CIR vs St. Luke's 2012

FACTS: St. Luke’s Medical Center, Inc. is a hospital organized as a non-stock and non-profit corporation. The BIR assessed St. Luke’s deficiency taxes for 1998, comprised of deficiency income tax, value-added tax, withholding tax on compensation and expanded withholding tax. St. Luke’s filed an administrative protest with the BIR against the deficiency tax assessments. The BIR did not act on the protest within the 180-day period under Section 228 of the NIRC. Thus, St. Luke’s appealed to the CTA.

BIR’s contentions: The BIR argued before the CTA that Section 27(B) of the NIRC, which imposes a 10% preferential tax rate on the income of proprietary nonprofit hospitals, should be applicable to St. Luke’s. According to the BIR, Section 27(B), introduced in 1997, “is a new provision intended to amend the exemption on non-profit hospitals that were previously categorized as non-stock, non-profit corporations under Section 26 of the 1997 Tax Code x x x.” It is a specific provision which prevails over the general exemption on income tax granted under Section 30(E) and (G) for non-stock, non-profit charitable institutions and civic organizations promoting social welfare. The BIR claimed that St. Luke’s was actually operating for profit in 1998 because only 13% of its revenues came from charitable purposes. Moreover, the hospital’s board of trustees, officers and employees directly benefit from its profits and assets.

St. Luke’s contention: St. Luke’s contended that the BIR should not consider its total revenues, because its free services to patients was P218,187,498 or 65.20% of its 1998 operating income. St. Luke’s also claimed that its income does not inure to the benefit of any individual. St. Luke’s maintained that it is a non-stock and non-profit institution for charitable and social welfare purposes under Section 30(E) and (G) of the NIRC. It argued that the making of profit per se does not destroy its income tax exemption.

ISSUE/S: Whether St. Luke’s is liable for deficiency income tax in 1998 under Section 27(B) of the NIRC, which imposes a preferential tax rate of 10% on the income of proprietary non-profit hospitals.

RULING: There is no dispute that St. Luke’s is organized as a non-stock and non-profit charitable institution. However, this does not automatically exempt St. Luke’s from paying taxes. This only refers to the organization of St. Luke’s. Even if St. Luke’s meets the test of charity, a charitable institution is not ipso facto tax exempt. To be exempt from real property taxes, Section 28(3), Article VI of the Constitution requires that a charitable institution use the property “actually, directly and exclusively” for charitable purposes. To be exempt from income taxes, Section 30(E) of the NIRC requires that a charitable institution must be “organized and operated exclusively” for charitable purposes. Likewise, to be exempt from income taxes, Section 30(G) of the NIRC requires that the institution be “operated exclusively” for social welfare.

However, the last paragraph of Section 30 of the NIRC qualifies the words “organized and operated exclusively.”

Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under this Code

In short, the last paragraph of Section 30 provides that if a tax exempt charitable institution conducts “any” activity for profit, such activity is not tax exempt even as its not-for-profit activities remain tax exempt. This paragraph qualifies the requirements in Section 30(E) that the “[n]on-stock corporation or association [must be] organized and operated exclusively for x x x charitable x x x purposes x x x.” It likewise qualifies the requirement in Section 30(G) that the civic organization must be “operated exclusively” for the promotion of social welfare.

Thus, even if the charitable institution must be “organized and operated exclusively” for charitable purposes, it is nevertheless allowed to engage in “activities conducted for profit” without losing its tax exempt status for its not-for-profit activities. The only consequence is that the “income of whatever kind and character” of a charitable institution “from any of its activities conducted for profit, regardless of the disposition made of such income, shall be subject to tax.”

In 1998, St. Luke’s had total revenues of P1,730,367,965 from services to paying patients. It cannot be disputed that a hospital which receives approximately P1.73 billion from paying patients is not an institution “operated exclusively” for charitable purposes. Clearly, revenues from paying patients are income received from “activities conducted for profit.” Services to paying patients are activities conducted for profit. They cannot be considered any other way. There is a “purpose to make profit over and above the cost” of services.

The Court finds that St. Luke’s is a corporation that is not “operated exclusively” for charitable or social welfare purposes insofar as its revenues from paying patients are concerned. This ruling is based not only on a strict interpretation of a provision granting tax exemption, but also on the clear and plain text of Section 30(E) and (G). Section 30(E) and (G) of the NIRC requires that an institution be “operated exclusively” for charitable or social welfare purposes to be completely exempt from income tax. An institution under Section 30(E) or (G) does not lose its tax exemption if it earns income from its for-profit activities. Such income from for-profit activities, under the last paragraph of Section 30, is merely subject to income tax, previously at the ordinary corporate rate but now at the preferential 10% rate pursuant to Section 27(B).

Francisco Chavez vs Presidential Commission on Good Government

FACTS: Petitioner Francisco I. Chavez, as taxpayer, citizen and former government official who initiated the prosecution of the Marcoses and their cronies who committed unmitigated plunder of the public treasury and the systematic subjugation of the countrys economy, alleges that what impelled him to bring this action were several news reports[2] bannered in a number of broadsheets sometime in September 1997. These news items referred to (1) the alleged discovery of billions of dollars of Marcos assets deposited in various coded accounts in Swiss banks; and (2) the reported execution of a compromise, between the government (through PCGG) and the Marcos heirs, on how to split or share these assets.

A provision in the compromise agreement provides:

xxx the FIRST PARTY shall determine which shall be ceded to the FIRST PARTY, and which shall be assigned to/retained by the PRIVATE PARTY. The assets of the PRIVATE PARTY shall be net of, and exempt from, any form of taxes due the Republic of the Philippines. Xxx

ISSUE: Whether or not such provision in the compromise agreement exempting the Marcoses from the taxes due to the government in valid

RULING: The PCGG has a limited life in carrying out its tasks and time is running short. It is thus imperative that the Court must hold even now, and remind PCGG, that it has indeed exceeded its bounds in entering into the General and Supplemental Agreements. The agreements clearly suffer from Constitutional and statutory infirmities,to wit: 1) The agreements contravene the statute in granting criminal immunity to the Marcos heirs; 2) PCGG’s commitment to exempt from all forms of taxes the property to be retained the Marcos’ heirs controverts the Constitution; and 3)the government’s undertaking to cause the dismissal of all cases filed against the Marcoses pending before the Sandiganbayan and other courts encroaches upon judicial powers.

