Digests and Doctrines Tax 2 OMEGA

Tax Digests and Doctrines of 3D BATCH 2012 under Atty.
Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
DIGESTS FOR TARIFFS AND CUSTOMS CODE
(Cua and Muli)
Collector of Customs, who, under the Constitution,

was "a responsible officer authorized by law" to
issue them. Sections 2208 of the Tariff and
Customs Code provide:
Chia v Collector
177 SCRA 755
Facts: Electronic and electrical equipment and
others articles found in 2 stores (Toms Electronics
and Sony Merchandizing) were seized by the Anti
Smuggling Center by virtue of the warrant issued
by the Collector of Customs. Items seized were
allegedly illegally imported into the Philippines by
foreign ships in transit through Philippines soil
without passing through the Bureau of Customs,
thereby evading corresponding custom duties and
taxes. Petitioner Chia seeks to nullify the warrants
issued.
SEC. 2208. RIGHT OF POLICE OFFICER TO ENTER

INCLOSURE For the more effective discharge of his
official duties, any person exercising the powers
herein conferred, may at any time enter, pass
through or search any land or inclosure or any
warehouse, store or other building, not being a
dwelling house.
A warehouse, store or other building or inclosure

used for the keeping or storage of articles does
not become a dwelling house within the meaning
hereof merely by reason of the fact that a person
employed as watchman lives in the place, nor will
the fact that his family stays there with him alter
the case.
Issue: W/N seizure is justified by the warrants

issued by the Collector of Customs? Yes
Held/Doctrine: The petition is devoid of merit
because not only may goods be seized without a
search and seizure warrant under Section 2536 of
the Customs and Tariff Code, when such goods are
openly offered for sale or kept in storage in a store
as in this case, but the fact is that petitioner's
stores
Tom's
Electronics"
and
"Sony
Merchandising (Phil.)" were searched upon
warrants of search and detention issued by the
Lastly, upon effecting the seizure of the goods,

Bureau of Customs acquired jurisdiction not only
over the case but also over the goods seized for
the purpose of enforcing the tariff and customs
taxes. A part dissatisfied by the decision of the
Collector may appeal to the Commissioner of
Customs, whose decision is appealable to the CTA
then to the SC. Since petitioner did not exhaust all
[1]
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

administrative remedies, his recourse to this court
is premature.
was searched. Nonetheless, respondent judge

quashed the warrant.
Issue: W/N there was grave abuse of discretion on
the part of the judge in quashing the search
warrant? Yes
Viduya v. Berdiago
73 SCRA 553
Facts: The search warrant issued by petitioner
Viduya who was the former Collector of Customs
is quashed by the lower court upon motion by
private respondent Berdiago. The warrant of
seizure and detention was issued on the basis of
reliable intelligence that fraudulent documents
were used by Berdiago in securing the release
from the Bureau of Customs of a Rolls Royce, it
being made to appear that such car was a 1961
model instead of a 1966, thus enabling
respondent to pay lower custom duties. There was
a demand for the correct amount due and
Respondent expressed his willingness to pay.
Unfortunately, he was not able to live up to his
promise so a search warrant was issued, pursuant
to Section 2099 of the TCC which requires a
search warrant if such goods are located in a
dwelling house because the car was located in the
Yabut Compound. Morever, it was not shown that
Berdiago did not own the dwelling house which
Held/Ratio: Petition is granted. As the car was kept

in a dwelling house in Wakas, Barrio San Dionisio,
Paraaque, Rizal, petitioner through two of his
officers in the Customs Police Service applied for
and was able to obtain the search warrant. Had
there been no such move on the part of petitioner,
the duties expressly enjoined on him by law
namely to assess and collect all lawful revenues,
to prevent and suppress smuggling and other
frauds, and to enforce tariff and customs law
would not have been performed.
LLamado v. Collector of Customs
122 SCRA 118
Facts: A Cessna plane containing de gaza lamps
was unloaded at the Alabat airstrip. Later that
night, that, a motorized boat carrying Fortune
Blue Seal Cigarettes unloaded the goods and was
later loaded in a DC-3 plane. The DC-3 plane took
off using the de gaza lamps as a guide to safety
take off from the airstrip. A few days after, a
[2]

warrant was issued for seizure and detention of
the Cessna Plane. Petitioners argue that the
Cessna was not used to transport the contraband
goods but only bring the de gaza lamps.
A province has no authority to impose the taxes

on gravel, sand, stones, earth and other quarry
resources extracted from private lands.
A province may not levy excise taxes on articles
already taxed by the NIRC
Issue: W/N the Cessna plane was used in the

unlawful importation of cigagrtes within the
meaning of Section 2530 of the TCC which
provides that
(by Gran) Facts: In 1992, the Sangguniang

Panlalawigan of
Bulacan
passed
Provincial
Ordinance No. 3, Sec 21 of which provides:
Sec 21. There is hereby levied & collected a tax of 10% of
the FMV in the locality per cubic meter of ordinary stones,
sand, gravel, earth & other quarry resources, such, but not
limited to marble, granite, volcanic cinders, basalt, tuff and
rock phosphate, extracted from public lands or from beds of
seas, lakes, rivers, streams, creeks and other public waters
within its territorial jurisdiction.
Held/Ratio: Petition Dismissed. It is not necessary

that the vessel or aircraft mist itself carry the
contraband. There is nothing in the law that
requires. In the case at bar, it is undeniable that
the Cessna plane was deliberately used to ensure
the DC-3 plane take off without peril and transport
the goods to Pampanga.
In a letter dated Nov. 11, 1993, the Provincial

Treasurer assessed Republic Cement Corp (RCC)
P2,524,692 for extracting limestone, shale and
silica from several parcels of private land in the
province during in 1992 & 1993.
On Dec. 23, 1993, RCC formally contested the
assessment, which was, denied by the Provincial
Treasurer on Jan. 17, 1994. Thus, on Feb. 14,
1994, RCC filed a petition for declaratory relief
with the RTC of Bulacan.
The RTC, upon motion of the province, dismissed
RCCs petition on the ground that the declaratory
relief was improper, allegedly because a breach of
the ordinance had been committed by RCC.
LOCAL GOVERNMENT TAXATION

Doctrines are from ANGEL NOTES, Digests
from our classmates
1. The Province of Bulacan v CA & Republic
Cement Corp
G.R. No. 126232. November 27, 1998
DOCTRINE:
[3]

On July 11, 1994, RCC filed a petition
for certiorari with the SC which, in a resolution,
referred the same to the CA.
In the interim, the Province issued a warrant of
levy against RCC for its unpaid tax liabilities. In
an agreement and modus vivendi between the
parties, RCC agreed to pay under protest 50% of
the tax assessed, in exchange for the lifting of the
warrant of levy. Also, the parties agreed, with the
approval of the CA, to limit the issue for to the
question as to WON the provincial government
could impose and/or assess taxes on quarry
resources extracted by RCC from private
lands. The CA ruled in favor of RCC, hence this
petition for certiorari.
Issues & Rulings:
1) WON the remedy against the RTCs dismissal of
the petition of RCC is certiorari.
The remedy against a final order [motion to
dismiss] is an appeal, and not a petition
for certiorari under Rule 65 regardless of the
questions sought to be raised on appeal, whether
of fact or of law, whether involving jurisdiction or
grave abuse of discretion of the trial court. The
party aggrieved does not have the option to
substitute
the
special
civil
action
for certiorari under Rule 65 for the remedy of
appeal. The existence and availability of the right
of appeal are antithetical to the availment of the
special civil action for certiorari.
However, contrary to the allegation of petitioners,
RCC did not file a petition for certiorari under Rule
65, but an appeal by certiorari under Rule

45. Even law students know that certiorari under
Rule 45 is a mode of appeal.
2) WON the province of Bulacan, on the basis of
the ordinance, has authority to impose taxes on
quarry resources extracted from private lands.
NO. Although Sec 186 of the LGC allows a
province to levy taxes other than those
specifically enumerated in the LGC, the same is
subject to certain conditions. One of these
limitations is Sec 133(h) of the LGC which
provides that a province may not levy excise taxes
on articles already taxed by the NIRC. Under Sec
151 of the NIRC, an excise tax is levied
on all quarry resources, regardless of origin,
whether extracted from public or private land.
In this case, since the tax imposed by the Province
is an excise tax (being a tax upon the
performance, carrying on, or exercise of an
activity), it may not ordinarily impose taxes on
stones, sand, gravel, earth and other quarry
resources, as the same are already taxed under
the NIRC.
However, as to sand, gravel, earth and other
quarry resources extracted from public lands, a
province may do so because Sec 138 of the LGC
expressly empowers a province to impose taxes
thereon.
Moreover, even if the limitation set by Section 133
of the LGC is disregarded, petitioners may not
impose taxes on quarry resources extracted from
[4]

private lands on the basis of Sec 21 of Provincial
Ordinance No. 3 as the latter clearly applies only
to quarry resources extracted from public lands.
moving vehicles or vessels either by land, sea or

water.
On June 15, 1994, FPIC filed with the RTC of
Batangas City a complaint for tax refund with
prayer for a writ of preliminary injunction against
the City of Batangas and the City Treasurer.
On October 3, 1994, the trial court rendered a
decision dismissing the complaint. FPIC assailed
the decision of the lower court via a petition for
review to the SC, which referred the case to the
CA. The CA affirmed the trial court's ruling and
denied FPICs motion for reconsideration hence,
this petition.
2. First Phil Industrial Corp v. CA

G.R. No. 125948. December 29, 1998
DOCTRINE:
The local government has no authority to impose
another tax on the
common carriers as the same is already taxed
under the Local
Government Code
To tax the same again would defeat the purpose
of the Code
Issue: WON FPIC is a common carrier or a

transportation contractor and thus not liable for
paying the local business tax.
YES. Under the following laws, PFIC is considered
a common carrier:
a. Art 1732 of the Civil Code defines a Common
Carrier as "any person, corporation, firm or
association engaged in the business of carrying
or transporting passengers or goods or both, by
land, water, or air, for compensation, offering
their services to the public."
Thus, the test for determining whether a party
is a common carrier of goods is:
1. must be engaged in the business of carrying
goods for others as a public employment, and
must hold himself out as ready to engage in
the transportation of goods for person
(by Gran) Facts: FPIC is a grantee of a pipeline

concession to contract, install and operate oil
pipelines. Sometime in Jan 1995, it applied for a
mayor's permit with the Office of the Mayor of
Batangas City. However, before it could be issued,
the respondent City Treasurer required it to pay a
contractors business tax on its gross receipts for
FY1993 pursuant to Sec 143(e) of the LGC.
FPIC paid the tax under protest and on January 20,
1994, it filed a letter-protest addressed to the City
Treasurer. On March 8, 1994, the protest was
denied on the ground that since FPIC is not
considered engaged in transportation business, it
cannot claim exemption under Sec 133(j) of the
LGC as said exemption applies only to common
carriers transporting goods & passengers through
[5]

generally as a business and not as a casual
occupation;
2. He must undertake to carry goods of the
kind to which his business is confined;
3. He must undertake to carry by the method
by which his business is conducted and over
his established roads; and
4. The transportation must be for hire.
PFIC is engaged in the business of transporting
or carrying goods, i.e. petroleum products, for
hire as a public employment. It undertakes to
carry for all persons indifferently, that is, to all
persons who choose to employ its services, and
transports the goods by land and for
compensation. The fact that petitioner has a
limited clientele does not exclude it from the
definition of a common carrier. Also, the Civil
Code makes no distinction as to the means of
transporting, as long as it is by land, water or
air. It does not provide that the transportation
of the passengers or goods should be by motor
vehicle. In fact, in the US, oil pipe line
operators are considered common carriers.
b. Petroleum Act of the Phils also considers FPIC a
common carrier and that such petroleum
operation is a public utility.
c. The BIR in BIR RULING 69-83 likewise said that
since PFIC is a pipeline concessionaire that is
engaged only in transporting petroleum
products, it is considered a common carrier
under Republic Act No. 387.
As FPIC is a common carrier, it is therefore,

exempt from the business tax as provided for in
Sec 133 (j) of the LGC.
It is clear that the legislative intent in excluding
from the taxing power of the LGU the imposition
of business tax against common carriers is to
prevent a duplication of the so-called common
carrier's tax already imposed under the NIRC. FPIC
is already paying 3% common carrier's tax on its
gross sales/earnings under the NIRC. To tax it
again on its gross receipts in its transportation of
petroleum business would defeat the purpose of
the LGC.
3. Mactan cebu vs. marcos, et. al.
G.R. 120082 SEPT. 11, 1996
4. LTO VS. CITY OF BUTUAN
G.R. 131512 JAN. 20, 2000
DOCTRINE:
Registration and licensing functions are vested in
the LTO while franchising and regulatory
responsibilities has been vested in the LTFRB.
LGUS have the power to regulate the operation of
tricyclesforhire and to grant franchises for the
operation thereof
The power is however subject to the guidelines
prescribed by the Department of Transportation
and Communications
[6]

