esponden#.

Before this court is a petition for review"under Rule 45 of theRules of Court, seeEing to annul the 6ctober ", !!7 decision

and 6ctober ;!, !!7 resolution;of the Court of %a& 'ppeals (nBanc in C.%.'. (.B. +o. :5.

%he assailed decision denied petitionerGs appeal and affir2ed the$anuary ;!, !!7 decision4and ay ;!, !!7 resolution5of theFirst #ivision of the Court of %a& 'ppeals, granting respondent ata& refund or credit in the a2ount of P;,7,;47.:;,representing unutili3ed e&cess creditable withholding ta&es forta&able year !!!. %he assailed resolution denied petitionerGs2otion for reconsideration.

%he pertinent facts are su22ari3ed in the assailed decision asfollows/chanRoblesvirtualawlibrary

n several transactions including but not li2ited to the sale ofreal properties, lease and co22issions, JrespondentK allegedly

earned inco2e and paid the corresponding inco2e ta&es duewhich were collected and re2itted by various payors aswithholding agents to the Bureau of nternal Revenue )OBR*during the ta&able year !!!.

6n 'pril ":, !!", JrespondentK filed its tentative inco2e ta&return for ta&able year !!! which JitK subse9uently a2ended on
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$uly 5, !!".

. . . JRespondentK filed again an a2ended inco2e ta& return forta&able year !!! on $une !, !!, declaring no inco2e ta&liability . . . as it incurred a net loss in the a2ount ofP"",;":,-57,!.!! and a gross loss of P745,7";,454.!! fro2its Regular BanEing Anit )ORBA* transactions. ?owever,JrespondentK had a "!= final inco2e ta& liability ofP"!,;4,:!.!! on ta&able inco2e of P",-5-,-;",":.!!earned fro2 its Foreign Currency #eposit Anit )OFC#A*transactions for the sa2e year. iEewise, in the Jsa2eK return,JrespondentK reported a total a2ount of P45,:::,5!7.!! finaland creditable withholding ta&es which was applied against thefinal inco2e ta& due of P"!,;4,:!.!! leaving an

overpay2ent of P;5,54,7.!!. . . .

. . . .

n its second a2ended return, JrespondentGsK inco2e ta&overpay2ent of P;5,54,7.!! consisted of the balance of theprior yearUs )"---* e&cess credits of P-,!57,4-.!! to be carriedDover as ta& credit to the succeeding 9uarteryear and e&cesscreditable withholding ta&es for ta&able year !!! in the a2ountof P,4,7;5.!! which JrespondentK opted to be refunded.

6n +ove2ber "", !!, JrespondentK . . . filed a clai2 for refundor the issuance of a ta& credit certificate in the a2ount ofP,4,7;5.4! for the ta&able year !!! with the JBRK.

#ue to JBRUsK inaction on its ad2inistrative clai2, JrespondentKappealed before Jthe Court of %a& 'ppealsK by way of a Petition

for Review on 'pril "", !!;.)Citation o2itted*

6n $anuary ;!, !!7, the Court of %a& 'ppeals First #ivisionrendered a decision in favor of respondent asfollows/chanRoblesvirtualawlibrary

WHERE!ORE, pre2ises considered, the petition is herebyGRANTE8. 'ccordingly, respondent is hereby OR8ERE8TO RE!"N8 or ISS"E A TA; RE8IT ERTI!IATEtopetitioner in the reduced a2ount of %wenty %hree illion even?undred i&ty %wo %housand %hree ?undred Forty even Pesosand :;"!! )P;,7,;47.:;* representing unutili3ed e&cesscreditable withholding ta&es for ta&able year !!!.7 )(2phasisin the original*

PetitionerGs 2otion for reconsideration was subse9uently deniedfor lacE of 2erit in the First #ivisionGs resolution dated ay ;!,!!7.

6n appeal, the Court of %a& 'ppeals (n Banc sustained the First#ivisionGs ruling. t held that the fact of withholding and thea2ount of ta&es withheld fro2 the inco2e pay2ents received byrespondent were sufficiently established by the creditablewithholding ta& certificates, and there was no need to present the

testi2onies of the various payors or withholding agents whoissued the certificates and 2ade the entries therein. t also heldthat respondent need not prove actual re2ittance of the withheldta&es to the Bureau of nternal Revenue because the functions ofwithholding and re2ittance of inco2e ta&es are vested in thepayors who are considered the agents ofpetitioner.:cralawlawlibrary


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%he Court of %a& 'ppeals (n Banc also denied petitionerGs2otion for reconsideration-in its 6ctober ;!, !!7 resolution.

?ence, this instant petition was filed.

Petitioner clai2s that the Court of %a& 'ppeals Oerred on a9uestion of law in ordering the refund to respondent of allegede&cess creditable withholding ta&es because)/*

'. Respondent failed to prove that the creditable withholdingta&es a2ounting to P;,7,;47.:; are duly supported by validcertificates of creditable ta& withheld at source

B. Respondent failed to prove actual re2ittance of the allegedwithheld ta&es to the Bureau of nternal Revenue )BR* and

C. Respondent failed to discharge its burden of proving itsentitle2ent to a refund."!chanrobleslaw

Petitioner 9uestions the validity of respondentGs certificates ofcreditable ta& withheld at source )withholding ta& certificates*and contends that even if the original certificates were offered inevidence, respondent failed to present the various withholding

agents to/ )"* identify and testify on their contents and )* provethe subse9uent re2ittance of the withheld ta&es to the Bureau ofnternal Revenue. oreover, petitioner faults respondent forpresenting the withholding ta& certificates only before the Courtof %a& 'ppeals, and not at the first instance when it filed itsclai2 for refund ad2inistratively before the Bureau of nternalRevenue.""cralawlawlibrary

n its co22ent," respondent countersthat/chanRoblesvirtualawlibrary

%he petition should be dis2issed for being pro for2a because it does not specify threversible errors of either fact or law that the lower courts co22itted, and the argu2entsraised are all rehash and purely factualt co2plied with all the re9uire2ents for


27/48

%he petition is but a reiteration of reasons and argu2entspreviously set forth in petitionerGs pleadings before the Court of%a& 'ppeals (n Banc, and which the latter had alreadyconsidered, weighed, and resolved before it rendered its decisionand resolution now sought to be set aside.

