JUNE TO AUGUST 2024 COURT OF TAX APPEALS DECISIONS

LETTER OF AUTHORITY (LOA)

A LOA IS VALIDLY SERVED TO A PERSON WHO CUSTOMARILY RECEIVES CORRESPONDENCES FROM THE BIR. A LOA is intended to inform the taxpayers of the revenue officers (RO) who are duly authorized to conduct the examination and assessment. Where it was admitted that the person who received the LOA is an employee, and he received the First Request, showing that he customarily receives correspondences for the taxpayer, the person who received the LOA is an authorized person. On the other hand, where the individual taxpayer was not present at the time of service of LOA and the examiner merely relied on the representation of the taxpayer’s supposed relative as to the authority to receive the LOA and the person who received the LOA is not an employee of the taxpayer, the LOA is void. With respect to the representative, principal must delegate the necessary authority. Agency is not presumed. Thus, where the BIR served the LOA to someone without verifying the position of the recipient, and it was found out that the one who receipt the LOA is a driver of the taxpayer, the LOA is improperly served. The act of receiving the LOA is no proof of authority. The act originating from the taxpayer must be shown.

A MEMORANDUM OF ASSIGNMENT (MOA) WITHOUT A LOA RENDERS THE ASSESSMENT VOID. An RO may recommend the assessment of any deficiency tax due. It is also clear, however, that such recommendation may only be done pursuant to a LOA. Where an RO, who was not named in the LOA, was assigned through a mere MOA signed by the RDO, who is neither the Commissioner of Internal Revenue (CIR) nor a Regional Revenue Director, the issuance of a mere MOA insufficient to validly grant a RO with the authority to examine a taxpayer’s records. Thus, the RO who examined taxpayer’s records and recommended the deficiency assessment was not authorized to do so, rendering said assessment void. Moreover, even if a second LOA was issued on the examiner, the second LOA did not cure the defect, since the original investigation had already ceased as when the second LOA was issued, the FLD/FAN as well as the have already been issued.

A TAX VERIFICATION NOTICE (TVN) WITHOUT A LOA RENDERS THE ASSESSMENT VOID. Unless authorized by Commissioner himself or by his duly authorized representative, through a LOA, an examination of the taxpayer cannot ordinarily be undertaken. Here, there is no LOA to prove the authority of the revenue officer to conduct an audit of the petitioner and only TVN was issued against petitioner

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Li-Son Transport Service v. CIR, CTA Case No. 10631, July 26, 2024. Redentor Agpuldo Tagala, as the proprietor of 7^th Concept Trading/7C Construction v. CIR, CTA Case No. 10720, August 14, 2024. Strawberry Foods Corporation v. CIR, CTA Case No. 10282, July 12, 2024. Travel Warehouse, Inc. v. CIR, CTA Case No. 10098, July 12, 2024; CIR v. Ma. Erlina T. Ong, CTA EB No. 2785, CTA Case No. 10100, August 5, 2024; CIR v. Zilog Electronics Philippines Inc., CTA Eb No. 2762, CTA Case Nos. 9403 & 9492, June 18, 2024; CIR v. Basic Housing Solution, Inc., CTA EB No. 2723, CTA Case No. 9905, June 11, 2024 ; CIR v. Sellery Phils. Enterprises, Inc. CTA EB No. 2756, CTA Case No. 10047, August 5, 2024; Alphaland Southgate Tower Inc., v. CIR, CTA Case No. 10669, August 13, 2024; Prudentialife Plans, Inc. v. CIR, CTA Case No. 10339, August 24, 2024. R.A. Tagala & Co. Ventures, Inc. v. CIR, CTA Case No. 10217, July 19, 2024

for taxable year 2007. TVN is not equivalent to a LOA. A TVN which is nowhere mentioned in the 1997 NIRC, as amended, is not a LOA that vests an authority to revenue officer to conduct tax examination of a taxpayer . Thus, In the absence of a LOA, the assessment is void.

A LETTER NOTICE, WITHOUT A LOA, RENDERS THE ASSESSMENT VOID. The Supreme Court, in Medicard Case, G.R. No. 222743, April 5, 2017, ruled that an LN must first be converted into a LOA before the RO may examine and assess the taxpayer. An LN is not the same as LOA and the absence of a LOA is tantamount to violation of taxpayer’s due process.

AN ASSESSMENT OUTSIDE THE COVERED PERIOD OF LOA IS VOID. An assessment must be conducted pursuant to a valid LOA. Where the LOA covers January 2020 to May 31, 2021, but the assessment relates to quarter ending June 30, 2021, the assessment has no legal effect. Moreover, a Letter issued by the BIR informing the taxpayer that it cannot utilize excess input VAT is in the nature of assessment notice requiring a valid LOA.

A LOA AT THE REINVESTIGATION STAGE IS NOT REQUIRED. The Tax Code requires authority from the commissioner or authorized representative before an examination of a taxpayer in the form of LOA. While the law explicitly requires a LOA to be addressed to a revenue officer before an examination of a taxpayer and recommendation of an assessment may be had, the law does not specifically require the same for purposes of recommending a final decision on a disputed assessment. Moreover, even assuming that a LOA is required to conduct the reinvestigation, its absence would only invalidate the resulting decision, such as the FDDA, but not the assessment. A new LOA however is not needed because the audit investigation process was already done – in case of reinvestigation, issuance of an assessment (thru a FAN), the objective of a LOA becomes functus offtcio.

