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TAX PRINCIPLES

AND REMEDIES
By:
JUSTICE JAPAR B. DIMAAMPAO

Transcribed by:
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos

Updated by:
Anonymous Lawyer
(2019)

House Rules:
1. Do not come to class unprepared.
2. Class recitations will include probable bar questions and recent jurisprudence.
3. Do not pull a sleep in class, or else, you will be asked to step out of the room.
4. Do not talk to your seatmate or classmate. Listen to your classmate’s recitation instead.
5. Observe proper court decorum in class as if you are already a lawyer.
6. Raise your hand if you want to go to the restroom.
7. Answer the questions briefly, concisely, and with legal basis.
8. I am only here to guide you, not to terrorize you.

--xXx--
Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)

serve, public improvements for the enjoyment of


the citizenry, and those which come within the
GENERAL PRINCIPLES
State’s territory and facilities and protection which
Part I
a government is supposed to provide.

Q: What is the Symbiotic Theory?


TAXATION A: The doctrine of symbiotic relationship is a term
Taxation is a mode of raising revenue for public culled from the ruling of the Supreme Court in
purpose. Commissioner of Internal Revenue v Algue, Inc.,
4which stressed that: “Taxes are what we pay for a

Taxes, on the other hand, are enforced proportional civilized society. Without taxes, the government
contributions from persons and property, levied by would be paralyzed for lack of the motive power to
the state by virtue of its sovereignty for the support activate and operate it. Hence, despite the natural
of the government and for all its public needs. reluctance to surrender part of one’s hard-earned
income to the taxing authorities, every person who
NATURE OF THE TAXING POWER is able to must contribute his share in the burden
The taxing power has two natures; of running the government. The government, for its
1. Taxation as an inherent Attribute of part, is expected to respond in the form of tangible
Sovereignty; and intangible benefits intended to improve the
2. Taxation is Legislative in Character lives of the people and enhance their material and
moral values.”
Inherent Attribute of Sovereignty
The power of taxation is an incident of sovereignty LIFEBLOOD THEORY
as it is inherent in the state, belonging as a matter of
right to every independent government. It does not Dimaampao: Now, holistic approach --- interplay
need constitutional conferment. of lifeblood theory and tax remedies. This
happened in the last bar exams. In enunciating
Constitutional provisions do not give rise to the certain rule, the court cited lifeblood theory and
power to tax but merely impose limitations on you must mark this with Sec. 112 of NIRC. Sec. 112
what would otherwise be an invincible power. was asked in the bar for three consecutive bar
exams. It will come out again.
Legislative in Character
The power to tax is inherent in the State, and the Now you must know how the court mentioned
state is free to select the object of taxation, such as lifeblood theory here. Sec. 112 is about tax remedy
being exclusively vested in the legislature, except on value-added tax. Sec. 112 provides for remedies
where the constitution provides otherwise. [1] on tax refund or tax credit involving VAT.

Q: What is the Life Blood Doctrine There are three prescriptive periods there: the 2-
A: The lifeblood doctrine is one that is enunciated year period, the 90-day period under the TRAIN
by the Supreme Court in Commissioner of Internal Law (no longer 120 days), and the 30-day period.
Revenue v. Pineda,[2] as follows: taxes are the Explain how they are applied.
lifeblood of the government and their prompt and
certain availability is an imperious need.” This The 2-year period must be observed in filing tax
means that, without taxes, the State can neither refund with the BIR, reckoned from the close of
exist nor endure. Taxes should be collected without taxable year.
unnecessary hindrance.
The 90-day period refers to the period within
Q: What is the Necessity Theory? which the BIR Commissioner must render decision
A: The necessity theory, as pronounced by the from the submission of the claim.
Supreme Court in Philippine Guaranty Co., Inc. v.
Commissioner of Internal Revenue, [3] states that The 30-day period must be observed in appealing
taxation is a power predicated upon necessity. It is the decision of the BIR Commissioner to the Court
a necessary burden to preserve the State’s of Tax Appeals from the receipt of the adverse
sovereignty and a means to give the citizenry an decision.
army to resist aggression, a navy to defend its
shores from invasion, a corps of civil servants to

1
Article VI, Sec. 28[2]. 3 G.R. No. L-22074. April 30, 1965 (13 SCRA 775)
2 G.R. No. L-22734. September 15, 1967 (21 SCRA 4 G.R. No. L-28896. February 17, 1988
105)

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Q:What does lifeblood doctrine dictate


regarding the application of these rules in DIMAAMPAO: The ruling means that no one
Section 112? What is the ruling in CIR v. San should interfere with the remedy availed of by the
Roque Power Corporation? [1] BIR to collect taxes because it has the discretion to
A: The lifeblood doctrine dictates that the rules in do so.
Section 112 must be applied strictly. Tax refunds
are in the nature of tax exemptions which must be Q: What was the administrative remedy resorted
strictly construed against the taxpayers and to by the BIR in that case, which may in effect
liberally in favor of the government. This is so bring about speedy collection of taxes?
because taxes are the lifeblood of the nation. A: Enforcement of tax lien was resorted to by the
BIR.
Dimaampao: Camp John Hay Development
Corporation v. CBAA,[2] also appeared in the bar Q: Why is enforcement of a tax lien the most
exam. It is about the interplay of the lifeblood expeditious way to collect taxes?
theory and another tax remedy - one of the rules A: It is the most expeditious way to collect taxes
under real property taxation. Mentioned therein is because it is an administrative remedy which may
the provision of Sec. 252 of R.A. No. 7160, which is require no judicial proceedings.
denominated as payment under protest.
DIMAAMPAO: Davao Gulf Lumber Corporation v.
Q:When must the payment under protest be CIR,[4] came out in the bar exam in 1998.
lodged?
A: It must be lodged within 30 days from payment Q: Why are tax exemptions strictly construed
of the tax. against the taxpayer and liberally construed in
favor of the government?
Q: Explain the rule of payment under protest? A: Tax exemptions are strictly construed against
A: Payment under protest means payment of real the taxpayer and liberally construed in favor of the
property tax before filing a protest. government because taxes are the lifeblood of the
government. This is so because by the
Q: What does the lifeblood doctrine dictate or government’s relinquishment of its power to tax, it
require regarding the application of Sec. 252? loses revenue. Thus, exemptions from taxation are
A: Before you can protest, you must first pay the highly disfavored, so much so that they may almost
real property tax. be said to be odious to the law.

Q: What does lifeblood doctrine require Q: What is the principle of strictissimi juris?
regarding the rule of payment under protest? A: This principle states that tax exemptions are
A: The lifeblood doctrine requires strict strictly construed against the taxpayer and
compliance of this rule. liberally construed in favor of the government.

Dimaampao: Payment under protest is thus Q: What are the exceptions to the principle of
consistent with the lifeblood doctrine, and as such strictissimi juris?
their collection cannot be curtailed by injunction or A: The exceptions to the principle of strictissimi
any like action; otherwise, the state or, in this case, juris are:
the local government unit, shall be crippled in 1. When the law expressly provides for
dispensing the needed services to the people, and liberal interpretation or construction of
its machinery gravely disabled. tax exemptions;
2. When the grantee of tax exemption is a
CIR v. Pineda,[3] came out in the difficult bar exam religious or charitable institution;
in 1999 where only 5% passed taxation. 3. When the grantee of tax exemption is the
government, its political subdivisions or
Q: What is the ruling of the Court in this case? instrumentalities; [5]
A: This case enunciates that the Bureau of Internal 4. When the taxpayer falls within the
Revenue has the necessary discretion to avail itself purview of exemption by clear legislative
of the most expeditious way to collect taxes intent; [6]
because taxes are the lifeblood of the government
and their prompt and certain availability is an
imperious need.

1 690 SCRA 336. 4 293 SCRA 77.


2 706 SCRA 547. 5 Maceda v. Macaraig, Jr., 197 SCRA 771.
3 See note 1. 6 CIR v. Arnoldus Carpentry Shop, 159 SCRA 199.

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5. When the grantee is a municipal DIMAAMPAO: Philex Mining Corporation v. CIR,[3],


corporation with respect to its public was also asked in the bar exam. It is about setoff of
property only; [1] and taxes.
6. When the imposition is special taxes
relating to special cases and affecting only Q: What is the ruling of the Court in that case?
special classes of persons. A: The Court did not allow the setoff of taxes. The
lifeblood doctrine disfavors the setoff of taxes
Q: What is a political subdivision? because it will reduce tax collection and there will
A: Political subdivisions include provinces, be less revenue for the government.
municipalities, cities, and barangays.
Q: May the taxes be the subject of setoff or
Q: Is GSIS an instrumentality or GOCC? compensation?
A: GSIS is a government instrumentality. No. Taxes may not be the subject of setoff or
compensation because:
Q: Why does the principle of strictissimi juris not (1) Taxes are not ordinary obligations which
apply to government, its political subdivisions or may be governed by the Civil Code;
instrumentalities? (2) Taxes are not based on a contract, debt or
A: It is because it will result in the absurd situation judgment, but on legal impositions; and
of the government taking money from one pocket (3) The government and the taxpayer are not
and putting it in another. creditors and debtors of each other. [4]

When do you apply this rule; that “tax exemption Q: Is there an exception to this rule?
is the general rule and taxation is the A: Yes, that is the case of Domingo v. Garlitos. [5] The
exemption”? peculiar circumstance therein is the enactment of
A: The general rule is that taxation is the rule and R.A. No. 2700 appropriating certain amount of
exemption is the exemption. It shall apply when the money for the taxpayer’s claim that made such
grantee is a municipal corporation, and the claim due and demandable or liquidated. Thus, the
property is not held in private ownership but a Court allowed compensation.
public property.
Dimaampao: YMCA v. CIR, [6] also came out in the
Dimaampao: This case is asked thrice already in bar exams. YMCA claimed that as a non-stock, non-
the bar examinations. profit organization, it should be exempt from
income taxation with regard to its profits on
Q: What is the jurisprudential ruling of the Court leasing its facilities to non-exempt entities.
in Ferdinand Marcos II v. Court of Appeals, [2]?
A: The Court ruled therein that the approval of the Q: What is ruling in that landmark case?
court, sitting in probate or as a settlement tribunal A: YMCA is taxable on its rental income. The
over the deceased’s estate, is not a mandatory exemption provided in Section 30(e) of the NIRC
requirement in the collection of estate taxes. must be strictly construed against YMCA.
Moreover, it is taxable because the Tax Code
Explanation: The collection of taxes does not provides that the income of charitable
necessitate the approval of the probate court organizations, such as YMCA, from any of their
because taxes are the lifeblood of the government properties, real or personal, or from any of their
and should be collected without unnecessary activities conducted for profit regardless of the
hindrance. To require the approval of the probate disposition made of such income, shall be subject
court is a cause of delay to the collection of taxes. to tax.

Q: Is there a provision that before the BIR can Q: What does YMCA stand for?
collect taxes there must be approval of the A: YMCA is short for Young Men’s Christian
probate court? Association.
A: No. There is none.
Read Section 30(e) of the NIRC;
Q: Is there a revenue regulation to that effect?
A: No. There is none. Non-stock corporation or association
organized and operated exclusively for

1 J. Cooley, pp. 1414-1415. 4 Republic v. Mambulao Lumber Co., 4 SCRA 622;


2 273 SCRA 47. Francia v. IAC, 162 SCRA 753
3 294 SCRA 687. 5 8 SCRA 443 (1962)
6 298 SCRA 83.

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religious, charitable, scientific, athletic, Q: How is assessment under the internal revenue
or cultural purposes, or for the taxation?
rehabilitation of veterans, no part of its A: In Adamson v. Court of Appeals, assessment
net income or asset shall belong to or under the internal revenue taxation is defined as
inures to the benefit of any member, “the written notice and demand made by the BIR on
organizer, officer or any specific the taxpayer for the settlement of a tax due liability
person. that is definite, final and fixed.”

Read the last paragraph of Section 30 of the NIRC. Q: Is the letter of the BIR to the taxpayer
That is the YMCA doctrine; qualified?
A: No, because the assessment must contain final
Notwithstanding the provisions in the assessment or determination.
preceding paragraphs, the income of
whatever kind and character of the Q: What is assessment in real property taxation?
foregoing organizations from any of A: Assessment under real property taxation is the
their properties, real or personal, or act or process of determining the value of a
from any of their activities conducted property, or proportion thereof subject to tax,
for profit regardless of the disposition including the discovery, listing, classification, and
made of such income, shall be subject to appraisal of properties. [4]
tax imposed under this Code.
(Emphasis supplied) Q: What are the requisites or conditions for a
valid assessment of real property tax? There are
Stages, Aspects, and Phases of taxation five requisites.
Explain the stages or aspects of taxation. These A: In Meralco v. Narvales, the Supreme Court
aspects do not refer to the fundamental principles enumerated the following guideline: (K-A-L-M-A)
of taxation. This is so basic. 1. The assessment must contain the kind of
property;
The stages of taxation are; (L-A-P) 2. It must set forth the assessed value of the
(1) Levy or imposition, which refers to the real property;
enactment of tax laws; 3. It must indicate the level of assessment;
(2) Assessment and collection, which provides for 4. It must specify the fair market value of the
the implementation, enforcement or property;
administration of tax laws; and 5. It must clearly indicate the actual use of
(3) Payment, which is defined as the compliance property.
by the taxpayer.
Q:What is assessment in customs law?
Q: What is the nature of levy or imposition? A: In Pilipinas Shell Petroleum Corporation v.
A: It is legislative in nature. Commissioner of Customs, [5] the Supreme Court
ruled that assessment in customs law is known as
Q: What is the nature of assessment and liquidation. It refers to the final computation and
collection? ascertainment of the collector of duties on
A: They are administrative in nature. imported merchandise, based on official reports as
to the quantity, character and value thereof, and
Q: What is the technical term for levy or the collector’s finding of the applicable rate of duty.
imposition?
A: It is the impact of taxation. Taxation as Inherent Power of the state

Q: What is the technical term for payment? Q: Why is the power to tax inherent in a
A: It is the incidence of taxation. sovereign State?
A: It is considered inherent in a sovereign State
DIMAAMPAO: You take note of these cases: because it is a necessary attribute of sovereignty.
1. Adamson v. Court of Appeals; [1] Without this power, no sovereign State can exist
2. Meralco v. Narvales; [2] nor endure. The power to tax proceeds upon the
3. Pilipinas Shell Petroleum Corporation v. theory that the existence of a government is a
Commissioner of Customs; [3] necessity and this power is an essential and
inherent attribute of sovereignty, belonging as a

1 588 SCRA 27. 4 (Section 199(f) of R.A. No. 7160).


2 433 SCRA 11. 5 589 SCRA 574.
3 G.R. No. 195876, December 05, 2016.

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matter of right to every independent State or DIMAAMPAO: Read the Customs Modernization
government. No sovereign State can continue to and Tariff Act or R.A. No. 10863, Sec. 102 in relation
exist without the means to pay its expenses, and to Section 1608.
that for those means, it has the right to compel all
citizens and property within its limits to Legal parameters where the President may
contribute, hence, the emergence of the power to exercise its tariff powers;
tax.
Sec. 102(u). Flexible Clause refer to the
Q: Explain the two-fold nature of taxation? power of the President upon
A: Taxation is an (1) inherent attribute of recommendation of the National Economic
sovereignty, and it is also (2) legislative in and Development Authority (NEDA): (1) to
character. Such power is exclusively vested in the increase, reduce or remove existing
Congress. This is based upon the principle that protective tariff rates of import duty, but in
“taxes are a grant of the people who are taxed, and no case shall be higher than one hundred
the grant must be made by the immediate percent (100%) ad valorem; (2) to establish
representatives of the people. And where the import quota or to ban importation of any
people have laid the power, there it must remain commodity as may be necessary; and (3) to
and be exercised.” impose additional duty on all import not
exceeding ten percent (10%) ad valorem,
Dimaampao: If you can cite that, the bar examiner whenever necessary.
will surely be impressed. Try to memorize.
Sec. 1608. Flexible Clause. –
NON-DELEGATIONS OF POWER a) In the interest of the general welfare
The power to tax is exclusively vested in the and national security, and, subject to
legislative body. the limitations prescribed under this
Act, the President, upon the
Q: What are the exceptions to the principle of recommendation of the NEDA, is
non-delegation of powers? hereby empowered to:
A: Delegation of the powers of the Congress is 1. Increase, reduce, or remove
allowed in: existing rates of import duty
1. Article VI, Section 28(2) of the including any necessary change
Constitution, which states that “The in classification. The existing
Congress may, by law, authorize the rates may be increased or
President to fix within specified limits, and decreased to any level, in one or
subject to such limitations and restrictions several stages, but in no case
as it may impose, tariff rates, import and shall the increased rate of
export quotas, tonnage and wharfage dues, import duty be higher than a
and other duties or imposts within the maximum of one hundred
framework of the national development percent (100%) ad valorem;
program of the Government.” 2. Establish import quotas or ban
2. Article X, Section 5 of the Constitution, imports of any commodity, as
which states that “Each local government may be necessary; and
unit shall have the power to create its own 3. Impose an additional duty on all
sources of revenues and to levy taxes, fees imports not exceeding ten
and charges subject to such guidelines and percent (10%) ad valorem
limitations as the Congress may provide, whenever necessary: Provided,
consistent with the basic policy of local That upon periodic
autonomy. Such taxes, fees, and charges investigations by the
shall accrue exclusively to the local Commission and
governments.” recommendation of the NEDA,
the President may cause a
Flexible Tariff Clause gradual reduction of rates of
import duty granted in Section
Q: What is the law allowing the exercise by the 1611 of this Act, including those
President of tariff power? subsequently granted pursuant
A: It is the flexible tariff clause. to this section.
b) Before any recommendation is
submitted to the President by the NEDA
pursuant to the provisions of this

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section, except in the imposition of an 1. Be equitable and based as far as


additional duty not exceeding ten practicable on the taxpayer's ability to
percent (10%) ad valorem, the pay;
Commission shall conduct an 2. Be levied and collected only for public
investigation and shall hold public purposes;
hearings wherein interested parties 3. Not be unjust, excessive, oppressive, or
shall be afforded reasonable confiscatory;
opportunity to be present, to produce 4. Not be contrary to law, public policy,
evidence and to be heard. The national economic policy, or in the
Commission shall also hear the views restraint of trade;
and recommendations of any c. The collection of local taxes, fees, charges
government office, agency, or and other impositions shall in no case be let
instrumentality. The Commission shall to any private person;
submit its findings and d. The revenue collected pursuant to the
recommendations to the NEDA within provisions of this Code shall inure solely to
thirty (30) days after the termination of the benefit of, and be subject to the
the public hearings; disposition by, the local government unit
c) The power of the President to increase levying the tax, fee, charge or other
or decrease rates of import duty within imposition unless otherwise specifically
the limits fixed in subsection (a) hereof provided herein; and,
shall include the authority to modify e. Each local government unit shall, as far as
the form of duty. In modifying the form practicable, evolve a progressive system of
of duty, the corresponding ad valorem taxation.
or specific equivalents of the duly with
respect to imports from the principal Section 133. Common Limitations on the
competing foreign country for the most Taxing Powers of Local Government
recent representative period shall be Units. - Unless otherwise provided herein,
used as basis; the exercise of the taxing powers of
d) Any order issued by the President provinces, cities, municipalities, and
pursuant to the provisions of this barangays shall not extend to the levy of the
section shall take effect thirty (30) days following:
after promulgation, except in the a. Income tax, except when levied on
imposition of additional duty not banks and other financial
exceeding ten percent (10%) ad institutions;
valorem which shall take effect at the b. Documentary stamp tax;
discretion of the President. c. Taxes on estates, inheritance, gifts,
e) The power delegated to the President legacies and other acquisitions
as provided for in this section shall be mortis causa, except as otherwise
exercised only when Congress is not in provided herein;
session. d. Customs duties, registration fees of
f) The power herein delegated may be vessel and wharfage on wharves,
withdrawn or terminated by Congress tonnage dues, and all other kinds
through a joint resolution. of customs fees, charges and dues
The NEDA shall promulgate rules and except wharfage on wharves
regulations necessary to carry out the constructed and maintained by the
provisions of this section. local government unit concerned;
e. Taxes, fees, and charges and other
DIMAAMPAO: Read Sections 130, 133 and 198 of impositions upon goods carried
the Local Government Code. into or out of, or passing through,
the territorial jurisdictions of local
Section 130. Fundamental Principles. - The government units in the guise of
following fundamental principles shall govern the charges for wharfage, tolls for
exercise of the taxing and other revenue-raising bridges or otherwise, or other
powers of local government units: taxes, fees, or charges in any form
a. Taxation shall be uniform in each local whatsoever upon such goods or
government unit; merchandise;
b. Taxes, fees, charges and other impositions f. Taxes, fees or charges on
shall: agricultural and aquatic products

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when sold by marginal farmers or a. Real property shall be appraised at


fishermen; its current and fair market value;
g. Taxes on business enterprises b. Real property shall be classified for
certified to by the Board of assessment purposes on the basis
Investments as pioneer or non- of its actual use;
pioneer for a period of six (6) and c. Real property shall be assessed on
four (4) years, respectively from the basis of a uniform classification
the date of registration; within each local government unit;
h. Excise taxes on articles d. The appraisal, assessment, levy
enumerated under the national and collection of real property tax
Internal Revenue Code, as shall not be let to any private
amended, and taxes, fees or person; and
charges on petroleum products; e. The appraisal and assessment of
i. Percentage or value-added tax real property shall be equitable.
(VAT) on sales, barters or
exchanges or similar transactions Dimaampoa: These all came out in the bar.
on goods or services except as
otherwise provided herein; Power to Tax is the Power to Destroy
j. Taxes on the gross receipts of DIMAAMPAO: Reconcile these seemingly
transportation contractors and conflicting views.
persons engaged in the
transportation of passengers or Chief Justice Marshall opines that the power to tax
freight by hire and common is the power to destroy. Justice Malcolm opines that
carriers by air, land or water, the power to tax does not include the power to
except as provided in this Code; destroy. This is worth 5 points.
k. Taxes on premiums paid by way or
reinsurance or retrocession; “The conflict is more apparent than real. Chief
l. Taxes, fees or charges for the Justice Marshall is correct in the sense that the
registration of motor vehicles and power to tax is the power to destroy if it is used
for the issuance of all kinds of validly as an implement of the police power of the
licenses or permits for the driving State. Justice Malcolm is likewise correct in this
thereof, except tricycles; perspective: where the power to tax is used solely for
m. Taxes, fees, or other charges on the purpose of raising revenues, it cannot be allowed
Philippine products actually to confiscate or destroy.” (J. Isagani Cruz)
exported, except as otherwise
provided herein; Q: What is the meaning of the phrase “the
n. Taxes, fees, or charges, on conflict is more apparent than real”?
Countryside and Barangay A: It means that there is no real conflict here.
Business Enterprises and
cooperatives duly registered under Q: What does this mean: “the power to tax is not
R.A. No. 6810 and Republic Act the power to destroy, so long as the Supreme
Numbered Sixty-nine hundred Court sits”?
thirty-eight (R.A. No. 6938) A: In the case of Sison v. Ancheta, [1], the Supreme
otherwise known as the Court held that, “While taxation is said to be the
"Cooperative Code of the power to destroy, it is by no means unlimited. If so
Philippines" respectively; and great an abuse is manifested as to destroy natural
o. Taxes, fees or charges of any kind and fundamental rights which no free government
on the National Government, its could consistently violate, it is the duty of the
agencies and instrumentalities, judiciary to hold such an act unconstitutional. The
and local government units. Constitution as the fundamental law of the land
overrides any legislative or executive act that runs
Section 198. Fundamental Principles. - counter to it. In any case, therefore, where it can be
The appraisal, assessment, levy and demonstrated that the challenged statutory
collection of real property tax shall be provision fails to abide by its command, then the
guided by the following fundamental court must so declare and adjudge it null.”
principles:

1 130 SCRA 654.

