Topic Case Title Facts Issues SC Ruling

Scope and Mandanas, et al. v. The petitioners in these consolidated cases challenge the Whether Section 284 of the Section 284 has effectively deprived the LGUs
Limitations of Executive Secretary, et way the just share in the national taxes of the local LGC is unconstitutional for from deriving their just share from other national
Taxation al., GR Nos. 199802 and government units (LGUs) has been computed being repugnant to Section taxes, like the customs duties.
208488, 3 July 2018; MR: 6, Article X of the 1987
10 April 2019 that certain collections of NIRTs by the Bureau of Customs Constitution to the effect That the exclusion of other national taxes like
(BOC) - specifically: excise taxes, value added taxes that the LGUs shall have a customs duties from the base for determining the
(VATs) and documentary stamp taxes (DSTs) - have not just share in the national just share of the LGUs contravened the express
been included in the base amounts for the computation of taxes. constitutional edict in Section 6, Article X the 1987
the IRA; that the basis to compute the just share of the Constitution.
LGU shall be of ALL NATIONAL TAXES. Congress cannot disobey the express mandate of
Section 6, Article X of the 1987 Constitution for
Insertion of the word INTERNAL REVENUE found in Sec the just share of the LGUs to be derived from the
284 of the LGC caused the diminution of just share of the national taxes.
LGU and should be declared unconstitutional.
Therefore, the SC DECLARES the phrase
"internal revenue" appearing in Section 284 of
Republic Act No. 7160 (Local Government Code)
UNCONSTITUTIONAL, and DELETES the
phrase from Section 284.
Basis of the Just Share
1. National tax
2. Imposed by the national gov
3.

Tax vs. Other Chevron Philippines, Inc. Petitioner assailed the validity of the issued policy Whether the imposition of The subject royalty fee as imposed primarily for
Forms of vs. BCDA, G.R. No. guidelines by the Clark Development Corporation imposing royalty fee is an exercise of regulatory purposes and not for generation of
Exactions 173863, 15 September royalty fee on the movement of petroleum fuel to and from police power or a power of income on profits on the ground that it vitally
2010 the Clark Special Economic Zone. The petitioner argued taxation? affects the general welfare ( there was a reasonable
that the CDC has no power to impose the royalty fee on relation between the high volume of fuel brought into the
the basis purely income generating functions and such zone and the greater extent of supervision and inspection
imposition is a form of revenue generating purposes which needed to monitor the fuel.). As cited in the case of Gerochi
amounts to imposition of tax. vs Department of energy the Supreme Court stated:
The conservative and pivotal distinction between
these two (2) powers rests in the purpose for
which the charge is made. If generation of

Angeles University Petitioner is an educational institution converted into a non-
Foundation vs. Angeles stock, nonprofit educational foundation under RA 6095.
City, G.R. No. 189999,
27 June 2012 Petitioner protested the imposition of building permit and
other fees in relation to its application of permit for the
construction of 11 storey building for its main campus.
Petitioner claimed that it is exempted from the payment
granted to them pursuant to RA 6055, which exempts NS-
NP from payment of tax.
Construction and CIR vs. Puregold Duty Puregold is an enterprise engaged in the sale of various
Interpretation Free, Inc. G.R. No. consumer goods located within Clark Special Economic
202789, June 22, 2015 Zone (CSEZ), and registered with Clark Development"
Corporation (CDC) entitled to incentives granted by law.
CIR issued an assessment notice regarding deficiency
taxes by PG.
Puregold requested for the cancellation of the assessment
issued by CIR on the ground that it availed of the tax
amnesty pursuant to RA 9399 which relieves them from tax
liability arising from non-payment of taxes.
(1) whether petitioner is
exempt from the payment
of building permit and
related fees imposed under
the National Building Code;
and (2) whether the parcel
of land owned by petitioner
which has been assessed
for real property tax is...
likewise exempt.
Whether or not Puregold
Duty Free is liable for
deficiency taxes.
revenue is the primary purpose and regulation is
merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that
revenue is incidentally raised does not make the
imposition a tax.
While it is true that the petitioner is among of
those enumerated that is exempted from payment
of all taxes imposed by the government on all
income derive from real property, exclusively
used for educational activities, however, they
cannot claim exemption from imposition of A
BUILDING PERMIT FEE as these are not taxes
but a REGULATORY FEES imposed by a city for
building or repairing a structure. This is imposed
to see if the applicant satisfies and conforms with
the approved standard required by the LGU. Such
charges on property are not impositions from
which the petitioner is exempted. (The test is the
purpose: If the purpose is merely for regulation
and revenue is only incidental , it is not a tax)
While on the issue that the real property is also
exempted from payment of tax, the petitioner
failed to prove that it is actually, directly and
exclusively used for educational purposes.
Puregold Duty Free, Inc. (Puregold) is entitled to,
and properly availed of, the tax amnesty under
Republic Act No. (RA) 9399[1] and so is no longer
liable for deficiency value-added tax (VAT) and
excise tax for its importation of distilled spirits,
wines, and cigarettes from January 1998 to May
2004.
The government, through the enactment of RA
9399, has expressed its intention to waive its right
to collect taxes.
Applying the principle of expressio unio est
expulsio alterius which means that the express
 mention of one person, thing, act, or
consequence excludes all others, Puregold Duty
Free is entitled and has properly availed of the tax
amnesty.

Doctrines in CIR vs. Solidbank Petitioner claims that although the 20% FWT on Whether or not the 20% Yes. The amount of interest income withheld in
Taxation Corporation, GR No. respondent’s interest income was not actually received by final withholding tax on [a] payment of the 20% FWT forms part of the gross
148191, 25 Nov. 2003; respondent because it was remitted directly to the bank’s interest income receipts in computing for GRT on banks. Although
government, the fact that the amount redounded to the forms part of the taxable the 20% FWT on respondent’s interest was not
bank’s benefit makes it part of the taxable gross receipts in gross receipts in computing actually received by respondent because it was
computing the 5% GRT. the 5% gross receipts tax. remitted directly to the government, the fact that
the amount redounded to the bank’s benefit
makes it part of the taxable gross receipts in
computing the 5% GRT. There can be no double
taxation as the 2 taxes are different, the one
being a business tax not subject to WHT while the
other is an income tax subject to WHT.
Swedish Match This is a case filed by the petitioner for Refund of Taxes. In Whether or not both RULING:
Philippines, Inc. vs. its letter to the City of Manila Treasurer, the petitioner sections of the Manila
Manila, GR NO. 181277, claimed double taxation when it paid business taxes under Revenue Code constitute Yes, there is double taxation.
3 July 2013 Sections 14 and 21 of Ordinance No. 7794 which is the double taxation
Manila Revenue Code. The respondent contends that both The ELEMENTS OF DOUBLE TAXATION ARE:
sections refer to two distinct objects of tax, hence they are
not the same in character and kind that will result in double The taxes are imposed on
taxation. The RTC, CTA division and CTA en banc denied 1. The same subject matter
the petition for a tax refund filed by the petitioner. 2. For the same purpose
3. By the same taxing authority
4. Within the same taxing jurisdiction
5. For the same taxing period
6. The same kind of character

While the petitioner is liable for the payment of

business taxes to the City of Manila, the fact that
it already paid under section 14 of the Manila
Revenue Code, it is already precluded from
paying the tax imposed under section 21 of the
same code.

As has been noted by the court, both sections are

imposed for the following:
 1. for the same subject matter, which is for doing
business in the City of Manila
2. for the same purpose, which his to contribute to
the city revenues
3. By the same taxing authority, which is the City
of Manila
4. Within the same taxing jurisdiction, which is the
territory of City of Manila
5. For the same taxing period, which is the same
calendar year when both taxes were paid
6. For the same kind of character, which is a local
business tax

