CD: Commissioner of Internal Revenue v. Mc.George Food Industries, Inc.

August 11, 2015 at 10:10 am (2010) (, )

CIR v. MC.GEORGE FOOD INDUSTRIES, INC.
G.R. No. 174157 October 20, 2010
Carpio, J.

Doctrine:
Pursuant to the general rule on the prospective application of laws, the 1997 NIRC operates to govern the conduct of corporate taxpayers the moment it took effect on 1 January 1998.

Facts:
On 15 April 1998, respondent filed with the BIR its final adjustment income tax return for the calendar year ending 31 December 1997. The return indicated a net overpayment of P4,736,188. Exercising its option to either seek a refund of this amount or carry it over to the succeeding year as tax credit, respondent chose the latter, indicating in its 1997 final return that it wished the amount “to be applied as credit to next year.”

On 15 April 1999, respondent filed its final adjustment return for the calendar year ending 31 December 1998, indicating a tax liability of P5,799,056. Instead of applying to this amount its unused tax credit carried over from 1997 (P4,736,188), respondent merely deducted from its tax liability the taxes withheld at source for 1998 and paid the balance of P5,581,877.

On 14 April 2000, respondent simultaneously filed with the BIR and the Court of Tax Appeals (CTA) a claim for refund of its overpayment in 1997 of P4,736,188. The CTA held that refund was proper because respondent complied with the requirements of timely filing of the claim and its substantiation.

Petitioner sought reconsideration, contending that respondent is precluded from seeking a refund for its overpayment in 1997 after respondent opted to carry-over and apply it to its future tax liability, following Section 76 of the 1997 NIRC. Petitioner claimed that Section 76 applies to respondent because by the time respondent filed its final adjustment return for 1997 on 15 April 1998, the 1997 NIRC was already in force, having taken effect on 1 January 1998.

The CTA denied reconsideration, holding that the 1997 NIRC only covers transactions done after 1 January 1998.

The Court of Appeals affirmed the CTA, ruling that the right to claim for refund or tax credit must be governed by the law in effect at the time the excess credits were earned. Thus, the pertinent law applicable to the case at bar is Section 69 of the old Tax Code.

Issue:
Whether or not the 1997 NIRC is the governing law

Held:
Yes. Section 76 of the 1997 NIRC controls.

Section 76 should be applied following the general rule on the prospective application of laws such that they operate to govern the conduct of corporate taxpayers the moment the 1997 NIRC took effect on 1 January 1998.

The lower courts grounded their contrary conclusion on the fact that respondent’s overpayment in 1997 was based on transactions occurring before 1 January 1998. This analysis suffers from the twin defects of missing the gist of the present controversy and misconceiving the nature and purpose of Section 76. None of respondent’s corporate transactions in 1997 is disputed here. Nor can it be argued that Section 76 determines the taxability of corporate transactions. To sustain the rulings below is to subscribe to the untenable proposition that, had Congress in the 1997 NIRC moved the deadline for the filing of final adjustment returns from 15 April to 15 March of each year, taxpayers filing returns after 15 March 1998 can excuse their tardiness by invoking the 1977 NIRC because the transactions subject of the returns took place before 1 January 1998. A keener appreciation of the nature and purpose of the varied provisions of the 1997 NIRC cautions against sanctioning this reasoning.

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CD: CIR v. Aichi Forging Company of Asia, Inc.

November 23, 2010 at 7:01 pm (2010, Case Digests) (, , )

CIR v. AICHI FORGING COMPANY OF ASIA, INC.
G.R. No. 184823 October 6, 2010
Del Castillo, J.

Doctrine:
– The CIR has 120 days, from the date of the submission of the complete documents within which to grant or deny the claim for refund/credit of input vat. In case of full or partial denial by the CIR, the taxpayer’s recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days.

– A taxpayer is entitled to a refund either by authority of a statute expressly granting such right, privilege, or incentive in his favor, or under the principle of solutio indebiti requiring the return of taxes erroneously or illegally collected. In both cases, a taxpayer must prove not only his entitlement to a refund but also his compliance with the procedural due process.

– As between the Civil Code and the Administrative Code of 1987, it is the latter that must prevail being the more recent law, following the legal maxim, Lex posteriori derogat priori.

– The phrase “within two (2) years x x x apply for the issuance of a tax credit certificate or refund” under Subsection (A) of Section 112 of the NIRC refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA.

