Commissioner v. Philamlife Insurance Co.

,
GR 105208
May 29, 1995

Case Digest No. 65 of Lucky O. Javellana

FACTS:

On May 30, 1983, private respondent Philamlife, For its Third Quarter of 1983, declared a net
taxable income of P2,515,671.00 and a tax due of P708,464.00. After crediting the amount of
P3,899,525.00 it declared a refundable amount of P3,158,061.00.
For its Fourth and final quarter ending December 31, private respondent suffered a loss and
thereby had no income tax liability.
In the return for that quarter, it declared a refund of P3,991,841.00 representing the first and
second quarterly payments: P215,742.00 as withholding taxes on rental income for 1983 and
P133,084.00 representing 1982 income tax refund applied as 1983 tax credit.
In 1984, private respondent again suffered a loss and declared no income tax liability.
However, it applied as tax credit for 1984, the amount of P3,991,841.00 representing its 1982
and 1983 overpaid income taxes and the amount of P250,867.00 as withholding tax on rental
income for 1984.
On September 26, 1984, private respondent filed a claim for its 1982 income tax refund of
P133,084.00.
On November 22, 1984, it filed a petition for review with the Court of Tax Appeals with
respect to its 1982 claim for refund. On December 16, 1985, it filed another claim for refund
On January 2, 1986, private respondent filed a petition for review with the CTA, docketed as
CTA Case No. 4018 regarding its 1983 and 1984 claims for refund in the above-stated amount.
Later, it amended its petition by limiting its claim for refund to only P3,858,757.00

ISSUE:

In a case such as this, where a corporate taxpayer remits/pays to the BIR tax withheld on income
for the first quarter but whose business operations actually resulted in a loss for that year, as
reflected in the Corporate Final Adjustment Return subsequently filed with the BIR, should not
the running of the prescriptive period commence from the remittance/payment at the end of the
first quarter of the tax withheld instead of from the filing of the Final Adjustment Return?

HELD:

The issue in this case is the reckoning date of the two-year prescriptive period provided
in Section 230 of the National Internal Revenue Code (formerly Section 292) which
states that: Recovery of tax erroneously or illegally collected. — No suit or proceeding
shall be maintained in any court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of any
penalty claimed to have been collected without authority, or of any sum alleged to have
been excessive or in any manner wrongfully collected, until a claim for refund or credit
has been duly filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid under protest or
duress.
In any case, no such suit or proceeding shall be begun after the expiration of two
years from the date of payment of the tax or penalty regardless of any supervening cause
that may arise after payment:Provided, however, That the Commissioner may, even
without a written claim therefor, refund or credit any tax, where on the face of the return
upon which payment was made, such payment appears clearly to have been erroneously
paid.
Forfeiture of refund. — A refund check or warrant issued in accordance with the
pertinent provisions of this Code which shall remain unclaimed or uncashed within five
(5) years from the date the said warrant or check was mailed or delivered shall be
forfeited in favor of the government and the amount thereof shall revert to the General
Fund.
Section 292 (now Section 230) stipulates that the two-year prescriptive period to claim
refunds should be counted from date of payment of the tax sought to be refunded. When
applied to tax payers filing income tax returns on a quarterly basis, the date of payment
mentioned in Section 292 (now Section 230) must be deemed to be qualified by Sections
68 and 69 of the present Tax Code
It may be observed that although quarterly taxes due are required to be paid within sixty
days from the close of each quarter, the fact that the amount shall be deducted from the
tax due for the succeeding quarter shows that until a final adjustment return shall have
been filed, the taxes paid in the preceding quarters are merely partial taxes due from a
corporation. Neither amount can serve as the final figure to quantity what is due the
government nor what should be refunded to the corporation.
This interpretation may be gleaned from the last paragraph of Section 69 of the Tax Code
which provides that the refundable amount, in case a refund is due a corporation, is that
amount which is shown on its final adjustment return and not on its quarterly returns.
Therefore, when private respondent paid P3,246,141.00 on May 30, 1983, it would not
have been able to ascertain on that date, that the said amount was refundable. The same
applies with cogency to the payment of P396,874.00 on August 29, 1983.
Clearly, the prescriptive period of two years should commence to run only from the
time that the refund is ascertained, which can only be determined after a final
adjustment return is accomplished. In the present case, this date is April 16, 1984,
and two years from this date would be April 16, 1986. The record shows that the claim
for refund was filed on December 10, 1985 and the petition for review was brought
before the CTA on January 2, 1986. Both dates are within the two-year reglementary
period. Private respondent being a corporation, Section 292 (now Section 230) cannot
serve as the sole basis for determining the two-year prescriptive period for refunds. As
we have earlier said in the TMX Sales case, Sections 68, 69, and 70 on Quarterly
Corporate Income Tax Payment and Section 321 should be considered in conjunction
with it.
Moreover, even if the two-year period had already lapsed, the same is not
jurisdictional and may be suspended for reasons of equity and other special
circumstances. 
 Pacific Pro., Ltd. Case (Case Not Found)
GR 68013
November 12, 1984

