Compilation of Digests on Tax Cases involving Remedies
Cases Covered Silk Air v. CIR CIR v. Aegis People Support CIR v.
Keihin-Everett Forwarding San Roque v. CIR CIR v. PIL Management
CIR v. Mirant Philippines Manila North Tollways Corp. v. CIR CIR v.
FarEast Bank Mermac Inc. v. CIR Maunsell Philippines v. CIR CIR v.
PNB Stablewood Philippines v. CIR St. Paul College v. CIR CIR v.
KEPCO Iljan Corp. Republic, represented by the Commissioner of
Customs, v. NPC Alliance Corp. City of Makati v. CIR Festo Holdings
v. CIR PNB v. CIR DNATA Inc. v. CIR Sea Lion Fishing Corp. v.
People CIR v. AsiaTrust Development Corp. Luzon Hydro Corp. v. CIR
Union Cement Corp. v. CIR La Flor dela Isabela v. CIR Fax N Parcel
Inc. v. CIR Hermano San Miguel Febres Cordero Medical Foundation v.
CIR Laurence Lee Luang v. Esquivias Cargill Philippines v. CIR RCBC
v. CIR1
In partial fulfilment of the requirements of Tax 2
Professor Dina D. Lucenario UP College of Law nd 2 Semester, AY
2011-2012
Bustamante, Blesie Mae Dela Cruz, Mabel Laperal, Fatima Madrid,
Kristoffer Gabriel Nisperos, Benedict Patagan, Gerille Hope Pulido,
Karina Sotto, Leighton John
Edison (Bataan) Cogeneration Corp. v. CIR International Exchange
Bank v. CIR People v. Lim and Coronacion People v. Kintanar
Petitioner also invoked Article 4(2) of the Air Transport
Agreement between the Government of the Republic of the Philippines
and the Government of the Republic of Singapore (Air Transport
Agreement between RP and Singapore). Due to inaction of the CIR, it
filed a petition for review with the CTA. CTA denied the same,
ruling that while petitioners country indeed exempts from similar
taxes petroleum products sold to Philippine carriers, petitioner
nevertheless failed to comply with the second requirement under
Section 135 (a) of the 1997 Tax Code as it failed to prove that the
jet fuel delivered by Petron came from the latters bonded storage
tank. On appeal, the CA affirmed the CTA, ruling that while
petitioner is exempt from paying excise taxes on petroleum products
purchased in the Philippines by virtue of Section 135 (b),
petitioner is not the proper party to seek for the refund of the
excise taxes paid. ISSUE: WON Silk Air has the legal personality to
file an administrative claim for refund of excise taxes allegedly
erroneously paid to its supplier of aviation fuel in the
Philippines HELD: No Excise taxes, which apply to articles
manufactured or produced in the Philippines for domestic sale or
consumption or for any other disposition and to things imported
into the Philippines, is basically an indirect tax. While the tax
is directly levied upon the manufacturer/importer upon removal of
the taxable goods from its place of production or from the customs
custody, the tax, in reality, is actually passed on to the end
consumer as part of the transfer value or selling price of the
goods, sold, bartered or exchanged. In early cases, we have ruled
that for indirect taxes (such as valued-added tax or VAT), the
proper party to question or seek a refund of the tax is the
statutory taxpayer, the person on whom the tax is imposed by law
and who paid the same even when he shifts the burden thereof to
another. Thus, in Contex Corporation v. Commissioner of Internal
Revenue, we held that while it is true that petitioner corporation
should not have been liable for the VAT inadvertently passed on to
it by its supplier since their transaction is a zerorated sale on
the part of the supplier, the petitioner is not the proper party to
claim such VAT refund. Rather, it is the petitioners suppliers who
are the proper parties to claim the tax credit and accordingly
refund the petitioner of the VAT erroneously passed on to the
latter.
Silk Air Singapore Ltd. V. CIR 25 January 2012 Silkair
(Singapore) Pte. Ltd. is a foreign corporation duly licensed by the
SEC to do business in the Philippines as an on-line international
carrier operating the Cebu-Singapore-Cebu and Davao-Singapore-Davao
routes. In the course of its international flight operations,
petitioner purchased aviation fuel from Petron Corporation (Petron)
from July 1, 1998 to December 31, 1998, paying the excise taxes
thereon in the sum of P5,007,043.39. It filed an administrative
claim for refund in the amount of P5,007,043.39 representing excise
taxes on the purchase of jet fuel from Petron, which it alleged to
have been erroneously paid. The claim is based on Section 135 (a)
and (b) of the 1997 Tax Code, which provides: SEC. 135. Petroleum
Products Sold to International Carriers and Exempt Entities or
Agencies. Petroleum products sold to the following are exempt from
excise tax: (a) International carriers of Philippine or foreign
registry on their use or consumption outside the Philippines:
Provided, That the petroleum products sold to these international
carriers shall be stored in a bonded storage tank and may be
disposed of only in accordance with the rules and regulations to be
prescribed by the Secretary of Finance, upon recommendation of the
Commissioner; (b) Exempt entities or agencies covered by tax
treaties, conventions and other international agreements for their
use or consumption: Provided, however, That the country of said
foreign international carrier or exempt entities or agencies
exempts from similar taxes petroleum products sold to Philippine
carriers, entities or agencies; and
2
In the first Silkair case decided on February 6, 2008, this
Court categorically declared: The proper party to question, or seek
a refund of, an indirect tax is the statutory taxpayer, the person
on whom the tax is imposed by law and who paid the same even if he
shifts the burden thereof to another. Section 130 (A) (2) of the
NIRC provides that [u]nless otherwise specifically allowed, the
return shall be filed and the excise tax paid by the manufacturer
or producer before removal of domestic products from place of
production. Thus, Petron Corporation, not Silkair, is the statutory
taxpayer which is entitled to claim a refund based on Section 135
of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement
between RP and Singapore. Even if Petron Corporation passed on to
Silkair the burden of the tax, the additional amount billed to
Silkair for jet fuel is not a tax but part of the price which
Silkair had to pay as a purchaser. The decision in the second
Silkair case reiterated the rule that in the refund of indirect
taxes such as excise taxes, the statutory taxpayer is the proper
party who can claim the refund. We also clarified that petitioner
Silkair, as the purchaser and end-consumer, ultimately bears the
tax burden, but this does not transform its status into a statutory
taxpayer. The person entitled to claim a tax refund is the
statutory taxpayer. Section 22(N) of the NIRC defines a taxpayer as
any person subject to tax. In Commissioner of Internal Revenue v.
Procter and Gamble Phil. Mfg. Corp., the Court ruled that: A person
liable for tax has been held to be a person subject to tax and
properly considered a taxpayer. The terms liable for tax and
subject to tax both connote a legal obligation or duty to pay a
tax. The excise tax is due from the manufacturers of the petroleum
products and is paid upon removal of the products from their
refineries. Even before the aviation jet fuel is purchased from
Petron, the excise tax is already paid by Petron. Petron, being the
manufacturer, is the person subject to tax. In this case, Petron,
which paid the excise tax upon removal of the products from its
Bataan refinery, is the person liable for tax. Petitioner is
neither a person liable for tax nor a person subject to tax. There
is also no legal duty on the part of petitioner to pay the excise
tax; hence, petitioner cannot be considered the taxpayer.
Even if the tax is shifted by Petron to its customers and even
if the tax is billed as a separate item in the aviation delivery
receipts and invoices issued to its customers, Petron remains the
taxpayer because the excise tax is imposed directly on Petron as
the manufacturer. Furthermore, petitioner has not demonstrated that
it dutifully complied with its contractual undertaking to timely
submit to Petron a valid certificate of exemption so that Petron
may subsequently file a claim for excise tax credit/refund pursuant
to Revenue Regulations No. 3-2008 (RR 3-2008). It was indeed
premature for petitioner to assert that the denial of its claim for
tax refund nullifies the tax exemption granted to it under Section
135 (b) of the 1997 Tax Code and Article 4 of the Air Transport
Agreement.
CIR v. Aegis People Support Inc. could not find a copy of this
case :/ CIR v. Keihin-Everett Forwarding February 2012 FACTS:
Keihin is in a forwarding business. It filed its Quarterly VAT
Returns for the third quarter of 2003 and 4th qtr in 2004. On
December 21, 2004 and May 10, 2005, respondent filed with the BIR
RDO an administrative claim for issuance of TCC for its alleged
unutilized input VAT for the four quarters of taxable year 2003 for
P3 M and P3.7 M in 2004. Alleging petitioner's inaction on its
application for issuance of TCC, respondent sought judicial
intervention via a Petition for Review filed on October 25, 2005,
but covering only the claim for the 3rd and 4th quarters of 2003.
CTA Division granted petition partially. Not convinced, petitioner
sought a reconsideration.
