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COMPANY and COURT OF TAX APPEALSG.R. No. L-29059 December 15,
By virtue of a decision of the Court of Tax Appeals rendered on June 21, 1961, as
modified on appeal by the Supreme Court on February 27, 1965, the Commissioner
of Internal Revenue was ordered to refund to the Cebu Portland Cement Company
the amount of P359,408.98, representing overpayments of ad valorem taxes on
cement produced and sold by it after October 1957.On March 28, 1968, following
denial of motions for reconsideration filed by both the petitioner and the private
respondent, the latter moved for a writ of execution to enforce the said judgment.
The motion was opposed by the petitioner on the ground that the private
respondent had an outstanding sales tax liability to which the judgment debt had
already been credited. In fact, it was stressed, there was still a balance owing on the
sales taxes in the amount of P 4,789,279.85 plus 28% surcharge. On April 22, 1968,
the Court of Tax Appeals granted the motion, holding that the alleged sales tax
liability of thep rivate respondent was still being questioned and therefore could not
be set-off against the refund.
Whether or not the judgment debt can be enforced against private respondents
sales tax liability, the latter still being questioned.
RULING: The argument that the assessment cannot as yet be enforced because it
is still being contested loses sight of the urgency of the need to collect taxes as "the
lifeblood of the government." If the payment of taxes could be postponed by simply
questioning their validity, the machinery of the state would grind to a halt and all
government functions would be paralyzed. The Tax Code provides: Sec. 291.
Injunction not available to restrain collection of tax.
- No court shall have authority to grant an injunction to restrain the collection of any
national internal revenue tax, fee or charge imposed by this Code. It goes without
saying that this injunction is available not only when the assessment is already
being questioned in a court of justice but more so if, as in the instant case, the
challenge to the assessment is still-and only-on the administrative level. There is all
the more reason to apply the rule here because it appears that even after crediting
of their fund against the tax deficiency, a balance of more than P 4 million is still
due from the private respondent.

Municipality of Makati vs. Court of Appeals

G.R. Nos. 89898-99 October 1, 1990

Facts: Petitioner Municipality of Makati expropriated a portion of land owned by

private respondents, Admiral Finance Creditors Consortium, Inc. After proceedings,
the RTC of Makati determined the cost of the said land which the petitioner must
pay to the private respondents amounting to P5,291,666.00 minus the advanced
payment of P338,160.00. It issued the corresponding writ of execution accompanied
with a writ of garnishment of funds of the petitioner which was deposited in PNB.
However, such order was opposed by petitioner through a motion for
reconsideration, contending that its funds at the PNB could neither be garnished nor
levied upon execution, for to do so would result in the disbursement of public funds
without the proper appropriation required under the law, citing the case of Republic
of the Philippines v. Palacio. The RTC dismissed such motion, which was appealed to
the Court of Appeals; the latter affirmed said dismissal and petitioner now filed this
petition for review.

Issue: Whether or not funds of the Municipality of Makati are exempt from
garnishment and levy upon execution.

Held: It is petitioner's main contention that the orders of respondent RTC judge
involved the net amount of P4,965,506.45, wherein the funds garnished by
respondent sheriff are in excess of P99,743.94, which are public fund and thereby
are exempted from execution without the proper appropriation required under the
law. There is merit in this contention. In this jurisdiction, well-settled is the rule that
public funds are not subject to levy and execution, unless otherwise provided for by
statute. Municipal revenues derived from taxes, licenses and market fees, and
which are intended primarily and exclusively for the purpose of financing the
governmental activities and functions of the municipality, are exempt from
execution. Absent a showing that the municipal council of Makati has passed an
ordinance appropriating the said amount from its public funds deposited in their
PNB account, no levy under execution may be validly effected. However, this court
orders petitioner to pay for the said land which has been in their use already. This
Court will not condone petitioner's blatant refusal to settle its legal obligation arising
from expropriation of land they are already enjoying. The State's power of eminent
domain should be exercised within the bounds of fair play and justice.


G.R. No. L-28896 February 17, 1988
The Philippine Sugar Estate Development Company had earlier appointed Algue as
its agent, authorizing it to sell its land, factories and oil manufacturing process.
Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara,
Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable Oil
Investment Corporation, inducing other persons to invest in it. Ultimately, after its
incorporation largely through the promotion of the said persons, this new
corporation purchased the PSEDC properties. For this sale, Algue received as agent
a commission of P126,000.00, and it was from this commission that the P75,000.00
promotional fees were paid to the aforenamed individuals. The petitioner contends
that the claimed deduction of P75,000.00 was properly disallowed because it was
not an ordinary reasonable or necessary business expense. The Court of Tax
Appeals had seen it differently. Agreeing with Algue, it held that the said amount
had been legitimately paid by the private respondent for actual services rendered.
The payment was in the form of promotional fees.

