COMMISSIONER OF INTERNAL REVENUE VS.
FILINVEST DEVELOPMENT CORPORATION
G.R. No. 163653 (July 19, 2011)
I. FACTS:
In 1996 and 1997, Filinvest Development Corporation (FDC) extended interest-free
cash advances to its affiliates. The advances were evidenced by instructional letters as well
as cash and journal vouchers. CIR assessed FDC for deficiency income tax on interest
imputed on the said cash advances pursuant to Section 50 of the Tax Code, as well as
documentary stamp tax (DST) on loans imposed under Section 179. FDC protested the
deficiency tax assessments. As the CIR failed to resolve the protest, FDC filed a Petition for
Review with CTA. FDC argued that CIR lacks the authority to impute theoretical interest on
the cash advances, and that interest cannot be demanded in the absence of a stipulation in
writing. CTA upheld the income tax assessment, explaining that CIR was justified in assessing
undeclared interest on the cash advances to forestall tax evasion. On appeal, CA granted
FDC's petition and cancelled the income tax assessment.
II. ISSUE: W/N CIR can impute theoretical interest on FDC's interest-free cash advances to
affiliates.
III. RULING:
No. The CIR has no authority to impute theoretical interest on FDC's cash advances to
its affiliates in the absence of proof that interest was paid or was agreed upon in writing.
While the CIR may distribute, apportion or allocate gross income and deductions between or
among controlled taxpayers, Section 50 of the Tax Code in relation to Section 179 of RR No.
2 does not authorize the CIR to impute theoretical interest on such transactions. There must
be a proof of the actual or, at the very least, probable receipt or realization by the controlled
taxpayer of the item of gross income sought to be distributed, apportioned or allocated by
the CIR.
The term “gross income” is understood to mean all income from whatever source
derived. While it has been held that the phrase from “whatever source derived” indicates a
legislative policy to include all income not expressly exempted by law, the term “income”
has been variously interpreted to mean “cash received or its equivalent”, “the amount of
money coming to a person within a specific time”, or “something distinct from principal or
capital”.
Lastly, Article 1956 of the Civil Code clearly provides that no interest shall be due
unless expressly stipulated in writing. Since interest was not agreed upon in writing, no
interest should be imputed to the cash advances extended by FDC to its affiliates.
BELLE CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 181298 (March 2, 2011)
I. FACTS:
Belle Corp. filed with BIR its ITR for the first quarter of 1997. Subsequently, it filed its
second quarter ITR, declaring overpayment of taxes. In view thereof, no taxes were paid for
the second and third quarters. Instead of claiming tax refund, Belle apply it as tax credit to
the succeeding taxable year, and marked the tax credit option in its ITR. However, in 2000,
Belle filed with BIR an administrative claim for refund of unutilized excess income tax
payments for 1997. Notwithstanding the administrative claim for refund, Belle carried over
the excess amount to taxable year 1999. Due to inaction of CIR, Belle filed petition for
review with CTA, which denied the same.
II. ISSUE: W/N Belle is entitled to refund.
III. RULING:
No. Section 76 of NIRC provides that a taxpayer has the option to file a claim for
refund or to carry-over its excess income tax payments. The option to carry-over is
irrevocable. Thus, once a taxpayer opted to carry-over its excess income tax payments, it
can no longer seek refund of the unutilized excess income tax payments. The taxpayer,
however, may apply the unutilized excess income tax payments as a tax credit to the
succeeding taxable years until such has been fully applied.
Belle Corp. has earlier opted to carry over its 1997 excess income tax payments by
marking the tax credit option box in its 1997 income tax return. However, while Belle may no
longer file a claim for refund, it properly carried over its 1997 excess income tax payments by
applying portions thereof to its 1998 and 1999 Minimum Corporate Income Tax. Thus, as of
the taxable year 1999, Belle still has unutilized excess income tax payments of ₱92,261,444
which may be carried over to the succeeding taxable years until fully utilized.
COMMISSIONER OF INTERNAL REVENUE VS. PL MANAGEMENT INTERNATIONAL
G.R. No. 160949 (April 04 ,2011)
I. FACTS:
PL Management earned ₱24,000,000 from its professional services rendered to
UEM-MARA Phil. Corp. (UMPC), from which income UMPC withheld ₱1,200,000 as the PL's
withholding agent. In its 1997 ITR filed on April 13, 1998, PL reported a net loss of ₱983,037,
but expressly signified that it had a creditable withholding tax of ₱1,200,000 for 1997 to be
claimed as tax credit in 1998. On April 13, 1999, PL submitted its ITR for 1998, in which it
declared a net loss of ₱2,772,043. Due to its net-loss position, PL was unable to claim the
₱1,200,000 as tax credit.
On April 12, 2000, PL filed with CIR a written claim for the refund of the ₱1,200,000
unutilized creditable withholding tax for 1997. CIR did not act, hence, PL commenced judicial
action with CTA. CTA Division denied the claim on the ground of prescription. On appeal, CA
partly granted the petition of PL holding that the two-year prescriptive period was not
jurisdictional.