3
CIR said that the CTA Division erred when it ruled that the two
Petitions for Review were filed within the two year prescriptive
period reckoned from the date of filing of the corresponding
quarterly VAT Returns for being contrary to the clear and
unequivocal provision of the NIRC. CIR added that Keihin filed its
appeal beyond the 30-day period in doing so. ISSUE: Whether or not
the tax claim is within the prescriptive period. HELD: NO The
governing provision is Section 112 of the NIRC, as amended. The
provision is explicit on the period within which an administrative
as well as judicial claim for refund should be filed to merit
consideration: "SEC. 112. Refunds or Tax Credits of Input Tax. (A)
Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered
person, whose sales are zero-rated or effectively zero-rated may,
within two (2) years after the close of the taxable quarter when
the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid
attributable to such sales, except transitional input tax, to the
extent that such input tax has not been applied against output tax:
From the foregoing, it is clear that a VAT-registered person, such
as respondent, has two (2) years after the close of the taxable
quarter when the pertinent sales were made, within which to apply
with the CIR a claim for refund or tax credit of creditable input
tax that remains unutilized. The CIR, on the other hand, has 120
days from the date of submission of complete documents in support
of the application for refund or tax credit of input tax to grant
such claim. If denied, upon notice of denial or expiration of the
allowable period of 120 days without any action on the part of the
CIR, the VAT-registered person has 30 days, within which to appeal
the adverse decision or the inaction of the CIR with the Court of
Tax Appeals. San Roque v. CIR CTA Cases 7882 & 7937 16 February
2012
FACTS: San Roque, a corporation engaged in operating
power-generating plants and under contract with the Govt.,
allegedly had unutilized input VAT credits in 2007. On May 28,
2008, it filed an administrative claim for refund of unutilized
input VAT for the 1st and 2nd quarters of 2007 (first claim), and
another admin claim for unutilized VAT credit for the 3rd and 4th
quarters on March 30, 2009 (second claim) with the CIR. In view of
CIRs inaction and to suspend the running of 2-year prescriptive
period, it filed a judicial claim with the CTA on March 13, 2009
for the first claim and on June 26, 2009 for the second claim.
HELD: The 30-day period within which to file an appeal with the CTA
as provided in Sec 112 of NIRC is jurisdictional and failure to
comply therewith would bar the appeal and deprive the CTA of its
jurisdiction. Such period is not merely directory but mandatory and
it is beyond the power of the courts to extend the same. This rule
applies to cases of tax refund or issuance of tax credit
certificate where the taxpayer may, within 30 days upon receipt of
decision denying the claim or after expiration of 120 days, appeal
the decision or the unacted claim with the CTA. Both administrative
claims were filed on time. However, the judicial claim for the
first claim was filed out of time or 140 days after the filing of
admin claim beyond the 120-day period. On the other hand, the
second judicial claim was prematurely filed, or only after 88 days
from filing of the administrative claim. CIR v. PL Management
FACTS: PL earned P24M in 1997 from UMPC, where UMPC withheld P1.2M.
In 1998 PL filed a lost for its 1997 earnings and signified that it
had a creditable withholding tax of P1,200,000.00 for 1997 to be as
tax credit in 1998. In 1999, it filed for a loss of P2.7M so it was
not able to claim the P1.2M credit. On April 12, 2000, the
respondent filed with CIR a claim for the refund of the P1.2M
refund.
4
CIR did not act so PL filed cases with CTA, which later denied
claim of PL saying the refund claim was filed out of time. Tax
payment on nApril 13, 1998, claim of refund is on April 14, 2000,
beyond the two year allowed. Appeal with the CA was for PL, the CA
saying that the prescriptive period is not jurisdictional and might
be suspended for reasons of equity. ISSUE: Whether the two-yr
prescriptive period for tax claim is nonjurisdictional and can be
suspended for equity HELD: No, PL already chose to carry over the
excess, refund cant be availed of. The Court of Appeals mistakenly
understood the phrase "for that taxable period" as a prescriptive
period for the irrevocability rule. There is a misplaced
application of the CIR v. BPI case. The evident intent of the
legislature, in adding the last sentence to Section 76 of the NIRC
of 1997, is to keep the taxpayer from flip-flopping on its options,
and avoid confusion and complication as regards said taxpayer's
excess tax credit. The interpretation of the Court of Appeals only
delays the flip-flopping to the end of each succeeding taxable
period. The irrevocability rule: Section 76. Final Adjustment
Return. - Every corporation liable to tax under Section 27 shall
file a final adjustment return covering the total taxable income
for the preceding calendar or fiscal year. If the sum of the
quarterly tax payments made during the said taxable year is not
equal to the total tax due on the entire taxable income of that
year the corporation shall either: (A) Pay the balance of tax still
due; or (B) Carry over the excess credit; or (C) Be credited or
refunded with the excess amount paid, as the case may be. In case
the corporation is entitled to a refund of the excess estimated
quarterly income taxes paid, the refundable amount shown on its
final adjustment return may be credited against the estimated
quarterly income tax liabilities for the taxable quarters of the
succeeding taxable years. Once the option to carry-over and apply
the excess quarterly income tax against income tax due for the
taxable quarters of the succeeding taxable years has been made,
such option shall be considered irrevocable for that taxable period
and no application for tax refund or issuance of a tax credit
certificate shall be allowed therefor. The options are alternative.
The amount being claimed as a refund would remain in the account of
the taxpayer until utilized in succeeding taxable years, as
provided in Section 76 of the NIRC of 1997. It is worthy to note
that unlike the option for refund of excess income tax, which
prescribes after two years from the filing of the FAR, there is no
prescriptive period for the carrying over of the same. PL already
chose to carry over the excess tax paid, refund cant be availed.
Commissioner of Internal Revenue v. Asiatrust Development Bank,
Inc., CTA EB No. 614; Asiatrust DevelopmentBank v. Commissioner of
Internal Revenue, CTA EB No. 677 18 November 2011 FACTS: Taxpayer
filed a Petition for Review before the CTA in Division for failure
of the CIR to act on its protest within the prescribed period. Both
the CIR and the taxpayer filed Motions for Partial Reconsideration
assailing the decision of the Court in Division partially granting
the petition. The Court in Division denied the Commissioner of
Internal Revenues plea for reconsideration for lack of merit, while
it partially granted that of the taxpayer. The Court in Division
substantially modified its former decision prompting the taxpayer
to file another Motion for Partial Reconsideration of the amended
decision which was denied by the Court. The CIR did not file the
same motion but instead filed a Petition for Review before the
Court of Tax Appeals En Banc. ISSUE: WON the appeal may be filed
with the CTA en banc. HELD: Before an appeal may be filed with the
Court of Tax Appeals En Banc by aggrieved party, it must be
preceded by the filing of a motion for reconsideration or new trial
with the Division that rendered the questioned decision. CIR v.
Mirant (Philippines) Operations Group5
15 June 2011 FACTS: Mirant entered into Operating and Management
Agreements with Mirant Pagbilao Corporation (formerly Southern
Energy Quezon, Inc.) and Mirant Sual Corporation (formerly Southern
Energy Pangasinan, Inc.) to provide these companies with
maintenance and management services in connection with the
operation, construction and commissioning of coal-fired power
stations situated in Pagbilao, Quezon, and Sual, Pangasinan
respectively. On September 20, 2001, Mirant wrote the BIR a letter
claiming a refund of 87,345,116.00 representing overpaid income
tax. CTA 1st Division: Partially granted Mirants claim for refund
but the amount was reduced to P38 million which constitutes the
duly substantiated unutilized creditable withholding taxes. ISSUE:
WON Mirant is entitled to a tax refund or to the issuance of a tax
credit certificate and, if it is, then what is the amount to which
it is entitled. HELD: YES but it is limited to the substantiated
claim. Ratio: 1. Once a corporation exercises the option to
carry-over and apply the excess quarterly income tax against the
tax due for the taxable quarters of the succeeding taxable years,
such option is irrevocable for that taxable period. Having chosen
to carry-over the excess quarterly income tax, the corporation
cannot thereafter choose to apply for a cash refund or for the
issuance of a tax credit certificate for the amount representing
such overpayment. 2. Mirant complied with all the requirements for
the refund of its unutilized creditable withholding taxes for
taxable year 2000. The requisites for claiming a tax credit or a
refund of creditable withholding tax: 1) The claim must be filed
with the CIR within the two-year period from the date of payment of
the tax; 2) It must be shown on the return that the income received
was declared as part of the gross income; and
3) The fact of withholding must be established by a copy of a
statement duly issued by the payor to the payee showing the amount
paid and the amount of the tax withheld. Mirant complied with all
the legal requirements and it is entitled, as it opted, to a refund
of its excess creditable withholding tax for the taxable year 2000
in the amount of 38,620,427.00. Manila North Tollways Corp. v. CIR
23 September 2011 Held: In claiming refund of overpaid CWT,
submission of the original Monthly Remittance Return of CWT (BIR
Form No. 1601-E) is mandatory. Amended return will not suffice. The
original form will help ascertain if the two-year prescriptive
period has been met and the alleged overpaid CWT has been remitted.
CIR v. FarEast Bank & Trust Company (now Equitable PCI Bank) 15
March 2010 FACTS: Far East filed Corporate Annual Income Tax Return
for 1994 for Corporate Banking Unit and Foreign Currency Deposit
Unit with reflected refundable income tax of P12M. The P12M refund
was carried over and applied for the 1995 income tax return. In
1995, Far East claimed that it overpaid tax payments by P17M. P13M
is being sought for refund and chose that the remaining will be
carried over. Far East then claimed for the refund of the P13.6M,
which the CIR did not act upon. Far East filed a claim for refund.
CTA denied claim for refund. CA reversed the CTA, ruling that Far
East duly proved that the income derived from rentals and sale of
real property upon which the taxes were withheld were included in
the return as part of the gross income. ISSUE: WON respondent is
entitled to the refund.
