Constitutional Law Case Digest: De Lima v. Pres. Duterte, G.R. No. 227635, October 15, 2019

De Lima v. Pres. Rodrigo R. Duterte
G.R. No. 227635, October 15, 2019

Lessons Applicable: Writ of Habeas Data, Presidential Immunity from Suit
Laws Applicable:

FACTS:

• May 9, 2016: Davao City Mayor Rodrigo Roa Duterte was elected as the 16th President of the Philippines with a key agenda of his Administration was the relentless national crackdown on illegal drugs.
• August 2, 2016: Sen. De Lima delivered a privilege speech on the floor of the Senate calling a stop to the alleged extrajudicial killings committed in the course of the crackdown.
• Petition for the issuance of a writ of habeas data seeking to enjoin President Rodrigo Roa Dutete from committing acts allegedly violative of her right to life, liberty and security through his public statements: 
• August 11, 2016 public statement of President Duterte: “I know I’m the favorite whipping boy of the NGOs and the human rights stalwarts.  But, I have a special ano kaya no.  She is a government official.  One day soon I will – bitiwan ko yan in public and I will have to destroy her in public.”  Incidentally, in the same event, President Duterte insinuated that with the help of another country, he was keeping surveillance of her.  “Akala nila na hindi rin ako nakikinig sa kanila.  So while all the time they were also listening to what I’ve done, I’ve also been busy, and with the help of another country, listening to them.
• The statement uttered in a briefing at the NAIA Terminal 3, Pasay City in August 17, 2016 wherein President Duterte named Sen. De Lima as the government office he referred to earlier at the same time accused her of living an immortal life by having a romantic affair with her driver, a married man, and of being involved in illegal drugs.  “There’s one crusading lady, whose even herself led a very immoral life, taking his driver as her lover… Paramour niya ang driver nya nagging hooked rin sa drugs because of the close association.  You know, when you are an immoral, dirty woman, the driver was married.  So you live with the driver, its concubinage.
• The statements that described her an immoral woman; that publicized her intimate and personal life, starting from her new boyfriend to her sexual escapades; that told of her being involved in illegal drugs as well as in activities that included her construction of a house for her driver/lover with financing from drug-money
• Statements that threatened her (“De Lima, you are finished”) and demeaned her womanhood and humanity.  If I were De Lima, ladies and gentlemen, I’ll hang myself.  Your life has been, hindi lang life, the innermost of your core as a female is being serialized everyday.  Dapat kang mag-resign.  You resign.  And “De Lima better hang yourself… Hindi ka na naghiya sa sarili mo.  Any other woman would have slashed her throat.  You?  Baka akala mo artista ka.  Mga artistang x-rated paglabas sa, paktapos ng shooting, nakangiti…”

• Sen. De Lima traces his animosity towards her when she 1st encountered President Durterte while he was still the City Mayor of Davao and she the Chairperson of the Commission on Human Rights investigating the existence of the so-called “Davao Death Squad.”

ISSUE: W/N Presidential’s immunity from suit can shield the President from being haled to court
HELD: Dismissed even without the President invoking the privilege of immunity from suit.
YES.
G.R. No. 227635, October 15, 2019

• Immunity can be classified either by: a. extent i.e. absolute or qualified or b. duration i.e. permanent or temporary
• Extent: 
• Absolute immunity is granted to a government official who has proven that his actions fell within the scope of his duties, and that his actions are discretionary rather than ministerial – conduct or the action performed must not involve insignificant or routinely office work but rather the challenged action must involve personal judgment.  It attaches to the function instead of the office.
• Qualified immunity was initially given to a government official who was able to prove that at the time of commission of the act complained of, he possessed a good faith that his actions were lawful – subjective element determined with the two-tier test:

• If the statutory or constitutional right asserted by the plaintiff was clear at the time of the alleged wrongful action
• Whether the official should reasonably have known the action was contrary to law
• Duration:
• Permanent or the immunity for speech or debate – immunity from liability in law suits that arise out of the performance of public duties of democratic deliberation
• Temporary or congressional immunity from arrest – to legislators from litigating even private suits while “at Session” of Congress as public officers

• Estrada v. Desierto (G.R. No. 146710-15, March 2, 2001): Being a former President, President Estrada no longer enjoyed immunity from suit
• David v. Macapagal-Arroyo (G.R. No. 171396, May 3, 2006): Improper to implead President Arroyo in a consolidated petition disputing the factual bases for Presidential Proclamation No. 1017 and General Order No. 5 declaring a state of national emergency and called out the Armed Forces of the Philippines in her capacity as Commander-in-Chief to maintain law and order throughout the country and to suppress acts of lawless violence, insurrection or rebellion.  
• Rubrico v. Macapagal-Arroyo (G.R. No. No. 183871, February 18, 2010):  Court upheld the exclusion of President  Gloria Macapagal-Arroyo, maintaining that presidential immunity from suit despite not being expressly reserved in the 1987 Constitution and declared that the President could not be sued during her tenure in a petition for the issuance of the writ of amparo against military, police personnel and the Office of the Ombudsman and including President Arroyo.
• Balao v. Macapagal-Arroyo (G.R. No. 186050, December 13, 2011): Court ruled that RTC had erred in holding that Presidential immunity could not be invoked in amparo proceedings
• While the concept of immunity from suit originated elsewhere, the ratification of the 1981 constitutional amendments and the 1987 Constitution made our version of presidential immunity unique.  Section 15, Article VII of the 1973 Constitution, as amended, provided for immunity at two distinct points in time: 1. Immunity during the tenure of the President 2. Thereafter.  Framer’s intended during tenure.  
• Presidential immunity does not hinge on the nature of the suit.  It is not intended to immunize the President from liability or accountability.
• Rationale for the grant of immunity stated in Soliven v. Makasiar (G.R. No. 82585, 82827, 83979, November 14, 1988): To assure the exercise of Presidential duties and functions fee from any hindrance of distraction, considering that being the Chief Executive of the Government is a job that aside from requiring all of the office-holder’s time, also demands undivided attention.
• Rationale expanded in David v. Macapagal-Arroyo: It will degrade the dignity of the high office of the President, the Head of State, if he can be dragged into court litigations while serving as such. Furthermore, it is important that he be freed from any form of harassment, hindrance or distraction to enable him to fully attend to the performance of his official duties and functions. Unlike the legislative and judicial branch, only one constitutes the executive branch and anything which impairs his usefulness in the discharge of the many great and important duties imposed upon him by the Constitution necessarily impairs the operation of the Government. However, this does not mean that the President is not accountable to anyone. Like any other official, he remains accountable to the people but he may be removed from office only in the mode provided by law and that is by impeachment.
• Passage in Soliven was made only to point out that it was the President by virtue of the office and may be invoked only by the holder of the office; not by any other person in the President’s behalf and that it was the President who had gone to court as the complainant
• If the Court were to first require the President to respond to each and every complaint brought against him, and then avail himself of presidential immunity on a case to case basis, then the rationale for the privilege – protecting the President from harassment, hindrance or distraction in the discharge of his duties – would very well be defeated.

