46-60.docx

46. MINDANAO II GEOTHERMAL PARTNERSHIP vs. CIR | MARCH 11,2013 47. PNB vs. SANTOS | DECEMBER 10, 2014 Facts: Sometime in May 1996, respondents discovered that their father maintained a premium savings account with Philippine National Bank (PNB), Sta. Elena-Marikina City Branch.Respondents went to PNB to withdraw their father's deposit. However, Aguilar informed them that the deposit had already "been released to a certain Bernardito Manimbo (Manimbo). On April 1, 1997, however, Aguilar informed them that the deposit had already "been released to a certain Bernardito Manimbo (Manimbo)... on April 1, 1997." On May 20, 1998, respondents filed before the Regional Trial Court of Marikina City a complaint for sum of money and damages against PNB, Lina B. Aguilar, and a John Doe. On May 20, 1998, respondents filed before the Regional Trial Court of Marikina City a complaint for sum of money and damages against PNB, Lina B. Aguilar, and a John Doe. Issues: We resolve the following issues: Whether Philippine National Bank was negligent in releasing the deposit to Bernardito Manimbo; Ruling: The default standard of diligence in the performance of obligations is "diligence of a good father of a family. Other industries, because of their nature, are bound by law to observe higher standards of diligence. Common carriers, for example, must observe "extraordinary diligence in the vigilance over the goods and for the safety of [their] passengers"[84] because... it is considered a business affected with public interest. "Extraordinary diligence" with respect to passenger safety is further qualified as "carrying the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with... a due regard for all the circumstances. Similar to common carriers, banking is a business that is impressed with public interest. It affects economies and plays a significant role in businesses and commerce.[86] The public reposes its faith and confidence upon banks, such that "even the humble... wage-earner has not hesitated to entrust his life's savings to the bank of his choice, knowing that they will be safe in its custody and will even earn some interest for him."[87] This is why we have recognized the fiduciary nature of the banks' functions,... and attached a special standard of diligence for the exercise of their functions. Petitioners PNB and Aguilar either have no fixed standards for the release of their deceased clients' deposits or they have standards that they disregard for convenience, favor, or upon exercise of discretion. Both are inconsistent with the required... diligence of banks. These threaten the safety of the depositors' accounts as they provide avenues for fraudulent practices by third persons or by bank officers themselves.

Petitioner Aguilar was aware that there were other claimants to Angel C. Santos' deposit. Respondents had already communicated with petitioner Aguilar regarding Angel C. Santos' account before Manimbo appeared. Petitioner Aguilar even gave respondents the updated passbook of Angel C. Santos' account.[107] Yet, petitioners PNB and Aguilar did not think twice before they released the deposit to Manimbo. They did not doubt why no original death certificate could be submitted. They did not doubt why Reyme L. Santos would execute an... affidavit of selfadjudication when he, together with others, had previously asked for the release of Angel C. Santos' deposit. They also relied on the certificate of time deposit and on Manimbo's representation that the passbook was lost when the passbook had just been... previously presented to Aguilar for updating Principles: Petitioner PNB and its manager, petitioner Aguilar, failed to meet even the standard of diligence of a good father of a family. Their actions and inactions... constitute gross negligence. 48. MARCELO INVESTMENT &MANAGEMENT CORP. vs. MARCELO, Jr. | NOVEMBER 26, 2014 The vesting of succession rights on the heirs upon the death of the decedent gives occasion for the baring of sibling disaccords right at the onset of the estate proceedings which is the determination of the administrator of the decedent’s estate. In such instances, the liquidation, partition and distribution of the decedent’s estate is prolonged and the issue of administration becomes, contrary to its very objective, itself the hindrance to the ultimate goal of settlement of the decedent’s estate. We catch a glimpse of that in this case. Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the 24 May 2013 Decision of the Court of Appeals in CA-G.R. CV No. 952191 which affirmed the Order2 of the Regional Trial Court (RTC), Branch 76, Quezon City appointing respondent Jose T. Marcelo, Jr. (Jose, Jr.) as the new regular administrator of the intestate estate of decedent Jose T. Marcelo, Sr. The facts herein occurred in two stages: (1) the first litigation between two of Jose Marcelo, Sr.’s (Jose, Sr.) compulsory heirs, his sons, Edward, (ascendant of herein petitioners, heirs of Edward T. Marcelo, Katherine J. Marcelo, Anna Melinda J. Marcelo Revilla, and John Steven J. Marcelo) and respondent Jose, Jr., for the appointment of regular administrator of Jose, Sr.’s estate; and (2) after Edward was appointed regular administrator of Jose, Sr.’s estate and Edward’s death in 2009, respondent Jose, Jr.’s revival of his pursuit to administer his father’s, Jose, Sr.’s, estate. These

details

of

these

stages

follow:chanroblesvirtuallawlibrary

On 24 August 1987, decedent Jose, Sr. died intestate. He was survived by his four compulsory heirs: (1) Edward, (2) George, (3) Helen and (4) respondent Jose, Jr. Initially, petitioner Marcelo Investment and Management Corporation (MIMCO) filed a Petition for the issuance of Letters of Administration of the estate of Jose, Sr. before the RTC, Branch 76, Quezon City docketed as S.P. Proc. No. Q-88-1448. At first, Helen, along with her brother, Jose,

Jr. separately opposed MIMCO’s petition; the two prayed for their respective appointment as administrator. Edward opposed Helen’s and Jose, Jr.’s respective petitions for issuance of Letters of Administration in their favor and Edward himself prayed for his appointment as regular administrator. Ultimately, MIMCO, George and Edward banded together: (1) opposed Helen’s and Jose, Jr.’s petitions, and (2) prayed for Edward’s appointment as regular administrator of Jose, Sr.’s estate. On 21 September 1989, pending issuance of letters of administration, the RTC appointed Helen and Jose, Jr. as special administrators. In an Order dated 13 December 1991, the RTC appointed Edward as regular administrator of Jose, Sr.’s estate: WHEREFORE, PREMISES CONSIDERED, this Court resolves as it hereby resolves to appoint Edward T. Marcelo as the Regular Administrator of the estate of the late Jose P. Marcelo, Sr. upon the posting of a bond amounting to THREE HUNDRED THOUSAND PESOS (P300,000.00). The aforementioned appointment shall take effect upon his oath as such and conditioned by a bond of P300,000.00 which shall insure the fidelity of the said regular administrator in the performance of his duties and obligations as such.3 Taking issue with the RTC’s Order and questioning Edward’s appointment, Jose, Jr. filed successive oppugnant motions: (1) motion for reconsideration of the 13 December 1991 Order; and (2) omnibus motion alleging the RTC Acting Presiding Judge Efren N. Ambrosio’s (Judge Ambrocio) unusual interest and undue haste in issuing letters of administration in favor of Edward. In an Order dated 12 March 1992, the RTC, through Judge Ambrosio, denied Jose, Jr.’s motion for reconsideration: WHEREFORE, prescinding from the foregoing, and fortified by the balm of clear judicial conscience, the herein motion is hereby denied. The letters of administration under date of March 4, 1992 issued in favor of Edward T. Marcelo is maintained with full force and effect. The letters testamentary issued in favor of Special Administrator, Jose T. Marcelo, Jr. under date of October 2, 1989 as well as the bond posted by him are hereby ordered cancelled. Likewise, the Special Administrator, Jose T. Marcelo, Jr. is hereby ordered to forthwith deliver to the regular administrator the goods, chattels, money and estate of the deceased in his hands.4 In the same vein of denial, the RTC ruled on the Omnibus Motion, thus: After a re-examination of the evidence adduced by the parties and a consideration of the arguments raised in the aforecited pleadings, this court arrived at a conclusion that no substantial error was committed by then Acting Presiding Judge Edren N. Ambrosio which would warrant a reversal of the questioned orders, namely, the order dated December 13, 1991 and March 12, 1992.5 Adamant on his competence to better administer his father’s estate, Jose, Jr. appealed Edward’s appointment as regular administrator to the Court of Appeals in CA-G.R. CV No. 43674. However, the appellate court affirmed in toto6 the Orders dated 1 October 1993, 13 December 1991 and 12 March 1992 of the intestate court. The question of who between Edward and Jose, Jr. should administer their father’s estate reached

us in G.R. No. 123883 (Jose Marcelo, Jr. v. Court of Appeals and Edward Marcelo): we did not find reversible error in the appellate court’s decision in CA-G.R. CV No. 43674. We disposed of the case via a Minute Resolution dated 22 May 1996,7 ultimately affirming the RTC’s and the appellate court’s separate rulings of Edward’s competence and better suited ability to act as regular administrator of Jose, Sr.’s estate. Thereafter, Jose, Jr. persistently opposed Edward’s actions as administrator and his inventory of Jose, Sr.’s estate. He filed anew serial motions which culminated in the following 23 June 2000 Order of the RTC: After a careful study of the arguments raised by the parties in support of their respective claims, the Court finds that the motion filed by oppositor [Jose, Jr.] is not well-taken. Anent the submission of complete list of stockholders of all the Marcelo group of companies together with the number and current par value of their respective shareholding, suffice it to say that as correctly pointed out by regular administrator [Edward], the shares of stock of the decedent will be equally distributed to the heirs that there is no necessity therefor. Considering oppositor’s insistence on the submission by regular administrator of a true and updated list as well as current market values of all real estate and personal properties of the decedent, the [c]ourt hereby directs herein oppositor [Jose, Jr.] to inform the regular administrator of such data to aid the regular administrator in the preparation of a complete and accurate inventory of the real and personal properties comprising the estate of Jose, Sr. As regards oppositor [Jose, Jr.’s] prayer for the submission by regular administrator of a true and complete accounting of the subject corporations reckoned from the death of [Jose, Sr.] up to the present, the [c]ourt likewise sees no need therefor as said corporations are not parties to the case and have separate and distinct personalities from the stockholders. With respect to the project of partition, it appears that regular administrator had already furnished oppositor [Jose, Jr.] with a copy thereof. Considering however oppositor [Jose, Jr.’s] oral motion for regular administrator to identify the heirs of the decedent and to secure their conformity to the project of partition, oppositor [Jose, Jr.] is given ten (10) days from receipt of the project of partition bearing the conformity of the heirs within to (sic) to comment thereon. Thereafter, the parties are directed to submit their project of partition for approval and consideration of the [c]ourt.8 (Emphasis supplied) On 15 January 2001, Edward filed a Manifestation and Motion stating that: 1. Oppositor [Jose, Jr.] now conforms to, and has accordingly signed, the attached “Liquidation of the Inventory of the Estate of Jose P. Marcelo, Sr. as of July 26, 2000” x x x. 2. Regular Administrator [Edward] respectfully prays that the Liquidation, duly signed by all four (4) compulsory heirs, be approved as the project of partition of the Estate of Jose P. Marcelo Sr.9 and moved for the approval of the Liquidation of the Inventory of the Estate of Jose, Sr. as the project of partition of the Estate of Jose, Sr.

The

project

of

partition

reads:

LIQUIDATION OF THE INVENTORY OF THE ESTATE OF JOSE P. MARCELO, SR. AS OF JULY 26, 2000 I.

Settlement

of

the

claims

Payables 1. Marcelo Chemical & Pigment Corp. 2. Maria Cristina Fertilizer Corp. 3. Marcelo Rubber & Latex Products, Inc. 4. Marcelo Investment & Mgnt. Corp. 5. Marcelo Steel Corporation 6. H. Marcelo & Co., Inc. TOTAL

against

the

estate

(SCH

IV)

P 1,556,002.06 797,487.00 542,932.74 532,066.35 1,108,252.19 2,356,684.99 P 6,893,425.33

Considering that the Estate as of June 3, 1999 has no sufficient cash to pay-off the above claims of P6,893,425.33, I can work out an offsetting arrangement since the Estate has also receivables from these companies as shown below:chanroblesvirtuallawlibrary SCH. III-A SCH. III-B Shares of Stock Receivables Total 1. MCPC P337,018.00 P 0.00 P 337,018.00 2. MCFC 300,000.00 0.00 300,000.00 3. MRLP 1,288,580.00 3,595,500.00 4,884,080.00 4. MIMCO 0.00 0.00 0.00 5. MSC 11,370.00 532,419.04 543,789.04 6. H. Marcelo 881,040.00 802,521.15 1,683,561.15 TOTAL P2,818,008.00 P 4,930,440.19 P7,748,448.19 If the above receivables and equity with total value of P7,748,448.19 will be offset against the claims of P6,893,425.33 the net will show the following:chanroblesvirtuallawlibrary SCH. III-A & B SCH. IV Net Claims Companies Equity & Receivables Claims (Receivables) 1. MCPC P 337,018.00 P1,556,002.06 P1,218,984.06 2. MCFC 300,000.00 797,487.00 497,487.00 3. MRLP 4,884,080.00 542,932.74 (4,341,147.26) 4. MIMCO 532,066.35 532,066.35 5. MSC 543,789.04 1,108,252.19 564,463.15 6. H. MARCELO & 1,683,561.15 2,356,684.99 673,123.84 CO., Inc. TOTAL P7,748,448.19 P6,893,425.33 P (855,022.86)

Based on the offsetting except for MRLP, which the Estate has net receivables of P4,341,147.26 there will be net claims or payables of P3,486,124.40 as follows:chanroblesvirtuallawlibrary 1. MCPC P1,218,984.06 2. MCFC 497,487.00 3. MIMCO 532,066.35 4. MSC 564,463.15 5. H. Marcelo & Co. 673,123.84 TOTAL P3,486,124.40 It is recommended that the net from MRLP of P4,341,147.26 be deducted to the above claims as shown below:chanroblesvirtuallawlibrary Net Receivables from MRLP P4,341,147.26 Net Claim 3,486,124.40 Net Receivables from MRLP P 855,022.86 II. After the claims are settled based on the above recommendation, the Estate will have the following assets for distribution to the four (4) of us:chanroblesvirtuallawlibrary 1. PCIB (to be updated) 3,099.81 3,099.81 2. Shares of Stocks No. Of Shares Amount a. MTRC 12,874 P1,287,400.00 b. MRLP 85,502 855,022.86 c. Farmer Fertilizer Corp. 5,000 5,000.00 d. Republic Broadcasting System 18,054 18,054.00 e. Seafront Resources 6,000,000 60,000.00 f. Industrial Finance 137 1,370.00 g. Astro Mineral 500,000 5,000.00 h. Sta. Mesa Market 42,105 42,105.00 i. Atlas Consolidated Mining 122 2,562.00 j. Phil. Long Distance Telephone 180 130,050.00 k. Jinico (Jabpract Minind) 2,500,000 25,000.00 l. Baguio Country Club 1 12,500.00 4. Receivables – Marcelo Fiberglass 212,729.17 *

Based

at

Par

Value

Above assets will be distributed equally by the four (4) of us depending if these will be sold or not. It is very important to note that equal distribution will be based on actual selling price minus taxes and other deduction if any, on the above inventories of estate properties. Sgd. EDWARD T. MARCELO Regular Administrator Conforme:chanroblesvirtuallawlibrary

Sgd. _________________ GEORGE

T.

MARCELO Sgd.

____________________ JOSE

T.

MARCELO,

JR. Sgd.

________________ HELEN T. MARCELO10 On 16 February 2001, the RTC issued an Order approving the partition of Jose, Sr.’s estate as proposed by Edward: Regular administrator [Edward] manifests that oppositor Jose T. Marcelo, Jr. had already expressed his conformity to the Liquidation of the Inventory of the Estate of Jose P. Marcelo, Sr., as of July 26, 2000, as evidenced by his signature therein. He therefore prays that the said document which bears the conformity of all four (4) compulsory heirs of Jose P. Marcelo, Sr. be approved as the project of partition of the estate of Jose P. Marcelo, Sr. Finding said liquidation of the Inventory of the Estate of Jose P. Marcelo, Sr. to bear the conformity of all the heirs of the decedent and considering further that the period for filing of money claims against the subject estate had already lapsed, the Court resolves to approve said liquidation of Inventory as the project of partition of the estate of Jose P. Marcelo, Sr. Nonetheless, let the distribution of the estate of Jose P. Marcelo, Sr. among his compulsory heirs in accordance with the approved Liquidation of the Inventory of the Estate of Jose P. Marcelo, Sr. be deferred until herein regular administrator Edward T. Marcelo has submitted to the Court proof of payment of estate taxes of the subject estate.11 On 14 September 2001, the RTC archived the intestate proceedings, S.P. Proc. No. Q-88-1448, pending Edward’s submission of proof of payment of estate taxes as directed in the 16 February 2001 Order.12chanrobleslaw On 3 July 2009, Edward died,13 ushering in the antecedents to the present controversy. Wasting no time, Jose, Jr. moved to revive the intestate proceedings involving his father’s estate, S.P. Proc. No. Q-88-1448, and moved for his appointment as new regular administrator thereof. Petitioners MIMCO and heirs of Edward, joined by George, opposed Jose, Jr.’s motion and nominated Atty. Henry Reyes as regular administrator in Edward’s stead. On 6 January 2010, the RTC issued the assailed Order, now appointing Jose, Jr. as regular administrator of Jose, Sr.’s estate:

Contrary to the assertion of petitioners, there is no showing that the [c]ourt has previously declared oppositor-movant [Jose, Jr.] unfit to be appointed as an administrator. The estate is left with no one who will administer the estate, i.e., to liquidate the estate and distribute the residue among the heirs. As well-settled, to liquidate means to determine the assets of the estate and to pay all debts and expenses. Records clearly show that the estate taxes due to the government have not been paid. It is, in fact, held that approval of the project of partition does not necessarily terminate administration x x x. There is a necessity to appoint a new regular administrator. Equally noteworthy is that the judicially approved inventory was prepared way back on August 30, 2000. It is but imperative that the same be updated. In the sound judgment of the [c]ourt, oppositor-movant [Jose, Jr.], a legitimate child of the decedent, appears to occupy higher interest than Atty. Henry A. Reyes in administering the subject estate. WHEREFORE, premises considered, oppositor Jose T. Marcelo, Jr. is appointed as the new regular administrator of the estate of Jose T. Marcelo, Sr. Before he enters upon the execution of his trust, and letters of administration issue, he shall give a bond in the amount of P200,000.00, conditioned as follows:chanroblesvirtuallawlibrary a. To make and return to the [c]ourt, within three (3) months, an updated inventory of all goods, chattels, rights, credits, and estate of the deceased which shall come to his possession or knowledge or to the possession of any other person for him; b. To administer according to the Rules of Court rules, all goods, chattels, rights, credits, and estate which shall at any time come to his possession or to the possession of any other person for him, and from the proceeds to pay and discharge all debts, legacies, and charges on the same, or such dividends thereon as shall be decreed by the court, not to mention the taxes due to the government; c. To render a true and just account of his administration to the [c]ourt within one (1) year; and at any other time when required by the Court; and d. To perform all orders of the [c]ourt.14 Petitioners filed an Omnibus Motion for Reconsideration of the 6 January 2010 Order and now moved for the appointment instead of George as administrator of Jose, Sr.’s estate. After Comment on the Omnibus Motion, the RTC issued another Order dated 23 March 2010, denying the Omnibus Motion and affirming the appointment of Jose, Jr. as new regular administrator. Petitioners appealed the RTC’s twin Orders dated 6 January 2010 and 23 March 2010 before the appellate court. This time around, the Court of Appeals affirmed Jose, Jr.’s appointment as new regular administrator. Ruling that the selection of administrator lies in the sound discretion of the trial court, the Court of Appeals held that:chanroblesvirtuallawlibrary 1. The prior Order dated 13 December 1991 of the RTC appointing Edward as regular administrator instead of Jose, Jr., which appointment was affirmed by this Court in G.R. No.

123883, did not make a finding on Jose, Jr.’s fitness and suitableness to serve as regular administrator; and 2. On the whole, Jose, Jr. is competent and “not wanting in understanding and integrity,” to act as regular administrator of Jose, Sr.’s estate. Hence, this appeal by certiorari ascribing grave error in the Court of Appeals’ Decision, to wit: A. THERE WAS NO NEED TO APPOINT AN ADMINISTRATOR FOR THE ESTATE OF JOSE P. MARCELO, SR. AS THERE WAS THEN NO PENDING INCIDENTS IN THE ESTATE PROCEEDINGS TO WARRANT THE APPOINTMENT OF AN ADMINISTRATOR. B. THE COURT OF APPEALS ERRED IN APPOINTING JOSE, JR. AS THE ADMINISTRATOR OF JOSE, SR.’S ESTATE CONSIDERING THAT JOSE, JR. WAS FOUND, BY A FINAL, IMMUTABLE, AND UNALTERABLE JUDGMENT, TO BE UNFIT TO ACT AS SUCH. THUS, THE COURT OF APPEALS WAS CLEARLY MISTAKEN WHEN IT DISREGARDED THE EARLIER PRONOUNCEMENT ON THE UNFITNESS OF JOSE, JR. TO ACT AS AN ADMINISTRATOR AS IT GOES AGAINST THE PRINCIPLE OF CONCLUSIVENESS OF JUDGMENT. C. THE COURT OF APPEALS VIOLATED THE PETITIONERS’ RIGHT TO DUE PROCESS, WHEN IT AFFIRMED THE RTC ORDERS, WITHOUT EVEN BOTHERING TO EXPLAIN WHY JOSE, JR. AND NOT GEORGE, SHOULD BE APPOINTED AS ADMINISTRATOR OF JOSE, SR.’S ESTATE.15 The appeal is impressed with merit. While we agree with the lower courts that the appointment of a regular administrator is still necessary, we disagree with the appointment of Jose, Jr. as new regular administrator of Jose, Sr.’s estate. We first dispose of the issue of whether the appointment of a regular administrator is still necessary at this liquidation, partition and distribution stage of the intestate proceedings involving Jose, Sr.’s estate. Petitioners contend that the appointment of a regular administrator is unnecessary where there remains no pending matter in the settlement of Jose, Sr.’s estate requiring attention and administration. Specifically, petitioners point out that there is no existing or unliquidated debt against the estate of Jose, Sr, the settlement thereof being already at the liquidation, partition and distribution stage. Further on that, the liquidation and proposed partition had long been approved by the probate court. We are not convinced. The settlement of Jose, Sr.’s estate is not yet through and complete albeit it is at the liquidation, partition and distribution stage.

Rule 90 of the Rules of Court provides for the Distribution and Partition of the Estate. The rule provides in pertinent part: SECTION

1. When

order

for

distribution

of

residue

made.

–

x

x

x

No distribution shall be allowed until payment of the obligations above mentioned has been made or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs.cralawred x

x

x

x

SEC. 3. By whom expenses of partition paid. – If at the time of the distribution the executor or administrator has retained sufficient effects in his hands which may lawfully be applied for the expenses of partition of the properties distributed, such expenses of partition may be paid by such executor or administrator when it appears equitable to the court and not inconsistent with the intention of the testator; otherwise, they shall be paid by the parties in proportion to their respective shares or interest in the premises, and the apportionment shall be settled and allowed by the court, and, if any person interested in the partition does not pay his proportion or share, the court may issue an execution in the name of the executor or administrator against the party not paying for the sum assessed. In this case, we observe that the Liquidation of the Inventory of the Estate, approved by the RTC in its Order dated 16 February 2001, is not yet in effect and complete. We further note that there has been no manifestation forthcoming from any of the heirs, or the parties in this case, regarding the completion of the proposed liquidation and partition of the estate. In fact, as all parties are definitely aware, the RTC archived the intestate proceedings pending the payment of estate taxes. For clarity, we refer to the Liquidation of the Inventory of the Estate, which was divided into two (2) parts: (1) Settlement of the Claims against the Estate, and (2) After Settlement of the Claims, distribution of the remaining assets of the estate to the four (4) compulsory heirs. The same document listed payables and receivables of the estate dependent on a number of factors and contingencies:chanroblesvirtuallawlibrary 1. Payables to various companies where the Marcelo family had equity amounting to P6,893,425.33; Considering that the Estate as of June 3, 1999 has no sufficient cash to pay-off the above claims of P6,893,425.33, [Edward] can work out an offsetting arrangement since the Estate has also receivables or equity from these companies as shown below:16chanrobleslaw xxxx 2. Receivables

from

the

same

companies

amounting

to

P7,748,448.19;

