7/28/2019 Tax Alert - 2008_Aug

1/6

8/FJollibeeCentre,SanMiguelAvenue,OrtigasCenter,PasigCity,1605Philippines

Telephone:(632)633-9418Facsimile:(632)633-1911E-mail:mail@baniquedlaw.comWeb:www.baniquedlaw.com

TAX ALERT

August 31, 2008

WHILE THE CTA HAS THE JURISDICTION TO RESOLVE TAX DISPUTES

IN GENERAL, 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 AND NOT THE

CTA HAVE JURISDICTION TO PASS UPON THE SAME. British American

Tobacco v. Camacho, et al., G.R. No. 163583 dated August 20, 2008.

THE CLASSIFICATION FREEZE PROVISION UNDER SECTION 145 OF RA8240 AS AMENDED BY RA 9334SATISFIEDTHE RATIONAL-BASIS TEST AS

IT ADDRESSED CONGRESS ADMINISTRATIVE CONCERNS IN THE

SIMPLIFICATION OF TAX ADMINISTRATION OF SIN PRODUCTS,

ELIMINATION OF POTENTIAL AREAS FOR ABUSE AND CORRUPTION IN

TAX COLLECTION, BUOYANT AND STABLE REVENUE GENERATION,

AND EASE OF PROJECTION OF REVENUES. CONSEQUENTLY, THERE

CAN BE NO DENIAL OF THE EQUAL PROTECTION OF THE LAWS.Ibid.

SECTION 4(B)(E)(C), 2ND

PARAGRAPH OF REVENUE REGULATIONS NO. 1-

97, AS AMENDED BY SECTION 2 OF REVENUE REGULATIONS 9-2003, AND

SECTIONS II(1)(B), II(4)(B), II(6), II(7), III (LARGE TAX PAYERS ASSISTANCEDIVISION II) II(B) OF REVENUE MEMORANDUM ORDER NO. 6-2003, AS

PERTINENT TO CIGARETTES PACKED BY MACHINE, ARE INVALID

INSOFAR AS THEY UNJUSTIFIABLY EMASCULATE THE OPERATION OF

SECTION 145 OF THE NIRC AND AUTHORIZE THE COMMISSIONER OF

INTERNAL REVENUE TO RECLASSIFY OR UPDATE THE

CLASSIFICATION OF NEW BRANDS EVERY TWO YEARS OR EARLIER.

Ibid.

WHERE THE ENTIRE INSURANCE PROCEEDS ARE USED TO

REHABILITATE AND REPLACE THE ASSETS DESTROYED BY FIRE, THE

EXCESS OF THE INSURANCE PROCEEDS OVER THE NET BOOK VALUEOR COST BASIS OF THE ASSETS IS NOT RECOGNIZED AS REALIZED

INCOME SUBJECT TO INCOME TAX.

Under the doctrine of Involuntary Conversion of Property such as destruction, theft,seizure, condemnation, where a property is converted into a property similar or related in

service or use or into money which is in good faith expended to acquire other property,no gain or loss shall be recognized. The excess of the total replacement cost over the net

book value of the damaged asset will not be a deductible loss but may be capitalized

7/28/2019 Tax Alert - 2008_Aug

2/6

2

subject to depreciation. Neither will the insurance proceeds form part of gross sales forVAT purposes since the indemnification is not an actual sale of goods by the insured to

the insurer. BIR Ruling DA(VAT-004)050-2008 dated July 16, 2008.

PROCEEDS FROM THE SALE OF PRINCIPAL RESIDENCE FULLY

UTILIZED TO PAY OFF LOANS OBTAINED FOR THE PRIOR ACQUISITIONOF A LAND AND THE CONSTRUCTION OF A NEW PRINCIPAL RESIDENCE

SHALL BE EXEMPT FROM THE 6% CAPITAL GAINS TAX. BIR Ruling DA-

(I005)057-2008 dated July 18, 2008.

