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.

(3)   It is not for the courts to fill in any gap in current statutes and regulations as to the relations among the BIR, the Bangko Sentral ng Pilipinas and the PDIC. It is up to the legislature to address the matter through appropriate legislation, and to the executive to provide the regulations for its implementation.

(4)   Section 30 of the New Central Bank Act expressly provides that debts and liabilities of the bank under liquidation are to be paid in accordance with the rules on concurrence and preference of credit under the Civil Code. Duties, taxes, and fees due the Government enjoy priority only when they are with reference to a specific movable property, under Article 2241(1) of the Civil Code, or immovable property, under Article 2242(1) of the same Code. However, with reference to the other real and personal property of the debtor, sometimes referred to as “free property,” the taxes and assessments due the National Government, other than those in Articles 2241(1) and 2242(1) of the Civil Code, such as the corporate income tax, will come only in ninth place in the order of preference. If a tax clearance shall be required before the project of distribution of the assets of a bank under liquidation may be approved, then its tax liabilities will be given absolute preference in all instances, including those that do not fall under Articles 2241(1) and 2242(1) of the Civil Code. Philippine Deposit Insurance Corporation v. Bureau of Internal Revenue, G.R. No. 172892, June 13, 2013.

Local Government Code; Claims for Tax Refund or Credit. Section 196 of the Local Government Code provides that in order to be entitled to a refund or credit of local taxes, the following procedural requirements must concur: first, the taxpayer concerned must file a written claim for refund/credit with the local treasurer; and second, the case or proceeding for refund has to be filed within two (2) years from the date of the payment of the tax, fee, or charge or from the date the taxpayer is entitled to a refund or credit. As petitioners have failed to prove that they have filed a written claim for refund with the local treasurer, their claim for local tax refund/credit must be denied. It is hornbook principle that a claim for a tax refund/credit is in the nature of a claim for an exemption and the law is construed in strictissimi juris against the one claiming it and in favor of the taxing authority. Metro Manila Shopping Mecca Corp., et al. v. Ms. Liberty M. Toledo, in her official capacity as the City Treasurer of Manila, and the City of Manila, G.R. No. 190818, June 5, 2013.

Revised Rules of the Court of Tax Appeals; extension to file petition for review.  The Revised Rules of the Court of Tax Appeals (the “Rules’) does not explicitly sanction extensions to file a petition for review with the Court of Tax Appeals (CTA). However, section 1, Rule 7 thereof reads that in the absence of any express provision in the Rules, Rules 42, 43, 44 and 46 of the Rules of Court may be applied in a suppletory manner. In particular, Section 9 of Republic Act No. 9282 makes reference to the procedure under Rule 42 of the Rules of Court. In this light, Section 1 of Rule 42 states that the period for filing a petition for review may be extended upon motion of the concerned party. In other words, the reglementary period provided under Section 3, Rule 8 of the Rules is extendible and, as such, the CTA Division’s grant of respondents’ motion for extension falls squarely within the law.  Metro Manila Shopping Mecca Corp., et al. v. Ms. Liberty M. Toledo, in her official capacity as the City Treasurer of Manila, and the City of Manila, G.R. No. 190818, June 5, 2013.

(Caren thanks Grace Ann C. Lazaro for assisting in the preparation of this post.)

Advertisements