Considering these nature of taxes paid by the

petitioner under both sections of the Code, the
court held that the petitioner is entitled to a tax
refund for the tax it paid under Section
Nursery Care
Corporation et al vs.
Acevedo, G.R. No.
180651, July 30, 2014
CIR v. S.C. Johnson and
Son, Inc., GR No.
127105, 25 June 2009
CBK Power Company
Limited vs. CIR, G.R.
Nos. 193383-84, January
14, 2015;
CIR vs. CBK Power
Company Limited, G.R.
Nos. 193407-08
CIR vs. Estate of Toda,
GR No. 147188, 14 Sept
2004)
Domingo vs. Carlitos (8
SCRA 443)
South African Airways vs.
CIR, GR No. 180356, 16
February 2010).
Air Canada vs. CIR, Air Canada is an offline air carrier  selling passage tickets in As an offline international No, because the 2.5% tax on Gross Philippine
January 11, 2016, G.R. the Philippines, through a general sales agent, Aerotel.  As
No. 169507 an off-line carrier, [Air Canada] does not have flights
originating from or coming to the Philippines [and does not]
operate any airplane [in] the Philippines[.]
Air Canada filed a claim for refund for more than 5 million
pesos. It claims that there was overpayment, saying that
the applicable tax rate against it is 2.5% under the law on
tax on Resident Foreign Corporations (RFCs) for
international carriers. It argues that, as an  international
carrier doing business in the Philippines, it is not subject to
tax at the regular rate of 32%.
Air Canada also claims that it is not taxable because its
income is taxable only in Canada because of the
Philippines-Canada Treaty (treaty). According to it, even if
taxable, the rate should not exceed 1.5% as stated in said
treaty.
However, the CTA ruled that  Air Canada was engaged in
business in the Philippines through a local agent that sells
airline tickets on its behalf. As such, it should be taxed as a
resident foreign corporation at the regular rate of 32%.
The CTA also said that Air Canada cannot avail of the
lower tax rate under the treaty because it has a "permanent
establishment" in the Philippines. Hence, Air Canada
cannot avail of the tax exemption under the treaty.
CIR v. Toledo Power In 2003, TPC filed with the BIR a claim for refund for its
Company, G.R. No. utilized input vat for taxable year 2002 for sale of electricity
196451, 2 December to the National Power Corporation (NPC), Cebu Electric
2015 Cooperative III (CEBECO), Atlas Consolidated Mining and
Development Corporation (ACMDC), and Atlas Fertilizer
Corporation (AFC).
In 2004, due to the inaction of the CIR, TPC filed with the
CTA a Petition for Review to the CTA.
The CIR argued that TPC is not entitled to a tax refund or
credit on the ground that it failed to prove that it is a
carrier selling passage Billings applies only to carriers maintaining flights
documents, is Air Canada to and from the Philippines. Air Canada's
subject to 2.5% tax on appointment of a general sales agent, Aerotel,
Gross Philippine Billings or here is only for the purpose of selling passage
to the regular 32% tax? documents. However, this is not the complete
answer since the treaty is the latter law that
prevails in this case.
Is Air Canada entitled to
the tax refund claimed at No, Air Canada is not entitled to refund. The
more than 5 million pesos? P5,185,676.77 Gross Philippine Billings tax paid
by petitioner was computed at the rate of 1 ½% of
its gross revenues amounting to
P345,711,806.08149 from the third quarter of
2000 to the second quarter of 2002. It is quite
apparent that the tax imposable under Section
28(A)(l) of the 1997 National Internal Revenue
Code [32% of taxable income, that is, gross
income less deductions] will exceed the maximum
ceiling of 1 ½% of gross revenues as decreed in
Article VIII of the Republic of the Philippines-
Canada Tax Treaty. Hence, no refund is
forthcoming.
1. Whether the TPC’s administrative and the judicial claims
administrative and were timely and validly filed.
the judicial claims
for tax refund or Pursuant to the NIRC, a taxpayer has two (2)
credit were timely years from the close of the taxable quarter when
and validly filed. the zero-rated sales were made within which to
file with the CIR an administrative claim for refund
2. Whether the TPC or credit of unutilized input VAT attributable to
is entitled to the full such sales.
amount of its claim
for tax refund or Likewise, the CIR has 120 days from receipt of
credit of its the complete documents within which to act on
generation company under EPIRA LAW.
INPUT VAT – the vat added to the price you pay for goods
or services (your purchases)
OUTPUT VAT – the vat you charged to the consumers.
(the vat you add)
To compute VAT DUE:
OUTPUT VAT – INPUT VAT = TAX DUE
SALES INVOICE – goods
OFFICIAL RECEIPT – services
ZERO-RATED GOOD – the government doesn’t tax its
sale but allows credit for the VAT paid on inputs.
VAT EXEMPT – the government doesn’t tax of the sale but
producers cannot claim credit for the VAT they pay on
inputs to produce it.
the administrative claim. Upon receipt of the
unutilized input decision, a taxpayer has 30 days within which to
VAT attributable to appeal the decision to the CTA. However, if the
its sales of 120-day period expires without any decision from
electricity to the CIR, the taxpayer may appeal the inaction to
CEBECO, the CTA within 30 days from the expiration of the
ACMDC, and AFC. 120-day period. Compliance with the 120+30-day
period is mandatory and jurisdictional.
In this case, TPC applied for a claim for refund or
credit of its unutilized input VAT for the taxable
year 2002 on December 22, 2003. Since the CIR
did not act on its application within the 120-day
period, TPC appealed the inaction on April 22,
2004. Clearly, both the administrative and the
judicial claims were filed within the prescribed
period provided in Section 112 of the NIRC.
Now, as to the validity of TPC's claim, there is no
question that TPC is entitled to a refund or credit
of its unutilized input VAT attributable to its zero-
rated sales of electricity to NPC for the taxable
year 2002 pursuant the NIRC.
2. TPC is not entitled to a refund or credit of
unutilized input VAT attributable to its sales of
electricity to CEBECO, ACMDC, and AFC.
To be entitled to a refund or credit of unutilized
input VAT attributable to the sale of electricity
under the EPIRA, a taxpayer must establish:
(1) that it is a generation company, and
(2) that it derived sales from power generation.
Under the EPIRA, all new generation companies
and existing generation facilities are required to
obtain a COC from the ERC. New generation
companies must show that they have complied

CS Garment, Inc., vs. Petitioner which is a domestic corporation registered with
CIR, G.R. No. 182399. PEZA was required to pay its alleged deficiency vat,
March 12, 2014 income, DST and WT filed a Manifestation and Motion
stating that it had availed of the government tax amnesty
program entitling it to all the immunities and privileges
under the law.
The OSG however asserted that the filing of an application
for tax amnesty does not itself entitle petitioner to the
benefits of the law. The BIR must still assess whether the
applicant is eligible for these benefits and all the conditions
for the availment must be satisfied.
TAXPAYER’S Remulla vs Maliksi, G.R. Petitioner Remulla, in his personal capacity as taxpayer
SUIT No. 171633, Sept. 18, and as then Vice-Governor and, hence, Presiding Officer of
2013 the Sangguniang Panlalawigan of the Province of
Cavite,24  filed a petition for annulment of judgment, arguing
that the subject compromise entered into by and between
MALIKSI and TRECE MARTIREZ MAYOR which was
approveed by RTC is grossly disadvantageous to the
government because:
(a) the agreed price for the subject property was excessive
as compared to its value at the time of taking in 1981; 26  improper purpose, or that public funds are wasted
Whether the petitioner is
immune from paying the
deficiency taxes upon filing
of the application.
whether or not the CA
properly denied Remulla’s
petition for annulment of
judgment due to his lack of
legal standing.
with the requirements, standards, and guidelines
of the ERC before they can operate.
TPCs application for COC did not automatically
make them a generation company.There must be
a certification from ERC granting such application.
Petitions are hereby DENIED. Decisionof the CTA
En banc are AFFIRMED.
Yes. Amnesty taxpayers may immediately enjoy
the privileges and immunities under the amnesty
law as soon as they fulfill the suspensive
condition imposed therein. Petitioner has
complied with all the requirement set forth by law
therefore no further assessment by the BIR is
necessary. There is no rule which imposes a
waiting period of one year before the applicant
can enjoy the benefits in the tax amnesty law. The
one year periof referred to in the law is the
prescriptive period within which third parties can
question the SALN not the period which the BIR
can prevent taxpayers from enjoying the
immunities and privileges under the law.
Remulla filed his petition for annulment of
judgment in two capacities: first, in his personal
capacity as a taxpayer; and, second , in his
official capacity as then presiding officer of the
Sangguniang Panlalawigan of the Province of
Cavite.
a taxpayer may be allowed to sue where there is
a claim that public funds are illegally disbursed or
that public money is being deflected to any
through the enforcement of an invalid or
(b) the government stands to lose prime lots;27  and unconstitutional law or ordinance.

(c) it nullifies/amends the 1957 deed of donation. 28  In this case, public funds of the Province of Cavite
stand to be expended to enforce the compromise
judgment. As such, Remulla – being a resident-
taxpayer of the Province of Cavite – has the legal
standing to file the petition for annulment of
judgment and, therefore, the same should not
have been dismissed on said ground.

Notably, the fact that there lies no proof that

public funds have already been disbursed should
not preclude Remulla from assailing the validity of
the compromise judgment. Lest it be
misunderstood, the concept of legal standing is
ultimately a procedural technicality which may be
relaxed by the Court if the circumstances so
warrant. As observed in Mamba v. Lara,35 the
Court did not hesitate to give standing to
taxpayers in cases36  where serious legal issues
were raised or where public expenditures of
millions of pesos were involved. Likewise, it has
also been ruled that a taxpayer need not be a
party to the contract in order to challenge its
validity,37 or to seek the annulment of the same
on the ground of extrinsic fraud.38  Indeed, for as
long as taxes are involved, the people have a
right to question contracts entered into by the
government,39 as in this case.1âwphi1

Remulla equally lodged the petition for annulment

of judgment in his official capacity as then Vice-
Governor and Presiding Officer of the
Sangguniang Panlalawigan of the Province of
Cavite. As such, he represents the interests of the
province itself which is, undoubtedly, a real party
in interest since it stands to be either benefited or
injured40  by the execution of the compromise

SOF, et al vs. Lazatin The petition seeks the reversal of the decision declaring
Revenue Regulation issued by SOF without force and
effect based on the grounds that respondents have no
legal standing when it filed a petition for prohibition and
injunction to annul and set aside RR.
judgment.1âwphi1
For these reasons, the CA should not have
dismissed the petition for annulment of judgment
on account of Remulla’s lack of legal standing.
Consequently, the case should be remanded to
the said court for further proceedings.
Therefore, the petition is GRANTED.Ordering the
decision of the CA to be REVERSED and SET
ASIDE. The case is REINSTATED and
REMANDED to the Court of Appeals for further
proceedings.
Whether respondents have Lazatin has legal standing as
legal standing to file a legislator. According to Lazatin, a member of
petition for declaratory Congress has standing to challenge the validity of
relief. an executive issuance if it tends to impair his
prerogatives as a legislator.
Whether RR 2-2012 is valid
and constitutional. In  Biraogo v. The Philippine Truth
Commission,47  we ruled that legislators have the
legal standing to ensure that the prerogatives,
powers, and privileges vested by the Constitution
in their office remain inviolate. To this end,
members of Congress are allowed to question the
validity of any official action that infringes on their
prerogatives as legislators.48
Thus, members of Congress possess the legal
standing to question acts that amount to a
usurpation of the legislative power of
Congress.49 Legislative power is exclusively
vested in the Legislature. When the implementing
rules and regulations issued by the Executive
contradict or add to what Congress has provided

