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Deans

Circle 2016
UNIVERSITY OF SANTO TOMAS
Digested by: DC 2016 Members
Editors: Tricia Lacuesta
Lorenzo Luigi Gayya
Cristopher Reyes
Macky Siazon
Janine Arenas
Ninna Bonsol
Lloyd Javier

TAXATION
LAW
Supreme Court decisions penned by Associate Justice
Presbitero J. Velasco, Jr.

Taxation Law (Cases Penned by J. Velasco) Deans Circle


2016
Table of Contents
General Principles of Taxation
Definition and Concept of Taxation ........................................................................................................ 2
Doctrines in Taxation
Kinds of Tax Exemptions ...................................................................................................................... 2
Tax Amnesty ........................................................................................................................................ 4
Construction and Interpretation
Tax Rules and Regulations.................................................................................................................... 5
Scope and Limitations of Taxation
Inherent Limitations
Public Purpose ..................................................................................................................................... 6
Exemptions of Government Entities Agencies and Instrumentalities ................................................... 7
Stages of Taxation
Payment .............................................................................................................................................. 8
Refund................................................................................................................................................. 9
NIRC
Income Taxation
Gross Income..................................................................................................................................... 11
Non-resident Foreign Corporations .................................................................................................... 11
Donors Tax
Sale/Exchange/Transfer of property for insufficient consideration ..................................................... 12
Value-Added Tax
Zero-rated sales of goods or properties and effectively zero-rated sales of goods or properties......... 13
Refund or Tax Credit of Excess Input Tax ............................................................................................ 14
Tax Remedies under NIRC
Suspension of the running of statute of limitations ............................................................................ 15
Refund............................................................................................................................................... 16
Local Government Code of 1991, as amended
Local Government Taxation .............................................................................................................. 18
Real Property Taxation ...................................................................................................................... 19
Judicial Remedies
Jurisdiction of the Court of Tax Appeals ............................................................................................. 20

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GENERAL PRINCIPLES OF TAXATION
Definition and Concept of Taxation
EDUARDO M. COJUANGCO, JR. v. REPUBLIC OF THE PHILIPPINES
G.R. No. 180705, November 27, 2012, Velasco, Jr., J.
Coconut levy funds partake of the nature of taxes, which, in general, are enforced proportional
contributions from persons and properties, exacted by the State by virtue of its sovereignty for the support of
government and for all public needs. A tax has three elements: a) it is an enforced proportional contribution
from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is levied for the
support of the government.
Facts:
R.A. 6260 was enacted creating the Coconut Investment Company (CIC) to administer the Coconut
Investment Fund (CIF), which, under Section 8 thereof, a levy was to be sourced on the sale of copra. Charged
with the duty of collecting and administering the Fund was Philippine Coconut Administration (PCA). Like
COCOFED with which it had a legal linkage, the PCA, by statutory provisions scattered in different coco levy
decrees, had its share of the coco levy. And per Cojuangcos own admission, PCA paid, out of the CCSF, the
entire acquisition price for the 72.2% option shares. The list of FUB stockholders included Cojuangco with
14,440 shares and PCA with 129,955 shares. It would appear later that, pursuant to the stipulation on
maintaining Cojuangcos equity position in the bank, PCA would cede to him 10% of its subscriptions to (a)
the authorized but unissued shares of FUB and (b) the increase in FUBs capital stock.
Issue:
Whether the cocolevy funds partake of the nature of taxes.
Ruling:
YES. The coconut levy funds were exacted for a special public purpose. Consequently, any
use or transfer of the funds that directly benefits private individuals should be invalidated. Taxation is done
not merely to raise revenues to support the government, but also to provide means for the rehabilitation and
the stabilization of a threatened industry, which is so affected with public interest as to be within the police
power of the State.
Even if the money is allocated for a special purpose and raised by special means, it is still public in
character. It cannot be denied that the coconut industry is one of the major industries supporting the national
economy. It is, therefore, the States concern to make it a strong and secure source not only of the livelihood
of a significant segment of the population, but also of export earnings the sustained growth of which is one of
the imperatives of economic stability. The coconut levy funds were sourced from forced exactions decreed
under P.D. Nos. 232, 276 and 582, among others, with the end-goal of developing the entire coconut industry.
Doctrines in Taxation
Kinds of Tax Exemption
Express
THE COMMISSIONER OF INTERNAL REVENUE v. ACESITE (PHILIPPINES) HOTEL CORPORATION
G.R. No. 147295, 16 February 2007, Velasco, Jr., J.

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Facts:
Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel. It leases a part of the
hotels premises to PAGCOR. For January 1996 to April 1997, Acesite incurred VAT from its rental income
and sale of food and beverages to PAGCOR. Acesite thereafter shifted the said tax to PAGCOR by
incorporating it in the amount assessed to the latter but it refused to pay the taxes on account of its tax
exempt status. Acesite thus paid the VAT to the CIR as it feared the legal consequences of non-payment of the
tax. However, Acesite belatedly arrived at the conclusion that its transaction with PAGCOR was subject to
zero rate as it was rendered to a tax-exempt entity. On 21 May 1998, Acesite filed an administrative claim for
refund with the CIR but the latter failed to resolve the same. In resisting Acesites claims for refund, the CIR
contends that the tax exemption refers only to PAGCORs direct tax liability and not to indirect taxes, like the
VAT.
Issue:
Whether PAGCORs tax exemption privilege includes the indirect tax of VAT.
Ruling:
YES. A close scrutiny of PD 1869 clearly gives PAGCOR a blanket exemption to taxes with no
distinction on whether the taxes are direct or indirect. We are one with the CA ruling that PAGCOR is also
exempt from indirect taxes.

COMMISSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMSv.PHILIPPINE AIRLINES,


INC.
G.R. Nos. 212536-37, August 27, 2014, Velasco, Jr., J.
A later law, general in terms and not expressly repealing a prior special law, will not affect the special
provisions of the earlier statute.
Facts:
On June 11, 1978, PAL was granted under PD 1590 a franchise to operate air transport services
domestically and internationally. During the lifetime of its franchise, PAL shall pay the government either
basic corporate income tax or franchise tax based on revenues and/or the rate defined in the provision,
whichever is lower and the taxes thus paid under either scheme shall be in lieu of all other taxes, duties and
other fees. On January 1, 2005 however, R.A. No. 9334 took effect which assessed excise taxes against PAL for
the latters February and March 2007 importation of cigarettes and alcoholic drinks. The CTA en banc granted
the claim of PAL for refund.
Issue:
Whether PALs exemption from payment of excise tax has been revoked by RA 9334.
Ruling:
NO. It is a basic principle of statutory construction that a later law, general in terms and not
expressly repealing or amending a prior special law, will not ordinarily affect the special provisions of such
earlier statute. The fact that one is special and other general creates a presumption that the special is
considered as remaining an exception to the general.