6
HELD: NO, The burden of proof for the claim is with the claimant
which it failed to establish. A taxpayer claiming for a tax credit
or refund of creditable withholding tax must comply with the
following requisites: 1) The claim must be filed with the CIR
within the two-year period from the date of payment of the tax; 2)
It must be shown on the return that the income received was
declared as part of the gross income; and 3) The fact of
withholding must be established by a copy of a statement duly
issued by the payor to the payee showing the amount paid and the
amount of the tax withheld. Moreover, the fact that the petitioner
failed to present any evidence or to refute the evidence presented
by respondent does not ipso facto entitle the respondent to a tax
refund. It is not the duty of the government to disprove a
taxpayers claim for refund. Rather, the burden of establishing the
factual basis of a claim for a refund rests on the taxpayer. And
while the petitioner has the power to make an examination of the
returns and to assess the correct amount of tax, his failure to
exercise such powers does not create a presumption in favor of the
correctness of the returns. The taxpayer must still present
substantial evidence to prove his claim for refund. As we have
said, there is no automatic grant of a tax refund. Mermac Inc. v.
CIR CTA EB 699, 27 July 2011 FACTS: MERMAC wanted to avail of the
refund or issuance of tax credit certificate of excess or unapplied
creditable withholding tax (CWT) under Section 204 of the Tax Code.
Section 2.58.3 (B) of the RR 2-98 requires that such taxpayer
claiming refund of excess CWT must show on the return that the
income payment subjected to withholding tax was declared part of
its gross income,
and establish fact of withholding by submitting a copy of the
withholding tax statement (BIR Form 2307) issued by the
payor/buyer. In the instant case, the payee/seller took charge of
deducting the amount of withholding tax from the payment received,
remitting the same to the BIR. To prove fact of withholding of CWT,
the taxpayer/refund claimant (MERMAC) presented BIR Form 1606
(withholding tax remittance return), which it filed relative to the
sale of its real property. Due to CIRs inaction on its claim for
refund amounting to 2,010,452.00, it filed a Petition for Review w/
the CTA 2nd Division, which partially granted MERMACs claim for
refund but only as to the amount of 92, 899.80 . It filed a
Petition for Review with the CTA En Banc. ISSUE: WON BIR Form 1606
suffices to establish fact of withholding HELD: No, it does not
suffice because it did not emanate from the payor. A claim for
refund of excess creditable withholding taxes in accordance with
settled jurisprudence, must comply w/ the following requisites: 1)
Claim for refund filed within 2-year prescriptive period under Sec.
204 (C) in relation to Section 229 of the NIRC 2) It is shown on
the return of the recipient that the income payment received was
declared as part of gross income 3) Fact of withholding established
by a copy of a statement duly issued by payor (withholding agent)
to the payee, showing the amount paid and amount of tax withheld
Petitioner complied with the first two requisites, but failed to
comply with the third. It is the BIR Form No. 2307 issued by the
income payor, the duly constituted withholding agent, which
establishes the fact of withholding. The BIR Form 1606 (withholding
tax remittance form) should come from the payor and not the payee
since the payor is in a better position to state that the
withholding of tax was in fact made, being the duly constituted
withholding agent. To be entitled to a refund or issuance of tax
credit certificate of excess/unapplied creditable withholding tax,
the fact of withholding, among others, must be established. The
document, which may be accepted as evidence to establish fact of
withholding, must (1) emanate from the payor itself, and not merely
from the payee, and must (2) indicate the name of the7
payor, the (3) income payment basis of the tax withheld, the (4)
amount of tax withheld, and the (5) nature of the tax paid. Hence,
for purposes of entitlement to refund or excess creditable
withholding tax, the only acceptable evidence is BIR Form No. 2307
to establish fact of withholding. The provisions of the law must be
applied accordingly, and industry practice, i.e. for real estate
companies to remit on behalf of clients (mostly individual buyers)
the creditable withholding tax due on its income from the sale of
property, does not justify non-compliance with the law.
Dispositive: petition denied Maunsell Philippines, Inc. v CIR CTA
case, 26 December 2011 Maunsell claims that in 2006, it accumulated
creditable withholding taxes amounting to P3,839,671.31. In its
AMENDED income tax return for 2006, it chose the option "To be
issued a Tax Credit Certificate" for its overpaid taxes. On July
13, 2007 it filed on administrative claim for the issuance of a tax
credit certificate with the BIR. Since, BIR did not act on the
claim, the company filed a petition before the CTA on January 15,
2009. ISSUE: WON Petitioner's right to claim for issuance of tax
credit certificate of the overpaid income taxes for FY 2006 is
substantiated with supporting documents? HELD: No Maunsell failed
to offer evidence of its filing of ORIGINAL income tax return for
2006. Sec. 229 provides that in any case no such suit or proceeding
shall be filed after the expiration of 2 years from the date of
payment of the tax or penalty regardless of any supervening cause.
In PAL vs. CIR, it was held that the counting should be made from
the date of filing of the original final adjustment return and not
from the date of filing of the amended return.
The original return is important in order for CTA to ascertain
whether the filing of the administrative and judicial claims for
refund or issuance of a tax credit certificate was made within the
two-year reglementary period. Absent such document, it has no way
of determining whether the claim was timely filed. Moreover, the
original return is necessary for the CTA to verify if petitioner's
original option was to be issued a tax credit certificate for the
unapplied creditable taxes withheld since once the option to
carry-over and apply the excess quarterly income tax against income
tax due for the taxable quarters of the succeeding taxable years
has been made, such option shall be considered irrevocable for that
taxable period. Under Section 76, if quarterly tax payments made
during the said taxable year is not equal to the total tax due the
corporation has an option to (A) Pay the balance of tax still due;
or (B) Carry-over the excess credit; or (C) Be credited or refunded
with the excess amount paid. Thus, if petitioner has originally
chosen the option "to be carried-over as tax credit next
year/quarter", it will be precluded from claiming the issuance of a
tax credit certificate for the said excess payment. CIR v. PNB CTA
EB 577 & 580, Resolution of 6 February 2012 FACTS: PNB
submitted its Annual ITR (covering the year 2003) before the CIR in
April 2004 where it reflected the amount of P33M, representing its
unused and unutilized income tax. PNBs ITR was amended on October
25, 2004, where the amount was increased to P 40.114M, and on
November 8, 2004, where the amount was again increased to P
40.165M. On February 17, 2005, petitioner filed its administrative
claim for refund. However, on March 29, 2005, PNB again filed its
amended Annual ITR which showed the amount of P 45.456M as
overpayment. On the same date, PNB filed its amended administrative
claim for refund or issuance of tax credit certificate, thus
superseding its earlier administrative claim for refund of its
alleged unutilized creditable withholding taxes for the taxable
year 2003 in the amount of P40.25 M, claiming that it carried over
the amount of P 4.93 M as prior years credit.
8
As respondent has not acted on petitioners claim, PNB filed a
Petition for Review before the CTA for the refund or issuance of
tax credit certificate representing its unused and unutilized
creditable withholding taxes for the calendar year 2003 pursuant to
Sec. 76 and 229 of the NIRC. The CTA Division granted PNBs
petition, but only to the extent of P39.3M.Both appealed. PNB
wanted to have a refund amounting to P 40.25M. CIR, in its
petition, raised the argument that PNB is not entitled to the
refund of its excess creditable withholding tax credits because it
failed to sufficiently prove that it did not carry-over and apply
its 2003 excess tax credits against its quarterly income tax
liabilities for the succeeding years. CIR alleged that PNB's
failure to formally offer as evidence its quarterly income tax
returns for the taxable year 2004 is fatal to its claim for refund.
ISSUE: WON The presentation of the quarterly income tax returns is
a legal requisite for the claim for refund of excess creditable
withholding tax credits. HELD: NO The presentation of the quarterly
income tax returns of PNB for the first, second and third quarters
of the taxable year 2004 is not a legal requisite for the claim for
refund of excess creditable withholding tax credits for the taxable
year 2003. The NIRC of 1997 did not require the presentation of the
quarterly income tax returns to prove the claim for refund of
creditable withholding taxes. According to Sec. 76, a corporate
taxpayer who is entitled to a tax credit or refund of the excess
estimated quarterly income taxes paid has two options: (1) to
carry-over the excess credits to the succeeding taxable years; (2)
to apply for the issuance of a tax credit certificate or to claim a
cash refund. Furthermore, Section 2.58 of BIR Revenue Regulations
No. 2-98, as amended, set forth the requisites for the entitlement
to a refund of excess creditable withholding tax credits: 1. That
the claim for refund was filed within the two-year prescriptive
period as provided under Section 204 (c) in relation to Section 229
of the NIRC of 1997; 2. That the fact of withholding is established
by a copy of a statement duly issued by the payor (withholding
agent) to the payee, showing the amount paid and the amount of tax
withheld therefrom ; and
3. That the income upon which the taxes were withheld were
included in the return of the recipient. Nowhere in the law or in
its implementing rules and regulations is it indicated that the
presentation of quarterly tax returns for the succeeding taxable
years is a requisite to establish the entitlement to the refund of
excess creditable withholding tax credits. As regards PNBs claim,
the CTA found that PNB failed to prove and substantiate each and
every component of the Total Tax Credits/ Payments reflected on its
final adjustment return. In order to establish the factual basis of
its claim for refund, petitioner must substantiate its prior year's
excess tax credits to overcome the burden of proof required.
Stablewood Philippines v. CIR CTA EB 712, 15 November 2011 FACTS:
Stablewood is the successor-in-interest of Orca Plant which was
dissolved by operation of law by virtue of its merger with
Rolls-Royce Power Ventures (Philippines), Inc. and Orca Energy,
Inc. In 2006, Orca Plant filed its 2005 Annual ITR through the
Electronic Payment and Filing System (EFPS) indicating that its
creditable withholding tax (CWT) is to be refunded. On that same
year, a claim for refund was filed by Orca through SGV & Co.
