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PALS Bar Ops Pilipinas Must Read Cases TAXATION 2015
PALS Bar Ops Pilipinas Must Read Cases TAXATION 2015
TAX I
Paseo Realty & Development Corporation v. Court of Appeals, GR No. 119286, October 13,
2004
Taxation is described as a destructive power which interferes with the personal and property rights
of the people and takes from them a portion of their property for the support of the government.
Commissioner of Internal Revenue v. Fortune Tobacco Corporation, 559 SCRA 160 (2008)
The power to tax is inherent in the State, such power being inherently legislative, based on the
principle that taxes are a grant of the people who are taxed, and the grant must be made by the
immediate representative of the people, and where the people have laid the power, there it must
remain and be exercised.
Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667 (1996)
As an incident of sovereignty, the power to tax has been described as unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is to be found only in
the responsibility of the legislature which imposes the tax on the constituency who are to pay it.
It is a settled principle that the power of taxation by the state is plenary. Comprehensive and
supreme, the principal check upon its abuse resting in the responsibility of the members of the
legislature to their constituents.
Commissioner of Internal Revenue v. SM Prime Holdings, Inc., 613 SCRA 774 (2010)
The power to tax is sometimes called the power to destroy. Therefore, it should be exercised with
caution to minimize injury to the proprietary rights of the taxpayer. It must be exercised fairly,
equally and uniformly, lest the tax collector kills the ‘hen that lays the golden egg.’
The 20% senior citizen discount and tax deduction scheme are valid exercises of police power of
the State absent a clear showing that it is arbitrary, oppressive or confiscatory. The discount is
intended to improve the welfare of the senior citizens who, at their age, are less likely to be
gainfully employed, more prone to illnesses and other disabilities, and thus, in need of subsidy in
purchasing commodities. As to its nature an effects, although the regulation affects the pricing,
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and, hence, the profitability of a private establishment, it does not purport to appropriate or burden
specific properties, used in the operation or conduct of the business of private establishments, for
the use or benefit of the public, or senior citizens for that matter, but merely regulates the pricing
of goods and services relative to, and the amount of profits or income/gross sales that such private
establishments may derive from, senior citizens. The State can employ police power measures to
regulate the pricing of goods and services, and, hence, the profitability of business establishments
in order to pursue legitimate State objectives for the common good, provided, the regulation does
not go too far as to amount to “taking.”
The motivation behind many taxation measures is the implementation of police power goals.
Progressive income taxes alleviate the margin between rich and poor; the so-called “sin taxes” on
alcohol and tobacco manufacturers help dissuade the consumers from excessive intake of these
potentially harmful products.
The expenses of government, having for their object the interest of all, should be borne by
everyone, and the more man enjoys the advantages of society, the more he ought to hold himself
honored in contributing to those expenses.
A tax is imposed under the taxing power of the government principally for the purpose of raising
revenues to fund public expenditures; toll fees, on the other hand, are collected by private tollway
operators as reimbursement for the costs and expenses incurred in the construction, maintenance
and operation of the tollways. Taxes may be imposed only by the government under its sovereign
authority, toll fees may be demanded by either the government or private individuals or entities,
as an attribute of ownership.
The Court was satisfied that the coco-levy funds were raised pursuant to law to support a proper
governmental purpose. They were raised with the use of the police and taxing powers of the State
for the benefit of the coconut industry and its farmers in general.
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.
Despite the natural reluctance to surrender part of one's hard earned income to the taxing
authorities, every person who is able to must contribute his share in the running of the government.
The government for its 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 it is
an arbitrary method of exaction by those in the seat of power.
As well said in a prior case, revenue laws are not intended to be liberally construed. Considering
that taxes are the lifeblood of the government and in Holmes’s memorable metaphor, the price we
pay for civilization, tax laws must be faithfully and strictly implemented.
Double taxation means taxing the same property twice when it should be taxed only once; that is,
“taxing the same person twice by the same jurisdiction for the same thing. There is indeed double
taxation if a taxpayer is subjected to the taxes under both Section 14 (Tax on Manufacturers,
Assemblers and other Processors) and Section 21 (Tax on Business Subject to the Excise, Value-
Added or Percentage Taxes under the NIRC) of the Tax Ordinance No. 7794.
SERAFICA v. CITY TREASURER OF ORMOC, G.R. No. L- 24813, April 28, 1968
Regulation and taxation are two different things, the first being an exercise of police power,
whereas the latter involves the exercise of the power of taxation. While R.A. 2264 provides that
no city may impose taxes on forest products and although lumber is a forest product, the tax in
question is imposed not on the lumber but upon its sale; thus, there is no double taxation and even
if there was, it is not prohibited.
Tax conventions are drafted with a view towards the elimination of international juridical double
taxation, which is defined as the imposition of comparable taxes in two or more states on the same
taxpayer in respect of the same subject matter and for identical periods. A corporation who has
paid 15% Branch Profit Remittance Tax (BPRT) has the right to avail (by way of refund ) of the
benefit of a preferential tax rate of 10% BPRT in accordance with the RP-Germany Tax Treaty
despite non-compliance with an application with ITAD at least 15 days before the transaction for
the lower rate. Bearing in mind the rationale of tax treaties, the requirements for the application
for availment of tax treaty relief as required by RMO No. 1-2000 should not operate to divest
entitlement to the relief as it would constitute a violation of the duty required by good faith in
complying with a tax treaty.
