ANGELES UNIVERSITY FOUNDATION vs. CITY OF ANGELES et. al, G.R. No. 189999, June 27, 2012

 

ANGELES UNIVERSITY FOUNDATION vs. CITY OF ANGELES et. al

G.R. No. 189999, June 27, 2012

Facts:

• Petitioner is an educational institution and was converted into a non-stock, non-profit education foundation under the provisions of R.A. 6055
• Sometime in August 2005, petitioner filed with the Office of the City Building Official an application for a building permit for the construction of an 11-storey building
• Said office issued a Building Permit Fee Assessment in the amount of P126,839.20 and P238,741.64 as Locational Clearance Fee.
•   Petitioner claimed that it is exempt from the payment of the building permit and locational clearance fees, citing legal opinions rendered by the DOJ.
•  Petitioner also reminded the respondents that they have previously issued building permits acknowledging such exemption from payment of building permit fees on the construction of petitioner’s 4-storey AUF Information Technology Center building
• Petitioner stresses that the tax exemption granted to educational stock corporations which have converted into non-profit foundations was broadened to include any other charges imposed by the Government as one of the incentives for such conversion.

Issues:

1.    Whether petitioner is exempt from the payment of building permit and related fees imposed under the National Building Code; and

2.    Whether the parcel of land owned by petitioner which has been assessed for real property tax is likewise exempt.

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Ruling:

R.A. No. 6055 granted tax exemptions to educational institutions like petitioner which converted to non-stock, non-profit educational foundations.

On February 19, 1977, P.D 1096 was issued adopting the National Building Code of the Philippines. The said Code requires every person, firm or corporation, including any agency or instrumentality of the government to obtain a building permit for any construction, alteration or repair of any building or structure.

Exempted from the payment of building permit fees are:

(1)  Public buildings and

(2)  Traditional indigenous family dwellings.

Not being expressly included in the enumeration of structures to which the building permit fees do not apply, petitioner’s claim for exemption rests solely on its interpretation of the term “other charges imposed by the National Government” in the tax exemption clause of R.A. No. 6055.

A “charge” is broadly defined as the “price of, or rate for, something,” while the word “fee” pertains to a “charge fixed by law for services of public officers or for use of a privilege under control of government.” As used in the LGC, charges refers to pecuniary liability, as rents or fees against persons or property, while fee means a charge fixed by law or ordinance for the regulation or inspection of a business or activity.

Note that the “other charges” mentioned in Sec. 8 of R.A. No. 6055 is qualified by the words “imposed by the Government on all property used exclusively for the educational activities of the foundation.”

Building permit fees are not impositions on property but on the activity subject of government regulation. While it may be argued that the fees relate to particular properties, i.e., buildings and structures, they are actually imposed on certain activities the owner may conduct either to build such structures or to repair, alter, renovate or demolish the same.

That a building permit fee is a regulatory imposition.

Thus, ancillary permits such as electrical permit, sanitary permit and zoning clearance must also be secured and the corresponding fees paid before a building permit may be issued.

Since building permit fees are not charges on property, they are not impositions from which petitioner is exempt.

As to petitioner’s argument that the building permit fees collected by respondents are in reality taxes because the primary purpose is to raise revenues for the local government unit, the same does not hold water.

A charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power. In this case, the Secretary of Public Works and Highways who is mandated to prescribe and fix the amount of fees and other charges that the Building Official shall collect in connection with the performance of regulatory functions, has promulgated and issued the Implementing Rules and Regulations which provide for the bases of assessment of such fees

Petitioner failed to demonstrate that the bases of assessment were arbitrarily determined or unrelated to the activity being regulated. Neither has petitioner adduced evidence to show that the rates of building permit fees imposed and collected by the respondents were unreasonable or in excess of the cost of regulation and inspection.

In distinguishing tax and regulation as a form of police power, the determining factor is the purpose of the implemented measure. If the purpose is primarily to raise revenue, then it will be deemed a tax even though the measure results in some form of regulation. On the other hand, if the purpose is primarily to regulate, then it is deemed a regulation and an exercise of the police power of the state, even though incidentally, revenue is generated.

Concededly, in the case of building permit fees imposed by the National Government under the National Building Code, revenue is incidentally generated for the benefit of local government units.

Section 208:  the Building Official is hereby authorized to retain not more than twenty percent of his collection for the operating expenses of his office.

The remaining eighty percent shall be deposited with the provincial, city or municipal treasurer and shall accrue to the General Fund of the province, city or municipality concerned.

Now, on petitioner’s claim that it is exempted from the payment of real property tax assessed against its real property presently occupied by informal settlers.

