“PRIMUS 2008 ONE-LINERS”

TAXATION
VER. 2008.09.10 copyrighted 2008 Prepared by the PRIMUS Board of Consultants
Prof. Abelardo T. Domondon Principal Consultant These Notes in the form of one or two sentences and questions and answers were specially prepared by a Board of Consultants specially commissioned by PRIMUSInformation Center, Inc., for the use of candidates who are going to take the 2008 Bar Examination. They are not as comprehensive as the other PRIMUS publications such as the PRIMUS Bar Star Notes, or the PRIMUS Cut and Paste. They are intended to be read during the Pre-Week or before the start of the regular Bar review for any given Bar Examination year. These Notes attempt to second guess the areas where questions may probably be sourced for the 2008 Bar Examination in Taxation. They include enumerations and distinctions, as well digests of some landmark cases, although they go beyond two sentences. They may also serve as “memory joggers” to help the candidate recall concepts. The reader is advised to concentrate on the “One-liners” that are in bold letters.Those that are not in bold are mere elucidations of concepts. The “PRIMUS 2008 ONE-LINERS” shall be revised regularly to consider latest law and jurisprudence to meet the requirements of future Bar Reviews such that the title shall change from year to year. For the 2009 Bar examination the title shall be “ PRIMUS 2009ONELINERS” which shall be released sometime in September, 2009. The reader is however advised to acquire and read the latest versions of the other PRIMUS publications such as the PRIMUS Bar Star Notes, or the PRIMUS Cut and Paste which contain more detailed information leading to a more comprehensive Bar review. Of course those who intend to take the 2009 Bar examination are encouraged to attend the PRIMUS 2009 Wrap-up Reviews Although primarily for the use of Bar candidates who have attended the PRIMUS 2008 Wrap-up Reviews, the “On-Liners” may be availed of by other students who are interested in the subject. While available for the free use of all the contents of the “PRIMUS 2008ONELINERS” are covered by copyright protection and should never be published (whether through printed media or through the internet) without written permission in writing from PRIMUS Information Center, Inc. Downloading and printing into hard copies is allowed only for private use and should not be distributed on a commercial basis.
TARIFF AND CUSTOMS CODE 1. Customs duties defined. Customs duties is the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country. (Nestle Phils. v. Court of Appeals, et al., G.R. No. 134114,July 6, 2001) 2. Safeguard measures are emergency measures, including tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them. The CTA is vested with jurisdiction to review decisions of the Secretary of Trade and Industry imposing safeguard measures as provided under Rep. Act No. 8800 the Safeguard Measures Act (SMA). (Southern Cross Cement Corporation v. The Philippine Cement Manufacturers Corp., et al., G. R. No. 158540, July 8, 2004) The DTI Secretary cannot impose the safeguard measures if the Tariff Commission does not favorably recommend its imposition. 3. What is mean by the term “entry” in Customs Law ?

SUGGESTED ANSWER: It has a triple meaning. a. the documents filed at the Customs house; b. the submission and acceptance of the documents; and c. Customs declaration forms or customs entry forms required to be accomplished by passengers of incoming vessels or passenger planes as envisaged under Sec. 2505 of the TCCP (Failure to declare baggage). (Jardeleza v. People, G.R. No. 165265, February 6, 2006) 4. A flight stewardess arrived from Singapore. Upon her arrival she was asked whether she has anything to declare. She answered none, and she submitted her “Customs Baggage Declaration Form” which she accomplished and signed with nothing or written on the space for items to be declared. When her hanger bag was examined some pieces of jewelry were found concealed within the lining of said bag. She was then convicted of violating of Sec. 3601 of the Tariff and Customs Code for unlawful importation which penalizes any person who shall fraudulently import or bring into the Philippines any article contrary to law. She now appeals claiming that lower court erred n convicting her under Sec. 3601 when the facts alleged both in the information and those shown by the prosecution constitute the offense under Sec. 2505 “Failure to Declare Baggage,” of which she was acquitted. Is she correct ? SUGGESTED ANSWER: No. Sec. 3601 does not define a crime. It merely provides, inter alia,the administrative remedies which can be resorted to by the Bureau of Customs when seizingdutiable articles found the baggage of any person arriving in the Philippines which is not included in the accomplished baggage declaration submitted to the customs authorities, and the administrative penalties that such person must pay for the release of such goods if not imported contrary to law. Such administrative penalties are independent of the criminal liability for smuggling that may be imposed under Sec. 3601, and other provisions of the TCC which can only be determined after the appropriate criminal proceedings, prescinding from the outcome in any administrative case that may have been filed and disposed of by the customs authorities. Indeed the second paragraph of Sec. 2505 provides that nothing shall prevent the bringing of a criminal action against the offender for smuggling under Section 3601. (Jardeleza v. People, G. R. No. 165265, February 6, 2006) 5. How is smuggling committed ? SUGGESTED ANSWER: Smuggling is committed by any person who: a. fraudulently imports or brings into the country any article contrary to law; b. assists in so doing any article contrary to law; or c. receives, conceals, buys, sells or in any manner facilitates the transportation, concealment or sale of such goods after importation, knowing the same to have been imported contrary to law. (Jardeleza v. People, G.R. No. 165265, February 6, 2006 citing Rodriguez v. Court of Appeals, G. R. No. 115218, September 18, 1995, 248 SCRA 288, 296) 6. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. RTCs are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus.(The Bureau of Customs, et al., v. Ogario, et al., G.R. No. 138081, March 20, 2000) What is the rationale for this doctrine ? SUGGESTED ANSWER: a. Regional Trial Courts have no jurisdiction to replevin a property which is subject to seizure and forfeiture proceedings for violation of the Tariff and Customs Code otherwise, actions for forfeiture of property for violation of the Customs laws could easily be undermined by the simple device of replevin. (De la Fuente v. De Veyra, et al., 120 SCRA 455) b. The doctrine of exclusive customs jurisdiction over customs cases to the exclusion of the RTCs is anchored upon the policy of placing no unnecessary hindrance on the government’s drive, not only to prevent smuggling and other frauds upon Customs,

c. but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform. (Jao, et al., v. Court of Appeals, et al., and companion case, 249 SCRA 35, 43) d. The issuance by regular courts of writs of preliminary injunction in seizure and forfeiture proceedings before the Bureau of Customs may arouse suspicion that the issuance or grant was for consideration other than the strict merits of the case. (Zuno v. Cabredo, 402 SCRA 75 [2003]) e. Under the doctrine of primary jurisdiction, the Bureau of Customs has exclusive administrative jurisdiction to conduct searches, seizures and forfeitures of contraband without interference from the courts. It could conduct searches and seizures without need of a judicial warrant except if the search is to be conducted in a dwelling place. Where an administrative office has obtained a technical expertise in a specific subject, even the courts must defer to this expertise. 7. “A” claiming to be the owner of a vessel which is the subject of customs warrant of seizure and detention sought the intercession of the RTC to restrain the Bureau of Customs from interfering with his property rights over the vessel. Would the suit prosper? SUGGESTED ANSWER: No. His remedy was not with the RTC but with the CTA, as issues of ownership of goods in the custody of customs officials are within the power of the CTA to determine. The Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings and trial courts are precluded from assuming cognizance over such matters even through petitions for certiorari, prohibition or mandamus. (Commissioner of Customs v. Court of Appeals, et al., G. R. Nos. 111202-05, January 31, 2006) 8. The customs authorities do not have to prove to the satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs searches, seizures, or arrests provided by law and continue with the administrative hearings.(The Bureau of Customs, et al., v. Ogario, et al., G.R. No. 138081, March 20, 2000) 9. Instances where there is no right of redemption of seized and forfeited articles: a. There is fraud; b. The importation is absolutely prohibited, or c. The release of the property would be contrary to law. (Transglobe International, Inc. v. Court of Appeals, et al., G.R. No. 126634, January 25, 1999) 10. In Aznar v. Court of Tax Appeals, 58 SCRA 519, reiterated in Farolan, Jr. v. Court of Tax Appeals, et al., 217 SCRA 298, the Supreme Court clarified that the fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception, willfully and deliberately done or resorted to in order to induce another to give up some right. 11. Requisites for forfeiture of imported goods: a. Wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the same person of any invoice, letter or paper – all touching on the importation or exportation of merchandise. b. the falsity of such declaration, affidavit, invoice, letter or paper; and c. an intention on the part of the importer/consignee to evade the payment of the duties due. (Republic, etc., v. The Court of Appeals, et al., G.R. No. 139050, October 2, 2001) 12. On January 7, 1989, the vessel M/V ”Star Ace, ”coming from Singapore laden with cargo, entered the Port of San Fernando, La Union for needed repairs. When the Bureau of Customs later became suspicious that the vessel’s real purpose in docking was to smuggle cargo into the country, seizure proceedings were instituted and subsequently two Warrants of Seizure and Detention were issued for the vessel and its cargo. Cesar does not own the vessel or any of its cargo but claimed a preferred maritime lien. Cesar then brought several cases in the RTC to enforce his lien. Would these suits prosper ? SUGGESTED ANSWER: No. The Bureau of Customs having first obtained possession of the vessel and its goods has obtained jurisdiction to the exclusion of the trial courts.

When Cesar has impleaded the vessel as a defendant to enforce his alleged maritime lien, in the RTC, he brought an action in rem under the Code of Commerce under which the vessel may be attached and sold. However, the basic operative fact is the actual or constructive possession of the res by the tribunal empowered by law to conduct the proceedings. This means that to acquire jurisdiction over the vessel, as a defendant, the trial court must have obtained either actual or constructive possession over it. Neither was accomplished by the RTC as the vessel was already in the possession of the Bureau of Customs. (Commissioner of Customs v. Court of Appeals, et al., G. R. Nos. 111202-05, January 31, 2006) 13. What is the concept of assessments under the Tariff and Customs Code ? SUGGESTED ANSWER: Assessments inform taxpayers of their tax liabilities. Under the TCCP, the assessment is in the form of a liquidation made on the face of the import entry return and approved by the Collector of Customs. (Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., G. R. No. 161953, March 6, 2008) 14. What is meant by liquidation ? SUGGESTED ANSWER: Liquidation is the final computation and ascertainment by the Collector of Customs of the duties due on imported merchandise based on official reports as to the quantity, character and value thereof, and the Collector of Customs' own finding as to the applicable rate of duty. A liquidation is considered to have been made when the entry is officially stamped “liquidated.” (Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., G. R. No. 161953, March 6, 2008) 15. When assessment or liquidation made by the Bureau of Customs attains finality and conclusiveness. An assessment or liquidation by the Bureau of Customs attains finality and conclusiveness one year from the date of the final payment of duties except when: a. there was fraud; b. there is a pending protest or c. the liquidation of import entry was merely tentative. (Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., G. R. No. 161953, March 6, 2008) 16. Instance when the Bureau of Customs would utilize its remedy of filing a civil suit for collection of taxes. Import duties constitute a personal debt of the importer that must be paid in full. The importer’s liability therefore constitutes a lien on the article which the government may choose to enforce while the imported articles are either in its custody or under its control. When Bureau of Customs has released the imported goods, its lien over the imported goods was extinguished. Consequently, Bureau of Customs could only enforce the payment ofimport duties in full by filing a case for collection against importer. (Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., G. R. No. 161953, March 6, 2008) 17. Despite the holding in Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., G. R. No. 161953, March 6, 2008, the distribution of jurisdiction for collection cases involving tariff and customs duties is as follows: a. Basic tax does not exceed P300,000.00 MTC if outside of Metro Manila; does not exceed P400,000.00 MTC if within Metro Manila; b. Basic tax exceeds P300,000 but does not reach P1 million RTC if outside Metro Manila, exceeds P400,000.00 but does not reach P1 million RTC if within Metro Manila; c. Basic tax is P1 million or over, Court of Tax Appeals, Division. Pilipinas Shell ruled that jurisdiction vested upon the RTC because it was interpreting the CTA jurisdiction prior to the amendment of Rep. Act No. 1125. 18. Importation begins when the conveying vessel or aircraft enters the jurisdiction of the Philippines with intention to unlade therein. (Sec. 1202, TCCP) The jurisdiction of the Bureau of Customs to enforce the provisions of the TCCP including seizure and forfeiture also begins from the beginning of importation.

or exported to. 8752. TCCP) The Bureau of Customs loses jurisdiction to enforce the TCCP and to make seizures and forfeitures after importation is deemed terminated. commodity or article of commerce introduced into the Philippines at an export price less than its normal value in the ordinary course of trade. and (c) to impose additional duty on all imports not exceeding 10% ad valorem. 301 (a). 24. commodity or article of commerce into the Philippines at less than its normal value when destined for domestic consumption in the exporting country which is causing or is threatening to cause material injury to a domestic industry. Customs duties defined. Normal value for purposes of imposing the anti-dumping duty is the comparable price at the date of sale of like product. 134114. or materially retarding the establishment of a domestic industry producing the like product..after formal investigation and affirmative finding of the Tariff Commission. 301 (a). general welfare and/or national security upon recommendation of the NEDA (a) to increase. Court of Appeals.”) imposed on the importation of a product. provided that. 23. as amended by Rep. and such exportation is causing or is threatening to cause material injury to a domestic industry. A dumped imported product is any product. “Anti-Dumping Act of 1999”] 26. TCC. in the case of agricultural product. The flexible tariff clause is a provision in the Tariff and Customs Code. Act No. or materially retards the establishment of a domestic industry producing the like product. Act No. “Anti-Dumping Act of 1999”] 28. Importation is deemed terminated upon payment of the duties. Where a product. 8752. Act No. 8752. v. as amended by Rep. commodity or article of commerce is exported into the Philippines at a price less than its normal value when destined for domestic consumption in the exporting country. 1202. (b) to establish import quota or to ban imports of any commodity. 21. the tariff or tax assessed upon merchandise imported from. reduce or remove existing protective rates of import duty. “Anti-Dumping Act of 1999. (Nestle Phils. or secured to be paid. TCC. commodity. at the port of entry and the legal permit for withdrawal shall have been granted. which is causing or is threatening to cause material injury to a domestic industry. 8752. among others. commodity. [Sec. July 6. The anti-dumping duty is imposed a. Customs duties is the name given to taxes on the importation and exportation of commodities. and under the Safeguard Measures Act (SMA) additional tariffs as safeguard measures. 301 (s) (1). taxes and other charges due upon the agencies. the countervailing duty. commodity or article destined for consumption in the exporting country. In case the articles are free of duties. et al. 301 (s) (5). Special customs duties are additional import duties imposed on specific kinds of imported articles under certain conditions. commodity or article. or materially retarding the establishment of a domestic industry producing the like product. [Sec. The special customs duties under the Tariff and Customs Code (TCCP) are the anti-dumping duty.19. for the like product. which implements the constitutionally delegated power to the President of the Philippines. “Anti-Dumping Act of 1999”] 25. G. 8752. or article in the ordinary course of trade when destined for consumption in the country of export. The special customs duties are imposed for the protection of consumers and manufacturers. the increase should not be higher than 100% ad valorem. “Anti-Dumping Act of 1999”] 27. 2001) 22. or article or the Secretary of Agriculture. the discriminatory duty. “Anti Dumping Act of 1999”] . 20. TCC. Act No. 301 (s) (3 ). as amended by Rep. a foreign country. Act No. in the interest of national economy. and the marking duty. 301 (s) (5). taxes and other charges. [Sec. [Sec. as well as Philippine products. Dumping duty is an additional special duty amounting to the difference between the export price and the normal value of such product. 8752. until they have legally left the jurisdiction of the customs. No. as amended by Rep. [Sec. b. Act No. commodity or article (Sec. The imposing authority for the anti-dumping duty is the Secretary of Trade and Industry in the case of non-agricultural product. TCC.R. as amended by Rep. (Sec. TCC. TCC. as amended by Rep.

the effect of imposing an anti-dumping duty on the welfare of the consumers and/or the general public. classification. In the determination of whether to impose the anti-dumping duty. 301 (a). 8752. in the case of agricultural product. commodity or article. 37. (Sec. (Sec. charge. 32. to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them. A discriminatory duty is a new and additional customs duty imposed upon articles wholly or in part the growth or product of. 8752. The CTA is vested with jurisdiction to review decisions of the Secretary of Trade and Industry imposing safeguard measures as provided under Rep. and the importation of such subsidized product. Act No. commodity or article. indelibly and permanently in such manner as to indicate to an ultimate purchaser in the Philippines the name of the country of origin. and other related local industries. 302. as amended by Rep. commodity. or imported in a vessel. upon the disposition or transportation in transit through or reexportation from such country of any article wholly or in part the growth or product of the Philippines. in addition to ordinary duties. The amount of anti-dumping duty that may be imposed is the difference between the export price and the normal value of such product. in a conspicuous place as legibly. Countervailing duties are additional customs duties imposed on any product. 301 (a). or article or the Secretary of Agriculture. as amended by Rep. 40. or discriminates against the commerce of the Philippines. TCCP as amended by Section 1. regulation or limitation which is not equally enforced upon like articles of every foreign country. “Anti-Dumping Act of 1999”) The anti-dumping duty shall be equal to the margin of dumping on such product. as amended by Rep. not marked in any official language in the Philippines. commodity or article thereafter imported to the Philippines under similar circumstances. “Anti-Dumping Act of 1999”) 31. 301 (s) (1). condition. Even when all the requirements for the imposition have been fulfilled.after formal investigation and affirmative finding of the Tariff Commission. any kind or form of specific subsidy upon the production. “Anti-Dumping Act of 1999”) 34. by law or administrative regulation or practice. 35. including tariffs. 39. the Tariff Commission. exaction. Act No. TCC.29. by or in respect to any customs. 8752. tonnage. regulation. TCC. The Commissioner of Customs imposes the marking duty. or port duty. as amended by Rep. the decision on whether or not to impose a definitive anti-dumping duty remains the prerogative of the Tariff Commission. 8752. “Anti-Dumping Act of 1999”] Thus. Safeguard measures are emergency measures. exaction. R. Act No. may consider among others. directly or indirectly. Act No. Act No. The marking duty is equivalent to five percent (5%) ad valorem. in such manner as to place the commerce of the Philippines at a disadvantage compared with the commerce of any foreign country. the decision on whether or not to impose a definitive anti-dumping duty remains the prerogative of the Tariff Commission. [Sec. manufacture or exportation of such product commodity or article. (Sec. The imposing authority for the countervailing duties is the Secretary of Trade and Industry in the case of non-agricultural product. restriction or prohibition. any unreasonable charge. 30. TCC. No. 38. 36. Marking duties are the additional customs duties imposed on foreign articles (or its containers if the article itself cannot be marked). of any foreign country which imposes. commodity or article of commerce which is granted directly or indirectly by the government in the country of origin or exportation. directly or indirectly. taxes and charges imposed by law on the imported product. 8751) 33. They could not impose the anti-dumping duty or any special customs duty without the favorable recommendation of the Tariff Commission. commodity or article. the cabinet secretaries could not contravene therecommendation of the Tariff Commission. (Sec. 8800 the Safeguard Measures Act . fee. commodity. The countervailing duty is equivalent to the value of the specific subsidy. or article has caused or threatens to cause material injury to a domestic industry or has materially retarded the growth or prevents the establishment of a domestic industry. The President of the Philippines imposes the discriminatory duties. Even when all the requirements for the imposition have been fulfilled. 301 (a). TCC.A.