The Philippine Constitution provides for adherence to the general principles of international law
as part of the law of the land. The time-honored international principle of pacta sunt servanda
demands the performance in good faith of treaty obligations on the part of the states that enter into
the agreement. In this jurisdiction, treaties have the force and effect of law. The obligation to
comply with a tax treaty must take precedence over the objective of RMO No. 1-2000. Logically,
noncompliance with tax treaties has negative implications on international relations, and unduly
discourages foreign investors. The objective of RMO No. 1-2000 in requiring the application for
treaty relief with the ITAD before a party’s availment of the preferential rate under a tax treaty is
to avert the consequences of any erroneous interpretation and/or application of treaty provisions,
such as claims for refund/credit for overpayment of taxes, or deficiency tax liabilities for
underpayment. However, the underlying principle of prior application with the BIR becomes moot
in refund cases – where the very basis of the claim is erroneous or there is excessive payment
arising from the non-availment of a tax treaty relief at the first instance. CBK Power could not
have applied for a tax treaty relief 15 days prior to its payment of the final withholding tax on the
interest paid to its lenders precisely because it erroneously paid said tax on the basis of the
regular rate as prescribed by the NIRC, and not on the preferential tax rate provided under the
different treaties. The prior application requirement under RMO No. 1-2000 is not only illogical,
but is also an imposition that is not found at all in the applicable tax treaties. BIR should not
impose additional requirements that would negate the availment of the reliefs provided for under
international agreements, especially since said tax treaties do not provide for any prerequisite at
all for the availment of the benefits under said agreements.
Section 135(a) should be construed as prohibiting the shifting of the burden of the excise tax to
the international carriers who buy petroleum products from the local manufacturers. Said
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international carriers are thus allowed to purchase the petroleum products without the excise tax
component which otherwise would have been added to the cost or price fixed by the local
manufacturers or distributors/sellers.
Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e., the payment
of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is
shown that a tax is due; (2) an accompanying state of mind which is described as being "evil," in
"bad faith," "willfull," or "deliberate and not accidental"; and (3) a course of action or failure of
action which is unlawful.
This Court recognized the removal of the blanket exclusion of government instrumentalities from
local taxation as one of the most significant provisions of the 1991 LGC. Specifically, we stressed
that Section 193 of the LGC, an express and general repeal of all statutes granting exemptions
from local taxes, withdrew the sweeping tax privileges previously enjoyed by the NPC under its
Charter.
Since the law granted the press a privilege, the law could take back the privilege anytime without
offense to the Constitution. The reason is simple: by granting exemptions, the State does not
forever waive the exercise of its sovereign prerogative; indeed, in withdrawing the exemption, the
law merely subjects the press to the same tax burden to which other businesses have long ago been
subject.
Nevertheless, since taxation is the rule and exemption therefrom the exception, the exemption may
thus be withdrawn at the pleasure of the taxing authority. The only exception to this rule is where
the exemption was granted to private parties based on material consideration of a mutual nature,
which then becomes contractual and is thus covered by the non-impairment clause of the
Constitution.
Taxes cannot be subject to compensation for the simple reason that the Government and the
taxpayers are not creditors and debtors of each other, debts are due to the Government in its
corporate capacity, while taxes are due to the Government in its sovereign capacity.
However, if the obligation to pay taxes and the taxpayer’s claim against the government are both
overdue, demandable, as well as fully liquidated, compensation takes place by operation of law
and both obligations are extinguished to their concurrent amounts.
While administrative agencies, such as the Bureau of Internal Revenue, may issue regulations to
implement statutes, they are without authority to limit the scope of the statute to less than what it
provides, or extend or expand the statute beyond its terms, or in any way modify explicit provisions
of the law. Hence, in case of discrepancy between the basic law and an interpretative or
administrative ruling, the basic law prevails.
Revenue Memorandum Circulars (RMCs) must not override, supplant, or modify the law, but must
remain consistent and in harmony with the law they seek to apply and implement.
BIR Ruling No. DA-489-03 is a general interpretative rule because it is a response to a query made,
not by a particular taxpayer, but by a government agency tasked with processing tax refunds and
credits. Thus, all taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance
on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010, where this Court
held that the 120+30 day periods are mandatory and jurisdictional.
It would be a robbery for the State to tax its citizens and use the funds generated for a private
purpose. When a tax law is only a mask to exact funds from the public when its true intent is to
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give undue benefit and advantage to a private enterprise, that law will not satisfy the requirement
of "public purpose."
Taxation assumes even greater significance with the ratification of the 1987 Constitution.
Thenceforth, the power to tax is no longer vested exclusively on Congress; local legislative bodies
are now given direct authority to levy taxes, fees and other charges pursuant to Article X, section
5 of the 1987 Constitution.
Clearly then, while a new slant on the subject of local taxation now prevails in the sense that the
former doctrine of local government units’ delegated power to tax had been effectively modified
with Article X, Section 5 of the 1987 Constitution now in place, the basic doctrine on local taxation
remains essentially the same. For as the Court stressed in Mactan, "the power to tax is [still]
primarily vested in the Congress."
Assuming that Section 28(2) Article VI did not exist, the enactment of the SMA [Safeguard
Measure Act] by Congress would be voided on the ground that it would constitute an undue
delegation of the legislative power to tax. The constitutional provision shields such delegation
from constitutional infirmity, and should be recognized as an exceptional grant of legislative power
to the President, rather than the affirmation of an inherent executive power.
For the source of income to be considered as coming from the Philippines, it is sufficient that the
income is derived from activities within this country regardless of the absence of flight operations
within Philippine territory. Indeed, the sale of tickets is the very lifeblood of the airline business,
the generation of sales being the paramount objective.
CITY OF IRIGA v. CAMARINES SUR III ELECTRIC COOPERATIVE, INC., G.R. No.
192945, September 5, 2012
Since it partakes of the nature of an excise tax, the situs of taxation is the place where the privilege
is exercised, in this case in the City of Iriga, where CASURECO III has its principal office and
from where it operates, regardless of the place where its services or products are delivered.
