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Commissioner of Internal Revenue vs. Algue Inc.

GR No. L-28896 | Feb. 17, 1988

Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities
On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency income taxes from 1958-1959, amtg to P83,183.85
A letter of protest or reconsideration was filed by Algue Inc on Jan 18
On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its counsel, Atty. Guevara, who refused to receive it on
the ground of the pending protest
Since the protest was not found on the records, a file copy from the corp was produced and given to BIR Agent Reyes, who deferred
service of the warrant
On April 7, Atty. Guevara was informed that the BIR was not taking any action on the protest and it was only then that he accepted
the warrant of distraint and levy earlier sought to be served
On April 23, Algue filed a petition for review of the decision of the CIR with the Court of Tax Appeals
CIR contentions:
- the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business
- payments are fictitious because most of the payees are members of the same family in control of Algue and that there is not enough
substantiation of such payments
CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered in the form of promotional fees. These were collected
by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of
the properties of the Philippine Sugar Estate Development Company.

Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by Algue as legitimate business
expenses in its income tax returns

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance, made in accordance with law.
RA 1125: the appeal may be made within thirty days after receipt of the decision or ruling challenged
During the intervening period, the warrant was premature and could therefore not be served.
Originally, CIR claimed that the 75K promotional fees to be personal holding company income, but later on conformed to the decision
of CTA
There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the
corresponding taxes thereon. CTA also found, after examining the evidence, that no distribution of dividends was involved
CIR suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction
Algue Inc. was a family corporation where strict business procedures were not applied and immediate issuance of receipts was not
required. at the end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by him or
her, to make up the total of P75,000.00. This arrangement was understandable in view of the close relationship among the persons in the
family corporation
The amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate Development Co. to
Algue Inc. was P125K. After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount
of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did practically
everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties.
Sec. 30 of the Tax Code: allowed deductions in the net income Expenses - All the ordinary and necessary expenses paid or incurred
during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for
personal services actually rendered xxx
the burden is on the taxpayer to prove the validity of the claimed deduction
In this case, Algue Inc. has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the
payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new
business requiring millions of pesos.
Taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to
activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every
person who is able to must contribute his share in the running of the government. The government for its part, is expected to respond in
the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values
Taxation must be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to
complain and the courts will then come to his succor

Algue Inc.s appeal from the decision of the CIR was filed on time with the CTA in accordance with Rep. Act No. 1125. And we also find that
the claimed deduction by Algue Inc. was permitted under the Internal Revenue Code and should therefore not have been disallowed by the
G.R. No. 134062 April 17, 2007
Corona, J.:
In October 28, 1988, petitioner assessed BPI of deficiency percentage and documentary stamp tax for the year 1986, in the total amount
of P129,488,056.63. A letter reply by respondent was sent on December 10, 1988 stating among other:
... we shall inform you the taxpayers decision on whether to pay of protest the assessment, CTA ruled that BPI failed to protest on time under Sec
270 of NIRC of 1986.
Whether or not the assessments issued to BPI for deficiency percentage and documentary stamp taxes for 1986 had already become final
and un-appealable.
In merely notifying BPI of his findings. CIR relied on the provisions of the former Section 270 prior to its amendment by RA 8424. The
the taxpayers shall be informed in writing of the law and the facts on which the assessment is made
Was not in the old Section 270 but was only later on inserted in the renumbered Section 228 in 1997.
Tax assessments by tax examiners are presumed correct and are 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 BIR examiner and approved by his superior officers
will not be distributed. All presumptions are in favor of the correctness of tax assessments.

