COMMISSIONER OF INTERNAL REVENUE vs.

CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS

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

FACTS:
By virtue of a decision of the Court of Tax Appeals rendered on June 21, 1961, the Commissioner of Internal Revenue was
ordered to refund to the Cebu Portland Cement Company the amount of P359,408.98, representing overpayments of ad valorem
(proportionate to the estimated value) taxes on cement produced and sold by it after October 1957.
Following denial of motions for reconsideration filed by both the petitioner and the private respondent, the latter moved for
a writ of execution to enforce the said judgment.
The motion was opposed by the petitioner on the ground that the private respondent had an outstanding sales tax liability
to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance owing on the sales taxes in
the amount of P 4,789,279.85 plus 28% surcharge.
On April 22, 1968, the Court of Tax Appeals granted the motion, holding that the alleged sales tax liability of the private
respondent was still being questioned and therefore could not be set-off against the refund.

ISSUE:
Whether or not the judgment debt can be enforced against private respondent’s sales tax liability, the latter still being
questioned.

RULING:
The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of
the need to collect taxes as "the lifeblood of the government." If the payment of taxes could be postponed by simply questioning their
validity, the machinery of the state would grind to a halt and all government functions would be paralyzed.
The Tax Code provides: Sec. 291. Injunction not available to restrain collection of tax. - No court shall have authority to grant
an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code.
It goes without saying that this injunction is available not only when the assessment is already being questioned in a court of
justice but more so if, as in the instant case, the challenge to the assessment is still-and only-on the administrative level. There is all
the more reason to apply the rule here because it appears that even after crediting of the refund against the tax deficiency, a balance
of more than P 4 million is still due from the private respondent.

Commissioner vs. Algue

GRL-28890, 17 February 1988
First Division, Cruz (J); 4 concur

FACTS:
The Philippine Sugar Estate Development Company (PSEDC) appointed Algue Inc. as its agent, authorizing it to sell its land,
factories, and oil manufacturing process. The Vegetable Oil Investment Corporation (VOICP) purchased PSEDC properties. For the sale,
Algue received a commission of P125,000 and it was from this commission that it paid Guevara, et. al. organizers of the VOICP, P75,000
in promotional fees.
In 1965, Algue received an assessment from the Commissioner of Internal Revenue in the amount of P83,183.85 as
delinquency income tax for years 1958 amd 1959. Algue filed a protest or request for reconsideration which was not acted upon by
the Bureau of Internal Revenue (BIR). The counsel for Algue had to accept the warrant of distrant and levy. Algue, however, filed a
petition for review with the Coourt of Tax Appeals.

ISSUE: Whether the assessment was reasonable.

HELD:
Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Every person who is
able to pay must contribute his share in the running of the government.
The Government, for his part, is expected to respond in the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should
dispel the erroneous notion that is an arbitrary method of exaction by those in the seat of power. Tax collection, however, should be
made in accordance with law as any arbitrariness will negate the very reason for government itself.
For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate that the
law has not been observed. Herein, the claimed deduction (pursuant to Section 30 [a] [1] of the Tax Code and Section 70 [1] of Revenue
Regulation 2: as to compensation for personal services) had been legitimately by Algue Inc. It has further proven that the payment of
fees was reasonable and necessary in light of the efforts exerted by the payees in inducing investors (in VOICP) to involve themselves
in an experimental enterprise or a business requiring millions of pesos. The assessment was not reasonable.

Association of Custom Brokers vs. Manila

GR L-4376, 22 May 1953
En Banc, Bautista-Angelo (J): 3 concur, 4 concur in result

FACTS:
The Association of Customs Brokers, which is composed of all brokers and public service operators of motor vehicles in the
City of Manila, challenges the validity of Ordinance 3379 on the grounds (1) that while it levies a so-called property tax, it is in reality
a license tax which is beyond the power of the Manila Municipal Board; (2) that said ordinance offends against the rule on uniformity
of taxes; and (3) that it constitutes double taxation.

ISSUE: Whether the ordinance infringes on the rule on uniformity of taxes as ordained by the Constitution.

HELD:
While the tax in the Ordinance refers to property tax and it is fixed ad valorem, it is merely levied on all motor vehicles
operating within Manila with the main purpose of raising funds to be expended exclusively for the repair, maintenance and
improvement of the streets and bridges in said city. The ordinance imposes a license fee although under the cloak of an ad valorem
tax to circumvent the prohibition in the Motor Vehicle Law.
Further, it does not distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it
distinguish between a motor vehicle registered in Manila and one registered in another place but occasionally comes to Manila and
uses its streets and public highways. The distinction is necessary if his ordinance intends to burden with tax only those registered in
Manila as may be inferred from the word “operating” used therein. There is an inequality in the ordinance which renders it offensive
to the Constitution.

Esso Standard Eastern vs. Commissioner

GR 28508-9, 7 July 1989
First Division, Cruz (J): 4 concur

FACTS:
ESSO deducted from its gross income for 1959, as part of its ordinary and necessary business expenses, the amount it had
spent for drilling and exploration of its petroleum concessions.
The Commissioner disallowed the claim on the ground that the expenses should be capitalized and might be written off as a
loss only when a “dry hole” should result. Hence, ESSO filed an amended return where it asked for the refund of P323,270 by reason
of its abandonment, as dry holes, of several of its oil wells.
It also claimed as ordinary and necessary expenses in the same return amount representing margin fees it had paid to the
Central Bank on its profit remittances to its New York Office.

ISSUE: Whether the margin fees may be considered ordinary and necessary expenses when paid.

HELD:
For an item to be deductible as a business expense, the expense must be
 ordinary and necessary;
 it must be paid or incurred within the taxable year; and
 it must be paid or incurred in carrying on a trade or business.
In addition, the taxpayer must substantially prove by evidence or records the deductions claimed under law, otherwise, the
same will be disallowed. There has been no attempt to define “ordinary and necessary” with precision.
However, as guiding principle in the proper adjudication of conflicting claims, an expenses is considered necessary where the
expenditure is appropriate and helpful in the development of the taxpayer’s business. It is ordinary when it connotes a payment which
is normal in relation to the business of the taxpayer and the surrounding circumstances.
Assuming that the expenditure is ordinary and necessary in the operation of the taxpayer’s business; the expenditure, to be
an allowable deduction as a business expense, must be determined from the nature of the expenditure itself, and on the extent and
permanency of the work accomplished by the expenditure.
Herein, ESSO has not shown that the remittance to the head office of part of its profits was made in furtherance of its own
trade or business. The petitioner merely presumed that all corporate expenses are necessary and appropriate in the absence of a
showing that they are illegal or ultra vires; which is erroneous. Claims for deductions are a matter of legislative grace and do not turn
on mere equitable considerations.

G.R. No. 175651, September 14, 2016

PILMICO-MAURI FOODS CORP., Petitioner, v.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS:
[PMFC] is a corporation, organized and existing under the laws of the Philippines, with principal place of business at Aboitiz
Corporate Center, Banilad, Cebu City. The books of accounts of [PMFC] pertaining to 1996 were examined for deficiency income, value-
added [tax] (VAT) and withholding tax liabilities.
The foregoing Assessment Notices were all received by [PMFC]. On December 29, 1998, [PMFC] filed a protest letter against
the aforementioned deficiency tax assessments. In a final decision of the [CIR], the deficiency tax liabilities of [PMFC] were reduced
from P9,761,750.02 to P3,020,259.30. PMFC filed its Petition for Review.
After trial, the [CTA] affirmed the assessments but in the reduced amount of P2,804,920.36 (inclusive of surcharge and
deficiency interest) representing [PMFC's] Income, VAT and Withholding Tax deficiencies for the taxable year 1996 plus 20%
delinquency interest per annum until fully paid.
From the total purchases of P5,893,694.64 which have been disallowed, it seems that a portion thereof amounting to
P1,280,268.19 (729,663.64 + 550,604.55) has no supporting sales invoices because of [PMFC's] failure to present said invoices.
The sales invoices contain alterations particularly in the name of the purchaser giving rise to serious doubts regarding their
authenticity and if they were really issued to [PMFC].
Besides, [PMFC] should have presented the following vital documents, namely,
1) Written Offsetting Agreement;
2) proof of payment by [PMFC] to Pilmico Foods Corporation; and
3) Financial Statements for the year 1996 of Pilmico Foods Corporation
to establish the fact that Pilmico Foods Corporation did not deduct the amount of raw materials being claimed by [PMFC]. Considering
that the official receipts and sales invoices presented by [PMFC] failed to comply with the requirements of Section 238 of the NIRC of
1977, the disallowance by the [CIR] of the claimed deduction for raw materials is proper.
PMFC] filed a Motion for Partial Consideration but PMFC's Motion for Reconsideration was denied for lack of merit. PMFC
then filed a petition for review before the CTA en banc which denied the motion for reconsideration

ISSUES:
The Honorable CTA First Division deprived PMFC of due process of law and the CTA assumed an executive function when it
substituted a legal basis other than that stated in the assessment and pleading of the CIR, contrary to law. Since the legal basis cited
by the CTA supporting the validity of the assessment was never raised by the CIR, was PMFC deprived of its constitutional right to be
apprised of the legal basis of the assessment.

RULING:
The Court affirms but modifies the herein assailed decision and resolution. Due process was not violated. CIR and PMFC both
agreed that among the issues for resolution was "whether or not the P5,895,694.66 purchases of raw materials are unsupported.
CIR had stated the material facts and the law upon which they were based. The CTA is not bound to rule solely on the basis
of the laws cited by the CIR. Were it otherwise, the tax court's appellate power of review shall be rendered useless. PMFC was at the
outset aware that the lack of inadequacy of supporting documents to justify the deductions claimed from the gross income was among
the issues raised for resolution before the CTA.
The Court recognizes that the CTA, which by the very nature of its function is dedicated exclusively to the consideration of
tax problems, has necessarily developed an expertise on the subject, and its conclusions will not be overturned unless there has been
an abuse or improvident exercise of authority.
MODIFICATION thereof, the legal interest of six percent (6%) per annum reckoned from the finality of this Resolution until
full satisfaction, is here imposed upon the amount of P2,804,920.36 to be paid by Pilmico-Mauri Foods Corporation to the
Commissioner of Internal Revenue.
NOTE: when a taxpayer claims a deduction, he must point to some specific provision of the statute in which that deduction
is authorized and must be able to prove that he is entitled to the deduction which the law allows.
Statutory test of deductibility where it is axiomatic that to be deductible as a business expense, three conditions are imposed,
namely: (1) the expense must be ordinary and necessary; (2) it must be paid or incurred within the taxable year, and (3) it must be
paid or incurred in carrying on a trade or business. In addition, not only must the taxpayer meet the business test, he must
substantially prove by evidence or records the deductions claimed under the law, otherwise, the same will be disallowed. The mere
allegation of the taxpayer that an item of expense is ordinary and necessary does not justify its deduction.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. NEXT MOBILE, INC.
(FORMERLY NEXTEL COMMUNICATIONS PHILS., INC.), Respondent. (G.R. No. 212825, December 07, 2015)

Section 203 of the 1997 NIRC mandates the BIR to assess internal revenue taxes within 3 years from the last day prescribed by law for
the filing of the tax return or the actual date of filing of such return, whichever comes later. Hence, an assessment notice issued after
the three-year prescriptive period is not valid and effective. Exceptions to this rule are provided under Section 222 of the NIRC.

