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BASIS OF TAXATION Lifeblood Doctrine CIR vs. Pineda, September 15, 1967, 21 SCRA 105
Facts: Manuel Pineda, the eldest son of the decedent who was made to pay the full amount of the income tax liabilities assessed against the estate. He questioned the assessment on the ground that as an heir his liability for the unpaid tax due the estate is only up to the extent of and in proportion to the share he received therefrom. Q. Can the Government require Manuel Pineda to pay the full amount of the taxes assessed? A. Yes, the Government can require Manuel Pineda to pay the full amount of the taxes assessed. The remedy (tax lien) is the very avenue the Government took in this case to collect the tax. The BIR should be given in instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood of the government and their prompt and certain availability is an imperious need.
CIR vs. CTA, July 21, 1994, 234 SCRA 348
Facts: A petition for review of the decision of the BIR denying tax refund of Citytrust was filed with the CTA. It was submitted for decision based solely on the pleadings and evidence submitted by Citytrust. CIR was denied its day in Court because of its inability to present evidence by reason of the failure of its Tax Credit/Refund Division to transmit records of the case to the Solicitor General. The CTA rendered its decision ordering BIR to grant a refund to Citytrust, CA affirmed. Q. Is the neglect, omission, error or mistake committed by the officers or agents of the State binding upon the Government? A. No, it is a long and firmly settled rule of law that the Government is not bound by the errors committed by its agents. In the performance of its government functions, the State cannot be estopped by the neglect of its agents and officers. Although the Government may generally be estopped through the affirmative acts of public officers acting within their authority, their neglect or omission of public duties as exemplified in this case will not and should not produce that effect. Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that the Government cannot and must not be estopped particularly in matters involving taxes. Taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the State effects its functions for the welfare of its constituents. The errors of certain administrative officers should never be allowed to jeopardize the Government’s financial position, especially in the case at bar where the amount involves millions of pesos the collection whereof, if justified, stands to be prejudiced just because of bureaucratic lethargy.
Marcos II vs. CA, June 5, 1997, 273 SCRA 47
Facts: Marcos II assailed the decision of the CA declaring the deficiency income tax assessments and estate tax assessments upon the estate and properties of his late father final despite the pendency of the probate proceedings of the will of the late President. On the other hand, the BIR argued that the State’s authority to collect internal revenue taxes is paramount. Q. Can the BIR collect estate taxes without the approval of a probate court? A. Yes, 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. The enforcement of tax laws and the collection of taxes are of paramount importance for the sustenance of government. Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the reason for the government itself. It is, therefore, necessary to reconcile the apparent conflicting interests of the authorities and the taxpayer so that the real purpose of taxation, which is the promotion of the common good, may be achieved.
YMCA vs. CIR, 298 SCRA 83
Facts: YMCA, a “welfare, educational, and charitable non-profit corporation, leased its facilities to small shop owners, restaurants, and canteen operators, and collected parking space. YMCA contends that its rental income is not subject to income tax. Q. Is the contention of YMCA tenable?
A. No, since taxes are the lifeblood of the nation, a claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on which it is based. The claimed exemption must expressly be granted in a language too clear to be mistaken
THEORIES ON TAXATION
Necessity Theory Philippine Guaranty Co., Inc. vs. CIR, 13 SCRA 780, (1965)
Facts: Petitioner Philippine Guaranty Co., Inc. (PGCI) entered into reinsurance contracts with foreign insurance companies not doing business in the Philippines and thereby agreed to cede to the foreign insurers a portion of the premiums. In accordance with the aforesaid contracts, the petitioner excluded in its gross income premiums ceded to the foreign reinsurers. Based on the foregoing, the CIR assessed taxes from PGCI. The Petitioner protested claiming that the premiums ceded to foreign reinsurance companies are not subject to withholding tax for they are not income from sources within the Phil. Q. Is the contention of petitioner correct? A. No, considering that the reinsurance premiums in question were afforded protection by the government and the recipient foreign reinsurers exercised rights and privileges guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden of maintaining the State. The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve the State’s sovereignty and means to give the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvements designed for the enjoyment of the citizenry and those which come within the State’s territory, and facilities and protection which a government is supposed to provide.
Benefits-Protection Theory or Doctrine of Symbiotic Relationship CIR vs. Algue, L-28896, February 17, 1988
Taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard-earned income to the taxing authorities, every person who is able to must contribute his share in the, running of the government. The government for its part is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.
Taxes are personal to the taxpayer. Sunio vs. NLRC, L-57767, January 31, 1984
Facts: Petitioner was impleaded in the Complaint in his capacity as General Manager of petitioner corporation. There appears to be no evidence on record that he acted maliciously or in bad faith in terminating the services of private respondents. His act, therefore, was within the scope of his authority and was a corporate act. Q. Can a corporation’s tax delinquency be enforced against its stockholders? A. No, a corporation’s tax delinquency cannot, for instance, be enforced against its stockholders because not only would this run counter to the principle that taxes are personal, but it would run counter to the principle that taxes are personal, but it would also not be in accord with the rule that a corporation is vested by law with a personality that is separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related.
When stockholders may be held liable for unpaid taxes of the corporation (Doctrine of Piercing the Corporate Veil) Tan vs. Commissioner, L-15778, April 23, 1962
Facts: The Central Syndicate, a corporation organized under the laws of the Phil., sent a letter to the Collector of Internal Revenue advising the latter that it purchased from Dee Hong Lue the entire stock of surplus properties and that it assumed Lue's obligation to pay the 3-1/2% sales tax on said surplus
goods, it was remitting the sum of P43,750.00 in his behalf as deposit to answer for the payment of said sales tax with the understanding that it would later be adjusted after the determination of the exact consideration of the sale. The syndicate again wrote the Collector requesting a refund due to the adjustment and reduction of the purchase price. However, the Collector denied the claim for refund. The Collector filed a motion requiring the syndicate to file a bond to guarantee the payment of the tax assessed against it which motion was denied by the CTA on the ground that cannot be legally done it appearing that the syndicate is already a non-existing entity due to the expiration of its corporate existence, the case was dismissed. From this order the syndicate appealed to the SC wherein it intimated that the appeal should not be dismissed because it could be substituted by its successors-ininterest. Q. The Central Syndicate having already been dissolved because of the expiration of its corporate existence, can the sales tax in question be enforced against its successors-in-interest who are the present petitioners? A. Yes, the creditor of a dissolved corporation may follow its assets once they passed into the hands of the stockholders. The dissolution of a corporation does not extinguish the debts due or owing to it. A creditor of a dissolved corporation may follow its assets, as in the nature of a trust fund, into the hands of its stockholders. An indebtedness of a corporation to the federal government for income and excess profit taxes is not extinguished by the dissolution of the corporation. And it has been stated, with reference to the effect of dissolution upon taxes due from a corporation, "that the hands of the government cannot, of course, collect taxes from a defunct corporation, it loses thereby none of its rights to assess taxes which had been due from the corporation, and to collect them from persons, who by reason of transactions with the corporation, hold property against which the tax can be enforced and that the legal death of the corporation no more prevents such action than would the physical death of an individual prevent the government from assessing taxes against him and collecting them from his administrator, who holds the property which the decedent had formerly possessed." Hence, petitioners could be held personally liable for the taxes in question as successorsin-interest of the defunct corporation.
Liabilities of a taxpayer Republic vs. Patanao, L-22356, July 21, 1967
Facts: A complaint was filed against Patanao, who was the holder of an ordinary timber license and as such was engaged in the business of producing logs and lumber for sale during the years 19511955. He failed to file income tax returns for 1953 and 1954, and although he filed income tax returns for 1951, 1952 and 1955, the same were false and fraudulent because he did not report substantial income earned by him from his business. An examination was conducted by the BIR it was ascertained that there are deficiency; income taxes and additional residence taxes for the aforesaid years, due from defendant. Notwithstanding repeated demands the defendant refused, failed and neglected to pay said taxes. Defendant moved to dismiss the complaint on the ground that the action is barred by prior judgment, defendant having been acquitted in criminal cases Nos. 2089 and 2090 of the same court, which were prosecutions for failure to file income tax returns and for non-payment of income taxes. Q. Is the contention of the defendant tenable? A. No, the acquittal in the said criminal cases cannot operate to discharge defendant 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. Said obligation is not a consequence of the felonious acts charged in the criminal proceeding nor is it a mere civil liability arising from crime that could be wiped out by the judicial declaration of non-existence of the criminal acts charged. Under the Penal Code the civil liability is incurred by reason of the offender's criminal act. The situation under the income tax law is the exact opposite. Civil liability to pay taxes arises from the fact, for instance, that one has engaged himself in business, and not because of any criminal act committed by him. The criminal liability arises upon failure of the debtor to satisfy his civil obligation.
ASPECTS, PROCESSES, PHASES OF TAXATION
Levy/ Imposition Tolentino, et al. vs Secretary of Finance, August 25, 1984,235 SCRA 630
Facts: Petitioners assail the constitutionality of RA 7716 imposing Value Added Tax (VAT) on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services. It is equivalent to 10% of gross selling price or gross value in money of good or properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. RA 7716 seeks to widen the tax base on existing VAT system and enhance its administration by amending the NIRC. The
claiming that R. The Municipal Board of the City of Manila. For example. the legislature has the inherent power to select the subjects of taxation and to grant exemptions. the amending authority of the Senate was declared by the United States Supreme Court to be sufficiently broad to enable it to make the alteration. the Senate certainly can pass its own version on the same subject matter. Yes. 567. In raising the hue and cry of "class legislation". The power of the Senate to propose amendments must be understood to be full. the single most important and influential consideration that led the legislature to select mail users as subjects of the tax is the relative ease and convenience of collecting the tax through the post offices. Antonio Araneta. Congress violated the Constitution because RA 7716 did not originate exclusively in the House of Representatives. Is the tax law increasing the existing tax on the manufacture of sugar valid? A." Indeed. a general revenue bill passed by the lower house of the United States Congress contained provisions for the imposition of an inheritance tax. 1968. however. 389] SCOPE OF THE LEGISLATIVE POWER TO TAX Discretion as to purposes for which taxes shall be levied. 220 U. L-23645. but if by public purpose petitioner means benefit to a taxpayer as a return for what he pays. This follows from the coequality of the two chambers of Congress. there is no reason why the state may not levy taxes to raise funds for their prosecution and attainment. Q.A. Gomez vs. because it is in fact the result of the consolidation of two distinct bills. L-7859. 55 L. Is contention of the petitioners correct? A. In the case of the anti-TB stamp. otherwise known as the Anti-TB Stamp Law. The eradication of a dreaded disease is a public purpose. the Senate cannot enact revenue measures of its own without such bills. Q. Walter Lutz vs J. After a revenue bill is passed and sent over to it by the House. plenary and complete "as on other Bills. charging extra five centavo charge for the use of semi-postal stamp violative of the equal protection clause of the Constitution because it constitutes mail users into a class for the purpose of the tax while leaving untaxed the rest of the population and that even among postal patrons the statute discriminatorily grants exemptions. Stone Tracy Company. 98 Phil 148 Facts: Lutz assailed the constitutionality of Section 2 and 3. then it is sufficient answer to that the only benefit to which the taxpayer is constitutionally entitled is that derived from enjoyment of the privileges of living in an organized society. 1955.S. C. No. the Senate can practically re-write a bill required to come from the House and leave only a trace of the original bill.A. the legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. Q. Does RA 1635 violates the equal protection clause and therefore unconstitutional? A. Palomar. The power of the Senate to propose or concur with amendments is apparently without restriction. This was changed by the Senate into a corporation tax. December 22. more than in other areas. one from the House of Representatives and the other from the Senate. 3398 of the City of Manila imposes a municipal occupation tax on persons exercising various professions in the city and penalizes non-payment of the tax. undoubtedly. 1635. 95 Phil 46 Facts: Ordinance No. alleging such tax as unconstitutional and void for not being levied for a public purpose but for the aid and support of the sugar industry exclusively. which provided for an increase of the existing tax on the manufacture of sugar. It would seem that by virtue of this power. No. This power has aptly been described as "of wide range and flexibility. The small amount of five centavo does not justify the great expense and inconvenience of collecting through the regular means of collection. ed." Thus. subject only to the test of reasonableness. 25 SCRA 827 Facts: Petitioner questions the validity of the statute. 107. the legislature possesses the greatest freedom in classification. the say his the Punsalan vs. it is said that in the field of taxation. the protection and promotion of the sugar industry is a matter of public concern. October 29. because revenue bills are required to originate exclusively in the House of Representatives. Discretion as to subjects of taxation. [Flint v. Taxation may be made the implement of the State’s police power. established and safeguarded by devotion of taxes to public purposes. the burden of plaintiffs' complaint is not that the professions to which they . the legislative discretion must be allowed full play. If objective and methods alike are constitutionally valid.contention of petitioners is that in enacting the VAT law. Here.
the Solicitor General stated in his answer that BP 135 is a valid exercise of the State’s power to tax. 130 SCRA 652 Facts: The National Internal Revenue Code was amended by BP 135. 25 SCRA 938 Facts: A lower court decision upholding the validity of an ordinance of the City of Baguio imposing a license fee on any person. vs. Article XI of the New Constitution. the raising of revenues is the principal object of taxation. So powerful that Chief Justice Marshall once said that “the power to tax involves the power to destroy. July 25. considering not only the presumption of validity but also the relatively modest rank of a city court in the judicial hierarchy. the power to tax is restricted by the equal protection and due process clauses of the Constitution. Justice Holmes’s pen stating that ‘The power to tax is not the power to destroy while this court sits. since the City Court is possessed of judicial power and it is likewise axiomatic that the judicial power embraces the ascertainment of facts and the application of the law. where it can be demonstrated that the challenged statutory provision fails to abide by its command. No. subject to such provisions as may be provided by law. vs Ramirez. No. it is not for the courts to judge what particular cities or municipalities should be empowered to impose occupation taxes in addition to those imposed by the National Government. there has been a firm insistence by appellant of the lack of jurisdiction of the City Court of Baguio. Under Section 5. not to mention municipalities. Yes. it cannot be said that a City Court is bereft of competence to proceed on the matter. where the suit originated due to the fact that the issue of constitutionality was raised. et al. Is it within the jurisdiction of the courts to determine what entities should be empowered to impose occupation tax? A. Does the City Court of Baguio have jurisdiction to decide on the constitutionality of the ordinance? A. Judicial Review of Taxation Sison. then the court must declare and adjudge it null. City of Baguio vs. Ancheta. effectively broadening the rates of tax on individual income taxes. entity or corporation doing business in the City of Baguio is assailed by De Leon. Is the contention of the petitioners correct? A. Q. In addition. oppressive and capricious in character. De Leon. The Constitution as the fundamental law overrides any legislative or executive act that runs counter to it. it has withheld that authority from other chartered cities. To raise revenue Bagatsing. In response thereto.” So it is in the Philippines. Q. He was held liable as a real estate dealer and was obligated to pay under such ordinance an annual fee. Q.respectively belong have been singled out for the imposition of this municipal occupation tax. the SC held that.” However. therefore. That matter is peculiarly within the domain of the political departments and the courts would do well not to encroach upon it. Hence. permit fees. tolls and other few is not strictly a taxing power but a revenue-raising function. While it remains undoubted that such a power to pass on the validity of an ordinance alleged to infringe certain constitutional rights of a litigant exists. Who among the contenders is correct? A. 74 SCRA 306 Facts: An Ordinance regulating the operation of public markets and prescribing for the rental of stalls was assailed in that the subject ordinance is not a "tax ordinance" because the imposition of rentals. as well as the rule requiring uniformity in taxation. Jr. "Each local government unit shall have the power to create its own sources of revenue and to levy taxes. Petitioner brought a taxpayer’s suit alleging that the amendatory provision was arbitrary amounting to class legislation. Justice Frankfurter could rightfully concluded: “The web of unreality spun from Marshall’s famous dictum was brushed away by one stroke of Mr. Finding in favor of the respondent’s contention. being an attribute of sovereignty. He concludes that both the equal protection and due process clauses had been transgressed. 1984. their complaint is that while the law has authorized the City of Manila to impose the said tax. so that the procedure for publication under the Local Tax Code finds no application. the Constitution as the highest law superseding any statute or ordinance in conflict therewith. PURPOSES OF TAXATION Primary Purpose. the power to tax is the strongest of all the powers of government. In any case. still it should be exercised with due care and circumspection. Q. firm. And one of those sources of revenue is what the Local Tax Code points to in particular: "Local governments may collect fan or .
SECONDARY OR NON-REVENUE PURPOSES Power to tax as an instrument to implement the power of eminent domain Commissioner vs. Yes. the citizens are held to be its indirect beneficiaries. and therefore valid. Manila Race Horse Trainers Association vs De La Fuente. CLD granted 20% sales discount to senior citizens pursuant to RA 7432 and its Implementing Rules. Central Luzon Drug. None. Q. there is no reason why the . CIR was ordered to issue a tax credit certificate in favor of CLD. Be it stressed that the privilege enjoyed by senior citizens does not come directly from the State. While the direct beneficiary of the said decree is the movie industry. and the equitable distribution of wealth. Inc alleged that they are owners of boarding stables for race horses question the constitutionality of the Ordinance enacted by the City of Manila as being discriminatory for it only taxed boarding stables for race horses to the exclusion of boarding stables for horses dedicated to other purposes.rentals for the occupancy or use of public markets and premises * * *. stalls or marketing privileges. which provided for an increase of the existing tax on the manufacture of sugar. but rather from the private establishments concerned. Petitioner attacks on the constitutionality of the Decree on the ground that the tax imposed is harsh. also. from the viewpoint of economics and public policy the taxing of boarding stables for race horses to the exclusion of boarding stables for horses dedicated to other purposes is not indefensible. the levy of a 30% tax is for a public purpose. Regulatory Measure Tio vs Videogram Regulatory Board. Walter Lutz vs J. It operated 6 drugstores under the name and style “Mercury Drug”. C. Q. Tax measures are but “enforced contributions exacted on pain of penal sanctions” and “clearly imposed for a public purpose. 151 SCRA 208 Facts: P. particularly because of the rampant film piracy. It was imposed primarily for answering the need for regulating the video industry. the protection and promotion of the sugar industry is a matter of public concern. their owners derive fat income and the public hardly any profit from horse racing." They can provide for and regulate market stands. public welfare. in the form of a supposed profit. the power to tax has indeed become a most effective tool to realize social justice. the legislative discretion must be allowed full play. Here. the said law imposes a thirty percent (30%) tax on the sale.A. the sale. CLD filed with petitioner a claim for tax refund/credit in the amount allegedly arising from the 20% sales discount. the tax credit benefit granted to these establishments can be deemed as their just compensation for private property taken by the State for public use. Race horses are devoted to gambling if legalized. December 22. L-7859. the flagrant violation of intellectual property rights. lease or disposition of videograms. No. 88 Phil 60 Facts: The Manila Race Horses Trainers Association. 567. 456 SCRA 414 Facts: Central Luzon Drug (CLD) is a domestic corporation primarily engaged in retailing of medicines and other pharmaceutical products. confiscatory. or permit the use of. stalls and privileges.D. Q. lease or occupancy thereof. 1955. Accordingly. taken from the drugstore and used for public use.” In recent years. Yes. They can license. Is there an arbitrary classification? A. by means of giving it directly to individual senior citizen. If objective and methods alike are constitutionally valid. 98 Phil 148 Facts: Lutz assailed the constitutionality of Section 2 and 3. and. In addition. Is the tax law increasing the existing tax on the manufacture of sugar valid? A. sell or otherwise dispose of stands. the taxation power can also be used as an implement for the exercise of the power of eminent domain. Antonio Araneta. subject only to the test of reasonableness. 1987 was promulgated creating the Videogram Regulatory Board with broad powers to regulate and supervise the videogram industry. alleging such tax as unconstitutional and void for not being levied for a public purpose but for the aid and support of the sugar industry exclusively. the legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. The 20% discount given to senior citizens on pharmacy products was considered a property. Can taxation be used as an implement for the exercise of the power of eminent domain? A. and the proliferation of pornographic videotapes. lease. Q. oppressive and/or in unlawful restraint of trade in violation of the due process clause of the Constitution. Is the decree unconstitutional? A. and this business demands relatively heavy police supervision.
The power to impose taxes is one so unlimited in force and so searching in extent that the courts scarcely venture to declare that it is subject to any restrictions whatever. and up to 100% on land which would necessarily lead to an increase in real property taxes amounting to confiscation of property. confiscatory.D. 151 SCRA 208 Facts: P. requires that sources of revenues must be adequate to meet government expenditures and their variations. The act of subdividing a farm land and selling them to the farmer. In addition. Additionally. the Roxas brothers only paid fifty percent (50%) thereof as income tax from capital gains.73 providing for the collection of Real Property taxes as provided for under Section 21 of the P. in order to maintain the general public's trust and confidence in the Government. Q. alleges that E. 1968. et al. It does not conform to our sense of justice in the instant case for the Government to persuade. equally and uniformly. as taxpayer. hence are liable to pay 100% of the net gain as income tax? A. Sometime later. 186 SCRA 331 Facts: Frank Chavez. April 26. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. a ten (10)-year amortization plan was conceptualized. to continue collecting real property taxes based on valuations arrived at several years ago. No. Ongpin. since the Government was unable to fully pay for the lands in question. this power must be used justly and not treacherously. Is the contention of the petitioner and intervenor correct? A. it is beyond serious question that a tax does not cease to be valid merely because it regulates. except such as rest in the discretion of the authority which exercises it. lest the tax collector kill the "hen that lays the golden egg". a residential house and lot. For the management of the aforesaid properties. P. PRINCIPLES OF SOUND TAX SYSTEM: Fiscal Adequacy That the sources of revenues must be adequate to meet government expenditures Chavez vs.D. Out of the net gain from the said sale. and shares of stocks in various corporations. the taxpayer to lend it a helping hand and later on to penalize him for duly answering the urgent call. the brothers formed a partnership which they named “Roxas y Compania. (ROAP). Q. It must be exercised fairly. However. Inc. Q. discourages or even definitely deters the activities taxed. The business activity of the landowner in selling the land involves an isolated transaction with its peculiar circumstances and not to be considered as an act of a dealer even though there were hundreds of vendees. as real property tax is admittedly a local tax for local governments. Roxas.O. The power of taxation is sometimes called also the power to destroy. 1987 was promulgated creating the Videogram Regulatory Board with broad powers to regulate and supervise the videogram industry. Were Roxas brothers and Roxas y Compania real estate dealers. the said law imposes a thirty percent (30%) tax on the sale.464 is unconstitutional insofar as it imposes an additional 1% tax on all property owners to raise funds for education. Fiscal adequacy.state may not levy taxes to raise funds for their prosecution and attainment. lease or disposition of videograms.464 (Real Property Tax Code) is unconstitutional because it accelerated the application of the general revision of assessments to January 1. Taxation may be made the implement of the State’s police power. No. . 23 SCRA 276 Facts: Petitioners are brothers who inherited from their grandparents parcels of agricultural lands. is not in consonance with a sound tax system. which is one of the characteristics of a sound tax system. vs CTA. Is the decree unconstitutional? A. in disregard of the increases in the value of real properties that have occurred since then. L-25043. oppressive and/or in unlawful restraint of trade in violation of the due process clause of the Constitution. Petitioner attacks on the constitutionality of the Decree on the ground that the tax imposed is harsh.D. EXTENT OF THE TAXING POWER Tio vs Videogram Regulatory Board. And. 1987 thereby increasing in real property taxes by 100% to 400% on improvements. and intervenor Realty Owners Association of the Philippines. the brothers agreed to sell the above-mentioned agricultural lands to the Government for the benefit of the farmers who tilled the said lands.occupants on installment in response to the Government’s policy to allocate land to the landless is not subject to real estate dealer’s tax.
XXX Taxes are not in the nature of contracts between the parties but grow out of duty to. added by every seller. A claim for taxes is not such debt. Q. No. Esso Standard. to his purchase of goods and services. Sampaguita was entitled to a judgment against the Republic for the payment of the face value of the certificate. VAT is a tax levied on a wide range of goods and services.000. 62 SCRA 753 Facts: Petitioner claims that his tax delinquency has been set-off or extinguished by legal compensation. 1989 The overpaid income tax of 1959 was considered as a tax credit against the deficiency income tax of 1960. It is a tax on the value. Q. legal compensation as a mode of extinguishing an obligation to pay taxes was nonetheless unavailing against the government. exceeding P200. it ought to be sentenced to pay the taxes. unless exempt. VAT is principally aimed to rationalize the system of taxing goods and services.00. No. there can be no off-setting of taxes against the claims that the taxpayer may have against the government. to enable the country to attain economic recovery. and are the positive acts of. 1989 Facts: The taxes sought to be collected by the Republic from Sampaguita were still unpaid. Can there be a legal compensation in this case? A. discriminatory. INHERENT LIMITATIONS ON THE POWER TO TAX Public Purpose . CIR vs. June 28 1988. IAC.Administrative Feasibility Kapatiran ng mga Naglilingkod sa Pamahalaan vs. The obligation to return the money mistakenly paid arises from the moment the payment is made. with aggregate gross annual sales of articles and/or services.O. Is VAT unconstitutional? A. Ericta. judgment ought at the same time to issue for Sampaguita commanding payment to it by Republic of the same sum representing the face value of the certificate of indebtedness assigned to it and for recovery of which it had specifically prayed in its counterclaim. Neither are they a proper subject of recoupment since they do not arise out of the contract of the transaction sued on. Q. regressive and violates the equal protection and due process clause of the Constitution. while judgment shall be rendered in favor of the Republic against Sampaguita for unpaid taxes. 172 SCRA 364. 172 SCRA 623. its tender of the certificates of indebtedness in question not constituting payment. simplify tax administration. Tan. demand. the government the making and enforcing of which does not require the personal consent of the individual taxpayer. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. 1988. He claims that the Government of the Philippines owes him a certain sum of money when a portion of his land was expropriated. EXCEPTIONS Republic vs. and not from the time that the payee admits the obligation to reimburse.) In effect. Petitioners contend that VAT is unconstitutional for being oppressive. Even assuming the contrary. June 30. contract or judgment as is allowed to be set-off under the statutes of set off. not from the payee’s confession of the mistake or recognition of the obligation to reimburse. and make the tax system more equitable. Yes. Hence. Taxes are not subject to set-off. the same having already been presented and surrendered within the said period of ten (10) years to the Treasurer of the Philippines (through the Municipal Treasurer of Bocaue. The collection of a tax cannot await the results of lawsuit against the government. The obligation of the payee to reimburse an amount paid to him results from the mistake. Francia vs. 163 SCRA 371 Facts: This case has been consolidated because of the similarity of the main issues involved therein which seek to nullify E. 273 which amended certain sections of the NIRC and adopted VAT. Can taxes be set-off? A.