Case Digest No. 66 of Lucky O. Javellana

United Airlines v. CIR,

G.R. No. 178788,
September 29, 2010

Case Digest No. 67 of Lucky O. Javellana

FACTS:

Petitioner used to be an online carrier but ceased operating cargo flights from the Philippines
starting 2001. It is now an offline international air carrier but has a general sales agent in the
Philippines which sells passage documents for its off-line flights for carriage of passengers and
cargo. It filed a claim for refund on the Gross Philippine Billings (GPB) tax it paid. The CTA
ruled that Petitioner was not liable for the GBP but was liable to pay 32% tax on its net income
derived from the sales of passage documents in the Philippines.

ISSUE:

Is Petitioner liable for either the GPB or the 32% tax?

HELD:

32% tax. The Court reiterated the ruling in South African Airways and BOAC stating that it is
the sale of tickets which is the revenue-generating activity subject to Philippine tax. The correct
interpretation of the applicable rules is that, if an international air carrier maintains flights to and
from the Philippines, it shall be taxed at the rate of 2 1/2% of its Gross Philippine Billings, while
international air carriers that do not have flights to and from the Philippines but nonetheless earn
income from other activities in the country will be taxed at the rate of 32% of such income.
The Court also ruled that “to avoid multiplicity of suits and  unnecessary difficulties and
expenses” the issue of deficiency tax assessment be resolved jointly with the its claim for refund
and doing so does not violate the rule against offsetting of taxes.

ABS-CBN Broadcasting Corp. v. CTA

108 SCRA 143

Case Digest No. 68 of Lucky O. Javellana

FACTS:

The ABS-CBN Broadcasting Corporation (herein shall be called the “Company”) was engaged
in the business of telecasting local as well as foreign films acquired from foreign corporations
not engaged in trade or business with the Philippines. Under Section 24 (b) of the National
Revenue Code, a withholding tax of 30% (RA 2343). It was implemented through Circular No.
V-334. Pursuant to the foregoing, ABS-CBN dutifully withheld and turned over to the BIR the
amount of 30% of one-half of the film rentals paid by it to foreign corporations not engaged in
trade or business within the Philippines. The last year that ABS-CBN withheld taxes pursuant to
the foregoing Circular was in 1968.

RA 5431 amended Section 24 (b) of the Tax Code increasing the tax rate from 30 % to 35 % and
revising the tax basis from “such amount” referring to rents, etc. to “gross income.” The
following was implemented by Circular No. 4-71.

Petitioner requested for a reconsideration and withdrawal of the assessment.

ISSUE:

Whether or not respondent can apply General Circular No. 4-71 retroactively and issue a
deficiency assessment against petitioner.

HELD:
Any rulings or circulars promulgated by the CIR have no retroactive application when it would
be prejudicial to taxpayers. The retroactive application of Memorandum Circular No. 4-71
prejudices ABS-CBN since:

1. The assessment and demand on petitioner to pay deficiency withholding income tax was also
made three years after 1968 for a period of time commencing in 1965.

2. ABS-CBN was no longer in a position to withhold taxes due from foreign corporations
because it had already remitted all film rentals and no longer had any control over them when the
new Circular was issued.

Emilio S. Lim v. Court of Appeals

GR L-48134-37
October 18, 1990

Case Digest No. 69 of Lucky O. Javellana

DOCTRINE: Prescriptive Period to File Criminal Case Under NIRC SECTION 281: 5 years
from failure to pay tax after notice and demand.