As a general rule, the VAT system uses the destination principle as a basis for the jurisdictional
reach of the tax. Goods and services are taxed only in the country where they are consumed; thus,
exports are zero-rated, while imports are taxed.
As property of public dominion, the Lucena Fishing Port Complex is owned by the Republic of
the Philippines and thus exempt from real estate tax.
Equality and uniformity in taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. The taxing power has the authority to make reasonable and
natural classifications for purposes of taxation; inequalities which result from a singling out of one
particular class for taxation or exemption infringe no constitutional limitation.
LUNG CENTER OF THE PHILIPPINES v. QUEZON CITY, G.R. No. 144104, June 29,
2004
Even as we find that the petitioner is a charitable institution, we hold that those portions of its real
property that are leased to private entities are not exempt from real property taxes as these are not
actually, directly and exclusively used for charitable purposes. On the other hand, the portions of
the land occupied by the hospital and portions of the hospital used for its patients, whether paying
or non-paying, are exempt from real property taxes.
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Section 30(E) and (G) of the NIRC requires that an institution be "operated exclusively" for
charitable or social welfare purposes to be completely exempt from income tax. An institution
under Section 30(E) or (G) does not lose its tax exemption if it earns income from its for-profit
activities. Such income from for-profit activities, under the last paragraph of Section 30, is merely
subject to income tax, previously at the ordinary corporate rate but now at the preferential 10%
rate pursuant to Section 27(B).
The incentives under R.A. No. 7227 are exclusive only to the Subic SEZ, hence, the extension of
the same to the John Hay SEZ finds no support therein. The challenged grant of tax exemption
would circumvent the Constitution's imposition that a law granting any tax exemption must have
the concurrence of a majority of all the members of Congress.
A contractor's tax is generally in the nature of an excise tax on the exercise of a privilege of selling
services or labor rather than a sale on products; and is directly collectible from the person
exercising the privilege. Being an excise tax, it can be levied by the taxing authority only when
the acts, privileges or business are done or performed within the jurisdiction of said authority.
CITY OF IRIGA v. CAMARINES SUR III ELECTRIC COOPERATIVE, INC., G.R. No.
192945, September 5, 2012
A franchise tax is a tax on the privilege of transacting business in the state and exercising corporate
franchises granted by the state. It is not levied on the corporation simply for existing as a
corporation, upon its property or its income, but on its exercise of the rights or privileges granted
to it by the government.
Indirect taxes, like VAT and excise tax, are different from withholding taxes: To distinguish, in
indirect taxes, the incidence of taxation falls on one person but the burden thereof can be shifted
or passed on to another person, such as when the tax is imposed upon goods before reaching the
consumer who ultimately pays for it. On the other hand, in case of withholding taxes, the incidence
and burden of taxation fall on the same entity, the statutory taxpayer. The burden of taxation is not
shifted to the withholding agent who merely collects, by withholding, the tax due from income
payments to entities arising from certain transactions and remits the same to the government.
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The accrual method relies upon the taxpayer’s right to receive amounts or its obligation to pay
them, in opposition to actual receipt or payment, which characterizes the cash method of
accounting. Amounts of income accrue where the right to receive them become fixed, where there
is created an enforceable liability. Similarly, liabilities are accrued when fixed and determinable
in amount, without regard to indeterminacy merely of time of payment. For a taxpayer using the
accrual method, the determinative question is, when do the facts present themselves in such a
manner that the taxpayer must recognize income or expense? The accrual of income and expense
is permitted when the all-events test has been met. This test requires: (1) fixing of a right to income
or liability to pay; and (2) the availability of the reasonable accurate determination of such income
or liability.
Tomas Calasanz, et al. vs. Commissioner of Internal Revenue, et al., G.R. No. L-26284,
October 9, 1986
The proceeds from the inherited land of petitioners, which they subdivided into small lots and in
the process converted into a residential subdivision and given the name Don Mariano Subdivision,
is taxable as ordinary income. Property initially classified as a capital asset may thereafter be
treated as an ordinary asset if a combination of the factors indubitably tend to show that the activity
was in furtherance of or in the course of the taxpayer's trade or business; thus, a sale of inherited
real property usually gives capital gain or loss even though the property has to be subdivided or
improved or both to make it salable--however, if the inherited property is
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substantially improved or very actively sold or both it may be treated as held primarily for sale to
customers in the ordinary course of the heir's business.
Stock dividends, strictly speaking, represent capital and do not constitute income to its recipient.
So that the mere issuance thereof is not yet subject to income tax as they are nothing but an
enrichment through increase in value of capital investment. However, the redemption or
cancellation of stock dividends, depending on the time and manner it was made, is essentially
equivalent to a distribution of taxable dividends, making the proceeds thereof taxable income to
the extent it represents profits. The exception was designed to prevent the issuance and cancellation
or redemption of stock dividends, which is fundamentally not taxable, from being made use of as
a device for the actual distribution of cash dividends, which is taxable.
Ma. Isabel T. Santos vs. Servier Phil., Inc., et al., G.R. No. 166377, November 28, 2008
Respondent terminated petitioner’s services due to her illness, rendering her incapable of
continuing to work, and gave her retirement benefits but withheld the tax due thereon. The
retirements benefits are taxable because the petitioner was only 41 yrs old at the time of retirement
and had rendered only 8 years of service; for these benefits to be exempt from tax, the following
requisites must concur: (1) a reasonable private benefit plan is maintained by the employer; (2) the
retiring official or employee has been in the service of the same employer for at least ten (10)
years; (3) the retiring official or employee is not less than fifty (50) years of age at the time of his
retirement; and (4) the benefit had been availed of only once.