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Scope of taxation (C-U-P-S) validity even if it is not in consonance with the


Taxation is said to be comprehensive, unlimited, principles of fiscal adequacy and administrative
plenary and supreme. feasibility because the Constitution does not
expressly require so. However, if a tax law runs
It is comprehensive as it covers persons, businesses, contrary to the principle of theoretical justice, such
activities, professions, rights and privileges. violation will render the law unconstitutional
considering that under the Constitution, the rule of
It is unlimited because the tax does not cease to be taxation should be uniform and equitable. (Section
valid merely because it regulates, discourages or 28(1), Article VI)
even definitely deters the activities taxed, and the
courts scarcely venture to declare that it is subject Secondary Purpose of Taxation
to any restrictions whatever, except such as rest in
the discretion of the authority which exercises it. Q: What are the non-revenue /regulatory
/secondary purposes of taxation? There are four.
It is plenary in the sense that it is complete. Explain each.
A:The secondary purposes of taxation are as
It is supreme insofar as the selection of the subject follows; (R-I-P-E)
of taxation is concerned. 1. Reduction of social inequality;
2. Implement of the police power of the
Dimaampao: J. Malcolm stresses that taxation is State:
the strongest of all the powers of the government. 3. Protection of the local industry against
unfair competition;
Q: What does that mean? It is strongest in what 4. Encouragement of the growth of local
sense? industries.
A: The police power of the State is supreme under
the principle of salus populi est suprema lex. The Taxation is used to reduce the inequality in the
power of eminent domain is supreme under the distribution of wealth by preventing its undue
concept of expropriation. Taxation thus, although concentration in the hands of a few individuals.
referred to as the strongest of all the powers of the
government, cannot be interpreted to mean that it is It is likewise used in the form of exemptions and
superior to the other inherent powers of the reliefs to serve as incentives to encourage
government. It is supreme insofar as the selection of investment in the local industry and thereby
the subject of taxation is concerned. promote economic growth.

Fundamental Principles of a Sound Tax System It protects the local industry by imposing certain
taxes upon imported goods or articles.
Q: What are the three fundamental principles of
a sound taxation system? Briefly explain each. It may be used as an implement of the police power
A: The three fundamental principles of a sound of the State through the imposition of taxes with
taxation are fiscal adequacy, theoretical justice, and the end in view of regulating a particular activity.
administrative feasibility.
Dimaampao: The Supreme Court ruled in CIR v.
Fiscal adequacy dictates that sources of revenue Central Luzon Drug Corporation,[1] that in recent
must be sufficient to meet government years, the power to tax has become the most
expenditures. effective tool to realize social justice, public
welfare, and the equitable distribution of wealth.
Theoretical justice mandates that taxes must be This is an abandoned doctrine.
imposed based on the taxpayer’s ability to pay.
Mark the case of Manila Memorial Park, Inc. v.
Administrative feasibility requires that tax laws DSWD Secretary,[2], which abandons the Central
must be capable of effective and efficient Luzon ruling. The power of taxation was used as an
enforcement. implement of police power in this case.

Q: If a tax law violates any of these principles, Q: What is that ruling?


will it render the tax law invalid? A: The senior’s citizen discount is an exercise of
A: The purpose of these principles is to make tax police power. In holding so, the Court explained
laws sound. A tax law will therefore retain its that the 20% discount is intended to improve the

1 456 SCRA 414. 2 711 SCRA 302.

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welfare of senior citizens who, at their age, are less 13. Cebu Port Authority
likely to be gainfully employed, more prone to  Republic of the Philippines v. City
illnesses and other disabilities, and thus, in need of of Parañaque, 677 SCRA 246
subsidy in purchasing basic commodities. The 20% There is only one mentioned in this case. This is the
discount may be properly viewed as belonging to one asked in the bar.
the category of price regulatory measures which 14. Philippine Reclamation Authority,
affect the profitability of establishments subjected formerly Public Estates Authority
thereto. On this face, the subject regulation is a  City of Lapu-Lapu v. Philippine
police power measure. (Manila Memorial Park v. Economic Zone Authority, 742
DSWD Secretary) SCRA 524
The remaining two instrumentalities can be found
Dimaampao: We really look for keywords. The in this case.
keyword here is price regulatory measures. 15. Philippine Economic Zone Authority
16. Government Service Insurance System
TAXES ARE NOT SUBJECT OF SET OFF 3. Learn why the instrumentalities in those cases
As a rule, taxes cannot be subject to compensation are exempt from taxation by determining their
because the government and the taxpayer are not distinct characteristics or features in the
creditors and debtors of each other. following case: Manila International Airport
Authority v. City of Lapu-Lapu, 757 SCRA 323.
However, the Supreme Court allowed offsetting of These are the reasons why instrumentalities
taxes only because the determination of the are exempt from tax.
taxpayer’s liability is intertwined with the  Instrumentality refers to any agency of
resolution of the claim for tax refund of the National Government,
erroneously or illegally collected taxes under 1. not integrated within the
Section 229 of the NIRC. department framework,
2. vested with special functions or
--xXx-- jurisdiction by law,
3. endowed with some if not all
Assignment corporate powers,
4. administering special funds,
1. Start from the inherent and constitutional and
limitations of taxation. 5. enjoying operational autonomy,
 Exemption of the government from usually through a charter.
taxation is an emerging favorite bar (Section 2(10) of the
question. Introductory Provisions of the
2. Find the 16 instrumentalities exempt from Administrative Code)
taxation in the following cases: 4. Research about technical smuggling.
 Manila International Airport  Smuggling refers to the fraudulent act of
Authority v. Court of Appeals, 495 importing any goods into the Philippines,
SCRA 591, 618, 632, 633 or the act of assisting in receiving,
MIAA is one. concealing, buying, selling, disposing or
On page 618, there are four other instrumentalities transporting such goods, with full
enumerated by the Supreme Court. knowledge that the same has been
On pages 632-633, there are eight more. fraudulently imported, or the fraudulent
1. Manila International Airport Authority exportation of goods. Goods referred to
2. Mactan-Cebu International Airport under this definition shall be known as
Authority smuggled goods. (Section 102(nn), R.A.
3. Philippine Ports Authority No. 10863)
4. University of the Philippines  Technical Smuggling refers to the act of
5. Bangko Sentral ng Pilipinas importing goods into the country by
6. Philippine Rice Research Institute means of fraudulent, falsified or erroneous
7. Laguna Lake Development Authority declaration of the goods to its nature, kind,
8. Philippine Fisheries Development quality, quantity or weight, for the
Authority purpose of reducing or avoiding payment
9. Bases Conversion Development of prescribed taxes, duties and other
Authority charges. (Section 102(pp), R.A. No. 10863)
10. Philippine National Railways
11. Cagayan de Oro Port Authority --xXx--
12. San Fernando Port Authority

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1. As to the exercise of power – a tax is levied


in the exercise of the taxing power, while
GENERAL PRINCIPLES
license fees emanate from the police
Part II
power of the State;
2. As to purpose – the primary purpose of
taxation is to generate revenues, while
DIMAAMPAO: You must know the prevailing license fees are imposed primarily for
jurisprudence here on pages 33-34 of your book. regulation;
You must have noticed the decided cases there. 3. As to subject – the subject of taxation is
There are mentioned 1,2,3,4. These were asked persons, properties, activities, while the
twice already in the bar exams. subject of license is limited to the right to
engage in a business or activity;
In Progressive Development Corp. vs Quezon City, [1] 4. As to consequence in case of non-payment –
the case involves a market in Cubao – the Farmers’ failure to pay tax makes your business
Market. So, there is this issue whether the market illegal. While failure to pay does not have
stall fee collected by the city government is a tax or that effect as it is merely a regulatory fee.
a license. What is the prevailing jurisprudence?
DIMAAMPAO: Let’s have another case. This has yet
Q: Is market stall fee a license or a tax? to be asked in the bar exam. This is about the
A: The market stall fees are considered as license charge imposed under the EPIRA Law (Electric
because the objective of imposing market stall fees is Power Industry Reform Act of 2001) called the
regulation and not revenue generation. Tax is Universal Charge.
imposed in the exercise of police power primarily
for purposes of regulation, while the latter is Q: Is that a license or a tax?
imposed under the taxing power primarily for A: It is a license. In Gerochi v. Department of Energy,
purposes of raising revenues. Thus, if the [2] the Supreme Court held that the Universal

generating of revenue is the primary purpose and Charge is a license. It is imposed and can be amply
regulation is merely incidental, the imposition is a discerned as regulatory in character because in the
tax; but if regulation is the primary purpose, the EPIRA Law, the State’s police power, particularly
fact that incidentally revenue is also obtained does its regulatory dimension, is invoked.
not make the imposition a tax.
Q: Is the Coco Levy Fund a tax or a license? Is it a
Q: What is the reason behind this ruling? regulatory imposition or tax?
A: Tax is imposed in the exercise of police power A: It is a tax. In Cojuangco, Jr. vs. Republic,[3] the
primarily for purposes of regulation, while the latter Court ruled that the coco levy funds are taxes since
is imposed under the taxing power primarily for the purpose of its imposition is to raise revenue for
purposes of raising revenues. Thus, if the generating the rehabilitation of the coconut industry.
of revenue is the primary purpose and regulation is
merely incidental, the imposition is a tax; but if Q: Is the building permit fee a tax or a license?
regulation is the primary purpose, the fact that A: NO. It is a regulatory fee. [4]
incidentally revenue is also obtained does not
make the imposition a tax. Q: Why is a building permit a regulatory fee?
A: That a building permit fee is a regulatory
Dimaampao: Based on my experience as bar imposition is highlighted by the fact that:
examiner for two bar exams, some examinees 1. In processing an application for a building
never take full credit though their answers were permit, the Building Official shall see to it that
correct because their reasons are not enough to the applicant satisfies and conforms to the
explain the SC ruling. approved standard requirements on zoning
and land use, lines and grades, structural
This came out in the bar examination. design, sanitary and sewerage, environmental
health, electrical and mechanical safety;
Q: What are the distinctions between a license 2. Clearances from various government
and a tax? authorities exercising and enforcing
A: The distinctions between a license and a tax are regulatory functions affecting buildings
as follows; /structures may be required before a building
permit may be issued.

1 172 SCRA 629. 4 (Angeles University Foundation vs. Angeles City,


2 527 SCRA 696. 675 SCRA 359)
3 686 SCRA 472.

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goods and services only in the country where these


Q: Is the Socialized Housing Tax a tax or a are consumed. [4]
regulatory fee?
A: NO. It is not a tax imposed by the local Q: What is the tax situs of VAT?
government but a license/regulatory fee. Its name A: Its tax situs is the place where the transaction is
is misleading. [1] made.

Q: What is the reason behind this ruling? Q: What is the situs of real property tax?
A: It is levied with a regulatory purpose. The levy is A: Its situs is the state or country where it is
primarily in the exercise of the police power for the located, regardless whether its owner is a resident
general welfare of the entire city. It is greatly or a non-resident.
imbued with public interest. Removing slum areas
in Quezon City is not only beneficial to the Q: What about income tax? Can we tax income
underprivileged and homeless constituents but derived from sources without? Whose income
advantageous to the real property owners as well. derived from sources without is subject to
The situation will improve the value of the their Philippine income tax? So, when we tax the
property investments, fully enjoying the same in income of a resident citizen derived from sources
view of an orderly, secure, and safe community, without, what is the criterion?
and will enhance the quality of life of the poor, A: The situs of income tax depends upon the
making them law-abiding constituents and better nationality and residence of the taxpayer. If the
consumers of business products. taxpayer is both a resident and a national of the
Philippines, the income is taxed upon sources
INHERENT LIMITATIONS derived from within and without the Philippines.
The inherent limitations on taxation are as follows; Otherwise, the taxpayer is taxed upon sources
1. Public purpose; derived from within the Philippines only.
2. Territoriality;
3. International comity; Q: What about community tax?
4. Exemption from taxation of government A: Community taxes are imposed on the residence
agencies and instrumentalities; of the taxpayer.
5. Non-delegation of the power to tax;
Q: Can estate tax be imposed upon property
Public purpose situated outside the Philippines?
The Supreme Court ruled that the term “public A: Yes, if the decedent is a citizen of the Philippines.
purpose” is not defined. It is an elastic concept that
can be hammered to fit modern standards. It Dimaampao: The same is true in case of donor’s
should be given a broad interpretation. [2] tax. Provided that the donor is a citizen, even if the
property donated is situated outside the
Q: What is the test to determine if the purpose is Philippines, the same can be the subject of donor’s
for the public? Is it the number of persons tax.
benefitted?
A: “Public” may refer to a special group of persons. Q: What is the Cross Border Doctrine?
The senior citizens are a special group of persons A: The Cross Border Doctrine mandates that no
who have contributed to the general welfare and VAT shall be imposed to form part of the cost of the
common good of the nation in the prime of their goods destined for consumption outside the
lives. [3] territorial border of the taxing authority. Hence,
actual export of goods and services from the
TERRITORIALITY Philippines to a foreign country must be free of
Let us focus on the principle of territoriality. This VAT, while those destined for use or consumption
might come out in the bar exam. It is about a within the Philippines shall be imposed with 10%
doctrine in value-added tax. VAT.

Q: What is the meaning of Destination Principle? Q: What are export processing zones? What is
A: It is a principle applied in value-added tax. It the tax treatment on the sales of goods or
dictates that value-added tax may be imposed on services within these export processing zones?

1 Ferrer Jr. vs. Bautista, 760 SCRA 652 4 Atlas Consolidated Mining and Development
2 Planters Products, Inc. v. Fertiphil Corporation, 548 Corporation v. CIR, 524 SCRA 73.
SCRA 485.
3 Ibid.

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A: Export processing zones are to be managed as a A: The Supreme Court explained in the case of PEZA
separate customs territory from the rest of the vs Lapu-Lapu City[1] that they must possess the
Philippines and, thus, for tax purposes, are characteristics of an instrumentality of the national
effectively considered as foreign territory. For this government.
reason, sales by persons from the Philippine
customs territory to those inside the export Manila International Airport Authority v. CA
processing zones are effectively zero-rated. G.R. No. 155650. July 20, 2006
CARPIO, J.:

INTERNATIONAL COMITY Facts: Petitioner Manila International Airport Authority (MIAA)


operates the Ninoy Aquino International Airport (NAIA) Complex
in Parañaque City under Executive Order No. 903, otherwise known
Q: Can the income of the Ambassador of the
as the Revised Charter of the Manila International Airport Authority
United States derived from sources within the ("MIAA Charter").
Philippines be subject to income tax?
A: NO, because it is one of the inherent limitations On 21 March 1997, the Office of the Government Corporate
Counsel (OGCC) issued Opinion No. 061 withdrawing the
– international comity. Subjecting their income to exemption from real estate tax granted to MIAA under Section 21
income tax will violate the internationally accepted of the MIAA Charter. The City of Parañaque, through its City
principle of sovereign equality among nations. Treasurer, issued notices of levy and warrants of levy on the Airport
Lands and Buildings.

Q: Does it have a constitutional basis? MIAA filed with the Court of Appeals an original petition for
A: YES. Article 2, Section 2 of the Constitution states prohibition and injunction, with prayer for preliminary injunction or
that the Philippines adopts the generally accepted temporary restraining order. MIAA argues that the Airport Lands
and Buildings are for the benefit of the general public thus, the
principles of international law as the law of the
ownership of these properties remains with the State and are not
land. Such generally accepted principle pertains to subject to real estate tax by local governments.
the sovereign equality of nations. Neither can we
impose real property tax on the foreign embassies Respondents invoke Section 193 of the Local Government Code,
which expressly withdrew the tax exemption privileges of
as these are extension of territories of sovereign "government-owned and-controlled corporations" upon the
states. effectivity of the Local Government Code. Respondents also argue
that a basic rule of statutory construction is that the express mention
of one person, thing, or act excludes all others. An international
EXEMPTION FROM TAXATION OF
airport is not among the exceptions mentioned in Section 193 of the
GOVERNMENT AGENCIES AND Local Government Code. Thus, respondents assert that MIAA
INSTRUMENTALITIES cannot claim that the Airport Lands and Buildings are exempt from
real estate tax.
Q: What are the 16 Exempt Instrumentalities of
ISSUE: whether the Airport Lands and Buildings of MIAA are
the National Government? exempt from real estate tax under existing laws.
A: The following instrumentalities are exempt from
tax; HELD: Yes. First, MIAA is not a government-owned or controlled
corporation but an instrumentality of the National Government and
1. Philippine Economic Zone Authority; thus exempt from local taxation. Second, the real properties of
2. Government Service Insurance System; MIAA are owned by the Republic of the Philippines and thus
3. Bangko Sentral ng Pilipinas; exempt from real estate tax.
4. Mactan-Cebu International Airport
A government-owned or controlled corporation must be "organized
Authority; as a stock or non-stock corporation." MIAA is not organized as a
5. Philippine Ports Authority; stock or non-stock corporation. MIAA is not a stock corporation
6. San Fernando Port Authority; because it has no capital stock divided into shares. MIAA has no
stockholders or voting shares. Clearly, under its Charter, MIAA
7. University of the Philippines; does not have capital stock that is divided into shares.
8. Philippine Fisheries Development
Authority; MIAA is also not a non-stock corporation because it has no
9. Philippine Rice Research Institute; members. Section 87 of the Corporation Code defines a non-stock
corporation as "one where no part of its income is distributable as
10. Cagayan De Oro Port Authority; dividends to its members, trustees or officers." A non-stock
11. Cebu Port Authority; corporation must have members. Even if we assume that the
12. Manila International Airport Authority; Government is considered as the sole member of MIAA, this will
not make MIAA a non-stock corporation. Non-stock corporations
13. Philippine Reclamation Authority;
cannot distribute any part of their income to their members. Section
14. Laguna Lake Development Authority; 11 of the MIAA Charter mandates MIAA to remit 20% of its annual
15. Bases Conversion Development Authority; gross operating income to the National Treasury. This prevents
16. Philippine National Railways; MIAA from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock


Q: What must be the reasons why they are corporations are "organized for charitable, religious, educational,
exempt? professional, cultural, recreational, fraternal, literary, scientific,
social, civil service, or similar purposes, like trade, industry,

1 G.R. No. 184203, November 26, 2014

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agriculture and like chambers." MIAA is not organized for any of Respondents point out that petitioner and MIAA are two very
these purposes. MIAA, a public utility, is organized to operate an different entities. Respondents argue that petitioner is a GOCC
international and domestic airport for public use. contrary to its assertions, based on its Charter and on DOJ Opinion
No. 50. Respondents argue that MCIAA properties such as the
MIAA is a government instrumentality vested with corporate terminal building, taxiway and runway are not exempt from real
powers to perform efficiently its governmental functions. MIAA is property taxation. As discussed in the 1996 MCIAA case, Section
like any other government instrumentality, the only difference is that 234 of the LGC omitted GOCCs such as MCIAA from entities
MIAA is vested with corporate powers. enjoying tax exemptions. Said decision also provides that the
transfer of ownership of the land to petitioner was absolute and
When local governments invoke the power to tax on national petitioner cannot evade payment of taxes.
government instrumentalities, such power is construed strictly
against local governments. The rule is that a tax is never presumed ISSUE: Whether or not Mactan International Airport is exempt from
and there must be clear language in the law imposing the tax. Any real estate tax.
doubt whether a person, article or activity is taxable is resolved
against taxation. This rule applies with greater force when local HELD: YES. The petitioner is an instrumentality of the government;
governments seek to tax national government instrumentalities. thus, its properties actually, solely and exclusively used for public
purposes, consisting of the airport terminal building, airfield,
Another rule is that a tax exemption is strictly construed against the runway, taxiway and the lots on which they are situated, are not
taxpayer claiming the exemption. However, when Congress grants subject to real property tax and respondent City is not justified in
an exemption to a national government instrumentality from local collecting taxes from petitioner over said properties.
taxation, such exemption is construed liberally in favor of the
national government instrumentality. While it is true, as respondents allege, that the 1996 MCIAA case
was cited in a long line of cases, still, in 2006, the Court en banc
decided a case that in effect reversed the 1996 Mactan ruling. The
Q: What are the 5 characteristics of an 2006 MIAA case had, since the promulgation of the questioned
instrumentality of the national government Decision and Resolution, reached finality and had in fact been either
under Sec. 2 (10) of the 1987 Administrative affirmed or cited in numerous cases by the Court. The decision
became final and executory on November 3, 2006. Furthermore, the
Code?
2006 MIAA case was decided by the Court en banc while the 1996
A: The reasons are as follows; MCIAA case was decided by a Division. Hence, the 1996 MCIAA
1. They are not integrated within the case should be read in light of the subsequent and unequivocal ruling
department network; in the 2006 MIAA case.

2. They are vested with special functions or Petitioner MCIAA is vested with corporate powers but it is not a
jurisdiction by law; stock or non-stock corporation, which is a necessary condition
3. They are endowed with some if not all before an agency or instrumentalityis deemed a government-owned
or controlled corporation. Like MIAA, petitioner MCIAA has
corporate powers;
capital under its charter but it is not divided into shares of stock. It
4. They are administering special fund; also has no stockholders or voting shares.
5. hey are enjoying operational autonomy,
usually through a charter Like in MIAA, the airport lands and buildings of MCIAA are
properties of public dominion because they are intended for public
use. As properties of public dominion, they indisputably belong to
MCIAA vs. City of Lapu-Lapu
the State or the Republic of the Philippines, and are outside the
G.R. No. 181756. June 15, 2015
commerce of man. This, unless petitioner leases its real property to
Leonardo-De Castro, J;
a taxable person, the specific property leased becomes subject to real
property tax; in which case, only those portions of petitioner’s
FACTS: Petitioner Mactan-Cebu International Airport Authority
properties which are leased to taxable persons like private parties
(MCIAA) was created by Congress on July 31, 1990 under Republic
are subject to real property tax by the City of Lapu-Lapu.
Act No. 69583 to "undertake the economical, efficient and effective
control, management and supervision of the Mactan International
Under Section 2(10) and (13) of the Introductory Provisions of the
Airport in the Province of Cebu and the Lahug Airport in Cebu City
Administrative Code, which governs the legal relation and status of
x x x and such other airports as may be established in the Province
government units, agencies and offices within the entire government
of Cebu.Upon its creation, petitioner enjoyed exemption from realty
machinery, MIAA is a government instrumentality and not a
taxes under Republic Act No. 6958.
government-owned or controlled corporation. Under Section 133(o)
of the Local Government Code, MIAA as a government
On September 11, 1996, however, this Court rendered a decision in
instrumentality is not a taxable person because it is not subject to
Mactan-Cebu International Airport Authority v. Marcos4 (the 1996
"[t]axes, fees or charges of any kind" by local governments. The
MCIAA case) declaring that upon the effectivity of Republic Act
only exception is when MIAA leases its real property to a "taxable
No. 7160 (The Local Government Code of 1991), petitioner was no
person" as provided in Section 234(a) of the Local Government
longer exempt from real estate taxes.
Code, in which case the specific real property leased becomes
subject to real estate tax. Thus, only portions of the Airport Lands
On January 7, 1997, respondent City issued to petitioner a Statement
and Buildings leased to taxable persons like private parties are
of Real Estate Tax assessing the lots comprising the Mactan
subject to real estate tax by the City of Parañaque.
International Airport in the amount of ₱151,376,134.66.