ING bank vs CIR Petitioner filed a petition for review questioning the
decision of CTA Division saying that the petitioner is liable
for deficiency taxes.
The petitioner likewise filed a manifestation and motion
while the case was pending before the court stating that it
availed of the tax amnesty program with respect to its
deficiency taxes.
Air Canada vs. CIR Air Canada is an offline air carrier  selling passage tickets in
the Philippines, through a general sales agent, Aerotel.  As
an off-line carrier, [Air Canada] does not have flights
originating from or coming to the Philippines [and does not]
Whether the petitioner may
validly avail itself of the tax
amnesty.
Can Air Canada validly
refuse to pay its tax
deficiency on the ground
that there is a pending tax
by legislation, the issuance of these rules
amounts to an undue exercise of legislative power
and an encroachment of Congress' prerogatives.
EPEC has legal standing as a
Clark FEZ locator.
EPEC as a Clark FEZ locator, it will be directly
affected by the implementation of RR.
RR 2-2012 is invalid and unconstitutional.
On the merits of the case, we rule that RR 2-2012
is invalid and unconstitutional because: a) it
illegally imposes taxes upon FEZ enterprises,
which, by law, enjoy tax-exempt status, and b) it
effectively amends the law (i.e., RA 7227, as
amended by RA 9400) and thereby encroaches
upon the legislative authority reserved exclusively
by the Constitution for Congress.
Petitioner is qualified to avail of the tax amnesty.
Qualified taxpayers with pending tax cases may
still avail themselves of the tax amnesty program
under Tax Amnesty Act. The provision in BIR
Revenue Memorandum excepting "[i]ssues and
cases which were ruled by any court (even
without finality) in favor of the BIR prior to
amnesty availment of the taxpayer" from the
benefits of the law is illegal, invalid, and null and
void.2  The duty to withhold the tax on
compensation arises upon its accrual.
No, it cannot. Even if Air Canada succeeds in
claiming tax refund, the general rule prevails that
there can be not setting off of taxes since the
Government and the taxpayer are not creditors
 operate any airplane [in] the Philippines[.] credit proceeding it has and debtors of each other.
filed?
Air Canada filed a claim for refund for more than 5 million
pesos. It claims that there was overpayment, saying that
the applicable tax rate against it is 2.5% under the law on
tax on Resident Foreign Corporations (RFCs) for Can Air Canada benefit
international carriers. It argues that, as an  international from the treaty's elimination
carrier doing business in the Philippines, it is not subject to of double taxation in favor
tax at the regular rate of 32%. of Canada or the Air Canada cannot avail of the elimination of
preferential rate of 1.5%?
Air Canada also claims that it is not taxable because its double taxation in favor of Canada since the
income is taxable only in Canada because of the treaty expressly excludes Canadian carriers with
Philippines-Canada Treaty (treaty). According to it, even if "permanent establishment."  Through the
taxable, the rate should not exceed 1.5% as stated in said appointment of Aerotel as its local sales agent,
treaty. petitioner is deemed to have created a
"permanent establishment" in the Philippines as
However, the CTA ruled that  Air Canada was engaged in defined under the Republic of the Philippines-
business in the Philippines through a local agent that sells Canada Tax Treaty.
airline tickets on its behalf. As such, it should be taxed as a
resident foreign corporation at the regular rate of 32%.

The CTA also said that Air Canada cannot avail of the
lower tax rate under the treaty because it has a "permanent
establishment" in the Philippines. Hence, Air Canada
cannot avail of the tax exemption under the treaty.

Income Taxation BIR vs. First E-Bank First E-Bank filed a petition for declaratory relief seeking to Is RMC No. 65-2012 valid? RMC No. 65-2012 is invalid
Tower Condominium declare as invalid RMC No. 65-2012 imposing 12% VAT a) Is a condominium
Corporation and 32% income tax on association dues/membership fees corporation engaged in Collected purely for the benefit of condominium
and other charges collected by condominium corporation trade or business? b) Are owners for the maintenance of unit and its
from its members and tenants. associat10n dues, premises.
membership fees, and
First-ebank alleged that it was a NS-NF condominium other assessments/charges RMC No. 65-2012 is invalid for ordaining that
corporation that owned and possessed through its subject to income tax, "gross receipts of condominium corporations
members a condominium office. That the RMC burdened value-added tax, and including association dues, membership fees, and
the owners of the condominium units with income tax and withholding tax? other assessments/charges are subject to VAT,
VAT on their own money which they exclusively used for income tax and income payments made to it are
the maintenance and preservation of tf the building and its subject to applicable withholding taxes." A law will
premises, thus the RMC was oppressive and confiscatory not be construed as imposing a tax unless it does
because it required owners to produce additional amounts so clearly and expressly. In case of doubt, tax
to pay VAT and Income tax. laws must be construed strictly against the
government and in favor of the taxpayer. 63
Taxes, as burdens that must be endured by the
taxpayer, should not be presumed to go beyond
what the law expressly and clearly declares.

A Condominium corporation is no engaged in

trade or business.

none of these stated corporate purposes are

geared towards maintaining a livelihood or the
obtention of profit. Even though the Corporation is
empowered to levy assessments or dues from the
unit owners, these amounts collected are not
intended for the incurrence of profit by the
Corporation or its members, but to shoulder the
multitude of necessary expenses that arise from
the maintenance of the Condominium Project.

The contention of the BIR that the collection of

fees and dues are with end view of getting full
appreciative living values for the condominium
units and as a result, profit is obtained once these
units are sold at a highest prices, the court said
that any profit obtained by the sale of the units
accrues to the unit owner and not to the exercise
of the power of taxation constitutes a deprivation
of property under the due process clause, and the
taxpayer's right to due process is violated when
arbitrary or oppressive methods are used in
assessing and collecting taxes.

The fact that the Corporation did not fall within the
enumerated classes of taxable businesses under
either the Local Government Code or the Makati
Revenue Code already forewarns that a clear
demonstration is essential on the part of the City
Treasurer on why the Corporation should be

Gross Income Courage vs. CIR The petitioners in the present case assail the validity of the
provisions of RMO No. 23-2014, specifically Secs. III and
IV, for subjecting to withholding taxes non-taxable
allowances, bonuses and benefits received by government
employees. The respondent, on the other hand, argues
that RMO No. 23-2014 that allowance, bonuses or benefits
listed under Sec. III of the assailed RMO are not fringe
benefits within the purview of the Tax Code, hence, it may
not be subjected to withholding tax. The Court issued a
Resolution directing the Fiscal Management and Budget
Office of the Court to maintain the status quo by the non-
withholding of taxes from the benefits authorized to be
granted to judiciary officials and personnel until such time
that a decision is rendered in the instant consolidated
cases. Hence, the present petition.
1.
taxed anyway. "Full appreciative living values" is
nothing but blather in search of meaning, and to
impose a tax hinged on that standard is both
arbitrary and oppressive. he corporation.
membership fees, assessment dues, and other
fees of similar nature only constitute contributions
to and/or replenishment of the funds for the
maintenance and operations of the facilities
offered by recreational clubs to their exclusive
members. They represent funds "held in trust" by
these clubs to defray their operating and general
costs and hence, only constitute infusion of
capital.
Whether or not Sec. III of Yes. The assailed provisions of the RMO are valid
the RMO is valid. and constitutional.
Under the NIRC of 1997, every form of
compensation for services, whether paid in cash
or in kind, is generally subject to income tax and
consequently to withholding tax. Sec 2.78 of RR
No. 2-98 provides that withholding tax on
compensation applies to all employed individuals
whether citizens or aliens, deriving income from
compensation for services rendered in the
Philippines. The employer is constituted as the
withholding agent. It further provides that the term
employee covers all employees, including officers
and employees, whether elected or appointed, of
the Government of the Philippines, or any political
subdivision thereof or any agency or
instrumentality while an employer embraces not
only an individual and an organization engaged in
trade or business, but also includes an
organization exempt from income tax, such as
charitable and religious organizations, clubs,
 social organizations and societies, as well as the
Government of the Philippines, including its
agencies, instrumentalities, and political
subdivisions. The law is therefore clear that
withholding tax on compensation applies to the
Government of the Philippines, including its
agencies, instrumentalities, and political
subdivisions. The Government, as an employer, is
constituted as the withholding agent, mandated to
deduct, withhold and remit the corresponding tax
on compensation income paid to all its
employees.

However, not all income payments to

employees are subject to withholding tax. These
are the allowance, bonuses or benefits, excluded
by the NIRC. While Section III enumerates certain
allowances which may be subject to withholding
tax, it does not exclude the possibility that these
allowances may fall under the exemptions
identified under Section IV, thus, the phrase,
"subject to the exemptions enumerated herein." In
other words, Sections III and IV articulate in a
general and broad language the provisions of the
NIRC on the forms of compensation income
deemed subject to withholding tax and the
allowances, bonuses and benefits exempted
therefrom. Thus, Sections III and IV cannot be
said to have been issued contrary with the
provisions of the NIRC of 1997, as amended, and
its implementing rules.

