[A CONSTRUCTION JOINT VENTURE (JV) MAY STILL BE SUBJECT TO LOCAL BUSINESS TAX (LBT) AS A CONTRACTOR EVEN IF IT IS EXCLUDED FROM THE DEFINITION OF "CORPORATION" UNDER THE LOCAL GOVERNMENT CODE (LGC)] [A JV & ITS CO-VENTURERS ARE NOT NECESSARILY THE SAME TAXPAYER FOR PURPOSES OF DOUBLE TAXATION ANALYSIS] [FOR CONTRACTORS, 30% OF SALES ARE ALLOCABLE TO THE PRINCIPAL OFFICE LOCALITY & 70% TO THE PROJECT OFFICE LOCALITY UNDER THE LGC SITUS RULES]

Petitioners HJ Shipbuilding and Construction Co., Ltd. (HJSC) and EEI Corporation (EEI) filed a Consolidated Petitions for Review seeking the reversal and nullification of the Regional Trial Court (RTC)’s Decision and Resolution on the deficiency Local Business Tax (LBT) assessment, while City Government of Taguig also filed a Petition for Review seeking the partial reversal of the RTC’s Decision and Resolution insofar as it nullified the assessment for the year 2008 and 2009 due to prescription. Petitioners HJ Shipbuilding and EEI argued that Hanjin-EEI Joint Venture (HEJV) was exempt from LBT because Construction JV are excluded from the statutory definition of a corporation under the Local Government Code (LGC) and the Tax Code, that it had no separate juridical personality from its members, and that taxing HEJV would result in double taxation since the venturers had already paid local taxes in their respective jurisdictions. They likewise contended that HEJV had no principal office in Taguig and that the assessment and penalties lacked factual and legal basis. On the other hand, Taguig City maintained that Respondent HEJV was a taxable contractor engaged in the sale of construction services for a fee, that it maintained a principal office in Taguig, and that it was a separate taxable entity from HJSC and EEI. They further argued that substantial discrepancies between HEJV’s reported gross receipts and its retirement documents constituted fraud, thereby justifying the application of the ten-year prescriptive period for assessment. In ruling, the Court held that HJSC and EEI had legal standing to challenge the assessment because, as co-venturers, they possessed a direct and substantial interest in the case. Taguig failed to prove fraud or intent to evade taxes by clear and convincing evidence. Hence, the ordinary five-year prescriptive period applies, rendering the assessments for taxable years 2009 and 2010 prescribed and void. Nevertheless, the Court found that HEJV, despite being a Construction JV, qualified as a “contractor” under the LGC and the Taguig Revenue Code and was therefore liable for LBT absent any express exemption. The Court also rejected the claim of double taxation, ruling that HEJV was a separate taxable entity and that the elements of direct double taxation were not present. Finally, the CTA sustained the deficiency LBT assessments for 2011 to 2015 but reduced the surcharges and interests to conform with the limitations imposed by the Local Government Code. Hence, the Consolidated Petitions for Review of HJSC and EEI are GRANTED, while the Petition for Review of Taguig City Government are DENIED. [HJ SHIPBUILDING & CONSTRUCTION CO., LTD. VS. J. VOLTAIRE L. ENRIQUEZ JR. & CITY GOVERNMENT OF TAGUIG, CTA AC CASE NO. 341, 343 & 345, JULY 20, 2026]

ERRONEOUSLY PAID CAPITAL GAINS TAX, SURCHARGE & INTEREST MAY BE REFUNDED WHEN THE TAXPAYER ESTABLISHES THE CORRECT ZONAL VALUE

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review, praying that the earlier Amended Decision and Resolution of the Court of Tax Appeals (CTA) 1^st Division be canceled and set aside, and that a new Decision be issued dismissing the Petition filed by the Respondent Bangko Sentral ng Pilipinas (BSP). The Petitioner argues that the Respondent failed to exhaust administrative remedies by failing to raise its objection to the Fair Market Value (FMV) before the Technical Committee on Real Property Valuation (TCRPV). It maintains that the Capital Gains Tax (CGT) was correctly assessed based on the higher FMV, that the property was properly classified as an “along the road” lot, and that the Court in Division improperly applied later-issued zonal values. It further asserts that the late payment resulted in deficiency taxes subject to interest and surcharge. On the other hand, the Respondent counters that the Petition should be dismissed for failure to attach the required documents and for merely rehashing arguments already resolved by the Court a quo. It maintains that the CTA correctly ruled that it is entitled to a refund of erroneously paid surcharge and interest on the CGT. In ruling, the Court held that the that there was no need to exhaust administrative remedies before the TCRPV. The Respondent correctly sought a refund of erroneously paid CGT, surcharge, and interest, as the proper zonal value was Php 4,725 per square meter, resulting in a CGT of Php 2,551,500. The Court further held that the surcharge was imposed without legal basis and that the Respondent was entitled to a refund. Consequently, the Petition is DENIED, and the Amended Decision and Resolution by CTA 1^st Division are AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS BANGKO SENTRAL NG PILIPINAS, CTA EN BANC CASE NO. 3190, JULY 15, 2026]

