G.R. No.

198677 November 26, 2014

COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
BASF COATING + INKS PHILS., INC., Respondent.
DECISION
PERALTA, J.:
1
Before the Court is a petition for review on certiorari assailing the Decision of the Court of Tax
2
Appeals (CTA) En Banc, dated June 16, 2011, and Resolution dated September 16, 2011, in
C.T.A. EB No. 664 (C.T.A. Case No. 7125).
The pertinent factual and procedural antecedents of the case are as follows:
Respondent was a corporation which was duly organized under and by virtue of the laws of the
Republic of the Philippines on August 1, 1990 with a term of existence of fifty (50) years. Its BIR-
registered address was at 101 Marcos Alvarez Avenue, Barrio Talon, Las Piñas City. In a joint
special meeting held on March 19, 2001, majorityof the members of the Board of Directors and the
stockholders representing more than two-thirds (2/3) of the entire subscribed and outstanding capital
stock of herein respondent corporation, resolved to dissolve the corporation by shortening its
3
corporate term to March 31, 2001. Subsequently, respondent moved out of its address in Las
Piñas City and transferred to Carmelray Industrial Park, Canlubang, Calamba, Laguna.
On June 26, 2001, respondent submitted two (2) letters to the Bureau of Internal Revenue (BIR)
Revenue District Officer of Revenue District Office (RDO) No. 53, Region 8, in Alabang, Muntinlupa
City. The first letter, dated April 26, 2001, was a notice of respondent's dissolution, in compliance
4
with the requirements of Section 52(c) of the National Internal Revenue Code. On the other hand,
the second letter, dated June 22, 2001, was a manifestation indicating the submission of various
documents supporting respondent's dissolution, among which was BIR Form No. 1905, which refers
5
to an update of information contained in its tax registration.
Thereafter, in a Formal Assessment Notice (FA N) dated January 17, 2003, petitioner assessed
respondent the aggregate amount of ₱18,671,343.14 representing deficiencies in income tax, value
added tax, withholding tax on compensation, expanded withholding tax and documentary stamp tax,
6
including increments, for the taxable year 1999. The FAN was sent by registered mail on January
24, 2003 to respondent's former address in Las Piñas City.
On March 5, 2004, the Chief of the Collection Section of BIR Revenue Region No. 7, RDO No. 39,
South Quezon City, issued a First Notice Before Issuance of Warrant of Distraint and Levy, which
7
was sent to the residence of one of respondent's directors.
On March 19, 2004, respondent filed a protest letter citing lack of due process and prescription as
8 9
grounds. On April 16, 2004, respondent filed a supplemental letter of protest. Subsequently, on
June 14, 2004, respondent submitted a letter wherein it attached documents to prove the defenses
10
raised in its protest letters.
On January 10, 2005, after 180 dayshad lapsed without action on the part of petitioner on
11
respondent's protest, the latter filed a Petition for Review with the CTA.
Trial on the merits ensued.
12
On February 17, 2010, the CTA Special First Division promulgated its Decision, the dispositive
portion of which reads, thus:
WHEREFORE, the Petition for Review is hereby GRANTED. The assessments for deficiency
income tax in the amount of ₱14,227,425.39, deficiency value-added tax of ₱3,981,245.66,
deficiency withholding tax on compensation of ₱49,977.21, deficiency expanded withholding tax of
₱156,261.97 and deficiency documentary stamp tax of ₱256,432.91, including increments, in the
aggregate amount of ₱18,671,343.14 for the taxable year 1999 are hereby CANCELLED and SET
ASIDE.
13
SO ORDERED.
The CTA Special First Division ruled that since petitioner was actually aware of respondent's new
address, the former's failure to send the Preliminary Assessment Notice and FAN to the said
address should not be taken against the latter. Consequently, since there are no valid notices sent to
respondent, the subsequent assessments against it are considered void. Aggrieved by the Decision,
petitioner filed a Motion for Reconsideration, but the CTA Special First Division denied it in its
14
Resolution dated July 13, 2010.
15
Petitioner then filed a Petition for Review with the CTA En Banc.
On June 16, 2011, the CTA En Banc promulgated its assailed Decision denying petitioner's Petition
for Review for lack of merit. The CTA En Banc held that petitioner's right to assess respondent for
deficiency taxes for the taxable year 1999 has already prescribed and that the FAN issued to
respondent never attained finality because respondent did not receive it.
Petitioner filed a Motion for Reconsideration, but the CTA En Banc denied it in its Resolution dated
September 16, 2011.
Hence, the present petition with the following Assignment of Errors:
I
THE HONORABLE CTA EN BANC ERRED IN RULING THAT THE RIGHT OF PETITIONER TO
ASSESS HEREIN RESPONDENT FOR DEFICIENCY INCOME TAX, VALUEADDED TAX,
WITHHOLDING TAX ON COMPENSATION, EXPANDED WITHHOLDING TAX AND
DOCUMENTARY STAMP TAX, FOR TAXABLE YEAR 1999 IS BARRED BY PRESCRIPTION.
II
THE HONORABLE COURT OF TAX APPEALS, EN BANC, ERRED IN RULING THAT THE
FORMAL ASSESSMENT NOTICE (FAN) FOR RESPONDENT'S DEFICIENCY INCOME TAX,
VALUE-ADDED TAX, WITHHOLDING TAX ON COMPENSATION, EXPANDED WITHHOLDING
TAX AND DOCUMENTARY STAMP TAX FOR TAXABLE YEAR 1999 HAS NOT YET BECOME
16
FINAL, EXECUTORY AND DEMANDABLE.
The petition lacks merit.
Petitioner contends that, insofar as respondent's alleged deficiency taxes for the taxable year1999
are concerned, the running of the three-year prescriptive period to assess, under Sections 203 and
222 of the National Internal Revenue Act of 1997 (Tax Reform Act of 1997) was suspended when
respondent failed to notify petitioner, in writing, of its change of address, pursuant to the provisions
of Section 223 of the same Act and Section 11 of BIR Revenue Regulation No. 12-85.
Sections 203, 222 and 223 of the Tax Reform Act of 1997 provide, respectively:
Sec. 203. Period of Limitation Upon Assessment and Collection.– Except as provided in Section
222,internal revenue taxes shall be assessed within three (3) years after the last day prescribed by
law for the filing of the return, and no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period: Provided, That in a case where a
return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from
the day the return was filed. For purposes of this Section, a return filed before the last day
prescribed by law for the filing thereof shall be considered as filed on such last day. (emphasis
supplied)
Sec. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. -
(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the
tax may be assessed, or a proceeding in court for the collection of such tax may be filed without
assessment, at any time within ten (10) years after the discovery of the falsity, fraud or omission:
Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall
be judicially taken cognizance of in the civil or criminal action for the collection thereof.
(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both
the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax
may be assessed within the period agreed upon.
The period so agreed upon may be extended by subsequent written agreement made before the
expiration of the period previously agreed upon.
(c) Any internal revenue tax which has been assessed within the period of limitation as prescribed in
paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within five (5)
years following the assessment of the tax.
(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided in
paragraph (b) hereinabove, may be collected bydistraint or levy or by a proceeding in court within
the period agreed upon in writing before the expiration of the five (5) -year period. The period so
agreed upon may be extended by subsequent written agreements made before the expiration of the
period previously agreed upon.
(e) Provided, however, That nothing in the immediately preceding and paragraph (a) hereof shall be
construed to authorize the examination and investigation or inquiry into any tax return filed in
accordance with the provisions of any tax amnesty law or decree.
Sec. 223. Suspension of Running of Statute of Limitations. - The running of the Statute of Limitations
provided in Sections 203 and 222 on the making of assessment and the beginning of distraint or levy
a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period
during which the Commissioner is prohibited from making the assessment or beginning distraint or
levy or a proceeding in court and for sixty (60) days thereafter; when the taxpayer requests for a
reinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the
address given by him in the return filed upon which a tax is being assessed or collected: Provided,
that, if the taxpayer informs the Commissioner of any change in address, the running of the Statute
of Limitations will not be suspended; when the warrant of distraint or levy is duly served upon the
taxpayer, his authorized representative, or a member of his household with sufficient discretion, and
no property could be located; and when the taxpayer is out of the Philippines. (emphasis supplied)
In addition, Section 11 of BIR Revenue Regulation No. 12-85 states:
Sec. 11. Change of Address. – In case of change of address, the taxpayer must give a written notice
thereof to the Revenue District Officer or the district having jurisdiction over his formerlegal
residence and/or place of business, copy furnished the Revenue District Officer having jurisdiction
over his new legal residence or place of business, the Revenue Computer Center and the
Receivable Accounts Division, BIR, National Office, Quezon City, and in case of failure to do so, any
communication referred to in these regulations previously sent to his former legal residence or
business address as appear in is tax return for the period involved shall be considered valid and
binding for purposes of the period within which to reply.
It is true that, under Section 223 of the Tax Reform Act of 1997, the running of the Statute of
Limitations provided under the provisions of Sections 203 and 222 of the same Act shall be
suspended when the taxpayer cannot be located in the address given by him in the return filed upon
which a tax is being assessed or collected. In addition, Section 11 of Revenue Regulation No. 12-85
states that, in case of change of address, the taxpayer is required to give a written notice thereof to
the Revenue District Officer or the district having jurisdiction over his former legal residence and/or
place of business. However, this Court agrees with both the CTA Special First Division and the CTA
En Banc in their ruling that the above mentioned provisions on the suspension of the three-year
period to assess apply only if the BIR Commissioner is not aware of the whereabouts of the
taxpayer.
In the present case, petitioner, by all indications, is well aware that respondent had moved to its new
address in Calamba, Laguna, as shown by the following documents which form partof respondent's
records with the BIR:
1) Checklist on Income Tax/Withholding Tax/Documentary Stamp Tax/Value-Added Tax and Other
17
Percentage Taxes;
18
2) General Information (BIR Form No. 23-02);
19
3) Report on Taxpayer's Delinquent Account, dated June 27, 2002;
20
4) Activity Report, dated October 17, 2002;
21
5) Memorandum Report of Examiner, dated June 27, 2002;
22
6) Revenue Officer's Audit Report on Income Tax;
23
7) Revenue Officer's Audit Report on Value-Added Tax;
24
8) Revenue Officer's Audit Report on Compensation Withholding Taxes;
25
9) Revenue Officer's Audit Report on Expanded Withholding Taxes;
26
10) Revenue Officer's Audit Report on Documentary Stamp Taxes.
The above documents, all of which were accomplished and signed by officers of the BIR, clearly
show that respondent's address is at Carmelray Industrial Park, Canlubang, Calamba, Laguna. The
CTA also found that BIR officers, at various times prior to the issuance of the subject FAN,
conducted examination and investigation of respondent's tax liabilities for 1999 at the latter's new
address in Laguna as evidenced by the following, in addition to the above mentioned records:
27
1) Letter, dated September 27, 2001, signed by Revenue Officer I Eugene R. Garcia;
2) Final Request for Presentation of Records Before Subpoena Duces Tecum, dated March 20,
28
2002, signed by Revenue Officer I Eugene R. Garcia.
Moreover, the CTA found that, based on records, the RDO sent respondent a letter dated April 24,
2002 informing the latter of the results of their investigation and inviting it to an informal
29
conference. Subsequently, the RDO also sent respondent another letter dated May 30, 2002,
30
acknowledging receipt of the latter's reply to his April 24, 2002 letter. These two letters were sent
to respondent's new address in Laguna. Had the RDO not been informed or was not aware of
respondent's new address, he could not have sent the said letters to the said address.
Furthermore, petitioner should have been alerted by the fact that prior to mailing the FAN, petitioner
sent to respondent's old address a Preliminary Assessment Notice but it was "returned to sender."
This was testified to by petitioner's Revenue Officer II at its Revenue District Office 39 in Quezon
31
City. Yet, despite this occurrence, petitioner still insisted in mailing the FAN to respondent's old
address.
Hence, despite the absence of a formal written notice of respondent's change of address, the fact
remains that petitioner became aware of respondent's new address as shown by documents replete
in its records. As a consequence, the running of the three-year period to assess respondent was not
suspended and has already prescribed.
It bears stressing that, in a number of cases, this Court has explained that the statute of limitations
on the collection of taxes primarily benefits the taxpayer. In these cases, the Court exemplified the
detrimental effects that the delay in the assessment and collection of taxes inflicts upon the
32
taxpayers. Thus, in Commissioner of Internal Revenue v. Philippine Global Communication, Inc.,
this Court echoed Justice Montemayor's disquisition in his dissenting opinion in Collector of Internal
33
Revenue v. Suyoc Consolidated Mining Company, regarding the potential loss to the taxpayer if
the assessment and collection of taxes are not promptly made, thus:
Prescription in the assessment and in the collection of taxes is provided by the Legislature for the
benefit of both the Government and the taxpayer; for the Government for the purpose of expediting
the collection of taxes, so that the agency charged with the assessment and collection may not tarry
too long or indefinitely tothe prejudice of the interests of the Government, which needs taxes to run
it; and for the taxpayer so that within a reasonable time after filing his return, hemay know the
amount of the assessment he is required to pay, whether or not such assessment is well founded
and reasonable so that he may either pay the amount of the assessment or contest its validity
incourt x x x. It would surely be prejudicial to the interest of the taxpayer for the Government
collecting agency to unduly delay the assessment and the collection because by the time the
collecting agency finally gets around to making the assessment or making the collection, the
taxpayer may then have lost his papers and books to support his claim and contest that of the
Government, and what is more, the tax is in the meantime accumulating interest which the taxpayer
34
eventually has to pay.
35
Likewise, in Republic of the Philippines v. Ablaza, this Court elucidated that the prescriptive
period for the filing of actions for collection of taxes is justified by the need to protect law-abiding
citizens from possible harassment. Also, in Bank of the Philippine Islands v. Commissioner of
36
Internal Revenue, it was held that the statute of limitations on the assessment and collection of
taxes is principally intended to afford protection to the taxpayer against unreasonable investigations
as the indefinite extension of the period for assessment deprives the taxpayer of the assurance that
he will no longer be subjected to further investigation for taxes after the expiration of a reasonable
37
period of time. Thus, in Commissioner of Internal Revenue v. B.F. Goodrich Phils., Inc., this Court
ruled that the legal provisions on prescription should be liberally construed to protect taxpayers and
that, as a corollary, the exceptions to the rule on prescription should be strictly construed.
It might not also be amiss to point out that petitioner's issuance of the First Notice Before Issuance of
38
Warrant of Distraint and Levy violated respondent's right to due process because no valid notice
of assessment was sent to it. An invalid assessment bears no valid fruit. The law imposes a
substantive, not merely a formal, requirement. To proceed heedlessly with tax collection without first
establishing a valid assessment is evidently violative of the cardinal principle inadministrative
investigations: that taxpayers should be able to present their case and adduce supporting
39
evidence. In the instant case, respondent has not properly been informed of the basis of its tax
liabilities. Without complying with the unequivocal mandate of first informing the taxpayer of the
government’s claim, there can be no deprivation of property, because no effective protest can be
made.
It is true that taxes are the lifeblood of the government. However, in spite of all its plenitude, the
40 41
power to tax has its limits. Thus, in Commissioner of Internal Revenue v. Algue, Inc., this
Court held:
Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. On the other hand, such collection should be made in accordance with law as any
1âwphi 1

arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile
the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of
taxation, which is the promotion of the common good, may be achieved.
xxxx
It is said that taxes are what we pay for civilized society. Without taxes, the government would be
paralyzed for the lack of the motive power to activate and operate it. Hence, despite the natural
reluctance to surrender part of one’s hard-earned income to taxing authorities, every person who is
able to must contribute his share in the running of the government. The government for its partis
expected torespond in the form of tangible and intangible benefits intended to improve the lives of
the people and enhance their moral and material values. This symbiotic relationship is the rationale
of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those
in the seat of power.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his
succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the
42
taxpayer can demonstrate x x x that the law has not been observed.
It is an elementary rule enshrined in the 1987 Constitution that no person shall be deprived of
property without due process of law. In balancing the scales between the power of the State to tax
and its inherent right to prosecute perceived transgressors of the law on one side, and the
constitutional rights of a citizen todue process of law and the equal protection of the laws on the
other, the scales must tilt in favor of the individual, for a citizen’s right is amply protected by the Bill
43
of Rights under the Constitution.
As to the second assigned error, petitioner's reliance on the provisions of Section 3.1.7 of BIR
44
Revenue Regulation No. 12-99 as well as on the case of Nava v. Commissioner of Internal
45
Revenue is misplaced, because in the said case, one of the requirements ofa valid assessment
notice is that the letter or notice must be properly addressed. It is not enough that the notice is sent
by registered mail as provided under the said Revenue Regulation. In the instant case, the FAN was
sent tothe wrong address. Thus, the CTA is correct in holding that the FAN never attained finality
because respondent never received it, either actually or constructively.
WHEREFORE, the instant petition is DENIED. The Decision of the Court of Tax Appeals En Banc,
dated June 16, 2011, and its Resolution dated September 16, 2011, in C.T.A. EB No. 664 (C.T.A.
Case No. 7125), are AFFIRMED.
SO ORDERED.