G.R. 139736 October 17, 2005
On June 6 and 14, 1985, petitioner bank sold $500,000.00 to the Central Bank, for the total sale amount of $1M. BIR issued deficiency
assessment for DST in the amount of 28,020.00 for the said sales. On October 20,1989, petitioner received the notice and consequently filed a
protest in November 16,1989. Petitioner did not receive a reply but soon after, October 15, 1992, BIR issued a Warrant of distraint, and finally in
August 13, 1997, BPI received a letter denying its request for reconsideration. Petitioner alleged prescription to CTA but the latter denied the same.
CTA likewise ruled in the negative that the sales of currency by petitioner was not subject to DST. CA sustained first issue but reinstated the second.
Whether or not the right to collect has prescribed;
Request for reconsideration
It will not suspend the running of the statute of limitations because reconsideration of tax assessment is limited to the evidence.
Request for reinvestigation
will suspend the running of statute of limitations because it entails the reception and re-evaluation of additional evidence. It will take more time.
The period for the BIR to assess and collect an internal revenue tax is limited to three years by Section 203 of the Tax Code. This period is
limited by Section 223
Exemptions a) in the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a
proceeding in court for the collection of such tax may be begun without assessment, at any time within 10 years after the discovery of the falsity,
fraud or omission
BPI executed no waiver of the Statute of Limitations, thus it did not suspend running of the prescription. Likewise, BPI requested for a
reconsideration and suspension of the running of the statute of limitations shouldnt apply. The statute of limitations for collection against BPI had
expired; none of the conditions from the statute of limitations on collection exists herein.
BPI (Far East Bank and Trust Co) vs. CIR
G.R. 174492 March 7, 2008
Tinga, J.:
Following a pre-assessment notice on deficiency tax filed by respondent in 1986, the latter sent final demand to petitioner on April 7,
1989. Petitioner filed a protest and a waiver of the Statutes of Limitations was effected until December 31, 1994. On August 9, 2002, respondent
issued a final decision on petitioners protest ordering the withdrawal and cancellation of the deficiency withholding tax assessment in the amount
of P190,752,860.82 and considered the sane as close and terminated but the documentary stamp tax of P24,587,174.63 was reiterated. Thereafter
petition for review was filed with CTA. The court denied the petition.
Whether or not the collection of the deficiency DST is barred by prescription:
In order to determine whether the prescriptive period for collecting the tax deficiency tolled by BPIs filing of the protest letters dated
April 7, 1989. Section 20 of the Tax Code must be examined:
The running of the Statute of Limitations on the making of assessment and the beginning of distraint or levy or a proceeding in court of
collection shall be suspended for the period when the taxpayer requests for re-investigation which is granted by the Commissioner.
In order to suspend the running of the prescriptive periods for assessment and collection, the request for re-investigation must be
granted by CIR. There is nothing in this case which indicates, expressly or impliedly, that the CIR had granted the request for re-investigation filed
by BPI. What is reflected is the silence and inaction of the CIR.
Given the prescription of the Governments claim, we no longer deem it necessary to pass upon the validity of the assessment.
CIR vs. Phil. Global Communitions
G.R. No. 167146 October 31, 2006
Chico Nazario, J.:
Responded was pre-assessed for a deficiency tax for the year 1990. In 1994, final assessment was sent to respondent and through
counsel, Philcon sent protest letter to CIR. In 2002, after 8 long years, respondent received from CIR a final decision denying the respondents
protest and affirming said assessment. CTA ruled on prescription and ordered CIR to withdraw and cancel assessment previously issued against
Whether or not CIRs right to collect alleged deficiency tax is barred by prescription
There was nothing from the respondents protest letter that could tell the running of prescriptive period upon which CIR could have
caused the collection from respondent. The motion for reconsideration was in effect denied by CIR and prescription runs from 1994 until 1997,
collection effected in 2002 was barred now, by prescription.

Commissioner of Internal Revenue vs Metro Star Superama, Inc.

Taxation Pre-Assessment Notice Due Process Requirement

In January 2001, a revenue officer was authorized to examine the books of accounts of Metro Star Superama, Inc. In April 2002, after the audit
review, the revenue district officer issued a formal assessment notice against Metro Star advising the latter that it is liable to pay P292,874.16 in
deficiency taxes. Metro Star assailed the issuance of the formal assessment notice as it averred that due process was not observed when it was not
issued a pre-assessment notice. Nevertheless, the Commissioner of Internal Revenue authorized the issuance of a Warrant of Distraint and/or Levy
against the properties of Metro Star.

Metro Star then appealed to the Court of Tax Appeals (CTA Case No. 7169). The CTA ruled in favor of Metro Star.

ISSUE: Whether or not due process was observed in the issuance of the formal assessment notice against Metro Star.

HELD: No. It is true that there is a presumption that the tax assessment was duly issued. However, this presumption is disregarded if the taxpayer
denies ever having received a tax assessment from the Bureau of Internal Revenue. In such cases, it is incumbent upon the BIR to prove by
competent evidence that such notice was indeed received by the addressee-taxpayer. The onus probandi was shifted to the BIR to prove by
contrary evidence that the Metro Star received the assessment in the due course of mail. In the case at bar, the CIR merely alleged that Metro Star
received the pre-assessment notice in January 2002. The CIR could have simply presented the registry receipt or the certification from the
postmaster that it mailed the pre-assessment notice, but failed. Neither did it offer any explanation on why it failed to comply with the
requirement of service of the pre-assessment notice. The Supreme Court emphasized that the sending of a pre-assessment notice is part of the due
process requirement in the issuance of a deficiency tax assessment, the absence of which renders nugatory any assessment made by the tax

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. But even so, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.

