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ESTATE TAX Ruling: Yes.

the approval of the court, sitting in probate, or as a settlement


tribunal over the deceased is not a mandatory requirement in the collection of
Dizon vs CTA GR 140944 estate taxes. It cannot therefore be argued that the Tax Bureau erred in
proceeding with the levying and sale of the properties allegedly owned by the
FACTS: Fernadez died. A petition for the probate of his will was filed late President, on the ground that it was required to seek first the probate
thereafter. At the time of his death, he had high amounts payable to creditors. court's sanction. There is nothing in the Tax Code, and in the pertinent remedial
These payables were appreciated as deductions from his gross estate. After the laws that implies the necessity of the probate or estate settlement court's
estate taxes have been paid, the creditors condoned the said debts. approval of the state's claim for estate taxes, before the same can be enforced
Issue: whether the actual claims of the creditors may be fully allowed as and collected.
deductions from the gross estate of Fernandez despite the fact that these claims On the contrary, under Section 87 of the NIRC, it is the probate or settlement
were reduced or condoned through compromise agreements entered into by the court which is bidden not to authorize the executor or judicial administrator of
estate with its creditors? the decedent's estate to deliver any distributive share to any party interested in
Ruling: YES. The claims of the estate’s creditors have been condoned. the estate, unless it is shown a Certification by the Commissioner of Internal
Condonation or remission of debt is defined as an act of liberality, by virtue of Revenue that the estate taxes have been paid. This provision disproves the
which without receiving any equivalent, the creditor renounces the enforcement petitioner's contention that it is the probate court which approves the
of the obligation, which is extinguished in its entirety or in that part or aspect of assessment and collection of the estate tax.
the same to which the remission refers. If there is any issue as to the validity of the BIR's decision to assess the estate
Applying the date-of-death valuation rule, the amount of claim against the taxes, this should have been pursued through the proper administrative and
estate at the time of death of the decedent is not affected by the subsequent judicial avenues provided for by law in Sec. 229 of the NIRC.
settlements. Apart from failing to file the required estate tax return within the time required
for the filing of the same, petitioner, and the other heirs never questioned the
assessments served upon them, allowing the same to lapse into finality, and
prompting the BIR to collect the said taxes by levying upon the properties left
[G.R. No. 120880. June 5, 1997] by President Marcos.

FERDINAND R. MARCOS II, petitioner, vs. COURT OF APPEALS, The Notices of Levy upon real property were issued within the prescriptive
THE COMMISSIONER OF THE BUREAU OF INTERNAL period and in accordance with the provisions of the present Tax Code. The
REVENUE and HERMINIA D. DE GUZMAN, respondents. deficiency tax assessment, having already become final, executory, and
demandable, the same can now be collected through the summary remedy of
Facts: Ferdinand R. Marcos II, the eldest son of the decedent, questions the distraint or levy pursuant to Section 205 of the NIRC.
actuations of the respondent Commissioner of Internal Revenue in assessing,
The omission to file an estate tax return, and the subsequent failure to contest
and collecting through the summary remedy of Levy on Real Properties, estate
or appeal the assessment made by the BIR is fatal to the petitioner's cause, as
and income tax delinquencies upon the estate and properties of his father,
under the above-cited provision, in case of failure to file a return, the tax may be
despite the pendency of the proceedings on probate of the will of the late
assessed at any time within ten years after the omission, and any tax so assessed
president.
may be collected by levy upon real property within three years following the
Issue: Does the BIR have the authority to collect by the summary remedy of assessment of the tax. Since the estate tax assessment had become final and
levying upon, and sale of real properties of the decedent, estate tax deficiencies, unappealable by the petitioner's default as regards protesting the validity of the
without the cognition and authority of the court sitting in probate over the said assessment, there is now no reason why the BIR cannot continue with the
supposed will of the deceased? collection of the said tax. Any objection against the assessment should have
been pursued following the avenue paved in Section 229 of the NIRC on Issue: WON whether the assessment against the estate is valid; and, second,
protests on assessments of internal revenue taxes. whether the compromise entered into is also valid?

Ruling:

