Nursery Care Corp. vs.

Acevedo
Facts:
The case involves Nursery Care Corporation, Shoemart, Inc., Star Appliance Center,
Inc., H&B, Inc., Supplies Station, Inc., and Hardware Workshop, Inc. as petitioners
against Anthony Acevedo, in his capacity as the Treasurer of Manila, and the City of
Manila as respondents. The events leading to the case began when the City of
Manila assessed and collected taxes from the petitioners under Sections 15 and 17
of the Revenue Code of Manila, which pertain to taxes on wholesalers, distributors,
dealers, and retailers. In addition, the City imposed further taxes under Section 21
of the same code as a condition for the renewal of their business licenses for the
year 1999. The petitioners paid the assessed taxes under protest, totaling
significant amounts for the first quarter of 1999. Following the payment, they
formally requested a tax credit or refund from the City Treasurer's office, which was
denied. The petitioners then sought reconsideration, but their request was again
denied. Subsequently, they filed petitions for certiorari in the Regional Trial Court
(RTC) of Manila, which were consolidated and assigned to Branch 19 after several
re-raffles. The RTC ruled that the taxes imposed did not constitute double taxation
and dismissed the petitions. The petitioners appealed to the Court of Appeals (CA),
which also dismissed their appeal for lack of jurisdiction, leading to the current
case.
Issue:
1. Did the Court of Appeals err in dismissing the petitioners' appeal for raising
only questions of law?
2. Were the petitioners entitled to a tax credit or refund for the taxes paid under
Section 21 of the Revenue Code of Manila?
3. Did the imposition of additional business tax under Section 21 constitute
double taxation in violation of the Local Government Code of 1991?
Ruling:
1. The Supreme Court ruled that the CA did not err in dismissing the appeal;
however, it emphasized that the rules should be applied liberally for the sake
of justice and equity.
2. The Court found that the collection of taxes under Section 21 of the Revenue
Code of Manila constituted double taxation, and thus the petitioners were
entitled to a refund of the taxes paid under that section.
Ratio:
The Supreme Court explained that the distinction between questions of law and fact
is crucial in determining the proper appellate procedure. A question of law arises
when there is uncertainty about the law applicable to a given set of facts, while a
question of fact involves doubts about the truth of the facts themselves. In this
case, the petitioners' appeal raised issues that were purely legal, justifying the CA's
dismissal. However, the Court adopted a liberal approach to ensure substantial
justice, particularly given the context of double taxation. The Court reiterated that
double taxation occurs when the same taxpayer is taxed twice for the same
purpose by the same taxing authority within the same jurisdiction during the same
taxing period. The Court found that the taxes imposed under Sections 15, 17, and
21 of the Revenue Code were all levied on the same subject matter—business
operations in Manila—thus constituting double taxation. Consequently, the
petitioners were entitled to a refund for the taxes paid under Section 21, as they
had already fulfilled their tax obligations under the other sections of the Revenue
Code.
City of Manila vs. Cosmos Bottling Corporation
Facts:
The case involves the City of Manila and the Office of the City Treasurer of Manila as
petitioners against Cosmos Bottling Corporation as the respondent. The events
leading to the case began in January 2007 when the City of Manila assessed Cosmos
local business taxes and regulatory fees amounting to P1,226,781.05, as indicated
in a Statement of Account dated January 15, 2007. Cosmos protested this
assessment through a letter dated January 18, 2007, arguing that the relevant Tax
Ordinance Nos. 7988 and 8011, which amended the Revenue Code of Manila (RCM),
had been declared null and void. They also contended that the imposition of local
business tax under Section 21 of the RCM, in addition to Section 14, constituted
double taxation. Cosmos tendered a payment of P131,994.23, which they claimed
was the correct amount, but this payment was refused by the City Treasurer.
Subsequently, Cosmos received a letter from the City Treasurer denying their
protest, stating that any action taken would be sub judice until a final ruling was
made. Consequently, Cosmos was compelled to pay the full assessed amount of
P1,226,781.05 on February 13, 2007, as evidenced by Official Receipt No. BAJ-
005340.
