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SECOND DIVISION
MISNET, INC., G.R. No. 210604
Petitioner,
Present:
CARPIO, J., Chairperson,
-versus - PERLAS-BERNABE,
CAGUIOA,*
REYES, J. JR., and
LAZARO-JAVIER, JJ.
COMMISSIONER OF INTERNAL
REVENUE, Promulgated:
x--------------~e:~~n~~~t~ --------- -~J~Jk---x
DECISION
REYES, J. JR., J.:
This resolves the Petition for Review on Certiorari from the Decision 1
dated July 15, 2013 and Resolution2 dated December 9, 2013 of the Court of
Tax Appeals (CTA) En Banc, in CTAEB Case No. 915.
On November 29, 2006, petitioner received a Preliminary Assessment
Notice (PAN)3 from respondent Commissioner of Internal Revenue (CIR)
stating that after examination, there was an alleged deficiency in taxes for
taxable year 2003 amounting to Pll,329,803.61, representing the expanded
withholding tax (EWT) and final withholding VAT. Pe'titioner filed a letter-
protest on the PAN.
On wellness leave.
1
Penned by Associate Justice Caesar A. Casanova, with Associate Justices Roman G. Del Rosario
(Presiding Justice), Juanito C. Castafleda, Jr., Lovell R. Bautista; Erlinda P. Uy, Esperanza R. Fabon-
Victorino; Cielito N. Mindaro-Grulla, Amelia R. Cotangco-Manalastas, and Ma. Belen M. Ringpis-
Liban; concurring; rollo, pp. 521-536.
(
2
Id. at 33-34.
3
Id. at 50
Decision 2 G.R. No. 210604
Thereafter, on January 23, 2007, petlt10ner received a Formal
Assessment Notice (FAN)4 which states that petitioner's tax deficiency for
the year 2003, amounted to Pll,580,749.31, inclusive of P25,000.00
Compromise Penalty. Thus:
Expanded Withholding Tax (EWT) P 1,781,873.55
Final Withholding ofVAT 9,773,875.76
SUBTOTAL 11,555,749.31
Add: Compromise Penalty 251000.00
TOTAL P 11,580,749.31
On February 9, 2007, petitioner paid the amount of P2,152.41 for
certain undisputed assessments. 5 On the same day, pet1t10ner
administratively protested the FAN by filing a request for reconsideration. 6
The CIR acknowledged receipt of the payment and the protest letter and
informed the petitioner that its tax docket had been forwarded to Revenue
District Officer (RDO) No. 049, North Makati. 7 On May 28, 2007, the CIR
informed petitioner that Revenue Officer (RO) Josephine L. Paralejas has
been authorized to verify the documents relative to its request for
reinvestigation and reiterated the previous assessment of petitioner's
deficiency taxes for taxable year 2003 in the amount of Pll,580,749.31. 8
On June 1, 2007, petitioner sent a letter to RO Josephine L. Paralejas
reiterating its protest to the PAN and the FAN.
On April 28, 2008, the CIR again wrote a letter to petitioner informing
it that it found additional deficiency taxes due. 9 On May 8, 2008, petitioner
protested this letter.
On March 28, 2011, petitioner received an Amended Assessment
Notice reflecting an amended deficiency EWT after reinvestigation. On the
same date, petitioner received a Final Decision on Disputed Assessment
(FDDA) stating that after reinvestigation, there was still due from petitioner
the amount of !!14,564,323.34, representing deficiency taxes, broken down
as follows:
Expanded Withholding Tax P 430,716.17
(with Interest)
Final Withholding of VAT 14,108,607.17
(with 25% Surcharge &
Interest)
Compromise Penalty 25,000.00
TOTAL P 14,564,323.34
4
Id. at 54-56
5
Id. at 6 l.
j
6
Id. at 63.
7
Id. at 64.
8
Id. at 67.
9
Id. at 68.
