1. On October 5, 2016, the Bureau of Internal Revenue (BIR) sent KLM Corp.

a Final Assessment Notice (FAN), stating

that after its audit pursuant to a Letter of Authority duly issued therefor, KLM Corp. had deficiency value-added and
withholding taxes. Subsequently, a warrant of distraint and/or levy was issued against KLM Corp. KLM Corp. opposed
the actions of the BIR on the ground that it was not accorded due process because it did not even receive a Preliminary
Assessment Notice (PAN) after the BIR' s investigation, which the BIR admitted.:

(a) Distinguish a PAN from a FAN.(2%)

PRELIMINARY ASSESSMENT NOTICE FINAL ASSESSMENT NOTICE

Description
PAN will be issued if after review and evaluation FAN or FLD (Formal letter of Demand) shall be
of the Commissioner or its duly authorized issued by the Commissioner or his duly
representative that there exists sufficient basis authorized representative. The FLD/FAN calling
to assess the taxpayer PAN shall show details the payment of the taxpayer’s deficiency tax or
the facts and law, related cases, revenue taxes shall state the facts, the law, rules and
issuance such assessment was based regulations, related cases, on which the
assessment is based; otherwise the assessment
shall be VOID.
Action to be taken by taxpayer
If the taxpayer accepts the deficiency, taxpayer If taxpayer agrees it shall pay the amount
shall pay the amount assessed which will assessed and which shall cause the termination
terminate the audit. of the audit.

If the taxpayer disagrees with the findings, If the taxpayer disagrees with the amount
taxpayer may at his option make a reply within assessed, it can within 30 days from the receipt
15 days from date of receipt of the PAN refute of the FAN/FLD file a protest letter either:
the findings made by the revenue officer by 1. Request for reconsideration – no need to
presenting reconciliations, related cases, laws to present supporting documents
present his cases. 2. Request for reinvestigation – need to
present supporting documents 60 days
Protest/Reply is not mandatory. from the filling of protest letter

All protest shall be considered as request for

reconsideration unless taxpayer clearly
indicates the request of reinvestigation.
Effect of inaction of taxpayer
FLD/FAN shall be issued 15 days from the date The assessment shall become final and
of receipt of PAN whether the same is protested executory when:
or not. 1. Failure to file a protest 30 days from receipt of
FAN/FLD.
2. Failure to submit supporting documents
within the 60-day period given if request for
reinvestigation is made.
3. Failure of the taxpayer to receive any
assessment notice because it was served in the
address indicated in the BIR’s registration
database not updated through BIR FORM 1905 –
Application for registration.

(b) Are the deficiency tax assessment and warrant of distraint and/or levy issued against KLM Corp. valid? Explain.
(3%)

NO.

2. For purposes of value-added tax, define, explain or distinguish the following terms:

(a) Input tax and output tax (3%)

INPUT TAX OUTPUT TAX

The value-added tax (VAT) due from or paid by a The value-added tax (VAT) on the sale or lease of
VAT-registered person in the course of his trade or taxable goods or properties by any person required
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 business on importation of goods or local purchase to register.
of goods or services, including lease or use of
property from a VAT-registered person.

Persons who can avail of input tax credit:

1. To the purchaser upon consummation of sale

and on importation of goods or properties; and
2. To the importer upon payment of the VAT prior
to the release of the goods from the custody of
the BOC.
3. In case of purchase of services, lease or use of
properties, the input tax shall be creditable to the
purchaser, lessee, and licensee upon payment of
the compensation, rental, royalty or fee.

(b) Zero-rated and effectively zero-rated transactions (3%)

Generally refers to the export sale of goods and Refer to local sale of goods of services to the
supply of services. persons (made by a VAT-registered person) or
entities whose exemption under the special laws or
Primarily, intended to be enjoyed by the seller who is international agreements to which the Philippines is
directly and legally liable for the VAT, making such a signatory effectively subjects such transactions to
seller internationally competitive by allowing the a zero rate.
refund or credit of input taxes that are attributable to
export sales. Intended to benefit the purchaser who, not being
directly and legally liable for the payment of the VAT,
will ultimately bear burden of the tax shifted by the
suppliers.

