Taxation Case Digest PDF

Taxation 1 Case Digest  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW UNIVERSITY OF SANTO TOMAS FACULTY OF CIVIL LAW LIST OF CASES...

Taxation 1 Case Digest  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW UNIVERSITY OF SANTO TOMAS FACULTY OF CIVIL LAW LIST OF CASES Taxation 1 I. General Principles A. Definition of Taxation B. Theories and Basis of Taxation 1. Lifeblood Theory Cases:  Pilmico-Mauri Foods Corp. v. CIR, 802 SCRA 618  CIR v. Next Mobile, Inc., 776 SCRA 343  CIR v. Dash Engineering Philippines, Inc., 712 SCRA 347  Camp John Hay Development Corporation v. CBAA, 706 SCRA 547  First Lepanto Taishu Insurance v. CIR, 695 SCRA 639  CIR v. San Roque Power Corporation, 690 SCRA 336  CIR v. BPI, 521 SCRA 373  CIR v. Pineda, 21 SCRA 105  Vera v. Fernandez, 89 SCRA 199  CIR v. CTA, 234 SCRA 348  CIR v. Algue, Inc, 158 SCRA 9  YMCA v. CIR, 298 SCRA 83  Davao Gulf Lumber Corp. v. CIR, 293 SCRA 77  Marcos II v. CA, 273 SCRA 47  Reyes v. Almanzor, 196 SCRA 322  PB Com v. CIR, 302 SCRA 250  Phil. Guaranty, Co., Inc. v. CIR, 13 SCRA 775  Philex Mining Corp. v. CIR, 294 SCRA 687  North Camarines Lumber Co. v. CIR, 109 Phil 511 2. Necessity Theory Cases:  Phil. Guaranty Co. v. CIR, 13 SCRA 775  Gerochi v. DOE, 527 SCRA 696 3. Benefits-protection Theory (Symbiotic Relationship) Cases:  CIR v. Algue, Inc. v. CTA, 158 SCRA 9  Abakada Guro Party List v. Exec. Sec. Eduardo Ermita, 469 SCRA 1 4. Jurisdiction Over Subject and Objects Cases:  CIR v. CA, 267 SCRA 557  Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Bienvenido Tan, 163 SCRA 371  CREBA , Inc. v. Romulo, 614 SCRA 605 C. Nature of Taxation 1. It is inherently legislative 2. It is for a public purpose 3. It is territorial in application 4. It is subject to international comity 5. It is an exaction payable in money 6. It is subject to limitations and restrictions Cases:  CREBA, Inc. v. Romulo, 614 SCRA 605  Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667  Republic v. Caguioa, 536 SCRA 193  National Telecommunications v. CA, 311 SCRA 508 1  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW  Paseo Realty & Dev't. Corp. v. CA, 309 SCRA 402  Pepsi Cola Bottling Co. (Phils.) v. Mun. Of Tanauan, Leyte, 69 SCRA 460  CIR v. Fortune Tobacco Corp., 559 SCRA 160  Phil Guarantee Company v. CIR, 13 SCRA 775  NPC v. Province of Albay, 186 SCRA 198 D. Purposes of Taxation 1. Revenue Raising Cases:  Lutz v. Araneta, 98 Phil 148  Gerochi v. DOE, 527 SCRA 696  Gaston v. Republic Bank, 158 SCRA 626 2. Regulatory Purpose Cases:  Chevron Phils., Inc. v. Bases Conversion Dev't. Authority, 630 SCRA 519  Terminal Facilities & Services Corp. v. Phil. Ports Authority, 378 SCRA 81  Manila Memorial Park, Inc. v. Secretary of DSWD, 711 SCRA 302 E. Characteristics of Taxation Cases:  Planters Products, Inc. v. Fertiphil Phil. Corporation, 548 SCRA 485  Tio v. Videogram Regulatory Board, et al., 151 SCRA 213 F. Scope and Limitations of Taxation 1. Inherent Limitations a. Power of taxation is inherently legislative in character Cases:  NPC v. Province of Albay, 186 SCRA 198  Quezon City, et al. v. Bayan Telecommunications, Inc., 484 SCRA 169  Pepsi-Cola Bottling Co. v. Mun. Of Tanuan, Leyte, 69 SCRA 460 b. Taxation is for a public purpose Case:  Planters Products, Inc. v. Fertiphil Corp., 548 SCRA 485 c. Taxation is territorial Case:  ACMDC v. CIR, 524 SCRA 73 d. Taxation is subject to international comity Cases:  CIR v. Mitsubishi Metal Corp., 181 SCRA 214  CBK Power Co., Ltd. v. CIR, GR No. 192283, January 14, 2015 e. Non-delegability of the power of taxation Cases:  Abakada Guro Party List v. Ermita, 469 SCRA 1  Southern Cross Cement Corp. v. Cement Manufacturers Asso. Of the Phils., GR No. 158540, August 3, 2005  Camarines North Elec. Cooperative v. Torres, GR No. 127249, February 27, 1998 f. Government is exempt from taxation Cases:  Phil. Fisheries Dev't. Authority v. The Municipality of Navotas, 534 SCRA 490  City of Lapu Lapu v. PEZA, 742 SCRA 524  MIAA v. Parañaque City, 495 SCRA 591  Mactan-Cebu International Airport Authority (MCIAA) v. City of Lapu-Lapu, 757 SCRA 323 2. Constitutional Limitations a. Uniformity and Equality Clause Cases:  CIR v. SM Prime Holdings, Inc., 613 SCRA 774 2  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW  PAGCOR v. CIR, 645 SCRA 338  Phil. Trust BL Company v. Yatco, 69 Phil 420  Tan v. Del Rosario, 237 SCRA 324  CREBA, Inc. v. Exec. Sec. Romulo, 614 SCRA 605  Roxas v. CTA, 23 SCRA 276  British Tobacco v. CIR, 562 SCRA 511  Punsalan v. City of Manila, 95 Phil 46  Juan Luna Subdivision, Inc. v. Sarmiento, 91 Phil 371  Pepsi Cola Bottling Co., Inc. v. City of Butuan, 24 SCRA 789 b. Non-impairment of Contract Clause Cases:  Casanovas v. Hord, 8 Phil 25  Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667  Tolentino v. Sec. of Finance, 235 SCRA 630 c. Due Process Clause Cases:  PB Communications v. CIR, 302 SCRA 241  Tanada v. Tuvera, 136 SCRA 27  CIR v. Metro Star Superama, Inc., 637 SCRA 633 d. Tax exemptions of religious, educational and charitable institutions/organizations from property tax Cases:  CIR v. YMCA, 298 SCRA 83  Lladoc v. CIR, 14 SCRA 292  Hodges v. Mun. Board of Iloilo City, 19 SCRA 28  Lung Cancer of the Philippines v. QC, 433 SCRA 119  St. Luke's Medical Center, Inc. v. CIR, 682 SCRA 66  Angeles University Foundation v. City of Angeles, 675 SCRA 359 e. Free Exercise of Religous Profession and Worship Cases:  American Bible Society v. City of Manila, 101 Phil 386  Tolentino v. Secretary of Finance, 235 SCRA 630 G. Stages of Taxation 1. Levy 2. Assesment and Collection Cases:  CIR v. United Salvage & Towage (Phils.) Inc., 729 SCRA 113  Alhambra Cigar & Cig. Mfg., Co. v. Collector, 105 Phil 1337  CIR v. The Stanley Works Sales (Phils.), Inc. 743 SCRA 642  Ungab v. Cusi, Jr., 97 SCRA 877  CIR v. Pascor Realty Development Corp., 309 SCRA 402  CIR v. Hantex Trading, 454 SCRA 301  CIR v. BPI, 411 SCRA 456 3. Payment Case:  First Lepanto Taisho Ins. Corp. v. CIR, 695 SCRA 639 H. Principles of a Sound Tax System 1. Fiscal Adequacy Case:  Chavez v. Ongpin, 186 SCRA 331 2. Administrative Feasibility Case:  Timbol & Diaz v. Sec. Of Finance, 654 SCRA 96 3. Theoretical Justice I. Doctrines in Taxation 1.Prospectivity of tax laws 3  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW Cases:  CIR v. Acosta, 529 SCRA 177  CIR v. CA, 267 SCRA 576 a. Revenue Regulations  Non-retroactivity Cases:  CIR v. Filinvest Dev't. Corp., 654 SCRA 56  Supreme Transliner, Inc. v. BPI Family Savings Bank, Inc., 644 SCRA 59  CIR v. CA, 267 SCRA 557  CIR v. Burroughs, Inc., 142 SCRA 324  British American Tobacco, Inc. v. Camacho, 562 SCRA 511 b. BIR Rulings or Administrative Rulings Cases:  Phil Bank of Communications v. CIR, 302 SCRA 241  Team Energy Corp. v. CIR, GR No. 197760  CIR v. Burroughs, Inc., 142 SCRA 324  CIR v. Aichi Forging Co. Of Asia, Inc., 632 SCRA 422 2. Imprescriptibility of taxes 3. Principle of Exhaustion of Administrative remedies in taxation Cases:  Silicon Phils., Inc. v. CIR, 717 SCRA 30  City of Lapu-Lapu v. PEZA, 742 SCRA 524  Comm. Of Customs v. Oilink Int'l. Corp., 728 SCRA 469 4. Double taxation  Manufacturers Life v. Meer, 89 Phil 210  Modes of eliminating double taxation: a) Tax exemption b) Tax credit c) Tax deduction d) Tax discount e) Tax treaties f) Principle of Reciprocity Case: CIR v. SC Johnson & Son, Inc., 309 SCRA 87 a. Direct duplicate taxation Cases:  Ericsson Telecommunications, Inc. v. City of Pasig, 538 SCRA 99  Nursery Care Corp. v. Acevedo, 731 SCRA 280 b. Indirect duplicate taxation Cases:  CIR v. SC Johnson & Son, Inc., 309 SCRA 87  La Suerte Cigar & Cig. Factory v. CA, 739 SCRA 489  Villanueva v. City of Iloilo, 26 SCRA 578  Compania General de Tabacos de Filipinos v. City of Manila, 8 SCRA 367  CIR v. Solidbank Corp., 416 SCRA 436 c. Tax pyramiding Cases:  People v. Sandiganbayan, 467 SCRA 137  CIR v. American Rubber Co., 18 SCRA 842 5. Escapes from taxation a. Shifting of tax burden Cases:  CIR v. Pilipinas Shell Petroleum Corp., 717 SCRA 53  Phil. Acetylene Co., Inc. v. CIR, 20 SCRA 1056 b. Tax avoidance Cases:  Gala v. Ellice Agro Industrial Corp., 418 SCRA 431  Heng Tong Textiles Co., Inc. v. CIR, 24 SCRA 767  Delpher Trades Corp. v. IAC, 157 SCRA 349 c. Tax evasion 4  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW Case:  CIR v. Estate of Benigno Toda, Jr., 438 SCRA 290 6. Exemption from taxation Cases:  John Hay Special Economic Zone v. Lim, 414 SCRA 356  CIR v. Phil. Associated Smelting & Refining Corp., 737 SCRA 328 Grounds of exemption Cases:  Batangas Power Corp. v. Batangas City & NPC, GR No. 152675, April 28, 2004  Tolentino v. Sec. Of Finance, 235 SCRA 630 Kinds of tax exemptions: a) Express:  CIR v. MERALCO, 725 SCRA 384  Western Minolco Corp. v. CIR, 124 SCRA 121 b) Implied or by inference Case:  John Hay Special Economic Zone v. Lim, 414 SCRA 356 c) Contractual Case:  MCIAA v. Marcos, 261 SCRA 667 Nature of tax exemption Case:  FELS Energy, Inc. v. Province of Batangas, 516 SCRA 186 Revocation of tax exemption Cases:  A. Tolentino v. Sec. of Finance, 235 SCRA 630  Provincial Treasurer of Province of Misamis Oriental v. Cagayan Electric Power & Light Co., Inc., 181 SCRA 38  Batangas Power Corp. v. Batangas City & NPCX, 428 SCRA 250  Phil. Basketball Asso. v. CA, 337 SCRA 358 Construed strictly against the taxpayer Cases:  MCIAA v. Marcos, 261 SCRA 667  CIR v. Phil. American Accident Ins. Co., Inc., 453 SCRA 668  NPC v. City of Cabanatuan, 401 SCRA 259 7. Compensation and set-off Cases:  CIR v. Toledo Power Company, 775 SCRA 709  Republic v. Ericta, 172 SCRA 623  CIR v. Esso Standard Eastern, Inc., 172 SCRA 364  Republic v. Mambulao Lumber Company, 4 SCRA 622  Domingo v. Garlitos, 8 SCRA 443  Francia v. IAC, 162 SCRA 753  Philex Mining Corp. v. CIR, 294 SCRA 687  CIR v. Citytrust Banking Corporation, 499 SCRA 477  CIR v. UST, 104 Phil 1062 8. Compromise Case:  Wonder Mechanical Engineering Corp. v. CA, 64 SCRA 555 9. Tax Amnesty Cases:  People v. Castañeda, 165 SCRA 327  Asia International Auctioneers, Inc. v. CIR, 682 SCRA 49  Special Economic Zone v. Lim, 414 SCRA 356 J. Elements of a Valid Tax K. Tax as Distinguished from Other Forms of Exactions 1. Tax v. Revenue 5  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW 2. Tax v. License Cases:  Ermita-Malate Hotel & Motel Operators Asso., Inc. v. City of Manila, 20 SCRA 47  Gerochi v. Department of Energy, 527 SCRA 696  Cojuangco, Jr. v. Republic, 686 SCRA 472  Angeles University Foundation v. City of Angeles, 675 SCRA 359  Smart Telecommunications, Inc. v. Mun. Of Malvar, Batangas, 716 SCRA 677  Progressive Dev't. Corp. v. Quezon