October 2013 Philippine Supreme Court Decisions on Tax Law

Here are select October 2013 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code; income tax; creditable withholding tax; claims for tax credit or refund; requisites. A taxpayer claiming for a tax credit or refund of creditable withholding tax must comply with the following requisites: (1) The claim must be filed with the Commissioner of Internal Revenue within the two-year period from the date of payment of the tax; (2) It must be shown on the return of the recipient that the income received was declared as part of the gross income; and (3) 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. The first requirement is based on section 229 of the National Internal Revenue Code of 1997 which provides that “no such suit or proceeding shall be filed after the expiration of two  years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment.” The second and third requirements are based on Section 10 of Revenue Regulation No. 6-85 which provides that a claim will prosper only “when it is shown on the return that the income payment received has been declared as part of the gross income and the fact of withholding is established by a copy of the Withholding Tax Statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom.” Commissioner of Internal Revenue v. Team [Philippines] Operations Corporation (formerly Mirant [Philippines] Operations Corporation), G.R. No. 185728. October 16, 2013.

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September 2013 Philippine Supreme Court Decisions on Tax Law

Here are select September 2013 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code; tax refund. If the Bureau of Internal Revenue, or other government taxing agencies for that matter, expects taxpayers to observe fairness, honesty, transparency and accountability in paying their taxes, it must hold itself against the same standard in refunding excess payments or illegal exactions. As a necessary corollary, when the taxpayer’s entitlement to a refund stands undisputed, the State should not misuse technicalities and legalisms, however exalted, to keep money not belonging to it. The government is not exempt from the application of solutio indebiti, a basic postulate proscribing one, including the State, from enriching himself or herself at the expense of another. Commissioner of Internal Revenue v. Fortune Tobacco Corporation, Fortune Tobacco Corporation v. Commissioner of Internal Revenue, G.R. Nos. 167274-75/G.R. No. 192576, September 11, 2013.

Procedure; execution of judgment; fallo prevails over the body of the opinion; exceptions. It is established jurisprudence that “the only portion of the decision which becomes the subject of execution and determines what is ordained is the dispositive part, the body of the decision being considered as the reasons or conclusions of the Court, rather than its adjudication.” However, there are two (2) exceptions to this rule: [1] where there is ambiguity or uncertainty, the body of the opinion may be referred to for purposes of construing the judgment because the dispositive part of a decision must find support from the decision’s ratio decidendi; and [2] where extensive and explicit discussion and settlement of the issue is found in the body of the decision. Both exceptions apply in this case. There is an ambiguity in the fallo of the July 21, 2008 decision in G.R. Nos. 167274-75 considering that the propriety of the Court of Appeals holding in CA-G.R. SP No. 83165 formed part of the core issues raised in G.R. Case Nos. 167274-75 but was left out in the decretal portion of the judgment. The fallo of the Court’s July 21, 2008 decision should, therefore, be corresponding corrected.  Commissioner of Internal Revenue v. Fortune Tobacco Corporation, Fortune Tobacco Corporation v. Commissioner of Internal Revenue,  G.R. Nos. 167274-75/G.R. No. 192576, September 11, 2013.

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August 2013 Philippine Supreme Court Decisions on Tax Law

Here are select August 2013 rulings of the Supreme Court of the Philippines on tax law:

Tariff and Customs Code; Central Bank Circular No. 1389; Prohibited goods v. regulated goods. Central Bank Circular No. 1389 dated April 13, 1993 classified imports into three (3) categories, namely: (a) “freely importable commodities” or those commodities which are neither “regulated” nor “prohibited” and the importation of which may be effected without any prior approval of or clearance from any government agency; (b) “regulated commodities” or those commodities the importation of which require clearances/permits from appropriate government agencies; and (c) “prohibited commodities” or those commodities the importation of which are not allowed by law.  Under Annex 1 of the foregoing circular, rice and corn, which are subject goods in this case, are enumerated as “regulated” commodities. Regulated goods may be released in detention by the filing of a cash bond. Thus, the Court of Tax Appeals did not gravely abuse its discretion when it granted respondent’s motion to release since there lies cogent legal bases to support the conclusion that subject goods were merely “regulated” and not “prohibited” commodities. Secretary of the Department of Finance v. Court of Tax Appeals and Kutangbato Conventional Trading Multi-Purpose Cooperative, G.R. No. 168137, August 7, 2013

Grave abuse of discretion; concept. In order to be qualified as “grave,” the abuse of discretion must be so patent or gross as to constitute an evasion of a positive duty or a virtual refusal to perform the duty or to act at all in contemplation of law. Finding that this characterization does not fit the Court of Tax Appeal’s (CTA) exercise of discretion in this case, the Court held that no grave abuse of discretion attended CTA’s grant of respondent’s motion to release the subject goods. Secretary of the Department of Finance v. Court of Tax Appeals and Kutangbato Conventional Trading Multi-Purpose Cooperative, G.R. No. 168137, August 7, 2013

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July 2013 Philippine Supreme Court Decisions on Tax Law

Here are select July 2013 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code; value-added tax; claims for tax refund or credit. Before an administrative claim for refund or tax credit can be granted, there must be a showing that all documentary and evidentiary requirements are satisfied. The taxpayer claiming the refund must comply with the invoicing and accounting requirements mandated by the National Internal Revenue Tax Code, as well as the revenue regulations implementing them.