CIR v. Reyes No. Under the present provisions of the Tax Code and pursuant to
elementary due process, taxpayers must be informed in writing of the law and
Facts: By virtue of a sworn affidavit for reward by one Abad, an investigation the facts upon which a tax assessment is based; otherwise, the assessment is
was conducted by BIR on the estate of the deceased Maria Tancinco who died void. Being invalid, the assessment cannot in turn be used as a basis for the
in 1993 leaving a residential lot and old house in Dasma. Without submitting a perfection of a tax compromise. This was clear and mandatory under Section
preliminary finding report, an LOA was issued and received by Reyes, one of 228.
the heirs on 14 March 1997.
Reyes was not informed in writing of the law and the facts on which
Then on 12 Feb 1998, a PAN was issued against the estate, and a FAN the assessment of estate taxes had been made. She was merely notified of the
as well as demand letter was issued on 22 April 1998. For the assessment of findings by the CIR, who had simply relied upon the provisions of former
P14.9M for estate tax of the estate of Maria Tancinco. On March 11, 1999, Section 22913 prior to its amendment by Republic Act (RA) No. 8424, otherwise
the heirs proposed a compromise settlement of P1,000,000.00. known as the Tax Reform Act of 1997.
During those dates, RA 8424 Tax Reform Act was already in effect. RA To be simply informed in writing of the investigation being conducted
8424 stated that the taxpayer must be informed of both the law and facts on and of the recommendation for the assessment of the estate taxes due is
which the assessment was based.The notice required under the old law was no nothing but a perfunctory discharge of the tax function of correctly assessing a
longer sufficient under the new law. First, RA 8424 has already amended the taxpayer. The act cannot be taken to mean that Reyes already knew the law and
provision of Section 229 on protesting an assessment. The old requirement of the facts on which the assessment was based. It does not at all conform to the
merely notifying the taxpayer of the CIR’s findings was changed in 1998 compulsory requirement under Section 228. Moreover, the Letter of Authority
to informing the taxpayer of not only the law, but also of the facts on which an received by respondent on March 14, 1997 was for the sheer purpose of
assessment would be made; otherwise, the assessment itself would be invalid. investigation and was not even the requisite notice under the law.
Due to failure to pay tax on the deadline BIR notified on June 6, 2000 Validity of Compromise. It would be premature for the Court to
that the subject property would be sold at public auction on August 8, 2000. declare that the compromise on the estate tax liability has been perfected and
Reyes filed a protest with the BIR. Hence the petition for review filed by Reyes consummated, considering the earlier determination that the assessment against
in CTA and a TRO to desist and refrain from proceeding with the auction sale the estate was void. Nothing has been settled or finalized. Under Section 204(A)
of the subject property or from issuing a warrant pending determination of the of the Tax Code, where the basic tax involved exceeds one million pesos or the
case and/or unless a contrary order is issued. settlement offered is less than the prescribed minimum rates, the compromise
shall be subject to the approval of the NEB composed of the petitioner and
CIR filed a motion saying CTA has no jurisdiction since the assessment four deputy commissioners. Finally, as correctly held by the appellate court, this
against the estate is already final and executory; and (ii) that the petition was provision applies to all compromises, whether government-initiated or not. Ubi
filed out of time lex non distinguit, nec nos distinguere debemos. Where the law does not distinguish, we
CTA – Ruled in favour of CIR ordering Reyes to pay the estate tax should not distinguish.
amounting to 19M. CTA ratiocinated that there can only be a perfected and
consummated compromise of the estate’s tax liability[,] if the NEB has
approved [Reyes’s] application for compromise in accordance with RR No. 6-
2000, as implemented by RMO No. 42-2000.

CA – Partly granted petition. SC – Affirmed, petition w/o merit.


ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL v CIR 1.) Whether or not the service of deficiency tax assessment against Juliana
Diez Vda. de Gabriel through the Philippine Trust Company was a
GR No. 155541 January 27, 2004 valid service in order to bind the Estate;
2.) Whether or not the action of the CIR to collect against the Estate has
FACTS: prescribed.
During the lifetime of the decedent, Juliana Vda. De Gabriel, her business
affairs were managed by the Philippine Trust Company (Philtrust). The HELD:
decedent died on April 3, 1979. Two days after her death, Philtrust, through its
Trust Officer, Atty. Antonio M. Nuyles, filed her Income Tax Return for 1978. 1.) No. The relationship between the decedent and Philtrust was one
The return did not indicate that the decedent had died. Philtrust also filed for a of agency, which is a personal relationship between agent and principal. Under
verified petition for appointment as Special Administrator but the same was Article 1919 (3) of the Civil Code, death of the agent or principal automatically
denied. Its Motion for reconsideration was also denied and the appointment of terminates the agency. In this instance, the death of the decedent on April 3,
Special Administrator was given to Mr. Diez, which was then transferred to 1979 automatically severed the legal relationship between her and Philtrust, and
Antonio Lantin, and subsequently to Atty. Vicente Onosa. such could not be revived by the mere fact that Philtrust continued to act as her
agent when, on April 5, 1979, it filed her Income Tax Return for the year 1978.
The Bureau of Internal Revenue conducted an administrative investigation on
the decedent’s tax liability and found a deficiency income tax for the year 1977. SEC. 104. Notice of death to be filed. – In all cases of transfers subject to
Thus, the BIR sent by registered mail a demand letter and an Assessment tax or where, though exempt from tax, the gross value of the estate
addressed to the decedent "c/o Philippine Trust Company, Sta. Cruz, Manila" exceeds three thousand pesos, the executor, administrator, or any of the
which was the address stated in her 1978 Income Tax Return. No response was legal heirs, as the case may be, within two months after the decedent’s
made by Philtrust. The BIR was not informed that the decedent had actually death, or within a like period after qualifying as such executor or
passed away. Commissioner of Internal Revenue then issued warrants of administrator, shall give written notice thereof to the Commissioner of
distraint and levy to enforce collection of the decedent’s deficiency income tax Internal Revenue.
liability, which were served upon her heir, Francisco Gabriel. CIR filed a
"Motion for Allowance of Claim and for an Order of Payment of Taxes" with Since the relationship between Philtrust and the decedent was automatically
the court a quo. severed at the moment of the Taxpayer’s death, none of Philtrust’s acts or
omissions could bind the estate of the Taxpayer. Service on Philtrust of the
Mr. Ambrosio filed a letter of protest with the Litigation Division of the BIR, which was not demand letter and Assessment Notice was improperly done.
acted upon because the assessment notice had allegedly become final, executory and
incontestable. The Estate of the decedent, through Mr. Ambrosio, filed a formal 2.) No. Since there was never any valid notice of this assessment, it
opposition to the BIR’s Motion for Allowance of Claim based on the ground could not have become final, executory and incontestable, and, for failure to
that there was no proper service of the assessment and that the filing of the make the assessment within the five-year period provided in Section 318 of the
aforesaid claim had already prescribed. The BIR filed its Reply, contending that service National Internal Revenue Code of 1977, respondent’s claim against the
to Philippine Trust Company was sufficient service, and that the filing of the claim against the petitioner Estate is barred. Said Section 18 reads:
Estate on November 22, 1984 was within the five-year prescriptive period for assessment and
collection of taxes under Section 318 of the 1977 National Internal Revenue Code (NIRC).
SEC. 318. Period of limitation upon assessment and collection. – Except as
provided in the succeeding section, internal revenue taxes shall be
ISSUES: assessed within five years after the return was filed, and no proceeding
in court without assessment for the collection of such taxes shall be
begun after the expiration of such period. For the purpose of this
section, a return filed before the last day prescribed by law for the filing
thereof shall be considered as filed on such last day: Provided, That this
limitation shall not apply to cases already investigated prior to the disallowed the premiums paid on the bond filed by the administrator as an
approval of this Code. expense of administration since the giving of a bond is in the nature of a
qualification for the office, and not necessary in the settlement of the estate.
CIR vs. CA and Pajunar; Estate Tax Neither may attorney's fees incident to litigation incurred by the heirs in
G.R. No. 123206 March 22, 2000 asserting their respective rights be claimed as a deduction from the gross estate.