Due to the inaction of the BIR, a Petition for Review was filed
with the CTA. CTA denied the refund claim because Orca carried-over
its excess tax credits of 2005 inclusive of the claimed amount as
Prior years Excess Credits in its Quarterly ITRs for the first
three quarters of taxable year 2006. Orcas original option to
refund the said amount was thus negated by its very act of carrying
over said excess amount to the succeeding taxable quarters of 2006.
Orca filed a petition for review with the CTA En Banc. It argued
that the CTA has no basis to conclude that it exercised its option
to carry-over because the quarterly tax returns were not final.
Ruling of the CTA En Banc: Sec. 76 of the NIRC Once the option to
carry-over and apply the excess quarterly income tax against income
tax due for the taxable quarters of the9
succeeding taxable years had been made, such option shall be
considered irrevocable for that taxable period and no application
for cash refund or issuance of a tax credit certificate shall be
allowed therefore.
The BIR Ruling interpreted the provisions of the NIRC. It was
issued in the exercise of the Commissioners power to interpret tax
laws. The administrative remedy is to appeal the adverse ruling
with the Sec. of Finance within 30 days from the receipt of such
ruling. Because St. Paul did not file an appeal with the Sec. of
Finance, it has failed to exhaust all available administrative
remedies before filing the Petition for Review with the CTA.
Failure to exhaust all available administrative remedies results to
lack of cause of action, one of the grounds for dismissing a
complaint. ISSUE: WON the CTA has jurisdiction RULING: The CTAs
jurisdiction to resolve tax disputes excludes the power to rule on
the constitutionality or validity of a law, rule or regulation. The
authority is vested before the regular courts. The validity of BIR
Ruling should have been elevated to the Sec. of Finance and
eventually before the regular courts, not with the CTA. Petition
dismissed for being prematurely filed and for lack of jurisdiction.
Dispositive: MR denied for lack of merit.
St. Paul College of San Rafael v. CIR CTA Resolution, 2 February
2012 FACTS: St. Paul College is a non-stock, non-profit educational
institution. In a letter dated Feb. 23, 2009, the RDO required it
to explain its failure to affix the P15 documentary stamp tax on
school diplomas issued to graduates in the school years 2006-2007
and 2007-2008. St. Paul filed its reply, which was forwarded to the
BIR National Office. BIR Ruling No. 143-2010 was issued. The Ruling
stated that even if non-stock, non-profit educational institutions
are exempt from the DST, they are collecting agents for the BIR and
shall be personally liable for failure to remit the DST as
collecting agents. No notice of assessment has been issued against
St. Paul. Instead of filing an appeal with the Sec. of Finance to
have the BIR Ruling set aside, it filed a Petition for Review with
the CTA, contesting the BIR Ruling. ISSUE: WON the petition for
review is premature for non-exhaustion of administrative remedies.
RULING: Before a party is allowed to seek the courts intervention,
he/she/it should have availed of all administrative processes. The
aggrieved party must not only initiate the prescribed
administrative procedure, but must also pursue it to its
appropriate conclusion before seeking judicial intervention. Sec.
4, NIRC The power to interpret the provisions of this Code and
other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the
Secretary of Finance.
CIR v. Kepco Ilijan Corp. CTA EB Resolution, 15 November 2011
FACTS: Kepco Ilijan Corporation (Petitioner) is a domestic
corporation engaged in the production and sale of electricity as an
Independent Power Producer (IPP), whose produced electricity is
sold solely to NPC. For the first three quarters of taxable year
2005 and for October 2005, petitioner filed its Quarterly and
Monthly VAT Returns showing that it10
incurred expenses representing importation and domestic
purchases of goods and services, for which petitioner also incurred
input VAT. Petitioner filed an administrative claim for refund with
the BIR representing input VAT allegedly incurred by petitioner
from importations and domestic purchases of capital goods/equipment
and services preparatory to its production and eventual sale of
electricity to NPC. Due to respondent's inaction and in order to
suspend the running of the twoyear prescriptive period under the
National Internal Revenue Code (NIRC), petitioner filed the present
Petition for Review on April 24, 2007. HELD: The administrative
claim for refund or issuance of tax credit certificate of
unutilized input VAT attributable to zero-rated sales is governed
by Section 112 (A) of the 1997 NIRC. Based on Section 112 (A) the
application for refund of unutilized input VAT attributable to
zero-rated sales may be made only within two (2) years after the
close of the taxable quarter when the sales were made. This period,
however, refers solely to applications for refund/credit filed with
the Commissioner of Internal Revenue (CIR) and not to appeals made
to the CTA. The period within which to file judicial claims is
found under Section 112 (0)10 of the 1997 NIRC. Accordingly,
judicial claim for refund should be filed within thirty (30) days
from receipt of the decision of the CIR or upon the expiration of
the one hundred twenty (120) days in case of inaction of the CIR.
The observance of these periods is mandatory and non-compliance
therewith would result in the denial of the claim. Applying the
same to the present case, the administrative claim for refund filed
by respondent covering the first to third quarters of 2005 was
filed on October 28. 2005 and for the month of October 2005, the
administrative claim was filed on December 7, 2005. It is clear
that the administrative claims were filed within the two-year
prescriptive period. However, despite the timely filing of the
administrative claims, this Court is constrained to deny
respondent's refund claim on the ground that its judicial claim was
filed out of time. Records show that
respondent filed its Petition for Review on April 24, 2007, way
beyond the 30day period from the lapse of the 120-day period for
the CIR to decide the claim. Republic of the Philippines,
represented by the Commissioner of Customs, v. NPC Alliance Corp.
CTA EB Resolution, 20 January 2012 A Decision or Order which is
appealable to the Court of Tax Appeals En Banc is that which has
resolved the case with finality, and which, in effect, terminates
or finally disposes of a case, as it leaves nothing to be done by
the court as the case has finally been decided on the merits. The
Commissioner of Customs filed a Petition for Review before the
Court of Tax Appeals En Banc assailing the Resolution of a division
of the Court denying the Bureau of Customs Motion for
Reconsideration, which allowed the posting of a bond. The Court
held that the petition was prematurely filed before the Court of
Tax Appeals En Banc for being interlocutory as it still leaves
something to be done by the court a quo and the same may not be
subject of review under the Revised Rules of the Court of Tax
Appeals. In fact, Section 1, Rule 41 of the 1997 Rules of Civil
Procedure, as amended, which applies suppletorily to proceeding
before the Court of Tax Appeals, expressly provides that no appeal
may be taken from an interlocutory order. The proper procedure that
petitioner should have taken in this case was to await for the
final termination of the proceedings before the Court in Division,
prior to the filing of the instant petition for review, because it
is a well-settled rule that only final orders or judgments on the
merits may be the subject of appeal. CIR v. City of Makati CTA EB
641, Resolution of 19 January 2012 FACTS: City of Makati received
assessment notices imposing deficiency taxes in the amount of 1.3B
for the years 1999-2002. Makati, however, protested. BIR, on its
part, said that the assessments against Makati were already final
and executory.
11
Makati, nonetheless, requested for another reinvestigation.
Revenue officer and a deputy commissioner granted the request.
Meetings were thereafter made between Makati and the Secretary of
Finance, and BIR officials for the reconciliation of the records
and positions of Makati and the BIR and Makati offered compromise
settlement of the tax liabilities for 1999-2001. Pursuant to the
compromise settlement, Makati paid P100M in payment of the taxes
due for 1999-2001. Makati, thereafter, offered compromise
settlement of the taxes due for 2002-2004 but BIR denied, and
issued tax assessments anew against Makati. BIR said that Makati is
still liable for deficiency taxes for the taxable years 1999-2001,
and 2002-2004. Makati protested. CIR denied. Makati then filed a
Petition for Review with the CTA. ISSUE: WON the reinvestigation of
the case reversed the finality of the assessments HELD: No Only the
Commissioner of Internal Revenue has the power to reverse, revoke
or modify any existing ruling of the Bureau of Internal Revenue
(BIR), which power cannot be delegated. In assessment cases, a
reopening/reinvestigation after a final decision on disputed
assessment (FDDA) has been issued must be initiated by the
commissioner. Otherwise, the reopening / reinvestigation is without
authority and failure to appeal the FDDA to CTA would render the
assessment final and executory. Here, the reinvestigation was
merely granted by a revenue officer and a deputy commissioner.
Festo Holdings Inc. v. CIR CTA Case 8226, 2 September 2011 FACTS:
Respondent filed a Motion to Dismiss the Petition for Review
commenced by Festo Holdings on the ground of lack of jurisdiction.
The Revenue District Officer who signed the letter which became the
basis of the instant petition, cannot be deemed an alter ego of the
CIR for purposes of issuing a final decision on petitioner's
protest under a delegated authority. As such, the subject letter is
not the CIR's final decision on petitioner's protest; thus, the 30
day period to file an appeal was yet to commence, rendering the
instant petition premature.
