4.) G.R. No.

199422
COMMISSIONER OF INTERNAL REVENUE vs. KEPCO ILIJAN
CORPORATION
FACTS:
For the first and second quarters of the calendar year 2000, respondent filed
its Quarterly VAT returns with the BIR. It also filed the Application for Zero
Rated Sales for calendar year 2000 which was duly approved by the BIR.
Thereafter, respondent filed with the BIR its claim for refund in the amount of
₱49,569,448.73 representing input tax incurred for the first and second
quarters of the calendar year 2000 from its importation and domestic
purchases of capital goods and services preparatory to its production and sales
of electricity to the National Power Corporation.
Petitioner did not act upon respondent's claim for refund or issuance of tax
credit certificate for the first and second quarters of the calendar year 2000.
Consequently, respondent filed a Petition for Review.
In her Answer, petitioner alleged the following Special and Affirmative
Defenses: (1) respondent is not entitled to the refund of the amounts prayed
for; (2) the petition was prematurely filed for respondent's failure to exhaust
administrative remedies; (3) respondent failed to show that the taxes paid were
erroneously or illegally collected; and (4) respondent has no cause of action.
Respondent, thereafter, filed its Memorandum on September 1, 2008. For
failure of petitioner to file the required Memorandum despite notice, the CTA
First Division issued a Resolution submitting the case for decision.
CTA First Division rendered a Decision, finding petitioner entitled to a refund
in the amount of ₱443,447,184.50, representing unutilized input VAT paid on
its domestic purchases and importation of capital goods for the first and
second quarters of 2000.
There being no motion for reconsideration filed by the petitioner, the
abovementioned decision became final and executory and a corresponding
Entry of Judgment was issued.
Petitioner alleges that she learned only of the Decision and the subsequent
issuance of the writ when the Office of the Deputy Commissioner for Legal and
Inspection Group received a Memorandum from the Appellate Division of the
National Office recommending the issuance of a Tax Credit Certificate in favor
of the respondent in the amount of ₱443,447,184.50.
Accordingly, petitioner filed a petition for annulment of judgment with the CTA
En Banc, praying for the following reliefs: (1) that the Decision of the CTA First
Division be annulled and set aside; (2) that the Entry of Judgment and Writ of
Execution be nullified; and (3) that the CTA First Division be directed to re-
open to allow petitioner to submit her memoranda setting forth her substantial
legal defenses.
In opposition, respondent filed its Motion to Deny Due Course, arguing, among
others, that petitioner is not lawfully entitled to the annulment of judgment on
the ground that the CTA En Banc is bereft of jurisdiction to entertain
annulment of judgments on the premise that the Rules of Court and the
Revised Rules of the Court of Tax Appeals do not expressly provide a remedy on
annulment of judgments.
CTA En Banc issued a Resolution dismissing the petition. Petitioner filed a
motion for reconsideration, but the same was denied.
Hence, this petition.
ISSUE:
Whether the CTA En Banc has jurisdiction to take cognizance of the petition for
annulment of judgment filed by petitioner.
RULING:
NO, the CTA En Banc has no jurisdiction to take cognizance of the petition for
annulment of judgment filed by petitioner.
Annulment of judgment, as provided for in Rule 47 of the Rules of Court, is
based only on the grounds of extrinsic fraud and lack of jurisdiction. It is a
recourse that presupposes the filing of a separate and original action for the
purpose of annulling or avoiding a decision in another case. Annulment is a
remedy in law independent of the case where the judgment sought to be
annulled is rendered. It is unlike a motion for reconsideration, appeal or even
a petition for relief from judgment, because annulment is not a continuation or
progression of the same case, as in fact the case it seeks to annul is already
final and executory. Rather, it is an extraordinary remedy that is equitable in
character and is permitted only in exceptional cases.
But the law and the rules are silent when it comes to a situation similar to the
case at bar, in which a court, in this case the Court of Tax Appeals, is called
upon to annul its own judgment. More specifically, in the case at bar, the CTA
sitting en banc is being asked to annul a decision of one of its divisions.
However, the laws creating the CTA and expanding its jurisdiction and the
court's own rules of procedure do not provide for such a scenario.
Thus, it appears contrary to these features that a collegial court, sitting en
banc, may be called upon to annul a decision of one of its divisions which had
become final and executory, for it is tantamount to allowing a court to annul its
own judgment and acknowledging that a hierarchy exists within such court. In
the process, it also betrays the principle that judgments must, at some point,
attain finality. A court that can revisit its own final judgments leaves the door
open to possible endless reversals or modifications which is anathema to a
stable legal system.
A direct petition for annulment of a judgment of the CTA to the Supreme Court,
meanwhile, is likewise unavailing, for the same reason that there is no
identical remedy with the High Court to annul a final and executory judgment
of the Court of Appeals. RA No. 9282, Section l puts the CTA on the same level
as the Court of Appeals, so that if the latter's final judgments may not be
annulled before the Supreme Court, then the CTA's own decisions similarly
may not be so annulled. And more importantly, it has been previously
discussed that am1ulment of judgment is an original action, yet, it is not
among the cases enumerated in the Constitution's Article VIII, Section 5 over
which the Supreme Court exercises original jurisdiction. Annulment of
judgment also often requires an adjudication of facts, a task that the Court
loathes to perform, as it is not a trier of facts.
Nevertheless, there will be extraordinary cases, when the interest of justice
highly demands it, where final judgments of the Court of Appeals, the CTA or
any other inferior court may still be vacated or subjected to the Supreme
Court's modification, reversal, annulment or declaration as void. But it will be
accomplished not through the same species of original action or petition for
annulment as that found in Rule 47 of the Rules of Court, but through any of
the actions over which the Supreme Court has original jurisdiction as specified
in the Constitution, like 65 of the Rules of Court.

