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Lladoc vs Commisioner of Internal Revenue (1965)

February 15, 2013 markerwins Tax Law

Facts: In 1957, the MB Estate Inc. of Bacolod City donated P10,000 in cash to the parish priest of Victorias,
Negros Occidental; the amount spent for the construction of a new Catholic Church in the locality,m as
intended. In1958, MB Estate filed the donors gift tax return. In 1960, the Commissioner issued an
assessment for donees gift tax against the parish. The priest lodged a protest to the assessment and
requested the withdrawal thereof.

Issue: Whether the Catholic Parish is tax exempt.

Held: The phrase exempt from taxation should not be interpreted to mean exemption from all kinds of
taxes. The exemption is only from the payment of taxes assessed on such properties as property taxes as
contradistinguished from excise taxes. A donees gift tax is not a property tax but an excise tax imposed on
the transfer of property by way of gift inter vivos. It does not rest upon general ownership, but an excise
upon the use made of the properties, upon the exercise of the privilege of receiving the properties. The
imposition of such excise tax on property used for religious purpose do not constitute an impairment of the
Constitution.

The tax exemption of the parish, thus, does not extend to excise taxes.
TANG HO, WILLIAM LEE, HENRI LEE, SOFIA LEE TEEHANKEE, THOMAS LEE, ANTHONY
LEE, JULIA LEE KAW, CHARLES LEE, VALERIANA LEE YU, VICTOR LEE, SILVINO LEE,
MARY LEE, JOHN LEE, and PETER LEE, for themselves and as heirs of LI SENG GIAP, deceased, v.
THE BOARD OF TAX APPEALS and THE COLLECTOR OF INTERNAL REVENUE. G.R. No. L-
5949. November 19, 1955. 97 PH 889
FACTS:

The BIR found that petitioners had an investment in shares issued to them from their family corporation.
The CIR regarded these transfers as undeclared gifts made in the respective years, and assessed against
petitioners. After paying the basic tax, petitioners asked for the reassessment stating that each of them
received by way of gift inter vivos, that those who got married were given additional money as propter
nuptias and those who did not received it by inter vivos. Petitioners also contend that the cash donated came
from conjugal funds, claiming for exemption.

The CIR refused to revise his original assessment. Upon petition to the CTA, the CTA still upheld the CIR's
assessment.

ISSUE: Whether petitioners are liable for tax. Whether petitioners can claim tax exemptions twice from the
conjugal funds.

RULING:

YES. As petitioners failed to pay taxes for the past ten years they are now scarcely in a position to complain
if their contentions are not accepted as truthful without satisfactory corroboration. Any other view would
leave the collection of taxes at the mercy of explanations concocted ex post facto by evading taxpayers,
drafted to suit any facts disclosed upon investigation, and safe from contradiction because the passing years
have erased all
trace of the truth.
NO. The Court took a look at the Spanish Civil Code of 1889, which was the governing law in this case.
The provisions state that the donations of property "by the husband" from the "donations by both spouses
by common consent" differs. The lawful donations by the husband to the common children are valid and
are chargeable to the community property, irrespective of whether the wife agrees or objects thereof. To be
a donation by both spouses, taxable to both, the wife must expressly join the husband in making the gift;
her participation therein cannot be implied.

A donation by the husband alone does not become in law a donation by both spouses merely because it
involves property of the conjugal partnership.

A donation of property belonging to the conjugal partnership, made during its existence, by the husband
alone in favor of the common children, is taxable to him exclusively as sole donor.

CIR V B.F. GOODRICH PHIL., INC., ET AL GR No. 104171, February 24, 1999
Sunday, January 25, 2009 Posted by Coffeeholic Writes
Labels: Case Digests, Taxation

Facts: Private respondent BF Goodrich Philippines Inc. was an Americancorporation prior to July 3, 1974.
As a condition for approving the manufacture of tires and other rubber products, private respondent was
required by the Central Bank to develop a rubber plantation. In compliance therewith, private respondent
bought from the government certain parcels of land in Tumajubong Basilan, in 1961 under the Public Land
Act and the Parity Amendment to the 1935 constitution, and there developed a rubber plantation.