Under Article 420 of the Civil Code, the Airport Lands and
Petitioner is before us now claiming that this Court, in the 2006
Buildings of MIAA, being devoted to public use, are properties of
MIAA case, had expressly declared that petitioner, while vested
public dominion and thus owned by the State or the Republic of the
with corporate powers, is not considered a government-owned or
Philippines. Article 420 specifically mentions "ports x x x
controlled corporation, but is a government instrumentality like the
constructed by the State," which includes public airports and
Manila International Airport Authority (MIAA), Philippine Ports
seaports, as properties of public dominion and owned by the
Authority (PPA), University of the Philippines, and Bangko Sentral
Republic. As properties of public dominion owned by the Republic,
ng Pilipinas (BSP). Petitioner alleges that as a government
there is no doubt whatsoever that the Airport Lands and Buildings
instrumentality, all its airport lands and buildings are exempt from
are expressly exempt from real estate tax under Section 234(a) of
real estate taxes imposed by respondent City.
the Local Government Code. This Court has also repeatedly ruled

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that properties of public dominion are not subject to execution or Government,” meaning in the interest of the
foreclosure sale.
national economy.
NON-DELEGATION OF POWER TO TAX
Unfortunately, this is now deleted. I could not
understand why it was deleted! It’s what the
Q: What underlying settled doctrine/principle
Constitution says! That’s how brilliant our
will be violated if we allow the delegation of
Congressmen are. The most important criterion is
power to tax?
deleted. What are left are “in the interest of
A: Delegation of power to tax violates the principle
national security,” “in the interest of the general
of separation of powers. Delegation is allowed
welfare of the people.” Read Sec. 1608, you will not
when expressly authorized by the Constitution.
find therein this constitutional criterion “within the
national development program of the
Under the Constitution, there are two provisions;
Government.”
1. Art. VI, Sec. 28 (2) – Tariff powers of the
President;
Q: What is that provision in the Constitution that
2. Art. X, Sec. 5 – Delegation to Local
likewise allow the delegation of the power to tax?
Government
A: Art. X, Sec. 5. Delegation to Local Government.
Congress passed a law authorizing the President to
Dimaampao: The Constitution made mention of
impose income tax on certain items of income.
these two striking words: guidelines and
limitations.
Q: Is that covered by that constitutional
provision?
Q: What do you understand by the word
A: NO. It is not covered by that constitutionally
guidelines?
delegated power.
A: R.A. No. 7160 does not use the word guidelines.
It uses “fundamental principles.” These principles
Q: So, what are the taxes covered by that
are found in two sections:
constitutionally delegated power?
1. Sec. 130 – Fundamental principles of local
A: It made no mention about income tax, donor’s
government taxation; and
tax, estate tax, value-added tax. The taxes covered
2. Sec. 198 – Fundamental principles of real
are customs duties.
property taxation.
Dimaampao: The constitutional provision says
SECTION 130. Fundamental Principles. - The
that the Congress may, by law, authorize the
following fundamental principles shall govern the
President to fix within specified limits, and subject
exercise of the taxing and other revenue-raising
to such limitations and restrictions as it may
powers of local government units:
impose, tariff rates, import and export quotas,
1. Taxation shall be uniform in each local
tonnage and wharfage dues, and other duties or
government unit;
imposts within the framework of the national
2. Taxes, fees, charges and other impositions
development program of the Government.
shall:
a. be equitable and based as far as
Q: What is that law authorizing the President to
practicable on the taxpayer's ability to
increase or decrease tariff rates?
pay;
A: That law is the flexible power clause under Sec.
b. be levied and collected only for public
221 of the Old Tariff and Customs Law. However,
purposes;
there is a new law: R.A. No. 10863 – Customs
c. not be adjust, excessive, oppressive, or
Modernization and Tariff Act.
confiscatory;
d. not be contrary to law, public policy,
Dimaampao: Read Sec. 102 (u) in relation to Sec.
national economic policy, or in
1608 of RA 10863.
restraint of trade;
3. The collection of local taxes, fees, charges
Explain the flexible power clause. The Constitution
and other impositions shall in no case be let
says, “within the national development program of
to any private person;
the Government.”
4. The revenue collected pursuant to the
provisions of this Code shall inure solely to
Q: Under what conditions or criteria will the
the benefit of, and be subject to disposition
President increase or decrease tariff rates?
by, the local government unit levying the
A: Under the Constitution, it says “within the
tax, fee, charge or other imposition unless
national development program of the
otherwise specifically provided herein; and,

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5. Each local government unit shall, as far as charges which could not be imposed by local
practicable, evolve a progressive system of government units. Can you mention some of them?
taxation.
SECTION 133. Common Limitations on
Section 198. Fundamental Principles. - The the Taxing Powers of Local Government
appraisal, assessment, levy and collection of real Units. - Unless otherwise provided herein,
property tax shall be guided by the following the exercise of the taxing powers of
fundamental principles: provinces, cities, municipalities, and
a. Real property shall be appraised at its Barangays shall not extend to the levy of the
current and fair market value; following:
b. Real property shall be classified for 1. Income tax, except when levied on
assessment purposes on the basis of its banks and other financial institutions;
actual use; 2. Documentary stamp tax;
c. Real property shall be assessed on the 3. Taxes on estates, inheritance, gifts,
basis of a uniform classification within legacies and other acquisitions mortis
each local government unit; causa, except as otherwise provided
d. The appraisal, assessment, levy and herein;
collection of real property tax shall not 4. Customs duties, registration fees
be let to any private person; and vessels and wharfage on wharves,
e. The appraisal and assessment of real tonnage dues, and all other kinds of
property shall be equitable. customs fees, charges and dues except
wharfage on wharves constructed and
Dimaampao: Tax ordinance is valid if complies maintained by the local government
with these fundamental principles of local unit concerned;
government taxation. Assessment, or appraisal or 5. Taxes, fee and charges and other
collection or real property tax is valid if it complies impositions upon goods carried into or
with these fundamental principles of real property out of, or passing through, the
taxation. territorial jurisdictions of local
government units in the guise of
Q: What are the common principles? charges for wharfage, tolls for bridges
A: (1) Rule on uniformity; (2) That taxes must be or otherwise, or other taxes, fees or
equitable; (3) No let principle. charges in any form whatsoever upon
such goods or merchandise;
Q: What is the “no let principle”? 6. Taxes, fees, or charges on agricultural
A: The appraisal, assessment, levy and collection of and aquatic products when sold by
real property tax cannot be delegated to any marginal farmers or fishermen;
private person. 7. Taxes on business enterprises certified
to by the Board of Investments as
Q: Can the collection of income tax or internal pioneer or non-pioneer for a period of
revenue tax that be delegated to private six (6) and (4) four years, respectively
corporations such as banks? from the date of registration;
A: YES. You should know that distinction. In the 8. Excise taxes on articles enumerated
case of local tax or real property tax, in the light of under the National Internal Revenue
that honored principle, the collection thereof Code, as amended, and taxes, fees or
should not be delegated or entrusted to private charges on petroleum products;
corporations. That’s why you must have noticed 9. Percentage or value added tax (VAT)
that banks are not authorized to collect local taxes on sales, barters or exchanges or
or real property tax. But in the case of income tax, similar transactions on goods or
donor’s tax, estate tax, and other internal revenue services except as otherwise provided
taxes, these can be collected by authorized agents. herein;
10. Taxes on the gross receipts of
Dimaampao: In the last bar examination, this was transaction contractors and persons
asked: common limitations on local government engaged in the transportation of
taxation, meaning these taxes cannot be imposed passengers or freight by hire and
by local government units. When the Constitution common carriers by air, land or water,
says under Art. X, Sec. 5 “subject to limitations as except as provided in this Code;
the Congress may provide,” that refers to Sec. 133 11. Taxes on premium paid by way or
of R.A. No. 7160 which enumerates 15 taxes or reinsurance or retrocession;

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12. Taxes, fees or charges for the


registration of motor vehicle and for CONSTITUTIONAL LIMITATIONS
the issuance of all kinds of licenses or These are provisions affecting the power of
permits for the driving thereof, except taxation.
tricycles;
13. Taxes, fees or charges on Philippine Q: How do you classify these constitutional
products actually exported, except as provisions?
otherwise provided herein; A: The classifications are as follows;
14. Taxes, fees, or charges, on Countryside 1. Constitutional Limitations - these
and Barangay Business Enterprises provisions involve restrictions, direct or
and cooperatives duly registered under indirect;
R.A. No. 6810 and Republic Act 2. Constitutional Conferment; (delegation)
Numbered Sixty-nine hundred thirty- 3. Constitutional Exemptions;
eight (R.A. No. 6938) otherwise known
as the "Cooperatives Code of the EQUAL PROTECTION CLAUSE
Philippines" respectively; and Equal Protection Clause – There are so many cases
15. Taxes, fees or charges, of any kind on here. It boils down to the application of the
the National Government, its agencies requisites of a valid classification.
and instrumentalities, and local
government units. Q: What are these requisites?
A: The requisites are as follows;
Dimaampao: You note here that all national 1. It must be based on substantial
internal revenue taxes are not within the taxing distinctions;
authority of the local government units. You must 2. It must apply to both present and future
memorize these. conditions;
3. It must be germane to the purpose of the
In the last item there, (15) Taxes, fees or charges, of law;
any kind on the National Government, its agencies 4. It must apply to all members of the same
and instrumentalities, and local government units, it class
was cited in the landmark case of Manila
International Airport Authority. Justice Carpio Dimaampao: So, there may be differential tax
mentioned that. Since Manila International Airport treatment or classification as long as it has these 4
Authority is an instrumentality of the national requisites, that law does not violate equal
government, the City Government of Paranaque protection clause. Jurisprudence in a long line of
cannot impose real property tax against it. Now, he cases classify things or articles for purposes of
cited this Doctrine of Supremacy of National taxation. There may be differential tax treatment
Government over Local Government Units. Explain but for as long as the classification has these
the Doctrine of Supremacy of National Government requisites, that law is still constitutional.
over Local Government Units based on three
American cases. There are so many cases decided by the Supreme
Court on this. I must tell you that in the previous
The basis of these limitations proceeds from this bar exams cases involving violations are the ones
Doctrine of Pre-emption. being asked.

Q: What is this Doctrine of Pre-emption? Q: Can you think of a case where the Supreme
A: The imposition of these limitations is a classic Court held that this ordinance is discriminatory?
application of that Doctrine. Pre-empt. To pre-empt A: Ormoc Sugar Co. vs. Treasurer of Ormoc City;
the exercise. Here, where it not for these Motor vehicles in Manila; Association of Customs
limitations, local government units may impose Brokers vs. Manila
these taxes. But the national government elects to
over these field or area of taxation thereby Dimaampao: There was this tax imposed on
withholding this power to tax on the part of local export sale made by Ormoc Sugar Co. The ruling of
government units. So those taxes which may not be the Court was clearly, the tax was discriminatory. It
covered by these, they can be imposed by local singled out a particular sugar industry. It applied
government units. In other words, if the national only to existing conditions. To conform with that
government does not impose taxes on certain condition number 2 that it must apply to both
subject, that may be taxed by the LGU. [1] present and future conditions

1 Victorias Milling vs. Municipality of Victorias, 25


SCRA 192

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Q: How do you cure the defect in the Ormoc Sugar Q: Now what does evolve mean?
Co. case? Definitely it does not mean prescribe, it means to
A: If an ordinance was passed imposing tax on develop. So it’s not mandatory.
installation manager conditioned on the ground
that it singled out a particular group of people, will Dimaampao: That’s why this Value Added Tax
you challenge that claiming that you were singled Law, which is a regressive tax, has been challenged
out and therefore it violates the equal protection for no less than 4 times before the Court. The Court
clause. This is where the Supreme Court applies consistently held that it does not violate this
this- inequality or inequity, resulting from singling because it is not mandatory upon Congress to
out a particular class for taxation or exemption prescribe or impose direct tax. That’s why as much
infringe no constitutional limitation. The mere fact as possible, indirect taxes must be minimized.
that he is singled out does not necessarily infringe
constitutional limitations since all the requisites It is not a directive to Congress to pass a law
are present. Differential tax treatment or imposing progressive tax. To pass a law imposing
classification that will result in singling out a progressive tax, is that a legally enforceable or
particular class provided that all the requisites of a justiciable right? No! It is just a moral incentive.
valid classification are present. In other words, This is where you apply the art of articulation.
differential tax treatment is allowed as long as the Pagalingan yan ng English! We are impressed by
classification is valid, meaning it must have all the answers that contain no grammatical error.
requisites of a valid classification.
Q: What do you understand by progressive
UNIFORMITY IN TAXATION system of taxation?
Equal protection clause, Art. 3, Sec. 1, you cannot A: It is a system of taxation that imposes
avoid equality here that’s why you jump to Art. VI, progressive rates, which provides that the tax rates
Sec. 28 (1) (Question No. 1 in Bar Exam 1996). increase as the tax base increases. It means that the
bigger your income, the higher your taxes; the
Q: What is the rule of uniformity in taxation? lower your income, the lower your taxes.
A: Uniformity means that things belonging to the
same class shall be treated alike - impositions, DUE PROCESS
privileges conferred, limitation imposed. Uniform The due process clause prohibits the taking of
requires that persons, corporations, associations property, deprivation of property without due
similarly situated must be taxed similarly. So, the process of law.
important word there is “similarly situated” to
make it allowed. Dimaampao: So here, in taxation, the government
is in effect taking your money. That’s why due
PROGRESSIVE SYSTEM OF TAXATION process must be observed. Can you think of a case
Let’s go to this principle that the Congress shall wherein the Supreme Court held that a tax law is
evolve a progressive system of taxation. not valid or unconstitutional because it violated the
due process of law? Relate this to tax remedies. If
Q: What do you mean by this constitutional you fail to pay your tax, the government will resort
provision? to these remedies- distraint of personal property,
A: It means that direct taxes are to be preferred and levy of real property, tax lien. These are taking of
indirect taxes, as much as possible, should be property. But these could only be done with due
minimized. regard with the requirement of due process law.

Dimaampao: These are the words of the Supreme Before the government will take your property as a
Court in the ponencia of Chief Justice Enrique result of your failure to pay your tax, there has to
Fernando, which was given judicial imprimatur by be notice. That is why we have this Notice of
the Supreme Court. I will look for these words Assessment. That is mandated by due process.
which were mentioned in the recent case of
Camacho: Directive; Not judicially imposable right; In your book, I hope you have come across the case
moral incentives. of Reyes vs. Almanzor. [1] That’s a case that shows a
classic violation of due process. It is about a land in
Q: Is it a directive to Congress? Is it mandatory? Tondo, Manila that has been the subject of real
A: No. That’s why the word “shall” is misleading. property assessment. That the land was in the
The operative word there is “evolve.” nature of a residential and therefore subject to the

1 G.R. Nos. 49839-46. April 26, 1991.

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Rental Control Law. So here, the Court ruled that A: Yes. Congress can unilaterally revoke a franchise
there is a violation of due process. The assessment it granted because the provision says “subject to
of real property tax is unjust, oppressive, and amendment or repeal.”
confiscatory. It is in this case that the Supreme
Court recognized two (2) methods of making an Q: When will the revocation of tax exemption
assessment – comparable sales approach method constitute impairment of contract?
and income approach method. When the exemption is based on contract whereby
valuable consideration has been given. (Casanova
So, when a local government unit will make an ruling).
assessment, it must be governed by this. It must
observe either comparable sales approach method In the case of Tolentino et al. vs. Secretary of
and income approach method. It turned out that Finance, it was an imposition of Value Added Tax
the real property tax exceeded the income derived on the sale of real property. At the time of the
from the lease of the property, that’s why it is passage of that Act, VAT, which imposes VAT on the
unjust, oppressive and confiscatory. So, if the sale of real property, there were contracts executed
property is leased, income is derived therefrom, for the sale of real estate. The parties argued it is a
this jurisprudence tells us that if the real property violation of non-impairment. Is there a violation?
tax is more than the income derived from the lease No. There can only be a violation when it involves
of the property, is unjust, oppressive and revocation of tax exemption based on contract
confiscatory and is a violation of the due process of whereby valuable consideration has been given.
law. That’s the settled jurisprudence.

This question came out in Political Law. The That where contracts were executed before the
question in taxation has something to do with passage of a law, a subsequent tax law may be filed
Value Added Tax. These are the two cases: (1) by Congress imposing tax on these certain
Tolentino et al vs. Secretary of Finance [1] and (2) contracts, that is allowed. Because it does not
American Bible Society vs. City of Manila. [2] involve exemption. So, your knowledge of
exemption comes into play.
In the latter case, the City of Manila is requiring a
religious society to pay a certain fee or amount Q: When is tax exemption irrevocable? When is it
before it could sell its religious articles. Is that revocable?
valid? A: It is revocable if it is based on franchise, equity,
public policy, economic policy, the state can
That’s an undue restraint in the exercise of unilaterally revoke that. On the other hand, tax
religious profession. exemption is irrevocable if that revocation would
result in violation of non-impairment clause- and
On the other hand, in the Tolentino case, there is no that is when it is based on contract whereby
violation. VAT can be imposed on the sale of valuable consideration is given.
religious articles. What cannot be imposed are
regulatory fees. The right is the religious freedom BILLS TO ORIGINATE FROM THE HOUSE OF
to disseminate, to sell. That could not be the subject REPRESENTIVES
of a fee because that is a regulation. You cannot We now come to the most important, and this is the
regulate that. But the imposition of sales tax or issue that will eventually be passed upon by the
VAT, that’s allowed. Court in the TRAIN Law and this I think has been
raised by the petitioners. You read again Tolentino
NON-IMPAIRMENT CLAUSE et al. vs. Secretary of Finance. You read the original,
The old case is the Tolentino case. Casanova vs 235 SCRA 630.
Court - new case. Justice Vitug asked this in the bar
exams. It has something to do with revocation of The contention of Speaker Alvarez, as you might
tax exemptions. You associate that with revocation have heard him, is that the insertion of the tax on
of tax exemption. coal is unconstitutional because it was not in the
version of the House. On the other hand, Senator
Exemption may be granted under Congressional Drilon, opines otherwise – we have the power to
franchise. Congress may grant a franchise subject amend. Is the Senate making an amendment? Is
to amendment or repeal. that tax on coal found in the original version of the
House? I’m sure the court will be guided by this.
Q: Can that be revoked unilaterally? What’s the ruling of the Court here? How did the

1 G.R. No. 115455. October 30, 1995 2 G.R. No. L-9637. April 30, 1957

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Court construe that Article VI, Sec. 24? So please


read that case and let us pre-empt the ruling of the
Court. Let us discuss this in the light of the TRAIN
Act. Is there a violation of Art. VI, Sec. 24?

--xXx—

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Q: What was the reason?


A: The reason for that, what was required by the
GENERAL PRINCIPLES
Constitution, is that the bill and not the law which
Part III
must originate exclusively in the HOR, to insist that
the bill must originate exclusively in the HOR,
would undermine the power of the Senate.
Dimaampao: We will finish General Principles
today, so that next week we will start with Tax Dimaampao: There are two reasons cited by the
Remedies. Supreme Court.

TOLENTINO V. SECRETARY OF FINANCE Q: What are they?


So we will start with a very interesting case, the A: The first is that, to insist that the revenue statute
case of Tolentino, et.al., vs. Secretary of Finance. Two must be substantially the same as that of the HOR’s
prominent senators of the Republic questioned the version would be to deprive the Senate of their power
constitutionality of the Expanded Value Added Tax not only to concur but also to propose amendments.
(VAT) Law, on the ground that the same fails to Second, this will violate the principle of co-equality
comply with the constitutional requirement under of legislative powers as it would make the House
Art. 6, Sec. 2 of the Constitution. superior to the Senate. In other words, what the
constitution simply requires is that the initiative or
Q:What was the main argument of Senators’ the filing of the Revenue and Tariff bills must
Tolentino & Salonga? originate from the HOR. (as synthesized by J.
A: In that case they are questioning the Dimaampao)
constitutionality of RA 7716 or the Expanded Value
Added Tax Law because according to them it did Q: Why does the constitution require that the
not follow the procedural requirement in the initiative of filing the revenue and tariff bill
constitution regarding the tax bills, which should originate from the House of Representatives?
originate from the House of Representatives A: Because as local representatives elected by their
(HOR). According to them the law that was passed own districts, they are expected to be more
was the consolidation of the senate and the HOR’s sensitive to the local needs and problems. The
version, thus, unconstitutional. But, according to Senate on the other hand, given that they are
the Supreme Court nationally (nationwide) elected, they are expected
to approach these problems from the national
Q: So, House Bill No. 1197 and Senate Bill 1630, perspective.
what happened to this two?
A: When House Bill No. 1197 was brought to the Dimaampao: Let us focus on the TRAIN Law. With
Senate, they made their own version and what was regard to Speaker Alvarez’ contention that the
passed was merely a consolidation of the distinct excise tax on coal was not on the version of HOR,
versions of the HOR and the Senate. answered by Senator Drilon that “ e have the power
to propose amendments.”
Q: Is there no single provision of House Bill No.
1197 has been enacted? Q: Now, whose contention is tenable?
A: There are similar provisions coming from the A: It is the Senator’s contention that is more
House. tenable. The Constitution merely requires that
Revenue and Tariff bills must originate from the
Q: Did the bicameral committee adopt majority HOR, not the statute itself.
of the provisions of House Bill No. 1197 or
majority of the provisions of Senate Bill 1630? Q: What do you mean by the word amend?
A: Yes, these two were consolidated. A: Amendment, according to Tolentino vs Secretary
of Finance, may include modification of the terms of
Q: Constitutional or not? the house bill. It may likewise include rewording,
A: It is constitutional. or a total overhaul of the provision included in the
House Bill.
Dimaampao: Reason out in accordance with the
ruling of the court. That was already asked in the Dimaampao: You focus on pages 631 (661) and
bar exams, 10 points. Ruling of the Court, RA 7716 633 (663) of Tolentino, et. al vs Secretary of
is declared constitutional, in other words it Finance. In pg. 631, there you will find the ruling of
complies with the constitutional requirement the case citing the 2 reasons. In pg. 663, there the
under Art. 6, Sec. 2 of the Constitution. Court said what the constitution simply requires is

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that the initiative or the filing of the Revenue and 2. Public; and
Tariff bills must originate from the HOR. 3. Non-stock non-profit.

TAX EXEMPTIONS Q: Which of these 3 are exempt?


Another favorite question of Bar Examiners is that A: Non-stock non-profit educational institutions.
which is found in Art. 6, Sec. 28 par. 3 of the
Constitution as discussed there in your book. Dimaampao: You must read Sec. 30 (e) of the
NIRC (National Internal Revenue Code), because it
Compare this with another constitutional likewise provides exemptions for religious and
provision Art. 14, Sec. 4, par. 3. Now, point out the charitable institutions from corporate income tax.
distinctions.
SECTION 28. (1) The rule of taxation
ART. VI, ART. XIV shall be uniform and equitable. The
Sec. 28(3) Sec. 4(3) Congress shall evolve a progressive system
Non-stock of taxation.
Religious,
and Non-
Institution Charitable, and
Profit
Exempt Educational xxx
Educational
Institutions;
Institutions;
Income Tax, (3) Charitable institutions, churches and
Taxes Custom parsonages or convents appurtenant
Property Tax;
Covered Duties, and thereto, mosques, non-profit cemeteries,
Property Tax; and all lands, buildings, and improvements,
Lands, actually, directly, and exclusively used for
Revenues
Scope Buildings, and
and Assets; religious, charitable, or educational
Improvements;
Actually, Actually, purposes shall be exempt from taxation.
Directly, and Directly, and
Criteria xxx
Exclusively Exclusively
Used; Used;
Q: Now what are the constitutional criteria?
Tax Exemptions under NIRC A: It must be actually, directly, and exclusively
used for that purpose.
Section 30. Exemptions from Tax on
Corporations. - The following Q: What is the Ruling of the Supreme Court in the
organizations shall not be taxed under this case of Lung Center v. Quezon City? [1]
Title in respect to income received by them A: The commercial establishments are not tax
as such; exempt. Only those properties, directly, &
Exclusively Used shall be exempt from tax.
xxx
Q: What was the definition of the court of the
(E) Nonstock corporation or association word exclusively?
organized and operated exclusively for A: Apart from all others; without admission of
religious, charitable, scientific, athletic, or others to participation; in a manner to exclude. [2]
cultural purposes, or for the rehabilitation
of veterans, no part of its net income or Q: What do you mean by the word “Actually”?
asset shall belong to or inures to the benefit A: Actually- opposed to seemingly, pretendedly, or
of any member, organizer, officer or any feignedly as actually engaged in farming means,
specific person; truly in fact.

xxx Q: What do you mean by the word “Directly”?


A: Directly- in a direct way without anything
Dimaampao: Sec. 30(e) of NIRC, grant exemptions intervening; not by secondary, but by direct means.
from income tax to Religious and Charitable
Institutions, but for Educational Institutions, it J. DIMAAMPAO: You answer this basic question.
depends. You always hear about these, “exemptions”.
Exemptions are granted to charitable institutions.
There are 3 kinds of educational institutions; So now, I ask you, what is the rational of granting
1. Private; these exemptions? You must have a mastery of that,

1 G.R. No. 144104. June 29, 2004 2 National Power Corp. vs. Central Board of

Assessment Appeals (G.R. No. 171470, January 30, 2009)

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because you might be asked why we grant derived from that transaction, only half of it will be
exemptions. subjected to capital gains tax.

Q: What is the rationale of granting tax So, this is a legally available tax opportunity. You
exemptions? can take advantage of that. So when are you going
A: Charitable institutions provide for free goods to sell your capital asset, within what period? Sell it
and services to the public which would otherwise after twelve months.
fall on the shoulders of the government. Thus, as a
matter of efficiency, the government forgoes taxes Dimaampao: What about a classic example of tax
which should have been spent to address public evasion? Have you read the case of CIR v. Toda, Jr.
needs, because certain private entities already [2] case? The mother of all tax evasion cases

assume a part of the burden. This is the rationale according to one author. There the Court cited the
for the tax exemption of charitable institutions. The elements of Tax evasion, what are the elements? I
loss of taxes by the government is compensated by must pressure you to memorize this.
its relief from doing public works which would
have been funded from the appropriations from Q: What are the elements of tax evasion?
the Treasury. A: Tax evasion connotes three factors;
1. The end to be achieved i.e. the payment of
Q: So, what are the three reasons for the grant of less than that known by the taxpayer to be
exemptions? legally due, or the non-payment of tax
A: The reasons for the grant of tax exemptions are; when it is shown that tax is due;
1. They perform ministrant functions that 2. An accompanying state of mind which is
would have done by the government; described as being “evil”, in “bad faith”,
2. In exchange for those taxes that have been “willful”, or “deliberate and not
forgone, are the services that these accidental”;
charitable institutions render; 3. A course of action or failure of action which
3. The loss of taxes is compensated by the is unlawful;
relief it gives to the government to
perform certain acts that may require Dimaampao: Have you heard of estate planning
appropriation from the Treasury; scheme? Did I not mention the case of Delcar Trade
vs IAC[3] ? Read that, I might ask you that in your
TAX AVOIDANCE AND TAX EVASION exam.
Now, let’s go to tax evasion.
Q: What is estate planning? Please memorize
Q: In 1998 Bar Exam, it asked, what is the that.
distinction between tax avoidance and tax A: The preparation of the management of the
evasion? person’s estate through wills, trust, insurance
A: Tax Evasion (Tax Dodging) - Willful act to defeat policies, and other arrangements designed to
or circumvent the law in order to illegally reduce reduce administration costs and estate tax
one’s tax liability. liabilities.