FACTS:
After submission of its returs for the year 2001, NM received a copy of the LOA given by the BIR to Revenue Officer (RO) NLC,
covering January to December of 2001. 5 waivers were signed by NM's finance director to extend the prescriptive period of
assessment. In 2005, BIR sent NM a Preliminary Assessment Notice (PAN) to which the latter replied. Later, NM received a Formal
Letter of Demand (FLD) to pay various tax deficiencies amounting to 313 million pesos.
On November 23, 2005, NM filed its protest against the FLD and requested the reinvestigation. BIR denied the protest. NM
filed a Petition for Review before the CTA.
In the CTA, NM argued that the CIR's right to assess NM's deficiency taxes had already prescribed, invoking the lack of
authority on the part of the person who signed the waivers. The CTA ruled in favor of NM and said that the 5 waivers of the statute of
limitations were not valid and binding; thus, the three-year period of limitation within which to assess deficiency taxes was not
extended. It also held that the records belie the allegation that respondent filed false and fraudulent tax returns; thus, the extension
of the period of limitation from 3 to 10 years does not apply.

ISSUE
1: Had the CIR's right to assess respondent's deficiency taxes already prescribed?
2: Is the 10-year period of limitation for assessments of false and fraudulent returns applicable in this case?

RULLING:
ISSUE #1:
The CIR's right to assess NM's deficiency taxes had NOT yet prescribed. Section 222(b) of the NIRC provides that the period
to assess and collect taxes may only be extended upon a written agreement between the CIR and the taxpayer executed before the
expiration of the three-year period. This is a waiver.
RMO No. 20-90 and RDAO 05-01 must be strictly complied with in order for such a waver to be valid. Thus, a waiver of
assessment period is invalid if, for example:
[1] It does not specify a definite agreed date between the BIR and the taxpayer within which the former may
assess and collect revenue taxes;
[2] It has been signed only by a revenue district officer, not the Commissioner;
[3] It has no date of acceptance;
[4] The taxpayer was not furnished a copy of the BIR-accepted waiver;
[5] The person who executed the waivers had no notarized written board authority to sign the waivers in behalf of
the corporation; or
[6] The fact of receipt by the taxpayer of its file copy was not indicated in the original copies of the waivers.
In this case, both are at fault because NM deliberately executed defective waivers and raised the same problem to avoid its
tax liablity. On the other hand, the BIR's negligence or failure to comply with the abovementioned regulations is so gross that it
amounts to malice and bad faith.
Although it is true that waivers of this kind must be carefully and strictly construed because they are in derogation of the
taxpayer's right to security against prolonged and unscrupulous investigations, there are 5 reasons why the CTA's decision should be
reversed.
[1] The parties in this case are in pari delicto or "in equal fault." In pari delicto connotes that the two parties to a
controversy are equally culpable or guilty and they shall have no action against each other.
[2] To uphold the validity of the waivers parties must come to court with clean handswould be consistent with the public
policy embodied in the principle that taxes are the lifeblood of the government.
[3] Parties must come to court with clean hands. NM should not be allowed to benefit from the defects in its own waivers.
[4] NM is estopped from questioning the validity of its own waivers. It allowed the government to rely on the defective
waivers without raising them as soon as possible. In fact, in its protest, it did not mention this.
[5] Finally, this is a highly suspicious situation. The BIR miserably failed to exact from NM compliance with its own rules
while NM raised the same invalidity it caused to avoid its tax liability. Such a situation is dangerous and open to abuse by
unscrupulous taxpayers who intend to escape their responsibility to pay taxes by mere expedient of hiding behind
technicalities.
 ISSUE #2:
No, the longer 10-year period is not applicable. Applicable is the normal 3-year period. Records failed to establish, even by
prima facie evidence, that NM filed false and fraudulent returns on the ground of substantial under-declaration of income in
respondent Next Mobile's Annual ITR for taxable year ending December 31, 2001.
Next Mobile (NM) lost the case. The CIR succeeded in convincing the Supreme Court that the CTA was wrong in invalidating
the waivers.

[GR No. 212920, Sep 16, 2015 ]

CIR v. NIPPON EXPRESS CORPORATION

FACTS:
Nippon is a domestic corporation duly organized and existing under Philippine laws which is engaged in the business of
freight forwarding in the international and domestic air and sea freight and cargo forwarding, hauling, carrying, handling,
distributing, loading, and unloading general cargoes and all classes of goods, wares, and merchandise, and the operation of
container depots, warehousing, storage, hauling, and packing facilities.
It is a Value-Added Tax (VAT) registered entity with Tax Identification No./VAT Registration No. As such, it filed its quarterly
VAT returns for the year 2002 on April 25, 2002, July 25, 2002, October 25, 2002, and January 27, 2003, respectively.
It maintained that during the said period it incurred input VAT attributable to its zero-rated sales in the amount of
28,405,167.60, from which only P3,760,660.74 was applied as tax credit, thus, reflecting refundable excess input VAT in the amount
of P24,644,506.86.
On April 22, 2004, Nippon filed an administrative claim for refund of its unutilized input VAT in the amount of
P24,644,506.86 for the year 2002 before the Bureau of Internal Revenue (BIR). A day later, it filed a judicial claim for tax refund, by
way of petition for review, before the CTA.
For its part, petitioner the Commissioner of Internal Revenue (CIR) asserted that the amounts being claimed by Nippon as
unutilized input VAT were not properly documented, hence, should be denied.

Proceedings Before the CTA Division

The CTA Division partially granted Nippon's claim for tax refund, and thereby ordered the CIR to issue a tax credit certificate
in the reduced amount of P2,614,296.84. It found that while Nippon timely filed its administrative and judicial claims within the two
(2)-year prescriptive period, it, however, failed to show that the recipients of its services - which, in this case, were mostly Philippine
Economic Zone Authority registered enterprises - were non-residents "doing business outside the Philippines."
It concluded that Nippon's purported sales could not qualify as zero-rated sales, hence, the reduction in the amount of tax
credit certificate claimed. Nippon filed a motion to withdraw. Separately, the CIR moved for reconsideration.

The CTA En Banc Ruling

CTA En Banc affirmed the July 31, 2012 Resolution of the CTA Division granting Nippon's motion to withdraw. Noting that
RMC No. 49-03 did not expressly require a taxpayer to inform the BIR of its assent nor prescribe a definite period for filing a motion
to withdraw. It also observed that the CIR did not deny the existence and issuance of the July 27, 2011 Tax Credit Certificate.

ISSUE:
Whether the CTA properly granted Nippon's motion to withdraw.

RULING:
The petition is meritorious.
The CTA Division allowed the withdrawal of Nippon's appeal thereby ordering the case closed and terminated,
notwithstanding the fact that the said motion was filed after the promulgation of its August 10, 2011 Decision.
As Pointed out by Associate Justice Teresita J. Leonardo-De Castro during the deliberations on this case, the massive
discrepancy alone between the administrative and judicial determinations of the amount to be refunded to Nippon should have
already raised a red flag to the CTA Division. Clearly, the interest of the government, and, more significantly, the public, will be
greatly prejudiced by the erroneous grant of refund - at a substantial amount at that - in favor of Nippon. Hence, under these
circumstances, the CTA Division should not have granted the motion to withdraw.
In this relation, it deserves mentioning that the CIR is not estopped from assailing the validity of the July 27, 2011 Tax Credit
Certificate which was issued by her subordinates in the BIR. In matters of taxation, the government cannot be estopped by the
mistakes, errors or omissions of its agents for upon it depends the ability of the government to serve the people for whose benefit
taxes are collected.
The petition is GRANTED
Philippine Airlines vs. Edu
HR L-41383, 15 August 1988

FACTS:
The Philippine Airlines (PAL) is engaged in the air transportation business under a legislative franchise, Act 4271, wherein it
is exempt from the payment of taxes. On the strength of an opinion of the Secretary of Justice (Opinion 307 of 1956),
PAL was determined to have not been paying motor vehicle registration fees since 1956. The Land Transportation
Commissioner required all tax exempt entities, including PAL, to pay motor vehicle registration fees.
PAL protested.

ISSUE:
Whether registration fees as to motor vehicles are taxes to which Philippine Airlines is exempt.

RULING:
Taxes are for revenue, whereas fees are exactions for purposes of regulation and inspection, and are for that reason limited
in amount to what is necessary to cover the cost of the services rendered in that connection. It is the object of the charge, and not
the name, that determines whether a charge is a tax or a fee.
The money collected under the Motor Vehicle Law is not intended for the expenditures of the Motor Vehicle Office but
accrues to the funds for the construction and maintenance of public roads, streets and bridges. As the fees are not collected for
regulatory purposes as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways,
but to provide revenue with which the Government is to construct and maintain public highways for everyone’s use, they are
veritable taxes, not merely fees. PAL is, thus, exempt from paying such fees, except for the period between June 27, 1968 to April 9,
1979, where its tax exception in the franchise was repealed.

CIR VS. DASH ENGINEERING PHILIPPINES, INC.

G.R. NO. 184145, DEC. 11, 2013

FACTS:
Respondent DASH ENGINEERING PHILIPPINES, INC. (DASH) filed its monthly and quarterly value-added tax (VAT) returns for
the period from January 1, 2003 to June 30, 2003. On August 9, 2004, it filed a claim for tax credit or refund in the amount of
P2,149,684.88 representing unutilized input VAT attributable to its zero-rated sales.
Because petitioner Commissioner of Internal Revenue (CIR) failed to act upon the said claim, DASH was compelled to file a
petition for review with the CTA on May 5, 2005. The 120-day period within which the CIR should have acted expired on December
7, 2004. 30 days from the lapse of the said period is on January 6, 2005.

CONTENTION OF THE PETITIONER COMMISSIONER:

DASH's petition was filed out of time because following Section 112(C) of the NIRC, it should have been filed on or before
January 6, 2005. The 30-day period to appeal under Section 112(C) is mandatory and jurisdictional. Hence, the CTA had no
jurisdiction to entertain it.

CONTENTION OF RESPONDENT DASH:

DASH argues that the petition was seasonably filed before the CTA according to Section 112, in relation to Section 229.
DASH argues that the taxpayer has the option to appeal to the CTA within 30 days from receipt of the CIR's denial and within the
two-year period ORto appeal the unacted claim to the CTA anytime after the 120-day period so long as it is within the two-year
period.

ISSUE: Whether or not respondent’s judicial claim for refund was filed within the prescriptive period provided under the Tax Code.