5.) G.R. No. 198146

POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION
vs. COMMISSIONER OF INTERNAL REVENUE.
FACTS:
Petitioner Power Sector Assets and Liabilities Management Corporation
(PSALM) is a government-owned and controlled corporation created under RA
9136, also known as the Electric Power Industry Reform Act of 2001 (EPIRA).
Section 50 of RA 9136 states that the principal purpose of PSALM is to manage
the orderly sale, disposition, and privatization of the National Power
Corporation (NPC) generation assets, real estate and other disposable assets,
and Independent Power Producer (IPP) contracts with the objective of
liquidating all NPC financial obligations and stranded contract costs in an
optimal manner.
PSALM conducted public biddings for the privatization of the Pantabangan-
Masiway Hydroelectric Power Plant and Magat Hydroelectric Power Plant. First
Gen Hydropower Corporation with its $129 Million bid and SN Aboitiz Power
Corporation with its $530 Million bid were the winning bidders for the
PantabanganMasiway Plant and Magat Plant, respectively.
The NPC received a letter from the BIR demanding immediate payment of
₱3,813,080,4726 deficiency value-added tax (VAT) for the sale of the
Pantabangan-Masiway Plant and Magat Plant. The NPC indorsed BIR's demand
letter to PSALM.
The BIR, NPC, and PSALM executed MOA, wherein they agreed that:
A) NPC/PSALM shall remit under protest to the BIR the amount of Php
3,813,080,472.00.
B) This remittance shall be without prejudice to the outcome of the resolution
of the Issues before the appropriate courts or body.
C) NPC/PSALM and BIR mutually undertake to seek final resolution of the
Issues by the appropriate courts or body.
D) BIR shall waive any and all interests and surcharges on the aforesaid BIR
letter, except when the case is elevated by the BIR before an appellate court.
E) Nothing contained in this MOA shall be claimed or construed to be an
admission against interest as to any party or evidence of any liability or
wrongdoing whatsoever nor an abandonment of any position taken by
NPC/PSALM in connection with the Issues.
F) Each Party to this MOA hereto expressly represents that the authorized
signatory hereto has the legal authority to bind the party to all the terms of this
MOA.
G) Any resolution by the appropriate courts or body in favor of the BIR, other
than a decision by the Supreme Court, shall not constitute as precedent and
sufficient legal basis as to the taxability of NPC/PSALM's transactions
pursuant to the privatization of NPC's assets as mandated by the EPIRA Law.
H) Any resolution in favor of NPC/PSALM by any appropriate court or body
shall be immediately executory without necessity of notice or demand from
NPC/PSALM. A ruling from the DOJ that is favorable to NPC/PSALM shall be
tantamount to the filing of an application for refund in cash/tax credit
certificate, at the option of NPC/PSALM. BIR undertakes to immediately
process and approve the application and release the tax refund/TCC within
fifteen (15) working days from issuance of the DOJ ruling that is favorable to
NPC/PSALM.
I) Either party has the right to appeal any adverse decision against it before
any appropriate court or body.
J) In the event of failure by the BIR to fulfill the undertaking referred to in (H)
above, NPC/PSALM shall assign to DOF its right to the refund of the subject
remittance, and the DOF shall offset such amount against any liability of
NPC/PSALM to the National Government pursuant to the objectives of the
EPIRA on the application of the privatization proceeds.