Decision 3 G.R. No. 210604
This FDDA was received by petitioner on March 28, 2011. 10
On April 8, 2011, petitioner filed a letter-reply 11 to the Amended
Assessment Notice and FDDA, which was received by the CIR on April 11,
2011. On May 9, 2011, the CIR sent a letter 12 to petitioner which states in
part that petitioner's letter-reply dated April 8, 2011 produced no legal effect
since it availed of the improper remedy. 13 It should have appealed the final
decision of the CIR to the Court of Tax Appeals within thirty (30) days from
the date of receipt of the said Decision, otherwise, the assessment became
final, executory and demandable. 14
On May 27, 2011, petitioner filed a Petition for Relief from
Judgment15 with respondent Commissioner arguing that it was not able to
file its proper appeal of the FDDA due to its mistake and excusable
negligence as it was not assisted by counsel. On June 29, 2011, petitioner
received a Preliminary Collection Letter 16 dated June 22, 2011, which is
deemed a denial of petitioner's Petition for Relief. 17
On July 26, 2011, petitioner filed a Petition for Review 18 docketed as
CTA Case No. 8313, with the Court of Tax Appeals which was raffled to the
First Division. Meanwhile, the CIR filed a Motion to Dismiss the petition on
the ground of lack of jurisdiction - arguing that the assessment against
petitioner has become final, executory and demandable for its failure to file
an appeal within the prescribed period of thirty (30) days.
In a Resolution dated March 27, 2012, 19 the CTA 1st Division granted
CIR's Motion to Dismiss. Petitioner filed a Motion for Reconsideration20 of
the March 27, 2012 Resolution. On June 27, 2012, petitioner received from
CTA 1st Division a Resolution dated June 22, 2012 21 denying its Motion for
Reconsideration.
On July 12, 2012, petitioner filed a Petition for Review (CTA EB Case
No. 915) with the CTAEn Banc.
In a Decision dated July 15, 2013, the CTA En Banc dismissed
petitioner's Petition for Review on the ground of lack of jurisdiction as the
lapse of the statutory period to apfeal rendered the subject deficiency taxes
final, executory and demandable. 2 On August 6, 2013, petitioner filed a
10
Id. at 8.
11
Id. at 76.
12
Id. at 77.
13 Id.
14 Id.
15
Id. at 78-82.
16
Id. at 192.
17
Id. at 1I.
18
Id. at 104-122.
19
Id. at 200-205.
20
Id. at 206-211.
21
Id. at 213-217.
22
Supra note 1, at 535.
y
Decision 4 GR. No. 210604
Motion for Reconsideration but the said Motion was denied in a Resolution
23
dated December 9, 2013.
Dissatisfied, petitioner filed the instant Petition with this Court raising
the lone issue that-
THE HONORABLE COURT OF TAX APPEALS [EN BANC]
GRAVELY ERRED IN DISMISSING THE PETITION FOR REVIEW
FOR LACK OF JURISDICTION, BECAUSE IT THEREBY
DISREGARDED THE REMEDY OF PETITION FOR RELIEF IN TAX
CASES, PURSUANT TO SECTION 3 OF RULE 1 OF THE REVISED
RULES OF THE COURT OF TAX APPEALS, SECTIONS 1 TO 3 OF
RULE 38 OF THE RULES OF COURT, AND THE RULING OF THE
SUPREME COURT IN THE CASE OF GESULGON [V.] NLRC. 24
Otherwise stated, the issue obtaining in the instant case is whether or
not the CTA En Banc correctly dismissed petitioner's Petition for Review on
the ground of lack of jurisdiction.
Section 228 of the 1997 National Internal Revenue Code of the
Philippines (NIRC) which provides for the remedies of a taxpayer in case of
an adverse final decision by the CIR on Disputed Assessment, thus:
SEC. 228. Protesting of Assessment. - When the Commissioner
or his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings: xx x
xxxx
Within a period to be prescribed by implementing rules and
regulations, the taxpayer shall be required to respond to said notice. If the
taxpayer fails to respond, the Commissioner or his duly authorized
representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a
request for reconsideration or reinvestigation within thirty (30) days from
receipt of the assessment in such form and manner as may be prescribed
by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant
supporting documents shall have been submitted; otherwise, the
assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon
within one hundred eighty (180) days from submission of documents, the
taxpayer adversely affected by the decision or inaction may appeal to
the Court of Tax Appeals within (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.
(Emphasis supplied)
23
Supra note 2.
24
Id. at 13.
'{
Decision 5 G.R. No. 210604
It bears to stress that the perfection of an appeal within the statutory
period is a jurisdictional requirement and failure to do so renders the
questioned decision or decree final and executory and no longer subject to
• 25
review.
