FIRST DIVISION

OCEANIC WIRELESS NETWORK, G.R. No. 148380

INC., Petitioner, Present:
DAIDE, !R., C.J. "C#$ir%$n&,
'(IS()*ING,
+NARES,SANTIAGO,
, -ers.s , CARPIO, $n/
A0C(NA, JJ.
CO))ISSIONER O1 INTERNAL Pro%.23$te/:
REEN(E, T4E CO(RT O1
TA5 APPEALS, $n/ T4E CO(RT De6e%7er 8, 900:
O1 APPEALS,
Res;on/ents.
<,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,<
DECISION
AZCUNA, J.:
T#is is $ Petition =or Re-ie> on Certior$ri see?in3 to re-erse $n/ set $si/e t#e De6ision
o= t#e Co.rt o= A;;e$2s /$te/ O6to7er 31, 9000, $n/ its Reso2.tion /$te/ )$@ 3, 9001, in
AO6e$ni6 Wire2ess Net>or?, In6. -. Co%%issioner o= Intern$2 Re-en.eB /o6?ete/ $s CA,
G.R. SP No. 3::81, .;#o2/in3 t#e De6ision o= t#e Co.rt o= T$< A;;e$2s /is%issin3 t#e
Petition =or Re-ie> in CTA C$se No. 4CC8 =or 2$6? o= D.ris/i6tion.
Petitioner O6e$ni6 Wire2ess Net>or?, In6. 6#$22en3es t#e $.t#orit@ o= t#e C#ie= o= t#e
A66o.nts Re6ei-$72e $n/ *i22in3 Di-ision o= t#e *.re$. o= Intern$2 Re-en.e "*IR&
N$tion$2 O==i6e to /e6i/e $n/Eor $6t >it# =in$2it@ on 7e#$2= o= t#e Co%%issioner o=
Intern$2 Re-en.e "CIR& on ;rotests $3$inst /is;.te/ t$< /e=i6ien6@ $ssess%ents.
T#e =$6ts o= t#e 6$se $re $s =o22o>s:
On )$r6# 1F, 1888, ;etitioner re6ei-e/ =ro% t#e *.re$. o= Intern$2 Re-en.e "*IR&
/e=i6ien6@ t$< $ssess%ents =or t#e t$<$72e @e$r 1884 in t#e tot$2 $%o.nt o=
P8,C44,888.F1, 7ro?en /o>n $s =o22o>s:
Kin/ o= T$< Assess%ent No. A%o.nt
De=i6ien6@ In6o%e T$< 1AR,4,1884,88,001130 P8,381,3:4.00
Pen$2ties =or 2$te ;$@%ent 1AR,4,1884,88,001131 3,000.00
o= in6o%e $n/ =$i2.re to
=i2e G.$rter2@ ret.rns
De=i6ien6@ Contr$6torHs 1AR,4,1884,88,001139 98,848.0C
T$<
De=i6ien6@ 1i<e/ T$< 1AR,4,,88,001133 19,083.C:
De=i6ien6@ 1r$n6#ise T$< 1AR,4I84,88,001134 JJJ99F,F19.00
T o t $ 2 ,,,,,,,, P8,C44,888.F1
Petitioner =i2e/ its ;rotest $3$inst t#e t$< $ssess%ents $n/ reG.este/ $ re6onsi/er$tion or
6$n6e22$tion o= t#e s$%e in $ 2etter to t#e *IR Co%%issioner /$te/ A;ri2 19, 1888.
A6tin3 in 7e#$2= o= t#e *IR Co%%issioner, t#en C#ie= o= t#e *IR A66o.nts Re6ei-$72e
$n/ *i22in3 Di-ision, )r. Se-erino *. *.ot, reiter$te/ t#e t$< $ssess%ents >#i2e /en@in3
;etitionerHs reG.est =or rein-esti3$tion in $ 2etter K1L /$te/ !$n.$r@ 94, 1881, t#.s:
ANote: +o.r reG.est =or re,in-esti3$tion #$s 7een /enie/ =or =$i2.re to s.7%it t#e
ne6ess$r@ s.;;ortin3 ;$;ers $s ;er en/orse%ent 2etter =ro% t#e o==i6e o= t#e S;e6i$2
O;er$tion Ser-i6e /$te/ 19,19,80.B
S$i/ 2etter 2i?e>ise reG.este/ ;etitioner to ;$@ t#e tot$2 $%o.nt o= P8,C44,888.F1 >it#in
ten "10& /$@s =ro% re6ei;t t#ereo=, ot#er>ise t#e 6$se s#$22 7e re=erre/ to t#e Co22e6tion
En=or6e%ent Di-ision o= t#e *IR N$tion$2 O==i6e =or t#e iss.$n6e o= $ >$rr$nt o=
/istr$int $n/ 2e-@ >it#o.t =.rt#er noti6e.
(;on ;etitionerHs =$i2.re to ;$@ t#e s.7De6t t$< $ssess%ents >it#in t#e ;res6ri7e/ ;erio/,
t#e Assist$nt Co%%issioner =or Co22e6tion, $6tin3 =or t#e Co%%issioner o= Intern$2
Re-en.e, iss.e/ t#e 6orres;on/in3 >$rr$nts o= /istr$int $n/Eor 2e-@ $n/ 3$rnis#%ent.
T#ese >ere ser-e/ on ;etitioner on O6to7er 10, 1881 $n/ O6to7er 1F, 1881, res;e6ti-e2@.
K9L
On No-e%7er 8, 1881, ;etitioner =i2e/ $ Petition =or Re-ie> >it# t#e Co.rt o= T$<
A;;e$2s "CTA& to 6ontest t#e iss.$n6e o= t#e >$rr$nts to en=or6e t#e 6o22e6tion o= t#e t$<
$ssess%ents. T#is >$s /o6?ete/ $s CTA C$se No. 4CC8.
T#e CTA /is%isse/ t#e ;etition =or 2$6? o= D.ris/i6tion in $ /e6ision /$te/ Se;te%7er 1C,
1884, /e62$rin3 t#$t s$i/ ;etition >$s =i2e/ 7e@on/ t#e t#irt@ "30&,/$@ ;erio/ re6?one/
=ro% t#e ti%e >#en t#e /e%$n/ 2etter o= !$n.$r@ 94, 1881 7@ t#e C#ie= o= t#e *IR
A66o.nts Re6ei-$72e $n/ *i22in3 Di-ision >$s ;res.%$72@ re6ei-e/ 7@ ;etitioner, i.e.,
A>it#in $ re$son$72e ti%e =ro% s$i/ /$te in t#e re3.2$r 6o.rse o= %$i2 ;.rs.$nt to Se6tion
9"-& o= R.2e 131 o= t#e R.2es o= Co.rt.BK3L
T#e /e6ision 6ite/ Surigao Electric Co., Inc. v. Court of Tax AppealsK4L >#erein t#is
Co.rt 6onsi/ere/ $ %ere /e%$n/ 2etter sent to t#e t$<;$@er $=ter #is ;rotest o= t#e
$ssess%ent noti6e $s t#e =in$2 /e6ision o= t#e Co%%issioner o= Intern$2 Re-en.e on t#e
;rotest. 4en6e, t#e =i2in3 o= t#e ;etition on No-e%7er 8, 1881 >$s #e2/ 62e$r2@ 7e@on/
t#e re32e%ent$r@ ;erio/.K:L
T#e court a quo 2i?e>ise st$te/ t#$t t#e =in$2it@ o= t#e /eni$2 o= t#e ;rotest 7@ ;etitioner
$3$inst t#e t$< /e=i6ien6@ $ssess%ents >$s 7o2stere/ 7@ t#e s.7seG.ent iss.$n6e o= t#e
>$rr$nts o= /istr$int $n/Eor 2e-@ $n/ 3$rnis#%ent to en=or6e t#e 6o22e6tion o= t#e
/e=i6ien6@ t$<es. T#e iss.$n6e >$s not 7$rre/ 7@ ;res6ri;tion 7e6$.se t#e %ere =i2in3 o=
t#e 2etter o= ;rotest 7@ ;etitioner >#i6# >$s 3i-en /.e 6o.rse 7@ t#e *.re$. o= Intern$2
Re-en.e s.s;en/e/ t#e r.nnin3 o= t#e ;res6ri;tion ;erio/ $s e<;ress2@ ;ro-i/e/ .n/er
t#e t#en Se6tion 994 o= t#e T$< Co/e:
SEC. 994. Suspension of Running of the Statute of Liitations. T#e r.nnin3 o= t#e
St$t.te o= Li%it$tions ;ro-i/e/ in Se6tion 903 $n/ 993 on t#e %$?in3 o= $ssess%ent $n/
t#e 7e3innin3 o= /istr$int or 2e-@ or $ ;ro6ee/in3 in 6o.rt =or 6o22e6tion, in res;e6t o= $n@
/e=i6ien6@, s#$22 7e s.s;en/e/ =or t#e ;erio/ /.rin3 >#i6# t#e Co%%issioner is
;ro#i7ite/ =ro% %$?in3 t#e $ssess%ent or 7e3innin3 /istr$int or 2e-@ or $ ;ro6ee/in3 in
6o.rt $n/ =or si<t@ "C0& /$@s t#ere$=terM >#en t#e t$<;$@er reG.ests =or $ rein-esti3$tion
>#i6# is 3r$nte/ 7@ t#e Co%%issionerM >#en t#e t$<;$@er 6$nnot 7e 2o6$te/ in t#e
$//ress 3i-en 7@ #i% in t#e ret.rn =i2es .;on >#i6# $ t$< is 7ein3 $ssesse/ or 6o22e6te/:
Provided, T#$t i= t#e t$<;$@er in=or% t#e Co%%issioner o= $n@ 6#$n3e o= $//ress, t#e
r.nnin3 o= t#e st$t.te o= 2i%it$tions >i22 not 7e s.s;en/e/M >#en t#e >$rr$nt o= /istr$int
$n/ 2e-@ is /.2@ ser-e/ .;on t#e t$<;$@er, #is $.t#oriNe/ re;resent$ti-e, or $ %e%7er o=
#is #o.se#o2/ >it# s.==i6ient /is6retion, $n/ no ;ro;ert@ 6o.2/ 2o6$te/M $n/ >#en t#e
t$<;$@er is o.t o= t#e P#i2i;;ines. KCL "(n/ers6orin3 s.;;2ie/.&
Petitioner =i2e/ $ )otion =or Re6onsi/er$tion $r3.in3 t#$t t#e /e%$n/ 2etter o= !$n.$r@
94, 1881 6$nnot 7e 6onsi/ere/ $s t#e =in$2 /e6ision o= t#e Co%%issioner o= Intern$2
Re-en.e on its ;rotest 7e6$.se t#e s$%e >$s si3ne/ 7@ $ %ere s.7or/in$te $n/ not 7@ t#e
Co%%issioner #i%se2=.KFL
Wit# t#e /eni$2 o= its %otion =or re6onsi/er$tion, ;etitioner 6onseG.ent2@ =i2e/ $ Petition
=or Re-ie> >it# t#e Co.rt o= A;;e$2s 6onten/in3 t#$t t#ere >$s no =in$2 /e6ision to
s;e$? o= 7e6$.se t#e Co%%issioner #$/ @et to %$?e $ ;erson$2 /eter%in$tion $s re3$r/s
t#e %erits o= ;etitionerHs 6$se.K8L
T#e Co.rt o= A;;e$2s /enie/ t#e ;etition in $ /e6ision /$te/ O6to7er 31, 9000, t#e
/is;ositi-e ;ortion o= >#i6# re$/s:
AW4ERE1ORE, t#e ;etition is DIS)ISSED =or 2$6? o= %erit.
SO ORDERED.B
PetitionerHs )otion =or Re6onsi/er$tion >$s 2i?e>ise /enie/ in $ reso2.tion /$te/ )$@ 3,
9001.
4en6e, t#is ;etition >it# t#e =o22o>in3 $ssi3n%ent o= errors:K8L
I
T4E 4ONORA*LE RESPONDENT CA ERRED IN 1INDING T4AT T4E DE)AND
LETTER ISS(ED *+ T4E "T4EN& ACCO(NTS RECEIA*LEE*ILLING DIISION
O1 T4E *IR NATIONAL O11ICE WAS T4E 1INAL DECISION O1 T4E
RESPONDENT CIR ON T4E DISP(TED ASSESS)ENTS, AND 4ENCE
CONSTIT(TED T4E DECISION APPEALA*LE TO T4E 4ONORA*LE
RESPONDENT CTAM AND,
II
T4E 4ONORA*LE RESPONDENT CA ERRED IN DECLARING T4AT T4E
DENIAL O1 T4E PROTEST O1 T4E S(*!ECT ALLEGED DE1ICIENC+ TA5
ASSESS)ENTS 4AD LONG *ECO)E 1INAL AND E5EC(TOR+ 1OR 1AIL(RE
O1 T4E PETITIONER TO INSTIT(TE T4E APPEAL 1RO) T4E DE)AND
LETTER O1 T4E C4IE1 O1 T4E ACCO(NTS RECEIA*LEE*ILLING DIISION,
*IR NATIONAL O11ICE, TO T4E 4ONORA*LE RESPONDENT CTA, WIT4IN
T4IRT+ "30& DA+S 1RO) RECEIPT T4EREO1.
T#.s, t#e %$in iss.e is >#et#er or not $ /e%$n/ 2etter =or t$< /e=i6ien6@ $ssess%ents
iss.e/ $n/ si3ne/ 7@ $ s.7or/in$te o==i6er >#o >$s $6tin3 in 7e#$2= o= t#e Co%%issioner
o= Intern$2 Re-en.e, is /ee%e/ =in$2 $n/ e<e6.tor@ $n/ s.7De6t to $n $;;e$2 to t#e Co.rt
o= T$< A;;e$2s.
We r.2e in t#e $==ir%$ti-e.
A /e%$n/ 2etter =or ;$@%ent o= /e2inG.ent t$<es %$@ 7e 6onsi/ere/ $ /e6ision on $
/is;.te/ or ;roteste/ $ssess%ent. T#e /eter%in$tion on >#et#er or not $ /e%$n/ 2etter is
=in$2 is 6on/itione/ .;on t#e 2$n3.$3e .se/ or t#e tenor o= t#e 2etter 7ein3 sent to t#e
t$<;$@er.
We 2$i/ /o>n t#e r.2e t#$t t#e Co%%issioner o= Intern$2 Re-en.e s#o.2/ $2>$@s in/i6$te
to t#e t$<;$@er in 62e$r $n/ .neG.i-o6$2 2$n3.$3e >#$t 6onstit.tes #is =in$2 /eter%in$tion
o= t#e /is;.te/ $ssess%ent, t#.s:
. . . >e /ee% it $;;ro;ri$te to st$te t#$t t#e Co%%issioner o= Intern$2 Re-en.e s#o.2/
$2>$@s in/i6$te to t#e t$<;$@er in 62e$r $n/ .neG.i-o6$2 2$n3.$3e >#ene-er #is $6tion on
$n $ssess%ent G.estione/ 7@ $ t$<;$@er 6onstit.tes #is =in$2 /eter%in$tion on t#e
/is;.te/ $ssess%ent, $s 6onte%;2$te/ 7@ Se6tions F $n/ 11 o= Re;.72i6 A6t No. 119:, $s
$%en/e/. On t#e 7$sis o= #is st$te%ent in/.7it$72@ s#o>in3 t#$t t#e Co%%issionerHs
6o%%.ni6$te/ $6tion is #is =in$2 /e6ision on t#e 6onteste/ $ssess%ent, t#e $33rie-e/
t$<;$@er >o.2/ t#en 7e $72e to t$?e re6o.rse to t#e t$< 6o.rt $t t#e o;;ort.ne ti%e.
Wit#o.t nee/2ess /i==i6.2t@, t#e t$<;$@er >o.2/ 7e $72e to /eter%ine >#en #is ri3#t to
$;;e$2 to t#e t$< 6o.rt $66r.es.
T#e r.2e o= 6on/.6t >o.2/ $2so o7-i$te $22 /esire $n/ o;;ort.nit@ on t#e ;$rt o= t#e
t$<;$@er to 6ontin.$22@ /e2$@ t#e =in$2it@ o= t#e $ssess%ent O $n/, 6onseG.ent2@, t#e
6o22e6tion o= t#e $%o.nt /e%$n/e/ $s t$<es O 7@ re;e$te/ reG.ests =or re6o%;.t$tion $n/
re6onsi/er$tion. On t#e ;$rt o= t#e Co%%issioner, t#is >o.2/ en6o.r$3e #is o==i6e to
6on/.6t $ 6$re=.2 $n/ t#oro.3# st./@ o= e-er@ G.estione/ $ssess%ent $n/ ren/er $ 6orre6t
$n/ /e=inite /e6ision t#ereon in t#e =irst inst$n6e. T#is >o.2/ $2so /eter t#e
Co%%issioner =ro% .n=$ir2@ %$?in3 t#e t$<;$@er 3ro;e in t#e /$r? $n/ s;e6.2$te $s to
>#i6# $6tion 6onstit.tes t#e /e6ision $;;e$2$72e to t#e t$< 6o.rt. O= 3re$ter i%;ort, t#is
r.2e o= 6on/.6t >o.2/ %eet $ ;ressin3 nee/ =or =$ir ;2$@, re3.2$rit@, $n/ or/er2iness in
$/%inistr$ti-e $6tion.K10L
In t#is 6$se, t#e 2etter o= /e%$n/ /$te/ !$n.$r@ 94, 1881, .nG.estion$72@ 6onstit.tes t#e
=in$2 $6tion t$?en 7@ t#e *.re$. o= Intern$2 Re-en.e on ;etitionerHs reG.est =or
re6onsi/er$tion >#en it reiter$te/ t#e t$< /e=i6ien6@ $ssess%ents /.e =ro% ;etitioner, $n/
reG.este/ its ;$@%ent. 1$i2.re to /o so >o.2/ res.2t in t#e Aiss.$n6e o= $ >$rr$nt o=
/istr$int $n/ 2e-@ to en=or6e its 6o22e6tion >it#o.t =.rt#er noti6e.BK11L In $//ition, t#e
2etter 6ont$ine/ $ not$tion in/i6$tin3 t#$t ;etitionerHs reG.est =or re6onsi/er$tion #$/ 7een
/enie/ =or 2$6? o= s.;;ortin3 /o6.%ents.
T#e $7o-e 6on62.sion =in/s s.;;ort in Commissioner of Internal evenue v. A!ala
Securities Corporation,K19L >#ere >e #e2/:
T#e 2etter o= 1e7r.$r@ 18, 18C3 "E<#. G&, in t#e -ie> o= t#e Co.rt, is t$nt$%o.nt to $
/eni$2 o= t#e re6onsi/er$tion or Kres;on/ent 6or;or$tionHsLP;rotest oK=L t#e $ssess%ent
%$/e 7@ t#e ;etitioner, 6onsi/erin3 t#$t t#e s$i/ 2etter K>$sL in itse2= $ reiter$tion o= t#e
/e%$n/ 7@ t#e *.re$. o= Intern$2 Re-en.e =or t#e sett2e%ent o= t#e $ssess%ent $2re$/@
%$/e, $n/ =or t#e i%%e/i$te ;$@%ent o= t#e s.% o= PF:8,C8F.04 in s;ite o= t#e -e#e%ent
;rotest o= t#e res;on/ent 6or;or$tion on A;ri2 91, 18C1. T#is 6ert$in2@ is $ 62e$r
in/i6$tion o= t#e =ir% st$n/ o= ;etitioner $3$inst t#e re6onsi/er$tion o= t#e /is;.te/
$ssess%entPT#is 7ein3 so, t#e s$i/ 2etter $%o.ntKe/L to $ /e6ision on $ /is;.te/ or
;roteste/ $ssess%ent, $n/, t#ere, t#e 6o.rt $ G.o /i/ not err in t$?in3 6o3niN$n6e o= t#is
6$se.
Si%i2$r2@, in Surigao Electric Co., Inc v. Court of Tax Appeals,K13L $n/ in CI v. "nion
S#ipping Corporation,[14] >e #e2/:
A. . . In t#is 2etter, t#e 6o%%issioner not on2@ in e==e6t /e%$n/e/ t#$t t#e ;etitioner ;$@
t#e $%o.nt o= P11,:33.:3 7.t $2so 3$-e >$rnin3 t#$t in t#e e-ent it =$i2e/ to ;$@, t#e s$i/
6o%%issioner >o.2/ 7e 6onstr$ine/ to en=or6e t#e 6o22e6tion t#ereo= 7@ %e$ns o= t#e
re%e/ies ;ro-i/e/ 7@ 2$>. T#e tenor o= t#e 2etter, s;e6i=i6$22@ t#e st$te%ent re3$r/in3 t#e
resort to 2e3$2 re%e/ies, .n%ist$?$72@ in/i6$teK/L t#e =in$2 n$t.re o= t#e /eter%in$tion
%$/e 7@ t#e 6o%%issioner o= t#e ;etitionerHs /e=i6ien6@ =r$n6#ise t$< [email protected]
T#e /e%$n/ 2etter re6ei-e/ 7@ ;etitioner -eri2@ si3ni=ie/ $ 6#$r$6ter o= =in$2it@.
T#ere=ore, it >$s t$nt$%o.nt to $ reDe6tion o= t#e reG.est =or re6onsi/er$tion. As 6orre6t2@
#e2/ 7@ t#e Co.rt o= T$< A;;e$2s, A>#i2e t#e /eni$2 o= t#e ;rotest >$s in t#e =or% o= $
/e%$n/ 2etter, t#e not$tion in t#e s$i/ 2etter %$?in3 re=eren6e to t#e ;rotest =i2e/ 7@
;etitioner 62e$r2@ s#o>s t#e intention o= t#e res;on/ent to %$?e it $s K#isL =in$2
/e6ision.BK1:L
T#is no> 7rin3s .s to t#e 6r.< o= t#e %$tter $s to >#et#er s$i/ /e%$n/ 2etter in/ee/
$tt$ine/ =in$2it@ /es;ite t#e =$6t t#$t it >$s iss.e/ $n/ si3ne/ 7@ t#e C#ie= o= t#e A66o.nts
Re6ei-$72e $n/ *i22in3 Di-ision inste$/ o= t#e *IR Co%%issioner.
T#e 3ener$2 r.2e is t#$t t#e Co%%issioner o= Intern$2 Re-en.e %$@ /e2e3$te $n@ ;o>er
-este/ .;on #i% 7@ 2$> to Di-ision C#ie=s or to o==i6i$2s o= #i3#er r$n?. 4e 6$nnot,
#o>e-er, /e2e3$te t#e =o.r ;o>ers 3r$nte/ to #i% .n/er t#e N$tion$2 Intern$2 Re-en.e
Co/e "NIRC& en.%er$te/ in Se6tion F.
As $%en/e/ 7@ Re;.72i6 A6t No. 8494, Se6tion F o= t#e Co/e $.t#oriNes t#e *IR
Co%%issioner to /e2e3$te t#e ;o>ers -este/ in #i% .n/er t#e ;ertinent ;ro-isions o= t#e
Co/e to $n@ s.7or/in$te o==i6i$2 >it# t#e r$n? eG.i-$2ent to $ /i-ision 6#ie= or #i3#er,
e<6e;t t#e =o22o>in3:
"$& T#e ;o>er to re6o%%en/ t#e ;ro%.23$tion o= r.2es $n/ re3.2$tions 7@ t#e Se6ret$r@
o= 1in$n6eM
"7& T#e ;o>er to iss.e r.2in3s o= =irst i%;ression or to re-erse, re-o?e or %o/i=@ $n@
e<istin3 r.2in3 o= t#e *.re$.M
"6& T#e ;o>er to 6o%;ro%ise or $7$te .n/er Se6tion 904"A& $n/ "*& o= t#is Co/e, $n@
t$< /e=i6ien6@: Pro-i/e/, #o>e-er, t#$t $ssess%ents iss.e/ 7@ t#e Re3ion$2 O==i6es
in-o2-in3 7$si6 /e=i6ien6@ t$<es o= =i-e #.n/re/ t#o.s$n/ ;esos "P:00,000& or 2ess, $n/
%inor 6ri%in$2 -io2$tions $s %$@ 7e /eter%ine/ 7@ r.2es $n/ re3.2$tions to 7e
;ro%.23$te/ 7@ t#e Se6ret$r@ o= 1in$n6e, .;on t#e re6o%%en/$tion o= t#e
Co%%issioner, /is6o-ere/ 7@ re3ion$2 $n/ /istri6t o==i6i$2s, %$@ 7e 6o%;ro%ise/ 7@ $
re3ion$2 e-$2.$tion 7o$r/ >#i6# s#$22 7e 6o%;ose/ o= t#e Re3ion$2 Dire6tor $s
C#$ir%$n, t#e Assist$nt Re3ion$2 Dire6tor, #e$/s o= t#e Le3$2, Assess%ent $n/
Co22e6tion Di-isions $n/ t#e Re-en.e Distri6t O==i6er #$-in3 D.ris/i6tion o-er t#e
t$<;$@er, $s %e%7ersM $n/
"/& T#e ;o>er to $ssi3n or re$ssi3n intern$2 re-en.e o==i6ers to est$72is#%ents >#ere
$rti62es s.7De6t to e<6ise t$< $re ;ro/.6e/ or ?e;t.
It is 62e$r =ro% t#e $7o-e ;ro-ision t#$t t#e $6t o= iss.$n6e o= t#e /e%$n/ 2etter 7@ t#e
C#ie= o= t#e A66o.nts Re6ei-$72e $n/ *i22in3 Di-ision /oes not =$22 .n/er $n@ o= t#e
e<6e;tions t#$t #$-e 7een %entione/ $s non,/e2e3$72e.
Se6tion C o= t#e Co/e =.rt#er ;ro-i/es:
ASEC. C. Po>er o= t#e Co%%issioner to )$?e Assess%ents $n/ Pres6ri7e A//ition$2
ReG.ire%ents =or T$< A/%inistr$tion $n/ En=or6e%ent. O
"A& E<$%in$tion o= Ret.rns $n/ Deter%in$tion o= T$< D.e. $ A=ter $ ret.rn #$s 7een =i2e/
$s reG.ire/ .n/er t#e ;ro-isions o= t#is Co/e, t#e Coissione! o! his "u#$ autho!i%e"
!ep!esentati&e %$@ $.t#oriNe t#e e<$%in$tion o= $n@ t$<;$@er $n/ t#e $ssess%ent o= t#e
6orre6t $%o.nt o= t$<M Pro-i/e/, #o>e-er, T#$t =$i2.re to =i2e $ ret.rn s#$22 not ;re-ent
t#e Co%%issioner =ro% $.t#oriNin3 t#e e<$%in$tion o= $n@ t$<;$@er.
T#e t$< or $n@ /e=i6ien6@ t$< so $ssesse/ s#$22 7e ;$i/ .;on noti6e $n/ /e%$n/ =ro% t#e
Coissione! o! f!o his "u#$ autho!i%e" !ep!esentati&e. . . .' "E%;#$sis s.;;2ie/&
T#.s, t#e $.t#orit@ to %$?e t$< $ssess%ents %$@ 7e /e2e3$te/ to s.7or/in$te o==i6ers.
S$i/ $ssess%ent #$s t#e s$%e =or6e $n/ e==e6t $s t#$t iss.e/ 7@ t#e Co%%issioner
#i%se2=, i= not re-ie>e/ or re-ise/ 7@ t#e 2$tter s.6# $s in t#is 6$se.K1CL
A reG.est =or re6onsi/er$tion %.st 7e %$/e >it#in t#irt@ "30& /$@s =ro% t#e t$<;$@erHs
re6ei;t o= t#e t$< /e=i6ien6@ $ssess%ent, ot#er>ise, t#e /e6ision 7e6o%es =in$2,
.n$;;e$2$72e $n/ t#ere=ore, /e%$n/$72e. A t$< $ssess%ent t#$t #$s 7e6o%e =in$2,
e<e6.tor@ $n/ en=or6e$72e =or =$i2.re o= t#e t$<;$@er to $ss$i2 t#e s$%e $s ;ro-i/e/ in
Se6tion 998 6$n no 2on3er 7e 6onteste/, t#.s:
ASEC. 998. (!otesting of Assessent. ) W#en t#e Co%%issioner or #is /.2@ $.t#oriNe/
re;resent$ti-e =in/s t#$t ;ro;er t$<es s#o.2/ 7e $ssesse/, #e s#$22 =irst noti=@ t#e t$<;$@er
o= #is =in/in3s*S.6# $ssess%ent %$@ 7e ;roteste/ $/%inistr$ti-e2@ 7@ =i2in3 $ reG.est
=or re6onsi/er$tion or rein-esti3$tion >it#in t#irt@ "30& /$@s =ro% re6ei;t o= t#e
$ssess%ent in s.6# =or% $n/ %$nner $s %$@ 7e ;res6ri7e/ 7@ i%;2e%entin3 r.2es $n/
re3.2$tions. Wit#in si<t@ "C0& /$@s =ro% =i2in3 o= t#e ;rotest, $22 re2e-$nt s.;;ortin3
/o6.%ents s#$22 #$-e 7een s.7%itte/M ot#er>ise, t#e $ssess%ent s#$22 7e6o%e =in$2.
I= t#e ;rotest is /enie/ in >#o2e or in ;$rt, or is not $6te/ .;on >it#in one #.n/re/ "180&
/$@s =ro% s.7%ission o= /o6.%ents, t#e t$<;$@er $/-erse2@ $==e6te/ 7@ t#e /e6ision or
in$6tion %$@ $;;e$2 to t#e Co.rt o= T$< A;;e$2s >it#in t#irt@ "30& /$@s =ro% re6ei;t o=
t#e s$i/ /e6ision, or =ro% t#e 2$;se o= t#e one #.n/re/ ei3#t@ "180& , /$@ ;erio/M
ot#er>ise, t#e /e6ision s#$22 7e6o%e =in$2, e<e6.tor@ $n/ /e%$n/$72e.B
4ere, ;etitioner =$i2e/ to $-$i2 o= its ri3#t to 7rin3 t#e %$tter 7e=ore t#e Co.rt o= T$<
A;;e$2s >it#in t#e re32e%ent$r@ ;erio/ .;on t#e re6ei;t o= t#e /e%$n/ 2etter reiter$tin3
t#e $ssesse/ /e2inG.ent t$<es $n/ /en@in3 its reG.est =or re6onsi/er$tion >#i6#
6onstit.te/ t#e =in$2 /eter%in$tion 7@ t#e *.re$. o= Intern$2 Re-en.e on ;etitionerHs
;rotest. *ein3 $ =in$2 /is;osition 7@ s$i/ $3en6@, t#e s$%e >o.2/ #$-e 7een $ ;ro;er
s.7De6t =or $;;e$2 to t#e Co.rt o= T$< A;;e$2s.
T#e r.2e is t#$t =or t#e Co.rt o= T$< A;;e$2s to $6G.ire D.ris/i6tion, $n $ssess%ent %.st
=irst 7e /is;.te/ 7@ t#e t$<;$@er $n/ r.2e/ .;on 7@ t#e Co%%issioner o= Intern$2
Re-en.e to >$rr$nt $ /e6ision =ro% >#i6# $ ;etition =or re-ie> %$@ 7e t$?en to t#e Co.rt
o= T$< A;;e$2s. W#ere $n $/-erse r.2in3 #$s 7een ren/ere/ 7@ t#e Co%%issioner o=
Intern$2 Re-en.e >it# re=eren6e to $ /is;.te/ $ssess%ent or $ 62$i% =or re=.n/ or 6re/it,
t#e t$<;$@er %$@ $;;e$2 t#e s$%e >it#in t#irt@ "30& /$@s $=ter re6ei;t t#ereo=.K1FL
We $3ree >it# t#e =$6t.$2 =in/in3s o= t#e Co.rt o= T$< A;;e$2s t#$t t#e /e%$n/ 2etter %$@
7e ;res.%e/ to #$-e 7een /.2@ /ire6te/, %$i2e/ $n/ >$s re6ei-e/ 7@ ;etitioner in t#e
re3.2$r 6o.rse o= t#e %$i2 in t#e $7sen6e o= e-i/en6e to t#e 6ontr$r@. T#is is in
$66or/$n6e >it# Se6tion 9"-&, R.2e 131 o= t#e R.2es o= Co.rt, $n/ in t#is 6$se, sin6e t#e
;erio/ to $;;e$2 #$s 6o%%en6e/ to r.n =ro% t#e ti%e t#e 2etter o= /e%$n/ >$s
;res.%$72@ re6ei-e/ 7@ ;etitioner >it#in $ re$son$72e ti%e $=ter !$n.$r@ 94, 1881, t#e
;erio/ o= t#irt@ "30& /$@s to $;;e$2 t#e $/-erse /e6ision on t#e reG.est =or re6onsi/er$tion
#$/ $2re$/@ 2$;se/ >#en t#e ;etition >$s =i2e/ >it# t#e Co.rt o= T$< A;;e$2s on2@ on
No-e%7er 8, 1881. 4en6e, t#e Co.rt o= T$< A;;e$2s ;ro;er2@ /is%isse/ t#e ;etition $s
t#e t$< /e2inG.en6@ $ssess%ent #$/ 2on3 7e6o%e =in$2 $n/ e<e6.tor@.
+,EREFORE, ;re%ises 6onsi/ere/, t#e De6ision o= t#e Co.rt o= A;;e$2s /$te/
O6to7er 31, 9000 $n/ its Reso2.tion /$te/ )$@ 3, 9001 in CA,G.R. SP No. 3::81 $re
#ere7@ AFFIR-ED. T#e ;etition is $66or/in32@ DENIED =or 2$6? o= %erit.
SO ORDERED.
..R. No. /01231 4une /0, 5660
RIZAL CO--ERCIAL 7AN8IN. COR(ORATION, Petitioner,
-s.
CO--ISSIONER OF INTERNAL REVENUE, Res;on/ent.
D E C I S I O N
9NARES:SANTIA.O, J.:
T#is is $ ;etition =or re-ie> .n/er R.2e 4: o= t#e R.2es o= Co.rt $ss$i2in3 t#e De6ision
1
o= t#e Co.rt o= T$< A;;e$2s "CTA& En %anc /$te/ !.ne F, 900: in C.T.A. E* No. :0
>#i6# $==ir%e/ t#e Reso2.tions o= t#e CTA Se6on/ Di-ision /$te/ )$@ 3, 9004
9
$n/
No-e%7er :, 9004
3
in C.T.A. C$se No. C4F: /en@in3 ;etitionerHs Petition =or Re2ie= =ro%
!./3%ent $n/ t#e )otion =or Re6onsi/er$tion t#ereo=, res;e6ti-e2@.
T#e .n/is;.te/ =$6ts $re $s =o22o>s:
On !.2@ :, 9001, ;etitioner RiN$2 Co%%er6i$2 *$n?in3 Cor;or$tion re6ei-e/ $ 1or%$2
Letter o= De%$n/ /$te/ )$@ 9:, 9001 =ro% t#e res;on/ent Co%%issioner o= Intern$2
Re-en.e =or its t$< 2i$7i2ities ;$rti6.2$r2@ =or Gross Ons#ore T$< in t#e $%o.nt o=
P:3,888,498.98 $n/ Do6.%ent$r@ St$%; T$< =or its S;e6i$2 S$-in3s P2$6e%ents in t#e
$%o.nt o= P4C,F1F,8:9.FC, =or t#e t$<$72e @e$r 188F.
4

On !.2@ 90, 9001, ;etitioner =i2e/ $ ;rotest 2etterEreG.est =or
re6onsi/er$tionErein-esti3$tion ;.rs.$nt to Se6tion 998 o= t#e N$tion$2 Intern$2 Re-en.e
Co/e o= 188F "NIRC&.
:

As t#e ;rotest >$s not $6te/ .;on 7@ t#e res;on/ent, ;etitioner =i2e/ on A;ri2 30, 9009 $
;etition =or re-ie> >it# t#e CTA =or t#e 6$n6e22$tion o= t#e $ssess%ents >#i6# >$s
/o6?ete/ $s C.T.A. C$se No. C4F:.
C

On !.2@ 1:, 9003, res;on/ent =i2e/ $ %otion to reso2-e =irst t#e iss.e o= CTAHs
D.ris/i6tion,
F
>#i6# >$s 3r$nte/ 7@ t#e CTA in $ Reso2.tion /$te/ Se;te%7er 10, 9003.
8
T#e ;etition =or re-ie> >$s /is%isse/ 7e6$.se it >$s =i2e/ 7e@on/ t#e 30,/$@ ;erio/
=o22o>in3 t#e 2$;se o= 180 /$@s =ro% ;etitionerHs s.7%ission o= /o6.%ents in s.;;ort o=
its ;rotest, $s ;ro-i/e/ .n/er Se6tion 998 o= t#e NIRC $n/ Se6tion 11 o= R.A. No. 119:,
ot#er>ise ?no>n $s t#e &a' Creating t#e Court of Tax Appeals.
Petitioner /i/ not =i2e $ %otion =or re6onsi/er$tion or $n $;;e$2 to t#e CTA En %anc =ro%
t#e /is%iss$2 o= its ;etition =or re-ie>. ConseG.ent2@, t#e Se;te%7er 10, 9003 Reso2.tion
7e6$%e =in$2 $n/ e<e6.tor@ on O6to7er 1, 9003 $n/ Entr@ o= !./3%ent >$s %$/e on
De6e%7er 1, 9003.
8
T#ere$=ter, res;on/ent sent $ De%$n/ Letter to ;etitioner =or t#e
;$@%ent o= t#e /e=i6ien6@ t$< $ssess%ents.
On 1e7r.$r@ 90, 9004, ;etitioner =i2e/ $ Petition for elief from Judgment
10
on t#e 3ro.n/
o= e<6.s$72e ne32i3en6e o= its 6o.nse2Hs se6ret$r@ >#o $22e3e/2@ %is=i2e/ $n/ 2ost t#e
Se;te%7er 10, 9003 Reso2.tion. T#e CTA Se6on/ Di-ision set t#e 6$se =or #e$rin3 on
A;ri2 9, 9004
11
/.rin3 >#i6# ;etitionerHs 6o.nse2 >$s ;resent.
19
Res;on/ent =i2e/ $n
O;;osition
13
>#i2e ;etitioner s.7%itte/ its )$ni=est$tion $n/ Co.nter,)otion.
14

On )$@ 3, 9004, t#e CTA Se6on/ Di-ision ren/ere/ $ Reso2.tion
1:
/en@in3 ;etitionerHs
Petition =or Re2ie= =ro% !./3%ent.la'p#(l.net
PetitionerHs %otion =or re6onsi/er$tion >$s /enie/ in $ Reso2.tion /$te/ No-e%7er :,
9004,
1C
#en6e it =i2e/ $ ;etition =or re-ie> >it# t#e CTA En %anc, /o6?ete/ $s C.T.A. E*
No. :0, >#i6# $==ir%e/ t#e $ss$i2e/ Reso2.tions o= t#e CTA Se6on/ Di-ision in $
De6ision /$te/ !.ne F, 900:.
4en6e, t#is ;etition =or re-ie> 7$se/ on t#e =o22o>in3 3ro.n/s:
I.
T4E 4ONORA*LE CTA AND CTA E) %A)C GRAEL+ ERRED IN DEN+ING
PETITIONERHS PETITION 1OR RELIE1, WIT4O(T 1IRST A11ORDING IT
T4E OPPORT(NIT+ TO ADD(CE EIDENCE TO ESTA*LIS4 T4E 1ACT(AL
ALLEGATIONS CONSTIT(TING ITS ALLEGED E5C(SA*LE NEGLIGENCE,
IN CLEAR IOLATION O1 PETITIONERHS *ASIC RIG4T TO D(E PROCESS.
II.
CONSIDERING T4AT T4E S(*!ECT ASSESS)ENT, INSO1AR AS IT
INOLES ALLEGED DE1ICIENC+ DOC()ENTAR+ STA)P TA5ES ON
SPECIAL SAINGS ACCO(NTS, IS AN ISS(E A11ECTING ALL )E)*ERS
O1 T4E *ANKING IND(STR+, PETITIONER, LIKE ALL OT4ER *ANKS,
S4O(LD *E A11ORDED AN E'(AL OPPORT(NIT+ TO 1(LL+ LITIGATE
T4E ISS(E, AND 4AE T4E CASE DETER)INED *ASED ON ITS )ERITS,
RAT4ER T4AN ON A )ERE TEC4NICALIT+.
1F

Re2ie= =ro% D./3%ent .n/er R.2e 38 o= t#e R.2es o= Co.rt is $ 2e3$2 re%e/@ t#$t is
$22o>e/ on2@ in e<6e;tion$2 6$ses >#ere7@ $ ;$rt@ see?s to set $si/e $ D./3%ent ren/ere/
$3$inst #i% 7@ $ 6o.rt >#ene-er #e >$s .nD.st2@ /e;ri-e/ o= $ #e$rin3 or >$s ;re-ente/
=ro% t$?in3 $n $;;e$2, in eit#er 6$se, 7e6$.se o= =r$./, $66i/ent, %ist$?e or e<6.s$72e
ne32e6t.
18

Petitioner $r3.es t#$t it >$s /enie/ /.e ;ro6ess >#en it >$s not 3i-en t#e o;;ort.nit@ to
7e #e$r/ to ;ro-e t#$t its =$i2.re to =i2e $ %otion =or re6onsi/er$tion or $;;e$2 =ro% t#e
/is%iss$2 o= its ;etition =or re-ie> >$s /.e to t#e =$i2.re o= its e%;2o@ee to =or>$r/ t#e
6o;@ o= t#e Se;te%7er 10, 9003 Reso2.tion >#i6# 6onstit.tes e<6.s$72e ne32i3en6e.
PetitionerHs $r3.%ent 2$6?s %erit.
It is 7$si6 t#$t $s 2on3 $s $ ;$rt@ is 3i-en t#e o;;ort.nit@ to /e=en/ #is interests in /.e
6o.rse, #e >o.2/ #$-e no re$son to 6o%;2$in, =or it is t#is o;;ort.nit@ to 7e #e$r/ t#$t
%$?es .; t#e essen6e o= /.e ;ro6ess.
18
In %atong*a+al v. ,afra,
90
t#e Co.rt #e2/ t#$t:
T#ere is no G.estion t#$t t#e Qessen6e o= /.e ;ro6ess is $ #e$rin3 7e=ore 6on-i6tion $n/
7e=ore $n i%;$rti$2 $n/ /isintereste/ tri7.n$2Q 7.t /.e ;ro6ess $s $ 6onstit.tion$2 ;re6e;t
/oes not, $2>$@s $n/ in $22 sit.$tions, reG.ire $ tri$2,t@;e ;ro6ee/in3. T#e essen6e o= /.e
;ro6ess is to 7e =o.n/ in t#e re$son$72e o;;ort.nit@ to 7e #e$r/ $n/ s.7%it $n@ e-i/en6e
one %$@ #$-e in s.;;ort o= oneHs /e=ense. ;To <e hea!"; "oes not on#$ ean &e!<a#
a!guents in =ou!t> one a$ <e hea!" a#so th!ough p#ea"ings. +he!e oppo!tunit$
to <e hea!", eithe! th!ough o!a# a!guents o! p#ea"ings, is a==o!"e", the!e is no
"enia# of p!o=e"u!a# "ue p!o=ess. "E%;#$sis s.;;2ie/&
As 6orre6t2@ ;ointe/ 7@ t#e O==i6e o= t#e So2i6itor Gener$2 "OSG&, t#e CTA Se6on/
Di-ision set t#e 6$se =or #e$rin3 on A;ri2 9, 9004 $=ter t#e =i2in3 7@ t#e ;etitioner o= its
;etition =or re2ie= =ro% D./3%ent. PetitionerHs 6o.nse2 >$s ;resent on t#e s6#e/.2e/
#e$rin3 $n/ in =$6t or$22@ $r3.e/ its ;etition.
)oreo-er, $=ter t#e CTA Se6on/ Di-ision /is%isse/ t#e ;etition =or re2ie= =ro% D./3%ent
in $ Reso2.tion /$te/ )$@ 3, 9004, ;etitioner =i2e/ $ %otion =or re6onsi/er$tion $n/ t#e
6o.rt =.rt#er reG.ire/ 7ot# ;$rties to =i2e t#eir res;e6ti-e %e%or$n/.%. In/ee/, ;etitioner
>$s not /enie/ its /$@ in 6o.rt 6onsi/erin3 t#e o;;ort.nities 3i-en to $r3.e its 62$i%.
Re2ie= 6$nnot 7e 3r$nte/ on t#e =2i%s@ e<6.se t#$t t#e =$i2.re to $;;e$2 >$s /.e to t#e
ne32e6t o= ;etitionerHs 6o.nse2.
91
Ot#er>ise, $22 t#$t $ 2osin3 ;$rt@ >o.2/ /o to s$2-$3e #is
6$se >o.2/ 7e to in-o?e ne32e6t or %ist$?e o= #is 6o.nse2 $s $ 3ro.n/ =or re-ersin3 or
settin3 $si/e t#e $/-erse D./3%ent, t#ere7@ ;.ttin3 no en/ to 2iti3$tion.
99

Ne32i3en6e to 7e Qe<6.s$72eQ %.st 7e one >#i6# or/in$r@ /i2i3en6e $n/ ;r./en6e 6o.2/
not #$-e 3.$r/e/ $3$inst $n/ 7@ re$son o= >#i6# t#e ri3#ts o= $n $33rie-e/ ;$rt@ #$-e
;ro7$72@ 7een i%;$ire/.
93
PetitionerHs =or%er 6o.nse2Hs o%ission 6o.2/ #$r/2@ 7e
6#$r$6teriNe/ $s e<6.s$72e, %.6# 2ess .n$-oi/$72e.
T#e Co.rt #$s re;e$te/2@ $/%onis#e/ 2$>@ers to $/o;t $ s@ste% >#ere7@ t#e@ 6$n
$2>$@s re6ei-e ;ro%;t2@ D./i6i$2 noti6es $n/ ;2e$/in3s inten/e/ =or t#e%.
94
A;;$rent2@,
;etitionerHs 6o.nse2 >$s not on2@ re%iss in 6o%;2@in3 >it# t#is $/%onition 7.t #e $2so
=$i2e/ to 6#e6? ;erio/i6$22@, $s $n $6t o= ;r./en6e $n/ /i2i3en6e, t#e st$t.s o= t#e ;en/in3
6$se 7e=ore t#e CTA Se6on/ Di-ision. T#e =$6t t#$t 6o.nse2 $22e3e/2@ #$/ not rene>e/
t#e e%;2o@%ent o= #is se6ret$r@, t#ere7@ %$?in3 t#e 2$tter no 2on3er $ttenti-e or =o6.se/
on #er >or?, /i/ not re2ie-e #i% o= #is res;onsi7i2ities to #is 62ient. It is $ ;ro72e%
;erson$2 to #i% >#i6# s#o.2/ not in $n@ %$nner inter=ere >it# #is ;ro=ession$2
6o%%it%ents.
In e<6e;tion$2 6$ses, >#en t#e %ist$?e o= 6o.nse2 is so ;$2;$72e t#$t it $%o.nts to 3ross
ne32i3en6e, t#is Co.rt $==or/s $ ;$rt@ $ se6on/ o;;ort.nit@ to -in/i6$te #is ri3#t. *.t t#is
o;;ort.nit@ is .n$-$i2in3 in t#e 6$se $t 7$r, es;e6i$22@ sin6e ;etitioner #$/ sG.$n/ere/ t#e
-$rio.s o;;ort.nities $-$i2$72e to it $t t#e /i==erent st$3es o= t#is 6$se. P.72i6 interest
/e%$n/s $n en/ to e-er@ 2iti3$tion $n/ $ 7e2$te/ e==ort to reo;en $ 6$se t#$t #$s $2re$/@
$tt$ine/ =in$2it@ >i22 ser-e no ;.r;ose ot#er t#$n to /e2$@ t#e $/%inistr$tion o= D.sti6e.
9:

Sin6e ;etitionerHs 3ro.n/ =or re2ie= is not >e22,t$?en, it =o22o>s t#$t t#e $ss$i2e/ D./3%ent
st$n/s.lavvp#il.-e. Ass.%in3 ex gratia argumenti t#$t t#e ne32i3en6e o= ;etitionerHs
6o.nse2 is e<6.s$72e, sti22 t#e ;etition %.st =$i2. As $;t2@ o7ser-e/ 7@ t#e OSG, e-en i=
t#e ;etition =or re2ie= =ro% D./3%ent >o.2/ 7e 3r$nte/, ;etitioner >i22 not =$re $n@ 7etter
i= t#e 6$se >ere to 7e ret.rne/ to t#e CTA Se6on/ Di-ision sin6e its $6tion =or t#e
6$n6e22$tion o= its $ssess%ents #$/ $2re$/@ ;res6ri7e/.
9C

Petitioner ;roteste/ t#e $ssess%ents ;.rs.$nt to Se6tion 998 o= t#e NIRC, >#i6#
;ro-i/es:
SEC. 998. Protesting of Assessment., < < <.
< < < <
Wit#in $ ;erio/ to 7e ;res6ri7e/ 7@ i%;2e%entin3 r.2es $n/ re3.2$tions, t#e t$<;$@er
s#$22 7e reG.ire/ to res;on/ to s$i/ noti6e. I= t#e t$<;$@er =$i2s to res;on/, t#e
Co%%issioner or #is /.2@ $.t#oriNe/ re;resent$ti-e s#$22 iss.e $n $ssess%ent 7$se/ on
#is =in/in3s.
S.6# $ssess%ent %$@ 7e ;roteste/ $/%inistr$ti-e2@ 7@ =i2in3 $ reG.est =or re6onsi/er$tion
or rein-esti3$tion >it#in t#irt@ "30& /$@s =ro% re6ei;t o= t#e $ssess%ent in s.6# =or% $n/
%$nner $s %$@ 7e ;res6ri7e/ 7@ i%;2e%entin3 r.2es $n/ re3.2$tions. Wit#in si<t@ "C0&
/$@s =ro% =i2in3 o= t#e ;rotest, $22 re2e-$nt s.;;ortin3 /o6.%ents s#$22 #$-e 7een
s.7%itte/M ot#er>ise, t#e $ssess%ent s#$22 7e6o%e =in$2.
If the p!otest is "enie" in ?ho#e o! in pa!t, o! is not a=te" upon ?ithin one hun"!e"
eight$ @/16A "a$s f!o su<ission of "o=uents, the taBpa$e! a"&e!se#$ affe=te" <$
the "e=ision o! ina=tion a$ appea# to the Cou!t of TaB Appea#s ?ithin @C6A "a$s
f!o !e=eipt of the sai" "e=ision, o! f!o the #apse of the one hun"!e" eight$ @/16A:
"a$ pe!io"> othe!?ise the "e=ision sha## <e=oe fina#, eBe=uto!$ an" "ean"a<#e.
"E%;#$sis s.;;2ie/&
T#e CTA Se6on/ Di-ision #e2/:
1o22o>in3 t#e ;erio/s ;ro-i/e/ =or in t#e $=ore%entione/ 2$>s, =ro% !.2@ 90, 9001, t#$t
is, t#e /$te o= ;etitionerHs =i2in3 o= ;rotest, it #$/ .nti2 Se;te%7er 18, 9001 to s.7%it
re2e-$nt /o6.%ents $n/ =ro% Se;te%7er 18, 9001, t#e Co%%issioner #$/ .nti2 )$r6# 1F,
9009 to iss.e #is /e6ision. As $/%itte/ 7@ ;etitioner, t#e ;rotest re%$ine/ .n$6te/ 7@ t#e
Co%%issioner o= Intern$2 Re-en.e. T#ere=ore, it #$/ .nti2 A;ri2 1C, 9009 >it#in >#i6# to
e2e-$te t#e 6$se to t#is 6o.rt. T#.s, >#en ;etitioner =i2e/ its Petition =or Re-ie> on A;ri2
30, 9009, t#e s$%e is o.tsi/e t#e t#irt@ "30& ;erio/.
9F