A LOA IS VALID EVEN THOUGH NOT REVALIDATED WHEN CONDUCT OF AUDIT EXTENDED BEYOND 120-DAY PERIOD. Beginning June 1, 2010, a LOA need not be revalidated if the examiner failed to complete the audit within 120-days from issuance of the LOA. Where, the covered LOA is 2014, the lack of revalidation will not invalidate the LOA.

LOA COVERING 2 YEARS FOR RETIRING BUSINESS IS VALID. The issuance of LOA covering 2 years (immediately preceding year and short period) is valid for retiring businesses. Thus, where the RO was assigned to audit taxable period for 2015 and 2016 for retiring business, the LOA remains valid.

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Dizon Country Fresh v. CIR, CTA Case No. 10643, June 7, 2024.

Republic of the Philippines v. Mr. Ranson Diodell N. Tenerife, CTA EB No. 2805, CTA OC No. 025, July 10, 2024,

PMFTC Inc. v. CIR, CTA Case No. 10714, June 19, 2024.

Fort Bonifacio Development Corporation v. CIR, CTA Case No. 10343, August 22, 2024.

Alberto Lim Tangso/A.L Electrical Shop and Parts Supply v. CIR, CTA Case No. 10367, June 18, 2024

Strawberry Foods Corporation v. CIR, CTA Case No. 10282, July 12, 2024.

Glend Agnes Llantada Serviplus Medical Equipment Services & Supply v. CIR, CTA Case No. 10468, July 26, 2024.

PRESCRIPTION

WILLFUL INTENT MUST BE ESTABLISHED FOR A 10-YEAR PRESCRIPTIVE PERIOD TO APPLY. When either the return is not filed at all or the taxpayer files a “false or fraudulent return with intent to evade taxes”, the BIR may assess the taxpayer within an extended period of 10-years from the discovery of the falsity, fraud, or omission. The 10-year period can be invoked only when willful intent is established. Where the BIR did not attempt to even allege such willful intent, the three-year period under Section 203 of the NIRC must be followed. Where the PAN, FLD/FAN and FDDA does not state the foregoing, 10-year prescriptive period will not apply. Imposition of 50% surcharge is not sufficient to apply the 10-year prescriptive period.

BIR’S RIGHT TO COLLECT AFTER 10 YEARS FROM ASSESSMENT PRESCRIBES. The BIR has five (5) years to enforce collection of deficiency taxes thru summary administrative remedies, such as the distraint and/or levy of taxpayer’s property and/or thru judicial remedies, such as the filing of a criminal or civil action against the erring taxpayer. Where the BIR assessment was received in 2010, but collection was initiated only in 2021 or more than 10 years from the issuance of the assessment, the collection effort has prescribed.

CRIMINAL CASE PRESCRIBES WHEN INFORMATION IS FILED AFTER 5 YEARS FROM FILING OF CASE WITH THE PROSECUTOR’S OFFICE. All violation of Tax Code prescribes in 5 years. If the day of commission of the offense is unknown, 5-year period shall run from the discovery and filing of case in the prosecutor’s office for preliminary investigation and it will be interrupted by filing of information with the CTA. Where the CIR referred the case to the DOJ on July 5, 2012, the information should be filed until July 5, 2017 to the CTA. But since the information was filed on October 26, 2022 or more than 5 years, the offense has prescribed.

PROTEST

PROTEST MUST STATE THE RELEVANT DATES, AND FACTUAL AND LEGAL BASES. To validly protest against a FLD/FAN, the following must be stated in the protest: (i) the nature of the protest whether reconsideration or reinvestigation, specifying newly discovered or additional evidence he intends to present if it is a request for reinvestigation, (ii) date of the assessment notice, and, (iii) the applicable law, rules and regulations, or jurisprudence on which his protest is based. Failure to comply with these mandatory prerequisites renders the protest void and devoid of legal force and effect. Where protest lacks reference to the date of receipt, itemized statement of findings,

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Travel Warehouse, Inc. v. CIR, CTA Case No. 10098, July 12, 2024.

Fort Bonifacio Development Corporation v. CIR, CTA Case No. 10343, August 22, 2024.

Dizon Country Fresh v. CIR, CTA Case No. 10643, June 7, 2024.

People of the Philippines v. Ziegfried Loo Tian, CTA CEB Crim No. 117, CTA Crim Case No. O-945, July 31, 2024.

schedule of adjustments, no factual narratives supported by laws, regulations and jurisprudence, the protest is invalid and no disputed assessment to speak of.

REFUSAL TO RECEIVE PRELIMINARY ASSESSMENT NOTICE (PAN) REQUIRES THE BIR TO BRING BARANGAY OFFICIAL AND TWO DISINTERESTED WITNESSES TO PERSONALLY OBSERVE THE SERVICE OF THE NOTICE AND TO ATTEST TO THE REFUSAL.