(c) Destination principle (3%)

Destination Principle Cross Border Doctrine

Goods and services are taxed only in the country Mandates that no VAT shall be imposed to form part
where these are consumed. of the cost of the goods destined for consumption
outside the territorial border of the taxing authority.
Hence, actual export of goods and services from the
Philippines to a foreign country must be free of VAT,
while those destined for use or consumption within
the Philippines shall be imposed with 12% VAT.

3. All the homeowners belonging to ABC Village Homeowners' Association elected a new set of members of the Board of
Trustees for the Association effective January 2019. The first thing that the Board looked into is the need to increase the
prevailing association dues. Mr. X, one of the trustees, proposed an increase of 100% to account for the payment of the 12%
value-added tax (VAT) on the association dues which were being collected for services allegedly rendered "in the course of
trade or business" by ABC Village Homeowners' Association.

(a) What constitutes transactions done "in the course of trade or business" for purposes of applying VAT?(2%)

The term “ in the course of trade or business: requires the regular conduct or pursuit of a commercial or an
economic activity, regardless of whether or not the entity is profit-oriented.

(b) Is Mr. X correct in stating that the association dues are subject to VAT? Explain. (3%)

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 NO. Sec. 109 (1) (y), NIRC as amended by TRAIN, enumerate the additional VAT exempt transactions including
those association dues, membership fees, and other assessments and charges collected by homeowners
associations and condominium corporations.

4. Due to rising liquidity problems and pressure from its concerned suppliers, P Corp. instituted a flash auction sale of its
shares of stock. P Corp. was then able to sell its treasury shares to Z, Inc., an unrelated corporation, for Pl,000,000.00,
which was only a little below the valuation of P Corp. 's shares based on its latest audited financial statements. In
connection therewith, P Corp. sought a Bureau of Internal Revenue ruling to confirm that, notwithstanding the price
difference between the selling price of the shares and their book value, the said transaction falls under one of the
recognized exemptions to donor's tax under the Tax Code.

(a) Cite the instances under the Tax Code where gifts made are exempt from donor's tax.(3%)

Under TRAIN LAW, the gifts that are exempted from payment of donor’s tax made by a resident are:

1. Gifts made to or for the use of the National Government or any entity created by any of its agencies which
is not conducted for profit, or to any political subdivision of the Government;

2. Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation,
institution, accredited nongovernment organization, trust or philanthropic organization or research
institution or organizations; provided, however, that not more than 30% of said gifts shall be used bysuch
done for administration purposes. For the purpose of this exemption, a ‘non-profit educational and/or
charitable corporation, institution, accreditated nongovernment organization, trust or philanthropic
organization and/ or research institution or organization, incorporated as a nonstock entity, paying no
dividends, governed by trustees who receive no compensation, and devoting all its income, whether
students’ fees or gifts, donation, subsidies or other forms of philanthropy, to the accomplishment and
promotion of the purposes enumerated in its Articles of Incorporation.

(b) Does the above transaction fall under any of the exemptions? Explain. (2%)

NO.

5. A, a resident Filipino citizen, died in December 2018. A's only assets consist of a house and lot in Alabang, where his heirs
currently reside, as well as a house in Los Angeles, California, USA. In computing A's taxable net estate, his heirs only
deducted: 1. ₱10,000,000.00 constituting the value of their house in Alabang as their family home; and 2. ₱200,000.00 in
funeral expenses because no other expenses could be substantiated.

(a) Are both deductions claimed by A's heirs correct? Explain.(2%)

NO. Excluding funeral Expenses.

(b) May a standard deduction be claimed by A's heirs? If so, how much and what proof needs to be presented for the
same to be validly made?(2%)

YES. Deductions Allowed to Nonresident Estates - In the case of a nonresident not a citizen of the Philippines,
by deducting from the value of that part of his gross estate which at the time of his death is situated in the
Philippines:

"(1) Standard Deduction - An amount equivalent to Five hundred thousand pesos (₱500,000).