HELD:
COMMISSIONER’S PETITION IS MERITORIOUS. – Sec. 229 is inapplicable; two-year period in Sec. 112 refers only to
administrative claims. Sections 204 and 229 of the NIRC pertain to the refund of erroneously or illegally collected taxes.
In Commissioner v. San Roque Power Corporation (GR 187485, Feb. 12, 2013), the Court clarified that input VAT is not
‘excessively’ collected as understood under section 229 because at the time the input VAT is collected the amount paid is correct
and proper.Section 112 is the more specific and appropriate provision of law for claims for excess input VAT.
The two-year prescriptive period referred to in Section 112(A) applies only to the filing of administrative claims with the CIR
and not to the filing of judicial claims with the CTA. In other words, for as long as the administrative claim is filed with the CIR within
the two-year prescriptive period, the 30-day period given to the taxpayer to file a judicial claim with the CTA need not fall in the
same two year period. At any rate, respondent’s compliance with the two-year prescriptive period under Section 112(A) is not an
issue. What is being questioned in this case is DASH’s failure to observe the requisite 120+30-day period as mandated by Section
112(C) of the NIRC.
The 120+30 day period under Sec. 112 is mandatory and jurisdictional.(Aichi, G.R. NO. 184823, and San Roque, GR 187485)
In the present case, DASH’s claim for refund was filed after the expiration of the 30-day period from the failure of the Commissioner
to make a decision within 120 days from the submission of the documents in support of respondent’s administrative claim. Hence,
DASH's judicial claim for refund must be denied for having been filed late.
Although DASH filed its administrative claim with the BIR on August 9, 2004 before the expiration of the two-year period in
Section l12(A), it undoubtedly failed to comply with the 120+ 30-day period in Section l l2(C) which requires that upon the inaction of
the CIR for 120 days after the submission of the documents in support of the claim, the taxpayer has to file its judicial claim within
30 days after the lapse of the said period.
The 120 days granted to the CIR to decide the case ended on December 7, 2004. Thus, DASH had 30 days therefrom, or until
January 6, 2005, to file a petition for review with the CTA. Unfortunately, DASH only sought judicial relief on May 5, 2005 when it
belatedly filed its petition to the CTA, despite having had ample time to file the same, almost four months after the period allowed
by law. As a consequence of DASH's late filing, the CTA did not properly acquire jurisdiction over the claim.
The Commissioner’s petition is GRANTED and DASH’s judicial claim for refund is DENIED.

CAMP JOHN HAY DEVELOPMENT CORPORATION vs. CENTRAL BOARD OF ASSESSMENT APPEALS (CBAA)
706 SCRA 547

FACTS:
Respondent City Assessor of Baguio City notified petitioner Camp John Hay Development Corporation about the issuance
against it of thirty-six (36) Owner’s Copy of Assessment of Real Property (ARP), covering various buildings of petitioner and two (2)
parcels of land owned by the Bases Conversion Development Authority (BCDA) in the John Hay Special Economic Zone (JHSEZ),
Baguio City, which were leased out to petitioner.
Petitioner questioned the assessments for lack of legal basis due to the City Assessor’s failure to identify the specific
properties and its corresponding assessed values. The City Assessor replied that the subject against the buildings of petitioner
located within the JHSEZ were issued on the basis of the approved building permits.
Consequently, petitioner filed with the Board of Tax Assessment Appeals (BTAA) of Baguio City an appeal challenging the
validity and propriety of the issuances of the City Assessor. Petitioner claimed that there was no legal basis for the issuance of the
assessments because it was allegedly exempted from paying taxes, national and local, including real property taxes, pursuant to RA
No. 7227, otherwise known as the Bases Conversion and Development Act of 1992.
The CBAA denied petitioner’s appeal and set aside the BTAA’s order of deferment of hearing, and remanded the case to the
LBAA of Baguio City for further proceedings subject to a full and up-to-date payment of the realty taxes on subject properties as
assessed by the respondent City Assessor of Baguio City, either in cash or in bond.
The CBAA explained that the deferment of hearings by the LBAA was merely in compliance with the mandate of the law.
Section 226, of RA No. 7160 which provides that "appeal on assessments of real property made under the provisions of this Code
shall, in no case, suspend the collection of the corresponding realty taxes on the property involved as assessed by the provincial or
city assessor, without prejudice to subsequent adjustment depending upon the final outcome of the appeal."
In addition, the CBAA expressed that it has yet to acquire jurisdiction over it since the same has not been resolved by the
LBAA. CTA En Banc found that petitioner has indeed failed to comply with Section 252 of RA No. 7160or the LGC of 1991. Hence, it
dismissed the petition and affirmed the subject Resolutions of the CBAA.

ISSUE:
Whether respondent CTA En Banc erred in dismissing for lack of merit the petition and accordingly affirmed the order of the CBAA to
remand the case to the LBAA of Baguio City for further proceedings subject to a full and up-to-date payment of realty taxes, either in
cash or in bond, on the subject properties assessed by the City Assessor of Baguio City?

HELD: NO.
Section 252 of RA No. 7160, also known as the LGC of 199114, categorically provides –
(a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on the tax receipts the words "paid under
protest." The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer,
in the case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt.
(b) The tax or a portion thereof paid under protest, shall beheld in trust by the treasurer concerned.
(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax protested shall be refunded to the
protestant, or applied as tax credit against his existing or future tax liability.
(d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in subparagraph (a), the tax payer may avail of the
remedies as provided for in Chapter 3, Title Two, Book II of this Code.
 Provisions of RA No. 7160 or the LGC of 1991,clearly sets forth the administrative remedies available to a taxpayer or real
property owner who does not agree with the assessment of the real property tax sought to be collected.
The petition filed before the court primarily involves the correctness of the assessments, which are questions of fact, that
are not allowed in a petition for certiorari, prohibition and mandamus. Therefore, if the property being taxed has not been dropped
from the assessment roll, taxes must be paid under protest if the exemption from taxation is insisted upon.
It is evident that petitioner’s failure to comply with the mandatory requirement of payment was fatal to its appeal. Section
206 of RA No. 7160 or the LGC of 1991 provides that every person by or for whom real property is declared, who shall claim
exemption from payment of real property taxes imposed against said property, shall file with the provincial, city or municipal
assessor sufficient documentary evidence in support of such claim. Clearly, the burden of proving exemption from local taxation is
upon whom the subject real property is declared; thus, said person shall be considered by law as the taxpayer thereof. Failure to do
so, said property shall be listed as taxable in the assessment roll.
Considering that petitioner is deemed a taxpayer within the meaning of law, hence, being a question of fact, petitioner
cannot do without first resorting to the proper administrative remedies, or as previously discussed, by paying under protest the tax
assessed in compliance with Section 252 thereof.
Accordingly, the CBAA and the CTA En Banc correctly ruled that real property taxes should first be paid before any protest
thereon may be considered. It is without a doubt that such requirement of "payment under protest" is a condition sine qua non
before an appeal may be entertained.
To reiterate, the restriction upon the power of courts to impeach tax assessment without a prior payment, under protest, of
the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation and as such their collection cannot be
curtailed by injunction or any like action; otherwise, the state or, in this case, the local government unit, shall be crippled in
dispensing the needed services to the people, and its machinery gravely disabled. The right of local government units to collect
taxes due must always be upheld to avoid severe erosion. This consideration is consistent with the State policy to guarantee the
autonomy of local governments and the objective of RA No. 7160 or the LGC of 1991 that they enjoy genuine and meaningful local
autonomy to empower them to achieve their fullest development as self-reliant communities and make them effective partners in
the attainment of national goals.
A claim for tax exemption, whether full or partial, does not question the authority of local assessor to assess real property
tax, but merely raises a question of the reasonableness or correctness of such assessment. Such argument which may involve a
question of fact should be resolved at the first instance by the LBAA. WHEREFORE, the petition is DENIED for lack of merit. The
Decision of the Court of Tax Appeals En Bane in C.T.A. EB No. 48 is AFFIRMED. The case is remanded to the Local Board of
Assessment Appeals (LBAA) of Baguio City for further proceedings.

Compania General de Tobacos de Filipinas vs. Manila

GR L-16619, 29 June 1963

FACTS:
Compania General de Tabacos de Filipinas (Tabacalera) paid the City of Manila the fixed license fees prescribed by
Ordinance 3358 for the years 1954 to 1957. In 1954, City Ordinance 3634 and 3816 were passed; where the term “general
merchandise” found therein included all articles in Sections 123 to 148 of the Tax Code (thus, also liquor under Sedctions 133 to
135). The Tabacalera paid its wholesaler’s and retailer’s taxes.
In 1954, the City Treasurer addressed a letter to an accounting firm, expressing the view that liquor dealers paying the
annual wholesale and retail fixed tax under Ordinance 3358 are not subject to the wholesale aand retail deaklers’ taxes prescribed
by City Ordinances 3634, 3301, and 3816. The Tabacalera, upon learning of said stopped including quarterly sworn declaratons
required by the latter ordinances, and in 1957, demanded refunde of the alleged overpayment. The claim was disallowed.

ISSUE:
Whether there is a distinction between Ordinance 3358 and Ordinances 3634, 3301 and 3816, to prevent refund to the company.

HELD:
Generally, the term “tax” applies to all kinds of exactions which become public funds. Legally, however, a license fee is a
legal concept quite distinct from tax: the former is imposed in the exercise of police power for purposes of regulation, while the
latter is imposed under the taxing power for the purpose of raising revenues. Ordinance 3358 prescribes municipal license fees for
the privilege to engage in the business of selling liquor or alcohol beverages; considering that the sale of intoxicating liquor is
(potentially) harmful to public health and morals, and must be subject to supervision or regulation by the State and by cities and
municipalities authorized to act in the premises.
On the other hand, Ordinances 3634, 3301 and 3816 imposed taxes on the sales of general merchandise, wholesale or
retail, and are revenue measures enacted by the Municipal Board of Manila. Both a license fee and a tax may be imposed on the
same business or occupation, or for selling the same article, without it being in violation of the rule against double taxation. The
contrary view of the Treasurer in its letter is of no consequence as the government is not bound by the errors or mistakes
committed by its officers, specially on matters of law.
The company, thus, is not entitled to refund.

FIRST LEPANTO TAISHO INSURANCE CORPORATION VS. CIR

[GR NO. 197117, APRIL 10, 2013]

FACTS:
After submitting its corporate income tax return for taxable year ending December 31, 1997, petitioner received a Letter of
Authority, dated October 30, 1998, from respondent Commissioner of Internal Revenue (CIR) to allow it to examine their books of
account and other accounting records for 1997 and other unverified prior years.
On 29 December 1999, CIR issued internal revenue tax assessments for deficiency income, withholding, expanded
withholding, final withholding, value-added and documentary stamp taxes for taxable year 1997. On 24 February 2000, petitioner
protested the said tax assessments.

ISSUE:
Whether a stipulation between contending parties as to correct withholding of taxes is sufficient evidence for deductibility of
expense

RULING:
As to service/contractors and purchases, petitioner contends that both parties already stipulated that it correctly withheld
the taxes due. Thus, petitioner is of the belief that it is no longer required to present evidence to prove the correct payment of taxes
withheld. As correctly ruled by the CTA Second Division and En Banc, however, stipulations cannot defeat the right of the State to
collect correct taxes due on an individual or juridical person because taxes are the lifeblood of our nation so its collection should be
actively pursued without unnecessary impediment.

COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE POWER CORPORATION

3 Consolidated Cases
[G.R. No. 187485. February 12, 2013.]
COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE POWER CORPORATION
[G.R. No. 196113. February 12, 2013.]
TAGANITO MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
[G.R. No. 197156. February 12, 2013.]
PHILEX MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE

CIR VS. SAN ROQUE; G.R. NO. 187485

FACTS:
San Roque is a domestic corporation duly organized under Philippine laws with principal office at Brgy San Roque, San
Manuel, Pangasinan. It was incorporated in 1997 to design, construct, erect, assemble, own, commission and operate power-
generating plant facilities pursuant to and under contract with the government. As a seller of services it is duly registered with BIR
and BOI on a preferred pioneer status.
On October 1997, San Roque entered into a Power Purchase Agreement (PPA) with National Power Corporation (NPC) to
generate additional power and energy for Luzon Power Grid by developing hydro-potential on the Agno River. The PPA provides,
among others, that San Roque shall be responsible for the design, construction and commissioning of the Power Station and shall
operate and maintain the same, subject to NPC instructions.
During the cooperation period of 25 years commencing from the completion date of the power station, NPC will take and
pay for all electricity available from the power station. On the construction and development of the San Roque multi-purpose
project which comprises of the dam, spillway and power plant, allegedly incurred, excess input VAT in the amount of 559, 709,
337.54 for taxable year 2001 which it declared in its quarterly VAT returns filed for the same year.
However, on Mar 28 2003, it amended its VAT returns for the year 2001 sand increased its input VAT to the amount of
560,200,283.14. San Roque filed with BIR for refund of such amount. CIR’s inaction prompted San Roque to file petition for review
before CTA.
CTA Division:
Initially denied claim because San Roque failed to show recorded zero-rated or effectively zero-rated sales; and required it
to show the ff. requirements to be entitled for refund:
 Vat registered entity
 Its input taxes claimed were paid on capital goods duly supported by VAT invoices
 Did not offset or apply the claimed input VAT on capital goods against any output VAT liability and
 Filed within 2 year prescriptive period.
San Roque only complied with 1st, third and fourth requirements. Partially granted refund reduced to 483M.

CTA En Banc:
Commissioner filed before EN Banc to pray for denial of refund in its entirety. The claim for refund with the BIR and the
subsequent appeal to the Court of Tax Appeals must be filed within the two-year period.
The Supreme Court held in the case of Atlas Consolidated Mining and Development Corporation vs. Commissioner of
Internal Revenue that the two-year prescriptive period for filing a claim for input tax is reckoned from the date of the filing of the
quarterly VAT return and payment of the tax due. If the said period is about to expire but the BIR has not yet acted on the
application for refund, the taxpayer may interpose a petition for review with this Court within the two year period.
Lastly, it is apparent from the following provisions of Revenue Memorandum Circular No. 49-03 dated August 18, 2003, that
[the CIR] knows that claims for VAT refund or tax credit filed with the Court [of Tax Appeals] can proceed simultaneously with the
ones filed with the BIR and that taxpayers need not wait for the lapse of the subject 120-day period
CTA dismissed petition.
Hence, CIR’s present petition.

TAGANITO MINING CORP. V. CI; G.R. NO. 196113

FACTS
Taganito Mining Corp is a corporation duly organized and existing under and by virtue of Phil. Laws. It is duly registered with
SEC with primary purpose:
To carry on the business, for itself and for others, of mining lode and/or placer mining, developing, exploiting, extracting,
milling, concentrating, converting, smelting, treating, refining, preparing for market, manufacturing, buying, selling, exchanging,
shipping, transporting, and otherwise producing and dealing in nickel, chromite, cobalt, gold, silver, copper, lead, zinc, brass, iron,
steel, limestone, and all kinds of ores, metals and their by-products…
Taganito is a VAT registered entity and is also registered with BOI as an exporter of beneficiated nickel.
Taganito filed all its monthly VAT declarations and VAT returns for the period of Jan 1 – December 2005. Taganito reported
zero-rated sales amounting to 1,446,854,034; input VAY on its domestic purchases and importations of goods and services
amounting to 2, 314,730 and input VAT on its domestic purchases and importations amounting to 6,050,933.95.
On Nov 14, 2005 filed with CIR claiming a tax refund of its supposed input VAT amounting to 8M period covering Jan 1-Dec
2004 and also Jan 1-Dec 2005.
As the statutory period within which to file claim for refund is about to lapse without CIR’s action, they filed the instant
petition for review on Feb 17 2007.

CTA Division:
Partially granted Taganito’s claim. Taganito was able to comply with requirements under Sec 112 (A) of RA 8242, to be
entitled for refund or credit of input VAT attributable to zero-rated sales.
CTA 2nd division:
Finally, records show that [Taganito’s] administrative claim filed on November 14, 2006, which was amended on November
29, 2006, and the Petition for Review filed with this Court on February 14, 2007 are well within the two-year prescriptive period,
reckoned from March 31, 2005, June 30, 2005, September 30, 2005, and December 31, 2005, respectively, the close of each taxable
quarter covering the period January 1, 2005 to December 31, 2005.
In fine, [Taganito] sufficiently proved that it is entitled to a tax credit certificate in the amount of ₱8,249,883.33
representing unutilized input VAT for the four taxable quarters of 2005.

CTA en banc:
Granted Petition of CIR. CTA EB declared that Sec 112 (A) and (B) set forth the 2 year prescriptive period for filing for tax
refund or credit claim. Applied Aichi Doctrine.
The CTA EB also relied on this Court’s rulings in the cases of Commissioner of Internal Revenue v. Aichi Forging Company of
Asia, Inc. (Aichi)30 and Commisioner of Internal Revenue v. Mirant Pagbilao Corporation (Mirant) Both Aichi and Mirant ruled that
the two-year prescriptive period to file a refund for input VAT arising from zero-rated sales should be reckoned from the close of the
taxable quarter when the sales were made.
 Aichi further emphasized that the failure to await the decision of the Commissioner or the lapse of 120-day period
prescribed in Section 112(D) amounts to a premature filing.
The CTA EB found that Taganito filed its administrative claim on 14 November 2006, which was well within the period
prescribed under Section 112(A) and (B) of the 1997 Tax Code. However, the CTA EB found that Taganito’s judicial claim was
prematurely filed. Taganito filed its Petition for Review before the CTA Second Division on 14 February 2007. The judicial claim was
filed after the lapse of only 92 days from the filing of its administrative claim before the CIR, in violation of the 120-day period
prescribed in Section 112(D) of the 1997 Tax Code.
Hence, Taganito’s present petition.

PHILEX MINING CORP VS. CIR GR NO. 197156

FACTS
Philex is a corporation duly organized and existing under the laws of the Republic of the Philippines, which is principally
engaged in the mining business, which includes the exploration and operation of mine properties and commercial production and
marketing of mine products
On Oct 21, 2005, filed its original VAT return for 3rd quarter of taxable year 2005 and amended VAT return for the same
quarter on Dec 1, 2005. On March 20, 2006, [Philex] filed its claim for refund/tax credit of the amount of ₱23,956,732.44 with the
One Stop Shop Center of the Department of Finance.

CTA Division:
The CTA Second Division ruled that the two-year prescriptive period specified in Section 112(A) of RA 8424, as amended,
applies not only to the filing of the administrative claim with the BIR, but also to the filing of the judicial claim with the CTA. Since
Philex’s claim covered the 3rd quarter of 2005, its administrative claim filed on 20 March 2006 was timely filed, while its judicial
claim filed on 17 October 2007 was filed late and therefore barred by prescription. Philex prayed for reversal.

CTA En Banc:
Denied Philex and Affirmed CTA division’s decision. In this case, while there is no dispute that [Philex’s] administrative claim
for refund was filed within the two-year prescriptive period; however, as to its judicial claim for refund/credit, records show that on
March 20, 2006, [Philex] applied the administrative claim for refund of unutilized input VAT
From March 20, 2006, which is also presumably the date [Philex] submitted supporting documents, together with the
aforesaid application for refund, the CIR has 120 days, or until July 18, 2006, within which to decide the claim.
Within 30 days from the lapse of the 120-day period, or from July 19, 2006 until August 17, 2006, [Philex] should have elevated its
claim for refund to the CTA. However, [Philex] filed its Petition for Review only on October 17, 2007, which is 426 days way beyond
the 30- day period prescribed by law. Hence, Philex’ present petition.

ISSUE
WON the 3 companies filed their claim for refund were timely filed

RULING:
I. APPLICATION OF THE 120+30 DAY PERIODS

A. For CIR vs. San Roque Corp

On 10 April 2003, a mere 13 days after it filed its amended administrative claim with the Commissioner on 28 March 2003,
San Roque filed a Petition for Review with the CTA docketed as CTA Case No. 6647. From this we gather 2 facts: 1) San Roque did not
wait for the 120-day period to lapse before filing judicial claim; 2) San Roque filed its judicial claim more than 4 years before Atlas
Doctrine (June 2007).
Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly given by law to the Commissioner
to decide whether to grant or deny San Roque’s application for tax refund or credit. It is indisputable that compliance with the 120-
day waiting period is mandatory and jurisdictional.
Failure to comply with the 120-day waiting period violates a mandatory provision of law. It violates the doctrine of
exhaustion of administrative remedies and renders the petition premature and thus without a cause of action, with the effect that
the CTA does not acquire jurisdiction over the taxpayer’s petition.
The charter of the CTA expressly provides that its jurisdiction is to review on appeal “decisions of the commissioner of
internal revenue in cases involving: refunds of internal revenue taxes.” Then a taxpayer prematurely files a judicial claim for tax
refund or credit with the CTA without waiting for CIR decision, there is no “decision” of the CIR to review and thus the CTA had no
jurisdiction, therefore. San Roque’s failure to comply with the 120-day mandatory period renders its petition for review with the CTA
void.
This Court cannot disregard mandatory and jurisdictional conditions mandated by law simply because the Commissioner
chose not to contest the numerical correctness of the claim for tax refund or credit of the taxpayer. Non-compliance with mandatory
periods, non-observance of prescriptive periods, and non-adherence to exhaustion of administrative remedies bar a taxpayer’s claim
for tax refund or credit, whether or not the Commissioner questions the numerical correctness of the claim of the taxpayer.
San Roque cannot also use Atlas Doctrine as an excuse because this case existed 4 years before the Atlas case. The Atlas
counts the 2 years prescriptive period from the date of payment of the output VAT, which means within 20 days after the close of
the taxable quarter. The output VAT at the time must be paid at the time of filing of the quarterly tax returns, which were to be filed
“within 20 days ff the end of each quarter”. Whether the Atlas doctrine (and later Mirant) is applied to San Roque is immaterial
because what is the issue in the present case is San Roque’s non-compliance with the 120-day period, a mandatory period the Atlas
or the Mirant doctrine is applied.
In San Roque’s case, it filed its petition with the CTA a mere 13 days after it filed its administrative claim with the
Commissioner. Indisputably, San Roque knowingly violated the mandatory 120-day period, and it cannot blame anyone but itself.
Sec 112 (c) is plain and clear. As this law states, the taxpayer may, if he wishes, appeal the decision of the Commissioner to
the CTA within 30 days from receipt of the Commissioner’s decision, or if the Commissioner does not act on the taxpayer’s claim
within the 120-day period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day period.

B. Taganito Mining Corp Case

Like San Roque, Taganito also filed its petition for review with the CTA without waiting for the 120-day period to lapse. Also,
like San Roque, Taganito filed its judicial claim before the promulgation of Atlas doctrine. Similarly situated as San Roque – both
cannot claim being misled, misguided or confused by the Atlas doctrine.
HOWEVER, Taganito can invoke BIR Ruling No. DA-489-0357 dated 10 Dec 2003, which expressly ruled that the “taxpayer-
claimant need not wait for the lapse of the 120-day period beforeit could seek judicial relief with the CTA by way of petition for
review.”
Taganito filed its judicial claim after the issuance of BIR ruling but before the adoption of the Aichi doctrine. Thus, Taganito
is deemed to have filed its judicial claim on time.

