REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

THIRD DIVISION

3M PHILIPPINES, INC., CTA CASE NO. 8147

Petitioner,
Members:

BAUTISTA, Chairperson,
-versus- FABON-VICTORINO, and
RINGPIS-LIBAN,JJ.

COMMISSIONER OF INTERNAL Promulgated:

REVENUE,
Respondent. JUN 1 5 ~015

X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X

AMENDED DECISION

RINGPIS-LIBAN, .L:

For this Court's resolution are the following:

1. Petitioner's Motion For Partial Reconsideration, flied by

registered mail on November 11, 2014, with respondent's
Comment (To Petitioner's Motion For Partial
Reconsideration), filed by registered mail on February 12, 2015,
and petitioner's REPLY (To Respondent's Comment dated
February 6, 2015), ftled on February 23, 2015; and

2. Respondent's Motion For Partial Reconsideration (of the

Decision promulgated on 22 October 2014), flied by registered
mail on November 12, 2014, with petitioner's COMMENT (To
the BIR's Motion for Partial Reconsideration dated
November 11, 2014), flied by registered mail on January 20,2015.

Both petitioner and respondent move for the partial reconsideration of

the Decision promulgated on October 22, 2014, the dispositive portion of
which read~jt-.t
AMENDED DEOSION
CTA CASE NO. 8147
Page 2 of 12

''WHEREFORE, premises considered, the instant

Petition for Review is hereby PARTIALLY GRANTED.
Accordingly, let a tax refund or a tax credit certificate be issued
in favor of petitioner in the amount of P5,554,067.05 and
P1,626,241.85 representing its erroneous payment of its
deficiency Income Tax and deficiency VAT for taxable year
2002, or total amount ofP7,180,308.90.

SO ORDERED."

Petitioner's Motion for Partial Reconsideration

Petitioner argues that it is entitled to the refund of the entire amount of

P13,250,152.55 it paid under protest pursuant to the subject Preliminary
Assessment Notice (PAN) based on the following grounds:

1. The totality of testimonial and documentary evidence

presented by the parties conclusively established that petitioner
filed its 2002 tax returns for withholding tax - expanded,
withholding tax - compensation, withholding tax - final, final
withholding tax- VAT, and fringe benefit tax.

2. Assuming arguendo that petitioner did not establish that it

filed the corresponding tax returns for withholding tax -
expanded, withholding tax - compensation, withholding tax -
final, final withholding tax- VAT, and fringe benefit tax for
2002, the right of the BIR to assess petitioner of any deficiency
taxes has nonetheless prescribed.

3. The disallowance of P6,069,843.65 indirectly allowed

respondent to collect taxes which are already barred not only
by prescription but also by laches.

4. The disallowance of P6,069,843.65 is erroneous, considering

that denial thereof gave the Government the authority to
collect deficiency taxes from petitioner despite the absence of
a validly issued final assessment.

Respondent moves for the denial of petitioner's motion, arguing that

petitioner voluntarily paid the assessed 2002 deficiency taxes, thus, there was
no erroneously paid or illegally collected taxes that may be the subject of a
claim. She also contends that the burden is on the taxpayer to prove its
entitlement to the refund and petitioner in this case failed to prove both the
facts and the law on which its claim for refund is based,ir'
AMENDED DEQSION
CTA CASE NO. 8147
Page 3 of 12

Petitioner, in its Reply, asserts that its payment of P13,250,152.55 last

August 14, 2008 was a payment under protest, not a voluntary payment and
that the same is the proper subject of a claim for refund. It also reiterates that it
proved the filing of its 2002 tax returns for withholding tax - expanded,
withholding tax - compensation, withholding tax - final, final withholding tax
- VAT, and fringe benefit tax. Petitioner attached in its Reply, a BIR
Certification dated November 12, 2014 confirming that petitioner filed its 2002
returns for and paid the applicable withholding tax - expanded, withholding tax
- compensation, withholding tax - final, final withholding tax - VAT, and
fringe benefit tax.