ISSUE: WON the CTA has jurisdiction HELD/RATIO: NO. The appeal
was premature. In the event that a taxpayer's protest against the
final assessment notice is denied by the CIR's duly authorized
representative, the aggrieved party has the option whether to
directly file an appeal with the Court of Tax Appeals within the
thirty (30) day period, or move for a reconsideration with the CIR
also within the same period. In this case, the petitioner appealed
the case before this Court within the reglementary period. However,
the Revenue District Officer who issued the letter cannot be
considered as the CIR's decision appealable to this Court, in the
absence of any proof that the former was authorized to decide and
act in behalf of the latter on the protest of a taxpayer. Nowhere
is it provided that a Revenue District Officer can issue decisions
that are appealable to this Court. Therefore, there being no
decision of the CIR in the present case, this Court cannot take
cognizance of the present case. PNB v. CIR 14 December 2011 PNB
appeals from the adverse ruling of the CTA. The CTA Division held
that payments of withholding taxes for a certain taxable year were
creditable to the payees income tax liability as determined after
it had filed its income tax returns the following year. Since PNB
posted net losses, it was not liable for any income tax and
consequently, the taxes withheld during the course of the taxable
year, which was 1998, while collected legally under Revenue
Regulations No. 02-98, Section 2.57 (B), became untenable and took
on the nature of erroneously collected taxes at the end of that
year. While the right to a refund is not automatic and must be
established by sufficient evidence, there is nothing in the Tax
Code that would suggest that the actual remittance of the
withholding tax is a condition precedent to claim for a tax refund.
Moreover, the CTA Division added, that the CIR failed to present
the certification to prove his contention of PNBs non-remittance of
the disallowed amount. However, the CTA Division affirmed the
disallowance of eight transactions, amounting to 445,578.92 as they
had12
already been reported as income for other years, had not been
recorded, or were not supported by pertinent documents. ISSUE: WON
the CTA En Banc should give due course to PNBs petition for review
mailed through LBC Express instead of registered mail HELD: No PNB
failed to comply w/ these procedural rules: 1) Petition was filed
late, 4 days beyond extended period, and offered no justification
as to why it sent its petition via ordinary mail instead of
registered mail 2) Petition was not accompanied by required
duplicate originals or certified true copies of assailed Decision,
and Affidavit of Service. DNATA, Inc. v. CIR CTA Resolution, 11
October 2011 DNATA was issued a formal assessment notice on sept
12, 2007 for P8.3 million in deficiency income tax, value-added
tax, withholding tax on compensation, and expanded withholding tax
for 2003. On Oct 18 2007, DNATA filed a letter of protest assailing
the validity of the FAN, and praying for its cancellation and
withdrawal. On March 18, 2008, the CIR issued a final decision
denying DNATA 's protest, on the ground that it failed to submit
proof/documents necessary for the cancellation and withdrawal of
the FAN within the 60 days reglementary period from the filing of
the protest. DNATA then filed a petition for review with the CTA
through registered mail. DNATA raised the issue of the BIR's
failure to inform them of the need for additional supporting
documents. ISSUE: Whether or not the petition was perfected on time
HELD: NO Ratio: DNATA filed the petition through registered mail on
the next working day after the deadline, which was a Saturday. But
it did not pay the docket fees through postal money order; instead,
it paid the docket fees on the day the
registered mail was received by the Court, or May 5, 2008. While
petitioner was deemed to have filed its petition for review on
time, it failed to perfect its appeal for non-payment of the
corresponding docket and other lawful fees at the same time that it
filed its initiatory pleading as required in Sec 1, Rule 42 of the
Rules of Civil Procedure. Basic is the rule that docket and other
lawful fees must be paid within the period for taking an appeal,
and that where the filing of the initiatory pleading is not
accompanied by payment of the docket fees, the court may allow
payment of the fee within a reasonable time but in no case beyond
the applicable prescriptive or reglementary period. The payment of
the docket fees within the prescribed period is mandatory for the
perfection of the appeal. Without payment, the appellate court does
not acquire jurisdiction on the subject matter of the action and
the decision sought to be appealed from becomes final and
executory. In the case of Villena v Rupisan, the Supreme Court went
further to say that the appellate court acquires jurisdiction on
the subject matter of the action only upon payment of the correct
amount of docket fees regardless of the date of filing of the case.
While it is true that petitioner subsequent to the filing of its
petition for review paid the required docket and other fees, the
same did not cure the defect as the payment was effected beyond the
reglementary period for perfecting an appeal. The payment of
appellate docket fees is not a mere technicality of law or
procedure but an essential requirement for the perfection of an
appeal. It is jurisdictional, an issue that may be raised even for
the first time on appeal. The lack of it will render the
proceedings conducted null and void. The strict application of the
jurisdictional nature of the rule on payment of appellate docket
fees may be mitigated under exceptional and meritorious
circumstances to better serve the interest of justice. However,
there is no showing of any satisfactory reason to justify
relaxation of what otherwise should be a stringent application of
the rule. For failure to pay the corresponding docket fees on time,
petitioner also failed to seasonably perfect its appeal, divesting
the CTA of jurisdiction or authority to take cognizance of the
instant Petition for Review. As provided in Section 228 of the
NIRC, for failure to perfect an appeal on time, the decision
rendered by CIR has become final, executory and demandable.13
Sea Lion Fishing Corp. v. People 23 March 2011 FACT: The
Captain, crew and fishermen aboard F/V Sea Lion were arrested for
illegal fishing in Mangsee Island in Balabac, Palawan. Various
charges were filed against them but the Provincial Prosecutor found
probable cause only against the Chinese fishermen and recommended
the vessel and all the fishing gadgets, paraphernalia and equipment
(which were previously confiscated) released upon proper showing of
evidence of its ownership of the aforesaid vessel by Sea Lion
Fishing Corp (which claims to be its owner). The RTC found the
fishermen guilty and the confiscated vessel and equipment were
placed under the [temporary] custody of the Philippine Coast Guard.
Sea Lions Motion for Reconsideration was denied. It then filed a
petition for Certiorari and Mandamus with the CA, but the same was
also denied. Thus, Sea Lion filed a Petition for Review on
Certiorari with the SC raising the sole issue of whether the
confiscation of F/V Sea Lion was valid. Held: The confiscation of
the vessel and equipment allegedly used in the commission of the
crime can be confiscated, regardless of ownership. When these are
claimed by a third-party not liable to the offense, such
third-party must first establish its ownership over the same. On
Remedy: Petitioner pursued an incorrect remedy when it sought
recourse before the CA. The filing of a Petition for Certiorari
under Rule 65 of the Rules of Court before the CA is limited only
to the correction of errors of jurisdiction or grave abuse of
discretion on the part of the trial court. The CA did not find
either lack or error of jurisdiction or grave abuse of discretion.
There was no jurisdictional error because based on the
Informations, the offenses were committed within the territorial
jurisdiction of the trial court. The penalties imposable under the
law were also within its jurisdiction. As a necessary consequence,
the trial court had the authority to determine how the
subject fishing vessel should be disposed of. Likewise, no grave
abuse of discretion attended the issuance of the trial court's
order to confiscate F/V Sea Lion considering the absence of
evidence showing that said vessel is owned by a third party.
Evidently, the remedial relief pursued by the petitioner was infirm
and improper. We also agree with the CA's observation that the
trial court impliedly recognized petitioner's right to intervene
when it pronounced that petitioner failed to exercise its right to
claim ownership of the F/V Sea Lion. This being the case,
petitioner should have filed an appeal instead of a petition for
certiorari before the CA. Under Rule 65 of the Rules of Court,
certiorari is unavailing when an appeal is the plain, speedy, and
adequate remedy. CIR v. AsiaTrust Development Bank CTA, 16 November
2011 Facts: Taxpayer filed a Petition for Review before the CTA in
Division for failure of the CIR to act on its protest within the
prescribed period. Both the CIR and the taxpayer filed Motions for
Partial Reconsideration assailing the decision of the Court in
Division partially granting the petition. The Court in Division
denied the Commissioner of Internal Revenues plea for
reconsideration for lack of merit, while it partially granted that
of the taxpayer. The Court in Division substantially modified its
former decision prompting the taxpayer to file another Motion for
Partial Reconsideration of the amended decision which was denied by
the Court. The CIR did not file the same motion but instead filed a
Petition for Review before the Court of Tax Appeals En Banc. Issue:
W/N the appeal may be filed with the CTA en banc. Held: Before an
appeal may be filed with the Court of Tax Appeals (CTA) En Banc by
aggrieved party, it must be preceded by the filing of a motion for
reconsideration or new trial with the Division that rendered the
questioned decision. Luzon Hydro Corporation v. CIR CTA EB 722, 6
January 2012
14
Facts: LHC is duly registered as a VAT taxpayer. A Power
Purchase Agreement (PPA) with the Napocor was entered into by The
Consortium of Northern Mini Hydro Corp.; Ever Electrical
Manufacturing Inc.; Aboitiz Equity Ventures Inc; Pacific Hydro
Limited. The PPP was for the development of Bakun hydroelectric
facilities. LHC filed administrative claim with BIR for refund of
its unutilized VAT from June to September 2006 in the amount of
P4,151,852.39. CTA 3rd Division: Dismissed the claim for having
been filed beyond the 30day period for claiming refund. Issue: WON
the administrative and judicial claim were filed within the
reglementary period allowed by law. The administrative claim was
filed within the reglementary period of 2 years from the close of
the taxable quarter, the judicial claim was filed beyond the period
mandated under Section 112 (C). Note: This case only discussed
procedural issues as regards the mandatory period for the filing of
a motion for reconsideration which is 15 days. When a judgment
becomes final and executory, it becomes immutable and unalterable
and any amendment or alteration which substantially affects a final
and executor judgment, is null and void for lack of jurisdiction,
including the entire proceedings held for that purpose. Held: The
assailed decision was received by LHC on November 26, 2010 and
petitioner had 15 days or until December 11, 2010 to file its
Motion for Reconsideration. However, petitioner filed its motion
only on December 22, 2010 or nine days after the lapse of the
prescribed period. Note: The more detailed discussion is in the
2008 case of CIR v. Mirant. CIR v. Mirant Pagbilao Corporation
(MPC) 12 September 2008 GR No. 172129 The claim for refund of
creditable Value Added Tax input taxes in the amount of
Php4,151,852.39 for the months of June to September 2006 must be
strictly construed and petitioner has the burden of proving that
the requirements were met or complied with especially the
requirement that petitioner's
administrative and judicial claims for tax refund was filed
within two (2) years after the close of the taxable quarter when
the sales were made in accordance with Sections 112 (A) and (D).
