62

Commissioner of Internal Revenue vs. First Express Pawnshop Company, Inc.

FACTS:

Respondent received tax assessment on 3 January 2002. On 1 February 2002, respondent submitted
its protest and attached its GIS and Balance Sheet as of 31 December 1998. Respondent explained
that it received ₱800,000 as a deposit with the possibility of applying the same as payment for the
future issuance of capital stock. Respondent, having submitted the supporting documents together
with its protest, did not present additional documents anymore. In a letter dated 12 March 2002,
petitioner requested respondent to present proof of payment of DST on subscription. In a letter-
reply, respondent stated that it could not produce any proof of DST payment because it was not
required to pay DST under the law considering that the deposit on subscription was an advance
made by its stockholders for future subscription, and no stock certificates were issued. Since
petitioner did not act on the protest during the 180-day period, respondent filed a petition before
the CTA on 28 August 2002.

The CTA, citing First Southern Philippines Enterprises, Inc. v. Commissioner of Internal Revenue,
pointed out that deposit on subscription is not subject to DST in the absence of proof that an
equivalent amount of shares was subscribed or issued in consideration for the deposit. Petitioner
now claims that since the respondent has not allegedly submitted any relevant supporting
documents, the assessment has become final, executory and demandable, hence, unappealable.

ISSUE:

WON the CTA erred on a question of law in disregarding the rule on finality of assessments
prescribed under Section 228 of the Tax Code.

RULING:

No. We reject petitioner’s view that the assessment has become final and unappealable. It cannot be
said that respondent failed to submit relevant supporting documents that would render the
assessment final because when respondent submitted its protest, respondent attached the GIS and
Balance Sheet. Further, petitioner cannot insist on the submission of proof of DST payment because
such document does not exist as respondent claims that it is not liable to pay, and has not paid, the
DST on the deposit on subscription.

The term "relevant supporting documents" should be understood as those documents necessary to
support the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can
only inform the taxpayer to submit additional documents. The BIR cannot demand what type of
supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy of the BIR,
which may require the production of documents that a taxpayer cannot submit.

Respondent has complied with the requisites in disputing an assessment pursuant to Section 228 of
the Tax Code. Hence, the tax assessment cannot be considered as final, executory and demandable.
Further, respondent’s deposit on subscription is not subject to the payment of DST. Consequently,
respondent is not liable to pay the deficiency DST of ₱12,328.45.
63
Second Division
Philippine Amusement and Gaming Corporation v. Bureau of Internal Revenue, Commissioner of
Internal Revenue, and Regional Director, Revenue Region No. 6
G.R. No. 208731, January 27, 2016

FACTS:

On January 17, 2008, PAGCOR received a Final Assessment Notice [FAN] dated January 14, 2008,
with demand for payment of deficiency Fringe Benefit Taxes (FBT) for taxable year 2004 in the
amount of P48,589,507.65. On January 24, 2008, PAGCOR filed a protest to the FAN addressed to RD
Misajon of Revenue Region No. 6 of the BIR. On August 14, 2008, PAGCOR elevated its protest to
respondent CIR in a Letter dated August 13, 2008, there being no action taken thereon as of that
date. In a Letter dated September 23, 2008 received on September 25, 2008, PAGCOR was informed
that the Legal Division of Revenue Region No. 6 sustained Revenue Officer Ma. Elena Llantada on the
imposition of FBT against it. On November 19, 2008, PAGCOR received a letter from the OIC-Regional
Director, Revenue Region No. 6 (Manila), stating that its letter protest was referred to Revenue
District Office No. 33 for appropriate action. On March 11, 2009, PAGCOR filed the instant Petition
for Review alleging respondents' inaction in its protest on the disputed deficiency FBT.