5. City govt. of san pablo vs. reyes
G.R. 127708 MARCH 25, 1999
DOCTRINE:
The tax exemptions or incentives granted to or
presently enjoyed by natural or juridical persons
are withdrawn upon the effectivity of the LGC
except with respect to those entities expressly
enumerated
of real property, for social housing, imposed new

rates of business tax and an annual Ad valorem
tax on real property. These ordinances were
alleged to be unconstitutional by petitioners
because they were promulgated without previous
public hearing thereby constituting deprivation of
property without due process of law. The appeal
was dismissed for being filed out of time or more
than 30 days after the effectivity of the
ordinances. Their petition having been denied,
they filed with the Court of Appeals a petition for
certiorari and prohibition which affirmed the
Secretary of Justice.
6. Meralco vs. province of laguna

GR. NO. 131359 MAY 5, 1999
DOCTRINE:
Local government units have the inherent power
to tax except to the extent that such power might
be delegated to them either by basic law or by
statute
ISSUES:
a. Whether or not the CA erred in affirming the
decision of the Secretary of Justice who dismissed
the prohibition suit, on the ground that it was filed
out of time?
b. Whether or not the lack of mandatory public
hearings prior to the enactment of the ordinances
render them void on the grounds of deprivation of
property without due process?
7. Reyes vs. CA
G.R. 118233 DEC. 10, 1999
DOCTRINE: The law requires that the dissatisfied
taxpayer who questions the validity of the tax
ordinance must file his appeal to the Secretary of
Justice, within 30 days from effectivity thereof. In
case the Secretary decides the appeal, a period of
also 30 days is allowed for the aggrieved party to
go the court. But if the Secretary doesn't decide,
after the lapse of 60 days, a party could already
proceed to seek relief in court.
RULING:
a. The law clearly requires that the dissatisfied
taxpayer who questions the validity or legality of a
tax ordinance must file his appeal to the Secretary
of Justice, within 30 days from effectivity thereof.
In case the Secretary of Justice decides the
appeal, a period of 30 days is allowed for an
aggrieved party to go to court. But if the
(by Dela Cruz) Facts: The Sangguniang Bayan

of San Juan implemented several tax ordinances
on printing and publication, on the sale or transfer
[7]

Secretary does not act thereon, after the lapse of
60 days, a party could already proceed to court to
seek relief. These 3 separate periods are given for
compliance as a prerequisite before seeking
redress in court. For this reason, the courts
construe these provisions as mandatory.
HELD:
Thus, reading together Section 133, 232 and 234
of the LGC, we conclude that as a general rule, as
laid down in Section 133 the taxing powers of
local government units cannot extend to the levy
of inter alia, "taxes, fees, and charges of any kind
of the National Government, its agencies and
instrumentalties, and local government units";
however, pursuant to Section 232, provinces,
cities, municipalities in the Metropolitan Manila
Area may impose the real property tax except on,
inter alia, "real property owned by the Republic of
the Philippines or any of its political subdivisions
except when the beneficial used thereof has been
granted, for consideration or otherwise, to a
taxable person", as provided in item (a) of the first
paragraph of Section 234. As to tax exemptions or
incentives granted to or presently enjoyed by
natural or juridical persons, including government
owned and controlled corporations, Section 193 of
the LGC prescribes the general rule, viz., they are
withdrawn upon the effectivity of the LGC, except
upon the effectivity of the LGC, except those
granted to local water districts, cooperatives duly
registered under R.A. No. 6938, non stock and
nonprofit hospitals and educational institutions,
and unless otherwise provided in the LGC. The
latter proviso could refer to Section 234, which
enumerates the properties exempt from real
property tax. But the last paragraph of Section
234 further qualifies the retention of the
exemption in so far as the real property taxes are
b. In accordance with the presumption of validity

in favor of an ordinance, their constitutionality or
legality should be upheld in the absence of
evidences showing that procedure prescribed by
law was not observed in their enactment. In this
case, petitioners have not proved that the
Sangguniang Bayan of San Juan failed to conduct
the required public hearings before enacting said
ordinances
REAL PROPERTY TAX (Digests here are taken
from ANGEL NOTES)
1. Mactan cebu vs. marcos, et. al.
G.R. 120082 SEPT. 11, 1996
FACTS: The MCIAA was created under a special
law and was granted exemption from taxes that
may be imposed by the national government or
any of its instrumentalities.
However, the local government of Cebu assessed
it for realty tax for parcels of land. It contested
this and since the local government wanted to
issue a warrant of levy, it sought declaratory
relief.
[8]

concerned by limiting the retention only to those
enumerated therein; all others not included in the
enumeration lost the privilege upon the effectivity
of the LGC. Moreover, even as the real property is
owned by the Republic of the Philippines, or any of
its political subdivisions covered by item (a) of the
first paragraph of Section 234, the exemption is
withdrawn if the beneficial use of such property
has been granted to taxable person for
consideration or otherwise.
NAPOCOR was the owner of real properties

comprising its hydroelectric power plant complex.
It was assessed by the local government for
payment of realty taxes. Letters of demand were
sent up to the extent of scheduling an auction
sale. Petitioner filed for a restraining order and
was granted.
HELD:
The exemption is not only legally defensible, but
also logically unassailable. The properties in
question comprise the site of the entire Agus II
Hydroelectric Power Plant Complex, which
generates and supplies relatively cheap electricity
to the island of Mindanao. These are government
properties, wholly owned by petitioner and
devoted directly and solely for public service and
utilized in the implementation of the state policy
of bringing about the total electrification of the
country at the least cost to the public, through the
development of power from all sources to meet
the needs of industrial development and rural
electrification. It can be noted, from RA 6395, PD
380 and PD 938, that petitioner's nonprofit
character has been maintained throughout its
existence, and that petitioner is mandated to
devote all its returns from capital investment and
excess revenues from operations to its expansion.
On account thereof, and to enable petitioner to
pay its indebtedness and obligations and in
furtherance of the state policy on electrification
and power generation, petitioner has always been
exempted from taxes.
Since the last paragraph of Section 234

unequivocally withdrew, upon the effectivity of
the LGC, exemptions from real property taxes
granted to natural or juridical persons, including
governmentowned or controlled corporations,
except as provided in the said section, and the
petitioner is, undoubtedly, a government owned
corporation, it necessarily follows that its
exemption from such tax granted it in Section 14
of its charter, R.A. No. 6958, has been withdrawn.
Any claim to the contrary can only be justified if
the petitioner can seek refuge under any of the
exceptions provided in Section 234, but not under
Section 133, as it now asserts, since, as shown
above, the said section is qualified by Section 232
and 234.
2. Napocor vs. province of Lanao
G.R. 96700 NOV. 19, 1996
[9]

Consequently, the assessment and levy on (as
well as the sale of) the properties of petitioner by
respondents were null and void for having been in
made in violation of Section 10 of P.D. 938 and
Section 40 (a) of the Real Property Tax Code.
At this juncture, we
foregoing ruling is
purported realty tax
period from June 14,
shall be appraised at the current and fair market

value prevailing in the locality where the property
is situated."
Contrary to petitioner's contention, acquisition
cost cannot be and is not the sole basis of the
current and fair market value of a property. The
current value of like properties and their actual or
potential uses, among others, are also considered.
hasten to point out that the

solely with respect to the
liabilities of petitioner for the
1984 to December 31, 1989.
4. Antonio Callanta vs. Ombudsman

G.R. 11525374 JAN 30, 1998
May officials and employees of the Office of the
City Assessor reduce the new assessed values of
real properties upon requests of the affected
property owners? To forestall the practice of
initially setting unreasonably high reassessment
values only to eventually change them to
unreasonably lower values upon "requests" of
property owners, the law gives no such authority
to the city assessor or his subalterns. Seemingly
innocuous occasions for mischief and veiled
opportunities for graft should be excised from the
public system. Builtin checks should be zealously
observed so that the ingenious and shrewd cannot
circumvent them and the audacious cannot
violate them with impunity.
3. Raul Sesbreno vs. CBAA

G.R. 106588 MAR. 24, 1997
FACTS:
Sesbreno bought real property to which it
constructed a residential property. He duly
registered the same for taxation purposes and
declared therein he owned a residential house
made of strong materials. However, the field
inspectors found otherwisewhat he constructed
was a 5storey building made of materials. As
such, they increased by 1000% the assessment
made on the property, to which petitioner
naturally contested.
HELD:
The cited provision merely defines "market value."
It does not in any way direct that the market value
as defined therein should be used as basis in
determining the value of a property for purposes
of real property taxation. On the other hand,
Section 5 of PD 464 provides unequivocally that
"(a)ll real property, whether taxable or exempt,
FACTS:
It is alleged that ageneral revision of assessment
was conducted by the Office of the City Assessor
in 1988 and sometime thereafter. Notices of
assessment
together
with
the
new
tax
[10]

declarations were subsequently sent to the
property owners. Thereafter, respondents, without
the authority of the Local Board of Assessment
Appeals, reassessed the values of certain
properties, in contravention of Sec. 30 of P.D. 464.
The said assessment resulted in the reduction of
assessed values of the properties.
In several similarly worded lettercomplaints
dated December 19, 1991, the City of Cebu
simultaneously filed criminal and administrative
charges against the above-enumerated officers
and staff of the City Assessor's Office for
"violations of Section 106 of the Real Property Tax
Code[,]
for
gross
negligence
or
willful
underassessment of real properties within the
city's taxing jurisdiction and for violation of Sec. 3
(e) of R.A. 3019, otherwise known as the Anti
Graft and Corrupt Practices Act[,] for the act of
causing undue injury to the City Government by
giving private persons unwarranted benefits,
advantages or preferences in the discharge of
their official and administrative functions through
manifest partiality, evident bad faith or gross
inexcusable negligence by reassessing the real
properties of taxpayers without any authority
whatsoever, thereby resulting in the reduction of
tax assessments to the prejudice of the city
government
expressly prohibiting the assessor from making

adjustments or corrections in the assessment of
real properties, and upon the longstanding
practice of the city assessor's office in making
such adjustments/corrections believed in good
faith to be sanctioned under Sec. 22, PD 464.
This is bereft of any merit. Under the procedure,
the issuance of a notice of assessment by the
local assessor shall be his last action on a
particular assessment. On the side of the property
owner, it is this last action which gives him [the]
right to appeal to the Local Board of Assessment
Appeals. The above procedure also, does not
grant the property owner the remedy of filing a
motion for reconsideration before the local
assessor.
The act of herein petitioners in providing the
corresponding notices of assessment the chance
for the property owners concerned to file a motion
for reconsideration and for acting on the motions
filed is not in accordance with law and in excess of
their authority and therefore constitutes ultra
vires acts.
5. BELEN FIGUERRAS VS. CA
G.R. 119172 MAR. 25, 1999
Petitioner was the owner of a parcel of land. She
received an assessment from the municipal
assessor by virtue of two ordinances issued by the
SBone fixing fair market values and another
issuing the assessment levels corresponding to
HELD:
Petitioners anchor the validity of their acts upon
the absence of a specific provision of law
[11]