On August 2, 1973, the Justice Secretary rendered an opinion that ownership rights of Americans over
Public agricultural lands, including the right to dispose or sell their real estate, would be lost upon expiration
on July 3, 1974 of the Parity Amendment. Thus, private respondent sold its Basilan land holding to Siltown
Realty Phil. Inc., (Siltown) for P500,000 on January 21, 1974. Under the terms of the sale, Siltown would
lease the property to private respondent for 25 years with an extension of 25 years at the option of private
respondent.

Private respondent books of accounts were examined by BIR for purposes of determining its tax liability
for 1974. This examination resulted in the April 23, 1975 assessment of private respondent
for deficiency income tax which it duly paid. Siltowns books of accounts were also examined, and on the
basis thereof, on October 10, 1980, the Collector of Internal Revenueassessed deficiency donors tax of
P1,020,850 in relation to said sale of the Basilan landholdings.

Private respondent contested this assessment on November 24, 1980. Another assessment dated March 16,
1981, increasing the amount demanded for the alleged deficiency donors tax, surcharge, interest
andcompromise penalty and was received by private respondent on April 9, 1981. On appeal, CTA upheld
the assessment. On review, CA reversed the decision of the court finding that the assessment was made
beyond the 5-year prescriptive period in Section 331 of the Tax Code.

Issue: Whether or not petitioners right to assess has prescribed.

Held: Applying then Sec. 331, NIRC (now Sec. 203, 1997 NIRC which provides a 3-year prescriptive
period for making assessments), it is clean that the October 16, 1980 and March 16, 1981 assessments were
issued by the BIR beyond the 5-year statute of limitations. The court thoroughly studied the records of this
case and found no basis to disregard the 5-year period of prescription, expressly set under Sec. 331 of the
Tax Code, the law then in force.

For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment,
our tax law provides a statute of limitations in the collection of taxes. Thus, the law or prescription, being
a remedial measure, should be liberally construed in order to afford such protection. As a corollary,
the exceptions to the law on prescription should perforce be strictly construed.
Donor's Tax

Donors Tax

A. Nature of Donors Tax

LLadoc v. CIR (14 SCRA 292)


A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter
vivos.

Facts: Sometime in 1957, M.B. Estate Inc., of Bacolod City, donated 10,000.00 pesos in cash to Fr. Crispin
Ruiz, the parish priest of Victorias, Negros Occidental, and predecessor of Fr. Lladoc, for the construction
of a new Catholic church in the locality. The donated amount was spent for such purpose.

On March 3, 1958, the donor M.B. Estate filed the donor's gift tax return. Under date of April 29, 1960.
Commissioner of Internal Revenue issued an assessment for the donee's gift tax against the Catholic Parish
of Victorias of which petitioner was the parish priest.

Issue: Whether or not the imposition of gift tax is valid despite the fact that the Constitution provides an
exemptions and that Fr. Lladoc was not the Parish priest at the time of donation.

Held: Yes, the imposition of the gift tax was valid. Section 22(3) Article VI of the Constitution
contemplates exemption only from payment of taxes assessed on such properties as Property
taxes contra distinguished from Excise taxes. The imposition of the gift tax on the property used for
religious purpose is not a violation of the Constitution. A gift tax is not a property by way of gift inter vivos,
the imposition of which on property used exclusively for religious purposes, does not constitute an
impairment of the Constitution. As well observed by the learned respondent Court, the phrase "exempt from
taxation," as employed in the Constitution (supra) should not be interpreted to mean exemption from all
kinds of taxes. And there being no clear, positive or express grant of such privilege by law, in favor of
petitioner, the exemption herein must be denied.

Pirovano v. CIR (14 SCRA 232)

Sec. 32[B] of the NIRC provides that Gifts, bequests and devises are excluded from gross income liable to
tax. Instead, such donations are subject to estate or gift taxes. However, if the amount is received on
account of services rendered, whether constituting a demandable debt or not (such as remuneratory
donations under Civil Law), the donation is considered taxable income.

Facts: De la Rama Steamship Co. insured the life of Enrico Pirovano who was then its President and
General Manager. The company initially designated itself as the beneficiary of the policies but, after
Pirovanos death, it renounced all its rights, title and interest therein, in favor of Pirovanos heirs.

The CIR subjected the donation to gift tax. Pirovanos heirs contended that the grant was not subject to
such donees tax because it was not a simple donation, as it was made for a full and adequate compensation
for the valuable services by the late Priovano (i.e. that it was remuneratory).

Issue: WON the donation is remuneratory and therefore not subject to donees tax, but rather taxable as
part of gross income.