Rep. 9135) 46. the following alternative methods should be used one after the other: a. No. The imposing authority for the countervailing duties is the Secretary of Trade and Industry in the case of non-agricultural product.(Sec. the party adversely affected may protest such ruling or decision a. v. and c.. G. TCC) 45. G. 1. or other charges are determined. Transaction value of similar goods c.(SMA).. 2308. fees. or within fifteen (15) days thereafter. No. it is necessary to determine exactly how much the Government is entitled to collect as customs duties. et al. fees or other charges are imposed by the Collector otherwise taxpayer could not obtain refund. by presenting to the Collector at the time when payment is made. If the transaction value of the imported article could not be determined using the above. 2001) 48. TCC numbering and arrangement supplied) 44. TCC as amended by Sec. et al. otherwise the action of the collector shall be final and conclusive against him. 158540. Insurance. 2004) The DTI Secretary cannot impose the safeguard measures if the Tariff Commission does not favorably recommend its imposition. shall make a protest. In determining whether Nestle is entitled to refund of alleged overpayment of custom duties. Until there is such a determination by the Collector and affirmed or rejected by the Commissioner. b. The above transaction value is the primary method of determining dutiable value. a written protest setting forth his objection to the ruling or decision in question. (Nestle Phil. adjusted by adding certain cost elements to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods. 41. Court of Appeals. which shall be the price actually paid or payable for the goods when sold for export to the Philippines. and may include the following: a. commodity. Deductive method d. the interested party who desires to have the action of the collector reviewed. Computed method e. Transaction value of identical goods b. Additional tariffs. 2309. No protest shall be considered unless payment of the amount due after final liquidation has first been made and the corresponding docket fee. b. In all cases subject to protest. July 6. taxes.. (Southern Cross Cement Corporation v. (Sec. There is no automatic grant of refund. except the fixing of fines in seizure cases. then the Court of Tax Appeals does not have jurisdiction. Payment under protest required where additional duties. together with his reasons therefor. Unless shown otherwise. 43. Protest Exclusive Remedy in Protestable Cases. 134114. Fallback method 47. The basis of dutiable value of merchandise that is subject to ad valorem customs duties the transaction value.R. July 8. Safeguards measures that may be imposed. Freight. or article or the Secretary of Agriculture. import quotas or banning of imports. The CTA’s jurisdiction under the Tariff and Customs Code is not concurrent with . after formal investigation and affirmative finding of the Tariff Commission.When a ruling or decision of the collector is made whereby liability for duties. commodity or article. Imposing authority for safeguard measures. Cost of containers and packing. In order for the rule on solutio indebeti to apply it is an essential condition that the petitioner must first show that its payment of the customs duties was in excess of what was required by the law at the time the subject 16 importations of milk and milk products were made. The Philippine Cement Manufacturers Corp. taxes. (Sec. 42. There is a mistaken belief that claims for refund are governed by the rule on quasicontract of solutio indebeti which prescribes in six (6) years under Article 1145 of the Civil Code. R. Act No. in the case of agricultural product. 201. the disputable presumption of regularity of performance of duty lies in favor of the Collector of Customs.

120 SCRA 455) 54. Consequently. 138081. All claims for refund of duties shall be made in writing and forwarded to the Collector of Customs to whom such duties are paid. 249 SCRA 35.(Sec. Under the doctrine of primary jurisdiction. 56.that of the Commissioner of Customs due to the absence of any certification from the Collector of Customs of Manila that such import duties should be refunded. No. the finding by the CTA in another case of overpayment of internal revenue taxes is not necessarily a finding that there was overpayment of customs duties. The importation is absolutely prohibited. Jr. v. Fraud must be proved to justify forfeiture. March 20. the Supreme Court clarified that the fraud contemplated by law must be actual and not constructive. The customs authorities do not have to prove to the satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs searches. 134114. There is fraud. G.. will not deprive . prohibition or mandamus. De Veyra. Ogario. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods.. v. et al. Court of Tax appeals. (Jao. et al. Mere negligence is not equivalent to the fraud contemplated by law. January 25. or c. G. 59. It must be actual.. Forfeiture is not favored in law nor in equity. seizures and forfeitures of contraband without interference from the courts. No. Court of Appeals. Inc. et al. willfully and deliberately done or resorted to in order to induce another to give up some right. v.R. such as by enforcing the tax lien on the imported article when the imported articles could be found and be subject to seizure and forfeiture. (Nestle Phil. shall certify the same to the Commissioner of Customs with his recommendation together with all necessary papers and documents. Court of Appeals. TCC) 50. 138081. The Tariff and Customs Code allows the Bureau of Customs to resort to the judicial remedy of filing an action in court when the imported articles could not anymore be found. which enables the government to carry out the functions it has been instituted to perform. RTCs are precluded from assuming cognizance over such matters even through petitions of certiorari. v. et al. et al. v. shall verify the same by the records of his Office.. to render effective and efficient the collection of import and export duties due the State. and companion case. and if found to be correct and in accordance with law. 43) 52. seizures. 1999) 58. who upon receipt of such claim. Instances where there is no right of redemption of seized and forfeited articles: a. 51. It must be intentional. 2001) 49. 2000) 55. et al. In Aznar v. 217 SCRA 298.R. Court of Appeals.(The Bureau of Customs. March 20. No... 126634. reiterated in Farolan. amounting to intentional wrongdoing with the clear purpose of avoiding the tax. Upon receipt by the Commissioner of such certified claim he shall cause the same to be paid if found correct. July 6.. G. An honest mistake. et al. (De la Fuente v.R. b. or arrests provided by law and continue with the administrative hearings. the Bureau of Customs has exclusive administrative jurisdiction to conduct searches. Court of Tax Appeals. consisting of deception. but more importantly. et al.. not only to prevent smuggling and other frauds upon Customs. G. The release of the property would be contrary to law. It could conduct searches and seizures without need of a judicial warrant except if the search is to be conducted in a dwelling place. et al. 1708. et al. actions for forfeiture of property for violation of the Customs laws could easily be undermined by the simple device of replevin. 57.. v. 2000) 53.R. The doctrine of exclusive customs jurisdiction over customs cases to the exclusion of the RTCs is anchored upon the policy of placing no unnecessary hindrance on the government’s drive. No. (The Bureau of Customs. (Transglobe International. Regional Trial Courts have no jurisdiction to replevin a property which is subject to seizure and forfeiture proceedings for violation of the Tariff and Customs Code otherwise.. 58 SCRA 519. Ogario. The Tariff and Customs Code allows the Bureau of Customs to resort to the administrative remedy of seizure.

in violation of the tariff and customs laws shall issue a warrant of seizure. REPUBLIC ACT NO. an intention on the part of the importer/consignee to evade the payment of the duties due. December 9.R. G.. et al. 1999) 62. and b. v. et al. Court of Tax Appeals. criminal. (Sec. The posting of customs guards at the importer’s warehouse where the imported steel billets were transferred under guard from the customs zone is an indication that the goods were not yet released by the Bureau of Customs to the importer and that importation has not yet been terminated. or the wrongful making or delivery by the same person of any invoice.... The goods could not anymore be seized and forfeited because importation has been validly terminated. v. exporter or consignee of any declaration or affidavit. G. etc. Court of Appeals. R. i. 126634. v. the CTA is a highly specialized court specifically created for the purpose of reviewing tax and customs cases. are not likely to possess. Court of Tax Appeals. October 2. CREATING THE COURT OF TAX APPEALS INCLUDING JURISDICTION OF THE CTA. The issue is limited to whether the imported goods should be forfeited and disposed of in accordance with law for violation of the Tariff and Customs Code. or are attempted to be imported or exported. (Ursal v. etc. 132929. 65. 135253. without reference whatsoever to the character or conduct of the owner. thus providing for an adequate remedy for a speedy determination of tax cases.Lacsamana.R. 139050. January 25. importer.e. G. 2001) 60. letter or paper. and c. 101 Phil. affidavit. March 27.. 2004) 64. No. et al. accepted the payment and issued an order of release such order is sufficient legal permit for withdrawal and importation is then deemed terminated. it is in legal contemplation the property itself which commits the violation and is treated as the offender. 931) 2.R. 209. then a search warrant should be issued by the regular courts not the Bureau of Customs. Inc. Title III. Forfeiture of seized goods in the Bureau of Customs is in the nature of a proceeding in rem. The Collector of Customs upon probable cause that the articles are imported or exported.. CTA. 9-93) If the search and seizure is to be conducted in a dwelling place.. directed against the res or imported goods and entails a determination of the legality of their importation. Smuggled goods seized by virtue of a court warrant should be surrendered to the court that issued the warrant and not to the Bureau of Customs because the goods are in custodia legis. The Court of Appeals. The one-year prescriptive period for forfeiture proceedings applies only in the absence of fraud. 6. October 2. To have a body with special knowledge which ordinary Judges of the then Courts of First Instance (now RTCs). No. There may be instances where no warrants issued by the Bureau of Customs or the regular courts is required. CAO No. 2001) 61. CTA specialized court.. No. (Sandoval-Gutierrez J. (Commissioner of Customs v. etc. No. et al. invoice. b. In this proceeding..(Transglobe International. 139050. as in search and seizures of motor vehicles and vessels. The Court of Appeals..the government of its right to collect the proper tax. in view of the backlog of civil.R.Commissioner of Customs v. Requisites for forfeiture of imported goods: a. et al.(Republic. G. Milwaukee Industrial Corporation. Wrongful making by the owner. However. 102 Phil. No. it is dedicated exclusively to . and cadastral cases accumulating in the dockets of such courts. By the very nature of its functions. Why was the Court of Tax Appeals created ? SUGGESTED ANSWER: a. et al. G. the falsity of such declaration. To prevent delay in the disposition of tax cases by the then Courts of First Instance (now RTCs). when the Bureau of Customs allowed the processing of the import entry. 1125. 2000) 63. et al. (Republic. AS AMENDED 1. . letter or paper – all touching on the importation or exportation of merchandise. v.

Panganiban in Southern Cross Cement Corporation v. The remedies may also be classified into the administrative or the judicial remedies. G. the taxpayer shall respond to the same within fifteen (15) days from receipt which is the period provided for by implementing rules and regulations. General Foods (Phils. 6. 143672. Court of Tax Appeals is not governed strictly by technical rules of evidence. Act No. G. (Ibid. 91 citing Commissioner of Internal Revenue v. (J. 1990. 1998. Court Commissioner of Internal Revenue v. 2005.Philippine Refining Company v. NIRC of 1997] . Commissioner of Internal Revenue. 676) Hence. 1990. the CTA is categorically described as a court of record. April 30. Manila Electric Company. Cement Manufacturers Association of the Philippines. 669.. when supported by substantial evidence. 133834. party-litigants shall prove every minute aspect of their cases.the study and consideration of revenue-related problems and has necessarily developed an expertise on the subject. citing various cases in his separate opinion to the decision on the motion for reconsideration) 3. No. 153204. Sec.R. G. unless it is shown that it committed gross error in the appreciation of facts. as a matter of practice and principle. August 31. No. 124043. R. [3rd par. August 28. August 3. (Commissioner of Internal Revenue v. as the rules on documentary evidence require that these documents must be formally offered before the CTA. Nos. 4.. 121666. 118794. 1125) While this may be so rules of procedure are not ends in themselves but are primarily intended as tools in the administration of justice. etc. No. 181 SCRA 214. The legal remedies under the NIRC of 1997 available to an aggrieved taxpayer at the administrative level with respect to assessment of internal revenue taxes are the following: a. 298 SCRA 83. No. Upon receipt of a pre-assessment notice. While the CTA is not governed strictly by technical rules of evidence. Commissioner of Internal Revenue v. the presentation of the BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of BIR's claims. 2003. Indubitably. No.. the Supreme Court will not set aside the conclusion reached by the Court of Tax Appeals. v. G. (Sec. 220. the tax court dedicates itself to the study and consideration of tax problems and necessarily develops expertise thereon. (Commissioner of Internal v.R. October 10. unless there has been an abuse or improvident exercise of authority on its part. 553. April 24. No. will not be disturbed on appeal. Manila Mining Corporation. October 14. 54909 and 80041. 8. October 14. January 22. G. May 8. Mitsubishi Metal Corp. R.R. and c. Court of Tax Appeals’ finding of fact binds the Supreme Court.R. No. et al. Philippine Refining Company v. assessment. As cases filed before it are litigated de novo. No. G. 1996. Court of Tax Appeals. 54909 and 80041.. Rep.R. G. b. 2008) 5. 256 SCRA 667. Court of Appeals. R. G. 140944. 220. 1998. Mitsubishi Metal Corp. the presentation of the purchase receipts and/or invoices is not mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of the taxpayer’s claims. 2006. G. refund of internal revenue taxes. 181 SCRA 214. 2005) Under Section 8 of RA 1125. no evidentiary value can be given the pieces of evidence submitted by the BIR. collection..R. The legal remedies under the NIRC of 1997 and other laws available to an aggrieved taxpayer may be classified into the tax remedies with respect to: a.. 91 citing Commissioner of Internal Revenue v. especially if affirmed by the Court of Appeals as in the present case. For by the nature of its functions.R. 228 (e). G.) Inc. 499 SCRA 664. as rules of procedure are not ends in themselves and are primarily intended as tools in the administration of justice. 298 SCRA 83. G. 158540. (Dizon. January 22. et al.R.. citing Compagnie Financiere Sucres et Denrees v. 124043. Court of Appeals. 2007 citing Commissioner of Internal Revenue v. Nos. No. 401 SCRA 545. Court of Appeals. It is doctrinal that the factual findings of the Court of Tax Appeals.

On appeal. unrep. NIRC of 1997] d. a denial of which is appealable to the Court of Tax Appeals en banc by means of a petition for review. 1989. covering the whole year. before the expiration of two (2) years from the date of payment of the tax regardless of any supervening cause that may arise after payment (2nd par. Within sixty (60) days from the filing of the protest. Court of Tax Appeals.R. et al.. The legal remedy under the NIRC of 1997 available to an aggrieved taxpayer at the administrative level with respect to refund or recovery of tax erroneously or illegally collected. The two (2) year period and the thirty (30) day period should be applied on a whichever comes first basis. the 30 days applies. et al. c. G. which is reflective of the results of the operations of a business enterprise. Thus. is filed that the taxpayer will be able to ascertain whether a tax is still due or refund can be claimed based on the adjusted and audited figures. otherwise the assessment shall become final. . 229. is not acted upon within one hundred eighty (180) days from submission of documents.R. or from the lapse of the one hundred eighty (180) – day period. (1stpar. A decision of a division of the Court of Tax Appeals adverse to the taxpayer or the government may be the subject of a motion for reconsideration or new trial. Commissioner of Internal Revenue. Where the taxpayer is a corporation the two year prescriptive period from “date of payment” for refund of income taxes should be the date when the corporation filed its final adjustment return not on the date when the taxes were paid on a quarterly basis. 1125) 10. Upon the issuance of an assessment notice. v. b. 144653. or b. in which amounts of the gross receipts and deductions have been audited and adjusted. No. otherwise. A Letter of Authority is issued authorizing BIR examiner to audit or examine the tax return and determines whether the full and complete taxes have been paid.. G. No. c. (Philippine Bank of Communications v. Commissioner of Internal Revenue. G.). The legal remedy under the NIRC of 1997 at the judicial level with respect torefund or recovery of tax erroneously or illegally collected. 228 (e). (Commissioners. It is only when the return. and extendible for justifiable reasons for thirty (30) days only. A decision of the Court of Tax Appeals en banc adverse to the taxpayer or the government may be appealed to the Supreme Court through a petition for review on certiorari filed with fifteen (15) days from notice. January 28. despite the absence of a decision. the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision. f. a. is to file a claim for refund or credit with the Commissioner of Internal Revenue. The legal remedies under the NIRC of 1997 available to an aggrieved taxpayer at the judicial level with respect to assessment of internal revenue taxes: a. (4th par.No. Generally speaking it is the Final Adjustment Return. The taxpayer files his tax return. e. (Bank of the PhilippineIslands v. . 1999) 12. if the 2 year period is about to lapse but there is no decision yet by the Commissioner which would trigger the 30-day period. executory and demandable. R.. the taxpayer shall protest administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Sec. within thirty (30) days from receipt of the denial by the Commissioner of the application for refund or credit. 8. 112024. if the 30 days is within the 2 years. the taxpayer should file an appeal. 229. NIRC of 1997) 9. August 28. all relevant supporting documents shall be submitted. [last par. (Sec.) 7. No. 2001) 13. Sec. the decision shall become final.. etc. 82618. 11. Ibid. the taxpayer should apply for the issuance of a writ of preliminary injunction to enjoin the BIR from collecting the tax subject of the appeal. or b.A.. If the protest is denied in whole or in part. Outline of tax remedies of a taxpayer and the government relative to ASSESSMENT of internal revenue taxes.b. NIRC of 1997.R.) 11. March 16. is the filing of a suit or proceeding with the Court of Tax Appeals a. Sec..

if the examiner is not satisfied that the tax return is truly reflective of the taxable transaction and that the taxes have not been fully paid. Where the taxpayer did not file a tax return or where the tax return filed is false or fraudulent. The taxpayer should then file an administrative protest by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment notice. law and jurisprudence relied upon by the Commissioner. Within sixty (60) days from filing of the protest. To be valid the administrative protest must be filed within the prescriptive period. not even the BIR Commissioner could change the same.. A decision of a division of the Court of Tax Appeals adverse to the taxpayer or the government may be the subject of a motion for reconsideration or new trial. h. a denial of which is appealable to the Court of Tax Appeals en banc by means of a petition for review. If the taxpayer ignores the invitation to the informal conference. If the taxpayer ignores the pre-assessment notice by not responding or his explanations are not accepted by the Commissioner. and the law and jurisprudence relied upon by the taxpayer. or if the examiner is not satisfied with taxpayer’s explanation. Otherwise it would not be valid. with an application for the issuance of a writ of preliminary injunction to enjoin the BIR from collecting the tax subject of the appeal. The pre-assessment notice requires the taxpayer to explain within fifteen (15) days from receipt why no notice of assessment and letter of demand for additional taxes should be directed to him. all relevant supporting documents shall be submitted. If the taxpayer attends the informal conference and the examiner is satisfied with the explanation of the taxpayer. the denial of the Commissioner or the inaction of the Commissioner would result to the notice of assessment becoming final and collectible and the BIR could then utilize its administrative and judicial remedies to collect the tax. then apply for a refund. If the examiner is satisfied that the tax return is truly reflective of the taxable transaction and all taxes have been paid. Once an assessment has become final and collectible. g. then the process is again ended. a Notice of Informal Conference is issued inviting the taxpayer to explain why he should not be subject to additional taxes. and he believes that proper taxes should be assessed. There is no need to pay under protest. otherwise the assessment shall become final and collectible and the BIR could use its administrative and judicial remedies to collect the tax. i. However. The running of the above prescriptive periods may however be suspended under certain instances. the process is again ended. . . The taxpayer could not immediately interpose an appeal to the Court of Tax Appeals because there is no decision yet of the Commissioner that could be the subject of a review. The notice of assessment must be issued within the prescriptive period and must contain the facts. must show the error of the Bureau of Internal Revenue and the correct computations supported by a statement of facts. and if denied appeal the same to the Court of Tax Appeals. If the Commissioner is satisfied with the explanation of the taxpayer. If the protest is denied in whole or in part. the process ends. then a notice of assessment and a letter of demand is issued. or is not acted upon within one hundred eighty (180) days from the submission of documents. the Commissioner of Internal Revenue or his duly authorized representative shall then notify the taxpayer of the findings in the form of a pre-assessment notice. then the Commissioner has a period of ten (10) years from discovery of the failure to file a tax return or from discovery of the fraud within which to issue an assessment notice. d. If the taxpayer fails to so appeal.c. f. If the protest was not seasonably filed the assessment becomes final and collectible and the Bureau of Internal Revenue could use its administrative and judicial remedies in collecting the tax. the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the adverse decision. The notice of assessment must be issued by the Commissioner to the taxpayer within a period of three (3) years from the time the tax return was filed or should have been filed whichever is the later of the two events. or from the lapse of the one hundred eighty (180-) day period. Thus. the taxpayer could not pay the tax. e.