Mode of Service of PAN/FLD/FAN/FDDA
Personal	Delivery to the party at his registered or known address or wherever he may be found
Substituted	· Not present – notice be left at the party’s registered or known address, with the clerk or with the person in charge of the office · No person is found – BIR to bring barangay official and 2 disinterested witnesses; notice to be given to the barangay official · Refused – BIR to bring barangay official and 2 disinterested witnesses; notice to be given to the barangay official
Mail	By sending the notice with instruction to the postmaster to return the mail to the sender after 10 days, if undelivered; registry receipt issued by the post office containing sufficiently identifiable details of the transactions shall constitute proof of mailing and be attached to the docket

Corporations are always present and found at its address. Corporations act thru their directors or another person (officers, committees, or agents). Thus, PAN binds the corporation when it is received by the board of directors or officers pursuant to law or corporate by-laws. Thus, when an employee refused to receive the notice, but it did not bring a barangay official and 2 disinterested witnesses, the service of PAN violates the taxpayer’s due process and renders the assessment void.

ASSESSMENT IS VOID IF NOTICE IS RECEIVED BY THE SECURITY GUARD. The assessment may be served by reputable courier service under the regulations. While the regulation removes the requirement to indicate the designation and authority to act for and in behalf of the taxpayer if the assessment notice is received by a person other than the taxpayer, the Supreme Court still upholds it in Mannasoft case. Thus, where the assessment notice was sent via LBC and it was received by the security guard of the company, who is not an authorized representative, the assessment is void. Failure of the taxpayer to notify the BIR of the transfer will not cure the defect.

ASSESSMENT IS VOID IF NO NOTICE OF INFORMAL CONFERENCE (NOW NOTICE OF DISCREPANCY OR NOD) AND PAN WAS SERVED. In the Pilipinas Shell

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Li-Son Transport Service v. CIR, CTA Case No. 10631, July 26, 2024; Pentagon Gas Corporation v. CIR, CTA Case No. 10868, July 19, 2024; Up North Holdings, Inc. v. CIR, CTA Case No. 10208, June 25, 2024.

Xytrix Systems Corporation v. CIR, CTA Case No. 10629, August 6, 2024.

Ship to Shore Medical Assist, Inc. v. CIR, CTA Case No. 10550, June 6, 2024.

case, G.R. No. 172598, December 21, 2007, the Supreme Court emphasized the importance of following the procedures prescribed under RR No. 12-99, as amended, which includes the issuance of notice of informal conference (now NOD) and PAN. Here, no NOD or PAN was served by the BIR prior to the assessment. Thus, the assessment is void.

FLD/FAN WITH DUE DATE, STATEMENT “REQUESTED TO PAY”; GAP IN THE INTEREST COMPUTATION, IS VALID. The Supreme Court, in the case of Fitness By Design, G,R, No. 215957, November 9, 2016, invalidated the assessment as the FAN remained indefinite for being subject to modification and the FAN did not contain due dates. The vital element is the definiteness of the amount and the deadline for the payment. Where the assessment indicates the due date of assessment, the assessment is valid. Moreover, the phrase “you are requested to pay” cannot invalidate the FLD/FAN. It is used in the pro-forma FLD in RR 12-99, as amended by RR 18-2013. The FLD/FAN was valid. Moreover, what is prohibited is the indefinite amount of total tax due and not the interest. Thus, gap of 2 months between due date of FLD/FAN and computation of interest will not make the amount indefinite; the use of the phrases “requested to pay,” “requested that you settle,” or “requested that you pay” does not negate the unequivocal demand for payment of deficiency tax.

THERE IS VALID DEMAND TO PAY A DEFINITE LIABILITY DESPITE THE STATEMENT “INTEREST WILL HAVE TO BE ADJUSTED” OR “IT IS REQUESTED” THAT THE LIABILITY BE PAID. For a tax assessment to be valid, it must not only contain a computation of tax liabilities but must also include a demand upon the taxpayer for the settlement of a tax liability that is definitely set and fixed. “A demand, within the meaning of the requirement of a demand for the payment of taxes, means any intimation to the taxpayer that payment is desired. There is a valid demand to pay a definite liability despite the statement “interest will have to be adjusted if paid beyond the date specified therein” and “it is requested” that liability be immediately paid, as it is sufficient that the tax due and interest are definite and fixed. Although the language of the FLD and FDDA may have been respectful, this did not change their tenor establishing that petitioner had an obligation to pay and, thus, it was being required to satisfy the same.

WHERE NO PAN WAS ISSUED TO THE TAXPAYER, THE FLD IMMEDIATELY ISSUED IS VOID. Taxpayer shall be issued with a PAN upon determination of deficiency taxes. Thereafter, it has 15 days from the receipt of the PAN within which to submit its response. Only after receiving the taxpayer’s reply or the lapse of the 15-day period to file the same shall the BIR issue a final assessment (i.e., FLD/Final Assessment Notice (“FAN”)). Here, the BIR’s non-issuance of the PAN prior to the issuance of the subject

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PMFTC Inc. v. CIR, CTA Case No. 10714, June 19, 2024; CIR v. Grand Geo Spheres Construction Corp., CTA EB No. 2778, CTA Case No. 10207, June 12, 2024. Li-Son Transport Service v. CIR, CTA Case No. 10631, July 26, 2024; (Fort Bonifacio Development Corporation v. CIR, CTA Case No. 10343, August 22, 2024 Altimax Broadcasting Co., Inc., v. CIR, CTA Case No. 10687, August 21, 2024 Ford Group Philippines, Inc. v. CIR, CTA Case No. 10316, July 15, 2024; Bio-Resource Power Generation Corporation v. CIR, CTA Case No. 10372, July 30, 2024; Xytrix Systems Corporation v. CIR, CTA Case No. 10629, August 6, 2024)

FLD constitutes a violation of petitioner’s right to due process, thus, invalidating the assessment against the petitioner.