On March 1, 2007, Cosmos filed a claim for refund of P1,094,786.82 with the Office
of the City Treasurer, reiterating the grounds of their protest. Following this, on
March 8, 2007, Cosmos filed a complaint with the Regional Trial Court (RTC) of
Manila, seeking a refund or a tax credit certificate for the same amount. The RTC
ruled in favor of Cosmos but denied the claim for refund, ordering the City Treasurer
to refrain from imposing tax under Section 21 if tax had already been imposed
under Section 14. Cosmos then filed a petition for review before the Court of Tax
Appeals (CTA), which was initially ruled in favor of Cosmos by the CTA Division on
November 9, 2010. However, the City of Manila and the Office of the City Treasurer
directly appealed to the CTA En Banc without filing a motion for reconsideration or
new trial, leading to the dismissal of their petition on procedural grounds.
Issue:
1. Did the CTA En Banc correctly dismiss the petition for review for the
petitioners' failure to file a motion for reconsideration or new trial with the
CTA Division?
 2. Can a taxpayer who initially protested and paid an assessment later shift
their remedy to one of refund?
Ruling:
1. The Supreme Court ruled that the CTA En Banc correctly dismissed the
petition for review due to the petitioners' failure to comply with the
mandatory requirement of filing a motion for reconsideration or new trial with
the CTA Division.
2. The Court also ruled that a taxpayer who has protested and paid an
assessment is permitted to subsequently institute an action for refund.
Ratio:
The Supreme Court emphasized that the filing of a motion for reconsideration or
new trial before the CTA Division is a mandatory prerequisite for any appeal to the
CTA En Banc, as stipulated in Section 18 of Republic Act No. 1125, as amended. The
Court highlighted that procedural rules are designed to be followed and that
noncompliance cannot be excused unless there are compelling reasons. The
petitioners' argument of excusable mistake was rejected, as the Court found no
justification for bypassing the established procedural requirements.
Regarding the second issue, the Court clarified that a taxpayer who has protested
an assessment and subsequently paid the tax is not precluded from seeking a
refund. The law allows for both a protest against an assessment and a claim for
refund, as outlined in Sections 195 and 196 of the Local Government Code (LGC).
The Court noted that Cosmos had timely protested the assessment and filed for a
refund within the prescribed periods, thus satisfying the necessary conditions to
pursue a refund. The Court affirmed the CTA Division's ruling that the City of
Manila's assessment was erroneous and warranted a refund to Cosmos.
Cargill Philippines, Inc. vs. Commissioner of Internal Revenue
Facts:
The case involves Cargill Philippines, Inc. (Petitioner) and the Commissioner of
Internal Revenue (Respondent). The events leading to the case began when Cargill
entered into an Intellectual Property License Agreement with CAN Technologies,
Inc., a U.S. company, on June 1, 2002. This agreement allowed Cargill to use CAN
Technologies' patents and copyrights for producing and selling animal feeds in the
Philippines, in exchange for royalty payments. From June 1, 2005, to April 30, 2007,
Cargill paid a total of P175,425,414.12 in royalties, deducting withholding taxes at a
rate of 15%, amounting to P26,313,812.10.
On December 21, 2005, Cargill sought confirmation from the Bureau of Internal
Revenue (BIR) regarding the applicability of a preferential tax rate of 10% on these
royalties under the "most favored nation" clause of the RP-US Tax Treaty, in relation
to the RP-Bahrain Tax Treaty. The BIR responded with Ruling No. DA-ITAD 60-07 on
May 11, 2007, allowing the 10% tax rate but clarifying that it was based on the RP-
Czech Tax Treaty, not the RP-Bahrain Tax Treaty.
Subsequently, on July 10, 2007, Cargill filed a claim for a refund of P8,771,270.71,
asserting that this amount represented overpaid withholding taxes on the royalties.
The Court of Tax Appeals (CTA) First Division dismissed the claim due to insufficient
evidence, stating that Cargill failed to demonstrate that the tax treatment of
royalties under the RP-US and RP-Czech treaties was similar. The CTA En Banc
upheld this decision, leading Cargill to file a Petition for Review on Certiorari, which
is the subject of this case.
Issue:
1. Does the Court of Tax Appeals have jurisdiction to determine the validity of
BIR Ruling No. DA-ITAD 60-07?
2. Did the Court of Tax Appeals err in declaring BIR Ruling No. DA-ITAD 60-07
invalid and not binding?