GR No. 124043, October 14, 1998
298 SCRA 83

FACTS: Private Respondent YMCA--a non-stock, non-profit institution, which conducts various programs beneficial to the public pursuant to its
religious, educational and charitable objectives--leases out a portion of its premises to small shop owners, like restaurants and canteen operators,
deriving substantial income for such. Seeing this, the Commissioner of Internal Revenue (CIR) issued an assessment to private respondent for
deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. YMCA
opposed arguing that its rental income is not subject to tax, mainly because of the provisions of Section 27 of NIRC which provides that civic league
or organizations not organized for profit but operate exclusively for promotion of social welfare and those organized exclusively for pleasure,
recreation and other non-profitble businesses shall not be taxed.

ISSUE: Is the contention of YMCA tenable?

HELD: No. Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation in construing tax
exemptions. Furthermore, a claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on
which it is based. Thus, the claimed exemption "must expressly be granted in a statute stated in a language too clear to be mistaken."
273 SCRA 47
GR No. 120880, June 5, 1997
"The approval of the court sitting in probate is not a mandatory requirement in the collection of estate taxes."
"In case of failure to file a return, the tax may be assessed at anytime within 10 years after the omission."

FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's petition to levy the properties of the late Pres.
Marcos to cover the payment of his tax delinquencies during the period of his exile in the US. The Marcos family was assessed by the BIR after it
failed to file estate tax returns. However the assessment were not protested administratively by Mrs. Marcos and the heirs of the late president so
that they became final and unappealable after the period for filing of opposition has prescribed. Marcos contends that the properties could not be
levied to cover the tax dues because they are still pending probate with the court, and settlement of tax deficiencies could not be had, unless there
is an order by the probate court or until the probate proceedings are terminated.
Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Notices of Levy on the Marcos properties were issued
beyond the allowed period, and are therefore null and void.

ISSUE: Are the contentions of Bongbong Marcos correct?

HELD: No. The deficiency income tax assessments and estate tax assessment are already final and unappealable -and-the subsequent levy of real
properties is a tax remedy resorted to by the government, sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summary
tax remedy is distinct and separate from the other tax remedies (such as Judicial Civil actions and Criminal actions), and is not affected or precluded
by the pendency of any other tax remedies instituted by the government.
The approval of the court, sitting in probate, or as a settlement tribunal over the deceased's estate is not a mandatory requirement in the
collection of estate taxes. On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize the
executor or judicial administrator of the decedent's estate to deliver any distributive share to any party interested in the estate, unless it is shown a
Certification by the Commissioner of Internal Revenue that the estate taxes have been paid. This provision disproves the petitioner's contention
that it is the probate court which approves the assessment and collection of the estate tax.
On the issue of prescription, the omission to file an estate tax return, and the subsequent failure to contest or appeal the assessment made by
the BIR is fatal to the petitioner's cause, as under Sec.223 of the NIRC, in case of failure to file a return, the tax may be assessed at anytime within
10 years after the omission, and any tax so assessed may be collected by levy upon real property within 3 years (now 5 years) following the
assessment of the tax. Since the estate tax assessment had become final and unappealable by the petitioner's default as regards protesting the
validity of the said assessment, there is no reason why the BIR cannot continue with the collection of the said tax.

Commissioner of Internal Revenue vs. Cebu Portland Cement Co.

G.R. No. L-29059, 15 December 1987

Facts: CTA decision ordered the petitioner CIR to refund to the Cebu Portland Cement Company, respondent, P 359,408.98 representing
overpayments of ad valorem taxes on cement sold by it. Execution of judgement was opposed by the petitioner citing that private respondent had
an outstanding sales tax liability to which the judgment debt had already been credited. In fact, there was still a P4 M plus balance they owed. The
Court of Tax Appeals, in holding that the alleged sales tax liability of the private respondent was still being questioned and therefore could not be
set-off against the refund, granted private respondent's motion. The private respondent questioned the assessed tax based on Article 186 of the
Tax Code, contending that cement was adjudged a mineral and not a manufactured product; and thusly they were not liable for their alleged tax
deficiency. Thereby, petitioner filed this petition for review.

Issue: Whether or not assessment of taxes can be enforced even if there is a case contesting it.