As ;ro-i/e/ in Se6tion 998, t#e =$i2.re o= $ t$<;$@er to $;;e$2 =ro% $n $ssess%ent on
ti%e ren/ere/ t#e $ssess%ent =in$2, e<e6.tor@ $n/ /e%$n/$72e. ConseG.ent2@, ;etitioner
is ;re62./e/ =ro% /is;.tin3 t#e 6orre6tness o= t#e $ssess%ent.
In /er 0 Compan!, &td. v. Court of Tax Appeals,
98
t#e Co.rt #e2/ t#$t >#i2e t#e ri3#t to
$;;e$2 $ /e6ision o= t#e Co%%issioner to t#e Co.rt o= T$< A;;e$2s is %ere2@ $ st$t.tor@
re%e/@, ne-ert#e2ess t#e reG.ire%ent t#$t it %.st 7e 7ro.3#t >it#in 30 /$@s is
D.ris/i6tion$2. I= $ st$t.tor@ re%e/@ ;ro-i/es $s $ 6on/ition ;re6e/ent t#$t t#e $6tion to
en=or6e it %.st 7e 6o%%en6e/ >it#in $ ;res6ri7e/ ti%e, s.6# reG.ire%ent is
D.ris/i6tion$2 $n/ =$i2.re to 6o%;2@ t#ere>it# %$@ 7e r$ise/ in $ %otion to /is%iss.
In =ine, t#e =$i2.re to 6o%;2@ >it# t#e 30,/$@ st$t.tor@ ;erio/ >o.2/ 7$r t#e $;;e$2 $n/
/e;ri-e t#e Co.rt o= T$< A;;e$2s o= its D.ris/i6tion to entert$in $n/ /eter%ine t#e
6orre6tness o= t#e $ssess%ent.
98

W4ERE1ORE, in -ie> o= t#e =ore3oin3, t#e De6ision o= t#e Co.rt o= T$< A;;e$2s En
%anc /$te/ !.ne F, 900: in C.T.A. E* No. :0 $==ir%in3 t#e Reso2.tions o= t#e Co.rt o=
T$< A;;e$2s Se6on/ Di-ision /$te/ )$@ 3, 9004 $n/ No-e%7er :, 9004 in C.T.A. C$se
No. C4F: /en@in3 ;etitionerHs Petition =or Re2ie= =ro% !./3%ent $n/ )otion =or
Re6onsi/er$tion, res;e6ti-e2@, is A11IR)ED.
..R. No. L:5C3/5 -a!=h /D, /301
CO--ISSIONER OF INTERNAL REVENUE, ;etitioner,
-s.
4OSE CONCE(CION, as An=i##a!$ A"inist!ato! of the Estate of -a!$ ,. -it=he#:
Ro<e!ts @"e=ease"A, an" 4AC8 F. -ITC,ELL:RO7ERTS, res;on/ents.
1ffice of t#e Solicitor 2eneral for petitioner.
&iedo, Andrada, Pere3 0 Associates for respondents.
FERNANDO, J.:
In t#is ;etition =or t#e re-ie> o= $ /e6ision o= t#e Co.rt o= T$< A;;e$2s, t#e /e6isi-e
G.estion, one o= =irst i%;ression, is >#et#er $ t$<;$@er >#o #$/ 2ost #is ri3#t to /is;.te
t#e -$2i/it@ o= $n $ssess%ent, t#e ;erio/ =or $;;e$2in3 to t#e Co.rt o= T$< A;;e$2s #$-in3
e<;ire/, $s =o.n/ 7@ s.6# Co.rt in $ ;re-io.s 6$se in $ /e6ision no> =in$2, $n/ >#o
t#ere$=ter ;$i/ .n/er ;rotest 6o.2/ t#en, re2@in3 on Se6tion 30C o= t#e N$tion$2 Intern$2
Re-en.e Co/e
1
s.e =or re6o-er@ on t#e 3ro.n/ o= its i22e3$2it@R T#e Co.rt o= T$<
A;;e$2s, in t#e /e6ision .n/er re-ie>, $ns>ere/ in t#e $==ir%$ti-e. We #o2/ ot#er>ise
$n/ $66or/in32@ re-erse.
In CTA C$se No. CC8, res;on/ent !ose Con6e;6ion, $s $n6i22$r@ $/%inistr$tor o= t#e
est$te o= )$r@ 4. )it6#e22,Ro7erts, $n/ res;on/ent !$6? 1. )it6#e22,Ro7erts, #.s7$n/ o=
t#e /e6e$se/ so.3#t $ re=.n/ o= t#e s.% o= P1,181.33 $n/ P9,C1C.10 re;resentin3 est$te
$n/ in#erit$n6e t$<es on :0 s#$res o= sto6? o= E/>$r/ !. Ne22 Co%;$n@ iss.e/ in t#e
n$%es o= 7ot# s;o.ses Q$s Doint ten$nts >it# =.22 ri3#ts o= s.r-i-ors#i; $n/ not $s ten$nts
in 6o%%on.Q T#e $7o-e $ssess%ent >$s %$/e 7@ ;etitioner Co%%issioner o= Intern$2
Re-en.e on t#e 3ro.n/ t#$t t#ere >$s $ tr$ns%ission to t#e #.s7$n/ o= one,#$2= s#$re
t#ereo= .;on t#e /e$t# o= t#e >i=e, t#e $7o-e s#$res 7ein3 6onD.3$2 ;ro;ert@.
Res;on/ents %$int$ine/ on t#e ot#er #$n/ t#$t t#ere >$s no tr$ns%ission o= ;ro;ert@
sin6e .n/er En32is# 2$>, o>ners#i; o= $22 ;ro;ert@ $6G.ire/ /.rin3 t#e %$rri$3e -ests in
t#e #.s7$n/. )oreo-er, t#e s#$res o= sto6? >ere iss.e/ to t#e s;o.ses Q$s Doint ten$nts
>it# =.22 ri3#ts o= s.r-i-ors#i; $n/ not $s ten$nts in 6o%%on.Q Not 7ein3 $3ree$72e to t#e
t#eor@ entert$ine/ 7@ ;etitioner Co%%issioner o= Intern$2 Re-en.e, res;on/ents, in $
;re-io.s 6$se, CTA C$se No. 1C8, $;;e$2e/ s.6# $ /e6ision .n/er Re;.72i6 A6t No.
119:. T#e Co.rt o= T$< A;;e$2s, #o>e-er, /is%isse/ s.6# $n $;;e$2 $s t#e ;etition =or
re-ie> 7e6$.se it >$s =i2e/ 7e@on/ t#e re32e%ent$r@ ;erio/ o= 30 /$@s. T#$t /e6ision
ren/ere/ on A;ri2 98, 18:F, 7e6$%e =in$2.
W#$t ne<t tr$ns;ire/ >$s set =ort# in t#e $;;e$2e/ /e6ision, CTA C$se No. CC8, t#.s:
QW#ere.;on, on !.ne 14, 18:F, ;etitioners ;$i/ t#e t$<es in G.estion $%o.ntin3 to
P1,181.33 "$s est$te t$<& $n/ P9,C1C.10 "$s in#erit$n6e t$<&, in62.si-e o= /e2inG.en6@
;en$2ties, $n/ $t t#e s$%e ti%e =i2e/ $ 62$i% =or t#e re=.n/ o= s$i/ $%o.nts "E<#. A, *IR
re6., ;;. 83,8F&. In t#e 62$i% =or re=.n/, ;etitioners $2so in-o?e/ t#e re6i;ro6it@ ;ro-ision
o= Se6tion 199 o= t#e Re-en.e Co/e "CTA re6., ;;. 89,83&. Wit#o.t >$itin3 =or t#e
/e6ision o= res;on/ent on t#e 62$i% =or re=.n/, ;etitionerSs instit.te/ t#e inst$nt $;;e$2 on
!.ne 11, 18:8 in or/er to $-oi/ t#e ;res6ri;ti-e ;erio/ o= t>o @e$rs ;ro-i/e/ =or in
Se6tion 30C o= t#e Re-en.e Co/e.Q
9
Petitioner Co%%issioner o= Intern$2 Re-en.e, 7e=ore t#e Co.rt o= T$< A;;e$2s, r$ise/ $s
one o= its /e=enses t#e =$6t t#$t res;on/ents >ere Qesto;;e/ =ro% /en@in3 t#e 2e3$2it@ $n/
6orre6tness o= t#e $ssess%ent =or est$te $n/ in#erit$n6e t$<es in -ie> o= t#e =$6t t#$t t#e@
;$i/ t#e s$%e in ;.rs.$n6e o= $ /e6ision o= t#e Co%%issioner >#i6# #$s 7e6o%e =in$2,
e<e6.tor@ $n/ /e%$n/$72e $s $ res.2t o= t#e /is%iss$2 o= CTA C$se No. 1C8, . . .Q
3
S.6# $
/e=ense >$s 6onsi/ere/ .n$-$i2in3 7@ t#e Co.rt o= T$< A;;e$2s 7@ -irt.e o= its /e6ision
in L$ P$N @ *.en i$De Ci3$r T Ci3$rette 1$6tor@ -. Co%%issioner o= Intern$2 Re-en.e.
4
It >$s t#e -ie> o= t#e Co.rt o= T$< A;;e$2s t#$t >it# no ;ro6e/.r$2 o7st$62e to st$n/ in
t#e >$@ $n/ >it# t#e s;o.ses, 7ot# non,resi/ent En32is# s.7De6ts, 7ein3 %$rrie/ in
En32$n/, t#eir ;ro;ert@ re2$tion t#.s 7ein3 3o-erne/ 7@ En32is# 2$>, t#e n$tion$2 2$> o=
t#e #.s7$n/, 7@ -irt.e o= >#i6# t#ere >$s no tr$ns%ission o= ;ro;ert@ =ro% >i=e to
#.s7$n/, 3o-erns, >it# t#e res.2t t#$t no t$< >$s /e%$n/$72e. Petitioner Co%%issioner
o= Intern$2 Re-en.e >$s or/ere/ to re=.n/ t#e in#erit$n6e $n/ est$te t$<es ;$i/ in t#e
$%o.nt o= P3,F8F.43. 4en6e t#is ;etition =or re-ie>.
T#e Co.rt o= T$< A;;e$2s in re2@in3 on its ;re-io.s /e6ision in t#e L$ P$N @ *.en i$De
Ci3$r T Ci3$rette 1$6tor@ $n/ r.2in3 $3$inst t#e /e=ense o= t#e =in$2it@ o= t#e $ssess%ent,
$=ter t#e /is%iss$2 o= t#e $;;e$2 in CTA No. 1C8 in -ie> o= t#e =$i2.re to #$-e it =i2e/
>it#in t#e re32e%ent$r@ ;erio/ o= t#irt@ "30& /$@s, %.st #$-e 7een o= t#e 7e2ie= t#$t t#is
Co.rt, in $==ir%in3 its /e6ision on )$r6# 30, 18C3, >it#o.t #o>e-er ;$ssin3 on t#e
$7o-e G.estion, /i/ 3i-e $n in/i6$tion o= its ;ro7$72e t#in?in3 on t#e %$tter. S.6# is not $
6orre6t $;;r$is$2 o= t#e sit.$tion #o>e-er, =or on )$r6# 30, 18C3, t#e -er@ s$%e /$@ its
L$ P$N @ *.en i$De /e6ision >$s $==ir%e/, t#e o;inion in epu*lic of t#e P#ilippines v.
&ope3
:
>$s #$n/e/ /o>n. T#is is $n $;;e$2 7@ t#e Re;.72i6 =ro% $n or/er o= t#e Co.rt o=
1irst Inst$n6e o= *$3.io /is%issin3 its 6o%;2$int =or 6o22e6tion o= $ /e=i6ien6@ in6o%e
t$< $3$inst /e=en/$nt Lo;eN on t#e 3ro.n/ t#$t t#e $6tion #$/ ;res6ri7e/. A=ter notin3
t#$t ;res6ri;tion $s $ /e=ense /i/ not 2ie, t#is Co.rt, in $n o;inion 7@ !.sti6e !.*.L. Re@es,
2i?e>ise st$te/: QAnot#er 3ro.n/ =or re-ersin3 t#e /is%iss$2 o= t#e 6o%;2$int is t#$t t#e
;ro;er re%e/@ o= t#e t$<;$@er $3$inst t#e $ssess%ent 6o%;2$ine/ o= >$s to $;;e$2 t#e
r.2in3 o= t#e Co22e6tor to t#e Co.rt o= T$< A;;e$2s. . . .Q T#e ;re6ise G.estion in t#is
2iti3$tion t#en, >#i2e .n/o.7te/2@ one o= no-e2t@, is not >it#o.t i22.%in$tion s.;;2ie/ 7@
r$/i$tions =ro% ;$st /e6isions.
1or s.7seG.ent2@, in epu*lic v. &im Tian Teng Sons 0 Co. Inc.,
C
t#e $7o-e /o6trine >$s
re$==ir%e/ 6$te3ori6$22@ in t#is 2$n3.$3e: QT$<;$@erSs =$i2.re to $;;e$2 to t#e Co.rt o= T$<
A;;e$2 in /.e ti%e %$/e t#e $ssess%ent in G.estion =in$2, e<e6.tor@ $n/ /e%$n/$72e.
An/ >#en t#e $6tion >$s instit.te/ on Se;te%7er 9, 18:8 to en=or6e t#e /e=i6ien6@
$ssess%ent in G.estion, it >$s $2re$/@ 7$rre/ =ro% /is;.tin3 t#e 6orre6tness t#e
$ssess%ent or in-o?in3 $n@ /e=ense t#$t >o.2/ reo;en t#e G.estion o= #is t$< 2i$7i2it@ on
t#e %erits. Ot#er>ise, t#e ;erio/ o= t#irt@ /$@s =or $;;e$2 to t#e Co.rt o= T$< A;;e$2s
>o.2/ %$?e 2itt2e sense.Q On6e, t#e %$tter #$s re$6#e/ t#e st$3e o= =in$2it@ in -ie> o= t#e
=$i2.re to $;;e$2, it 2o3i6$22@ =o22o>s, in t#e $;;ro;ri$te 2$n3.$3e o= !.sti6e )$?$2int$2, in
4orales v. Collector of Internal evenue,
F
t#$t it Q6o.2/ no 2on3er 7e reo;ene/ t#ro.3#
t#e e<;e/ient o= $n $;;e$2 =ro% t#e /eni$2 o= ;etitionerSs reG.est =or 6$n6e22$tion o= t#e
>$rr$nt o= /istr$int $n/ [email protected]
In t#e s$%e >$@ t#en t#$t t#e e<;e/ient o= $n $;;e$2 =ro% $ /eni$2 o= $ t$< reG.est =or
6$n6e22$tion o= >$rr$nt o= /istr$int $n/ 2e-@ 6$nnot 7e .ti2iNe/ =or t#e ;.r;ose o= testin3
t#e 2e3$2it@ o= $n $ssess%ent, >#i6# #$/ 7e6o%e 6on62.si-e $n/ 7in/in3 on t#e t$<;$@er,
t#ere 7ein3 no $;;e$2, t#e ;ro6e/.re set =ort# in Se6tion 30C o= t#e N$tion$2 Intern$2
Re-en.e Co/e is not $-$i2$72e to re-i-e t#e ri3#t to 6ontest t#e -$2i/it@ o= $n $ssess%ent
on6e t#e s$%e #$/ 7een irretrie-$72@ 2ost not on2@ 7@ t#e =$i2.re to $;;e$2 7.t 2i?e>ise 7@
t#e 2$;se o= t#e re32e%ent$r@ ;erio/ >it#in >#i6# to $;;e$2 6o.2/ #$-e 7een t$?en.
C2e$r2@ t#en, t#e 2i$7i2it@ o= res;on/ent Con6e;6ion $s $n $n6i22$r@ $/%inistr$tor o= t#e
est$te o= t#e /e6e$se/ >i=e $n/ o= res;on/ent )it6#e22,Ro7erts $s t#e #.s7$n/ =or t#e
$%o.nt o= P1,181.33 $s est$te t$< $n/ P9,C1C.10 $s in#erit$n6e t$< >$s 7e@on/ G.estion.
4$-in3 ;$i/ t#e s$%e, res;on/ents $re 62e$r2@ /e-oi/ o= $n@ 2e3$2 ri3#t to s.e =or
re6o-er@. T#e /e6ision o= t#e Co.rt o= T$< A;;e$2s or/erin3 ;etitioner Co%%issioner o=
Intern$2 Re-en.e to re=.n/ t#e $7o-e tot$2 s.% o= P3,F8F.43 6$nnot st$n/.
W4ERE1ORE, t#e /e6ision o= t#e res;on/ent Co.rt o= T$< A;;e$2 .n/er re-ie> is
re-erse/. Wit# 6osts $3$inst res;on/ents.56'p#75.-8t
e!es, J.%.&., 9i3on, 4a+alintal, %eng3on, J.P., ,aldivar, Sanc#e3, Castro and Angeles,
JJ., concur.
Concepcion, C.J., is on leave.
FIS,+EALT, CANNIN.
COR(ORATION,
(etitione!,
: &e!sus :
CO--ISSIONER OF INTERNAL
REVENUE,
Respon"ent.
..R. No. /E3C2C
Present:
P(NO, C.!., C#$ir;erson,
CARPIO )ORALES,
LEONARDO,DE CASTRO,
*ERSA)IN, $n/
ILLARA)A, !R., !!.
Pro%.23$te/:
!$n.$r@ 91, 9010
< , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , <
D E C I S I O N
CAR(IO -ORALES, 4.:
T#e Co%%issioner o= Intern$2 Re-en.e "res;on/ent&, 7@ Letter o= A.t#orit@ /$te/ )$@
1C, 9000,K1L or/ere/ t#e e<$%in$tion o= t#e intern$2 re-en.e t$<es =or t#e t$<$72e @e$r
1888 o= 1is#>e$2t# C$nnin3 Cor;. ";etitioner&. T#e in-esti3$tion /is62ose/ t#$t ;etitioner
>$s 2i$72e in t#e $%o.nt o= P9,38:,89C.88 re;resentin3 in6o%e t$<, -$2.e $//e/ t$<
"AT&, >it##o2/in3 t$< /e=i6ien6ies $n/ ot#er %is6e22$neo.s /e=i6ien6ies. Petitioner
e-ent.$22@ sett2e/ t#ese o72i3$tions on A.3.st 30, 9000.K9L
On A.3.st 9:, 9000, res;on/ent rein-esti3$te/ ;etitionerHs 7oo?s o= $66o.nts $n/ ot#er
re6or/s o= intern$2 re-en.e t$<es 6o-erin3 t#e s$%e ;erio/ =or t#e ;.r;ose o= >#i6# it
iss.e/ $ s.7;oen$ /.6es te6.% reG.irin3 ;etitioner to s.7%it its re6or/s $n/ 7oo?s o=
$66o.nts. Petitioner reG.este/ t#e 6$n6e22$tion o= t#e s.7;oen$ on t#e 3ro.n/ t#$t t#e
s$%e set o= /o6.%ents #$/ ;re-io.s2@ 7een e<$%ine/.
As ;etitioner /i/ not #ee/ t#e s.7;oen$, res;on/ent t#ere$=ter =i2e/ $ 6ri%in$2 6o%;2$int
$3$inst ;etitioner =or -io2$tion o= Se6tions : "6& $n/ 9CC o= t#e 188F Intern$2 Re-en.e
Co/e, >#i6# 6o%;2$int >$s /is%isse/ =or ins.==i6ien6@ o= e-i/en6e.K3L
Res;on/ent sent, on A.3.st C, 9003, ;etitioner $ 1in$2 Assess%ent Noti6e o= in=oe taB
$n/ VAT "efi=ien=ies tot$2in3 PCF,:8F,33C.F: =or t#e t$<$72e @e$r 1888,K4L >#i6#
$ssess%ent ;etitioner 6onteste/ 7@ 2etter o= Se;te%7er 93, 9003.K:L
Res;on/ent t#ere$=ter iss.e/ $ 1in$2 De6ision on Dis;.te/ Assess%ent /$te/ A.3.st 9,
900:, >#i6# ;etitioner re6ei-e/ on A.3.st 4, 900:, /en@in3 its 2etter o= ;rotest, $;;risin3
it o= its in=oe taB $n/ VAT #ia<i#ities in t#e $%o.nts o= AP1:,38C,80:.94 $n/
PC3,C88,434.40 Ksi6L, res;e6ti-e2@, =or t#e t$<$72e @e$r 1888,BKCL $n/ reG.estin3 t#e
i%%e/i$te ;$@%ent t#ereo=, Ain62.si-e o= ;en$2ties in6i/ent to /[email protected] Res;on/ent
$//e/ t#$t i= ;etitioner /is$3ree/, it %$@ $;;e$2 to t#e Co.rt o= T$< A;;e$2s "CTA&
A>it#in t#irt@ "30& /$@s =ro% /$te o= re6ei;t #ereo=, ot#er>ise o.r s$i/ /e=i6ien6@ in6o%e
$n/ -$2.e,$//e/ t$<es $ssess%ents s#$22 7e6o%e =in$2, e<e6.tor@, $n/ /e%$n/$72e.BKFL
Inste$/ o= $;;e$2in3 to t#e CTA, ;etitioner =i2e/, on Se;te%7er 1, 900:, $ Letter o=
Re6onsi/er$tion /$te/ A.3.st 31, 900:.K8L
*@ $ Pre2i%in$r@ Co22e6tion Letter /$te/ Se;te%7er C, 900:, res;on/ent /e%$n/e/
;$@%ent o= ;etitionerHs t$< 2i$7i2ities,K8L /r$>in3 ;etitioner to =i2e on O6to7er 90, 900: $
Petition =or Re-ie>K10L 7e=ore t#e CTA.
In #is Ans>er,K11L res;on/ent $r3.e/, $%on3 ot#er t#in3s, t#$t t#e ;etition >$s =i2e/ o.t
o= ti%e >#i6# $r3.%ent t#e 1irst Di-ision o= t#e CTA .;#e2/ $n/ $66or/in32@ /is%isse/
t#e ;etition.K19L
Petitioner =i2e/ $ )otion =or Re6onsi/er$tion K13L >#i6# >$s /enie/.K14L T#e Reso2.tion
/en@in3 its %otion =or re6onsi/er$tion >$s re6ei-e/ 7@ ;etitioner on O6to7er 31, 900C.
K1:L
On No-e%7er 91, 900C, ;etitioner =i2e/ $ ;etition =or re-ie> 7e=ore t#e CTA En *$n6K1CL
>#i6#, 7@ De6isionK1FL o= !.2@ :, 900F, #e2/ t#$t t#e ;etition 7e=ore t#e 1irst Di-ision, $s
>e22 $s t#$t 7e=ore it, >$s =i2e/ o.t o= ti%e.
4en6e, t#e ;resent ;etition,K18L ;etitioner $r3.in3 t#$t t#e CTA En *$n6 erre/ in #o2/in3
t#$t t#e ;etition it =i2e/ 7e=ore t#e CTA 1irst Di-ision $s >e22 $s t#$t =i2e/ 7e=ore it "CTA
En *$n6& >$s =i2e/ o.t o= ti%e.
T#e ;etition is 7ere=t o= %erit.
Se6tion 998 o= t#e 188F T$< Co/e ;ro-i/es t#$t $n $ssess%ent
< < < %$@ 7e ;roteste/ $/%inistr$ti-e2@ 7@ =i2in3 $ reG.est =or re6onsi/er$tion or
rein-esti3$tion >it#in t#irt@ "30& /$@s =ro% re6ei;t o= t#e $ssess%ent in s.6# =or% $n/
%$nner $s %$@ 7e ;res6ri7e/ 7@ i%;2e%entin3 r.2es $n/ re3.2$tions. Wit#in si<t@ "C0&
/$@s =ro% =i2in3 o= t#e ;rotest, $22 re2e-$nt s.;;ortin3 /o6.%ents s#$22 #$-e 7een
s.7%itte/M ot#er>ise, t#e $ssess%ent s#$22 7e6o%e =in$2.
I= t#e ;rotest is /enie/ in >#o2e or in ;$rt, or is not $6te/ .;on >it#in one #.n/re/ ei3#t@
"180& /$@s =ro% s.7%ission o= /o6.%ents, t#e t$<;$@er $/-erse2@ $==e6te/ 7@ t#e
/e6ision or in$6tion %$@ $;;e$2 to t#e Co.rt o= T$< A;;e$2s >it#in t#irt@ "30& /$@s =ro%
re6ei;t o= t#e s$i/ /e6ision, or =ro% t#e 2$;se o= t#e one #.n/re/ ei3#t@ "180&,/$@ ;erio/M
ot#er>ise, t#e /e6ision s#$22 7e6o%e =in$2, e<e6.tor@ $n/ /e%$n/$72e. ".n/ers6orin3
s.;;2ie/&
In t#e 6$se $t 7$r, ;etitionerHs $/%inistr$ti-e ;rotest >$s /enie/ 7@ 1in$2 De6ision on
Dis;.te/ Assess%ent /$te/ A.3.st 9, 900: iss.e/ 7@ res;on/ent $n/ >#i6# ;etitioner
re6ei-e/ on A.3.st 4, 900:. (n/er t#e $7o-e,G.ote/ Se6tion 998 o= t#e 188F T$< Co/e,
;etitioner #$/ 30 /$@s to $;;e$2 res;on/entHs /eni$2 o= its ;rotest to t#e CTA.
Sin6e ;etitioner re6ei-e/ t#e /eni$2 o= its $/%inistr$ti-e ;rotest on A.3.st 4, 900:, it #$/
.nti2 Se;te%7er 3, 900: to =i2e $ ;etition =or re-ie> 7e=ore t#e CTA Di-ision. It =i2e/ one,
#o>e-er, on O6to7er 90, 900:, #en6e, it >$s =i2e/ o.t o= ti%e. 1or $ %otion =or
re6onsi/er$tion o= t#e /eni$2 o= t#e $/%inistr$ti-e ;rotest /oes not to22 t#e 30,/$@ ;erio/
to $;;e$2 to t#e CTA.
On ;etitionerHs =in$2 6ontention t#$t it #$s $ %eritorio.s 6$se in -ie> o= t#e /is%iss$2 o=
t#e $7o-e,%entione/ 6ri%in$2 6$se =i2e/ $3$inst it =or -io2$tion o= t#e 188F Intern$2
Re-en.e Co/e,K18L t#e s$%e =$i2s. 1or t#e 6ri%in$2 6o%;2$int >$s instit.te/ not to
/e%$n/ ;$@%ent, 7.t to ;en$2iNe t#e t$<;$@er =or -io2$tion o= t#e T$< Co/e.K90L
W4ERE1ORE, t#e ;etition is DIS)ISSED.
Costs $3$inst ;etitioner.
SO ORDERED.
ALLIED *ANKING G.R. No. 1F:08F
CORPORATION,
Petitioner,
Present:
CARPIO, J., C#airperson,
, -ers.s , *RION,
DEL CASTILLO,
A*AD, and
PERE0, JJ.
CO))ISSIONER O1
INTERNAL REEN(E, Pro%.23$te/:
espondent. 1e7r.$r@ :, 9010
< , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , <
D E C I S I O N
DEL CASTILLO, !.:
T#e ?e@ to e==e6ti-e 6o%%.ni6$tion is 62$rit@.
T#e Co%%issioner o= Intern$2 Re-en.e "CIR& $s >e22 $s #is /.2@ $.t#oriNe/
re;resent$ti-e %.st in/i6$te 62e$r2@ $n/ .neG.i-o6$22@ to t#e t$<;$@er >#et#er $n $6tion
6onstit.tes $ =in$2 /eter%in$tion on $ /is;.te/ $ssess%ent.K1L Wor/s %.st 7e 6$re=.22@
6#osen in or/er to $-oi/ $n@ 6on=.sion t#$t 6o.2/ $/-erse2@ $==e6t t#e ri3#ts $n/ interest
o= t#e t$<;$@er.
Ass$i2e/ in t#is Petition =or Re-ie> on CertiorariK9L .n/er Se6tion 19 o= Re;.72i6 A6t
"RA& No. 8989,K3L in re2$tion to R.2e 4: o= t#e R.2es o= Co.rt, $re t#e A.3.st 93, 900C
De6isionK4L o= t#e Co.rt o= T$< A;;e$2s "CTA& $n/ its O6to7er 1F, 900C Reso2.tionK:L
/en@in3 ;etitionerHs )otion =or Re6onsi/er$tion.
Factual Antecedents
On A;ri2 30, 9004, t#e *.re$. o= Intern$2 Re-en.e "*IR& iss.e/ $ Pre2i%in$r@
Assess%ent Noti6e "PAN& to ;etitioner A22ie/ *$n?in3 Cor;or$tion =or /e=i6ien6@
Do6.%ent$r@ St$%; T$< "DST& in t#e $%o.nt o= P19,0:0,:8:.C0 $n/ Gross Re6ei;ts T$<
"GRT& in t#e $%o.nt o= P38,88:,98C.FC on in/.str@ iss.e =or t#e t$<$72e @e$r 9001.KCL
Petitioner re6ei-e/ t#e PAN on )$@ 18, 9004 $n/ =i2e/ $ ;rotest $3$inst it on )$@ 9F,
9004.KFL
On !.2@ 1C, 9004, t#e *IR >rote $ 1or%$2 Letter o= De%$n/ >it# Assess%ent Noti6es to
;etitioner, >#i6# ;$rt2@ re$/s $s =o22o>s:K8L
It is reG.este/ t#$t t#e $7o-e /e=i6ien6@ t$< 7e ;$i/ i%%e/i$te2@ .;on re6ei;t #ereo=,
in62.si-e o= ;en$2ties in6i/ent to /e2inG.en6@. T#is is o.r =in$2 /e6ision 7$se/ on
in-esti3$tion. I= @o. /is$3ree, @o. %$@ $;;e$2 t#e =in$2 /e6ision >it#in t#irt@ "30& /$@s
=ro% re6ei;t #ereo=, ot#er>ise s$i/ /e=i6ien6@ t$< $ssess%ent s#$22 7e6o%e =in$2,
e<e6.tor@ $n/ /e%$n/$72e.
Petitioner re6ei-e/ t#e 1or%$2 Letter o= De%$n/ >it# Assess%ent Noti6es on A.3.st 30,
9004.K8L
Proceedings before the CTA First Division
On Se;te%7er 98, 9004, ;etitioner =i2e/ $ Petition =or Re-ie>K10L >it# t#e CTA >#i6#
>$s r$==2e/ to its 1irst Di-ision $n/ /o6?ete/ $s CTA C$se No. F0C9.K11L
On De6e%7er F, 9004, res;on/ent CIR =i2e/ #is Ans>er.K19L On !.2@ 98, 900:, #e =i2e/ $
)otion to Dis%issK13L on t#e 3ro.n/ t#$t ;etitioner =$i2e/ to =i2e $n $/%inistr$ti-e
;rotest on t#e 1or%$2 Letter o= De%$n/ >it# Assess%ent Noti6es. Petitioner o;;ose/ t#e
)otion to Dis%iss on A.3.st 18, 900:.K14L
On O6to7er 19, 900:, t#e 1irst Di-ision o= t#e CTA ren/ere/ $ Reso2.tionK1:L 3r$ntin3
res;on/entHs )otion to Dis%iss. It r.2e/:
C2e$r2@, it is neit#er t#e $ssess%ent nor t#e =or%$2 /e%$n/ 2etter itse2= t#$t is $;;e$2$72e
to t#is Co.rt. It is t#e /e6ision o= t#e Co%%issioner o= Intern$2 Re-en.e on t#e /is;.te/
$ssess%ent t#$t 6$n 7e $;;e$2e/ to t#is Co.rt "Commissioner of Internal evenue vs.
:illa, 99 SCRA 3&. As 6orre6t2@ ;ointe/ o.t 7@ res;on/ent, $ /is;.te/ $ssess%ent is one
>#erein t#e t$<;$@er or #is /.2@ $.t#oriNe/ re;resent$ti-e =i2e/ $n $/%inistr$ti-e ;rotest
$3$inst t#e =or%$2 2etter o= /e%$n/ $n/ $ssess%ent noti6e >it#in t#irt@ "30& /$@s =ro%
/$te Ko=L re6ei;t t#ereo=. In t#is 6$se, ;etitioner =$i2e/ to =i2e $n $/%inistr$ti-e ;rotest on
t#e =or%$2 2etter o= /e%$n/ >it# t#e 6orres;on/in3 $ssess%ent noti6es. 4en6e, t#e
$ssess%ents /i/ not 7e6o%e /is;.te/ $ssess%ents $s s.7De6t to t#e Co.rtHs re-ie> .n/er
Re;.72i6 A6t No. 8989. "See $2so epu*lic v. &iam Tian Teng Sons 0 Co., Inc., 1C SCRA
:84.&
W4ERE1ORE, t#e )otion to Dis%iss is GRANTED. T#e Petition =or Re-ie> is #ere7@
DIS)ISSED =or 2$6? o= D.ris/i6tion.
SO ORDERED.K1CL
A33rie-e/, ;etitioner %o-e/ =or re6onsi/er$tion 7.t t#e %otion >$s /enie/ 7@ t#e 1irst
Di-ision in its Reso2.tion /$te/ 1e7r.$r@ 1, 900C.K1FL
Proceedings before the CTA n !anc
On 1e7r.$r@ 99, 900C, ;etitioner $;;e$2e/ t#e /is%iss$2 to t#e CTA En *$n6.K18L T#e
6$se >$s /o6?ete/ $s CTA E* No. 1CF.
1in/in3 no re-ersi72e error in t#e Reso2.tions /$te/ O6to7er 19, 900: $n/ 1e7r.$r@ 1,
900C o= t#e CTA 1irst Di-ision, t#e CTA En %anc /enie/ t#e Petition =or Re-ie>K18L$s
>e22 $s ;etitionerHs )otion =or Re6onsi/er$tion.K90L
T#e CTA En %anc /e62$re/ t#$t it is $7so2.te2@ ne6ess$r@ =or t#e t$<;$@er to =i2e $n
$/%inistr$ti-e ;rotest in or/er =or t#e CTA to $6G.ire D.ris/i6tion. It e%;#$siNe/ t#$t $n
$/%inistr$ti-e ;rotest is $n inte3r$2 ;$rt o= t#e re%e/ies 3i-en to $ t$<;$@er in
6#$22en3in3 t#e 2e3$2it@ or -$2i/it@ o= $n $ssess%ent. A66or/in3 to t#e CTA En %anc,
$2t#o.3# t#ere $re e<6e;tions to t#e /o6trine o= e<#$.stion o= $/%inistr$ti-e re%e/ies,
t#e inst$nt 6$se /oes not =$22 in $n@ o= t#e e<6e;tions.
Issue
4en6e, t#e ;resent re6o.rse, >#ere ;etitioner r$ises t#e 2one iss.e o= >#et#er t#e 1or%$2
Letter o= De%$n/ /$te/ !.2@ 1C, 9004 6$n 7e 6onstr.e/ $s $ =in$2 /e6ision o= t#e CIR
$;;e$2$72e to t#e CTA .n/er RA 8989.
O.r R.2in3
T#e ;etition is %eritorio.s.
Section ; of A <=>= expressl! provides t#at t#e CTA exercises exclusive appellate
?urisdiction to revie' *! appeal decisions of t#e CI in cases involving disputed
assessments
T#e CTA, 7ein3 $ 6o.rt o= s;e6i$2 D.ris/i6tion, 6$n t$?e 6o3niN$n6e on2@ o=
%$tters t#$t $re 62e$r2@ >it#in its D.ris/i6tion.K91L Se6tion F o= RA 8989 ;ro-i/es:
Se6. F. !.ris/i6tion. I T#e CTA s#$22 e<er6ise:
"$& E<62.si-e $;;e22$te D.ris/i6tion to re-ie> 7@ $;;e$2, $s #erein ;ro-i/e/:
"1& De6isions o= t#e Co%%issioner o= Intern$2 Re-en.e in 6$ses in-o2-in3 /is;.te/
$ssess%ents, re=.n/s o= intern$2 re-en.e t$<es, =ees or ot#er 6#$r3es, ;en$2ties in re2$tion
t#ereto, or ot#er %$tters $risin3 .n/er t#e N$tion$2 Intern$2 Re-en.e Co/e or ot#er 2$>s
$/%inistere/ 7@ t#e *.re$. o= Intern$2 Re-en.eM
"9& In$6tion 7@ t#e Co%%issioner o= Intern$2 Re-en.e in 6$ses in-o2-in3 /is;.te/
$ssess%ents, re=.n/s o= intern$2 re-en.e t$<es, =ees or ot#er 6#$r3es, ;en$2ties in re2$tion
t#ereto, or ot#er %$tters $risin3 .n/er t#e N$tion$2 Intern$2 Re-en.e Co/e or ot#er 2$>s
$/%inistere/ 7@ t#e *.re$. o= Intern$2 Re-en.e, >#ere t#e N$tion$2 Intern$2 Re-en.e
Co/e ;ro-i/es $ s;e6i=i6 ;erio/ o= $6tion, in >#i6# 6$se t#e in$6tion s#$22 7e /ee%e/ $
/eni$2M "E%;#$sis s.;;2ie/&
< < < <
T#e >or/ A/e6isionsB in t#e $7o-e G.ote/ ;ro-ision o= RA 8989 #$s 7een inter;rete/ to
%e$n t#e /e6isions o= t#e CIR on t#e ;rotest o= t#e t$<;$@er $3$inst t#e $ssess%ents.K99L
Coro22$r@ t#ereto, Se6tion 998 o= t#e N$tion$2 Intern$2 Re-en.e Co/e "NIRC& ;ro-i/es
=or t#e ;ro6e/.re =or ;rotestin3 $n $ssess%ent. It st$tes:
SECTION 998. Protesting of Assessment. O W#en t#e Co%%issioner or #is /.2@
$.t#oriNe/ re;resent$ti-e =in/s t#$t ;ro;er t$<es s#o.2/ 7e $ssesse/, #e s#$22 =irst noti=@
t#e t$<;$@er o= #is =in/in3s: Pro-i/e/, #o>e-er, T#$t $ ;re$ssess%ent noti6e s#$22 not 7e
reG.ire/ in t#e =o22o>in3 6$ses:
"$& W#en t#e =in/in3 =or $n@ /e=i6ien6@ t$< is t#e res.2t o= %$t#e%$ti6$2 error in t#e
6o%;.t$tion o= t#e t$< $s $;;e$rin3 on t#e =$6e o= t#e ret.rnM or
"7& W#en $ /is6re;$n6@ #$s 7een /eter%ine/ 7et>een t#e t$< >it##e2/ $n/ t#e $%o.nt
$6t.$22@ re%itte/ 7@ t#e >it##o2/in3 $3entM or
"6& W#en $ t$<;$@er >#o o;te/ to 62$i% $ re=.n/ or t$< 6re/it o= e<6ess 6re/it$72e
>it##o2/in3 t$< =or $ t$<$72e ;erio/ >$s /eter%ine/ to #$-e 6$rrie/ o-er $n/
$.to%$ti6$22@ $;;2ie/ t#e s$%e $%o.nt 62$i%e/ $3$inst t#e esti%$te/ t$< 2i$7i2ities =or
t#e t$<$72e G.$rter or G.$rters o= t#e s.66ee/in3 t$<$72e @e$rM or
"/& W#en t#e e<6ise t$< /.e on e<6is$72e $rti62es #$s not 7een ;$i/M or
"e& W#en $n $rti62e 2o6$22@ ;.r6#$se/ or i%;orte/ 7@ $n e<e%;t ;erson, s.6# $s, 7.t not
2i%ite/ to, -e#i62es, 6$;it$2 eG.i;%ent, %$6#ineries $n/ s;$re ;$rts, #$s 7een so2/, tr$/e/
or tr$ns=erre/ to non,e<e%;t ;ersons.
T#e t$<;$@ers s#$22 7e in=or%e/ in >ritin3 o= t#e 2$> $n/ t#e =$6ts on >#i6# t#e
$ssess%ent is %$/eM ot#er>ise, t#e $ssess%ent s#$22 7e -oi/.
Wit#in $ ;erio/ to 7e ;res6ri7e/ 7@ i%;2e%entin3 r.2es $n/ re3.2$tions, t#e t$<;$@er
s#$22 7e reG.ire/ to res;on/ to s$i/ noti6e. I= t#e t$<;$@er =$i2s to res;on/, t#e
Co%%issioner or #is /.2@ $.t#oriNe/ re;resent$ti-e s#$22 iss.e $n $ssess%ent 7$se/ on
#is =in/in3s.
S.6# $ssess%ent %$@ 7e ;roteste/ $/%inistr$ti-e2@ 7@ =i2in3 $ reG.est =or re6onsi/er$tion
or rein-esti3$tion >it#in t#irt@ "30& /$@s =ro% re6ei;t o= t#e $ssess%ent in s.6# =or% $n/
%$nner $s %$@ 7e ;res6ri7e/ 7@ i%;2e%entin3 r.2es $n/ re3.2$tions. Wit#in si<t@ "C0&
/$@s =ro% =i2in3 o= t#e ;rotest, $22 re2e-$nt s.;;ortin3 /o6.%ents s#$22 #$-e 7een
s.7%itte/M ot#er>ise, t#e $ssess%ent s#$22 7e6o%e =in$2.
I= t#e ;rotest is /enie/ in >#o2e or in ;$rt, or is not $6te/ .;on >it#in one #.n/re/ ei3#t@
"180& /$@s =ro% s.7%ission o= /o6.%ents, t#e t$<;$@er $/-erse2@ $==e6te/ 7@ t#e
/e6ision or in$6tion %$@ $;;e$2 to t#e Co.rt o= T$< A;;e$2s >it#in t#irt@ "30& /$@s =ro%
re6ei;t o= t#e s$i/ /e6ision, or =ro% t#e 2$;se o= t#e one #.n/re/ ei3#t@ "180&,/$@ ;erio/M
ot#er>ise, t#e /e6ision s#$22 7e6o%e =in$2, e<e6.tor@ $n/ /e%$n/$72e.
In t#e inst$nt 6$se, ;etitioner ti%e2@ =i2e/ $ ;rotest $=ter re6ei-in3 t#e PAN. In res;onse
t#ereto, t#e *IR iss.e/ $ 1or%$2 Letter o= De%$n/ >it# Assess%ent Noti6es. P.rs.$nt to
Se6tion 998 o= t#e NIRC, t#e ;ro;er re6o.rse o= ;etitioner >$s to /is;.te t#e $ssess%ents
7@ =i2in3 $n $/%inistr$ti-e ;rotest >it#in 30 /$@s =ro% re6ei;t t#ereo=. Petitioner,
#o>e-er, /i/ not ;rotest t#e =in$2 $ssess%ent noti6es. Inste$/, it =i2e/ $ Petition =or
Re-ie> >it# t#e CTA. T#.s, i= >e stri6t2@ $;;2@ t#e r.2es, t#e /is%iss$2 o= t#e Petition =or
Re-ie> 7@ t#e CTA >$s ;ro;er.
T#e case is an exception to t#e
rule on ex#austion of administrative remedies
4o>e-er, $ 6$re=.2 re$/in3 o= t#e 1or%$2 Letter o= De%$n/ >it# Assess%ent Noti6es
2e$/s .s to $3ree >it# ;etitioner t#$t t#e inst$nt 6$se is $n e<6e;tion to t#e r.2e on
e<#$.stion o= $/%inistr$ti-e re%e/ies, i.e., esto;;e2 on t#e ;$rt o= t#e $/%inistr$ti-e
$3en6@ 6on6erne/.
In t#e 6$se o= /$. De T$n -. eter$ns *$6?;$@ Co%%ission,K93L t#e res;on/ent
6onten/e/ t#$t 7e=ore =i2in3 $ ;etition >it# t#e 6o.rt, ;etitioner s#o.2/ #$-e =irst
e<#$.ste/ $22 $/%inistr$ti-e re%e/ies 7@ $;;e$2in3 to t#e O==i6e o= t#e Presi/ent.
4o>e-er, >e r.2e/ t#$t res;on/ent >$s esto;;e/ =ro% in-o?in3 t#e r.2e on e<#$.stion o=
$/%inistr$ti-e re%e/ies 6onsi/erin3 t#$t in its Reso2.tion, it s$i/, AT#e o;inions
;ro%.23$te/ 7@ t#e Se6ret$r@ o= !.sti6e $re $/-isor@ in n$t.re, >#i6# %$@ eit#er 7e
$66e;te/ or i3nore/ 7@ t#e o==i6e see?in3 t#e o;inion, $n/ $n@ $33rie-e/ ;$rt@ #$s t#e
6o.rt =or re6o.rseB. T#e st$te%ent o= t#e res;on/ent in s$i/ 6$se 2e/ t#e ;etitioner to
6on62./e t#$t on2@ $ =in$2 D./i6i$2 r.2in3 in #er =$-or >o.2/ 7e $66e;te/ 7@ t#e
Co%%ission.
Si%i2$r2@, in t#is 6$se, >e =in/ t#e CIR esto;;e/ =ro% 62$i%in3 t#$t t#e =i2in3 o= t#e
Petition =or Re-ie> >$s ;re%$t.re 7e6$.se ;etitioner =$i2e/ to e<#$.st $22 $/%inistr$ti-e
re%e/ies.
T#e 1or%$2 Letter o= De%$n/ >it# Assess%ent Noti6es re$/s:
*$se/ on @o.r 2etter,;rotest /$te/ )$@ 9C, 9004, @o. $22e3e/ t#e =o22o>in3:
1. T#$t t#e s$i/ $ssess%ent #$s $2re$/@ ;res6ri7e/ in $66or/$n6e >it# t#e ;ro-isions o=
Se6tion 903 o= t#e T$< Co/e.
9. T#$t sin6e t#e e<e%;tion o= 1CD(s =ro% $22 t$<es =o.n/ in t#e O2/ T$< Co/e #$s 7een
/e2ete/, t#e >or/in3 o= Se6tion 98"A&"F&"7& /is62oses t#$t t#ere $re no ot#er t$<es
i%;os$72e .;on 1CD(s $si/e =ro% t#e 10U 1in$2 In6o%e T$<.
Contr$r@ to @o.r $22e3$tion, t#e $ssess%ents 6o-erin3 GRT $n/ DST =or t$<$72e @e$r
9001 #$s not ;res6ri7e/ =or Ksi6L si%;2@ 7e6$.se no ret.rns >ere =i2e/, t#.s, t#e t#ree
@e$r ;res6ri;ti-e ;erio/ #$s not 2$;se/.
Wit# t#e i%;2e%ent$tion o= t#e CTRP, t#e ;#r$se Ae<e%;t =ro% $22 t$<esB >$s /e2ete/.
P2e$se re=er to Se6tion 9F"D&"3& $n/ 98"A&"F& o= t#e ne> T$< Co/e. A66or/in32@, @o.
>ere $ssesse/ =or /e=i6ien6@ 3ross re6ei;ts t$< on ons#ore in6o%e =ro% =orei3n 6.rren6@
tr$ns$6tions in $66or/$n6e >it# t#e r$tes ;ro-i/e/ .n/er Se6tion 191 o= t#e s$i/ T$<
Co/e. Li?e>ise, /e=i6ien6@ /o6.%ent$r@ st$%; t$<es >$s Ksi6L $2so $ssesse/ on Lo$n
A3ree%ents, *i22s P.r6#$se/, Certi=i6$te o= De;osits $n/ re2$te/ tr$ns$6tions ;.rs.$nt to
Se6tions 180 $n/ 181 o= NIRC, $s $%en/e/.
T#e 9:U s.r6#$r3e $n/ 90U interest #$-e 7een i%;ose/ ;.rs.$nt to t#e ;ro-ision o=
Se6tion 948"A& $n/ 948"7&, res;e6ti-e2@, o= t#e N$tion$2 Intern$2 Re-en.e Co/e, $s
$%en/e/.
It is reG.este/ t#$t t#e $7o-e /e=i6ien6@ t$< 7e ;$i/ i%%e/i$te2@ .;on re6ei;t #ereo=,
in62.si-e o= ;en$2ties in6i/ent to /e2inG.en6@. T#is is o.r =in$2 /e6ision 7$se/ on
in-esti3$tion. I= @o. /is$3ree, @o. %$@ $;;e$2 t#is =in$2 /e6ision >it#in t#irt@ "30& /$@s
=ro% re6ei;t #ereo=, ot#er>ise s$i/ /e=i6ien6@ t$< $ssess%ent s#$22 7e6o%e =in$2,
e<e6.tor@ $n/ /e%$n/$72e.K94L "E%;#$sis s.;;2ie/&
It $;;e$rs =ro% t#e =ore3oin3 /e%$n/ 2etter t#$t t#e CIR #$s $2re$/@ %$/e $ =in$2
/e6ision on t#e %$tter $n/ t#$t t#e re%e/@ o= ;etitioner is to $;;e$2 t#e =in$2 /e6ision
>it#in 30 /$@s.
In O6e$ni6 Wire2ess Net>or?, In6. -. Co%%issioner o= Intern$2 Re-en.e,K9:L >e
6onsi/ere/ t#e 2$n3.$3e .se/ $n/ t#e tenor o= t#e 2etter sent to t#e t$<;$@er $s t#e =in$2
/e6ision o= t#e CIR.
In t#is 6$se, re6or/s s#o> t#$t ;etitioner /is;.te/ t#e PAN 7.t not t#e 1or%$2 Letter o=
De%$n/ >it# Assess%ent Noti6es. Ne-ert#e2ess, >e 6$nnot 72$%e ;etitioner =or not
=i2in3 $ ;rotest $3$inst t#e 1or%$2 Letter o= De%$n/ >it# Assess%ent Noti6es sin6e t#e
2$n3.$3e .se/ $n/ t#e tenor o= t#e /e%$n/ 2etter in/i6$te t#$t it is t#e =in$2 /e6ision o=
t#e res;on/ent on t#e %$tter. We #$-e ti%e $n/ $3$in re%in/e/ t#e CIR to in/i6$te, in $
62e$r $n/ .neG.i-o6$2 2$n3.$3e, >#et#er #is $6tion on $ /is;.te/ $ssess%ent 6onstit.tes
#is =in$2 /eter%in$tion t#ereon in or/er =or t#e t$<;$@er 6on6erne/ to /eter%ine >#en #is
or #er ri3#t to $;;e$2 to t#e t$< 6o.rt $66r.es.K9CL ie>e/ in t#e 2i3#t o= t#e =ore3oin3,
res;on/ent is no> esto;;e/ =ro% 62$i%in3 t#$t #e /i/ not inten/ t#e 1or%$2 Letter o=
De%$n/ >it# Assess%ent Noti6es to 7e $ =in$2 /e6ision.
)oreo-er, >e 6$nnot i3nore t#e =$6t t#$t in t#e 1or%$2 Letter o= De%$n/ >it#
Assess%ent Noti6es, res;on/ent .se/ t#e >or/ A$;;e$2B inste$/ o= A;rotestB,
Arein-esti3$tionB, or Are6onsi/er$tionB. A2t#o.3# t#ere >$s no /ire6t re=eren6e =or
;etitioner to 7rin3 t#e %$tter /ire6t2@ to t#e CTA, it 6$nnot 7e /enie/ t#$t t#e >or/
A$;;e$2B .n/er ;re-$i2in3 t$< 2$>s re=ers to t#e =i2in3 o= $ Petition =or Re-ie> >it# t#e
CTA. As $;t2@ ;ointe/ o.t 7@ ;etitioner, .n/er Se6tion 998 o= t#e NIRC, t#e ter%s
A;rotestB, Arein-esti3$tionB $n/ Are6onsi/er$tionB re=er to t#e $/%inistr$ti-e re%e/ies $
t$<;$@er %$@ t$?e 7e=ore t#e CIR, >#i2e t#e ter% A$;;e$2B re=ers to t#e re%e/@ $-$i2$72e
to t#e t$<;$@er 7e=ore t#e CTA. Se6tion 8 o= RA 8989, $%en/in3 Se6tion 11 o= RA 119:,
K9FL 2i?e>ise .ses t#e ter% A$;;e$2B >#en re=errin3 to t#e $6tion $ t$<;$@er %.st t$?e
>#en $/-erse2@ $==e6te/ 7@ $ /e6ision, r.2in3, or in$6tion o= t#e CIR. As >e see it t#en,
;etitioner in $;;e$2in3 t#e 1or%$2 Letter o= De%$n/ >it# Assess%ent Noti6es to t#e CTA
%ere2@ too? t#e 6.e =ro% res;on/ent. *esi/es, $n@ /o.7t in t#e inter;ret$tion or .se o=
t#e >or/ A$;;e$2B in t#e 1or%$2 Letter o= De%$n/ >it# Assess%ent Noti6es s#o.2/ 7e
reso2-e/ in =$-or o= ;etitioner, $n/ not t#e res;on/ent >#o 6$.se/ t#e 6on=.sion.
To 7e 62e$r, >e $re not /isre3$r/in3 t#e r.2es o= ;ro6e/.re .n/er Se6tion 998 o= t#e
NIRC, $s i%;2e%ente/ 7@ Se6tion 3 o= *IR Re-en.e Re3.2$tions No. 19,88.K98L It is t#e
1or%$2 Letter o= De%$n/ $n/ Assess%ent Noti6e t#$t %.st 7e $/%inistr$ti-e2@ ;roteste/
or /is;.te/ >it#in 30 /$@s, $n/ not t#e PAN. Neit#er $re >e /e-i$tin3 =ro% o.r
;rono.n6e%ent in St. Ste;#enHs C#inese Gir2Hs S6#oo2 -. Co22e6tor o= Intern$2 Re-en.e,
K98L t#$t t#e 6o.ntin3 o= t#e 30 /$@s >it#in >#i6# to instit.te $n $;;e$2 in t#e CTA
6o%%en6es =ro% t#e /$te o= re6ei;t o= t#e /e6ision o= t#e CIR on t#e /is;.te/
$ssess%ent, not =ro% t#e /$te t#e $ssess%ent >$s iss.e/.
W#$t >e $re s$@in3 in t#is ;$rti6.2$r 6$se is t#$t, t#e 1or%$2 Letter o= De%$n/ >it#
Assess%ent Noti6es >#i6# >$s not $/%inistr$ti-e2@ ;roteste/ 7@ t#e ;etitioner 6$n 7e
6onsi/ere/ $ =in$2 /e6ision o= t#e CIR $;;e$2$72e to t#e CTA 7e6$.se t#e >or/s .se/,
s;e6i=i6$22@ t#e >or/s A=in$2 /e6isionB $n/ A$;;e$2B, t$?en to3et#er 2e/ ;etitioner to
7e2ie-e t#$t t#e 1or%$2 Letter o= De%$n/ >it# Assess%ent Noti6es >$s in =$6t t#e =in$2
/e6ision o= t#e CIR on t#e 2etter,;rotest it =i2e/ $n/ t#$t t#e $-$i2$72e re%e/@ >$s to
$;;e$2 t#e s$%e to t#e CTA.
We note, #o>e-er, t#$t /.rin3 t#e ;en/en6@ o= t#e inst$nt 6$se, ;etitioner $-$i2e/ o= t#e
;ro-isions o= Re-en.e Re3.2$tions No. 30,9009 $n/ its i%;2e%entin3 Re-en.e
)e%or$n/.% Or/er 7@ s.7%ittin3 $n o==er o= 6o%;ro%ise =or t#e sett2e%ent o= t#e GRT,
DST $n/ AT =or t#e ;erio/ 1888,9003, $s e-i/en6e/ 7@ $ Certi=i6$te o= A-$i2%ent /$te/
No-e%7er 91, 900F.K30L A66or/in32@, t#ere is no re$son to reinst$te t#e Petition =or
Re-ie> in CTA C$se No. F0C9.
W4ERE1ORE, t#e ;etition is #ere7@ .RANTED. T#e $ss$i2e/ A.3.st 93, 900C
De6ision $n/ t#e O6to7er 1F, 900C Reso2.tion o= t#e Co.rt o= T$< A;;e$2s $re
REVERSED $n/ SET ASIDE. T#e Petition =or Re-ie> in CTA C$se No. F0C9 is #ere7@
DIS)ISSED 7$se/ so2e2@ on t#e *.re$. o= Intern$2 Re-en.eHs $66e;t$n6e o= ;etitionerHs
o==er o= 6o%;ro%ise =or t#e sett2e%ent o= t#e 3ross re6ei;ts t$<, /o6.%ent$r@ st$%; t$<
$n/ -$2.e $//e/ t$<, =or t#e @e$rs 1888,9003.
SO ORDERED.
..R. No. L:5/EC/ -a!=h C/, /300
RE(U7LIC OF T,E (,ILI((INES, ;2$inti==,$;;e22$nt,
-s.
LI- TIAN TEN. SONS an" CO., INC., /e=en/$nt,$;;e22$nt.
1ffice of t#e Solicitor 2eneral for t#e plaintiff$appellant.
P. %. "! Calderon for t#e defendant$appellee.
7EN.ZON, 4.(., J.:
Li% Ti$n Ten3 Sons T Co., In6., $ /o%esti6 6or;or$tion >it# ;rin6i;$2 o==i6e in Ce7.
Cit@, en3$3e/ in 18:1 $n/ 18:9, $%on3 ot#ers, in t#e e<;ort$tion o= 6o;r$. T#e 6o;r$
>$s >ei3#e/ 7e=ore s#i;%ent in t#e ;ort o= /e;$rt.re $n/ .;on $rri-$2 in t#e ;ort o=
/estin$tion. T#e >ei3#t 7e=ore s#i;%ent >$s 6$22e/ 6o;r$ o.tt.rn. To $22o> =or 2ose in
>ei3#t /.e to s#rin?$3e, s$i/ e<;orter 6o22e6te/ on2@ 8:U o= t#e $%o.nt $;;e$rin3 in t#e
2etter o= 6re/it 6o-erin3 e-er@ 6o;r$ o.tt.rn. T#e :U 7$2$n6e re%$ine/ o.tst$n/in3 .nti2
=in$2 2iG.i/$tion $n/ $/D.st%ent.
On )$r6# 30, 18:3 Li% Ti$n Ten3 Sons T Co., In6. =i2e/ its in6o%e t$< ret.rn =or 18:9
7$se/ on $66r.e/ in6o%e $n/ e<;enses. Its ret.rn s#o>e/ $ 2oss o= P:C,108.88. It too? .;
$s ;$rt o= t#e 7e3innin3 in-entor@ =or 18:9 t#e 6o;r$ o.tt.rn s#i;;e/ in 18:1 in t#e s.%
o= P8:,:00.00 $2re$/@ ;$rti$22@ 6o22e6te/, $s ;$rt o= its o.tst$n/in3 sto6? $s o= De6e%7er
31, 18:1.
In t#e $./it $n/ e<$%in$tion o= t$<;$@erSs 18:9 in6o%e t$< ret.rn, t#e Co22e6tor o=
Intern$2 Re-en.e e2i%in$te/ t#e P8:,:00.00 o.tt.rn =ro% t#e 7e3innin3 in-entor@ =or
18:9 $n/ 6onsi/ere/ it $s $66r.e/ in6o%e =or 18:1. T#is in6re$se/ t$<;$@erSs 18:9 net
in6o%e 7@ P8:,:00.00 >#i6#, 6onsi/erin3 /is$22o>$n6es in t#e s.% o= P8,880.8:, r$ise/
t#e t$<;$@erSs net t$<$72e in6o%e =or 18:9 to P:0,3F0.8F. A66or/in32@, in $ 2etter /$te/
!$n.$r@ 1C, 18:F "E<#i7it C&, re6ei-e/ 7@ Li% Ti$n Ten3 Sons T Co., In6. on !$n.$r@ 30,
18:F, t#e Co22e6tor o= Intern$2 Re-en.e $ssesse/ $ /e=i6ien6@ in6o%e t$< o= P10,0F4.00
$n/ :0U s.r6#$r3e t#ereon $%o.ntin3 to P:,03F.00 $n/ /e%$n/e/ ;$@%ent t#ereo= not
2$ter t#$n 1e7r.$r@ 1:, 18:F.
On !$n.$r@ 31, 18:F Li% Ti$n Ten3 Sons T Co., In6. reG.este/ rein-esti3$tion o= its
18:9 in6o%e t$< 2i$7i2it@. T#e Co22e6tor o= Intern$2 Re-en.e /i/ not re;2@M inste$/, #e
re=erre/ t#e 6$se to t#e So2i6itor Gener$2 =or 6o22e6tion 7@ D./i6i$2 $6tion.
On Se;te%7er 90, 18:F t#e So2i6itor Gener$2 /e%$n/e/ =ro% Li% Ti$n Ten3 Sons T Co.,
In6. t#e ;$@%ent o= P1:,111.:0 >it#in =i-e /$@s, st$tin3 t#$t ot#er>ise D./i6i$2 $6tion
>o.2/ 7e instit.te/ >it#o.t =.rt#er noti6e. In $ 2etter /$te/ O6to7er :, 18:F, re6ei-e/ 7@
t#e Co22e6tor o= Intern$2 Re-en.e on O6to7er F, 18:F, Li% Ti$n Ten3 Sons T Co., In6.
reiter$te/ its reG.est =or rein-esti3$tion. It $2so >rote t#e So2i6itor Gener$2 on O6to7er 8,
18:F reG.estin3 t#$t it 7e $22o>e/ to ;resent its e<;2$n$tion to3et#er >it# s.;;ortin3
;$;ers re2$ti-e to its in6o%e t$< 2i$7i2it@. T#e So2i6itor Gener$2 tr$ns%itte/ t#e 2etter to
t#e Co22e6tion o= Intern$2 Re-en.e. T#ere.;on, t#e De;.t@ Co22e6tor o= Intern$2 Re-en.e,
7@ #is 2etter /$te/ O6to7er 1C, 18:F, in=or%e/ t#e t$<;$@er t#$t its reG.est =or
rein-esti3$tion >o.2/ 7e 3r$nte/ ;ro-i/e/ it e<e6.te/ >it#in ten /$@s $ >$i-er o= t#e
st$t.te o= 2i%it$tions $s reG.ire/ in Gener$2 Cir6.2$r ,9:8 /$te/ A.3.st 90, 18:F. In #is
2etter /$te/ De6e%7er 10, 18:F, t#e De;.t@ Co22e6tor o= Intern$2 Re-en.e e<ten/e/ t#e
;erio/ >it#in >#i6# to e<e6.te $n/ =i2e >it# #i% t#e >$i-er o= t#e st$t.te o= 2i%it$tions to
De6e%7er 31, 18:F, 7.t $/-ise/ t#$t i= no >$i-er is =ort#6o%in3 on or 7e=ore s$i/ /$te,
D./i6i$2 $6tion =or 6o22e6tion >o.2/ 7e instit.te/ >it#o.t =.rt#er noti6e. Re6ei;t o= t#is
2etter is /enie/ 7@ $;;e22$nt 6o%;$n@.
As Li% Ti$n Ten3 Sons T Co., In6. =$i2e/ to =i2e $ >$i-er o= t#e st$t.te o= 2i%it$tions, t#e
Co22e6tor o= Intern$2 Re-en.e instit.te/ ei3#t %ont#s $=ter, s;e6i=i6$22@ on Se;te%7er 9,
18:8, $n $6tion in t#e Co.rt o= 1irst Inst$n6e o= Ce7. =or t#e 6o22e6tion o= /e=i6ien6@
in6o%e t$<.
A=ter #e$rin3 t#e ;$rties, t#e 6o.rt 7e2o> ren/ere/ t#e =o22o>in3 D./3%ent.
IN IEW O1 T4E 1OREGOING, D./3%ent is #ere7@ ren/ere/, /e62$rin3 t#e
$ssess%ent "E<#. D, D,1& o= in6o%e t$< in t#e s.% o= P1:,111.00 /.e =ro% t#e
/e=en/$nt to t#e ;2$inti== =or t#e @e$r 18:9 -$2i/, =in$2 $n/ e<e6.tor@M 6on/e%nin3 t#e
/e=en/$nt to ;$@ t#e s$%e to t#e ;2$inti== >it# interest $t one "1& ;er 6ent.% %ont#2@
=ro% O6to7er 98, 18:F .nti2 =.22@ ;$i/.
Wit# 6osts $3$inst t#e /e=en/$nt.
IT IS SO ORDERED.
Not s$tis=ie/ >it# t#e /e6ision, t#e Co22e6tor o= Intern$2 Re-en.e %o-e/ =or its
re6onsi/er$tion on t#e 3ro.n/ t#$t it /i/ not in62./e t#e :U s.r6#$r3e =or 2$te ;$@%ent o=
t$<. T#e %otion >$s /enie/ =or t#e re$son t#$t t#e t$<;$@er #$s $2re$/@ 7een or/ere/ to
;$@ $ s.r6#$r3e o= :0U.
*ot# ;$rties $;;e$2e/, r$isin3 on2@ G.estions o= 2$>.
P2$inti== 6ites $s errors t#e non,i%;osition o= t#e :U s.r6#$r3e =or t#e 2$te ;$@%ent o= t$<
$n/ t#e 6o%;.t$tion o= /e2inG.en6@ interest =ro% O6to7er 8, 18:F.
De=en/$nt, on t#e ot#er #$n/, $ss$i2s t#e D.ris/i6tion o= t#e 2o>er 6o.rt, its =in/in3 t#$t
t#e $ssess%ent in G.estion #$s 7e6o%e =in$2 $n/ e<e6.tor@, t#e 6orre6tness o= t#e
$ssess%ent $n/ t#e i%;osition o= t#e :0U s.r6#$r3e.56'p#75.-8t
We >i22 /is6.ss =irst t#e t$<;$@erSs $;;e$2. It %$int$ins t#$t t#e 2o>er 6o.rt #$s no
D.ris/i6tion to entert$in t#is 6$se on t#e 3ro.n/ t#$t t#e Co22e6tor o= Intern$2 Re-en.e #$s
not @et iss.e/ #is final decision on its reG.ests =or rein-esti3$tion. T#e t$<;$@erSs st$n/ is
t#$t =in$2 /e6ision o= t#e Co22e6tor o= Intern$2 Re-en.e on t#e /is;.te/ $ssess%ent is $
6on/ition ;re6e/ent to t#e =i2in3 o= $n $6tion in t#e Co.rt o= 1irst Inst$n6e =or t#e
6o22e6tion o= $ t$<. T#is $r3.%ent #$s no %erit. T#e Co22e6tor o= Intern$2 Re-en.e is
$.t#oriNe/ to 6o22e6t /e2inG.ent intern$2 re-en.e t$<es eit#er 7@ /istr$int $n/ 2e-@ or 7@
D./i6i$2 $6tion or 7ot# si%.2t$neo.s2@.
1
T#e on2@ reG.isite 7e=ore #e 6$n 6o22e6t t#e t$< is
t#$t #e %.st =irst $ssess t#e s$%e >it#in t#e ti%e =i<e/ 7@ 2$>.
9
An/ in t#e 6$se o= $ =$2se
or =r$./.2ent ret.rn >it# intent to e-$/e t#e t$< or o= $ =$i2.re to =i2e $ ret.rn, $
;ro6ee/in3 in 6o.rt =or t#e 6o22e6tion o= s.6# t$< %$@ 7e 7e3.n >it#o.t $ssess%ent.
3
No>#ere in t#e T$< Co/e is t#e Co22e6tor o= Intern$2 Re-en.e reG.ire/ to r.2e =irst on $
t$<;$@erSs reG.est =or rein-esti3$tion 7e=ore #e 6$n 3o to 6o.rt =or t#e ;.r;ose o=
6o22e6tin3 t#e t$< $ssesse/. On t#e 6ontr$r@, Se6tion 30: o= t#e s$%e Co/e >it##o2/s
=ro% $22 6o.rts, e<6e;t t#e Co.rt o= T$< A;;e$2s .n/er Se6tion 11 o= Re;.72i6 A6t 119:,
t#e $.t#orit@ to restr$in t#e 6o22e6tion o= $n@ n$tion$2 intern$2,re-en.e t$<, =ee or 6#$r3e,
t#ere7@ in/i6$tin3 t#e 2e3is2$ti-e ;o2i6@ to $22o> t#e Co22e6tor o= Intern$2 Re-en.e %.6#
2$tit./e in t#e s;ee/@ $n/ ;ro%;t 6o22e6tion o= t$<es. T#e re$son is o7-io.s. It is .;on
t$<$tion t#$t t#e 3o-ern%ent 6#ie=2@ re2ies to o7t$in t#e %e$ns t#e 6$rr@ on its o;er$tions,
$n/ it is o= t#e .t%ost i%;ort$n6e t#$t t#e %o/es $/o;te/ to en=or6e 6o22e6tion o= t$<es
2e-ie/ s#o.2/ 7e s.%%$r@ $n/ inter=ere/ >it# $s 2itt2e $s ;ossi72e. No 3o-ern%ent 6o.2/
e<ist i= $22 2iti3$nts >ere ;er%itte/ to /e2$@ t#e 6o22e6tion o= its t$<es.
4
)oreo-er, 7e=ore t#e 6re$tion o= t#e Co.rt o= T$< A;;e$2s t#e re%e/@ o= $ t$<;$@er >#o
/esire/ to 6ontest $n $ssess%ent iss.e/, 7@ t#e Co22e6tor o= Intern$2 Re-en.e >$s to ;$@
t#e t$< $n/ 7rin3 $n $6tion in t#e or/in$r@ 6o.rts =or its re6o-er@ ;.rs.$nt to Se6tion 30C
o= t#e Co/e.
:
Co22e6tion or ;$@%ent o= t#e t$< >$s not %$/e, to, >$it .nti2 $=ter t#e
Co22e6tor o= Intern$2 Re-en.e #$s reso2-e/ $22 iss.es r$ise/ 7@ t#e t$<;$@er $3$inst $n
$ssess%ent. Re;.72i6 A6t 119: 6re$tin3 t#e Co.rt o= A;;e$2s $22o>s t#e t$<;$@er to
/is;.te t#e 6orre6tness 2e3$2it@ o= $n $ssess%ent 7ot# in t#e ;.re2@ $/%inistr$ti-e 2e-e2
$n/ in s$i/ 6o.rt, 7.t it /oes not sto; t#e Co22e6tor o= Intern$2 Re-en.e =ro% 6o22e6tin3
t#e t$< t#ro.3# $n@ o= t#e %e$ns ;ro-i/e/ =or in Se6tion 31C o= t#e T$< Co/e, e<6e;t
>#en enDoine/ 7@ s$i/ Co.rt o= T$< A;;e$2s. Se6tion 11 o= Re;.72i6 A6t 119: st$tes in
;$rt:
No $;;e$2 t$?en to t#e Co.rt o= T$< A;;e$2s =ro% t#e /e6ision o= t#e Co22e6tor o=
Intern$2 Re-en.e ... s#$22 s.s;en/ t#e ;$@%ent, 2e-@, /istr$int, $n/Eor s$2e o= $n@
;ro;ert@ o= t#e t$<;$@er =or t#e s$tis=$6tion o= #is t$< 2i$7i2it@ $s ;ro-i/e/ 7@ e<istin3
2$>: Provided, #o'ever, T#$t >#en in t#e o;inion o= t#e Co.rt t#e 6o22e6tion 7@ t#e
*.re$. o= Intern$2 Re-en.e or t#e Co%%issioner o= C.sto%s %$@ Deo;$r/iNe t#e
interest o= t#e Go-ern%ent $n/Eor t#e t$<;$@er t#e Co.rt $t $n@ st$3e o= t#e
;ro6ee/in3 %$@ s.s;en/ t#e s$i/ 6o22e6tion $n/ reG.ire t#e t$<;$@er eit#er to /e;osit
t#e $%o.nt 62$i%e/ or to =i2e $ s.ret@ 7on/ =or not %ore t#$n /o.72e t#e $%o.nt >it#
t#e Co.rt.
We >i22 no> reso2-e t#e iss.e o= >#et#er or not t#e 6o.rt a quo erre/ in 6onsi/erin3 $s
=in$2 $n/ e<e6.tor@ t#e $ssess%ent 6ont$ine/ in t#e 2etter o= t#e Co22e6tor o= Intern$2
Re-en.e /$te/ !$n.$r@ 1C, 18:F. As st$te/, /e=en/$nt re6ei-e/ s$i/ $ssess%ent on
!$n.$r@ 30, 18:F $n/ on t#e =o22o>in3 /$@ reG.este/ rein-esti3$tion o= its t$< 2i$7i2it@.
T#e Co22e6tor o= Intern$2 Re-en.e #o>e-er /i/ not re;2@ to t#e reG.est =or
rein-esti3$tion. Inste$/, #e re=erre/ t#e 6$se to t#e So2i6itor Gener$2 =or 6o22e6tion o= t#e
t$<. T#e 2o>er 6o.rt inter;rete/ t#is $6tion o= t#e Co22e6tor o= Intern$2 Re-en.e $s $
/eni$2 o= /e=en/$ntSs reG.est =or rein-esti3$tion.
S$i/ 6o.rt, to o.r %in/, 6o%%itte/ no error. 1or >#$t is %ore in/i6$ti-e o= t#e
Co22e6torSs /e6ision $3$inst rein-esti3$tion t#$n #is insisten6e to 6o22e6t t#e t$<R T#is
/e6ision >$s 6o%%.ni6$te/ to /e=en/$nt in $ 2etter /$te/ Se;te%7er 90, 18:F o= t#e
o==i6e o= t#e So2i6itor Gener$2 >#i6# %.st #$-e 7een re6ei-e/ 7@ /e=en/$nt not 2$ter t#$n
O6to7er 8, 18:F =or on s$i/ /$te it $6?no>2e/3e/ re6ei;t t#ereo=. It #$/ t#irt@ /$@s =ro%
O6to7er 8, 18:F >it#in >#i6# to $;;e$2 to t#e Co.rt o= T$< A;;e$2s ;.rs.$nt to Se6tion
11 o= Re;.72i6 A6t 119:.
C
Inste$/ o= $;;e$2in3 to t#e T$< Co.rt, #o>e-er, t#e /e=en/$nt
#erein in $ 2etter /$te/ O6to7er 8, 18:F reiter$te/ its reG.est =or rein-esti3$tion.
On O6to7er 1:, 18:F t#e Co22e6tor o= Intern$2 Re-en.e >rote /e=en/$nt t#$t its QreG.est
=or $ rein-esti3$tion >i22 7e 3r$nte/ on2@ .;on 6o%;2i$n6e >it# Gener$2 Cir6.2$r No. ,
9:8 /$te/ A.3.st 90, 18:F, >#i6# reG.ires $s $ ;rereG.isite to t#e 3r$nt o= $
rein-esti3$tion t#e e<e6.tion o= $ >$i-er o= t#e st$t.te o= 2i%it$tionsQ. In $ s.7seG.ent
2etter, #e e<ten/e/ t#e ;erio/ >it#in >#i6# to s.7%it t#e $=ores$i/ >$i-er to De6e%7er
31, 18:F.
In e==e6t, t#e Co22e6tor o= Intern$2 Re-en.e ;2$6e/ in t#e #$n/s o= t#e /e=en/$nt t#e
#o2/in3 o= $ rein-esti3$tion. 4o>e-er, no s.6# rein-esti3$tion >$s %$/e in$s%.6# $s
t$<;$@er =$i2e/ to s.7%it $ >ritten >$i-er o= t#e st$t.te o= 2i%it$tions on or 7e=ore
De6e%7er 31, 18:F. S.6# o%ission $.to%$ti6$22@ 7ro.3#t $7o.t t#e /eni$2 o= t#e reG.est
=or rein-esti3$tion.
T$<;$@er #o>e-er G.estions t#e 2e3$2it@ o= reG.irin3 >$i-er o= t#e st$t.te o= 2i%it$tions
7e=ore t#e 3r$nt o= rein-esti3$tion $s ;ro-i/e/ =or in Gener$2 Cir6.2$r No.
,9:8. T#is G.estion >$s not r$ise/ in t#e *.re$. o= Intern$2 Re-en.e. S.==i6e it to s$@ in
t#is 6onne6tion t#$t Gener$2 Cir6.2$r No. ,9:8 >$s ;ro%.23$te/ ;.rs.$nt to Se6tion
338 o= t#e T$< Co/e. T#e $.t#orit@ t#ere.n/er o= t#e Se6ret$r@ o= 1in$n6e to iss.e r.2es
$n/ re3.2$tions =or t#e e==e6ti-e en=or6e%ent o= t#e ;ro-isions o= t#e T$< Co/e #$s 7een
s.st$ine/ 7@ t#is Co.rt in ;re-io.s 6$ses.
F
E-en i= >e /o not 6o.nt t#e ;erio/ =ro% O6to7er 8, 18:F "t#e /$te >#en t$<;$@er
re6ei-e/ noti6e o= t#e /eni$2 o= its reG.est =or rein-esti3$tion& to De6e%7er 31, 18:F "t#e
/e$/2ine =or t#e s.7%ission o= t#e >ritten >$i-er o= t#e st$t.te o= 2i%it$tions& in
re6?onin3 t#e 30,/$@ ;erio/ >it#in >#i6# t#e t$<;$@er %$@ $;;e$2 to t#e Co.rt o= T$<
A;;e$2s, s$i/ ;erio/ #$/ 2on3 2$;se/ >#en t#e Co22e6tor o= Intern$2 Re-en.e =i2e/ t#e
6o%;2$int in t#is 6$se on Se;te%7er 9, 18:8.
T$<;$@er =$i2.re to $;;e$2 to t#e Co.rt o= T$< A;;e$2s in /.e ti%e %$/e t#e $ssess%ent
in G.estion =in$2, e<e6.tor@ $n/ /e%$n/$72e.
8
An/ >#en t#e $6tion >$s instit.te/ on
Se;te%7er 9, 18:8 to en=or6e t#e /e=i6ien6@ $ssess%ent in G.estion, it >$s $2re$/@ 7$rre/
=ro% /is;.tin3 t#e 6orre6tness o= t#e $ssess%ent or in-o?in3 $n@ /e=ense t#$t >o.2/
reo;en t#e G.estion o= #is t$< 2i$7i2it@ on %erits.
8
Ot#er>ise, t#e ;erio/ o= t#irt@ /$@s =or
$;;e$2 to t#e Co.rt o= T$< A;;e$2s >o.2/ %$?e 2itt2e sense.
10
In $ ;ro6ee/in3 2i?e t#is t#e t$<;$@erSs /e=enses $re si%i2$r to t#ose o= t#e /e=en/$nt in $
6$se =or t#e en=or6e%ent o= $ D./3%ent 7@ D./i6i$2 $6tion .n/er Se6tion C o= R.2e 38 o=
t#e R.2es o= Co.rt. No inG.ir@ 6$n 7e %$/e t#erein $s to t#e %erits o= t#e ori3in$2 6$se or
t#e D.stness o= t#e D./3%ent re2ie/ .;on, ot#er t#$n 7@ e-i/en6e o= >$nt o= D.ris/i6tion,
o= 6o22.sion 7et>een t#e ;$rties, or o= =r$./ in t#e ;$rt@ o==erin3 t#e re6or/ >it# res;e6t
to t#e ;ro6ee/in3s.
11
As #e2/ 7@ t#is Court in Insular 2overnment vs.
)ico
19
t#e t$<;$@er %$@ r$ise on2@ t#e G.estions >#et#er or not t#e Co22e6tor o= Intern$2
Re-en.e #$/ D.ris/i6tion to /o t#e ;$rti6.2$r $6t, $n/ >#et#er $n@ =r$./ >$s 6o%%itte/
in t#e /oin3 o= t#e $6t. In t#$t 6$se, Doroteo Ni6o >$s =ine/ 7@ t#e Co22e6tor o= Intern$2
Re-en.e =or -io2$tion o= s.7;$r$3r$;#s "/&, "e& $n/ "3& o= Se6tion 98 $s >e22 $s Se6tions
3C, 101 $n/ 10F o= A6t 1188. (n/er Se6tion :4 o= t#e s$%e A6t t#e t$<;$@er >$s 3i-en
t#e ri3#t to $;;e$2 =ro% t#e /e6ision o= t#e Co22e6tor o= Intern$2 Re-en.e to t#e Co.rt o=
1irst Inst$n6e >it#in $ ;erio/ o= ten /$@s =ro% noti6e o= i%;osition o= t#e =ine. Ni6o /i/
not $;;e$2, neit#er /i/ #e ;$@ t#e =ine. P.rs.$nt to Se6tion 33 o= t#e A6t, t#e Co22e6tor o=
Intern$2 Re-en.e =i2e/ $n $6tion in t#e Co.rt o= 1irst Inst$n6e to en=or6e #is /e6ision $n/
6o22e6t t#e =ine. T#e /e6ision o= t#e Co22e6tor o= Intern$2 Re-en.e #$-in3 7e6o%e =in$2,
t#is Co.rt, on $;;e$2, $22o>e/ no =.rt#er inG.ir@ into t#e %erits o= t#e s$%e.
1or t#e s$tis=$6tion o= /e=en/$nt, #o>e-er, it %$@ 7e >ort# st$tin3 t#$t on its %erits, t#e
$ssess%ent in G.estion is 6orre6t. It is not 6ontro-erte/ t#$t, $s $;;e$rin3 =ro% its 18:9
in6o%e t$< ret.rn Li% Ti$n Ten3 Sons T Co., In6. e%;2o@s t#e Q$66r.$2Q %et#o/ o=
$66o.ntin3. 1o22o>in3 s.6# $66o.ntin3 %et#o/ t#e 6o;r$ o.tt.rn in t#e $%o.nt o=
P8:,:00.00 o.tst$n/in3 $s o= De6e%7er 31, 18:1, s#o.2/ #$-e 7een tre$te/ $s $66r.e/
in6o%e =or 18:1, inste$/ o= $s sto6? on #$n/ on !$n.$r@ 1, 18:9.
De=en/$nt too? .; t#e 6o;r$ o.tt.rn in G.estion $s 6o;r$ on #$n/ in t#e 7e3innin3
in-entor@ =or 18:9. S$i/ 7e3innin3 in-entor@, to3et#er >it# e<;enses, 6o;r$ ;.r6#$se/
/.rin3 t#e @e$r $n/ 6o;r$ on #$n/ $s o= De6e%7er 31, 18:9 >ere /e/.6te/ $s Q6ost o=
3oo/s so2/Q =ro% t#e tot$2 3ross s$2es =or t#e ;.r;ose o= /eter%inin3 t#e net s$2es. Sin6e
t#e P8:,:00.00 6o;r$ o.tt.rn =or%e/ ;$rt o= t#e Q6ost o= 3oo/s so2/Q, it /i%inis#e/ t#e
net s$2es 7@ P8:,:00.00, t#ere7@ $2so /e6re$sin3 /e=en/$ntSs net t$<$72e in6o%e 7@ t#e
s$%e $%o.nt. T#is ;ro6e/.re o= tre$tin3 t#e 6o;r$ o.tt.rn in G.estion is in6onsistent >it#
/e=en/$nts $66o.ntin3 %et#o/.
1ro% t#e re6or/, t#en, t#ere is e-er@ in/i6$tion t#$t t$<;$@erSs 18:9 in6o%e t$< ret.rn is
=r$./.2ent, $s $22e3e/ in ;$r$3r$;# "F& o= t#e 6o%;2$int in t#is 6$se. 1irst2@, t$<;$@erSs
7e3innin3 in-entor@ =or 18:9 /i/ not st$te t#e tr.t# in 6onsi/erin3 t#e 6o;r$ o.tt.rn $s
6o;r$ on #$n/, =or on De6e%7er 31, 18:1 s.6# 6o;r$ >$s not $n@ %ore in t$<;$@erSs
7o/e3$. It >$s in tr$nsit to $ =orei3n ;ort. An/ t#e t$<;$@er no 2on3er o>ne/ t#e 6o;r$.
As $ %$tter o= =$6t, it $2re$/@ re6ei-e/ ;$@%ent =or t#e s$%e. Se6on/2@, 7@ o7ser-in3
re3.2$r2@ its o>n s@ste% o= $66o.ntin3, t$<;$@er #$/ no 6#oi6e 7.t to $66o.nt t#e 6o;r$
o.tt.rn $s $66r.e/ in6o%e. T#is it /i/ not /o. 1or s.6# /e-i$tion, >e see no ot#er ;.r;ose
t#$n to 2essen, i= not o72iter$te $s in =$6t it /i/, its in6o%e t$< 2i$7i2it@ ;er its ret.rn. T#e
2o>er 6o.rt t#ere=ore /i/ not err in i%;osin3 t#e :0U s.r6#$r3e.
We no> 6o%e to t#e $;;e$2 o= t#e Go-ern%ent. It %$int$ins t#$t t#e 2o>er 6o.rt erre/ in
not i%;osin3 on /e=en/$ntSs t$< 2i$7i2it@ $ s.r6#$r3e o= :U =or 2$te ;$@%ent. S.7se6tion
"6&, Se6tion :1 o= t#e T$< Co/e st$tes:
SEC. :1. Assess%ent $n/ ;$@%ent o= in6o%e t$<. I
< < < < < < < < <
"6& S.r6#$r3e $n/ interest in 6$se o= /e2inG.en6@. , To $n@ s.% or s.%s /.e $n/
.n;$i/ $=ter t#e /$tes ;res6ri7e/ in s.7se6tions "7&, "6& $n/ "/& =or t#e ;$@%ent o= t#e
s$%e, t#ere s#$22 7e $//e/ t#e s.% o= =i-e ;er 6ent.% on t#e $%o.nt o= t$< .n;$i/
$n/ interest $t t#e r$te o= one ;er 6ent.% $ %ont# .;on s$i/ t$< =ro% t#e ti%e t#e
s$%e 7e6$%e /.e . . . . "E%;#$sis s.;;2ie/&
As %$@ 7e 32e$ne/ =ro% t#e $7o-e,G.ote/ ;ro-ision, t#e :U s.r6#$r3e is %$n/$tor@ $n/
$.to%$ti6$22@ /.e, on6e t#e t$< is not ;$i/ on ti%e. QS#$22Q is t#e >or/ t#$t 2$> .ses $
>or/ nor%$22@ i%;er$ti-e $n/ $ Q2$n3.$3e o= /e%$n/Q.
13
A;;2i6$72e #erein is >#$t #$s
7een s$i/ o= $ si%i2$r ;ro-ision I t#e ;resent Se6tion 183 o= t#e T$< Co/e I st$tin3
t#$t:
I= t#e ;er6ent$3e t$< on $n@ 7.siness is not ;$i/ >it#in t#e ti%e ;res6ri7e/ $7o-e t#e
$%o.nt o= t#e t$< s#$22 7e in6re$se/ 7@ t>ent@,=i-e ;er 6ent.%, t#e in6re%ent to 7e
;$rt o= t#e t$<. "E%;#$sis s.;;2ie/&
S$i/ t#is Co.rt in &im Co C#ui vs. Posadas
14
:
T#is ;ro-ision is %$n/$tor@. It ;ro-i/es $ ;2$n >#i6# >or?s o.t $.to%$ti6$22@. It
6on=ers no /is6retion on t#e Co22e6tor o= Intern$2 Re-en.e. T#$t, o==i6i$2 %$@ not
/isre3$r/ t#e 2$> $n/ s.7stit.te t#ere=or #is o>n ;erson$2 D./3%ent.
1in$22@, t#e Go-ern%ent G.estions t#e 6o%;.t$tion o= t#e /e2inG.en6@ interest, /.e on
t#e /e=i6ien6@ t$<, from 1cto*er >, 5<@;. It insists t#$t ;$@%ent o= s.6# interest s#o.2/
6o%%en6e =ro% 1e7r.$r@ 1:, 18:F. S.6# 6ontention is >e22,=o.n/e/. P.rs.$nt to Se6tion
:1"/&, Qt#e $ssess%ent %$/e 7@ t#e Co22e6tor o= Intern$2 Re-en.e s#$22 7e ;$i/ ...
i%%e/i$te2@ .;on noti=i6$tion o= t#e $%o.nt o= s.6# $ssess%ent.Q No>, t#e in6o%e t$<
$ssess%ent noti6e 3$-e /e=en/$nt .; to 1e7r.$r@ 1:, 18:F to ;$@ t#e /e=i6ien6@ t$< in
G.estion. No ;$@%ent >$s %$/e. 4en6e, ;.rs.$nt to Se6tion :1 "e&, G.ote/ e$r2ier,
interest on t#e .n;$i/ t$< =e22 /.e st$rtin3 1e7r.$r@ 1C, 18:F $n/ 6ontin.es to $66r.e .nti2
=.22 ;$@%ent o= t#e t$<.
W#ere=ore, t#e /e6ision $;;e$2e/ =ro% is %o/i=ie/. Li% Ti$n Ten3 Sons T Co., In6. is
#ere7@ or/ere/ to ;$@ t#e s.% o= P10,0F4.00 $s /e=i6ien6@ in6o%e t$< =or 18:9 ;2.s :0U
$n/ :U s.r6#$r3es t#ereon =or =r$./ $n/ 2$te ;$@%ent, res;e6ti-e2@, $n/ 1U %ont#2@
interest .;on s$i/ t$< o= P10,0F4.00, 6o%;.te/ =ro% 1e7r.$r@ 1C, 18:F .nti2 t#e t$< is
=.22@ ;$i/. Wit# 6osts $3$inst /e=en/$nt,$;;e22$nt. So or/ere/.
%eng3on, C.J., %autista Angelo, Concepcion, e!es, J.%.&., %arrera, egala, 4a+alintal,
,aldivar and Sanc#e3, JJ., concur.
9i3on, J., is on leave.
G.R. No. L-59758 December 26, 1984
ADVERTISING ASSOCIATES, INC., petitioner,
vs.
CORT O! A""EALS #$% CO&&ISSIONER O! INTERNAL REVENE,
respondents.
Bito, Misa & Lozada Law Office for petitioner.
The Solicitor General for respondents.
A'INO, J.(
This case is about the liability of Advertising Associates, lnc. for P382,700.1 as
3! contractor"s percentage ta# on its rental inco$e fro$ the lease of neon signs
and billboards i$posed by section 1%1 of the Ta# &ode 'as a$ended by (epublic
Acts )os. 112 and 110* on business agents and independent contractors.
Parenthetically, it $ay be noted that Presidential +ecree )o. %, effective
)ove$ber 2,, 1%72, added paragraph 17 to section 1%1 by ta#ing lessors of
personal property.
-ection 1%1 defines an independent contractor as including all persons .hose
activity consists essentially of the sale of all kinds of services for a fee. -ection
1%,'v* of the Ta# &ode defines a business agent as including persons who
conduct advertising agencies.
/t should be noted that in Advertising Associates, /nc. vs. &ollector of /nternal
(evenue, %7 Phil. 3, the ta#payer .as held liable as a $anufacturer for
the.%0! sales ta# on its sales of neon0tube signs under section 181'2* of the Ta#
&ode as a$ended. /t paid P11,%8.18 as sales ta for the ,th 3uarter of 1%,8 to
1%11.
This &ourt re4ected the ta#payer"s contention that it .as only a contractor of
neon0tube signs and that it should pay only the 3! contractor"s ta# under section
1%1 of the Ta# &ode.
/n the instant case, Advertising Associates alleged that it sold in 1%,% its
advertising agency business to Philippine Advertising &ounsellors, that its
business is li$ited to the $a2ing, construction and installation of billboards and
electric signs and $a2ing and printing of posters, signs, handbills, etc. '101 tsn*.
/t contends that it is a $edia co$pany, not an advertising co$pany,
/t paid sales ta#es for selling billboards, electric signs, calendars, posters, etc.,
realty dealer"s ta# for leasing billboards and electric signs and 3! contractor"s ta#
for repairing electric signs.
The billboards and electric signs $anufactured by it are either sold or leased, As
already stated, the &o$$issioner of /nternal (evenue sub4ected to 3!
contractor"s ta# its rental inco$e fro$ billboards and electric signs 'p. 10,
Appellant"s brief *.
The &o$$issioner re3uired Advertising Associates to pay P2%7,%27.0 and
P8,,773.10 as contractor"s ta# for 1%701%71 and 1%72, respectively, including
21! surcharge 'the latter a$ount includes interest* on its inco$e fro$ billboards
and neon signs.
The basis of the assess$ent is the fact that the ta#payer"s articles of
incorporation provide that its pri$ary purpose is to engage in general advertising
business. /ts inco$e ta# returns indicate that its business .as advertising '5#h.
1, and 11, etc.*.
/t is supposed 6to conduct a general advertising business, both as principal and
agent, including the preparation and arrange$ents of advertising devices and
novelties7 to erect, construct, purchase, lease or other.ise ac3uire fences,
billboards, signboards, buildings and other structures suitable for advertising
purposes7 to carry on the business of printers, publishers, binders, and
decorators in connection .ith advertising business and to $a2e and carry out
contracts of every 2ind and character that $ay be necessary or conducive to the
acco$plish$ent of any of the purposes of the co$pany7 to engage in and carry
on a general advertising business by the circulation and distribution and the
display of cards, signs, posters, dodgers, handbills, progra$s, banners and flags
to be placed in and on railroad cars, street cars, stea$ boats, cabs, hac2s,
o$nibuses, stages and any and all 2inds of conveyances used for passengers or
for any other purposes7 to display $oveable or changeable signs, cards, pictures,
designs, $ottoes, etc., operated by cloc2.or2, electricity or any other po.er7 to
use, place and display the sa$e in depots, hotels, halls, and other public places,
to advertise in the air by airplanes, strea$ers, s2y.riting and other si$ilar or
dissi$ilar operation.6 '5#h. 1,0A, pp. ,80,%, 8/( (ecords, 9ol. /*.
Advertising Associates contested the assess$ents in its "letters of :une 21, 1%73
'for the 1%7071 deficiency ta#es* and ;arch 7, 1%7, 'for the 1%72 deficiency*.
The &o$$issioner reiterated the assess$ents in his letters of :uly 12 and
-epte$ber 1,1%7, 'p. 3, (ollo*.
The ta#payer re3uested the cancellation of the assess$ents in its letters of
-epte$ber 13 and )ove$ber 21, 1%7, 'p. 3, (ollo*. !neplica"l#, for a"out four
#ears there was no $ove$ent in the case. Then, on ;arch 31, 1%78, the
&o$$issioner resorted to the su$$ary re$edy of issuing t.o .arrants of
distraint, directing the collection enforce$ent division to levy on the ta#payer"s
personal properties as .ould be sufficient to satisfy the deficiency ta#es 'pp. ,,
2% and 30, (ollo*. The .arrants .ere served upon the ta#payer on April 18 and
;ay 21, 1%78.
;ore than a year later, Acting &o$$issioner 5fren /. Plana .rote a letter dated
;ay 23, 1%7% in ans.er to the re3uests of the ta#payer for the cancellation of the
assess$ents and the withdrawal of the warrants of distraint 'Anne# & of Petition,
pp. 31032, (ollo*.
<e 4ustified the assess$ents by stating that the rental inco$e of Advertising
Associates fro$ billboards and neon signs constituted fees or co$pensation for
its advertising services. <e re3uested the ta#payer to pay the deficiency ta#es
.ithin ten days fro$ receipt of the de$and7 other.ise, the 8ureau .ould enforce
the .arrants of distraint. <e closed his de$and letter .ith this paragraph=
This constitutes our final decision on the $atter. /f you are not agreeable,
you $ay appeal to the &ourt of Ta# Appeals .ithin 30 days fro$ receipt of
this letter.
Advertising Associates received that letter on :une 18, 1%7%. )ineteen days later
or on :uly 7, it filed its petition for revie.. /n its resolution of August 28, 1%7%, the
Ta# &ourt en%oined the enforce$ent of the warrants of distraint.
The Ta# &ourt did not resolve the case on the $erits. /t ruled that the .arrants of
distraint .ere the &o$$issioner"s appeala"le decisions. -ince Advertising
Associates appealed fro$ the decision of ;ay 23, 1%7%, the petition for revie.
.as filed out of ti$e. /t .as dis$issed. The ta#payer appealed to this &ourt.
>e hold that the petition for revie. .as filed on ti$e. The revie.able decision is
that contained in &o$$issioner Plana"s letter of ;ay 23, 1%7% and not the
.arrants of distraint.
)o a$ount of 3uibbling or sophistry can blin2 the fact that said letter, as its tenor
sho.s, e$bodies the &o$$issioner"s final decision .ithin the $eaning of section
7 of (epublic Act )o. 1121. The &o$$issioner said so. <e even directed the
ta#payer to appeal it to the Ta# &ourt. That .as the sa$e situation in St.
Stephen&s 'ssociation and St. Stephen&s (hinese Girl&s School vs. (ollector of
!nternal )evenue, 10, Phil. 31,, 3170318.
The directive is in consonance .ith this &ourt"s dictu$ that the &o$$issioner
should al.ays indicate to the ta#payer in clear and une3uivocal language .hat
constitutes his final deter$ination of the disputed assess$ent. That procedure is
de$anded by the pressing need for fair play, regularity and orderliness in
ad$inistrative action '-urigao 5lectric &o., /nc. vs. &ourt of Ta# Appeals, ?0
2128%, :une 28, 1%7,, 17 -&(A 123*.
@n the $erits of the case, the petitioner relies on the &ollector"s rulings dated
-epte$ber 12, 1%0 and :une 20, 1%7 that it is neither an independent
contractor nor a business agent '5#h. A and <*.
As already stated, it considers itself a $edia co$pany, li2e a ne.spaper or a
radio broadcasting co$pany, but not an advertising agency in spite of the
purpose stated in its articles of incorporation. /t argues that its act of leasing its
neon signs and billboards does not $a2e it a business agent or an independent
contractor. /t stresses that it is a $ere lessor of neon signs and billboards and
does not perfor$ advertising services.
8ut the undeniable fact is that neon signs and billboards are pri$arily designed
for advertising. >e hold that the petitioner is a business agent and an
independent contractor as conte$plated in sections 1%1 and 1%,'v*.
<o.ever, in vie. of the prior rulings that the ta#payer is not a business agent nor
an independent contractor and in vie. of the controversial nature of the
deficiency assess$ents, the 21! surcharge should be eli$inated '&. ;. <os2ins
B &o., /nc. vs. &o$$issioner of /nternal (evenue, ?028383, :une 22, 1%7, 71
-&(A 111, 11%7 /$us 5lectric &o., /nc. vs. &o$$issioner of /nternal (evenue,
121 Phil. 108,*.
Petitioner"s last contention is that the collection of the ta# had already prescribed.
-ection 332 of the 1%3% Ta# &ode, no. section 31% of the 1%77 Ta# &ode,
Presidential +ecree )o. 1118, effective on :une 3, 1%77, provides that the ta#
$ay be collected by distraint or levy or by a 4udicial proceeding begun ".ithin five
years after the assess$ent of the ta#6.
The ta#payer received on :une 18, 1%73 and ;arch 1, 1%7, the deficiency
assess$ents herein. The .arrants of distraint .ere served upon it on April 18
and $ay 21,1%78 or .ithin five years after the assess$ent of the ta#. @bviously,
the .arrants .ere issued to interrupt the five0year prescriptive period. /ts
enforce$ent .as not i$ple$ented because of the pending protests of the
ta#payer and its re3uests for .ithdra.al of the .arrants .hich .ere eventually
resolved in &o$$issioner Plana"s letter of ;ay 23, 1%7%.
/t should be noted that the &o$$issioner did not institute any 4udicial proceeding
to collect the ta#. <e relied on the .arrants of distraint to interrupt the running of
the statute of li$itations. <e gave the ta#payer a$ple opportunity to contest the
assess$ents but at the sa$e ti$e safeguarded the Aovern$ent"s interest by
$eans of the .arrants of distraint.
><5(5C@(5, the 4udg$ent of the Ta# &ourt is reversed and set aside. The
&o$$issioner"s deficiency assess$ents are $odified by re3uiring the petitioner
to pay the ta# proper and eli$inating the 21! surcharge, interest and penalty. /n
case of non0pay$ent, the .arrants of distrant should be i$ple$ented. The
preli$inary in4unction issued by the Ta# &ourt on August 28, 1%7% restraining the
enforce$ent of said .arrants is lifted. )o costs.
-@ @(+5(5+.
G.R. No. L-28896 !ebr)#r* 17, 1988
CO&&ISSIONER O! INTERNAL REVENE, petitioner,
vs.
ALGE, INC., #$% T+E CORT O! TA, A""EALS, respondents.
CR-, J.:
Ta#es are the lifeblood of the govern$ent and so should be collected .ithout unnecessary hindrance @n the
other hand, such collection should be $ade in accordance .ith la. as any arbitrariness .ill negate the very
reason for govern$ent itself. /t is therefore necessary to reconcile the apparently conflicting interests of the
authorities and the ta#payers so that the real purpose of ta#ation, .hich is the pro$otion of the co$$on
good, $ay be achieved.
The $ain issue in this case is .hether or not the &ollector of /nternal (evenue correctly disallo.ed the
P71,000.00 deduction clai$ed by private respondent Algue as legiti$ate business e#penses in its inco$e
ta# returns. The corollary issue is .hether or not the appeal of the private respondent fro$ the decision of
the &ollector of /nternal (evenue .as $ade on ti$e and in accordance .ith la..
>e deal first .ith the procedural 3uestion.
The record sho.s that on :anuary 1,, 1%1, the private respondent, a do$estic corporation engaged in
engineering, construction and other allied activities, received a letter fro$ the petitioner assessing it in the
total a$ount of P83,183.81 as delin3uency inco$e ta#es for the years 1%18 and 1%1%.
1
@n :anuary 18,
1%1, Algue flied a letter of protest or re3uest for reconsideration, .hich letter .as sta$p
received on the sa$e day in the office of the petitioner.
2
@n ;arch 12, 1%1, a .arrant of
distraint and levy .as presented to the private respondent, through its counsel, Atty. Alberto
Auevara, :r., .ho refused to receive it on the ground of the pending protest.
.
A search of the
protest in the doc2ets of the case proved fruitless. Atty. Auevara produced his file copy and gave
a photostat to 8/( agent (a$on (eyes, .ho deferred service of the .arrant.
4
@n April 7, 1%1,
Atty. Auevara .as finally infor$ed that the 8/( .as not ta2ing any action on the protest and it
.as only then that he accepted the .arrant of distraint and levy earlier sought to be served.
5
-i#teen days later, on April 23, 1%1, Algue filed a petition for revie. of the decision of the
&o$$issioner of /nternal (evenue .ith the &ourt of Ta# Appeals.
6