If the above receivables and equity with total value of P7,748,448.19 will be offset against the claims of P6,893,425.33 the net will show the following:17chanrobleslaw

xxxx 3. An offsetting of the payables and receivables to be arranged by the then regular administrator, Edward; and 4. Offsetting of the receivables from Marcelo Rubber & Latex Products, Inc. amounting to P4,341,147.26 against the net claims against the estate amounting to P3,486,124.40 resulting in net receivables of the estate in the amount of P855,022.86. There has been no showing from either of the parties that the receivables of, and claims against, Jose, Sr.’s estate has been actually liquidated, much less, if an offsetting occurred with the companies listed in the inventory on one hand, and Jose, Sr.’s estate, on the other. Although the Marcelo family, in particular the compulsory heirs of Jose, Sr., hold equity in the corporations mentioned in the inventory, considering that the corporations are family owned by the Marcelos’, these corporations are different juridical persons with separate and distinct personalities from the Marcelo patriarch, the decedent, Jose, Sr.18chanrobleslaw More importantly, the liquidation scheme appears yet to be effected, the actual partition of the estate, where each heir separately holds his share in the estate as that which already belongs to him, remains intangible and the ultimate distribution to the heirs still held in abeyance pending payment of estate taxes.19chanrobleslaw Significantly, even the Liquidation of the Inventory of Jose, Sr.’s estate states that the valuation amount of the shares of stock as listed therein is based on par value, which may have varied given the passage of time. The same document delivers a very important notation that the equal distribution of the listed assets of the estate will depend on the actual selling price of these assets less taxes and other deductions: Above assets will be distributed equally by the four (4) [compulsory heirs] depending if these will be sold or not. It is very important to note that equal distribution will be based on actual selling price minus taxes and other deduction if any, on the above inventories of estate properties.20 To date, more than a decade has passed since the intestate proceedings were archived, thus, affecting the value of the estate’s assets. From all of the foregoing, it is apparent that the intestate proceedings involving Jose, Sr.’s estate still requires a regular administrator to finally settle the estate and distribute remaining assets to the heirs of the decedent. We now come to the issue of whether Jose, Jr. may be appointed as regular administrator despite the previous Order of the RTC on 13 December 1991, affirmed by the appellate court and this Court in G.R. No. 123883, that as between Jose, Jr. and Edward, the latter was better suited to act as regular administrator of their father’s estate. Stated differently, whether Jose, Jr.’s previous nonappointment as regular administrator of Jose, Sr.’s estate bars his present appointment as such even in lieu of Edward who is now dead. A close scrutiny of the records reveals that in all of Jose, Jr.’s pleadings opposing Edward’s

appointment as regular administrator, he simultaneously prayed for his appointment as regular administrator of their father’s estate. In short, he proffered his competence and qualification to be appointed as regular administrator as a legal issue for resolution of the courts. Essentially, Jose, Jr. was weighed and found wanting by the RTC, the appellate court, and this Court. In its 13 December 1991 Order, the RTC categorically ruled on who between Edward and Jose, Jr. was fit to administer the estate of Jose, Sr., framing the issue in this wise: The [c]ourt’s choice as to who among the [compulsory heirs] will be appointed regular administrator of the estate of Jose, Sr. is now limited to Edward and Jose, Jr. in view of the withdrawal of Helen T. Marcelo. It is this [c]ourt’s observation that the continuous internal wranglings between the heirs would achieve nothing. In the meantime, the estate of the late Jose, Marcelo, Sr. is dragged further into the quagmire of dissipation and loss. It would not be amiss to state that the animosity among the interested [petitioners therein], Edward and Jose, Jr. have considerably increased since the filing of their respective petitions, but the [c]ourt on the basis of their qualifications will have to decide whom to appoint as regular administrator. Willingness to act and/or serve as regular administrator is no longer in issue here as both applicants are undoubtedly willing to serve as such. However, after subjecting the evidence, both testimonial and documentary to careful judicial study, this [c]ourt now resolves as it hereby resolves to appoint Edward T. Marcelo as regular administrator of the estate of the late Jose, Sr. As aptly cited by petitioner, Edward T. Marcelo, there can be no adverse conclusion that may be inferred from the withdrawal of a petition or nomination. While it may be true that initially the petition for the issuance of letters testamentary was filed by Marcelo Investment and Management Corporation (MIMCO for brevity) and by Danilo O. Ibay as nominee of Edward and George Marcelo, the same did not constitute a waiver on the part of Edward T. Marcelo. This can be gleaned from the withdrawal of the nomination of Danilo O. Ibay and the subsequent filing of Edward T. Marcelo of his petition for the appointment as legal administrator on September 14, 1989. Further, nowhere in the provisions of the Revised Rules of Court is such a nomination of a party other than a compulsory heir prohibited. The documents presented by Jose, Jr. purporting to show that the deceased had other assets other than those enumerated in the original petition filed by MIMCO and which should have been included in the estate cannot be accorded any weight or credence by this [c]ourt, as the individual who supposedly prepared the document was never identified and the sources of information not disclosed. Upon the other hand, the petition filed by MIMCO was based on the Financial Statements prepared by an independent auditor, A. F. Pablo and Associates. On the basis of the information provided by MIMCO in the original petition, this [c]ourt can determine the probable value and nature of the estate of the deceased Jose P. Marcelo, Sr. There is no argument that both Edward and Jose, Jr. are willing to serve as regular administrator but undoubtedly, Edward appears to be more responsible and competent that his younger brother, Jose, Jr. This is bolstered by the fact that the family corporations and his own personal corporation are presently of sound financial condition. This success, the [c]ourt believes can be attributed to

the management skills and the sound management policies Edward has adopted throughout the years. Likewise, it can be deduced that among the four (4) children of Jose, Sr., it was Edward whom he trusted the most. The deceased valued the opinion of Edward on decisions that had to be made and he would have Edward around in his meetings to discuss matter relating to the corporations which he managed. Further, as can be gleaned from the evidence presented by Jose, Jr., it was Edward Marcelo who was appointed as trustee to vote the deceased’s share in a Marcelo Corporation, Polaris Marketing Corporation. It was also Edward who was made co-signatory when the deceased deposited money in the bank to be given to the children of Jose, Jr. It is thus quite evident that Edward was really the most trusted child of the deceased. Upon the other hand, this court looks with deep concern the manner by which Jose, Jr. treats the corporate properties of the Marcelo Group of Companies. Evidence shows that sometime October 21, 1998, Jose, Jr. took evidencing liabilities of the deceased and other pertinent records and up to the present has not returned them. Jose, Jr. cannot justify the taking of the records/or borrowing of the same by asserting that he is now keeping them in his capacity as Special Administrator as he was appointed Special Administrator only on September 21, 1989 whereas the records were “borrowed” as early as October 21, 1988. Be that as it may, what belies Jose, Jr.’s assertion is the fact that the records of the corporation which were allegedly “borrowed/taken” do not form part of the estate of Jose, Sr. but to the corporation from where they were taken. Likewise, it should be noted that the appointment of Jose, Jr. as one of the Special Administrators does not necessarily make him more qualified to be appointed as regular administrator. The records of the case will bear out, that the appointment of a Special Administrator was premised on the need to have someone, oversee, manage and preserve the estate of Jose, Sr., as there was the danger of the estate being dissipated. Moreover, the [c]ourt never touched on the issue of the qualifications of the applicants, as there was in fact, no evidence presented on the matter, other than the bare allegations of the applicants that they were all qualified to act as such.21 (Citations omitted) Notably, the decision of the trial court appointing Edward as the Administrator of the Estate of Jose, Sr., which decision had the imprimatur of a final resolution by this Court, was not merely a comparison of the qualifications of Edward and Jose, Jr., but a finding of the competence of Edward compared to the unfitness of Jose, Jr. As against this Order of the RTC, its subsequent opposite Order dated 6 January 2010 appointing Jose, Jr. as new regular administrator only had two (2) sentences to essentially reverse the previous findings. Contrary to the assertion of petitioners, there is no showing that the [c]ourt has previously declared [Jose, Jr.] unfit to be appointed as an administrator.cralawred x

x

x

x

In the sound judgment of the [c]ourt, [Jose, Jr.], a legitimate child of the decedent, appears to occupy a higher interest than Atty. Henry A. Reyes in administering the subject estate.22 The first sentence contained in the Order of 6 January 2010 is disproven by the definite finding of “deep concern” in the original Order. The second sentence does not amount to a finding of a qualification superior to that of the rest of the children of Jose, Sr.

In affirming the issuance of letters of administration to Jose, Jr., the appellate court dwelt largely on the considerable latitude allowed a probate court in the determination of a person’s suitability for the office of judicial administrator. The Court of Appeals only briefly delved into Jose, Jr.’s numerous attempts to be appointed regular administrator of Jose, Sr.’s estate which were all denied previously by the same probate court: The RTC Order dated 13 December 1991, as affirmed by this [c]ourt in Decision dated 30 March 1995, and by the Supreme Court in the Resolution dated 22 May 1996, did not declare [respondent] Jose, Jr. unfit to serve as administrator. What was ruled upon by the RTC, and affirmed by this [c]ourt, and by the Supreme Court, was the appointment of Edward as the administrator of Jose, Sr.’s estate, and the denial of [respondent] Jose, Jr.’s opposition to Edward’s appointment. Nowhere was there any categorical ruling, or a definite finding, that [respondent] Jose, Jr. was, unfit to execute the duties of the trust by reason of drunkenness, improvidence, or want of understanding or integrity, or by reason of conviction of an offense involving moral turpitude. Thus, there is no merit in [petitioners’] contention that the finding on the unfitness of [respondent] Jose, Jr. became binding, and precluded the RTC from appointing [respondent] Jose, Jr., as the new regular administrator of Jose, Sr.’s estate. Jurisprudence has long held that the selection of an administrator lies in the sound discretion of the trial court. The determination of a person’s suitability for the office of judicial administrator rests, to a great extent, in the sound judgment of the court exercising the power of appointment and said judgment is not to be interfered with on appeal unless the said court is clearly in error. The RTC did not err in appointing Jose, Jr. as the new administrator, even though his previous prayer for appointment was denied. Notably, by virtue of Edward’s death, the office of the regular administrator of Jose, Sr.’s estate was vacated, and it was within the jurisdiction of the RTC, as probate court, to appoint a new administrator.23 Evidently, the Court of Appeals like the RTC in its second order, closed its eyes on the facts detailed by the RTC in the first order. Considering the two (2) sets of conflicting rulings of the RTC and the Court of Appeals in the two stages of this litigation, we put into proper perspective the 13 December 1991 Order of the RTC appointing Edward over Jose, Jr. as regular administrator of their father’s estate, which Order was upheld by us in G.R. No. 123883. Section 1, Rule 78 of the Rules of Court provides for the general disqualification of those who wish to serve as administrator: SECTION 1. Who are incompetent to serve as executors or administrators.— No person is competent to serve as executor or administrator who:chanroblesvirtuallawlibrary (a) Is a minor; (b) Is not a resident of the Philippines; and Is in the opinion of the court unfit to execute the duties of the trust by reason of drunkenness, (c) improvidence, or want of understanding or integrity, or by reason of conviction of an offense involving moral turpitude.

Section 6 of the same rule, on the other hand, lists an order of preference in instances when there is a contest of who should be appointed administrator: SEC. 6. When and to whom letters of administration granted.— If no executor is named in the will, or the executor or executors are incompetent, refuse the trust, or fail to give bond, or a person dies intestate, administration shall be granted:chanroblesvirtuallawlibrary (a) To the surviving spouse, or next of kin, or both, in the discretion of the court, or to such person as such surviving spouse, or next of kin, requests to have appointed, if competent and willing to serve; (b) If such surviving spouse, or next of kin, or the person selected by them, be incompetent or unwilling, or if the surviving spouse, or next of kin, neglects for thirty (30) days after the death of the person to apply for the administration or to request that administration be granted to some other person, it may be granted to one or more of the principal creditors, if competent and willing to serve; (c) If there is no such creditor competent and willing to serve, it may be granted to such other person as the court may select. Because Edward and Jose, Jr. are both compulsory heirs of Jose, Sr., they were, at the time the issue of administration first cropped, equally preferred to administer Jose, Sr.’s estate. Necessarily, the courts also delved into the question of their suitableness and fitness to serve as administrator, preferring one over the other, framing it as Edward being more fit and suited to be administrator: 1. Edward has kept the Marcelo family corporations and his own in good financial condition; 2. The trust reposed by the decedent on Edward who voted on Jose, Sr.’s behalf in a Marcelo corporation; and 3. Edward being made a co-signatory for money deposited for Jose, Jr.’s own children. Plainly, the RTC in its Order dated 13 December 1991, found Edward competent to serve as regular administrator, more competent than Jose, Jr., preferred despite equal status in the Order of Preference, manifesting none of the disqualifications set by law. Still and all, the same Order likewise judged Jose, Jr.’s suitableness and fitness, or lack thereof, for the office of administrator, albeit in comparison with Edward and not with the rest of Jose, Sr.’s children. Jose, Jr. was not what Edward was. The fact however, that Edward was made co-signatory for money deposited for Jose, Jr.’s own children is a telling commentary against Jose, Jr.’s competence, if not integrity. Then too, the RTC in the original order made a specific finding, “[viewing it] with deep concern,” Jose, Jr.’s handling of the records of the Marcelo Group of Companies. It euphemistically called taking of the records evidencing liabilities of the decedent as “borrowed/taken.” However, the RTC noted that such cannot be justified as the records and other pertinent documents taken “do not form part of the estate of Jose P. Marcelo, Sr. but to the corporation from where they were taken.”ChanRoblesVirtualawlibrary Contrary to the recent rulings of the RTC and the Court of Appeals appointing Jose, Jr. as administrator, there is a previous and categorical ruling on Jose, Jr.’s fitness to serve as such:

It is Jose T. Marcelo’s position that he is more competent, qualified and suitable for the position of regular administrator. This, above all else is the main thrust of this second motion for reconsideration. However, the court in the exercise of its sound discretion after a consideration of the evidence adduced by both parties, ruled otherwise and instead appointed Edward T. Marcelo as regular administrator.cralawred x x x True, Jose T. Marcelo, Jr. was initially appointed as Special Administrator of the estate of their deceased father but the same was without the benefit of a hearing on the qualifications of the parties concerned. x x x This did not however confer on Jose Marcelo, Jr. as Special Administrator a better right to the office of regular administrator. x x x.cralawred x

x

x

x

The third assigned error raised by [Jose, Jr.] “that both trial judges erred in not appointing Special Administrator Jose T. Marcelo, Jr. as Regular Administrator considering his tested probity and competence as special administrator, his good name and integrity in accordance with the evidence,” is devoid of merit, as already discussed earlier. The findings of the lower court in this regard deserve full consideration x x x.24 Undoubtedly, there has been a declaration that Jose, Jr. is unfit and unsuitable to administer his father’s estate. To obviate further delay in the settlement of Jose, Sr.’s estate, we emphasize that such is already at the liquidation and distribution stage which project of partition had long been conformed to by the parties. We note that this case has been unnecessarily prolonged and resulted in added litigation by the non-payment of estate taxes which is the ultimate responsibility of the heirs having inchoate right in the estate, should there be assets remaining, to be partitioned and distributed. The inheritance tax is an obligation of the estate, indirectly the heirs: SECTION 1. When order for distribution of residue made. – When the debts, xxx, and inheritance tax, if any, chargeable to the estate in accordance with law, have been paid, xxx. No distribution shall be allowed until payment of the obligations above mentioned has been made or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs.25 Given the factual considerations that led to the prior findings on the unfitness of Jose, Jr. to act as regular administrator; the Affidavit of Helen26 preferring George as administrator; and the conformity on record of the rest of Jose, Sr.’s heirs to George’s administration as reflected in petitioners’ Appellants’ Brief before the Court of Appeals: More importantly, consistent with Section 6, Rule 78 of the Rules of Court, not only is George the eldest son of Jose, Sr. and, therefore, his most immediate kin, he has, moreover, been chosen by the rest of the heirs of Jose, Sr. to perform the functions of an administrator. In this regard, in

addition to George and the heirs of Edward, Helen executed an Affidavit to manifest her opposition to Jose, Jr. and to support the appointment of George and herself as joint administrators, a copy of which was given to the [Court of Appeals.]27 we thus issue Letters of Administration to George to facilitate and close the settlement of Jose, Sr.’s estate.28chanrobleslaw WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 95219 and the Order dated 6 January 2010 of the Regional Trial Court, Branch 76, Quezon City in S.P. Proc. No. Q-88-1448 are REVERSED and SET ASIDE. Letters of Administration shall issue to George T. Marcelo upon payment of a bond to be set by the Regional Trial Court, Branch 76, Quezon City. The Regional Trial Court, Branch 76, Quezon City is likewise directed to complete the settlement of the decedent’s, Jose T. Marcelo, Sr.’s, estate with dispatch starting from an Order setting a deadline for the parties to pay the estate taxes and to inform this Court when such has been paid. SO ORDERED.cra

49.DIZON vs. CTA | APRIL 30, 2008 Facts: 1. Jose P. Fernandez (Jose) died. Thereafter, a petition for the probate of his will was filed. 2. The probate court then appointed retired Justice Dizon and petitioner, Atty. Rafael Arsenio P. Dizon as Special and Assistant Special Administrator. 3. Justice Dizon informed respondent Commissioner of the Bureau of Internal Revenue (BIR) of the special proceedings for the Estate. 4. Petitioner alleged that several requests for extension of the period to file the required estate tax return were granted by the BIR since the assets of the estate, as well as the claims against it, had yet to be collated, determined and identified. 5. Justice Dizon authorized Atty. Gonzales) to sign and file on behalf of the Estate the required estate tax return and to represent the same in securing a Certificate of Tax Clearance. 6. Atty. Gonzales wrote a letter addressed to the BIR Regional Director and filed the estate tax return with the same BIR Regional Office, showing therein a NIL estate tax liability. 7. BIR Regional Director issued Certification stating that the taxes due on the transfer of real and personal properties of Jose had been fully paid and said properties may be transferred to his heirs. 8. Petitioner requested the probate court's authority to sell several properties forming part of the Estate, for the purpose of paying its creditors. However, the Assistant Commissioner for

Collection of the BIR, issued Estate Tax Assessment Notice demanding the payment of P66,973,985.40 as deficiency estate tax. 9. Atty. Gonzales moved for the reconsideration of the said estate tax assessment but the BIR Commissioner denied the request. So petitioner filed a petition for review before the CTA. 10. During the hearings conducted, petitioner did not present testimonial evidence but merely documentary evidence consisting of the following: a. b. c. d. e. f.

Letter to CIR informing them of the probate proceedings Petition for probate of will and issuance of letter of administration Inventory Several claims against the estate Estate tax return Certification of Payment of Taxes

11. Respondent's [BIR] counsel presented one witness in the person of Alberto Enriquez, who was one of the revenue examiners who conducted the investigation on the estate tax case of Jose. In the course of the direct examination of the witness, he identified the following: a. Estate tax return prep by BIR b. Demand Letter c. Assessment Notice d. Etc….. 12. CTA: denied pet. For review Citing this Court's ruling in Vda. de Oñate v. Court of Appeals, the CTA opined that the aforementioned pieces of evidence introduced by the BIR were admissible in evidence. a. Although the above-mentioned documents were not formally offered as evidence for respondent, considering that respondent has been declared to have waived the presentation thereof during the hearing on March 20, 1996, still they could be considered as evidence for respondent since they were properly identified during the presentation of respondent's witness, whose testimony was duly recorded as part of the records of this case. Besides, the documents marked as respondent's exhibits formed part of the BIR records of the case. b. the CTA did not fully adopt the assessment made by the BIR and it came up with its own computation of the deficiency estate tax.= P 37,419,493.7 13. Petitioner filed a pet. For review with the CA. CA: Affirmed CTA; the petitioner's act of filing an estate tax return with the BIR and the issuance of BIR Certification Nos. 2052 and 2053 did not deprive the BIR Commissioner of her authority to re-examine or re-assess the said return filed on behalf of the Estate. MR denied Issue: WON the CTA and the CA gravely erred in allowing the admission of the pieces of evidence which were not formally offered by the BIR

Contentions: Petitioner- claims that in as much as the valid claims of creditors against the Estate are in excess of the gross estate, no estate tax was due; that the lack of a formal offer of evidence is fatal to BIR's cause; that the doctrine laid down in Vda. de Oñate has already been abandoned in a long line of cases in which the Court held that evidence not formally offered is without any weight or value; that Section 34 of Rule 132 of the Rules on Evidence requiring a formal offer of evidence is mandatory in character; that, while BIR's witness Alberto Enriquez (Alberto) in his testimony before the CTA identified the pieces of evidence aforementioned such that the same were marked, BIR's failure to formally offer said pieces of evidence and depriving petitioner the opportunity to cross-examine Alberto, render the same inadmissible in evidence; that assuming arguendo that the ruling in Vda. de Oñate is still applicable, BIR failed to comply with the doctrine's requisites because the documents herein remained simply part of the BIR records and were not duly incorporated in the court records Respondent- counters that the documents, being part of the records of the case and duly identified in a duly recorded testimony are considered evidence even if the same were not formally offered; Held: Yes No evidentiary value can be given the pieces of evidence submitted by the BIR, as the rules on documentary evidence require that these documents must be formally offered before the CTA. The CTA and the CA rely solely on the case of Vda. de Oñate, which reiterated this Court's previous rulings in People v. Napat-a and People v. Mate on the admission and consideration of exhibits which were not formally offered during the trial. Although in a long line of cases many of which were decided after Vda. de Oñate, we held that courts cannot consider evidence which has not been formally offered, nevertheless, petitioner cannot validly assume that the doctrine laid down in Vda. de Oñate has already been abandoned. Recently, in Ramos v. Dizon, this Court, applying the said doctrine, ruled that the trial court judge therein committed no error when he admitted and considered the respondents' exhibits in the resolution of the case, notwithstanding the fact that the same were not formally offered. Indubitably, the doctrine laid down in Vda. De Oñate still subsists in this jurisdiction. In Vda. de Oñate, we held that: From the foregoing provision, it is clear that for evidence to be considered, the same must be formally offered. Corollarily, the mere fact that a particular document is identified and marked as an exhibit does not mean that it has already been offered as part of the evidence of a party. Xxx However, in People v. Napat-a citing People v. Mate, we relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the trial court provided the following requirements are present, viz.: first, the same must have been duly identified by testimony duly recorded and, second, the same must have been incorporated in the records of the case.

From the foregoing declaration, however, it is clear that Vda. de Oñate is merely an exception to the general rule. Being an exception, it may be applied only when there is strict compliance with the requisites mentioned therein; otherwise, the general rule in Section 34 of Rule 132 of the Rules of Court should prevail. In this case, we find that these requirements have not been satisfied. The assailed pieces of evidence were presented and marked during the trial particularly when Alberto took the witness stand. Alberto identified these pieces of evidence in his direct testimony. He was also subjected to cross-examination and re-cross examination by petitioner. But Alberto's account and the exchanges between Alberto and petitioner did not sufficiently describe the contents of the said pieces of evidence presented by the BIR. In fact, petitioner sought that the lead examiner, one Ma. Anabella A. Abuloc, be summoned totestify, inasmuch as Alberto was incompetent to answer questions relative to the working papers. The lead examiner never testified. Moreover, while Alberto's testimony identifying the BIR's evidence was duly recorded, the BIR documents themselves were not incorporated in the records of the case. A common fact threads through Vda. de Oñate and Ramos that does not exist at all in the instant case. In the aforementioned cases, the exhibits were marked at the pre-trial proceedings to warrant the pronouncement that the same were duly incorporated in the records of the case. Thus, we held in Ramos: In this case, we find and so rule that these requirements have been satisfied. The exhibits in question were presented and marked during the pre-trial of the case thus, they have been incorporated into the records. Further, Elpidio himself explained the contents of these exhibits when he was interrogated by respondents' counsel... While the CTA is not governed strictly by technical rules of evidence, as rules of procedure are not ends in themselves and are primarily intended as tools in the administration of justice, the presentation of the BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of BIR's claims against the Estate. The BIR's failure to formally offer these pieces of evidence, despite CTA's directives, is fatal to its cause. Such failure is aggravated by the fact that not even a single reason was advanced by the BIR to justify such fatal omission. This, we take against the BIR. Per the records of this case, the BIR was directed to present its evidence[48] in the hearing of February 21, 1996, but BIR's counsel failed to appear.[49] The CTA denied petitioner's motion to consider BIR's presentation of evidence as waived, with a warning to BIR that such presentation would be considered waived if BIR's evidence would not be presented at the next hearing. Again, in the hearing of March 20, 1996, BIR's counsel failed to appear.[50] Thus, in its Resolution[51] dated March 21, 1996, the CTA considered the BIR to have waived presentation of its evidence. In the same Resolution, the parties were directed to file their respective memorandum. Petitioner complied but BIR failed to do so.[52] In all of these proceedings, BIR was duly notified. Hence, in this case, we are constrained to apply our ruling in Heirs of Pedro Pasag v. Parocha:[53]

A formal offer is necessary because judges are mandated to rest their findings of facts and their judgment only and strictly upon the evidence offered by the parties at the trial. Its function is to enable the trial judge to know the purpose or purposes for which the proponent is presenting the evidence. On the other hand, this allows opposing parties to examine the evidence and object to its admissibility. Moreover, it facilitates review as the appellate court will not be required to review documents not previously scrutinized by the trial court. Strict adherence to the said rule is not a trivial matter. The Court in Constantino v. Court of Appeals ruled that the formal offer of one's evidence is deemed waived after failing to submit it within a considerable period of time. It explained that the court cannot admit an offer of evidence made after a lapse of three (3) months because to do so would "condone an inexcusable laxity if not non-compliance with a court order which, in effect, would encourage needless delays and derail the speedy administration of justice." Applying the aforementioned principle in this case, we find that the trial court had reasonable ground to consider that petitioners had waived their right to make a formal offer of documentary or object evidence. Despite several extensions of time to make their formal offer, petitioners failed to comply with their commitment and allowed almost five months to lapse before finally submitting it. Petitioners' failure to comply with the rule on admissibility of evidence is anathema to the efficient, effective, and expeditious dispensation of justice. *other issue: It is admitted that the claims of the Estate's aforementioned creditors have been condoned. Verily, the second issue in this case involves the construction of Section 79 of the NIRC which provides for the allowable deductions from the gross estate of the decedent. The specific question is whether the actual claims of the aforementioned creditors may be fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were reduced or condoned through compromise agreements entered into by the Estate with its creditors.

We express our agreement with the date-of-death valuation rule. Xxx the claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable deductions.

50. PHILAM LIFE vs. SECRETARY OF FINANCE | NOVEMBER 24,2014 Philam Life sold its shares in Philam Care Health Systems to STI Investments Inc., the highest bidder. After the sale was completed, Philam life applied for a tax clearance and was informed by BIR that there is a need to secure a BIR Ruling due to a potential donor’s tax liability on the sold shares. ISSUE on DONOR’S TAX: W/N the sales of shares sold for less than an adequate consideration be subject to donor’s tax?

PETITIONER’S CONTENTION: The transaction cannot attract donor’s tax liability since there was no donative intent and, ergo, no taxable donation, citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009; that the shares were sold at their actual fair market value and at arm’s length; that as long as the transaction conducted is at arm’s length––such that a bonafide business arrangement of the dealings is done in the ordinary course of business––a sale for less than an adequate consideration is not subject to donor’s tax; and that donor’s tax does not apply to sale of shares sold in an open bidding process. CIR DENYING THE REQUEST: Through BIR Ruling No. 015-12. As determined by the Commissioner, the selling price of the shares thus sold was lower than their book value based on the financial statements of Philam Care as of the end of 2008. The Commissioner held donor’s tax became imposable on the price difference pursuant to Sec. 100 of the National Internal Revenue Code (NIRC): SEC. 100. Transfer for Less Than Adequate and full Consideration. - Where property, other than real property referred to in Section 24(D), is transferred for less than an adequate and full consideration in money or money’s worth, then the amount by which the fair market value of the property exceeded the value of the consideration shall, for the purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year. RULING: The price difference is subject to donor’s tax. Petitioner’s substantive arguments are unavailing. The absence of donative intent, if that be the case, does not exempt the sales of stock transaction from donor’s tax since Sec. 100 of the NIRC categorically states that the amount by which the fair market value of the property exceeded the value of the consideration shall be deemed a gift. Thus, even if there is no actual donation, the difference in price is considered a donation by fiction of law. Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters for determining the “fair market value” of a sale of stocks. Such issuance was made pursuant to the Commissioner’s power to interpret tax laws and to promulgate rules and regulations for their implementation. Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being applied retroactively in contravention to Sec. 246 of the NIRC.26 Instead, it merely called for the strict application of Sec. 100, which was already in force the moment the NIRC was enacted. ISSUE on TAX REMEDIES: The issue that now arises is this––where does one seek immediate recourse from the adverse ruling of the Secretary of Finance in its exercise of its power of review under Sec. 4?

Petitioner essentially questions the CIR’s ruling that Petitioner’s sale of shares is a taxable donation under Sec. 100 of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely questioned incidentally since it was used by the CIR as bases for its unfavourable opinion. Clearly, the Petition involves an issue on the taxability of the transaction rather than a direct attack on the constitutionality of Sec. 100, Sec.7 (c.2.2.) of RR 06-08 and RMC 25-11. Thus, the instant Petition properly pertains to the CTA under Sec. 7 of RA 9282. As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers are now at a quandary on what mode of appeal should be taken, to which court or agency it should be filed, and which case law should be followed. Petitioner’s above submission is specious (erroneous). CTA, through its power of certiorari, to rule on the validity of a particular administrative rule or regulation so long as it is within its appellate jurisdiction. Hence, it can now rule not only on the propriety of an assessment or tax treatment of a certain transaction, but also on the validity of the revenue regulation or revenue memorandum circular on which the said assessment is based.

Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition not only contested the applicability of Sec. 100 of the NIRC over the sales transaction but likewise questioned the validity of Sec. 7(c.2.2) of RR 06-08 and RMC 25-11 does not divest the CTA of its jurisdiction over the controversy, contrary to petitioner’s arguments. 51. BIR vs. CA | NOVEMBER 14, 2014 Facts: Antonio Villan Manly... stockholder and the Executive Vice-President... family-owned corporation... engaged in rental business. BIR) issued Letter of Authority... petitioner issued a letter[9] to respondent spouses requiring them to submit documentary evidence to substantiate the source of their cash purchase of a 256square meter log cabin in Tagaytay City worth P17,511,010.00. spouses,... however, failed to comply with the letter... revenue officers executed a Joint Affidavit[11] alleging that respondent Antonio's reported or declared annual income for the taxable years 1998-2003... despite his modest income for the said years, respondent spouses were able to purchase in cash the following properties... luxurious vacation house P17,511,010.00 Toyota RAV4 P1,350,000.00 Toyota Prado P2,000,000.0... revenue officers concluded that respondent Antonio's Income Tax Returns (ITRs) for taxable years 2000, 2001, and 2003 were underdeclared. since the underdeclaration... exceeded 30% of the reported or declared income, it was considered a prima facie evidence of fraud with intent to evade the payment of proper taxes due to the government.

prima facie evidence of fraud with intent to evade the payment... revenue officers, thus, recommended the filing of criminal cases... failing to supply correct and accurate information in their ITRs Respondent spouses, in their Joint Counter-Affidavit,[24] denied the accusations... t they used their accumulated savings from their earnings for the past 24 years in purchasing the properties. criminal complaint should be dismissed because petitioner failed to issue a deficiency assessment against them State Prosecutor... recommending the filing of criminal charges Attempt to Evade or Defeat Tax Failure to Supply Correct and Accurate Information for taxable years 2000, 2001 and 2003; Failure to Pay Petitioner contends that in filing a criminal case for tax evasion, a prior computation or assessment of tax is not required because... the crime is complete when the violator knowingly and willfully filed a fraudulent return with intent to evade a part or all of the tax. Petition should be dismissed as petitioner availed of the wrong remedy in filing a Petition for Certiorari under Rule 65... petitioner miserably failed to prove that a tax is actually due. Neither was it able to show the... source of the alleged unreported or undeclared income as required by Revenue Memorandum Order No. 15-95, Guidelines and Investigative Procedures in the Development of Tax Fraud Cases for Internal Revenue Officers. Issues: CATEGORICAL FINDING OF THE EXACT AMOUNT OF TAX DUE FROM THE PRIVATE RESPONDENT SHOULD BE SPECIFICALLY ALLEGED SINCE THE BIR FAILED TO MAKE SUCH FINDINGS THEY CONSEQUENTLY FAILED TO BUILD A CASE FOR TAX EVASION DESPITE THE WELL ESTABLISHED DOCTRINE THAT IN TAX EVASION CASES, A PRECISE COMPUTATION OF THE [TAX] DUE IS NOT NECESSARY. Ruling: reversed the Resolution of the State Prosecutor... found no willful failure to pay or attempt to evade or defeat the tax... petitioner's failure to issue a deficiency tax assessment against respondent... spouses which is a prerequisite to the filing of a criminal case for tax evasion. disagreed that an assessment is a condition sine qua non in filing a criminal case for tax evasion... there was no probable cause to charge respondent spouses as petitioner allegedly failed to state their exact tax liability and to show sufficient proof of their likely source of income. before one could be prosecuted for... tax evasion, the fact that a tax is due must first be proved SEC. 254. Attempt to Evade or Defeat Tax Any person who willfully attempts... in any manner to evade or defeat any tax... x imposed... in addition to other penalties... upon conviction... fine of not less than Thirty thousand pesos (P30,000.00) but not more than One hundred thousand pesos (P100,000.00)... imprisonment of not less than two (2) years but not more than four (4) years:... conviction or acquittal obtained under this Section... shall not be a bar to the filing of a civil suit for the collection of taxes. SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax, Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation... willfully fails to pay such tax, make such return, keep such record, or supply such correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation at... the time or times required by law or rules and regulations... fine of not less than Ten thousand pesos

(P10,000.00) and suffer imprisonment of not less than one (1) year but not more... than ten (10) years. tax evasion is deemed complete when the violator has knowingly and willfully filed a fraudulent return with intent to evade and defeat a part or all of the tax. required in a criminal prosecution for tax evasion... although a deficiency assessment is not... necessary, the fact that a tax is due must first be proved before one can be prosecuted for tax evasion A method commonly used by the government is the expenditure method, which is a method of reconstructing a taxpayer's income by deducting the aggregate yearly expenditures from the declared... yearly income... when the amount of the money that a taxpayer spends during a given year exceeds his reported or declared income and the source of such money is unexplained, it may be inferred that such expenditures... represent unreported or undeclared income. since the underdeclaration is more than 30% of respondent spouses' reported or declared income NIRC constitutes as prima facie evidence of false or fraudu... fraudulent retur... petitioner recommended the filing of criminal cases against... respondent spouses under Sections 254 and 255, in relation to Section 248(B) of the NIRC. amount of tax due from respondent spouses was specifically alleged in the Complaint-Affidavit... computation, as well as the method used in determining the tax liability, was also clearly explained. The revenue officers likewise showed that the... underdeclaration exceeded 30% of the reported or declared income. asked respondent [Antonio] if we can proceed to his rented property to [appraise] the earning... capacity of the building [for] lease/ rent, but he declined our proposition. revenue officers considered respondent Antonio's rental business to be the likely source of their unreported or undeclared income due to his unjustified refusal to allow the revenue officers to inspect the building. by just looking at the tables presented by petitioner, there is a manifest showing that respondent spouses had underdeclared their income... we are convinced that there is probable cause to indict respondent spouses for tax evasion as petitioner was able to show that a tax is due from them. however, that we are only here to determine probable cause. As to whether respondent spouses are guilty of tax evasion is an issue that must be resolved during the trial of the criminal case, where the quantum of proof required is proof beyond reasonable... doubt. 52. WINEBRENNER & INIGO INSURANCE BROKERS, INC vs. CIR | JANUARY 28, 2015 In this petition for review under Rule 45 of the Rules of Court and Rule 16 of the Revised Rules of the Court of Tax Appeals, Winebrenner & Iñigo Insurance Brokers, Inc. (petitioner) seeks the review of the March 22, 2013 Decision[1] of the Court of Tax Appeals En Banc (CTA-En Banc). In the said decision, the CTA-En Banc affirmed the denial of petitioner's judicial claim for refund or issuance of tax credit certificate for excess and unutilized creditable withholding tax (CWT) for the 1st to 4th quarter of calendar year (CY) 2003 amounting to P4,073,954.00. In denying the refund, the CTA-En Banc held that petitioner failed to prove that the excess CWT for CY 2003 was not carried over to the succeeding quarters of the subject taxable year. Under the 1997 National Internal Revenue Code (NIRC), a taxpayer must not have exercised the option to carry over the excess CWT for a particular taxable year in order to qualify for refund.

The Factual Antecedents On April 15, 2004, petitioner filed its Annual Income Tax Return for CY 2003. About two years thereafter or on April 7, 2006, petitioner applied for the administrative tax credit/refund claiming entitlement to the refund of its excess or unutilized CWT for CY 2003, by filing BIR Form No. 1914 with the Revenue District Office No. 50 of the Bureau of Internal Revenue (BIR). There being no action taken on the said claim, a petition for review was filed by petitioner before the CTA on April 11, 2006. The case was docketed as CTA Case No. 7440 and was raffled to the Special First Division (CTA Division). On April 13, 2010, CTA Division partially granted petitioner's claim for refund of excess and unutilized CWT for CY 2003 in the reduced amount of P2,737,903.34 in its April 13, 2010 Decision[2] (original decision). The dispositive portion of the decision reads:

In view of the foregoing, the Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDEREDto REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor of the petitioner in the reduced amount of P2,737,903.34 representing its excess/unutilized creditable withholding taxes for the year 2003. SO ORDERED.[3] Petitioner filed a Motion for Partial Reconsideration with Leave to Submit Supplemental Evidence. It prayed that an amended decision be issued granting the entirety of its claim for refund, or in the alternative, that it be allowed to submit and offer relevant documents as supplemental evidence. Respondent Commissioner of Internal Revenue (CIR) also moved for reconsideration, praying for the denial of the entire amount of refund because petitioner failed to present the quarterly Income Tax Returns (ITRs) for CY 2004. To the CIR, the presentation of the 2004 quarterly ITRs was indispensable in proving petitioner's entitlement to the claimed amount because it would prove that no carry-over of unutilized and excess CWT for the four (4) quarters of CY 2003 to the succeeding four (4) quarters of CY 2004 was made. In the absence of said ITRs, no refund could be granted. In the CIR's view, this was in accordance with the irrevocability rule under Section 76 of the NIRC which reads:

SEC. 76. Final Adjustment Return. Every corporation liable to tax under Section 27 shall file an adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year, the corporation shall either:

(A) Pay the balance of tax still due; or (B) Carry-over the excess credits; or (C) Be credited or refunded with the excess amount paid, as the case may be. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor. On July 27, 2011, the CTA-Division reversed itself. In an Amended Decision,[4] it denied the entire claim of petitioner. It reasoned out that petitioner should have presented as evidence its first, second and third quarterly ITRs for the year 2004 to prove that the unutilized CWT being claimed had not been carried over to the succeeding quarters. Thus:

WHEREFORE, in view of the foregoing, petitioner's Motion for Partial Reconsideration is hereby DENIED while respondent's Motion for Reconsideration is hereby GRANTED. Accordingly, the Decision dated April 13, 2010 granting petitioner's claim in the reduced amount of P2,737,903.34 is hereby REVERSED AND SET ASIDE. Consequently, the instant Petition for Review is hereby DENIED due to insufficiency of evidence. SO ORDERED.[5] Aggrieved, petitioner elevated the case to the CTA En Banc praying for the reversal of the Amended Decision of the CTA Division. In its March 22, 2013 Decision,[6] the CTA-En Banc affirmed the Amended Decision of the CTA-Division. It stated that before a cash refund or an issuance of tax credit certificate for unutilized excess tax credits could be granted, it was essential for petitioner to establish and prove, by presenting the quarterly ITRs of the succeeding years, that the excess CWT was not carried over to the succeeding taxable quarters considering that the option to carry over in the succeeding taxable quarters could not be modified in the final adjustment returns (FAR). Because petitioner did not present the first, second and third quarterly ITRs for CY 2004, despite having offered and submitted the Annual ITR/FAR for the same year, the CTA-En Banc stated that the petitioner failed to discharge its burden, hence, no refund could be granted. In justifying its conclusions, the CTA-En Banc cited its own case of Millennium Business Services, Inc. v. Commissioner of Internal Revenue (Millennium)[7] wherein it held as follows:

Since the burden of proof is upon the claimant to show that the amount claimed was not utilized or carried over to the succeeding taxable quarters, the presentation of the succeeding quarterly income tax return and final adjustment return is indispensable to prove that it did not carry over or utilized the claimed excess creditable withholding taxes. Absent thereof, there will be no basis for a taxpayer's claim for refund since there will be no evidence that the taxpayer did not carry

over or utilize the claimed excess creditable withholding taxes to the succeeding taxable quarters. Significantly, a taxpayer may amend its quarterly income tax return or annual income tax return or Final Adjustment Return, which in any case may modify the previous intention to carry-over, apply as tax credit certificate or refund, as the case may be. But the option to carry over in the succeeding taxable quarters under the irrevocability rule cannot be modified in its final adjustment return. The presentation of the final adjustment return does not shift the burden of proof that the excess creditable withholding tax was not utilized or carried over to the first three (3) taxable quarters. It remains with the taxpayer claimant. It goes without saying that final adjustment returns of the preceding and the succeeding taxable years are not sufficient to prove that the amount claimed was utilized or carried over to the first three (3) taxable quarters. The importance of the presentation of the succeeding quarterly income tax return and the annual income tax return of the subsequent taxable year need not be overly emphasized. All corporations subject to income tax, are required to file quarterly income tax returns, on a cumulative basis for the preceding quarters, upon which payment of their income tax has been made. In addition to the quarterly income tax returns, corporations are required to file a final or adjustment return on or before the fifteenth day of April. The quarterly income tax return, like the final adjustment return, is the most reliable firsthand evidence of corporate acts pertaining to income taxes, as it includes the itemization and summary of additions to and deductions from the income tax due. These entries are not without rhyme or reason. They are required, because they facilitate the tax administration process, and guide this Court to the veracity of a petitioner's claim for refund without which petitioner could not prove with certainty that the claimed amount was not utilized or carried over to the succeeding quarters or the option to carry over and apply the excess was effectively chosen despite the intent to claim a refund. In the same vein, if the government wants to disprove that the excess creditable withholding tax was not utilized or carried over to the succeeding taxable quarters, the presentation of the succeeding quarterly income tax return and the annual income tax return of the subsequent taxable year indicating utilization or carrying over are [sic] indispensible. However, the claimant must first establish its claim for refund, such that it did not utilize or carry over or that it opted to utilize and carry over to the 1st, 2nd, 3rd quarters and final adjustment return of the succeeding taxable year. Concomitantly, the presentation of the quarterly income tax return and the annual income tax return to prove the fact that excess creditable withholding tax was not utilized or carried over or opted to be utilized and carried over to the 1st, 2nd, 3rd quarters and final adjustment return of the succeeding taxable quarter is not only for convenience to facilitate the tax administration process but it is part of the requisites to establish the claim for refund. Section 76 of the NIRC of 1997 provides that if the taxpayer claimant carries over and applies the excess quarterly income tax against the income tax due for the taxable quarters of the succeeding taxable years, the same is irrevocable and no application for cash refund or issuance of a tax credit certificate shall be allowed.[8]

Hence, this petition. Noteworthy is the fact that the CTA-En Banc ruling was met with two dissents from Associate Justices Juanito C. Castañeda (Justice Castañeda) and Esperanza R. Fabon-Victorino (Justice Fabon-Victorino). In his Dissenting Opinion[9] which was concurred in by Justice Fabon-Victorino, Justice Castañeda expressed the view that the CTA-En Banc should have reinstated the CTA-Division's original decision because in the cases of Philam Asset Management Inc. v. Commissioner of Internal Revenue (Philam);[10] State Land Investment Corporation v. Commissioner of Internal Revenue (State Land);[11]Commissioner of Internal Revenue v. PERF Realty Corporation (PERF Realty);[12] and Commissioner of Internal Revenue v. Mirant (Philippines) Operations, Corporation (Mirant),[13] this Court already ruled that requiring the ITR or the FAR for the succeeding year in a claim for refund had no basis in law and jurisprudence. According to him, the submission of the FAR of the succeeding taxable year was not required under the law to prove the claimant's entitlement to excess or unutilized CWT, and by following logic, the submission of quarterly income tax returns for the subsequent taxable period was likewise unnecessary. He found no justifiable reason not to follow the existing rulings of this Court. Petitioner's reasoning in this petition echoes the dissenting opinion of Justice Castaneda. It further submits that despite the non-presentation of the quarterly ITRs, it has sufficiently shown that the excess CWT for CY 2003 was not carried over or applied to its income tax liabilities for CY 2004, as shown in the Annual ITR for 2004 it submitted. Thus, petitioner insists that its refund should have been granted. Petitioner further avers, in its Reply,[14] that even if Millennium Business case was applicable, such must be given prospective effect considering that this case was litigated on the basis of the doctrines laid down in Philam, State Land and PERF Realty cases wherein the submission of quarterly ITRs in a case for tax refund was held by this Court as not mandatory. In its Comment,[15] the CIR counters that even if the taxpayer signifies the option for either tax refund or carry-over as tax credit, this does not ipso facto confer the right to avail of the option immediately. There is a need, according to the CIR, for an investigation to ascertain the correctness of the corporate returns and the amount sought to be credited; and part of which is to look into the quarterly returns so that it may be determined whether or not excess and unutilized CWT was carried over into the succeeding quarters of the next taxable year. Because the pertinent quarterly ITRs were not presented, the CIR submits that the petitioner failed to prove its right to a tax refund.

Issue The sole issue here is whether the submission and presentation of the quarterly ITRs of the succeeding quarters of a taxable year is indispensable in a claim for refund.

The Court's Ruling The Court recognizes, as it always has, that the burden of proof to establish entitlement to refund is on the claimant taxpayer.[16] Being in the nature of a claim for exemption,[17] refund is construed in strictissimi juris against the entity claiming the refund and in favor of the taxing power.[18] This is the reason why a claimant must positively show compliance with the statutory requirements provided for under the NIRC in order to successfully pursue one's claim. As implemented by the applicable rules and regulations and as interpreted in a vast array of decisions, a taxpayer who seeks a refund of excess and unutilized CWT must:

1) File the claim with the CIR within the two year period from the date of payment of the tax; 2) Show on the return that the income received was declared as part of the gross income; and 3) Establish the fact of withholding by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld.[19] The original decision of the CTA-Division made plain that the petitioner complied with the above requisites in so far as the reduced amount of P2,737,903.34 was concerned. In the amended decision, however, it was pointed out that because petitioner failed to present the quarterly ITRs of the subsequent year, there was an impossibility of determining compliance with the irrevocability rule under Section 76 of the NIRC as in those documents could be found evidence of whether the excess CWT was applied to its income tax liabilities in the quarters of 2004. The irrevocability rule under Section 76 of the NIRC means that once an option, either for refund or issuance of tax credit certificate or carry-over of CWT has been exercised, the same can no longer be modified for the succeeding taxable years.[20] For said reason, the CTA-En Banc affirmed the conclusion in the amended decision that because of the said impossibility, the claim for refund was not substantiated. The CIR agrees with the disposition of the CTA-En Banc, stressing that the petitioner failed to carry out the burden of showing that no carry-over was made when it did not present the quarterly ITRs for CY 2004. Petitioner disagrees, as the dissents did, that the non-submission of quarterly ITRs is fatal to its claim. Hence, the issue on the indispensability of quarterly ITRs of the succeeding taxable year in a claim for refund. The Court finds for the petitioner. There is no question that those who claim must not only prove its entitlement to the excess credits, but likewise must prove that no carry-over has been made in cases where refund is sought.

In this case, the fact of having carried over petitioner's 2003 excess credits to succeeding taxable year is in issue. According to the CTA-En Banc and the CIR, the only evidence that can sufficiently show that carrying over has been made is to present the quarterly ITRs. Some members of this Court adhere to the same view. The Court however cannot. Proving that no carry-over has been made does not absolutely require the presentation of the quarterly ITRs. In Philam, the petitioner therein sought for recognition of its right to the claimed refund of unutilized CWT. The CIR opposed the claim, on the grounds similar to the case at hand, that no proof was provided showing the non-carry over of excess CWT to the subsequent quarters of the subject year. In a categorical manner, the Court ruled that the presentation of the quarterly ITRs was not necessary. Therein, it was written:

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. First, 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. Indeed, any refundable amount indicated in the FAR of the preceding taxable year may be credited against the estimated income tax liabilities for the taxable quarters of the succeeding taxable year. However, nowhere is there even a tinge of a hint in any provisions of the [NIRC] that the FAR of the taxable year following the period to which the tax credits are originally being applied should also be presented to the BIR. Second, Section 5 of RR 12-94, amending Section 10(a) of RR 6-85, merely provides that claims for refund of income taxes deducted and withheld from income payments shall be given due course only (1) when it is shown on the ITR that the income payment received is being declared part of the taxpayer's gross income; and (2) when the fact of withholding is established by a copy of the withholding tax statement, duly issued by the payor to the payee, showing the amount paid and the income tax withheld from that amount. It has been submitted that Philam cannot be cited as a precedent to hold that the presentation of the quarterly income tax return is not indispensable as it appears that the quarterly returns for the succeeding year were presented when the petitioner therein filed an administrative claim for the refund of its excess taxes withheld in 1997. It appears however that there is misunderstanding in the ruling of the Court in Philam. That factual distinction does not negate the proposition that subsequent quarterly ITRs are not indispensable. The logic in not requiring quarterly ITRs of the succeeding taxable years to be presented remains true to this day. What Section 76 requires, just like in all civil cases, is to prove the prima facie entitlement to a claim, including the fact of not having carried over the excess credits to the subsequent quarters or taxable year. It does not say that to prove such a fact, succeeding quarterly ITRs are absolutely needed.

This simply underscores the rule that any document, other than quarterly ITRs may be used to establish that indeed the non-carry over clause has been complied with, provided that such is competent, relevant and part of the records. The Court is thus not prepared to make a pronouncement as to the indispensability of the quarterly ITRs in a claim for refund for no court can limit a party to the means of proving a fact for as long as they are consistent with the rules of evidence and fair play. The means of ascertainment of a fact is best left to the party that alleges the same. The Court's power is limited only to the appreciation of that means pursuant to the prevailing rules of evidence. To stress, what the NIRC merely requires is to sufficiently prove the existence of the non-carry over of excess CWT in a claim for refund. The implementing rules similarly support this conclusion, particularly Section 2.58.3 of Revenue Regulation No. 2-98 thereof. There, it provides as follows:

SECTION 2.58.3. Claim for Tax Credit or Refund. (A) The amount of creditable tax withheld shall be allowed as a tax credit against the income tax liability of the payee in the quarter of the taxable year in which income was earned or received. (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding tax statement duly issued by the payer to the payee showing the amount paid and the amount of tax withheld therefrom.

xxx xxx xxx Evident from the above is the absence of any categorical pronouncement of requiring the presentation of the succeeding quarterly ITRs in order to prove the fact of non-carrying over. To say the least, the Court rules that as to the means of proving it, It has no power to undulyrestrict it. In this case, it confounds the Court why the CTA did not recognize and discuss in detail the sufficiency of the annual ITR for 2004,[21]which was submitted by the petitioner. The CTA in fact said:

In the present case, while petitioner did offer its Annual ITR/Final Adjustment Return for taxable year 2004, it appears that petitioner miserably failed to submit and offer as part of its evidence the first, second, and third Quarterly ITRs for the year 2004. Consequently, petitioner was not able to prove that it did not exercise its option to carry-over its excess CWT.[22] Petitioner claims that the requirement of proof showing the non-carry over has been established in said document.

Indeed, an annual ITR contains the total taxable income earned for the four (4) quarters of a taxable year, as well as deductions and tax credits previously reported or carried over in the quarterly income tax returns for the subject period. A quick look at the Annual ITR reveals this fact:

Aggregate Income Tax Due Less Tax Credits/Payments Prior Year's excess Credits Taxes withheld Tax Payment (s) for the Previous Quarter (s) of the same taxable year other than MCIT xxx xxx xxx Creditable Tax Withheld for the Previous Quarter (s) Creditable Tax Withheld Per BIR Form No. 2307 for this Quarter xxx xxx xxx[23] It goes without saying that the annual ITR (including any other proof that may be sufficient to the Court) can sufficiently reveal whether carry over has been made in subsequent quarters even if the petitioner has chosen the option of tax credit or refund in the immediately 2003 annual ITR. Section 76 of the NIRC requires a corporation to file a Final Adjustment Return (or Annual ITR) covering the total taxable income for the preceding calendar or fiscal year. The total taxable income contains the combined income for the four quarters of the taxable year, as well as the deductions and excess tax credits carried over in the quarterly income tax returns for the same period. If the excess tax credits of the preceding year were deducted, whether in whole or in part, from the estimated income tax liabilities of any of the taxable quarters of the succeeding taxable year, the total amount of the tax credits deducted for the entire taxable year should appear in the Annual ITR under the item "Prior Year's Excess Credits." Otherwise, or if the tax credits were carried over to the succeeding quarters and the corporation did not report it in the annual ITR, there would be a discrepancy in the amounts of combined income and tax credits carried over for all quarters and the corporation would end up shouldering a bigger tax payable. It must be remembered that taxes computed in the quarterly returns are mere estimates. It is the annual ITR which shows the aggregate amounts of income, deductions, and credits for all quarters of the taxable year. It is the final adjustment return which shows whether a corporation incurred a loss or gained a profit during the taxable quarter.[24] Thus, the presentation of the annual ITR would suffice in proving that prior year's excess credits were not utilized for the taxable year in order to make a final determination of the total tax due. In this case, petitioner reported an overpayment in the amount of P7,194,213.00 in its annual ITR

for the year ended December 2003:

Annual ITR 2003 Income Tax Due Less: Prior Year's Excess Credits (2002 Annual ITR) Creditable Tax Withheld for the 4th Quarter Tax Payable / (Overpayment)

1,259,259.00 (4,379,518.00) (4,073,954.00) (7,194,213.00)

For the overpayment, petitioner chose the option "To be issued a Tax Credit Certificate." In its Annual ITR for the year ended December 2004, petitioner did not report the Creditable Tax Withheld for the 4th quarter of 2003 in the amount of P4,073,954.00 as prior year's excess credits. As shown in the 2004 ITR:

Annual ITR 2004 Income Tax Due Less: Prior Year's Excess Credits Creditable Tax Withheld for the 4th Quarter Tax Payable / (Overpayment)

1,321,409.00 (3,689,419.00) (2,368,010.00)

Verily, the absence of any amount written in the Prior Year excess Credit Tax Withheld portion of petitioner's 2004 annual ITR clearly shows that no prior excess credits were carried over in the first four quarters of 2004. And since petitioner was able to sufficiently prove that excess tax credits in 2003 were not carried over to taxable year 2004 by leaving the item "Prior Year's Excess Credits" as blank in its 2004 annual ITR, then petitioner is entitled to a refund. Unfortunately, the CTA, in denying entirely the claim, merely relied on the absence of the quarterly ITRs despite being able to verify the truthfulness of the declaration that no carry over was indeed effected by simply looking at the 2004 annual ITR. At this point, worth mentioning is the fact that subsequent cases affirm the proposition as correctly pointed out by petitioner. State Land, PERF and Mirant reiterated the rule that the presentation of the quarterly ITRs of the subsequent year is not mandatory on the part of the claimant to prove its claims. There are some who challenges the applicability of PERF in the case at bar. It is said that PERF is not in point because the Annual ITR for the succeeding year had actually been attached to PERF's motion for reconsideration with the CTA and had formed part of the records of the case. Clearly, if the Annual ITR has been recognized by this Court in PERF, why then would the submitted 2004 Annual ITR in this case be insufficient despite the absence of the quarterly ITRs? Why then would this Court require more than what is enough and deny a claim even if the minimum burden has been overcome? At best, the existence of quarterly ITRs would have the effect of strengthening a proven fact. And as such, may only be considered corroborative evidence, obviously not indispensable in character. PERF simply affirms that quarterly ITRs are

not indispensable, provided that there is sufficient proof that carrying over excess CWT was not effected. Stateland and Mirant are equally challenged. In all these cases however, the factual distinctions only serve to bolster the proposition that succeeding quarterly ITRs are not indispensable. Implicit from all these cases is the Court's recognition that proving carry-over is an evidentiary matter and that the submission of quarterly ITRs is but a means to prove the fact of one's entitlement to a refund and not a condition sine qua non for the success of refund. True, it would have been better, easier and more efficient for the CTA and the CIR to have as basis the quarterly ITRs, but it is not the only way considering further that in this case, the Annual ITR for 2004 is sufficient. Courts are here to painstakingly weigh evidence so that justice and equity in the end will prevail. It must be emphasized that once the requirements laid down by the NIRC have been met, a claimant should be considered successful in discharging its burden of proving its right to refund. Thereafter, the burden of going forward with the evidence, as distinct from the general burden of proof, shifts to the opposing party,[25] that is, the CIR. It is then the turn of the CIR to disprove the claim by presenting contrary evidence which could include the pertinent ITRs easily obtainable from its own files. All along, the CIR espouses the view that it must be given ample opportunity to investigate the veracity of the claims. Thus, the Court asks: In the process of investigation at the administrative level to determine the right of the petitioner to the claimed amount, did the CIR, with all its resources even attempt to verify the quarterly ITRs it had in its files? Certainly, it did not as the application was met by the inaction of the CIR. And if desirous in its effort to clearly verify petitioner's claim, it should have had the time, resources and the liberty to do so. Yet, nothing was produced during trial to destroy the prima facie right of the petitioner by counterchecking the claims with the quarterly ITRs the CIR has on its file. To the Court, it seems that the CIR languished on its duties to ascertain the veracity of the claims and just hoped that the burden would fall on the petitioner's head once the issue reaches the courts. This mindset ignores the rule that the CIR has the equally important responsibility of contradicting petitioner's claim by presenting proof readily on hand once the burden of evidence shifts to its side. Claims for refund are civil in nature and as such, petitioner, as claimant, though having a heavy burden of showing entitlement, need only prove preponderance of evidence in order to recover excess credit in cold cash. To review, "[P]reponderance of evidence is [defined as] the weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with the term 'greater weight of the evidence' or 'greater weight of the credible evidence.' It is evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto.[26] The CIR must then be reminded that in Philam, the CIR's "failure to present [the quarterly ITRs and AFR] to support its contention against the grant of a tax refund to [a claimant] is certainly fatal." PERF reinforces this with a sweeping statement holding that the verification process is not incumbent on PERF [or any claimant for that matter]; [but] is the duty of the CIR to verify whether xxx excess income taxes [have been carried over].