In the instant case, petitioner allegedly failed to observe the 30-day
period within which to appeal the final decision of the CIR to the CTA. As
records would show, petitioner admittedly received the FDDA on March 28,
2011. Reckoned from this date of receipt, it has until April 27, 2011, within
which to appeal with the CTA. However, petitioner filed its appeal (Petition
for Review) only on July 26, 2011 or after the lapse of ninety-three (93) days
from its receipt of the FDDA. It appears that petitioner's filing of an appeal
with the CTA was beyond the statutory period to appeal.
Nonetheless, this Court has on several occasions relaxed this strict
requirement. We have on several instances allowed the filing of an appeal
outside the period prescribed by law in the interest of justice, and in the
exercise of its equity jurisdiction. 26 Thus:
x x x [F]or a party to seek exception for its failure to comply
strictly with the statutory requirements for perfecting its appeal, strong
compelling reasons such as serving the ends of justice and preventing a
grave miscarriage thereof must be shown, in order to warrant the Court's
suspension of the rules. Indeed, the Court is confronted with the need to
balance stringent application of technical rules vis-a-vis strong policy
considerations of substantial significance to relax said rules based on
equity and justice. 27 (Emphasis supplied; citation omitted)
Petitioner averred that after rece1vmg the Amended Assessment
Notice and the FDDA of the CIR on March 28, 2011, it filed, without the
assistance of a counsel, a letter protesting the Amended Assessment Notice,
with Regional Director Mr. Jaime B. Santiago, of RDO No. 049, Makati
28
City. This letter of protest was filed by petitioner on April 11, 2011 or
within the statutory period within which to appeal. Apparently, petitioner
was merely relying on the statement in the said Amended Assessment
Notice, which reads:
IF YOU DISAGREE WITH THIS ASSESSMENT, FILE YOUR
PROTEST IN WRITING INDICATING YOUR REASONS WITH THE
COMMISSIONER OF INTERNAL REVENUE, BIR DILIMAN,
QUEZON CITY OR THE REGIONAL DIRECTOR WITHIN 30 DAYS
FROM RECEIPT HEREOF: x x x29
Thus, petitioner opted to file the protest with the Regional Director.
On May 12, 2011, petitioner received a letter informing it that its filing of a
25
Jocson v. Baguio, 259 Phil. 153, 158 (1989).
26
Toledo v. Intermediate Appellate Court, 236 Phil. 619, 625 (I 987), citing Vda. De Crisologo v. Court
ofAppeals, 137 SCRA 238.
27
Trans International v. Court ofAppeals, 348 Phil. 830, 838 (1998).
28
See Affidavit of Merit, rollo, p. 89.
29
Id. at 71.
y
Decision 6 G.R. No. 210604
letter of protest was an improper remedy. 30 Therefore, petitioner, on May
27, 2011, filed a Petition for Relief from Judgment on the ground of mistake
in good faith for relying on the statement provided in the Amended
Assessment Notice. Petitioner contends that the CTA En Banc should have
taken into consideration that the filing of the Petition for Relief from
Judgment has stopped the running of the period to appeal. Petitioner insists
that all of these incidents constitute excusable delay that justified its belated
filing of an appeal with the CTA.
We sustain petitioner's argument.
When pet1t1oner sent a letter-reply31 dated April 8, 2011 to the
Regional Director, it was actually protesting both the Amended Assessment
Notice and the FDDA. The Amended Assessment Notice 32 reflects the
amended deficiency EWT of petitioner after reinvestigation while the
FDDA 33 reflects the Final Decision on: (a) petitioner's deficiency EWT;
(b) Final Withholding of VAT; and (c) Compromise Penalty. Since the
deficiency EWT is a mere component of the aggregate tax due as reflected in
the FDDA, then the FDDA cannot be considered as the final decision of the
CIR as one of its components - the amended deficiency EWT - is still under
protest.
Petitioner was correct when it protested with the Regional Director the
deficiency EWT as per the Amended Assessment Notice sent by the BIR.
However, instead of resolving the protest, the Regional Director informed
the petitioner that it was an improper remedy. A ruling totally inconsistent
with the statement reflected in the Amended Assessment Notice, which
states that protest must be filed with the CIR or the Regional Director within
30 days from receipt thereof. 34 Apparently, the Regional Director has hastily
presumed that petitioner was already protesting the FDDA, which
incidentally was received by petitioner on the same date as that of the
Amended Assessment Notice.