The above chronology sho.s that the petition .as filed seasonably. According to (ep. Act )o.
1121, the appeal $ay be $ade .ithin thirty days after receipt of the decision or ruling challenged.
7
/t is true that as a rule the .arrant of distraint and levy is 6proof of the finality of the assess$ent6
8
and renders hopeless a re3uest for reconsideration,6
9
being 6tanta$ount to an outright denial
thereof and $a2es the said re3uest dee$ed re4ected.6
1/
8ut there is a special circu$stance in
the case at bar that prevents application of this accepted doctrine.
The proven fact is that four days after the private respondent received the petitioner"s notice of
assess$ent, it filed its letter of protest. This .as apparently not ta2en into account before the
.arrant of distraint and levy .as issued7 indeed, such protest could not be located in the office of
the petitioner. /t .as only after Atty. Auevara gave the 8/( a copy of the protest that it .as, if at
all, considered by the ta# authorities. +uring the intervening period, the .arrant .as pre$ature
and could therefore not be served.
As the &ourt of Ta# Appeals correctly noted,6
11
the protest filed by private respondent .as not
pro for$a and .as based on strong legal considerations. /t thus had the effect of suspending on
:anuary 18, 1%1, .hen it .as filed, the regle$entary period .hich started on the date the
assess$ent .as received, viD., :anuary 1,, 1%1. The period started running again only on April
7, 1%1, .hen the private respondent .as definitely infor$ed of the i$plied re4ection of the said
protest and the .arrant .as finally served on it. <ence, .hen the appeal .as filed on April 23,
1%1, only 20 days of the regle$entary period had been consu$ed.
)o. for the substantive 3uestion.
The petitioner contends that the clai$ed deduction of P71,000.00 .as properly disallo.ed
because it .as not an ordinary reasonable or necessary business e#pense. The &ourt of Ta#
Appeals had seen it differently. Agreeing .ith Algue, it held that the said a$ount had been
legiti$ately paid by the private respondent for actual services rendered. The pay$ent .as in the
for$ of pro$otional fees. These .ere collected by the Payees for their .or2 in the creation of the
9egetable @il /nvest$ent &orporation of the Philippines and its subse3uent purchase of the
properties of the Philippine -ugar 5state +evelop$ent &o$pany.
Parenthetically, it $ay be observed that the petitioner had @riginally clai$ed these pro$otional
fees to be personal holding co$pany inco$e
12
but later confor$ed to the decision of the
respondent court re4ecting this assertion.
1.
/n fact, as the said court found, the a$ount .as
earned through the 4oint efforts of the persons a$ong .ho$ it .as distributed /t has been
established that the Philippine -ugar 5state +evelop$ent &o$pany had earlier appointed Algue
as its agent, authoriDing it to sell its land, factories and oil $anufacturing process. Pursuant to
such authority, Alberto Auevara, :r., 5duardo Auevara, /sabel Auevara, 5dith, @"Carell, and
Pablo -ancheD, .or2ed for the for$ation of the 9egetable @il /nvest$ent &orporation, inducing
other persons to invest in it.
14
Elti$ately, after its incorporation largely through the pro$otion of
the said persons, this ne. corporation purchased the P-5+& properties.
15
Cor this sale, Algue
received as agent a co$$ission of P12,000.00, and it .as fro$ this co$$ission that the
P71,000.00 pro$otional fees .ere paid to the aforena$ed individuals.
16

There is no dispute that the payees duly reported their respective shares of the fees in their
inco$e ta# returns and paid the corresponding ta#es thereon.
17
The &ourt of Ta# Appeals also
found, after e#a$ining the evidence, that no distribution of dividends .as involved.
18

The petitioner clai$s that these pay$ents are fictitious because $ost of the payees are $e$bers
of the sa$e fa$ily in control of Algue. /t is argued that no indication .as $ade as to ho. such
pay$ents .ere $ade, .hether by chec2 or in cash, and there is not enough substantiation of
such pay$ents. /n short, the petitioner suggests a ta# dodge, an atte$pt to evade a legiti$ate
assess$ent by involving an i$aginary deduction.
>e find that these suspicions .ere ade3uately $et by the private respondent .hen its President,
Alberto Auevara, and the accountant, &ecilia 9. de :esus, testified that the pay$ents .ere not
$ade in one lu$p su$ but periodically and in different a$ounts as each payee"s need arose.
19
/t
should be re$e$bered that this .as a fa$ily corporation .here strict business procedures .ere
not applied and i$$ediate issuance of receipts .as not re3uired. 5ven so, at the end of the year,
.hen the boo2s .ere to be closed, each payee $ade an accounting of all of the fees received by
hi$ or her, to $a2e up the total of P71,000.00.
2/
Ad$ittedly, everything see$ed to be infor$al.
This arrange$ent .as understandable, ho.ever, in vie. of the close relationship a$ong the
persons in the fa$ily corporation.
>e agree .ith the respondent court that the a$ount of the pro$otional fees .as not e#cessive.
The total co$$ission paid by the Philippine -ugar 5state +evelop$ent &o. to the private
respondent .as P121,000.00.
21
After deducting the said fees, Algue still had a balance of
P10,000.00 as clear profit fro$ the transaction. The a$ount of P71,000.00 .as 0! of the total
co$$ission. This .as a reasonable proportion, considering that it .as the payees .ho did
practically everything, fro$ the for$ation of the 9egetable @il /nvest$ent &orporation to the
actual purchase by it of the -ugar 5state properties. This finding of the respondent court is in
accord .ith the follo.ing provision of the Ta# &ode=
-5&. 30. *eductions fro$ gross inco$e.00/n co$puting net inco$e there shall be allo.ed
as deductions F
'a* 5#penses=
'1* !n general.00All the ordinary and necessary e#penses paid or incurred during the
ta#able year in carrying on any trade or business, including a reasonable allo.ance for
salaries or other co$pensation for personal services actually rendered7 ...
22

and (evenue (egulations )o. 2, -ection 70 '1*, reading as follo.s=
-5&. 70. (o$pensation for personal services.00A$ong the ordinary and necessary
e#penses paid or incurred in carrying on any trade or business $ay be included a
reasonable allo.ance for salaries or other co$pensation for personal services actually
rendered. The test of deductibility in the case of co$pensation pay$ents is .hether they
are reasonable and are, in fact, pay$ents purely for service. This test and deductibility in
the case of co$pensation pay$ents is .hether they are reasonable and are, in fact,
pay$ents purely for service. This test and its practical application $ay be further stated
and illustrated as follo.s=
Any a$ount paid in the for$ of co$pensation, but not in fact as the purchase price of
services, is not deductible. 'a* An ostensible salary paid by a corporation $ay be a
distribution of a dividend on stoc2. This is li2ely to occur in the case of a corporation
having fe. stoc2holders, Practically all of .ho$ dra. salaries. /f in such a case the
salaries are in e#cess of those ordinarily paid for si$ilar services, and the e#cessive
pay$ent correspond or bear a close relationship to the stoc2holdings of the officers of
e$ployees, it .ould see$ li2ely that the salaries are not paid .holly for services
rendered, but the e#cessive pay$ents are a distribution of earnings upon the stoc2. . . .
'Pro$ulgated Ceb. 11, 1%31, 30 @.A. )o. 18, 321.*
/t is .orth noting at this point that $ost of the payees .ere not in the regular e$ploy of Algue nor
.ere they its controlling stoc2holders.
2.