Exclusive appellate jurisdiction to review by appeal. (DIVISION) 2. 14. in which case the inaction shall be deemed a denial. j. seizure. Decisions of the Commissioner of Customs in cases involving liability for customs duties. detention or release of property affected. commodity or article. or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue’. or other matter arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue.Thus. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments. (If original DIVISION. if the prescriptive period of two years is about to expire. fines. exclusive of . Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments. Decisions. penalties in relation thereto. if appellate EN BANC) 4. That offenses or felonies mentioned in this paragraph where the principal amount of taxes and fees. in relation thereto. where the National Internal Revenue Code provides a specific period of action. Jurisdiction over cases involving criminal offenses as herein provided: 1. of the Tariff and Customs Code. fees or other charges. commodity or article. If the taxpayer does not so appeal. as herein provided: 1. and the Secretary of Agriculture in the case of agricultural product. If the decision of the Court of Tax Appeals en banc affirms the denial of the protest by the Commissioner or the assessment in case of failure by the Commissioner to decide the taxpayer must file a petition for review on certiorari with the Supreme Court within fifteen (15) days from notice of the judgment on questions of law. An extension of thirty (30) days may for justifiable reasons be granted. however. in case of nonagricultural product. Exclusive original jurisdiction over all criminal cases arising from violations of the National Internal Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of Internal Revenue or the Bureau of Customs: Provided. (DIVISION) 5.The Court of Tax Appeals. or other matters arising under the Customs Law or other laws administered by the Bureau of Customs. involving dumping and countervailing duties under Section 301 and 302. (The inaction on refunds in two years from the time tax was paid. (DIVISION) b. the taxpayer should interpose a petition for review with the CTA – DIVISION) 3. (This has reference to forfeiture cases where the decision is to release the seized articles – DIVISION) 7. The BIR could then use its administrative and judicial remedies to collect the tax. and safeguard measures under Republic Act No. orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction. The jurisdiction of the Court of Tax Appeals: “a. respectively. forfeitures or other penalties in relation thereto. (EN BANC) 6. refunds of internal revenue taxes. the decision of the Court of Tax Appeals would become final and this has the effect of making the assessment also final and collectible. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the Commissioner of Customs which are adverse to the Government under Section 2315 of the Tariff and Customs Code. fees or other charges. 8800. Decisions of the Secretary of Trade and Industry. refunds or internal revenue taxes. has a period of twelve (12) months from submission of the case for decision within which to decide. penalties. where either party may appeal the decision to impose or not to impose said duties. fees or other money charges.

Over petitions for review of the judgments. July 11.000. (Surigao Electric Co. as amended by R. 9282. 2. Exclusive appellate jurisdiction in criminal offenses: a) Over appeals from the judgments. 2001 held that not only is the Notice the only response received: its content and tenor supports the theory that it was the CIR’s final act regarding the request for reconsideration. exclusive of charges and penalties. Any provision of law or the Rules of Court to the contrary notwithstanding. charges and penalties: Provided. The very title expressly indicated that it was a final notice prior to . resolutions.00) or where there is no specified amount claimed shall be tried by the regular Courts and the jurisdiction of the CTA shall be appellate. c. Isabela Cultural Corporation. 2. A BIR demand letter sent to the taxpayer after his protest of the assessment notice is considered as the final decision of the Commissioner on the protest. 7. Municipal Trial Courts and Municipal Circuit Trial Courts. claimed is less than One million pesos (P1. resolutions or orders of the Regional Trial Courts in the exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts. No.. or orders of the Regional Trial Courts in tax collection cases originally decided by them. Jurisdiction over tax collection cases: 1.000) shall be tried by the proper Municipal Trial Court. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes. and jointly determined in the same proceeding by the CTA. 57 SCRA 523) d. the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action. is less than One million pesos (P1. Union Shipping Corporation. A. 70 SCRA 204) e. The following are the acts of BIR Commissioner considered as denial of a protest which serve as basis for appeal to the Court of Tax Appeals: a. resolutions or orders of the Regional Trial Courts in the exercise of their appellate jurisdiction over tax collection cases originally decided by the Metropolitan Trial Courts. resolutions or orders of the Regional Trial Courts in tax cases originally decided by them. v. in their respective jurisdiction. G. R. emphasis and words in parentheses supplied) 15. Exclusive appellate jurisdiction in tax collection cases: a. et al.000. b.R. b) Over petitions for review of the judgments. Commissioner of Internal Revenue v. (Commissioner of Internal Revenue v. A. That collection cases where the principal amount of taxes and fees. No. No.charges and penalties claimed. Union Shipping Corporation. A letter of the BIR Commissioner reiterating to a taxpayer his previous demand to pay an assessment is considered a denial of the request for reconsideration or protest and is appealable to the Court of Tax Appeals. (Commissioner of Internal Revenue v. the criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with. 185 SCRA 547) c. (Commissioner v. in their respective territorial jurisdiction. Final notice before seizure considered as commissioner’s decision of taxpayer’s request for reconsideration who received no other response. Ayala Securities Corporation.” (Sec. fees. however. 185 SCRA 547) b. 135210. and no right to reserve the filing of such civil action separately from the civil action will be recognized. Over appeals from judgments. Filing by the BIR of a civil suit for collection of the deficiency tax is considered a denial of the request for reconsideration. An indication to the taxpayer by the Commissioner “in clear and unequivocal language” of his final denial not the issuance of the warrant of distraint and levy. in their respective territorial jurisdiction. 1125.. Municipal Trial Courts and Municipal Circuit Trial Courts in their respective jurisdiction. Metropolitan Trial Court and Regional Trial Court. Inc.000. What is the subject of the appeal is the final decision not the warrant of distraint. Court of Tax Appeals.

To be a valid decision on a disputed assessment. Where the Commissioner has not acted on an application for refund or credit and the two year period from the time of payment is about to expire. 11. Rule 10. the taxpayer has a period of 30 days from the expiration of the 180 day period within which to appeal to the Court of Tax Appeals. unrep.(Commissioner of Internal Revenue v. During the pendency of the protest the CIR issued a warrant of distraint and levy to collect the taxes subject of the protest. The two (2) year period and the thirty (30) day period should be applied on a whichever comes first basis. G. 228 (e). Court of Tax Appeals.. 1989. the taxpayer has to file his appeal with the Court of Tax Appeals before the expiration of two years from the time the tax was paid. rules and regulations. The taxpayer seasonably protested the assessment issued by the Commissioner of Internal Revenue.seizure of property. RRCTA effective December 15. otherwise. or b.R. March 16. 2005) because the collection of the tax may jeopardize the interest of the taxpayer. within thirty (30) days from receipt of the denial by the Commissioner of the application for refund or credit. ANSWER: The taxpayer should appeal. (Sec. in which case the same shall not be considered a decision on the disputed assessment. NIRC of 1997). v. would have jurisdiction. No. Regs. the applicable law. a motion for the suspension of the collection of the tax may be filed together with the petition for review (Sec. (Sec. R. 1989. (Commissioner of Customs. Court of Tax Appeals. its properties would be subjected to distraint and levy. As a general rule. by way of a petition for review. the would be dismissed for lack of jurisdiction unless the case falls under any of the following exceptions. The actual issuance of a warrant of distraint and levy in certain cases cannot be considered a final decision on a disputed assessment. 1125) 20. As counsel what advice shall you give the taxpayer.R. R. 2001) b. 82618. March 16. et al..) .1. is the filing of a suit or proceeding with the Court of Tax Appeals a. 12-99) These conditions are not complied with by the mere issuance of a warrant of distraint and levy. If there is no such decision. 18. at his personal convenience. No.A. et al. et al. the decision shall be void. before the expiration of two (2) years from the date of payment of the tax regardless of any supervening cause that may arise after payment (2nd par.. would have. Thus. The legal remedy under the NIRC of 1997 at the judicial level with respect to refund or recovery of tax erroneously or illegally collected. the taxpayer should file an appeal. 82618. unrep. the 30 days applies.. G. No. if the 30 days is within the 2 years. 17. 16. Explain briefly your answer. despite the absence of a decision. there must always be a decision of the Commissioner of Internal Revenue or Commissioner of Customs before the Court of Tax Appeals. G. (last par. 3. or jurisprudence on which such decision is based. 229.. given his go signal. Commissioner of Internal Revenue v. No. The letter itself clearly stated that the taxpayer was being given “this LAST OPPORTUNITY” to pay. Isabela Cultural Corporation. Union Shipping Corp. the decision of the Commissioner or his duly authorized representative shall (a) state the facts. What is the legal remedy under the NIRC of 1997 at the judicial level with respect to refund or recovery of tax erroneously or illegally collected ? SUGGESTED ANSWER. July 11. 185 SCRA 547) Furthermore.6. Instances where the Court of Tax Appeals would have jurisdiction even if there is no decision yet by the Commissioner of Internal Revenue: a. Where the Commissioner has not acted on the disputed assessment after a period of 180 days from submission of complete supporting documents.. It is disheartening enough to a taxpayer to be kept waiting for an indefinite period for the ruling. (Commissioners. NIRC of 1997. if the 2 year period is about to lapse but there is no decision yet by the Commissioner which would trigger the 30-day period. Rev. 135210. It would make matters more exasperating for the taxpayer if the doors of justice would be closed for such a relief until after the Commissioner. etc. v. Sec. and (b) that the same is his final decision. 3. to the Court of Tax Appeals not on the ground of the denial of the protest but on other matter arising under the provisions of the National Internal Revenue Code. Sec.) 19. otherwise.

Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place.21. No. 2006. cases filed in the CTA are litigated de novo. Act No. then jurisdiction vests upon the CTA or the lower courts depending on the amount of the tax. March 116. which provides that the civil action for recovery of civil liability should be jointly determined in the criminal proceeding by the Sandiganbayan or appropriate courts. Commissioner of Internal Revenue. Therefore. a judicial claim for refund or tax credit in the CTA is by no means an original action.A. et al. 144653. (Bank of the Philippine Islands v. a petitioner has to convince the appellate court that the quasi-judicial agency a quo did not have any reason to deny its claims. the Supreme Court ruled that on the tax collection case the RTC would have jurisdiction. 11 February 2005. 1995. This is so because. R. 9282. 7916 Allocating Two Percent (2%) of the Gross Income Earned by All Businesses and Enterprises Within the Subic. 451 SCRA 132) 23. R. then this court retains jurisdiction. See Commissioner of Internal Revenue v. Applicability of Proton Pilipinas Corporation vs. through the recommendation of the then Commissioner of Internal Revenue issued Revenue Regulations [Rev. (Atlas Consolidated Mining and Development Corporation v. [R. 153866. (Atlas Consolidated Mining and Development Corporation v. Clark. Thus.] No. is filed that the taxpayer will be able to ascertain whether a tax is still due or refund can be claimed based on the adjusted and audited figures. providing the “Rules and Regulations to Implement the Tax Incentives Provisions Under Paragraphs (b) and (c) of Section 12. Rev. 2007) 24. Poro Point . Reg. the Supreme Court said that tax collection cases may be tried separately. 3019 cases. 8249. Republic. G. No. etc. Where the taxpayer is a corporation the two year prescriptive period from “date of payment” for refund of income taxes should be the date when the corporation filed its final adjustment return not on the date when the taxes were paid on a quarterly basis. What is the nature of proceedings before the Court of Tax Appeals ? SUGGESTED ANSWER: First. Rep. 104 of the Revised Penal Code does not cover taxes. with the civil jurisdiction being cognizable by the CTA or the lower courts depending on the amount. by words too plain to be mistaken. Act. 112024. Act No. August 28. March 16. 7227. G. 1999) Generally speaking it is the Final Adjustment Return. Commissioner of Internal Revenue.A. formally offering and submitting its evidence to the CTA. 1-95. G. The case was decided on factual antecedents before R. 165027. the prohibition of reservation of the criminal aspect. Second. that the legislature intended to entitle them to such claims. It is only when the return. G. but rather an appeal by way of petition for review of a previous. Commissioner of Internal Revenue. No.R. John Hay. Commissioner of Internal Revenue. a petitioner should prove every minute aspect of its case by presenting. as in every appeal or petition for review. 145526. Consequently.] No. No. 25.. the then Secretary of Finance. If the issue is a purely tax case. R. 7227 and Sections 24(b) and (c) of [R. Interpreting the provisions of Republic Act No. and not before the Sandiganbayan in Rep. On January 24. Reg. in which amounts of the gross receipts and deductions have been audited and adjusted.] No. 2001) 22. G. What is the burden of taxpayers seeking tax refunds or credits ? SUGGESTED ANSWER: It has always been the rule that those seeking tax refunds or credits bear the burden of proving the factual basis of their claims and of showing. Interpretation by the author in the light of Rep. even if it involves cases cognizable by the Sandiganbayan. No.] No. (Philippine Bank of Communications v. A.” Subsequently.A.R. 12-97 was issued providing for the “Regulations Implementing Sections 12(c) and 15 of [R. 145526. October 16. 9282 which grants criminal jurisdiction to the Court of Tax Appeals if the value of the tax is P1 million or more. [o]therwise known as the Bases Conversion and Development Act of 1992. unsuccessful administrative claim. 2007. part of the evidence to be submitted to the CTA must necessarily include whatever is required for the successful prosecution of an administrative claim.. R. No. January 28. Seagate Technology (Philippines) G. covering the whole year. 3019 is silent on the definition of civil liability and the application of Art. If it is a criminal case cognizable by the Sandiganbayan. No. No. which is reflective of the results of the operations of a business enterprise.

.] 7227” the RMCs issued by the CIR. 31-2003 dated June 3. They do “do not challenge the rate. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases.The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner. In the case at bar. otherwise known as the ‘Bases Conversion and Development Act of 1992’ Relative to the Tax Incentives Granted to Enterprises Registered in the Subic Special Economic and Freeport Zone. and Unconstitutional [RMC] No. Inc. rather they challenge the authority of the respondent Commissioner to impose and collect the said taxes.” They also claim that the challenge on the authority of the CIR to issue the RMCs does not fall within the jurisdiction of the Court of Tax Appeals (CTA). penalties imposed in relation thereto. Reg. Ultra Vires.” which provided for the tax treatments on the transactions involved in the importation of motor vehicles through the SSEFZ and other legislated Freeport zones and subsequent sale thereof through public auction. the aggrieved taxpayer would then be able to take recourse to the tax court at the opportune time.v. This was later amended by RMC No. August 7. etc et al. G. No. subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. . 1-95.” On June 3. No. respectively. 148380. emphases supplied. Commissioner of Internal Revenue. 31-2003 setting the “Uniform Guidelines on the Taxation of Imported Motor Vehicles through the Subic Free Port Zone and Other Freeport Zones that are Sold at Public Auction. the taxpayer would be able to determine when his right to appeal to the tax court accrues. No. R. G. Inc. Without needless difficulty. No. Nos. . 7227 which provides that “exportation or removal of goods from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines. 103445. as amended. On the basis of his statement indubitably showing that the Commissioner’s communicated action is his final decision on the contested assessment. et al. No.(Commissioner of Internal Revenue v. fees or other charges..-. 2003. 477 SCRA 205. 1999.” They were issued pursuant to the power of the CIR under Section 4 of the National Internal Revenue Code. 2003 and [RMC] No. Asia International Auctioneers..] No.A. 16-99 was issued “Amending [RR] No.. Rev.A. void and against the provisions of [R. Asia International Auctioneers and others filed a complaint before the RTC of Olongapo City. R. 2007) 26.. No. and other related Rules and Regulations to Implement the Provisions of paragraphs (b) and (c) of Section 12 of [R. structure or figures of the imposed taxes. 211-212. Bank of the Philippines Islands. R. Rev. 1997 and September 27. April 17. G. 7227. 12-97 and 16-99 dated January 24. Parayno. December 18. Reg. 1995.Special Economic Zones and other Special Economic Zones under PEZA. Does the RTC have jurisdiction ? SUGGESTED ANSWER: No.A. v. 2007 citing Oceanic Wireless Network. 1-95. 32-2003 dated June 5. the Commissioner of Internal Revenue issued Revenue Memorandum Circular (RMC) No. or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner. 32-2003. (as amended by the NIRC of 1997. the assailed revenue regulations and revenue memorandum circulars are actually rulings or opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ to implement Section 12 of R. The power to decide disputed assessments. viz: Section 4. 9 December 2005. 2003. to declare Void. What is the characteristic of a BIR denial of a protest such as would enable the taxpayer to appeal the same to the Court of Tax Appeals ? SUGGESTED ANSWER: The Commissioner of Internal Revenue should always indicate to the taxpayer in clear and unequivocal language whenever his action on an assessment questioned by a taxpayer constitutes his final determination on the disputed assessment.. 134062. subject to review by the Secretary of Finance. They contended that jurisdiction over the case at bar properly pertains to the regular courts as this is “an action to declare as unconstitutional. refunds of internal revenue taxes.” OnSeptember 27. Jr. It is the Court of Tax Appeals that has exclusive jurisdiction. etc. 1999.

2001 held that not only is the Notice the only response received: its content and tenor supports the theory that it was the CIR’s final act regarding the request for reconsideration. Reasons for the rule requiring CIR’s unequivocal language on his action on the protest. a. Final notice before seizure considered as commissioner’s decision of taxpayer’s request for reconsideration who received no other response. 148380. Regs. citing Surigao Electric Co. v. in which case the same shall not be considered a decision on the disputed assessment. As counsel what advice shall you give the taxpayer. 134062. Court of Tax Appeals. G. et al. 9 December 2005. d. Filing by the BIR of a civil suit for collection of the deficiency tax is considered a denial of the request for reconsideration. 57 SCRA 523) 27. 135210. this would encourage his office to conduct a careful and thorough study of every questioned assessment and render a correct and define decision thereon in the first instance. the decision shall be void. v. An indication to the taxpayer by the Commissioner “in clear and unequivocal language” of his final denial not the issuance of the warrant of distraint and levy. Inc. Ayala Securities Corporation. and (b) that the same is his final decision. consequently. This would also deter the Commissioner of Internal Revenue from unfairly making the taxpayer grope in the dark and speculate as to which action constitutes the decision appealable to the tax court. Inc. July 11. Commissioner of Internal Revenue v. No. by way of a petition for review. No. To be a valid decision on a disputed assessment.. On the part of the Commissioner of Internal Revenue. G. G. L-254289. No. Commissioner of Internal Revenue. A BIR demand letter sent to the taxpayer after his protest of the assessment notice is considered as the final decision of the Commissioner on the protest. 12-99) These conditions are not complied with by the mere issuance .6. 70 SCRA 204) e. April 17. Court of Tax Appeals. rules and regulations. R. G.citing Surigao Electric Co. c. No. 28 June 1974. otherwise. 3. Rev. 29. (Commissioner of Internal Revenue v. Union Shipping Corporation. 57 SCRA 523) d.. 2007 citing Oceanic Wireless Network. Cite acts of BIR Commissioner that may be considered as denial of a protest which serve as basis for appeal to the Court of Tax Appeals.. 28 June 1974. 185 SCRA 547) c. Explain briefly your answer. and orderliness in administrative action. L-254289. Union Shipping Corporation. A letter of the BIR Commissioner reiterating to a taxpayer his previous demand to pay an assessment is considered a denial of the request for reconsideration or protest and is appealable to the Court of Tax Appeals. Inc. (Sec. 57 SCRA 523) 28. 211-212. The actual issuance of a warrant of distraint and levy in certain cases cannot be considered a final decision on a disputed assessment.. this rule of conduct would meet a pressing need for fair play. Court of Tax Appeals. R.R. Bank of the Philippines Islands. v. Isabela Cultural Corporation. b. The very title expressly indicated that it was a final notice prior to seizure of property. R.1. 477 SCRA 205. the decision of the Commissioner or his duly authorized representative shall (a) state the facts. or jurisprudence on which such decision is based. 185 SCRA 547) b. SUGGESTED ANSWER: The taxpayer should appeal. the applicable law. (Commissioner of Internal Revenue v. It would obviate all desire and opportunity on the part of the taxpayer to continually delay the finality of the assessment – and. (Commissioner v. What is the subject of the appeal is the final decision not the warrant of distraint. otherwise. No. The taxpayer seasonably protested the assessment issued by the Commissioner of Internal Revenue. v. Inc. G. R. (Surigao Electric Co. to the Court of Tax Appeals not on the ground of the denial of the protest but on other matter arising under the provisions of the National Internal Revenue Code. regularity. During the pendency of the protest the CIR issued a warrant of distraint and levy to collect the taxes subject of the protest. SUGGESTED ANSWER: a. (Commissioner of Internal Revenue v. the collection of the amount demanded as taxes – by repeated requests for recomputation and reconsideration. The letter itself clearly stated that the taxpayer was being given “this LAST OPPORTUNITY” to pay. its properties would be subjected to distraint and levy. Of greater import.

