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TAXATION 1
1st Semester SY 2018-2019 (Final Revision)
Course Outline
Professor : JUDGE GIL G. BOLLOZOS, CPA

I. A. Course Description

A study of the general principles of taxation as well as the provisions relating to the
organization and function of the Bureau of Internal Revenue, and the income taxation under
the National Internal, Revenue Code (NIRC) and its related laws, including cases pertinent
thereto.

Mode of Instruction : Recitations on the substantive law/provisions and cases assigned.


Students are expected to memorize the definitions and enumerations and salient
jurisprudence. Multiple Choice, essay questions, definitions and enumerations will be the
written exam.
NOTE : HIGHLIGHTED CASES TO BE RECITED

COVERAGE :

Part I – General Principle of Taxation


Book : Fundamentals of Taxation
By Hector S. de Leon
Pages 1-85

A. Concepts, Nature, Characteristics of Taxation and Taxes


1. Power of taxation
a) Taxation
o Sarasola vs. Trinidad, 40 Phil. 252
o CIR vs. Santos, 277 SCRA 1997
o Gerochi vs. Department of Energy, 527 SCRA 696
o Churchill vs. Concepcion, 34 Phil. 969
o CIR vs. Eastern Telecommunications, 624 SCRA 340
o ABAKADA Guro vs. Ermita, 469 SCRA 14
o Paseo Realty and Development Corp. vs. CA, G.R. No. 119286, October 13, 2004
o CIR vs. Fortune Tobacco Corp., 559 SCRA 161 (2008)
b) Police Power as an Implement of Power of Taxation
o Lutz vs. Araneta, G.R. No. L-7859, December 22, 1955
c) Power of Taxation as an Implement of the Power of Eminent Domain
o CIR vs. Central Luzon Drug Corp., G.R. No. 159647, April 15, 2005
o Carlos Superdrug Corp. vs. DSWD, G.R. No. 166494, June 29, 2007
o Manila Memorial Park, Inc. vs. Sec. of DSWD, G.R. No. 175356, December 3, 2013

2. Purpose and scope of taxation


a) Purpose
o Planters Product Inc. vs. Fertiphil Corp., 564 SCRA 385 (2008)
o Bagatsing vs. Ramirez, 74 SCRA 407
o Caltex Phils. vs. COA, G.R. No. 92585, May 8, 1992
o Southern Cross Cement Corp. vs. Cement Manufacturers Assoc. of the Phils., G.R.
No. 158540, August 3, 2005

3. Meaning of taxes
a) Imprescriptibility of Taxes
o CIR vs. Ayala Securities Corp., G.R. No. L-29485, Nov. 21, 1980

4. Essential characteristics of tax

5. Theory and basis of taxation


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a) Theory and Basis of Taxation


o PBCom vs. CIR, G.R. No. 112024, January 28, 1999
o Velera vs. Office of the Ombudsman, 547 SCRA 43
o National Power Corp. vs. City of Cabanatuan, 401 SCRA 409
o CIR vs. Algue, G.R. No. L-28896, February 17, 1988

6. Nature of the power of taxation


o Southern Cross Cement Corp. vs. Phil. Cement Manufacturers Corp., 434 SCRA 65
o Meralco vs. Province of Laguna, 306 SCRA 750
o CIR vs. Tokyo Shipping, 244 SCRA 332
o Roxas vs. CTA, 23 SCRA 276

7. Aspects of taxation
o Mactan Cebu International Airport vs. Marcos, 261 SCRA 667

8. Extent of the of the legislative power to tax


1) Scope of Legislative Power to Tax
o Petron vs. Pililla, G.R. No. 90776, June 3, 1991
o CREBA Inc. vs. Romulo, G.R. No. 160756, March 9, 2010
o People vs. Sandiganbayan, 467 SCRA 137
- Tax Pyramiding
2) Judicial Review of Taxation
o Roxas vs. CTA, G.R. No. L-25043, April 26, 1968
3) Extent of the Taxing Power
o Tio vs. Videogram Regulatory Board, G.R. No. 75697, June 18, 1987
4) Test in Determining Whether the Imposition is a Tax or a License Fee
o Progressive Development Corp. vs. Quezon City, G.R. No. L-36081, April 24, 1989
5) Taxpayer’s Suit
o Locus Standi/Injunction
o Maceda vs. Macaraig, 197 SCRA 771
o Chavez vs. NHA, 530 SCRA 235
o Talento vs. Escalada, Jr. 556 SCRA 491
o Coconut Oil Refiners Association, Inc. vs. Torres, G.R. No. 132527, July 29, 2005

