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Filinvest Development Corporation vs. CIR, G. R. No.

146941, August 9, 2007

Facts: Filinvest Development Corporation filed a claim for refund or in the alternative the
issuance of a tax credit certificate (TCC) with the Commissioner of Internal Revenue (CIR)
representing excesscreditable withholding taxes for taxable years 1994, 1995, 1996.
The CIR did not resolve the claim for refund and the two-year prescriptive period was about to
lapse which prompted the petitioner to file a petition for review before the Court of Tax Appeals
(CTA). In the petition, it prayed for refund or in the alternative the issuance of TCC amounting
P3,173,868.00.The amount of P1,004,236.00 representing excess/unutilized
creditable withholding taxes for 1994 was no longer included as it was already barred by
Eventually, CTA dismissed the petition for review. Motion for review was filed before the Court of
Appeals which was dismissed so as the motion for reconsideration, denied.
Then here comes the petition before the Supreme Court which was also denied but later in the
motion for reconsideration it was at last granted. The petitioner alleged among others that the
CA erred in relying on CTA cases where they cited in its decision as jurisprudential basis to
support its ruling.
Issue: Whether or not decisions of the CTA are jurisprudential basis for coming up a decision.
Held: The SC ruled that the CA was wrong in relying decisions of the CTA as jurisprudential
basis in resolving the case.
By tradition and in our system of administration, the Supreme Court has the last word on what
the law is, and that its decisions applying or interpreting the laws or the Constitution form part of
the legal system of the country, all other courts should take their bearingsfrom the decisions of
this court.
The principle of stare decisis et non quieta movere, as embodied inART 8 of the CIVIL CODE
of the Philippines,enjoins adherence to judicial precedents. It requires our courts to follow a rule
already established in a final decision of the SC. That decision becomes a judicial precedent to
be followed in subsequent cases by all courts in the land.


CORPORATION- Theoretical Interest

Filinvest Development Corporation extended advances in favor of its affiliates and supported the
same with instructional letters and cash and journal vouchers. The BIR assessed Filinvest for
deficiency income tax by imputing an arms length interest rate on its advances to affiliates.
Filinvest disputed this by saying that the CIR lacks the authority to impute theoretical interest
and that the rule is that interests cannot be demanded in the absence of a stipulation to the
Can the CIR impute theoretical interest on the advances made by Filinvest to its affiliates?
NO. Despite the seemingly broad power of the CIR to distribute, apportion and allocate gross
income under (now) Section 50 of the Tax Code, the same does not include the power to impute
theoretical interests even with regard to controlled taxpayers transactions. This is true even if
the CIR is able to prove that interest expense (on its own loans) was in fact claimed by the
lending entity. The term in the definition of gross income that even those income from whatever
source derived is covered still requires that there must be actual or at least probable receipt or
realization of the item of gross income sought to be apportioned, distributed, or allocated.
Finally, the rule under the Civil Code that no interest shall be due unless expressly stipulated in
writing was also applied in this case.
The Court also ruled that the instructional letters, cash and journal vouchers qualify as loan
agreements that are subject to DST.
Caltex Philippines, Inc. v COA (1992)
In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil Price Stabilization Fund (OPSF),
excluding that unremitted for the years 1986 and 1988, of the additional tax on petroleum products authorized under
the PD 1956. Pending such remittance, all of its claims for reimbursement from the OPSF shall be held in abeyance.
The grant total of its unremitted collections of the above tax is P1,287,668,820.
Caltex submitted a proposal to COA for the payment and the recovery of claims. COA approved the proposal but
prohibited Caltex from further offsetting remittances and reimbursements for the current and ensuing years. Caltex
moved for reconsideration but was denied. Hence, the present petition.
Whether the amounts due from Caltex to the OPSF may be offsetted against Caltexs outstanding claims from said

No. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of government.
Taxes may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a
threatened industry which is affected with public interest as to be within the police power of the State.
PD 1956, as amended by EO 137, explicitly provides that the source of OPSF is taxation. A taxpayer may not offset
taxes due from the claims he may have against the government. Taxes cannot be subject of compensation because
the government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a
debt, demand,, contract or judgment as is allowed to be set-off.
Hence, COA decision is affirmed except that Caltexs claim for reimbursement of underrecovery arising from sales to
the National Power Corporation is allowed.
G.R. No. L- 41383, August 15, 1988
The Philippine Airlines (PAL) is a corporation engaged in the air transportation business under a
legislative franchise, Act No. 42739. Under its franchise, PAL is exempt from the payment of taxes.
Sometime in 1971, however, Land Transportation Commissioner Romeo F. Elevate (Elevate)
issued a regulation pursuant to Section 8, Republic Act 4136, otherwise known as the Land and
Transportation and Traffic Code, requiring all tax exempt entities, among them PAL to pay motor vehicle
registration fees.
Despite PAL's protestations, Elevate refused to register PAL's motor vehicles unless the amounts
imposed under Republic Act 4136 were paid. PAL thus paid, under protest, registration fees of its motor
vehicles. After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Land
Transportation Commissioner Romeo Edu (Edu) demanding a refund of the amounts paid. Edu denied the
request for refund. Hence, PAL filed a complaint against Edu and National Treasurer Ubaldo Carbonell
The trial court dismissed PAL's complaint. PAL appealed to the Court of Appeals which in turn
certified the case to the Supreme Court.
Whether or not motor vehicle registration fees are considered as taxes.
Yes. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial
purposes, then the exaction is properly called a tax. Such is the case of motor vehicle registration fees.
The motor vehicle registration fees are actually taxes intended for additional revenues of the government
even if one fifth or less of the amount collected is set aside for the operating expenses of the agency
administering the program.
TIO VS. VIDEOGRAM REGULATORY BOARD [151 SCRA 208; G.R. No. L-75697; 18 Jun 1987]
Friday, January 30, 2009 Posted by Coffeeholic Writes
Labels: Case Digests, Political Law
Facts: The case is a petition filed by petitioner on behalf of videogram operators

adversely affected by Presidential Decree No. 1987, An Act Creating the Videogram
Regulatory Board" with broad powers to regulate and supervise the videogram
A month after the promulgation of the said Presidential Decree, the amended the
National Internal Revenue Code provided that:
"SEC. 134. Video Tapes. There shall be collected on each processed video-tape
cassette, ready for playback, regardless of length, an annual tax of five pesos;
Provided, That locally manufactured or imported blank video tapes shall be subject
to sales tax."
"Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding
any provision of law to the contrary, the province shall collect a tax of thirty percent
(30%) of the purchase price or rental rate, as the case may be, for every sale,
lease or disposition of a videogram containing a reproduction of any motion picture
or audiovisual program.
Fifty percent (50%) of the proceeds of the tax collected shall accrue to the
province, and the other fifty percent (50%) shall accrue to the municipality where
the tax is collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared
equally by the City/Municipality and the Metropolitan Manila Commission.
The rationale behind the tax provision is to curb the proliferation and unregulated
circulation of videograms including, among others, videotapes, discs, cassettes or
any technical improvement or variation thereof, have greatly prejudiced the
operations of movie houses and theaters. Such unregulated circulation have caused
a sharp decline in theatrical attendance by at least forty percent (40%) and a
tremendous drop in the collection of sales, contractor's specific, amusement and
other taxes, thereby resulting in substantial losses estimated at P450 Million
annually in government revenues.
Videogram(s) establishments collectively earn around P600 Million per annum from
rentals, sales and disposition of videograms, and these earnings have not been

subjected to tax, thereby depriving the Government of approximately P180 Million

in taxes each year.
The unregulated activities of videogram establishments have also affected the
viability of the movie industry.
(1) Whether or not tax imposed by the DECREE is a valid exercise of police power.
(2) Whether or nor the DECREE is constitutional.
Held: Taxation has been made the implement of the state's police power. The levy
of the 30% tax is for a public purpose. It was imposed primarily to answer the need
for regulating the video industry, particularly because of the rampant film piracy,
the flagrant violation of intellectual property rights, and the proliferation of
pornographic video tapes. And while it was also an objective of the DECREE to
protect the movie industry, the tax remains a valid imposition.
We find no clear violation of the Constitution which would justify us in pronouncing
Presidential Decree No. 1987 as unconstitutional and void. While the underlying
objective of the DECREE is to protect the moribund movie industry, there is no
question that public welfare is at bottom of its enactment, considering "the unfair
competition posed by rampant film piracy; the erosion of the moral fiber of the
viewing public brought about by the availability of unclassified and unreviewed
video tapes containing pornographic films and films with brutally violent sequences;
and losses in government revenues due to the drop in theatrical attendance, not to
mention the fact that the activities of video establishments are virtually untaxed
since mere payment of Mayor's permit and municipal license fees are required
to engage in business."
WHEREFORE, the instant Petition is hereby dismissed. No costs
151 SCRA 208 Political Law The Embrace of Only One Subject by a Bill
Delegation of Power Delegation to Administrative Bodies
In 1985, Presidential Dedree No. 1987 entitled An Act Creating the Videogram Regulatory
Board was enacted which gave broad powers to the VRB to regulate and supervise the
videogram industry. The said law sought to minimize the economic effects of piracy. There was