228 (e). 105 U. NIRC) “No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the Commissioner of Customs or the Regional Trial Court. et al. 82618.. RRCTA effective December 15..9. as amended by Sec. as the case may be shall suspend the payment. That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court. Where the Commissioner has not acted on the disputed assessment after a period of 180 days from submission of complete supporting documents. Rep. at his personal convenience.S. a motion for the suspension of the collection of the tax may be filed together with the petition for review (Sec. Instances where the Court of Tax Appeals would have jurisdiction even if there is no decision yet by the Commissioner of Internal Revenue: a... July 11. his tax liability may be determined by estimation. General rule: “The rule is that in the absence of accounting records of a taxpayer. G. Commissioner of Internal Revenue v..(Commissioner of Internal Revenue v. G. 9282 ) The Supreme Court may enjoin the collection of taxes under its general judicial power but it should be apparent that the source of the power is not statutory but constitutional.) 31. Rep. suspend. No. the rule does not apply where the estimation is arrived at arbitrarily and capriciously. 319 U.” (Sec. The Philippine Cement Manufacturers Corp. It is disheartening enough to a taxpayer to be kept waiting for an indefinite period for the ruling. 1989. (Commissioner of Customs. 32. To hold otherwise would be tantamount to holding that skillful concealment is an invincible barrier to proof.. Court of Tax Appeals. 2001) b. would have. a peremptory judicial act which is traditionally frowned upon unless there is a clear statutory basis for it. Hantex Trading Co. Isabela Cultural Corporation.R. the taxpayer has a period of 30 days from the expiration of the 180 day period within which to appeal to the Court of Tax Appeals. Union Shipping Corp.R. 158540. No. citing United States v. v. The Supreme Court did not grant the provisional remedy prayed for in Southern Cross Cement Corporation v. 2004 for it would be tantamount to enjoining the collection of taxes. No. This so because the Safeguard Measures Act states that the filing of a petition for review before the CTA does not stop. Act No. 1233 (1943)] “However. 135210. et al. the taxpayer has to file his appeal with the Court of Tax Appeals before the expiration of two years from the time the tax was paid.of a warrant of distraint and levy. 185 SCRA 547) Furthermore. Rindskopf. No. Inc.418 (1881)] . It would make matters more exasperating for the taxpayer if the doors of justice would be closed for such a relief until after the Commissioner. et al. G. 11. 3. R. March 16. and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided.. R.. Sec.” (Sec. the Secretary of Trade and Industry and Secretary of Agriculture.” [Commissioner of Internal Revenue v.. provincial. G. distraint. fee or charge.Approximation in the calculation of taxes due is justified. should not be enjoined notwithstanding any timely appeal of the imposition. Hantex Trading Co. levy. Act No. “No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax.” [Commissioner of Internal Revenue v.Evident is the clear legislative intent that the imposition of safeguard measures. city or municipal treasurer or the Secretary of Finance. Inc. (last par. NIRC of 1997. Where the Commissioner has not acted on an application for refund or credit and the two year period from the time of payment is about to expire. despite the availability of judicial review. The petitioner (Commissioner of Internal Revenue) is not required to compute such tax liabilities with mathematical exactness. 2005 citing United States v. 218. 136975. however. unrep. Rule 10. or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures. given his go signal.S. 1125. March 31. Johnson. As a general rule. July 8. 30. 2005) because the collection of the tax may jeopardize the interest of the taxpayer.

Under the bank deposit method. industry publication. appellate court declared that where the records of the taxpayer are manifestly inaccurate and incomplete. 47172. 111 F. September 30. The following are the general methods developed by the Bureau of Internal Revenue for reconstructing a taxpayer’s income where the records do not show the true income or where no return was filed or what was filed was a false and fraudulent return (a) Percentage method. (g) Surveillance and assessment method. Necessarily.2d 374) 35. (Chapter XIII. Commissioner. (Chapter XIII. (c) Bank deposit method.The existence of unreported income may be shown by any particular proof that is available in the circumstances of the particular situation. The Commissioner is not bound to follow any set of patterns. 6 (B). (b) Net worth method. Thus. Inc. Indirect Approach to Investigation. Indirect Approach to Investigation. the Commissioner may look to other sources of information to establish income made by the taxpayer during the years in question. Jr. Inc. he may examine and subpoena.. He may take the sworn testimony of the taxpayer. 6 (B) of the NIRC of 1997 allows the BIR to make or amend a tax return from his own knowledge or obtained through testimony or otherwise. in turn citing Kenney v. 68-74) 38. 68-74) 37... The comparison will provide an indication on the possibility of revenue being understated. this inquiry would have to be outside of the books because they supported the return as filed. Thismeans that the original documents must be produced. Commissioner of Internal Revenue.2d 878 (1961)] Citing its ruling in a previous case. Handbook on Audit Procedures and Techniques – Volume I. (f) Third party information or access to records method. If it could not be produced. (e) Unit and value method. traders’ and brokers’ accounts and books and the taxpayer’s books of accounts. total assets turnover. pp. SP No. Guetersloh. 1998) 34. Any increase in net worth is presumed to be income not declared for tax purposes. pp. a “U. v. Indirect Approach to Investigation. This method stands on the premise that deposits represent taxable income unless otherwise explained as being non-taxable items. the Commissioner of Internal Revenue investigates ”any circumstance which led him to believe that the taxpayer had taxable income larger than that reported.. he has understated his income for that year. Handbook on Audit Procedures and Techniques – Volume I. 68-74) 39. This method may be used only where the BIR has been legally allowed . citing Campbell. CA . Hantex Trading Co. (d) Cash expenditure method. Meaning of "best evidence obtainable" under Sec. (Chapter XIII. [Commissioner of Internal Revenue v. the computed amount of revenues based on the percentage computation is compared to the amount of revenues reflected on the return. secondary evidence must be adduced. and inventory turnover. Indirect Approach to Investigation.S. The net worth method is a method of reconstructing income which is based on the theory that if the taxpayer’s net worth has increased in a given year in an amount larger than his reported income. if necessary. (Ibid. pp. 287 F.. prior year’s audit results. Handbook on Audit Procedures and Techniques – Volume I. Handbook on Audit Procedures and Techniques – Volume I. profit margin. (Chapter XIII. he may take the testimony of third parties. Under the percentage method. (Hantex Trading Co. pp. gross profits ratio or gross margin percentage. NIRC of 1997. Among the significant ratios and trends to be analyzed are the percentage mark-up. or third parties.G. Sec. v.33. The difficulty of establishing the opening net worth of a tax payer has led to the “Cohan Rule” which is the use of estimates or approximations of the amount of cash and other asserts where the taxpayer lacks adequate records.R. the bank records of the taxpayer are analyzed and the BIR estimates income on the basis of the total bank deposits after eliminating non-income items. The percentages used may be obtained from the taxpayer. The net worth on a fixed starting date is compared with the net worth on a fixed ending date. 68-74) 36.

68-74) 41. Under the unit and value method. Pascor Realty and Development Corporation. government agencies and instrumentalities including the Bangko Sentral ng Pilipinas and government-owned or –controlled corporations. The BIR may require third parties. When the excess tax due on excisable articles has not been paid. such as. may have more than one meaning. or c. NIRC of 1997) 45. The cash expenditure method assumes that the excess of a taxpayer’s expenditures during the tax period over his reported income for that period is taxable to the extent not disproved otherwise. et al. NIRC of 1997) 43. and the names . costs and volume of production. Indirect Approach to Investigation. the BIR could not issue an assessment notice without first issuing a preassessment notice because it is part of the due process rights of a taxpayer to be given notice in the form of a pre-assessment notice. It is part of the due process rights of a taxpayer. but not limited to vehicles. A pre-assessment notice is a letter sent by the Bureau of Internal Revenue to a taxpayer asking him to explain within a period of fifteen (15) days from receipt why he should not be the subject of an assessment notice. (Chapter XIII. or e. 5 (B). insurance companies. but not limited to. Handbook on Audit Procedures and Techniques – Volume I. “obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to audit or investigation. It is sometimes called a special assessment or a special levy. 128315. Indirect Approach to Investigation. (Commissioner of Internal Revenue v. machineries and spare parts. joint accounts. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent. the determination or verification of gross receipts may be computed by applying price and profit figures to the known ascertainable quality of business of the taxpayer. The above definition of assessment finds application under tariff and customs taxation as well as local government taxation. capital equipment. addresses. public or private to supply information to the BIR. pp. multiply the pounds of flour used by the number of pizzas per pound which in turn would then be multiplied by the average price per pizza. (Sec. in order to determine the gross receipts of a pizza parlor. there may be a special meaning to the burdens that are imposed upon real properties that have been benefited by a public works expenditure of a local government. Third party information or access to records method. has been sold. xxx”[Sec. When an article locally purchased or imported by an exempt person.. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return. or from any office or officer of the national and local governments. 1999) . 68-74) 40. (Chapter XIII. 68-74) For example. No. Indirect Approach to Investigation. 42. June 29. Handbook on Audit Procedures and Techniques – Volume I. G. More commonly the word “assessment” means the official valuation of a taxpayer’s property for purpose of taxation. a. For real property taxation. regional operating headquarters or multinational companies. any information such as. pp. and thus. Handbook on Audit Procedures and Techniques – Volume I. Instances where a pre-assessment notice is not required before a notice of assessment is sent to the taxpayer. and for him to explain why he should not be the subject of an assessment notice. associations. joint ventures or consortia and registered partnerships. (Chapter XIII. trade or transferred to nonexempt persons. receipts or sales and gross incomes of taxpayers. 228. pp. and their members. and financial statements of corporations. or d. The word assessment when used in connection with taxation.access to the taxpayer’s bank records. When a taxpayer opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding table year. or b. As a general rule.R. 44. mutual fund companies.

2008] b. et al. G. No. 128315. 50. The Tax Code follows the pay-as-you-file system of taxation under which the taxpayer computes his own tax liability. BIR took the opposite view contending further that there was no seasonable protest. The ultimate purpose of an assessment to such a connection is to ascertain the amount that each taxpayer is to pay. 2005 and companion case citing Tupaz v.” The taxpayer bank insists that the assessment was not valid. whichever is later (Sec. investigation or assessment. Commissioner of Internal Revenue. R. Carpio in Philippine National Oil Company v. R. 134062. prepares the return. Carpio in Philippine National Oil Company v. et al. the taxpayer bank counsel filed a letter that “as soon as this is explained and clarified in a proper noti ce of assessment. and pays the tax as he files the return. 1988. G. No. Internal revenue taxes are self-assessing. 270.. [Commissioner of Internal Revenue v. NIRC of 1997) . and after such investigation to issue the tax assessment that creates the tax liability. 222 (b). April 17. June 29. G. then the tax is no longer self-assessed. ten years from discovery of the failure to file the tax return or discovery of falsity or fraud in the return [Sec.The taxpayer’s liability for the income tax does not depend on whether or not the BIR conducts such subsequent investigation or audit. 174942. Goodrich Phils. Court of Appeals. No. we shall inform you of the taxpayer’s decision on whether to pay or protest the assessment. 1988 taxpayer bank received a notice of assessment from the BIR informing it that deficiency taxes are due from the said taxpayer bank without any findings of law or fact but supported only with a computation. et al.G. No. On December 10. 109976. 222 (a). However. B. Three (3) years from the last day within which to file a return or when the return was actually filed. The BIR may or may not investigate or audit the annual income tax return filed by the taxpayer.(Commissioner of Internal Revenue v. Pascor Realty and Development Corporation. (Commissioner of Internal Revenue v. It is a tax that self-assessed by the taxpayer without the intervention of an assessment by the tax authority to create the tax liability. An assessment is a notice duly sent to the taxpayer which is deemed made only when the BIR releases.(Commissioner of Internal Revenue v.. NIRC of 1997). within the period agreed upon between the government and the taxpayer where there is a waiver of the prescriptive period for assessment (Sec..For internal revenue taxation assessment as laying a tax. What are the prescriptive periods for making assessments of internal revenue taxes ? SUGGESTED ANSWER: a. Court of Appeals. it is enough merely that the BIR Commissioner shall “notify the taxpayer of his findings The taxpayer bank counsel’s December 10. 1988 letter is not a seasonable protest because it was filed thirty (30) days after receipt of the assessment on October 28. Ulep. Bank of Philippine Islands. What is a self-assessed tax ? SUGGESTED ANSWER: A tax that the taxpayer himself assesses or computes and pays to the taxing authority.R. March 7. 1997. [Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v. p. R. G. 1988. 2005 and companion case) 48.R. mails or sends such notice to the taxpayer. our tax law provides a statute of limitations in the collection of taxes. Who is correct ? SUGGESTED ANSWER: The BIR is correct.F. No. hence the tax is sue andcollectible. 316 SCRA 118 (1999) in turn citing Vitug and Acosta. 2007) 49. For the purpose of safeguarding taxpayers from any unreasonable examination. 1999) 46. 1st edition. No. if the taxing authority is first required to investigate. 1999) 47.(Dissent of J. The annual income tax becomes due and payable without need of any prior assessment by the BIR. Purpose of period of limitations in taxation. 203. April 26. The CIR has three (3) years from the date of actual filing of the tax return to assess a national internal revenue tax or to commence court proceedings for the collection thereof without an assessment. Of course. which the taxpayer himself computes and pays without the intervention of any assessment by the BIR. G. On October 28.. Tax Law and Jurisprudence. June 29. 267] A clear example of a self-assessed tax is the annual income tax. 128315.The pay-as-you-file system is a self-assessing tax return. [Dissent of J. R. et al. or c. 109976. NIRC of 1997). . Under the old law Sec. Pascor Realty and Development Corporation. April 26.

SUGGESTED ANSWER: I would rule in favor of the heir. 104171. December 16. 2005. The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens.. Goodrich Phils. cited in Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v. R. No. et al. 1999. No. Without such a legal defense taxpayers would furthermore be under obligation to always keep their books and keep them open for inspection subject to harassment by unscrupulous tax agents. the BIR filed with the estate court a motion for allowance of claim..(Commissioner of Internal Revenue v. Rule on the conflicting claims of the parties. B. 2004 citing Commissioner of Internal Revenue v. should be liberally construed in order to afford such protection.. on November 18. the exceptions to the law on prescription should perforce be strictly construed. the BIR Commissioner issued warrants of distraint and levy to enforce collection of the deficiency income tax liability which was served on Juliana’s heir... B. No. Inc. On the other hand the BIR made the submission that both the issuance of the assessment notice and the motion were all properly made on Philtrust. and to citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers. December 16. No. filed her Income Tax Return for 2000. Philtrust filed a verified petition with the RTC for appointment as Special Administrator. investigation or assessment.F. 162852. . No. her business affairs were managed by the Philippine Trust Company (Philtrust). executory and uncontestable and not time barred. not to determine the latter’s real liability. it sent. G. being a remedial measure.R. 162852. December 16. v. Commissioner of Internal Revenue. G. 1105. Inc (now Sime Darby International Tire Co. 108 Phil. February 24. She died on April 3. 1999. [Republic of the Philippines v.). G. Unreasonable investigation contemplates cases where the period for assessment extends indefinitely because this deprives the taxpayer of the assurance that it will not longer be subjected to further investigation for taxes after the expiration of a reasonable period of time. Philippine Journalists. Inc. 2003. Goodrich Phils. G. law-abiding citizens. R.. Philtrust. v. No. On May 22.]. to the Government because tax officers would be obliged to act promptly in the making of assessment. Commissioner of Internal Revenue. 303 SCRA 546. After an investigation by the BIR of the decedent’s income tax liability. On November 22. 2005. As a corollary. 2001. 108 Phil.. 2001. 303 SCRA 546] The prescriptive period was precisely intended to give the taxpayers peace of mind. Reason: for the purpose of safeguarding taxpayers from an unreasonable examination. 1105. the law on prescription. No. [Philippine Journalists.F. 104171. No response was made neither was the BIR advised that Juliana already died. v. February 24. Inc. 1108. 2004. 1108) Laws on prescription should be liberally construed in favor of the taxpayer.G. Furthermore the lapse of the 30-day period within which to protest made the assessment final.. (Philippine Journalists. March 7. but to take advantage of every opportunity to molest peaceful. 104171. without indicating that Juliana died. through its Trust Officer. On June 18. Inc. G..). Philtrust’s motion for reconsideration was denied. 2008] 51.R. This was denied by the court who appointed one of the heirs as Special Administrator. R. Thus. as well as their assessments. G. Inc. et al. our tax laws provide a statute of limitation on the collection of taxes. February 24. Ablaza. 174942. 162852.Two days after her death. a demand letter and a Notice of Assessment to Juliana c/o Philtrust at the latter’s address which was stated in the 1998 Income Tax Return. The law on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommend the approval of the law. 2004 with note to see Republic v. Inc. The heir claimed that there was no proper service of the notice of assessment and that the filing of the motion was time-barred. (now Sime Darby International Tire Co. 1999) 52.Inc. Ablaza. R. et al. Commissioner of Internal Revenue. During Juliana’s lifetime..R. Commissioner of Internal Revenue.

Where the BIR has come out with a “naked assessment” i. R. or beginning distraint. 155541. or the waiver of the notice requirement for such assessments. citations omitted) 54. 266 F. d. No. 2005 citing United States v. the determination by the CTA must rest on all the evidence introduced and its ultimate determination must find support in credible evidence. All presumptions are in favor of the correctness of tax assessments. L-81446. R. What is the presumption that flows from a taxpayer’s failure to protest an assessment ? SUGGESTED ANSWER: “Tax assessments by tax examiners are presumed correct and made in good faith. No.” [Commissioner of Internal Revenue v. Tuazon.. G. Ed.. January 27. 49 L..S. Inc. G. When the taxpayer is out of the Philippines. 18 August 1988. 2005) in the performance of public functions. and e. G. 482 F. his authorized representative.. R. Bank of Philippine Islands.” [Commissioner of Internal Revenue.R. In the absence of proof of any irregularities in the performance of duties. an assessment duly made by a Bureau of Internal Revenue examiner and approved by his superior officers will not be disturbed.G. 1973) d. Court of Appeals. 164 SCRA 524. or a member of his household with sufficient discretion. 173 SCRA 397) c. or levy or proceeding in court and for sixty (60) days thereafter. Give instances where prima facie correctness of a tax assessment does not apply. Inc. Commissioner of Internal Revenue. 2004) 53. When the taxpayer requests for and is granted a reinvestigation by the commissioner. without any foundation character. 136975. SUGGESTED ANSWER: The “prima facie correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation. supra citing a U. 2d 698 (1959)] “Hence. R.) 55. meaning it is arbitrary and capricious. What are the reasons for presumption of correctness of assessments ? SUGGESTED ANSWER: a. de Gabriel v. The desirability of bolstering the record-keeping requirements of the NIRC. and no property could be located. Rexach. “the determination of the Commissioner contained in a deficiency notice disappears. supra citing United States v. G. 2007 citing Sy Po v.The severed relationship could not be revived on the mere fact that Philtrust filed her Tax Return two days after her death. When the taxpayer could not be located in the address given by him in the return filed upon which the tax is being assessed or collected.There was no proper service of the notice of assessment because the death of Juliana automatically severed the legal relationship of principal and agent between her and Philtrust.. No.. No. Lifeblood theory b. March 31. The likelihood that the taxpayer will have access to the relevant information [Commissioner of Internal Revenue. (Ibid. No. 428 US 433 (1976)] In such a situation. supra] 56. 530. March 31. Court of Appeals ruling. Philtrust’s failure to file a notice of death subjects it to penal sanctions which do not include the indefinite tolling of the prescriptive period for making deficiency tax assessments. When the warrant of distraint and levy is duly served upon the taxpayer. When the Commissioner is prohibited from making the assessment. April 17. Hantex Trading Co.” (Commissioner of Internal Revenue v. in respect of any tax deficiencies? SUGGESTED ANSWER: a. The taxpayer has the duty to prove otherwise. 134062. Presumption of regularity (Commissioner of Internal Revenue v. b. c. Commissioner of Internal Revenue. Inc. Hantex Trading Co. the determination of the tax due is without rational basis. . The certiorari was denied by the United States Supreme Court on November 19. What are the instances that suspends the running of the prescriptive periods (Statute of Limitations) within which to make an assessment and the beginning of distraint or levy or of a proceeding in court for the collection.. 2d 1046 (1976). in Clark and Clark v.e. 136975.” [Commissioner of Internal Revenue. (Commissioner of Internal Revenue v.2d 10 (1973). (Estate of the late Juliana Diez Vda. Janis.

