[IF THE PROTEST IS WHOLLY OR PARTIALLY DENIED BY THE CIR OR HIS AUTHORIZED REPRESENTATIVE, THE TAXPAYER MAY APPEAL TO THE CTA WITHIN 30 DAYS FROM RECEIPT OF THE WHOLE OR PARTIAL DENIAL OF THE PROTEST] [ISSUANCE OF AN FLD/FAN IDENTICAL TO THE PAN, WHILE ONLY ACKNOWLEDGING THE TAXPAYER’S PROTEST, DOES NOT CONSTITUTE DUE PROCESS BUT ONLY A SEMBLANCE OF COMPLIANCE]

Petitioner In.Corp Corporate Services Philippines, Inc. filed a Petition for Review seeking the cancellation of the Warrant of Distraint and/or Levy (WDL) issued by the Respondent Commissioner of Internal Revenue (CIR) to collect alleged deficiency assessments for Taxable Year (TY) 2017. Petitioner contends that the assessment had not yet become final, executory and demandable because it timely filed a Request for Reconsideration with the CIR after the issuance of the Final Decision on Disputed Assessment (FDDA), thereby preventing the assessment from attaining finality. Likewise, the assessment is void for violation of its right to administrative due process since the BIR failed to properly consider and address the explanations and supporting documents it submitted in response to the Preliminary Assessment Notice (PAN), with the Formal Letter of Demand and Final Assessment Notices (FLD/FAN) merely reiterating the findings in the PAN. Respondent, on the other hand, contends that Petitioner’s Request for Reconsideration was invalid, causing the FDDA to become final, executory and demandable and justifying the issuance of the WDL, and further argues that the CTA lacked jurisdiction over the Petition. In ruling, the Court held that the FDDA did not attain finality because the administrative appeal remained pending citing the Supreme Court landmark case of LRTA. Consequently, the WDL was prematurely issued since no delinquent tax existed that could be the subject of collection through distraint and levy. Further, the BIR violated Petitioner’s right to administrative due process because the FLD/FAN failed to discuss, evaluate, or rebut Petitioner’s explanations and evidence, contrary to the requirements of Section 228 of the Tax Code and prevailing jurisprudence in Avon case. The Petition was GRANTED, and the WDL, the FDDA, and the FLD/FAN were declared VOID and are CANCELLED and SET ASIDE. [IN.CORP CORPORATE SERVICES PHILIPPINES, INC. VS. CIR, CTA CASE NO. 11340, SEPTEMBER 18, 2026]

[A TAX ASSESSMENT IS VOID WHEN IT IS THE PRODUCT OF AN AUDIT CONDUCTED BY REVENUE OFFICERS WHO WERE NOT AUTHORIZED THROUGH A VALID LOA; REASSIGNMENT OR ADDITION OF REVENUE OFFICERS REQUIRES THE ISSUANCE OF A NEW LOA] [A MEMORANDUM OR ASSIGNMENT ISSUED BY AN UNAUTHORIZED OFFICIAL CANNOT SUBSTITUTE FOR AN LOA]

Both Golden Donuts Inc. (GDI) and Commissioner of Internal Revenue (CIR) filed a Consolidated Petitions for Review assailing the Decision and Resolution of the Third Division upholding in part and cancelling in part the Respondent CIR's deficiency assessment. GDI argued that the audit was void because several Revenue Officers who actively examined its books and recommended the issuance of assessments were not named in the Letter of Authority (LOA), and no new LOA was issued to authorize their participation. It maintained that a mere letter or Memorandum of Assignment could not substitute for the statutory requirement of a valid LOA. On the other hand, the CIR contended that the audit remained valid because one of the originally authorized examiners continued to participate and that the additional personnel derived authority from internal assignment documents. The CIR likewise insisted that the assessments were supported by the taxpayer’s records and were entitled to the presumption of correctness. In ruling, it was found that the unauthorized Revenue Officers substantially participated in the audit and preparation of the assessment recommendations. The Court ruled that under prevailing jurisprudence and Bureau of Internal Revenue (BIR) regulations, any reassignment or substitution of Revenue Officers requires the issuance of a new LOA by a duly authorized official. The Court further held that the assignment letter relied upon by the CIR could not cure the defect because it was not a valid substitute for an LOA. Consequently, the audit was conducted without proper authority and violated the taxpayer’s right to due process. Hence, the assessment was CANCELLED. [COMMISSIONER OF INTERNAL REVENUE V. GOLDEN DONUTS, INC., CTA EN BANC CASE NO. 3068 AND 3076, SEPTEMBER 17, 2026]