City, 172 SCRA 629  Land Transportation v. City of Butuan, 322 SCRA 805  CIR v. Maritime Shipping, 238 SCRA 42 3. Tax v. Debts 4. Tax v. Fees/Charges 5. Tax v. Tariff 6. Tax v. Penalty 7. Tax v. Subsidy L. Kinds of Taxes 1. Direct taxes Cases:  Maceda v. Macaraig, Jr., 223 SCRA 217  CIR v. PLDT Company, 478 SCRA 61 2. Indirect taxes Cases:  Diaz & Timbol v. Sec. Of Finance, 654 SCRA 96  Phil. Acetylene Co., Inc. v. CIR, 20 SCRA 1056  Silkair (Sing) Pte., Ltd. v. CIR, 571 SCRA 1431  Asia Int'l. Auctioneers, Inc. v. CIR, 682 SCRA 49  CIR v. Acesite (Phils) Hotel Corp. v. CIR, 516 SCRA 93 3. Specific ad valorem and mixed 4. General or fiscal; special, regulatory, sumptuary 5. National and local 6. Progressive, regressive and proportionate II. National Internal Revenue Code of 1997, as amended by RA 10963 (Tax Reform for Acceleration and Inclusion Law) A. Income taxation 1. Income tax systems Case: Tan v. Del Rosario, 237 SCRA 324 2. Features of the Philippine income tax law 3. Criteria in imposing Philippine income tax Cases:  Tan v. Del Rosario, 237 SCRA 324  CIR v. BOAC, 149 SCRA 395  South African Airways v. CIR, 612 SCRA 665  Alexander Howden & Co., Ltd. v. Collector13 SCRA 601  CIR v. Baier-Nickel, 500 SCRA 87 4. Types of Philippine income tax 5. Taxable period 6. Kinds of taxpayers 7. Income a. Definition Broad Definition, RR 2, Section 36 Judicial definition Cases: Eisner v. Macomber, 252 U.S. 189 CONWI v. CTA, 213 SCRA 83 6  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW b. Nature and Basis Cases:  CIR v. Lednicky, 11 SCRA 603  CIR v. BOAC, 149 SCRA 395  CREBA v. Romulo, 614 SCRA 605 8. Gross income a. Definition – General statutory, broad and jurisprudential 9. Exclusions from gross income Cases:  El Oriente v. Posadas, 56 Phil 147  Santos v. Servier Philippines, Inc., 572 SCRA 487  Request for reconsideration of Atty. Zialcita, 190 SCRA 851  CIR v. Mitsubishi Metal Corp., 181 SCRA 214 10. Taxation of resident citizens, non-resident citizens, and resident aliens 11. Taxation of non-resident aliens engaged in trade or business 12. Individual taxpayers exempt from income tax 13. Categories of income a. Forms of Compensation  Cancellation or forgiveness of indebtedness  Life Insurance Premiums b. Special Rules on Fringe Benefits c. Business/Trade/Professional Income d. Interest income e. Rent income f. Dividend income g. Passive investment income h. Other sources 14. Taxation of domestic corporations Case: CIR v. St. Luke's Medical Center, Inc., 682 SCRA 66 15. Taxation of resident foreign corporations Cases:  Air Canada v. CIR, 778 SCRA 131  Far East International Import and Export Corp. v. Nankai Kogyo Co., Ltd., 6 SCRA 725  South African Airways v. CIR, 612 SCRA 665 16. Taxation of non-resident foreign corporations Case: N.V. Reederij Amsterdam v. CIR, 162 SCRA 487 17. Taxation of partnerships (Business and General Professional) Cases:  Evangelista v. Collector, 102 Phil 140  Oña v. CIR, 45 SCRA 74  Pascual and Dragon v. CIR, 166 SCRA 560  Obillos, Sr. v. CIR, 139 SCRA 436  Afisco Insurance Corp. v. CA, 302 SCRA 1  Brocki v. American Express Company, 279F 2d 785, 787 18. Other Corporate Tax Rules a. Branch Profit Remittance Tax Cases:  Deutsche Ban AG Manila Branch v. CIR, 704 SCRA 216  CIR v. Marubeni, 177 SCRA 500  Bank of America NT & SA v. CA, 234 SCRA 302 b. Minimum Corporate Income Tax (MCIT) Cases:  CREBA v. Romulo, 614 SCRA 605  Manila Banking Corporation v. CIR, 499 SCRA 782 c. Improperly Accumulated Earnings Tax (IAET) Cases:  Cyanamid v. CA, 322 SCRA 639 7  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW  Helvering v. National Grocery Co., 304 U.S. 282 d. Tax sparing credit (TSC) Case:  CIR v. Procter, 204 SCRA 377 19. Exempt corporations Cases:  CIR v. De La Salle University, 808 SCRA 156  CIR v. CA, 298 SCRA 83  CIR v. St. Luke's Medical Center, Inc., 682 SCRA 66  PAGCOR v. CIR, 744 SCRA 712 20. Allowable Deductions from Gross Income Cases:  Pilmico-Mauri General Foods Corp. v. CIR, 802 SCRA 608  Atlas Consolidated Mining v. CIR, 102 SCRA 246  Hospital De San Juan De Dios v. CIR, 185 SCRA 273  Esso Standard Eastern, Inc. v. CIR, 175 SCRA 149  CIR v. Algue, Inc., 158 SCRA 9  CIR v. Isabela Cultural Corp., 515 SCRA 556  CIR v. General Foods Phils., 401 SCRA 545  CIR v. Palanca, 18 SCRA 496  CIR v. Prieto, 109 Phil 592  PICOP v. CA, 250 SCRA 434  CIR v. Bicolandia Drug Corp., 496 SCRA 176  CIR v. Prescilla, 11 SCRA 130  PRC v. CIR, 256 SCRA 667 21. Optional Standard Deduction (OSD) 22. Taxation of Estates and Trusts 23. Special Topics in Income Taxation Cases:  NDC v. CIR, 151 SCRA 472  Calasanz v. CIR, 144 SCRA 664  Tuason, Jr. v. Lingad, 58 SCRA 176  Smi-ed Phil Technology v. CIR, 739 SCRA 691  Supreme Transliner, Inc. v. BPI Family Savings Bank, Inc., 644 SCRA 59  Delpher Trades, Corp. v. IAC, 157 SCRA 349 24. Withholding tax (Creditable and Final) Cases:  BDO v. RP, 745 SCRA 361  RCBC v. CIR, 657 SCRA 70  Citibank v. CIR, 280 SCRA 459 25. Persons Required to File Income Tax Returns 8  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW PILMICO-MAURI FOODS CORP., PETITIONER, -versus-. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. G.R. No. 175651, THIRD DIVISION, September 14, 2016, REYES, J. To support deductions for business expenses, official receipts and sales invoices must meet the requirements provided for in Section 238 of the 1977 Tax Code. FACTS: Petitioner was assessed deficiency income, value-added and withholding tax for the taxable year 1996. In the assessment, petitioner’s claim for business deduction on purchases of raw materials was disallowed on the ground that petitioner failed to support sales invoices which are compliant with Section 238 of the 1977 Tax Code, particularly in the name of the purchaser and the date of the transaction. The CTA found that the alterations in the sales invoices gave rise to serious doubts as to their authenticity. Petitioner argues that Section 29 of the 1977 Tax Code is applicable to determine the deductibility of an expense, particularly, (1) the expense must be ordinary and necessary; (2) it must be paid or incurred within the taxable year; and (3) it must be paid or incurred in carrying on a trade or business. Petitioner argues that, prior to the promulgation of the 1997 Tax Code; the law does not require the production of official receipts to prove an expense. ISSUE: Whether or not Section 238 of the 1977 Tax Code, particularly the requirements on the information reflected in the receipts and invoices, is applicable to determine business deductibility of expenses? (Yes) RULING: The law intends for Section 29 and 238 of the 1977 Tax Code to be read together, and not for one provision to be accorded preference over the other. While official receipts are not the only pieces of evidences which can prove deductible expenses, if presented, they shall be subjected to examination. The petitioner submitted the receipts as evidence of its business deductions. Accordingly, Section 238 of the 1977 Tax Code is applicable to determine if such receipts and invoices may substantiate such claims for deduction. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, -versus-. NEXT MOBILE, INC. (FORMERLY NEXTEL COMMUNICATIONS PHILS., INC.), RESPONDENT. G.R. No. 212825, THIRD DIVISION, December 07, 2015, VELASCO JR., J. An assessment notice issued after the three-year prescriptive period is not valid and effective. Exceptions to this rule are provided under Section 222 of the NIRC. Section 222(b) of the NIRC provides that the period to assess and collect taxes may only be extended upon a written agreement between the CIR and the taxpayer executed before the expiration of the three-year period. The general rule is that when a waiver does not comply with the requisites for its validity specified under RMO No. 20-90 and RDAO 01-05, it is invalid and ineffective to extend the prescriptive period to assess taxes. However, due to its peculiar circumstances, We shall treat this case as an exception to this rule and find the Waivers valid for the reasons discussed below. First, the parties in this case are in pari delicto or "in equal fault." Second, the Court has repeatedly pronounced that parties must come to court with clean hands. Third, respondent is estopped from questioning the validity of its Waivers. Finally, the Court cannot tolerate this highly suspicious situation. In this case, the taxpayer, on the one hand, after voluntarily executing waivers, insisted on their invalidity by raising the very same defects it caused. On the other hand, the BIR miserably failed to exact from respondent compliance with its rules. The BIR's negligence in the performance of its duties was so gross that it amounted to malice and bad faith. Moreover, the BIR was so lax such that it seemed that it consented to the mistakes in the Waivers. Such a situation is dangerous and open to abuse by unscrupulous taxpayers who intend to escape their responsibility to pay taxes by mere expedient of hiding behind technicalities. 9  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW FACTS: Respondent filed with the BIR its Annual Income Tax Return (ITR) for taxable year ending December 31, 2001. Respondent also filed its Monthly Remittance Returns of Final Income Taxes Withheld, its Monthly Remittance Returns of Expanded Withholding Tax and its Monthly Remittance Return of Income Taxes Withheld on Compensation for year ending December 31, 2001. Later on, respondent received a copy of the Letter of Authority authorizing the Revenue Officer to examine respondent's books of accounts and other accounting records for income and withholding taxes for the period covering January 1, 2001 to December 31, 2001. Sarmiento, respondent's Director of Finance, subsequently executed several waivers of the statute of limitations to extend the prescriptive period of assessment for taxes due in taxable year ending December 31, 2001 (Waivers). Respondent received a Formal Letter of Demand (FLD) and Assessment Notices/Demand No. 43-734 both dated October 17, 2005 from the BIR, demanding payment of deficiency income tax, FWT, EWT, increments for late remittance of taxes withheld, and compromise penalty for failure to file returns/late filing/late remittance of taxes withheld, in the total amount of P313, 339,610.42 for the taxable year ending December 31, 2001. Respondent filed its protest against the FLD and requested the reinvestigation of the assessments. On July 28, 2009, respondent received a letter from the BIR denying its protest. Thus, on August 27, 2009, respondent filed a Petition for Review before the CTA docketed as CTA Case