A. the settled law is that intangibles have only the domicile of the decedent at the time of his death as the situs for the purpose of inheritance tax (mobilia sequuntur personam). Respondent sought to subject anew the aforesaid shares of stock to the Philippine inheritance tax. oppressive and/or in unlawful restraint of trade in violation of the due process clause of the Constitution. No. Jose C. alleging such tax as unconstitutional and void for not being levied for a public purpose but for the aid and support of the sugar industry exclusively. the flagrant violation of intellectual property rights. and therefore valid. Antonio Araneta. Taxation may be made the implement of the State’s police power. since they were located in a subdivision owned by Sen. Are the questioned shares of stocks subject to the Philippine Inheritance Tax? A. On the other hand.D. and cannot be applied to limit or control the right of the state to tax property within its . 70 Phil. which provided for an increase of the existing tax on the manufacture of sugar. otherwise the said property would revert to the donor. No. the protection and promotion of the sugar industry is a matter of public concern. Pascual vs. The deed contained a condition that the property donated would be used exclusively by the donee for street purposes and none other. but upon transmission by inheritance.000 shares of stock in the Benguet Consolidated Mining Company. Originally. private property. Wells Fargo Bank & Union Trust Company. 98 Phil 148 Facts: Lutz assailed the constitutionality of Section 2 and 3. 1960. if what is incidental is the promotion of a private enterprise. lease or disposition of videograms. Q. Here. Videogram Regulatory Board. If objective and methods alike are constitutionally valid. The rule is that if the public advantage or benefit is merely incidental in the promotion of a particular enterprise. California. Is the tax law increasing the existing tax on the manufacture of sugar valid? A. Zulueta executed a deed of donation over the property in question in favor of the Government. subject only to the test of reasonableness. Q. J. confiscatory. their transmission by death necessarily takes place under his domiciliary laws. 567. C. In addition. the citizens are held to be its indirect beneficiaries. 110 Phil 331 Facts: Petitioner was the Provincial Governor of Rizal at the time of the institution of this petition. and the proliferation of pornographic videotapes. 151 SCRA 208 Facts: P. R. such defect shall render the law invalid. Territoriality Wells Fargo Bank and Union Trust vs.A. like shares of stock. to which petitioner objected contending that as to intangibles. the levy of a 30% tax is for a public purpose. particularly because of the rampant film piracy. Q. 920 was enacted. their situs is in the domicile of the owner thereof. Tio vs. Is the decree unconstitutional? A. such doctrine has been decried as a mere "fiction of law having its origin in considerations of general convenience and public policy. the place of her alleged last residence and domicile. the legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. December 22. there is no reason why the state may not levy taxes to raise funds for their prosecution and attainment. It was imposed primarily for answering the need for regulating the video industry. Petitioner attacks on the constitutionality of the Decree on the ground that the tax imposed is harsh. 1987 was promulgated creating the Videogram Regulatory Board with broad powers to regulate and supervise the videogram industry. During his term. and donation to the government of the said land made over five (5) months after the approval and effectivity of the Act for the purpose of giving a semblance of legality to the appropriation does not cure the basic defect. the tax law shall be deemed for a public purpose. May the legislature validly appropriate public funds for a private purpose? A. She left a will which was duly admitted to probate in California where her estate was administered and settled. therefore. the legislative discretion must be allowed full play. 1955. and. Sen. at the time of the passage of said act. inheritance tax is not a tax on property. December 29. Secretary of Public Works. While the direct beneficiary of the said decree is the movie industry.000 for the construction of projected feeder roads. was duly appointed trustee of the trust created by the said will. Months after the enactment of the law. Collector. Yes. appropriating P85. Among the properties she left was her one-half conjugal share in 70. the said law imposes a thirty percent (30%) tax on the sale. Said feeder roads were. the law appropriating public funds for the construction of feeder roads on land belonging to a private person is not valid. died at Los Angeles. However. Zulueta. 235 Facts: Birdie Lillian Eye. Yes. L-7859. Q. The Federal and State of California's inheritance taxes due on said shares have been duly paid.Walter Lutz vs.
agricultural. Any claim to the contrary can only be justified if MCIAA can take refuge under any of the exceptions provided in Section 234." and must "yield to established fact of legal ownership.jurisdiction. Cebu City. 55 Phil 715 Facts: Plaintiff. Yes. Q. a warehouse with a floor area of 1. including GOCC’s. m. it necessarily follows that its exemption from payment of such tax as granted in Section 14 of its Charter has been withdrawn. demanded payment for realty taxes on several parcels of land belonging to the petitioner located in Cebu. the assessment and collection by the Philippine Government of the tax on sales of merchandise made in the Philippines to the US Army and US Navy is illegal. citing Section 133 of the Local Government Code of 1991 which puts limitations on the taxing powers of local government units. has the legal title to the certificates of stock held in trust for the true owner thereof. Sales made in the Philippines to the US Army and US Navy are made to instrumentalities of the US Government. reserving Block No. industrial. secretary of the Benguet Consolidated Mining Company. and LGU’s. Posadas. and MCIAA is undoubtedly a GOCC.599 sq. November 5. Respondent City argued that the MCIAA is a government-controlled corporation whose tax exemption privilege has been withdrawn by virtue of Sections 193 and 234 of the Local Government Code. . it may be exercised by local legislative bodies. the owner residing in California has extended here her activities with respect to her intangibles so as to avail herself of the protection and benefit of the Philippine laws. was constructed thereon. Reclamation Area No. The power to tax is primarily vested in the Congress however. Subsequently. 215 SCRA 382 Facts: National Development Company (NDC) is authorized to engage in commercial. Thus. Is petitioner liable to pay real property taxes? A. except as provided in the said section.sold to the US Army fuel and asphalts well as to the US Navy fuel oil. management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City. The President issued Proclamation No. since the said section is now qualified by Sections 232 and 234. 1931. consisting of 4. the actual situs of the shares of stock is in the Philippines. in our jurisdiction. The NDC claims that both the land and the warehouse belonged to the Republic and therefore exempt from taxation. its agencies or instrumentalities. The last paragraph of Section 234 of the Local Government Code unequivocally withdrew exemptions from payment of real property taxes granted to natural or juridical persons. And that one Syrena McKee. MCIAA can no longer invoke the general rule in Section 133 . Taxing Power of LGUs MCIAA v. 4. fees or charges of any kind on the National Government. mining. and therefore are not subject to tax by the Philippine Government. And besides. for warehousing purposes. and cannot be applied if to do so would result in inescapable and patent injustice. Article X of 1987 Constitution subject to guidelines and limitations which Congress may provide which must be consistent with the basic policy of local autonomy. no longer merely by virtue of a valid delegation but pursuant to direct authority conferred by Section 5. Cebu City assessed and collected from NDC real estate taxes on the land and the warehouse thereon." In the instant case. Marcos. Q. Exemption from Taxation of Government Standard Oil Company of New York vs. National Development Co. CIR imposed taxes on the said merchandise. February 26. efficient and effective control. Plaintiff paid the assessed tax under protest alleging that said transactions are not subject to sales tax based on the principle that a state is prohibited from taxing the instrumentalities of the Federal Government.1992.940 sq. but not under Section 133 as it asserts. 4 of Cebu City. and other enterprises necessary or contributory to economic development or important to public interest. In other words.a foreign corporation duly authorized to do business in the Philippines. Is the contention of plaintiff correct? A. Said sales were for the use of the said products by the US Army and Navy in the Philippines. However. m. 261 SCRA 667 (1996) Facts: Petitioner MCIAA was mandated to “principally undertake the economical.” MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with Section 14 of its Charter. actual presence and control elsewhere. the corporation being domiciled therein. vs. the Office of the Treasurer of the City of Cebu.that the taxing power of LGU’s cannot extend to the levy of (a) taxes. 430. the certificates of stock have remained in this country up to the time when the deceased died in California. Yes. Petitioner objected claiming in its favor the said tax exemption and also asserted that it is an instrumentality of the government performing governmental functions.
Petitioners question the used of comparable sales approach rather than income approach. An obvious example is where it can be shown to amount to confiscation of property that would be a clear abuse of power. the RA 6359 – Rental Freezing Law was enacted. The due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. (4) It applies only to those who belong to the same class. Villegas vs. for it taxes only centrifugal sugar produced and exported by Ormoc Sugar Company. The warehouse constructed on the reserved land by NDC should properly be assessed real estate tax as such improvement does not appear to belong to the Republic. 196 SCRA 322 (1991) Facts: Petitioners are owners of a parcel of land which are leased and occupied as dwelling. excessive and confiscatory assessment? A. Inc. and none other. from the coverage of the tax. Equal Protection of the Law Ormoc Sugar Industry vs. was the only sugar central in Ormoc. Still. Is the public land reserved by the President for warehousing purposes in favor of a governmentowned or controlled corporation (GOCC) as well as the warehouse thereon exempt from tax? A. Ormoc Sugar Company. Is the used of comparable sales approach results to an unjust. petitioners were precluded from raising their rental fee. However. was the only sugar central in the City of Ormoc. to be reasonable. the realty tax on said land was increased. the use of the comparable sales approach result to the fact that the taxes exceed the sum total of the yearly income or rental paid by the dweller. At the time of the enactment. may form a corporation with personality and existence distinct from its own. Yes. The taxing ordinance should not be singular and exclusive as to exclude any substantially established sugar central. of the same class as plaintiff. citing violation of the due process clause. Petitioner alleged that said Ordinance is unconstitutional for being violative of the equal protection clause. It may therefore be stated that the tax exemption of property owned by the Republic refers to properties owned by the Government and by its agencies which do not have separate and distinct personalities (unincorporated entities). At the time of the taxing ordinance’s enactment. City Treasurer of Ormoc City. (2) These are germane to the purpose of the law. 1968 Facts: The City Council of Ormoc enacted Ordinance No.Q. A classification is reasonable where: (1) It is based on substantial distinction which makes real difference. Series of 1964 taxing the production and exportation of only centrifugal sugar. Almanzor. (3) The classification applies not only to present conditions but also to future conditions which are substantially identical to those of the present. Is the Ordinance valid? A. The tenants were paying monthly rentals not exceeding P300. the exemption of public property from taxation does not extend to improvements on the public lands made by preemptioners. CONSTITUTIONAL LIMITATIONS ON THE POWER TO TAX Due Process of Law Reyes vs. Later. like any individual. After a reclassification and re-assessment was made by the City Assessor.00. Q. equal protection clause applies only to persons or things identically situated and does not bar a reasonable classification of the subject of legislation. Consequently. A perusal of the requisites instantly show that the questioned ordinance does not meet them. the classification. plaintiff Ormoc Sugar Co.4. it is true. The subject reserved public land remains tax exempt. 86 SCRA 270 . Q. No. should be in terms applicable to future conditions as well. the Republic. Hiu Chiong Tsao Pao Ho. 22 SCRA 603. homesteaders and other claimants or occupants. Mayor Antonio J. the answer is in the affirmative. With regard to the land. The separate personality allows a GOCC to hold and possess properties in its own name and thus permit greater independence and flexibility in its operations. What appears to have been ceded to NDC is merely the administration of the property while the government retains ownership of what has been declared reserved for warehousing purposes.
This is constitutionally permissible. especially on account of the recommendatory power granted to the Secretary of Finance. 2005 Facts: Petitioners contends that R. The Constitution does not prohibit classification but it is imperative that the classification should be based on real and substantial differences having a reasonable relation to the subject of the particular legislation. Petitioners question the method used in the assessment of properties. The tenants were paying monthly rentals not exceeding P300. Association of Custom Brokers. Yes. As they are benefited by their use they should also be made to share the corresponding burden. No. 196 SCRA 322 Facts: Petitioners are owners of a parcel of land which are leased and occupied as dwelling. No. October 18. whether he is casual or permanent. the RA 6359 – Rental Freezing Law was enacted. temporary or casual without first securing an employment permit from the Mayor of Manila. its task being to interpret the law. The ordinance does not lay down any criterion or standard to guide the Major in the exercise of his discretion. vs. Neither does it distinguish between a motor vehicle registered in the City of Manila and one registered in another place but occasionally comes to Manila and uses its streets and public highways. The petitioners claim that the Ordinance is violative of the rule on uniformity of taxation. Q. It exacts the tax upon all motor vehicles operating within the City of Manila. Yes. claim that it is an exercise of the police power as it is a regulatory measure by nature. The intent and will to increase the VAT rate to 12% came from Congress and the task of the President is to simply execute the legislative policy. constitutes undue delegation of legislative power. the realty tax on said land was increased. Uniformity of Taxation Reyes vs. Almanzor. 168056.R. Private respondent questioned the Constitutionality of the Ordinance as being violative of the equal protection clause. Does the recommendatory power of the Secretary of Finance constitute undue delegation? A. After a reclassification and re-assessment was made by the City Assessor. 93 Phil. Does the Ordinance violates the rule on uniformity? A. Congress did not delegate the power to tax but the mere implementation of the law. Later. Consequently. That Congress chose to use the GDP as a benchmark to determine economic growth is not within the province of the Court to inquire into. part-time or full-time. Q. petitioners were precluded from raising their rental fee.00. Is the Ordinance unconstitutional? A. however. Non-Delegation of the Power to Tax ABAKADA vs. the P50. Q.A. the Ordinance infringes the rule of uniformity. 9337's stand-by authority to the Executive to increase the VAT rate. City of Manila. Q. The said ordinance infringes also the rule of uniformity of taxation ordained by our Constitution. The Court held that in making recommendation to the President on the existence of either of the two conditions. It does not distinguish between a motor vehicle for hire and one which is purely for private use. Petitioners. Is the law invalid as it violates the rule on uniformity and equality in taxation? A. No. Inc.00 fee is unreasonable because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it. there is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is an inequality which is found in the ordinance in question and which renders it offensive to the Constitution. whether permanent. There is no pretense that the ordinance equally applies to motor vehicles which come to Manila for a temporary stay or for short errands. No. G. They submit that the recommendatory power given to the Secretary of Finance in regard to the occurrence of either of two events using the Gross Domestic Product (GDP) as a benchmark necessarily and inherently required extended analysis and evaluation is an act of policy making. The fee is collected from every employed alien. ERMITA. the Secretary of Finance is not acting as the alter ego of the President or even her . whether he is a lowly employee or a highly-paid executive.Facts: The City of Manila enacted an Ordinance prohibiting aliens from being employed or to engage or participate in any position or occupation or business. 107 Facts: Petitioners question the validity of a City Ordinance which provides for the collection of a tax against motor vehicles operating within the City of Manila. The law operates equally and uniformly on all persons under the same circumstances. the taxing power may make a reasonable and natural classification for purposes of taxation but it must not be discriminatory. and it cannot be denied that they contribute in no small degree to the deterioration of the streets and public highways.
Tax Exemption of Properties Educational Purposes Used for Religious. St. Catherine’s Hospital was established for charitable and humanitarian purposes. The contention of petitioners is that in enacting the VAT law. considering that he possesses all the facilities to gather data and information and has a much broader perspective to properly evaluate them. He must answer for libel. He may be punished for contempt of court. within the purview of constitutional exemption from taxation. Secretary of Finance. one from the House of Representatives and the other from the Senate. Secretary of Finance. it being admitted that the income derived from pay-patients is devoted to the improvement of charity ward. The Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented. PPI presses its claim because of the possibility that the exemption may still be removed by mere revocation of the regulation of the Secretary of Finance. A bill originating in the House of Representatives may undergo extensive changes in the Senate that may result in the rewriting of the whole. he must pay equitable and nondiscriminatory taxes on his business. Q. 3 SCRA 186 Facts: St. barter or exchange of goods and properties as well as on the sale or exchange of services. Are the lot. Taxation and the Freedom of the Press Tolentino vs. Is contention of the petitioners correct? A. Although the exemption was subsequently restored by administrative regulation with respect to the circulation of income of newspapers.subordinate. Congress violated the Constitution because RA 7716 did not originate exclusively in the House of Representatives. One of the petitioners is Philippine Press Institute (PPI). 235 SCRA 630 Facts: RA 7716 was enacted to widen the tax base of the existing VAT system and enhance its administration by amending the National Internal Revenue Code (NIRC). Catherine’s Hospital exempt from real property tax? A. bartered or exchanged or of the gross receipts from the sale or exchange of services. No. RA 7716 seeks to widen the tax base on existing VAT system and enhance its administration by amending the NIRC. even with due recognition of its high estate and its importance in a democratic society. a charitable institution and the fact that it admits pay-patients does not bar it from claiming that is devoted exclusively to benevolent purposes. because it is in fact the result of the consolidation of two distinct bills. It used to enjoy exemption from real property tax but was later reclassified as taxable. 1961. Quezon City Board of Assessment Appeals (QCBAA). building and other improvements used by St. It had a total capacity of 32 beds. No. and Herrera vs. The PPI questions the law insofar as it has withdrawn the exemption previously granted to the press under Section 103 (f) f the NIRC. Yes. Catherine Hospital is therefore. it is not the law but the revenue bill which is required by the Constitution to originate exclusively in the House of Representatives. It is equivalent to 10% of gross selling price or gross value in money of good or properties sold. To insist that the revenue statute and not only the bill must substantially be the same as the House bill will be to violate the Senate’s power to concur and propose amendments. Q. to determine and declare the event upon which its expressed will is to take effect. He is acting as the agent of the legislative department. August 25. Like others. however the press is not immune from general regulation by the State. which represents almost 2/3 of the bed capacity of the hospital.a non-profit organization of newspaper publishers. Bills to Originate from the House of Representatives Tolentino vs. September 30. . Is RA 7716 unconstitutional for it violates the freedom of the press? A. August 25. 1994. aside from “charity out-patients” who come only for consultation. It likewise operates as a school for midwifery. Charitable. 235 SCRA 630 Facts: Petitioners assail the constitutionality of RA 7716 imposing Value Added Tax (VAT) on the sale. He has no special privilege to invade the rights and liberty of others. 1994. Q. His function is to gather and collate statistical data and other pertinent information and verify if any of the two conditions laid out by Congress is present. It has been held that the publisher of a newspaper has no immunity from the application of general laws. Petitioner claims violations of their rights under Sections 4 of the Bill of Rights as a result of the enactment of the VAT Law. 20 of which are for charity patients and the remaining 12 are for pay patients.
309 SCRA 102 . interns and residents. an educational corporation and institution of higher learning duly incorporated with the Securities and Exchange Commission failed to pay its real estate taxes and penalties as a result thereof a Notice of Seizure and Notice of Sale of the lot and building was served against the petitioner. the petitioner is burdened to prove. The ground floor of said building was leased to various commercial establishments. or for the Lung Center. while a big portion on the right side is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. No. Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and idle. directly and exclusively used for religious. Q. Under the 1973 and 1987 Constitutions and Rep. the exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. What is meant by actual. The lease of the ground floor to the Northern Marketing Corporation cannot by any stretch of imagination be considered incidental to the purpose of education. 1988 Facts: Petitioner. together with his family. Are the real properties of the petitioner exempt from real property taxes? A. What is exempted is not the institution itself but lands. the exemption in favor of the property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefore but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes.. 162 SCRA 106. DOUBLE TAXATION CIR vs. 1999. the test for exemption from taxation is the use of the property for purposes mentioned in the Constitution. Quezon City and Constantino P. DIRECTLY and EXCLUSIVELY used for charitable purposes. parcel of land located at Quezon City.Moreover. direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. June 25. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. directly and exclusively used for charitable purposes. 144104. charges and fees imposed by the Government or any political subdivision or instrumentality thereof with respect to equipment purchases made by. 2004 Facts: The petitioner Lung Center of the Philippines is a non-stock and non-profit entity. The school was assessed for taxes because it was not exclusively used for educational purposes. resident doctors. Article VI of the 1987 Constitution. and (b) its real properties are ACTUALLY. which is complimentary to the main or primary purpose – educational. Both the land and the hospital building of the petitioner were assessed for real property taxes by the City Assessor of Quezon City. property used to provide housing facilities for interns. Lung Center of the Philippines vs. Q. such as. SC Johnson and Son. both paying and nonpaying. a school for training nurses. the petitioner receives annual subsidies from the government. Petitioner accepts paying and non-paying patients. charitable or educational purposes. such as ‘athletic field’ including a firm used for the inmates of the institution. It also renders medical services to out-patients. buildings and improvements actually. A big space at the ground floor is being leased to private parties. The tax exemption under Section 28(3). the petitioner does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. Act No.R. superintendents and other members of the hospital staff and recreational facilities for student nurses. The use of the second floor of the main building in the case at bar for residential purposes of the Director and his family may find justification under the concept of incidental use. 7160 in order to be entitled to the exemption. Article VI covers property taxes only. Are the parts of the school building used as residence and leased to commercial establishments tax-exempt? A.G. Rosas. Abra Valley College vs. Aquino. for canteen and small store spaces. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes. It is plain as day that under the decree. by clear and unequivocal proof. The Lung Center of the Philippines shall be exempt from the payment of taxes. occupies the second floor of the school building as their residence.463 sq.m. in the case of hospitals. Aside from its income from paying patients. Inc. However. The Director of the Abra Valley College. June 29. a nurses’ home. Petitioner avers that it is a charitable institution within the context of Section 28(3). While the use of the school building or lot for commercial purposes is neither contemplated by law. nor by jurisprudence therefore not tax exempt. Those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually. and to medical or professional practitioners who use the same as their private clinics for their patients whom they charge for their professional services. It is the registered owner of a 121. that (a) it is a charitable institution. I qualify.
1968 Facts: Upon the passage of the Local Autonomy Act – RA 2264. On International Juridical Double Taxation -The RP-US Tax Treaty is just one of a number of bilateral treaties which the Philippines has entered into for the avoidance of double taxation. The most favored nation clause is intended to establish the principle of equality of international treatment by providing that the citizens or subjects of the contracting nations may enjoy the privileges accorded by either party to those of the most favored nation. speaks of tax on royalties for the use of trademark. patents. although the amount of tax that may be imposed by the state of source is limited. For the use of trademark and technology respondent was obliged to pay SC Johnson and Son. as owners of tenement houses. The second method for the elimination of double taxation applies whenever the state of source is given a full or limited right to tax together with the state of residence. royalty income. The basic difference between the two methods is that in the exemption method. although in some instances it may be taken into account in determining the rate of tax applicable to the taxpayer’s remaining income or capital. and technology. an exclusive right to tax is conferred on one of the contracting states. Villanueva vs. in this case.Facts: SC Johnson and Son. above-quoted. Iloilo. is a domestic corporation organized and operating under the Philippine laws. the tax paid in the former is credited against the tax levied in the latter. a tax treaty resorts to several methods. however. In some cases. the income or capital which is taxable at the state of source or situs is exempted at the state of residence. a non-resident foreign corporation based in the USA pursuant to which respondent was granted the right to use the trademark. On the other hand. marketing and production from SC Johnson and Son. question the . In the exemption method.the exemption method and the credit method. The CIR however. whereas the credit method focuses upon the tax. since the RP-US Tax Treaty does not give a matching credit of 20% for the taxes paid to the Philippines on royalties as allowed under the RP-West Germany Tax Treaty. The essence of the principle is to allow the taxpayer in one state to avail of more liberal provisions granted in another tax treaty to which the country of residence of such taxpayer is also a party provided that the subject matter of taxation. Inc. did not act on the claim for refund. USA. Plaintiff-appellees. Q. No. patents and technology owned by the latter including the right to manufacture. Inc. for other items of income or capital. More precisely. the City of Iloilo collected from Villanueva several amounts for the years 1960 to 1964. USA. both states are given the right to tax. entered into an agreement with SC Johnson and Son. There are two methods of relief . the focus is on the income or capital.. Pursuant to the said Ordinance. although the income or capital which is taxed in the state of source is still taxable in the state of residence. First. USA is only subject to 10% withholding tax pursuant to the most-favored nation clause. In this case. USA royalties and subjected the same to 25% withholding tax on royalty payments. Respondent claim for refund of overpaid withholding tax on royalties and submit that the royalties paid to SC Johnson and Son. 26 SCRA 578. it sets out the respective rights to tax of the state of source or situs and of the state of residence with regard to certain classes of income or capital. Is SC Johnson and Son. The similarity in the circumstances of payment of taxes is a condition for the enjoyment of most favored nation treatment precisely to underscore the need for equality of treatment. is the same as that in the tax treaty under which the taxpayer is liable. the City of Iloilo Board passed an Ordinance imposing municipal license tax on persons engaged in the business of operating tenement houses. the tax conventions are drafted with a view towards the elimination of international juridical double taxation which is defined as the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical periods. in the credit method. entitled to the “most favored nation” tax rate of 10% on royalties? A. the treaties make it incumbent upon the state of residence to allow relief in order to avoid double taxation. The purpose of these international agreements is to reconcile the national fiscal legislation of the contracting parties in order to help the taxpayer avoid simultaneous taxation in two different jurisdictions. respondent cannot be deemed entitled to the 10% rate granted under the latter treaty for the reason that there is no payment of taxes on royalties under similar circumstances. The entitlement of the 10% rate by US firms despite the absence of matching credit (20% for royalties) would derogate from the design behind the most favored nation clause to grant equality of international treatment since the tax burden laid upon the income of the investor is not the same in the two countries. Both Articles 13 of the RP-US Tax Treaty and Article 12(2) of the RP-West Germany Tax Treaty. The “purpose of the “most favored nation clause” is to grant to the contracting parties treatment not less favorable than that which has been or may be granted to the “most favored” among other countries. package and distribute the products covered by the Agreement and secure assistance in management. Methods to Eliminate Double Taxation -In order to eliminate double taxation.
It is a wellsettled rule that a license tax may be levied upon a business or occupation although the land or property used in connection therewith is subject to property tax. Such scheme is tainted with fraud. • during the same taxing period. The administrator of the estate of Toda paid the deficiency taxes under protest. Cusi. Choa for P12. including all acts. • within the same jurisdiction or taxing district. The scheme resorted to by CIC in making it appear that there were two sales of the subject properties. Tax avoidance is the tax saving device within the means sanctioned by law. Is the scheme perpetuated by Toda a case of tax evasion or tax avoidance? Ruling: It is a tax evasion scheme. Does the ordinance constitute double taxation? A. Jr. the payment of less than that known by the taxpayer to be legally due. The State may collect an ad valorem tax on property used in a calling. from CIC to Altonaga. GR 147188.. At all events. trust or confidence justly reposed. moreover. Government or taxing authority. thus evading the higher corporate income tax rate of 35%. and at the same time impose a license tax on that calling.e. and (3) a course of action or failure of action which is unlawful. No. in turn. or by which an undue and unconscionable advantage is taken of another. to sell the Cibeles Building and the two parcels of land on which the building stands. Fraud in its general sense “is deemed to comprise anything calculated to deceive. and not the 35% corporate income tax. and then from Altonaga to RMI cannot be considered a legitimate tax planning (one way of tax avoidance). Toda sold his entire shares of stocks in CIC to Le Hun T. which is owned by an entirely different set of stockholders.” Here. it usually subjects the taxpayer to further or additional civil or criminal liabilities. Sept.5 million. Prior to the transaction. These two transactions were evidenced by Deeds of Absolute Sale notarized on the same day by the same notary public. i. the contention that plaintiff-appellees are double-taxed because they are paying real estate taxes and the tenement tax imposed by the ordinance in question is devoid of merit..991% of its issued and outstanding capital stock. For the sale of the property to RMI. who. resulting in the damage to another. 2004. 1980.. It has been shown that a real estate tax and the tenement tax imposed by the ordinance.” or “deliberate and not accidental”. • the same kind or character of tax. Benigno Toda Jr. Toda had undertaken to hold the buyer of his stockholdings and the CIC free from all tax liabilities for the fiscal years 1987-1989. Altonaga paid capital gains tax in the amount of P10 million. 14. The BIR then proceeded against the estate of Toda. (2) an accompanying state of mind which is described as being “evil. The new CIC asked for a reconsideration asserting that the assessment should be directed against the old CIC. are not of the same kind or character. Tax evasion connotes the integration of three factors: (1) the end to be achieved.e. This method should be used by the taxpayer in good faith and at arms length.” “willfull. President and owner of 99. 438 SCRA 290 Facts: The BIR sent an assessment notice and demand letter to the Cibeles Insurance Corporation (CIC) for deficiency income tax for the year 1989 arising from an alleged simulated sale of a 16-storey commercial building known as Cibeles Building in Makati City. Toda purportedly sold the property for P100 million to Altonaga. Ungab vs. sold the same property on the same day to Royal Match Inc. is a scheme used outside of those lawful means and when availed of. In order to constitute double taxation in the objectionable or prohibited sense -• the same property must be taxed twice when it should be taxed but once. • by the same State. the imposition of the latter kind of tax being in no sense a double tax.” in “bad faith. although imposed by the same taxing authority. Q. Three and a half years later Toda died. Tax evasion. However. • both taxes must be imposed on the same property or subject matter.. this protest was denied by the CIR stating that a fraudulent scheme was deliberately perpetuated by the CIC wholly owned and controlled by Toda by covering up the additional gain of P100 million. there is no constitutional prohibition against double taxation in the Philippines. • for the same purpose. and not against the new CIC. omissions. or the non-payment of tax when it is shown that a tax is due. 97 SCRA 877 . They contend that they are doubly taxed because they are paying both the real estate tax and the tenement tax imposed by the ordinance in question. on the other hand. which resulted in the change in the income structure of the proceeds of the sale of the two parcels of land and the building thereon to an individual capital gains. and concealment involving a breach of legal or equitable duty. May 30. (RMI) for P200 million. TAX EVASION CIR vs. it is obvious that the objective of the sale to Altonaga was to reduce the amount of tax to be paid especially that the transfer from him to RMI would then subject the income to only 5% individual capital gains tax.constitutionality of the ordinance. i. the CIC authorized Benigno Toda. Q.
assessment is not a condition precedent to the filing of criminal charges for tax evasion. Is an assessment necessary before a criminal charge can be filed? A. it was discovered that he failed to report his income derived from the sales of banana saplings. Q. INCOME TAXATION Global System vs. It must be stressed that a criminal complaint is instituted not to demand payment but to penalize the taxpayer for violation of the Tax Code. preserve and enhance the same. Pascor Realty Development Corporation. Secretary of Public Works. CCP’s Board of Trustees received foreign donations and financial commitments. Petitioner however.Facts: Upon examination of petitioner’s income tax return. No. 1994 Facts: The Simplified Net Income Taxation Scheme (SNITS) was promulgated imposing a tax on taxable net income from all sources. there was the absence of the pecuniary requisite or monetary interest. executed an affidavit and filed a criminal complaint for tax evasion. Accordingly. the BIR examiner recommended the filing of a criminal prosecution for tax evasion. 30 based on a taxpayer’s suit? A. 30. 237 SCRA 324. Q. there was an encroachment by the President on the legislative’s prerogative to enact laws. 1999 Facts: Under authority by the CIR. revenue officers examined herein respondent’s accounting books and discovered deficiency taxes for two (2) fiscal years. 65 SCRA 624. The trust was to undertake the construction of a national theater and music hall to awaken the nation’s consciousness or cultural heritage and to promote. rather than instituting a criminal complaint at once. assails the action of the CIR by stating that a deficiency tax assessment should have been first filed by the CIR. the President created a trust for the benefit of the Filipino People under the name and style of the Cultural Center of the Philippines. TAXPAYER’S SUIT Gonzales vs. has not satisfied an element for a taxpayer’s suit. Section 205 clearly mandates that the civil and criminal aspects of the case may be pursued simultaneously. officers of the corporation. alleging that the trial court has no jurisdiction to take cognizance of the criminal case in view of his pending protest against the assessment made on him. Pursuant thereto. Vera. No.. foreshadowed by People vs. No. There is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution under the Code. 30. This is not to retreat from the liberal approach followed in the earlier case of Pascual vs. Furthermore. Does the petitioner have the personality to question the validity of EO No. Is the resolution of the protest of the assessment necessary before the filing of a criminal case? A. Section 222 of NIRC provides that in cases where a false or fraudulent return was submitted or in cases of failure to file a return such as this case. It was pointed out therein that one valid reason why such an outcome was unavoidable was that the funds administered by the Center came from donations and contributions and not from taxation. an assessment of a deficiency tax is not necessary to precede a criminal prosecution for willful attempt to defeat and evade income tax. judged by orthodox legal learning. other than income from salaries. Schedular System Tan vs Del Rosario Jr. whether to file a criminal case against the taxpayer or to do both. 309 SCRA 402. Petitioner filed a motion to quash the information. The stand of the lower court finds support in judicial precedents. without a single centavo raised by taxation. Convinced that petitioner filed a fraudulent return. Petitioners challenge said law for violating the constitutional requirement of uniformity in taxation in that the law would now attempt to tax single proprietorship and professionals differently from the manner that it imposes tax on corporations and partnerships. proceedings in court may be commenced without an assessment. Q. CIR vs. . Respondents Rogelio Dio and Virginia Dio. The trial court dismissed the petition on the ground that Gonzales did not have the personality to question the issuance of EO No. based on the reports made by the revenue officers. 1975 Facts: Through EO No. Marcos. CIR has discretion in such tax evasion cases. of every individual whether a citizen of the Philippines or an alien residing in the Philippines who is self-employed or practices his profession herein. where the doctrine was exhaustively discussed. The CIR. The crime is complete when the violator has. The contention of the petitioner is without merit. as in this case. Gonzales did not meet the requisite burden to warrant the reversal of the trial court’s decision. 30 since the funds administered by the CCP came from donations. claims that in issuing EO No. knowingly and willfully filed a fraudulent return with the intent to evade and defeat a part or all of the tax. It is only to clarify that the Petitioner.
