Professional Documents
Culture Documents
Case Digests Volume III
Case Digests Volume III
Commissioner v. CA
(G.R. # 119761; 08-29-1996) by yurei
Facts:
1. RA 7654 was enacted by Congress on June 10, 1993 and took
1
effect July 3, 1993. It amended partly Sec. 142 (c) of the NIRC
2. Fortune Tobacco manufactured the following cigaretter brands:
Hope, More and Champion. Prior to RA 7654, these 3 brands
were considered local brands subjected to an ad valorem tax of
20 to 45%. Applying the amendment and nothing else, (see
footnote below) the 3 brands should fall under Sec 142 (c) (2)
NIRC and be taxed at 20 to 45%.
3. However, on July 1, 1993, petitioner Commissioner of Internal
Revenue issued Revenue Memorandum Circular37-93 which
reclassified the 3 brands as locally manufactured cigarettes
bearing a foreign brand subject to the 55% ad valorem tax. The
reclassification was before RA 7654 took effect.
4. In effect, the memo circular subjected the 3 brands to the
provisions of Sec 142 (c) (1) NIRC imposing upon these brands
a rate of 55% instead of just 20 to 45% under Sec 142 (c) (2)
NIRC.
5. There was no notice and hearing. CIR argued that the memo
circular was merely an interpretative ruling of the BIR which did
not require notice and hearing.
Issue: WON RMC 37-93 was valid and enforceable No; lack of
notice and hearing violated due process required for promulgated
rules. Moreover, it infringed on uniformity of taxation / equal
protection since other local cigarettes bearing foreign brands had
not been included within the scope of the memo circular.
Ratio:
1. Contrary to petitioners contention, the memo was not a mere
interpretative rule but a legislative rule in the nature of
subordinate legislation, designed to implement a primary
legislation by providing the details thereof. Promulgated
legislative rules must be published.
2. On the other hand, interpretative rules only provide guidelines
to the law which the administrative agency is in charge of
enforcing.
3. BIR, in reclassifying the 3 brands and raising their applicable tax
rate, did not simply interpret RA 7654 but legislated under its
quasi-legislative authority.
BELLOSILLO separate opinion: the administrative issuance was not
quasi-legislative but quasi-judicial. Due process should still be
observed of course but use Ang Tibay v. CIR.
Holding: CA affirmed.
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Sec. 142 (c) ... There shall be... collected on cigarettes... a tax at the rates
prescribed below... :
(1) On locally manufactured cigarettes which are currently classified
and taxed at 55% 55%
(2) On other locally manufactured cigarettes (already at 20 to 45%)
20 to 45%
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Excerpt from CTA ruling:
To make petitioner liable for specific tax after it has made the importations, would surely
prejudice petitioner as it would be subject to a tax liability of which the Bureau of Internal
Revenue has not made it fully aware. As a result, the rulings of May 8, 1978 and February 15,
1980 having been issued long after the importations on June 21 and August 1 7, 1977 in
question cannot be applied with legal effect in this case because to do so will violate the
prohibition against retroactive application of the rulings of executive bodies. Rulings or
circulars promulgated by the Commissioner of Internal Revenue, such as the rulings of
January 28, 1977 and those of May 8, 1978 and February 15, 1980, can not have any
retroactive application, where to do so, as it did in the case at bar, would prejudice the
taxpayer.
withholding income tax for the years 1965, 1966, 1967 and
1968.
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HELD: No. Sec. 338-A (now Sec. 327) of the Tax Code
applies in this case. Rulings or circulars promulgated by the
CIR have no retroactive application where to so apply
them would be prejudicial to taxpayers. The retroactive
application of Memorandum Circular No. 4-71 prejudices ABSCBN since:
a) it was issued only in 1971, or 3 years after 1968, the last
year that petitioner had withheld taxes under General Circular
No. V-334.
b) the assessment and demand on petitioner to pay deficiency
withholding income tax was also made three years after 1968
for a period of time commencing in 1965.
c) ABS-CBN was no longer in a position to withhold taxes due
from foreign corporations because it had already remitted all
film rentals and no longer had any control over them when the
new Circular was issued.
And in so far as the enumerated exceptions (to nonretroactivity) are concerned, ABS-CBN does not fall under any
of them.
In connection with Section 24 (b) of Tax Code, the amendment introduced by Republic Act
No. 2343, under which an income tax equal to 30% is levied upon the amount received by
every foreign corporation not engaged in trade or business within the Philippines from all
sources within this country as interest, dividends, rents, salaries, wages, premiums, annuities,
compensations, remunerations, emoluments, or other fixed or determinable annual or
periodical gains, profits, and income, it has been determined that the tax is still imposed on
income derived from capital, or labor, or both combined, in accordance with the basic principle
of income taxation (Sec. 39, Income Tax Regulations), and that a mere return of capital or
investment is not income (Par. 5,06, 1 Mertens Law of Federal 'Taxation). Since according to
the findings of the Special Team who inquired into business of the non-resident foreign film
distributors, the distribution or exhibition right on a film is invariably acquired for a
consideration, either for a lump sum or a percentage of the film rentals, whether from a parent
company or an independent outside producer, a part of the receipts of a non-resident foreign
film distributor derived from said film represents, therefore, a return of investment.
Amended version:
11
ISSUES:
12
rather than
RATIO:
1. NO. Section 1 of Revenue Regulation 19-86 plainly states
that it was promulgated pursuant to Section 277 of the NIRC.