Respondent's Motion for Partial Reconsideration

Respondent raises the following grounds:

1. No FAN was issued because there are no more tax liabilities to

assess and hence, there is nothing to demand.

2. There is no erroneous or illegally collected taxes (sic).

3. The only rationalization derived from the alleged invalidity of

waivers is irrelevant.

Petitioner opposes respondent's motion based on the following

arguments:

1. Petitioner's payment of P13,250,152.55 last August 14, 2008

was a payment under protest, not a voluntary payment,
necessitating the issuance of a Final Assessment Notice.

2. The right of the BIR to (i) issue a Preliminary Assessment

Notice and Final Assessment Notice, and (ii) assess and collect
any deficiency internal taxes against petitioner for taxable year
ended 2002 has already prescribed because the waivers sought
by the respondent were legally infirm.

3. Considering that there were no validly issued tax assessments

against which the P13,250,152.55 may be applied, petitioner is
entitled to the full refund thereof.

We PARTIALLY GRANT petitioner's Motion for Partial

Reconsideration, and DENY respondent's Motion for Partial Reconsideration/!'
AMENDED DECISION
CTA CASE NO. 8147
Page 4 of 12

After a careful study of the arguments proffered by both parties in their

respective pleadings, the Court fmds for petitioner.

In the assailed Decision, out of the P13,250,152.55 originally prayed for,

only the amount of P7,180,308.90 was allowed to be refunded. The remainder
was denied refund for failure of petitioner to present relevant documents, such
as tax returns concerning deficiency withholding taxes on compensation, final
taxes, and fringe benefit taxes. The portion of the assailed Decision reads:

"Records disclose that petitioner submitted before this

Court its Annual Income Tax Return (ITR) and Quarterly VAT
Returns for taxable year 2002 as evidence in support of its claim
that respondent's right to make an assessment for deficiency
income tax and deficiency VAT for the same taxable year had
already been barred by prescription.

Incidentally. no evidence was offered to this Court to

support the same in connection with deficiency fringe benefit
taxes. Tax returns concerning deficiency withholding taxes on
compensation income and deficiency final taxes were denied
admission by this Court because petitioner failed to present the
originals for comparison in a Resolution dated November 9. 2012.

Therefore, due to petitioner's failure to present before this

Court all relevant documents, only the amounts of P5,554,067.05
and P1,626,241.85 representing assessments for deficiency
Income Tax and VAT shall be considered in determining whether
the statute of limitations set forth in Section 203 of the NIRC, as
amended, has set in." (Underscoring ours)

The Court ruled that respondent's right to assess petitioner for

deficiency income taxes and VAT for taxable year 2002 has already prescribed.
Meanwhile, the claim for refund relative to withholding tax- expanded (EWT),
withholding tax- compensation (WTC), withholding tax- final (FW1) , fmal
withholding tax- VAT (FWT-VA1), and fringe benefit tax (FB1), was denied
for failure to provide the required returns for determination of whether the
statute of limitations has set in.

Upon a thorough evaluation of the parties' arguments and re-

examination of the records of this case, the Court is convinced that there is
sufficient basis to rule that the right of respondent to assess petitioner
deficiency taxes on EWT, WTC, FWT, FWT-VAT, and FBT for taxable year
2002 has prescribed.

The Court reiterates that the four (4) Waivers executed to extend the
period to assess were all defective. In addition to the defects mentioned in th/1
AMENDED DEOSION
CTA CASE NO. 8147
Page 5 of 12

assailed Decision, the date of acceptance by respondent of the first waiver was
not indicated. While the first waiver was found to be defective, necessarily, the
second, third and fourth waivers were of no use as there were no more periods
to extend. Since the Waivers in this case are defective and thus invalid, the said
waivers produce no effect; hence, the prescriptive period for assessment and
collection of alleged deficiency taxes for taxable year 2002 was never suspended
or tolled.

