Tax Digests and Doctrines of 3D BATCH 2012 under Atty.

Gonzales
TCC, LGC and Remedies under the Tax Code of 1997

DIGESTS FOR TARIFFS AND CUSTOMS CODE (Cua and Muli)

SEC. 2208. RIGHT OF POLICE OFFICER TO ENTER INCLOSURE For
Chia v Collector the more effective discharge of his official duties, any person
177 SCRA 755 exercising the powers herein conferred, may at any time enter,
Facts: Electronic and electrical equipment and others articles pass through or search any land or inclosure or any warehouse,
found in 2 stores (Toms Electronics and Sony Merchandizing) store or other building, not being a dwelling house.

were seized by the Anti Smuggling Center by virtue of the

A warehouse, store or other building or inclosure used for the
warrant issued by the Collector of Customs. Items seized were
keeping or storage of articles does not become a dwelling
allegedly illegally imported into the Philippines by foreign ships
house within the meaning hereof merely by reason of the fact
in transit through Philippines soil without passing through the
that a person employed as watchman lives in the place, nor
Bureau of Customs, thereby evading corresponding custom
will the fact that his family stays there with him alter the case.
duties and taxes. Petitioner Chia seeks to nullify the warrants
issued. Lastly, upon effecting the seizure of the goods, Bureau of
Customs acquired jurisdiction not only over the case but also
Issue: W/N seizure is justified by the warrants issued by the
over the goods seized for the purpose of enforcing the tariff
Collector of Customs? Yes
and customs taxes. A part dissatisfied by the decision of the
Held/Doctrine: The petition is devoid of merit because not Collector may appeal to the Commissioner of Customs, whose
only may goods be seized without a search and seizure decision is appealable to the CTA then to the SC. Since
warrant under Section 2536 of the Customs and Tariff Code, petitioner did not exhaust all administrative remedies, his
when such goods are openly offered for sale or kept in storage recourse to this court is premature.
in a store as in this case, but the fact is that petitioner's stores
Tom's Electronics" and "Sony Merchandising (Phil.)" were
searched upon warrants of search and detention issued by the
Collector of Customs, who, under the Constitution, was "a Viduya v. Berdiago
responsible officer authorized by law" to issue them. Sections 73 SCRA 553
2208 of the Tariff and Customs Code provide:

[1]
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997

Facts: The search warrant issued by petitioner Viduya who was collect all lawful revenues, to prevent and suppress smuggling
the former Collector of Customs is quashed by the lower court and other frauds, and to enforce tariff and customs law would
upon motion by private respondent Berdiago. The warrant of not have been performed.
seizure and detention was issued on the basis of reliable
intelligence that fraudulent documents were used by Berdiago
LLamado v. Collector of Customs
in securing the release from the Bureau of Customs of a Rolls
122 SCRA 118
Royce, it being made to appear that such car was a 1961
Facts: A Cessna plane containing de gaza lamps was unloaded
model instead of a 1966, thus enabling respondent to pay
at the Alabat airstrip. Later that night, that, a motorized boat
lower custom duties. There was a demand for the correct
carrying Fortune Blue Seal Cigarettes unloaded the goods and
amount due and Respondent expressed his willingness to pay.
was later loaded in a DC-3 plane. The DC-3 plane took off using
Unfortunately, he was not able to live up to his promise so a
the de gaza lamps as a guide to safety take off from the
search warrant was issued, pursuant to Section 2099 of the
airstrip. A few days after, a warrant was issued for seizure and
TCC which requires a search warrant if such goods are located
detention of the Cessna Plane. Petitioners argue that the
in a dwelling house because the car was located in the Yabut
Cessna was not used to transport the contraband goods but
Compound. Morever, it was not shown that Berdiago did not
only bring the de gaza lamps.
own the dwelling house which was searched. Nonetheless,
respondent judge quashed the warrant. Issue: W/N the Cessna plane was used in the unlawful
importation of cigagrtes within the meaning of Section 2530 of
Issue: W/N there was grave abuse of discretion on the part of
the TCC which provides that
the judge in quashing the search warrant? Yes
Held/Ratio: Petition Dismissed. It is not necessary that the
Held/Ratio: Petition is granted. As the car was kept in a
vessel or aircraft mist itself carry the contraband. There is
dwelling house in Wakas, Barrio San Dionisio, Paraaque, Rizal,
nothing in the law that requires. In the case at bar, it is
petitioner through two of his officers in the Customs Police
undeniable that the Cessna plane was deliberately used to
Service applied for and was able to obtain the search warrant.
ensure the DC-3 plane take off without peril and transport the
Had there been no such move on the part of petitioner, the
goods to Pampanga.
duties expressly enjoined on him by law namely to assess and

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Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
LOCAL GOVERNMENT TAXATION
Doctrines are from ANGEL NOTES, Digests from our
classmates
1. The Province of Bulacan v CA & Republic Cement Corp
G.R. No. 126232. November 27, 1998
DOCTRINE:
A province has no authority to impose the taxes on gravel,
sand, stones, earth and other quarry resources extracted from
private lands.
A province may not levy excise taxes on articles already taxed
by the NIRC
(by Gran) Facts: In 1992, the Sangguniang Panlalawigan of
Bulacan passed Provincial Ordinance No. 3, Sec 21 of which
provides:
Sec 21. There is hereby levied & collected a tax of 10% of the FMV in the
locality per cubic meter of ordinary stones, sand, gravel, earth & other
quarry resources, such, but not limited to marble, granite, volcanic cinders,
basalt, tuff and rock phosphate, extracted from public lands or from beds
of seas, lakes, rivers, streams, creeks and other public waters within its
territorial jurisdiction.
In a letter dated Nov. 11, 1993, the Provincial Treasurer
assessed Republic Cement Corp (RCC) P2,524,692 for
extracting limestone, shale and silica from several parcels
of private land in the province during in 1992 & 1993.
[3]
On Dec. 23, 1993, RCC formally contested the assessment,
which was, denied by the Provincial Treasurer on Jan. 17,
1994. Thus, on Feb. 14, 1994, RCC filed a petition for
declaratory relief with the RTC of Bulacan.
The RTC, upon motion of the province, dismissed RCCs
petition on the ground that the declaratory relief was
improper, allegedly because a breach of the ordinance had
been committed by RCC.
On July 11, 1994, RCC filed a petition for certiorari with the SC
which, in a resolution, referred the same to the CA.
In the interim, the Province issued a warrant of levy against
RCC for its unpaid tax liabilities. In an agreement and modus
vivendi between the parties, RCC agreed to pay under protest
50% of the tax assessed, in exchange for the lifting of the
warrant of levy. Also, the parties agreed, with the approval of
the CA, to limit the issue for to the question as to WON the
provincial government could impose and/or assess taxes on
quarry resources extracted by RCC from private lands. The CA
ruled in favor of RCC, hence this petition for certiorari.
Issues & Rulings:
1) WON the remedy against the RTCs dismissal of the petition
of RCC is certiorari.
The remedy against a final order [motion to dismiss] is an
appeal, and not a petition for certiorari under Rule 65
regardless of the questions sought to be raised on appeal,
whether of fact or of law, whether involving jurisdiction or
grave abuse of discretion of the trial court. The party
aggrieved does not have the option to substitute the special
civil action for certiorari under Rule 65 for the remedy of
appeal. The existence and availability of the right of appeal
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
are antithetical to the availment of the special civil action
for certiorari.
However, contrary to the allegation of petitioners, RCC did not
file a petition for certiorari under Rule 65, but an appeal
by certiorari under Rule 45. Even law students know
that certiorari under Rule 45 is a mode of appeal.
2) WON the province of Bulacan, on the basis of the
ordinance, has authority to impose taxes on quarry resources
extracted from private lands.
NO. Although Sec 186 of the LGC allows a province to levy
taxes other than those specifically enumerated in the LGC, the
same is subject to certain conditions. One of these limitations
is Sec 133(h) of the LGC which provides that a province may
not levy excise taxes on articles already taxed by the NIRC.
Under Sec 151 of the NIRC, an excise tax is levied on all quarry
resources, regardless of origin, whether extracted from public
or private land.
In this case, since the tax imposed by the Province is an excise
tax (being a tax upon the performance, carrying on, or exercise
of an activity), it may not ordinarily impose taxes on stones,
sand, gravel, earth and other quarry resources, as the same
are already taxed under the NIRC.
However, as to sand, gravel, earth and other quarry resources
extracted from public lands, a province may do so because Sec
138 of the LGC expressly empowers a province to impose taxes
thereon.
Moreover, even if the limitation set by Section 133 of the LGC
is disregarded, petitioners may not impose taxes on quarry
resources extracted from private lands on the basis of Sec 21
[4]
of Provincial Ordinance No. 3 as the latter clearly applies only
to quarry resources extracted from public lands.
2. First Phil Industrial Corp v. CA
G.R. No. 125948. December 29, 1998
DOCTRINE:
The local government has no authority to impose another tax
on the
common carriers as the same is already taxed under the Local
Government Code
To tax the same again would defeat the purpose of the Code
(by Gran) Facts: FPIC is a grantee of a pipeline concession to
contract, install and operate oil pipelines. Sometime in Jan
1995, it applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before it could be issued,
the respondent City Treasurer required it to pay a contractors
business tax on its gross receipts for FY1993 pursuant to Sec
143(e) of the LGC.
FPIC paid the tax under protest and on January 20, 1994, it
filed a letter-protest addressed to the City Treasurer. On March
8, 1994, the protest was denied on the ground that since FPIC
is not considered engaged in transportation business, it cannot
claim exemption under Sec 133(j) of the LGC as said exemption
applies only to common carriers transporting goods &
passengers through moving vehicles or vessels either by land,
sea or water.
On June 15, 1994, FPIC filed with the RTC of Batangas City a
complaint for tax refund with prayer for a writ of preliminary
injunction against the City of Batangas and the City Treasurer.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
On October 3, 1994, the trial court rendered a decision
dismissing the complaint. FPIC assailed the decision of the
lower court via a petition for review to the SC, which referred
the case to the CA. The CA affirmed the trial court's ruling and
denied FPICs motion for reconsideration hence, this petition.
Issue: WON FPIC is a common carrier or a transportation
contractor and thus not liable for paying the local business tax.
YES. Under the following laws, PFIC is considered a common
carrier:
a. Art 1732 of the Civil Code defines a Common Carrier as "any
person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public."
Thus, the test for determining whether a party is a common
carrier of goods is:
1. must be engaged in the business of carrying goods for
others as a public employment, and must hold himself
out as ready to engage in the transportation of goods for
person generally as a business and not as a casual
occupation;
2. He must undertake to carry goods of the kind to which
his business is confined;
3. He must undertake to carry by the method by which
his business is conducted and over his established roads;
and
4. The transportation must be for hire.
PFIC is engaged in the business of transporting or carrying
goods, i.e. petroleum products, for hire as a public
[5]
employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ
its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited
clientele does not exclude it from the definition of a
common carrier. Also, the Civil Code makes no distinction
as to the means of transporting, as long as it is by land,
water or air. It does not provide that the transportation of
the passengers or goods should be by motor vehicle. In
fact, in the US, oil pipe line operators are considered
common carriers.
b. Petroleum Act of the Phils also considers FPIC a common
carrier and that such petroleum operation is a public utility.
c. The BIR in BIR RULING 69-83 likewise said that since PFIC is
a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a
common carrier under Republic Act No. 387.
As FPIC is a common carrier, it is therefore, exempt from the
business tax as provided for in Sec 133 (j) of the LGC.
It is clear that the legislative intent in excluding from the taxing
power of the LGU the imposition of business tax against
common carriers is to prevent a duplication of the so-called
common carrier's tax already imposed under the NIRC. FPIC is
already paying 3% common carrier's tax on its gross
sales/earnings under the NIRC. To tax it again on its gross
receipts in its transportation of petroleum business would
defeat the purpose of the LGC.
3. Mactan cebu vs. marcos, et. al.
G.R. 120082 SEPT. 11, 1996
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997