[MOST FAVORED NATION CLAUSE SUPPORTS A 10% ROYALTY TAX RATE WHEN TREATY CONDITIONS ARE PROVEN] [A U.S. RESIDENT MAY AVAIL ITSELF OF A LOWER ROYALTY TAX RATE GRANTED BY THE PHILIPPINES TO A THIRD STATE UNDER THE RP-US TAX TREATY'S MFN CLAUSE, PROVIDED TREATY REQUIREMENTS ARE ESTABLISHED BY EVIDENCE]

Petitioner KFC Asia Holdings LLC filed a Petition for Review praying for the refund or issuance of a Tax Credit Certificate (TCC) for its allegedly excessive and/or erroneously paid taxes for the period of January to April and June 2020. The Petitioner argues that it erroneously paid Php 44,064,664.22 in excess Final Withholding Tax (FWT), representing the difference between the 30% FWT rate applied by its franchisees and the 10% rate under the Most-Favored-Nation (MFN) Clause of the Republic of the Philippines and the Government of the United States of America (RP-US Tax Treaty), and that the Court has jurisdiction over its claim for a refund of the excess and erroneously paid FWT for the covered period. On the other hand, the Respondent Commissioner of Internal Revenue (CIR) argues that the Petitioner failed to exhaust administrative remedies, is not entitled to treaty benefits or a tax refund, and that tax refund claims must be strictly construed. In ruling, the Court held that the Petitioner qualified for the 10% FWT rate under the MFN clause of the RP-US Tax Treaty, considering its U.S. residency, the nature of the royalty payments, and compliance with the applicable treaty requirements. Since the franchisees withheld tax at 30% instead of the proper 10% rate, the Court found that the Petitioner was entitled to a refund of Php 44,064,664.22 in excess withholding tax. [KFC ASIA HOLDINGS LLC VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10956, SEPTEMBER 15, 2026]

[THE CIR MAY NOT UNILATERALLY AMEND A FINAL DECISION ON A DISPUTED ASSESSMENT TO INCREASE THE TAXPAYER’S LIABILITY] [MEMBERS’ CAPITAL CONTRIBUTIONS & REINVESTMENT FUND COLLECTIONS OF AN ELECTRIC COOPERATIVE ARE NOT SUBJECT TO INCOME TAX & VAT WHEN THEY DO NOT CONSTITUTE TAXABLE INCOME OR SALES OF GOODS OR SERVICES] [FAILURE TO REVALIDATE A LETTER OF AUTHORITY DOES NOT, BY ITSELF, INVALIDATE A TAX ASSESSMENT]

Petitioner Tarlac I Electric Cooperative, Inc. (TARELCO I) filed a Petition for Review seeking the cancellation of deficiency assessments issued by the respondent Commissioner of Internal Revenue (CIR), for taxable year 2015. Petitioner argued that the assessments were void for violating its due process rights because of the lack of a revalidated Letter of Authority (LOA), the issuance of an Amended Final Decision on Disputed Assessment (FDDA), and the premature issuance of Warrant of Distraint and/or Levy (WDL) and Warrant of Garnishment (WOG). Also, its Members’ Capital Contribution (MCC) and Reinvestment Fund for Sustainable Capital Expenditure (RFSC) collections should not be subjected to Income Tax and Value Added Tax (VAT). On the other hand, the Respondent countered that no due process violation occurred because the Revenue Officers were authorized to conduct the audit, and the failure to revalidate the LOA subjected only the responsible BIR officers to administrative sanctions. Also, the Petitioner’s partial payment prevented it from challenging the assessments. Further, the Petitioner’s income tax exemption expired, and the MCC/RFSC collections were taxable because member-consumers could not withdraw them. In ruling, the Court held that the BIR violated due process by failing to meaningfully consider the taxpayer’s reply to the Preliminary Assessment Notice (PAN) and supporting evidence, citing the Supreme Court landmark case of Avon. Also, the Respondent could not unilaterally issue an Amended FDDA increasing the taxpayer’s liability after the original FDDA had been served. Further, the MCC/RFSC collections, which were earmarked and used solely for capital expenditures and did not represent taxable income or sales of goods or services, were not subject to income tax and VAT. However, the Court clarified that the failure to revalidate the LOA did not, by itself, invalidate the assessments. Thus, the Petition was GRANTED, and the assessment was CANCELLED. [TARLAC I ELECTRIC COOPERATIVE, INC. (TARELCO 1) VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10092, SEPTEMBER 14, 2026]