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Based on PALs franchise, PALs payment of either the basic corporate income tax or franchise tax,
whichever is lower, shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and
charges, except only real property tax. The phrase "in lieu of all other taxes" includes but is not limited to
taxes that are directly due from or imposable upon the purchaser or the seller, producer, manufacturer, or
importer of said petroleum products butane billed or passed on the grantee either as part of the price or cost
thereof or by mutual agreement or other arrangement."
Tax Amnesty
COMMISSIONER OF INTERNAL REVENUE v. PUREGOLD DUTY FREE, INC.
G.R. No. 202789, June 22, 2015, Velasco, Jr., J.
A tax amnesty is designed to be a general grant of clemency and the only exceptions are those
specifically mentioned.
Facts:
As an enterprise located within Clark Special Economic Zone (CSEZ) and registered with the Clark
Development" Corporation (CDC), Puregold had been issued Certificate of Tax Exemption pursuant to Sec. 5
of EO 80, extending to business enterprises operating within the CSEZ all the incentives granted to
enterprises within the Subic Special Economic Zone (SSEZ) under RA 7227. In Coconut Oil Refiners v.
Torre, however, this Court annulled the adverted Sec. 5 of EO 80. Then Deputy Commissioner issued a
Preliminary Assessment Notice regarding unpaid VAT and excise tax on wines, liquors and tobacco products
imported by Puregold. The latter protested the assessment. Pending the resolution of Puregold's protest,
Congress enacted RA 9399, which provides that availment of the tax amnesty relieves the qualified taxpayers
of any civil, criminal and/or administrative liabilities arising from, or incident to, nonpayment of taxes, duties
and other charges. Puregold availed itself of the tax amnesty. However, it received a formal letter of demand
from the BIR for the payment of the deficiency VAT and excise taxes on its importations. In its response-letter,
Puregold requested the cancellation of the assessment on the ground that it has already availed of the tax
amnesty under RA 9399. This notwithstanding, the BIR issued a Final Decision stating that the availment of
the tax amnesty under RA 9399 did not relieve Puregold of its liability for deficiency VAT, excise taxes, and
inspection fees under Sec. 13l(A) of the 1997 NIRC.
Issue:
Whether RA 9399 grants amnesty from liability to pay VAT and excise tax under Section 131 of the
1997 NIRC.
Ruling:
YES. It is worthy to note that Sec. 1 of RA 9399 explicitly and unequivocally mentions businesses
within the CSEZ as among the beneficiaries of the tax amnesty provided by RA 9399. Furthermore, Puregold
enjoyed duty free importations and exemptions from local and national taxes under EO 80, a privilege which
extended to business enterprises operating within the CSEZ all the incentives granted to enterprises within
SSEZ by RA 7227. Hence, Puregold was repeatedly issued tax exemption certificates and the BIR itself did not
assess any deficiency taxes from the time the 1997 NIRC took effect in January 1998. The special income tax
regime or tax incentives granted to enterprises registered within the secured area of Subic and Clark Special
Economic Zones have not been repealed by R.A. 8424. The courts ruling in Coconut Oil cannot be
retroactively applied to obliterate the effect of Section 5 of EO 80 and the various rulings of the former CIR
prior to the promulgation of the Decision in 2005. There is nothing in Sec. 1 of RA 9399 that excludes Sec.
131(A) of the 1997 NIRC from the amnesty. In fact, there is no mention at all of any tax or duty imposed by
the 1997 NIRC as being specifically excluded from the coverage of the tax amnesty. If Congress intended Sec.

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131 of the 1997 NIRC to be an exception to the general grant of amnesty given under RA 9399, it could have
easily so provided in either the law itself, or even the implementing rules.
Construction and Interpretation
Tax Rules and Regulations
COMMISSIONER OF INTERNAL REVENUE v.BICOLANDIA DRUG CORPORATION (Formerly known as
ELMAS DRUG CO.)
G.R. No. 148083 July 21, 2006, Velasco, Jr., J.
In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the
basic law prevails because said rule or regulation cannot go beyond the terms and provisions of the basic law.
Facts:
Bicolandia treated the 20% sales discount granted by Republic Act (RA) 7432 to qualified senior
citizens purchasing their medicines as a deduction from its gross income in compliance with Revenue
Regulation (RR) No. 2-94 issued by the Bureau of Internal Revenue (BIR). Bicolandia filed a claim for tax
refund or credit with the Appellate Division of the BIR. Bicolandia appealed to the Court of Tax Appeals (CTA)
in order to toll the running of the two-year prescriptive period to file a claim for refund pursuant to Sec. 230
of the Tax Code then. Bicolandia questioned RR No. 2-94 which treated the 20% discount as deduction, not as
tax credit under RA 7432, from its gross income or gross sales. The CTA granted Bicolandias claim for refund
and declared that the provisions of RA 7432 would prevail over RR No. 2-94. The CA modified the CTA
decision and issued a tax credit certificate in favor of Bicolandia, in lieu of tax refund.
Issue:
Whether the 20% sales discount granted to qualified senior citizens by the respondent pursuant to
RA 7432 may be claimed as a tax credit, instead of a deduction from gross income or gross sales.
Ruling:
YES. Revenue Regulations No. 2-94 is still subordinate to R.A. No. 7432, and in cases of conflict, the
implementing rule will not prevail over the law it seeks to implement. It cannot be denied that R.A. No. 7432
has a laudable goal. Moreover, it cannot be argued that it was the intent of lawmakers for private
establishments to be the primary beneficiaries of the law. However, while the purpose of the law to benefit
senior citizens is praiseworthy, the concerns of the affected private establishments were also considered by
the lawmakers. As in other cases wherein private property is taken by the State for public use, there must be
just compensation. In this particular case, it took the form of the tax credit granted to private establishments,
purposely chosen by the lawmakers. The discussions of the lawmakers clearly showed the intent that the
cost of the 20 percent discount may be claimed by the private establishments as a tax credit.
Revenue Regulations No. 2-94 is null and void for failing to conform to the law it sought to
implement. In case of discrepancy between the basic law and a rule or regulation issued to implement said
law, the basic law prevails because said rule or regulation cannot go beyond the terms and provisions of the
basic law.
Note: R.A. No. 7432 has been amended by Republic Act No. 9257, the "Expanded Senior Citizens Act
of 2003." In this, the term "tax credit" is no longer used. This time around, there is no conflict between the law
and the implementing Revenue Regulations. Under Revenue Regulations No. 4-2006, "(o)nly the actual
amount of the discount granted or a sales discount not exceeding 20% of the gross selling price can be

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deducted from the gross income, net of value added tax, if applicable, for income tax purposes, and from gross
sales or gross receipts of the business enterprise concerned, for VAT or other percentage tax
purposes." Under the new law, there is no tax credit to speak of, only deductions.