G.R. 118233 DEC. 10, 1999

DOCTRINE: The law requires that the dissatisfied taxpayer who
4. LTO VS. CITY OF BUTUAN questions the validity of the tax ordinance must file his appeal
G.R. 131512 JAN. 20, 2000 to the Secretary of Justice, within 30 days from effectivity
DOCTRINE: thereof. In case the Secretary decides the appeal, a period of
Registration and licensing functions are vested in the LTO while also 30 days is allowed for the aggrieved party to go the court.
franchising and regulatory responsibilities has been vested in But if the Secretary doesn't decide, after the lapse of 60 days,
the LTFRB. a party could already proceed to seek relief in court.
LGUS have the power to regulate the operation of tricycles-
for-hire and to grant franchises for the operation thereof (by Dela Cruz) Facts: The Sangguniang Bayan of San Juan
The power is however subject to the guidelines prescribed by implemented several tax ordinances on printing and
the Department of Transportation and Communications publication, on the sale or transfer of real property, for social
housing, imposed new rates of business tax and an annual Ad
valorem tax on real property. These ordinances were alleged
5. City govt. of san pablo vs. reyes to be unconstitutional by petitioners because they were
G.R. 127708 MARCH 25, 1999 promulgated without previous public hearing thereby
DOCTRINE: constituting deprivation of property without due process of
The tax exemptions or incentives granted to or presently law. The appeal was dismissed for being filed out of time or
enjoyed by natural or juridical persons are withdrawn upon more than 30 days after the effectivity of the ordinances. Their
the effectivity of the LGC except with respect to those entities petition having been denied, they filed with the Court of
expressly enumerated Appeals a petition for certiorari and prohibition which
affirmed the Secretary of Justice.
6. Meralco vs. province of laguna
GR. NO. 131359 MAY 5, 1999 ISSUES:
DOCTRINE: a. Whether or not the CA erred in affirming the decision of the
Local government units have the inherent power to tax except Secretary of Justice who dismissed the prohibition suit, on the
to the extent that such power might be delegated to them ground that it was filed out of time?
either by basic law or by statute b. Whether or not the lack of mandatory public hearings prior
to the enactment of the ordinances render them void on the
7. Reyes vs. CA grounds of deprivation of property without due process?