The CTA 1st Division ruled in favor of respondents. It ruled that RD Misajon's issuance of the FAN
was a valid delegation of authority, and PAGCOR's administrative protest was validly and seasonably
filed on 24 January 2008. The petition for review filed with the CTA 1st Division, however, was filed
out of time in accordance with Section 228 of the Tax Code. Respondent CIR or her duly authorized
representative had 180 days or until July 22, 2008 to act on the protest, and after the expiration
which without action on the protest, as in the instant case, the taxpayer, specifically PAGCOR, had 30
days or until August 21, 2008 to assail the non-determination of its protest. Clearly, the conclusion
that the instant Petition for Review was filed beyond the reglementary period for appeal on March
11, 2009, effectively depriving the Court of jurisdiction over the petition, is inescapable. The CTA En
Banc dismissed PAGCOR's petition for review and affirmed the CTA 1st Division's Decision and
Resolution.

ISSUE:

WON or not the CTA En Banc gravely erred in affirming the CTA 1st Division's Decision dismissing the
Petition for Review for having been filed out of time.

RULING:

No. A textual reading of Section 3.1.5 of Revenue Regulations No. 12-99, implementing Section 228
gives a protesting taxpayer like PAGCOR only three options:

1. If the protest is wholly or partially denied by the CIR or his authorized representative, then the
taxpayer may appeal to the CTA within 30 days from receipt of the whole or partial denial of the
protest.

2. If the protest is wholly or partially denied by the CIR's authorized representative, then the
taxpayer may appeal to the CIR within 30 days from receipt of the whole or partial denial of the
protest.
3. If the CIR or his authorized representative failed to act upon the protest within 180 days from
submission of the required supporting documents, then the taxpayer may appeal to the CTA within
30 days from the lapse of the 180-day period.

When PAGCOR filed its petition before the CTA, it is clear that PAGCOR failed to make use of any of
the three options described above. A petition before the CTA may only be made after a whole or
partial denial of the protest by the CIR or the CIR's authorized representative. When PAGCOR filed
its petition before the CTA on 11 March 2009, there was still no denial of PAGCOR's protest by either
the RD or the CIR. Therefore, under the first option, PAGCOR's petition before the CTA had no cause
of action because it was prematurely filed. The CIR made an unequivocal denial of PAGCOR's protest
only on 18 July 2011, when the CIR sought to collect from PAGCOR the amount of P46,589,507.65. It
thus follows that a complaint whose cause of action has not yet accrued cannot be cured or
remedied by an amended or supplemental pleading alleging the existence or accrual of a cause of
action while the case is pending.
64
Commissioner of Internal Revenue v. Fortune Tobacco Corporation
G.R. Nos. 167274-75, July 21, 2008

FACTS:

After much wrangling in the Court of Tax Appeals (CTA) and the Court of Appeals, Fortune Tobacco
Corporation (Fortune Tobacco) was granted a tax refund or tax credit representing specific taxes
erroneously collected from its tobacco products. This entire controversy revolves around the
interplay between Section 145 of the Tax Code and Revenue Regulation 17-99. Revenue Regulation
17-99, which was issued pursuant to the unquestioned authority of the Secretary of Finance to
promulgate rules and regulations for the effective implementation of the Tax Code, interprets the
above-quoted provision and reflects the 12% increase in excise taxes effective on 1 January 2000
based on the taxes indicated under paragraph C, sub-paragraph 1-4. However, Revenue Regulation
No. 17-99 went further and added that "The new specific tax rate for any existing brand of cigars,
cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be lower than
the excise tax that is actually being paid prior to January 1, 2000."

ISSUE:

WON the revenue regulation has exceeded the allowable limits of legislative delegation.

RULING:

Yes. Parenthetically, Section 145 states that during the transition period, i.e., within the next three
(3) years from the effectivity of the Tax Code, the excise tax from any brand of cigarettes shall not be
lower than the tax due from each brand on 1 October 1996. This qualification, however, is
conspicuously absent as regards the 12% increase which is to be applied on cigars and cigarettes
packed by machine, among others, effective on 1 January 2000. Clearly and unmistakably, Section
145 mandates a new rate of excise tax for cigarettes packed by machine due to the 12% increase
effective on 1 January 2000 without regard to whether the revenue collection starting from this
period may turn out to be lower than that collected prior to this date.