IDENTICAL SIDE-BY-SIDE COMPARISON OF FIGURES BETWEEN PAN AND FLD/FAN WITHOUT INDICATION THAT THE BIR CONSIDERED ARGUMENTS IN THE PAN RENDERS THE ASSESSMENT VOID. The BIR must consider the matters raised by the taxpayer. It cannot simply reproduce the PAN’s contents in the subsequent FLD/FAN without mentioning of the taxpayer’s arguments or any discussion on the merits (Avon Case). Where the FLD/FAN made no reference to the taxpayers reply to the PAN and the CIR did not mention any of the taxpayer’s arguments, much less give an intelligent discourse in resolving each matter raised, the assessment is void.

FLD/FAN ISSUED ON THE 15^TH DAY TO FILE PROTEST TO THE PAN IS VOID; RECEIPT DATE AND NOT DATE OF MAILING IS THE RECKONING POINT OF THE 15-DAY PERIOD. A taxpayer that disagrees with a PAN issued against it may protest the same within 15 days from receipt of said notice. The FAN can only be issued either (a) within 15 days from the filing of the protest; or (b) after the expiration of the 15-day period for filing a protest if none is filed. The 15-day period to reply to the PAN is counted from receipt of the PAN and not of the mailing. October 9, 2018 as the start of the 15-day period, taxpayer had until October 24,2018 within which to protest the PAN. BIR, however, issued the Formal Letter of Demand with the assailed FAN on that date (October 24), without waiting for the expiration of the 15-day period. This premature issuance was, again, a violation of petitioner’s right to due process and yet another reason to declare the assailed assessment void.

FLD WITHOUT DEFINITE FINAL DATE OF PAYMENT IS VOID. An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period. Here, the FLD did not provide for a definite final date for payment of the taxes assessed therein. More importantly, the said FLD did not have assessment notices attached thereto which could have likewise indicated a definite due date. Since the FLD failed to indicate the due date for payment, the assessment is void.

ELECTRIC COOPERATIVES ARE EXEMPT FROM INCOME TAX DESPITE NON-REGISTRATION WITH COOPERATIVE DEVELOPMENT AUTHORITY (CDA) Under Section 39 of P.D. No. 269, cooperatives registered with the National Electrification Administration (“NEA”) are permanently exempted from paying income taxes. In the

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Arnel Cortez Manaloto v. CIR, CTA Case No. 10551, June 25, 2024.

Wipro Philippines, Inc. v. CIR, CTA Case No. 10814, June 24, 2024; Berong Nickel Corporation v. CIR, CTA Case No. 10319, June 11, 2024; Serbiz Multi-Purpose Cooperative v. CIR, CTA Case No. 10369, July 15, 2024; Bio-Resource Power Generation Corporation v. CIR, CTA Case No. 10372, July 30, 2024; Glend Agnes Llantada Serviplus Medical Equipment Services & Supply v. CIR, CTA Case No. 10468, July 26, 2024; CIR v. The Residences at Greenbelt Condominium Corporation, CTA EB No. 2910, CTA Case No. 9942, August 5, 2024; Altimax Broadcasting Co., Inc., v. CIR, CTA Case No. 10687, August 21, 2024; Motalban Methane Power Corporation v. CIR, CTA Case No. 10334, August 13, 2024.

Travel Warehouse, Inc. v. CIR, CTA Case No. 10098, July 12, 2024.

Arnel Cortez Manaloto v. CIR, CTA Case No. 10551, June 25, 2024.

case of Samar-1 Electric Cooperative, inc. v CIR (CTA EB No. 460 and 462, March 11, 2020), the CTA ruled that electric cooperative exempt from Minimum Corporate Income Tax under P.D. No. 269, even in the face of E.O. No. 93 and FIRB Resolution No. 24-87 and despite said cooperative not being registered with the CDA under the Cooperative Code. The ruling was reached via two conclusions: (1) registration with the CDA was optional for cooperatives already registered with the NEA; and (2) E O No. 93 is inconsistent with the Cooperative Code, which thus repealed the former. Thus, where the taxpayer is registered with NEA, it is exempt from income tax even if it is not registered with CDA.

SUBSEQUENT SALE OF VEHICLES BY THE CUSTOMERS OF BUYER-ENTITY REGISTERED IN SUBIC SPECIAL ECONOMIC ZONE WILL NOT AFFECT THE ZERO-RATED VAT TRANSACTION. Sales of goods by a V A T-registered taxpayer, such as petitioner, to entities located in the Subic Special Economic Zone, which by legal fiction is regarded as foreign territory, are considered “export sales” subject to VAT zero-rating, The subsequent resale by the buyer-entity of these vehicles and spare parts to its customers who may or may not bring them outside the SFZ is beyond taxpayer’s control and should not affect the tax treatment of its sale of vehicles and spare parts.