each. This prompted the petitioner to file for
prohibition but this was overruled by the CA.
HELD:
Petitioner is right in contending that public
hearings are required to be conducted prior to the
enactment of an ordinance imposing real property
taxes. R.A. No. 7160 provides that an ordinance
levying taxes, fees, or charges "shall not be
enacted without any prior public hearing
conducted for the purpose." However, it is
noteworthy that apart from her bare assertions,
petitioner Figuerres has not presented any
evidence to show that no public hearings were
conducted prior to the enactment of the
ordinances in question. On the other hand, the
Municipality of Mandaluyong claims that public
hearings were indeed conducted before the
subject ordinances were adopted, although it
likewise failed to submit any evidence to establish
this allegation. However, in accordance with the
presumption of validity in favor of an ordinance,
their constitutionality or legality should be upheld
in the absence of evidence showing that the
procedure prescribed by law was not observed in
their enactment. In view of 188 and 511(a) of R.A.
No. 7160, an ordinance fixing the assessment
levels applicable to the different classes of real
property in a local government unit and imposing
penal sanctions for violations thereof (such as
Ordinance No. 125) should be published in full for
three (3) consecutive days in a newspaper of local
circulation, where available, within ten (10) days
of its approval, and posted in at least two (2)

prominent places in the provincial capitol, city,
municipal, or barangay hall for a minimum of
three (3) consecutive weeks.
Apart from her allegations, petitioner has not
presented any evidence to show that the subject
ordinances were nor disseminated in accordance
with these provisions of R.A. No. 7160. On the
other hand, the Municipality of Mandaluyong
presented a certificate, dated November 12, 1993,
of Williard S. Wong, Sanggunian Secretary of the
Municipality of Mandaluyong that "Ordinance No.
125, S1993 . . . has been posted in accordance
with 59(b) of R.A. No. 7160, otherwise known as
the Local Government Code of 1991."
6. TY VS. TRAMPE
G.R. NO. 117577, DEC. 1, 1995.
FACTS:
Petitioners were assessed by the municipal
assessor for realty taxes over their real properties.
They asked for reconsideration and thinking this is
not yet enough, they filed a petition for prohibition
in the RTC.
HELD:
Coming down to specifics, Sec. 9 of P.D. 921
requires that the schedule of values of real
properties in the Metropolitan Manila area shall be
prepared jointly by the city assessors in the
districts created therein: while Sec. 212 of R.A.
7160 states that the schedule shall be prepared
"by the provincial, city and municipal assessors of
[12]

the municipalities within the Metropolitan Manila
Area for the different classes of real property
situated in their respective local government units
for enactment by ordinance of the sanggunian
concerned. . . ." It is obvious that harmony in
these provisions is not only possible, but in fact
desirable, necessary and consistent with the
legislative intent and policy. By reading together
and harmonizing these two provisions, we arrive
at the following steps in the preparation of the
said schedule, as follows:
sanggunian
concerned
for
enactment
ordinance, per Sec. 212, R.A. 7160.
by
Although as a rule, administrative remedies must

first be exhausted before resort to judicial action
can prosper, there is a wellsettled exception in
cases where the controversy does not involve
questions of fact but only of law. In the present
case the parties, even during the proceedings in
the lower court on 11 April 1994, already agreed
"that the issues in the petition are legal", and
thus, no evidence was presented in said court.
In laying down the powers of the Local Board of
Assessment Appeals, R.A. 7160 provides in Sec.
229 (b) that "(t)he proceedings of the Board shall
be conducted solely for the purpose of
ascertaining the facts . . . ." It follows that appeals
to this Board may be fruitful only where questions
of fact are involved. Again, the protest
contemplated under Sec. 252 of R.A. 7160 is
needed where there is a question as to the
reasonableness of the amount assessed. Hence, if
a taxpayer disputes the reasonableness of an
increase in a real estate tax assessment, he is
required to "first pay the tax" under protest.
Otherwise, the city or municipal treasurer will not
act on his protest. In the case at bench however,
the petitioners are questioning the very authority
and power of the assessor, acting solely and
independently, to impose the assessment and of
the treasurer to collect the tax. These are not
questions merely of amounts of the increase in
1. The assessor in each municipality or city in the

Metropolitan Manila area shall prepare his/her
proposed schedule of values, in accordance with
Sec. 212, R.A. 7160.
2. Then, the Local Treasury and Assessment
District shall meet, per Sec. 9, P.D. 921. In the
instant case, that district shall be composed of the
assessors in Quezon City, Pasig, Marikina,
Mandaluyong and San Juan, pursuant to Sec. 1 of
said P.D. In this meeting, the different assessors
shall compare their individual assessments,
discuss and thereafter jointly agree and produce a
schedule of values for their district, taking into
account the preamble of said P.D. that they should
evolve "a progressive revenue raising program
that will not unduly burden the taxpayers"
3. The schedule jointly agreed upon by the
assessors shall then be published in a newspaper
of general circulation and submitted to the
[13]

the tax but attacks on the very validity of any
increase.
(4) Furthermore, RA 7227 clearly vests in the

President the authority to delineate the metes and
bounds of the SSEZ.
REVISION OF THE JURISDICTION OF THE CTA

1. TIU VS. COURT OF APPEALS
G.R. 127410 JANUARY 20, 1999
FACTS:
The Congress passed into law RA 7227 entitled
An Act Accelerating the Conversion of Military
Reservations Into Other Productive Uses, Creating
the Bases Conversion and Development Authority
for this Purpose, Providing Funds Therefore and for
Other Purposes, creating the Subic Special
Economic Zone (SSEZ). SSEZ has multiple benefits
such as (1) free flow or movement of goods and
capital; (2) tax and dutyfree importations of raw
materials, capital and equipment; (3) no exchange
control policy; (4) banking and finance shall be
liberalized.
2. PHILIPPINE MATCH CO VS. CITY OF CEBU

L30745 JAN. 18 1978 WHERE THE SALE WAS
BOOKED
FACTS:
Ordinance No. 279 of Cebu City (approved by the
mayor on March 10, 1960 and also approved by
the provincial board) is "an ordinance imposing a
quarterly tax on gross sales or receipts of
merchants, dealers, importers and manufacturers
of any commodity doing business" in Cebu City. It
imposes a sales tax of one percent (1%) on the
gross sales, receipts or value of commodities sold,
bartered, exchanged or manufactured in the city
in excess of P2,000 a quarter. Section 9 of the
ordinance provides that, for purposes of the tax,
"all deliveries of goods or commodities stored in
the City of Cebu, or if not stored are sold" in that
city, "shall be
considered as sales" in the city and shall be
taxable. Thus, it would seem that under the tax
ordinance sales of matches consummated outside
of the city are taxable as long as the matches sold
are taken from the company's stock stored in
Cebu City.
The Philippine Match Co., Ltd., whose principal
office is in Manila, is engaged in the manufacture
of matches. Its factory is located at Punta, Sta.
Ana, Manila. It ships cases or cartons of matches
HELD:
(1) The equalprotection guarantee does not
require territorial uniformity of laws.
(2) The fundamental right of equal protection of
the law is not absolute, but is subject to
reasonable classification.
(3) Classification, to be valid, must (1) rest on
substantial distinctions, (2) be germane to the
purpose of the law, (3) not be limited to existing
conditions only, and (4) apply equally to all
members of the same class.
[14]

from Manila to its branch office in Cebu City for
storage, sale and distribution within the territories
and districts under its Cebu branch or the whole
VisayasMindanao region. Cebu City itself is just
one of the eleven districts under the company's
Cebu City branch office. Philippine Match sought
the refund of a portion of the sales tax collected
from them by virtue of a part of it was assessed
based on sales which transpired outside of the city
and that some of the matches were just stored in
the city and delivered directly to customers
outside of Cebu. This was denied by the City
Treasurer, prompting Philippine Match to file a
case in court. The trial court invalidated the tax on
transfers of matches to salesmen assigned to
different agencies outside of the city and on
shipments of matches to provincial customers
pursuant to the instructions of the newsmen It
ordered the defendants to refund to the plaintiff
the sum of P8,923.55 as taxes paid out the said
outoftown deliveries with legal rate of interest
from the respective dates of payment.
The trial court characterized the tax on the other
two transactions as a "storage tax" and not a
sales tax. It assumed that the sales were
consummated outside of the city and, hence,
beyond the city's taxing power. The city did not
appeal from that decision. The company appealed
from that portion of the decision upholding the tax
on sales of matches to customers outside of the
city but which sales were booked and paid for in
Cebu City, and also from the dismissal of its claim

for damages against the city treasurer.
HELD:
We hold that the appeal is devoid of merit bemuse
the city can validly tax the sales of matches to
customers outside of the city as long as the orders
were booked and paid for in the company's branch
office in the city. Those matches can be regarded
as sold in the city, as contemplated in the
ordinance, because the matches were delivered to
the carrier in Cebu City. Generally, delivery to the
carrier is delivery to the buyer. A different
interpretation would defeat the tax ordinance in
question or encourage tax evasion through the
simple expedient of arranging for the delivery of
the matches at the out. skirts of the city through
the purchase were effected and paid for in the
company's branch office in the city.
The taxing power of cities, municipalities and
municipal districts may be used (1) "upon any
person engaged in any occupation or business, or
exercising any privilege" therein; (2) for services
rendered by those political subdivisions or
rendered in connection with any business,
profession or occupation being conducted therein,
and (3) to levy, for public purposes, just and
uniform taxes, licenses or fees.
Applying that jurisdictional test to the instant
case, it is at once obvious that sales of matches to
[15]

customers outside oil Cebu City, which sales were
booked and paid for in the company's branch
office in the city, are subject to the city's taxing
power. The sales in the instant case were in the
city and the matches sold were stored in the city.
The fact that the matches were delivered to
customers, whose places of business were outside
of the city, would not place those sales beyond
the city's taxing power. Those sales formed part of
the merchandising business being assigned on by
the company in the city. In essence, they are the
same as sales of matches fully consummated in
the city.
1. distribution of softdrinks
2. manufacture of softdrinks, and
3. bottling of softdrinks within the territorial
jurisdiction of the City of Iloilo.
There is no question that after it transferred its
plant to Pavia, Iloilo province, Iloilo Bottlers, Inc.
no longer manufactured/bottled its softdrinks
within Iloilo City. Thus, it cannot be taxed as one
falling under the second or the third type of
business. The resolution of this case therefore
hinges on whether the company may be
considered engaged in the distribution of
softdrinks in Iloilo City, even after it had
transferred its bottling plant to Pavia, so as to be
within the purview of the ordinance.
3. ILOILO BOTTLERS INC. VS. CITY OF ILOILO

G.R. NO. 52019 AUG 19, 1988
Iloilo Bottlers, Inc. disclaims liability on two

grounds: First, it contends that since it is not
engaged in the independent business of
distributing softdrinks, but that its activity of
selling is merely an incident to, or is a necessary
consequence of its main or principal business of
bottling, then it is NOT liable under the city tax
ordinance
Second,
it
claims
that
only
manufacturers or bottlers having their plants
inside the territorial jurisdiction of the city are
covered by the ordinance.
The second ground is manifestly devoid of merit.
It is clear from the ordinance that three types of
activities are covered: (1) distribution, (2)
manufacture and (3) bottling of softdrinks. A
FACTS:
Plaintiff was an operator of a bottling plant in
Pavia, Iloilo. In the meanwhile, city government of
Iloilo enacted an ordinance ordering the payment
of municipal tax by bottling, manufacturing and
distributing plants, regardless of destination of
deliveries. Plaintiff purchased a bottling plant in
Iloilo City but subsequently closed the same and
moved all to its original plant. Thereafter, the city
government assessed it for municipal taxes.
HELD:
The tax ordinance imposes a tax on persons,
firms, and corporations engaged in the
business of:
[16]

person engaged in any or all of these activities is
subject to the tax.
stores or warehouses maintained by the company.