3) The law applies all things being equal. Sources of Income CIR vs. While income is the gain derived from capital. interests. and compromise penalties because the sale of the ticket does not constitute income in the Philippines because no carriage of person or cargo was made by BOAC therein.tax treatment views indifferently the tax base and generally treats in common all categories of taxable income of the taxpayer. which was responsible for selling BOAC tickets covering passengers and cargoes. Ltd. No. and was not granted a Certificate of public convenience and necessity to operate in the Philippines by the Civil Aeronautics Board (CAB). Uniformity does not forbid classification as long as – 1) The standards that are used therefore are substantial and not arbitrary. by and large. British Overseas Airways Corporation (BOAC). Fisher protested the assessment made against him and claimed that the stock dividends in question are not income but are capital and are. Are stock dividends income? A. including the gain derived from the sale or exchange of capital assets. the power to tax cannot override constitutional proscriptions. as a matter of fact. and 4) The classification applies equally well to all those belonging to the same class. was a stockholder in the Philippine American Drug Company. coverage (subjects) and situs (place) of taxation. Conwi vs. Trinidad. by constitutional fiat. although it maintained a general sales agent the Philippines-Warner Barnes and Company. The stockholder has received nothing but a representation of an interest in the property of the corporation and. Said corporation declared a stock dividend and that a proportionate share of stock dividend was issued to the plaintiff-appellant. . What may instead be perceived to be apparent from the amendatory law is the legislative intent to increasingly shift the income tax system towards the schedular approach in the income taxation of individual taxpayers and to maintain. 1987. uniformity in taxation merely requires that all subjects or objects of taxation similarly situated be treated alike in both privileges and liabilities. and the corporation parts with nothing to its stockholder. despite all its plenitude. Unless otherwise specified. from labor.employed where the income tax treatment varies and made to depend on the kind or category of taxable income of the taxpayer. The CIR issued an assessment against BOAC for deficiency income taxes.Q. A stock dividend. 1992. except for a nine-month temporary landing permit. not subject to tax. (Qantas Airways). when declared. extent (rate). With the legislature primarily lies the discretion to determine the nature (kind). demanded payment of income tax on the aforesaid dividends. A declaration of stock dividend by a corporation involves no disbursement to the stockholder of accumulated earnings. object (purpose). 43 Phil 973 Facts: Frederick C. It did not carry passengers or cargo to or from the Philippines. August 31. 2) The categorization is germane to achieve the legislative purpose. for. Global System -. to both present and future conditions. depending upon the final outcome of the business of the corporation. The property represented by a stock dividend is still that of the corporation and not of the stockholder. Judicial Definition Fisher vs. 213 SCRA 83 Income may be defined as an amount of money coming to a person or corporation within a specified time. from both capital and labor. whether as payment for services. Schedular System -. he may never receive anything. No. CTA. April 30. courts will not hesitate to strike it down. rightly rest on legislative judgment. stock dividends are not income and are therefore not taxable as such. Where a tax measure becomes so unconscionable and unjust as to amount of confiscation of property. Income can also be thought of as a flow of the fruits of one's labor. Q. therefore. This court cannot freely delve into those matters which.149 SCRA 395 Facts: BOAC is engaged in the international airline business. being the then Commissioner of Internal Revenue. it means cash or its equivalent. It had no landing rights in the Philippines. is merely a certificate of stock which evidences the interest of the stockholder in the increased capital of the corporation. We certainly do not view this classification to be arbitrary and inappropriate. interest or profit from investment. Trinidad. the present global treatment on the taxable corporations. Fisher. Is the law invalid for it runs counter to the constitutional rule that taxation shall be uniform and equitable? A.
July 31. where the income was earned and where the taxpayer is domiciled. This information as to the insolvency of the Company — reached (the taxpayer) in 1950. No. Yes. 1948. Rafferty. vs. completely insolvent. Is the worthlessness of the said stock had been clearly established? A. To carry out this idea. When the company ceased to operate. The CIR questions the Tax Court's allowance of the taxpayer's writing off as worthless securities in its 1950 return the sum of P8. Partnership Theory CIR vs. is a domestic corporation organized for the principal purpose of engaging in business as an “investment company”. and proper climate for such production xxx. There must be gain or profit. 29 SCRA 553 Facts: Petitioner. it is undisputable that justice and equity demand that the tax on the income should accrue to the benefit of the Phil. The source of an income is the property. Commissioner. The test of taxability is the source. Q." when properly claimed the loss as a deduction in its 1950 tax return. The Court. Fernandez Hermanos. found that "the company ceased operations in 1949 when its Manager and owner died.050. xxx the right of a government to tax income emanates from its partnership in the production of income. Is the contention of the spouses correct? A. they paid the corresponding taxes thereon. public considerations have demanded an exemption roughly equivalent to the minimum of subsistence. however. Hence. there was adequate basis for the writing off of the stock as worthless securities. Assuming that the Company would later somehow realize some proceeds from its sawmill and equipment. it still had its sawmill and equipment which must be of considerable value. where the income was not earned and where the taxpayer did not reside. Q. Lednicky. it is sufficient that the income is derived from the activity in the Philippines.Q. the Philippine Government only receives the proceeds of one tax. 2.00 representing the cost of shares of stock of Mati Lumber Co. 1964 11 SCRA 603 Facts: The Lednicky spouses are resident aliens deriving all their income from Philippine sources. Functions of Income Tax Madrigal vs. for the source of income to be derived in the Philippines. 1956 and 1957. Government and they requested the refund of the allegedly overpaid taxes. Requisites for Income to be Taxable: 1. The flow of wealth proceeded form and occurred within the Philippine territory enjoying the protection accorded by the Philippine Government. In the present case. Inc. 38 Phil 414 The aim has been to mitigate the evils arising from the inequalities of wealth by a progressive scheme of taxation. The gain must not be excluded by law or treaty from taxation. whether in cash or its equivalent.. they would be subjected to double taxation. while the spouses would have to pay two taxes on the same income. 3. pursuant to Section 30(d) (4) (b) or Section 30 (e) (3) of the National Internal Revenue Code. and the US. on the ground that the worthlessness of said stock in the year 1950 had not been clearly established. the absence of flight operations cannot alter the fact that tickets were sold in the Philippines and the revenue derived therefrom were derived from a business activity regularly pursued in the Philippines. which places the burden on those best able to pay. The spouses stress that if they are not allowed to deduct the income taxes they ate required to the US Government in their return for Philippine income tax. incentives. With these exceptions. The sale of the tickets is the activity that produces the income. double taxation becomes obnoxious only when the taxpayer is taxed twice for the benefit of the same governmental entity.S. which were still existing. activity or service that produced the income. As between the Phil. September 30. 1960. the Income Tax Law is supposed to reach the earnings of the entire nongovernmental property of the country. The absence of flight operations is not determinative of the source of income or the situs of income taxation. After filing their income tax returns for the years 1955. and that such proceeds would later be distributed to its stockholders such as the . The Commissioner contends that although the said Company was no longer in operation in 1950. it had no assets. the spouses filed an amended income tax return claiming therein deductions for foreign income taxes paid to the U. Thereafter. Is the selling of tickets by BOAC without landing rights in the Philippines constitute income derived therein and therefore subject to income tax? A. in other words. resources. The gain must be realized. Yes. acquired by the taxpayer on January 1. The situs or the source of the payment is in the Philippines. by providing the protection.
in order to protect itself against the loss that it might suffer by reason of the death of its manager.. the duly appointed. It is a cause beyond the control of the said official or employee. Posadas. No. The payment by the subtenant in 1957 should have been reported as rental income in said year. 1990. Atty. Petitioner denied having received or collected the said unreported rental income explaining that part of said amount was not declared because its president did not turn the same over to petitioner in said year but did so only in 1959 and that a certain tenant deposited in court his rentals over which the corporation had no actual or constructive control. Upon his compulsory retirement. Limpan duly filed its 1956 and 1957 income tax returns however the examiners of BIR conducted investigation of petitioner’s income tax returns and they discovered and ascertained that petitioner had under declared its rental income during said taxable years and had claimed excessive depreciation of its buildings. Q. Plaintiff paid for the insurance premiums and charged the same as expenses of its business and deducted the same from its gross income which Posadas. and whose death would be a serious loss to the plaintiff. which he received by virtue of his compulsory retirement. Zialcita. hence.declaration of said income in 1957. Zialcita’s request was granted. it necessarily follows that the terminal leave pay or its cash equivalent is no longer compensation for services rendered. . a retired employee of the Supreme Court filed a request with the SC for the refund of the amount of P59. Plaintiff. 190 SCRA 851 Facts: Bernardo Zalcita.taxpayer. 56 Phil 147 Facts: El Oriente is a domestic corporation duly organized and existing under Phil. No.502. Constructive Receipt Limpan Investment Corp. The Court said that the terminal leave pay of Atty. October 18. an insurance policy on the life of the said manager and designated itself as the sole beneficiary. Bernardo Zialcita. The same is applied for by an employee who retires or resigns or is separated from service through no fault of his own. and was not the fault of its tenants. No. can never be considered as part of his salary subject to income tax. EXCLUSIONS FROM GROSS INCOME Proceeds of Life Insurance El Oriente vs. Plaintiff paid under protest claiming exemption. the amount so received by the taxpayer would then properly be reportable as income of the taxpayer in the year it is received. Is terminal leave pay subject to income tax? A. the proceeds of insurance taken by a corporation on the life of an important official to indemnify it against loss in case of his death. the withdrawal in 1958 of the deposits in court pertaining to the 1957 rental income is no sufficient justification for the non. Is the contention of the petitioner sufficient to justify the non-declaration of rental income? A. since it is income just the same regardless of its source. A. Q. Therefore. laws. Since terminal leave pay is applied for by an officer or employee who has already severed his connection with his employer and who is no longer working. qualified and acting Collector of Internal Revenue allowed. petitioner is deemed to have constructively received such rentals in 1957. Are the proceeds of the life insurance policy taxable? A. plaintiff received all the proceeds of the life insurance policy which Posadas assessed and levied as income tax. he is entitled to the commutation of his accumulated leave credits to its monetary value. Thus. the commutation of leave credits is commonly known as terminal leave pay. it cannot be received by the said employee as salary. 17 SCRA 703 Facts: Petitioner. are not taxable as income under the Philippine Income Tax Law. Upon the death of Velhagen. Hence. since the deposit was resorted to due to the refusal of petitioner to accept the same. vs. Retirement Benefits Re: Request of Atty. The indefiniteness of the local law is emphasized. Q. it is one of those excluded from gross income and is therefore not subject to tax. a domestic corporation duly registered is engaged in the business of leasing real properties. procured from the Manufacturers Life Insurance Co. Commisioner.33 which was deducted from his terminal leave pay as withholding tax. CIR demands the payment of deficiency income tax. who had had more than thirty-five (35) years of experience in the manufacture of cigars in the Philippines. Velhagen.
in turn undertook to sell to Mitsubishi all the copper concentrates produced from said machine for a period of fifteen (15) years. Henderson. Under said contract. Significantly. controlled. the taxpayers are entitled only to a ratable value of the allowances in question. It was contemplated that $9. bonds or other domestic securities. for the installation of a new concentrator for copper production. Cebu. US currency. A claim for tax credit was filed by Atlas. Although the quarters they occupied exceeded their personal needs." The loan and sales contract between Mitsubishi and Atlas does not contain any direct or inferential reference to Eximbank whatsoever. Mitsubishi thereafter applied for a loan with the Export-Import Bank of Japan (Eximbank for short) obviously for purposes of its obligation under said contract. that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. assessment notice and paid the amount assessed. interest payments were made by the former to the latter. The BIR reassessed the taxpayer’s income after investigation. The taxpayer asked for reconsideration with the Collector but was denied.000. as to dispense with the need for citations. water. Nevertheless. and (3) international or regional financing institutions established by governments. Q. subsistence. 1 SCRA 649 Convenience of the Employer Rule Facts: Arthur. telephone. Mitbushi Metal Corporation. private respondents are not even among the entities which.. under Section 29 (b) (7) (A). No. Inc. This is the reason why the husband-taxpayer's employer-corporation had to grant him allowance for rental and utilities in addition to his annual basic salary to take care of those extra expenses for rental and utilities in excess of their personal needs. Meanwhile. Are the allowances given by his employer formed part of the taxable income? A. are entitled to exemption and which should indispensably be the party in interest in this case.00. for no part of the allowances in question redounded to their personal benefit or was retained by them.000. Mitsubishi agreed to extend a loan to Atlas 'in the amount of $20. The excess should be considered as expenses of the corporation. Only the reasonable amount they would spent for house rental and utilities such as light. INDIVIDUAL INCOME TAXATION Tax Exempt Compensation Income Collector vs. Taxation is the rule and exemption is the exception. is the president of the American International Underwriters for the Phil.00 of said loan was to be used for the purchase of the concentrator machinery from Japan.. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed. or enjoying refinancing from them. a domestic corporation engaged in insurance business. The spouses received from the BIR. stocks. Spouses Arthur and Marie Henderson filed with the BIR returns of annual net income for the years 1948 to 1952. residential. for purposes of the projected expansion of the productive capacity of the former's mines in Toledo.000. Q. Atlas. a Japanese corporation licensed to engage in business in the Phil. the contract between Eximbank and Mitsubishi is entirely different. February 28. should be subject to tax. Their bills for rental and utilities were paid directly by the employer-corporation to the creditors. which onus petitioners have failed to discharge. the BIR included the taxpayer-husband’s allowances for rental. etc.Miscellaneous items Commissioner vs. Allowable Deductions from Gross Compensation Income: . (2) financing institutions owned. under Section 29 (b) (7) (A) of the Tax code. In the foregoing assessment. Is the loan tax exempt? A. They had to entertain and put up house-guests in their apartments. Pursuant to the contract between Atlas and Mitsubishi. 181 SCRA 214 Facts: Atlas Consolidated Mining and Development Corporation (Atlas) entered into a Loan and Sales Contract with Mitsubishi Metal Corporation (Mitsubishi). excludes from gross income: "(A) Income received from their investments in the Philippines in loans. or from interest on their deposits in banks in the Philippines by (1) foreign governments. It is too settled a rule in this jurisdiction.000. water. 1961. The fact that the taxpayers had to live or did not have to live in the apartment's chosen by the husband-taxpayer's employer-corporation is of no moment. and bonus paid to him. the exigencies of husbandtaxpayer's high executive position demanded and compelled them to live in more spawning and pretentious quarters like the ones they had occupied. The agreement is strictly between Mitsubishi as creditor in the contract of loan and Atlas as the seller of the copper concentrates.
87 Phil (wala po kme makitang ganitong ruling sa mismong case or maybe we got the wrong case. January 20. Rafferty. Dona Carmen. Stock dividend is taxable to usufructuary. as her conjugal share and the other half formed part of his estate. Thereafter. August 7. BUSINESS/ TRADE/ PROFESSIONAL INCOME GR: Stock dividends are not taxable. Dona Carmen requested a ruling from the US Internal Revenue Service. His claim having been denied. EXCPS: Cancellation or redemption of shares of stock Commissioner vs. essentially equivalent to the distribution of a taxable dividend. wife of Vicente Madrigal. and cannot be subjected to tax until that gain has been realized. CA. CA.Personal Exemptions Madrigal vs. for his income tax for the year 1914. appellant pays the tax under protest. 1999. The exception was designed to prevent the issuance and cancellation or redemption of stock dividends. paki check nalang po. Bachrach vs Siefert. The husband and wife are only entitled to the exemption of P8. She has an interest in the ultimate property rights and in the ultimate ownership of property acquired as income after such income has become capital. Is the contention of petitioner correct? A. The IRS opined that the exchange is only recapitalization scheme and not tax avoidance scheme. making the proceeds thereof taxable. Soriano Y Sia”. As she has no estate and income. 38 Phil 414 Facts: Vicente Madrigal is married to Susana Paterno. Susana Paterno cannot make a separate return in order to receive the benefit of the exemption which would arise by reason of the additional tax.000. Not being seized of a separate estate. he claims that the amount reflected in the return does not represent his income alone but that of the conjugal partnership of the spouses. The BIR examiners after examining ANSCOR’ books of account and records issued a report proposing that ANSCOR be assessed for deficiency withholding tax. 301 SCRA 152 Facts: Don Andres Soriano. Don Andres died one-half of his shareholdings were transferred to his wife. specifically granted by the law. formed the corporation “A. So that the mere issuance thereof is not yet subject to income tax as they are nothing but an “enrichment through increase in value of capital investment. 301 SCRA 152 However. herein appellee. In 1964. which is fundamentally not taxable. the income cannot properly be considered the separate income of the wife for the purposes of the additional tax. He filed a tax return with the Collector of Internal Revenue. tnx. actually and legally vested in her and entirely distinct from her husband's property. Petitioner contends that the redemption of stocks and exchange of common with preferred shares can be considered as “essentially equivalent to the distribution of taxable dividend”. 1999. Commissioner vs. He proposes that the aforementioned net income be divided equally into two parts for the payment of the proper tax.” In a loose sense. has an inchoate right in the property of her husband Vicente Madrigal during the life of the conjugal partnership. 1918. stock dividends issued by the corporation are considered unrealized gain. Q. Recipient is other than shareholder. inquiring if an exchange of common with preferred shares may be considered as tax avoidance scheme. January 20. represent capital and do not constitute income to its recipient. the amount so distributed in redemption or cancellation of stock shall be considered as taxable income to the extent it represents a distribution of earning or profits. No. who are all non-resident aliens. stock dividends. Susana Paterno has no absolute right to one-half the income of the conjugal partnership.) . ANSCOR declared stock dividends. predecessor of ANSCOR. Moreover. ANSCOR is wholly owned and controlled by the family of Don Andres. Should the income tax be divided between the spouses? A. strictly speaking. from being made use as a device for the actual distribution of cash dividends. Susana Paterno. a citizen and resident of the US. the Income Tax Law does not look on the spouses as individual partners in an ordinary partnership. if a corporation cancels or redeems stock issued as a dividend at such time and in such manner as to make the distribution and cancellation or redemption in whole or in part. Q.
CORPORATION INCOME TAXATION: Unregistered or Registered Partnership Evangelista vs. it must be allude to organizations which are not necessarily "partnership" in the technical sense of the term. Section 24 of the Internal Revenue Code exempts from the tax imposed upon corporations "duly registered general partnership". real estate dealer’s tax. The declaration of said shares as treasury stock dividend was a complete nullity and plainly violative of public policy. Thus. xxx The Pennsylvania rule is more in accord with our statutory laws than the Massachusetts rule. for otherwise equal distribution of voting powers among stockholders will be effectively lost and the directors will be able to perpetuate their control of the corporation though it still represent a paid . represent surplus profits. Instead." This qualifying expression clearly indicates that a joint venture need not be undertaken in any of the standards form. Yes. in order that one could be deemed constituted for the purposes of the tax on corporations. Respondent decided that petitioners formed an unregistered partnership and therefore subject to corporate income tax. However. The real properties they bought were rented or leased to various tenants. When our Internal Revenue Code includes "partnership" among the entities subject to the tax on "corporations". being a civil fruit. but being in the treasury they do not have the status of outstanding shares. 2 Phil 509 An agreement between two persons to operate a cockpit. October 15. because dividends cannot be declared by the corporation to itself. A settlement of the estate was instituted in the CFI. no corporation may make or declare from its business. Consequently. 1972. donation.for interest in the property of the corporation. Lorenzo Ońa and her five children. constitutes a partnership. or conformity with the usual requirements of the law on partnerships. said stock dividend maybe taxable to the usufructuary. Article 471 of the Civil Code provides that the usufructuary shall be entitled to receive all the natural. no matter how created or organized. petitioners seek to reversed the letter of demand and be absolved from the payment of the taxes in question. the properties remained under the management of Lorenzo who used said properties by leasing or selling them and investing the income derived therefrom and the proceeds from the sales thereof in real properties and securities. industrial. forfeiture or other means. by which one is to contribute his services and the other to provide the capital. nor in the meetings of the corporations as voting stock. such share. Rallos. Rosales vs. Petitioners protested the assessment and asked for reconsideration alleging that they are co-owners of the properties inherited and the profits derived from the transactions. a stock dividend is considered part of the capital and belongs to the remainderman. May 25. 66 SCRA 14 Treasury shares are stocks issued and fully paid for and re-acquired by the corporation either by purchase.Under the Massachusetts rule. 1903. Dividends declared in the guise of treasury stock dividend to avoid the effects of income taxation Commissioner vs. As defined in section 84 (b) of the Internal Revenue Code "the term corporation includes partnership. From said investments and properties petitioners derived such income as profits. which constitute precisely one of the most typical forms of partnership in this jurisdiction. and corporation residence tax. Collector of Internal Revenue. there was no attempt made to divide the properties listed. therefore. "Corporations" strictly speaking are distinct and different from "partnership". 1957. The project partition was approved by the Court however. participates neither in dividends. Manning. to treat the shares of a deceased stockholder as absolutely outstanding shares of said stockholder's estate until they were fully paid. Under section 16 of our Corporation Law. . while under the Pennsylvania rule. belong to the latter. They are therefore issued shares. Are petitioners subject to tax on corporations? A. may be re-issued or sold again. The stock dividend in question in this case is a civil fruit of the original investment.102 Phil 140 Facts: Petitioners borrowed a sum of money from their father which amount together with their personal monies was used by them for the purpose of buying real properties. the profits to be divided between them. as long as it is held by the corporation as a treasury share. September 24. and civil fruits of the property in the usufruct. 45 SCRA 74 Facts: Julia Buńales died leaving as heirs her surviving spouse. not having been retired by the corporation re-acquiring it. Where the manifest intention of the parties to the trust agreement was. in sum and substance. 1975. Any dividend. Q. August 6. when declared as dividends in whatever form. et al vs Commissioner. whether cash or stock. The respondent demanded the payment of income tax on corporations. made during the lifetime of the usufructuary. all earnings of a corporation. although a treasury share. The shares of stock issued in payment of said dividend may be sold independently of the original shares just as the offspring of a domestic animal may be sold independently of its mother. Ońa.
Q. The two isolated transactions whereby they purchased properties and sold the same a few years thereafter did not thereby make them partners. the first two were sold to Meirenir Development Corporation and 3 to Reyes and Samson. No. even if no document or instrument were executed for the purpose. to his 4 children to enable them to build residences on the lots. Joint Accounts or Joint Ventures formed for profits Collector vs. Are petitioners subject to corporate income tax? A. Q. it is taxable under section 24 of the same code. each heir allows his share to be held in common with his co-heirs under a single management to be used with the intent of making profit thereby in proportion to his share. Commissioner. a year. The division of the profit was merely incidental to the dissolution of the co-ownership which was in the nature of things a temporary state. co-ownership is tax exempt. there can be no doubt that. Commissioner. 166 SCRA 560 Facts: Pascual and Dragon bought 2 parcels of land from Bernardino and 3 from Roque. 279F 2d 785 Joint Stock Companies are generally classified as a partnership possessing some character of the characteristics of a corporation. If after such partition. the Obillos children sold them to Walled City Securities Corporation and Olga Cruz Canda. Thereafter. as a rule. and consequently. 1985. It cannot possibly be true and correct to say that at the end of each year. Is the contention of the Collector correct? A. as defined in section 84 (b). CA Michigan. Obillos. They appear to be like corporations to the extent that they have . The transactions were isolated. both of the National Internal Revenue Code. Instead of building houses. Sr. The theory of the Collector is that the Joint Emergency Operation was a corporation distinct from the two respondent companies. the gross receipts and income and the gross expenses of two companies are exactly the same for purposes of the payment of income tax. The sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have a joint or common right or interest in the property. The co-ownership of inherited properties is automatically converted into an unregistered partnership the moment the said common properties and/or the income derived therefrom are used as common fund with intent to produce profits for the heirs in proportion to their respective shares in the inheritance as determined in the proper partition either duly executed in an extra-judicial settlement or approved by the court in the corresponding estate or intestate proceeding. and so liable to income tax under section 24.139 SCRA 436 Facts: On 2 March 1973. for tax purposes. October 29. Obillos children are co-owners. transferred his rights under contract with Ortigas Co. TCTs were issued. Joint Stock Companies Brocki vs. Batangas Co. Petitioner required the children to pay corporate income tax under the theory that they formed an unregistered partnership or joint venture. To regard the Obillos children as having formed a taxable unregistered partnership would result in oppressive taxation and confirm the dictum that the power to tax involves the power to destroy. 54 OG 6724 Joint Emergency Operation Facts: Batangas Transportation and Laguna Bus were registered and operating separately. The Commissioner contended that the petitioners formed an unregistered partnership or joint venture taxable as a corporation under the Code and its income is subject to the NIRC. an unregistered partnership is formed and therefore subject to corporate income tax. Q. Pascual and Dragon vs. They were placed under one sole management called the "Joint Emergency Operation" whereby the joint management operates the business affairs of the two companies as though they constitute a single entity thereby obtaining substantial economy and profit in operation. it is an isolated act which shows no intention to from a partnership. The character of habituality peculiar to business transactions for the purpose of gain was not present. They divided the profits between the two (2) of them. Yes. the Joint Emergency Operation is a corporation within the meaning of section 84 (b) of the Internal Revenue Code. at least. There is no adequate basis to support the proposition that they thereby formed an unregistered partnership. Q. there is clear evidence of co-ownership between the petitioners. (see Article 1769. There was no partnership formed. It appears that they decided to sell it after they found it expensive to build houses. Yes. vs.. NCC). Joe Obillos Sr. American Express Company. Are the petitioners liable for corporate income tax? A. Is there an unregistered partnership formed? A. In the present case.