thus a unilateral waiver on the part of the taxpayer does not suspend the prescriptive period. Commissioner of Internal Revenue. 1997 informal conference with the Revenue District Officer.Finally. G. No. R. No. Philippine Journalists. 1999 (Carnation case)] 58. inclusive of interest and compromise penalty. PJI. 111 Phil. 197. the waiver is also defective from the government side because it was signed only by a revenue district officer. PJI received the final notice on November 24. 25 February 1999.1999. 2004 citing Panrtoja v. 1125. G. 303 SCRA 614) b. 33-1-000757-94. 1994 which showed a net income of P30 million and the tax due as P10 million. (Ibid.R. The request for reinvestigation must be granted by the CIR. PJI’s Comptroller executed a waiver of statute of limitations provided for under sections 223 and 224 of the NIRC. as amended by R. Court of Appeals. v. 115712.During the September 22. Court of Appeals. 162852. Does the CTA have jurisdiction over the appeal ? b. .Such grant may be expressed in its communications with the taxpayer or implied from the action of the Commissioner or his authorized representative in response to the request for reinvestigation. (PJI) filed its Annual Income Tax Return for the calendar year ended December 31. March 7. 1999 and on November 26. On March 28. 115712. [Ynares-Santiago. 2008] 59. 1999 PJI asked that it be clarified on how the tax liability of P111 million was arrived at and requested for an extension of 30 days from receipt of the clarification within which to reply. as so required. citing Commissioner of Internal Revenue v. No. This is so because the CTA has exclusive appellate jurisdiction to review by appeal decisions of the Commissioner of Internal Revenue in cases involving “other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue. Were the Assessment/Demand and the Warrant of Distraint and/or Levy valid ? Will the appeal prosper? Explain briefly your answer. R. 7 (a) (1). Philippine Journalists. Furthermore. VAT and expanded withholding taxes. [Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v. The Supreme Court declared that the burden of proof that the request for reinvestigation had been actually granted shall be on the Commissioner of Internal Revenue. On November 10. Was the Waiver of the Statute of Limitations valid ? c. [Commissioner of Internal Revenue v. G. On March 16. Income Tax and Withholding Tax in the total amount of P1`27 million. R. 2000 PJI received a Warrant of Distraint and/or Levy. the BIR sent to PJI a Preliminary Collection Letter to pay the assessment within 10 days from receipt.. 1994 showed deficiency VAT.. asserted it never received Assessment/Demand No. and not the Commissioner. within which the former may assess and collect revenue taxes. No. The signatures of both the Commissioner and the taxpayer. thus invalidating the assessments issued by the BIR. A. The following issues are for resolution in the appeal: a. December 16. February 25. 1998. The Waiver of the Statute of Limitations is not valid because it did not specify a definite agreed date between the BIR and PJI. are required for a waiver of the prescriptive period. a. Commissioner of Internal Revenue. et al. David. The act of requesting a reinvestigation alone does not suspend the running of the prescriptive period. 1994 to December 31. PJI was not furnished a copy of the waiver. 1 SCRA 608 (1961)] Likewise upheld by the Supreme Court was the decision of the CTA declaring several waivers executed by the taxpayer as null and void. it will prosper. the BIR issued a PreAssessment Notice which was followed by Assessment/Demand No. 1999. R. a Final Notice Before Seizure was issued giving PJI 10 days from receipt within which to pay.” [Sec. Inc. 174942. 9282) Thus it was previously ruled that the CTA had jurisdiction to act on a petition to invalidate and annul the distraint orders of the Commissioner. SUGGESTED ANSWER: Yes. No.: 57. through a follow-up letter. The CTA has jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of the Statute of Limitations was validly effected. G. A. PJI then appealed to the CTA. J. On October 5. Inc. An examination of PJI’s books of account and other accounting records for the period January 1.33-1-000757-94 stating a total deficiency taxes in the amount of P111 million for income tax. No.

R. [Commissioner of Internal Revenue. Inc. which entails the reception and evaluation of additional evidence. supra citing Republic v. 2006 citing Sec. A compromise being. be the subject matter of compromise settlement: a. (Vda. Commissioner of Internal Revenue. 2001) 63. 167146. G. Philippine Global Communication. In the same manner. Philippine Global Communication. Enforcement Service and other offices in the National Office. R. 2006 citing Rev. Inc. Request for reinvestigation which refers to a plea for re-evaluation of an assessment on the basis of newly-discovered evidence or additional evidence that a taxpayer intends to present in the investigation. G. (Art. Philippine Global Communication. Legal Service. Inc. It may involve both a question of fact or of law or both. September 10. R. this justifies why the former can suspend the running of the statute of limitations on collection of the assessed tax. No. G. R. No. Revenue District Offices. 138485. A compromise is a contract whereby the parties. 12-85) 61. Commissioner of Internal Revenue. Request for reconsideration which refers to a plea for re-evaluation of an assessment on the basis of existing records without need of additional evidence. No. (Philippine Journalists. 2004) 60. v. 2001) 65. R. by its nature. 568-569 (1963)] Undoubtedly. 2028. upon taxpayer’s compliance with the basis for compromise. A compromise is a contract whereby the parties. (Art. a reinvestigation. 1998 was invalid because it was issued beyond the three (3) year period. What is that type of protest that suspends the running of the statute of limitations for the beginning of distraint or levy or a proceeding in court for collection ? Why ? SUGGESTED ANSWER: It is that type of protest “when the taxpayer requests for a reinvestigation which is granted by the Commissioner” (Sec. NIRC of 1997) When a taxpayer demands a reinvestigation. 139736. SUGGESTED ANSWER: a. It may also involve a question of fact or law or both. et al. Large Taxpayer Service (LTS). Cases under administrative protest after issuance of the Final Assessment Notice to the taxpayer which are still pending in the Regional Offices. . 167146. Consequently. b. by its nature. v. 1998. (Commissioner of Internal Revenue v. 167146. G. The payment made under protest could only signify that there was no agreement that had effectively been reached between the parties. Civil Code) 64.. What are the two ways of protesting an assessment notice for an internal revenue tax ? Alternatively. Inc. September 10. de San Agustin. Regs. G.. if the taxpayer did not agree. R. the Warrant of Distraint and/or Levy which PJI received on March 28. (Commissioner of Internal Revenue v. A compromise being. b. October 31. December 16. G. 162852. Commissioner of Internal Revenue. A compromise penalty could not be imposed by the BIR. The payment made under protest could only signify that there was no agreement that had effectively been reached between the parties. The waiver document is incomplete and defective and thus the three-year prescriptive period within which to assess was not tolled or extended and continued to run until April 17. (Vda.(Commissioner of Internal Revenue v.. 230-231) 62.. Civil Code) A compromise penalty could not be imposed by the BIR. 575. G. Assessment/Demand No. if the taxpayer did not agree. avoid a litigation or put an end to one already commenced. R. No. October 31. v. Delinquent accounts. mutual in essence requires agreement. what are the two types of protests ? Explain briefly. 223. 117 Phil. mutual in essence requires agreement. Collection Service. 271. by making reciprocal concessions. 7 SCRA 566. the time employed in reinvestigation should be deducted from the total period of limitation.c. Commissioner of Internal Revenue. The following cases may.. 17 October 2005. 578. 138485. while the latter cannot. October 31. 2028. 223. avoid a litigation or put an end to one already commenced. No. by making reciprocal concessions. No. NIRC of 1997). 33-1-000757-94 issued on December 9. now Sec. de San Agustin. No. that suspends the running of the statute of limitations for collection of the tax. 2000 is also null and void for having been issued pursuant to an invalid assessment. No. et al. 2006 citing Bank of Philippine Islands v. Lopez. 473 SCRA 205. will take more time than a reconsideration of a tax assessment which will be limited to the evidence already at hand.

The administration and collection costs involved do not justify the collection of the amount due. d. Rev. The taxpayer failed to file an administrative protest on account of the alleged failure to receive notice of assessment and there is reason to believe that the assessment is lacking in legal and/or factual basis. The taxpayer failed to elevate to the Court of Tax Appeals (CTA) an adverse decision of the Commissioner. (Sec. e. within 30 days from receipt thereof and there is reason to believe that the assessment is lacking in legal and/or factual basis. Cases where final reports of reinvestigation or reconsideration have been issued resulting to reduction in the original assessment and the taxpayer is agreeable to such decision by signing the required agreement form for the purpose. NIRC of 1997] In instances where the Commissioner is not authorized. and g. f. 204 (B). 30-2002) 67. or b. Tax cases which could not be the subject of compromise: a. other protested cases shall be handled by the Regional Evaluation Board (REB) or the National Evaluation Board (NEB) on a case to case basis. On the other hand. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax provided that the minimum compromise entered into is equivalent to ten percent (10%) of the basic assessed tax In the above instances the Commissioner is allowed to enter into a compromise only if the basic tax involved does not exceed One million pesos (P1. Regs. or b. or . c. Rev. The assessment seems to be arbitrary in nature. [Sec. Regs. when: a. Criminal tax fraud cases. 2. Delinquent accounts with duly approved schedule of installment payments. Cases which become final and executory after final judgment of a court where compromise is requested on the ground of doubtful validity of the assessment. The delinquent account or disputed assessment is one resulting from a jeopardy assessment. or those involving criminal tax fraud. appearing to be based on presumptions and there is reason to believe that it is lacking in legal and/or factual basis. 2. Collection cases filed in courts. No. The tax or any portion thereof appears to be unjustly or excessively assessed. Estate tax cases where compromise is requested on the ground of financial incapacity of the taxpayer. the compromise shall be subject to the approval of the Evaluation Board composed of the Commissioner and the four (4) Deputy Commissioners. confirmed as such by the Commissioner of Internal Revenue or his duly authorized representative. 204 (A). A reasonable doubt as to the validity of the claim against the taxpayer exists provided that the minimum compromise entered into is equivalent to forty percent (40%) of the basic tax. and the settlement offered is not less than the prescribed percentages. other than those already filed in court.000. or his authorized representative. d.00). or b. NIRC of 1997] 69. 30-2002) 66. The taxpayer failed to file a request for reinvestigation/reconsideration within 30 days from receipt of final assessment notice and there is reason to believe that the assessment is lacking in legal and/or factual basis. 68.. or e. The offer to compromise a delinquent account or disputed assessment on the ground of reasonable doubt as to the validity of the assessment may be accepted when it is shown that: a. Civil tax cases being disputed before the courts. (Sec. Criminal violations. The Commissioner may compromise the payment of any internal revenue tax when: a.c.000. Criminal violations already filed in court. b. [Sec. or c. No. e. in some cases. Withholding tax cases unless the applicant-taxpayer invokes provisions of law that cast doubt on the taxpayer’s obligation to withhold. or d. The Commissioner of Internal Revenue is authorized to abate or cancel a tax liability.

or any extensions before the expiration of the period agreed upon. or e. 3. fraud or omission “may be collected by distraint or levy or by a proceeding in court within five (5) years following the assessment of the tax. emphasis supplied) . deferred charges. in relation to Sec. Rev. The taxpayer is suffering from a networth deficit (total liabilities exceed total assets) computed by deducting total liabilities (net of deferred credits and amounts payable to stockholders/owners reflected as liabilities. The corporation ceased operation or is already dissolved Provided. 222 (d). or less. 222 (b) and 203. whose salary together with his spouse is P21. Collection upon an extended assessment. The assessment was issued within the prescriptive period for assessment as extended by the taxpayer’s execution of Waiver of the Statute of Limitations the validity or authenticity of which is being questioned or at issue and there is strong reason to believe and evidence to prove that it is not authentic. 1. fraud or omission. at any time within ten (10) years after the discovery of the falsity. 3.1 both of Regs. where the demand notice allegedly failed to comply with the formalities under Sec. 222 (c). emphasis supplied) c. in relation to Secs. or c.4. or g. The offer to compromise based on financial incapacity may be accepted upon showing that: a. if single. or b. 2. 30-3002) 70. or if married. or d. In case of a false or fraudulent return with the intent to evade tax or of failure to file a return. “a proceeding in court for the collection of such tax may be filed without assessment. P10. 1998. he has no other leviable properties under the law other than his family home. 222 (a) NIRC of 1997.500 or less. that tax liabilities corresponding to the Subscription Receivable or Assets distributed/distributable to the stockholders representing return of capital at the time of cessation of operation or dissolution of business shall not be considered for compromise.f. NIRC of 1997. except business-related transactions) from total assets (net of prepaid expenses. (Sec. and provided further that the taxpayer has no sufficient liquid asset to satisfy the tax liability. as reflected in its latest Balance Sheet supposed to be filed with the Bureau of Internal Revenue. provided that in the case of an individual taxpayer. pre-operating expenses.” [Sec. Collection upon a false or fraudulent return or no return with assessment. or h. 222 (a). 30-3002) 71. The period so agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon. Assessments made based on the “Best Evidence Obtainable Rule” and there is reason to believe that the same can be disputed by sufficient and competent evidence. provided that amounts payable to due to stockholders other than businessrelated transactions which are properly ineludible in the regular “accounts payable” are by fiction of law considered as part of capital and not liability. is suffering from surplus or earnings deficit resulting to impairment in the original capital by at least 50%. The taxpayer has been declared by any competent tribunal/ authority/body/government agency as bankrupt or insolvent. Collection upon a false or fraudulent return or no return without assessment. 228 of the National Internal Revenue Code of 1997. Rev. the tax “may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing before the expiration of the five (5) year period. and it appears that the taxpayer possesses no other leviable/distrainable assets other than his family home. Any internal revenue tax which has been assessed (because the return is false or fraudulent with intent to evade tax or of failure to fail a return). The taxpayer. The assessments were issued on or after January 1.” [Sec. Regs. in relation to Sec. Where a tax has been assessed with the period agreed upon between the Commissioner and the taxpayer in writing (which should initially be within three (3) years from the time the return was filed or should have been filed). NIRC of 1997) b. within a period of ten (10) years from discovery of the falsity. (Sec. No.000 per month. The taxpayer is a compensation income earner with no other source of income and the family’s gross monthly compensation income does not exceed.” [Sec. What is the prescriptive period for collecting internal revenue taxes ? SUGGESTED ANSWER: There are four (4) prescriptive periods for the collection of an internal revenue tax: a. No. as well as appraisal increases in fixed assets) taken from the latest audited financial statements.1.

No. mailed or sent to the taxpayer. 69 of the 1977 NIRC (now Sec. July 28. Commissioner of Internal Revenue. The assessment of the tax is deemed made and the three (3)-year period for collection of the assessed tax begins to run on the date the assessment notice had been released. and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. (vda. internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return. 2001 citing Roman Catholic Archbishop of Cebu v. Commissioner of Internal Revenue. NIRC of 1997.R. G. R. is necessary for the following reasons: a. 473 SCRA 205. before filing a case with the Court of Tax Appeals. 2007) 73. Collector of Internal Revenue. should not be interpreted as to result in absurdities. would in effect require of him to go through a useless and needless ceremony that would only delay the disposition of the case. 1950) 74. March 7. or (b) may be credited against the estimated quarterly income tax liabilities for the quarters of the succeeding taxable year. or court proceeding. (Commissioner of Internal Revenue v. Since the Bank has chosen the tax credit approach it cannot anymore avail of the .R.. 139736.d. No. 2008 citing BPI v. R. That in case where a return is filed beyond the period prescribed by law. 174942. G. G. a return filed before the last day prescribed by law for the filing thereof shall be considered filed on such last day.R. September 10. Acesite (Philippines) Hotel Corporation. et al. February 16. To ease the administration of tax collection. or where the assessment is not an extended assessment. can be recovered or refunded. 17 October 2005. de San Agustin. For purposes of this Section. What is solutio indebeti as applied to tax cases ? SUGGESTED ANSWER: This is erroneous payment of taxes and occurs when the taxpayer pays under a mistake of fact. Commissioner of Internal Revenue. To notify the Government that such taxes have been questioned and the notice should be borne in mind in estimating the revenue available for expenditures. 76 of the NIRC of 1997) provides that any excess of the total quarterly payments over the actual income tax computed in the adjustment or final corporate income tax return. Collection upon a return that is not false or fraudulent. it has another three (3) years within which to collect the tax due by distraint. Such payment is held to be not voluntary and therefore. L3028. The failure to first file a written claim for refund or credit is not fatal to a petition for review involving a disputed assessment where an assessment was disputed but the protest was denied by the Bureau of Internal Revenue. etc. shall either (a) be refunded to the corporation. What are the reasons for requiring the filing of an administrative application for refund or credit with the Bureau of Internal Revenue before a case may be filed with the Court of Tax Appeals ? SUGGESTED ANSWER: The filing of an administrative claim for refund with the BIR.. Court of Tax Appeals. for the Commissioner would certainly disallow the claim for refund in the same way as he disallowed the protest against the assessment. “Except as provided in Section 222. as for the instance in a case where he is not aware of an existing exemption in his favor at the time the payment was made. [Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v. As a general rule the filing of an application for refund or credit with the Bureau of Internal Revenue is an administrative precondition before a suit may be filed with the Court of Tax Appeals. No. emphasis supplied) When the BIR validly issues an assessment within the three (3)-year period. G. Collector. (Bermejo v. (Gonzales v. these remedies are in the alternative and the choice of one precludes the other. 147295. the three (3) year period shall be computed from the day the return was filed. The law. To hold that the taxpayer has now lost the right to appeal from the ruling on the disputed assessment and require him to file a claim for a refund of the taxes paid as a condition precedent to his right to appeal. 14 SCRA 79) b. Is there any exception ? SUGGESTED ANSWER: Yes. To afford the Commissioner an opportunity to correct his errors or that of subordinate officers. What is the nature of the taxpayer’s remedy of either to ask for a refund of excess tax payments or to apply the same in payment of succeeding taxable periods’ taxes ? ANSWER: Sec. 203. 222-223) 72. G. No.. v. levy. 4 SCRA 279) 75. 138485. Provided.” (Sec. No.

. Nos. In such a case. 112024. Inc. 176290. v. To facilitate tax collection. the corporation permanently ceases its operations before full utilization of the tax credits it opted to carry over. 2007 citing Philippine Bank of Communications v. the corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. 916 (1999)] This is known as the irrevocability rule and is embodied in the last sentence of Section 76 of the Tax Code. creditable against future income tax liabilities until fully utilized. Commissioner of Internal Revenue. Commissioner of Internal Revenue.. Commissioner of Internal Revenue. No. v. However. SUGGESTED ANSWER: Systra’s claim for refund should be denied. these remedies are in the alternative and the choice of one precludes the other. Inc.(Philippine Bank of Communications v.R. (Systra Philippines. No. What is the “irrevocability rule” in claims for refund and what is the rationale behind this ? SUGGESTED ANSWER: A corporation entitled to a tax credit or refund of the excess estimated quarterly income taxes paid has two options: (1) to carry over the excess credit or (2) to apply for the issuance of a tax credit certificate or to claim a cash refund. September 21. R. 23. v.. 361 Phil. 2007 citing Philam Asset Management. Commissioner of Internal Revenue.. Systra does not lose the unapplied tax credits. G. it became forever irrevocable regardless of whether the excess tax credits were actually or fully utilized Under Section 76 of the Tax Code. [Systra Philippines. September 21. Petitioner may claim and carry it over in the succeeding taxable years. v. G. (Footnote no. September 21.R. the tax due for the next taxable year is lower than excess tax credits.. The rule prevents a taxpayer from claiming twice the excess quarterly taxes paid: (1) as automatic credit against taxes for the taxable quarters of the succeeding years for which no tax credit certificate has been issued and (2) as a tax credit either for which a tax credit certificate will be issued or which will be claimed for cash refund. 477 SCRA 761) Supposing in the above problem that Systra permanent ceased operations. G. a claim for refund of such excess credits can no longer be made. Seventh Edition. actually or constructively. Cessante ratione legis. what happens to the unapplied credits ? SUGGESTED ANSWER: Where.tax refund. May its refund be granted ? If the refund is denied. Is it fatal to a claim for refund the failure of a taxpayer to indicate in its tax return the option whether to request a refund or claim the excess withholding tax as tax credit for the succeeding taxable year ? . Inc. 1999) 76. 156637/162004. 176290. it may then be allowed to claim the refund of the remaining tax credits. Hector. 430) 77. supra citing De Leon. 14 December 2005. 2007) 78. Commissioner of Internal Revenue. THE NATIONAL INTERNAL REVENUE CODE. R. G. Commissioner of Internal Revenue. Once the carry over option was made. Inc.” Despite the denial of its claim for refund. Inc. The phrase “such option shall be considered irrevocable for that taxable period” means that the option to carry over the excess tax credits of a particular taxable year can no longer be revoked. Systra Philippines. (Systra Philippines. R. No. 2000. In the year 2000 Systra derived excess tax credits and exercised the option to carry them over as tax credits for the next taxable year. No. G. The excess credits will only be applied “against income tax due for the taxable quarters of the succeeding taxable years. If the option to carry over the excess credit is exercised. In exercising its option. 176290. It now applies for a refund of the unapplied tax credits. et al. the remaining tax credits can no longer be carried over and the irrevocability rule ceases to apply. January 28. does Systra lose the unapplied tax credits ? Explain briefly your answer. the same shall be irrevocable for that taxable period. The amount will not be forfeited in favor of the government but will remain in the taxpayer’s account. cessat ipse lex. p.