G. R. No. 157064 August 7, 2006

BARCELON, ROXAS SECURITIES, INC. (now known as UBP Securities, Inc.) Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeking to set aside
1
the Decision of the Court of Appeals in CA-G.R. SP No. 60209 dated 11 July 2002, ordering the
petitioner to pay the Government the amount of P826,698.31 as deficiency income tax for the year
1987 plus 25% surcharge and 20% interest per annum. The Court of Appeals, in its assailed
2
Decision, reversed the Decision of the Court of Tax Appeals (CTA) dated 17 May 2000 in C.T.A.
Case No. 5662.
Petitioner Barcelon, Roxas Securities Inc. (now known as UBP Securities, Inc.) is a corporation
engaged in the trading of securities. On 14 April 1988, petitioner filed its Annual Income Tax Return
for taxable year 1987. After an audit investigation conducted by the Bureau of Internal Revenue
(BIR), respondent Commissioner of Internal Revenue (CIR) issued an assessment for deficiency
income tax in the amount of P826,698.31 arising from the disallowance of the item on salaries,
bonuses and allowances in the amount of P1,219,093,93 as part of the deductible business expense
since petitioner failed to subject the salaries, bonuses and allowances to withholding taxes. This
assessment was covered by Formal Assessment Notice No. FAN-1-87-91-000649 dated 1 February
1991, which, respondent alleges, was sent to petitioner through registered mail on 6 February 1991.
3
However, petitioner denies receiving the formal assessment notice.
On 17 March 1992, petitioner was served with a Warrant of Distraint and/or Levy to enforce
collection of the deficiency income tax for the year 1987. Petitioner filed a formal protest, dated 25
March 1992, against the Warrant of Distraint and/or Levy, requesting for its cancellation. On 3 July
1998, petitioner received a letter dated 30 April 1998 from the respondent denying the protest with
4
finality.
On 31 July 1998, petitioner filed a petition for review with the CTA. After due notice and hearing, the
CTA rendered a decision in favor of petitioner on 17 May 2000. The CTA ruled on the primary issue
of prescription and found it unnecessary to decide the issues on the validity and propriety of the
assessment. It maintained that while a mailed letter is deemed received by the addressee in the
course of mail, this is merely a disputable presumption. It reasoned that the direct denial of the
petitioner shifts the burden of proof to the respondent that the mailed letter was actually received by
the petitioner. The CTA found the BIR records submitted by the respondent immaterial, self-serving,
and therefore insufficient to prove that the assessment notice was mailed and duly received by the
5
petitioner. The dispositive portion of this decision reads:
WHEREFORE, in view of the foregoing, the 1988 deficiency tax assessment against petitioner is
hereby CANCELLED. Respondent is hereby ORDERED TO DESIST from collecting said deficiency
6
tax. No pronouncement as to costs.
On 6 June 2000, respondent moved for reconsideration of the aforesaid decision but was denied by
the CTA in a Resolution dated 25 July 2000. Thereafter, respondent appealed to the Court of
Appeals on 31 August 2001. In reversing the CTA decision, the Court of Appeals found the evidence
presented by the respondent to be sufficient proof that the tax assessment notice was mailed to the
7
petitioner, therefore the legal presumption that it was received should apply. Thus, the Court of
Appeals ruled that:
WHEREFORE, the petition is hereby GRANTED. The decision dated May 17, 2000 as well as the
Resolution dated July 25, 2000 are hereby REVERSED and SET ASIDE, and a new on entered
ordering the respondent to pay the amount of P826,698.31 as deficiency income tax for the year
1987 plus 25% surcharge and 20% interest per annum from February 6, 1991 until fully paid
8
pursuant to Sections 248 and 249 of the Tax Code.
Petitioner moved for reconsideration of the said decision but the same was denied by the Court of
9
Appeals in its assailed Resolution dated 30 January 2003.
Hence, this Petition for Review on Certiorari raising the following issues:
I
WHETHER OR NOT LEGAL BASES EXIST FOR THE COURT OF APPEALS’ FINDING THAT THE
COURT OF TAX APPEALS COMMITTED "GROSS ERROR IN THE APPRECIATION OF FACTS."
II
WHETHER OR NOT THE COURT OF APPEALS WAS CORRECT IN REVERSING THE SUBJECT
DECISION OF THE COURT OF TAX APPEALS.
III
WHETHER OR NOT THE RIGHT OF THE BUREAU OF INTERNAL REVENUE TO ASSESS
PETITIONER FOR ALLEGED DEFICIENCY INCOME TAX FOR 1987 HAS PRESCRIBED.
IV
WHETHER OR NOT THE RIGHT OF THE BUREAU OF INTERNAL REVENUE TO COLLECT THE
SUBJECT ALLEGED DEFICIENCY INCOME TAX FOR 1987 HAS PRESCRIBED.
V
WHETHER OR NOT PETITIONER IS LIABLE FOR THE ALLEGED DEFICIENCY INCOME TAX
ASSESSMENT FOR 1987.
VI
WHETHER OR NOT THE SUBJECT ASSESSMENT IS VIOLATIVE OF THE RIGHT OF
10
PETITIONER TO DUE PROCESS.
This Court finds the instant Petition meritorious.
The core issue in this case is whether or not respondent’s right to assess petitioner’s alleged
deficiency income tax is barred by prescription, the resolution of which depends on reviewing the
findings of fact of the Court of Appeals and the CTA.
While the general rule is that factual findings of the Court of Appeals are binding on this Court, there
11
are, however, recognized exceptions thereto, such as when the findings are contrary to those of
12
the trial court or, in this case, the CTA.
In its Decision, the CTA resolved the issues raised by the parties thus:
Jurisprudence is replete with cases holding that if the taxpayer denies ever having received an
assessment from the BIR, it is incumbent upon the latter to prove by competent evidence that such
notice was indeed received by the addressee. The onus probandi was shifted to respondent to prove
by contrary evidence that the Petitioner received the assessment in the due course of mail. The
Supreme Court has consistently held that while a mailed letter is deemed received by the addressee
in the course of mail, this is merely a disputable presumption subject to controversion and a direct
denial thereof shifts the burden to the party favored by the presumption to prove that the mailed
letter was indeed received by the addressee (Republic vs. Court of Appeals, 149 SCRA 351). Thus
as held by the Supreme Court in Gonzalo P. Nava vs. Commissioner of Internal Revenue, 13 SCRA
104, January 30, 1965:
"The facts to be proved to raise this presumption are (a) that the letter was properly addressed with
postage prepaid, and (b) that it was mailed. Once these facts are proved, the presumption is that the
letter was received by the addressee as soon as it could have been transmitted to him in the
ordinary course of the mail. But if one of the said facts fails to appear, the presumption does not lie.
(VI, Moran, Comments on the Rules of Court, 1963 ed, 56-57 citing Enriquez vs. Sunlife Assurance
of Canada, 41 Phil 269)."
In the instant case, Respondent utterly failed to discharge this duty. No substantial evidence was
ever presented to prove that the assessment notice No. FAN-1-87-91-000649 or other supposed
notices subsequent thereto were in fact issued or sent to the taxpayer. As a matter of fact, it only
submitted the BIR record book which allegedly contains the list of taxpayer’s names, the reference
number, the year, the nature of tax, the city/municipality and the amount (see Exh. 5-a for the
Respondent). Purportedly, Respondent intended to show to this Court that all assessments made
are entered into a record book in chronological order outlining the details of the assessment and the
taxpayer liable thereon. However, as can be gleaned from the face of the exhibit, all entries thereon
appears to be immaterial and impertinent in proving that the assessment notice was mailed and duly
received by Petitioner. Nothing indicates therein all essential facts that could sustain the burden of
proof being shifted to the Respondent. What is essential to prove the fact of mailing is the registry
receipt issued by the Bureau of Posts or the Registry return card which would have been signed by
the Petitioner or its authorized representative. And if said documents cannot be located, Respondent
at the very least, should have submitted to the Court a certification issued by the Bureau of Posts
and any other pertinent document which is executed with the intervention of the Bureau of Posts.
This Court does not put much credence to the self serving documentations made by the BIR
personnel especially if they are unsupported by substantial evidence establishing the fact of mailing.
Thus:
"While we have held that an assessment is made when sent within the prescribed period, even if
received by the taxpayer after its expiration (Coll. of Int. Rev. vs. Bautista, L-12250 and L-12259,
May 27, 1959), this ruling makes it the more imperative that the release, mailing or sending of the
notice be clearly and satisfactorily proved. Mere notations made without the taxpayer’s intervention,
notice or control, without adequate supporting evidence cannot suffice; otherwise, the taxpayer
would be at the mercy of the revenue offices, without adequate protection or defense." (Nava vs.
CIR, 13 SCRA 104, January 30, 1965).
xxxx
The failure of the respondent to prove receipt of the assessment by the Petitioner leads to the
conclusion that no assessment was issued. Consequently, the government’s right to issue an
assessment for the said period has already prescribed. (Industrial Textile Manufacturing Co. of the
13
Phils., Inc. vs. CIR CTA Case 4885, August 22, 1996).
Jurisprudence has consistently shown that this Court accords the findings of fact by the CTA with the
14
highest respect. In Sea-Land Service Inc. v. Court of Appeals this Court recognizes that the Court
of Tax Appeals, which by the very nature of its function is dedicated exclusively to the consideration
of tax problems, has necessarily developed an expertise on the subject, and its conclusions will not
be overturned unless there has been an abuse or improvident exercise of authority. Such findings
can only be disturbed on appeal if they are not supported by substantial evidence or there is a
15
showing of gross error or abuse on the part of the Tax Court. In the absence of any clear and
convincing proof to the contrary, this Court must presume that the CTA rendered a decision which is
valid in every respect.
16
Under Section 203 of the National Internal Revenue Code (NIRC), respondent had three (3) years
from the last day for the filing of the return to send an assessment notice to petitioner. In the case of
17
Collector of Internal Revenue v. Bautista, this Court held that an assessment is made within the
prescriptive period if notice to this effect is released, mailed or sent by the CIR to the taxpayer within
said period. Receipt thereof by the taxpayer within the prescriptive period is not necessary. At this
point, it should be clarified that the rule does not dispense with the requirement that the taxpayer
should actually receive, even beyond the prescriptive period, the assessment notice which was
timely released, mailed and sent.
In the present case, records show that petitioner filed its Annual Income Tax Return for taxable year
18 19
1987 on 14 April 1988. The last day for filing by petitioner of its return was on 15 April 1988,
thus, giving respondent until 15 April 1991 within which to send an assessment notice. While
respondent avers that it sent the assessment notice dated 1 February 1991 on 6 February 1991,
within the three (3)-year period prescribed by law, petitioner denies having received an assessment
notice from respondent. Petitioner alleges that it came to know of the deficiency tax assessment only
20
on 17 March 1992 when it was served with the Warrant of Distraint and Levy.
21
In Protector’s Services, Inc. v. Court of Appeals, this Court ruled that when a mail matter is sent
by registered mail, there exists a presumption, set forth under Section 3(v), Rule 131 of the Rules of
22
Court, that it was received in the regular course of mail. The facts to be proved in order to raise
this presumption are: (a) that the letter was properly addressed with postage prepaid; and (b) that it
was mailed. While a mailed letter is deemed received by the addressee in the ordinary course of
mail, this is still merely a disputable presumption subject to controversion, and a direct denial of the
receipt thereof shifts the burden upon the party favored by the presumption to prove that the mailed
23
letter was indeed received by the addressee.
In the present case, petitioner denies receiving the assessment notice, and the respondent was
unable to present substantial evidence that such notice was, indeed, mailed or sent by the
respondent before the BIR’s right to assess had prescribed and that said notice was received by the
petitioner. The respondent presented the BIR record book where the name of the taxpayer, the kind
of tax assessed, the registry receipt number and the date of mailing were noted. The BIR records
custodian, Ingrid Versola, also testified that she made the entries therein. Respondent offered the
entry in the BIR record book and the testimony of its record custodian as entries in official records in
24
accordance with Section 44, Rule 130 of the Rules of Court, which states that:
Section 44. Entries in official records. - Entries in official records made in the performance of his duty
by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined
by law, are prima facie evidence of the facts therein stated.
The foregoing rule on evidence, however, must be read in accordance with this Court’s
25
pronouncement in Africa v. Caltex (Phil.), Inc., where it has been held that an entrant must have
personal knowledge of the facts stated by him or such facts were acquired by him from reports made
by persons under a legal duty to submit the same.
There are three requisites for admissibility under the rule just mentioned: (a) that the entry was made
by a public officer, or by another person specially enjoined by law to do so; (b) that it was made by
the public officer in the performance of his duties, or by such other person in the performance of a
duty specially enjoined by law; and (c) that the public officer or other person had sufficient
knowledge of the facts by him stated, which must have been acquired by him personally or through
official information x x x.
In this case, the entries made by Ingrid Versola were not based on her personal knowledge as she
did not attest to the fact that she personally prepared and mailed the assessment notice. Nor was it
26
stated in the transcript of stenographic notes how and from whom she obtained the pertinent
information. Moreover, she did not attest to the fact that she acquired the reports from persons under
a legal duty to submit the same. Hence, Rule 130, Section 44 finds no application in the present
case. Thus, the evidence offered by respondent does not qualify as an exception to the rule against
hearsay evidence.
Furthermore, independent evidence, such as the registry receipt of the assessment notice, or a
certification from the Bureau of Posts, could have easily been obtained. Yet respondent failed to
present such evidence.
27
In the case of Nava v. Commissioner of Internal Revenue, this Court stressed on the importance
of proving the release, mailing or sending of the notice.
While we have held that an assessment is made when sent within the prescribed period, even if
received by the taxpayer after its expiration (Coll. of Int. Rev. vs. Bautista, L-12250 and L-12259,
May 27, 1959), this ruling makes it the more imperative that the release, mailing, or sending of the
notice be clearly and satisfactorily proved. Mere notations made without the taxpayer’s intervention,
notice, or control, without adequate supporting evidence, cannot suffice; otherwise, the taxpayer
would be at the mercy of the revenue offices, without adequate protection or defense.
In the present case, the evidence offered by the respondent fails to convince this Court that Formal
Assessment Notice No. FAN-1-87-91-000649 was released, mailed, or sent before 15 April 1991, or
before the lapse of the period of limitation upon assessment and collection prescribed by Section
203 of the NIRC. Such evidence, therefore, is insufficient to give rise to the presumption that the
assessment notice was received in the regular course of mail. Consequently, the right of the
government to assess and collect the alleged deficiency tax is barred by prescription.
IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision of the
Court of Appeals in CA-G.R. SP No. 60209 dated 11 July 2002, is hereby REVERSED and SET
ASIDE, and the Decision of the Court of Tax Appeals in C.T.A. Case No. 5662, dated 17 May 2000,
cancelling the 1988 Deficiency Tax Assessment against Barcelon, Roxas Securitites, Inc. (now
known as UPB Securities, Inc.) for being barred by prescription, is hereby REINSTATED. No costs.
SO ORDERED.

