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FUNDAMENTAL PRINCIPLES OF TAXATION

Chavez v Ongpin
GR No 76778, June 6, 1990
Facts:
On November 25, 1986, President Corazon Aquino issued EO 73 stating that
beginning January 1, 1987, the 1984 assessments shall be the basis of real property
taxes.
Francisco Chavez, a taxpayer and an owner of three parcels of land, questioned the
constitutionality of EO 74. He alleges that it accelerated the application of the
general revision of assessments to January 1, 1987 thereby mandating an excessive
increase in real property taxes by 100% to 400% on improvements, and up to 100%
on land; that any increase in the value of real property brought about by the
revision of real property values and assessments would necessarily lead to a
proportionate increase in real property taxes; that sheer oppression is the result of
increasing real property taxes at a period of time when harsh economic conditions
prevail; and that the increase in the market values of real property as reflected in
the schedule of values was brought about only by inflation and economic recession.
Issue:
Whether EO 73 Constitutional.
Held:
Yes. Without EO 73, the basis for collection of real property taxes will still be the
1978 revision of property values. Certainly, to continue collecting real property
taxes based on valuations arrived at several years ago, in disregard of the increases
in the value of real properties that have occurred since then is not in consonance
with a sound tax system.
Fiscal adequacy, which is one of the characteristics of a sound tax system, requires
that sources of revenue must be adequate to meet government expenditures and
their variations.

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Diaz v. Secretary of Finance
GR 193007, July 19, 2011
Facts:
Petitioner assails the validity of the impending imposition of value-added tax (VAT)
by the Bureau of Internal Revenue (BIR) on the collections of tollway operators.
Petitioners assert that the substantiation requirements for claiming input VAT make
the VAT on tollway operations impractical and incapable of implementation. They
cite the fact that, in order to claim input VAT, the name, address and tax
identification number of the tollway user must be indicated in the VAT receipt or
invoice. The manner by which the BIR intends to implement the VAT by rounding of
the toll rate and putting any excess collection in an escrow account is also illegal,
while the alternative of giving change to thousands of motorists in order to meet the
exact toll rate would be a logistical nightmare. Thus, according to them, the VAT on
tollway operations is not administratively feasible.
Issue:
Whether the imposition of VAT on tollway operators is not administratively feasible
and cannot be implemented.
Held:
No. Any declaration by the Court that the manner of its implementation is illegal or
unconstitutional would be premature. The Court cannot preempt the BIRs discretion
on the matter, absent any clear violation of law or the Constitution.
For the same reason, the Court cannot prematurely declare as illegal, BIR RMC 632010 which directs toll companies to record an accumulated input VAT of zero
balance in their books as of August 16, 2010, the date when the VAT imposition was
supposed to take efect. The issuance allegedly violates Section 111(A)of the Code
which grants first time VAT payers a transitional input VAT of 2% on beginning
inventory.
Administrative feasibility is one of the canons of a sound tax system. It simply
means that the tax system should be capable of being efectively administered and
enforced with the least inconvenience to the taxpayer. Non-observance of the
canon, however, will not render a tax imposition invalid except to the extent that
specific constitutional or statutory limitations are impaired. Thus, even if the
imposition of VAT on tollway operations may seem burdensome to implement, it is
not necessarily invalid unless some aspect of it is shown to violate any law or the
Constitution.

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Ormoc Sugar vs. Treasurer of Ormoc City
GR L-23794, 17 February 1968
Facts:
In 1964, the Municipal Board of Ormoc City passed a municipal Tax Ordinance 4,
imposing on any and all productions of centrifugal sugar milled at the Ormoc Sugar
Inc. in Ormoc City a municpal tax equivalent to 1% per export sale to the United
States and other foreign countries.
Said company filed before the CFI of Leyte a complaint against the City of Ormoc, its
Treasurer, Municipal Board and Mayor, alleging sasid ordinance is violative of the
equal protection clause and the rule of uniformity of taxation, among other things.
Ormoc Sugar Company Inc. was the only sugar central in Ormoc City at the time.
Issue:
Whether constitutional limits on the power of taxation, were infringed. (EPC and
uniformity of taxation)
Held:
The Ordinance taxes only centrifugal sugar produced and exported by the Ormoc
Sugar Co. Inc. and none other. At the time of the taxing ordinance’s enacted, the
company was the only sugar central in Ormoc City.
The classification, to be reasonable, should be in terms applicable to future
conditions as well. The taxing ordinance should not be singular and exclusive as to
exclude any subsequently established sugar central, of the same class as the
present company, from the coverage of the tax. As it is now, even if later a similar
company is set up, it cannot be subject to the tax because the ordinance expressly
points only to the company as the entity to be levied upon.

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PHILEX Mining Corporation v Commission on Internal Revenue
G.R. No. 125704. August 28, 1998
Facts:
BIR sent a letter to Philex asking it to settle its tax liabilities for 1991-1992 in the
total
amount of P123,821,982.52. Philex protested the demand for payment of the tax
liabilities stating that it has pending claims for VAT input credit/refund for the taxes
it paid for the years 1989 to 1991 in the amount of P119,977,037.02 plus interest.
Philex was able to obtain its VAT input credit/refund not only for the taxable year
1989 to 1991 but also for 1992and 1994
In view of the grant of its VAT input credit/refund, Philex now contends that the
same should, ipso jure, of-set its excise tax liabilities, since both had already
become “due and demandable, as well as fully liquidated;” hence, legal
compensation can properly take place.
Issue:
Whether there should be a set-of.
Held:
No.
“Taxes cannot be subject to compensation for the simple reason that the
government and the taxpayer are not creditors and debtors of each other. There is a
material distinction between a tax and debt. Debts are due to the Government in its
corporate capacity, while taxes are due to the Government in its sovereign
capacity.”
Philex’s claim is an outright disregard of the basic principle in tax law that taxes are
the lifeblood of the government and so should be collected without unnecessary
hindrance.A taxpayer cannot refuse to pay his taxes when they fall due simply
because he has a claim against the government or that the collection of the tax is
contingent on the result of the lawsuit it filed against the government. Moreover,
Philex’s theory that would automatically apply its VAT input credit/refund against its
tax liabilities can easily give rise to confusion and abuse, depriving the government
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to exclude the remedy in an action or any indebtedness of the State or municipality to one who is liable to the State or municipality for taxes.50 as reforestation charges. to the making and enforcing of which. contract or judgment as is allowed to be set-of under the statutes of set-of. Republic vs. Held: Internal revenue taxes.37 for forest charges. A claim for taxes is not such a debt. to the efect that he has no discretion to extend the time for paying the reforestation charges and also explained why not all denuded areas are being reforested. 5 | Page . the company has been found liable for an aggregate amount of P4. if it cannot be refunded. Neither are they subject of recoupment since they do not arise out of the contract or transaction sued on. it then contended that since the Republic (Government) has not made use of the reforestation charges for reforesting the denuded area of the land covered by the company’s license. Mambulao Lumber GR L-17725. cannot be the subject of set-of or compensation. Issue: Whether taxes may be subject of set-of or compensation. demand. it demanded that the Republic should refund said amount or. the personal consent of individual taxpayers is not required. The director of Forestry answered Mambulao Lumber.of authority over the manner by which taxpayers credit and ofset their tax liabilities. However. which are construed uniformly. in the light of public policy.802.127. Taxes are not in the nature of contracts between the parties but grow out of a duty to. such as forest charges. at least the company should be compensated with what it owed the Republic for reforestation charges. 28 February 1962 Facts: Mambulao Lumber Company paid the Government a total of P9. and are the positive acts of the government.

Republic vs. contract or judgment as is allowed to be set-of under the statutes of set-of. the company has been found liable for an aggregate amount of P4. Issue: Whether taxes may be subject of set-of or compensation. Held: Internal revenue taxes. in the light of public policy.50 as reforestation charges. to the efect that he has no discretion to extend the time for paying the reforestation charges and also explained why not all denuded areas are being reforested. such as forest charges. demand. Neither are they subject of recoupment since they do not arise out of the contract or transaction sued on.802.127. to exclude the remedy in an action or any indebtedness of the State or municipality to one who is liable to the State or municipality for taxes. The director of Forestry answered Mambulao Lumber. cannot be the subject of set-of or compensation.37 for forest charges. if it cannot be refunded. Mambulao Lumber GR L-17725. it demanded that the Republic should refund said amount or. A claim for taxes is not such a debt. Taxes are not in the nature of contracts between the parties but grow out of a duty 6 | Page . at least the company should be compensated with what it owed the Republic for reforestation charges. which are construed uniformly. it then contended that since the Republic (Government) has not made use of the reforestation charges for reforesting the denuded area of the land covered by the company’s license. 28 February 1962 Facts: Mambulao Lumber Company paid the Government a total of P9. However.