“Prescribing the Regulations Governing the Manner of the Issuance of Tax Credit Certificates.” Tax credits were granted under EO 226 as incentives to encourage investments in certain businesses.. 172598.citing Oran and Tosti. Commissioner of Internal Revenue. citing Philam Asset Management. an allowance against the tax itself.” (Id.R. PERF Realty Corporation. A tax credit should be construed merely as an alternative remedy to a tax refund. 1999)] It is therefore an “allowance against the tax itself” [Pilipinas Shell. ed. 2000. The reason for requiring that a choice be made in the FAR upon its filing is to ease tax administration. No. Revalidation and Transfer. G. acknowledging that a taxpayer is entitled to a certain amount of tax credit from either an . Tax credit. 2008. subject to prior verification and approval by the BIR. defined.Conversely. (Commissioner of Internal Revenue v. 163345. Inc. 2000)]. by a taxpayer to the government. “Prescribing the Regulations Governing the Manner of the Issuance of Tax Credit Certificates. Revalidation and Transfer.” issued by then Secretary of Finance Jose T. G. While a taxpayer is required to mark its choice in the form provided by the BIR. duly issued to the taxpayer named therein.SUGGESTED ANSWER: No. but Art. (Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue. I.WEST’S TAX LAW DICTIONARY 177-178 (1993). as may be prescribed by the provisions of these Regulations. Pardo on July 19. ORAN’S DICTIONARY OF THE LAW 124 (3rd ed. One cannot get a tax refund and a tax credit at the same time for the same excess income taxes paid. A certification. 156637 & 162004.” [Pilipinas Shell Petroleum Corporation v. should one still choose this option later on. April 15. G. December 21..” issued by then Secretary of Finance Jose T. and the Conditions for their Use.R. The option of requesting a tax refund or claiming a tax credit is in the alternative. A tax credit generally refers to an amount that may be “subtracted directly from one’s total tax liability. R. 21 of EO 226 defines a tax credit as “any of the credits against taxes and/or duties equal to those actually paid or would have been paid to evidence which a tax credit certificate shall be issued by the Secretary of Finance or his representative. G. this requirement is only for the purpose of facilitating tax collection. December 21. 172598.. Tax credit certificate (TCC). Nos. G. if any.] or “a deduction from what is owed” [Ibid. No. No. 2005. Sec. supra citing Smith. 2007 citing RR 5-2000. 2005) 80. or may otherwise be disposed of in the manner and in accordance with the limitations. Failure to signify one’s intention in the FAR does not mean outright barring of a valid request for a refund. July 4. by the Commissioner or his duly authorized representative. Commissioner of Internal Revenue. particularly the self-assessment and collection aspects. 477 SCRA 761) 79. In RR 5-2000. Central Luzon Drug Corporation. 2000. A tax credit reduces the tax due. if so delegated by the Secretary of Finance. A tax credit is not specifically defined in our Tax Code. a taxpayer that makes no choice expresses uncertainty or lack of preference and hence shows simple negligence or plain oversight. including –whenever applicable – the income tax that is determined after applying the corresponding tax rates to taxable income. R. (Commissioner of Internal Revenue v.. a tax credit is defined as “the amount due to a taxpayer resulting from an overpayment of a tax liability or erroneous payment of a tax due. v.A) Tax credit generally refers to an amount that is subtracted directly from one’s total tax liability. Pardo on July 19. A taxpayer that makes a choice expresses certainty or preference and thus demonstrates clear diligence. defined. acknowledging that the grantee-taxpayer named therein is legally entitled a tax credit. or may be converted as a cash refund. Section 1. 159647. R. the money value of which may be used in payment or in satisfaction of any of his internal revenue tax liability (except those excluded). B) It is clear that a TCC is an undertaking by the government through the BIR or DOF. BLACK’S LAW DICTIONARY 1501 (8th ed. or the Board (of Investments). and the Conditions for their Use. and its nature. A corporation must signify its intention – whether to request a tax refund or claim a tax credit – by marking the corresponding option box provided in the FAR... reduced in a BIR Accountable Form in accordance with the prescribed formalities. or a deduction from what is owned. 2007 citing Garner. No. December 14.

Philippine National Bank.R. 161997. 229 of the NIRC of 1997. 2007. 1999 and May 14. No. a tax refund requires a physical return of the sum erroneously paid by the taxpayer..” Analyzing the underlying reason behind the advance payment (to help the government) made by XYZ it would be improper to treat the same as erroneous. 344. while a tax credit involves the application of the reimbursable amount against any sum that may be due and collectible from the taxpayer. et al. to be considered on condition that: (1) evidence must have been identified by testimony duly recorded and (2) it must have been incorporated in the records of the case. By the end of 1999. 320 Phil. The taxpayer must present convincing evidence to . Only July 30. Court of Appeals. No. October 25. not formally offered. Since no action was taken by the Commissioner on its claim. Philippine Phosphate Fertilizer Corporation. the taxpayer to whom the tax is refunded would have the option. As such.overpayment of income taxes. In early April 1999 XYZ Bank advanced the amount of P180 million to the BIR its income tax payment for the bank’s 1999 operations in response for the government’s call to generate more revenues for national development. ABC Bank now seeks refuge in Onate v.R. On July 28. Philippine National Bank. Therefore. 2005 to comply with the two-year reglementary period and avoid the prescription of its action. G. SUGGESTED ANSWER: There are unmistakable formal and practical differences between the two modes. 105208. On the practical side. May 29. the TCCs are immediately valid and effective after their issuance. the CTA rendered a decision denying the claim for ABC’s failure to file its formal offer of evidence in the CTA. that period would be ten (10) years under Article 1144 of the Civil Code. to invest for profit the returned sum. The BIR rejected the request on the ground of among others prescription having been applied for beyond the two-year reglementary period for filing claims for refund as set forth in Sec. a credit balance in the amount of P73 million remain which was carried over for the years 2000 to 2004 but was not availed of because XYZ incurred losses during the period. supra) 83. ABC Bank filed with the BIR an application for a tax credit/refund for alleged excess payments of its gross receipts tax (GRT) for the 3rd and 4th quarters of 2003 and the entire 2004 amounting to P14 million. 1995) Absent any specific provision in the Tax Code or special laws. Formally. G. tax credit is transferable in accordance with pertinent laws. an option not proximately available if thetaxpayer chooses instead to receive a tax credit. Has the claim prescribed ? Explain briefly your answer. 2005 citing Commissioner of Internal Revenue v. a direct benefit granted by law or other sources and instances granted by law such as on specific unused input taxes and excise taxes on certain goods. (Commissioner of Customs v. In separate letters dated April 19 and 29. The Philippine Life Insurance Co. or of any sum alleged to have excessively or in any manner wrongfully collected. 2005 PNB reiterated its request for the issuance of a TCC for the P73 million balance. or of any penalty claimed to have been collected without authority. 250 SCRA 283 (1995) where the Supreme Court allowed evidence. ABC filed a case with the CTA on October 18. (Commissioner of Internal Revenue v. 229 of the Tax Code.(Pilipinas Shell Petroleum Corporation. rules. G. particularly its statute of limitations component. Is ABC correct ? SUGGESTED ANSWER: No. 2004) 82. An availment of tax credit due for reasons other than the erroneous or wrongful collection of taxes may have a different prescriptive period. SUGGESTED ANSWER: The claim has not prescribed. wrongful or illegal payment of tax within the meaning of Sec. 229 of the NIRC of 1997. supra) 81. Discuss the difference between tax refund and tax credit. is in context intended to apply to suits for any national internal revenue tax “alleged to have been erroneously or illegally assessed or collected. 1999 XYZ requested for the issuance of a Tax Credit Certificate (TCC) to be utilized against future tax obligations of the bank. as couched. R. and regulations. Sec. 144440. A tax refund s in the nature of a tax exemption which must be construed strictissimi juris against the taxpayer. September 1. (Commissioner of Internal Revenue v. No. among others.

specially if the bank trustee. which fixed the period (thirty days from receipt of decision) for appealing to the court. G. After all. If the latter requisite cannot be ascertained with particularity. September 15. and c. The need to be determinate is important. R. 138919. No. et al. The claim is filed with the Commissioner of Internal Revenue within the two-year period from the date of the payment of the tax. 386 Phil. Court of Appeals. A simultaneous filing of the application with the BIR for refund/credit and the institution of the court suit with the CTA is allowed. 151) 85. par. R. The burden in proving the claim for refund necessarily falls on the taxpayer. October 13.substantiate a claim for refund. G. 204. R. Bank of Philippine Islands. Tax refunds partake of the nature of tax exemptions and are thus construed strictissimi jurisagainst the person claiming the exemption. 229. It is shown on the return of the recipient that the income payment received was declared as part of the gross income. What are the three (3) conditions for the grant of a claim for refund of creditable withholding tax ? SUGGESTED ANSWER: a. thus clearly implying that the prior decision of the Commissioner is necessary to take cognizance of the case. b. R.) 86. The fact of withholding is established by a copy of a statement duly issued by the payee showing the amount paid and the amount of tax withheld therefrom. in BPI-Family Savings Bank v. 2006) 84. There is no need to wait for a BIR denial. Tax refunds. earns interest income not only from its . Court of Tax Appeals. 326 SCRA 641 (2000). et al. 229 (now Sec. March 27. 2007) 87. NIRC of 1997). et al. 229. September 9. et al. 34102. No. etc. Commissioner of Internal Revenue. (Banco Filipino Savings and Mortgage Bank v. is that the amount sought to be refunded to the bank-trustee corresponds to the tax withheld on the interest income earned from the exempt employees’ trust. What are the requisites for the refund of illegally deducted taxes from the income of an employees’ trust fund ? SUGGESTED ANSWER: What has to be established.R. because other evidence was presented to prove that the overpaid taxes were not applied. NIRC (now Sec. (Commissioner of Internal Revenue v. and for filing suit in court under Sec. The grant of a refund is founded on the assumption that the tax return is valid. (Ibid. ABC failed to discharge the burden of proving its right to a tax credit/tax refund. Johnston Lumber Co. No. 228. despite the failure to present the tax return. there is cause to deny the refund. i.. as a matter of evidence. et al. Commissioner of Internal Revenue. Gibbs v. G. c. SP No. The positive requirement of Section 230 NIRC (now Sec. REASONS: a. The law fixed the same period two years for filing a claim for refund with the Commissioner under Sec. G. 234 SCRA 348) Without the tax return it would be virtually impossible to determine whether the proper taxes have been assessed and paid. No. are construed strictly against the taxpayer. unlike in protests of assessments under Sec. 155682. like tax exemptions. The doctrine that delay of the Commissioner in rendering decision does not extend the peremptory period fixed by the statute. 119286. v. No. 106611. (Paseo Realty & Development Corporation v. NIRC of 1997). (Commissioner of Internal Revenue v. Collector of Internal Revenue. 1994. Court of Appeals. 3. NIRC of 1997). (Far East Bank & Trust Company v. 107 Phil. (Far East Bank Trust and Company. 1994. b. Court of Appeals.. but also the correct amount that should be refunded. that the facts stated therein are true and correct. 101 Phil.e. CTA.. NIRC (now Sec. refund was granted. May 2. 719. July 21. in the ordinary course of its banking business.. R. v. 230.. or allow it only to the extent of the sum that is actually proven as due. Without any documentary evidenced on record. 2004) However. 204 [C]. 149589.. 2006) 88. CA-G. etc. NIRC of 1997). it is axiomatic that a claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund. 232. What should be established by a taxpayer for the grant of a tax refund ? Why ? SUGGESTED ANSWER: A taxpayer needs to establish not only that the refund is justified under the law. G.

1987. but onlyP77. For the last quarter ending December 31. v. and there is an apparent failure to do so. but also the correct amount that should be refunded. directing the investigation of tax liabilities of respondent for taxable year . May 2. 1-95. Acting on a yearly routinary Letter of Authority No. 1-95 clearly requires that photocopies of the receipts or invoices must be pre-marked and submitted to the CTA to verify the correctness of the summary listing and the CPA certification.R. The party who desires to introduce as evidence such voluminous documents must present: (a) Summary containing the total amount/s of the tax account or tax paid for the period involved and a chronological or numerical list of the numbers. 138919. invoices and other documents covering the said accounts or payments must be pre-marked by the party concerned and submitted to the Court in order to be made accessible to the adverse party whenever he/she desires to check and verify the correctness of the summary and CPA certification. However. (Far East Bank and Trust Company. identification and comparison with the originals thereof need not be done before the Court or the Commissioner anymore after the introduction of the summary and CPA certification. A necessary consequence of the special exemption enjoyed alone by employees’ trusts would be a necessary segregation in the accounting of such income. the originals of the said receipts... The burden in proving the amount to be refunded necessarily falls on the bank-trustee. 2. however. 72 on February 10. as amended by Republic Act No. respondent filed on April 15.812 was applied as tax credit for the succeeding taxable year 1988. and (b) a Certification of an independent Certified Public Accountant attesting to the correctness of the contents of the summary after making an examination and evaluation of the voluminous receipts and invoices. 2006)The amounts that are the exempt earnings of the employee’s trust has not been shown as they have been commingled with the interest income of the other clients of the bank-trustee. CTA Circular No.. respondent became subject to the payment of regular corporate income tax. but on a whole range of accounts which do not enjoy the same broad exemption as employees’ trusts. invoices or documents should be ready for verification and comparison in case doubt on the authenticity of the particular documents presented is raised during the hearing of the case. Tax refunds partake of the nature of tax exemptions and are thus construed strictissimi jurisagainst the person or entity claiming the exemption. 1987.741. etc. et al.. 2006) 89. It is enough that the receipts. CTA Circular No. had been paying a 2% franchise tax based on its gross receipts. May 2. Commissioner of Internal Revenue. 1988 issued by petitioner. G.. issued on 25 January 1995. No. Upon the effectivity of Executive Order No. the banktrustee instead presented witness to establish that it would next to impossible to single out the specific transactions involving the employees’ trust funds from the totality of all interest income from its total investments. The application for refund will not prosper. (Far East Bank Trust and Company.897.931. 484. 4159 and Presidential Decree No. interest or otherwise. On the above basis will the application for refund prosper ? SUGGESTED ANSWER: No. etc. earned from those trusts from that earned by the other clients of the bank-trustee. et al.” (Emphasis supplied) 91. reads: “1. The bank-trustee needs to establish not only that the refund is justified under the law (which is so because incomes of employees’ trusts are tax exempt). 90. G. Manila Electric Company a grantee of a legislative franchise under Act No. R. dates and amounts covered by the invoices or receipts. Commissioner. etc. 138919. A bank-trustee of employee trusts filed an application for the refund of taxes withheld on the interest incomes of the investments made of the funds of the employees’ trusts. in lieu of all other taxes and assessments of whatever nature.investments of employees’ trusts. 1988 its tentative income tax reflecting a refundable amount of P101. 0018064 NA dated June 27. No. The method of individual presentation of each and every receipt or invoice or other documents for marking. Instead of presenting separate accounts for interest incomes made of these investments. Such summary and certification must properly be identified by a competent witness from the accounting firm. v. 551.

838.729 representing overpaid income taxes for the years 1987 and 1988. The computation sheets that were attached to the letter made reference to Ordinance 92-03. October 10.902.838. and taxes. but when the choices are made through legislation. Any prudent adjudication should fully ascertain the mandate of local government units to impose taxes on petroleum products. The Local Government Code prohibits local government units from collecting excise taxes on articles enumerated under the NIRC. if the sum of the quarterly tax payments made during a taxable year is not equal to the total tax due on the entire taxable income of that year as shown in its final adjustment return. It protested the payment of the alleged deficiency income tax and claimed as an alternative remedy the deduction thereof from its claim for refund or credit. and 2. 32-76 dated June 11.” The plain letter of the law is an explicit disinclination on the part of the legislature to impart that particular taxing power to local government units. it specifically prohibits local government units from extending the levy of any kind of “taxes. Manila Electric Company. 133 [h].259. the purpose of which being to “insure prompt action on corporate annual income tax returns showing refundable amounts arising from overpaid quarterly income taxes. a figure derived from the gross sales of the depot during the years in question. deficiency franchise tax in the amount of P2. The Court of Tax Appeals granted the P107.649. 121666. or in the alternative for the BIR to issue a tax credit. No. The returns submitted are “merely pre-audited which consist mainly of checking mathematical accuracy of the figures in the return.52. Is the Court of Tax Appeals correct ? SUGGESTED ANSWER: Yes.” The stated total amount due was P6. Petitioner not having acted on its request. The Supreme Court defers to the other branches of government in the formulation of oil policy. Petron maintains a depot or bulk plant at the Navotas Fishport Complex in Navotas.84.649.649.340.335.” On April 17.335.62. Through that depot. On 1 March 2002. 2. G. respondent filed on April 6.087. 1990 a judicial claim for refund or credit with the Court of Tax Appeals. 76 provides. It is gathered that respondent paid the deficiency franchise tax in the amount ofP2. empowered under the Local Government Code (the LGC) to impose business taxes on persons or entities engaged in the sale of petroleum products ? SUGGESTED ANSWER: No. (Commissioner of Internal Revenue v. Local Government Code in relation to the Tax Code). (Sec. or (b) be refunded the excess amount paid. it has engaged in the selling of diesel fuels to vessels used in commercial fishing in and around Manila Bay. 1990 a letter-claim for refund or credit in the amount of P107. considering that the stakes are virtually all-in.729. an investigation was conducted by Revenue Officer Frederick Capitan which showed that respondent was liable for “1. Toby Tiangco. but it would be utter indolence to reflexively affirm such policy when the inevitable effect is an increase in oil prices. or the New Navotas Revenue Code (Navotas Revenue Code). 2007) LOCAL GOVERNMENT CODE ON TAXATION LOCAL TAXATION 1. Section 69 of the National Internal Revenue Code of 1986. Navotas may be bolstered by the constitutional and statutory policy favoring local fiscal autonomy. 1988 reflecting a refundable amount of P107. like Navotas. the Court expects that the choices are deliberate. Petron received a letter from the office of Navotas Mayor. the corporation has the option to either: (a) pay the excess tax still due.” (Revenue Memorandum Order No. deficiency income tax in the amount of P2. While the Local Government Code does not generally bar the imposition of business taxes on articles burdened by excise taxes under the NIRC. fees or charges on petroleum products. 1976) the refund or tax credit is granted. fees or charges on petroleum products. now Sec.” After such checking. Respondent thus filed on March 30.1987. and such mandate should be cast in so specific terms as to leave no dispute as to the legislative .84. respondent filed an amended final corporate Income Tax Return ending December 31. 1989.729 claim for refund. R. wherein the corporation was assessed taxes “relative to the figures covering sale of diesel declared by your Navotas Terminal from 1997 to 2001. Is a local government unit.