Facts:
Petitioner filed a claim of refund/credit of input vat in relation to its zero-rated sales from July 1, 2002 to September 30, 2002. The CTA 2nd Division partially granted respondent’s claim for refund/credit.

Petitioner filed a Motion for Partial Reconsideration, insisting that the administrative and the judicial claims were filed beyond the two-year period to claim a tax refund/credit provided for under Sections 112(A) and 229 of the NIRC. He reasoned that since the year 2004 was a leap year, the filing of the claim for tax refund/credit on September 30, 2004 was beyond the two-year period, which expired on September 29, 2004. He cited as basis Article 13 of the Civil Code, which provides that when the law speaks of a year, it is equivalent to 365 days. In addition, petitioner argued that the simultaneous filing of the administrative and the judicial claims contravenes Sections 112 and 229 of the NIRC. According to the petitioner, a prior filing of an administrative claim is a “condition precedent” before a judicial claim can be filed.

The CTA denied the MPR thus the case was elevated to the CTA En Banc for review. The decision was affirmed. Thus the case was elevated to the Supreme Court.

Respondent contends that the non-observance of the 120-day period given to the CIR to act on the claim for tax refund/credit in Section 112(D) is not fatal because what is important is that both claims are filed within the two-year prescriptive period. In support thereof, respondent cited Commissioner of Internal Revenue v. Victorias Milling Co., Inc. [130 Phil 12 (1968)] where it was ruled that “if the CIR takes time in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in the CTA before the end of the two-year period without awaiting the decision of the CIR.”

Issues:
1. Whether or not the claim for refund was filed within the prescribed period
2. Whether or not the simultaneous filing of the administrative and the judicial claims contravenes Section 229 of the NIRC, which requires the prior filing of an administrative claim, and violates the doctrine of exhaustion of administrative remedies

Held:
1. Yes. As ruled in the case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (G.R. No. 172129, September 12, 2008), the two-year period should be reckoned from the close of the taxable quarter when the sales were made.

In Commissioner of Internal Revenue v. Primetown Property Group, Inc (G.R. No. 162155, August 28, 2007, 531 SCRA 436), we said that as between the Civil Code, which provides that a year is equivalent to 365 days, and the Administrative Code of 1987, which states that a year is composed of 12 calendar months, it is the latter that must prevail being the more recent law, following the legal maxim, Lex posteriori derogat priori.

Thus, applying this to the present case, the two-year period to file a claim for tax refund/credit for the period July 1, 2002 to September 30, 2002 expired on September 30, 2004. Hence, respondent’s administrative claim was timely filed.

2. Yes. We find the filing of the judicial claim with the CTA premature.

Section 112(D) of the NIRC clearly provides that the CIR has “120 days, from the date of the submission of the complete documents in support of the application [for tax refund/credit],” within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer’s recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days.

Subsection (A) of Section 112 of the NIRC states that “any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.” The phrase “within two (2) years x x x apply for the issuance of a tax credit certificate or refund” refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA.

The case of Commissioner of Internal Revenue v. Victorias Milling, Co., Inc. is inapplicable as the tax provision involved in that case is Section 306, now Section 229 of the NIRC. Section 229 does not apply to refunds/credits of input VAT.

The premature filing of respondent’s claim for refund/credit of input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA.

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CD: JRA Philippines, Inc. v. CIR

October 29, 2010 at 4:16 pm (2010, Case Digests) (, , )

J.R.A. PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 177127 October 11, 2010
Del Castillo, J.

Doctrine:
The absence of the word “zero rated” on the invoices/receipts is fatal to a claim for credit/refund of input VAT.
Stare decisis et non quieta movere. Courts are bound by prior decisions. Thus, once a case has been decided one way, courts have no choice but to resolve subsequent cases involving the same issue in the same manner.

Facts:
Petitioner, a PEZA Corporation, filed applications for tax credit/refund of unutilized input VAT on its zero-rated sales for the taxable quarters of 2000. The claim for credit/refund, however, remained unacted by the respondent. Hence, petitioner was constrained to file a petition before the CTA.

The CTA eventually denied the petition for lack of the word “zero-rated” on the invoices/receipts.

Issue:
Whether or not the failure to print the word “zero-rated” on the invoices/receipts is fatal to a claim for credit/ refund of input VAT on zero-rated sales

Held:
Yes. The absence of the word “zero rated” on the invoices/receipts is fatal to a claim for credit/refund of input VAT. This has been squarely resolved in Panasonic Communications Imaging Corporation of the Philippines (formerly Matsushita Business Machine Corporation of the Philippines) v. Commissioner of Internal Revenue (G.R. No. 178090, 612 SCRA 28, February 8, 2010). In that case, the claim for tax credit/refund was denied for non-compliance with Section 4.108-1 of Revenue Regulations No. 7-95, which requires the word “zero rated” to be printed on the invoices/receipts covering zero-rated sales.