• Constitution provides remedies for violations committed by the Chief Executive except an ordinary suit before the courts.  The Chief Executive must 1st be allowed to end his tenure (not his term) either through resignation or removal by impeachment. 

Tax Case Digest: City of Davao v. Randy Allied Ventures, G.R. No. 241697, July 29, 2019

City of Davao v. Randy Allied Ventures, Inc.
G.R. No. 241697, July 29, 2019.

Second Division
PERLAS-BERNABE, J.:

Lessons Applicable:  non-bank financial intermediary, local business tax
Laws Applicable:

FACTS:

• Randy Allied Ventures, Inc. (RAVI) is one of the Coconut Industry Investment Fund (CIIF) holding companies established to own and hold the shares of stock of San Miguel Corporation (SMC).
• January 24, 2012: Supreme Court decision in Philippine Coconut Producers Federation, Inc. v. Republic (COCOFED), G.R. Nos. 177857-58 and 178793, declared the CIIF companies, including RAVI, and the CIIF block of SMC shares as "public funds necessarily owned by the Government”.
• January 17, 2013: RAVI filed with the Regional Trial Court (RTC), a claim for refund or credit of erroneously and illegally collected LBT for the taxable year 2010 in the amount of P503,346.00, corresponding to its dividends from its SMC preferred shares, on the mistaken assumption that it is a non-bank financial intermediary (NBFI).
• RTC: Denied the claim for refund or credit.  Being a financial intermediary, RAVI's income from dividends and interests is subject to LBT under Section 143 (f) of Republic Act (RA) No. 7160, or the Local Government Code of 1991 (LGC).  It is its principal source of income, in line with the primary purpose stated in its Amended AOI.
• RAVI filed a Petition for Review with the CTA First Division.
• CTA First Division granted the petition and held that RAVI is a holding company and not an NBFI subject to LBT and denied City of Davao’s Motion for Reconsideration (MR)
• CTA EB: Denied City of Davao’s petition for lack of merit.  RAVI cannot be considered an NBFI for failing to meet the requisites provided under the General Banking Law, Manual of Regulations for Non-Bank Financial Institutions, and the National Internal Revenue Code, i.e., it is not authorized to act as an NBFI by the Bangko Sentral ng Pilipinas (BSP); its principal function does not relate to NBFI activities; and that while its primary purpose may involve one of the activities enumerated in the BSP Manual, there was no proof that it performed such activities as its principal function and on a regular and recurring basis.

ISSUE: W/N CTA EB erred in finding that RAVI is not an NBFI subject to LBT under Section 143 (f) of the LGC

HELD: Petition is denied.

• Essentially, LBT are taxes imposed by local government units on the privilege of doing business within their jurisdictions.  "Doing business" means some "trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit."  LBT imposed pursuant to Section 143 (f) is premised on the fact that the persons made liable for such tax are banks or other financial institutions by virtue of their being engaged in the business as such. This is why the LBT are imposed on their gross receipts from "interest, commissions and discounts from lending activities, income from financial leasing, dividends, rentals on property and profit from exchange or sale of property, insurance premium."
• In order to be considered as an NBFI under the National Internal Revenue Code, banking laws, and pertinent regulations, the following must concur:
• a.    The person or entity is authorized by the BSP to perform quasi-banking functions;
• b.    The principal functions of said person or entity include the lending, investing or placement of funds or evidences of indebtedness or equity deposited to them, acquired by them, or otherwise coursed through them, either for their own account or for the account of others; 
• c.    The person or entity must perform any of the following functions on a regular and recurring, not on an isolated basis, to wit:
• i.    Receive funds from 1 group of persons, irrespective of number, through traditional deposits, or issuance of debt or equity securities; and make available/lend these funds to another person or entity, and in the process acquire debt or equity securities;
• ii.    Use principally the funds received for acquiring various types of debt or equity securities
• iii.    Borrow against, or lend on, or buy or sell debt or equity securities.

• A "'holding company' is 'organized' and is basically conducting its business by investing substantially in the equity securities of another company for the purpose of controlling their policies (as opposed to directly engaging in operating activities) and 'holding' them in a conglomerate or umbrella structure along with other subsidiaries."While holding companies may partake in investment activities, this does not per se qualify them as financial intermediaries that are actively dealing in the same. Financial intermediaries are regulated by the BSP because they deal with public funds when they offer quasi-banking functions. On the other hand, a holding company is not similarly regulated because any investment activities it conducts are mere incidental operations, since its main purpose is to hold shares for policy-controlling purposes

Tax Case Digest: CIR v. PNB, G.R. No. 212699, March 13, 2019

Commissioner of Internal Revenue (CIR) V. Philippine National Bank (PNB)
G.R. No. 212699, March 13, 2019.

