SC: Microsoft not entitled to P11M tax refund

By Tetch Torres INQUIRER.net
First Posted 10:53:00 04/27/2011

MANILA, Philippines—The Supreme Court has affirmed the decision of the Court of Tax Appeals (CTA) that Microsoft Philippines was not entitled to an P11-million tax refund for taxes paid in 2001.

In a nine-page decision dated April 5 but was made public Tuesday, the high court’s second division through Senior Associate Justice Antonio Carpio said Microsoft Philippines failed to prove that it is was entitled to a tax refund due to its non-compliance with the requirements set forth under the National Internal Revenue Regulations Code (NIRC).

Under the law, the high court explained that a VAT registered taxpayer such as Microsoft Philippines is required to comply with all the VAT invoicing requirements to be able to file a claim for input taxes on domestic purchases for goods or services attributable to zero-rated sales.

A VAT invoice meets the requirements under the law and that of the Revenue Regulations.

Microsoft argued in its petition for review that the law failed to indicate that failure to indicate the word “zero-rated” in its invoices or receipts would result in the outright invalidation of the invoices or receipts and the disallowance of a claim for tax credit or refund.

“A tax credit or refund, like tax exemption, is strictly construed against the taxpayer. The taxpayer claiming the tax credit or refund has the burden of proving that he is entitled to the refund or credit,” the high court said.

In this case, burden of proof that Microsoft Philippines was entitled to a refund or credit could be shown by compliance with the requirements set forth under the law.

An input tax is defined under the NIRC as the “VAT due from or paid by a VAT registered person in the course of his trade or business of importation of goods or local purchase of goods or services including lease or use of property from a VAT registered person.”

This is deducted from the output tax which is the “VAT due on the sale or lease of taxable goods or properties or services by any VAT registered taxpayer” in order to arrive to a VAT payable amount.

But in zero-rated transactions, output tax is multiplied by zero percent thus when input tax is deducted from output tax would result in an excess input tax which may be refunded or credited to other internal revenue taxes upon compliance with all the requirements stated under the law.

In this case, Microsoft paid a VAT input tax worth P11, 449, 814.99 on its domestic purchases of taxable goods and services in 2001.

The company claimed it as a tax credit in 2002 but due to the inaction of the Bureau of Internal Revenue (BIR), the company took their case to the CTA which ruled against them.

The CTA said Microsoft’s official receipts failed to indicate the word “zero rated” on its face thus it cannot be considered as valid evidence to prove zero-rated sales for VAT purposes.”

After their motion for reconsideration was dismissed by the CTA en banc, they went to the Supreme Court.

“The appearance of the word ‘zero-rated’ on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT is actually paid. Absent such word, the government may be refunding taxes it did not collect,” the high court said.

PNOY may soon appoint two new SC Justices

Associate Justices of the Supreme Court (SC) Conchita Carpio-Morales and Antonio Eduardo Nachura are set to retire this coming June 19 and June 13 respectively.

The impending retirement of the two justices will increase President Noynoy Aquino’s appointees to the Supreme Court making it to a total of three. The first was Associate Justice Ma. Lourdes Sereno. Before the appointment of Sereno, all of the 15 Justices which comprise the entire tribunal were appointed by former president Gloria Arroyo.

The Judicial and Bar Council of the Philippines is a constitutionally-created body that recommends appointees for vacancies that may arise in the composition of the Supreme Court and other lower courts.

It is composed of a representative of the Integrated Bar, a professor of law, a retired member of the Supreme Court, and a representative of the private sector. The Secretary of Justice and a representative of Congress are ex-officio members while the Chief Justice of the Supreme Court is the ex-officio Chairman. The Clerk of the Supreme Court shall serve as the ex-officio secretary.

Land Registration Authority (LRA) now under Department of Justice (DOJ)

President Noynoy Aquino (PNOY) transferred the Land Registration Authority (LRA) to the Department of Justice (DOJ) by virtue of Executive Order No. 30 which was dated March 14, 2011.

