Case Digests: Taxation i

CIR v. PINEDA
GR
No.
21 SCRA 105

L-22734,

September

15,

1967

FACTS: Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children,
the eldest of whom is Atty. Manuel Pineda. Estate proceedings were had in Court so that
the estate was divided among and awarded to the heirs. Atty Pineda's share amounted
to about P2,500.00. After the estate proceedings were closed, the BIR investigated the
income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found
that the corresponding income tax returns were not filed. Thereupon, the representative
of the Collector of Internal Revenue filed said returns for the estate issued an
assessment and charged the full amount to the inheritance due to Atty. Pineda who
argued that he is liable only to extent of his proportional share in the inheritance.
ISSUE: Can BIR collect the full amount of estate taxes from an heir's inheritance.
HELD: Yes. The Government can require Atty. Pineda to pay the full amount of the taxes
assessed.
The reason is that the Government has a lien on the P2,500.00 received by him from the
estate as his share in the inheritance, for unpaid income taxes for which said estate is
liable. By virtue of such lien, the Government has the right to subject the property in
Pineda's possession to satisfy the income tax assessment. After such payment, Pineda
will have a right of contribution from his co-heirs, to achieve an adjustment of the
proper
share
of
each
heir
in
the
distributable
estate.
All told, the Government has two ways of collecting the tax in question. One, by going
after all the heirs and collecting from each one of them the amount of the tax
proportionate to the inheritance received; and second, is by subjecting said property of
the estate which is in the hands of an heir or transferee to the payment of the tax due.
This second remedy is the very avenue the Government took in this case to collect the
tax. The Bureau of Internal Revenue should be given, in instances like the case at bar,
the necessary discretion to avail itself of the most expeditious way to collect the tax as
may be envisioned in the particular provision of the Tax Code above quoted, because
taxes are the lifeblood of government and their prompt and certain availability is an
imperious need.

VERA
GR
89 SCRA 199

v.
No.

L-31364

March

30,

FERNANDEZ
1979

FACTS: The BIR filed on July 29, 1969 a motion for allowance of claim and for payment of
taxes representing the estate's tax deficiencies in 1963 to 1964 in the intestate
proceedings of Luis Tongoy. The administrator opposed arguing that the claim was
already barred by the statute of limitation, Section 2 and Section 5 of Rule 86 of the
Rules of Court which provides that all claims for money against the decedent, arising
from contracts, express or implied, whether the same be due, not due, or contingent, all
claims for funeral expenses and expenses for the last sickness of the decedent, and
judgment for money against the decedent, must be filed within the time limited in the
notice; otherwise they are barred forever.
ISSUE: Does the statute of non-claims of the Rules of Court bar the claim of the
government for unpaid taxes?
HELD: No. The reason for the more liberal treatment of claims for taxes against a
decedent's estate in the form of exception from the application of the statute of nonclaims, is not hard to find. Taxes are the lifeblood of the Government and their prompt
and certain availability are imperious need. (CIR vs. Pineda, 21 SCRA 105). Upon
taxation depends the Government ability to serve the people for whose benefit taxes
are collected. To safeguard such interest, neglect or omission of government officials
entrusted with the collection of taxes should not be allowed to bring harm or detriment
to the people, in the same manner as private persons may be made to suffer
individually on account of his own negligence, the presumption being that they take
good care of their personal affairs. This should not hold true to government officials with
respect to matters not of their own personal concern. This is the philosophy behind the
government's exception, as a general rule, from the operation of the principle of
estoppel.
CIR
v.
CA,
CITY
TRUST
BANKING
CORP.
GR
No.
86785,
November
21,
1991
234 SCRA 348
FACTS: Respondent corporation Citytrust filed a refund of overpaid taxes with the BIR
by which the latter denied on the ground of prescription. Citytrust filed a petition for
review before the CTA. The case was submitted for decision based solely on the
pleadings and evidence submitted by the respondent because the CIR could not present
any evidence by reason of the repeated failure of the Tax Credit/Refud Division of the
BIR to transmit the records of the case, as well as the investigation report thereon, to
the Solicitor General. CTA rendered the decision ordering BIR to grant the respondent's
request for tax refund amounting to P 13.3 million.
ISSUE: Failure of the CIR to present evidence to support the case of the government,
should the respondent's claim be granted?
HELD: Not yet. It is a long and firmly settled rule of law that the Government is not
bound by the errors committed by its agents. In the performance of its governmental
functions, the State cannot be estopped by the neglect of its agent and officers.
Although the Government may generally be estopped through the affirmative acts of
public officers acting within their authority, their neglect or omission of public duties as