Held: No. the donation is not remuneratory. There is nothing on record to show that when the late Enrico
Pirovano rendered services as President and General Manager of the De la Rama Steamship Co. and was
largely responsible for the rapid and very successful development of the activities of the company", he
was not fully compensated for such services. The fact that his services contributed in a large measure to the
success of the company did not give rise to a recoverable debt, and the conveyances made by the company
to his heirs remain a gift or a donation. The companys gratitude was the true consideration for the donation,
and not the services themselves.
1. Definition:
A tax on the privilege of transmitting ones property or property rights to another or others without adequate
valuable consideration.

Donors tax shall be imposed upon the transfer by any person, resident or non-resident, of any property by
gift. This tax shall be applied whether the transfer is by trust or otherwise, whether the gift is direct or
indirect, and whether the property is real or personal, tangible or intangible. (Sec. 98, NIRC)

2. Composition of gross gift (Sec. 98 and 104)


Gross gifts include real and personal property whether tangible or intangible or mixed wherever situated.

3. Tax exempt, net gift (Sec. 99)


If the net gift is not over PhP100,000, it shall be exempted from donors tax.

4. Minimum and Maximum Rates (Sec 99)


a) If the Donee is not a stranger- The minimum donors tax rate is 2% in excess of PhP100,000 but not over
PhP200,000. The maximum donors tax rate is 15% in excess of 10M.
b) If the done is a stranger, the maximum and the minimum tax rate is fixed at 30% of the net gifts.

5. Who is a stranger and applicable tax rate (Sec 99)


a) A stranger is not the brother, sister (whether by whole or half blood), spouse, ancestor and lineal
descendant; or
b) Relative by consanguinity, in the collateral line, within the fourth civil degree of relationship.

B. Composition of the gross gift (Sec. 104)

1. Resident and citizens; resident alien


All properties, real or personal, tangible or intangible wherever situated

2. Non-resident alien
Only properties situated in the Philippines provided that, with respect to intangible personal property, its
inclusion in the gross estate is subject to the rule of reciprocity provided for under Section 104 of the NIRC.

Rule on Reciprocity: No tax shall be collected in respect of intangible personal property if


a) the decedent at the time of his death or the donor at the time of donation was a citizen of and resident of
a foreign country which at the time of his death or donation did not impose a transfer tax of any character,
in respect of intangible personal property of citizens of the Philippines not residing in that foreign country;
or
b) the laws of the foreign country of which the decedent or donor was a citizen and resident at the time of
his death or donation allows a similar exemption from transfer or death, taxes of every character or
description in respect of intangible personal property owned by citizens of the Philippines not residing to
that foreign country.

3. Corporations
Shall be considered as situated in the Philippines and therefore the property shall be subject to tax, provided
that-
a) Franchise which must be exercised in the Philippines;
b) Shares, obligations or bonds issued by any corporation or sociedad anonimaorganized or constituted in
accordance with its laws;
c) Shares, obligations or bonds by any foreign corporation 85% of the business of which is located in the
Philippines;
d) Shares, obligations or bonds issued by any foreign corporation if such shares, obligations or bonds have
acquired a business situs in the Philippines;
e) Shares, or rights in partnership, business or industry established in the Philippines, shall be considered as
situated in the Philippines; provided further that imposition of such donors tax is subject to Reciprocity
Rule.

4. Valuation of gifts made in the property (Sec 102)


a) In case of personal property: the value to be taken into consideration is the fair market value at the time
of the donation
b) For real properties: Section 102 refers to Section 88 (B) which provides that the value to be considered
shall be the (i) FMV as determined by the Commissioner; or (ii) FMV as showed in the schedule of values
fixed by the Provincial or City Assessors, whichever is higher.

