(Regulators Day) Court Decisions ELR PICPA for Presentation

7/24/2019 (Regulators Day) Court Decisions ELR PICPA for Presentation

http://slidepdf.com/reader/full/regulators-day-court-decisions-elr-picpa-for-presentation 1/45

© 2013 Punongbayan & Araullo. All rights reserved.

PICPA 2013 National Accountancy WeekTax Updates: Latest Court Decisions

July 17, 2013

Atty. Lea L. Roque

Head, P&A Tax Division




Tax assessments




Proof of Unutilized CWT(Jardine Lloyd Thompson Insurance Brokers Inc., v CIR, CTA

EB 861 June 5, 2013)

Facts:

The Company seeks for a refund of its alleged unutilized CWT

and submitted its annual income tax return for the following year to prove that it did not carry forward the refunded amount.

Issue:

Whether the Company is entitled to a refund of its unutilizedCWT




Held:

Sec. 76 of 1997 NIRC states that the option to carry-over is exercised against the quarterly income taxes to

the taxable quarters of the succeeding taxable years.

Proof of Unutilized CWT




Facts:

A company engaged in transmission of information wasassessed for undeclared sales. The assessment of the BIR

arose from the matching of computer records using the

summary list of purchases submitted by the taxpayer’s

customers.

Assessment based on Letter Notice

(CIR v Fax N Parcel, Inc., CTA EB 883 re CTA Case 7415,

February 14, 2013)




Ruling:

While tax assessments are presumed correct and made in good

faith, the assessments should not, however, be based onpresumptions no matter how reasonable or logical the

presumption might be.

In order to withstand the test of judicial scrutiny, the assessment

must be based on actual facts.

Assessment based on Letter Notice


http://slidepdf.com/reader/full/regulators-day-court-decisions-elr-picpa-for-presentation 7/45© 2013 Punongbayan & Araullo. All rights reserved.

Facts:

After having affirmed the deficiency tax assessment

against the company, the CTA ordered the company’spresident (who was likewise found guilty for failure to

file return and supply information under Section 255 of

the Tax Code) to pay for the civil liability of the

company arising from its tax assessment.

Piercing the Corporate Veil

(People of the Philippines v Wong Yan Tak, Geralyn Bobier

and Pic N' Pac Mart, Inc., CTA Criminal Case 0-090, January

8, 2013)



Ruling:

Considering that no allegation was made that the corporation

was used by its president in the aforementioned circumstances,the fiction that the stockholders and/or officers are separate and

distinct entities from the corporation cannot be disregarded.

Hence, the CTA held that the company president cannot be

made personally liable.

Piercing the Corporate Veil



Tax Treaty Relief Application



Prior ITAD Ruling Requirement

Facts:

• The taxpayer filed for a TTRA for dividends.

• The BIR denied the appl ication.

• TP appealed to the Secretary of Finance who denied the taxpayer’sappeal.

• TP appealed to the CTA.



Prior ITAD Ruling Requirement

Ruling:

• Jurisdiction of the CTA to resolve tax disputes in general does not

include cases where the validity or constitutionality of a law, or a rule or

regulation issued by the administrative agency in the performance of itsquasi-legislative function is challenged.

• The determination of whether a specific rule or set of rules issued by an

administrative agency contravenes the law or the constitution is within

the jurisdiction of the regular courts.



Tax Refund / Tax Credit of Unutilized Input VAT




Taxpayer must be VAT registered

(Crescent Park 14-678 Property Holdings, Inc. v CIR,

CTA Case 8326, June 13, 2013)

Facts:

• Company purchased parcels of land on August 3, 2009.

• Company’s Certificate of VAT registration was dated

August 4, 2009.




Ruling:

• Company is not entitled to refund or issuance of tax credit

certificate since at the time the transactions were made, TPwas not yet a VAT registered entity.

• VAT registration is indispensable to VAT refund.

VAT registered




Proof of Export Sales(Phil. Gold Processing & Refining Corp. v CIR, CTA Case

8270, June 11, 2013)

Facts:

A VAT-registered company exported 100% of its mineral

products to Switzerland, and was paid through inward

remittance in accordance with BSP rules.

The Company posits that such export sales are subject to

0% VAT under the 1997 Tax Code.

The Company then seeks the refund or issuance of tax

credit certificate allegedly representing TP’s unutilized input

VAT.




Proof of Export Sales

Ruling:

Any VAT-registered person claiming VAT zero-rated direct export sales must

present at least 3 types of documents, to wit:

1. The sales invoice as proof of sale of goods;

2. The export declaration and bill of lading or airway bill as proof of actual

shipment of goods from the Philippines to a foreign country, and

3. The bank credit advice, certificate of bank remittance or any other

document proving payment for the goods in acceptable foreign currencyor its equivalent in goods and services.