In the recent case of Commissioner of Internal Revenue vs. The Stanley Works
Sales (Phils.), Incorporated,1 the Supreme Court was emphatic on the strict
observance of the requisites of a valid waiver, it held:

"The statute of limitations on the right to assess and collect

a tax means that once the period established by law for the
assessment and collection of taxes has lapsed, the government's
corresponding right to enforce that action is barred by provision
of law.

The period to assess and collect deficiency taxes may

be extended only upon a written agreement between the CIR
and the taxpayer prior to the expiration of the three-year
prescribed period in accordance with Section 222 (b) of the
NIRC. In relation to the implementation of this provision, the
CIR issued Revenue Memorandum Order (RMO) No. 20-90 10
on 4 April 1990 to provide guidelines on the proper execution of
the Waiver of the Statute of Limitations. In the execution of this
waiver, the following procedures should be followed:

XXX XXX XXX

In Philippine Journalist, Inc. v. Commissioner of Internal

Revenue, the Court categorically stated that a Waiver must strictly
conform to RMO No. 20-90. The mandatory nature of the
requirements set forth in RMO No. 20-90, as ruled upon by this
Court, was recognized by the BIR itself in the latter's subsequent
issuances, namely, Revenue Memorandum Circular (RMC) Nos.
6-2005 and 29-2012. Thus, the BIR cannot claim the benefits of
extending the period to collect the deficiency tax as a consequence
of the Waiver when, in truth it was the BIR's inaction which is the
proximate cause of the defects of the Waiver. The BIR has the
burden of ensuring compliance with the requirements of RMO
No. 20-90, as they have the burden of securing the right of the
government to assess and collect tax deficiencies. This right would
prescribe absent any showing of a valid extension of the period
set by the law~

1
G.R. No. 187589, December 3, 2014.
AMENDED DECISION
CTA CASE NO. 8147
Page 6 of 12

To emphasize, the Waiver was not a unilateral act of the

taxpayer; hence, the BIR must act on it, either by conforming to
or by disagreeing with the extension. A waiver of the statute of
limitations, whether on assessment or collection, should not be
construed as a waiver of the right to invoke the defense of
prescription but, rather, an agreement between the taxpayer and
the BIR to extend the period to a date certain, within which the
latter could still assess or collect taxes due. The waiver does not
imply that the taxpayer relinquishes the right to invoke
prescription unequivocally."2

It is clear that the period to assess and collect deficiency taxes mqy onfy be
extended lry a written agreement, and not by any mode of action. Here, the defective
Waivers were intended to extend the period of assessment up to the following
dates:

WAIVER Date to which Period to

Assess is extended
1st April 15, 2006 3
2nd April15, 2007 4
3rd December 31, 2007 5
4th December 31 , 20086

Since these Waivers did not extend the period to assess, consequently,
the PAN dated August 4, 2008, received by petitioner through facsimile on
August 14, 2008 and the hard copy on September 24, 2008, is null and void.
PAN was issued beyond the three (3)-year prescriptive period to assess.

Even assuming petitioner failed to file the required returns, the statute of
limitations under Section 222 of the National Internal Revenue Code (NIRC)
of 1997, as amended, has already set in. We quote the pertinent portions of
Section 222, NIRC of 1997 which provide that in case of false or fraudulent
return or failure to file a return, the prescriptive period for the BIR to assess a
taxpayer for deficiency internal revenue taxes is ten (1 0) years, to wit:

"SEC. 222. Exceptions as to Period of Limitation of Assessment

and Collection ofTaxes.-

(a) In the case of a false or fraudulent return with intent to

evade tax or of failure to file a return, the tax may be
assessed, or a proceeding in court for the collection of suey

2
Ibid.
3
Exhibits "7" and "7-A".
4
Exhibits "8" and "8-A".
5
Exhibits "9" and "9-A".
6
Exhibits "10" and "10-A".
AMENDED DEOSION
CfA CASE NO. 8147
Page 7 of 12

tax may be flied without assessment, at any time within ten

(1 0) years after the discovery of the falsity, fraud or
omission: Provided, That in a fraud assessment which has
become flnal and executory, the fact of fraud shall be
judicially taken cognizance of in the civil or criminal action
for the collection thereof."