Further2ore, the 9uestions on whether respondentGs clai2 forrefund of unutili3ed e&cess creditable withholding ta&esa2ounting to P;,7,;47.:; were duly supported by validcertificates of creditable ta& withheld at source and whether ithad sufficiently proven its clai2 are 9uestions of fact. %heseissues re9uire a review, e&a2ination, evaluation, or weighing ofthe probative value of evidence presented, especially thewithholding ta& certificates, which this court does not have the

ithheld

P,4,7;5.4!

".* Certificates which do not bear any date or period whenthe indicated creditable ta&es were withheld

4:,!!.!!

.* Certificates dated outside the period of clai2 7;!,"5"."!;.* Certificate without indicated a2ount of ta& withheld :,7-4.5!4.* Certificates taEenDup twice -,!!!.!!ubstantiated Creditable %a&es >ithheld P25,ithheld, the related inco2e ofwhich was not verified against the general ledger

",-!7,:4".-7

Refundable (&cess Creditable %a&es >ithheld P2=,7


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%his court accords respect to the conclusion reached by theCourt of %a& 'ppeals and will not presu2ptuously set it asideabsent any showing of gross error or abuse on itspart."cralawlawlibrary

%he certificate of creditable ta& withheld at sourceis theco2petent proof to establish the fact that ta&es are withheld. ; tis not necessary for the person who e&ecuted and prepared thecertificate of creditable ta& withheld at source to be presentedand to testify personally to prove the authenticity of thecertificates.4cralawlawlibrary

n"anco +ilipino Savings and ,or#gage "an- v. Cour# of)ppeals'5this court declared that a certificate is co2plete in the

relevant details that would aid the courts in the evaluation of anyclai2 for refund of e&cess creditable withholdingta&es/chanRoblesvirtualawlibrary

n fine, the docu2ent which 2ay be accepted as evidence of thethird condition, that is, the fact of withholding, 2ust e2anatefro2 the payor itself, and not 2erely fro2 the payee, and 2ustindicate the na2e of the payor, the inco2e pay2ent basis of theta& withheld, the a2ount of the ta& withheld and the nature ofthe ta& paid.

't the ti2e 2aterial to this case, the re9uisite infor2ationregarding withholding ta&es fro2 the sale of ac9uired assets canbe found in BR For2 +o. "74;.". 's described in ection ofRevenue Regulations +o. D:5, BR For2 +o. "74;." is awritten state2ent issued by the payor as withholding agentshowing the inco2e or other pay2ents 2ade by the said

withholding agent during a 9uarter or year and the a2ount of theta& deducted and withheld therefro2. t readily identifies thepayor, the inco2e pay2ent and the ta& withheld. I% '( *o#e%e'n %&e )e#e/n% -e%'#( &'*& ou#- '- %&e *ou)%( 'n %&e

e/#u%'on o n$ *#' o) )eun- o *)e-'%+#e '%&&o#-'n

%e(.)Emphasis supplied, citations o2itted*

oreover, as correctly held by the Court of %a& 'ppeals (nBanc, the figures appearing in the withholding ta& certificatescan be taEen at face value since these docu2ents were e&ecutedunder the penalties of per


29/48

re2ittance to the Bureau of nternal Revenue deserves scantconsideration. Proof of actual re2ittance is not a condition toclai2 for a refund of unutili3ed ta& credits. Ander ections 57and 5: of the "--7 +ational nternal Revenue Code, as

a2ended, it is the payorDwithholding agent, and not the payeeDrefund clai2ant such as respondent, who is vested with theresponsibility of withholding and re2itting inco2e ta&es.

%his courtGs ruling inCommissioner of $n#ernal %evenue v. )sianransmission Corpora#ion,7citing the Court of %a& 'ppealsGe&planation, is instructive/chanRoblesvirtualawlibrary

. . . proof of actual re2ittance by the respondent is not needed inorder to prove withholding and re2ittance of ta&es to petitioner.

ection .5:.; )B* of Revenue Regulation +o. D-: clearlyprovides that proof of re2ittance is the responsibility of thewithholding agent and not of the ta&payerDrefund clai2ant. tshould be borne in 2ind by the petitioner that payors ofwithholding ta&es are by the2selves constituted as withholdingagents of the BR. %he ta&es they withhold are held in trust forthe govern2ent. n the event that the withholding agents co22itfraud against the govern2ent by not re2itting the ta&es sowithheld, such act should not pre


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G.R. No. 197515, Ju#$ 02, 2014

OMMISSIONER O! INTERNAL REVEN"E,Pe#i#ioner,v."NITE8 SALVAGE AN8 TOWAGE >PHILS.?, IN.,

%esponden#.

