Case Summary (G.R. No. 257697)
Petitioner and Respondent
• In G.R. No. 257697, SMC is Petitioner and the CIR is Respondent.
• In G.R. No. 259446, the CIR is Petitioner and SMC is Respondent.
Key Dates
• July 19, 2011 – Filinvest decision is promulgated.
• October 6, 2011 – BIR issues Revenue Memorandum Circular No. 48-2011, directing DST deficiency assessments on similar intercompany advances.
• May 14, 2014 – SMC receives Preliminary Assessment Notice (PAN) for various deficiencies, including DST on P2.90 billion of advances.
• June 24, 2014 – SMC pays P30.42 million under protest and files refund claim.
• May 3, 2019 – CTA Division issues its decision partially granting refund of penalties.
• September 23, 2021 – CTA En Banc affirms retroactive application of Filinvest and grants partial relief.
• April 12, 2023 – Supreme Court renders final decision.
Applicable Law
• 1987 Philippine Constitution (Article VIII governs judicial power).
• National Internal Revenue Code of 1997 (NIRC), especially Section 179 (formerly 180) on stamp tax on debt instruments and Section 173 on scope of DST.
• Revenue Regulations No. 9-94, defining “loan agreement.”
Factual Background
SMC extended P2.90 billion in advances to related entities in taxable year 2009, documented only by journal entries, cash vouchers, and inter-office memoranda. Following Filinvest, the BIR assessed DST on these advances. SMC contested the DST deficiency on grounds that such internal documents do not constitute loan agreements and that Filinvest should not apply retroactively.
CTA Division Ruling
The CTA Division (May 3, 2019) granted refund of P15.92 million representing interest and compromise penalty, holding that SMC acted in good faith based on prior BIR interpretations. It denied refund of the P14.51 million DST deficiency, applying Filinvest prospectively.
CTA En Banc Ruling
The CTA En Banc (Sept 23, 2021) affirmed that:
- Filinvest’s interpretation of Section 179 is part of the NIRC from its enactment and may be applied retroactively.
- SMC is exempt from interest on DST deficiency on grounds of good faith reliance.
- Compromise penalty is mutual and should not have been imposed.
Issue
Whether Filinvest’s DST interpretation may be applied retroactively and whether SMC is entitled to refund of interest and compromise penalty paid under protest.
Supreme Court Ruling
Retroactive Application of Filinvest
- Judicial interpretations form part of the law from the date of enactment (Civil Code Articles 4 and 8).
- Prospective application is required only when a new doctrine overrules a prior one.
- No prior judicial or final BIR ruling held that inter-office memos and vouchers are not loan agreements; Filinvest merely interpreted the existing statute.
- Minute Resolutions (e.g., APC) and BIR rulings for other taxpayers are not binding precedents for SMC.
Good Faith and Interest
- A taxpayer may invoke good faith only upo
Case Syllabus (G.R. No. 257697)
Facts
- On July 19, 2011, this Court in Commissioner of Internal Revenue v. Filinvest held that instructional letters and journal and cash vouchers evidencing advances by Filinvest Development Corporation (FDC) to its affiliates qualified as loan agreements subject to Documentary Stamp Tax (DST).
- Pursuant to Filinvest, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. 48-2011 on October 6, 2011, directing all internal revenue officers to assess deficiency DST on such transactions if warranted.
- On May 14, 2014, San Miguel Corporation (SMC) received a Preliminary Assessment Notice (PAN) for its 2009 taxable year, asserting deficiency taxes—income tax, VAT, withholding taxes (compensation and expanded), final tax, VAT withholding, and DST—totaling ₱3,310,612,351.45 (inclusive of penalties and interest).
- The PAN’s DST component was based on SMC’s advances to related parties amounting to ₱2,901,493,003.15.
- On May 29, 2014, SMC replied, contending that its advances were not loans and that Filinvest should not apply retroactively.
- On June 24, 2014, SMC paid ₱30,424,259.59 under protest and on April 20, 2016 filed a claim for refund for that amount.
- After inaction by the BIR, SMC filed a Petition for Review before the Court of Tax Appeals (CTA) Division on June 22, 2016.
CTA Division Ruling
- On May 3, 2019, the CTA Division granted in part SMC’s refund claim and ordered refund or issuance of a tax credit certificate for ₱15,916,794.59, representing interest (₱15,886,794.59) and compromise penalty (₱50,000).
- The Division accepted SMC’s good-faith reliance on earlier BIR interpretations that inter-office memos and