G.R. No. 208731

PHILIPPINE AMUSEMENT AND GAMING CORPORATION, Petitioner,
vs.
BUREAU OF INTERNAL REVENUE, COMMISSIONER OF INTERNAL REVENUE, and
REGIONAL DIRECTOR, REVENUE REGION No. 6, Respondents.
DECISION
CARPIO, J.:
The Case
1 2
G.R. No. 208731 is a petition for review assailing the Decision promulgated on 18 February 2013
3
as well as the Resolution promulgated on 23 July 2013 by the Court of Tax Appeals En Banc (CTA
4
En Banc) in CTA EB No. 844. The CTA EB affirmed the Decision dated 6 July 2011 and
5
Resolution dated 13 October 2011 of the Court of Tax Appeals' First Division (CTA 1st Division) in
CTA Case No. 7880.
In its 6 July 2011 Decision, the CTA 1st Division ruled in favor of the Bureau of Internal Revenue
(BIR), Commissioner of Internal Revenue (CIR), and the Regional Director of Revenue Region No. 6
(collectively, respondents) and against petitioner Philippine Amusement and Gaming Corporation
(PAGCOR). The CTA 1st Division dismissed PAGCOR's petition for review seeking the cancellation
of the Final Assessment Notice (FAN) dated 14 January 2008 which respondents issued for alleged
deficiency fringe benefits tax in 2004. The CTA 1st Division ruled that PAGCOR's petition was filed
out of time.
The Facts
The CTA 1st Division recited the facts as follows:
[PAGCOR] claims that it is a duly organized government-owned and controlled corporation existing
under and by virtue of Presidential Decree No. 1869, as amended, with business address at the 6th
Floor, Hyatt Hotel and Casino, Pedro Gil comer M.H. Del Pilar Streets, Malate, Manila. It was
created to regulate, establish and operate clubs and casinos for amusement and recreation,
including sports gaming pools, and such other forms of amusement and recreation.
Respondent [CIR], on the other hand, is the Head of the [BIR] with authority, among others, to
resolve protests on assessments issued by her office or her authorized representatives. She holds
office at the BIR National Office Building, Agham Road, Diliman, Quezon City.
[PAGCOR] provides a car plan program to its qualified officers under which sixty percent (60%) of
the car plan availment is shouldered by PAGCOR and the remaining forty percent (40%) for the
account of the officer, payable in five (5) years.
On October 10, 2007, [PAGCOR] received a Post Reporting Notice dated September 28, 2007 from
BIR Regional Director Alfredo Misajon [RD Misajon] of Revenue Region 6, Revenue District No. 33,
for an informal conference to discuss the result of its investigation on [PAGCOR's] internal revenue
taxes in 2004. The Post Reporting Notice shows that [PAGCOR] has deficiencies on Value Added
Tax (VAT), Withholding Tax on VAT (WTV), Expanded Withholding Tax (EWT), and Fringe Benefits
Tax (FBI).
Subsequently, the BIR abandoned the claim for deficiency assessments on VAT, WTV and EWT in
the Letter to [PAGCOR] dated November 23, 2007 in view of the principles laid down in
Commissioner of Internal Revenue vs. Acesite Hotel Corporation [G.R. No. 147295] exempting
[PAGCOR] and its contractors from VAT. However, the assessment on deficiency FBT subsists and
remains due to date.
On January 17, 2008, [PAGCOR] received a Final Assessment Notice [FAN] dated January 14,
2008, with demand for payment of deficiency FBT for taxable year 2004 in the amount of
P48,589,507.65.
On January 24, 2008, [PAGCOR] filed a protest to the FAN addressed to [RD Misajon] of Revenue
Region No. 6 of the BIR.
On August 14, 2008, [PAGCOR] elevated its protest to respondent CIR in a Letter dated August 13,
2008, there being no action taken thereon as of that date.
In a Letter dated September 23, 2008 received on September 25, 2008, [PAGCOR] was informed
that the Legal Division of Revenue Region No. 6 sustained Revenue Officer Ma. Elena Llantada on
the imposition of FBT against it based on the provisions of Revenue Regulations (RR) No. 3-98 and
that its protest was forwarded to the Assessment Division for further action.
On November 19, 2008, [PAGCOR] received a letter from the OIC-Regional Director, Revenue
Region No. 6 (Manila), stating that its letter protest was referred to Revenue District Office No. 33 for
appropriate action.
On March 11, 2009, [PAGCOR] filed the instant Petition for Review alleging respondents' inaction in
6
its protest on the disputed deficiency FBT.
The CTA 1st Division's Ruling
The CTA 1st Division issued the assailed decision dated 6 July 2011 and ruled in favor of
respondents. The CTA 1st Division ruled that RD Misajon's issuance of the FAN was a valid
delegation of authority, and PAGCOR's administrative protest was validly and seasonably filed on 24
January 2008. The petition for review filed with the CTA 1st Division, however, was filed out of time.
The CTA 1st Division stated:
As earlier stated, [PAGCOR] timely filed its administrative protest on January 24, 2008. In
accordance with Section 228 of the Tax Code, respondent CIR or her duly authorized representative
had 180 days or until July 22, 2008 to act on the protest. After the expiration of the 180-day period
without action on the protest, as in the instant case, the taxpayer, specifically [PAGCOR], had 30
days or until August 21, 2008 to assail the non-determination of its protest.
Clearly, the conclusion that the instant Petition for Review was filed beyond the reglementary period
for appeal on March 11, 2009, effectively depriving the Court of jurisdiction over the petition, is
inescapable.
And as provided in Section 228 of the NIRC, the failure of [PAGCOR] to appeal from an assessment
on time rendered the same final, executory and demandable. Consequently, [PAGCOR] is already
precluded from disputing the correctness of the assessment. The failure to comply with the 30-day
statutory period would bar the appeal and deprive the Court of Tax Appeals of its jurisdiction to
entertain and determine the correctness of the assessment.
Even assuming in gratia argumenti that the [CTA] has jurisdiction over the case as claimed by
[PAGCOR], the petition must still fail on the ground that [PAGCOR] is not exempt from payment of
the assessed FBT under its charter.
xxxx
Since the car plan provided by [PAGCOR] partakes of the nature of a personal expense attributable
to its employees, it shall be treated as taxable fringe benefit of its employees, whether or not the
same is duly receipted in the name of the employer. Therefore, [PAGCOR's] obligation as an agent
of the government to withhold and remit the final tax on the fringe benefit received by its employees
is personal and direct. The government's cause of action against [PAGCOR] is not for the collection
of income tax, for which [PAGCOR] is exempted, but for the enforcement of the withholding
provision of the 1997 NIRC, compliance of which is imposed on [PAGCOR] as, the withholding
agent, and not upon its employees. Consequently, [PAGCOR's] non-compliance with said obligation
7
to withhold makes it personally liable for the tax arising from the breach of its legal duty.
PAGCOR filed a motion for reconsideration, dated 26 July 2011, of the 6 July 2011 Decision of the
8
CTA 1st Division. The CIR filed a comment, and asked that PAGCOR be ordered to pay
P48,589,507.65 representing deficiency fringe benefits tax for taxable year 2004 plus 25%
surcharge and 20% delinquency interest from late payment beyond 15 February 2008 until fully paid,
pursuant to Sections 248 and 249 of the National Internal Revenue Code (NIRC) of 1997.
9
In the meantime, the CIR sent PAGCOR a letter dated 18 July 2011. The letter stated that
PAGCOR should be subjected to the issuance of a Warrant of Distraint and/or Levy and a Warrant
of Garnishment because of its failure to pay its outstanding delinquent account in the amount of
P46,589,507.65, which included surcharge and interest. Settlement of the tax liability is necessary to
obviate the issuance of a Warrant of Distraint and/or Levy and a Warrant of Garnishment.
Subsequently, PAGCOR filed a reply dated 28 September 2011 to ask that an order be issued
directing respondents to hold in abeyance the execution of the Warrant of Distraint and/or Levy and
the Warrant of Garnishment, as well as to suspend the collection of tax insofar as the 2004
assessment is concerned. PAGCOR also asked for exemption from filing a bond or depositing the
10
amount claimed by respondents.
11
PAGCOR filed a petition for review with urgent motion to suspend tax collection with the CTA En
Banc on 23 November 2011.
The CTA En Banc's Ruling
The CTA En Banc dismissed PAGCOR's petition for review and affirmed the CTA 1st Division's
Decision and Resolution. The CTA En Banc ruled that the protest filed before the RD is a valid
protest; hence, it was superfluous for PAGCOR to raise the protest before the CIR. When PAGCOR
filed its administrative protest on 24 January 2008, the CIR or her duly authorized representative had
180 days or until 22 July 2008 to act on the protest. After the expiration of the 180 days, PAGCOR
had 30 days or until 21 August 2008 to assail before the CTA the non-determination of its protest.
Moreover, Section 223 of the NIRC merely suspends the period within which the BIR can make
assessments on a certain taxpayer. A taxpayer's request for reinvestigation only happens upon the
BIR's issuance of an assessment within the three-year prescriptive period. The reinvestigation of the
assessment suspends the prescriptive period for either a revised assessment or a retained
assessment.
PAGCOR filed its Motion for Reconsideration on 22 March 2013, while respondents filed their
Comment/Opposition on 3 June 2013.
12
The CTA En Banc denied PAGCOR's motion in a Resolution dated 23 July 2013.
PAGCOR filed the present petition for review on 14 October 2013. Respondents filed their comment
through the Office of the Solicitor General on 20 March 2014. On 23 April 2014, this Court required
PAGCOR to file a reply to the comment within 10 days from notice. This period expired on 26 June
2014. On 15 September 2014, this Court issued another resolution denying PAGCOR's petition for
failure to comply with its lawful order without any valid cause. On 31 October 2014, PAGCOR filed a
motion for reconsideration of the Court's 15 September 2014 Resolution. We granted PAGCOR's
motion in a Resolution dated 10 December 2014.
The Issues
PAGCOR presented the following issues in its petition:
1. Whether or not the CTA En Banc gravely erred in affirming the CTA 1st Division's Decision
dismissing the Petition for Review for having been filed out of time.
2. Whether or not the CTA En Banc seriously erred when it affirmed the CTA 1st Division's failure to
decide the case on substantive matters, i.e., the full import of PAGCOR's tax exemption under its
charter which necessarily includes its exemption from the fringe benefits tax (FBT).
2.1 Assuming that PAGCOR is not exempt from the FBT, whether or not the car plan extended to its
officers inured to its benefit and it is required or necessary in the conduct of its business.
2.2 Assuming that PAGCOR is subject to the alleged deficiency FBT, whether or not it is only liable
13
for the basic tax, i.e., excluding surcharge and interest.
14
In their Comment, respondents argue that the CTA properly dismissed PAGCOR's petition
because it was filed beyond the periods provided by law.
The Court's Ruling
The petition has no merit. The CTA En Banc and 1st Division were correct in dismissing PAGCOR's
petition. However, as we shall explain below, the dismissal should be on the ground of premature,
rather than late, filing.
Timeliness of PAGCOR's Petition before the CTA
The CTA 1st Division and CTA En Banc both established that PAGCOR received a FAN on 17
January 2008, filed its protest to the FAN addressed to RD Misajon on 24 January 2008, filed yet
another protest addressed to the CIR on 14 August 2008, and then filed a petition before the CTA on
11 March 2009. There was no action on PAGCOR's protests filed on 24 January 2008 and 14
August 2008. PAGCOR would like this Court to rule that its protest before the CIR starts a new
period from which to determine the last day to file its petition before the CTA.
The CIR, on the other hand, denied PAGCOR's claims of exemption with the issuance of its 18 July
2011 letter. The letter asked PAGCOR to settle its obligation of P46,589,507.65, which consisted of
tax, surcharge and interest. PAGCOR's failure to settle its obligation would result in the issuance of a
Warrant of Distraint and/or Levy and a Warrant of Garnishment.
The relevant portions of Section 228 of the NIRC of 1997 provide:
SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized
representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his
findings: x x x.
xxxx
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be
required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly
authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or
reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as
may be prescribed by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been
submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days
from submission of documents, the taxpayer adversely affected by the decision or inaction may
appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from
the lapse of one hundred eighty (180)-day period; otherwise, the decision shall become final,
executory and demandable.
Section 3.1.5 of Revenue Regulations No. 12-99, implementing Section 228 above, provides:
3.1.5. Disputed Assessment. - The taxpayer or his duly authorized representative may protest
administratively against the aforesaid formal letter of demand and assessment notice within thirty
(30) days from date of receipt thereof.xx x.
xxxx
If the taxpayer fails to file a valid protest against the formal letter of demand and assessment notice
within thirty (30) days from date of receipt thereof, the assessment shall become final, executory and
demandable.
If the protest is denied, in whole or in part, by the Commissioner, the taxpayer may appeal to the
Court of Tax Appeals within thirty (30) days from the date of receipt of the said decision, otherwise,
the assessment shall become final, executory and demandable.
In general, if the protest is denied, in whole or in part, by the Commissioner or his duly authorized
representative, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from date
of receipt of the said decision, otherwise, the assessment shall become final executory and
demandable: Provided, however, that if the taxpayer elevates his protest to the Commissioner within
thirty (30) days from date of receipt of the final decision of the Commissioner's duly authorized
representative, the latter's decision shall not be considered final, executory and demandable, in
which case, the protest shall be decided by the Commissioner.
If the Commissioner or his duly authorized representative fails to act on the taxpayer's protest within
one hundred eighty (180) days from date of submission, by the taxpayer, of the required documents
in support of his protest, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days
from the lapse of the said 180-day period, otherwise the assessment shall become final, executory
and demandable.
Following the verba legis doctrine, the law must be applied exactly as worded since it is clear, plain,
15
and unequivocal. A textual reading of Section 3.1.5 gives a protesting taxpayer like PAGCOR
only three options:
1. If the protest is wholly or partially denied by the CIR or his authorized representative, then the
taxpayer may appeal to the CTA within 30 days from receipt of the whole or partial denial of the
protest.
2. If the protest is wholly or partially denied by the CIR's authorized representative, then the taxpayer
may appeal to the CIR within 30 days from receipt of the whole or partial denial of the protest.
3. If the CIR or his authorized representative failed to act upon the protest within 180 days from
submission of the required supporting documents, then the taxpayer may appeal to the CTA within
30 days from the lapse of the 180-day period.
To further clarify the three options: A whole or partial denial by the CIR's authorized representative
may be appealed to the CIR or the CTA. A whole or partial denial by the CIR may be appealed to the
CTA. The CIR or the CIR's authorized representative's failure to act may be appealed to the CTA.
There is no mention of an appeal to the CIR from the failure to act by the CIR's authorized
representative.
PAGCOR did not wait for the RD or the CIR's decision on its protest. PAGCOR made separate and
successive filings before the RD and the CIR before it filed its petition with the CTA. We shall
illustrate below how PAGCOR failed to follow the clear directive of Section 228 and Section 3.1.5.
PAGCOR's protest to the RD on 24 January 2008 was filed within the 30-day period prescribed in
Section 228 and Section 3.1.5. The RD did not release any decision on PAGCOR's protest; thus,
PAGCOR was unable to make use of the first option as described above to justify an appeal to the
CTA. The effect of the lack of decision from the RD is the same, whether we consider PAGCOR's
16
April 2008 submission of documents or not.
Under the third option described above, even if we grant leeway to PAGCOR and consider its
unspecified April 2008 submission, PAGCOR still should have waited for the RD's decision until 27
October 2008, or 180 days from 30 April 2008. PAGCOR then had 30 days from 27 October 2008,
or until 26 November 2008, to file its petition before the CTA. PAGCOR, however, did not make use
of the third option. PAGCOR did not file a petition before the CTA on or before 26 November 2008.
Under the second option, PAGCOR ought to have waited for the RD's whole or partial denial of its
protest before it filed an appeal before the CIR. PAGCOR rendered the second option moot when it
formulated its own rule and chose to ignore the clear text of Section 3.1.5. PAGCOR "elevated an
appeal" to the CIR on 13 August 2008 without any decision from the RD, then filed a petition before
the CTA on 11 March 2009. A textual reading of Section 228 and Section 3 .1.5 will readily show that
neither Section 228 nor Section 3 .1.5 provides for the remedy of an appeal to the CIR in case of the
RD's failure to act. The third option states that the remedy for failure to act by the CIR or his
authorized representative is to file an appeal to the CTA within 30 days after the lapse of 180 days
from the submission of the required supporting documents. PAGCOR clearly failed to do this. 1âwphi 1