.@

%he facts as culled fro2 the records/

Respondent is engaged in the business of subDcontracting worEfor service contractors engaged in petroleu2 operations in thePhilippines.#uring the ta&able years in 9uestion, it had enteredinto various contracts andor subDcontracts with severalpetroleu2 service contractors, such as hell Philippines

(&ploration, B.0. and 'lorn Production Philippines for thesupply of service vessels.;

n the course of respondentGs operations, petitioner foundrespondent liable for deficiency inco2e ta&, withholding ta&,valueDadded ta& )0'%* and docu2entary sta2p ta& )#%* forta&able years "--, "--4, "--7 and "--:.4 Particularly,petitioner, through BR officials, issued de2and letters withattached assess2ent notices for withholding ta& onco2pensation )>%C* and e&panded withholding ta& )(>%* for

ta&able years "--, "--4 and "--:,5detailed as follows/

A((e((en% No%'*e No. T o/e)e- Pe)'o- Aoun%

5D"D!!!545D- >%C "-- P5!,4-.":

5D"D!!!54D- (>% "-- P"4,!7-.45

!;4D"4D!!!!-D-4 (>% "--4 P4:,4".7

!;4D"D!!!!:!D-: (>% "--: P,4;7.!"

6n $anuary -, "--: and 6ctober 4, !!", A%P filedad2inistrative protests against the "--4 and "--: (>%assess2ents, respectively.7

6n February ", !!;, A%P appealed by way of Petition forReview before the Court in action )which was thereafter raffledto the C%'Dpecial First #ivision* alleging, a2ong others, thatthe +otices of 'ssess2ent are bereft of any facts, law, rules andregulations or ithdraw and declared the issues on inco2e ta&, 0'% and #%deficiencies closed and ter2inated in accordance with ourpronounce2ent in Philippine "an-ing Corpora#ion v.Commissioner of $n#ernal %evenue."! Conse9uently, the casewas sub2itted for decision covering the re2aining issue ondeficiency (>% and >%C, respectively, for ta&able years "--,"--4 and "--:.""

%he C%'Dpecial First #ivision held that the Preli2inary


31/48

'ssess2ent +otices )P'+s* for deficiency (>% for ta&ableyears "--4 and "--: were not for2ally offered hence, pursuantto ection ;4, Rule "; of the Revised Rules of Court, the Courtshall neither consider the sa2e as evidence nor rule on their

validity." 's regards the Final 'ssess2ent +otices )F'+s* fordeficiency (>% for ta&able years "--4 and "--:, the C%'Dpecial First #ivision held that the sa2e do not show the lawand the facts on which the assess2ents were based."; aidassess2ents were, therefore, declared void for failure to co2plywith ection : of the "--7 +ational nternal Revenue Code)a/ Code*."4 Fro2 the foregoing, the only re2aining validassess2ent is for ta&able year "--."5

+evertheless, the C%'Dpecial First #ivision declared that the

right of petitioner to collect the deficiency (>% and >%C,respectively, for ta&able year "-- had already lapsed pursuantto ection !; of the %a& Code."%hus, in ruling for A%P, theC%'Dpecial First #ivision cancelled 'ssess2ent +otice +os.5D"D!!54D- and 5D"D!!!545D-, both dated $anuary -, "--and covering the period of "--, as declared in its #ecision"7

dated arch ", !"!, the dispositive portion of whichprovides/chanroblesvirtuallawlibrary

WHERE!ORE, the instant Petition for Review is hereby

GRANTE8. 'ccordingly, 'ssess2ent +otice +o. 5D"D!!54D- dated $anuary -, "-- for deficiency (&panded >ithholding%a& and 'ssess2ent +otice +o. 5D"D!!!545 dated $anuary -,"-- for deficiency >ithholding %a& on Co2pensation arehereby ANELLE8.

SO OR8ERE8.":

#issatisfied, petitioner 2oved to reconsider the aforesaid ruling.?owever, in a Resolution"-dated $uly "5, !"!, the C%'DpecialFirst #ivision denied the sa2e for lacE of 2erit.

6n 'ugust ":, !"!, petitioner filed a Petition for Review withthe C%'En "ancpraying that the #ecision of the C%'DpecialFirst #ivision, dated arch ", !"!, be set aside.!

6n $une 7, !"", the C%'En "ancpro2ulgated a #ecisionwhich affir2ed with 2odification the #ecision dated arch ",!"! and the Resolution dated $uly "5, !"! of the C%'DpecialFirst #ivision, the dispositive portion of whichreads/chanroblesvirtuallawlibrary

WHERE!ORE, pre2ises considered, the Petition is PARTLYGRANTE8. %he #ecision dated arch ", !"! and theResolution dated $uly "5, !"! are A!!IRME8withMO8I!IATIONupholding the "--: (>% assess2ent. naddition to the basic (>% deficiency of P"4,4-.7-, A%P isordered to pay surcharge, annual deficiency interest, and annualdelin9uency interest fro2 the date due until full pay2entpursuant to ection 4- of the "--7 +RC.

SO OR8ERE8."

?ence, the instant petition raising the followingissues/chanroblesvirtuallawlibrary

" >hether or not the Court of %a& 'ppeals is governedstrictly by the technical rules of evidence


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>hether or not the (&panded >ithholding %a&'ssess2ents issued by petitioner against the respondent forta&able year "--4 was without any factual and legal basis

and

; >hether or not petitionerGs right to collect the creditablewithholding ta& and e&panded withholding ta& for ta&ableyear "-- has already prescribed.

'fter careful review of the records and evidence presentedbefore us, we find no basis to overturn the decision of the C%'

En "anc.

