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.
Omnibus Investments Code; tax credit certificates; validity thereof; post audit is not a suspensive condition. Tax credit certificates (TCCs) issued pursuant to article 39 (k) of Executive Order No. 36 (or the “Omnibus Investments Code”) are subject to the guidelines and instructions printed at the back thereof and are valid upon their issuance in favor of the original grantees which have the right to use them in payment of their tax liabilities and/or transfer them to assignees which could in turn utilize them as payment of their own tax liabilities. TCCs are not subject to a post-audit as a suspensive condition. The post-audit is limited only to computational discrepancies arising from the use or transfer of TCCs and would, if at all, only give rise to an adjustment of the monetary value of the TCCs subject thereto. Petron Corporation vs. Commissioner of Internal Revenue, G.R. No. 180385, July 28, 2010.
Omnibus Investments Code; tax credit certificates; fraud in the issuance thereof; effect on transferees for value and in good faith. A transferee of the TCCs for value and in good faith cannot be prejudiced by the subsequent discovery of fraud that attended the issuance thereof. In this case, Petron had no participation in the procurement of the subject TCCs. It was not shown to have had a hand in or knowledge of the fraud which purportedly attended the issuance of the same TCCs. It was qualified to be a transferee as a Board of Investments-registered enterprise. And it went through the multi-tiered prescribed procedures for the transfer of said TCCs and use thereof in payment of its tax obligations. Relying on the validity of the TCCs, the Department of Finance One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center’s (the Center) approval of the transfer thereof and the Bureau of Internal Revenue’s acceptance of the same as consideration for the TCCs, Petron issued credit notes by way of consideration for the TCCs and delivered petroleum products in favor of the grantees and/or their assignees. As a transferee in good faith and for value, Petron cannot, therefore be said to have incurred any liability insofar as the transfers of the TCCs are concerned. Petron Corporation vs. Commissioner of Internal Revenue, G.R. No. 180385, July 28, 2010.
Omnibus Investments Code; tax credit certificates; cancellation thereof; government remedies. The Center has concurrent authority to cancel subject TCCs alongside the Bureau of Internal Revenue (BIR) and the Bureau of Customs. Given the nature of the TCC’s immediate effectiveness and validity, however, said authority may be exercised only before the TCC has been fully utilized by a transferee which had no participation in the perpetration of fraud in the issuance, transfer and utilization thereof. Once accepted by the BIR and applied towards the satisfaction of such transferee’s tax obligations, a TCC is effectively used up, debited and canceled such that there is nothing left to avoid or cancel anew. Considering the protection afforded to transferees in good faith and for value, the remedy of the government is to go after grantees alleged to have perpetrated fraud in the procurement of the subject TCCs. Petron Corporation vs. Commissioner of Internal Revenue, G.R. No. 180385, July 28, 2010.