Commissioner of Internal Revenue vs Pascor Realty & Development Corporation

FACTS: BIR Commissioner authorized revenue officers to examined the books of accounts and accounting records of Pascor Realty (PRDC). Such examination resulted in a recommendation for the issuance of an assessment amounting to P7,498,434.65 and P3,015,236.35 for the years 1986 and 1987, respectively. Commissioner of Internal Revenue filed a criminal complaint before the Department of Justice against the PRDC, its President Rogelio A. Dio, and its Treasurer Virginia S. Dio, alleging evasion of taxes in the total amount of P10,513,671.00. Pascor filed a request for reconsideration/reinvestigation which  the CIR denied prompting the respondents to elevate the CIR’s decision to the CTA. CIR filed a Motion to Dismiss on the ground that CTA has no jurisdiction over the subject matter since no formal assessment has been issued against PRDC. The CTA denied the Motion stating that the criminal case for tax evasion is already an assessment. The amount and kind of tax due and the covered period are sufficient details for an assessment. CA agreed with the decision of the CTA.

ISSUE: Whether or not the criminal complaint for tax evasion can be construed as an assessment.

RULING: NO. Neither the NIRC nor the revenue regulations governing the protest of assessments provide a specific definition or form of an assessment. However, the NIRC defines the specific functions and effects of an assessment. To consider the affidavit attached to the Complaint as a proper assessment is to subvert the nature of an assessment and to set a bad precedent that will prejudice innocent taxpayers.

Quirico Ungab vs Vicente Cusi

FACTS: BIR Examiner Ben Garcia examined the income tax returns filed by Quirico P. Ungab, for the calendar year ending December 31, 1973. In the course of his examination, he discovered that the petitioner failed to report his income derived from sales of banana saplings. As a result, the BIR District Revenue Officer at Davao City sent a "Notice of Taxpayer" to the petitioner informing him that there is due from him (Ungab) the amount of P104,980.81, representing income, business tax and forest charges for the year 1973 and inviting petitioner to an informal conference where the petitioner, duly assisted by counsel, may present his objections to the findings of the BIR Examiner. Upon receipt of the notice, the petitioner wrote the BIR District Revenue Officer protesting the assessment, claiming that he was only a dealer or agent on commission basis in the banana sapling business and that his income. BIR Examiner Ben Garcia, however, was fully convinced that the petitioner had filed a fraudulent income tax return so that he submitted a "Fraud Referral Report," to the Tax Fraud Unit of the BIR. Consequently, the Special Investigation Division of the BIR found sufficient proof that the herein petitioner is guilty of tax evasion for the taxable year 1973 and recommended his prosecution. Ungab filed a motion to quash the informations on the ground that his pending protest with the CIR has not yet been acted upon hence the assessment is not yet final and executory and therefore the trial court has no jurisdiction yet over the criminal cases.

ISSUE: Whether or not the contention of Ungab is correct

RULING: The contention is without merit. What is involved here is not the collection of taxes where the assessment of the Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals, but a criminal prosecution for violations of the National Internal Revenue Code which is within the cognizance of courts of first instance. While there can be no civil action to enforce collection before the assessment procedures provided in the Code have been followed, there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution under the Code.

Besides, it has been ruled that a petition for reconsideration of an assessment may affect the suspension of the prescriptive period for the collection of taxes, but not the prescriptive period of a criminal action for violation of law. Obviously, the protest of the petitioner against the assessment of the District Revenue Officer cannot stop his prosecution for violation of the National Internal Revenue Code. Accordingly, the respondent Judge did not abuse his discretion in denying the motion to quash filed by the petitioner.

Francis Churchill vs James Rafferty

FACTS: The judgment appealed from in this case perpetually restrains and prohibits the defendant and his deputies from collecting and enforcing against the plaintiffs and their property the annual tax mentioned and described in subsection (b) of section 100 of Act No. 2339, effective July 1, 1914, and from destroying or removing any sign, signboard, or billboard, the property of the plaintiffs, for the sole reason that such sign, signboard, or billboard is, or may be, offensive to the sight; and decrees the cancellation of the bond given by the plaintiffs to secure the issuance of the preliminary injunction granted soon after the commencement of this action.

ISSUE: Whether or not a provision in the internal revenue law prohibiting the courts from enjoining the collection of an internal revenue tax is invalid

RULING: NO. A provision in an internal revenue law prohibiting the courts from enjoining the collection for an internal revenue tax is not invalid as opposed to the due process and equal protection of the law clauses of the bill of rights of the Organic Act. Such legislation has been upheld by the United States Supreme Court

Nor is such a provision of law invalid as curtailing the jurisdiction of the courts of the Philippine Islands as fixed by section 9 of the Organic Act; a) because jurisdiction was never conferred upon Philippine courts to enjoin the collection of taxes imposed by the Philippine Commission; and b) because, in the present case, another adequate remedy has been provided by payment and protest

Commissioner of Internal Revenue vs Cebu Portland Cement

FACTS: By virtue of a decision of the Court of Tax Appeals, the CIR was ordered to refund to the Cebu Portland Cement Company the amount of P359,408.98, representing overpayments of ad valorem taxes on cement produced and sold by it after October 1957. The private respondent then moved for a writ of execution to enforce the said judgment The motion was opposed by the petitioner on the ground that the private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance owing on the sales taxes in the amount of P 4,789,279.85 plus 28% surcharge.

ISSUE: Whether or not assessment of taxes can be enforced even if it is a subject of a pending case or it is still being contested

RULING: The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the government." If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. That is the reason why, save for the exception already noted, the Tax Code provides:

Sec. 291.         Injunction not available to restrain collection of tax. — No court shall have authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code.

It goes without saying that this injunction is available not only when the assessment is already being questioned in a court of justice but more so if, as in the instant case, the challenge to the assessment is still-and only-on the administrative level. There is all the more reason to apply the rule here because it appears that even after crediting of the refund against the tax deficiency, a balance of more than P 4 million is still due from the private respondent.