Tax Avoidance (Tax Minimization) - It is the act of Q: If a person fails to pay tax, will he be liable for
taking advantage of legally available tax tax evasion? Mere understatement of income,
opportunities in order to minimize one’s tax will that amount to tax evasion?
liability. A: No, there has to be fraud! That is the defense of
a taxpayer, e.g. honest mistake.
Dimaampao: Can you give an example of tax
avoidance relative to income tax? Okay, I will give Dimaampao: I mentioned in my example tax
you an example. When you sell capital assets, avoidance with regard to sale of capital asset.
personal property. Apply this holding period rule.
Holding period rule, Sec. 39 (b) [1] of the National Q: What is another form of tax avoidance? When
Internal Revenue Code. When you sell capital asset, you deposit your money in the bank, that would
this is what you should do, so that, should gain be earn interest income, hence it will be subject to
20% final tax. Now, how do you minimize it?

1 (B) Percentage Taken into Account - In the case of a held for not more than twelve (12) months; and (2)Fifty percent
taxpayer, other than a corporation, only the following (50%) if the capital asset has been held for more than twelve
percentages of the gain or loss recognized upon the sale or (12) months;
exchange of a capital asset shall be taken into account in 2 G.R. No. 147188. September 14, 2004

computing net capital gain, net capital loss, and net income: 3 159 SCRA 349

(1)One hundred percent (100%) if the capital asset has been

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A: Through Long Term deposits. The term of which


is 5 years are exempt from tax. [1] Q: What are its elements?
A: The elements of International Juridical Double
Dimaampao: Double Taxation was asked in the Taxation are;
last Bar Exam as we predicted. That’s a favorite bar 1. There are two or more states;
question. There are two kinds of Double Taxation. 2. There is one and the same taxpayer;
3. The same subject matter is taxed;
Q: What are the two kinds of double taxation? 4. The same period; [3]
A: Direct double taxation and indirect double
taxation. Q: what are the ways enunciated by this case to
eliminate/minimize double taxation?
Q: how do you distinguish one from the other? A: In order to eliminate double taxation, a tax
A: There is direct double taxation when the same treaty may be entered into, resorting to two
property is taxed twice when it should only be tax methods;
once, and both taxes are imposed; 1. Tax Exemption Method;
1. On the same property or subject matter; 2. Tax Credit Method;
2. For the same purpose;
3. By the same taxing authority; Exemption Method
4. Within the same taxing jurisdiction; The income or capital which is taxable in the state
5. During the same taxing period; and of source or situs is exempted in the state of
6. Must be of the same kind/character of tax; residence, although in some instances it may be
taken into account in determining the rate of tax
There is indirect taxation if among the elements of applicable to the taxpayer’s remaining income or
direct double taxation, one of them is absent. capital.

Q: Which of the kinds double taxation is The focus is on the income or capital itself. It
prohibited? eliminates double taxation.
A: Direct double Taxation.
Credit Method
Q: Why is direct double taxation prohibited? The tax paid or levied in the state of source is
A: Direct double taxation is prohibited because it credited against the tax levied in the state o
would amount to confiscation of property without residence.
due process of law.
The focus is upon the tax. It only minimizes double
Dimaampao: Another probable bar question is taxation.
International Juridical Double Taxation as
enunciated in CIR v S. C. Johnson & Sons. [2] Dimaampao: Think of Manny Pacquiao, for you to
understand this tax credit method. He earns
Q: What do you understand by that? income from the US, he also earns income here. He
A: International Juridical Double Taxation refers to is taxed in both jurisdictions; thus he is claiming the
the imposition of comparable taxes in two or more taxes he paid in the US as a deduction from his tax
states on the same taxpayer in respect of the same liability in the Phils. It’s a classical definition of that.
subject matter and for incidental periods. Again there is that double taxation, but to minimize
its effect there is that tax credit. So, it does not
Double taxation usually takes place when a person eliminate double taxation here, it only minimizes.
is resident of a contracting state and derives
income from, or owns capital in, the other There is a case I mentioned in your book, which
contracting state and both states impose tax on that involves double taxation. It’s about Ericsson
income or capital. Telecommunications vs. City of Pasig. You mark
that case, it’s a possible bar question. It’s a classic
Q: Is that an example of direct or indirect double case of direct double taxation. It boils down to the
taxation? tax base.
A: This is an example of indirect double taxation
because the tax is imposed by different jurisdiction Q: What is that case all about? What must be the
and taxing authority. tax base?

1 Section 24(B) of NIRC.


2 G.R. No. 127105. June 25, 1999.
3 Caveat: This is supplemented only by me according

to the definition given by the Supreme Court.

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A: The imposition of local business tax based on 2. Identity of property;


gross revenue will inevitably result in the 3. The same property is taxed;
constitutionally proscribed double taxation – 4. It was previously taxed;
taxing the same person twice by the same 5. No previous vanishing deduction;
jurisdiction for the same thing- inasmuch as
petitioner’s gross revenue or income for a taxable IMPRESCRIPTIBILITY OF TAXES
year will definitely include its gross receipts As a general rule, taxes are imprescriptible as they
already reported during the previous year and for are the life blood of the government. However, tax
which local business tax has already been paid. statutes may provide for statute of limitations.

Dimaampao: Sec. 143 of RA 7160 provides that Dimaampao: You must bear in mind that there are
the tax base for local business tax should be gross four major tax statutes, namely;
sales or gross receipts, not gross revenue. Gross 1. National Internal Revenue Code, as
Sales are derived from the sale of goods and amended by the TRAIN Act; [1]
properties, on the other hand, gross receipts are 2. Local Government Code; [2]
derived from sale of services. 3. Real Property Taxation; [3]
4. Customs Modernization and Tariffs Act; [4]
Q: So, with that, how will that amount to double
taxation? Which is broader, gross sales or gross Q: What is the general rule?
revenue? A: As a general rule, taxes are imprescriptible as
A: Gross revenue, because it covers both gross sales they are the life blood of the government. However,
and gross receipts. So that, when the local tax statutes may provide for statute of limitations.
government of Pasig prescribed it as the tax base,
that compounded the tax because a portion of it has Q: What are the period for the statute of
already been paid in the previous year. That is the limitations?
simplification of the ruling. A: Under the NIRC – the statute of limitation for
assessment of tax if a return is filed is within three
Q: In case of a building can it be taxed twice? (3) years from the last day prescribed by law for
A: YES. the filing of the return or if filed after the last day,
within three (3) years from the date of actual filing.
Q: What is the tax that is imposed by the local If no return is filed or the return filed is false or
and national government? fraudulent, the period to assess is within ten (10)
A: Real Property tax for the local government and years from the discovery of the omission, fraud, or
income tax imposed by the National Government falsity.
for the lease of the building because rent Income is
subject to income tax. Any internal revenue tax which has been assessed
within the period of limitation as prescribed in
Q: In estate tax, what is that form of or paragraph (a) of Section 22 may be collected by
method/device which may minimize the effect of distraint or levy or by proceeding in court within
double taxation? five (5) years following the assessment of the tax.
A: Vanishing deduction.
Under the tariff and Customs Code – it does not
Dimaampao: Do you recall there is double taxation express any general statute of limitations; it
there? This property has been taxed in the previous provides, however, that “when articles have been
decedent, and when its transferred it was taxed in entered and passed free of duty of final
the present decedent.Vanishing deduction adjustments of duties made, with subsequent
presupposes double taxation. Because the same delivery, such entry and passage free of duty or
property forms part of the two estate, hence it is settlements of duties will after the expiration of
taxed twice. The purpose of double taxation is to three (3) years from the date of the final payment
reduce, minimize, lessen double taxation. of duties, in the absence of fraud or protest or
compliance audit pursuant to the provision of this
Q: What are its elements? Code, be final and conclusive upon all parties,
A: Its elements are as follows; unless the liquidation of the import entry was
1. Death of the decedent occurring within 5 merely tentative. [5]
years from the transfer of the property
through succession;

1 RA 10963. 4 RA 10863.
2 Book II Title 1, RA 7160. 5 Sec 480, R.A. 10863.
3 Book II Title 2, RA 7160

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Local Government Code - Local taxes, fees, or application will impose harsh and oppressive tax
charges shall be assessed within five (5) years from or would amount to denial of due process.
the date they became due. In case of fraud or intent
to evade the payment of taxes, fees, or charges, the That is the time when you will disregard the
same may be assessed within ten (10) years from retroactive application of tax.
discovery of the fraud or intent to evade payment.
They shall also be collected either by TAX PAYER’S SUIT
administrative or judicial action within five (5) There have been rulings in taxpayer’s suit.
years from date of assessment. [1]
i. Local taxes, fees, or charges may be Q: What are the two indispensable requisites of
collected within five (5) years from the taxpayer’s suit as held in Gonzales vs Marcos [4]?
date of assessment by administrative A: The requisites of taxpayer’s suit under Gonzales
or judicial action. No such action shall vs Marcos are;
be instituted after the expiration of said 1. Illegal or unlawful disbursement of public
period. [2] funds;
ii. The basic real property tax and any 2. The public funds must be derived from
other tax levied under this Title shall be taxes;
collected within five (5) years from the
date they become due. No action for the Dimaampao: Did I not mention that the coverage
collection of the tax, whether of your Bar Exam includes the distinction of
administrative or judicial, shall be taxpayers’ suit and citizens suit? What do you mean
instituted after the expiration of such by a citizen’s suit? You discuss that under the
period. In case of fraud or intent to Constitution. Did I not ask you to research on that?
evade payment of the tax, such action Its discussed in David vs Arroyo. Including the
may be instituted for the collection of doctrine of transcendental importance. This
the same within ten (10) years from the doctrine is always discussed in all these landmark
discovery of such fraud or intent to cases. It’s there in the case of 489 SCRA 160.
evade payment. [3]
Q: What do you mean by a citizen’s suit.
Dimaampao: You memorize those periods! A: In citizen’s suit the petitioner is just an
instrument of public concern.
Q: When do you apply the general rule that taxes
are imprescriptible? Dimaampao: There is a public concern there, it’s
A: Taxes as a rule are imprescriptible for those just that it don’t involve disbursement of public
which are not covered by any statute of limitations! funds.

Q: What is that tax? Q: If you question this TRAIN Law, what will you
A: Improperly Accumulated Earnings Tax. file, a taxpayer suit or a citizen suit?
A: A citizen’s suit because there is a public concern
Dimaampao: You cannot compel corporations to which may affect the people. It involves the general
report this. In effect its imprescriptible. welfare of the people.

Q: Now when do you apply or consider that Taxes Dimaampao: What about this doctrine of
are imprescriptible? transcendental importance? There are tax cases
A: If the law is silent. which involves matters of transcendental
importance. Its an exception of the requirement of
Dimaampao: Yes! If the law is silent, if it did not locus standi.
provide for any limitations! Thus, you cannot apply
this rule to those 4 kinds of tax since the law In making this one of the coverage, it only pertains
provides for prescriptive periods. to tax cases.

NATURE AND PROSEPCTIVITY OF TAX LAWS So locus standi may be relaxed when a cases has
As a rule tax laws apply prospectively, except when transcendental importance. So, you need not prove
it provides for its retroactive application. this so called locus standi.

Exception to the exception as held in Republic vs Q: does the doctrine of locus standii this apply to
Oasan Vda. De Fernandez, is when its retroactive the TRAIN Act?

1 Sec. 194, Local Government Code. 3 Sec. 270, Local Government Code.
2 Sec. 194, Local Government Code. 4 G.R. No. L-31685. July 31, 1975.

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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)

A: Yes, it applies to the TRAIN Act. Can you think of


other tax cases that are of transcendental
importance, that’s why that doctrine is now
included in the coverage? E-Vat Law RA 7716.

--xXx--

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2. Collection;

TAX REMEDIES
In the bar examination, this came out;
PART I
Q: What is the difference between assessment
and collection?
Dimaampao: There are remedies that may be A: Assessment is the written notice and demand to
availed of by the government. There are remedies the taxpayer of his due tax liability. Collection is the
that may be resorted to by the taxpayer. enforcement of the assessment.

Q: What are the remedies of the government? Q: Which comes first, assessment or collection?
A: These are: A: Assessment precedes collection except when the
1. Compromise; unpaid tax is a tax due per return as in the case of a
2. Enforcement of a tax lien; self-assessed income tax under the pay-as-you-file
3. Forfeiture; system in which case collection may be instituted
4. Distraint of personal property; without need of assessment.
5. Levy of real property;
6. Civil action; Q: Is assessment a condition sine qua non to
7. Criminal action; collection insofar as the NIRC is concerned?
8. Civil penalties; A: NO. Sections 203 and 222 of the NIRC do not
require prior assessment before collection may be
Q: What is the purpose of the remedies insofar as made. Therefore, collection may be made with or
the government is concerned? without prior assessment.
A: These remedies available to the government are
designed to ensure the collection of taxes. In Q: What is meant by assessment?
resorting to these remedies, the government must A: An assessment contains not only a computation
observe/comply with the legal parameters that are of tax liabilities, but also a demand for payment
set forth in the tax laws. within a prescribed period. It also signals the time
when penalties and interests begin to accrue
Q: On the other hand, what is the underlying against the taxpayer. To enable the taxpayer to
purpose of the remedies that may be resorted to determine his remedies thereon, due process
by the taxpayer? requires that it must be served on and received by
A: The purpose of these taxpayer’s remedies is to the taxpayer. [55]
safeguard the interests of the taxpayers against
unreasonable or arbitrary assessment, collection Dimaampao: Adamson v. Court of Appeals [56] is the
or investigation. authoritative definition. You memorize that.

Dimaampao: These remedies are either Q: What is meant by assessment under the NIRC?
administrative or judicial. A: It is a written notice and demand made by the
BIR on a taxpayer for the settlement of due tax
Q: What is the difference between these liability that is set and fixed within a prescribed
administrative and judicial remedies? period.
A: Administrative remedies are those that do not
require judicial proceedings, whereas judicial Dimaampao: This is a defective definition.
remedies are those that require /necessitate
/warrant judicial actions or proceedings. Q: What are the requisites of a valid assessment
under the NIRC?
Dimaampao: Do not use the word “exercise.” We A: The requisites of a valid assessment under the
are not talking about power. Use the words NIRC are as follows:
“resorted to,” “availed of” because these are 1. It must be a written notice and demand;
remedies. 2. It must state the due tax liability of a
taxpayer;
ASPECTS OF TAXATION 3. The taxpayer’s tax liability must be final;
There are two aspects of taxation; 4. It must state the law and the facts upon
1. Assessment; and which it is based. [57]

55 Adamson v. Court of Appeals, 588 SCRA 27


56 588 SCRA 27.
57 Section 228, NIRC; Commissioner v. Reyes (G.R. No.

159694. January 27, 2006)

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5. It must be served on and duly received by
the taxpayer; [58] Q: What are the requisites of a valid assessment
for purposes of customs duties?
Example; A: The requisites are as follows;
The BIR wrote the taxpayer allowing him to 1. It must contain the final computation and
counter or present his side, or asking him if the ascertainment of duties on imported
assessment is to be his final tax liability. merchandise;
2. It must be based on official reports as to
Q: Will that constitute valid assessment? the quantity, character, and value of the
A: NO. It does not contain the taxpayer’s final tax imported merchandise;
liability. 3. It must set forth/contain the collector’s
own finding as to the applicable rate of
Example; duty.
An affidavit executed by a revenue officer or agent
setting forth the final tax liability of the taxpayer. Methods of Assessment
Dimaampao: In your book, I mentioned methods
Q: Will that qualify as assessment? that may be used by the BIR to make an
A: No, because there is no written notice and assessment.
demand. It is just an affidavit.
Q: What are these methods?
Q: If there is a violation of the 4th or the 5th The methods of assessment are:
requisite, what is the effect on the assessment? 1. Networth Method of Investigation; [61]
A: The assessment is void ab initio because it is a 2. Presumed gross sales or receipts method;
violation of due process. 3. Expenditures method; [62]

Dimaampao: There must be proof of receipt by the BEST EVIDENCE OBTAINABLE


taxpayer of the assessment. The networth method of investigation finds
support in the Best Evidence Obtainable Rule. It is a
Q: Who has the burden of proof? different concept in Remedial Law.
A: It is the BIR who must prove that the assessment
is duly received by the taxpayer. This is an Q: What do you mean by best evidence
exception to the presumption of regularity in the obtainable?
performance of official functions. A: This includes corporate and accounting records
of the taxpayer who is the subject of the assessment
Q: Can the BIR invoke the presumption of process; the accounting records of other taxpayers
regularity in the performance of official engaged in the same line of business, including
functions to discharge the burden of proof? their gross profit and net profit sales; data, record,
A: NO. This is an exception to the presumption. paper, document or any evidence gathered by
internal revenue officers from other taxpayers who
Q: What is assessment for purposes of real had personal transactions or from whom the
property taxation? subject taxpayer received any income; and record,
A: Assessment for purposes of real property data, document and information secured from
taxation is the act or process of determining the government offices or agencies, such as the SEC, the
value of a property, or proportion thereof subject BSP, the BOC and the TCC.
to tax, including the discovery, listing,
classification, and appraisal of properties. [59] Q: What are the four instances wherein the BIR
may resort to this best evidence obtainable rule?
Q: What is assessment for purposes of customs A: These are;
duties? 1. When a report required by law as a basis
A: Assessment for purposes of customs duties for the assessment of any national internal
refers to the final computation and ascertainment revenue tax shall not be forthcoming
by the collector of duties on imported merchandise within the time fixed by laws or rules and
based on official reports as to the quantity, regulations;
character, and value thereof, and the collector’s 2. When there is reason to believe that any
own finding as to the applicable rate of duty. [60] such report is false;

Commissioner v. Pascor (G.R. No. 128315. June 29, 1999)


58 61 Section 43 of the NIRC.
Section 199(f), Local Government Code.
59 62 Collector v. Jamir, 4 SCRA 718.
60 Pilipinas Shell Petroleum Corporation v. Customs

Commissioner, 589 SCRA 574

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3. When there is reason to believe that any declared income therefor. If the amount spent is
such report is incomplete; more than the amount earned for the same year,
4. When there is reason to believe that any the excess is the unreported income.
such report is erroneous; [63]
PRESCRIPTIVE PERIODS
1. Can you strictly apply the hearsay Sections 203, 222 and 223 of the NIRC provide for
evidence rule in tax cases? No. Hearsay is prescriptive periods. This clearly shows that
admissible in tax cases because other sources internal revenue taxes are prescriptible. Let us
may include information or data from third discuss in this regard these three related
persons. provisions.

Dimaampao: Read Campbell v. Guetersloh and Q: Does Section 203 apply to assessment and
Kenny v. Commissioner, as cited in CIR v. Hantex collection?
Trading Co., Inc. [64] A: YES. It is in the law. With due respect to the BIR,
it not only applies to assessment, but also
Q: Can mere photocopies of records/documents collection.
constitute best evidence obtainable?
A: NO. They have no probative weight if offered as Q: When do you reckon the three-year period?
proof of the contents thereof. [65] A: It is reckoned from the last day prescribed by
law for the filing of the return or from the day the
Dimaampao: Best evidence obtainable allows the return was filed.
BIR to use the networth investigation method.
Q: In the case of individual taxpayers, when will
Q: How do you apply this method? be the deadline for filing the return?
A: The steps are as follows; A: In case of individual taxpayers, the deadline is
Step 1: Get the difference of networth end April 15 of the applicable year.
and networth beginning.
Step 2: Add the non-deductible expenses Q: What about the corporate taxpayers?
which understated the income. A: In case of corporate taxpayers, the tax return is
Step 3: Deduct the exclusions which filed quarterly. If it has adopted the calendar year
overstated the income. period, the deadline for filing the final adjusted
Step 4: Compare the total amount obtained return is April 15. If it has adopted the fiscal year
with the taxpayer’s taxable income reported in the period, the deadline is the 15th day of the fourth
return. If there is discrepancy between the two, this month following the close of the fiscal year. [67]
will be the subject of assessment.
Q: If the return has been amended, when do you
Q: When is it proper for the BIR to fix the commence/reckon the three-year period?
presumed gross sales or receipts? A: It depends. If the amendment is substantial, the
A: It is resorted to in the following cases; three-year period will be reckoned from the filing
1. When it is found that a person has failed to of the substantially amended return. Otherwise,
issue receipts and invoices in violation of the period will be reckoned from the date of the
the requirements of Sections 113 and 237 original filing.
of this Code; or
2. When there is reason to believe that the Q: What is the distinction between Section 203
books of accounts or other records do not and Section 222?
correctly reflect the declarations made or A: In Section 203, the return is neither false nor
to be made in a return required to be filed fraudulent. Section 222, on the other hand,
under the provisions of this Code. [66] contemplates three situations *triple F*: when a
false or fraudulent return is filed, or when there is
Dimaampao: Collector v. Jamir discusses the other failure or omission to file a return.
method of assessment: the expenditures method.
Q: How do you apply the five-year period in
Q: How does it apply? Section 222?
A: It is applied by deducting the aggregate yearly A: The five-year period only applies to collection. It
expenditures from the declared yearly income, not is reckoned from the assessment of the tax.
the expenditures incurred each month, from the

63 Section 6(b), NIRC. 66 Section 6(c), NIRC.


64 454 SCRA 301. 67 Section 77(b) of the NIRC.
65 CIR v. Hantex Trading Co., Inc., 454 SCRA 301.