Facts: Private respondent Josefina Pajonar was the guardian of the person of In this case, it is clear that the extrajudicial settlement was for the purpose of
decedent Pedro Pajonar. The payment of taxes and the distribution of the estate to the heirs. The execution
property of the decedent was put by the RTC- Dumaguete, under the of the extrajudicial settlement necessitated the notarization of the same. It
guardianship of the Philippine National Bank via special proceeding, wherein follows then that the notarial fee of P60,753.00 was incurred primarily to settle
50, 000 was spent therein for payment of attorney's fees. When the decedent the estate of the deceased Pedro Pajonar. Said amount should then be
died, instead of filing an estate tax return, PNB advised Josefina to extra- considered an administration expenses actually and necessarily incurred in the
judicially settle the estate of his brother. The decedent's estate was extra- collection of the assets of the estate, payment of debts and distribution of the
judicially settled and the heirs paid an amount of P60, 753 for the notarization remainder among those entitled thereto. Thus, the notarial fee of P60,753
of the deed of extra-judicial settlement of estate. The private paid the estate tax, incurred for the Extrajudicial Settlement should be allowed as a deduction from
however, they were subsequently assessed of deficiency taxes because the the gross estate.
amount paid in the special proceeding [P50, 000] and the notarization fee [P60,
753] cannot be claimed as a deduction to the decedent's estate. Private Deductible expenses of administration of the estate may include executor's or
respondent paid the said taxes under protest. While the case is under review by administrator's fees, attorney's fees, court fees and charges, appraiser's fees,
the BIR, she filed a claim for refund in the CTA which was granted. clerk hire, costs of preserving and distributing the estate and storing or
maintaining it, brokerage fees or commissions for selling or disposing of the
Issue: Whether or not the notarial fee paid for the extrajudicial settlement in estate, and the like. Deductible attorney's fees are those incurred by the executor
the amount of P60,753 and the attorney's fees in the guardianship proceedings or administrator in the settlement of the estate or in defending or prosecuting
in the amount of P50,000 may be allowed as deductions from the gross estate of claims against or due the estate.
decedent in order to arrive at the value of the net estate.
As to the deductibility of attorney's fees in the Special proceedings- As a rule
Ruling: Yes. As to the deductibility of the amount spent for notarization of the attorney's fees in order to be deductible from the gross estate must be essential
deed of extra-judicial settlement of estate- Explained the SC, administration to the collection of assets, payment of debts or the distribution of the property
expenses, as an allowable deduction from the gross estate of the decedent for to the persons entitled to it. The services for which the fees are charged must
purposes of arriving at the value of the net estate, have been construed by the relate to the proper settlement of the estate. In this case, the guardianship
federal and state courts of the United States [which the law on allowable proceeding was necessary for the distribution of the property of the late Pedro
deductions from gross estate was copied] to include all expenses "essential to Pajonar to his rightful heirs. It is noteworthy to point that PNB was appointed
the collection of the assets, payment of debts or the distribution of the property the guardian over the assets of the deceased. Necessarily the assets of the
to the persons entitled to it." deceased formed part of his gross estate. Accordingly, all expenses incurred in
relation to the estate of the deceased will be deductible for estate tax purposes
In other words, the expenses must be essential to the proper settlement of the provided these are necessary and ordinary expenses for administration of the
estate. Expenditures incurred for the individual benefit of the heirs, devisees or settlement of the estate. Hence the attorney's fees of 50, 000 is deductible from
legatees are not deductible. This distinction has been carried over to our the gross estate of the decedent.
jurisdiction. Thus, in Lorenzo v. Posadas the Court construed the phrase
"judicial expenses of the testamentary or intestate proceedings" as not including
the compensation paid to a trustee of the decedent's estate when it appeared
that such trustee was appointed for the purpose of managing the decedent's real
estate for the benefit of the testamentary heir. In another case, the Court
DONORS TAX [G.R. No. 120721. February 23, 2005]

