Commissioner of Internal Revenue vs. Algue Inc.
· RA 1125: the appeal may be made within thirty days after receipt
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.
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
CASE DIGEST: MACTAN CEBU INTERNATIONAL AIRPORT
AUTHORITY, petitioner, vs. HON. FERDINAND J. MARCOS, in
his capacity as the Presiding Judge of the Regional Trial Court,
Branch 20, Cebu City, THE CITY OF CEBU, represented by its
Mayor, HON. TOMAS R. OSMEA, and EUSTAQUIO B. CESA,
respondents. (G.R. No. 120082; September 11, 1996)
FACTS:
Under its charter, the MCIAA shall be exempt from realty taxes
imposed by the National Government or any of its political
subdivisions, agencies and instrumentalities. In 1994, the Local
Government Unit (LGU) of Cebu City demanded payment for realty
taxes on several parcels of land belonging to MCIAA.
instrumentality of the national government. It also insisted that while
it is indeed a GOCC, it nonetheless stands on the same footing as
an agency or instrumentality of the national government by the very
nature of its powers and functions.
ISSUES:
[1] Is MCIAA a taxable person?
[2] Is MCIAA exempt from realty taxation?
HELD:
[1] Yes, although it previously enjoyed exemption from realty tax
under its charter (which has already been withdrawn by the LGC),
this exemption extended only to said tax, not to other taxes. Hence,
MCIAA is still a taxable person.
[2] No, MCIAA is not exempt from realty tax by the City of Cebu.
First, its tax exemption under its charter has already been withdrawn.
Second, while it is true that LGUs cannot levy tax on property of the
Republic of the Philippines or the National Government (outside
Metro Manila), the beneficial use of property should not be given to a
taxable person.
Here, MCIAA is already the owner of the parcels of land in question.
Hence, even the exemption under the LGC cannot apply.

MCIAA objected to the same as baseless and unjustified, claiming its

exemption under its charter. Also, it cites the LGC stating that LGUs Commissioner of Internal Revenue vs. Cebu Portland Cement
taxing power does not extend to taxes, fees or charges of any kind Co.
on the National Government, its agencies and instrumentalities, and
local government units. G.R. No. L-29059, 15 December 1987

Cebu City countered, however, citing Sections 193 and 234 of the
LGC which withdraw tax exemptions of GOCCs and realty tax
exemptions previously granted to ore presently enjoyed by all Facts: CTA decision ordered the petitioner CIR to refund to the
persons, whether natural or juridical, including GOCCs.
Cebu Portland Cement Company, respondent, P 359,408.98
MCIAA paid tax under protest. It insisted that the taxing powers of
representing overpayments of ad valorem taxes on cement sold by
LGUs do not extend to the levy of taxes or fees of any kind on an