If we consider, for the sake of argument, PAGCOR's submission before the CIR as a separate
protest and not as an appeal, then such protest should be denied for having been filed out of time.
PAGCOR only had 30 days from 17 January 2008 within which to file its protest. This period ended
on 16 February 2008. PAGCOR filed its submission before the CIR on 13 August 2008.
When PAGCOR filed its petition before the CTA, it is clear that PAGCOR failed to make use of any
of the three options described above. A petition before the CTA may only be made after a whole
or partial denial of the protest by the CIR or the CIR's authorized representative. When
PAGCOR filed its petition before the CTA on 11 March 2009, there was still no denial of PAGCOR's
protest by either the RD or the CIR. Therefore, under the first option, PAGCOR's petition before the
CTA had no cause of action because it was prematurely filed. The CIR made an unequivocal denial
of PAGCOR's protest only on 18 July 2011, when the CIR sought to collect from PAGCOR the
amount of P46,589,507.65. The CIR's denial further puts PAGCOR in a bind, because it can no
17
longer amend its petition before the CTA.
It thus follows that a complaint whose cause of action has not yet accrued cannot be cured or
remedied by an amended or supplemental pleading alleging the existence or accrual of a cause of
action while the case is pending. Such an action is prematurely brought and is, therefore, a
groundless suit, which should be dismissed by the court upon proper motion seasonably filed by the
defendant. The underlying reason for this rule is that a person should not be summoned before the
public tribunals to answer for complaints which are [premature]. As this Court eloquently said in
Surigao Mine Exploration Co., Inc. v. Harris:
It is a rule of law to which there is, perhaps, no exception, either at law or in equity, that to recover at
all there must be some cause of action at the commencement of the suit. As observed by counsel for
appellees, there are reasons of public policy why there should be no needless haste in bringing up
litigation, and why people who are in no default and against whom there is yet no cause of action
should not be summoned before the public tribunals to answer complaints which are groundless. We
say groundless because if the action is [premature], it should not be entertained, and an action
prematurely brought is a groundless suit.
It is true that an amended complaint and the answer thereto take the place of the originals which are
thereby regarded as abandoned (Reynes vs. Compañia General de Tabacos [1912], 21 Phil. 416;
Ruyman and Farris vs. Director of Lands [1916], 34 Phil. 428) and that "the complaint and answer
having been superseded by the amended complaint and answer thereto, and the answer to the
original complaint not having been presented in evidence as an exhibit, the trial court was not
authorized to take it into account." (Bastida vs. Menzi & Co. [1933], 58 Phil. 188.) But in none of
these cases or in any other case have we held that if a right of action did not exist when the original
complaint was filed, one could be created by filing an amended complaint. In some jurisdictions in
the United States what was termed an "imperfect cause of action" could be perfected by suitable
amendment (Brown vs. Galena Mining & Smelting Co., 32 Kan., 528; Hooper vs. City of Atlanta, 26
Ga. App., 221) and this is virtually permitted in Banzon and Rosaura vs. Sellner ([1933], 58 Phil.
453); Asiatic Potroleum [sic] Co. vs. Veloso ([1935], 62 Phil. 683); and recently in Ramos vs. Gibbon
(38 Off. Gaz. 241). That, however, which is no cause of action whatsoever cannot by amendment or
supplemental pleading be converted into a cause of action: Nihil de re accrescit ei qui nihil in re
quando jus accresceret habet.
We are therefore of the opinion, and so hold, that unless the plaintiff has a valid and subsisting
cause of action at the time his action is commenced, the defect cannot be cured or remedied by the
acquisition or accrual of one while the action is pending, and a supplemental complaint or an
18
amendment setting up such after-accrued cause of action is not permissible. (Italics ours)
PAGCOR has clearly failed to comply with the requisites in disputing an assessment as provided by
Section 228 and Section 3.1.5. Indeed, PAGCOR's lapses in procedure have made the BIR's
assessment final, executory and demandable, thus obviating the need to further discuss the issue of
the propriety of imposition of fringe benefits tax.
WHEREFORE, we DENY the petition. The Decision promulgated on 18 February 2013 and the
Resolution promulgated on 23 July 2013 by the Court of Tax Appeals - En Banc in CTA EB No. 844
are AFFIRMED with the MODIFICATION that the denial of Philippine Amusement and Gaming
Corporation's petition is due to lack of jurisdiction because of premature filing. We REMAND the
case to the Court of Tax Appeals for the determination of the final amount to be paid by PAGCOR
after the imposition of surcharge and delinquency interest.
SO ORDERED.