Republic vs. Guzman GR 132964 Feb 18, 2000 MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D.
REGALA, AVELINO V. CRUZ, petitioners, vs. COMMISSIONER OF
FACTS: David Guzman, a natural born American citizen is the son of sps.
INTERNAL REVENUE and COURT OF APPEALS, respondents.
Simeon and Helen Guzman, both American Citizens. Simeon died in 1968
leaving to his sole heirs Helen and David an estate constituting several parcels
of land. On December 10, 1981, Helen executed a Quitclaim Deed assigning, Facts: During the 1987 national elections, petitioners, who are partners in the
transferring and conveying to her son David her undivided ½ interest on all the Angara, Abello, Concepcion, Regala and Cruz (ACCRA) law firm, contributed
parcels of land. Abela, Helen’s atty. in fact, upon instruction of Helen, paid P882,661.31 each to the campaign funds of Senator Edgardo Angara, then
donor’s taxes to facilitate the registry of the parcels of land in the name of running for the Senate. In letters dated April 21, 1988, the Bureau of Internal
David. The State initiated escheat proceedings. It asserts that David, being an Revenue (BIR) assessed each of the petitioners P263,032.66 for their
American Citizen could not validly acquire ½ interest in the parcels of land by contributions. On August 2, 1988, petitioners questioned the assessment
way of the quitclaim deed as they are in reality donations inter vivos. through a letter to the BIR. They claimed that political or electoral contributions
are not considered gifts under the National Internal Revenue Code (NIRC), and
ISSUE: was there a donation? that, therefore, they are not liable for donors tax. The claim for exemption was
denied by the Commissioner.
RULING: NO. The essential elements of a donation are:
Issue: Was there a donation?
1. Reduction of the patrimony of the donor;
2. Increase in the patrimony of the done; and Ruling: Yes. Donation has the following elements: (a) the reduction of the
3. Intent to do an act of liberality or animus donandi patrimony of the donor; (b) the increase in the patrimony of the donee; and, (c)
4. The law further requires that in a donation of an immovable property, the intent to do an act of liberality or animus donandi. The present case falls
it be made in a public document and that there should be an acceptance squarely within the definition of a donation. Petitioners, the late Manuel G.
thereof made in the same deed of donation or in a separate public Abello, Jose C. Concepcion, Teodoro D. Regala and Avelino V. Cruz, each gave
document. P882,661.31 to the campaign funds of Senator Edgardo Angara, without any
material consideration. All three elements of a donation are present. The
In this case, Helen’s intention to peform an act of liberality in favor of David patrimony of the four petitioners were reduced by P882,661.31 each. Senator
was not sufficiently established. The language of the deed of quitclaim is clear Edgardo Angaras patrimony correspondingly increased by P3,530,645.24. There
that Helen merely contemplated a waiver of her rights, title and interest over the was intent to do an act of liberality or animus donandi was present since each of
lands in favor of David, and not a donation. The element of animus donandi the petitioners gave their contributions without any consideration.
was missing. However, the inexistence of a donation does not render the
repudiation made by Helen in favor of David valid. There is no repudiation of Issue: Was there donative intent?
inheritance as Helen had already accepted her share of the inheritance when she,
together with David, executed a deed of extrajudicial settlement of the estate of Ruling: Yes. Since animus donandi or the intention to do an act of liberality is
Simeon Guzman. The repudiation being of no effect whatsoever, the parcel of an essential element of a donation, petitioners argue that it is important to look
land should revert to their private owner, Helen, who although being an into the intention of the giver to determine if a political contribution is a gift.
American citizen, is qualified by hereditary succession to own the property Petitioners argument is not tenable. First of all, donative intent is a creature of
subject of the litigation. the mind. It cannot be perceived except by the material and tangible acts which
manifest its presence. This being the case, donative intent is presumed present
when one gives a part of ones patrimony to another without consideration.
Second, donative intent is not negated when the person donating has other
intentions, motives or purposes which do not contradict donative intent. This
Court is not convinced that since the purpose of the contribution was to help
elect a candidate, there was no donative intent. Petitioners contribution of
money without any material consideration evinces animus donandi. The fact respondent for 25 years with an extension of 25 years at the option of private
that their purpose for donating was to aid in the election of the donee does not respondent.
negate the presence of donative intent.
Private respondent books of accounts were examined by BIR for
The fact that petitioners will somehow in the future benefit from the election of purposes of determining its tax liability for 1974. This examination resulted in
the candidate to whom they contribute, in no way amounts to a valuable the April 23, 1975 assessment of private respondent for deficiency income
material consideration so as to remove political contributions from the purview taxwhich it duly paid. Siltown’s books of accounts were also examined, and on
of a donation. Senator Angara was under no obligation to benefit the the basis thereof, on October 10, 1980, the Collector of Internal Revenue
petitioners. The proper performance of his duties as a legislator is his obligation assessed deficiency donor’s tax of P1,020,850 in relation to said sale of the
as an elected public servant of the Filipino people and not a consideration for Basilan landholdings.
the political contributions he received. In fact, as a public servant, he may even
be called to enact laws that are contrary to the interests of his benefactors, for
the benefit of the greater good. In fine, the purpose for which the sums of Private respondent contested this assessment on November 24, 1980.
money were given, which was to fund the campaign of Senator Angara in his Another assessment dated March 16, 1981, increasing the amount demanded
bid for a senatorial seat, cannot be considered as a material consideration so as for the alleged deficiency donor’s tax, surcharge, interest and compromise
to negate a donation. penalty and was received by private respondent on April 9, 1981. On appeal,
CTA upheld the assessment. On review, CA reversed the decision of the court
Obiter: Finally, this Court takes note of the fact that subsequent to the finding that the assessment was made beyond the 5-year prescriptive period in
donations involved in this case, Congress approved Republic Act No. 7166 on Section 331 of the Tax Code.
November 25, 1991, providing in Section 13 thereof that political/electoral
contributions, duly reported to the Commission on Elections, are not subject to
the payment of any gift tax. This all the more shows that the political
contributions herein made are subject to the payment of gift taxes, since the Issue: Whether or not petitioner’s right to assess has prescribed.
same were made prior to the exempting legislation, and Republic Act No. 7166
provides no retroactive effect on this point. Ruling: Applying then Sec. 331, NIRC (now Sec. 203, 1997 NIRC which
provides a 3-year prescriptive period for making assessments), it is clean that the
October 16, 1980 and March 16, 1981 assessments were issued by the BIR
beyond the 5-year statute of limitations. The court thoroughly studied the
CIR v. BF Goodrich records of this case and found no basis to disregard the 5-year period of
Facts: Private respondent BF Goodrich Philippines Inc. was an American prescription, expressly set under Sec. 331 of the Tax Code, the law then in
corporation prior to July 3, 1974. As a condition for approving the manufacture force.
of tires and other rubber products, private respondent was required by the
Central Bank to develop a rubber plantation. In compliance therewith, private For the purpose of safeguarding taxpayers from any unreasonable
respondent bought from the government certain parcels of land in Tumajubong examination, investigation or assessment, our tax law provides a statute of
Basilan, in 1961 under the Public Land Act and the Parity Amendment to the limitations in the collection of taxes. Thus, the law or prescription, being a
1935 constitution, and there developed a rubber plantation. remedial measure, should be liberally construed in order to afford such
protection. As a corollary, the exceptions to the law on prescription should
On August 2, 1973, the Justice Secretary rendered an opinion that perforce be strictly construed.
ownership rights of Americans over Public agricultural lands, including the right
to dispose or sell their real estate, would be lost upon expiration on July 3, 1974
of the Parity Amendment. Thus, private respondent sold its Basilan land
holding to Siltown Realty Phil. Inc., (Siltown) for P500,000 on January 21, 1974.
Under the terms of the sale, Siltown would lease the property to private
IV. EXCISE TAXES same for their use or consumption outside the Philippines. The oil companies
which sold such petroleum products to international carriers are not entitled to
CHEVRON PHILIPPINES INC., VS COMMISSIONER OF a refund of excise taxes previously paid on the petroleum products sold." Thus,
INTERNAL REVENUE Chevron is not entitled".