Petitioner failed to discharge its burden to prove that its real property is actually, directly and exclusively used for educational purposes. While there is no allegation or proof that petitioner leases the land to its present occupants, still there is no compliance with the constitutional and statutory requirement that said real property is actually, directly and exclusively used for educational purposes. The respondents correctly assessed the land for real property taxes for the taxable period during which the land is not being devoted solely to petitioner’s educational activities.

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Harte-Hanks Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 205189, March 7, 2022

 

Harte-Hanks Philippines, Inc. vs. Commissioner of Internal Revenue, 

G.R. No. 205189, March 7, 2022

 

Facts:

1.     Harte-Hanks Philippines, Inc. is a domestic corporation duly organized and existing by virtue of the laws of the Republic of the Philippines. 

2.     On March 23, 2010, petitioner filed a written application for refund or issuance of a tax credit for its excess and unutilized input value-added tax for the first to second quarters of 2008 with respondent CIR. The CIR did not act on the application.

3.     On June 29, 20l0, petitioner filed a petition for review with the CTA Second Division, praying for the refund or issuance of a tax credit representing excess input VAT attributable to zero-rated sales for the second quarter of 2008.

4.     On October 4, 2010, the CIR filed a supplemental answer, praying that the petition for review be dismissed for failure of petitioner to exhaust administrative remedies, pursuant to Section 112 (C) of the 1997 Tax Code.

 

Issue:

Whether or not petitioner failed to exhaust administrative remedies, pursuant to Section 112 (C) of the 1997 Tax Code.

 

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Ruling:

 

No. The Supreme Court held that Section 112 (D) [now Section 112 (C)] of the NIRC clearly provides that the CIR has "120 days, from the date of the submission of the complete documents in support of the appli \cation [for tax refund/credit]," within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if end the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days.

 

There is an exception to this general rule, however. BIR Ruling No. DA489-03, a general interpretative rule issued by the CIR pursuant to its power under Section 4 of the Tax Code, expressly states that the "taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of petition for review."

 

In other words, the 120+30-day period is generally mandatory and jurisdictional from the effectivity of the 1997 NIRC on 1 January 1998, up to the present. By way of an exception, judicial claims filed during the window period from 10 December 2003 to 6 October 2010, need not wait for the exhaustion of the 120-day period.

 

Even if petitioner seemed to have prematurely filed its judicial claim under the general rule, the Court, pursuant to BIR Ruling No. DA-489-03, considers petitioner to have filed its judicial claim on time.

 

As a final note, the Court emphasizes that, although petitioner did not actually invoke BIR Ruling No. DA-489-03 in any of its pleadings to justify the timeliness of its judicial claim with the CTA, the BIR Ruling applies to all taxpayers who filed their judicial claims within the window period of December 10, 2003 to October 6, 2010. To limit the application of the BIR Ruling only to those who invoked it specifically would unduly strain the pronouncements in San Roque, Taganito and Philex.

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Asian Transmission Corporation vs. Commissioner of Internal Revenue, G.R. No. 230861, February 14, 2022

 

Asian Transmission Corporation vs. Commissioner of Internal Revenue, 

G.R. No. 230861, February 14, 2022

 

Facts:

1.     On the strength of a Letter of Authority dated August 9, 2004, the BIR commenced its audit and investigation of ATC's books of account and other accounting records pertaining to taxable year 2002, 

2.     CIR right to assess ATC for the relevant taxes was due to prescribe in the first quarter of 2006. However, the Waivers' execution extended until December 31, 2018.

3.     In its administrative protest, ATC raised only two main objections: first, the BIR violated ATC's right to due process and second, the BIR's details of discrepancies in the Formal Letter of Demand.

4.     Subsequently, the ATC proceeded to file a judicial protest before the CTA where it introduced the following arguments: first, the LOA became invalid due to lack of revalidation; and second, the first, second, and third Waivers were defective; thus, these did not validly extend the assessment period.

5.     CTA Second Division: ruled in ATC's favor and canceled the tax assessments on account of prescription. 

6.     CTA En Banc reinstated the assessments and remanded the case to the CTA Division for further proceedings to determine ATC's tax liability.

7.     SC: The Court explained that ATC benefited from the Waivers. They are estopped from assailing its validity. Thus, the CTA En Banc was correct in applying the equitable principles of in pari delicto, unclean hands, and estoppel.

8.     Hence, this present motion for reconsideration.

 

Issue:

Whether or not taxpayer's belated action on questioning the waivers validity will render effective an otherwise flawed waiver

 

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Ruling:

 

Yes. If a waiver suffers from defects on account of both parties, the waiver's validity in relation to the timeliness of the CIR's subsequent issuance of a tax assessment is not determined by a mere plurality of the defects committed between the BIR and the taxpayer.