it. Execution of judgement was opposed by the petitioner citing that
private respondent had an outstanding sales tax liability to which the
judgment debt had already been credited. In fact, there was still a P4
M plus balance they owed. The Court of Tax Appeals, in 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,
granted private respondent's motion. The private respondent
questioned the assessed tax based on Article 186 of the Tax Code,
contending that cement was adjudged a mineral and not a
manufactured product; and thusly they were not liable for their
alleged tax deficiency. Thereby, petitioner filed this petition for
review.
Issue: Whether or not assessment of taxes can be enforced even if
there is a case contesting it.
Held: 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. That is the reason why,
save for the exception in RA 1125 , the Tax Code provides that
injunction is not available to restrain collection of tax. Thereby, we
hold that the respondent Court of Tax Appeals erred in its order.
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.
LORENZO vs. POSADAS JR.
G.R. No. L-43082
June 18, 1937
FACTS: Thomas Hanley died, leaving a will and a considerable
amount of real and personal properties. Proceedings for the probate
of his will and the settlement and distribution of his estate were
begun in the CFI of Zamboanga. The will was admitted to probate.
The CFI considered it proper for the best interests of the estate to
appoint a trustee to administer the real properties which, under the
will, were to pass to nephew Matthew ten years after the two
executors named in the will was appointed trustee. Moore acted as
trustee until he resigned and the plaintiff Lorenzo herein was
appointed in his stead.
During the incumbency of the plaintiff as trustee, the defendant
Collector of Internal Revenue (Posadas) assessed against the estate
an inheritance tax, together with the penalties for deliquency in
payment. Lorenzo paid said amount under protest, notifying Posadas
at the same time that unless the amount was promptly refunded suit
would be brought for its recovery. Posadas overruled Lorenzo’s
protest and refused to refund the said amount. Plaintiff went to court.
The CFI dismissed Lorenzo’s complaint and Posadas’ counterclaim.
Both parties appealed to this court.
ISSUE:
(e) Has there been delinquency in the payment of the inheritance
tax?
HELD: The judgment of the lower court is accordingly modified, with
costs against the plaintiff in both instances
YES
The defendant maintains that it was the duty of the executor to pay
the inheritance tax before the delivery of the decedent’s property to
the trustee. Stated otherwise, the defendant contends that delivery to
the trustee was delivery to the cestui que trust, the beneficiary in this
case, within the meaning of the first paragraph of subsection (b) of
section 1544 of the Revised Administrative Code. This contention is
well taken and is sustained. A trustee is but an instrument or agent
for the cestui que trust
The appointment of Moore as trustee was made by the trial court in
conformity with the wishes of the testator as expressed in his will. It
is true that the word “trust” is not mentioned or used in the will but
the intention to create one is clear. No particular or technical words
are required to create a testamentary trust. The words “trust” and
“trustee”, though apt for the purpose, are not necessary. In fact, the
use of these two words is not conclusive on the question that a trust
is created. ” To constitute a valid testamentary trust there must be
a concurrence of three circumstances:
(1) Sufficient words to raise a trust;
(2) a definite subject;
(3) a certain or ascertain object; statutes in some jurisdictions
expressly or in effect so providing.”
There is no doubt that the testator intended to create a trust. He
ordered in his will that certain of his properties be kept together
undisposed during a fixed period, for a stated purpose. The probate
court certainly exercised sound judgment in appointmening a trustee
to carry into effect the provisions of the will

As the existence of the trust was already proven, it results that the
estate which plaintiff represents has been delinquent in the payment
of inheritance tax and, therefore, liable for the payment of interest
and surcharge provided by law in such cases.
The delinquency in payment occurred on March 10, 1924, the date
when Moore became trustee. On that date trust estate vested in him.
The interest due should be computed from that date.
NOTES: Other issues:
(a) When does the inheritance tax accrue and when must it be
satisfied?
The accrual of the inheritance tax is distinct from the obligation to
pay the same.
Acording to article 657 of the Civil Code, “the rights to the succession
of a person are transmitted from the moment of his death.” “In other
words”, said Arellano, C. J., “. . . the heirs succeed immediately to all
of the property of the deceased ancestor. The property belongs to
the heirs at the moment of the death of the ancestor as completely
as if the ancestor had executed and delivered to them a deed for the
same before his death.”
Whatever may be the time when actual transmission of the
inheritance takes place, succession takes place in any event at the
moment of the decedent’s death. The time when the heirs legally
succeed to the inheritance may differ from the time when the heirs
actually receive such inheritance. ” Thomas Hanley having died on
May 27, 1922, the inheritance tax accrued as of the date.
From the fact, however, that Thomas Hanley died on May 27, 1922,
it does not follow that the obligation to pay the tax arose as of the
date. The time for the payment on inheritance tax is clearly fixed by
section 1544 of the Revised Administrative Code as amended by Act
No. 3031, in relation to section 1543 of the same Code. The two
sections follow:
SEC. 1543. Exemption of certain acquisitions and transmissions. —
The following shall not be taxed:
(a) The merger of the usufruct in the owner of the naked title.
(b) The transmission or delivery of the inheritance or legacy by the
fiduciary heir or legatee to the trustees.
(c) The transmission from the first heir, legatee, or donee in favor of
another beneficiary, in accordance with the desire of the
predecessor. xx
SEC. 1544. When tax to be paid. — The tax fixed in this article shall
be paid:
(a) In the second and third cases of the next preceding
section, before entrance into possession of the property.
(b) In other cases, within the six months subsequent to the death of
the predecessor; but if judicial testamentary or intestate proceedings
shall be instituted prior to the expiration of said period, the payment
shall be made by the executor or administrator before delivering to
each beneficiary his share.
The instant case does[not] fall under subsection (a), but under
subsection (b), of section 1544 above-quoted, as there is here no
fiduciary heirs, first heirs, legatee or donee. Under the subsection,
the tax should have been paid before the delivery of the properties in
question to Moore as trustee.
(b) Should the inheritance tax be computed on the basis of the value
of the estate at the time of the testator’s death, or on its value ten
years later?
If death is the generating source from which the power of the estate
to impose inheritance taxes takes its being and if, upon the death of
the decedent, succession takes place and the right of the estate to
tax vests instantly, the tax should be measured by the value of the
estate as it stood at the time of the decedent’s death, regardless of
any subsequent contingency value of any subsequent increase or
decrease in value
(c) In determining the net value of the estate subject to tax, is it
proper to deduct the compensation due to trustees?
A trustee, no doubt, is entitled to receive a fair compensation for his
services. But from this it does not follow that the compensation due
him may lawfully be deducted in arriving at the net value of the
estate subject to tax. There is no statute in the Philippines which
requires trustees’ commissions to be deducted in determining the net
value of the estate subject to inheritance tax
paid. PAL thus paid, under protest, registration fees of its motor
vehicles. After paying under protest, PAL through counsel, wrote a
letter dated May 19,1971, to Land Transportation Commissioner
Romeo Edu (Edu) demanding a refund of the amounts paid. Edu
denied the request for refund. Hence, PAL filed a complaint against
Edu and National Treasurer Ubaldo Carbonell (Carbonell).

