The Waiver of Statute of Limitations must indicate the date of execution by the taxpayer and the date of acceptance by the Commissioner of Internal Revenue (CIR) to be valid and effective as prescribed by RMO No. 20-90.

The taxpayer, through its Controller, executed two "Waivers of the Defense of Prescription" under the Statute of Limitations of the National Internal Revenue Code (NIRC). These documents were accepted by Revenue District Officer, who failed to indicate his date of acceptance. The Court ruled that the waivers were defective and could not validly extend the original three-year prescriptive period wherein the CIR may assess the taxpayer. The date of acceptance must be indicated to determine whether the waiver was validly accepted before the expiration of the original three-year period. If the acceptance was made beyond the prescriptive period, the waiver is defective and cannot validly extend the original three-year period for the respondent to issue an assessment. (East Asia Power Resources Corporation vs. Commissioner of Internal Revenue, CTA Case No. 7956, December 26, 2011) 

The Court ruled that the term "complete documents" referred to under Section 112 of the National Internal Revenue Code (NIRC) of 1997, as amended, should be construed as those documents necessary to support the legal basis of taxpayer's application for input VAT refund/credit as may be determined by the taxpayer bearing in mind that the "burden of proving entitlement to refund lies with the claimant"

The taxpayer filed an administrative claim for refund of its unutilized input VAT for the four quarters of taxable year 2002 with the Bureau Internal Revenue (BIR). Due to BIR’s inaction and to suspend the two-year prescriptive period under the NIRC of 1997, as amended, and Revenue Regulations No. 7-95, taxpayer filed a Petition for Review on April 22, 2004. The CIR argued that the law requires the submission of complete documents in support of the application filed with the BIR before the 120-day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law. The CIR asserted that taxpayer merely submitted five (5) classes of documents in the administrative proceedings. CIR also asserted that the administrative claim was correctly denied by inaction due to its failure to submit complete documents as required. The Court ruled that the term "complete documents" referred to under Section 112 of the NIRC of 1997, as amended, should be construed as those documents necessary to support the legal basis of taxpayer's application for input VAT refund/credit as may be determined by the taxpayer bearing in mind that the "burden of proving entitlement to a refund lies with the claimant." Hence, the determination of what constitutes as complete documents should not be left at the sole discretion of the CIR. Otherwise, a taxpayer would be practically placed at the mercy of the CIR which may require production of documents that a taxpayer cannot submit. (Commissioner of Internal Revenue vs. Mirant Navotas Corporation, CTA Case No. 6960, December 20, 20114) 

The requirements for claim for refund of excess unutilized creditable withholding tax at source are: (1) the claim is filed with the Commissioner of Internal Revenue (CIR) within the two-year period from the date of payment of the tax; (2) it is shown on the return of the recipient that the income payment received was declared as part of the gross income; and (3) 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 the tax withheld therefrom.

The instant case involves a claim for refund of taxpayer's alleged unutilized creditable tax withheld for taxable year ending December 31, 2007. Due to the inaction on its claim for refund, the taxpayer filed a petition for review before the CTA. The Court ruled that the taxpayer complied with all the requirements for claim for refund of excess creditable withholding tax at source. As to the first requisite/condition, the reckoning of the two-year prescriptive period for filing a claim for refund of excess creditable withholding tax (CWT) or quarterly income tax payment starts from the date of filing of the Annual Income Tax Return because it is only from this time that the refund is ascertained. Petitioner electronically filed its original Annual Income Tax Return for taxable year 2007 on April 14, 2008. Counting from this date, petitioner had until April 14, 2010 within which to file its claim for refund both administratively and judicially. Thus, petitioner's administrative claim, filed on October 21, 2009, and the instant Petition for Review, filed on April 13, 2010, fall within the two-year prescriptive period provided under Sections 204(C) and 229 of the NIRC of 1997, as amended. (Philippine Realty and Holdings Corporation vs. Commissioner of Internal Revenue, CTA Case No. 8070, December 20, 2011) 

There are two requirements for taxpayer to be liable for franchise tax: (1) it has a “franchise” in the sense of a secondary or special franchise; and (2) it is exercising its rights or privileges under this franchise within the territory of the local government unit concerned.

