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36101072 Taxation Cases Digest

36101072 Taxation Cases Digest

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Published by CHow Gatchallan

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Published by: CHow Gatchallan on Jul 03, 2012
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ad majorem Dei gloriam 
Commissioner vs. AlgueGRL-28890, 17 February 1988First Division, Cruz (J); 4 concur
The Philippine Sugar Estate Development Company (PSEDC)appointed Algue Inc. as its agent, authorizing it to sell itsland, factories, and oil manufacturing process. The VegetableOil Investment Corporation (VOICP) purchased PSEDC properties.For the sale, Algue received a commission of P125,000 and it wasfrom this commission that it paid Guevara, et. al. organizers ofthe VOICP, P75,000 in promotional fees. In 1965, Algue receivedan assessment from the Commissioner of Internal Revenue in theamount of P83,183.85 as delinquency income tax for years 1958amd 1959. Algue filed a protest or request for reconsiderationwhich was not acted upon by the Bureau of Internal Revenue(BIR). The counsel for Algue had to accept the warrant ofdistrant and levy. Algue, however, filed a petition for reviewwith the Coourt of Tax Appeals.
Whether the assessment was reasonable
Taxes are the lifeblood of the government and so should becollected without unnecessary hindrance. Every person who isable to pay must contribute his share in the running of thegovernment. The Government, for his part, is expected to respondin the form of tangible and intangible benefits intended toimprove the lives of the people and enhance their moral andmaterial values. This symbiotic relationship is the rationale oftaxation and should dispel the erroneous notion that is anarbitrary method of exaction by those in the seat of power.Tax collection, however, should be made in accordance with lawas any arbitrariness will negate the very reason for governmentitself. For all the awesome power of the tax collector, he maystill be stopped in his tracks if the taxpayer can demonstratethat the law has not been observed. Herein, the claimeddeduction (pursuant to Section 30 [a] [1] of the Tax Code andSection 70 [1] of Revenue Regulation 2: as to compensation forpersonal services) had been legitimately by Algue Inc. It hasfurther proven that the payment of fees was reasonable and
necessary in light of the efforts exerted by the payees ininducing investors (in VOICP) to involve themselves in anexperimental enterprise or a business requiring millions ofpesos.The assessment was not reasonable.
Commissioner vs. Cebu Portland CementGR L-29059, 15 December 1987First Division, Cruz (J): 4 concur
By virtue of a decision of the Court of Tax Appeals,modified by the Supreme Court, the Commissioner was ordered torefund overpayments of ad valorem taxes on cement produced andsold by the company after October 1957. The company moved for awrit of execution, which was opposed by the Commissioner on theground that the company had an outstanding sales tax liabilityto which the judgment debt had already been credited. The Courtof Tax Appeals held that the alleged sales tax liability wasstill being questioned and therefore cannot be set-off againstthe refund.
Whether the assessment of sales tax liability may beenforced, i.e. to set off against the refund.
The argument, that the assessment cannot as yet be enforcedbecause it is still being contested, loss sight of the urgencyof the need to collect taxes as the life blood of thegovernment.” If the payment of taxes could be postponed bysimply questioning their validity, the machinery of the statewould grind to a halt and all government functions would beparalyzed. To require the Commissioner to actually refund tothe company the amount of the judgment debt. Which he will laterhave the right to distrait for payment of its sales taxliability, is an idle ritual.
Sison vs. AnchetaGR L-59431, 25 July 1984En Banc, Fernando (J): 9 concur, 2 concur in result, 1concur in separate opinion, 1 took no part
Batas Pambansa 135 was enacted. Sison, as taxpayer,alleged that its provision (Section 1) unduly discriminatedagainst him by the imposition of higher rates upon his income as
a professional, that it amounts to class legislation, and thatit transgresses against the equal protection and due processclauses of the Constitution as well as the rule requiringuniformity in taxation.
Whether BP 135 violates the due process and equalprotection clauses, and the rule on uniformity in taxation.
There is a need for proof of such persuasive character aswould lead to a conclusion that there was a violation of the dueprocess and equal protection clauses. Absent such showing, thepresumption of validity must prevail. Equality and uniformity intaxation means that all taxable articles or kinds of property ofthe same class shall be taxed at the same rate. The taxing powerhas the authority to make reasonable and natural classificationsfor purposes of taxation. Where the differentitation conforms tothe practical dictates of justice and equity, similar to thestandards of equal protection, it is not discriminatory withinthe meaning of the clause and is therefore uniform. Taxpayersmay be classified into different categories, such as recipientsof compensation income as against professionals. Recipients ofcompensation income are not entitled to make deductions forincome tax purposes as there is no practically no overheadexpense, while professionals and businessmen have no uniformcosts or expenses necessaryh to produce their income. There isample justification to adopt the gross system of income taxationto compensation income, while continuing the system of netincome taxation as regards professional and business income.
Lutz vs. AranetaGR L-7859, 22 December 1955First Division, Reyes JBL (J): 8 concur
Walter Lutz, as Judicial Administrator of the IntestateEstate of Antonio Jayme Ledesma, sought to recover the sum ofP14,6666.40 paid by the estate as taxes from the Commissionerunder Section e of Commonwealth Act 567 (the Sugar AdjustmentAct), alleging that such tax is unconstitutional as it leviedfor the aid and support of the sugar industry exclusively, whichis in his opinion not a public purpose.
Whether the tax is valid in supporting an industry.

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