Under the BIR rules and regulations, the tax returns for the following
tax types must be flied with the BIR on the following dates:

Tax Type BIRForm Deadline Basis

Withholding Tax 1601-E 10 days after the end Sec. 2.58(A)(2),
-Expanded of each month except RR. No. 02-1998,
for taxes withheld for as amended
the month of
December which shall
be flied on or before
January 15 of the
succeeding year.
Withholding Tax 1601-C 10 days after the end Sec. 2.81, RR.
- Compensation of each month except No. 02-1998, as
for taxes withheld for amended
the month of
December which shall
be flied on or before
January 15 of the
following year
Withholding Tax 1601-F 10 days after the end Sec. 2.58(A)(2),
-Final of each month except RR. No. 02-1998,
for taxes withheld for as amended
the month of
December which shall
be flied on or before
January 15 of the
following year
Final Withholding 1600 10 days after the end Sec. 5.116(B),
Tax- VAT of each month RR. No. 02-1998,
as amended
Fringe Benefit 1603 10th day following the Sec. 5, RR. No.
Tax calendar quarter m 4-2002
which the fringe
benefits were granted

Applying the foregoing to the present case, the right of respondent to

assess petitioner for deficiency EWT, WTC, FWT, FWT -VAT, and FBT for
taxable year 2002, has already prescribed, to wi_/y'
AMENDED DEOSION
CTA CASE NO. 8147
Page 8 of 12

Withholding Tax- Expanded (BIR Form No. 1601-El

Taxable Period Deadline Ex]!_. Of 10-Year Period7
January 2002 February 10, 2002 February 10, 2012
February 2002 March 10,2002 March 10, 2012
March 2002 April10, 2002 April10, 2012
April2002 May 10,2002 May 10,2012
May 2002 June 10, 2002 June 10, 2012
June 2002 July 10, 2002 lul_y 10, 2012
July 2002 August 10, 2002 Au~st 10, 2012
August 2002 September 10, 2002 September 10,2012
September 2002 October 10,2002 October 10, 2012
October 2002 November 10,2002 November 10, 2012
November 2002 December 10,2002 December 10,2012
December 2002 January 15, 2003 January 15, 2013

Withholding Tax - Compensation (BIR Form No. 1601-C)

Taxable Period Deadline Ex_Q. Of 10-Year Period
January 2002 February 10, 2002 February 10, 2012
February 2002 March 10,2002 March 10, 2012
March 2002 April10, 2002 April10, 2012
April2002 May 10,2002 May 10,2012
May 2002 June 10, 2002 June 10, 2012
June 2002 July 10, 2002 July 10, 2012
July 2002 August 10, 2002 August 10, 2012
August 2002 September10,2002 September 10, 2012
September 2002 October 10,2002 October 10, 2012
October 2002 November 10, 2002 November 10, 2012
November 2002 December 10,2002 December 10,2012
December 2002 January 15, 2003 January 15, 2013

Withholding Tax- Final (BIR Form No. 1601-F)

Taxable Period Deadline Exp. Of 10-Year Period
January 2002 February 10,2002 February 10, 2012
February 2002 March 10,2002 March 10, 2012
March 2002 April10, 2002 April10, 2012
April2002 May 10,2002 May 10,2012
May 2002 June 10, 2002 June 10, 2012
June 2002 July 10, 2002 July 10, 2012
July 2002 August 10, 2002 August 10, 2012
August 2002 September 10, 2002 September 10, 2012
September 2002 October 10, 2002 October 10, 2012
October 2002 November 10,2002 November 10, 2012
November 2002 December 10,2002 December 10,2012
December 2002 January 15, 2003 lanu~ 15,2013

7
A year is composed of twelve (12) calendar months. Commissioner ofInternal Revenue vs.
Aichi Forging Company ofAsia, Inc., G.R. No. 184823, October 6, 2010.
AMENDED DECISION
CTA CASE NO. 8147
Page 9 of 12

