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Supreme Transliner, Inc., Moises C. Alvarez and Paulita S. Alvarez vs BPI Family Savings Bank, Inc., G.R. No. N o. 165617, February 25, 2011; BPI Family Savings Bank, Inc. vs Supreme Transliner, Inc., Moises C. Alvarez and Paulita S. Alvarez, G.R. No. 165837, February 25, 2011. Taxation,, villarama doctrines Taxation National Internal Revenue Code; capital gains tax; documentary stamp tax; if right of redemption exercised.Under exercised.Under Revenue Regulations (RR) No. 13-85 (December 12, 1985), every sale or exchange or other disposition of real property classified as capital asset under the National Internal Revenue Code (NIRC) shall be subject to final capital gains tax. The term “sale” includes i ncludes pacto de retro and other forms of conditional sale. Section 2.2 of Revenue Memorandum Order (RMO) No. 29-86, as amended by RMO Nos. 16-88, 27-89 and 6-92, 6-92, states that these conditional sales “necessarily includes mortgage foreclosure sales (judicial (judicial and extrajudicial foreclosure sales).” Further, for real property foreclosed by a bank on or after September 3, 1986, the capital gains tax and documentary stamp tax must be paid before title to the property can be consolidated in favor of the bank. Under Section 63 of Presidential Decree No. 1529, or the Property Registration Decree, if no right of redemption exists, the certificate of title of the mortgagor shall be cancelled, and a new certificate issued in the name of the purchaser. But where the right of redemption exists, the certificate of title of the mortgagor shall not be cancelled, but the certificate of sale and the order confirming the sale shall be registered by brief memorandum thereof made by the Register of Deeds on the certificate of title. It is therefore clear that in foreclosure sale, there is no actual transfer of the mortgaged real property until after the expiration of the one-year redemption period as provided in Act No. 3135, or An Act or Regulate the Sale of Property Under Special Powers Inserted In or Annexed to Real Estate Mortgages, and title thereto is consolidated in the name of the mortgagee in case of non-redemption. In the interim, the mortgagor is given the option whether or not to redeem the real property. The issuance of the Certificate of Sale does not by itself transfer ownership. RR No. 4-99 (March 16, 1999), further amends RMO No. 6-92 relative to the payment of capital gains tax and documentary stamp tax on extrajudicial foreclosure sale of capital assets initiated by banks, finance and insurance companies. Under this RMO, in case the mortgagor exercises his right of redemption within one year from the issuance of the certificate of sale, no capital gains tax shall be imposed because no capital gain has been derived by the mortgagor and no sale or transfer of real property was realized. Moreover, the transaction will be subject to documentary stamp tax of only PhP 15 because no land or realty was sold or transferred for a consideration. National Internal Revenue Code; non-retroactivity of rulings; exception. Section 246 of the National Internal Revenue Code sets out that rule on non-retroactivity of rulings. In this case, the retroactive application of Revenue Regulations No. 4-99 [to the transaction which took place before its effectivity is more consistent with the policy of aiding the exercise of the right of redemption. As the Court of Tax Appeals concluded in one case, RR No. 4-99 4-99 “has curbed the inequity of imposing a capital gains tax even before the expiration of the redemption period [since] there is yet no transfer of title and no profit or gain is realized by the mortgagor at the time of foreclosure sale but only upon expiration of the redemption period.” In his commentaries [Hector] De Leon expressed the view that while revenue regulations as a general r ule have no retroactive effect, if the revocation is due to the fact that the regulation is erroneous or contrary to
law, such revocation shall have retroactive operation as to affect past transactions, because a wrong construction cannot give rise to a vested right that can be invoked by a taxpayer.Supreme Transliner, Inc., Moises C. Alvarez and Paulita S. Alvarez vs BPI Family Savings Bank, Inc., G.R. No. 165617, February 25, 2011; BPI Family Savings Bank, Inc. vs Supreme Transliner, Inc., Moises C. Alvarez and Paulita S. Alvarez,
Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice, L.M. Camus Engineering Corporation (represented by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010. Taxation, villarama doctrines Assessment; validity of assessment notice; lack of control number. The formality of a control number in the assessment notice is not a requirement for its validity; rather the contents thereof should inform the taxpayer of the declaration of deficiency tax against the taxpayer. Both the formal letter of demand and the notice of assessment shall be void if the former failed to state the fact, the law, rules and regulations or jurisprudence on which the assessment is based, which is a mandatory requirement under section 228 of the National Internal Revenue Code. Tax evasion; failure to comply with subpoena duces tecum not relevant to tax evasion; forum shopping. A violation of section 266 (failure to obey summons) of the National Internal Revenue Code (NIRC) involves a separate offense and hence litis pendencia is not present considering that the outcome of this complaint is not determinative of the issue as to whether probable cause exists to charge the taxpayer with the crimes of attempt to evade or defeat tax and willful failure to supply correct and accurate information and pay tax defined and penalized under sections 254 and 255, respectively, of the NIRC. For the crime of tax evasion in particular, compliance by the taxpayer with such subpoena, if any had been issued, is irrelevant. Thus, the Secretary of Justice erred in holding that the Commissioner of Internal Revenue committed forum shopping when it filed the complaint for tax evasion during the pendency of its appeal from the City Prosecutor’s dismissal of the complaint involving the act of disobedience to the summons in the course of the preliminary investigation on the taxpayer’s correct tax liabilities for the taxable years 1997, 1998 and 1999. Tax evasion; lack of consent by taxpayer under investigation. Lack of consent by the taxpayer under investigation does not imply that the Bureau of Revenue (BIR) obtained the information from third parties illegally or that the information received is false or malicious. Nor does the lack of consent preclude the BIR from assessing deficiency taxes on the taxpayer based on the documents. In the same vein, the taxpayer cannot be allowed to escape criminal prosecution under sections 254 and 255 of the National Internal Revenue Code (NIRC) by mere imputation of a “fictitious” or disqualified informant under section 282 of the NIRC simply because other than disclosure of the official registry number of the third party “informer,” the BIR insisted on maintaining the confidentiality of the identity and personal circumstances of said “informer.” Voluntary Assessment Program; Revenue Regulations No. 2-99; Economic Recovery Assistance Payment (ERAP) Program; immunity. Revenue Regulations No. 2-99
explained in its Policy Statement that considering the scarcity of financial and human resources as well as the time constraints within which the Bureau of Internal Revenue (BIR) has to “clean the [BIR’s] backlog of unaud ited tax returns in order to keep updated and be focused with the most current accounts” in preparation for the full implementation of a computerized tax administration, the said revenue regulation was issued “providing for last priority in audit and investigation of tax returns” to accomplish the said objective “without, however, compromising the revenue collection that would have been generated from audit and enforcement activities.” The program granted immunity from audit and investigation of income tax, VAT and percentage tax returns for 1998. It expressly excluded withholding tax returns. Since such immunity from audit and investigation does not preclude the collection of revenues generated from audit and enforcement activities, it follows that the BIR is likewise not barred from collecting any tax deficiency discovered as a result of tax fraud investigations. Voluntary Assessment Program; immunity. Availment by the taxpayer of the voluntary assessment program (VAP) under Revenue Regulations No, 8-2001, as amended, did not amount to settlement of its assessed tax deficiencies for the period 1997 to 1999, nor immunity from prosecution for filing fraudulent return and attempt to evade or defeat tax. From the express terms of the said revenue regulations, taxpayer is not qualified to avail of the VAP granting taxpayers the privilege of last priority in the audit and investigation of all internal revenue taxes for the taxable year 2000 and all prior years under certain conditions, considering that, first, it was issued a preliminary assessment notice (PAN) on February 19, 2001, and, second, it was the subject of investigation as a result of verified