National Power Corporation v. Central Board of Assessment Appeals et al., G.R. No. 171470, 30 January 2009

FACTS

First Private Power Corporation (FPPC) entered into a Build-Operate-Transfer (BOT) agreement with NAPOCOR for the construction of Bauang Diesel Power Plant and creation of Bauang Power Plant Corporation (BPPC). The pertinent provisions of the BOT agreement, include among others:“2.03 NAPOCORxxx shall be responsible for the payment of all real estate taxes and assessments, rates, and other charges in respect of the Site and the buildings and improvements thereon.” The Municipal Assessor of Bauang issued a Notice of Assessment and Tax Bill to BPPC. NAPOCOR sought tax exemption on the basis if Sec. 234(c) of R.A. No. 7160.

 

ISSUE

Under the terms of the BOT, can the GOCC be deemed the actual, direct, and exclusive user of machineries and equipment for tax exemption purposes? If not, can it pass on its tax-exempt status to its BOT partner, a private corporation, through the BOT agreement?

HELD

NO. Neither can NAPOCOR pass its tax–exempt status to its BOT partner.

NAPOCOR’s basis for its claimed exemption – Section 234(c) of the LGC – is clear and not at all ambiguous in its terms. Exempt from real property taxation are: (a) all machineries and equipment; (b) [that are] actually, directly, and exclusively used by; (c) [local water districts and] government-owned or –controlled corporations engaged in the [supply and distribution of water and/or] generation and transmission of electric power.

By [BOT’s] express terms, BPPC has complete ownership – both legal and beneficial – of the project, including the machineries and equipment used, subject only to the transfer of these properties without cost to NAPOCOR after the lapse of the period agreed upon. As agreed upon, BPPC provided the funds for the construction of the power plant, including the machineries and equipment needed for power generation; thereafter, it actually operated and still operates the power plant, uses its machineries and equipment, and receives payment for these activities and the electricity generated under a defined compensation scheme. Notably, BPPC – as owner-user – is responsible for any defect in the machineries and equipment.

Consistent with the BOT concept and as implemented, BPPC – the owner-manager-operator of the project – is the actual user of its machineries and equipment. BPPC’s ownership and use of the machineries and equipment are actual, direct, and immediate, while NAPOCOR’s is contingent and, at this stage of the BOT Agreement, not sufficient to support its claim for tax exemption.

 

The Provincial Assessor of Marinduque v. Court of Appeals and Marcopper Mining, G.R. No. 170532, 30 April 2009

[CALLEJO, SR., J.]

FACTS

Petitioner issued against respondent an Assessment Notice, dated March 28, 1994, for real property taxes due on the latter’s real properties, including its Siltation Dam and Decant System which was damaged by typhoon sometime in 1993. Respondent paid the tax demanded, but appealed the assessment before the Local Board of Assessment Appeals (LBAA) on the ground that the subject property is exempt from real property taxation under Section 234(e) of Republic Act (R.A.) No. 7160 or the Local Government Code of 1991, which provides for exemptions from Real Property Tax for “Machinery and equipment used for pollution control and environmental protection.” The LBAA as well as the Central Board of Assessment Appeals (CBAA) on appeal ruled against tax exemption. The Court of Appeals reversed the rulings of LBAA and CBAA and held that the subject property was exempt from real property taxation under Section 91 of R.A. No. 7942 or the Philippine Mining Act of 1995.

ISSUE

Whether the Siltation Dam and Decant System of Marcopper Mining Corporation is exempt from real property tax.

 

HELD

NO.

The disputed assessment notice having taken effect on January 1, 1995, (by virtue of Sec. 221 of R.A. No. 7160) its validity is determined by the provisions of R.A. No. 7160, effective January 1, 1992. R.A. No. 7942 has no bearing on the matter, for this law came into effect only on April 14, 1995. Hence, reference to R.A. No. 7942 by the CA and the respondent are all out of place.Title II of R.A. No. 7160 governs the administration, appraisal, assessment, levy and collection of real property tax. Section 234 thereof grants exemption from real property taxation based on ownership, character or usage.

As held in Mactan Cebu International Airport Authority v. Marcos, the exemption granted under Sec. 234(e) of R.A. No. 7160 to “[m]achinery and equipment used for pollution control and environmental protection” is based on usage. The term usage means direct, immediate and actual application of the property itself to the exempting purpose. Section 199 of R.A. No. 7160 defines actual use as “the purpose for which the property is principally or predominantly utilized by the person in possession thereof.” It contemplates concrete, as distinguished from mere potential, use. Thus, a claim for exemption under Sec. 234(e) of R.A. No. 7160 should be supported by evidence that the property sought to be exempt is actually, directly and exclusively used for pollution control and environmental protection.