Anyone who desires to purchase the product may
go to the store or warehouse and there purchase
the merchandise. The stores and warehouses
serve as selling centers.
The first ground, however, merits serious

consideration.
This Court has always recognized that the right to
manufacture implies the right to sell/distribute the
manufactured products. Hence, for tax purposes,
a manufacturer does not necessarily become
engaged in the separate business of selling simply
because it sells the products it manufactures. In
certain cases, however, a manufacturer may also
be considered as engaged in the separate
business of selling its products. To determine
whether an entity engaged in the principal
business of manufacturing, is likewise engaged in
the separate business of selling, its marketing
system or sales operations must be looked into.
This Court had occasion to distinguish two
marketing systems: Under the first system, the
manufacturer enters into sales transactions and
invoices the sales at its main office where
purchase orders are received and approved before
delivery orders are sent to the company's
warehouses, where in turn actual deliveries are
made. No warehouse sales are made; nor are
separate stores maintained where products may
be sold independently from the main office. The
warehouses only serve as storage sites and
delivery points of the products earlier sold at the
main office. Under the second system, sale
transactions are entered into and perfected at
Entities operating under the first system are NOT

considered engaged in the separate business of
selling or dealing in their products, independent of
their manufacturing business. Entities operating
under the second system are considered engaged
in the separate business of selling.
In the case at bar, the company distributed its
softdrinks by means of a fleet of delivery trucks
which went directly to customers in the different
places in lloilo province. Sales transactions with
customers were entered into and sales were
perfected and consummated by route salesmen.
Truck sales were made independently of
transactions in the main office. The delivery trucks
were not used solely for the purpose of delivering
softdrinks previously sold at Pavia. They served as
selling units. They were what were called, until
recently, "rolling stores". The delivery trucks were
therefore much the same as the stores and
warehouses under the second marketing system.
Iloilo Bottlers, Inc. thus falls under the second
category above. That is, the corporation was
engaged in the separate business of selling or
distributing softdrinks, independently of its
business of bottling them. The tax imposed under
Ordinance No. 5 is an excise tax. It is a tax on the
[17]

privilege of distributing, manufacturing or bottling
softdrinks. Being an excise tax, it can be levied by
the taxing authority only when the acts, privileges
or businesses are done or performed within the
jurisdiction of said authority.
otherwise. He declared that all the procedural

requirements had been observed in the
enactment of the Manila Revenue Code and that
the City of Manila had not been able to prove such
compliance before the Secretary only because he
had given it only five days within which to gather
and present to him all the evidence (consisting of
25 exhibits) later submitted to the trial court.
HELD:
Section 187 authorizes the Secretary of Justice to
review only the constitutionality or legality of the
tax ordinance and, if warranted, to revoke it on
either or both of these grounds. When he alters or
modifies or sets aside a tax ordinance, he is not
also permitted to substitute his own judgment for
the judgment of the local government that
enacted the measure. Secretary Drilon did set
aside the Manila Revenue Code, but he did not
replace it with his own version of what the Code
should be. He did not pronounce the ordinance
unwise or unreasonable as a basis for its
annulment. He did not say that in his judgment it
was a bad law. What he found only was that it was
illegal. All he did in reviewing the said measure
was determine if the petitioners were performing
their functions in accordance with law, that is,
with the prescribed procedure for the enactment
of tax ordinances and the grant of powers to the
city government under the Local Government
Code. As we see it, that was an act not of control
but of mere supervision. An officer in control lays
down the rules in the doing of an act. If they are
4. DRILON VS. LIM

G.R. NO. 112497 AUG 4, 1994
FACTS:
Question on the constitutionality of Section 187
which empowers the Secretary of Justice
regarding constitutionality or legality of tax
ordinances. In his resolution, Secretary Drilon
declared that there were no written notices of
public hearings on the proposed Manila Revenue
Code that were sent to interested parties as
required by Art. 276(b) of the Implementing Rules
of the Local Government Code nor were copies of
the proposed ordinance published in three
successive issues of a newspaper of general
circulation pursuant to Art. 276(a). No minutes
were submitted to show that the obligatory public
hearings had been held. Neither were copies of
the measure as approved posted in prominent
places in the city in accordance with Sec. 511(a)
of the Local Government Code. Finally, the Manila
Revenue Code was not translated into Pilipino or
Tagalog and disseminated among the people for
their information and guidance, conformably to
Sec. 59(b) of the Code. Judge Palattao found
[18]

not followed, he may, in his discretion, order the
act undone or redone by his subordinate or he
may even decide to do it himself. Supervision
does not cover such authority. The supervisor or
superintendent merely sees to it that the rules are
followed, but he himself does not lay down such
rules, nor does he have the discretion to modify or
replace them. If the rules are not observed, he
may order the work done or redone but only to
conform to the prescribed rules. He may not
prescribe his own manner for the doing of the act.
He has no judgment on this matter except to see
to it that the rules are followed. In the opinion of
the Court, Secretary Drilon did precisely this, and
no more nor less than this, and so performed an
act not of control but of mere supervision. The
issue of noncompliance with the prescribed
procedure in the enactment of the Manila
Revenue Code is another matter. The procedural
requirements have indeed been observed. Notices
of the public hearings were sent to interested
parties as evidenced by Exhibits G1 to 17. The
minutes of the hearings are found in Exhibits M,
M1, M2, and M3. Exhibits B and C show that the
proposed ordinances were published in the Balita
and the Manila Standard on April 21 and 25, 1993,
respectively, and the approved ordinance was
published in the July 3, 4 5, 1993 issues of the
Manila Standard and in the July 6, 1993 issue of
Balita, as shown by Exhibits Q, Q1, Q2, and Q3.
The only exceptions are the posting of the
ordinance as approved but this omission does not
affect its validity, considering that its publication
general circulation will satisfy due process. It has

also not been shown that the text of the ordinance
has been translated and disseminated, but this
requirement applies to the approval of local
development plans and public investment
programs of the local government unit and not to
tax ordinances.
TAX REMEDIES UNDER THE TAX CODE

Tax Delinquency v Tax Deficiency
CIR V Island Garment- Siron
The respondent corporation filed its appeal
seasonably, i.e. within the 30-day period
prescribed under R.A. No. 1125, the Act which
created the CTA.
Respondent
corporations
letter,
contesting
petitioners use of mathematical computation,
amounted to a motion for reconsideration which
interrupted the running of the 30-day period for
appeal. Its a valid request for reconsideration of
petitioners letter since it raises new and valid
issues. A request for reconsideration of the
decision of respondent is pro forma if it merely
reiterates the ground already stated in the first
request for cancellation or withdrawal of the
assessment. Here, the request is not merely pro
forma as it did not merely reiterate the grounds
stated in its first request for cancellation of the
[19]

assessments but also called attention to those
facts or arguments which have been disregarded
in the disputed decision of petitioner.
protested assessment. The determination on

whether or not a demand letter is final is
conditioned upon the language used or the tenor
of the letter being sent to the taxpayer.
Assessment Process
Phil Journalist v CIR Siron
The NIRC, under Sections 203 and 222, provides
for a statute of limitations on the assessment and
collection of internal revenue taxes in order to
safeguard the interest of the taxpayer against
unreasonable
investigation.
Unreasonable
investigation refers to where the period of
assessment extends indefinitely since this
deprives the taxpayer of the assurance that it will
no longer be subjected to further investigation
after the expiration of the reasonable period of
time.
RMC No. 20-90 implements these provisions of the
NIRC, and must be strictly followed, such that in
its execution, the phrase but not after ___19__
should be filled up, indicating the expiry date of
the period agreed upon to assess/collect the tax
after the regular three-year period of prescription.
It must also be signed by the Commissioner or the
Revenue District Officer, as the case may be. The
waiver is not a unilateral act by the taxpayer or
the BIR, but is a bilateral agreement between two
parties to extend the period to a date certain.
Here, the letter of demand, unquestionably

constitutes the final action taken by the BIR on
petitioners request for reconsideration when it
reiterated the tax deficiency assessments due
from petitioner, and requested its payment.
Failure to do so would result in the issuance of a
warrant of distraint and levy to enforce its
collection without further notice. In addition, the
letter contained a notation indicating that
petitioners request for reconsideration had been
denied for lack of supporting documents. As to
whether it has become final despite the fact that
it was only issued and signed by the chief of a
division of the BIR, the general rule is that the CIR
may delegate any power vested upon him by law
to Division Chiefs or to officials of higher rank,
subject only to the four (4) exceptions mentioned
in the NIRC, as amended. The act of issuance of
the demand letter by the Chief of the Accounts
Receivable and Billing Division does not fall under
any of the exceptions that have been mentioned
as non-delegable.
Oceanic Wireless network v CIR Siron

A demand letter for payment of delinquent taxes
may be considered a decision on a disputed or
Mirant Navotas Corp v CIR Siron

Section 112(A) of the Tax Code provides that any
VAT-registered person, whose sales are zero-rated
[20]

or effectively zero-rated, may, within two years
after the close of the taxable quarter when the
sales were made, apply for the issuance of a tax
credit certificate or refund of creditable input tax
due or paid attributable to such sales. It is clear
that the two-year period within which the refund
may be applied should be reckoned from the close
of the taxable quarter when the relevant sales
pertaining to the input VAT were made, not from
the date the tax was paid. Claims filed beyond this
period will be disallowed.
The tax payers contention that the final decision

of the Collector of Internal Revenue on the
disputed assessment is a condition precedent to
the filing of an action in the CFI for the collection
of taxes must fail. Nowhere in the Tax Code is the
CIR required to decide with finality a disputed
assessment/request for reinvestigation before the
CIR can file an action for the collection of tax
liabilities. RA 1125 allows the taxpayer to question
the correctness of an assessment in both
administrative and judicial levels at the same
time; thus, the law does not restrict the CIR from
collecting the tax liability through any of the
means provided in the Tax Code.
CIR v Enron Subic Power Corp. - Fajardo

PNZ Marketing v Com * - Fajardo
Artex dev Co. v NLRC *- Fajardo
Arches v Bellosillo *- Francisco

In assailing the action brought by the BIR for the
collection of tax liabilities, petitioner claims that
the approval of the Revenue Commissioner is
jurisdictional, and the lack of which strips the
court of any authority to hear the tax collection
case. The court has ruled in a line of cases that
the lack of approval by the Commissioner is not
jurisdictional, it only affects the parties or the
cause of action. Further, Memorandum Order V634 delegated the power of the Revenue
Commissioner regarding the administration and
enforcement of revenue laws and regulations to
the respective Regional Directors. Here, it was the
Regional Director himself who instituted the case,
leaving it unnecessary for further approval.
CIR v Global Communication -Alciso

Oceanic Wireless Network v Comm - Alciso
Collector v Batangas Transportation Co.Alciso
Lascona Realty Corp
IMPORTANT CASE
Comm.
Alciso
Tax Remedies
A. Remedies of the Government
1. Collection of Tax Liability
Republic v Lim Tian Teng Francisco
[21]

Republic v Salud Hizon Francisco
The issues in this case revolve around the lack of
approval of the CIR in filing the collection case
and the summary nature of collection cases in
relation to the prescription of an action for
collection. The court ruled that in accordance with
Sec. 221 of the NIRC as implemented by RAO 583, the authority to file complaints for collection of
tax liabilities has been validly delegated to the
Revenue Regions particularly to the Special
Attorneys and Special Counsels designated by the
Regional Director. As such, approval of the CIR is
no longer necessary. In the case at bar, it was the
Chief of the Legal Division with the approval of the
Regional Director who instituted the case. Anent
the second issue, the petitioner is incorrect in
saying that the action has prescribed. When the
BIR served warrants of distraint or levy on Hizon,
the running of the period to collect was
suspended. The summary nature of collection by
distraint or levy allows the enforcement of such
collection to proceed beyind the statutory period.
fraudulent returns with intent to evade and defeat

a part or all of the tax.1
People v Patanao Cruz
Criminal action does not amount to a decision for
unpaid taxes. Criminal liability gives birth to the
civil obligation while such is the opposite under
the income tax law. Civil liability to pay taxes
arises from the fact that one has engaged himself
in business and not because of any criminal act
committed by him. The acquittal in the said
criminal cases cannot operate to discharge one
from the duty of paying the taxes which the law
requires to be paid, since that duty is imposed by
statute prior to and independently of any
attempts by the taxpayer to evade payment.
CIR v CA *- Cruz
Before one is prosecuted for wilful attempt to
evade or defeat any tax under Sections 253 and
255 of the Tax code, the fact that a tax is due
must first be proved.2
1
Logically, it has been ruled that a petition for reconsideration of

an assessment may affect the suspension of the prescriptive
period for the collection of taxes, but not the prescriptive period of
a criminal action for violation of law
2
the registered wholesale price of the goods, approved by the BIR,
is presumed to be the actual wholesale price, therefore, not
fraudulent and unless and until the BIR has made a final
determination of what is supposed to be the correct taxes, the
taxpayer should not be placed in the crucible of criminal
prosecution. Herein lies a whale of difference between Ungab and
the case at bar
Ungab v Cusi * - Cruz