9. Non-revenue objectives of taxation


o Gerochi vs. Department of Energy (supra)
o COCOFED vs. PCGG, 178 SCRA 236 (1989)
o Caltex vs. COA, 208 SCRA 738
o Osmeña vs. Orboz, 220 SCRA 703
o Tañada vs. Angara, 272 SCRA 18
o Philhealth Care vs. CIR, 554 SCRA 411

10. Basic principles of a sound tax system


a) Principle of a Sound Tax System
o Chavez vs. Ongpin, G.R. No. 76778, June 6, 1990
o Abakada Guro Party List vs. Ermita, G.R. No. 168056, Sept. 1, 2005

B. Classifications and Distinctions


1. Classification of taxes
a) As to Who Bears the Burden and Incidence
o Tolentino vs. Secretary of Finance, G.R. No. 115455, October 30, 1995
b) Person liable
o Tan Tiong Bio vs. CIR, G.R. No. L-15778, April 23, 1962

2. Regressive / progressive system of taxation


3. Tax distinguished from toll
4. Tax distinguished from penalty
5. Tax distinguished from special assessment
6. Tax distinguished from license or permit fee
7. Importance of the distinctions
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8. Tax distinguished from debt


a) Tax vs. Debt
o CIR vs. Pineda, 21 SCRA 105
o Borja vs. Gella, G.R. No. L-18330, July 31, 1963
o CIR vs. Cebu Portland Cement, G.R. No. L-29059, December 15, 1987
o Republic vs. Mambulao, G.R. No. L-17725, February 28, 1962
o Francia vs. IAC, G.R. No. L-67649, June 28, 1988
o Philex Mining vs. CIR, 294 SCRA 687
o Domingo vs. Garlitos, 8 SCRA 443

9. Taxes not generally subject to set-off


10. Tax distinguished from other terms
11. Concept of power of eminent domain
12. Concept of police power
13. Similarities among taxation, eminent domain, and police power
14. Distinctions among the three powers
15. Taxation and public finance

C. Limitations on the Power of Taxation

1. Limitations classified
2. Enumeration of the limitations

3. Requirement of due process of law


a) Due Process Clause
o Chamber of Real Estate and Builders Associations, Inc. vs. The Hon. Executive
Secretary Alberto Romulo, G.R. No. 160756, March 9, 2010
o Reyes vs. Almanzor, 196 SCRA 323
o Sison vs. Ancheta, 130 SCRA 655
o Obillos, Jr. vs. CIR, 139 SCRA 439

4. Requirement of equal protection of the laws


a) Equal Protection Clause
o Sison, Jr. vs. Ancheta, G.R. No. L-59431, July 25,1984
o Villegas vs. Hiu Chiong Tsai Pao Ho, G.R. No. L-29646, November 10, 1978
o Ormoc Sugar Company vs. Treasurer of Ormoc, G.R. No. L-23794, Feb. 17, 1968
o Tiu vs. CA, 301 SCRA 279

5. Requirement of uniformity and equity in taxation


a) Taxation Shall Be Uniform and Equitable
o City of Baguio vs. De Leon, G.R. No. L-24756, October 31, 1968
o Abakada Guro Party List vs. Ermita, G.R. No. 168056, Sept. 1, 2005
o De Villata vs. Standley, G.R. No. L-8154, Dec. 20, 1915
b) Progressive System of Taxation
o Tolentino vs. Secretary of Finance, G.R. No. 115455, October 30, 1995
o British American Tobacco vs. Camacho, 585 SCRA 36

6. Prohibition against imprisonment for non-payment of poll tax


a) Non-Imprisonment for Non-Payment of Poll Tax
o Republic vs. Patanao, G.R. No. L-22356, July 21, 1967