C. PHILEX Mining Corp case

Philex timely filed its administrative claim on Mar 20 2006, within the 2 year prescriptive period. Even if the 2 year
prescriptive period is computed from the date of payment of the output VAT under Sec 229, Philex, still filed its claim on time. Thus,
the Atlas doctrine is immaterial in this case.
The commissioner had until 17 Jul 2006, the last day of the 120-day period, to decide Philex’s claim. Since the commissioner
did not act on Philex’s claim on or before July 17 2006, Philex had until August 17 2006, the last day of the 30-day period, to filed its
judicial claim. However, Philex filed its Petition for Review with CTA only on October 17, 2007, or 426 days after the last day of filing.
In short, Philex was late by one year and 61 days in filing its judicial claim.
AS the CTA EB correctly found: Evidently, the Petition for Review in C.T.A. Case No. 7687 was filed 426 days late. Thus, the
Petition for Review in C.T.A. Case No. 7687 should have been dismissed on the ground that the Petition for Review was filed way
beyond the 30-day prescribed period; thus, no jurisdiction was acquired by the CTA Division; x x x58 (Emphasis supplied)
Unlike in San Roque and Taganito, Philex’ case is not one of premature filing but of late filinf. Philex did not file any petition
with the CTA within the 120-day period. Philex did not also file any petition with the CTA within the 30 days after the 120-day period,
in fact 426 days after the lapse of the 120-day period.
In any event, whether governed by jurisprudence before, during, or after the Atlas case, Philex's judicial claim will have to
be rejected because of late filing. Whether the two-year prescriptive period is counted from the date of payment of the output VAT
following the Atlas doctrine, or from the close of the taxable quarter when the sales attributable to the input VAT were made
following the Mirant and Aichi doctrines, Philex's judicial claim was indisputably filed late.
The Atlas doctrine cannot save Philex from the late filing of judicial claim. The inaction of CIR was deemed a denial. Philex
had 30 days from the expiration of 120-day period. And it failed to do so.

II. PRESCRIPTIVE PERIODS UNDER SEC 112 (A) AND (C)

Taxpayer may within 2 years after the close of the taxable quarter when the sales are made, apply for the issuance of tax
credit certificate or refund of the creditable input tax due or paid to such sales. In short, the law states that the taxpayer may apply
with the Commissioner for a refund or credit within 2 years, which meant at anytime within 2 years.
The two-year prescriptive period does not refer to the filing of judicial claim with the CTA but the filing of the CTA but to the
filing of the administrative claim with the commissioner refund/ credit with the CIR and not to appeals made to the CTA.
 The commissioner will have 120 days from such filing to decide the claim. If the commissioner decides the claim on the
120th day, or does not decide it on that day, the taxpayer has 30 days to file his judicial claim with the CTA.
The 30-day period was adopted precisely to do away with the old rule, so that under the VAT System the taxpayer will
always have 30 days to file the judicial claim even if the Commissioner acts only on the 120th day, or does not act at all during the
120-day period . With the 30-day period always available to the taxpayer, the taxpayer can no longer file a judicial claim for refund
or credit of input VAT without waiting for the Commissioner to decide until the expiration of the 120-day period.

III. RMC 49-03

What is important, as far as the present cases are concerned, is that the mere filing by a taxpayer of a judicial claim with the CTA
before the expiration of the 120-day period cannot operate to divest the Commissioner of his jurisdiction to decide an
administrative claim within the 120-day mandatory period, unless the Commissioner has clearly given cause for equitable estoppel
to apply as expressly recognized in Section 246 of the Tax Code.

IV. BIR RULING no. DA-489-03 dated 10 Dec 2003

Provides a valid claim for equitable estoppel under the Tax Code. BIR ruling expressly states that the taxpayer-claimant
need not wait for lapse of the 120-day period before it could seek judicial relief with the CTA by way of petition for review. Prior to
this, BIR held that 120 day period is mandatory and jurisdictional.
It is still mandatory and jurisdictional but there are 2 exceptions to this rule:
1. The first exception is if the Commissioner, through a specific ruling, misleads a particular taxpayer to prematurely
file a judicial claim with the CTA. Such specific ruling is applicable only to such particular taxpayer.
2. The second exception is where the Commissioner, through a general interpretative rule issued under Section 4 of
the Tax Code, misleads all taxpayers into filing prematurely judicial claims with the CTA.
NOTE: However, this was reversed by AICHI on Oct 6 2010.
 San Roque cannot benefit from the BIR ruling because it filed its judicial claim prematurely, before the issuance
of this BIR ruling.
 Taganito, filed after the issuance of BIR ruling hence, it can claim benefit thereof.
 Philex was very late. It was not premature at all.

Section 112 (D) of the 1997 Tax Code is clear, unequivocal, and categorical that the Commissioner has 120 days to act on an
administrative claim. The taxpayer can file the judicial claim (1) only within thirty days after the Commissioner partially or fully
denies the claim within the 120-day period, or (2) only within thirty days from the expiration of the 120-day period if the
Commissioner does not act within the 120-day period.

By reasons stated above, the court:

 GRANTS petition of CIR re: San Roque
 GRANTS Taganito’s petition for refund or credit
 DENIES Philex Mining Corporation.

CIR v. BPI G.R. No. 134062, April 17, 2007 521 SCRA 373
FACTS:
Sometime in 1988 the CIR sent two notices of assessment to the respondent of their deficiency percentage and
documentary stamp taxes for the year 1986 in the total amount of P129, 488,656.63.
In response, respondent alleged that they were not properly informed of the deficiency in tax assessment made against
them by the CIR which violated the rule set forth in NIRC. Whereas in the said law the taxpayer shall be informed in writing of the
law and the facts on which the assessment is made otherwise, the assessment shall be void.

ISSUE: Whether or not respondent was properly informed of the assessment made by the CIR?

RULING:
Accordingly, when the assessments were made pursuant to the former Section 270, the only requirement was for the CIR to
"notify" or inform the taxpayer of his "findings." Nothing in the old law required a written statement to the taxpayer of the law and
facts on which the assessments were based. The Court cannot read into the law what obviously was not intended by Congress. That
would be judicial legislation, nothing less.
Jurisprudence, on the other hand, simply required that the assessments contain a computation of tax liabilities, the amount
the taxpayer was to pay and a demand for payment within a prescribed period. From all the foregoing discussions,
 We can now conclude that [BPI] was indeed aware of the nature and basis of the assessments, and was given all the
opportunity to contest the same but ignored it despite the notice conspicuously written on the assessments which states that "this
ASSESSMENT becomes final and unappealable if not protested within 30 days after receipt." Counsel resorted to dilatory tactics and
dangerously played with time.
Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor endure. A principal
attribute of sovereignty, the exercise of taxing power derives its source from the very existence of the state whose social contract
with its citizens obliges it to promote public interest and common good. The theory behind the exercise of the power to tax
emanates from necessity; without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of
the people. The petition is hereby GRANTED

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.

MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.
G.R. No. L-22734 September 15, 1967

FACTS:
Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is Manuel B. Pineda, a
lawyer. The estate was divided among the heirs and Manuel B. Pineda's share amounted to about P2,500.00. After the estate
proceedings were closed, the BIR investigated the income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it
found that the corresponding income tax returns were not filed.
The representative of the Collector of Internal Revenue filed said returns for the estate and issued an assessment. Manuel
B. Pineda, who received the assessment, contested the same. He appealed to the Court of Tax Appeals alleging that he was
appealing "only that proportionate part or portion pertaining to him as one of the heirs."
The Court of Tax Appeals rendered judgment holding Manuel B. Pineda liable for the payment corresponding to his share of
the taxes. The Commissioner of Internal Revenue has appealed to the SC and has proposed to hold Manuel B. Pineda liable for the
payment of all the taxes found by the Tax Court to be due from the estate instead of only for the amount of taxes corresponding to
his share in the estate.
Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid income tax due the estate
only up to the extent of and in proportion to any share he received.

ISSUE:
Can BIR collect the full amount of estate taxes from an heir's inheritance

RULING:
The court rulled in affirmative. The Government can require Atty. Pineda to pay the full amount of the taxes assessed.
Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to the estate/taxpayer.
As an heir he is individually answerable for the part of the tax proportionate to the share he received from the inheritance.
His liability, however, cannot exceed the amount of his share. As a holder of property belonging to the estate, Pineda is liable for he
tax up to the amount of the property in his possession. The reason is that the Government has a lien on the P2,500.00 received by
him from the estate as his share in the inheritance, for unpaid income taxes a for which said estate is liable.
All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and collecting from
each one of them the amount of the tax proportionate to the inheritance received. Another remedy, is by subjecting said property of
the estate which is in the hands of an heir or transferee to the payment of the tax due, the estate. This second remedy is the very
avenue the Government took in this case to collect the tax.
The Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary discretion to avail itself of
the most expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because
taxes are the lifeblood of government and their prompt and certain availability is an imperious need. And as afore-stated in this case
the suit seeks to achieve only one objective: payment of the tax.
The adjustment of the respective shares due to the heirs from the inheritance, as lessened by the tax, is left to await the
suit for contribution by the heir from whom the Government recovered said tax.
REPUBLIC OF THE PHILIPPINES, represented by the PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) vs. COCOFED,
ET AL. and BALLARES, ET AL., EDUARDO M. COJUANGCO JR. and the SANDIGANBAYAN (First Division)
G.R. No. 147062-64 December 14, 2001

FACTS:
The PCGG issued and implemented numerous sequestrations, freeze orders and provisional takeovers of allegedly ill-gotten
companies, assets and properties, real or personal.
Among the properties sequestered by the Commission were shares of stock in the United Coconut Planters Bank (UCPB)
registered in the names of the alleged "one million coconut farmers," the so-called Coconut Industry Investment Fund companies (CIIF
companies) and Private Respondent Eduardo Cojuangco Jr.
On January 23, 1995, the trial court rendered its final Decision nullifying and setting aside the Resolution of the Sandiganbayan
which lifted the sequestration of the subject UCPB shares.

ISSUE:
Are the Coconut Levy Funds raised through the State’s police and taxing powers?

RULING:
Indeed, coconut levy funds partake of the nature of taxes which, in general, are enforced proportional contributions from
persons and properties, exacted by the State by virtue of its sovereignty for the support of government and for all public needs.
Based on this definition, a tax has three elements, namely:
 it is an enforced proportional contribution from persons and properties;
 it is imposed by the State by virtue of its sovereignty; and
 it is levied for the support of the government.
Taxation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation
and the stabilization of a threatened industry, which is so affected with public interest as to be within the police power of the State.

LUTZ v. ARANETA
GR No. L-7859, December 22, 1955
98 PHIL 148

FACTS:
Plaintiff Walter Lutz, in his capacity as judicial administrator of the intestate estate of Antionio Ledesma, sought to recover
from the CIR the sum of P14,666.40 paid by the estate as taxes, under section 3 of the CA 567 or the Sugar Adjustment Act thereby
assailing its constitutionality, for it provided for an increase of the existing tax on the manufacture of sugar, alleging that such
enactment is not being levied for a public purpose but solely and exclusively for the aid and support of the sugar industry thus
making it void and unconstitutional.
The sugar industry situation at the time of the enactment was in an imminent threat of loss and needed to be stabilized by
imposition of emergency measures.

ISSUE:
Is CA 567 constitutional, despite its being allegedly violative of the equal protection clause, the purpose of which is not for the
benefit of the general public but for the rehabilitation only of the sugar industry?