C. M. Hoskins & Co., Inc. vs. Commissioner of Internal Revenue, G.R. No. L-24059,
November 28, 1969
Philippine Refining Company vs. Court of Appeals, et al., G.R. No. 118794, May 8, 1996
In claiming deductions for bad debts, the only evidentiary support given by PRC was the
explanation posited by its accountant, whose allegations were not supported by any documentary
evidence. One of the requisites to qualify as “bad debt” is that the debt must be actually ascertained
to be worthless and uncollectible during the taxable year, and the taxpayer must prove that he
exerted diligent efforts to collect the debts by (1) sending of statement of accounts;
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(2) sending of collection letters; (3) giving the account to a lawyer for collection; and (4) filing a
collection case in court.
Consolidated Mines, Inc. vs. Court of Tax Appeals, et al., G.R. Nos. L-18843 & 18844, August
29, 1974
Both depletion and depreciation are predicated on the same basic promise of avoiding a tax on
capital. The allowance for depletion is based on the theory that the extraction of minerals gradually
exhausts the capital investment in the mineral deposit. The purpose of the depiction deduction is
to permit the owner of a capital interest in mineral in place to make a tax-free recovery of that
depleting capital asset. A depletion is based upon the concept of the exhaustion of a natural
resource whereas depreciation is based upon the concept of the exhaustion of the property, not
otherwise a natural resource, used in a trade or business or held for the production of income. Thus,
depletion and depreciation are made applicable to different types of assets. And a taxpayer may
not deduct that which the Code allows as of another.
The intent of Congress relative to the MCIT is to grant a 4 year suspension of tax payment to newly
formed corporations. Corporations still starting have to stabilize their venture in order to obtain
stronghold in the industry. It is not a surprise when many corporations reported losses in their
initial years of operations.
Commissioner of Internal Revenue vs. Court of Appeals, et al., G.R. No. 124043, October 14,
1998
YMCA, a non-stock non-profit corporation with charitable objectives, claimed exemption from
payment of income tax by invoking the NIRC and the Constitution. While the income received by
the organizations enumerated in 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 “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”; Moreover, charitable institutions under
Art. VI, sec. 28 of the Constitution are only exempted from property taxes, and YMCA is not an
educational institution under Article XIV, Section 4 of the Constitution.
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Commissioner of Internal Revenue vs. Citytrust Investment Phils., Inc., G.R. Nos. 139786 &
140857, September 27, 2006
Citytrust and Asianbank are domestic corporations which paid gross receipts tax and claimed a
refund on the basis of a CTA ruling that the 20% FWT on a bank’s passive income does not form
part of the taxable gross receipts. The 20% FWT on a bank’s interest income forms part of the
taxable gross receipts because “gross receipts” means “the entire receipts without any deduction”;
moreover, the imposition of the 20% FWT and 5% GRT does not constitute double taxation
because GRT is a percentage tax while FWT is an income tax, and the two concepts are different
from each other.
For a taxpayer to be entitled to a tax credit or refund of creditable withholding tax, the following
requisites must be complied with: First, The claim must be filed with the CIR within the two- year
period from the date of payment of the tax; Second, It must be shown on the return of the recipient
that the income received was declared as part of the gross income; and Third, The fact of
withholding is established by a copy of the statement duly issued by the payor to the payee showing
the amount paid and the amount of tax withheld.
TAX II
GONZALO VILLANUEVA vs. SPOUSES FROILAN, G.R. No. 172804, January 24, 2011
The conveyance in question is not, first of all, one of mortis causa, which should be embodied in
a will. In this case, the monies subject of savings account were in the nature of conjugal funds. In
the case relied on, Rivera v. People's Bank and Trust Co., we rejected claims that a survivorship
agreement purports to deliver one party's separate properties in favor of the other, but simply, their
joint holdings.
RAFAEL ARSENIO S. DIZON vs. COURT OF TAX APPEALS, G.R. No. 140944, April 30,
2008
As held in Propstra v. U.S., where a lien claimed against the estate was certain and enforceable on
the date of the decedent's death, the fact that the claimant subsequently settled for lesser amount
did not preclude the estate from deducting the entire amount of the claim for estate tax purposes.
These pronouncements essentially confirm the general principle that post-death developments are
not material in determining the amount of the deduction.
SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA vs. COURT OF APPEALS,
G.R. No. 111904, October 5, 2000
The granting clause shows that Diego donated the properties out of love and affection for the donee
which is a mark of a donation inter vivos; second, the reservation of lifetime usufruct indicates
that the donor intended to transfer the naked ownership over the properties; third, the donor
reserved sufficient properties for his maintenance in accordance with his standing in society,
indicating that the donor intended to part with the six parcels of land; lastly, the donee accepted
the donation.
The Philippine American Life and General Insurance Company vs. The Secretary of Finance
and the Commissioner of Internal Revenue, G.R. No. 210987 (November 24, 2014). The
absence of donative intent does not exempt the sales of stock transaction from donor’s tax since
Sec. 100 of the NIRC categorically states that the amount by which the fair market value of the
property exceeded the value of the consideration shall be deemed a gift. Thus, even if there is no
actual donation, the difference in price is considered a donation by fiction of law. Moreover, Sec.
7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters for
determining the “fair market value” of a sale of stocks. Lastly, RMC 25-11, even if issued after
the sale, was not being applied retroactively since it merely called for the strict application of Sec.
100, which was already in force the moment the NIRC was enacted.
Thus, there must be a sale, barter or exchange of goods or properties before any VAT may be
levied. Certainly, there was no such sale, barter or exchange in the subsidy given by SIS to Sony;
it was but a dole out by SIS and not in payment for goods or properties sold, bartered or exchanged
by Sony.
CIR v. SM Prime Holdings, Inc. and First Asia Realty Development Corp., G.R. No. 183505,
February 26, 2010
Among those included in the enumeration is the “lease of motion picture films, films, tapes and
discs.” This, however, is not the same as the showing or exhibition of motion pictures or films.
