January 2014 Philippine Supreme Court Decisions on Tax Law

Here are select January 2014 rulings of the Supreme Court of the Philippines on tax law:

Court of Tax Appeals; findings of fact. The Court will not lightly set aside the conclusions reached by the CTA which, by the very nature of its function of being dedicated exclusively to the resolution of tax problems, has accordingly developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority. Factual findings made by the CTA can only be disturbed on appeal if they are supp1ied by substantial evidence or there is a showing of gross error or abuse on the part of the CTA. In the absence of any clear and convincing proof to the contrary, the Court must presume that the CTA rendered a decision which is valid in every respect. Commissioner of Internal Revenue v. Toledo, Power, Inc., G.R. No. 183880, January 20, 2014.

Refund; solutio indebiti; elements. There is solutio indebiti when: (1) Payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and (2) Payment is made through mistake, and not through liberality or some other cause. Solutio indebiti does not apply in this case because there exists a binding relation between petitioner and the CIR, the former being a taxpayer obligated to pay VAT and the payment of input tax was not made through mistake since petitioner was legally obligated to pay for that liability. The entitlement to a refund or credit of excess input tax is solely based on the distinctive nature of the VAT system. At the time of payment of the input VAT, the amount paid was correct and proper. CBK Power Company Limited vs. Commissioner of Internal Revenue, G.R. No. 198729-30, January 15, 2014.

Value-added tax; refund of input value-added tax;; prescriptive period for judicial and administrative claims. Under Section 112 of the National Internal Revenue Code (NIRC), it is only the administrative claim for refund of input value-added tax (VAT) that must be filed within the two-year prescriptive period; the judicial claim need not fall within the two-year prescriptive period. Subsection (A) of the said provision states that “any VAT-registered person whose sales are zero-rated may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.” The phrase “within two (2) years x x x apply for the issuance of a tax credit certificate or refund” refers to applications for refund/credit filed with the Commissioner of Internal Revenue (CIR) and not to appeals made to the Court of Tax Appeals (CTA). This is apparent in the first paragraph of subsection (D) of the same provision which states that the CIR has “120 days from the submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)” within which to decide on the claim. Commissioner of Internal Revenue vs. Mindanao II Geothermal Partnership, G.R. No. 191498, January 15, 2014.

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January 2012 Philippine Supreme Court Decisions on Tax Laws

National Internal Revenue Code; excise tax; proper party to seek a tax refund. Silkair (Singapore) is a foreign corporation licensed to do business in the Philippines as an on-line international carrier. It purchased aviation fuel from Petron and paid the excise taxes. It filed an administrative claim for refund for excise taxes on the purchase of jet fuel from Petron, which it alleged to have been erroneously paid. For indirect taxes, the proper party to question or seek a refund of the tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even when he shifts the burden thereof to another. Thus, Petron, not Silkair, is the statutory taxpayer which is entitled to claim a refund. Excise tax is due from the manufacturers of the petroleum products and is paid upon removal of the products from their refineries. Even before the aviation jet fuel is purchased from Petron, the excise tax is already paid by Petron. Petron, being the manufacturer, is the “person subject to tax.” In this case, Petron, which paid the excise tax upon removal of the products from its Bataan refinery, is the “person liable for tax.” Petitioner is neither a “person liable for tax” nor “a person subject to tax.” Silkair (Singapore) Pte. Ltd. vs. Commissioner of Internal Revenue, G.R. No. 166482, January 25, 2012.

(Caren thanks Lui Manalaysay for assisting in the preparation of this post.)