SC Second Division
J. REYES, JR., J.:

Lessons Applicable:  Duty of CIR, CTA's jurisdiction is appellate
Laws Applicable:

FACTS:

• April 17, 2006: PNB electronically filed its Annual Income Tax Return (ITR) for taxable year 2005 with attachments dated February 12, 2007, June 22, 2007, and March 10, 2008, which were received by the CIR on February 22, 2007, June 25, 2007, and March 13, 2008, respectively.
• PNB filed its claim for refund or issuance of tax credit certificate of its excess CWT in the amount of P74,598,430.47
• Due to the CIR's inaction to the said claim, PNB filed a petition for review for its claim on April 11, 2008 before the CTA.
• CTA Third Division: Denied the petition for review and Motion for Reconsideration (MR).  PNB's evidence to be insufficient to support its claim for refund or the issuance of a tax credit certificate.  Presentation of PNB's Annual ITR for 2006 is not enough to prove that it did not carry over the claimed excess or unutilized CWT to the subsequent quarters of 2006 and that succeeding Quarterly ITRs is vital to its claim for refund.
• CTA En Banc: Affirmed CTA 3rd Division but reversed and granted PNB’s MR as PNB complied with all the requisites for the filing of such claim: 1. Within the 2-year prescription period 2. Income related to the CW formed part of taxable income as evidenced by documents presented: Original accounting tickets or input sheets; original deeds of absolute/conditional sale; general ledgers for the years 1999 to 2006; audited financial statements; and ITRs for the years 1999 to 2006 3. Supported by original Certificates of Creditable Tax Withheld at Source issued in the name of PNB and dated within the calendar year 2005.  It denied CIR’S MR. 
• CIR filed a petition for review on certiorari under Rule 45

ISSUE: W/N presentation of the subsequent Quarterly ITRs (for 2006) is indispensable to the claim of refund.

HELD:

NO.   CTA correctly ruled that there is nothing under the NIRC that requires the submission of the Quarterly ITRs of the succeeding taxable year in a claim for refund. Even the BIR's own regulations do not provide for such requirement.

• Winebrenner & Iñigo Insurance Brokers, Inc. v. Commissioner of Internal Revenue (GR No. 206526, January 28, 2015): presentation of the claimant's quarterly returns is not a requirement to prove entitlement to the refund.
• Republic v. Team Energy (Phils.) Corporation (G.R. No. 188016, January 14, 2015)
• BIR ought to have its own copies, originals at that, of the claimant's quarterly returns on file, on the basis of which it could have easily rebut the claim that the excess or unutilized CWT sought for refund were carried over to the immediately succeeding taxable quarters.  Failure to present such document during the trial is fatal against the BIR's case rather than the claimant's.

•  It bears stressing that the power to decide matters concerning refunds of internal revenue taxes, among others, is vested in the CIR.  It has the duty to ascertain the veracity of such claims and should not just wait and hope for the burden to fall on the claimant when the issue reaches the court. 
• Commissioner of Internal Revenue v. PERF Realty Corporation (G.R. NO. 163345, July 4, 2008):
• Duty of the CIR to verify whether or not the claimant had carried over its excess CWT
• CTA's jurisdiction is appellate. In the exercise of its authority to review, the CTA cannot dictate what particular evidence the parties must present to prove their respective cases. The means of ascertainment of a fact is best left to the party that alleges the same. The court's power is limited only to the appreciation of that means pursuant to the prevailing rules of evidence.

• Despite PNB's failure to present at the onset its Quarterly ITRs for 2006, its Annual ITR for 2006 is apt and sufficient to show that no CWT carry over was made in 2006.

• Factual findings of the CTA when supported by substantial evidence, will not be disturbed on appeal.

Tax Case Digest: CIR v. V.Y. Domingo (G.R. No. 221780, March 25, 2019)

Commissioner of Internal Revenue v. V.Y. Domingo Jewellers, Inc.'s
G.R. No. 221780, March 25, 2019.

SC Third Division
PERALTA, J.:

Lessons Applicable: doctrine of exhaustion of administrative remedies, petition for review on certiorari under rule 45
Laws Applicable: Section 228 of the NIRC, RR 12-99, rule 45

FACTS:

• September 9, 2009: Bureau of Internal Revenue (BIR) issued a Preliminary Assessment Notice (PAN) against V.Y. Domingo for P2,781,844.21 representing deficiency income tax and value-added tax, inclusive of interest, for the taxable year 2006.
• V.Y. Domingo then received a Preliminary Collection Letter (PCL) dated August 10, 2011 from the Revenue District Office (RDO) No. 28 – Novaliches pursuant to Assessment Notice No. 32-06-IT-0242 and Assessment Notice No. 32-06-VT-0243, both dated November 18, 2010, for collection for the total amount of P3,164,617.43.
• September 15, 2011: V.Y. Domingo received the certified true copies of Assessment Notice Nos. 32-06-IT-0242 and 32-06-VT-0243 which it requested through a letter on September 12, 2011.
• September 16, 2011: V.Y. Domingo  filed a Petition for Review with the CTA in Division, under Section 7(1) of RA No. 1125 and Section 4, Rule 8 of the Revised Rules of the Court of Tax Appeals (RRCTA), praying that Assessment Notice Nos. 32-06-IT-0242 and 32-06-VT-0243 dated November 18, 2010 and the PCL dated August 10, 2011 be declared  void for been issued beyond the prescriptive period for assessment and collection
• CTA En Banc: granted reversing Resolutions of the CTA First Division and remanded the case to the CTA First Division for further proceedings to afford the CIR full opportunity to present her evidence
• CIR filed a Petition for review on certiorari under Rule 45

ISSUE: W/N CTA has jurisdiction over the petition for review

HELD: Grants. Resolution of the CTA reinstated.

NO.  V.Y. Domingo's immediate recourse to the CTA First Division was in violation of the doctrine of exhaustion of administrative remedies.