Nankai was doing business in the Phil. an act of the ordinary business of the corporation. after receiving the shipment of the scrap iron under consideration. its business transactions must be continuous. one of the appellant's officers. Is the contention of Marubeni correct? . Marubeni claimed for the refund or issuance of a tax credit representing profit tax remittance erroneously paid on the dividends remitted by AG&P. Garcia. Nankai filed a motion to dismiss the complaint and the dissolve the injunction on the ground of lack of jurisdiction over the defendant and over the subject matter. 1962.V. but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state. Subsequently. scrap steel was loaded however the loading was stopped.capital stock but when capital is divided or made transferable even without the consent of the copartner. 3. revealed the defendant's desire to continue engaging in business here. laws. Far East seeks for the extension of license which was refused by then Pres. Marubeni. Major 1. Royal International Ocean Lines acted as husbanding agent for a fee or commission on said vessels. they partake of the nature of partnership. In these two instances. Q. 6 SCRA 725 Facts: Petitioner is a corporation organized under Phil. Defendant made an assessment as a non-resident foreign corporation not engaged in trade or business. a foreign corporation organized under Japanese laws. Upon the expiration of the license. Yes. Marubeni contends that it is a resident foreign corporation subject only to the 10% intercorporate final tax on dividends received from a domestic corporation in accordance with Section 24(c) (1) of the Tax Code of 1977. 162 SCRA 487 Facts: Petitioner is a foreign corporation not authorized or licensed to do business in the Phil. June 23. 2. Nankai Kogyo Co. The buyer signed in Japan and the seller in Manila. and to make the state a basis of operations for the conduct of a part of the corporation's ordinary business. No income tax appears to have been paid by petitioner on the freight receipts. November 30. that a single act may bring the corporation within the purview of the statute where it is. this was corroborated by the testimony of Nabuo Yoshida. does not amount to engaging in trade or business in the Phillipines. Branch Profit Remittance Tax Commissioner vs. the single act or transaction is not merely incidental or casual. entered into a Contract of Sale of Steel scrap with Nankai. Is petitioner a non-resident foreign corporation not engaged in trade or business? A. A complaint was filed by Far East for specific performance directed against Nankai and the shipping company to issue and deliver to petitioner the complete set of Bill of Lading for metric tons of scrap delivered to defendant and a writ of preliminary mandatory injunction against China Bank. and it made only two calls in Phil. It does not have a branch office in the Phil. The rule that the doing of a single act does not constitute business within the meaning of statutes prescribing the conditions to be complied with by foreign corporations must be qualified to this extent. “Transacting business” means continuity of commercial dealing and arrangements. ports to unload cargoes for foreign destination. the corporation is considered as a non-resident foreign corporation. Q. Reederij “Amsterdam” vs. 177 SCRA 500 Facts: Marubeni Corporation. In such a case. Q. is a foreign corporation duly organized and existing under the laws of Japan and duly licensed to engage in business under Philippine laws. Casual activity as in this case. Petitioner filed a petition praying for the cancellation of the subject assessment. Does the Philippine court have jurisdiction over the case? A.1988.. N. Yes. Upon the perfection of the contract Nankai opened a Letter of Credit with China Banking Corporation. making the Philippines a base thereof. Groups of Corporation for Income Tax Purposes Domestic Corporations Resident Foreign Corporations Non-Resident Foreign Corporations Far East International Import-Export Corp vs. In order that a foreign corporation may be considered engaged in trade or business. Atlantic Gulf and Pacific Co. Commissioner. Four days before the expiration of petitioner’s export license 3 boats sent by respondent arrived in the Phillippines. of Manila (AG&P) declared and paid cash dividends to petitioner and withheld the corresponding final dividend tax thereon.
Wander filed a claim for refund. If the withholding agent is also an agent of the beneficial owner. an ordinary and necessary business expense in order to compete with other corporations also interested in the investment market in the US.. Japan. Q. Subsidiary corporation (withholding agent) file an action for refund Commissioner vs. the tax rate shall be 15% of the dividends remitted. subject to the condition that the country in which the nonresident corporation shall allow a credit against the tax due from the non-resident corporation taxes deemed to be paid in the Philippines equivalent to 20% which represents the difference between the regular tax of 35% on corporations and 15% tax on dividends. Wander remits dividends to its parent company out of which Wander withholds 35% and pays the same to the BIR. It is the contention of Atlas that the amount paid in 1958 as annual public relations expenses is a deductible expense from gross income under Section 30 (a) (1) of the NIRC. he must point to some specific provision of the statute in which that deduction is authorized and must be able to prove that he is entitled to the deduction which the law allows. filed with petitioner Commissioner of Internal Revenue a claim for refund or tax credit. There can be no other logical conclusion that the investment was made for purposes peculiarly germane to the conduct of the corporate affairs to Marubeni. NIRC [now Section 22 (N)] and therefore. however. The Commissioner assessed against Atlas deficiency income taxes for the years 1957 and 1958. U. Yes.S. May a subsidiary corporation (withholding agent) file an action for refund? A. 102 SCRA 246 Facts: Atlas is a corporation engaged in the mining industry registered under the laws of the Phil. authorized to file refund. under the Tax Code. a reputable public relations consultant in New York City. P. January 27.a service corporation not engaged in trade or business in the Philippines. Q. No. P& G(USA) is properly regarded as a “taxpayer” within the meaning of Section 309. (USA) ("P&GUSA"). to claim a refund and to commence an action for such refund. the dividend income remitted to Marubeni Corporation of Japan arising from its equity investments in Atlantic. Atlas claimed that it was paid for services of a public relations firm. Tax Sparing Credit Rule CIR vs. This implied authority is especially warranted where the withholding agent is the wholly owned subsidiary of the parent-stockholder and therefore. Procter and Gamble Co. It is also an agent of the taxpayer in reporting such income. Inc. concerning the operation of the Atlas was aimed at creating a favorable image and goodwill to gain or maintain their patronage. . Q..A. Yes. Is Wander entitled to the preferential rate of 15% withholding tax on the dividends it remitted to Glaro? A.K Macker & Co. is a domestic corporation owned by Glaro S. Can Atlas claim the amount paid for the services of a public relations firm as deduction? A. contending that it is liable only for 15% withholding tax and not 35% as provided in the Tax Code. should be considered as a full satisfaction of the given conditions.") declared dividends payable to its parent company and sole stockholder. P&G-Phil. Withholding agent is technically considered as taxpayer. at all times. 160 SCRA 573 Facts: Wander Inc. Switzerland did not impose any tax on dividends received by Glaro. It seems particularly unreal to deny the implied authority of P&G-Phil. but certainly not of the branch in the Philippines. hence. Such fact.A. In the instant case. dividends received from a domestic corporation liable to tax. ALLOWABLE DEDUCTIONS FROM GROSS INCOME: Atlas Consolidated Mining vs. The principle is recognized that when a taxpayer claims a deduction. Ltd.. Wander Philippines Inc. 204 SCRA 377 Facts: Procter and Gamble Philippine Manufacturing Corporation ("P&G-Phil..A. such authority may reasonably be held to include the authority to file a claim for refund and to bring an action for recovery of such claim. Procter. To deny Wander to withhold the 15% tax would run counter to the very spirit and intent of said law. under the effective control of such parent-stockholder.. 1981. Commissioner.K MacKer & Co. Gulf and Pacific Company of Manila is considered separate and distinct income from the branch office in the Philippines. As previously adverted to. It is the stand of Atlas that information given out to the public in general and to the stockholder in particular by the P. the law allowing expenses as deduction from gross income for purposes of the income tax is Section 30 (a) (1) of the NIRC which allows a deduction of "all the ordinary and necessary expenses paid or incurred during the taxable .
The term "ordinary" does not require that the payments be habitual or normal in the sense that the same taxpayer will have to make them often. the interests and dividends from sharing in the allocation of administrative expenses. June 29. It is intended to realize a profit or to minimize a loss. promotion expenses and commission or fees paid for the sale of stock organization) are not deductible. It is "ordinary" when it connotes a payment which is normal in relation to the business of the taxpayer and the surrounding circumstances. the payment may be unique or non-recurring to the particular taxpayer affected. Inc. Ordinarily. Atlas Consolidated Mining vs. In the computation of its taxable income for the years 1952 to 1955. Visayan Cebu Terminal Co. Hospital de San Juan de Dios allowed all its taxable income to share in the allocation of administrative expenses. Commissioner. January 27. a reputable public relations consultant in New York City. hence. CTA Case No.. in order to be deductible under this section of the statute. It is the contention of Atlas that the amount paid in 1958 as annual public relations expenses is a deductible expense from gross income under Section 30 (a) (1) of the NIRC.. May 30. The Commissioner assessed against Atlas deficiency income taxes for the years 1957 and 1958. must fall squarely within its language. lost all its pre-war books of accounts and records. Q. the fees paid by the taxpayer to recover its lost assets occasioned by the war and to rehabilitate its business are a business connected expense. Are the expenses deductible? A. 28." An item of expenditure.A. Philippine Education Co. Collector. vs. . 1953 Facts: Education Co. the cost of obtaining stock subscription. 2. the answer to the question as to whether the expenditure is an allowable deduction as a business expense must be determined from the nature of the expenditure itself. U. Reason: Capital expenditures (such as recapitalization and reorganization expenses. 1.S. May 10. To carry on its business.. 1990 Facts: Hospital de San Juan de Dios is engaged in both taxable and non-taxable operations.48 as a deduction under section 30 of the NIRC.045.. which in turn depends on the extent and permanency of the work accomplished by the expenditure. 1941. The right to a deduction depends in each case on the particular facts and the relation of the payment to the type of business in which the taxpayer is engaged. an ordinary and necessary business expense in order to compete with other corporations also interested in the investment market in the United States. Yes. Business Expenses. an expense will be considered "necessary" where the expenditure is appropriate and helpful in the development of the taxpayer's business. There is thus no hard and fast rule on the matter. GR No. Assuming that the expenditure is ordinary and necessary in the operation of the taxpayer's business. The intention of the taxpayer often may be the controlling fact in making the determination. the taxpayer not only must have sufficient assets but must preserve the same and recover any that should be lost. GR No. 1957 A business expense is necessary where it is appropriate and helpful in the development of the taxpayer’s business. The expenditure paid by Atlas for services carrying on the selling campaign in an effort to sell Atlas' additional capital stock is not an ordinary expense. concerning the operation of the Atlas was aimed at creating a favorable image and goodwill to gain or maintain their patronage. Q. P. It is the stand of Atlas that information given out to the public in general and to the stockholder in particular by the P. It claimed the sum of P13. 311305. 1981. 102 SCRA 246 Facts: Atlas is a corporation engaged in the mining industry registered under the laws of the Phil. The expenses must be incurred in trade or business carried on by the taxpayer.K Macker & Co. Is the expenses paid for the services rendered by a public relations is an allowable deduction as business expense under Section 30 (a) (1) of the NIRC? A. Hospital de San Juan De Dios vs. l-8505. Requisites for Deductibility. however. Collector vs.K MacKer & Co. The Commissioner disallowed. with the exception of a copy of the trial balance sheet of November 30. Commissioner. The expense must be ordinary and necessary. Atlas claimed that it was paid for services of a public relations firm.year in carrying on any trade or business.
Can the margin fees be considered ordinary and necessary expenses when paid? A. of several of its oil wells. A logical link or nexus between the expense and the taxpayer's business must be established by the taxpayer. the interests and dividends in question are merely incidental income to petitioner's main activity.270 by reason of its abandonment. Commissioner. it is incumbent upon the taxpayer to adduce substantial evidence to establish a reasonably proximate relation petition between the expenses to the ordinary conduct of the business of the taxpayer. Inc. Q.14 representing the amount paid for the services of the public relations was incurred for acquisition of additional capital is not supported by the evidence. Who has the burden of proof? A. per examiners' report assessed that petitioner has a deficiency income tax for 1953 and 25% surtax on unreasonably accumulated profits as of 1953 pursuant to Section 25 of the Tax Code. the oral testimony (CPA) not contradicted by the government is sufficient. even if there are no records or receipts available.. The petitioner merely presumed that all corporate expenses are necessary and appropriate in the absence of a showing that they are illegal or ultra vires. It also claimed as ordinary and necessary expenses in the same return amount representing margin fees it had paid to the Central Bank on its profit remittances to its New York Office.523. 3. Hence. Mere holding of investments cannot be considered engaging in business so that the expenses in managing the investments are not considered ordinary and necessary in the pursuit of a trade or business. but in the disposition of said income after it had already been earned. L-22494. Basilan Estates. Atlas Consolidated Mining vs.Q. Yes. However: Basilan Estates vs. To avail of the claimed deduction under Section 30(a) (1) of the National Internal Revenue Code. The expenses must be substantiated by proof. vs. 102 SCRA 246 Facts: Atlas contends that the conclusion of the CTA in holding that the expense of P25. these were disallowed on the ground that the nature of these expenses could not be satisfactorily explained nor could the same be supported by appropriate papers. 1989. The expenses must be reasonable. it is not deductible as business or administrative expenses. it is an expense properly attributable to the head office and not in the carrying on of its trade or business in the Philippines. 4. The burden of proof that the expenses incurred are ordinary and necessary is on the taxpayer and does not rest upon the Government. as part of its ordinary and necessary business expenses. Q. Commissioner. which is the operation of its hospital and nursing schools. Q. No. GR No. 158 SCRA 11 . L-285080. ESSO Standard Eastern Inc. Commissioner vs. Petitioner contends that there is an error in disallowing claimed deductions. ESSO filed an amended return where it asked for the refund of P323. The Commissioner disallowed the claim on the ground that the expenses should be capitalized and might be written off as a loss only when a “dry hole” should result. September 5. corporation engaged in the coconut industry. filed its income tax returns for 1953 and paid the same. However. 1981. the amount it had spent for drilling and exploration of its petroleum conscessions. as dry holes. petitioner had no more obligation to keep the same since five years had lapsed from the time these expenses were incurred (Sec. Commissioner. Hence. The fees were paid not in the production of income. Are the expenses business expense and therefore deductible? A. The petitioner further argues that when the Bureau of Internal Revenue decided to investigate. July 7. Algue. The Commissioner of Internal Revenue. 1967 Facts: A Phil. 175 SCRA 158 Facts: ESSO deducted from its gross income for 1959. Hence. January 27. 337 of the Tax Code). ESSO has not shown that the remittance to the head office of part of its profits was made in furtherance of its own trade or business. Can the expenses be allowed as deductions even if they are not substantiated by proof? A. GR No.
Kuenzle and Strife Inc. . Sugar Estate Development Co. Pursuant to said authority and through the joint efforts of the officers of Algue. construction and other allied activities. To hold otherwise would open the gate to rampant tax evasion. the promotional expense paid by Phil. This new corporation later purchased the PSEDC properties. authorizing it to sell its land. Nava vs. Collector. Paid in good faith as additional compensation for services rendered.000 and it was from this commission that the P75. Paid or incurred during the taxable year 6. private respondent formed the Vegetable Oil Investment Corporation. The private respondent has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise (Vegetable Oil Investment Corp. It must be for personal services actually rendered. The Commissioner ratiocinated that said fees were properly disallowed since it was not an ordinary. 106 Phil 355 As a general rule. Contingent compensation may be deductible as long as it is not influenced by any consideration other than securing fair and advantageous terms. provided such payments. Collector. September 25. Commissioner. Bonuses are deductible under the following conditions: 1. and 3. public moral or law. Algue filed a letter protest which was stamp-received on the same day in the office of the petitioner. The denial of the protest filed by Algue included the disallowance of its claimed deduction of the P75. Inc. Philippine Sugar Estate Development Company (PSEDC) appointed Algue as its agent. 2) Reyes vs. is a domestic corporation engaged in engineering. vs. For this sale. received a letter of assessment from petitioner for delinquency income taxes for the years 1958 and 1959 in the total amount of P83. 7.) and involve themselves in a new business requiring millions of pesos.183. Collector. reasonable or necessary business expense. proof of payment to BIR must be shown. 1969 In determining whether the particular salary or compensation payment is reasonable.M. the former partners agreeing to continue in the service of the corporation. Is the promotional expense reasonable? A. 2.Facts: Algue. The salaries are not merely for services but payment for the transfer of their business. C. one of them being the amount and quality of the services performed with relation to the business. do not exceed a reasonable compensation for the services rendered. BUSINESS EXPENSES Factors or Tests to Determine Whether Compensation Paid for Services Rendered is Deductible or Not: Alhambra vs.000 promotional fees earlier mentioned. 5. to Algue Inc. through counsel. November 28. Reg.85. 4.000. the situation must be considered as a whole. CTA. This depends upon many factors. 70. CTA No. There is no fixed test for determining the reasonableness of a given bonus as compensation. Algue received as an agent a commission of P125. factories and oil manufacturing processes.000 promotional fees were paid to the officers of Algue. (Sec. Reasonable amount. Hoskins and Co. Rev. 106 Phil 355 An ostensible salary may be in part payment for property – Partnership sells out to a corporation. 1957 The form or method of fixing compensation is not decisive as to deductibility. bonuses to employees made in good faith and as additional compensation for the services actually rendered by the employees are deductible. September 30. If subject to withholding tax. vs. 568. Private respondent. Yes. inducing other persons to invest in it. GR No. No.00 was reasonable & not excessive. Q. when added to the stipulated salaries. 1961 Entertainment expenses incurred by an officer of a corporation to entertain certain government officials to discuss transactions/dealing at Manila Hotel are against public policy. l-24059. CTA No. Expenses must not be against public policy. 105. amounting to P125.
Extraordinary Repairs Dirscoll vs. the size of the particular business. the payment of a bonus to them of the gain realized from the sale cannot be considered as a selling expense. 1946 Expenses of repairs to walls and roof of a building to prevent leakage are deductible.) g. the salary policy of the corporation. No. For accounting purposes. the character of the taxpayer's business. It keeps the fishponds in an ordinary efficient operating condition. namely: (a) the manufacture of fishing nets. Is the bonus given to the officers of the petitioner upon the sale of its Muntinglupa land is an ordinary and necessary business expense deductible for income tax purposes? A.) payment must be 'made in good faith. To hold otherwise would open the gate of rampant tax evasion. its locality. CTA Case October 7.48 as additional remuneration paid to the officers of petitioner. There is absolutely no evidence of any service actually rendered by Aguinaldo Industries’ officers which could be the basis of a grant to them of a bonus out of the profit derived from the sale.) i. March 30. Incidental or ordinary repairs Villegas vs. and general economic conditions. CTA. INTEREST EXPENSES There must be indebtedness Sambrano vs. Q. 1963 Expenses for the maintenance and repair of fishponds are deductible. Previously. Rizal. as site of the fishing net factory. This is a part of the cost of the project. petitioner filed two separate income tax returns one for its Fish Nets Division and another for its Furniture Division. 1957 .THE OTHER TESTS SUGGESTED ARE: a. petitioner derived profit from this sale which was entered in the books of the Fish Nets Division as miscellaneous income to distinguish it from its tax-exempt income.) h. when another parcel of land in Marikina Heights was found supposedly more suitable for the needs of petitioner. but for income tax purposes the employer cannot legally claim such bonuses as deductible expenses unless they are shown to be reasonable. the examiners of the Bureau of Internal Revenue found that the Fish Nets Division deducted from its gross income for that year the amount of P61.) f.) c. This being so. bonuses granted to corporate officers for the successful sale of a piece of land effected through a broker – no services rendered – not deductible as reasonable and necessary expenses. However: Buckland vs. February 25. it sold the Muntinglupa property. the employees' qualifications and contributions to the business venture. 1982 Facts: Petitioner is a domestic corporation engaged in two lines of business. L-8652. nor can it be deemed reasonable and necessary so as to make it deductible for tax purposes.) b. and (b) the manufacture of furniture. Commissioner. each division is provided with separate books of accounts as required by the Department of Finance. Commissioner. GR No. Commissioner. a tax-exempt industry. Aguinaldo Industries Corp vs. US.187. This transaction was entered in the books of the Fish Nets Division of the Company. its business of manufacturing fishing nets is handled by its Fish Nets Division. l-29790. while the manufacture of Furniture is operated by its Furniture Division. For the year 1957. After investigation of these returns. the type and extent of the services rendered. the volume and amount of its net earnings. 1477 [2d] 493) Expenses necessitated by radical changes in design made during construction are not deductible. The right to fix compensation may be conceded. petitioner acquired a parcel of land in Muntinglupa.) d. Later. GR No.) e. DC Com May 9.
either for contract or the requirements of the law. In March 1956. the tax becomes. Federal taxes are debts.500 shares of stock in La Tondeña. Palanca was assessed gift tax. the distinction becomes inconsequential in this case. especially for remedial purposes. died. a debt. The term "debt" is properly used in a comprehensive sense as embracing not merely money due by contract. Marcelo Stell Corp. October 29. (1) manufacture of wire fence. he filed an amended return. it must be shown that there is indebtedness. it is apparent that a tax may be considered indebtedness. Commissioner vs. and the same was paid within the year it is sought to he deducted. Where statutes impose a personal liability for a tax. vs. It follows that the interest paid by herein respondent for the late payment of her donor's tax is deductible from her gross income. L-13912. but whatever one is bound to render to another. The term ‘indebtedness’ as used in the Tax Code of the United States has been defined as the unconditional and legally enforceable obligation for the payment of money. for interest to be deductible. who however wishes to find out e. however. but whatever one is bound to render to another. 1960 For interest to be deductible. and (3) . it must be shown that there be an indebtedness. It is here conceded that the interest paid by respondent was in consequence of the late payment of her donor's tax. and that what is claimed as an interest deduction should have been paid or accrued within the year. Palanca. Taxpayer must prove that the loss was suffered by him. Under the law. September 30. 1966. that there should be interest upon it. Such "theorefical" or imputed interest does not arise from a legally demandable interest-bearing obligation incurred by the taxpayer.500 shares of stock as Palanca’s inheritance so he was assessed estate and inheritance tax. Within the meaning of that definition. It is engaged in three (3) industrial activities. strictly speaking. 250 SCRA 434 Theoretical interest is that interest "calculated" or computed (and not incurred or paid) for the purpose of determining the "opportunity cost" of investing funds in a given business. GR No. Meanwhile. the BIR considered the transfer of 12. It is here conceded that the interest paid by respondent was in consequence of the late payment of her donor's tax. Inc. Palanca filed his income tax return for the year 1955 claiming a deduction for interest.g.Although taxes already due have not. October 31. Q. Palanca claim a deduction representing interest on the estate and inheritance taxes on the shares of stock. he donated in favor of his son 12. at least in a broad sense. LOSSES Requisites for Deductibility of Losses: 1. Non-deductible Interest Expenses PICOP vs. that there should be interest upon it. either for contract or the requirements of the law. they are. and the same was paid within the year it is sought to be deducted. The term "indebtedness" as used in our Tax Code has been defined as an unconditional and legally enforceable obligation for the payment of money. One thing that Section 79 quoted above makes clear is that interest which does constitute a charge arising under an interest-bearing obligation is an allowable deduction from gross income. Some American authorities hold that. surcharge and interest which he paid. A tax is a debt for which a creditor's bill may be brought in a proper case. Prieto. whether he would have been better off by lending out his funds and earning interest rather than investing such funds in his business. The term ‘debt’ is properly used in a comprehensive sense as embracing not merely money due by contract. and that what is claimed as an interest deduction should have been paid or accrued within the year. Collector. CA. laws. the same concept as debts. (2) manufacture of nails.18 SCRA 496 Facts: Before Don Carlos Palanca Sr. A tax is a debt for which a creditor's bill may be brought in a proper case. Within the meaning of that definition it is apparent that a tax may be considered an indebtedness. While “taxes” and “debt” are distinguishable legal concepts on account of their nature. Yes. In November 1956. Is the amount paid by Palanca for interest on his delinquent estate and inheritance tax deductible from the gross income for that year under section 30(b) (1) of the NIRC? A. Commissioner of Internal Revenue vs. claiming an additional deduction representing interest paid on the donee's gift tax based on the provisions of Section 30(b) (1) of the Tax Code authorizing the deduction from gross income of interest paid within the taxable year on indebtedness.. 1960 putol Facts: The petitioner is a corporation duly organized under Phil. obligations that may be considered as such. namely. GR No L-12401.
No. subdivision (b) thereof. August 31. it claimed a deduction as war losses. Payment was received in the year 1950. which did not exist under the aforementioned section 5g of the War Damage Corporation Act. 'the amount of the loss must be reduced by the amount of any insurance or other compensation received. when the losses were actually sustained. 2. The petitioner in its income tax return for 1950. Section 30(d) (2) of the Revenue Code allows the deduction from the gross income of a corporation of "all losses actually sustained and charged off within the taxable year and not compensated for by insurance or otherwise. It did not intend to grant the tax exemption benefit to an entrepreneur engaged at the same time in a taxable or non-exempt industry and a new and necessary industry. since it is required that losses. September 29. of the property'. the privilege of tax exemption is confined only to new and necessary industries. a relation identical to that existing between the insurer and the insured under a contract of insurance. Asturias Sugar Central Inc. August 31. 3.' If property is not insured against loss. Usually loss is incurred rather than profit made. . The intent of the law is to treat taxable or non-exempt industries as separate and distinct from new and necessary industries which are tax. the purpose of Republic Act No. However.. On or about April 18. said section 5g particularly. Loss not compensated by insurance or otherwise. respondent was burned by the retreating USAFFE under its scorch earth policy and/or to resist enemy attack. 35 is to encourage the establishment or exploitation of new and necessary industries to promote the economic growth of the country. 35. was in fact in force at the time of" the "loss or damage" in question-leaves no room for doubt about the intent of Congress of the United States to establish.manufacture of steel bars. showing that bit suffered a net loss for the said years. 1948. L-15013. 1961 Facts: Respondent is a corporation duly organized under the laws of the Phil. Q.Petitioner filed amended income tax returns for two taxable years. with the Philippine War Damage Commission a claim for damages sustained on its properties during the war which was approved. GR No. rods and other allied steel products. At any rate. . May petitioner be allowed to deduct from the profits realized from its taxable business activities. Indeed. notices of deficiency income tax assessments were issued against the respondent. between the War Damage Corporation and the owner of the property lost or damaged. 1961 It is urged that "insurance" is a contract. . 4. nothing in its nature bars an insurance by operation of law. GR No. Loss must have been sustained during the taxable year. BTA. to be deductible. as if a policy . The said losses were arrived at by consolidating the gross income and expenses and/or deductions of the petitioner in all its business activities. if any. enjoined the benefits of the tax exemption under Republic Act No. a contract. Commissioner vs. and the amount not so compensated for by insurance is deductible in the year the claim for indemnity is finally determined. Q. the juridical relation thus created is such as to clearly fall within the purview of the term "insurance or otherwise" used in sections 30 and 94 of our Tax Code. . Cu Unjieng Sons Inc. Asturias Sugar Central Inc. The fact that the petitioner is a corporation organized with a single capital that answers for all its financial obligations including those incurred in the tax exempt industries is of no moment. Although "insurance" is generally. the losses sustained by its tax except industries? A. Upon proper verification petitioner disallowed all deductions for war losses and consequently. Petitioner filed a claim for refund but no action was taken by the respondent. Commissioner vs. or in 1950 and 1951? A. Respondent paid thereafter filed a claim for refund. must be evidenced by closed and completed transactions. providing for compensation "by the War Damage Corporation without requiring a contract of insurance or the payment of premiums or other charge . GR No.exempt for purposes of taxation. Were the war losses in question properly deductible in 1942. and by the salvaged value. respondent has been engaged in the manufacture of sugar from sugar cane in its. by allowing him to deduct his gains or profits derived from the operation of the first from the losses incurred in the operation of the second. Since its organization. L-6296. Loss evidenced by a closed and completed transaction. 1956 . The war losses are properly deductible in 1950 and 1951 when the claim for indemnity was properly determined. 1942. L-15013. The Central was totally destroyed and was reconstructed only on or about 1947 it then filed on February 26.. vs. It is a form of subsidy granted by the Government to courageous entrepreneurs staking their capital in an unknown venture.