THE PHILIPPINE CEMENT MANUFACTURERS CORP. petitioner. the personal consent of individual taxpayers is not required. Private respondent Philippine Cement Manufacturers Corporation (Philcemcor) is an association of domestic cement manufacturers. Its principal stockholders are Taiheiyo Cement Corporation and Tokuyama Corporation. Philcemcor sought the imposition at first of provisional. and THE COMMISSIONER OF THE BUREAU OF CUSTOMS. purportedly the largest cement manufacturers in Japan. determined that critical circumstances existed justifying the imposition of provisional measures. and are the positive acts of the government. then later. to the making and enforcing of which. as well as caused depressed local prices.R. importation and exportation. SOUTHERN CROSS CEMENT CORPORATION. THE SECRETARY OF THE DEPARTMENT OF FINANCE.to. DTI issued an Order. definitive safeguard measures on the import of cement pursuant to the SMA. the Bureau of Import Services of the DTI. respondents. Respondent Department of Trade and Industry (DTI) accepted an application from Philcemcor. July 8.. production. 2004 FACTS: Petitioner Southern Cross Cement Corporation (Southern Cross) is a domestic corporation engaged in the business of cement manufacturing. imposing a provisional measure 7 | Page . THE SECRETARY OF THE DEPARTMENT OF TRADE & INDUSTRY. No. market share. 158540. alleging that the importation of gray Portland cement in increased quantities has caused declines in domestic production. vs. sales and employment. capacity utilization. After preliminary investigation. G.

received a request from the DTI for a formal investigation to determine whether or not to impose a definitive safeguard measure on imports of gray Portland cement. and. Thus the DTI issued an order that the application for safeguard measures against the importation of gray Portland cement filed by PHILCEMCOR (Case No. that the factual findings of the Tarif Commission on the existence or non-existence conditions warranting the imposition of general safeguard measures are binding upon the DTI Secretary. DOJ Secretary rendered an opinion stating that the DTI that it was bound by the negative finding of the Tarif Commission. Sothern cross file a MR Alleging that Philcemcor was not entitled to provisional relief. Prohibition and Mandamus. on 19 November 2001. CA render its decision held that the DTI Secretary is not bound by the factual findings of the Tarif Commission since such findings are merely recommendatory and they fall within the ambit of the Secretary’s discretionary review. It determined that the legislative intent is to grant the DTI Secretary the power to make a final decision on the Tarif Commissions recommendation. the Tarif Commission issued its Formal Investigation Report stating that The elements of serious injury and imminent threat of serious injury not having been established. that courts should not interfere in matters addressed to the sound discretion and coming under the special technical knowledge and training of such agencies. ISSUE: 8 | Page . Philcemcor received a copy of the DTI Decision on 12 April 2002.The Tarif Commission. The DTI has no alternative but to abide by the [Tarif] Commissions recommendations. likewise applied for a Temporary Restraining Order/Injunction to enjoin the DTI and the BOC from implementing the questioned Decision and Report. The CA granted the writ sought. Southern Cross likewise sought a clarificatory order as to whether the grant of the writ of preliminary injunction could extend the earlier imposition of the provisional measure beyond the two hundred (200)-day limit imposed by law. Ten days later. Despite the lapse of the period. the BOC continued to impose the provisional measure on all importations of Portland cement made by Southern Cross. But It refused to annul the findings of the Tarif Commission. it filed with the Court of Appeals a Petition for Certiorari. the proper remedy being a petition for review with the CTA conformably with the SMA. 02-2001) is hereby denied. the two-hundred (200)-day period for the imposition of the provisional measure expired. it is hereby recommended that no definitive general safeguard measure be imposed on the importation of gray Portland cement. citing the rule that factual findings of administrative agencies are binding upon the courts and its corollary. DTI requested an opinion from the Department of Justice . Thus southern cross filed an appeal to the Supreme court argues that the Court of Appeals has no jurisdiction over Philcemcors petition. DTI Secretary disagreed with the conclusion of the Tarif Commission.

the most fundamental 9 | Page . Whether or not the CA has jurisdiction over the case. and (iii) such ruling must be in connection with the imposition of a safeguard measure. Held : As to the issue of jurisdiction the SC held that. as well as the steps to be taken in case there is a negative final determination. The implication of the Court of Appeals holding is that the DTI Secretary may adopt a definitive safeguard measure. It reads: ”The petition for review shall comply with the same requirements and shall follow the same rules of procedure and shall be subject to the same disposition as in appeals in connection with adverse rulings on tax matters to the Court of Appeals. Under Section 29 of the SMA. whether or not the DTI Secretary may impose general safeguard measures in the absence of a positive final determination by the Tarif Commission. Section 29 of the SMA is worded in such a way that it places under the CTAs judicial review all rulings of the DTI Secretary.1. Undoubtedly. 2. In the same way that a question of whether to tax or not to tax is properly a tax matter. so is the question of whether to impose or not to impose a definitive safeguard measure. Section 13 details the procedure for the adoption of a safeguard measure. notwithstanding a negative determination made by the Tarif Commission. On another note. Since Congress mandated that the form and procedure adopted be analogous to a review of a CTA ruling by the Court of Appeals. The third requisite deserves closer scrutiny. which are connected with the imposition of a safeguard measure.” This is the only passage in the SMA in which the Court of Appeals is mentioned. This is sound and proper in light of the specialized jurisdiction of the CTA over tax matters. However. On the issue of Binding Effect of Tariff Commissions Factual Determination on DTI Secretary. the second paragraph of Section 29 similarly reveals the legislative intent that rulings of the DTI Secretary over safeguard measures should first be reviewed by the CTA and not the Court of Appeals. The express wish of Congress is that the petition conform to the requirements and procedure under Rule 43 of the Rules of Civil Procedure. The first two requisites are clearly present. Court of Appeals relied upon Section 13 of the SMA in ruling that the findings of the Tarif Commission do not necessarily constitute a final decision. (ii) the petition must be filed by an interested party adversely afected by the ruling. there are three requisites to enable the CTA to acquire jurisdiction over the petition for review contemplated therein: (i) there must be a ruling by the DTI Secretary. Section 13 prescribes certain limitations and restrictions before general safeguard measures may be imposed. This theoretical quandary need not come to pass. the legislative contemplation could not have been that the appeal be directly taken to the Court of Appeals.

The plain meaning of Section 5 shows that it is the Tarif Commission that has the power to make a positive final determination. as the executive power to impose definitive safeguard measures is but a delegated power the power of taxation. and other duties or imposts within the framework of the national development program of the Government. petitioner. and subject to such limitations and restrictions as it may impose. The restrictions and limitations imposed by Congress take on the mantle of a constitutional command. This power lodged in the Tarif Commission. G. Such legislative intent should be given full force and efect. No Costs.. JR. RAMON R. The DTI Secretary authority is derived from the SMA. 109289 October 3. The assailed Decision of the Court of Appeals is DECLARED NULL AND VOID and SET ASIDE. Article VI of the 1987 Constitution confirms the delegation of legislative power. by nature and by command of the fundamental law. 109446 October 3. DEL ROSARIO. warranted as they are by a constitutional fiat. import and export quotas. the petition is GRANTED. ONG. No. TAN. the Constitution also grants the delegating authority (Congress) the right to impose restrictions and limitations on the taxation power delegated to the President. as SECRETARY OF FINANCE & JOSE U. as COMMISSIONER OF INTERNAL REVENUE. Thus. respondents. 1994 10 | P a g e . which the executive branch is obliged to observe. No. being a preserve of the legislature. by law. WHEREFORE. the limitations imposed by Section 5 are absolute.R. it does not flow from any inherent executive power. This delegation of the taxation power by the legislative to the executive is authorized by the Constitution itself. The Decision of the DTI Secretary dated 25 June 2003 is also DECLARED NULL AND VOID and SET ASIDE. tonnage and wharfage dues. G. vs. yet ensures that the prerogative of Congress to impose limitations and restrictions on the executive exercise of this power: The Congress may. 1994 RUFINO R. At the same time. Section 28(2).R. must be distinguished from the power to impose the general safeguard measure which is properly vested on the DTI Secretary. authorize the President to fix within specified limits.restriction on the DTI Secretarys power in that respect is contained in Section 5 of the SMA that there should first be a positive final determination of the Tariff Commission which the Court of Appeals curiously all but ignored. Section 5 plainly evinces legislative intent to restrict the DTI Secretary’s power to impose a general safeguard measure by preconditioning such imposition on a positive determination by the Tarif Commission. tarif rates.

Whether or not the tax law is unconstitutional for violating due process 2. 3. No. Section 26(1) — Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof. as well as the Rules and Regulations promulgated by public respondents pursuant to said law. "Simplified Net Income Taxation Scheme for the Self-Employed and Professionals Engaged in the Practice of their Profession" (Petition in G.R. JR. Petitioners also contend it violated due process. ONG. in his capacity as SECRETARY OF FINANCE and JOSE U. MANUELITO O. . “An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed and Professionals Engaged In The Practice of Their Profession. CARAG. ELPIDIO C. JR. 11 | P a g e . CABALLES. DEL ROSARIO.Article VI. 2. JAMORA. and BENJAMIN A. CABALLES. 109289) when the full text of the title actually reads.. Amending Sections 21 and 29 of the National Internal Revenue Code. property without due process of law. Petitioners posit that RA 7496 is unconstitutional as it allegedly violates the following provisions of the Constitution: 1.' as amended. is deficient for being merely entitled. JAMORA AND SOMERA LAW OFFICES. CARLO A. 2-93 authority in HELD: In both issue the supreme court ruled in the negative As to the 1st issue at hand the Supreme court stated that. Petitioner contends that the title of HB 34314. in his capacity as COMMISSIONER OF INTERNAL REVENUE. progenitor of RA 7496. Whether or not public respondents exceeded their promulgating the Section 6 of Revenue Regulation No. SOMERA. respondents. petitioners. nor shall any person be denied the equal protection of the laws. Article III. .” ISSUE: 1. RAMON R. which amended certain provisions of the NIRC. The Congress shall evolve a progressive system of taxation. Article VI. Petitioners contended that public respondents exceeded their rule-making authority in applying SNIT to general professional partnerships. FACTS: Two consolidated cases assail the validity of RA 7496 or the Simplified Net Income Taxation Scheme ("SNIT").CARAG. Section 1 — No person shall be deprived of . vs. Section 28(1) — The rule of taxation shall be uniform and equitable.