M.E. HOLDING CORPORATION v. COURT OF APPEALS


G.R. No. 160193, March 23, 2008, Second Division, Velasco, Jr., J.
A law necessarily prevails over an administrative issuance.
Facts:
M.E. Holding Corporation is claiming the 20% sales discount it granted to qualified senior citizens.
M.E. treated the discount as deductions from its gross income purportedly in accordance with RR No. 2-94.
However it filed the return under protest arguing that the discount should be treated as tax credit and not as
mere deductions. Due to the inaction of the BIR, M.E. filed an appeal before the CTA reiterating its position.
The CTA held that Sec. 2(i) of RR 2-94 contravenes the clear proviso of RA 7432 prescribing that the 20%
sales discount should be claimed as a tax credit. It also ruled that RA 7432 is a law that necessarily prevails
over an administrative issuance such as RR 2-94.
Issue:
Whether or not M.E. may claim the 20% sales discount as a tax credit contrary to what is provided for
under RR 2-94
Ruling:
YES. The 20% sales discount to senior citizens may be claimed by an establishment owner as tax
credit. RA 7432, the applicable law, is unequivocal on this. The implementing RR 2-94 that considers such
discount as mere deductions to the taxpayers gross income or gross sales clearly clashes with the clear
language of RA 7432, the law sought to be implemented.
It ought to be noted, however, that RA 9257, amending RA 7432, was signed into law, ushering in a
new tax treatment for sales discount purchases of qualified senior citizens of medicines. The establishments
may claim the discounts as tax deduction based on the net cost of the goods sold. Conformably, starting
taxable year 2004, the 20% sales discount granted by establishments to qualified senior citizens is to be
treated as a tax deduction, no longer a tax credit.
Scope and Limitation of Taxation
Inherent Limitations
Public Purpose
EDUARDO M. COJUANGCO, JR. v. REPUBLIC OF THE PHILIPPINES
G.R. No. 180705, November 27, 2012, Velasco, Jr., J.
Even by law, that the revenues received from the imposition of the coconut levies be used purely for
private purposes to be owned by private individuals in their private capacity and for their benefit, would
contravene the rationale behind the imposition of taxes or levies.
Facts:

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R.A. 6260 was enacted creating the Coconut Investment Company (CIC) to administer the Coconut
Investment Fund (CIF), which, under Section 8 thereof, a levy was to be sourced from the sale of copra.
Charged with the duty of collecting and administering the Fund was Philippine Coconut Administration
(PCA). Like COCOFED with which it had a legal linkage, the PCA, by statutory provisions scattered in different
coco levy decrees, had its share of the coco levy. And per Cojuangcos own admission, PCA paid, out of the
CCSF, the entire acquisition price for the 72.2% option shares. The list of FUB stockholders included
Cojuangco with 14,440 shares and PCA with 129,955 shares. It would appear later that, pursuant to the
stipulation on maintaining Cojuangcos equity position in the bank, PCA would cede to him 10% of its
subscriptions to (a) the authorized but unissued shares of FUB and (b) the increase in FUBs capital stock.
Issue:
Whether Cojuangco is entitled to the FUB (UCPB) shares.
Ruling:
NO. The coconut levy funds were exacted for a special public purpose. Consequently, any
use or transfer of the funds that directly benefits private individuals should be invalidated. Taxation is done
not merely to raise revenues to support the government, but also to provide means for the rehabilitation and
the stabilization of a threatened industry, which is so affected with public interest as to be within the police
power of the State.
Even if the money is allocated for a special purpose and raised by special means, it is still public in
character. It cannot be denied that the coconut industry is one of the major industries supporting the national
economy. It is, therefore, the States concern to make it a strong and secure source not only of the livelihood
of a significant segment of the population, but also of export earnings the sustained growth of which is one of
the imperatives of economic stability. The coconut levy funds were sourced from forced exactions decreed
under P.D. Nos. 232, 276 and 582, among others, with the end-goal of developing the entire coconut industry.

Exemption of Government Entities, Agencies and Instrumentalities


GOVERNMENT SERVICE INSURANCE SYSTEM v. CITY TREASURER AND CITY ASSESSOR OF THE CITY OF
MANILA
G.R. No. 186242 December 23, 2009, Velasco, Jr., J.
GSIS enjoys under its charter full tax exemption. As an instrumentality of the national government, it is
itself not liable to pay real estate taxes assessed by the City of Manila against its properties.
Facts:
Respondent City Treasurer of Manila assessed petitioner GSIS of unpaid real property taxes due on
its Katigbak property and Concepcion-Arroceros property for years 1992 to 2002. Respondent thereafter
issued Notices of Realty Tax Delinquency for the subject properties which prompted petitioner to file a
petition for certiorari and prohibition before the RTC Manila. However, the court dismissed the petition and
upheld the validity of the assessments.
GSIS contended that both its old charter, PD No. 1146, and present charter, RA 8291 or the GSIS Act of
1997, exempt the agency and its properties from all forms of taxes and assessments, inclusive of realty tax.
Respondents countered that GSIS may not successfully resist the citys notices and warrants of levy on the
basis of its exemption under RA 8291, real property taxation being governed by RA 7160 or the Local
Government Code of 1991.