By adding the qualification that the tax due after the 12% increase becomes effective shall not be
lower than the tax actually paid prior to 1 January 2000, Revenue Regulation No. 17-99 effectively
imposes a tax which is the higher amount between the ad valorem tax being paid at the end of the
three-year transition period and the specific tax under paragraph C, sub-paragraph 1-4, as increased
by 12%—a situation not supported by the plain wording of Section 145 of the Tax Code.

Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific
and less general interpretations of tax laws) which are issued from time to time by the Commissioner
of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the
executive officers, whose duty is to enforce it, is entitled to great respect by the courts.
Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be
erroneous. Thus, courts will not countenance administrative issuances that override, instead of
remaining consistent and in harmony with, the law they seek to apply and implement.
65
Commissioner of Internal Revenue v. Manila Electric Company (MERALCO)
G.R. No. 181459, June 9, 2014

FACTS:

In relation to loans obtained from Norddeutsche Landesbank Girozentrale, MERALCO paid to the BIR
withholding tax on its interest payments to NORD/LB Singapore Branch, covering the period from
January 1999 to September 2003 in the aggregate sum of ₱264,120,181.44. However, sometime in
2001, respondent MERALCO discovered that NORD/LB Singapore Branch is a foreign government-
owned financing institution of Germany. Thus, on December 20, 2001, respondent MERALCO filed a
request for a BIR Ruling with the CIR with regard to the tax exempt status of NORD/LB Singapore
Branch, in accordance with Section 32(B)(7)(a) of the 1997 Tax Code, as amended. On October 7,
2003, the BIR issued Ruling No. DA-342-2003 declaring that the interest payments made to NORD/LB
Singapore Branch are exempt from the 10% final withholding tax, since it is a financing institution
owned and controlled by the foreign government of Germany. Consequently, on July 13, 2004,
relying on the aforesaid BIR Ruling, respondent MERALCO filed with petitioner a claim for tax refund
or issuance of tax credit certificate in the aggregate amount of ₱264,120,181.44, representing the
erroneously paid or overpaid final withholding tax on interest payments made to NORD/LB
Singapore Branch. Petitioner denied its claim for tax refund on the basis that the same had already
prescribed under Section 204 of the Tax Code, which gives a taxpayer/claimant a period of two (2)
years from the date of payment of tax to file a claim for refund before the BIR. Aggrieved,
respondent MERALCO filed a Petition for Review with the CTA which in turn partially granting
respondent MERALCO’s Petition. Petitioner’s claim in the amount of ₱224,760,926.65 representing
erroneously paid and remitted final income taxes for the period January 1999 to July 2002 was
denied on the ground of prescription, while petitioner’s claim in the amount of ₱39,359,254.79 was
granted representing the final withholding taxes erroneously paid and remitted for the period
December 2002 to September 2003. The CTA En Banc upheld in toto the Decision of the CTA-First
Division.

ISSUE:
WON respondent MERALCO is entitled to a tax refund/credit relative to its payment of final
withholding taxes on interest payments made to NORD/LB from January 1999 to September 2003.

RULING:

No. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from
the date of payment of the tax or penalty regardless of any supervening cause that may arise after
payment: Provided, however, that the Commissioner may, even without a written claim therefor,
refund or credit any tax, where on the face of the return upon which payment was made, such
payment appears clearly to have been erroneously paid. As can be gleaned from the foregoing, the
prescriptive period provided is mandatory regardless of any supervening cause that may arise after
payment. It should be pointed out further that while the prescriptive period of two (2) years
commences to run from the time that the refund is ascertained, the propriety thereof is determined
by law (in this case, from the date of payment of tax), and not upon the discovery by the taxpayer of
the erroneous or excessive payment of taxes. The issuance by the BIR of the Ruling declaring the tax-
exempt status of NORD/LB, if at all, is merely confirmatory in nature. Though the Tax Code
recognizes the right of taxpayers to request the return of such excess/erroneous payments from the
government, they must do so within a prescribed period. Further, "a taxpayer must prove not only
his entitlement to a refund, but also his compliance with the procedural due process as non-
observance of the prescriptive periods within which to file the administrative and the judicial claims
would result in the denial of his claim."
66
Philam Asset Management, Inc. w. Commissioner of Internal Revenue
G.R. Nos. 156637/162004, December 14, 2005