The Court does not view this classification to be arbitrary and inappropriate. merely requires that all subjects or objects of taxation. No such transgression is so evident in herein case. VIDEOGRAM REGULATORY BOARD 12 | P a g e . Uniformity of taxation. either before or after the amendatory legislation. all things being equal.The due process clause may correctly be invoked only when there is a clear contravention of inherent or constitutional limitations in the exercise of the tax power. TIO vs. to both present and future conditions. (2) the categorization is germane to achieve the legislative purpose. What is apparent from the amendatory law is the legislative intent to increasingly shift the income tax system towards the schedular approach in the income taxation of individual taxpayers and to maintain. to place in an unequal footing or in significant variance the income tax treatment of professionals who practice their respective professions individually and of those who do it through a general professional partnership. the present global treatment on taxable corporations. are to be treated alike both in privileges and liabilities. Uniformity does not violate classification as long as: (1) the standards that are used therefor are substantial and not arbitrary. like the concept of equal protection. similarly situated. by and large. As to the 2nd issue the court held that There is no evident intention of the law. and (4) the classification applies equally well to all those belonging to the same class. (3) the law applies.

10). 134) and a 30% tax on the gross receipts of a videogram establishment. oppressive and/or unlawfully restraints trade in violation of the due process clause of the Constitution.R. L-75697. except such as those rest in the discretion of the authority which exercises it. discourages. assails the validity of PD 1987 citing especially Section 10 thereof. the legislature acts upon its constituents. in the very language of the decree. Tio. The power to impose taxes is one so unlimited in force and so searching in extent. and conferring authority or discretion as to its execution to be exercised under and in pursuance of the law. 1987 Facts: Valentin Tio is an operator of a videogram establishment which was adversely afected by Presidential Decree No. and such imposition was being harsh. the true distinction is between the delegation of power to make the law.D. Held: Yes. to the latter. payable to the local government (Sec. 13 | P a g e . 1987 entitled "An Act Creating the Videogram Regulatory Board". that the courts scarcely venture to declare that it is subject to any restrictions whatever. Besides. No. Petitioner contends that aside from its being a rider and not germane to the subject matter thereof. The fist cannot be done. No. no valid objection can be made. Issue: Whether or not PD 1987 a valid exercise of the taxing power of the state. a sufficient security against erroneous and oppressive taxation. This is. 1987 provides for the levy of a tax over each cassette sold (Sec.G. June 18. which necessarily involves a discretion as to what it shall be. and implementation. enforcement. It is beyond serious question that a tax does not cease to be valid merely because it regulates. In imposing a tax. P. in general. 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 Board. confiscatory. This is not a delegation of the power to legislate but merely a conferment of authority or discretion as to its execution. or even definitely deters the activities taxed." The petition was DISMISSED.

patents and technology owned by the latter including the right to manufacture. 1999 Facts: SC. S. License Agreement was duly registered with the Technology Transfer Board of the Bureau of Patents. USA is only subject to 10% withholding tax pursuant to the most-favored nation clause of the RP-US Tax Treaty. the provisions of the treaty must be construed strictly against it. which is known as the "most favored nation" clause. Respondent filed a petition for review before the CTA to claim a refund of the overpaid withholding tax on royalty payments. CIR contends that under RP-US Tax Treaty. 309 SCRA 87 June 25. Also petitioner argues that since S. entered into a license agreement with SC Johnson and Son. a domestic corporation organized and operating under the Philippine laws.. JOHNSON AND SON. and COURT OF APPEALS REVENUE vs. The Commissioner did not act on said claim for refund. CIR filed a petition for review with CA.. 1993. Since the RP-US Tax Treaty contains no "matching credit" provision as that provided in RP-West Germany Tax Treaty. SC.266. a non-resident foreign corporation was granted the right to use the trademark.DOUBLE TAXATION COMMISSIONER OF INTERNAL INC. INC was obliged to pay SC Johnson and Son. 1992 to May.00 representing overpaid withholding tax on royalty payments. that the phrase "paid under similar circumstances" does not 14 | P a g e . CTA decided for Respondent and ordered CIR to issue a tax credit certificate in the amount of P963. beginning July. JOHNSON AND SON. the preferential tax rate of 10% should apply hence royalties paid by the [respondent] to SC Johnson and Son.C. CA upheld CTA. the lowest rate of the Philippine tax at 10% may be imposed on royalties derived by a resident of the United States from sources within the Philippines only if the circumstances of the resident of the United States are similar to those of the resident of West Germany. Trade Marks and Technology Transfer under Certificate of Registration No. Respondent filed with the International Tax Afairs Division (ITAD) of the BIR a claim for refund of overpaid withholding tax on royalties arguing that Since the agreement was approved by the Technology Transfer Board. 8064. INC. the tax on royalties under the RP-US Tax Treaty is not paid under similar circumstances as those obtaining in the RP-West Germany Tax Treaty. Respondent countered that the "most favored nation" clause under the RP-US Tax Treaty refers to royalties paid under similar circumstances as those royalties subject to tax in other treaties.C. package and distribute the products. Johnson's invocation of the "most favored nation" clause is in the nature of a claim for exemption from the application of the regular tax rate of 25% for royalties. JOHNSON AND SON. USA royalties based on a percentage of net sales and subjected the same to 25% withholding tax on royalty payments which [respondent] paid from July 1992 to May 1993. United States of America (USA).

patents and technology. is based there. S. subject to the basic condition that the subject matter of taxation in that other tax treaty is the same as that in the original tax treaty under which the taxpayer is liable. i. 17 The United States is the state of residence since the taxpayer. located within the Philippines. the state of source is the Philippines because the royalties are paid for the right to use property or rights. S. The concessional tax rate of 10 percent provided for in the RP-Germany Tax Treaty should apply only if the taxes imposed upon royalties in the RP-US Tax Treaty and in the RP-Germany Tax Treaty are paid under similar circumstances. C. the RP-US Tax Treaty speaks of "royalties of the same kind paid under similar circumstances". that is.. A. because the "most favored nation" clause is intended to allow the taxpayer in one state to avail of more liberal provisions contained in another tax treaty wherein the country of residence of such taxpayer is also a party thereto. the state of residence and the state of source are both permitted to tax the royalties. thus. This would mean that private respondent must prove that the RP-US Tax Treaty grants similar tax reliefs to residents of the United States in respect of the taxes imposable upon royalties earned from sources within the Philippines as those allowed to their German counterparts under the RP-Germany Tax Treaty. ISSUE: Whether or not there is double taxation HELD: The Supreme court held in the negative In the case at bar. Under the RP-US Tax Treaty. Thus there being no double taxation respondent cannot be deemed entitled to the 10 percent rate granted under the RP-West Germany Tax Treaty for the reason that there is no payment of taxes on royalties under similar circumstances in RP-US treaty. U. royalties. The RP-US and the RP-West Germany Tax Treaties do not contain similar provisions on tax crediting.refer to payment of the tax but to the subject matter of the tax.e. with a restraint on the tax that may be collected by the state of source. 15 | P a g e . trademarks. Johnson and Son.

is engaged in trade or business in the Philippines subject to the 32% income tax. Sec. 2010 Facts: Petitioner South African Airways is a foreign corporation organized and existing under and by virtue of the laws of the Republic of South Africa. as an of-line international carrier selling passage documents through an independent sales agent in the Philippines. Aerotel sells passage documents for compensation or commission for petitioner's of-line flights for the carriage of passengers and cargo between ports or points outside the territorial jurisdiction of the Philippines. which was decided under similar factual circumstances. Thus.727. in that case. No. 28 (A) 16 | P a g e . Petitioner has a general sales agent in the Philippines. 180356.766. COMMISSIONER OF INTERNAL REVENUE G. Ruling: Yes. Sec.R. It is not licensed to do business in the Philippines. Thus petitioner filed a petition for Review with the CTA for the refund of the abovementioned amount. On 2003. Aerotel. Such claim was unheeded. the Court ruled that of-line air carriers having general sales agents in the Philippines are engaged in or doing business in the Philippines and that their income from sales of passage documents here is income from within the Philippines.INCOME TAXATION SOUTH AFRICAN AIRWAYS vs.38 as erroneously paid tax on Gross Philippine Billings (GPB) for the taxable year 2000. we held the of-line air carrier liable for the 32% tax on its taxable income. or partnership. branch office. For the taxable year 2000. Issue: Whether or not petitioner. Petitioner is not registered with the Securities and Exchange Commission as a corporation. In Commissioner of Internal Revenue v. February 16. it is an internal air carrier having no landing rights in the country. In the Philippines. petitioner filed separate quarterly and annual income tax returns for its of-line flights. petitioner filed with the Bureau of Internal Revenue a claim for the refund of the amount of P1. 28 (A) (1) of the 1997 NIRC is a general rule that resident foreign corporations are liable for 32% tax on all income from sources within the Philippines. British Overseas Airways Corporation.