From the abovementioned decision, the Court ruled that the appearance of the word “zero-rated” on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT was actually paid. If, absent such word, a successful claim for input VAT is made, the government would be refunding money it did not collect.

Stare decisis et non quieta movere. Courts are bound by prior decisions. Thus, once a case has been decided one way, courts have no choice but to resolve subsequent cases involving the same issue in the same manner [Agencia Exquisite of Bohol, Incorporated v. Commissioner of Internal Revenue, G.R. Nos. 150141, 157359 and 158644, February 12, 2009, 578 SCRA 539, 550].

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CD: Spouses Beltran v. Nieves

October 29, 2010 at 12:34 pm (2010, Case Digests) (, , , )

SPOUSES BELTRAN v. NIEVES
G.R. No. 175561 October 20, 2010
Carpio, J.

Doctrine:
– A certificate of title is conclusive evidence of ownership. Registered owners are entitled to the possession of the property covered by the title from the time such title was issued in their favor. No entitlement to possess the property is granted on the basis of an unregistered deed of sale.

– The tax declarations presented are not conclusive evidences of ownership, but are good indicators of possession in the concept of an owner.

– The only issue in an ejectment case is the physical possession of real property: possession de facto and not possession de jure. Prior physical possession is material only in forcible entry cases. In an ejectment suit, the question of ownership may be provisionally ruled upon only for the sole purpose of determining who is entitled to possession de facto.

– A person who occupies the land of another at the latter’s tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand. In case of failure, a summary action for ejectment is the proper remedy against them.

– Any question regarding the validity of a title can only be assailed in an action expressly instituted for that purpose. A certificate of title shall not be subject to collateral attack.

Facts:
Respondent Nieves is the registered owner of the subject parcel of land as well as the house thereon. Milagros Beltran is Nieves’ niece, being the daughter of Gaston, Nieves’ brother. In asserting their ownership and rightful occupation against Nieves, petitioners spouses Beltran claim that Nieves sold the land and house to Gaston. The deed of sale, which Nieves disclaims having signed, remains unregistered.

The MTC and, subsequently, the RTC respected the right of possession of the spouses Beltran. The CA reversed the decision.

Issues:
1. Whether or not an unregistered deed of sale is sufficient to grant ownership over the property
2. Whether or not title is material in ejectment suits

Held:
1. No. No entitlement to possess the property is granted on the basis of an unregistered deed of sale. A certificate of title is conclusive evidence of ownership. Registered owners are entitled to the possession of the property covered by the title from the time such title was issued in their favor [Spouses Apostol v. Court of Appeals, 476 Phil. 403 (2004)].

The tax declarations presented by the spouses Beltran are not conclusive evidences of ownership, but are good indicators of possession in the concept of an owner.

Whatever right of possession that the spouses Beltran may have over the subject property cannot prevail over that of Nieves for the simple reason that Nieves is the registered owner of the subject property and the alleged deed of sale remains unregistered.

2. No. The only issue in an ejectment case is the physical possession of real property: possession de facto and not possession de jure. In an ejectment suit, the question of ownership may be provisionally ruled upon only for the sole purpose of determining who is entitled to possession de facto [Umpoc v. Mercado, 490 Phil. 120,136 (2005)].

A person who occupies the land of another at the latter’s tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which a summary action for ejectment is the proper remedy against them [Calubayan, et al. v. Pascual, 128 Phil. 160, 163 (1967)].

Although it is true that the spouses Beltran, and not Nieves, were in prior physical possession of the subject property, this argument cannot hold water as prior physical possession is material only in forcible entry cases (Spouses Apostol v. Court of Appeals, supra).

Any question regarding the validity of Nieves’ title can only be assailed in an action expressly instituted for that purpose. A certificate of title shall not be subject to collateral attack (Section 48, P.D. No. 1529).

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CD: AT&T Communications Services Philippines, Inc. v. CIR

August 27, 2010 at 3:26 pm (2010, Case Digests) (, )

AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC. v. CIR
G.R. No. 182364 August 3, 2010
Carpio Morales, J.

Doctrine:
Section 113 of the Tax Code does not create a distinction between a sales invoice and an official receipt.