(c) In determining the gross estate of A, should the heirs include A's house in Los Angeles, California, USA?
Explain.(2%)

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 YES. Gross Estate. - the value of the gross estate of the decedent shall be determined by including the value at
the time of his death of all property, real or personal, tangible or intangible, wherever situated: Provided,
however, that in the case of a nonresident decedent who at the time of his death was not a citizen of the
Philippines, only that part of the entire gross estate which is situated in the Philippines shall be included in his
taxable estate.

6. XYZ Air, a 100% foreign-owned airline company based and registered in Netherlands, is engaged in the international airline
business and is a member signatory of the International Air Transport Association. Its commercial airplanes neither operate
within the Philippine territory nor are its service passengers embarking from Philippine airports. Nevertheless, XYZ Air is able to
sell its airplane tickets in the Philippines through ABC Agency, its general agent in the Philippines. As XYZ Air's ticket sales, sold
through ABC Agency for the year 2013, amounted to ₱5,000,000.00, the Bureau of Internal Revenue (BIR) assessed XYZ Air
deficiency income taxes on the ground that the income from the said sales constituted income derived from sources within the
Philippines.

Aggrieved, XYZ Air filed a protest, arguing that, as a non-resident foreign corporation, it should only be taxed for income derived
from sources within the Philippines. However, since it only serviced passengers outside the Philippine territory, the situs of the
income from its ticket sales should be considered outside the Philippines. Hence, no income tax should be imposed on the
same.

Is XYZ Air's protest meritorious? Explain.(5%)

NO.

In the earlier case of South African Airways v. Commissioner of Internal Revenue, 612 SCRA 665 (2010), this
court held that Section 28(A)(3)(a) does not categorically exempt all international air carriers from the coverage
of Section 28(A)(1). Thus, if Section 28(A)(3)(a) is applicable to a taxpayer, then the general rule under Section
28(A)(1) does not apply. If, however, Section 28(A)(3)(a) does not apply, an international air carrier would be
liable for the tax under Section 28(A)(1). This court in South African Airways declared that the correct
interpretation of these provisions is that: “international air carrier[s] maintain[ing] flights to and from the
Philippines . . . shall be taxed at the rate of 2 1/2% of its Gross Philippine Billings; while international air
carriers that do not have flights to and from the Philippines but nonetheless earn income from other activities
in the country like sale of airline tickets will be taxed at the rate of 32% of such [taxable] income.” (Air Canada
vs. Commissioner of Internal Revenue, 778 SCRA 131, G.R. No. 169507 January 11, 2016)

Commissioner of Internal Revenue v. British Overseas Airways Corporation (British Overseas Airways), 149
SCRA 395 (1987), which was decided under similar factual circumstances, this Court ruled that off-line air
carriers having general sales agents in the Philippines are engaged in or doing business in the Philippines and
that their income from sales of passage documents here is income from within the Philippines. Thus, in that
case, we held the off-line air carrier liable for the 32% tax on its taxable income. ( South African Airways vs.
Commissioner of Internal Revenue, 612 SCRA 665, G.R. No. 180356 February 16, 2010)

7. Differentiate tax exclusions from tax deductions.(3%)

TAX EXCLUSIONS TAX DEDUCTIONS TAX CREDIT

Refers to income received but is The amount which the law allow Refers to the amount that
not taxable as income because to be subtracted from gross is subtracted directly from
they are exempted by law or income in the order to arrive at one’s total liability, an
treaty. the net income. allowance against the tax
itself, or a deduction from
Income of taxpayer which are not Something spent or paid in the what is owned.
treated as part of gross income earning gross income.
for purposes of computing the
taxpayer’s taxable income

8. B transferred his ownership over a 1,000-square meter commercial land and three-door apartment to ABC Corp., a family
corporation of which B is a stockholder. The transfer was in exchange of 10,000 shares of stock of ABC Corp. As a result, B
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acquired 51 % ownership of ABC Corp., with all the shares of stock having the right to vote. B paid no tax on the exchange,
maintaining that it is a tax avoidance scheme allowed under the law. The Bureau of Internal Revenue, on the other hand,
insisted that B's alleged scheme amounted to tax evasion.