DST attaches upon acceptance of the stockholder’s subscription in the corporation’s capital stock regardless of actual or constructive delivery of the certificates of stock. does not fall under the exception. except for resident foreign corporations that are international carriers that derive income "from carriage of persons. Both parties filed Motions for Reconsideration which were denied. Inc. the general rule is that resident foreign corporations shall be liable for a 32% income tax on their income from within the Philippines. As such. a thing not being excepted must be regarded as coming within the purview of the general rule. Issue: Whether or not the subscription contracts are subject to DST. Respondent alleged that no deficiency DST was due because the National Internal Revenue Code (Tax Code) does not cover any document or transaction which relates to respondent. The CTA En Banc promulgated a Decision ordering respondent to pay DST on its pawnshop tickets but found that respondent’s deposit on subscription was not subject to DST. BUSINESS TAXATION COMMISSIONER OF INTERNAL REVENUE vs. which means. A stock subscription is a contract by which the subscriber agrees to take a certain number of shares of the capital stock of a corporation. In the instant case. Respondent filed its written protest on the assessments and when petitioner did not act on the protest during the 180-day period. INC. Aggrieved.328. hence. 2009 Facts: Petitioner Bureau of Internal Revenue (BIR) issued assessment notices against respondent First Express Pawnshop Company.87 on pawn tickets.. According to Section 175 of the Tax Code. Based on the testimony of respondent’s 17 | P a g e . DST is imposed on the original issue of shares of stock. which included assessments for deficiency documentary stamp tax (DST) of P12. FIRST EXPRESS PAWNSHOP COMPANY. paying for the same or expressly or impliedly promising to pay for the same.R. This principle is embodied in the Latin maxim. Ruling: Yes. Nos. being an international carrier with no flights originating from the Philippines.128. June 16.45 on deposit on subscription and for deficiency DST of P62. Sections 175 and 176 of the Tax Code contemplate a subscription agreement in order for a taxpayer to be liable to pay the DST. Petitioner. both parties filed Petitions for Review with the CTA En Banc. G. respondent petitioned before the Court of Tax Appeals (CTA). 172045-46.(3) is an exception to this general rule. petitioner elevated the case before this Court. exception firmat regulam in casibus non exceptis. petitioner must fall under the general rule. excess baggage. cargo and mail originating from the Philippines" which shall be taxed at 2 1/2% of their Gross Philippine Billings. The CTA First Division ruled that the assessments for deficiency DST shall be cancelled.

COMMISSIONER OF INTERNAL REVENUE G. the deposit on stock subscription refers to an amount of money received by the corporation as a deposit with the possibility of applying the same as payment for the future issuance of capital stock. Inc. voting rights or other prerogatives and attributes of a stockholder. the Supreme Court held that those certificates of stocks temporarily subject to suspensive conditions shall be liable for DST only when released from said conditions. which states that a pawnshop is not enumerated as one of those engaged in sale or exchange of services and Petitioner's pawn tickets are not subject to documentary stamp tax pursuant to existing laws and jurisprudence.50 deficiency documentary stamp tax on pawn tickets. it filed a Petition for Review with the Court of Tax Appeals the ground that Pawnshops are not subject to Value Added Tax pursuant to Section 108 of the National Internal Revenue Code. Here.75 deficiency expanded withholding tax. P7. vs. and P21. Hence. As the protest merited no response. 2010 Facts: Respondent Commissioner of Internal Revenue sent petitioner Tambunting Pawnshop.092. INC. TAMBUNTING PAWNSHOP.. there was no agreement to subscribe to the unissued shares.723. Issue: What are tax liabilities of pawnshops? Ruling: 18 | P a g e .auditor and respondent’s financial statements as of 1998. respondent is not liable for the payment of DST on its deposit on subscription for the reason that there is yet no subscription that creates rights and obligations between the subscriber and the corporation. all inclusive of interests and surcharges for the taxable year 1999. P406. January 21. No. 179085. In Commissioner of Internal Revenue v.55 deficiency withholding tax on compensation. an assessment notice for P3.34 deficiency value-added tax. Construction Resources of Asia. The First Division of the CTA ruled that petitioner is liable for VAT and documentary stamp tax but not for withholding tax on compensation and expanded withholding tax. for then and only then shall they truly acquire any practical value for their owners.055.201.564.R. Petitioner protested the assessment. The person making a deposit on stock subscription does not have the standing of a stockholder and he is not entitled to dividends. The petition was denied and the CTA en banc’s decision was affirmed. Inc. an event which may or may not happen.

 The levy. and by R. thus —  Under the National Internal Revenue Code of 1977. finance companies. with the enactment of R. for the year 2000. 8241. non-bank financial intermediaries. No. due to the specific nature of its business. and other financial intermediaries not performing quasi-banking functions were specifically exempted from VAT. No.  With the imposition of the VAT under R." Instead.A. 2003. finance companies. collection and assessment thereof were again deferred until December 31. the levy. collection and assessment of the 10% VAT was further deferred by R. remuneration or consideration. non-bank financial intermediaries. 2000. the Court finds that pawnshops should have been treated as non-bank financial intermediaries from the very beginning. which states: "'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee. No. finance companies.A.A. 9010. it is subject to 10% VAT for the tax years 1996 to 2002. and other financial intermediaries not performing quasi-banking functions were finally made efective beginning January 1. No. assessment and collection of VAT 19 | P a g e . which amended R. No. that is. No. No.  Finally. 1999. 2002.A. 7716. collection and assessment of the 10% VAT on banks.A. with the levy. 8761 until December 31. although the levy. pawnshops should have been levied the 5% percentage tax on gross receipts imposed on bank and non-bank financial intermediaries under Section 119 (now Section 121 of the Tax Code of 1997).  R. until December 31. 9238 in 2004. pawnshops were then subject to 10% VAT under the category of non-bank financial intermediaries.A. however.On the issue of whether pawnshops are liable to pay VAT. pawnshops were not subject to 10% VAT under the general provision on "sale or exchange of services" as defined under Section 108 (A) of the Tax Code of 1997. pawnshops should have been subjected to the 10% VAT imposed on banks and non-bank financial intermediaries and financial institutions under Section 102 of the Tax Code of 1977 (now Section 108 of the Tax Code of 1997). were made efective January 1. the services of banks. subject to the appropriate taxes provided by law. non-bank financial intermediaries. 7716 or the EVAT Law. and other financial intermediaries not performing quasi-banking functions. 1998. 28 and the 0% to 5% percentage tax on gross receipts on other non-bank financial intermediaries was re-imposed under Section 122 of the Tax Code of 1997.  With no further deferments given by law.A.  This was restated by R. At the time of the disputed assessment. collection and assessment of the 10% VAT on services rendered by banks. 8424 or the Tax Reform Act of 1997 likewise imposed a 10% VAT under Section 108 but the levy. Since petitioner is a non-bank financial intermediary.

was assessed for alleged deficiency income tax in the amount of P753. Since the imposition of VAT on pawnshops. by virtue of R.. vs. Inc. Petitioner filed a protest with the respondent Commissioner of the Internal Revenue (CIR). March 5. 9238. The argument fails. the law does not consider said ticket as an evidence of security or indebtedness.from non-bank financial intermediaries being specifically deferred by law. 2012 Facts: Petitioner Lascona Land Co.R. for purposes of taxation. No. petitioner is no longer liable for VAT but it is subject to percentage tax on gross receipts from 0% to 5%. No. However. And beginning 2004 up to the present. executory and demandable as is it was not elevated to the Court of Tax Appeals (CTA) as required in the last paragraph of Section 228 of the Tax Code. petitioner is not liable for VAT for the tax year 1999.266. was deferred for the tax years 1996 to 2002. There is therefore no basis in petitioner's assertion that a DST is literally a tax on a document and that no tax may be imposed on a pawn ticket. Petitioner appealed before the CTA alleging that the CIR erred in ruling that the failure to appeal to the CTA within 30 days from the lapse of the 180-day period rendered the assessment final and executory. the CIR maintained its argument that petitioner’s failure to file an appeal after the 20 | P a g e . But with the full implementation of the VAT system on non-bank financial intermediaries starting January 1.A. as the case may be. However. 171251. INC.. petitioner argues that such tickets are neither securities nor printed evidence of indebtedness. COMMISSIONER OF INTERNAL REVENUE G. which are non-bank financial intermediaries. petitioner is liable for 10% VAT for said tax year. TAX ASSESSMENT LASCONA LAND CO. then petitioner is not liable for VAT during these tax years. 2003. the same pawn ticket is proof of an exercise of a taxable privilege of concluding a contract of pledge.56 for the taxable year 1993. True. but it was denied on the ground that it has become final. In dodging liability for documentary stamp tax on its pawn tickets.

however. It must be emphasized. or (2) await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of a copy of such decision. that in case of the inaction of the CIR on the protested assessment. even after the expiration of the 180-day period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. he naturally expects the CIR to decide either positively or negatively. Ruling: No. because the law and jurisprudence have always contemplated a scenario where the CIR will decide on the protested assessment. it then has the right to appeal such final decision to the Court by filing a petition for review within 30 days after receipt of a copy of such decision or ruling. More so. In the case at bar. these options are mutually exclusive and resort to one bars the application of the other.lapse of the 180-day reglementary period required by law resulted to the finality of the assessment. 15 June 1988 Facts: Abra Valley College rents out the ground floor of its college building to Northern Marketing Corporation while the second floor thereof is used by the Director of the College for residential purposes. Precisely. Issue: Whether or not the subject assessment has become final and executory. Aquino GR L-39086. petitioner opted to await the final decision of the Commissioner on the protested assessment. when a taxpayer protested an assessment. it did not intend to limit it to a single remedy of filing an appeal after the lapse of the 180-day prescribed period. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested assessment. the taxpayer has two options. 21 | P a g e . either: (1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period. TAX EXEMPTION Abra Valley College vs. When the law provided for the remedy to appeal the inaction of the CIR.

” reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. the lease of the first floor cannot by any stretch of imagination be considered incidental to the purposes of education. is incidental to education. then Municipal Mayor of Bangued. The bishop claims tax exemption from real estate tax. Abra. Q-83 duly registered in the name of petitioner. Hernando GR L-49336. Paterno Millare. claiming that it is tax-exempt. While the second floor’s use. The school filed suit to annul said notices. 1972 for the sale at public auction of said college lot and building. by respondents Municipal Treasurer and Provincial Treasurer. without even hearing the side of petitioner. which sale was held on the same date. on July 6. 31 August 1981 Facts: The provincial assessor made a tax assessment on the properties of the Roman Catholic Bishop of Bangued. Abra vs. The certificate of sale was correspondingly issued to him. plaintif below. 1972. Said "Notice of Seizure" of the college lot and building covered by Original Certificate of Title No. ofered the highest bid of P6. Issue: Whether the College is exempt from taxes. 22 | P a g e .00 which was duly accepted. defendants below. The "Notice of Sale" was caused to be served upon the petitioner by the respondent treasurers on July 8. Held: While the Court allows a more liberal and non-restrictive interpretation of the phrase “exclusively used for educational purposes. The test of exemption from taxation is the use of the property for purposes mentioned in the Constititution. Dr. as residence of the director.The municipal and provincial treasurers served upon the College a “notice of seizure” and later a “notice of sale” due to the alleged failure of the College to pay real estate taxes and penalties thereon. was issued for the satisfaction of the said taxes thereon. A summary judgment was made granting such exemption.000. through an action for declaratory relief.

adjudged the case. by giving due course to the petition of private respondent for declaratory relief. so that if granted. and thereafter without allowing petitioner to answer and without any hearing. Herrera vs. . There was an allegation of lack of jurisdiction and of lack of cause of action. Quezon City Board of Assessment Appeals GR L-15270. it must be strictly construed against the taxpayer.. wantonly violated the rights of petitioner to due process. 30 September 1961 Facts: 23 | P a g e . There must be proof of the actual and direct use of the lands. which should have compelled the judge to accord a hearing to the province rather than deciding the case immediately in favor of the Bishop. all in total disregard of basic laws of procedure and basic provisions of due process in the constitution Issue: Whether the properties of the Bishop of Bangued are tax-exempt.. Herein. Exemption from taxation is not favored and is never presumed. respondent Judge contends that it "virtually ignored the pertinent provisions of the Rules of Court. and improvements for religious (or charitable) purposes to be exempted from taxation. Held: The 1935 and the 1973 Constitutions difer in language as to the exemption of religious property from taxes as tehy should not only be “exclusively” but also “actually” and “directly” used for religious purposes. as counsel for petitioner. the judge accepted at its face the allegation of the Bishop instead of demonstrating that there is compliance with the constitutional provision that allows an exemption. buildings.The Acting Provincial Fiscal.

the Director of the Bureau of Hospitals authorized Jose V. and recreational facilities for student nurses. A school of midwifery is also operated within the premises of the hospital. In 1953. property used to provide housing facilities for interns. the Assessor reclassified the properties from “exempt” to “taxable” efective 1956. the fact that it admits pay-patients does not bar it from claiming that it is devoted exclusively to benevolent purposes. Held: Yes. Catherine’s Hospital is exempted from realty tax. TAX CREDIT 24 | P a g e . such as in the case of hospitals — a school for training nurses. aside from "out-charity patients" who come only for consultation. the Herreras sent a letter to the Quezon City Assessor requesting exemption from payment of real estate tax on the hospital. Catherine’s Hospital. After an inspection of the premises in question and after a careful study of the case. interns and residents. as it was ascertained that out 32 beds in the hospital. which represent almost two-thirds (2/3) of the bed capacity of the hospital. but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purpose. St. a nurses’ home. the exemption from real property taxes was granted efective the years 1953. Catherine’s Hospital is a charitable institution exempt from taxation.In 1952. 1954 and 1955. 1955. Within the purview of the Constitution. it being admitted that the income derived from pay-patients is devoted to the improvement of the charity wards. Herrera and Ester Ochangco Herrera to establish and operate the St. 12 of which are for pay-patients. The exemption was granted efective years 1953 to 1955. in a letter dated August 10. The exemption in favor of property used exclusively for charitable or educational purpose is not limited to property actually indispensable therefore. resident doctors. stating that the same was established for charitable and humanitarian purposes and not for commercial gain. superintendents and other members of the hospital staf. however. Subsequently. Issue: Whether St.

which prompted the latter to file with the CTA in Division. COMMISSIONER OF INTERNAL REVENUE G. To claim refund or tax credit petitioner must comply with the following criteria: (1) the taxpayer is VAT registered. 106 (B). The latter showing excess input VAT payments on account of its importation and domestic purchases of goods and services. 2009 Facts: Petitioner San Roque Corporation entered into a Power Purchase Agreement (PPA) with the National Power Corporation (NPC) to develop the hydro potential of the Lower Agno River. Ruling: Yes. For January to December 2002. (2) the taxpayer is engaged in efectively zero-rated or zero-rated sales. and the input taxes cannot be directly and entirely attributable to any of these sales. Because of the exclusive nature of the PPA between petitioner and the NPC. 180345. November 25. (5) the input taxes have not been applied against output taxes during and in the succeeding quarters. Issue: Whether or not petitioner may claim a tax refund or credit. (8) where there are both zero-rated or efectively zero-rated sales and taxable or exempt sales.R. the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations. and completion and testing and commissioning of the Power Station and it shall operate and maintain the same. During the cooperation period of 25 years commencing from the completion date of the Power Station. 25 | P a g e . and (9) the claim is filed within two years after the close of the taxable quarter when such sales were made. No. (4) the input taxes are not transitional input taxes. the input taxes shall be proportionately allocated on the basis of sales volume.SAN ROQUE POWER CORPORATION vs. After a hearing on the merits. a Petition for Review. (3) the input taxes are due or paid. the former applied for and was granted five Certificates of Zero Rate by the BIR. (6) the input taxes claimed are attributable to zero-rated or efectively zero-rated sales. by developing and operating the San Roque Multipurpose Project. Respondent failed to act on the request for tax refund or credit of petitioner. construction. (7) for zero-rated sales under Section 106 (A) (2) (1) and (2). The PPA provides that petitioner shall be responsible for the design. petitioner filed with the respondent Commissioner of Internal Revenue its Monthly VAT Declaration and Quarterly VAT Returns. the CTA Second Division denied petitioner's claim for tax refund or credit. the NPC shall purchase all the electricity generated by the Power Plant. Petitioner filed with the BIR four separate administrative claims for refund of Unutilized Input VAT. installation. and to be able to generate additional power and energy for the Luzon Power Grid. and 108 (B) (1) and (2). subject to the instructions of the NPC.

such as the NPC. 26 | P a g e .San Roque Corporation complied with the abovementioned requirements. but to relieve certain exempt entities. from the burden of indirect tax so as to encourage the development of particular industries. It bears emphasis that efective zero-rating is not intended as a benefit to the person legally liable to pay the tax. in this case the petitioner.

6. except the corporate income tax imposed under Title II of the NIRC and as specified in Section 2(A) of these regulations. One of the changes introduced by this law is the imposition of Minimum Corporate Income Tax (MCIT). and charges of whatever nature and description.A. The CTA denied the petition. whichever comes later.R. No. On 1999. On May 22. Meanwhile. The bank ceased to operate. the bank filed with the CTA a petition for review. there was merely an interruption of business operations. Due to inaction of the BIR. COMMISSIONER OF INTERNAL REVENUE G.TAX REFUND THE MANILA BANKING CORPORATION vs. Period of exemption. 1987. Ruling: Revenue Regulation No. “date of commencement of operations” shall be understood to mean the date when the thrift bank was registered with the Securities and Exchange Commission or the date when the Certificate of Authority to Operate was issued by the Monetary Board of the Bangko Sentral ng Pilipinas. 7906 provides: “Sec. finding that the bank’s payment of corporate income tax is in order. the bank filed with the BIR a claim for refund of the sum it earlier paid. As mentioned earlier.” For purposes of these regulations. The BIR then issued a ruling stating that the petitioner is entitled to the four (4)-year grace period. 168118. was incorporated in 1961 and was engaged in commercial banking industry until 1987. petitioner bank was registered with the BIR in 1961. 27 | P a g e . fees. – All thrift banks created and organized under the provisions of the Act shall be exempt from the payment of all taxes. Petitioner sent a request letter to the BIR on whether it is entitled to the four (4)-year grace period to pay its minimum corporate income tax as provided by the new law. August 28. it filed with the BIR its income tax return for taxable year 1999. for a period of five (5) years from the date of commencement of operations. while for thrift banks which are already existing and operating as of the date of efectivity of the Act (March 18. Pursuant to the ruling. Bangko Sentral ng Pilipinas issued a resolution prohibiting the bank from engaging in business by reason of insolvency. 4-95 implementing certain provisions of R. No. contending that the bank is not a new corporation. the tax exemption shall be for a period of five (5) years reckoned from the date of such efectivity. 2006 Facts: The Manila Banking Corp. Comprehensive Tax Reform Act of 1987 became efective. Issue: Whether the bank is entitled to a refund of its minimum corporate income tax paid to the BIR for taxable year 1999. 1995). the bank was authorized by the BSP to operate as a thrift bank. The following year. It is the same corporation registered with the SEC.

Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to contest the issuance of the warrants to enforce the collection of the tax assessments. Petitioner filed a Motion for Reconsideration arguing that the demand letter cannot be considered as the final decision of the Commissioner of Internal Revenue on its protest because the same was signed by a mere subordinate and not by the Commissioner himself. The Court of Appeals denied the petition. Petitioner filed its protest requested a reconsideration or cancellation Commissioner.However. reiterated the tax assessments while denying petitioner’s request for reinvestigation. The CTA dismissed the petition for lack of jurisdiction.644. Mr. Buot. the Bureau of Internal Revenue (BIR) year 1984 in the total amount of against the tax assessments and of the same in a letter to the BIR Acting in behalf of the BIR Commissioner. 4-95 that the date of commencement of operations of a thrift bank is the date it was registered with the SEC or the date when the Certificate of Authority to Operate was issued to it by the Monetary Board of the BSP. 1999. the Assistant Commissioner for Collection. Then it filed with the SEC its Articles of Incorporation which was approved on June 22. Upon petitioner’s failure to pay the subject tax assessments within the prescribed period. It is clear from the abovequoted provision of Revenue Regulations No.R. it was found insolvent by the Monetary Board of the BSP and was placed under receivership. 2005 Facts: On March 17. in 1987. Earlier. or on June 23. or on January 21. it registered with the BIR. After twelve (12) years.71. No. 148380. then Chief of the BIR Accounts Receivable and Billing Division. 1999. acting for the Commissioner of Internal Revenue. COMMISSIONER OF INTERNAL REVENUE G. petitioner consequently filed a Petition for Review with the Court of Appeals contending that there was no final decision to speak of because the Commissioner had yet to make a personal determination as regards the merits of petitioner’s case.December 9.998. Said letter likewise requested petitioner to pay within 10 days from receipt thereof. issued the corresponding warrants of distraint and/or levy and garnishment. Severino B. whichever comes later. 28 | P a g e . With the denial of its motion for reconsideration. the BSP issued to it a Certificate of Authority to Operate as a thrift bank. petitioner received from deficiency tax assessments for the taxable P8. TAX DEFICIENCY OCEANIC WIRELESS vs. 1988. otherwise the case shall be referred to the Collection Enforcement Division of the BIR National Office for the issuance of a warrant of distraint and levy without further notice. 1999.

except the following: (a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance. it was tantamount to a rejection of the request for reconsideration. The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank. and requested its payment. In this case. revoke or modify any existing ruling of the Bureau. Therefore. Section 7 of the Code authorizes the BIR Commissioner to delegate the powers vested in him under the pertinent provisions of the Code to any subordinate official with the rank equivalent to a division chief or higher. Failure to do so would result in the “issuance of a warrant of distraint and levy to enforce its collection without further notice. may be compromised by a regional evaluation board which shall be composed of the Regional Director as Chairman. The demand letter received by petitioner verily signified a character of finality. discovered by regional and district officials. the letter of demand. Ruling: Yes. A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment.Issue: Whether the demand letter for tax deficiency issued and signed by a subordinate officer who was acting in behalf of the CIR is deemed final and executor and subject to an appeal to the CTA. He cannot. that assessments issued by the Regional Offices involving basic deficiency taxes of five hundred thousand pesos (P500. (b) The power to issue rulings of first impression or to reverse. 8424. however. (c) The power to compromise or abate under Section 204(A) and (B) of this Code. however. This now brings us to the crux of the matter as to whether said demand letter indeed attained finality despite the fact that it was issued and signed by the Chief of the Accounts Receivable and Billing Division instead of the BIR Commissioner.000) or less. any tax deficiency: Provided. delegate the four powers granted to him under the National Internal Revenue Code (NIRC).” In addition. the Assistant Regional Director. and minor criminal violations as may be determined by rules and regulations to be promulgated by the Secretary of Finance. The determination on whether or not a demand letter is final is conditioned upon the language used or the tenor of the letter being sent to the taxpayer. upon the recommendation of the Commissioner. the letter contained a notation indicating that petitioner’s request for reconsideration had been denied for lack of supporting documents. heads of the 29 | P a g e . unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioner’s request for reconsideration when it reiterated the tax deficiency assessments due from petitioner. As amended by Republic Act No.

charges and penalties. Under the circumstances. Issue: Whether a tax and a debt may be compensated.058. Thus. was denied by the lower court. and ordered the amount of inheritance taxes be deducted from the Government’s indebtedness to the Estate. 29 June 1963 Facts: It appears in Domingo vs. the Supreme Court declared as final and executory.200. however. amounting to P40. and (d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept. the authority to make tax assessments may be delegated to subordinate officers. Said assessment has the same force and efect. Garlitos GR L-18993. special proceedings No.55. 14 entitled "In the matter of the Intestate Estate of the Late Walter Scott Price. ESTATE TAX Domingo vs. Moscoso (106 PHIL 1138). issued by the Court of First Instance of Leyte in.200 has already been appropriated by a corresponding law (RA 2700)." The petition for execution filed by the fiscal. the order for the payment by the estate of the estate and inheritance taxes. as members. It is clear from the above provision that the act of issuance of the demand letter by the Chief of the Accounts Receivable and Billing Division does not fall under any of the exceptions that have been mentioned as non-delegable. both the claim of the Government for inheritance taxes and the 30 | P a g e .Legal. Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer. Held: The court having jurisdiction of the Estate had found that the claim of the Estate against the Government has been recognized and an amount of P262. which held that the execution is not justifiable as the Government is indebted to the estate under administration in the amount of P262.

claim of the intestate for services rendered have already become overdue and demandable as well as fully liquidated. 2007 Facts: Respondent Philippine Health Care Providers. in accordance with Article 1279 and 1290 of the Civil Code. This new Tax Code provided for the following: “SEC. therefore. No. inquiring whether the services it provides to the participants in its health care program are exempt from the payment of the VAT. On January 1. takes place by operation of law. legal. amending the National Internal Revenue Code of 1977 by imposing Value-Added Tax (VAT) on the sale of goods and services. 1998.O. – There shall be 31 | P a g e . Compensation. the National Internal Revenue Code of 1997 became efective.R. and both debts are extinguished to the concurrent amount. 1987. INC. – (a) Rate and base of tax. President Corazon C. petitioner. as a provider of medical services.O.) No. is a domestic corporation which is a health care delivery system or a health maintenance organization (HMO) created to take care of the sick and disabled persons enrolled in the health care plan and to provide for the administrative. Petitioner issued VAT Ruling No. 273. VALUE ADDED TAX COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE HEALTH CARE PROVIDERS. Inc. Value-added tax on sale of services and use or lease of properties. 102. 231-88 stating that respondent. and financial responsibilities of the organization. 273. Aquino issued Executive Order (E. G. is exempt from the VAT coverage. On July 25. No. Before the efectivity of E. respondent wrote the Commissioner of Internal Revenue (CIR). 168129 April 24.

The taxpayer is not subject to VAT for the years 1996 and 1997.R. – The following shall be exempt from the value-added tax: (l) Medical. the CTA decided that it was not VAT exempt. COMMISSIONER CORPORATION OF INTERNAL REVENUE vs. NIRC.” The BIR sent respondent a Preliminary Assessment Notice for deficiency in its payment of the VAT and documentary stamp taxes (DST) for taxable years 1996 and 1997. a health maintenance organization. including the use or lease of properties. including those performed or rendered by construction and service contractors”. 2006 Facts: Migrant Pagbilao Corporation (MPC) is a corporation engaged in the business of power generation and distribution. and “SEC. On both instances. It accumulated input taxes in the amount of 39. hospital and veterinary services except those rendered by professionals. 1996. a value-added tax equivalent to 10% of gross receipts derived from the sale or exchange of services. MPC claims that it paid these input taxes to the suppliers of capital goods and services for the construction and development of power plants.330. which does not actually provide medical and/or hospital services. Ruling: No.levied. 103. but merely arranges for the same. The phrase “sale or exchange of service” means the performance of all kinds of services in the Philippines for a fee. the CTA decided for the respondent however since it was not involve directly in providing health care. and that tax credit laws are construed against 32 | P a g e .85 from April 1. Without waiting for the BIR Commissioner to answer. Issue: Whether or not respondent is liable for VAT. the BIR sent a demand letter for the payment of VAT with 4 notice of assessments for the same years. 1988. There is no misrepresentation by the mere fact that the taxpayer failed to describe itself as an HMO. dental.500. 103. MIGRANT PAGBILAO G. 231-88. pursuant to Section 246 of the NIRC on non-retroactivity of rulings prejudicial to the taxpayer. is not VAT-exempt under Sec. MPC filed a petition for review to toll the running of the 2-year prescriptive period for claiming a refund under the law. that the action is premature. relying on good faith on VAT Ruling No. assessed and collected. MPC applied for tax credit/refund on the unutilized VAT paid on capital goods. No. which the BIR ignored. Exempt Transactions. The BIR in its answer denied MPC’s application citing that MPC’s claim for refund is still being investigated before the BIR. 1996 to December 31. Further. October 16. remuneration or consideration. Via a petition for review. the respondent seasonably filed its protest for the assessments. June8. 159593. Subsequently. Such decision was affirmed by the Court of Appeals.