Facts:
Petitioner filed with the respondent an application for tax refund and/or tax credit of its excess/unutilized input VAT from zero-rated sales. To prevent the running of the prescriptive period, petitioner subsequently filed a petition for review with the CTA.

The CTA held that since petitioner is engaged in sale of services, VAT Official Receipts should have been presented in order to substantiate its claim of zero-rated sales, not VAT invoices which pertain to sale of goods or properties.

Issue:
Whether or not a Sales Invoice would suffice as a proof for entitlement to a refund of unutilized input VAT from zero-rated sales, even for seller of services

Held:
Yes. Section 113 of the Tax Code does not create a distinction between a sales invoice and an official receipt. Parenthetically, to determine the validity of petitioner’s claim as to unutilized input VAT, an invoice would suffice provided the requirements under Sections 113 and 237 of the Tax Code are met.

Sales invoices are recognized commercial documents to facilitate trade or credit transactions. They are proofs that a business transaction has been concluded, hence, should not be considered bereft of probative value (Seaoil Petroleum Corporation v. Autocorp Group, G.R. No. 164326, October 17, 2008). Only the preponderance of evidence threshold as applied in ordinary civil cases is needed to substantiate a claim for tax refund proper (Commissioner of Internal Revenue v. Mirant Pagbilao Corporation, G.R. No. 172129, September 12, 2008).

A taxpayer engaged in zero-rated transactions may apply for tax refund or issuance of tax credit certificate for unutilized input VAT, subject to the following requirements: (1) the taxpayer is engaged in sales which are zero-rated (i.e., export sales) or effectively zero-rated; (2) the taxpayer is VAT-registered; (3) the claim must be filed within two years after the close of the taxable quarter when such sales were made; (4) the creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax; and (5) in case of zero-rated sales, the acceptable foreign currency exchange proceeds thereof have been duly accounted for in accordance with BSP rules and regulations.

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CD: Roa v. Heirs of Santiago Ebora

August 18, 2010 at 2:34 pm (2010, Case Digests) (, , )

ROA v. HEIRS OF SANTIAGO EBORA
G.R. No. 161137 March 15, 2010
Corona, J.

Doctrine:
Any right acquired by one buyer over a disputed property cannot prevail over, but must yield to, any superior right possessed by another buyer. The spring cannot rise higher than its source.

Facts:
A parcel of land, which was continuously, openly and adversely possessed by Santiago Ebora, was mistakenly included by Chacon Enterprises in its application for original registration. As a result, litigation arose between the heirs of Ebora and Chacon Enterprises.

During the case’s pendency, the heirs of Ebora sold the land to their co-heir Josefa Ebora Pacardo (Josefa) and her husband Rosalio Pacardo. On the same day, the spouses Pacardo assigned the property to Digno Roa, married to petitioner Lydia Roa. The corresponding deeds of absolute sale and assignment were inscribed on original certificate of title (OCT) and a transfer certificate of title was issued in the name of Digno Roa.

The case was resolved against Chacon Enterprises and in favor of the heirs of Ebora.

Thereafter the heirs of Ebora again adjudicated the land among themselves, pro indiviso. That same day, a deed of confirmation of a prior conveyance by Josefa to respondent Samuel Sonnie Lim of a portion was likewise inscribed on TCT No. T-48097. The issuance of new TCTs in the name of Alejandro Ebora was likewise inscribed in the same. The lots were thereafter sold to various respondents which resulted in the issuance of new TCTs in the names of the respective vendees.

All these transactions occurred without petitioner’s knowledge and consent.

In view of the death of her husband, petitioner filed a petition for annulment and cancellation of TCT No. 48097 and its derivative titles. The RTC ruled against the petitioner. Hence, this petition for review on certiorari.

Issue:
Whether or not the petitioner has a superior right over the land as against the respondents

Held:
Yes. From the moment the disputed land was sold to the spouses Pacardo, the heirs of Ebora lost all their rights and interest over the property.

Thus, the heirs of Ebora had nothing to adjudicate among themselves. Neither did they have anything to transfer to the vendees or successors-in-interest. As such, the transferees of the heirs of Ebora acquired no better right than that of the transferors. The spring cannot rise higher than its source.

Whatever right a buyer, notwithstanding the fact that he is an innocent purchaser for value, may have acquired over the disputed property cannot prevail over, but must yield to, the superior right possessed by another buyer.