Final Withholding VAT _(_BIR Form No.1600J

Taxable Period Deadline Exp. Of 10-Year Period
January 2002 February 10, 2002 February 10, 2012
February 2002 March 10,2002 March 10, 2012
March 2002 April10, 2002 April10, 2012
April2002 May 10,2002 May 10,2012
May 2002 June 10, 2002 June 10, 2012
June 2002 July 10, 2002 July 10, 2012
July 2002 August 10, 2002 August 10, 2012
August 2002 September 10, 2002 September 10, 2012
September 2002 October 10, 2002 October 10, 2012
October 2002 November 10,2002 November 10, 2012
November 2002 December 10,2002 December 10, 2012
December 2002 January 10, 2003 January 10,2013

Fringe Benefit Tax BIR Form No.1603)

Taxable Period Deadline Exp. Of 10-Year Period
1st Quarter April 10, 2002 April10, 2012
2nd Quarter July 10, 2002 July 10, 2012
3rd Quarter October 10,2002 October 10, 2012
4th Quarter January 10, 2003 January 10, 2013

Considering the inadmissibility and defectiveness of all four (4) Waivers,

the right therefore of respondent to assess petitioner for taxable year 2002
under the 10-year period has already prescribed.

While the PAN was issued by respondent on August 4, 2008, before the
lapse of the 10-year prescriptive period, still, respondent has the obligation to
issue a FAN as part of due process. We reiterate our ruling, to wit:

"Second, regardless of whether or not petitioner treated

the PAN as a FAN, since this case is not one where the PAN
can be dispensed with under Section 228, this does not
discharge the obligation of respondent to issue a FAN --
otherwise known as a Notice of Assessment --together with
a Formal Letter of Demand to petitioner.
In CJR v. Enron Subic Power Corporation, the Supreme Court
clarifies what is required in a Notice of Assessment under the
NIRC and RR No. 12-99, thus:

XXX XXX XXX

The Enron Case brings home three points: First, that the
issuance of a PAN, and subsequently, a FAN, is part of the
duties of the CIR in correctly assessing a taxpayer; Second~
AMENDED DEQSION
CTA CASE NO. 8147
Page 10 of 12

that the mere issuance of a FAN is insufficient if it fails to state

the facts and the law on which the assessment is based; and Third,
the collection of taxes must comply with the Due Process Clause
of the Constitution.

It cannot be stressed enough that in this case, there was no

FAN or Notice of Assessment issued by respondent. If
jurisprudence and the law have stringent requirements as regards
the form in which the FAN is to be issued for due process to be
followed, the omission of the FAN itself, especially when it
has been specifically requested by petitioner, is an obvious
indication that the tax collected was without basis." (Emphasis ours)

Records show that on August 14, 2008, petitioner paid the alleged
deficiency taxes stated in the PAN dated August 4, 2008. 8 In a letter dated
August 15, 20089, petitioner informed respondent that the payments on August
14, 2008 "were made without prf!fudice to its right to file a formal protest on the said
assessment upon receipt of the final assessment notice/formal demand letter xxx" 10•

Since respondent failed to issue a FAN before the 10-year prescriptive

period to assess petitioner for taxable year 2002, the collection of petitioner's
deficiency taxes on August 14, 2008 is without statutory authority and the
payment thereof is deemed erroneous.