The trial court dismissed PAL's complaint. PAL appealed to the Court
(d) What law governs the case at bar? Should the provisions of Act
of Appeals which in turn certified the case to the Supreme Court.
No. 3606 favorable to the tax-payer be given retroactive effect?

A statute should be considered as prospective in its operation, ISSUE:

whether it enacts, amends, or repeals an inheritance tax, unless the
language of the statute clearly demands or expresses that it shall Whether or not motor vehicle registration fees are considered
have a retroactive effect, . . . .” Act No. 3606 itself contains no as taxes.
provisions indicating legislative intent to give it retroactive effect. No
such effect can be given the statute by this court.

PHILIPPINE AIRLINES, INC. v. EDU
G.R. No. L- 41383, August 15, 1988
FACTS:
The Philippine Airlines (PAL) is a corporation engaged in the air
transportation business under a legislative franchise, Act No. 42739.
Under its franchise, PAL is exempt from the payment of taxes.
RULING:
Yes. If the purpose is primarily revenue, or if revenue is, at least, one
of the real and substantial purposes, then the exaction is properly
called a tax. Such is the case of motor vehicle registration fees. The
motor vehicle registration fees are actually taxes intended for
additional revenues of the government even if one fifth or less of the
amount collected is set aside for the operating expenses of the
agency administering the program.

Sometime in 1971, however, Land Transportation Commissioner

Romeo F. Elevate (Elevate) issued a regulation pursuant to Section
8, Republic Act 4136, otherwise known as the Land and
Transportation and Traffic Code, requiring all tax exempt entities,
among them PAL to pay motor vehicle registration fees.

