TAXATION LAW 1

1. The CIR assessed the COMELEC for ANSWER

non-withholding of taxes a) Yes. Sec 4 of the NIRC, as
amounting to around P49 million, amended, provides that the
inclusive of statutory penalties, on power to decide disputed
its transactions with Smartmatic assessments, refunds of
and Avante for lease with option to internal revenue taxes, fees
purchase of electronic voting or other charges, penalties
machines. The COMELEC argues imposed in relation thereto,
that the procurement of election or other matters arising
materials and equipment are "free under this Code or other
from taxes and import duties" laws or portions thereof
under Section 12(6) of Republic Act administered by the Bureau
(RA) No. 8436. Upon elevation to of Internal Revenue is
the CTA Division, the Court ruled vested in the Commissioner,
that the COMELEC was liable for the subject to the exclusive
non-withholding. However, the appellate jurisdiction of the
same was liable only to the Court of Tax Appeals.
deficiency tax but not to the
penalties pursuant to Sec 247(b) of b) Yes. While Section 1 Rule 8
the NIRC. The decision of the CTA of the RRCTA requires that
Division, was later amended an appeal to the CTA En
because in its original decision, it Banc must be preceded by
indicated that the COMELEC was the filing of a timely motion
liable to pay P49 million. The for reconsideration or new
amended decision corrected the trial with the CTA Division
amount to P30 million, after that issued the decision or
removing the penalties from the resolution, it was
assessment, which is in line with nonetheless held that the
the substance of the court’s Amended Decision must be
decision. Not dissuaded, the entirely new decision. Here,
COMELEC filed a petition for review the Amended Decision is a
before the CTA En Banc without mere clarification, a
first filing a motion for correction at best, of the
reconsideration in the CTA amount due from the
Division’s amended decision. COMELEC.

a) On the procedural c) Yes. The Court held that

matters, does the CTA Income tax is different from
have jurisdiction? withholding tax, with both
b) Is the COMELEC correct operating in distinct
in filing filed a petition systems. The withholding
for review before the agent is liable only insofar
CTA En Banc without as he failed to perform his
first filing a motion for duty to withhold the tax and
reconsideration in the remit the same to the
CTA Division’s amended government. The liability for
decision? the tax, however, remains
c) On the substantive with the taxpayer because
matters, is the COMELEC the gain was realized and
liable for the non- received by him. The cause
withholding? of action for failure to
withhold taxes is different

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from the cause of action b) Assuming that the NPC’s

arising front non-payment argument is correct, in
of income taxes. One may that they are not
be exempt from the required to pay the
obligation to pay income tax assessment because
but may still be liable for they are questioning the
withholding the tax on authority of the
income payments made to assessor, was the
taxable entities. The first is protest before the LBAA
based on personal tax proper? Should the case
liability, while the second is be remanded back to the
premised on its duty as a LBAA?
withholding agent to c) Are the properties listed
withhold the taxes paid to in the Machineries
the payee. (CIR v. Assessment exempt
COMELEC, GR No. 244155, from RPT?
May 11, 2021, J. M. Lopez)
ANSWER
2. NPC was assessed Real Property a) Yes. As early as in National
Tax (RPT) on various properties. Power Corporation v.
NPC filed a protest before the Local Province of Quezon, the
Board of Assessment Appeals Court ruled that a claim for
(LBAA) pertaining to the exemption is a question of
Machineries Assessment, arguing fact that pertains to the
that their machineries are exempt correctness of an
from RPT under Sec 234 of the LGC assessment. Hence,
because they are actually, directly, payment under protest is
and exclusively used in generating mandatory pursuant to Sec
and transmitting electricity. The 252 of the LGC. Here, the
protest however, was denied by the authority or power of the
LBAA and eventually the CTA, which municipal assessor to
held that a protest questioning the impose RPT on the NPC's
reasonableness or correctness of properties is not being
the amount of assessment must be questioned. Nothing in the
preceded by paying the tax under Petition filed with the LBAA
protest. Without a valid protest, the supported NPC's claim
assessor cannot validly act on the regarding the assessor's
protest. Hence, the protest to the alleged lack of authority.
LBAA was premature. However, Instead, the Petition
NPC insists that it is not required to primarily involved factual
first pay the tax under protest since questions on the
it is not questioning the correctness of the
reasonableness or correctness of assessment based on NPC’s
the assessments against it but the argument that the
very authority of the assessor in properties listed in the
assessing properties that are Machineries Assessment are
exempt from RPT. exempt from RPI because
they are actually, directly,
a) Is the NPC required to and exclusively used for the
pay the assessed tax generation of electricity.
before they can file a
protest?