5. Exemption of certain gifts made in the property (Sec 101)


a) Resident and Citizens
- For dowries or gifts made on account of marriage, the following should be present (i) the gift was made
on account of marriage; (ii) it was made before or within one year after the celebration of marriage; (iii) the
donor is the parent; (iv) the donee is the legitimate natural, or adopted children of the donor; and (v) the
amount of the gift exempted is only to the extent of the first PhP100,000.00
- For Gifts made for the use of the National Government or any entity created by any of its agencies which
is not conducted for profit, or any political subdivision of the said government are exempt from donors
tax. The only requirement to be exempt is that the done should be an agency not conducted for profits.
- Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation,
institution, accredited nongovernment organization, trust or philanthropic organization or research
institution or organization. To be exempted
(i) Not more than 30% of the said gift should be used for administrative purposes;
(ii) The donee must be a non-stock, non profit organization or institution;
(iii) The donee organization or institution should be governed by trustees who do not receive dividends; and
(iv) Said donee devotes all its income to the accomplishment and promotion of its purposes.

b) Non-resident aliens
- Gifts made for the use of the National Government or any entity created by any of its agencies which is
not conducted for profit, or any political subdivision of the government;
- Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation,
institution, accredited nongovernment organization, trust or philanthropic organization or research
institution or organization. Unlike in the case of residents and citizens, for nonresidents who are not citizens
of the Philippines, there is only one requirement that is not more than 30% of the gift should be used for
administrative purposes.
c) Corporations
- Incorporated as a non-stock entity;
- Pays no dividends;
- Governed by trustee who received no compensation; and
- Devotes all its income whether students fees or gifts, donations, subsidies or other forms of philanthropy
to the accomplishment and promotion of the purposes enumerated in its articles of incorporation

C. Other Matters

1. Rule on Political Contributions (Sec 13 and 14 RA 7166)


As provided in the Election Code, as amended by RA 7166, Sec 13, if the donee is a candidate, a political
party or a coalition of parties, the donation is exempt from donors tax. As provided in Sec 14 of the law,
the only requirement to be exempt thereof is that the donation should be duly reported to the COMELEC.

Thus:
Section 13. Authorized Expenses of Candidates and Political Parties. - The agreement amount
that a candidate or registered political party may spend for election campaign shall be as follows:
(a) For candidates. - Ten pesos (P10.00) for President and Vice-President; and for other candidates Three
Pesos (P3.00) for every voter currently registered in the constituency where he filed his certificate of
candidacy: Provided, That a candidate without any political party and without support from any political
party may be allowed to spend Five Pesos (P5.00) for every such voter; and
(b) For political parties. - Five pesos (P5.00) for every voter currently registered in the constituency or
constituencies where it has official candidates.

Any provision of law to the contrary notwithstanding any contribution in cash or in kind to any candidate
or political party or coalition of parties for campaign purposes, duly reported to the Commission shall not
be subject to the payment of any gift tax.

Section 14. Statement of Contributions and Expenditures: Effect of Failure to File Statement. - Every
candidate and treasurer of the political party shall, within thirty (30) days after the day of the election, file
in duplicate with the offices of the Commission the full, true and itemized statement of all contributions
and expenditures in connection with the election.

No person elected to any public offices shall enter upon the duties of his office until he has filed the
statement of contributions and expenditures herein required.

The same prohibition shall apply if the political party which nominated the winning candidate fails to file
the statement required herein within the period prescribed by this Act.

Except candidates for elective barangay office, failure to file the statements or reports in connection with
electoral contributions and expenditures are required herein shall constitute an administrative offense for
which the offenders shall be liable to pay an administrative fine ranging from One thousand pesos
(P1,000.00) to Thirty thousand pesos (P30,000.00), in the discretion of the Commission.

The fine shall be paid within thirty (30) days from receipt of notice of such failure; otherwise, it shall be
enforceable by a writ of execution issued by the Commission against the properties of the offender.
It shall be the duty of every city or municipal election registrar to advise in writing, by personal delivery or
registered mail, within five (5) days from the date of election all candidates residing in his jurisdiction to
comply with their obligation to file their statements of contributions and expenditures.

For the commission of a second or subsequent offense under this section, the administrative fine shall be
from Two thousand pesos (P2,000.00) to Sixty thousand pesos (P60,000.00), in the discretion of the
Commission. In addition, the offender shall be subject to perpetual disqualification to hold public office.
2. Transfer for less than adequate and full consideration (Sec 100)
Under this Section, the property was transferred by the donor for less than adequate consideration for money
or moneys worth. However, the Code considers this transfer as a donation since what motivated the donor
in transferring the property is his generosity. It is as if the property was donated but in order to avoid donors
tax, the donor opted to transfer the property for inadequate consideration.