In compliance with the MOA, PSALM remitted under protest to the BIR the
amount of ₱3, 813, 080, 472, representing the total basic VAT due.
On 21 September 2007, PSALM filed with the DOJ a petition for the
adjudication of the dispute with the BIR to resolve the issue of whether the sale
of the power plants should be subject to VAT.
The DOJ ruled in favor of PSALM.
The BIR moved for reconsideration, alleging that the DOJ had no jurisdiction
since the dispute involved tax laws administered by the BIR and therefore
within the jurisdiction of the CTA. Furthermore, the BIR stated that the sale of
the subject power plants by PSALM to private entities is in the course of trade
or business, as contemplated under Section 105 of the NIRC, which covers
incidental transactions. Thus, the sale is subject to VAT. On 14 January 2009,
the DOJ denied BIR's Motion for Reconsideration.
On 7 April 2009, the BIR Commissioner filed with the Court of Appeals a
petition for certiorari, seeking to set aside the DOJ's decision for lack of
jurisdiction.
The Ruling of the Court of Appeals
The Court of Appeals held that the petition filed by PSALM with the DOJ was
really a protest against the assessment of deficiency VAT, which under Section
204 of the NIRC of 1997 is within the authority of the CIR to resolve. In fact,
PSALM's objective in filing the petition was to recover the ₱3,813,080,472 VAT
which was allegedly assessed erroneously and which PSALM paid under
protest to the BIR.
PSALM moved for reconsideration, which the Court of Appeals denied. Hence,
this petition.
ISSUES:
1. Whether the Secretary of Justice has jurisdiction over the case.
2. Whether the sale of the power plants is subject to VAT.
RULING:
1. Yes, the Secretary of Justice has jurisdiction over the case.

We agree with the Court of Appeals that jurisdiction over the subject
matter is vested by the Constitution or by law, and not by the parties to
an action. Jurisdiction cannot be conferred by consent or acquiescence
 of the parties or by erroneous belief of the court, quasi-judicial office or
government agency that it exists.

However, contrary to the ruling of the Court of Appeals, we find that the
DOJ is vested by law with jurisdiction over this case. This case involves a
dispute between PSALM and NPC, which are both wholly government
owned corporations, and the BIR, a government office, over the
imposition of VAT on the sale of the two power plants. There is no
question that original jurisdiction is with the CIR, who issues the
preliminary and the final tax assessments. However, if the government
entity disputes the tax assessment, the dispute is already between the
BIR and another government entity, in this case, the petitioner PSALM.
Under PD 242, all disputes and claims solely between government
agencies and offices, including government-owned or controlled
corporations, shall be administratively settled or adjudicated by the
Secretary of Justice, the Solicitor General, or the Government Corporate
Counsel, depending on the issues and government agencies involved. As
regards cases involving only questions of law, it is the Secretary of
Justice who has jurisdiction.