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b) No. In City of Lapu-Lapu v. and (b) the local water

Philippines Economic Zone districts and GOCCs
Authority the Court held claiming exemption must be
that in case of an illegal engaged in the supply and
assessment where the distribution of water and/or
assessment was issued the generation and
without authority, transmission of electric
exhaustion of administrative power." Further, under Sec
remedies is not necessary 199 of the same Code, the
and the taxpayer may property may be considered
directly resort to judicial a "machinery'' for purposes
action. The taxpayer shall of determining exemption
file a complaint for from RPT under Section 234
injunction before the of the LGC, if: (I) it is
Regional Trial Court to actually, directly, and
enjoin the local government exclusively used for the
unit from collecting real exempting purpose; and (2)
property taxes. Assuming by its nature and purpose,
NPC’s contention is correct. the property is necessary or
NPC should have filed an indispensable for the
injunction with the RTC and exempting purpose. Here,
not an appeal under Section the eleven properties
226 of the LGC to the LBAA. assessed for RPT under the
Nevertheless, the doctrine Machineries Assessment
of exhaustion of may have some usage in the
administrative remedies, Angat Hydro-Electric Power
however, is a relative one Plant operation but not
and is flexible depending on exclusively. Accordingly, the
the peculiarity and municipality of Norzagaray
uniqueness of the factual properly imposed RPT upon
and circumstantial settings them. (NPC v. Provincial
of a case. It may be Government of Bulacan, GR
disregarded: (1) when to No. 207140, January 30,
require exhaustion would be 2023, J. M. Lopez)
unreasonable; or (2) when
the issue of non-exhaustion 3. Joel Mendez, is the owner of Weigh
has been rendered moot, as Less Center, Mendez Body and Face
in this case when the LBAA Salon and Spa and Mendez Body
already discussed the and Face Skin Clinic with branches
factual basis and merits of in Quezon City, Makati City, San
NPC’s claim for exemption Fernando, Pampanga and Dagupan
and eventually denied the City. In April, 2003 BIR filed a case
same. of violation of the Tax Code for
failure to file his Income Tax Return
c) No. To successfully claim for Taxable Year 2002 - estimated
exemption under Sec 234 at P1.5 million and in 2003 at P2.1
(c) of the LGC, the claimant million. The charges stemmed from
must prove that: "(a) the the Bureau of Internal Revenue
machineries and equipment acting upon a confidential tip that
are actually, directly, and Joel has not been issuing Official
exclusively used by local Receipts over Services Rendered
water districts and GOCCs; which prompted BIR to examine his

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Books of Accounts - to which the shall be exercised by the

latter failed to comply. BIR resorted proper first-level courts;
to the Best Obtainable Evidence c. Exclusive appellate
through the Net Worth and jurisdiction over tax
Expenditures Method. Joel raised collection cases originally
the defense that the (1) non-filling decided by the first-level
was due to his accountant Richard, courts shall be exercised by
who was incharge of inventories the RTC;
and payment of fees and d. Exclusive original
withholding taxes and (2) no formal jurisdiction over criminal
tax assessment was included in the offenses or felonies where
Criminal Complaint against him. the principal amount of
The Court of Tax Appeals thereafter taxes and fees, exclusive of
convicted Joel Mendez for the charges and penalties,
alleged Failure to File Tax Returns. claimed is Pl ,000,000.00 or
a) Does the Court of Tax more remains with the CT
Appeals have Jurisdiction A;
over the Tax case against e. Exclusive original
Mendez? jurisdiction over criminal
b) May Joel raise the Defense offenses or felonies where
that the Failure to File was the principal amount of
due to his Accountant’s taxes and fees, exclusive of
fault? charges and penalties,
c) Is an assessment for claimed is less than Pl
deficiency taxes a ,000,000.00 shall be
prerequisite for collection of exercised by the proper
the taxpayer-accused's civil first-level courts; and
liability for unpaid taxes in f. Exclusive appellate
the criminal prosecution for jurisdiction over criminal
tax law violations? offenses or felonies
originally decided by the
ANSWERS: first-level courts remains
a) YES, the Court of Tax with the RTC.
Appeals has Jurisdiction
over the Tax case. It must be emphasized,
however, that the foregoing
The apparent conflicting clarification shall apply to cases
provisions of RA No. 9282 filed upon the effectivity of RA
and BP Blg. 129, as No. 11576 on August 21, 2021
amended by RA No. 11576, since jurisdiction over the
are reconciled as follows: subject matter in criminal cases
is determined by the statute in
a. Exclusive original force at the time of
jurisdiction over tax commencement of the action.
collection cases involving
Pl,000,000.00 or more The Informations stated that
remains with the CTA; Joel's potential liability for
b. Exclusive original deficiency taxes is Pl.5M and
jurisdiction over tax P2.1 million - more than Pl
collection cases involving million in both cases. Clearly,
less than Pl ,000,000.00 pursuant to RA No. 9282, the
statute in force when the