Whether or not the Collector of Internal Revenue correctly disallowed the
P75,000.00 deduction claimed by private respondent Algue as legitimate business
expenses in its income tax returns.

The Supreme Court agrees with the respondent court that the amount of the
promotional fees was not excessive. The amount of P75,000.00 was 60% of the total
commission. This was a reasonable proportion, considering that it was the payees
who did practically everything, from the formation of the Vegetable Oil Investment
Corporation to the actual purchase by it of the Sugar Estate properties. It is said
that taxes are what we pay for civilization society. Without taxes, the government
would be paralyzed for lack of the motive power to activate and operate it. Hence,
despite the natural reluctance to surrender part of one's hard earned income to the
taxing authorities, every person who is able to must contribute his share in the
running of the government.

BPI-Family Savings Bank vs. CA

Facts: BPI claims for a tax refund of P112,491. As appearing in its 1989 ITR, BPI has
a total of P297,492 refundable taxes. BPI declared in its 1989 ITR that it would apply
the excess withholding tax as a tax credit for the year 1990. Subsequently,
however, BPI claimed for a tax refund since in the year 1990 it suffered losses, thus,
could not have applied said amount as tax credit. The CIR and CTA denied this on
the ground that BPI failed to show its 1990 ITR which would show that the amount
claimed was not applied as a tax credit.

Issue: WON BPI is entitled to a tax refund.

Held: Yes. BPI is entitled to refund.

Evidence shows that petitioner suffered a net loss in 1990, thus, it could not have
applied the amount claimed as tax credits.
Substantial justice, equity and fair play are on the side of petitioner. Technicalities
and legalisms, however exalted, should not be misused by the government to keep
money not belonging to it and thereby enrich itself at the expense of its law-abiding
citizens. If the State expects its taxpayers to observe fairness and honesty in paying
their taxes, so must it apply the same standard against itself in refunding excess
payments of such taxes. Indeed, the State must lead by its own example of honor,
dignity and uprightness.

CIR vs. Tokyo Shipping Co., Ltd.

Facts: Tokyo shipping is a foreign corporation which owns and operates a vessel. The
vessel was chartered by a certain Nasutra to load raw sugar in the Phil thru its
representative. Thus, Tokyo Shippings representative made a pre-payment of the
required income and common carriers taxes. Upon arrival at the port, the vessel
found no sugar for loading, thus, claimed for a tax refund. The CIR failed to act
promptly, thus, respondent went to CTA which decided in their favor. The CIR claims

Issue: WON Tokyo Shipping is entitled to a tax refund.

Held: Yes, Tokyo Shipping is entitled to a tax refund.

Pursuant to section 24 (b) (2) of the National Internal Revenue Code, a resident
foreign corporation engaged in the transport of cargo is liable for taxes depending
on the amount of income it derives from sources within the Philippines. Thus, before
such a tax liability can be enforced the taxpayer must be shown to have earned
income sourced from the Philippines. The respondent court held that sufficient
evidence has been adduced by the private respondent proving that it derived no
receipt from its charter agreement with NASUTRA.
Fair deal is expected by our taxpayers from the BIR and the duty demands that BIR
should refund without any unreasonable delay what it has erroneously collected.
The power of taxation is sometimes called also the power to destroy. Therefore it
should be exercised with caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the hen that lays the golden egg. And, in order to maintain the general publics
trust and confidence in the Government this power must be used justly and not



Facts: Atlas Consolidated Mining and Development Corporation, a domestic

corporation, entered into a Loan and Sales Contract with Mitsubishi Metal
Corporation, a Japanese corporation licensed to engage in business in the
Philippines. To be able to extend the loan to Atlas, Mitsubishi entered into another
loan agreement with Export-Import Bank (Eximbank), a financing institution owned,
controlled, and financed by the Japanese government. After making interest
payments to Mitsubishi, with the corresponding 15% tax thereon remitted to the
Government of the Philippines, Altas claimed for tax credit with the Commissioner of
Internal Revenue based on Section 29(b)(7) (A) of the National Internal Revenue
Code, stating that since Eximbank, and not Mitsubishi, is where the money for the
loan originated from Eximbank, then it should be exempt from paying taxes on its
loan thereon.