And should there be a possibility that a claimant may have violated the irrevocability rule and thereafter claim twice from its credits, no one is to be blamed but the CIR for not discharging its burden of evidence to destroy a claimant's right to a refund. At any rate, a claimant who defrauds the government cannot escape liability be it criminal or civil in nature. Verily, with the petitioner having complied with the requirements for refund, and without the CIR showing contrary evidence other than its bare assertion of the absence of the quarterly ITRs, copies of which are easily verifiable by its very own records, the burden of proof of establishing the propriety of the claim for refund has been sufficiently discharged. Hence, the grant of refund is proper. The Court does not, and cannot, however, grant the entire claimed amount as it finds no error in the original decision of the CTA Division granting refund to the reduced amount of P2,737,903.34. This finding of fact is given respect, if not finality, as the CTA,[27] which by the very nature of its functions of dedicating itself exclusively to the consideration of the tax problems has necessarily developed an expertise on the subject.[28] It being the case, the Court partly grants this petition to the extent of reinstating the April 23, 2010 original decision of the CTA Division. The Court reminds the CIR that substantial justice, equity and fair play take precedence over technicalities and legalisms. The government must keep in mind that it has no right to keep the money not belonging to it, thereby enriching itself at the expense of the law-abiding citizen[29] or entities who have complied with the requirements of the law in order to forward the claim for refund. Under the principle of solution indebiti provided in Article 2154 of the Civil Code, the CIR must return anything it has received.[30] Finally, even assuming that the Court reverses itself and pronounces the indispensability of presenting the quarterly ITRs to prove entitlement to the claimed refund, petitioner should not be prejudiced for relying on Philam. The CTA En Banc merely based its pronouncement on a case that does not enjoy the benefit of stare decis et non quieta movere which means "to adhere to precedents, and not to unsettle things which are established."[31] As between a CTA En Banc Decision (Millennium) and this Court's Decision (Philam), it is elementary that the latter should prevail. WHEREFORE, the Court partly grants the petition. The March 22, 2013 Decision of the Court of Tax Appeals En Banc is REVERSED. The April 13, 2010 Decision of the Court of Tax Appeals Special First Division is REINSTATED. Respondent Commissioner of Internal Revenue is ordered to REFUND to petitioner the amount of P2,737,903.34 as excess creditable withholding tax paid for taxable year 2003. SO ORDERED. 53. MITSUBISHI MOTORS PHILS CORP vs. BOC | JUNE 17,2015 The Facts

The instant case arose from a collection suit4 for unpaid taxes and customs duties in the aggregate amount of P46,844,385.00 filed by respondent against petitioner Mitsubishi Motors Philippines Corporation (petitioner) before the Regional Trial Court of Manila, Branch 17 (RTC), docketed as Civil Case No. 02-103763 (collection case). Respondent alleged that from 1997 to 1998, petitioner was able to secure tax credit certificates (TCCs) from various transportation companies; after which, it made several importations and utilized said TCCs for the payment of various customs duties and taxes in the aggregate amount of P46,844,385.00.5Believing the authenticity of the TCCs, respondent allowed petitioner to use the same for the settlement of such customs duties and taxes. However, a post-audit investigation of the Department of Finance revealed that the TCCs were fraudulently secured with the use of fake commercial and bank documents, and thus, respondent deemed that petitioner never settled its taxes and customs duties pertaining to the aforesaid importations.6 Thereafter, respondent demanded that petitioner pay its unsettled tax and customs duties, but to no avail. Hence, it was constrained to file the instant complaint.7chanrobleslaw In its defense,8 petitioner maintained, inter alia, that it acquired the TCCs from their original holders in good faith and that they were authentic, and thus, their remittance to respondent should be considered as proper settlement of the taxes and customs duties it incurred in connection with the aforementioned importations.9chanrobleslaw Initially, the RTC dismissed10 the collection case due to the continuous absences of respondent’s counsel during trial.11 On appeal to the CA,12 and eventually the Court,13 the said case was reinstated and trial on the merits continued before the RTC.14chanrobleslaw After respondent’s presentation of evidence, petitioner filed a Demurrer to Plaintiff’s Evidence15 on February 10, 2012, essentially contending that respondent failed to prove by clear and convincing evidence that the TCCs were fraudulently procured,16 and thus, prayed for the dismissal of the complaint.17 In turn, respondent filed an Opposition18 dated March 7, 2012 refuting petitioner’s contentions.

The RTC Ruling In an Order19 dated April 10, 2012, the RTC granted petitioner’s Demurrer to Plaintiff’s Evidence, and accordingly, dismissed respondent’s collection case on the ground of insufficiency of evidence.20 It found that respondent had not shown any proof or substantial evidence of fraud or conspiracy on the part of petitioner in the procurement of the TCCs.21 In this connection, the RTC opined that fraud is never presumed and must be established by clear and convincing evidence, which petitioner failed to do, thus, necessitating the dismissal of the complaint.22chanrobleslaw Respondent moved for reconsideration,23 which was, however, denied in an Order24 dated August 3, 2012. Dissatisfied, it appealed25 to the CA.

The CA Ruling In a Resolution26 dated June 7, 2013, the CA referred the records of the collection case to the CTA for proper disposition of the appeal taken by respondent. While the CA admitted that it had no jurisdiction to take cognizance of respondent’s appeal, as jurisdiction is properly lodged with the CTA, it nevertheless opted to relax procedural rules in not dismissing the appeal outright.27 Instead, the CA deemed it appropriate to simply refer the matter to the CTA, considering that the government stands to lose the amount of P46,844,385.00 in taxes and customs duties which can then be used for various public works and projects.28chanrobleslaw Aggrieved, petitioner filed a motion for reconsideration29 on June 23, 2013, arguing that since the CA does not have jurisdiction over respondent’s appeal, it cannot perform any action on it except to order its dismissal.30 The said motion was, however, denied in a Resolution31 dated November 4, 2013, hence, this petition.

The Issue Before the Court The core issue for the Court’s resolution is whether or not the CA correctly referred the records of the collection case to the CTA for proper disposition of the appeal taken by respondent. The Court’s Ruling The petition is meritorious. Jurisdiction is defined as the power and authority of a court to hear, try, and decide a case.32 In order for the court or an adjudicative body to have authority to dispose of the case on the merits, it must acquire, among others, jurisdiction over the subject matter.33 It is axiomatic that jurisdiction over the subject matter is the power to hear and determine the general class to which the proceedings in question belong; it is conferred by law and not by the consent or acquiescence of any or all of the parties or by erroneous belief of the court that it exists.34 Thus, when a court has no jurisdiction over the subject matter, the only power it has is to dismiss the action.35chanrobleslaw Guided by the foregoing considerations and as will be explained hereunder, the Court finds that the CA erred in referring the records of the collection case to the CTA for proper disposition of the appeal taken by respondent. Section 7 of Republic Act No. (RA) 1125,36 as amended by RA 9282,37 reads:chanRoblesvirtualLawlibrary Sec. 7. Jurisdiction. – The CTA shall exercise:ChanRoblesVirtualawlibrary

xxxx c. Jurisdiction over tax collection cases as herein provided:ChanRoblesVirtualawlibrary xxxx 2. Exclusive appellate jurisdiction in tax collection cases:ChanRoblesVirtualawlibrary a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection cases originally decided by them in their respective territorial jurisdiction.chanroblesvirtuallawlibrary xxxx Similarly, Section 3, Rule 4 of the Revised Rules of the Court of Tax Appeals, as amended,38 states:chanRoblesvirtualLawlibrary Sec. 3. Cases within the jurisdiction of the Court in Divisions. – The Court in Divisions shall exercise:ChanRoblesVirtualawlibrary xxxx c. Exclusive jurisdiction over tax collections cases, to wit:ChanRoblesVirtualawlibrary xxxx 2. Appellate jurisdiction over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection cases originally decided by them within their respective territorial jurisdiction.chanroblesvirtuallawlibrary Verily, the foregoing provisions explicitly provide that the CTA has exclusive appellate jurisdictionover tax collection cases originally decided by the RTC. In the instant case, the CA has no jurisdiction over respondent’s appeal; hence, it cannot perform any action on the same except to order its dismissal pursuant to Section 2, Rule 5039 of the Rules of Court. Therefore, the act of the CA in referring respondent’s wrongful appeal before it to the CTA under the guise of furthering the interests of substantial justice is blatantly erroneous, and thus, stands to be corrected. In Anderson v. Ho,40 the Court held that the invocation of substantial justice is not a magic wand that would readily dispel the application of procedural rules,41viz.:chanRoblesvirtualLawlibrary x x x procedural rules are designed to facilitate the adjudication of cases. Courts and litigants alike are enjoined to abide strictly by the rules. While in certain instances, we allow a relaxation in the application of the rules, we never intend to forge a weapon for erring litigants to violate the rules with impunity. The liberal interpretation and application of rules apply only in proper cases of demonstrable merit and under justifiable causes and circumstances. While it is true that litigation is not a game of technicalities, it is equally true that every case must be prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy administration of justice. Party litigants and their counsels are well advised to abide by rather than flaunt, procedural rules for these rules illumine the path of the law and rationalize the pursuit of justice. 42 (Emphasis and underscoring supplied)

Finally, in view of respondent’s availment of a wrong mode of appeal via notice of appeal stating that it was elevating the case to the CA – instead of appealing by way of a petition for review to the CTA within thirty (30) days from receipt of a copy of the RTC’s August 3, 2012 Order, as required by Section 11 of RA 1125, as amended by Section 9 of RA 928243 – the Court is constrained to deem the RTC’s dismissal of respondent’s collection case against petitioner final and executory. It is settled that the perfection of an appeal in the manner and within the period set by law is not only mandatory, but jurisdictional as well, and that failure to perfect an appeal within the period fixed by law renders the judgment appealed from final and executory.44 The Court’s pronouncement in Team Pacific Corporation v. Daza45 is instructive on this matter, to wit:46cralawred Although appeal is an essential part of our judicial process, it has been held, time and again, that the right thereto is not a natural right or a part of due process but is merely a statutory privilege. Thus, the perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but also jurisdictional and failure of a party to conform to the rules regarding appeal will render the judgment final and executory. Once a decision attains finality, it becomes the law of the case irrespective of whether the decision is erroneous or not and no court — not even the Supreme Court — has the power to revise, review, change or alter the same. The basic rule of finality of judgment is grounded on the fundamental principle of public policy and sound practice that, at the risk of occasional error, the judgment of courts and the award of quasijudicial agencies must become final at some definite date fixed by law. WHEREFORE, the petition is GRANTED. Accordingly, the Resolutions dated June 7, 2013 and November 4, 2013 of the Court of Appeals (CA) in CA-G.R. CV No. 99594 are hereby REVERSED and SET ASIDE. Accordingly, a new one is entered DISMISSING the appeal of respondent Bureau of Customs to the Court of Appeals. SO ORDERED.

54. CIR vs. CTA AND PETRON CORP | JULY 15, 2015 The CIR asserts that the interpretation of the subject tax provision, i.e., Section 148 (e) of the NIRC, embodied in CMC No. 164-2012, is an exercise of her quasi-legislative function which is reviewable by the Secretary of Finance, whose decision, in turn, is appealable... to the Office of the President and, ultimately, to the regular courts, and that only her quasi judicial functions or the authority to decide disputed assessments, refunds, penalties and the like are subject to the exclusive appellate jurisdiction of the CTA.[20] She likewise contends that the petition suffers from prematurity due to Petron's failure to exhaust all available remedies within the administrative level in accordance with the Tariff and Customs Code (TCC). In asserting its jurisdiction over the present case, the CTA explained that Petron's petition filed before it "simply puts in question" the propriety or soundness of the CIR's interpretation and application of Section 148 (e) of the NIRC (as embodied in CMC No. 164-2012) "in... relation to" the imposition of excise tax on Petron's importation of alkylate; thus, the CTA posits that the case should be regarded as "other matters arising under [the NIRC]" under the second paragraph of Section 4 of the NIRC, therefore falling within the CTA's... jurisdiction:[26]

SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is... vested in the commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. Issues: The core issue to be resolved is whether or not the CTA properly assumed jurisdiction over the petition assailing the imposition of excise tax on Petron's importation of alkylate based on Section 148 (e) of the NIRC. Ruling: The petition is meritorious. Section 4 of the NIRC confers upon the CIR both: (a) the power to interpret tax laws in the exercise of her quasi-legislative function; and (b) the power to decide tax cases in the exercise of her quasi-judicial function. It also delineates the jurisdictional... authority to review the validity of the CIR's exercise of the said powers, thus: SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to... review by the Secretary of Finance. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is... vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. (Emphases and underscoring supplied) The CTA is a court of special jurisdiction, with power to review by appeal decisions involving tax disputes rendered by either the CIR or the COC. Conversely, it has no jurisdiction to determine the validity of a ruling issued by the CIR or the COC in the exercise of their... quasilegislative powers to interpret tax laws. These observations may be deduced from a reading of Section 7 of RA 1125,[22] as amended by RA 9282,[23] entitled "An Act Creating the Court of Tax Appeals," enumerating the cases over... which the CTA may exercise its jurisdiction: Sec. 7. Jurisdiction. - The CTA shall exercise:... a. Exclusive appellate jurisdiction to review by appeal, as herein provided: 1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws... administered by the Bureau of Internal Revenue; In this case, Petron's tax liability was premised on the COC's issuance of CMC No. 164-2012, which gave effect to the CIR's June 29, 2012 Letter interpreting Section 148 (e) of the NIRC as to include alkylate among the articles subject to customs duties, hence, Petron's petition... before the CTA ultimately challenging the legality and constitutionality of the CIR's aforesaid interpretation of a tax provision. In line with the foregoing discussion, however, the CIR correctly argues that the CTA had no jurisdiction to take cognizance of the petition... as its resolution would necessarily involve a declaration of the validity or constitutionality of the CIR's

interpretation of Section 148 (e) of the NIRC, which is subject to the exclusive review by the Secretary of Finance and ultimately by the regular courts. In British American Tobacco v. Camacho,[24] the Court ruled that the CTA's jurisdiction to resolve tax disputes excludes the power to rule on the constitutionality or validity of a law, rule or regulation, to wit: While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not include cases where the constitutionality of a law or rule is challenged. Where what is assailed is the validity or constitutionality of a law, or a rule or... regulation issued by the administrative agency in the performance of its quasi legislative function, the regular courts have jurisdiction to pass upon the same. x x x. As the CIR aptly pointed out, the phrase "other matters arising under this Code," as stated in the second paragraph of Section 4 of the NIRC, should be understood as pertaining to those matters directly related to the preceding phrase "disputed assessments, refunds of internal... revenue taxes, fees or other charges, penalties imposed in relation thereto" and must therefore not be taken in isolation to invoke the jurisdiction of the CTA.[27] In other words, the subject phrase should be used only in reference to cases that are, to... begin with, subject to the exclusive appellate jurisdiction of the CTA, i.e., those controversies over which the CIR had exercised her quasi-judicial functions or her power to decide disputed assessments, refunds or internal revenue taxes, fees or other charges, penalties... imposed in relation thereto, not to those that involved the CIR's exercise of quasi-legislative powers. In Enrile v. Court of Appeals,[28] the Court, applying the statutory construction principle of ejusdem generis,[29] explained the import of using the general clause "other matters arising under the Customs Law or other... law or part of law administered by the Bureau of Customs" in the enumeration of cases subject to the exclusive appellate jurisdiction of the CTA, saying that: [T]he 'other matters' that may come under the general clause should be of the same nature as those that have preceded them applying the rule of construction known as ejusdem generis.[30] (Emphasis and underscoring... supplied) Hence, as the CIR's interpretation of a tax provision involves an exercise of her quasi-legislative functions, the proper recourse against the subject tax ruling expressed in CMC No. 164-2012 is a review by the Secretary of Finance and ultimately the regular courts. In Commissioner of Customs v. Hypermix Feeds Corporation,[31] the Court has held that: The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to... declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the regional trial courts. This is within the scope of judicial power, which includes the authority of the courts to determine... in an appropriate action the validity of the acts of the political departments. x x x.[32] 55. THE CITY OF MANILA vs. HON. CARIDAD GRECIA-CUERDO |FEBRUARY 4, 2014 NATURE: This is a special civil action for certiorari under Rule 65 of the Rules of Court seeking to reverse and set aside the Resolutions1 dated April 6, 2006 and November 29, 2006 of the Court of Appeals. FACTS:

Petitioner City of Manila, through its treasurer, petitioner Liberty Toledo, assessed taxes for the taxable period from January to December 2002 against the private respondents.In addition to the taxes purportedly due from private respondents pursuant to Section 14, 15, 16, 17 of the Revised Revenue Code of Manila (RRCM), said assessment covered the local business taxes. private respondents were constrained to pay the P 19,316,458.77 assessment under protest. On January 24, 2004, private respondents filed before the RTC of Pasay City the complaint denominated as one for “Refund or Recovery of Illegally and/or Erroneously–Collected Local Business Tax, Prohibition with Prayer to Issue TRO and Writ of Preliminary Injunction The RTC granted private respondents’ application for a writ of preliminary injunction. Petitioners filed a Motion for Reconsideration4 but the RTC denied. Petitioners then filed a special civil action for certiorari with the CA but the CA dismissed petitioners’ petition for certiorari holding that it has no jurisdiction over the said petition. The CA ruled that since appellate jurisdiction over private respondents’ complaint for tax refund, which was filed with the RTC, is vested in the Court of Tax Appeals (CTA), pursuant to its expanded jurisdiction under Republic Act No. 9282 (RA 9282), it follows that a petition for certiorari seeking nullification of an interlocutory order issued in the said case should, likewise, be filed with the CTA. Petitioners filed a Motion for Reconsideration,7 but the CA denied it in its Resolution hence, this petition ISSUE: Whether or not the CTA has jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by the RTC in a local tax case.

HELD: The CTA has jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by the RTC in a local tax case. In order for any appellate court to effectively exercise its appellate jurisdiction, it must have the authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed tax cases to the CTA, it can reasonably be assumed that the law intended to transfer also such power as is deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There is no perceivable reason why the transfer should only be considered as partial, not total. Consistent with the above pronouncement, the Court has held as early as the case of J.M. Tuason & Co., Inc. v. Jaramillo, et al. [118 Phil. 1022 (1963)] that “if a case may be appealed to a particular court or judicial tribunal or body, then said court or judicial tribunal or body has jurisdiction to issue the extraordinary writ of certiorari, in aid of its appellate jurisdiction.” This principle was affirmed in De Jesus v. Court of Appeals (G.R. No. 101630, August 24, 1992) where the Court stated that “a court may issue a writ of certiorari in aid of its appellate jurisdiction if said court has jurisdiction to review, by appeal or writ of error, the final orders or decisions of the lower court. 56. PAGCOR vs. CA AND ANGELINE V. PAEZ | AUGUST 20, 2018

his is a petition for certiorari under Rule 65 of the 1997 Rules of Court (ROC) assailing the April 27, 20161 and January 3, 20172 Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 126110, which deemed abandoned the petition for review brought by the Philippine Amusement and Gaming Corporation (PAGCOR) under Rule 43 of the ROC. The said petition for review sought to reverse and set aside the January 24, 2012 Resolution3 of the Civil Service Commission (CSC), which nullified the dismissal of Angeline V. Paez (respondent) and reinstated her into service. The Antecedents Respondent was an employee of PAGCOR with a position of Dealer stationed at Casino Filipino-Waterfront Hotel, Lahug, Cebu City. In a random drug testing conducted by PAGCOR to all its employees, respondent allegedly tested positive for methamphetamine. Thus, in its March 30, 2006 Letter,4respondent was informed that she was dismissed from the service for gross misconduct and violation of company rules and regulations. Respondent moved for reconsideration which PAGCOR denied in its May 11, 2006 letter. On May 19, 2006, respondent appealed her dismissal with the CSC. The CSC, in its March 24, 2008 resolution, dismissed the appeal and affirmed her dismissal. When respondent moved for reconsideration of this resolution, the CSC, in its January 24, 2012 resolution, reversed itself and reinstated respondent into service. The CSC exonerated respondent from the administrative charges on account of PAGCOR's failure to comply with the requirements of Section 38 of Republic Act (R.A.) No. 9165 or the Comprehensive Dangerous Drugs Act of 2002. It found that respondent was not notified of the positive screening result, which should have given her a window of opportunity to impugn the result through a confirmatory testing. It held that notice of the screening test is part of her substantive rights and the absence thereof is tantamount to denial of the due process granted to her by law. Thus, it exonerated her of the administrative charges. PAGCOR filed a motion for reconsideration but it was denied by the CSC in its July 17, 2012 resolution.5 Thus, on August 17, 2012, PAGCOR filed a petition for review before the CA under Rule 43 of the ROC. In a Resolution,6 dated June 13, 2014, the CA required PAGCOR, within ten (10) days from notice, to (1) submit proof that copies of the petition, together with its annexes, had been duly received by respondent or her counsel; and (2) manifest the current correct and complete address of respondent and of her counsel. This is because copies of all resolutions of the CA furnished to counsel for respondent, the Yap Gonzales & Associates Law Firm, were returned unserved with uniform postal notation on the envelopes "RTS-MOVED (out)." The CA Ruling In a Resolution,7 dated November 28, 2014, the CA dismissed the petition. It noted that PAGCOR failed to comply with its June 13, 2014 resolution as of November 17, 2014. It further noted that the copy of its June 13, 2014 resolution to respondent's counsel was again returned unserved with the same postal notation of "Moved." It held that due to PAGCOR's failure to provide the exact addresses of respondent and her counsel, it failed to acquire jurisdiction over respondent as provided for under Section 4, Rule 46 of the ROC. Thus, it dismissed the petition for failure to acquire jurisdiction over respondent. PAGCOR moved for reconsideration of this resolution. Meanwhile, respondent filed a Manifestation,8dated May 13, 2015, and Motion cum Manifestation,9 dated August 5, 2015, insisting that she be provided copies of the petition and the CA's November 28, 2014 resolution.

She also alleged that PAGCOR had prior knowledge of her counsel's change of address and requested that all subsequent court processes be sent to her counsel's new address. In a Resolution,10 dated October 22, 2015, the CA reinstated the petition in view of respondent's voluntary submission to its jurisdiction. It ordered PAGCOR to furnish respondent a copy of the petition for review, complete with annexes, within five (5) days from notice and to submit proof of compliance therewith. In a resolution, dated April 27, 2016, the CA deemed the petition abandoned and dismissed the same. It noted that, as of March 3, 2016, PAGCOR had yet to comply with its October 22, 2015 resolution. Accordingly, it dismissed the petition. PAGCOR moved for reconsideration of this resolution, which the CA denied in its January 3, 2017 resolution. Hence, this petition, anchored on the ground that the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction when it rendered the April 27, 2016 and January 3, 2017 resolutions. PAGCOR argues that its failure to comply with the CA's October 22, 2015 resolution was unintentional. It was merely due to the heavy workload of its former counsel, as well as the effect of the recurring water intrusion/leakage in its offices due to bursting of the PAGCOR FCU Chilled Water. This outpour of water soaked and damaged the computers, case files, confidential documents and other materials belonging to the lawyers. Further, PAGCOR argues that the gross negligence of its former handling lawyer should not bind it as it would be tantamount to a deprivation of its right to due process and to be rightfully heard on the merits of the case. In her Comment/Opposition,11 dated July 22, 2017, respondent alleges that PAGCOR failed to demonstrate a highly meritorious ground for the relaxation of the rules of procedure in its favor. Thus, the CA rightfully dismissed the action. In its Reply,12 dated March 14, 2018, PAGCOR insists that its former counsel's negligence was so gross that it should not be bound thereby. Otherwise, it would amount to a deprivation of due process. ISSUE WHETHER THE CA COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DISMISSED THE PETITION FOR REVIEW OF PAGCOR. The Court's Ruling The petition is devoid of merit. PAGCOR comes before this Court seeking exemption from the general rule that a client is bound by the acts, even mistakes, of his counsel in the realm of procedural technique.13 However, PAGCOR's disregard for technical procedure is made manifest by the fact that the instant petition is a substitute for a lost appeal. Further, the CA did not commit any grave abuse of discretion when it dismissed the petition for review before it. The instant petition is a substitute for a lost appeal. The right to appeal is neither a natural right nor a part of due process. It is merely a statutory privilege and may be exercised only in the manner and in accordance with the provisions of law. Thus, one who seeks to avail of the right to appeal must comply with the requirements of the ROC. Failure to do so often leads to the loss of the right to appeal.14

Under Section 1, Rule 45 of the ROC, the proper remedy to question the CA’s judgment, final order or resolution, as in the present case, is an appeal by certiorari. The petition must be filed within fifteen (15) days from notice of the judgment, final order or resolution appealed from; or of the denial of petitioner's motion for reconsideration filed in due time after notice of the judgment.15 PAGCOR received the January 3, 2017 resolution of the CA denying its motion for reconsideration on January 11, 2017. Hence, PAGCOR had fifteen (15) days, or until January 26, 2017, to file its appeal. It let this period lapse and, instead, filed herein petition for certiorari on March 13, 2017. Evidently, the present petition is a substitute for the lost remedy of appeal. Time and again, the Court has ruled that a special civil action for certiorari under Rule 65 is an independent action based on the specific grounds therein provided and proper only if there is no appeal or any plain, speedy and adequate remedy in the ordinary course of law. It is an extraordinary process for the correction of errors of jurisdiction and cannot be availed of as a substitute for the lost remedy of an ordinary appeal.16 Mere invocation of "grave abuse of discretion amounting to lack or excess of jurisdiction" will not permit the substitution of a lost remedy of appeal with a special civil action for certiorari. Since PAGCOR filed the instant special civil action for certiorari instead of the lost remedy of appeal by certiorari, the petition should be dismissed. The negligence of PAGCOR's counsel binds it. None of the recognized exceptions obtains in this case. The petition necessarily fails even if the Court were to consider it as a petition for certiorari. The CA did not commit any grave abuse of discretion amounting to lack or excess of jurisdiction when it dismissed the petition for review of PAGCOR on the ground that it abandoned the same. It is settled that the negligence of counsel binds the client. This is based on the rule that any act performed by a counsel within the scope of his general or implied authority is regarded as an act of his client. Consequently, the mistake or negligence of counsel may result in the rendition of an unfavorable judgment against the client. We have, however, carved out exceptions to this rule; as where the reckless or gross negligence of counsel deprives the client of due process of law; or where the application of the rule will result in outright deprivation of the client's liberty or property; or where the interests of justice so requires and relief ought to be accorded to the client who suffered by reason of the lawyer's gross or palpable mistake or negligence. In order to apply the exceptions rather than the rule, the circumstances obtaining in each case must be looked into.17 In the case at bar, PAGCOR argues that the negligence of its former counsel was so gross that it effectively deprived it of due process. Gross negligence has been defined as the want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It examines a thoughtless disregard of consequences without exerting any effort to avoid them.18 Mere allegation of gross negligence does not suffice.19 The fact of gross negligence must be proven and supported by evidence. The Court finds in the instant case that PAGCOR failed to prove that the negligence of its former counsel was so gross that it effectively deprived it of due process. PAGCOR argues in its petition that its failure to comply with the CA's October 22, 2015 resolution was unintentional. It contends that its failure was merely due to the heavy workload of its former counsel and an effect of the recurring water intrusion/leakage in its offices. The Court fails to see how these excuses could amount to gross negligence on the part of its former counsel.