3. Can the ruling declaring BIR Ruling No. DA-ITAD 60-07 to be invalid be
applied retroactively to Cargill?
4. Is Cargill entitled to a tax refund/credit certificate for the amount of
P8,771,270.71, representing erroneously paid final withholding taxes on
royalties paid to CAN Technologies?
Ruling:
The Supreme Court denied the Petition for Review on Certiorari, affirming the
decisions of the Court of Tax Appeals En Banc. The Court held that the CTA has
jurisdiction to review the validity of BIR Ruling No. DA-ITAD 60-07, that the ruling
was correctly deemed invalid, and that the invalidity could be applied to Cargill.
Consequently, Cargill was not entitled to the claimed tax refund.
Ratio:
The Supreme Court reasoned that the Court of Tax Appeals possesses the
jurisdiction to review and nullify the rulings of the Commissioner of Internal
Revenue, as established under Republic Act No. 1125. The Court emphasized that
the CTA is not bound by erroneous interpretations of tax treaties by the BIR. The
Court reiterated that for the "most favored nation" clause to apply, two conditions
must be met: (1) the royalties must be of the same kind, and (2) the tax
circumstances must be similar. The Court found that Cargill failed to demonstrate
that the tax treatment of royalties under the RP-US and RP-Czech treaties was
similar, particularly regarding the limitations on tax credits under U.S. law, which
were not presented in evidence. The Court underscored that the burden of proof lies
with the taxpayer to establish claims for tax refunds, and any ambiguity in tax laws
or treaties must be construed against the taxpayer. Thus, the Court concluded that
Cargill was not entitled to the preferential tax rate or the refund it sought.
Mitsubishi Corp. - Manila Branch vs. Commissioner of Internal Revenue
Facts:
The case involves Mitsubishi Corporation-Manila Branch (petitioner) as the appellant
and the Commissioner of Internal Revenue (CIR) as the respondent. The events
leading to the case began on June 11, 1987, when the governments of Japan and
the Philippines executed an Exchange of Notes, wherein Japan agreed to extend a
loan of Forty Billion Four Hundred Million Japanese Yen (₱40,400,000,000) to the
Philippines for the Calaca II Coal-Fired Thermal Power Plant Project. The Exchange of
Notes included a provision (Paragraph 5(2)) stating that the Philippine Government
would assume all taxes imposed on Japanese contractors involved in the project.
Subsequently, Loan Agreement No. PH-P76 was executed on September 25, 1987,
followed by Loan Agreement No. PH-P141 on December 20, 1994, for additional
funding.
On June 21, 1991, the National Power Corporation (NPC), acting as the executing
agency, entered into a contract with Mitsubishi Corporation for the engineering and
construction of the project, which was funded by the OECF loans. The contract
included a clause obligating NPC to pay all taxes directly imposed under the
contract. The project was completed on December 2, 1995, and accepted by NPC on
January 31, 1998.
On July 15, 1998, Mitsubishi filed its Income Tax Return for the fiscal year ending
March 31, 1998, reporting income from the OECF-funded portion of the project and
remitting ₱8,324,100.00 as Branch Profit Remittance Tax (BPRT). On June 30, 2000,
Mitsubishi filed a claim for refund with the CIR for ₱52,612,812.00, representing
erroneously paid income tax and BPRT. The claim was based on BIR Ruling No. DA-
407-98, which interpreted the Exchange of Notes as indicating that the Philippine
Government was responsible for the tax obligations of Japanese contractors.
The Court of Tax Appeals (CTA) Division initially granted the refund in a decision
dated December 17, 2003, but this was reversed by the CTA En Banc in a decision
dated May 24, 2006, which ruled that Mitsubishi was not entitled to a refund. The
CTA En Banc held that the Exchange of Notes did not grant tax exemption and that
the proper remedy for Mitsubishi was to recover the taxes from NPC, not the CIR.
Mitsubishi's motion for reconsideration was denied on December 4, 2006, prompting
the appeal to the Supreme Court.
Issue:
1. Is Mitsubishi Corporation-Manila Branch entitled to a refund of the
erroneously paid income tax and BPRT?
2. If so, from which government entity should the refund be claimed?
Ruling:
The Supreme Court ruled in favor of Mitsubishi Corporation-Manila Branch, granting
the petition for review and reversing the decisions of the CTA En Banc. The Court
reinstated the CTA Division's decision, which ordered the CIR to refund the
erroneously paid taxes.