6n this score, our ruling in Compagnie +inanciere Sucres E#&enrees v. C$%,; is enlightening, towit/chanroblesvirtuallawlibrary

>e reiterate the wellDestablished doctrine that as a 2atter ofpractice and principle, JweK will not set aside the conclusionreached by an agency, liEe the C%', especially if affir2ed by theJC'K. By the very nature of its function, it has dedicated itself tothe study and consideration of ta& proble2s and has necessarilydeveloped an e&pertise on the sub


33/48

'lthough in a long line of cases, we have rela&ed the foregoingrule and allowed evidence not for2ally offered to be ad2ittedand considered by the trial court, we e&ercised e&tre2e caution

in applying the e&ceptions to the rule, as pronounced in 0da. de(a#e v. Cour# of )ppeals,;;thus/chanroblesvirtuallawlibrary

Fro2 the foregoing provision,it is clear that for evidence to beconsidered, the same must be formally offered. Corollarily, the2ere fact that a particular docu2ent is identified and 2arEed asan e&hibit does not 2ean that it has already been offered as partof the evidence of a party. n $n#erpacific ransi#' $nc. v.)vilesJ": CR' ;:5, ;::D;:- )"--!*K, we had the occasion to2aEe a distinction between identification of docu2entary

evidence and its for2al offer as an e&hibit. >e said that the firstis done in the course of the trial and is acco2panied by the2arEing of the evidence as an e&hibit while the second is doneonly when the party rests its case and not before. ' party,therefore, 2ay opt to for2ally offer his evidence if he believesthat it will advance his cause or not to do so at all. n the eventhe chooses to do the latter, the trial court is not authori3ed by theRules to consider the sa2e.

?owever, in People v. 2apa#3aJ"7- CR' 4!; )"-:-*K citing

People v. ,a#e J"!; CR' 4:4 )"-:!*K, e )e#e- %&eo)eo'n )u#e n- ##oe- e/'-en*e no% o)##$ oe)e- %o

+e -'%%e- n- *on('-e)e- +$ %&e %)'# *ou)% )o/'-e- %&e

o##o'n )eu')een%( )e )e(en%, viz.: first, the same must

have been duly identified by testimony duly recorded and,

second, the same must have been incorporated in the records

of the case.;4

%he evidence 2ay, therefore, be ad2itted provided the followingre9uire2ents are present/ )"* the sa2e 2ust have been dulyidentified by testi2ony duly recorded and )* the sa2e 2ust

have been incorporated in the records of the case. Being ane&ception, the sa2e 2ay only be applied when there is strictco2pliance with the re9uisites 2entioned above otherwise, thegeneral rule in ection ;4 of Rule "; of the Rules of Courtshould prevail.;5

n the case at bar, petitioner categorically ad2itted that it failedto for2ally offer the P'+s as evidence. >orse, it advanced no% deficiencies were notduly identified by testi2ony and were not incorporated in therecords of the case, as re9uired by hile we concur with petitioner that the C%' is not governed

strictly by technical rules of evidence, as rules of procedure arenot ends in the2selves but are pri2arily intended as tools in thead2inistration of


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so, the sa2e is the only 2eans by which the C%' 2ay ascertainand verify the truth of respondentUs clai2s. >e are, therefore,constrained to apply our ruling in Heirs of Pedro Pasag v.Spouses Parocha,;:vi4./

/ / /.A formal offer is necessary because judges are mandatedto rest their findings of facts and their judgment only and

strictly upon the evidence offered by the parties at the trial. $#s

func#ion is #o ena5le #he #rial 6udge #o -now #he purpose or

purposes for which #he proponen# is presen#ing #he evidence. (n#he o#her hand'this allows opposing parties to examine the

evidence and object to its admissibility. ,oreover' i# facili#a#es

review as #he appella#e cour# will no# 5e re7uired #o reviewdocumen#s no# previously scru#ini4ed 5y #he #rial cour#.

S#ric# adherence #o #he said rule is no# a #rivial ma##er. heCour# in Cons#an#ino v. Cour# of )ppeals ruled #ha# #he formal

offer of one8s evidence is deemed waived af#er failing #o su5mi#

i# wi#hin a considera5le period of #ime. $# e/plained #ha# #hecour# canno# admi# an offer of evidence made af#er a lapse of

#hree 9:; mon#hs 5ecause #o do so would for #a/a5le years

1==? and 1==@' respec#ively' were issued on January 1=' 1==@'when #he a/ Code was already in effec#' as correc#ly found 5y

#he C) En "ancD

he da#e of issuance of #he no#ice of assessmen# de#ermines

which law applies3 #he 1== 2$%C or #he old a/ Code. he

case of Commissioner of $n#ernal %evenue v. "an- of Philippine$slands is ins#ruc#iveD


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$n merely no#ifying "P$ of his findings' #he C$% relied on #he

provisions of #he former Sec#ion AB prior #o i#s amendmen# 5y

%) @?A? 9also -nown as #he a/ %eform )c# of 1==;. $n C$% v.%eyes' we held #ha#D

$n #he presen# case' %eyes was no# informed in wri#ing of #he law

and #he fac#s on which #he assessmen# of es#a#e #a/es had 5eenmade. She was merely no#ified of #he findings 5y #he C$%' who

had simply relied upon #he provisions of former Sec#ion AA=

prior #o i#s amendmen# 5y F%)G @?A?' o#herwise -nown as #hea/ %eform )c# of 1==.

+irs#' %) @?A? has already amended #he provision of Sec#ionAA= on pro#es#ing an assessmen#. The old reuirement of

merely notifying the taxpayer of the C!"#s findings waschanged in $%%o informing#he #a/payer of no# only #he law'5u# also of #he fac#s on which an assessmen# would 5e made

o#herwise' #he assessmen# i#self would 5e invalid.