In fact, they themselves characterized it as a mere, unintentional lapse. This is simple negligence. There is simply no gross negligence to speak of in the instant case. Further, PAGCOR was not deprived of due process. On the contrary, it was given every opportunity to be heard, which is the very essence of due process. The merits of its case were heard by the CSC. It appealed the decision of the CSC to the CA. The CA initially dismissed the case for failure to acquire jurisdiction over respondent due to PAGCOR's failure to comply with its orders regarding service of a copy of the petition to respondent and/or her counsel. When the CA reinstated the case in view of respondent's voluntary submission to its jurisdiction, PAGCOR squandered the second chance given to it by failing to comply with the CA's directive to furnish respondent with a copy of the petition. This is despite respondent volunteering the current address of her counsel through the manifestations she filed. To add salt to injury, PAGCOR let the period to appeal the January 3, 2017 resolution of the CA before this Court lapse. Instead, it filed the present petition for certiorari as a substitute for its lost appeal. The acts of its former counsel did not deprive PAGCOR of due process. PAGCOR was given every opportunity to be heard but it failed to take advantage of the said opportunities. Hence, the general rule that the negligence of the counsel binds the client applies herein. On a last note, PAGCOR's cavalier attitude towards court processes and procedure is plain to see. Its conduct before the CA and before this Court underscores this. The Court reminds PAGCOR, as we have consistently reminded countless other litigants, that the invocation of substantial justice is not a magic potion that will automatically compel this Court to set aside technical rules. This principle is especially true when a litigant, as in the present case, shows a predilection for utterly disregarding the ROC, as well as court directives.20 WHEREFORE, the petition is DISMISSED. The April 27, 2016 and January 3, 2017 Resolutions of the Court of Appeals in CA-G.R. SP No. 126110 are AFFIRMED. SO ORDERED.

57. HERARC REALTY CORP VS PROVINCIAL TREASURER OF BATANGAS | SEPTEMBER 5, 2018 his petition for review on certiorari under Rule 45 of the Rules of Court (Rules) seeks to reverse and set aside the November 18, 2013 Decision[1] and January 7, 2014 Resolution[2] of the Regional Trial Court (RTC), Branch 8, Pallocan West, Batangas City in Civil Case No. 9428, which held that petitioner Herarc Realty Corporation is liable to pay the deficiency real property tax for the years 2007, 2008, and January to August 12, 2009. Stripped of non-essentials, the facts of the present controversy are simple and undisputed. Upon acquisition via execution sale in August 2004, thirteen ( 13) parcels of land located in Sta. Ana, Calatagan, Batangas are registered since 2006 in the name of petitioner Herarc Realty Corporation under Transfer Certificate of Title (TCT) Nos. T-105907 to T-105919(subject property). From March 2, 2006 up to August 12, 2009, the Subject Property had been in actual possession of private respondents Dr. Rafael A. Manalo, Grace Oliva, and Freida Rivera Yap in their capacity as assignees in an involuntary insolvency proceeding against the Spouses Rosario and Saturnino Baladjay pending before the Muntinlupa City RTC Br. 204.[3] It was only on August 13, 2009 that petitioner was able to take full possession and control of the subject

property by virtue of the July 31, 2009 Order of the Makati City RTC Br. 56 granting the issuance of a writ of execution, which, in tum, was based on the final and executory Decision of the Court of Appeals in CA G.R. SP Nos. 93818 and 93823.[4] In a letter dated October 9, 2012, public respondent Provincial Treasurer of Batangas sent to petitioner a Statement of Real Property Tax(RPT) Liabilities to collect the amount of P8,093,256.89, which included the unpaid RPT on the subject property for 2007, 2008, and January to August 2009 (covered period).[5] The demand was reiterated in letters dated October 23, 2012 and November 21, 2012.[6] The assessment was paid under protest on November 20, 2012.[7] Less than a month after, petitioner filed a petition for prohibition andmandamus[8] against respondents, praying the trial court to: i.

[declare], as null and void, the assessments for unpaid real property taxes made against Petitioner Herarc over the Subject Property for the years 2007, 2008 until 12 August 2009;

ii.

[declare], the questioned assessments to be chargeable against Dr. Rafael Manalo, et al., they being in possession of the Subject Property [during] the [Covered] Period;

iii.

[require] Public Respondents to issue the corresponding tax clearances in favor of Petitioner Herarc for the Subject Property over the period beginning 2007 up to 2012; and

iv.

[require] Public Respondents to refund Petitioner Herarc of whatever amount it has paid under protest that is in excess of the real property taxes legally chargeable against Petitioner Herarc .[9] For petitioner, the RPT assessment is illegal and erroneous, because the subject property was not in its possession during the covered period. Citing Testate Estate of Concordia T. Lim v. City of Manila[10] and Government Service Insurance System v. City Treasurer and City Assessor of the City of Manila,[11] which ruled that unpaid tax is chargeable against the taxable person who had actual or beneficial use and possession of it regardless of whether or not he is the owner, it contended that private respondents should be the one charged therefor as they had its actual or beneficial use and possession at the time. On November 18, 2013, the RTC denied the petition. In ruling that petitioner is liable to pay the RPT for the covered period, it held: While it may be true that[,] as stated by the Honorable Supreme Court[,] the unpaid tax attaches to the property and is chargeable against the taxable person who had actual or beneficial use and possession of it regardless of whether or not he is the owner, it does not follow that the position of the Provincial Treasurer does not [hold] true. The doctrine laid down by the Honorable Supreme Court as mentioned by the [herein] Petitioner to substantiate one's position has been predicated on the theory that the registered owner is a tax exempt entity. In this case under consideration[,] the registered owner is a juridical person subject to tax. Logic

dictates that the pronouncement made by the Supreme Court in the two case[s] quoted by Herarc Realty Corporation is not applicable in this case under consideration. An entity not exempt from payment of taxes must be responsible for the payment of the deficiency taxes under the theory that unpaid taxes attach to the land. This may be the reason why the doctrine of beneficial user of the property owned by tax exempt entity must be answerable for the payment of real property taxes on the real estate property owned by tax exempt entity. It may be appropriate to state that this rule of law has been modified in the case of City of Pasig versus Republic of the Philippines, G.R. No. 185023, August 24, 2011[.] The Highest Magistrate of the Land made a pronouncement - In sum, only those portions of the properties leased to taxable entities are subject to real estate tax for the period of such leases. Pasig City must, therefore, issue to respondent new real property tax assessments covering the portions of the properties leased to taxable entities. If the Republic of the Philippines fails to pay the real property tax on the portions of the properties leased to taxable entities, then such portions may be sold at public auction to satisfy the tax delinquency. An [in-depth] examination of the doctrine of the Premier Magistrate of the Philippines in the case of Pasig versus Republic of the Philippines cited above, the owner of the real estate property must be the one who would be responsible for the payment of real property tax if the beneficial user failed to pay the required real property tax. It goes without saying that the Petition filed by Herarc Realty Corporation has to be denied.[12] When its motion for reconsideration was denied on January 7, 2014, petitioner directly filed before Us a Rule 45 petition. We deny. Petitioner's direct recourse to the RTC is warranted since the issue of the legality or validity of the assessment is a question of law.[13] However, as a taxpayer not satisfied with the RTC decision, it should have filed a petition for review before the Court of Tax Appeals(CTA).[14] The decision, ruling or resolution of the CTA, sitting as Division, may further be reviewed by the CTA En Banc. [15] It is only after this procedure has been exhausted that the case may be elevated to this Court. Under Section 7 (a) (3) of Republic Act (R.A.) No. 9282,[16] the appellate jurisdiction of the C TA over decisions, orders, or resolutions of the RTC becomes operative when the latter has ruled on a local tax case, i.e., one which is in the nature of a tax case or which primarily involves a tax issue.[17] Local tax cases include those involving RPT, which is governed by Book II, Title II of R.A No. 7160, or Local Government Code (LGC) of 1991.[18] Among the possible issues are the legality or validity of the RPT assessment; protests of assessments; disputed assessments, surcharges, or penalties; legality or validity of a tax ordinance; claims for tax refund/credit; claims for tax exemption; actions to collect the tax due; and even prescription of assessments.[19] Evidently, petitioner erred in its appeal. If the taxpayer fails to appeal in due course, the right of

the local government to collect the taxes due with respect to the property becomes absolute upon the expiration of the period to appeal.[20] The assessment becomes final, executory and demandable, precluding the taxpayer from assailing the legality/validity (or reasonableness/correctness) of the assessment.[21] Time and again, the Court stresses that perfection of an appeal in the manner and within the period permitted by law is mandatory and jurisdictional such that failure to do so renders the judgment of the court final and executory.[22] The right to appeal is a statutory right, not a natural nor a constitutional right. The party who intends to appeal must comply with the procedures and rules governing appeals; otherwise, the right of appeal may be lost or squandered.[23] Even if this case is resolved on its substantive merit, the disposition remains the same. As the RTC correctly opined, in real estate taxation, the unpaid tax attaches to the property.[24] The personal liability for the tax delinquency is generally on whoever is the owner of the real property at the time the tax accrues.[25] This is a necessary consequence that proceeds from the fact of ownership.[26] Nonetheless, where the tax liability is imposed on the beneficial use of the real property, such as those owned but leased to private persons or entities by the government, or when the assessment is made on the basis of the actual use thereof, the personal liability is on any person who has such beneficial or actual use at the time of the accrual of the tax.[27] Beneficial use means that the person or entity has the use and possession of the property.[28] Actual use refers to the purpose for which the property is principally or predominantly utilized by the person in possession thereof.[29] As a general rule, real properties are subject to the RPT since the LGC has withdrawn exemptions from real property taxes of all persons, whether natural or juridical.[30] Entities may be exempt from payment of the RPT if their charters, which were enacted or reenacted after the effectivity of the LGC, exempt them payment of the RPT.[31] Likewise, exceptions to the rule are provided in Section 133(o) [32] of the LGC, which states that local government units have no power to levy taxes of any kind on the national government, its agencies and instrumentalities and local government units. Particularly on the RPT, Section 234[33] enumerates the persons and real property exempt therefrom. The tax exemption of real property owned by the Republic, its political subdivisions, agencies or instrumentalities carries, however, ceases if the beneficial use of the real property has been granted, for a consideration or otherwise, to a taxable person. In such case, the corresponding liability for the payment of the RPT devolves on the taxable beneficial user.[34] As applied in subsequent cases,[35] it is in this context that our ruling in Testate Estate of Concordia T. Lim[36] should be understood. Moreover, in said case, the taxpayer that was being assessed with the unpaid RPT was neither the registered owner nor the possessor of the subject property when the tax became due and demandable. In contrast, petitioner herein, an entity that is not tax exempt under the law, is the registered owner of the real property. Therefore, it is personally liable for the RPT at the time it accrued. WHEREFORE, premises considered, the petition for review on certiorari under Rule 45 of the Rules of Court, which seeks to reverse and set aside the November 18, 2013 Decision and January 7, 2014 Resolution of the Regional Trial Court, Branch 8, Pallocan West, Batangas City, is DENIED.

SO ORDERED.

58. INTERNATIONAL CONTAINER TERMINAL SERVICES, INC vs. CITY OF MANILA | OCTOBER 17, 2018 If a party can prove that the resort to an administrative remedy would be an idle ceremony such that it will be absurd and unjust for it to continue seeking relief that evidently will not be granted to it, then the doctrine of exhaustion of administrative remedies will not apply. This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the September 5, 2008 Decision2 and December 12, 2008 Resolution3 of the Court of Tax Appeals En Banc in C.T.A. EB No. 277. The Court of Tax Appeals En Banc dismissed the Petition for Review4 filed by International Container Terminal Services, Inc. (International Container), and affirmed the May 17, 2006 Decision5 and February 22, 2007 Resolution6 of the Court of Tax Appeals Second Division. The Court of Tax Appeals Second Division found that the City of Manila committed direct double taxation when it imposed a local business tax under Section 21 (A) of Manila Ordinance No. 7794, as amended by Section 1(G) of Ordinance No. 7807, in addition to the business tax already imposed under Section 18 of Manila Ordinance No. 7794, as amended.7 It ordered a partial refund of P6,224,250.00, representing the erroneously paid business taxes for the third quarter of taxable year 1999. However, it did not order the City of Manila to refund the business taxes paid by International Container subsequent to the first three (3) quarters of 1999.8 International Container, a corporation with its principal place of business in Manila, renewed its business license for 1999. It was assessed for two (2) business taxes: one for which it was already paying, and another for which it was newly assessed. It was already paying a local annual business tax for contractors equivalent to 75% of 1% of its gross receipts for the preceding calendar year pursuant to Section 18 of Manila Ordinance No. 7794. The newly assessed business tax was computed at 50% of 1% of its gross receipts for the previous calendar year, pursuant to Section 21 (A) of Manila Ordinance No. 7794, as amended by Section 1(G) of Manila Ordinance No. 7807. It paid the additional assessment, but filed a protest letter9 dated July 15, 1999 before the City Treasurer of Manila.10 When the City Treasurer failed to decide International Container's protest within 60 days from the protest, International Container filed before the Regional Trial Court of Manila its Petition for Certiorari and Prohibition with Prayer for the Issuance of a Temporary Restraining Order against the City Treasurer and Resident Auditor of Manila.11 The City Treasurer and the Resident Auditor of Manila moved for the dismissal12 of the Petition for Certiorari and Prohibition on the ground that International Container had no cause of action, since it had failed to comply with the requirements of Section 187 of Republic Act No. 7160, otherwise known as the Local Government Code of 1991.13 The Regional Trial Court granted the City Treasurer and the Resident Auditor's motion and dismissed International Container's Petition for Certiorari and Prohibition.14 International Container appealed the dismissal to the Court of Appeals, which set aside the Regional Trial Court's dismissal and ordered the case remanded to the Regional Trial Court for further proceedings.15 While the Petition for Certiorari and Prohibition was pending, the City of Manila continued to impose the business tax under Section 21 (A), in addition to the business tax under Section 18,

on International Container so that it would be issued business permits. On June 17, 2003, International Container sent a letter16 addressed to the City Treasurer of Manila, reiterating its protest to the business tax under Section 21 (A) and requesting for a refund of its payments in the amount of P27,800,674.36 "in accordance with Section 196 of the Local Government Code,"17 which states: Section 196. Claim for Refund of Tax Credit. — No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be entertained in any court after the expiration of two (2) years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit. On July 11, 2003, International Container filed an Amended and Supplemental Petition,18 alleging, among others, that since the payment of both business taxes was a precondition to the renewal of International Container's business permit, it was compelled to pay, and had been paying under protest. It amended its prayer to include not only the refund of business taxes paid for the first three (3) quarters of 1999, but also the taxes continuously paid afterwards.19 The Regional Trial Court admitted its Amended and Supplemental Petition.20 In its February 28, 2005 Decision,21 the Regional Trial Court dismissed the Amended and Supplemental Petition, again finding that International Container failed to comply with the requirements of Section 195 of the Local Government Code. It found that when the City Treasurer failed to act on International Container's protest and continued to collect the business tax under Section 21 (A), it could be determined that the protest was denied. Under Section 195 of the Local Government Code, International Container had 60 days to appeal the denial to a competent court. However, instead of appealing the denial, it resorted to a Petition for Certiorari and Prohibition, which was not a remedy prescribed under Section 195 of the Local Government Code. By failing to avail of the proper remedy, the assessments made against it became conclusive and unappealable.22 International Container filed a Petition for Review23 against the City of Manila, its City Treasurer, its Resident Auditor, and its City Council (the City of Manila and its Officials) before the Court of Tax Appeals, docketed as C.T.A. AC No. 11. It prayed that the Court of Tax Appeals set aside the Regional Trial Court February 28, 2005 Decision, and order the City of Manila and its Officials to refund the business taxes assessed, demanded, and collected under Section 21 (A) in the amount of P39,268,772.41. This amount corresponded to the periods from 1999 to the first quarter of 2004 plus any and all subsequent payments until the case would have been finally decided. Finally, it prayed that the Court of Tax Appeals order the City of Manila and its Officials to desist from imposing and collecting the business tax under Section 21 (A), and to pay attorney's fees.24 On August 18, 2005, International Container sent another letter25 addressed to the City Treasurer of Manila, reiterating its protest against the business tax under Section 21 (A), and claiming a refund for the third quarter of 2003 up to the second quarter of 2005. The Court of Tax Appeals Second Division issued its May 17, 2006 Decision26 setting aside the Regional Trial Court February 28, 2005 Decision and partially granting International Container's prayer for a refund. It found that imposing the business tax under Section 21 (A) in addition to the contractors' tax under Section 18 constituted direct double taxation.27 It ordered the City of Manila and its Officials to refund the amount of P6,224,250.00, representing the additional taxes paid for the first three (3) quarters of 1999. The claims corresponding to the subsequent periods were denied, since the Court of Tax Appeals Second Division found that International Container

failed to substantiate its claims and to comply with Section 195 of the Local Government Code. It found that International Container failed to submit to the court its protest dated June 17, 2003, and thus, the court could not verify the total amount of taxes paid and the taxing period covered in this protest.28 International Container moved to partially reconsider29 the May 17, 2006 Decision, praying, among others, that the Court of Tax Appeals Second Division elevate the records of the case so that it may verify the June 17, 2003 protest. It further argued that Section 196 of the Local Government Code should be applied to its claim, and not Section 195. The City of Manila and its Officials filed their own Motion for Reconsideration.30 The Court of Tax Appeals Second Division directed the elevation of the records.31 International Container sent a letter32 dated January 10, 2007 addressed to the City Treasurer of Manila, reiterating its protest, this time, covering the period from the third quarter of 2005 to the fourth quarter of 2006. On February 22, 2007, the Court of Tax Appeals Second Division denied the parties' respective Motions for Reconsideration.33 It found that International Container raised the applicability of Section 196 of the Local Government Code for the first time on appeal. Further, it held that International Container's failure to file a written protest for each assessment in the mayor's permit after the first three (3) quarters of 1999 rendered these assessments final and executory. International Container filed a Petition for Review with Prayer for Temporary Restraining Order and/or Preliminary Injunction before the Court of Tax Appeals En Banc.34 It argued that the Court of Tax Appeals Second Division should have applied Section 196 of the Local Government Code for the payments that it had made subsequent to the third quarter of 1999, pointing out that it had prayed for a refund as early as the proceedings in the Regional Trial Court.35 Moreover, Sections 195 and 196 pertain to separate and independent remedies; to resort to Section 195 as a condition precedent to availing of the remedy under Section 196 was illogical.36 On June 22, 2007, International Container filed an Urgent Motion to Suspend Collection,37 claiming that the City of Manila and its Officials still collected the business tax under Section 21 (A) despite the Court of Tax Appeals Second Division May 17, 2006 Decision. The Urgent Motion was granted by the Court of Tax Appeals En Banc to preserve the status quo and upon the filing by International Container of a surety bond.38 On September 5, 2008, the Court of Tax Appeals En Banc issued its Decision,39 dismissing the Petition for Review for lack of merit. Contrary to the claim of International Container, the Court of Tax Appeals En Banc found that International Container's causes of action in the Regional Trial Court and Court of Tax Appeals Second Division were different from each other. In. the Regional Trial Court, International Container's action was for the annulment of the assessment and collection of additional local business tax. In its Amended and Supplemental Petition, International Container discussed the propriety of the imposition of the business tax under Section 21 (A) to support the annulment of the assessment.40According to the Court of Tax Appeals En Banc, this meant that International Container chose to protest the assessment pursuant to Section 195 of the Local Government Code, and not to request for a refund as provided by Section 196.41 Notably, International Container prayed for, and was granted, the opportunity to amend its Petition for Certiorari and Prohibition, but still failed to include an argument in support of its alleged claim under Section 196 of the Local Government Code. The Court of Tax Appeals En Banc further found that Sections 195 and 196 of the Local Government Code are two (2) separate and distinct remedies granted to taxpayers, with different

requirements and conditions. International Container cannot merely claim that by complying with the reglementary period of protesting an assessment under Section 195, it had already complied with the two (2)-year period stated in Section 196. The Court of Tax Appeals found that since International Container paid the taxes under the assessment, its claim for refund assumed that the assessment was wrong. The claim for refund should be understood as a logical and necessary consequence of the allegedly improper assessment such that if the assessment were cancelled, the taxes paid under it should be refunded. This should not be understood as the claim for refund under Section 196 of the Local Government Code.42 Moreover, even if the applicability of Section 195 did not preclude the availability of Section 196 as a remedy, International Container only made its protest to the City Treasurer's assessment without expressly stating that it intended to claim a refund under Section 196 for taxes paid after the first three (3) quarters of 1999. As pointed out by the Court of Tax Appeals Second Division, its attempt to invoke Section 196 on appeal was due to its failure to recover under Section 195, not having made timely written protests of the assessments made against it.43 Having found that only Section 195 applied, the Court of Tax Appeals En Banc found that it was no longer necessary to determine whether International Container complied with the requirements of Section 196 for the periods after the first three (3) quarters of 1999. It reiterated the Court of Tax Appeals Second Division's ruling that International Container should have filed a written protest within 60 days from receipt of each and every assessment made by the City of Manila and its Officials, as embodied in the Mayor's Permit, regardless of its belief that the written protest would have been futile. Writing "paid under protest" on the face of municipal license receipts upon payment of the taxes is not the administrative protests contemplated by law.44 Court of Tax Appeals Associate Justice Caesar A. Casanova (Associate Justice Casanova) wrote a Concurring and Dissenting Opinion.45 He noted that the notice of assessment in Section 195 of the Local Government Code was the same as a notice of assessment under Section 228 of the 1997 National Internal Revenue Code. He opined that no notice for deficiency taxes subsequent to the third quarter of 1999 up to the present was ever issued by the City of Manila and its Officials; thus, Section 195 of the Local Government Code did not apply.46 Moreover, according to Associate Justice Casanova, International Container partially complied with the requirements of Section 196 of the Local Government Code, from the third quarter of 2001 up to the fourth quarter of 2006. Following its July 15, 1999 protest for the first three (3) quarters of 1999, it filed claims for refund before the City Treasurer on June 17, 2003, August 19, 2005, and January 11, 2007. The payments from October 19, 1999 to April 19, 2001, in the total amount of P15,539,727.90, could no longer be refunded as the period to claim the refund had prescribed since its earliest claim was on June 17, 2003. Similarly, the claim for refund for the first and second quarters of 2007 could not be allowed since it did not file a claim with the City Treasurer. Associate Justice Casanova voted to partially grant the petition and to order the City of Manila and its Officials to refund P44,134,449.68 in its favor.47 On December 12, 2008, the Court of Tax Appeals En Banc denied International Container's Motion for Reconsideration48 for lack of merit.49 In its Resolution, it addressed the City of Manila and its Officials' claim in their Comment to the Motion for Reconsideration50 that the Court of Tax Appeals had no jurisdiction over International Container's claim for refund from the fourth quarter of 1999 onwards due to non-payment of docket fees before the Regional Trial Court.51 It noted that in Sun Insurance Office, Ltd. v. Asuncion,52 the error of non-payment or insufficiency of docket fees may be rectified by the payment by the filing party of the correct

amount within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. However, it held that Sun Insurance was inapplicable to this case, as there was no showing that International Container had paid the additional docket fees. The applicable ruling should be Manchester Development Corp. v. Court of Appeals ,53 which held that the nonpayment or insufficiency of docket fees would result in the court not acquiring jurisdiction over the case, rendering void the ruling of the Regional Trial Court on the additional claims of International Container.54 On December 24, 2008, International Container filed a Motion for Extension of Time to file Petition for Review55 with this Court, praying for an additional 30 days, or until February 2, 2009 within which to file its Petition for Review. This Court granted the Motion for Extension in its January 14, 2009 Resolution. On February 2, 2009, International Container filed its Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the September 5, 2008 Decision and December 12, 2008 Resolution of the Court of Tax Appeals En Banc.56 In its Petition for Review, International Container claims that it is entitled to a refund of P6,224,250.000 plus P57,865,901.68 in payments of taxes under Section 21 (A) of Manila Ordinance No. 7764, as amended by Section 1(G) of Manila Ordinance No. 7807.57 First, it argues that it raised the issue of the refund at the earliest possible instance at the administrative level, and later, before the Regional Trial Court, and not only on appeal. It points out that in its July 15, 1999 Letter to the City of Manila and its Officials, it requested that if the questioned assessment had already been paid, then the amount paid should be refunded. For the amounts paid for the fourth quarter of 1999 up to the second quarter of 2003, it demanded a refund and expressly cited Section 196 of the Local Government Code in its June 17, 2003 Letter. The City Treasurer, in its September 1, 2005 Letter, even acknowledged that International Container had made a claim for refund or tax credit.58 Petitioner included prayers for refund of the taxes paid under protest both in its original Petition for Certiorari and Prohibition, and in its Amended and Supplemental Petition before the Regional Trial Court.59 Second, petitioner argues that when it filed its Petition before the Regional Trial Court, it availed of two (2) remedies: a protest under Section 195 of the Local Government Code for the assessments made by the City of Manila and its Officials for the first three (3) quarters of 1999, and a refund under Section 196 of the Local Government Code for its subsequent payments.60 The P6,224,250.00 ordered refunded by the Court of Tax Appeals Second Division represented the taxes that petitioner paid under the assessment issued not only for the taxes for the third quarter of 1999, but also back taxes for the first and second quarters of 1999. Since the assessment was issued on July 5, 1999, after the taxes for these quarters were already due, then the assessment was for deficiency tax assessments. According to petitioner, this was within the scope of Section 195 of the Local Government Code, which it claims covers only deficiency tax assessments.61 As for the additional business taxes paid by petitioner, these were not deficiency taxes, but taxes due for the current taxable periods. Since these taxes were required for the issuance of its business permit, it was forced to pay the assessments under protest. This was the situation contemplated by Section 196 of the Local Government Code, which involves the recovery of any tax, fee, or charge erroneously or illegally collected.62