Southern Cross Cement Corp vs Philippine Cement Manufacturers’ Corporation

FACTS: Petitioner Southern Cross Cement Corporation (Southern Cross) is a domestic corporation engaged in the business of cement manufacturing, production, importation and exportation. Private respondent Philippine Cement Manufacturers Corporation (Philcemcor) is an association of domestic cement manufacturers. DTI accepted an application from Philcemcor, alleging that the importation of gray Portland cement in increased quantities has caused declines in domestic production, capacity utilization, market share, sales and employment; as well as caused depressed local prices. Accordingly, Philcemcor sought the imposition a definitive safeguard measures on the import of cement pursuant to the Safeguard Measures Act.

The Tariff Commission received a request from the DTI for a formal investigation to determine whether or not to impose a definitive safeguard measure on imports of gray Portland cement

Tariff Commission’s report: The elements of serious injury and imminent threat of serious injury not having been established, it is hereby recommended that no definitive general safeguard measure be imposed on the importation of gray Portland cement

After reviewing the report, then DTI Secretary Manuel Roxas II (DTI Secretary) disagreed with the conclusion of the Tariff Commission that there was no serious injury to the local cement industry caused by the surge of imports. In view of this disagreement, the DTI requested an opinion from the Department of Justice (DOJ) on the DTI Secretarys scope of options in acting on the Commissions recommendations.

Subsequently, then DOJ Secretary Hernando Perez rendered an opinion stating that Section 13 of the SMA precluded a review by the DTI Secretary of the Tariff Commissions negative finding, or finding that a definitive safeguard measure should not be imposed.

DTI then denied application for safeguard measures against the importation of gray Portland cement

Philcemcor received a copy of the DTI Decision on 12 April 2002. Ten days later, it filed with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus seeking to set aside the DTI Decision, as well as the Tariff Commissions Report. On the other hand, Southern Cross filed its Comment arguing that the Court of Appeals had no jurisdiction over Philcemcors Petition, for it is on the Court of Tax Appeals (CTA) that the SMA conferred jurisdiction to review rulings of the Secretary in connection with the imposition of a safeguard measure.

ISSUE: Whether or not the CA has jurisdiction over the case which is concerned with imposition of safeguard measures

RULING: CTA has jurisdiction.  Under Section 29 of the SMA, there are three requisites to enable the CTA to acquire jurisdiction over the petition for review contemplated therein: (i) there must be a ruling by the DTI Secretary; (ii) the petition must be filed by an interested party adversely affected by the ruling; and (iii) such ruling must be in connection with the imposition of a safeguard measure. The first two requisites are clearly present. The third requisite deserves closer scrutiny.

Contrary to the stance of the public respondents and Philcemcor, in this case where the DTI Secretary decides not to impose a safeguard measure, it is the CTA which has jurisdiction to review his decision. The reasons are as follows:

First. Split jurisdiction is abhorred. The law expressly confers on the CTA, the tribunal with the specialized competence over tax and tariff matters, the role of judicial review without mention of any other court that may exercise corollary or ancillary jurisdiction in relation to the SMA.

Second. The interpretation of the provisions of the SMA favors vesting untrammeled appellate jurisdiction on the CTA.

A plain reading of Section 29 of the SMA reveals that Congress did not expressly bar the CTA from reviewing a negative determination by the DTI Secretary nor conferred on the Court of Appeals such review authority. Respondents note, on the other hand, that neither did the law expressly grant to the CTA the power to review a negative determination. However, under the clear text of the law, the CTA is vested with jurisdiction to review the ruling of the DTI Secretary in connection with the imposition of a safeguard measure. Had the law been couched instead to incorporate the phrase the ruling imposing a safeguard measure, then respondents claim would have indisputable merit. Undoubtedly, the phrase in connection with not only qualifies but clarifies the succeeding phrase imposition of a safeguard measure. As expounded later, the phrase also encompasses the opposite or converse ruling which is the non-imposition of a safeguard measure.

Third. Interpretatio Talis In Ambiguis Semper Fienda Est, Ut Evitur Inconveniens Et Absurdum.

Even assuming arguendo that Section 29 has not expressly granted the CTA jurisdiction to review a negative ruling of the DTI Secretary, the Court is precluded from favoring an interpretation that would cause inconvenience and absurdity. Adopting the respondents position favoring the CTAs minimal jurisdiction would unnecessarily lead to illogical and onerous results.

Republic of the Philippines vs Ramon Enriquez

FACTS: On 28 January 1985, the petitioner, through the Commissioner of Internal Revenue, served a Warrant of Distraint of Personal Property on the Maritime Company of the. Philippines to satisfy various deficiency taxes of said company in the total amount of P17,284,882.45, pursuant to unappealed and final tax assessments. The First Coast Guard District acknowledged receipt from the Commissioner of several barges, vehicles and 2 bodegas of spare parts belonging to taxpayer Maritime. Ramon Enriquez, respondent sheriff, levied on two (2) barges of the Maritime Company of the Philippines, pursuant to a writ of execution issued by the RTC in a Civil Case involving Maritime where the said company lost. Enriquez then scheduled a public auction sale including the aforementioned properties. The Commissioner wrote the sheriff informing him that the barges were no longer owned by Maritime as the said barges had been distrained and seized by the BIR in satisfaction of the deficiency taxes. This letter was filed on June 19, 1986 at the office of the sheriff. On June 23, 1986, the sheriff sold the 2 barges and issued certificates of sale to the highest bidder which was the levying creditor. On June 24, 1986, Commissioner filed a petition for prohibition praying that the respondent be ordered to desist and refrain from further proceedings in connection with the execution and that respondent’s notice of levy be null and void. The CA dismissed the petition holding that the sheriff did not commit grave abuse of discretion.

ISSUE: Whether or not the BIR warrant of distraint and notice of seizure of personal property is valid and effective as against the writ of execution issued by RTC and the levy on execution and auction sale of the barges in question.

RULING: BIR warrant of distraint is valid. It is settled that the claim of the government predicated on a tax lien is superior to the claim of a private litigant predicated on a judgment. The tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax became due and payable. Besides, the distraint on the subject properties of Maritime Company of the Philippines as well as the notice of their seizure were made by petitioner, through the Commissioner of Internal Revenue, long before the writ of execution was issued by the RTC. There is no question then that at the time the writ of execution was issued, the two (2) barges, MCP-1 and MCP-4, were no longer properties of the Maritime Company of the Philippines. The power of the court in execution of judgments extends only to properties unquestionably belonging to the judgment debtor. Execution sales affect the rights of the judgment debtor only, and the purchaser in an auction sale acquires only such right as the judgment debtor had at the time of sale. It is also well-settled that the sheriff is not authorized to attach or levy on property not belonging to the judgment debtor.