FACTS:

In GR No. 156637, petitioner filed an administrative claim for refund with the BIR - Appellate Division
in the amount of ₱522,092.00 representing unutilized excess tax credits for calendar year 1997. In
GR No. 162004, petitioner filed with the Revenue District Office No. 50, Revenue Region No. 8, a
written administrative claim for refund with respect to the unapplied creditable withholding tax of
₱459,756.07, representing its prior excess credit for taxable year 1998. The amount of ₱80,042.00,
representing the tax due for the taxable year 1999 has been credited from its ₱915,995.00 creditable
withholding tax for taxable year 1999, thus leaving its 1998 creditable withholding tax in the amount
of ₱459,756.07 still unapplied. The CA denied the claim of petitioner for a refund of the latter’s
excess creditable taxes withheld for the years 1997 and 1998, despite compliance with the basic
requirements of Revenue Regulations No. 12-94. The appellate court pointed out that, in the
respective ITRs for both years, petitioner did not indicate its option to have the amounts either
refunded or carried over and applied to the succeeding year. It was held that to request for either a
refund or a credit of income tax paid, a corporation must signify its intention by marking the
corresponding option box on its annual corporate adjustment return. The CA further held in GR No.
156637 that the failure to present the 1998 ITR was fatal to the claim for a refund, because there
was no way to verify if the tax credit for 1997 could not have been applied against the 1998 tax
liabilities of petitioner. In GR No. 162004, however, the subsequent acts of petitioner demonstrated
its option to carry over its tax credit for 1998, even if it again failed to tick the appropriate box for
that option in its 1998 ITR. Under RR 12-94, its failure to indicate that option resulted in the
automatic carry-over of any excess tax credit for the prior year.

ISSUES:

1. Whether or not the failure of the petitioner to indicate in its annual income tax return the
option to refund its creditable withholding tax is fatal to its claim for refund.
2. Whether or not the presentation in evidence of the petitioner’s annual income tax return for
the succeeding calendar year is a legal requisite in a claim for refund of unapplied creditable
withholding tax.
3. Whether or not the petitioner is entitled to the refund of its unutilized creditable
withholding tax in the taxable year 1998.

RULINGS:

1. No. Under Section 76 of the National Internal Revenue Code, a taxable corporation with
excess quarterly income tax payments may apply for either a tax refund or a tax credit, but
not both. The choice of one precludes the other. Failure to indicate a choice, however, will
not bar a valid request for a refund, should this option be chosen by the taxpayer later on.

2. No. Requiring that the ITR or the FAR of the succeeding year be presented to the BIR in
requesting a tax refund has no basis in law and jurisprudence. Section 76 of the Tax Code
does not mandate it. The law merely requires the filing of the FAR for the preceding -- not
 the succeeding -- taxable year. The pertinent regulations implementing the law do not
require the submission of the FAR for the taxable year following the period to which the tax
credits are being applied.

3. No. A corporation that is entitled to a tax refund or a tax credit for excess payment of
quarterly income taxes may carry over and credit the excess income taxes paid in a given
taxable year against the estimated income tax liabilities of the succeeding quarters. Once
chosen, the carry-over option shall be considered irrevocable for that taxable period, and no
application for a tax refund or issuance of a tax credit certificate shall then be allowed.
According to petitioner, it neither chose nor marked the carry-over option box in its 1998
FAR. As this option was not chosen, it seems that there is nothing that can be considered
irrevocable. This argument does not hold water. The subsequent acts of petitioner reveal
that it has effectively chosen the carry-over option. The fact that it filled out the portion
"Prior Year’s Excess Credits" in its 1999 FAR means that it categorically availed itself of the
carry-over option.
67
Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation
G.R. No. 180402, February 10, 2016