THE TAX CONSEQUENCES OF A DEMERGER TAKING PLACE OUTSIDE

THE PHILIPPINES OF TWO FOREIGN CORPORATIONS WITH PHILIPPINE

BRANCHES ARE AKIN TO A MERGER UNDER SECTION 40(C)(2) OF THE

NIRC INASMUCH AS THE TRANSFER OF ASSETS AND LIABILITIES OF

THE ABSORBED FOREIGN CORPORATION, INCLUDING THAT OF ITS

BRANCH, TO THE SURVIVING CORPORATION IS IN EXCHANGE OF

SHARES OF STOCK IN THE LATTER. BIR Ruling DA(C003)017-2008 dated July9, 2008.

THE CONDITIONAL ASSIGNMENT OF RIGHTS OVER THE CERTIFICATE

OF SALE COVERING FORECLOSED REAL PROPERTY EXECUTED PRIOR

TO THE EXPIRATION OF THE REDEMPTION PERIOD, NOT BEING A

CONVEYANCE OF REALTY SUCH AS LAND OR BUILDING, IS NOT

SUBJECT TO CAPITAL GAINS TAX BUT ANY GAIN THEREFROM SHALL

BE SUBJECT TO REGULAR INCOME TAX. BIR Ruling DA-387-2008 dated

June 24, 2008.

SINCE THE REDEEMABLE PREFERRED SHARES UPON REDEMPTION

BECOME TREASURY SHARES WHICH ARE CONSIDERED RETIRED AND

NO LONGER ISSUABLE, THE REDEMPTOR NOT TAKING TITLE NOR

RECEIVING THEM FOR VALUE SHALL NOT BE LIABLE FOR INCOME

TAX. BIR Ruling DA-390-2008 dated June 27, 2008.

THE SHAREHOLDER OF THE REDEEMABLE PREFERRED SHARES SHALL

REALIZE CAPITAL GAIN OR LOSS CONSISTING OF THE DIFFERENCE

BETWEEN THE ADJUSTED BASIS OF THE SHARES AND THE

REDEMPTION PRICES OF THE SHARES.

Since the redeemable preferred shares will be redeemed at a price equal to its issue value,

the shareholders will not realize a taxable gain or deductible loss upon redemption. BIRRuling DA-390-2008 dated June 27, 2008.

THE LESSEES ABANDONMENT IN FAVOR OF THE LESSOR OF

LEASEHOLD IMPROVEMENTS AFTER PRE-TERMINATION OF THE

LEASE AGREEMENT AND WRITING OFF FROM THE LESSEES BOOKS OF

ACCOUNTS THE PRE-TERMINATION PENALTY EQUIVALENT TO THE

BOOK VALUE OF THE IMPROVEMENTS SHALL NOT BE SUBJECT TO

7/28/2019 Tax Alert - 2008_Aug

3/6

3

DONORS TAX, THERE BEING NO DONATIVE INTENT. BIR Ruling DA-390-

2008 dated June 27, 2008.

WHERE IT IS THE SUPPLIER-IMPORTER WHO PAID EXCISE TAX ON

RAW ALCOHOL, THE MANUFACTURER-EXPORTER OF FINISHED

ALCOHOL IS NOT THE PROPER PARTY TO CLAIM A REFUND UNDERSECTION 130(D) OF THE NIRC. Dissent, Acosta: The law categorically grants themanufacturer-exporter the privilege to claim a refund of excise taxes paid on raw

materials used in its exported products as long as the following conditions are fulfilled: 1)excise taxes were actually paid on the locally-manufactured goods; (2) such locally

manufactured goods were exported either in their original state or as ingredients or partsof any manufactured goods or products; and (3) there must be proof of actual exportation

of the said goods and receipt of the corresponding foreign exchange payment. The excisetax paid attaches to the goods or products, irrespective of who paid it. Diageo

Philippines, Inc. v. CIR, CTA EB No. 260 (CTA Case No. 7369) dated July 2, 2008.

FAILURE TO INDICATE A CHOICE TO AVAIL OF EITHER THE TAXREFUND OR THE TAX CREDIT IN THE ANNUAL ITR IS NOT FATAL TO A

CLAIM FOR REFUND AND SHOULD NOT BAR THE AVAILMENT OF SUCH

REMEDY. CIR v. PERF Realty Corporation, G.R. No. 163345 dated July 4, 2008.