By way of exception, Sec 100 provides that for the property mentioned in Sec 24 (D)(1), this is not
applicable. Sec 24(D)(1) refers to real property located in the Philippines which is capital asset. Hence,
under Sec 100, if the property transferred for inadequate consideration was a real property located in the
Philippines which is capital asset, donors tax will not be applicable. In that case, the applicable tax is Final
Income Tax of 6% of the FMV or gross selling price whichever is higher.

Further Sec 100 will not apply if the transfer is a bona fide donation. In that case, if there was a consideration
given by the donee to the donor, even if such consideration is inadequate, Sec 100 will not apply and the
donation shall be subject to donors tax.

3. Manner of Computing the Donors Tax (Sec 12 RR No. 2-03)


- The computation of the donors tax is on a cumulative basis over a period of one calendar year. Thus
when the donor makes two or more donation within the same calendar year, it is required that said donation
be included in the return for the last donation. There is no double taxation. Under this method, the tax paid
on the first donation will be considered as tax credit. Relevant in a donation made not by a strangers in the
computation of tax percentage to be imposed under Sec 99(A).

D. Filing and Payment of Returns (Sec 103/ Sec 13 RR No. 2-03)

1. Requirements
Any person making a donation (whether direct or indirect), unless the donation is specifically exempt under
the Code or other special laws, is required, for every donation, to accomplish under oath a donors tax return
in duplicate. The return shall set forth:
(i) Each gift made during the calendar year which is to be included in computing net gifts;
(ii) The deductions claimed and allowable;
(iii) Any previous net gifts made during the same calendar year;
(iv) The name of the donee;
(v) Relationship of the donor to the donee; and
(vi) Such further information as the Commissioner may require.
2. Time and Place of Filing
- The Code provides that the return shall be filed within 30 days after the date the gift was made and the
tax due thereon shall be paid at the time of filing. The pay as you file system is applicable.
- Unlike in the estate tax, there is no extension allowed by the Code for the donor tax. At the time of filing
of the return, the donor tax due should be paid.
- The return shall be filed and the tax shall be paid at any authorized agent bank, the RDO, RCO, or duly
authorized treasure of the city or municipality where the donor was domiciled at the time of the transfer, or
if there be no legal residence in the Philippines, with the office of the Commissioner. In case of the gifts
made by a non-resident, the return may be filed with the Philippine Embassy or Consulate in the country
where he is domiciled at the time of the transfer, or directly with the office of the Commissioner.

3. Notice of Donation - Exemption from Donors Tax (Sec 13 RR No. 2-03)


- In order to be exempt from donors tax and to claim full deduction of the donation given to qualified
donee institutions duly accredited by the Philippine Council for NGO Certification, Inc. (PCNC), the donor
engaged in business shall give a notice of donation on every donation worth at least Fifty Thousand Pesos
(P50,000) to the Revenue District Office (RDO) which has jurisdiction over his place of business within
thirty (30) days after receipt of the qualified donee institutions duly issued Certificate of Donation, which
shall be attached to the said Notice of Donation, stating that not more than thirty percent (30%) of the said
donation/gifts for the taxable year shall be used by such accredited non-stock, non-profit corporation/NGO
institution (qualified-donee institution) for administration purposes pursuant to the provisions of Section
101(A)(3) and (B)(2) of the Code.

4. Rule on waiver of hereditary share correlate with Estate Tax


- Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute
community after the dissolution of the marriage in favor of the heirs of the deceased spouse of any other
person/s is subject to donor tax.
- General renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate
left by the decedent is not subject to donors tax, unless specifically done in favor of an identified heir/s to
the exclusion or disadvantage of the other co-heirs in the hereditary estate

MARIA CARLA PIROVANO, etc., et al. v. THE COMMISSIONER OF INTERNAL REVENUE. G.R.
No. L-19865. July 31, 1965
FACTS:

De la Rama Steamship Co. insured the life of Enrico Pirovano, who was then its President and General
Manager until the time of his death. The Company then received the total sum of P643,000.00 as proceeds
of the said life insurance policies. The Company renounced all its rights on the money in favor of the
decendent's children.

After a case that marred Estefania Pirovano, the guardian and the Company (see Pirovano vs. De la Rama
Steamship Co., 96 Phil. 335.), the Company paid in favor of the children.
The CIR then assessed donees' gift tax against Pirovano and donor's tax against the Company. Pirovano
contested with the CIR which she lost and thus appealed with the CTA.

The CTA held that donees' gift tax were correctly assessed.