G.R. No. 210836, September 01, 2015 Hence, Chevron has filed the Motion for Reconsideration.

ISSUE:
DOCTRINE: Excise tax on petroleum products is essentially a tax on
property, the direct liability for which pertains to the statutory taxpayer (i.e., Whether or not Chevron was entitled to the tax refund or the tax credit for the
manufacturer, producer or importer). Any excise tax paid by the statutory excise taxes paid on the importation of petroleum products that it had sold to
taxpayer on petroleum products sold to any of the entities or agencies named in CDC in 2007.
Section 135 of the National Internal Revenue Code (NIRC) exempt from excise tax
is deemed illegal or erroneous, and should be credited or refunded to the payor HELD:
pursuant to Section 204 of the NIRC. This is because the exemption granted
under Section 135 of the NIRC must be construed in favor of the property YES. Section 131 of the NIRC declares that excise taxes on imported things
itself, that is, the petroleum products. shall be paid by the owner or importer to the Customs officers, conformably
with the regulations of the Department of Finance and before the release of
FACTS: Chevron sold and delivered petroleum products to Clark such articles from the customs house, unless the imported things are exempt
Development Corporation (CDC) in the period from August 2007 to December from excise taxes and the person found to be in possession of the same is other
2007. Chevron did not pass on to CDC the excise taxes paid on the than those legally entitled to such tax exemption. For this purpose, the statutory
importation of the petroleum products sold to CDC in taxable year taxpayer is the importer of the things subject to excise tax. Chevron, being the
2007; hence, on 2009, it filed an administrative claim for tax refund or issuance statutory taxpayer, paid the excise taxes on its importation of the petroleum
of tax credit certificate. Considering that respondent Commissioner of Internal products
Revenue (CIR) did not act on the administrative claim for tax refund or tax
credit, Chevron elevated its claim to the CTA by petition for review. The CTA Pursuant to Section 135(c), petroleum products sold to entities that are by law
First Division denied Chevron's judicial claim for tax refund or tax credit. exempt from direct and indirect taxes are exempt from excise tax. The
phrase which are by law exempt from direct and indirect taxes describes the entities to
Chevron appealed to the CTA En Banc, which affirmed the ruling of the CTA whom the petroleum products must be sold in order to render the
First Division, stating that there was nothing in Section 135(c) of the NIRC that exemption operative. Section 135(c) should thus be construed as an exemption in
explicitly exempted Chevron as the seller of the imported petroleum products favor of the petroleum products on which the excise tax was levied in the first
from the payment of the excise taxes; and holding that because it did not fall place. The exemption cannot be granted to the buyers - that is, the entities that
under any of the categories exempted from paying excise tax, Chevron was not are by law exempt from direct and indirect taxes - because they are not under
entitled to the tax refund or tax credit. any legal duty to pay the excise tax. Inasmuch as its liability for the payment of
the excise taxes accrued immediately upon importation and prior to the removal
In addition, CTA En Banc noted that, "Considering that an excise tax is in the of the petroleum products from the customshouse, Chevron was bound to pay,
nature of an indirect tax where the tax burden can be shifted, Section 135(c) of and actually paid such taxes. But the status of the petroleum products as exempt
the NIRC of 1997, as amended, should be construed as prohibiting the shifting from the excise taxes would be confirmed only upon their sale to CDC in 2007
of the burden of the excise tax to tax-exempt entities who buys petroleum (or, for that matter, to any of the other entities or agencies listed in Section 135
products from the manufacturer/seller by incorporating the excise tax of the NIRC). Before then, Chevron did not have any legal basis to claim the
component as an added cost in the price fixed by the manufacturer/seller." tax refund or the tax credit as to the petroleum products.
Also, based on jurisprudence, the Supreme Court held that the exemption from It is noteworthy that excise taxes are considered as a kind of indirect tax, the
excise tax payment on petroleum products under Section 135(a) of the NIRC of liability for the payment of which may fall on a person other than whoever
1997, as amended, is conferred on international carriers who purchased the
actually bears the burden of the tax. Simply put, the statutory taxpayer may shift Respondent also contends that the Court’s ruling that Section 135 only
the economic burden of the excise tax payment to another - usually the buyer. prohibits local petroleum manufacturers like respondent from shifting the
burden of excise tax to international carriers has adverse economic impact as it
In cases involving excise tax exemptions on petroleum products under Section severely curtails the domestic oil industry. Requiring local petroleum
135 of the NIRC, the Court has consistently held that it is the statutory manufacturers to absorb the tax burden in the sale of its products to
taxpayer, not the party who only bears the economic burden, who is entitled to international carriers is contrary to the State’s policy of "protecting gasoline
claim the tax refund or tax credit. But the Court has also made clear that this dealers and distributors from unfair and onerous trade conditions," and places
rule does not apply where the law grants the party to whom the economic them at a competitive disadvantage.
burden of the tax is shifted by virtue of an exemption from both direct and
indirect taxes. In which case, such party must be allowed to claim the tax refund Lastly, respondent asserts that the imposition by the Philippine Government of
or tax credit even if it is not considered as the statutory taxpayer under the law. excise tax on petroleum products sold to international carriers is in violation of
the Chicago Convention on International Aviation and other international