 

Relevant jurisprudence reveals that the taxpayer's contributory fault or negligence coupled with estoppel will render effective an otherwise flawed waiver, regardless of the physical number of mistakes attributable to a party.

 

In other words, while a waiver may have been deficient in formalities, the taxpayer's belated action on questioning its validity tilts the scales in favor of the tax authorities.

 

It is no longer disputed that the subject defects were the result of both parties failure to observe diligence in performing what is incumbent upon them, respectively, relative to the execution of a valid waiver, particularly the requirements outlined in applicable BIR issuances. That the defects attributable to one party had been greater in number cannot diminish the seriousness of the counter-party's fault or negligence.

 

ATC issued eight successive Waivers over the course of four years (2004-2008). The Waivers had always been marred by defects and, yet, ATC continued to correspond with the tax authorities and allowed them to proceed with their investigation, as extended by the Waivers in question.

 

When the CIR issued the FLD, ATC did not question the Waivers' validity. It raised this argument for the first time in its appeal to the CTA, after obtaining an unfavorable CIR decision on their administrative protest. 

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Republic of the Philippines, represented by the Bureau of Internal Revenue vs. First Gas Power Corporation, G.R. No. 214933, February 15, 2022

 

Republic of the Philippines, represented by the Bureau of Internal Revenue vs. First Gas Power Corporation, 

G.R. No. 214933, February 15, 2022

 

Facts:

1.     On October 24, 2002, First Gas received a Letter of Authority from the petitioner authorizing the BIR representative to examine the book of accounts and other accounting records of First Gas for all revenue taxes for the taxable years 2000 and 2001.

2.     On September 30, 2003, First Gas received a Notice to Taxpayer from petitioner requesting it to appear for an informal conference on October 15, 2003.

3.     Thereafter, on March 11, 2004, First Gas received Preliminary Assessment Notices dated December 15, 2003 and January 28, 2004, wherein it was assessed for deficiency taxes and penalties for the taxable years 2000 and 2001.

4.     On April 6, 2004, First Gas filed its Preliminary Reply to the PAN.

5.     Then on September 6, 2004, it received Final Assessment Notices and Formal Letters of Demand all dated July 19, 2004, wherein it was assessed for deficiency taxes and penalties for the taxable years 2000 and 2001.

6.     Meanwhile, the record shows that First Gas, represented by Nestor H. Vasay, and the BIR, represented by Celia C. King executed three (3) Waivers of the Defense of Prescription under the Statue of Limitations.

 

7.     On October 5, 2004, First Gas filed a Letter of Protest before respondent which was not acted upon

8.     Thus, on June 30, 2005, it filed a Petition for Review before the CTA to assail the FAN and Formal Letters of Demand, all dated July 19, 2004.

9.     In a Decision the CTA Third Division granted the petition of First Gas and cancelled the FAN and Formal Letters of Demand.

 

Issues:

·      Whether or not the issuance of FAN and the Formal Letter of Demand for taxable year 2000 has already prescribed

·      Whether or not the waivers are valid

 

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Ruling:

 

FIRST ISSUE

 

Yes. The Supreme Court held that The period of limitation in the assessment and collection of taxes is governed by Section 203 of the National Internal Revenue Code (NIRC) which states that the internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return.

 

Meanwhile, Section 222(b) of the NIRC authorizes the extension of the original three-year prescriptive period upon the execution of a valid waiver between the taxpayer and the BIR, provided: (1) the agreement was made before the expiration of the three-year period, and (2) the guidelines in the proper execution of the waiver are strictly followed.

 

In this case, the records show that respondent filed two (2) Income Tax Returns (ITR) for taxable year 2000. The first ITR was filed on October 16, 2000 for the fiscal year ending on June 30, 2000, and the second ITR was filed on April 16, 2001 for the calendar year ending on December 31, 2000. According to respondent, this was due to the change in its accounting period from fiscal year to calendar year. Thus, in accordance with Section 203 of the NIRC, petitioner had until October 16, 2003 and April 16, 2004 within which to assess respondent for deficiency income tax for taxable year 2000.

 

SECOND ISSUE

 

As shown above, the Waivers appear to have extended the period to assess respondent for taxable year 2000 until October 15, 2004.  However, the Waivers are defective because the date of acceptance by petitioner is not indicated therein.

 

RMO 20-90 and RDAO 05-01 clearly mandate that the date of acceptance by the BIR should be indicated in the waiver. In the case of Commissioner of Internal Revenue v. Standard Chartered Bank, this Court ruled that the provisions of the RMO and RDAO are mandatory and require strict compliance, hence, the failure to comply with any of the requisites renders a waiver defective and ineffectual.

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