ASSOCIATION OF SMALL LANDOWNERS V.
SECRETARY OF executive orders violate the constitutional provision that no
DAR
Note: The relevance of this case with regard to tax is the
matter regarding the excercise of the power of taxation as an
implement of police power and the power of eminent domain.
FACTS: These are consolidated cases involving common legal
questions including serious challenges to the constitutionality
of R.A. No. 6657 also known as the "Comprehensive Agrarian
Reform Law of 1988"
In G.R. No. 79777, the petitioners are questioning the P.D No.
27 and E.O Nos. 228 and 229 on the grounds inter alia of
separation of powers, due process, equal protection and the
constitutional limitation that no private property shall be
taken for public use without just compensation.
In G.R. No. 79310, the petitioners in this case claim that the
power to provide for a Comprehensive Agrarian Reform
Program as decreed by the Constitution belongs to the
Congress and not to the President, the also allege that
Proclamation No. 131 and E.O No. 229 should be annulled for
violation of the constitutional provisions on just
compensation, due process and equal protection. They
contended that the taking must be simultaneous with
payment of just compensation which such payment is not
contemplated in Section 5 of the E.O No. 229.
In G.R. No. 79744, the petitioner argues that E.O Nos. 228 and
229 were invalidly issued by the President and that the said
private property shall be taken without due process or just
compensation which was denied to the petitioners.
In G.R. No 78742 the petitioners claim that they cannot eject
their tenants and so are unable to enjoy their right
of retention because the Department of Agrarian Reform has
so far not issued the implementing rules of the decree. They
therefore ask the Honorable Court for a writ of mandamus to
compel the respondents to issue the said rules.
ISSUE: WON the case involves the excercise of Police Power or
Power of Eminent Domain
HELD: Power of Eminent Domain. There are traditional
distinctions between the police power and the power of
eminent domain that logically preclude the application of both
powers at the same time on the same subject. Recent trends,
however, would indicate not a polarization but a mingling of
the police power and the power of eminent domain, with the
latter being used as an implement of the former like the
power of taxation. The employment of the taxing power to
achieve a police purpose has long been accepted.
CIR v. Central Luzon Drug Corporation
Facts:
Respondents operated six drugstores under the business
name Mercury Drug. From January to December 1996
respondent granted 20% sales discount to qualified senior
citizens on their purchases of medicines pursuant to RA 7432
for a total of ₱ 904,769.

On April 15, 1997, respondent filed its annual Income Tax
Return for taxable year 1996 declaring therein net losses. On
Jan. 16, 1998 respondent filed with petitioner a claim for tax
refund/credit of ₱ 904,769.00 allegedly arising from the 20%
sales discount. Unable to obtain affirmative response from
petitioner, respondent elevated its claim to the Court of Tax
Appeals. The court dismissed the same but upon
reconsideration, the latter reversed its earlier ruling and
ordered petitioner to issue a Tax Credit Certificate in favor of
respondent citing CA GR SP No. 60057 (May 31, 2001, Central
Luzon Drug Corp. vs. CIR) citing that Sec. 229 of RA 7432 deals
exclusively with illegally collected or erroneously paid taxes
but that there are other situations which may warrant a tax
credit/refund.
CA affirmed Court of Tax Appeal's decision reasoning that RA
7432 required neither a tax liability nor a payment of taxes by
private establishments prior to the availment of a tax credit.
Moreover, such credit is not tantamount to an unintended
benefit from the law, but rather a just compensation for the
taking of private property for public use.
Issue:
Whether or not respondent, despite incurring a net loss, may
still claim the 20% sales discount as a tax credit.
Ruling:
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens
the privilege of obtaining a 20% discount on their purchase of
medicine from any private establishment in the country. The
latter may then claim the cost of the discount as a tax credit.
Such credit can be claimed even if the establishment operates
at a loss.
A tax credit generally refers to an amount that is “subtracted
directly from one’s total tax liability.” It is an “allowance
against the tax itself” or “a deduction from what is owed” by
a taxpayer to the government.
A tax credit should be understood in relation to other tax
concepts. One of these is tax deduction – which is subtraction
“from income for tax purposes,” or an amount that is “allowed
by law to reduce income prior to the application of the tax
rate to compute the amount of tax which is due.” In other
words, whereas a tax credit reduces the tax due, tax
deduction reduces the income subject to tax in order to arrive
at the taxable income.