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Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
RULING:
a. The law clearly requires that the dissatisfied taxpayer who
questions the validity or legality of a tax ordinance must file
his appeal to the Secretary of Justice, within 30 days from
effectivity thereof. In case the Secretary of Justice decides the
appeal, a period of 30 days is allowed for an aggrieved party to
go to court. But if the Secretary does not act thereon, after the
lapse of 60 days, a party could already proceed to court to
seek relief. These 3 separate periods are given for compliance
as a prerequisite before seeking redress in court. For this
reason, the courts construe these provisions as mandatory.
b. In accordance with the presumption of validity in favor of an
ordinance, their constitutionality or legality should be upheld
in the absence of evidences showing that procedure
prescribed by law was not observed in their enactment. In this
case, petitioners have not proved that the Sangguniang Bayan
of San Juan failed to conduct the required public hearings
before enacting said ordinances
REAL PROPERTY TAX (Digests here are taken from ANGEL
NOTES)
1. Mactan cebu vs. marcos, et. al.
G.R. 120082 SEPT. 11, 1996
FACTS: The MCIAA was created under a special law and was
granted exemption from taxes that may be imposed by the
national government or any of its instrumentalities.
[7]
However, the local government of Cebu assessed it for realty
tax for parcels of land. It contested this and since the local
government wanted to issue a warrant of levy, it sought
declaratory relief.
HELD:
Thus, reading together Section 133, 232 and 234 of the LGC,
we conclude that as a general rule, as laid down in Section 133
the taxing powers of local government units cannot extend to
the levy of inter alia, "taxes, fees, and charges of any kind of
the National Government, its agencies and instrumentalties,
and local government units"; however, pursuant to Section
232, provinces, cities, municipalities in the Metropolitan
Manila Area may impose the real property tax except on, inter
alia, "real property owned by the Republic of the Philippines
or any of its political subdivisions except when the beneficial
used thereof has been granted, for consideration or otherwise,
to a taxable person", as provided in item (a) of the first
paragraph of Section 234. As to tax exemptions or incentives
granted to or presently enjoyed by natural or juridical persons,
including government-owned and controlled corporations,
Section 193 of the LGC prescribes the general rule, viz., they
are withdrawn upon the effectivity of the LGC, except upon
the effectivity of the LGC, except those granted to local water
districts, cooperatives duly registered under R.A. No. 6938,
non stock and non-profit hospitals and educational
institutions, and unless otherwise provided in the LGC. The
latter proviso could refer to Section 234, which enumerates
the properties exempt from real property tax. But the last
paragraph of Section 234 further qualifies the retention of the
exemption in so far as the real property taxes are concerned
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
by limiting the retention only to those enumerated there-in; all
others not included in the enumeration lost the privilege upon
the effectivity of the LGC. Moreover, even as the real property
is owned by the Republic of the Philippines, or any of its
political subdivisions covered by item (a) of the first paragraph
of Section 234, the exemption is withdrawn if the beneficial
use of such property has been granted to taxable person for
consideration or otherwise.
Since the last paragraph of Section 234 unequivocally
withdrew, upon the effectivity of the LGC, exemptions from
real property taxes granted to natural or juridical persons,
including government-owned or controlled corporations,
except as provided in the said section, and the petitioner is,
undoubtedly, a government owned corporation, it necessarily
follows that its exemption from such tax granted it in Section
14 of its charter, R.A. No. 6958, has been withdrawn. Any
claim to the contrary can only be justified if the petitioner can
seek refuge under any of the exceptions provided in Section
234, but not under Section 133, as it now asserts, since, as
shown above, the said section is qualified by Section 232 and
234.
2. Napocor vs. province of Lanao
G.R. 96700 NOV. 19, 1996
NAPOCOR was the owner of real properties comprising its
hydroelectric power plant complex. It was assessed by the
local government for payment of realty taxes. Letters of
[8]
demand were sent up to the extent of scheduling an auction
sale. Petitioner filed for a restraining order and was granted.
HELD:
The exemption is not only legally defensible, but also logically
unassailable. The properties in question comprise the site of
the entire Agus II Hydroelectric Power Plant Complex, which
generates and supplies relatively cheap electricity to the island
of Mindanao. These are government properties, wholly owned
by petitioner and devoted directly and solely for public service
and utilized in the implementation of the state policy of
bringing about the total electrification of the country at the
least cost to the public, through the development of power
from all sources to meet the needs of industrial development
and rural electrification. It can be noted, from RA 6395, PD 380
and PD 938, that petitioner's non-profit character has been
maintained throughout its existence, and that petitioner is
mandated to devote all its returns from capital investment and
excess revenues from operations to its expansion. On account
thereof, and to enable petitioner to pay its indebtedness and
obligations and in furtherance of the state policy on
electrification and power generation, petitioner has always
been exempted from taxes.
Consequently, the assessment and levy on (as well as the sale
of) the properties of petitioner by respondents were null and
void for having been in made in violation of Section 10 of P.D.
938 and Section 40 (a) of the Real Property Tax Code.
At this juncture, we hasten to point out that the foregoing
ruling is solely with respect to the purported realty tax
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
liabilities of petitioner for the period from June 14, 1984 to
December 31, 1989.
3. Raul Sesbreno vs. CBAA
G.R. 106588 MAR. 24, 1997
FACTS:
Sesbreno bought real property to which it constructed a
residential property. He duly registered the same for taxation
purposes and declared therein he owned a residential house
made of strong materials. However, the field inspectors found
otherwisewhat he constructed was a 5-storey building made
of materials. As such, they increased by 1000% the assessment
made on the property, to which petitioner naturally contested.
HELD:
The cited provision merely defines "market value." It does not
in any way direct that the market value as defined therein
should be used as basis in determining the value of a property
for purposes of real property taxation. On the other hand,
Section 5 of PD 464 provides unequivocally that "(a)ll real
property, whether taxable or exempt, shall be appraised at the
current and fair market value prevailing in the locality where
the property is situated."
Contrary to petitioner's contention, acquisition cost cannot be
and is not the sole basis of the current and fair market value of
a property. The current value of like properties and their actual
or potential uses, among others, are also considered.
4. Antonio Callanta vs. Ombudsman
G.R. 11525374 JAN 30, 1998
[9]
May officials and employees of the Office of the City Assessor
reduce the new assessed values of real properties upon
requests of the affected property owners? To forestall the
practice of initially setting unreasonably high reassessment
values only to eventually change them to unreasonably lower
values upon "requests" of property owners, the law gives no
such authority to the city assessor or his subalterns. Seemingly
innocuous occasions for mischief and veiled opportunities for
graft should be excised from the public system. Built-in checks
should be zealously observed so that the ingenious and
shrewd cannot circumvent them and the audacious cannot
violate them with impunity.
FACTS:
It is alleged that a-general revision of assessment was
conducted by the Office of the City Assessor in 1988 and
sometime thereafter. Notices of assessment together with the
new tax declarations were subsequently sent to the property
owners. Thereafter, respondents, without the authority of the
Local Board of Assessment Appeals, reassessed the values of
certain properties, in contravention of Sec. 30 of P.D. 464. The
said assessment resulted in the reduction of assessed values of
the properties.
In several similarly worded letter-complaints dated December
19, 1991, the City of Cebu simultaneously filed criminal and
administrative charges against the above-enumerated officers
and staff of the City Assessor's Office for "violations of Section
106 of the Real Property Tax Code[,] for gross negligence or
willful underassessment of real properties within the city's
taxing jurisdiction and for violation of Sec. 3 (e) of R.A. 3019,
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
otherwise known as the Anti-Graft and Corrupt Practices Act[,]
for the act of causing undue injury to the City Government by
giving private persons unwarranted benefits, advantages or
preferences in the discharge of their official and administrative
functions through manifest partiality, evident bad faith or
gross inexcusable negligence by reassessing the real properties
of taxpayers without any authority whatsoever, thereby
resulting in the reduction of tax assessments to the prejudice
of the city government
HELD:
Petitioners anchor the validity of their acts upon the absence
of a specific provision of law expressly prohibiting the assessor
from making adjustments or corrections in the assessment of
real properties, and upon the long-standing practice of the city
assessor's office in making such adjustments/corrections
believed in good faith to be sanctioned under Sec. 22, PD 464.
This is bereft of any merit. Under the procedure, the issuance
of a notice of assessment by the local assessor shall be his last
action on a particular assessment. On the side of the property
owner, it is this last action which gives him [the] right to
appeal to the Local Board of Assessment Appeals. The above
procedure also, does not grant the property owner the
remedy of filing a motion for reconsideration before the local
assessor.
The act of herein petitioners in providing the corresponding
notices of assessment the chance for the property owners
concerned to file a motion for reconsideration and for acting
on the motions filed is not in accordance with law and in
[10]
excess of their authority and therefore constitutes ultra vires
acts.
5. BELEN FIGUERRAS VS. CA
G.R. 119172 MAR. 25, 1999
Petitioner was the owner of a parcel of land. She received an
assessment from the municipal assessor by virtue of two
ordinances issued by the SBone fixing fair market values and
another issuing the assessment levels corresponding to each.
This prompted the petitioner to file for prohibition but this
was overruled by the CA.
HELD:
Petitioner is right in contending that public hearings are
required to be conducted prior to the enactment of an
ordinance imposing real property taxes. R.A. No. 7160
provides that an ordinance levying taxes, fees, or charges
"shall not be enacted without any prior public hearing
conducted for the purpose." However, it is noteworthy that
apart from her bare assertions, petitioner Figuerres has not
presented any evidence to show that no public hearings were
conducted prior to the enactment of the ordinances in
question. On the other hand, the Municipality of Mandaluyong
claims that public hearings were indeed conducted before the
subject ordinances were adopted, although it likewise failed to
submit any evidence to establish this allegation. However, in
accordance with the presumption of validity in favor of an
ordinance, their constitutionality or legality should be upheld
in the absence of evidence showing that the procedure
prescribed by law was not observed in their enactment. In
view of 188 and 511(a) of R.A. No. 7160, an ordinance fixing
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
the assessment levels applicable to the different classes of real
property in a local government unit and imposing penal
sanctions for violations thereof (such as Ordinance No. 125)
should be published in full for three (3) consecutive days in a
newspaper of local circulation, where available, within ten (10)
days of its approval, and posted in at least two (2) prominent
places in the provincial capitol, city, municipal, or barangay hall
for a minimum of three (3) consecutive weeks.
Apart from her allegations, petitioner has not presented any
evidence to show that the subject ordinances were nor
disseminated in accordance with these provisions of R.A. No.
7160. On the other hand, the Municipality of Mandaluyong
presented a certificate, dated November 12, 1993, of Williard
S. Wong, Sanggunian Secretary of the Municipality of
Mandaluyong that "Ordinance No. 125, S-1993 . . . has been
posted in accordance with 59(b) of R.A. No. 7160, otherwise
known as the Local Government Code of 1991."
6. TY VS. TRAMPE
G.R. NO. 117577, DEC. 1, 1995.
FACTS:
Petitioners were assessed by the municipal assessor for realty
taxes over their real properties. They asked for reconsideration
and thinking this is not yet enough, they filed a petition for
prohibition in the RTC.
HELD:
Coming down to specifics, Sec. 9 of P.D. 921 requires that the
schedule of values of real properties in the Metropolitan
Manila area shall be prepared jointly by the city assessors in
the districts created therein: while Sec. 212 of R.A. 7160 states
[11]
that the schedule shall be prepared "by the provincial, city and
municipal assessors of the municipalities within the
Metropolitan Manila Area for the different classes of real
property situated in their respective local government units for
enactment by ordinance of the sanggunian concerned. . . ." It
is obvious that harmony in these provisions is not only
possible, but in fact desirable, necessary and consistent with
the legislative intent and policy. By reading together and
harmonizing these two provisions, we arrive at the following
steps in the preparation of the said schedule, as follows:
1. The assessor in each municipality or city in the Metropolitan
Manila area shall prepare his/her proposed schedule of values,
in accordance with Sec. 212, R.A. 7160.
2. Then, the Local Treasury and Assessment District shall meet,
per Sec. 9, P.D. 921. In the instant case, that district shall be
composed of the assessors in Quezon City, Pasig, Marikina,
Mandaluyong and San Juan, pursuant to Sec. 1 of said P.D. In
this meeting, the different assessors shall compare their
individual assessments, discuss and thereafter jointly agree
and produce a schedule of values for their district, taking into
account the preamble of said P.D. that they should evolve "a
progressive revenue raising program that will not unduly
burden the taxpayers"
3. The schedule jointly agreed upon by the assessors shall then
be published in a newspaper of general circulation and
submitted to the sanggunian concerned for enactment by
ordinance, per Sec. 212, R.A. 7160.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
Although as a rule, administrative remedies must first be
exhausted before resort to judicial action can prosper, there is
a well-settled exception in cases where the controversy does
not involve questions of fact but only of law. In the present
case the parties, even during the proceedings in the lower
court on 11 April 1994, already agreed "that the issues in the
petition are legal", and thus, no evidence was presented in
said court.
In laying down the powers of the Local Board of Assessment
Appeals, R.A. 7160 provides in Sec. 229 (b) that "(t)he
proceedings of the Board shall be conducted solely for the
purpose of ascertaining the facts . . . ." It follows that appeals
to this Board may be fruitful only where questions of fact are
involved. Again, the protest contemplated under Sec. 252 of
R.A. 7160 is needed where there is a question as to the
reasonableness of the amount assessed. Hence, if a taxpayer
disputes the reasonableness of an increase in a real estate tax
assessment, he is required to "first pay the tax" under protest.
Otherwise, the city or municipal treasurer will not
act on his protest. In the case at bench however, the
petitioners are questioning the very authority and power of
the assessor, acting solely and independently, to impose the
assessment and of the treasurer to collect the tax. These are
not questions merely of amounts of the increase in the tax but
attacks on the very validity of any increase.
REVISION OF THE JURISDICTION OF THE CTA
1. TIU VS. COURT OF APPEALS
G.R. 127410 JANUARY 20, 1999
[12]
FACTS:
The Congress passed into law RA 7227 entitled An Act
Accelerating the Conversion of Military Reservations Into
Other Productive Uses, Creating the Bases Conversion and
Development Authority for this Purpose, Providing Funds
Therefore and for Other Purposes, creating the Subic Special
Economic Zone (SSEZ). SSEZ has multiple benefits such as (1)
free flow or movement of goods and capital; (2) tax and duty-
free importations of raw materials, capital and equipment; (3)
no exchange control policy; (4) banking and finance shall be
liberalized.
HELD:
(1) The equal-protection guarantee does not require territorial
uniformity of laws.
(2) The fundamental right of equal protection of the law is not
absolute, but is subject to reasonable classification.
(3) Classification, to be valid, must (1) rest on substantial
distinctions, (2) be germane to the purpose of the law, (3) not
be limited to existing conditions only, and (4) apply equally to
all members of the same class.
(4) Furthermore, RA 7227 clearly vests in the President the
authority to delineate the metes and bounds of the SSEZ.
2. PHILIPPINE MATCH CO VS. CITY OF CEBU
L30745 JAN. 18 1978 WHERE THE SALE WAS BOOKED
FACTS:
Ordinance No. 279 of Cebu City (approved by the mayor on
March 10, 1960 and also approved by the provincial board) is
"an ordinance imposing a quarterly tax on gross sales or
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
receipts of merchants, dealers, importers and manufacturers
of any commodity doing business" in Cebu City. It imposes a
sales tax of one percent (1%) on the gross sales, receipts or
value of commodities sold, bartered, exchanged or
manufactured in the city in excess of P2,000 a quarter. Section
9 of the ordinance provides that, for purposes of the tax, "all
deliveries of goods or commodities stored in the City of Cebu,
or if not stored are sold" in that city, "shall be
considered as sales" in the city and shall be taxable. Thus, it
would seem that under the tax ordinance sales of matches
consummated outside of the city are taxable as long as the
matches sold are taken from the company's stock stored in
Cebu City.
The Philippine Match Co., Ltd., whose principal office is in
Manila, is engaged in the manufacture of matches. Its factory
is located at Punta, Sta. Ana, Manila. It ships cases or cartons
of matches from Manila to its branch office in Cebu City for
storage, sale and distribution within the territories and
districts under its Cebu branch or the whole Visayas-Mindanao
region. Cebu City itself is just one of the eleven districts under
the company's Cebu City branch office. Philippine Match
sought the refund of a portion of the sales tax collected from
them by virtue of a part of it was assessed based on sales
which transpired outside of the city and that some of the
matches were just stored in the city and delivered directly to
customers outside of Cebu. This was denied by the City
Treasurer, prompting Philippine Match to file a case in court.
The trial court invalidated the tax on transfers of matches to
salesmen assigned to different agencies outside of the city and
on shipments of matches to provincial customers pursuant to
[13]
the instructions of the newsmen It ordered the defendants to
refund to the plaintiff the sum of P8,923.55 as taxes paid out
the said out-of-town deliveries with legal rate of interest from
the respective dates of payment.
The trial court characterized the tax on the other two
transactions as a "storage tax" and not a sales tax. It assumed
that the sales were consummated outside of the city and,
hence, beyond the city's taxing power. The city did not appeal
from that decision. The company appealed from that portion
of the decision upholding the tax on sales of matches to
customers outside of the city but which sales were booked
and paid for in Cebu City, and also from the dismissal of its
claim for damages against the city treasurer.
HELD:
We hold that the appeal is devoid of merit bemuse the city can
validly tax the sales of matches to customers outside of the
city as long as the orders were booked and paid for in the
company's branch office in the city. Those matches can be
regarded as sold in the city, as contemplated in the ordinance,
because the matches were delivered to the carrier in Cebu
City. Generally, delivery to the carrier is delivery to the buyer. A
different interpretation would defeat the tax ordinance in
question or encourage tax evasion through the simple
expedient of arranging for the delivery of the matches at the
out. skirts of the city through the purchase were effected and
paid for in the company's branch office in the city.
The taxing power of cities, municipalities and municipal
districts may be used (1) "upon any person engaged in any
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
occupation or business, or exercising any privilege" therein; (2)
for services rendered by those political subdivisions or
rendered in connection with any business, profession or
occupation being conducted therein, and (3) to levy, for public
purposes, just and uniform taxes, licenses or fees.
Applying that jurisdictional test to the instant case, it is at once
obvious that sales of matches to customers outside oil Cebu
City, which sales were booked and paid for in the company's
branch office in the city, are subject to the city's taxing power.
The sales in the instant case were in the city and the matches
sold were stored in the city. The fact that the matches were
delivered to customers, whose places of business were outside
of the city, would not place those sales beyond the city's
taxing power. Those sales formed part of the merchandising
business being assigned on by the company in the city. In
essence, they are the same as sales of matches fully
consummated in the city.
3. ILOILO BOTTLERS INC. VS. CITY OF ILOILO
G.R. NO. 52019 AUG 19, 1988
FACTS:
Plaintiff was an operator of a bottling plant in Pavia, Iloilo. In
the meanwhile, city government of Iloilo enacted an ordinance
ordering the payment of municipal tax by bottling,
manufacturing and distributing plants, regardless of
destination of deliveries. Plaintiff purchased a bottling plant in
Iloilo City but subsequently closed the same and moved all to
[14]
its original plant. Thereafter, the city government assessed it
for municipal taxes.
HELD:
The tax ordinance imposes a tax on persons, firms, and
corporations engaged in the
business of:
1. distribution of soft-drinks
2. manufacture of soft-drinks, and
3. bottling of softdrinks within the territorial jurisdiction of the
City of Iloilo.
There is no question that after it transferred its plant to Pavia,
Iloilo province, Iloilo Bottlers, Inc. no longer
manufactured/bottled its softdrinks within Iloilo City. Thus, it
cannot be taxed as one falling under the second or the third
type of business. The resolution of this case therefore hinges
on whether the company may be considered engaged in the
distribution of softdrinks in Iloilo City, even after it had
transferred its bottling plant to Pavia, so as to be within the
purview of the ordinance.
Iloilo Bottlers, Inc. disclaims liability on two grounds: First, it
contends that since it is not engaged in the independent
business of distributing soft-drinks, but that its activity of
selling is merely an incident to, or is a necessary consequence
of its main or principal business of bottling, then it is NOT
liable under the city tax ordinance Second, it claims that only
manufacturers or bottlers having their plants inside the
territorial jurisdiction of the city are covered by the ordinance.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
The second ground is manifestly devoid of merit. It is clear
from the ordinance that three types of activities are covered:
(1) distribution, (2) manufacture and (3) bottling of softdrinks.
A person engaged in any or all of these activities is subject to
the tax.
The first ground, however, merits serious consideration.
This Court has always recognized that the right to manufacture
implies the right to sell/distribute the manufactured products.
Hence, for tax purposes, a manufacturer does not necessarily
become engaged in the separate business of selling simply
because it sells the products it manufactures. In certain cases,
however, a manufacturer may also be considered as engaged
in the separate business of selling its products. To determine
whether an entity engaged in the principal business of
manufacturing, is likewise engaged in the separate business of
selling, its marketing system or sales operations must be
looked into. This Court had occasion to distinguish two
marketing systems: Under the first system, the manufacturer
enters into sales transactions and invoices the sales at its main
office where purchase orders are received and approved
before delivery orders are sent to the company's warehouses,
where in turn actual deliveries are made. No warehouse sales
are made; nor are separate stores maintained where products
may be sold independently from the main office. The
warehouses only serve as storage sites and delivery points of
the products earlier sold at the main office. Under the second
system, sale transactions are entered into and perfected at
stores or warehouses maintained by the company. Anyone
who desires to purchase the product may go to the store or
[15]
warehouse and there purchase the merchandise. The stores
and warehouses serve as selling centers.
Entities operating under the first system are NOT considered
engaged in the separate business of selling or dealing in their
products, independent of their manufacturing business.
Entities operating under the second system are considered
engaged in the separate business of selling.
In the case at bar, the company distributed its softdrinks by
means of a fleet of delivery trucks which went directly to
customers in the different places in lloilo province. Sales
transactions with customers were entered into and sales were
perfected and consummated by route salesmen. Truck sales
were made independently of transactions in the main office.
The delivery trucks were not used solely for the purpose of
delivering softdrinks previously sold at Pavia. They served as
selling units. They were what were called, until recently,
"rolling stores". The delivery trucks were therefore much the
same as the stores and warehouses under the second
marketing system. Iloilo Bottlers, Inc. thus falls under the
second category above. That is, the corporation was engaged
in the separate business of selling or distributing soft-drinks,
independently of its business of bottling them. The tax
imposed under Ordinance No. 5 is an excise tax. It is a tax on
the privilege of distributing, manufacturing or bottling
softdrinks. Being an excise tax, it can be levied by the taxing
authority only when the acts, privileges or businesses are
done or performed within the jurisdiction of said authority.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
4. DRILON VS. LIM
G.R. NO. 112497 AUG 4, 1994
FACTS:
Question on the constitutionality of Section 187 which
empowers the Secretary of Justice regarding constitutionality
or legality of tax ordinances. In his resolution, Secretary Drilon
declared that there were no written notices of public hearings
on the proposed Manila Revenue Code that were sent to
interested parties as required by Art. 276(b) of the
Implementing Rules of the Local Government Code nor were
copies of the proposed ordinance published in three
successive issues of a newspaper of general circulation
pursuant to Art. 276(a). No minutes were submitted to show
that the obligatory public hearings had been held. Neither
were copies of the measure as approved posted in prominent
places in the city in accordance with Sec. 511(a) of the Local
Government Code. Finally, the Manila Revenue Code was not
translated into Pilipino or Tagalog and disseminated among
the people for their information and guidance, conformably to
Sec. 59(b) of the Code. Judge Palattao found otherwise. He
declared that all the procedural requirements had been
observed in the enactment of the Manila Revenue Code and
that the City of Manila had not been able to prove such
compliance before the Secretary only because he had given it
only five days within which to gather and present to him all
the evidence (consisting of 25 exhibits) later submitted to the
trial court.
HELD:
[16]
Section 187 authorizes the Secretary of Justice to review only
the constitutionality or legality of the tax ordinance and, if
warranted, to revoke it on either or both of these grounds.
When he alters or modifies or sets aside a tax ordinance, he is
not also permitted to substitute his own judgment for the
judgment of the local government that enacted the measure.
Secretary Drilon did set aside the Manila Revenue Code, but
he did not replace it with his own version of what the Code
should be. He did not pronounce the ordinance unwise or
unreasonable as a basis for its annulment. He did not say that
in his judgment it was a bad law. What he found only was that
it was illegal. All he did in reviewing the said measure was
determine if the petitioners were performing their functions in
accordance with law, that is, with the prescribed procedure for
the enactment of tax ordinances and the grant of powers to
the city government under the Local Government Code. As we
see it, that was an act not of control but of mere supervision.
An officer in control lays down the rules in the doing of an act.
If they are not followed, he may, in his discretion, order the act
undone or re-done by his subordinate or he may even decide
to do it himself. Supervision does not cover such authority. The
supervisor or superintendent merely sees to it that the rules
are followed, but he himself does not lay down such rules, nor
does he have the discretion to modify or replace them. If the
rules are not observed, he may order the work done or re-
done but only to conform to the prescribed rules. He may not
prescribe his own manner for the doing of the act. He has no
judgment on this matter except to see to it that the rules are
followed. In the opinion of the Court, Secretary Drilon did
precisely this, and no more nor less than this, and so
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
performed an act not of control but of mere supervision. The
issue of non-compliance with the prescribed procedure in the
enactment of the Manila Revenue Code is another matter. The
procedural requirements have indeed been observed. Notices
of the public hearings were sent to interested parties as
evidenced by Exhibits G-1 to 17. The minutes of the hearings
are found in Exhibits M, M-1, M-2, and M-3. Exhibits B and C
show that the proposed ordinances were published in the
Balita and the Manila Standard on April 21 and 25, 1993,
respectively, and the approved ordinance was published in the
July 3, 4 5, 1993 issues of the Manila Standard and in the July
6, 1993 issue of Balita, as shown by Exhibits Q, Q-1, Q-2, and
Q-3. The only exceptions are the posting of the ordinance as
approved but this omission does not affect its validity,
considering that its publication in three successive issues of a
newspaper of general circulation will satisfy due process. It has
also not been shown that the text of the ordinance has been
translated and disseminated, but this requirement applies to
the approval of local development plans and public investment
programs of the local government unit and not to tax
ordinances.
TAX REMEDIES UNDER THE TAX CODE
Tax Delinquency v Tax Deficiency
CIR V Island Garment Siron
[17]
The respondent corporation filed its appeal seasonably, i.e.
within the 30-day period prescribed under R.A. No. 1125, the
Act which created the CTA.
Respondent corporations letter, contesting petitioners use of
mathematical computation, amounted to a motion for
reconsideration which interrupted the running of the 30-day
period for appeal. Its a valid request for reconsideration of
petitioners letter since it raises new and valid issues. A
request for reconsideration of the decision of respondent is
pro forma if it merely reiterates the ground already stated in
the first request for cancellation or withdrawal of the
assessment. Here, the request is not merely pro forma as it did
not merely reiterate the grounds stated in its first request for
cancellation of the assessments but also called attention to
those facts or arguments which have been disregarded in the
disputed decision of petitioner.
Assessment Process
Phil Journalist v CIR Siron
The NIRC, under Sections 203 and 222, provides for a statute
of limitations on the assessment and collection of internal
revenue taxes in order to safeguard the interest of the
taxpayer against unreasonable investigation. Unreasonable
investigation refers to where the period of assessment extends
indefinitely since this deprives the taxpayer of the assurance
that it will no longer be subjected to further investigation after
the expiration of the reasonable period of time.
RMC No. 20-90 implements these provisions of the NIRC, and
must be strictly followed, such that in its execution, the phrase
but not after ___19__ should be filled up, indicating the
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
expiry date of the period agreed upon to assess/collect the tax
after the regular three-year period of prescription. It must also
be signed by the Commissioner or the Revenue District Officer,
as the case may be. The waiver is not a unilateral act by the
taxpayer or the BIR, but is a bilateral agreement between two
parties to extend the period to a date certain.
Oceanic Wireless network v CIR Siron
A demand letter for payment of delinquent taxes may be
considered a decision on a disputed or protested assessment.
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.
Here, the letter of demand, unquestionably constitutes the
final action taken by the BIR on petitioners request for
reconsideration when it reiterated the tax deficiency
assessments due from petitioner, and requested its payment.
Failure to do so would result in the issuance of a warrant of
distraint and levy to enforce its collection without further
notice. In addition, the letter contained a notation indicating
that petitioners request for reconsideration had been denied
for lack of supporting documents. As to whether it has
become final despite the fact that it was only issued and
signed by the chief of a division of the BIR, the general rule is
that the CIR may delegate any power vested upon him by law
to Division Chiefs or to officials of higher rank, subject only to
the four (4) exceptions mentioned in the NIRC, as amended.
The act of issuance of the demand letter by the Chief of the
Accounts Receivable and Billing Division does not fall under
[18]
any of the exceptions that have been mentioned as non-
delegable.
Mirant Navotas Corp v CIR Siron
Section 112(A) of the Tax Code provides that any VAT-
registered person, whose sales are zero-rated or effectively
zero-rated, may, within two years after the close of the taxable
quarter when the sales were made, apply for the issuance of a
tax credit certificate or refund of creditable input tax due or
paid attributable to such sales. It is clear that the two-year
period within which the refund may be applied should be
reckoned from the close of the taxable quarter when the
relevant sales pertaining to the input VAT were made, not
from the date the tax was paid. Claims filed beyond this period