7. Prohibition against impairment of obligation of contracts


a) Non-Impairment Clause
o Mactan Cebu International Airport vs. Marcos, 261 SCRA 667
o People vs. Caguioa, G.R. No. 168584, October 15, 2007
o Meralco vs. Province of Laguna, 306 SCRA 750

8. Prohibition against infringement of religious freedom


a) Religious Freedom
o American Bible Society vs. City of Manila, G.R. No. L-9637, April 30, 1957
o Tolentino vs. Secretary of Finance, G.R. No. 115455, Oct. 30, 1995
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9. Prohibition against appropriation for religious purposes


o Aglipay vs. Ruiz, G.R. No. L-45459, March 13, 1937

10. Prohibition against taxation of religious charitable, and educational entities, etc.
a) Tax Exemption of Religious, Charitable, and Educational Entities
o Abra Valley College, Inc. vs. Aquino, G.R. No. L-39086, June 15, 1988
o National Power Corp. vs. Central Board of Assessment Appeals, G.R. No. 171470,
Jan. 30, 2009
o Lung Center of the Philippines vs. Quezon City, G.R. No. 144104, June 29, 2000
o Herrera vs. Quezon City Board of Assessment Appeals, G.R. No. L-15270, Sept. 30,
1961
o Abra Valley College Inc. vs. Aquino, G.R. No. 39086, June 15, 1988
o City Assessor of Cebu vs. Association of Benevola De Cebu, Inc., G.R. No. 152904,
June 8, 2007
o CIR vs. CA (YMCA), 298 SCRA 83
o Jesus Sacred Heart College vs. CIR, 95 SCRA 16

11. Prohibition against taxation of non-stock, non-profit educational institutions


a) Taxability of Income Derived from the Operation of Dormitories, Canteens and
Bookstores
o CIR vs. Ateneo de Manila University, Inc. CTA EB No. 669 (CTA Case Nos. 7246 &
7293, March 11, 2010), June 30, 2011

12. Other constitutional limitations

13. Requirement of public purpose


a) Public Purpose
o Planters Products,Inc. vs. Fertiphil Corp., G.R. No. 166006, March 14, 2008
o CIR vs. Central Luzon Drug Corp., G.R. No. 159647, April 15, 2005

14. Prohibition against delegation of taxing power


a) Non-delegation of Taxing Power
o Abakada Guro Party List vs. Ermita, G.R. No. 168056, Sept. 1, 2005
o Albon vs. Fernando, G.R. No. 148357, June 30, 2006

15. Exemption of government agencies or instrumentalities


a) Exemption of the Government
o Board of Assessment Appeals of Laguna vs. CTA, G.R. No. L-18125, May 31, 1963
b) Taxability of Government Agencies
o Philippine Fisheries Development Authority vs. The Municipality of Navotas, G.R. No.
150301, October 2, 2007
o MIAA vs. CA, G.R. No. 155650, July 20, 2006
o Maceda vs. Macaraig, G.R. No. 88291, June 8, 1993
o MCIAA vs. Marcos, G.R. No. 120082, Sept. 11, 1996
o Infantry Post Exchange vs. Posadas, G.R. No. 33403, Sept. 4, 1930
c) Taxability of GOCCs
o MCIAA vs. Marcos, G.R. No. 120082, Sept. 11, 1996

16. Limitation of international comity


17. Limitation of territorial jurisdiction

D. Situs of Taxation and Double Taxation

1. Meaning of situs of taxation


a) Territoriality or Situs of Taxation
o CIR vs. Marubeni Corp., G.R. No. 137377, Dec. 18, 2001

2. Situs of subjects of taxation


3. Multiplicity of situs
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4. Meaning of doubles taxation


a) Double Taxation
o Victorias Milling vs. Municipality of Victoria, Negros Occidental, G.R. No. L-21183,
Sept. 27, 1968
o Villanueva vs. City of Iloilo, G.R. No. L-26521, Dec. 28, 1968
o CIR vs. SC Johnson & Son, Inc., G.R. No. 127105, June 25, 1999
o Pepsi Cola Bottling Co. vs. Municipality of Tanauan, Leyte, G.R. No. L-31156, Feb. 27,
1976
o CIR vs. Procter & Gamble, G.R. No. L-66838, Dec. 2, 1991
o CIR vs. SC Johnson & Son Inc., G.R. No. 127105, June 25, 1999

