July 2010 Philippine Supreme Court Decisions on Tax Law

Here are selected July 2010 rulings of the Supreme Court of the Philippines on tax law:

Court of Tax Appeals; raising new issues on appeal; general rule. The general rule is that appeals can only raise questions of law or fact that (a) were raised in the court below; and (b) were within the issues framed by the parties therein. 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 was made for the benefit of the adverse party and the trial court as well. Raising new issues at the appeal level is offensive to the basic rules of fair play and justice and is violative of a party’s constitutional right to due process of law. Moreover, the trial court should be given a meaningful opportunity to consider and pass upon all the issues, and to avoid or correct any alleged errors before those issues or errors become the basis for an appeal. Commissioner of Internal Revenue vs. Eastern Telecommunications Philippines, Inc., G.R. No. 163835, July 7, 2010.

Court of Tax Appeals; raising new issues on appeal; exceptions. In this case, contrary to respondent’s claim, the petitioner has previously questioned the nature of the respondent’s transactions (i.e., respondent was also engaged in value-added tax (VAT) transactions) insofar as they affected the claim for VAT refund, in petitioner’s motion for reconsideration of the Court of Tax Appeals’ decision, although it did not specifically refer to the relevant provision of the National Internal Revenue Code (Tax Code). Moreover, the rule against raising new issues on appeals is not without exceptions; it is a procedural rule that the Court may relax when compelling reasons so warrant or when justice requires it. Former Senator Vicente Francisco, a noted authority in procedural law, cites an instance when the appellate court may take up an issue for the first time: The appellate court may, in the interest of justice, properly take into consideration in deciding the case matters of record having some bearing on the issue submitted which the parties failed to raise or the lower court ignored, although they have not been specifically raised as issues by the pleadings. As applied in the present case, even without the petitioner raising the applicability of Section 104 (A) of the Tax Code, since all four of respondent’s tax returns clearly stated that it earned income from exempt sales, i.e., non-VAT taxable sales. Respondent’s quarterly VAT returns are matters of record and were, in fact, included by it in its formal offer of evidence before the CTA. Commissioner of Internal Revenue vs. Eastern Telecommunications Philippines, Inc., G.R. No. 163835, July 7, 2010.

National Internal Revenue Code; irrevocability of option to carry-over of excess income tax credits. In the old National Internal Revenue Code provision, the option to carry-over the excess or overpaid income tax for a given taxable year is limited to the immediately succeeding taxable year only. Under the current provision, the application of the option to carry-over the excess creditable tax is not limited only to the immediately following tax year but extends to the next succeeding taxable years. Thus, once the taxpayer opts to carry-over the excess income tax against the taxes due for the succeeding taxable years, such option s irrevocable for the whole amount of the excess income tax, thus, prohibiting the taxpayer from applying for a refund for that same excess income tax in the nest succeeding taxable years. The unutilized excess tax credits will remain in the taxpayer’s account and will be carried over and applied against the taxpayer’s income tax liabilities until fully utilized. Asiaworld Properties Philippine Corporation vs. Commissioner of Internal Revenue, G.R. No. 171766, July 29, 2010.

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