will be disallowed.
CIR v Enron Subic Power Corp. Fajardo
PNZ Marketing v Com * Fajardo
Artex dev Co. v NLRC * Fajardo
CIR v Global Communication Alciso
Oceanic Wireless Network v Comm Alciso
Collector v Batangas Transportation Co. Alciso
Lascona Realty Corp v Comm. Alciso IMPORTANT CASE
Tax Remedies
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
A. Remedies of the Government
1. Collection of Tax Liability
Republic v Lim Tian Teng Francisco
The tax payers contention that the final decision of the
Collector of Internal Revenue on the disputed assessment is a
condition precedent to the filing of an action in the CFI for the
collection of taxes must fail. Nowhere in the Tax Code is the
CIR required to decide with finality a disputed
assessment/request for reinvestigation before the CIR can file
an action for the collection of tax liabilities. RA 1125 allows the
taxpayer to question the correctness of an assessment in both
administrative and judicial levels at the same time; thus, the
law does not restrict the CIR from collecting the tax liability
through any of the means provided in the Tax Code.
Arches v Bellosillo * Francisco
In assailing the action brought by the BIR for the collection of
tax liabilities, petitioner claims that the approval of the
Revenue Commissioner is jurisdictional, and the lack of which
strips the court of any authority to hear the tax collection case.
The court has ruled in a line of cases that the lack of approval
by the Commissioner is not jurisdictional, it only affects the
parties or the cause of action. Further, Memorandum Order V-
634 delegated the power of the Revenue Commissioner
regarding the administration and enforcement of revenue laws
and regulations to the respective Regional Directors. Here, it
was the Regional Director himself who instituted the case,
leaving it unnecessary for further approval.
[19]
Republic v Salud Hizon Francisco
The issues in this case revolve around the lack of approval of
the CIR in filing the collection case and the summary nature of
collection cases in relation to the prescription of an action for
collection. The court ruled that in accordance with Sec. 221 of
the NIRC as implemented by RAO 5-83, the authority to file
complaints for collection of tax liabilities has been validly
delegated to the Revenue Regions particularly to the Special
Attorneys and Special Counsels designated by the Regional
Director. As such, approval of the CIR is no longer necessary. In
the case at bar, it was the Chief of the Legal Division with the
approval of the Regional Director who instituted the case.
Anent the second issue, the petitioner is incorrect in saying
that the action has prescribed. When the BIR served warrants
of distraint or levy on Hizon, the running of the period to
collect was suspended. The summary nature of collection by
distraint or levy allows the enforcement of such collection to
proceed beyind the statutory period.
Ungab v Cusi * Cruz
While there can be no civil action to enforce collection before
the assessment, there is no requirement for the precise
computation and assessment of the tax before there can be a
criminal prosecution. The crime is complete when the violator
has knowingly and willfully filed fraudulent returns with intent
to evade and defeat a part or all of the tax. 1
1
Logically, it has been ruled that a petition for reconsideration of an assessment
may affect the suspension of the prescriptive period for the collection of taxes, but
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
People v Patanao Cruz
Criminal action does not amount to a decision for unpaid
taxes. Criminal liability gives birth to the civil obligation while
such is the opposite under the income tax law. Civil liability to
pay taxes arises from the fact that one has engaged himself in
business and not because of any criminal act committed by
him. The acquittal in the said criminal cases cannot operate to
discharge one from the duty of paying the taxes which the law
requires to be paid, since that duty is imposed by statute prior
to and independently of any attempts by the taxpayer to
evade payment.
CIR v CA * Cruz
Before one is prosecuted for wilful attempt to evade or defeat
any tax under Sections 253 and 255 of the Tax code, the fact
that a tax is due must first be proved.2
Marcos v CA * Cruz
The Government has two ways of collecting the taxes 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. Another remedy, pursuant to the lien
created by Section 315 of the Tax Code, is by subjecting said
property of the estate which is in the hands of an heir or
not the prescriptive period of a criminal action for violation of law
2
the registered wholesale price of the goods, approved by the BIR, is presumed to
be the actual wholesale price, therefore, not fraudulent and unless and until the
BIR has made a final determination of what is supposed to be the correct taxes, the
taxpayer should not be placed in the crucible of criminal prosecution. Herein lies a
whale of difference between Ungab and the case at bar
[20]
transferee to the payment of the tax due the estate. 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.
If there is any issue as to the validity of the BIR's decision to
assess the estate taxes, this should have been pursued
through the proper administrative and judicial avenues
provided for by law such as protest of assessment under
Section 209.
2. Forfeiture
Republic v Enriquez Dela Cruz
The warrant of distraint issued by the CIR should be upheld
over the writ of execution issued by the RTC because it is
settled that the claim of the government predicated on a tax
lien is superior to the claim of a private litigant predicated on a
judgment. The tax lien attaches not only from the service of
the warrant of distraint of personal property but from the time
the tax became due and payable. In this case, the distraint and
notice of seizure were made before the writ of execution was
issued by the Court and that at the time of the writs issuance,
the barges were no longer properties of the debtor Company.
Hence, the court has no jurisdiction over the properties
because the power of the court in execution of judgments
extends only to properties unquestionably belonging to the
judgment debtor.
B. Deficiency Tax Assesment
Republic v Ricarte Dela Cruz
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
The BIRs action to collect the deficiency tax will not hold
because collection should be made within 5 years after tax
assessment. In this case, although notice of assessment was
allegedly made and sent, no evidence was presented to show
that it was actually received. The prescriptive period is
counted from the time assessment was made on April 1959,
however, from said date until the filing of the case at bar, 6
years and 9 months had already lapsed.
Tupaz v Ulep Dela Cruz
In this case, the collection of deficiency tax may be upheld
having been made within the 5 year prescriptive period from
the last day of filing the return or from the date the return is
filed whichever comes later. The violation of non-payment of
taxes can only be committed after service of notice and
demand for payment of deficiency taxes upon the taxpayer.
This is so because prior to the finality of the assessment, the
taxpayer has not committed any violation for nonpayment of
the tax. The offense is deemed committed only after the
finality of the assessment coupled with the taxpayers refusal
to pay the taxes within the period allowed by law.
Victorias Milling Co. Inc. * Dela Cruz
In this case, the Provincial Board of Assessment Appeals had
jurisdiction over the dispute to the exclusion of the Court of
First Instance. Petitioners claim that the assessments are
illegal and void will not hold because assessments only
become illegal and void when the assessor has no power to
act at all. On the other hand, an assessment is considered
erroneous when the assessor has the power but errs in the
[21]
exercise of that power. Since the Provincial Assessor had the
power to make the assessments, but in the exercise of such
power he deviated from the procedure set down by law, in
that he employed the "fixed percentage of diminishing book
value method"3 instead of the "straight line method" 4 in
depreciating the machineries, logically, the assessment should
be considered as erroneous. In which event, Victoria's remedy,
pursuant to Section 17 of the Assessment Law, was to appeal
to the Provincial Board of Assessment Appeals. By the doctrine
of primacy of administrative remedy, the Provincial Board of
Assessment Appeals had jurisdiction over the dispute to the
exclusion of the Court of First Instance.
3. Principles Governing Assessments
CIR V Pascor Realty Venzuela
3
Fixed percentage of diminishing book value method the rate of yearly
depreciation remains the same but the base (book value) upon which the rate is
applied diminishes from year to year.
Fixed diminishing book value method: (P100,000 cost of
machinery)
Book ValueDepreciation1st year5% of100,0005,0002nd
year5% of95,0004,7503rd year5% of90,2504,512.50*same
rate but diminishing base
4
Straight line method the rate and the base (cost) are constant.
Straight-line method: (P100,000 cost of machinery)
Book ValueDepreciation1st year5% of100,0005,0002nd
year5% of95,0005,0003rd year5% of90,0005,000*fixed
depreciation rate
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
An assessment is deemed made only when the CIR releases,
mails or sends such notice to the taxpayer. It must be sent to
and received by a taxpayer, and must demand payment of the
taxes described therein within a specific period. Necessarily,
the taxpayer must be certain that a specific document
constitutes an assessment. A revenue officers affidavit
showing a computation of tax liability, without demand or
period of payment cannot be considered an assessment. In
addition, the filing of a criminal complaint need not be
preceded by an assessment, because in cases of false or
fraudulent returns, or failure to file a return, proceedings in
court may be commenced without an assessment (Sec. 222).
Bonifacia sy po v CTA Venzuela
Tax assessments by tax examiners are presumed correct and
made in good faith. The taxpayer has the duty to prove
otherwise. In the absence of proof of any irregularities in the
performance of duties, an assessment duly made by the BIR
examiner and approved by his superior officers will not be
disturbed. All presumptions are in favour of the correctness of
tax assessments.
CIR v Antonio Tuason Venzuela
All presumptions are in favour of the correctness of CIRs
assessment against the taxpayer. It is incumbent upon the
taxpayer to prove the contrary.
Marcos v CA Venzuela
The determinations and assessments made by the BIR are
presumed correct and made in good faith. The taxpayer has
[22]
the duty of proving otherwise. In the absence of proof of any
irregularities in the performance of official duties, an
assessment will not be disturbed. Even an assessment based
on estimates is prima facie valid and lawful where it does not
appear to have been arrived at arbitrarily or capriciously. The
burden of proof is upon the complaining party to show clearly
that the assessment is erroneous. Failure to present proof of
error in the assessment will justify the judicial affirmance of
said assessment.
CIR v Benipayo * Noel
The assessment determines the tax liability of a taxpayer. As it
is imperative to be accurate, the assessment must be based on
actual facts. Although there is a presumption of correctness in
the assessment, such presumption cannot be based on
another presumption as well, not matter how reasonable or
logical such may be. The basis of the presumption of
correctness must be actual facts.
Meralco Securities v Savellano Noel
Mandamus cannot lie to compel the Commissioner to impose
a deficiency tax assessment. Mandamus only lies when the act
is ministerial in nature, and not discretionary, as assessments
are, with regard to the Commissioner. Should the
Commissioner choose not to impose deficiency tax
assessments due to want of proof, the courts cannot interfere
with such discretionary function.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
City Lumber v Domingo Noel
The order in question only applies to subordinate officers, and
not the Commissioner himself. The Regional Directors merely
reviewed the case and recommended a lower assessment. The
Commissioner may validly delegate the power to assess,
however, such assessment is not binding on him. Thus, if the
Commissioner makes a different final assessment, he may do
so validly.
Republic v Delarama Mendoza, R
The tax must be collected from the estate of the deceased,
and it is the administrator who is under the obligation to pay
such claim. The notice of assessment should have been sent
to the administrator to give effect to such assessment. Since
the person liable for the payment of the tax did not receive
the assessments, the assessment could not have become final
and executory.
Republic v Dela Rama Mendoza, R
The government cannot collect because there is no clear
evidence of the transfer of dividends to the heirs. Since there
is no clear showing that income in the form of said dividends
had really been received, which is the verb used in Section 21
of the NIRC by the Estate whether actually or constructively
and the income tax being collected by the Governemt then
would be without any basis.
CIR v CA * Mendoza, R
[23]
The two-year prescriptive period should be computed from
April 2, 1984, when the final adjustment return was actually
filed because that is the time of payment of the tax within the
meaning of Section 230 of the NIRC. It is only upon such time
that the refund is ascertained.
When it cannot be ascertained whether there has been an
overpayment, in line with the provisions of Section 230 which
provides for a two-year period of prescription counted from
the date of the payment of tax for actions for refund of
corporate income tax, the two-year period should be
computed from the time of actual filing of the Adjustment
Return or Annual Income Tax Return at this point, the it can
already be determined if there has been an overpayment
Commissioner must state in a clear and unequivocal
language the decision
CIR v Union Shipping Corp. Fabia, K
The CIR assessed Yee Fong Hong, Ltd the total sum of 500K, as
deficiency income taxes due for the years 1971 and 1972.
Respondent Yee protested the assessment.
November 25, 1976 the CIR, without ruling on the protest by
Yee, issued a Warrant of Distraint and Levy, which was served
on private respondent's counsel.
November 27, 1976 Yee reiterated its request for the
reinvestigation of the assessment. However the CIR, again,
without acting on the request for reinvestigation and
reconsideration of the Warrant of Distraint and Levy, filed a
collection suit before the CFI.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
January 10, 1976 Respondent filed its Petition for Review of
the petitioner's assessment of its deficiency income taxes in
the Court of Tax Appeals.
According to the petitioner, the Court of Tax Appeals has no
jurisdiction over this case. It claims that the warrant of
distraint and levy is proof of the finality of an assessment and
is tantamount to an outright denial of a motion for
reconsideration of an assessment. Among others, petitioner
contends that the warrant was issued after the respondent
filed a request for reconsideration of subject assessment, thus
constituting petitioner's final decision in the disputed
assessments. Therefore, the period to appeal to the CTA
commenced from the receipt of the warrant on November 25,
1976 so that on January 10, 1976 when respondent
corporation sought redress, it has long become final and
executory.
ISSUE: W/N the CTA has jurisdiction over the case
HELD: Yes
There is no dispute that petitioner did not rule on private
respondent's motion for reconsideration but left private
respondent in the dark as to which action of the Commissioner
is the decision appealable to the CTA. Had he categorically
stated that he denies private respondent's motion for
reconsideration and that his action constitutes his final
determination on the disputed assessment, private
respondent without needless difficulty would have been able
to determine when his right to appeal accrues and the
[24]
resulting confusion would have been avoided. Under the
circumstances, the CIR, not having clearly signified his final
action on the disputed assessment, legally the period to
appeal has not commenced to run.
Advertising Assoc. Inc. Fabia, K
On June 18, 1973 and March 5, 1974 Advertising Associates
received a deficiency tax assessment. They were required to
pay taxes for being a business agent and independent
contractor. April 18 and May 25, 1978, the warrants of
distraint and levy were served upon Advertising Associates.
Advertising Associates filed a protest and there were
subsequent litigation about the nature of Advertising
Assoiates's business. The enforcement of the warrant of
distraint and levy was not implemented. When the issue was
finally resolved, the CIR sought to collect the taxes. Again,
Advertising filed an opposition claiming that the collection of
tax had already prescribed because it was done beyond the 5-
year period. According to Advertising, Sec, 319 of the Tax Code
provides that the tax may be collected by distraint or levy or
by a judicial proceeding begun within 5 years after the
assessment of the tax.
ISSUE: W/N the prescriptive period had already elapsed due to
the failure to enforce the warrant of distraint and levy.
HELD: No
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
The taxpayer received on June 19, 1973 and MArch 5, 1974,
the deficiency assessments herein. The warrants were served
on Paril 18 and May 25, 1975, or within five years after the
assessment of the tax. Obviously, the warrants were issued to
interrupt the 5-year prescriptive period. Its enforcement was
not implemented because of the pending protests of the
taxpayer and its requests for withdraway of the warrants.
CIR v Reyes v CIR Fabia, K
A certain person died and left behind a property in Dasmarinas
Village wirth 34M. The BIR issued a preliminary assessment
notice in the amount of 14 M. Sumbillo protested the
assessment on behalf of the heirs. Later on, the Commissioner