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Q: How about the ten-year period? 1. When in the opinion of the Court the
A: The ten-year period is applied to both collection by the government agency may
assessment and collection. It is reckoned from the jeopardize the interest of the Government
discovery of the falsity, fraud or omission. This or the taxpayer; and
allows collection even without prior assessment. 2. When the taxpayer is required either to
deposit the amount claimed or to file a
Grounds to suspend prescriptive period. surety bond for not more than double the
Having discussed these prescriptive periods in amount of the tax sought to be collected
Section 203 and 222, you must know the grounds with the Court.
in Section 223 to suspend the prescriptive period.
Dimaampao: Read Pacquiao v. CTA. [71] The Court
Q: What are these grounds? reiterated therein that a bond must be posted,
A: The grounds for suspension of prescriptive whether cash or surety bond.
period are as follows:
1. When the Commissioner is prohibited Q: If surety bond is posted, what is the
from making the assessment or beginning requirement of the law?
distraint or levy or a proceeding in court A: The surety bond must be posted for more than
and for sixty (60) days thereafter; double the amount of the tax sought to be collected.
2. When the taxpayer requests for a
reinvestigation which is granted by the Dimaampao: The posting of the bond in order to
Commissioner; suspend the collection of taxes admits of two
3. When the taxpayer cannot be located in exceptions.
the address given by him in the return filed
upon which a tax is being assessed or Q: What are these?
collected; A: These are;
4. When the warrant of distraint or levy is 1) If the method employed by the Collector of
duly served upon the taxpayer, his Internal Revenue in the collection of tax is
authorized representative, or a member of not sanctioned by law; [72]
his household with sufficient discretion, 2) If the collection of taxes was made after the
and no property could be located; lapse of the three-year limitation period; [73]
5. When the taxpayer is out of the
Philippines; and The prescriptive periods may be extended by
6. When there is a waiver of the Statute of agreement between the BIR and the taxpayer. Read
Limitations. [68] the landmark case on the waiver of the prescriptive
7. When the Commissioner files an answer to period: Commissioner v. Kudos Metal
taxpayer’s petition for review; [69] Corporation.[74] It discussed the requisites in
Revenue Memorandum Order No. 2090.
Q: Who can enjoin the collection of taxes?
A: No court shall have the authority to grant an Q: What are the requisites of valid waiver of
injunction to restrain the collection of any national prescriptive period?
internal revenue tax, fee or charge imposed by this A: The requisites of a valid waiver of prescriptive
Code. [70] period are as follows;
1. An agreement must be reached /made
Dimaampao: The “court” referred to in the “No before the expiration of the prescriptive
Injunction Rule” is limited to “regular courts” only. period;
Republic Act No. 9282, in Section 9, para. 4 thereof, 2. It must be in writing;
confers upon the Court of Tax Appeals the 3. It must be signed by the BIR authorized
authority to enjoin/suspend the collection of taxes representative and the taxpayer;
under the circumstances stated therein. 4. It must be approved by the BIR;
5. If the taxpayer is a corporation, the Board
Q: What are the grounds upon which the CTA must approve the waiver.
may restraint/enjoin the collection of taxes?
A: Section 9, para. 4 of R.A. No. 9282 provides for Dimaampao: There are five grounds for
the following grounds; suspension of the prescriptive period under

68Not found in Section 223. 73 Collector of Internal Revenue v. Zulueta, G.R. No. L-8840,
69Fernandez Hermanos v. Commissioner, 29 SCRA 552. February 8, 1957.
70 Section 218, NIRC.
74 620 SCRA 232.
71 789 SCRA 19.
72 Collector of Internal Revenue v. Avelino, G.R. No. L-

14847. September 19, 1961

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Section 223. Another ground is a judicial ground 2. Jeopardy assessment.
the waiver of prescriptive period.
Read the other seven cases of doubtful validity in
Q: What is the other ground for suspension of the book. The other seven cases are;
prescriptive period? 1. Assessment appearing to be arbitrary or
A: The judicial ground for suspension of based on presumptions;
prescriptive period is the filing of Answer to 2. Failure of taxpayer to file protest on
taxpayer’s petition for review. [75] account of alleged failure to receive notice
of assessment or preliminary assessment;
COMPROMISE 3. Failure of taxpayer to file request for
Let us now discuss one of the most important reinvestigation or reconsideration within
topics - compromise. 30 days from receipt of final assessment
notice;
Dimaampao: The BIR is authorized to compromise 4. Failure of taxpayer to elevate to CTA an
internal revenue tax cases. adverse decision of the Commissioner or
his representative within 30 days from
Q: What are the grounds upon which the BIR may receipt thereof;
compromise an internal revenue tax? 5. Assessment issued on or after January 1,
A: The grounds as stated in Section 204 of the NIRC 1998, where demand allegedly failed to
are: comply with the formalities of the Tax
2. The existence of doubtful validity of the Code of 1997;
assessment against the taxpayer; or 6. Assessment issued within the extended
3. The financial incapacity of the taxpayer to prescriptive period where the waiver of
pay the assessed tax. the statute of limitations is being
questioned or at issue;
Dimaampao: There are nine doubtful validity 7. Assessment based on an issue decided
cases in your book. Note that assessment made against the Bureau, but for which the SC
based on the best evidence obtainable is one of has not decided upon with finality
them.
Q: What are the obvious grounds under the cases
Q: Why is it a doubtful validity case? Can you of the taxpayer’s financial incapacity?
explain that? A: There are five in your book. These are:
A: It falls under the doubtful validity cases because 1. When the corporation ceased operation or
the source of information or data may come from is already dissolved;
other persons. It may be hearsay. That makes it 2. hen the taxpayer is suffering from surplus
doubtful. or earnings deficit resulting in impairment
of the original capital by at least 50%;
Dimaampao: Another one asked in the Bar is 3. When the taxpayer is suffering from a
jeopardy assessment. It is another doubtful validity networth deficit;
case. 4. When the taxpayer is a compensation
income earner with no other source of
Q: What is a jeopardy assessment? income, and the family’s gross monthly
A: A jeopardy assessment is a tax assessment made compensation income does not exceed the
by an authorized Revenue Officer without the levels provided for under the revenue
benefit of complete or partial audit, in light of the regulations;
revenue officer's belief that the government’s 5. When the taxpayer has been granted by
interest will be jeopardized by delay caused by the the SEC or the competent tribunal a
taxpayer. moratorium or suspension of payments to
creditors, or otherwise declared bankrupt
Q: Whys is jeopardy assessment doubtful? or insolvent.
A: It is doubtful because there is no audit made by
the BIR. That makes it doubtful. Dimaampao: Memorize those that cannot be
compromised. Memorize those seven and apply
Dimaampao: Out of these nine cases, these two are expressio unius. It is a must that you memorize
the most important; these. Section 204 mentions only two. It is
1. Assessment based on best evidence incomplete. The other cases are found in revenue
obtainable; and regulations. It is in your book in page 198.

75 Fernandez Hermanos v. Commissioner, 29 SCRA 552

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on the fact that the taxpayer is given ample time to
Q: What are these cases that the Commissioner settle his tax liability. (5 years in case of judicial
cannot compromise? settlement of estate, 2 years in case of extrajudicial
A: These cases are as follows; settlement of estate – Section 91 of the NIRC)
1. Criminal tax fraud cases; [76]
2. Criminal violation already filed in court; Dimaampao: If you can explain that, you are better
[77] than tax authors, revenue officers, and tax lawyers.
3. Withholding tax cases; If you ask them, they can hardly explain that.
4. Delinquent accounts with duly approved
schedule of installment payments; ADMINISTRATIVE REMEDIES AVAILABLE TO
5. Final reports of reinvestigation or THE GOVERNMENT
reconsideration resulting in reduction in Let us have a brief review of these three
the original assessment, and the taxpayer administrative remedies that may be availed of the
is agreeable to such decision by signing the government;
required agreement form for the purpose; 1. Enforcement of a tax lien;
6. Final and executory judgment of a court; 2. Distraint; and
7. Estate tax cases where the ground for 3. Levy.
compromise is the financial incapacity of
the taxpayer; Dimaampao: Section 219 – Enforcement of a tax
lien. It is defined in your book.
Q: If there is fraud involved, why can we not
compromise it? Q: How is tax lien defined?
A: It is because that will open the floodgates to the A tax lien is a legal claim or charge on property,
commission of tax fraud. That is contrary to public whether real or personal, established by law as a
policy. When cases are compromised, the law or sort of security for the payment of tax obligations.
jurisprudence allows that if it is not contrary to [78]

public policy.
Q: What is the difference between tax lien and
Q: Why can we not compromise criminal cases forfeiture?
not attended by fraud if it is already filed in A: In tax lien, the excess, after satisfying the tax
court? liability, will go to the taxpayer. In forfeiture, all the
A: It is because the BIR no longer has jurisdiction. proceeds of the sale will go to the coffers of the
It is now the court which has jurisdiction, and the government. [79]
BIR can no longer interfere.
Dimaampao: The issue in CIR v. NLRC [80] involves
Q: Why can we not compromise final judgments the determination of who has the superior claim to
or final reports? the barges.
A: It is because they are already binding upon the
taxpayer. Q: Between a claim based on judgment and a
claim based on tax lien, which will prevail?
Dimaampao: Take note there is a qualification in Explain.
estate tax cases. A: The government’s claim predicated upon a tax
lien is superior to a claim based on judgment. The
Q: What does the qualification imply? reasons are as follows;
A: It is not an absolute that estate tax cases may be 1. A tax lien attaches upon all property and
compromised. This means that estate tax cases rights to property of the taxpayer in case
where the ground for compromise is the financial he fails to pay taxes. [81]
incapacity of the taxpayer cannot be compromised. 2. It attaches from the moment the taxpayer
fails to pay the tax. Thus, there is nothing
Q: Why can we not compromise estate tax cases left to be attached by the sheriff for a claim
where the request for compromise is based on based on judgment because the
financial incapacity of the taxpayer? government has acquired tax lien on the
A: When there is a case filed with the property.
Commissioner, all issues are passed upon. That is
why that can no longer be raised. This rule is based

76 Section 204. 80 238 SCRA 42.


77 Ibid. 81 Section 219
78 Hong Kong and Shanghai Banking Corp. v. Rafferty (G.R.

No. 13188. November 15, 1918)


79 BPI v. Trinidad, (G.R. No. L-16014. October 4, 1921)

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Q: Can LGUs avail of these administrative A: Yes as provided under Section 175 of the Local
remedies? Government Code.
A: Yes, as provided for by Section 173 of the Local
Government Code. Section 175. Distraint of Personal
Property. - The remedy by distraint shall
Section 173. Local Government's Lien. - proceed as follows:
Local taxes, fees, charges and other
revenues constitute a lien, superior to all (a) Seizure - Upon failure of the person
liens, charges or encumbrances in favor of owing any local tax, fee, or charge to pay the
any person, enforceable by appropriate same at the time required, the local
administrative or judicial action, not only treasurer or his deputy may, upon written
upon any property or rights therein which notice, seize or confiscate any personal
may be subject to the lien but also upon property belonging to that person or any
property used in business, occupation, personal property subject to the lien in
practice of profession or calling, or exercise sufficient quantity to satisfy the tax, fee, or
of privilege with respect to which the lien is charge in question, together with any
imposed. The lien may only be extinguished increment thereto incident to delinquency
upon full payment of the delinquent local and the expenses of seizure.
taxes fees and charges including related
surcharges and interest. Q: Is distraint available under real property
taxation?
Q: Can LGUs resort to enforcement of tax lien? A: Yes, under Section 254 of the LGC. However, it is
A: Yes as provided by Section 257 of the Local an erroneous provision because the subject of
Government Code. distraint is personal property.

Section 257. Local Governments Lien. - Section 254. Notice of Delinquency in the
The basic real property tax and any other Payment of the Real Property Tax. -
tax levied under this Title constitutes a lien
on the property subject to tax, superior to xxx
all liens, charges or encumbrances in favor
of any person, irrespective of the owner or (b) Such notice shall specify the date upon
possessor thereof, enforceable by which the tax became delinquent and shall
administrative or judicial action, and may state that personal property may be
only be extinguished upon payment of the distrained to effect payment.
tax and the related interests and expenses.
Q: Is distraint available under the Old Customs
Q: May the Collector of Customs avail of the Code?
enforcement of tax lien? A: No. There is no such remedy in this law to that
A: Under the Customs and Tariff Modernization Act effect.
(R.A. No. 10863), the answer is NO. However, under
the Old Customs Code, the answer is yes. Q: Is distraint available under the CMTA?
A: Yes as provided by Section 1134(a)
Q: What is the subject of distraint?
A: The subject of distraint is personal property, Section 1134. Summary Remedies.—
such as goods, chattels, or effects of the taxpayer, as
well as stocks and other securities, debts, credits, (A) Distraint of Personal
bank accounts, and interest in and rights to Property.— Upon failure of the person
personal property. owing any delinquent duty, tax and other
charges to pay at the time required, the
Q: What is the subject of levy? Commissioner shall seize and distraint the
A: On the other hand, the subject of levy is real goods, chattels or effects, and the personal
property or any interest therein. property, including stocks and other
securities, debts, credits, hank accounts, and
Dimaampao: It is clear under Section 207(a) that interests in and rights to personal property
the BIR is allowed to resort to distraint. of such persons, in sufficient quantity to
satisfy the duty, tax or other charge and the
Q: Is distraint an available remedy under the expenses of the distraint and the cost of the
LGC? subsequent sale.

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The officer serving the warrant of distraint
shall make or cause to be made an account Section 176. Levy on Real Property. -
of the goods, chattels, effects, or other After the expiration of the time required to
personal property distrained, a copy of pay the delinquent tax, fee, or charge, real
which, signed by the said officer, shall he left property may be levied on before,
either with the owner or person from whose simultaneously, or after the distraint of
possession such goods, chattels, or effects or personal property belonging to the
other personal property were taken, or at delinquent taxpayer.
the dwelling or other place of business of
such person and with someone of suitable Q: Is levy available under real property taxation?
age and discretion, to which list shall be A: Yes as provided under Section 258 of the Local
added a statement of the sum demanded Government Code.
and note of the time and place of sale.
Section 258. Levy on Real Property. -
Stocks and other securities shall be After the expiration of the time required to
distrained by serving a copy of the warrant pay the basic real property tax or any other
of distraint upon the importer and upon the tax levied under this Title, real property
president, manager, treasurer, or other subject to such tax may be levied upon
responsible officer of the corporation, through the issuance of a warrant on or
company or association, which issued the before, or simultaneously with, the
said stocks or securities. institution of the civil action for the
collection of the delinquent tax.
Debts and credits shall be distrained by
leaving with the person owing the debts or Q: Is levy available under the Old Customs Code?
having in his/her possession or under A: NO.
his/her control such credits, or with his/her
agent, a copy of the warrant of distraint. Q: Is levy available under the CMTA?
The warrant of distraint shall be sufficient A: Yes as provided under Section 1134(b) of the
authority to the person owing the debts or CMTA
having in his possession or under his control
any credits belonging to the importer to pay Section 1134. Summary Remedies.—
to the Commissioner the amount of such
debts of credits. xxx

Bank accounts shall be garnished by serving (B) Levy on Real Property.— After the
a warrant of garnishment upon the expiration of the period within which to pay
importer and upon the president, manager, the duty, tax and other charges as
treasurer, or other responsible officer of the prescribed in this section, real property may
bank Upon the receipt of the warrant of be levied upon, before, simultaneously, or
garnishment, the bank shall turn over to the after the distraint of personal property
Commissioner so much of the bank accounts belonging to the importer. To this end, the
as may be sufficient to satisfy the claim of Commissioner or the duly authorized
the government. representative shall prepare a duly
authenticated certificate showing the name
A report on the distraint shall, within ten of the importer and the amounts of the duty
(10) days from receipt of the warrant, be and tax and penalty due. The certificate
submitted by the Commissioner to the shall operate with the force of a legal
Secretary of Finance: Provided, That the execution throughout the Philippines.
Commissioner shall have the power to lift
such order of distraint subject to the rules The levy shall be effected by writing upon
and regulations promulgated pursuant to the certificate a description of the property
this Act. on which levy is made. At the same time,
written notice of the levy shall be mailed to
Dimaampao: It is clear under Section 207(b) that or served upon the register of deeds of the
the BIR is allowed to resort to levy. province or city where the property is
located and upon the importer, or if the
Q: Is levy available under the LGC? latter is not in the Philippines, upon the
A: Yes as provided by Section 176 of the Local agent or the manager of the business from
Government Code.

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which the liability arose, or if there be none, Q: In levy, is notice of sale still required to be
to the occupant of the property in question. served on the delinquent taxpayer?
A: Yes, because the taxpayer cannot exercise his
In case the warrant of levy on real property right under Section 213 to prevent the sale if he is
is not issued before or simultaneously with not informed of such sale. What you learned that
the warrant of distraint on personal publication is a notice to the whole world does not
property, and the personal property of the apply here because of that provision.
importer is not sufficient to satisfy the duty
and tax due, the Commissioner or a duly SEC. 213. Advertisement and Sale. –
authorized representative shall, within xxx
thirty (30) days after execution of the
distraint, proceed with the levy on the real At any time before the day fixed for the sale,
property of the importer. the taxpayer may discontinue all
proceedings by paying the taxes, penalties
Within ten (10) days after receipt of the and interest.
warrant, a report on any levy shall be
submitted by the levying officer to the Assignment:
Commissioner; Provided, That the Cases which will answer this bar question: what
Commissioner may lift such warrants of levy may constitute decisions of the BIR appealable to
issued, subject to the rules and regulations the CTA?
promulgated pursuant to this Act. 1. Republic v. Lim Tian Teng Sons, 16 SCRA 584
2. Surigao Electric v. CA, 57 SCRA 523
Distraint v. Levy 3. Commissioner v. Ayala Securities
DISTRAINT LEVY Corporation, 70 SCRA 204
Involves Real Involves Personal 4. Yabes v. Flojo, 115 SCRA 278
Property; Property; 5. Commissioner v. Advertising Associates, 133
May be Actual or No such thing as SCRA 765
Constructive; constructive Levy;
6. Commissioner v. Algue, 158 SCRA 9
Requires posting; Requires publication;
7. Commissioner v. Union Shipping Lines, 185
SCRA 547
Q: How is constructive distraint effected?
8. Commissioner v. Isabela Cultural
A: The constructive distraint of personal property
Corporation, 361 SCRA 71
shall be effected by requiring the taxpayer or any
9. Oceanic Wireless Network, Inc. v.
person having possession or control of such
Commissioner, 477 SCRA 205
property to sign a receipt covering the property
10. Allied Banking Corporation v.
distrained and obligate himself to preserve the
Commissioner, 611 SCRA 692
same intact and unaltered and not to dispose of the
I will ask you one or two liner on the
same, in any manner whatever, without the
jurisprudential ruling of the court.
express authority of the Commissioner. [82]

--xXx--
Q: When can the BIR resort to constructive
distraint?
A: To safeguard the interest of the Government, the
Commissioner may place under constructive
distraint the property of any taxpayer:
1. When he is retiring from any business
subject to tax;
2. When he is intending to leave the
Philippines;
3. When he is intending to remove his
property therefrom or to hide or conceal
his property; or
4. When he is intending to perform any act
tending to obstruct the proceedings for
collecting the tax due or which may be due
from him. (Section 206, NIRC)

82
Section 206, NIRC.

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Q: When do you file?


TAX REMEDIES
A: Within 30 days from the date of payment of
PART II
taxes.

Preliminary Assessment
Protest under the NIRC
Q: Is preliminary assessment notice required?
Q: What must be protested? A: Yes. The sending of a Preliminary Assessment
A: The final assessment notice or final letter of Notice (PAN) to taxpayer to inform him of the
demand assessment made is but part of the due process
requirement in the issuance of a Deficiency Tax
Q: Is notice of informal conference under Rev. Assessment, the absence of which renders
Reg. 12-1999 required? nugatory any assessment by the tax authorities.
A: YES.
Q: What is the prescriptive period to respond?
Q: Is notice of informal conference under Rev. A: 15 days from receipt of PAN.
Reg. 18-2013 required?
A: NO LONGER REQUIRED. Q: When there is no response given within 15
days, what will happen?
Q: What do you file? A: The BIR will issue the Final Assessment Notice
A: Request for reinvestigation or reconsideration (FAN) or Final Letter of Demand (FLD).

Q: Where do you file your protest under Income Reinvestigation v. Reconsideration


Tax?
A: BIR. REQUEST FOR REQUEST FOR
REINVESTIGA RECONSIDERA
Q: When do you file? TION TION
A: Within 30 days from receipt of the final Newly
assessment notice or final letter of demand. Basis discovered Existing records
evidence
Protest under the Local Government Code Suspensi
(Section 195) on of
Allowed
prescript Not allowed
Q: Where do you file? (Section 228)
ive
A: Local treasurer period

Q: When do you file? Q: What is the reason why request for


A: Within 60 days from receipt of the local tax reinvestigation suspends the running of
assessment. prescriptive period?
A: If both suspend the running of prescriptive
Protest under Real Property Tax period, then an erroneous assessment may never
(Section 252) prescribe.

Q: What do you file? General rule: PAN must first be sent before FAN.
A: Payment under protest is required.
Exceptions;
Q: Where do you file?
A: Local treasurer.

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1. When the finding for any deficiency tax is


the result of mathematical error in the Q: What is the 180-day period?
computation of the tax as appearing on the A: It is the period of inaction on the part of BIR. The
face of the return; or taxpayer will have the option to either;
2. When a discrepancy has been determined 1. File a petition for review under Rule 42
between the tax withheld and the amount within 30 days after the lapse of 180-day
actually remitted by the withholding period; or
agent; or 2. Await the final decision of the
3. When a taxpayer who opted to claim a Commissioner of Internal Revenue.
refund or tax credit of excess creditable
withholding tax for a taxable period was Q: What happens if there is a decision by the
determined to have carried over and Commissioner?
automatically applied the same amount A: If there is a decision, the taxpayer may opt to;
claimed against the estimated tax 1. Appeal to the CTA within 30 days from
liabilities for the taxable quarter or receipt of the decision ;or
quarters of the succeeding taxable year; or 2. File a request for reinvestigation within 30
4. When the excise tax due on excisable days from receipt.
articles has not been paid; or
5. When the article locally purchased or Tax Refund
imported by an exempt person, such as,
but not limited to, vehicles, capital Tax refund v. Tax credit
equipment, machineries and spare parts, Tax credit is not synonymous with tax refund.
has been sold, traded or transferred to
non-exempt persons.[83] Tax refund is defined as the money that a taxpayer
overpaid and is thus returned by the taxing
Q: What is the purpose of PAN? authority.
A: To rectify the amount. The taxpayer is given
chance to explain why PAN is erroneous. Tax credit, on the other hand, is an amount
subtracted directly from one’s total tax liability.
Q: Why are there 5 exceptions?
A: The ratio decidendi is that in the 5 exceptions, Two Fold purpose of tax refund
the BIR can easily rectify the assessment. The two-fold purpose of the tax refund are as
follows;
Q: Who can issue PAN? 1. To afford the collector an opportunity to
A: BIR and its duly authorized representative correct the action of subordinate officers;
2. To notify the government that such taxes
Q: Who are the duly authorized representatives? have been questioned, and the notice
A: Regional Revenue Directors. should then be borne in mind in estimating
the revenue available for expenditure;
Q: What is the purpose of the 60-day period after
filing the administrative protest? Q: What is the prescriptive period to file a tax
A: It is required in request for reinvestigation refund under the NIRC?
where relevant supporting documents shall be A: Under Section 229, the tax refund must be filed
submitted. within 2 years from the date of the payment.

Q: Does this apply to reconsideration? Q: Is tax refund available under the Local
A: NO. Government Code?

83 Section 228, NIRC.

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A: YES under Section 196 of the Local Government


Code. Q: Is refund available under the Tariff and
customs Code?
Q: Where do you file the tax refund? A: YES.
A: The Local Treasurer.
Q: What is the prescription period?
Q: What is the Prescriptive Period? A: Prescription period under Section 193 is Within
A: 2 years from the date of payment or from the 12 months from the date of payment of duties and
time he is entitled thereto. taxes. This is a new prescriptive period.

Justice DIMAAMPAO: You don’t find that in the Justice DIMAAMPAO: So, it’s 2-2-2 except customs
NIRC. Under the NIRC sec. 229 is from the date of duties. So, its 12 months or 1 year.
payment. Here (LGC) is from the date of payment
or from the time he is entitled thereto. I am talking Q: What is the difference between 12 months and
about Sec. 196 of RA 7160 of Local Government 1year?
Taxation. A: Art. 13 of New Civil Code provides that “It shall
be understood that years are of three hundred
Q: What do you think the difference or its legal sixty-five days each”. In Administrative Code, a year
implications “from the time he is entitled is counted 12 months regardless of the number of
thereto”? the days in each month.
A: Under Sec. 229 of the NIRC, it means that the
doctrine of supervening cause or event does not The law says 12 months from the payment of duties
apply. and taxes.

Q: Does the doctrine of Supervening event apply Tax Refund under the NIRC
in the Local Government Code? So Let’s us focus on Sec. 229, we can review here a
A: YES. Due to that provision “from the time he is lot of jurisprudence. I hope you recall. I think I cited
entitled thereto.” 38 decisions of the court from page 225 to 242.
Some of them has already asked in the bar exam.
Example; With that number of cases, this serve as a notice of
For instance, local tax was paid in 2016. In 2017, you that this is the most favorite bar question next
there was finding to effect that this taxpayer was to protest.
exempt. What’s the reckoning date of the 2-year
period? 2016 or 2017? Q: What are the requisites for a tax refund under
the NIRC?
2017 is from the time he is entitled thereto. But if it A: The requisites are as follows;
were a revenue tax, you should count that from the 1. There must be a written claim for refund
date of payment. filed by the taxpayer with the
commissioner;
Q: Is tax refund available to Real property 2. The claim for refund must be a categorical
Taxation? demand for reimbursement;
A: YES. Section 253 allows refund. 3. The claim for refund must be filed within
two years from date of payment of the tax
Q: What is the Prescriptive period to claim syuch or penalty regardless of any supervening
refund? cause;
A: 2 years from the date of payment or from the
time he is entitled thereto. Therefore, the doctrine Q: What do you mean when you say “categorical
of supervening cause applies. demand”?