Undeclared Input Taxes(Coca Cola Bottlers Philippines, Inc. v CIR – CTA Case 8136,

May 15, 2013)

Facts:

TP claimed a refund of the VAT it paid on its purchases, which

it recorded in its books of account but failed to declare in its

quarterly VAT returns due to inadvertence.

TP was unable to amend its VAT return to include its

undeclared input taxes since the BIR has issued a LOA

covering said return.




Undeclared Input Taxes

Ruling:

CTA denied the Company's claim. There are 2 instances when

excess input taxes may be claimed for refund:

(1) zero-rated or effectively zero rated sales; and

(2) upon cancellation of VAT registration due to retirement from or

cessation of business.




Exception to Irrevocability Rule – Sec 76 Tax Code

(Sankyu Construction Philippines, Inc. v CIR, CTA

Case 8079, May 31, 2013)

Facts:

Despite previously choosing to carry over its excess credits,

a Corporation filed a claim for refund due to cessation of business

Issue:

Whether the Company should be allowed to choose refund




Exception to Irrevocability Rule – Sec 76 Tax Code

Ruling:

Absent the tax clearance certificate issued by the BIR and

certificate of dissolution issued by the SEC, the CTA held thatit cannot consider the taxpayer as already dissolved or has

permanently ceased its operations to remove it from the

application of the irrevocability rule under Section 76 of the

Tax Code.




VAT




Exception to the 120-30 day rule(CIR v San Roque Power Corporation, Taganito

Mining Corporation and Philex Mining Corporation,GR 187485, February 12, 2013)

Facts:

San Roque filed an amended claim for refund or issuance of tax credit certificate representing unutilized input VAT for TY

2001 on purchases of goods and services and importation of

goods attributable to zero-rated sales with the BIR on March

28, 2003.

Company filed its Petition for Review before the CTA on April

10, 2003.




Exception to the 120-30 day rule

Issue:

Whether TP’s judicial claim was timely filed.

Held:

120+30 day rule is manadatory and jurisdictional. Claim for

refund was denied for being premature.





FACTS:

Taganito filed BIR claim on Nov 13, 2006 for input VAT for

TY2004 and 2005.

CTA claim was filed on February 17, 2007.

Issue: Whether TP’s judicial claim was timely filed.

Held: Taganito’s claim fall within the exception period betweenDec 10, 2003 and October 5, 2010.





Held:

BIR Ruling No. DA 489-03 dated Dec 10, 2003 expressly

stated that “taxpayer need not wait for the lapse of the 120

day before before it could seek judicial relief with the CTA.”

The ruling was a general interpretative rule no specific to a

TP.

Aichi Doctrine was adopted on October 6, 2010.





FACTS:

Philex Mining filed with BIR on 20 March 2006 for refund for

Q3 2005.

CTA cas filed on 17 October 2007.

ISSUE: Whether TP’s judicial claim was timely filed.

HELD: This is not a case of premature filing but one of latefiling.




Exception to 120-30 day rule

(Sony Ericsson Mobile Communications International

AB v CIR, CTA Case 8059, June 11, 2013)

Facts: TP filed with RDO on March 30, 2010 for input VAT for

TY 2008.

CTA case was filed on March 31, 2010.

Held:

The Company filed its judicial claim within the exception

provided in the San Roque case(Dec 10, 2003 and October 5,

2010).




VAT treatment on Isolated Transaction

(Mindanao II Geothermal Partnership v CIR, GR

193301, March 11, 2013)

Facts:

In the course of its business, a power generating companybought a motor vehicle which formed part of its assets used

in its business operations.

When the motor vehicle was already fully depreciated, thecompany sold the motor vehicle.





Ruling:

The SC held that while the sale of the motor vehicle is an isolated

transaction, it may be deemed an incidental transaction which is

subject to 12% VAT. It does not follow that an isolated transactioncannot be an incidental transaction for VAT purposes. Section 105

of the Tax Code which provides that a transaction “in the course of

trade or business” includes “transactions incidental thereto”.

Hence, the sale of motor vehicle is considered an incidental

transaction made in the course of trade or business which should

be subject to the 12% VAT.




Tax Evasion




Willful Blindness

(PP v. Judy Anne Santos, CTA Crim Case No o-012,

Jan 16, 2013)

Facts:

A local celebrity was accused of filing a false and fraudulent

income tax return before the CTA and a Warrant of Arrest has

been issued against her. She denied the allegations statingthat it is her manager who is in charge of filing the relevant

returns and paying the corresponding taxes since she started

working, handling all her transactions and that out of trust,

respect and confidence on her Manager, she signedcontracts and other documents without reading the same.