Accordingly, Chevron was entitled to the refund or credit of the excise taxes agreements.
erroneously paid on the importation of the petroleum products sold to CDC.la
ISSUE: Is Shell entitled to a tax refund of the allegedly erroneously paid excise
tax for petroleum products?
CIR vs. PILIPINAS SHELL PETROLEUM CORPORATION
G.R. No. 188497 RULING: The court maintains that Section 135 (a), in fulfillment of
February 19, 2014 international agreement and practice to exempt aviation fuel from excise tax and
other impositions, prohibits the passing of the excise tax to international carriers
FACTS: Pilipinas Shell Petroleum Corporation assails the Court’s ruling who buys petroleum products from local manufacturers/sellers such as
denying its claim for tax refund or credit for the excise taxes it paid respondent. However, the court agrees that there is a need to reexamine the
for petroleum products sold to international carriers of foreign registry for their effect of denying the domestic manufacturers/sellers’ claim for refund of the
use or consumption outside the Philippines. Respondent claims that it is entitled excise taxes they already paid on petroleum products sold to international
to a tax refund because those petroleum products it sold to international carriers carriers, and its serious implications on the Government’s commitment to the
are not subject to excise tax as provided for in Section 135 (a), hence the excise goals and objectives of the Chicago Convention.
taxes it were erroneously collected. The Chicago Convention, which established the legal framework for
international civil aviation, did not deal comprehensively with tax matters.
It argues that a plain reading of Section 135 of the NIRC reveals that it is the Article 24 (a) of the Convention simply provides that fuel and lubricating oils on
petroleum products sold to international carriers which are exempt from excise board an aircraft of a Contracting State, on arrival in the territory of another
tax, and that since the excise tax exemption is attached to the petroleum Contracting State and retained on board on leaving the territory of that State,
products themselves, the manufacturer or producer is under no duty to pay the shall be exempt from customs duty, inspection fees or similar national or local
excise tax thereon. It points out that excise tax being an indirect tax, Section 135 duties and charges. Subsequently, the exemption of airlines from national taxes
in relation to Section 148 should be interpreted as referring to a tax exemption and customs duties on spare parts and fuel has become a standard element of
from the point of production and removal from the place of production bilateral air service agreements (ASAs) between individual countries.
considering that it is only at that point that an excise tax is imposed. The The importance of exemption from aviation fuel tax was underscored in the
situation is unlike the value-added tax (VAT) which is imposed at every point of following observation made by a British author in a paper assessing the debate
turnover – from production to wholesale, to retail and to end-consumer. on using tax to control aviation emissions and the obstacles to introducing
Respondent thus concludes that exemption could only refer to the imposition excise duty on aviation fuel, thus:
of the tax on the statutory seller, in this case the respondent. This is because
when a tax paid by the statutory seller is passed on to the buyer it is no longer in Without any international agreement on taxing fuel, it is highly likely that moves
the nature of a tax but an added cost to the purchase price of the product sold. to impose duty on international flights, either at a domestic or European level,
would encourage 'tankering': carriers filling their aircraft as full as possible
whenever they landed outside the EU to avoid paying tax. Clearly this would be between the ad valorem tax being paid at the end of the 3 year transition period
entirely counterproductive. Aircraft would be travelling further than necessary and the specific tax under Paragraph C, as increased by 12 – a situation not
to fill up in low-tax jurisdictions; in addition they would be burning up more supported by the plain wording of Sec. 145 of the tax code. The proviso in
fuel when carrying the extra weight of a full fuel tank. RR17-99 clearly went beyond the terms of the law it was supposed to
With the prospect of declining sales of aviation jet fuel sales to international implement, and therefore entitles Fortune Tobacco to claim a refund of the
carriers on account of major domestic oil companies' unwillingness to shoulder overpaid excise taxes collected pursuant to this provision. The rule on
the burden of excise tax, or of petroleum products being sold to said carriers by uniformity of taxation was violated by Section 1 of RR17-99.
local manufacturers or sellers at still high prices , the practice of "tankering"
would not be discouraged. This scenario does not augur well for the Philippines'
growing economy and the booming tourism industry. Worse, the Government CIR v. San Miguel
would be risking retaliatory action under several bilateral agreements with
various countries. Evidently, construction of the tax exemption provision in Facts: Respondent San Miguel Corporation, a domestic corporation engaged in
question should give primary consideration to its broad implications on our the manufacture and sale of fermented liquor, produces as one of its products
commitment under international agreements. "Red Horse" beer which is sold in 500-ml. and 1-liter bottle variants. On
The court therefore hold that respondent, as the statutory taxpayer who is January 1, 1998, Republic Act (R.A.) No. 8424 or the Tax Reform Act of 1997
directly liable to pay the excise tax on its petroleum products, is entitled to a took effect. It reproduced, as Section 143 thereof, the provisions of Section 140
refund or credit of the excise taxes it paid for petroleum products sold to of the old National Internal Revenue Code as amended by R.A. No. 8240 which
international carriers, the latter having been granted exemption from the became effective on January 1, 1997. Part of Section 143 of the Tax Reform Act
payment of said excise tax under Sec. 135 (a) of the NIRC. of 1997 reads:

The excise tax from any brand of fermented liquor within the next three (3) years from the
effectivity of Republic Act No. 8240 shall not be lower than the tax which was due from each
brand on October 1, 1996.
CIR vs Fortune Tobacco GR 180006 Sept. 28, 2011
The rates of excise tax on fermented liquor under paragraphs (a), (b) and (c) hereof shall be
FACTS: Under our laws, manufacturers of cigarettes are subject to pay excise increased by twelve percent (12%) on January 1, 2000.
taxes on their products. Prior to Jan 1, 1997, the excise taxes on these products
were in the form of ad valorem taxes. Beginning Jan 1, 1997, RA 8240 took Thereafter, on December 16, 1999, the Secretary of Finance issued
effect and a shift from ad valorem to specific taxes was made. The rates of Revenue Regulations No. 17-99 increasing the applicable tax rates on fermented
specific tax on cigars under par. 1,2,3 and 4 of Sec. 142 shall be increased by liquor by 12%. This increase, however, was qualified by the last paragraph of
12% on Jan. 1, 2000. SEC.1 of RR 17-99 contains a proviso which says that the Section 1 of Revenue Regulations No. 17-99 which reads:
new specific tax rate for any existing brand of cigars and cigarettes packed by
machine, distilled spirits, wines, and fermented liquors shall not be lower than Provided, however, that the new specific tax rate for any existing brand of cigars, cigarettes
the excise tax that is actually being paid prior to Jan. 1, 2000. Fortune Tobacco packed by machine, distilled spirits, wines and fermented liquors shall not be lower than
paid in advance excise taxes for the year 2003. In 2004 it filed an administrative the excise tax that is actually being paid prior to January 1, 2000.
claim for tax refund claiming erroneously and or illegally collected taxes in the
amount of P491M. For the period June 1, 2004 to December 31, 2004, respondent was
assessed and paid excise taxes amounting to P2,286,488,861.58. Respondent,
ISSUE: Did the proviso in Sec. 1 RR17-99 go beyond the terms of the law it however, later contended that the said qualification in the last paragraph of
was supposed to implement (RA 8240) Section 1 of Revenue Regulations No. 17-99 has no basis in the plain wording
of Section 143 and filed before the BIR a claim for refund or tax credit of the
RULING: YES. By adding the qualification that the tax due after the 12% amount of P60,778,519.56 as erroneously paid excise taxes for the period of
increase becomes effective shall not be lower than the tax actually paid prior to May 22, 2004 to December 31, 2004. Later, said amount was reduced to
Jan.1 2000, RR 17-99 effectively imposes a tax which is the higher amount P58,213,294.92 because of prescription.
On September 26, 2007, the CTA Second Division granted the petition G.R. No. 183553 November 12, 2012
and ordered petitioner to refund P58,213,294.92 to respondent or to issue in the
latter’s favor a Tax Credit Certificate for the said amount for the erroneously DIAGEO PHILIPPINES, INC., Petitioner,
paid excise taxes. The CTA held that Revenue Regulations No. 17-99 modified vs.
or altered the mandate of Section 143 of the Tax Reform Act of 1997. The CTA COMMISSIONER OF INTERNAL REVENUE, Respondent.
En Banc affirmed the Decision. Hence, this petition for review on certiorari.
Facts: Petitioner Diageo Philippines, Inc. (Diageo) is a domestic corporation
Issue: Whether or not Section 1 of Revenue Regulations No. 17-99 is an invalid
organized and existing under the laws of the Republic of Philippines and is
administrative interpretation of Section 143 of the Tax Reform Act of 1997?
primarily engaged in the business of importing, exporting, manufacturing,
Ruling: Yes. Section 143 of the Tax Reform Act of 1997 is clear and marketing, distributing, buying and selling, by wholesale, all kinds of beverages
unambiguous. It provides for two periods: the first is the 3- year transition and liquors and in dealing in any material, article, or thing required in
period beginning January 1, 1997, the date when R.A. No. 8240 took effect, connection with or incidental to its principal business. It is registered with the
until December 31, 1999; and the second is the period thereafter. During the 3- Bureau of Internal Revenue (BIR) as an excise tax taxpayer.
year transition period, Section 143 provides that "the excise tax from any brand
For the period November 1, 2003 to December 31, 2004, Diageo purchased
of fermented liquor...shall not be lower than the tax which was due from each
raw alcohol from its supplier for use in the manufacture of its beverage and
brand on October 1, 1996." After the transitory period, Section 143 provides
liquor products. The supplier imported the raw alcohol and paid the related
that the excise tax rate shall be the figures provided under paragraphs (a), (b) excise taxes thereon before the same were sold to the petitioner.5 The purchase
and (c) of Section 143 but increased by 12%, without regard to whether the
price for the raw alcohol included, among others, the excise taxes paid by the
revenue collection starting January 1, 2000 may turn out to be lower than that
supplierin the total amount of P12,007,528.83. Subsequently, Diageo exported
collected prior to said date. Revenue Regulations No. 17-99, however, created a
its locally manufactured liquor products to Japan, Taiwan, Turkey and Thailand
new tax rate when it added in the last paragraph of Section 1 thereof, the
and received the corresponding foreign currency proceeds of such export sales.
qualification that the tax due after the 12% increase becomes effective "shall not
Within two (2) years from the time the supplier paid the subject excise taxes,
be lower than the tax actually paid prior to January 1, 2000."
Diageo filed with the BIR Large Taxpayer’s Audit and Investigation Division II
It bears reiterating that tax burdens are not to be imposed, nor applications for tax refund/issuance of tax credit certificates corresponding to
presumed to be imposed beyond what the statute expressly and clearly imports, the excise taxes which its supplier paid but passed on to it as part of the
tax statutes being construed strictissimi juris against the government. In case of purchase price of the subject raw alcohol invoking Section 130(D) of the Tax
discrepancy between the basic law and a rule or regulation issued to implement Code. However, due to the failure of the respondent Commissioner of Internal
said law, the basic law prevails as said rule or regulation cannot go beyond the Revenue (CIR) to act upon Diageo’s claims, the latter was constrained to timely
terms and provisions of the basic law. file a petition for review before the CTA. On December 27, 2005, the CIR filed
its Answer assailing Diageo’s lack of legal personality to institute the claim for
As there is nothing in Section 143 of the Tax Reform Act of 1997 refund because it was not the one that paid the alleged excise taxes but its
which clothes the BIR with the power or authority to rule that the new specific supplier. Subsequently, the CIR filed a motion to dismiss reiterating the same
tax rate should not be lower than the excise tax that is actually being paid prior issue
to January 1, 2000, such interpretation is clearly an invalid exercise of the power
of the Secretary of Finance to interpret tax laws and to promulgate rules and Issue: Does Diageo have the legal personality to file aclaim for refund or tax
regulations necessary for the effective enforcement of the Tax Reform Act of credit for the excise taxes paid by its supplier on the raw alcohol it purchased
1997. and used in the manufacture of its exported goods?