FACTS:

Pilipinas Shell sold and delivered petroleum products to various international carriers of the
Philippines or foreign registry for their use outside the Philippines. Pilipinas Shells filed two separate
claims for the refund or credit of the excise taxes paid on the foregoing sales, totaling
P49,058,733.09. On November 28, 2006, the CTA Second Division rendered its Decision granting
Pilipinas Shell's claim but at a reduced amount of P39,305,419.49. Said amount was computed based
on Pilipinas Shell's sales and deliveries of petroleum products to international carriers sourced from
its own tax-paid inventories. The claim for refund/credit of the excise taxes from the sales and
deliveries coming from the portion sourced from Petron was disallowed by the CTA on the ground
that Pilipinas Shell is not the proper party to claim the same. The CIR filed a motion for
reconsideration of the CTA decision but it was denied. The CTA en banc likewise rendered the
assailed decision dismissing the BIR's petition. The arguments raised by the CIR that is, Pilipinas Shell
is not entitled to a refund/credit of the excise taxes paid on its sales and deliveries to international
carriers for the following reasons: (1) excise taxes are levied on the manufacturer/producer prior to
sale and delivery to international carriers and, regardless of its purchaser, said taxes must be
shouldered by the manufacturer/producer or in this case, Pilipinas Shell; (2) the excise taxes paid by
Pilipinas Shell do not constitute taxes erroneously paid as they are rightfully due from Pilipinas Shell
as manufacturer/producer of the petroleum products sold to international carriers; (3) the intent of
the law - Section 135 of the National Internal Revenue Code (NIRC) - is to exempt the international
carriers from paying the excise taxes but not the manufacturer/producer; and (4) BIR Ruling No. 051-
99, Revenue Regulations No. 5-2000 and other BIR issuances allowing tax refund/credit of excise
taxes paid on petroleum products sold to tax-exempt entities or agencies should be nullified for
being contrary to Sections 129, 130 and 148 of the NIRC.

ISSUE:

WON Pilipinas Shell's claim for refund/tax credit must be granted.

RULING:

Yes. This has already been squarely dealt with in G.R. No. 188497 entitled "Commissioner of Internal
Revenue v. Pilipinas Shell Petroleum Corporation. Respondent, as the statutory taxpayer who is
directly liable to pay the excise tax on its petroleum products, is entitled to a refund or credit of the
excise taxes it paid for petroleum products sold to international carriers, the latter having been
granted exemption from the payment of said excise tax under Sec. 135(a) of the NIRC.

The Court, then, cannot grant CIR's prayer that BIR Ruling No. 051-99, Revenue Regulations No. 5-
2000 and other BIR issuances allowing tax refund/credit of excise taxes paid on petroleum products
sold to tax-exempt entities or agencies be declared invalid. What the CIR wants is a wholesale
invalidation of these issuances, which the Court will not allow. For one, Pilipinas Shell already ruled
that petroleum products sold by local manufacturers/sellers to international carriers are exempt
from the imposition of excise taxes as these international carriers enjoy exemption from payment of
excise taxes under Section 135(a) of the NIRC. For another the CIR failed to state with specificity the
tenor of these issuances, except that these relate to the BIR's alleged grant of excise tax exemption
on petroleum products, without even making an effort to present an official copy of these issuances,
much less its contents.