• CTA, being a court of special jurisdiction, can take cognizance only of matters that are clearly within its jurisdiction.  Section 7 of R.A. No. 1125, as amended by R.A. No. 9282, specifically provides:

“SEC. 7. Jurisdiction. — The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws, administered by the Bureau of Internal Revenue;  xxx”

• In relation thereto, Section 228 of R.A. No. 8424 or The Tax Reform Act of 1997, as amended, implemented by Revenue Regulations No. 12-99, provides for the procedure to be followed in issuing tax assessments and in protesting the same.
• Section 228 of the Tax Code requires taxpayers to exhaust administrative remedies by filing a request for reconsideration or reinvestigation within 30 days from receipt of the assessment.
• Assessment Notice Nos. 32-06-IT-0242 and 32-06-VT-0243 dated November 18, 2010 have not been disputed by V.Y. Domingo at the administrative level without any valid basis therefor, in violation of the doctrine of exhaustion of administrative remedies. To reiterate, what is appealable to the CTA are decisions of the CIR on the protest of the taxpayer against the assessments.  Consequently, the non-filing of the protest against the FLD (30 days from September 15, 2011 - when it received a copy of it) let to the finality of the assessment.

Tax Case Digest: CIR V. Team Energy Corporation (formerly Mirant Pagbilao Corporation) G.R. No. 230412, March 27, 2019

CIR V. Team Energy Corporation (formerly Mirant Pagbilao Corporation)
G.R. No. 230412, March 27, 2019.

Second Division
J. REYES, JR., J.:

Lessons Applicable: VAT tax refund, judicial claim,
Laws Applicable: Section 108(B)(3) of NIRC, Section 4.108-1 of Revenue Regulations No. 7-95 (Consolidated Value Added Tax Regulations)

FACTS:

• Team Energy Corporation (TEC) (formerly Mirant Pagbilao Corporation) is principally engaged in the business of power generation and the subsequent sale thereof to the National Power Corporation (NPC) under a Build, Operate, Transfer Scheme.  It is also a VAT taxpayer.
• December 17, 2004: TEC filed with the BIR Audit Information, Tax Exemption and Incentives Division an Application for Effective Zero-Rate for the supply of electricity to the NPC for the period January 1, 2005 to December 31, 2005, which was subsequently approved.
• December 20, 2006: TEC filed an administrative claim for cash refund or issuance of tax credit certificate corresponding to the input VAT reported in its Quarterly VAT Returns for the 1st 3 quarters of 2005 and Monthly VAT Declaration for October 2005 in the amount of P80,136,251.60
• April 18, 2007: Due to inaction on its claim, TEC filed a Petition for Review before the CTA in Division
• CTA in Division on July 13, 2010: Partially granted ordered to refund or in the alternative, issue a tax credit certificate in the amount of P79,185,617.33 representing unutilized input VAT, attributable to its effectively zero-rated sales of power generation services to NPC for the period covering January 1, 2005 to October 31, 2005.
• Court in Division: Granted CIR’s Motion for Reconsideration, reversed and set aside the Decision dated July 13, 2010, and dismissed the Petition for Review for having been filed prematurely
• CTA En Banc: denied the Petition for Review for lack of merit and denied tis MR
• Supreme Court 3rd Division: Granted Motion to Admit Attached Petition for Review on Certiorari and granted the Certiorari remanded to the Court of Tax Appeals for the proper determination of the refundable amount.  It became final and executory on March 10, 2014 and was recorded in the Book of Entries of Judgments.
• January 9, 2015: CIR filed a Manifestation with Motion for Reinstatement of the July 13, 2010 Decision of the Court of Tax Appeals
• CTA En Banc: Petition for Review is denied.
• CIR filed a petition for review on certiorari

ISSUES:
1.    W/N the Certificate of Compliance (COC) issued by the Energy Regulation Commission (ERC) is indispensable in claiming a tax refund or tax credit.
2.    W/N judicial claim was prematurely filed for its failure to exhaust administrative remedies when it failed to submit complete supporting documents for its administrative claim

HELD:  Petition is denied.
1.    Yes.  But, considering that Team Energy's refund claim is premised on Section 108(B)(3) of the 1997 NIRC, in relation to Section 13 of the NPC Charter, as amended by Section 10 of P.D. No. 938, the requirements under the EPIRA are inapplicable. To qualify its electricity sale to NPC as zero-rated, Team Energy needs only to show that it is a VAT-registered entity and that it has complied with the invoicing requirements under Section 108(B)(3) of the 1997 NIRC, in conjunction with Section 4,.108-1 of Revenue Regulations No. 7-95.

• CIR v. Toledo Power Company (G.R. No. 196415, December 02, 2015)
• requirements of the EPIRA must be complied with only if the claim for refund is based on EPIRA
• Section 6 of the EPIRA provides that the sale of generated power by generation companies shall be zero-rated. Section 4 (x) of the same law states that a generation company "refers to any person or entity authorized by the ERC to operate facilities used in the generation of electricity." Corollarily, to be entitled to a refund or credit of unutilized input VAT attributable to the sale of electricity under the EPIRA, a taxpayer must establish: (1) that it is a generation company, and (2) that it derived sales from power generation.

• Team Energy Corporation v. CIR (G.R. Nos. 197663 and 197770, March 14, 2018)
• CIR that Team Energy is not entitled to tax refund or tax credit because it cannot qualify for VAT zero-rating for its failure to submit its ERC Registration and COC required under the EPIRA.

• Effective zero-rating was intended to relieve the exempt entity from being burdened with the indirect tax which is or which will be shifted to it had there been no exemption. In this case, respondent is being exempted from paying VAT on its purchases to relieve NPC of the burden of additional costs that respondent may shift to NPC by adding to the cost of the electricity sold to the latter.

2.    No.  There is no showing that the CIR sent a written notice requiring respondent to submit additional documents — a process that is indispensable in computing the 120+30 day period.

• Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue (GR No. 207112, December 08, 2015)
• To summarize, for the just disposition of the subject controversy, the rule is that from the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty (30) days within which to submit the documentary requirements sufficient to support his claim, unless given further extension by the CIR. Then, upon filing by the taxpayer of his complete documents to support his application, or expiration of the period given, the CIR has 120 days within which to decide the claim for tax credit or refund. Should the taxpayer, on the date of his filing, manifest that he no longer wishes to submit any other addition documents to complete his administrative claim, the 120-day period allowed to the CIR begins to run from the date of filing. 