Despite PAL's protestations, Elevate refused to register PAL's motor

vehicles unless the amounts imposed under Republic Act 4136 were
WALTER LUTZ, as Judicial Administrator of the Intestate of the
deceased Antonio Jayme Ledesma, plaintiff-appellant v. J.
ANTONIO ARANETA, as collector of Internal Revenue,
defendant-apppelle
G.R No. L-7856. December 22, 1955
FACTS:
Appelant in this case Walter Lutz in his capacity as the Judicial
Administrator of the intestate of the deceased Antonio Jayme
Ledesma, seeks to recover from the Collector of the Internal
Revenue the total sum of fourteen thousand six hundred sixty six
and forty cents (P 14, 666.40) paid by the estate as taxes, under
section 3 of Commonwealth Act No. 567, also known as the Sugar
Adjustment Act, for the crop years 1948-1949 and 1949-1950.
Commonwealth Act. 567 Section 2 provides for an increase of the
existing tax on the manufacture of sugar on a graduated basis, on
each picul of sugar manufacturer; while section 3 levies on the
owners or persons in control of the land devoted tot he cultivation of
sugarcane and ceded to others for consideration, on lease or
otherwise - "a tax equivalent to the difference between the money
value of the rental or consideration collected and the amount
representing 12 per centum of the assessed value of such land. It
was alleged 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 was dismissed by the CFI thus the
plaintiff appealed directly to the Supreme Court.
ISSUE:
Whether or not the tax imposition in the Commonwealth Act No. 567
are unconstitutional.
RULING:
Yes, the Supreme Court held that the fact that sugar production is
one of the greatest industry of our nation, sugar occupying a leading
position among its export products; that it gives employment to
thousands of laborers in the fields and factories; that it is a great
source of the state's wealth, is one of the important source of foreign
exchange needed by our government and is thus pivotal in the plans
of a regime committed to a policy of currency stability. Its promotion,
protection and advancement, therefore redounds greatly to the
general welfare. Hence it was competent for the legislature to find
that the general welfare demanded that the sugar industry be
stabilized in turn; and in the wide field of its police power, the law-
making body could provide that the distribution of benefits therefrom
be readjusted among its components to enable it to resist the added
strain of the increase in taxes that it had to sustain.
The subject tax is levied with a regulatory purpose, to provide means
for the rehabilitation and stabilization of the threatened sugar
industry. In other words, the act is primarily a valid exercise of police
power.
[G.R. No. 158540. August 3, 2005]
SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs.
CEMENT MANUFACTURERS ASSOCIATION OF THE
PHILIPPINES, THE SECRETARY OF THE DEPARTMENT OF
TRADE AND INDUSTRY, THE SECRETARY OF THE
DEPARTMENT OF FINANCE and THE COMMISSIONER OF THE
BUREAU OF CUSTOMS, respondents.
Facts:
Republic Act No. 8800, the Safeguard Measures Act (SMA), which
was one of the laws enacted by Congress soon after the Philippines
ratified the General Agreement on Tariff and Trade (GATT) and the
World Trade Organization (WTO) Agreement.[3] The SMA provides
the structure and mechanics for the imposition of emergency
measures, including tariffs, to protect domestic industries and
producers from increased imports which inflict or could inflict serious
injury on them.
Petitioner Southern Cross Cement Corporation (Southern Cross) is a
domestic corporation engaged in the business of cement
manufacturing, production, importation and exportation. Its principal
stockholders are Taiheiyo Cement Corporation and Tokuyama
Corporation, purportedly the largest cement manufacturers in
Japan.[5]
Private respondent Philippine Cement Manufacturers Corporation[6]
(Philcemcor) is an association of domestic cement manufacturers. It
has eighteen (18) members,[7] per Record. While Philcemcor
heralds itself to be an association of domestic cement
manufacturers, it appears that considerable equity holdings, if not
controlling interests in at least twelve (12) of its member-
corporations, were acquired by the three largest cement
manufacturers in the world, namely Financiere Lafarge S.A. of
France, Cemex S.A. de C.V. of Mexico, and Holcim Ltd. of
Switzerland (formerly Holderbank Financiere Glaris, Ltd., then
Holderfin B.V.).
the DTIs disagreement with the conclusions of the Tariff
Commission, but at the same time, ultimately denying Philcemcors
application for safeguard measures on the ground that the he was
bound to do so in light of the Tariff Commissions negative findings.
Philcemcor challenged this Decision of the DTI Secretary by filing
with the Court of Appeals a Petition for Certiorari, Prohibition and
Mandamus[11] seeking to set aside the DTI Decision, as well as the
Tariff Commissions Report. The Court of Appeals Twelfth Division, in
a Decision[13] penned by Court of Appeals Associate Justice Elvi
John Asuncion,[14] partially granted Philcemcors petition.
On 23 June 2003, Southern Cross filed the present petition, arguing
that the Court of Appeals has no jurisdiction over Philcemcors
petition, as the proper remedy is a petition for review with the CTA