The records yield no allegation or evidence by respondent that the subject property was actually, directly and exclusively used for pollution control and environmental protection during the period covered by the assessment notice under protest. Rather, the finding of the CBAA that said property “apparently out of commission and not apt to its function as would control pollution and protect the environment” stands undisputed; [and] that the siltation dam was damaged in 1993 when a typhoon hit Marinduque.

 

Fels Energy, Inc. v. The Province of Batangas and the Office of the Provincial Assessor of Batangas, G.R. No. 168557, 16 February 2007

[CALLEJO, SR., J.]

FACTS

NPC entered into a lease contract with Polar Energy, Inc. (POLAR) over diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract contained a provision that POLAR may be or become subject to real estate taxes and assessments, rates and other charges in respect of the power barges.Subsequently, POLAR assigned its rights under the Agreement to Fels Energy, Inc. (FELS). Later, FELS received an assessment of real property taxes on the power barges from Provincial Assessor, that the owner or person having legal interest may appeal the matter within 60 days from receipt to the Board of Assessment Appeals of the province.  FELS referred the matter to NPC, which sought reconsideration of the Provincial Assessor’s decision to assess real property taxes on the power barges. However, the motion was denied and the Provincial Assessor advised NPC to pay the assessment. After sixty (60) days from receipt of assessment from, the NPC filed a petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment and the declaration of the barges as non-taxable items; it also prayed that should LBAA find the barges to be taxable, the Provincial Assessor be directed to make the necessary corrections.

ISSUE

WhetherNPC’s appeal to LBAA may prosper considering that the timely filing of MR with the Provincial Assessor tolled the running of reglementay period.

HELD

NO.

Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, provides:“SECTION 226. Local Board of Assessment Appeals. – Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal.” Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a motion for reconsideration of the Provincial Assessor’s decision, a remedy not sanctioned by law.

[Citing] the case of Callanta v. Office of the Ombudsman, where [the Supreme Court] ruled that under Section 226 of R.A. No 7160, the last action of the local assessor on a particular assessment shall be the notice of assessment; it is this last action which gives the owner of the property the right to appeal to the LBAA. The procedure likewise does not permit the property owner the remedy of filing a motion for reconsideration before the local assessor. It follows ineluctably that the 60-day period for making the appeal to the LBAA runs without interruption.

 

Philippine Journalists, Inc. v. Commissioner of Internal Revenue, G.R. No. 162852, 16 December 2004

[YNARES-SANTIAGO, J.]

FACTS

The Revenue District Office  of the Bureau of Internal Revenue (BIR) issued Letter of Authority for Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine petitioner’s books of account and other accounting records for internal revenue taxes. Revenue District Officer Jaime Concepcion invited petitioner to send a representative to an informal conference for an opportunity to object and present documentary evidence relative to the proposed assessment. Petitioner’s Comptroller, LorenzaTolentino, executed a “Waiver of the Statute of Limitation Under the National Internal Revenue Code (NIRC)”. Records show that, it did not bear the date of acceptance, that petitioner was not furnished a copy of the waiver, and the waiver was signed only by the Revenue District Officer. The tax liability exceeds One Million Pesos (P1,000,000.00).

ISSUE

Whether the waiver is in accordance with RMO No. 20-90 to validly extend the three-year prescriptive period under the NIRC.

HELD

NO.

The waiver document is incomplete and defective and thus the three-year prescriptive period was not tolled or extended and continued to run. Consequently, the Assessment/Demand was invalid because it was issued beyond the three (3) year period. In the same manner, Warrant of Distraint and/or Levy which petitioner received thereafter is also null and void for having been issued pursuant to an invalid assessment.

The NIRC, under Sections 203 and 222, provides for a statute of limitations on the assessment and collection of internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable investigation. Unreasonable investigation contemplates cases where the period for assessment extends indefinitely because this deprives the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time.

A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the taxpayers’ right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. xxx Thus, the law on prescription, being a remedial measure, should be liberally construed in order to afford such protection.

The waiver is also defective from the government side because it was signed only by a revenue district officer, not the Commissioner, as mandated by the NIRC and RMO No. 20-90. The waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral agreement between two parties to extend the period to a date certain. The conformity of the BIR must be made by either the Commissioner or the Revenue District Officer. This case involves taxes amounting to more than One Million Pesos (P1,000,000.00) and executed almost seven months before the expiration of the three-year prescription period. For this, RMO No. 20-90 requires the Commissioner of Internal Revenue to sign for the BIR.