A tax credit is used to reduce directly the tax that is due, there
ought to be a tax liability before the tax credit can be
applied. Without that liability, any tax credit application will
be useless. There will be no reason for deducting the latter
when there is, to begin with, no existing obligation to the
government. However, as will be presented shortly, the
existence of a tax credit or its grant by law is not the same as
the availment or use of such credit. While the grant is
mandatory, the availment or use is not. If a net loss is
reported by, and no other taxes are currently due from, a
business establishment, there will obviously be no tax liability
against which any tax credit can be applied. For the
establishment to choose the immediate availment of a tax
credit will be premature and impracticable.
However, RA 9257 now specifically provides that all covered
establishments may claim the senior citizens' discount as tax
deduction.
Contrary to the provision in RA 7432 where the senior citizens'
discount granted by all covered establishments can be claimed
as tax credit, RA 9257 now specifically provides that this
discount should be treated as tax deduction.
With the effectivity of RA 9257 on 21 March 2004, there is
now a new tax treatment for senior citizens' discount granted
by all covered establishments. This discount should be
considered as a deductible expense from gross income and no
longer as tax credit.
The present case, however, covers the taxable year 1997 and
is thus governed by the old law, RA 7432.
PB Com V. CIR (1999)
G.R. No. 112024 January 28, 1999
FACTS:
Petitioner PBCom reported on its annual Income Tax Return
for the year 1985 and 1986 a net loss of P 25, 317, 228 and P
14, 129 602 respectively. But during both year, PBCom's
lessees withheld creditable taxes of P 282 795.50 in 1985 and
P 234, 077.69 in 1986.
August 7, 1987: PBCom requested a tax credit for the
overpayment of taxes in the 1st and 2nd quarters.
July 25, 1988: PBCom filed a claim for refund of creditable
taxes withheld by lessees.
Pending the investigation, it filed a Petition for Review before
the CTA who denied its request for filing beyond the 2-year
reglementary period provided by Sec. 292 and 295 of the NIRC
and the claim for 1986 was denied based on the assumption
that it was automatically credited for the succeeding year as
shown in its 1986 adjusted final corporate annual tax return.
PBCom filed a Motion for Reconsideration and then a Petition
for Review with the CA which affirmed the CTA's decision.
It raised the matter to the SC where it argues that it relief on
Rev. Memorandum Circular No. 285 issued April 1, 1985 that
provides that the prescriptive period for overpayment is NOT
2 years but 10 years under Art. 114 of the Civil Code
ISSUE:
1. W/N PBCom can rely on RMC No. 785 changing the
prescriptive period from 2 to 10 years
2. W/N PBCom can be assumed to assail of tax crediting

HELD: petition is DENIED
1. No.
Taxes are the lifeblood of the nation. Due process of law
under the Constitution does not require judicial proceedings
in tax cases. This must necessarily be so because it is upon
taxation that the government chiefly relies to obtain the
means to carry on its operations and it is of utmost
importance that the modes adopted to enforce the collection
of taxes levied should be summary and interfered with as little
as possible.
From the same perspective, claims for refund or tax credit
should be exercised within the time fixed by law because the
BIR being an administrative body enforced to collect taxes, its
functions should not be unduly delayed or hampered by
incidental matters.
Sec. 230 of the National Internal Revenue Code (NIRC) of 1977
(now Sec. 229, NIRC of 1997) provides for the prescriptive
period for filing a court proceeding with the CIR for the
recovery of tax erroneously or illegally collected within 2 years
after payment of tax (computed from the time of filing the
Adjustment Return and final payment of the tax for the year),
before any suit in CTA is commenced.
Through the issuance of RMC 7-85, the BIR did NOT simply
interpret the law but legislated guidelines contrary to the
statute passed by Congress
RMCs are considered administrative ruling in the same of
more specific and less specific and less general interpretations
of tax laws issued by the CIR. It is entitled great respect by the
courts. Nevertheless, such interpretation is not conclusive and
will be ignored if judicially found to be erroneous.
Art. 8 of the Civil Code 26 recognizes judicial decisions,
applying or interpreting statutes as part of the legal system of
the country. But administrative decisions do not enjoy that
level of recognition.