Hongkong & Shanghai Banking Corp vs Commissioner

FACTS: From 1912-191 inclusive, Pujalte & Co was engaged in the business of lumbering in Mindanao. The company removed from the forest and milled at it a total of 6,087.54 cubic meters of timber. The forest charges amounted to P8,328.93. Puljate & Co executed bonds in the aggregate sum of P2,000 to secure the payment of the forest charges due the government. Consequently, CIR permitted Pujalte & Co. to remove this timber from the public forests for shipment without prior payment of the forest charges. From the timber so removed by Pujalte & Co., railroad ties were manufactured. In February, 1915, the firm of Pujalte & Co. was indebted to the Hongkong and Shanghai Banking Corporation with a large sum of money. Being unable to pay its debt, the company assigned to the bank a large quantity of the railroad ties manufactured at its mills. The bank sold and disposed of these ties at various times until in May 1916, there remained with it some 2,000 railroads ties of the lot acquired.

The internal revenue charges on the forest products removed from the public forests by Pujalte & Co. not having been paid, on May 2, 1916, the Collector of Internal Revenue caused delinquency proceedings to be commenced and had issued a distress warrant. Later, on May 15, 1916, the CIR caused an additional distress levy to be made upon the 6,305 ties, which had been assigned by Pujalte & Co. to the Hongkong & Shanghai Banking Corporation. Proceeding in accordance with this action, the CIR seized the 2,000 ties in the possession of the bank. Until the date last mentioned, the bank had no notice of the tax.

ISSUE: Does the lien follow the property subject to the tax into the hands of a third party when at the time of transfer, no demand for payment had been made and when the purchaser had no notice of the existence of the lien?

RULING: NO. In order that the lien may follow the property into the hands of a third party, it is further essential that the latter should have notice, either actual or constructive. The reason is the benevolence of our Constitution which prohibits the taking of property without due process of law. Internal revenue laws are to be construed fairly for the government and justly for the citizen. They should receive a liberal construction to carry out the purposes of their enactment.

The plaintiff was not of course personally liable for any part of the internal revenue taxes due the Government from Pujalte & Co. On the date the railroad ties were transferred from Pujalte & Co. to the Hongkong & Shanghai Banking Corporation no demand for payment of the tax had been made. The bonds in favor of the Government were still presumably subsisting. No demand in fact was made until over a year later when distraint proceedings were initiated. When the Hongkong & Shanghai Banking Corporation purchased and acquired these 2,000 ties in February, 1915, there was nothing to show that Pujalte & Co. were delinquent tax payers. No public record could be consulted to protect the purchaser from loss by reason of the existence of a secret lien. A businessman of ordinary prudence could not be expected to foresee that the personal property which he had taken in satisfaction of a debt was burdened by a tax. On this date, because no demand had been made and because the plaintiff had no notice of the tax, there was no valid subsisting lien upon the ties.

Commissioner of Internal Revenue vs Court of Appeals

FACTS: On April 2, 1986, Paramount Acceptance Corporation (Paramount for brevity) filed its Corporate Annual Income Tax Return, for calendar year ending December 31, 1985, declaring a Net Income of P3,324,802.00 (Exh. A). The income tax due thereon is P1,153,681.00. However, Paramount paid the BIR its quarterly income tax. After deducting Paramounts total quarterly income tax payments of P1,218,940.00 from its income tax of P1,153,681.00, the return showed a refundable amount of P65,259.00. The appropriate box in the return was marked with a cross (x) indicating To be refunded the amount of P65,259.00. On April 14, 1988, petitioner BPI, as liquidator of Paramount, through counsel filed a letter dated April 12, 1988 reiterating its claim for refund of P65,259.00 as overpaid income tax for the calendar year 1985. The following day or on April 15, 1988, BPI filed the instant petition with this Court in order to toll the running of the prescriptive period for filing a claim for refund of overpaid income taxes.

ISSUE: Whether the two-year period of prescription for filing a claim for refund, as provided in 230 of the National Internal Revenue Code, is to be counted from April 2, 1986 when the corporate income tax return was actually filed OR from April 15, 1986 when, according to 70(b) of the NIRC, the final adjustment return could still be filed without incurring any penalty.

RULING: We agree with the respondent courts ruling that the date of payment of the tax as prescribed under the Tax Code is the date when the corporate income tax return is required to be filed. . . .

The Supreme Court has laid down the rule regarding the computation of the prescriptive period that the two-year period should be computed from the time of filing of the Adjustment Returns or Annual Income Tax Return and final payment of income tax; it is only when the Adjustment Return covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures. The two-year prescriptive period within which to claim a refund commences to run, at the earliest, on the date of the filing of the adjusted final tax return.

In this case, BPI filed its final adjustment return on April 2, 1986. No taxes were paid then because the returns showed that the quarterly taxes already paid exceeded the income tax due by P65,259.00. As correctly put by BPI, it is only on April 15 that the previous years income tax becomes due and payable and the taxpayer is still free to make amendments or adjustments on its return, without penalty, until April 15, 1986 (See Section 80, N.I.R.C.). Thus the final payment of income tax should be deemed to be on April 15, 1986, when the previous years income tax became due and payable and when the quarterly corporate income taxes may be considered paid. Accordingly the administrative claim and court proceeding for tax refund were timely filed.

Commissioner of Internal Revenue vs TMX Sales & CTA

FACTS: TMX Sales Inc. filed its quarterly income tax for the 1st quarter of 1981. It declared P571,174.31 and paying an income tax  of P247,019 on May 13, 1981. However, during the subsequent quarters, TMX suffered losses. On April 15, 1982, when TMX filed its Annual Income Tax Return for the year ended in December 31, 1981, it declared a net loss of P6,156,525. On July 9, 1982, TMX filed with the Appellate Division of BIR for refund in the amount of P247,010 representing overpaid income tax. His claim was not acted upon by the Commissioner of Internal Revenue. On May 14, 1984, TMX Sales filed a petition for review before the Court of Tax Appeals against CIR, praying that the CIR be ordered to refund to TMX the amount of P247,010. The CIR averred that TMX is already barred for claiming the refund since more than 2 years has elapsed between the payment (May 15, 1981) and the filing of the claim in court (March 14, 1984). The Court of Tax Appeals rendered a decision granting the petition of TMX Sales and ordered CIR to refund the amount mentioned. Hence, this appeal of CIR.