7. Tax Ordinance No. For failure of the City to move for reconsideration the decision lapsed into finality. 8011 is also invalid and cannot be enforced. 2006 citingPeople v. No. R. 2005) 6.” By its very nature a condominium corporation is not engaged in business. b. 7988. SUGGESTED ANSWER: ABC is correct. Condominium corporations are generally exempt from local business taxation under the Local Government Code. Professional tax may be imposed by a province or city but not by a municipality or barangay. to impose and collect a local franchise tax because the Local Government Code has withdrawn all tax exemptions previously enjoyed by all persons and authorized local government units to impose a tax on business enjoying a franchise tax notwithstanding the grant of tax exemption to them. As such it is not a private corporation engaged in “business enjoying franchise” Is such contention meritorious ? SUGGESTED ANSWER: No. G. 2003) 4. et al. by paying the taxes and other charges due them. Transaction taxed: Exercise or practice of profession requiring government licensure examination. ... Its membership comprises the unit owners and is authorized under its By-Laws to collect regular assessments from its members for operating expenses. July 14. 143867. v. capital expenditures on the common areas and other special assessments as provided for in the Master Deed with ?Declaration of Restrictions of the Condominium. Resolve the controversy. 154993. City of Iloilo. April 16. hence resulting in the need for these entities to share in the requirements of development. On 22 February 2001. R. hence Tax Ordinance No. (Petron Corporation v. No. R. 156252. and any profit that it derives is merely incidental. G. Lim. May Tax Ordinance No. which is defined under the Code as ”trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit. June 27. 158881. v.. X City issued a notice of assessment against ABC Condominium Corporation for unpaid business taxes. 8011 be enforced ? SUGGESTED ANSWER: No. the City enacted Tax Ordinance No. No. X City.. irrespective of any local ordinance that seeks to declare otherwise. City of Manila. there should be no occasion or need to amend it. to impose a tax on business. 7988 was declared null and void and of no effect by the Secretary of Justice. G. upheld the authority of the City of Davao. 1091 (1960)]. a local government unit. [Coca-Cola Bottlers Philippines. Philippine Long Distance Telephone Company. Tiangco. It is thus. BA Lepanto Condominium Corporation. No. October 25. 2008) 3. Inc. et al. 8011 which amended certain provisions of Tax Ordinance No. G. 108 Phil. fiscal or otherwise. City of Manila. ABC Condominium Corporation insists that the X City Revenue Code and the Local Government Code do not contain provisions upon which the assessment could be based. 5. 2001. The primary reason for the withdrawal of tax exemption privileges granted to government owned and controlled corporations and all other units of government was that such privilege resulted to serious tax base erosion and distortions in the tax treatment of similarly situated enterprises. (Philippine Ports Authority v. (Yamane . then it does not legally exist. If an order or law such as Tax Ordinance No. 109791. The Condominium Corporation is a duly constituted condominium corporation in accordance with the Condominium Act which owns and holds title to the common and limited common areas of the condominium. G. an instrumentality of the National Government which is exempt from local taxation. 7988 is invalid. R.00. etc.intendment to extend such power in the name of local autonomy.. National Power Corporation (NPC) is of the insistence that it is not subject to the payment of franchises taxes imposed by the Province of Isabela because all of its shares are owned by the Republic of the Philippines. August 22. hence it may not be subject to business taxes. City of Davao. No. v. R. Tax rate: Not be exceed P300. et al. is authorized under the Local Government Code. Inc. a. etc. On 17 August 2000.

Constitution) These guidelines and limitations as provided by Congress are in main contained in the Local Government Code of 1991 which provides for comprehensive instances when and how local government units may impose taxes. The Code specifically enumerates several types of business on which municipalities and cities may impose taxes. plans and designs. reports. prescriptions. or any board or other examinations conducted by the Professional Regulation Commission (PRC).for example. books of account. . which recognizes the power of these units “to create its own sources of revenue and to levy taxes. Any person subject to the professional tax shall write in deeds.The power of local government units to impose taxes within its territorial jurisdiction derives from the Constitution itself. defined. X City issued a notice of assessment against ABC Condominium Corporation for unpaid business taxes. e. Exemption: Professionals exclusively employed in the government shall be exempt from payment. v. Professionals who are subject to professional tax. ABC Condominium Corporation insists that the X City Revenue Code and the Local Government Code do not contain provisions upon which the assessment could be based. 238 (f). Rule XXX. 5. license or fee for the practice of such profession in any part of the Philippine professionals exclusively employed in the government. a lawyer who is also a Certified Public Accountant (CPA) must pay the professional tax imposed on lawyers and that fixed for CPAs. R. The Condominium Corporation is a duly constituted condominium corporation in accordance with the Condominium Act which owns and holds title to the common and limited common areas of the condominium. Resolve the controversy.) 11. d. Its membership comprises the unit owners and is authorized under its By-Laws to collect regular assessments from its members for operating expenses. the local sanggunian is also authorized to impose taxes on any other businesses not otherwise specified under the Code which the sanggunian concerned may deem proper to tax. fees and charges subject to such guidelines and limitations as the Congress may provide consistent with the basic policy of local autonomy. Article X. Date of payment: or on before January 31 or engaging in the profession. No. Moreover. G. surveys and maps. Rules and Regulations Implementing the Local Government Code of 1991] 10. Overview of the power of a local government unit to impose business taxes. (Sec. LGC) 9. if he is to practice both professions. Requirements: Any individual or corporation employing a person subject to professional tax shall require payment by that person of the tax on his profession before employment and annually thereafter. f. Place of payment: Province or city where the professional practices his profession or where he maintains his principal office in case he practices his profession in several places. as the case may be. 139. which includes among others.(Yamane .c. Tax base: Reasonable classification by the sanggunian. capital expenditures on the common areas and other special assessments as provided for in the Master Deed with ?Declaration of Restrictions of the Condominium. receipts. October 25. the number of the official receipt issued to him. etc. 154993. The significant limitations are enumerated primarily in Section 133 of the Code. 2005 citing Sec. 8. f. Exception: Payment to one province or city no longer subject to any other national or local tax. a prohibition on the imposition of income taxes except when levied on banks and other financial institutions. [Sec. (Ibid. The most well-known mode of local government taxation is perhaps the real property tax. BA Lepanto Condominium Corporation. The professionals subject to the professional tax are only those who have passed the bar examinations.

producers. assemblers. sales office or warehouse and the tax due thereon is paid to the LGU where such branch. contractors. distillers.ANSWER: ABC is correct. LGUs where only experimental farms are located shall not be entitled to the above sales allocation. (Yamane .] 14.For purposes of collecting business taxes. vans. sales office or warehouse. The LGUs where the route trucks.Rules and Regulations Implementing the Local Government Code of 1991. For route sales made in a locality where a manufacturer. Art. [Sec. The following sales allocation shall apply to manufacturers. wholesaler. [2nd par. [Art. retailer or dealer has a branch or sales office or warehouse. cigars and cigarettes. For route sales made in a locality where a manufacturer. and other products as may be determined by thesangguniang panlalawigan. 243 (b) (2). rectifiers and compounders of liquor. LGC. No. producers. producer. is authorized under the Local Government Code.. assemblers. 150 (a). irrespective of any local ordinance that seeks to declare otherwise. to impose a tax on business. fermented liquors.[Art. Ibid. dealers. plant or plantation in pursuit of business. dealers. Situs of municipal taxation where there is a factory. v. the sales are recorded in the branch. plant or plantation is located. and exporters with a factory. R. [Art. October 25. banks and other financial institutions. Rules and Regulations Implementing the Local Government Code of 1991] b. seventy percent (70%) of all sales recorded in the principal office shall be taxable by the city or municipality where the factory. plant or plantation in pursuit of a business. and any profit that it derives is merely incidental. Condominium corporations are generally exempt from local business taxation under the Local Government Code. a.” By its very nature a condominium corporation is not engaged in business. wholesalers. 243 (b) (3). LGC. 154993.Rules and Regulations Implementing the Local Government Code of 1991] 13. brewers. producer. project office. the sales are recorded in the branch. sales office. producers. sales office or warehouse is located. and b. exporters. 2005) 12. hence it may not be subject to business taxes. mentioned above. 243 (d) (3). [Sec. or retailers in the delivery and distribution of distilled spirits. sales office or warehouse. distributors. distilled spirits and wines. thirty percent (30%) of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located. and the tax due on such sale is paid to the LGU where such branch. or warehouse in the locality where the sale is made. retailer or dealer has no branch. G. softdrinks. sales office or warehouse is located. Situs of municipal taxation where the sales are made by route trucks. deliver merchandise cannot impose any tax on said trucks except the annual fixed tax authorized to be imposed by the province or city on every delivery truck or van or any motor vehicle used by manufacturers. Art. manufacturers. repackers. or vehicles. Ibid. project office. 243 (d) (2). millers. 243 (d) (1). BA Lepanto Condominium Corporation. and other business shall report In cases where there is no such branch. Art. or panlungsod. 150 (a). contractors. Situs of municipal taxation where there is no branch. Ibid. wholesalers. a. 243 (a) (5). etc. which is defined under the Code as ”trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit.] . wholesaler.] c. the sale shall be recorded in the principal office along with the sales made by said principal office and the tax shall accrue to the city or municipality where said principal office is located. project office. X City. sales office or warehouse from where the route trucks withdraw their products for sale. numbering and arrangement supplied] On-site sales of commercial quantity made by experimental farms shall be similarly imposed the corresponding tax and allocated as shown above.

In case the Secretary decides the appeal. wholesaler. 1993 letter to Megastrat. retailers. City of Cebu. sales office or warehouse. wholesalers.. G. the sales are recorded in the branch. but this still requires the taxpayer to adduce evidence to show that no public hearings ever took place. et al. where said route trucks withdraw their products for delivery to the customers inPasig City. 1999) 17. Court of Appeals.) b. and the tax due on such sales is paid to the LGU where such branch. However. et al. Inc. In addition to the annual fixed tax. However. it may also collect the mayor’s permit and other regulatory fees. 1263) This is the place where the sale was consummated through delivery. No. G.R. December 10. 1978] 16. March 25. But if the Secretary does not act thereon. after the lapse of 60 days. The place of delivery of the subject of the contract. retailer or dealer has no branch. Ltd.. producer.R. a.. producers. Municipality of Sipocot. Matches purchased by customers outside of Cebu City but booked.(Reyes.” (DOF February 26. 118233.R. et al. Camarines Sur. L-30745.. (DOF March 29. G. Ibid. MC should pay business taxes to Quezon City and not to Pasig City. (Reyes. 1999) . It holds office in Pasig City. a party could already seek relief in court within 30 days from the lapse of the 60 day period. v. December 10. Illustrations of situs of taxation. and not the place where the contract was perfected determines the situs of taxation. 119172. (Figuerres v. Delivery to the carrier is delivery to the buyer. within 30 days from effectivity thereof. where all transactions are made including the issuance of sales invoices. MI is a corporation engaged in the trading of books. d. et al.] 15. cities may also collect from the same manufacturers.. The IRR of the LGC of 1991 provides in Article 243 (2). G. “For route sales made in a locality where a manufacturer.. MC is a subsidiary of SMC. it also maintains a warehouse in Mandaluyong City which serves as its storage area and no transactions are made therein. Court of Appeals. sales office or warehouse is located. a period also of 30 days is allowed for an aggrieved party to go to court. 118233.d. and dealers using route trucks a mayor’s permit fee which shall be imposed in a local tax ordinance. (Shell Co. No. 243 (d) (4). (Philippine Match Co. Mandaluyong City where the warehouse is located but where no transactions are made. et al. sales office or warehouse from where the route trucks withdraw their products for sale. Public hearings are mandatory prior to approval of tax ordinance. 1993 letter to San Miguel Corporation) c.. March 25. v. 119172. Inc. Court of Appeals. No. may only collect the Mayor’s permit fee and other regulatory fees provided for under its existing local tax ordinances. These three separate periods are clearly given for compliance as a prerequisite before seeking redress in a competent court. v. 105 Phil.R. v. [Art.Likewise.. paid for and delivered to carriers in Cebu City are taxable by Cebu City. Court of Appeals. 1999) Taxpayer files appeal to the Secretary of Justice. January 18. et al. It has a factory and sales office inQuezon City. (Figuerres v. 1999) Public hearings are required to be conducted prior to the enactment of an ordinance imposing real property taxes. Such statutory periods are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions. et al. What is the jurisdiction of the Secretary of Justice regarding issues of validity of tax ordinances ? SUGGESTED ANSWER: Secretary of Justice can take cognizance of a case involving the constitutionality or legality of tax ordinances where there are factual issues involved. Pasig may levy and collect the annual fixed tax for every delivery truck or van of MC delivering goods within Pasig. MI should be assessed at the gross sales or receipts of the preceding year by Pasig City. For this reason the courts construe these provisions of statutes as mandatory.. It is a manufacturer with a principal office in Pasig Citymaintained for management and administrative purposes. No.

19. G. The real property taxes that may be collected by provinces.18. levy and collection shall not be let to a private person.. basic real property tax. v. Unlike the special levy. SUGGESTED ANSWER: If the ground for the protest is validity of the real property tax ordinance and not the unreasonableness of the amount collected the tax must be paid under protest. (Lopez v.. Appraisal. No. and the issue of legality may be raised to the proper courts on certiorari without need of exhausting administrative remedies. City of Manila. 127139. Preparation of Schedule of Fair Market Values. G. Real properties shall be appraised at the current and fair market value prevailing in the locality where the property is situated and classified for assessment purposes on the basis of its actual use. and c. the ad valorem tax on idle lands. etc. . cities and municipalities within the Metro Manila area are the a. a municipality within the Metropolitan Manila Area. Quezon City Government. 2) Fixing the assessment levels to be applied to the market values of real properties. 2005) KINDS OF REAL PROPERTY TAXES THEIR LEVY AND IMPOSITION 1. R. e. and 4) Adopting the Schedule of Fair Market Values prepared by the assessors. d. b . February 19.. REAL PROPERTY TAXATION GENERAL CONCEPTS 1. What is the fair market value of properties ? SUGGESTED ANSWER: Fair market value is the price at which a property may be sold by a seller who is not compelled to sell and bought by a buyer who is not compelled to buy. A special levy or special assessment is an imposition by a province.R. a city. What are the steps to be followed for the mandatory conduct of General Revision of Real Property Assessments ? SUGGESTED ANSWER: a. et al. et al. Appraisal at current and fair market value. Appraisal and assessment shall be equitable. b. 154126. 2. 3. 1999) 4. Assessment on the basis of uniform classification. Classification for assessment on the basis of actual use. b.. the levy and collection of real property taxes are limited only to the above local government units. a municipality or a barangay upon real property specially benefited by a public works expenditure of the LGU to recover not more than 60% of such expenditures. (Allied Banking Corporation. When is payment under protest not required when impugning the validity of a tax ordinance ? Explain. No. When is payment under protest required when impugning the validity of a tax ordinance ? If the ground for the protest is unreasonableness of the amounts collected there is need to pay under protest and administrative remedies must be resorted to before recourse to the proper courts. assessment. What are the fundamental principles of real property taxation ? SUGGESTED ANSWER: The fundamental principles of real property taxation are: a. October 11. 2. taking into consideration all uses to which the property is adopted and might in reason be applied. the special education fund. 3) Providing the necessary appropriations to defray expenses incident to general revision of real property assessments. Enactment of Ordinances: 1) Levying an annual “ad valorem” tax on real property and an additional tax accruing to the Special Education Fund. Basis for appraisal. c.

cession. No. where available. (Allied Banking Corporation. as evidenced by the certificate of payment of the capital gains tax issued therefore.The criterion established by the statute contemplates a hypothetical sale.. whoever owns it. R. Court of Appeals. the real property tax burden should not be interpreted to include those beyond what the Code or the regulations expressly clearly state.. et al. Factors to be considered in fixing values of real property. within ten (10) days of its approval.It unduly interferes with the duties statutorily placed upon the local assessor by completely dispensing with his analysis and discretion which the Local Government Code and the regulations require to be exercised. valued and assessed on the basis of its actual use regardless of where located. October 11. et al. 327 (1991)]) 6 Procedure for the preparation of fair market values. G.. 1999) 7. etc. October 11. The schedule of fair market values shall be published in a newspaper of general circulation in the province. Almanzor.. No. 196 SCRA 322. b. the income capitalization approach and the reproduction approach provided under the rules implementing the statute. While the Local Government Code provides that the assessment of real property shall not be increased once every three (3) years. e. [Allied Banking Corporation. 154126. No. February 19. assessors have to consider all the circumstances and elements of value and must exercise prudent discretion in reaching conclusions. 127139. 1999) 8. Quezon City Government. transfer and conveyance. G. Consequently. An ordinance that contravenes any statute is ultra viresand void. 119172. The “consideration approach” in the ordinance is illegal since “the appraisal. Manila v. municipal or barangay hall for a minimum of three (3) consecutive weeks. et al. In fixing the value of real property. 2005 citing Reyes v.R. etc. (Lopez v. Allowing the parties to a private sale to dictate the fair market value of the property will dispense with the distinctions of actual use stated in the Local Government Code and in the regulations. the questioned proviso subjects the property to a higher . assessment. ceded. 44 Phil. No. whichever is higher. It mandates an exclusive rule in determining the fair market value and departs from the established procedures such as the sales analysis approach. Transferred and conveyed for remuneratory consideration after the effectivity of this revision shall be subject to real estate tax based on the actual amount reflected in the deed of conveyance or the current approved zonal valuation of the Bureau of Internal Revenue prevailing at the time of sale. The proviso being contrary to public policy and for restraining trade is not valid for the following reasons: a. 383 ) 5.. R. Hence. 1) The city or municipal assessor shall prepare a schedule of fair market values for the different classes of real property situated in their respective Local Government Units for the enactment of an ordinance by the sanggunian concerned. Proposed fair market values of real property in a local government unit as well as the ordinance containing the schedule must be published in full for three (3) consecutive days in a newspaper of local circulation. 154126. 2005 citing Army and Navy Club. City of Manila. Trinidad. v. G. and posted in at lease two (2) prominent places in the provincial capitol.. G.” Is the proviso for the basis in determining the value for real property tax purposes valid ? SUGGESTED ANSWER: No. the buyers need not be actual and existing purchasers. city or municipality concerned or the posting in the provincialcapitol or other places as required by law. The ordinance would result to real property assessments more than once every three (3) years and that is not the congressional intent as shown in the provisions of the Local Government Code and the regulations.R. city. Publication requirement. Quezon City Government. levy and collection of real property tax shall not be let to any private person”.(Figuerres v. March 25. et al. and 2). The invalidity is not cured by the prhase “whichever is higher” because an integral part of that system still permits valuing real property in disregard of its “actual use. The proviso would provide a chilling effect on real property owners or administrators to enter freely into contracts reflecting the increasing value of real properties in accordance with prevailing market conditions. v. Quezon City passed an ordinance whereby the “parcels of land sold. c. and whoever uses it. it will also completely destroy the fundamental principle in real property taxation – that real property shall be classified.” d.

R. It is the contention of the City Assessor that the medical arts center is commercial in nature because CHH is charging rental from the doctors that use the facility and is located 100 meters away from the main building. v. No. Quezon City Government.. 166865. Inc. No. is a non-stock. 17 June 2003. Article 415(9) of the Civil Code provides that “[d]ocks and structures which.. the property is not exempt because their beneficial use has been granted to LRTA a taxable entity. 80 Misc. What is the nature of a tax declaration ? SUGGESTED ANSWER: As a rule. They constitute at least proof that the holder has a claim of title over the property. In the late 1990’s. 151440. 2007 and companion case. 11. nevertheless. they are good indicia of possession in the concept of owner. Inc. G.. October 11. G. 114 SCRA 296) b. The City of New York. 154126. and the accessory equipment mounted on the barges were subject to real property taxes. 199 – 200) 10. In the above two scenarios real property owners are effectively prevented from obtaining the best price possible for their properties and unduly hampers the equitable distribution of wealth. March 2. they are not open to use by the general public hence not exempt from real property taxes.assessment every time a sales transaction is made. 2d 1065 (1975) cited in FELS Energy. v. or if they do so within the said period they shall be compelled to dispose of the property at a price not exceeding the last prior conveyance in order to avoid a higher tax assessment.. it constructed the CHH Medical Arts Center (CHHMAC). Province of Batangas. et al. Heirs of Mariano E.. R. tax declarations or realty tax payments of property are not conclusive evidence of ownership. Moreover. No. G. 168557. (Buenaventura. Light Rail Transit (LRT) improvements such as buildings. v. (Light Rail Transit Authority v. The carriageways and terminals serve a function different from the public roads. lake or coast” are considered immovable property by destination being intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work. R. October 12. Association of Benevola de Cebu. Even granting that the national government owns the carriageways and terminal stations. Inc. but also the intention to contribute needed revenues to the government.Furthermore. 2005) 9. a. Real property owners would therefore postpone sales until after the lapse of the three (3) year period. though floating. v. (Allied Banking Corporation. Inc. Republic. The voluntary declaration of a piece of property for taxation purposes manifests not only one’s sincere and honest desire to obtain title to the property and announces his adverse claim against the State and all other interested parties. 404 SCRA 193. et al. carriageways. R. passenger terminals stations. In turn these doctors also charge fees . etc. G. SUGGESTED ANSWER: Personal property under the civil law may be considered as real property for purposes of taxes where the property is essential to the conduct of the business. 2000) c. The Supreme Court of New York in Consolidated Edison Company of New York. 2007 citing Heirs of Simplicio Santiago v. are intended by their nature and object to remain at a fixed place on a river.. Give examples of personal property under the civil law that may be considered as real property for purposes of taxes. Underground tanks are essential to the conduct of the business of a gasoline station without which it would not be operational. and similar structures do not form part of the public roads since the former are constructed over the latter in such a way that the flow of vehicular traffic would not be impaired. et al. non-profit organization organized under the laws of the Republic of the Philippines and is the owner of Chong Hua Hospital (CHH) in Cebu City. 127316. held that barges on which were mounted gas turbine power plants designated to generate electrical power. February 16. Santiago. the fuel oil barges which supplied fuel oil to the power plant barges.. Such an act strengthens one’s bona fide claim of acquisition of ownership. et al. Central Board of Assessment Appeals.... Central Board of Assessment Appeals. v. R. No. No. et al. for no one in his right mind would be paying taxes for a property that is not in his actual or constructive possession. et al. G. (Caltex Phils.