DEDUCTION OF EXCESS INPUT TAX CARRIED FORWARD TO SUCCEEDING QUARTER DEDUCTED FROM INPUT TAX CREDITS WITHOUT EXPLANATION IS A VIOLATION OF DUE PROCESS. Taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Where the BIR deducted amount of excess input tax carried forward to succeeding quarter from the available input tax credits of petitioner which effectively disallows the same, and BIR did not provide for any legal and/or factual basis for disallowing the said amount, as such, the same must be cancelled.

A PRIOR TAX CLEARANCE IN FAVOR OF AN ABSORBED CORPORATION IS UNNECESSARY FOR THE SURVIVING CORPORATION TO ABSORB THE FORMER’S UNUTILIZED INPUT VAT A merger shall be effective at the time the certificate approving the articles and plan of merger is issued, and this results in the transfer of all rights, privileges, immunities, franchises, and other assets of the absorbed corporation without need of any act or deed. Thus, the pending tax investigation of the absorbed corporation does not bar the transfer of its unutilized input VAT to the surviving corporation.

FINAL DECISION ON DISPUTED ASSESSMENT (FDDA) SIGNED BY THE CIR HIMSELF IS APPEALABLE TO THE CTA. Pursuant to the PAGCOR Case, G.R. No. 208731, January 27, 2016, a whole or partial denial by the CIR is appealable to the CTA. Thus, where the taxpayer received the FDDA, signed by the Commissioner himself, denying the protest and declaring the assessment final and demandable, the taxpayer’s remedy is to file an appeal to the CTA, not a letter-reply to the FDDA addressed to the

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Misamis Oriental Rural Electric Service Cooperative, I, Inc. v. CIR, CTA Case No. 10206, July 16, 2024.

Ford Group Philippines, Inc. v. CIR, CTA Case No. 10316, July 15, 2024.

PMFTC Inc. v. CIR, CTA Case No. 10714, June 19, 2024.

Commissioner. The letter-reply is an MR to the CIR that does not toll the running of the 30-day period to appeal to the CTA.

REQUEST FOR REINVESTIGATION TO THE COMMISSIONER ON THE FDDA ISSUED BY THE REGIONAL OFFICE IS NOT ALLOWED. Under RR No. 12-99, as amended by RR No. 18-2013, if the protest is denied by the CIR’s duly authorized representative, the elevation to the CIR through a request for reinvestigation shall not be allowed. Instead, only a request for reconsideration shall be permitted. Taxpayer’s request for reinvestigation is not sanctioned by the regulations.

THE ISSUANCE OF WDL OR ANY FORM OF DEMAND TO COLLECT ASSESSMENT WITHOUT THE ISSUANCE OF FDDA IS TANTAMOUNT TO DENIAL OF PROTEST. Thus, WDL is not premature after the taxpayer’s grant of request for reinvestigation.

AN ASSESSMENT ITEM INCLUDED IN THE FDDA AND NOT FOUND IN THE FLD/FAN, IS NOT VALID. To allow respondent to incorporate new assessments in the FDDA would deprive the taxpayer of its right to due process and would put the latter at the mercy of the former. Hence, the particular assessment should be cancelled for being issued contrary to the guidelines of RR No. 12-99, as amended by RR No. 18-2013.

JURISDICTION

WARRANT OF GARNISHMENT (WG) IS APPEALABLE TO THE CTA WITHIN 30 DAYS FROM ITS RECEIPT. In the Supreme Court case of CIR v. Algue, Inc., G.R. No. 225809, March 17, 2021, the warrant of distraint and/or levy is the CIR’s final decision. With the issuance of WG, the protest is considered denied. The taxpayer has 30 days from receipt of WG to file the petition with the CTA. Thus, where the WG was received in 2021, but instead of the taxpayer wrote a letter to the BIR, and appealed the letter received in 2022, the CTA has no jurisdiction over the case.

ENVIRONMENTAL FEE IS NOT A TAX AND NOT WITHIN THE JURISDICTION OF THE CTA. The CTA’s appellate jurisdiction over regional trial court’s decision become operative only when the case involve tax. Tax and fee are different from each other. The imposition is tax if the generation of revenue is the primary purpose; regulatory fee, if regulation is the primary purpose. An environmental tax is not a tax but a regulatory fee, as it is imposed for purposes of watershed protection, conservation and management program under the Watershed Code. Thus, the CTA has no jurisdiction.

APPEAL TO THE COURT OF INACTION OF THE LOCAL TREASURER ON THE PROTEST SHOULD BE FILED WITHIN 30 DAYS AFTER THE LAPSE OF 60-DAYS

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Pentagon Gas Corporation v. CIR, CTA Case No. 10868, July 19, 2024.

Up North Holdings, Inc. v. CIR, CTA Case No. 10208, June 25, 2024.

Xytrix Systems Corporation v. CIR, CTA Case No. 10629, August 6, 2024.

Golden Donuts, Inc. v. CIR, CTA Case No. 10336, July 30, 2024.

Country Bank, Rural Bank of Bongabong, Inc. v. BIR, CTA EB No. 2760, CTA Case No. 10864, August 5, 2024.

DOLE Philippines Inc. – Stanfilco Division v. The Sangguniang Panlungsod of the City of Davao et. al., CTA AC no. 286, Civil Case No. R-DVO-20-0252-CV, June 7, 2024.