Tax Case Digest: CIR v. Univation Motor Philippines, Inc. , G.R. No. 231581, April 10, 2019

Commissioner Of Internal Revenue  v. Univation Motor Philippines, Inc. (formerly Nissan Motor Philippines, Inc.).
G.R. No. 231581, April 10, 2019.

Second Division
REYES, J. JR., J.:

Lessons Applicable:  2-year prescription period, judicial claim, Factual Finding by the CTA
Laws Applicable: Sections 204 and 229 of NIRC, Section 7 of Republic Act No. 9282, Sec. 8 of RA 1125

FACTS: 

• March 12, 2012: Univation Motor Philippines, Inc. (UMP) filed its administrative claim with the Bureau of Internal Revenue (BIR) explaining that the overpayment of P26,103,898.52 consists of prior year's excess credits in the amount of P15,576,837.00 less Minimum Corporate Income Tax amounting to P2,341,683.48 and creditable withholding taxes accumulated during the four quarters of 2010 in the amount of P12,868,745.00.
• April 12, 2013: Since the BIR has not acted upon the application for tax credit, UMP filed a petition for review with the CTA
• CTA En Banc affirmed the CTA First Division decision partially granting the petition for Review and ordered the CIR to issue a tax credit certificate and denied CIR’s MR.
• CIR filed a Petition for Review on Certiorari.

ISSUES:
1. W/N CTA has prematurely assumed jurisdiction on judicial claim for tax refund or credit without waiting for the decision of BIR.
2. W/N CTA en Banc erred in granting the claim for refund despite its failure to substantiate its claim by sufficient documentary proof.

HELD:
1.    NO. No violation of the doctrine of exhaustion of administrative remedies.  The law only requires that an administrative claim be priorly filed.  As long as the administrative claim and the judicial claim were filed within the two-year prescriptive period, then there was exhaustion of the administrative remedies.

• 2-year prescriptive period to claim a refund actually commences to run, at the earliest, on the date of the filing of the adjusted final tax return because this is where the figures of the gross receipts and deductions have been audited and adjusted, reflective of the results of the operations of a business enterprise. 
• 2-year period to file a claim for refund is reckoned from the date of filing its Final Adjustment Return – April 15, 2011 – both claims were filed on time:
• Administrative claim – March 12, 2012
• Judicial claim – April 12, 2013

•  Under the circumstances, if respondent awaited for the commissioner to act on its administrative claim (before resort to the Court), chances are, the two-year prescriptive period will lapse effectively resulting to the loss of respondent's right to seek judicial recourse and worse, its right to recover the taxes it erroneously paid to the government.

2.    No.  CIR did not even render a Decision denying respondent's administrative claim on the ground that it had failed to submit all the required documents.  Considering that the administrative claim was never acted upon, there was no decision for the CTA to review on appeal per se. However, this does not preclude the CTA from considering evidence that was not presented in the administrative claim with the BIR.

• Pilipinas Total Gas v. CIR (G.R. No. 207112, December 08, 2015): A distinction must be made between administrative cases (1) appealed due to inaction and those (2) dismissed at the administrative level due to the failure of the taxpayer to submit supporting documents. If an administrative claim was dismissed by the CIR due to the taxpayer's failure to submit complete documents despite notice/request, then the judicial claim before the CTA would be dismissible, not for lack of jurisdiction, but for the taxpayer's failure to substantiate the claim at the administrative level.  Failure to submit a document requested by the BIR at the administrative level cannot be cured by filing before the CTA.
• Cases filed in the CTA are litigated de novo as such, respondent "should prove every minute aspect of its case by presenting, formally offering and submitting x x x to the Court of Tax Appeals all evidence x x x required for the successful prosecution of its administrative claim." Consequently, the CTA may give credence to all evidence presented by respondent, including those that may not have been submitted to the CIR as the case is being essentially decided in the first instance.
• The issue of whether or not respondent was able to prove by preponderance of evidence its entitlement to the issuance of a Tax Credit certificate, the same is a factual matter. "It is doctrinal that the Court will not lightly set aside the conclusions reached by the CTA which, by the very nature of its function of being dedicated exclusively to the resolution of tax problems, has developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority."

• Jurisprudence laid down the basic requirements in order for a taxpayer to claim tax credit or refund of creditable withholding tax, thus: (1) The claim must be filed with the CIR within the two-year period from the date of payment of the tax, as prescribed under Section 229 of the NIRC of 1997; (2) The fact of withholding is established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld; and (3) It must be shown on the return of the recipient that the income received was declared as part of the gross income.  The second and third requirements are found under Section 2.58.3(B) of Revenue Regulation No. 2-98, as amended.
• CTA En Banc correctly appreciated that there were certain income payments which, although respondent expected to receive in 2006, 2008 and 2009, were only remitted to it in 2010.    The delay in collection of certain income payments caused the timing difference between the actual reporting of the income by respondent and the actual withholding of the corresponding creditable income tax by its customers.  What is important is that the creditable withholding taxes corresponding to the related income in the respondent's books for CY's 2006, 2008 and 2009 were not yet claimed as income tax credits in respondent's annual ITRs corresponding to the said years.  It presented Schedule/Summary of Creditable Taxes Withheld for the year 2010 and the related Certificates of Creditable Taxes Withheld at Source (BIR form No. 2307) duly issued to it by various withholding agents for the year 2010xxx.  Court was able to trace the income payments related to the substantiated CWT of P12,868,745.87 (save for the amount of P139,127.97 CWT) to UMP’s General Ledger (GL) for CY 2010, 2009, 2008 and 2006.