of Internal Revenue issued a preliminary collection letter to
Reyes (one of the heirs). Subsequently, a Warrant of Distraint
or Levy was served upon the estate, followed by Notices of
Levy. Reyes protested the notice of levy and eventually
proposed a compromise agreement of 1M Pesos.
This was rejected by the CIR. According to the CIR, since the
estate tax is a charge on the estate and not on the heirs, the
latter's financial incapacity is immaterial. The estate failed to
pay its taxes and so on June 6, 2000, Reyes was informed that
the property would be sold at a public auction. On June 13,
2000, she filed a protest with the BIR Appellate Devision,
asserting that the whole tax proceeding are VOID. Without
acting on Reyes' protest and offer, the BIR scheduled the
property to be sold.
But then, a law was passed allowing tax delinquents to
[25]
compromise their taxes with the BIR. Reyes filed an application
for compromise with the BIR. Later on, with the acquiescence
of the Secretary of Finance, Reyes paid the 1M and claimed
that she was only waiting for the approval of the NEB (Note:
the NIRC requires the approval of the NEB in compromise
agreements where the tax is more than 1M OR the settlement
offered is less than the prescribed minimum rates.) Oddly
enough, she filed a Motion to Declare the Compromise
Agreement as valid. The CIR countered, saying that there
compromise had not been signed by the NEB.
ISSUE: Was the assessment against the estate valid? Was the
compromise agreement valid?
HELD:
No, the assessment was invalid.
Reyes was not informed in writing of the law and the facts on
which the assessment of the estate had been made. She was
merely notified of the findings by the CIR, who had simply
relied upon the provisions of RA 8424 or the Tax Reform Act.
To be simply informed in writing of the investigation being
conducted and of the recommendation for the assessment
due is nothing but a perfunctory discharge of the tax function
of correctly assessing a taxpayer. The act canot be taken to
mean that Reyes already knew the law and the facts on which
the assessment was based.
No, the compromise was invalid.
It would be premature for the SC to declare that the
compromise on the estate tax liability has been perfected and
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
consummated, considering that the assessment was VOID.
Since the assessment is void it cannot, in turn, be used as a
basis for the perfection of a tax compromise. Furthermore,
nothing has been final and settled. Under Sec 204 (A) where
the basic tax involved exceeds one million pesos or the
settlement offered is less than the prescribed minimum rates,
the compromise shall be subject to the approval of the
National Evaluation Board (NEB) composed of the petitioner
and four deputy commissioners. In this case, the petitioner
paid the value of the compromise but she had no approval
from the NEB.
CIR v Enron Subic Power Corp. Fabia, K
The formal letter of demand calling for payment of the
taxpayer's deficiency tax shall state the fact, the law, rules and
regulations or jurisprudence on which the assessment is
based, otherwise the formal letter of demand and the notice
of assessment shall be VOID.
The finding was that the CIR only wrote the taxes due and the
surcharges as well as the penalties, but there was nothing
about the law upon which it was based. It was only an
itemization of the deductions and rates. According to the CIR,
the 5-day letter should be sufficient in informing Enron about
the legal bases of the assessment. The SC disagreed. The
advice of tax deficiency given by the CIR to an employee of
Enron, as well as the preliminary five-day letter, were not valid
substitutes for the mandatory notice in writing of the legal and
factual bases of the assessment. This does not necessarily
[26]
mean that Enron was informed of the law and facts on which
the deficiency tax assessment was made.
CIR v BPI Clavio
Tax laws cannot be applied retroactively. It can only operate
prospectively. Hence, assessments made pursuant to the (old)
law in force at that time, when the only requirement was for
CIR to notify the taxpayers of his findings, is valid. The CIR
cannot later require an assessment based on law and facts
under the amendatory law.
Fraud Cases
Aznar v CIR * Clavio
The 5-yr prescriptive period to assess tax is applicable only
under normal circumstances. But when false returns,
fraudulent returns are filed or there is failure to file returns,
the 10-yr prescriptive period counted from the time of the
discovery of the falsity, fraud or omission should apply.
Fraud contemplated by law is actual and not constructive. It
must be intentional and deliberate, to avoid or evade tax
liability. Mere mistake or negligence (whether slight or gross)
is not equivalent to fraud so as to warrant the imposition of
50% fraud penalty.
CIR v Toda * Clavio
Transactions (sale/transfer of property) prompted to mitigate
tax liability (from 35% corporate tax to 5% individual CGT) than
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
for legitimate business purposes constitute tax evasion. The
transaction is tainted with fraud.
Assuming there was no fraud, however, ITRs not reflecting the
true/actual amount gained from the transaction are false.
Therefore, the 10-yr prescriptive period to assess, counted
from the date of discovery of the falsity, should be applied.
Hence, assessment was still within the prescriptive period.
4. No Estoppel Against the Governmnet
CIR v Abad Mendoza, J
The CIR made a mistake in classifying the end product of
respondents to be denatured alcohol which if true would
exempt it from specific tax. Respondents argue that since they
were not part in the committee which examined the end
product, it should not be held against them. SC refuted this by
saying that the manufacturer is responsible for the quality of
his products and he cannot escape responsibility by showing
that the denaturing committee of the BIR has certified his
products to be denatured alcohol. He cannot claim ignorance
because the permit issued to him stated that the manufacture
of the denatured alcohol should be under his exclusive
responsibility.
Visayan Cebu Terminal v CIR Mendoza, J
Petitioner had agreed with Bureau of Customs (BOC) that 28%
of its gross receipt would go to the latter. BIR however
assessed petitioner for deficiency in the 3% percentage tax
since the petitioner is still a contractor. The contention is the
base of the percentage tax of w/n the 28 percent that goes to
[27]
the BOC would still be included. As contractor, petitioner is
liable for percentage tax but the 28 percent which goes to the
BOC should be excluded in computation of the percentage tax.
Although petitioner pays to BOC, it does not preclude them to
be classified as a contractor.
Phil Bank of Com v CIR Mendoza, J
Petitioner pleas for a tax refund after it was filed 2 years after
it was due. It relied on RMC No. 785 which extended the
prescriptive period from 2 years and now to 10 years contrary
to Tax code limiting it to only 2 years. The Court refuted this
argument providing that RMC 785 is a mere administrative
ruling and is not conclusive and may be ignored if erroneous.
The State cannot be put in estoppel by the mistakes of its
officials. The RMC, a mere interpretation of the Tax Code,
cannot be given effect if it goes contrary to the express
provision of a statute which in this case the Tax code 0f 1977
Sec. 230.
CIR v CA * Exception Martinez 1997
Alhambra Cigar used BIR Ruling 473-88 to compute their excise
tax; thereafter, the BIR issued Ruling 017-91 repealing said
ruling, then assessed Alhambra for deficiency excise tax.
Alhambra claims that the ruling cannot be applied
retroactively to them; the BIR claims that they cannot be
estopped by the mistakes of their agents.
BIR states that Alhambra acted in bad faith; however, their
failure to consult the BIR before applying BIR Ruling 473-88 is
not a sign of bad faith. Admittedly the government is not
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
estopped from collecting taxes legally due because of mistakes
or errors of its agents; but like other principles of law, this
admits of exceptions in the interest of justice and fair play, as
where injustice will result to the taxpayer.
CIR v CA * Exception Martinez 1999
Central Vegetable Manufacturing Co. Inc was assessed 1.5M
deficiency miller's tax. CVMC claims that boxes are not "raw
materials and supplies used in the milling process" that cannot
be claimed as a tax credit against miller's tax due under the old
tax code. BIR says otherwise. CTA, CA, SC ruled in favor of
CVMC applying the statcon rule that exceptions to the general
rule should be strictly construed.
A similar ruling had been issued four years earlier in favor of
CVMC, but BIR claims that this cannot be adhered to because
the government cannot be estopped by the mistakes of its
agents; but this rule admits of exceptions in the interest of
justice and fairplay.
5. Disputable Presumption
Basilan Estates v CIR Martinez delegated to Paeng
Republic v CA Martinez delegated to Paeng
Marcos v CA Cajucom
In the absence of proof of any irregularities in the
performance of official duties, an assessment will not be
[28]
disturbed. Even an assessment based on estimates is prima
facie valid and lawful where it does not appear to have been
arrived at arbitrarily or capriciously. The burden of proof is
upon the complaining party to show clearly that the
assessment is erroneous. Failure to present proof of error in
the assessment will justify the judicial affirmance of said
assessment.
CIR v Bautista Cajucom
Same doctrine as Basilan.
Basilan Estates v CIR Cajucom
An assessment is deemed made when notice to this effect is
released, mailed, or sent by the CIR to the taxpayer and it is
not required that the notice be received by the taxpayer
within the period of prescription.
Nava v CIR Olympia
The presumption that a letter duly directed and mailed was
received in the regular course of mail cannot apply where
none of the required facts to raise this presumption have been
shown. These facts are: that the letter was properly addressed
with postage pre-paid and that it was mailed.
CIR v Pasco Realty * Olympia
An assessment is deemed made only when the collector
releases, mails, or sends such notice to the taxpayer.
Furthermore, an assessment is not necessary before a criminal
complaint can be filed but is necessary for collection such that
an affidavit may not take the place of an assessment.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
C. Prescription of Right to Assess and Collect Taxes
1. Prescription of Right to Asses
Cases
Comm v Gonzales Calalang
Facts: Matias Yusay, a resident of Pototan, Iloilo, died intestate
leaving two heirs: Jose Yusay, a legitimate child and Lilia Yusay
Gonzales, an acknowledged natural child. Jose was appointed
as the administrator of his etate. On May 11, 1949, he filed an
estate and inheritance tax return with the BIR declaring
certain properties. This return did not mention any heir.
On February 13, 1958 the BIR commissioner issued an
assessment of estate and inheritance tax plus surcharge,
interest, and compromise payment. Because Jose passed
away, the said assessment was sent to his widow, Florencia
Vda. De Yusay, who succeeded him in the administration of the
estate of Matias.
No payment having been made, the BIR Commissioner filed a
proof of claim for the estate and inheritance taxes due and a
motion for its allowance with the settlement court.
Thereafter, on November 17, 1959, Lilia disputed the legality
of the assessment claiming that the right to make the same
has already prescribed because more than 5 years have
elapsed since the filing of the estate and inheritance tax
return.
On April 13, 1960, Lilia filed a petition for review with the CTA
assailing the legality of the said assessment. The CTA decided
in favor of Lilia, ruling that the right of the BIR Commissioner
to assess the taxes have already prescribed.
[29]
Issue: Whether or not the right of the BIR Commissioner to
make an assessment has already prescribed.
Ruling: No, the right has not prescribed.
The Commissioner claims that the period to make an
assessment should be 10 years rather than 5 years from the
filing of the return because the return filed by Jose Yusay was
fraudulent as it failed to mention any heir of Matias Yusay.
The SC said that fraud must be alleged and proved in the court
a quo. Since the same was not done, the SC deemed not to
entertain the Commissioners assertion that the return was
fraudulent. However, the return filed by Jose, albeit not
fraudulent, was not a return at all since it is substantially
defective because there was an underdeclaration of 92 parcels
of land and it did not mention any heir.
Therefore, the return filed was no return at all as required by
Section 93 of the Tax Code. (Said section lists down the
requirement/contents of a return)
Accordingly, Section 332 of the Tax Code is applicable. This
section states that in case of a false or fraudulent return or
when no return is filed, the tax may be assessed within 10
years after the discovery of the falsity, fraud, or omission. In
the case at bar, the Commissioner came to know of the
identity of the heirs on September 24, 1953 and the
underdeclaration in the gross estate of Matias on July 12,
1957. From this latter date up to February 13, 1958(date of
assessment), less than 10 years have elapsed. Thus, the right
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
of the Commissioner to assess the tax herein imposed has not
prescribed.
Guagua Electric v Collector Calalang
Guagua Electric Light Co. is a a grantee of a municipal
franchise of Guagua , Pampangga and Sexmoan, Pampangga.
For the period of January 1, 1947 to November 1956, it
reported its gross income and paid the corresponding
franchise tax of 5% in accordance with Section 259 of the tax
code.
Believing, however, that it should pay a lower franchise tax as
provided for in its franchise, it filed a claim for refund on
March 25, 1957. The Commissioner denied the same on the
ground that the right to its refund had already prescribed.
Guagua Electric elevated the case on appeal with the CTA but
the same was dismissed. Subsequently, the SC, in the case of
Hoa Hin Co. Vs. David, held that franchise holders under Act 57
are liable for 5% franchise tax under the tax code. Due to this,
the Commissioner assessed deficiency franchise taxes against
Guagua Electric.
In a letter dated March 30, 1961, Guagua Electric contested
the latter assessment stating, among others that the right of
the Commissioner to assess and/or collect the taxes had
already prescribed. Due to a recommendation by the appellate
division of the BIR, the Commissioner issued a revised
assessment reducing the taxes due against Guagua. It
eliminated the deficiency taxes due for the period prior to
January 1, 1956 as the right to assess and/or collect these
taxes, according to the recommendation, have already
prescribed.
[30]
Guagua Electric still appealed to the CTA which affirmed the
decision of the Comissioner. The CTA ruled that Guagua did
not raise the issue of prescription.
Hence, this appeal.
Issue :Whether or not Guagua Electric failed to raise the issue
of prescription of the right of the government to assess/collect
the franchise taxes.
Ruling: No, Guagua Electric did not fail to raise the issue of
prescription. In its letter dated March 30, 1961, it already
assailed the right of to assess/collect the tax on the ground of
prescription. Moreover, the contention of the Commissioner
that Guagua failed to adduce evidence to prove that
prescription has set in is without merit. In paragraph 10 of the
Commisioners answer, he admitted the allegations in
paragraph 13 of the petition for review. Paragraph 13 alleged
the facts, supported by annexes, constituting prescription.
There was therefore no need for the taxpayer to present
further evidence in the point.
With respect to the issue on surcharge, the SC held that
Guagua Electric should not be liable for the same because it
acted in good faith when it paid its franchise taxes, albeit
lower than that prescribed in the tax code. It only paid in
accordance with its franchise.
CIR v Suyoc Calalang
Facts: Suyoc Consolidated Mining Company is a mining
company operating before the war. It failed to file its income
tax return on 1942 for the year of 1941 due to the last war.
After liberation, the Congress enacted a law extending the
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
period to file returns for 1941 up to December 31, 1945.
Because its records were destroyed as an offshoot of the war,
Suyoc Consolidated requested for an extension to file its
return until February 15, 1946. The request was granted by the
Commissioner. On February 12, 1946, it filed its tentative
return. On November 28, 1946, it filed its second amended
return. Lastly, on February 6, 1947, it filed its third amended
return. The reason for these successive filings is that Suyoc has
not yet completely reconstructed its records.
On the bases of the second amended return, the Collector
assessed the companys income tax liability on February 11,
1947. The company asked for 1 year extension to pay the
amount assessed. The request was granted but only for an
extension of 3 months.
Suyoc failed to pay within the 3 month period. Accordingly, the
Collector sent a letter on November 28, 1950, demanding
payment on the tax so assessed. On April 6, 1951, Suyoc asked
for a reconsideration and reinvestigation of the assessment
which was granted. After a change of the examiner and a
series of negotiations, the income tax due the petitioner was
reduced by the Collector to P 24, 438.96. The company was
notified of this new assessment on July 28, 1955.
The company then filed a petition for review with the CTA on
the ground that the right of the government to collect the tax
has prescribed.
Issue: Whether or not the right of the government to collect
the income taxes of Suyoc Consolidated has prescribed.
Ruling: No, the right of the government to collect the income
taxes has not prescribed. The petitioner refrained from
collecting the tax by distraint or levy or by a proceeding in
[31]