Fundamental is the rule that the State cannot be put in
estoppel by the mistakes or errors of its officials or agents
Non-retroactivity of rulings by the Commissioner of Internal
Revenue is not applicable in this case because the nullity of
RMC No. 7-85 was declared by respondent courts and not by
the Commissioner of Internal Revenue
Claim for refund is in the nature of a claim for exemption and
should be construed in strictissimi juris against the taxpayer.
2. Yes.
Sec. 69 of the 1977 NIRC (now Sec. 76 of the 1997 NIRC)
provides that any excess of the total quarterly payments over
the actual income tax computed in the adjustment or final
corporate income tax return, shall either (a) be refunded to
the corporation, or (b) may be credited against the estimated
quarterly income tax liabilities for the quarters of the
succeeding taxable year.
Remedies are in the alternative, and the choice of one
precludes the other.
Since credit is opted, can no longer refund.
CASE DIGEST:DOUBLE TAXATION
NURSERY CARE CORPORATION, ET AL, vs. ACEVEDO, G.R. No.
180651, July 30, 2014
FACTS OF THE CASE:
The CITY OF MANILA assessed and collected taxes from
the individual petitioners pursuant to Section 15 (Tax on
Wholesalers, Distributors, or Dealers) and Section 17 (Tax on
Retailers) of the Revenue Code of Manila. At the same time,
the CITY OF MANILA imposed additional taxes upon the
petitioners pursuant to Section 21 of the Revenue Code of
Manila, as amended, as a condition for the renewal of their
respective business licenses for the year 1999.
SECTION 21 OF THE REVENUE CODE OF MANILA stated:
Section 21.Tax on Business Subject to the Excise, Value-Added
or Percentage Taxes under the NIRC - On any of the following
businesses and articles of commerce subject to the excise,
VALUE-ADDED OR PERCENTAGE TAXES under the National
Internal Revenue Code,hereinafter referred to as NIRC, as
amended, a tax of FIFTY PERCENT (50%) OF ONE PERCENT
(1%) per annum on the gross sales or receipts of the preceding
calendar year is hereby imposed: A) On person who sells
goods and services in the course of trade or businesses;
PROVIDED, that all registered businesses in the City of Manila
already paying the aforementioned tax shall be exempted
from payment thereof.
To comply with the City of Manila’s assessment of
taxes under Section 21, the
PETITIONERS paid under protest the following amounts
corresponding to the first quarter of 1999, to wit: (a) Nursery
Care Corporation ₱595,190.25; (b) Shoemart Incorporated
₱3,283,520.14;(c) Star Appliance Center ₱236,084.03; (d) H &
B, Inc. ₱1,271,118.74; (e) Supplies Station, Inc. ₱239,501.25;
(f) Hardware Work Shop,
Inc. ₱609,953.24. By letter dated March 1, 1999, the
PETITIONERS formally requested the Office of the City
Treasurer for the tax credit or refund of the local business
taxes paid under protest. However, then City Treasurer
Anthony Acevedo(Acevedo) denied the request.
On April 8, 1999, the PETITIONERS, sought the
reconsideration of the denial of their request. Still, the
CITY TREASURER did not reconsider. In the meanwhile, Liberty
Toledo succeeded Acevedo as the City Treasurer of Manila.
PETITIONERS filed their respective petitions for certiorari in
the Regional Trial Court (RTC) in Manila.
 RTC held that it perceives NO INSTANCE OF THE
CONSTITUTIONALLY PROSCRIBED DOUBLE TAXATION
, in the strict, narrow or obnoxious sense, imposed upon the
petitioners under Section 15 and 17, on the one hand, and
under Section 21, on the other, of the questioned Ordinance.
The tax imposed under Section 15 and 17,
as against that imposed under Section 21, are levied against
different tax objects or subject matter. The tax under
Section 15 is imposed upon wholesalers, distributors or
dealers, while that under Section17 is imposed upon retailers.
In short, taxes imposed under Section 15 and 17 is a tax on the
business of wholesalers, distributors, dealers and retailers. On
the other hand, the tax imposed upon herein petitioners
under Section 21 is
not a tax against the business of the petitioners (as
wholesalers, distributors, dealers or retailers) but is rather a
tax against consumers or end-users of the articles sold by
petitioners. CA affirmed the decision of the RTC.
ISSUE:
Whether or not the collection of taxes under Section
21 of Ordinance No. 7794, as amended, constitutes double
taxation.