exemplified in this case will not and should not produce that effect.
Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic
that the Government cannot and must not be estopped particularly in matters involving
taxes. Taxes are the lifeblood of the nation through which the government agencies
continue to operate and with which the State effects its functions for the welfare of its
constituents. The errors of certain administrative officers should never be allowed to
jeopardize the Government's financial position, especially in the case at bar where the
amount involves millions of pesos the collection whereof, if justified, stands to be
prejudiced just because of bureaucratic lethargy. Thus, it is proper that the case be
remanded back to the CTA for further proceedings and reception of evidence.
COMMISSIONER
v.
GR No. L-28896, February 17, 1988
158 SCRA 9

ALGUE,

INC.

FACTS: Private respondent corporation Algue, Inc. filed its income tax returns for 1958
and 1959 showing deductions, for promotional fees paid, from their gross income, thus
lowering their taxable income. The BIR assessed Algue based on such deductions
contending that the claimed deduction is disallowed because it was not an ordinary,
reasonable and necessary expense.
ISSUE: Should an uncommon business expense be disallowed as a proper deduction in
computation of income taxes, corollary to the doctrine that taxes are the lifeblood of the
government?
HELD: No. Private respondent has proved that the payment of the fees was necessary
and reasonable in the light of the efforts exerted by the payees in inducing investors
and prominent businessmen to venture in an xperimental enterprise and involve
themselves in a new business requiring millions of pesos. This was no mean feat and
should
be,
as
it
was,
sufficiently
recompensed.
It is well-settled that taxes are the lifeblood of the government and so should be
collected without unnecessary hindrance On the other hand, such collection should be
made in accordance with law as any arbitrariness will negate the very reason for
government itself. It is therefore necessary to reconcile the apparently conflicting
interests of the authorities and the taxpayers so that the real purpose of taxation, which
is
the
promotion
of
the
common
good,
may
be
achieved.
But even as we concede the inevitability and indispensability of taxation, it is a
requirement in all democratic regimes that it be exercised reasonably and in accordance
with the prescribed procedure. If it is not, then the taxpayer has a right to complain and
the courts will then come to his succor. For all the awesome power of the tax collector,
he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here,
that the law has not been observed.
CIR
GR
No.
298 SCRA 83

v.
124043,

October

14,

YMCA
1998

FACTS: Private Respondent YMCA--a non-stock, non-profit institution, which conducts

various programs beneficial to the public pursuant to its religious, educational and
charitable objectives--leases out a portion of its premises to small shop owners, like

restaurants and canteen operators, deriving substantial income for such. Seeing this,
the commissioner of internal revenue (CIR) issued an assessment to private respondent
for deficiency income tax, deficiency expanded withholding taxes on rentals and
professional fees and deficiency withholding tax on wages. YMCA opposed arguing that
its rental income is not subject to tax, mainly because of the provisions of Section 27 of
NIRC which provides that civic league or organizations not organized for profit but
operate exclusively for promotion of social welfare and those organized exclusively for
pleasure, recreation and other non-profitble businesses shall not be taxed.
ISSUE: Is the contention of YMCA tenable?
HELD: No. Because taxes are the lifeblood of the nation, the Court has always applied
the doctrine of strict in interpretation in construing tax exemptions. Furthermore, a
claim of statutory exemption from taxation should be manifest and unmistakable from
the language of the law on which it is based. Thus, the claimed exemption "must
expressly be granted in a statute stated in a language too clear to be mistaken."
DAVAO
GR
293 SCRA 77

GULF
No.