PLDT vs. CIR, GR No. PLDT is claiming for a tax credit or refund for the payment
157264, 31 January 2008 of separation pay to its employees in compliance to the
labor requirement. PLDT invoked, that as employer and
withholding agent, it deducted from the separation pay
withholding taxes which was remitted to the BIR. According
to the petitioner, the remitted amount was excluded from
gross income pursuant to sec 28 of the NIRC.
Jaime N. Soriano, et al On 17 June 2008, R.A. 9504 entitled “An Act Amending
vs. SOF and CIR, GR Sections 22, 24, 34, 35, 51, and 79 of Republic Act No.
No. 184450, 24 January 8424, as Amended, Otherwise Known as the National
2017 Internal Revenue Code of 1997,” was approved and signed
into law by President Arroyo. On 24 September 2008, the
Bureau of Internal Revenue (BIR) issued RR 10-2008,
dated 08 July 2008, implementing the provisions of R.A.
9504.
Petitioners assail the subject RR as an unauthorized
departure from the legislative intent of R.A. 9504. The
regulation allegedly restricts the implementation of the
minimum wage earners’ (MWE) income tax exemption only
to the period starting from 6 July 2008, instead of applying
the exemption to the entire year 2008. They further
challenge the BIR’s adoption of the prorated application of
the new set of personal and additional exemptions for
taxable year 2008. They also contest the validity of the
RR’s alleged imposition of a condition for the availment by
MWEs of the exemption provided by R.A. 9504.
Supposedly, in the event they receive other benefits in
excess of P30,000, they can no longer avail themselves of
that exemption. Petitioners contend that the law provides
for the unconditional exemption of MWEs from income tax
and, thus, pray that the RR be nullified.
1) Whether or not the
increased personal and
additional exemptions
provided by R.A. 9504
should be applied to the
entire taxable year 2008
2)Whether or not   Sections
1 and 3 of RR 10-2008 are
consistent with the law in
providing that an MWE who
receives other benefits in
excess of the statutory limit
of P30,00019 is no longer
entitled to the exemption
provided by R.A. 9504
1) Yes. R.A. 9504 as a piece of social legislation
clearly intended to afford immediate tax relief to
individual taxpayers, particularly low-income
compensation earners. Indeed, if R.A. 9504 was
to take effect beginning taxable year 2009 or half
of the year 2008 only, then the intent of Congress
to address the increase in the cost of living in
2008 would have been negated. In one case, the
test is whether the new set of personal and
additional exemptions was available at the time of
the filing of the income tax return. In other words,
while the status of the individual taxpayers is
determined at the close of the taxable year, their
personal and additional exemptions – and
consequently the computation of their taxable
income – are reckoned when the tax becomes
due, and not while the income is being earned or
received.
In the present case, the increased exemptions
were already available much earlier than the
required time of filing of the return on 15 April
2009. R.A. 9504 came into law on 6 July 2008,
more than nine months before the deadline for the
filing of the income tax return for taxable year
2008. Hence, individual taxpayers were entitled to
claim the increased amounts for the entire year
2008. This was true despite the fact that incomes
were already earned or received prior to the law’s
effectivity on 6 July 2008.
2) Yes. To be exempt, one must be an MWE, a
term that is clearly defined. Section 22(HH) of
Republic Act No. 8424 says he/she must be one
who is paid the statutory minimum wage if he/she
works in the private sector, or not more than the
statutory minimum wage in the non-agricultural
sector where he/she is assigned, if he/she is a
government employee. R.A. 9504 is explicit as to
the coverage of the exemption: the wages that
are not in excess of the minimum wage as
determined by the wage boards, including the
corresponding holiday, overtime, night differential
and hazard pays. In other words, the law exempts
from income taxation the most basic
compensation an employee receives – the
amount afforded to the lowest paid employees by
the mandate of law. In a way, the legislature
grants to these lowest paid employees additional
income by no longer demanding from them a
contribution for the operations of government.

An administrative agency may not enlarge, alter

or restrict a provision of law. The Court is not
persuaded that RR 10-2008 merely clarifies the
law. The treatment of bonuses and other benefits
that an employee receives from the employer in
excess of the P30,000 ceiling cannot but be the
same as the prevailing treatment prior to R.A.
9504 – anything in excess of P30,000 is taxable;
no more, no less.

The treatment of this excess cannot operate to

disenfranchise the MWE from enjoying the
exemption explicitly granted by R.A. 9504.
Moreover, RR 10-2008 does not withdraw the
MWE exemption from those who are earning
other income outside of their employer employee
relationship. Section 2.78.1 (B) of RR 10-2008
provides that: MWEs receiving other income,
such as income from the conduct of trade,
business, or practice of profession, except income
subject to final tax, in addition to compensation
income are not exempted from income tax on
their entire income earned during the taxable
year. This rule, notwithstanding, the SMW,
Holiday pay, overtime pay, night shift differential
pay and hazard pay shall still be exempt from
 withholding tax.

In sum, the proper interpretation of R.A. 9504 is

that it imposes taxes only on the taxable income
received in excess of the minimum wage, but the
MWEs will not lose their exemption as such.
Workers who receive the statutory minimum wage
their basic pay remain MWEs. The receipt of any
other income during the year does not disqualify
them as MWEs. They remain MWEs, entitled to
exemption as such, but the taxable income they
receive other than as MWEs may be subjected to
appropriate taxes.

Republic vs. Bunsay, Who is liable to pay for It is the expropriating agency as part of the just
G.R. No. 205473, 10 CGT in case of compensation.
December 2019 expropriation?
CIR vs. Jerry Ocier, GR The taxpayer is liable to pay CGT for the sale,
No. 192023, 21 barter, exchange, or other disposition of shares of
November 2018 stock in a domestic corporation except if the sale
or disposition is through the stock exchange. For
this purpose, the term disposition includes any act
of disposing transferring or parting with, or
alienation of, or giving up of property to another
(loan).
Deductions from CIR vs. General Foods Respondent corporation General Foods (Phils), which is W/N the subject media No, the advertising expenses was is not
Gross Income (Phils.), Inc., G.R. No. engaged in the manufacture of beverages such as “Tang”, advertising expense for deductible. To be deductible from gross income,
143672, April 24 “Calumet” and “Kool-Aid”, filed its income tax return for the “Tang” was ordinary and the subject advertising expense must comply with
fiscal year ending February 1985 and claimed as necessary expense fully the following requisites: (a) the expense must be
deduction, among other business expenses, P9,461,246 deductible under the NIRC ordinary and necessary; (b) it must have been
for media advertising for “Tang”. paid or incurred during the taxable year; (c) it
must have been paid or incurred in carrying on
The Commissioner disallowed 50% of the deduction the trade or business of the taxpayer; and (d) it
claimed and assessed deficiency income taxes of must be supported by receipts, records or other
P2,635,141.42 against General Foods, prompting the latter pertinent papers.
to file an MR which was denied. While the subject advertising expense was paid or
incurred within the corresponding taxable year
General Foods later on filed a petition for review at CA, and was incurred in carrying on a trade or
which reversed and set aside an earlier decision by CTA business, hence necessary, the parties’  views
dismissing the company’s appeal. conflict as to whether or not it was ordinary. To be
deductible, an advertising expense should not
only be necessary but also ordinary.

The Commissioner maintains that the subject

advertising expense was not ordinary on the
ground that it failed the two conditions set by U.S.
jurisprudence: first, “reasonableness” of the
amount incurred and second, the amount incurred
must not be a capital outlay to create “goodwill”
for the product and/or private respondent’s
business. Otherwise, the expense must be
considered a capital expenditure to be spread out
over a reasonable time.

There is yet to be a clear-cut criteria or fixed test

for determining the reasonableness of an
advertising expense. There being no hard and
fast rule on the matter, the right to a deduction
depends on a number of factors such as but not
limited to: the type and size of business in which
the taxpayer is engaged; the volume and amount
of its net earnings; the nature of the expenditure
itself; the intention of the taxpayer and the general
economic conditions. It is the interplay of these,
among other factors and properly weighed, that
will yield a proper evaluation.

The Court finds the subject expense for the

advertisement of a single product to be
inordinately large. Therefore, even if it is
necessary, it cannot be considered an ordinary
expense deductible under then Section 29 (a) (1)
(A) of the NIRC.

Advertising is generally of two kinds: (1)

advertising to stimulate the current  sale of
merchandise or use of services and (2)
advertising designed to stimulate the  future  sale
of merchandise or use of services. The second

C. M. Hoskins & Co., Inc. Petitioner questions CTA’s findings which disallowed
vs. CIR, G.R. No. L- supervision fees paid to Hoskins the founder Mr. C. M.
24059, November 28, Hoskins as deductible ordinary and necessary expense
1969 and said that it should be treated as profit of the taxpayer.
Petitioner as founder Mr. C. M. Hoskins and Chairman of
the board of directors of the corporation, receives 50%
share of the sales commissions he earned , besides his
monthly salary of P3,750.00 amounting to an annual
compensation of P45,000.00 and an annual salary bonus
of P40,000.00, plus free use of the company car and
receipt of other similar allowances and benefits, claims that
it should be treated as deductible expenses.
The CTA said that the payment by the company to Hoskins
was inordinately large and could not be accorded the
treatment of ordinary and necessary expenses allowed as
deductible items within the purview of Section 30 (a) (i) of
the Tax Code.
type involves expenditures incurred, in whole or in
part, to create or maintain some form of goodwill
for the taxpayer’s trade or business or for the
industry or profession of which the taxpayer is a
member. If the expenditures are for the
advertising of the first kind, then, except as to the
question of the reasonableness of amount, there
is no doubt such expenditures are deductible as
business expenses. If, however, the expenditures
are for advertising of the second kind, then
normally they should be spread out over a
reasonable period of time.
The company’s media advertising expense for the
promotion of a single product is doubtlessly
unreasonable considering it comprises almost
one-half of the company’s entire claim for
marketing expenses for that year under
review. Petition granted, judgment reversed
and set aside.
Whether the supervision The SC denied the petition and affirmed the
fee received by Hoskins decision of the CTA.
can be treated as
deductible expenses? The Supreme court held that it is NOT
deductible. 
General rule, bonuses to employees made in
good faith and as additional compensation for
services actually rendered by the employees are
deductible, provided such payments, when added
to the salaries do not exceed the compensation
for services rendered.
AND In order for additional compensation be
considered as deductible, it must pass the test of
reasonableness which is has the following
conditions:
         Payment of bonuses is in fact compensation
         Must be for personal services rendered
          Bonuses when added to salaries are reasonable
when measured by the amount and quality of
services performed with relation to the business
of the particular taxpayer.