The LRA was formerly under the Department of Environment and Natural Resources (DENR). Read the full text of the Order below.

MALACAÑAN PALACEMANILA

BY THE PRESIDENT OF THE PHILIPPINES

EXECUTIVE ORDER NO. 30

TRANSFERRING THE LAND REGISTRATION AUTHORITY (LRA) FROM THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR) TO THE DEPARTMENT OF JUSTICE (DOJ), REPEALING FOR THE PURPOSE EXECUTIVE ORDER NO. 690, SERIES OF 2007

WHEREAS, the Land Registration Authority (LRA) was transferred to the Department of Environment and Natural Resources (DENR) pursuant to Executive Order No. 690, dated December 28, 2007;

WHEREAS, the government is committed to pursue a more responsive and efficient bureaucracy by adopting homogenous grouping of functionally related government agencies;

WHEREAS, with due regard to the quasi-judicial functions being performed by the LRA in land registration cases, and given the present mandate, organizational capability, expertise and experience of the LRA and its Registries of Deeds throughout the country, it is more appropriate that the LRA and its Registries of Deeds continue to perform its land registration functions under the Department of Justice (DOJ);

WHEREAS, Section 31, Chapter 10, Title Ill, Book Ill of Executive Order No. 292, series of 1987, otherwise known as the “Administrative Code of 1987″, provides that the President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President.

NOW, THEREFORE, I, BENIGNO S. AQUINO Ill, President of the Philippines, by virtue of the powers vested in me by the Constitution and existing laws, do hereby order:

Section 1. Transferring LRA from DENR to the DOJ. – The LRA is hereby transferred from the DENR to the DOJ in order to ensure a more effective and efficient execution of laws relative to land registration.

Section 2. Repealing Clause. – All executive orders, including Executive Order No. 690, series of 2007, rules and regulation, and other issuances or parts thereof that are inconsistent with the provisions of this Executive Order, are hereby either revoked or modified accordingly.

Section 3. Effectivity -This Executive Order shall take effect immediately upon publication in the Official Gazette or in a newspaper of general circulation.

DONE in the City of Manila, this 14th day of March, in the year of Our Lord, Two Thousand and Eleven


By the President:

(Sgd.) BENIGNO S. AQUINO III

(Sgd.) PAQUITO N. OCHOA, JR.

Executive Secretary



SC: Cityhood Laws Constitutional

It’s final. The 16 Cityhood Laws are constitutional.
The Supreme Court, by a vote of 7-6, denied for lack of merit and with finality the Ad Cautelam Motion for Reconsideration of its February 15, 2011 ruling that declared constitutional RA Nos. 9389 (Baybay City in Leyte), 9390 (Bogo City in Cebu), 9391 (Catbalogan City in Samar), 9392 (Tandag City in Surigao del Sur), 9393 (Lamitan City in Basilan), 9394 (Borongan City in Samar), 9398 (Tayabas City in Quezon), 9404 (Tabuk City in Kalinga), 9405 (Bayugan City in Agusan del Sur), 9407 (Batac City in Ilocos Norte), 9408 (Mati City in Davao Oriental), 9409 (Guihulngan City in Negros Oriental), 9434 (Cabadbaran City in Agusan del Norte), 9435 (El Salvador City in Misamis Oriental), 9436 (Carcar City in Cebu), and 9491 (Naga City in Cebu).

In a 26-page resolution penned by Justice Lucas P. Bersamin, who also penned the February 15, 2011 resolution, the Court maintained that the said Cityhood Laws do not violate Art. X, sections 6 and 10 and the equal protection clause of the Constitution.

“We should not ever lose sight of the fact that the 16 cities covered by the Cityhood Laws not only had conversion bills pending during the 11th Congress, but have also complied with the requirements of the [Local Government Code] LGC prescribed prior to its amendment by RA No. 9009. Congress undeniably gave these cities all the considerations that justice and fair play demanded. Hence, this Court should do no less by stamping its imprimatur to the clear and unmistakable legislative intent and by duly recognizing the certain collective wisdom of Congress,” the Court said.