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A: Since you are requesting for a refund, therefore, Which one is clearly applicable to you? Because
demand for reimbursement of taxes illegally, that decision is deficient. It should have cited the
erroneously, unlawfully or excessively assessed or payment under the provision of the civil code.
collected. From there, corporate taxpayer was the one
making filing such refund.
Q: Under Section 229 of the NIRC, who shall file
such refund? Q: Now, when do you apply that the reckoning
A: It is the Tax Payer. date of 2 year period?
A: From the filing of the Final Adjustment
Bar Question. Corporate return where you read sec. 76, NIRC.
I think it was asked 5 times already. There can be payment in contemplation of law
upon the filing of final adjustment corporate
Q: may a withholding agent file a written claim return.
for refund?
A: YES. The withholding agent is not only the agent Justice DIMAAMPAO: Remember that corporate
of the government. It is also an agent of the taxpayers file their corporate income tax returns
taxpayer. As an agent of the taxpayer, the on quarterly. For instance, excessive payment or
withholding agent has two fold duties to pay the tax erroneous payment or illegal payment of the
and to file the return. So with that obligation to pay payment of the first quarterly return. So, payment
the tax, the withholding agent is technically was made there. Will you count the 2 year period
considered as taxpayer. Withholding agent has the from the first quarterly return?
legal obligation to file the return of the taxpayer to
pay the tax of the taxpayer as such withholding Justice DIMAAMPAO: There is no payment in the
agent technically considered as taxpayer. That is contemplation of the law but a partial payment. In
the jurisprudence there. partial payment, there is no payment at all under
the civil code.
In 1988, there were two conflicting decisions of the
Court, The Proctor & Gamble Case and the Wander There will only be payment when there is Integrity,
Case. In the Wander Case, Yes, but in Proctor & when there is a final payment.
Gamble Case, No. But it has been reconciled by the
Supreme Court. The prevailing jurisprudence now Q: In case of a leap year, which will prevail; the
is that the withholding agent may file a claim for tax Civil Code or the Administrative Code?
refund. A: The Administrative Code. Lex posterior derogat
prior. It means that recent law prevails over prior
That case that I cited to your book on page 225 on law. The prior law must yield to recent law
the case of Commissioner vs. TMX Sales 25 SCRA 184 otherwise. The recent law is the 1987
what asked not less than 5 times in the bar exams. Administrative Code. That is you’re your reason
That is the case explains the meaning of "date of why.
payment".
Justice DIMAAMPAO: As the case of CIR v.
Now from the date of payment, what do you mean Primetown property group, Inc., 531 SCRA 436,
by payment? What is the jurisprudence there in supposed that leap year intervene, there is a
"Date of Payment"? When there is payment in problem now because there seems to be a conflict
contemplation of law? Or recall what you learn in between the Civil Code and the 1987
civil law. That’s why civil law in the suppletory law. Administrative code. Under the Civil Code, a year
When there is payment? Do you recall the three consists of 365 days and how about the declaration
characteristics of payment? Identity of Payment, of 1 year in the 1987 Administrative Code? In Sec.
Integrity of Payment and Indivisibility of Payment. 31, Chapter 7, Book I of the Administrative Code

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provides a year is composed of 12 calendar Q: What does jurisdictional mean?


months. A: It means that you cannot appeal to the CTA
before the lapse of that.
Section 112 v. Section 229
SECTION 229 SECTION 112 Justice DIMAAMPAO: But now, the period It is no
Involves longer mandatory and jurisdictional. There is no
internal provision to appeal after the expiration of the
Revenue Tax Covers refund period. There is no provision similar to from NIRC
As to the Tax such as of Value- to the TRAIN act. With that amended provision, the
involve; Income tax Added Tax; ruling of the court is deemed abandoned that it is
other than mandatory and jurisdictional.
Value added
tax; Sec 112, of the NIRC prior to the Train Law, reads;
The running
of the 2-year xxx
period
commence to (D) Period within which Refund or Tax
run from the Credit of Input Taxes shall be Made. - In
date of The running proper cases, the Commissioner shall
payment. In of the 2-year grant a refund or issue the tax credit
the case of period runs certificate for creditable input taxes
As to the corporate from the close within one hundred twenty (120) days
Prescriptive taxpayer, the of the taxable from the date of submission of compete
Period; running of the quarter which documents in support of the
2-year period such sales application filed in accordance with
commence to were made; Subsections (A) and (B) hereof.
run from the
date of filing In case of full or partial denial of the
of the final claim for tax refund or tax credit, or the
adjustment failure on the part of the Commissioner
corporate to act on the application within the
return; period prescribed above, the taxpayer
As amended affected may, within thirty (30) days
by the TRAIN from the receipt of the decision denying
Law, within the claim or after the expiration of the
Period for There is no one hundred twenty day-period (120),
ninety (90)
the BIR to period for the appeal the decision or the unacted
days from the
render a BIR to render claim with the Court of Tax Appeals
date of
decision; a decision; (emphasis supplied)
submission of
compete
documents; xxx

Section 112 On the other hand, Section 112 of the NIRC, as


amended by the TRAIN Law read;
Q: Is the 90 day period in Section112 mandatory
and jurisdictional? xxx
A: NO. It is no longer mandatory and jurisdictional.

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(C) Period within which Refund of Input the ninety (90) day period shall be
Taxes shall be Made— In proper cases, punishable under Section 269; [84]
the Commissioner shall grant a refund
for creditable input taxes within ninety Q: What is the 30-day period under Section 112?
(90) days from the date of submission A: In case of full or partial denial of the claim for tax
of the official receipts or invoices and refund, the taxpayer affected may, within thirty
other documents in support of the (30) days from the receipt of the decision denying
application filed in accordance with the claim, appeal the decision with the Court of Tax
Subsections (A) and (B) hereof: Appeals.
Provided, That should the
Commissioner find that the grant of Q: What is the 90-day period under Section 112?
refund is not proper, the Commissioner A: In proper cases, the Commissioner shall grant a
must state in writing the legal and refund for creditable input taxes within ninety (90)
factual basis for the denial. days from the date of submission of the official
receipts or invoices and other documents in
In case of full or partial denial of the support of the application.
claim for tax refund, the taxpayer
affected may, within thirty (30) days Q: If the decision has been rendered by the BIR
from the receipt of the decision denying within the 90-day period, what is the remedy of
the claim, appeal the decision with the the taxpayer?
Court of Tax Appeals: Provided, A: The remedy is to file such petition for review on
however, That failure on the part of any the BIR’s decision on the Value Added Tax to Court
official, agent, or employee of the BIR to of Tax Appeals.
act on the application within the ninety
(90)-day period shall be punishable Requisites
under Section 269 of this Code. For claiming unutilized/excess VAT, except
transitional input vat, are as follows;
xxx 1. The taxpayer-claimant is VAT-registered;
2. The taxpayer-claimant is engaged in zero-
New Rules according to Section 112 as rated or effectively zero-rated sales;
amended by the TRAIN law; 3. There are creditable input taxes due or
1. The prescriptive period within which the paid attributable to the zero-rated or
CIR shall grant a refund for creditable effectively zero-rated sales;
input tax is ninety (90) days from the 4. The input tax has not been applied against
submission of the official receipts or the output tax;
invoices and other documents in support 5. The application and claim for refund have
of the application therefore; been filed within the prescribed period; [85]
2. In case the CIR finds the refund improper,
he must state in writing the legal and Section 229
factual basis for the denial;
3. The taxpayer aggrieved may within thirty Section 229. Recovery of Tax
(30) days from receipt of the CIR decision Erroneously or Illegally Collected. - no
denying the claim, appeal the decision suit or proceeding shall be maintained
with the Court of Tax appeals; in any court for the recovery of any
4. Any official, agent, or employee of the BIR national internal revenue tax hereafter
who fails to act on the application within alleged to have been erroneously or

84 Dimaampao, Tax Principles and Remedies, 2018, 85 CIR v. Toledo Power Company, 765 SCRA 511
p.265.

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illegally assessed or collected, or of any any supervening cause that may arise after
penalty claimed to have been collected payment.
without authority, of any sum alleged
to have been excessively or in any Justice DIMAAMPAO: The appeal of the decision
manner wrongfully collected without of the BIR for refund to the CTA must observed
authority, or of any sum alleged to have these two periods. One, it must be filed within 30
been excessively or in any manner days from the receipt of the decision and it must
wrongfully collected, until a claim for also within 2 years from the date of payment.
refund or credit has been duly filed with
the Commissioner; but such suit or Q: Is the 2 year period available in Section 112?
proceeding may be maintained, A: NO. Under Section 112, (Last Paragraph), There
whether or not such tax, penalty, or is only one period must be observed.
sum has been paid under protest or
duress. Justice DIMAAMPAO: That why in your bar, you
check the subject tax is a value added tax, income
In any case, no such suit or proceeding tax, donor’s tax or other revenue taxes.
shall be filed after the expiration of two
(2) years from the date of payment of The court construed that there is only one period
the tax or penalty regardless of any in the appeal of the decision of the BIR involving
supervening cause that may arise after refund of Value added tax. The only remedy is 30
payment: Provided, however, That the days from the receipt of such decision.
Commissioner may, even without a
written claim therefor, refund or credit Q: may the 2-year period be suspended by an
any tax, where on the face of the return intervening cause?
upon which payment was made, such A: NO. These 2-year period must be observed and
payment appears clearly to have been cannot be suspended by any supervening cause.
erroneously paid.
Q: Is there an exception to the rule?
Q: What is the 30-days period in Section 229? A: YES. In case of CIR v. Philamlife [87] and CIR v.
A: The period to appeal the BIR’s decision from the PNB, [88] the 2 year period may be suspended based
receipt of said decision, or from the lapse of the 180 on these two equitable and principle grounds;
day period for the submission of documents. [86] 1. Assurance on the part of the BIR that steps
were being taken to credit taxpayer with
Under the Rules of Court of the Tax Appeals, there the amount sought to be refunded;
is under Rule 4, it’s been there that there are two 2. An agreement or understanding with the
period that must be observed. BIR that they await the result of a pending
case involving similar issue raised in the
Q: What are these two periods? claim for refund;
A: The 30-days period and the 2 years period.
Q: Why equitable consideration?
Q: What is the 2-year period under Section 229? A: Because the assurance of the BIR is bound by the
A: The suit must be filed within 2 years from the equitable principle of estoppel.
date of payment of the tax or penalty regardless of

86 The 30-day period is under Section 228; xxx If the receipt of the said decision, or from the lapse of one hundred
protest is denied in whole or in part, or is not acted upon within eighty (180)-day period; otherwise, the decision shall become
one hundred eighty (180) days from submission of documents, final, executory and demandable.
the taxpayer adversely affected by the decision or inaction may 87 G.R. No. 105208. May 29, 1995.

appeal to the Court of Tax Appeals within thirty (30) days from 88 G.R. No. 161997 October 25, 2005

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Understand before you memorize. If you ISSUE: whether or not the assessment contained in the letter of
understood what the Supreme Court Said, that the the Collector of Internal Revenue is final and executory.

time you memorize that. HELD: YES. Said court, to our mind, committed no error. For
what is more indicative of the Collector's decision against
CASES reinvestigation than his insistence to collect the tax?

On October 15, 1957 the Collector of Internal Revenue wrote


Republic v. Lim Tan Tieng defendant that its "request for a reinvestigation will be granted
(G.R. No. L-21731. March 31, 1966) only upon compliance with General Circular No. V-258 dated
August 20, 1957, which requires as a prerequisite to the grant
FACTS: Lim Tian Teng Sons & Co., Inc., a domestic corporation of a reinvestigation the execution of a waiver of the statute of
engaged in the exportation of copra in the year 1951 and 1952. limitations". In a subsequent letter, he extended the period
The copra was weighed before shipment in the port of within which to submit the aforesaid waiver to December 31,
departure, called copra outturn, and upon arrival in the port of 1957.
destination.
In effect, the Collector of Internal Revenue placed in the hands
On March 30, 1953 Lim Tian Teng Sons & Co., Inc. filed its of the defendant the holding of a reinvestigation. However, no
income tax return for 1952 based on accrued income and such reinvestigation was made inasmuch as taxpayer failed to
expenses. Its return showed a loss of P56,109.98. It took up as submit a written waiver of the statute of limitations on or before
part of the beginning inventory for 1952 the copra outturn December 31, 1957. Such omission automatically brought about
shipped in 1951 in the sum of P95,500.00 already partially the denial of the request for reinvestigation.
collected, as part of its outstanding stock as of December 31,
1951.
Surigao Electric co. v. CTA
In the audit and examination of taxpayer's 1952 income tax G.R. No. L-25289. June 28, 1974
return, the Collector of Internal Revenue eliminated the
P95,500.00 outturn from the beginning inventory for 1952 and FACTS: The petitioner Surigao Electric Co., Inc., grantee of a
considered it as accrued income for 1951 which increased legislative electric franchise, received a warrant of distraint and
taxpayer's 1952 net income by P95,500.00 and raised the levy to enforce the collection from "Mainit Electric" of a
taxpayer's net taxable income for 1952 to P50,370.87. deficiency franchise tax plus surcharge in the total amount of
P718.59. In a letter to the Commissioner of Internal Revenue,
The Collector of Internal Revenue assessed a deficiency income the petitioner contested this warrant, stating that it did not have
a franchise in Mainit, Surigao.
tax of P10,074.00 and 50% surcharge thereon amounting to
P5,037.00.
Thereafter the Commissioner advised the petitioner to take up
the matter with the General Auditing Office. In a letter to the
On January 31, 1957 Lim Tian Teng Sons & Co., Inc. requested
Auditor General, the petitioner asked for reconsideration of the
reinvestigation of its 1952 income tax liability. The Collector of
assessment, admitting liability only for the 2% franchise tax in
Internal Revenue did not reply; instead, he referred the case to
the Solicitor General for collection by judicial action. accordance with its legislative franchise and not at the higher
rate of 5% imposed by section 259 of the National Internal
Lim Tian Teng Sons & Co., Inc. reiterated its request for Revenue Code, as amended, which latter rate the Auditor
reinvestigation. Thereupon, the Deputy Collector of Internal General used as basis in computing the petitioner's deficiency
Revenue, informed the taxpayer that its request for franchise tax.
reinvestigation would be granted provided it executed within
ten days a waiver of the statute of limitations. The controversy culminated in a revised assessment in the
amount of P11,533.53, representing the petitioner's deficiency
franchise-tax and surcharges thereon for the period from April
As Lim Tian Teng Sons & Co., Inc. failed to file a waiver of the
1, 1956 to June 30, 1959. The petitioner then requested a
statute of limitations, the Collector of Internal Revenue
recomputation of the revised assessment. The Commissioner,
instituted eight months after an action in the Court of First
however, denied the request for recomputation.
Instance of Cebu for the collection of deficiency income tax.

On August 1, 1963 the petitioner appealed to the Court of Tax


Plaintiff maintains that the lower court has no jurisdiction to
entertain this case on the ground that the Collector of Internal Appeals. The tax court dismissed the appeal on October 1, 1965
Revenue has not yet issued his final decision on its requests for on the ground that the appeal was filed beyond the thirty-day
reinvestigation. The taxpayer's stand is that final decision of the period of appeal provided by section 11 of Republic Act 1125.
Collector of Internal Revenue on the disputed assessment is a
condition precedent to the filing of an action in the Court of First ISSUE: whether or not the petitioner's appeal to the Court of Tax
Instance for the collection of a tax. Appeals was time-barred.

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HELD: YES. A close reading of the numerous letters exchanged CIR v. Ayala Securities Corp.
between the petitioner and the Commissioner clearly discloses G.R. No. L-29485. March 31, 1976
that the letter of demand issued by the Commissioner
constitutes the definite determination of the petitioner's FACTS: On November 29, 1955, respondent Ayala Securities
deficiency franchise tax liability or the decision on the disputed Corporation filed its income tax returns for its fiscal year which
assessment and, therefore, the decision appealable to the tax ended on September 30, 1955 which showed a surplus of
court. P2,758,442.37. The income tax due on the return of the
respondent corporation was duly paid for within the time
Moreover, the letter of demand dated April 29, 1963 prescribed by law.
unquestionably constitutes the final action taken by the
Commissioner on the petitioner's several requests for In a letter dated February 21, 1961, petitioner advised the
reconsideration and recomputation. In this letter, the respondent corporation of the assessment of P758.687.04 on its
Commissioner not only in effect demanded that the petitioner accumulated surplus reflected on its income tax return. The
pay the amount of P11,533.53 but also gave warning that in the respondent corporation protested against the assessment and
event it failed to pay, the said Commissioner would be sought reconsideration thereof for the reasons (1) that the
constrained to enforce the collection thereof by means of the accumulation of the surplus was for a bona fide business
remedies provided by law. The tenor of the letter, specifically, purpose and not to avoid the imposition of income tax on the
the statement regarding the resort to legal remedies, individual shareholders, and (2) that the said assessment was
unmistakably indicates the final nature of the determination issued beyond the five-year prescriptive period.
made by the Commissioner of the petitioner's deficiency
franchise tax liability. On May 30, 1961, petitioner wrote respondent corporation's
auditing and accounting firm with the "advise that your request
To sustain the petitioner's contention that the Commissioner's for reconsideration will be the subject matter of further
letter of June 28, 1963 denying its request for further reinvestigation and a thorough analysis of the issues involved
amendment of the revised assessment constitutes the ruling conditioned, however, upon the execution of your client of the
appealable to the tax court and that the thirty-day period enclosed form for waiver of the defense of prescription". However,
should, therefore, be counted from July 16, 1963, the day it respondent corporation did not execute the requested waiver of
received the June 28, 1963 letter, would, in effect, leave solely to the statute of limitations.
the petitioner's will the determination of the commencement of
the statutory thirty-day period, and place the petitioner — and On February 21, 1963, respondent corporation received a letter
for that matter, any taxpayer — in a position, to delay at will and dated February 18, 1963, from the Chief, Manila Examiners, of
on convenience the finality of a tax assessment. This absurd the Office of the herein petitioner, requesting for the payment of
interpretation espoused by the petitioner would result in grave its outstanding and unpaid tax in the amount of P708,687.04.
detriment to the interests of the Government, considering that Believing the aforesaid letter to be a denial of its protest, the
taxes constitute its life-blood and their prompt and certain herein respondent corporation filed with the Court of Tax
availability is an imperative need.6 Appeals a Petition for Review of the assessment.

The revised assessment embodied in the Commissioner's letter After trial the Court of Tax Appeals rendered its decision
dated April 29, 1963 being, in legal contemplation, the final reversing the decision of the respondent Commissioner of
ruling reviewable by the tax court, the thirty-day appeal period Internal Revenue assessing petitioner the amount of
should be counted from May 8, 1963 (the day the petitioner P758,687.04 as surtax.
received a copy of the said letter). From May 8, 1963 to June 7,
1963 (the day the petitioner, by registered mail, sent to the From this decision, the Commissioner of Internal Revenue
Commissioner its letter of June 6, 1963 requesting for further interposed this appeal. Petitioner maintains that respondent
recomputation of the amount demanded from it) saw the lapse Court of Tax Appeals erred in holding that the letter dated
of thirty days. The June 6, 1963 request for further February 18, 1963, is a denial of the private respondent
recomputation, partaking of a motion for reconsideration, tolled corporation's protest against the assessment. Petitioner
the running of the thirty-day period from June 7, 1963 (the day contends that the letter dated February 18, 1963, is merely an
the petitioner sent its letter by registered mail) to July 16, 1963 ordinary office letter designed to remind delinquent taxpayers
(the day the petitioner received the letter of the Commissioner of their obligations to pay their taxes to the Government and,
dated June 28, 1963 turning down its request). The prescriptive certainly, not a decision on a disputed or protested assessment
period commenced to run again on July 16, 1963. The petitioner contemplated under Section 7(1) of R.A. 1125.
filed its petition for review with the tax court on August 1, 1963
— after the lapse of an additional sixteen days. The petition for ISSUE: Whether the letter dated February 18, 1963 is a decision
review having been filed beyond the thirty-day period, we rule on a disputed protest.
that the Court of Tax Appeals correctly dismissed the same.
HELD: YES. It is to be noted that the respondent Court of Tax
Appeals is a court of special appellate jurisdiction created under
R. A. No. 1125. Thus under Section 7 (1), R. A. 1125, the Court of
Tax Appeals exercises exclusive appellate jurisdiction to review

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by appeal "decisions of the Collector of Internal Revenue in anew the Statute of Limitations". Conformably with the request
cases involving disputed assessments, refunds of internal of the Commissioner, the heirs of Doroteo Yabes filed a revised
revenue taxes, fees or other charges, penalties imposed in waiver further extending the period of prescription to
relation thereto, or other matters arising under the National December 31, 1970.
Internal Revenue Code or other law or part of law administered
by the Bureau of Internal Revenue". On January 20, 1971, petitioners as heirs of the deceased
Doroteo Yabes received the summons and a copy of the
The letter of February 18, 1963 (Exh. G), in the view of the Court, complaint filed by the Commissioner on December 4, 1970 with
is tantamount to a denial of the reconsideration or protest of the the Court of First Instance of Cagayan which seeks to collect
respondent corporation on the assessment made by the from the petitioners the sum of P 15,976.82, as deficiency
petitioner, considering that the said letter is in itself a commercial broker's fixed and percentage taxes.
reiteration of the demand by the Bureau of Internal Revenue for
the settlement of the assessment already made, and for the Taking the complaint as the final decision of the Commissioner,
immediate payment of the sum of P758, 687.04 in spite of the petitioners filed on February 12, 1971, a petition for review of
vehement protest of the respondent corporation on April 21, said disputed assessment with the Court of Tax Appeals; later
1961. This certainly is a clear indication of the firm stand of on the same day, February 12, 1971, petitioners filed their
petitioner against the reconsideration of the disputed answer to the complaint of the Commissioner before the Court
assessment in view of the continued refusal of the respondent of First Instance of Cagayan; and alleged therein, by way of
corporation to execute the waiver of the period of limitation special defense, that the Court of Tax Appeals has exclusive
upon the assessment in question. jurisdiction of the action and that there is another action of the
same nature between the parties relating to the same
This being so, the said letter amounts to a decision on a disputed assessment pending before the Court of Tax Appeals.
or protested assessment and, therefore, the court a quo did not
err in taking cognizance of this case. ISSUE: whether or not the assessment made by the
Commissioner of Internal Revenue against the deceased
Yabes v. Flojo taxpayer Doroteo Yabes, as contained in the letter dated March
G.R. No. L-46954 July 20, 1982 27, 1962, has become final and executory and incontestable.