5. Instances of double taxation in its broad sense


6. Constitutionality of double taxation

E. Forms of Escape from Taxation

1. In general
2. Meaning of shifting
3. Meaning of impact of taxation
4. Meaning of incidence of taxation
5. Relations among impact, shifting, and incidence of a tax
6. Direct tax cannot be shifted
7. Kinds of shifting
8. Meaning of capitalization
9. Meaning of transformation
10. Meaning of tax evasion
a) Tax Evasion
o Yutivo Sons Hardware vs. CTA, G.R. No. L-13203, Jan. 28, 1961
o CIR vs. Estate of Benigno Toda Jr., G.R. No. 147188, Sept. 14, 2004
o CIR vs. Reyes, G.R. Nos. L-11534 and L-11558, Nov. 25, 1958

11. Factors in tax evasion


12. Evidence to prove tax evasion
13. No proceeds in tax evasion

14. Meaning of tax avoidance


a) Tax Avoidance
o CIR vs. Estate of Benigno Toda, Jr., G.R. No. 147188, Sept. 14, 2004
o Delpher Trades Co. vs. IAC, G.R. No. L-69259, Jan. 26, 1988

15. Tax avoidance not punishable by law


16. Distinction between tax evasion and tax avoidance

F. Exemption from Taxation

1. Meaning of exemption from taxation


2. Nature of power to grant tax exemption
3. Rationale of tax exemption
4. Grounds for tax exemption
5. Equity not a ground for tax exemption
6. Nature of tax exemption
7. Kinds of tax exemption
8. Exemptions provided for in the Constitution
9. Exemptions provided for in the Tax Code
10. Exemptions provided for under special law
11. Construction of tax exemption statutes
12. Tax amnesty
a) Rule of No Estoppel Against the Government
o CIR vs. CTA, G.R. No. 106611, July 21, 1994
o Balmaceda vs. Corominas and Co., Inc., G.R. No. L-21971, Sept. 5, 1975
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b) Principle of Strictissimi Juris


o Sea-Land Service, Inc. vs. CA, G.R. No. 57828, June 14, 1993
o PAGCOR vs. BIR, G.R.No. 172087, March 15, 2011
o Luzon Stevedoring Co. vs. CA, G.R. No. L-58897, December 3, 1987
o CIR vs. Arnoldus Carpentry Shop, Inc., G.R. No. 71122, March 25, 1988
c) Kinds of Tax Exemption
o MCIAA vs. Marcos, G.R. No. 120082, Sept. 11, 1996
o Province of Misamis Oriental vs. Cagayan Electric Power & Light Co., Inc., G.R. No.
L-45355, Jan. 12,1990
d) Tax Refunds
o CIR vs. CA, G.R. No. 104151, March 10, 1995
o State Land Investment Corp. vs. CIR, 542 SCRA 115
e) Tax Amnesty
o Asia International Auctioneers, Inc. vs. CIR, G.R. No. 179115, Sept. 26, 2012
o Luzon Stevedoring Co. vs. CTA, G.R. No. L-30232, July 29, 1988
o Bañas, Jr. vs. CA, G.R. No. 102967, Feb. 10, 2000
o CIR vs. Marubeni Corp., 372 SCRA 577
f) Tax Exclusions / In lieu of all taxes clause
o PLDT vs. City of Bacolod, G.R. No. 149179, July 15, 2006
o CIR vs. CA, G.R. No. 115349, April 18, 1997
o PLDT vs. Province of Laguna, 467 SCRA 95
g) Doctrine of Equitable Recoupment
o Collector vs. University of Sto. Tomas, 104 Phil 1062

G. Nature, Construction, Application, and Sources of Tax Laws

1. Nature of internal revenue law


o Hilado vs. CIR, G.R. No. L-9408, October 31, 1956

2. Construction of tax laws


o Manila Railroad vs. Collector of Customs, G.R. No. L-10214, November 4, 1915
o CIR vs. CA, G.R. No. 115349, April 18, 1997
o Philippines Bank of Communications vs. CIR, G.R. No. 112024, January 28, 1999
o Hilado vs. Collector of Internal Revenue. G.R. L-9408, Oct. 31, 1956
o People vs. Licera, G.R. No. L-39990, July 22, 1975
o Banas vs. CA, G.R. No. 102967, February 10, 2000