Petitioner argues that it complied with the requirements of Section 196, namely, that it filed the requisite written claims for refund, and the judicial claim was filed within two (2) years from payment or from the date of entitlement to the refund or credit.63 For the amounts paid after the third quarter of 1999 up to the second quarter of 2003, petitioner filed a claim for refund before the City Treasurer in its June 17, 2003 Letter. Then, it filed its Amended and Supplemental Petition before the Regional Trial Court, among the prayers of which was the recovery of all payments made under Section 21 (A) of Manila Ordinance No. 7794 subsequent to the first three (3) quarters of 1999. It also filed claims for refund for the third quarter of 2003 up to the second quarter of 2005 on August 19, 2005, and from the third quarter of 2005 up to the fourth quarter of 2006 on January 11, 2007.64 Petitioner claims that there was no longer a need to make separate written claims for the taxes paid but not covered by these claims for refund. Citing Central Azucarera Don Pedro v. Central Bank,65 it points out that this Court has previously dispensed with the filing of the subsequent claims because it would have been an exercise in futility since the claims were based on common grounds that the taxing authority had already rejected. Moreover, as petitioner's basis for its claims for refund is a pure question of law, there is no need for it to exhaust its administrative remedies.66 As for the prescriptive period, petitioner avers that it became entitled to a refund or credit only on July 2, 2007, when the dismissal of its appeal of the May 17, 2006 Decision and February 22, 2007 Resolution of the Court of Tax Appeals Second Division became final and executory. It points out that these judgments declared that Section 21 (A) of Manila Ordinance No. 7764 was illegal double taxation. Thus, it had until July 2, 2009 to file its judicial claim for refund for its payments. While it agrees with some portions of Justice Casanova's Concurring and Dissenting Opinion in the Court of Tax Appeals En Banc September 5, 2008 Decision, it argues that all of its payments were covered by its claims for refund since the two (2)-year period for a judicial refund ended on July 2, 2009 and the administrative claim may be dispensed with.67 Third, petitioner asserts that the joinder of its protest to the deficiency tax assessment and the refund of its tax payments are in accordance with the Rules of Court. Since both are premised on the same cause of action, namely, the illegal collection of business taxes under Section 21 (A) of Manila Ordinance No. 7794, to file separate cases would be to split this cause of action and would produce a multiplicity of suits.68 Finally, petitioner claims that when it filed its Amended and Supplemental Petition, it was not ordered by the Regional Trial Court to pay additional docket and filing fees. Citing Lu v. Lu Ym,69 it argues that cases should not be automatically dismissed when there is no showing of bad faith on the part of the filing party when insufficient docket fees were paid. In any event, it undertakes to pay any additional docket fees that may be found due by this Court.70 On February 18, 2009,71 this Court ordered respondents to comment on the Petition for Review, with which they complied on April 16, 2009.72 In their Comment, respondents argue that the Regional Trial Court did not acquire jurisdiction over this case because petitioner failed to pay the docket fees for the additional claims within the reglementary period. They claim that petitioner purposefully avoided paying these docket fees.73 On August 26, 2009, petitioner filed its Reply to the Comment,74 in compliance with this Court's July 1, 2009 Resolution.75 In its Reply, petitioner reiterates its argument that the insufficiency of the docket fees paid for the Amended and Supplemental Petition does not warrant its dismissal. Citing United Overseas Bank (formerly Westmont Bank) v. Ros,76 it argues that a case should not be dismissed simply

because a party failed to file the docket fees, if no bad faith is shown.77 It claims that it did not act with malice or deliberately intend to evade payment of docket fees.78 Moreover, it points out that respondents raised the issue of insufficient docket fees for the first time in its October 25, 2008 Comment before the Court of Tax Appeals En Banc. Respondents should be deemed estopped from questioning the jurisdiction of the Regional Trial Court and of the Court of Tax Appeals.79 On December 9, 2009, the parties were ordered to submit their respective memoranda.80 Petitioner filed its Memorandum on April 5, 2010,81 while respondents filed their Memorandum on June 10, 2010.82 In their Memorandum, respondents argue that petitioner invoked Section 195 of the Local Government Code when it filed its original action, and only belatedly introduced its cause of action under Section 196 before the Court of Tax Appeals. Moreover, even if it may validly invoke Section 196, it failed to comply with the requirement of filing a written claim prior to the institution of its action with the Regional Trial Court since it already filed the case for refund even before it paid the taxes owed to respondents beginning the fourth quarter of 1999. Finally, it claims that not only is there non¬payment of docket fees, petitioner is already barred from paying the deficiency docket fees, since the period within which to pay is only within the applicable prescriptive or reglementary period, which has already lapsed.83 The issues for this Court's resolution are: First, whether or not the Regional Trial Court has jurisdiction over petitioner International Container Terminal Services, Inc.'s claims for refund from the fourth quarter of 1999 onwards, despite its non-payment of additional docket fees to the Regional Trial Court; Second, whether or not Section 195 or Section 196 of the Local Government Code govern petitioner International Container Terminal Services, Inc.'s claims for refund from the fourth quarter of 1999 onwards; and Finally, whether or not petitioner International Container Terminal Services, Inc. complied with the requirements that would entitle it to the refund it claims. I It is an established rule that the payment of the prescribed docket fees is essential for a court to acquire jurisdiction over a case.84 Nonetheless, in Sun Insurance Office,85 this Court laid down the principles concerning the payment of docket fees for initiatory pleadings: Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the total amount of the claim. This is a matter which the clerk of court of the lower court and/or his duly authorized docket clerk or clerk in-charge should determine and, thereafter, i[f] any amount is found due, he must require the private respondent to pay the same. Thus, the Court rules as follows: 1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. 2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee.86 Should the docket fees paid be found insufficient considering the value of the claim, the filing party shall be required to pay the deficiency, but jurisdiction is not automatically lost. The clerk of court involved, or his or her duly authorized deputy, is responsible for making the deficiency assessment.87 If a party pays the correct amount of docket fees for its original initiatory pleading, but later amends the pleading and increases the amount prayed for, the failure to pay the corresponding docket fees for the increased amount should not be deemed to have curtailed the court's jurisdiction. In PNOC Shipping and Transport Corp. v. Court of Appeals:88 With respect to petitioner's contention that the lower court did not acquire jurisdiction over the amended complaint increasing the amount of damages claimed to P600,000.00, we agree with the Court of Appeals that the lower court acquired jurisdiction over the case when private respondent paid the docket fee corresponding to its claim in its original complaint. Its failure to pay the docket fee corresponding to its increased claim for damages under the amended complaint should not be considered as having curtailed the lower court's jurisdiction. Pursuant to the ruling in Sun Insurance Office, Ltd. (SIOL) v. Asuncion, the unpaid docket fee should be considered as a lien on the judgment even though private respondent specified the amount of P600,000.00 as its claim for damages in its amended complaint.89 (Citation omitted) When it is not shown that the party deliberately intended to defraud the court of the full payment of docket fees, the principles enumerated in Sun Insurance should apply. In United Overseas Bank:90 This Court is not inclined to adopt the petitioner's piecemeal construction of our rulings in Manchester and Sun Insurance. Its attempt to strip the said landmark cases of one or two lines and use them to bolster its arguments and clothe its position with jurisprudential blessing must be struck down by this Court. All told, the rule is clear and simple. In case where the party does not deliberately intend to defraud the court in payment of docket fees, and manifests its willingness to abide by the rules by paying additional docket fees when required by the court, the liberal doctrine enunciated in Sun Insurance and not the strict regulations set in Manchester will apply.91 Here, contrary to the findings of the Court of Tax Appeals En Banc, the circumstances dictate the application of Sun Insurance. First, it is undisputed that petitioner paid the correct amount of docket fees when it filed its original Petition for Certiorari and Prohibition before the Regional Trial Court. It was when it filed its Amended and Supplemental Petition, where it prayed for refund of all the tax payments it had made and would make after the first three (3) quarters of 1999,92 that the issue of deficient payment of docket fees arose. As pointed out by petitioner, in its July 18, 2003 Order admitting the Amended and Supplemental Petition, the Regional Trial Court did not order petitioner to pay any additional docket fees corresponding to its amended prayer: The Court admits the Amended and Supplemental Petition. The respondents are ordered to file their responsive pleading to said Amended Petition. In view of this development, respondents are

given a new period of ten (10) days from receipt of this Order, to submit said responsive pleading. SO ORDERED.93 Notably, as argued by petitioner, the amount it claims under its amended prayer for refund in the Amended and Supplemental Petition cannot be determined with absolute certainty, as it continued to pay the taxes due to respondents during the course of the proceedings.94 Second, it is clear that respondents never assailed petitioner's insufficient payment of docket fees before the Regional Trial Court and the Court of Tax Appeals Second Division. They only raised this issue in their October 25, 2008 Comment to petitioner's Motion for Reconsideration95 of the September 5, 2008 Decision of the Court of Tax Appeals En Banc. Respondents have not denied this. If a party fails to seasonably raise the other party's failure to pay sufficient docket fees, then estoppel will set in. In Lu v. Lu Ym, Sr:96 Assuming arguendo that the docket fees were insufficiently paid, the doctrine of estoppel already applies. The assailed August 4, 2009 Resolution cited Vargas v. Caminas on the non-applicability of the Tijam doctrine where the issue of jurisdiction was, in fact, raised before the trial court rendered its decision. Thus the Resolution explained: Next, the Lu Ym father and sons filed a motion for the lifting of the receivership order, which the trial court had issued in the interim. David, et al., brought the matter up to the CA even before the trial court could resolve the motion. Thereafter, David, at al., filed their Motion to Admit Complaint to Conform to the Interim Rules Governing Intra-Corporate Controversies. It was at this point that the Lu Ym father and sons raised the question of the amount of filing fees paid. They also raised this point again in the CA when they appealed the trial court's decision in the case below. We find that, in the circumstances, the Lu Ym father and sons are not estopped from challenging the jurisdiction of the trial court. They raised the insufficiency of the docket fees before the trial court rendered judgment and continuously maintained their position even on appeal to the CA. Although the manner of challenge was erroneous—they should have addressed this issue directly to the trial court instead of the OCA—they should not be deemed to have waived their right to assail the jurisdiction of the trial court. Lu Ym father and sons did not raise the issue before the trial court. The narration of facts in the Court's original decision shows that Lu Ym father and sons merely inquired from the Clerk of Court on the amount of paid docket fees on January 23, 2004. They thereafter still "speculated] on the fortune of litigation. " Thirty-seven days later or on March 1, 2004 the trial court rendered its decision adverse to them. Meanwhile, Lu Ym father and sons attempted to verify the matter of docket fees from the Office of the Court Administrator (OCA). In their Application for the issuance [of] a writ of preliminary injunction filed with the Court of Appeals, they still failed to question the amount of docket fees paid by David Lu, el al. It was only in their Motion for Reconsideration of the denial by the appellate court of their application for injunctive writ that they raised such issue. Lu Ym father and sons' further inquiry from the OCA cannot redeem them. A mere inquiry from an improper office at that, could not, by any stretch, be considered as an act of having raised the jurisdictional question prior to the rendition of the trial court's decision. In one case, it was held: Here it is beyond dispute that respondents paid the full amount of docket fees as assessed by the Clerk of Court of the Regional Trial Court of Malolos, Bulacan, Branch 17, where they filed the

complaint. If petitioners believed that the assessment was incorrect, they should have questioned it before the trial court. Instead, petitioners belatedly question the alleged underpayment of docket fees through this petition, attempting to support their position with the opinion and certification of the Clerk of Court of another judicial region. Needless to state, such certification has no bearing on the instant case. The inequity resulting from the abrogation of the whole proceedings at this late stage when the decision subsequently rendered was adverse to the father and sons is precisely the evil being avoided by the equitable principle of estoppel.97 (Emphasis supplied, citations omitted) In this case, respondents failed to explain why they belatedly raised the issue of insufficient payment of docket fees before the Court of Tax Appeals En Banc in 2008, even though the issue arose as early as 2003, when petitioner filed its Amended and Supplemental Petition. As such, they are now estopped from assailing the jurisdiction of the Regional Trial Court due to petitioner's insufficient payment of docket fees. Finally, there is no showing that petitioner intended to deliberately defraud the court when it did not pay the correct docket fees for its Amended and Supplemental Petition. Respondents have not provided any proof to substantiate their allegation that petitioner purposely avoided the payment of the docket fees for its additional claims. On the contrary, petitioner has been consistent in its assertion that it will undertake to pay any additional docket fees that may be found due by this Court. Further, it is well settled that any additional docket fees shall constitute a lien on the judgment that may be awarded.98 II Sections 195 and 196 of the Local Government Code govern the remedies of a taxpayer for taxes collected by local government units, except for real property taxes: Section 195. Protest of Assessment. — When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice cancelling wholly or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60)-day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable. Section 196. Claim for Refund of Tax Credit. — No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be entertained in any court after the expiration of two (2) years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit. In City of Manila v. Cosmos Bottling Corp.,99 this Court distinguished between these two (2) remedies: The first provides the procedure for contesting an assessment issued by the local treasurer; whereas, the second provides the procedure for the recovery of an erroneously paid or illegally collected tax, fee or charge. Both Sections 195 and 196 mention an administrative remedy that

the taxpayer should first exhaust before bringing the appropriate action in court. In Section 195, it is the written protest with the local treasurer that constitutes the administrative remedy; while in Section 196, it is the written claim for refund or credit with the same office. As to form, the law does not particularly provide any for a protest or refund claim to be considered valid. It suffices that the written protest or refund is addressed to the local treasurer expressing in substance its desired relief. The title or denomination used in describing the letter would not ordinarily put control over the content of the letter. Obviously, the application of Section 195 is triggered by an assessment made by the local treasurer or his duly authorized representative for nonpayment of the correct taxes, fees or charges. Should the taxpayer find the assessment to be erroneous or excessive, he may contest it by filing a written protest before the local treasurer within the reglementary period of sixty (60) days from receipt of the notice; otherwise, the assessment shall become conclusive. The local treasurer has sixty (60) days to decide said protest. In case of denial of the protest or inaction by the local treasurer, the taxpayer may appeal with the court of competent jurisdiction; otherwise, the assessment becomes conclusive and unappealable. On the other hand, Section 196 may be invoked by a taxpayer who claims to have erroneously paid a tax, fee or charge, or that such tax, fee or charge had been illegally collected from him. The provision requires the taxpayer to first file a written claim for refund before bringing a suit in court which must be initiated within two years from the date of payment. By necessary implication, the administrative remedy of claim for refund with the local treasurer must be initiated also within such two-year prescriptive period but before the judicial action. Unlike Section 195, however, Section 196 does not expressly provide a specific period within which the local treasurer must decide the written claim for refund or credit. It is, therefore, possible for a taxpayer to submit an administrative claim for refund very early in the two-year period and initiate the judicial claim already near the end of such two-year period due to an extended inaction by the local treasurer. In this instance, the taxpayer cannot be required to await the decision of the local treasurer any longer, otherwise, his judicial action shall be barred by prescription. Additionally, Section 196 does not expressly mention an assessment made by the local treasurer. This simply means that its applicability does not depend upon the existence of an assessment notice. By consequence, a taxpayer may proceed to the remedy of refund of taxes even without a prior protest against an assessment that was not issued in the first place. This is not to say that an application for refund can never be precipitated by a previously issued assessment, for it is entirely possible that the taxpayer, who had received a notice of assessment, paid the assessed tax, fee or charge believing it to be erroneous or illegal. Thus, under such circumstance, the taxpayer may subsequently direct his claim pursuant to Section 196 of the LGC.100 (Emphasis in the original, citation omitted) If the taxpayer receives an assessment and does not pay the tax, its remedy is strictly confined to Section 195 of the Local Government Code.101 Thus, it must file a written protest with the local treasurer within 60 days from the receipt of the assessment. If the protest is denied, or if the local treasurer fails to act on it, then the taxpayer must appeal the assessment before a court of competent jurisdiction within 30 days from receipt of the denial, or the lapse of the 60-day period within which the local treasurer must act on the protest.102 In this case, as no tax was paid, there is no claim for refund in the appeal.103 If the taxpayer opts to pay the assessed tax, fee, or charge, it must still file the written protest within the 60-day period, and then bring the case to court within 30 days from either the decision

or inaction of the local treasurer. In its court action, the taxpayer may, at the same time, question the validity and correctness of the assessment and seek a refund of the taxes it paid.104 "Once the assessment is set aside by the court, it follows as a matter of course that all taxes paid under the erroneous or invalid assessment are refunded to the taxpayer."105 On the other hand, if no assessment notice is issued by the local treasurer, and the taxpayer claims that it erroneously paid a tax, fee, or charge, or that the tax, fee, or charge has been illegally collected from him, then Section 196 applies.106 Here, there is no dispute on the refund of P6,224,250.00, representing the additional taxes paid for the first three (3) quarters of 1999, as ordered by the Court of Tax Appeals Second Division in its May 17, 2006 Decision on to petitioner's entitlement to a refund of the taxes paid subsequent to the third quarter of 1999, which was denied by the Court of Tax Appeals Second Division on the ground that petitioner failed to comply with the requirements of Section 195. When petitioner raised the applicability of Section 196 to the claim for refund of these subsequent payments, the Court of Tax Appeals Second Division, as affirmed by the Court of Tax Appeals En Banc, held that Section 196 cannot apply as petitioner previously anchored its claims under Section 195. As ruled by the Court of Tax Appeals En Banc: Unmistakably, Section 195 and Section 196 of the LGC are two separate and diverse remedies granted to taxpayers, calling for different requirements and conditions for their application. Considering so, petitioner should have been clear on the basis of its action. It cannot be allowed to resort to an all-encompassing remedy so that in case it is disqualified under once, it can immediately shift to the other. When petitioner appealed to the Second Division, the following issues were raised: 1. Whether or not the Petition of petitioner were prematurely filed, or, whether or not the said petition is the "appeal" contemplated in Section 195 of the Local Government Code. 2. Whether or not petitioner is taxable under Section 21 (A) of Manila Ordinance No. 7794, as amended by Manila Ordinance No. 7807, given the fact that it is already taxed as a contractor under Section 18 of the same ordinance. Again, a cursory reading of the above as well as the arguments, discussions and theories in the Petition for Review and Memorandum filed before the Second Division shows that petitioner's argument/theory on the applicability of Section 196 to its claim after the first three quarters of 1999 was not ascertainable. In contrast, the petition is enclosed with supporting arguments on petitioner's protest to the imposition of the additional local business tax. There was no mention or discussion of Section 196. From the RTC until the filing of a petition before the Second Division, emphasis had been given on petitioner's arguments questioning the assessment.107 (Emphasis in the original) The nature of an action is determined by the allegations in the complaint and the character of the relief sought.108 Here, petitioner seeks a refund of taxes that respondents had collected. Following City of Manila,109 refund is available under both Sections 195 and 196 of the Local Government Code: for Section 196, because it is the express remedy sought, and for Section 195, as a consequence of the declaration that the assessment was erroneous or invalid. Whether the remedy availed of was under Section 195 or Section 196 is not determined by the taxpayer paying the tax and then claiming a refund. What determines the appropriate remedy is the local government's basis for the collection of the tax. It is explicitly stated in Section 195 that it is a remedy against a notice of assessment issued by the local treasurer, upon a finding that the correct taxes, fees, or charges have not been paid. The notice of assessment must state "the nature of the tax, fee, or charge, the amount of

deficiency, the surcharges, interests and penalties."110 In Yamane v. BA Lepanto Condominium Corp.:111 Ostensibly, the notice of assessment, which stands as the first instance the taxpayer is officially made aware of the pending tax liability, should be sufficiently informative to apprise the taxpayer the legal basis of the tax. Section 195 of the Local Government Code does not go as far as to expressly require that the notice of assessment specifically cite the provision of the ordinance involved but it does require that it state the nature of the tax, fee or charge, the amount of deficiency, surcharges, interests and penalties. In this case, the notice of assessment sent to the Corporation did state that the assessment was for business taxes, as well as the amount of the assessment. There may have been prima facie compliance with the requirement under Section 195. However in this case, the Revenue Code provides multiple provisions on business taxes, and at varying rates. Hence, we could appreciate the Corporation's confusion, as expressed in its protest, as to the exact legal basis for the tax. Reference to the local tax ordinance is vital, for the power of local government units to impose local taxes is exercised through the appropriate ordinance enacted by the sanggunian, and not by the Local Government Code alone. What determines tax liability is the tax ordinance, the Local Government Code being the enabling law for the local legislative body.112 (Citations omitted) No such precondition is necessary for a claim for refund pursuant to Section 196.113 Here, no notice of assessment for deficiency taxes was issued by respondent City Treasurer to petitioner for the taxes collected after the first three (3) quarters of 1999. As observed by Court of Tax Appeals Justice Casanova in his Concurring and Dissenting Opinion to the September 5, 2008 Decision: In order to apply Section 195 of the LGC, there is a need for the issuance of a notice of assessment stating the nature of the tax, fee or charge, the amount of deficiency, the surcharges, interests and penalties. It is only upon receipt of this notice of assessment that a taxpayer is required to file a protest within sixty (60) days from receipt thereof. Given the nature of a notice of assessment, it is my opinion that no notice pertaining to deficiency taxes for the periods subsequent to the 3rd Quarter of 1999 up to the present were ever issued or sent by respondents to ICTSI. In ICTSI's case, as correctly found by the Second Division, viz: "Records disclose in the instant case that petitioner filed a protest pursuant to Section 195 of the LGC only with respect to the assessment of the amount of P6,224,250.00, which covers the [first three quarters] of 1999. Petitioner protested the said assessment on July 15, 1999 and paid the same amount under protest. This is not controverted by the respondents." Hence, Section 195 of the LGC cannot apply to the period subsequent to the 3rd Quarter of 1999 because ICTSI did not receive any notice of assessment thereafter that states the nature of the tax[,] amount of deficiency[,] and charges.114 The "assessments" from the fourth quarter of 1999 onwards were Municipal License Receipts; Mayor's Permit, Business Taxes, Fees & Charges Receipts; and Official Receipts issued by the Office of the City Treasurer for local business taxes, which must be paid as prerequisites for the renewal of petitioner's business permit in respondent City of Manila.115 While these receipts state the amount and nature of the tax assessed, they do not contain any amount of deficiency, surcharges, interests, and penalties due from petitioner. They cannot be considered the "notice of assessment" required under Section 195 of the Local Government Code. When petitioner paid these taxes and filed written claims for refund before respondent City Treasurer, the subsequent denial of these claims should have prompted resort to the remedy laid

down in Section 196, specifically the filing of a judicial case for the recovery of the allegedly erroneous or illegally collected tax within the two (2)-year period. Petitioner appealed the denial of the protest against respondent City Treasurer's assessment and the action against the denial of its claims for refund. For both issues, petitioner's arguments are based on the common theory that the additional tax under Section 21 (A) of Manila Ordinance No. 7794, as amended by Section 1(G) of Manila Ordinance No. 7807, is illegal double taxation. Hence, their joinder in one (1) suit was legally appropriate and avoided a multiplicity of suits.116 III A tax refund or credit is in the nature of a tax exemption,117 construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority.118 Claimants of a tax refund must prove the factual basis of their claims with sufficient evidence.119 To be entitled to a refund under Section 196 of the Local Government Code, the taxpayer must comply with the following procedural requirements: first, file a written claim for refund or credit with the local treasurer; and second, file a judicial case for refund within two (2) years from the payment of the tax, fee, or charge, or from the date when the taxpayer is entitled to a refund or credit.120 As to the first requirement, the records show that the following written claims for refund were made by petitioner: In its June 17, 2003 Letter to the City Treasurer, it claimed a refund of P27,800,674.36 for taxes paid from the fourth quarter of 1999 up to the second quarter of 2003.121 In its August 18, 2005 Letter to the City Treasurer, it claimed a refund of P14,190,092.90 for taxes paid for the third quarter of 2003 up to the second quarter of 2005.122 In her September 1, 2005 Response123 to the August 18, 2005 Letter, City Treasurer Liberty M. Toledo denied the claim, stating in part: With respect to the alleged final and executory decision of the Regional Trial Court, Branch 21, Manila in Civil Case No. 00-97081, please be informed that as of this writing, there is no decision yet rendered by the Supreme [Court] on the appeal made by the City. Hence, the decision has not attained finality. In view thereof and considering that the issue on whether or not Golden Arches is liable under Section 21 or not and that the same constitute double taxation is sub-judice due to the case filed in court by your company, this Office, cannot, much to our regret, act favorably on your claim for refund or credit of the tax collected as mentioned above. Rest assured that upon receipt of any decision from the Supreme Court declaring Section 21 illegal and unconstitutional, this Office shall act accordingly.124 Thereafter, petitioner sent its January 10, 2007 Letter to the City Treasurer claiming a refund of taxes paid for the third quarter of 2005 until the fourth quarter of 2006, pursuant to the Court of Tax Appeals Second Division May 17, 2006 Decision.125 As for the taxes paid thereafter and were not covered by these letters, petitioner readily admits that it did not make separate written claims for refund, citing that "there was no further necessity"126 to make these claims. It argues that to file further claims before respondent City Treasurer would have been "another exercise in futility"127 as it would have merely raised the same grounds that it already raised in its June 17, 2003 Letter: In the present controversy, it can be gleaned from the foregoing discussion that to file a written claim before the Respondent City Treasurer would have been another exercise in futility because the grounds for claiming a refund for the subsequent years would have been the very same grounds cited by petitioner in support of its 17 June 2003 letter that was not acted upon by

Respondent City Treasurer. Thus, it would have been reasonable to expect that any subsequent written claim would have likewise been denied or would similarly not be acted upon. This is bolstered by the fact that during the pendency of the instant case, from its initial stages before the Regional Trial Court up to the present, Respondents have continued and unceasingly assessed and collected the questioned local business tax. . . . 128 The doctrine of exhaustion of administrative remedies requires recourse to the pertinent administrative agency before resorting to court action.129 This is under the theory that the administrative agency, by reason of its particular expertise, is in a better position to resolve particular issues: One of the reasons for the doctrine of exhaustion is the separation of powers, which enjoins upon the Judiciary a becoming policy of non-interference with matters coming primarily (albeit not exclusively) within the competence of the other departments. The theory is that the administrative authorities are in a better position to resolve questions addressed to their particular expertise and that errors committed by subordinates in their resolution may be rectified by their superiors if given a chance to do so. A no less important consideration is that administrative decisions are usually questioned in the special civil actions of certiorari, prohibition and mandamus, which are allowed only when there is no other plain, speedy and adequate remedy available to the petitioner. It may be added that strict enforcement of the rule could also relieve the courts of a considerable number of avoidable cases which otherwise would burden their heavily loaded dockets.130(Citation omitted) When there is an adequate remedy available with the administrative remedy, then courts will decline to interfere when the party refuses, or fails, to avail of it.131 Nonetheless, the failure to exhaust administrative remedies is not always fatal to a party's cause. This Court has admitted of several exceptions to the doctrine: As correctly suggested by the respondent court, however, there are a number of instances when the doctrine may be dispensed with and judicial action validly resorted to immediately. Among these exceptional cases are: 1) when the question raised is purely legal; 2) when the administrative body is in estoppel; 3) when the act complained of is patently illegal; 4) when there is urgent need for judicial intervention; 5) when the claim involved is small; 6) when irreparable damage will be suffered; 7) when there is [no] other plain, speedy and adequate remedy; 8) when strong public interest is involved; 9) when the subject of the controversy is private land; and 10) in quo warranto proceedings.132(Citations omitted) If the party can prove that the resort to the administrative remedy would be an idle ceremony such that it will be absurd and unjust for it to continue seeking relief that evidently will not be granted to it, then the doctrine would not apply. In Central Azucarera:133 On the failure of the appellee to exhaust administrative remedies to secure the refund of the special excise tax on the second importation sought to be recovered, we are of the same opinion as the trial court that it would have been an idle ceremony to make a demand on the administrative officer and after denial thereof to appeal to the Monetary Board of the Central Bank after the refund of the first excise tax had been denied.134 As correctly pointed out by petitioner, the filing of written claims with respondent City Treasurer for every collection of tax under Section 21 (A) of Manila Ordinance No. 7764, as amended by Section 1(G) of Ordinance No. 7807, would have yielded the same result every time. This is bolstered by respondent City Treasurer's September 1, 2005 Letter, in which it stated that it could not act favorably on petitioner's claim for refund until there would have been a final judicial determination of the invalidity of Section 21 (A).