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CD: Commissioner of Internal Revenue v. Eastern Telecommunications Philippines

August 16, 2010 at 12:12 pm (2010, Case Digests) (, )

Commissioner of Internal Revenue v. Eastern Telecommunications Philippines
G.R. No. 163835 July 7, 2010
Brion, J.

Doctrine:
Lapses in the literal observance of a rule of procedure may be overlooked when they have not prejudiced the adverse party and especially when they are more consistent with upholding settled principles in taxation.

The burden of strict compliance with statutory and administrative requirements by the person claiming for a tax refund cannot be offset by the non-observance of procedural technicalities by the government’s tax agents when the non-observance of the remedial measure addressing it does not in any manner prejudice the taxpayer’s due process rights.

Facts:
Eastern filed with the CIR a written application for refund or credit of unapplied input taxes it paid on the imported equipment purchased during 1995 and 1996 amounting to P22,013,134.00. To toll the running of the two-year prescriptive period under the same provision, Eastern filed an appeal with the CTA. The CTA found that Eastern has a valid claim for the refund/credit of the unapplied input taxes, declaring it entitled to a tax refund of P16,229,100.00.

The CIR filed a motion for reconsideration of the CTA’s decision. Subsequently, it filed a supplemental motion for reconsideration. The CTA denied the CIR’s motion for reconsideration. The CIR then elevated the case to the CA, who affirmed the CTA ruling and likewise denied the subsequent motion for reconsideration. Hence, the present petition.

The CIR posits that, applying Section 104(A) of the Tax Code on apportionment of tax credits, Eastern is entitled to a tax refund of only a portion of the amount claimed. Since the VAT returns clearly reflected income from exempt sales, the CIR asserts that this constitutes as an admission on Eastern’s part that it engaged in transactions not subject to VAT. Hence, the proportionate allocation of the tax credit to VAT and non-VAT transactions provided in Section 104(A) of the Tax Code should apply.

Eastern objects to the arguments raised in the petition, alleging that these have not been raised in the Answer filed by the CIR before the CTA and was only raised. In fact, the CIR only raised the applicability of Section 104(A) of the Tax Code in his supplemental motion for reconsideration of the CTA’s ruling. Eastern claims that for the CIR to raise such an issue now would constitute a violation of its right to due process; following settled rules of procedure and fair play, the CIR should not be allowed at the appeal level to change his theory of the case.

Eastern further argues that there is no evidence on record that would evidently show that respondent is also engaged in other transactions that are not subject to VAT.

Issue:
Whether or not the rule in Section 104(A) of the Tax Code on the apportionment of tax credits can be applied in appreciating Eastern’s claim for tax refund, considering that the matter was raised by the CIR only when he sought reconsideration of the CTA ruling

Held:
Yes. The question of the applicability of Section 104(A) of the Tax Code was already raised but the tax court did not rule on it. This failure should not be taken against the CIR. The mere declaration of exempt sales in the VAT returns, whether based on Section 103 of the Tax Code or some other special law, should have prompted for the application of Section 104 (A) of the Tax Code to Eastern’s claim.

The general rule is that appeals can only raise questions of law or fact that (a) were raised in the court below, and (b) are within the issues framed by the parties therein (People v. Echegaray, G.R. No. 117472). An issue which was neither averred in the pleadings nor raised during trial in the court below cannot be raised for the first time on appeal.

The rule against raising new issues on appeal is not without exceptions; it is a procedural rule that the Court may relax when compelling reasons so warrant or when justice requires it. What constitutes good and sufficient cause that would merit suspension of the rules is discretionary upon the courts (CIR v. Mirant Pagbilao Corporation, G.R. No. 159593). Another exception is when the question involves matters of public importance.

“Taxes are the lifeblood of the government.” For this reason, the right of taxation cannot easily be surrendered; statutes granting tax exemptions are considered as a derogation of the sovereign authority and are strictly construed against the person or entity claiming the exemption. Claims for tax refunds, when based on statutes granting tax exemption or tax refund, partake of the nature of an exemption; thus, the rule of strict interpretation against the taxpayer-claimant similarly applies (CIR v. Fortune Tobacco Corporation, G.R. Nos. 167274-75).

The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. This burden cannot be offset by the non-observance of procedural technicalities by the government’s tax agents when the non-observance of the remedial measure addressing it does not in any manner prejudice the taxpayer’s due process rights.

Lapses in the literal observance of a rule of procedure may be overlooked when they have not prejudiced the adverse party and especially when they are more consistent with upholding settled principles in taxation.

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