Should B pay taxes on the exchange? Explain.(3%)

NO. Sec 40 (c) (2) TAX-FREE OR TAX-DEFERRED EXCHANGE

(C) Exchange of Property. - (1) General Rule. - Except as herein provided, upon the sale or exchange or
property, the entire amount of the gain or loss, as the case may be, shall be recognized.

(2) Exception. - No gain or loss shall be recognized if in pursuance of a plan of merger or consolidation –

(a) A corporation, which is a party to a merger or consolidation, exchanges property solely for stock in a
corporation, which is a party to the merger or consolidation; or

(b) A shareholder exchanges stock in a corporation, which is a party to the merger or consolidation, solely for
the stock of another corporation also a party to the merger or consolidation; or

(c) A security holder of a corporation, which is a party to the merger or consolidation, exchanges his securities
in such corporation, solely for stock or securities in such corporation, a party to the merger or consolidation.

No gain or loss shall also be recognized if property is transferred to a corporation by a person in exchange for
stock or unit of participation in such a corporation of which as a result of such exchange said person, alone or
together with others, not exceeding four (4) persons, gains control of said corporation: Provided, That stocks
issued for services shall not be considered as issued in return for property.

9. GHI, Inc. is a corporation authorized to engage in the business of manufacturing ultra-high density microprocessor unit
packages. After its registration on July 5, 2005, GHI, Inc. constructed buildings and purchased machineries and equipment. As
of December 31, 2005, the total cost of the machineries and equipment amounted to ₱250,000,000.00. However, GHI, Inc.
failed to commence operations. Its factory was temporarily closed effective September 15, 2010. On October 1, 2010, it sold its
machineries and equipment to JKL Integrated for ₱300,000,000.00. Thereafter, GHI, Inc. was dissolved on November 30, 2010.

(a) Is the sale of the machineries and equipment to JKL Integrated subject to normal corporate income tax or capital
gains tax? Explain. (3%)

Section 39 (a) of NIRC Capital Assets. - The term "capital assets" means property held by the taxpayer
(whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or
other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the
close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary
course of his trade or business, or property used in the trade or business, of a character which is subject to
the allowance for depreciation provided in Subsection (F) of Section 34; or real property used in trade or
business of the taxpayer.

(b) Distinguish an ordinary asset from a capital asset.(2%)

ORDINARY ASSETS CAPITAL ASSETS

Assets or Property (real property) primarily used in Includes all properties held by the taxpayer whether
the trade or business of the taxpayer or not connected with his trade or business and
which are not included among the real properties
considered as ordinary assets

10. In 2018, City X amended its Revenue Code to include a new provision imposing a tax on every sale of merchandise by a
wholesaler based on the total selling price of the goods, inclusive of value-added taxes (VAT). ABC Corp., a wholesaler
operating within City X, challenged the new provision based on the following contentions: 1. the new provision is a form of

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prohibited double taxation because it essentially amounts to City X imposing VAT which was already being levied by the national
government; and 2. since the tax being imposed is akin to VAT, it is beyond the power of City X to levy the same

Rule on each of ABC Corp.'s contentions. (5%)

DOUBLE TAXATION

a. Same property is taxed twice when it should be taxed only once;

b. Both taxes are imposed on the same property or subject matter for the same purpose,
c. By the same State, Government, or taxing authority within the same jurisdiction
d. Taxing during the same taxing period
e. The same kind of character of tax

11. Mr. D, a Filipino amateur boxer, joined an Olympic qualifying tournament held in Las Vegas, USA, where he won the gold
medal. Pleased with Mr. D's accomplishment, the Philippine Government, through the Philippine Olympic Committee, awarded
him a cash prize amounting to ₱1,000,000.00. Upon receipt of the funds, he went to a casino in Pasay City and won the
₱30,000,000.00 jackpot in the slot machine. The next day, he went to a nearby Lotto outlet and bought a Lotto ticket which won
him a cash prize of ₱5,000.00.