No. 7965. The former First Division of the CTA rendered a Decision granting respondent's Petition for Review and declared the FLD dated October 17, 2005 and Assessment Notices/Demand No. 43-734 dated October 17, 2005 cancelled and withdrawn for being issued beyond the three-year prescriptive period provided by law. The tax court also rejected petitioner's claim that this case falls under the exception as to the three- year prescriptive period for assessment and that the 10-year prescriptive period should apply on the ground of filing a false or fraudulent return. The CTA First Division held that the Waivers executed by Sarmiento did not validly extend the three-year prescriptive period to assess respondent for deficiency income tax, FWT, EWT, increments for late remittance of tax withheld and compromise penalty, for, as found, the Waivers were not properly executed according to the procedure in Revenue Memorandum Order No. 20-90 (RMO 20-90) and Revenue Delegation Authority Order No. 05-01 (RDAO 05-01). Petitioner's Motion for Reconsideration was denied on March 14, 2013. Petitioner filed a Petition for Review before the CTA En Banc. The CTA En Banc rendered a Decision denying the Petition for Review and affirmed that of the former CTA First Division. It held that the five (5) Waivers of the statute of limitations were not valid and binding; thus, the three-year period of limitation within which to assess deficiency taxes was not extended. It also held that the records belie the allegation that respondent filed false and fraudulent tax returns; thus, the extension of the period of limitation from three (3) to ten (10) years does not apply. ISSUE: Whether or not the CIR's right to assess respondent's deficiency taxes had already prescribed? (NO) RULING: Section 203 of the 1997 NIRC mandates the BIR to assess internal revenue taxes within three years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later. Hence, an assessment notice issued after the three-year prescriptive period is not valid and effective. Exceptions to this rule are provided under Section 222 of the NIRC. Section 222(b) of the NIRC provides that the period to assess and collect taxes may only be extended upon a written agreement between the CIR and the taxpayer executed before the expiration of the three-year period. RMO 20-90 issued on April 4, 1990 and RDAO 05-01 issued on August 2, 2001 provide the procedure for the proper execution of a waiver. The Court has consistently held that a waiver of the statute of limitations must faithfully comply 10  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW with the provisions of RMO No. 20-90 and RDAO 05-01 in order to be valid and binding. In the instant case, the CTA found the Waivers because of the following flaws: (1) they were executed without a notarized board authority; (2) the dates of acceptance by the BIR were not indicated therein; and (3) the fact of receipt by respondent of its copy of the Second Waiver was not indicated on the face of the original Second Waiver. To be sure, both parties in this case are at fault. Here, respondent, through Sarmiento, executed five Waivers in favor of petitioner. However, her authority to sign these Waivers was not presented upon their submission to the BIR. Similarly, the BIR violated its own rules and was careless in performing its functions with respect to these Waivers. It is very clear that under RDAO 05-01 it is the duty of the authorized revenue official to ensure that the waiver is duly accomplished and signed by the taxpayer or his authorized representative before affixing his signature to signify acceptance of the same. It also instructs that in case the authority is delegated by the taxpayer to a representative, the concerned revenue official shall see to it that such delegation is in writing and duly notarized. Furthermore, it mandates that the waiver should not be accepted by the concerned BIR office and official unless duly notarized. Both parties knew the infirmities of the Waivers yet they continued dealing with each other on the strength of these documents without bothering to rectify these infirmities. In fact, in its Letter Protest to the BIR, respondent did not even question the validity of the Waivers or call attention to their alleged defects. In this case, respondent, after deliberately executing defective waivers, raised the very same deficiencies it caused to avoid the tax liability determined by the BIR during the extended assessment period. It must be remembered that by virtue of these Waivers, respondent was given the opportunity to gather and submit documents to substantiate its claims before the CIR during investigation. It was able to postpone the payment of taxes, as well as contest and negotiate the assessment against it. Yet, after enjoying these benefits, respondent challenged the validity of the Waivers when the consequences thereof were not in its favor. In other words, respondent's act of impugning these Waivers after benefiting therefrom and allowing petitioner to rely on the same is an act of bad faith. On the other hand, the stringent requirements in RMO 20-90 and RDAO 05-01 are in place precisely because the BIR put them there. Yet, instead of strictly enforcing its provisions, the BIR defied the mandates of its very own issuances. The BIR stood to lose millions of pesos in case the Waivers were declared void, as they eventually were by the CTA, but it appears that it was too negligent to even comply with its most basic requirements. The general rule is that when a waiver does not comply with the requisites for its validity specified under RMO No. 20-90 and RDAO 01-05, it is invalid and ineffective to extend the prescriptive period to assess taxes. However, due to its peculiar circumstances, We shall treat this case as an exception to this rule and find the Waivers valid for the reasons discussed below. First, the parties in this case are in pari delicto or "in equal fault." In pari delicto connotes that the two parties to a controversy are equally culpable or guilty and they shall have no action against each other. Here, to uphold the validity of the Waivers would be consistent with the public policy embodied in the principle that taxes are the lifeblood of the government, and their prompt and certain availability is an imperious need. Taxes are the nation's lifeblood through which government agencies continue to operate and which the State discharges its functions for the welfare of its constituents. As between the parties, it would be more equitable if petitioner's lapses were allowed to pass and consequently uphold the Waivers in order to support this principle and public policy. Second, the Court has repeatedly pronounced that parties must come to court with clean hands. Parties who do not come to court with clean hands cannot be allowed to benefit from their own wrongdoing. Following the foregoing principle, respondent should not be allowed to benefit from the flaws in its own Waivers and successfully insist on their invalidity in order to evade its responsibility to pay taxes. 11  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW Third, respondent is estopped from questioning the validity of its Waivers. While it is true that the Court has repeatedly held that the doctrine of estoppel must be sparingly applied as an exception to the statute of limitations for assessment of taxes, the Court finds that the application of the doctrine is justified in this case. Verily, the application of estoppel in this case would promote the administration of the law, prevent injustice and avert the accomplishment of a wrong and undue advantage. Respondent executed five Waivers and delivered them to petitioner, one after the other. It allowed petitioner to rely on them and did not raise any objection against their validity until petitioner assessed taxes and penalties against it. Moreover, the application of estoppel is necessary to prevent the undue injury that the government would suffer because of the cancellation of petitioner's assessment of respondent's tax liabilities. Finally, the Court cannot tolerate this highly suspicious situation. In this case, the taxpayer, on the one hand, after voluntarily executing waivers, insisted on their invalidity by raising the very same defects it caused. On the other hand, the BIR miserably failed to exact from respondent compliance with its rules. The BIR's negligence in the performance of its duties was so gross that it amounted to malice and bad faith. Moreover, the BIR was so lax such that it seemed that it consented to the mistakes in the Waivers. Such a situation is dangerous and open to abuse by unscrupulous taxpayers who intend to escape their responsibility to pay taxes by mere expedient of hiding behind technicalities. It is true that petitioner was also at fault here because it was careless in complying with the requirements of RMO No. 20-90 and RDAO 01-05. Nevertheless, petitioner's negligence may be addressed by enforcing the provisions imposing administrative liabilities upon the officers responsible for these errors. The BIR's right to assess and collect taxes should not be jeopardized merely because of the mistakes and lapses of its officers, especially in cases like this where the taxpayer is obviously in bad faith. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, -versus- DASH ENGINEERING PHILIPPINES, INC., RESPONDENT. G.R. No. 184145, THIRD DIVISION, December 11, 2013, MENDOZA, J. The 120+30-day period in Section(d) (now subparagraph C) requires that upon the inaction of the CIR for 120 days after the submission of the documents in support of the claim, the tax payer has to file its judicial claim within 30 days from the lapse of the said period. The 120+30 day period under Sec. 112 is mandatory and jurisdictional that a judicial claim for refund must be denied if the same has been filed beyond the period prescribed as the Court of Appeals cannot validly acquire jurisdiction over the claim. FACTS: Dash Corporation filed its monthly and quarterly VAT returns for the period January 1, 2003 to June 30, 2003. On August 9, 2004, it filed a claim for tax credit or refund representing the unutilized input VAT attributable to its zero-rated sales. Subsequently, by reason of the CIR’s inaction, Dash was compelled to file a petition for review with CTA on May 5, 2005. The CTA Division rendered its Decision partially granting Dash’s claim. On the matter of the timelines of filing of the judicial claim, the Tax Court found that Dash’s claims for refund for the first and second quarters of 2003 were filed within the two-year prescriptive period which is counted from the date of filing of the return and payment of tax due. CIR moved for reconsideration but the same was denied. Aggrieved, CIR elevated the case to the CTA En Banc arguing, among others, that the petition for review filed by Dash was filed out of time. The CTA En Banc, in its decision, upheld the decision of the CTA Division, ruling that the judicial claim was filed on time because the use of the word “may” in Section 112(D) (now subparagraph C) of the NIRC indicates that judicial recourse within thirty days after the lapse of the 120-day period is only directory and permissive and not mandatory and jurisdictional, as long as the petition was filed within the two-year prescriptive period. The Tax Court further reiterated that the two-year prescriptive period applies to both administrative and judicial claims. After the denial of its motion for reconsideration, the CIR filed a Petition for Review arguing that the 12  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW judicial claim was filed out of time because Dash failed to comply with the 30-day period referred to in Section 112 (D) (now subparagraph C) of the NIRC, citing the case of CIR V. Aichi where the Court categorically held that compliance with the prescribed periods in Section 12 is mandatory and jurisdictional. ISSUE: Whether or not the judicial claim was filed out of time? (YES) RULING: Petition Granted. The 120+30 day period under Sec. 112 is mandatory and jurisdictional. Section 112(D) (now subparagraph C) of the NIRC provides that: Sec. 112. Refunds or Tax Credits of Input Tax x x x (D) Period within which Refund or Tax Credit of Input Taxes shall be Made. – In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. Petitioner is entirely correct in its assertion that compliance with the periods provided for in the above quoted provision is indeed mandatory and jurisdictional, as affirmed in this Court’s ruling in San Roque, where the Court En Banc settled the controversy surrounding the application of the 120+30-day period provided for in Section 112 of the NIRC and reiterated the Aichi doctrine that the 120+30-day period is mandatory and jurisdictional. Nonetheless, the Court took into account the issuance by the Bureau of Internal Revenue (BIR) of BIR Ruling No. DA-489-03 which misled taxpayers by explicitly stating that taxpayers may file a petition for review with the CTA even before the expiration of the 120-day period given to the CIR to decide the administrative claim for refund. Even though observance of the periods in Section 112 is compulsory and failure to do so will deprive the CTA of jurisdiction to hear the case, such a strict application will be made from the effectivity of the Tax Reform Act of 1997 on January 1, 1998 until the present, except for the period from December 10, 2003 (the issuance of the erroneous BIR ruling) to October 6, 2010 (the promulgation of Aichi), during which taxpayers need not wait for the lapse of the 120+30- day period before filing their judicial claim for refund. The case at bench, however, does not involve the issue of premature filing of the petition for review with the CTA. Rather, this petition seeks the denial of DEPI’s claim for refund for having been filed late or after the expiration of the 30-day period from the denial by the CIR or failure of the CIR to make a decision within 120 days from the submission of the documents in support of respondent’s administrative claim. In accordance with San Roque, respondent's judicial claim for refund must be denied for having been filed late. Although respondent filed its administrative claim with the BIR on August 9, 2004 before the expiration of the two-year period in Section 112(A), it undoubtedly failed to comply with the 120+ 30-day period in Section 112(D) (now subparagraph C) which requires that upon the inaction of the CIR for 120 days after the submission of the documents in support of the claim, the taxpayer has to file its judicial claim within 30 days after the lapse of the said period. The 120 days granted to the CIR to decide the case ended on December 7, 2004. Thus, DEPI had 30 days therefrom, or until January 6, 2005, to file a petition for review with the CTA. Unfortunately, DEPI only sought judicial relief on May 5, 2005 when it belatedly filed its petition to the CTA, despite having had ample time to file the same, almost four months after the period allowed by law. As a consequence of DEPI's late filing, the CTA did not properly acquire jurisdiction over the claim. CAMP JOHN HAY DEVELOPMENT CORPORATION, PETITIONER, -versus- CENTRAL BOARD OF ASSESSMENT APPEALS, REPRESENTED BY ITS CHAIRMAN HON. 13  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW CESAR S. GUTIERREZ, ADELINA A. TABANGIN, IN HER CAPACITY AS CHAIRMAN OF THE BOARD OF TAX (ASSESSMENT) APPEALS OF BAGUIO CITY, AND HON. ESTRELLA B. TANO, IN HER CAPACITY AS THE CITY ASSESSOR OF THE CITY OF BAGUIO, RESPONDENTS. G.R. No. 169234, SECOND DIVISION, October 2, 2013, PEREZ, J. A taxpayer questioning the correctness of an assessment of real property tax must comply with the requirement of “payment under protest” since it is a condition sine qua non before such protest or appeal may be entertained. Moreover, a claim for exemption from payment of real property taxes does not actually question the assessor’s authority to assess and collect such taxes, but pertains to the reasonableness or correctness of the assessment by the local assessor, a question of fact which should be resolved, at the very first instance, by the LBAA. FACTS: Respondent City Assessor of Baguio City notified petitioner about the issuance against it of real property tax assessment. In response, petitioner questioned the assessments for lack of legal. The City Assessor replied that the subject RPT was issued on the basis of the approved building permits and pursuant to Sections 201 to 206 of RA No. 7160. Consequently, petitioner filed with the Board of Tax Assessment Appeals (BTAA) an appeal. BTAA enjoined petitioner to first comply as to the payment under protest of the subject real property taxes before the hearing of its appeal. Aggrieved, petitioner elevated the case before the CBAA. The CBAA denied petitioner’s appeal and remanded the case to the LBAA for further proceedings subject to a full and up-to-date payment of the realty taxes on subject properties. Undaunted by the pronouncements in the abovementioned Resolutions, petitioner appealed to the CTA En Banc. The CTA En Banc found that petitioner has indeed failed to comply with Section 252 of RA No. 7160. Hence, it dismissed the petition and affirmed the subject Resolutions of the CBAA. Moreover, adopting the CBAA’s position, the court a quo ruled that it could not resolve the issue on whether petitioner is liable to pay real property tax or whether it is indeed a tax-exempt entity considering that the LBAA has not decided the case on the merits. ISSUE: Whether or not respondent CTA En Banc erred in dismissing for lack of merit the petition and accordingly affirmed the order of the CBAA to remand the case to the LBAA for further proceedings? (NO) RULING: The petition is denied. To begin with, Section 252 emphatically directs that the taxpayer/real property owner questioning the assessment should first pay the tax due before his protest can be entertained. As a matter of fact, the words “paid under protest” shall be annotated on the tax receipts. Consequently, only after such payment has been made by the taxpayer may he file a protest in writing (within thirty days from said payment of tax) to the provincial, city, or municipal treasurer, who shall decide the protest within sixty (60) days from its receipt. In no case is the local treasurer obliged to entertain the protest unless the tax due has been paid. Secondly, within the period prescribed by law, any owner or person having legal interest in the property not satisfied with the action of the provincial, city, or municipal assessor in the assessment of his property may file an appeal with the LBAA of the province or city concerned, as provided in Section 226 of RA No. 7160. Thereafter, within thirty (30) days from receipt, he may elevate, by filing a notice of appeal, the adverse decision of the LBAA with the CBAA, which exercises exclusive jurisdiction to hear and decide all appeals from the decisions, orders, and resolutions of the Local Boards involving contested assessments of real properties, claims for tax refund and/or tax credits, or overpayments of taxes. In the present case, the authority of the assessor is not being questioned. Despite petitioners’ protestations, the petition filed before the court a quo primarily involves the correctness of the assessments, which are questions of fact, that are not allowed in a petition for certiorari, prohibition and mandamus. The court a quo is therefore precluded from entertaining the petition, and it 14  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW appropriately dismissed the petition. Moreover, a claim for exemption from payment of real property taxes does not actually question the assessor’s authority to assess and collect such taxes, but pertains to the reasonableness or correctness of the assessment by the local assessor, a question of fact which should be resolved, at the very first instance, by the LBAA. In other words, by providing that real property not declared and proved as tax-exempt shall be included in the assessment roll, Section 206 of RA No. 7160 implies that the local assessor has the authority to assess the property for realty taxes, and any subsequent claim for exemption shall be allowed only when sufficient proof has been adduced supporting the claim. To reiterate, the restriction upon the power of courts to impeach tax assessment without a prior payment, under protest, of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation and as such their collection cannot be curtailed by injunction or any like action; otherwise, the state or, in this case, the local government unit, shall be crippled in dispensing the needed services to the people, and its machinery gravely disabled.30 The right of local government units to collect taxes due must always be upheld to avoid severe erosion. This consideration is consistent with the State policy to guarantee the autonomy of local governments and the objective of RA No. 7160 or the LGC of 1991 that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. FIRST LEPANTO TAISHO INSURANCE CORPORATION, PETITIONER, -versus-COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. G.R. No. 