!t was on 'ebruary $(, $%%&, that a preliminary assessment

notice was issued against the estate. )n April ((, $%%&, the

final estate tax assessment notice, as well as demand letter, was

also issued. *uring those dates, "A &+(+ was already in effect.

The notice reuired under the old law was no longer sufficient

under the new law. 9Emphasis ours.;

!n the instant case, the $%% -!"C covers the $%%+ and $%%&

/T 'A-s because there were issued on 0anuary $%, $%%&

and 1eptember ($, (22$, respectively, at the time of the

effectivity of the $%% -!"C. Clearly' #he assessmen#s are

governed 5y #he law.?:

$ndeed' Sec#ion AA@ of #he a/ Code provides #ha# #he #a/payer

shall 5e informed in wri#ing of #he law and #he fac#s on which#he assessmen# is made. (#herwise' #he assessmen# is void. o

implemen# #he aforesaid provision' %evenue %egula#ion 2o. 1A3== was enac#ed 5y #he "$%' of which Sec#ion :.1.? #hereof readsD

:.1.?. +ormal *e##er of &emand and )ssessmen# 2o#ice. he

formal le##er of demand and assessmen# no#ice shall 5e issued 5y#he Commissioner or his duly au#hori4ed represen#a#ive. The

letter of demand calling for payment of the taxpayer3s

deficiency tax or taxes shall state the facts, the law, rules and

regulations, or jurisprudence on which the assessment is

based, otherwise, the formal letter of demand and assessmentnotice shall be void. he same shall 5e sen# #o #he #a/payer only5y regis#ered mail or 5y personal delivery. / / /??

$# is clear from #he foregoing #ha# a #a/payer mus# 5e informedin wri#ing of #he legal and fac#ual 5ases of #he #a/ assessmen#

made agains# him. he use of #he word Ishall in #hese legal

provisions indica#es #he manda#ory na#ure of #he re7uiremen#slaid down #herein.

$n #he presen# case' a mere perusal of #he +)2 for #he deficiencyE> for #a/a5le year 1==?will show #ha# o#her #han a #a5ula#ion

of #he alleged deficiency #a/es due' no fur#her de#ail regarding

#he assessmen# was provided 5y pe#i#ioner. (nly #he resul#ing

in#eres#' surcharge and penal#y were anchored wi#h legal 5asis. ?

Pe#i#ioner should have a# leas# a##ached a de#ailed no#ice of

discrepancy or s#a#ed an e/plana#ion why #he amoun# of


36/48

P?@'?K1.K is collec#i5le agains# responden#?Kand how #he same

was arrived a#. )ny shor#3cu#s #o #he prescri5ed con#en# of #he

assessmen# or #he process #hereof should no# 5e coun#enanced'in consonance wi#h #he ruling in Commissioner of $n#ernal

%evenue v. Enron Su5ic Power Corpora#ion?#o wi#D

he C$% insis#s #ha# an e/amina#ion of #he fac#s shows #ha#

Enron was properly apprised of i#s #a/ deficiency. &uring #he

pre3assessmen# s#age' #he C$% advised Enrons represen#a#ive of#he #a/ deficiency' informed i# of #he proposed #a/ deficiency

assessmen# #hrough a preliminary five3day le##er and furnished

Enron a copy of #he audi# wor-ing paper allegedly showing inde#ail #he legal and fac#ual 5ases of #he assessmen#. he C$%

argues #ha# #hese s#eps sufficed #o inform Enron of #he laws andfac#s on which #he deficiency #a/ assessmen# was 5ased.

>e disagree. The advice of tax deficiency, given by the C!" to

an employee of nron, as well as the preliminary five4day

letter, were not valid substitutes for the mandatory notice in

writing of the legal and factual bases of the assessment. hese

s#eps were mere perfunc#ory discharges of #he C$%s du#ies incorrec#ly assessing a #a/payer. The reuirement for issuing a

preliminary or final notice, as the case may be, informing a

taxpayer of the existence of a deficiency tax assessment ismar5edly different from the reuirement of what such notice

must contain. 0ust because the C!" issued an advice, a

preliminary letter during the pre4assessment stage and a final

notice, in the order reuired by law, does not necessarily mean

that nron was informed of the law and facts on which the

deficiency tax assessment was made.

he law re7uires #ha# #he legal and fac#ual 5ases of #he

assessmen# 5e s#a#ed in #he formal le##er of demand andassessmen# no#ice. hus' such canno# 5e presumed. (#herwise'

#he e/press provisions of )r#icle AA@ of #he 2$%C and %% 2o.1A3== would 5e rendered nuga#ory. he alleged Ifac#ual 5ases

in #he advice' preliminary le##er and Iaudi# wor-ing papers didno# suffice. here was no going around #he manda#e of #he law

#ha# #he legal and fac#ual 5ases of #he assessmen# 5e s#a#ed in

wri#ing in #he formal le##er of demand accompanying #heassessmen# no#ice.

>e no#e #ha# #he old law merely re7uired #ha# #he #a/payer 5eno#ified of #he assessmen# made 5y #he C$%. his was changed in

1==@ and #he #a/payer mus# now 5e informed no# only of #he law5u# also of #he fac#s on which #he assessmen# is made. Suchamendmen# is in -eeping wi#h #he cons#i#u#ional principle #ha#

no person shall 5e deprived of proper#y wi#hou# due process. $n

view of #he a5sence of a fair oppor#uni#y for Enron #o 5einformed of #he legal and fac#ual 5ases of #he assessmen#

agains# i#' #he assessmen# in 7ues#ion was void. / / /.?@

$n #he same vein' we have held in Commissioner of $n#ernal

%evenue v. %eyes'?=#ha#D

Even a cursory review of #he preliminary assessmen# no#ice' as

well as #he demand le##er sen#' reveals #he lac- of 5asis for 33 no#

#o men#ion #he insufficiency of 33 #he gross figures and de#ails of#he i#emi4ed deduc#ions indica#ed in #he no#ice and #he le##er.