The Court stressed that Congress clearly intended that the local government units covered by the Cityhood Laws be exempted from the coverage of RA 9009, which imposes a higher income requirement of PhP100 million for the creation of cities.

The Court reiterated that while RA 9009 was being deliberated upon, the Congress was well aware of the pendency of conversion bills of several municipalities, including those covered by the Cityhood Laws. It pointed out that RA 9009 took effect on June 30, 2001, when the 12th Congress was incipient. By reason of the clear legislative intent to exempt the municipalities covered by the conversion bills pending during the 11th Congress, the House of Representatives adopted Joint Resolution No. 29 entitled Joint Resolution to Exempt Certain Municipalities Embodied in Bills Filed in Congress before June 30, 2001 from the coverage of Republic Act No. 9009. However, the Senate failed to act on the said Joint Resolution. Even so, the House readopted Joint Resolution No. 29 as Joint Resolution No. 1 during the 12th Congress, and forwarded the same for approval to the Senate, which again failed to prove it. Eventually, the conversion bills of respondents were individually filed in the Lower House and were all unanimously and favorably voted upon. When forwarded to the Senate, the bills were also unanimously approved. The acts of both Chambers of Congress show that the exemption clauses ultimately incorporated in the Cityhood Laws are but the express articulations of the clear legislative intent to exempt the respondents, without exception, from the coverage of RA No. 9009. Thereby, RA 9009, and, by necessity, the LCG, were amended, not by repeal but by way of the express exemptions being embodied in the exemption clauses.

The Court held that the imposition of the income requirement of P100 million from local sources under RA 9009 was arbitrary. When the sponsor of the law chose the specific figure of P100 million, no research or empirical date buttressed the figure. Nor was there proof that the proposal took into account the after-effects that were likely to arise. While the Constitution mandates that the creation of local government units must comply with the criteria laid down in the LGC, it cannot be justified to insist that the Constitution must have to yield to every amendment to the LGC despite such amendment imminently producing effects contrary to the original thrusts of the LGC to promote autonomy, decentralization, countryside development, and the concomitant national growth.

In its February 15 resolution, the Court granted the motion for reconsideration of its August 24, 2010 resolution filed by respondents Municipality of Baybay, et al. Hence, it reversed and set aside its August 24, 2010 resolution and declared constitutional the Cityhood Laws. It held that it “should not be restricted by technical rules of procedure at the expense of the transcendental interest of justice and equity. While it is true that litigation must end, even at the expense of errors in judgment, it is nobler rather for this Court of last resort, as vanguard of truth, to toil in order to dispel apprehensions and doubt.”

The February 15, 2011 resolution is the fourth ruling since the High Court first resolved the Cityhood case in 2008.

The cases at bar were spawned by the consolidated petitions filed by the League of Cities of the Philippines (LCP), et al. On November 18, 2008, the Court, by a 6-5 vote, granted the petitions and struck down the Cityhood Laws as unconstitutional for violating sections 10 and 6, Art. X, and the equal protection clause.

On March 31, 2009, the Court, by a 7-5 vote, denied the first motion for reconsideration.

On April 28, 2009, the Court, with a 6-6 vote, denied a second motion for reconsideration for being a prohibited pleading. However, the Court, in its June 2, 2009 resolution, clarified its April 28, 2009 resolution that it voted on the second motion for reconsideration and that it allowed the filing of the second MR, hence, the second MR was no longer a prohibited pleading. However, for lack or the required number of votes to overturn the November 18, 20009 decision and March 31, 2009 resolution, the Court denied the second MR in its April 28, 2009 resolution.

On December 21, 2009, the Court, by a vote of 6-4, declared the Cityhood Laws as constitutional.