Tax Case Digest: ANPC v. BIR,G.R. No. 228539, June 26, 2019

Association of Non-Profit Clubs, Inc. v. Bureau of Internal Revenue
G.R. No. 228539, June 26, 2019
Second Division
Perlas-Bernabe, J.:

Lessons Applicable: doctrine of hierarchy of courts, rule-making authority of BIR
Laws Applicable: RMC No. 35-2012

FACTS:

• August 3, 2012: Bureau of Internal Revenue (BIR) issued issued Revenue Memorandum Circular (RMC) No. 35-2012 entitled “"Clarifying the Taxability of Clubs Organized and Operated Exclusively for Pleasure, Recreation, and Other Non-Profit Purposes” which was addressed to all revenue officials, employees, and others concerned for their guidance regarding the income tax and Valued Added Tax (VAT) liability of the said recreational clubs.
• RMC No. 35-2012 states that "clubs which are organized and operated exclusively for pleasure, recreation, and other non-profit purposes are subject to income tax under the National Internal Revenue Code of 1997, as amended (1997 NIRC)."  In justifying the interpration, the BIR raised the doctrine of casus omissus pro omisso habendus est, a person, object, or thing omitted from an enumeration must be held to have been omitted intentionally. The provision in the 1977 Tax Code which granted income tax exemption to such recreational clubs was omitted in the 1997 NIRC, as amended and  Section 105, Chapter I, Title IV of the 1997 NIRC, which states that even a nonstock, nonprofit private organization or government entity is liable to pay VAT on the sale of goods or services.
• October 25, 2012: During the meeting of ANPC and other club member representatives with Atty. Elenita Quimosing (Atty. Quimosing), Chief of Staff and Operations Group of the BIR, Atty. Quimosing suggested the attendees to submit a position paper to the BIR regarding their concerts about the Circular.   
• September Since the BIR has not action upon NPC’s request on its position paper for the non-application of RMC No. 35-2012, ANPC, filed before the RTC a petition for declaratory relief to declare RMC no. 35-2012 invalid, unjust, oppressive, confiscatory, and in violation of the due process clause of the Constitution for it is beyond the BIR’s rule-making authority.
• RTC: Denied the petition for declaratory relief and upheld RMC No. 35-2012
• ANPC filed a petition for review on certiorari raising pure questions of law

ISSUES:
1.    W/N the doctrine of hierarchy of courts should apply and the matter should be first elevated the matter to the Secretary of Finance for review pursuant to Section 4, Title I of the 1997 NIRC.
2.    W/N RMC No. 35-2012 is constitutional.

HELD: Partly meritorious.
1.    NO.  The petition for review on certiorari, filed pursuant to Section 2 (c), Rule 41 in relation to Rule 45 of the Rules of Court, is the sole remedy to appeal a decision of the RTC in cases involving pure questions of law

• The doctrine of hierarchy of courts is violated only when relief may be had through multiple fora having concurrent jurisdiction over the case, such as in petitions for certiorari, mandamus, and prohibition which are concurrently cognizable either by the Regional Trial Courts, the Court of Appeals, or the Supreme Court.
• Uy v. Contreras: This Court, the Court of Appeals, and the Regional Trial Courts have concurrent original jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, and habeas corpus, such concurrence does not accord litigants unrestrained freedom of choice of the court to which application therefor may be directed. There is a hierarchy of courts determinative of the venue of appeals which should also serve as a general determinant of the proper forum for the application for the extraordinary writs.

 
2.    Yes.

• RMC No. 35-2012 erroneously foisted a sweeping interpretation that membership fees and assessment dues are sources of income of recreational clubs from which income tax liability may accrue.  As correctly argued by ANPC, membership fees, assessment dues, and other fees of similar nature only constitute contributions to and/or replenishment of the funds for the maintenance and operations of the facilities offered by recreational clubs to their exclusive members.  They represent funds "held in trust" by these clubs to defray their operating and general costs and hence, only constitute infusion of capital.
• Well-enshrined principle in our jurisdiction that the State cannot impose a tax on capital as it constitutes an unconstitutional confiscation of property.  An income tax is arbitrary and confiscatory if it taxes capital because capital is not income.
• Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary (G.R. No. 108524, November 10, 1994): Court held that "as a matter of power, a court, when confronted with an interpretative rule, [such as RMC No. 35-2012] is free to (i) give the force of law to the rule; (ii) go to the opposite extreme and substitute its judgment; or (iii) give some intermediate degree of authoritative weight to the interpretative rule."  By sweepingly including in RMC No. 35-2012 all membership fees and assessment dues in its classification of "income of recreational clubs from whatever source'' that are "subject to income tax,"the BIR exceeded its rule-making authority.
• In the same way, the Court declares as invalid the BIR's interpretation in RMC No. 35-2012 that membership fees, assessment dues, and the like are part of "the gross receipts of recreational clubs" that are "subject to VAT.  Basic principle that before a transaction is imposed VAT, a sale, barter or exchange of goods or properties, or sale of a service is required.  This is true even if such sale is on a cost-reimbursement basis.

Tax Case Digest: City Treasurer of Manila v. Philippine Beverage Partners, Inc. G.R. No. 233556, September 11, 2019

City Treasurer of Manila v. Philippine Beverage Partners, Inc.
G.R. No. 233556, September 11, 2019

Second Division
REYES, J. JR., J.:

Lessons Applicable: Local Tax Protest, Judicial Claim for Refund
Laws Applicable: Section 125 and 126 of LGC

FACTS:

• January 17, 2007: City Treasurer of Manila (CTM) issued a Statement of Account (SOA) under Bill No. 012007-33025 representing business taxes and regulatory fees for the first quarter of 2007 in the total amount of P2,930,239.82 to Philippine Beverage Partners, Inc. (PBP).
• February 6, 2007: PBP received the decision of CTM dated February 2, 2007 denying its protest for the assessment dated January 19, 2007, arguing that Tax Ordinance Nos. 7988 and 8011, amending the Revenue Code of Manila (RCM), should be declared null and void since the collection of local business tax under Section 21 (tax on other business) of the RCM and Section 14 (tax on manufacturers) of the same code constitutes double taxation. 
• February 13, 2007: PBP paid in full the amount stated in the SOA.
• March 2, 2007: It filed a written claim for refund of erroneously/illegally collected tax with petitioner in the amount of P2,424,158.93.  
• March 8, 2007: It filed a Complaint for the Revision of SOA (Preliminary Assessment) and for Refund or Credit of LBT Erroneously/Illegally Collected with the Regional Trial Court, Manila, Branch 47 (RTC).
• CTA Second Division affirmed RTC decision: Ordered CTM to refund the amount of P2,424,158.93 and the cost of suit. 
• CTA En Banc: CTM was able to comply with the requisites for entitlement to a refund/credit of local taxes considering that it filed written claim for refund on March 2, 2007 and filed the judicial claim on March 8, 2007 which is within two years from payment of the tax on February 13, 2007.  With regards the deficiency tax for year 2006 and 2007 sought to be offset, CTM has waived any additional defenses by its failure to raise the same in its Answer before the trial court
• PBP filed a Petition for Review on Certiorari

ISSUES:
1.    W/N a taxpayer who protested an assessment may later on institute a judicial action for refund
2.    W/N deficiency taxes may be used to offset its claim for refund

HELD:  Denied for lack of merit.