RULING:
There is DOUBLE TAXATION when the same taxpayer is
taxed twice when he should be taxed only once for the
same purpose by the same taxing authority within the same
jurisdiction during the same taxing period
, and the taxes are of the same kind or character. DOUBLE
TAXATION is obnoxious.
Using the aforementioned test, the COURT finds that
there is INDEED DOUBLE TAXATION
IF RESPONDENT IS SUBJECTED TO THE TAXESUNDER BOTH
SECTIONS 14 AND 21 OF TAX ORDINANCE NO. 7794
, since these are being imposed:
(1) on thesame subject matter - the privilege of doing
business in the City of Manila;
(2) for the same purpose – to make persons
conducting business within the City ofManila contribute to city
revenues;
(3) by the same taxing authority – petitioner City of
Manila;
(4) within the same taxing jurisdiction - within the
territorial jurisdiction of the City of Manila;
(5) for thesame taxing periods – per calendar year; and
(6) of the same kind or character - a local business tax
imposed on gross sales or receipts of the business.
Based on the foregoing reasons, PETITIONER should not have
been subjected to taxes under Section 21 of the Manila
Revenue Code for the fourth quarter of 2001, considering that
it had already been paying local business tax under Section 14
of the same ordinance.
Accordingly, respondent’s assessment under both Sections 14
and 21 had no basis. PETITIONER is
indeed liable to pay business taxes to the City of Manila;
nevertheless, considering that the
FORMER has already paid these taxes under Section 14 of the
Manila Revenue Code, it is exempt from the same payments
under Section 21 of the same code. Hence, payments made
under Section 21 must be refunded in favor of petitioner. It is
undisputed that PETITIONER paid business taxes based on
Sections 14 and 21 for the fourth quarter of 2001 in the total
amount of ₱470,932.21. Therefore, it is ENTITLED TO A
REFUND OF ₱164,552.04
corresponding to the payment under Section 21 of the Manila
Revenue Code.
In fine, the IMPOSITION OF THE TAX UNDER SECTION
21 OF THE REVENUE CODE OF MANILA
constituted double taxation, and the taxes collected pursuant
thereto must be refunded.
PHIL. GUARANTY CO., INC. v. CIR
GR No. L-22074, April 30, 1965
13 SCRA 775
FACTS: The petitioner Philippine Guaranty Co., Inc., a domestic
insurance company, entered into reinsurance
contracts with foreign insurance companies not doing
business in the country, thereby ceding to foreign
reinsurers a portion of the premiums on insurance it has
originally underwritten in the Philippines. The premiums
paid by such companies were excluded by the petitioner from
its gross income when it file its income tax returns
for 1953 and 1954. Furthermore, it did not withhold or pay tax
on them. Consequently, the CIR assessed against
the petitioner withholding taxes on the ceded reinsurance
premiums to which the latter protested the
assessment on the ground that the premiums are not subject
to tax for the premiums did not constitute income
from sources within the Philippines because the foreign
reinsurers did not engage in business in the Philippines,
and CIR's previous rulings did not require insurance companies
to withhold income tax due from foreign
companies.
ISSUE: Are insurance companies not required to withhold tax
on reinsurance premiums ceded to foreign
insurance companies, which deprives the government from
collecting the tax due from them?
HELD: No. The power to tax is an attribute of sovereignty. It is
a power emanating from necessity. It is a
necessary burden to preserve the State's sovereignty and a
means to give the citizenry an army to resist an
aggression, a navy to defend its shores from invasion, a corps
of civil servants to serve, public improvement
designed for the enjoyment of the citizenry and those which
come within the State's territory, and facilities and
protection which a government is supposed to provide.
Considering that the reinsurance premiums in question
were afforded protection by the government and the recipient
foreign reinsurers exercised rights and privileges
guaranteed by our laws, such reinsurance premiums and
reinsurers should share the burden of maintaining the
 state.
The petitioner's defense of reliance of good faith on rulings
of the CIR requiring no withholding of tax due on
reinsurance premiums may free the taxpayer from the
payment of surcharges or penalties imposed for failure to
pay the corresponding withholding tax, but it certainly would
not exculpate it from liability to pay such
withholding tax. The Government is not estopped from
collecting taxes by the mistakes or errors of its agents.