FROM FILING OF PROTEST. Whenever a taxpayer receives a notice of assessment from a local treasurer, he or she can file a protest thereto with the local treasurer within 60 days from receipt of such notice of assessment. Thereafter, the local treasurer has 60 days to decide a protest filed by a taxpayer. Should the local treasurer wholly or partly deny the protest, the taxpayer then has 30 days to file an appeal with the regular courts from (1) the receipt of the denial of the protest; or (2) from the lapse of the 60-day period for the local treasurer to decide on the protest. Significantly, the failure of the local treasurer to decide a protest on time is deemed a “denial due to inaction” and as such can be acted upon by the regular courts. The taxpayer does not have the option to wait for an actual denial by the local treasurer before filing an appeal. Here, the protest was filed on March 13, 2019, the treasurer has until May 12, 2019 to decide. Without the decision, the taxpayer has until June 11, 2019. But where the taxpayer filed the appeal on June 13, 2019, the court has no jurisdiction to rule on the appeal.

AVON CASE DOES NOT APPLY TO FDDA. Avon case applies to a situation where the BIR issued identical amounts of assessments in the PAN and FAN, without considering the arguments and documents submitted by a taxpayer in its protest. It does not apply to a situation where FLD and FDDA contains the same amounts of assessments and explanation. An assessment itself differs from a decision on a disputed assessment.

CASH BASIS OF ACCOUNTING REQUIRES PROOF THAT TAXPAYER MAINTAINS CASH SALES BOOKS. The taxable income of a taxpayer shall be computed in accordance with the method of accounting regularly employed in keeping its books, but if it does not regularly employ a method of accounting which reasonably shows the correct income, the computation of income shall be made in such manner as in the opinion of the Commissioner clearly reflects such income. Where the taxpayer adopts cash basis of accounting, but it failed to show proof that it regularly employs cash basis method of accounting, such that the sales book has no indication of cash sales or sales on account, the BIR can compute income tax based on accrual/invoice.

BIR’S FAILURE TO PRESENT REGISTRY RECEIPT AND CERTIFICATION OF POSTMASTER WHEN RECEIPT OF PAN IS DENIED, RENDERS THE PAN INVALID; BIR MUST EXPLAIN WHY IT IS RESORTING TO SERVICE BY MAIL. The Supreme Court in the case of CIR v. Metro Star Suprema, Inc. (G.R. No. 185371, December 8, 2010) ruled that issuance and service of PAN is part of due process requirement. PAN is served through personal service, and if not practicable, by substituted service or by mail. The server shall make a written report under oath setting forth the manner, place and date of service, the name of the person who received the same and such other relevant information. The registry receipt shall constitute sufficient proof of mailing and shall be attached to the docket. Where the taxpayer denied receipt by mail, The BIR has the burden to prove that the mailed matter was received. Where the BIR failed to present the registry receipt and the certification of the postmaster to prove od mailing an and receipt, nor present the testimony of the BIR server or personnel who delivered the mail to the post office, the PAN is void.

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Public Safety Mutual Benefit Fund, Inc v. Rosette A. Lauian, CTA AC Case No. 245, June 11, 2024

Alberto Lim Tangso/A.L Electrical Shop and Parts Supply v. CIR, CTA Case No. 10367, June 18, 2024

Alberto Lim Tangso/A.L Electrical Shop and Parts Supply v. CIR, CTA Case No. 10367, June 18, 2024.

Ma. Erlinda Ong v. CIR, CTA Case No. 10444, June 13, 2024.

REFUND OF EXCESS INPUT VAT ON ZERO-RATED SALES

Certain requisites must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT related to zero-rated sales. Said requisites are classified into certain categories, to wit:

As to the timeliness of the filing of the administrative and judicial claims:

The claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made. In accordance with Section 112(A) and (C) of the NIRC of1997, as amended by TRAIN Law, the administrative claim for refund of unutilized input VAT must be filed with the BIR within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made.
That in case of full or partial denial of the refund claim rendered within a period of 90 days from the date of submission of the official receipts or invoices and other documents in support of the application, the judicial claim shall be filed with the Court of Tax Appeals (CTA) within thirty (30) days from receipt of the decision made.

Where the taxpayer failed to offer the Denial Letter with proof of receipt, the CTA has no means to determine whether the judicial claim was timely filed.
In case of inaction within the said 90-day period, petitioner had thirty (30) days from such expiration to file its judicial claim. Any belated decision is not binding upon the taxpayer. The non-receipt of the decision within 90 days is considered inaction and the reckoning point to file the judicial claim within 30 days.
For regional cases, the power to decide applications or claims for refund of creditable input taxes was delegated to the Regional Director, within the 90-day time frame. The participation of a Revenue District Officer (RDO) after the filing of the claim is limited only to verification/processing. Thus, for applications or claims for refund of creditable input taxes filed with the concerned RDO, the appealable decision to this Court is not one issued by the corresponding RDO, but by the Regional Director.

With reference to the taxpayer’s registration with the BIR:

The taxpayer is a VAT-registered person.

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HP PPS (Philippines), Inc. v. CIR, CTA Case No. 10090, July 2, 2024; Offsourcing Philippines, Inc. v. CIR, CTA Case No. 10257, July 5, 2024.

HP PPS (Philippines), Inc. v. CIR, CTA Case No. 10090, July 2, 2024.

