Syllabus

LAW ON INCOME TAXATION

Second semester AY 2019-2020
Atty. Erikson Eustaquio
Course credit: 3 units

Breakdown of Grades:
Recitation 30%
Midterms 30%
Finals 40%

House Rules
1. Students must strictly observe UMak’s rules on absences and tardiness, as well as on dress code
and proper grooming.
2. Student must come to class prepared. The sequence of discussion will be based on the syllabus.
3. Cellular phones must be switched to silent mode during class. Students whose cellphones sound
off during class will immediately be called for recitation.
4. No notes/laptops/iPads/cellphones/electronic gadgets during recitation.
5. No make up exams for whatever reason.
6. A student who is called for recitation but is not in the room at that time (unless officially
excused) will automatically get a 60 every time s/he is called to recite.
7. Students are expected to use the restroom before or after class, but there will also be a
restroom break every meeting at around 730pm. Students may use the restroom during class,
subject to rule 6 above.

Part I. General Principles of Taxation

Reference: Chavez, Josephrally L., Income Taxation Law Illustrated and Simplified, Volume I. Manila:
Rex Bookstore, Inc., 2019 Edition.

I. Taxation
1. Definition of Taxation (pages 1-2)
a. 71 Am Jur 2nd 342
b. CIR v. Fortune Tobacco Corporation, 559 SCRA 161 (2008)
c. Pambansang Koalisyon ng mga Samahang Magsasaka v. Executive Secretary, G.R. Nos.
147036-37, 10 April 2012

2. Definition of Taxes
a. 71 Am Jur 2nd 343-346
b. Republic v. Philippine Rabbit Bus Lines, Inc., G.R. No. L-26862, 30 March 1970

3. Taxes distinguished from

a. Toll Fees (pages 6-7)
i. 71 Am Jur 2nd 351
 ii. Section 155 of the Local Government Code (LGC)
iii. City of Ozamiz v. Lumapas, G.R. No. L-30727, 16 July 1975
iv. Diaz v. Sec. of Finance, G.R. No. 193007, 19 July 2011
b. Debts
i. 71 Am Jur 2nd 345-346
ii. Francia v. IAC, 162 SCRA 753 (1988)
iii. Caltex v. COA, 208 SCRA 726 (1992)
iv. Philex Mining Corp. v. CIR, CA, and CTA, G.R. No. 125704, 28 Aug 1998
c. License Fees
i. 71 Am Jur 2nd 352-353
ii. Compania General de Tabacos v. City of Manila, 8 SCRA 367 (1963)
iii. PAL v. Edu, 164 SCRA 320 (1988)
iv. Progressive Dev. Corp. v. QC, 172 SCRA 629 (1989)
v. ESSO v. CIR, 175 SCRA 149 (1989)
vi. Osmena v. Orbos, 220 SCRA 703
d. Special Levies under the Local Government Code
i. Section 240 of the LGC
ii. Apostolic Prefect v. Treasurer of Baguio, 71 Phil 547 (1941)
iii. Republic v. Bacolod Murcia, 17 SCRA 632 (1966)
e. Penalties
i. NDC v. CIR, 151 SCRA 472 (1987)
f. Custom duties

4. Classification of Taxes
a. Burden (direct, indirect) (pages 20-21)
i. 71 Am Jur 2nd 354
ii. Maceda v. Macaraig, 223 SCRA 217 (1993)
iii. CIR v. PLDT, G.R. No. 140230, 15 Dec 2005
iv. Silkair v. CIR, G.R. No. 184398, 25 Feb 2010
b. Amount (specific, ad valorem)
i. 71 Am Jur 2nd 355
ii. Section 129, NIRC
c. Rates (progressive, regressive, proportionate, mixed)
d. Object (personal/capitation or poll taxes, property taxes, excise or license taxes)
i. 71 Am Jur 2nd 357-361
ii. Association of Customs Brokers v. Municipal Board, 93 Phil 106 (1953)
e. Purpose (general or specific)
i. 71 Am Jur 2nd 355-356
f. Scope (national, local)

February 13

5. Taxation as the Strongest Power of the State (pages 4-6); Scope of Taxation (pages 21-23)
a. Section 28, Article VI of the Philippine Constitution
b. 71 Am Jur 2nd 394-395, 397-398
 c. Sarasola v. Trinidad, 40 Phil 259 (1919)
d. Sison v. Ancheta, 130 SCRA 654 (1984)
e. Reyes v. Almanzor, 196 SCRA 322 (1991)
f. Plenary and Unlimited - Chamber of Real Estate and Builder’s Associations, Inc. v. Romulo,
G.R. No. 160756, 09 March 2010