 

Lascona Land Co. Inc. v. Commissioner of Internal Revenue, G.R. No. 171251, 05 March 2012

[PERALTA, J.]

FACTS

The Commissioner of Internal Revenue (CIR) issued an assessment against Lascona Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount of P753,266.56. Consequently, on April 20, 1998, Lascona filed a letter protest, but was denied by Norberto R. Odulio, Officer-in-Charge (OIC), Regional Director, Bureau of Internal Revenue, Revenue Region No. 8, Makati City. On April 12, 1999, Lascona appealed the decision before the CTA. Lascona alleged that the Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30) days from the lapse of the 180-day period rendered the assessment final and executory. The CIR, however, maintained that Lascona’s failure to timely file an appeal with the CTA after the lapse of the 180-day reglementary period provided under Section 228 of the National Internal Revenue Code (NIRC) resulted to the finality of the assessment.

ISSUE

Whether the subject assessment has become final, executory and demandable due to the failure of petitioner to file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred Eighty (180)-day period pursuant to Section 228 of the NIRC.

HELD

NO.

[T]he Court has held that in case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: (1) file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. These options are mutually exclusive and resort to one bars the application of the other.

Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it did not intend to limit it to a single remedy of filing of an appeal after the lapse of the 180-day prescribed period. Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either positively or negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested assessment. More so, because the law and jurisprudence have always contemplated a scenario where the CIR will decide on the protested assessment.

 

Commissioner of Internal Revenue v. Kudos Metal Corporation, G.R. 178087, 05 May 2010

[DEL CASTILLO, J.]

 

FACTS

The CTA En Banc ruled for canceling the assessment notices issued against respondent for having been issued beyond the prescriptive period. It found the first Waiver of the Statute of Limitations incomplete and defective for failure to comply with the provisions of Revenue Memorandum Order (RMO) No. 20-90. Thus: the waiver failed to indicate the date of acceptance. Such date of acceptance is necessary to determine whether the acceptance was made within the prescriptive period; And, the fact of receipt by the taxpayer of his file copy was not indicated on the original copy. The requirement to furnish the taxpayer with a copy of the waiver is not only to give notice of the existence of the document but also of the acceptance by the BIR and the perfection of the agreement. The subject waiver is therefore incomplete and defective. As such, the three-year prescriptive period was not tolled or extended and continued to run.

Petitioner argues that the government’s right to assess taxes is not barred by prescription as the two waivers executed by respondent, through its accountant, effectively tolled or extended the period within which the assessment can be made. In disputing the conclusion of the CTA that the waivers are invalid, petitioner claims that respondent is estopped from adopting a position contrary to what it has previously taken. Petitioner insists that by acquiescing to the audit during the period specified in the waivers, respondent led the government to believe that the “delay” in the process would not be utilized against it. Thus, respondent may no longer repudiate the validity of the waivers and raise the issue of prescription.Respondent maintains that prescription had set in due to the invalidity of the waivers executed by Pasco, who executed the same without any written authority from it, in clear violation of RDAO No. 5-01.

ISSUE

Whether the belated assessment of the CIR is still valid and effective on the ground that respondent is already in estoppel.

HELD

NO. 

Section 203 of the National Internal Revenue Code of 1997 (NIRC) mandates the government to assess internal revenue taxes within three years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later. Hence, an assessment notice issued after the three-year prescriptive period is no longer valid and effective. Exceptions however are provided under Section 222 of the NIRC.

Section 222 (b) of the NIRC provides that the period to assess and collect taxes may only be extended upon a written agreement between the CIR and the taxpayer executed before the expiration of the three-year period. RMO 20-90 issued on April 4, 1990 and RDAO 05-01 issued on August 2, 2001 lay down the procedure for the proper execution of the waiver

Due to the defects in the waivers, the period to assess or collect taxes was not extended. Consequently, the assessments were issued by the BIR beyond the three-year period and are void.

 

Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., G.R. No. 184823, 06 October 2010

[DEL CASTILLO, J.]