Take note that the reckoning of the 2-year period for
filing/claiming refund or issuance of TCC is from the close of the
quarter when such sales were made and compliance with the "120-30
day period" under Section 112 (C) is crucial in filing a judicial
claim. When petitioner filed its administrative claim for tax
refund on 30 April 2007, respondent had 120 days within which to
decide on petitioner's claim for tax refund. And in case of full or
partial denial of the claim or failure of respondent to act on the
application within the 120 day period, petitioner has 30 days to
appeal the decision or inaction with the Court of Tax Appeals.
Thus, respondent had to render a decision within 120 days from 30
April 2007 or until 27 August 2007. However, petitioner filed the
instant petition for review with the Court of Tax Appeals only on
18 July 2008, almost a year after the lapse of the period allowed
by law to file the judicial claim for tax refund with the Court of
Tax Appeals. Clearly, the instant petition for review was filed out
of time. Under Sec. 105 of the NIRC, creditable input VAT is an
indirect tax which can be shifted or passed on to the buyer,
transferee, or lessee of the goods, properties, or services of the
taxpayer. The fact that the subsequent sale or transaction involves
a wholly-tax exempt client, resulting in a zero-rated or
effectively zero-rated transaction, does not, standing alone,
deprive the taxpayer of its right to a refund for any unutilized
creditable input VAT, albeit the erroneous, illegal, or wrongful
payment angle does not enter the equation. Held: While the
administrative claim was filed within the reglementary period of 2
years from the close of the taxable quarter, the judicial claim was
filed beyond the period mandated under Section 112 (C). Thus, the
Court is constrained to DENY the petitioner's claim for refund or
issuance of TCC. La Flor dela Isabela, Inc. v CIR La Flor is a
domestic corporation. In 2000 the letter of authority for
assessment for taxable year 1999 was issued by the BIR. From 2002
to 2005, La Flor executed five Waivers to extend BIRs period to
assess the taxes. The Formal Letter of Demand (FDL) for the tax
deficiency was received by La Flor before the expiration of the 5th
waiver in 2005.
15
La Flor immediately filed a protest against the FDL. It also
filed a supplemental protest less than two weeks after. After 2
years, June 2007, La Flor received a Final Decision on Disputed
Assessments (FDDA) indicating its deficiency taxes in the total
amount of P10,460,217.23. On October 2007, petitioner filed an
application for tax amnesty. Ten days later it also filed an
application for compromise agreement pursuant to Section 204 of the
Tax Code. La Flor received an undated Warrant of Distraint and/or
Levy (WDL) issued by BIR. ISSUE: WON La Flor can still validly
assail the assessment. HELD: NO. If a protest is not acted upon by
respondent within 180 days from submission of supporting documents,
the taxpayer adversely affected by such inaction may appeal to the
CTA within 30 days from the lapse of the 180-day period. La Flor
should have appealed to the CTA when it did not receive action on
its protest immediately. To reiterate, the failure of a taxpayer to
file a petition for review with the Court of Tax Appeals within the
statutory period rendered the disputed assessment final, executory
and demandable, thereby precluding the said taxpayer from
interposing the defenses of legality or validity of the assessment
and prescription of the Government's right to assess. Indeed, any
objection against the assessment should have been pursued following
the avenue paved in Section 229 (now Section 228) of the NIRC on
protests on assessments of internal revenue taxes. Fax N Parcel,
Inc. v CIR CTA Case 7415, 22 November 2011 FACTS: Fax N Parcel is
contesting the assessments issued by the CIR for deficiency income
tax and VAT for the 4th quarter of 2002. In March 2005, the CIR had
issued against petitioner a Preliminary Assessment Notice (PAN),
with attached details of discrepancies for unreported income from
understatement of sales during the 4th quarter of 2002. In April,
the CIR issued a Formal Assessment Notice (FAN), prompting
petitioner to file a Protest Letter in July, which the CIR failed
to act on, hence this petition for
review. ISSUE: WON the assessment for alleged undeclared income
from petitioners unreported sales for the 4th quarter of 2002 based
on the BIRs computergenerated Quarterly Report on third party
Information on Purchases is valid HELD: No When served with
subpoena duces tecum and ad tesfificandum, 11 of the 15 alleged
purchasers of petitioner, through their duly authorized officers or
representatives, either controverted or denied respondents
allegations. The quarterly report of the BIR also showed
considerable discrepancies. As admitted by the respondents own
witness, the summary lists of purchases received by the BIR were
not verified with other externally sourced data to check the
integrity of the information gathered. The Integrated Tax System of
the BIR can only check or validate the format and possible viruses
in the computer program, not the content or substance of the
encoded summary lists of purchases. While assessments have the
presumption of correctness and regularity in its favor, it is also
equally true that assessments should not be based on mere
presumptions, no matter how reasonable or logical the presumption
might be (citing CIR v. Hantex Trading, March 31, 2005).
Assessments lack sufficiency in evidence when it is based on the
BIRs computer-generated third party information which was not
verified with other externally sourced data; esp. when third
parties controvert the allegations. Finally, imputation of fraud
against petitioner adding 50% surcharge to its alleged income and
VAT liabilities is erroneous since the claimed fraudulent intent
was merely deduced from the fact that there was an
under-declaration of sales/income for the 4thquarter of 2002, which
respondent failed to establish. Fraud cannot be presumed but must
be proved. Dispositive: petition granted Hermano (San Miguel)
Febres Cordero Medical Foundation, Inc. v. CIR C.T.A. CASE NO. 8194
9 January 201216
Hermano is seeking the cancellation of Final Assessment Notice
(FAN) issued by the BIR for VAT deficiency amounting to
P2,607,933.07, arising from its sale of pharmacy items to its
in-patients, in line with its rendering of hospital services.
Hermano grounds are: (1) The FAN is void for they merely showed a
mathematical computation of petitioner's tax liability without
stating the factual and legal bases of the same; (2) CIR failed to
take into consideration that its sales of pharmacy items to its
in-patients are exempt from VAT pursuant to Section 109(L). Ruling:
FAN is not void based in the first ground. Section 228 provides
that in the assessment, 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 to ensure that taxpayers
are duly apprised of the basis of the tax assessments against them.
Here, in the "Details of Discrepancies", attached to the
assessment, the details contained therein showed that the factual
basis for assessing petitioner for deficiency VAT was the
discrepancy from RELIEF and Third-Party Matching. In a long line of
cases, the SC has ruled that the requirement of the law to inform
the taxpayer of the basis of the assessment does not necessarily
mean that it be a full narration of the facts and laws on which the
assessment is based. Here, Hermano was able to intelligently make
its protest by stating that its sales of pharmaceutical items in
favor of its in-patients are exempt from VAT. This circumstance
proves that petitioner was sufficiently informed of the facts and
the law as to why the assessment has been issued against it.
However, the assessment of VAT deficiency was incorrect. As held in
Perpetual Succour Hospital vs. CIR and St. Luke's Medical Center v.
CTA & CIR, hospital services includes not only the services of
the doctors, nurses and allied medical personnel, but also the
necessary laboratory services, and making available the medicines,
drugs and pharmaceutical items that are necessary in the diagnosis,
treatment and care of patients. Sale of drugs or pharmaceutical
items to inpatients of the hospital are, therefore, considered part
of the hospital services covered by Section 109 (l) of the NIRC of
1997, as amended.
Laurence Lee v. Luang and Sixto Esquivias IV in his capacity as
Commissioner of Internal Revenue CTA Resolution, 23 February 2012
Petitioner owned a Unioil gas station. He sent a letter dated June
21, 2005 to the BIR to inform said office that his business
operations would cease by the middle of the year 2005 and that
taxes were to be incurred only up to June 30, 2005. Said letter was
also meant to inform the BIR of the cessation of reportorial
requirements that must be complied with by the taxpayer pursuant to
the operation of a business entity. Petitioner filed his second
(2nd) quarter VAT return on July 26, 2005. Petitioner received a
copy of a Formal Letter of Demand and a FAN on November 5, 2008 for
alleged deficiency VAT, deficiency income tax, and compromise
penalties for the year 2005 amounting to P 7.7M. Petitioner filed a
Protest to the FAN, but there was no response from the CIR.
Petitioner thus filed a Petition for Review before the CTA,
claiming that after the issuance of the Letter Notice (LN) dated
April 30, 2007, there is no evidence that a Preliminary Assessment
Notice (PAN) was served upon petitioner pursuant to RR No. 12-99
and as such, petitioner believes that the deficiency VAT and income
tax assessments issued against him must be considered void for
being violative of the due process. On the other hand, respondent
argues that the absence of a PAN may not invalidate the assessment,
and that what is essential is that petitioner was able to file his
protest to the FAN/Formal Letter of Demand within thirty (30) days
from receipt of the same. W/N the absence of a Preliminary
Assessment Notice violates invalidates an assessment. HELD: YES.