LUMBER
117359,

CORP
July

23,

v.

CIR
1998

FACTS: Republic Act No. 1435 entitles miners and forest concessioners to the refund of
25% of the specific taxes paid by the oil companies, which were eventually passed on to
the user--the petitioner in this case--in the purchase price of the oil products. Petitioner
filed before respondent Commissioner of Internal Revenue (CIR) a claim for refund in the
amount representing 25% of the specific taxes actually paid on the above-mentioned
fuels and oils that were used by petitioner in its operations. However petitioner asserts
that equity and justice demands that the refund should be based on the increased rates
of specific taxes which it actually paid, as prescribed in Sections 153 and 156 of the
NIRC. Public respondent, on the other hand, contends that it should be based on specific
taxes deemed paid under Sections 1 and 2 of RA 1435.
ISSUE: Should the petitioner be entitled under Republic Act No. 1435 to the refund of
25% of the amount of specific taxes it actually paid on various refined and
manufactured mineral oils and other oil products, and not on the taxes deemed paid
and passed on to them, as end-users, by the oil companies?
HELD: No. According to an eminent authority on taxation, "there is no tax exemption
solely on the ground of equity." Thus, the tax refund should be based on the taxes
deemed paid. Because taxes are the lifeblood of the nation, statutes that allow
exemptions are construed strictly against the grantee and liberally in favor of the
government. Otherwise stated, any exemption from the payment of a tax must be
clearly stated in the language of the law; it cannot be merely implied therefrom.
MARCOS
GR
293 SCRA 77

No.

II
120880,

June

v.

5,

CA
1997

FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to
grant CIR's petition to levy the properties of the late Pres. Marcos to cover the payment

of his tax delinquencies during the period of his exile in the US. The Marcos family was
assessed by the BIR, and notices were constructively served to the Marcoses, however
the assessment were not protested administratively by Mrs. Marcos and the heirs of the
late president so that they became final and unappealable after the period for filing of
opposition has prescribed. Marcos contends that the properties could not be levied to
cover the tax dues because they are still pending probate with the court, and
settlement of tax deficiencies could not be had, unless there is an order by the probate
court or until the probate proceedings are terminated.
ISSUE: Is the contention of Bongbong Marcos correct?
HELD: No. The deficiency income tax assessments and estate tax assessment are
already final and unappealable -and-the subsequent levy of real properties is a tax
remedy resorted to by the government, sanctioned by Section 213 and 218 of the
National Internal Revenue Code. This summary tax remedy is distinct and separate from
the other tax remedies (such as Judicial Civil actions and Criminal actions), and is not
affected or precluded by the pendency of any other tax remedies instituted by the
government.
The approval of the court, sitting in probate, or as a settlement tribunal over the
deceased is not a mandatory requirement in the collection of estate taxes. It cannot
therefore be argued that the Tax Bureau erred in proceeding with the levying and sale of
the properties allegedly owned by the late President, on the ground that it was required
to seek first the probate court's sanction. There is nothing in the Tax Code, and in the
pertinent remedial laws that implies the necessity of the probate or estate settlement
court's approval of the state's claim for estate taxes, before the same can be enforced
and
collected.
On the contrary, under Section 87 of the NIRC, it is the probate or settlement court
which is bidden not to authorize the executor or judicial administrator of the decedent's
estate to deliver any distributive share to any party interested in the estate, unless it is
shown a Certification by the Commissioner of Internal Revenue that the estate taxes
have been paid. This provision disproves the petitioner's contention that it is the
probate court which approves the assessment and collection of the estate tax.
REYES
GR
Nos.
196 SCRA 322