Issue: WON the interest income from the loans extended to Atlas by Mitsubishi is
excludible from gross income taxation.

Held: NO. Mitsubishi secured the loan from Eximbank in its own independent
capacity as a private entity and not as a conduit of Eximbank. Therefore, what the
subject of the 15% withholding tax is not the interest income paid by Mitsubishi to
Eximbank, but the interest income earned by Mitsubishi from the loan to Atlas.
Thus, it does not come within the ambit of Section 29(b)(7)(A), and it is not exempt
from the payment of taxes.
Notes: Findings of fact of the Court of Tax Appeals are entitled to the highest respect
and can only be disturbed on appeal if they are not supported by substantial
evidence or if there is a showing of gross error or abuse on the part of the tax court.
Laws granting exemption from tax are construed strictissimi juris against the
taxpayer and liberally in favor of the taxing power. Taxation is the rule and
exemption is the exception.

Phil Bank of Communications vs. CIR, et. al.

302 SCRA 241 January 28, 1999
FACTS: Petitioner PBCom filed its first and second quarter income tax returns,
reported profits, and paid income taxes amounting to P5.2M in 1985. However, at
the end of the year PBCom suffered losses so that when it filed its Annual Income
Tax Returns for the year-ended December 31, 1986, the petitioner likewise reported
a net loss of P14.1 M, and thus declared no tax payable for the year. In 1988, the
bank requested from CIR for a tax credit and tax refunds representing overpayment
of taxes. Pending investigation of the respondent CIR, petitioner instituted a Petition
for Review before the Court of Tax Appeals (CTA). CTA denied its petition for tax
credit and refund for failing to file within the prescriptive period to which the
petitioner belies arguing the Revenue Circular No.7-85 issued by the CIR itself states
that claim for overpaid taxes are not covered by the two-year prescriptive period
mandated under the Tax Code.

ISSUE: Is the contention of the petitioner correct? Is the revenue circular a valid
exemption to the NIRC?

HELD: No. The relaxation of revenue regulations by RMC 7-85 is not warranted as it
disregards the two-year prescriptive period set by law. Basic is the principle that
"taxes are the lifeblood of the nation." The primary purpose is to generate funds for
the State to finance the needs of the citizenry and to advance the common weal.
Due process of law under the Constitution does not require judicial proceedings in
tax cases. This must necessarily be so because it is upon taxation that the
government chiefly relies to obtain the means to carry on its operations and it is of
utmost importance that the modes adopted to enforce the collection of taxes levied
should be summary and interfered with as little as possible.
From the same perspective, claims for refund or tax credit should be exercised
within the time fixed by law because the BIR being an administrative body enforced
to collect taxes, its functions should not be unduly delayed or hampered by
incidental matters.

Sison vs Ancheta

Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its
provision (Section 1) unduly discriminated against him by the imposition of higher
rates upon his income as a professional, that it amounts to class legislation, and
that it transgresses against the equal protection and due process clauses of the
Constitution as well as the rule requiring uniformity in taxation.

Issue: Whether BP 135 violates the due process and equal protection clauses, and
the rule on uniformity in taxation.

Held: There is a need for proof of such persuasive character as would lead to a
conclusion that there was a violation of the due process and equal protection
clauses. Absent such showing, the presumption of validity must prevail. Equality
and uniformity in taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate. The taxing power has the authority to
make reasonable and natural classifications for purposes of taxation. Where the
differentiation conforms to the practical dictates of justice and equity, similar to the
standards of equal protection, it is not discriminatory within the meaning of the
clause and is therefore uniform. Taxpayers may be classified into different
categories, such as recipients of compensation income as against professionals.
Recipients of compensation income are not entitled to make deductions for income
tax purposes as there is no practically no overhead expense, while professionals
and businessmen have no uniform costs or expenses necessary to produce their
income. There is ample justification to adopt the gross system of income taxation to
compensation income, while continuing the system of net income taxation as
regards professional and business income.