FAILURE TO FORMALLY OFFER THE 1998 ITR IS NOT FATAL TO A

CLAIM FOR REFUND WHERE THE SAID DOCUMENT IS ATTACHED TO A

SUBSEQUENT MOTION FOR RECONSIDERATION AND HAS BECOME

PART OF THE RECORDS OF THE CASE. Id.

WHILE PPA-NCR MAY BE HELD LIABLE FOR PENALTIES, SURCHARGES

AND INTEREST FOR THE DELAY IN THE REMITTANCE OF

WITHHOLDING TAXES, ITS PROPERTIES CANNOT BE SUBJECT OF

DISTRAINT AND/OR LEVY, PPA-NCR BEING A GOVERNMENT AGENCY

PERFORMING AN ESSENTIAL PUBLIC SERVICE. Parole and ProbationAdministration - NCR v. CIR, CTA Case No. 7153 dated July 2, 2008.

THE DEPOSIT REQUIRED BEFORE COURTS ENTERTAIN ANY ACTION

ASSAILING THE PUBLIC AUCTION OF REAL PROPERTY UNDER SECTION

257 OF RA 7160 IS NOT APPLICABLE ON THE GOVERNMENT OR ITS

AGENCIES SUCH AS NHA ESPECIALLY WHEN ITS TAX-EXEMPT STATUS

IS THE BASIS OF THE SUIT. NHA v. Iloilo City, et al., G.R. No. 172267 dated

August 20, 2008.

DISMISSAL BY THE RTC OF A PETITION FOR DECLARATORY RELIEF

INVOLVING THE LEGALITY OF ASSESSMENT FOR REAL PROPERTY

TAXES IS NOT APPEALABLE TO THE CTA.

Facts:NPC filed before the RTC a petition for declaratory relief, annulment of notice of

delinquency, warrant of levy, notice of sale and public auction sale to question thelegality of the assessment of real property taxes under R.A. 7160. On the ground that

7/28/2019 Tax Alert - 2008_Aug

4/6

4

NPC failed to exhaust its remedies before the LBAA and the CBAA, the RTC dismissedthe petition for lack of jurisdiction. NPC filed a petition for review before the CTA.

Held: The petition is dismissed for lack of jurisdiction considering that: (A) The petitiondoes not fall under Section 7(a)(5) of R.A. 9282 wherein decisions of the CBAA

involving assessment and taxation of real property are appealable; (B) The petition does

not fall under Section 7(a)(3) of R.A. 9282 involving local taxes since real property taxesare governed by the more specific provision under Section 7(a)(5) thereof; (C) It is theCA, not the CTA which has jurisdiction over petitions for declaratory relief and appeals

of such cases; (D) Though NPC raises the purely legal question of propriety of impositionof real property tax on its machineries and equipment, it should have exhausted its

administrative remedies before the LBAA and the CBAA. Dissent, Palanca-Enriquez:(A) Where NPC questions the legality of the real property tax and not the correctness of

the computation of the amount being assessed, the petition for declaratory relief and notthe appeal to CBAA is the proper remedy; (B) Sections 7(a)(3) and 7(a)(5) of R.A. 9282

are not general and special provisions, respectively, but are two different jurisdictions ofthe CTA involving decisions of the RTC and the CBAA; (C) Cases involving pure

questions of law are exempt from exhaustion of administrative remedies; (D) Realproperty tax is a local tax which is within the jurisdiction of the CTA under Section

7(a)(3) of R.A. 9282. NPC v. Municipal Government of Navotas, et al., CTA AC No. 37(Civil Case No. 4658-MN) dated July 18, 2008.

THE DENIAL BY THE CUSTOMS COMMISSIONER TO REVIEW THE

DECISION OF THE CUSTOMS COLLECTOR WHICH HAS BECOME FINAL

AND EXECUTORY IN VIEW OF THE ABSENCE OF A WRITTEN PROTEST

DOES NOT CONSTITUTE A DECISION OF THE CUSTOMS COMMISSIONER

APPEALABLE TO THE CTA. GST Philippines, Inc. v. Commissioner of Customs

and Secretary of Finance, CTA Case No. 7133 dated July 17, 2008.