The -olicitor Aeneral is correct .hen he says that the burden is on the ta#payer to prove the
validity of the clai$ed deduction. /n the present case, ho.ever, .e find that the onus has been
discharged satisfactorily. The private respondent has proved that the pay$ent of the fees .as
necessary and reasonable in the light of the efforts e#erted by the payees in inducing investors
and pro$inent business$en to venture in an e#peri$ental enterprise and involve the$selves in a
ne. business re3uiring $illions of pesos. This .as no $ean feat and should be, as it .as,
sufficiently reco$pensed.
/t is said that ta#es are .hat .e pay for civiliDation society. >ithout ta#es, the govern$ent .ould
be paralyDed for lac2 of the $otive po.er to activate and operate it. <ence, despite the natural
reluctance to surrender part of one"s hard earned inco$e to the ta#ing authorities, every person
.ho is able to $ust contribute his share in the running of the govern$ent. The govern$ent for its
part, is e#pected to respond in the for$ of tangible and intangible benefits intended to i$prove
the lives of the people and enhance their $oral and $aterial values. This sy$biotic relationship is
the rationale of ta#ation and should dispel the erroneous notion that it is an arbitrary $ethod of
e#action by those in the seat of po.er.
8ut even as .e concede the inevitability and indispensability of ta#ation, it is a re3uire$ent in all
de$ocratic regi$es that it be e#ercised reasonably and in accordance .ith the prescribed
procedure. /f it is not, then the ta#payer has a right to co$plain and the courts .ill then co$e to
his succor. Cor all the a.eso$e po.er of the ta# collector, he $ay still be stopped in his trac2s if
the ta#payer can de$onstrate, as it has here, that the la. has not been observed.
>e hold that the appeal of the private respondent fro$ the decision of the petitioner .as filed on
ti$e .ith the respondent court in accordance .ith (ep. Act )o. 1121. And .e also find that the
clai$ed deduction by the private respondent .as per$itted under the /nternal (evenue &ode and
should therefore not have been disallo.ed by the petitioner.
A&&@(+/)A?G, the appealed decision of the &ourt of Ta# Appeals is ACC/(;5+ in toto, .ithout
costs.
-@ @(+5(5+.
G.R. No. L-46954 0)1* 2/, 1982
EL"IDIO 2A3ES #$% SEVERINO 2A3ES, petitioners,
vs.
T+E +ON. NA"OLEON !LO0O, 4$ 546 c#7#c48* #6 "re64%4$9 0)%9e o:
3r#$c5 II, Co)r8 o: !4r68 I$68#$ce o: C#9#*#$ #$% T+E RE"3LIC O! T+E
"+ILI""INES, respondents.
Bito, Misa & Lozada & 'ssociates for petitioners.
Solicitor General +stelito ,. Mendoza, 'sst. Solicitor General )u"en +. 'gpolo
and Solicitor *eusdedit B. -uinano for respondents.
CONCE"CION 0R., J.:
The lone issue raised in this petition for certiorari and prohibition, .hich see2s to
annul the @rder dated :une 22, 1%71 issued by the &ourt of Cirst /nstance of
&agayan in &ivil &ase )o. //07, .hich denied the $otion to dis$iss said case
dated ;arch 21, 1%71, filed by petitioner7
1
the @rder dated :une 7, 1%77 of the
respondent +istrict :udge of said &ourt in the sa$e civil case denying petitioners" $otion for
reconsideration of the said @rder of denial dated :une 22, 1%717
2
and the @rder dated :uly 21,
1%77, issued by the said respondent :udge of said &ourt in the sa$e civil case denying
petitioners" $otion for leave to file a second $otion for reconsideration of the aforesaid order of
denials7
.
is .hether or not respondent &ourt of Cirst /nstance can la.fully ac3uire 4urisdiction
over a contested assess$ent $ade by the &o$$issioner of /nternal (evenue against the
deceased ta#payer +oroteo Gabes, .hich has not yet beco$e final, e#ecutory and incontestable,
and .hich assess$ent is being contested by petitioners in the &ourt of Ta# Appeals, &ase )o.
221, and still pending consideration.
After this &ourt re3uired respondents to co$$ent on the petition and issued a te$porary
restraining order in the (esolution dated -epte$ber 28, 1%77,
4
the -olicitor Aeneral, in his
&o$$ent dated )ove$ber 21, 1%77, sub$itted that the petition be given due course, and
thereafter 4udg$ent be rendered setting aside the 3uestioned orders issued by the respondent
&ourt of Cirst /nstance of &agayan in &ivil &ase )o. //07, directing said lo.er &ourt to hold in
abeyance any action or proceeding in &ivil &ase )o. //07, until after the &ourt of Ta# Appeals shall
have finally decided &TA &ase )o. 221.
5
The -olicitor Aeneral also filed a ;anifestation dated
)ove$ber 22, 1%77, stating that 6in their &o$$ent dated )ove$ber 21, 1%77, they have li$ited
their appearance as counsel only for the (epublic of the Philippines and not for the respondent
:udge on the ground that they do not agree .ith the latter"s orders .hich are being 3uestioned in
the instant petition.6
6

Endisputed facts of record are as follo.s=
'1* +oroteo Gabes of &ala$aniugan &agayan, .ho .as for so$eti$e an e#clusive dealer
of products of the /nternational <arvester ;acleod, /nc., received on or about ;ay 1,
1%2, a letter fro$ the &o$$issioner of /nternal (evenue dated ;arch 27, 1%2,
de$anding pay$ent of the a$ount of P11,%7.81, as co$$ercial bro2er"s fi#ed and
percentage ta#es plus surcharges and the su$ of P2,130 as co$pro$ise penalty
alledgely due fro$ Gabes for the years 1%101%07
7

'2* @n ;ay 11, 1%2, +oroteo Gabes, through his counsel, filed .ith the &o$$issioner"s
@ffice his letter dated ;ay 10, 1%2, protesting the assess$ent of co$$ercial bro2er"s
fi#ed and percentage ta#es plus penalties against hi$ on the ground that his agree$ents
.ith the /nternational <arvester ;acleod, /nc. .ere of purchase and sale, and not of
agency, hence he clai$ed he .as not able to pay such 2ind of ta#es7
8

'3* Thereafter, there ensued an e#change of correspondence bet.een the la.yers of
+oroteo Gabes and the &o$$issioner7 the &o$$issioner in a letter dated August 3,
1%2, infor$ed +oroteo Gabes that he acted as a co$$ercial bro2er 6in accordance .ith
the ruling of this @ffice in the case of &irilo +. &onstantino76
9
in turn, +oroteo Gabes, in a
letter dated August 22, 1%2, re3uested for the reinvestigation, or revie. of the case by
the appellate division of the 8ureau of /nternal (evenue in accordance .ith standing
rules, regulations or practice on the $atter7
1/
Gabes also .rote the &o$$issioner on
August 2,, 1%2, re3uesting that the appeal be held in abeyance pending final decision
of the &ase of &irilo +. &onstantino7
11
in reply, the &o$$issioner infor$ed +oroteo
Gabes in a letter dated -epte$ber 18, 1%2, that the latter"s re3uest for reinvestigation
.as denied on the ground that he has 6not sub$itted any evidence to offset the findings
of this @ffice as to .arrant a reinvestigation thereof67
12
but eight days later or on
-epte$ber 2, 1%2, the &o$$issioner .rote a letter advising +oroteo Gabes that 6the
ad$inistrative appeal ... .ill be held in abeyance pending the resolution of the issues in a
si$ilar case 'obviously referring to the aforesaid &onstantino case*67
',* To give ti$e for the &o$$issioner to study the case and several other cases si$ilar
thereto, the la.yers of +oroteo Gabes agreed to file, and their client, +oroteo Gabes did
file a ta# .aiver on @ctober 20, 1%2, e#tending the period of prescription to +ece$ber
31, 1%77
1.

'1* +oroteo Gabes died on ;arch 13, 1%3 and no estate proceedings .ere instituted for
the settle$ent of his estate7 his .ido. also died during the pendency of the case7 the
petitioners are the children of the deceased ta#payer7
14

'* @n ;arch 1,, 1%, the &ourt of Ta# Appeals decided the &onstantino 6test6 case.
The &ourt of Ta# Appeals ruled that agree$ents entered into by &onstantino .ith the
/nternational <arvester ;acleod, /nc. .ere of purchase and sale, and not of agency,
hence no co$$ercial bro2er"s fi#ed and percentage fees could be collected fro$ the said
ta#payer7 ho.ever this &ourt on Cebruary 27, 1%70, in A.(. )o. ?021%2 reversed the
&ourt of Ta# Appeals and ruled in favor of the &o$$issioner of /nternal (evenue7
15

'7* After a lapse of about five years, the heirs of the deceased +oroteo Gabes, through
their la.yers, received on August ,, 1%7, a letter fro$ the &o$$issioner dated :uly 27,
1%7, re3uesting that they 6.aive ane. the -tatute of ?i$itations6 and further confir$ing
the previous understanding that the final resolution of the protest of the deceased
+oroteo Gabes .as 6being held in abeyance until the -upre$e &ourt renders its decision
on a si$ilar case involving the sa$e factual and legal issues brought to it on appeal6
'referring to the &onstantino 6test6 case*7
16
confor$ably .ith the re3uest of the
&o$$issioner, the heirs of +oroteo Gabes filed a revised .aiver further e#tending the
period of prescription to +ece$ber 31, 1%707
17

'8* Thereafter, no .ord .as received by the petitioners or their la.yers during the interi$
of $ore than three '3* years, but on :anuary 20, 1%71, petitioners as heirs of the
deceased +oroteo Gabes received the su$$ons and a copy of the co$plaint filed by the
&o$$issioner on +ece$ber ,, 1%70 .ith the &ourt of Cirst /nstance of &agayan .hich
see2s to collect fro$ the petitioners the su$ of P 11,%7.82, as deficiency co$$ercial
bro2er"s fi#ed and percentage ta#es, including surcharges and interest thereon, due fro$
their predecessor0in0interest, +oroteo Gabes, by reason of the latter"s inco$e derived
fro$ transactions as dealer of the products of the /nternational <arvester ;acleod, /nc.7
'%* Ta2ing the co$plaint as the final decision of the &o$$issioner on the disputed
assess$ent against the deceased ta#payer +oroteo Gabes, petitioners filed on Cebruary
12, 1%71, a petition for revie. of said disputed assess$ent .ith the &ourt of Ta# Appeals7
18
later on the sa$e day, Cebruary 12, 1%71, petitioners filed their ans.er to the co$plaint
of the &o$$issioner before the &ourt of Cirst /nstance of &agayan7
19
and alleged
therein, by .ay of special defense, that the &ourt of Ta# Appeals has e#clusive
4urisdiction of the action and that there is another action of the sa$e nature bet.een the
parties relating to the sa$e assess$ent pending before the &ourt of Ta# Appeals7
'10* @n the other hand, the &o$$issioner filed a $otion to dis$iss dated ;arch 2,,
1%71, .ith the &ourt of Ta# Appeals in &TA &ase )o. 221, and subse3uently filed a
$e$orandu$ in support of said $otion to dis$iss, on the ground that the assess$ent
against +oroteo Gabes had already beco$e final, e#ecutory and incontestable, and the
&ourt of Ta# Appeals had no 4urisdiction over the case7
'11* @n ;arch 21, 1%71, petitioners filed a for$al $otion to dis$iss &ivil &ase )o. //07
.ith the &ourt of Cirst /nstance of &agayan on the grounds that said &ourt has no
4urisdiction over the case and that there is another action pending bet.een the sa$e
parties for the sa$e cause before a co$petent court7
2/

'12* @n :une 22, 1%71, the respondent &ourt of Cirst /nstance of &agayan, through its
for$er presiding 4udge issued the 3uestioned order in &ivil &ase )o. //07, .hich is the
$ain sub4ect of the instant petition, denying the petitioners" $otion to dis$iss on the
ground that the petitioners 6have already $ade a previous ans.er .herein they
categorically ad$itted the 4urisdiction of the court over the sub4ect $atter and the &ourt
believes that, granting for the sa2e of argu$ent, there is a pending action bet.een the
sa$e parties for the sa$e cause yet the 4udg$ent .hich $ay be rendered in the first
cited case does not necessarily bar the present action67
21

'13* @n -epte$ber 1, 1%72, the respondent &ourt of Cirst /nstance of &agayan issued an
order holding the trial of &ivil &ase )o. / /07, in abeyance upon the 4oint $otion of the
parties7
22

'1,* @n -epte$ber 2%, 1%7,, the &ourt of Ta# Appeals denied the &o$$issioner"s
$otion to dis$iss &TA &ase )o. 221.
2.
Accordingly, on @ctober 30, 1%71, the
&o$$issioner filed his Ans.er to the petition for revie..
24

'11* @n +ece$ber 17, 1%7, ho.ever, the &ourt of Cirst /nstance of &agayan, this ti$e
presided by the respondent :udge )apoleon Clo4o, upon $otion of counsel for the plaintiff
therein, set &ivil &ase )o. //07 for trial on :anuary 27 and 28, 1%77.
25

'1* @n Cebruary %, 1%77, the respondent :udge Clo4o denied the petitioners" $otion to
suspend further proceedings and set the trial of the case for ;arch 1, 1%77.
26

'17* @n ;ay 3, 1%77, the herein petitioners filed a $otion for the reconsideration of the
order issued on :une 22, 1%71 and for a ruling on their affir$ative defense that the &ourt
of Cirst /nstance of &agayan has no 4urisdiction over the case.
27

'18* @n :une 7, 1%77, the respondent :udge denied the afore$entioned $otion for
reconsideration for lac2 of $erit, and set the trial of the case for :une 23, 1%77.
28

'1%* @n :uly 8, 1%77, the petitioners filed a $otion see2ing leave to file a second $otion
for reconsideration of the order issued on :une 7, 1%77,
29
attaching thereto a copy of
their $otion for reconsideration.
./
The $otions .ere denied on :uly 21, 1%77, and trial
.as set for August 18, and 1%, 1%77
.1
.hich .as postponed to -epte$ber 23, 1%77.
.2

<ence, the present recourse. As prayed for, a te$porary restraining order .as issued on
-epte$ber 28, 1%77.
..

As to the issue of .hether or not the assess$ent $ade by the &o$$issioner of /nternal (evenue
against the deceased ta#payer +oroteo Gabes, as contained in the letter dated ;arch 27, 1%2,
has beco$e final, e#ecutory and incontestable, after +oroteo Gabes had received the
&o$$issioner"s letter dated August 3, 1%2, denying the latter"s protest against the said
assess$ent on -epte$ber 18, 1%2 and his failure to appeal therefro$ .ithin the 300day period
conte$plated under -ection 11, of (epublic Act 1121, >e are constrained to agree .ith the &ourt
of Ta# Appeals, .hen it denied the &o$$issioner"s $otion to dis$iss &TA &ase )o. 221, that=
the period for appeal to this &ourt should not be counted fro$ -epte$ber 18, 1%2. /n a
letter of :uly 27, 1%7, respondent infor$ed petitioners that a resolution of their protest
.as being held in abeyance until the -upre$e &ourt renders a decision on a si$ilar case
6involving the sa$e factual and legal issues6. As a $atter of fact, in an earlier letter dated
-epte$ber 2, 1%2, respondent also infor$ed petitioners" counsel that 6ad$inistrative
appeal for and in behalf of their clients .in be held in abeyance pending resolution of the
issues on a si$ilar case .hich .as appealed by you to the &ourt of Ta# Appeals6. /t is
thus clear in these letters that respondent reconsidered the finality of his decision of
August 3, 1%2, assu$ing arguendo that the letter had a tenor of finality.
.4

The &ourt of Ta# Appeals in &TA &ase )o. 221, stated further=
The records sho. that a .arrant of distraint and levy .as issued on @ctober 2, 1%70.
<ad this been served on +oroteo Gabes, it .ould have been e3uivalent to a final
decision, ... There is, ho.ever, nothing to sho. that it .as ever served on Gabes. )either
is there anything in the record to sho. that a for$al decision of denial .as $ade after
respondent"s letter of :uly 27, 1%7.
.5

There is no reason for Es to disagree fro$ or reverse the &ourt of Ta# Appeals" conclusion that
under the circu$stances of this case, .hat $ay be considered as final decision or assess$ent of
the &o$$issioner is the filing of the co$plaint for collection in the respondent &ourt of Cirst
/nstance of &agayan, the su$$ons of .hich .as served on petitioners on :anuary 20, 1%71, and
that therefore the appeal .ith the &ourt of Ta# Appeals in &TA &ase )o. 221 .as filed on ti$e.
.6
The respondent &ourt of Cirst /nstance of &agayan can only ac3uire 4urisdiction over this case
filed against the heirs of the ta#payer if the assess$ent $ade by the &o$$issioner of /nternal
(evenue had beco$e final and incontestable. /f the contrary is established, as this &ourt holds it
to be, considering the afore$entioned conclusion of the &ourt of Ta# Appeals on the finality and
incontestability of the assess$ent $ade by the &o$$issioner is correct, then the &ourt of Ta#
Appeals has e#clusive 4urisdiction over this case. Petitioners received the su$$ons in &ivil &ase
)o. //07 of the respondent &ourt of Cirst /nstance of &agayan on :anuary 20, 1%71, and
petitioners filed their appeal .ith the &ourt of Ta# Appeals in &TA &ase )o. 221, on Cebruary 12,
1%71, .ell .ithin the thirty0day prescriptive period under -ection 11 of (epublic Act )o. 1121. The
&ourt of Ta# Appeals has e#clusive appellate 4urisdiction to revie. on appeal any decision of the
&ollector of /nternal (evenue in cases involving disputed assess$ents and other $atters arising
under the )ational /nternal (evenue &ode.
.7

Cor .ant of 4urisdiction over the case, the &ourt of Cirst /nstance of &agayan should have
dis$issed the co$plaint filed in &ivil &ase )o. //07.
The reco$$endation of the -olicitor Aeneral that the lo.er court hold in abeyance any action or
proceeding in &ivil &ase )o. //07 until after the &ourt of Ta# Appeals shall have finally decided
&TA &ase )o. 221, is untenable since the lo.er court has no 4urisdiction over the case.
:urisdiction over an action includes 4urisdiction over all interlocutory $atters incidental to the case
and dee$ed necessary to preserve the sub4ect $atter of the suit or protect interests of the
parties. Absent 4urisdiction over the case, it .ould be i$proper for the &ourt of Cirst /nstance of
&agayan to ta2e cogniDance over the case and act upon interlocutory $atters of the case, as
.ell.
The dis$issal of the co$plaint, ho.ever, is not sufficient. The ends of 4ustice .ould best be
served by considering the co$plaint filed in &ivil &ase )o. //07 not only as a final notice of
assess$ent but also as a counterclai$ in &TA &ase )o. 221, in order to avoid $utiplicity of
suits, as .ell as to e#pedite the settle$ent of the controversy bet.een the parties. After all, the
t.o cases involve the sa$e parties, the sa$e sub4ect $atter, and the sa$e issue, .hich is the
liability of the heirs of the deceased +oroteo Gabes for co$$ercial bro2er"s fi#ed and percentage
ta#es due fro$ the said deceased.
><5(5C@(5, the petition is granted and the .rits prayed for are hereby issued. The 3uestioned
orders dated :une 22, 1%71, :une 7, 1%77 and :uly 21, 1%77 are hereby annulled and set aside
and the co$plaint filed in &ivil &ase )o. //07 of the &ourt of Cirst /nstance of &agayan, entitled=
6)epu"lic of the ,hilippines, plaintiff, versus .icolasa /urado 0a"es, et al., defendants,6 should
be, as it is hereby, dis$issed, the sa$e to be transferred to the &ourt of Ta# Appeals to be
considered therein as a counterclai$ in &TA &ase )o. 221. The te$porary restraining order
heretofore issued is hereby $ade per$anent. >ithout costs.
-@ @(+5(5+.
Barredo 1(hair$an2, Guerrero, '"ad Santos and +scolin, //., concur.
G.R. No. L-6616/ &#* 21, 199/
CO&&ISSIONER O! INTERNAL REVENE, petitioner,
vs.
NION S+I""ING COR"ORATION #$% T+E CORT O! TA, A""EALS,
respondents.
'rte$io M. Lo"rin for private respondent.
"ARAS, J.:
This is a petition for revie. on certiorari of the +ece$ber %, 1%83 decision 3 of the &ourt of Ta# Appeals in
&TA &ase )o. 2%8% reversing the &o$$issioner of /nternal (evenue.
/n a letter dated +ece$ber 27, 1%7, '5#hibit 6A6* herein petitioner &o$$issioner of /nternal (evenue
assessed against Gee Cong <ong, ?td. andHor herein private respondent Enion -hipping &orporation, the
total su$ of P183,111.22 as deficiency inco$e ta#es due for the years 1%71 and 1%72. -aid letter .as
received on :anuary ,, 1%71, and in a letter dated :anuary 10, 1%71 '5#hibit 686*, received by petitioner on
:anuary 13, 1%71, private respondent protested the assess$ent.
Petitioner, .ithout ruling on the protest, issued a >arrant of +istraint and ?evy '5#hibit 6&6*, .hich .as
served on private respondent"s counsel, &le$ente &elso, on )ove$ber 21, 1%7.
/n a letter dated )ove$ber 27, 1%7 '5#hibit 6+6*, received by petitioner on )ove$ber 2%, 1%7 '5#hibit 6+0
16* private respondent reiterated its re3uest for reinvestigation of the assess$ent and for the reconsideration
of the su$$ary collection thru the >arrant of +istraint and ?evy.
Petitioner, again, .ithout acting on the re3uest for reinvestigation and reconsideration of the >arrant of
+istraint and ?evy, filed a collection suit before 8ranch II/ of the then &ourt of Cirst /nstance of ;anila and
doc2eted as &ivil &ase )o. 120,1% against private respondent. -u$$ons '5#hibit 656* in the said collection
case .as issued to private respondent on +ece$ber 28, 1%78.
@n :anuary 10, 1%7%, private respondent filed .ith respondent court its Petition for (evie. of the petitioner"s
assess$ent of its deficiency inco$e ta#es in a letter dated +ece$ber 27, 1%7,, doc2eted therein as &TA
&ase )o. 2%8% ')ollo, pp. ,,0,%*, .herein it prays that after hearing, 4udg$ent be rendered holding that it is
not liable for the pay$ent of the inco$e ta# herein involved, or .hich $ay be due fro$ foreign shipo.ner
Gee Cong <ong, ?td.7 to .hich petitioner filed his ans.er on ;arch 2%, 1%7% ')ollo, pp. 10013*.
(espondent Ta# &ourt, in a decision dated +ece$ber %, 1%83, ruled in favor of private respondent F
><5(5C@(5, the decision of the &o$$issioner of /nternal (evenue appealed fro$, assessing
against and de$anding fro$ petitioner the pay$ent of deficiency inco$e ta#, inclusive of 10!
surcharge, interest and co$pro$ise penalties, in the a$ounts of P73,%18.7 and P183,111.22 for
the years 1%71 and 1%72, respectively, is reversed.
<ence, the instant petition.
The -econd +ivision of this &ourt, after the filing of the re3uired pleadings, in a resolution dated :anuary 28,
1%81, resolved to give due course to the petition, and directed petitioner therein, to file his brief ')ollo, p.
1,1*. /n co$pliance, petitioner filed his brief on ;ay 10, 1%81 ')ollo, p. 111*. (espondents, on the other
hand, filed their brief on :une , 1%81 ')ollo, p. 11*.
The $ain issues in this case are= 'a* on the procedural aspect, .hether or not the &ourt of Ta# Appeals has
4urisdiction over this case and 'b* on the $erits, .hether or not Enion -hipping &orporation acting as a $ere
6husbanding agent6 of Gee Cong <ong ?td. is liable for pay$ent of ta#es on the gross receipts or earnings of
the latter.
The $ain thrust of this petition is that the issuance of a .arrant of distraint and levy is proof of the finality of
an assess$ent because it is the $ost drastic action of all $edia of enforcing the collection of ta#, and is
tanta$ount to an outright denial of a $otion for reconsideration of an assess$ent. A$ong others, petitioner
contends that the .arrant of distraint and levy .as issued after respondent corporation filed a re3uest for
reconsideration of sub4ect assess$ent, thus constituting petitioner"s final decision in the disputed
assess$ents '8rief for petitioner, pp. % and 12*.
Petitioner argues therefore that the period to appeal to the &ourt of Ta# Appeals co$$enced to run fro$
receipt of said .arrant on )ove$ber 21, 1%7, so that on :anuary 10, 1%7% .hen respondent corporation
sought redress fro$ the Ta# &ourt, petitioner"s decision has long beco$e final and e#ecutory.
@n this issue, this &ourt had already laid do.n the dictu$ that the &o$$issioner should al.ays indicate to
the ta#payer in clear and une3uivocal language .hat constitutes his final deter$ination of the disputed
assess$ent.
-pecifically, this &ourt ruled=
. . . .e dee$ it appropriate to state that the &o$$issioner of /nternal (evenue should al.ays
indicate to the ta#payer in clear and une3uivocal language .henever his action on an assess$ent
3uestioned by a ta#payer constitutes his final deter$ination on the disputed assess$ent, as
conte$plated by sections 7 and 11 of (epublic Act 1121, as a$ended. @n the basis of this
state$ent indubitably sho.ing that the &o$$issioner"s co$$unicated action is his final decision
on the contested assess$ent, the aggrieved ta#payer .ould then be able to ta2e recourse to the
ta# court at the opportune ti$e. >ithout needless difficulty, the ta#payer .ould be able to deter$ine
.hen his right to appeal to the ta# court accrues. This rule of conduct .ould also obviate all desire
and opportunity on the part of the ta#payer to continually delay the finality of the assess$ent F
and, conse3uently, the collection of the a$ount de$anded as ta#es F by repeated re3uests for
reco$putation and reconsideration. @n the part of the &o$$issioner, this .ould encourage his
office to conduct a careful and thorough study of every 3uestioned assess$ent and render a
correct and definite decision thereon in the first instance. This .ould also deter the &o$$issioner
fro$ unfairly $a2ing the ta#payer grope in the dar2 and speculate as to .hich action constitutes
the decision appealable to the ta# court. @f greater i$port, this rule of conduct .ould $eet a
pressing need for fair play, regularity, and orderliness in ad$inistrative action. '-urigao 5lectric &o.,
/nc. v. &.T.A., 17 -&(A 123, 128, J1%7,K*.
There appears to be no dispute that petitioner did not rule on private respondent"s $otion for reconsideration
but contrary to the above ruling of this &ourt, left private respondent in the dar2 as to .hich action of the
&o$$issioner is the decision appealable to the &ourt of Ta# Appeals. <ad he categorically stated that he
denies private respondent"s $otion for reconsideration and that his action constitutes his final deter$ination
on the disputed assess$ent, private respondent .ithout needless difficulty .ould have been able to
deter$ine .hen his right to appeal accrues and the resulting confusion .ould have been avoided.
;uch later, this &ourt reiterated the above0$entioned dictu$ in a ruling applicable on all fours to the issue in
the case at bar, that the revie.able decision of the 8ureau of /nternal (evenue is that contained in the letter
of its &o$$issioner, that such constitutes the final decision on the $atter .hich $ay be appealed to the
&ourt of Ta# Appeals and not the warrants of distraint 'Advertising Associates, /nc. v. &ourt of Appeals, 133
-&(A 7% J1%8,K e$phasis supplied*. /t .as li2e.ise stressed that the procedure enunciated is de$anded
by the pressing need for fair play, regularity and orderliness in ad$inistrative action.
Ender the circu$stances, the &o$$issioner of /nternal (evenue, not having clearly signified his final action
on the disputed assess$ent, legally the period to appeal has not co$$enced to run. Thus, it .as only .hen
private respondent received the su$$ons on the civil suit for collection of deficiency inco$e on +ece$ber
28, 1%78 that the period to appeal co$$enced to run.
The re3uest for reinvestigation and reconsideration .as in effect considered denied by petitioner .hen the
latter filed a civil suit for collection of deficiency inco$e. -o. that on :anuary 10, 1%7% .hen private
respondent filed the appeal .ith the &ourt of Ta# Appeals, it consu$ed a total of only thirteen '13* days .ell
.ithin the thirty day period to appeal pursuant to -ection 11 of (.A. 1121.
@n the $erits, it .as found fully substantiated by the &ourt of Ta# Appeals that, respondent corporation is
the husbanding agent of the vessel Gee Cong <ong, ?td. as follo.s=
&o$ing to the second issue, petitioner contended and .as substantiated by satisfactory
uncontradicted testi$onies of &le$ente &elso, &ertified Public Accountant, and (odolfo &.
&abal3uinto, President and Aeneral ;anager, of petitioner that it is actually and legally the
husbanding agent of the vessel of Gee Cong <ong, ?td. as '1* it neither perfor$ed nor transacted
any shipping business, for and in representation, of Gee Cong <ong, ?td. or its vessels or other.ise
negotiated or procured cargo to be loaded in the vessels of Gee Cong <ong, ?td. 'p. 21, t.s.n., :uly
1, 1%80*7 '2* it never solicited or procured cargo or freight in the Philippines or else.here for
loading in said vessels of Gee Cong <ong, ?td. 'pp. 21 B 38, i"id.*7 '3* it had not collected any
freight inco$e or receipts for the said Gee Cong <ong, ?td. 'pp. 22 B 38, i"id7 pp. , B ,8, t.s.n.,
)ov. 1,, 1%80.*7 ',* it never had possession or control, actual or constructive, over the funds
representing pay$ent by Philippine shippers for cargo loaded on said vessels 'pp. 21 B 38, i"id7 p.
,8, i"id*7 petitioner never re$itted to Gee Cong <ong, ?td. any su$ of $oney representing freight
inco$es of Gee Cong <ong, ?td. 'p. 21, i"id.7 p. ,8, i"id*7 and '1* that the freight pay$ents $ade for
cargo loaded in the Philippines for foreign destination .ere actually paid directly by the shippers to
the said Gee Cong <ong, ?td. upon arrival of the goods in the foreign ports. ')ollo, pp. 1801%*.
@n the sa$e issue, the &o$$issioner of /nternal (evenue ;isael P. 9era, on 3uery of respondent"s
counsel, opined that respondent corporation being $erely a husbanding agent is not liable for the pay$ent
of the inco$e ta#es due fro$ the foreign ship o.ners loading cargoes in the Philippines ')ollo, p. 37 5#hibit
6/6, )ollo, pp. ,0*.
)either can private respondent be liable for .ithholding ta# under -ection 13 of the /nternal (evenue &ode
since it is not in possession, custody or control of the funds received by and re$itted to Gee Cong <ong,
?td., a non0resident ta#payer. As correctly ruled by the &ourt of Ta# Appeals, 6if an individual or corporation
li2e the petitioner in this case, is not in the actual possession, custody, or control of the funds, it can neither
be physically nor legally liable or obligated to pay the so0called .ithholding ta# on inco$e clai$ed by Gee
Cong <ong, ?td.6 ')ollo, p. 7*.
Cinally, it $ust be stated that factual findings of the &ourt of Ta# Appeals are binding on this &ourt '/ndustrial
Te#tiles ;anufacturing &o$pany of the Phil., /nc. '/T5;&@P* v. &o$$issioner of /nternal (evenue, et al.
'13 -&(A 1,% J1%81K*. /t is .ell0settled that in passing upon petitions for revie. of the decisions of the
&ourt of Ta# Appeals, this &ourt is generally confined to 3uestions of la.. The findings of fact of said &ourt
are not to be disturbed unless clearly sho.n to be unsupported by substantial evidence '&o$$issioner of
/nternal (evenue v. ;anila ;achinery B -upply &o$pany, 131 -&(A 8 J1%81K*.
A careful scrutiny of the records reveals no cogent reason to disturb the findings of the &ourt of Ta# Appeals.
P(5;/-5- &@)-/+5(5+, the instant petition is hereby +/-;/--5+ and the assailed decision of the &ourt
of Ta# Appeals is hereby ACC/(;5+.
-@ @(+5(5+.
Melencio45errera, ,adilla, Sar$iento and )egalado, //., concur.
..R. No. /CD5/6 4u#$ //, 566/
CO--ISSIONER OF INTERNAL REVENUE, ;etitioner,
-s.
ISA7ELA CULTURAL COR(ORATION, res;on/ent.
(AN.ANI7AN, J.:
A =in$2 /e%$n/ 2etter =ro% t#e *.re$. o= Intern$2 Re-en.e, reiter$tin3 to t#e t$<;$@er t#e
i%%e/i$te ;$@%ent o= $ t$< /e=i6ien6@ $ssess%ent ;re-io.s2@ %$/e, is t$nt$%o.nt to $
/eni$2 o= t#e t$<;$@erSs reG.est =or re6onsi/er$tion. S.6# 2etter $%o.nts to $ =in$2
/e6ision on $ /is;.te/ $ssess%ent $n/ is t#.s $;;e$2$72e to t#e Co.rt o= T$< A;;e$2s
"CTA&.
The Case
*e=ore t#is Co.rt is $ Petition =or Re-ie> on Certiorari
1
;.rs.$nt to R.2e 4: o= t#e R.2es
o= Co.rt, see?in3 to set $si/e t#e A.3.st 18, 1888 De6ision
9
o= t#e Co.rt o= A;;e$2s
3
"CA& in CA,GR SP No. 4C383 $n/ .2ti%$te2@ to $==ir% t#e /is%iss$2 o= CTA C$se No.
:911. T#e /is;ositi-e ;ortion o= t#e $ss$i2e/ De6ision re$/s $s =o22o>s:
QW4ERE1ORE, t#e $ss$i2e/ /e6ision is REERSED $n/ SET ASIDE. A66or/in32@,
D./3%ent is #ere7@ ren/ere/ RE)ANDING t#e 6$se to t#e CTA =or ;ro;er
/is;osition.Q
4

The Fa=ts
T#e =$6ts $re .n/is;.te/. T#e Co.rt o= A;;e$2s G.ote/ t#e s.%%$r@ o= t#e CTA $s
=o22o>s:
QAs s.66in6t2@ s.%%$riNe/ 7@ t#e Co.rt o= T$< $;;e$2s "CTA =or 7re-it@&, t#e
$nte6e/ent =$6ts $re $s =o22o>s:
SIn $n in-esti3$tion 6on/.6te/ on t#e 188C 7oo?s o= $66o.nt o= Kres;on/ent,
;etitionerL #$/ t#e ;re2i%in$r@ K=in/in3L t#$t Kres;on/entL in6.rre/ $ tot$2 in6o%e
t$< /e=i6ien6@ o= P8,88:,389.1:, in62.si-e o= in6re%ents. (;on ;rotest 7@
Kres;on/entSsL 6o.nse2, t#e s$i/ ;re2i%in$r@ $ssess%ent >$s re/.6e/ to t#e
$%o.nt o= P39:,8C8.44, $ 7re$?/o>n o= >#i6# =o22o>s:
+eficiency /nco$e Ta# P321,022.8
+eficiency 5#panded >ithholding Ta#
,,8,.7
Total P 321,8%.,,
";;. 18F,188, *IR re6or/s&S
On 1e7r.$r@ 93, 1880, Kres;on/entL re6ei-e/ =ro% K;etitionerL $n $ssess%ent 2etter,
/$te/ 1e7r.$r@ 8, 1880, /e%$n/in3 ;$@%ent o= t#e $%o.nts o= P333,18C.8C $n/
P4,88F.F8 $s /e=i6ien6@ in6o%e t$< $n/ e<;$n/e/ >it##o2/in3 t$< in62.si-e o=
s.r6#$r3e $n/ interest, res;e6ti-e2@, =or t#e t$<$72e ;erio/ =ro% !$n.$r@ 1, 188C to
De6e%7er 31, 188C. ";;. 904 $n/ 90:, *IR re6.&
In $ 2etter, /$te/ )$r6# 99, 1880, =i2e/ >it# t#e K;etitionerSsL o==i6e on )$r6# 93,
1880 ";;. 98C,311, *IR re6.&, Kres;on/entL reG.este/ < < < $ re6onsi/er$tion o= t#e
s.7De6t $ssess%ent.
S.;;2e%ent$2 to its ;rotest >$s $ 2etter, /$te/ A;ri2 9, 1880, =i2e/ >it# t#e
K;etitionerSsL o==i6e on A;ri2 18, 1880 ";;. 994 T 99:, *IR re6.&, to >#i6# < < < >ere
$tt$6#e/ 6ert$in /o6.%ents s.;;orti-e o= its ;rotest, $s >e22 $s $ W$i-er o= St$t.te o=
Li%it$tion, /$te/ A;ri2 1F, 1880, >#ere it >$s in/i6$te/ t#$t K;etitionerL >o.2/ on2@
#$-e .nti2 A;ri2 :, 1881 >it#in >#i6# to $sses $n/ 6o22e6t t#e t$<es t#$t %$@ 7e =o.n/
/.e =ro% Kres;on/entL $=ter t#e re,in-esti3$tion.
On 1e7r.$r@ 8, 188:, Kres;on/entL re6ei-e/ =ro% K;etitionerL $ 1in$2 Noti6e *e=ore
SeiN.re, /$te/ De6e%7er 99, 1884 ";. 340, *IR re6.&. In s$i/ 2etter, K;etitionerL
/e%$n/e/ ;$@%ent o= t#e s.7De6t $ssess%ent >it#in ten "10& /$@s =ro% re6ei;t
t#ereo=. Ot#er>ise, =$i2.re on its ;$rt >o.2/ 6onstr$in K;etitionerL to 6o22e6t t#e
s.7De6t $ssess%ent t#ro.3# s.%%$r@ re%e/ies.
KRes;on/entL 6onsi/ere/ s$i/ =in$2 noti6e o= seiN.re $s K;etitionerSsL =in$2 /e6ision.
4en6e, t#e inst$nt ;etition =or re-ie> =i2e/ >it# t#is Co.rt on )$r6# 8, 188:.
T#e CTA #$-in3 ren/ere/ D./3%ent /is%issin3 t#e ;etition, Kres;on/entL =i2e/ t#e
inst$nt ;etition $n6#ore/ on t#e $r3.%ent t#$t K;etitionerSsL iss.$n6e o= t#e 1in$2
Noti6e *e=ore SeiN.re 6onstit.tes KitsL /e6ision on Kres;on/entSsL reG.est =or
rein-esti3$tion, >#i6# t#e Kres;on/entL %$@ $;;e$2 to t#e CTA.Q
:

Ru#ing of the Cou!t of Appea#s
In its De6ision, t#e Co.rt o= A;;e$2s re-erse/ t#e Co.rt o= T$< A;;e$2s. T#e CA
6onsi/ere/ t#e =in$2 noti6e sent 7@ ;etitioner $s t#e 2$tterSs /e6ision, >#i6# >$s
$;;e$2$72e to t#e CTA. T#e $;;e22$te 6o.rt re$sone/ t#$t t#e =in$2 Noti6e 7e=ore seiN.re
#$/ e==e6ti-e2@ /enie/ ;etitionerSs reG.est =or $ re6onsi/er$tion o= t#e 6o%%issionerSs
$ssess%ent. T#e CA re2ie/ on t#e 2on3,sett2e/ t$< D.ris;r./en6e t#$t $ /e%$n/ 2etter
reiter$tin3 ;$@%ent o= /e2inG.ent t$<es $%o.nte/ to $ /e6ision on $ /is;.te/ $ssess%ent.
4en6e, t#is re6o.rse.
C

Issues
In #is )e%or$n/.%,
F
;etitioner ;resents =or t#is Co.rtSs 6onsi/er$tion $ so2it$r@ iss.e:
QW#et#er or not t#e 1in$2 Noti6e *e=ore SeiN.re /$te/ 1e7r.$r@ 8, 188: si3ne/ 7@
A6tin3 C#ie= Re-en.e Co22e6tion O==i6er )i2$3ros A6e-e/o $3$inst ICC 6onstit.tes
t#e =in$2 /e6ision o= t#e CIR $;;e$2$72e to t#e CTA.Q
8

The Cou!tFs Ru#ing
T#e Petition is not %eritorio.s.
So#e Issue:
The "ature of the Final "otice !efore #ei$ure
T#e 1in$2 Noti6e *e=ore SeiN.re sent 7@ t#e *.re$. o= Intern$2 Re-en.e "*IR& to
res;on/ent re$/s $s =o22o>s:
QOn 1e7. 8, 1880, Kt#isL O==i6e sent @o. $ 2etter reG.estin3 @o. to sett2e t#e $7o-e,
6$;tione/ $ssess%ent. To /$te, #o>e-er, /es;ite t#e 2$;se o= $ 6onsi/er$72e 2en3t# o=
ti%e, >e #$-e not 7een #onore/ >it# $ re;2@ =ro% @o..
In t#is 6onne6tion, >e $re 3i-in3 @o. t#is LAST OPPORT(NIT+ to sett2e t#e
$/-erte/ $ssess%ent >it#in ten "10& /$@s $=ter re6ei;t #ereo=. S#o.2/ @o. $3$in =$i2,
$n/ re=.se to ;$@, t#is O==i6e >i22 7e 6onstr$ine/ to en=or6e its 6o22e6tion 7@ s.%%$r@
re%e/ies o= W$rr$nt o= Le-@ o= Ro$/ Pro;ert@, Distr$int o= Person$2 Pro;ert@ or
W$rr$nt o= G$rnis#%ent, $n/Eor si%.2t$neo.s 6o.rt $6tion.
P2e$se 3i-e t#is %$tter @o.r ;re=erenti$2 $ttention.
9ery truly yours,
/-/+(@ 8. T5&-@), :(.
(evenue +istrict @fficer
8y=
'-igned*
;/?AA(@- ;. A&595+@
Actg. &hief (evenue &ollection @fficer6
%
Petitioner %$int$ins t#$t t#is 1in$2 Noti6e >$s $ %ere reiter$tion o= t#e /e2inG.ent
t$<;$@erSs o72i3$tion to ;$@ t#e t$<es /.e. It >$s s.;;ose/2@ $ %ere /e%$n/ t#$t s#o.2/
not #$-e 7een %ist$?en =or $ /e6ision on $ ;roteste/ $ssess%ent. S.6# /e6ision, t#e
6o%%issioner 6onten/s, %.st .neG.i-o6$72@ in/i6$te t#$t it is t#e reso2.tion o= t#e
t$<;$@erSs reG.est =or re6onsi/er$tion $n/ %.st 2i?e>ise st$te t#e re$son t#ere=or.
Res;on/ent, on t#e ot#er #$n/, ;oints o.t t#$t t#e 1in$2 Noti6e *e=ore SeiN.re s#o.2/ 7e
6onsi/ere/ $s $ /eni$2 o= its reG.est =or re6onsi/er$tion o= t#e /is;.te/ $ssess%ent. T#e
Noti6e s#o.2/ 7e /ee%e/ $s ;etitionerSs 2$st $6t, sin6e =$i2.re to 6o%;2@ >it# it >o.2/
2e$/ to t#e /istr$int $n/ 2e-@ o= res;on/entSs ;ro;erties, $s in/i6$te/ t#erein.
We $3ree >it# res;on/ent. In t#e nor%$2 6o.rse, t#e re-en.e /istri6t o==i6er sen/s t#e
t$<;$@er $ noti6e o= /e2inG.ent t$<es, in/i6$tin3 t#e ;erio/ 6o-ere/, t#e $%o.nt /.e
in62./in3 interest, $n/ t#e re$son =or t#e /e2inG.en6@. I= t#e t$<;$@er /is$3rees >it# or
>is#es to ;rotest t#e $ssess%ent, it sen/s $ 2etter to t#e *IR in/i6$tin3 its ;rotest, st$tin3
t#e re$sons t#ere=or, $n/ s.7%ittin3 s.6# ;roo= $s %$@ 7e ne6ess$r@. T#$t 2etter is
6onsi/ere/ $s t#e t$<;$@erSs reG.est =or re6onsi/er$tion o= t#e /e2inG.ent $ssess%ent.
A=ter t#e reG.est is =i2e/ $n/ re6ei-e/ 7@ t#e *IR, t#e $ssess%ent 7e6o%es $ /is;.te/
$ssess%ent on >#i6# it %.st ren/er $ /e6ision. T#$t /e6ision is $;;e$2$72e to t#e Co.rt o=
T$< A;;e$2s =or re-ie>.
Prior to t#e /e6ision on $ /is;.te/ $ssess%ent, t#ere %$@ sti22 7e e<6#$n3es 7et>een t#e
6o%%issioner o= intern$2 re-en.e "CIR& $n/ t#e t$<;$@er. T#e =or%er %$@ $s?
62$ri=i6$tor@ G.estions or reG.ire t#e 2$tter to s.7%it $//ition$2 e-i/en6e. 4o>e-er, t#e
CIRSs ;osition re3$r/in3 t#e /is;.te/ $ssess%ent %.st 7e in/i6$te/ in t#e =in$2 /e6ision.
It is t#is /e6ision t#$t is ;ro;er2@ $;;e$2$72e to t#e CTA =or re-ie>.
In/is;.t$72@, res;on/ent re6ei-e/ $n $ssess%ent 2etter /$te/ 1e7r.$r@ 8, 1880, st$tin3
t#$t it #$/ /e2inG.ent t$<es /.eM $n/ it s.7seG.ent2@ =i2e/ its %otion =or re6onsi/er$tion
on )$r6# 93, 1880. In s.;;ort o= its reG.est =or re6onsi/er$tion, it sent to t#e CIR
$//ition$2 /o6.%ents on A;ri2 18, 1880. T#e ne<t 6o%%.ni6$tion res;on/ent re6ei-e/
>$s $2re$/@ t#e 1in$2 Noti6e *e=ore SeiN.re /$te/ No-e%7er 10, 1884.
In t#e 2i3#t o= t#e $7o-e =$6ts, t#e 1in$2 Noti6e *e=ore SeiN.re 6$nnot 7.t 7e 6onsi/ere/
$s t#e 6o%%issionerSs /e6ision /is;osin3 o= t#e reG.est =or re6onsi/er$tion =i2e/ 7@
res;on/ent, >#o re6ei-e/ no ot#er res;onse to its reG.est. Not on2@ >$s t#e Noti6e t#e
on2@ res;onse re6ei-e/M its 6ontent $n/ tenor s.;;orte/ t#e t#eor@ t#$t it >$s t#e CIRSs
=in$2 $6t re3$r/in3 t#e reG.est =or re6onsi/er$tion. T#e -er@ tit2e e<;ress2@ in/i6$te/ t#$t
it >$s $ final noti6e ;rior to seiN.re o= ;ro;ert@. T#e 2etter itse2= 62e$r2@ st$te/ t#$t
res;on/ent >$s 7ein3 3i-en Qt#is LAST OPPORT(NIT+Q to ;$@M ot#er>ise, its
;ro;erties >o.2/ 7e s.7De6te/ to /istr$int $n/ 2e-@. 4o> t#en 6o.2/ it #$-e 7een %$/e to
7e2ie-e t#$t its reG.est =or re6onsi/er$tion >$s sti22 ;en/in3 /eter%in$tion, /es;ite t#e
$6t.$2 t#re$t o= seiN.re o= its ;ro;ertiesR
1.rt#er%ore, Se6tion 998 o= t#e N$tion$2 Intern$2 Re-en.e Co/e st$tes t#$t $ /e2inG.ent
t$<;$@er %$@ ne-ert#e2ess directl! appeal $ /is;.te/ $ssess%ent, i= its reG.est =or
re6onsi/er$tion re%$ins .n$6te/ .;on 180 /$@s $=ter s.7%ission t#ereo=. We G.ote:
QSe6. 998. Protesting an Assess%ent. O < < <
Wit#in $ ;erio/ to 7e ;res6ri7e/ 7@ i%;2e%entin3 r.2es $n/ re3.2$tions, t#e t$<;$@er
s#$22 7e reG.ire/ to res;on/ to s$i/ noti6e. I= t#e t$<;$@er =$i2s to res;on/, t#e
Co%%issioner or #is /.2@ $.t#oriNe/ re;resent$ti-e s#$22 iss.e $n $ssess%ent 7$se/
on #is =in/in3s.
S.6# $ssess%ent %$@ 7e ;roteste/ $/%inistr$ti-e2@ 7@ =i2in3 $ reG.est =or
re6onsi/er$tion or rein-esti3$tion >it#in t#irt@ "30& /$@s =ro% re6ei;t o= t#e
$ssess%ent in s.6# =or% $n/ %$nner $s %$@ 7e ;res6ri7e/ 7@ i%;2e%entin3 r.2es $n/
re3.2$tions. Wit#in si<t@ "C0& /$@s =ro% =i2in3 o= t#e ;rotest, $22 re2e-$nt s.;;ortin3
/o6.%ents s#$22 #$-e 7e6o%e =in$2.
I= t#e ;rotest is /enie/ in >#o2e or in ;$rt, or is not $6te/ .;on >it#in one #.n/re/
ei3#t@ "180& /$@s =ro% s.7%ission o= /o6.%ents, t#e t$<;$@er $/-erse2@ $==e6te/ 7@
t#e /e6ision or in$6tion %$@ $;;e$2 to t#e Co.rt o= T$< A;;e$2s >it#in "30& /$@s =ro%
re6ei;t o= t#e s$i/ /e6ision, or =ro% t#e 2$;se o= t#e one #.n/re/ ei3#t@ "180&,/$@
;erio/M ot#er>ise t#e /e6ision s#$22 7e6o%e =in$2, e<e6.tor@ $n/ /e%$n/$72e.Q
10