conformably with the SMA, and; that the factual findings of the Tariff
Commission on the existence or non-existence of conditions
warranting the imposition of general safeguard measures are binding
upon the DTI Secretary.
Despite the fact that the Court of Appeals Decision had not yet
become final, its binding force was cited by the DTI Secretary when
he issued a new Decision on 25 June 2003, wherein he ruled that
that in light of the appellate courts Decision, there was no longer any
legal impediment to his deciding Philcemcors application for
definitive safeguard measures.
The Court of Appeals had held that based on the foregoing
premises, petitioner’s prayer to set aside the findings of the Tariff
Commission in its assailed Report dated March 13, 2002 is DENIED.
On the other hand, the assailed April 5, 2002 Decision of the
Secretary of the Department of Trade and Industry is hereby SET
ASIDE. Consequently, the case is REMANDED to the public
respondent Secretary of Department of Trade and Industry for a final
decision in accordance with RA 8800 and its Implementing Rules
and Regulations. Hence, the appeal.
Yet on 25 June 2003, the DTI Secretary issued a new Decision,
ruling this time that that in light of the appellate courts Decision there
was no longer any legal impediment to his deciding Philcemcors
application for definitive safeguard measures.[41] He made a
determination that, contrary to the findings of the Tariff Commission,
the local cement industry had suffered serious injury as a result of
the import surges.[42] Accordingly, he imposed a definitive
safeguard measure on the importation of gray Portland cement, in
the form of a definitive safeguard duty in the amount of P20.60/40
kg. bag for three years on imported gray Portland Cement. Hence,
the appeal.
Issue:
Whether or not the decision of DTI Secretary, to impose safeguard
measures is valid.
Held:
NO, due to the nature of this case, the Court found that the DTI
should follow the regulations prescribed by SMA. The Court held that
he assailed Decision of the Court of Appeals is DECLARED NULL
AND VOID and SET ASIDE. The Decision of the DTI Secretary
dated 25 June 2003 is also DECLARED NULL AND VOID and SET
ASIDE. No Costs.
Yet on 25 June 2003, the DTI Secretary issued a new Decision,
ruling this time that that in light of the appellate courts Decision there
was no longer any legal impediment to his deciding Philcemcors
application for definitive safeguard measures.[41] He made a
determination that, contrary to the findings of the Tariff Commission,
the local cement industry had suffered serious injury as a result of
the import surges.[42] Accordingly, he imposed a definitive safeguard
measure on the importation of gray Portland cement, in the form of a
definitive safeguard duty in the amount of P20.60/40 kg. bag for
three years on imported gray Portland Cement.
CHAMBER OF REAL ESTATE AND BUILDERS’ ASSOCIATION,
INC. vs. EXECUTIVE SECRETARY- Minimum Corporate Income
Tax
FACTS:
CREBA assails the imposition of the minimum corporate income tax
(MCIT) as being violative of the due process clause as it levies
income tax even if there is no realized gain. They also question the
creditable withholding tax (CWT) on sales of real properties
classified as ordinary assets stating that (1) they ignore the different
treatment of ordinary assets and capital assets; (2) the use of gross
selling price or fair market value as basis for the CWT and the
collection of tax on a per transaction basis (and not on the net
income at the end of the year) are inconsistent with the tax on
ordinary real properties; (3) the government collects income tax even
when the net income has not yet been determined; and (4) the CWT
is being levied upon real estate enterprises but not on other
enterprises, more particularly those in the manufacturing sector.
ISSUE:
Are the impositions of the MCIT on domestic corporations
and CWT on income from sales of real properties classified
as ordinary assets unconstitutional?
HELD:
NO. MCIT does not tax capital but only taxes income as shown by
the fact that the MCIT is arrived at by deducting the capital spent by
a corporation in the sale of its goods, i.e., the cost of goods and
other direct expenses from gross sales. Besides, there are sufficient
safeguards that exist for the MCIT: (1) it is only imposed on the 4th
year of operations; (2) the law allows the carry forward of any excess
MCIT paid over the normal income tax; and (3) the Secretary of
Finance can suspend the imposition of MCIT in justifiable instances.
The regulations on CWT did not shift the tax base of a real estate
business’ income tax from net income to GSP or FMV of the property
sold since the taxes withheld are in the nature of advance tax
payments and they are thus just installments on the annual tax which
may be due at the end of the taxable year. As such the tax base for
the sale of real property classified as ordinary assets remains to be
the net taxable income and the use of the GSP or FMV is because
these are the only factors reasonably known to the buyer in
connection with the performance of the duties as a withholding
agent.
Neither is there violation of equal protection even if the CWT is levied
only on the real industry as the real estate industry is, by itself, a
class on its own and can be validly treated different from other
businesses.