This Court cannot countenance an assessment based on


37/48

estimates that appear to have been arbitrarily or capriciously

arrived at.)l#hough #a/es are #he life5lood of #he governmen#'

#heir assessmen# and collec#ion Ishould 5e made in accordancewi#h law as any ar5i#rariness will nega#e #he very reason for

governmen# i#self.B

)pplying #he afore7uo#ed rulings #o #he case a# 5ar' i# is clear#ha# #he assailed deficiency #a/ assessmen# for #he E> in

1==?disregarded #he provisions of Sec#ion AA@ of #he a/ Code'

as amended' as well as Sec#ion :.1.? of %evenue %egula#ions2o. 1A3== 5y no# providing #he legal and fac#ual 5ases of #he

assessmen#. Hence' #he formal le##er of demand and #he no#ice of

assessmen# issued rela#ive #here#o are void.

$n any case' we find no 5asis in pe#i#ioners claim #ha# %evenue%egula#ion 2o. 1A3== is no# applica5le a# #he #ime #he P)2 and+)2 for #he deficiency E> for #a/a5le year 1==? were issued.

Considering #ha# such regula#ion merely implemen#s #he law'

and does no# crea#e or #a-e away ves#ed righ#s' #he same may 5eapplied re#roac#ively' as held in %eyesD

/ / / /.

Second, the nonDretroactive application of Revenue Regulation)RR* +o. "D-- is of no 2o2ent, considering that it 2erelyi2ple2ents the law.

' ta& regulation is pro2ulgated by the finance secretary toi2ple2ent the provisions of the %a& Code. >hile it is desirablefor the govern2ent authority or ad2inistrative agency to have

one i22ediately issued after a law is passed, the absence of theregulation does not automatically mean that the law itself

would become inoperative.

At the time the pre4assessment notice was issued to "eyes, "A&+(+ already stated that the taxpayer must be informed of both

the law and facts on which the assessment was based. Thus,

the C!" should have reuired the assessment officers of the

6ureau of !nternal "evenue 76!"8 to follow the clear mandate

of the new law. The old regulation governing the issuance of

estate tax assessment notices ran afoul of the rule that tax

regulations 44 old as they were 44 should be in harmony with,

and not supplant or modify, the law.

t 2ay be argued that the %a& Code provisions are not selfDe&ecutory. t would be too wide a stretch of the i2agination,though, to still issue a regulation that would si2ply re9uire ta&officials to infor2 the ta&payer, in any 2anner, of the law andthe facts on which an assess2ent was based. %hat re9uire2entis neither difficult to 2aEe nor its desired results hard to achieve.

9oreover, an administrative rule interpretive of a statute, and

not declarative of certain rights and corresponding

obligations, is given retroactive effect as of the date of the

effectivity of the statute. "" $(4%% is one such rule. 6einginterpretive of the provisions of the Tax Code, even if it was

issued only on 1eptember , $%%%, this regulation was to

retroact to 0anuary $, $%%& 44 a date prior to the issuance of

the preliminary assessment notice and demand letter.5"

$ndu5i#a5ly' #he dispu#ed assessmen#s for #a/a5le year 1==?


38/48

should have already complied wi#h #he re7uiremen#s laid down

under %evenue %egula#ion 2o. 1A3==. Having failed so' #he

same produces no legal effec#.

2o#wi#hs#anding #he foregoing findings' we sus#ain #he C) En"ancs findings on #he deficiency E> for #a/a5le year 1==@

considering #ha# i# complies wi#h Sec#ion AA@ of #he a/ Code aswell as %evenue %egula#ion 2o. 1A3==' #husD

(n #he o#her hand' #he 1==@ E> +)2 reflec#ed #he followingD a

de#ailed fac#ual accoun# why #he 5asic E> is P1?'?=K.= and

#he legal 5asis' Sec#ion " of #he 1== 2$%C suppor#ingfindings of E> lia5ili#y of PAA'?:.B1. hus' #he E> +)2 for

1==@ is duly issued in accordance wi#h #he law.A

)s #o #he las# issue' pe#i#ioner avers #ha# i#s righ# #o collec# #he

E> for #a/a5le year 1==A has no# ye# prescri5ed. $# argues #ha#

while #he final assessmen# no#ice and demand le##er on E> for#a/a5le year 1==A were all issued on January =' 1==K' #he five

9;3year prescrip#ive period #o collec# was in#errup#ed when

responden# filed i#s re7ues# for reinves#iga#ion on ,arch 1?'1== which was gran#ed 5y pe#i#ioner on January AA' ABB1

#hrough #he issuance of a/ 0erifica#ion 2o#ice 2o. BB1K?=@ on

even da#e.:

hus' #he period for #a/ collec#ion should have5egun #o run from #he da#e of #he reconsidered or modified

assessmen#.?

his argumen# fails #o persuade us.

he s#a#u#e of limi#a#ions on assessmen# and collec#ion of

na#ional in#ernal revenue #a/es was shor#ened from five 9;

years #o #hree 9:; years 5y vir#ue of "a#as Pam5ansa "lg. BB.