Commissioner of Internal Revenue vs. Algue Inc.
GR No. L-28896 | Feb. 17, 1988
Facts:
· Algue Inc. is a domestic corp engaged in engineering,
construction and other allied activities
· On Jan. 14, 1965, the corp received a letter from the CIR
regarding its delinquency income taxes from 1958-1959, amtg
to P83,183.85
· A letter of protest or reconsideration was filed by Algue Inc
on Jan 18
· On March 12, a warrant of distraint and levy was presented
to Algue Inc. thru its counsel, Atty. Guevara, who refused to
receive it on the ground of the pending protest
· Since the protest was not found on the records, a file copy
from the corp was produced and given to BIR Agent
Reyes, who deferred service of the warrant
· On April 7, Atty. Guevara was informed that the BIR was not
taking any action on the protest and it was only then that he
accepted the warrant of distraint and levy earlier sought to be
served
· On April 23, Algue filed a petition for review of the decision
of the CIR with the Court of Tax Appeals
· CIR contentions:
- the claimed deduction of P75,000.00 was properly
disallowed because it was not an ordinary reasonable or
necessary business expense
- payments are fictitious because most of the payees are
members of the same family in control of Algue and that there
is not enough substantiation of such payments
· CTA: 75K had been legitimately paid by Algue Inc. for actual
services rendered in the form of promotional fees. These were
collected by the Payees for their work in the creation of the
Vegetable Oil Investment Corporation of the Philippines and
its subsequent purchase of the properties of the Philippine
Sugar Estate Development Company.
Issue: W/N the Collector of Internal Revenue correctly
disallowed the P75,000.00 deduction claimed by Algue as
legitimate business expenses in its income tax returns
Ruling:
· Taxes are the lifeblood of the government and so should be
collected without unnecessary hindrance, made in accordance
with law.
· RA 1125: the appeal may be made within thirty days after
receipt of the decision or ruling challenged
· During the intervening period, the warrant was premature
and could therefore not be served.
· Originally, CIR claimed that the 75K promotional fees to be
personal holding company income, but later on conformed to
the decision of CTA
· There is no dispute that the payees duly reported their
respective shares of the fees in their income tax returns and
paid the corresponding taxes thereon. CTA also found, after
examining the evidence, that no distribution of dividends was
involved
· CIR suggests a tax dodge, an attempt to evade a legitimate
assessment by involving an imaginary deduction
· Algue Inc. was a family corporation where strict business
procedures were not applied and immediate issuance of
receipts was not required. at the end of the year, when the
books were to be closed, each payee made an accounting of
all of the fees received by him or her, to make up the total of
P75,000.00. This arrangement was understandable in view of
the close relationship among the persons in the family
corporation
· The amount of the promotional fees was not excessive. The
total commission paid by the Philippine Sugar Estate
Development Co. to Algue Inc. was P125K. After deducting the
said fees, Algue still had a balance of P50,000.00 as clear profit
from the transaction. The amount of P75,000.00 was 60% of
the total commission. This was a reasonable proportion,
considering that it was the payees who did practically
everything, from the formation of the Vegetable Oil
Investment Corporation to the actual purchase by it of the
Sugar Estate properties.
· Sec. 30 of the Tax Code: allowed deductions in the net
income – Expenses - All the ordinary and necessary expenses
paid or incurred during the taxable year in carrying on any
trade or business, including a reasonable allowance for
salaries or other compensation for personal services actually
rendered xxx
· the burden is on the taxpayer to prove the validity of the
claimed deduction
· In this case, Algue Inc. has proved that the payment of the
fees was necessary and reasonable in the light of the efforts
exerted by the payees in inducing investors and prominent
businessmen to venture in an experimental enterprise and
involve themselves in a new business requiring millions of
pesos.
· Taxes are what we pay for civilization society. Without taxes,
the government would be paralyzed for lack of the motive
power to activate and operate it. Hence, 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
· Taxation must be exercised reasonably and in accordance
with the prescribed procedure. If it is not, then the taxpayer
has a right to complain and the courts will then come to his
succor
Algue Inc.’s appeal from the decision of the CIR was filed on
time with the CTA in accordance with Rep. Act No. 1125. And
we also find that the claimed deduction by Algue Inc. was
permitted under the Internal Revenue Code and should
therefore not have been disallowed by the CIR