ISSUE: Whether or not TMX Sales Inc. is entitled to a refund considering that two years gas already elapsed since the payment of the tax

RULING: Yes. Petition of CIR is denied. Sec. 292, par. 2 of the National Internal Revenue Code stated that “in any case, no such suit or proceeding shall be begun after the expiration of two years from the date of the payment of the tax or penalty regardless of any supervening cause that may arise after payment.” This should be interpreted in relation to the other provisions of the Tax Code. The most reasonable and logical application of the law would be to compute the 2-year prescriptive period at the time of the filing of the Final Adjustment Return or the Annual Income Tax Return, where it can finally be ascertained if the tax payer has still to pay additional income tax or if he is entitled to a refund of overpaid income tax. Since TMX filed  the suit on March 14, 1984, it is within the 2-year prescriptive period starting from April 15, 1982 when they filed their  Annual Income Tax Return.

Collector of Internal Revenue vs Prieto

ieto

FACTS: The case was submitted for decision in the court below upon a stipulation of facts, which for brevity is summarized as follows: On December 4, 1945, the respondent conveyed by way of gifts to her four children, namely, Antonio, Benito, Carmen and Mauro, all surnamed Prieto, real property with a total assessed value of P892,497.50. After the filing of the gift tax returns on or about February 1, 1954, the petitioner Commissioner of Internal Revenue appraised the real property donated for gift tax purposes at P1,231,268.00, and assessed the total sum of P117,706.50 as donor's gift tax, interest and compromises due thereon. Of the total sum of P117,706.50 paid by respondent on April 29, 1954, the sum of P55,978.65 represents the total interest on account of deliquency. This sum of P55,978.65 was claimed as deduction, among others, by respondent in her 1954 income tax return. Petitioner, however, disallowed the claim and as a consequence of such disallowance assessed respondent for 1954 the total sum of P21,410.38 as deficiency income tax due on the aforesaid P55,978.65, including interest up to March 31, 1957, surcharge and compromise for the late payment.

ISSUE: Whether or not such interest was paid upon an indebtedness within the contemplation of section 30 (b) (1) of the Tax Code

RULING: The term "indebtedness" as used in the Tax Code of the United States containing similar provisions as in the above-quoted section has been defined as an unconditional and legally enforceable obligation for the payment of money. Within the meaning of that definition, it is apparent that a tax may be considered an indebtedness. It follows that the interest paid by herein respondent for the late payment of her donor's tax is deductible from her gross income under section 30(b) of the Tax Code. Thus, under sec. 23(b) of the Internal Revenue Code of 1939, as amended, which contains similarly worded provisions as sec. 30(b) of our Tax Code, the uniform ruling is that interest on taxes is interest on indebtedness and is deductible. The rule applies even though the tax is nondeductible.

In conclusion, we are of the opinion and so hold that although interest payment for delinquent taxes is not deductible as tax under Section 30(c) of the Tax Code and section 80 of the Income Tax Regulations, the taxpayer is not precluded thereby from claiming said interest payment as deduction under section 30(b) of the same Code.

BPI Leasing Corp vs Court of Appeals

FACTS: BLC is a corporation engaged in the business of leasing properties. For the calendar year 1986, BLC paid the Commissioner of Internal Revenue (CIR) a total of P1,139,041.49 representing 4% contractors percentage tax then imposed by Section 205 of the National Internal Revenue Code (NIRC), based on its gross rentals from equipment leasing for the said year amounting to P27,783,725.42.

On November 10, 1986, the CIR issued Revenue Regulation 19-86. Section 6.2 thereof provided that finance and leasing companies registered under Republic Act 5980 shall be subject to gross receipt tax of 5%-3%-1% on actual income earned. This means that companies registered under Republic Act 5980, such as BLC, are not liable for contractors percentage tax under Section 205 but are, instead, subject to gross receipts tax under Section 260 (now Section 122) of the NIRC. Since BLC had earlier paid the aforementioned contractors percentage tax, it re-computed its tax liabilities under the gross receipts tax and arrived at the amount of P361,924.44.

On April 11, 1988, BLC filed a claim for a refund with the CIR for the amount of P777,117.05, representing the difference between the P1,139,041.49 it had paid as contractors percentage tax and P361,924.44 it should have paid for gross receipts tax. Four days later, to stop the running of the prescriptive period for refunds, petitioner filed a petition for review with the CTA. CTA dismissed the petition and denied BLCs claim of refund. The CTA held that Revenue Regulation 19-86, as amended, may only be applied prospectively such that it only covers all leases written on or after January 1, 1987. The CTA ruled that, since BLCs rental income was all received prior to 1986, it follows that this was derived from lease transactions prior to January 1, 1987, and hence, not covered by the revenue regulation.

ISSUE:

1) Whether or not Revenue Regulation 19-86 is legislative rather than interpretative in character

RULING: The Court finds the questioned revenue regulation to be legislative in nature. LEGISLATIVE

2) Whether or not its application should be prospective or retroactive. PROSPECTIVE

RULING:

1) Section 1 of Revenue Regulation 19-86 plainly states that it was promulgated pursuant to Section 277 of the NIRC. Section 277 (now Section 244) is an express grant of authority to the Secretary of Finance to promulgate all needful rules and regulations for the effective enforcement of the provisions of the NIRC. The Court recognized that the application of Section 277 calls for none other than the exercise of quasi-legislative or rule-making authority. Verily, it cannot be disputed that Revenue Regulation 19-86 was issued pursuant to the rule-making power of the Secretary of Finance, thus making it legislative, and not interpretative as alleged by BLC.

2) The principle is well entrenched that statutes, including administrative rules and regulations, operate prospectively only, unless the legislative intent to the contrary is manifest by express terms or by necessary implication. In the present case, there is no indication that the revenue regulation may operate retroactively. Furthermore, there is an express provision stating that it shall take effect on January 1, 1987, and that it shall be applicable to all leases written on or after the said date. Being clear on its prospective application, it must be given its literal meaning and applied without further interpretation. Thus, BLC is not in a position to invoke the provisions of Revenue Regulation 19-86 for lease rentals it received prior to January 1, 1987.