While there can be no civil action to enforce
collection before the assessment, there is no
requirement for the precise computation and
assessment of the tax before there can be a
criminal prosecution. The crime is complete when
the violator has knowingly and willfully filed
[22]

Marcos v CA * - Cruz
The Government has two ways of collecting the
taxes in question. One, by going after all the heirs
and collecting from each one of them the amount
of the tax proportionate to the inheritance
received. Another remedy, pursuant to the lien
created by Section 315 of the Tax Code, is by
subjecting said property of the estate which is in
the hands of an heir or transferee to the payment
of the tax due the estate. The approval of the
court, sitting in probate, or as a settlement
tribunal over the deceased is not a mandatory
requirement in the collection of estate taxes.
If there is any issue as to the validity of the BIR's
decision to assess the estate taxes, this should
have
been
pursued
through
the
proper
administrative and judicial avenues provided for
by law such as protest of assessment under
Section 209.
was issued by the Court and that at the time of

the writs issuance, the barges were no longer
properties of the debtor Company. Hence, the
court has no jurisdiction over the properties
because the power of the court in execution of
judgments
extends
only
to
properties
unquestionably belonging to the judgment debtor.
B. Deficiency Tax Assesment
Republic v Ricarte Dela Cruz
The BIRs action to collect the deficiency tax will
not hold because collection should be made within
5 years after tax assessment. In this case,
although notice of assessment was allegedly
made and sent, no evidence was presented to
show that it was actually received. The
prescriptive period is counted from the time
assessment was made on April 1959, however,
from said date until the filing of the case at bar, 6
years and 9 months had already lapsed.
2. Forfeiture
Republic v Enriquez Dela Cruz
The warrant of distraint issued by the CIR should
be upheld over the writ of execution issued by the
RTC because it is settled that the claim of the
government predicated on a tax lien is superior to
the claim of a private litigant predicated on a
judgment. The tax lien attaches not only from the
service of the warrant of distraint of personal
property but from the time the tax became due
and payable. In this case, the distraint and notice
of seizure were made before the writ of execution
Tupaz v Ulep Dela Cruz

In this case, the collection of deficiency tax may
be upheld having been made within the 5 year
prescriptive period from the last day of filing the
return or from the date the return is filed
whichever comes later. The violation of nonpayment of taxes can only be committed after
service of notice and demand for payment of
deficiency taxes upon the taxpayer. This is so
because prior to the finality of the assessment,
[23]

the taxpayer has not committed any violation for
nonpayment of the tax. The offense is deemed
committed only after the finality of the
assessment coupled with the taxpayers refusal to
pay the taxes within the period allowed by law.
assessment should be considered as erroneous. In

which event, Victoria's remedy, pursuant to
Section 17 of the Assessment Law, was to appeal
to the Provincial Board of Assessment Appeals. By
the doctrine of primacy of administrative remedy,
the Provincial Board of Assessment Appeals had
jurisdiction over the dispute to the exclusion of
the Court of First Instance.
Victorias Milling Co. Inc. * - Dela Cruz

In this case, the Provincial Board of Assessment
Appeals had jurisdiction over the dispute to the
exclusion of the Court of First Instance.
Petitioners claim that the assessments are illegal
and void will not hold because assessments only
become illegal and void when the assessor has no
power to act at all. On the other hand, an
assessment is considered erroneous when the
assessor has the power but errs in the exercise of
that power. Since the Provincial Assessor had the
power to make the assessments, but in the
exercise of such power he deviated from the
procedure set down by law, in that he employed
the "fixed percentage of diminishing book value
method"3 instead of the "straight line method" 4 in
depreciating the machineries, logically, the
3. Principles Governing Assessments

CIR V Pascor Realty - Venzuela
An assessment is deemed made only when the
CIR releases, mails or sends such notice to the
taxpayer. It must be sent to and received by a
taxpayer, and must demand payment of the taxes
described therein within a specific period.
Necessarily, the taxpayer must be certain that a
specific document constitutes an assessment. A
revenue officers affidavit showing a computation
of tax liability, without demand or period of
payment cannot be considered an assessment. In
addition, the filing of a criminal complaint need
not be preceded by an assessment, because in
cases of false or fraudulent returns, or failure to
Fixed percentage of diminishing book value method the rate of yearly

depreciation remains the same but the base (book value) upon which the rate is
applied diminishes from year to year.
Fixed diminishing book value method: (P100,000 cost of
machinery)
Book ValueDepreciation1st year5% of100,0005,0002nd
year5% of95,0004,7503rd year5% of90,2504,512.50*same
rate but diminishing base
4
Book ValueDepreciation1st year5% of100,0005,0002nd

year5% of95,0005,0003rd year5% of90,0005,000*fixed
depreciation rate
Straight line method the rate and the base (cost) are constant.
Straight-line method: (P100,000 cost of machinery)
[24]

file a return, proceedings in court may be
commenced without an assessment (Sec. 222).
of error in the assessment will justify the judicial

affirmance of said assessment.
Bonifacia sy po v CTA- Venzuela

Tax assessments by tax examiners are presumed
correct and made in good faith. The taxpayer has
the duty to prove otherwise. In the absence of
proof of any irregularities in the performance of
duties, an assessment duly made by the BIR
examiner and approved by his superior officers
will not be disturbed. All presumptions are in
favour of the correctness of tax assessments.
CIR v Benipayo * - Noel

The assessment determines the tax liability of a
taxpayer. As it is imperative to be accurate, the
assessment must be based on actual facts.
Although there is a presumption of correctness in
the assessment, such presumption cannot be
based on another presumption as well, not matter
how reasonable or logical such may be. The basis
of the presumption of correctness must be actual
facts.
CIR v Antonio Tuason - Venzuela

All presumptions are in favour of the correctness
of CIRs assessment against the taxpayer. It is
incumbent upon the taxpayer to prove the
contrary.
Meralco Securities v Savellano Noel

Mandamus cannot lie to compel the Commissioner
to impose a deficiency tax assessment.
Mandamus only lies when the act is ministerial in
nature, and not discretionary, as assessments are,
with regard to the Commissioner. Should the
Commissioner choose not to impose deficiency
tax assessments due to want of proof, the courts
cannot interfere with such discretionary function.
Marcos v CA Venzuela
The determinations and assessments made by the
BIR are presumed correct and made in good faith.
The taxpayer has the duty of proving otherwise. In
the absence of proof of any irregularities in the
performance of official duties, an assessment will
not be disturbed. Even an assessment based on
estimates is prima facie valid and lawful where it
does not appear to have been arrived at arbitrarily
or capriciously. The burden of proof is upon the
complaining party to show clearly that the
assessment is erroneous. Failure to present proof
City Lumber v Domingo Noel

The order in question only applies to subordinate
officers, and not the Commissioner himself. The
Regional Directors merely reviewed the case and
recommended
a
lower
assessment.
The
Commissioner may validly delegate the power to
[25]

assess, however, such assessment is not binding
on him. Thus, if the Commissioner makes a
different final assessment, he may do so validly.
meaning of Section 230 of the NIRC. It is only

upon such time that the refund is ascertained.
When it cannot be ascertained whether there has
been an overpayment, in line with the provisions
of Section 230 which provides for a two-year
period of prescription counted from the date of
the payment of tax for actions for refund of
corporate income tax, the two-year period should
be computed from the time of actual filing of the
Adjustment Return or Annual Income Tax Return
at this point, the it can already be determined if
there has been an overpayment
Republic v Delarama Mendoza, R

The tax must be collected from the estate of the
deceased, and it is the administrator who is under
the obligation to pay such claim. The notice of
assessment should have been sent to the
administrator to give effect to such assessment.
Since the person liable for the payment of the tax
did not receive the assessments, the assessment
could not have become final and executory.
Commissioner must state in a clear and

unequivocal language the decision
CIR v Union Shipping Corp. - Fabia, K
The CIR assessed Yee Fong Hong, Ltd the total
sum of 500K, as deficiency income taxes due for
the years 1971 and 1972. Respondent Yee
protested the assessment.
Republic v Dela Rama- Mendoza, R

The government cannot collect because there is
no clear evidence of the transfer of dividends to
the heirs. Since there is no clear showing that
income in the form of said dividends had really
been received, which is the verb used in Section
21 of the NIRC by the Estate whether actually or
constructively and the income tax being collected
by the Governemt then would be without any
basis.
November 25, 1976 the CIR, without ruling on

the protest by Yee, issued a Warrant of Distraint
and Levy, which was served on private
respondent's counsel.
November 27, 1976 Yee reiterated its request for
the reinvestigation of the assessment. However
the CIR, again, without acting on the request for
reinvestigation and reconsideration of the Warrant
of Distraint and Levy, filed a collection suit before
the CFI.
CIR v CA * - Mendoza, R
The two-year prescriptive period should be
computed from April 2, 1984, when the final
adjustment return was actually filed because that
is the time of payment of the tax within the
[26]

January 10, 1976 Respondent filed its Petition for
Review of the petitioner's assessment of its
deficiency income taxes in the Court of Tax
Appeals.
final determination on the disputed assessment,

private respondent without needless difficulty
would have been able to determine when his right
to appeal accrues and the resulting confusion
would
have
been
avoided.
Under
the
circumstances, the CIR, not having clearly
signified his final action on the disputed
assessment, legally the period to appeal has not
commenced to run.
According to the petitioner, the Court of Tax

Appeals has no jurisdiction over this case. It
claims that the warrant of distraint and levy is
proof of the finality of an assessment and is
tantamount to an outright denial of a motion for
reconsideration of an assessment. Among others,
petitioner contends that the warrant was issued
after the respondent filed a request for
reconsideration of subject assessment, thus
constituting petitioner's final decision in the
disputed assessments. Therefore, the period to
appeal to the CTA commenced from the receipt of
the warrant on November 25, 1976 so that on
January 10, 1976 when respondent corporation
sought redress, it has long become final and
executory.
Advertising Assoc. Inc. - Fabia, K

On June 18, 1973 and March 5, 1974 Advertising
Associates received a deficiency tax assessment.
They were required to pay taxes for being a
business agent and independent contractor. April
18 and May 25, 1978, the warrants of distraint
and levy were served upon Advertising Associates.
Advertising Associates filed a protest and there
were subsequent litigation about the nature of
Advertising Assoiates's business. The enforcement
of the warrant of distraint and levy was not
implemented. When the issue was finally
resolved, the CIR sought to collect the taxes.
Again, Advertising filed an opposition claiming
that the collection of tax had already prescribed
because it was done beyond the 5-year period.
According to Advertising, Sec, 319 of the Tax Code
provides that the tax may be collected by distraint
or levy or by a judicial proceeding begun within 5
years after the assessment of the tax.
ISSUE: W/N the CTA has jurisdiction over the case

HELD: Yes
There is no dispute that petitioner did not rule on
private respondent's motion for reconsideration
but left private respondent in the dark as to which
action of the Commissioner is the decision
appealable to the CTA. Had he categorically stated
that he denies private respondent's motion for
reconsideration and that his action constitutes his
[27]

immaterial. The estate failed to pay its taxes and
so on June 6, 2000, Reyes was informed that the
property would be sold at a public auction. On
June 13, 2000, she filed a protest with the BIR
Appellate Devision, asserting that the whole tax
proceeding are VOID. Without acting on Reyes'
protest and offer, the BIR scheduled the property
to be sold.
ISSUE: W/N the prescriptive period had already

elapsed due to the failure to enforce the warrant
of distraint and levy.
HELD: No
The taxpayer received on June 19, 1973 and
MArch 5, 1974, the deficiency assessments
herein. The warrants were served on Paril 18 and
May 25, 1975, or within five years after the
assessment of the tax. Obviously, the warrants
were issued to interrupt the 5-year prescriptive
period. Its enforcement was not implemented
because of the pending protests of the taxpayer
and its requests for withdraway of the warrants.
But then, a law was passed allowing tax

delinquents to compromise their taxes with the
BIR. Reyes filed an application for compromise
with the BIR. Later on, with the acquiescence of
the Secretary of Finance, Reyes paid the 1M and
claimed that she was only waiting for the approval
of the NEB (Note: the NIRC requires the approval
of the NEB in compromise agreements where the
tax is more than 1M OR the settlement offered is
less than the prescribed minimum rates.) Oddly
enough, she filed a Motion to Declare the
Compromise Agreement as valid. The CIR
countered, saying that there compromise had not
been signed by the NEB.
CIR v Reyes v CIR - Fabia, K