G.R. No. 196596

COMMISSIONER OF INTERNAL REVENUE, Petitioner
vs.
DE LA SALLE UNIVERSITY, INC., Respondent
x-----------------------x
G.R. No. 198841
DE LA SALLE UNIVERSITY INC., Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
x-----------------------x
G.R. No. 198941
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
DE LA SALLE UNIVERSITY, INC., Respondent.
DECISION
BRION, J.:
1
Before the Court are consolidated petitions for review on certiorari:
1. G.R. No. 196596 filed by the Commissioner of Internal Revenue (Commissioner) to assail the
December 10, 2010 decision and March 29, 2011 resolution of the Court of Tax Appeals (CTA) in En
2
Banc Case No. 622;
2. G.R. No. 198841 filed by De La Salle University, Inc. (DLSU) to assail the June 8, 2011 decision
3
and October 4, 2011 resolution in CTA En Banc Case No. 671; and
3. G.R. No. 198941 filed by the Commissioner to assail the June 8, 2011 decision and October 4,
4
2011 resolution in CTA En Banc Case No. 671.
G.R. Nos. 196596, 198841 and 198941 all originated from CTA Special First Division (CTA Division)
Case No. 7303. G.R. No. 196596 stemmed from CTA En Banc Case No. 622 filed by the
Commissioner to challenge CTA Case No. 7303. G.R. No. 198841 and 198941 both stemmed from
CTA En Banc Case No. 671 filed by DLSU to also challenge CTA Case No. 7303.
The Factual Antecedents
Sometime in 2004, the Bureau of Internal Revenue (BIR) issued to DLSU Letter of Authority (LOA)
No. 2794 authorizing its revenue officers to examine the latter's books of accounts and other
accounting records for all internal revenue taxes for the period Fiscal Year Ending 2003 and
5
Unverified Prior Years.
6
On May 19, 2004, BIR issued a Preliminary Assessment Notice to DLSU.
Subsequently on August 18, 2004, the BIR through a Formal Letter of Demand assessed DLSU the
following deficiency taxes: (1) income tax on rental earnings from restaurants/canteens and
bookstores operating within the campus; (2) value-added tax (VAI) on business income; and (3)
documentary stamp tax (DSI) on loans and lease contracts. The BIR demanded the payment of
₱17,303,001.12, inclusive of surcharge, interest and penalty for taxable years 2001, 2002 and
7
2003.
DLSU protested the assessment. The Commissioner failed to act on the protest; thus, DLSU filed on
8
August 3, 2005 a petition for review with the CTA Division.
DLSU, a non-stock, non-profit educational institution, principally anchored its petition on Article XIV,
Section 4 (3)of the Constitution, which reads:
(3) All revenues and assets of non-stock, non-profit educational institutions used actually, directly,
and exclusively for educational purposes shall be exempt from taxes and duties. xxx.
On January 5, 2010, the CTA Division partially granted DLSU's petition for review. The dispositive
portion of the decision reads:
WHEREFORE, the Petition for Review is PARTIALLY GRANTED. The DST assessment on the loan
transactions of [DLSU] in the amount of ₱1,1681,774.00 is hereby CANCELLED. However, [DLSU]
is ORDERED TO PAY deficiency income tax, VAT and DST on its lease contracts, plus 25%
surcharge for the fiscal years 2001, 2002 and 2003 in the total amount of ₱18,421,363.53 ... xxx.
In addition, [DLSU] is hereby held liable to pay 20% delinquency interest on the total amount due
computed from September 30, 2004 until full payment thereof pursuant to Section 249(C)(3) of the
[National Internal Revenue Code]. Further, the compromise penalties imposed by [the
Commissioner] were excluded, there being no compromise agreement between the parties.
9
SO ORDERED.
Both the Commissioner and DLSU moved for the reconsideration of the January 5, 2010
10
decision. On April 6, 2010, the CTA Division denied the Commissioner's motion for
11
reconsideration while it held in abeyance the resolution on DLSU's motion for reconsideration.
On May 13, 2010, the Commissioner appealed to the CTA En Banc (CTA En Banc Case No. 622)
arguing that DLSU's use of its revenues and assets for non-educational or commercial purposes
12
removed these items from the exemption coverage under the Constitution.
On May 18, 2010, DLSU formally offered to the CTA Division supplemental pieces of documentary
evidence to prove that its rental income was used actually, directly and exclusively for educational
13
purposes. The Commissioner did not promptly object to the formal offer of supplemental evidence
14
despite notice.
On July 29, 2010, the CTA Division, in view of the supplemental evidence submitted, reduced the
amount of DLSU's tax deficiencies. The dispositive portion of the amended decision reads:
WHEREFORE, [DLSU]'s Motion for Partial Reconsideration is hereby PARTIALLY GRANTED.
[DLSU] is hereby ORDERED TO PAY for deficiency income tax, VAT and DST plus 25% surcharge
for the fiscal years 2001, 2002 and 2003 in the total adjusted amount of ₱5,506,456.71 ... xxx.
In addition, [DLSU] is hereby held liable to pay 20% per annum deficiency interest on the ... basic
deficiency taxes ... until full payment thereof pursuant to Section 249(B) of the [National Internal
Revenue Code] ... xxx.
Further, [DLSU] is hereby held liable to pay 20% per annum delinquency interest on the deficiency
taxes, surcharge and deficiency interest which have accrued ... from September 30, 2004 until fully
15
paid.
Consequently, the Commissioner supplemented its petition with the CTA En Banc and argued that
16
the CTA Division erred in admitting DLSU's additional evidence.
Dissatisfied with the partial reduction of its tax liabilities, DLSU filed a separate petition for review
with the CTA En Banc (CTA En Banc Case No. 671) on the following grounds: (1) the entire
assessment should have been cancelled because it was based on an invalid LOA; (2) assuming the
LOA was valid, the CTA Division should still have cancelled the entire assessment because DLSU
submitted evidence similar to those submitted by Ateneo De Manila University (Ateneo) in a
17
separate case where the CTA cancelled Ateneo's tax assessment; and (3) the CTA Division erred
in finding that a portion of DLSU's rental income was not proved to have been used actually, directly
18
and exclusively for educational purposes.
The CTA En Banc Rulings
CTA En Banc Case No. 622
The CTA En Banc dismissed the Commissioner's petition for review and sustained the findings of
19
the CTA Division.
Tax on rental income
Relying on the findings of the court-commissioned Independent Certified Public Accountant
(Independent CPA), the CTA En Banc found that DLSU was able to prove that a portion of the
assessed rental income was used actually, directly and exclusively for educational purposes; hence,
20
exempt from tax. The CTA En Banc was satisfied with DLSU's supporting evidence confirming
that part of its rental income had indeed been used to pay the loan it obtained to build the
21
university's Physical Education – Sports Complex.
Parenthetically, DLSU's unsubstantiated claim for exemption, i.e., the part of its income that was not
shown by supporting documents to have been actually, directly and exclusively used for educational
22
purposes, must be subjected to income tax and VAT.
DST on loan and mortgage transactions
Contrary to the Commissioner's contention, DLSU froved its remittance of the DST due on its loan
23
and mortgage documents. The CTA En Banc found that DLSU's DST payments had been
remitted to the BIR, evidenced by the stamp on the documents made by a DST imprinting machine,
24
which is allowed under Section 200 (D) of the National Internal Revenue Code (Tax Code) and
25
Section 2 of Revenue Regulations (RR) No. 15-2001.
Admissibility of DLSU's supplemental evidence
The CTA En Banc held that the supplemental pieces of documentary evidence were admissible
even if DLSU formally offered them only when it moved for reconsideration of the CTA Division's
original decision. Notably, the law creating the CTA provides that proceedings before it shall not be
26
governed strictly by the technical rules of evidence.
The Commissioner moved but failed to obtain a reconsideration of the CTA En Banc's December 10,
27
2010 decision. Thus, she came to this court for relief through a petition for review on certiorari
(G.R. No. 196596).
CTA En Banc Case No. 671
The CTA En Banc partially granted DLSU's petition for review and further reduced its tax liabilities to
28
₱2,554,825.47inclusive of surcharge.
On the validity of the Letter of Authority
29
The issue of the LOA' s validity was raised during trial; hence, the issue was deemed properly
submitted for decision and reviewable on appeal.
Citing jurisprudence, the CTA En Banc held that a LOA should cover only one taxable period and
30
that the practice of issuing a LOA covering audit of unverified prior years is prohibited. The
prohibition is consistent with Revenue Memorandum Order (RMO) No. 43-90, which provides that if
the audit includes more than one taxable period, the other periods or years shall be specifically
31
indicated in the LOA.
In the present case, the LOA issued to DLSU is for Fiscal Year Ending 2003 and Unverified Prior
Years. Hence, the assessments for deficiency income tax, VAT and DST for taxable years 2001 and
32
2002 are void, but the assessment for taxable year 2003 is valid.
On the applicability of the Ateneo case
The CTA En Banc held that the Ateneo case is not a valid precedent because it involved different
33
parties, factual settings, bases of assessments, sets of evidence, and defenses.
On the CTA Division's appreciation of the evidence
The CTA En Banc affirmed the CTA Division's appreciation of DLSU' s evidence. It held that while
DLSU successfully proved that a portion of its rental income was transmitted and used to pay the
loan obtained to fund the construction of the Sports Complex, the rental income from other sources
34
were not shown to have been actually, directly and exclusively used for educational purposes.
Not pleased with the CTA En Banc's ruling, both DLSU (G.R. No. 198841) and the Commissioner
(G.R. No. 198941) came to this Court for relief.
The Consolidated Petitions
G.R. No. 196596
The Commissioner submits the following arguments:
First, DLSU's rental income is taxable regardless of how such income is derived, used or disposed
35
of. DLSU's operations of canteens and bookstores within its campus even though exclusively
36
serving the university community do not negate income tax liability.
The Commissioner contends that Article XIV, Section 4 (3) of the Constitution must be harmonized
with Section 30 (H) of the Tax Code, which states among others, that the income of whatever kind
and character of [a non-stock and non-profit educational institution] from any of [its] properties, real
or personal, or from any of [its] activities conducted for profit regardless of the disposition made of
37
such income, shall be subject to tax imposed by this Code.
The Commissioner argues that the CTA En Banc misread and misapplied the case of
38
Commissioner of Internal Revenue v. YMCA to support its conclusion that revenues however
generated are covered by the constitutional exemption, provided that, the revenues will be used for
39
educational purposes or will be held in reserve for such purposes.
On the contrary, the Commissioner posits that a tax-exempt organization like DLSU is exempt only
40
from property tax but not from income tax on the rentals earned from property. Thus, DLSU's
income from the leases of its real properties is not exempt from taxation even if the income would be
41
used for educational purposes.
42
Second, the Commissioner insists that DLSU did not prove the fact of DST payment and that it is
not qualified to use the On-Line Electronic DST Imprinting Machine, which is available only to certain
43
classes of taxpayers under RR No. 9-2000.
Finally, the Commissioner objects to the admission of DLSU's supplemental offer of evidence. The
belated submission of supplemental evidence reopened the case for trial, and worse, DLSU offered
44
the supplemental evidence only after it received the unfavorable CTA Division's original decision.
In any case, DLSU's submission of supplemental documentary evidence was unnecessary since its
45
rental income was taxable regardless of its disposition.
G.R. No. 198841
DLSU argues as that:
First, RMO No. 43-90 prohibits the practice of issuing a LOA with any indication of unverified prior
years. A LOA issued contrary to RMO No. 43-90 is void, thus, an assessment issued based on such
46
defective LOA must also be void.
DLSU points out that the LOA issued to it covered the Fiscal Year Ending 2003 and Unverified Prior
Years. On the basis of this defective LOA, the Commissioner assessed DLSU for deficiency income
47
tax, VAT and DST for taxable years 2001, 2002 and 2003. DLSU objects to the CTA En Banc's
conclusion that the LOA is valid for taxable year 2003. According to DLSU, when RMO No. 43-90
provides that:
The practice of issuing [LOAs] covering audit of 'unverified prior years' is hereby prohibited.
it refers to the LOA which has the format "Base Year + Unverified Prior Years." Since the LOA
48
issued to DLSU follows this format, then any assessment arising from it must be entirely voided.
Second, DLSU invokes the principle of uniformity in taxation, which mandates that for similarly
situated parties, the same set of evidence should be appreciated and weighed in the same
49
manner. The CTA En Banc erred when it did not similarly appreciate DLSU' s evidence as it did
to the pieces of evidence submitted by Ateneo, also a non-stock, non-profit educational
50
institution.
G.R. No. 198941
The issues and arguments raised by the Commissioner in G.R. No. 198941 petition are exactly the
same as those she raised in her: (1) petition docketed as G.R. No. 196596 and (2) comment on
51
DLSU's petition docketed as G.R. No. 198841.
Counter-arguments
DLSU's Comment on G.R. No. 196596
52
First, DLSU questions the defective verification attached to the petition.
Second, DLSU stresses that Article XIV, Section 4 (3) of the Constitution is clear that all assets and
revenues of non-stock, non-profit educational institutions used actually, directly and exclusively for
53
educational purposes are exempt from taxes and duties.
On this point, DLSU explains that: (1) the tax exemption of non-stock, non-profit educational
institutions is novel to the 1987 Constitution and that Section 30 (H) of the 1997 Tax Code cannot
54
amend the 1987 Constitution; (2) Section 30 of the 1997 Tax Code is almost an exact replica of
Section 26 of the 1977 Tax Code -with the addition of non-stock, non-profit educational institutions
to the list of tax-exempt entities; and (3) that the 1977 Tax Code was promulgated when the 1973
Constitution was still in place.
DLSU elaborates that the tax exemption granted to a private educational institution under the 1973
Constitution was only for real property tax. Back then, the special tax treatment on income of private
educational institutions only emanates from statute, i.e., the 1977 Tax Code. Only under the 1987
Constitution that exemption from tax of all the assets and revenues of non-stock, non-profit
educational institutions used actually, directly and exclusively for educational purposes, was
55
expressly and categorically enshrined.
DLSU thus invokes the doctrine of constitutional supremacy, which renders any subsequent law that
56
is contrary to the Constitution void and without any force and effect. Section 30 (H) of the 1997
Tax Code insofar as it subjects to tax the income of whatever kind and character of a non-stock and
non-profit educational institution from any of its properties, real or personal, or from any of its
activities conducted for profit regardless of the disposition made of such income, should be declared
without force and effect in view of the constitutionally granted tax exemption on "all revenues and
assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for
57
educational purposes."
DLSU further submits that it complies with the requirements enunciated in the YMCA case, that for
an exemption to be granted under Article XIV, Section 4 (3) of the Constitution, the taxpayer must
prove that: (1) it falls under the classification non-stock, non-profit educational institution; and (2) the
income it seeks to be exempted from taxation is used actually, directly and exclusively for
58
educational purposes. Unlike YMCA, which is not an educational institution, DLSU is undisputedly
a non-stock, non-profit educational institution. It had also submitted evidence to prove that it actually,
59
directly and exclusively used its income for educational purposes.
DLSU also cites the deliberations of the 1986 Constitutional Commission where they recognized that
the tax exemption was granted "to incentivize private educational institutions to share with the State
60
the responsibility of educating the youth."
Third, DLSU highlights that both the CTA En Banc and Division found that the bank that handled
DLSU' s loan and mortgage transactions had remitted to the BIR the DST through an imprinting
61
machine, a method allowed under RR No. 15-2001. In any case, DLSU argues that it cannot be
62
held liable for DST owing to the exemption granted under the Constitution.
Finally, DLSU underscores that the Commissioner, despite notice, did not oppose the formal offer of
supplemental evidence. Because of the Commissioner's failure to timely object, she became bound
63
by the results of the submission of such supplemental evidence.
The CIR's Comment on G.R. No. 198841
The Commissioner submits that DLSU is estopped from questioning the LOA's validity because it
64
failed to raise this issue in both the administrative and judicial proceedings. That it was asked on
65
cross-examination during the trial does not make it an issue that the CTA could resolve. The
Commissioner also maintains that DLSU's rental income is not tax-exempt because an educational
institution is only exempt from property tax but not from tax on the income earned from the
66
property.
DLSU's Comment on G.R. No. 198941
67
DLSU puts forward the same counter-arguments discussed above. In addition, DLSU prays that
the Court award attorney's fees in its favor because it was constrained to unnecessarily retain the
68
services of counsel in this separate petition.
Issues
Although the parties raised a number of issues, the Court shall decide only the pivotal issues, which
we summarize as follows:
I. Whether DLSU' s income and revenues proved to have been used actually, directly and
exclusively for educational purposes are exempt from duties and taxes;
II. Whether the entire assessment should be voided because of the defective LOA;
III. Whether the CTA correctly admitted DLSU's supplemental pieces of evidence; and
IV. Whether the CTA's appreciation of the sufficiency of DLSU's evidence may be disturbed by the
Court.
Our Ruling
As we explain in full below, we rule that:
I. The income, revenues and assets of non-stock, non-profit educational institutions proved to have
been used actually, directly and exclusively for educational purposes are exempt from duties and
taxes.
II. The LOA issued to DLSU is not entirely void. The assessment for taxable year 2003 is valid.
III. The CTA correctly admitted DLSU's formal offer of supplemental evidence; and
IV. The CTA's appreciation of evidence is conclusive unless the CTA is shown to have manifestly
overlooked certain relevant facts not disputed by the parties and which, if properly considered, would
justify a different conclusion.
The parties failed to convince the Court that the CTA overlooked or failed to consider relevant facts.
We thus sustain the CTA En Banc's findings that:
a. DLSU proved that a portion of its rental income was used actually, directly and exclusively for
educational purposes; and
b. DLSU proved the payment of the DST through its bank's on-line imprinting machine.
I. The revenues and assets of non-stock,
non-profit educational institutions
proved to have been used actually,
directly, and exclusively for educational
purposes are exempt from duties and
taxes.
DLSU rests it case on Article XIV, Section 4 (3) of the 1987 Constitution, which reads:
(3) All revenues and assets of non-stock, non-profit educational institutions used actually,
directly, and exclusively for educational purposes shall be exempt from taxes and duties.
Upon the dissolution or cessation of the corporate existence of such institutions, their assets shall be
disposed of in the manner provided by law.
Proprietary educational institutions, including those cooperatively owned, may likewise be
entitled to such exemptions subject to the limitations provided by law including restrictions on
dividends and provisions for reinvestment. [underscoring and emphasis supplied]
Before fully discussing the merits of the case, we observe that:
First, the constitutional provision refers to two kinds of educational institutions: (1) non-stock, non-
69
profit educational institutions and (2) proprietary educational institutions.
Second, DLSU falls under the first category. Even the Commissioner admits the status of DLSU as a
70
non-stock, non-profit educational institution.
Third, while DLSU's claim for tax exemption arises from and is based on the Constitution, the
Constitution, in the same provision, also imposes certain conditions to avail of the exemption. We
discuss below the import of the constitutional text vis-a-vis the Commissioner's counter-arguments.
Fourth, there is a marked distinction between the treatment of non-stock, non-profit educational
institutions and proprietary educational institutions. The tax exemption granted to non-stock, non-
profit educational institutions is conditioned only on the actual, direct and exclusive use of their
revenues and assets for educational purposes. While tax exemptions may also be granted to
proprietary educational institutions, these exemptions may be subject to limitations imposed by
Congress.
As we explain below, the marked distinction between a non-stock, non-profit and a proprietary
educational institution is crucial in determining the nature and extent of the tax exemption granted to
non-stock, non-profit educational institutions.
The Commissioner opposes DLSU's claim for tax exemption on the basis of Section 30 (H) of the
Tax Code. The relevant text reads:
The following organizations shall not be taxed under this Title [Tax on
Income] in respect to income received by them as such:
xxxx
(H) A non-stock and non-profit educational institution
xxxx
Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and
character of the foregoing organizations from any of their properties, real or personal, or from
any of their activities conducted for profit regardless of the disposition made of such income
shall be subject to tax imposed under this Code. [underscoring and emphasis supplied]
The Commissioner posits that the 1997 Tax Code qualified the tax exemption granted to non-stock,
non-profit educational institutions such that the revenues and income they derived from their assets,
or from any of their activities conducted for profit, are taxable even if these revenues and income are
used for educational purposes.
Did the 1997 Tax Code qualify the tax exemption constitutionally-granted to non-stock, non-profit
educational institutions?
We answer in the negative.
71
While the present petition appears to be a case of first impression, the Court in the YMCA case
had in fact already analyzed and explained the meaning of Article XIV, Section 4 (3) of the
Constitution. The Court in that case made doctrinal pronouncements that are relevant to the present
case.
The issue in YMCA was whether the income derived from rentals of real property owned by the
YMCA, established as a "welfare, educational and charitable non-profit corporation," was subject to
72
income tax under the Tax Code and the Constitution.
The Court denied YMCA's claim for exemption on the ground that as a charitable institution falling
73
under Article VI, Section 28 (3) of the Constitution, the YMCA is not tax-exempt per se; " what is
exempted is not the institution itself... those exempted from real estate taxes are lands, buildings and
improvements actually, directly and exclusively used for religious, charitable or educational
74
purposes."
The Court held that the exemption claimed by the YMCA is expressly disallowed by the last
paragraph of then Section 27 (now Section 30) of the Tax Code, which mandates that the income of
exempt organizations from any of their properties, real or personal, are subject to the same tax
imposed by the Tax Code, regardless of how that income is used. The Court ruled that the last
paragraph of Section 27 unequivocally subjects to tax the rent income of the YMCA from its
75
property.
In short, the YMCA is exempt only from property tax but not from income tax.
As a last ditch effort to avoid paying the taxes on its rental income, the YMCA invoked the tax
privilege granted under Article XIV, Section 4 (3) of the Constitution.
The Court denied YMCA's claim that it falls under Article XIV, Section 4 (3) of the Constitution
holding that the term educational institution, when used in laws granting tax exemptions, refers to the
school system (synonymous with formal education); it includes a college or an educational
establishment; it refers to the hierarchically structured and chronologically graded learnings
76
organized and provided by the formal school system.
The Court then significantly laid down the requisites for availing the tax exemption under Article XIV,
Section 4 (3), namely: (1) the taxpayer falls under the classification non-stock, non-profit
educational institution; and (2) the income it seeks to be exempted from taxation is used
77
actually, directly and exclusively for educational purposes.
We now adopt YMCA as precedent and hold that:
1. The last paragraph of Section 30 of the Tax Code is without force and effect with respect to non-
stock, non-profit educational institutions, provided, that the non-stock, non-profit educational
institutions prove that its assets and revenues are used actually, directly and exclusively for
educational purposes.
2. The tax-exemption constitutionally-granted to non-stock, non-profit educational institutions, is not
subject to limitations imposed by law.
The tax exemption granted by the
Constitution to non-stock, non-profit
educational institutions is conditioned only
on the actual, direct and exclusive use of
78
their assets, revenues and income for
educational purposes.
We find that unlike Article VI, Section 28 (3) of the Constitution (pertaining to charitable institutions,
churches, parsonages or convents, mosques, and non-profit cemeteries), which exempts from tax
only the assets, i.e., "all lands, buildings, and improvements, actually, directly, and exclusively
used for religious, charitable, or educational purposes ... ," Article XIV, Section 4 (3) categorically
states that "[a]ll revenues and assets ... used actually, directly, and exclusively for educational
purposes shall be exempt from taxes and duties."
The addition and express use of the word revenues in Article XIV, Section 4 (3) of the Constitution is
not without significance.
We find that the text demonstrates the policy of the 1987 Constitution, discernible from the records
79
of the 1986 Constitutional Commission to provide broader tax privilege to non-stock, non-profit
educational institutions as recognition of their role in assisting the State provide a public good. The
tax exemption was seen as beneficial to students who may otherwise be charged unreasonable
tuition fees if not for the tax exemption extended to all revenues and assets of non-stock, non-profit
80
educational institutions.
Further, a plain reading of the Constitution would show that Article XIV, Section 4 (3) does not
require that the revenues and income must have also been sourced from educational activities or
activities related to the purposes of an educational institution. The phrase all revenues is unqualified
by any reference to the source of revenues. Thus, so long as the revenues and income are used
actually, directly and exclusively for educational purposes, then said revenues and income shall be
81
exempt from taxes and duties.
We find it helpful to discuss at this point the taxation of revenues versus the taxation of assets.
Revenues consist of the amounts earned by a person or entity from the conduct of business
82
operations. It may refer to the sale of goods, rendition of services, or the return of an investment.
83 84 85
Revenue is a component of the tax base in income tax, VAT, and local business tax (LBT).