Section 228 of the Tax Code requires that the taxpayer must first
be informed that he is liable for deficiency taxes through the
sending of a PAN. He must be informed of the facts and the law upon
which the assessment is made. The law imposes a substantive, not
merely a formal, requirement. The sending of a PAN to taxpayer to
inform him of the assessment made is but part of the 'due process
requirement in the issuance of a deficiency tax assessment,' the
absence of which renders nugatory any assessment made by the tax
authorities. The use of the word 'shall' in subsection 3.1.2 of
Revenue Regulations 12-99 describes the mandatory nature17
of the service of a PAN. The persuasiveness of the right to due
process reaches both substantial and procedural rights and the
failure of the CIR to strictly comply with the requirements laid
down by law and its own rules is a denial of petitioner's right to
due process. Cargill Philippines Inc. v CIR CTA Case 7928, 23
August 2011 In Sept 9, 2008, Cargill received a Preliminary
Assessment Notice (PAN) assessing deficiency VAT and compromise
penalty for the period covering Sept 2005 to Aug 2005. Soon after,
Cargill also received a Final Assessment Notice (FAN) together with
an Audit Result / Assessment Notice. It was found liable of VAT in
the amount of Php5.4M++. Cargill filed a protest but the same was
not acted upon. Thus, it filed a Petition for Review with the CTA.
Cargill argues that it was denied due process and that the
assessment period has lapsed. In its answer, the CIR said that
Cargill the assessment was proper because it failed to respond to
the PAN with the 15-day allowable period. Ruling of the CTA: The
CIR has substantially complied with the requirements of due process
because Cargill was given the opportunity to refute the PAN and was
able to exercise its option to protest the FAN. However, the period
to assess has prescribed assessments should be served to the
taxpayer within a three-years period counted from the day the
return was filed. Therefore, the assessments served on Sept 9, 2008
for the periods of Sept 2004 to May 2005 are barred by
prescription. RCBC v. CIR 7 September 2011 FACTS: - RCBC filed its
Corporate Annual Income Tax Return for Foreign Currency Deposit
Unit for 1994 and 1995. - CIR issued Letter of Authority,
authorizing a special audit team to examine RCBCs books of accounts
and other records for all internal revenue taxes from Jan. 1, 1994
to Dec. 31, 1995.
- Jan. 23, 1997. RCBC executed 2 Waivers of the Defense of
Prescription Under the Statute of Limitations of the NIRC covering
the internal revenue taxes for 1994 and 1995, effectively extending
the period of the BIR to assess up to Dec. 31, 2000. - Jan. 27,
2000. RCBC received a Formal Letter of Demand with Assessment
Notices for deficiency tax assessments. - RCBC filed a protest on
Feb. 24, 2000. On Nov. 20, 2000, it filed a petition for review
with the CTA. - Dec. 6, 2000. RCBC received another Formal Letter
of Demand with Assessment Notices. The original amount of
deficiency taxes was drastically reduced (from P4.1B to P303M). -
RCBC paid P15M but refused to pay assessments for deficiency
onshore tax and DST. It claimed that the waivers of the Statute of
Limitations were not valid because they were not signed or
conformed to by the CIR as required under Sec. 222(b) of the Tax
Code. - CTA (1st Div.) rendered its Decision partially granting the
petition for review. It considered as closed and terminated the
assessments for deficiency taxes, except for the final tax on FCDU
onshore income and deficiency DST for 1994 and 1995. It ordered
RCBC to pay the amounts due plus 20% delinquency tax. - RCBC filed
MR. CTA modified its decision for its inadvertence in the addition
of the total deficiency taxes. CTA en banc denied RCBCs petition
for lack of merit. ISSUE: WON RCBC, by paying the other tax
assessment covered by the waivers, is estopped from questioning the
validity of the said waivers with respect to the assessment of
deficiency onshore tax. RULING: RCBC, through its partial payment
of the revised assessments issued within the extended period as
provided for in the waivers, impliedly admitted the validity of
those waivers. Had it truly believed that the waivers are invalid
and that the assessments were issued beyond the prescriptive
period, it should not have paid the reduced amount of taxes in the
revised assessment. Upon the receipt of the revised assessment,
RCBC immediately made payment on the uncontested taxes. It is
estopped from questioning the validity of the waivers.18
ISSUE: WON RCBC can be held liable for deficiency onshore tax
HELD: Yes The liability of the withholding agent is independent
from that of the taxpayer. The former cannot be made liable for the
tax due because it is the latter who earned the income subject to
withholding tax. The withholding agent is liable only insofar as he
failed to perform his duty to withhold the tax and remit the same
to the government. The liability of the tax remains with the
taxpayer because the gain was realized and received by him. RCBC
cannot evade its liability for FCDU Onshore Tax by shifting the
blame on the payor-borrower as the withholding agent. Petition
denied. Edison (Bataan) Cogeneration Corp. v. CIR 30 January 2012
Facts: On February 2, 2004, Edison (Bataan) Cogeneration
Corporation (EBCC) received respondent's Formal Letter of Demand
and Final Assessment Notice, dated January 23, 2004, assessing
petitioner for alleged deficiency income tax, VAT, withholding tax
on compensation, EWT and FWT for taxable year 2000, On March 3,
2004, petitioner protested said assessments by filing a
letterprotest dated March 2, 2004 with respondent CIR.
Subsequently, petitioner and the assigned BIR examiners had several
meetings between March and May 2004, where petitioner furnished
respondent with certain documents, as requested by the examiners.
CIR failed to render a decision on petitioner's protest, within the
180-day period prescribed in Section 228 of the Tax Code; thus, on
November 25, 2004, petitioner filed the instant Petition for
Review. On November 30, 2010, the Court Former Second Division
partially granted the Petition for Review and ordered CIR to cancel
and set aside the
assessments for deficiency withholding tax on compensation and
expanded withholding tax for taxable year 2000. The EBCC, on the
other hand, was ordered to pay the CIR the amount of Two Million
Two Hundred Thirty Two Thousand One Hundred Forty Six Pesos and
91/100 (P2,232,146.91), representing EBCC's deficiency final
withholding tax. Both appealed the decision to CTA En Banc.
Assessment in Issue: Interest Payments from EBCC's Intercompany
Loans from Ogden Power International Holdings, Inc. amounting to
P7,707,504.96; Interest Payments on Syndicated Loans in Dollars
made by EBCC amounting to P2,520,117.76. CTA En Banc Ruling: The
determination of EBCC's liability for the deficiency FWT on
Interest Payments from Inter-company loans from Ogden Power is
subject to the provision of Revenue Regulation (RR) No. 2-98, the
controlling revenue issuance at the time the loan agreement was
entered into. Applying RR No. 2-98, there is no question then that
the obligation to withhold only accrues when the loan is paid or
becomes payable or when it becomes due, demandable or legally
enforceable, whichever comes first. Upon analysis of the loan
agreement between EBCC and Ogden, the Court En Bane finds no
controversy on the date when the obligation to pay the loan to the
lender has commenced, which as indicated in the loan agreement is
on June 1, 2002. The CIR alleges that it is on January 5, 2000,
when the loan document was notarized that the interest started to
accrue. On the part of EBCC, it alleges that the intention of the
parties was to set simultaneously the payment of the loan and the
interest. The obligation to withhold the interest over the loan
only commenced on June 1, 2002. EBCC alleges that with the
admission of the CIR's witness, Revenue Officer19
Dahlia V. Nitura, of EBCC's payment of FWT amounting to
P2,842,630.20 the liability imposed by the Court Former Second
Division is already complied with. On the other hand, the CIR
reiterates EBCC's failure to prove the remittance of the
withholding tax by the lending banks due to lack of evidence. EBCC
is duty bound to prove that indeed it has remitted the amount of
P2,842,630.20 as payment for its deficiency FWT. For cases filed
before the Court are litigated de novo/ party litigants should
prove every minute aspect of their cases. Unfortunately, in this
case, EBCC has failed to present sufficient evidence to prove
remittance of its payment. Thus, the Court En Bane adopts the
computation of the Court Former Second Division on EBCC's
deficiency FWT on its interest payments on its dollar-denominated
syndicated loan liability amounting to P1,785,717.53 for the year
2000. International Exchange Bank v. CIR CTA Case 7875, 18 October
2011 Petitioner, a banking institution duly organized and existing
under the laws of the Philippines, was on April 13, 1999 served
Letter of Authority by the Commissioner of Internal Revenue
directing the examination by a "Special Team created pursuant to
RSO 797-98" of petitioners books of accounts and other accounting
records for the year 1997 and "unverified prior years." An
examination of said documents was in fact conducted. Petitioner
subsequently received on November 16, 1999 a "Notice to Taxpayer"
from the Assistant Commissioner, Enforcement Service of the Bureau
of Internal Revenue, notifying it of the results of the examination
conducted by the Special Team regarding its tax liabilities, which
amounted to P465,158,118.31 for 1996 and P17,033,311,974.23 for
1997, and requesting it to appear for an informal conference to
present its side. On January 6, 2000, petitioner was personally
served with an undated Pre-Assessment Notice (PAN) assessing it of
deficiency on its purchases of securities from the Bangko Sentral
ng Pilipinas or Government Securities Purchased-Reverse Repurchase
Agreement (RRPA) and its FSD for the taxable years 1996 and 1997.