In addition to the erroneously paid deficiency IT and VAT, petitioner

was able to sufficiently prove that it erroneously paid the alleged deficiency
EWT, WTC, FWT, and FBT as stated in the PAN, to wit:

Tax Type BIREFPS BIR Payment Amount Paid

Payment Form (BIR
Confirmation Form 0605)
Withholding Tax Exhibit "I<"' Exhibit "15-a" p 25,000.00
'
-Compensation Docket Vol. II, p. Docket Vol. II, p.
751 1033
Withholding Tax Exhibit "L", Docket Exhibit "15-b" P5,583,637.95
'
-Expanded Vol. II, p. 756 Docket Vol. II, p.
1034
Withholding Tax Exhibit "M", Exhibit "15-c" p 272.30
'
-Final Docket Vol. II, p. Docket Vol. II, p.
761 1035
Fringe Benefit Exhibit "0", Exhibit "15-e" p 228,232.20
'
Tax Docket Vol. II, p. Docket Vol. II, p.
769 1037

8
Petitioner's Exhibits "J"I "K"I "L"I "M"I "0"I "P"·I Respondent's Exhibits "15 to 15-F''•
9
Petitioner's Exhibits "Q" and Q-1".
10
Ibid.
AMENDED DECISION
CTA CASE NO. 8147
Page 11 of 12

jTOTAL I P5,837,142.45

Petitioner is therefore entitled to the refund erroneously paid EWT,

WTC, FWT, and FBT in the total amount P5,837,142.45.

However, while there was evidence that petitioner filed a BIR Payment
Form on August 14,2008 for the deficiency FWT- VAT11 , there was no BIR
EFPS Payment Confirmation that was submitted for the transaction. Thus,
there was no proof of payment of the same.

As to respondent's Motion for Partial Reconsideration, the same

deserves scant consideration. The arguments raised by respondent were mere
rehash of the arguments she raised in her Answer12 and Memorandum13 • These
were already considered and thoroughly threshed out by the Court in the
assailed Decision.

"Although we recognize that the power of taxation is deemed inherent

in order to support the government, tax provisions are not all about raising
revenue. Our legislature has provided safeguards and remedies beneficial to
both the taxpayer, to protect against abuse; and the government, to promptly
act for the availability and recovery of revenues. A statute of limitations on the
assessment and collection of internal revenue taxes was adopted to serve a
purpose that would benefit both the taxpayer and the government." 14

WHEREFORE, premises considered, petitioner's Motion for Partial

Reconsideration is hereby PARTIALLY GRANTED, while respondent's
Motion for Partial Reconsideration is hereby DENIED for lack of merit.
Accordingly, the assailed Decision promulgated on October 22, 2014 is hereby
MODIFIED as follows:

"WHEREFORE, premises considered, the instant

Petition for Review is hereby PARTIALLY GRANTED.
Accordingly, let a tax refund or a tax credit certificate be issued
in favor of petitioner in the amount of:

Tax Type Amount to be

Refunded
Income Tax p 5,554,067.05
Withholding Tax - Expanded 5,583,637.95
Withholding Tax - Compensation 25,000.00
Withholding Tax- Final 272.30

11
Exhibit "15-d", Docket Vol. II, p. 1036.
12
Docket Vol. I, pp. 247-269.
13
Docket Vol. I, pp. 1139-1156.
14
Commissioner ofInternal Revenue vs. The Stanley Works Sales (Phils.), Incorporated, G.R. No.
187589, December 3, 2014.
AMENDED DECISION
CTA CASE NO. 8147
Page 12 of 12

Fringe Benefit Tax 228,232.20

Value-added Tax 1,626,241.85
TOTAL p 13,017,451.35

representing its erroneously paid taxes relative to Income Tax,

Withholding Tax Expanded, Withholding Tax
Compensation, Withholding Tax - Final, Fringe Benefit Tax
and Value-added Tax for taxable year 2002, or total amount of
P13,017 ,451.35.

SO ORDERED."

SO ORDERED.

~.~.a·~'
MA. BELEN M. RINGPIS-LIBAN
Associate Justice

WE CONCUR:

R. FABON-VICTORINO

ATTESTATION

I attest that the conclusions in the above decision were reached in

consultation before the case was assigned to the writer of the opinion of the
Court's Division. /J/
LOVELL R. «uTISTA
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the

Division Chairperson's Attestation, is it hereby certified that the conclusions in
the above decision were reached in consultation before the case w assigned to
the writer of the opinion of the Court.

Presiding Justice