PD 242 is only applicable to disputes, claims, and controversies solely

between or among the departments, bureaus, offices, agencies and
instrumentalities of the National Government, including government-
owned or controlled corporations, and where no private party is involved.
In other words, PD 242 will only apply when all the parties involved are
purely government offices and government-owned or controlled
corporations.28 Since this case is a dispute between PSALM arid NPC,
both government owned and controlled corporations, and the BIR, a
National Government office, PD 242 clearly applies and the Secretary of
Justice has jurisdiction over this case. In fact, the MOA executed by the
BIR, NPC, and PSALM explicitly provides that "a ruling from the DOJ
that is favorable to NPC/PSALM shall be tantamount to the filing of an
application for refund (in cash)/tax credit certificate (TCC), at the option
of NPC/PSALM." Such provision indicates that the BIR and petitioner
PSALM and the NPC acknowledged that the Secretary of Justice indeed
has jurisdiction to resolve their dispute.

2. NO, the sale of the power plants is not subject to VAT.

We do not agree with the CIR's position, which is anchored on the wrong
premise that PSALM is a successor-in-interest of NPC. PSALM is not a
successor-in-interest of NPC. Under its charter, NPC is mandated to
"undertake the development of hydroelectric generation of power and the
production of electricity from nuclear, geothermal and other sources, as
well as the transmission of electric power on a nationwide basis." With
the passage of the EPIRA law which restructured the electric power
 industry into generation, transmission, distribution, and supply sectors,
the NPC is now primarily mandated to perform missionary electrification
function through the Small Power Utilities Group (SPUG) and is
responsible for providing power generation and associated power delivery
systems in areas that are not connected to the transmission system. On
the other hand, PSALM, a government-owned and controlled corporation,
was created under the EPIRA law to manage the orderly sale and
privatization of NPC assets with the objective of liquidating all of NPC's
financial obligations in an optimal manner. Clearly, NPC and PSALM
have different functions. Since PSALM is not a successor-in-interest of
NPC, the repeal by RA 9337 of NPC's VAT exemption does not affect
PSALM.
In any event, even if PSALM is deemed a successor-in-interest of NPC,
still the sale of the power plants is not "in the course of trade or
business" as contemplated under Section 105 of the NIRC, and thus, not
subject to VAT. The sale of the power plants is not in pursuit of a
commercial or economic activity but a governmental function mandated
by law to privatize NPC generation assets. PSALM was created primarily
to liquidate all NPC financial obligations and stranded contract costs in
an optimal manner. The purpose and objective of PSALM are explicitly
stated in Section 50 of the EPIRA law.
Thus, it is very clear that the sale of the power plants was an exercise of
a governmental function mandated by law for the primary purpose of
privatizing NPC assets in accordance with the guidelines imposed by the
EPIRA law.