GR Nos. L-49839-46, April 26, 1991
196 SCRA 322

FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased
and occupied as dwelling units by tenants who were paying monthly rentals of not
exceeding P300. Sometimes in 1971 the Rental Freezing Law was passed prohibiting
for one year from its effectivity, an increase in monthly rentals of dwelling units
where rentals do not exceed three hundred pesos (P300.00), so that the Reyeses
were precluded from raising the rents and from ejecting the tenants. In 1973,
respondent City Assessor of Manila re-classified and reassessed the value of the
subject properties based on the schedule of market values, which entailed an
increase in the corresponding tax rates prompting petitioners to file a Memorandum
of Disagreement averring that the reassessments made were "excessive,
unwarranted, inequitable, confiscatory and unconstitutional" considering that the
taxes imposed upon them greatly exceeded the annual income derived from their
properties. They argued that the income approach should have been used in
determining the land values instead of the comparable sales approach which the
City Assessor adopted.

ISSUE: Is the approach on tax assessment used by the City Assessor reasonable?

HELD: No. The taxing power has the authority to make a reasonable and natural
classification for purposes of taxation but the government's act must not be
prompted by a spirit of hostility, or at the very least discrimination that finds no
support in reason. It suffices then that the laws operate equally and uniformly on all
persons under similar circumstances or that all persons must be treated in the same
manner, the conditions not being different both in the privileges conferred and the
liabilities imposed.
Consequently, it stands to reason that petitioners who are burdened by the
government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the
principle of social justice should not now be penalized by the same government by
the imposition of excessive taxes petitioners can ill afford and eventually result in
the forfeiture of their properties.

PAL v. Sec of Finance

GR No. 115852; 30 October 1995

FACTS: The Value-Added Tax [VAT] is levied on the sale, barter or exchange of
goods and properties as well as on the sale or exchange of services. It is equivalent
to 10% of the gross selling price or gross value in money of goods or properties
sold, bartered or exchanged or of the gross receipts from the sale or exchange of
services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT
system and enhance its administration by amending the National Internal Revenue
These are various suits for certiorari and prohibition challenging the constitutionality
of RA 7716:
In the case at bar, PAL attacks the formal validity of Republic Act No. 7716. PAL
contends that it violates Art. VI, Section 26[1] which provides that "Every bill passed
by Congress shall embrace only one subject which shall be expressed in the title
thereof." It is contended that neither H. No. 11197 nor S. No. 1630 provided for
removal of exemption of PAL transactions from the payment of the VAT and that this
was made only in the Conference Committee bill which became Republic Act No.
7716 without reflecting this fact in its title.
The title of Republic Act No. 7716 is:
Furthermore, section 103 of RA 7716 states the following:
Section 103. Exempt Transactions.- The following shall be exempt from the valueadded tax:
[q] Transactions which are exempt under special laws, except those granted under
Presidential Decree Nos. 66, 529, 972, 1491, 1590.
The effect of the amendment is to remove the exemption granted to PAL, as far as
the VAT is concerned.
Philippine Airlines [PAL] claims that its franchise under P.D. No. 1590 which makes it
liable for a franchise tax of only 2% of gross revenues "in lieu of all the other fees
and charges of any kind, nature or description, imposed, levied, established,
assessed or collected by any municipal, city, provincial, or national authority or
government agency, now or in the future," cannot be amended by Rep. Act No.
7716 as to make it [PAL] liable for a 10% value-added tax on revenues, because
Sec. 24 of P.D. No. 1590 provides that PAL's franchise can only be amended,
modified or repealed by a special law specifically for that purpose.

ISSUE: Whether or not this amendment of Section 103 of the NIRC is fairly
embraced in the title of Republic Act No. 7716, although no mention is made therein
of P. D. No. 1590

HELD: The court ruled in in the affirmative. The title states that the purpose of the
statute is to expand the VAT system, and one way of doing this is to widen its base
by withdrawing some of the exemptions granted before. To insist that P. D. No. 1590
be mentioned in the title of the law, in addition to Section 103 of the NIRC, in which
it is specifically referred to, would be to insist that the title of a bill should be a
complete index of its content.
The constitutional requirement that every bill passed by Congress shall embrace
only one subject which shall be expressed in its title is intended to prevent surprise
upon the members of Congress and to inform the people of pending legislation so
that, if they wish to, they can be heard regarding it. If, in the case at bar, petitioner
did not know before that its exemption had been withdrawn, it is not because of any
defect in the title but perhaps for the same reason other statutes, although
published, pass unnoticed until some event somehow calls attention to their
Republic Act No. 7716 expressly amends PAL's franchise [P. D. No. 1590] by
specifically excepting from the grant of exemptions from the VAT PAL's exemption
under P. D. No. 1590. This is within the power of Congress to do under Art. XII,
Section 11 of the Constitution, which provides that the grant of a franchise for the
operation of a public utility is subject to amendment, alteration or repeal by
Congress when the common good so requires.