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Issue:
Whether GSIS, under its charter, is exempt from real property taxation.
Ruling:
YES.Pursuant to Sec. 33 of PD 1146, GSIS enjoyed tax exemption from real estate taxes, among other
tax burdens, until January 1, 1992 when the LGC took effect and withdrew exemptions from payment of real
estate taxes privileges granted under PD 1146. RA 8291 restored in 1997 the tax exempt status of GSIS by
reenacting under its Sec. 39 what was once Sec. 33 of P.D. 1146. If any real estate tax is due to the City of
Manila, it is, following City of Davao, only for the interim period, or from 1992 to 1996, to be precise.
GSIS enjoys under its charter full tax exemption. Moreover, as an instrumentality of the national
government, it is itself not liable to pay real estate taxes assessed by the City of Manila against its Katigbak
and Concepcion-Arroceros properties. The tax exemption the property of the Republic or its instrumentality
carries ceases only if, as stated in Sec. 234(a) of the LGC of 1991, "beneficial use thereof has been granted, for
a consideration or otherwise, to a taxable person." GSIS, as a government instrumentality, is not a taxable
juridical person under Sec. 133(o) of the LGC. GSIS, however, lost in a sense that status with respect to the
Katigbak property when it contracted its beneficial use to Manila Hotel Corporation, doubtless a taxable
person. Following the "beneficial use" rule, accrued real property taxes are due from the Katigbak property,
leased as it is to a taxable entity. The Katigbak property cannot in any event be subject of a public auction sale,
notwithstanding its realty tax delinquency. This means that the City of Manila has to satisfy its tax claim by
serving the accrued realty tax assessment on MHC, as the taxable beneficial user of the Katigbak property and,
in case of nonpayment, through means other than the sale at public auction of the leased property.
Stages of Taxation
Payment
PILIPINAS SHELL PETROLEUM CORPORATION (PSPC) v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 172598, December 21, 2007, Velasco, Jr., J.
TCCs are immediately valid and effective after their issuance. If the TCCs are considered to be subject to
post-audit as a suspensive condition, the very purpose of the TCC would be defeated as there would be no
guarantee that the TCC would be honored by the government as payment for taxes. Also, the transferee in good
faith and for value who has relied on the Centers representation of the genuineness and validity of the TCC
transferred to it may not be legally required to pay again the tax covered by the TCC which has been belatedly
declared null.
Facts:
From 1988-1997, PSPC paid part of its excise tax liabilities with Tax Credit Certificates (TCC) which it
acquired through the Department of Finance One Stop Shop Inter-Agency Tax Credit Center. When PSPC
signified its intent to use the TCCs to pay part of its excise tax liabilities, said payments were approved and
the BIR accepted such as payments. However, on 1998, BIR sent a collection letter to PSPC for alleged
deficiencies excise tax liabilities, alleging that PSPC is not a qualified transferee of the TCCs it acquired from
other BOI-registered companies. CTA en banc ordered PSPS to pay and ruled that the TCCs are subject to the
results of the post-audit done by the Center since their issuance is subject to a suspensive condition.
Issue:
Whether or not the assessment against PSPC for deficiency excise taxes is valid

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Ruling:
NO. A TCC is an undertaking by the government through the BIR or DOF, acknowledging that a
taxpayer is entitled to a certain amount of tax credit from either an overpayment of income taxes or a direct
benefit granted by law. Hence, TCCs are immediately valid and effective after their issuance. If the TCCs are
considered to be subject to post-audit as a suspensive condition, the very purpose of the TCC would be
defeated as there would be no guarantee that the TCC would be honored by the government as payment for
taxes. No investor would take the risk of utilizing TCCs if these were subject to a post-audit that may
invalidate them, without prescribed grounds or limits as to the exercise of said post-audit.
Moreover, any fraud or breach of law relating to the issuance of the TCC by the Center to the
transferor or original grantee is the latters liability. The transferee in good faith and for value who has relied
on the Centers representation of the genuineness and validity of the TCC transferred to it may not be legally
required to pay again the tax covered by the TCC which has been belatedly declared null. PSPC is a transferee
in good faith hence, it cannot be prejudiced by such.
Refund
ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION v. COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 159490, February 18, 2008, Velasco, Jr., J.
Tax refunds are in the nature of tax exemptionsand are to be construed strictissimi juris against the
taxpayer.
Facts:
Atlas Corporation is a VAT-registered entity. It filed an application for the issuance of a tax credit
certificate or refund for refundable input VAT. It then filed a petition for review with the CTA which denied
the same for insufficiency of evidence to warrant the grant of tax credit or refund. It pointed out that Atlas
failed to submit photocopies of export documents, invoices, or receipts evidencing the sale of goods and
others. On the other hand, Atlas asserted that the documents it presented, coupled with the testimony of its
Accounting and Finance Manager sufficiently proved its case. The CA struck down Atlas contention that it has
sufficiently established the existence of its export sales through the testimony of its Accounting and Finance
Manager, as her testimony is self-serving.
Issue:
Whether Atlas has sufficiently proven entitlement to a tax credit or refund only by submission of a
summary of its invoices.
Ruling:
NO. The summary of invoices or transactions presented by Atlas does not replace the pertinent
invoices, receipts, and export sales documents as competent evidence to prove the fact of refundable or
creditable input VAT. Indeed, the summary presented with the certification by an independent Certified
Public Accountant (CPA) and the testimony of Atlas Accounting and Finance Manager are merely
corroborative of the actual input VAT it paid and the actual export sales. It would not be proper to allow Atlas
to simply prevail and compel a tax credit or refund in the amount it claims without proving the amount of its
claim.

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M.E. HOLDING CORPORATION v. COURT OF APPEALS
G.R. No. 160193, March 23, 2008, Second Division, Velasco, Jr., J.
Claims for tax refund / credit are in the nature of claims for exemption. Accordingly, the law relied upon
is not only strictissimi juris against the taxpayer, but also the proofs presented entitling a taxpayer to an
exemption are strictissimi scrutinized.
Facts:
M.E. Holding Corporation is claiming the 20% sales discount it granted to qualified senior citizens.
M.E. treated the discount as deductions from its gross income purportedly in accordance with RR No. 2-84.
However it filed the return under protest arguing that the discount should be treated as tax credit and not as
mere deductions. Due to the inaction of the BIR, M.E. filed an appeal before the CTA reiterating its position.
CTA granted M.E.s petition, but the claimed refund was reduced due to M.E.s failure to properly support the
claimed discount with the corresponding cash slips. The CA dismissed the petition to it and upheld the
decision of the CTA.
Issue:
Whether or not the CA erred and has deviated from applicable laws and jurisprudence in not
appreciating other competent evidence proving the amount of discounts granted to senior citizens and
merely relying solely on the cash slips.
Ruling:
NO. The CA was correct in disallowing and not considering the belatedly-submitted cash receipts to
be part of the 20% sales discount for M.E.s taxable year 1995. This is as it should be in the light of Sec. 34 of
Rule 132 prescribing that no evidence shall be considered unless formally offered with a statement of the
purpose why it is being offered. In addition, the rule is that the best evidence under the circumstance must be
adduced to prove the allegations in a complaint, petition, or protest. Only when the best evidence cannot be
submitted may secondary evidence be considered. But, in the instant case, the disallowed cash slips, the best
evidence at that time, were not part of M.E.s offer of evidence. While it may be true that the authenticated
special record books yield the same data found in the cash slips, they cannot plausibly be considered by the
courts a quo and made to corroborate pieces of evidence that have, in the first place, been disallowed.
Claims for tax refund / credit are in the nature of claims for exemption. Accordingly, the law relied
upon is not only strictissimi juris against the taxpayer, but also the proofs presented entitling a taxpayer to an
exemption are strictissimi scrutinized.