3. Application of tax laws


o Lorenzo vs. Posadas, G.R. No. L-43082, June 18, 1937

4. Mandatory and directory provisions of tax laws


5. Sources of tax laws
6. Existing tax laws
7. Authority of Secretary of Finance to promulgate rules and regulations
8. Nature of power to make regulations
9. Necessity and function of regulations
10. Validity and effectivity of regulations
11. Force and effect of regulations
12. Administrative interpretations and opinions
13. Weight given to administrative interpretation
14. Power of Secretary of Finance to revoke rulings of his predecessor
15. Non-retroactivity of repeal of regulations or rulings
16. Decisions of the Supreme Court and Court of Tax Appeals

Part II – NIRC (as amended by the TRAIN LAW)

Sections 1 to 20

CASES
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1. CIR vs. Hantex, G.R. No. 136975, March 31, 2015


2. Fitness by Design vs. CIR, G.R. No. 177982, October 17, 2008
3. PAGCOR vs. CIR, G.R. No. 172087, March 15, 2011
4. PAGCOR vs. BIR, G.R. No. 215427, December 10, 2014
5. General Electric vs. Collector, 19 SCRA 790
6. Hilado vs. Collector, 100 Phil. 288
7. Republic vs. Hernandez, 99 Phil. 935
8. Republic vs. Phil. Rabbit Bus Lines, G.R. No. L-26862, March 30, 1970
9. La Perla Cigar vs. Capapas, G.R. Nos. L-27948 & L-28001 – 11, July 31, 1969
10. Vera vs. Cuevas, 90 SCRA 379
11. MERALCO vs. Savellano, 117 SCRA 804
12. Asia International Auctioneers vs. Parayno, 50 SCRA 536
13. PBCom vs. CIR, 302 SCRA 241
14. BIR vs. Filinvest, 654 SCRA 56
15. ABS-CBN vs. CTA, 108 SCRA 142
16. CIR vs. CA, 267 SCRA 557
17. Roman Catholic Archbishop of Manila vs. CA, G.R. No. 111324, July 5, 1996
18. CIR vs. Phil. Health Providence, 522 SCRA 131
19. CIR vs CA, 240 SCRA 368
20. Alexander Howden vs. CIR, 13 SCRA 601
21. CIR vs. Solidbank, 416 SCRA 2003
22. PLDT vs. CIR, G.R. No. L-3222, January 21, 1952
23. Mis. Or. Assoc. of Coco Traders vs. BIR, G.R. No. 108524, November 10, 1994, 238 SCRA 63
24. CIR vs. Fortune Tobacco, G.R. No. 119761, August 29, 1996
25. Madrigal vs. Rafferty, G.R. No. 12287, August 7, 1918
26. Philamlife vs. Dept. of Finance, 741 SCRA 578
27. Banco de Oro vs. Republic, 745 SCRA 361
28. Nestle vs. CA, 203 SCRA 337
29. CIR vs. CTA, 204 SCRA 182
30. CIR vs. Procter & Gamble, 160 SCRA 560
31. CIR vs. Burroghs, G.R. No. 66653, June 19, 1986
32. Medicard Phils. vs. CIR, G.R. No. 222743, April 5, 2017
33. Sy Po vs. CTA, G.R. No. 81446, August 18, 1988, 164 SCRA 524
34. CIR vs. Kudos Metal, 620 SCRA 232
35. Medina vs. CIR, 110 Phil. 912
36. Basilan Estates vs. CIR, 2 SCRA 17
37. Capitol Steel vs. Phividec, 510 SCRA 590
38. Arches vs. Bellosillo, 20 SCRA 34
39. CIR vs. Sony Phils., 635 SCRA 234
40. Republic Bank vs. CTA & CIR, G.R. No. 62554 – 55, September 29, 1992