On August 24, 2010, the Court, this time by a vote of 7-6, resolved the Ad Cautelam Motion for Reconsideration and Motion to Annul the Decision of December 21, 2009, both filed by petitioners, and the Ad Cautelam Motion for Reconsideration filed by petitioners-in-intervention Batangas City, et al., reinstating the November 18, 2008 decision.

Concurring with Justice Bersamin were Chief Justice Renato C. Corona and Justices Presbitero J. Velasco, Jr., Teresita J. Leonardo-De Castro, Jose Portugal Perez, and Jose Catral Mendoza. Justice Roberto A. Abad wrote a separate concurring opinion.

Senior Justice Antonio T. Carpio maintained his dissent and was joined in his opinion by Justices Conchita Carpio Morales, Arturo D. Brion, Diosdado M. Peralta, Martin S. Villarama, Jr., and Maria Lourdes P. A. Sereno.

Justices Antonio Eduardo B. Nachura and Mariano C. Del Castillo did not take part.

Justice Carpio opined that the said Cityhood Laws contravene the letter and intent of Section 10, Article X of the Constitution. He stressed that “the Constitution expressly requires Congress to stipulate in the Local Government Code itself all the criteria necessary for the creation of a city, including the conversion of a municipality into a city. To avoid discrimination and ensure uniformity and equality, such criteria cannot be embodied in any other law except the Local Government Code. In this case, the Cityhood Laws, which are unmistakably laws other than the Local Government Code, provide an exemption from the increased income requirement for the creation of cities under 450 of the Local Government Code, as amended by RA No. 9009.” He said that “This Court has made history with its repeated flip-flopping in this case.”

For his part, Justice Abad opined that there was no flip-flopping and that such charge was unfair. To flip-flop, he pointed out, “means to vote for one proposition at first (take a stand), shift to the opposite proposition upon the second vote (flip), and revert to his first position upon the third (flop). Not one of the 23 Justices flipped-flopped in his vote. He stressed that “the Justices did not decide to change their minds on a mere whim. The two sides filed motions for reconsideration in the case and the Justices had no options, considering their divided views, but perform their duties and vote on the same on the dates the matters came up for resolution.” He stressed that of the 23 Justices who voted in the case at any of its various stages, 20 Justices stood by their original positions and never reconsidered their views. Only three did so and not on the same occasion, showing not wholesale change of votes at any time. He noted that in 2009 alone, seven Justices retired and were replaced by an equal number. It is such that the resulting change in the combination of minds produced multiple shifts in the outcomes of the voting. He said that no law or rule requires succeeding Justices to adopt the views of their predecessors.

He said that the three Justices who changed their votes did not do so in one direction. Justice Velasco changed his vote from a vote to annul to a vote to uphold; Justice Villarama from a vote to uphold to a vote to annul; and Justice Mendoza from a vote to annul to a vote to uphold. Not one of the three flipped-flopped since they never changed their votes again afterwards. “[N]o one can dispute the right of a judge, acting on a motion for reconsideration, to change his mind regarding the case. The rules are cognizant of the fact that human judges could err and that it would merely be fair and right for them to correct their perceived errors upon a motion for reconsideration. The three Justices who changed their votes had the right to do so,” Justice Abad said. (GR No. 176951, League of City of the Philippines v. COMELEC; GR No. 177499, League of City of the Philippines v. COMELEC: GR No. 178056, League of City of the Philippines v. COMELEC, April 12, 2011)


Source: http://sc.judiciary.gov.ph/news/courtnews%20flash/2011/04/04141101.php

Option to carry-over excess income tax payments to the succeeding years once made becomes irrevocable

Under Section 76 of the 1997 National Internal Revenue Code (NIRC), once an option to carry-over excess income tax payments to the succeeding years, it becomes irrevocable. This was what the Supreme Court reiterated in its new decision in the case of Belle Corporation vs. Commissioner of Internal Revenue, G.R. No. 181298 promulgated last January 10, 2011.

The issue passed upon by the Court is whether petitioner is entitled to a refund of its excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00.