College of Oral and Dental Surgery vs Court of Tax Appeals

FACTS: The College of Oral and Dental Surgery, sent a letter to the Collector of Internal Revenue, dated November 14, 1952, protesting against the collection and claimed for the refund of the sums of P4,333.39 and P500 paid for income tax corresponding to 1950 and the amount of P2,434.50 paid for income tax corresponding to 1951. It was claimed that the school was exempted from the payment of said tax in virtue of section 27, paragraph (f) of the National Internal Revenue Code. This petition for refund was denied by the Collector of Internal Revenue. Thereafter, the taxpayer sent another letter requesting for the reconsideration but CIR denied such on the ground that while it was true that the profits realized by the College of Oral and Dental Surgery were used for the expansion and improvement of the school and that no part thereof apparently injured to the benefit of any individual stockholder, yet considering that the records proved that Dr. Aldecoa, as president of the institution, and his family actually derived some benefits in the operation of the same. On April 29, 1955, the College of Oral and Dental Surgery filed a petition with the Court of Tax Appeals CTA. The CTA issued a resolution dismissing the petition on the ground that the court acquired no jurisdiction to entertain the same, it appearing that the case was filed 2 years after the taxes sought to be refunded had been paid.

ISSUE: Whether or not the claim for the refund was made within the prescribed period

RULING: No. There is no controversy that the taxes sought to be recovered where paid on May 15, 1951, September 15, 1951 and May 15, 1952, and that although the claim for the refund of the same was filed wlith the Collector of Internal Revenue on November 14, 1952, the request for the reconsideration of the latter's decision was denied only on April 20, 1955. Meanwhile, no proceeding in court was instituted for that purpose in the intervening period. Although the filing of the claim with the Collector of Internal Revenue is intended as a notice to said official that unless the tax or penalty alleged to have been erroneously or illegally collected is refunded court action will follow, this does not imply that the taxpayer must wait for the action of the Collector before bringing the matter to court. Indeed, it must be observed that under said provisions, the taxpayer's failure to comply with the requirement regarding the institution of the action or proceeding in court within 2 years after the payment of the taxes bars him from the recovery of the same, irrespective of whether a claim for the refund of such taxes filed with the Collector of Internal Revenue is still pending action of the latter.

Commissioner of Internal Revenue vs Victorias Milling Co

FACTS: On December 23, 1957 Victorias Milling Co., Inc., filed a claim for the refund of the sum of P12,464.53 representing 50% of the specific tax paid on the manufactured oils and fuels used in its agricultural operation for the period from June 18, 1952 to June 18, 1957. The Commissioner of Internal Revenue granted refund in the sum of P3,415.18 representing the tax paid for the period from January 1, 1956 to June 18, 1957 but denied the claim in the amount of P2,817.08 which corresponds to the tax paid during the period from June 18, 1952 to December 31, 1955 for the reason that the same was filed after the two-year period provided for in Section 306 of the Tax Code had elapsed. Subsequently, Victorias Milling Co., Inc. appealed to the Court of Tax Appeals contending that the aforesaid Section 306 does not apply to its claim

ISSUE: Whether or not Victorias Milling’s right to claim a refund has already prescribed

RULING: YES. The taxpayer's claim for refund with the Bureau of Internal Revenue of December 23, 1957 is within two years from December 1955 — the last month of the period during which the fuels and oils were used. The appeal to the Court of Tax Appeals however, was instituted six years and two months from December 31, 1955. We have repeatedly held that the claim for refund with the Bureau of Internal Revenue and the subsequent appeal to the Court of Tax Appeals must be filed within the two-year period. "If, however, the Collector takes time in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in the Court of Tax Appeals before the end of the two-year period without awaiting the decision of the Collector." In the light of the above quoted ruling, We find that the right of Victorias Milling Co., Inc. to claim refund of P2,817.08 has prescribed.

ACCRA Investment Corp vs Court of Appeals

FACTS: The petitioner corporation filed with the Bureau of Internal Revenue its annual corporate income tax return for the calendar year ending December 31, 1981 reporting a net loss of P2,957,142.00. In the said return, the petitioner corporation declared as creditable all taxes withheld at source by various withholding agents. The withholding agents paid and remitted the amounts representing taxes on rental, commission and consultancy income of the petitioner corporation to the Bureau of Internal Revenue from February to December 1981.

In a letter dated December 29, 1983 addressed to CIR, the petitioner corporation filed a claim for refund inasmuch as it had no tax liability against which to credit the amounts withheld. Pending action of the respondent Commissioner on its claim for refund, the petitioner corporation, on April 13, 1984, filed a petition for review with CTA asking for the refund of the amounts withheld as overpaid income taxes. On January 27, 1988, the respondent CTA dismissed the petition for review after a finding that the two-year period within which the petitioner corporation's claim for refund should have been filed had already prescribed pursuant to Section 292 of the National Internal Revenue Code of 1977, as amended.

ISSUE: Whether or not the claim for refund was filed on time

RULING: YES. Crucial in the resolution of the instant case is the interpretation of the phraseology "from the date of payment of the tax" in the context of Section 230 on Recovery of tax erroneously or illegally collected.

A correct application of the Gibbs case according to the court is that “a taxpayer whose income is withheld at source will be deemed to have paid his tax liability at the end of the tax year. It is from when the same falls due at the his latter date then, or when the two-year prescriptive period under Section 306 of the Revenue Code starts to run with respect to payments effected through the withholding tax system..”

The aforequoted ruling presents two alternative reckoning dates, (1) the end of the tax year; and (2) when the tax liability falls due. In the instant case, it is undisputed that the petitioner corporation's withholding agents had paid the corresponding taxes withheld at source to the Bureau of Internal Revenue from February to December 1981. Petitioner corporation is not claiming a refund of overpaid withholding taxes, per se. It is asking for the recovery the refundable or creditable amount determined upon the petitioner corporation's filing of the its final adjustment tax return on or before 15 April 1982 when its tax liability for the year 1981 fell due. The petitioner corporation's taxable year is on a calendar year basis, hence, with respect to the 1981 taxable year, ACCRA had until 15 April 1982 within which to file its final adjustment return. The petitioner corporation duly complied with this requirement

Anent claims for refund, section 8 of Revenue Regulation No. 13-78 issued by the Bureau of Internal Revenue requires that:

Section 8. Claims for tax credit or refund — Claims for tax credit or refund of income tax deducted and withheld on income payments shall be given due course only when it is shown on the return that the income payment received was declared as part of the gross income and the fact of withholding is established by a copy of the statement, duly issued by the payor to the payee (BIR Form No. 1743-A) showing the amount paid and the amount of tax withheld therefrom.