Sections 22 to 83

CASES
1. Republic vs. CTA & CIR, G.R. No. 62554-55, September 29, 1992
2. Tan vs. Del Rosario, G.R. No. 109289, October 3, 1994
- GPP vs. self-employed individual
- Global vs. Schedular
3. ING Bank N.V. vs. CIR, 763 SCRA 359 (2015)
- Sec. 29, par. (j), NIRC
- Compensation income
- Constructive receipt
- Cash basis vs. accrual method
4. Republic vs. Soriano, 752 SCRA 71 (2015)
- Capital Gains Tax on sale of real property
5. Banco de Oro vs. Republic, 745 SCRA 361 (2015)
- Secs. 24; 27; 28; & 32, NIRC
6. Fisher vs. Trinidad, 43 Phil. 973
- Stock Dividend
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7. PAL vs. CIR, G.R. No. 206079-80, January 27, 2018


- Tax on savings interest/refund
8. CIR vs. PAL, G.R. No. 180066, July 2009
9. Manila Bank vs. CIR, G.R. No. 168118, August 28, 2006
- Gross Philippine Billings
10. Cir vs. BOAC, 149 SCRA 395
- Sec. 18 (A)(3), NIRC
- Gross Philippine Billings
11. CIR vs. American Airlines, 180 SCRA 274
12. CIR vs. Air India, 157 SCRA 648
13. CIR vs. JAL, 202 SCRA 450
14. Air Canada vs. CIR, 778 SCRA 131 (2016)
15. Bank of America vs. CA, 234 SCRA 302
- Tax on Bank Profit Remittances
16. Cyanamid Phil. Vs. CIR, G.R. No. 108067, January 20, 2000
- Immediacy test
17. CIR vs. CA & YMCA, G.R. No. 124043, October 14, 1998
- Section 30
18. CIR vs. St. Luke’s, G.R. No. 195909, September 26, 2012
19. CIR vs. St. Luke’s, G.R. No. 203514, February 13, 2017
20. CIR vs. De La Salle, G.R. No. 196596, November 9, 2016, 808 SCRA 516
21. * CIR vs. De La Salle University, Inc., 808 SCRA 156 (2016)
- Secs. 27 & 30, NIRC
- Non-stock, non-profit educational institution
- Last paragraph of Sec. 30 of the NIRC is declared without force and effect
22. CIR vs. Marubeni, G.R. No. 137377, December 18, 2001
- Turnkey Contract
23. CIR vs. Isabela Cultural Corp., G.R. No. 172231, February 12, 2007
- All events test
24. British American Tobacco vs. Camacho, et al., G.R. No. 163583, August 20, 2008
- Rational Basis Test
25. CIR vs. Mitsubishi, G.R. No. 54908, January 22, 1990
- Section (7a)
26. Republic vs. Team (Phils.) Energy Corp., 746 SCRA 41 (2015)
- Sec. 41, NIRC
27. Honda Cars vs. Honda Cars Technical, G.R. No. 204142, November 19, 2014
- Fringe Benefits Tax
28. CIR vs. Secretary of Justice, 808 SCRA 14 (2016)
- Fringe Benefits Tax
29. Duty Free vs. COA, G.R. No. 211991, July 12, 2016
30. Soriano vs. Secretary of Finance, G.R. No. 184450, January 24, 2017
- De Minimis Benefits
31. Winebrenner & Iñigo insurance Brokers, Inc. vs. CIR, 748 SCRA 591 (2015)
- Section 76
32. LG Electronics vs. CIR, 743 SCRA 511 (2014)
- Withholding tax
33. CIR vs. PNB, 736 SCRA 609 (2014)
- Secs. 57 & 58, NIRC
34. Mendez vs. People, 726 SCRA 203 (2014)
- Sec. 51, NIRC

INSTRUCTIONS:

1. Digest of cases shall be written using this format:


9

TITLE
FACTS
ISSUE/S
RULING

2. Digest of cases shall be written in your OWN HANDWRITING on a notebook with table of
contents following the listing of cases as chronologically assigned.

3. Digest of cases covering Part I (General Principles of Taxation) shall be submitted five (5) days
after the Midterm Exam and Part II (NIRC) five (5) days after the Final Exam.

4. Failure to submit the notebook within the deadline minus 10 points of the actual result of the
exam.