85 to 28. REVENUE COMMISSIONER OF INTERNAL G. On appeal. Whether the BIR is allowed to change its theory on appeal. Ruling: 1. The CTA ruled that indeed. On exceptional cases. Input VAT on capital goods and services may be claimed as tax refund.” KEPCO PHILIPPINES CORPORATION vs. No. As a rule. the BIR raised that MPC being an electric utility is subject to franchise tax and not VAT and since it is VAT exempt. Upon investigation. a party is never allowed to change its theory or raise a totally new issue on appeal. The BIR filed a motion for reconsideration that was subsequently denied.R. MPC is entitled to tax credit but the amount is reduced in line with the Revenue Officer’s findings. January 31. a domestic corporation engaged in the production and sale of electricity.745. 2011 Facts: Petitioner Kepco Philippines Corporation. Pertinent provisions of the Tax Code allow that Input VAT on capital goods be claimed as tax credit. as duly proven by valid invoices or official receipts. Whether Input VAT on capital goods and services is allowed. Sec 106 (b) of the Tax Code of 1986 as amended by RA 7716 expressly states that “A VAT.40. The CA denied BIR’s appeal upholding that it is not allowed to change its theory on appeal. Issues: 1. the rules may be relaxed allowing new issues on appeal but it is only done for good and sufficient causes in order to pave way for justice. Petitioner filed with respondent Commissioner of Internal Revenue (CIR) an application for efective 33 | P a g e . The SC prohibited the BIR from changing its theory on the case and raising a new issue on appeal. 2. the Revenue Officer recommended for the approval of the tax credit but it reduced the amount from 39. is a value-added tax (VAT) registered taxpayer.502. 179961.330.MPC. it can’t claim tax refund. The BIR is erroneous in stating that a VAT exempt or zero rated VAT payer is not allowed to claim tax credits.500. The BIR has not shown any good or sufficient cause for relaxing the rules. to the extent that such input taxes have not been applied against output taxes.registered person may apply for the issued of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased. It sells its electricity to the National Power Corporation (NPC). 2.

to enable the Bureau of Internal Revenue to properly implement and enforce the other provisions of the 1997 NIRC on VAT.zero-rating of its sales of electricity to the NPC.) No. The tax court held that petitioner also failed to comply with the invoicing requirements in clear violation of Section 4.R. Inc. MICROSOFT PHILIPPINES. Petitioner alleged that for the taxable year 1999. implementing Section 108(B)(3) in conjunction with Section 113 of the 1997 NIRC. it incurred input VAT in the amount of P10.527. Ruling: Yes. Petitioner filed an appeal but the CTA En Banc dismissed such. as in this case. including the imprinting of the words "zero-rated" in its VAT official receipts and invoices in order for its sales of electricity to NPC to qualify for zero-rating. petitioner Panasonic has been unable to substantiate its claim for refund. No. The pieces of evidence presented entitling a taxpayer to an exemption are also scrutinized and must be duly proven. v. Further. No. Upon denial of its application. 7-95. those that are subject to 0% VAT (zero-rated) and exempt sales. It is the duty of petitioner to comply with the requirements. 2011 34 | P a g e .R. Issue: Whether or not petitioner’s failure to imprint the words "zero-rated" on its official receipts issued to NPC justifies an outright denial of its claim for refund of unutilized input tax credits. citing Tropitek International. 7-95 is mandatory as ruled by the CTA En Banc. April 6. Well-settled in this jurisdiction is the fact that actions for tax refund. The imprinting of "zero-rated" is necessary to distinguish sales subject to 10% VAT. reasoning out that petitioner’s failure to comply with the requirement of imprinting the words "zero-rated" on its official receipts resulted in non-entitlement to the benefit of VAT zero-rating and denial of its claim for refund of input tax. vs.54 on its domestic purchases of goods and services that were used in its production and sale of electricity to NPC for the same period.202.108-1 of Revenue Regulations (R.R. 180173. the printing of the word "zero-rated" on the invoice helps segregate sales that are subject to 10% (now 12%) VAT from those sales that are zero-rated. petitioner elevated the case to the Court of Tax Appeals (CTA) and the CTA Second Division denied petitioner’s claim for refund due to failure to properly substantiate its efectively zero-rated sales. are in the nature of a claim for exemption and the law is construed in strictissimi juris against the taxpayer. It must be emphasized that the requirement of imprinting the word "zero-rated" on the invoices or receipts under Section 4. INC. COMMISSIONER OF INTERNAL REVENUE G. Commissioner of Internal Revenue.108-1 of R. Unable to submit the proper invoices.

" is not a "VAT invoice. 7-95 (RR 7-95). The CTA stated that petitioner’s official receipts do not bear the imprinted word "zero-rated" on its face. Inc." and thus cannot give rise to any input tax. Ltd. The services are paid for in acceptable foreign currency and qualify as zero-rated sales for VAT purposes. Inc.449. thus.108-1 of Revenue Regulations No. The CTA explained that petitioner failed to comply with the invoicing requirements of Sections 113 and 237 of the National Internal Revenue Code (NIRC) as well as Section 4. In Panasonic v. Due to the Bureau of Internal Revenue’s (BIR) inaction. A "VAT invoice" is an invoice that meets the requirements of Section 4. which denied the claim for tax credit of VAT input taxes. In the case at bar. it was held that the appearance of the word "zero-rated" on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT is actually paid.108-1 of RR 7-95. a VAT-registered taxpayer. The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and revenue regulations are clear. Commissioner of Internal Revenue. It was ruled in several cases that the printing of the word "zero-rated" is required to be placed on VAT invoices or receipts covering zero-rated sales in order to be entitled to claim for tax credit or refund. (MOP) and Microsoft Licensing. the official receipts cannot be considered as valid evidence to prove zero-rated sales for VAT purposes. both affiliated non-resident foreign corporations.99 attributable to its zero-rated sales. 35 | P a g e ." Petitioner's invoice. A VAT-registered taxpayer is required to comply with all the VAT invoicing requirements to be able to file a claim for input taxes on domestic purchases for goods or services attributable to zero-rated sales.814. renders marketing services to Microsoft Operations Pte.. the government may be refunding taxes it did not collect. Petitioner filed an administrative claim for tax credit of VAT input taxes in the amount of P11. Issue: Whether or not the petitioner is entitled to a refund of VAT input taxes.Facts: Petitioner Microsoft Philippines. both the CTA Second Division and CTA En Banc found that Microsoft's receipts did not indicate the word "zero-rated" on its official receipts. petitioner filed a petition for review before the Court of Tax Appeals (CTA). which lacks the word "zero-rated. Absent such word. (MLI). RR 7-95 expressly states that "All purchases covered by invoices other than a VAT invoice shall not give rise to any input tax. Contrary to petitioner's claim. Ruling: No.

Ruling: Yes. No. When applied to the tax base or the selling price of the goods or services sold. Interpreting these requirements.40 believing that its sales are zero-rated sales. making him internationally competitive. Zero-rated transactions generally refer to the export sale of goods and services. From 1998 to 1999. February 8.482. such zero rate results in no tax chargeable against the foreign buyer or customer. respondent CIR ruled that under Revenue Memorandum Circular (RMC) 42-2003. Panasonic filed a petition for review with the Court of Tax Appeals (CTA). 2010 Facts: Petitioner Panasonic Communications Imaging Corporation of the Philippines produces and exports plain paper copiers and their sub-assemblies. The CTA First Division denied the petition stating that while petitioner’s export sales were subject to 0% VAT under the NIRC. 178090. its claim for tax credit/refund of VAT on its purchases shall be denied considering that the invoice it is issuing to its customers does not depict its being a 36 | P a g e . If the claim for refund is based on the existence of zero-rated sales by the taxpayer but it fails to comply with the invoicing requirements in the issuance of sales invoices. Issue: Whether or not the words "zero-rated" must appear in the sales invoice so that a claim for refund of unutilized input VAT on zero-rated sales will be proper. But. which allows him to recover the input taxes he paid relating to the export sales. The motion for reconsideration was denied. petitioner generated export sales where it paid input VAT of P9. however. When the BIR did not act on the same. COMMISSIONER OF INTERNAL REVENUE G. the taxpayer’s failure to comply with invoicing requirements will result in the disallowance of his claim for refund.368. the CTA en banc upheld the First Division’s decision. The seller thus enjoys automatic zero rating. It is a registered value-added tax (VAT) enterprise.108-1 of Revenue Regulations (RR) 7-95. he can claim a refund of the VAT that his suppliers charged him. Claiming that the input VAT it paid remained unutilized. and components. the same did not qualify for zero-rating because the word "zero-rated" was not printed on its export invoices.R. On appeal. although the seller in such transactions charges no output tax. parts.PANASONIC COMMUNICATIONS IMAGING CORPORATION OF THE PHILIPPINES (formerly MATSUSHITA BUSINESS MACHINE CORPORATION OF THE PHILIPPINES) vs. Panasonic filed with the Bureau of Internal Revenue (BIR) two separate applications for refund or tax credit of what it paid. the taxpayer has to be VAT-registered and must comply with invoicing requirements. This omission violates the invoicing requirements of Section 4. For the efective zero rating of such transactions.