While there is no fixed test for determining the

reasonableness of a given bonus as
compensation. This depends upon many factors.

In the case, Hoskins fails to pass the test, thus

SC held that CTA was correct in holding that the
payment of the company to Mr. Hoskins 50%
share of supervision fees received by the
company was inordinately large and could not be
treated as an ordinary and necessary expenses
allowed for deduction.

CIR Vs. Isabela Cultural Isabela Cultural Corp.(ICC for brevity) , a domestic WON CA is correct in Revenue Audit Memorandum Order No.1-2000
Corporation, G.R. No. corporation received from BIR assessment notice no. FAS- sustaining the deduction of provides that under the accrual method of
172231. February 12, 1-86-90000680 (680 for brevity) for deficiency income tax the expenses for accounting, expenses not being claimed as
2007 in the amount of PhP 333,196.86 and assessment notice professionals and security deductions by a tax payer in the current year
no. FAS-1-86-90-000681 (681 for brevity) for deficiency services form ICC gross when they are incurred cannot be claimed as
expanded withholding tax in the amount of PhP 4,897.79, income? deductions from the income for the succeeding
inclusive of surcharge and interest both for the taxable year year.
1986.  The deficiency income tax of PhP 333,196 arose
from BIR disallowance of ICC claimed expenses
deductions for professional and security services billed to
and paid by ICC in 1986.
WON CA correctly held that
ICC did not understate its Sustaining the finding of the CTA and CA that no
The deficiency expanded withholding tax of PhP4,897.79 interest income from the such understatement exist and that only simple
was allegedly due to the failure of ICC to withhold 1% promissory notes of Realty interest computation and not a compounded one
expanded withholding tax on its claimed PhP244,890 Investment, Inc; that ICC should have been applied by the BIR.   There is
deduction for security services. withheld the required 1% no indeed no stipulation between the latter and
Court of Tax Appeal and Court of Appeal affirmed that the withholding tax from the ICC on the application of compound interest.
professional services were rendered to ICC in 1984 and deduction for security
services. Under Article 1959 of the Civil Code, unless there
1985, the cost of the service was not yet determinable at is a stipulation to the contrary, interest due should
 that time, hence, it could be considered as deductible not further earn interest.
expenses only in 1986 when ICC received the billing
statement for said service.   It further ruled that ICC did not
state its interest income from the promissory notes of
Realty Investment and that ICC properly withheld the
remitted taxes on the payment for security services for the
taxable year 1986.

Petitioner contend that since ICC is using the accrual

method of accounting, the expenses for the professional
services that accrued in 1984 and 9185 should have been
declared as deductions from income during the said years
and the failure of ICC to do so bars it from claiming said
expenses as deduction for the taxable year 1986.

Income Tax on Air Canada vs. CIR,  Air Canada is an offline air carrier selling passage tickets
Corporations January 11, 2016, G.R. in the Philippines, through a general sales agent,
No. 169507 Aerotel.  As an off-line carrier, it does not have flights
originating from or coming to the Philippines and does not
operate any airplane in the Philippines
Air Canada filed a claim for refund for overpayment saying
that it is not subject to tax at the regular rate of 32%. It
argues that, as an international carrier doing business in
the Philippines, the applicable tax rate against it is 2.5% as
provided on Resident Foreign Corporations (RFCs) for
international carriers.
Air Canada also claims that it is not taxable because its
income is taxable only in Canada because of the
Philippines-Canada Treaty (treaty). According to it, even if
taxable, the rate should not exceed 1.5% as stated in said
treaty.
However, the CTA ruled that  Air Canada was engaged in
Whether or not Air Canada YES, air Canada is subject to 32% tax on its
is liable for a 32% tax on its taxable income. Petitioner falls within the
taxable income. definition of resident foreign corporation under
the Tax Code.
According to the SC an international air
carrier with no landing rights in the Philippines
is classified AS A RESIDENT FOREIGN
CORPORATION ENGAGED IN BUSINESS
IN THE PHILIPPINES. The term “engaged”
pertains to acts or works or exercises
functions that are incidental and beneficial to
the purpose of business. The activities of
Aerotel bringing direct receipts or profits to
petitioner, falls under the definition. Petitioner
is, therefore, a resident foreign corporation
that is taxable on its income derived from
sources within the Philippines.
Air Canada is liable for income tax from sources
within the Philippines at the regular rate of 30%
being a RFC EBT in the Ph

business in the Philippines through a local agent that sells
airline tickets on its behalf. As such, it should be taxed as a
resident foreign corporation at the regular rate of 32%.
CIR vs. St. Luke’s St. Luke’s Medical Center, Inc. is a hospital organized as a
Medical Center, Inc., non-stock and non-profit corporation was assessed by the
G.R. No. 195909, BIR for comprised deficiency income tax, value-added tax,
September 26, 2012; withholding tax on compensation and expanded
withholding tax.
The BIR claimed that St. Luke’s was actually operating for
profit in 1998 because only 13% of its revenues came from
charitable purposes. Moreover, the hospital’s board of
trustees, officers and employees directly benefit from its
profits and assets.
St. Luke’s contention: St. Luke’s contended that the BIR
should not consider its total revenues, because its free
services to patients was 65.20% of its 1998 operating
income. St. Luke’s also claimed that its income does not
inure to the benefit of any individual. St. Luke’s maintained
that it is a non-stock and non-profit institution for charitable
and social welfare purposes under Section 30(E) and (G)
of the NIRC. It argued that the making of profit per se does
not destroy its income tax exemption.
Whether St. Luke’s is liable
for deficiency income tax in
1998 under Section 27(B)
of the NIRC, which
imposes a preferential tax
rate of 10% on the income
of proprietary non-profit
hospitals.
As to the sale of tickets – treated as income
derived from the PH, hence subject to PH income
tax.
There is no dispute that St. Luke’s is organized as
a non-stock and non-profit charitable institution.
However, this does not automatically exempt St.
Luke’s from paying taxes. This only refers to the
organization of St. Luke’s. Even if St. Luke’s
meets the test of charity, a charitable institution is
not ipso facto tax exempt. To be exempt from real
property taxes, Section 28(3), Article VI of the
Constitution requires that a charitable institution
use the property “actually, directly and
exclusively” for charitable purposes. To be
exempt from income taxes, Section 30(E) of the
NIRC requires that a charitable institution must be
“organized and operated exclusively” for
charitable purposes. Likewise, to be exempt from
income taxes, Section 30(G) of the NIRC requires
that the institution be “operated exclusively” for
social welfare.
However, the last paragraph of Section 30 of the
NIRC qualifies the words “organized and operated
exclusively.”
Notwithstanding the provisions in the preceding
paragraphs, the income of whatever kind and
character of the foregoing organizations 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, shall be subject to tax imposed under
this Code
In short, the last paragraph of Section 30 provides
that if a tax exempt charitable institution
conducts “any” activity for profit, such activity is
not tax exempt even as its not-for-profit activities
remain tax exempt. This paragraph qualifies the
requirements in Section 30(E) that the “[n]on-
stock corporation or association [must
be] organized and operated exclusively  for x x
x charitable x x x purposes x x x.” It likewise
qualifies the requirement in Section 30(G) that the
civic organization must be “operated exclusively”
for the promotion of social welfare.

Thus, even if the charitable institution must be

“organized and operated exclusively” for
charitable purposes, it is nevertheless allowed to
engage in “activities conducted for profit” without
losing its tax exempt status for its not-for-profit
activities. The only consequence is that
the “income of whatever kind and
character” of a charitable institution “from any of
its activities conducted for profit, regardless
of the disposition made of such income, shall
be subject to tax.”

In 1998, St. Luke’s had total revenues of

P1,730,367,965 from services to paying patients.
It cannot be disputed that a hospital which
receives approximately P1.73 billion from paying
patients is not an institution “operated exclusively”
for charitable purposes. Clearly, revenues from
paying patients are income received from
“activities conducted for profit.” Services to paying
patients are activities conducted for profit. They
cannot be considered any other way. There is a
“purpose to make profit over and above the cost”
of services.