The term "return" in the case of domestic corporations like ACCRA refers to the final adjustment return. It bears emphasis at this point that the rationale in computing the two-year prescriptive period with respect to the petitioner corporation's claim for refund from the time it filed its final adjustment return is the fact that it was only then that ACCRA could ascertain whether it made profits or incurred losses in its business operations. The "date of payment", therefore, in ACCRA's case was when its tax liability, if any, fell due upon its filing of its final adjustment return on April 15, 1982.

Commissioner of Internal Revenue vs Philippine American Life Insurance

FACTS: On May 30, 1983, private respondent Philamlife paid to the Bureau of Internal Revenue (BIR) its first quarterly corporate income tax for Calendar Year (CY) 1983 amounting to P3,246,141.00. On August 29, 1983, it paid P396,874.00 for the Second Quarter of 1983. For the Third Quarter of 1983, private respondent declared a net taxable income of P2,515,671.00 and a tax due of P708,464.00. After crediting the amount of P3,899,525.00 it declared a refundable amount of P3,158,061.00. For its Fourth and final quarter ending December 31, private respondent suffered a loss and thereby had no income tax liability. It then filed for a tax refund but it only filed the same in December 1985. The Commissioner of Internal Revenue (CIR) denied the claim on the ground that it has been filed beyond the two-year prescriptive period to file such refund claim. The CIR contends that the 2-year prescriptive period should be reckoned from the date of the quarterly payment.  Hence, Philamlife’s refund claim for the quarterly payments it paid in 1983 had prescribed in May 1985 and August 1985, respectively.

ISSUE: Whether or not the contention of CIR is correct

RULING: NO. It may be observed that although quarterly taxes due are required to be paid within sixty days from the close of each quarter, the fact that the amount shall be deducted from the tax due for the succeeding quarter shows that until a final adjustment return shall have been filed, the taxes paid in the preceding quarters are merely partial taxes due from a corporation. Neither amount can serve as the final figure to quantity what is due the government nor what should be refunded to the corporation.

Therefore, when private respondent paid P3,246,141.00 on May 30, 1983, it would not have been able to ascertain on that date, that the said amount was refundable. The same applies with cogency to the payment of P396,874.00 on August 29, 1983.

Clearly, the prescriptive period of two years should commence to run only from the time that the refund is ascertained, which can only be determined after a final adjustment return is accomplished. In the present case, this date is April 16, 1984, and two years from this date would be April 16, 1986. The record shows that the claim for refund was filed on December 10, 1985 and the petition for review was brought before the CTA on January 2, 1986. Both dates are within the two-year reglementary period.

Commissioner of Internal Revenue vs Rosemarie Acosta

FACTS: Respondent is an employee of Intel Manufacturing Phils., Inc. (Intel). For the period January 1, 1996 to December 31, 1996, respondent was assigned in a foreign country. During that period, Intel withheld the taxes due on respondent’s compensation income and remitted to the BIR the amount of P308,084.56.

On March 21, 1997, respondent and her husband filed with the BIR their Joint Individual Income Tax Return for the year 1996. Later, on June 17, 1997, respondent, through her representative, filed an amended return and a Non-Resident Citizen Income Tax Return, and paid the BIR P17,693.37 plus interests in the amount of P14,455.76. On October 8, 1997, she filed another amended return indicating an overpayment of P358,274.63.

Claiming that the income taxes withheld and paid by Intel and respondent resulted in an overpayment of P340,918.92,4 respondent filed on April 15, 1999 a petition for review with the Court of Tax Appeals. The CIR moved to dismiss the petition for failure of respondent to file the mandatory written claim for refund before the CIR.

In its Resolution dated August 4, 1999, the CTA dismissed respondent’s petition. CTA ruled that respondent failed to file a written claim for refund with the CIR, a condition precedent to the filing of a petition for review before the CTA. The CTA also noted that respondent’s omission, inadvertently or otherwise, to allege in her petition the date of filing the final adjustment return, deprived the court of its jurisdiction over the subject matter of the case.

Upon review, the CA reversed the CTA and directed the latter to resolve respondent’s petition for review. Applying Section 204(c) of the 1997 NIRC, the CA ruled that respondent’s filing of an amended return indicating an overpayment was sufficient compliance with the requirement of a written claim for refund.

ISSUE:

1) Whether or not the amended return filed by respondent indicating an overpayment constitute the written claim for refund required by law, thereby vesting the CTA with jurisdiction over this case. NO

2) Whether or not the 1997 NIRC can be applied retroactively? NO

RULING:

On the first issue, we rule against respondent’s contention. Entrenched in our jurisprudence is the principle that tax refunds are in the nature of tax exemptions which are construed strictissimi juris against the taxpayer and liberally in favor of the government. As tax refunds involve a return of revenue from the government, the claimant must show indubitably the specific provision of law from which her right arises; it cannot be allowed to exist upon a mere vague implication or inference nor can it be extended beyond the ordinary and reasonable intendment of the language actually used by the legislature in granting the refund. To repeat, strict compliance with the conditions imposed for the return of revenue collected is a doctrine consistently applied in this jurisdiction.

Under the circumstances of this case, we cannot agree that the amended return filed by respondent constitutes the written claim for refund required by the old Tax Code, the law prevailing at that time. Neither can we apply the liberal interpretation of the law based on our pronouncement in the case of BPI-Family Savings Bank, Inc. v. Court of Appeals, as the taxpayer therein filed a written claim for refund aside from presenting other evidence to prove its claim, unlike this case before us.

On the second issue, we find that we cannot give retroactive application to Section 204(c) abovecited. We have to stress that tax laws are prospective in operation, unless the language of the statute clearly provides otherwise. Moreover, it should be emphasized that a party seeking an administrative remedy must not merely initiate the prescribed administrative procedure to obtain relief, but also pursue it to its appropriate conclusion before seeking judicial intervention in order to give the administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and premature resort to court action. This the respondent did not follow through. Additionally, it could not escape notice that at the time respondent filed her amended return, the 1997 NIRC was not yet in effect. Hence, respondent had no reason at that time to think that the filing of an amended return would constitute the written claim for refund required by applicable law.