197117, THIRD DIVISION, April 10, 2013, MENDOZA, J. As to service/contractors and purchases, petitioner contends that both parties already stipulated that it correctly withheld the taxes due. Thus, petitioner is of the belief that it is no longer required to present evidence to prove the correct payment of taxes withheld. As correctly ruled by the CTA Second Division and En Banc, however, stipulations cannot defeat the right of the State to collect the correct taxes due on an individual or juridical person because taxes are the lifeblood of our nation so its collection should be actively pursued without unnecessary impediment. FACTS: Petitioner is a non-life insurance corporation and considered as a “Large Taxpayer”. After submitting its corporate income tax return for taxable year ending December 31, 1997, petitioner received a Letter of Authority, dated October 30, 1998, from respondent Commissioner of Internal Revenue (CIR) to allow it to examine their books of account and other accounting records for 1997 and other unverified prior years. On December 29, 1999, CIR issued internal revenue tax assessments for deficiency income, withholding, expanded withholding, final withholding, value-added, and documentary stamp taxes for taxable year 1997. Petitioner protested the said tax assessments. During the pendency of the case, particularly on February 15, 2008, petitioner filed its Motion for Partial Withdrawal of Petition for Review of Assessment Notice Nos. ST-INC-97-0220-99; ST-VAT- 97-0222-99 and ST-DST-97-0217-00, in view of the tax amnesty program it had availed. The CTA Second Division granted the said motion. Consequently, on May 21, 2009, the CTA Second Division partially granted the petition. It directed petitioner to pay CIR a reduced tax liability of P1, 994,390.86. Petitioner’s Motion for Partial Reconsideration was likewise denied by the CTA Second Division in its October 29, 2009 Resolution. Unsatisfied, petitioner filed a Petition for Review before the CTA En Banc. The CTA En Banc affirmed the decision of the CTA Second Division. Petitioner contended that it was not liable to pay Withholding Tax on Compensation on the P500, 000.00 Director’s Bonus to their directors, specifically, Rodolfo Bausa, Voltaire Gonzales, Felipe Yap, and Catalino Macaraig, Jr., because they were not employees and the amount was already subjected 15  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW to Expanded Withholding Tax. The CTA En Banc, however, ruled that Section 5 of Revenue Regulation No. 12-86 expressly identified a director to be an employee. As to transportation, subsistence and lodging, and representation expenses, the expenses would not be subject to withholding tax only if the same were reimbursement for actual expenses of the company. In the present case, the CTA En Banc declared that petitioner failed to prove that they were so. As to deficiency expanded withholding taxes on compensation, petitioner failed to substantiate that the commissions earned totaling P905, 428.36, came from reinsurance activities and should not be subject to withholding tax. Petitioner likewise failed to prove its direct loss expense, occupancy cost and service/contractors and purchases. As to deficiency final withholding taxes, “petitioner failed to present proof of remittance to establish that it had remitted the final tax on dividends paid as well as the payments for services rendered by the Malaysian entity.” As to the imposition of delinquency interest under Section 249 (c) (3) of the 1997 National Internal Revenue Code (NIRC), records reveal that petitioner failed to pay the deficiency taxes within thirty (30) days from receipt of the demand letter, thus, delinquency interest accrued from such non-payment. Petitioner moved for partial reconsideration, but the CTA En Banc denied the same in its May 27, 2011 Resolution. Hence, this petition. ISSUE: Whether or not the CTA En Banc erred in holding petitioner liable for deficiency taxes? (NO) RULING: For taxation purposes, a director is considered an employee under Section 5 of Revenue Regulation No. 12-86. The non-inclusion of the names of some of petitioner’s directors in the company’s Alpha List does not ipso facto create a presumption that they are not employees of the corporation, because the imposition of withholding tax on compensation hinges upon the nature of work performed by such individuals in the company. Moreover, contrary to petitioner’s attestations, Revenue Regulation No. 2-98, specifically, Section 2.57.2. A (9) thereof, cannot be applied to this case as the latter is a later regulation while the accounting books examined were for taxable year 1997. As to the deficiency withholding tax assessment on transportation, subsistence and lodging, and representation expense, commission expense, direct loss expense, occupancy cost, service/contractor and purchases, the Court finds no cogent reason to deviate from the findings of the CTA En Banc. As correctly observed by the CTA Second Division and the CTA En Banc, petitioner was not able to sufficiently establish that the transportation expenses reflected in their books were reimbursement from actual transportation expenses incurred by its employees in connection with their duties as the only document presented was a Schedule of Transportation Expenses without pertinent supporting documents. Without said documents, such as but not limited to, receipts, transportation-related vouchers and/or invoices, there is no way of ascertaining whether the amounts reflected in the schedule of expenses were disbursed for transportation. With regard to commission expense, no additional documentary evidence, like the reinsurance agreements contracts, was presented to support petitioner’s allegation that the expenditure originated from reinsurance activities that gave rise to reinsurance commissions, not subject to withholding tax. As to occupancy costs, records reveal that petitioner failed to compute the correct total occupancy cost that should be subjected to withholding tax, hence, petitioner is liable for the deficiency. As to service/contractors and purchases, petitioner contends that both parties already stipulated that it correctly withheld the taxes due. Thus, petitioner is of the belief that it is no longer required to present evidence to prove the correct payment of taxes withheld. As correctly ruled by the CTA Second Division and En Banc, however, stipulations cannot defeat the right of the State to collect the correct taxes due on an individual or juridical person because taxes are the lifeblood of our nation so its collection should be actively pursued without unnecessary impediment. 16  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW As to the deficiency final withholding tax assessments for payments of dividends and computerization expenses incurred by petitioner to foreign entities, particularly Matsui Marine & Fire Insurance Co. Ltd. (Matsui),17 the Court agrees with CIR that petitioner failed to present evidence to show the supposed remittance to Matsui. The Court likewise holds the imposition of delinquency interest under Section 249 (c) (3) of the 1997 NIRC to be proper, because failure to pay the deficiency tax assessed within the time prescribed for its payment justifies the imposition of interest at the rate of twenty percent (20%) per annum, which interest shall be assessed and collected from the date prescribed for its payment until full payment is made. It is worthy to note that tax revenue statutes are not generally intended to be liberally construed. Moreover, the CTA being a highly specialized court particularly created for the purpose of reviewing tax and customs cases, it is settled that its findings and conclusions are accorded great respect and are generally upheld by this Court, unless there is a clear showing of a reversible error or an improvident exercise of authority. Absent such errors, the challenged decision should be maintained. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, -versus- SAN ROQUE POWER CORPORATION, RESPONDENT. G.R. No. 187485, EN BANC, February 12, 2013, CARPIO, J. Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly given by law to the Commissioner to decide whether to grant or deny San Roque’s application for tax refund or credit. It is indisputable that compliance with the 120-day waiting period is mandatory and jurisdictional. Failure to comply with the 120-day waiting period violates a mandatory provision of law. There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA does not acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-day period. There are, however, two exceptions to this rule. The first exception is if the Commissioner, through a specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is applicable only to such particular taxpayer. The second exception is where the Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code, misleads all taxpayers into filing prematurely judicial claims with the CTA. In these cases, the Commissioner cannot be allowed to later on question the CTA’s assumption of jurisdiction over such claim since equitable estoppel has set in as expressly authorized under Section 246 of the Tax Code. Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010, where this Court held that the 120+30 day periods are mandatory and jurisdictional. San Roque, however, cannot benefit from BIR Ruling No. DA-489-03 because it filed its judicial claim prematurely on 10 April 2003, before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003. To repeat, San Roque cannot claim that it was misled by the BIR into filing its judicial claim prematurely because BIR Ruling No. DA-489-03 was issued only after San Roque filed its judicial claim. At the time San Roque filed its judicial claim, the law as applied and administered by the BIR was that the Commissioner had 120 days to act on administrative claims. FACTS: On October 11, 1997, San Roque entered into a Power Purchase Agreement ("PPA") with the National Power Corporation ("NPC") to develop hydro-potential of the Lower Agno River and generate additional power and energy for the Luzon Power Grid, by building the San Roque Multi- Purpose Project located in San Manuel, Pangasinan. The PPA provides, among others, that San Roque shall be responsible for the design, construction, installation, completion, testing and commissioning of the Power Station and shall operate and maintain the same, subject to NPC instructions. During the cooperation period of twenty-five (25) years commencing from the completion date of the Power Station, NPC will take and pay for all electricity available from the Power Station. On the construction and development of the San Roque Multi- Purpose Project which comprises of 17  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW the dam, spillway and power plant, San Roque allegedly incurred, excess input VAT in the amount of ₱559,709,337.54 for taxable year 2001 which it declared in its Quarterly VAT Returns filed for the same year. [San Roque] duly filed with the BIR separate claims for refund, in the total amount of ₱559,709,337.54, representing unutilized input taxes as declared in its VAT returns for taxable year 2001. However, on March 28, 2003, San Roque filed amended Quarterly VAT Returns for the year 2001 since it increased its unutilized input VAT to the amount of ₱560,200,283.14. Consequently, San Roque filed with the BIR on even date, separate amended claims for refund in the aggregate amount of ₱560,200,283.14. CIR’s inaction on the subject claims led to the filing by [San Roque] of the Petition for Review with the Court of Tax Appeals] in Division on April 10, 2003. The CTA Second Division required San Roque to show that it complied with the following requirements of Section 112(B) of Republic Act No. 8424 (RA 8424) to be entitled to a tax refund or credit of input VAT attributable to capital goods imported or locally purchased: (1) it is a VAT- registered entity; (2) its input taxes claimed were paid on capital goods duly supported by VAT invoices and/or official receipts; (3) it did not offset or apply the claimed input VAT payments on capital goods against any output VAT liability; and (4) its claim for refund was filed within the two- year prescriptive period both in the administrative and judicial levels. The CTA Second Division found that San Roque complied with the first, third, and fourth requirements. For the first, second, third, and fourth quarters of 2001, [San Roque] filed its VAT returns on April 25, 2001, July 25, 2001, October 23, 2001 and January 24, 2002, respectively. These returns were all subsequently amended on March 28, 2003. On the other hand, San Roque originally filed its separate claims for refund on July 10, 2001, October 10, 2001, February 21, 2002, and May 9, 2002 for the first, second, third, and fourth quarters of 2001, respectively, and subsequently filed amended claims for all quarters on March 28, 2003. Moreover, the Petition for Review was filed on April 10, 2003. Counting from the respective dates when San Roque originally filed its VAT returns for the first, second, third and fourth quarters of 2001, the administrative claims for refund (original and amended) and the Petition for Review fall within the two-year prescriptive period. San Roque filed a Motion for New Trial and/or Reconsideration on 7 April 2006. In its 29 November 2007 Amended Decision, the CTA Second Division found legal basis to partially grant San Roque’s claim. The CTA Second Division ordered the Commissioner to refund or issue a tax credit in favor of San Roque in the amount of ₱483,797,599.65, which represents San Roque’s unutilized input VAT on its purchases of capital goods and services for the taxable year 2001. The Commissioner filed a Motion for Partial Reconsideration on 20 December 2007. The CTA Second Division issued a Resolution dated 11 July 2008 which denied the CIR’s motion for lack of merit. The Commissioner filed a Petition for Review before the CTA EB praying for the denial of San Roque’s claim for refund or tax credit in its entirety as well. The CTA EB dismissed the CIR’s petition for review and affirmed the challenged decision and resolution. The Commissioner raised the following grounds in the Petition for Review: I. The Court of Tax Appeals En Banc erred in holding that [San Roque’s] claim for refund was not prematurely filed. II. The Court of Tax Appeals En Banc erred in affirming the amended decision of the Court of Tax Appeals (Second Division) granting [San Roque’s] claim for refund of alleged unutilized input VAT on its purchases of capital goods and services for the taxable year 2001 in the amount of P483,797,599.65. 18  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW ISSUE: Whether or not San Roque’s claim was filed prematurely as argued by the CIR? (YES) RULING: On 10 April 2003, a mere 13 days after it filed its amended administrative claim with the Commissioner on 28 March 2003; San Roque filed a Petition for Review with the CTA. From this we gather two crucial facts: first, San Roque did not wait for the 120-day period to lapse before filing its judicial claim; second, San Roque filed its judicial claim more than four (4) years before the Atlas doctrine, which was promulgated by the Court on 8 June 2007. Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly given by law to the Commissioner to decide whether to grant or deny San Roque’s application for tax refund or credit. It is indisputable that compliance with the 120-day waiting period is mandatory and jurisdictional. The waiting period, originally fixed at 60 days only, was part of the provisions of the first VAT law, Executive Order No. 273, which took effect on 1 January 1988. The waiting period was extended to 120 days effective 1 January 1998 under RA 8424 or the Tax Reform Act of 1997. Thus, the waiting period has been in our statute books for more than fifteen (15) years before San Roque filed its judicial claim. Failure to comply with the 120-day waiting period violates a mandatory provision of law. It violates the doctrine of exhaustion of administrative remedies and renders the petition premature and thus without a cause of action, with the effect that the CTA does not acquire jurisdiction over the taxpayer’s petition. Philippine jurisprudence is replete with cases upholding and reiterating these doctrinal principles. San Roque’s failure to comply with the 120-day mandatory period renders its petition for review with the CTA void. San Roque’s void petition for review cannot be legitimized by the CTA or this Court because Article 5 of the Civil Code states that such void petition cannot be legitimized "except when the law itself authorizes its validity." There is no law authorizing the petition’s validity. This Court cannot brush aside the grave issue of the mandatory and jurisdictional nature of the 120- day period just because the Commissioner merely asserts that the case was prematurely filed with the CTA and does not question the entitlement of San Roque to the refund. The mere fact that a taxpayer has undisputed excess input VAT, or that the tax was admittedly illegally, erroneously or excessively collected from him, does not entitle him as a matter of right to a tax refund or credit. Strict compliance with the mandatory and jurisdictional conditions prescribed by law to claim such tax refund or credit is essential and necessary for such claim to prosper. Well-settled is the rule that tax refunds or credits, just like tax exemptions, are strictly construed against the taxpayer.51 The burden is on the taxpayer to show that he has strictly complied with the conditions for the grant of the tax refund or credit. San Roque cannot also claim being misled, misguided or confused by the Atlas doctrine because San Roque filed its petition for review with the CTA more than four years before Atlas was promulgated. The Atlas doctrine did not exist at the time San Roque failed to comply with the 120- day period. Thus, San Roque cannot invoke the Atlas doctrine as an excuse for its failure to wait for the 120-day period to lapse. In any event, the Atlas doctrine merely stated that the two-year prescriptive period should be counted from the date of payment of the output VAT, not from the close of the taxable quarter when the sales involving the input VAT were made. The Atlas doctrine does not interpret, expressly or impliedly, the 120+30 day periods. In fact, Section 106(b) and (e) of the Tax Code of 1977 as amended, which was the law cited by the Court in Atlas as the applicable provision of the law did not yet provide for the 30-day period for the taxpayer to appeal to the CTA from the decision or inaction of the Commissioner. Thus, the Atlas doctrine cannot be invoked by anyone to disregard compliance with the 30-day mandatory and jurisdictional period. Whether the Atlas doctrine or the Mirant doctrine is applied to San Roque is immaterial because 19  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW what is at issue in the present case is San Roque’s non-compliance with the 120-day mandatory and jurisdictional period, which is counted from the date it filed its administrative claim with the Commissioner. The 120-day period may extend beyond the two-year prescriptive period, as long as the administrative claim is filed within the two-year prescriptive period. However, San Roque’s fatal mistake is that it did not wait for the Commissioner to decide within the 120-day period, a mandatory period whether the Atlas or the Mirant doctrine is applied. There is nothing in RMC 49-03 that states, expressly or impliedly, that the taxpayer need not wait for the 120-day period to expire before filing a judicial claim with the CTA. RMC 49-03 merely authorizes the BIR to continue processing the administrative claim even after the taxpayer has filed its judicial claim, without saying that the taxpayer can file its judicial claim before the expiration of the 120-day period. RMC 49-03 states: "In cases where the taxpayer has filed a ‘Petition for Review’ with the Court of Tax Appeals involving a claim for refund/TCC that is pending at the administrative agency (either the Bureau of Internal Revenue or the One- Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance), the administrative agency and the court may act on the case separately." Thus, if the taxpayer files its judicial claim before the expiration of the 120-day period, the BIR will nevertheless continue to act on the administrative claim because such premature filing cannot divest the Commissioner of his statutory power and jurisdiction to decide the administrative claim within the 120-day period. On the other hand, if the taxpayer files its judicial claim after the 120- day period, the Commissioner can still continue to evaluate the administrative claim. There is nothing new in this because even after the expiration of the 120-day period, the Commissioner should still evaluate internally the administrative claim for purposes of opposing the taxpayer’s judicial claim, or even for purposes of determining if the BIR should actually concede to the taxpayer’s judicial claim. The internal administrative evaluation of the