. Q. May the deductions claimed by Goodrich for bad debts and as representation expenses be allowed? A." obviously to prevent arbitrary action by the taxpayer. (3) giving the account to a lawyer for collection. Furthermore. The words or 'otherwise' in law. There was no iota of documentary evidence to give support to the testimony of an employee of the Petitioner. there are steps outlined to be undertaken by the taxpayer to prove that he exerted diligent efforts to collect the debts. when used as a general phrase following an enumeration of particulars. Goodrich has not established either that the debts are actually worthless or that it had reasonable grounds to believe them to be so in 1951. the approval of the Philippine Rehabilitation Act of 1946. Collector vs. Philippine Refining Co. 1. to another year. and did not exist as a legal obligation prior to the approval of said Act. the claim for deduction of the debts should be rejected. not due. in the year for which the deduction is sought. The requirement of ascertainment of worthlessness requires proof of two facts: (1) that the taxpayer did in fact ascertain the debt to be worthless. The debt must be actually ascertained to be worthless and uncollectible during the taxable year. Our statute permits the deduction of debts "actually ascertained to be worthless within the taxable year. that a proposed legislation authorizing payment of an indemnity. 21 SCRA 1336. Additionally. BAD DEBTS Debts must be charged off within the year of worthlessness. At the CTA. in the 'income tax law. the taxpayer must also show that it is uncollectible even in the future.128. Does PRC sufficiently proved its claim for deductions by reason of the alleged bad debts? A. or even the moral certainty. (2) sending of collection letters. in so doing. No. Mere allegations cannot prove the worthlessness of such debts in 1985. The debt must arise from the business or trade of the taxpayer. there has 'never been any case in which the words "or otherwise". The assessment was protested by PRC on the basis of alleged erroneous disallowance of bad debts.. making them the taxpayer should show that: There is a subsisting and valid debt. The Collector disallowed the deductions claimed by Goodrich. while on appeal. receiving an ejusdem generis interpretation At any rate. 4. and (4) filing a collection case in court. the sums of P14. or under any particular statute-would eventually be approved. are commonly interpreted in a restricted sense. and (2) that. to unduly avoid tax liability. petitioner is now estopped from maintaining that said war losses were "compensated for by insurance or otherwise".' Mere testimony of the Financial Accountant of the Petitioner explaining the worthlessness of said debts is seen by this Court as nothing more than a selfserving exercise which lacks probative value. debts to be considered as worthless and thereby qualify as bad debts. either under the general Principles of law. vs.00 as deficiency income taxes for 1951 and 1952.The announcement of the Federal Loan Agency of the United States with the of the approval of the President of the US. The debt must be charged off during the taxable year. Goodrich International Rubber Co.439. as referring to such other matters as are kindred to the classes before mentioned. Herein respondent Goodrich claimed deductions for said assessed taxes consisting of bad debts and as representation expenses. The indemnity provided for in the Philippine Rehabilitation Act of 1946 was purely an obligation voluntarily assumed solely for moral considerations.00 and P8. viz: (1) sending of statement of accounts. PRC presented only the testimony of its financial accountant to explain and prove the worthlessness of the debts claimed as bad debts. Q. No. its claim for deduction arising from the war losses in question. he acted in good faith. CA. 3. of the creation of the War Insurance Corporation (later War Damage Corporation) by the Rehabilitation Finance Corporation to provide protection against losses resulting from enemy attack which might be sustained by owners of property in continental US and consequently. did not constitute in 1945 a compensation "otherwise" than by insurance. 2. 1314 Facts: The Collector of Internal Revenue assessed Goodrich International Rubber Co. have been held to include the hope. The claim for deduction of these thirteen (13) debts should be rejected. for deductible. Consequently. and did not authorize petitioner here in to postpone. Said accounts have not satisfied the requirements of the 'worthlessness of a debt. the Court of Tax Appeals allowed said claims. 256 SCRA 667 Facts: PRC was assessed by the CIR to pay deficiency tax for 1985.
If the CIR is unsatisfied. Thereafter.DEPRECIATION Definition Basilan Estates Inc. of an amount more than the invested capital in an asset will transgress the underlying purpose of a depreciation allowance. 1967 The income tax law does not authorize the depreciation of an asset beyond its acquisition cost. there is. Before an assessment is issued. based on the reports made by the revenue officers. Necessity of Depreciation Allowance Basilan Estates Inc. . The taxpayer is then given a chance to submit position papers and documents to prove that the assessment is unwarranted. To enable the taxpayer to determine his remedies thereon. a pre-assessment notice sent to the tax-payer. and. It must be stressed that a criminal complaint is instituted not to demand payment. They are not created by implication but upon clear expression in the law. the claim for depreciation beyond P36. a deduction over and above such cost cannot be claimed and allowed. the taxpayer is notified that a criminal case had been filed against him. executed an affidavit and filed a criminal complaint for tax evasion. the original investment remains as it was in the beginning.04 or in the amount of P10. Commissioner. It is entitled to see that from earnings the value of the property invested is kept unimpaired. September 5. but it is its duty to its bond and stockholders. an assessment signed by him is then sent to the taxpayer informing the latter specifically and clearly that an assessment has been made against him or her. its plain duty to the public. The reason is that deductions from gross income are privileges. For then what the taxpayer would recover will be. not matters of right. revenue officers examined Pascor’s accounting books and discovered deficiency taxes for two fiscal years. The term is also applied to amortization of the value of intangible assets. so that at the end of any given term of years. the law permits the taxpayer to recover gradually his capital investment in wasting assets free from income tax. the use of which in the trade or business is definitely limited in duration.49 has no justification in the law. an assessment is not necessary before a criminal complaint can be had. at least. the idea of profit on the investment made has never been the undertying reason for the allowance of a deduction for depreciation. not only the acquisition cost. assails the action of the CIR by stating that a deficiency tax assessment should have been first filed by the CIR. without making provision out of earnings for its replacement.842. September 5. the recovery. Depreciation commences with the acquisition of the property and its owner is not bound to see his property gradually waste. What is an assessment? Is it a condition precedent before the institution of a criminal complaint? A. Commissioner. NO. rather than instituting a criminal complaint at once. 21 SCRA 17. The issuance of an assessment must be distinguished from the filing of a complaint. Moreover. but to penalize the taxpayer for violation of the NIRC. due process requires that it must be served on and received by taxpayers. vs. It is not only the right of a company to make such a provision. The criminal charge is filed directly with the DOJ. An assessment contains not only a computation of tax liabilities but also a demand for payment within a prescribed period. Hence. Q. ASSESSMENT AND COLLECTION CIR vs PASCOR. the criminal charge need not go through the long and winding process described above. in the case of a public service corporation. In contrast. It also signals the time when penalties and interests begin to accrue against the taxpayer. vs. officers of the corporation. The CIR. Respondents Rogelio Dio and Virginia Dio. TAX REMEDIES OF THE GOVERNMENT A. Accordingly. by practice. free of income tax. 1967 Depreciation is the gradual diminution in the useful value of tangible property resulting from wear and tear and normal obsolescense. Recovery in due time thru depreciation of investment made is the philosophy behind depreciation allowance. but also some profit. 21 SCRA 17. 309 SCRA 402 Facts: Under authority by the CIR.500. not that the CIR has issued an assessment.3 Accordingly.
222 states that an assessment is not necessary before a criminal charge can be filed. REMEDIES FOR COLLECTION OF DELIQUENT TAXES 1. Tax lien 5. or effects of the taxpayer including other personal property of whatever character as well as stocks & other securities. Moreover. Can the demand letter dated July 16 can be considered an assessment? A. GR No.00. 1987 Facts: In a demand letter dated July 16. proceedings in court may be commenced without an assessment. 222 of the Tax Code specifically states that in cases where a false or fraudulent return is submitted or in cases of failure to file a return such as this case. 1955. Furthermore. reiterating its demand for the payment of taxes as originally demanded in petitioner's letter dated 16 July 1955. B. To reiterate. The CIR has discretion on whether to issue an assessment or to file a criminal case against the taxpayer or to do both. Levy refers to the seizure of real properties and interest in or rights to such properties for the satisfaction of taxes due from the delinquent taxpayer. credits. bank accts. GR No. All presumptions are in favor of tax assessments. CIR assessed Nielson & Co. Sec. De Codinera. per letters dated 24 April 1956. the criminal charge need only be supported by a prima facie showing of failure to file a required return. it can not be assumed that private respondent received said letter. show that petitioner wrote private respondent a follow-up letter dated 19 September 1956. Follow-up Letter Reiterating Demand for Payment Considered Notice of Assessment Republic vs CA and Nielson and Company. failure to present proof of error in the assessment will justify judicial affirmance of said assessment. simultaneously. April 30. Both remedies are summary in nature & either may be pursued in the discretion of the authorities charged with the collection of tax independently. Records. 205 of the same Code clearly mandates that the civil and criminal aspects of the case may be pursued simultaneously. Compromise 4. o after the distraint of personal property. CA reversed the decision. 104151 Assessments are prima facie presumed correct and made in good faith. 449. It is an elementary rule that in the absence of proof of any irregularities in the performance of official duties. L-38540.. Since petitioner has not adduced proof that private respondent had in fact received the demand letter of 16 July 1955. GR No. Q. an assessment will not be disturbed. Verily. Presumption of Regularity CIR vs CA and Atlas Consolidated Mining and Dev’t Corp. 19 September 1956 and 9 February 1960. December 21.Sec. said Sec. however. Levy can be made before. This is the general rule. Civil penalties DISTRAINT AND LEVY Central Cement Corporation vs Commissioner. It is the taxpayer and not the Bureau of Internal Revenue who has the duty of proving otherwise. On the other hand. petitioner filed a complaint for collection of the said amount against private respondent with the CFI which ruled against the respondent. 4312. On the theory that the assessment had become final and executory. or simultaneously with civil & criminal action once the assessment becomes final and demandable. & interest in & rights to personal property. This follow-up letter is considered a notice of assessment in itself which was duly received by private respondent in accordance with its own admission. Forfeiture 6. L-9675. Private respondents failed to show that they are entitled to an exception. This fact need not be proven by an assessment. CTA Case No. Distraint of personal property and Levy upon real property 2. 1957 . debts. chattels. September 28. 1988 Distraint is a remedy whereby the collection of the tax is enforced on the goods. Private respondent did not contest the assessment in the Court of Tax Appeals. CIR vs Vda. Petitioner reiterated its demand upon private respondent for payment of said amount. Deficiency taxes for the years 1949-1952 totalling P14. Civil or criminal action 3.
In the case of notices of levy issued to satisfy the delinquent estate tax. rolls. The fact that the Philippine Trade Act of 1946 allows transfers of sugar quotas does not militate against their immovability. it follows that the services of notices of levy in satisfaction of the tax delinquencies upon the heir is not required by law. Error in the name of the owner in the assessment and 2. the orderly administration of justice requires this to be done by & under the sanction of the court. 1940 at 9am and everyday thereafter. 4406. The attachment merely deprives the Collector or his agents of the power to divest the Court of its jurisdiction over said property." In order to enable a taxpayer to protect his rights. a levy made by the sheriff upon a sugar quota is null and void if not in compliance with the procedure prescribed in Section 14. because the announcement that the sale would take place on December 15. This mandatory requirement was not satisfied in the present case. 1946 Facts: The provincial treasurer of Tayabas issued a notice for the sale at public auction of real properties forfeited for tax delinquency “on December 15. Despite personal and constructive notice upon the estate. Was said notice sufficient to comply with jurisdictional requirements? A." (By implication the procedure for levy. 470. subject to the prior lien of the attachment creditor. Hence. October 23. Are sugar quotas real (immovable) or personal properties? Should we adopt the definition of personal and real properties under the Civil Code in order to determine the requisites to be followed in levy or distraint proceedings? A. Act 4166). NO. the heir of the decedent. consequently the sale of the property. GR No. the date of the tax sale. requiring "the filing with the registered of deeds of a copy of the orders together with a description of the property . he should at least be apprised of the exact date of the proceeding by which he is to lose his property. just like servitudes and other real rights over an immovable. xxx Under section 35 of Commonwealth Act No. GR No.Property levied upon by the order of a competent court may. is as general and indefinite as a notice for the sale "within this or next year" or "some time within the month of December. Presbitero vs Fernandez. 120880. Hence. be subsequently distrained. with the consent thereof. of the Rules of Court. and exclusively. Rule 59. though not physically so united. valid? A. and not necessarily. in relation with Section 7. Thus. xxx In the levying of tax assesments and the keeping of the tax. and the burden of proving the regularity of all proceedings leading up to a tax sale is upon the purchaser at the sale. 1940 and every day thereafter. notice of the public sale must be given to the delinquent taxpayer. Defect in the description of the property Q. Cabrera vs Provincial Treasurer of Tayabas. The most serious of these irregularities are the ff: 1. NO. 502. 470. liable to pay taxes. and there can exist no quota without there being first a corresponding plantation. CA No. section 35). This has reference to the registered owner. It does not impair such rights as the Government may have for the collection of taxes. at the same place and hour until all the properties have been sold to the highest bidder. sugar quotas are inseparable therefrom. . There cannot be a sugar plantation owner without land to which the quota is attached. While the lien for taxes must be recognized & enforced. no protest was made by the heirs. although the delinquent property remains assessed in the name of a former owner. Is the assessment. June 5. among other particulars. Invalidity of tax sales by reason of defects in the proceedings. 1997 Facts: After the death of Ferdinand Marcos. Valencia vs Jimenez. January 29. it is a vital requisite that the . As an improvement attached to the land. must be followed) Marcos II vs Court of Appeals. . the delinquent taxpayer is the estate of the decedent. by express provision of law (Section 9. Necessity for specifying exact date of sale. Under the law (Commonwealth Act No. Yes. Due process of law must be shown. There is no presumption of the regularity of any administrative proceeding which results in depriving a citizen or taxpayer of his property. 1908 Facts: An action to set aside a sale of real estate to defendant Jimenez for unpaid taxes and the transfer of ½ interest therein by him to Fuster was brought before teh then CFI Mla on the ground theat the tax sale was invalid by reason of defects int eh proceedings to impose the tax. and should be considered as immovable or real property under Article 416 (10) of the Civil Code. 7 SCRA 627 Q. not distraint.” Q. Is notice of levy upon the estate enough? A. BIR caused the collection by resorting to summary remedy of levy on real properties. the BIR issued deficiency estate taxes. Q. Rule 39. the provincial treasurer is enjoined to set forth in the notice.
Inc. on the property owned by the Ordovezas. affects the essence of the Torrens System.. This request was denied. that is. 21731. which has not yet become final. 115 SCRA 278 Facts: Yabes received a demand letter from CIR which he protested and for which he requested for a reinvestigation with the BIR coupled with a request to hold in abeyance the appeal pending final decision.102 Phil 395 Facts: After publication of the corresponding notice.. Q. A protest against the assessment is filed by the taxpayer but the Commissioner’s decision denying in whole or in part the said protest. The Collector of Internal Revenue did not reply. to Ricardo Velayo for the sum of P185.. When the Commissioner did not reply to the taxpayer’s request for reconsideration & instead referred the case to the SolGen for judicial collection. plus penalty and costs. Velayo vs Ordoveza. the property in question.95. 2216.00 and demanded payment thereof. and which assessment is being contested by petitioners in the Court of Tax Appeals. executory. as in the case of a purchaser at a tax sale. GR No. was not appealed to the CTA within 30 days from receipt of such decision. NO. Yabes vs Flojo. He was surprised to hear about it. Can the CFI lawfully acquire jurisdiction over a contested assessment made by the Commissioner of Internal Revenue against the deceased taxpayer Doroteo Yabes. The owner of property registered under the Torrens System is justified in relying upon the description given in his certificate of title as the one officially identifying said property. representing the amount due by way of unpaid real estate taxes.00 and 50% surcharge thereon amounting to P5. Inc. Case No. executory and incontestable. he referred the case to the Solicitor General for collection by judicial action. the CIR instituted an action in the CFI of Cebu for the collection of deficiency income tax. for he had not received any previous notice thereof or read in the newspapers about the public auction to be held in connection therewith. 79178. and demandable. failed to file a waiver of the statute of limitations. instead.. a vital defect in either tax invalidates the sale. YES.037. Inc. CIR assessed a deficiency income tax of P10. March 31.. Effects of variance in the description of the property in the notice of sale and title. This is resorted to when a tax liability becomes collectible. As Lim Tian Teng Sons & Co. A mistake or confusion in the name of the owner of property is also a substantial error and will make a tax sale voidable. hence. Is the decision of denial appealable to the CTA? A. Yabes filed a tax waiver extending the period of prescription. may have an interest therein. is a domestic corporation engaged in the exportation of copra. 1966 Facts: Lim Tian Teng Sons & Co. Q. This is an instance where the Commissioner’s action is in effect a decision of denial which is appealable to the Court of Tax Appeals. Is the sale of such property valid? A. Lim Tian Teng Sons & Co.. When Fernando Ordoveza tried to pay the real estate tax thereon. It appears that the description in said deed of sale is different from the description appearing in Transfer Certificate of Title No. Q. Other instances when taxpayer must appeal to CA within 30 days: Republic vs Lim Tian Teng sons. Spouses Yabes died pending said action. Inc. When is Civil Action resorted to? A. The sale for non-payment of tax of the property with a description distinct and different from that which appears in its certificate of title can not be sanctioned without impairing the full faith and credence which the title is meant to command and. and a proximately clear description of the property in a later tax roll will not cure an erroneous description in an earlier one. This occurs when: a. OR the decision of the Commissioner has become final. CIVIL ACTION Q. et al. requested reinvestigation of its 1952 income tax liability. A tax is assessed and the taxpayer fails to file an administrative protest by filing a request for reconsideration or reinvestigation within 30 days from receipt of the assessment. this was indicative of his decision against reinvestigation. and still pending consideration? . the assessment becomes final and unappealable. at public auction. b. Consequently. the City Treasurer of Manila sold. When one tax sale embraces two different taxes. he was advised of the sale.074. or subsequently.property assessed be so clearly described that it may be easily identified by any person who at the time.
NO. 1985 Facts: CIR assessed Basa of deficiency tases. 7(1). 1966 Facts: Ker and Co was assessed by the CIR of deficiency income taxes for 1947-1950. It would be worth mentioning that since the assessment for deficiency income tax for 1947 has become final and executory. and (2) that the estate's administrator waived the defense of prescription when he filed a surety bond to guarantee payment of the taxes in question and when he requested postponement of the payment of the taxes pending determination of who the heirs are by the settlement court. also filed a motion for reconsideration maintaining that since the filing of its petition for review in the Court of Tax Appeals did not stop the running of the period of limitations. August 5. may not anymore raise defenses which go into the merits of the assessment. the taxpayer can no longer assail the legality or validity of the assessment. 45277. prescription of the Commissioner's right to assess the tax. the Republic of the Philippines should be considered to have waived its right to object to the setting up of such defense.e. Lilia Yusay filed an answer to the proof of claim alleging non-receipt of the assessment. Basa vs Republic. CIR filed a proof of claim for the estate and inheritance taxes due and a motion for its allowance with the settlement court in voting priority of lien pursuant to Section 315 of the Tax Code. i. namely. The prescription of the Government’s right to assess is no longer available as a defense in a civil action for collection. BIR found other properties not covered by said return. RP filed an MR contending that the right of the CIR to collect the deficiency assessment for 1947 has not prescribed by a lapse of merely five years and three months. the right of the Commissioner of Internal Revenue to collect the tax in question has prescribed. Once an action for collection is filed with the regular court. Rep. L-19495. Republic vs Ker and Co. Ltd. The CFI affirmed the assessment for 1948-1950 but dismissed the claim for 1947. thus. Basa tried to contest the assessment before the CA. considering the aforementioned conclusion of the Court of Tax Appeals on the finality and incontestability of the assessment made by the Commissioner is correct. Q. NO. September 29. The trial court affirmed the CIR. raised the defense of prescription in the proceedings below and the Republic of the Philippines. 1953 of the identity of the heirs. She therefore requested that the assessment be declared invalid and without force and effect. Lilia Yusay disputed the legality of the assessment claiming that the right to make the same had prescribed inasmuch as more than five years had elapsed since the filing of the estate and inheritance tax return. it became final and incontestable. Ltd. It is in that forum to the exclusion of the Court of First Instance where the taxpayer can ventilate his or her defense against the assessment.A. Act 1125). instead of questioning the right of the defendant to raise such defense. An action involving a disputed assessment for internal revenue taxes falls within the exclusive appellate jurisdiction of the Court of Tax Appeals (Sec. Can a taxpayer contest an assessment before the CA without protesting before the CTA? A. If the contrary is established. Intestate proceedings were instituted in the CFI. it assessed deficiency taxes. Could the CTA take cognizance of an appeal despite the pendency of the "Proof of Claim" and "Motion for Allowance of Claim and for an Order of Payment of Taxes" filed by the CIR in Special Proceedings before the CFI? A. Ker & Co. November 24. because the taxpayer's income tax return was fraudulent in which case prescription sets in ten years from the date of discovery of the fraud. 1966 Facts: Matias Yusay died intestate leaving two heirs. By its actuation. filed with BIR an estate and inheritance tax return.. as this Court holds it to be.. Q. The respondent Court of First Instance of Cagayan can only acquire jurisdiction over this case filed against the heirs of the taxpayer if the assessment made by the Commissioner of Internal Revenue had become final and incontestable.. litigated on it and submitted the issue for resolution of the court. Ker & Co. thus. CIR then sued Basa for the collection of the assessed tax. Commissioner vs Lilia Yusay Gonzales. Ltd. GR No. Ker & Co. CIR requested the request for the reasons. L-21609.. then the Court of Tax Appeals has exclusive jurisdiction over this case. Basa did not contest the assessments. In this case however. Jose Yusay as administrator. . the same should have been ventilated before the CTA. The filing of a civil action in court to collect a tax which was the subject of a pending protest in the BIR was a justifiable basis for the taxpayer to appeal to the Court of Tax Appeals & to move for the dismissal in the trial court of the Government’s action to collect the tax under dispute.. However. GR No. (1) that the right to assess the taxes in question has not been lost by prescription since the return which did not name the heirs cannot be considered a true and complete return sufficient to start the running of the period of limitations of five years under Section 331 of the Tax Code and pursuant to Section 332 of the same Code he has ten years within which to make the assessment counted from the discovery on September 24. No payment having been made. GR No.
People vs Tierra. as required by Section 308 of the Tax Code. 1980 Facts: Six informations were filed with the CFI against Ungab for violation of the NIRC. 17177-80. 1964 The subsequent satisfaction of a tax liability will not operate to extinguish the criminal liability. If We were to sustain the taxpayer's stand. for refusal or neglect to pay income tax or to make a return thereof. and not because of any criminal act committed by him. In both cases. it failed to provide the collection of said tax in criminal proceedings. . that one has engaged himself in business. Does acquital in a criminal case for non-filing of tax return or non-payment of taxes operate as acquital of civil liability to pay taxes? A. Under the Penal Code the civil liability is incurred by reason of the offender's criminal act. the BIR filed suit for collection. Civil liability to pay taxes arises from the fact. Ungab filed a motion to quash on the ground that the trial court has no jurisdiction to take cognizance of the cases in view of his pending protest against the assessment made by the BIR examiner. We would be encouraging taxpayers to delay the payment of taxes in the hope of ultimately avoiding the same. NO. Is the approval of the Revenue Commissioner jurisdictional? A. he was acquitted. Besides. if one is not criminally liable under the Penal Code. is found in the fact that while Section 73 of the National Internal Revenue Code has provided the imposition of the penalty of imprisonment or fine. to do so would be to violate the judicial policy of avoiding multiplicity of suits and the rule on lis pendens. Another reason. Court of Tax Appeals. 20 SCRA 712 Facts: Patanao has been accused in two Criminal Cases for not filing his income tax returns and for non-payment of income taxes for the..Q. L-10210. The criminal liability arises upon failure of the debtor to satisfy his civil obligation. The incongruity of the factual premises and foundation principles of the two cases is one of the reasons for not imposing civil indemnity on the criminal infractor of the income tax law. Q. The question of whether a suit should bear the approval of the Revenue Commissioner is not jurisdictional. et al. the criminal liability gives birth to the civil obligation such that generally. L-41919-24. Arches moved to dismiss the complaint on the ground that it did not expressly show the approval of the Revenue Commissioner. the provisions of Section 333 of the Tax Code will apply. GR No. The acquittal in a criminal case cannot operate to discharge defendant from the duty of paying the taxes which the law requires to be paid. People vs Balagtas. acquittal of the taxpayer in the criminal proceeding does not necessarily entail exoneration from his liability to pay the taxes. Said obligation is not a consequence of the felonious acts charged in the criminal proceeding nor is it a mere civil liability arising from a crime that could be wiped out by the judicial declaration of non-existence of the criminal acts charged. July 29. the Commissioner of Internal Revenue was prevented. When Ker & Co. December 28. Since the civil liability is not deemed included in the criminal action. or both. YES. Patanao. The situation under the income tax law is the exact opposite. GR No. until the termination of its appeal in the Supreme Court. This being so. filed a petition for review in the Court of Tax Appeals contesting the legality of the assessments in question. This not having been disputed. the CIR was in effect prohibited from collecting the tax in question. NO. he cannot become civilly liable thereunder. 20 SCRA 33 Facts: CIR assessed Arches of deficiency taxes. Arches vs Bellosillo. since that duty is imposed by statute prior to and independently of any attempts by the taxpayer to evade payment. May 30. of course. 1959 Subsidiary imprisonment for failure to pay the tax in case of insolvency cannot be imposed in criminal cases involving violations of the provisions of the Tax Code. Q. CRIMINAL ACTION Republic vs. but one relating to capacity to sue or affecting the cause of action only. Ltd. from filing an ordinary action in the Court of First Instance to collect the tax. as recognized in this Court's ruling in Ledesma. Ungab vs Cusi. Under the circumstances. Stated differently. v. for instance. Did the pendency of the taxpayer's appeal in the Court of Tax Appeals and in the Supreme Court have the effect of legally preventing the Commissioner of Internal Revenue from instituting an action in the Court of First Instance for the collection of the tax? A.
otherwise called the Tariff and Customs Code? A. It does not speak of the liability that falls on the person or offender. A compromise penalty is a certain amount of money which the taxpayer pays to compromise a tax violation. What is involved here is not the collection of taxes where the assessment of the Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals. 1958 A compromise is an agreement between 2 or more persons who amicably settle their differences on such terms as they can agree on to avoid a lawsuit. Besides. in the absence of express provision to that effect.He moved for the dismissal of the case alleging that his criminal liability had been extinguished by a compromise agreement with the Collector of Customs. L-19627 June 27. L-20805. A penalty can be imposed only on a finding of criminal liability. in regard to violation of the Tariff and Customs Code. but a criminal prosecution for violations of the NIRC which is within the cognizance of the CFI. While there can be no civil action to enforce collection before the assessment procedures provided in the Code have been followed. 1965 Facts: Ignacio Desiderio was charged with illegal importation of cigarettes. NO. however. Does settlement of the case under Section 2307 extinguish the criminal liability under Section 3601. Section 309 of said Code allows the Commissioner of Internal Revenue to compromise the civil as well as criminal cases arising thereunder. CTA Case. 1961 Facts: Magdaluyo was found in possession of assorted imported items and was required to pay specific tax thereon. Clearly. If an offer of compromise is rejected by the taxpayer. July 16. et al vs Collector of Internal Revenue. both of Republic Act 1937.16235. there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution under the Code. Pending criminal prosecution. The payment of a compromise penalty cannot be demanded inasmuch as it was offered by the petitioner only by way of compromise and the compromise did not go through. Q. and cannot be imposed in the absence of a showing that the taxpayer consented thereto. in accordance with Section 2307 of the same Republic Act 1937. Section 2307 of Republic Act 1937 falls under part 2 of Title VI of said Act. Section 2307 limits the effects of the aforesaid settlement to the liability that attaches to the property. Can the BIR demand a compromise penalty from Abad in view of such refusal? A. therefore. as in this case. GR No.Q. Ungab’s contention that the filing of the informations were precipitate and premature since the Commissioner has not yet resolved his protests against the assessment of the Revenue District Officer is without merit. A criminal complaint is instituted not to demand payment but to penalize the taxpayer for violation of the Tax Code. GR No. upon being advised thereof. but not the prescriptive period of a criminal action for violation of law. Q. April 20. Does the protest against the assessment filed by the taxpayer deprive the CFI of jurisdiction to hear the case for violation of the NIRC? A. Moreover. It very nature implies mutual agreement by the parties in regard to the thing to be compromised. The Pasay City Fiscal. the interpretation of the accused is not supported by the law. expressed his conformity to the agreement and considered the case as "closed and terminated”. the SolGen interposed . the Commissioner of Internal Revenue should file a criminal action if he believes that the taxpayer is criminally liable for violation of the tax law as the only way to enforce a penalty. Magdaluyo agreeing to pay the tax and compromise penalty. 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. and no obligation arises or is created by a simple offer or suggestion coming from one of the parties without the acceptance by the other. CIR offered a compromise to which Abad did not acceed. amount to settlement of the criminal liability. He refused arguing that he is the owner of them. L. which is entitled "Administrative Proceedings". vis-a-vis the Collector or Commissioner of Customs. No similar provision exists. November 29. An offer to compromise does not assume the category of a compromise until it is voluntarily accepted by the other party. A compromise implies agreement. the CIR agreed to compromise the case. GR No. COMPROMISE Chuy. the BIR cannot. It is paid in lieu of criminal prosecution. Commissioner vs Abad. An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat and evade the income tax. 1968 Facts: Abad was found by the BIR guilty for violation of the NIRC provisions. NO. People vs Magdaluyo. or to the bond that replaces the property. NO. Upon full payment. Settlement of the administrative proceedings does not. People vs Desiderio.
modify or alter a final decision of a court. These railroad ties were however rejected byt he Manila Railroad Co. Qs. NO for both queries. GR No. either real or personal. the CIR permitted the company to remove the timber which was used to manufacture railroad ties. Can the CIR compromise the criminal aspect of a tax case if the information was filed before the full payment of liability and compromise penalty? A. Bureau of Customs (BOC) created a committee to reappraise the confiscated jewelry and requested the modification of the judgment based on the reappraisal. May 20. In order that the lien may follow the property into the hands of a third party. On the second query: The contention that the parties to a case may enter into a compromise even a final judgment rendered by a court. was not able to pay its debt to Hongkong and Shanghai Banking Co. Pujalte and Co. TAX LIENS Hongkong and Shanghai Banking Corp. including an appellate court or stay execution of a final judgment in favor of the Government by receiving of said Government anything less than what the judgment calls for. The reason is the benevolence of our Constitution which prohibits the taking of property without due process of law. Corazon Velos de Torres vs Collector. May 5. no demand for payment had been made and when the purchaser had no notice of the existence of the lien? A. NO. or had no means of knowing from the public records that such taxes had accrued. the Commissioner of Customs is not a private party and is not the owner of the money involved in the fine based on the original appraisal. it is further essential that the latter should have notice. Thus. GR No. Q. 1987 . GR No.an objection arguing that since the information charging defendant with the offense in question was filed prior to his full payment of the tax liability and compromise penalty. however. Rovero vs Amparo. S. When violations of tax laws/cases may be compromised. 1952 Facts: Rovero was found guilty of illegal importation of jewelry. Can the BOC reappraise confiscated items AFTER rendition of judgment? Can the RP enter into a compromise after judgment? A. either actual or constructive. YES. In order to secure the payment of forest charges due the government.) The rule. 351. CIR 39 Phil. 56568. the CIR lost the authority to compromise the criminal aspect of the tax case. the conduct of the hearing. AFTER rendition of judgment. may be correct as regards private parties who are the owners of the property subject-matter of the litigation.. he is not authorized to accept anything different from or anything less than what is adjudicated in favor of the Government. A compromise validly entered into between the Commissioner and the taxpayer prior to the institution of the corresponding criminal action arising out of a violation of the provisions of the Tax Code is a bar to such criminal action. L-5482. In the case of real estate or special assessment taxation a man cannot get rid of his liability to a tax by buying without notice. Meanwhile. 1918 Facts: Pujalte and Co. February 26. 145. The compromise agreement was complied with as it did not set date within which Magdaluyo should complete the payment. However. prompting Pujalte and Co. But surely he cannot under the guise of supervision and control of judicial proceedings. 195 U. the CIR caused delinquency proceedings to be commenced and had issued a distress warrant and later seized railroad ties including which had been assigned by Pujalte & Co. He is a mere agent of the Government and acts as a trustee of the money or property in his hands or coming thereto by virtue of a favorable judgment. to the Supreme Court. The charges on the timber against Pujalte also not having been paid. 1943. On the first query: The Commissioner of Customs may supervise and control the filing of pleadings. without the latter receiving any notice of the tax. Unless expressly authorized by his principal or by law. Was engaged in lumber business. as security for the payment of some debt or obligation. it executed bonds. (City of Seattle vs. 48602. The tax lien does not establish itself upon property which has been transferred to innocent purchasers prior to demand. To assign to HK & S a large quantity of railroad ties. Does the lien follow the property subject to the tax into the hands of a third party when at the time of transfer. the presentation of evidence and even the taking of an appeal from the decision of the Court of First Instance. Kelleher . to the Hongkong & Shanghai Banking Corporation. Q. adverse to the Government. A TAX LIEN in its modern acceptation is understood to denote a legal claim or charge on property. Republic vs Peralta. Its meaning is more extensive than the jus retentionis (derecho de retencion) of the civil law. vs Rafferty. Thus. is different where the vendee has no knowledge of the taxes on personality existing at the time. November 15.