68
Chevron Philippines Inc. vs. Commissioner of Internal Revenue
G.R. No. 210836, September 1, 2015

FACTS:

Chevron sold and delivered petroleum products to CDC in the period from August 2007 to December
2007. Chevron did not pass on to CDC the excise taxes paid on the importation of the petroleum
products sold to CDC in taxable year 2007; hence, on June 26, 2009, it filed an administrative claim
for tax refund or issuance of tax credit certificate in the amount of P6,542,400.00. 7Considering that
respondent CIR did not act on the administrative claim for tax refund or tax credit, Chevron elevated
its claim to the CTA by petition for review. The CTA First Division denied Chevron’s judicial claim for
tax refund or tax credit. In due course, Chevron appealed to the CTA En Banc, which affirmed the
ruling of the CTA First Division, stating that there was nothing in Section 135(c) of the NIRC that
explicitly exempted Chevron as the seller of the imported petroleum products from the payment of
the excise taxes; and holding that because it did not fall under any of the categories exempted from
paying excise tax, Chevron was not entitled to the tax refund or tax credit.

ISSUE:

WON Chevron was entitled to the tax refund or the tax credit for the excise taxes paid on the
importation of petroleum products that it had sold to CDC in 2007.

RULING:

Yes. Pursuant to Section 135(c), supra, petroleum products sold to entities that are by law exempt
from direct and indirect taxes are exempt from excise tax. Excise tax is a tax on property; hence, the
exemption from the excise tax expressly granted under Section 135 of the NIRC must be construed in
favor of the petroleum products on which the excise tax was initially imposed. Hence, the excise
taxes that Chevron paid on its importation of petroleum products subsequently sold to CDC were
illegal and erroneous, and should be credited or refunded to Chevron in accordance with Section 204
of the NIRC which provides:

SEC 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. – The
Commissioner may –
xxxx
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority,
refund the value of internal revenue stamps when they are returned in good condition by the
purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit
for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties
shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or
refund within two (2) years after payment of the tax or penalty: Provided, however, That a return
filed showing an overpayment shall be considered as a written claim for credit or refund.
69
Metropolitan Bank & Trust Company v. The Commissioner of Internal Revenue
G.R. No. 182582, April 17, 2017

FACTS:

Solidbank Corporation (Solidbank) entered into an agreement with Luzon Hydro Corporation (LHC),
whereby the former extended to the latter a foreign currency denominated loan in the principal
amount of US$123,780,000.00. Pursuant to the agreement, LHC is bound to shoulder all the
corresponding internal revenue taxes required by law to be deducted or withheld on the said loan,
as well as the filing of tax returns and remittance of the taxes withheld to the BIR. On September 1,
2000, Metrobank acquired Solidbank, and consequently, assumed the latter's rights and obligations
under the aforesaid agreement. On March 2, 2001 and October 31, 2001, LHC paid Metro bank the
total amounts of US$1,538,122.17 and US$1,333,268.31, respectively. Pursuant to the agreement,
LHC withheld, and eventually paid to the BIR, the 10% final tax on the interest portions of the
aforesaid payments. According to Metrobank, it mistakenly remitted the aforesaid amounts to the
BIR as well when they were inadvertently included in its own Monthly Remittance Returns of Final
Income Taxes Withheld for the months of March 2001 and October 2001. Thus, on December 27,
2002, it filed a letter to the BIR requesting for the refund thereof. The CTA Division denied
Metrobank's claims for refund for lack of merit. The CTA En Banc affirmed the CTA Division's ruling. It
held that since Metrobank's March 2001 final tax is in the nature of a final withholding tax, the two-
year prescriptive period was correctly reckoned from the time the same was paid on April 25, 2001.
As such, Metro bank's claim for refund had already prescribed as it only filed its judicial claim on
September 10, 2003.

ISSUE:

WON the CTA En Banc correctly held that Metrobank's claim for refund relative to its March 2001
final tax had already prescribed.