FACTS: Doroteo Yabes of Calamaniugan Cagayan was an HELD: YES.There is no reason for Us to disagree from or reverse
exclusive dealer of products of the International Harvester the Court of Tax Appeals' conclusion that under the
Macleod, Inc. He received on or about May 1, 1962, a letter from circumstances of this case, what may be considered as final
the Commissioner of Internal Revenue dated March 27, 1962, decision or assessment of the Commissioner is the filing of the
demanding payment of the amount of P15,976.81, as complaint for collection in the respondent Court of First
commercial broker's fixed and percentage taxes plus surcharges Instance of Cagayan, the summons of which was served on
and the sum of P2,530 as compromise penalty alledgely due petitioners on January 20, 1971, and that therefore the appeal
from Yabes for the years 1956-1960. with the Court of Tax Appeals in CTA Case No. 2216 was filed on
time.
Doroteo Yabes, protested the assessment on the ground that his
agreements with the International Harvester Macleod, Inc. were The respondent Court of First Instance of Cagayan can only
of purchase and sale, and not of agency, hence he claimed he was acquire jurisdiction over this case filed against the heirs of the
not able to pay such kind of taxes. taxpayer if the assessment made by the Commissioner of
Internal Revenue had become final and incontestable. If the
Yabes requested for the reinvestigation, or review of the case by contrary is established, as this Court holds it to be, considering
the appellate division of the Bureau of Internal Revenue. In the aforementioned conclusion of the Court of Tax Appeals on
reply, the Commissioner informed Doroteo Yabes that his the finality and incontestability of the assessment made by the
request for reinvestigation was denied on the ground that he Commissioner is correct, then the Court of Tax Appeals has
has "not submitted any evidence to offset the findings of this exclusive jurisdiction over this case.
Office as to warrant a reinvestigation thereof".
Petitioners received the summons in Civil Case No. II-7 of the
Eight days later, the Commissioner advised Yabes that "the respondent Court of First Instance of Cagayan on January 20,
administrative appeal will be held in abeyance pending the 1971, and petitioners filed their appeal with the Court of Tax
resolution of the issues in a similar case. To give time for the Appeals in CTA Case No. 2216, on February 12, 1971, well within
Commissioner to study the case, Yabes filed a tax waiver on the thirty-day prescriptive period under Section 11 of Republic
October 20, 1962, extending the period of prescription to Act No. 1125. The Court of Tax Appeals has exclusive appellate
December 31, 1967. Doroteo Yabes died on March 13, 1963. The jurisdiction to review on appeal any decision of the Collector of
petitioners are the children of the deceased taxpayer. Internal Revenue in cases involving disputed assessments and
other matters arising under the National Internal Revenue Code.
After a lapse of about five years, the heirs of the deceased For want of jurisdiction over the case, the Court of First Instance
Doroteo Yabes received on August 4, 1967, a letter from the of Cagayan should have dismissed the complaint.
Commissioner dated July 27, 1967, requesting that they "waive
Advertising Assoc. v. CA

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G.R. No. L-59758 December 26, 1984 filed out of time. It was dismissed. The taxpayer appealed to this
Court.
FACTS: Advertising Associates alleged that it sold in 1949 its
advertising agency business to Philippine Advertising Issue: Whether or not the petition for Review was filed on time.
Counsellors, that its business is limited to the making,
construction and installation of billboards and electric signs and HELD: YES. No amount of quibbling or sophistry can blink the
making and printing of posters, signs, handbills, etc. It contends fact that said letter, as its tenor shows, embodies the
that it is a media company, not an advertising company, Commissioner's final decision within the meaning of section 7
of Republic Act No. 1125. The Commissioner said so. He even
It paid sales taxes for selling billboards, electric signs, calendars, directed the taxpayer to appeal it to the Tax Court.
posters, etc., realty dealer's tax for leasing billboards and
electric signs and 3% contractor's tax for repairing electric The directive is in consonance with this Court's dictum that the
signs. Commissioner should always indicate to the taxpayer in clear
and unequivocal language what constitutes his final
The Commissioner required Advertising Associates to pay determination of the disputed assessment. That procedure is
P297,927.06 and P84,773.10 as contractor's tax for 1967-1971 demanded by the pressing need for fair play, regularity and
and 1972, respectively, including 25% surcharge (the latter orderliness in administrative action.
amount includes interest) on its income from billboards and
neon signs.
CIR v. Algue
G.R. No. L-28896 February 17, 1988
The basis of the assessment is the fact that the taxpayer's
articles of incorporation provide that its primary purpose is to
FACTS: The record shows that on January 14, 1965, the private
engage in general advertising business. Its income tax returns
respondent, a domestic corporation engaged in engineering,
indicate that its business was advertising.
construction and other allied activities, received a letter from
the petitioner assessing it in the total amount of P83,183.85 as
Advertising Associates contested the assessments in its 'letters
delinquency income taxes for the years 1958 and 1959.
of June 25, 1973 (for the 1967-71 deficiency taxes) and March
7, 1974 (for the 1972 deficiency). The Commissioner reiterated
On January 18, 1965, Algue flied a letter of protest or request
the assessments in his letters of July 12 and September 16,1974.
for reconsideration, which letter was stamp received on the
same day in the office of the petitioner.
The taxpayer requested the cancellation of the assessments in
its letters of September 13 and November 21, 1974.
On March 12, 1965, a warrant of distraint and levy was
Inexplicably, for about four years there was no movement in the
presented to the private respondent, through its counsel, Atty.
case. Then, on March 31, 1978, the Commissioner resorted to
Alberto Guevara, Jr., who refused to receive it on the ground of
the summary remedy of issuing two warrants of distraint,
the pending protest. A search of the protest in the dockets of the
directing the collection enforcement division to levy on the
case proved fruitless. Atty. Guevara produced his file copy and
taxpayer's personal properties as would be sufficient to satisfy
gave a photostat to BIR agent Ramon Reyes, who deferred
the deficiency taxes. The warrants were served upon the
service of the warrant.
taxpayer on April 18 and May 25, 1978.
On April 7, 1965, Atty. Guevara was finally informed that the BIR
More than a year later, Acting Commissioner Efren I. Plana
was not taking any action on the protest and it was only then
wrote a letter justifying the assessments by stating that the
that he accepted the warrant of distraint and levy earlier sought
rental income of Advertising Associates from billboards and
to be served. Sixteen days later, on April 23, 1965, Algue filed a
neon signs constituted fees or compensation for its advertising
petition for review of the decision of the Commissioner of
services. He requested the taxpayer to pay the deficiency taxes
Internal Revenue with the Court of Tax Appeals.
within ten days from receipt of the demand; otherwise, the
Bureau would enforce the warrants of distraint. He closed his
ISSUE: Whether or not the petition was seasonably filed.
demand letter with this paragraph:
HELD: YES. The above chronology shows that the petition was
“This you may appeal to the Court of Tax Appeals within 30 days
filed seasonably. According to Rep. Act No. 1125, the appeal may
from receipt of this letter constitutes our final decision on the
be made within thirty days after receipt of the decision or ruling
matter. If you are not agreeable.”
challenged. It is true that as a rule the warrant of distraint and
levy is "proof of the finality of the assessment" and renders
Advertising Associates received that letter on June 18, 1979.
hopeless a request for reconsideration," being "tantamount to
Nineteen days later or on July 7, it filed its petition for review.
an outright denial thereof and makes the said request deemed
rejected." But there is a special circumstance in the case at bar
The Tax Court did not resolve the case on the merits. It ruled
that prevents application of this accepted doctrine.
that the warrants of distraint were the Commissioner's
appealable decisions. Since Advertising Associates appealed
The proven fact is that four days after the private respondent
from the decision of May 23, 1979, the petition for review was
received the petitioner's notice of assessment, it filed its letter

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of protest. This was apparently not taken into account before HELD: YES. The main thrust of this petition is that the issuance
the warrant of distraint and levy was issued; indeed, such of a warrant of distraint and levy is proof of the finality of an
protest could not be located in the office of the petitioner. It was assessment because it is the most drastic action of all media of
only after Atty. Guevara gave the BIR a copy of the protest that enforcing the collection of tax, and is tantamount to an outright
it was, if at all, considered by the tax authorities. During the denial of a motion for reconsideration of an assessment. Among
intervening period, the warrant was premature and could others, petitioner contends that the warrant of distraint and
therefore not be served. levy was issued after respondent corporation filed a request for
reconsideration of subject assessment, thus constituting
As the Court of Tax Appeals correctly noted," the protest filed by petitioner's final decision in the disputed assessments
private respondent was not pro forma and was based on strong
legal considerations. It thus had the effect of suspending on On this issue, this Court had already laid down the dictum that
January 18, 1965, when it was filed, the reglementary period the Commissioner should always indicate to the taxpayer in
which started on the date the assessment was received, viz., clear and unequivocal language what constitutes his final
January 14, 1965. The period started running again only on determination of the disputed assessment.
April 7, 1965, when the private respondent was definitely
informed of the implied rejection of the said protest and the There appears to be no dispute that petitioner did not rule on
warrant was finally served on it. Hence, when the appeal was private respondent's motion for reconsideration but contrary to
filed on April 23, 1965, only 20 days of the reglementary period the above ruling of this Court, left private respondent in the dark
had been consumed. as to which action of the Commissioner is the decision
appealable to the Court of Tax Appeals. Had he categorically
stated that he denies private respondent's motion for
CIR v. Union Shipping
reconsideration and that his action constitutes his final
G.R. No. L-66160. May 21, 1990
determination on the disputed assessment, private respondent
without needless difficulty would have been able to determine
FACTS: In a letter dated December 27, 1974 herein petitioner
when his right to appeal accrues and the resulting confusion
Commissioner of Internal Revenue assessed against Yee Fong
would have been avoided.
Hong, Ltd. and/or herein private respondent Union Shipping
Corporation, the total sum of P583,155.22 as deficiency income
Much later, this Court reiterated the above-mentioned dictum in
taxes due for the years 1971 and 1972. Said letter was received
a ruling applicable on all fours to the issue in the case at bar, that
on January 4, 1975, and in a letter dated January 10, 1975 ,
the reviewable decision of the Bureau of Internal Revenue is
received by petitioner on January 13, 1975, private respondent
that contained in the letter of its Commissioner, that such
protested the assessment.
constitutes the final decision on the matter which may be
appealed to the Court of Tax Appeals and not the warrants of
Petitioner, without ruling on the protest, issued a Warrant of
distraint. It was likewise stressed that the procedure enunciated
Distraint and Levy, which was served on private respondent's
is demanded by the pressing need for fair play, regularity and
counsel, Clemente Celso, on November 25, 1976. In a letter
orderliness in administrative action.
dated November 27, 1976, received by petitioner on November
29, 1976 private respondent reiterated its request for
Under the circumstances, the Commissioner of Internal
reinvestigation of the assessment and for the reconsideration of
Revenue, not having clearly signified his final action on the
the summary collection thru the Warrant of Distraint and Levy.
disputed assessment, legally the period to appeal has not
commenced to run. Thus, it was only when private respondent
Petitioner, again, without acting on the request for
received the summons on the civil suit for collection of
reinvestigation and reconsideration of the Warrant of Distraint
deficiency income on December 28, 1978 that the period to
and Levy, filed a collection suit before the Court of First Instance
appeal commenced to run.
of Manila against private respondent.

On January 10, 1979, private respondent filed with respondent CIR v. Isabela Cultural Corporation.
court its Petition for Review of the petitioner's assessment of its G.R. No. 135210. July 11, 2001
deficiency income taxes , wherein it prays that judgment be
rendered holding that it is not liable for the payment of the FACTS: On February 23, 1990, respondent received from
income tax herein involved. petitioner an assessment letter, dated February 9, 1990,
demanding payment of the amounts of P333,196.86 and
Petitioner argues therefore that the period to appeal to the P4,897.79 as deficiency income tax and expanded withholding
Court of Tax Appeals commenced to run from receipt of said tax for the taxable period from January 1, 1986 to December
warrant on November 25, 1976, so that on January 10, 1979 31, 1986. Respondent requested a reconsideration of the
when respondent corporation sought redress from the Tax
subject assessment with a waiver of Statute of Limitation.
Court, petitioner's decision has long become final and executory

On February 9, 1995, respondent received from petitioner a


ISSUE: Whether or not the Court of Tax Appeals has jurisdiction
Final Notice Before Seizure with a demanded payment of the
over this case.
subject assessment within ten (10) days from receipt thereof.

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Otherwise, failure on its part would constrain petitioner to


collect the subject assessment through summary remedies. On November 8, 1991, petitioner filed a Petition for Review to
contest the issuance of the warrants to enforce the collection
Petitioner maintains that this Final Notice was a mere of the tax assessments.
reiteration of the delinquent taxpayer's obligation to pay the
taxes due. It was supposedly a mere demand that should not ISSUE: is whether or not a demand letter for tax deficiency
have been mistaken for a decision on a protested assessment. assessments issued and signed by a subordinate officer who
Such decision, the commissioner contends, must was acting in behalf of the Commissioner of Internal Revenue,
unequivocably indicate that it is the resolution of the is deemed final and executory.
taxpayer's request for reconsideration and must likewise state
the reason therefor. A demand letter for payment of delinquent taxes may be
considered a decision on a disputed or protested assessment.
Respondent, on the other hand, points out that the Final The determination on whether or not a demand letter is final
Notice Before Seizure should be considered as a denial of its is conditioned upon the language used or the tenor of the
request for reconsideration of the disputed assessment. The letter being sent to the taxpayer.
Notice should be deemed as petitioner's last act, since failure
to comply with it would lead to the distraint and levy of We laid down the rule that the Commissioner of Internal
respondent's properties, as indicated therein. Revenue should always indicate to the taxpayer in clear and
unequivocal language what constitutes his final
ISSUE: Whether or not the Final Notice constitutes a final determination of the disputed assessment.
decision of the CIR.
The rule of conduct would also obviate all desire and
HELD: YES. In the light of the above facts, the Final Notice opportunity on the part of the taxpayer to continually delay
Before Seizure cannot but be considered as the the finality of the assessment – and, consequently, the
commissioner's decision disposing of the request for collection of the amount demanded as taxes – by repeated
reconsideration filed by respondent, who received no other requests for recomputation and reconsideration. On the part
response to its request. Not only was the Notice the only of the Commissioner, this would encourage his office to
response received; its content and tenor supported the theory conduct a careful and thorough study of every questioned
that it was the CIR's final act regarding the request for assessment and render a correct and definite decision thereon
reconsideration. The very title expressly indicated that it was in the first instance. This would also deter the Commissioner
a final notice prior to seizure of property. The letter itself from unfairly making the taxpayer grope in the dark and
clearly stated that respondent was being given "this LAST speculate as to which action constitutes the decision
OPPORTUNITY" to pay; otherwise, its properties would be appealable to the tax court. Of greater import, this rule of
subjected to distraint and levy. How then could it have been conduct would meet a pressing need for fair play, regularity,
made to believe that its request for reconsideration was still and orderliness in administrative action.10
pending determination, despite the actual threat of seizure of
its properties? In this case, the letter of demand dated January 24, 1991,
unquestionably constitutes the final action taken by the
Bureau of Internal Revenue on petitioner’s request for
Oceanic Wireless v. CIR
reconsideration when it reiterated the tax deficiency
G.R. No. 148380 December 9, 2005
assessments due from petitioner, and requested its payment.
Failure to do so would result in the "issuance of a warrant of
FACTS: On March 17, 1988, petitioner received from the
distraint and levy to enforce its collection without further
Bureau of Internal Revenue (BIR) deficiency tax assessments
notice."11 In addition, the letter contained a notation
for the taxable year 1984 in the total amount of ₱8,644,998.71.
indicating that petitioner’s request for reconsideration had
been denied for lack of supporting documents.
Petitioner filed its protest against the tax assessments and
requested a reconsideration or cancellation of the same in a
letter to the BIR Commissioner dated April 12, 1988. Allied Banking Corp. v. CIR.
G.R. No. 175097 February 5, 2010
BIR reiterated the tax assessments while denying petitioner’s
request for reinvestigation in a letter 1 dated January 24, 1991. FACTS:
On April 30, 2004, the Bureau of Internal Revenue (BIR)
Upon petitioner’s failure to pay the subject tax assessments issued a Preliminary Assessment Notice (PAN) to petitioner
within the prescribed period, the Assistant Commissioner for Allied Banking Corporation for deficiency Documentary
Collection, acting for the Commissioner of Internal Revenue, Stamp Tax (DST) in the amount of ₱12,050,595.60 and Gross
issued the corresponding warrants of distraint and/or levy Receipts Tax (GRT) in the amount of ₱38,995,296.76 on
and garnishment.

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industry issue for the taxable year 2001.Petitioner filed a Besides, any doubt in the interpretation or use of the word
protest against it on May 27, 2004. "appeal" in the Formal Letter of Demand with Assessment
Notices should be resolved in favor of petitioner, and not the
On July 16, 2004, the BIR wrote a Formal Letter of Demand respondent who caused the confusion.
with Assessment Notices to petitioner, which partly reads as
follows:

It is requested that the above deficiency tax be paid


immediately upon receipt hereof, inclusive of penalties
incident to delinquency. This is our final decision based on
investigation. If you disagree, you may appeal the final
decision within thirty (30) days from receipt hereof, otherwise
said deficiency tax assessment shall become final, executory
and demandable.

ISSUE: whether the Formal Letter of Demand can be


construed as a final decision of the CIR.

HELD: YES. It appears from the foregoing demand letter that


the CIR has already made a final decision on the matter and
that the remedy of petitioner is to appeal the final decision
within 30 days.

In this case, records show that petitioner disputed the PAN


but not the Formal Letter of Demand with Assessment
Notices. Nevertheless, we cannot blame petitioner for not
filing a protest against the Formal Letter of Demand with
Assessment Notices since the language used and the tenor of
the demand letter indicate that it is the final decision of the
respondent on the matter. We have time and again reminded
the CIR to indicate, in a clear and unequivocal language,
whether his action on a disputed assessment constitutes his
final determination thereon in order for the taxpayer
concerned to determine when his or her right to appeal to the
tax court accrues. Viewed in the light of the foregoing,
respondent is now estopped from claiming that he did not
intend the Formal Letter of Demand with Assessment Notices
to be a final decision.

Moreover, we cannot ignore the fact that in the Formal Letter


of Demand with Assessment Notices, respondent used the
word "appeal" instead of "protest", "reinvestigation", or
"reconsideration". Although there was no direct reference for
petitioner to bring the matter directly to the CTA, it cannot be
denied that the word "appeal" under prevailing tax laws
refers to the filing of a Petition for Review with the CTA. As
aptly pointed out by petitioner, under Section 228 of the
NIRC, the terms "protest", "reinvestigation" and
"reconsideration" refer to the administrative remedies a
taxpayer may take before the CIR, while the term "appeal"
refers to the remedy available to the taxpayer before the CTA.
Section 9 of RA 9282, amending Section 11 of RA 1125,27
likewise uses the term "appeal" when referring to the action a
taxpayer must take when adversely affected by a decision,
--xXx--
ruling, or inaction of the CIR. As we see it then, petitioner in
appealing the Formal Letter of Demand with Assessment
Notices to the CTA merely took the cue from respondent.

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COMPARATIVE REVIEW OF THE TAXPAYER’S REMEDIES

In case of protest
To whom When to
What to file When to File To whom filed
appealed Appeal
Within 30
days from the
receipt of the
decision of
National Request for Within 30 days
Commissioner the
Internal Reinvestigation from the Court of Tax
of Internal Commissioner
Revenue Code or receipt if the Appeals;
Revenue or 180 days
[89] Reconsideration; assessment;
from the date
of submission
of the
documents;
Within sixty
Within 60 days (60) days
Local
from the Regional Trial from the
Government Written protest; Local Treasurer;
notice of Court; receipt of the
Code [90]
Assessment; notice of
assessment;
Within sixty
Provincial (60) days
within thirty
treasurer, City Board of from the date
Real Property Payment under (30) days from
treasurer or Assessment of receipt of
Tax protest; [91] payment of the
municipal Appeals; [92] the written
tax;
treasurer; notice of
assessment
Within 15
days from the
Within 15 days
receipt of the
Payment under from the date Commissioner Court of Tax
Customs Code notice of
protest; [93] of payment of of Customs; Appeals
decision (Rule
taxes;
42, Rules of
Court)

Tax Refund
When to File To whom filed
National Internal Commissioner of Internal
Within 2 years from the date of payment;
Revenue Code; [94] Revenue
Local Government 2 years from the date of payment or from the
Local Treasurer;
Code; [95] time he is entitled thereto;
Within two (2) years from the date the Provincial treasurer, City
Real Property Tax; [96] taxpayer is entitled to such reduction or treasurer or municipal
adjustment; treasurer;
Within 12 months from the date of payment
Customs Code; [97] Commissioner of Customs;
of duties and taxes;

--xXx--

89 Section 228, NIRC.


90 Section 195, Local Government Code.
91 Section 252, Local Government Code.
92 Section 226, Local Government Code.
93 Section 1106,R.A. 10863.
94 Section 229, NIRC.
95 Section 196, Local Government Code.
96 Section 253, Local Government Code.
97 Section 193, tariff and Customs Code.

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As a rule, filing of second motion for


THE NEW
reconsideration is not allowed pursuant to Sec.7
COURT OF TAX APPEALS
Rule 15 Revised Rules of CTA;

Q: Why is it considered a specialized court? SEC. 7. No second motion for


A: It is tasked to resolves tax issues. reconsideration or for new trial. – No party
shall be allowed to file a second motion for
JURISDICTION OF THE CTA reconsideration of a decision, final
Under R.A. 9282, the CTA has two jurisdictions; resolution or order; or for new trial.
1. Exclusive original jurisdiction; and
2. Appellate jurisdiction; But BPI v. CIR, the procedural rules were relaxed in
the interest of substantial justice and allowed the
Exclusive Original Jurisdiction filing of the second motion for reconsideration as
The Court of Tax Appeals has exclusive original BPI was able to prove that it is entitled to refund.
jurisdiction over the following cases;
1. Criminal cases where the principal amount Q: Can you file a Motion for Reconsideration on
of taxes and penalties involve one million the decision of the BIR before you can file an
pesos or more arising from the violations appeal with the CTA?
of; A: No. It is not allowed.
a. NIRC;
b. Tariff and Customs Code; Q: Is motion for extension to file a petition for
c. Other laws administered by the review with the CTA allowed?
BIR and BOC; A: Yes. The Supreme Court allowed a motion for
2. Tax collection cases where the principal extension to file a petition for review in the case of
amount involve one million pesos or more; City of Manila v. Coca-Cola Bottlers. [1]

Appellate Jurisdiction 7 DECISIONS APPEALABLE TO THE CTA


The Court of Tax Appeals has appellate jurisdiction Exclusive Appellate Jurisdiction to Review by
over the following cases; Appeal;
1. Decisions of the Regional trial Court where 1. Decisions of the Commissioner of Internal
the amount is less than one million pesos; Revenue in cases involving disputed
2. Decisions of the Regional trial Court in assessments, refunds of internal revenue
local tax cases; taxes, fees or other charges, penalties in
3. Decision of the Central Board of relation thereto, or other matters arising
Assessment Appeals over cases involving under the National Internal Revenue or
the assessment of taxation of real other laws administered by the Bureau of
property; Internal Revenue; (via petition for
Review under Rule 42)
Q: What is the jurisdictional amount? 2. Inaction by the Commissioner of Internal
A: Principal amount of taxes & penalties involved is Revenue in cases involving disputed
1 million or more. assessments, refunds of internal revenue
taxes, fees or other charges, penalties in
COMPOSITION relations thereto, or other matters arising
The CTA’s membership was increased from one under the National Internal Revenue Code
division of three judges comprised of the Presiding or other laws administered by the Bureau
Judge and two associate judges to three divisions of of Internal Revenue, where the National
nine Justices composed of a Presiding Justice and Internal Revenue Code provides a specific
eight associate justice. period of action, in which case the inaction
shall be deemed a denial; (via petition for
Q: Since it is a specialized court, is it bound by the Review under Rule 42)
technical rules on Evidence? 3. Decisions, orders or resolutions of the
A: NO. As a rule, No. It is not bound by basic Regional Trial Courts in local tax cases
evidentiary rules. originally decided or resolved by them in
the exercise of their original or appellate
2ND MOTION FOR RECONSIDERATION jurisdiction; (via petition for Review
under Rule 43)

1 G.R. No. 181845, August 4, 2009.

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4. Decisions of the Commissioner of Customs in In cases falling under the exclusive appellate
cases involving liability for customs duties, jurisdiction of the Court en banc, the petition for
fees or other money charges, seizure, review of a decision or resolution of the Court in
detention or release of property affected, Division must be preceded by the filing of a timely
fines, forfeitures or other penalties in motion for reconsideration or new trial with the
relation thereto, or other matters arising Division. [2]
under the Customs Law or other laws
administered by the Bureau of Customs; Q: Does the CTA En Banc have certiorari
(via petition for Review under Rule 42) jurisdiction over interlocutory orders issued by
5. Decisions of the Central Board of its division?
Assessment Appeals in the exercise of its A: NO. The CTA en banc is devoid of certiorari
appellate jurisdiction over cases involving jurisdiction over its division’s interlocutory orders.
the assessment and taxation of real R.A. No. 9282 conferred no such jurisdiction.
property originally decided by the Settled is the rule that jurisdiction is conferred by
provincial or city board of assessment law.
appeals; (via petition for Review under
Rule 43) Q: What is the period to file an appeal to the CTA?
6. Decisions of the Secretary of Finance on A: A party adversely affected by a decision, ruling
customs cases elevated to him or the inaction of the Commissioner of Internal
automatically for review from decisions of Revenue on disputed assessments or claims for
the Commissioner of Customs which are refund of internal revenue taxes, or by a decision or
adverse to the Government under Section ruling of the Commissioner of Customs, the
2315 of the Tariff and Customs Code; (via Secretary of Finance, the Secretary of Trade and
petition for Review under Rule 42) Industry, the Secretary of Agriculture, or a Regional
7. Decisions of the Secretary of Trade and Trial Court in the exercise of its original jurisdiction
Industry, in the case of non-agricultural may appeal to the Court by petition for review
product, commodity or article, and the filed within thirty (30) days after receipt of a
Secretary of Agriculture in the case of copy of such decision or ruling, or expiration of
agricultural product, commodity or article, the period fixed by law for the Commissioner of
involving dumping and countervailing Internal Revenue to act on the disputed
duties under Section 301 and 302, assessments. [3]
respectively, of the Tariff and Customs
Code, and safeguard measures under Q: What is the exception to the 30 day period?
Republic Act No. 8800, where either party A: A party adversely affected by a decision or
may appeal the decision to impose or not resolution of a Division of the Court on a motion for
to impose said duties. (via petition for reconsideration or new trial may appeal to the
Review under Rule 42) Court by filing before it a petition for review
within fifteen (15)days from receipt of a copy of
Q: What is question of law and question of fact? the questioned decision or resolution. Upon
A: A question of fact is a question that must be proper motion and the payment of the full amount
answered by reference to facts and evidence as of the docket and other lawful fees and deposit for
well as inferences arising from those facts. A costs before the expiration of the reglementary
question of law, which must be answered by period herein fixed, the Court may grant an
applying relevant legal principles. additional period not exceeding fifteen days from
the expiration of the original period within which
Q: What is Automatic review procedure and to file the petition for review. [4]
what is the purpose?
A: The decisions of the Commissioner of customs Does the CTA have certiorari jurisdiction over
which are adverse to the government shall be the decisions of the RTC?
elevated to the Secretary of Finance automatically A: YES. Judicial power includes the duty of the
for review. The purpose is to protect the courts of justice to settle actual controversies
government against corrupt & conniving customs involving rights which are legally demandable and
collector. enforceable, and to determine whether or not there
has been grave abuse of discretion amounting to
APPEAL TO THE CTA EN BANC

2 Section 4, Rule 8, A.M. No. 05-11-07-CTA, Revised 4 Section 3(b), Rule 8, A.M. No. 05-11-07-CTA, Revised

Rules of the Court of Tax Appeals. Rules of the Court of Tax Appeals.
3 Section 3(a), Rule 8, A.M. No. 05-11-07-CTA,
Revised Rules of the Court of Tax Appeals.