NATURE: Petition for Review on Certiorari

FACTS: Spouses Lim were engaged in the dealership of various household appliances.

The NBI conducted a raid on Oct. 5, 1959 on their:

1.) Business Address: No. 336 Nueva Street, Manila; and
2.) 111 12th Street, Quezon City.
Seized from the Lim couple were business and accounting records which served as bases for an
investigation undertaken by the BIR.
On Sept. 30, 1964, Senior Revenue Examiner Raphael S. Daet submitted a memorandum that the
income tax returns filed by the spouses Lim for 1958 and 1959 were false or fraudulent.
Assessment should be: P835, 127.
Acting Commissioner Benjamin M. Tabios informed the couple that there deficiency income
taxes are P922, 913.04.

On April 10, 1965, spouses requested an re-investigation.

BIR expressed willingness on the following conditions:

1.) written waiver of the defense of prescription under the statute of limitations;
2.) depositing ½ of the assessment and securing the other ½ with a surety bond.
Spouses Lim refused to comply with the conditions and reiterated his request.
BIR rendered a final decision holding that there was no cause for reversal of the assessment
against the Lim couple.

The final notice and demand for payment was served through their daughter in law on July 3,
1968 for the amount of P1,237,190.55 including interest, surcharges and penalty for late
payment.
BIR referred the matter to the Manila’s Fiscal’s Office for investigation and prosecution.

4 criminal informations were filed against petitioners.

 violation of NIRC SECTION 45
 violation of NIRC SECTION 51

RTC Manila found petitioners guilty.

CA affirmed RTC. 23 days later Antonio Lim, Sr. died.

ISSUE/S:
1.) WON the offenses prescribe after 5 years (Lim) or 10 years (government’s position)?
2.) WON the prescriptive period commenced to run from 1965 date of 1 st assessment or
discovery (according to Lim spouses) or from final notice on 1968 (government)?
3.) WON the RTC had jurisdiction over the tax collection case?
4.) WON the death of Emilio S. Lim, Sr. extinguished his civil liabilities?

HELD:
1.) 5 years – but the government instituted the case within the prescriptive period.

NIRC

SECTION 73. PENALTY FOR FAILURE TO FILE RETURN OR TO PAY TAX. –

Anyone liable to pay the tax, to make a return or to supply information required under this
code, who refuses or neglects to pay such tax, to make such return or to supply such
information at the time or times herein specified in each year, shall be punished by a fine of
not more than P2,000 or by imprisonment for not more than 6 months, or both.

Any individual or any officer of any corporation, or general co-partnership…, required by

law to make, render, sign or verify any return or to supply any information, who makes any
false or fraudulent return or statement with intent to defeat or evade the assessment required
by this Code to be made, shall be punished by a fine not exceeding P4,000 or by
imprisonment for not exceeding 1 year, or both.

SECTION 354. PRESCRIPTION FOR VIOLATIONS OF ANY PROVISIONS OF

THIS CODE. – All violations of any provision of this Code shall prescribe after 5 years.
 Prescription shall run from the day of the commission of the violation of the law, and if the
same not be known at the time, from the discovery thereof AND the institution of judicial
proceeding for its investigation and punishment.

The presumption shall be interrupted when proceedings are instituted against the guilty
persons and shall begin to run again if the proceedings are dismissed for reasons not
constituting jeopardy.

The term of prescription shall not run when the offender is absent from the Philippines.

2.) Commenced from the date of the final notice.

In criminal cases, statutes of limitations are acts of grace, a surrendering by the sovereign of
its right to prosecute.
They receive strict construction in favor of the Government and limitations in such cases will
not be presumed in the absence of clear legislation.

3.) No, because the criminal case was instituted on June 23, 1970 and PD 69 which mandates
RTC to order payment of the taxes took effect only on Jan. 1, 1973. It has no retroactive
application.
The law applicable was SECTION 316 which does not sanction such imposition.

4.) Regarding the liability of Emilio S. Lim, Sr. – extinguished by his death in accordance ith
SECTION 89 of the RPC; but the fine imposed in the 4 criminal cases is affirmed in the case
of petitioner Antonia Sun Lim in accordance with NIRC SECTION 73.