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NIRC
Income Taxation
Gross Income
CAGAYAN VALLEY DRUG CORPORATION v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 151413, February 13, 2008, Velasco, Jr., J.
This fact that the corporation suffered loss does not preclude the corporation from availing of its
statutory right to a tax credit for the 20% sales discounts it granted to qualified senior citizens.
Facts:
Cagayan Valley Drug Corporation is a corporation under Philippine laws which operates two
drugstores under the name of Mercury Drug. The corporation alleged that it granted 20% discount to senior
citizens and treated the same as deductions from the gross sales instead of treating them as tax credit in
order to arrive at the net sales. However, the corporation filed with BIR a claim for tax refund/credit of the
full amount of the 20% as discount it granted to senior citizens for the year 1995.
Issue:
Whether or not the corporation is entitled to refund or tax credit.
Ruling:
Yes. This court held that private drug companies are entitled to a tax credit for the 20% sales
discounts they granted to qualified senior citizens under RA 7432 and nullified Secs. 2.i and 4 of RR 2-94. It is
true that petitioner did not pay any tax in 1995 since it suffered a net loss for that taxable year. This fact,
however, without more, does not preclude petitioner from availing of its statutory right to a tax credit for the
20% sales discounts it granted to qualified senior citizens. The fact that petitioner suffered a net loss in 1995
will not make the tax credit due to petitioner unavailable. This is the core issue resolved in Central Luzon,
where we ruled that the net loss for a taxable year does not bar the grant of the tax credit to a taxpayer
pursuant to RA 7432 and that prior tax payments are not required for such grant.

Non-resident Foreign Corporations


SOUTH AFRICAN AIRWAYS v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 180356, February 16, 2010, Velasco, Jr., J.
The general rule is that resident foreign corporations shall be liable for a 32% corporate income tax
(now 30%) on their income from within the Philippines, except for resident foreign corporations that are
international carriers that derive income from carriage of persons, excess baggage, cargo and mail originating
from the Philippines which shall be taxed at 2 1/2% of their Gross Philippine Billings
Facts:
Petitioner South African Airways is an international air carrier having no landing rights in the
country and not registered with the Securities and Exchange Commission as a corporation, branch office, or
partnership. Thus, it is not licensed to do business in the Philippines. Petitioner filed a claim for refund with
the CTA for erroneously paid tax on Gross Philippine Billings (GPB) for the taxable year 2000.

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The CTA denied the claim of refund reasoning that petitioner was not liable to pay tax on its GPB
under Section 28(A)(3)(a) of the National Internal Revenue Code (NIRC) of 1997. The CTA, however, stated
that petitioner is liable to pay a tax of 32% (30%) on its income derived from the sales of passage documents
in the Philippines.
Issue:
Whether petitioner, as an off-line international carrier selling passage documents through an
independent sales agent in the Philippines, is engaged in trade or business in the Philippines subject to the
32% (30%) income tax imposed by Section 28 (A)(1) of the 1997 NIRC.
Ruling:
YES. To reiterate, the correct interpretation of the above provisions is that, if an international air
carrier maintains flights to and from the Philippines, it shall be taxed at the rate of 2 1/2% of its Gross
Philippine Billings, while international air carriers that do not have flights to and from the Philippines but
nonetheless earn income from other activities in the country will be taxed at the rate of 32% (30%) of such
income.
Petitioner, being an international carrier with no flights originating from the Philippines, does not fall
under the exception. As such, petitioner must fall under the general rule. This principle is embodied in the
Latin maxim, exception firmat regulam in casibus non exceptis, which means, a thing not being excepted must
be regarded as coming within the purview of the general rule.

Donors tax
Sale/Exchange/Transfer of property for insufficient consideration
THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY v. THE SECRETARY OF
FINANCE and THE COMMISSIONER OF INTERNAL REVENUE
G.R. No. 210987. November 24, 2014. THIRD DIVISION. Velasco, Jr., J.
The absence of donative intent, if that be the case, does not exempt the sales of stock transaction from
donor's tax since Sec. 100 of the NIRC categorically states that the amount by which the fair market value of the
property exceeded the value of the consideration shall be deemed a gift.
Facts:
In a competitive bidding organized by The Philippine American Life and General Insurance Company
(Philamlife), STI Investments, Inc., acquired the Class A shares of Philamlife in Philam Care Health Systems,
Inc. (PhilamCare). Later, Philamlife filed an application for a certificate authorizing registration/tax clearance
with the Bureau of Internal Revenue to facilitate the transfer of the shares but was informed that it needed to
secure a BIR ruling in connection with its application due to potential donors tax liability. In compliance
thereto, petitioner requested a ruling that the sale was not subject to donors tax since there was no donative
intent.
Commissioner on Internal Revenue (Commissioner) denied Philamlifes request holding that the
selling price of the shares thus sold was lower than their book value based on the financial statements of
PhilamCare thus donors tax became imposable on the price difference pursuant to Sec. 100 of the National
Internal Revenue Code.
Issue:

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Whether or not the price difference in petitioners adverted sale of shares in PhilamCare attracts
donors tax.
Ruling:
YES. The price difference is subject to donor's tax. The absence of donative intent, if that be the case,
does not exempt the sales of stock transaction from donor's tax since Sec. 100 of the NIRC categorically states
that the amount by which the fair market value of the property exceeded the value of the consideration shall
be deemed a gift. Thus, even if there is no actual donation, the difference in price is considered a donation by
fiction of law.