On July 24. November 9. The changes and alterations embodied in the amended income tax return were substantial. Q. it received the notice beyond the five-year prescriptive period. the residue of such proceeds over and above the tax sought to be realized. Castro contends that the sale and forfeiture to the government (due to lack of bidders) of her properties which had been levied upon by the CIR and advertised for sale constitutes a full discharge of petitioner's tax liabilities. STATUTE OF LIMITATIONS Arches vs.502 00. 1958. 1953. the date when the amended return was filed. CASTRO vs. the Commissioner of Internal Revenue assessed deficiency income tax in the sum of P5. Ltd. When does a tax lien attach? A. NO. US vs Suria. A. L- Facts: Castro was assessed to be liable for war profits tax. Q. Commissioner. for lack of adequate bids. The CIR insists that his right to issue the assessment has not prescribed inasmuch as the same was availed of before the 5-year period provided for in Section 331 of the Tax Code expired. all the proceeds of the sale of the thing forfeited are turned over to the Collector of Internal Revenue. 14 SCRA 52) Facts: Phoenix Assurance Co. 21 SCRA 17 Facts: Basilan Estates claims that it never received notice of assessment of the deficiency or if it did. Pheonix Assurance Co.A tax lien created in favor of the government is superior to all other claims or preferences. When is the reckoning date of the 5-year prescriptive period to issue an assessment? A. There being no bidders. filed its income tax return for 1952 on April 1.) 3 years Commissioner vs. 20 Phil 163] In a seizure under forfeiture. including all expenses. 1955 reporting a tax liability of P2.00. Ltd. The tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax income becomes due and payable.667. 1994 Q.) 10 years Basilan Estates vs. b. BPI vs Trinidad. . operate as full satisfaction of the total tax claims even beyond the value of the property forfeited? A. FORFEITURE MARIA B. 1955. Consequently. GR No. The CTA ruled that the right of the CIR was barred by prescription. the properties first sold at a public auction were forfeited in favor of the Government. CIR vs NLRC. It amended said return on August 30. 42 Phil 220 In a seizure to enforce a tax lien. No. 1962 G. COLLECTOR OF INTERNAL REVENUE 12174 April 26. Does forfeiture of the taxpayer's distrained or levied property in favor of the Government. The period of limitation of the right to issue the same should be counted from the filing of the amended income tax return. Assessment of the Tax Liability a. 74965.R. another public auction of other properties was held in order to raise the deficiency. Bellosillo. including expenses. August 30... is collected. The remedy by distraint of personal property and levy on realty may be repeated if necessary until the full amount due. 20 SCRA 32 The defense of prescription is not jurisdictional and must be raised seasonably. after examination of the amended return. is returned to the owner of the property. otherwise it is deemed waived.
Neither are they subject of recoupment since they do not arise out of the contract or transaction sued on. Taligman Lumber Co. the conclusion must be that no such returns had been filed and that the Government had 10 years within which to make the corresponding assessments. Inc. in the light of public policy. The right of the CIR to collect by summary method has the effect of stopping the running of prescription once a warrant of distraint and levy is issued. such as forest charges. by filing an answer to the taxpayer's petition for review wherein payment of the tax is prayed for. vs. GRN L-37061. 4 SCRA 263 Q.. This is true even if the information embodied in the wrong return could enable the BIR to assess the tax liability of the taxpayer. it was incumbent upon the latter to prove that it had submitted said returns. The summary remedy of distraint and levy is begun by the issuance of a warrant of distraint and levy. which are construed uniformly. at least the company should be compensated with what it owed the Republic for reforestation charges. and are the positive acts of the government. All that is required to start the running of the period of limitation therein prescribed is to distraint or levy. vs. .) 5 years b. Demand Letter issued by the Bureau of Forestry not an assessment Mambulao Lumber Co. Internal revenue taxes. When is assessment deemed made for the purpose of counting the 5year presciptive period? A. Republic of the Phil. Commissioner. it is not required that the same be received by the taxpayer within the prescriptive period. vs. A judicial action for the collection of a tax is begun by the filing of a complaint with the proper court. Republic vs. mailed or sent by the Collector to the taxpayer. to exclude the remedy in an action or any indebtedness of the State or municipality to one who is liable to the State or municipality for taxes. 4 SCRA 842 Since prescription is one of the affirmative defenses set up by petitioner herein. NO. The assessment is deemed made when notice to this effect is released.802. it contended that since the Republic (Government) has not made use of the reforestation charges for reforesting the denuded area of the land covered by the company’s license. As long as the notice is released within the prescriptive period. Butuan Sawmill. the personal consent of individual taxpayers is not required. contract or judgment as is allowed to be set-off under the statutes of set-off. demand. 1984 Facts: Mambulao Lumber Company paid the Government a total of P9. or institute a proceeding in court. as it did in this case. the Republic should refund said amount or. May taxes be subject of set-off or compensation? A. Q. Having found liable for an aggregate amount of P4. cannot be the subject of set-off or compensation. When does the running of the period of limitation commence? A. Co. Marsman Dev. 16 SCRA 277 The 10 year prescriptive period will still apply even if what was filed was a wrong return. CTA. the return must be as substantially complete as to include the needed details on which the full assessment may be made.) 10 years Clara Diluangco vs. Taxes are not in the nature of contracts between the parties but grow out of a duty to. Collection of the Tax a. Filing of answer to taxpayer’s petition for review considered as institution of judicial action. April 27. having failed to do so. and that. within 5 years after the assessment of the tax. or where the assessment is appealed to the CTA.Q. B. Collector. if it cannot be refunded. 1972 It was incumbent upon appellants to show that such a return had been submitted. GRN L-18986.37 for forest charges. to the making and enforcing of which. In order that the filing of a return may serve as the starting point of the period for the making of an assessment. A claim for taxes is not such a debt. September 5.50 as reforestation charges.127.
1967 Facts: Tan Guan and Sia Lin is a partnership. fraudulent return with intent to evade tax.593.. A “fraudulent return” implies intentional or deceitful entry with intent to evade the taxes due. Ayala Securities Corporation.Fernandez Hermanos. The fraud contemplated by law is actual and not constructive. Domingo. whether slight or gross. CTA. CTA case No. as a special law prevails over a general law. What constitutes fraud CIR vs. Commissioner. Fraud is a question of fact and the circumstances constituting fraud must be alleged and proved in the court below. 1976 Q. Fraudulent or False Return Aznar vs. A judicial action for the collection of a tax is begun by the filing of a complaint with the proper court of first instance. Later however. due to the holding in Hoa Hin Co. February 16. Q. namely . Pampanga."falsity. It must amount to intentional wrong-doing with the sole object of avoiding the tax. and failure to file a return is strengthened immeasurably by the last portion of the provision which segregates the situations into three different classes. It must be intentional fraud. Said assessment was assailed before the CTA and was eventually elevated before the SC. The expenses were fictitious or non-existent. The finding of the trial court as to its existence and non-existence is final and cannot be reviewed here unless clearly shown to be erroneous. vs. Commissioner. 19 SCRA 790 Facts: Guagua Electric Light Plant Co. consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some legal right. Where the tax obligation is secured by a bond. 1969 Inc. The BIR investigated the books and papers of the said partnership posted fictitious expenses for the purpose of avoiding taxes. 1168. Facts: Upon verification of the taxpayer’s income tax returns. the prescriptive period for the action for the forfeiture of the bond is governed by the Civil Code Guagua Electric Co. The taxpayer contended that prescription has set in for failure of the Commissioner to file a complaint for collection against it in an appropriate civil action. GRN L-29485. A “false return” implies deviation from the truth. Guagua Electric is absolved from the payment of the amount erroneously refunded. March 31. What constitutes fraud? A. September 30." "fraud" and "omission. and thereby including the amount previously allowed by the Commissioner to be refunded. 1964 Mere understatement of the income in itself does not constitute fraud. vs. Inc. GRN L-21551. NO. Q. April 27. Tan Guan vs. Said conclusion was prompted by the absence of . OR where the assessment is appealed to the Court of Tax Appeals. Gomez vs. Should tax “refunded erroneously” be imposed against the company. The BIR investigators disallowed the deductions because there was substantial and intentional overstatement of deductions. thus.87 is in effecct an assessment of deficiency franchise tax. it should not be imposed against the company. Fraud is never lightly to be presumed because it is a serious charge. Does the filing of an answer to taxpayer’s petition for review stay the prescriptive period? A. is a grantee of municipal franchises by the municipal councils of Guagua and Sexmoan. the CIR assessed the taxpayer deficiency income taxes. the Commissioner assessed against the company deficiency franchise tax subject to a 25% surcharge. Commissioner." That there is a difference between "false return" and "fraudulent return" cannot be denied. vs. whether intentional or not. Negligence. and to collect is governed by Section 331 of the Tax Code rather than by Article 1145 of the Civil Code. David. is not equivalent to the fraud with intent to evade the tax contemplated by law. It filed a claim for refund for overpayment of franchise tax as provided by its franchises which was denied by the Commissioner on the ground that the right to refund has prescribed. 58 SCRA 519 Our stand that the law should be interpreted to mean a separation of the three different situations of false return. The demand on the taxpayer to pay the sum of P16. or has the right to recover prescribed? A. The right to assess. GRN L-23676. L-21557. YES. by filing an answer to the taxpayer's petition for review wherein payment of the tax is prayed for.
Tan Guan did not present any evidence to disprove the findings that the expenses are fictitious. 1968 The delay in collection could not be attributed to the defendant at all. PROTEST AGAINST ASSESSMENT St. Stephen’s Association vs Collector of Internal Revenue. Alca's waiver was of the period of prescription beginning January 20. The defense of prescription is waivable. His requests had been unheeded until then. considering that the investigation on Tan Guan’s liability was made prior to the expiration of the 5-year period to preserve and keep receipts as set fgorth in Section 337 of the Tax Code. and hence. and there was nothing to impede enforcement of the tax liability by any of the means provided by law. Q. CTA and Commissioner. was not rebutted by the taxpayer. GRN L-204207. Republic Act No. L-11238. unappealable and therefore demandable. More than 5 years had elapsed since the assessment in question was made. and the taxpayer can appeal to the Court of Tax Appeals only upon receipt of the decision of the Collector on the disputed assessment. making subsequent events in connection with the said assessment entirely immaterial. 1125. Prescription: Suspension of the Statutory Period for Collection Republic vs. 1958 Where a taxpayer questions an assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer) believes he is not liable therefore. for under the law such waiver must be executed within the original 5year period within which suit could be commenced. There is nothing unlawful nor immoral about this kind of waiver. 165 SCRA 571 . TAX REMEDIES OF THE TAXPAYER: 1. August 21. Felix Acebedo. Tan Guan or the company cannot claim the expenses as deduction from gross income. and found established by the Court of Tax Appeals. Wyeth Suaco Laboratories. in accordance with par. GRN L-24624. It is not just an extension of the period of limitation. Criminal Liability SUSPENSION OF PRESCRIPTIVE PERIODS Republic vs. However: Sinforoso Alca vs.. Commissioner vs. the assessment becomes a "disputed assessment" that the Collector must decide. proven. conferring appellate jurisdiction upon the Court of Tax Appeals to review decisions of the Collector of Internal Revenue in cases involving disputed assessment. 320 SCRA 574 Section 229 (now 228) of the Tax Code mandates that a request for reconsideration must be made within 30 days from the taxpayer’s receipt of the tax deficiency assessment.supporting receipts in the voucher recovering the expenses and by the failure of the recipients thereof to declare them in their income tax returns. November 27. but a renunciation of her right to invoke the defense of prescription which was then already available to her. Can the expenses be claimed as a deduction by the partnership considering such findings? A. otherwise the assessment becomes final. For failure to overcome the burden. prescription had already set in. As the determination of the Commissioner is presumed correct. (1) of section 7. Dayrit vs Cruz. 1968 The right to avail of the defense of prescription is waivable. March 29. NO. The Commissioner’s finding on the facts constituting fraud. C. it behooves the taxpayers to rebut such presumption. 1956. The period starts to run again when said request is denied. 202 SCRA 125 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. Hizon. The written waiver of the statute signed by the defendant could no longer revive the 'right of action. GR No. Inc.
This was apparently not taken into account before the warrant of distraint and levy was issued. GR No. February 17. as the heirs and estate have paid a total of P285. the proven fact is that four days after the private respondent received the petitioner's notice of assessment. Q. It paid sales taxes.Facts: Petitioners are the heirs of the deceased spouses Marta and Toribio Teodoro who died intestate. The taxpayer’s remedy is to appeal to the CTA within 30 days from the date he is notified. YES. The heirs separately filed estate and inheritance tax returns for the estates of the spouses with the BIR. Was the assessment final. the reglamentary period was suspended when Algue filed its protest against the assessment and the period began to run again when Algue was informed of the denial of its protest. However. The protest was not pro forma and it thus had the effect of suspending reglementary period which started on the date the assessment was received. and for an order of payment of taxes before the trial court.046.91 plus surcharges and interest. Q." Exception: If the protest filed was not pro forma and was based on strong legal considerations. The warrant was deferred. the act of the Commissioner in filing an action for allowance of the claim for estate and inheritance taxes. however failed to avail of this remedy. executory. Advertising Associates contested the assessments but the Commissioner reiterated the assessments. may be construed as a denial of the taxpayers’ request for reconsideration. and demandable? A. Algue filed a letter protest which was stamp-received on the same day in the office of the petitioner. Algue’s letter-protest of the assessment could not be found in the petitioner’s office. directing the collection enforcement division to levy on the taxpayer's personal properties as would be sufficient to satisfy the deficiency taxes. From the date of receipt of the copy of the Commissioner’s letter for collection of taxes. 133 SCRA 766 Facts: Advertising Associates contends that it is a media company. He closed his demand letter with this paragraph: "This constitutes our final decision on the matter. YES. 1979 in answer to the requests of the taxpayer for the cancellation of the assessments and the withdrawal of the warrants of distraint. Inc. Hence. Since the said protest could not be found in the dockets. The petitioners. the warrant of distraint and levy is "proof of the finality of the assessment" and "renders hopeless a request for reconsideration. they have a period of 30 days to appeal the case to the Court of Tax Appeals. and upon denial thereof.391. The taxpayer requested the cancellation of the assessments in its letters of September 13 and November 21. the Commissioner issued two warrants of distraint. Tax assessment made by tax examiners are presumed correct and made in good faith. Algue’s counsel produced his copy and furnished the agent with a photostatic copy. who refused to accept because of a pending protest. The act of the Commissioner. a warrant of distraint and levy was presented to Algue through its counsel. Such failure to file a position paper may be construed as abandonment of the petitioners' request for reconsideration. not an advertising company. Was the petition for review of the decision of the Commissioner seasonably filed with the CTA? A. the Commissioner filed a motion for allowance of claim against the estates. may be considered as an outright denial of petitioners' request for reconsideration. as amended by PD 67. The Acting Commissioner wrote a letter dated May 23. it filed its letter of protest. Failure of the taxpayers to appeal to the Court of Tax Appeals in due time made the assessments final. The period started running again only when the private respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it." . As a rule. in filing an action for allowance of the claim for estate and inheritance taxes. Algue filed a petition for review of the decision of the Commissioner with the CTA. In a tax return Dayrit declared an additional amount of P3. praying that Dayrit be ordered to pay the BIR the sum of P6.470. A taxpayer has to prove otherwise. executory and demandable. vs CA. The heirs asked for reconsideration as the assessment was allegedly contrary to law and not supported by sufficient evidence. 1988 Facts: Algue received a letter of assessment from CIR for delinquency income taxes.655. In this case. In 1974. The CIR subjected to 3% contractor's tax its rental income from billboards and electric signs. L-28896. In 1978. the taxpayers must contest and dispute the same.88. realty dealer's tax and 3% contractor's tax for repairing electric signs.78 as part of the estates of the Teodoro spouses. The court notes that it took the respondent Commissioner a period of more than one (1) year and five (5) months before finally instituting the action for collection. you may appeal to the Court of Tax Appeals within 30 days from receipt of this letter. Later. Dayrit filed oppositions contending that the taxes have been settled according to the provisions of PD 23.595. Under the circumstances of the case. The BIR issued deficiency estate and inheritance tax assessments the Estates of Dona Marta and Don Toribio. the protest was denied. The BIR issued tax payment acceptance orders. The billboards and electric signs manufactured by it are either sold or leased. 1974. CIR vs Algue. If you are not agreeable. Advertising Associates." being "tantamount to an outright denial thereof and makes the said request deemed rejected.
NO. 117 SCRA 805 Facts: In 1967. on appeal. The Secretary of Finance sustained the Commissioner’s action. where a taxpayer questions an assessment and asks the CIR to reconsider or cancel the same because he believes he is not liable therefore. Villa filed on May 4. NO. not the assessment itself. L-9692. The question of whether or not to impose a deficiency tax assessment on Meralco Securities Corporation undoubtedly comes within the purview of the words "disputed assessments" or of "other matters arising under the National Internal Revenue Code ". January 2.The reviewable decision of the BIR is the letter it issued. 1958 The CIR. provided it is done within the prescriptive period. hence. The said letter embodies the Commissioner's final decision within the meaning of Section 7 of Republic Act No. GR No. any decision of the Collector of Internal Revenue in cases involving disputed assessments and other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue. What may be the subject of a judicial review is the decision of the Commissioner on the protest against assessment. Moreover. Collector of Internal Revenue vs Batangas Trans co. for that would be tantamount to a usurpation of executive functions. L-23998. after appeal from his decision to the CTA has been perfected. Maniago filed a petition for mandamus against the Commissioner so as to compel it to impose the alleged deficiency tax assessment against Meralco Securities and to award him the corresponding informer’s award. may still modify his assessment. That procedure is demanded by the pressing need for fair play. For. The term “decision” has been interpreted to mean the decisions of the CIR on the protest of the taxpayer against the assessments and does not signify the assessment itself. The Commissioner caused the investigation of the denunciation and found that no deficiency corporate tax was due from Meralco Securities. Meralco Securities Corporation vs Savellano. Q. As such. He even directed the taxpayer to appeal it to the Tax Court. The Tax Court is a court of special jurisdiction. for years 1962 to 1966. 1961 a petition for review with the CTA. The Commissioner said so. Commissioner vs Villa. the CIR must decide and the taxpayer can appeal to the CTA only upon receipt of the decision of the disputed assessment. If the Collector of internal Revenue is not allowed to amend his assessment before the Court of Tax Appeals. .. Thus. Is an uncontested assessment a decision within the purview of RA 1125 thus reviewable by the CTA? A. and after the Tax Court has acquired jurisdiction over the appeal. Q. Purely administrative and discretionary functions may not be interfered with by the Courts. subject of the appeal. since the office of the Commissioner of Internal Revenue is charged with the administration of revenue laws. Mandamus may not be made against the Commissioner to compel him to impose a tax assessment not found by him to be due or proper. without contesting the said assessment. is not subject tot he contrary judgment or control of others. 1125. regularity and orderliness in administrative action. The Court of Tax Appeals has exclusive appellate jurisdiction to review. Maniago was informed of the findings. by increasing the same. However. which is the primary responsibility of the executive branch of the government. that would lead to multiplicity of suit which the law does not encourage. and since he may make a subsequent reassessment to collect additional sums within the same subject of his original assessment. Since in the instant case the taxpayer appealed from the assessment of the Commissioner of Internal Revenue without previously contesting the same. 1968 Facts: Leonardo Villa and his wife were assessed deficiency taxes by the BIR. the jurisdiction of the Tax Court is to review by appeal decisions of the Commissioner of Internal Revenue on disputed assessments. as stated. falling within the jurisdiction of the Court of Tax Appeals and not of the Court of First Instance. in the absence of arbitrariness or grave abuse so as to go beyonf the statutory authority. Can the Commissioner be compelled to impose the alleged deficiency tax assessment? A. GR No. Mandamus only lies to enforce the performance of a ministerial act or duty and not to control the performance of discretionary power. but before the answer is filed with the court. it can take cognizance only of such matters as are clearly within its jurisdiction. the late Juan G. Jaunary 6. Maniago submitted to the Commissioner confidential denunciation against the Meralco Securities Corp. The directive is in consonance with this Court's dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. The discretionary power vested in the proper executive official. the appeal was premature and the Court of Tax Appeals had no jurisdiction to entertain said appeal. for tax evasion for not having paid income tax on 25% of the dividends it received from the Manila Electric Co. mandamus may not lie against the Commissioner to compel him to impose a tax assessment not found by him to be due or proper for that would be tantamount to a usurpation of executive functions.
Best-Obtainable Evidence Rule Commissioner of Internal Revenue vs. Hantex Trading Co., Inc. (March 31, 2005)
FACTS: Lt. Vicente Amoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and Investigation Bureau, received confidential information that the respondent had imported synthetic resin amounting to P115,599,018.00 but only declared P45,538,694.57. According to the informer, based on photocopies of 77 Consumption Entries furnished by another informer, the 1987 importations of the respondent were understated in its accounting records. An audit investigation was conducted and the respondent’s president refused to cooperate since he contended that save for the current investigation, they have always cooperated in the previous investigations before. Payment was demanded from the respondent but it protested the assessment. The matter was elevated to the CTA and it ruled in favor of the CIR, but was later on reversed by the CTA. Q. Is an assessment based on the machine copies of the Consumption Entries competent evidence? A. NO, The photocopies of the consumption entries is incompetent. The “best evidence” envisaged in Sec. 16 of the 1977 NIRC, as amended, includes the corporate and accounting records of other taxpayers engaged in the same line of business, including their gross profit and net profit sales. The general rule is that administrative agencies such as the BIR are no bound by the technical rules of evidence. The best evidence obtainable under Sec. 16 of the 1977 NIRC, as amended, does not include mere photocopies of records/documents. The rule s that in the absence of the accounting records of a taxpayer, his tax liability may be determined by estimation; Rule does not apply where the estimation is arrived at arbitrarily and capriciously.
2. CLAIM FOR REFUND There must be a written claim for refund filed by the taxpayer with the Commissioner. Commissioner of Internal Revenue vs. Central Luzon Drug Corporation (April 15, 2005)
FACTS: Respondent is engaged in retailing medicines and pharmaceutical products and from January to December 1996, it granted 20% sales discount to qualified senior citizens on their purchases of medicines pursuant to RA 7432, which totaled to P904, 769. For the taxable year 1996, the corporation incurred a net loss. The respondent then filed a claim for tax refund/credit from the petitioner but was unable to get an affirmative response. Q. Can a taxpayer validly claim a tax refund/credit despite a net loss? A. YES. The tax credit allowed under RA 7432 to establishments as a result of granting senior citizens 20% discount on their purchase of medicines from private establishments may be claimed by such establishments even though they are operating at a loss. Under RA 7432, Congress has granted without conditions a tax credit benefit to all covered establishments. Although this tax credit benefit is available, it need not be used by losing ventures, since there is no tax liability that calls for its application – by its nature, the tax credit may still be deducted from a future, not a present, tax liability, without which it does not have any use .Also, the discount privilege to which our senior citizens are entitled is actually a benefit enjoyed by the general public to which these citizens belong. As a result of the 20% discount imposed by RA 7432, an establishment becomes entitled to a just compensation, and this term refers not only to the issuance of a tax credit certificate indicating the correct amount of the discounts given, but also to the promptness of its release.
Atlas Consolidated Mining and Development Corp. vs. Commissioner of Internal Revenue (March 16, 2007)
FACTS: Petitioner presented to respondent Commissioner of Internal Revenue applications for refund or tax credit of excess input taxes for the second, third and fourth quarters of 1992 in the following amounts: P24,031,673 for the second quarter, P16,597,709.17 for the third quarter and P29,839,894.82 for the last. Petitioner attributed these claims to its sales of gold to the Central Bank, copper concentrates to Philippine Associated Smelting and Refining Corporation (PASAR) and pyrite to Philippine Phosphates, Inc. (Philphos) on the theory that these were zero-rated transactions resulting in refundable or creditable input taxes under Section 106(b) of the Tax Code of 1986. Due to the inaction of the CIR, the petitioner brought its claim to the CTA but it was subsequently denied. Q. Can the taxpayer validly claim tax refund/credit? A. NO. It has always been the rule that those seeking tax refunds or credits bear the burden of proving the factual bases of their claims and of showing, by words too plain to be mistaken, that the legislature intended to entitle them to such claims. The rule, in this case, required petitioner to (1) show that its
sales qualified for zero-rating under the laws then in force and (2) present sufficient evidence that those sales resulted in excess input taxes. There is no dispute that respondent had approved petitioner’s applications for the zero-rating of its sales to the Central Bank, PASAR and Philphos prior to the transactions from which these claims arose. However, it was also incumbent on petitioner to submit sufficient evidence to justify the grant of refund or tax credit. It was here that petitioner fell short. The CTA and the CA both found that petitioner failed to comply with the evidentiary requirements for claims for tax credits or refunds set forth in Section 2(c) of Revenue Regulations 3-88 and in CTA Circular 1-95, as amended by CTA Circular 10-97.
Cebu Portland Cement Co. vs Collector, 25 SCRA 789
Facts: By virtue of a decision of the Court of Tax Appeals, modified by the Supreme Court, the Commissioner was ordered to refund overpayments of ad valorem taxes on cement produced and sold by the company after October 1957. The company moved for a writ of execution, which was opposed by the Commissioner on the ground that the company had an outstanding sales tax liability to which the judgment debt had already been credited. The Court of Tax Appeals held that the alleged sales tax liability was still being questioned and therefore cannot be set-off against the refund. Q. May the assessment of sales tax liability may be enforced, i.e. to set off against the refund, pending contest? A. YES. The argument, that the assessment cannot as yet be enforced because it is still being contested, lost sight of the urgency of the need to collect taxes as “the life blood of the government.” If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. To require the Commissioner to actually refund to the company the amount of the judgment debt which he will later have the right to distrait for payment of its sales tax liability, is an idle ritual.