a need to regulate the sale of videograms as it has adverse effects to the movie industry. The
proliferation of videograms has significantly lessened the revenue being acquired from the
movie industry, and that such loss may be recovered if videograms are to be taxed. Section 10
of the PD imposes a 30% tax on the gross receipts payable to the LGUs.
In 1986, Valentin Tio assailed the said PD as he averred that it is unconstitutional on the
following grounds:
1. Section 10 thereof, which imposed the 30% tax on gross receipts, is a rider and is not
germane to the subject matter of the law.
2. There is also undue delegation of legislative power to the VRB, an administrative body,
because the law allowed the VRB to deputize, upon its discretion, other government
agencies to assist the VRB in enforcing the said PD.
ISSUE: Whether or not the Valentin Tios arguments are correct.
1. The Constitutional requirement that every bill shall embrace only one subject which shall be
expressed in the title thereof is sufficiently complied with if the title be comprehensive enough
to include the general purpose which a statute seeks to achieve. In the case at bar, the
questioned provision is allied and germane to, and is reasonably necessary for the
accomplishment of, the general object of the PD, which is the regulation of the video industry
through the VRB as expressed in its title. The tax provision is not inconsistent with, nor foreign
to that general subject and title. As a tool for regulation it is simply one of the regulatory and
control mechanisms scattered throughout the PD.
2. There is no undue delegation of legislative powers to the VRB. VRB is not being tasked to
legislate. What was conferred to the VRB was the authority or discretion to seek assistance in
the execution, enforcement, and implementation of the law. Besides, in the very language of the
decree, the authority of the BOARD to solicit such assistance is for a fixed and limited period
with the deputized agencies concerned being subject to the direction and control of the [VRB].

Gaston vs. Republic Planters Bank

Post under case digests, Political Law at Monday, March 12, 2012 Posted by Schizophrenic

Facts: Petitioners are sugar producers and planters and millers filed a MANDAMUS to
implement the privatization of Republic Planters Bank, and for the transfer of the shares in the
government bank to sugar producers and planters. (because they are allegedly the true
beneficial owners of the bank since they pay P1.00 per picul of sugar from the proceeds of
sugar producers as STABILIZATION FEES)
The shares are currently held by Philsucom / Sugar Regulatory Admin.
The Solgen countered that the stabilization fees are considered government funds and that the
transfer of shares to from Philsucom to the sugar producers would be irregular.
Issue: What is the nature of the P1.00 stabilization fees collected from sugar producers? Are
they funds held in trust for them, or are they public funds? Are the shares in the bank (paid
using these fees) owned by the government Philsucom or privately by the different sugar
planters from whom such fees were collected?
Held: PUBLIC FUNDS. While it is true that the collected fees were used to buy shares in RPB, it
did not collect said fees for theaccount of sugar producers. The stabilization fees were charged
on sugar produced and milled which ACCRUED TO PHILSUCOM, under PD 338.
The fees collected ARE IN THE NATURE OF A TAX., which is within the power of the state to
impose FOR THE PROMOTION OF THE SUGAR INDUSTRY. They constitute sugar liens. The
collections accrue to a SPECIAL FUNDS. It is levied not purely for taxation, but for regulation, to
provide means TO STABILIZE THE SUGAR INDUSTRY. The levy is primarily an exercise of
police powers.
The fact that the State has taken money pursuant to law is sufficient to constitute them as
STATE FUNDS, even though held for a special purpose. Having been levied for a special
purpose, the revenues are treated as a special fund, administered in trust for the purpose
intended. Once the purpose has been fulfilled or abandoned, the balance will be transferred to
the general funds of govt.
It is a special fund since the funds are deposited in PNB, not in the National Treasury.