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criminal actions at bar were prosecution of criminal tax

instituted, jurisdiction over the law violations and the
cases is with the CTA. corresponding civil liability
for unpaid taxes:
b) NO, Joel may not raise the
defense that it was his 1) When a criminal
Accountant’s fault. action for violation
of the tax laws is
The doctrine of willful filed, a prior
blindness is well established assessment is not
in criminal law. Many required. Neither a
criminal statutes require final assessment is a
proof that a defendant precondition to
acted knowingly or willfully, collection of
and Jourts applying the delinquent taxes in
doctrine have held that the criminal tax
defendants cannot escape case.
the reach of the statutes by
deliberately shielding The criminal action
themselves from clear is deemed a
evidence of critical facts that collection case.
are strongly suggested by Therefore, the
the circumstances The government must
traditional rationale for the prove two things:
doctrine is that defendants One, the guilt of the
who behave in this manner accused by proof
are just as culpable as those beyond reasonable
who have actual knowledge. doubt, and two, the
accused's civil
Joel knew that he had two liability for taxes by
clinics in Quezon City and competent evidence
one in Pampanga, all (other than an
registered with the BIR in assessment).
2003. However, he did not
ascertain whether the 2) If before the
income reported in the ITR institution of the
filed was correctly and criminal action, the
accurately contained all his government filed (1)
earnings for 2003. As a a civil suit for
medical doctor and as a collection, or (2) an
businessman, Joel is not answer to the
only presumed to take taxpayer's petition
ordinary care of his for review before the
concerns. TA,
the civil action or the
c) NO, a valid assessment is resolution of the
not required when a taxpayer's petition for
Criminal Case is instituted. review shall be
suspended before
For the guidance of the judgment on the merits
bench and bar, the following until final judgment is
rules shall govern the

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rendered in the criminal Was the denial of the CTA

action. proper?

However, before Answer

judgment on the merits
is rendered in the civil Yes, pursuant to the 1997
action, it may be NIRC, the sales of goods,
consolidated with the properties or services made by
criminal action. In such a VAT-registered supplier to a
a case, the judgment in BOI-registered
the criminal action shall manufacturer/producer whose
include a finding of the products are 100% exported
accused's civil liability are considered export sales. A
for unpaid taxes relative certification to this effect must
to the criminal case. be issued by the Board of
Investment (BOI) which shall
The prosecution filed a be good for one year unless
criminal case for tax subsequently re-issued by the
violation against Joel. BOI.
The civil action for
collection of deficiency Proof of actual exportation of goods
taxes is deemed sold by a Value Added Tax (VAT)-
instituted; hence, a registered taxpayer to a Board of
formal assessment Investments (BOI)-registered
issued by the CIR is not enterprise is vital for the transaction
required for the to be considered as zero-rated
imposition of civil export sales. (COMMISSIONER OF
liability for unpaid taxes. INTERNAL REVENUE VS.
Hence, the proper FILMINERA RESOURCES CORP.,
remedy is to remand the G.R. NO. 236325, SEPTEMBER 16,
case to the Court in 2020, J. M.V. LOPEZ)
Division to determine
the civil liability of the
accused Joel. (People vs 5. PM Corp, a VAT-registered taxpayer
Joel Mendez (EN BANC), requested a refund for excess input
G.R. Nos. 208310-11, VAT they paid attributable to its
March 28, 2023, J. M. zero-rated sales for the second and
Lopez) third quarters of the taxable year
4. In a purchase agreement entered 2010. They provided receipts, tax
into by two domestic corporations filings, and import documents to
for export, one of which filed for prove their claim. The CIR
VAT returns and filed administrative disagreed and countered saying the
claims for refund for its unutilized company did not comply with the
input VAT attributable to its zero-
accounting requirements such as
rated sales. But, the CTA denied the
keeping of subsidiary sales and
petition on the ground that the
corporation failed to show purchase journals and didn't file
substantial evidence that the said monthly tax reports. PM Corp
sales qualify as export sales subject argued that the tax code does not
to the zero percent (0%) rate. necessitate the accounting
requirements to get a refund, and
that the documents they submitted

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already prove their entitlement for

refund.

Q: Was the absence of

subsidiary sales, purchase
journals, and monthly VAT
declarations a valid ground to
deny VAT refund?

Answer
No, the tax code does not bar
refund due to non-submission of
subsidiary sales, purchase journals,
and monthly VAT declarations.

According to Section 110 of the Tax

Code, to be creditable, the input
taxes must be evidenced by validly
issued invoices and/or official
receipts containing the information
enumerated in Sections 113 and
237. The law does not require that
subsidiary journals where the sales
and purchases (and the output
taxes and their corresponding input
taxes) were recorded, are also kept.
Furthermore, jurisprudence
provides that while submission of
VAT declarations are required, it
does not result to refund denial but
only penalties. Hence, PM Corp
should get a refund in this case as
it was able to comply with the
requirements required by the law.
(CIR VS. PHILEX MINING
CORPORATION, G.R. NO. 230016,
NOVEMBER 23, 2020, J. LOPEZ)

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