86
Assets, on the other hand, are the tangible and intangible properties owned by a person or entity.
It may refer to real estate, cash deposit in a bank, investment in the stocks of a corporation,
inventory of goods, or any property from which the person or entity may derive income or use to
generate the same. In Philippine taxation, the fair market value of real property is a component of
87
the tax base in real property tax (RPT). Also, the landed cost of imported goods is a component
88 89
of the tax base in VAT on importation and tariff duties.
Thus, when a non-stock, non-profit educational institution proves that it uses its revenues actually,
directly, and exclusively for educational purposes, it shall be exempted from income tax, VAT, and
LBT. On the other hand, when it also shows that it uses its assets in the form of real property for
educational purposes, it shall be exempted from RPT.
To be clear, proving the actual use of the taxable item will result in an exemption, but the specific tax
from which the entity shall be exempted from shall depend on whether the item is an item of revenue
or asset.
To illustrate, if a university leases a portion of its school building to a bookstore or cafeteria, the
leased portion is not actually, directly and exclusively used for educational purposes, even if the
bookstore or canteen caters only to university students, faculty and staff.
The leased portion of the building may be subject to real property tax, as held in Abra Valley
90
College, Inc. v. Aquino. We ruled in that case that the test of exemption from taxation is the use of
the property for purposes mentioned in the Constitution. We also held that the exemption extends to
facilities which are incidental to and reasonably necessary for the accomplishment of the main
purposes.
In concrete terms, the lease of a portion of a school building for commercial purposes, removes such
91
asset from the property tax exemption granted under the Constitution. There is no exemption
because the asset is not used actually, directly and exclusively for educational purposes. The
commercial use of the property is also not incidental to and reasonably necessary for the
accomplishment of the main purpose of a university, which is to educate its students.
However, if the university actually, directly and exclusively uses for educational purposes the
revenues earned from the lease of its school building, such revenues shall be exempt from taxes
and duties. The tax exemption no longer hinges on the use of the asset from which the revenues
were earned, but on the actual, direct and exclusive use of the revenues for educational purposes.
Parenthetically, income and revenues of non-stock, non-profit educational institution not used
actually, directly and exclusively for educational purposes are not exempt from duties and taxes. To
avail of the exemption, the taxpayer must factually prove that it used actually, directly and
exclusively for educational purposes the revenues or income sought to be exempted.
The crucial point of inquiry then is on the use of the assets or on the use of the revenues. These
are two things that must be viewed and treated separately. But so long as the assets or revenues
are used actually, directly and exclusively for educational purposes, they are exempt from duties and
taxes.
The tax exemption granted by the
Constitution to non-stock, non-profit
educational institutions, unlike the exemption
that may be availed of by proprietary
educational institutions, is not subject to
limitations imposed by law.
That the Constitution treats non-stock, non-profit educational institutions differently from proprietary
educational institutions cannot be doubted. As discussed, the privilege granted to the former is
conditioned only on the actual, direct and exclusive use of their revenues and assets for educational
purposes. In clear contrast, the tax privilege granted to the latter may be subject to limitations
imposed by law.
We spell out below the difference in treatment if only to highlight the privileged status of non-stock,
non-profit educational institutions compared with their proprietary counterparts.
While a non-stock, non-profit educational institution is classified as a tax-exempt entity under Section
30 (Exemptions from Tax on Corporations) of the Tax Code, a proprietary educational institution is
covered by Section 27 (Rates of Income Tax on Domestic Corporations).
To be specific, Section 30 provides that exempt organizations like non-stock, non-profit educational
institutions shall not be taxed on income received by them as such.
Section 27 (B), on the other hand, states that "[p]roprietary educational institutions ... which are
nonprofit shall pay a tax of ten percent (10%) on their taxable income .. . Provided, that if the gross
income from unrelated trade, business or other activity exceeds fifty percent (50%) of the total gross
income derived by such educational institutions ... [the regular corporate income tax of 30%] shall be
92
imposed on the entire taxable income ... "
By the Tax Code's clear terms, a proprietary educational institution is entitled only to the reduced
rate of 10% corporate income tax. The reduced rate is applicable only if: (1) the proprietary
educational institution is nonprofit and (2) its gross income from unrelated trade, business or activity
does not exceed 50% of its total gross income.
Consistent with Article XIV, Section 4 (3) of the Constitution, these limitations do not apply to non-
stock, non-profit educational institutions.
Thus, we declare the last paragraph of Section 30 of the Tax Code without force and effect for being
contrary to the Constitution insofar as it subjects to tax the income and revenues of non-stock, non-
profit educational institutions used actually, directly and exclusively for educational purpose. We
93
make this declaration in the exercise of and consistent with our duty to uphold the primacy of the
94
Constitution.
Finally, we stress that our holding here pertains only to non-stock, non-profit educational institutions
and does not cover the other exempt organizations under Section 30 of the Tax Code.
For all these reasons, we hold that the income and revenues of DLSU proven to have been used
actually, directly and exclusively for educational purposes are exempt from duties and taxes.
II. The LOA issued to DLSU is
not entirely void. The
assessment for taxable year
2003 is valid.
DLSU objects to the CTA En Banc 's conclusion that the LOA is valid for taxable year 2003 and
insists that the entire LOA should be voided for being contrary to RMO No. 43-90, which provides
that if tax audit includes more than one taxable period, the other periods or years shall be specifically
indicated in the LOA.
A LOA is the authority given to the appropriate revenue officer to examine the books of account and
other accounting records of the taxpayer in order to determine the taxpayer's correct internal
95 96
revenue liabilities and for the purpose of collecting the correct amount of tax, in accordance
with Section 5 of the Tax Code, which gives the CIR the power to obtain information, to
97
summon/examine, and take testimony of persons. The LOA commences the audit process and
informs the taxpayer that it is under audit for possible deficiency tax assessment.
Given the purposes of a LOA, is there basis to completely nullify the LOA issued to DLSU, and
consequently, disregard the BIR and the CTA's findings of tax deficiency for taxable year 2003?
We answer in the negative.
The relevant provision is Section C of RMO No. 43-90, the pertinent portion of which reads:
3. A Letter of Authority [LOA] should cover a taxable period not exceeding one taxable year. The
practice of issuing [LO As] covering audit of unverified prior years is hereby prohibited. If the audit of
a taxpayer shall include more than one taxable period, the other periods or years shall be specifically
98
indicated in the [LOA].
What this provision clearly prohibits is the practice of issuing LOAs covering audit of unverified prior
years. RMO 43-90 does not say that a LOA which contains unverified prior years is void. It merely
prescribes that if the audit includes more than one taxable period, the other periods or years must be
specified. The provision read as a whole requires that if a taxpayer is audited for more than one
taxable year, the BIR must specify each taxable year or taxable period on separate LOAs.
Read in this light, the requirement to specify the taxable period covered by the LOA is simply to
inform the taxpayer of the extent of the audit and the scope of the revenue officer's authority. Without
this rule, a revenue officer can unduly burden the taxpayer by demanding random accounting
records from random unverified years, which may include documents from as far back as ten years
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in cases of fraud audit.
In the present case, the LOA issued to DLSU is for Fiscal Year Ending 2003 and Unverified Prior
Years. The LOA does not strictly comply with RMO 43-90 because it includes unverified prior years.
This does not mean, however, that the entire LOA is void.
As the CTA correctly held, the assessment for taxable year 2003 is valid because this taxable period
is specified in the LOA. DLSU was fully apprised that it was being audited for taxable year 2003.
Corollarily, the assessments for taxable years 2001 and 2002 are void for having been unspecified
on separate LOAs as required under RMO No. 43-90.
Lastly, the Commissioner's claim that DLSU failed to raise the issue of the LOA' s validity at the CTA
Division, and thus, should not have been entertained on appeal, is not accurate.
On the contrary, the CTA En Banc found that the issue of the LOA's validity came up during the
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trial. DLSU then raised the issue in its memorandum and motion for partial reconsideration with
the CTA Division. DLSU raised it again on appeal to the CTA En Banc. Thus, the CTA En Banc
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could, as it did, pass upon the validity of the LOA. Besides, the Commissioner had the
opportunity to argue for the validity of the LOA at the CTA En Banc but she chose not to file her
102
comment and memorandum despite notice.
III.The CTA correctly admitted
the supplemental evidence
formally offered by DLSU.
The Commissioner objects to the CTA Division's admission of DLSU's supplemental pieces of
documentary evidence.
To recall, DLSU formally offered its supplemental evidence upon filing its motion for reconsideration
103
with the CTA Division. The CTA Division admitted the supplemental evidence, which proved
that a portion of DLSU's rental income was used actually, directly and exclusively for educational
purposes. Consequently, the CTA Division reduced DLSU's tax liabilities.
We uphold the CTA Division's admission of the supplemental evidence on distinct but mutually
reinforcing grounds, to wit: (1) the Commissioner failed to timely object to the formal offer of
supplemental evidence; and (2) the CTA is not governed strictly by the technical rules of evidence.
First, the failure to object to the offered evidence renders it admissible, and the court cannot, on its
104
own, disregard such evidence.
The Court has held that if a party desires the court to reject the evidence offered, it must so state in
the form of a timely objection and it cannot raise the objection to the evidence for the first time on
105
appeal. Because of a party's failure to timely object, the evidence offered becomes part of the
evidence in the case. As a consequence, all the parties are considered bound by any outcome
106
arising from the offer of evidence properly presented.
As disclosed by DLSU, the Commissioner did not oppose the supplemental formal offer of evidence
107
despite notice. The Commissioner objected to the admission of the supplemental evidence only
when the case was on appeal to the CTA En Banc. By the time the Commissioner raised her
objection, it was too late; the formal offer, admission and evaluation of the supplemental evidence
were all fait accompli.
We clarify that while the Commissioner's failure to promptly object had no bearing on the materiality
or sufficiency of the supplemental evidence admitted, she was bound by the outcome of the CTA
108
Division's assessment of the evidence.
Second, the CTA is not governed strictly by the technical rules of evidence. The CTA Division's
admission of the formal offer of supplemental evidence, without prompt objection from the
Commissioner, was thus justified.
Notably, this Court had in the past admitted and considered evidence attached to the taxpayers'
motion for reconsideration. 1âwphi1
109
In the case of BPI-Family Savings Bank v. Court of Appeals, the tax refund claimant attached to
its motion for reconsideration with the CT A its Final Adjustment Return. The Commissioner, as in
the present case, did not oppose the taxpayer's motion for reconsideration and the admission of the
110
Final Adjustment Return. We thus admitted and gave weight to the Final Adjustment Return
although it was only submitted upon motion for reconsideration.
We held that while it is true that strict procedural rules generally frown upon the submission of
documents after the trial, the law creating the CTA specifically provides that proceedings before it
111
shall not be governed strictly by the technical rules of evidence and that the paramount
consideration remains the ascertainment of truth. We ruled that procedural rules should not bar
112
courts from considering undisputed facts to arrive at a just determination of a controversy.
We applied the same reasoning in the subsequent cases of Filinvest Development Corporation v.
113
Commissioner of Internal Revenue and Commissioner of Internal Revenue v. PERF Realty
114
Corporation, where the taxpayers also submitted the supplemental supporting document only
upon filing their motions for reconsideration.
Although the cited cases involved claims for tax refunds, we also dispense with the strict application
of the technical rules of evidence in the present tax assessment case. If anything, the liberal
application of the rules assumes greater force and significance in the case of a taxpayer who claims
a constitutionally granted tax exemption. While the taxpayers in the cited cases claimed refund of
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excess tax payments based on the Tax Code, DLSU is claiming tax exemption based on the
Constitution. If liberality is afforded to taxpayers who paid more than they should have under a
statute, then with more reason that we should allow a taxpayer to prove its exemption from tax
based on the Constitution.
Hence, we sustain the CTA's admission of DLSU's supplemental offer of evidence not only because
the Commissioner failed to promptly object, but more so because the strict application of the
technical rules of evidence may defeat the intent of the Constitution.
IV. The CTA's appreciation of
evidence is generally binding on
the Court unless compelling
reasons justify otherwise.
It is doctrinal that the Court will not lightly set aside the conclusions reached by the CTA which, by
the very nature of its function of being dedicated exclusively to the resolution of tax problems, has
developed an expertise on the subject, unless there has been an abuse or improvident exercise of
116
authority. We thus accord the findings of fact by the CTA with the highest respect. These
findings of facts can only be disturbed on appeal if they are not supported by substantial evidence or
there is a showing of gross error or abuse on the part of the CTA. In the absence of any clear and
convincing proof to the contrary, this Court must presume that the CTA rendered a decision which is
117
valid in every respect.
We sustain the factual findings of the CTA.
The parties failed to raise credible basis for us to disturb the CTA's findings that DLSU had used
actually, directly and exclusively for educational purposes a portion of its assessed income and that
it had remitted the DST payments though an online imprinting machine.
a. DLSU used actually, directly, and exclusively for educational purposes a portion of its assessed
income.
To see how the CTA arrived at its factual findings, we review the process undertaken, from which it
deduced that DLSU successfully proved that it used actually, directly and exclusively for educational
purposes a portion of its rental income.
The CTA reduced DLSU' s deficiency income tax and VAT liabilities in view of the submission of the
supplemental evidence, which consisted of statement of receipts, statement of disbursement and
118
fund balance and statement of fund changes.
119
These documents showed that DLSU borrowed ₱93.86 Million, which was used to build the
university's Sports Complex. Based on these pieces of evidence, the CTA found that DLSU' s rental
income from its concessionaires were indeed transmitted and used for the payment of this loan. The
CTA held that the degree of preponderance of evidence was sufficiently met to prove actual, direct
and exclusive use for educational purposes.
The CTA also found that DLSU's rental income from other concessionaires, which were allegedly
120
deposited to a fund (CF-CPA Account), intended for the university's capital projects, was not
proved to have been used actually, directly and exclusively for educational purposes. The
CTA observed that "[DLSU] ... failed to fully account for and substantiate all the disbursements from
the [fund]." Thus, the CTA "cannot ascertain whether rental income from the [other] concessionaires
121
was indeed used for educational purposes."
To stress, the CTA's factual findings were based on and supported by the report of the Independent
CPA who reviewed, audited and examined the voluminous documents submitted by DLSU.
Under the CTA Revised Rules, an Independent CPA's functions include: (a) examination and
verification of receipts, invoices, vouchers and other long accounts; (b) reproduction of, and
comparison of such reproduction with, and certification that the same are faithful copies of original
documents, and pre-marking of documentary exhibits consisting of voluminous documents; (c)
preparation of schedules or summaries containing a chronological listing of the numbers, dates and
amounts covered by receipts or invoices or other relevant documents and the amount(s) of taxes
paid; (d) making findings as to compliance with substantiation requirements under pertinent
tax laws, regulations and jurisprudence; (e) submission of a formal report with certification of
authenticity and veracity of findings and conclusions in the performance of the audit; (f) testifying on
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such formal report; and (g) performing such other functions as the CTA may direct.
Based on the Independent CPA's report and on its own appreciation of the evidence, the CTA held
that only the portion of the rental income pertaining to the substantiated disbursements (i.e., proved
by receipts, vouchers, etc.) from the CF-CPA Account was considered as used actually, directly and
exclusively for educational purposes. Consequently, the unaccounted and unsubstantiated
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disbursements must be subjected to income tax and VAT.
The CTA then further reduced DLSU's tax liabilities by cancelling the assessments for taxable years
124
2001 and 2002 due to the defective LOA.
The Court finds that the above fact-finding process undertaken by the CTA shows that it based its
ruling on the evidence on record, which we reiterate, were examined and verified by the Independent
CPA. Thus, we see no persuasive reason to deviate from these factual findings.
However, while we generally respect the factual findings of the CTA, it does not mean that we are
bound by its conclusions. In the present case, we do not agree with the method used by the CTA to
arrive at DLSU' s unsubstantiated rental income (i.e., income not proved to have been actually,
directly and exclusively used for educational purposes).
To recall, the CTA found that DLSU earned a rental income of ₱l0,610,379.00 in taxable year
125
2003. DLSU earned this income from leasing a portion of its premises to: 1) MTG-Sports
Complex, 2) La Casita, 3) Alarey, Inc., 4) Zaide Food Corp., 5) Capri International, and 6) MTO
126
Bookstore.
To prove that its rental income was used for educational purposes, DLSU identified the transactions
127
where the rental income was expended, viz.: 1) ₱4,007,724.00 used to pay the loan obtained by
128
DLSU to build the Sports Complex; and 2) ₱6,602,655.00 transferred to the CF-CPA Account.
DLSU also submitted documents to the Independent CPA to prove that the ₱6,602,655.00
transferred to the CF-CPA Account was used actually, directly and exclusively for educational
purposes. According to the Independent CPA' findings, DLSU was able to substantiate
disbursements from the CF-CPA Account amounting to ₱6,259,078.30.
Contradicting the findings of the Independent CPA, the CTA concluded that out of the
₱l0,610,379.00 rental income, ₱4,841,066.65 was unsubstantiated, and thus, subject to income tax
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and VAT.
The CTA then concluded that the ratio of substantiated disbursements to the total disbursements
130
from the CF-CPA Account for taxable year 2003 is only 26.68%. The CTA held as follows:
However, as regards petitioner's rental income from Alarey, Inc., Zaide Food Corp., Capri
International and MTO Bookstore, which were transmitted to the CF-CPA Account, petitioner again
failed to fully account for and substantiate all the disbursements from the CF-CPA Account; thus
failing to prove that the rental income derived therein were actually, directly and exclusively used for
educational purposes. Likewise, the findings of the Court-Commissioned Independent CPA show
that the disbursements from the CF-CPA Account for fiscal year 2003 amounts to ₱6,259,078.30
only. Hence, this portion of the rental income, being the substantiated disbursements of the CF-CPA
Account, was considered by the Special First Division as used actually, directly and exclusively for
educational purposes. Since for fiscal year 2003, the total disbursements per voucher is
₱6,259,078.3 (Exhibit "LL-25-C"), and the total disbursements per subsidiary ledger amounts to
₱23,463,543.02 (Exhibit "LL-29-C"), the ratio of substantiated disbursements for fiscal year 2003 is
26.68% (₱6,259,078.30/₱23,463,543.02). Thus, the substantiated portion of CF-CPA Disbursements
for fiscal year 2003, arrived at by multiplying the ratio of 26.68% with the total rent income added to
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and used in the CF-CPA Account in the amount of ₱6,602,655.00 is ₱1,761,588.35. (emphasis
supplied)
For better understanding, we summarize the CTA's computation as follows:
1. The CTA subtracted the rent income used in the construction of the Sports Complex
(₱4,007,724.00) from the rental income (₱10,610,379.00) earned from the abovementioned
concessionaries. The difference (₱6,602,655.00) was the portion claimed to have been deposited to
the CF-CPA Account.
2. The CTA then subtracted the supposed substantiated portion of CF-CPA disbursements
(₱1,761,308.37) from the ₱6,602,655.00 to arrive at the supposed unsubstantiated portion of the
132
rental income (₱4,841,066.65).
133
3. The substantiated portion of CF-CPA disbursements (₱l,761,308.37) was derived by
multiplying the rental income claimed to have been added to the CF-CPA Account (₱6,602,655.00)
by 26.68% or the ratio of substantiated disbursements to total disbursements (₱23,463,543.02).
134
4. The 26.68% ratio was the result of dividing the substantiated disbursements from the CF-
CPA Account as found by the Independent CPA (₱6,259,078.30) by the total disbursements
(₱23,463,543.02) from the same account.
We find that this system of calculation is incorrect and does not truly give effect to the constitutional
grant of tax exemption to non-stock, non-profit educational institutions. The CTA's reasoning is
flawed because it required DLSU to substantiate an amount that is greater than the rental income
deposited in the CF-CPA Account in 2003.
To reiterate, to be exempt from tax, DLSU has the burden of proving that the proceeds of its rental
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income (which amounted to a total of ₱10.61 million) were used for educational purposes. This
amount was divided into two parts: (a) the ₱4.0l million, which was used to pay the loan obtained for
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the construction of the Sports Complex; and (b) the ₱6.60 million, which was transferred to the
CF-CPA account.
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For year 2003, the total disbursement from the CF-CPA account amounted to ₱23 .46 million.
These figures, read in light of the constitutional exemption, raises the question: does DLSU claim
that the whole total CF-CPA disbursement of ₱23.46 million is tax-exempt so that it is
required to prove that all these disbursements had been made for educational purposes?
We answer in the negative.
The records show that DLSU never claimed that the total CF-CPA disbursements of ₱23.46 million
had been for educational purposes and should thus be tax-exempt; DLSU only claimed ₱10.61
million for tax-exemption and should thus be required to prove that this amount had been used as
claimed.
Of this amount, ₱4.01 had been proven to have been used for educational purposes, as confirmed
by the Independent CPA. The amount in issue is therefore the balance of ₱6.60 million which was
transferred to the CF-CPA which in turn made disbursements of ₱23.46 million for various general
purposes, among them the ₱6.60 million transferred by DLSU.
Significantly, the Independent CPA confirmed that the CF-CPA made disbursements for educational
purposes in year 2003 in the amount ₱6.26 million. Based on these given figures, the CT A
concluded that the expenses for educational purposes that had been coursed through the CF-CPA
should be prorated so that only the portion that ₱6.26 million bears to the total CF-CPA
disbursements should be credited to DLSU for tax exemption.
This approach, in our view, is flawed given the constitutional requirement that revenues actually and
directly used for educational purposes should be tax-exempt. As already mentioned above, DLSU is
not claiming that the whole ₱23.46 million CF-CPA disbursement had been used for educational
purposes; it only claims that ₱6.60 million transferred to CF-CPA had been used for educational
purposes. This was what DLSU needed to prove to have actually and directly used for educational
purposes.
That this fund had been first deposited into a separate fund (the CF -CPA established to fund capital
projects) lends peculiarity to the facts of this case, but does not detract from the fact that the
deposited funds were DLSU revenue funds that had been confirmed and proven to have been
actually and directly used for educational purposes via the CF-CPA. That the CF-CPA might have
had other sources of funding is irrelevant because the assessment in the present case pertains only
to the rental income which DLSU indisputably earned as revenue in 2003. That the proven CF-CPA
funds used for educational purposes should not be prorated as part of its total CF-CPA
disbursements for purposes of crediting to DLSU is also logical because no claim whatsoever had
been made that the totality of the CF-CPA disbursements had been for educational purposes. No
prorating is necessary; to state the obvious, exemption is based on actual and direct use and this
DLSU has indisputably proven.
Based on these considerations, DLSU should therefore be liable only for the difference between
what it claimed and what it has proven. In more concrete terms, DLSU only had to prove that its
rental income for taxable year 2003 (₱10,610,379.00) was used for educational purposes. Hence,
while the total disbursements from the CF-CPA Account amounted to ₱23,463,543.02, DLSU only
had to substantiate its Pl0.6 million rental income, part of which was the ₱6,602,655.00 transferred
to the CF-CPA account. Of this latter amount, ₱6.259 million was substantiated to have been used
for educational purposes.
To summarize, we thus revise the tax base for deficiency income tax and VAT for taxable year 2003
as follows:
CTA
138
Decision Revised