In denying petitioner Belle Corp.’s Petition for Certiorari under Rule 45 of the Rules of Court, the highest tribunal of the land opined that since petitioner already carried over its 1997 excess income tax payments to the succeeding taxable year 1998, it may no longer file a claim for refund of unutilized tax credits for taxable year 1997.

The Court explained that “Under the new law, in case of overpayment of income taxes, the remedies are still the same; and the availment of one remedy still precludes the other. But unlike Section 69 of the old NIRC, the carry-over of excess income tax payments is no longer limited to the succeeding taxable year. Unutilized excess income tax payments may now be carried over to the succeeding taxable years until fully utilized. In addition, the option to carry-over excess income tax payments is now irrevocable. Hence, unutilized excess income tax payments may no longer be refunded.”

Read the FULL TEXT

Minimum Corporate Income Tax

"Minimum corporate tax"


By Raul J. Palabrica
Philippine Daily Inquirer
First Posted 20:55:00 04/08/2010
Filed Under: State Budget & Taxes, Economy and Business and Finance

IT’S INCOME TAX SEASON AGAIN.

This is the time of the year when accountants are busiest preparing (or as some cynics put it, “cooking”) the books of account of their clients to meet their tax obligations.

In doing so, the “bean counters” have to carefully tread the thin line that separates tax avoidance from tax evasion.

If there are gray areas in the law that can be invoked to reduce or avoid the payment of taxes, the taxpayer concerned cannot be faulted for taking advantage of them.

For making some “savings” possible, the tax adviser who spotted the loophole can expect to be rewarded handsomely for his cleverness.

And when word spreads in the industry about it, similarly situated taxpayers follow suit until the regulators get wise to the scheme and adopt the appropriate measures to stem the revenue loss.

Tax evasion, however, is a different story. The refusal to pay taxes that are due and payable can give rise to criminal and civil liabilities to the taxpayer and whoever may have advised him to willfully renege on his tax duties.

Low taxes

Until our lawmakers took notice, it was common practice by unscrupulous businessmen to form corporations that raked in huge profits during the year but reported losses at the end of their fiscal year.

Following the principle that income tax is imposable only on earned income, these companies were not, strictly speaking, obliged to pay taxes.

Behind the scenes, however, the bulk of their earnings went to the pockets of their stockholders and officers (who are also stockholders) by way of dividends, salaries, allowances and other perks and privileges.

With sleight-of-hand accounting techniques, the supposedly employment-based expenses were added to bloated operating costs that resulted, at least in the corporate books, in low income or losses.

The net effect of this slick scheme was low or zero taxes.

Either way it went, these companies availed of the services and facilities that the government made available to all companies regardless of their financial condition.

Thus, supposedly unprofitable companies enjoyed the benefits of public services and facilities without contributing any centavo to the national coffers. It was corporate parasitism and exploitation at their worst.

Taxable year

To even up the balance and to discourage avoidance of taxes by repeated reporting of losses, Republic Act No. 8424 imposed in 1998 a minimum corporate income tax (MCIT) on domestic corporations.

Basically, the law gives new corporations some breathing space by allowing them to invoke business losses to excuse the payment of the standard corporate income tax.

However, on the fourth taxable year immediately following the year in which these corporations started operating, they are required to pay the MCIT which is equivalent to two percent of their gross income as of the end of the taxable year.

The specifics on how the tax shall be computed and paid are spelled out in the regulations that the Bureau of Internal Revenue later issued to implement the law.

The bottom line of the law is, all corporations, regardless of their state of profitability, have to pay income tax using a formula that takes into account their actual income stream during the taxable year.

Understandably, the affected parties complained about the innovative tax regulation. A convenient excuse for avoiding (if not evading) taxes—business losses—was removed from the tax books.


Valid exercise

Last month, the Supreme Court settled the issue on the constitutionality of the MCIT.

Earlier, an association of real estate brokers claimed that the tax imposition is “highly oppressive, arbitrary and confiscatory.”