152904. The concurrent and simultaneous remedies afforded local government units in enforcing collection of real property taxes: a. being hundred meters away from the CHH main building. p. G. p. First. Vol. 2.. The doctors and medical specialists holding clinics in CHHMAC are those duly accredited by CHH. Within thirty (30) days from receipt of treasurer’s decision or if the treasurer does not decide. 621). The treasurer has a period of sixty (60) days from receipt of the protest within to decide. CHHMAC’s charge of rentals for the offices and clinics its accredited physicians occupy cannot be equated to a commercial venture. a nurses’ home. CHHMAC should not be categorized as “commercial” since a tertiary hospital like CHH is required by law to have a pool of physicians who comprises the required medical departments in various medical fields. treated as a special real property entitled to a 10% assessment currently imposed for CHH and its other separate buildings—the CHH’s Dietary and Records Departments for purposes of realty tax ? SUGGESTED ANSWER: CHHMAC is subject to the 10% assessment and not the 35% rate. “a school for training nurses.Second. such as. the charging of rentals is a practical necessity: (1) to recoup the investment cost of the building. R. thus: Moreover. and c. any medical practitioner. fourth. as correctly pointed out by respondent. 1430). and (3) to maintain the CHHMAC building and its facilities. resident doctors. Procedure for refund of real property taxes based on unreasonableness or excessiveness of amounts collected. city or in the case of a municipality within the Metro Manila Area the municipal treasurer. a. the exemption in favor of property used exclusively for charitable or educational purposes is “not limited to property actually indispensable” therefore (Cooley on Taxation. Is the CHHMAC built by CHH to house its doctors a separate commercial establishment with an assessment rate of 35% on the building or an appurtenant to the hospital. CHHMAC. Thus. (City Assessor of Cebu v. which is mainly for profit. (2) to cover the rentals for the lot CHHMAC is built on. within thirty (30) days from the expiration of the sixty (60) period for the treasurer to decide. such as “athletic fields. b.S. the taxpayer should file an appeal with the Local Board of Assessment Appeals. Distraint of personal property. Third. interns and residents” (84 C. if there is indeed any net income from the lease income of CHHMAC. Payment under protest at the time of payment or within thirty (30) days thereafter. June 8. . Association of Benevola de Cebu. Inc. and other members of the hospital staff. c. And. CHHMAC is only for its consultants or accredited doctors and medical specialists.. b. Collection of real property tax through ordinary court action.. does not denigrate from its being an integral part of the latter. superintendents. in the case of hospitals. but extends to facilities which are “incidental to and reasonably necessary for” the accomplishment of said purposes. for then CHHMAC would be running a commercial building for lease only to doctors which would indeed subject the CHHMAC to the commercial level of 35% assessment. 1430). they are consultants of the hospital and the ones who can treat CHH’s patients confined in it. andrecreational facilities for student nurses. 2007) TAX REMEDIES: REAL PROPERTY TAXATION 1. Vol. The Herrera ruling on what constitutes property exempt from taxation is indeed applicable in the instant case. property use to provide housing facilities for interns. that is. 2.J.for the service they render to their patients. protest being lodged to the provincial. it pays the proper taxes for its rental income. 2.” including “a farm used for the inmates of the institution” (Cooley on Taxation. Sale of delinquent real property. No. such does not inure to any private or individual person as it will be used for respondent’s other charitable projects. that is. It would have been different if CHHMAC was also open for non-accredited physicians.

not on the basis of the May 18. (Ibid. De Knecht. What is the rationale for the restriction upon the requirement for payment under protest of real property taxes ? SUGGESTED ANSWER: The restriction upon the power of courts to impeach tax assessment without a prior payment.... May personal property be distrained in order to enforce real property tax delinquencies ? Explain briefly. Thus. 2001 decision is still valid.R. and its machinery gravely disabled. G. MERALCO the former owner/user of the property was required to pay the tax instead of the new owner NAPOCOR. (De Knecht. The Local Board of Assessment Appeals has 120 days from receipt of the appeal within which to decide. the state or. The author submits that the above ruling in the May 18.) 4. 2001 decision was set aside by the Supreme Court when it granted the petitioner’s second motion for reconsideration on June 29. Barlis. Thus. I. The adverse decision of the Local Board of Assessment Appeals should be appealed within thirty (30) days from receipt to the Central Board of Assessment Appeals. 795. in this case. v. May 18. Abellera. the issuance of the warrants of garnishment over MERALCO’s bank deposits was not improper or irregular.d. shall be crippled in dispensing the needed services to the people. No. The LGU could also avail of the remedy of distraint and levy of personal property subjecting any personal property of the taxpayer to execution. 2001 decision. f. (Manila Electric Company v. 3. are mandatory. in the light of pronouncements of the Supreme Court in other cases.R. 2001) 5. Unpaid real property taxes are considered as liens upon the property form which they were due. e. While unpaid realty taxes attach to the property and is chargeable against the person who had actual or beneficial use and possession of it regardless of whether or not he is the owner. 114231.The prescribed notices must be sent to comply with the requirements of due process. May such property be proceeded against if it is already owned by one other than the one who used it at the time the real property taxes were due ?Explain your answer briefly.R. v.A. De Asis v. as well as the legal requirements for a tax delinquency sale. What is the nature of the publication requirement for delinquency sales of real property ? What is the reason behind this nature ? SUGGESTED ANSWER: Notice and publication. G. 2004. The decision of the CTA may be the subject of a motion for reconsideration or new trial after which an appeal may be interposed by means of a petition for review on certiorari directed to the Supreme Court on pure questions of law within a period of fifteen (15) days from receipt extendible for a period of thirty (30) days. and the failure to comply therewith can invalidate the sale. had a contract to supply NPC with the electricity generated by FELS’ power barges. The contract also stated that NPC shall be responsible for all real estate taxes . SUGGESTED ANSWER: Yes. Court of Appeals. otherwise. 114231. Barlis. the trial court has no jurisdiction to entertain a petition for prohibition absent payment under protest of the tax assessed. 290 SCRA 223. Inc. 2001) NOTE: The above May 18. do not cite the doctrine as emanating from the May 18. 169 SCRA 789. and as such their collection cannot be curtailed by injunction or any like action.169 SCRA 314) 7. (Manila Electric Company v. et al.236) The reason behind the notice requirement is that tax sales are administrative proceedings which are in personam in nature. et al. FELS Energy.C. under protest. to impose the real property tax on the subsequent owner which was neither the owner not the beneficial user of the property during the designated periods would not only be contrary to law but also unjust. g. et al. SUGGESTED ANSWER: No. of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation. No.. The adverse decision of the Central Board of Assessment Appeals shall be appealed to the Court of Tax Appeals (En Banc) by means of a petition for review within thirty (30) days from receipt of the adverse decision. May 18. 2001) Thus. No. 114231. 6. (Manila Electric Company v. Consequently. Honorable Sayo. G. Barlis. (Puzon v. 2001 decision. the local government unit. May 18..

No. Upon denial. The City of New York. In the latter instance. Inc. September 15. R. v. R. G. (FELS Energy. Moreover. FELS elevated the matter to the Local Board of Assessment Appeals (LBAA). lake or coast” are considered immovable property by destination being intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work. 168557. The procedure does not permit the property owner the remedy of filing a motion for reconsideration before the local assessor. 168557. the fuel oil barges which supplied fuel oil to the power plant barges.and assessments. It is this last action which gives the owner of the property the right to appeal to the LBAA. 2007 and companion case. No. The entitlement to a tax refund does not necessarily call for the automatic payment of the sum claimed. No. January 30. allusions of possible cover. (FELS Energy. A notice of assessment issued by a local assessor is not the subject of a motion for reconsideration that must be appealed to the LBAA. a. February 16. where it raised the following issues: 1) Since NPC is tax-exempt then FEL’s should also be tax-exempt because of its contract with NPC. and then subsequently reduced upon the request of a property owner. R. illicit trade-off cannot be avoided. The Treasurer is correct. No. citing Callanta v.. G. 2) The power barges are not real property subject to real property taxes... Inc.. R. February 16. 2007 and companion case. though floating. 154126. Office of the Ombudsman. Upon the other hand the Local Treasurer insists that the assessment has attained a state of finality hence the appeal to the LBAA should be dismissed. G. To allow the procedure would indeed invite corruption in the system of appraisal and assessment. The procedure do not allow a motion for reconsideration to be filed with the Provincial Assessor. R. The amount of the claim being a factual matter. Quezon City Government. b. 285 SCRA 648) 9. v. G. 115253-74. February 16. Such occasion for mischief must be prevented and excised from our system.held that barges on which were mounted gas turbine power plants designated to generate electrical power. A City Ordinance adopting a method of assessment was nullified by the Supreme Court. 80 Misc.. Province of Batangas. as provided under the Local Government Code. citing Callanta v. 115253-74. (Allied Banking Corporation. etc. it must still be proven in the normal course and in accordance with the administrative procedure for obtaining a refund of real property taxes. 2006) .. FELS then received an assessment of real property taxes on its power barges from the Provincial Assessor of Batangas. Province of Batangas. and the accessory equipment mounted on the barges were subject to real property taxes. 1998. it conveniently courts a graft-prone situation where values of real property may be initially set unreasonably high. et al. 2d 1065 (1975) cited in FELS Energy. January 30. v. 168557. G. b. G. et al. Rule on the conflicting contentions. SUGGESTED ANSWER: a. Article 415(9) of the Civil Code provides that “[d]ocks and structures which. 285 SCRA 648) 8. Is this correct ? SUGGESTED ANSWER: No. v. Province of Batangas. 2007 and companion case. Office of the Ombudsman. Nos. Inc. If filed a motion for reconsideration with the Provincial Assessor. et al. the covenant is between NPC and FELs and does not bind a third person not privy to the contract such as the Province of Batangas. Nos. 1998. The tax exemption privilege granted to NPC cannot be extended to FELS. 2) The Supreme Court of New York in Consolidated Edison Company of New York. v. A taxpayer who has paid his real property taxes on the basis of the nullified ordinance now posits that the return of the real property tax erroneously collected and paid is a necessary consequence of the Supreme Court’s nullification of the ordinance and there is no need to claim for a refund.. R. All the contentions of FELS are without merit: 1) NPC is not the owner of the power barges nor the operator of the power barges.. are intended by their nature and object to remain at a fixed place on a river. Inc. The last action of the local assessor on a particular assessment shall be the notice of assessment. and in fact can conveniently take place.

it is subject to tax. 13. (Yamane . Procedure for refund of real property taxes based on validity of the tax measure or solutio indebeti. November 11. that the exemption of public property from taxation does not extend to improvements made thereon by homesteaders or occupants at their own expense. The decision of the Regional Trial Court should be appealed by means of a petition for review directed to the Court of Tax Appeals (Division). In the same way that the Supreme Court once ruled. G. and the fact that it is not open for use by everyone and freely accessible to the public. R. which. claim must be directed to the local treasurer. 154993. are accessible to the general public does not exempt it from the payment of real property taxes. Warehouses located in ports are property subject to real property taxes. etc. PPA is a profit earning corporation. Despite the language of Section 195 of the Local Government Code which states that the remedy of the taxpayer whose protest is denied by the local treasurer is “to appeal with the court of competent jurisdiction. An instrumentality “refers to any agency of the National Government.10. b. and buildings on the ground that the Local Government Code has withdrawn exemptions previously enjoyed by government-owned and controlled corporations. a. SUGGESTED ANSWER: MIAA is correct because it is not a government owned or controlled corporation but an instrumentality of the government that is exempt from taxation. v. d. City of Iloilo. who must decide within sixty (60) days from receipt. It is not a stock corporation because its capital is not divided into shares. The denial by the local treasurer of the protest would fall within the Regional Trial Court’s original jurisdiction. and enjoying operational autonomy. [Philippine Ports Authority v. owned by the Philippine Ports Authority (PPA). considering its separable nature as an improvement upon the port. it likewise upheld the taxability of the warehouse. e. Payment under protest not required. Are port and other facilities owned by the Philippine Ports Authority exempt from real property taxes ? SUGGESTED ANSWER: No. The fact that the port and its facilities and appurtenances. R. The decision of the Court of Tax Appeals (en banc) may be the subject of a petition for review on certiorari on pure questions of law directed to the Supreme Court. a warehouse. The warehouse. but of a local government official. 109791. 420 of the Civil Code which enumerates these as properties intended for public use. No. and that the operation of the port and its facilities and the administration of its buildings are in the nature of ordinary business. administering special funds. in the case at bar. STATUTORY TAX EXEMPTIONS 11. may not be held as part of the port. not integrated within the department framework vested with special functions or jurisdiction by law. et al. neither is it a non-stock corporation because there are no members. 342 SCRA 692 (2000)] 12. Thus. The Manila International Airport Authority (MIAA) was subject to real property taxes by the municipality of Paranaque on its airport lands. Central Board of Assessment Appeals. although located within the port is distinct from the port itself. July 14. it being a mere improvement built on an alleged property of public domain. No. (Philippine Ports Authority v. The decision of the Court of Tax Appeals (Division) may be the subject of a review by the Court of Tax Appeals (en banc). in the case at bar. usually . City of Iloilo. G. the review being the initial judicial cognizance of the matter. MIAA contends otherwise as it claims it is not a government owned or controlled corporation. G. 143214. fees or other charges. 2003) This is still good doctrine. Be that as it may. October 25. These are patrimonial properties of PPA. endowed with some if not all corporate powers. 2004 citing Light Rail Transit Authority v. BA Lepanto Condominium Corporation. It is instead an instrumentality of the government upon which the local governments are not allowed to levy taxes. R. 2005) c.. hence its patrimonial properties are subject to tax.” labeling the said review as an exercise of appellate jurisdiction is inappropriate since the denial of the protest is not the judgment or order of a lower court. Who is correct. not for public use. No. Ports constructed by the State are properties of the public dominion under Art.

The properties were already transferred and the alienation of the properties sold by GSIS was the proximate cause and necessary consequence of the delinquent taxes due.R. This term includes regulatory agencies chartered institutions and governmentowned or controlled corporations. 432 SCRA529)) 16. No.R. July 20. The tax-exempt properties and assets of GSIS referred to those that remained at its disposal and use. Marcos. buildings and personal property. (Philippine Ports Authority v. No. citing Rubia v. the intention to revoke must be clear and manifest.. a legislative franchise with tax exemption privileges which partly reads. revenues. et al. 8291. Repeal cannot be assumed. No. a later law. “The grantee. are excluded and are thus taxable. No. L-29772. 2 (10). Since the original owner’s duplicate TCT could not be found. No. A City then enacted an ordinance in 1993 imposing a real property on all real properties located within the city limits.A.A. Is the contention of GSIS tenable? SUGGESTED ANSWER: No. 147192. 2006) 14. notwithstanding any laws to the contrary. 2006 citing City of Baguio v. G. charges or duties of all kinds. 7160. 39 of R. To bring about an implied repeal. The court ordered the cancellation of GSIS’ title and the issuance of a new title in the buyer’s name. Busuego. July 14. Administrative Code of 1987] It is an instrumentality exercising not only governmental but also corporate powers. and levying of fees and charges. police power authority.A. .” (Sec. A. G. the prescription is not so encompassing as to make the tax exemption applicable to the properties in dispute.A. 151439. City of Iloilo. 100 SCRA 116) The allegation of the repeal of R.through a charter. 7160 by R.” [Sec. 8291 could not exist without nullifying the earlier law. It exercises governmental powers of eminent domain. and benefits paid shall be exempt from all taxes. 109791. No. R. No. No. Even if the charter of GSIS generally exempts it from tax liabilities. No. disability and life insurance benefits of its members. et al. City Assessor of Iloilo City. abrogated the provisions of R. 261 SCRA 667) 15. 155650. The primary reason for the withdrawal of tax exemption privileges granted to governmentowned and controlled corporations and all other units of governmentwas that such privilege resulted to serious tax base erosion and distortions in the tax treatment of similarly situated enterprises. Two (2) parcels of land previously owned by GSIS and sold to private parties were bought at public auction by a private individual to satisfy real property tax delinquencies. R. A telecommunications company was granted by Congress on July 20. (Manila International Airport Authority v. the GSIS. supra) Sec. 2004 citing Mactan Cebu International Airport Authority v. as other persons or corporations are now or hereafter may be required by law to pay. the buyer sought the registration of the land in her name. 1992. after the effectivity of the Local Government Code on January 1. the airport lands and buildings are property owned by the government that are devoted to public use and are properties of the public domain. assessment fees. 7160. exclusive of this franchise. 8291.” This provision existed in the company’s franchise prior to the effectivity of the Local Government Code. its successors or assigns shall be liable to pay the same taxes on their real estate. “Accordingly.Properties whose actual and beneficial use had been transferred to private taxable persons. No. fiscal or otherwise. 18 September 1980. (Government Service Insurance System v.R. 39) It is the claim of GSIS that the above provisions of R.A. hence resulting in the need for these entities to share in their requirements of development. including all accruals thereto. is not convincing. Government Service Insurance System. G. (Ibid. Court of Appeals. 8291 should be read consistently with its avowed purpose – the maintenance of its actuarial solvency to finance the retirement. G. and withdrawing all tax exemptions previously .A. Introductory Provisions. A. GSIS now annulment of the decision claiming that it is exempt from payment of real property taxes in accordance with its charter R.. Finally. its assets. 21 June 2004. the two laws must be clearly repugnant in away that the later law R. No. June 27. for consideration or otherwise. (Government Service Insurance System. by paying the taxes and other charges due from them. 1992. 8291 which provides among others that. either for investment or for income generating purposes.

v. The company then filed a petition for the issuance of a writ of prohibition claiming exemption under its legislative franchise.granted. R. This is so because the properties are already scheduled for auction sale.. 2006) ADVANCE CONGRATULATIONS AND SEE YOU IN COURT . b. No. Among properties covered are those owned by the company from which the City is now collecting P43 million. b. directly and exclusively used in the pursuit of its franchise. March 6. The City defended its position raising the following: a. Furthermore one of the recognized exceptions to the rule on exhaustion is that if the issue is purely legal in character which is so in this case. all of the company’s properties that are actually. There was no exhaustion of administrative remedies because the matter should have first been filed before the Local Board of Assessment Appeals. The properties are exempt from taxation. The subsequent piece of legislation which reiterated the phrase “exclusive of this franchise” found in the previous tax exemption grant to the company is an express and real intention on the part of Congress to once against remove from the LGC’s delegated taxing power.. (The City Government of Quezon City. et al. The company’s properties are exempt from tax under its franchise. directly and exclusively used in the radio or telecommunications business. The term “exclusive of this franchise” is interpreted to mean properties actually. G. There is no need to exhaust administrative remedies as the appeal to the LBAA is not a speedy and adequate remedy within the law. The properties of the company were then scheduled by the City for sale at public auction. Inc. SUGGESTED ANSWERS: a. The grant of taxing powers to local governments under the Constitution and the Local Government Code does not affect the power of Congress to grant tax exemptions. Resolve the issues raised. Bayan Telecommunications. 162015.