A certain person died and left behind a property in
Dasmarinas Village wirth 34M. The BIR issued a
preliminary assessment notice in the amount of
14 M. Sumbillo protested the assessment on
behalf of the heirs. Later on, the Commissioner of
Internal Revenue issued a preliminary collection
letter to Reyes (one of the heirs). Subsequently, a
Warrant of Distraint or Levy was served upon the
estate, followed by Notices of Levy. Reyes
protested the notice of levy and eventually
proposed a compromise agreement of 1M Pesos.
ISSUE: Was the assessment against the estate

valid? Was the compromise agreement valid?
HELD:
No, the assessment was invalid.
Reyes was not informed in writing of the law and
the facts on which the assessment of the estate
had been made. She was merely notified of the
This was rejected by the CIR. According to the CIR,

since the estate tax is a charge on the estate and
not on the heirs, the latter's financial incapacity is
[28]

findings by the CIR, who had simply relied upon
the provisions of RA 8424 or the Tax Reform Act.
To be simply informed in writing of the
investigation being conducted and of the
recommendation for the assessment due is
nothing but a perfunctory discharge of the tax
function of correctly assessing a taxpayer. The act
canot be taken to mean that Reyes already knew
the law and the facts on which the assessment
was based.
The formal letter of demand calling for payment

of the taxpayer's deficiency tax shall state the
fact, the law, rules and regulations or
jurisprudence on which the assessment is based,
otherwise the formal letter of demand and the
notice of assessment shall be VOID.
The finding was that the CIR only wrote the taxes
due and the surcharges as well as the penalties,
but there was nothing about the law upon which it
was based. It was only an itemization of the
deductions and rates. According to the CIR, the 5day letter should be sufficient in informing Enron
about the legal bases of the assessment. The SC
disagreed. The advice of tax deficiency given by
the CIR to an employee of Enron, as well as the
preliminary five-day letter, were not valid
substitutes for the mandatory notice in writing of
the legal and factual bases of the assessment.
This does not necessarily mean that Enron was
informed of the law and facts on which the
deficiency tax assessment was made.
No, the compromise was invalid.

It would be premature for the SC to declare that
the compromise on the estate tax liability has
been perfected and consummated, considering
that the assessment was VOID.
Since the
assessment is void it cannot, in turn, be used as a
basis for the perfection of a tax compromise.
Furthermore, nothing has been final and settled.
Under Sec 204 (A) where the basic tax involved
exceeds one million pesos or the settlement
offered is less than the prescribed minimum rates,
the compromise shall be subject to the approval
of the National Evaluation Board (NEB) composed
of the petitioner and four deputy commissioners.
In this case, the petitioner paid the value of the
compromise but she had no approval from the
NEB.
CIR v BPI- Clavio

Tax laws cannot be applied retroactively. It can
only operate prospectively. Hence, assessments
made pursuant to the (old) law in force at that
time, when the only requirement was for CIR to
notify the taxpayers of his findings, is valid. The
CIR cannot later require an assessment based on
law and facts under the amendatory law.
CIR v Enron Subic Power Corp. - Fabia, K
[29]

Fraud Cases
Aznar v CIR * - Clavio
The 5-yr prescriptive period to assess tax is
applicable only under normal circumstances. But
when false returns, fraudulent returns are filed or
there is failure to file returns, the 10-yr
prescriptive period counted from the time of the
discovery of the falsity, fraud or omission should
apply.
4. No Estoppel Against the Governmnet

CIR v Abad Mendoza, J
The CIR made a mistake in classifying the end
product of respondents to be denatured alcohol
which if true would exempt it from specific tax.
Respondents argue that since they were not part
in the committee which examined the end
product, it should not be held against them. SC
refuted this by saying that the manufacturer is
responsible for the quality of his products and he
cannot escape responsibility by showing that the
denaturing committee of the BIR has certified his
products to be denatured alcohol. He cannot claim
ignorance because the permit issued to him
stated that the manufacture of the denatured
alcohol
should
be
under
his
exclusive
responsibility.
Fraud contemplated by law is actual and not

constructive. It must be intentional and
deliberate, to avoid or evade tax liability. Mere
mistake or negligence (whether slight or gross) is
not equivalent to fraud so as to warrant the
imposition of 50% fraud penalty.
CIR v Toda * - Clavio
Transactions (sale/transfer of property) prompted
to mitigate tax liability (from 35% corporate tax to
5% individual CGT) than for legitimate business
purposes constitute tax evasion. The transaction
is tainted with fraud.
Visayan Cebu Terminal v CIR Mendoza, J

Petitioner had agreed with Bureau of Customs
(BOC) that 28% of its gross receipt would go to
the latter. BIR however assessed petitioner for
deficiency in the 3% percentage tax since the
petitioner is still a contractor. The contention is
the base of the percentage tax of w/n the 28
percent that goes to the BOC would still be
included. As contractor, petitioner is liable for
percentage tax but the 28 percent which goes to
the BOC should be excluded in computation of the
percentage tax. Although petitioner pays to BOC,
Assuming there was no fraud, however, ITRs not

reflecting the true/actual amount gained from the
transaction are false. Therefore, the 10-yr
prescriptive period to assess, counted from the
date of discovery of the falsity, should be applied.
Hence,
assessment
was
still
within
the
prescriptive period.
[30]

it does not preclude them to be classified as a
contractor.
from collecting taxes legally due because of

mistakes or errors of its agents; but like other
principles of law, this admits of exceptions in the
interest of justice and fair play, as where injustice
will result to the taxpayer.
Phil Bank of Com v CIR Mendoza, J

Petitioner pleas for a tax refund after it was filed 2
years after it was due. It relied on RMC No. 785
which extended the prescriptive period from 2
years and now to 10 years contrary to Tax code
limiting it to only 2 years. The Court refuted this
argument providing that RMC 785 is a mere
administrative ruling and is not conclusive and
may be ignored if erroneous. The State cannot be
put in estoppel by the mistakes of its officials. The
RMC, a mere interpretation of the Tax Code,
cannot be given effect if it goes contrary to the
express provision of a statute which in this case
the Tax code 0f 1977 Sec. 230.
CIR v CA * Exception Martinez 1999

Central Vegetable Manufacturing Co. Inc was
assessed 1.5M deficiency miller's tax. CVMC
claims that boxes are not "raw materials and
supplies used in the milling process" that cannot
be claimed as a tax credit against miller's tax due
under the old tax code. BIR says otherwise. CTA,
CA, SC ruled in favor of CVMC applying the
statcon rule that exceptions to the general rule
should be strictly construed.
CIR v CA * Exception Martinez 1997

Alhambra Cigar used BIR Ruling 473-88 to
compute their excise tax; thereafter, the BIR
issued Ruling 017-91 repealing said ruling, then
assessed Alhambra for deficiency excise tax.
Alhambra claims that the ruling cannot be applied
retroactively to them; the BIR claims that they
cannot be estopped by the mistakes of their
agents.
A similar ruling had been issued four years earlier

in favor of CVMC, but BIR claims that this cannot
be adhered to because the government cannot be
estopped by the mistakes of its agents; but this
rule admits of exceptions in the interest of justice
and fairplay.
5. Disputable Presumption
Basilan Estates v CIR Martinez delegated
to Paeng
Republic v CA Martinez delegated to
Paeng
BIR states that Alhambra acted in bad faith;

however, their failure to consult the BIR before
applying BIR Ruling 473-88 is not a sign of bad
faith. Admittedly the government is not estopped
[31]

An assessment is deemed made only when the
collector releases, mails, or sends such notice to
the taxpayer. Furthermore, an assessment is not
necessary before a criminal complaint can be filed
but is necessary for collection such that an
affidavit may not take the place of an assessment.
Marcos v CA Cajucom
In the absence of proof of any irregularities in the
performance of official duties, an assessment will
not be disturbed. Even an assessment based on
estimates is prima facie valid and lawful where it
does not appear to have been arrived at arbitrarily
or capriciously. The burden of proof is upon the
complaining party to show clearly that the
assessment is erroneous. Failure to present proof
of error in the assessment will justify the judicial
affirmance of said assessment.
C. Prescription of Right to Assess and

Collect Taxes
1. Prescription of Right to Asses
Cases
Comm v Gonzales Calalang
Facts: Matias Yusay, a resident of Pototan, Iloilo,
died intestate leaving two heirs: Jose Yusay, a
legitimate child and Lilia Yusay Gonzales, an
acknowledged natural child. Jose was appointed
as the administrator of his etate. On May 11,
1949, he filed an estate and inheritance tax return
with the BIR declaring certain properties. This
return did not mention any heir.
On February 13, 1958 the BIR commissioner
issued an assessment of estate and inheritance
tax plus surcharge, interest, and compromise
payment. Because Jose passed away, the said
assessment was sent to his widow, Florencia Vda.
De
Yusay,
who
succeeded
him
in
the
administration of the estate of Matias.
No payment having been made, the BIR
Commissioner filed a proof of claim for the estate
and inheritance taxes due and a motion for its
allowance with the settlement court. Thereafter,
CIR v Bautista Cajucom

Same doctrine as Basilan.
Basilan Estates v CIR Cajucom
An assessment is deemed made when notice to
this effect is released, mailed, or sent by the CIR
to the taxpayer and it is not required that the
notice be received by the taxpayer within the
period of prescription.
Nava v CIR Olympia
The presumption that a letter duly directed and
mailed was received in the regular course of mail
cannot apply where none of the required facts to
raise this presumption have been shown. These
facts are: that the letter was properly addressed
with postage pre-paid and that it was mailed.
CIR v Pasco Realty * - Olympia
[32]

on November 17, 1959, Lilia disputed the legality
of the assessment claiming that the right to make
the same has already prescribed because more
than 5 years have elapsed since the filing of the
estate and inheritance tax return.
On April 13, 1960, Lilia filed a petition for review
with the CTA assailing the legality of the said
assessment. The CTA decided in favor of Lilia,
ruling that the right of the BIR Commissioner to
assess the taxes have already prescribed.
section lists down the requirement/contents of a

return)
Accordingly, Section 332 of the Tax Code is
applicable. This section states that in case of a
false or fraudulent return or when no return is
filed, the tax may be assessed within 10 years
after the discovery of the falsity, fraud, or
omission. In the case at bar, the Commissioner
came to know of the identity of the heirs on
September 24, 1953 and the underdeclaration in
the gross estate of Matias on July 12, 1957. From
this latter date up to February 13, 1958(date of
assessment), less than 10 years have elapsed.
Thus, the right of the Commissioner to assess the
tax herein imposed has not prescribed.
Issue: Whether or not the right of the BIR

Commissioner to make an assessment has already
prescribed.
Ruling: No, the right has not prescribed.
The Commissioner claims that the period to make
an assessment should be 10 years rather than 5
years from the filing of the return because the
return filed by Jose Yusay was fraudulent as it
failed to mention any heir of Matias Yusay. The SC
said that fraud must be alleged and proved in the
court a quo. Since the same was not done, the SC
deemed not to entertain the Commissioners
assertion that the return was fraudulent. However,
the return filed by Jose, albeit not fraudulent, was
not a return at all since it is substantially defective
because there was an underdeclaration of 92
parcels of land and it did not mention any heir.
Guagua Electric v Collector Calalang

Guagua Electric Light Co. is a a grantee of a
municipal franchise of Guagua , Pampangga and
Sexmoan, Pampangga. For the period of January
1, 1947 to November 1956, it reported its gross
income and paid the corresponding franchise tax
of 5% in accordance with Section 259 of the tax
code.
Believing, however, that it should pay a lower
franchise tax as provided for in its franchise, it
filed a claim for refund on March 25, 1957. The
Commissioner denied the same on the ground
that the right to its refund had already prescribed.
Guagua Electric elevated the case on appeal with
the CTA but the same was dismissed.
Subsequently, the SC, in the case of Hoa Hin Co.
Therefore, the return filed was no return at all as

required by Section 93 of the Tax Code. (Said
[33]