In its ruling, the tribunal pointedly stated that some companies deliberately manipulate their books to report negative or minimal taxable income by “under declarations in income earned or over deduction in expenses.”

With that premise, the justices said the MCIT is aimed at deterring tax evasion and reducing the incidence of tax avoidance schemes that are “achieved through sophisticated and artful manipulations of deductions and other stratagems.”

Since the MCIT is based on the companies’ gross income (or total earnings before deducting allowable expenses), the tribunal did not see anything wrong with requiring them to contribute a reasonable portion of their money to the national coffers.

The decision couldn’t have come at a more opportune time considering that the BIR is presently engaged in aggressive efforts to meet its revenue target for the year.

It has been said (and with sufficient reason) that government regulation of business activities is a catch-up game.

The regulated parties devise ways and means to go around the rules that restrict their ability to make a lot of money. In turn, the regulators try to anticipate these moves to enable them to take the appropriate remedial measures.

Mercifully, in the tax collection game, the government has in its corner the presumption that “taxes constitute the lifeblood of the State” and therefore all doubts about its power to tax are resolved in its favor.

Source: Inquirer.net

Civil Service Examination Schedule for 2011

The 2011 Civil Service Exam is scheduled on May 22, 2011 and October 16, 2011. This is for the Career Service Examination Paper and Pencil Test (Professional and Subprofessional)

Case Digest in Evidence (Remedial Law): BPI vs. Reyes

BANK OF THE PHILIPPINE ISLANDS vs. JESUSA P. REYES and CONRADO B. REYES

[G.R. No. 157177, February 11, 2008]

FACTS:

On December 7, 1990, respondent Jesusa Reyes together with her daughter, went to BPI Zapote Branch to open an ATM account.

Respondent informed one of petitioners employees, Mr. Capati, that they wanted to open an ATM account for the amount of P200,000.00, P100,000.00 of which shall be withdrawn from her exiting savings account with BPI bank which is account no. 0233-2433-88 and the other P100,000.00 will be given by her in cash.

Capati allegedly made a mistake and prepared a withdrawal slip for P200,00.00 to be withdrawn from her existing savings account with said bank and the respondent believing in good faith that Capati prepared the papers with the correct amount signed the same unaware of the mistakes in figures.

Minutes later after the slips were presented to the teller, Capati returned to where the respondent was seating and informed the latter that the withdrawable balance could not accommodate P200,000.00.

Respondent explained that she is withdrawing the amount of P100,000.00 only and then changed and correct the figure two (2) into one (1) with her signature super-imposed thereto signifying the change, afterwhich the amount of P100,000.00 in cash in two bundles containing 100 pieces of P500.00 peso bill were given to Capati with her daughter Joan witnessing the same. Thereafter Capati prepared a deposit slip for P200,000.00 in the name of resondent Jesusa Reyes with the new account no. 0235-0767-48 and brought the same to the teller's booth.

After a while, he returned and handed to the respondent her duplicate copy of her deposit to account no. 0235-0767-48 reflecting the amount of P200,000.00 with receipt stamp showing December 7, as the date.

Later on, respondent would become aware that her ATM account only contained the amount of P100,000.00 with interest. Hence, she filed an action before the RTC.

Petitioner claimed that there was actually no cash involved with the transactions which happened on December 7, 1990 as contained in the bank’s teller tape.

On August 12, 1994, the RTC issued a Decision upholding the versions of respondents.

Aggrieved, petitioner appealed to the CA which affirmed the RTC decision with modification

ISSUE:

Whether the CA erred in sustaining the RTC's finding that respondent Jesusa made an initial deposit of P200,000.00 in her newly opened Express Teller account on December 7, 1990.

HELD:

It is a basic rule in evidence that each party to a case must prove his own affirmative allegations by the degree of evidence required by law. In civil cases, the party having the burden of proof must establish his case by preponderance of evidence, or that evidence which is of greater weight or is more convincing than that which is in opposition to it. It does not mean absolute truth; rather, it means that the testimony of one side is more believable than that of the other side, and that the probability of truth is on one side than on the other.