CTA DISMISSED ON THE GROUND OF FORUM SHOPPING A PETITION

FOR REVIEW OF THE CUSTOMS COMMISSIONERS DECISION ON THE

PROPRIETY OF TARIFF CLASSIFICATION WHERE PETITIONER: (A)

FAILED TO DISCLOSE A PENDING APPEAL BEFORE THE DEPARTMENT

OF FINANCE INVOLVING THE SAME ISSUE BETWEEN PETITIONER AND

ANOTHER PARTY; (B) SUBSEQUENTLY FILED A PETITION BEFORE THE

COURT OF APPEALS INVOLVING SAME PARTIES, ISSUES AND RELIEFS

THEREBY CREATING THE POSSIBILITY OF CONFLICTING DECISIONS BY

THE DIFFERENT FORA. Kraft Foods (Philippines), Inc. v. Commissioner of

Customs and Sugar Regulatory Administration, CTA EB No. 326 (CTA Case No. 7306)

dated July 18, 2008.

THE FACT THAT IMPORTED ARTICLES WERE WITHDRAWN FROM THE

WAREHOUSE WITHOUT PAYMENT OF DUTIES AND TAXES, OR THAT

THE SURETY WAS NOT NOTIFIED OF THE ACTS OF THE IMPORTER,

DOES NOT RELIEVE THE SURETY OF ITS SOLIDARY OBLIGATION, THE

NATURE OF SURETY AGREEMENT BEING TO HOLD THE SURETY

JOINTLY AND SEVERALLY LIABLE FOR THE IMPORTERS OBLIGATION

7/28/2019 Tax Alert - 2008_Aug

5/6

5

TO PAY DUTIES, TAXES AND CHARGES DUE. Intra-Strata Assurance

Corporation, et al. v. Republic of the Philippines, G.R. No. 156571 dated July 9, 2008.

AN IMPORTED ARTICLE IS DEEMED ABANDONED WHEN THE OWNER,

IMPORTER, CONSIGNEE OR INTERESTED PARTY FAILS TO FILE AN

ENTRY WITHIN A NON-EXTENDIBLE PERIOD OF 30 DAYS FROM THEDATE OF DISCHARGE OF THE LAST PACKAGE FROM THE VESSEL OR

AIRCRAFT AFTER DUE NOTICE. IT IS THE FILING AND ACCEPTANCE OF

BOTH THE IMPORT ENTRY DECLARATION (IED) AND THE IMPORT

ENTRY AND INTERNAL REVENUE DECLARATION (IEIRD) WHICH

CONSTITUTES ENTRY UNDER SECTION 205 OF THE TARIFF AND

CUSTOMS CODE OF THE PHILIPPINES AND WHICH BECOMES THE BASIS

OF THE NON-EXTENDIBLE 30-DAY PERIOD. SUCH ABANDONED

ARTICLES SHALL IPSO FACTO BE DEEMED THE PROPERTY OF THE

GOVERNMENT. A DECLARATION AND NOTICE BY THE COLLECTOR OF

CUSTOMS THAT THE GOODS HAVE BEEN ABANDONED BY THE

IMPORTERS IS NOT REQUIRED BEFORE ANY ABANDONMENT CANBECOME EFFECTIVE.Chevron Philippines, Inc. v. Commissioner of the Bureau of

Customs, G.R. No. 178759 dated August 11, 2008.

THE DELAY IN THE FILING OF THE IEIRD WHICH RESULTED IN THE

PAYMENT OF LOWER DUTY FROM 10% TO 3% WAS DEEMED

CALCULATED, PRECONCEIVED AND PURPOSELY DONE TO EVADE

PAYMENT OF CORRECT DUTIES. IT WAS A CLEAR INDICATION OF THE

INTENTION TO DEFRAUD THE GOVERNMENT WHICH RENDERED THE

PRESCRIPTIVE PERIOD INAPPLICABLE. Ibid.

A RESOLUTION BY THE CTA DIVISION DENYING A MOTION TO QUASH,

BEING AN INTERLOCUTORY ORDER, IS NOT PROPER SUBJECT OF AN

APPEAL BY PETITION FOR REVIEW BEFORE THE CTA EN BANC. Judy

Anne L. Santos v. People and BIR, G.R. No. 173176 dated August 26, 2008.