The sugar planters are NOT BENEFICIAL OWNERS. The money is collected from them only
because they it is also they who are to be benefited from the expenditure of funds derived from
it. The investing of the funds in RPB is not alien to the purpose since the Bank is a commodity
bank for sugar, conceived for the sugar industry growth and development.
Revenues derived from taxes cannot be used purely for private purposes or for the exclusive
benefit of private persons. The Stabilization Fund is to be utilized for the benefit of the ENTIRE
SUGAR INDUSTRY, and all its components, stabilization of domestic and foreign markets, since
the sugar industry is of vital importance to the countrys economy and national interest.
May toll fees collected by tollway operators be subject to VAT?
(1) VAT is imposed on all kinds of services and tollway operators who are engaged in constructing,
maintaining, and operating expressways are no different from lessors of property, transportation
contractors, etc.
(2) Not only do they fall under the broad term under (1) but also come under those described as all other
franchise grantees which is not confined only to legislative franchise grantees since the law does not
distinguish. They are also not a franchise grantee under Section 119 which would have made them subject
to percentage tax and not VAT.
(3) Neither are the services part of the enumeration under Section 109 on VAT-exempt transactions.
(4) The toll fee is not a users tax and thus it is permissible to impose a VAT on the said fee. The MIAA
case does not apply and the Court emphasized that toll fees are not taxes since they are not assessed by
the BIR and do not go the general coffers of the government. Toll fees are collected by private operators
as reimbursement for their costs and expenses with a view to a profit while taxes are imposed by the
government as an attribute of its sovereignty. Even if the toll fees were treated as users tax, the VAT can
not be deemed as a tax on tax since the VAT is imposed on the tollway operator and the fact that it might
pass-on the same to the tollway user, it will not make the latter directly liable for VAT since the shifted
VAT simply becomes part of the cost to use the tollways.
(5) The assertion that the VAT imposed is not administratively feasible given the manner by which the
BIR intends to implement the VAT (i.e., rounding off the toll rates and putting any excess collection in an
escrow account) is not enough to invalidate the law. Non-observance of the canon of administrative
feasibility will not render a tax imposition invalid except to the extent that specific constitutional or
statutory limitations are impaired.
Diaz vs. Secretary of Finance (2011)

Facts:Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed this petition for
declaratory relief assailing the validity of the impending imposition of value-added tax (VAT) by
the Bureau of Internal Revenue (BIR) on the collections of tollway operators. Court treated the
case as one of prohibition.Petitioners hold the view that Congress did not, when it enacted the
NIRC, intend to include toll fees within the meaning of "sale of services" that are subject to VAT;
that a toll fee is a "user's tax," not asale of services; that to impose VAT on toll fees would
amount to a tax on public service; and that,since VAT was never factored into the formula for
computing toll fees, its imposition would violate thenon-impairment clause of the
constitution.The government avers that the NIRC imposes VAT on all kinds of services of
franchise grantees,including tollway operations; that the Court should seek the meaning and
intent of the law from the words used in the statute; and that the imposition of VAT on tollway
operations has been the subjectas early as 2003 of several BIR rulings and circulars.The
government also argues that petitioners have no right to invoke the non-impairment of
contractsclause since they clearly have no personal interest in existing toll operating
agreements (TOAs) between the government and tollway operators. At any rate, the nonimpairment clause cannot limitthe State's sovereign taxing power which is generally read into
Issue:May toll fees collected by tollway operators be subjected to VAT (Are tollway operations a
franchiseand/or a service that is subject to VAT)
?Ruling: When a tollway operator takes a toll fee from a motorist, the fee is in effect for the
latter's use of thetollway facilities over which the operator enjoys private proprietary rights that
its contract and the law recognize. In this sense, the tollway operator is no different from the
service providers under Section108 who allow others to use their properties or facilities for a
fee.Tollway operators are franchise grantees and they do not belong to exceptions that Section
119 sparesfrom the payment of VAT. The word "franchise" broadly covers government grants of
a special rightto do an act or series of acts of public concern. Tollway operators are, owing to
the nature and objectof their business, "franchise grantees." The construction, operation, and
maintenance of toll facilitieson public improvements are activities of public consequence that
necessarily require a special grant of authority from the state. A tax is imposed under the taxing
power of the government principally for the purpose of raisingrevenues to fund public
expenditures. Toll fees, on the other hand, are collected by private tollway operators as
reimbursement for the costs and expenses incurred in the construction, maintenance

andoperation of the tollways, as well as to assure them a reasonable margin of income.

Although toll feesare charged for the use of public facilities, therefore, they are not government
exactions that can beproperly treated as a tax. Taxes may be imposed only by the government
under its sovereignauthority, toll fees may be demanded by either the government or private
individuals or entities, as anattribute of ownership