6. Taxation as an Implement of Eminent Domain and Police Power (pages 2-4)

a. 71 Am Jur 2nd 395-397
b. Lutz v. Araneta, 98 Phil 48
c. Gerochi v. Bautista, G.R. No. 159796, 17 July 2007

7. Characteristics of Taxation (page 7)

a. Enforced Contribution
b. Progressive - Article VI, Section 28(a) of the Constitution
c. Generally payable in money - Borja v. Gella, 8 SCRA 602 (1963)
d. Legislative
e. For public purpose

8. Purposes of Taxation (pages 8-10)

a. Revenue-raising
i. Fels Energy v. The Province of Batangas, G.R. No. 168557, 16 Feb 2007
b. Non-revenue/special or regulatory
i. 71 Am Jur 2nd 371-372
ii. Planters Products, Inc. v. Fertiphil Corporation, 564 SCRA 385 (2008)

9. Basis of Taxation
a. Lifeblood Theory (pages 7-8)
i. Marcos II v. CA, 273 SCRA 47 (1997)
ii. Valera v. Office of the Ombudsman, 547 SCRA 43 (2008)
b. Necessity Theory (page 8)
i. National Power Corporation v. City of Cabanatuan, 401 SCRA 259 (2003)
c. Symbiotic relationship
i. CIR v. Algue, 158 SCRA 9 (1988)

10. Principles of Sound Tax System (pages 23-24)

a. Fiscal Adequacy
i. Chavez v. Ongpin, 186 SCRA 331 (1990)
b. Administrative Feasibility
i. Diaz v. Sec. of Finance, G.R. No. 193007, 19 July 2011
c. Uniformity and Equality in Taxation
i. CIR v. Fortune Tobacco Corporation, G.R. No. 180006, 28 Sept 2011

11. Aspects of Taxation (pages 12-15)

a. Levy
 b. Assessment and Collection
i. Powers and Duties of the BIR (pages 17-20)
1. Genato v. Silapan, A.C. No. 4078 dated 14 July 2003
2. CIR v. CTA, G.R. No. 207843, 15 July 2015
c. Payment
d. Refund

February 20

II. Limitations of Taxation

12. Public Purpose (pages 25-28)
a. Pascual v. Sec. of Public Works, 110 Phil 331 (1960)
b. Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987)
c. COCOFED v. Republic, G.R. Nos. 177857-58, 24 Jan 2012

13. Taxation is Inherently Legislative (pages 11-12)

a. Chamber of Real Estate and Builders’ Associations, Inc. v. The Hon. Executive Secretary
Alberto Romulo, G.R. No. 160756, 09 March 2010
b. Secretary of Finance v. Phil Tabaco Institute, Inc., G.R. No. 210251, 22 Feb 2017

14. Non-delegation of the Power to Tax (pages 15-17)

a. In general – power to tax may not be delegated
i. Kapatiran v. Tan, 163 SCRA 372 (1988)
ii. CIR v. Santos and Guild of Phil. Jewelers, Inc., 277 SCRA 617 (1997)
b. Exceptions
i. Delegation to LGUs
1. Section 5, Article X of the Philippine Constitution
2. LTO v. City of Butuan, 322 SCRA 805 (2000)
3. Quezon City, et al. v. Bayantel, G.R. No. 162015, 6 March 2006
ii. Delegation to the President
1. Section 28(2), Article VI of the Philippine Constitution
2. Section 401, Tariff and Customs Code
3. Garcia v. Executive Secretary, 210 SCRA 219 (1992)
4. ABAKADA v. Ermita, 469 SCRA 1 (2005)
iii. Delegation to Administrative Agencies
a. Phil Comm Satellite Corp. v. Alcuaz, 180 SCRA 218 (1989)
b. CIR v. CA and Fortune Tobacco Corporation, 261 SCRA 236 (1996)

15. Territoriality/Situs
a. CIR v. Marubeni Corporation, G.R. No. 137377, 18 Dec 2001
b. CIR v. Baier-Nickel, G.R. No. 153793, 29 Aug 2006

16. International Comity

a. Section 2, Article II of the Philippine Constitution
b. Income derived by the government or its political subdivisions - Section 32 (B)(7)(a), NIRC
 c. Tanada v. Angara, 272 SCRA 18 (1997)
d. GOCCs – PAGCOR v. BIR, G.R. No. 215427, 10 Dec 2014

17. Exemption of Government Entities, Agencies, and Instrumentalities (pages 28-32; 66-67)
a. Section 32 (B)(7)(b), NIRC
b. Section 27 (C), NIRC
c. Manila International Airport Authority v. CA, 495 SCRA 591 (2006)
d. Philippine Fisheries Development Authority v. CA, 528 SCRA 706 (2007)