hus' pe#i#ioner has #hree 9:; years from #he da#e of ac#ual filingof #he #a/ re#urn #o assess a na#ional in#ernal revenue #a/ or #o

commence cour# proceedings for #he collec#ion #hereof wi#hou#an assessmen#.KHowever' when i# validly issues an assessmen#

wi#hin #he #hree 9:;3year period' i# has ano#her #hree 9:; yearswi#hin which #o collec# #he #a/ due 5y dis#rain#' levy' or cour#

proceeding.he assessmen# of #he #a/ is deemed made and #he

#hree 9:;3year period for collec#ion of #he assessed #a/ 5egins #orun on #he da#e #he assessmen# no#ice had 5een released' mailed

or sen# #o #he #a/payer.@

(n #his ma##er' we no#e #he findings of #he C)3Special +irs#

&ivision #ha# no evidence was formally offered #o prove whenresponden# filed i#s re#urns and paid #he corresponding E>and >C for #a/a5le year 1==A.=

2ever#heless' as correc#ly held 5y #he C) En "anc' #hePreliminary Collec#ion *e##er for deficiency #a/es for #a/a5le

year 1==A was only issued on +e5ruary A1' ABBA' despi#e #he

fac# #ha# #he +)2s for #he deficiency E> and >C for #a/a5leyear 1==A was issued as early as January =' 1==K. Clearly' five

9; long years had already lapsed' 5eyond #he #hree 9:;3year

prescrip#ive period' 5efore collec#ion was pursued 5y pe#i#ioner.

+ur#her' while #he re7ues# for reinves#iga#ion was made on

,arch 1?' 1==' #he same was only ac#ed upon 5y pe#i#ioner on

January AA' ABB1' also 5eyond #he #hree 9:; year s#a#u#e oflimi#a#ions rec-oned from January =' 1==K' no#wi#hs#anding #he

lac- of impedimen# #o rule upon such issue.


39/48

>e canno# coun#enance such inac#ion 5y pe#i#ioner #o #he

pre6udice of responden# pursuan# #o our ruling in Commissionerof $n#ernal %evenue v. Philippine !lo5al Communica#ion' $nc.'KB

#o wi#D

he assessmen#' in #his case' was presuma5ly issued on 1? )pril

1==? since #he responden# did no# dispu#e #he C$%s claim.

herefore' #he "$% had un#il 1: )pril 1==. However' as #herewas no >arran# of &is#rain# andLor *evy served on #he

responden#s nor any 6udicial proceedings ini#ia#ed 5y #he "$%'

#he earlies# a##emp# of #he "$% #o collec# #he #a/ due 5ased on#his assessmen# was when i# filed i#s )nswer in C) Case 2o.

KK@ on = January ABB:' which was several years 5eyond #he#hree3year prescrip#ive period. hus' #he C$% is now prescri5edfrom collec#ing #he assessed #a/.K1

Here' pe#i#ioner had ample #ime #o ma-e a fac#ually and legallywell3founded assessmen# and implemen# collec#ion pursuan#

#here#o. >ha#ever e/amina#ion #ha# pe#i#ioner may have

conduc#ed canno# possi5ly ou#las# #he en#ire #hree 9:;3yearprescrip#ive period provided 5y law #o collec# #he assessed #a/.

hus' #here is no reason #o suspend #he running of #he s#a#u#e of

limi#a#ions in #his case.

,oreover' in "an- of #he Philippine $slands' ci#ing earlier

6urisprudence' we held #ha# #he re7ues# for reinves#iga#ion

should 5e gran#ed or a# leas# ac#ed upon in due course 5efore#he suspension of #he s#a#u#e of limi#a#ions may se# in' #husD

$n "P$ v. Commissioner of $n#ernal %evenue' #he Cour#

emphasi4ed #he rule #ha# #he C$% mus# firs# gran# #he re7ues# forreinves#iga#ion as a re7uiremen# for #he suspension of #he s#a#u#e

of limi#a#ions. he Cour# saidD

$n #he case of %epu5lic of #he Philippines v. !ancayco' #a/payer!ancayco re7ues#ed for a #horough reinves#iga#ion of #he

assessmen# agains# him and placed a# #he disposal of #he

Collec#or of $n#ernal %evenue all #he evidences he had for suchpurpose ye#' #he Collec#or ignored #he re7ues#' and #he records

and documen#s were no# a# all e/amined. Considering #he given

fac#s' #his Cour# pronounced #ha#M

/ / / The act of reuesting a reinvestigation alone does notsuspend the period. The reuest should first be granted, in

order to effect suspension. 9Collec#or v. Suyoc Consolida#ed'

supra also%epu5lic v. )5la4a' supra;. ,oreover' #he Collec#or

gave appellee un#il )pril 1' 1=?=' wi#hin which #o su5mi# hisevidence' which #he la##er did one day 5efore. here were no

impedimen#s on #he par# of #he Collec#or #o file #he collec#ion

case from )pril 1' 1=?=N

$n %epu5lic of #he Philippines v. )ce5edo' #his Cour# similarly

found #ha#

/ / / Ghe defendan#' af#er receiving #he assessmen# no#ice of

Sep#em5er A?' 1=?=' as-ed for a reinves#iga#ion #hereof on

(c#o5er 11' 1=?= 9E/h.


40/48

dis#rain# and levy for #he full amoun# of #he assessmen# 9E/h.


41/48

year prescriptive period under ection !; of the %a& Code. JK

'dditionally, petitioner clai2ed that since it was incorporatedonly on ay ;!, "--5, there was no basis to assu2e that it hadalready earned inco2e for the ta& year "--5.J;K

6n February ", !!5, respondent issued a warrant of

distraint andor levy against petitioner,J4K drawing petitioner tofile on arch ", !!5 a Petition for Review )with otion touspend Collection of nco2e %a&, 0alue 'dded %a&,#ocu2entary ta2p %a& and urcharges and nterests sub10? $e)( %e) %&e -'(*o/e)$ o (u*&

o'(('on o) )u-pursuant to ection )a*of the "--7 %a& Code.