In t#is 6$se, t#e s$i/ ;erio/ o= 180 /$@s #$/ $2re$/@ 2$;se/ >#en res;on/ent =i2e/ its
reG.est =or re6onsi/er$tion on )$r6# 93, 1880, >it#o.t $n@ $6tion on t#e ;$rt o= t#e CIR.
L$st2@, D.ris;r./en6e /i6t$tes t#$t $ =in$2 /e%$n/ 2etter =or ;$@%ent o= /e2inG.ent t$<es
%$@ 7e 6onsi/ere/ $ /e6ision on $ /is;.te/ or ;roteste/ $ssess%ent. In Commissioner of
Internal evenue v. A!ala Securities Corporation, t#is Co.rt #e2/:
QT#e 2etter o= 1e7r.$r@ 18, 18C3 "E<#. G&, in t#e -ie> o= t#e Co.rt, is t$nt$%o.nt to $
/eni$2 o= t#e re6onsi/er$tion or Kres;on/ent 6or;or$tionSsL < < < ;rotest oK=L t#e
$ssess%ent %$/e 7@ t#e ;etitioner, 6onsi/erin3 t#$t t#e s$i/ 2etter K>$sL in itse2= $
reiter$tion o= t#e /e%$n/ 7@ t#e *.re$. o= Intern$2 Re-en.e =or t#e sett2e%ent o= t#e
$ssess%ent $2re$/@ %$/e, $n/ =or t#e i%%e/i$te ;$@%ent o= t#e s.% o= PF:8,C8F.04
in s;ite o= t#e -e#e%ent ;rotest o= t#e res;on/ent 6or;or$tion on A;ri2 91, 18C1. T#is
6ert$in2@ is $ 62e$r in/i6$tion o= t#e =ir% st$n/ o= ;etitioner $3$inst t#e
re6onsi/er$tion o= t#e disputed assessment, in -ie> o= t#e 6ontin.e/ re=.s$2 o= t#e
res;on/ent 6or;or$tion to e<e6.te t#e >$i-er o= t#e ;erio/ o= 2i%it$tion .;on t#e
$ssess%ent in G.estion.
T#is 7ein3 so, t#e s$i/ 2etter $%o.ntKe/L to $ /e6ision on $ /is;.te/ or ;roteste/
$ssess%ent $n/, t#ere, t#e 6o.rt a quo /i/ not err in t$?in3 6o3niN$n6e o= t#is 6$se.Q
11

Si%i2$r2@, in Surigao Electric Co., Inc. v. Court of Tax Appeals
19
$n/ $3$in in CI v.
"nion S#ipping Corp.,
13
>e r.2e/:
Q< < <. T#e 2etter o= /e%$n/ /$te/ A;ri2 98, 18C3 .nG.estion$72@ 6onstit.tes t#e =in$2
$6tion t$?en 7@ t#e 6o%%issioner on t#e ;etitionerSs se-er$2 reG.ests =or
re6onsi/er$tion $n/ re6o%;.t$tion. In t#is 2etter t#e 6o%%issioner not on2@ in e==e6t
/e%$n/e/ t#$t t#e ;etitioner ;$@ t#e $%o.nt o= P11,:33.:3 7.t $2so 3$-e >$rnin3 t#$t
in t#e e-ent it =$i2e/ to ;$@, t#e s$i/ 6o%%issioner >o.2/ 7e 6onstr$ine/ to en=or6e
t#e 6o22e6tion t#ereo= 7@ %e$ns o= t#e re%e/ies ;ro-i/e/ 7@ 2$>. T#e tenor o= t#e
2etter, s;e6i=i6$22@ t#e st$te%ent re3$r/in3 t#e resort to 2e3$2 re%e/ies, .n%ist$?$72@
in/i6$teK/L t#e =in$2 n$t.re o= t#e /eter%in$tion %$/e 7@ t#e 6o%%issioner o= t#e
;etitionerSs /e=i6ien6@ =r$n6#ise t$< [email protected]
As in CI v. "nion S#ipping,
14
;etitioner =$i2e/ to r.2e on t#e )otion =or Re6onsi/er$tion
=i2e/ 7@ ;ri-$te res;on/ent, 7.t si%;2@ 6ontin.e/ to /e%$n/ ;$@%ent o= t#e 2$tterSs
$22e3e/ t$< /e2inG.en6@. T#.s, t#e Co.rt reiter$te/ t#e /i6t.% t#$t t#e *IR s#o.2/ $2>$@s
in/i6$te to t#e t$<;$@er in 62e$r $n/ .neG.i-o6$2 2$n3.$3e >#$t 6onstit.tes =in$2 $6tion
on $ /is;.te/ $ssess%ent. T#e o7De6t o= t#is ;o2i6@ is to $-oi/ re;e$te/ reG.ests =or
re6onsi/er$tion 7@ t#e t$<;$@er, t#ere7@ /e2$@in3 t#e =in$2it@ o= t#e $ssess%ent $n/,
6onseG.ent2@, t#e 6o22e6tion o= t#e t$<es /.e. 1.rt#er%ore, t#e t$<;$@er >o.2/ not 7e
3ro;in3 in t#e /$r?, s;e6.2$tin3 $s to >#i6# 6o%%.ni6$tion or $6tion o= t#e *IR %$@ 7e
t#e /e6ision $;;e$2$72e to t#e t$< 6o.rt.
1:

In t#e inst$nt 6$se, t#e se6on/ noti6e re6ei-e/ 7@ ;ri-$te res;on/ent -eri2@ in/i6$te/ its
n$t.re O t#$t it >$s final. (neG.i-o6$72@, t#ere=ore, it >$s t$nt$%o.nt to $ reDe6tion o= t#e
reG.est =or re6onsi/er$tion.
Commissioner v. Algue
1C
is not in ;oint #ere. In t#$t 6$se, t#e W$rr$nt o= Distr$int $n/
Le-@, iss.e/ to t#e t$<;$@er >it#o.t $n@ 6$te3ori6$2 r.2in3 on its reG.est =or
re6onsi/er$tion, >$s not /ee%e/ eG.i-$2ent to $ /eni$2 o= t#e reG.est. *e6$.se s.6#
reG.est 6o.2/ not in =$6t 7e =o.n/ in its re6or/s, t#e *IR 6$nnot 7e ;res.%e/ to #$-e
t$?en it into 6onsi/er$tion. T#e reG.est >$s 6onsi/ere/ on2@ >#en t#e t$<;$@er 3$-e $
6o;@ o= it, /.2@ st$%;,re6ei-e/ 7@ t#e *IR. 4en6e, t#e W$rr$nt >$s /ee%e/
;re%$t.re.5A'p#i5.nBt
In t#e ;resent 6$se, ;etitioner /oes not /en@ re6ei;t o= ;ri-$te res;on/entSs ;rotest 2etter.
As $ %$tter o= =$6t, it 6$te3ori6$22@ re2$tes t#e =o22o>in3 in its QSt$te%ent o= Re2e-$nt
1$6tsQ:
1F