Ruling: No. contrary to the position of Diageo, the right to claim a refund or be
credited with the excise taxes belongs to its supplier. The phrase "any excise tax
paid thereon shall be credited or refunded" requires that the claimant be the
same person who paid the excise tax. when the excise taxes paid by the supplier
were passed on to Diageo, what was shifted is not the tax per se but alcoholic drinks for its commissary supplies used in its international flights,
anadditional cost of the goods sold. Thus, the supplier remains the statutory PAL, thereafter, filed separate administrative claims for refund before the BIR
taxpayer even if Diageo, the purchaser, actually shoulders the burden of tax. for the alleged excise taxes it erroneously paid on said dates.

The statutory taxpayer is the proper party to claim refund of indirect taxes. In ISSUE:
the present case, it is not disputed that the supplier of Diageo imported the
subject raw alcohol, hence, it was the one directly liable and obligated to file a Whether or not PAL’s claims for refund over excise tax on its importations of
return and pay the excise taxes under the Tax Code before the goods or alcohol and tobacco products for its commissary supplies should be granted.
products are removed from the customs house. It is, therefore, the statutory Yes.
taxpayer as contemplated by law and remains to be so, even if it shifts the
burden of tax to Diageo. Consequently, the right to claim a refund, if legally RULING:
allowed, belongs to it and cannot be transferred to another, in this case Diageo, The tax privilege of PAL provided in Sec. 13 of PD 1590 has not been revoked
without any clear provision of law allowing the same. by Sec. 131 of the NIRC of 1997, as amended by Sec. 6 of RA 9334. PD 1590
is a special law, which governs the franchise of PAL. Between the provisions
under PD 1590 as against the provisions under the NIRC of 1997, as amended
Commissioner of Internal Revenue v. Philippine Airlines by 9334, which is a general law, the former necessary prevails. This is in
G.R. Nos. 212536-37 accordance with the rule that on a specific matter, the special law shall prevail
Tax Law over the general law, which shall be resorted only to supply deficiencies in the
former. In addition, where there are two statutes, the earlier special and the later
general – the terms of the general broad enough to include the matter provided
DOCTRINES: The phrase "in lieu of all other taxes" includes but is not for in the special – the fact that one is special and other general creates a
limited to taxes that are "directly due from or imposable upon the purchaser or presumption that the special is considered as remaining an exception to the
the seller, producer, manufacturer, or importer of said petroleum products but general, one as a general law of the land and the other as the law of a particular
are billed or passed on the grantee either as part of the price or cost thereof or case.
by mutual agreement or other arrangement."

If the state expects taxpayers to observe fairness and honesty in paying their
taxes, it must hold itself against the same standard in refunding erroneous Under its franchise, PAL’s payment of either the basic corporate income tax or
exactions and payment of such taxes. franchise tax, whichever is lower, PAL is exempt from paying: (a) taxes directly
due from or imposable upon it as the purchaser of the subject petroleum
FACTS: products; and (b) the cost of the taxes billed or passed on to it by the seller,
producer, manufacturer, or importer of the said products either as part of the
PAL was granted under PD 1590 a franchise to operate air transport purchase price or by mutual agreement or other arrangement. Thus, it is
services domestically and internationally. Under Section 13 of the franchise endowed with the legal standing to file the subject tax refund claim,
PAL, during the lifetime of its franchise, shall pay the government either basic notwithstanding the fact that it is not the statutory taxpayer as contemplated by
corporate income tax or franchise tax based on revenues and/or the rate law. PAL has presented in context a clear statutory basis for its refund claim of
defined in the provision, whichever is lower and the taxes thus paid under either excise tax, a claim predicated on a statutory grant of exemption from that forced
scheme shall be in lieu of all other taxes, duties and other fees. On January 1, exaction. It thus behooves the government to refund what it erroneously
2005, RA 9334 took effect amending Sec. 131 of the 1997 National Internal collected. As held in CIR v. Fortune Tobacco Corporation, if the state expects
Revenue Code (NIRC) where imported products including cigarettes, distilled taxpayers to observe fairness and honesty in paying their taxes, it must hold
spirits, fermented liquors and wines even if destined for tax and duty-free shops, itself against the same standard in refunding erroneous exactions and payment
shall be subject to all applicable taxes, duties, charges, including excise taxes due of such taxes.
thereon. After being assessed for excise taxes on importation of cigarettes and