Manulife Data Services, Inc. v. CIR, CTA Case No. 10666, August 2, 2024; Offsourcing Philippines, Inc. v. CIR, CTA Case No. 10257, July 5, 2024; “K” Line Maitime Academy Philippines, Inc. v. CIR, CTA Case No. 10270, June 27, 2024.

Sankyu-Ats Consortium-B v. CIR, CTA Case No. 10495, August 6, 2024.

In relation to the taxpayer’s output VAT:

The taxpayer is engaged in zero-rated or effectively zero-rated sales.

Reason for disallowance: sale outside the period of claim; unreported inward remittance; no VAT OR; failed to indicate the nature of the service; or indicated only the billing statement numbers but failed to offer the billing statement.

For zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b), and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with Bangko Sentral ng Pilipinas (BSP) rules and regulations

sales of goods abroad, in order for an export sale to qualify as zero-rated

The following conditions must be complied with: first, the sale was made by a VAT-registered person; second, there was sale and actual shipment of goods from the Philippines to a foreign country; and third, said sale was paid for in acceptable foreign currency accounted for in accordance with the rules and regulations of the BSP.
In relation to the second condition, any VAT-registered person claiming VAT zero-rated direct export sales must present, among others: one, sales invoice as proof of sale of goods; and two, bill of lading or airway bill as proof of actual shipment of goods from the Philippines to a foreign country.
Reason for the denial: Sales without remittance; sales with bill of lading not in customer’s name; customer is not the remitter; VAT ORs dated in the subsequent quarter or dated outside the validity period of the ATP; missing date and corrections without countersignature; unreadable OR; cancelled OR.

Sale of services to ECOZONE-registered enterprises.Since the Ecozone, by legal fiction, is viewed as a foreign territory, a VAT-registered person’s sales of goods and services to an entity registered and operating within the ecozone in the Philippine customs territory are considered exports to a foreign country subject to zero percent (0%) VAT.

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PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024

Halliburton Worldwide Limited Philippine Branch v. CIR, CTA Case No. 10467, July 26, 2024; Philippine Mining Service Corporation v. CIR, CTA Case No. 10494, July 8, 2024.

Philippine Mining Service Corporation v. CIR, CTA Case No. 10494, July 8, 2024; Nippon Express Philippines Corporation v. CIR, July 5, 2024.

Philippine Mining Service Corporation v. CIR, CTA Case No. 10494, July 8, 2024.

Sale of services to RE Developers

To confer 0% VAT on sales of goods, properties and services to an RE Developer, the following conditions must be present: first, the RE Developer must be registered with the DOE and BOI; and second, the local sales of goods, properties and services to the RE Developer are needed for the development, construction, and installation of the RE Developer’s plant facilities and the whole process of exploration and development of RE sources up to its conversion into power.

sales of services, certain essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%), towit:

The services fall under any of the categories under Section 108(B)(2), or simply, the services rendered should be other than ”processing, manufacturing or repacking of goods”
The service must be performed in the Philippines by a VAT-registered person.The ICPA testimony that the services are performed in the Philippines is not sufficient as the ICPA lacks personal knowledge of such fact and merely examined the taxpayer’s documents. Petitioner must prove that the services were rendered in the Philippines.
The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules.
The recipient of the services must be engaged in business conducted outside the Philippines or not engaged in business and is outside the Philippines when the services are performed.

In order to be considered as a non-resident foreign corporation doing business outside the Philippines, each entity must be supported, at the very least, by both a Certification of Non-Registration of Corporation/Partnership issued by the Philippine SEC, and proof of incorporation/registration in a foreign country (e.g., Articles/Certificate of Incorporation/Registration and/or Tax

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Halliburton Worldwide Limited Philippine Branch v. CIR, CTA Case No. 10467, July 26, 2024.

PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024; MSCI Hongkong Limited v. CIR, CTA Case No. 10474, July 17, 2024;

PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024;MSCI Hongkong Limited v. CIR, CTA Case No. 10474, July 17, 2024)

Avaloq Philippines Operating Headquarters v. CIR, CTA Case No. 2746, CTA Case No. 1019, July 31, 2024.

PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024; MSCI Hongkong Limited v. CIR, CTA Case No. 10474, July 17, 2024; Stefanini Philippines, Inc. v. CIR, CTA Case No. 10595, June 24, 2024.

PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024; Stefanini Philippines, Inc. v. CIR, CTA Case No. 10595, June 24, 2024.

Residence Certificate).

As regards the taxpayer’s input VAT being refunded:

The input taxes claimed are attributable to zero-rated or effectively zero-rated sales.However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume.

The input taxes are not transitional input taxes.

The input taxes have not been applied against output taxes during and in the succeeding quarters.

Input tax must comply with invoicing The following information shall be indicated in the VAT invoice or official receipt:

Reasons for the disallowance: unreadable date, description or VAT amount; nature of the service is not indicated or the reference indicated is not attached to the OR; alteration in the address and the countersignature differs from that of the authorized representative; no TIN of the taxpayer; different date in the COR; collection receipt only; VAT was not separately shown.

REFUND OF UNUTILIZED CREDITABLE WITHHOLDING TAX (CWT)

In filing a claim for refund or credit of creditable withholding tax, compliance with the following must be met:

The claim for refund must be filed within the two-year prescriptive period.