The Court finds that St. Luke’s is a corporation

that is not “operated exclusively” for charitable or
social welfare purposes insofar as its revenues
from paying patients are concerned. This ruling is
based not only on a strict interpretation of a

CIR vs. St. Luke’s CIR assails the decision of the CTA En banc finding SLMC
Medical Center, Inc., not liable for deficiency income tax since it exempt from
G.R. No 203514, paying under the tax code being a NS-NF organization.
February 13, 2017
Meanwhile, the CIR contends that the doctrine of stare
decisis shall be applied in this case.
The SC rendered decision finding SL in 2012 not entitled to
the exemption as it does not operate exclusively for
charitable and social welfare purposes insofar as its
revenues from paying patients are concerned.
Whether or not SL is liable
for income tax?
provision granting tax exemption, but also on the
clear and plain text of Section 30(E) and (G).
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).
SLMC is liable for income tax under
Section 27(B) of the 1997 NIRC insofar
as its revenues from paying patients are
concerned
There is no dispute that St. Luke's is organized as
a non-stock and non-profit charitable institution.
However, this does not automatically exempt St.
Luke's from paying taxes. This only refers to the
organization of St. Luke's. Even if St. Luke's
meets the test of charity, a charitable institution is
not ipso facto  tax exempt. To be exempt from real
property taxes, Section 28(3), Article VI of the
Constitution requires that a charitable institution
use the property 'actually, directly and exclusively'
for charitable purposes. To be exempt from
income taxes, Section 30(E) of the NIRC requires
that a charitable institution must be 'organized
and operated exclusively' for charitable purposes.
Likewise, to be exempt from income taxes,
Section 30(G) of the NIRC requires that the
institution be 'operated exclusively' for social
welfare.

PAGCOR v. BIR, et al. The Philippine Amusement and Gaming Corporation
G.R. No. 215427, 10 (PAGCOR) assailed the validity of Section 1 of Republic
December 2014 Act 9337, amending Section 27(C) of the National Internal
Revenue Code (NIRC). The amendment omitted PAGCOR
from the list of government owned or controlled
corporations, consequently eliminating its exemption from
income taxes.
As such, the Bureau of Internal Revenue (BIR) issued
Revenue Memorandum Circular (RMC) No. 33-2013,
subjecting PAGCOR to a corporate income tax which will
be derived from the income of its operations and licensing
of gambling casinos, gaming clubs, gaming pools, and
other similar recreation and amusement parks.
The circular also subjected PAGCOR to a 5% franchise tax
derived from the gross revenue from its operations and
licensing of gambling casinos, gaming clubs and other
similar recreation or amusement places.
PAGCOR requested a consideration, but the BIR
commissioner denied this. PAGCOR now contends that
RMC No. 33-2013 is an erroneous application of the law,
because under their charter (P.D. 1869 as amended by
Thus, even if the charitable institution must be
'organized and operated exclusively' for charitable
purposes, it is nevertheless allowed to engage in
'activities conducted for profit' without losing its
tax exempt status for its not-for-profit activities.
The only consequence is that the 'income of
whatever kind and character' of a charitable
institution 'from any of its activities conducted for
profit, regardless of the disposition made of such
income, shall be subject to tax.' Prior to the
introduction of Section 27(B), the tax rate on such
income from for-profit activities was the ordinary
corporate rate under Section 27(A). With the
introduction of Section 27(B), the tax rate is now
10%.
Whether or not PAGCOR’s No, PAGCOR’s charter is not deemed repealed or
charter (P.D. 1869 as amended by R.A. 9337.
amended) is deemed
repealed or amended
because of R.A. 9337. It is an established rule in statutory construction
that every effort should be exerted to avoid
conflict between two statutes, and if possible,
come up with a construction where the two laws
can be reconciled in a reasonable manner.
In this case, there is no real conflict between P.D.
1869 as amended and R.A. 9337. The former lays
down the taxes imposable upon petitioner, which
includes a 5% franchise tax of the gross revenues
or earnings derived from its operations. The
enactment of R.A. No. 9337, which withdrew
PAGCOR’s income tax exemption under R.A. No.
8424, only reinstated their liability for such tax.
There is also no express repeal of P.D. 1869
under the repealing clause of R.A. 9337. Hence,
P.D. 1869 should not be deemed impliedly
repealed as well, seeing that it is not in conflict or
 R.A. 9487), they can only be subjected to 5% franchise tax
from related services. The BIR however contends that P.D.
1869 is already deemed repealed because of R.A. 9337.
Bloombery Resort vs. PAGCOR granted a provisional license to operate resort-
BIR, GR No, 212530, 10 casino to the petitioner. Pursuant to such license and
Aug 2016 PAGCOR’s charter, the petitioner only paid license fees
inlieu of taxes. However RA 9337 amended a provision of
the NIRC which excludes PAGCOR from GOCCs
exempted from paying CIT, thus, the Petitioner questions
the validity of the amendment.
irreconcilable with the provisions of R.A. 9337.
WN the RMC is valid and
constitutional despite the
exemption granted by the
Charte
1. of courts. However, pursuant to its
jurisdictional prerogative, the SC took
cognizance of the case.
2. The Court then referred to the case of
PAGCOR v. BIR, wherein it held that (1)
RA 9337, which amended the NIRC and
removed the exemption of PAGCOR was
valid; (2) PAGCOR’s income from gaming
operations is subject only to the 5%
franchise tax; and PAGCOR’s income
from other related services is subject to
corporate income tax only. RA 9337
merely reinstated the tax liability of
PAGCOR from other related services
(shows, entertainment, etc.), without
affecting its tax privilege (5% franchise
tax only) on gaming operations. The
Court in that case held that the issuance
of the RMC, subjecting BOTH income
from gaming operations AND related
services to corporate income tax, as with
grave abuse of discretion.
3. The Charter provides for the exemption of
PAGCOR and its contractees and
licensees from payment of all other taxes
aside from the franchise fee. This
includes corporate income tax. The said
provision in the Charter was not amended
or repealed, and is thus, still in effect.
Hence, the contractees and licensees are
exempt from payment of corporate
income tax.
1. As the charter states in clear

CIR vs. BCDA, G.R. No. Respondent BCDA filed a refund before the
217898, 15 January 2020 BIR for the CTW imposed on the sale of its
properties known as the "Expanded Big Delta
Lots" to the "Net Group claiming that the sale
was exempt from all taxes and fees under its
charter, Republic Act (RA) 7227, as amended
by 7917. CTA grant the claim for refund
by the respondent stating that While
respondent is not among the exempted
corporations listed under the NIRC, insofar as
the sale of the EBDL is concerned, RA 7227
specifically exempts BCDA from taxes.
terms that the exemptions shall
inure to the benefit of and extend
to the corporations, associations,
agencies, or individuals with
whom PAGCOR has any
contractual relationship in
connection with the operations of
casinos authorized to be
conducted under the franchise,
so it must be that all contractees
and licensees of PAGCOR, upon
payment of the franchise fee,
shall likewise be exempted from
payment of all kinds of taxes,
including corporate income tax,
from the operation of casinos.
2. They shall be liable for corporate
income tax for income derived
from other related services,
similar to how PAGCOR is liable
for such.
Is the BCDA exempt from Yes. Section 8 of RA 7227, as
Creditable Withholding Tax amended by RA 7917, otherwise known as the
(CWT) on the sale of its Bases Conversion and Development Act of
Global City properties? 1992 provides that The capital of the
Conversion Authority shall come from the sales
proceeds and/or transfers of certain Metro
Manila military camps, including all lands
covered by Proclamation No. 423, series of
1957, commonly known as Fort Bonifacio and
Villamor (Nicholas) Air Base.
Section 8 of RA 7227, as amended by
RA 7917, specifically governs BCDA's
disposition of the properties enumerated therein
and their sale proceeds. The law exempts these
sale proceeds from all kinds of fees and taxes
as the same law has already appropriated them