Value-Added Tax (VAT)


Zero-rated sales of goods or properties and effectively zero-rated sales of goods or properties
THE COMMISSIONER OF INTERNAL REVENUE v. ACESITE (PHILIPPINES) HOTEL CORPORATION
G.R. No. 147295, 16 February 2007, Velasco, Jr., J.
Facts:
Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel. It leases a part of the
hotels premises to PAGCOR. For January 1996 to April 1997, Acesite incurred VAT from its rental income
and sale of food and beverages to PAGCOR. Acesite thereafter shifted the said tax to PAGCOR by
incorporating it in the amount assessed to the latter but it refused to pay the taxes on account of its tax
exempt status. Acesite thus paid the VAT to the CIR as it feared the legal consequences of non-payment of the
tax. However, Acesite belatedly arrived at the conclusion that its transaction with PAGCOR was subject to
zero rate as it was rendered to a tax-exempt entity. On 21 May 1998, Acesite filed an administrative claim for
refund with the CIR but the latter failed to resolve the same.
Issue:
Whether the VAT exempt status of PAGCOR extends to Acesite.
Ruling:
YES. Transactions with a VAT exempt taxpayer is subject to zero rated VAT. While it was proper for
PAGCOR not to pay the 10% VAT (now 12%) charged by Acesite, the latter is not liable for the payment of it
as it is exempt in this particular transaction by operation of law to pay the indirect tax. Such exemption falls
within the former Section 102 (b) (3) of the 1977 Tax Code which exempts services rendered to persons or
entities whose exemption under special laws.
The rationale for the exemption from indirect taxes provided for in P.D. 1869 and the extension of
such exemption to entities or individuals dealing with PAGCOR in casino operations are best elucidated from
the 1987 case of Commissioner of Internal Revenue v. John Gotamco & Sons, Inc., where the absolute tax
exemption of the World Health Organization (WHO) upon an international agreement was upheld. We held in
said case that the exemption of contractee WHO should be implemented to mean that the entity or person
exempt is the contractor itself who constructed the building owned by contractee WHO, and such does not
violate the rule that tax exemptions are personal because the manifest intention of the agreement is to
exempt the contractor so that no contractors tax may be shifted to the contractee WHO. Thus, the

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proviso in P.D. 1869, extending the exemption to entities or individuals dealing with PAGCOR in casino
operations, is clearly to proscribe any indirect tax, like VAT, that may be shifted to PAGCOR.

Refund or tax credit of excess input tax


COMMISSIONER OF INTERNAL REVENUE v. MIRANT PAGBILAO CORPORATION (Formerly SOUTHERN
ENERGY QUEZON INC.)
G.R. No. 172129, September 12, 2008, Velasco, Jr., J.
Under Sec. 112(A) of the NIRC, unutilized input VAT payments not otherwise used for any internal
revenue tax due the taxpayer must be claimed within two years reckoned from the close of the taxable quarter
when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not.
Facts:
MPC sells the power it generates to the National Power Corp. (NPC). It engaged the services of
Mitsubishi Corp. to construct the electrical and mechanical portion of its plant in Pagbilao, Quezon from
1993-1996. Under its charter, NPC is exempt from all taxes direct and indirect. Due to NPCs tax exempt
status, MPC believed that the sale of power generation services to NPC is zero-rated for VAT purposes. It then
filed an application for zero-rating before the CIR. Believing itself to be zero-rated, it was only in 1998 that
MPC paid Mitsubishi the VAT component for the construction. The corresponding progress billings was from
the construction project was from April 1993 to September 1996. MPC filed an administrative claim for
refund for the creditable input VAT paid to Mitubishi on December 10, 1999.
Issue:
Whether MPC is entitled to the refund.
Ruling:
NO. The claim for refund or tax credit for the creditable input VAT payment made was filed beyond
the period provided by law for such claim. The prescriptive period commences from the close of the taxable
quarter when the sales were made and not from the time the input VAT was paid nor from the time the
official receipt was issued. Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent
transaction, said taxpayer only has a year to file a claim for refund or tax credit of the unutilized creditable
input VAT. The reckoning frame would always be the end of the quarter when the pertinent sales or
transaction was made, regardless when the input VAT was paid. Be that as it may, and given that the last
creditable input VAT due for the period covering the progress billing of September 6, 1996 is the third
quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input VAT refund or tax
credit for said quarter prescribed two years after September 30, 1996 or, to be precise, on September 30,
1998. Consequently, MPCs claim for refund or tax credit filed on December 10, 1999 had already prescribed.
Secs. 204(C) and 229 of the NIRC where the claim for refund must be filed within two years after the
payment of the tax are also inapplicable. They only apply to instances of erroneous payment or illegal
collection for internal revenue taxes, and not tax refund for creditable input VAT on zero-rated sales.

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Tax Remedies under the NIRC
Suspension of the running of statute of limitations
COMMISSIONER OF INTERNAL REVENUE v. NEXT MOBILE INC.,
G.R. No. 212825, December 7, 2015, Velasco, Jr., J.
The general rule is that when a waiver does not comply with the requisites for its validity specified
under RMO No. 20-90 and RDAO 01-05, it is invalid and ineffective to extend the prescriptive period to assess
taxes. However, due to its peculiar circumstances, we shall treat this case as an exception to this rule and find the
Waivers valid for the reasons discussed below.
Facts:
Ma. Lida Sarmiento (Sarmiento), respondents (NEXT MOBILE INC) Director of Finance, executed
several waivers of the statute of limitations to extend the prescriptive period of assessment for taxes due in
taxable year ending December 31, 2001 (Waivers).
However, the waiver failed to comply with provisions of RMO No. 20-90 and RDAO 05-01. In the
instant case, the CTA found the Waivers invalid because of the following flaws: (1) they were executed
without a notarized board authority; (2) the dates of acceptance by the BIR were not indicated therein; and
(3) the fact of receipt by respondent of its copy of the Second Waiver was not indicated on the face of the
original Second Waiver. To be sure, both parties in this case are at fault.
Issue:
Whether CIRs right to assess respondents deficiency taxes had already prescribed.
Ruling:
NO. Section 2033 of the 1997 NIRC mandates the BIR to assess internal revenue taxes within three
years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such
return, whichever comes later. Hence, an assessment notice issued after the three-year prescriptive period
is not valid and effective. Exceptions to this rule are provided under Section 222 of the NIRC. Section 222(b)
of the NIRC provides that the period to assess and collect taxes may only be extended upon a written
agreement between the CIR and the taxpayer executed before the expiration of the three-year period
provided it comply with the requisites for its validity specified under RMO No. 20-90 and RDAO 01-05.
Here, it did not comply with the procedure for a valid agreement for the waiver of the statute of
limitations. However, the Court cannot tolerate this highly suspicious situation. In this case, the taxpayer, on
the one hand, after voluntarily executing waivers, insisted on their invalidity by raising the very same defects
it caused. On the other hand, the BIR miserably failed to exact from respondent compliance with its rules. The
BIRs negligence in the performance of its duties was so gross that it amounted to malice and bad faith.
Moreover, the BIR was so lax such that it seemed that it consented to the mistakes in the Waivers. Such a
situation is dangerous and open to abuse by unscrupulous taxpayers who intend to escape their
responsibility to pay taxes by mere expedient of hiding behind technicalities.
It is true that petitioner was also at fault here because it was careless in complying with the
requirements of RMO No. 20-90 and RDAO 01-05. Nevertheless, petitioner's negligence may be addressed by
enforcing the provisions imposing administrative liabilities upon the officers responsible for these errors.
The BIR's right to assess and collect taxes should not be jeopardized merely because of the mistakes and
lapses of its officers, especially in cases like this where the taxpayer is obviously in bad faith.