6.) G.R. No. 213394, April 06, 2016

SPOUSES EMMANUEL D. PACQUIAO AND JINKEE J. PACQUIAO v. THE
COURT OF TAX APPEALS.
FACTS:
The controversy began on March 25, 2010, when Pacquiao received a Letter of
Authority from the Regional District Office No. 43 of the BIR for the
examination of his books of accounts and other accounting records for the
period covering January 1, 2008 to December 31, 2008.
On April 15, 2010, Pacquiao filed his 2009 income tax return, which although
reflecting his Philippines-sourced income, failed to include his income derived
from his earnings in the US. He also failed to file his Value Added Tax returns
for the years 2008 and 2009.
Finding the need to directly conduct the investigation and determine the tax
liabilities of the petitioners, respondent CIR issued another Letter of Authority,
authorizing the BIR's National Investigation Division (NID) to examine the
books of accounts and other accounting records of both Pacquiao and Jinkee
for the last 15 years, from 1995 to 2009.
Due to these developments, the petitioners, through counsel, wrote a letter
questioning the propriety of the CIR investigation. According to the petitioners,
they were already subjected to an earlier investigation by the BIR for the years
prior to 2007, and no fraud was ever found to have been committed. They
added that pursuant to the March LA issued by the RDO, they were already
being investigated for the year 2008.
The CIR informed the petitioners that its reinvestigation of years prior to 2007
was justified because the assessment thereof was pursuant to a "fraud
investigation" against the petitioners under the "Run After Tax Evaders" (RATE)
program of the BIR.
On January 5 and 21, 2011, the petitioners submitted various income tax
related documents for the years 2007-2009. As for the years 1995 to 2006, the
petitioners explained that they could not furnish the bureau with the books of
accounts and other, tax related documents as they had already been disposed
in accordance with Section 235 of the Tax Code. They added that even if they
wanted to, they could no longer find copies of the documents because during
those years, their accounting records were then managed by previous counsels,
who had since passed away. Finally, the petitioners pointed out that their tax
liabilities for the said years had already been fully settled with then CIR Jose
Mario Buñag, who after a review, found no fraud against them.
Then, on February 20, 2012, the CIR issued the Preliminary Assessment Notice
(PAN), informing the petitioners that based on third-party information allowed
under Section 5(B) and 6 of the National Internal Revenue Code (NIRC), they
found the petitioners liable not only for deficiency income taxes in the amount
of P714,061,116.30 for 2008 and P1,446;245,864.33 for 2009, but also for
their non-payment of their VAT liabilities in the amount P4,104,360.01 for
2008 and P 24,901,276.77 for 2009.
The petitioners filed their protest against the PAN.
After denying the protest, the BIR issued its Formal Letter Demand (FLD),
finding the petitioners liable for deficiency income tax and VAT amounting to
P766,899,530.62 for taxable years 2008 and P1,433,421,214.61 for 2009,
inclusive of interests and surcharges.
On May 14, 2013, the BIR issued its Final Decision on Disputed Assessment
(FDDA), addressed to Pacquiao only, informing him that the CIR found him
liable for deficiency income tax and VAT for taxable years 2008 and 2009
which, inclusive of interests and surcharges, amounted to a total of
P2,261,217,439.92.
Then, on August 7, 2013, the BIR-ARMD sent Pacquiao and Jinkee the Final
Notice Before Seizure (FNBS), informing the petitioners of their last opportunity
to make the necessary settlement of deficiency income and VAT liabilities
before the bureau would proceed against their property.
Although they no longer questioned the BIR's assessment of their deficiency
VAT liability, the petitioners requested that they be allowed to pay the same in
four (4) quarterly installments. Eventually, through a series of installments,
Pacquiao and Jinkee paid a total P32,196,534.40 in satisfaction of their
liability for deficiency VAT.
Proceedings at the CTA
Before the CTA, the petitioners contended that the assessment of the CIR was
defective because it was predicated on its mere allegation that they were guilty
of fraud.
They also questioned the validity of the attempt by the CIR to collect deficiency
taxes from Jinkee, arguing that she was denied due process. According to the
petitioners, as all previous communications and notices from the CIR were
addressed to both petitioners, the FDDA was void because it was only
addressed to Pacquiao. Moreover, considering that the PCL and FNBS were
based on the FDDA, the same should likewise be declared void.
The petitioners added that the CIR assessment, which was not based on actual
transaction documents but simply on "best possible sources," was not
sanctioned by the Tax Code. They also argue that the assessment failed to
consider not only the taxes paid by Pacquiao to the US authorities for his
fights, but also the deductions claimed by him for his expenses.
Pending the resolution by the CTA of their appeal, the petitioners sought the
suspension of the issuance of warrants of distraint and/or levy and warrants of
garnishment.
Meanwhile, in a letter, dated October 14, 2013, the BIR-ARMD informed the
petitioners that they were denying their request to defer the collection
enforcement action for lack of legal basis. The same letter also informed the
petitioners that despite their initial payment, the amount to be collected from
both of them still amounted to P3,259,643,792.24, for deficiency income tax for
taxable years 2008 and 2009, and P46,920,235.74 for deficiency VAT for the
same period. A warrant of distraint and/or levy against Pacquiao and Jinkee
was included in the letter.
Aggrieved, the petitioners filed the subject Urgent Motion for the CTA to lift the
warrants of distraint, levy and garnishments issued by the CIR against their
assets and to enjoin the CIR from collecting the assessed deficiency taxes
pending the resolution of their appeal. As for the cash deposit and bond
requirement under Section 11 of Republic Act (R.A.) No. 1125, the petitioners
question the necessity thereof, arguing that the CIR's assessment of their tax
liabilities was highly questionable. At the same time, the petitioners manifested
that they were willing to file a bond for such reasonable amount to be fixed by
the tax court.
On April 22, 2014, the CTA issued the first assailed resolution granting the
petitioner's Urgent Motion, ordering the CIR to desist from collecting on the
deficiency tax assessments against the petitioners. In its resolution, the CTA
noted that the amount sought to be collected was way beyond the petitioners'
net worth, which, based on Pacquiao's Statement of Assets, Liabilities and Net
Worth (SALN), only amounted to P1,185,984,697.00.
The CTA, however, saw no justification that the petitioners should deposit less
than the disputed amount. They were, thus, required to deposit the amount of
P3,298,514,894.35 or post a bond in the amount of P4,947,772,341.53.
Hence, this petition
ISSUE:
1. Whether an appeal will suspend the collection of tax.
2. Whether the petitioners' case falls within the exception provided under
Section 11, R.A No. 1125.
3. Whether the Court can make a preliminary determination on whether the
CIR used methods not sanctioned by law.
RULING:
1. Generally, no, an appeal will not suspend the collection of tax. However,
by way of exception, the CTA may suspend the collection if the collection
may jeopardize the interest of the Government and/or the taxpayer.