Section 277 (now Section 244) is an express grant of authority
to the Secretary of Finance to promulgate all needful rules and
regulations for the effective enforcement of the provisions of
the NIRC.
12
Income
Tax,
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SEC. 29. GROSS INCOME. - (a) General definition. - "Gross income" includes gains,
profits, and income derived from salaries, wages, or compensation for personal service of
whatever kind and in whatever form paid, or from professions, vocations, trades, businesses,
commerce, sales or dealings in property, whether real or personal, growing out of ownership or
use of or interest in such property; also from interests, rents, dividends, securities, or the
transactions of any business carried on for gain or profit, or gains, profits, and income derived
from any source whatsoever.
The spouses did not live in the apartments and nor did they
avail of the travel expenses. As such, they did not pay for taxes
corresponding to the allowances. Hence, the CIR assessed
deficiency income taxes against the spouses.
Issue:
WON allowances given by an employer, but unavailed of by an
employee, are taxable on the latters personal income.
Held: No. No part of the allowances in question redounded to
the benefit of the spouses ultimately or was retained by them.
The Hendersons are entitled only to a ratable value of the
allowances the reasonable amount they would have spent for
house rental and utilities which would be the only part of the
allowances at issue subject to their personal tax. The same is
true with the allowances as no part of the allowance for
traveling expenses redounded to the benefit of the
Hendersons. Hence, the traveling allowance is likewise not
taxable.
CIR bases its assessment on the fact that P824k was the
acquisition cost as determined by Mr. Ramos.
o SC: Considering that records were destroyed, no
showing how this figure was established. The
CIR places much emphasis on what he asserts
as estoppel in pais and contends that because
the said amount appears in Binalbagans book,
the same should be held controlling. WE do not
find this contention material herein inasmuch as
whether or the P824k is held the correct
acquisition cost of the tangible assets in question,
the same would not determine the profits realized
from the sale of Binalbagans BISCOM shares to
PPC. The basis in computing the taxable gain
from the sale of Binalbagans BISCOM shares is
the fair market value (FMV) of the assets and
sugar quota in question. At any rate,
Binalbagans error in carrying the figure P824k in
its books and using the same in its income tax
returns for 1951, 1952, and 1953 neither
benefited Binalbagan, nor prejudiced the
government
o
15
Aguinaldo v. Com
Gutierrez v. Collector
Gancayo v. Collector
Roxas v. CTA
Com v. Prieto
CIR v. Lednicky
CIR v. Bicolandia
Plaridel Security
Collector v. Goodrich
FACTS:
NO. The claim for deduction thereof is based upon receipts issued,
not by the entities in which the alleged expenses had been incurred, but by
the officers of Goodrich who allegedly paid them.
The claim must be rejected. If the expenses had really been incurred,
receipts or chits would have been issued by the entities to which the
payments had been made, and it would have been easy for Goodrich or its
officers to produce such receipts.
These issued by said officers merely attest to their claim that they
had incurred and paid said expenses. They do not establish payment of said
alleged expenses to the entities in which the same are said to have been
incurred. The Court of Tax Appeals erred, therefore, in allowing the
deduction thereof.
Whether or not the debts had been properly deducted as bad debts for
the year 1951.
PRC v. CA
FACTS:
Basilan v. Com
Com v. CTA
FACTS:
Basilan Estates, Inc. filed before the CTA a petition for review of the
Commissioner's assessment, alleging prescription of the period for
assessment and collection; error in disallowing claimed depreciations,
travelling and miscellaneous expenses; and error in finding the existence of
unreasonably accumulated profits and the imposition of 25% surtax thereon.
CTA found that there was no prescription and affirmed the deficiency
assessment in toto.
FACTS:
In its 1971 original income tax return, Smith Kline declared a net
taxable income of P1,489,277 and paid P511,247 as tax due. Among the
deductions claimed from gross income was P501,040 ($77,060) as its share
of the head office overhead expenses.
HELD:
The income tax law does not authorize the depreciation of an asset
beyond its acquisition cost. Hence, a deduction over and above such cost
cannot be claimed and allowed. The reason is that deductions from gross
income are privileges, not matters of right. They are not created by
implication but upon clear expression in the law.
Pansacola v. CIR
FACTS:
Carmelino F. Pansacola filed his income tax return for the taxable
year 1997 that reflected an overpayment of P5,950. In it he claimed the
increased amounts of personal and additional exemptions under Section 35
of the NIRC, although his certificate of income tax withheld on compensation
indicated the lesser allowed amounts on these exemptions.
On appeal, the Court of Appeals denied his petition for lack of merit.
The appellate court ruled that Umali v. Estanislao, relied upon by petitioner,
was inapplicable to his case. It further ruled that the NIRC took effect on
January 1, 1998, thus the increased exemptions were effective only to cover
taxable year 1998 and cannot be applied retroactively.
ISSUE:
WON the exemptions under Section 35 of the NIRC, which took effect on
January 1, 1998, be availed of for the taxable year 1997.
HELD:
Section 35 (A) and (B) allow the basic personal and additional
exemptions as deductions from gross or net income, as the case maybe, to
arrive at the correct taxable income of certain individual taxpayers. Section
24 (A) (1) (a) imposed income tax on a resident citizens taxable income
derived for each taxable year.
Reagan v. Com
3.
= 29.75 > 13
Therefore, Section 902, US Tax Code, specifically and clearly
complies with the requirements of Section 24 (b) (1), NIRC.
The reduced rate of 15% shall apply.
BPI v. Com