%he sub


42/48

%he aforecited ection )a*J:K of the "--7 %a& Code

provides/

n the case of a false or fraudulentreturn with intent to evade ta& or of failure tofile a return, the ta& 2ay be assessed, or aproceeding in court for the collection of suchta& 2ay be filed without assess2ent, at anyti2e within ten )"!* years after the discoveryof the falsity, fraud, or o2ission/ Provided,%hat in a fraud assess2ent which has beco2efinal and e&ecutory, the fact of fraud shall be


43/48

relevant.J"KBesides, the C%' found that to re9uire ablan totestify would violate ection of Republic 'ct +o. ;;:, asi2ple2ented by ection " of Finance #epart2ent 6rder +o. 4D, proscribing the revelation of identities of infor2ers of

violations of internal revenue laws, e&cept when the infor2ationis proven to be 2alicious or false.JK

n any event, the C%' held that there was no need to issuea subpoena duces #ecum to obtain the 'ffidavit of the nfor2er asthe sa2e for2ed part of the BR records of the case, theproduction of which had been ordered by it.J;K

PetitionerGs otion for ReconsiderationJ4K of the C%'

Resolution of $anuary "5, !!7 was denied, J5K hence, the present

Petition for CertiorariJK

which i2putes grave abuse of discretionto the C%'

.

& & & in holding that the legality of the 2odeof ac9uiring the docu2ents which are thebases of the above discussed deficiency ta&assess2ents, the sub


44/48

the 2ain issue in the Petition for Review iscurrently pending at the ?onorable econd#ivision. %herefore, it is a pre


45/48

arbitrary or despotic 2anner by reason of passion or personalhostility, and it 2ust be so patent and gross as to a2ount to anevasion of positive duty or a virtual refusal of duty enhat docu2ents, if any, did you

obtain fro2 petitioner5. >ere these docu2ents that you

obtained fro2 petitioner sub2itted tothe Bureau of nternal Revenue )BR*Please describe said docu2ents andunder what circu2stances the sa2ewere sub2itted.

. >as the consent of the petitioner,

its officers or e2ployees obtainedwhen the docu2ents that you obtainedwere sub2itted to the BR Pleasestate when and fro2 who2 the consentwas obtained.

7. #id you e&ecute an affidavit asan infor2er in the assess2ent which
http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn28http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn28http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn29http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn29http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn28http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn29


46/48

was issued by the BR againstpetitioner for the ta& year "--5 andother yearsJ;!K )Anderscoringsupplied*

while the 9uestions for the revenue officers read/

". >here did you obtain the docu2ents,particularly the invoices and officialreceipts, which JwereK used by youroffice as evidence and as basis of theassess2ent for deficiency inco2e ta&and value added ta& for the ta& year

"--5 issued against petitioner

. #o you Enow r. eonardo ablanPlease state under what circu2stanceyou ca2e to Enow r. ablanJ;"K

)Anderscoring supplied*

Petitioner i2pugns the 2anner in which the docu2ents in9uestion reached the BR, ablan having allegedly sub2itted

the2 to the BR without its )petitionerGs* consent. PetitionerGslacE of consent does not, however, i2ply that the BR obtainedthe2 illegally or that the infor2ation received is false or2alicious. +or does the lacE of consent preclude the BR fro2assessing deficiency ta&es on petitioner based on the docu2ents.%hus ection 5 of the %a& Code provides/

n ascertaining the correctness of anyreturn, or in 2aEing a return when none hasbeen 2ade, or in deter2ining the liability ofany person for any internal revenue ta&, or in

collecting any such liability, or in evaluatingta& co2pliance, the Co22issioner isauthori3ed/

)'* %o e&a2ine any booE,

paper, record or other datawhich 2ay be relevant or2aterial to such 9uery

)B* %o obtain on a regularbasis )o n$ e)(on o%&e)

%&n %&e e)(on &o(e'n%e)n# )e/enue % #'+'#'%$

'( (u+De*% %o u-'% o)

'n/e(%'%'on, or fro2 anyoffice or officer of the nationaland local govern2ents,govern2ent agencies andinstru2entalities, including the"ang-o Sen#ral ng Pilipinas

and govern2entDowned and H

controlled corporations, anyinfor2ation such as, but notli2ited to, costs and volu2e ofproduction, receipts or salesand gross inco2es of ta&payers,and the na2es, addresses, andfinancial state2ents of
http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn30http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn30http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn31


47/48

corporations, 2utual fundco2panies, insuranceco2panies, regional operatinghead9uarters of 2ultinational

co2panies,


48/48

and even granting that it is related to .. +o. !!5D!;, therespondents in the latter proceeding are the officers andaccountant of petitionerDcorporation, not petitioner. Fro2 theco2plaint and supporting affidavits in .. +o. !!5D!;, ablan

does not even appear to be a witness against the respondentstherein.J;4K

'% ' (0(+%, issuance of subpoena duces #ecumfor

the production of the docu2ents re9uested by the petitioner Hwhich docu2ents petitioner clai2s to be crucial to its defenseJ;5K

H is unnecessary in view of the C%' order for respondent tocertify and forward to it all the records of the case. J;K f the orderhas not been co2plied with, the C%' can enforce it by citingrespondent for indirect conte2pt.J;7K

WHERE!ORE, in light of the foregoing dis9uisition, thepetition is #(#.

Costs against petitioner.

6 6R#(R(#.
http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn36http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn37http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn36http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/177982.htm#_ftn37

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