ISSUE: Whether Pirovano should pay the donees' gift tax.

RULING:

YES. Pirovano contends that the Court itself declared that the donation was renumenatory and not simple
and it was made for a full and adequate compensation for the valuable services by decedent to the
Company; hence, the donation does not constitute a taxable gift under the provisions of Section 108 of the
National Internal Revenue Code (old law).

The Court states that it is a donation; that the consideration for the donation was, therefore, the company's
gratitude for his services, and not the services themselves and whether the donation was simple or
renumenatory, it was still a gift taxable under the law.

PhilAm LIFE vs. Secretary of Finance, G.R. No. 210987, Case Digest
Philam Life sold its shares in Philam Care Health Systems to STI Investments Inc., the highest bidder. After
the sale was completed, Philam life applied for a tax clearance and was informed by BIR that there is a
need to secure a BIR Ruling due to a potential donors tax liability on the sold shares.

ISSUE on DONORS TAX:

W/N the sales of shares sold for less than an adequate consideration be subject to donors tax?

PETITIONERS CONTENTION:

The transaction cannot attract donors tax liability since there was no donative intent and, ergo, no taxable
donation, citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009; that the shares were sold at
their actual fair market value and at arms length; that as long as the transaction conducted is at arms
lengthsuch that a bonafide business arrangement of the dealings is done in the ordinary course of
businessa sale for less than an adequate consideration is not subject to donors tax; and that donors tax
does not apply to sale of shares sold in an open bidding process.

CIR DENYING THE REQUEST:

Through BIR Ruling No. 015-12. As determined by the Commissioner, the selling price of the shares thus
sold was lower than their book value based on the financial statements of Philam Care as of the end of
2008. The Commissioner held donors tax became imposable on the price difference pursuant to Sec. 100
of the National Internal Revenue Code (NIRC):

SEC. 100. Transfer for Less Than Adequate and full Consideration. - Where property, other than real
property referred to in Section 24(D), is transferred for less than an adequate and full consideration in
money or moneys worth, then the amount by which the fair market value of the property exceeded the
value of the consideration shall, for the purpose of the tax imposed by this Chapter, be deemed a gift, and
shall be included in computing the amount of gifts made during the calendar year.

RULING:

The price difference is subject to donors tax.

Petitioners substantive arguments are unavailing. The absence of donative intent, if that be the case, does
not exempt the sales of stock transaction from donors tax since Sec. 100 of the NIRC categorically states
that the amount by which the fair market value of the property exceeded the value of the consideration shall
be deemed a gift. Thus, even if there is no actual donation, the difference in price is considered a donation
by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters
for determining the fair market value of a sale of stocks. Such issuance was made pursuant to the
Commissioners power to interpret tax laws and to promulgate rules and regulations for their
implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being applied
retroactively in contravention to Sec. 246 of the NIRC.26 Instead, it merely called for the strict application
of Sec. 100, which was already in force the moment the NIRC was enacted.

ISSUE on TAX REMEDIES:

The issue that now arises is thiswhere does one seek immediate recourse from the adverse ruling of the
Secretary of Finance in its exercise of its power of review under Sec. 4?

Petitioner essentially questions the CIRs ruling that Petitioners sale of shares is a taxable donation under
Sec. 100 of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely
questioned incidentally since it was used by the CIR as bases for its unfavourable opinion. Clearly, the
Petition involves an issue on the taxability of the transaction rather than a direct attack on the
constitutionality of Sec. 100, Sec.7 (c.2.2.) of RR 06-08 and RMC 25-11. Thus, the instant Petition properly
pertains to the CTA under Sec. 7 of RA 9282.

As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers are now at a
quandary on what mode of appeal should be taken, to which court or agency it should be filed, and which
case law should be followed.

Petitioners above submission is specious (erroneous).

CTA, through its power of certiorari, to rule on the validity of a particular administrative rule or regulation
so long as it is within its appellate jurisdiction. Hence, it can now rule not only on the propriety of an
assessment or tax treatment of a certain transaction, but also on the validity of the revenue regulation or
revenue memorandum circular on which the said assessment is based.

Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition not only contested
the applicability of Sec. 100 of the NIRC over the sales transaction but likewise questioned the validity of
Sec. 7(c.2.2) of RR 06-08 and RMC 25-11 does not divest the CTA of its jurisdiction over the controversy,
contrary to petitioners arguments.