court within the 5 year period from the filing of the second
amended final return due to the several requests of
respondent. (Requests for extension and requests for
reconsideration and reinvestigation)
After inducing petitioner to delay collection as he in fact did, it
is most unfair for respondent to now take advantage of such
desistance to elude his deficiency income tax liability to the
prejudice of the government invoking the ground of
prescription.
The SC said that there is no precedent in this jurisdiction
dealing with the matter at hand. However, it took a look at
several American cases. One of which states that He who
prevents a thing from being done may not avail himself of the
non-performance which he has himself occasioned, for the law
says to him in effect this is your own act, and therefore you
are not damnified.
Republic v Lopez Martin
The five-year prescriptive period fixed by Section 332(c) of the
Internal Revenue Code within which the Government may sue
to collect an assessed tax is to be counted from the last
revised assessment resulting from a reinvestigation asked for
by the taxpayer. Where a taxpayer demands a reinvestigation,
the time employed in reinvestigating should be deducted from
the total period of limitation. Hence, from the period that
intervened between the first revised assessment (29 May
1954) and the filing of the complaint (13 August 1960) is
deducted the time consumed in considering and deciding the
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
taxpayer's subsequent petition for reconsideration and
reinvestigation (from 16 January 1956 to 22 April 1960), it will
be seen that only one (1) year, three (3) months, and six (6)
days, counted against the government. Thus, Prescription has
not set in.
Comm v Sison Martin
The period of time between June 1952 to October 1956,
should be excluded from the computation of the five-year
prescription, because of the petition made by the Sisons for
re-consideration or re-investigation. It is settled that the five-
year period of Sec. 332 of the Internal Revenue Code
(prescription, like 331) is to be counted from the last revised
assessment resulting from a reinvestigation asked for by the
taxpayer; and that where a taxpayer demands a
reinvestigation, the time employed in reinvestigating should be
deducted from the total period of limitation.
Bisaya Land Transpo v Collector Martin
When there is no explicit provision imposing the duty to file a
return, and penalizing non-compliance therewith, duty to file a
return but the tax is such that its amount cannot be
ascertained without data pertinent thereto, the Collector of
Internal Revenue may by appropriate regulations require the
filing of the necessary returns. In any event, with or without
such regulations, it is to the interest of the taxpayer to file said
return if he wishes to avail himself of the benefits of section
331. If, this notwithstanding, he does not file a return, then an
[32]
assessment may be made within the time stated in section
332(a).
Butuan Sawmill v CTA Martin
CIR v Ayala Securities Docena
The 10-year prescriptive period is only applicable to fraud
cases or falsity of return. If there is no proof of fraud, or falsity
of return with an intention to evade taxes, said period is
inapplicable. The period applicable is the 5-year prescriptive
period.
Aznar v CIR Docena
Fraud cannot be presumed but must be proven. Fraudulent
intent could not be deduced from mistakes however frequent
they may be, especially if such mistakes emanate from
erroneous entries or erroneous classification of items in
accounting methods utilized for determination of tax liabilities.
The 50% fraud penalty cannot be imposed if fraud is not
proved.
CIR v Javier Jr. Docena
The rule in fraud cases is that the proof must be clear and
convincing such that it would be sufficient to sustain a
judgment on the issue of correctness of the deficiency itself
apart from the fraud penalty. If fraud is not proved, there is no
reason for imposing the 50% surcharge provided in the code.
Castro v Collector Docena
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
Laws are generally prospective, not retroactive. An
amendment introduced to the Tax Code several years after the
assessment on a taxpayer cannot be applied retroactively.
Republic v Acevedo Jularbal
An action for collection of deficiency income tax must be
commenced within five years after the assessment of the tax.
Any waiver of the statute of limitations must also be executed
within the original five-year period within which suit could be
commenced. A request for reinvestigation which is not acted
upon does not suspend the running of the period for filing an
action for collection.
Sinforosa Alca v CA Jularbal
An extension of the period of limitation is different from the
waiver of prescription. A waiver made after the action to
collect has already prescribed is not just an extension of the
period of limitation but a renunciation of the right to invoke
the defense of prescription which was then already available
to the taxpayer. There is nothing unlawful nor immoral about
this kind of waiver; just like any other right, the right to avail of
the defense of prescription is waivable.
RP v Lim De Yu Jularbal
If fraud is not proved, the period of limitation for assessment
is five years from the filing of the return. The five-year period
for assignment may be extended via waiver of the statute of
limitations which should be done before the expiration of the
original period.
[33]
CIR v BF Goodrich Ursua
Boise Cascade v CIR Ursua
Carnation v CIR Ursua
Marcos V CA Ursua
CIR v Rascor Raso
The issuance of an assessment is vital in determining the
period of limitation regarding its proper issuance and the
period within which to protest it. Section 203 of the NIRC
provides that internal revenue taxes must be assessed within
three years from the last day within which to file the return.
Section 222, on the other hand, specifies a period of ten years
in case a fraudulent return with intent to evade was submitted
or in case of failure to file a return. Also, Section 228 of the
same law states that said assessment may be protested only
within thirty days from receipt thereof. Necessarily, the
taxpayer must be certain that a specific document constitutes
an assessment. Otherwise, confusion would arise regarding
the period within which to make an assessment or to protest
the same, or whether interest and penalty may accrue
thereon.
Tupaz v Ulep Raso
A new law (BP 700) shortening the assessment period from
five years to three years shouldnt apply to the petitioner and
shouldnt constitute as grounds for prescription of the action
since the law expressly stated the year that it would take effect
and the non-payment of taxes occurred prior to the effectivity
of the said law.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
Internal revenue taxes are self-assessing and no further
assessment by the government is required to create the tax
liability. An assessment, however, is not altogether
inconsequential; it is relevant in the proper pursuit of judicial
and extra judicial remedies to enforce taxpayer liabilities and
certain matters that relate to it, such as the imposition of
surcharges and interest, and in the application of statues of
limitations and in the establishment of tax liens
BPI v CIR Raso
The filing of a protest letter doesnt constitute as a valid
ground to suspend the running of the prescriptive period.
The statute of limitations on collection may only be
interrupted or suspended by a valid waiver executed in
accordance with (at the time of the case) paragraph (d) of
Section 223 of the Tax Code of 1977, as amended, and the
existence of the circumstances enumerated in Section 224 of
the same Code, which include a request for reinvestigation
granted by the BIR Commissioner.
Even when the request for reconsideration or reinvestigation is
not accompanied by a valid waiver or there is no request for
reinvestigation that had been granted by the BIR
Commissioner, the taxpayer may still be held in estoppel and
be prevented from setting up the defense of prescription of
the statute of limitations on collection when, by his own
repeated requests or positive acts, the Government had been,
for good reasons, persuaded to postpone collection to make
the taxpayer feel that the demand is not unreasonable or that
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no harassment or injustice is meant by the Government, as
laid down by this Court in the Suyoc case.
CIR v Primetown Property Group Raso
Under Section 229 of the Tax Code, a such suit or proceeding shall
be filed after the expiration of two (2) years from the date of
payment of the tax or penalty regardless of any supervening cause
that may arise after payment. The subject of contention is how long
exactly is the period of two years to determine the date of
prescription. In this case, the Court applied manner in which the
Administrative Code of 1987 counts legal period. In the said code,
acalendar month is a month designated in the calendar without
regard to the number of days it may contain. It is the period of
time running from the beginning of a certain numbered day up to,
but not including, the corresponding numbered day of the next
month, and if there is not a sufficient number of days in the next
month, then up to and including the last day of that month.[ To
illustrate, one calendar month from December 31, 2007 will be from
January 1, 2008 to January 31, 2008; one calendar month from
January 31, 2008 will be from February 1, 2008 until February 29,
2008.
2. Prescription of Right to Collect
Comm v Wyett Suaco * Fragante
A request for reconsideration or reinvestigation tolls the
prescriptive period to collect and starts to run again when the
request is denied. Even though a letter or request is not
captioned as a reconsideration or reinvestigation of the
assessment it will be deemed such a request if the ultimate
relief or remedy asked by the taxpayer will result in the audit
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
or examination of the records of the taxpayer to determine the
tax liability.
3. Suspension of Prescriptive Period
Cases
CIR v Sison Fragante
The five-year period of sec. 332 of the Internal Revenue Code
(prescription, like 331) is to be counted from the last revised
assessment resulting from a reinvestigation asked for by the
taxpayer; and that where a taxpayer demands a
reinvestigation, the time employed in reinvestigating should be
deducted from the total period of limitation.
Republic v Ablaza Fragante
A request for detailed computation of an alleged tax liability is
not a request for reinvestigation which will toll/suspend the
prescriptive period to collect.
CIR v Capitol Subd Dialino
The period for prescription of the action to collect taxes is
interrupted when the taxpayer requests for a review or
reconsideration of the assessment, and starts to run again
when said request is denied.
Capitol did not specifically used the words review or
reconsideration but its requests for information on
disallowed items, for explanation of disallowances, and for
reinvestigation of the same, all of which were denied,
interrupted the period of prescription to collect the taxes.
[35]
Palanca V CIR Dialino
A judicial action for the collection of taxes is begun by the
filing of the complaint with the proper court of first instance,
or where the assessment is appealed to the CTA, by filing an
answer to the taxpayers petition for review wherein payment
of the tax is prayed for. The summary remedy of distraint and
levy is begun by the issuance of a warrant of distraint and levy
which stops the running of prescription of the right to collect
taxes although the warrant is not actually executed or carried
out.
The estates many requests for postponement, reinvestigation,
revaluation of the properties, or other matters delayed the
execution of the warrant. Were it not for said requests, the
warrant would have been fully executed well within the period
prescribed by law.
Republic v Ker Dialino
The running of the prescriptive period to collect taxes shall be
suspended for the period during which the CIR is prohibited
from beginning a distraint and levy or instituting a proceeding
in court.
Kers petition for review in the CTA and its appeal to the SC
legally prevented the Commissioner from instituting an action
in the CFI for the collection of taxes. Thus, even though the
CTAs dismissal and the SCs affirmation were made five years
after the final assessment, the CIR is not prohibited from
collecting the taxes due.
CIR v Algue Arriola
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
According to RA 1125, the appeal may be made within 30 days
after receipt of the decision or ruling challenged. It is true that
as a rule the warrant of distraint and levy is proof of the
finality of the assessment; Exception is where there is a letter
of protest after receipt of notice of assessment. The proven
facts is that 4 days after private respondent received the
petitioner's notice of assessment, it filed its letter of protest. It
thus had the effect of suspending the reglementary period
which started on the date the assessment was received. The
period started running again only when the private
respondent was definitely informed of the implied rejection of
the said protest and the warrant was finally served on it.
CIR v Wyeth Suaco Laboratories Arriola
Settled is the rule that the prescriptive period provided by law
to make a collection by distraint or levy or by a proceeding in
court is interrupted once a taxpayer requests for
reinvestigation or reconsideration of the assessment. Wyeth
Suaco admitted that it was seeking reconsideration of the tax
assessments as shown in a letter of its President and General
Manager. Although the protest letters did not categorically
state or use the words reinvestigation and reconsideration,
the same are to be treated as letters of reinvestigation and
reconsideration. These letters of Wyeth Suaco interrupted the
running of the five-year prescriptive period to collect the
deficiency taxes. The period started to run again when the BIR
served the final assessment to Wyeth Suaco.
CIR v Union Shipping Corp Arriola
[36]
Commissioner should always indicate to the taxpayer in clear
and unequivocal language what constitutes his final
determination of the disputed assessment. Petitioner did not
rule on private respondent's motion for reconsideration which
left private respondent in the dark as to which action of the
CIR is the decision appealable to the CTA. The CIR, not having
clearly signified his final action on the disputed assessment,
legally the period to appeal has not commenced to run. Thus,
its was only when private respondent received the summons
on the civil suit for collection of deficiency income that the
period to appeal commenced to run.
D. Remedies of the Taxpayer
1. Remedies before payment of the tax
Delta Motors Co. v CIR * Escueta (CTA Case 3782, May 21,
1986)
A taxpayer may contest the assessment made by the BIR by
presenting evidence to substantiate the errors that are
claimed to have been committed by the CIR in making the
assessments. All presumptions are in favor of the correctness
of the tax assessments. The burden of proof is on the
purchaser to show the contrary.
Upon failure to appear, prosecute for an unreasonable length
of time, the petition, upon motion may be dismissed and
adjudicated based on merits, unless otherwise provided by the
Courts.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
Basa v Republic * (compare with CTA Jurisdiction now)
Escueta
Appeals by the taxpayer regarding assessments of the BIR
should be made to the Tax Courts not to the CFI.
The taxpayer did not contest the asessment, hence it becomes
final. Then the BIR files a civil case (i.e., collection suit) with
CFI. At this stage, the taxpayer can no longer contest/appeal
the assessment. After the assessment has been made, the
proper remedy it to file an appeal with the Tax Court. Having
failed to do so, the assessment has become final.
Current rule: Section 7 (a) (1) of RA 1125 as amended by RA
9282 provides that the CTA shall exercise exclusive appellate
jurisdiction to review by appeal decisions of the CIR in cases
involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties in relation thereto, or
other matters arising under the National internal revenue or
other laws administered by the BIR.
Note: The entire Section 7 enumerates the jurisdiction of the
CTA.
Marcos v CA Escueta
If there is any isue as to the validity of the BIRs decision to
assess the taxes the proper remedy is to pursue the proper
admiistrative and judicial avenues provided by law (i.e.,
Section 228 if the NIRC: Protesting of an assessment and not
via Petition for Certiorari under the pretext of grave abuse of
discretion.
[37]
2. Taxpayers Defenses against the assessment
Aguinaldo Industries Co v CIR Imperial
Since exemptions are only statutory graces, in claiming items
as deductibles, the taxpayer must show that its claimed
deductions clearly come within the language of the law,
otherwise they will not be allowed.
Abra Valley College v Aquino Imperial
The Constitution provided for exemptions of all lands buildings
and improvements used exclusively for educational purposes.
The test of exemption is the use of the property for purposes
mentioned in the Constitution. Reasonable interpretation of
the phrase used exclusively extends to those facilities which
are incidental to and reasonably necessary for the
accomplishment of the said purposes.
CIR v P&G Imperial
In claims for refunds or tax credits, a written claim must be
filed with the BIR by a taxpayer which is defined as any person
who is subject to tax. As a withholding agent is made
personally liable for such tax which he is required to deduct
and withhold, he is deemed a taxpayer for purposes of
claiming refunds or tax credits. Likewise, for the reduced rate
of 15% to apply, the NIRC does not require that the domicile of
the non-resident foreign corporation give a deemed paid tax
credit but only that it shall allow a credit against the tax due
on said corporation taxes deemed to have been paid in the
Philippines.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997