Rental income 10,610,379.00 10,610,379.00

Less: Rent income used in construction of the Sports 4,007,724.00 4,007,724.00

Complex

Rental income deposited to the CF-CPA Account 6,602,655.00 6,602,655.00

Less: Substantiated portion of CF-CPA 1,761,588.35 6,259,078.30
disbursements

Tax base for deficiency income tax and VAT 4,841,066.65 343.576.70

On DLSU' s argument that the CTA should have appreciated its evidence in the same way as it did
with the evidence submitted by Ateneo in another separate case, the CTA explained that the issue in
the Ateneo case was not the same as the issue in the present case.
The issue in the Ateneo case was whether or not Ateneo could be held liable to pay income taxes
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and VAT under certain BIR and Department of Finance issuances that required the educational
institution to own and operate the canteens, or other commercial enterprises within its campus, as
condition for tax exemption. The CTA held that the Constitution does not require the educational
140
institution to own or operate these commercial establishments to avail of the exemption.
Given the lack of complete identity of the issues involved, the CTA held that it had to evaluate the
separate sets of evidence differently. The CTA likewise stressed that DLSU and Ateneo gave distinct
defenses and that its wisdom "cannot be equated on its decision on two different cases with two
141
different issues."
DLSU disagrees with the CTA and argues that the entire assessment must be cancelled because it
submitted similar, if not stronger sets of evidence, as Ateneo. We reject DLSU's argument for being
non sequitur. Its reliance on the concept of uniformity of taxation is also incorrect.
First, even granting that Ateneo and DLSU submitted similar evidence, the sufficiency and
materiality of the evidence supporting their respective claims for tax exemption would necessarily
differ because their attendant issues and facts differ.
To state the obvious, the amount of income received by DLSU and by Ateneo during the taxable
years they were assessed varied. The amount of tax assessment also varied. The amount of
income proven to have been used for educational purposes also varied because the amount
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substantiated varied. Thus, the amount of tax assessment cancelled by the CTA varied.
On the one hand, the BIR assessed DLSU a total tax deficiency of ₱17,303,001.12 for taxable years
2001, 2002 and 2003. On the other hand, the BIR assessed Ateneo a total deficiency tax of
₱8,864,042.35 for the same period. Notably, DLSU was assessed deficiency DST, while Ateneo was
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not.
Thus, although both Ateneo and DLSU claimed that they used their rental income actually, directly
and exclusively for educational purposes by submitting similar evidence, e.g., the testimony of their
employees on the use of university revenues, the report of the Independent CPA, their income
summaries, financial statements, vouchers, etc., the fact remains that DLSU failed to prove that a
portion of its income and revenues had indeed been used for educational purposes.
The CTA significantly found that some documents that could have fully supported DLSU's claim
were not produced in court. Indeed, the Independent CPA testified that some disbursements had not
144
been proven to have been used actually, directly and exclusively for educational purposes.
The final nail on the question of evidence is DLSU's own admission that the original of these
documents had not in fact been produced before the CTA although it claimed that there was no bad
145
faith on its part. To our mind, this admission is a good indicator of how the Ateneo and the
DLSU cases varied, resulting in DLSU's failure to substantiate a portion of its claimed exemption.
Further, DLSU's invocation of Section 5, Rule 130 of the Revised
Rules on Evidence, that the contents of the missing supporting documents were proven by its recital
146
in some other authentic documents on record, can no longer be entertained at this late stage of
the proceeding. The CTA did not rule on this particular claim. The CTA also made no finding on
DLSU' s assertion of lack of bad faith. Besides, it is not our duty to go over these documents to test
the truthfulness of their contents, this Court not being a trier of facts.
Second, DLSU misunderstands the concept of uniformity of taxation.
Equality and uniformity of taxation means that all taxable articles or kinds of property of the same
147
class shall be taxed at the same rate. A tax is uniform when it operates with the same force and
148
effect in every place where the subject of it is found. The concept requires that all subjects of
149
taxation similarly situated should be treated alike and placed in equal footing.
In our view, the CTA placed Ateneo and DLSU in equal footing. The CTA treated them alike because
their income proved to have been used actually, directly and exclusively for educational purposes
were exempted from taxes. The CTA equally applied the requirements in the YMCA case to test if
they indeed used their revenues for educational purposes.
DLSU can only assert that the CTA violated the rule on uniformity if it can show that, despite proving
that it used actually, directly and exclusively for educational purposes its income and revenues, the
CTA still affirmed the imposition of taxes. That the DLSU secured a different result happened
because it failed to fully prove that it used actually, directly and exclusively for educational purposes
its revenues and income.
On this point, we remind DLSU that the rule on uniformity of taxation does not mean that subjects of
taxation similarly situated are treated in literally the same way in all and every occasion. The fact that
the Ateneo and DLSU are both non-stock, non-profit educational institutions, does not mean that the
CTA or this Court would similarly decide every case for (or against) both universities. Success in tax
litigation, like in any other litigation, depends to a large extent on the sufficiency of evidence. DLSU's
evidence was wanting, thus, the CTA was correct in not fully cancelling its tax liabilities.
b. DLSU proved its payment of the DST
The CTA affirmed DLSU's claim that the DST due on its mortgage and loan transactions were paid
and remitted through its bank's On-Line Electronic DST Imprinting Machine. The Commissioner
argues that DLSU is not allowed to use this method of payment because an educational institution is
excluded from the class of taxpayers who can use the On-Line Electronic DST Imprinting Machine.
We sustain the findings of the CTA. The Commissioner's argument lacks basis in both the Tax Code
and the relevant revenue regulations.
DST on documents, loan agreements, and papers shall be levied, collected and paid for by the
150
person making, signing, issuing, accepting, or transferring the same. The Tax Code provides
that whenever one party to the document enjoys exemption from DST, the other party not exempt
from DST shall be directly liable for the tax. Thus, it is clear that DST shall be payable by any party
to the document, such that the payment and compliance by one shall mean the full settlement of the
DST due on the document.
In the present case, DLSU entered into mortgage and loan agreements with banks. These
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agreements are subject to DST. For the purpose of showing that the DST on the loan
agreement has been paid, DLSU presented its agreements bearing the imprint showing that DST on
the document has been paid by the bank, its counterparty. The imprint should be sufficient proof that
DST has been paid. Thus, DLSU cannot be further assessed for deficiency DST on the said
documents.
Finally, it is true that educational institutions are not included in the class of taxpayers who can pay
and remit DST through the On-Line Electronic DST Imprinting Machine under RR No. 9-2000. As
correctly held by the CTA, this is irrelevant because it was not DLSU who used the On-Line
Electronic DST Imprinting Machine but the bank that handled its mortgage and loan transactions. RR
No. 9-2000 expressly includes banks in the class of taxpayers that can use the On-Line Electronic
DST Imprinting Machine.
Thus, the Court sustains the finding of the CTA that DLSU proved the
payment of the assessed DST deficiency, except for the unpaid balance of
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₱13,265.48.
WHEREFORE, premises considered, we DENY the petition of the Commissioner of Internal
Revenue in G.R. No. 196596 and AFFIRM the December 10, 2010 decision and March 29, 2011
resolution of the Court of Tax Appeals En Banc in CTA En Banc Case No. 622, except for the total
amount of deficiency tax liabilities of De La Salle University, Inc., which had been reduced.
We also DENY both the petition of De La Salle University, Inc. in G.R. No. 198841 and the petition of
the Commissioner of Internal Revenue in G.R. No. 198941 and thus AFFIRM the June 8, 2011
decision and October 4, 2011 resolution of the Court of Tax Appeals En Banc in CTA En Banc Case
No. 671, with the MODIFICATION that the base for the deficiency income tax and VAT for taxable
year 2003 is ₱343,576.70.
SO ORDERED.