Vs. David, held that franchise holders under Act
57 are liable for 5% franchise tax under the tax
code. Due to this, the Commissioner assessed
deficiency franchise taxes against Guagua
Electric.
In a letter dated March 30, 1961, Guagua Electric
contested the latter assessment stating, among
others that the right of the Commissioner to
assess and/or collect the taxes had already
prescribed. Due to a recommendation by the
appellate division of the BIR, the Commissioner
issued a revised assessment reducing the taxes
due against Guagua. It eliminated the deficiency
taxes due for the period prior to January 1, 1956
as the right to assess and/or collect these taxes,
according to the recommendation, have already
prescribed.
Guagua Electric still appealed to the CTA which
affirmed the decision of the Comissioner. The CTA
ruled that Guagua did not raise the issue of
prescription.
Hence, this appeal.
Issue :Whether or not Guagua Electric failed to
raise the issue of prescription of the right of the
government to assess/collect the franchise taxes.
Ruling: No, Guagua Electric did not fail to raise
the issue of prescription. In its letter dated March
30, 1961, it already assailed the right of to
assess/collect the tax on the ground of
prescription. Moreover, the contention of the
Commissioner that Guagua failed to adduce
evidence to prove that prescription has set in is
without merit. In paragraph 10 of the

Commisioners
answer,
he
admitted
the
allegations in paragraph 13 of the petition for
review. Paragraph 13 alleged the facts, supported
by annexes, constituting prescription. There was
therefore no need for the taxpayer to present
further evidence in the point.
With respect to the issue on surcharge, the SC
held that Guagua Electric should not be liable for
the same because it acted in good faith when it
paid its franchise taxes, albeit lower than that
prescribed in the tax code. It only paid in
accordance with its franchise.
CIR v Suyoc Calalang
Facts: Suyoc Consolidated Mining Company is a
mining company operating before the war. It failed
to file its income tax return on 1942 for the year
of 1941 due to the last war. After liberation, the
Congress enacted a law extending the period to
file returns for 1941 up to December 31, 1945.
Because its records were destroyed as an offshoot
of the war, Suyoc Consolidated requested for an
extension to file its return until February 15, 1946.
The request was granted by the Commissioner. On
February 12, 1946, it filed its tentative return. On
November 28, 1946, it filed its second amended
return. Lastly, on February 6, 1947, it filed its third
amended return. The reason for these successive
filings is that Suyoc has not yet completely
reconstructed its records.
[34]

On the bases of the second amended return, the
Collector assessed the companys income tax
liability on February 11, 1947. The company asked
for 1 year extension to pay the amount assessed.
The request was granted but only for an extension
of 3 months.
Suyoc failed to pay within the 3 month period.
Accordingly, the Collector sent a letter on
November 28, 1950, demanding payment on the
tax so assessed. On April 6, 1951, Suyoc asked for
a reconsideration and reinvestigation of the
assessment which was granted. After a change of
the examiner and a series of negotiations, the
income tax due the petitioner was reduced by the
Collector to P 24, 438.96. The company was
notified of this new assessment on July 28, 1955.
The company then filed a petition for review with
the CTA on the ground that the right of the
government to collect the tax has prescribed.
Issue: Whether or not the right of the
government to collect the income taxes of Suyoc
Consolidated has prescribed.
Ruling: No, the right of the government to collect
the income taxes has not prescribed. The
petitioner refrained from collecting the tax by
distraint or levy or by a proceeding in court within
the 5 year period from the filing of the second
amended final return due to the several requests
of respondent. (Requests for extension and
requests for reconsideration and reinvestigation)
After inducing petitioner to delay collection as he
in fact did, it is most unfair for respondent to now
take advantage of such desistance to elude his

deficiency income tax liability to the prejudice of
the government invoking the ground of
prescription.
The SC said that there is no precedent in this
jurisdiction dealing with the matter at hand.
However, it took a look at several American cases.
One of which states that He who prevents a thing
from being done may not avail himself of the nonperformance which he has himself occasioned, for
the law says to him in effect this is your own act,
and therefore you are not damnified.
Republic v Lopez Martin
The five-year prescriptive period fixed by Section
332(c) of the Internal Revenue Code within which
the Government may sue to collect an assessed
tax is to be counted from the last revised
assessment resulting from a reinvestigation asked
for by the taxpayer. Where a taxpayer demands a
reinvestigation,
the
time
employed
in
reinvestigating should be deducted from the total
period of limitation. Hence, from the period that
intervened between the first revised assessment
(29 May 1954) and the filing of the complaint (13
August 1960) is deducted the time consumed in
considering
and
deciding
the
taxpayer's
subsequent petition for reconsideration and
[35]

reinvestigation (from 16 January 1956 to 22 April
1960), it will be seen that only one (1) year, three
(3) months, and six (6) days, counted against the
government. Thus, Prescription has not set in.
return, then an assessment may be made within

the time stated in section 332(a).
Butuan Sawmill v CTA Martin
CIR v Ayala Securities Docena
The 10-year prescriptive period is only applicable
to fraud cases or falsity of return. If there is no
proof of fraud, or falsity of return with an intention
to evade taxes, said period is inapplicable. The
period applicable is the 5-year prescriptive period.
Comm v Sison Martin

The period of time between June 1952 to October
1956, should be excluded from the computation of
the five-year prescription, because of the petition
made by the Sisons for re-consideration or reinvestigation. It is settled that the five-year period
of Sec. 332 of the Internal Revenue Code
(prescription, like 331) is to be counted from the
last revised assessment resulting from a
reinvestigation asked for by the taxpayer; and
that where a taxpayer demands a reinvestigation,
the time employed in reinvestigating should be
deducted from the total period of limitation.
Aznar v CIR Docena

Fraud cannot be presumed but must be proven.
Fraudulent intent could not be deduced from
mistakes however frequent they may be,
especially if such mistakes emanate from
erroneous entries or erroneous classification of
items in accounting methods utilized for
determination of tax liabilities. The 50% fraud
penalty cannot be imposed if fraud is not proved.
Bisaya Land Transpo v Collector Martin

When there is no explicit provision imposing the
duty to file a return, and penalizing noncompliance therewith, duty to file a return but the
tax is such that its amount cannot be ascertained
without data pertinent thereto, the Collector of
Internal Revenue may by appropriate regulations
require the filing of the necessary returns. In any
event, with or without such regulations, it is to the
interest of the taxpayer to file said return if he
wishes to avail himself of the benefits of section
331. If, this notwithstanding, he does not file a
CIR v Javier Jr. Docena

The rule in fraud cases is that the proof must be
clear and convincing such that it would be
sufficient to sustain a judgment on the issue of
correctness of the deficiency itself apart from the
fraud penalty. If fraud is not proved, there is no
reason for imposing the 50% surcharge provided
in the code.
Castro v Collector Docena
[36]

Laws are generally prospective, not retroactive.
An amendment introduced to the Tax Code
several years after the assessment on a taxpayer
cannot be applied retroactively.
limitations which should be done before the

expiration of the original period.
CIR v BF Goodrich - Ursua
Boise Cascade v CIR- Ursua
Carnation v CIR - Ursua
Marcos V CA Ursua
Republic v Acevedo Jularbal

An action for collection of deficiency income tax
must be commenced within five years after the
assessment of the tax. Any waiver of the statute
of limitations must also be executed within the
original five-year period within which suit could be
commenced. A request for reinvestigation which is
not acted upon does not suspend the running of
the period for filing an action for collection.
CIR v Rascor Raso

The issuance of an assessment is vital in
determining the period of limitation regarding its
proper issuance and the period within which to
protest it. Section 203 of the NIRC provides that
internal revenue taxes must be assessed within
three years from the last day within which to file
the return.
Section 222, on the other hand,
specifies a period of ten years in case a fraudulent
return with intent to evade was submitted or in
case of failure to file a return. Also, Section 228 of
the same law states that said assessment may be
protested only within thirty days from receipt
thereof.
Necessarily, the taxpayer must be
certain that a specific document constitutes an
assessment. Otherwise, confusion would arise
regarding the period within which to make an
assessment or to protest the same, or whether
interest and penalty may accrue thereon.
Sinforosa Alca v CA Jularbal

An extension of the period of limitation is different
from the waiver of prescription. A waiver made
after the action to collect has already prescribed is
not just an extension of the period of limitation
but a renunciation of the right to invoke the
defense of prescription which was then already
available to the taxpayer. There is nothing
unlawful nor immoral about this kind of waiver;
just like any other right, the right to avail of the
defense of prescription is waivable.
RP v Lim De Yu Jularbal
If fraud is not proved, the period of limitation for
assessment is five years from the filing of the
return. The five-year period for assignment may
be extended via waiver of the statute of
Tupaz v Ulep Raso

A new law (BP 700) shortening the assessment
period from five years to three years shouldnt
apply to the petitioner and shouldnt constitute as
[37]

grounds for prescription of the action since the
law expressly stated the year that it would take
effect and the non-payment of taxes occurred
prior to the effectivity of the said law.
waiver or there is no request for reinvestigation

that had been granted by the BIR Commissioner,
the taxpayer may still be held in estoppel and be
prevented from setting up the defense of
prescription of the statute of limitations on
collection when, by his own repeated requests or
positive acts, the Government had been, for good
reasons, persuaded to postpone collection to
make the taxpayer feel that the demand is not
unreasonable or that no harassment or injustice is
meant by the Government, as laid down by this
Court in the Suyoc case.
Internal revenue taxes are self-assessing and no

further assessment by the government is required
to create the tax liability.
An assessment,
however, is not altogether inconsequential; it is
relevant in the proper pursuit of judicial and extra
judicial remedies to enforce taxpayer liabilities
and certain matters that relate to it, such as the
imposition of surcharges and interest, and in the
application of statues of limitations and in the
establishment of tax liens
CIR v Primetown Property Group - Raso

Under Section 229 of the Tax Code, a such suit or
proceeding shall be filed after the expiration of two (2)
years from the date of payment of the tax or penalty
regardless of any supervening cause that may arise
after payment. The subject of contention is how long
exactly is the period of two years to determine the
date of prescription. In this case, the Court applied
manner in which the Administrative Code of 1987
counts legal period. In the said code, acalendar month
is a month designated in the calendar without regard
to the number of days it may contain. It is the period
of time running from the beginning of a certain
numbered day up to, but not including, the
corresponding numbered day of the next month, and if
there is not a sufficient number of days in the next
month, then up to and including the last day of that
month.[ To illustrate, one calendar month from
December 31, 2007 will be from January 1, 2008 to
January 31, 2008; one calendar month from January
BPI v CIR Raso

The filing of a protest letter doesnt constitute as
a valid ground to suspend the running of the
prescriptive period.
The statute of limitations on collection may only
be interrupted or suspended by a valid waiver
executed in accordance with (at the time of the
case) paragraph (d) of Section 223 of the Tax
Code of 1977, as amended, and the existence of
the circumstances enumerated in Section 224 of
the same Code, which include a request for
reinvestigation granted by the BIR Commissioner.
Even when the request for reconsideration or
reinvestigation is not accompanied by a valid
[38]

A request for detailed computation of an alleged
tax liability is not a request for reinvestigation
which will toll/suspend the prescriptive period to
collect.
31, 2008 will be from February 1, 2008 until February

29, 2008.
2. Prescription of Right to Collect

Comm v Wyett Suaco * - Fragante
A request for reconsideration or reinvestigation
tolls the prescriptive period to collect and starts to
run again when the request is denied. Even
though a letter or request is not captioned as a
reconsideration
or
reinvestigation
of
the
assessment it will be deemed such a request if the
ultimate relief or remedy asked by the taxpayer
will result in the audit or examination of the
records of the taxpayer to determine the tax
liability.
CIR v Capitol Subd- Dialino

The period for prescription of the action to collect
taxes is interrupted when the taxpayer requests
for a review or reconsideration of the assessment,
and starts to run again when said request is
denied.
Capitol did not specifically used the words
review or reconsideration but its requests for
information on disallowed items, for explanation
of disallowances, and for reinvestigation of the
same, all of which were denied, interrupted the
period of prescription to collect the taxes.
3. Suspension of Prescriptive Period
Palanca V CIR- Dialino