RULING:

Yes. As may be gleaned from Sections 204 and 229 of the National Internal Revenue Code, a claimant
for refund must first file an administrative claim for refund before the CIR, prior to filing a judicial
claim before the CTA. Notably, both the administrative and judicial claims for refund should be filed
within the two (2)-year prescriptive period indicated therein, and that the claimant is allowed to file
the latter even without waiting for the resolution of the former in order to prevent the forfeiture of
its claim through prescription. In this regard, case law states that "the primary purpose of filing an
administrative claim [is] to serve as a notice of warning to the CIR that court action would follow
unless the tax or penalty alleged to have been collected erroneously or illegally is refunded. To
clarify, Section 229 of the Tax Code - then Section 306 of the old Tax Code - however does not mean
that the taxpayer must await the final resolution of its administrative claim for refund, since doing so
would be tantamount to the taxpayer's forfeiture of its right to seek judicial recourse should the
two-year prescriptive period expire without the appropriate judicial claim being filed.
Final withholding taxes are considered as full and final payment of the income tax due, and thus, are
not subject to any adjustments. Thus, the two-year prescriptive period commences to run from the
time the refund is ascertained, i.e., the date such tax was paid, and not upon the discovery by the
taxpayer of the erroneous or excessive payment of taxes or from the time the Final Adjustment
Return or Annual Income Tax Return was filed.

70
CIR v. The Court of Appeals, Court of Tax Appeals and A. Soriano Corp.
G.R. No. 108576, January 20, 1999

FACTS:

In 1973, after examining ANSCOR’s books of account and records, Revenue examiners issued a
report proposing that ANSCOR be assessed for deficiency withholding tax-at-source, pursuant to
Sections 53 and 54 of the 1939 Revenue Code for the year 1968 and the second quarter of 1969
based on the transactions of exchange and redemption of stocks. The Bureau of Internal Revenue
(BIR) made the corresponding assessments despite the claim of ANSCOR that it availed of the tax
amnesty under Presidential Decree (P.D.) 23 32 which were amended by P.D.’s 67 and 157.
However, petitioner ruled that the invoked decrees do not cover Sections 53 and 54 in relation to
Article 83(b) of the 1939 Revenue Act under which ANSCOR was assessed. ANSCOR’s subsequent
protest on the assessments was denied in 1983 by petitioner. Subsequently, ANSCOR filed a petition
for review with the CTA assailing the tax assessments on the redemptions and exchange of stocks. In
its decision, the Tax Court reversed petitioner’s ruling, after finding sufficient evidence to overcome
the prima facie correctness of the questioned assessments. In a petition for review, the CA, as
mentioned, affirmed the ruling of the CTA. Hence, this petition.

ISSUE:

WON ANSCOR, in its capacity as withholding agent, be deemed a taxpayer for it to avail of the
amnesty?

RULING:

No. ANSCOR was assessed by petitioner for deficiency withholding tax under Sections 53 and 54 of
the 1939 Code. As such, it is being held liable in its capacity as a withholding agent and not in its
personality as a taxpayer. Not being a taxpayer, a withholding agent, like ANSCOR in this transaction
is not protected by the amnesty under the invoked Section 1 of P.D. 67 46 which condones "the
collection of all internal revenue taxes including the increments or penalties or account of non-
payment as well as all civil, criminal or administrative liabilities arising from or incident to"
(voluntary) disclosures under the NIRC of previously untaxed income and/or wealth "realized here or
abroad by any taxpayer, natural or juridical.".

In the operation of the withholding tax system, the withholding agent is the payor, a separate entity
acting no more than an agent of the government for the collection of the tax in order to ensure its
payments; the payer is the taxpayer — he is the person subject to tax imposed by law; and the payee
is the taxing authority. In other words, the withholding agent is merely a tax collector, not a
taxpayer. Under the withholding system, however, the agent-payor becomes a payee by fiction of
law. His (agent) liability is direct and independent from the taxpayer, because the income tax is still
imposed on and due from the latter. The agent is not liable for the tax as no wealth flowed into him
— he earned no income. The Tax Code only makes the agent personally liable for the tax arising from
the breach of its legal duty to withhold as distinguished from its duty to pay tax since: "the
government’s cause of action against the withholding agent is not for the collection of income tax,
but for the enforcement of the withholding provision of Section 53 of the Tax Code, compliance with
which is imposed on the withholding agent and not upon the taxpayer."