Commissioner vs Wander Philippines, Inc., GR No. L-68375, April 15, 1988
Facts: Wander Inc. is a domestic corporation owned by Glaro S.A. Ltd., - a service corporation not engaged in trade or business in the Philippines. Wander remits dividends to its parent company out of which Wander withholds 35% and pays the same to the BIR. Wander filed a claim for refund, contending that it is liable only for 15% withholding tax and not 35% as provided in the Tax Code. Q. Is Wander entitled to the preferential rate of 15% withholding tax on the dividends it remitted to Glaro? A. YES. Under the Tax Code, dividends received from a domestic corporation liable to tax, the tax rate shall be 15% of the dividends remitted, subject to the condition that the country in which the nonresident corporation shall allow a credit against the tax due from the non-resident corporation taxes deemed to be paid in the Philippines equivalent to 20% which represents the difference between the regular tax of 35% on corporations and 15% tax on dividends. In the instant case, Switzerland did not impose any tax on dividends received by Glaro. Such fact, however, should be considered as a full satisfaction of the given conditions. To deny Wander to withhold the 15% tax would run counter to the very spirit and intent of said law. The submission of petitioner that Wander is but a withholding agent of the government and therefore cannot claim reimbursement of the alleged overpaid taxes, is untenable. It will be recalled, that said corporation is first and foremost a wholly owned subsidiary of Glaro. The fact that it became a withholding agent of the government which was not by choice but by compulsion under Tax Code, cannot by any stretch of the imagination be considered as an abdication of its responsibility to its mother company. It is a device to insure the collection by the Philippine Government of taxes on incomes, derived from sources in the Philippines, by aliens who are outside the taxing jurisdiction of this Court. In fact, Wander may be assessed for deficiency withholding tax at source, plus penalties consisting of surcharge and interest. Therefore, as the Philippine counterpart, Wander is the proper entity who should claim for the refund or credit of overpaid withholding tax on dividends paid or remitted by Glaro.
The claim for refund must be filed within two (2) years from date of payment of the tax or penalty regardless of any supervening event. Gibbs vs Collector of Internal Revenue, GR No. L-13453, February 29, 1960
Facts: After the denial of their petition by the BIR, Petitioners paid the deficiency income tax and demanded a refund therefrom. Petitioners filed a petition for review of the refund which was denied by the respondent court holding that it had no jurisdiction for being filed beyond the 30-day reglamentary period. Q. Was the petition seasonably filed? A. NO. A taxpayer who has paid the tax whether under protest or not, and who is claiming a refund of the same, must comply with the requirements of both section 306 o0f the NIRC and section 11 of RA
1125; (1) that is, he must file a claim for refund with the CIR within 2 years from the date of his payment of the tax as required by Sec. 306 of the NIRC and (2) appeal to the CTA within 30 days from receipt of the CIR’s ruling or decision denying his claim for refund, as required by Sec. 11 of RA 1125. If however, the Collector takes time in deciding the claim and the period of 2 years is about to end, the suit or proceeding must be started with the CTA before the end of the 2-year period without awaiting the Decision of the Collector. This is so because the positive requirement of Sec. 306 and the doctrine that delay of the Collector in rendering decision does not extend the peremptory period fixed by the statute. In the case of taxpayer who has not yet paid the tax and who is protesting the assessment made by the CIR, he must file an appeal with the CTA within 30 days from his receipt of the Collector’s Assessment as required by Sec. 11 of RA 1125. Otherwise, his failure to comply with said statutory requirement would bar his appeal and deprive the CTA of its jurisdiction to entertain or determine the same. Sec. 7, in relation to Sec. 11 of RA 1125 gives the CTA exclusive appellate jurisdiction to review by appeal decisions of the CIR involving disputed assessments or refunds of internal revenue taxes, provided the case is filed within 30 days after the receipt of such decision or ruling. Petitioners received the notice of denial on November 14, 1956, they filed the petition more than 10 months thereafter on September 27, 1957. The CTA will no longer entertain such petition for being filed way beyond the 30-day reglamentary period.
Computation of two-year period. Collector of Internal Revenue vs Prieto, GR No. L-11976, August 29, 1961
Q. When the tax is paid in installments, when should the prescriptive period of two years provided in section 306 of the Revenue Code be counted from? A. The 2-yr period should be counted from the date of the final payment. This rule proceeds from the theory that, in contemplation of tax laws, there is no payment until the whole or entire tax liability is completely paid. Thus, a payment of a part or portion thereof, can not operate to start the commencement of the statute of limitations. In this regard the word "tax", or words "the tax" in statutory provions comparable to section 306 of our Revenue Code have been uniformly held to refer to the entire tax and not a portion thereof and the vocables "payment of tax" within statutes requiring refund claim, refer to the date when all the tax was paid, not when a portion was paid.
Gibbs vs Commissioner of Internal Revenue, GR No. L-17406, November 29, 1965
Payment is a mode of extinguishing obligations (Art. 1231, Civil Code) and it means not only the delivery of money but also the performance, in any other manner, of an obligation (Art. 1231). A taxpayer, resident or nonresident, does so not really to deposit an amount to the Commissioner of Internal Revenue, but, in truth, to perform and extinguish his tax obligation for the year concerned. In other words, he is paying his tax liabilities for that year. Consequently, a taxpayer whose income is withheld at source will be deemed to have paid his tax liability when the same falls due at the end of the tax year. It is from this latter date then, or when the tax liability falls due, that the two-year prescriptive period under Section 306 (now part of Section 230) of the Revenue Code starts to run with respect to payments effected through the withholding tax system.
ACCRA Investment Corporation vs CA, 204 SCRA 957
Facts: On April 15, 1982, the petitioner corporation filed with the Bureau of Internal Revenue its annual corporate income tax return for the calendar year ending December 31, 1981 reporting a net loss. In the said return, the petitioner corporation declared as creditable all taxes withheld at source by various withholding agents which were paid and remitted by the latter to the Bureau of Internal Revenue from February to December 1981. On December 29, 1983, the petitioner corporation filed a claim for refund inasmuch as it had no tax liability against which to credit the amounts withheld. Pending action of respondent CIR on its claim for refund, Petitioner filed a petition for review with the CTA asking for the refund of the amounts withheld as overpaid income taxes. The CTA dismissed the action after finding that the two-year period within which the petitioner’s claim for refund should have been filed had already prescribed pursuant to the Tax Code. Q. Is CTA correct? A. NO, CTA is not correct. There are two alternative reckoning dates: (1) the end of the tax year; and (2) when the tax liability falls due. The corporation's withholding agents had paid the corresponding taxes withheld at source to the Bureau of Internal Revenue from February to December 1981. In having applied the first alternative date-"the end of the tax year" in order to determine whether or not the petitioner corporation's claim for refund had been seasonably filed, the respondent appellate court failed to appreciate properly the attending circumstances of this case. The petitioner corporation is not claiming a refund of overpaid withholding taxes, per se. It is asking for the recovery of the sum of P82,751.91.00, the refundable or creditable amount determined upon the petitioner corporation's filing of the its final adjustment tax return on or before 15 April 1982
before filing its income tax return. alleged that the amount in question can no longer be refunded considering that more than two years had already elapsed. Clearly.146. it declared a gross income of P 904. After it ceased operations. leaving a balance of P174. hence. during the subsequent quarters.1982.320. Q. to be adjusted at the end of the calendar or fiscal year. August 28. filed a suit for a refund on March 14. BIR filed a petition for review in the CTA seeking the refund of the aforesaid amount. In case of dissolution of a corporation. claimed this amount as tax refund. 230 commence to run? Is it from the date the quarterly income tax was paid or from the date of filing the adjusted return? A. The two-year prescriptive period within which to claim a refund commences to run. the petitioner corporation had until April 15. Hence. Inc filed its quarterly income tax return for the first quarter of 1981. that is truly reflective of the results of the operations of a business enterprise.138.77.77 and the previous year's excess credit of P2. Thus. Since the two-year prescriptive period should be counted from the filing of the Adjustment Return on April 15.060. When does the 2-year period to claim a refund of erroneously collected tax provided for in Sec. TMX Sales filed a petition for review with the CTA. it would be absurd for FBTC to wait until the fifteenth day of April.57. when does the two-year period of prescription under Sec. or almost 10 months after it ceased its operations. In case of the dissolution of a corporation. on the date of the filing of the adjusted final tax return.122. CTA dismissed BIR's petition for review and denied its claim for refund on the ground that the claim had already prescribed. Inc. BPI vs CIR. there is the need to file a return first before a claim for refund can prosper inasmuch as the respondent Commissioner by his own rules and regulations mandates that the corporate taxpayer opting to ask for a refund must show in its final adjustment return the income it received from all sources and the amount of withholding taxes remitted by its withholding agents to the Bureau of Internal Revenue. but CIR refunded only the amount of P2. TMX Sales. in his answer. the filing of quarterly income tax returns required in sec. Bank of the Philippines Islands vs. The petitioner corporation filed its final adjustment return for its 1981 taxable year on April 15. the period of prescription should be reckoned from the date of filing of the return required by §78 of the Tax Code which state …”Every corporation shall. TMX sales suffered losses so that when it filed its income tax return.00. However. These quarterly tax payments which are computed on the cumulative figures of gross receipts and deductions on order to arrive at a net taxable income.render a correct return to the Commission of Internal Revenue.065. NIRC and implemented per BIR Form 1702-Q and payment of quarterly income tax should only be considered were installments of the annual tax due. CA affirmed CTA decision. The CIR. 292 of the Tax Code start to run? A. Thereafter. GR No. 2001 Facts: Family Bank and Trust Co had a refundable of P2. Q. ACCRAIN had until 15 April 1982 within which to file its final adjustment return. Inc.146.072. This claim was not acted upon by the CIR. It thus became necessary for FBTC to file its income tax return within 30 days after approval by the SEC of its plan or resolution of dissolution. 83736. within thirty days after the adoption by the corporation of a resolution or plan for the dissolution of the corporation x x x . 1984 within which to file its claim for refund.072.75. representing that year's tax credit of P174. CIR vs TMX Sales Inc. should be treated as advances or portions of the annual income tax due. The situation of FBTC is precisely what was contemplated under §78 of the Tax Code. the taxable year of FBTC was shortened to six months. x x x . when it can be finally ascertained if the taxpayer has still to pay additional income tax or if he is entitled to a refund of overpaid income tax.00 and total deductions of P 7. The most reasonable and logical application of the law would be to compute the 2-year prescriptive period at the time of filing the Final Adjustment Return or the Annual Income Tax Return. It is the Final Adjustment Return where the figures of the gross receipts and deductions have been audited and adjusted.. 144653. Accordingly. The CTA ruled in favor of TMX Sales. 1984. TMX Sales. GR No. with respect to the 1981 taxable year. Therefore. Commissioner of Internal Revenue (Oct.34. The petitioner corporation duly complied with this requirement on the basis of the corporate income tax return which ACCRAIN filed on 15 April 1982. However.647. it is only when the Adjustments Return covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures. Indeed. The petitioner corporation's taxable year is on a calendar year basis. 2005) .57.1982. TMX Sales filed a claim for refund with the appellate division of the BIR.when its tax liability for the year 1981 fell due. 1992 Facts: TMX Sales. FBTC's successor-in-interest. BPI. is not yet barred by prescription. January 15. 17.065. at the earliest.
FACTS: BPI. respondent filed its quarterly VAT returns from April 1. Respondent sells 80% of its products to its mother corporation. the BIR issued a Warrant of Distraint and/or Levy. In taxable transactions. Cebu Toyo Corporation (Feb. The CIR belies the claim for refund of the respondent. 2005) FACTS: The respondent is an export enterprise and is a subsidiary of a foreign corporation duly registered with the Philippine Economic Zone Authority pursuant to PD 66 and is also registered with the BIR as a VAT taxpayer. 1997 showing a total input VAT of P4. However. as amended. BPI did not receive any immediate reply to its protest letter. which include a request for reinvestigation granted by the BIR Commissioner. as amended. 1996 to December 31.714. when its counsel received a letter. denying its “request for reconsideration”. as clearly reflected in its 1996 and 1997 Annual Corporate Income Tax Returns. the respondent had two options with respect to its tax burden. Act No. and the existence of the circumstances enumerated in Section 224 of the same Code. and the rest are sold to various enterprises doing business in the Mactan Export Processing Zone.462. No.00 to the Central Bank of the Philippines for the total sales amount of US$1. where respondent specified that it was availing of the tax relief under E. Has the right of BIR to collect from BPI the alleged deficiency DST prescribed? A. it is engaged in taxable rather than exempt transactions.720.D. petitioner BPI. signed by then BIR Commissioner Liwayway Vinzons-Chato. Inasmuch as both sales are considered export sales subject to Value-Added Tax (VAT) at 0% rate under Section 106(A)(2) (a)of the National Internal Revenue Code. together with the attached Assessment Notice. No. Q. Applying the given rules to the present Petition. The statute of limitations on collection may only be interrupted or suspended by a valid waiver executed in accordance with paragraph (d) of Section 223 of the Tax Code of 1977. by his own repeated requests or positive acts. and that would have prevented or estopped petitioner BPI from setting up the defense of prescription against collection of the tax assessed. Is the grant of a refund in the amount of P2. FAS-5-85-89-002054. thus exempt it from income taxes for a number of years but not from other internal revenue taxes such as VAT.O. It could avail of an income tax holiday pursuant to provisions of E. the Bureau of Internal Revenue issued Assessment No. No. as amended. this Court finds that: (a) The statute of limitations for collection of the deficiency DST in Assessment No. had already expired.63.00. 7916. 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.000. as required in the Suyoc case. the protest filed by petitioner BPI was a request for reconsideration. In fine.21 representing excess VAT input payments. VALUE-ADDED TAX Commissioner of Internal Revenue vs. against petitioner BPI for the assessed deficiency DST for taxable year 1985. did not make repeated requests or performed positive acts that could have persuaded the respondent BIR Commissioner to delay collection. 226. FAS-5-85-89-002054. Suyoc Consolidated Mining Co. 1997 to the respondent is proper? A. Act No. On 10 October 1989. YES. including VAT under P. 1995.412. Even when the request for reconsideration or reinvestigation is not accompanied by a valid 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. in the amount of P27. properties or services. and (b) None of the conditions and requirements for exception from the statute of limitations on collection exists herein: Petitioner BPI did not execute any waiver of the prescriptive period on collection as mandated by paragraph (d) of Section 223 of the Tax Code of 1977. on two separate occasions. on 15 October 1992.439. or it could avail of the tax exemptions on all taxes.000. Taxable transactions are those transactions which are subject to value-added tax either at the rate of ten percent (10%) or zero percent (0%). other than filing a request for reconsideration of Assessment No. Then again. Respondent filed an application for tax credit/refund of VAT paid for the period April 1. dated 13 August 1997. sold United States (US) $500.46 representing unutilized input VAT on goods and services for the period April 1. for good reasons. the seller shall be entitled to tax credit for the value-added tax paid on purchases and leases of goods. BPI did not hear from the BIR until 11 September 1997. as amended. 226. Petitioner BPI received the Assessment. properties or services and the use or lease of properties is not subject to VAT (output tax) . 16. Under the fiscal incentives granted to PEZAregistered enterprises under Section 23 of Rep. not a request for reinvestigation that was granted by respondent BIR Commissioner which could have suspended the prescriptive period for collection under Section 224 of the Tax Code of 1977. Hence. respondent is not exempt from VAT and it correctly registered itself as a VAT taxpayer. the respondent’s claim should be granted. Respondent availed of the income tax holiday for four (4) years starting from August 7.00. 66 and pay only the preferential tax rate of 5% under Rep.O. YES. BPI then elevated the case to the CTA which ruled that the BIR can still collect the said tax since its right to collect has not yet prescribed. issued against petitioner BPI. 7916. An exemption means that the sale of goods. on 20 October 1989 and protested such on Nov. 1997 amounting to P4. as laid down by this Court in the case of CIR vs. the Government had been. 16. and. Q.000. It served the Warrant on petitioner BPI only on 23 October 1992. 1996 to December 31. 1996 to December 31. which was likewise affirmed by the Court of Appeals. FAS-5-85-89-002054.827.158. 1989. finding petitioner BPI liable for deficiency Documentary Stamp Tax on its afore-mentioned sales of foreign bills of exchange to the Central Bank.
as a PEZA-registered enterprise within a special economic zone. The rule that any sale by a VAT-registered supplier from the Customs Territory to a PEZA-registered enterprise shall be considered an export sale and subject to zero percent (0%) VAT was clearly established only on 15 October 1999.07. 66 from Section 103(q) of the Tax Code of 1977. properties. 153866. It is also registered with the PEZA to engage in the manufacture of recording components primarily used in computers for export.’ the respondent has the burden of proof that the taxes sought to be refunded were erroneously or illegally collected. shall be entitled to claim tax credit/refund of its input VAT attributable to such sales. as amended. The CIR contended that since ‘taxes are presumed to have been collected in accordance with laws and regulations. 7916. respondent enjoys preferential tax treatment. Unfortunately.247. and services by persons from the Customs Territory to ECOZONE enterprises shall be subject to VAT at zero percent (0%). which would necessarily be located within ECOZONES. but the input tax on his purchase of goods. properties or services related to such zero-rated sale shall be available as tax credit or refund.28. Inc. but. however. 9. the VAT-registered supplier shall not pass on any output VAT to the ECOZONE enterprise. The VAT on capital goods is an internal revenue tax from which petitioner as an entity is exempt. supplies. the exception of Presidential Decree No. An administrative claim for refund of VAT input taxes in the amount of P28. as amended. (Aug. or a total of P18.79.601. This Court agrees. not because of Section 24 of Rep. No. rather. Toshiba filed applications for tax credit/refund of its unutilized input VAT for 01 January to 31 March 1996 in the amount of P14. and at the same time. however. moreover. additional deduction for labor expense. No doubt. because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory. A VAT-registered purchaser of goods.176.). a zero rated sale by a VAT-registered person. Toshiba Information Equipment (Phils. February 11. petitioner as a VAT-registered person. Q. in lieu of all taxes. is the precursor of Rep. Zero-rated transactions generally refer to the export sale of goods and supply of services. Yes. is entitled to their credits. 7916. creating the Export Processing Zone Authority (EPZA). according to which. however.422. the respondent failed to do so. 2005) FACTS: Respondent Toshiba is a domestic corporation duly registered with the Philippine Economic Zone Authority as an ECOZONE Export Enterprise and is also registered in the BIR as a VAT taxpayer. Sales of goods. Although the transactions involving such tax are not exempt. An ECOZONE enterprise is a VAT-exempt entity. 66. properties or services that are VAT exempt. are VAT-exempt entities.118. It alleged that the said input VAT was from its purchases of capital goods and services which remained unutilized since it had not yet engaged in any business activity or transaction for which it may be liable for any output VAT. 2005] TECHNOLOGY Facts: SEAGATE is a resident foreign corporation duly registered with the SEC to do business in the Philippines. SEAGATE (PHILIPPINES) [G.303. no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. In zerorated transactions.161.128. enjoy all privileges. as amended. that PEZA-registered enterprises.00 and P5. If such sales are made by a VAT-registered supplier. COMMISSIONER OF INTERNAL REVENUE vs. properties and services by a VAT-registered supplier from the Customs Territory to an ECOZONE enterprise shall be treated as export sales. which is a taxable transaction for VAT purposes. Is Toshiba entitled to the tax credit/refund of its input VAT on its purchases of capital goods and services? A.369. Zero-rated transactions differ from effectively zero-rated transactions as to their source. is not entitled to any input tax on such purchases despite the issuance of a VAT invoice or receipt. upon the issuance of RMC No. 7499.and the seller is not allowed any tax credit on VAT (input tax) previously paid. etc or would be entitled to income tax holiday. Under the system.761. Is respondent entitled to the refund or issuance of Tax Credit Certificate representing alleged unutilized input VAT paid on capital goods purchased? A. The administrative claim for refund was not acted upon by the petitioner prompting the respondent to elevate the case to the CTA. Effectively zero-rated . for a total of P19. extends likewise to Rep.R. Commissioner of Internal Revenue vs. Act No. articles. advantages or exemptions under both Republic Act Nos. whether or not a PEZA-registered enterprise was VAT-exempt depended on the type of fiscal incentives availed of by the said enterprise. respondent is entitled to the fiscal incentives and benefits provided for in either PD 66 or EO 226 which would not subject respondent to internal revenue laws and regulations for raw materials.94. 7227 (Duty-free importation) and 7844 (Tax Credits). benefits. Thus. Respondent Toshiba filed its VAT returns for the 1st and 2nd quarters of 1996.226. The Philippine VAT system adheres to the Cross Border Doctrine. Consequently. under which the EPZA evolved into the PEZA.94. shall not result in any output tax.338. reporting input VAT in the amount of P13. and for 01 April to 30 June 1996 in the amount of P5. which imposes the five percent (5%) preferential tax rate on gross income of PEZA-registered enterprises. It shall. Sales of goods. Prior to the said date.820. they shall be subject to VAT at zero percent (0%). etc. Act No. as amended. 7916. Presidential Decree No. SEAGATE is a VAT-registered entity. Q. Consequently. respectively.38 with supporting documents was filed with Revenue District Office in Cebu. Act No.542.
for only VAT-Registered entities can claim Input VAT Credit/Refund.e. petitioner’s supplier may claim an Input VAT credit . 7227 apply to petitioner as a purchaser. at the point of the sale. Act No. CONTEX CORPORATION vs. properties or services related to such zero-rated sale shall be available as tax credit or refund in accordance with these regulations. the input tax on his purchases of goods.R. Petitioner then filed two applications for tax refund or tax credit of the VAT it paid. But in an exemption there is only partial relief. 7227. however. for exemption from VAT for its purchases of supplies and raw materials is incongruous with its claim that it is VAT-Exempt. On the other hand. because the purchaser is not allowed any tax refund of or credit for input taxes paid.transactions. On the other hand.72. there is total relief for the purchaser from the burden of the tax. Zero-rated Sales are sales by VAT-registered persons which are subject to 0% rate. HON.except specifically declared areas -. but can claim a refund of or a tax credit certificate for the VAT previously charged by suppliers. However. In both instances. Does the VAT exemption embodied in Rep. it is exempt from VAT on all its sales and importations of goods and services. Since the purchases of respondent are not exempt from the VAT.307. the rate to be applied is zero. 2004] Facts: Petitioner is a domestic corporation engaged in the business of manufacturing hospital textiles and garments and other hospital supplies for export. It is duly registered with the Subic Bay Metropolitan Authority (SBMA) As an SBMA-registered firm. While it is true that the petitioner should not have been liable for the VAT inadvertently passed on to it by its supplier since such is a zero-rated sale on the part of the supplier. shall not result in any output tax. This is a case wherein the VAT is removed at the exempt stage (i. 7227. As such. A VAT exemption means that the sale of goods or properties and/or services and the use or lease of properties is not subject to VAT (output tax) and the seller is not allowed any tax credit on VAT (input tax) previously paid. the purchase transaction is not exempt. In fact. COMMISSIONER OF INTERNAL REVENUE [G. Q. Its exemption under both PD 66 and RA 7916 effectively subjects such transactions to a zero rate. The petitioner’s claim to VAT exemption in the instant case for its purchases of supplies and raw materials is founded mainly on Section 12 (b) and (c) of Rep. A zero-rated sale by a VAT-registered person. No. properties or services shall not bill any output tax to his customers because the said transaction is not subject to VAT.to an ecozone. 1-95. petitioner then elevated the matter to the CTA. Under the cross-border principle of the VAT system being enforced by the BIR. however. properties or services. The BIR contended that since petitioner failed to establish both its right to a tax refund or tax credit and its compliance with the rules on tax refund as provided for in Sections 204 and 229 of the Tax Code. which led the petitioner to pay input taxes in the total amount of P1. If exports of goods and services from the Philippines to a foreign country are free of the VAT. Petitioner purchased various supplies and materials necessary in the conduct of its manufacturing business. 151135. Applying this principle to the case at bar. then the same rule holds for such exports from the national territory -. Petitioner’s claim. barter or exchange of the goods or properties). its claim should be denied. which is a taxable transaction for VAT purposes. Petitioner also registered with the BIR as a non-VAT taxpayer. VAT is a tax on consumption. but does not relieve the same party as a purchaser from its indirect burden of the VAT shifted to it by its VAT-registered suppliers. a VAT-registered purchaser of VAT-exempt goods/properties or services which are exempt from VAT is not entitled to any input tax on such purchase despite the issuance of a VAT invoice or receipt. petitioner is registered as a NON-VAT taxpayer per Certificate of Registration issued by the BIR. petitioner is exempt from all local and national internal revenue taxes except for the preferential tax provided for in Section 12 (c) of Rep. Act No. The person making the exempt sale of goods. When no response was forthcoming. the transactions are not exempt transactions and the seller of such transactions charges no output tax.108. refer to the sale of goods or supply of services to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory. Petitioner rightly claims that it is indeed VAT-Exempt and this fact is not controverted by the respondent. the purchase transactions entered into by respondent are not VAT-exempt.. the amount of which may be shifted or passed on by the seller to the purchaser of the goods. because the ecozone within which it is registered is managed and operated by the PEZA as a separate customs territory. No. Act No. including VAT and Section 4 (A)(a) of BIR Revenue Regulations No. July 2. meaning the tax burden is not passed on to the purchaser. This means that in such zone is created the legal fiction of foreign territory. In both instances of zero rating. no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Is Petitioner entitled to the tax refund on its purchases of supplies and raw materials? A. the petitioner is not the proper party to claim such VAT refund. Since the transaction is deemed a zero-rated sale because the sale was in favor of an ecozone firm. If a special law merely exempts a party as a seller from its direct liability for payment of the VAT. which basically exempts them from all national and local internal revenue taxes. The suppliers of these goods shifted unto petitioner the 10% VAT on the purchased items.
concealment or sale of such goods after importation. However. organization. the special civil action for certiorari is available only when there is no plain. Jardeleza vs. market share. A person arriving in the Philippines with baggages containing dutiable articles is bound to declare the same in all respects.1 kilograms of assorted gold jewelry with an estimated value of P7. No. Lastly. YES. Smuggling is committed by any person who: (1) fraudulently imports or brings into the Philippines any article contrary to law. credit or refund on the input tax previously paid as petitioner is TARIFF AND CUSTOMS CODE Maribel B. Cement Manufacturers Association of the Philippines (465 SCRA 532) FACTS: On May 22. In fine. is exempt from VAT. no Output VAT may be passed on to the petitioner. speedy and adequate remedy in the ordinary course of law. Congruently. knowing the same to have been imported contrary to law. 3601 qualifies the phrases “imports or brings into the Philippines” and “assists in so doing. the DTI Secretary issued a new decision .231.” and not the word “article”. capacity utilization. Subsequently. The appellate court ruled that it had jurisdiction over the petition for certiorari since it alleged grave abuse of discretion. Before the finality of the decision of the CA. by not declaring it in the Customs Declaration form and. alleging that the importation of gray Portland cement in increased quantities has caused declines in domestic production. by verbally denying that she is carrying said items by answering no when asked by Bureau of Customs if she has anything to declare prior to the actual inspection of her luggage. 3601 of the Tariffs and Customs Code and for violation of other provisions in the TCC. 1997 the accused brought 20. 6. definitive safeguard measures on the import of cement pursuant to the SMA. it is not allowed if we are to assume that exemption petitioner is still not entitled to any tax an exempt VAT taxpayer. or (3) receives. Philcemcor sought the imposition at first of provisional. It also refused to annul the findings of the Tariff Commission. The phrase “contrary to law” in Sec. Is the accused guilty of smuggling the jewelries? A.with no corresponding Output VAT liability. Southern Cross Cement Corporation vs. Any administrative penalty imposed on the person arriving in the Philippines with undeclared dutiable articles is separate from and independent of criminal liability for smuggling under Sec. 1997 averred that on February 28. the Tariff Commission received a request from the DTI for a formal investigation to determine whether to impose a definitive safeguard measure and it found that there is no need to establish definitive safeguard measure since the elements of serious injury and imminent threat of serious injury has not been established. Q. even from the burden of VAT on petitioner’s purchases did exist. alleging that it was the CTA which has jurisdiction over the case. or finding that a definitive safeguard measure should not be imposed. Philcemcor then sought to set aside the finding of the DTI in the CA which was opposed by Southern Cross. conceals. People of the Philippines (Feb. Did the CA acquire jurisdiction over Philcemcor’s petition? Are the factual findings of the Tariff Commission on the existence or non existence conditions warranting the imposition of general safeguard measures binding upon the DTI Secretary? A. he imposed a definitive safeguard measure on the importation of gray Portland cement. 2001. After investigation. The DTI Secretary disagreed with the findings of the Commission and requested for an opinion from the DOJ. The petitioner is registered as exempt VAT taxpayer. Such was effected by hiding said jewelry inside a hanger bag and. it held that the DTI Secretary is not bound by the findings of the Tariff Commission since such findings are merely recommendatory and they fall within the ambit of the Secretary’s discretionary review. The Court does not doubt that the Court of Appeals’ certiorari powers extend to correcting grave abuse of discretion on the part of an officer exercising judicial or quasi-judicial functions. which might render it beneficial by a substantive and criminal statement separately providing for the punishment of smuggling. and failure to comply with those requisites is as condemnable as failure to pay customs fees. sales and employment. 13 of the SMA precluded a review by the DTI Secretary of the Tariff Commission’s negative finding. As an any tax credit on VAT (input tax) previously paid. The accused denied the allegations against her. as well as caused depressed local prices. sells or in any manner facilitate the transportation. meaning substantive or legislative type rules as opposed to general statements of policy or rules of agency. then later. it was determined that critical circumstances existed justifying the imposition of provisional measures. ruling this time that since there was no longer any legal impediment to his deciding Philcemcor’s application. (2) assists in so doing any article contrary to law. Adequate reporting of dutiable merchandise being brought into the country is absolutely necessary to the enforcement of customs laws. Southern Cross relies on this limitation.562. Q. 2006) FACTS: The Information charging Jardeleza with violating the TCC was filed before the RTC of Pasay City on October 23. Section 3601 of the TCC was designed to supplement the existing provisions of the TCC against the means leading up to smuggling. 2. a NON-VAT taxpayer and thus. DTI accepted an application from Philcemcor. But the DOJ Secretary opined that Sec.50. procedures or positions. The word “law” includes regulations having the force and effect of law. buys. 29 of the . stressing that Sec.
