[TABULATION OF ALLEGED DEFICIENCY TAXES, WITHOUT ANY EXPLANATION FROM THE TAXING AUTHORITY AS TO HOW THE SAME WAS DETERMINED VIOLATES THE TAXPAYER'S RIGHT TO DUE PROCESS] [PRODUCTS SUCH AS PILLS, CONDOMS, INJECTABLES & MEDICAL DEVICES CAN BE CLASSIFIED AS FAMILY PLANNING PRODUCTS & INCLUDED IN THE ESSENTIAL DRUG LIST; HOWEVER, LUBRICANTS DO NOT MEET THE CRITERIA FOR INCLUSION] [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, NOT SOLELY BY THE PROVISIONS OF THE LOCAL GOVERNMENT CODE]

Petitioner Quezon City, represented by Edgar T. Villanueva, in his capacity as the Treasurer of Quezon City, filed a Petition for Review seeking to reverse the Decision and Order of the Regional Trial Court, Branch 216, Quezon City (RTC), which ordered the refund or credit of Local Business Taxes (LBT) erroneously paid by Respondent DKT Health, Inc. and, cancelled the deficiency LBT assessments for being void. The core issue is whether the RTC erred in ordering a refund or credit in favor of the Respondent resulting from a void assessment. In ruling, Section 194(a) of the Local Government Code (LGC) provides that cities are given five (5) years from the date local taxes become due to issue an assessment. To be clear, the five-year period to assess 2016 LBT shall be reckoned from the deadline for each quarterly payment. Thus, the Court found that at the time of the Assessment Report's issuance on June 4, 2021, the right to assess LBT relative to the first (1^st) quarter of 2016 had already prescribed. Moreover, the RTC in the assailed Order ruled that the Respondent's products like pills, condoms, injectables, lubricants, and medical devices are considered essential medicine. It cites Republic Act (R.A.) No. 10354, or the Reproductive Health Act, which directs Philippine National Drug Formulary (PNDF) to include various family planning products in its Essential Drugs List. The Court, however, found that while the Respondent’s products can be included in the essential drug list as family planning products and services, lubricants do not qualify for inclusion citing Section 3.01 (hh), Rule 3 and the Implementing Rules and Regulations (IRR) of the R.A. No. 10354. On whether the Assessment Report violated due process requirements, the content requirements for a local tax, fee, or charge assessment are outlined in the case of Yamane vs. BA Lepanto Condominium Corporation (Yamane), and, more recently, in National Power Corporation vs. The Province of Pampanga (NPC), as follows: (1) nature of the local tax, fee, or charge; (2) the amount of deficiency local tax, fee, or charge, including surcharges, interests, and penalties; and (3) the period covered by the local tax, fee, or charge assessment. Conversely, the lack of any one of these requirements would lead to a violation of the right to due process, as the party would not be properly informed of the legal and factual grounds for the assessment. In the case at bar, the Petitioner failed to comply with the first requirement. To be precise, the total deficiency LBT due relative to 2016 to 2021 is based on the two-page Assessment Report prepared by the City Treasurer which failed to state the Quezon City Revenue Code provisions from which said report was based. This omission violated the Respondent’s right to due process in local tax assessment. Consequently, the Petition was DENIED for lack of merit, and the assailed Decision and Order promulgated on September 22, 2022, and August 7, 2023, respectively, were AFFIRMED. [QUEZON CITY, REPRESENTED BY EDGAR T. VILLANUEVA, IN HIS CAPACITY AS THE TREASURER OF QUEZON CITY VS. DKT HEALTH, INC., CTA AC NO. 304, JUNE 13, 2025]

IN THE ABSENCE OF SUFFICIENT PROOF OF A FALSE OR FRAUDULENT RETURN, THE BIR CANNOT INVOKE THE EXTENDED TEN-YEAR PERIOD FOR AUDIT PURPOSES