Q3. On )$r6# 93, 1880, res;on/ent ICC >rote t#e CIR reG.estin3 =or $
re6onsi/er$tion o= t#e $ssess%ent on t#e 3ro.n/ t#$t t#ere >$s $n error 6o%%itte/ in
t#e 6o%;.t$tion o= interest $n/ t#$t t#ere >ere e<;enses >#i6# >ere /is$22o>e/
"I7i/., ;;. 98C,311&.
Q4. On A;ri2 9, 1880, res;on/ent ICC sent t#e CIR $//ition$2 /o6.%ents in s.;;ort o=
its ;rotestEre6onsi/er$tion. T#e 2etter >$s re6ei-e/ 7@ t#e *IR on A;ri2 18, 1880.
Res;on/ent ICC =.rt#er e<e6.te/ $ W$i-er o= St$t.te o= Li%it$tion "/$te/ A;ri2 1F,
1880& >#ere7@ it 6onsente/ to t#e *IR to $ssess $n/ 6o22e6t $n@ t$<es t#$t %$@ 7e
/is6o-ere/ in t#e ;ro6ess o= rein-esti3$tion, .nti2 A;ri2 3, 1881 "I7i/., ;;. 98C,311&. A
6o;@ o= t#e >$i-er is #ereto $tt$6#e/ $s Anne< SCS.Q
4$-in3 $/%itte/ $s $ fact ;ri-$te res;on/entSs reG.est =or re6onsi/er$tion, ;etitioner %.st
#$-e ;$sse/ .;on it ;rior to t#e iss.$n6e o= t#e 1in$2 Noti6e *e=ore SeiN.re.
W4ERE1ORE, t#e Petition is #ere7@ D"&D $n/ t#e $ss$i2e/ De6ision AFF&'(D.
SO ORDERED.
4elo, :itug, Sandoval$2utierre3, JJ., 6on6.r.
2on3aga$e!es, on 2e$-e.
..R. No. /01/53 Ap!i# 52, 566E
CO--ISSIONER OF INTERNAL REVENUE, Petitioner,
-s.
(,ILI((INE ,EALT, CARE (ROVIDERS, INC., Res;on/ent.
D E C I S I O N
SANDOVAL:.UTIERREZ, J.:
1or o.r reso2.tion is t#e inst$nt Petition =or Re-ie> on Certior$ri .n/er R.2e 4: o= t#e
188F R.2es o= Ci-i2 Pro6e/.re, $s $%en/e/, see?in3 to re-erse t#e De6ision
1
/$te/
1e7r.$r@ 18, 900: $n/ Reso2.tion /$te/ )$@ 8, 900: o= t#e Co.rt o= A;;e$2s "1i=teent#
Di-ision& in CA,G.R. SP No. FC448.
T#e =$6t.$2 $nte6e/ents o= t#is 6$se, $s 6.22e/ =ro% t#e re6or/s, $re:
T#e P#i2i;;ine 4e$2t# C$re Pro-i/ers, In6., #erein res;on/ent, is $ 6or;or$tion or3$niNe/
$n/ e<istin3 .n/er t#e 2$>s o= t#e Re;.72i6 o= t#e P#i2i;;ines. P.rs.$nt to its Arti62es o=
In6or;or$tion,
9
its ;ri%$r@ ;.r;ose is QTo est$72is#, %$int$in, 6on/.6t $n/ o;er$te $
;re;$i/ 3ro.; ;r$6ti6e #e$2t# 6$re /e2i-er@ s@ste% or $ #e$2t# %$inten$n6e or3$niN$tion
to t$?e 6$re o= t#e si6? $n/ /is$72e/ ;ersons enro22e/ in t#e #e$2t# 6$re ;2$n $n/ to
;ro-i/e =or t#e $/%inistr$ti-e, 2e3$2, $n/ =in$n6i$2 res;onsi7i2ities o= t#e
or3$niN$tion.Q5Cvvp#i5.net
On !.2@ 9:, 188F, Presi/ent Cor$Non C. AG.ino iss.e/ E<e6.ti-e Or/er "E.O.& No. 9F3,
$%en/in3 t#e N$tion$2 Intern$2 Re-en.e Co/e o= 18FF "Presi/enti$2 De6ree No. 11:8& 7@
i%;osin3 $2.e,A//e/ T$< "AT& on t#e s$2e o= 3oo/s $n/ ser-i6es. T#is E.O. too? e==e6t
on !$n.$r@ 1, 1888.
*e=ore t#e e==e6ti-it@ o= E.O. No. 9F3, or on De6e%7er 10, 188F, res;on/ent >rote t#e
Co%%issioner o= Intern$2 Re-en.e "CIR&, ;etitioner, inG.irin3 >#et#er t#e ser-i6es it
;ro-i/es to t#e ;$rti6i;$nts in its #e$2t# 6$re ;ro3r$% $re e<e%;t =ro% t#e ;$@%ent o= t#e
AT.
On !.ne 8, 1888, ;etitioner CIR, t#ro.3# t#e AT Re-ie> Co%%ittee o= t#e *.re$. o=
Intern$2 Re-en.e "*IR&, iss.e/ AT R.2in3 No. 931,88 st$tin3 t#$t res;on/ent, $s $
;ro-i/er o= %e/i6$2 ser-i6es, is e<e%;t =ro% t#e AT 6o-er$3e. T#is R.2in3 >$s
s.7seG.ent2@ 6on=ir%e/ 7@ Re3ion$2 Dire6tor Os%.n/o G. (%$2i o= Re-en.e Re3ion
No. 8 in $ 2etter /$te/ A;ri2 99, 1884.
)e$n>#i2e, on !$n.$r@ 1, 188C, Re;.72i6 A6t "R.A.& No. FF1C "E<;$n/e/ AT or E,AT
L$>& too? e==e6t, $%en/in3 =.rt#er t#e N$tion$2 Intern$2 Re-en.e Co/e o= 18FF. T#en on
!$n.$r@ 1, 1888, R.A. No. 8494 "N$tion$2 Intern$2 Re-en.e Co/e o= 188F& 7e6$%e
e==e6ti-e. T#is ne> T$< Co/e s.7st$nti$22@ $/o;te/ $n/ re;ro/.6e/ t#e ;ro-isions o= E.O.
No. 9F3 on AT $n/ R.A. No. FF1C on E,AT.
In t#e interi%, on O6to7er 1, 1888, t#e *IR sent res;on/ent $ Pre2i%in$r@ Assess%ent
Noti6e =or /e=i6ien6@ in its ;$@%ent o= t#e AT $n/ /o6.%ent$r@ st$%; t$<es "DST& =or
t$<$72e @e$rs 188C $n/ 188F.
On O6to7er 90, 1888, res;on/ent =i2e/ $ ;rotest >it# t#e *IR.
On !$n.$r@ 9F, 9000, ;etitioner CIR sent res;on/ent $ 2etter /e%$n/in3 ;$@%ent o=
Q/e=i6ien6@ ATQ in t#e $%o.nt o= P100,:0:,030.9C $n/ DST in t#e $%o.nt o=
P194,18C,C10.89, or $ tot$2 o= P994,F09,C41.18 =or t$<$72e @e$rs 188C $n/ 188F.
Att$6#e/ to t#e /e%$n/ 2etter >ere =o.r "4& $ssess%ent noti6es.
On 1e7r.$r@ 93, 9000, res;on/ent =i2e/ $not#er ;rotest G.estionin3 t#e $ssess%ent
noti6es.
Petitioner CIR /i/ not t$?e $n@ $6tion on res;on/entSs ;rotests. 4en6e, on Se;te%7er 91,
9000, res;on/ent =i2e/ >it# t#e Co.rt o= T$< A;;e$2s "CTA& $ ;etition =or re-ie>,
/o6?ete/ $s CTA C$se No. C1CC.
On A;ri2 :, 9009, t#e CTA ren/ere/ its De6ision, t#e /is;ositi-e ;ortion o= >#i6# re$/s:
W4ERE1ORE, in -ie> o= t#e =ore3oin3, t#e inst$nt Petition =or Re-ie> is PARTIALL+
GRANTED. Petitioner is #ere7@ ORDERED TO PA+ t#e /e=i6ien6@ AT $%o.ntin3 to
P99,0:4,831.F: in62.si-e o= 9:U s.r6#$r3e ;2.s 90U interest =ro% !$n.$r@ 90, 188F
.nti2 =.22@ ;$i/ =or t#e 188C AT /e=i6ien6@ $n/ P31,084,1C3.8F in62.si-e o= 9:U
s.r6#$r3e ;2.s 90U interest =ro% !$n.$r@ 90, 1888 .nti2 ;$i/ =or t#e 188F AT
/[email protected]'p#i5.nDt A66or/in32@, AT R.2in3 No. 931,88 is /e62$re/ -oi/ $n/
>it#o.t =or6e $n/ e==e6t. T#e 188C $n/ 188F /e=i6ien6@ DST $ssess%ent $3$inst
;etitioner is #ere7@ CANCELLED AND SET ASIDE. Res;on/ent is ORDERED to
DESIST =ro% 6o22e6tin3 t#e s$i/ DST /e=i6ien6@ t$<.
SO ORDERED.
Res;on/ent =i2e/ $ %otion =or ;$rti$2 re6onsi/er$tion o= t#e $7o-e D./3%ent 6on6ernin3
its 2i$7i2it@ to ;$@ t#e /e=i6ien6@ AT.
In its Reso2.tion
3
/$te/ )$r6# 93, 9003, t#e CTA 3r$nte/ res;on/entSs %otion, t#.s:
W4ERE1ORE, in -ie> o= t#e =ore3oin3, t#e inst$nt )otion =or P$rti$2 Re6onsi/er$tion
is GRANTED. A66or/in32@, t#e AT $ssess%ent iss.e/ 7@ #erein res;on/ent $3$inst
;etitioner =or t#e t$<$72e @e$rs 188C $n/ 188F is #ere7@ WIT4DRAWN $n/ SET ASIDE.
SO ORDERED.
T#e CTA #e2/:
)oreo-er, t#is 6o.rt $/#eres to its 6on62.sion t#$t ;etitioner is $ se!&i=e =ont!a=to!
s.7De6t to AT sin6e it /oes not $6t.$22@ ren/er %e/i6$2 ser-i6e 7.t %ere2@ $6ts $s $
6on/.it 7et>een t#e %e%7ers $n/ ;etitionerSs $66re/ite/ $n/ re6o3niNe/ #os;it$2s $n/
62ini6s.
4o>e-er, $=ter $ 6$re=.2 re-ie> o= t#e =$6ts o= t#e 6$se $s >e22 $s t#e L$> $n/
D.ris;r./en6e $;;2i6$72e, t#is 6o.rt reso2-es to 3r$nt ;etitionerSs Q)otion =or P$rti$2
Re6onsi/er$tion.Q We $re in $66or/ >it# t#e -ie> o= ;etitioner t#$t it is entit2e/ to t#e
7ene=it o= non,retro$6ti-it@ o= r.2in3s 3.$r$ntee/ .n/er Se6tion 94C o= t#e T$< Co/e, in
t#e $7sen6e o= s#o>in3 o= 7$/ =$it# on its ;$rt. Se6tion 94C o= t#e T$< Co/e ;ro-i/es:
#ec. =EF. "on)'etroactivit* of 'ulings. : An@ re-o6$tion, %o/i=i6$tion or re-ers$2 o= $n@
o= t#e r.2es $n/ re3.2$tions ;ro%.23$te/ in $66or/$n6e >it# t#e ;re6e/in3 Se6tions or
$n@ o= t#e r.2in3s or 6ir6.2$rs ;ro%.23$te/ 7@ t#e Co%%issioner s#$22 not 7e 3i-en
retro$6ti-e $;;2i6$tion i= t#e re-o6$tion, %o/i=i6$tion or re-ers$2 >i22 7e ;reD./i6i$2 to t#e
t$<;$@ers, < < <.
C2e$r2@, .n/.e ;reD./i6e >i22 7e 6$.se/ to ;etitioner i= t#e re-o6$tion o= AT R.2in3 No.
931,88 >i22 7e retro$6ti-e2@ $;;2ie/ to its 6$se. AT R.2in3 No. 931,88 iss.e/ 7@ no 2ess
t#$n t#e res;on/ent itse2= #$s 6on=ir%e/ ;etitionerSs entit2e%ent to AT e<e%;tion .n/er
Se6tion 103 o= t#e T$< Co/e. In s$@in3 so, res;on/ent #$s $6t.$22@ 7ro$/ene/ t#e s6o;e
o= Q%e/i6$2 ser-i6esQ to in62./e t#e 6$se o= t#e ;etitioner. T#is AT r.2in3 >$s e-en
6on=ir%e/ s.7seG.ent2@ 7@ Re3ion$2 Dire6tor Or%.n/o G. (%$2i in #is 2etter /$te/ A;ri2
99, 1884 "Ex#i*it 4&. E<#i7it P, >#i6# ser-e/ $s 7$sis =or t#e iss.$n6e o= t#e s$i/ AT
r.2in3 in =$-or o= t#e ;etitioner s.==i6ient2@ /es6ri7e/ t#e 7.siness o= ;etitioner $n/ t#ere
is no >$@ *IR 6o.2/ 7e %is2e/ 7@ t#e s$i/ re;resent$tion $s to t#e re$2 n$t.re o=
;etitionerSs 7.siness. S.6# 7ein3 t#e 6$se, t#is 6o.rt is 6on-in6e/ t#$t ;etitionerSs re2i$n6e
on t#e s$i/ r.2in3 is ;re%ise/ on 3oo/ =$it#. T#e =$6ts o= t#e 6$se /o not s#o> t#$t
;etitioner /e2i7er$te2@ 6o%%itte/ %ist$?es or o%itte/ %$teri$2 =$6ts >#en it o7t$ine/ t#e
s$i/ r.2in3 =ro% t#e *.re$. o= Intern$2 Re-en.e. T#.s, in t#e $7sen6e o= s.6# ;roo=, t#is
6o.rt .;#o2/s t#e $;;2i6$tion o= Se6tion 94C o= t#e T$< Co/e. ConseG.ent2@, t#e
;rono.n6e%ent %$/e 7@ t#e *IR in AT R.2in3 No. 931,88 $s to t#e AT e<e%;tion o=
;etitioner s#o.2/ 7e .;#e2/.
Petitioner se$son$72@ =i2e/ >it# t#e Co.rt o= A;;e$2s $ ;etition =or re-ie>, /o6?ete/ $s
CA,G.R. SP No. FC448.
In its De6ision /$te/ 1e7r.$r@ 18, 900:, t#e Co.rt o= A;;e$2s $==ir%e/ t#e CTA
Reso2.tion.
Petitioner CIR =i2e/ $ %otion =or re6onsi/er$tion, 7.t it >$s /enie/ 7@ t#e $;;e22$te 6o.rt
in its Reso2.tion
4
/$te/ )$@ 8, 900:.
4en6e, t#e inst$nt ;etition =or re-ie> on 6ertior$ri r$isin3 t#ese t>o iss.es: "1& >#et#er
res;on/entSs ser-i6es $re s.7De6t to ATM $n/ "9& >#et#er AT R.2in3 No. 931,88
e<e%;tin3 res;on/ent =ro% ;$@%ent o= AT #$s retro$6ti-e $;;2i6$tion.
On t#e =irst iss.e, res;on/ent is 6ontestin3 ;etitionerSs $ssess%ent o= its AT 2i$7i2ities
=or t$<$72e @e$rs 188C $n/ 188F.
Se6tion 109
:
o= t#e N$tion$2 Intern$2 Re-en.e Co/e o= 18FF, $s $%en/e/ 7@ E.O. No.
9F3 "AT L$>& $n/ R.A. No. FF1C "E,AT L$>&, ;ro-i/es:
SEC. 109. :alue$added tax on sale of services and use or lease of properties. , "$& ate
and *ase of tax. , T#ere s#$22 7e 2e-ie/, $ssesse/ $n/ 6o22e6te/, $ -$2.e,$//e/ t$<
eG.i-$2ent to 10U o= 3ross re6ei;ts /eri-e/ =ro% t#e s$2e or e<6#$n3e o= ser-i6es,
in62./in3 t#e .se or 2e$se o= ;ro;erties.
T#e ;#r$se Qs$2e or e<6#$n3e o= ser-i6eQ %e$ns t#e ;er=or%$n6e o= $22 ?in/s o= ser-i6es
in t#e P#i2i;;ines =or $ =ee, re%.ner$tion or 6onsi/er$tion, in62./in3 t#ose ;er=or%e/ or
ren/ere/ 7@ 6onstr.6tion $n/ ser-i6e 6ontr$6tors < < <.
Se6tion 103
C
o= t#e s$%e Co/e s;e6i=ies t#e e<e%;t tr$ns$6tions =ro% t#e ;ro-ision o=
Se6tion 109, t#.s:
SEC. 103. Exempt Transactions. , T#e =o22o>in3 s#$22 7e e<e%;t =ro% t#e -$2.e,$//e/
t$<:
< < <
"2& )e/i6$2, /ent$2, #os;it$2 $n/ -eterin$r@ ser-i6es e<6e;t t#ose ren/ere/ 7@
;ro=ession$2s
< < <
T#e i%;ort o= t#e $7o-e ;ro-ision is ;2$in. It reG.ires no inter;ret$tion. It 6onte%;2$tes
t#e e<e%;tion =ro% AT o= t$<;$@ers en3$3e/ in t#e ;er=or%$n6e o= %e/i6$2, /ent$2,
#os;it$2, $n/ -eterin$r@ ser-i6es. In Commissioner of International evenue v. Seagate
Tec#nolog! GP#ilippinesH,
F
>e /e=ine/ $n e<e%;t tr$ns$6tion $s one in-o2-in3 3oo/s or
ser-i6es >#i6#, 7@ t#eir n$t.re, $re s;e6i=i6$22@ 2iste/ in $n/ e<;ress2@ e<e%;te/ =ro% t#e
AT, .n/er t#e T$< Co/e, >it#o.t re3$r/ to t#e t$< st$t.s o= t#e ;$rt@ in t#e tr$ns$6tion.
In Commissioner of Internal evenue v. Tos#i*a Information Equipment GP#ils.H Inc.,
8
>e
reiter$te/ t#is /e=inition.
In its 2etter to t#e *IR reG.estin3 6on=ir%$tion o= its AT,e<e%;t st$t.s, res;on/ent
/es6ri7e/ its ser-i6es $s =o22o>s:
(n/er t#e ;re;$i/ 3ro.; ;r$6ti6e #e$2t# 6$re /e2i-er@ s@ste% $/o;te/ 7@ 4e$2t# C$re,
in/i-i/.$2s enro22e/ in 4e$2t# C$reSs #e$2t# 6$re ;ro3r$% $re entit2e/ to ;re-enti-e,
/i$3nosti6, $n/ 6orre6ti-e %e/i6$2 ser-i6es to 7e /is;ense/ 7@ 4e$2t# C$reSs /.2@
2i6ense/ ;#@si6i$ns, s;e6i$2ists, $n/ ot#er ;ro=ession$2 te6#ni6$2 st$== ;$rti6i;$tin3 in s$i/
3ro.; ;r$6ti6e #e$2t# 6$re /e2i-er@ s@ste% est$72is#e/ $n/ o;er$te/ 7@ 4e$2t# C$re. S.6#
%e/i6$2 ser-i6es >i22 7e /is;ense/ in $ #os;it$2 or 62ini6 o>ne/, o;er$te/, or $66re/ite/
7@ 4e$2t# C$re. To 7e entit2e/ to re6ei-e s.6# %e/i6$2 ser-i6es =ro% 4e$2t# C$re, $n
in/i-i/.$2 %.st enro22 in 4e$2t# C$reSs #e$2t# 6$re ;ro3r$% $n/ ;$@ $n $nn.$2 =ee.
Enro22%ent in 4e$2t# C$reSs #e$2t# 6$re ;ro3r$% is on $ @e$r,to,@e$r 7$sis $n/ enro22ees
$re iss.e/ i/enti=i6$tion 6$r/s.
1ro% t#e =ore3oin3, t#e CTA %$/e t#e =o22o>in3 6on62.sions:
$& Res;on/ent ;is not a=tua##$ !en"e!ing e"i=a# se!&i=e <ut e!e#$ a=ting as a
=on"uit <et?een the e<e!s an" thei! a==!e"ite" an" !e=ogni%e" hospita#s an"
=#ini=s.;
7& It %ere2@ ;p!o&i"es an" a!!anges fo! the p!o&ision of p!e:nee" hea#th =a!e
se!&i=es to its e<e!s fo! a fiBe" p!epai" fee fo! a spe=ifie" pe!io" of tie.;
6& It t#en ;=ont!a=ts the se!&i=es of ph$si=ians, e"i=a# an" "enta# p!a=titione!s,
=#ini=s an" hospita#s to pe!fo! su=h se!&i=es to its en!o##e" e<e!s>; $n/
/& Res;on/ent ;a#so ente!s into =ont!a=t ?ith =#ini=s, hospita#s, e"i=a#
p!ofessiona#s an" then negotiates ?ith the !ega!"ing pa$ent s=hees,
finan=ing an" othe! p!o=e"u!es in the "e#i&e!$ of hea#th se!&i=es.;
We note t#$t t#ese =$6t.$2 =in/in3s o= t#e CTA >ere neit#er %o/i=ie/ nor re-erse/ 7@ t#e
Co.rt o= A;;e$2s. It is $ /o6trine t#$t =in/in3s o= =$6t o= t#e CTA, $ s;e6i$2 6o.rt
e<er6isin3 ;$rti6.2$r e<;ertise on t#e s.7De6t o= t$<, $re 3ener$22@ re3$r/e/ $s =in$2,
7in/in3, $n/ 6on62.si-e .;on t#is Co.rt, %ore so >#ere t#ese /o not 6on=2i6t >it# t#e
=in/in3s o= t#e Co.rt o= A;;e$2s.
8
(e!fo!=e, as !espon"ent "oes not a=tua##$ p!o&i"e
e"i=a# an"Go! hospita# se!&i=es, as p!o&i"e" un"e! Se=tion /6C on eBept
t!ansa=tions, <ut e!e#$ a!!anges fo! the sae, its se!&i=es a!e not VAT:eBept.
Re2$ti-e to t#e se6on/ iss.e, Se6tion 94C o= t#e 188F T$< Co/e, $s $%en/e/, ;ro-i/es
t#$t r.2in3s, 6ir6.2$rs, r.2es $n/ re3.2$tions ;ro%.23$te/ 7@ t#e Co%%issioner o= Intern$2
Re-en.e #$-e no retro$6ti-e $;;2i6$tion i= to $;;2@ t#e% >o.2/ ;reD./i6e t#e t$<;$@er.
T#e e<6e;tions to t#is r.2e $re: "1& >#ere t#e t$<;$@er /e2i7er$te2@ %isst$tes or o%its
%$teri$2 =$6ts =ro% #is ret.rn or in $n@ /o6.%ent reG.ire/ o= #i% 7@ t#e *.re$. o=
Intern$2 Re-en.eM "9& >#ere t#e =$6ts s.7seG.ent2@ 3$t#ere/ 7@ t#e *.re$. o= Intern$2
Re-en.e $re %$teri$22@ /i==erent =ro% t#e =$6ts on >#i6# t#e r.2in3 is 7$se/, or "3& >#ere
t#e t$<;$@er $6te/ in 7$/ =$it#.
We %.st no> /eter%ine >#et#er AT R.2in3 No. 931,88 e<e%;tin3 res;on/ent =ro%
;$@in3 its AT 2i$7i2ities #$s retro$6ti-e $;;2i6$tion.
In its Reso2.tion /$te/ )$r6# 93, 9003, t#e CTA =o.n/ t#$t t#ere is no s#o>in3 t#$t
res;on/ent Q/e2i7er$te2@ 6o%%itte/ %ist$?es or o%itte/ %$teri$2 =$6tsQ >#en it o7t$ine/
AT R.2in3 No. 931,88 =ro% t#e *IR. T#e CTA #e2/ t#$t res;on/entSs 2etter >#i6#
ser-e/ $s t#e 7$sis =or t#e AT r.2in3 Qs.==i6ient2@ /es6ri7e/Q its 7.siness $n/ Qt#ere is
no >$@ t#e *IR 6o.2/ 7e %is2e/ 7@ t#e s$i/ re;resent$tion $s to t#e re$2 n$t.reQ o= s$i/
7.siness.
In s.st$inin3 t#e CTA, t#e Co.rt o= A;;e$2s =o.n/ t#$t Qt#e =$i2.re o= res;on/ent to re=er
to itse2= $s $ #e$2t# %$inten$n6e or3$niN$tion is not $n in/i6$tion o= 7$/ =$it# or $
/e2i7er$te $tte%;t to %$?e =$2se re;resent$tions.Q As Qt#e ter% #e$2t# %$inten$n6e
or3$niN$tion /i/ not $s @et #$-e $n@ ;$rti6.2$r si3ni=i6$n6e =or t$< ;.r;oses,Q
res;on/entSs =$i2.re Qto in62./e $ ter% t#$t #$s @et to $6G.ire its ;resent /e=inition $n/
si3ni=i6$n6e 6$nnot 7e eG.$te/ >it# 7$/ =$it#.Q
We $3ree >it# 7ot# t#e T$< Co.rt $n/ t#e Co.rt o= A;;e$2s t#$t res;on/ent $6te/ in 3oo/
=$it#. In Civil Service Commission v. 4aala,
10
>e /es6ri7e/ 3oo/ =$it# $s Qt#$t st$te o=
%in/ /enotin3 #onest@ o= intention $n/ =ree/o% =ro% ?no>2e/3e o= 6ir6.%st$n6es >#i6#
o.3#t to ;.t t#e #o2/er .;on inG.ir@M $n #onest intention to $7st$in =ro% t$?in3 $n@
.n6ons6ientio.s $/-$nt$3e o= $not#er, e-en t#ro.3# te6#ni6$2ities o= 2$>, to3et#er >it#
$7sen6e o= $22 in=or%$tion, noti6e, or 7ene=it or 7e2ie= o= =$6ts >#i6# ren/er tr$ns$6tion
.n6ons6ientio.s.Q
A66or/in3 to t#e Co.rt o= A;;e$2s, res;on/entSs =$i2.re to /es6ri7e itse2= $s $ Q#e$2t#
%$inten$n6e or3$niN$tion,Q >#i6# is s.7De6t to AT, is not t$nt$%o.nt to 7$/ =$it#. We
note t#$t t#e ter% Q#e$2t# %$inten$n6e or3$niN$tionQ >$s =irst re6or/e/ in t#e P#i2i;;ine
st$t.te 7oo?s on2@ .;on t#e ;$ss$3e o= QT#e N$tion$2 4e$2t# Ins.r$n6e A6t o= 188:Q
"Re;.72i6 A6t No. F8F:&. Se6tion 4 "o& "3& t#ereo= /e=ines $ #e$2t# %$inten$n6e
or3$niN$tion $s Q$n entit@ t#$t ;ro-i/es, o==ers, or $rr$n3es =or 6o-er$3e o= /esi3n$te/
#e$2t# ser-i6es nee/e/ 7@ ;2$n %e%7ers =or $ =i<e/ ;re;$i/ ;re%i.%.Q (n/er t#is 2$>, $
#e$2t# %$inten$n6e or3$niN$tion is one o= t#e 62$sses o= $ Q#e$2t# 6$re ;ro-i/er.Q
It is t#.s $;;$rent t#$t >#en AT R.2in3 No. 931,88 >$s iss.e/ in res;on/entSs =$-or, t#e
ter% Q#e$2t# %$inten$n6e or3$niN$tionQ >$s @et .n?no>n or #$/ no si3ni=i6$n6e =or
t$<$tion ;.r;oses. Res;on/ent, t#ere=ore, 7e2ie-e/ in 3oo/ =$it# t#$t it >$s AT e<e%;t
=or t#e t$<$72e @e$rs 188C $n/ 188F on t#e 7$sis o= AT R.2in3 No. 931,88.
In A%S$C%) %roadcasting Corp. v. Court of Tax Appeals,
11
t#is Co.rt #e2/ t#$t .n/er
Se6tion 94C o= t#e 188F T$< Co/e, the Coissione! of Inte!na# Re&enue is
p!e=#u"e" f!o a"opting a position =ont!a!$ to one p!e&ious#$ taHen ?he!e inIusti=e
?ou#" !esu#t to the taBpa$e!. 4en6e, >#ere $n $ssess%ent =or /e=i6ien6@ >it##o2/in3
in6o%e t$<es >$s %$/e, t#ree @e$rs $=ter $ ne> *IR Cir6.2$r re-erse/ $ ;re-io.s one
.;on >#i6# t#e t$<;$@er #$/ re2ie/ .;on, s.6# $n $ssess%ent >$s ;reD./i6i$2 to t#e
t$<;$@er. To r.2e ot#er>ise, o;ine/ t#e Co.rt, >o.2/ 7e 6ontr$r@ to t#e tenets o= 3oo/
=$it#, eG.it@, $n/ =$ir ;2$@.
T#is Co.rt #$s 6onsistent2@ re$==ir%e/ its r.2in3 in A%S$C%) %roadcasting Corp. in t#e
2$ter 6$ses o= Commissioner of Internal evenue v. %orroug#s, &td.,
19
Commissioner of
Internal evenue v. 4ega 2en. 4dsg. Corp.
13
Commissioner of Internal evenue v.
Telefun+en Semiconductor GP#ils.H Inc.,
14
$n/ Commissioner of Internal evenue v. Court
of Appeals.
1:
T#e r.2e is t#$t t#e *IR r.2in3s #$-e no retro$6ti-e e==e6t >#ere $ 3ross2@
.n=$ir /e$2 >o.2/ res.2t to t#e ;reD./i6e o= t#e t$<;$@er, $s in t#is 6$se.
)ore re6ent2@, in Commissioner of Internal evenue v. %enguet Corporation,
1C
>#erein
t#e t$<;$@er >$s entit2e/ to t$< re=.n/s or 6re/its 7$se/ on t#e *IRSs o>n iss.$n6es 7.t
2$ter >$s s.//en2@ s$//2e/ >it# /e=i6ien6@ t$<es /.e to its s.7seG.ent r.2in3 6#$n3in3
t#e 6$te3or@ o= t#e t$<;$@erSs tr$ns$6tions =or t#e ;.r;ose o= ;$@in3 its AT, t#is Co.rt
r.2e/ t#$t $;;2@in3 s.6# r.2in3 retro$6ti-e2@ >o.2/ 7e ;reD./i6i$2 to t#e t$<;$@er.
+,EREFORE, >e DEN9 t#e ;etition $n/ AFFIR- t#e $ss$i2e/ De6ision $n/
Reso2.tion o= t#e Co.rt o= A;;e$2s in CA,G.R. SP No. FC448. No 6osts.
SO ORDERED.
CO--ISSIONER OF ..R. No. /DC56D
INTERNAL REVENUE,
Petitioner, Present:
'(IS()*ING, J.
, -ers.s , C#$ir;erson,
CARPIO,
CARPIO )ORALES,
TINGA, $n/
7UR-EISTER AND +AIN ELASCO, !R., JJ.
SCANDINAVIAN CONTRACTOR
-INDANAO, INC., Pro%.23$te/:
Res;on/ent.
!$n.$r@ 99, 900F
<,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,<
D E C I S I O N
CAR(IO+ J.:
The Case
T#is ;etition =or re-ie>K1L see?s to set $si/e t#e 1C A;ri2 9009 De6isionK9L o= t#e Co.rt
o= A;;e$2s in CA,G.R. SP No. CC341 $==ir%in3 t#e 8 A.3.st 9001 De6isionK3L o= t#e
Co.rt o= T$< A;;e$2s "CTA&. T#e CTA or/ere/ t#e Co%%issioner o= Intern$2 Re-en.e
";etitioner& to iss.e $ t$< 6re/it 6erti=i6$te =or PC,884,C:8.CF in =$-or o= *.r%eister $n/
W$in S6$n/in$-i$n Contr$6tor )in/$n$o, In6. "res;on/ent&.
The Ante=e"ents
T#e CTA s.%%$riNe/ t#e =$6ts, >#i6# t#e Co.rt o= A;;e$2s $/o;te/, $s =o22o>s:
KRes;on/entL is $ /o%esti6 6or;or$tion /.2@ or3$niNe/ $n/ e<istin3 .n/er $n/ 7@ -irt.e
o= t#e 2$>s o= t#e P#i2i;;ines >it# ;rin6i;$2 $//ress 2o6$te/ $t D$r.%$ *.i2/in3, !ose P.
L$.re2 A-en.e, L$n$n3, D$-$o Cit@.
It is re;resente/ t#$t $ =orei3n 6onsorti.% 6o%;ose/ o= *.r%eister $n/ W$in
S6$n/in$-i$n Contr$6tor AES "*WSC,Den%$r?&, )its.i En3ineerin3 $n/ S#i;7.i2/in3,
Lt/., $n/ )its.i $n/ Co., Lt/. entere/ into $ 6ontr$6t >it# t#e N$tion$2 Po>er
Cor;or$tion "NAPOCOR& =or t#e o;er$tion $n/ %$inten$n6e o= KNAPOCORHsL t>o
;o>er 7$r3es. T#e Consorti.% $;;ointe/ *WSC,Den%$r? $s its 6oor/in$tion %$n$3er.
*WSC,Den%$r? est$72is#e/ Kres;on/entL >#i6# s.76ontr$6te/ t#e $6t.$2 o;er$tion $n/
%$inten$n6e o= NAPOCORHs t>o ;o>er 7$r3es $s >e22 $s t#e ;er=or%$n6e o= ot#er
/.ties $n/ $6ts >#i6# ne6ess$ri2@ #$-e to 7e /one in t#e P#i2i;;ines.
NAPOCOR ;$i/ 6$;$6it@ $n/ ener3@ =ees to t#e Consorti.% in $ %i<t.re o= 6.rren6ies
")$r?, +en, $n/ Peso&. T#e =ree2@ 6on-erti72e non,Peso 6o%;onent is /e;osite/ /ire6t2@
to t#e Consorti.%Hs 7$n? $66o.nts in Den%$r? $n/ !$;$n, >#i2e t#e Peso,/eno%in$te/
6o%;onent is /e;osite/ in $ se;$r$te $n/ s;e6i$2 /esi3n$te/ 7$n? $66o.nt in t#e
P#i2i;;ines. On t#e ot#er #$n/, t#e Consorti.% ;$@s Kres;on/entL in =orei3n 6.rren6@
in>$r/2@ re%itte/ to t#e P#i2i;;ines t#ro.3# t#e 7$n?in3 s@ste%.
In or/er to $s6ert$in t#e t$< i%;2i6$tions o= t#e $7o-e tr$ns$6tions, Kres;on/entL so.3#t $
r.2in3 =ro% t#e *IR >#i6# res;on/e/ >it# *IR R.2in3 No. 093,8: /$te/ 1e7r.$r@ 14,
188:, /e62$rin3 t#erein t#$t i= Kres;on/entL 6#ooses to re3ister $s $ AT ;erson $n/ t#e
6onsi/er$tion =or its ser-i6es is ;$i/ =or in $66e;t$72e =orei3n 6.rren6@ $n/ $66o.nte/ =or
in $66or/$n6e >it# t#e r.2es $n/ re3.2$tions o= t#e *$n3?o Sentr$2 n3 Pi2i;in$s, t#e
$=ores$i/ ser-i6es s#$22 7e s.7De6t to AT $t Nero,r$te.
KRes;on/entL 6#ose to re3ister $s $ AT t$<;$@er. On )$@ 9C, 188:, t#e Certi=i6$te o=
Re3istr$tion 7e$rin3 RDO Contro2 No. 8:,113,00F::C >$s iss.e/ in =$-or o=
Kres;on/entL 7@ t#e Re-en.e Distri6t O==i6e No. 113 o= D$-$o Cit@.
1or t#e @e$r 188C, Kres;on/entL se$son$72@ =i2e/ its G.$rter2@ $2.e,A//e/ T$< Ret.rns
re=2e6tin3, $%on3 ot#ers, $ tot$2 Nero,r$te/ s$2es o= P14F,31F,188.C9 >it# AT in;.t
t$<es o= P3,3C1,1F4.14, /et$i2e/ $s =o22o>s:
'tr. E<#. D$te 1i2e/ 0ero,R$te/ S$2es AT In;.t T$<
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
1
st
E 04,18,8C P 33,018,C:1.0F PC08,8:3.48
9
n/
1 0F,1C,8C 3F,108,8C3.33 F:C,809.CC
3
r/
G 10,14,8C 34,18C,3F9.3: 830,9F8.14
4
t#
4 01,90,8F 49,889,309.8F 1,0C:,138.8C
Tot$2s P 14F,31F,188.C9 P 3,3C1,1F4.14
On De6e%7er 98, 188F, Kres;on/entL $-$i2e/ o= t#e o2.nt$r@ Assess%ent Pro3r$%
"AP& o= t#e *IR. It $22e3e/2@ %isinter;rete/ Re-en.e Re3.2$tions No. :,8C /$te/
1e7r.$r@ 90, 188C to 7e $;;2i6$72e to its 6$se. Re-en.e Re3.2$tions No. :,8C ;ro-i/es in
;$rt t#.s:
SECTIONS 4.109,9"7&"9& $n/ 4.103,1"*&"6& o= Re-en.e Re3.2$tions No. F,8: $re
#ere7@ $%en/e/ to re$/ $s =o22o>s:
Se6tion 4.109,9"7&"9& O ASer-i6es ot#er t#$n ;ro6essin3, %$n.=$6t.rin3 or re;$6?in3 =or
ot#er ;ersons /oin3 7.siness o.tsi/e t#e P#i2i;;ines =or 3oo/s >#i6# $re s.7seG.ent2@
e<;orte/, $s >e22 $s ser-i6es 7@ $ resi/ent to $ non,resi/ent =orei3n 62ient s.6# $s ;roDe6t
st./ies, in=or%$tion ser-i6es, en3ineerin3 $n/ $r6#ite6t.r$2 /esi3ns $n/ ot#er si%i2$r
ser-i6es, t#e 6onsi/er$tion =or >#i6# is ;$i/ =or in $66e;t$72e =orei3n 6.rren6@ $n/
$66o.nte/ =or in $66or/$n6e >it# t#e r.2es $n/ re3.2$tions o= t#e *SP.B
< < < < < < < < < <.
In K6on=or%it@L >it# t#e $=ore6ite/ Re-en.e Re3.2$tions, Kres;on/entL s.7De6te/ its s$2e
o= ser-i6es to t#e Consorti.% to t#e 10U AT in t#e tot$2 $%o.nt o= P103,::8,338.11
re;resentin3 A;ri2 to De6e%7er 188C s$2es sin6e s$i/ Re-en.e Re3.2$tions No. :,8C
7e6$%e e==e6ti-e on2@ on A;ri2 188C. T#e s.% o= P43,883,8:1.0F, re;resentin3 !$n.$r@
to )$r6# 188C s$2es >$s s.7De6te/ to Nero r$te. ConseG.ent2@, Kres;on/entL =i2e/ its 188C
$%en/e/ AT ret.rn 6onso2i/$tin3 t#erein t#e AT o.t;.t $n/ in;.t t$<es =or t#e =o.r
6$2en/$r G.$rters o= 188C. It ;$i/ t#e $%o.nt o= PC,884,C:8.CF t#ro.3# *IRHs 6o22e6tin3
$3ent, PCI*$n?, $s its o.t;.t t$< 2i$7i2it@ =or t#e @e$r 188C, 6o%;.te/ $s =o22o>s:
A%o.nt s.7De6t to 10U AT P103,::8,338.11
).2ti;2@ 7@ 10U
AT O.t;.t T$< P 10,3::,833.81
Less: 188C In;.t AT P 3,3C1,1F4.14
AT O.t;.t T$< P$@$72e P C,884,C:8.CF
On !$n.$r@ F,1888, Kres;on/entL >$s $72e to se6.re AT R.2in3 No. 003,88 =ro% t#e
AT Re-ie> Co%%ittee >#i6# re6on=ir%e/ *IR R.2in3 No. 093,8: Ainso=$r $s it #e2/
t#$t t#e ser-i6es 7ein3 ren/ere/ 7@ *WSC)I is s.7De6t to AT $t Nero ;er6ent "0U&.B
On t#e stren3t# o= t#e $=ore%entione/ r.2in3s, Kres;on/entL on A;ri2 99,1888, =i2e/ $
62$i% =or t#e iss.$n6e o= $ t$< 6re/it 6erti=i6$te >it# Re-en.e Distri6t No. 113 o= t#e *IR.
KRes;on/entL 7e2ie-e/ t#$t it erroneo.s2@ ;$i/ t#e o.t;.t AT =or 188C /.e to its
$-$i2%ent o= t#e o2.nt$r@ Assess%ent Pro3r$% "AP& o= t#e *IR.K4L
On 9F De6e%7er 1888, res;on/ent =i2e/ $ ;etition =or re-ie> >it# t#e CTA in or/er to
to22 t#e r.nnin3 o= t#e t>o,@e$r ;res6ri;ti-e ;erio/ .n/er t#e T$< Co/e.
The Ru#ing of the Cou!t of TaB Appea#s
In its 8 A.3.st 9001 De6ision, t#e CTA or/ere/ ;etitioner to iss.e $ t$< 6re/it 6erti=i6$te
=or PC,884,C:8.CF in =$-or o= res;on/ent. T#e CTAHs r.2in3 st$te/:
KRes;on/entHsL s$2e o= ser-i6es to t#e Consorti.% K>$sL ;$i/ =or in $66e;t$72e =orei3n
6.rren6@ in>$r/2@ re%itte/ to t#e P#i2i;;ines $n/ $66o.nte/ =or in $66or/$n6e >it# t#e
r.2es $n/ re3.2$tions o= *$n3?o Sentr$2 n3 Pi2i;in$s. T#ese >ere est$72is#e/ 7@ -$rio.s
*PI Cre/it )e%os s#o>in3 re%itt$n6es in D$nis# Kroner "DKK& $n/ (S /o22$rs "(SV&
$s ;$@%ents =or t#e s;e6i=i6 in-oi6es 7i22e/ 7@ Kres;on/entL to t#e 6onsorti.%. T#ese
re%itt$n6es >ere =.rt#er 6erti=ie/ 7@ t#e *r$n6# )$n$3er < < < o= *PI,D$-$o L$n$n3
*r$n6# to re;resent ;$@%ents =or s.7,6ontr$6t =ees t#$t 6$%e =ro% Den D$ns?e
A?tiese2s?$7 *$n?,Den%$r? =or t#e $66o.nt o= Kres;on/entL. C2e$r2@, Kres;on/entHsL s$2e
o= ser-i6es to t#e Consorti.% is s.7De6t to AT $t 0U ;.rs.$nt to Se6tion 108"*&"9& o=
t#e T$< Co/e.
< < < <
T#e Nero,r$tin3 o= Kres;on/entHsL s$2e o= ser-i6es to t#e Consorti.% >$s e-en 6on=ir%e/
7@ t#e K;etitionerL in *IR R.2in3 No. 093,8: /$te/ 1e7r.$r@ 1:, 188:, $n/ 2$ter 7@ AT
R.2in3 No. 003,88 /$te/ !$n.$r@ F,1888, < < <.
Sin6e it is $;;$rent t#$t t#e ;$@%ents =or t#e ser-i6es ren/ere/ 7@ Kres;on/entL >ere
in/ee/ s.7De6t to AT $t Nero ;er6ent, it =o22o>s t#$t it %ist$?en2@ $-$i2e/ o= t#e
o2.nt$r@ Assess%ent Pro3r$% 7@ ;$@in3 o.t;.t t$< =or its s$2e o= ser-i6es. < < <
< < < Consi/erin3 t#e ;rin6i;2e o= solutio inde*iti >#i6# reG.ires t#e ret.rn o= >#$t #$s
7een /e2i-ere/ 7@ %ist$?e, t#e K;etitionerL is o72i3$te/ to iss.e t#e t$< 6re/it 6erti=i6$te
;r$@e/ =or 7@ Kres;on/entL. < < <K:L
Petitioner =i2e/ $ ;etition =or re-ie> >it# t#e Co.rt o= A;;e$2s, >#i6# /is%isse/ t#e
;etition =or 2$6? o= %erit $n/ $==ir%e/ t#e CTA /e6ision.KCL
4en6e, t#is ;etition.
The Cou!t of Appea#sJ Ru#ing
In $==ir%in3 t#e CTA, t#e Co.rt o= A;;e$2s reDe6te/ ;etitionerHs -ie> t#$t sin6e
res;on/entHs ser-i6es $re not /estine/ =or 6ons.%;tion $7ro$/, t#e@ $re not o= t#e s$%e
n$t.re $s ;roDe6t st./ies, in=or%$tion ser-i6es, en3ineerin3 $n/ $r6#ite6t.r$2 /esi3ns, $n/
ot#er si%i2$r ser-i6es %entione/ in Se6tion 4.109,9"7&"9& o= Re-en.e Re3.2$tions No. :,
8CKFL $s s.7De6t to 0U AT. T#.s, $66or/in3 to ;etitioner, res;on/entHs ser-i6es 6$nnot
2e3$22@ G.$2i=@ =or 0U AT 7.t $re s.7De6t to t#e re3.2$r 10U AT.K8L
T#e Co.rt o= A;;e$2s =o.n/ .nten$72e ;etitionerHs 6ontention t#$t .n/er AT R.2in3 No.
040,88, res;on/entHs ser-i6es s#o.2/ 7e /estine/ =or 6ons.%;tion $7ro$/ to enDo@ Nero,
r$tin3. Contr$r@ to ;etitionerHs inter;ret$tion, t#ere $re t>o ?in/s o= tr$ns$6tions or
ser-i6es s.7De6t to Nero ;er6ent AT .n/er AT R.2in3 No. 040,88. T#ese $re "$&
ser-i6es ot#er t#$n re;$6?in3 3oo/s =or ot#er ;ersons /oin3 7.siness o.tsi/e t#e
P#i2i;;ines >#i6# 3oo/s $re s.7seG.ent2@ e<;orte/M $n/ "7& ser-i6es 7@ $ resi/ent to $
non,resi/ent =orei3n 62ient, s.6# $s ;roDe6t st./ies, in=or%$tion ser-i6es, en3ineerin3 $n/
$r6#ite6t.r$2 /esi3ns $n/ ot#er si%i2$r ser-i6es, t#e 6onsi/er$tion =or >#i6# is ;$i/ =or in
$66e;t$72e =orei3n 6.rren6@ $n/ $66o.nte/ =or in $66or/$n6e >it# t#e r.2es $n/
re3.2$tions o= t#e %ang+o Sentral ng Pilipinas "*SP&.K8L
T#e Co.rt o= A;;e$2s st$te/ t#$t Aon2@ t#e =irst 62$ssi=i6$tion is reG.ire/ 7@ t#e ;ro-ision
to 7e 6ons.%e/ $7ro$/ in or/er to 7e t$<e/ $t Nero r$te. In < < < t#e $7sen6e o= s.6#
e<;ress or i%;2ie/ sti;.2$tion in t#e st$t.te, t#e se6on/ 62$ssi=i6$tion nee/ not 7e
6ons.%e/ $7ro$/.BK10L
T#e Co.rt o= A;;e$2s =.rt#er #e2/ t#$t $ss.%in3 ;etitionerHs inter;ret$tion o= Se6tion
4.109,9"7&"9& o= Re-en.e Re3.2$tions No. :,8C is 6orre6t, s.6# $/%inistr$ti-e ;ro-ision
is -oi/ 7ein3 $n $%en/%ent to t#e T$< Co/e. Petitioner >ent 7e@on/ %ere2@ ;ro-i/in3
t#e i%;2e%entin3 /et$i2s 7@ $//in3 $not#er reG.ire%ent to Nero,r$tin3. AT#is is in/i6$te/
7@ t#e $//ition$2 ;#r$se W$s >e22 $s ser-i6es 7@ $ resi/ent to $ non,resi/ent =orei3n 62ient,
s.6# $s ;roDe6t st./ies, in=or%$tion ser-i6es $n/ en3ineerin3 $n/ $r6#ite6t.r$2 /esi3ns
$n/ ot#er si%i2$r ser-i6es.H In e==e6t, t#is ;#r$se $//s not D.st one 7.t t>o reG.isites: "$&
ser-i6es %.st 7e ren/ere/ 7@ $ resi/ent to $ non,resi/entM $n/ "7& t#ese %.st 7e in t#e
n$t.re o= ;roDe6t st./ies, in=or%$tion ser-i6es, et6.BK11L
T#e Co.rt o= A;;e$2s e<;2$ine/ t#$t .n/er Se6tion 108"7&"9& o= t#e T$< Co/e,K19L =or
ser-i6es >#i6# >ere ;er=or%e/ in t#e P#i2i;;ines to enDo@ Nero,r$tin3, t#ese %.st 6o%;2@
on2@ >it# t>o reG.isites, to >it: "1& ;$@%ent in $66e;t$72e =orei3n 6.rren6@ $n/ "9&
$66o.nte/ =or in $66or/$n6e >it# t#e r.2es o= t#e *SP. Se6tion 108"7&"9& o= t#e T$< Co/e
/oes not ;ro-i/e t#$t ser-i6es %.st 7e A/estine/ =or 6ons.%;tion $7ro$/B in or/er to 7e
AT Nero,r$te/.K13L
T#e Co.rt o= A;;e$2s /is$3ree/ >it# ;etitionerHs $r3.%ent t#$t o.r AT 2$> 3ener$22@
=o22o>s t#e /estin$tion ;rin6i;2e "i.e., e<;orts e<e%;t, i%;orts t$<$72e&.K14L T#e Co.rt o=
A;;e$2s st$te/ t#$t Ai= in/ee/ t#e W/estin$tion ;rin6i;2eH .n/er2ies $n/ is t#e 7$sis o= t#e
AT 2$>s, t#en ;etitionerHs ;ro;er re%e/@ >o.2/ 7e to re6o%%en/ $n $%en/%ent o=
Se6tion 108"7&"9& to Con3ress. Wit#o.t s.6# $%en/%ent, #o>e-er, ;etitioner s#o.2/
$;;2@ t#e ter%s o= t#e 7$si6 2$>. Petitioner 6o.2/ not resort to $/%inistr$ti-e 2e3is2$tion,
$s >#$t K#eL #$/ /one in t#is 6$se.BK1:L
The Issue
T#e 2one iss.e =or reso2.tion is >#et#er res;on/ent is entit2e/ to t#e re=.n/ o=
PC,884,C:8.CF $s erroneo.s2@ ;$i/ o.t;.t AT =or t#e @e$r 188C.K1CL
The Ru#ing of the Cou!t
We /en@ t#e ;etition.
At t#e o.tset, t#e Co.rt /e62$res t#$t t#e /eni$2 o= t#e inst$nt ;etition is not on t#e 3ro.n/
t#$t res;on/entHs ser-i6es $re s.7De6t to 0U AT. R$t#er, it is 7$se/ on t#e non,
retro$6ti-it@ o= t#e ;reD./i6i$2 re-o6$tion o= *IR R.2in3 No. 093,8:K1FL $n/ AT R.2in3
No. 003,88,K18L >#i6# #e2/ t#$t res;on/entHs ser-i6es $re s.7De6t to 0U AT $n/ >#i6#
res;on/ent in-o?e/ in $;;2@in3 =or re=.n/ o= t#e o.t;.t AT.
Se6tion 109"7& o= t#e T$< Co/e,K18L t#e $;;2i6$72e ;ro-ision in 188C >#en res;on/ent
ren/ere/ t#e ser-i6es $n/ ;$i/ t#e AT in G.estion, en.%er$tes >#i6# ser-i6es $re Nero,
r$te/, t#.s:
"7& Transactions su*?ect to 3ero$rate. X T#e =o22o>in3 ser-i6es ;er=or%e/ in t#e
P#i2i;;ines 7@ AT,re3istere/ ;ersons s#$22 7e s.7De6t to 0U:
"1& Pro6essin3, %$n.=$6t.rin3 or re;$6?in3 3oo/s fo! othe! pe!sons "oing <usiness
outsi"e the (hi#ippines >#i6# 3oo/s $re s.7seG.ent2@ e<;orte/, >#ere t#e ser-i6es $re
;$i/ =or in $66e;t$72e =orei3n 6.rren6@ $n/ $66o.nte/ =or in $66or/$n6e >it# t#e r.2es
$n/ re3.2$tions o= t#e %ang+o Sentral ng Pilipinas "*SP&M
"9& Se!&i=es othe! than those entione" in the p!e=e"ing su<:pa!ag!aph, t#e
6onsi/er$tion =or >#i6# is ;$i/ =or in $66e;t$72e =orei3n 6.rren6@ $n/ $66o.nte/ =or in
$66or/$n6e >it# t#e r.2es $n/ re3.2$tions o= t#e %ang+o Sentral ng Pilipinas "*SP&M
"3& Ser-i6es ren/ere/ to ;ersons or entities >#ose e<e%;tion .n/er s;e6i$2 2$>s or
intern$tion$2 $3ree%ents to >#i6# t#e P#i2i;;ines is $ si3n$tor@ e==e6ti-e2@ s.7De6ts t#e
s.;;2@ o= s.6# ser-i6es to Nero r$teM
"4& Ser-i6es ren/ere/ to -esse2s en3$3e/ e<62.si-e2@ in intern$tion$2 s#i;;in3M $n/
":& Ser-i6es ;er=or%e/ 7@ s.76ontr$6tors $n/Eor 6ontr$6tors in ;ro6essin3, 6on-ertin3, or
%$n.=$6t.rin3 3oo/s =or $n enter;rise >#ose e<;ort s$2es e<6ee/ se-ent@ ;er6ent "F0U&
o= tot$2 $nn.$2 ;ro/.6tion. "E%;#$sis s.;;2ie/&
In insistin3 t#$t its ser-i6es s#o.2/ 7e Nero,r$te/, res;on/ent 62$i%s t#$t it 6o%;2ie/ >it#
t#e reG.ire%ents o= t#e T$< Co/e =or Nero r$tin3 .n/er t#e se6on/ ;$r$3r$;# o= Se6tion
109"7&. Res;on/ent $sserts t#$t "1& t#e ;$@%ent o= its ser-i6e =ees >$s in $66e;t$72e
=orei3n 6.rren6@, "9& t#ere >$s in>$r/ re%itt$n6e o= t#e =orei3n 6.rren6@ into t#e
P#i2i;;ines, $n/ "3& $66o.ntin3 o= s.6# re%itt$n6e >$s in $66or/$n6e >it# *SP r.2es.
)oreo-er, res;on/ent 6onten/s t#$t its ser-i6es >#i6# A6onstit.te t#e $6t.$2 o;er$tion
$n/ %$n$3e%ent o= t>o "9& ;o>er 7$r3es in )in/$n$oB $re not Ae-en re%ote2@ si%i2$r to
;roDe6t st./ies, in=or%$tion ser-i6es $n/ en3ineerin3 $n/ $r6#ite6t.r$2 /esi3ns .n/er
Se6tion 4.109,9"7&"9& o= Re-en.e Re3.2$tions No. :,8C.B As s.6#, res;on/entHs ser-i6es
nee/ not 7e A/estine/ to 7e 6ons.%e/ $7ro$/ in or/er to 7e AT Nero,r$te/.B
Res;on/ent is %ist$?en.
T#e T$< Co/e not on2@ reG.ires t#$t t#e ser-i6es 7e ot#er t#$n A;ro6essin3,
%$n.=$6t.rin3 or re;$6?in3 o= 3oo/sB $n/ t#$t ;$@%ent =or s.6# ser-i6es 7e in
$66e;t$72e =orei3n 6.rren6@ $66o.nte/ =or in $66or/$n6e >it# *SP r.2es. Anot#er
essenti$2 6on/ition =or G.$2i=i6$tion to Nero,r$tin3 .n/er Se6tion 109"7&"9& is t#$t t#e
re6i;ient o= s.6# ser-i6es is /oin3 7.siness o.tsi/e t#e P#i2i;;ines. W#i2e t#is
reG.ire%ent is not e<;ress2@ st$te/ in t#e se6on/ ;$r$3r$;# o= Se6tion 109"7&, t#is is
62e$r2@ ;ro-i/e/ in t#e =irst ;$r$3r$;# o= Se6tion 109"7& >#ere t#e 2iste/ ser-i6es %.st 7e
A=or ot#er ;ersons /oin3 7.siness o.tsi/e t#e P#i2i;;ines.B T#e ;#r$se A=or ot#er ;ersons
/oin3 7.siness o.tsi/e t#e P#i2i;;inesB not on2@ re=ers to t#e ser-i6es en.%er$te/ in t#e
=irst ;$r$3r$;# o= Se6tion 109"7&, 7.t $2so ;ert$ins to t#e 3ener$2 ter% Aser-i6esB
$;;e$rin3 in t#e se6on/ ;$r$3r$;# o= Se6tion 109"7&. In s#ort, ser-i6es ot#er t#$n
;ro6essin3, %$n.=$6t.rin3, or re;$6?in3 o= 3oo/s %.st 2i?e>ise 7e ;er=or%e/ =or ;ersons
/oin3 7.siness o.tsi/e t#e P#i2i;;ines.
T#is 6$n on2@ 7e t#e 2o3i6$2 inter;ret$tion o= Se6tion 109"7&"9&. I= t#e ;ro-i/er $n/
re6i;ient o= t#e Aot#er ser-i6esB $re 7ot# /oin3 7.siness in t#e P#i2i;;ines, t#e ;$@%ent
o= =orei3n 6.rren6@ is irre2e-$nt. Ot#er>ise, t#ose s.7De6t to t#e re3.2$r AT .n/er
Se6tion 109"$& 6$n $-oi/ ;$@in3 t#e AT 7@ si%;2@ sti;.2$tin3 ;$@%ent in =orei3n
6.rren6@ in>$r/2@ re%itte/ 7@ t#e re6i;ient o= ser-i6es. To inter;ret Se6tion 109"7&"9& to
$;;2@ to $ ;$@er,re6i;ient o= ser-i6es /oin3 7.siness in t#e P#i2i;;ines is to %$?e t#e
;$@%ent o= t#e re3.2$r AT .n/er Se6tion 109"$& /e;en/ent on t#e 3enerosit@ o= t#e
t$<;$@er. T#e ;ro-i/er o= ser-i6es 6$n 6#oose to ;$@ t#e re3.2$r AT or $-oi/ it 7@
sti;.2$tin3 ;$@%ent in =orei3n 6.rren6@ in>$r/2@ re%itte/ 7@ t#e ;$@er,re6i;ient. S.6#
inter;ret$tion re%o-es Se6tion 109"$& $s $ t$< %e$s.re in t#e T$< Co/e, $n inter;ret$tion
t#is Co.rt 6$nnot s$n6tion. A t$< is $ %$n/$tor@ e<$6tion, not $ -o2.nt$r@ 6ontri7.tion.
W#en Se6tion 109"7&"9& sti;.2$tes ;$@%ent in A$66e;t$72e =orei3n 6.rren6@B .n/er *SP
r.2es, t#e 2$> 62e$r2@ en-isions t#e ;$@er,re6i;ient o= ser-i6es to 7e /oin3 7.siness
o.tsi/e t#e P#i2i;;ines. On2@ t#ose not /oin3 7.siness in t#e P#i2i;;ines 6$n 7e reG.ire/
.n/er *SP r.2esK90L to ;$@ in $66e;t$72e =orei3n 6.rren6@ =or t#eir ;.r6#$se o= 3oo/s or
ser-i6es =ro% t#e P#i2i;;ines. In $ /o%esti6 tr$ns$6tion, >#ere t#e ;ro-i/er $n/ re6i;ient
o= ser-i6es $re 7ot# /oin3 7.siness in t#e P#i2i;;ines, t#e *SP 6$nnot reG.ire $n@ ;$rt@ to
%$?e ;$@%ent in =orei3n 6.rren6@.
Ser-i6es 6o-ere/ 7@ Se6tion 109"7& "1& $n/ "9& $re in t#e n$t.re o= e<;ort s$2es sin6e t#e
;$@er,re6i;ient o= ser-i6es is /oin3 7.siness o.tsi/e t#e P#i2i;;ines. (n/er *SP r.2es,
K91L t#e ;ro6ee/s o= e<;ort s$2es %.st 7e re;orte/ to t#e *$n3?o Sentr$2 n3 Pi2i;in$s.
T#.s, t#ere is re$son to reG.ire t#e ;ro-i/er o= ser-i6es .n/er Se6tion 109"7& "1& $n/ "9&
to $66o.nt =or t#e =orei3n 6.rren6@ ;ro6ee/s to t#e *SP. T#e s$%e r$tion$2e /oes not
$;;2@ i= t#e ;ro-i/er $n/ re6i;ient o= t#e ser-i6es $re 7ot# /oin3 7.siness in t#e
P#i2i;;ines sin6e t#eir tr$ns$6tion is not in t#e n$t.re o= $n e<;ort s$2e e-en i= ;$@%ent is
/eno%in$te/ in =orei3n 6.rren6@.
1.rt#er, >#en t#e ;ro-i/er $n/ re6i;ient o= ser-i6es $re 7ot# /oin3 7.siness in t#e
P#i2i;;ines, t#eir tr$ns$6tion =$22s sG.$re2@ .n/er Se6tion 109"$& 3o-ernin3 /o%esti6 s$2e
or e<6#$n3e o= ser-i6es. In/ee/, t#is is $ ;.re2@ 2o6$2 s$2e or e<6#$n3e o= ser-i6es s.7De6t
to t#e re3.2$r AT, .n2ess o= 6o.rse t#e tr$ns$6tion =$22s .n/er t#e ot#er ;ro-isions o=
Se6tion 109"7&.
T#.s, >#en Se6tion 109"7&"9& s;e$?s o= AKsLe!&i=es othe! than those entione" in the
p!e=e"ing su<pa!ag!aph,' t#e 2e3is2$ti-e intent is t#$t on2@ t#e ser-i6es $re /i==erent
7et>een s.7;$r$3r$;#s 1 $n/ 9. T#e reG.ire%ents =or Nero,r$tin3, in62./in3 t#e essenti$2
6on/ition t#$t t#e re6i;ient o= ser-i6es is /oin3 7.siness o.tsi/e t#e P#i2i;;ines, re%$in
t#e s$%e .n/er 7ot# s.7;$r$3r$;#s.
Si3ni=i6$nt2@, t#e $%en/e/ Se6tion 108"7&K99L K;re-io.s2@ Se6tion 109"7&L o= t#e ;resent
T$< Co/e 62$ri=ies t#is 2e3is2$ti-e intent. E<;ress2@ in62./e/ $%on3 t#e tr$ns$6tions
s.7De6t to 0U AT $re AKsLer-i6es ot#er t#$n t#ose %entione/ in t#e K=irstL ;$r$3r$;# Ko=
Se6tion 108"7&L ren/ere/ to $ ;erson en3$3e/ in 7.siness 6on/.6te/ o.tsi/e t#e
P#i2i;;ines or to $ nonresi/ent ;erson not en3$3e/ in 7.siness >#o is o.tsi/e t#e
P#i2i;;ines >#en t#e ser-i6es $re ;er=or%e/, t#e 6onsi/er$tion =or >#i6# is ;$i/ =or in
$66e;t$72e =orei3n 6.rren6@ $n/ $66o.nte/ =or in $66or/$n6e >it# t#e r.2es $n/
re3.2$tions o= t#e *SP.B
In t#is 6$se, t#e ;$@er,re6i;ient o= res;on/entHs ser-i6es is t#e Consorti.% >#i6# is $
Doint,-ent.re /oin3 7.siness in t#e P#i2i;;ines. W#i2e t#e Consorti.%Hs ;rin6i;$2
%e%7ers $re non,resi/ent =orei3n 6or;or$tions, t#e Consorti.% itse2= is /oin3 7.siness in
t#e P#i2i;;ines. T#is is s#o>n 62e$r2@ in *IR R.2in3 No. 093,8: >#i6# st$tes t#$t t#e
6ontr$6t 7et>een t#e Consorti.% $n/ NAPOCOR is =or $ 1:,@e$r ter%, t#.s:
T#is re=ers to @o.r 2etter /$te/ !$n.$r@ 14, 1884 reG.estin3 =or $ 62$ri=i6$tion o= t#e t$<
i%;2i6$tions o= $ 6ontr$6t 7et>een $ 6onsorti.% 6o%;ose/ o= *.r%eister T W$in
S6$n/in$-i$n Contr$6tor AES "A*WSCB&, )its.i En3ineerin3 T S#i;7.i2/in3, Lt/.
")ES&, $n/ )its.i T Co., Lt/. "A)ITS(IB&, $22 re=erre/ to #erein$=ter $s t#e
AConsorti.%B, $n/ t#e N$tion$2 Po>er Cor;or$tion "ANAPOCORB& fo! the ope!ation
an" aintenan=e of t?o /66:-ega?att po?e! <a!ges @M(o?e! 7a!ges'A a=Nui!e" <$
NA(OCOR fo! a /D:$ea! te!.K93L "E%;#$sis s.;;2ie/&
Consi/erin3 t#is 2en3t# o= ti%e, t#e Consorti.%Hs o;er$tion $n/ %$inten$n6e o=
NAPOCORHs ;o>er 7$r3es 6$nnot 7e 62$ssi=ie/ $s $ sin32e or iso2$te/ tr$ns$6tion. T#e
Consorti.% /oes not =$22 .n/er Se6tion 109"7&"9& >#i6# reG.ires t#$t t#e re6i;ient o= t#e
ser-i6es %.st 7e $ ;erson /oin3 7.siness o.tsi/e t#e P#i2i;;ines. T#ere=ore, res;on/entHs
ser-i6es to t#e Consorti.%, not 7ein3 s.;;2ie/ to $ ;erson /oin3 7.siness o.tsi/e t#e
P#i2i;;ines, 6$nnot 2e3$22@ G.$2i=@ =or 0U AT.
Res;on/ent, $s s.76ontr$6tor o= t#e Consorti.%, o;er$tes $n/ %$int$ins NAPOCORHs
;o>er 7$r3es in t#e P#i2i;;ines. NAPOCOR ;$@s t#e Consorti.%, t#ro.3# its non,
resi/ent ;$rtners, ;$rt2@ in =orei3n 6.rren6@ o.t>$r/2@ re%itte/. In t.rn, t#e Consorti.%
;$@s res;on/ent $2so in =orei3n 6.rren6@ in>$r/2@ re%itte/ $n/ $66o.nte/ =or in
$66or/$n6e >it# *SP r.2es. T#is ;$@%ent s6#e%e /oes not entit2e res;on/ent to 0U AT.
As t#e Co.rt #e2/ in Co%%issioner o= Intern$2 Re-en.e -. A%eri6$n E<;ress
Intern$tion$2, In6. "P#i2i;;ine *r$n6#&,K94L t#e ;2$6e o= ;$@%ent is i%%$teri$2, %.6# 2ess
is t#e ;2$6e >#ere t#e o.t;.t o= t#e ser-i6e is .2ti%$te2@ .se/. An essenti$2 6on/ition =or
entit2e%ent to 0U AT .n/er Se6tion 109"7&"1& $n/ "9& is t#$t t#e re6i;ient o= t#e
ser-i6es is $ ;erson /oin3 7.siness o.tsi/e t#e P#i2i;;ines. In t#is 6$se, t#e re6i;ient o=
t#e ser-i6es is t#e Consorti.%, >#i6# is /oin3 7.siness not o.tsi/e, 7.t >it#in t#e
P#i2i;;ines 7e6$.se it #$s $ 1:,@e$r 6ontr$6t to o;er$te $n/ %$int$in NAPOCORHs t>o
100,%e3$>$tt ;o>er 7$r3es in )in/$n$o.
T#e Co.rt re6o3niNes t#e r.2e t#$t t#e AT s@ste% 3ener$22@ =o22o>s t#e A/estin$tion
;rin6i;2eB "e<;orts $re Nero,r$te/ >#ere$s i%;orts $re t$<e/&. 4o>e-er, $s t#e Co.rt
st$te/ in A%eri6$n E<;ress, t#ere is $n e<6e;tion to t#is r.2e.K9:L T#is e<6e;tion re=ers to
t#e 0U AT on ser-i6es en.%er$te/ in Se6tion 109 $n/ ;er=or%e/ in t#e P#i2i;;ines. 1or
ser-i6es 6o-ere/ 7@ Se6tion 109"7&"1& $n/ "9&, t#e re6i;ient o= t#e ser-i6es %.st 7e $
;erson /oin3 7.siness o.tsi/e t#e P#i2i;;ines. T#.s, to 7e e<e%;t =ro% t#e /estin$tion
;rin6i;2e .n/er Se6tion 109"7&"1& $n/ "9&, t#e ser-i6es %.st 7e "$& ;er=or%e/ in t#e
P#i2i;;inesM "7& =or $ ;erson /oin3 7.siness o.tsi/e t#e P#i2i;;inesM $n/ "6& ;$i/ in
$66e;t$72e =orei3n 6.rren6@ $66o.nte/ =or in $66or/$n6e >it# *SP r.2es.
Res;on/entHs re2i$n6e on t#e r.2in3 in A%eri6$n E<;ressK9CL is %is;2$6e/. T#$t 6$se
in-o2-e/ $ re6i;ient o= ser-i6es, s;e6i=i6$22@ A%eri6$n E<;ress Intern$tion$2, In6.
"4on3?on3 *r$n6#&, /oin3 7.siness o.tsi/e t#e P#i2i;;ines. T#ere, t#e Co.rt st$te/:
Res;on/ent KA%eri6$n E<;ress Intern$tion$2, In6. "P#i2i;;ine *r$n6#&L is $ AT,
re3istere/ ;erson t#$t =$6i2it$tes t#e 6o22e6tion $n/ ;$@%ent o= re6ei-$72es 7e2on3in3 to
its non,resi/ent =orei3n 62ient KA%eri6$n E<;ress Intern$tion$2, In6. "4on3?on3 *r$n6#&L,
=or >#i6# it 3ets ;$i/ in $66e;t$72e =orei3n 6.rren6@ in>$r/2@ re%itte/ $n/ $66o.nte/ =or
in $66or/$n6e >it# *SP r.2es $n/ re3.2$tions. < < < <K9FL "E%;#$sis s.;;2ie/&
In 6ontr$st, t#is 6$se in-o2-es $ re6i;ient o= ser-i6es O t#e Consorti.% O >#i6# is /oin3
7.siness in t#e P#i2i;;ines. 4en6e, A%eri6$n E<;ressH ser-i6es >ere s.7De6t to 0U AT,
>#i2e res;on/entHs ser-i6es s#o.2/ 7e s.7De6t to 10U AT.
Ne-ert#e2ess, in see?in3 $ re=.n/ o= its e<6ess o.t;.t t$<, res;on/ent re2ie/ on AT
R.2in3 No. 003,88,K98L >#i6# re6on=ir%e/ *IR R.2in3 No. 093,8:K98L Ainso=$r $s it #e2/
t#$t t#e ser-i6es 7ein3 ren/ere/ 7@ *WSC)I is s.7De6t to AT $t Nero ;er6ent "0U&.B
Res;on/entHs re2i$n6e on t#ese *IR r.2in3s 7in/s ;etitioner.
PetitionerHs =i2in3 o= #is Ans>er 7e=ore t#e CTA 6#$22en3in3 res;on/entHs 62$i% =or
re=.n/ e==e6ti-e2@ ser-es $s $ re-o6$tion o= AT R.2in3 No. 003,88 $n/ *IR R.2in3 No.
093,8:. 4o>e-er, s.6# re-o6$tion 6$nnot 7e 3i-en retro$6ti-e e==e6t sin6e it >i22
;reD./i6e res;on/ent. C#$n3in3 res;on/entHs st$t.s >i22 /e;ri-e res;on/ent o= $ re=.n/ o=
$ s.7st$nti$2 $%o.nt re;resentin3 e<6ess o.t;.t t$<.K30L Se6tion 94C o= t#e T$< Co/e
;ro-i/es t#$t $n@ re-o6$tion o= $ r.2in3 7@ t#e Co%%issioner o= Intern$2 Re-en.e s#$22
not 7e 3i-en retro$6ti-e $;;2i6$tion i= t#e re-o6$tion >i22 ;reD./i6e t#e t$<;$@er. 1.rt#er,
t#ere is no s#o>in3 o= t#e e<isten6e o= $n@ o= t#e e<6e;tions en.%er$te/ in Se6tion 94C
o= t#e T$< Co/e =or t#e retro$6ti-e $;;2i6$tion o= s.6# re-o6$tion.
4o>e-er, .;on t#e =i2in3 o= ;etitionerHs Ans>er /$te/ 9 )$r6# 9000 7e=ore t#e CTA
6ontestin3 res;on/entHs 62$i% =or re=.n/, res;on/entHs ser-i6es s#$22 7e s.7De6t to t#e
re3.2$r 10U AT.K31L S.6# =i2in3 is /ee%e/ $ re-o6$tion o= AT R.2in3 No. 003,88 $n/
*IR R.2in3 No. 093,8:.
+,EREFORE, t#e Co.rt DENIES t#e ;etition.
SO ORDERED.
G.R. No. 112/24 0#$)#r* 28, 1999
"+ILI""INE 3AN; O! CO&&NICATIONS, petitioner,
vs.
CO&&ISSIONER O! INTERNAL REVENE, CORT O! TA, A""EALS #$%
CORT O! A""EALS, respondent.
'IS&3ING, J.:
This petition for revie. assails the (esolution
1
of the &ourt of Appeals dated -epte$ber
22, 1%%3 affir$ing the +ecision