A judicial action for the collection of taxes is
begun by the filing of the complaint with the
proper court of first instance, or where the
assessment is appealed to the CTA, by filing an
answer to the taxpayers petition for review
wherein payment of the tax is prayed for. The
summary remedy of distraint and levy is begun by
the issuance of a warrant of distraint and levy
which stops the running of prescription of the
right to collect taxes although the warrant is not
actually executed or carried out.
The estates many requests for postponement,
reinvestigation, revaluation of the properties, or
Cases
CIR v Sison Fragante
The five-year period of sec. 332 of the Internal
Revenue Code (prescription, like 331) is to be
counted from the last revised assessment
resulting from a reinvestigation asked for by the
taxpayer; and that where a taxpayer demands a
reinvestigation,
the
time
employed
in
reinvestigating should be deducted from the total
period of limitation.
Republic v Ablaza Fragante
[39]

other matters delayed the execution of the
warrant. Were it not for said requests, the warrant
would have been fully executed well within the
period prescribed by law.
only when the private respondent was definitely

informed of the implied rejection of the said
protest and the warrant was finally served on it.
CIR v Wyeth Suaco Laboratories- Arriola
Settled is the rule that the prescriptive period
provided by law to make a collection by distraint
or levy or by a proceeding in court is interrupted
once a taxpayer requests for reinvestigation or
reconsideration of the assessment. Wyeth Suaco
admitted that it was seeking reconsideration of
the tax assessments as shown in a letter of its
President and General Manager. Although the
protest letters did not categorically state or use
the words reinvestigation and reconsideration,
the same are to be treated as letters of
reinvestigation and reconsideration. These letters
of Wyeth Suaco interrupted the running of the
five-year prescriptive period to collect the
deficiency taxes. The period started to run again
when the BIR served the final assessment to
Wyeth Suaco.
Republic v Ker Dialino

The running of the prescriptive period to collect
taxes shall be suspended for the period during
which the CIR is prohibited from beginning a
distraint and levy or instituting a proceeding in
court.
Kers petition for review in the CTA and its appeal
to the SC legally prevented the Commissioner
from instituting an action in the CFI for the
collection of taxes. Thus, even though the CTAs
dismissal and the SCs affirmation were made five
years after the final assessment, the CIR is not
prohibited from collecting the taxes due.
CIR v Algue- Arriola
According to RA 1125, the appeal may be made
within 30 days after receipt of the decision or
ruling challenged. It is true that as a rule the
warrant of distraint and levy is proof of the
finality of the assessment; Exception is where
there is a letter of protest after receipt of notice of
assessment. The proven facts is that 4 days after
private respondent received the petitioner's notice
of assessment, it filed its letter of protest. It thus
had the effect of suspending the reglementary
period which started on the date the assessment
was received. The period started running again
CIR v Union Shipping Corp- Arriola

Commissioner should always indicate to the
taxpayer in clear and unequivocal language what
constitutes his final determination of the disputed
assessment. Petitioner did not rule on private
respondent's motion for reconsideration which left
private respondent in the dark as to which action
of the CIR is the decision appealable to the CTA.
The CIR, not having clearly signified his final
[40]

action on the disputed assessment, legally the
period to appeal has not commenced to run. Thus,
its was only when private respondent received the
summons on the civil suit for collection of
deficiency income that the period to appeal
commenced to run.
The taxpayer did not contest the asessment,

hence it becomes final. Then the BIR files a civil
case (i.e., collection suit) with CFI. At this stage,
the taxpayer can no longer contest/appeal the
assessment. After the assessment has been
made, the proper remedy it to file an appeal with
the Tax Court. Having failed to do so, the
assessment has become final.
D. Remedies of the Taxpayer

1. Remedies before payment of the tax
Delta Motors Co. v CIR * - Escueta (CTA Case
3782, May 21, 1986)
A taxpayer may contest the assessment made by
the BIR by presenting evidence to substantiate
the errors that are claimed to have been
committed by the CIR in making the assessments.
All presumptions are in favor of the correctness of
the tax assessments. The burden of proof is on
the purchaser to show the contrary.
Current rule: Section 7 (a) (1) of RA 1125 as

amended by RA 9282 provides that the CTA shall
exercise exclusive appellate jurisdiction to review
by appeal decisions of the CIR in cases involving
disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the
National internal
revenue or other
laws
administered by the BIR.
Note:
The entire Section 7 enumerates the
jurisdiction of the CTA.
Upon failure to appear, prosecute for an

unreasonable length of time, the petition, upon
motion may be dismissed and adjudicated based
on merits, unless otherwise provided by the
Courts.
Marcos v CA Escueta
If there is any isue as to the validity of the BIRs
decision to assess the taxes the proper remedy is
to pursue the proper admiistrative and judicial
avenues provided by law (i.e., Section 228 if the
NIRC: Protesting of an assessment and not via
Petition for Certiorari under the pretext of grave
abuse of discretion.
Basa v Republic * (compare with CTA

Jurisdiction now) Escueta
Appeals by the taxpayer regarding assessments of
the BIR should be made to the Tax Courts not to
the CFI.
[41]

2.
Taxpayers
Defenses
against
the
assessment
Aguinaldo Industries Co v CIR Imperial
Since exemptions are only statutory graces, in
claiming items as deductibles, the taxpayer must
show that its claimed deductions clearly come
within the language of the law, otherwise they will
not be allowed.
the tax due on said corporation taxes deemed to

have been paid in the Philippines.
3. Remedies after payment of tax
Bermejo v Collector * -Gran
Chemphil v CIR *- Gran
CIR v Ca * -Gran
CC & CIR v CA & Planters * - Gran
Gibbs v CIR * - Cua
ACCRA Investment Corp v CA - Cua
CIR v TMX Sales - Cua
Citibank v CIR - Cua
CIR v Wander Phil Inc - Plazo
CIR v P&G - Plazo
CIR v Jose Concepcion - Plazo
Abra Valley College v Aquino Imperial

The Constitution provided for exemptions of all
lands
buildings
and
improvements
used
exclusively for educational purposes. The test of
exemption is the use of the property for purposes
mentioned in the Constitution. Reasonable
interpretation of the phrase used exclusively
extends to those facilities which are incidental to
and reasonably necessary for the accomplishment
of the said purposes.
4. Judicial Remedies
Lascona Land v CIR * - Plazo
CIR v P&G Imperial

In claims for refunds or tax credits, a written claim
must be filed with the BIR by a taxpayer which is
defined as any person who is subject to tax. As a
withholding agent is made personally liable for
such tax which he is required to deduct and
withhold, he is deemed a taxpayer for purposes of
claiming refunds or tax credits. Likewise, for the
reduced rate of 15% to apply, the NIRC does not
require that the domicile of the non-resident
foreign corporation give a deemed paid tax
credit but only that it shall allow a credit against
Surigao electric v CA * Sia

The failure of a taxpayer to lodge his appeal
within the prescribed period of 30 days from the
notice of final assessment bars his appeal and
renders the questioned decision final and
executory.
Remark on the case:
The Court, in its obiter, pointed out that the
Commissioner of Internal Revenue should always
indicate to the taxpayer in clear and unequivocal
language whenever his action on an assessment
[42]

questioned by a taxpayer constitutes his final
determination on the disputed assessment.
Although the Court pointed this out, it still
construed the letters of the commissioner
demanding for payment and a threat of legal
action in case of default as final assessment
already (In this case, the Court did not mention
that the Commissioner said in clear and
unequivocal language that the assessment was
final.)
The remedy of an aggrieved taxpayer is not

without any limitation. A taxpayer's right to
contest assessments, particularly the right to
appeal to the Court of Tax Appeals, may be
waived or lost as in this case.
In this case, the assessment has already become
final and executory because even if the
petitioners requested a 30 day extension to file
their position paper, they did not file any. Hence,
petitioners' letter for a reconsideration of the
assessments is nothing but a mere scrap of paper.
CIR v Villa* - Sia

A taxpayer must first contest an assessment in
the Bureau of Internal Revenue before filing a
petition for review in the Court of Tax Appeals.
Absent said contest renders the appeal premature
and the Court of Tax Appeals will have no
jurisdiction to entertain said appeal.
Procedure of Appeal
CTA Finding of fact conclusive
Nasiad v CTA * - Fabia, F
Advertising Assoc Inc V CIR Sia

The Commissioner should always indicate to the
taxpayer in clear and unequivocal language what
constitutes his final determination of the disputed
assessment. That procedure is demanded by the
pressing need for fair play, regularity and
orderliness in administrative action.
Remark:
This doctrine was actually from surigao case but
was merely an obiter therein.
Appeal of CTA Decisions
Dayrit v Cruz * - Sia
Prescription for violations of NIRC

Lim v CA & People - Olympia
DBP v CA * Fabia, F
RCBC v CIR * Fabia, F
E. Statutory Offenses and Penalties
CIR v ESSO - Olympia
[43]

Com v JAL - Fajardo
Informers Reward
CIR v COA Soller

Issue :Whether an informers reward should be
given to Savellano when the tax delinquents
concern government agencies:
Held: YES. The law makes no distinction between
delinquent taxpayers, whether private persons or
corporations, or public or quasi-public agencies, it
being sufficient for its operation that the person or
entity concerned is subject to and violated
revenue laws, and the informers report resulted
in the recovery of revenues.
Meralco Securities v Savellano Soller

(Same as the Meralco Case above) An informer
cannot file a mandamus to compel the CIR to
issue an assessment for deficiency corporate
income tax of a corporation (Meralco). Informers
reward is contingent upon payment and collection
of unpaid or deficiency taxes. An informer is
entitled by way of reward only to a percentage of
the taxes actually assessed and collected. Since
no assessment, much less any collection, has
been made, it is gross error for the trial court to
issue a writ against the CIR to pay respondent 25
% informers reward.
Penid v Virata Soller
Issue: Whether or not an informers reward should
be given to an informer when the corporation (Pan
Fil) was not included in the companies listed in the
information (criminal complaint).
Held: YES. The inclusion of Pan Fil among the firms
investigated was the direct, logical, and necessary
consequence of the information given by the
petitioners
during
their
interview.
The
investigation was extended to include other
companies not listed in the Information, which in
turn led to the discovery and recovery of income.
[44]

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Tax Digests and Doctrines of 3D BATCH 2012 under Atty.

Collector of Customs, who, under the Constitution,

SEC. 2208. RIGHT OF POLICE OFFICER TO ENTER

A warehouse, store or other building or inclosure

Issue: W/N seizure is justified by the warrants

Lastly, upon effecting the seizure of the goods,

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

was searched. Nonetheless, respondent judge

Held/Ratio: Petition is granted. As the car was kept

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

A province has no authority to impose the taxes

Issue: W/N the Cessna plane was used in the

(by Gran) Facts: In 1992, the Sangguniang

Held/Ratio: Petition Dismissed. It is not necessary

In a letter dated Nov. 11, 1993, the Provincial

LOCAL GOVERNMENT TAXATION

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

65, but an appeal by certiorari under Rule

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

moving vehicles or vessels either by land, sea or

2. First Phil Industrial Corp v. CA

Issue: WON FPIC is a common carrier or a

(by Gran) Facts: FPIC is a grantee of a pipeline

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

As FPIC is a common carrier, it is therefore,

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

of real property, for social housing, imposed new

6. Meralco vs. province of laguna

(by Dela Cruz) Facts: The Sangguniang Bayan

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

b. In accordance with the presumption of validity

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

NAPOCOR was the owner of real properties

Since the last paragraph of Section 234

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

shall be appraised at the current and fair market

hasten to point out that the

4. Antonio Callanta vs. Ombudsman

3. Raul Sesbreno vs. CBAA

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

expressly prohibiting the assessor from making

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

of its approval, and posted in at least two (2)

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

Although as a rule, administrative remedies must

1. The assessor in each municipality or city in the

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

(4) Furthermore, RA 7227 clearly vests in the

REVISION OF THE JURISDICTION OF THE CTA

2. PHILIPPINE MATCH CO VS. CITY OF CEBU

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

Cebu City, and also from the dismissal of its claim

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

3. ILOILO BOTTLERS INC. VS. CITY OF ILOILO

Iloilo Bottlers, Inc. disclaims liability on two

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

stores or warehouses maintained by the company.

The first ground, however, merits serious

Entities operating under the first system are NOT

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

otherwise. He declared that all the procedural

4. DRILON VS. LIM

Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales

general circulation will satisfy due process. It has