v.
L-49839-46,

April

26,

ALMANZOR
1991

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

ISSUE: Is the approach on tax assessment used by the City Assessor reasonable?
HELD: No. The taxing power has the authority to make a reasonable and natural
classification for purposes of taxation but the government's act must not be prompted
by a spirit of hostility, or at the very least discrimination that finds no support in reason.
It suffices then that the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the conditions
not being different both in the privileges conferred and the liabilities imposed.
Consequently, it stands to reason that petitioners who are burdened by the
government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the
principle of social justice should not now be penalized by the same government by the
imposition of excessive taxes petitioners can ill afford and eventually result in the
forfeiture of their properties.
PHIL.
BANK
GR
No.
302 SCRA 250

OF
112024,

COMMUNICATIONS
January

28,

v.

CIR
1999

FACTS: Petitioner PBCom filed its first and second quarter income tax returns, reported
profits, and paid income taxes amounting to P5.2M in 1985. However, at the end of the
year PBCom suffered losses so that when it filed its Annual Income Tax Returns for the
year-ended December 31, 1986, the petitioner likewise reported a net loss of P14.1 M,
and thus declared no tax payable for the year. In 1988, the bank requested from CIR for
a tax credit and tax refunds representing overpayment of taxes. Pending investigation
of the respondent CIR, petitioner instituted a Petition for Review before the Court of Tax
Appeals (CTA). CTA denied its petition for tax credit and refund for failing to file within
the prescriptive period to which the petitioner belies arguing the Revenue Circular No.785 issued by the CIR itself states that claim for overpaid taxes are not covered by the
two-year prescriptive period mandated under the Tax Code.
ISSUE: Is the contention of the petitioner correct? Is the revenue circular a valid
exemption to the NIRC?
HELD: No. The relaxation of revenue regulations by RMC 7-85 is not warranted as it
disregards
the
two-year
prescriptive
period
set
by
law.
Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose
is to generate funds for the State to finance the needs of the citizenry and to advance
the common weal. Due process of law under the Constitution does not require judicial
proceedings in tax cases. This must necessarily be so because it is upon taxation that
the government chiefly relies to obtain the means to carry on its operations and it is of
utmost importance that the modes adopted to enforce the collection of taxes levied
should
be
summary
and
interfered
with
as
little
as
possible.
From the same perspective, claims for refund or tax credit should be exercised within
the time fixed by law because the BIR being an administrative body enforced to collect
taxes, its functions should not be unduly delayed or hampered by incidental matters.
PHIL.
GR
13 SCRA 775

GUARANTY
No.

CO.,
L-22074,

INC.
April

v.
30,

CIR
1965

FACTS: The petitioner Philippine Guaranty Co., Inc., a domestic insurance company,
entered into reinsurance contracts with foreign insurance companies not doing business
in the country, thereby ceding to foreign reinsurers a portion of the premiums on
insurance it has originally underwritten in the Philippines. The premiums paid by such
companies were excluded by the petitioner from its gross income when it file its income
tax returns for 1953 and 1954. Furthermore, it did not withhold or pay tax on them.
Consequently, the CIR assessed against the petitioner withholding taxes on the ceded
reinsurance premiums to which the latter protested the assessment on the ground that
the premiums are not subject to tax for the premiums did not constitute income from
sources within the Philippines because the foreign reinsurers did not engage in business
in the Philippines, and CIR's previous rulings did not require insurance companies to
withhold income tax due from foreign companies.
ISSUE: Are insurance companies not required to withhold tax on reinsurance premiums
ceded to foreign insurance companies, which deprives the government from collecting
the tax due from them?
HELD: No. The power to tax is an attribute of sovereignty. It is a power emanating from
necessity. It is a necessary burden to preserve the State's sovereignty and a means to
give the citizenry an army to resist an aggression, a navy to defend its shores from
invasion, a corps of civil servants to serve, public improvement designed for the
enjoyment of the citizenry and those which come within the State's territory, and
facilities and protection which a government is supposed to provide. Considering that
the reinsurance premiums in question were afforded protection by the government and
the recipient foreign reinsurers exercised rights and privileges guaranteed by our laws,
such reinsurance premiums and reinsurers should share the burden of maintaining the
state.
The petitioner's defense of reliance of good faith on rulings of the CIR requiring no
withholding of tax due on reinsurance premiums may free the taxpayer from the
payment of surcharges or penalties imposed for failure to pay the corresponding
withholding tax, but it certainly would not exculpate it from liability to pay such
withholding tax. The Government is not estopped from collecting taxes by the mistakes
or errors of its agents.
PHILEX
GR
No.
294 SCRA 687