Held: The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to
collect taxes as "the lifeblood of the government." If the payment of taxes could be postponed by simply questioning their validity, the machinery
of the state would grind to a halt and all government functions would be paralyzed. That is the reason why, save for the exception in RA 1125 , the
Tax Code provides that injunction is not available to restrain collection of tax. Thereby, we hold that the respondent Court of Tax Appeals erred in
its order


GR No. L-22074, April 30, 1965
13 SCRA 775

FACTS: The petitioner Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance
contracts with foreign insurance companies not doing business in the country, thereby ceding to foreign
reinsurers a portion of the premiums on insurance it has originally underwritten in the Philippines. The premiums
paid by such companies were excluded by the petitioner from its gross income when it file its income tax returns
for 1953 and 1954. Furthermore, it did not withhold or pay tax on them. Consequently, the CIR assessed against
the petitioner withholding taxes on the ceded reinsurance premiums to which the latter protested the
assessment on the ground that the premiums are not subject to tax for the premiums did not constitute income
from sources within the Philippines because the foreign reinsurers did not engage in business in the Philippines,
and CIR's previous rulings did not require insurance companies to withhold income tax due from foreign

ISSUE: Are insurance companies not required to withhold tax on reinsurance premiums ceded to foreign
insurance companies, which deprives the government from collecting the tax due from them?

HELD: No. The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a
necessary burden to preserve the State's sovereignty and a means to give the citizenry an army to resist an
aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvement
designed for the enjoyment of the citizenry and those which come within the State's territory, and facilities and
protection which a government is supposed to provide. Considering that the reinsurance premiums in question
were afforded protection by the government and the recipient foreign reinsurers exercised rights and privileges
guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden of maintaining the
The petitioner's defense of reliance of good faith on rulings of the CIR requiring no withholding of tax due on
reinsurance premiums may free the taxpayer from the payment of surcharges or penalties imposed for failure to
pay the corresponding withholding tax, but it certainly would not exculpate it from liability to pay such
withholding tax. The Government is not estopped from collecting taxes by the mistakes or errors of its agents.


GR No. 112024, January 28, 1999
302 SCRA 250

FACTS: Petitioner PBCom filed its first and second quarter income tax returns, reported profits, and paid income
taxes amounting to P5.2M in 1985. However, at the end of the year PBCom suffered losses so that when it filed
its Annual Income Tax Returns for the year-ended December 31, 1986, the petitioner likewise reported a net
loss of P14.1 M, and thus declared no tax payable for the year. In 1988, the bank requested from CIR for a tax
credit and tax refunds representing overpayment of taxes. Pending investigation of the respondent CIR,
petitioner instituted a Petition for Review before the Court of Tax Appeals (CTA). CTA denied its petition for tax
credit and refund for failing to file within the prescriptive period to which the petitioner belies arguing the
Revenue Circular No.7-85 issued by the CIR itself states that claim for overpaid taxes are not covered by the
two-year prescriptive period mandated under the Tax Code.

ISSUE: Is the contention of the petitioner correct? Is the revenue circular a valid exemption to the NIRC?

HELD: No. The relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-year
prescriptive period set by law.
Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate funds for
the State to finance the needs of the citizenry and to advance the common weal. Due process of law under the
Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon
taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost
importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered
with as little as possible.
From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law
because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly
delayed or hampered by incidental matters.


GR No. 117359, July 23, 1998
293 SCRA 77

FACTS: Republic Act No. 1435 entitles miners and forest concessioners to the refund of 25% of the specific taxes paid by the oil companies, which were
eventually passed on to the user--the petitioner in this case--in the purchase price of the oil products. Petitioner filed before respondent Commissioner of
Internal Revenue (CIR) a claim for refund in the amount representing 25% of the specific taxes actually paid on the above-mentioned fuels and oils that
were used by petitioner in its operations. However petitioner asserts that equity and justice demands that the refund should be based on the increased
rates of specific taxes which it actually paid, as prescribed in Sections 153 and 156 of the NIRC. Public respondent, on the other hand, contends that it
should be based on specific taxes deemed paid under Sections 1 and 2 of RA 1435.

ISSUE: Should the petitioner be entitled under Republic Act No. 1435 to the refund of 25% of the amount of specific taxes it actually paid on various refined
and manufactured mineral oils and other oil products, and not on the taxes deemed paid and passed on to them, as end-users, by the oil companies?

HELD: No. According to an eminent authority on taxation, "there is no tax exemption solely on the ground of equity." Thus, the tax refund should be based
on the taxes deemed paid. Because taxes are the lifeblood of the nation, statutes that allow exemptions are construed strictly against the grantee and
liberally in favor of the government. Otherwise stated, any exemption from the payment of a tax must be clearly stated in the language of the law; it cannot
be merely implied therefrom.