HELD:
Yes. The protection and promotion of the sugar industry is a matter of public concern, it follows that the Legislature may
determine within reasonable bounds what is necessary for its protection and expedient for its promotion.
Here, the legislative discretion must be allowed to fully play, subject only to the test of reasonableness; and it is not
contended that the means provided in the law bear no relation to the objective pursued or are oppressive in character.
If objective and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds
for their prosecution and attainment. Taxation may be made the implement of the state's police power.
LUTZ vs. ARANETA
G.R. No. L-7859 December 22, 1955

FACTS:
Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency, due to the threat to our
industry by the imminent imposition of export taxes upon sugar as provided in the Tydings-McDuffie Act, and the "eventual loss of
its preferential position in the United States market"; wherefore, the national policy was expressed "to obtain a readjustment of the
benefits derived from the sugar industry by the component elements thereof" and "to stabilize the sugar industry so as to prepare it
for the eventuality of the loss of its preferential position in the United States market and the imposition of the export taxes."
In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the manufacture of sugar, on a
graduated basis, on each picul of sugar manufactures; while section 3 levies on owners or persons in control of lands devoted to the
cultivation of sugar cane and ceded to others for a consideration, on lease or otherwise.
Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to
recover from the Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the
crop years 1948-1949 and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the aid and support of the
sugar industry exclusively, which in plaintiff's opinion is not a public purpose for which a tax may be constitutionally levied. The
action having been dismissed by the Court of First Instance, the plaintiffs appealed the case directly to this Court

ISSUE:
Whether or not taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act is legal?

RULING:
As the protection and promotion of the sugar industry is a matter of public concern the Legislature may determine within
reasonable bounds what is necessary for its protection and expedient for its promotion.
Here, the legislative must be allowed full play, subject only to the test of reasonableness; and it is not contended that the
means provided in section 6 of Commonwealth Act No. 567 bear no relation to the objective pursued or are oppressive in character.
If objective and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their
prosecution and attainment.
Taxation may be made the implement of the state's police power. It is inherent in the power to tax that a state be free to
select the subjects of taxation, and it has been repeatedly held that "inequalities which result from a singling out of one particular
class for taxation or exemption infringe no constitutional limitation

COMMISSIONER OF INTERNAL REVENUE vs.TOKYO SHIPPING CO. LTD., represented by SORIAMONT STEAMSHIP AGENCIES INC.,
and COURT OF TAX APPEALS (244 SCRA 342; May 26, 1995)

FACTS:
Tokyo Shipping a foreign corporation represented in the Philippines by Soriamont Steamship Agencies and owns and operates
M/V Gardenia. NASUTRA 2 chartered M/V Gardenia to load 16,500 metric tons of raw sugar in the Philippines. Soriamont Agency, 4
paid the required income and common carrier's taxes P59,523.75 and P47,619.00, respectively (Total P107,142.75).
Upon arriving, however, at Guimaras Port of Iloilo, the vessel found no sugar for loading. NASUTRA and Soriamont mutually
agreed to have the vessel sail for Japan without any cargo. Claiming the pre-payment of income and common carrier's taxes as
erroneous since no receipt was realized from the charter agreement, Tokyo instituted a claim for tax credit or refund of the sum
P107,142.75 from CIR.
Petitioner failed to act promptly on the claim , hence Tokyo filed a petition for review 6 before Court of Tax Appeals. CTA
decided for Tokyo and denied MR of CIR.

ISSUE:
Whether or not Tokyo Shipping Co. Ltd., is entitled to a refund or tax credit – whether it was able to prove that it derived no receipts
from its charter agreement, and hence is entitled to a refund of the taxes it pre-paid to the government.

RULING:
Yes. Pursuant to Section 24 (b) (2) of the National Internal Revenue Code which at that time, a resident foreign corporation
engaged in the transport of cargo is liable for taxes depending on the amount of income it derives from sources within the Philippines.
Thus, before such a tax liability can be enforced the taxpayer must be shown to have earned income sourced from the
Philippines.
Indeed, a claim for refund is in the nature of a claim for exemption 8 and should be construed in strictissimi juris against the
taxpayer. And Tokyo has the burden of proof to establish the factual basis of its claim for tax refund.
 But sufficient evidence has already been adduced by Tokyo proving that it derived no receipt from its charter agreement with
NASUTRA - M/V "Gardenia" arrived in Iloilo on January 10, 1981 but found no raw sugar to load and returned to Japan without any
cargo laden on board.

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

JOSE B. L. REYES and EDMUNDO A. REYES, petitioners,
vs.PEDRO ALMANZOR (196 SCRA 322; April 26, 1991)

FACTS:
Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta. Cruz Districts,
City of Manila, which are leased and entirely occupied as dwelling sites by tenants. Said tenants were paying monthly rentals not
exceeding three hundred pesos (P300.00) in July, 1971.
On July 14, 1971, the National Legislature enacted Republic Act No. 6359 prohibiting for one year from its effectivity, an
increase in monthly rentals of dwelling units or of lands on which another's dwelling is located, where such rentals do not exceed
three hundred pesos (P300.00) a month but allowing an increase in rent by not more than 10% thereafter.
On October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the prohibition to increase
monthly rentals below P300.00 and by indefinitely suspending the aforementioned provision of the Civil Code, excepting leases with
a definite period. Consequently, the Reyeses were precluded from raising the rentals and from ejecting the tenants thereof.
The City Assessor of Manila assessed the value of the Reyeses property on the schedule of market values duly reviewed by
the Secretary of Finance. The revision entailed an increase to the tax rates and the petitioners averred that the reassessment imposed
upon them greatly exceeded the annual income derived from their properties.

ISSUE:
Whether or not income approach is the method to be used in the tax assessment and not the comparable sales approach.

HELD:
The income approach and not the comparable sales approach must be used. “By no strength of the imagination can the
market value of properties covered by P.D. No. 20 be equated with the market value of properties not so covered. The former has
naturally a much lesser market value in view of the rental restrictions.
In the case at bar, not even the factors determinant of the assessed value of subject properties under the "comparable sales
approach" were presented by the public respondents, namely:
(1) that the sale must represent a bonafide arm's length transaction between a willing seller and a willing buyer and
(2) the property must be comparable property.
Nothing can justify or support their view as it is of judicial notice that for properties covered by P.D. 20 especially during the
time in question, there were hardly any willing buyers. As a general rule, there were no takers so that there can be no reasonable basis
for the conclusion that these properties were comparable with other residential properties not burdened by P.D. 20.”

G.R. No. L-67649 June 28, 1988

ENGRACIO FRANCIA, petitioner,
vs. INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, respondents.

FACTS:
Engracio Francia was the registered owner of a house and lot located in Pasay City. A portion of such property was
expropriated by the Republic of the Philippines in 1977. It appeared that Francia did not pay his real estate taxes from 1963 to 1977.
Thus, his property was sold in a public auction by the City Treasurer of Pasay City.

ISSUE:
Whether the expropriation payment may compensate for the real estate taxes due.

HELD:
There can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person canot
refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected.
The collection of a tax annot await the results of a lawsuit against the government. Internal revenue taxes cannot be the
subject of compensation. The Government and the taxpayer are not mutually creditors and debtors of each other under Article 1278
of the Civil Code and a claim of taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.
Commissioner vs. Itogon-Suyoc Mines
GR L-25299, 29 July 1969
En Banc, Fernando (J): 9 concur, 1 took no part

FACTS: Itogon-Suyoc Mines filed its income tax return for the fiscal year 1959 to 1960. Four months later, it filed an amended
income tax return, reporting a loss. It thus sought a refund from the Commissioner. When it filed its income tax return on the next
year, it deducted an amount representing alleged tax credit for overpayment for the preceding fiscal year. The Commissioner
imposed an amount P1,512.83 as 1% monthly interest on the amount of P13,155.20 from January to December 1962. The basis for
such assessment was allegedly the absence of a legal right to deduct said amount before the tax credit or refund is approved by the
Commissioner.

ISSUE:
Whether the assessment on interest was justified.

HELD:
The Tax Code provides that interest upon the amount determined as a deficiency shall be assessed and shall be paid upon
notice and demand from the Commissioner at the rate therein specified. It made clear, however, in an earlier provision found in the
same section that if in any preceding year, the taxpayer was entitled to a refund of any amount due as tax, such amount, if not
refunded, may be deducted from the tax to be paid. Although the imposition of monthly interest does not constitute penalty but a
just compensation to the State for the delay in paying the tax and for the concomitant use by the taxpayer of funds that rightfully
should be in government’s hands; in light of the overpayment for 1959 and 1960, it cannot be said that the taxpayer was guilty of
delay enabling it to utilize the money.
The company is entitled to refund.

G.R. No. 97787 August 1, 1996

The Anti-Graft League of the Philippines, Inc., represented by REYNALDO L. BAGATSING, in his capacity as Chief
Prosecutor/Investigator, petitioner, vs.Hon. REYNALDO SAN JUAN, et al.

FACTS:
Marcos issued a decree establishing the Technological Colleges of Rizal. It directed the Board to provide funds for the
purchase of 4 parcels of land which belonged to Ortigas &Co. For 12 yrs, the land was idle and construction did not materialize so
the Board authorized the selling of the lot. This was sold to Valley View Realty.
Ortigas filed for rescission of contract contending that it violated the terms of the contract by selling such lot to Valley View.
The Board made a Resolution providing for the rescission of the deed of sale to Valley View.
Valley View filed a case against the Province of Rizal for specific performance but was dismissed. Thereafter, a compromise
agreement was executed between Province and Ortigas to reconvey the lots to Ortigas. The Anti-Graft League of the Philippines is a
non-government organization, constituted to protect the interest of the Republic and its instrumentalities and political subdivisions
against abuses its public official and employees, claims the instant petition for certiorari is a taxpayer’s suit because the Provincial
Board of Rizal allegedly illegally disbursed public funds in transactions involving the land.

ISSUE:
Whether or not this is a case of taxpayer’s suit.

HELD:
To constitute a taxpayer’s suit, two requisites: (1) that public funds are disbursed by a political subdivision or
instrumentality and (2) in doing so, a law is violated or some irregularity is committed, and that the petitioner is directly affected by
the alleged ultra vires act.
In the case at bar, petitioner’s standing should not even be made an issue here since standing is a concept in constitutional
law and here no constitutional question is actually involved. The disbursement of public funds was only made when the Province
bought the lands from Ortigas. Petitioner never referred to such purchase as an illegal disbursement of public funds but focused on
the alleged fraudulent reconveyance of said property to Ortigas because the price paid was lower than the prevailing market value
of neighboring lots.
As a taxpayer, petitioner would somehow be adversely affected by an illegal use of public money. But when no such
unlawful spending has been shown petitioner, even as a taxpayer, cannot question the transaction executed by the Province and
Ortigas for the reason that it is not privy to said contract.
G.R. No. L-59068 January 27, 1983
JOSE MARI EULALIO C. LOZADA and ROMEO B. IGOT, petitioners,
vs.THE COMMISSION ON ELECTIONS, respondent.

FACTS:
This is a petition for mandamus filed by Lozada and Igot as a representative suit for and in behalf of those who wish to
participate in the election, to compel the respondent COMELEC to call a special election to fill up existing 12 vacancies in the Interim
Batasan Pambansa.
Petitioner Lozada claims that he is a citizen taxpayer and a bonafide voter who desires to run for the position in the Batasan
Pambansa; while petitioner Romeo B. Igot alleges that, as a citizen taxpayer, he has standing to petition by mandamus the calling of
a special election as mandated by the 1973 Constitution.
The respondent COMELEC, represented by counsel, opposes the petition alleging that 1) petitioners lack standing to file the
instant petition for they are not the proper parties to institute the action; 2) this Court has no jurisdiction to entertain this petition;
and 3) Section 5(2), Article VIII of the 1973 Constitution does not apply to the Interim Batasan Pambansa.