February 27

18. Constitutional Limitations (pages 36-37)

a. Due Process (pages 38-40)
i. Section 1, Article III of the Philippine Constitution
ii. Philippine Bank of Comm v. CIR, 302 SCRA 241 (1999)
b. Equal Protection (pages 41-42)
i. Section 1, Article III of the Philippine Constitution
ii. Tiu v. CA, 301 SCRA 279 (1999)
c. Uniform and Equitable
i. Section 28(1), Article VI of the Philippine Constitution
ii. British American Tobacco v. Camacho and Parayno, G.R. No. 163583, 20 Aug 2008 and
15 April 2009
d. Non-impairment of Contracts (pages 42-43)
i. Section 10, Article III and Section 11, Article XII of the Philippine Constitution
ii. Tolentino v. Sec. of Finance, 235 SCRA 630 (1995)
iii. Manila Electric Company v. Province of Laguna, G.R. No. 131359, 05 May 1999
iv. Phil. Rural Electric Cooperatives Association Inc., et al. v. DILG and DOF, G.R. No.
143076, 10 June 2003
e. Non-imprisonment for non-payment of poll tax
i. Section 20, Article III of the Philippine Constitution
ii. Secs. 156-164, LGC
f. Prohibition against taxation of real property of charitable institutions, churches, parsonages
or convents, mosques, and non-profit cemeteries (pages 44-63)
i. Section 28(3), Article VI of the Philippine Constitution
ii. Abra Valley College, Inc. v. Aquino, 162 SCRA 106 (1988)
iii. Lung Center v. QC et al., G.R. No. 144104, 29 June 2004
iv. Commissioner v. St. Luke’s Medical Center, G.R. No. 195909, 26 Sept 2012
g. Prohibition against taxation of non-stock, non-profit educational institutions
i. Section 4(3,4), Article XIV of the Philippine Constitution
ii. Sections 27 (B) and 30 (H), NIRC
iii. CIR v. CA, CTA and ADMU, G.R. No. 115349, 18 April 1997
iv. CIR v. CA & YMCA, 298 SCRA 83 (1998)
v. Angeles University Foundation v. City of Angeles, G.R. No. 189999, 27 June 2012
vi. CIR v. De La Salle University, Inc., G.R. No. 196596, 09 Nov 2016
vii. CIR v. St. Paul College Makati, G.R. No. 215383, 08 March 2017
March 5

h. Passage of tax bills

i. Section 24, Article VI of the Philippine Constitution
ii. Tolentino v. Sec. Finance, 249 SCRA 628 (1995)
i. Veto power of the President
i. Section 27 (2), Article VI of the Philippine Constitution
ii. Gonzales v. Macaraig, 191 SCRA 452 (1990)
j. Judicial power to review legality of tax
i. Sections 2 and 5(2)(b), Article VIII of the Philippine Constitution
ii. Tolentino v. Sec. Finance, supra
k. Presidential power to tax (pages 43-44)
l. Granting of tax exemptions
i. Section 28(4), Article VI of the Philippine Constitution
ii. John Hay Peoples Alternative Coalition, et al. v. Lim, et al., G.R. No. 119775, 24 Oct 2003
m. Power of LGUs to create sources of revenue
i. Section 5, Article X of the Philippine Constitution
ii. Section 234 (c) of the LGC

III. Doctrines in Taxation

19. Imprescriptibility of taxes
a. CIR v. Ayala Securities Corporation, G.R. No. L-29485, 21 Nov 1980

20. Tax Laws (pages 67-71; 88-90)

a. Hydro Resources v. CTA, G.R. No. 80276, 21 Dec 1990
b. City of Iloilo v. Smart, G.R. No. 167260, 27 Feb 2009
c. Philippine Health Care Providers, Inc. v. CIR, G.R. No. 167330, 12 June 2008

21. Revenue Regulations and BIR Issuances (pages 85-88)

a. BPI Leasing Corp. v. CA and CIR, G.R. No. 127624, 18 Nov 2003
b. Fort Bonifacio Development Corporation v. CIR, G.R. No. 158885, 02 Oct 2009
c. CIR v. San Miguel Corporation, G.R. No. 184428, 23 Nov 2011

22. Double Taxation (pages 32-36)

a. 71 Am Jur 2nd 362-365
b. CIR v. Solidbank Corporation, 416 SCRA 437 (2003)
c. CIR v. Citytrust Investment Phils. Inc., G.R. No. 139786, 27 Sept 2006
d. City of Manila v. Coca-cola Bottlers Phil., Inc., G.R. No. 181845, 04 Aug 2009