The legislative intent is not to impose VAT on persons already covered by the amusement tax and
this holds true even in the case of cinema/theater operators taxed under the LGC of 1991 precisely
because the VAT law was intended to replace the percentage tax on certain services.
According to the Destination Principle, goods and services are taxed only in the country where
these are consumed. In connection with the said principle, the Cross Border Doctrine mandates
that no VAT shall be imposed to form part of the cost of the goods destined for consumption
outside the territorial border of the taxing authority. Hence, actual export of goods and services
from the Philippines to a foreign country must be free of VAT, while those destined for use or
consumption within the Philippines shall be imposed with 10% VAT.
CIR v. Seksui Jushi Phils, Inc. G.R. No. 149671, July 21, 2006
exemptions are personal because the manifest intention of the agreement is to exempt the
contractor so that no contractor's tax may be shifted to the contractee WHO.
Under Section 112(A) of the NIRC, for VAT-registered persons whose sales are zero-rated or
effectively zero-rated, a claim for the refund or credit of creditable input tax that is due or paid,
and that is attributable to zero-rated or effectively zero-rated sales, must be filed within two years
after the close of the taxable quarter when such sales were made. The reckoning frame would
always be the end of the quarter when the pertinent sale or transactions were made, regardless of
when the input VAT was paid. Also, in the filing of judicial claims, the 30-day period to appeal to
the CTA is dependent on the 120-day period, compliance with both periods is jurisdictional. The
period of 120 days is a prerequisite for the commencement of the 30-day period to appeal to the
CTA.
Commissioner of Internal Revenue vs. Silicon Philippines, Inc. (formerly Intel Philippines
Manufacturing, Inc.), G.R. No. 169778 (March 12, 2014).
Prior to seeking judicial recourse before the CTA, a VAT–registered person may apply for the
issuance of a tax credit certificate or refund of creditable input tax attributable to zero–rated or
effectively zero–rated sales within two (2) years after the close of taxable quarter when the sales
or purchases were made. Additionally, under paragraph (D) of Section 112, Tax Code, the
Commissioner of Internal Revenue is given a 120–day period, from submission of complete
documents in support of the administrative claim within which to act on claims for
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refund/applications for issuance of the tax credit certificate. Upon denial of the claim or
application, or upon expiration of the 120–day period, the taxpayer only has 30 days within which
to appeal said adverse decision or unacted claim before the CTA.
Taganito Mining Corporation vs. Commissioner of Internal Revenue, G.R. No. 197591 (June
18, 2014).
The 2010 Aichi case instructs that once the administrative claim is filed within the prescriptive
period, the claimant must wait for the 120-day period to end and, thereafter, he is given a 30-day
period to file his judicial claim before the CTA, even if said 120-day and 30-day periods would
exceed the aforementioned two (2)-year prescriptive period.
Taganito Mining Corporation vs. Commissioner of Internal Revenue, G.R. No. 201195
(November 26, 2014).
The 2-year period under Section 229 does not apply to appeals before the CTA in relation to claims
for a refund or tax credit for unutilized creditable input VAT. Section 229 pertains to the recovery
of taxes erroneously, illegally, or excessively collected. 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. It is, therefore, Section 112 which applies specifically with regard to claiming
a refund or tax credit for unutilized creditable input VAT.
Prior payment of taxes is not necessary before a taxpayer could avail of the 8% transitional input
tax credit: first, it was never mentioned in Section 105 of the old NIRC [now Sec. 111] that prior
payment of taxes is a requirement; second, since the law (Section 105 of the NIRC) does not
provide for prior payment of taxes, to require it now would be tantamount to judicial legislation
which, to state the obvious, is not allowed; third, a transitional input tax credit is not a tax refund
per se but a tax credit; fourth, if the intent of the law were to limit the input tax to cases where
actual VAT was paid, it could have simply said that the tax base shall be the actual value-added
tax paid; and fifth, this Court had already declared that prior payment of taxes is not required in
order to avail of a tax credit.
CIR vs Pascor Realty and Development Corp., GR no. 128315, June 29, 1999
An assessment contains not only a computation of tax liabilities, but also a demand for payment
within a prescribed period. It also signals the time when penalties and protests begin to accrue
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against the taxpayer. To enable the taxpayer to determine his remedies thereon, due process
requires that it must be served on and received by the taxpayer. Accordingly, an affidavit, which
was executed by revenue officers stating the tax liabilities of a taxpayer and attached to a criminal
complaint for tax evasion, cannot be deemed an assessment that can be questioned before the Court
of Tax Appeals.
SMI-ED Philippine Technology, Inc. vs. Commissioner of Internal Revenue, G.R. No. 175410
(November 12, 2014)
The power and duty to assess national internal revenue taxes are lodged with the BIR. The
Court of Tax Appeals has no power to make an assessment at the first instance. On matters such
as tax collection, tax refund, and others related to the national internal revenue taxes, the Court of
Tax Appeals’ jurisdiction is appellate in nature. However, because Republic Act No. 1125 also
vests the Court of Tax Appeals with jurisdiction over the BIR’s inaction on a taxpayer’s refund
claim, there may be instances when the Court of Tax Appeals has to take cognizance of cases that
have nothing to do with the BIR’s assessments or decisions. If the BIR fails to act on the request
for refund, the taxpayer may bring the matter to the Court of Tax Appeals.
Samar-I Electric Cooperative vs. Commissioner of Internal Revenue, G.R. No. 193100
(December 10, 2014).