MINING
125704,

CORP.
August

v.
28,

CIR
1998

FACTS: Petitioner Philex Mining Corp. assails the decision of the Court of Appeals
affirming the Court of Tax Appeals decision ordering it to pay the amount of P110.7 M as
excise tax liability for the period from the 2nd quarter of 1991 to the 2nd quarter of
1992 plus 20% annual interest from 1994 until fully paid pursuant to Sections 248 and
249 of the Tax Code of 1977. 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 P120 M plus interest. Therefore these
claims for tax credit/refund should be applied against the tax liabilities.
ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims of tax
refund of the petitioner?

HELD: No. 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. Evidently, to countenance Philex's whimsical reason would
render ineffective our tax collection system. Too simplistic, it finds no support in law or
in
jurisprudence.
To be sure, Philex cannot be allowed to refuse the payment of its tax liabilities on the
ground that it has a pending tax claim for refund or credit against the government
which has not yet been granted.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. xxx There can be no off-setting of taxes against the claims that the
taxpayer may have against the government. 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. The collection of a tax cannot await the results of a lawsuit against the
government.
NORTH
CAMARINES
LUMBER
GR
No.
L-12353,
109 PHIL 511

CO.,
September

INC.

30,

v.

CIR
1960

FACTS: The petitioner sold more than 2M boardfeet of logs to General Lumber Co. with
the agreement that the latter would pay the sales taxes. The CIR, upon consultation
officially advised the parties that the bureau interposes no objection so long as the tax
due shall be covered by a surety. General Lumber complied, but later failed, with the
surety, to pay the tax liabilities, and so the respondent collector required the petitioner
to pay thru a letter dated August 30, 1955. Twice did the petitioner filed a request for
reconsideration before finally submitting the denied request for appeal before the Court
of Tax Appeals. The CTA dismissed the appeal as it was clearly filed out of time. The
petitioner had consumed thirty-three days from the receipt of the demand, before filing
the appeal. Petitioner argued that in computing the 30-day period in perfecting the
appeal the letter of the respondent Collector dated January 30, 1956, denying the
second request for reconsideration, should be considered as the final decision
contemplated in Section 7, and not the letter of demand dated August 30, 1955.
ISSUE: Is the contention of the petitioner tenable?
HELD: No. This contention is untenable. We cannot countenance that theory that would
make the commencement of the statutory 30-day period solely dependent on the will of
the taxpayer and place the latter in a position to put off indefinitely and at his
convenience the finality of a tax assessment. Such an absurd procedure would be
detrimental to the interest of the Government, for "taxes are the lifeblood of the
government, and their prompt and certain availability is an imperious need."
LUTZ
GR
98 PHIL 148

No.

L-7859,

v.