1.    YES.

• City of Manila v. Cosmos Bottling Corporation (G.R. No. 196681, June 27, 2018) held that a taxpayer facing an assessment issued by the local treasurer may protest it and alternatively: (1) appeal the assessment in court, or (2) pay the tax, and thereafter, seek a refund.
• The taxpayers' remedies of protesting an assessment and refund of taxes are stated in Sections 195 and 196 of the LGC
• The first provides the procedure for contesting an assessment issued by the local treasurer; whereas, the second provides the procedure for the recovery of an erroneously paid or illegally collected tax, fee or charge. Both Sections 195 and 196 mention an administrative remedy that the taxpayer should first exhaust before bringing the appropriate action in court. In Section 195, it is the written protest with the local treasurer that constitutes the administrative remedy; while in Section 196, it is the written claim for refund or credit with the same office.
• Unlike Section 195, Section 196 does not expressly provide a specific period within which the local treasurer must decide the written claim for refund or credit. It is, therefore, possible for a taxpayer to submit an administrative claim for refund very early in the two-year period and initiate the judicial claim already near the end of such two-year period due to an extended inaction by the local treasurer. In this instance, the taxpayer cannot be required to await the decision of the local treasurer any longer, otherwise, his judicial action shall be barred by prescription.
• Section 196 does not expressly mention an assessment made by the local treasurer. This simply means that its applicability does not depend upon the existence of an assessment notice. By consequence, a taxpayer may proceed to the remedy of refund of taxes even without a prior protest against an assessment that was not issued in the first place.
• Where an assessment is to be protested or disputed, the taxpayer may proceed (a) without payment, or (b) with payment of the assessed tax, fee or charge
• (a)   Where no payment is made, the taxpayer's procedural remedy is governed strictly by Section  195. That is, in case of whole or partial denial of the protest, or inaction by the local treasurer, the taxpayer's only recourse is to appeal the assessment with the court of competent jurisdiction. The appeal before the court does not seek a refund but only questions the validity or correctness of the assessment.
• (b)  Where payment was made, the taxpayer may thereafter maintain an action in court questioning the validity and correctness of the assessment (Section 195, LGC) and at the same time seeking a refund of the taxes. In truth, it would be illogical for the taxpayer to only seek a reversal of the assessment without praying for the refund of taxes. Once the assessment is set aside by the court, it follows as a matter of course that all taxes paid under the erroneous or invalid assessment are refunded to the taxpayer.

• 2 conditions for an action for refund in case the taxpayer had received an assessment:
• (a) Pay the tax and administratively assail within 60 days the assessment before the local treasurer, whether in a letter-protest or in a claim for refund
• (b)   Bring an action in court within thirty (30) days from decision or inaction by the local treasurer, whether such action is denominated as an appeal from assessment and/or claim for refund of erroneously or illegally collected tax

2.    NO.

• Based on Section 195 of the LGC, the issuance of a notice of assessment is mandatory before the local treasurer may collect deficiency taxes from the taxpayer. The notice of assessment is not only a requirement of due process but it also stands as the first instance the taxpayer is officially made aware of the pending tax liability. The local treasurer cannot simply collect deficiency taxes for a different taxing period by raising it as a defense in an action for refund of erroneously or illegally collected taxes.

Tax Case Digest: FDCP v. Colon Heritage Realty Corporation G.R. No. 203754/G.R. No. 204418, October 15, 2019

FDCP v. Colon Heritage Realty Corporation
G.R. No. 203754/G.R. No. 204418, October 15, 2019
SC En Banc
Perlas-Bernabe, J.

Lessons Applicable: Doctrine of Operative Fact , Lifeblood theory
Laws Applicable:

FACTS:

• 1993: Cebu City passed City Ordinance No. LXIX: Revised Omnibus Tax Ordinance of the City of Cebu, Sections 42 and 43, Chapter XI of the Ordinance required proprietors, lessees or operators of theaters, cinemas, concert halls, circuses, boxing stadia and other places of amusement to pay amusement tax equivalent to 30% of the gross receipts of the admission fees to the Office of the City Treasurer of Cebu City.
• June 7, 2002: Congress passed RA 9167 creating FDCP.  Sections 13 and 14 thereof provide that the amusement tax on certain graded films which would otherwise accrue to the cities and municipalities in Metropolitan Manila and highly urbanized and independent component cities in the Philippines during the period the graded film is exhibited, should be deducted and withheld by the proprietors, operators or lessees of theaters or cinemas and remitted to the FDCP which shall reward the same to producers of the graded films.  
• RTC: Granted Cebu City and CHRC separate petition for declaratory relief before the RTC Cebu City which sought to declare Sections 13 and 14 of RA 9167 invalid and unconstitutional.

ISSUE: W/N doctrine of operative fact in relation to the declaration of Sections 13 and 14 of RA 9167 as invalid and unconstitutional.

HELD:  YES.  The operative fact doctrine equally applies to the non-remittance by proprietors since the law produced legal effects prior to the declaration of the nullity of Sections 13 and 14 of RA 9167.