Further, the issue at the core of petitioner's claims for refund, the validity of Section 21 (A) of Manila Ordinance No. 7794, as amended by Section 1(G) of Manila Ordinance No. 7807, is a question of law.135When the issue raised by the taxpayer is purely legal and there is no question concerning the reasonableness of the amount assessed, then there is no need to exhaust administrative remedies.136 Thus, petitioner's failure to file written claims of refund for all of the taxes under Section 21 (A) with respondent City Treasurer is warranted under the circumstances. Similarly, petitioner complied with the second requirement under Section 196 of the Local Government Code that it must file its judicial action for refund within two (2) years from the date of payment, or the date that the taxpayer is entitled to the refund or credit. Among the reliefs it sought in its Amended and Supplemental Petition before the Regional Trial Court is the refund of any and all subsequent payments of taxes under Section 21 (A) from the time of the filing of its Petition until the finality of the case: WHEREFORE, premises considered, it is respectfully prayed – .... c)

after trial, a decision be rendered ordering the respondents to refund the local business taxes assessed, demanded and collected by them and paid under protest by petitioner, in the amount of P6,224,250.00, corresponding to the first three (3) quarters of 1999 plus any and all subsequent payments of taxes under Section 21 (A) of Manila Ordinance No. 7794, as amended, made by petitioner from the time of the filing of this Petition until this case is finally decided, together with legal interest thereon, as well as the attorney's fees and costs of suit.137

As acknowledged by respondent City Treasurer in her September 1, 2005 Letter, petitioner's entitlement to the refund would only arise upon a judicial declaration of the invalidity of Section 21 (A) of Manila Ordinance No. 7794, as amended by Section 1(G) of Manila Ordinance No. 7807. This only took place when the Court of Tax Appeals En Banc dismissed respondents' Petition for Review of the May 17, 2006 Decision of the Court of Tax Appeals Second Division, rendering the judgment on the invalidity of Section 21 (A) final and executory on July 2, 2007.138 Therefore, the judicial action for petitioner's claim for refund had not yet expired as of the filing of the Amended and Supplemental Petition. WHEREFORE, the Petition for Review on Certiorari is GRANTED. The September 5, 2008 Decision and December 12, 2008 Resolution of the Court of Tax Appeals En Banc in C.T.A. EB No. 277 are hereby REVERSED and SET ASIDE. The Court of Tax Appeals En Banc is DIRECTED to proceed with the resolution on the merits of C.T.A. EB No. 277 with due and deliberate dispatch. SO ORDERED.

59. CITY OF MANILA & THE CITY TREASURER VS. COSMOS BOTTLING CORP| JUNE 27, 2018 MARTIRES, J.: The filing of a motion for reconsideration or new trial to question the decision of a division of the Court of Tax Appeals (CTA) is mandatory. An appeal brought directly to the CTA En Banc is dismissible for lack of jurisdiction.

In local taxation, an assessment for deficiency taxes made by the local government unit may be protested before the local treasurer without necessity of payment under protest. But if payment is made simultaneous with or following a protest against an assessment, the taxpayer may subsequently maintain an action in court, whether as an appeal from assessment or a claim for refund, so long as it is initiated within thirty (30) days from either decision or inaction of the local treasurer on the protest. THE CASE This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the 16 February 2011[1] and 20 April 2011[2]Resolutions of the CTA En Banc. The 16 February 2011 Resolution dismissed the petition for review of the petitioners for failure to file a motion for reconsideration or new trial before the CTA Third Division (CTA Division); while the 20 April 2011 Resolution denied the motion for reconsideration of the first assailed resolution. The CTA Division's 9 November 2010 Decision[3] ruled in favor of respondent Cosmos Bottling Corporation (Cosmos) by partially granting its appeal from the decision of the Regional Trial Court, Branch 49, Manila (RTC), in Civil Case No. 01-116881 entitled Cosmos Bottling Corporation v. City of Manila and Liberty Toledo (City Treasurer of Manila). THE FACTS Antecedents The CTA Division, narrates the antecedents as follows: For the first quarter of 2007, the City of Manila assessed [Cosmos] local business taxes and regulatory fees in the total amount of P1,226,781.05, as contained in the Statement of Account dated January 15, 2007. [Cosmos] protested the assessment through a letter dated January 18, 2007, arguing that Tax Ordinance Nos. 7988 and 8011, amending the Revenue Code of Manila (RCM), have been declared null and void. [Cosmos] also argued that the collection of local business tax under Section 21 of the RCM in addition to Section 14 of the same code constitutes double taxation. [Cosmos] also tendered payment of only P131,994.23 which they posit is the correct computation of their local business tax for the first quarter of 2007. This payment was refused by the City Treasurer. [Cosmos] also received a letter from the City Treasurer denying their protest, stating as follows: In view thereof, this Office, much to our regret, has to deny your protest and that any action taken thereon will be sub-judice. Rest assured, however, that once we receive a final ruling on the matter, we will act in accordance therewith. [Cosmos] was thus constrained to pay the assessment of P1,226,78,1.05 as evidenced by Official Receipt No. BAJ-005340 dated February 13, 2007. On March 1, 2007, [Cosmos] filed a claim for refund of P1,094,786.82 with the Office of the City Treasurer raising the same grounds as discussed in their protest. On March 8, 2007, [Cosmos] filed its complaint with the RTC of Manila praying for the refund or issuance of a tax credit certificate in the amount of P1,094,786.82. The RTC in its decision ruled in favor of [Cosmos] but denied the claim for refund. The dispositive portion of the assailed Decision reads: WHEREFORE, premises considered, judgment is hereby rendered enjoining the respondent Treasurer of the City of Manila to refrain henceforth from imposing tax under Section 21 of the Revenue Code of Manila if it had already imposed tax on .manufacturers under Section 14 of the same Code. As to the prayer in the petition for refund, the same is denied. [Cosmos'] motion for partial reconsideration was also denied, hence, [the] Petition for Review [before the CTA].[4]

The petition for review was raffled to the CTA Division and docketed as CTA A.C. No. 60. The Ruling of the CTA Division The CTA Division essentially ruled that the collection by the City Treasurer of Manila of local business tax under both Section 21 and Section 14 of the Revenue Code of Manila constituted double taxation.[5] It also ruled that the City Treasurer cannot validly assess local business tax based on the increased rates under Tax Ordinance Nos. 7988 and 8011 after the same have been declared null and void.[6]Finally, the court held that Cosmos Bottling Corporation's (Cosmos) local business tax liability for the calendar year 2007 shall be computed based on the gross sales or receipts for the year 2006.[7] The dispositive portion of the decision of the CTA Division reads: WHEREFORE, finding merit in the instant Petition for Review, the same is hereby granted. The assailed Decision dated April 14, 2009 of the Regional Trial Court of Manila, Branch 49 in Civil Case No. 07-116881 is hereby PARTIALLY REVERSED. Accordingly, respondent is ENJOINED from imposing the business tax under Section 21 of the Revenue Code of Manila if it had already imposed tax on manufacturers under Section 14 of the same Code. Respondent, furthermore, is ORDERED to REFUND or to issue a TAX CREDIT CERTIFICATE to petitioner the amount of P1,094,786.82, representing excess business taxes collected for the first quarter of year 2007.[8] Instead of filing a motion for reconsideration or new trial, the petitioners directly filed with the CTA En Banc a petition for review[9]praying that the decision of the CTA Division be reversed or set aside. The Ruling of the CTA En Banc In its Resolution of 16 February 2011, the CTA En Banc ruled that the direct resort to it without a prior motion for reconsideration or new trial before the CTA Division violated Section 18 of Republic Act (R.A.) No. 1125,[10] as amended by R.A. No. 9282 and R.A. No. 9503, and Section 1, Rule 8 of the Revised Rules of the CTA (CTA Rules).[11] The petitioners sought reconsideration, but their motion was denied by the CTA En Banc. Hence, the appeal before this Court. The Present Petition for Review The petitioners assigned the following errors allegedly committed by the CTA En Banc: 1. The Honorable CTA En Banc erred in not reconsidering its Order dismissing the case on procedural grounds. 2. The 3rd Division of the CTA committed reversible error when it ruled in favor of respondent Cosmos despite its failure to appeal the assessment within 30 days from receipt of the denial by the City Treasurer. 3. The 3rd Division of the CTA committed grave error when it failed to consider that the assessment subject of this case has already become final and executory and no longer appealable. 4. The 3rd Division of the CTA gravely erred in granting Cosmos' claim despite erroneously filing the instant case under the provision of Section 196 of the LGC.[12] On the first ground, the petitioners essentially invoke excusable mistake on the part of their handling lawyer in asking the Court to resolve the case on the merits. They argue that the Court had on many occasions set aside the rules of procedure in order to afford substantial justice.

On the second, third, and fourth grounds, the petitioners claim that Cosmos' remedy was one of protest against assessment as demonstrated by its letter dated 18 January 2007. Being so, Cosmos' adopted remedy should be governed by Section 195 of the Local Government Code (LGC). Pursuant to such provision, Cosmos had only thirty (30) days from receipt of denial of the protest within which to file an appeal before a court of competent jurisdiction. However, Cosmos failed to comply with the period of appeal, conveniently shifting its theory from tax protest to tax refund under Section 196 of the LGC when it later on filed a "claim for refund/tax credit of illegally/erroneously paid taxes" on 1 March 2007. The petitioners, thus, argue that Cosmos had already lost its right to appeal and is already precluded from questioning the denial of its protest. In its comment,[13] Cosmos counters that the rules should not be lightly disregarded by harping on substantial justice and the policy of liberal construction. It also insists that it is not Section 195 of the LGC that is applicable to it but Section 196 of the same code. ISSUES Whether the CTA En Banc correctly dismissed the petition for review before it for failure of the petitioners to file a motion for reconsideration or new trial with the CTA Division. Whether a taxpayer who had initially protested and paid the assessment may shift its remedy to one of refund. OUR RULING We rule for Cosmos. I. The filing of a motion for reconsideration or new trial before the CTA Division is an indispensable requirement for filing an appeal before the CTA En Banc. The CTA En Banc was correct in interpreting Section 18 of R.A. No. 1125, as amended by R.A. 9282 and R.A. No. 9503, which states – Section 18. Appeal to the Court of Tax Appeals En Banc. – No civil proceeding involving matter arising under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code shall be maintained, except as herein provided, until and unless an appeal has been previously filed with the CTA and disposed of this Act. A party adversely affected by a resolution of a Division of the CTA on motion for reconsideration or new trial, may file a petition for review with the CTA en banc. (underlining supplied) as requiring a prior motion for reconsideration or new trial before the same division of the CTA that rendered the assailed decision before filing a petition for review with the CTA En Banc. Failure to file such motion for reconsideration or new trial is cause for dismissal of the appeal before the CTA En Banc. Corollarily, Section 1, Rule 8 of the CTA Rules provides: Section 1. Review of cases in the Court en banc. — In cases falling under the exclusive appellate jurisdiction of the Court en banc, the petition for review of a decision or resolution of the Court in Division must be preceded by the filing of a timely motion for reconsideration or new trial with the Division. (emphasis supplied) Clear it is from the cited rule that the filing of a motion for reconsideration or new trial is mandatory – not merely directory – as indicated by the word "must."

Thus, in Asiatrust Development Bank, Inc. v. Commissioner of Internal Revenue (Asiatrust),[14] we declared that a timely motion for reconsideration or new trial must first be filed with the CTA Division that issued the assailed decision or resolution in order for the CTA En Banc to take cognizance of an appeal via a petition for review. Failure to do so is a ground for the dismissal of the appeal as the word "must" indicates that the filing of a prior motion is mandatory, and not merely directory.[15] In Commissioner of Customs v. Marina Sales, Inc. (Marina Sales),[16] which was cited in Asiatrust, we held: The rules are clear. Before the CTA En Banc could take cognizance of the petition for review concerning a case falling under its exclusive appellate jurisdiction, the litigant must sufficiently show that it sought prior reconsideration or moved for a new trial with the concerned CTA division. Procedural rules are not to be trifled with or be excused simply because their noncompliance may have resulted in prejudicing a party's substantive rights. Rules are meant to be followed. They may be relaxed only for very exigent and persuasive reasons to relieve a litigant of an injustice not commensurate to his careless non-observance of the prescribed rules.[17](citations omitted) The rules are to be relaxed only in the interest of justice and to benefit the deserving.[18] We cannot lend to the petitioners the benefit of liberal application of the rules.. As in Marina Sales, the rules may be relaxed when to do so would afford a litigant substantial justice. After a cursory examination of the records of the case, we find that the petitioners, as determined by the CTA Division, erroneously assessed and collected from Cosmos local business taxes for the first quarter of 2007; thus, a refund is warranted. The ruling of the CTA Division is anchored on the following findings: the assessment against Cosmos was based on Ordinance Nos. 7988 and 8011 (Revenue Code (1) of Manila); (2)

the assessment against Cosmos included taxes imposed under Section 21, in addition to Section 14, of the Revenue Code of Manila; and

the local taxes collected from Cosmos for the first quarter of 2007 was based on its gross receipts in 2005. We cannot help but sustain the ruling of the CTA Division that the City of Manila cannot validly assess local business taxes under Ordinance Nos. 7988 and 8011 because they are void and of no legal effect; the collection of local business taxes under Section 21 in addition to Section 14 of the Revenue Code of Manila constitutes double taxation; and the 2007 local business tax assessed against Cosmos should be computed based on the latter's gross receipts in 2006. 1. Ordinance Nos. 7988 and 8011 have been declared null and void, hence, invalid bases for the imposition of business taxes. At .the time the CTA Division rendered the assailed decision, the cases of Coca-Cola Bottlers Philippines, Inc. v. City of Manila (2006),[19] The City of Manila v. Coca-Cola Bottlers, Inc. (2009)[20] and City of Manila v. Coca-Cola Bottlers, Inc. (2010)[21] had already settled the matter concerning the validity of Ordinance Nos. 7988 and 8011. The said cases clarified that Ordinance Nos. 7988 and 8011, which amended Ordinance No. 7794, were null and void for failure to comply with the required publication for three (3) consecutive days and thus cannot be the basis for the collection of business taxes. (3)

It is not disputed that Cosmos was assessed with the tax on manufacturers under Section 14 and the tax on other businesses under Section 21 of Ordinance No. 7988, as amended by Ordinance No. 8011. Consistent with the settled jurisprudence above, the taxes assessed in this case, insofar as they are based on such void ordinances, must perforce be nullified. Thus, what remains enforceable is the old Ordinance No. 7794. Accordingly, the business tax assessable against Cosmos should be based on the rates provided by this Ordinance. 2. The collection of taxes under both Sections 14 and 21 of the Revenue Code of Manila constitutes double taxation. While the City of Manila could impose against Cosmos a manufacturer's tax under Section 14 of Ordinance No. 7794, or the Revenue Code of Manila, it cannot at the same time impose the tax under Section 21 of the same code; otherwise, an obnoxious double taxation would set in. The petitioners erroneously argue that double taxation is wanting for the reason that the tax imposed under Section 21 is imposed on a different object and of a different nature as that in Section 14. The argument is not novel. In The City of Manila v. Coca-Cola Bottlers, Inc. (2009),[22] the Court explained – [T]here is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since these are being imposed: (1) on the same subject matter — the privilege of doing business in the City of Manila; (2) for the same purpose — to make persons conducting business within the City of Manila contribute to city revenues; '(3) by the same taxing authority — petitioner City of Manila; (4) within the same taxing jurisdiction — within the territorial jurisdiction of the City of Manila; (5) for the same taxing periods per calendar year; and (6) of the same kind or character — a local business tax imposed on gross sales or receipts of the business. The distinction petitioners attempt to make between the taxes under Sections 14 and 21 of Tax Ordinance No. 7794 is specious. The Court revisits Section 143 of the LGC, the very source of the power of municipalities and cities to impose a local business tax, and to which any local business tax imposed by petitioner City of Manila must conform. It is apparent from a perusal thereof that when a municipality or city has already imposed a business tax on manufacturers, etc. of liquors, distilled spirits, wines, and any other article of commerce, pursuant to Section 143(a) of the LGC, said municipality or city may no longer subject the same manufacturers, etc. to a business tax under Section 143(h) of the same Code. Section 143(h) may be imposed only on businesses that are subject to excise tax, VAT, or percentage tax under the NIRC, and that are "not otherwise specified in preceding paragraphs." In the same way, businesses such as respondent's, already subject to a local business tax under Section 14 of Tax Ordinance No. 7794 [which is based on Section 143(a) of the LGC], can no longer be made liable for local business tax under Section 21 of the same Tax Ordinance [which is based on Section 143(h) of the LGC].[23](emphases supplied) In reality, Cosmos, being a manufacturer of beverages,[24] is similarly situated with Coca-Cola Bottlers, Inc. in the cited cases, with the difference only in the taxable periods of assessment. Thus, given that Cosmos is already paying taxes under Section 14 (just like Coca-Cola), it is not totally misplaced to consider the additional imposition of a tax under Section 21 as constituting double taxation, therefore excessive, warranting its refund to Cosmos as the CTA Division has correctly ordered. Computation of Business Tax Under Section 14

We consider next the proper basis for the computation of the business tax under Section 14 that is imposable against Cosmos. 3. The computation of local business tax is based on gross sales or receipts of the preceding calendar year. It is undisputed that Section 14 of the Revenue Code of Manila is derived from Section 143(a) of the LGC which provides: Section 143. Tax on Business. – The municipality may impose taxes on the following businesses: On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and (a) compounders x x x in accordance with the following schedule: With gross sales or receipts for the preceding calendar year in the amount of: x x x x (emphasis supplied) Consistent with the above provision, an assessment for business tax under Section 14 of Ordinance No. 7794 for the taxable year 2007 should be computed based on the taxpayer's gross sales or receipts of the preceding calendar year 2006. In this case, however, the petitioners based the computation of manufacturer's tax on Cosmos' gross sales for the calendar year 2005. The CTA Division was therefore correct in adjusting the computation of the business tax on the basis of Cosmos' gross sales in 2006 which amount, incidentally, was lower than Cosmos' gross sales in 2005. The business tax paid corresponding to the difference is consequently refundable to Cosmos. II. A taxpayer who had protested and paid an assessment may later on institute an action for refund. The petitioners submit that the assessment against Cosmos became final and executory when the latter effectively abandoned its protest and instead sued in court for the refund of the assessed taxes and charges. We cannot agree mainly for two reasons. First, even a cursory glance at the complaint filed by Cosmos would readily reveal that the action is not just for the refund of its paid taxes but also one assailing the assessment in question. Cosmos captioned its petition before the RTC as "For: The Revision of Statement of Account (Preliminary Assessment) and For Refund or Credit of Local Business Tax Erroneously/Illegally Collected."[25] The allegations in said complaint[26] likewise confirm that Cosmos did not agree with the assessment prepared by Liberty M. Toledo (Toledo) who was the City Treasurer of the City of Manila at the time. In asking the court to refund the assessed taxes it had paid, Cosmos essentially alleged that the basis of the payment, which is the assessment issued by Toledo, is erroneous or illegal. It is, thus, totally misplaced to consider Cosmos as having abandoned its protest against the assessment. By seasonably instituting the petition before the RTC, the assessment had not attained finality. Second, a taxpayer who had protested and paid an assessment is not precluded from later on instituting an action for refund or credit. The taxpayers' remedies of protesting an assessment and refund of taxes are stated in Sections 195 and 196 of the LGC, to wit:

Section 195. Protest of Assessment. – When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice cancelling wholly or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60)-day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable. Section 196. Claim for Refund of Tax Credit. – No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be entertained in any court after the expiration of two (2) years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit. The first provides the procedure for contesting an assessment issued by the local treasurer; whereas, the second provides the procedure for the recovery of an erroneously paid or illegally collected tax, fee or charge. Both Sections 195 and 196 mention an administrative remedy that the taxpayer should first exhaust before bringing the appropriate action in court. In Section 195, it is the written protest with the local treasurer that constitutes the administrative remedy; while in Section 196, it is the written claim for refund or credit with the same office. As to form, the law does not particularly provide any for a protest or refund claim to be considered valid. It suffices that the written protest or refund is addressed to the local treasurer expressing in substance its desired relief. The title or denomination used in describing the letter would not ordinarily put control over the content of the letter. Obviously, the application of Section 195 is triggered by an assessment made by the local treasurer or his duly authorized representative for nonpayment of the correct taxes, fees or charges. Should the taxpayer find the assessment to be erroneous or excessive, he may contest it by filing a written protest before the local treasurer within the reglementary period of sixty (60) days from receipt of the notice; otherwise, the assessment shall become conclusive. The local treasurer has sixty (60) days to decide said protest. In case of denial of the protest or inaction by the local treasurer, the taxpayer may appeal[27] with the court of competent jurisdiction; otherwise, the assessment becomes conclusive and unappealable. On the other hand, Section 196 may be invoked by a taxpayer who claims to have erroneously paid a tax, fee or charge, or that such tax, fee or charge had been illegally collected from him. The provision requires the taxpayer to first file a written claim for refund before bringing a suit in court which must be initiated within two years from the date of payment. By necessary implication, the administrative remedy of claim for refund with the local treasurer must be initiated also within such two-year prescriptive period but before the judicial action. Unlike Section 195, however, Section 196 does not expressly provide a specific period within which the local treasurer must decide the written claim for refund or credit. It is, therefore, possible for a taxpayer to submit an administrative claim for refund very early in the two-year period and initiate the judicial claim already near the end of such two-year period due to an

extended inaction by the local treasurer. In this instance, the taxpayer cannot be required to await the decision of the local treasurer any longer, otherwise, his judicial action shall be barred by prescription. Additionally, Section 196 does not expressly mention an assessment made by the local treasurer. This simply means that its applicability does not depend upon the existence of an assessment notice. By consequence, a taxpayer may proceed to the remedy of refund of taxes even without a prior protest against an assessment that was not issued in the first place. This is not to say that an application for refund can never be precipitated by a previously issued assessment, for it is entirely possible that the taxpayer, who had received a notice of assessment, paid the assessed tax, fee or charge believing it to be erroneous or illegal. Thus, under such circumstance, the taxpayer may subsequently direct his claim pursuant to Section 196 of the LGC. Clearly, when a taxpayer is assessed a deficiency local tax, fee or charge, he may protest it under Section 195 even without making payment of such assessed tax, fee or charge. This is because the law on local government taxation, save in the case of real property tax,[28] does not expressly require "payment under protest" as a procedure prior to instituting the appropriate proceeding in court. This implies that the success of a judicial action questioning the validity or correctness of the assessment is not necessarily hinged on the previous payment of the tax under protest. Needless to say, there is nothing to prevent the taxpayer from paying the tax under protest or simultaneous to a protest. There are compelling reasons why a taxpayer would prefer to pay while maintaining a protest against the assessment For instance, a taxpayer who is engaged in business would be hard-pressed to secure a business permit unless he pays an assessment for business tax and/or regulatory fees. Also, a taxpayer may pay the assessment in order to avoid further penalties, or save his properties from levy and distraint proceedings. The foregoing clearly shows that a taxpayer facing an assessment may protest it and alternatively: (1) appeal the assessment in court, or (2) pay the tax and thereafter seek a refund.[29] Such procedure may find jurisprudential mooring in San Juan v. Castro[30] wherein the Court described for the first and only time the alternative remedies for a taxpayer protesting an assessment – either appeal the assessment before the court of competent jurisdiction, or pay the tax and then seek a refund.[31] The Court, however, did not elucidate on the relation of the second mentioned alternative option, i.e., pay the tax and then seek a refund, to the remedy stated in Section 196. As this has a direct bearing on the arguments raised in the petition, we thus clarify. Where an assessment is to be protested or disputed, the taxpayer may proceed (a) without payment, or (b) with payment[32] of the assessed tax, fee or charge. Whether there is payment of the assessed tax or not, it is clear that the protest in writing must be made within sixty (60) days from receipt of the notice of assessment; otherwise, the assessment shall become final and conclusive. Additionally, the subsequent court action must be initiated within thirty (30) days from denial or inaction by the local treasurer; otherwise, the assessment becomes conclusive and unappealable. (a) Where no payment is made, the taxpayer's procedural remedy is governed strictly by Section 195. That is, in case of whole or partial denial of the protest, or inaction by the local treasurer, the taxpayer's only recourse is to appeal the assessment with the court of competent jurisdiction. The appeal before the court does not seek a refund but only questions the validity or correctness of the assessment. (b) Where payment was made, the taxpayer may thereafter maintain an action in court questioning the validity and correctness of the assessment (Section 195, LGC) and at the same

