Handout No. 12 SUGGESTED ANSWERS TO THE 2016 BAR EXAMINATIONS IN TAXATION I Briefly explain the following doctrines: lifeblood doctrine; necessity theory; benefits received principle; and, doctrine of symbiotic relationship. (5%) SUGGESTED ANSWE! The following doctrines, explained: v Lifeblood doctrine — Without revenue raised from taxation, the government will not survive, resulting in detriment to society. Without taxes, the government would be paralyzed for lack of motive power to activate and operate it (CIR v. Algue, Inc. 158 SCRA 9 1988). Necessity theory — The exercise of the power to tax emanates from necessity, because without taxes, government cannot fulfill its mandate of promoting the general welfare and well being of the people (CIR v. Bank of Philippine Islands, 521 SCRA 373 [2007)). Benefits received principle — Taxpayers receive benefits from taxes through the protection the State affords to them. For the protection they get arises their obligation to support the government through payment of taxes (CIR v. Algue, Inc. 158 SCRA 9 [1988)). Doctrine of symbiotic relationship — Taxation arises because of the reciprocal relation of protection and support between the state and taxpayers. The state gives protection and for it to continue giving protection, it must be supported by the taxpayers in the form of taxes (CIR v. Algue, Inc. 158 SCRA 9 [1988)). I State at least five (5) cases under the exclusive appellate jurisdiction of the Court of Tax Appeals (CTA). (5%)SUGGESTED ANSWER: The following cases are under the exclusive appellate jurisdiction of the Court of Tax Appeals. a, Exclusive appellate jurisdiction to review by appeal: 1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws administered by the BIR; Inaction of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws administered by the BIR, where the NIRC provides a specific period of action, in which case the inaction shall be deemed a denial; Decisions, orders or resolutions of the RTC in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction; Decisions of the Commissioner of Customs in cases involving liability of customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs; and Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the Commissioner of Customs adverse to the Government under Sec. 2315 of the Tariff and Customs Code; and Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or article, and the Secretary of Agriculture, in the case of agricultural product, commodity or article, involving dumping and countervailing duties under Sec. 301 and 302, respectively, of the Tariff and Customs Code, and safeguard measures under R.A. No. 8800, where either party may appeal the decision to impose or not impose said duties.b. _ Exclusive appellate jurisdiction in criminal offenses: 1. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases originally decided by them, in their respective territorial jurisdiction; and 2. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in their respective jurisdiction. [NOTE: It is recommended that any five (5) of the above-enumerated cases be given credit). I Rakham operates the lending company that made a loan to Alfonso in the amount of P120,000.00 subject of a promissory note \which is due within one (1) year from the note's issuance. Three years after the loan became due and upon information that Alfonso is nowhere to be found, Rakham asks you for advice on how to treat the obligation as "bad debt." Discuss the requisites for deductibility of a "bad debt?" (5%) SUGGESTED ANSWE! I will advise Rakham that the obligation of Alfonso may now be considered as bad debts for having met the yardstick of a debt which had become worthless. In order to be considered worthless, the taxpayer should establish that during the year from which a deduction is sought, a situation developed as a result of which it became evident in the exercise of sound, objective business judgment that there remained no practical, but only vaguely theoretical, prospect that the debt would ever be paid (Collector of Internal Revenue v. Goodrich International Rubber Co., 21 SCRA 1336 [1967)). A bad debt is deductible if it complies with the following requisites: a. There must be a valid and subsisting debt. b. The obligation is connected with the taxpayer’s trade or business and is not between related parties. There is an actual ascertainment that the debt is worthless. d. The debt is charged-off during the taxable year. A partial write-off is not allowed (PRC v. CA, 256 SCRA 667|1996). °