Cyanamid Philippines, Petitioner is a corporation organized under Philippine laws
Inc. vs. CA, et al., G.R. and is a wholly owned subsidiary of American Cyanamid
No. 108067, January 20, Co. based in Maine, USA. It is engaged in the manufacture
2000 of pharmaceutical products and chemicals, a wholesaler of
imported finished goods and an imported/indentor.  business to avoid the surtax upon the
Cyanamid protested the assessments particularly the 25%
surtax for undue accumulation of earnings. It claimed that
said profits were retained to increase petitioner’s working
capital and it would be used for reasonable business needs
of the company. The CIR refused to allow the cancellation
of the assessments, petitioner appealed to the CTA
claiming that the CIR have no legal basis because the
petitioner accumulated its earnings and profits for
reasonable business requirements to meet working capital
needs and retirement of indebtedness, (b) petitioner is
wholly owned subsidiary of American Cyanamid Co., a
corporation organized under the laws of the State of Maine,
in the USA, whose shares of stock are listed and traded in
New York Stock Exchange.
The CTA denied the petition stating that the law permits
corporations to set aside a portion of its retained earnings
for specified purposes under Sec. 43 of the Corporation
Whether petitioner is liable
for the accumulated
earnings tax for the year
1981.
for specific purposes and for designated
beneficiaries.
To repeat, there is no income to speak
of here; only the sale proceeds of specific
properties which the legislature itself exempts
from all taxes and fees.
ACCORDINGLY, the petition is
DENIED.
In order to determine whether profits are
accumulated for the reasonable needs of the
shareholders, it must be shown that the
controlling intention of the taxpayer is manifested
at the time of the accumulation, not intentions
subsequently, which are mere afterthoughts. The
accumulated profits must be used within
reasonable time after the close of the taxable
year. In the instant case, petitioner did not
establish by clear and convincing evidence that
such accumulated was for the immediate needs
of the business.
To determine the reasonable needs of the
business, the United States Courts have invented
the “Immediacy Test” which construed the words
 Code but that petitioner’s purpose did not fall within such
purposes. It found that there was no need to set aside such
retained earnings as working capital as it had considerable
liquid funds. Those corporations exempted from the
accumulated earnings tax are found under Sec. 25 of the
NIRC, and that the petitioner is not among those
exempted. The CA affirmed the CTA’s decision.
Manila Bankers’ Life Consolidated Petitions of Manila Bankers' Life Insurance
Insurance Corp. vs. CIR, Corporation (MBLIC) and CIR assailing the decision of
GR Nos. 199729-30, 27 Court of Tax Appeals (CTA)  En Banc stating that DST is
Feb 2019 not part of cost of service for purposes of computing MCIT
MBLIC was assessed for its alleged MCIT and DST
deficiencies for 2001.
“reasonable needs of the business” to mean the
immediate needs of the business, and it is held
that if the corporation did not prove an immediate
need for the accumulation of earnings and profits
such was not for reasonable needs of the
business and the penalty tax would apply. (Law of
Federal Income Taxation Vol 7) The working
capital needs of a business depend on the nature
of the business, its credit policies, the amount of
inventories, the rate of turnover, the amount of
accounts receivable, the collection rate, the
availability of credit and other similar factors. The
Tax Court opted to determine the working capital
sufficiency by using the ration between the
current assets to current liabilities. Unless,
rebutted, the presumption is that the assessment
is correct. With the petitioner’s failure to prove the
CIR incorrect, clearly and conclusively, the Tax
Court’s ruling is upheld.
Whether or not premium Premium taxes are NOT deductible costs of
taxes on insurance and services.
DSTs are deductible from
gross receipts. The NIRC expressly provides for the
requirements for deductibility - that the claimed
deduction should be a direct cost or expense.
A cost or expense is deemed "direct" when it is
readily attributable to the production of the goods
According to the CIR, premium taxes and DSTs on
insurance policies are not included in the enumeration of
an insurance company’s direct costs or deemed “costs of
service” that can be deducted from gross receipts for
purposes of computing MCIT.
or for the rendition of the service.
NIRC provides that "cost of services" means all
direct costs and expenses necessarily incurred
to provide the services required by the
customers and clients, including (A) salaries
and employee benefits of personnel, consultants
and specialists directly rendering the service and
(B) cost of facilities directly utilized in providing
the service such as depreciation or rental of
equipment used and cost of supplies.
Premium taxes are not  direct costs within the
contemplation of the phrase "cost of services,"
incurred as they are  after the sale of service had
already transpired. This cannot therefore be
considered as the equivalent of raw materials,
labor, and manufacturing cost of deductible "cost
of sales" in the sale of goods.
DSTs are NOT deductible costs of services
The CTA did not, however, err in holding that
DSTs are  not deductible costs of services.
The general provision on DST states:
SEC. 173. Stamp Taxes Upon Documents,
Loan Agreements, Instruments and Papers.  -
Upon documents, instruments, loan agreements
and papers, and upon acceptances, assignments,
sales and transfers of the obligation, right or
property incident thereto, there shall be levied,
collected and paid for, and in respect of the
transaction so had or accomplished, the
corresponding documentary stamp taxes
prescribed in the following Sections of this
Title,  by the person making, signing, issuing,
accepting, or transferring the same  wherever
the document is made, signed, issued, accepted
or transferred when the obligation or right arises
from Philippine sources or the property is situated
in the Philippines, and the same time such act
is done or transaction had: Provided, That
whenever one party to the taxable document
enjoys exemption from the tax herein imposed,
the other party who is not exempt shall be the one
directly liable for the tax. (emphasis added)
As can be gleaned, DST is incurred "by the
person making, signing, issuing, accepting, or
transferring" the document subject to the tax. And
since a contract of insurance is mutual in
character, either the insurer or the insured may
shoulder the cost of the DST.

In this case, it was duly noted by the CTA that

MBLIC never disputed charging DSTs from its
clients as part of their premiums. Hence, it cannot
readily be said that it was MBLIC who
"necessarily incurred" the expense.36 Moreover,
DSTs cannot also qualify as direct costs "to
provide the services required by the customers
and clients" since, just like premium taxes, they
are incurred  after the service had been rendered.
No error is then attributable to the CTA in this
regard.

Liability for DST

Instead, the company merely argued that it

cannot be made liable for additional DST unless a
new policy is issued.

We do not agree.

The imposition of DST on insurance policies

becomes due at the same time the insurance
policy is executed or had under sec 183 of NIRC.
By way of exception, however, an insurance
contract may again attract DST at the same rate
when it is (a) assigned or transferred, or (b)
renewed or continued by alteration or otherwise.

MBLIC is then mistaken in its claim that it can

only be liable under Section 183 whenever a new
policy is issued.

In  Lincoln, it was held that an increase in the

assured amount of an insurance policy would
yield a corresponding increase in the DST due.

Here, although the automatic increase in the

amount of life insurance coverage was to take
effect later on, the date of its effectivity, as well as
the amount of the increase, was already definite
at the time of the issuance of the policy. Thus, the
amount insured by the policy at the time of its
issuance necessarily included the additional sum
covered by the automatic increase clause
because it was already determinable at the time
the transaction was entered into and formed part
of the policy.

The "automatic increase clause" in the policy is in

the nature of a conditional obligation under Article
1181, by which the increase of the insurance
coverage shall depend upon the happening of the
event which constitutes the obligation. In the
instant case, the additional insurance that took
effect in 1984 was an obligation subject to a
suspensive obligation, but still a part of the
insurance sold to which private respondent was
liable for the payment of the documentary stamp
tax. (Citations omitted; emphasis supplied)

WHEREFORE, premises considered, the Court

hereby resolves as follows:

a. The Petition of MBLIC is


CIR VS. Philippine PHILIPPINE AIRLINES, INC. had zero taxable income for
Airlines, Inc., G.R. No. 2000 but would have been liable for Minimum Corporate
179259, September 25, Income Tax based on its gross income. However,
2013 PHILIPPINE AIRLINES, INC. did not pay the Minimum
Corporate Income Tax using as basis its franchise which
exempts it from “all other taxes” upon payment of
whichever is lower of either (a) the basic corporate income
tax based on the net taxable income or (b) a franchise tax
of 2%.
hereby  DENIED for lack of merit
b. The Petition of the CIR is PARTLY
MERITORIOUS; and
c. Decision CTA En banc
is  AFFIRMED  with
the MODIFICATION that premium taxes
are not deductible from gross receipts for
purposes of determining the minimum
corporate income tax due.
d. Accordingly, Manila Bankers' Life
insurance Corporation is
hereby  ORDERED TO PAY the
Commissioner of Internal Revenue the
amount of  FOURTEEN MILLION SIX
HUNDRED NINETY-FIVE THOUSAND
FOUR HUNDRED SEVENTY-FOUR
PESOS AND 93/100
(P14,695,474.93)  representing the
deficiency MCIT
Is PAL liable for Minimum
NO. PHILIPPINE AIRLINES, INC.’s franchise
Corporate Income Tax?
clearly refers to "basic corporate income tax"
which refers to the general rate of 35% (now
30%). In addition, there is an apparent distinction
under the Tax Code between taxable income,
which is the basis for basic corporate income tax
under Sec. 27 (A) and gross income, which is the
basis for the Minimum Corporate Income Tax
under Section 27 (E). The two terms have their
respective technical meanings and cannot be
used interchangeably. Not being covered by the
Charter which makes PAL liable only for basic
corporate income tax, then Minimum Corporate
Income Tax is included in "all other taxes" from
which PHILIPPINE AIRLINES, INC. is exempted.

The CIR also can not point to the “Substitution

Theory” which states that Respondent may not
invoke the “in lieu of all other taxes” provision if it
did not pay anything at all as basic corporate
income tax or franchise tax. The Court ruled that it
is not the fact tax payment that exempts
Respondent but the exercise of its option. The
Court even pointed out the fallacy of the argument
in that a measly sum of one peso would suffice to
exempt PAL from other taxes while a zero liability
would not and said that there is really no
substantial distinction between a zero tax and a
one-peso tax liability. Lastly, the Revenue
Memorandum Circular stating the applicability of
the MCIT to PAL does more than just clarify a
previous regulation and goes beyond mere
internal administration and thus cannot be given
effect without previous notice or publication to