2
and a (esolution
.
of the &ourt @f Ta# Appeals .hich denied the
clai$s of the petitioner for ta# refund and ta# credits, and disposing as follo.s=
/) 9/5> @C A??, T<5 C@(5A@/)A, the instant petition for revie., is +5)/5+ due
course. The +ecision of the &ourt of Ta# Appeals dated ;ay 20, 1%%3 and its resolution
dated :uly 20, 1%%3, are hereby ACC/(;5+ in toto.
-@ @(+5(5+.
4
The &ourt of Ta# Appeals earlier ruled as follo.s=
><5(5C@(5, Petitioner"s clai$ for refundHta# credits of overpaid inco$e ta# for 1%81 in
the a$ount of P1,2%%,7,%.%1 is hereby denied for having been filed beyond the
regle$entary period. The 1%8 clai$ for refund a$ounting to P23,,077.% is li2e.ise
denied since petitioner has opted and in all li2elihood auto$atically credited the sa$e to
the succeeding year. The petition for revie. is dis$issed for lac2 of $erit.
-@ @(+5(5+.
5
The facts on record sho. the antecedent circu$stances pertinent to this case.
Petitioner, Philippine 8an2 of &o$$unications 'P8&o$*, a co$$ercial ban2ing corporation duly
organiDed under Philippine la.s, filed its 3uarterly inco$e ta# returns for the first and second
3uarters of 1%81, reported profits, and paid the total inco$e ta# of P1,01,%1,.00. The ta#es due
.ere settled by applying P8&o$"s ta# credit $e$os and accordingly, the 8ureau of /nternal
(evenue '8/(* issued Ta# +ebit ;e$o )os. 07,081 and 07,7081 for P3,,01,701.00 and
P1,11,213.00, respectively.
-ubse3uently, ho.ever, P8&o$ suffered losses so that .hen it filed its Annual /nco$e Ta#
(eturns for the year0ended +ece$ber 31, 1%8, the petitioner li2e.ise reported a net loss of
P1,,12%,02.00, and thus declared no ta# payable for the year.
8ut during these t.o years, P8&o$ earned rental inco$e fro$ leased properties. The lessees
.ithheld and re$itted to the 8/( .ithholding creditable ta#es of P282,7%1.10 in 1%81 and
P23,,077.% in 1%8.
@n August 7, 1%87, petitioner re3uested the &o$$issioner of /nternal (evenue, a$ong others,
for a ta# credit of P1,01,%1,.00 representing the overpay$ent of ta#es in the first and second
3uarters of 1%81.
Thereafter, on :uly 21, 1%88, petitioner filed a clai$ for refund of creditable ta#es .ithheld by their
lessees fro$ property rentals in 1%81 for P282,7%1.10 and in 1%8 for P23,,077.%.
Pending the investigation of the respondent &o$$issioner of /nternal (evenue, petitioner
instituted a Petition for (evie. on )ove$ber 18, 1%88 before the &ourt of Ta# Appeals '&TA*.
The petition .as doc2eted as &TA &ase )o. ,30% entitled= 6Philippine 8an2 of &o$$unications
vs. &o$$issioner of /nternal (evenue.6
The losses petitioner incurred as per the su$$ary of petitioner"s clai$s for refund and ta# credit
for 1%81 and 1%8, filed before the &ourt of Ta# Appeals, are as follo.s=
1%81 1%8
FFF FFF
)et /nco$e '?oss* 'P21,317,288.00* 'P1,,12%,02.00*
Ta# +ue )/? )/?
Luarterly ta#.
Pay$ents ;ade 1,01,%1,.00 F
Ta# >ithheld at -ource 282,7%1.10 23,,077.%
FFFFFFFF FFFFFFF
5#cess Ta# Pay$ents P1,2%%,7,%.10< P23,,077.%
MMMMMMMMMMMMMMM MMMMMMMMMMMMM
< &TA"s decision reflects P8&o$"s 1%81 ta# clai$ as P1,2%%,7,%.%1. A forty five
centavo difference .as noted.
@n ;ay 20, 1%%3, the &TA rendered a decision .hich, as stated on the outset, denied the re3uest
of petitioner for a ta# refund or credit in the su$ a$ount of P1,2%%,7,%.%1, on the ground that it
.as filed beyond the t.o0year regle$entary period provided for by la.. The petitioner"s clai$ for
refund in 1%8 a$ounting to P23,,077.% .as li2e.ise denied on the assu$ption that it .as
auto$atically credited by P8&o$ against its ta# pay$ent in the succeeding year.
@n :une 22, 1%%3, petitioner filed a ;otion for (econsideration of the &TA"s decision but the
sa$e .as denied due course for lac2 of $erit.
6
Thereafter, P8&o$ filed a petition for revie. of said decision and resolution of the &TA .ith the
&ourt of Appeals. <o.ever on -epte$ber 22, 1%%3, the &ourt of Appeals affir$ed in toto the
&TA"s resolution dated :uly 20, 1%%3. <ence this petition no. before us.
The issues raised by the petitioner are=
/. >hether ta#payer P8&o$ F .hich relied in good faith on the for$al
assurances of 8/( in (;& )o. 7081 and did not i$$ediately file .ith the &TA a
petition for revie. as2ing for the refundHta# credit of its 1%8108 e#cess 3uarterly
inco$e ta# pay$ents F can be pre4udiced by the subse3uent 8/( re4ection,
applied retroactivity, of its assurances in (;& )o. 7081 that the prescriptive
period for the refundHta# credit of e#cess 3uarterly inco$e ta# pay$ents is not
t.o years but ten '10*.
7
//. >hether the &ourt of Appeals seriously erred in affir$ing the &TA decision
.hich denied P8&o$"s clai$ for the refund of P23,,077.% inco$e ta# overpaid
in 1%8 on the $ere speculation, .ithout proof, that there .ere ta#es due in 1%87
and that P8&o$ availed of ta#0crediting that year.
8
-i$ply stated, the $ain 3uestion is= >hether or not the &ourt of Appeals erred in denying the
plea for ta# refund or ta# credits on the ground of prescription, despite petitioner"s reliance on
(;& )o. 7081, changing the prescriptive period of t.o years to ten yearsN
Petitioner argues that its clai$s for refund and ta# credits are not yet barred by prescription
relying on the applicability of (evenue ;e$orandu$ &ircular )o. 7081 issued on April 1, 1%81.
The circular states that overpaid inco$e ta#es are not covered by the t.o0year prescriptive period
under the ta# &ode and that ta#payers $ay clai$ refund or ta# credits for the e#cess 3uarterly
inco$e ta# .ith the 8/( .ithin ten '10* years under Article 11,, of the &ivil &ode. The pertinent
portions of the circular reads=
(595)E5 ;5;@(A)+E; &/(&E?A( )@. 7081
-E8:5&T= P(@&5--/)A @C (5CE)+ @( TAI &(5+/T @C 5I&5--
&@(P@(AT5 /)&@;5 TAI (5-E?T/)A C(@; T<5 C/?/)A @C T<5
C/)A? A+:E-T;5)T (5TE().
T@= All /nternal (evenue @fficers and @thers &oncerned.
-ec. 81 And 8 @f the )ational /nternal (evenue &ode provide=
### ### ###
The foregoing provisions are i$ple$ented by -ection 7 of (evenue (egulations )os. 100
77 .hich provide7
### ### ###
/t has been observed, ho.ever, that because of the e#cess ta# pay$ents, corporations
file clai$s for recovery of overpaid inco$e ta# .ith the &ourt of Ta# Appeals .ithin the
t.o0year period fro$ the date of pay$ent, in accordance .ith sections 2%2 and 2%1 of
the )ational /nternal (evenue &ode. /t is obvious that the filing of the case in court is to
preserve the 4udicial right of the corporation to clai$ the refund or ta# credit.
/t should he noted, ho.ever, that this is not a case of erroneously or illegally paid ta#
under the provisions of -ections 2%2 and 2%1 of the Ta# &ode.
/n the above provision of the (egulations the corporation $ay re3uest for the refund of
the overpaid inco$e ta# or clai$ for auto$atic ta# credit. To insure pro$pt action on
corporate annual inco$e ta# returns sho.ing refundable a$ounts arising fro$ overpaid
3uarterly inco$e ta#es, this @ffice has pro$ulgated (evenue ;e$orandu$ @rder )o.
3207 dated :une 11, 1%7, containing the procedure in processing said returns. Ender
these procedures, the returns are $erely pre0audited .hich consist $ainly of chec2ing
$athe$atical accuracy of the figures of the return. After .hich, the refund or ta# credit is
granted, and, this procedure .as adopted to facilitate i$$ediate action on cases li2e this.
/n this regard, therefore, there is no need to file petitions for revie. in the &ourt of Ta#
Appeals in order to preserve the right to clai$ refund or ta# credit the t.o year period. As
already stated, actions hereon by the 8ureau are i$$ediate after only a cursory pre0audit
of the inco$e ta# returns. ;oreover, a ta#payer $ay recover fro$ the 8ureau of /nternal
(evenue e#cess inco$e ta# paid under the provisions of -ection 8 of the Ta# &ode
.ithin 10 years fro$ the date of pay$ent considering that it is an obligation created by
la. 'Article 11,, of the &ivil &ode*.
9
'5$phasis supplied.*
Petitioner argues that the govern$ent is barred fro$ asserting a position contrary to its declared
circular if it .ould result to in4ustice to ta#payers. &iting 'BS (B. Broadcasting (orporation vs.
(ourt of Ta 'ppeals
1/
petitioner clai$s that rulings or circulars pro$ulgated by the
&o$$issioner of /nternal (evenue have no retroactive effect if it .ould be pre4udicial to
ta#payers, /n A8-0&8) case, the &ourt held that the govern$ent is precluded fro$ adopting a
position inconsistent .ith one previously ta2en .here in4ustice .ould result therefro$ or .here
there has been a $isrepresentation to the ta#payer.
Petitioner contends that -ec. 2, of the )ational /nternal (evenue &ode e#plicitly provides for
this rules as follo.s=
-ec. 2, .on4retroactivit# of rulings6 Any revocation, $odification or reversal of any of
the rules and regulations pro$ulgated in accordance .ith the preceding section or any of
the rulings or circulars pro$ulgated by the &o$$issioner shall not be given retroactive
application if the revocation, $odification or reversal .ill be pre4udicial to the ta#payers
e#cept in the follo.ing cases=
a*. .here the ta#payer deliberately $isstates or o$its $aterial facts fro$
his return or in any docu$ent re3uired of hi$ by the 8ureau of /nternal
(evenue7
b*. .here the facts subse3uently gathered by the 8ureau of /nternal
(evenue are $aterially different fro$ the facts on .hich the ruling is
based7
c*. .here the ta#payer acted in bad faith.
(espondent &o$$issioner of /nternal (evenue, through -olicitor Aeneral, argues that the t.o0
year prescriptive period for filing ta# cases in court concerning inco$e ta# pay$ents of
&orporations is rec2oned fro$ the date of filing the Cinal Ad4usted /nco$e Ta# (eturn, .hich is
generally done on April 11 follo.ing the close of the calendar year. As precedents, respondent
&o$$issioner cited cases .hich adhered to this principle, to .it '(()' !nvest$ents (orp. vs.
(ourt of 'ppeals, et al.,
11
and (o$$issioner of !nternal )evenue vs. TM7 Sales, !nc., et al..
12
(espondent &o$$issioner also states that since the Cinal Ad4usted /nco$e Ta# (eturn of the
petitioner for the ta#able year 1%81 .as supposed to be filed on April 11, 1%8, the latter had only
until April 11, 1%88 to see2 relief fro$ the court. Curther, respondent &o$$issioner stresses that
.hen the petitioner filed the case before the &TA on )ove$ber 18, 1%88, the sa$e .as filed
beyond the ti$e fi#ed by la., and such failure is fatal to petitioner"s cause of action.
After a careful study of the records and applicable 4urisprudence on the $atter, .e find that,
contrary to the petitioner"s contention, the rela#ation of revenue regulations by (;& 7081 is not
.arranted as it disregards the t.o0year prescriptive period set by la..
8asic is the principle that 6ta#es are the lifeblood of the nation.6 The pri$ary purpose is to
generate funds for the -tate to finance the needs of the citiDenry and to advance the co$$on
.eal.
1.
+ue process of la. under the &onstitution does not re3uire 4udicial proceedings in ta#
cases. This $ust necessarily be so because it is upon ta#ation that the govern$ent chiefly relies
to obtain the $eans to carry on its operations and it is of ut$ost i$portance that the $odes
adopted to enforce the collection of ta#es levied should be su$$ary and interfered .ith as little
as possible.
14
Cro$ the sa$e perspective, clai$s for refund or ta# credit should be e#ercised .ithin the ti$e
fi#ed by la. because the 8/( being an ad$inistrative body enforced to collect ta#es, its functions
should not be unduly delayed or ha$pered by incidental $atters.
-ec. 230 of the )ational /nternal (evenue &ode ')/(&* of 1%77 'no. -ec. 22%, )/(& of 1%%7*
provides for the prescriptive period for filing a court proceeding for the recovery of ta# erroneously
or illegally collected, viz.=
-ec. 230. )ecover# of ta erroneousl# or illegall# collected. F )o suit or proceeding shall
be $aintained in any court for the recovery of any national internal revenue ta# hereafter
alleged to have been erroneously or illegally assessed or collected, or of any penalty
clai$ed to have been collected .ithout authority, or of any su$ alleged to have been
e#cessive or in any $anner .rongfully collected, until a clai$ for refund or credit has
been duly filed .ith the &o$$issioner7 but such suit or proceeding $ay be $aintained,
.hether or not such ta#, penalty, or su$ has been paid under protest or duress.
/n any case, no such suit or proceedings shall "egun after the epiration of two #ears
fro$ the date of pa#$ent of the ta or penalt# regardless of an# supervening cause that
$a# arise after pa#$ent7 ,rovided however, That the &o$$issioner $ay, even .ithout a
.ritten clai$ therefor, refund or credit any ta#, .here on the face of the return upon .hich
pay$ent .as $ade, such pay$ent appears clearly to have been erroneously paid.
'5$phasis supplied*
The rule states that the ta#payer $ay file a clai$ for refund or credit .ith the &o$$issioner of
/nternal (evenue, .ithin t.o '2* years after pay$ent of ta#, before any suit in &TA is
co$$enced. The t.o0year prescriptive period provided, should be co$puted fro$ the ti$e of
filing the Ad4ust$ent (eturn and final pay$ent of the ta# for the year.
/n (o$$issioner of !nternal )evenue vs. ,hilippine '$erican Life !nsurance (o.,
15
this &ourt
e#plained the application of -ec. 230 of 1%77 )/(&, as follo.s=
&learly, the prescriptive period of t.o years should co$$ence to run only fro$ the ti$e
that the refund is ascertained, .hich can only be deter$ined after a final ad4ust$ent
return is acco$plished. /n the present case, this date is April 1, 1%8,, and t.o years
fro$ this date .ould be April 1, 1%8. . . . As .e have earlier said in the T;I -ales
case, -ections 8.
16
%,
17
and 70
18
on Luarterly &orporate /nco$e Ta# Pay$ent and
-ection 321 should be considered in con4unction .ith it
19
>hen the Acting &o$$issioner of /nternal (evenue issued (;& 7081, changing the prescriptive
period of t.o years to ten years on clai$s of e#cess 3uarterly inco$e ta# pay$ents, such circular
created a clear inconsistency .ith the provision of -ec. 230 of 1%77 )/(&. /n so doing, the 8/(
did not si$ply interpret the la.7 rather it legislated guidelines contrary to the statute passed by
&ongress.
/t bears repeating that (evenue $e$orandu$0circulars are considered ad$inistrative rulings 'in
the sense of $ore specific and less general interpretations of ta# la.s* .hich are issued fro$
ti$e to ti$e by the &o$$issioner of /nternal (evenue. /t is .idely accepted that the interpretation
placed upon a statute by the e#ecutive officers, .hose duty is to enforce it, is entitled to great
respect by the courts. )evertheless, such interpretation is not conclusive and .ill be ignored if
4udicially found to be erroneous.
2/
Thus, courts .ill not countenance ad$inistrative issuances
that override, instead of re$aining consistent and in har$ony .ith the la. they see2 to apply and
i$ple$ent.
21
/n the case of ,eople vs. Li$,
22
it .as held that rules and regulations issued by ad$inistrative
officials to i$ple$ent a la. cannot go beyond the ter$s and provisions of the latter.
Appellant contends that -ection 2 of CA@ )o. 3701 is void because it is not only
inconsistent .ith but is contrary to the provisions and spirit of Act. )o ,003 as a$ended,
because .hereas the prohibition prescribed in said Cisheries Act .as for any single
period of ti$e not e#ceeding five years duration, CA@ )o 3701 fi#ed no period, that is to
say, it establishes an absolute ban for all ti$e. This discrepancy bet.een Act )o. ,003
and CA@ )o. 3701 .as probably due to an oversight on the part of -ecretary of
Agriculture and )atural (esources. @f course, in case of discrepancy, the basic Act
prevails, for the reason that the regulation or rule issued to i$ple$ent a la. cannot go
beyond the ter$s and provisions of the
latter. . . . /n this connection, the attention of the technical $en in the offices of
+epart$ent <eads .ho draft rules and regulation is called to the i$portance and
necessity of closely follo.ing the ter$s and provisions of the la. .hich they intended to
i$ple$ent, this to avoid any possible $isunderstanding or confusion as in the present
case.
2.
Curther, funda$ental is the rule that the -tate cannot be put in estoppel by the $ista2es or errors
of its officials or agents.
24
As pointed out by the respondent courts, the nullification of (;& )o. 70
81 issued by the Acting &o$$issioner of /nternal (evenue is an ad$inistrative interpretation
.hich is not in har$ony .ith -ec. 230 of 1%77 )/(&. for being contrary to the e#press provision
of a statute. <ence, his interpretation could not be given .eight for to do so .ould, in effect,
a$end the statute.
/t is li2e.ise argued that the &o$$issioner of /nternal (evenue, after pro$ulgating (;&
)o. 7081, is estopped by the principle of non0retroactively of 8/( rulings. Again >e do not
agree. The ;e$orandu$ &ircular, stating that a ta#payer $ay recover the e#cess
inco$e ta# paid .ithin 10 years fro$ date of pay$ent because this is an obligation
created by la., .as issued by the Acting &o$$issioner of /nternal (evenue. @n the
other hand, the decision, stating that the ta#payer should still file a clai$ for a refund or
ta# credit and corresponding petition fro revie. .ithin the
t.o0year prescription period, and that the lengthening of the period of li$itation on refund
fro$ t.o to ten years .ould be adverse to public policy and run counter to the positive
$andate of -ec. 230, )/(&, 0 .as the ruling and 4udicial interpretation of the &ourt of Ta#
Appeals. 5stoppel has no application in the case at bar because it .as not the
&o$$issioner of /nternal (evenue .ho denied petitioner"s clai$ of refund or ta# credit.
(ather, it .as the &ourt of Ta# Appeals .ho denied 'albeit correctly* the clai$ and in
effect, ruled that the (;& )o. 7081 issued by the &o$$issioner of /nternal (evenue is
an ad$inistrative interpretation .hich is out of har$ony .ith or contrary to the e#press
provision of a statute 'specifically -ec. 230, )/(&*, hence, cannot be given .eight for to
do so .ould in effect a$end the statute.
25
Art. 8 of the &ivil &ode
26
recogniDes 4udicial decisions, applying or interpreting statutes as part of
the legal syste$ of the country. 8ut ad$inistrative decisions do not en4oy that level of recognition.
A $e$orandu$0circular of a bureau head could not operate to vest a ta#payer .ith shield against
4udicial action. Cor there are no vested rights to spea2 of respecting a .rong construction of the
la. by the ad$inistrative officials and such .rong interpretation could not place the Aovern$ent
in estoppel to correct or overrule the sa$e.
27
;oreover, the non0retroactivity of rulings by the
&o$$issioner of /nternal (evenue is not applicable in this case because the nullity of (;& )o.
7081 .as declared by respondent courts and not by the &o$$issioner of /nternal (evenue.
?astly, it $ust be noted that, as repeatedly held by this &ourt, a clai$ for refund is in the nature of
a clai$ for e#e$ption and should be construed in strictissi$i %uris against the ta#payer.
28
@n the second issue, the petitioner alleges that the &ourt of Appeals seriously erred in affir$ing
&TA"s decision denying its clai$ for refund of P23,,077.% 'ta# overpaid in 1%8*, based on $ere
speculation, .ithout proof, that P8&o$ availed of the auto$atic ta# credit in 1%87.
-ec. % of the 1%77 )/(&
29
'no. -ec. 7 of the 1%%7 )/(&* provides that any e#cess of the total
3uarterly pay$ents over the actual inco$e ta# co$puted in the ad4ust$ent or final corporate
inco$e ta# return, shall either 'a* be refunded to the corporation, or 'b* $ay be credited against
the esti$ated 3uarterly inco$e ta# liabilities for the 3uarters of the succeeding ta#able year.
The corporation $ust signify in its annual corporate ad4ust$ent return 'by $ar2ing the option bo#
provided in the 8/( for$* its intention, .hether to re3uest for a refund or clai$ for an auto$atic
ta# credit for the succeeding ta#able year. To ease the ad$inistration of ta# collection, these
re$edies are in the alternative, and the choice of one precludes the other.
As stated by respondent &ourt of Appeals=
Cinally, as to the clai$ed refund of inco$e ta# over0paid in 1%8 F the &ourt of Ta#
Appeals, after e#a$ining the ad4usted final corporate annual inco$e ta# return for ta#able
year 1%8, found out that petitioner opted to apply for auto$atic ta# credit. This .as the
basis used 'vis4avis the fact that the 1%87 annual corporate ta# return .as not offered by
the petitioner as evidence* by the &TA in concluding that petitioner had indeed availed of
and applied the auto$atic ta# credit to the succeeding year, hence it can no longer as2
for refund, as to JsicK the t.o re$edies of refund and ta# credit are alternative.
./
That the petitioner opted for an auto$atic ta# credit in accordance .ith -ec. % of the 1%77 )/(&,
as specified in its 1%8 Cinal Ad4usted /nco$e Ta# (eturn, is a finding of fact .hich .e $ust
respect. ;oreover, the 1%87 annual corporate ta# return of the petitioner .as not offered as
evidence to contovert said fact. Thus, .e are bound by the findings of fact by respondent courts,
there being no sho.ing of gross error or abuse on their part to disturb our reliance thereon.
.1
><5(5C@(5, the, petition is hereby +5)/5+, The decision of the &ourt of Appeals appealed
fro$ is ACC/(;5+, .ith &@-T- against the petitioner.89wphi8.n:t
-@ @(+5(5+.
G.R. No. 117982 !ebr)#r* 6, 1997
CO&&ISSIONER O! INTERNAL REVENE, petitioner,
vs.
CORT O! A""EALS, CORT O! TA, A""EALS #$% AL+A&3RA
INDSTRIES, INC., respondents.
3ELLOSILLO, J.:
A?<A;8(A /)+E-T(/5-, /)&., is a do$estic corporation engaged in the
$anufacture and sale of cigar and cigarette products. @n 7 ;ay 1%%1 private
respondent received a letter dated 2 April 1%%1 fro$ the &o$$issioner of
/nternal (evenue assessing it deficiency Ad 9alore$ Ta# 'A9T* in the total
a$ount of Cour <undred 5ighty05ight Thousand Three <undred )inety0-i#
Pesos and -i#ty0T.o &entavos 'P,88,3%.2*, inclusive of incre$ents, on the
re$ovals of cigarette products fro$ their place of production during the period 2
)ove$ber 1%%0 to 22 :anuary 1%%1.
1
Petitioner co$putes the deficiency thus F
Total A9T due per $anufacturer"s declaration P ,,27%,0,2.33
?ess= A9T paid under 8/( (uling )o. ,73088 3,%01,3,8.81
FFFFFF
+eficiency A9T 373,%3.,8
Add= Penalties=
21! -urcharge '-ec. 2,8JcKJ3K )/(&* %3,,23.37
20! /nterest 'P,7,11.81 # 82H30 days* 21,27%.27
FFFFFF
Total A$ount +ue P ,88,3%.2
/n a letter dated 22 ;ay 1%%1 received by petitioner on even date, private respondent thru
counsel filed a protest against the proposed assess$ent .ith a re3uest that the sa$e be
.ithdra.n and cancelled. @n 31 ;ay 1%%1 private respondent received petitioner"s reply dated 27
;ay 1%%1 denying its protest and re3uest for cancellation stating that the decision .as final, and
at the sa$e ti$e re3uesting pay$ent of the revised a$ount of Cive <undred T.enty Thousand
5ight <undred Thirty0Cive Pesos and T.enty0)ine &entavos 'P120,831.2%*, .ith interest
updated, .ithin ten '10* days fro$ receipt thereof. /n a letter dated 10 :une 1%%1 .hich petitioner
received on the sa$e day, private respondent re3uested for the reconsideration of petitioner"s
denial of its protest. >ithout .aiting for petitioner"s reply to its re3uest for reconsideration, private
respondent filed on 1% :une 1%%1 a petition for revie. .ith the &ourt of Ta# Appeals. @n 21 :une
1%%1 private respondent received fro$ petitioner a letter dated 21 :une 1%%1 denying its re3uest
for reconsideration declaring again that its decision .as final. @n 8 :uly 1%%1 private respondent
paid under protest the disputed ad valore$ ta# in the su$ of P120,831.2%.
2
/n its +ecision
.
of 1 +ece$ber 1%%3 the &ourt of Ta# Appeals ordered petitioner to refund to
private respondent the a$ount of Cive <undred T.enty Thousand 5ight <undred Thirty0Cive
Pesos and T.enty0)ine &entavos 'P120,831.2%* representing erroneously paid ad valore$ ta#
for the period 2 )ove$ber 1%%0 to 22 :anuary 1%%1.
The &ourt of Ta# Appeals e#plained that the sub4ect deficiency e#cise ta# assess$ent resulted
fro$ private respondent"s use of the co$putation $andated by 8/( (uling ,73088 dated ,
@ctober 1%88 as basis for co$puting the fifteen percent '11!* ad valore$ ta# due on its
re$ovals of cigarettes fro$ 2 )ove$ber 1%%0 to 22 :anuary 1%%1. 8/( &ircular ,73088 .as
issued by +eputy &o$$issioner 5ufracio +. -antos to /nsular0Gebana Tobacco &orporation
allo.ing the latter to e#clude the value0added ta# '9AT* in the deter$ination of the gross selling
price for purposes of co$puting the ad valore$ ta# of its cigar and cigarette products in
accordance .ith -ec. 127 of the Ta# &ode as a$ended by 5#ecutive @rder )o. 273 .hich
provides as follo.s=
-ec. 127. ,a#$ent of ecise taes on do$estic products. F . . . . 'b* +eter$ination of
gross selling price of goods sub4ect to ad valore$ ta#. F Enless other.ise provided, the
price, e#cluding the value0added ta#, at .hich the goods are sold at .holesale in the
place of production or through their sales agents to the public shall constitute the gross
selling price.
The co$putation, pursuant to the ruling, is illustrated by .ay of e#a$ple thus F
P ,,.00#1H1 M P ,.00 9AT
P ,,.00 0 P ,.00 M P ,0.00 price .ithout 9AT
P ,0.00 # 11! M P .00 Ad 9alore$ Ta#
Cor the period 2 )ove$ber 1%%0 to 22 :anuary 1%%1 private respondent paid P3,%01,3,8.81
ad valore$ ta#, applying -ec. 127 'b* of the )/(& as interpreted by 8/( (uling ,73088 by
e#cluding the 9AT in the deter$ination of the gross selling price.
Thereafter, on 11 Cebruary 1%%1, petitioner issued 8/( (uling 0170%1 to /nsular0Gebana Tobacco
&orporation revo2ing 8/( (uling ,73088 for being violative of -ec. 1,2 of the Ta# &ode. /t
included bac2 the 9AT to the gross selling price in deter$ining the ta# base for co$puting the ad
valore$ ta# on cigarettes. &ited as basis by petitioner is -ec. 1,2 of the Ta# &ode, as a$ended
by 5.@. )o. 273 F
-ec. 1,2. (igar and cigarettes F . . . Cor purposes of this section, $anufacturer"s or
i$porter"s registered. .holesale price shall include the ad valore$ ta# i$posed in
paragraphs 'a*, 'b*, 'c* or 'd* hereof and the a$ount intended to cover the value added
ta# i$posed under Title /9 of this &ode.
Petitioner sought to apply the revocation retroactively to private respondent"s re$ovals of
cigarettes for the period starting 2 )ove$ber 1%%0 to 22 :anuary 1%%1 on the ground that private
respondent allegedly acted in bad faith .hich is an e#ception to the rule on non0retroactivity of
8/( (ulings.
4
@n appeal, the &ourt of Appeals affir$ed the &ourt of Ta# Appeals holding that the retroactive
application of 8/( (uling 0170%1 cannot be allo.ed since private respondent did not act in bad
faith7 private respondent"s co$putation under 8/( (uling ,73088 .as not sho.n to be $otivated
by ill .ill or dishonesty parta2ing the nature of fraud7 hence, this petition.
Petitioner i$putes error to the &ourt of Appeals= '1* in failing to consider that private respondent"s
reliance on 8/( (uling ,73088 being contrary to -ec. 1,2 of the Ta# &ode does not confer vested
rights to private respondent in the co$putation of its ad valore$ ta#7 '2* in failing to consider that
good faith and pre4udice to the ta#payer in cases of reliance on a void 8/( (uling is i$$aterial
and irrelevant and does not place the govern$ent in estoppel in collecting ta#es legally due7 '3* in
holding that private respondent acted in good faith in applying 8/( (uling ,730887 and, ',* in
failing to consider that the assess$ent of petitioner is presu$ed to be regular and the clai$ for
ta# refund $ust be strictly construed against private respondent for being in derogation of
sovereign authority.
Petitioner clai$s that the $ain issue before us is .hether private respondent"s reliance on a void
8/( ruling conferred upon the latter a vested right to apply the sa$e in the co$putation of its ad
valore$ ta# and clai$ for ta# refund. -ec. 1,2 'd* of the Ta# &ode, .hich provides for the
inclusion of the 9AT in the ta# base for purposes of co$puting the 11! ad valore$ ta#, is the
applicable la. in the instant case as it specifically applies to the $anufacturer"s .holesale price of
cigar and cigarette products and not -ec. 127 'b* of the Ta# &ode .hich applies in general to the
.holesale of goods or do$estic products. -ec. 1,2 being a specific provision applicable to cigar
and cigarettes $ust perforce prevail over -ec. 127 'b*, a general provision of la. insofar as the
i$position of the ad valore$ ta# on cigar and cigarettes is concerned.
5
&onse3uently, the
application of -ec. 127 'b* to the .holesale price of cigar and cigarette products for purposes of
co$puting the ad valore$ ta# is patently erroneous. Accordingly, 8/( (uling ,73088 is void a"
initio as it contravenes the e#press provisions of -ec. 1,2 'd* of the Ta# &ode.
6
Petitioner contends that 8/( (uling ,73088 being an erroneous interpretation of -ec. 1,2 'b* of
the Ta# &ode does not confer any vested right to private respondent as to e#e$pt it fro$ the
retroactive application of 8/( (uling 0170%1. Thus Art. 221, of the )e. &ivil &ode is e#plicit that
6'n*o vested or ac3uired right can arise fro$ acts or o$issions .hich are against the la. . . . 6
7
/t
is argued that the &ourt of Appeals erred in ruling that retroactive application cannot be $ade
since private respondent acted in good faith. The follo.ing circu$stances .ould sho. that private
respondent"s reliance on 8/( (uling ,73088 .as induced by ill .ill= first, private respondent
despite 2no.ledge that -ec. 1,2 of the Ta# &ode .as the specific provision applicable still shifted
its accounting $ethod pursuant to -ec. 127 'b* of the Ta# &ode7 and, second, the shift in
accounting $ethod .as $ade .ithout any prior consultation .ith the 8/(.
8
/t is further contended by petitioner that clai$s for ta# refund $ust be construed against private
respondent. A ta# refund being in the nature of a ta# e#e$ption is regarded as in derogation of
the sovereign authority and is strictly construed against private respondent as the sa$e parta2es
the nature of a ta# e#e$ption. Ta# e#e$ptions cannot $erely be i$plied but $ust be categorically
and un$ista2ably e#pressed.
9
>e cannot sustain petitioner. The deficiency ta# assess$ent issued by petitioner against private
respondent is .ithout legal basis because of the prohibition against the retroactive application of
the revocation of 8/( rulings in the absence of bad faith on the part of private respondent.
The present dispute arose fro$ the discrepancy in the ta#able base on .hich the e#cise ta# is to
apply on account of t.o incongruous 8/( (ulings= '1* 8/( (uling ,73088 dated , @ctober 1%88
.hich ecluded the 9AT fro$ the ta# base in co$puting the fifteen percent '11!* e#cise ta# due7
and, '2* 8/( (uling 0170%1 dated 11 Cebruary 1%%1 .hich included bac2 the 9AT in co$puting
the ta# base for purposes of the fifteen percent '11!* ad valore$ ta#.
The 3uestion as to the correct co$putation of the e#cise ta# on cigarettes in the case at bar has
been sufficiently addressed by 8/( (uling 0170%1 dated 11 Cebruary 1%%1 .hich revo2ed 8/(
(uling ,73088 dated , @ctober 1%88 F
/t is to be noted that -ection 127 'b* of the Ta# &ode as a$ended applies in general to
do$estic products and e#cludes the value0added ta# in the deter$ination of the gross
selling price, .hich is the ta# base for purposes of the i$position of ad valore$ ta#. @n
the other hand, the last paragraph of -ection 1,2 of the sa$e &ode .hich includes the
value0added ta# in the co$putation of the ad valore$ ta#, refers specifically to cigar and
cigarettes only. /t does not includeHapply to any other articles or goods sub4ect to the ad
valore$ ta#. Accordingly, -ection 1,2 $ust perforce prevail over -ection 127 'b* .hich is
a general provision of la. insofar as the i$position of the ad valore$ ta# on cigar and
cigarettes is concerned.
;oreover, the phrase unless otherwise provided in -ection 127 'b* purports of e#ceptions
to the general rule contained therein, such as that of -ection 1,2, last paragraph thereof
.hich e#plicitly provides that in the case of cigarettes, the ta# base for purposes of the ad
valore$ ta# shall include, a$ong others, the value0added ta#.
Private respondent did not 3uestion the correctness of the above 8/( ruling. /n fact, upon
2no.ledge of the effectivity of 8/( (uling )o. 0170%1, private respondent i$$ediately
i$ple$ented the $ethod of co$putation $andated therein by restoring the 9AT in co$puting the
ta# base for purposes of the 11! ad valore$ ta#.
<o.ever, .ell0entrenched is the rule that rulings and circulars, rules and regulations pro$ulgated
"# the (o$$issioner of !nternal )evenue would have no retroactive application if to so appl#
the$ would "e pre%udicial to the tapa#ers.
1/
The applicable la. is -ec. 2, of the Ta# &ode .hich provides F
-ec. 2,. .on4retroactivit# of rulings. F Any revocation, $odification, or reversal of any
rules and regulations pro$ulgated in accordance .ith the preceding section or any of the
rulings or circulars pro$ulgated by the &o$$issioner of /nternal (evenue shall not be
given retroactive application if the revocation, $odification, or reversal .ill be pre4udicial
to the ta#payers e#cept in the follo.ing cases= a* .here the ta#payer deliberately
$isstates or o$its $aterial facts fro$ his return or in any docu$ent re3uired of hi$ by
the 8ureau of /nternal (evenue7 b* .here the facts subse3uently gathered by the 8ureau
of /nternal (evenue are $aterially different fro$ the facts on .hich the ruling is based7 or
c* .here the ta#payer acted in bad faith.
>ithout doubt, private respondent .ould be pre4udiced by the retroactive application of the
revocation as it .ould be assessed deficiency e#cise ta#.
>hat is left to be resolved is petitioner"s clai$ that private respondent falls under the third
e#ception in -ec. 2,, i.e., that the ta#payer has acted in bad faith.
8ad faith i$ports a dishonest purpose or so$e $oral obli3uity and conscious doing of .rong. /t
parta2es of the nature of fraud7 a breach of a 2no.n duty through so$e $otive of interest or ill
.ill.
11
>e find no convincing evidence that private respondent"s i$ple$entation of the
co$putation $andated by 8/( (uling ,73088 .as ill0$otivated or attended .ith a dishonest
purpose. To the contrary, as a sign of good faith, private respondent i$$ediately reverted to the
co$putation $andated by 8/( (uling 0170%1 upon 2no.ledge of its issuance on 11 Cebruary
1%%1.
As regards petitioner"s argu$ent that private respondent should have $ade consultations .ith it
before private respondent used the co$putation $andated by 8/( (uling ,73088, suffice it to
state that the aforesaid 8/( (uling .as clear and categorical thus leaving no roo$ for
interpretation. The failure of private respondent to consult petitioner does not i$ply bad faith on
the part of the for$er.
Ad$ittedly the govern$ent is not estopped fro$ collecting ta#es legally due because of $ista2es
or errors of its agents. 8ut li2e other principles of la., this ad$its of e#ceptions in the interest of
4ustice and fair play, as .here in4ustice .ill result to the ta#payer.
12
><5(5C@(5, there being no reversible error co$$itted by respondent &ourt of Appeals, the
petition is +5)/5+ and petitioner &@;;/--/@)5( @C /)T5()A? (595)E5 is ordered to
refund private respondent A?<A;8(A /)+E-T(/5-, /)&., the a$ount of P120,831.2% upon
finality of this +ecision.
-@ @(+5(5+.
, 4., 6on6.rrin3:
/ concur in the ponencia .ritten by $y estee$ed colleague, ;r. :ustice :osue ).
8ellosillo. / only .ould li2e to stress that the 1%88 opinion of the &o$$issioner of
/nternal (evenue cannot be considered void, considering that it evinces .hat the
for$er &o$$issioner $ust have felt to be a real inconsistency bet.een -ection
127 and -ection 1,2 of the Ta# &ode. The non0retroactivity proscription under
-ection 2, of the Ta# &ode can thus aptly apply. / reserve $y vote, ho.ever, in
a situation .here, as the -olicitor Aeneral so points out, the revo2ed ruling is
patently null and void in .hich case it could possibly be disregarded as being in
e#istent fro$ the very beginning.
CO))ISSIONER O1 INTERNAL
REEN(E,
Petitioner,
,-ers.s,
1ILINEST DEELOP)ENT
CORPORATION,
Res;on/ent.
<,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,<
CO))ISSIONER O1 INTERNAL
REEN(E,
Petitioner,
,-ers.s,
1ILINEST DEELOP)ENT
CORPORATION,
Res;on/ent.
G. R. No. 1C3C:3
G. R. No. 1CFC88
Present:
CORONA, C.!.,
CARPIO,
ELASCO, !R.,
LEONARDO,DE CASTRO,
*RION,
PERALTA,
*ERSA)IN,
DEL CASTILLO,
A*AD,
ILLARA)A, !R.,
PERE0,
)ENDO0A, $n/
SERENO,Y !!.
Pro%.23$te/:
!.2@ 18, 9011
<,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, <
D E C I S I O N
PERE0, !.:
Ass$i2e/ in t#ese t>in ;etitions =or re-ie> on 6ertior$ri =i2e/ ;.rs.$nt to R.2e 4: o= t#e
188F R.2es o= Ci-i2 Pro6e/.re $re t#e /e6isions ren/ere/ 7@ t#e Co.rt o= A;;e$2s "CA& in
t#e =o22o>in3 6$ses: "$& De6ision /$te/ 1C De6e%7er 9003 o= t#e t#en S;e6i$2 1i=t#
Di-ision in CA,G.R. SP No. F9889MK1L $n/, "7& De6ision /$te/ 9C !$n.$r@ 900: o= t#e
t#en 1o.rteent# Di-ision in CA,G.R. SP No. F4:10.K9L
T#e 1$6ts
T#e o>ner o= 80U o= t#e o.tst$n/in3 s#$res o= res;on/ent 1i2in-est A2$7$n3, In6. "1AI&,
res;on/ent 1i2in-est De-e2o;%ent Cor;or$tion "1DC& is $ #o2/in3 6o%;$n@ >#i6# $2so
o>ne/ CF.49U o= t#e o.tst$n/in3 s#$res o= 1i2in-est L$n/, In6. "1LI&. On 98 No-e%7er
188C, 1DC $n/ 1AI entere/ into $ Dee/ o= E<6#$n3e >it# 1LI >#ere7@ t#e =or%er 7ot#
tr$ns=erre/ in =$-or o= t#e 2$tter ;$r6e2s o= 2$n/ $;;r$ise/ $t P4,30C,FFF,000.00. In
e<6#$n3e =or s$i/ ;$r6e2s >#i6# >ere inten/e/ to =$6i2it$te /e-e2o;%ent o= %e/i.%,rise
resi/enti$2 $n/ 6o%%er6i$2 7.i2/in3s, 4C3,084,301 s#$res o= sto6? o= 1LI >ere iss.e/ to
1DC $n/ 1AI.K3L As $ res.2t o= t#e e<6#$n3e, 1LIHs o>ners#i; str.6t.re >$s 6#$n3e/ to
t#e e<tent re=2e6te/ in t#e =o22o>in3 t$7.2$r ;rZ6is, -iN.:
Sto6?#o2/er N.%7er $n/ Per6ent$3e o=
S#$res 4e2/ Prior to t#e
E<6#$n3e
N.%7er o=
A//ition$2
S#$res Iss.e/
N.%7er $n/ Per6ent$3e o=
S#$res 4e2/ A=ter t#e
E<6#$n3e
1DC 9,:3F,3:8,000 CF.49U 49,91F,000 9,:F8,:F:,000 C1.03U
1AI 0 0 490,8FF,000 490,8FF,000 8.8CU
OT4ERS 1,99C,1FF,000 39.:8U 0 1,99C,1FF,000 98.01U
,,,,,,,,,,,,,,,,, ,,,,,,,,,,, ,,,,,,,,,,,,,, ,,,,,,,,,,,,,,,
3,FC3,:3:,000 100U 4C3,084,301 4,99C,C98,000 "100U&
On 13 !$n.$r@ 188F, 1LI reG.este/ $ r.2in3 =ro% t#e *.re$. o= Intern$2 Re-en.e "*IR&
to t#e e==e6t t#$t no 3$in or 2oss s#o.2/ 7e re6o3niNe/ in t#e $=ores$i/ tr$ns=er o= re$2
;ro;erties. A6tin3 on t#e reG.est, t#e *IR iss.e/ R.2in3 No. S,34,04C,8F /$te/ 3
1e7r.$r@ 188F, =in/in3 t#$t t#e e<6#$n3e is $%on3 t#ose 6onte%;2$te/ .n/er Se6tion 34
"6& "9& o= t#e o2/ N$tion$2 Intern$2 Re-en.e Co/e "NIRC&K4L >#i6# ;ro-i/es t#$t A"n&o
3$in or 2oss s#$22 7e re6o3niNe/ i= ;ro;ert@ is tr$ns=erre/ to $ 6or;or$tion 7@ $ ;erson in
e<6#$n3e =or $ sto6? in s.6# 6or;or$tion o= >#i6# $s $ res.2t o= s.6# e<6#$n3e s$i/
;erson, $2one or to3et#er >it# ot#ers, not e<6ee/in3 =o.r "4& ;ersons, 3$ins 6ontro2 o=
s$i/ 6or;or$tion.QK:L Wit# t#e *IRHs reiter$tion o= t#e =ore3oin3 r.2in3 .;on t#e 10
1e7r.$r@ 188F reG.est =or 62$ri=i6$tion =i2e/ 7@ 1LI,KCL t#e 2$tter, to3et#er >it# 1DC $n/
1AI, 6o%;2ie/ >it# $22 t#e reG.ire%ents i%;ose/ in t#e r.2in3.KFL
On -$rio.s /$tes /.rin3 t#e @e$rs 188C $n/ 188F, in t#e %e$nti%e, 1DC $2so e<ten/e/
$/-$n6es in =$-or o= its $==i2i$tes, n$%e2@, 1AI, 1LI, D$-$o S.3$r Centr$2 Cor;or$tion
"DSCC& $n/ 1i2in-est C$;it$2, In6. "1CI&.K8L D.2@ e-i/en6e/ 7@ instr.6tion$2 2etters $s
>e22 $s 6$s# $n/ Do.rn$2 -o.6#ers, s$i/ 6$s# $/-$n6es $%o.nte/ to P9,::F,913,849.C0 in
188CK8L $n/ P3,3C0,888,CFF.48 in 188F.K10L On 1: No-e%7er 188C, 1DC $2so entere/
into $ S#$re#o2/ersH A3ree%ent >it# Re6o 4errer$ PTE Lt/. "R4PL& =or t#e =or%$tion o=
$ Sin3$;ore,7$se/ Doint -ent.re 6o%;$n@ 6$22e/ 1i2in-est Asi$ Cor;or$tion "1AC&, t$s?e/
to /e-e2o; $n/ %$n$3e 1DCHs :0U o>ners#i; o= its P*Co% O==i6e To>er ProDe6t "t#e
ProDe6t&. Wit# t#eir eG.it@ ;$rti6i;$tion in 1AC res;e6ti-e2@ ;e33e/ $t C0U $n/ 40U in
t#e S#$re#o2/ersH A3ree%ent, 1DC s.7s6ri7e/ to P:00.F %i22ion >ort# o= s#$res in s$i/
Doint -ent.re 6o%;$n@ to R4PLHs s.7s6ri;tion >ort# P433.8 %i22ion. 4$-in3 ;$i/ its
s.7s6ri;tion 7@ e<e6.tin3 $ Dee/ o= Assi3n%ent tr$ns=errin3 to 1AC $ ;ortion o= its
ri3#ts $n/ interest in t#e ProDe6t >ort# P:00.F %i22ion, 1DC e-ent.$22@ re;orte/ $ net 2oss
o= P180,C8:,0C1.00 in its Ann.$2 In6o%e T$< Ret.rn =or t#e t$<$72e @e$r 188C.K11L
On 3 !$n.$r@ 9000, 1DC re6ei-e/ =ro% t#e *IR $ 1or%$2 Noti6e o= De%$n/ to ;$@
/e=i6ien6@ in6o%e $n/ /o6.%ent$r@ st$%; t$<es, ;2.s interests $n/ 6o%;ro%ise
;en$2ties,K19L 6o-ere/ 7@ t#e =o22o>in3 Assess%ent Noti6es, -iN.: "$& Assess%ent Noti6e
No. SP,INC,8C,00018,9000 =or /e=i6ien6@ in6o%e t$<es in t#e s.% o= P1:0,0F4,0CC.9F
=or 188CM "7& Assess%ent Noti6e No. SP,DST,8C,00090,9000 =or /e=i6ien6@ /o6.%ent$r@
st$%; t$<es in t#e s.% o= P10,49:,48F.0C =or 188CM "6& Assess%ent Noti6e No. SP,INC,
8F,00018,9000 =or /e=i6ien6@ in6o%e t$<es in t#e s.% o= P:,F1C,89F.03 =or 188FM $n/
"/& Assess%ent Noti6e No. SP,DST,8F,00091,9000 =or /e=i6ien6@ /o6.%ent$r@ st$%;
t$<es in t#e s.% o= P:,F8C,C88.40 =or 188F.K13L T#e =ore3oin3 /e=i6ien6@ t$<es >ere
$ssesse/ on t#e t$<$72e 3$in s.;;ose/2@ re$2iNe/ 7@ 1DC =ro% t#e Dee/ o= E<6#$n3e it
e<e6.te/ >it# 1AI $n/ 1LI, on t#e /i2.tion res.2tin3 =ro% t#e S#$re#o2/ersH A3ree%ent
1DC e<e6.te/ >it# R4PL $s >e22 $s t#e A$r%Hs,2en3t#B interest r$te $n/ /o6.%ent$r@
st$%; t$<es i%;os$72e on t#e $/-$n6es 1DC e<ten/e/ to its $==i2i$tes.K14L
On 3 !$n.$r@ 9000, 1AI si%i2$r2@ re6ei-e/ =ro% t#e *IR $ 1or%$2 Letter o= De%$n/ =or
/e=i6ien6@ in6o%e t$<es in t#e s.% o= P1,4FF,484,C38.93 =or t#e @e$r 188F.K1:L Co-ere/
7@ Assess%ent Noti6e No. SP,INC,8F,009F,9000,K1CL s$i/ /e=i6ien6@ t$< >$s $2so
$ssesse/ on t#e t$<$72e 3$in ;.r;orte/2@ re$2iNe/ 7@ 1AI =ro% t#e Dee/ o= E<6#$n3e it
e<e6.te/ >it# 1DC $n/ 1LI.K1FL On 9C !$n.$r@ 9000 or >it#in t#e re32e%ent$r@ ;erio/
o= t#irt@ "30& /$@s =ro% noti6e o= t#e $ssess%ent, 7ot# 1DC $n/ 1AI =i2e/ t#eir res;e6ti-e
reG.ests =or re6onsi/er$tionE;rotest, on t#e 3ro.n/ t#$t t#e /e=i6ien6@ in6o%e $n/