RENATO V. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads. and that. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE G. F. as petitioners so strongly allege. and that the imposition of VAT on tollway operations has been the subject as early as 2003 of several BIR rulings and circulars. since VAT was never factored into the formula for computing toll fees. Someone must pay for the maintenance of the road. July 19. 193007.R. this treatment is without prejudice to the right of the taxpayer to charge the input taxes to the appropriate expense account or asset account subject to depreciation. Nonetheless. either the public indirectly through the taxes they pay the government. No. that to impose VAT on toll fees would amount to a tax on public service. its imposition would violate the non-impairment clause of the constitution. The government averred that the NIRC imposes VAT on all kinds of services of franchise grantees." not a sale of services. Issue: Whether or not toll fees collected by tollway operators may be subjected to valueadded tax. They alleged that the Congress when it enacted the NIRC did not intend to include toll fees within the meaning of "sale of services" that are subject to VAT. except where the law provides otherwise. DIAZ AND AURORA MA. The operation by the government of a tollway does not change the character of the road as one for public use. If the legislative intent was to exempt tollway operations from VAT. TIMBOL vs. that the Court should seek the meaning and intent of the law from the words used in the statute. 37 | P a g e . then it would have been well for the law to clearly say so. whichever is applicable. or only those among the public who actually use the road through the toll fees they pay upon using the road. Ruling: Yes. that a toll fee is a "user’s tax. F. Tax exemptions must be justified by clear statutory grant and based on language in the law too plain to be mistaken. the case shall be referred by the processing office to the concerned BIR office for verification of other tax liabilities of the taxpayer. including tollway operations.VAT-registered taxpayer whose sales are classified as zero-rated sales. Timbol filed a 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. 2011 Facts: Petitioners Renato Diaz and Aurora Ma. Moreover.

manufacturing and exporting advance and large-scale integrated circuit components or "IC’s. office supplies.082. petitioner elevated the case to the CTA En Banc. petitioner’s claim for refund of unutilized input VAT on capital goods was granted. the limitation on the kind of vehicles that can use the road. posters.170.) vs. January 17.With regard to petitioner’s claim for credit/refund of input VAT attributable to its zero-rated export sales. books and the like) purchased by petitioner were not duly proven to have been used. Issues: 38 | P a g e . the speed restrictions and other conditions for the use of the road do not afect the public character of the road. COMMISSIONER OF INTERNAL REVENUE G. the road is still "intended for public use" if anyone can use the road under the same terms and conditions as the rest of the public. INC. and so the reduction decided by the CTA Division was upheld. 2011 Facts: Petitioner Silicon Philippines. Inc. directly or indirectly in the production or sale of taxable goods or services.". banners. and failure to print the word "zero-rated" in its export sales invoices. On appeal to the Court of Tax Appeals (CTA) Division. Upon denial of its motion for reconsideration. It also ruled that the items being claimed as capital goods (training materials. As such.00 . The CIR denied this application.00 to P9.902. they cannot be considered as capital goods. SILICON PHILIPPINES. t-shirts. is registered with the Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer.867. Petitioner filed with the respondent Commissioner of Internal Revenue (CIR) an application for credit/refund of unutilized input VAT for 1998 in the amount of P31. developing.R.The charging of fees to the public does not determine the character of the property whether it is for public dominion or not.50. Article 420 of the Civil Code defines property of public dominion as "one intended for public use.898. The charging of fees." Even if the government collects toll fees. (formerly INTEL PHILIPPINES MANUFACTURING.. a Philippine corporation engaged in the business of designing. 172378. the CTA Division reduced the amount which petitioner claimed from P15. No. INC. The CTA En Banc denied petitioner’s claim for credit/ refund of input VAT attributable to its zero-rated sales due to its failure to show that it secured an Authorization-to-Print (ATP) invoices from the BIR and to indicate the same in its export sales invoices.507. the CTA Division denied the same. However.

(3) The input taxes must not have been 39 | P a g e . In the case of Intel. Section 112 (B) of the NIRC requires that: (1) The claimant must be a VAT registered person. Thus. Without this proof. 2. To prove this. No. Ruling: 1. a claimant must be engaged in sales which are zero-rated or efectively zero-rated. Indeed. on the other hand. the invoices or receipts would have no probative value for the purpose of refund. However. except the transitional input tax. is not. what is important with respect to the BIR authority to print is that it has been secured or obtained by the taxpayer. Whether or not the petitioner can claim input VAT paid on capital goods. (2) The input taxes claimed must have been paid on capital goods. No. the CTA ruled correctly. In a claim for credit/refund of input VAT attributable to zero-rated sales. and (4) the creditable input tax due or paid must be attributable to such sales. 2. The failure to indicate the ATP in the sales invoices or receipts. In this case. (2) the taxpayer must be engaged in sales which are zero-rated or efectively zerorated. the only way to verify whether the invoices or receipts are duly registered is by requiring the claimant to present its ATP from the BIR. and that invoices or receipts are duly registered. petitioner failed to present its ATP and to print the word "zero-rated" on its export sales invoices. To claim a refund of input VAT on capital goods. to the extent that such input tax has not been applied against the output tax. we emphasized that “It is not specifically required that the BIR authority to print be reflected or indicated therein. since the ATP is not indicated in the invoices or receipts. Whether or not petitioner can claim credit/refund of input VAT attributable to its zero-rated sales. duly registered invoices or receipts evidencing zero-rated sales must be presented.1. Under Section 112(A) of the NIRC. Section 112 (A) of the NIRC lays down four requisites: (1) the taxpayer must be VAT-registered.” The non-presentation of the ATP and the failure to indicate the word "zero-rated" in the invoices or receipts are fatal to a claim for credit/refund of input VAT on zerorated sales. (3) the claim must be filed within two years after the close of the taxable quarter when such sales were made.

REAL ESTATE TAX Francia vs. 40 | P a g e . used directly or indirectly in the production or sale of taxable goods or services.00 is proper.898. Issue: Whether the expropriation payment may compensate for the real estate taxes due. 7-95 defines capital goods as “goods or properties with estimated useful life greater that one year and which are treated as depreciable assets under Section 29 (f). in 1977. banners. the Supreme Court affirmed the findings of the CTA that training materials. From 1963 to 1977 it appeared that Francia did not pay his real estate taxes.106-1(b) of RR No. T-shirts. Thus.00 to P9. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. Section 4. his property was sold in a public auction by the City Treasurer of Pasay City. 28 June 1988 Facts: Engracio Francia was the registered owner of a residential lot and a two-story house located in Pasay City. and the other similar items reflected in petitioner’s Summary of Importation of Goods are not capital goods. Intermediate Appellate Court GR L-67649.082.867. The reduction in the refundable input VAT on capital goods from P15. and (4) The administrative claim for refund must have been filed within two years after the close of the taxable quarter when the importation or purchase was made. Held: There can be no of-setting of taxes against the claims that the taxpayer may have against the government.00 representing the estimated amount equivalent to the assessed value of the aforesaid portion.applied against any output tax liability. posters. A portion of such property was expropriated by the Republic of the Philippines for the sum of P4.116.170. office supplies.” Based on this definition. books.

Metro Angeles Chamber of Commerce and Industry Inc. June 29. (MACCI) of which AEC is a member filed a petition seeking the reduction of the tax rates and a review of the provisions of the RRCAC was filed by. which was granted a legislative franchise to generate and distribute electricity in Angeles City.The collection of a tax cannot wait the results of a lawsuit against the government. The petition was referred to the Bureau of Local Government Finance (BLGF) and an indorsement was issued to the City Treasurer of Angeles City. contract or judgment as is allowed to be set-of. ANGELES CITY G. the Sangguniang Panlungsod of Angeles City enacted a tax ordinance known as the Revised Revenue Code of Angeles City (RRCAC) which imposed a local franchise tax upon AEC. instructing the latter to make representations with the Sanggunian for the appropriate amendment of the RRCAC. Pampanga. 41 | P a g e . claiming that the ordinance is oppressive. No. When the Local Government Code (LGC) of 1991 was passed into law. ANGELES CITY ELECTRIC CORPORATION AND REGIONAL TRIAL COURT BRANCH 57. Internal revenue taxes cannot be the subject of compensation. 166134. LOCAL TAXATION ANGELES CITY vs. 2010 Facts: Respondent Angeles City Electric Corporation (AEC). pays a franchise tax of two percent (2%) of its gross receipts to the BIR. demand.R. The Government and the taxpayer are not mutually creditors and debtors of each other under Article 1278 of the Civil Code and a claim of taxes is not such a debt.

42 | P a g e . it must be emphasized that although there is no express prohibition in the LGC. the City Treasurer issued a Notice of Assessment to AEC for payment of business tax. fee or charge imposed by the code. No grave abuse of discretion was committed by the RTC in the issuance of the writ of preliminary injunction because the two requisites to warrant the issuance of such.194. however. which are the existence of a clear and unmistakable right that must be protected and an urgent and paramount necessity for the writ to prevent serious damage. Nevertheless. Courts therefore should exercise extreme caution in issuing such injunctions. have been satisfied. is diferent in the case of the collection of local taxes as there is no express provision in the LGC prohibiting courts from issuing an injunction to restrain local governments from collecting taxes. the National Internal Revenue Code of 1997 (NIRC) expressly provides that no court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax. The City Treasurer however levied on the real properties of AEC and a Notice of Auction Sale was published announcing that a public auction of the levied properties would be held. Issue: Whether or not the RTC can enjoin the collection of local taxes. but the RTC denied such motion. AEC protested the assessment but the City Treasurer denied the protest. Ruling: No. contending that the RTC cannot enjoin the collection of taxes pursuant to the LGC. The Court then had no other recourse but to grant the prayer for the issuance of a writ of preliminary injunction considering that if the respondent will not be restrained from doing the acts complained of. it will preempt the Court from properly adjudicating on the merits the various issues between the parties.On 2004. In line with this principle. A principle deeply embedded in our jurisprudence is that taxes being the lifeblood of the government should be collected promptly.861. without unnecessary hindrance or delay. Unlike the National Internal Revenue Code.10. The LGC does not specifically prohibit an injunction enjoining the collection of taxes. After due notice and hearing. the RTC issued a TRO and a Writ of Preliminary Injunction. injunctions enjoining the collection of local taxes are frowned upon. license fee and other charges for the period 1993 to 2004 amounting to P94. This prompted AEC to file with the RTC an Urgent Motion for Issuance of Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction. AEC appealed to the RTC of Angeles City via a Petition for Declaratory Relief. the Local Tax Code does not contain any specific provision prohibiting courts from enjoining the collection of local taxes. and will render moot and academic the proceedings before the court. The situation. Angeles City filed a motion for dissolution of preliminary injunction. The petition was dismissed.

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