• The operative fact doctrine recognizes the existence and validity of a legal provision prior its being declared as unconstitutional and legitimizes otherwise invalid acts done pursuant thereto because of considerations of practicality and fairness. 
• In this regard, certain acts done pursuant to a legal provision which was just recently declared as unconstitutional by the Court cannot be anymore undone because not only would it be highly impractical to do so, but more so, unfair to those who have relied on the said legal provision prior to the time it was struck down.

• The right to receive the amusement taxes accrued the moment the taxes were deemed payable under the provisions of the Omnibus Tax Ordinance of Cebu City. 
• Taxes, once due, must be paid without delay to the taxing authority
• Taxes are the lifeblood of Government and their prompt and certain availability is an imperious need.  This flows from the truism that without taxes, the government would be paralyzed for lack of the motive power to activate and operate it.  
• The prompt payment of taxes to the rightful authority, cannot be left to the whims of taxpayers.  To rule otherwise would be to acquiesce to the norm allowing taxpayers to reject payment of taxes under the supposition that the law imposing the same is illegal or unconstitutional.  This would unduly hamper government operations. 

Tax Case Digest: People v. Mallari, G.R. No. 197164, December 4, 2019

People v. Mallari
G.R. No. 197164, December 4, 2019

SC Second Division
Hernando, J.

Lessons Applicable: Doctrine of  Immutability
Laws Applicable:

FACTS:

• October 23, 2007: Revenue Delegation Authority Order (RDAO) No. 202007, Regional Director Alfredo V. Misajon (Misajon) of the Bureau of Internal Revenue (BIR), Revenue Region No. 6 of Manila (BIR Manila) filed a criminal complaint against respondens Benedicta Mallari (Mallari) and Chi Wei-Neng (Wei-Neng), President and General Manager of Topsun Int’l (Topsun) for violation of Section 255 in relation to Sections 253 and 256 of the 1997 National Internal Revenue Code (NIRC) before the Office of the City Prosecutor (OCP) of Manila before the Office of the City Prosecutor. 
• August 7, 2009: Assistant City Prosecutor of Manila Gideon C. Mendoza (ACP Mendora) found probable cause to indict Mallari and Wei-neng and Information was subsequently filed before the CTA 1st Division.
• CTA 1st Division dismissed the criminal complaint for failure of ACP Mendorza to obey a lawful order of the court to submit a certified true copy of the Memorandum of the CIR authorizing Misajon to prosecute.
• January 18, 2010 (out of time): Special counsels/prosecutors of the BIR Manila filed their Entry of Appearance with Leave to Admit Attached Motion for Reconsideration maintaining that RD Misajon can sign approval and referral letters to authorize the institution of criminal actions/cases from the regional office with the courts, government agencies, or quasi-judicial bodies under Section 220 of the NIRC in accordance with the delegated authority vested by the CIR to RD under RDAO No. 2-2007.  Further, March 27, 2007 Memorandum issued by the CIR gives authority to specific BIR legal offices to prosecute and conduct criminal proceedings with respect to violation of tax laws like in the instant case.
• CTA En Banc dismissed Petition for Review on Certiorari under Rule 45 of the Rules of Court affirming CTA 1st Division decision which has already become final.

ISSUE: W/N CTA 1st Division decision which has already become final

HELD: YES. By Doctrine of Immutability, the resolution can no longer be reviewed nor modified even if it is meant to correct an erroneous conclusion of law and facts of the said tax court. 

• Alleged negligence of special counsel ACP Mendoza bind petitioner.

Case Digest: Republic of the Philippines v. Sps. Marcelino (2019)

Republic of the Philippines v. Sps. Marcelino
G.R. No. 205473, December 10, 2019
SC First Division
Caquioa, J

Lessons Applicable:  Capital Gains Tax on Expropriation
Laws Applicable: Section 6 Rule 67

FACTS:
•    RTC Order dated August 23, 2012 and Order dated January 10, 2013 directed the expropriation of a 100 sqm. Lot in Valuenzuela City covered by Transfer Certificate of Title (TCT) No. V-16548 issued in the name of Sps. Marcelino and Sps. Bunsay and orderining Department of Public Works and Highways (DPWH) to pay Sps. Bunsay consequential damages equivalent to the value of the capital gains tax (CGT) and other taxes necessary to transfer the Disputed Property in its name.
•    Department of Public Works and Highways (DPWH) filed a Motion for Partial Reconsideration (MPR) praying for the deletion of the award for just compensation representing replacement cost of improvements and equivalent value of CGT and other taxes necessary to transfer
•    RTC granted the MPR in part by excluding the replacement cost of improvements
•    DPWH filed a Petition for review on certiorari filed under Rule 45 of the Rules of Court against the Order dated August 23, 2012 and Order dated January 10, 2013

ISSUE: W/N RTC award for consequential damages should include equivalent value of CGT and other taxes necessary to transfer

HELD:  NO.  While award of consequential damages equivalent value of CGT and other taxes necessary to transfer must be struck down for being erroneous, it is just and equitable to direct Republic to shoulder such taxes to preserve the compensation awarded as a consequence of the expropriation.  Compensation, to be just, must be of such value as to fully rehabilitate the affected owner; it must be sufficient to make the affected owner whole.

•    CGT, being a tax on passive income, is imposed by National Internal Revenue Code (NIRC) on the seller as a consequence of the latter’s presumed income from the sale or exchange of real property.  However, the transfer of real property by way of expropriation is not an ordinary sale contemplated under Art. 1458 of the Civil Code.  It is akin to a “forced sale” or one which arises not from consensual agreement of the vendor and vendee, but by compulsion of law.  Unlike in an ordinary sale wherein the vendor sets and agrees on the selling price, the compensation paid to the affected owner in an expropriation proceeding comes in the form of just compensation determined by the court.  Just compensation is defined as the fair and full equivalent of the loss incurred by the affected owner.
•    Section 6 Rule 67 of the Rules of Court mandates that in no case shall xxx the owner be deprived of the actual value of his property so taken.  Since just compensation requires that real, substantial, full and ample equivalent be given for the property taken, the loss incurred by the affected owner necessarily includes all incidental costs to facilitate the transfer of the expropriated property to the expropriating authority including the CGT, other taxes and fees due on the forced sale.