And that her manager hired an accountant to handle her tax

obligations.




Willful Blindness

Recall:

People v Kintanar (CTA EB Crim 006, May 27, 2010, affirmed by

SC Resolution January 2012) – Kintanar claimed that she did not

actively participate in the filing of her joint ITRs with her husbandand entrusted the fulfillment of such duty to her husband and that

her husband hired an accountant tasked to handle the filing and

payment of their tax obligations. But CTA found her guilty of

supplying BIR with incorrect and inaccurate information on the

ground of Willful Blindness Doctrine. SC upheld the CTA's ruling.




Willful Blindness

Recall:

Elements of violation of Section 255 of the 1997 Tax Code:

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




Willful Blindness

Ruling:

CTA acquitted and found the local celebrity only negligent, which is

not equivalent to fraud with intent to evade tax, due to insufficient

evidence to prove fraud and the celebrity's intention to settle thecase.

This ruling was upheld by the SC Resolution issued last April 17,

2013.




DST




DST on Assignment of Promissory Notes(Philacor

Credit Corporation v CIR, GR 169899, February 6,

2013)

Facts:

A domestic corporation was assessed by the BIR for

deficiency DST on the promissory notes executed by the

buyers of appliances on installment basis in favor ofappliance dealers, and also, on the subsequent assignment

of the same promissory notes in favor of the company.

The BIR contends that the finance company is subject toDST on the issuance of promissory notes as the transferee

which “accepted” the promissory notes from the appliance

dealer.





Ruling:

The financing company is not liable to DST.

The person who made, signed, issued, accepted or

transferred the promissory notes is the buyer and not the

financing company.

The financing company is not also liable for the DST on the

assignment of promissory notes since the transaction is not

taxed under the law.




Local Government Taxes




Re-Classification for purposes of tax

(Super Grocers, Inc. v The Municipality of San Pedro

Laguna, CTA AC 86, February 25, 2013)

Facts:

A company was subjected to LBT as “owners or operators of

privately-owned supermarket, shopping centers and mini-marts”, a classification which was introduced by the host

municipality in 2006 via a municipal ordinance.

Prior to this, it was classified as retailer of grocery items

selling both essential and non-essential commodities which

are subject to differentiated LBT rate.




Ruling:

The re-classification of the company from a retailer of essential

goods into an owner or operator of privately-owned

supermarkets, shopping centers, and mini-marts is invalid

since it failed to consider the limitation imposed under par (h) of

Sec 143 of the LGC, stating that the power of the municipality to

impose business tax on any other business which it may deem

proper is limited to those businesses that are “not otherwisespecified in the preceding paragraph” of Section 143 of the

LGC.





Ruling:

Considering that the phrase “retailers of essential commodities”

under Section 143(C) of the LGC and “on retailers” under

Section 143(d) of the same Code, as adopted by the subjectmunicipal ordinance is broad enough to include the business

activities of operating privately-owned supermarkets, shopping

centers, including mini-marts, the additional classification being

already within the scope of “retailers of essential commodities”and “retailers” is deemed invalid.





Facts:

The Company received notices of assessment and later, amended

notices of assessment LG for LBT. The Company protested on

both notices, arguing that it is not engaged in business for being

non-stock nonprofit cooperative.

LG denied the protest and issued a Notice of Seizure or

Confiscation of TP’s personal properties and copies Notices of

Garnishment and Warrant of Levy, representing Company’s LBT.Company filed a Petition for Prohibition, which the RTC denied

since there was another remedy of appeal under Sec. 195 of LGC

that lapsed without TP availing of it, therefore became

unappealable and conclusive.

Protesting an LBT Assessment(Benguet Electric Cooperative v Municipality of La Trinidad,

CTA AC 85, June 7, 2013)




Ruling:

Since no appeal was filed by Company within the 30day period

provided under Sec. 195 of LGC, the assessments for LBT

became conclusive and unappealable. Consequently, Company is

precluded from questioning the validity of the assessments even

through a Petition for Prohibition. If Company has timely availed of

this remedy of appeal to the RTC when LG denied its protest, then

RTC would have acquired jurisdiction to determine the legality orvalidity of the Notices of Assessment/Amended Notices of

Assessment issued by respondents.

Protesting an LBT Assessment




Special civil actions of certiorari and prohibition do not lie

where the remedy by appeal has been lost because said

special civil actions cannot take the place of an appeal.

Protesting an LBT Assessment



Thank you.

Contact:

[email protected]

(Regulators Day) Court Decisions ELR PICPA for Presentation

Documents

Transcript of (Regulators Day) Court Decisions ELR PICPA for Presentation