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lack or excess of jurisdiction on the part of any


branch or instrumentality of the government.

It can be briefly interpreted that the power of the


CTA includes that of determining whether or not
there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the
part of the RTC in issuing an interlocutory order in
cases falling within the exclusive appellate
jurisdiction of the tax court.

Q: May CTA en banc resolve petitions for


annulment of judgment?
A: NO. The law did not confer jurisdiction

--xXx--

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BPI-FAMILY vs. CA Again, the BIR did not controvert the veracity of the said return.
G.R. No. 122480. April 12, 2000 It did not even file an opposition to petitioner's Motion and the
330 SCRA 507 1990 Final Adjustment Return attached thereto. In denying the
Motion for Reconsideration, however, the CTA ignored the said
CASE DOCTRINE: Again, the BIR did not controvert the veracity Return. In the same vein, the CA did not pass upon that
of the said return. It did not even file an opposition to petitioner's significant document.
Motion and the 1990 Final Adjustment Return attached thereto.
In denying the Motion for Reconsideration, however, the CTA True, strict procedural rules generally frown upon the
ignored the said Return. In the same vein, the CA did not pass upon submission of the Return after the trial. The law creating the
that significant document. Court of Tax Appeals, however, specifically provides that
proceedings before it "shall not be governed strictly by the
True, strict procedural rules generally frown upon the technical rules of evidence." The paramount consideration
submission of the Return after the trial. The law creating the remains the ascertainment of truth. Verily, the quest for orderly
Court of Tax Appeals, however, specifically provides that presentation of issues is not an absolute. It should not bar courts
proceedings before it "shall not be governed strictly by the from considering undisputed facts to arrive at a just
technical rules of evidence." The paramount consideration determination of a controversy.
remains the ascertainment of truth. Verily, the quest for orderly
presentation of issues is not an absolute. It should not bar courts In the present case, the Return attached to the Motion for
from considering undisputed facts to arrive at a just Reconsideration clearly showed that petitioner suffered a net
determination of a controversy. loss in 1990. Contrary to the holding of the CA and the CTA,
petitioner could not have applied the amount as a tax credit. In
FACTS: This case involves a claim for tax refund in the amount failing to consider the said Return, as well as the other
of P112,491.00 representing petitioner's tax withheld for the documentary evidence presented during the trial, the appellate
year 1989. It appears from the foregoing 1989 Income Tax court committed a reversible error.
Return that petitioner had a total refundable amount of
P297,492 inclusive of the P112,491.00 being claimed as tax CIR V. MANILA MINING CORPORATION
refund in the present case. However, petitioner declared in the G.R. No. 153204 August 31, 2005
same 1989 Income Tax Return that the said total refundable 568 SCRA 571
amount of P297,492.00 will be applied as tax credit to the
succeeding taxable year. CASE DOCTRINE: Under Section 8 of RA 1125, the CTA is
described as a court of record. As cases filed before it are litigated
On October 11, 1990, petitioner filed a written claim for refund de novo, party litigants should prove every minute aspect of their
in the amount of P112,491.00 with the respondent cases. No evidentiary value can be given the purchase invoices or
Commissioner of Internal Revenue alleging that it did not apply receipts submitted to the BIR as the rules on documentary
the 1989 refundable amount of P297,492.00 (including evidence require that these documents must be formally offered
P112,491.00) to its 1990 Annual Income Tax Return or other tax before the CTA. These sales invoices or receipts issued by the
liabilities due to the alleged business losses it incurred for the supplier are necessary to substantiate the actual amount or
same year. Without waiting for respondent Commissioner of quantity of goods sold and their selling price, and taken
Internal Revenue to act on the claim for refund, petitioner filed collectively are the best means to prove the input VAT payments.
a petition for review with respondent Court of Tax Appeals,
seeking the refund of the amount of P112,491.00. FACTS: Respondent, a mining corporation duly organized and
existing under Philippines laws, is registered with the Bureau of
CTA Ruling: The respondent Court of Tax Appeals dismissed Internal Revenue (BIR) as a VAT-registered enterprise. In 1991,
petitioner's petition on the ground that petitioner failed to respondent’s sales of gold to the Central Bank (now Bangko
present as evidence its corporate Annual Income Tax Return for Sentral ng Pilipinas) amounted to ₱200,832,364.70. On April 22,
1990 to establish the fact that petitioner had not yet credited the 1991, July 23, 1991, October 21, 1991 and January 20, 1992, it
amount of P297,492.00 (inclusive of the amount P112,491.00 filed its VAT Returns for the 1st, 2nd, 3rd and 4th quarters of
which is the subject of the present controversy) to its 1990 1991, respectively, with the BIR.
income tax liability.
Respondent, relying on a letter dated October 10, 1988 from
ISSUE: Whether or not petitioner is entitled to the refund of then BIR Deputy Commissioner Victor Deoferio that:
P112,491.90, representing excess creditable withholding tax
paid for the taxable year 1989. xxx under Sec. 2 of E.O. 581 as amended,
gold sold to the Central Bank is considered
HELD: YES. In the first place, petitioner presented evidence to an export sale which under Section
prove its claim that it did not apply the amount as a tax credit. 100(a)(1) of the NIRC, as amended by E.O.
During the trial before the CTA, Ms. Yolanda Esmundo, the 273, is subject to zero-rated if such sale is
manager of petitioner's accounting department, testified to this made by a VAT-registered person[,]
fact.
filed an application for tax refund/credit of the input VAT it paid
The Bureau of Internal Revenue, for its part, failed to controvert from July 1- December 31, 1999 in the amount of ₱8,173,789.60.
petitioner's claim. In fact, it presented no evidence at all. Petitioner subsequently filed on March 5, 1991 another
Because it ought to know the tax records of all taxpayers, the CIR application for tax refund/credit of input VAT it paid the amount
could have easily disproved petitioner's claim. To repeat, it did of ₱5,683,035.04 from January 1 – June 30, 1991.
not do so. More important, a copy of the Final Adjustment
Return for 1990 was attached to petitioner's Motion for As the CIR failed to act upon respondent’s application within
Reconsideration filed before the CTA. A final adjustment return sixty (60) days from the dates of filing, it filed on March 22, 1993
shows whether a corporation incurred a loss or gained a profit a Petition for Review against the CIR before the CTA seeking the
during the taxable year. In this case, that Return clearly showed issuance of tax credit certificate or refund in the amount of
that petitioner incurred P52,480,173 as net loss in 1990. ₱5,683,035.04 and ₱8,173,789.60 covering its input VAT
Clearly, it could not have applied the amount in dispute as a tax payments for the 1st and 2nd quarters of 1991 and for the 3rd
credit. and 4th quarters of 1991 respectively.

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The CIR filed its Answer, it averring that sales of gold to the
Central Bank may not be legally considered export sales for Sec.2. Section 16 of Revenue Regulations 5-87 is hereby
purposes of Section 100(a) in relation to Section 100(a)(1)21 of amended to read as follows:
the Tax Code; and that assuming that a refund is proper,
respondent must demonstrate that it complied with the xxx
provisions of Section 204(3) in relation to Section 230 of the Tax
Code. (c) Claims for tax credits/refunds. -
Application for Tax Credit/Refund of
The CIR subsequently filed its Reply admitting that respondent Value-Added Tax Paid (BIR Form No.
filed its VAT returns and VAT applications for tax credit for the 2552) shall be filed with the Revenue
3rd and 4th quarters of 1991, but specifically denying the District Office of the city or municipality
correctness and veracity of the amounts indicated in the where the principal place of business of
schedules and summary of importations, VAT services and the applicant is located or directly with
goods, the total input and output taxes, including the amount of the Commissioner, Attention: VAT
refund claimed. Division.

CTA RULING: Nonetheless, the CTA denied respondent’s claim A photocopy of the purchase invoice or
for refund of input VAT for failure to prove that it paid the receipt evidencing the value added tax
amounts claimed as such for the year 1991, no sales invoices, paid shall be submitted together with the
receipts or other documents as required under Section 2(c)(1) application. The original copy of the said
of Revenue Regulations No. 3-88 having been presented. The invoice/receipt, however, shall be
CTA explained that a mere listing of VAT invoices and receipts, presented for cancellation prior to the
even if certified to have been previously examined by an issuance of the Tax Credit Certificate or
independent certified public accountant, would not suffice to refund. (Emphasis and underscoring
establish the truthfulness and accuracy of the contents of such supplied)
invoices and receipts unless offered and actually verified by it
(CTA) in accordance with CTA Circular No. 1-95, as amended by xxx
CTA Circular No. 10-97, which requires that photocopies of
invoices, receipts and other documents covering said accounts Under Section 8 of RA 1125, the CTA is described as a court of
of payments be pre-marked by the party concerned and record. As cases filed before it are litigated de novo, party
submitted to the court. litigants should prove every minute aspect of their cases. No
evidentiary value can be given the purchase invoices or receipts
CA RULING: By Decision39 of April 12, 2002, the Court of submitted to the BIR as the rules on documentary evidence
Appeals reversed the decision of the CTA and granted require that these documents must be formally offered before
respondent’s claim for refund or issuance of tax credit the CTA.
certificates in the amounts of ₱5,683,035.04 and ₱8,173,789.60.
These sales invoices or receipts issued by the supplier are
In granting the refund, the appellate court held that there was necessary to substantiate the actual amount or quantity of
no need for respondent to present the photocopies of the goods sold and their selling price, and taken collectively are the
purchase invoices or receipts evidencing the VAT paid in view best means to prove the input VAT payments.
of Rule 26, Section 2 of the Revised Rules of Court and the
Resolutions of the CTA holding that the matters requested in Respondent contends, however, that the certification of the
respondent’s Request for Admissions in CTA No. 4968 were independent CPA attesting to the correctness of the contents of
deemed admitted by the CIR41 in light of its failure to file a the summary of suppliers’ invoices or receipts which were
verified reply thereto. examined, evaluated and audited by said CPA in accordance
with CTA Circular No. 1-95 as amended by CTA Circular No. 10-
CIR Contends: The CIR arguing that respondent’s failure to 97 should substantiate its claims.
submit documentary evidence to confirm the veracity of its
claims is fatal; and that the CTA, being a court of record, is not There is nothing, however, in CTA Circular No. 1-95, as amended
expected to go out of its way and dig into the records of the BIR by CTA Circular No. 10-97, which either expressly or impliedly
to supply the insufficient evidence presented by a party, and in suggests that summaries and schedules of input VAT payments,
fact it may set a definite rule that only evidence formally even if certified by an independent CPA, suffice as evidence of
presented will be considered in deciding cases before it.44 input VAT payments.

MMC Contends: Respondent, in its Comment, avers that it The circular, in the interest of speedy administration of justice,
complied with the provisions of Section 2(c)(1) of Revenue was promulgated to avoid the time-consuming procedure of
Regulation No. 3-88 when it submitted the original receipts and presenting, identifying and marking of documents before the
invoices to the BIR, which fact of submission had been deemed Court. It does not relieve respondent of its imperative task of
admitted by petitioner, as confirmed by the CTA in its pre-marking photocopies of sales receipts and invoices and
Resolutions in both cases granting respondent’s Requests for submitting the same to the court after the independent CPA
Admissions therein. shall have examined and compared them with the originals.
Without presenting these pre-marked documents as evidence –
ISSUE: whether respondent adduced sufficient evidence to from which the summary and schedules were based, the court
prove its claim for refund of its input VAT for taxable year 1991 cannot verify the authenticity and veracity of the independent
in the amounts of ₱5,683,035.04 and ₱8,173,789.60. auditor’s conclusions.

HELD: NO. For a judicial claim for refund to prosper, however, Mere listing of VAT invoices and receipts, even if certified to
respondent must not only prove that it is a VAT registered entity have been previously examined by an independent certified
and that it filed its claims within the prescriptive period. It must public accountant, would not suffice to establish the
substantiate the input VAT paid by purchase invoices or official truthfulness and accuracy of the contents thereof unless offered
receipts. This respondent failed to do. and actually verified by this Court. CTA Circular No. 1-95, as
amended by CTA Circular No. 10-97, requires that the
Revenue Regulation No. 3-88 amending Revenue Regulation No. photocopies of invoices, receipts and other documents covering
5-87 provides the requirements in claiming tax credits/refunds.

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said accounts or payments must be pre-marked by the party and with Application for a Writ of Preliminary Injunction and/or
submitted to this Court. (Underscoring supplied) Restraining Order to annul the July 4, 1988 — "Order Granting
Replevin with Temporary Restraining Order" (CA-G.R. SP NO.
While the CTA is not governed strictly by technical rules of 15090; p. 396, Rollo).
evidence, as rules of procedure are not ends in themselves but
are primarily intended as tools in the administration of justice, On July 15, 1988, the Collector of Customs reconsidered his June
the presentation of the purchase receipts and/or invoices is not 7, 1988 decision finding the the 9,000 bags/sacks of refined
mere procedural technicality which may be disregarded sugar in question are of foreign origin, smuggled into the
considering that it is the only means by which the CTA may country, and declares them forfeited in favor of the government.
ascertain and verify the truth of respondent’s claims.
It is petitioner's contention that the June 7, 1988 decision of the
The records further show that respondent miserably failed to District Collector of Customs became final and executory, in
substantiate its claim for input VAT refund for the first semester view of the absence of an appeal therefrom by the "aggrieved
of 1991. Except for the summary and schedules of input VAT party" (himself) within the 15-day period provided for in Sec.
payments prepared by respondent itself, no other evidence was 2313 of the Tariff and Customs Code. Hence, the release of the
adduced in support of its claim. 9,000 bags of sugar must be upheld.

YAOKASIN V. THE COMMISSIONER OF CUSTOMS On the other hand, the District Collector and the Commissioner
G.R G.R. No. 84111 December 22, 1989 of Customs argue that since the June 7, 1988 decision is adverse
180 SCRA 591 to the government, the case should go to the Commissioner of
Customs on automatic review, pursuant to Memorandum Order
CASE DOCTRINE: Taxes being the lifeblood of the Government, No. 20-87, dated May 18, 1987, of former Acting Commissioner
Section 12, which the Commissioner of Customs in his Customs of Customs Alexander Padilla, which provides:
Memorandum Order No. 20-87, enjoined all collectors to follow
strictly, is intended to protect the interest of the Government in Decisions of the Collector of Customs in seizure and protest
the collection of taxes and customs duties in those seizure and cases are subject to review by the Commissioner upon appeal as
protest cases which, without the automatic review provided provided under existing laws; provided, however, that where a
therein, neither the Commissioner of Customs nor the Secretary of decision of the Collector of Customs in such seizure and protest
Finance would probably ever know about. Without the automatic cases is adverse to the government it shall automatically be
review by the Commissioner of Customs and the Secretary of reviewed by the Commissioner of Customs. (PD. No. 1, Annex C.)
Finance, a collector in any of our country's far-flung ports, would
have absolute and unbridled discretion to determine whether In view thereof, no releases in any seizure or like cases may be
goods seized by him are locally produced, hence, not dutiable or effected unless and until the decision of the Collector has been
of foreign origin, and therefore subject to payment of customs confirmed in writing by the Commissioner of Customs.
duties and taxes. His decision, unless appealed by the aggrieved
party (the owner of the goods), would become final with 'the no ISSUE: Whether or not the case should go to the Commissioner
one the wiser except himself and the owner of the goods. The of Customs on Automatic Review
owner of the goods cannot be expected to appeal the collector's
decision when it is favorable to him. A decision that is favorable to HELD: YES. Taxes being the lifeblood of the Government,
the taxpayer would correspondingly be unfavorable to the Section 12, which the Commissioner of Customs in his Customs
Government, but who will appeal the collector's decision in that Memorandum Order No. 20-87, enjoined all collectors to follow
case certainly not the collector. strictly, is intended to protect the interest of the Government in
the collection of taxes and customs duties in those seizure and
FACTS: On May 27, 1988, the Philippine Coast Guard seized protest cases which, without the automatic review provided
9000 bags/ sacks of refined sugar, which were being unloaded therein, neither the Commissioner of Customs nor the Secretary
from the M/V Tacloban, and turned them over to the custody of of Finance would probably ever know about. Without the
the Bureau of Customs. automatic review by the Commissioner of Customs and the
Secretary of Finance, a collector in any of our country's far-flung
The petitioner presented a sales invoice from the Jordan ports, would have absolute and unbridled discretion to
Trading of Iloilo (Annex A, Petition) to prove that the sugar was determine whether goods seized by him are locally produced,
purchased locally. The District Collector of Customs, however, hence, not dutiable or of foreign origin, and therefore subject to
proceeded with the seizure of the bags of sugar. payment of customs duties and taxes. His decision, unless
appealed by the aggrieved party (the owner of the goods),
On June 7, 1988, the District Collector of Customs ordered the would become final with 'the no one the wiser except himself
release of the sugar. and the owner of the goods. The owner of the goods cannot be
expected to appeal the collector's decision when it is favorable
On June 10, 1988, the decision, together with the entire records to him. A decision that is favorable to the taxpayer would
of the case, were transmitted to, and received by, the correspondingly be unfavorable to the Government, but who
Commissioner of Customs. will appeal the collector's decision in that case certainly not the
collector.
On July 4, 1988, the Commissioner of Customs by "2nd
Indorsement" returned to the District Collector of Customs the Evidently, it was to cure this anomalous situation (which may
folder of Tacloban S.I. No. 06-01 (R.P. vs. 9000 bags/sacks of have already defrauded our government of huge amounts of
refined sugar, MR. JIMMY YAOKASIN, consignee/claimant), uncollected taxes), that the provision for automatic review by
together with the proposed decision, for hearing and/or the Commissioner of Customs and the Secretary of Finance of
resolution of the government is motion for reconsideration. unappealed seizure and protest cases was conceived to protect
the government against corrupt and conniving customs
On the same date, July 4, 1988, petitioner applied for and collectors.
secured a writ of replevin from the Regional Trial Court of Leyte.
WHEREFORE, the petition for review is denied for lack of merit.
On July 12, 1988, respondent District Collector of Customs filed The temporary restraining order which we issued in this case is
an Answer assailing the court's jurisdiction. On the same day, hereby made permanent. Cost against the petitioner. SO
the District Collector and the Commissioner of Customs filed in ORDERED.
the Court of Appeals a Petition for certiorari and Prohibition

Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos 3


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Metro Manila Shopping Mecca v. Toledo within the reglementary period thus, making the RTC decision
G.R. No. 190818. June 5, 2013 already final and executory. On March 16, 2009, the CTA
697 SCRA 425 Division issued a Resolution denying petitioners’ motion.
Aggrieved, petitioners elevated the matter to the CTA En Banc.
CASE DOCTRINE: Although the RRCTA does not explicitly
sanction extensions to file a petition for review with the CTA, Ruling of CTA En Banc: In its Decision dated September 8,
Section 1, Rule 7 thereof reads that in the absence of any express 2009, the CTA En Banc upheld the CTA Division’s ruling and
provision in the RRCTA, Rules 42, 43, 44 and 46 of the Rules of found that: (1) respondents were able to file their Petition for
Court may be applied in a suppletory manner. In this light, Section Review within the reglementary period; (2) the assessment of
1 of Rule 42 states that the period for filing a petition for review local business taxes against petitioners had become conclusive
may be extended upon motion of the concerned party. Thus, in City and unappealable; and (3) petitioners’ claim for refund should
of Manila v. Coca-Cola Bottlers Philippines, Inc., the Court held be denied for their failure to comply with the requisites
that the original period for filing the petition for review may be provided for by law.
extended for a period of fifteen (15) days, which for the most
compelling reasons, may be extended for another period not Petitioner Contends: Petitioners argue that the CTA Division
exceeding fifteen (15) days. In other words, the reglementary erred in extending the reglementary period within which
period provided under Section 3, Rule 8 of the RRCTA is extendible respondents may file their Petition for Review, considering that
and as such, CTA Division’s grant of respondents’ motion for Section 3, Rule 8 of the Revised Rules of the CTA (RRCTA) is
extension falls squarely within the law. silent on such matter. Further, even if it is assumed that an
extension is allowed, the CTA Division should not have
FACTS: Sometime in October 2001, respondent Liberty M. entertained respondents’ Petition for Review for their failure to
Toledo, as Treasurer of respondent City of Manila (City), comply with the filing requisites set forth in Section 4, Rule 5
assessed petitioners for their fourth quarter local business taxes and Section 2, Rule 6 of the RRCTA.
pursuant to Section 21 the "Revenue Code of the City of Manila"
(Manila Revenue Code).5 Consequently, on October 20, 2001, ISSUE: Whether or not the CTA Division may extend the
petitioners paid the total assessed amount of ₱5,104,281.26 reglementary period to file a Petition for Review.
under protest.
HELD: YES. Although the RRCTA does not explicitly sanction
In a letter dated October 19, 2001, petitioners informed the extensions to file a petition for review with the CTA, Section 1,
Office of the City Treasurer of Manila of the nature of the Rule 7 thereof reads that in the absence of any express provision
foregoing payment, assailing as well the unconstitutionality of in the RRCTA, Rules 42, 43, 44 and 46 of the Rules of Court may
Section 21 of the Manila Revenue Code. Petitioners’ protest was be applied in a suppletory manner.
however denied on October 25, 2001.
In this light, Section 1 of Rule 42 states that the period for filing
On October 20, 2003, petitioners filed a case with the Regional a petition for review may be extended upon motion of the
Trial Court of Manila (RTC) against respondents, reiterating concerned party. Thus, in City of Manila v. Coca-Cola Bottlers
their claim that Section 21 of the Manila Revenue Code is null Philippines, Inc., the Court held that the original period for filing
and void. Accordingly, they sought the refund of the amount of the petition for review may be extended for a period of fifteen
local business taxes they previously paid to the City, plus (15) days, which for the most compelling reasons, may be
interest. extended for another period not exceeding fifteen (15) days.

Consequently, respondents filed their Answer. Respondents In other words, the reglementary period provided under Section
averred that petitioners failed to file any written claim for tax 3, Rule 8 of the RRCTA is extendible and as such, CTA Division’s
refund or credit with the Office of the City Treasurer of Manila. grant of respondents’ motion for extension falls squarely within
the law.
RTC Ruling: In its Decision dated December 7, 2006, the RTC
held that respondents’ assessment of local business tax under Neither did respondents’ failure to comply with Section 4, Rule
Section 21 of the Manila Revenue Code is null and void thereby, 5 and Section 2, Rule 6 of the RRCTA militate against giving due
warranting the issuance of a tax refund, or tax credit in the course to their Petition for Review. Respondents’ submission of
alternative, in the amount of ₱5,104,281.26 in favor of only one copy of the said petition and their failure to attach
petitioners. therewith a certified true copy of the RTC’s decision constitute
mere formal defects which may be relaxed in the interest of
Respondents filed a Motion for Reconsideration dated January substantial justice. It is well-settled that dismissal of appeals
16, 2007 which the RTC, however, denied. Thereafter, they filed based purely on technical grounds is frowned upon as every
two (2) Motions for Extension to File Petition for Review with party litigant must be afforded the amplest opportunity for the
the CTA, effectively requesting for a period of thirty (30) days proper and just determination of his cause, free from the
from May 27, 2007, or until June 26, 2007, to file their petition unacceptable plea of technicalities.41 In this regard, the CTA
for review. Division did not overstep its boundaries when it admitted
respondents’ Petition for Review despite the aforementioned
On June 26, 2007, respondents filed their Petition for Review defects "in the broader interest of justice."
dated June 22, 2007 via registered mail. In its Resolution dated
July 6, 2007, the CTA Division granted respondents’ Motions for
Extension, noted their Manifestation, and admitted their
Petition for Review.

Ruling of CTA Division: In its Decision dated October 31, 2008,


the CTA Division reversed and set aside the RTC’s ruling and in
effect, denied petitioners’ request for tax refund/credit.
--xXx--
On November 19, 2008, petitioners moved for reconsideration,
averring that respondents failed to file their Petition for Review

Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos 4


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