1. Does the Court of Tax Appeals have jurisdiction over a tax dispute involving solely two government agencies under the Executive Department?

None. In The Department of Energy ("DOE") v. Court of Tax Appeals ("CTA") (G.R. No. 260912, August 17, 2022), the Supreme Court held that it is the Executive, acting through the Solicitor General or the Secretary of Justice, as the case may be, that has jurisdiction over a tax dispute involving two government agencies under the Executive Department.

In DOE v. CTA, the Bureau of Internal Revenue ("BIR") assessed deficiency excise taxes against the DOE. The DOE filed a petition for review before the CTA Second Division, which dismissed the petition for lack of jurisdiction. The CTA En Banc affirmed the dismissal.

In affirming the dismissal by the CTA, the Supreme Court held that the CTA is not the proper forum to resolve a purely intra-governmental dispute. The Supreme Court ruled that all disputes, claims, and controversies, including disputes on tax assessments, solely between or among executive agencies, must be submitted to administrative settlement by the Secretary of Justice or the Solicitor General, as the case may be.

SyCipLaw TIP 1:

If a tax dispute involves solely two government agencies, even if one of them is the BIR, jurisdiction to resolve the case lies with the Executive. However, if the parties to the tax dispute include not only government agencies but also individual taxpayers and/or non-individual taxpayers that are not government agencies, the jurisdiction lies with the tax courts.

The Supreme Court explained that Presidential Decree No. 242 (Prescribing the Procedure for Administrative Settlement or Adjudication of

Disputes, Claims and Controversies, between or among Government Offices, Agencies and Instrumentalities, including Government- Owned or Controlled Corporations and for Other Purposes) ("PD No. 242"), as a special law, prevails over Republic Act No. 1125 (An Act

Creating the Court of Tax Appeals), as amended ("RA 1125"), and the National Internal Revenue Code of 1997, as amended ("NIRC"), with respect to provisions on the jurisdiction of the CTA over tax disputes. The Supreme Court reiterated its ruling in PSALM v. Commissioner of Internal Revenue ("CIR") (GR No. 198146, August 8, 2017) where the Court made a definitive and binding pronouncement that PD No. 242 is a special law and must be read as a carve-out from the general jurisdiction of the CTA over tax cases.

The provisions in the NIRC and RA 1125, on the jurisdiction of the CTA over tax disputes involving tax laws enforced by the BIR, should be read as general provisions governing the settlement of disputes involving tax claims. These provisions apply with equal force to all persons involved in disputes pertaining to all tax claims arising from all tax laws being implemented by the BIR. In contrast, PD No. 242, as now embodied in the Revised Administrative Code, applies only to particular persons involved in a uniquely specific category of cases — disputes, claims, and controversies where all the parties involved are government agencies.

The Supreme Court said that it was categorical in its ruling in PSALM v. CIR that when the law says "all disputes, claims and controversies solely among government agencies," the law means all, without exception. Therefore, so long as such dispute arises from any of the following – "the interpretation and application of statutes, contracts, or agreements" – the same falls under the administrative settlement proceedings directed by PD No. 242.

The Supreme Court also held that the Executive's power of control necessitates administrative settlement of disputes. Given that the President, as Chief Executive, has control over all agencies in dispute, including the BIR and the CIR, it is only proper and logical that he first be given a chance to resolve the dispute before resorting to the courts. Only after the President has decided or settled the dispute can the court's jurisdiction be invoked.

Tax Updates January 2023 (SyCipLaw Tax Issues and Practical Solutions (T.I.P.S.) Vol. 22)

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