September 2011 Philippine Supreme Court Decisions on Tax Law

Here are selected September 2011 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code; Civil Code; waiver of statute of limitations; estoppel. Taxpayer assails the validity of the waivers of the statute of limitations on the ground that the waivers were merely attested to by the coordinator for the Commissioner of Internal Revenue (CIR) and he failed to indicate the acceptance or agreement of the CIR, as required under Section 223 of the National Internal Revenue Code. Taxpayer argues that the principle of estoppel cannot be used against it because its payment of the other tax assessment does not signify a clear intention on its part to give up its right to question the validity of the waivers. The Court ruled that estoppel applied to the taxpayer. Under Article 1431 of the Civil Code, the doctrine of estoppel is anchored on the rule that “an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.” Thus, a party is precluded from denying his own acts, admissions or representation to the prejudice of the other party in order to prevent fraud and falsehood. In this case, taxpayer, through its partial payment of the revised assessments issued within the extended period as provided for in the questioned waivers, impliedly admitted the validity of those waivers. Had taxpayer believed that the waivers were invalid and that the assessments were issued beyond the prescriptive period, then it should not have paid the reduced amount of taxes in the revised assessment. Its subsequent action effectively believes its insistence that its waivers are invalid. The records show that taxpayer immediately made payment on the uncontested taxes immediately upon receipt of the revised assessment. It is thus estopped from questioning the validity of the waivers. To hold otherwise and allow a party to gainsay its own act of deny rights which it had previously recognized would run counter to the principle of equity which the Court holds dear.  Rizal Commercial Banking Corporation vs. Commissioner of Internal Revenue, G.R. No. 170257, September 7, 2011998.

National Internal Revenue Code; foreign currency deposit units; liability for final withholding tax on onshore income; taxpayer versus withholding agent. The liability of the withholding agent is independent from that of the taxpayer. The former cannot be made liable for the tax due because it is the latter who earned the income subject to withholding tax. The withholding agent is liable only insofar as he failed to perform his duty to withhold the tax and remit the same to the government. The liability for the tax, however, remains with the taxpayer because the gain was realized and received by him. While the payor-borrower can be held accountable for its negligence in performing its duty to withhold the amount of tax due on the transaction, petitioner, as the taxpayer and the one which earned income on the transaction, remains liable for the payment of tax as the taxpayer shares the responsibility of making certain that the tax is properly withheld by the withholding agent, so as to avoid any penalty that may arise from the non-payment of the withholding tax due. Taxpayer bank cannot evade its liability for foreign currency deposit unit onshore tax by shifting the blame on the payor-borrower as the withholding agent. As such, it is liable for payment of deficiency onshore tax on interest income derived from foreign currency loans, pursuant to Section 24(c) (3) of the National Internal Revenue Code. Rizal Commercial Banking Corporation vs. Commissioner of Internal Revenue, G.R. No. 170257, September 7, 2011.

National Internal Revenue Code; excise taxes; Revenue Regulations No. 17-99. The provision in Section 1 of Revenue Regulations No. 17-99 (that requires the payment of excise tax actually being paid prior to January 1, 2000 if this amount is higher than the new specific tax rate) clearly went beyond the terms of the law it was supposed to implement and, therefore, entitles the taxpayer to claim a refund of the overpaid excise taxes collected pursuant to the provision. It effectively extended the qualification stated in the third paragraph of Section 145 (c) of the National Internal Revenue Code that was supposed to apply only during the transition period. The said paragraph states: [t]he excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than the tax, which is due from each brand on October 1, 1996… [Note that Section 145 was subsequently amended by Republic Act No. 9334 in 2005.] Commissioner of Internal Revenue vs. Fortune Tobacco Corporation, G.R. No. 180006, September 28, 2011.