For a better perspective on the calibration of the evidence on hand, it must first be stressed that the judge who had heard and seen the witnesses testify was not the same judge who penned the decision. Thus, not having heard the testimonies himself, the trial judge or the appellate court would not be in a better position than this Court to assess the credibility of witnesses on the basis of their demeanor.

Hence, to arrive at the truth, we thoroughly reviewed the transcripts of the witnesses' testimonies and examined the pieces of evidence on record.

After a careful and close examination of the records and evidence presented by the parties, we find that respondents failed to successfully prove by preponderance of evidence that respondent Jesusa made an initial deposit of P200,000.00 in her Express Teller account.

Case Digest in Evidence (Remedial Law): Atlas vs. Commisioner

ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORP. vs. COMMISSIONER OF INTERNAL REVENUE


[G.R. No. 159490, February 18, 2008]

FACTS:

Atlas is a corporation duly organized and existing under Philippine laws engaged in the production of copper concentrates for export.

Atlas applied with the BIR for the issuance of a tax credit certificate or refund under Section 106(b) of the Tax Code.

Atlas then filed a petition for review with the CTA on February 22, 1995 to prevent the running of the prescriptive period under Sec. 230 of the Tax Code.

On October 13, 1997, the CTA rendered a Decision denying Atlas’ claim for tax credit or refund.

Respondent CIR filed his Answer asserting that Atlas has the burden of proving erroneous or illegal payment of the tax being claimed for refund, as claims for refund are strictly construed against the taxpayer

In denying Atlas’ claim for tax credit or refund, the CTA held that Atlas failed to present sufficient evidence to warrant the grant of tax credit or refund for the alleged input taxes paid by Atlas. Relying on Revenue Regulation No. (RR) 3-88 which was issued to implement the then VAT law and list the documents to be submitted in actions for refunds or tax credits of input taxes in export sales, it found that the documents submitted by Atlas did not comply with said regulation. It pointed out that Atlas failed to submit photocopies of export documents, invoices, or receipts evidencing the sale of goods and others.

Atlas timely filed its Motion for Reconsideration of the above decision contending that it relied on Sec. 106 of the Tax Code which merely required proof that the foreign exchange proceeds has been accounted for in accordance with the regulations of the Central Bank of the Philippines. Consequently, Atlas asserted that the documents it presented, coupled with the testimony of its Accounting and Finance Manager sufficiently proved its case. It argued that RR 3-88 was issued for claims for refund of input VAT to be processed by the BIR, that is, for administrative claims, and not for judicial claims as in the present case. Anyhow, Atlas prayed for a re-trial, even as it admitted that it has committed a mistake or excusable negligence when the CTA ruled that RR 3-88 should be the one applied for Atlas to submit the basis required under the regulation.

On Atlas’ appeal, the CA denied and dismissed Atlas’ petition on the ground of insufficiency of evidence to support Atlas’ action for tax credit or refund.

ISSUE: Whether Atlas has sufficiently proven entitlement to a tax credit or refund.

HELD:

No.

The Rules of Court, which is suppletory in quasi-judicial proceedings, particularly Sec. 349 of Rule 132, Revised Rules on Evidence, is clear that no evidence which has not been formally offered shall be considered. Thus, where the pertinent invoices or receipts purportedly evidencing the VAT paid by Atlas were not submitted, the courts a quo evidently could not determine the veracity of the input VAT Atlas has paid. Moreover, when Atlas likewise failed to submit pertinent export documents to prove actual export sales with due certification from accredited banks on the export proceeds in foreign currency with the corresponding conversion rate into Philippine currency, the courts a quo likewise could not determine the veracity of the export sales as indicated in Atlas’ amended VAT return.

It must be noted that the most competent evidence must be adduced and presented to prove the allegations in a complaint, petition, or protest before a judicial court. And where the best evidence cannot be submitted, secondary evidence may be presented. In the instant case, the pertinent documents which are the best pieces of evidence were not presented.