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Refund
PHILIPPINE NATIONAL BANKv. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 206019, March 18, 2015, Velasco Jr., J.
The probative value of BIR Form 2307, which is basically a statement showing the amount paid for the
subject transaction and the amount of tax withheld therefrom, is to establish only the fact of withholding of the
claimed creditable withholding tax. There is nothing in BIR Form No. 2307 which would establish either
utilization or non-utilization, as the case may be, of the creditable withholding tax.
Facts:
Gotesco Tyan Ming Development, Inc. entered into a syndicated loan agreement with PNB and three
(3) other banks. To secure the loan, Gotesco mortgaged the Ever Ortigas Commercial Complex. For its failure
to pay its obligation, the secured property was foreclosed. As it prepared for the consolidation of its
ownership, PNB withheld and remitted to the BIR withholding taxes equivalent to 6% of the bid price.
In its claim for refund, PNB explained that it inadvertently applied the six percent (6%) creditable
withholding tax rate on the sale of real property classified as ordinary asset, when it should have applied the
five percent (5%) creditable withholding tax rate on the sale of ordinary asset, as provided in Section 2.57.2
(J)(B) of Revenue Regulation No. 2-98 as amended by RR No. 6-01, considering that Gotesco is primarily
engaged in the real estate business.
Issue:
Whether PNB presented sufficient evidence to be entitled to the refund erroneously paid to BIR.
Ruling:
YES. Although PNB was not able to submit Gotescos BIR Form No. 2307, the Court is persuaded and
so declares that PNB submitted evidence sufficiently showing Gotescos non-utilization of the taxes withheld
subject of the refund.
First, Gotescos Audited Financial Statements for year 2003, which it subsequently filed with the BIR
in 2004, still included the foreclosed Ever Ortigas Commercial Complex, in the Asset account Property and
Equipment. As advised by the First Division, Gotesco presented its 2003 ITR along with its 2003 Schedule of
Prepaid Taxwhich itemized in detail the withholding taxes claimed by Gotesco for the year 2003 amounting to
P6,014,433. The aforesaid schedule shows that the creditable withholding taxes Gotesco utilized to pay for its
2003 tax liabilities came from the rental payments of its tenants in the Ever Ortigas Commercial Complex, not
from the foreclosure sale. Further, Gotescos former accountant stated in her Judicial Affidavit that the tax
credits claimed for year 2003 did not include any portion of the amount subject to the claim for refund. First,
she explained that Gotesco could not have possibly utilized the amount claimed for refund as it was not even
aware that PNB paid the six percent (6%) creditable withholding tax since no documents came to its attention
which showed such payment by PNB. As she also explained, had Gotesco claimed the entire or even any
portion of P74,400,028.49, corresponding to the six percent (6%) tax withheld by PNB, the amount appearing
in Gotescos 2003 ITR should have reflected the additional amount of P74,400,028.49.
There is no need for PNB to present Gotescos BIR Form No. 2307, as insisted by the First Division,
because the information contained in the said form may be very well gathered from other documents already
presented by PNB. Thus, the presentation of BIR Form No. 2307 would be in the final analysis a superfluity, of
little or no value. While perhaps it may be necessary to prove that the taxpayer did not use the claimed

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creditable withholding tax to pay for his/its tax liabilities, there is no basis in law or jurisprudence to say that
BIR Form No. 2307 is the only evidence that may be adduced to prove such non-use.

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LOCAL GOVERNMENT CODE OF 1991, AS AMENDED
Local Government Taxation
FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES v. COLON HERITAGE REALTY CORPORATION
G.R. No. 203754, June 16, 2015, Velasco, Jr., J.
Local fiscal autonomy includes the power of LGUs to allocate their resources in accordance with their
own priorities. By earmarking the income on amusement taxes imposed by the LGUs in favor of FDCP and the
producers of graded films, the legislature appropriated and distributed the LGUs' funds-as though it were legally
within its control-under the guise of setting a limitation on the LGUs' exercise of their delegated taxing power.
Facts:
City of Cebu passed a City Tax Ordinance. Central to the case at bar are Sections 42 and 43, Chapter XI
thereof which require proprietors, lessees or operators of theatres, cinemas, concert halls, circuses, boxing
stadia, and other places of amusement, to pay an amusement tax to the Office of the City Treasurer of Cebu
City. Almost a decade later, Congress passed RA 9167, creating the Film Development Council of the
Philippines (FDCP). Secs. 13 and 14 of RA 9167 provided for the tax treatment of certain graded films.
Accordingly, FDCP sent demand letters for unpaid amusement tax reward due to the producers of the Grade
"A" or "B" films to several cinema proprietors and operators in Cebu City including Colon Heritage Realty
Corp. Because of the persistent refusal of the proprietors and cinema operators to remit the said amounts, the
city filed before the RTC a petition which sought the declaration of Secs. 13 and 14 of RA 9167 as invalid and
unconstitutional.
Issue:
Whether Sections 13 and 14 of RA 9167 are invalid for being unconstitutional.
Ruling:
YES. It is apparent that what Congress did in issuing RA 9167 was not to exclude the authority to levy
amusement taxes from the taxing power of the covered LGUs, but to earmark, if not altogether confiscate, the
income to be received by the LGU from the taxpayers in favor of and for transmittal to FDCP, instead of the
taxing authority. This is in clear contravention of the constitutional command that taxes levied by LGUs shall
accrue exclusively to said LGU and is repugnant to the power of LGUs to apportion their resources in line with
their priorities. In the case at bar, through the application and enforcement of Sec. 14 of RA 9167, the income
from the amusement taxes levied by the covered LGUs did not and will under no circumstance accrue to them,
not even partially, despite being the taxing authority therefor. Congress, therefore, clearly overstepped its
plenary legislative power, the amendment being violative of the fundamental law's guarantee on local
autonomy. Moreover, it is undoubtedly a usurpation of the latter's exclusive prerogative to apportion their
funds, an impermissible intrusion into the LGUs' constitutionally-protected domain which puts to naught the
guarantee of fiscal autonomy to municipal corporations enshrined in our basic law.
It was argued that subject Sec. 13 is a grant by Congress of an exemption from amusement taxes in
favor of producers of graded films. Without question, this Court has previously upheld the power of Congress
to grant exemptions over the power of LGUs to impose taxes. This amusement tax reward, however, is not a
tax exemption. Exempting a person or entity from tax is to relieve or to excuse that person or entity from the
burden of the imposition. Here, however, it cannot be said that an exemption from amusement taxes was
granted by Congress to the producers of graded films. Take note that the burden of paying the amusement tax
in question is on the proprietors, lessors, and operators of the theaters and cinemas that showed the graded
films. Simply put, both the burden and incidence of the amusement tax are borne by the proprietors, lessors,
and operators, not by the producers of the graded films. The transfer of the amount to the film producers is