The Provincial Treasurer assessed the taxpayer and demanded payment for franchise tax on its receipts from a customer. The taxpayer argued that it cannot be considered to be operating or performing its privilege under its franchise within the Province of Bataan because although it has a substation in the said Province, its customer is in the City of Balanga, which is outside the territorial jurisdiction of the Province. The Court ruled that there are only two requirements for taxpayer to be liable for franchise tax: (1) it has a “franchise” in the sense of a secondary or special franchise; and (2) it is exercising its rights or privileges under this franchise within the territory of the local government unit concerned. While taxpayer has exercised its rights and privileges under its franchise within the Province of Bataan, including the City of Balanga in connection with its electrical transmission function, nevertheless, the Province of Bataan is not authorized to impose franchise tax on taxpayer’s gross receipts from its customer. The one authorized to impose such franchise tax is the City of Balanga. (National Transmission Corporation vs. Province of Bataan, CTA AC No. 78, December 16, 20113) 

Two options to a taxpayer whose quarterly income tax payments in a given taxable year exceeds its total income tax due: (1) filing a tax refund, either in the form of cash or tax credit certificate or (2) availing of a tax credit. Once the carry-over option is taken, actually or constructively, it becomes irrevocable for that taxable period.

A Petition for Review was filed for failure of the CIR to act on the taxpayer’s administrative claim seeking the refund or issuance of a tax credit certificate representing its unutilized creditable tax withheld for the taxable year 2007. The CIR argued that the refund cannot be granted because the taxpayer automatically carried over the said amount to its income tax return for the fiscal year ended March 31, 2008. The Court ruled that Section 76 of the NIRC provides two options to a taxpayer whose quarterly income tax payments in a given taxable year exceeds its total income tax due: (1) filing a tax refund, either in the form of cash or tax credit certificate or (2) availing of a tax credit. Once the carry-over option is taken, actually or constructively, it becomes irrevocable for that taxable period. Thus, the application for cash refund or issuance of tax credit certificate of the taxpayer cannot be allowed. (UPSI Management, Inc. 2 vs. Commissioner of Internal Revenue, CTA Case No. 7945, December 16, 2011 ). 

Due process requires that the receipt of the Preliminary Assessment Notice (PAN) be proven by the prosecution for the accused to be held liable under Section 255 of the NIRC.

The taxpayer informed the Bureau of Internal Revenue (BIR) that it has decided to permanently close and cease operations effective September 2005. Tax Verification Notice was issued by the BIR to verify supporting documents and pertinent records relative to the taxpayer’s closure of business. The verification prompted the issuance of the assessment for alleged value-added tax (VAT) deficiency, which in turn, led to the filing of the case, against accused, as the alleged responsible officers of taxpayer. The accused asserted that they did not receive the Preliminary Assessment Notice (PAN) and Final Assessment Notice (FAN). Since accused supposedly never received any of the assessment notices, no willfulness could be attributed as such and in fact they were not even aware of the legal and factual bases of the tax assessment. The Court ruled that due process requires that the receipt of the PAN be proven by the prosecution for the accused to be held liable under Section 255 of NIRC. The accused should be acquitted because prosecution failed to prove beyond reasonable doubt the essential elements of the offense and also failed to show that the PAN was indeed personally received by the accused. Considering that the prosecution failed to prove that the PAN was received by the accused, the assessment made by the CIR is void. It is well-settled that a void assessment bears no fruit. Thus, no civil liability arises in this case. (People of the Philippines vs. Katherine M. Lim and Edelyn Coronacion, CTA Crim. Case No.0-113, December 12, 2011) 

Petition for Review before the Court of Tax Appeals (CTA) for refund should be filed within thirty (30) days from the receipt of the decision of the Commissioner of Internal Revenue (CIR) or upon the expiration of the one hundred twenty (120) days in case of inaction of the CIR.

The taxpayer filed a judicial claim two (2) days after it filed its administrative claim for refund or tax credit for unutilized input Value-added tax (VAT). The CIR claims that the CTA has no jurisdiction to entertain the petition for failure to await the expiration of the 120-day period provided under Section 112(C) of the 1997 National Internal Revenue Code. (NIRC) The taxpayer is of the view that the two year-period prescriptive period applies to both administrative and judicial claims and that the 120 day-period in Section 112 of NIRC is only directory and need not be complied when the 2-year prescriptive period is about to expire. The Court ruled that the petition was prematurely filed and the taxpayer lacks cause of action. Petition for Review before the CTA for refund should be filed within thirty (30) days from the 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. Thus, it failed to exhaust the administrative remedy which is a condition precedent before taking judicial action. (Crescent Park 19-1 Property Holdings, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 8057, December 07, 20111)