Which of the above sums of money is/are subject to income tax? Explain. (5%)

SEC. 32 Gross Income. (A) General Definition. - Except when otherwise provided in this Title, gross income
means all income derived from whatever source, including (but not limited to) the following items:

(9) Prizes and winnings;

(B) Exclusions from Gross Income. - The following items shall not be included in gross income and shall be
exempt from taxation under this title:

7) Miscellaneous Items.

(d) Prizes and Awards in Sports Competition. - All prizes and awards granted to athletes in local and
international sports competitions and tournaments whether held in the Philippines or abroad and sanctioned
by their national sports associations.

12. JKL-Philippines is a domestic corporation affiliated with JKL-Japan, a Japan-based information technology company with
affiliates across the world. Mr. F is a Filipino engineer employed by JKL-Philippines. In 2018, Mr. F was sent to the Tokyo
branch of JKL-Japan based on a contract entered into between the two (2) companies. Under the said contract, Mr. F would be
compensated by JKL-Philippines for the months spent in the Philippines, and by JKL-Japan for months spent in Japan. For the
entirety of 2018, Mr. F spent ten (10) months in the Tokyo branch.

On the other hand, Mr. J, a Japanese engineer employed by JKL-Japan, was sent to Manila to work with JKL-Philippines as a
technical consultant. Based on the contract between the two (2) companies, Mr. J's annual compensation would still be paid by
JKL-Japan. However, he would be paid additional compensation by JKL-Philippines for the months spent working as a
consultant. For 2018, Mr. J stayed in the Philippines for five (5) months.

In 2019, the Bureau of Internal Revenue (BIR) assessed JKL-Philippines for deficiency withholding taxes for both Mr. F and Mr.
J for the year 2018. As to Mr. F, the BIR argued that he is a resident citizen; hence, his income tax should be based on his
worldwide income. As to Mr. J, the BIR argued that he is a resident alien; hence, his income tax should be based on his income
from sources within the Philippines at the schedular rate under Section 24 (A) (2) of the Tax Code, as amended by Republic Act
No. 10963, or the "Tax Reform for Acceleration and Inclusion" Law.

(a) ls the BIR correct in basing its income tax assessment on Mr. F's worldwide income? Explain. (3%)

(E) The term "nonresident citizen" means:

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 (1) A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical
presence abroad with a definite intention to reside therein.

(2) A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an
immigrant or for employment on a permanent basis.

(3) A citizen of the Philippines who works and derives income from abroad and whose employment thereat
requires him to be physically present abroad most of the time during the taxable year.

(b) Is the BIR correct in basing its income tax assessment on Mr. J's income within the Philippines at the schedular
rate? Explain. (3%)

13. As a way to augment the income of the employees of DEF, Inc., a private corporation, the management decided to grant a
special stipend of ₱50,000.00 for the first vacation leave that any employee takes during a given calendar year. In addition, the
senior engineers were also given housing inside the factory compound for the purpose of ensuring that there are available
engineers within the premises every time there is a breakdown in the factory machineries and equipment.

(a) Is the special stipend part of the taxable income of the employees receiving the same? If so, what tax is applicable
and what is the tax rate? Explain. (3%)

YES. Subject to tax on compensation income

(b) Is the cash equivalent value of the housing facilities received by the senior engineers subject to fringe benefits tax?
Explain. (3%)

Section 33. (B) Fringe Benefit defined. - For purposes of this Section, the term "fringe benefit" means any
good, service or other benefit furnished or granted in cash or in kind by an employer to an individual employee
(except rank and file employees as defined herein) such as, but not limited to, the following:.