Although the Court pointed this out, it still construed the

letters of the commissioner demanding for payment and a
3. Remedies after payment of tax threat of legal action in case of default as final assessment
Bermejo v Collector * Gran already (In this case, the Court did not mention that the
Chemphil v CIR * Gran Commissioner said in clear and unequivocal language that the
CIR v Ca * Gran assessment was final.)
CC & CIR v CA & Planters * Gran
Gibbs v CIR * Cua CIR v Villa* Sia
ACCRA Investment Corp v CA Cua A taxpayer must first contest an assessment in the Bureau of
CIR v TMX Sales Cua Internal Revenue before filing a petition for review in the Court
Citibank v CIR Cua of Tax Appeals. Absent said contest renders the appeal
CIR v Wander Phil Inc Plazo premature and the Court of Tax Appeals will have no
CIR v P&G Plazo jurisdiction to entertain said appeal.
CIR v Jose Concepcion Plazo
Advertising Assoc Inc V CIR Sia
4. Judicial Remedies The Commissioner should always indicate to the taxpayer in
Lascona Land v CIR * Plazo clear and unequivocal language what constitutes his final
determination of the disputed assessment. That procedure is
Surigao electric v CA * Sia demanded by the pressing need for fair play, regularity and
The failure of a taxpayer to lodge his appeal within the orderliness in administrative action.
prescribed period of 30 days from the notice of final Remark:
assessment bars his appeal and renders the questioned This doctrine was actually from surigao case but was merely
decision final and executory. an obiter therein.
Remark on the case:
The Court, in its obiter, pointed out that the Commissioner of Dayrit v Cruz * Sia
Internal Revenue should always indicate to the taxpayer in The remedy of an aggrieved taxpayer is not without any
clear and unequivocal language whenever his action on an limitation. A taxpayer's right to contest assessments,
assessment questioned by a taxpayer constitutes his final particularly the right to appeal to the Court of Tax Appeals,
determination on the disputed assessment. may be waived or lost as in this case.

[38]
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997

In this case, the assessment has already become final and

executory because even if the petitioners requested a 30 day
extension to file their position paper, they did not file any.
Hence, petitioners' letter for a reconsideration of the
assessments is nothing but a mere scrap of paper.
Procedure of Appeal
CTA Finding of fact conclusive
Nasiad v CTA * Fabia, F
Meralco Securities v Savellano Soller
(Same as the Meralco Case above) An informer cannot file a
mandamus to compel the CIR to issue an assessment for
deficiency corporate income tax of a corporation (Meralco).
Informers reward is contingent upon payment and collection
of unpaid or deficiency taxes. An informer is entitled by way of
reward only to a percentage of the taxes actually assessed and
collected. Since no assessment, much less any collection, has
been made, it is gross error for the trial court to issue a writ
against the CIR to pay respondent 25 % informers reward.

Appeal of CTA Decisions Penid v Virata Soller

Issue: Whether or not an informers reward should be given to
DBP v CA * Fabia, F an informer when the corporation (Pan Fil) was not included in
RCBC v CIR * Fabia, F the companies listed in the information (criminal complaint).
Held: YES. The inclusion of Pan Fil among the firms
E. Statutory Offenses and Penalties investigated was the direct, logical, and necessary
CIR v ESSO Olympia consequence of the information given by the petitioners
during their interview. The investigation was extended to
include other companies not listed in the Information, which
in turn led to the discovery and recovery of income.

Prescription for violations of NIRC

Lim v CA & People Olympia
Com v JAL Fajardo CIR v COA Soller
Issue :Whether an informers reward should be given to
Savellano when the tax delinquents concern government
Informers Reward agencies:

[39]
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
TCC, LGC and Remedies under the Tax Code of 1997

Held: YES. The law makes no distinction between delinquent

taxpayers, whether private persons or corporations, or public
or quasi-public agencies, it being sufficient for its operation
that the person or entity concerned is subject to and violated
revenue laws, and the informers report resulted in the
recovery of revenues.

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