Here are selected January 2010 rulings of the Supreme Court of the Philippines on tax law:
National Internal Revenue Code
Documentary stamp tax; pledge. A pawn ticket is subject to documentary stamp tax. Tambunting Pawnshop, Inc. vs. Commissioner of Internal Revenue, G.R. No. 179085, January 21, 2010.
Interest; good faith reliance. With respect to petitioner’s argument against liability for surcharges and interest — that it was in good faith in not paying documentary stamp taxes, it having relied on the rulings of respondent CIR and the CTA that pawn tickets are not subject to documentary stamp taxes, the Court finds the same meritorious.
It is settled that good faith and honest belief that one is not subject to tax on the basis of previous interpretations of government agencies tasked to implement the tax law are sufficient justification to delete the imposition of surcharges and interest. Tambunting Pawnshop, Inc. vs. Commissioner of Internal Revenue, G.R. No. 179085, January 21, 2010.
Value added tax; pawnshops. Since the imposition of VAT on pawnshops, which are non-bank financial intermediaries, was deferred for the tax years 1996 to 2002, petitioner is not liable for VAT for the tax year 1999. Tambunting Pawnshop, Inc. vs. Commissioner of Internal Revenue, G.R. No. 179085, January 21, 2010.
VAP; coverage. It is well-settled that where the language of the law is clear and unequivocal, it must be given its literal application and applied without interpretation. The general rule of requiring adherence to the letter in construing statutes applies with particular strictness to tax laws and provisions of a taxing act are not to be extended by implication. A careful reading of the RMOs pertaining to the VAP shows that the recording of the information in the Official Registry Book of the BIR is a mandatory requirement before a taxpayer may be excluded from the coverage of the VAP. Commissioner of Internal Revenue vs. Julieta Ariete, G.R. No. 164152. January 21, 2010.
Tax Procedure
Assessment; finality. Petitioner’s administrative protest was denied by Final Decision on Disputed Assessment dated August 2, 2005 issued by respondent and which petitioner received on August 4, 2005. Under the above-quoted Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal respondent’s denial of its protest to the CTA.
Since petitioner received the denial of its administrative protest on August 4, 2005, it had until September 3, 2005 to file a petition for review before the CTA Division. It filed one, however, on October 20, 2005, hence, it was filed out of time. For a motion for reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to the CTA. Fishwealth Canning Corporation vs. Commissioner of Internal Revenue, G.R. No. 179343, January 21, 2010.
Court of Tax Appeals; findings of fact. Generally, the findings of fact of the CTA, a court exercising expertise on the subject of tax, are regarded as final, binding, and conclusive upon this Court, especially if these are similar to the findings of the Court of Appeals which is normally the final arbiter of questions of fact. Commissioner of Internal Revenue vs. Julieta Ariete, G.R. No. 164152. January 21, 2010.
Real property tax; payment of tax prior to protest. The protest contemplated under Section 252 is required where there is a question as to the reasonableness or correctness of the amount assessed. Hence, if a taxpayer disputes the reasonableness of an increase in a real property tax assessment, he is required to “first pay the tax” under protest. Otherwise, the city or municipal treasurer will not act on his protest.
A claim for tax exemption, whether full or partial, does not question the authority of local assessor to assess real property tax. National Power Corporation vs. Province of Quezon and Municipalilty of Pagbilao, G.R. No. 171586, January 25, 2010.
Real property tax; proper entity to file protest of assessment. Legal interest is defined as interest in property or a claim cognizable at law, equivalent to that of a legal owner who has legal title to the property. Given this definition, Napocor is clearly not vested with the requisite interest to protest the tax assessment, as it is not an entity having the legal title over the machineries. It has absolutely no solid claim of ownership or even of use and possession of the machineries.
If Napocor truly believed that it was the owner of the subject machineries, it should have complied with Sections 202 and 206 of the LGC which obligates owners of real property to:
a. file a sworn statement declaring the true value of the real property, whether taxable or exempt; and
b. file sufficient documentary evidence supporting its claim for tax exemption.
While a real property owner’s failure to comply with Sections 202 and 206 does not necessarily negate its tax obligation nor invalidate its legitimate claim for tax exemption, Napocor’s omission to do so in this case can be construed as contradictory to its claim of ownership of the subject machineries. That it assumed liability for the taxes that may be imposed on the subject machineries similarly does not clothe it with legal title over the same. We do not believe that the phrase “person having legal interest in the property” in Section 226 of the LGC can include an entity that assumes another person’s tax liability by contract.
A review of the provisions of the LGC on real property taxation shows that the phrase has been repeatedly adopted and used to define an entity:
a. in whose name the real property shall be listed, valued, and assessed;
b. who may be summoned by the local assessor to gather information on which to base the market value of the real property;
c. who may protest the tax assessment before the LBAA and may appeal the latter’s decision to the CBAA;
d. who may be liable for the idle land tax, as well as who may be exempt from the same;
e. who shall be notified of any proposed ordinance imposing a special levy, as well as who may object the proposed ordinance;
f. who may pay the real property tax;
g. who is entitled to be notified of the warrant of levy and against whom it may be enforced;
h. who may stay the public auction upon payment of the delinquent tax, penalties and surcharge; and
i. who may redeem the property after it was sold at the public auction for delinquent taxes.
For the Court to consider an entity assuming another person’s tax liability by contract as a person having legal interest in the real property would extend to it the privileges and responsibilities enumerated above. The framers of the LGC certainly did not contemplate that the listing, valuation, and assessment of real property can be made in the name of such entity; nor did they intend to make the warrant of levy enforceable against it. Insofar as the provisions of the LGC are concerned, this entity is a party foreign to the operation of real property tax laws and could not be clothed with any legal interest over the property apart from its assumed liability for tax. The rights and obligations arising from the BOT Agreement between Napocor and Mirant were of no legal interest to the tax collector – the Province of Quezon – which is charged with the performance of independent duties under the LGC.
Some authorities consider a person whose pecuniary interests is or may be adversely affected by the tax assessment as one who has legal interest in the property (hence, possessed of the requisite standing to protest it), citing Cooley’s Law on Taxation. The reference to this foreign material, however, is misplaced. The tax laws of the United States deem it sufficient that a person’s pecuniary interests are affected by the tax assessment to consider him as a person aggrieved and who may thus avail of the judicial or administrative remedies against it. As opposed to our LGC, mere pecuniary interest is not sufficient; our law has required legal interest in the property taxed before any administrative or judicial remedy can be availed. The right to appeal a tax assessment is a purely statutory right; whether a person challenging an assessment bears such a relation to the real property being assessed as to entitle him the right to appeal is determined by the applicable statute – in this case, our own LGC, not US federal or state tax laws. National Power Corporation vs. Province of Quezon and Municipalilty of Pagbilao, G.R. No. 171586, January 25, 2010.