(1) Housing;
(2) Expense account;
(3) Vehicle of any kind;
(4) Household personnel, such as maid, driver and others;
(5) Interest on loan at less than market rate to the extent of the difference between the market rate and actual
rate granted;
(6) Membership fees, dues and other expenses borne by the employer for the employee in social and athletic
clubs or other similar organizations;
(7) Expenses for foreign travel;
(8) Holiday and vacation expenses;
(9) Educational assistance to the employee or his dependents; and
(10) Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the
law allows.

14. City R owns a piece of land which it leased to V Corp. In turn, V Corp. constructed a public market thereon and leased the
stalls to vendors and small storeowners. The City Assessor then issued a notice of assessment against V Corp. for the payment
of real property taxes (RPT) accruing on the public market building, as well as on the land where said market stands.

Is the City Assessor correct in including the land in its assessment of RPT against V Corp., even if the same is owned
by City R? Explain. (3%)

TEST: USE OF REAL PROPERTY

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 SEC. 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real property
tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;

B.15.

15. Mr. C is employed as a Chief Executive Officer of MNO Company, receiving an annual compensation of ₱10,000,000.00,
while Mr. S is a security guard in the same company earning an annual compensation of ₱200,000.00. Both of them source their
income only from their employment with MNO Company.

(a) At the end of the year, is Mr. C personally required to file an annual income tax return? Explain. (2.5%)

SEC. 51. Individual Return. -

(A) Requirements. -

(2) The following individuals shall not be required to file an income tax return; (b) An individual with respect to
pure compensation income, as defined in Section 32 (A)(1), derived from sources within the Philippines, the
income tax on which has been correctly withheld under the provisions of Section 79 of this
Code: Provided, That an individual deriving compensation concurrently from two or more employers at any
time during the taxable year shall file an income tax return: Provided, further, That an individual whose
compensation income derived from sources within the Philippines exceeds Sixty thousand pesos (P60,000)
shall also file an income tax return;

(b) How about Mr. S? Is he personally required to file an annual income tax return? Explain. (2.5%)

SEC. 51. Individual Return. -(A) Requirements. -

(2) The following individuals shall not be required to file an income tax return; (a) An individual whose gross
income does not exceed his total personal and additional exemptions for dependents under Section 35:
Provided, That a citizen of the Philippines and any alien individual engaged in business or practice of
profession within the Philippine shall file an income tax return, regardless of the amount of gross income;

16. (a) Differentiate between a calendar year and a fiscal year. (2.5%)

A calendar year is simply the conventional year that A fiscal year is a 12-month period that ends on the
begins on January 1 and ends on December 31. last day of any month. A fiscal year may end on April
30, for instance. Such a fiscal year would start on
May 1 of the previous year, since it must cover 12 full
consecutive months.

(b) When is the deadline for the filing of a corporation's final adjustment return for a calendar year? How about for
a fiscal year? (2.5%)

SEC. 77. Place and Time of Filing and Payment of Quarterly Corporate Income Tax.

(B) Time of Filing the Income Tax Return. - The corporate quarterly declaration shall be filed within sixty
(60) days following the close of each of the first three (3) quarters of the taxable year.

The final adjustment return shall be filed on or before the fifteenth (15 th) day of April, or on or before
the fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year, as the case may
be.

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17. XYZ Corp. is listed as a top 20,000 Philippine corporation by the Bureau of Internal Revenue. It secured a loan from ABC
Bank with a 6% per annum interest. All interest payments made by XYZ Corp. to ABC Bank is subject to a 2% creditable
withholding tax. At the same time, XYZ Corp. has a trust deposit with ABC Bank in the amount of ₱100,000,000.00, which earns
2% interest per annum, but is subject to a 20% final withholding tax on the interest income received by XYZ Corp.