December

22,

ARANETA
1955

FACTS: Plaintiff Walter Lutz, in his capacity as judicial administrator of the intestate
estate of Antionio Ledesma, sought to recover from the CIR the sum of P14,666.40 paid

by the estate as taxes, under section 3 of the CA 567 or the Sugar Adjustment Act
thereby assailing its constitutionality, for it provided for an increase of the existing tax
on the manufacture of sugar, alleging that such enactment is not being levied for a
public purpose but solely and exclusively for the aid and support of the sugar industry
thus making it void and unconstitutional. The sugar industry situation at the time of the
enactment was in an imminent threat of loss and needed to be stabilized by imposition
of emergency measures.
ISSUE: Is CA 567 constitutional, despite its being allegedly violative of the equal
protection clause, the purpose of which is not for the benefit of the general public but
for the rehabilitation only of the sugar industry?
HELD: Yes. The protection and promotion of the sugar industry is a matter of public
concern, it follows that the Legislature may determine within reasonable bounds what is
necessary for its protection and expedient for its promotion. Here, the legislative
discretion must be allowed to fully play, subject only to the test of reasonableness; and
it is not contended that the means provided in the law bear no relation to the objective
pursued or are oppressive in character. If objective and methods are alike
constitutionally valid, no reason is seen why the state may not levy taxes to raise funds
for their prosecution and attainment. Taxation may be made the implement of the
state's police power.
GOMEZ
GR
No.
25 SCRA 827

v.
L-23645,

October

29,

PALOMAR
1968

FACTS: Petitioner Benjamin Gomez mailed a letter at the post office in San Fernando,
Pampanga. It did not bear the special anti-TB stamp required by the RA 1635. It was
returned to the petitioner. Petitioner now assails the constitutionality of the statute
claiming that RA 1635 otherwise known as the Anti-TB Stamp law is violative of the
equal protection clause because it constitutes mail users into a class for the purpose of
the tax while leaving untaxed the rest of the population and that even among postal
patrons the statute discriminatorily grants exemptions. The law in question requires an
additional 5 centavo stamp for every mail being posted, and no mail shall be delivered
unless bearing the said stamp.
ISSUE: Is the Anti-TB Stamp Law unconstitutional, for being allegedly violative of the
equal protection clause?
HELD: No. It is settled that the legislature has the inherent power to select the subjects
of taxation and to grant exemptions. This power has aptly been described as "of wide
range and flexibility." Indeed, it is said that in the field of taxation, more than in other
areas, the legislature possesses the greatest freedom in classification. The reason for
this is that traditionally, classification has been a device for fitting tax programs to local
needs and usages in order to achieve an equitable distribution of the tax burden.
The classification of mail users is based on the ability to pay, the enjoyment of a
privilege and on administrative convenience. Tax exemptions have never been thought
of as raising revenues under the equal protection clause.
PUNSALAN

v.

MUN.

BOARD

OF

CITY

OF

MANILA

GR
95 PHIL 46

No.

L-23645,

October

29,

1968

FACTS: The plaintiffs--two lawyers, medical practitioner, a dental surgeon, a CPA, and a
pharmacist--sought the annulment of Ordinance No.3398 of the City of Manila which
imposes a municipal occupation tax on persons exercising various professions in the city
and penalizes non-payment of the tax, contending in substance that this ordinance and
the law authorizing it constitute class legislation, are unjust and oppressive, and
authorize what amounts to double taxation. The burden of plaintiffs' complaint is not
that the professions to which they respectively belong have been singled out for the
imposition of this municipal occupation tax, but that while the law has authorized the
City of Manila to impose the said tax, it has withheld that authority from other chartered
cities, not to mention municipalities.
ISSUE: Does the law constitute a class legislation? Is it for the Court to determine which
political unit should impose taxes and which should not?
HELD: No. It is not for the courts to judge what particular cities or municipalities should
be empowered to impose occupation taxes in addition to those imposed by the National
Government. That matter is peculiarly within the domain of the political departments
and the courts would do well not to encroach upon it. Moreover, as the seat of the
National Government and with a population and volume of trade many times that of any
other Philippine city or municipality, Manila, no doubt, offers a more lucrative field for
the practice of the professions, so that it is but fair that the professionals in Manila be
made to pay a higher occupation tax than their brethren in the provinces