On January 12, 2000, petitioner received a Formal Assessment Notice
(FAN) for deficiency DST on its RRPA and FSD, including surcharges,
in the amounts of P25,180,492.15 for 1996 and P75,383,751.55 for
1997, and an accompanying demand letter requesting payment thereof
within 30 days. Acting on the FAN, petitioner filed on February 11,
2000 a protest letter alleging that the assessments should be
reconsidered on the grounds that: (1) the assessments are null and
void for having been issued without any authority
and due process, and were made beyond the prescribed period for
making assessments; (2) there is no law imposing DST on RRPA, and
assuming that DST was payable, it is the Bangko Sentral ng
Pilipinas which is liable therefor; (3) there is no law imposing
DST on its FSD; and (4) assuming the deficiency assessments for DST
were proper, the imposition of surcharges was patently without
legal authority. Petitioner argued that its FSD is not subject to
DST since it was not one of the documents enumerated either under
the 1977 Tax Code (Tax Code) or the 1997 National Internal Revenue
Code (NIRC). Respondent on the other hand argued that petitioner
should be liable not only for DST on its FSD but also on its RRPA.
The First Division of the CTA and the CTA En Banc upheld the
propriety of the DST. ISSUE: WON a Savings Account-Fixed Savings
Deposit (FSD) evidenced by a passbook issued by petitioner subject
to documentary stamp tax (DST) for the years 1996 and 1997 HELD: NO
RATIO: The applicable provision is Section 180 of the Tax Code, as
amended by R.A. 7660, which reads: Sec. 180. Stamp tax on all loan
agreements, promissory notes, bills of exchange, drafts,
instruments and securities issued by the government or any of its
instrumentalities, certificates of deposit bearing interest and
others not payable on sight or demand. - On all loan agreements
signed abroad wherein the object of the contract is located or used
in the Philippines; bills of exchange (between points within the
Philippines), drafts, instruments and securities issued by the
Government or any of its instrumentalities or certificates of
deposits drawing interest,or orders for the payment of any sum of
money otherwise than at sight or on demand, or on all promissory
notes, whether negotiable or non-negotiable, except bank notes
issued for circulation, and on each renewal of any such note, there
shall be collected a documentary stamp tax of Thirty centavos
(P0.30) on each two hundred pesos, or fractional part thereof, of
the face value of any such agreement, bill of exchange, draft,
certificate of deposit, or note: Provided, That only one
documentary stamp tax shall be imposed on either loan agreement, or
promissory notes issued to secure such loan, whichever will yield a
higher tax:20
Provided, however, That loan agreements or promissory notes the
aggregate of which does not exceed Two hundred fifty thousand pesos
(P250,000) executed by an individual for his purchase on
installment for his personal use or that of his family and not for
business, resale, barter or hire of a house, lot, motor vehicle,
appliance or furniture shall be exempt from the payment of the
documentary stamp tax provided under this section. As correctly
found by the CTA En Banc, a passbook representing an interest
earning deposit account issued by a bank qualifies as a certificate
of deposit drawing interest. A document to be deemed a certificate
of deposit requires no specific form as long as there is some
written memorandum that the bank accepted a deposit of a sum of
money from a depositor. What is important and controlling is the
nature or meaning conveyed by the passbook and not the particular
label or nomenclature attached to it, inasmuch as substance, not
form, is paramount. Contrary to petitioners claim, not all
certificates of deposit are negotiable. A certificate of deposit
may or may not be negotiable as gathered from the use of the
conjunction or, instead of and, in its definition. A certificate of
deposit may be payable to the depositor, to the order of the
depositor, or to some other person or his order. In any event, the
negotiable character of any and all documents under Section 180 is
immaterial for purposes of imposing DST. Orders for the payment of
sum of money payable at sight or on demand are of course explicitly
exempted from the payment of DST. Thus, a regular savings account
with a passbook which is withdrawable at any time is not subject to
DST, unlike a time deposit which is payable on a fixed maturity
date. As for petitioners argument that its FSD is similar to a
regular savings deposit because it is evidenced by a passbook, and
that based on the legislative deliberations on the bill which was
to become R.A. 9243 which amended Section 180 of the NIRC (which is
to a large extent the same as Section 180 of the Tax Code, as
amended by R.A. 7660), Congress admitted that deposits evidenced by
passbooks which have features akin to time deposits are not subject
to DST, the same does not lie. The FSD, like a time deposit,
provides for a higher interest rate when the deposit is not
withdrawn within the required fixed period; otherwise, it earns
interest pertaining to a regular savings deposit. Having a fixed
term and the reduction of interest rates in case of pre-termination
are essential features of a time deposit. People v. Katherine Lim
CTA Criminal Case 0-113, 12 December 2011 FACTS: Katherine M Lim
and Edelyn Coronacion were president and accountant, respectively,
of UEAM, a company engaged in the manufacture of automotive spare
parts. Sometime in 2000, UEAM informed the BIR of its decision to
permanently close and cease operations. BIR issued UEAM a tax
verification notice relative to its closure of business. The
verification resulted in the issuance of an assessment for alleged
value-added tax (VAT) deficiency on the companys allegedly taxable
inventories appearing in its audited financial statements, which
were considered by the BIR as transaction deemed sale subject to
VAT under Section 106(B)(4) of the Tax Code. Lima and Coronacion,
however, failed to pay the tax. Hence, a criminal case was filed
against them pursuant to Sec. 255, in relation to Sec. 253 (d), and
256 of the Tax Code. To negate criminal liability, Lim and
Coronacion argued UEAMs lack of willfulness in its default saying
that the prosecution failed to prove that UEAM indeed received the
preliminary assessment notice (PAN). ISUE: WON prosecution failed
to prove that UEAM received the PAN. HELD: YES A taxpayer may deny
that he received an assessment form BIR. And if he does so, it is
incumbent upon the BIR to prove by competent evidence that such
notice was indeed received by the addressee. The onus probandi
shifts to the BIR to prove that the taxpayer received the
assessment in the due course of the mail. Willfulness of not paying
the tax requires the showing of knowledge and voluntariness. Here,
the prosecution failed to present the registry return receipts. The
prosecution, therefore, failed to prove that Lim and Coronacion had
knowledge of their obligation to pay the taxes of UEAM. The
prosecution was not able to prove that Lim and Coronacion willfully
failed to pay the assessed tax.
21
People v. Gloria Kintanar CTA Criminal Case, Resolution of 16
November 2011 FACTS: Spouses Kintanar allegedly failed to file
their income tax returns for the years 2000 and 2001. The BIR,
asking them to cooperate, make the tax returns, and pay the taxes,
sent them the following documents: 1) Letter of Access No.
00029663, dated March 28, 2003, which was received by petitioner's
husband on April 3, 2003; 2) Second Request for Presentation of
Records, dated April21, 2003 , was received by a certain George
Llorente on April23, 2003; 3) Final Notice, dated May 5, 2003, was
received by George Llorente; 4) Subpoena Duces Tecum, dated June
11, 2003; 5) Letter by Chief Rosimo, dated September 3, 2003; 6)
Preliminary Assessment Notice, dated December 9, 2003, together
with the Details of Discrepancies, for taxable years 1999 to 2002;
7) Memorandum, dated February 26, 2004; 8) Formal Letter of Demand,
dated February 26, 2004, together with Assessment Notices; 9)
Letter of Chief Guballa, dated September 30, 2004; and 10)Final
Decision on Disputed Assessment, dated December 13, 2004. The
spouses did not heed these notices and failed to cooperate. Two
separate informations were filed against them. Criminal action for
tax evation ensued. Section 255 of the NIRC of 1997, as amended,
contemplates four different situations punishable by law, each of
which constitutes failure to perform in a timely manner, an
obligation imposed by the NIRC of 1997, as amended, to wit: 1) To
pay any tax; 2) To make a return; 3) To keep any record; and 4) To
supply correct and accurate information. The elements of Violation
of Section 255 of the NIRC of 1997, as amended, for failure to make
or file a return, are, as follows:
1) The accused is a person required to make or file a return; 2)
The accused failed to make or file the return at the time required
by law; and 3) That failure to make or file the return was willful.
The defenses were: It was the husband who filed. The husband
delegated an accountant who did not properly file the tax returns.
The return (evidence for the defense) was made in Novaliches,
instead of in Paranaque, the RDO with jurisdiction over their legal
residences. ISSUE: WON the Spouses are guilty beyond reasonable
doubt of tax evation. HELD: Yes BIR, through documentary and
testimonial evidence, were able to prove all of the elements of Sec
255 with respect to failure to make or file a return. Dispositive
for both cases (2000 and 2001): GUlLTY beyond reasonable doubt of
violation of Section 255 of the National Internal Revenue Code of
1997, as amended, and is hereby SENTENCED to suffer an
indeterminate penalty of one (1) year, as minimum, to two (2)
years, as maximum, and is ORDERED to pay a fine in the amount of
P10,000.00, with subsidiary imprisonment in case accused has no
property with which to meet the said fine, or unable to pay such
fine, pursuant to Section 280 of the NIRC of 1997, as amended. As
regards the civil liability, accused is ORDERED to PAY deficiency
income tax for taxable year 2000, the amount of P3,156,470.22,
inclusive of penalties, surcharges and interests, plus 20% interest
per annum accounted from April 12, 2005 until full payment thereof,
pursuant to Section 249 (C ) (3) of the NIRC of 1997, as
amended.
22