G.R. No. 175097

ALLIED BANKING CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
DEL CASTILLO, J.:
The key to effective communication is clarity.
The Commissioner of Internal Revenue (CIR) as well as his duly authorized representative must
indicate clearly and unequivocally to the taxpayer whether an action constitutes a final determination
1
on a disputed assessment. Words must be carefully chosen in order to avoid any confusion that
could adversely affect the rights and interest of the taxpayer.
2 3
Assailed in this Petition for Review on Certiorari under Section 12 of Republic Act (RA) No. 9282,
4
in relation to Rule 45 of the Rules of Court, are the August 23, 2006 Decision of the Court of Tax
5
Appeals (CTA) and its October 17, 2006 Resolution denying petitioner’s Motion for
Reconsideration.
Factual Antecedents
On April 30, 2004, the Bureau of Internal Revenue (BIR) issued a Preliminary Assessment Notice
(PAN) to petitioner Allied Banking Corporation for deficiency Documentary Stamp Tax (DST) in the
amount of ₱12,050,595.60 and Gross Receipts Tax (GRT) in the amount of ₱38,995,296.76 on
6
industry issue for the taxable year 2001. Petitioner received the PAN on May 18, 2004 and filed a
7
protest against it on May 27, 2004.
On July 16, 2004, the BIR wrote a Formal Letter of Demand with Assessment Notices to petitioner,
8
which partly reads as follows:
It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of
penalties incident to delinquency. This is our final decision based on investigation. If you disagree,
you may appeal the final decision within thirty (30) days from receipt hereof, otherwise said
deficiency tax assessment shall become final, executory and demandable.
9
Petitioner received the Formal Letter of Demand with Assessment Notices on August 30, 2004.
Proceedings before the CTA First Division
10
On September 29, 2004, petitioner filed a Petition for Review with the CTA which was raffled to its
11
First Division and docketed as CTA Case No. 7062.
12
On December 7, 2004, respondent CIR filed his Answer. On July 28, 2005, he filed a Motion to
13
Dismiss on the ground that petitioner failed to file an administrative protest on the Formal Letter of
14
Demand with Assessment Notices. Petitioner opposed the Motion to Dismiss on August 18, 2005.
15
On October 12, 2005, the First Division of the CTA rendered a Resolution granting respondent’s
Motion to Dismiss. It ruled:
Clearly, it is neither the assessment nor the formal demand letter itself that is appealable to this
Court. It is the decision of the Commissioner of Internal Revenue on the disputed assessment that
can be appealed to this Court (Commissioner of Internal Revenue vs. Villa, 22 SCRA 3). As correctly
pointed out by respondent, a disputed assessment is one wherein the taxpayer or his duly
authorized representative filed an administrative protest against the formal letter of demand and
assessment notice within thirty (30) days from date [of] receipt thereof. In this case, petitioner failed
to file an administrative protest on the formal letter of demand with the corresponding assessment
notices. Hence, the assessments did not become disputed assessments as subject to the Court’s
review under Republic Act No. 9282. (See also Republic v. Liam Tian Teng Sons & Co., Inc., 16
SCRA 584.)
WHEREFORE, the Motion to Dismiss is GRANTED. The Petition for Review is hereby DISMISSED
for lack of jurisdiction.
16
SO ORDERED.
Aggrieved, petitioner moved for reconsideration but the motion was denied by the First Division in its
17
Resolution dated February 1, 2006.
Proceedings before the CTA En Banc
18
On February 22, 2006, petitioner appealed the dismissal to the CTA En Banc. The case was
docketed as CTA EB No. 167.
Finding no reversible error in the Resolutions dated October 12, 2005 and February 1, 2006 of the
19
CTA First Division, the CTA En Banc denied the Petition for Review as well as petitioner’s Motion
20
for Reconsideration.
The CTA En Banc declared that it is absolutely necessary for the taxpayer to file an administrative
protest in order for the CTA to acquire jurisdiction. It emphasized that an administrative protest is an
integral part of the remedies given to a taxpayer in challenging the legality or validity of an
assessment. According to the CTA En Banc, although there are exceptions to the doctrine of
exhaustion of administrative remedies, the instant case does not fall in any of the exceptions.
Issue
Hence, the present recourse, where petitioner raises the lone issue of whether the Formal Letter of
Demand dated July 16, 2004 can be construed as a final decision of the CIR appealable to the CTA
under RA 9282.
Our Ruling
The petition is meritorious.
Section 7 of RA 9282 expressly provides that the CTA exercises exclusive appellate jurisdiction to
review by appeal decisions of the CIR in cases involving disputed assessments
The CTA, being a court of special jurisdiction, can take cognizance only of matters that are clearly
21
within its jurisdiction. Section 7 of RA 9282 provides:
Sec. 7. Jurisdiction. — The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue Code or other laws administered by the Bureau
of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue Code or other laws administered by the Bureau
of Internal Revenue, where the National Internal Revenue Code provides a specific period of action,
in which case the inaction shall be deemed a denial; (Emphasis supplied)
xxxx
The word "decisions" in the above quoted provision of RA 9282 has been interpreted to mean the
22
decisions of the CIR on the protest of the taxpayer against the assessments. Corollary thereto,
Section 228 of the National Internal Revenue Code (NIRC) provides for the procedure for protesting
an assessment. It states:
SECTION 228. Protesting of Assessment. – When the Commissioner or his duly authorized
representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his
findings: Provided, however, That a preassessment notice shall not be required in the following
cases:
(a) When the finding for any deficiency tax is the result of mathematical error in the computation of
the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount actually
remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for
a taxable period was determined to have carried over and automatically applied the same amount
claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding
taxable year; or
(d) When the excise tax due on excisable articles has not been paid; or
(e) When an article locally purchased or imported by an exempt person, such as, but not limited to,
vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to
non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which the assessment is
made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be
required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly
authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or
reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as
may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the
protest, all relevant supporting documents shall have been submitted; otherwise, the assessment
shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days
from submission of documents, the taxpayer adversely affected by the decision or inaction may
appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from
the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final,
executory and demandable.
In the instant case, petitioner timely filed a protest after receiving the PAN. In response thereto, the
BIR issued a Formal Letter of Demand with Assessment Notices. Pursuant to Section 228 of the
NIRC, the proper recourse of petitioner was to dispute the assessments by filing an administrative
protest within 30 days from receipt thereof. Petitioner, however, did not protest the final assessment
notices. Instead, it filed a Petition for Review with the CTA. Thus, if we strictly apply the rules, the
dismissal of the Petition for Review by the CTA was proper.
The case is an exception to the
rule on exhaustion of administrative remedies
However, a careful reading of the Formal Letter of Demand with Assessment Notices leads us to
agree with petitioner that the instant case is an exception to the rule on exhaustion of administrative
remedies, i.e., estoppel on the part of the administrative agency concerned.
23
In the case of Vda. De Tan v. Veterans Backpay Commission, the respondent contended that
before filing a petition with the court, petitioner should have first exhausted all administrative
remedies by appealing to the Office of the President. However, we ruled that respondent was
estopped from invoking the rule on exhaustion of administrative remedies considering that in its
Resolution, it said, "The opinions promulgated by the Secretary of Justice are advisory in nature,
which may either be accepted or ignored by the office seeking the opinion, and any aggrieved party
has the court for recourse". The statement of the respondent in said case led the petitioner to
conclude that only a final judicial ruling in her favor would be accepted by the Commission.
Similarly, in this case, we find the CIR estopped from claiming that the filing of the Petition for
Review was premature because petitioner failed to exhaust all administrative remedies.
The Formal Letter of Demand with Assessment Notices reads:
Based on your letter-protest dated May 26, 2004, you alleged the following:
1. That the said assessment has already prescribed in accordance with the provisions of Section
203 of the Tax Code.
2. That since the exemption of FCDUs from all taxes found in the Old Tax Code has been deleted,
the wording of Section 28(A)(7)(b) discloses that there are no other taxes imposable upon FCDUs
aside from the 10% Final Income Tax.
Contrary to your allegation, the assessments covering GRT and DST for taxable year 2001 has not
prescribed for [sic] simply because no returns were filed, thus, the three year prescriptive period has
not lapsed.
With the implementation of the CTRP, the phrase "exempt from all taxes" was deleted. Please refer
to Section 27(D)(3) and 28(A)(7) of the new Tax Code. Accordingly, you were assessed for
deficiency gross receipts tax on onshore income from foreign currency transactions in accordance
with the rates provided under Section 121 of the said Tax Code. Likewise, deficiency documentary
stamp taxes was [sic] also assessed on Loan Agreements, Bills Purchased, Certificate of Deposits
and related transactions pursuant to Sections 180 and 181 of NIRC, as amended.
The 25% surcharge and 20% interest have been imposed pursuant to the provision of Section
248(A) and 249(b), respectively, of the National Internal Revenue Code, as amended.
It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of
penalties incident to delinquency. This is our final decision based on investigation. If you disagree,
you may appeal this final decision within thirty (30) days from receipt hereof, otherwise said
24
deficiency tax assessment shall become final, executory and demandable. (Emphasis supplied)
It appears from the foregoing demand letter that the CIR has already made a final decision on the
matter and that the remedy of petitioner is to appeal the final decision within 30 days.
25
In Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue, we considered the
language used and the tenor of the letter sent to the taxpayer as the final decision of the CIR.
In this case, records show that petitioner disputed the PAN but not the Formal Letter of Demand with
Assessment Notices. Nevertheless, we cannot blame petitioner for not filing a protest against the
Formal Letter of Demand with Assessment Notices since the language used and the tenor of the
demand letter indicate that it is the final decision of the respondent on the matter. We have time and
again reminded the CIR to indicate, in a clear and unequivocal language, whether his action on a
disputed assessment constitutes his final determination thereon in order for the taxpayer concerned
26
to determine when his or her right to appeal to the tax court accrues. Viewed in the light of the
foregoing, respondent is now estopped from claiming that he did not intend the Formal Letter of
Demand with Assessment Notices to be a final decision.
Moreover, we cannot ignore the fact that in the Formal Letter of Demand with Assessment Notices,
respondent used the word "appeal" instead of "protest", "reinvestigation", or "reconsideration".
Although there was no direct reference for petitioner to bring the matter directly to the CTA, it cannot
be denied that the word "appeal" under prevailing tax laws refers to the filing of a Petition for Review
with the CTA. As aptly pointed out by petitioner, under Section 228 of the NIRC, the terms "protest",
"reinvestigation" and "reconsideration" refer to the administrative remedies a taxpayer may take
before the CIR, while the term "appeal" refers to the remedy available to the taxpayer before the
27
CTA. Section 9 of RA 9282, amending Section 11 of RA 1125, likewise uses the term "appeal"
when referring to the action a taxpayer must take when adversely affected by a decision, ruling, or
inaction of the CIR. As we see it then, petitioner in appealing the Formal Letter of Demand with
Assessment Notices to the CTA merely took the cue from respondent. Besides, any doubt in the
interpretation or use of the word "appeal" in the Formal Letter of Demand with Assessment Notices
should be resolved in favor of petitioner, and not the respondent who caused the confusion.
To be clear, we are not disregarding the rules of procedure under Section 228 of the NIRC, as
28
implemented by Section 3 of BIR Revenue Regulations No. 12-99. It is the Formal Letter of
Demand and Assessment Notice that must be administratively protested or disputed within 30 days,
and not the PAN. Neither are we deviating from our pronouncement in St. Stephen’s Chinese Girl’s
29
School v. Collector of Internal Revenue, that the counting of the 30 days within which to institute
an appeal in the CTA commences from the date of receipt of the decision of the CIR on the disputed
assessment, not from the date the assessment was issued. 1avvphi 1

What we are saying in this particular case is that, the Formal Letter of Demand with Assessment
Notices which was not administratively protested by the petitioner can be considered a final decision
of the CIR appealable to the CTA because the words used, specifically the words "final decision" and
"appeal", taken together led petitioner to believe that the Formal Letter of Demand with Assessment
Notices was in fact the final decision of the CIR on the letter-protest it filed and that the available
remedy was to appeal the same to the CTA.
We note, however, that during the pendency of the instant case, petitioner availed of the provisions
of Revenue Regulations No. 30-2002 and its implementing Revenue Memorandum Order by
submitting an offer of compromise for the settlement of the GRT, DST and VAT for the period 1998-
30
2003, as evidenced by a Certificate of Availment dated November 21, 2007. Accordingly, there is
no reason to reinstate the Petition for Review in CTA Case No. 7062.
WHEREFORE, the petition is hereby GRANTED. The assailed August 23, 2006 Decision and the
October 17, 2006 Resolution of the Court of Tax Appeals are REVERSED and SET ASIDE. The
Petition for Review in CTA Case No. 7062 is hereby DISMISSED based solely on the Bureau of
Internal Revenue’s acceptance of petitioner’s offer of compromise for the settlement of the gross
receipts tax, documentary stamp tax and value added tax, for the years 1998-2003.
SO ORDERED.