Our stand that the law should be interpreted to mean a separation of the three different situations
of false return, fraudulent return with intent to evade tax, and failure to file a return is strengthened
immeasurably by the last portion of the provision which segregates the situations into three
different classes, namely “falsity,” “fraud” and “omission.” That there is a difference between
“false return” and “fraudulent return” cannot be denied. While the first merely implies deviation
from the truth, whether intentional or not, the second implies intentional or deceitful entry with
intent to evade the taxes due.
The rule is that in the absence of the accounting records of a taxpayer, his tax liability may be
determined by estimation. The petitioner is not required to compute such tax liabilities with
mathematical exactness. Approximation in the calculation of the taxes due is justified. To hold
otherwise would be tantamount to holding that skillful concealment is an invincible barrier to
proof. However, the rule does not apply where the estimation is arrived at arbitrarily and
capriciously. In fine, then, the petitioner acted arbitrarily and capriciously in relying on and giving
weight to the machine copies of the Consumption Entries in fixing the tax deficiency assessments
against the respondent.
its economic burden. However, the abovementioned rule should not apply to instances where the
law clearly grants the party to which the economic burden of the tax is shifted an exemption from
both direct and indirect taxes. In which case, the latter must be allowed to claim a tax refund even
if it is not considered as the statutory taxpayer under the law. In this case, PAL’s franchise grants
it an exemption from both direct and indirect taxes on its purchase of petroleum products. Hence,
PAL has the legal personality to file the claim for refund for the passed on excise taxes because of
its franchise.
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code
of 1987 deal with the same subject matter — the computation of legal periods. Under the Civil
Code, a year is equivalent to 365 days whether it be a regular year or a leap year. Under the
Administrative Code of 1987, however, a year is composed of 12 calendar months. Needless to
state, under the Administrative Code of 1987, the number of days is irrelevant. There obviously
exists a manifest incompatibility in the manner of computing legal periods under the Civil Code
and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII, Book
I of the Administrative Code of 1987, being the more recent law, governs the computation of legal
periods.
Sec. 228 of the Tax Code clearly requires that the taxpayer must be informed that he is liable for
deficiency taxes through the sending of a Preliminary Assessment Notice. The sending of a PAN
to the taxpayer is to inform him of the assessment made is but part of due process requirement in
the issuance of a deficiency tax assessment, the absence of which renders nugatory any assessment
made by the tax authorities.
absence of a fair opportunity for Enron to be informed of the bases of the assessment, the
assessment was void. This is a requirement of due process.
Records show that petitioner disputed the PAN but not the Formal Letter of Demand with
Assessment Notices. Nevertheless, we cannot blame petitioner for not filing a protest against the
Formal Letter of Demand with Assessment Notices since the language used and the tenor of the
demand letter indicate that it is the final decision of the respondent on the matter. We have time
and again reminded the CIR to indicate, in a clear and unequivocal language, whether his action
on a disputed assessment constitutes his final determination thereon in order for the taxpayer
concerned to determine when his or her right to appeal to the tax court accrues. Viewed in the light
of the foregoing, respondent is now estopped from claiming that he did not intend the Formal
Letter of Demand with Assessment Notices to be a final decision.
The request for reinvestigation and reconsideration was in effect considered denied by petitioner
when the latter filed a civil suit for collection of deficiency income. Under the circumstances, the
Commissioner of Internal Revenue, not having clearly signified his final action on the disputed
assessment, legally the period to appeal has not commenced to run. Thus, it was only when private
respondent received the summons on the civil suit for collection of deficiency income on
December 28, 1978 that the period to appeal commenced to run.
The running of the prescription period where the acts of the taxpayer did not prevent the
government from collecting the tax. Partial payment would not prevent the government from suing
the taxpayer. Because, by such act of payment, the government is not thereby “persuaded to
postpone collection to make him feel that the demand was not unreasonable or that no harassment
or injustice is meant.”
Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v. Commissioner
of Internal Revenue, G. R. No. 174942, March 7, 2008
The law prescribing a limitation of actions for the collection of the income tax is beneficial both
to the Government and to its citizens; to the Government because tax officers would be obliged to
act promptly in the making of assessment, and to citizens because after the lapse of the period of
prescription citizens would have a feeling of security against unscrupulous tax agents who will
always find an excuse to inspect the books of taxpayers, not to determine the latter’s real liability,
but to take advantage of every opportunity to molest peaceful, law-abiding citizens. Without such
a legal defense taxpayers would furthermore be under obligation to always keep their books and
keep them open for inspection subject to harassment by unscrupulous tax agents.
It is settled that the claim of the government predicated on a tax lien is superior to the claim of a
private litigant predicated on a judgment. The tax lien attaches not only from the service of the
warrant of distraint of personal property but from the time the tax became due and payable.
Besides, the distraint on the subject properties of Maritime Company of the Philippines as well as
the notice of their seizure were made by petitioner, through the Commissioner of Internal Revenue,
long before the writ of execution was issued by the Regional Trial Court.
Commissioner of Internal Revenue vs. Manila Electric Company, G.R. No. 181459 (June 9,
2014).
The claim for tax refund in the aggregate amount must fail since the same has already prescribed
under Section 229 of the Tax Code. The prescriptive period of two (2) years commences to run
from the time that the refund is ascertained, the propriety thereof is determined by law (in this
case, from the date of payment of tax), and not upon the discovery by the taxpayer of the erroneous
or excessive payment of taxes. The issuance by the BIR of the Ruling declaring the tax-exempt
status of NORD/LB, if at all, is merely confirmatory in nature. BIR Ruling No. DA- 342-2003 is
not the operative act from which an entitlement of refund is determined.
In cases before tax courts, Rules of Court applies only by analogy or in a suppletory character and
whenever practicable and convenient shall be liberally construed in order to promote its objective
of securing a just, speedy and inexpensive disposition of every action and proceeding. Since it is
not disputed that petitioner is entitled to tax exemption, it should not be precluded from presenting
evidence to substantiate the amount of refund it is claiming on mere technicality especially in this
case, where the failure to present invoices at the first instance was adequately explained by
petitioner.