Thus, the change of taxpayer’s name to “Bonifacio GDE Water Corporation,” being unauthorized and without approval of the Securities and Exchange Commission, and the issuance of official receipts under that name which were presented to support taxpayer’s claim for tax refund, cannot be used to allow the grant of tax refund or issuance of a tax credit certificate in taxpayer’s favor. The absence of official receipts issued in its name is tantamount to noncompliance with the substantiation requirements provided by law. Bonifacio Water Corporation (formerly Bonifacio Vivendi Water Corporation) v. The Commissioner of Internal Revenue, G.R. No. 175142, July 22, 2013.

National Internal Revenue Code; value-added tax; capital goods; definition. “Capital goods or properties” refer to goods or properties with estimated useful life greater than one year and which are treated as depreciable assets under Section 29(f) of the National Internal Revenue Code, used directly or indirectly in the production or sale of taxable goods or services. Thus, payment for services relating to the construction of the capital assets were not considered capital assets considering, especially, that the same were not recorded in the taxpayer’s property, plant and equipment account. Bonifacio Water Corporation (formerly Bonifacio Vivendi Water Corporation) v. The Commissioner of Internal Revenue, G.R. No. 175142, July 22, 2013.

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July 2013 Philippine Supreme Court Decisions on Tax Law

Here are select July 2013 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code; excise tax; goods subject to excise tax; persons liable to pay.   Excise taxes are imposed on two (2) kinds of goods, namely: (a) goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition; and (b) things imported. With respect to the first kind of goods, Section 130 of the National Internal Revenue Code (the “Tax Code”) states that, unless otherwise specifically allowed, the taxpayer obligated to file the return and pay the excise taxes due thereon is the manufacturer/producer.On the other hand, with respect to the second kind of goods, Section 131 of the Tax Code states that the taxpayer obligated to file the return and pay the excise taxes due thereon is the owner or importer, unless the imported articles are exempt from excise taxes and the person found to be in possession of the same is other than those legally entitled to such tax exemption.While the Tax Code mandates the foregoing persons to pay the applicable excise taxes directly to the government, they may, however, shift the economic burden of such payments to someone else – usually the purchaser of the goods – since excise taxes are considered as a kind of indirect tax. Philippine Airlines, Inc. v. Commissioner of Internal Revenue, G.R. No. 198759, July 1, 2013.

National Internal Revenue Code; excise tax; statutory taxpayer as proper party to seek refund; exception. Since excise taxes are considered as a kind of indirect tax, the statutory taxpayer can transfer to its customers the value of the excise taxes it paid or would be liable to pay to the government by treating it as part of the cost of the goods and tacking it on to the selling price. This notwithstanding, pursuant to Section 204(c) of the Tax Code, the proper party to question, or seek a refund of, excise tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. Accordingly, in cases involving excise tax exemptions on petroleum products under Section 135 of the Tax Code, the Court has consistently held that it is the statutory taxpayer who is entitled to claim a tax refund based thereon and not the party who merely bears its economic burden. However, the abovementioned rule should not apply to instances where the law clearly grants the party to which the economic burden of the tax is shifted an exemption from both direct and indirect taxes. In which case, the latter must be allowed to claim a tax refund even if it is not considered as the statutory taxpayer under the law.Thus, the propriety of a tax refund claim is hinged on the kind of exemption which forms its basis. If the law confers an exemption from both direct or indirect taxes, a claimant is entitled to a tax refund even if it only bears the economic burden of the applicable tax. On the other hand, if the exemption conferred only applies to direct taxes, then the statutory taxpayer is regarded as the proper party to file the refund claim. Philippine Airlines, Inc. v. Commissioner of Internal Revenue, G.R. No. 198759, July 1, 2013.

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June 2013 Philippine Supreme Court Decisions on Tax Law

Here are select June 2013 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code; Certificate of Tax Clearance under Section 52(C); liquidation under the New Central Bank Act. A tax clearance is not a prerequisite to the approval of the project of distribution of the assets of a bank under liquidation by the Philippine Deposit Insurance Corporation (PDIC) for the following reasons:

(1)   Section 52(C) of the National Internal Revenue Code of 1997 pertains only to a regulation of the relationship between the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) with respect to corporations contemplating dissolution or reorganization. On the other hand, banks under liquidation by the PDIC as ordered by the Monetary Board constitute a special case governed by the special rules and procedures provided under Section 30 of the New Central Bank Act, which does not require that a tax clearance be secured from the BIR.

(2)   Only a final tax return is required to satisfy the interest of the BIR in the liquidation of a closed bank, which is the determination of the tax liabilities of a bank under liquidation by the PDIC. In view of the timeline of the liquidation proceedings under Section 30 of the New Central Bank Act, it is unreasonable for the liquidation court to require that a tax clearance be first secured as a condition for the approval of project of distribution of a bank under liquidation.

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