 

FACTS

Respondent Aichi filed a claim for refund/credit of input VAT for the period July 1, 2002 to September 30, 2002, with the petitioner Commissioner of Internal Revenue (CIR), through the Department of Finance (DOF) One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center.On even date, respondent filed a Petition for Review with the CTA for the refund/credit of the same input VAT.  The CTA partially granted the petition. In a Motion for Reconsideration, petitioner argued that the simultaneous filing of the administrative and the judicial claims contravenes Sections 112 and 229 of the NIRC and a prior filing of an administrative claim is a “condition precedent” before a judicial claim can be filed. The CTA En Banc affirmed the division ruling.

 

ISSUE

Whether the respondent’s judicial and administrative claims for tax refund/credit were filed within the two-year prescriptive period as provided in Sections 112(A) and 229 of the NIRC.

 

HELD

NO.

The two-year period to file a claim for tax refund/credit for the period July 1, 2002 to September 30, 2002 expired on September 30, 2004. Hence, respondent’s administrative claim was timely filed.The filing of the judicial claim was premature. However, notwithstanding the timely filing of the administrative claim, [the Supreme Court is] constrained to deny respondent’s claim for tax refund/credit for having been filed in violation of Section 112(D). Section 112(D) of the NIRC clearly provides that the CIR has “120 days, from the date of the submission of the complete documents in support of the application [for tax refund/credit],” within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer’s recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days.

In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004. Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this reason, we find the filing of the judicial claim with the CTA premature. The premature filing of respondent’s claim for refund/credit of input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA.

 

Applied Food Ingredients Company, Inc. v. Commissioner of Internal Revenue, G.R. No. 184266, 11 November 2013

[SERENO, CJ.]

 

FACTS

Petitioner is a Value-Added Tax (VAT) taxpayer engaged in the importation and exportation business, as a pure buy-sell trader. Petitioner alleged that from September 1998 to December 31, 2000, it paid an aggregate sum of input taxes for its importation of food ingredients.Subsequently, these imported food ingredients were exported between the periods of April 1, 2000 to December 31, 2000, from which the petitioner was able to generate export sales amounting to P114,577,937.24. The aforestated export sales which transpired from April 1, 2000 to December 31, 2000 were “zero-rated” sales, pursuant to Section 106(A (2)(a)(1) of the NIRC of 1997.Petitioner alleged that the accumulated input taxes for the period of September 1, 1998 to December 31, 2000 have not been applied against any output tax.

On March 26, 2002 and June 28, 2002, petitioner filed two separate applications for the issuance of tax credit certificates.On July 24, 2002, in view of respondent’s inaction, petitioner elevated the case before this Court by way of a Petition for Review, docketed as C.T.A. Case No. 6513.Trial ensued and the CTA First Division rendered a Decision on 13 June 2007. It denied petitioner’s claim for failure to comply with the invoicing requirements prescribed under Section 113 in relation to Section 237 of the National Internal Revenue Code (NIRC) of 1997 and Section 4.108-1 of Revenue Regulations No. 7-95.On appeal, the CTA En Banc likewise denied the claim of petitioner citing violation of the invoicing requirements.

ISSUE

Is the petitioner is entitled to the issuance of a tax certificate or refund representing creditable input taxes attributable to zero-rated sales?

 

HELD

NO.

The Commissioner of Internal Revenue (CIR) had one hundred twenty (120) days from the date of submission of complete documents in support of the application within which to decide on the administrative claim.Counting 120 days from 26 March 2002, the CIR had until 24 July 2002 within which to decide on the claim of petitioner for an input VAT refund attributable to the its zero-rated sales for the period April to September 2000.On the other hand, the CIR had until 26 October 2002 within which to decide on petitioner’s claim for refund filed on 28 June 2002, or for the period covering October to December 2000.

In this case, the judicial claim of petitioner was filed on 24 July 2002. Petitioner clearly failed to observe the mandatory 120-day waiting period. Consequently, the premature filing of its claim for refund/credit of input VAT before the CTA warranted a dismissal, inasmuch as no jurisdiction was acquired by the CTA. In accordance with the ruling in San Roque and considering that petitioner’s judicial claim was filed on 24 July 2002, when the 120+30 day mandatory periods were already in the law and BIR Ruling No. DA-489-03 had not yet been issued, petitioner does not have an excuse for not observing the 120+ 30 day period. Failure of petitioner to observe the mandatory 120-day period is fatal to its claim and rendered the CT A devoid of jurisdiction over the judicial claim.

 

Commissioner of Internal Revenue v. Visayas Geothermal Power Co. Inc., G.R. No. 181276, 11 November 2013

[MENDOZA, J.]