For corporations, the two-year prescriptive period within which to claim a refund commences to
run, at the earliest, on the date of the filing of the adjusted final tax return. The rationale in
computing the two-year prescriptive period with respect to the petitioner corporation's claim for
refund from the time it filed its final adjustment return is the fact that it was only then that
ACCRAIN could ascertain whether it made profits or incurred losses in its business operations.
Silkair vs CIR, G.R. Nos. 171383 & 172379, November 14, 2008
The proper party to question, or seek a refund of an indirect tax is the statutory taxpayer, the person
on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to
another. Even if Petron Corporation passed on to Silkair the burden of the tax, the additional
amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a
purchaser.
Angeles City vs. Angeles City Electric Corp., GR 166134, June 29, 2010
The National Internal Revenue Code of 1997 (NIRC) expressly provides that no court shall have
the authority to grant an injunction to restrain the collection of any national internal revenue tax,
fee or charge imposed by the code. The situation, however, is different in the case of the collection
of local taxes as there is no express provision in the LGC prohibiting courts from issuing an
injunction to restrain local governments from collecting taxes. Such statutory lapse or intent,
however it may be viewed, may have allowed preliminary injunction where local taxes are
involved but cannot negate the procedural rules and requirements under Rule 58.
The BIR may therefore abate or cancel the whole or any unpaid portion of a tax liability, inclusive
of increments, if its assessment is excessive or erroneous; or if the administration costs involved
do not justify the collection of the amount due. No mutual concessions need be made, because an
excessive or erroneous tax is not compromised; it is abated or canceled. Only correct taxes should
be paid.
Law on Taxation
National Power Corporation v. City of Cabanatuan, G.R. No. 149110, April 09, 2003
As commonly used, a franchise tax is "a tax on the privilege of transacting business in the state
and exercising corporate franchises granted by the state." To determine whether the petitioner is
covered by franchise tax, the following requisites should concur: (1) that petitioner has a
"franchise" in the sense of a secondary or special franchise; and (2) that it is exercising its rights
or privileges under this franchise within the territory of the respondent city government.
Municipality of San Fernando, La Union v. Sta. Romana, G.R. No. L-30159, March 31, 1987
Under the Local Tax Code. there is no question that the authority to impose the license fees
collected from the hauling of sand and gravel excavated properly belongs to the province
concerned and not to the municipality where they are found which is specifically prohibited under
Section 22 of the same Code "from levying taxes, fees and charges that the province or city is
authorized to levy in this Code."
In order for an entity to legally undertake a quarrying business, he must first comply with all the
requirements imposed not only by the national government, but also by the local government unit
where his business is situated. Particularly, Section 138 (2) of RA 7160 requires that such entity
must first secure a governor's permit prior to the start of his quarrying operations
City of Manila v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 181845, August 04, 2009
When a municipality or city has already imposed a business tax on manufacturers, etc. of liquors,
distilled spirits, wines, and any other article of commerce, pursuant to Section 143 (a) of the
Law on Taxation
LGC, said municipality or city may no longer subject the same manufacturers, etc. to a business
tax under Section 143 (h) of the same Code. Section 143 (h) may be imposed only on businesses
that are subject to excise tax, VAT, or percentage tax under the NIRC, and that are "not otherwise
specified in preceding paragraphs".
Ericsson Telecoms vs. City of Pasig. G.R. NO. 176667, November 22, 2007
Tax should be computed based on gross receipts; the right to receive income, and not the actual
receipt, determines when to include the amount in gross income. The imposition of local business
tax based on petitioner’s gross revenue will inevitably result in the constitutionally proscribed
double taxation – taxing of the same person twice by the same jurisdiction for the same thing –
inasmuch as petitioner’s revenue or income for a taxable year will definitely include its gross
receipts already reported during the previous year and for which local business tax has already
been paid.
Palma Development Corp. v. Municipality of Malangas, G.R. No. 152492, October 16, 2003
Section 133(e) of RA No. 7160 prohibits the imposition, in the guise of wharfage, of fees — as
well as all other taxes or charges in any form whatsoever — on goods or merchandise. It is
therefore irrelevant if the fees imposed are actually for police surveillance on the goods, because
any other form of imposition on goods passing through the territorial jurisdiction of the
municipality is clearly prohibited by Section 133(e).
Jardine Davies Insurance Brokers Inc. v. Aliposa, G.R. No. 118900, February 27, 2003
As a general precept, a taxpayer may file a complaint assailing the validity of the ordinance and
praying for a refund of its perceived overpayments without first filing a protest to the payment of
taxes due under the ordinance.
Valley Trading Co., Inc. v. CFI of Isabela, Branch II, G.R. No. L-49529, March 31, 1989
Unlike the National Internal Revenue Code, the Local Tax Code does not contain any specific
provision prohibiting courts from enjoining the collection of local taxes. Such Statutory lapse or
intent, however it may be viewed, may have allowed preliminary injunction where local taxes are
involved but cannot negate the procedural rules and requirements under Rule 58.
Manila International Airport Authority v. Court of Appeals, G.R. No. 155650, July 20, 2006
Under Section 234(a), real property owned by the Republic is exempt from real estate tax except
when the government gives the beneficial use of the real property to a taxable entity. The
justification for the exception to the exemption is that the real property, although owned by the
Republic, is not devoted to public use or public service but devoted to the private gain of a taxable
person.
Allied Banking Corporation, etc., v. Quezon City Government, et al., G. R. No. 154126,
October 11, 2005
Real properties shall be appraised at the current and fair market value prevailing in the locality
where the property is situated and classified for assessment purposes on the basis of its actual use.