(a) Who are the withholding agents in the case of: 1. the 20% final withholding tax; and 2. the 2% creditable withholding
tax? Explain. (2.5%)

1. BANK

(a) When is the deadline for filing a judicial claim for refund for any excess or erroneous taxes paid in the case of: 1. the
20% final withholding tax; and 2. the 2% creditable withholding tax? (2.5%)

1. 2YRS FROM REMITTANCE

2. LAST DATE OF FILING, PAYMENT

Sec. 76 Final Adjustment Return. - Every corporation liable to tax under Section 27 shall file a final adjustment
return covering the total taxable income for the preceding calendar or fiscal year.

If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on
the entire taxable income of that year, the corporation shall either:

(A) Pay the balance of tax still due; or

(B) Carry-over the excess credit; or

(C) Be credited or refunded with the excess amount paid, as the case may be.

In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid,
the excess amount shown on its final adjustment return may be carried over and credited against the
estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years.

Once the option to carry-over and apply the excess quarterly income tax against income tax due for the
taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable
for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed
therefor.

18. After a Bureau of Internal Revenue (BIR) audit, T Corp., a domestic corporation engaged in buying and selling of scrap
metals, was found to have deficiency income tax of ₱25,000,000.00, including interests and penalties, for the year 2012. For
2012, T Corp. filed its income tax return (ITR) on April 15, 2013 because it used the calendar year for its accounting. The BIR
sent the Preliminary Assessment Notice (PAN) on December 23, 2015, and eventually, the Final Assessment Notice (FAN) on
April 11, 2016, which were received by T Corp. on the same dates that they were sent. Upon receipt of the FAN, T Corp. filed its
protest letter on June 25, 2016.

Thereafter, and without action from the Commissioner of Internal Revenue (CIR), T Corp. filed a petition for review before the
Court of Tax Appeals, alleging that the assessment has prescribed. For its part, the CIR moved to dismiss the case, pointing out
that the assessment had already become final because the protest was filed beyond the allowable period.

(a) Is T Corp.'s contention regarding the prescription of the assessment meritorious? Explain. (2.5%)

NO.

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 (b) Should the CIR's motion to dismiss be granted? Explain. (2.5%)

YES.

19. On May 10, 2011, the final withholding tax for certain income payments to W Corp. was withheld and remitted to the Bureau
of Internal Revenue (BIR), and the corresponding return therefor was concomitantly filed on the same date. Upon discovering
that the amount withheld was excessive, W Corp. filed with the BIR a claim for refund for erroneously withheld and collected
final withholding income tax on May 3, 2013. A week after, and without waiting for any decision from the Commissioner of
Internal Revenue (CIR), W Corp. filed a petition for review before the Court of Tax Appeals (CTA) to make sure that the petition
was filed within the two (2)-year period for claiming refunds.

In resisting the claim, the BIR contended that the claim must be dismissed by the CT A on the ground of non-exhaustion of
administrative remedies because it did not give the CIR the opportunity to act on the claim of refund.

(a) Is the BIR's contention meritorious? Explain. (2.5%)

NO.

(b) Assuming that the claim for refund filed by W Corp. is for excess and/or unutilized input VAT for the second quarter
of 2011, and for which the return was timely filed on July 25, 2011, would your answer be the same? Explain. (2.5%)

NO. 120 + 30 days

20. ABC, Inc. owns a 950-square meter commercial lot in Quezon City. It received a notice of assessment from the City
Assessor, subjecting the property to real property taxes (RPT). Believing that the assessment was erroneous, ABC, Inc. filed a
protest with the City Treasurer. However, for failure to pay the RPT, the City Treasurer dismissed the protest.

(a) Was the City Treasurer correct in dismissing ABC, Inc.'s protest? Explain. (2.5%)

NO. payment under protest first

(b) Assuming that ABC, Inc. decides to appeal the dismissal, where should the appeal be filed? (2.5%)

LOCAL BOARD OF ASSESSMENT APPEALS

If the subject matter of the appeal is the perceived error or errors in the assessment of the property concerned, the appeal to
the Local Board of Assessment Appeals – with the concerned assessor as the respondent – shall be filed within sixty (60) days
from the appellant’s receipt of the written notice of assessment from the assessor

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