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actually a monetary reward given to them for having produced a graded film, the funding for which was taken
by the national government from the coffers of the covered LGUs. Without a doubt, this is not an exemption
from payment of tax.

Real Property Taxation


CITY ASSESSOR OF CEBU CITY v. ASSOCIATION OF BENEVOLA DE CEBU, INC.
G.R. No. 152904, June 8, 2007, Velasco, Jr., J.
All lands, buildings, and other improvements thereon actually, directly and exclusively used for
hospitals, cultural or scientific purposes, and those owned and used by local water districts, and governmentowned or controlled corporations rendering essential public services in the supply and distribution of water
and/or generation and transmission of electric power shall be classified as special.
Facts:
Association of Benevola de Cebu, Inc. is a non-stock, non-profit organization which is the owner of
Chong Hua Hospital (CHH). The association constructed the CHH Medical Arts Center (CHHMAC). A Certificate
of Occupancy was issued to the center with a classification of "Commercial Clinic." The city assessor assessed
the CHHMAC building as "commercial" at the assessment level for commercial buildings, and not for special
assessment currently imposed for CHH and its other separate buildingsthe CHH's Dietary and Records
Departments. The association filed with the LBAA for reconsideration, asserting that CHHMAC is part of CHH
and ought to be imposed the same special assessment level that of CHH. The LBAA ruled in favor of the
association stating that it is of public knowledge that hospitals have plenty of spaces leased out to medical
practitioners, which is both an accepted and desirable fact; thus, respondent's claim is not disputed that such
is a must for a tertiary hospital like CHH which decision was affirmed by the CBAA. Likewise, the CA affirmed
the same that the CHHMAC is part and parcel of CHH since the facilities and utilities of CHHMAC are necessary
for the CHH to achieve its purpose.
Issue:
Whether the medical arts center built by the hospital to house its doctors is a commercial
establishment.
Ruling:
NO. We so hold that CHHMAC is an integral part of CHH. It is undisputed that the doctors and medical
specialists holding clinics in CHHMAC are those duly accredited by CHH, that is, they are consultants of the
hospital and the ones who can treat CHH's patients confined in it. This fact alone takes away CHHMAC from
being 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. The CHHMAC facility,
while seemingly not indispensable to the operations of CHH, is definitely incidental to and reasonably
necessary for the operations of the hospital.
Given the foregoing arguments, we fail to see any reason why the CHHMAC building should be
classified as "commercial" as it is not operated primarily for profit but as an integral part of CHH. The
CHHMAC, with operations being devoted for the benefit of the CHH's patients, should be accorded the special
assessment. In this regard, we point with approbation the appellate court's application of Sec. 216 in relation
with Sec. 215 of the Local Government Code on the proper classification of the subject CHHMAC building as
"special" and not "commercial."

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JUDICIAL REMEDIES (R.A. No. 1125, as amended, and the Revised Rules of the Court of Tax Appeals)
Jurisdiction of the Court of Tax Appeals
THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY v. THE SECRETARY OF
FINANCE and THE COMMISSIONER OF INTERNAL REVENUE
G.R. No. 210987. November 24, 2014. THIRD DIVISION. Velasco, Jr., J.
There is no provision in law that expressly provides where exactly the ruling of the Secretary of Finance
under the adverted NIRC provision is appealable to. However, Sec. 7(a)(1) of RA 1125, as amended, addresses the
seeming gap in the law as it vests the CTA, albeit impliedly, with jurisdiction over the CA petition as "other
matters" arising under the NIRC or other laws administered by the BIR.
Facts:
In a competitive bidding organized by The Philippine American Life and General Insurance Company
(Philamlife), STI Investments, Inc., acquired the Class A shares of Philamlife in Philam Care Health Systems,
Inc. (PhilamCare). To facilitate the transfer of the shares, Philamlife filed an application for a certificate
authorizing registration/tax clearance with the Bureau of Internal Revenue but was informed that it needed
to secure a BIR ruling in connection with its application due to potential donors tax liability. Philamlife
complied however Commissioner on Internal Revenue (Commissioner) denied the request. Appeal to the
Secretary of Finance was unsuccessful which prompted Philamlife to appeal to CA. CA however dismissed the
petition for lack of jurisdiction holding that the it is the Court of Tax Appeals (CTA) which has jurisdiction
over the issues raised.
Issue:
Whether or not the CA erred in dismissing the CA Petition for lack of jurisdiction
Ruling:
NO. There is no provision in law that expressly provides where exactly the ruling of the Secretary of
Finance under the adverted NIRC provision is appealable to. However, Sec. 7(a)(1) of RA 1125, as amended,
addresses the seeming gap in the law as it vests the CTA, albeit impliedly, with jurisdiction over the CA
petition as "other matters" arising under the NIRC or other laws administered by the BIR.
Even though the provision suggests that it only covers rulings of the Commissioner, it is, nonetheless,
sufficient enough to include appeals from the Secretarys review under Sec. 4 of the NIRC. Indeed, to leave
undetermined the mode of appeal from the Secretary of Finance would be an injustice to taxpayers
prejudiced by his adverse rulings. To remedy this situation, the Court imply from the purpose of RA 1125 and
its amendatory laws that the CTA is the proper forum with which to institute the appeal. This is not, and
should not, in any way, be taken as a derogation of the power of the Office of President but merely as
recognition that matters calling for technical knowledge should be handled by the agency or quasi-judicial
body with specialization over the controversy. As the specialized quasi-judicial agency mandated to
adjudicate tax, customs, and assessment cases, there can be no other court of appellate jurisdiction that can
decide the issues raised in the CA petition, which involves the tax treatment of the shares of stocks sold.

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