 

FACTS

Respondent VGPCI incurred input value added tax of P20,213,044.50 on its domestic purchase of goods and services and importation of goods used in its business for the third and fourth quarter of 2001 and for the entire year of 2002. Due to the enactment of Republic Act (R.A.) No. 9136, which became effective on June 26, 2001, VGPCI’s sales of generated power became zero-rated and were no longer subject to VAT at 10%.

On June 26, 2003, VGPCI filed before the BIR a claim for refund of unutilized input VAT payment in the third quarter of 2001. On December 18, 2003, another claim was filed for the last quarter of 2001 and the four quarters of 2002. For failure of the BIR to act upon said claims, VGPCI filed separate petitions for review before the CTA on September 30, 2003 and December 19, 2003, praying for a refund on the issuance of a tax credit certificate covering the period from July to September 2001 andfor the period from October 2001 to December 2002, CTA Case Nos. 6790 and 6838, respectively.

 

ISSUE

Whether VGPCI failed to observe the proper prescriptive period required by law for the filing of an appeal before the CTA because it filed its petition before the end of the 120-day period granted to the CIR to decide its claim for refund under Section 112(D) of the National Internal Revenue Code (NIRC).

 

HELD

YES, to CTA Case No. 6790.

NO, to CTA Case No. 6838.

The judicial claim filed on September 30, 2003 (CTA Case No. 6790) was prematurely filed and cannot be taken cognizance of because respondent failed to wait for the requisite 120 days after the filing of its claim for refund with the BIR before elevating the case to the CTA. However, the judicial claim filed on December 19, 2003 (CTA Case No. 6838), which was made after the issuance of BIR Ruling DA-480-03, can be considered by the CTA despite its hasty filing only one day after the application for refund was first lodged with the BIR.

 

Commissioner of Internal Revenue v. Dash Engineering Philippines, Inc. (DEPI), G.R. No. 184145, 11 December 2013

[MENDOZA, J.]

 

FACTS

Respondent DEPI filed its monthly and quarterly value-added tax (VAT) returns for the period from January 1, 2003 to June 30, 2003. On August 9, 2004, it filed a claim for tax credit or refund for the unutilized input VAT attributable to its zero-rated sales. Because petitioner Commissioner of Internal Revenue (CIR) failed to act upon the said claim, respondent was compelled to file a petition for review with the CTA on May 5, 2005. CTA ruled in favor of DEPI. CIR elevated the case to CTA En Banc averring that the claim was filed out of time. DEPI asserts that its petition was seasonably filed before the CTA in keeping with the two-year prescriptive period provided for in Sections 204(c) and 229 of the NIRC. CTA En Banc affirmed the CTA division ruling.

 

ISSUE

Whether respondent DEPI’s judicial claim was filed within the prescriptive period under Sec. 112 of the Tax Code.

 

HELD

NO.

The two-year period inSec. 112 refers only to administrative claims. Sections 204 and 229 of the NIRC pertain to the refund of erroneously or illegally collected taxes.Input VAT is not ‘excessively’ collected as understood under Section 229 because at the time the input VAT is collected the amount paid is correct and proper. Hence, respondent cannot advance its position by referring to Section 229 because Section 112 is the more specific and appropriate provision of law for claims for excess input VAT.Petitioner is entirely correct in its assertion that compliance with the periods provided for in the abovequoted provision is indeed mandatory and jurisdictional, as affirmed in this Court’s ruling in San Roque, where the CourtEn Banc settled the controversy surrounding the application of the 120+30-day period provided for in Section 112 of the NIRC and reiterated the Aichi doctrine that the 120+30-day period is mandatory and jurisdictional.

Therefore, in accordance with San Roque, respondent’s judicial claim for refund must be denied for having been filed late. Although respondent filed its administrative claim with the BIR on August 9, 2004 before the expiration of the two-year period in Section l 12(A), it undoubtedly failed to comply with the 120+ 30-day period in Section l l 2(D) (now subparagraph C) which requires that upon the inaction of the CIR for 120 days after the submission of the documents in support of the claim, the taxpayer has to file its judicial claim within 30 days after the lapse of the said period. The 120 days granted to the CIR to decide the case ended on December 7, 2004. Thus, DEPI had 30 days therefrom, or until January 6, 2005, to file a petition for review with the CTA. Unfortunately, DEPI only sought judicial relief on May 5, 2005 when it belatedly filed its petition to the CTA, despite having had ample time to file the same, almost four months after the period allowed by law. As a consequence of DEPI’s late filing, the CTA did not properly acquire jurisdiction over the claim.