23. Remedies against double taxation

i. Reciprocity clause
ii. Tax sparing rule
iii. Tax credit method
iv. Exemption method
v. Tax treaties
 1. CIR v. CBK Power Company Limited, G.R. No. 193383-84, 14 Jan 2015
2. Deutsche Bank AG Manila Branch v. CIR, G.R. No. 188550, 19 Aug 2013

March 12

IV. Escapes from Taxation

24. In Lieu of All Taxes Clause
a. City of Pasig v. Meralco, G.R. No. 181710, 07 March 2018 (The 7th case in tax exemption)

25. Tax Avoidance v. Tax Evasion (pages 63-64)

a. CIR v. Estate of Benigno P. Toda, Jr., 438 SCRA 291 (2004)
b. CIR v. Gonzales, G.R. No. 177279, 13 Oct 2010

26. Tax Exemptions (pages 64-67)

a. CIR v. The Philippine American Accident Insurance Company, Inc., G.R. No.141658, 18 March
2005
b. CIR v. Central Luzon Drug Corp., G.R. No.159647, 15 April 2005
c. City of Iloilo v. Smart, G.R. No. 167260, 27 Feb 2009
d. CIR v. SM Prime Holdings, Inc., G.R. No. 183505, 26 Feb 2010
e. Atlas Consolidated Mining and Development Corporation v. CIR, G.R. No. 159471, 26 Jan
2011
f. Soriano v. Sec. of Finance, G.R. No.184450, 24 Jan 2017

27. Exemption of the Government from Taxation

28. Tax Refunds

a. Kepco Philippines Corp. v. CIR GR No. 179356, Dec. 14, 2009
b. CIR v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, 25 April 2012

29. Tax Amnesty (pages 81-84)

a. CIR v. Marubeni Corporation, 372 SCRA 577 (2001)
b. CIR v. Gonzales, G.R. No.177279, 13 Oct 2010
c. CIR v. Covanta Energy Phil. Holdings, Inc., G.R. No.203160, 24 Jan 2018

30. Set-off (pages71-73)

a. Philex Mining Corporation v. CIR, supra

March 19

31. Taxpayers’ suit and locus standi (pages 73-78)

a. Kilosbayan, Inc. v. Guingona, Jr., G.R. No.113375, 05 May 1994
b. Abaya v. Ebdane, 515 SCRA 721 (2007)
c. Mamba v. Lara, G.R. No. 165109, 14 Dec 2009

32. Injunction Suit (pages 78-81)

a. Talento v. Escalada, Jr., 556 SCRA 491 (2008)
 b. Pacquiao v. CTA, G.R. No. 213394, 05 April 2016
c. Tridharma Marketing v. CTA, G.R. No.215950, 20 June 2016

GR: No court shall have the authority to grant an injunction to restrain the collection of any national
internal revenue tax, fee or charge.

XPN (Requisites of Injunction):

a.) The taxpayer has shown a clear and unmistakable right to refuse or to hold in abeyance the payment
of taxes.
b.) The collection by the aforementioned government agencies may jeopardize the interest of the
government and/or taxpayer.
c) Require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than
double the amount with the court.
XPN to c: The requirement of posting a bond to suspend the collection of taxes could be
dispensed with only if the methods employed by the CIR in the tax collection were clearly null and void
and prejudicial to the taxpayer.

33. Tax Pyramiding (pages 84-85)

a. People v. Sandiganbayan, 467 SCRA 137 (2005)

34. Doctrine of Equitable Recoupment (page 90)

35. Benchmarking (pages 90-91)

Organization, Powers, and Duties of the BIR

1. Powers and duties of the BIR – Sec. 2, NIRC
2. Chief officials of the BIR – Sec. 3, NIRC
3. Internal revenue districts – Sec. 9, NIRC
4. Revenue regional director – Sec. 10, NIRC
5. Duties of revenue district officers and other internal revenue officers – Sec. 11, NIRC
6. Authority of a revenue officer – Sec. 13, NIRC
7. Authority of officers to administer oaths and take testimony – Sec. 14, NIRC
8. Authority of internal revenue officers to make arrests and seizures – Sec. 15, NIRC
9. Agents and deputies for collection of national internal revenue taxes – Sec. 12, NIRC
10. BIR organization structure

Powers and Authority of the Commissioner of BIR

1. Power to interpret tax laws and decide tax cases – Sec. 4, NIRC
2. Powers to obtain information, and to summon, examine, and take testimony of persons – Sec. 5,
NIRC
3. Power to make assessments and prescribe additional requirements for tax administration and
enforcement – Sec. 6, NIRC
4. Authority to delegate power – Sec. 7, NIRC
5. Authority to compromise tax payments, abate, or cancel tax liability and refund or credit taxes –
Sec. 204, NIRC