The administrative and judicial remedy of filing a claim for refund of erroneously or excessively paid tax must be done within two (2) years from the date of payment of the tax both in the administrative and judicial levels.
For actions for refund of excess corporate income tax, the Supreme Court ruled that the two-year prescriptive period should be counted from the filing of the Final Adjustment Return, because it is only during that date that the exact tax liability or refundability of the tax can be determined.

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PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024; (MSCI Hongkong Limited v. CIR, CTA Case No. 10474, July 17, 2024; Stefanini Philippines, Inc. v. CIR, CTA Case No. 10595, June 24, 2024.

Nippon Express Philippines Corporation vs. Commissioner of Internal Revenue (CTA Case No. 10489; July 5, 2024.

Stefanini Philippines, Inc. v. CIR, CTA Case No. 10595, June 24, 2024; Halliburton Worldwide Limited Philippine Branch v. CIR, CTA Case No. 10467, July 26, 2024.

Tullett Prebon [Philippines], Inc. v. CIR, CTA Case No. 10273,CTA Case no. 10273, June 28, 2024; Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024.

Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024; Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024; Ayala Corporation v. CIR, CTA Case No. 10496, June 19, 2024.

The law prescribes two options to a taxable corporation whose total quarterly income tax payment in a given taxable year exceeds its total income tax due. The taxpayer may either file a tax refund (either in the form of cash or tax credit certificate) or carry over the excess credit. However, once the carry-over option is taken actually or constructively it becomes irrevocable for that taxable period. The phrase “for that taxable period” refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer.
In exercising its option, the corporation must signify in its final adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other.

The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom.

Proof of actual remittance of taxes withheld to the BIR is not required in a claim for refund of excess CWT. The claimant-taxpayer is only required to prove that the income payment formed part of the gross income and the fact of withholding. The proof of remittance of the withheld taxes remains the responsibility of the withholding agent.
Reasons for disallowance: TIN of taxpayer was not complete; no signature of the payor; out of period; typographical error per CWT certificates; incorrect TIN of the taxpayer and name; overclaimed amount.

The income upon which the taxes were withheld must be included in the return of the recipient.

Taxpayer must prove that the income payments from which the substantiated CWTs were withheld were declared as part of taxpayer’s gross income in its Annual ITR. It requires that the SAWT tie up with the General Ledger.

VIOLATION OF TAX CODE

ACCUSED IS ACQUITTED FOR ALLEGED WILLFUL REFUSAL TO PAY TAX IF ASSESSMENT IS VOID; CTA MAY RULE ON THE CIVIL LIABILITY DESPITE

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Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024; Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024; Sonoma Services, Inc. v. CIR, CTA Case No. 10515, July 2, 2024; Ayala Corporation v. CIR, CTA Case No. 10496, June 19, 2024.

Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024; Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024

Tullett Prebon [Philippines], Inc. v. CIR, CTA Case No. 10273,CTA Case no. 10273, June 28, 2024; Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024; Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024.

Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024

Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024; ; Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024; Ayala Corporation v. CIR, CTA Case No. 10496, June 19, 2024; Philippine Mining Service Corporation v. CIR, CTA Case No. 10494, July 8, 2024.

Tullett Prebon [Philippines], Inc. v. CIR, CTA Case No. 10273,CTA Case no. 10273, June 28, 2024; Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024.

Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024.

ACQUITTAL. One of the elements of the crime of willful refusal to pay tax under Section 255 of the NIRC is that the taxpayer is required to pay tax. Where the PAN and FLD was not served properly (no proof that accused received it and prosecution’s witness admitted that there was no authorization was issued by the accused to the representative), thereby rendering the assessment void, the said element is not met. Moreover, the Court, in the criminal case, may rule on the civil liability despite assessment is void applying the Mendez Case (G.R. Nos. 208310-11 & 208662, March 28, 2023). Where the prosecution failed to present evidence to prove the civil liability, no civil should be imposed.

A VEHICLE USED IN TRANSPORTING SMUGGLED GOODS MAY BE SUBJECT OF FORFEITURE IF (A) IT IS A PRIVATE CARRIER OR A LEASED OR CHARTERED COMMON CARRIER; AND (B) OWNER HAS KNOWLEDGE OF THE SMUGGLING. Thus, the vehicle is considered a private carrier if the service is limited only to friend referrals and owner failed to prove that he had ongoing application to engage in trucking business. But since owner has no knowledge of the smuggling, the vehicle cannot be forfeited.

ACQUITTAL OF THE ACCUSED IS FINAL AND UNAPPEALABLE EXCEPT WHEN THE PROSECUTION WAS DENIED OPPORTUNITY TO PRESENT CASE OR WHERE THE TRIAL IS A SHAM, IN WHICH CASE, THE COURT ACTED WITH GRAVE ABUSE OF DISCRETION. Thus, where the petition failed to allege any violation of due process or mistrial and merely seeks to correct mistake in the findings of the trial court, the CTA cannot rule on the trial court’s appreciation of the parties’ evidence. Thus, the petition should be denied.

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People v. Angelito O. Dela Peña, CTA Crim Case No. O-844, June 20, 2024

Marvin Raluna Reyes v. Commissioner of Customs, CTA Case No. 10340, August 7, 2024.

People of the Philippines v. Hon. Ana Teresa T. Cornejo-Tomacruz et. al., CTA SCA Case No. 0014, July 16, 2024.

JUNE TO AUGUST 2024 COURT OF TAX APPEALS DECISIONS

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