1. 66 (EPZA Law). among others. which imports the same and pays the corresponding customs duties to the Bureau of Customs. Both the Tariff Commission and the DTI Secretary may be regarded as agents of Congress within their limited respective spheres.the Tariff Commission does not fall under the administrative supervision of the DTI. Congress in enacting the SMA and prescribing the roles to be played therein by the Tariff Commission and the DTI Secretary did not envision that the President. These fuel supplies are considered indispensable by Philphos. Moreover. and deductions for organizational and preoperating expenses are to be enjoyed in conjunction with the incentives under Section 17. Is Philphos entitled to refund? Has the claim for refund prescribed? A. Effectively thus.149. and accelerating the development of the country. Sec. the President or the alter egos may be properly deemed as agents of Congress to perform an act that inherently belongs as a matter of right to the legislature. foreign exchange assistance. 29 of the SMA is worded in such a way that it places under the CTA’s judicial review of all rulings of the DTI Secretary. . reading Sec. When Congress tasks the President or his/her alter egos to impose safeguard measures under the delineated conditions.indeed.473. place the government at a disadvantage as they preclude the collection of revenue. The incentives offered to enterprises duly registered with the PEZA consist. These benefits may. The enunciated policy of the EPZA Law is to encourage and promote foreign commerce as a means of making the Philippines a center of international trade. the expectation is that the tax breaks ultimately redound to the benefit of the national economy. Still. Philphos is billed by Petron the corresponding customs duties imposed on these products. as ordained in the Safeguard Measures Act. is a plain. exemption from export tax. Since Section 17(1) treats these supplies for tax purposes as beyond the ambit of customs laws and regulations. by establishing export processing zones in strategic locations in the Philippines. PHILIPPINE PHOSPHATE FERTILIZER CORPORATION [G.SMA. This is sound and proper in light of the specialized jurisdiction of the CTA in tax matters. financial assistance. its actions are not beyond the pale of certiorari jurisdiction. could exercise supervisory powers over the Tariff Commission. When the fuel and petroleum products are delivered at Philphos’s manufacturing plant. COMMISSIONER OF CUSTOMS vs. at first blush. as they had been in this case. 29. or his/her alter ego. Section 18(i) does not impose limitations on the exemptions granted in the preceding provisions. the modality by which the exemption takes form. 18 with Sec. Section 17(1) is determinative of the fundamental question whether there is legal basis for the claim of exemption. Under this arrangement. Philphos indirectly paid as customs duties. On the other hand. deductions for labor training services.R. strengthening our export trade and foreign exchange position. Yes. Philphos sought the refund of customs duties it had paid on the ground that Philphos is entitled to tax incentives under Presidential Decree No. in the implementation of the said law which significantly draws its strength from the plenary legislative power of taxation. 17 of the EPZA Law would mean that the “additional incentives” under Section 18 which include allowance of net-operating loss carry-over. 2004] Facts: Respondent Philippine Phosphate Fertilizer Corporation (Philphos) is a domestic corporation engaged in the manufacture and production of fertilizers for domestic and international distribution. the amount of P20. which are connected with the imposition of safeguard measure. enticing as they do more enterprises to invest and do business within the zones. but would only affect. even the president may be considered as an agent of Congress for the purpose of imposing safeguard measures. and. if at all. September 1. Philphos reimburses Petron for the customs duties on the purchased fuels and petroleum products which are passed on by the Petron as part of the selling price. hastening industrialization. a petition for review of such ruling within 30 days from receipt thereof. Considering that the Tariff Commission is an instrumentality of the government. the ad valorem and specific taxes to the BIR. Qs. accelerated depreciation. The manufacture of fertilizers required Philphos to purchase fuel and petroleum products for its machineries. 144440. The positive final determination by the Tariff Commission operates as an indispensable requisite to the imposition of the safeguard measure. reducing domestic unemployment. Under Sec. speedy and adequate remedy in the ordinary course of law which Philcemcor did not avail of. The Petron Corporation (Petron) was Philphos’ supplier. exemptions for local taxes and licenses.77. to wit: “Any interested party who is adversely affected by the ruling of the Secretary in connection with the imposition of a safeguard measure may file with the CTA. No. now known as the Philippine Export Zone Authority (PEZA). of tax exemptions. It is clear that Section 17(1) of EPZA Law considers such supplies exempt even if they are used indirectly. The Bureau of Customs denied the claim for refund. the arguments of the Commissioner invoking the provisions of the Tariff and Customs Code must fail. thus creating more employment opportunities and infusing more dynamism to the vibrant interplay of market forces. It is registered with the Export Processing Zone Authority (EPZA). as they are used to run the machines and equipment and in the transformation of raw materials into fertilizer.
(March 6. radio station tower and its accessories and generating sheds. The express withdrawal of all tax exemptions accorded to all persons natural or juridical. 133 of the Local Government Code qualified the exemption of the National Government. considered that Sec. and machinery shed are real properties and are thus subject to real property tax. it is an elementary rule in taxation that exemptions are strictly construed against the taxpayer and liberally in favor of the taxing authority. In consideration of the franchise. to invest for profit the returned sum. GSIS filed a Petition for Cetiorari. an option not proximately available if the taxpayer chooses instead to receive a tax credit. RCPI protested such assessment. a tax refund requires a physical return of the sum erroneously paid by the taxpayer. Is GSIS still exempt from paying real property tax? A. 133 was not intended to be so absolute a prohibition on the power of LGUs to tax the National Government. as amended by RA 4054. Clearly. instrumentalities or GOCCs do not fall within the exceptions under Sec.61. No. the GSIS retained its exemption.721. Is RCPI liable to pay real property tax on the said properties? A. Q. To replace the franchise tax. Branch XII. The said petition sought to determine whether the exemption of the GSIS from paying realty axes has been withdrawn by the Local Government Code. RA 7716 imposed a 10 percent value-added-tax on telecommunications companies under Section 102 of the National Internal Revenue Code. The EPZA Law itself is silent on the matter. The Court in ruling in the case of Mactan-Cebu International Airport Authority non-exempt from realty taxes. The “in lieu of all taxes” clause in Section 14 of RA 2036. RTC. Thus. the enactment of the Local Government Code. which specifically states that only real properties owned “by the Republic of the Philippines or any of its political subdivisions” is exempted from payment of the tax. RA 2036 granted RCPI a 50 year franchise and Sec. The exemptions from real property taxes are enumerated in Sec. buildings x x x. The state is mandated to ensure local autonomy of local governments. 14 of such mandate it to pay the taxes required by law on real estate. by specific mandate of Section 17(1) of the EPZA Law. its agencies and instrumentalities from local taxation with the phrase “unless otherwise provided herein”. 18. and the prescriptive periods under the Tariff and Customs Code and other revenue laws are inapplicable. The municipal treasurer of Tupi. Lastly. among others. The Court has in the past sanctioned the application of the provisions on solutio indebiti in cases when taxes were collected thru error or mistake. 7716 (“RA 7716”) abolished the franchise tax on telecommunications companies effective 1 January 1996. City of Davao vs. radio station building. Formally. its agencies and instrumentalities. 2. Q. as stated in Sec. 2005) FACTS: The GSIS Davao City Branch received a Notice of Public Auction scheduling the public bidding of GSIS properties located in Matina and Ulas. YES. Provincial Assessor of South Cotabato (April 13. The said court subsequently ruled that notwithstanding. Thus.The Tax Reform Act of 1997 authorizes either a refund or credit as a means of recovery of tax erroneously or illegally collected. It is the taxpayer’s duty to justify the exemption by words too plain to be mistaken and too categorical to be misinterpreted. machinery shed. 234. buildings and other personal property except radio equipment. cannot exempt RCPI from the real estate tax because the same Section 14 expressly states that RCPI “shall pay the same taxes x x x on real estate. the claim for refund must be commenced within six (6) years from date of payment pursuant to Article 1145(2) of the New Civil Code. Bayan Telecommunications Inc. The Local Government Code of 1991 “withdrew all the tax exemptions existing at the time of its passage — including that of RCPI’s” with respect to local taxes like the real property tax. Mandamus and/or Declaratory Relief and further sought to enjoin the auction sale by praying for a restraining order in the RTC of Davao City. and local governments are empowered to levy taxes. a tax equal to one and one-half per centum of all gross receipts from the business transacted under this franchise by the grantee shall be paid and such shall be in lieu of any tax collected by any authority. 2005) FACTS: in 1957. Also. machinery and spare parts needed in connection with its business. without impediment to the present case. Prohibition. the Civil Code provisions on solutio indebiti may find application. Davao City for non payment of realty taxes for the years 1992-1994 totalling P295. while a tax credit involves the application of the reimbursable amount against any sum that may be due and collectible from the taxpayer. LOCAL TAXATION Radio Communications of the Philippines. RCPI’s radio relay station tower. 2006) . the taxpayer to whom the tax is refunded would have the option. fees. Republic Act No. 133 of the Local Government Code applies. Inc. South Cotabato subsequently assessed RCPI real property tax on its radio station building. Sec. charges that accrue exclusively to them. 234. vs. subject to congressional guidelines and limitations.NO. City Government of Quezon City vs. Davao City (Aug. On the practical side.” Subsequent legislations have radically amended the “in lieu of all taxes” clause in franchises of public utilities.
vested with functions relating to public needs whether governmental or proprietary in nature. [G. no longer merely by virtue of a valid delegation as before. but subsequently withdrawn by Sec. On the other hand. the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax. First. however. it may be exercised by the local legislative bodies. It opposed such claiming that its properties were exempted by virtue of Sec. July 20. has been restored by Sec. MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to 2001. 155650. The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines. which expressly withdrew the tax exemption privileges of “government-owned and-controlled corporations” upon the effectivity of the Local Government Code. improvements and equipment within the NAIA Complex. Also.FACTS: Bayantel was assessed real property taxes for its properties located in the territorial jurisdiction of Quezon City. The power to tax is primarily vested in the Congress. 234 of the Local Government Code. to the extent of at least 51% of its capital stock. The City of Parañaque.R. the Office of the Government Corporate Counsel (OGCC) issued an opinion stating that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. MIAA is Not a Government-Owned or Controlled Corporation Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as any agency organized as a stock or nonstock corporation. where applicable as in the case of stock corporations. No. The Supreme Court has upheld the power of Congress to grant exemptions over the power of local government units to impose taxes. non-stock corporations cannot distribute any part of their income to their members. MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Also. through its City Treasurer. While Sec. MIAA administers the land. MIAA filed with the Court of Appeals an original petition for prohibition and injunction to restrain the City of Parañaque from imposing real estate tax on. levying against. COURT OF APPEALS. and owned by the Government directly or through its instrumentalities either wholly. In 1997. it cited the ruling of the Court in Mactan International Airport v. directly and exclusively used in the pursuit of its franchise. Are the Airport Lands and Buildings of MIAA exempt from real estate tax under existing laws? A. as couched. et al. The realty tax exemption enjoyed by Bayantel under its original franchise. Q. 1. issued notices of levy and warrants of levy on the Airport Lands and Buildings. 21 of its Charter. 11 of its franchise which exempts it from paying such taxes. 2006] Facts: Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Parañaque City under Executive Order No. Marcos (216 SCRA 667) where the Court held that the Local Government Code has withdrawn the exemption from real estate tax granted to international airports. 11 of RA 7633. MIAA is not organized as a stock or non-stock corporation. Q. CITY OF PARAÑAQUE. YES. MIAA failed to pay these taxes since they allege that they are still exempt from taxes under Sec. may be validly viewed as an implied delegation of power to tax. MIAA is also not a non-stock corporation because it has no members. X of the Constitution. 5 Art. Second. in our jurisdiction. is limited to impositions over properties of the franchisee which are not actually. the delegation under that provision. Respondents invoke Section 193 of the Local Government Code. 903. REAL PROPERTY TAXATION MANILA INTERNATIONAL AIRPORT AUTHORITY vs. and auctioning for public sale the Airport Lands and Buildings. otherwise known as the Revised Charter of the Manila International Airport Authority (Charter). MIAA is not a stock corporation because it has no capital stock divided into shares. the said city anchors its actions on the provisions of the LGC which allows local governments to collect real property tax. Section 11 of the . the original franchise of Bayantel. MIAA has no stockholders or voting shares. or. but pursuant to direct authority conferred by Sec. Is Bayantel liable to pay real property tax? A. 14 of RA 3259.
The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. However. not integrated within the department framework. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads. The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code. torrents. This prevents MIAA from qualifying as a non-stock corporation. Section 133 of the Local Government Code starts with the saving clause “unless otherwise provided in this Code. the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines.MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. which makes the national government subject to real estate tax when it gives the beneficial use of its real properties to a taxable entity. MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. which is the governing law defining the legal relationship and status of government entities. endowed with some if not all corporate powers. the rule is local governments have no power to tax the national government. unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from public use. Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations. the President must first withdraw from public use the Airport Lands and Buildings. Its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. As an exception to this rule. its agencies and instrumentalities. they are not government-owned or controlled corporations in the strict sense as understood under the Administrative Code. its agencies and instrumentalities. ports and bridges constructed by the State. Section 48. 2. being outside the commerce of man. Any encumbrance. property of public dominion. MIAA is a Mere Trustee of the Republic MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. c. they are properties of public dominion. administering special funds. The operation by the government of a tollway does not change the character of the road as one for public use. b. the Airport Lands and Buildings are outside the commerce of man. Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic. cannot be the subject of an auction sale. owned by the Republic and outside the commerce of man. or only those among the public who actually use the road through the toll fees they pay upon using the road. either the public indirectly through the taxes they pay the government. which recognizes the basic principle that local governments cannot tax the national government. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government “instrumentality” as any agency of the National Government. Airport Lands and Buildings of MIAA are Owned by the Republic a. Someone must pay for the maintenance of the road. Before MIAA can encumber the Airport Lands and Buildings. Clearly. These government instrumentalities are sometimes loosely called government corporate entities. vested with special functions or jurisdiction by law. Such fees are often termed user’s tax. Only the President of the Republic can sign such deed of conveyance. Airport Lands and Buildings are of Public Dominion Properties of public dominion mentioned in Article 420 of the Civil Code. A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code. Thus. Chapter 12.” This means that unless the Local Government Code grants an express authorization. rivers. its agencies and instrumentalities only if the Local Government Code expressly so provides. usually through a charter. local governments may tax the national government. canals. levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. local governments have no power to tax the national government. and enjoying operational autonomy. The term “ports” includes seaports and airports. As properties of public dominion. like “roads.” are owned by the State. Also. MIAA is like any other government instrumentality. . the only difference is that MIAA is vested with corporate powers. Airport Lands and Buildings are Outside the Commerce of Man The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. Under Article 420 of the Civil Code.
No. both paying and non-paying.860) by the City Assessor of Quezon City. which prohibits local governments from imposing “taxes. Aside from its income from paying patients. Petitioner accepts paying and non-paying patients. its agencies and instrumentalities.) YES. for consideration or otherwise. No. and to medical or professional practitioners who use the same as their private clinics for their patients whom they charge for their professional services. Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and idle.R. the methods of administration. which is a law. However. the character of the services rendered. 1. No party claims any ownership rights over MIAA’s assets adverse to the Republic.554. the indefiniteness of the beneficiaries. QUEZON CITY and CONSTANTINO P. e. Is petitioner a charitable institution within the context of PD1823 and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act No. the petitioner receives annual subsidies from the government. promissory notes or even stock since MIAA is not a stock corporation.463 square meter parcel of land located at Quezon City. MIAA itself is owned solely by the Republic. the elements which should be considered include the statute creating the enterprise. the nature of the actual work performed. ROSAS [G.” While Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the “beneficial use thereof has been granted. Petitioner avers that it is a charitable institution within the context of Section 28(3). 7160? Are the real properties of the petitioner exempt from real property taxes? A. is not a taxable person under Section 133(o) of the Local Government Code. the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. even assuming that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings. as a government instrumentality. and the use and occupation of the properties. The petitioner is a non-profit and non-stock corporation organized for the welfare and benefit of the Filipino people principally to help combat the high incidence of lung and pulmonary diseases. petitioner is a charitable institution within the context of PD 1823 and RA 7160. June 29. Such transfer was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. to a taxable person. 2004) LUNG CENTER OF THE PHILIPPINES vs. Transfer to MIAA was Meant to Implement a Reorganization The MIAA Charter. Real Property Owned by the Republic is Not Taxable Section 234(a) of the Local Government Code exempts from real estate tax any “real property owned by the Republic of the Philippines. its corporate purposes.” MIAA. To determine whether an enterprise is a charitable institution/entity or not. It is the registered owner of a 121. For example. A big space at the ground floor is being leased to private parties. while a big portion on the right side is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air Transportation of the Department of Transportation and Communications without the Republic receiving cash. MIAA has granted the beneficial use of such land area for a consideration to a taxable person and therefore such land area is subject to real estate tax. its constitution and by-laws. The medical services of the petitioner are to be rendered to the public in general in any and all walks of life including those who are poor and the needy without . It also renders medical services to outpatients. portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. Both the land and the hospital building of the petitioner were assessed for real property taxes (P4. such fact does not make these real properties subject to real estate tax. June 29. The Republic remains the beneficial owner of the Airport Lands and Buildings. Q. Quezon City (G. Article VI of the 1987 Constitution.R.” This exemption should be read in relation with Section 133(o) of the same Code. 144104. for canteen and small store spaces. In such a case. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. Thus. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body.d. 144104. 2004] Facts: The petitioner Lung Center of the Philippines is a non-stock and non-profit entity. This was the ruling enunciated in the case of Lung Center of the Philippines vs. fees or charges of any kind on the National Government.
MERALCO did not pay the tax assessed.discrimination. that (a) it is a charitable institution. MANILA ELECTRIC COMPANY vs. and no money inures to the private benefit of the persons managing or operating the institution. under Sec. From 1975 to 1978 MERALCO paid the real property taxes on the said properties on the basis of their assessed value as stated in the tax declarations. May 18. buildings and improvements actually. or confined in the hospital. the petitioner is burdened to prove. and a consequent relief. found in the said power plants. The Lung Center of the Philippines shall be exempt from the payment of taxes. ordering it to pay the deficiency in the real property taxes in the amount of P36. No. 2001] Facts: From 1968 to 1972 the Manila Electric Company (MERALCO) erected 4 power generating plants in Sucat. Qs. After all. It is not the use of the income from the real property that is determinative of whether the property is used for taxexempt purposes. Act No. the petitioner does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. 64 of the Real Property Tax Code. NELIA A. to some extent. As a general principle. charges and fees imposed by the Government or any political subdivision or instrumentality thereof with respect to equipment purchases made by. directly and exclusively used for religious. Accordingly. charitable or educational purposes. those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually. 2.000. or for the Lung Center. and (2) lack of cause of action by reason of MERALCO’s failure to question the notice of assessment before the Local Board of Assessment Appeals. MERALCO sold all the power-generating plants including the landsite to the NAPOCOR. Under the 1973 and 1987 Constitutions and Rep. DIRECTLY and EXCLUSIVELY used for charitable purposes. BARLIS. the rich as well as the poor.) NO. In 1978. Muntinlupa. under protest. What is exempted is not the institution itself but lands.00 covering the machineries and equipment in the said power plants. the Municipal Treasurer issued warrants of garnishment ordering the attachment of the bank deposits of MERALCO with the PCIB. Exemptions in favor of charitable institutions are based on the benefit conferred upon the public by them. seems rather to enhance the usefulness of the institution to the poor. or receives subsidies from the government. the tax. consisting of several equipment and machineries. of the burden upon the state to care for and advance the interests of its citizens. MERALCO filed before the RTC of Makati a Petition for Prohibition. Article VI covers property taxes only. 64 of the Real Property Tax Code? Were the 1986 notices equivalent to an assessment. In 1986. 7160 in order to be entitled to the exemption. the profits derived from attendance upon these patients being exclusively devoted to the maintenance of the charity.000. may fall sick or be injured or wounded and become a subject of charity. any person. by clear and unequivocal proof. The Municipal Treasurer filed a Motion to Dismiss on the grounds of: (1) lack of jurisdiction since. METROBANK and the BPI to the extent of its unpaid real property taxes. The tax exemption under Section 28(3). a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients.R. and (b) its real properties are ACTUALLY. thus subject to protest to the LBAA? Should payment of real property tax be made by proceeding against the real property itself or any . in her capacity as Officer-in-Charge/Acting Municipal Treasurer of Muntinlupa [G. 114231. Does the trial court has jurisdiction over the questioned petition for prohibition? Is petitioner a taxpayer contemplated under Sec. courts are prohibited from entertaining any suit assailing the validity of a tax assessed until the taxpayer shall have paid. the Offices of the Municipal Assessor and Municipal Treasurer of Muntinlupa discovered that MERALCO misdeclared and/or failed to declare for taxation purposes a number of real properties. In 1985. What is meant by actual. after issuing the requisite certification of non-payment of real property taxes and complying with the additional requirement of public posting of the notice of delinquency. It is plain as day that under the decree. so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve. the Municipal Treasurer of Muntinlupa issued several collection notices to MERALCO. The fact that paying patients are taken. whether outpatient. directly and exclusively used for charitable purposes. direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized.
1. actual use and assessment level. (b) sale of delinquent real property. is a condition sine qua non before the trial court could assume jurisdiction over the petition. NELIA A. When these persons fail or refuse to make a declaration of the true value of their real property within the prescribed period.R. The Court. and. and (c) collection of real property tax through ordinary court action.e. 4. depreciation. market value and assessment level. BARLIS. From the tone and content of the notices. The petitioner pointed out that the said notices did not contain the assessor’s findings regarding the kind of real estate. and not the separate personal property of petitioner. 2004] Facts: A Motion for Reconsideration was filed by petitioner on the decision of the Court dated May 18. The Court issued a Resolution denying with finality the petitioner’s motion for reconsideration. it could not be required to avail of the prescribed administrative remedies in protesting an erroneous tax assessment under the said Code. Jun 29. None. however. in the Central Board of Assessment Appeals (CBAA). notices of collection. The remedy of levy can be pursued by putting up for sale the real property subject of tax. It is an accepted principle in taxation that taxes are paid by the person obliged to declare the same for taxation purposes. The trial court has no jurisdiction to entertain a Petition for Prohibition absent petitioner’s payment. The notice of assessment and collection was directed to petitioner. and later. 114231. Yes.. the duty to declare the true value of real property for taxation purposes is imposed upon the owner. This rule is consistent with the doctrine that taxes are the lifeblood of the government. the provincial or city assessor shall declare the property in the name of the defaulting owner and assess the property for taxation. No. in the case of the machinery attached to the land. the said notices could not be used as bases for filing an appeal to the Local Board of Assessment Appeals under Section 30 of the Real Property Tax Code. 2. i. not because it is still the present owner of the subject real property but because it is the defaulting owner thereof who has failed to make proper tax declaration and the proper tax payment thereon. date of operation. or proportion thereof subject to tax. Thus. in her capacity as Officer-in-Charge/ Acting Municipal Treasurer of Muntinlupa[G. However. While real property tax constitutes a lien on the property subject to tax. . the petitioner contended. the RPTC affords local government units three (3) concurrent and simultaneous remedies to enforce the Code’s provisions.D. listing. namely: (a) distraint of personal property. the delinquent property upon which the tax lien attaches.personal property located therein. save certain exceptions as enumerated under Sec. regardless of the present owner or possessor thereof. MANILA ELECTRIC COMPANY vs. under protest. 64 of the RPTC. Thus. Bank deposits are not among those exceptions. original cost. petitioner must have questioned the correctness of the assessments before the Local Board of Assessment Appeals (LBAA). 2001. area. 464 (RPTC). the trial court is without authority to address the alleged irregularity in the issuance of the notices of assessment without prior tax payment. by petitioner. Yes. or their duly authorized representatives. the description of the machinery. in fact. The petitioner argued that the notices issued by the Municipal Treasurer of Muntinlupa were not notices of assessment envisaged in Section 3 of P. the Court ruled against a remand of the case to the trial court since the issue in the main case was one of jurisdiction and as such the Court ruled that the RTC has none. market value. A notice of assessment should effectively inform the taxpayer of the value of a specific property. or administrator. classification. Payment of the tax assessed under protest. the 3 September 1986 notices sent by the Municipal Treasurer to MERALCO are the notices of assessment required by the law as it merely informed the petitioner that it has yet to pay the taxes in accordance with the reassessed values of the real property mentioned therein. No. including the discovery. unit value. It categorically stated that the notices were. 3. reversed its ruling that the notices sent by the respondent to the petitioner were notices of assessment. The remedy of distraint and levy of personal property meanwhile allows the taxing authority to subject any personal property of the taxpayer to execution. 69 of the RPTC. Under the Real Property Tax Code. No. which clearly adverts to a written notice of assessment. specifically its bank deposits? A. and appraisal of properties. under protest. of the tax assessed as required by Sec. The foregoing notwithstanding. Hence.
Sections 90 and 90-A of the RPTC. the Court should have ordered the case remanded to the trial court for further proceedings considering that while the material findings in the instant case were reversed. he is not the proper officer obliged to do so. thus the reminder to the taxpayer that the failure to pay the taxes shall authorize the government to auction off the properties subject to taxes or. 2002 Resolution. or proportion thereof subject to tax. It is a notice to the effect that the amount therein stated is due as tax and a demand for payment thereof. . the value of a specific property or proportion thereof which is being taxed. The assessor is mandated under Section 27 of the law to give written notice within thirty days of such assessment. 1986 notice as a "collection letter." Indeed.The petitioner then filed a Second Motion for Reconsideration. A notice of assessment as provided for in the RPTC should effectively inform the taxpayer of the value of a specific property. It contended that after the Court held in its February 1. 464 was not applicable. the respondent was burdened to prove the service of the tax declarations on the petitioner. In the Court’s February 1. 1989 notices do not contain the essential information that a notice of assessment must specify. including the discovery. to the person in whose name the property is declared. No. nor does it state the discovery. its actual use and market value. the functions related to the appraisal and assessment for tax purposes of real properties situated within a municipality pertains to the Municipal Deputy Assessor and for the municipalities within Metropolitan Manila. The respondent even failed to append a copy of the said receipt in its motion to dismiss in the trial court. 1989 notices sent by the respondent to the petitioner were notices of collection. namely. An assessment fixes and determines the tax liability of a taxpayer. and appraisal of properties. deemed the September 3. listing. Furthermore. classification and appraisal of the property subject to taxation. the petitioner’s motion for reconsideration was altogether denied. even the Bureau of Local Government Finance (BLGF). The petitioner avers that it should not be prevented from moving for a rectification of this Court’s inconsistent stance. in view of the factual findings contained in the Court’s February 1. Yes. 1986 and October 31. The notice should indicate the kind of property being assessed. The record is bereft of evidence regarding this matter. the assessment level and the assessed value. thus. listing. The petitioner denied receiving copies of the Tax Declarations prepared by the respondent Municipal Assessor in 1985. in the words of the notice. it said that it is apparent why the foregoing cannot qualify as a notice of tax assessment. 2002 Resolution? A. the same is lodged on the Municipal Assessor. upon whose recommendation former Municipal Treasurer Alon relied in the collection of back taxes against petitioner. justifying its conclusion that Section 614 of P. classification. In the face of the petitioner’s denial. Under Chapter VIII.D. 2002 Resolution that the September 3. The September 3. In fact. Should the Decision be set aside and the case remanded to the trial court for further proceedings. Q. the tenor of the notices bespeaks an intention to collect unpaid taxes. 1986 and October 31. even the respondent admitted in his comment on the petition that respondent did not issue any notice of assessment because statutorily.
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