With petitioner's pending protest with the Regional Director on the
amended EWT, then technically speaking, there was yet no final decision
that was issued by the CIR that is appealable to the CTA. It is still
incumbent for the Regional Director to act upon the protest on the amended
EWT- whether to grant or to deny it. Only when the CIR settled
(deny/grant) the protest on the deficiency EWT could there be a final
decision on petitioner's liabilities. And only when there is a final decision of
the CIR, would the prescriptive period to appeal with the CTA begin to run.
Hence, petitioner's belated filing of an appeal with the CTA is not
without strong, compelling reason. We could say that petitioner was merely
exhausting all administrative remedies available before seeking recourse to
30 Id. at 89.
31 Id. at 76.
32
Id. at 71.
33
Id. at 72.
34
Id. at 71.
r
Decision 7 GR. No. 21();04
the judicial courts. While the rule is that a taxpayer has 30 days to appeal to
the CTA from the final decision of the CIR, the said rule could not be
applied if the Assessment Notice itself clearly states that the taxpayer must
file a protest with the CIR or the Regional Director within 30 days from
receipt of the Assessment Notice. Under the circumstances obtaining in this
case, we opted not to apply the statutory period within which to appeal with
the CTA considering that no final decision yet was issued by the CIR on
petitioner's protest. The subsequent appeal taken by petitioner is from the
inaction of the CIR on its protest.
In this case, petitioner's appeal with the CTA was basically anchored
on two points of contention, to wit: (a) the BIR's assessment of EWT which
has no basis in fact and in law. Petitioner argues that it is not a top 10,000
Corporation, hence, not all its purchases are subject to the 1% and 2% EWT;
and (b) the withholding of the VAT on royalty payments for the software
application it purchased from a non-resident foreign corporation. Petitioner
argues that it is only a reseller (engaged in the buy and sell) of Microsoft
products and not a licensor. Thus, the income payments made to Microsoft
do not constitute royalty income subject to withholding VAT but merely a
business income. It maintained that even Revenue Memorandum Circular
(RMC) No. 44-2005 issued by the Bureau of Internal Revenue (BIR) on
September 7, 2005 does not consider payments for computer software as
royalties but business income. And lastly, petitioner argues that RMC No.
7-2003 issued on November 18, 2003, which was relied upon by the BIR in
assessing it with deficiency withholding tax on VAT on royalties, does not
expressly state when it would take effect. Thus, petitioner opined that it
cannot be given retroactive effect (to cover its case), otherwise, it will
impose liabilities not existing at the time of its passage.
If petitioner's right to appeal would be curtailed by the mere
expediency of holding that it had belatedly filed its appeal, then this Court as
the final arbiter of justice would be deserting its avowed objective, that is to
dispense justice based on the merits of the case and not on a mere
technicality. 35
Since the CTA First Division has the exclusive appellate jurisdiction
over decisions of the Commissioner of Internal Revenue on disputed
assessment, 36 it is just proper to remand the case to it in order to determine
whether petitioner is indeed liable to pay the deficiency withholding tax on
VAT on royalties. It should be noted that the CTA has developed an
expertise on the subject of taxation because it is a specialized court
37
dedicated exclusively to the study and resolution of tax problems. Thus,
this Court has no jurisdiction to review tax cases at the first instance without
38
first letting the CTA study and resolve the same.
35
Trans International v. Court ofAppeals, supra note 27, at 838.
36
{
REVISED RULES OF THE COURT OF TAX APPEALS, Rule 4, Sec. 3 (a), par. 1.
37
Gaw, Jr. v. Commissioner of Internal Revenue, G.R. No. 222837, July 23, 2018.
38 Id.
Decision 8 G.R. No. 2i0604
WHEREFORE, the instant petition is GRANTED. The case is
REMANDED to the Court of Tax Appeals 1st Division which is
DIRECTED to reinstate petitioner's Petition for Review (appeal), in CTA
Case No. 8313 and to resolve the same on the merits with reasonable
dispatch.
SO ORDERED.
~,41/.
(7! t0
E C. REYE¥, JR.
ssociate Justice
WE CONCUR:
~J--
Senior Associate Justice
Chairperson
MO.~N11 (On Wellness Leave)
ESTELA M!
PERLAS-BERNABE ALFREDO BENJAMIN S. CAGUIOA
Associate Justice Associate Justice
AMY{~O-JAVIER
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.
az:
ANTONIO T. CARPIO
Senior Associate Justice
Chairperson, Second Division
Decision 9 G.R. No. 210604
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the
Division Chairperson's Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court's Division.