[THE ABSENCE OF A NOTICE FOR INFORMAL CONFERENCE (NIC) BEFORE THE PAN, WHEN REQUIRED UNDER RR NO. 7-2018, VIOLATES DUE PROCESS & RENDERS THE TAX ASSESSMENT VOID] [THE NIC IS A SUBSTANTIVE DUE PROCESS REQUIREMENT & NOT A MERE PROCEDURAL FORMALITY THAT MAY BE CURED BY THE SUBSEQUENT ISSUANCE OF THE PAN OR FAN] [A TAXPAYER'S RESPONSE TO THE PAN OR FAN DOES NOT CURE THE BIR'S FAILURE TO ISSUE THE MANDATORY NIC BEFORE THE PAN]

The case involves consolidated Petitions for Review before the Court of Tax Appeals (CTA) En Banc, filed by Adelantado Corporation and the Commissioner of Internal Revenue (CIR), assailing the Decision and Resolution of the Court’s 2^nd Division, which partially upheld the assessment against Adelantado. Adelantado argued that the deficiency assessments for taxable year 2015 were void for violation of due process because the BIR failed to issue a Notice for Informal Conference (NIC) before the Preliminary Assessment Notice (PAN), as required under Revenue Regulations (RR) No. 7-2018. In addition, the BIR improperly served the Letter of Authority (LOA), PAN, and Formal Assessment Notice (FAN) on unauthorized persons, failed to properly address its defenses, and prematurely issued the Warrant of Distraint and/or Levy (WDL) while its Motion for Reconsideration was still pending. On the other hand, the CIR maintained that the issuance of a WDL did not constitute a denial of the protest or trigger the right to appeal. It also argued that Adelantado failed to prove its defenses concerning the deductibility of interest expense, Net Operating Loss Carryover (NOLCO), and the timing of income payments subject to EWT. In ruling, the Court En Banc held that the absence of an NIC before the PAN rendered the assessments void. RR No. 7-2018, which was already effective when the PAN was issued, made the NIC a mandatory due process requirement to give the taxpayer an opportunity to present its side before the issuance of the PAN. The Court further held that the prior issuance of the LOA, as well as Adelantado's subsequent responses to the PAN and FAN, could not cure the BIR's failure to issue the required NIC. Consequently, the assessments were void ab initio for violation of due process. Thus, Adelantado's Petition was GRANTED, while the CIR's Petition was DISMISSED, and the deficiency tax assessments were CANCELLED and SET ASIDE. [ADELANTADO CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 3092 & 3096, JULY 15, 2026]

[IN CASE OF FRAUD OR INTENT TO EVADE THE PAYMENT OF LOCAL TAXES, FEES, OR CHARGES, THE SAME MAY BE ASSESSED WITHIN 10 YEARS FROM THE DATE OF DISCOVERY OF FRAUD OR INTENT TO EVADE PAYMENT] [THE GOVERNMENT'S RIGHT TO ASSESS LOCAL BUSINESS TAXES PRESCRIBES AFTER FIVE YEARS UNLESS FRAUD IS CLEARLY PROVEN] [FRAUD CANNOT BE PRESUMED & MUST BE ESTABLISHED BY CLEAR & CONVINCING EVIDENCE TO APPLY THE 10-YEAR PRESCRIPTIVE PERIOD]

Petitioners, the City Government of Valenzuela and its officials, filed a Petition for Review challenging the CTA 3^rd Division's ruling which cancelled the assessment of Local Business Tax (LBT) against Respondent NLEX Corporation for taxable years 2005 to 2014. Petitioners argued that the CTA Division erred in ruling that the assessment of LBT had prescribed. They maintained that the ten (10)-year prescriptive period should apply because NLEX allegedly committed fraud by proposing that its tax payments be treated as "donations.” They also asserted that NLEX's toll booths were already subject to LBT even before the issuance of Department of Finance (DOF) Circular No. 1-2013. On the other hand, the Respondent countered that the assessment of deficiency LBT had already prescribed and that Petitioners failed to prove fraud or intent to evade taxes. In ruling, the Court held that the assessments for TYs 2005 to 2014 had already prescribed under the five-year period under Section 194 of the Local Government Code (LGC). It found that Petitioners failed to establish fraud necessary to invoke the 10-year prescriptive period, emphasizing that fraud cannot be presumed and must be proven by clear and convincing evidence. The uncorroborated testimony was insufficient to prove fraudulent intent, and NLEX's prior payment of LBT under protest and subsequent compliance with DOF Circular No. 1-2013 demonstrated good faith rather than an intent to evade taxes. Thus, the Petition was DENIED, and the original Petition was DISMISSED for lack of jurisdiction. [THE CITY GOVERNMENT OF VALENZUELA, HON. ADELIA SORIANO, IN HER CAPACITY AS CITY TREASURER, & ATTY. ULYSSES L. GALLEGO, IN HIS CAPACITY AS OFFICER-IN-CHARGE OF THE BUSINESS PERMIT & LICENSING OFFICE VS. NLEX CORPORATION, CTA EN BANC CASE NO. 3183, JUNE 19, 2026]