Petitioner Commissioner of Internal Revenue filed a Petition for Review Ad Cautelam to challenge the Court in Division’s Decision cancelling the deficiency income tax assessment issued against the Respondent Norkis Trading Company, Inc. for the fiscal year ending June 30, 2007. The controversy arose when the Respondent received a Preliminary Assessment Notice (PAN) on March 17, 2014, and later a Final Assessment Notice (FAN) and Formal Letter of Demand (FLD) on April 11, 2014, assessing a total of Php 285,927,070.68 for alleged deficiency income taxes. The Respondent protested the assessment through a request for reconsideration and later brought the case to the CTA Division, which ruled in its favor by cancelling the assessment on the ground that it had already prescribed. The key issues raised were whether the assessment was issued within the allowable period, whether the 10-year prescriptive period under Section 222(a) of the Tax Code applied based on a false return, and whether there was valid evidence to support the assessment. The Petitioner argued that the Respondent failed to declare a $6 million indemnity from Yamaha Motor Company, Inc., resulting in a substantial underdeclaration of income. It claimed that this constituted a false return, thus justifying the 10-year prescriptive period. Likewise, the Indemnity Agreement was a public document, and the Respondent had effectively admitted its genuineness by failing to deny a request for admission properly. In response, the Respondent maintained that there was no competent evidence showing it received the alleged $6 million. It pointed out that the Indemnity Agreement was neither formally offered in evidence nor properly authenticated and therefore could not be considered. Furthermore, even if it had received an indemnity, such payment would constitute a return of capital and not taxable income. Thus, there was no willful or deliberate misstatement in its return, and thus only the standard 3-year prescriptive period under Section 203 of the Tax Code applied, which had already lapsed in 2010. In ruling, the Court DENIED the Petition, affirming that the 10-year period did not apply as there was no sufficient proof of a false return. The alleged Indemnity Agreement was inadmissible and, even if admitted, did not establish taxable income. Since the BIR issued the assessment more than six (6) years after the deadline for filing the return, it was issued beyond the 3-year prescriptive period and was therefore VOID. [COMMISSIONER OF INTERNAL REVENUE VS. NORKIS TRADING COMPANY, INC., CTA EN BANC CASE NO. 1766, JUNE 13, 2025]

IT IS IMPERATIVE FOR THE COURT TO PRESCRIBE THE PROPER PENALTIES WHEN CONVICTING THE ACCUSED & TO IMPOSE THE APPROPRIATE CIVIL LIABILITIES, UNLESS WAIVED, OR THE ACTION FOR ITS RECOVERY IS RESERVED

Petitioner Bureau of Internal Revenue filed a Petition for Certiorari assailing the Respondent, Regional Trial Court (RTC)-Branch 26 Order declaring the Accused, Datu Amerhassan Lucman, guilty of two (2) counts of violation of Section 255 of the Tax Code, but without imposing a civil liability despite his conviction. The Petitioner argues that the Respondent acted with grave abuse of discretion when it refused to resolve the issue of the Accused’s civil liability despite his guilty plea, and that there is no other plain, speedy, and adequate remedy in the ordinary course of law to question the denial of the Motion for Partial Reconsideration. On the other hand, the Respondent asserts that at the time the issue of civil liability was raised, he was uncertain whether civil liability attaches to the criminal case, wherefore, to prevent delay, he made a ruling that no civil liability attaches and instructed the Petitioner to just file the necessary Motion. However, the Petitioner failed to file the necessary Motion within the prescribed period; thus, he can no longer avail of the remedy of appeal or other plain, speedy, and adequate remedy. In ruling, the Court emphasized the requisites of a Petition for Certiorari under Rule 65. First, it must be directed against a tribunal, board, or officer exercising judicial or quasi-judicial functions. In this case, the Orders were issued by the Respondent in his capacity as a judicial officer. Second, the tribunal must have acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction. In this case, the Court held that the Respondent did not, at all, conduct any proceeding to determine the civil aspect of the case, and that there is no written order or judgment regarding the same. And third, there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. In this case, the circumstances of the case left the Petitioner in the dark as to what remedies are available. Since there was no judgment on the civil aspect of the case, the Petitioner still expects a final order on it. Since there was no final order, the Petitioner could not have availed of the ordinary remedy of appeal, thus the only recourse against the Respondent’s inaction is a Petition for Certiorari. Thus, the Petition for Certiorari is hereby GRANTED. [BUREAU OF INTERNAL REVENUE-REVENUE REGION I REPRESENTED BY REGIONAL DIRECTOR JOSEPHINE S. VIRTUCIO VS HON WENDELL M. RAMITERRE, PRESIDING JUDGE OF THE REGIONAL TRIAL COURT BRANCH 26 OF SAN FERNANDO CITY, LA UNION, CTA SCA NO. 0011, JUNE 4, 2025]

