UNIVERSITY OF THE CORDILLERAS COLLEGE OF LAW
ATTY. CLEO D. SABADO-ANDRADA, CPA, MBA
SEYCHELLES JUNE M. DORINGO
AUGUST 7, 2012
PHILEX MINING CORPORATION, vs. COMMISSIONER OF INTERNAL REVENUE G.R. No. 125704 August 28, 1998
FACTS: On August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax liabilities for the 2nd, 3rd and 4th quarter of 1991 as well as the 1st and 2nd quarter of 1992 in the total amount of P123,821.982. Philex protested the demand for payment of the tax liabilities stating that it has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of P119,977,037.02 plus interest. Therefore these claims for tax credit/refund should be applied against the tax liabilities. BIR denied the position of Philex. In its letter, it stated that since these pending claims have not yet been established or determined with certainty, it follows that no legal compensation can take place.
ISSUE: Whether or not taxes could be the subject of set-off or legal compensation.
RULING: Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity. Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Evidently, to countenance Philex's whimsical reason would render ineffective our tax collection system. Too simplistic, it finds no support in law or in jurisprudence. To be sure, we cannot allow Philex to refuse the payment of its tax liabilities on the ground that it has a pending tax claim for refund or credit against the government which has not yet been granted. It must be noted that a distinguishing feature of a tax is that it is compulsory rather than a matter of bargain. Hence, a tax does not depend upon the consent of the taxpayer. If any taxpayer can defer the payment of taxes by raising the defense that it still has a pending claim for refund or credit, this would adversely affect the government revenue system. A taxpayer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government or that the collection of the tax is contingent on the result of the lawsuit it filed against the government. Moreover, Philex's theory that would automatically apply its VAT input credit/refund against its tax liabilities can easily give rise to confusion and abuse,
depriving the government of authority over the manner by which taxpayers credit and offset their tax liabilities.
ATLAS CONSOLIDATED AND DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE G.R. No. 159490, February 18, 2008
FACTS: Atlas is a corporation engaged in the production of copper concentrates for export registered as a VAT entity. In September 1993, Atlas applied for the issuance of a tax credit certificate or refund. There were allegedly input taxes not applied against their output taxes. CTA however ruled that Atlas failed to prove the erroneous or illegal payment of the tax being claimed for refund. CA ruled the same.
ISSUE: Whether or not Atlas has sufficiently proven entitlement to a tax credit or refund.
RULING: No, Atlas failed to show sufficient proof. Atlas’ mere allegations of the figures in its amended VAT return for the first quarter of 1993 as well as in its petition before the CTA are not sufficient proof of the amount of its refund entitlement. They do not even constitute evidence adverse to CIR against whom they are being presented. While Atlas indeed submitted several documents, still, the CTA could not ascertain from them the veracity of the figures as the documents presented by Atlas were not sufficient to prove its action for tax credit or refund....
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