ISSUE:
Whether or not the petitioners have legal standing. (Court ruled in negative)

RULING:
As taxpayers, petitioners may not file the instant petition, for nowhere is it alleged that tax money is being illegally spent.
The act complained of involves no expenditure of public funds. It is only when an act complained of involves the illegal expenditure
of public money that the so-called taxpayer suit may be allowed. What the case at bar seeks is one that entails expenditure of public
funds which may be illegal because it would be spent for a purpose that of calling a special election which has no authority either in
the Constitution or a statute.
As voters, neither have petitioners the requisite interest or personality to qualify them to maintain and prosecute the
present petition. The unchallenged rule is that the person who impugns the validity of a statute must have a personal and
substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement.
Petitioners' standing to sue may not be predicated upon a generalized interest, which is held in common by all members of
the public because of the necessarily abstract nature of the injury supposedly shared by all citizens.
Concrete injury, whether actual or threatened, is that indispensable element of a dispute which serves in part to cast it in a
form traditionally capable of judicial resolution. Petitioners have not demonstrated any permissible personal stake. Petitioner
Lozada does not only fail to inform the Court of the region he wants to be a candidate but makes indiscriminate demand that special
election be called throughout the country.
The Supreme Court's jurisdiction over the COMELEC is only to review by certiorari the latter's decision, orders or rulings, as
the Constitution provides (Article XI IC Section 11). There is in this case no decision, order or ruling of the COMELEC which is sought
to be reviewed by this Court under its certiorari jurisdiction.
Mandamus will not lie in this case because it is not shown that petitioners have a clear right to the holding of a special
election which is equally the clear and ministerial duty of COMELEC to respect. It is obvious that the holding of special elections in
several regional districts where vacancies exist, would entail huge expenditure of money. Only the Batasan Pambansa can make the
necessary appropriation for the purpose.
The provision of Section 5(2), Article VIII of the Constitution was intended to apply to vacancies in the regular National
Assembly, now Batasan Pambansa, not to the Interim Batasan Pambansa.
The strongest reason why the aforecited provision of the Constitution is not intended to apply to the Interim National
Assembly is the fact that as passed by the Constitutional Convention, the Interim National Assembly was to be composed by the
delegates to the Constitutional Convention, as well as the President and VP, members of the Senate and HOR of Congress. With such
number of representatives representing each congressional district or a province, there is no need for filing vacancies occurring in
the Interim National Assembly, considering the uncertainty of the duration of its existence.
What was in the mind of the Constitutional Convention in providing for special elections to fill up vacancies is the regular
National Assembly, because a province or representative district would have only one representative in the said National Assembly.
The provision of Section 5(2) of Article VIII of the New Constitution is in the main body of the said Constitution, not in the
transitory provisions in which all matters relating to the Interim Batasan Pambansa are found. No provision outside of Article VIII on
the "Transitory Provisions" has reference or relevance to the Interim Batasan Pambansa.
G.R. No. 99886 March 31, 1993
JOHN H. OSMEÑA, petitioner, vs. OSCAR ORBOS, in his capacity as Executive Secretary

FACTS:
PD 1956 (REVISING THE RATES OF SPECIFIC TAX…) was issued to create the Oil Price Stabilization Fund (OPSF) designed to
reimburse oil companies for cost increases in crude oil resulting from exchange rate fluctuations and from increases in the prices of
oil in the world market. It was later amended by EO 137 which expands the grounds for reimbursement to oil companies for possible
cost underrecovery incurred as a result of the reduction of domestic prices of petroleum products.
In 1991, the OPSF incurred a deficit to which the Energy Regulatory Board (ERB) tried to resolve such problem by issuing an
order to increase pump prices of petroleum and such shall have covered the OPSF deficit within 6 months.
Osmena reacted to this by claiming that the OPSF should be treated as a special fund and not as a trust account/fund
because a special tax collected for a specific purpose shall have its revenue expended for such purposes only and not channeled to
another government objective and that PD 1956 is unconstitutional because it confers invalid delegation to ERB.
It thus appears that the challenge posed by the petitioner is premised primarily on the view that the powers granted to the
ERB under PD 1956, partake the nature of the taxation power of the State.

ISSUES:
(1) Whether PD 1956 is a legislation partaking the nature of the taxation power of the State or is it more of police power;
(2) Whether Paragraph 1 PD No. 1956 is unconstitutional for being an undue and invalid delegation of legislative power, setting no
limit on the powers of the ERB

HELD:
The fluctuations in world market prices and foreign exchange rates would in a completely free market translate into
corresponding adjustments in domestic prices of oil and petroleum products with sympathetic frequency. But domestic prices which
vary from day to day would result in a chaotic market with unpredictable effects upon the country’s economy.
The OPSF was established to protect local consumers from the adverse consequences that frequent oil price adjustments
may have upon the economy. The OPSF is thus a buffer mechanism through which the domestic consumer prices of oil and petroleum
products are stabilized instead of fluctuating every so often.
The establishment and maintenance of the OPSF is well within that power and responsibility of the government to secure the
physical and economic survival—it is within the police power of the State. The stabilization and subsidy of domestic prices of petroleum
products is regarded as public purpose.
With regard to undue delegation of legislative power, the Court finds that the authority conferred upon the ERB to impose
additional amounts on petroleum provides a sufficient standard. PD 1956 expressly authorizes the ERB to impose additional amounts
to augment the resources of the Fund. What is here involved is not so much the power of taxation as police power.
Although the provision authorizing the ERB to impose additional amounts could be construed to refer to the power of
taxation, it cannot be overlooked that the overriding consideration is to enable the delegate to act with expediency in carrying out the
objectives of the law which are embraced by the police power of the State.
Constant fluctuation of the various factors involved in the determination of the price of oil and petroleum products do not
conveniently permit the setting of fixed or rigid parameters in the law as proposed by the petitioner.
As such, the standard as it is expressed, suffices to guide the delegate in the exercise of the delegated power. The petition is
granted only for the nullification of the reimbursement of financing charges (because they were not incurred as a result of the
reduction of domestic prices of petroleum products.

DAVAO GULF LUMBER CORP v. CIR

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

FACTS:
Republic Act No. 1435 entitles miners and forest concessioners to the refund of 25% of the specific taxes paid by the oil
companies, which were eventually passed on to the user--the petitioner in this case--in the purchase price of the oil products.
Petitioner filed before respondent Commissioner of Internal Revenue (CIR) a claim for refund in the amount representing 25% of the
specific taxes actually paid on the above-mentioned fuels and oils that were used by petitioner in its operations.
However petitioner asserts that equity and justice demands that the refund should be based on the increased rates of specific
taxes which it actually paid, as prescribed in Sections 153 and 156 of the NIRC. Public respondent, on the other hand, contends that it
should be based on specific taxes deemed paid under Sections 1 and 2 of RA 1435.
ISSUE:
Should the petitioner be entitled under Republic Act No. 1435 to the refund of 25% of the amount of specific taxes it actually paid on
various refined and manufactured mineral oils and other oil products, and not on the taxes deemed paid and passed on to them, as
end-users, by the oil companies?

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

Supplemental:
A tax cannot be imposed unless it is supported by the clear and express language of a statute. On the other hand, once the
tax is unquestionably imposed, a claim of exemption from tax payments must be clearly shown and based on language in the law too
plain to be mistaken. Section 5, RA 1435 as a tax exemption, must be construed strictissimi juris against the grantee.
Supported by CIR v. CA and Atlas Co., CIR v. Rio Tuba Nickel Mining Corp. and Insular Lumber Co. - all cases where purchases
was made BEFORE 1997 NIRC is in effect. According to an eminent authority on taxation, there is no tax exemption solely on the
ground of equity

COMMISSIONER OF INTERNAL REVENUE V. COURT OF APPEALS

AND YMCA
G.R.NO.L-124043 OCTOBER 14, 1998

FACTS:
Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are
beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives.
In 1980, private respondent earned, among others, an income of P676,829.80 from leasing out a portion of its premises to
small shop owners, like restaurants and canteen operators, and P44,259.00 from parking fees collected from non-members. On July
2, 1984, the commissioner of internal revenue (CIR) issued an assessment to private respondent, in the total amount of P415,615.01
including surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees
and deficiency withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its basic
protest, filed a letter dated October 8, 1985. In reply, the CIR denied the claims of YMCA.
Contesting the denial of its protest, the YMCA filed a petition for review at the Court of Tax Appeals (CTA) on March 14, 1989.
In due course, the CTA issued this ruling in favor of the YMCA:

ISSUE:
Whether or not the YMCA is exempted from rental income derived from the lease of its properties

RULING:
The rental income of the YMCA is taxable.
Petitioner argues that while the income received by the organizations enumerated in Section 27 (now Section 26) of the NIRC
is, as a rule, exempted from the payment of tax "in respect to income received by them as such," the exemption does not apply to
income derived "xxx from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of
the disposition made of such income xxx" We agree with the commissioner.
In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of
then Section 27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties,
real or personal, be subject to the tax imposed by the same Code.
The exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Sec. 27 of the
NIRC; court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at
construction.
The said provision mandates that the income of exempt organizations (such as YMCA) from any of their properties, real or
personal, be subject to the tax imposed by the same Code. Private respondent is exempt from the payment of property tax, but nit
income tax on rentals from its property.
Walter Lutz vs. Araneta
GR L-7859, 22 December 1955

FACTS:
Plaintiff Walter Lutz, in his capacity as judicial administrator of the intestate estate of Antionio Ledesma, sought to recover
from the CIR the sum of P14,666.40 paid by the estate as taxes, under section 3 of the CA 567 or the Sugar Adjustment Act thereby
assailing its constitutionality, for it provided for an increase of the existing tax on the manufacture of sugar, alleging that such
enactment is not being levied for a public purpose but solely and exclusively for the aid and support of the sugar industry thus making
it void and unconstitutional.
The sugar industry situation at the time of the enactment was in an imminent threat of loss and needed to be stabilized by
imposition of emergency measures.

ISSUE:
Whether the tax is valid in supporting an industry.

HELD:
The tax is levied with a regulatory prupose, i.e. to provide means for the rehabilitation and stabilization of the threatened
sugar industry. The act is primarily an exercise of police power, and is not a pure exercise of taxing power.
As sugar production is one of the great industries of the Philippines; and that its promotion, protection and advancement
redounds greatly to the general welfare, the legislature found that the general welfare demanded that the industry should be
stabilized, and provided that the distribution of benefits therefrom be readjusted among its component to enable it to resist the added
strain of the increase in tax that it had to sustain.
Further, it cannot be said that the devotion of tax money to experimental stations to seek increase of efficiency in sugar
production, utilization of by-products, etc., as well as to the improvement of living and working conditions in sugar mills and
plantations, without any part of such money being channeled diectly to private persons, constitute expenditure of tax money for
private purposes.
The tax is valid.