time seeking a refund of the taxes. In truth, it would be illogical for the taxpayer to only seek a reversal of the assessment without praying for the refund of taxes. Once the assessment is set aside by the court, it follows as a matter of course that all taxes paid under the erroneous or invalid assessment are refunded to the taxpayer. The same implication should ensue even if the taxpayer were to style his suit in court as an action for refund or recovery of erroneously paid or illegally collected tax as pursued under Section 196 of the LGC. In such a suit for refund, the taxpayer cannot successfully prosecute his theory of erroneous payment or illegal collection of taxes without necessarily assailing the validity or correctness of the assessment he had administratively protested. It must be understood, however, that in such latter case, the suit for refund is conditioned on the prior filing of a written claim for refund or credit with the local treasurer. In this instance, what may be considered as the administrative claim for refund is the letter-protest submitted to the treasurer. Where the taxpayer had paid the assessment, it can be expected that in the same letterprotest, he would also pray that the taxes paid should be refunded to him.[33] As previously mentioned, there is really no particular form or style necessary for the protest of an assessment or claim of refund of taxes. What is material is the substance of the letter submitted to the local treasurer. Equally important is the institution of the judicial action for refund within thirty (30) days from the denial of or inaction on the letter-protest or claim, not any time later, even if within two (2) years from the date of payment (as expressly stated in Section 196). Notice that the filing of such judicial claim for refund after questioning the assessment is within the two-year prescriptive period specified in Section 196. Note too that the filing date of such judicial action necessarily falls on the beginning portion of the two-year period from the date of payment. Even though the suit is seemingly grounded on Section 196, the taxpayer could not avail of the full extent of the two-year period within which to initiate the action in court. The reason is obvious. This is because an assessment was made, and if not appealed in court within thirty (30) days from decision or inaction on the protest, it becomes conclusive and unappealable. Even if the action in court is one of claim for refund, the taxpayer cannot escape assailing the assessment, invalidity or incorrectness, the very foundation of his theory that the taxes were paid erroneously or otherwise collected from him illegally. Perforce, the subsequent judicial action, after the local treasurer's decision or inaction, must be initiated within thirty (30) days later. It cannot be anytime thereafter because the lapse of 30 days from decision or inaction results in the assessment becoming conclusive and unappealable. In short, the scenario wherein the administrative claim for refund falls on the early stage of the two-year period but the judicial claim on the last day or late stage of such two-year period does not apply in this specific instance where an assessment is issued. To stress, where an assessment is issued, the taxpayer cannot choose to pay the assessment and thereafter seek a refund at any timewithin the full period of two years from the date of payment as Section 196 may suggest. If refund is pursued, the taxpayer must administratively question the validity or correctness of the assessment in the 'letter-claim for refund' within 60 days from receipt of the notice of assessment, and thereafter bring suit in court within 30 days from either decision or inaction by the local treasurer. Simply put, there are two conditions that must be satisfied in order to successfully prosecute an action for refund in case the taxpayer had received an assessment. One, pay the tax and administratively assail within 60 days the assessment before the local treasurer, whether in a

letter-protest or in a claim for refund. Two, bring an action in court within thirty (30) days from decision or inaction by the local treasurer, whether such action 1s denominated as an appeal from assessment and/or claim for refund of erroneously or illegally collected tax. In this case, after Cosmos received the assessment of Toledo on 15 January 2007, it forthwith protested such assessment through a letter dated 18 January 2007.[34] Constrained to pay the assessed taxes and charges, Cosmos subsequently wrote the Office of the City Treasurer another letter asking for the refund and reiterating the grounds raised in the previous submitted protest letter.[35] In the meantime, Cosmos received on 6 February 2007 the letter of Toledo denying its protest.[36] Thus, on 8 March 2007, or exactly thirty (30) days from its receipt of the denial, Cosmos brought the action before the RTC of Manila. Under the circumstances, it is evident that Cosmos was fully justified in asking for the refund of the assailed taxes after protesting the same before the local treasurer. Consistent with the discussion in the premises, Cosmos may resort to, as it actually did, the alternative procedure of seeking a refund after timely protesting and paying the assessment. Considering that Cosmos initiated the judicial claim for refund within 30 days from receipt of the denial of its protest, it stands to reason that the assessment which was validly protested had not yet attained finality. To reiterate, Cosmos, after it had protested and paid the assessed tax, is permitted by law to seek a refund having fully satisfied the twin conditions for prosecuting an action for refund before the court. Consequently, the CTA did not commit a reversible error when it allowed the refund in favor of Cosmos. WHEREFORE, the petition is DENIED for lack of merit. The 16 February 2011 and 20 April 2011 Resolutions of the Court of Tax Appeals En Banc in C.T.A. E.B. No. 702 are hereby AFFIRMED. 60. CIR vs. NEGROS CONSOLIDATED FARMERS MULTI PURPOSE COOPERATIVE | DECEMBER 5, 2018

TIJAM, J.: Assailed in this Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court are the Decision[2] dated March 5, 2014 and the Resolution[3] dated May 27, 2014 of the Court of Tax Appeals (CTA) En Banc in CTA EB Case No. 992, declaring respondent Negros Consolidated Farmers Multi-Purpose Cooperative (COFA) as exempt from the Valueadded tax (VAT) and hence, entitled to refund of the VAT it paid in advance. The Antecedents COFA is a multi-purpose agricultural cooperative organized under Republic Act (RA) No. 6938.[4]

As its usual course, COFA's farmer-members deliver the sugarcane produce to be milled and processed in COFA's name with the sugar mill/refinery.[5] Before the refined sugar is released by the sugar mill, however, an Authorization Allowing the Release of Refined Sugar (AARRS) from the Bureau of Internal Revenue (BIR) is required from COFA. For several instances, upon COFA's application, the BIR issued the AARRS without requiring COFA to pay advance VAT pursuant to COFA's tax exemption under Section 61[6] of RA 6938 and Section 109(r) (now under Section 109[L])[7] of RA No. 8424[8], as amended by RA No. 9337.[9] As such, COFA was issued Certificates of Tax Exemption dated May 24, 1999 and April 23, 2003 by the BIR.[10] However, beginning February 3, 2009, the BIR, through the Regional Director of Region 12-Bacolod City, required as a condition for the issuance of the AARRS the payment of "advance VAT" on the premise that COFA, as an agricultural cooperative, does not fall under the term "producer." According to the BIR, a "producer" is one who tills the land it owns or leases, or who incurs cost for agricultural production of the sugarcane to be refined by the sugar refinery.[11] As bases for the required payment of advance VAT, the Regional Director pointed to Sections 3 and 4 of Revenue Regulations (RR) No. 132008,[12] which, in part, respectively provide: Sec. 3. Requirement to pay in Advance VAT Sale of Refined Sugar. - In general, the advance VAT on the sale of refined sugar provided for under Sec. 8 hereof, shall be paid in advance by the owner/seller before the refined sugar is withdrawn from any sugar refinery/mill. x x x xxxx Sec. 4. Exemption from the Payment of the Advance VAT. - x x x xxxx A cooperative is said to be the producer of the sugar if it is the tiller of the land it owns, or leases, incurs cost of agricultural production of the sugar and produces the sugar cane to be refined. xxxx

COFA was thus, constrained to pay advance VAT under protest[13] and to seek the legal opinion of the BIR Legal Division, as to whether COFA is considered the producer of the sugar product of its members. In a Ruling dated January 11, 2008, the BIR[14] stated that the sales of sugar produce by COFA to its members and non-members are exempt from VAT pursuant to Section 109(L) of RA 9337, as implemented by Revenue Regulations (RR) No; 4-2007. The Ruling, in part, provides: Thus, COFA and its members['] respective roles in the operation of the Cooperative cannot be treated as separate and distinct from each other. Notwithstanding that COFA is not the owner of the land and the actual tiller of the land, it is considered as the actual producer of the members' sugarcane production because it primarily provided the various production inputs (fertilizers), capital, technology transfer and farm management. In short, COFA has direct participation in the sugarcane production of its farmers-member.[15] Thus, pursuant to Section 229[16] of RA. 8424, as amended, COFA lodged with petitioner Commissioner of Internal Revenue (CIR) an administrative claim for refund in the amount of P11,172,570.00 for the advance VAT it paid on the 109,535 LKG bags of refined sugar computed at P102.00 VAT per bag for the period covering February 3, 2009 to July 22, 2009. Because of the CIR's inaction, COFA filed a petition for review[17] before the CTA Division pursuant to Rule 8, Section 3(a)[18] of the Revised Rules of the CTA, but this time seeking the refund of the amount of P7,290,960.00 representing 71,480 LKG bags of refined sugar at P102.00 VAT per bag for the period covering May 12, 2009 to July 22, 2009.[19] In its Answer, the CIR raised as sole point COFA's alleged failure to comply with the requisites for recovery of tax erroneously or illegally collected as spelled under Section 229 of RA 8424, specifically, the lack of a prior claim for refund or credit with the CIR.[20] Trial on the merits thereafter ensued where only COFA presented evidence through its Tax Consultant, Jose V. Ramos. The CIR, on the other hand, waived the presentation of evidence. However, in its Memorandum,[21] the CIR additionally argued that COFA is not entitled to refund as it failed to present certain documents[22] required under Sections 3 and 4 of RR No. 13-2008.[23]

On December 12, 2012, the CTA Division rendered its Decision[24] finding COFA to be exempt from VAT and thus, ordered the refund of the advance VAT it erroneously paid. The CIR Division reasoned that COFA's Certificates of Tax Exemption dated May 24, 1999 and April 23, 2003 and the BIR Ruling dated January 11, 2008, which had not been revoked or nullified, affirmed COFA's status as a tax-exempt agricultural cooperative. It further held that based on said uncontroverted[25] evidence, COFA is "considered as the actual producer of the members' sugarcane production because it primarily provided the various production inputs (fertilizers), capital, technology transfer and farm management."[26] The CIR Division likewise held that COFA substantiated its claim for refund in the amount of P7,290,960.00 representing advance VAT on the 71,480 LKG bags of refined sugar from May 12, 2009 to July 22, 2009, by submitting in evidence the Summary of VAT Payments Under Protest with the related BIR Certificates of Advance Payment ofVAT and Revenue Official Receipts.[27] In disposal, the CIR Division pronounced: WHEREFORE, the instant Petition for Review is hereby GRANTED. Accordingly, [CIR] is hereby ORDERED TO REFUND in favor of [COFA] the amount of SEVEN MILLION TWO HUNDRED NINETY THOUSAND NINE HUNDRED SIXTY PESOS (P7,290,960.00), representing erroneously paid advance VAT for the period covering May 12, 2009 to July 22, 2009. SO ORDERED.[28] The CIR's motion for reconsideration met similar denial in the CTA Division's Resolution[29] dated March 5, 2013, thus prompting a petition for review before the CTA En Banc. The CIR maintained its argument that COFA failed to present evidence to prove that the refined sugar withdrawn from the sugar mills were actually produced by COFA through its registered members as required under RA 8424, as amended. The CIR argues that COFA's failure to present the quedan of the raw sugar issued by sugar mills in COFA's name is fatal to its claim for refund as it cannot be determined whether its registered members are the actual producers of the refined sugar before it was transferred in COFA's name and before COFA sells it to its members and non-members.[30]

Further, the CIR pointed to COFA's failure to present documentary evidence to prove that it is indeed the principal provider of the various production inputs (fertilizers), capital, technology transfers and farm management, as well as documentary evidence to show that COFA has sales transactions with its members and non-members. The CIR reiterated its argument that COFA failed to present the documents required for the administrative and judicial claim for refund in accordance with RR No. 132008. COFA countered that the instant case involves advance VAT assessed on its withdrawal of sugar from the refinery/mill, and not on its sale of sugar to members or non-members. Thus, COFA argued that the payment in advance of VAT for the withdrawal of sugar from the refinery/mill was without basis. In its presently assailed Decision, the CTA En Banc affirmed COFA's status as an agricultural cooperative entitled to VAT exemption. By evidence consisting of COFA's Certificate of Registration dated October 19, 2009 and Certificate of Good Standing dated May 19, 2010, as well as the CIR's admission in its Answer, pre-trial brief and stipulation of facts, it was established that COFA is an agricultural cooperative. According to the CTA En Banc, COFA, at the time of the subject transactions, was a cooperative in good standing as indicated in the Certification of Good Standing issued and renewed by the CDA on May 19, 2010. As such, the CTA En Banc held that pursuant to Section 109(L) of RA 8424, as amended, transactions such as sales by agricultural cooperatives duly registered with the CDA to their members, as well as sales of their produce, whether in its original state or processed fom1, to nonmembers, are exempt from VAT. Citing Article 61 of RA 6938, as amended by RA 9520, the CTA En Banc held that cooperatives were exempt from VAT for sales or transactions with members. As well, the CTA En Banc held that COFA was exempt from VAT for transactions with non-members, provided that the goods subject of the transaction were produced by the members of the cooperative; that the processed goods were sold in the name and for the account of the cooperative; and, that at least 25% of the net income of the cooperatives was returned to the members in the form of interest and/or patronage refunds.

The CIR's motion for reconsideration was denied by the CTA En Banc in its Resolution dated May 27, 2014, thus, giving rise to the present petition. The Issue The issue to be resolved is whether or not COFA, at the time of the subject transactions, i.e., from May 12, 2009 to July 22, 2009, is VAT-exempt and therefore entitled to a tax refund for the advance VAT it paid. The Ruling of the Court We deny the petition. COFA is a VAT-exempt agricultural cooperative. Exemption from the payment of VAT on sales made by the agricultural cooperatives to members or to non-members necessarily includes exemption from the payment of "advance VAT" upon the withdrawal of the refined sugar from the sugar mill. VAT is a tax on transactions, imposed at every stage of the distribution process on the sale, barter, exchange of goods or property, and on the performance of services, even in the absence of profit attributable thereto, so much so that even a non-stock, non-profit organization or government entity, is liable to pay VAT on the sale of goods or services.[31] Section 105 of RA 8424, as amended, provides: Section 105. Persons Liable. - Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the valueadded tax (VAT) imposed in Sections 106 to 108 of this Code. The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716. The phrase "in the course of trade or business" means the regular conduct

or pursuit of a commercial or an economic activity. including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in the Philippines by nonresident foreign persons shall be considered as being course of trade or business. There are, however, certain transactions exempt from VAT[32] such as the sale of agricultural products in their original state, including those which underwent simple processes of preparation or preservation for the market, such as raw cane sugar. Thus, Section 7 of RA 9337 amending Section 109 of RA 8424 provides: Section 7. Section 109 of the same Code, as amended, is hereby further amended to read as follows: "Section 109. Exempt Transactions. - (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: "A) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor. "Products classified under this paragraph shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping. Polished and/or husked rice, corn grits, raw cane sugar and molasses, ordinary salt, and copra shall be considered in their original state; (Emphasis ours) x x x x" While the sale of raw sugar, by express provision of law, is exempt from VAT, the sale of refined sugar, on the other hand, is not so exempted as refined sugar already underwent several refining processes and as such, is no longer considered to be in its original state. However, if the sale of the

sugar, whether raw or refined, was made by an agricultural cooperative to its members or non-members, such transaction is still VAT-exempt. Section 7 of RA 9337 amending Section 109 (L) of RA 8424, the law applicable at the time material to the claimed tax refund, further reads: Section 7. Section 109 of the same Code, as amended, is hereby further amended to read as follows: "SEC. 109. Exempt Transactions. - (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: xxxx "(L) Sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their produce, whether in its original state or processed form, to non-members;their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce;" (Emphasis ours) Relatedly, Article 61 of RA 6938, as amended by RA 9520, provides: ART. 61. Tax and Other Exemptions. Cooperatives transacting business with both members and non-members shall not be subjected to tax on their transaction with members. In relation to this, the transactions of members with the cooperative shall not be subject to any taxes and fees, including but not limited to final taxes on members' deposits and documentary tax. Notwithstanding the provisions of any law or regulation to the contrary, such cooperatives dealing with nonmembers shall enjoy the following tax exemptions: (1) Cooperatives with accumulated reserves and undivided net savings of not more than Ten million pesos (P10,000,000.00) shall be exempt from all national, city, provincial, municipal or barangay taxes of whatever name and nature. Such cooperatives shall be exempt from customs duties, advance sales or compensating taxes on their importation of machineries, equipment and spare parts used by them and which are not available locally as certified by the Department of Trade and Industry (DTI). All tax free importations shall not be sold nor the beneficial ownership thereof be transferred to any person until after five (5) years, otherwise, the

cooperative and the transferee or assignee shall be solidarily liable to pay twice the amount of the imposed tax and/or duties. (2) Cooperatives with accumulated reserves and divided net savings of more than Ten million pesos (P10,000,000.00) shall fee (sic) the following taxes at the full-rate: (a) Income Tax - x x x; (b) Value-Added Tax - On transactions with nonmembers: Provided, however, That cooperatives duly registered with the Authority; are exempt from the payment of value-added tax; subject to Section 109, subsections L, M and N of Republic Act No. 9337, the National Internal Revenue Code, as amended: Provided, That the exempt transaction under Section 109 (L) shall include sales made by cooperatives duly registered with the Authority organized and operated by its member to undertake the production and processing of raw materials or of goods produced by its members into finished or process products for sale by the cooperative to its members and nonmembers: Provided, further, That any processed product or its derivative arising from the raw materials produced by its members, sold in then (sic) name and for the account of the cooperative: Provided, finally, That at least twenty-five per centum (25%) of the net income of the cooperatives is returned to the members in the form of interest and/or patronage refunds; xxxx Thus, by express provisions of the law under Section 109 (L) of RA 8424, as amended by RA 9337, and Article 61 of RA 6938 as amended by RA 9520, the sale itself by agricultural cooperatives duly registered with the CDA to their members as well as the sale of their produce, whether in its original state or processed form, to non-members are exempt from VAT. In the interim, or on September 19, 2008, the BIR issued RR No. 13-2008 consolidating the regulations on the advance payment of VATor "advance VAT" on the sale of refined sugar.[33] Generally, the advance VAT on the sale of the refined sugar is required to be paid in advance by the owner/seller before the refined sugar is withdrawn from the sugar refinery/mill. The "sugar owners" refer to those persons having legal title over the refined sugar and may include, among others, the cooperatives.[34]

By way of exception, withdrawal of refined sugar is exempted from advance VAT upon the concurrence of certain conditions which ultimately relate to a two-pronged criteria: first, the character of the cooperative seeking the exemption; and second, the kind of customers to whom the sale is made. As to the character of the cooperative, Section 4 of RR No. 13-2008 in part, provides: Sec. 4. Exemption from the Payment of the Advance VAT. - Notwithstanding the provisions of the foregoing Section, the following withdrawals shall be exempt from the payment of the advance VAT: (a) Withdrawal of Refined Sugar by Duly Accredited and Registered Agricultural Producer Cooperative of Good Standing. - In the event the refined sugar is owned and withdrawn from the Sugar Refinery/Mill by an agricultural cooperative of good standing duly accredited and registered with the Cooperative Development Authority (CDA), which cooperative is the agricultural producer of the sugar cane that was refined into refined sugar, the withdrawal is not subject to the payment of advance VAT. x x x Thus, for an agricultural cooperative to be exempted from the payment of advance VAT on refined sugar, it must be (a) a cooperative in good standing duly accredited and registered with the CDA; and (b) the producer of the sugar. Section 4 of RR No. 13-2008 defines when a cooperative is considered in good standing and when it is said to be the producer of the sugar in this manner: A cooperative shall be considered in good standing if it is a holder of a "Certificate of Good Standing" issued by the CDA. x x x A cooperative is said to be the producer of the sugar if it is the tiller of the land it owns, or leases, incurs cost of agricultural production of the sugar and produces the sugar cane to be refined. As to the kind of customers to whom the sale is made, Section 4 of RR No. 13-2008 differentiates the treatment between the sale of a refined sugar to members and non-members as follows: Sale of sugar in its original form is always exempt from VAT regardless of who the seller is pursuant to Sec. 109 (A) of the Tax Code. On the other

hand, sale of sugar, in its processed form, by a cooperative is exempt from VAT if the sale is made to members of the cooperative. Whereas, if the sale of sugar in its processed form is made by the cooperative to non-members, said sale is exempt from VAT only if the cooperative is an agricultural producer of the sugar cane that has been converted into refined sugar as herein defined and discussed. Nevertheless, RR No. 13-2008 makes it clear that the withdrawal of refined sugar by the agricultural cooperative for sale to its members is not subject to advance VAT, while sale to non-members of refined sugar is not subject to advance VAT only if the cooperative is the agricultural producer of the sugar cane. Thus, it appears that the requirement as to the character of the cooperative being the producer of the sugar is relevant only when the sale of the refined sugar is likewise made to non-members. The foregoing requisites for the application of the VAT-exemption for sales by agricultural cooperatives to apply were likewise identified by the Court in Commissioner of Internal Revenue v. United Cadiz Sugar Farmers Association Multi-Purpose Cooperative,[35] thus: First, the seller must be an agricultural cooperative duly registered with the CDA. An agricultural cooperative is "duly registered" when it has been issued a certificate of registration by the CDA. This certificate is conclusive evidence of its registration. Second, the cooperative must sell either: 1) exclusively to its members; or 2) to both members and non-members, its produce, whether in its original state or processed form. The second requisite differentiates cooperatives according to its customers. If the cooperative transacts only with members, all its sales are VATexempt, regardless of what it sells. On the other hand, if it transacts with both members and non-members, the product sold must be the cooperative's own produce in order to be VAT-exempt. x x x[36] Having laid down the requisites when an agricultural cooperative is considered exempt from the payment of advance VAT for the withdrawal of the refined sugar from the sugar refinery/mill, the next task is to measure whether, indeed, COFA met the foregoing requirements.

We find no reason to disturb the CTA En Banc's finding that COFA is a cooperative in good standing as indicated in the Certification of Good Standing previously issued and subsequently renewed by the CDA. It was likewise established that COFA was duly accredited and registered with the CDA as evidenced by the issuance of the CDA Certificate of Registration. There is no showing that the CIR disputed the authenticity of said documents or that said certifications had previously been revoked. Consequently, such must be regarded as conclusive proof of COFA's good standing and due registration with the CDA.[37] Similarly, COFA is considered the producer of the sugar as found by the CTA Division and affirmed by the CTA En Banc. That COFA is regarded as the producer of the sugar is affirmed no other than the BIR itself when it issued its Ruling[38] on the matter, the pertinent portions of which are herein quoted: xxxx As a multi-purpose cooperative, COFA is an agricultural co-producer of the sugarcane produced by all its cooperative members. Being a juridical person, it is legally impossible for the cooperative to do the actual tillage of the land but the cooperative and all its members altogether carry out the sugar farming activities during the agricultural crop year. The cooperative members have consistently provided the sugar farms/plantations and the tillage while COFA, in its capacity as co-producer, has provided the following services to its members as its co-producers x x x. xxxx Moreover, being the exclusive marketing arm of the harvested sugarcane from the various farms of its members, the cooperative does not: engage in the purchase of sugarcane produced by non-members. As such, the sugarcane produced by the cooperative members will be harvested, hauled, delivered and milled to the sugarmill in the name of COFA. The sugarmill issues the quedan of the raw sugar in the name of COFA pursuant to the membership agreement that the cooperative will be solely and exclusively tasked to market the sugar, molasses and other derivative products. Thereafter, COFA turns over to its members the net proceeds of the sale of the sugarcane produce. When COFA further decides to process the

produced raw sugar of its members into refined sugar, the sugarmill issues refined sugar quedan in the name of COFA. xxxx The farmer-members of COFA joined together to form the COFA with the objective of producing and selling of sugar as its products. The members thereof made their respective equitable contributions required to achieve their objectives. Consequently, the proceeds of the sale thereof are intended to be shared among them in accordance with cooperative principles. x x x x[39] The above BIR ruling operates as an equitable estoppel precluding the CIR from unilaterally revoking its pronouncement and thereby depriving the cooperative of the tax exemption provided by law.[40] Having established that COFA is a cooperative in good standing and duly registered with the CDA and)s the-producer of the sugar, its sale then of refined sugar whether sold to members or non-members, following the express provisions of Section 109(L) of RA 8424, as amended, is exempt from VAT. As a logical and necessary consequence then of its established VAT exemption, COFA is likewise exempted from the payment of advance VAT required under RR No. 13-2008. The CIR, however, breeds confusion when it argues that the VAT exemption given to cooperatives under the laws pertain only to the sale of the sugar but not to the withdrawal of the sugar from the refinery. The CIR is grossly mistaken. To recall, VAT is a transaction tax - it is imposed on sales, barters, exchanges of goods or property, and on the performance of services. The withdrawal from the sugar refinery by the cooperative is not the incident which gives rise to the imposition of VAT, but the subsequent sale of the sugar. If at all, the withdrawal of the refined sugar gives rise to the obligation to pay the VAT on the would-be sale. In other words, the advance VAT which is imposed upon the withdrawal of the refined sugar is the very same VAT which would be imposed on the sale of refined sugar following its withdrawal from the refinery, hence, the term "advance." It is therefore erroneous to treat the withdrawal of the refined sugar as a tax incident different from or in addition to the sale itself. Finally, as regards the CIR's contention that COFA failed to submit

complete documentary requirements fatal to its claim for tax refund, suffice it to say, that COFA was a previous recipient and holder of certificates of tax exemption issued by the BIR, and following the Court's pronouncement in United Cadiz Sugar Farmers Association Multi-Purpose Cooperative, the issuance of the certificate of tax exemption presupposes that the cooperative submitted to the BIR the complete documentary requirements. In the same manner, COFA's entitlement to tax exemption cannot be made dependent upon the submission of the monthly VAT declarations and quarterly VAT returns, as the CIR suggests. Here, it was established that COFA satisfied the requirements under Section 109(L) of RA 8424, as amended, to enjoy the exemption from VAT on its sale of refined sugar; its exemption from the payment of advance VAT for the withdrawal it made from May 12, 2009 to July 22, 2009 follows, as a matter of course. WHEREFORE, the petition is DENIED. The Decision dated March 5, 2014 and the Resolution dated May 27, 2014 of the Court of Tax Appeals En Banc in CTA EB Case No. 992, declaring respondent Negros Consolidated Farmers Multi-Purpose Cooperative exempt from Value-added tax (VAT) and hence, entitled to refund of the VAT it paid in advance in the amount of SEVEN MILLION TWO HUNDRED NINETY THOUSAND NINE HUNDRED SIXTY PESOS (P7,290,960.00) for the withdrawal of the refined sugar it made from May 12, 2009 to July 22, 2009 are AFFIRMED. SO ORDERED.