Law on Taxation
Heirs of Tajonera v. Court of Appeals, G.R. No. L-26677, March 27, 1981
It is `the duty of each person' acquiring real estate in the city to make a new declaration thereof,
with the advertence that failure to do so shall make the assessment in the name of the previous
owner 'valid and binding on all persons interested, and for all purposes, as though the same had
been assessed in the name of its actual owner.'
Davao Oriental Electric Coop vs. Prov. Dvo. of Oriental, 576 SCRA 645
Under then Sec. 30 of PD 464 [now under Sec. 226, LGC], having failed to appeal the real property
assessments to the LBAA, taxpayer now cannot assail the validity of the tax assessment before the
courts. For failure to exhaust administrative remedies, the assessment became final. Under Sec. 64
of PD 464 [now under Sec. 252, LGC), the taxpayer must first pay under protest and then assail
the validity of the assessment.
Fels Energy, Inc. v. Province of Batangas, G.R. No. 168557, 170628, February 16, 2007
Under Section 226 of R.A. No 7160, the last action of the local assessor on a particular
assessment shall be the notice of assessment; it is this last action which gives the owner of the
property the right to appeal to the LBAA. The procedure likewise does not permit the property
owner the remedy of filing a motion for reconsideration before the local assessor.
Nestle Philippines, Inc. v. Court of Appeals, G.R. No. 134114, July 06, 2001
Customs duties" is "the name given to taxes on the importation and exportation of commodities,
the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country.
Feeder International Line, Pte., Ltd. v. Court of Appeals, G.R. No. 94262, May 31, 1991
Section 1202 of the Tariff and Customs Code provides that importation begins when the carrying
vessel or aircraft enters the jurisdiction of the Philippines with intention to unload therein. It is
clear from the provision of the law that mere intent to unload is sufficient to commence an
importation and "intent," being a state of mind, is rarely susceptible of direct proof, but must
ordinarily be inferred from the facts, and therefore can only be proved by unguarded,
expressions, conduct and circumstances generally.
Smuggling is committed by any person who: (1) fraudulently imports or brings into the Philippines
any article contrary to law; (2) assists in so doing any article contrary to law; or (3) receives,
conceals, buys, sells or in any manner facilitate the transportation, concealment or sale of such
goods after importation, knowing the same to have been imported contrary to law.
Carrara Marble Phil., Inc. v. Commissioner of Customs, G.R. No. 129680, September 01,
1999
The Tariff and Customs law subjects to forfeiture any article which is removed contrary to law
from any public or private warehouse under customs supervision, or released irregularly from
Customs custody. Before forfeiture proceedings are instituted the law requires the presence of
probable cause; once established, the burden of proof is shifted to the claimant.
People v. Court of First Instance of Rizal, G.R. No. L-41686, November 17, 1980
It is quite clear that seizure and forfeiture proceedings under the tariff and customs laws are not
criminal in nature as they do not result in the conviction of the offender nor in the imposition of
the penalty provided for in section 3601 of the Code. As can be gleaned from Section 2533 of the
code, seizure proceedings, such as those instituted in this case, are purely civil and administrative
in character, the main purpose of which is to enforce the administrative fines or forfeiture incident
to unlawful importation of goods or their deliberate possession.
Subic Bay Metropolitan Authority v. Rodriguez, G.R. No. 160270, April 23, 2010
Regional trial courts are devoid of any competence to pass upon the validity or regularity of seizure
and forfeiture proceedings conducted by the BOC and to enjoin or otherwise interfere with these
proceedings. Regional trial courts are precluded from assuming cognizance over such matters even
through petitions for certiorari, prohibition or mandamus.
Jao v. Court of Appeals, G.R. No. 104604, 111223, October 06, 1995
Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, we have
said that such act does not deprive the Bureau of Customs of jurisdiction thereon. The allegations
of petitioners regarding the propriety of the seizure should properly be ventilated before the
Collector of Customs.
Transglobe International, Inc. v. Court of Appeals, G.R. No. 126634, January 25, 1999
A forfeiture proceeding is in the nature of a proceeding in rem, i.e., directed against the res or
imported articles and entails a determination of the legality of their importation. In this proceeding,
it is in legal contemplation the property itself which commits the violation and is treated as the
offender, without reference whatsoever to the character or conduct of the owner.
Commr. v. Hambretch & Quist Philippines, Inc., G.R. No. 169225, November 17, 2010
The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the CIR
on matters relating to assessments or refunds. Section 7 of Republic Act No. 1125 covers other
cases that arise out of the National Internal Revenue Code (NIRC) or related laws administered by
the Bureau of Internal Revenue (BIR).
Law on Taxation
Duty Free Philippines vs. Bureau of Internal Revenue, G.R. No. 197228 (October 8, 2014).
This Court has had a long-standing rule that a court’s jurisdiction over the subject matter of an
action is conferred only by the Constitution or by statute. In this regard, petitioner’s direct appeal
to this Court is fatal to its claim. Section 2, Rule 4 of the Revised Rules of the CTA reiterates the
exclusive appellate jurisdiction of the CTA en banc relative to the review of the court divisions’
decisions or resolutions on motion for reconsideration or new trial in cases arising from
administrative agencies such as the BIR. Clearly, this Court is without jurisdiction to review
decisions rendered by a division of the CTA, exclusive appellate jurisdiction over which is
vested in the CTA en banc.
Rizal Commercial Banking Corp. v. Commr., G.R. No. 168498, June 16, 2006
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180)
days from submission of documents, the taxpayer adversely affected by the decision or inaction
may appeal to the Court of Tax Appeals within (30) days from receipt of the said decision, or from
the lapse of the one hundred eighty (180)-day period; otherwise the decision shall become final,
executory and demandable.