LUTZ vs. ARANETA

G.R. No. L-7859 December 22, 1955

FACTS:
Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency, due to the threat to our industry
by the imminent imposition of export taxes upon sugar as provided in the Tydings-McDuffie Act, and the "eventual loss of its
preferential position in the United States market"; wherefore, the national policy was expressed "to obtain a readjustment of the
benefits derived from the sugar industry by the component elements thereof" and "to stabilize the sugar industry so as to prepare it
for the eventuality of the loss of its preferential position in the United States market and the imposition of the export taxes."
In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the manufacture of sugar, on a graduated
basis, on each picul of sugar manufactures; while section 3 levies on owners or persons in control of lands devoted to the cultivation
of sugar cane and ceded to others for a consideration, on lease or otherwise.
Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to
recover from the Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the
crop years 1948-1949 and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the aid and support of the
sugar industry exclusively, which in plaintiff's opinion is not a public purpose for which a tax may be constitutionally levied. The action
having been dismissed by the Court of First Instance, the plaintiffs appealed the case directly to this Court

ISSUE:
Whether or not taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act is legal?

RULING:
As the protection and promotion of the sugar industry is a matter of public concern the Legislature may determine within
reasonable bounds what is necessary for its protection and expedient for its promotion. Here, the legislative must be allowed full play,
subject only to the test of reasonableness; and it is not contended that the means provided in section 6 of Commonwealth Act No.
567 bear no relation to the objective pursued or are oppressive in character. If objective and methods are alike constitutionally valid,
no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment.
 Taxation may be made the implement of the state's police power. It is inherent in the power to tax that a state be free to
select the subjects of taxation, and it has been repeatedly held that "inequalities which result from a singling out of one particular
class for taxation or exemption infringe no constitutional limitation

Punzalan vs. Municipal Board of Manila,

95 Phil. 46 (1954) G.R. No. L-4817, May 26, 1954

FACTS:
The municipal board of the City of Manila on July 25, 1950, imposes a municipal occupation tax on persons exercising various
professions in the city and penalizes non-payment of the tax “by a fine of not more than two hundred pesos or by imprisonment of
not more than six months, or by both such fine and imprisonment in the discretion of the court.”
Among the professions taxed were those to which plaintiffs belong. The ordinance was enacted pursuant to paragraph (1) of
section 18 of the Revised Charter of the City of Manila (as amended by Republic Act No. 409), which empowers the Municipal Board
of said city to impose a municipal occupation tax, not to exceed P50 per annum, on persons engaged in the various professions above
referred to.
Having already paid their occupation tax under section 201 of the National Internal Revenue Code, plaintiffs, upon being
required to pay the additional tax prescribed in the ordinance, paid the same under protest and then brought the present suit for the
purpose already stated.
The lower court upheld the validity of the provision of law authorizing the enactment of the ordinance but declared the
ordinance itself illegal and void on the ground that the penalty there in provided for non-payment of the tax was not legally authorized.
From this decision both parties appealed to this Court, and the only question they have presented for our determination is
whether this ruling is correct or not, for though the decision is silent on the refund of taxes paid plaintiffs make no assignment of error
on this point.

ISSUE:
Whether double taxation of certain classes is authorized by law?

HELD:
As to plaintiffs' appeal, the contention in substance is that this ordinance and the law authorizing it constitute class legislation,
are unjust and oppressive, and authorize what amounts to double taxation. The Legislature may, in its discretion, select what
occupations shall be taxed, and in the exercise of that discretion it may tax all, or it may select for taxation certain classes and leave
the others untaxed
Plaintiffs brand the ordinance unjust and oppressive because they say that it creates discrimination within a class in that while
professionals with offices in Manila have to pay the tax, outsiders who have no offices in the city but practice their profession therein
are not subject to the tax. Plaintiffs make a distinction that is not found in the ordinance. The ordinance imposes the tax upon every
person "exercising" or "pursuing" in the City of Manila naturally any one of the occupations named, but does not say that such person
must have his office in Manila. What constitutes exercise or pursuit of a profession in the city is a matter of judicial determination.
The argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed
by the city (1 Cooley on Taxation, 4th ed., p. 492), it being widely recognized that there is nothing inherently obnoxious in the
requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the
political subdivisions thereof.

Pepsi-Cola Bottling Company of the Philippines, Inc. v. Municipality of Tanauan

G.R. No. L-31156; February 27, 1976

FACTS:
In February 1963, plaintiff commenced a complaint seeking to declare Section 2 of R.A. 2264 (Local Autonomy Act)
unconstitutional as an undue delegation of taxing power and to declare Ordinance Nos. 23 and 27 issued by the Municipality of
Tanauan, Leyte as null and void.
Municipal Ordinance No. 23 levies and collects from soft drinks producers and manufacturers one-sixteenth (1/16) of a
centavo for every bottle of soft drink corked. On the other hand, Municipal Ordinance No. 27 levies and collects on soft drinks produced
or manufactured within the territorial jurisdiction of the municipality a tax of one centavo (P0.01) on each gallon of volume capacity.
The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.”

ISSUES: (1) Is Section 2 of R.A. 2264 an undue delegation of the power of taxation? (2) Do Ordinance Nos. 23 and 24 constitute double
taxation and impose percentage or specific taxes?
RULING:
(1) Court ruled in negative. The power of taxation is purely legislative and cannot be delegated to the executive or judicial
department of the government without infringing upon the theory of separation of powers. But as an exception, the theory does not
apply to municipal corporations. Legislative powers may be delegated to local governments in respect of matters of local concern.
(2) Cpurt ruled in negative. The Municipality of Tanauan discovered that manufacturers could increase the volume contents
of each bottle and still pay the same tax rate since tax is imposed on every bottle corked. To combat this scheme, Municipal Ordinance
No. 27 was enacted. As such, it was a repeal of Municipal Ordinance No. 23. In the stipulation of facts, the parties admitted that the
Municipal Treasurer was enforcing Municipal Ordinance No. 27 only. Hence, there was no case of double taxation.

PEPSI-COLA vs MUNICIPALITY OF TANAUAN G.R. No. L-31156 February 27, 1976

FACTS:
The municipality of Tanauan, Leyte enacted two ordinances in 1962: The first one, Municipal Ordinance No. 23 levies and
collects "from soft drinks producers and manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked."
For the purpose of computing the taxes due, the person, firm, company or corporation producing soft drinks shall submit to the
Municipal Treasurer a monthly report, of the total number of bottles produced and corked during the month.
Municipal Ordinance No. 27 levies and collects "on soft drinks produced or manufactured within the territorial jurisdiction of
this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity." For the purpose of
computing the taxes due, the person, firm, company, partnership, corporation or plant producing soft drinks shall submit to the
Municipal Treasurer a monthly report of the total number of gallons produced or manufactured during the month.
Pepsi-Cola commenced a complaint with preliminary injunction before the Court of First Instance of Leyte for that court to
declare Section 2 of the Local Autonomy Act unconstitutional as an undue delegation of taxing authority as well as to declare
Ordinances Nos. 23 and 27 null and void.
Section 2 of the Local Autonomy Act of 1959 provides: “xxx, all chartered cities, municipalities and municipal district shall
have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business, or exercising privileges
in chartered cities, municipalities or municipal districts xxxx.”
Pepsi said both Ordinances Nos. 23 and 27 embrace or cover the same subject matter and the production tax rates imposed
therein are practically the same, and second, that on January 17, 1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his
letter addressed to the Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by the latter of the
provisions of said Ordinance No. 27 series of 1962.

ISSUES:
1. Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory and oppressive and invalid as double taxation?
2. Do Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or specific taxes?
3. Are Ordinances Nos. 23 and 27 unjust and unfair?

RULING:
I.
As to undue delegation: The rule is that the power of taxation is purely legislative and cannot be delegated. The exception,
however, lies in the case of municipal corporations. Legislative powers may be delegated to local governments in respect of matters
of local concern. By necessary implication, the legislative power to create political corporations for purposes of local self-government
carries with it the power to confer on such local governmental agencies the power to tax. Moreover, under the New Constitution,
local governments are granted the autonomous authority to create their own sources of revenue and to levy taxes. The plenary nature
of the taxing power thus delegated, contrary to plaintiff-appellant's pretense, would not suffice to invalidate the said law as
confiscatory and oppressive.
As to the ordinances being confiscatory and oppressive: The taking of property without due process of law may not be
passed over under the guise of taxing power. This is not to say though that the constitutional injunction against deprivation of property
without due process of law may be passed over under the guise of the taxing power, except when the taking of the property is in the
lawful exercise of the taxing power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed; (3)
either the person or property taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment and collection
of certain kinds of taxes notice and opportunity for hearing are provided.
Due process does not require that the property subject to the tax or the amount of tax to be raised should be determined by
judicial inquiry, and a notice and hearing as to the amount of the tax and the manner in which it shall be apportioned are generally
not necessary to due process of law.
As to the municipal ordinance being invalid on the ground of double taxation resulting for delegation by the National
Government: There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of
double taxation. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local
taxation may not be exercised.
Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity
or by the same jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by the city or
municipality.

II.
There is no double taxation here. Ordinance No. 23, the first tax, levies or collects from soft drinks producers or manufacturers
a tax of one-sixteen (1/16) of a centavo for every bottle corked, irrespective of the volume contents of the bottle used. When it was
discovered that the producer or manufacturer could increase the volume contents of the bottle and still pay the same tax rate, the
Municipality of Tanauan enacted Ordinance No. 27 imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of
volume capacity. The difference between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No.
23, it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces,
U.S.) of volume capacity.
The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain
substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even without words to that effect. Moreover, the
municipality mentioned in its letter that it was only seeking to enforce Ordinance No. 27, series of 1962.
As to the remaining Ordinance No. 27 imposes a percentage or a specific tax? Undoubtedly, the taxing authority conferred
on local governments under Section 2, Republic Act No. 2264, is broad enough as to extend to almost "everything, accepting those
which are mentioned therein." As long as the tax levied under the authority of a city or municipal ordinance is not within the exceptions
and limitations in the law, the same comes within the ambit of the general rule. The limitation applies, particularly, to the prohibition
against municipalities and municipal districts to impose "any percentage tax or other taxes in any form based thereon nor impose
taxes on articles subject to specific tax except gasoline, under the provisions of the National Internal Revenue Code." For purposes of
this particular limitation, a municipal ordinance which prescribes a set ratio between the amount of the tax and the volume of sale of
the taxpayer imposes a sales tax and is null and void for being outside the power of the municipality to enact.
The imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft drinks
produced or manufactured under Ordinance No. 27 does not partake of the nature of a percentage tax on sales, or other taxes in any
form based thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The volume capacity of the taxpayer's
production of soft drinks is considered solely for purposes of determining the tax rate on the products, but there is not set ratio
between the volume of sales and the amount of the tax.
Nor can the tax levied on softdrinks be treated as a specific tax. Specific taxes are those imposed on specified articles, such
as distilled spirits, wines, fermented liquors, products of tobacco other than cigars and cigarettes, matches firecrackers, manufactured
oils and other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing cards, saccharine, opium and other habit-
forming drugs. Soft drink is not one of those specified.]

III.
The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all softdrinks, produced or manufactured,
or an equivalent of 1-½ centavos per case is not unjust and unfair. Municipal corporations are allowed much discretion in determining
the rates of imposable taxes.
This is in line with the constitutional policy of according the widest possible autonomy to local governments in matters of
local taxation. Unless the amount is so excessive as to be prohibitive, courts will go slow in writing off an ordinance as unreasonable.