Section 11 of R.A. No. 1125, as amended by R.A. No. 9282, embodies the
rule that an appeal to the CTA from the decision of the CIR will not
suspend the payment, levy, distraint, and/or sale of any property of the
taxpayer for the satisfaction of his tax liability as provided by existing
law. When, in the view of the CTA, the collection may jeopardize the
interest of the Government and/or the taxpayer, it may suspend the said
collection and require the taxpayer either to deposit the amount claimed
or to file a surety bond.

Whenever it is determined by the courts that the method employed by

the Collector of Internal Revenue in the collection of tax is not sanctioned
by law, the bond requirement under Section 11 of R.A. No. 1125 should
be dispensed with. The purpose of the rule is not only to prevent
jeopardizing the interest of the taxpayer, but more importantly, to
prevent the absurd situation wherein the court would declare "that the
collection by the summary methods of distraint and levy was violative of
 law, and then, in the same breath require the petitioner to deposit or file
a bond as a prerequisite for the issuance of a writ of injunction."

2. No, in this case, the alleged illegality of the methods employed by

respondent to effect the collection of tax is not at all patent or evident as
in the foregoing cases. At this early stage of the proceedings, it is
premature for this Court to rule on the issues of whether or not the
warrants were defectively issued; or whether the service thereof was done
in violation of the rules; or whether or not respondent's assessments
were valid. These matters are evidentiary in nature, the resolution of
which can only be made after a full-blown trial.

Though it may be true that it would have been premature for the CTA to
immediately determine whether the assessment made against the
petitioners was valid or whether the warrants were properly issued and
served, still, it behooved upon the CTA to properly determine, at least
preliminarily, whether the CIR, in its assessment of the tax liability of the
petitioners, and its effort of collecting the same, complied with the law
and the pertinent issuances of the BIR itself. The CTA should have
conducted a preliminary hearing and received evidence so it could have
properly determined whether the requirement of providing the required
security under Section 11, R.A. No. 1125 could be reduced or dispensed
with pendente lite.

3. No. For the Court to make any finding of fact on this point would be
premature. As stated earlier, there is no evidentiary basis. All the
arguments are mere allegations from both sides. Moreover, any finding
by the Court would pre-empt the CTA from properly exercising its
jurisdiction and settle the main issues presented before it, that is,
whether the petitioners were afforded due process; whether the CIR has
valid basis for its assessment; and whether the petitioners should be
held liable for the deficiency taxes.