BIR ISSUES SUPPLEMENT TO REV. REGS. NO. 09-2004, AS AMENDED BY

REV. REGS. NO. 10-2004, CLARIFYING THAT THE TRANSACTIONS OF

BANGKO SENTRAL NG PILIPINAS ENTERED INTO IN THE EXERCISE OF

ITS GOVERNMENTAL/REGULATORY AUTHORITY ARE OUTSIDE OF THE

COVERAGE OF THE GROSS RECEIPTS TAX. Revenue Regulations No. No. 8-

2008 dated August 29, 2008.

BIR PUBLISHES THE FULL TEXT OF DEPARTMENT ORDER NO. 9-08,

IMPLEMENTING RULES AND REGULATIONS ON THE ACCESSIBILITY

OF INFORMATION ON TAXPAYERS BETWEEN THE BUREAU OF

INTERNAL REVENUE AND THE LOCAL GOVERNMENT UNITS FOR TAX

COLLECTION PURPOSES PURSUANT TO EXECUTIVE ORDER NO. 646.

Revenue Memorandum Circular No. 44-2008 dated May 5, 2008.

7/28/2019 Tax Alert - 2008_Aug

6/6

6

CLARIFICATION THAT REV. REGS. NO. 30-2002 AS AMENDED BY REV.

REGS. NO. 8-2004 ON THE EXERCISE OF COMPROMISE POWER OF THE

BUREAU OF INTERNAL REVENUE SHALL, IN CASE OF CONFLICT,

PREVAIL OVER THE PROVISIONS OF RMO NO. 20-2007. Revenue

Memorandum Order No. 27-2008 dated June 16, 2008.

BIR OUTLINES THE PROCEDURE ON THE HANDLING OF TAXPAYERS

APPLICATION FOR CANCELLATION OF BUSINESS REGISTRATION, AND

ISSUES WARNING ON THE USE OF OFFICIAL RECEIPTS/SALES INVOICES

OF DISSOLVED BUSINESSES FOR PURPOSES OF CLAIMING INPUT TAXES.

Revenue Memorandum Circular No. 56-2008 dated July 25, 2008.

BIR ISSUES CLARIFICATION ON THE TIME WITHIN WHICH TO RECKON

THE REDEMPTION PERIOD ON THE FORECLOSED ASSET AND THE

PERIOD WITHIN WHICH TO PAY CAPITAL GAINS TAX OR CREDITABLE

WITHHOLDING TAX AND DOCUMENTARY STAMP TAX ON THE

FORECLOSURE OF REAL ESTATE MORTGAGE BY THOSE GOVERNED BYTHE GENERAL BANKING LAW OF 2000, AS WELL AS THE VENUE FOR

THE PAYMENT OF THESE TAXES. Revenue Memorandum Circular No. 58-2008

dated August 15, 2008.

BIR ISSUES AMENDMENTS TO CERTAIN PORTIONS OF RMC NO. 30-2008

ON THE TAXABILITY OF INSURANCE COMPANIES FOR MINIMUM

CORPORATE INCOME TAX, BUSINESS TAX AND DOCUMENTARY STAMP

TAX PURPOSES. Revenue Memorandum Circular No. 59-2008 dated August 27,

2008.

Note: The information provided herein is general and may not be applicable in allsituations. It should not be acted upon without specific legal advice based on particular

situations. If you have any questions, please feel free to contact any of the following attelephone number (632) 633-9418, facsimile number (632) 633-1911, or at the indicated

e-mail address:

Atty. Carlos G. Baniqued cgbaniqued@baniquedlaw.comAtty. Laura Victoria A.S. Yuson-Layug lvyusonlayug@baniquedlaw.com

Atty. Terence Conrad H. Bello thbello@baniquedlaw.comAtty. Suzette A. Celicious-Sy sacelicious@baniquedlaw.com

Atty. Madeline L. Zialcita-Villapando mlzvillapando@baniquedlaw.comAtty. Kathleen L. Saga klsaga@baniquedlaw.com

Atty. Excelsis V. Antolin evantolin@baniquedlaw.comAtty. Cheryll Ann R. Trinidad crtrinidad@baniquedlaw.com

Atty. Bernadette V. Quiroz bvquiroz@baniquedlaw.com

Past issues of the Tax Alert are available at our website www.baniquedlaw.com.