Oceanic Wireless Network vs Commissioner of Internal Revenue

Facts: Oceanic Wireless is a corporation filed its 1995 Annual Corporate Annual Income Tax Return in April 1996. In December 1996, petitioner received a letter from the Revenue District Officer authorizing Revenue Officers to examine the books of accounts and other records for the period January to December 1995. Oceanic executed a Waiver of Defense of Prescription of the NIRC within which respondent may assess petitioner for deficiency taxes. A preliminary report of tax assessment was issued and petitioner was requested to attend an informal conference to discuss the result of the investigation done on the books. Petitioner received again another pre-assessment notice this time with Details of Discrepancies. The company was advised to file a written protest or set up an office conference to discuss the deficiencies. Since the authority of respondent to assess was about to prescribe in July 31 1999, demand letters were sent on July 30, 1999.

Petitioner’s contention: The assessment notices for taxable year 1995 are void for having been issued beyond the 3-yr prescriptive period as provided under the NIRC. Since the tax return was filed in April 1995, respondent has 3 years to assess the petitioner.  But the assessment was done only in 1999, hence the action has already prescribed.

Respondent’s contention: Petitioner executed a waiver extending the period of the respondent pursuant to the provisions in the Tax Code.

Issue:

1. Whether or not the BIR’s right to assess has already prescribed. NO

2. Whether or not the deficiency assessments are void for failure to state the law and facts to which the assessments are made. NO

3. Whether or not petitioner is liable for deficiency income tax. YES

Held:

1. No. BIR’s right has not yet prescribed and the assessment notices are valid. At the time of the execution of the waiver, there was no preliminary assessment issued yet against petitioner where the kind and amount of tax could be referred to. Such details cannot be specified in the waiver since it was still unascertainable at the time. Since the period of respondent to assess was extended up to July 31, 1999 in view of the waiver, the deficiency assessments issued against petitioner on July 30, 1999 are within the period allowed by law.

2. No. The purpose of Section 228 of the National Internal Revenue Code of 1997 in requiring that "the taxpayer be informed of the law and facts on which assessment is made" is to give the taxpayer the opportunity to refute the findings of the examiner and give a more accurate and detailed explanation regarding the proposed assessment. In the case, there was substantial compliance with Sec. 228 of the NIRC because petitioner was able to protest the assessments intelligently, thereby implying that it had actual knowledge of the factual and legal bases of the assessments. The fact that petitioner was furnished the computation and brief explanation of how the assessment for deficiency quarterly income tax was arrived at, the requirement under Section 228 of the 1997 Tax Code is deemed complied with. And even if petitioner was not furnished of the detailed computation of the deficiency quarterly income tax, the same was discussed with petitioner during the informal conference. 

3. Yes. Petitioner having failed to comply with the requirement of the law in disputing an assessment, the same became final, executory and demandable.  Sec. 228 states that:

x x x If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) daysfrom submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable. Undoubtedly, a taxpayer has sixty (60) days from the filing of the protest to submit the relevant documents to support its protest, otherwise, the assessment becomes final. Within one hundred eighty(180) days from the submission of the relevant documents, the respondent should act on the protest. If the respondent rendered his decision within the period or failed to act on it, the remedy of the taxpayer is to file within thirty (30) days from the receipt of the decision or from the lapse of one hundred eighty(180) days, an appeal to this court, otherwise, the assessment will become final, executory and demandable. x x x

In the case, petitioner failed to submit supporting documents contrary to what was jointly stipulated by the parties. Hence, the reckoning of the 180-day period would be the day the protest was filed which was August 16, 1999. However, respondent failed to render his decision within 180 days or until February 12, 2000. The remedy of petitioner was to file within 30 days there from an appeal with this court which would be until March 14, 2000. But since the Petition for Review was filed only on May 12, 2000, the same was definitely filed beyond the date prescribed by law.

Lascona Land Co vs Commissioner of Internal Revenue

FACTS: On March 27, 1998, the CIR issued a formal assessment notice (FAN) to Lascona Land Co., Inc. demanding the company to pay P753,266.56 income taxes. Lascona filed a protest on April 20, 1998. CIR promulgated its decision on March 3, 1999. Lascona received a copy of the decision on March 12, 1999. On April 12, 1999, Lascona appealed the decision to the Court of Tax Appeals. The CIR moved for the dismissal of the appeal on the ground that under a revenue regulation issued by the Bureau of Internal Revenue (RR No. 12-99), if the CIR or its representative failed to act on a protest within the 180-day period the taxpayer may appeal within 30 days from the lapse of the 180-day period to the CTA otherwise, the decision shall become final and executor and that Lascona having failed to appeal within the said period, CTA has no jurisdiction over the case

ISSUE: Whether or not the contention of the CIR is correct.

HELD: No. The SC ruled that the revenue regulation to which the CIR anchored its contention is invalid. Section 228 of the National Internal Revenue Code provides that a taxpayer has two remedies if the CIR failed to act on his protest within the 180-day period, to wit;

1) the taxpayer adversely affected by the decision may appeal to the CTA within 30 days from receipt of the decision, or

2) may appeal to the CTA within 30 days from the lapse of the one hundred eighty (180)-day period.

From the above provision, the taxpayer was given two options in case CIR failed to act on their claim. First is to appeal to the CTA within 30 days from the lapse of the 180 day period; or second, wait for the CIR to issue the decision and then appeal, if adverse, to the CTA within 30 days from the receipt of the decision by the taxpayer

In the case at bar, Lascona waited for the CIR to decide on the case and it did not appeal within 30 days from the lapse of the 180-day period. Lascona received the adverse decision of the CIR on March 12, 1999. It appealed on April 12, 1999 which is still within the 30-day period to appeal to the CTA.

The revenue regulation in question is invalid because in effect, it limited the remedy provided for by the law. Section 228 of the NIRC prevails over the said revenue regulation. The said revenue regulation cannot validly take away the option of the taxpayer to continue waiting, even after the lapse of the 180 day period, for the CIR to decide on the case and just appeal, within 30 days from receipt, if the CIR’s ruling is adverse.