taxpayer’s claim must necessarily continue to enable the BIR to oppose intelligently the judicial claim or, if the facts and the law warrant otherwise, for the BIR to concede to the judicial claim, resulting in the termination of the judicial proceedings. What is important, as far as the present cases are concerned, is that the mere filing by a taxpayer of a judicial claim with the CTA before the expiration of the 120-day period cannot operate to divest the Commissioner of his jurisdiction to decide an administrative claim within the 120-day mandatory period, unless the Commissioner has clearly given cause for equitable estoppel to apply as expressly recognized in Section 246 of the Tax Code. There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA does not acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-day period. There are, however, two exceptions to this rule. The first exception is if the Commissioner, through a specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is applicable only to such particular taxpayer. The second exception is where the Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code, misleads all taxpayers into filing prematurely judicial claims with the CTA. In these cases, the Commissioner cannot be allowed to later on question the CTA’s assumption of jurisdiction over such claim since equitable estoppel has set in as expressly authorized under Section 246 of the Tax Code. Thus, a general interpretative rule issued by the Commissioner may be relied upon by taxpayers from the time the rule is issued up to its reversal by the Commissioner or this Court. Section 246 is not limited to a reversal only by the Commissioner because this Section expressly states, "Any revocation, modification or reversal" without specifying who made the revocation, modification or reversal. Hence, a reversal by this Court is covered under Section 246. Thus, the only issue is whether BIR Ruling No. DA-489-03 is a general interpretative rule applicable to all taxpayers or a specific ruling applicable only to a particular taxpayer. BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made, not by a particular taxpayer, but by a government agency tasked with processing tax refunds and credits, that is, the One Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance. Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010, where this Court held that the 120+30 20  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW day periods are mandatory and jurisdictional However, BIR Ruling No. DA-489-03 cannot be given retroactive effect for four reasons: first, it is admittedly an erroneous interpretation of the law; second, prior to its issuance, the BIR held that the 120-day period was mandatory and jurisdictional, which is the correct interpretation of the law; third, prior to its issuance, no taxpayer can claim that it was misled by the BIR into filing a judicial claim prematurely; and fourth, a claim for tax refund or credit, like a claim for tax exemption, is strictly construed against the taxpayer. San Roque, therefore, cannot benefit from BIR Ruling No. DA-489-03 because it filed its judicial claim prematurely on 10 April 2003, before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003. To repeat, San Roque cannot claim that it was misled by the BIR into filing its judicial claim prematurely because BIR Ruling No. DA-489-03 was issued only after San Roque filed its judicial claim. At the time San Roque filed its judicial claim, the law as applied and administered by the BIR was that the Commissioner had 120 days to act on administrative claims. This was in fact the position of the BIR prior to the issuance of BIR Ruling No. DA-489-03. Indeed, San Roque never claimed the benefit of BIR Ruling No. DA-489-03 or RMC 49-03, whether in this Court, the CTA, or before the Commissioner. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, -versus- BANK OF THE PHILIPPINE ISLANDS, RESPONDENT. G.R. No. 134062, FIRST DIVISION, April 17, 2007, CORONA, J. Admittedly, the CIR did not inform BPI in writing of the law and facts on which the assessments of the deficiency taxes were made. He merely notified BPI of his findings, consisting only of the computation of the tax liabilities and a demand for payment thereof within 30 days after receipt. In merely notifying BPI of his findings, the CIR relied on the provisions of the former Section 270 prior to its amendment by RA 8424 (also known as the Tax Reform Act of 1997). Accordingly, when the assessments were made pursuant to the former Section 270, the only requirement was for the CIR to "notify" or inform the taxpayer of his "findings." Nothing in the old law required a written statement to the taxpayer of the law and facts on which the assessments were based. The Court cannot read into the law what obviously was not intended by Congress. That would be judicial legislation, nothing less. FACTS: In two notices dated October 28, 1988, CIR assessed respondent BPI’s deficiency percentage and documentary stamp taxes for the year 1986 in the total amount of ₱129,488,656.63. In a letter dated December 10, 1988, BPI, through counsel, replied that “the deficiency assessments are no assessments at all. The taxpayer is not informed, even in the vaguest terms, why it is being assessed a deficiency. The very purpose of a deficiency assessment is to inform taxpayer why he has incurred a deficiency so that he can make an intelligent decision on whether to pay or to protest the assessment. This is all the more so when the assessment involves astronomical amounts, as in this case. We therefore request that the examiner concerned be required to state, even in the briefest form, why he believes the taxpayer has a deficiency documentary and percentage taxes, and as to the percentage tax, it is important that the taxpayer be informed also as to what particular percentage tax the assessment refers to xxxx.” BPI received a letter from CIR dated May 8, 1991 stating that: “although in all respects, your letter failed to qualify as a protest under Revenue Regulations No. 12-85 and therefore not deserving of any rejoinder by this office as no valid issue was raised against the validity of our assessment… still we obliged to explain the basis of the assessments” BPI requested a reconsideration of the assessments stated in the CIR’s May 8, 1991 letter which was denied. BPI filed a petition for review in the CTA. CTA dismissed the case for lack of jurisdiction since the subject assessments had become final and unappealable. The CTA ruled that BPI failed to protest on and it denied reconsideration in a 21  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW resolution dated May 27, 1996. The CA reversed the tax court’s decision and resolution and remanded the case to the CTA for a decision on the merits. It ruled that the October 28, 1988 notices were not valid assessments because they did not inform the taxpayer of the legal and factual bases therefor. It declared that the proper assessments were those contained in the May 8, 1991 letter which provided the reasons for the claimed deficiencies. Thus, it held that BPI filed the petition for review in the CTA on time. The CIR elevated the case to this Court. ISSUE: Whether or not the October 28, 1988 notices were valid assessments? (YES) RULING: The CIR argues that the CA erred in holding that the October 28, 1988 notices were invalid assessments. He asserts that he used BIR Form No. 17.08 (as revised in November 1964) which was designed for the precise purpose of notifying taxpayers of the assessed amounts due and demanding payment thereof. He contends that there was no law or jurisprudence then that required notices to state the reasons for assessing deficiency tax liabilities. BPI counters that due process demanded that the facts, data and law upon which the assessments were based be provided to the taxpayer. It insists that the NIRC, as worded now (referring to Section 228), specifically provides that: "the taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void." According to BPI, this is declaratory of what sound tax procedure is and a confirmation of what due process requires even under the former Section 270. BPI’s contention has no merit. The present Section 228 of the NIRC provides: Sec. 228. Protesting of Assessment. — When the [CIR] or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, That a preassessment notice shall not be required in the following cases: xxx xxx xxx The taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Admittedly, the CIR did not inform BPI in writing of the law and facts on which the assessments of the deficiency taxes were made. He merely notified BPI of his findings, consisting only of the computation of the tax liabilities and a demand for payment thereof within 30 days after receipt. In merely notifying BPI of his findings, the CIR relied on the provisions of the former Section 270 prior to its amendment by RA 8424 (also known as the Tax Reform Act of 1997). Accordingly, when the assessments were made pursuant to the former Section 270, the only requirement was for the CIR to "notify" or inform the taxpayer of his "findings." Nothing in the old law required a written statement to the taxpayer of the law and facts on which the assessments were based. The Court cannot read into the law what obviously was not intended by Congress. That would be judicial legislation, nothing less. Jurisprudence, on the other hand, simply required that the assessments contain a computation of tax liabilities, the amount the taxpayer was to pay and a demand for payment within a prescribed period. Everything considered, there was no doubt the October 28, 1988 notices sufficiently met the 22  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW requirements of a valid assessment under the old law and jurisprudence. The sentence the taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void was not in the old Section 270 but was only later on inserted in the renumbered Section 228 in 1997. Evidently, the legislature saw the need to modify the former Section 270 by inserting the aforequoted sentence. The fact that the amendment was necessary showed that, prior to the introduction of the amendment, the statute had an entirely different meaning. Contrary to the submission of BPI, the inserted sentence in the renumbered Section 228 was not an affirmation of what the law required under the former Section 270. The amendment introduced by RA 8424 was an innovation and could not be reasonably inferred from the old law. Clearly, the legislature intended to insert a new provision regarding the form and substance of assessments issued by the CIR. Considering that the October 28, 1988 notices were valid assessments, BPI should have protested the same within 30 days from receipt thereof. The December 10, 1988 reply it sent to the CIR did not qualify as a protest since the letter itself stated that "[a]s soon as this is explained and clarified in a proper letter of assessment; we shall inform you of the taxpayer’s decision on whether to pay or protest the assessment."36 Hence, by its own declaration, BPI did not regard this letter as a protest against the assessments. As a matter of fact, BPI never deemed this a protest since it did not even consider the October 28, 1988 notices as valid or proper assessments. The inevitable conclusion is that BPI’s failure to protest the assessments within the 30-day period provided in the former Section 270 meant that they became final and unappealable. Thus, the CTA correctly dismissed BPI’s appeal for lack of jurisdiction. BPI was, from then on, barred from disputing the correctness of the assessments or invoking any defense that would reopen the question of its liability on the merits.37 Not only that. There arose a presumption of correctness when BPI failed to protest the assessments. Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor endure. A principal attribute of sovereignty, the exercise of taxing power derives its source from the very existence of the state whose social contract with its citizens obliges it to promote public interest and common good. The theory behind the exercise of the power to tax emanates from necessity; without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, -versus- MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, RESPONDENT. G.R. No. L-22734, EN BANC, September 15, 1967, BENGZON, J.P., J. By virtue of such lien, the Government has the right to subject the property in Pineda's possession, i.e., the P2, 500.00, to satisfy the income tax assessment in the sum of P760.28. After such payment, Pineda will have a right of contribution from his co-heirs, to achieve an adjustment of the proper share of each heir in the distributable estate. All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance received. This action rests on the concept that hereditary property consists only of that part which remains after the settlement of all lawful claims against the estate, for the settlement of which the entire estate is first liable. Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property belonging to the taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due, the estate. This second remedy is the very avenue the Government took in this case to collect the tax. The Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood of government and their prompt and certain availability is an imperious need. 23  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW FACTS: Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is Manuel B. Pineda, a lawyer. Estate proceedings were had in the Court of First Instance of Manila wherein the surviving widow was appointed administratrix. The estate was divided among and awarded to the heirs and the proceedings terminated on June 8, 1948. Manuel B. Pineda's share amounted to about P2, 500.00. After the estate proceedings were closed, the Bureau of Internal Revenue investigated the income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax returns were not filed. Thereupon, the representative of the Collector of Internal Revenue filed said returns for the estate on the basis of information and data obtained from the aforesaid estate proceedings and issued an assessment for deficiency taxes. Manuel B. Pineda, who received the assessment, contested the same. Subsequently, he appealed to the Court of Tax Appeals alleging that he was appealing "only that proportionate part or portion pertaining to him as one of the heirs." The Court of Tax Appeals rendered judgment reversing the decision of the Commissioner on the ground that his right to assess and collect the tax has prescribed. The Commissioner appealed and this Court affirmed the findings of the Tax Court in respect to the assessment for income tax for the year 1947 but held that the right to assess and collect the taxes for 1945 and 1946 has not prescribed. Accordingly, the case was remanded to the Tax Court for further appropriate proceedings. On November 29, 1963 the Court of Tax Appeals rendered judgment holding Manuel B. Pineda liable for the payment corresponding to his share of the deficiency taxes. The Commissioner of Internal Revenue has appealed this case before the SC and has proposed to hold Manuel B. Pineda liable for the payment of all the taxes found by the Tax Court to be due from the estate in the total amount of P760.28 instead of only for the amount of taxes corresponding to his share in the estate. Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid income tax due the estate only up to the extent of and in proportion to any share he received. ISSUE: Whether or not Pineda can be held liable for the payment of all the taxes found by the Tax Court to be due from the estate of his deceased father? (YES) RULING: We hold that the Government can require Manuel B. Pineda to pay the full amount of the taxes assessed. Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to the estate/taxpayer. As an heir he is individually answerable for the part of the tax proportionate to the share he received from the inheritance. His liability, however, cannot exceed the amount of his share.4 As a holder of property belonging to the estate, Pineda is liable for the tax up to the amount of the property in his possession. The reason is that the Government has a lien on the P2, 500.00 received by him from the estate as his share in the inheritance, for unpaid income taxes for which said estate is liable, pursuant to the last paragraph of Section 315 of the Tax Code. By virtue of such lien, the Government has the right to subject the property in Pineda's possession, i.e., the P2, 500.00, to satisfy the income tax assessment in the sum of P760.28. After such payment, Pineda will have a right of contribution from his co-heirs, to achieve an adjustment of the proper 24  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW share of each heir in the distributable estate. All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance received. This remedy was adopted in Government of the Philippine Islands v. Pamintuan, supra. In said case, the Government filed an action against all the heirs for the collection of the tax. This action rests on the concept that hereditary property consists only of that part which remains after the settlement of all lawful claims against the estate, for the settlement of which the entire estate is first liable. The reason why in case suit is filed against all the heirs the tax due from the estate is levied proportionately against them is to achieve thereby two results: first, payment of the tax; and second, adjustment of the shares of each heir in the distributed estate as lessened by the tax. Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property belonging to the taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due, the estate. This second remedy is the very avenue the Government took in this case to collect the tax. The Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood of government and their prompt and certain availability is an imperious need. And as afore-stated in this case the suit seeks to achieve only one objective: payment of the tax. The adjustment of the respective shares due to the heirs from the inheritance, as lessened by the tax, is left to await the suit for contribution by the heir from whom the Government recovered said tax. MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as Regional Director, Revenue Region No. 14, Bureau of Internal Revenue, PETITIONERS, -versus- HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V, and FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D. TONGOY, RESPONDENTS. G.R. No. L-31364, FIRST DIVISION, March 30, 1979, DE CASTRO, J. The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception from the application of the statute of non-claims is not hard to find. Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of estoppel. In the instant case, petitioners filed an application (Motion for Allowance of Claim and for an Order of Payment of Taxes) which, though filed after the expiration of the time previously limited but before an order of the distribution is entered, should have been granted by the respondent court, in the absence of any valid ground, as none was shown, justifying denial of the motion, especially considering that it was for allowance Of claim for taxes due from the estate, which in effect represents a claim of the people at large, the only reason given for the denial that the claim was filed out of the previously limited period, sustaining thereby private respondents' contention, erroneously as has been demonstrated. FACTS: Appeal from two orders of the Court of First Instance of Negros Occidental, in Special Proceedings No. 7794, entitled: "Intestate Estate of Luis D. Tongoy," the first dated July 29, 1969 dismissing the Motion for Allowance of Claim and for an Order of Payment of Taxes by the Government of the Republic of the Philippines against the Estate of the late Luis D. Tongoy, for deficiency income taxes for the years 1963 and 1964 of the decedent in the total amount of P3,254.80, inclusive 5% surcharge, 1% monthly interest and compromise penalties. The second, dated October 7, 1969, denying the Motion for reconsideration of the Order of dismissal. 25  DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW The Motion for allowance of claim and for payment of taxes dated May 28, 1969 was filed on June 3, 1969 in the abovementioned special proceedings. The claim represents the indebtedness to the Government of the late Luis D. Tongoy for deficiency income taxes in the total sum of P3,254.80 as above stated, covered by Assessment Notices, to which motion was attached Proof of Claim. The Administrator opposed the motion solely on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court. Finding the opposition well-founded, the respondent Judge, Jose F. Fernandez, dismissed the motion for allowance of claim filed by herein petitioner, Regional Director of the Bureau of Internal Revenue, in an order dated July 29, 1969. On September 18, 1969, a motion for reconsideration was filed, of the order of July 29, 1969, but was denied in an Order dated October 7, 196