II. ISSUE: W/N PL is entitled to refund.
III. RULING:
No. Section 76 of the NIRC provides that 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.
These two options are alternative in nature. The choice of one precludes the other. One
cannot get a tax refund and a tax credit at the same time for the same excess income taxes
paid.
Inasmuch as PL already opted to carry over its unutilized creditable withholding tax
to taxable year 1998, the carry-over could no longer be converted into a claim for tax refund
because of the irrevocability rule provided in Section 76. Thereby, the respondent became
barred from claiming the refund. However, PL remained entitled to utilize that amount of
P1,200,000 as tax credit in succeeding taxable years until fully exhausted. In this regard,
prescription did not bar it from applying the amount as tax credit considering that there was
no prescriptive period for the carrying over of the amount as tax credit in subsequent
taxable years.
CENTRAL LUZON DRUG CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 181371 (March 2, 2011)
I. FACTS:
On April 13, 2005, petitioner CENTRAL LUZON DRUG CORPORATION (CLDC) filed with
CIR a request for tax credit certificate in the amount of P32,170,409, representing the 20%
sales discounts allegedly granted to senior citizens for the year 2002. On April 14, 2005,
petitioner filed with CTA a Petition for Review. CTA Division denied CLDC’s claim for
insufficiency of evidence. CTA En Banc affirmed the Division. This prompted CLDC to file
before SC a Petition for Review on Certiorari under Rule 45. In response, comments were
filed by CIR and OSG, as counsel for CIR.
However, instead of filing a reply, CLDC filed a Motion to Withdraw, praying that the
case be dismissed without prejudice. According to CLDC, the amount of tax credit being
claimed for 2002 would just be included in its future claims for issuance of a TCC since the
said amount was carried over to its 2003 ITR. OSG does not oppose the Motion. However,
citing Section 2, Rule 17 of the Rules of Court, OSG argues that withdrawal of the instant
case is no longer a matter of right on the part of CLDC, but is discretionary upon the Court.
OSG also calls attention to the failure of Mr. Jacinto J. Conception, the person who signed
the Verification and Certification of Non-forum Shopping, to exhibit before the notary public
a valid Identification Card. OSG insists that such failure renders the instant Petition defective.
Thus, it should be dismissed with prejudice.
ISSUE: Whether the dismissal should be with prejudice against petitioner.
RULING:
YES. Section 1, Rule 13 of the Internal Rules of the Supreme Court provides that "a
case shall be deemed submitted for decision or resolution upon the filing of the last
pleading, brief, or memorandum that the Court or its Rules require." In the instant case,
records show that on August 19, 2009, SC resolved to require CLDC to file a reply. Instead of
complying, it opted to file a motion to withdraw. Clearly, by requiring petitioner to file its
Reply, the Court has not yet deemed the case submitted for decision or resolution. Thus, SC
resolve to grant petitioner's Motion to Withdraw.
However, SC agrees with OSG that the dismissal of the case should be with prejudice.
By withdrawing the appeal, petitioner is deemed to have accepted the decision of the CTA.
And since the CTA had already denied petitioner's request for the issuance of a tax credit
certificate for insufficiency of evidence, it may no longer be included in petitioner's future
claims. Petitioner cannot be allowed to circumvent the denial of its request for a tax credit
by abandoning its appeal and filing a new claim. An appellant who withdraws his appeal
must face the consequence of his withdrawal, such as the decision of the court a quo
becoming final and executory.
MICROSOFT PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 180173 (April 6, 2011)
I. FACTS:
Microsoft renders marketing services to two affiliated nonresident foreign corporations with
their services being paid for in foreign currency. Itt filed an administrative claim for tax credit of VAT
input taxes in the amount of ₱11,449,814.99 with the BIR. The administrative claim for tax credit was
filed within two years from the close of the taxable quarters when the zero-rated sales were made.
Due to the BIR's inaction, Microsoft filed a petition for review with the CTA, which denied the same
on the basis that the official receipts issued did not bear the imprinted word “zero-rated” on its face
as required by Sections 113 and 237 of the NIRC as well as Section 4.108-1 of Revenue
Regulations No. 7-957, and are thus not valid evidence of Microsoft’s [Link] En Banc affirmed.
II. ISSUE: W/N Microsoft is entitled to a refund.
III. RULING:
No. A tax credit or refund, like tax exemption, is strictly construed against the taxpayer. The
taxpayer has the burden of proving that he is entitled to the refund or credit by submitting evidence
that he has complied with the requirements laid down in the tax code and the BIR's revenue
regulations under which such privilege of credit or refund is accorded. The regulations in effect when
the sales were made, particularly RR 7-957, clearly indicate in the portion outlining the “Invoicing
Requirements” that the word “zero-rated” must be imprinted in the invoice. Without such, the
invoices are not considered as VAT invoices and thus could not give rise to any input tax. The Court
added that the reason for enforcing this rule even if only based on regulation is that it prevents
buyers from falsely claiming input VAT from their purchases when no VAT is actually paid.