Ratio:
The Supreme Court's ruling was based on the interpretation of the Exchange of
Notes and the relevant provisions of the National Internal Revenue Code (NIRC). The
Court emphasized that the taxes paid by Mitsubishi were erroneously collected
because the obligation to pay these taxes had been assumed by the Philippine
Government as per the Exchange of Notes. The Court clarified that the term
"assume" in the context of the Exchange of Notes meant that the Philippine
Government took on the tax liabilities of Japanese contractors, which is distinct from
a tax exemption.
The Court also highlighted that the CIR has the authority to refund taxes that have
been erroneously collected, as provided in Sections 204 and 229 of the NIRC. The
Court rejected the CTA En Banc's interpretation that the Exchange of Notes did not
grant tax exemption, asserting that the assumption of tax liabilities constituted a
concession to Japanese contractors. Furthermore, the Court noted that
administrative issuances, such as RMC No. 42-99, could not override the statutory
authority of the CIR to grant refunds. Therefore, the Court concluded that Mitsubishi
was entitled to a refund of the taxes it had erroneously paid, which should be
processed by the CIR.
Mandanas vs. Ochoa, Jr.
Facts:
The case involves two consolidated petitions: G.R. No. 199802 filed by Congressman
Hermilando I. Mandanas and others, and G.R. No. 208488 filed by Congressman
Enrique T. Garcia, Jr. The petitions were filed against various government officials,
including Executive Secretary Paquito N. Ochoa, Secretary of Finance Cesar
Purisima, and others, regarding the computation of the just share of local
government units (LGUs) in national taxes. The petitions were prompted by the
assertion that the computation of the Internal Revenue Allotment (IRA) for LGUs, as
provided in the General Appropriations Act (GAA) for FY 2012, was flawed.
Specifically, the petitioners contended that certain collections of national internal
revenue taxes (NIRTs) collected by the Bureau of Customs (BOC), such as excise
taxes, value-added taxes (VAT), and documentary stamp taxes (DST), were
excluded from the base amount for computing the IRA. The petitioners argued that
these taxes should be included in the computation, as they are considered national
taxes. They sought the release of additional funds amounting to
P60,750,000,000.00 for FY 2012 and the unpaid IRA from FY 1992 to FY 2011,
totaling P438,103,906,675.73. The case was filed in the Supreme Court on July 3,
2018, and the issues raised were centered on the interpretation of the 1987
Constitution and the Local Government Code (LGC).
Issue:
1. Is mandamus the proper remedy to challenge the constitutionality of the
relevant provisions of the GAA and the LGC?
2. Is Section 284 of the LGC unconstitutional for being inconsistent with Section
6, Article X of the 1987 Constitution?
 3. Are the existing shares given to the LGUs by virtue of the GAA consistent with
the constitutional mandate to provide LGUs a "just share" in national taxes?
4. Are the petitioners entitled to the reliefs they prayed for?
Ruling:
The Supreme Court ruled that the petitions are partly meritorious. It declared the
phrase "internal revenue" in Section 284 of the LGC unconstitutional and ordered its
deletion. The Court also mandated that the computation of the IRA for LGUs must
include all collections of national taxes, not just national internal revenue taxes.
However, the Court denied the petitioners' claims for the payment of arrears,
stating that the ruling would only have prospective application.
Ratio:
The Court's decision was based on the interpretation of Section 6, Article X of the
1987 Constitution, which mandates that LGUs shall have a just share in national
taxes, automatically released to them. The Court found that the phrase "internal
revenue" in Section 284 of the LGC limited the base for the computation of the IRA
to national internal revenue taxes, which was inconsistent with the constitutional
provision that refers to all national taxes. The Court emphasized that Congress has
the authority to determine the just share of LGUs, but it cannot restrict the base for
that share to only internal revenue taxes. The Court also highlighted the importance
of fiscal autonomy for LGUs, which is essential for effective local governance. The
ruling underscored that the automatic release of the IRA is a constitutional mandate
that should not be subject to annual appropriations. However, the Court applied the
doctrine of operative fact, which allows for the effects of the unconstitutional law to
remain valid until the ruling's finality, thus denying the petitioners' claims for past
arrears.