GR#222743, April 5, 2017
Medicard vs CIR

Highlights

Synopsis
Settled is the rule that a claim for refund duly filed with the Commissioner of Internal Revenue is a condition precedent to the prosecution of a suit before the Court of Tax Appeals (CTA) and failure to comply with this condition subject the petition for dismissal for lack of cause of action (Republic vs. Limaco and De Guzman Commercial Co., 5 SCRA 990). 

Claims for refund are construed strictly against herein petitioner for the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211).

Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. 

In case of full or partial. denial of the claim for tax refund or tax credit, or the fallure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. 

In Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenuti-8 , citing the landmark case of Commissioner of Internal Revenue vs. San Roque Power Corporatiort9 (San Roque), the Supreme Court held that the taxpayer can file an appeal in one of two ways: (1) file the judicial claim within 30 days after the BIR Commissioner denies the claim within the 120-day waiting period, or (2) file the judicial claim within 30 days from the expiration of the 120-day period if the BIR Commissioner does not act within that period.

In the San Roque case, the Supreme Court emphasized that compliance with the 120+30 day periods prescribed under Section 112© of the NIRC is mandatory and jurisdictional.

See full text attached.

-Adamson v. Court of Appeals G.R. Nos. 120935 & 124557, May 21, 2009

In Commissioner of Internal Revenue v. Pascor Realty and Development Corporation (G.R. No. 128315, June 29, 1999) , the Supreme Court ruled that: Private respondents maintain that the filing of a criminal complaint must be preceded by an assessment. This is incorrect, because Section 222 of the NIRC specifically states that in cases where a false or fraudulent return is submitted or in cases of failure to file a return such as this case, proceedings in court may be commenced without an assessment.

It must be stressed that a criminal complaint is instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code

In the determination of such jurisdictional amount, the BIR may use the best available evidence it can obtain to arrive at the amount a taxpayer may owe the government particularly when such taxpayer did not declare any Income nor file the necessary tax return.

Cited in:
http://cta.judiciary.gov.ph/pdfv/web/vie...6e0c3f049b

References Cited:
Revenue Memorandum Circular 23-2000 dated November 27, 2000 (For failure to submit required Returns)

-Input Tax Refund
-Citing Inaction by the CIR
-2 years after the close of taxable quarter, 120 day for the CIR to decide.

-Subsequent to the Aichi ruling and during the pendency of the case at bar, the Supreme Court En Banc resolved the consolidated cases involved in Commissioner of Internal Revenue v. San Roque Power Corporation (San Roque case) and stated that a judicial claim for refund of input VAT which was filed with the CTA before the lapse of the 120-day period under Section 112 of the NIRC is considered to have been timely made, if such filing occurred after the issuance of the Bureau of Internal Revenue (BIR) Ruling No. DA-489-03 dated December 10, 2003 but before the adoption of the Aichi doctrine which was promulgated on October 6, 2010.

-Taxpayers should not be prejudiced by an erroneous interpretation by the Commissioner, particularly on a difficult question of law. The abandonment of the Atlas doctrine by Mirant and Aichi is proof that the reckoning of the prescriptive periods for input VAT tax refund or credit is a difficult question of law. The abandonment of the Atlas doctrine did not result in Atlas, or other taxpayers similarly situated, being made to return the tax refund or credit they received or could have received under Atlas prior to its abandonment. This Court is applying Mirant and Atlas prospectively. Absent fraud, bad faith or misrepresentation, the reversal by this Court of a general interpretative rule issued by the Commissioner, like the reversal of a specific BIR ruling under Section 246, should also apply prospectively. 

-It is undisputed that the aforementioned date of filing falls within the period following the issuance of BIR Ruling No. DA-489-03 on December 10, 2003 but before the promulgation of the Aichi case on October 6, 2010.

Deutsche Knowledge vs. CIR
GR 197980, Dec. 1, 1966

Taxing the same person (same subject or object) twice by the same jurisdiction over the same thing (Victorias Milling vs. Municipality of Victoria, Negros Occidental, GR No. L-21183, September 27, 1968).

In the broad sense, double taxation means indirect duplicate taxation. It extends to all cases in which there are two or more pecuniary impositions. The Constitution does not prohibit the imposition of double taxation in the broad sense (Villanueva vs. City of Iloilo, GR No. L-26521, December 28, 1968). It is something not favored, but is nevertheless permissible.

An illegal means of escaping taxation. It connotes fraud through the use of pretenses and forbidden devices to lessen or defeat taxes (Yutivo Sons Hardware vs CTA, G.R. No. L-13203, January 28, 1961). Hence, it subjects the taxpayer to further or additional civil or criminal liabilities. 

Tax evasion is sometiimes referred to as tax dodging.

A scheme used outside of those lawful means and when availed of, it usually subjects the taxpayer to further of additional civil or criminal liabilities (CIR vs Estate of Benigno Toda, Jr., GR No. 147188, September 14, 2004).

Factors of Tax Evasion
1. The end to be achieved, i.e., payment of less than that known by the taxpayer to be legally due or paying no tax when it is shown that the tax is due.
2. An accompanying state of mind which is described as being evil, in bad faith, willful, or deliberate and not coincidental; and
3. A course of action that is unlawful (CIR vs Estate of Benigno Toda, Jr., GR No. 147188, September 14, 2004).

Proof of Tax Evasion
1. Failure to declare for taxation purposes true and actual income derived from business for two (2) consecutive years (Republic vs. Gonzales, GR No. L-17962, April 30, 1965).
2. Substantial under declaration of income in the tax returns of the taxpayer for four (4) consecutive years coupled with intentional overstatement of deductions (CIR vs. Reyes, GR No. L-11534 and L-11558, November 25, 1958).

Also called minimization. The exploitation by the taxpayer of legally permissible alternative tax rates or methods of assessing taxable property or income, in order to avoid or reduce tax liability.

Tax avoidance is the tax savings device within the means sanctioned by law. This method should be used by the taxpayer in good faith and at arm's length (CIR vs. Estate of Benigno Toda jr., GR No. 147188, Sept. 14, 2004).

A taxpayer has legal right to decrease the amount of what would otherwise be his taxes or altogether avoid them by means which the law permits (Delpher Trades Co. vs. IAC, GR No. L-69259, January 26, 1988).

The CIR erred in applying the principles of tax exemption without first applying the well-settled doctrine of strict implementation in the imposition of taxes. It is both illogical and impractical to determine who are exempted without FIRST determining who are covered b the aforesaid provisions. As such, it must be determined first if the person is covered by the tax law, applying the rule of strict interpretation of laws imposing taxes and other burdens on the populace, before asking the same person to prove his exemption therefor (CIR vs. CA, GR No. 115349, April 18, 1997).

Tax refunds are in the nature of tax exemptions. They are regarded as in derogation of sovereign authority and to be construed strictissimi jurisagainst the person or entity claiming the exemption.

The burden of proof is upon him who claims the exemption in his favor and he must be able to justify his claim by the clearest grant of organic or statute law (CIR vs. CA, GR No. 104151, March 10, 1995).

1. When the statue granting exemption provides for liberal construction thereof;
2. In case of special taxes relating to special cases and affecting only special classes of persons;
3. If exemptions refers to the public property
4. In cases of exemptions granted to religious, charitable and educational institutions or their property
5. In cases of exemptions in favor of the government, its political subdivisions or instrumentality; and
6. If there is an express mention or if the taxpayer falls within the purview of the exemption by clear legislative intent (CIR vs. Arnoldus Carpentry Shop, Inc. vs. GR No. 71122, March 25, 1988).