/o6.%ent$r@ st$%; t$<es $ssesse/ 7@ t#e *IR >ere 7ere=t o= =$6t.$2 $n/ 2e3$2 7$sis.K18L
4$-in3 s.7%itte/ t#e re2e-$nt s.;;ortin3 /o6.%ents ;.rs.$nt to t#e 31 !$n.$r@ 9000
/ire6ti-e =ro% t#e *IR A;;e22$te Di-ision, 1DC $n/ 1AI =i2e/ on 11 Se;te%7er 9000 $
2etter reG.estin3 $n e$r2@ reso2.tion o= t#eir reG.est =or re6onsi/er$tionE;rotest on t#e
3ro.n/ t#$t t#e 180 /$@s ;res6ri7e/ =or t#e reso2.tion t#ereo= .n/er Se6tion 998 o= t#e
NIRC >$s 3oin3 to e<;ire on 90 Se;te%7er 9000.K18L
In -ie> o= t#e =$i2.re o= ;etitioner Co%%issioner o= Intern$2 Re-en.e "CIR& to reso2-e
t#eir reG.est =or re6onsi/er$tionE;rotest >it#in t#e $=ores$i/ ;erio/, 1DC $n/ 1AI =i2e/
on 1F O6to7er 9000 $ ;etition =or re-ie> >it# t#e Co.rt o= T$< A;;e$2s "CTA& ;.rs.$nt
to Se6tion 998 o= t#e 188F NIRC. Do6?ete/ 7e=ore s$i/ 6o.rt $s CTA C$se No. C189, t#e
;etition $22e3e/, $%on3 ot#er %$tters, t#$t $s ;re-io.s2@ o;ine/ in *IR R.2in3 No. S,34,
04C,8F, no t$<$72e 3$in s#o.2/ #$-e 7een $ssesse/ =ro% t#e s.7De6t Dee/ o= E<6#$n3e
sin6e 1DC $n/ 1AI 6o22e6ti-e2@ 3$ine/ =.rt#er 6ontro2 o= 1LI $s $ 6onseG.en6e o= t#e
e<6#$n3eM t#$t 6orre2$ti-e to t#e CIRSs 2$6? o= $.t#orit@ to i%;.te t#eoreti6$2 interests on
t#e 6$s# $/-$n6es 1DC e<ten/e/ in =$-or o= its $==i2i$tes, t#e r.2e is sett2e/ t#$t interests
6$nnot 7e /e%$n/e/ in t#e $7sen6e o= $ sti;.2$tion to t#e e==e6tM t#$t not 7ein3
;ro%issor@ notes or 6erti=i6$tes o= o72i3$tions, t#e instr.6tion$2 2etters $s >e22 $s t#e 6$s#
$n/ Do.rn$2 -o.6#ers e-i/en6in3 s$i/ 6$s# $/-$n6es >ere not s.7De6t to /o6.%ent$r@
st$%; t$<esM $n/, t#$t no in6o%e t$< %$@ 7e i%;ose/ on t#e ;ros;e6ti-e 3$in =ro% t#e
s.;;ose/ $;;re6i$tion o= 1DCSs s#$re#o2/in3s in 1AC. As $ 6onseG.en6e, 1DC $n/ 1AC
7ot# ;r$@e/ t#$t t#e s.7De6t $ssess%ents =or /e=i6ien6@ in6o%e $n/ /o6.%ent$r@ st$%;
t$<es =or t#e @e$rs 188C $n/ 188F 7e 6$n6e22e/ $n/ $nn.22e/.K90L
On 4 De6e%7er 9000, t#e CIR =i2e/ its $ns>er, 62$i%in3 t#$t t#e tr$ns=er o= ;ro;ert@ in
G.estion s#o.2/ not 7e 6onsi/ere/ t$< =ree sin6e, >it# t#e res.2t$nt /i%in.tion o= its
s#$res in 1LI, 1DC /i/ not 3$in =.rt#er 6ontro2 o= s$i/ 6or;or$tion. Li?e>ise 6$22in3
$ttention to t#e =$6t t#$t t#e 6$s# $/-$n6es 1DC e<ten/e/ to its $==i2i$tes >ere interest
=ree /es;ite t#e interest 7e$rin3 2o$ns it o7t$ine/ =ro% 7$n?in3 instit.tions, t#e CIR
in-o?e/ Se6tion 43 o= t#e o2/ NIRC >#i6#, $s i%;2e%ente/ 7@ Re-en.e Re3.2$tions No.
9, Se6tion 1F8 "7& $n/ "6&, 3$-e #i% Qt#e ;o>er to $22o6$te, /istri7.te or $;;ortion
in6o%e or /e/.6tions 7et>een or $%on3 s.6# or3$niN$tions, tr$/es or 7.siness in or/er to
;re-ent e-$sion o= t$<es.Q T#e CIR D.sti=ie/ t#e i%;osition o= /o6.%ent$r@ st$%; t$<es
on t#e instr.6tion$2 2etters $s >e22 $s 6$s# $n/ Do.rn$2 -o.6#ers =or s$i/ 6$s# $/-$n6es on
t#e stren3t# o= Se6tion 180 o= t#e NIRC $n/ Re-en.e Re3.2$tions No. 8,84 >#i6#
;ro-i/e t#$t 2o$n tr$ns$6tions $re s.7De6t to s$i/ t$< irres;e6ti-e o= >#et#er or not t#e@
$re e-i/en6e/ 7@ $ =or%$2 $3ree%ent or 7@ %ere o==i6e %e%o. T#e CIR $2so $r3.e/ t#$t
1DC re$2iNe/ t$<$72e 3$in $risin3 =ro% t#e /i2.tion o= its s#$res in 1AC $s $ res.2t o= its
S#$re#o2/ersS A3ree%ent >it# R4PL.K91L
At t#e ;re,tri$2 6on=eren6e, t#e ;$rties =i2e/ $ Sti;.2$tion o= 1$6ts, Do6.%ents $n/
Iss.esK99L >#i6# >$s $/%itte/ in t#e 1C 1e7r.$r@ 9001 reso2.tion iss.e/ 7@ t#e CTA.
Wit# t#e =.rt#er $/%ission o= t#e 1or%$2 O==er o= Do6.%ent$r@ E-i/en6e s.7seG.ent2@
=i2e/ 7@ 1DC $n/ 1AIK93L $n/ t#e 6on62.sion o= t#e testi%on@ o= S.s$n$ )$6$7e2/$
$nent t#e 6$s# $/-$n6es 1DC e<ten/e/ in =$-or o= its $==i2i$tes,K94L t#e CTA >ent on to
ren/er t#e De6ision /$te/ 10 Se;te%7er 9009 >#i6#, >it# t#e e<6e;tion o= t#e /e=i6ien6@
in6o%e t$< on t#e interest in6o%e 1DC s.;;ose/2@ re$2iNe/ =ro% t#e $/-$n6es it
e<ten/e/ in =$-or o= its $==i2i$tes, 6$n6e22e/ t#e rest o= /e=i6ien6@ in6o%e $n/
/o6.%ent$r@ st$%; t$<es $ssesse/ $3$inst 1DC $n/ 1AI =or t#e @e$rs 188C $n/ 188F,K9:L
t#.s:
W4ERE1ORE, in -ie> o= $22 t#e =ore3oin3, t#e 6o.rt =in/s t#e inst$nt ;etition ;$rt2@
%eritorio.s. A66or/in32@, Assess%ent Noti6e No. SP,INC,8C,00018,9000 i%;osin3
/e=i6ien6@ in6o%e t$< on 1DC =or t$<$72e @e$r 188C, Assess%ent Noti6e No. SP,DST,
8C,00090,9000 $n/ SP,DST,8F,00091,9000 i%;osin3 /e=i6ien6@ /o6.%ent$r@ st$%; t$<
on 1DC =or t$<$72e @e$rs 188C $n/ 188F, res;e6ti-e2@ $n/ Assess%ent Noti6e No. SP,
INC,8F,009F,9000 i%;osin3 /e=i6ien6@ in6o%e t$< on 1AI =or t#e t$<$72e @e$r 188F $re
#ere7@ CANCELLED $n/ SET ASIDE. 4o>e-er, K1DCL is #ere7@ ORDERED to PA+
t#e $%o.nt o= P:,C81,8F9.03 $s /e=i6ien6@ in6o%e t$< =or t$<$72e @e$r 188F. In $//ition,
;etitioner is $2so ORDERED to PA+ 90U /e2inG.en6@ interest 6o%;.te/ =ro% 1e7r.$r@
1C, 9000 .nti2 =.22 ;$@%ent t#ereo= ;.rs.$nt to Se6tion 948 "6& "3& o= t#e T$< Co/e.K9CL
1in/in3 t#$t t#e 6o22e6ti-e in6re$se o= t#e eG.it@ ;$rti6i;$tion o= 1DC $n/ 1AI in 1LI
ren/ere/ t#e 3$in /eri-e/ =ro% t#e e<6#$n3e t$<,=ree, t#e CTA $2so r.2e/ t#$t t#e in6re$se
in t#e -$2.e o= 1DCSs s#$res in 1AC /i/ not res.2t in e6ono%i6 $/-$nt$3e in t#e $7sen6e
o= $6t.$2 s$2e or 6on-ersion t#ereo=. W#i2e 2i?e>ise =in/in3 t#$t t#e /o6.%ents
e-i/en6in3 t#e 6$s# $/-$n6es 1DC e<ten/e/ to its $==i2i$tes 6$nnot 7e 6onsi/ere/ $s 2o$n
$3ree%ents t#$t $re s.7De6t to /o6.%ent$r@ st$%; t$<, t#e CTA en.n6i$te/, #o>e-er, t#$t
t#e CIR >$s D.sti=ie/ in $ssessin3 .n/e62$re/ interests on t#e s$%e 6$s# $/-$n6es
;.rs.$nt to #is $.t#orit@ .n/er Se6tion 43 o= t#e NIRC in or/er to =orest$22 t$< e-$sion.
1or ;ers.$si-e e==e6t, t#e CTA re=erre/ to t#e eG.i-$2ent ;ro-ision in t#e Intern$2
Re-en.e Co/e o= t#e (nite/ St$tes "IRC,(S&, i.e., Se6. 489, $s i%;2e%ente/ 7@ Se6tion
1.489,9 o= 18C:,18C8 Re3.2$tions o= t#e L$> o= 1e/er$2 In6o%e T$<$tion.K9FL
Diss$tis=ie/ >it# t#e =ore3oin3 /e6ision, 1DC =i2e/ on : No-e%7er 9009 t#e ;etition =or
re-ie> /o6?ete/ 7e=ore t#e CA $s CA,G.R. No. F9889, ;.rs.$nt to R.2e 43 o= t#e 188F
R.2es o= Ci-i2 Pro6e/.re. C$22in3 $ttention to t#e =$6t t#$t t#e 6$s# $/-$n6es it e<ten/e/
to its $==i2i$tes >ere interest,=ree in t#e $7sen6e o= t#e e<;ress sti;.2$tion on interest
reG.ire/ .n/er Arti62e 18:C o= t#e Ci-i2 Co/e, 1DC G.estione/ t#e i%;osition o= $n
$r%Ss,2en3t# interest r$te t#ereon on t#e 3ro.n/, $%on3 ot#ers, t#$t t#e CIRSs $.t#orit@
.n/er Se6tion 43 o= t#e NIRC: "$& /oes not in62./e t#e ;o>er to i%;.te i%$3in$r@
interest on s$i/ tr$ns$6tionsM "7& is /ire6te/ on2@ $3$inst 6ontro22e/ t$<;$@ers $n/ not
$3$inst %ot#er or #o2/in3 6or;or$tionsM $n/, "6& 6$n on2@ 7e in-o?e/ in 6$ses o=
.n/erst$te%ent o= t$<$72e net in6o%e or e-i/ent t$< e-$sion.K98L (;#o2/in3 1DCSs
;osition, t#e CASs t#en S;e6i$2 1i=t# Di-ision ren/ere/ t#e #erein $ss$i2e/ /e6ision /$te/
1C De6e%7er 9003,K98L t#e /e6ret$2 ;ortion o= >#i6# st$tes:
W4ERE1ORE, ;re%ises 6onsi/ere/, t#e inst$nt ;etition is #ere7@ GRANTED. T#e
$ss$i2e/ De6ision /$te/ Se;te%7er 10, 9009 ren/ere/ 7@ t#e Co.rt o= T$< A;;e$2s in
CTA C$se No. C189 /ire6tin3 ;etitioner 1i2in-est De-e2o;%ent Cor;or$tion to ;$@ t#e
$%o.nt o= P:,C81,8F9.03 re;resentin3 /e=i6ien6@ in6o%e t$< on $22e3e/2@ .n/e62$re/
interest in6o%e =or t#e t$<$72e @e$r 188F, ;2.s 90U /e2inG.en6@ interest 6o%;.te/ =ro%
1e7r.$r@ 1C, 9000 .nti2 =.22 ;$@%ent t#ereo= is REERSED $n/ SET ASIDE $n/, $ ne>
one entere/ $nn.22in3 Assess%ent Noti6e No. SP,INC,8F,00018,9000 i%;osin3
/e=i6ien6@ in6o%e t$< on ;etitioner =or t$<$72e @e$r 188F. No ;rono.n6e%ent $s to 6osts.
K30L
Wit# t#e /eni$2 o= its ;$rti$2 %otion =or re6onsi/er$tion o= t#e s$%e 11 De6e%7er 9009
reso2.tion iss.e/ 7@ t#e CTA,K31L t#e CIR $2so =i2e/ t#e ;etition =or re-ie> /o6?ete/
7e=ore t#e CA $s CA,G.R. No. F4:10. In essen6e, t#e CIR $r3.e/ t#$t t#e CTA re-ersi72@
erre/ in 6$n6e22in3 t#e $ssess%ent noti6es: "$& =or /e=i6ien6@ in6o%e t$<es on t#e
e<6#$n3e o= ;ro;ert@ 7et>een 1DC, 1AI $n/ 1LIM "7& =or /e=i6ien6@ /o6.%ent$r@ st$%;
t$<es on t#e /o6.%ents e-i/en6in3 1DCSs 6$s# $/-$n6es to its $==i2i$tesM $n/ "6& =or
/e=i6ien6@ in6o%e t$< on t#e 3$in 1DC ;.r;orte/2@ re$2iNe/ =ro% t#e in6re$se o= t#e
-$2.e o= its s#$re#o2/in3s in 1AC.K39L T#e =ore3oin3 ;etition >$s, #o>e-er, /enie/ /.e
6o.rse $n/ /is%isse/ =or 2$6? o= %erit in t#e #erein $ss$i2e/ /e6ision /$te/ 9C !$n.$r@
900:K33L ren/ere/ 7@ t#e CASs t#en 1o.rteent# Di-ision, .;on t#e =o22o>in3 =in/in3s $n/
6on62.sions, to >it:
1. As $==ir%e/ in t#e 3 1e7r.$r@ 188F *IR R.2in3 No. S,34,04C,8F, t#e 98 No-e%7er
188C Dee/ o= E<6#$n3e res.2te/ in t#e 6o%7ine/ 6ontro2 7@ 1DC $n/ 1AI o= %ore t#$n
:1U o= t#e o.tst$n/in3 s#$res o= 1LI, #en6e, no t$<$72e 3$in 6$n 7e re6o3niNe/ =ro% t#e
tr$ns$6tion .n/er Se6tion 34 "6& "9& o= t#e o2/ NIRCM
9. T#e instr.6tion$2 2etters $s >e22 $s t#e 6$s# $n/ Do.rn$2 -o.6#ers e-i/en6in3 t#e
$/-$n6es 1DC e<ten/e/ to its $==i2i$tes $re not s.7De6t to /o6.%ent$r@ st$%; t$<es
;.rs.$nt to *IR R.2in3 No. 11C,88, /$te/ 30 !.2@ 1888, sin6e t#e@ /o not ;$rt$?e t#e
n$t.re o= 2o$n $3ree%entsM
3. A2t#o.3# *IR R.2in3 No. 11C,88 #$/ 7een s.7seG.ent2@ %o/i=ie/ 7@ *IR R.2in3 No.
108,88, /$te/ 1: !.2@ 1888, to t#e e==e6t t#$t /o6.%ent$r@ st$%; t$<es $re i%;os$72e on
inter,o==i6e %e%os e-i/en6in3 6$s# $/-$n6es si%i2$r to t#ose e<ten/e/ 7@ 1DC, s$i/
2$tter r.2in3 6$nnot 7e 3i-en retro$6ti-e $;;2i6$tion i= to /o so >o.2/ 7e ;reD./i6i$2 to t#e
t$<;$@erM
4. 1DCSs $22e3e/ 3$in =ro% t#e in6re$se o= its s#$re#o2/in3s in 1AC $s $ 6onseG.en6e o=
t#e S#$re#o2/ersS A3ree%ent it e<e6.te/ >it# R4PL 6$nnot 7e 6onsi/ere/ t$<$72e in6o%e
sin6e, .nti2 $6t.$22@ 6on-erte/ t#r. s$2e or /is;osition o= s$i/ s#$res, t#e@ %ere2@
re;resent .nre$2iNe/ in6re$se in 6$;it$2.K34L
Res;e6ti-e2@ /o6?ete/ 7e=ore t#is Co.rt $s G.R. Nos. 1C3C:3 $n/ 1CFC88, t#e CIRSs
;etitions =or re-ie> on 6ertior$ri $ss$i2in3 t#e 1C De6e%7er 9003 /e6ision in CA,G.R.
No. F9889 $n/ t#e 9C !$n.$r@ 900: /e6ision in CA,G.R. SP No. F4:10 >ere
6onso2i/$te/ ;.rs.$nt to t#e 1 )$r6# 900C reso2.tion iss.e/ 7@ t#is Co.rtHs T#ir/
Di-ision.
T#e Iss.es
In G.R. No. 1C3C:3, t#e CIR .r3es t#e 3r$nt o= its ;etition on t#e =o22o>in3 3ro.n/:
T4E CO(RT O1 APPEALS ERRED IN REERSING T4E DECISION O1 T4E
CO(RT O1 TA5 APPEALS AND IN 4OLDING T4AT T4E ADANCES
E5TENDED *+ RESPONDENT TO ITS A11ILIATES ARE NOT S(*!ECT TO
INCO)E TA5.K3:L
In G.R. No. 1CFC88, on t#e ot#er #$n/, ;etitioner ;ro==ers t#e =o22o>in3 iss.es =or
reso2.tion:
I
T4E 4ONORA*LE CO(RT O1 APPEALS CO))ITTED GRAE A*(SE O1
DISCRETION IN 4OLDING T4AT T4E E5C4ANGE O1 S4ARES O1 STOCK 1OR
PROPERT+ A)ONG 1ILINEST DEELOP)ENT CORPORATION "1DC&,
1ILINEST ALA*ANG, INCORPORATED "1AI& AND 1ILINEST LAND
INCORPORATED "1LI& )ET ALL T4E RE'(IRE)ENTS 1OR T4E NON,
RECOGNITION O1 TA5A*LE GAIN (NDER SECTION 34 "6& "9& O1 T4E OLD
NATIONAL INTERNAL REEN(E CODE "NIRC& "NOW SECTION 40 "C& "9& "6& O1
T4E NIRC.
II
T4E 4ONORA*LE CO(RT O1 APPEALS CO))ITTED REERSI*LE ERROR IN
4OLDING T4AT T4E LETTERS O1 INSTR(CTION OR CAS4 O(C4ERS
E5TENDED *+ 1DC TO ITS A11ILIATES ARE NOT DEE)ED LOAN
AGREE)ENTS S(*!ECT TO DOC()ENTAR+ STA)P TA5ES (NDER SECTION
180 O1 T4E NIRC.
III
T4E 4ONORA*LE CO(RT O1 APPEALS GRAEL+ ERRED IN 4OLDING T4AT
GAIN ON DIL(TION AS A RES(LT O1 T4E INCREASE IN T4E AL(E O1 1DCHS
S4ARE4OLDINGS IN 1AC IS NOT TA5A*LE.K3CL
T#e Co.rtHs R.2in3
W#i2e t#e ;etition in G.R. No. 1C3C:3 is 7ere=t o= %erit, >e =in/ t#e CIRHs ;etition in
G.R. No. 1CFC88 i%;resse/ >it# ;$rti$2 %erit.
In G.R. No. 1C3C:3, t#e CIR $r3.es t#$t t#e CA erre/ in re-ersin3 t#e CTAHs =in/in3 t#$t
t#eoreti6$2 interests 6$n 7e i%;.te/ on t#e $/-$n6es 1DC e<ten/e/ to its $==i2i$tes in
188C $n/ 188F 6onsi/erin3 t#$t, =or s$i/ ;.r;ose, 1DC resorte/ to interest,7e$rin3 =.n/
7orro>in3s =ro% 6o%%er6i$2 7$n?s. Sin6e 6onsi/er$72e interest e<;enses >ere /e/.6te/
7@ 1DC >#en s$i/ =.n/s >ere 7orro>e/, t#e CIR t#eoriNes t#$t interest in6o%e s#o.2/
2i?e>ise 7e /e62$re/ >#en t#e s$%e =.n/s >ere so.r6e/ =or t#e $/-$n6es 1DC e<ten/e/
to its $==i2i$tes. In-o?in3 Se6tion 43 o= t#e 1883 NIRC in re2$tion to Se6tion 1F8"7& o=
Re-en.e Re3.2$tion No. 9, t#e CIR %$int$ins t#$t it is -este/ >it# t#e ;o>er to $22o6$te,
/istri7.te or $;;ortion in6o%e or /e/.6tions 7et>een or $%on3 6ontro22e/ or3$niN$tions,
tr$/es or 7.sinesses e-en in t#e $7sen6e o= =r$./, sin6e s$i/ ;o>er is inten/e/ Ato ;re-ent
e-$sion o= t$<es or 62e$r2@ to re=2e6t t#e in6o%e o= $n@ s.6# or3$niN$tions, tr$/es or
7.sinesses.B In $//ition, t#e CIR $sse-er$tes t#$t t#e CA s#o.2/ #$-e $66or/e/ >ei3#t
$n/ res;e6t to t#e =in/in3s o= t#e CTA >#i6#, $s t#e s;e6i$2iNe/ 6o.rt /e/i6$te/ to t#e
st./@ $n/ 6onsi/er$tion o= t$< %$tters, 6$n t$?e D./i6i$2 noti6e o= (S in6o%e t$< 2$>s
$n/ re3.2$tions.K3FL
A/%itte/2@, Se6tion 43 o= t#e 1883 NIRCK38L ;ro-i/es t#$t, A"i&n $n@ 6$se o= t>o or
%ore or3$niN$tions, tr$/es or 7.sinesses ">#et#er or not in6or;or$te/ $n/ >#et#er or not
or3$niNe/ in t#e P#i2i;;ines& o>ne/ or 6ontro22e/ /ire6t2@ or in/ire6t2@ 7@ t#e s$%e
interests, t#e Co%%issioner o= Intern$2 Re-en.e is $.t#oriNe/ to /istri7.te, $;;ortion or
$22o6$te 3ross in6o%e or /e/.6tions 7et>een or $%on3 s.6# or3$niN$tion, tr$/e or
7.siness, i= #e /eter%ines t#$t s.6# /istri7.tion, $;;ortion%ent or $22o6$tion is ne6ess$r@
in or/er to ;re-ent e-$sion o= t$<es or 62e$r2@ to re=2e6t t#e in6o%e o= $n@ s.6#
or3$niN$tion, tr$/e or 7.siness.B In $%;2i=i6$tion o= t#e eG.i-$2ent ;ro-isionK38L .n/er
Co%%on>e$2t# A6t No. 4CC,K40L Se6. 1F8"7& o= Re-en.e Re3.2$tion No. 9 st$tes $s
=o22o>s:
Deter%in$tion o= t#e t$<$72e net in6o%e o= 6ontro22e/ t$<;$@er. O "A& DE1INITIONS. O
W#en .se/ in t#is se6tion O
"1& T#e ter% Aor3$niN$tionB in62./es $n@ ?in/, >#et#er it 7e $ so2e ;ro;rietors#i;, $
;$rtners#i;, $ tr.st, $n est$te, or $ 6or;or$tion or $sso6i$tion, irres;e6ti-e o= t#e ;2$6e
>#ere or3$niNe/, >#ere o;er$te/, or >#ere its tr$/e or 7.siness is 6on/.6te/, $n/
re3$r/2ess o= >#et#er /o%esti6 or =orei3n, >#et#er e<e%;t or t$<$72e, or >#et#er
$==i2i$te/ or not.
"9& T#e ter%s Atr$/eB or A7.sinessB in62./e $n@ tr$/e or 7.siness $6ti-it@ o= $n@ ?in/,
re3$r/2ess o= >#et#er or >#ere or3$niNe/, >#et#er o>ne/ in/i-i/.$22@ or ot#er>ise, $n/
re3$r/2ess o= t#e ;2$6e >#ere 6$rrie/ on.
"3& T#e ter% A6ontro22e/B in62./es $n@ ?in/ o= 6ontro2, /ire6t or in/ire6t, >#et#er 2e3$22@
en=or6e$72e, $n/ #o>e-er e<er6is$72e or e<er6ise/. It is t#e re$2it@ o= t#e 6ontro2 >#i6# is
/e6isi-e, not its =or% or %o/e o= e<er6ise. A ;res.%;tion o= 6ontro2 $rises i= in6o%e or
/e/.6tions #$-e 7een $r7itr$ri2@ s#i=te/.
"4& T#e ter% A6ontro22e/ t$<;$@erB %e$ns $n@ one o= t>o or %ore or3$niN$tions, tr$/es,
or 7.sinesses o>ne/ or 6ontro22e/ /ire6t2@ or in/ire6t2@ 7@ t#e s$%e interests.
":& T#e ter% A3ro.;B $n/ A3ro.; o= 6ontro22e/ t$<;$@ersB %e$ns t#e or3$niN$tions, tr$/es
or 7.sinesses o>ne/ or 6ontro22e/ 7@ t#e s$%e interests.
"C& T#e ter% Atr.e net in6o%eB %e$ns, in t#e 6$se o= $ 6ontro22e/ t$<;$@er, t#e net
in6o%e "or $s t#e 6$se %$@ 7e, $n@ ite% or e2e%ent $==e6tin3 net in6o%e& >#i6# >o.2/
#$-e res.2te/ to t#e 6ontro22e/ t$<;$@er, #$/ it in t#e 6on/.6t o= its $==$irs "or, $s t#e 6$se
%$@ 7e, $n@ ite% or e2e%ent $==e6tin3 net in6o%e& >#i6# >o.2/ #$-e res.2te/ to t#e
6ontro22e/ t$<;$@er, #$/ it in t#e 6on/.6t o= its $==$irs "or, $s t#e 6$se %$@ 7e, in t#e
;$rti6.2$r 6ontr$6t, tr$ns$6tion, $rr$n3e%ent or ot#er $6t& /e$2t >it# t#e ot#er %e%7ers or
%e%7ers o= t#e 3ro.; $t $r%Hs 2en3t#. It /oes not %e$n t#e in6o%e, t#e /e/.6tions, or t#e
ite% or e2e%ent o= eit#er, res.2tin3 to t#e 6ontro22e/ t$<;$@er 7@ re$son o= t#e ;$rti6.2$r
6ontr$6t, tr$ns$6tion, or $rr$n3e%ent, t#e 6ontro22e/ t$<;$@er, or t#e interest 6ontro22in3
it, 6#ose to %$?e "e-en t#o.3# s.6# 6ontr$6t, tr$ns$6tion, or $rr$n3e%ent 7e 2e3$22@
7in/in3 .;on t#e ;$rties t#ereto&.
"*& SCOPE AND P(RPOSE. , T#e ;.r;ose o= Se6tion 44 o= t#e T$< Co/e is to ;2$6e $
6ontro22e/ t$<;$@er on $ t$< ;$rit@ >it# $n .n6ontro22e/ t$<;$@er, 7@ /eter%inin3,
$66or/in3 to t#e st$n/$r/ o= $n .n6ontro22e/ t$<;$@er, t#e tr.e net in6o%e =ro% t#e
;ro;ert@ $n/ 7.siness o= $ 6ontro22e/ t$<;$@er. T#e interests 6ontro22in3 $ 3ro.; o=
6ontro22e/ t$<;$@er $re $ss.%e/ to #$-e 6o%;2ete ;o>er to 6$.se e$6# 6ontro22e/
t$<;$@er so to 6on/.6t its $==$irs t#$t its tr$ns$6tions $n/ $66o.ntin3 re6or/s tr.2@ re=2e6t
t#e net in6o%e =ro% t#e ;ro;ert@ $n/ 7.siness o= e$6# o= t#e 6ontro22e/ t$<;$@ers. I=,
#o>e-er, t#is #$s not 7een /one $n/ t#e t$<$72e net in6o%e $re t#ere7@ .n/erst$te/, t#e
st$t.te 6onte%;2$tes t#$t t#e Co%%issioner o= Intern$2 Re-en.e s#$22 inter-ene, $n/, 7@
%$?in3 s.6# /istri7.tions, $;;ortion%ents, or $22o6$tions $s #e %$@ /ee% ne6ess$r@ o=
3ross in6o%e or /e/.6tions, or o= $n@ ite% or e2e%ent $==e6tin3 net in6o%e, 7et>een or
$%on3 t#e 6ontro22e/ t$<;$@ers 6onstit.tin3 t#e 3ro.;, s#$22 /eter%ine t#e tr.e net
in6o%e o= e$6# 6ontro22e/ t$<;$@er. T#e st$n/$r/ to 7e $;;2ie/ in e-er@ 6$se is t#$t o= $n
.n6ontro22e/ t$<;$@er. Se6tion 44 3r$nts no ri3#t to $ 6ontro22e/ t$<;$@er to $;;2@ its
;ro-isions $t >i22, nor /oes it 3r$nt $n@ ri3#t to 6o%;e2 t#e Co%%issioner o= Intern$2
Re-en.e to $;;2@ its ;ro-isions.
"C& APPLICATION O Tr$ns$6tions 7et>een 6ontro22e/ t$<;$@er $n/ $not#er >i22 7e
s.7De6te/ to s;e6i$2 s6r.tin@ to $s6ert$in >#et#er t#e 6o%%on 6ontro2 is 7ein3 .se/ to
re/.6e, $-oi/ or es6$;e t$<es. In /eter%inin3 t#e tr.e net in6o%e o= $ 6ontro22e/
t$<;$@er, t#e Co%%issioner o= Intern$2 Re-en.e is not restri6te/ to t#e 6$se o= i%;ro;er
$66o.ntin3, to t#e 6$se o= $ =r$./.2ent, 6o2or$72e, or s#$% tr$ns$6tion, or to t#e 6$se o= $
/e-i6e /esi3ne/ to re/.6e or $-oi/ t$< 7@ s#i=tin3 or /istortin3 in6o%e or /e/.6tions. T#e
$.t#orit@ to /eter%ine tr.e net in6o%e e<ten/s to $n@ 6$se in >#i6# eit#er 7@
in$/-erten6e or /esi3n t#e t$<$72e net in6o%e in >#o2e or in ;$rt, o= $ 6ontro22e/
t$<;$@er, is ot#er t#$n it >o.2/ #$-e 7een #$/ t#e t$<;$@er in t#e 6on/.6t o= #is $==$irs
7een $n .n6ontro22e/ t$<;$@er /e$2in3 $t $r%Hs 2en3t# >it# $not#er .n6ontro22e/ t$<;$@er.
K41L
As %$@ 7e 32e$ne/ =ro% t#e /e=initions o= t#e ter%s A6ontro22e/B $n/ Q6ontro22e/
t$<;$@erQ .n/er ;$r$3r$;#s "$& "3& $n/ "4& o= t#e =ore3oin3 ;ro-ision, it >o.2/ $;;e$r
t#$t 1DC $n/ its $==i2i$tes 6o%e >it#in t#e ;.r-ie> o= Se6tion 43 o= t#e 1883 NIRC.
Asi/e =ro% o>nin3 si3ni=i6$nt ;ortions o= t#e s#$res o= sto6? o= 1LI, 1AI, DSCC $n/
1CI, t#e =$6t t#$t 1DC e<ten/e/ s.7st$nti$2 s.%s o= %one@ $s 6$s# $/-$n6es to its s$i/
$==i2i$tes =or t#e ;.r;ose o= ;ro-i/in3 t#e% =in$n6i$2 $ssist$n6e =or t#eir o;er$tion$2 $n/
6$;it$2 e<;en/it.res see%in32@ in/i6$te t#$t t#e sit.$tion so.3#t to 7e $//resse/ 7@ t#e
s.7De6t ;ro-ision e<ists. 1ro% t#e tenor o= ;$r$3r$;# "6& o= Se6tion 1F8 o= Re-en.e
Re3.2$tion No. 9, it %$@ $2so 7e seen t#$t t#e CIRSs ;o>er to /istri7.te, $;;ortion or
$22o6$te 3ross in6o%e or /e/.6tions 7et>een or $%on3 6ontro22e/ t$<;$@ers %$@ 7e
2i?e>ise e<er6ise/ >#et#er or not =r$./ in#eres in t#e tr$ns$6tionEs .n/er s6r.tin@. 1or $s
2on3 $s t#e 6ontro22e/ t$<;$@erSs t$<$72e in6o%e is not re=2e6ti-e o= t#$t >#i6# it >o.2/
#$-e re$2iNe/ #$/ it 7een /e$2in3 $t $r%Ss 2en3t# >it# $n .n6ontro22e/ t$<;$@er, t#e CIR
6$n %$?e t#e ne6ess$r@ re6ti=i6$tions in or/er to ;re-ent e-$sion o= t$<es.
Des;ite t#e 7ro$/ ;$r$%eters ;ro-i/e/, #o>e-er, >e =in/ t#$t t#e CIRSs ;o>ers o=
/istri7.tion, $;;ortion%ent or $22o6$tion o= 3ross in6o%e $n/ /e/.6tions .n/er Se6tion
43 o= t#e 1883 NIRC $n/ Se6tion 1F8 o= Re-en.e Re3.2$tion No. 9 /oes not in62./e t#e
;o>er to i%;.te Qt#eoreti6$2 interestsQ to t#e 6ontro22e/ t$<;$@erSs tr$ns$6tions. P.rs.$nt
to Se6tion 98 o= t#e 1883 NIRC,K49L $=ter $22, t#e ter% A3ross in6o%eB is .n/erstoo/ to
%e$n $22 in6o%e =ro% >#$te-er so.r6e /eri-e/, in62./in3, 7.t not 2i%ite/ to t#e
=o22o>in3 ite%s: 6o%;ens$tion =or ser-i6es, in62./in3 =ees, 6o%%issions, $n/ si%i2$r
ite%sM 3ross in6o%e /eri-e/ =ro% 7.sinessM 3$ins /eri-e/ =ro% /e$2in3s in ;ro;ert@MB
interestM rentsM ro@$2tiesM /i-i/en/sM $nn.itiesM ;riNes $n/ >innin3sM ;ensionsM $n/
;$rtnerHs /istri7.ti-e s#$re o= t#e 3ross in6o%e o= 3ener$2 ;ro=ession$2 ;$rtners#i;.K43L
W#i2e it #$s 7een #e2/ t#$t t#e ;#r$se Q=ro% >#$te-er so.r6e /eri-e/Q in/i6$tes $
2e3is2$ti-e ;o2i6@ to in62./e $22 in6o%e not e<;ress2@ e<e%;te/ >it#in t#e 62$ss o= t$<$72e
in6o%e .n/er o.r 2$>s, t#e ter% Qin6o%eQ #$s 7een -$rio.s2@ inter;rete/ to %e$n Q6$s#
re6ei-e/ or its eG.i-$2entQ, Qt#e $%o.nt o= %one@ 6o%in3 to $ ;erson >it#in $ s;e6i=i6
ti%eQ or Qso%et#in3 /istin6t =ro% ;rin6i;$2 or 6$;it$2.QK44L Ot#er>ise st$te/, t#ere %.st
7e ;roo= o= t#e $6t.$2 or, $t t#e -er@ 2e$st, ;ro7$72e re6ei;t or re$2iN$tion 7@ t#e 6ontro22e/
t$<;$@er o= t#e ite% o= 3ross in6o%e so.3#t to 7e /istri7.te/, $;;ortione/ or $22o6$te/ 7@
t#e CIR.
O.r 6ir6.%s;e6t ;er.s$2 o= t#e re6or/ @ie2/e/ no e-i/en6e o= $6t.$2 or ;ossi72e s#o>in3
t#$t t#e $/-$n6es 1DC e<ten/e/ to its $==i2i$tes #$/ res.2te/ to t#e interests s.7seG.ent2@
$ssesse/ 7@ t#e CIR. 1or $22 its #$r;in3 .;on t#e s.;;ose/ =$6t t#$t 1DC #$/ resorte/ to
7orro>in3s =ro% 6o%%er6i$2 7$n?s, t#e CIR #$/ $//.6e/ no 6on6rete ;roo= t#$t s$i/
=.n/s >ere, in/ee/, t#e so.r6e o= t#e $/-$n6es t#e =or%er ;ro-i/e/ its $==i2i$tes. W#i2e
$/%ittin3 t#$t 1DC o7t$ine/ interest,7e$rin3 2o$ns =ro% 6o%%er6i$2 7$n?s,K4:L S.s$n
)$6$7e2/$ , 1DCSs 1.n/s )$n$3e%ent De;$rt%ent )$n$3er >#o >$s t#e so2e >itness
;resente/ 7e=ore t#e CTA , 62$ri=ie/ t#$t t#e s.7De6t $/-$n6es >ere so.r6e/ =ro% t#e
6or;or$tionSs ri3#ts o==erin3 in 188: $s >e22 $s t#e s$2e o= its in-est%ent in *oni=$6io
L$n/ in 188F.K4CL )ore si3ni=i6$nt2@, s$i/ >itness testi=ie/ t#$t s$i/ $/-$n6es: "$& >ere
e<ten/e/ to 3i-e 1LI, 1AI, DSCC $n/ 1CI =in$n6i$2 $ssist$n6e =or t#eir o;er$tion$2 $n/
6$;it$2 e<;en/it.resM $n/, "7& >ere $22 te%;or$ri2@ in n$t.re sin6e t#e@ >ere re;$i/ >it#in
t#e /.r$tion o= one >ee? to t#ree %ont#s $n/ >ere e-i/en6e/ 7@ %ere Do.rn$2 entries,
6$s# -o.6#ers $n/ instr.6tion$2 2etters.BK4FL
E-en i= >e >ere, t#ere=ore, to $66or/ ;re6i;it$te 6re/.2it@ to t#e CIRSs 7$re $ssertion t#$t
1DC #$/ /e/.6te/ s.7st$nti$2 interest e<;ense =ro% its 3ross in6o%e, t#ere >o.2/ sti22 7e
no =$6t.$2 7$sis =or t#e i%;.t$tion o= t#eoreti6$2 interests on t#e s.7De6t $/-$n6es $n/
$ssess /e=i6ien6@ in6o%e t$<es t#ereon. )ore so, >#en it is 7orne in %in/ t#$t, ;.rs.$nt
to Arti62e 18:C o= t#e Ci-i2 Co/e o= t#e P#i2i;;ines, no interest s#$22 7e /.e .n2ess it #$s
7een e<;ress2@ sti;.2$te/ in >ritin3. Consi/erin3 t#$t t$<es, 7ein3 7.r/ens, $re not to 7e
;res.%e/ 7e@on/ >#$t t#e $;;2i6$72e st$t.te e<;ress2@ $n/ 62e$r2@ /e62$res,K48L t#e r.2e
is 2i?e>ise sett2e/ t#$t t$< st$t.tes %.st 7e 6onstr.e/ stri6t2@ $3$inst t#e 3o-ern%ent $n/
2i7er$22@ in =$-or o= t#e t$<;[email protected] A66or/in32@, t#e 3ener$2 r.2e o= reG.irin3 $/#eren6e
to t#e 2etter in 6onstr.in3 st$t.tes $;;2ies >it# ;e6.2i$r stri6tness to t$< 2$>s $n/ t#e
;ro-isions o= $ t$<in3 $6t $re not to 7e e<ten/e/ 7@ i%;2i6$tion.K:0L W#i2e it is tr.e t#$t
t$<es $re t#e 2i=e72oo/ o= t#e 3o-ern%ent, it #$s 7een #e2/ t#$t t#eir $ssess%ent $n/
6o22e6tion s#o.2/ 7e in $66or/$n6e >it# 2$> $s $n@ $r7itr$riness >i22 ne3$te t#e -er@
re$son =or 3o-ern%ent itse2=.K:1L
In G.R. No. 1CFC88, >e $2so =in/ $ /e$rt# o= %erit in t#e CIRSs insisten6e on t#e
i%;osition o= /e=i6ien6@ in6o%e t$<es on t#e tr$ns=er 1DC $n/ 1AI e==e6te/ in e<6#$n3e
=or t#e s#$res o= sto6? o= 1LI. Wit# res;e6t to t#e Dee/ o= E<6#$n3e e<e6.te/ 7et>een
1DC, 1AI $n/ 1LI, Se6tion 34 "6& "9& o= t#e 1883 NIRC ;ertinent2@ ;ro-i/es $s =o22o>s:
Se6. 34. Deter%in$tion o= $%o.nt o= $n/ re6o3nition o= 3$in or 2oss.,
< < < <
"6& E<6e;tion O < < < <
No 3$in or 2oss s#$22 $2so 7e re6o3niNe/ i= ;ro;ert@ is tr$ns=erre/ to $ 6or;or$tion 7@ $
;erson in e<6#$n3e =or s#$res o= sto6? in s.6# 6or;or$tion o= >#i6# $s $ res.2t o= s.6#
e<6#$n3e s$i/ ;erson, $2one or to3et#er >it# ot#ers, not e<6ee/in3 =o.r ;ersons, 3$ins
6ontro2 o= s$i/ 6or;or$tionM Pro-i/e/, T#$t sto6?s iss.e/ =or ser-i6es s#$22 not 7e
6onsi/ere/ $s iss.e/ in ret.rn o= ;ro;ert@.
As e-en $/%itte/ in t#e 14 1e7r.$r@ 9001 Sti;.2$tion o= 1$6ts s.7%itte/ 7@ t#e ;$rties,
K:9L t#e reG.isites =or t#e non,re6o3nition o= 3$in or 2oss .n/er t#e =ore3oin3 ;ro-ision
$re $s =o22o>s: "$& t#e tr$ns=eree is $ 6or;or$tionM "7& t#e tr$ns=eree e<6#$n3es its s#$res
o= sto6? =or ;ro;ert@Eies o= t#e tr$ns=erorM "6& t#e tr$ns=er is %$/e 7@ $ ;erson, $6tin3
$2one or to3et#er >it# ot#ers, not e<6ee/in3 =o.r ;ersonsM $n/, "/& $s $ res.2t o= t#e
e<6#$n3e t#e tr$ns=eror, $2one or to3et#er >it# ot#ers, not e<6ee/in3 =o.r, 3$ins 6ontro2
o= t#e tr$ns=eree.K:3L A6tin3 on t#e 13 !$n.$r@ 188F reG.est =i2e/ 7@ 1LI, t#e *IR #$/, in
=$6t, $6?no>2e/3e/ t#e 6on6.rren6e o= t#e =ore3oin3 reG.isites in t#e Dee/ o= E<6#$n3e
t#e =or%er e<e6.te/ >it# 1DC $n/ 1AI 7@ iss.in3 *IR R.2in3 No. S,34,04C,8F.K:4L
Wit# t#e *IRSs reiter$tion o= s$i/ r.2in3 .;on t#e reG.est =or 62$ri=i6$tion =i2e/ 7@ 1LI,
K::L t#ere is $2so no /is;.te t#$t s$i/ tr$ns=eree $n/ tr$ns=erors s.7seG.ent2@ 6o%;2ie/
>it# t#e reG.ire%ents ;ro-i/e/ =or t#e non,re6o3nition o= 3$in or 2oss =ro% t#e e<6#$n3e
o= ;ro;ert@ =or t$<, $s ;ro-i/e/ .n/er Se6tion 34 "6& "9& o= t#e 1883 NIRC.K:CL
T#en $s no>, t#e CIR $r3.es t#$t t$<$72e 3$in s#o.2/ 7e re6o3niNe/ =or t#e e<6#$n3e
6onsi/erin3 t#$t 1DCSs 6ontro22in3 interest in 1LI >$s $6t.$22@ /e6re$se/ $s $ res.2t
t#ereo=. 1or s$i/ ;.r;ose, t#e CIR 6$22s $ttention to t#e =$6t t#$t, ;rior to t#e e<6#$n3e,
1DC o>ne/ 9,:3F,3:8,000 or CF.49U o= 1LISs 3,FC3,:3:,000 o.tst$n/in3 6$;it$2 sto6?.
(;on t#e iss.$n6e o= 443,084,000 $//ition$2 1LI s#$res $s $ 6onseG.en6e o= t#e
e<6#$n3e $n/ >it# on2@ 49,91F,000 t#ereo= $66r.in3 in =$-or o= 1DC =or $ tot$2 o=
9,:F8,:F:,000 s#$res, s$i/ 6or;or$tionHs 6ontro22in3 interest >$s s.;;ose/2@ re/.6e/ to
C1U.03 >#en re6?one/ =ro% t#e tr$ns=ereeSs $33re3$te 4,99C,C98,000 o.tst$n/in3 s#$res.
Wit#o.t o>nin3 $ s#$re =ro% 1LISs initi$2 3,FC3,:3:,000 o.tst$n/in3 s#$res, on t#e ot#er
#$n/, 1AISs $6G.isition o= 490,8FF,000 1LI s#$res $s $ res.2t o= t#e e<6#$n3e ;.r;orte/2@
res.2te/ in its 6ontro2 o= on2@ 8.8CU o= s$i/ tr$ns=eree 6or;or$tionSs 4,99C,C98,000
o.tst$n/in3 s#$res. On t#e ;rin6i;2e t#$t t#e tr$ns$6tion /i/ not G.$2i=@ $s $ t$<,=ree
e<6#$n3e .n/er Se6tion 34 "6& "9& o= t#e 1883 NIRC, t#e CIR $sse-er$tes t#$t t$<$72e
3$in in t#e s.% o= P9C3,38C,891.00 s#o.2/ 7e re6o3niNe/ on t#e ;$rt o= 1DC $n/ in t#e
s.% o= P3,088,F11,3CF.00 on t#e ;$rt o= 1AI.K:FL
T#e ;$.6it@ o= %erit in t#e CIRSs ;osition is, #o>e-er, e-i/ent =ro% t#e 6$te3ori6$2
2$n3.$3e o= Se6tion 34 "6& "9& o= t#e 1883 NIRC >#i6# ;ro-i/es t#$t 3$in or 2oss >i22 not
7e re6o3niNe/ in 6$se t#e e<6#$n3e o= ;ro;ert@ =or sto6?s res.2ts in t#e 6ontro2 o= t#e
tr$ns=eree 7@ t#e tr$ns=eror, $2one or >it# ot#er tr$ns=erors not e<6ee/in3 =o.r ;ersons.
R$t#er t#$n iso2$tin3 t#e s$%e $s ;ro;ose/ 7@ t#e CIR, 1DCSs 9,:F8,:F:,000 s#$res or
C1.03U 6ontro2 o= 1LISs 4,99C,C98,000 o.tst$n/in3 s#$res s#o.2/, t#ere=ore, 7e
$;;re6i$te/ in 6o%7in$tion >it# t#e 490,8FF,000 ne> s#$res iss.e/ to 1AI >#i6#
re;resents 8.8CU 6ontro2 o= s$i/ tr$ns=eree 6or;or$tion. To3et#er 1DCSs 9,:F8,:F:,000
s#$res "C1.03U& $n/ 1AISs 490,8FF,000 s#$res "8.8CU& 62e$r2@ $// .; to 3,000,4:9,000
s#$res or F0.88U o= 1LISs 4,99C,C98,000 s#$res. Sin6e t#e ter% Q6ontro2Q is 62e$r2@
/e=ine/ $s Qo>ners#i; o= sto6?s in $ 6or;or$tion ;ossessin3 $t 2e$st =i=t@,one ;er6ent o=
t#e tot$2 -otin3 ;o>er o= 62$sses o= sto6?s entit2e/ to one -oteQ .n/er Se6tion 34 "6& "C&
K6L o= t#e 1883 NIRC, t#e e<6#$n3e o= ;ro;ert@ =or sto6?s 7et>een 1DC 1AI $n/ 1LI
62e$r2@ G.$2i=@ $s $ t$<,=ree tr$ns$6tion .n/er ;$r$3r$;# 34 "6& "9& o= t#e s$%e ;ro-ision.
A3$inst t#e 62e$r tenor o= Se6tion 34"6& "9& o= t#e 1883 NIRC, t#e CIR 6ites t#en
S.;re%e Co.rt !.sti6e !ose it.3 $n/ CTA !.sti6e Ernesto D. A6ost$ >#o, in t#eir 7oo?
T$< L$> $n/ !.ris;r./en6e, o;ine/ t#$t s$i/ ;ro-ision 6o.2/ 7e in$;;2i6$72e i= 6ontro2 is
$2re$/@ -este/ in t#e e<6#$n3or ;rior to e<6#$n3e.K:8L Asi/e =ro% t#e =$6t t#$t t#$t t#e 10
Se;te%7er 9009 De6ision in CTA C$se No. C189 .;#o2/in3 t#e t$<,e<e%;t st$t.s o= t#e
e<6#$n3e 7et>een 1DC, 1AI $n/ 1LI >$s ;enne/ 7@ no 2ess t#$n !.sti6e A6ost$ #i%se2=,
K:8L 1DC $n/ 1AI si3ni=i6$nt2@ ;oint o.t t#$t s$i/ $.t#ors #$-e $6?no>2e/3e/ t#$t t#e
;osition t$?en 7@ t#e *IR is to t#e e==e6t t#$t Qt#e 2$> >o.2/ $;;2@ e-en >#en t#e
e<6#$n3or $2re$/@ #$s 6ontro2 o= t#e 6or;or$tion $t t#e ti%e o= t#e e<6#$n3e.QKC0L T#is
>$s 6on=ir%e/ >#en, $;;rise/ in 1LISs reG.est =or 62$ri=i6$tion $7o.t t#e 6#$n3e o=
;er6ent$3e o= o>ners#i; o= its o.tst$n/in3 6$;it$2 sto6?, t#e *IR o;ine/ $s =o22o>s:
P2e$se 7e in=or%e/ t#$t re3$r/2ess o= t#e =ore3oin3, t#e tr$ns=erors, 1i2in-est
De-e2o;%ent Cor;. $n/ 1i2in-est A2$7$n3, In6. sti22 3$ine/ 6ontro2 o= 1i2in-est L$n/, In6.
T#e ter% S6ontro2S s#$22 %e$n o>ners#i; o= sto6?s in $ 6or;or$tion 7@ ;ossessin3 $t 2e$st
:1U o= t#e tot$2 -otin3 ;o>er o= $22 62$sses o= sto6?s entit2e/ to -ote. Contro2 is
/eter%ine/ 7@ t#e $%o.nt o= sto6?s re6ei-e/, i.e., tot$2 s.7s6ri7e/, >#et#er =or ;ro;ert@
or =or ser-i6es 7@ t#e tr$ns=eror or tr$ns=erors. In /eter%inin3 t#e :1U sto6? o>ners#i;,
on2@ t#ose ;ersons >#o tr$ns=erre/ ;ro;ert@ =or sto6?s in t#e s$%e tr$ns$6tion %$@ 7e
6o.nte/ .; to t#e %$<i%.% o= =i-e "*IR R.2in3 No. :4F,83 /$te/ De6e%7er 98, 1883.
KC1L
At $n@ r$te, it $2so $;;e$rs t#$t t#e s.;;ose/ re/.6tion o= 1DCSs s#$res in 1LI ;osite/ 7@
t#e CIR is %ore $;;$rent t#$n re$2. As t#e .n6onteste/ o>ner o= 80U o= t#e o.tst$n/in3
s#$res o= 1AI, it 6$nnot 7e 3$ins$i/ t#$t 1DC i/e$22@ 6ontro2s t#e s$%e ;er6ent$3e o= t#e
490,8FF,000 s#$res iss.e/ to its s$i/ 6o,tr$ns=eror >#i6#, 7@ itse2=, re;resents F.8C8U o=
t#e o.tst$n/in3 s#$res o= 1LI. Consi/ere/ $2on3si/e 1DCSs C1.03U 6ontro2 o= 1LI $s $
6onseG.en6e o= t#e 98 No-e%7er 188C Dee/ o= Tr$ns=er, s$i/ F.8C8U $// .; to $n
$33re3$te o= C8.888U o= s$i/ tr$ns=eree 6or;or$tionSs o.tst$n/in3 s#$res o= sto6? >#i6#
is e-i/ent2@ sti22 3re$ter t#$n t#e CF.49U 1DC initi$22@ #e2/ ;rior to t#e e<6#$n3e. T#is
%.6# >$s $/%itte/ 7@ t#e ;$rties in t#e 14 1e7r.$r@ 9001 Sti;.2$tion o= 1$6ts,
Do6.%ents $n/ Iss.es t#e@ s.7%itte/ to t#e CTA.KC9L In$s%.6# $s t#e 6o%7ine/
o>ners#i; o= 1DC $n/ 1AI o= 1LISs o.tst$n/in3 6$;it$2 sto6? $//s .; to $ tot$2 o=
F0.88U, it st$n/s to re$son t#$t neit#er o= s$i/ tr$ns=erors 6$n 7e #e2/ 2i$72e =or
/e=i6ien6@ in6o%e t$<es t#e CIR $ssesse/ on t#e s.;;ose/ 3$in >#i6# res.2te/ =ro% t#e
s.7De6t tr$ns=er.
On t#e ot#er #$n/, inso=$r $s /o6.%ent$r@ st$%; t$<es on 2o$n $3ree%ents $n/
;ro%issor@ notes $re 6on6erne/, Se6tion 180 o= t#e NIRC ;ro-i/es =o22o>s:
Se6. 180. St$%; t$< on $22 2o$n $3ree%ents, ;ro%issor@ notes, 7i22s o= e<6#$n3e, /r$=ts,
instr.%ents $n/ se6.rities iss.e/ 7@ t#e 3o-ern%ent or $n@ o= its instr.%ent$2ities,
6erti=i6$tes o= /e;osit 7e$rin3 interest $n/ ot#ers not ;$@$72e on si3#t or /e%$n/. O On $22
2o$n $3ree%ents si3ne/ $7ro$/ >#erein t#e o7De6t o= t#e 6ontr$6t is 2o6$te/ or .se/ in t#e
P#i2i;;inesM 7i22 o= e<6#$n3e "7et>een ;oints >it#in t#e P#i2i;;ines&, /r$=ts, instr.%ents
$n/ se6.rities iss.e/ 7@ t#e Go-ern%ent or $n@ o= its instr.%ent$2ities or 6erti=i6$tes o=
/e;osits /r$>in3 interest, or or/ers =or t#e ;$@%ent o= $n@ s.% o= %one@ ot#er>ise t#$n
$t si3#t or on /e%$n/, or on $22 ;ro%issor@ notes, >#et#er ne3oti$72e or non,ne3oti$72e,
e<6e;t 7$n? notes iss.e/ =or 6ir6.2$tion, $n/ on e$6# rene>$2 o= $n@ s.6# note, t#ere
s#$22 7e 6o22e6te/ $ /o6.%ent$r@ st$%; t$< o= T#irt@ 6ent$-os "P0.30& on e$6# t>o
#.n/re/ ;esos, or =r$6tion$2 ;$rt t#ereo=, o= t#e =$6e -$2.e o= $n@ s.6# $3ree%ent, 7i22 o=
e<6#$n3e, /r$=t, 6erti=i6$te o= /e;osit or note: Pro-i/e/, T#$t on2@ one /o6.%ent$r@
st$%; t$< s#$22 7e i%;ose/ on eit#er 2o$n $3ree%ent, or ;ro%issor@ notes iss.e/ to
se6.re s.6# 2o$n, >#i6#e-er >i22 @ie2/ $ #i3#er t$<: Pro-i/e/ #o>e-er, T#$t 2o$n
$3ree%ents or ;ro%issor@ notes t#e $33re3$te o= >#i6# /oes not e<6ee/ T>o #.n/re/
=i=t@ t#o.s$n/ ;esos "P9:0,000.00& e<e6.te/ 7@ $n in/i-i/.$2 =or #is ;.r6#$se on
inst$22%ent =or #is ;erson$2 .se or t#$t o= #is =$%i2@ $n/ not =or 7.siness, res$2e, 7$rter or
#ire o= $ #o.se, 2ot, %otor -e#i62e, $;;2i$n6e or =.rnit.re s#$22 7e e<e%;t =ro% t#e
;$@%ent o= /o6.%ent$r@ st$%; t$< ;ro-i/e/ .n/er t#is Se6tion.
W#en re$/ in 6onD.n6tion >it# Se6tion 1F3 o= t#e 1883 NIRC,KC3L t#e =ore3oin3
;ro-ision 6on6e/e/2@ $;;2ies to Q"$&22 2o$n $3ree%ents, >#et#er %$/e or si3ne/ in t#e
P#i2i;;ines, or $7ro$/ >#en t#e o72i3$tion or ri3#t $rises =ro% P#i2i;;ine so.r6es or t#e
;ro;ert@ or o7De6t o= t#e 6ontr$6t is 2o6$te/ or .se/ in t#e P#i2i;;ines.Q Corre2$ti-e2@,
Se6tion 3 "7& $n/ Se6tion C o= Re-en.e Re3.2$tions No. 8,84 ;ro-i/e $s =o22o>s:
Se6tion 3. De=inition o= Ter%s. O 1or ;.r;oses o= t#ese Re3.2$tions, t#e =o22o>in3 ter%
s#$22 %e$n:
"7& SLo$n $3ree%entS O re=ers to $ 6ontr$6t in >ritin3 >#ere one o= t#e ;$rties /e2i-ers to
$not#er %one@ or ot#er 6ons.%$72e t#in3, .;on t#e 6on/ition t#$t t#e s$%e $%o.nt o=
t#e s$%e ?in/ $n/ G.$2it@ s#$22 7e ;$i/. T#e ter% s#$22 in62./e 6re/it =$6i2ities, >#i6#
%$@ 7e e-i/en6e/ 7@ 6re/it %e%o, $/-i6e or /r$>in3s.
T#e ter%s SLo$n A3ree%entQ .n/er Se6tion 180 $n/ Q)ort3$3eS .n/er Se6tion 18:, 7ot#
o= t#e T$< Co/e, $s $%en/e/, 3ener$22@ re=er to /istin6t $n/ se;$r$te instr.%ents. A 2o$n
$3ree%ent s#$22 7e t$<e/ .n/er Se6tion 180, >#i2e $ /ee/ o= %ort3$3e s#$22 7e t$<e/
.n/er Se6tion 18:.Q
QSe6tion C. St$%; on $22 Lo$n A3ree%ents. O A22 2o$n $3ree%ents >#et#er %$/e or
si3ne/ in t#e P#i2i;;ines, or $7ro$/ >#en t#e o72i3$tion or ri3#t $rises =ro% P#i2i;;ine
so.r6es or t#e ;ro;ert@ or o7De6t o= t#e 6ontr$6t is 2o6$te/ in t#e P#i2i;;ines s#$22 7e
s.7De6t to t#e /o6.%ent$r@ st$%; t$< o= t#irt@ 6ent$-os "P0.30& on e$6# t>o #.n/re/
;esos, or =r$6tion$2 ;$rt t#ereo=, o= t#e =$6e -$2.e o= $n@ s.6# $3ree%ents, ;.rs.$nt to
Se6tion 180 in re2$tion to Se6tion 1F3 o= t#e T$< Co/e.
In 6$ses >#ere no =or%$2 $3ree%ents or ;ro%issor@ notes #$-e 7een e<e6.te/ to 6o-er
6re/it =$6i2ities, t#e /o6.%ent$r@ st$%; t$< s#$22 7e 7$se/ on t#e $%o.nt o= /r$>in3s or
$-$i2%ent o= t#e =$6i2ities, >#i6# %$@ 7e e-i/en6e/ 7@ 6re/itE/e7it %e%o, $/-i6e or
/r$>in3s 7@ $n@ =or% o= 6#e6? or >it#/r$>$2 s2i;, .n/er Se6tion 180 o= t#e T$< Co/e.
A;;2@in3 t#e $=ores$i/ ;ro-isions to t#e 6$se $t 7en6#, >e =in/ t#$t t#e instr.6tion$2
2etters $s >e22 $s t#e Do.rn$2 $n/ 6$s# -o.6#ers e-i/en6in3 t#e $/-$n6es 1DC e<ten/e/ to
its $==i2i$tes in 188C $n/ 188F G.$2i=ie/ $s 2o$n $3ree%ents .;on >#i6# /o6.%ent$r@
st$%; t$<es %$@ 7e i%;ose/. In ?ee;in3 >it# t#e 6$-e$t $tten/$nt to e-er@ *IR R.2in3 to
t#e e==e6t t#$t it is -$2i/ on2@ i= t#e =$6ts 62$i%e/ 7@ t#e t$<;$@er $re 6orre6t, >e =in/ t#$t
t#e CA re-ersi72@ erre/ in .ti2iNin3 *IR R.2in3 No. 11C,88, /$te/ 30 !.2@ 1888 >#i6#,
stri6t2@ s;e$?in3, 6o.2/ 7e in-o?e/ on2@ 7@ AS* De-e2o;%ent Cor;or$tion, t#e t$<;$@er
>#o so.3#t t#e s$%e. In s$i/ r.2in3, t#e CIR o;ine/ t#$t /o6.%ents 2i?e t#ose e-i/en6in3
t#e $/-$n6es 1DC e<ten/e/ to its $==i2i$tes $re not s.7De6t to /o6.%ent$r@ st$%; t$<, to
>it:
On t#e %$tter o= >#et#er or not t#e inter,o==i6e %e%o 6o-erin3 t#e $/-$n6es 3r$nte/ 7@
$n $==i2i$te 6o%;$n@ is s.7De6t to /o6.%ent$r@ st$%; t$<, it is in=or%e/ t#$t not#in3 in
Re3.2$tions No. 9C "Do6.%ent$r@ St$%; T$< Re3.2$tions& $n/ Re-en.e Re3.2$tions No.
8,84 st$tes t#$t t#e s$%e is s.7De6t to /o6.%ent$r@ st$%; t$<. S.6# 7ein3 t#e 6$se, s$i/
inter,o==i6e %e%o e-i/en6in3 t#e 2en/in3s or 7orro>in3s >#i6# is neit#er $ =or% o=
;ro%issor@ note nor $ 6erti=i6$te o= in/e7te/ness iss.e/ 7@ t#e 6or;or$tion,$==i2i$te or $
6erti=i6$te o= o72i3$tion, >#i6# $re, %ore or 2ess, 6$te3oriNe/ $s Sse6.ritiesS, is not s.7De6t
to /o6.%ent$r@ st$%; t$< i%;ose/ .n/er Se6tion 180, 1F4 $n/ 1F: o= t#e T$< Co/e o=
188F, res;e6ti-e2@. R$t#er, t#e inter,o==i6e %e%o is 7ein3 ;re;$re/ =or $66o.ntin3
;.r;oses on2@ in or/er to $-oi/ t#e 6o,%in32in3 o= =.n/s o= t#e 6or;or$te $==i2i$tes.
In its $;;e$2 7e=ore t#e CA, t#e CIR $r3.e/ t#$t t#e =ore3oin3 r.2in3 >$s 2$ter %o/i=ie/
in *IR R.2in3 No. 108,88 /$te/ 1: !.2@ 1888, >#i6# o;ine/ t#$t inter,o==i6e %e%os
e-i/en6in3 2en/in3s or 7orro>in3s e<ten/e/ 7@ $ 6or;or$tion to its $==i2i$tes $re $?in to
;ro%issor@ notes, #en6e, s.7De6t to /o6.%ent$r@ st$%; t$<es.KC4L In 7r.s#in3 $si/e t#e
=ore3oin3 $r3.%ent, #o>e-er, t#e CA $;;2ie/ Se6tion 94C o= t#e 1883 NIRCKC:L =ro%
>#i6# ;ro6ee/s t#e sett2e/ ;rin6i;2e t#$t r.2in3s, 6ir6.2$rs, r.2es $n/ re3.2$tions
;ro%.23$te/ 7@ t#e *IR #$-e no retro$6ti-e $;;2i6$tion i= to so $;;2@ t#e% >o.2/ 7e
;reD./i6i$2 to t#e t$<;[email protected] A/%itte/2@, t#is r.2e /oes not $;;2@: "$& >#ere t#e
t$<;$@er /e2i7er$te2@ %isst$tes or o%its %$teri$2 =$6ts =ro% #is ret.rn or in $n@ /o6.%ent
reG.ire/ o= #i% 7@ t#e *.re$. o= Intern$2 Re-en.eM "7& >#ere t#e =$6ts s.7seG.ent2@
3$t#ere/ 7@ t#e *.re$. o= Intern$2 Re-en.e $re %$teri$22@ /i==erent =ro% t#e =$6ts on
>#i6# t#e r.2in3 is 7$se/M or "6& >#ere t#e t$<;$@er $6te/ in 7$/ =$it#.KCFL Not 7ein3 t#e
t$<;$@er >#o, in t#e =irst inst$n6e, so.3#t $ r.2in3 =ro% t#e CIR, #o>e-er, 1DC 6$nnot
in-o?e t#e =ore3oin3 ;rin6i;2e on non,retro$6ti-it@ o= *IR r.2in3s.
ie>e/ in t#e 2i3#t o= t#e =ore3oin3 6onsi/er$tions, >e =in/ t#$t 7ot# t#e CTA $n/ t#e
CA erre/ in in-$2i/$tin3 t#e $ssess%ents iss.e/ 7@ t#e CIR =or t#e /e=i6ien6@
/o6.%ent$r@ st$%; t$<es /.e on t#e instr.6tion$2 2etters $s >e22 $s t#e Do.rn$2 $n/ 6$s#
-o.6#ers e-i/en6in3 t#e $/-$n6es 1DC e<ten/e/ to its $==i2i$tes in 188C $n/ 188F. In
Assess%ent Noti6e No. SP,DST,8C,00090,9000, t#e CIR 6orre6t2@ $ssesse/ t#e s.% o=
PC,400,C83.C9 =or /o6.%ent$r@ st$%; t$<, P3,888,F83.44 in interests $n/ P9:,000.00 $s
6o%;ro%ise ;en$2t@, =or $ tot$2 o= P10,49:,48F.0C. A2on3si/e t#e s.% o= P4,0:0,:88.C9
=or /o6.%ent$r@ st$%; t$<, t#e CIR si%i2$r2@ $ssesse/ P1,F91,088.F8 in interests $n/
P9:,000.00 $s 6o%;ro%ise ;en$2t@ in Assess%ent Noti6e No. SP,DST,8F,00091,9000 or
$ tot$2 o= P:,F8C,C88.40. T#e i%;osition o= /e=i6ien6@ interest is D.sti=ie/ .n/er Se6. 948
"$& $n/ "7& o= t#e NIRC >#i6# $.t#oriNes t#e $ssess%ent o= t#e s$%e A$t t#e r$te o=
t>ent@ ;er6ent "90U&, or s.6# #i3#er r$te $s %$@ 7e ;res6ri7e/ 7@ re3.2$tionsB, =ro% t#e
/$te ;res6ri7e/ =or t#e ;$@%ent o= t#e .n;$i/ $%o.nt o= t$< .nti2 =.22 ;$@%ent.KC8L T#e
i%;osition o= t#e 6o%;ro%ise ;en$2t@ is, in t.rn, >$rr$nte/ .n/er Se6. 9:0KC8L o= t#e
NIRC >#i6# ;res6ri7es t#e i%;osition t#ereo= Ain 6$se o= e$6# =$i2.re to =i2e $n
in=or%$tion or ret.rn, st$te%ent or 2ist, or ?ee; $n@ re6or/ or s.;;2@ $n@ in=or%$tion
reG.ire/B on t#e /$te ;res6ri7e/ t#ere=or.
To o.r %in/, no re-ersi72e error 6$n, =in$22@, 7e i%;.te/ $3$inst 7ot# t#e CTA $n/ t#e CA
=or in-$2i/$tin3 t#e Assess%ent Noti6e iss.e/ 7@ t#e CIR =or t#e /e=i6ien6@ in6o%e t$<es
1DC is s.;;ose/ to #$-e in6.rre/ $s $ 6onseG.en6e o= t#e /i2.tion o= its s#$res in 1AC.
Anent 1DCHs S#$re#o2/ersH A3ree%ent >it# R4PL, t#e re6or/ s#o>s t#$t t#e ;$rties
>ere in $3ree%ent $7o.t t#e =o22o>in3 =$6t.$2 $nte6e/ents n$rr$te/ in t#e 14 1e7r.$r@
9001 Sti;.2$tion o= 1$6ts, Do6.%ents $n/ Iss.es t#e@ s.7%itte/ 7e=ore t#e CTA,KF0L
-iN.:
A1.11. On No-e%7er 1:, 188C, 1DC entere/ into $ S#$re#o2/ersH A3ree%ent "WSAH& >it#
Re6o 4errer$ Pte. Lt/. "WR4PLH& =or t#e =or%$tion o= $ Doint -ent.re 6o%;$n@ n$%e/
1i2in-est Asi$ Cor;or$tion "W1ACH& >#i6# is 7$se/ in Sin3$;ore ";$rs. 1.01 $n/ C.11,
Petition, ;$rs. 1 $n/ F, Ans>er&.
1.19. 1AC, t#e Doint -ent.re 6o%;$n@ =or%e/ 7@ 1DC $n/ R4PL, is t$s?e/ to /e-e2o;
$n/ %$n$3e t#e :0U o>ners#i; interest o= 1DC in its P*Co% O==i6e To>er ProDe6t
"WProDe6tH& >it# t#e P#i2i;;ine *$n? o= Co%%.ni6$tions ";$r. C.19, PetitionM ;$r. F,
Ans>er&.
1.13. P.rs.$nt to t#e SA 7et>een 1DC $n/ R4PL, t#e eG.it@ ;$rti6i;$tion o= 1DC $n/
R4PL in 1AC >$s C0U $n/ 40U res;e6ti-e2@.
1.14. In $66or/$n6e >it# t#e ter%s o= t#e SA, 1DC s.7s6ri7e/ to P:00.F %i22ion >ort# o=
s#$res o= sto6? re;resentin3 $ C0U eG.it@ ;$rti6i;$tion in 1AC. In t.rn, R4PL s.7s6ri7e/
to P433.8 %i22ion >ort# o= s#$res o= sto6? o= 1AC re;resentin3 $ 40U eG.it@
;$rti6i;$tion in 1AC.
1.1:. In ;$@%ent o= its s.7s6ri;tion in 1AC, 1DC e<e6.te/ $ Dee/ o= Assi3n%ent
tr$ns=errin3 to 1AC $ ;ortion o= 1DCHs ri3#t $n/ interests in t#e ProDe6t to t#e e<tent o=
P:00.F %i22ion.
1.1C. 1DC re;orte/ $ net 2oss o= P180,C8:,0C1.00 in its Ann.$2 In6o%e T$< Ret.rn =or
t#e t$<$72e @e$r 188C.BKF1L
A2on3si/e t#e ;rin6i;2e t#$t t$< re-en.es $re not inten/e/ to 7e 2i7er$22@ 6onstr.e/,KF9L
t#e r.2e is sett2e/ t#$t t#e =in/in3s $n/ 6on62.sions o= t#e CTA $re $66or/e/ 3re$t res;e6t
$n/ $re 3ener$22@ .;#e2/ 7@ t#is Co.rt, .n2ess t#ere is $ 62e$r s#o>in3 o= $ re-ersi72e
error or $n i%;ro-i/ent e<er6ise o= $.t#[email protected] A7sent s#o>in3 o= s.6# error #ere, >e
=in/ no stron3 $n/ 6o3ent re$sons to /e;$rt =ro% s$i/ r.2e >it# res;e6t to t#e CTASs
=in/in3 t#$t no /e=i6ien6@ in6o%e t$< 6$n 7e $ssesse/ on t#e 3$in on t#e s.;;ose/
/i2.tion $n/Eor in6re$se in t#e -$2.e o= 1DCSs s#$re#o2/in3s in 1AC >#i6# t#e CIR, $t
$n@ r$te, =$i2e/ to est$72is#. *e$rin3 in %in/ t#e %e$nin3 o= Q3ross in6o%eQ $s $7o-e
/is6.sse/, it 6$nnot 7e 3$ins$i/, e-en t#en, t#$t $ %ere in6re$se or $;;re6i$tion in t#e
-$2.e o= s$i/ s#$res 6$nnot 7e 6onsi/ere/ in6o%e =or t$<$tion ;.r;oses. Sin6e A$ %ere
$/-$n6e in t#e -$2.e o= t#e ;ro;ert@ o= $ ;erson or 6or;or$tion in no sense 6onstit.te t#e
Win6o%eH s;e6i=ie/ in t#e re-en.e 2$>,B it #$s 7een #e2/ in t#e e$r2@ 6$se o= 1is#er -s.
Trini/$/,KF4L t#$t it A6onstit.tes $n/ 6$n 7e tre$te/ %ere2@ $s $n in6re$se o= 6$;it$2.B
4en6e, t#e CIR #$s no =$6t.$2 $n/ 2e3$2 7$sis in $ssessin3 in6o%e t$< on t#e in6re$se in
t#e -$2.e o= 1DCSs s#$re#o2/in3s in 1AC .nti2 t#e s$%e is $6t.$22@ so2/ $t $ ;ro=it.
W4ERE1ORE, ;re%ises 6onsi/ere/, t#e CIRSs ;etition =or re-ie> on 6ertior$ri in G.R.
No. 1C3C:3 is DENIED =or 2$6? o= %erit $n/ t#e CAHs 1C De6e%7er 9003 De6ision in
G.R. No. F9889 is A11IR)ED in toto. T#e CIRHs ;etition in G.R. No. 1CFC88 is
PARTIALL+ GRANTED $n/ t#e CAHs 9C !$n.$r@ 900: De6ision in CA,G.R. SP No.
F4:10 is )ODI1IED.
A66or/in32@, Assess%ent Noti6es Nos. SP,DST,8C,00090,9000 $n/ SP,DST,8F,00091,
9000 iss.e/ =or /e=i6ien6@ /o6.%ent$r@ st$%; t$<es /.e on t#e instr.6tion$2 2etters $s
>e22 $s Do.rn$2 $n/ 6$s# -o.6#ers e-i/en6in3 t#e $/-$n6es 1DC e<ten/e/ to its $==i2i$tes
$re /e62$re/ -$2i/.
T#e 6$n6e22$tion o= Assess%ent Noti6es Nos. SP,INC,8C,00018,9000, SP,INC,8F,
00018,9000 $n/ SP,INC,8F,009F,9000 iss.e/ =or /e=i6ien6@ in6o%e $ssesse/ on "$& t#e
A$r%s,2en3t#B interest =ro% s$i/ $/-$n6esM "7& t#e 3$in =ro% 1DCHs Dee/ o= E<6#$n3e
>it# 1AI $n/ 1LIM $n/ "6& in6o%e =ro% t#e /i2.tion res.2tin3 =ro% 1DCHs S#$re#o2/ersH
A3ree%ent >it# R4PL is, #o>e-er, .;#e2/.
SO ORDERED.