Tax raps filed vs billionaire businessman

By Tetch Torres
INQUIRER.net
First Posted 18:28:00 04/07/2011

MANILA, Philippines—The Department of Justice (DoJ) ordered the filing of tax evasion case against a billionaire businessman before the Court of Tax Appeals.

In an 8-page resolution approved by Prosecutor General Claro Arellano, the DoJ gave the go for the prosecution of Macario Lim Gaw for violation of Section 255 of the National Internal Revenue Code (NIRC); which provides penalty for a tax payer’s failure to file return; supply correct and accurate information; pay tax withhold and remit tax and refund excess taxes withheld on compensation.

The resolution is dated March 17, 2011, but was released to the media on Thursday through a press conference by Justice Secretary Leila De Lima.

In December, 2007 and from April to June, 2008, Gaw bought a total of 10 properties consisting of an aggregate area of 19.5592 hectares from which he sold in July, 2008.

The DoJ, in its resolution stated that Gaw failed to pay the corresponding tax for the income he earned for the sale of the said properties.

Gaw said that he already paid the corresponding capital gains tax as he insisted that the sold properties were capital assets and not ordinary assets as claimed by the Bureau of Internal Revenue (BIR).

Gaw paid the 6 percent capital gains tax amounting to P9,111,801.69 for 2007 and P418,746,021.11 for 2008 to evade the payment of the 32 percent income tax and the 12 percent VAT due to sale of lands classified as ordinary assets.

However, the DoJ pointed that evidence showed the transactions of Gaw, as well as his continuing transactions showed he is engaged in real estate business under the BIR revenue regulation 7-2003.

“While respondent would insist that the revenue regulation merely pertains to selling and not buying, the revenue regulation does not distinguish since the revenue regulation itself states that the property purchased for future use in the business, even though this purpose is later thwarted by circumstances beyond the taxpayer’s control, does not lose its character as an ordinary asset,” the DoJ said.

The DoJ added that Gaw himself, in an agreement to sell dated April 3, 2008, which he submitted to the DoJ showed that he is actually into business of selling real properties for profit.

The BIR said Gaw is registered as a one-time transaction tax payer which, according to the BIR are those who are selling properties which is not in the nature of a regular business transaction.

But the DoJ reiterated the statement made by the BIR that Gaw has extensive knowledge in real-estate business having handled nine real-estate transactions for various corporations.

Gaw is the president of Mega Packaging Corp. and Makro LPG.

BIR files tax evasion case against model-host Diana Menezes

Model and host Diana Menezes faces a tax evasion case for failing to file her income tax returns considering that she is a resident alien deriving income from within the Philippines and thus liable under Section 24 of the National Internal Revenue Code (NIRC) to pay income taxes.

Read article below.

"Brazilian TV host slapped with tax evasion rap"
By Tetch Torres
INQUIRER.net
First Posted 13:54:00 04/07/2011

MANILA, Philippines—The Bureau of Internal Revenue on Thursday filed a tax evasion case against Brazilian model and host Diana Menezes before the Department of Justice for her failure to file tax returns and pay taxes.

Menezes’ tax liability amounts to P983,658.07, said the BIR.

Menezes has been in the country since 2007 and has been a regular host of the noontime television show “Eat Bulaga” also since 2007.

Investigation showed that Menezes did not file any tax returns for taxable years 2007 to 2009. Under Section 24 of the National Internal Revenue Code (NIRC), a resident alien deriving income from the Philippines is required to pay income tax.

Records showed that Menezes received a total taxable income of P2.6 million from 2007 to 2009 from various modeling and hosting stints and endorsements but failed to pay taxes.

BIR Commissioner Kim Jacinto-Henares said that Menezes registered with the BIR under Executive Order No. 98 only for the purpose of securing a Taxpayer Identification Number (TIN) as part of the essential requirements in all applications for a government permit, license, clearance or any official documents.