informed filed by a tax informer under section 282 of the National Internal Revenue Code duly recorded in the BIR official registry even prior to the issuance of the PAN, which are excepted from coverage of the VAP under said regulations. Moreover, the taxpayer cannot invoke the availment of VAP to foreclose any subsequent audit of its account books and other accounting records in view of the strong finding of underdeclaration in its payment of the correct income tax liability by more than 30% as supported by the written report of the Tax Fraud Division. Under the regulations, a taxpayer who has availed of the VAP shall not be audited except upon authorization and approval of the Commissioner of Internal Revenue when there is strong evidence or finding of understatement in the payment of its correct tax liability by more than 30% as supported by a written report of the appropriate office detailing the facts and the law on which such finding is based. Voluntary Assessment Program; estoppel. Given the explicit conditions for the grant of immunity from audit under the said revenue regulations, the Secretary of Justice erred in declaring that the Commissioner of Internal Revenue is estopped from assessing any tax deficiency against the taxpayer after the issuance of the documents of immunity from audit/investigation and settlement of tax liabilities. The State can never be in estoppel, and this is particularly true in matters involving taxation. The errors of certain administrative officers should never be allowed to jeopardize the government’s financial position. Voluntary Assessment Program; exception to rule that examination and inspection should be made only once a taxable year. The discovery of substantial underdeclarations of income by the taxpayer for taxable years 1997, 1998 and 1999
upon verified information provided by an “informer” under section 282 of the National Internal Revenue Code (NIRC), as well as the necessity of obtaining information from third parties to ascertain correctness of the return filed or evaluation of tax compliance in collecting taxes (as a result of the disobedience to the summons issued by the Bureau of Internal Revenue against the taxpayer) are circumstances warranting exception from the general rule in section 235 of the NIRC.Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice, L.M. Camus Engineering Corporation (represented by Luis M. Camus and Lino D. Mendoza),
United Airlines, Inc. vs Commissioner of Internal Revenue, G.R. No. 178788, September 29, 2010. Taxation, villarama doctrines National Internal Revenue Code; international air carriers; Gross Philippine Billings; regular income tax. Inasmuch as the taxpayer has ceased operating passenger flights to or from the Philippines in 1998, it is not taxable under Section 28(A)(3)(a) of the National Internal Revenue Code (NIRC), or on 2 1/2% of its Gross Philippine Billings (GPB). The correct interpretation of said provisions is that, if an international air carrier maintains flights to and from the Philippines then it shall be taxed at the rate of 2 1/2 % of its GPB, while international air carriers that do not have flights to and from the Philippines but nonetheless earn income from other activities in the country will be taxed at the rate of 32% [now 30%] of such income. National Internal Revenue Code; claims for refunds. Under Section 72 [Suit to Recover Tax Based on False or Fraudulent Returns] of the National Internal Revenue Code, the Court of Tax Appeals can make a valid finding that taxpayer made erroneous deductions on its gross cargo revenue; that because of the erroneous deductions, taxpayer reported a lower cargo revenue and paid a lower income tax thereon; and that taxpayer’s underpayment of the income tax on cargo revenue is even higher than the income tax it paid on passenger revenue subject of the claim for refund, such that the refund cannot be granted. On the assumption that taxpayer filed a correct return, it had the right to file a claim for refund of the Gross Philippine Billings (GPB) tax on passenger revenues it paid in 1999 when it was not operating passenger flights to and from the Philippines. However, upon examination by the CTA, taxpayer’s return was found erroneous as it understated its gross cargo revenue for the same taxable year due to deductions of two items. Having underpaid the GPB tax due on its cargo revenues for 1999, taxpayer is not entitled to a refund of its GPB tax on its passenger revenue, the amount of the former being even much higher than the tax refund sought. United Airlines, Inc. vs Commissioner of Internal Revenue,