[A SEPARATE AGREEMENT BETWEEN OR AMONG THE COMPANY'S AFFILIATES IS NECESSARY BEFORE AN OFFSETTING ARRANGEMENT CAN TAKE EFFECT BETWEEN AND/OR AMONG THEMSELVES] [DENIAL OF INPUT VAT REFUND CLAIM FOR FAILURE TO PROVIDE SUFFICIENT EVIDENCE OR DOCUMENTATION TO SUPPORT THE DETAILS OF THE OFFSETTING] [FAILURE TO SUBMIT A TRANSLATION OR A SUFFICIENT EXPLANATION CLARIFYING THE CONTENTS OF THE OFFSETTING SCHEDULE, IF WRITTEN IN A LANGUAGE NOT UNDERSTOOD BY THE COURT, MAY LEAD TO THE DENIAL OF THE INPUT VAT REFUND]

Petitioner Avaloq Philippines Operating Headquarters filed a Petition for Review seeking to reverse the earlier Decision rendered by the Court's Special Third Division (Court in Division), which denied its claim for refund of excess and/or unutilized input value-added tax (VAT) attributable to its zero-rated sales for the first (1^st) and second (2^nd) quarters of calendar year (CY) 2018 and the Resolution denying its Motion for Reconsideration. The Petitioner argued that it has sufficiently proven the existence of an offsetting arrangement with non-resident foreign corporations (NRFCs) as an alternative to the actual inward remittance of foreign currency for purposes of VAT zero-rating. In addition, the Petitioner averred that this intercompany offsetting arrangement was clearly shown and sufficiently explained by its witness, Ms. Mary Lalaine V. Munar (Ms. Munar), who testified that whenever the Petitioner obtains a loan from its head office, Avaloq Group AG, which essentially constitutes its monthly funding, the amount is credited to the Avaloq Group AG group current account. In turn, the receivables from services rendered to affiliates are debited or offset against the same account. On the other hand, the Respondent Commissioner of Internal Revenue (CIR) countered that since the core issue involves a tax refund, which partakes of the nature of a tax exemption and is strictly construed against the claimant, the Petitioner must clearly prove its entitlement. In ruling, after a judicious review of the Petitioner's arguments and the records of the case, the Court En Banc finds no reason to modify, much less reverse, the assailed Decision and Resolution. The Court explained that while the Short-Term Credit Facility Agreement (STCFA) confirms that the Petitioner had loan transactions in foreign currency with Avaloq Group AG, it fails to show that such advances can be offset against receivables from the Petitioner's sale of services to other affiliates. The Court ruled that Avaloq Group AG is a distinct legal entity from its affiliates. Thus, the right of offset between the Petitioner and other affiliates cannot be presumed. If an offsetting arrangement exists among its affiliates, it should have been covered by a separate agreement, which the Petitioner failed to provide. Moreover, the Petitioner failed to establish the actual details of offsetting, relying solely on a Schedule of Offsetting of Receivables written in a language not understood by the Court. Despite being alerted to this issue in the earlier Decision, the Petitioner failed to submit a translation or adequate explanation that would clarify the contents of the document. In view of this, the Petition was DENIED for lack of merit, and the assailed Decision and Resolution issued by the Court in Division were AFFIRMED. [AVALOQ PHILIPPINES OPERATING HEADQUARTERS VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 2897, JUNE 3, 2025]