CIR vs. Interpublic Group Respondent Interpublic Group of Companies, Inc. (IGC) is
of companies, Inc., GR a non-resident foreign corporation duly organized and
No. 207039, 14 August existing under and by virtue of the laws of the State of
2019 Delaware, United States of America.
The IGC owns 30% shares of the total outstanding and
voting capital stock of McCann Worldgroup Philippines,
Inc. (McCann), a domestic corporation duly organized and
existing under the laws of the Philippines engaged in the
general advertising business.
The IGC received cash dividends from McCann and
McCann withheld a Final Withholding Tax (FWT) at the
rate of 35% on IGC's cash dividends and remitted the
payment of the FWT to the CIR
the IGC established a Regional Headquarters (RHQ) in the
Philippines and was converted into its Regional Operating
Headquarters (ROHQ).
the IGC filed an administrative claim for refund or issuance
of tax credit certificate (TCC) representing the alleged
overpaid FWT on dividends paid by McCann to IGC. In the
said administrative claim, the IGC averred that as a non-
resident foreign corporation, it may avail of the preferential
FWT rate of 15% on dividends received from a domestic
corporation under the Tax Code.
CTA granted the IGC's petition for review. Accordingly, the
CIR was ordered to refund or to issue a TCC in favor of
IGC representing the overpaid FWT on cash dividends for
taxable year 2006.
those who will be affected thereby.
1. WON IGC IS The Tax Code provides that a foreign corporation
ENTITLED TO A not engaged in trade or business in the
TAX REFUND OR Philippines shall pay a tax equal to thirty-five
TAX CREDIT percent (35%) of the gross income received
CERTIFICATE during each taxable year from all sources within
FOR THE the Philippines, such as among others, dividends.
ALLEGED
OVERPAID FINAL However, the ordinary 35% tax rate applicable to
WITHHOLDING dividend remittances to non-resident corporate
TAX ON ITS CASH stockholders of a Philippine corporation, goes
DIVIDENDS. down to 15% if the country of domicile of the
foreign stockholder corporation "shall allow" such
foreign corporation a tax credit for "taxes deemed
paid in the Philippines," applicable against the tax
payable to the domiciliary country by the foreign
stockholder corporation.
IGC, being a non-resident US corporation is
qualified to avail of the aforesaid 15% preferential
tax rate on the dividends it earned from the
Philippines. It was proven that the country which it
was domiciled shall grant similar tax relief/credit
against the tax due upon the dividends earned
from sources within the Philippines. Clearly, the
IGC has made an overpayment of its tax due of
FWT by using the 35% tax rate.
Income Tax on Afisco Insurance Corp.,
Partnerships, et al. vs. CA et al., G.R.
No. 112675,January 25,
1999
Estates and Dizon vs. CTA, G.R. No. FACTS:
Trusts 140944, 30 April 2008
Petitioner questions the deficiency estate tax assessment
of the BIR to the estate of the deceased Jose Fernandez
claiming that in as much as the claims of creditors against
the Estate are in excess of the gross estate, NO estate tax
was due. While the respondent BIR, argue that since such
claims of the Estate’s creditor have been condoned, such
claims may no longer be deducted from the gross estate of
the decedent and such claim should be allowed only to the
extent of the amount actually paid or condoned.
CIR vs. Pineda, GR No. Atanasio Pineda died, survived by his wife, Felicisima
L-22734, 15 September Bagtas, and 15 children, the eldest of whom is Manuel B.
1967) Pineda, a lawyer. The estate was divided among  the heirs  from an heir's inheritance
and Manuel B. Pineda's share amounted to about
P2,500.00. After the estate proceedings were closed, the
BIR investigated the income tax liability of the estate for the
years 1945, 1946, 1947 and 1948 and it found that the
corresponding income tax returns were not filed. The
whether the actual claims No. claims must be existing at the
of the aforementioned
creditors may be fully
allowed as deductions from
the gross estate of Jose Yes, it is deductible. The SC said that
despite the fact that the indebtedness must not have been condoned by
said claims were reduced the creditor during the lifetime of the decedent or
or condoned through the action must not have prescribed. If the debts
compromise agreements were condoned after the death of the decedent,
entered into by the Estate the debts are deductible following the date of
with its creditors valuation rule.
Therefore, the claims existing at the time of death
are significant to, and should be made the basis
of, the determination of allowable deductions.
WHEREFORE, the instant Petition is GRANTED.
Accordingly, the assailed Decision dated April 30,
1999 and the Resolution dated November 3, 1999
of the Court of Appeals in CA-G.R. S.P. No.
46947 are REVERSED  and SET ASIDE. The
Bureau of Internal Revenue's deficiency estate
tax assessment against the Estate of Jose P.
Fernandez is hereby  NULLIFIED. No costs.
Can BIR collect the full Yes. The Government can require Atty. Pineda to
amount of estate taxes pay the full amount of the taxes assessed. Pineda
is liable for the assessment as an heir and as a
holder-transferee of property belonging to the
estate/taxpayer. As an heir he is individually
answerable for the part of the tax proportionate to
the share he received from the inheritance. His
liability, however, cannot exceed the amount of
 representative of the Collector of Internal Revenue filed
said returns for the estate and issued an assessment.
Manuel B. Pineda, who received the assessment,
contested the same. He appealed to the Court of Tax
Appeals alleging that he was appealing "only that
proportionate part or portion pertaining to him as one of the
heirs."  The Court of Tax Appeals rendered judgment
holding Manuel B. Pineda liable for the payment
corresponding to his share of the taxes.  The
Commissioner of Internal Revenue has appealed to the SC
and has proposed to hold Manuel B. Pineda liable for the
payment of all the taxes found by the Tax Court to be due
from the estate instead of only for the amount of taxes
corresponding to his share in the estate. Manuel B. Pineda
opposes the proposition on the ground that as an heir he is
liable for unpaid income tax due the estate only up to the
extent of and in proportion to any share he received.
CIR Vs. Magsaysay The National Development Company NDC sell its National
Lines, GR No. 146984, Marine Corporation (NMC) shares and five of its ships
28 July 2006 pursuant to the government program of privatization. The
NDC was held liable for VAT by the BIR for such sale.
According to the BIR, NDC is liable because it is a VAT
registered enterprise – thus the transaction or the sale is
incident to its normal VAT registered activity of leasing out
his share.     As a holder of property belonging to
the estate, Pineda is liable for he tax up to the
amount of the property in his possession. The
reason is that the Government has a lien on the
P2,500.00 received by him from the estate as his
share in the inheritance, for unpaid income taxes
a for which said estate is liable.
              All told, the Government has two ways of
collecting the tax in question. One, by going after
all the heirs and collecting from each one of them
the amount of the tax proportionate to the
inheritance received.      Another remedy, is by
subjecting said property of the estate which is in
the hands of an heir or transferee to the payment
of the tax due, the estate. This second remedy is
the very avenue the Government took in this case
to collect the tax. The Bureau of Internal Revenue
should be given, in instances like the case at bar,
the necessary discretion to avail itself of the most
expeditious way to collect the tax as may be
envisioned in the particular provision of the Tax
Code above quoted, because taxes are the
lifeblood of government and their prompt and
certain availability is an imperious need. And as
afore-stated in this case the suit seeks to achieve
only one objective: payment of the tax. The
adjustment of the respective shares due to the
heirs from the inheritance, as lessened by the tax,
is left to await the suit for contribution by the heir
from whom the Government recovered said tax.
Whether the sale by NDC No, the sale is not subject to VAT. The sale was
of its shares in NMC made not in the ordinary course or trade or
including the ships is business of NDC. The word “course of business”
subject to VAT refers to what is usually done in the management
of trade or business. It connotes regularity.
In the case of NDC, cannot be considered as a
 personal property.
ANPC vs. BIR, G.R. No. Petitioner ANPC questioned the validity of Revenue
228539, June 2019 Memorandum Circular (RMC) No. 35-2012 issued by the
BIR which states that clubs which are organized and
operated exclusively for pleasure, recreation, and other
non-profit purposes are subject to income tax since they
are excluded from the list of tax exempt corporations.
Hence, the income of recreational clubs from whatever
source, including but not limited to membership fees,
assessment dues, rental income and services fees are
subject to income tax.
Likewise, it also provides that the gross receipts of
recreational clubs including but not limited to
membership fees, assessment dues, rental income,
and service fees are subject to VAT
Whether or not RMC No.
35-2012 subjecting
membership fees,
assessment dues, and fees
of similar nature collected
by clubs which are
organized and operated
exclusively for pleasure,
recreation, and other
nonprofit purposes to
income tax and  part of the
"gross receipts of
recreational clubs" are
"subject to VAT is valid.
transaction related to it course of business since it
is only an isolated transaction. The sale which
was involuntary and made pursuant to the
declared policy of the government for which could
no longer be repeated or carried with regularity.
Thus any sale, barter, or exchange of goods or
service not I the course or trade or business is
NOT SUBJECT TO TAX.
Recreational clubs' non-profit nature, membership
fees and assessment dues cannot be considered
as funds that would represent these clubs' interest
or profit from any investment. In fact, these fees
are paid by the clubs' members without any
expectation of any yield or gain (unlike in stock
subscriptions), but only for the above-stated
purposes and in order to retain their membership
therein.
Membership fees, assessment dues, and other
fees of similar nature only constitute
contributions to and/or replenishment of the
funds for the maintenance and operations of
the facilities offered by recreational clubs to
their exclusive members.51 They represent
funds "held in trust" by these clubs  to defray
their operating and general costs and hence,
only constitute infusion of capital.  52
Clearly, because of the nature of membership
fees and assessment dues as funds inherently
dedicated for the maintenance, preservation, and
upkeep of the clubs' general operations and
facilities, nothing is to be gained from their
collection.
This stands in contrast to the fees received by
recreational clubs coming from their income-
generating facilities, such as bars, restaurants,
and food concessionaires, or from income-
generating activities, like the renting out of sports
equipment, services, and other accommodations:
In these latter examples, regardless of the
purpose of the fees' eventual use, gain is already
realized from the moment they are collected
because capital maintenance, preservation, or
upkeep is not their pre-determined purpose. As
such, recreational clubs are generally free to use
these fees for whatever purpose they desire and
thus, considered as unencumbered "fruits"
coming from a business transaction.

In fine, for as long as  these membership fees,

assessment dues, and the like are treated as
collections by recreational clubs from their
members as an inherent consequence of their
membership, and are, by nature, intended for
the maintenance, preservation, and upkeep of
the clubs' general operations and facilities,
then these fees cannot be classified as "the
income of recreational clubs from whatever
source" that are "subject to income
tax."54 Instead, they only form part of capital
from which no income tax may be collected or
imposed.

It is a well-enshrined principle in our jurisdiction

that the State cannot impose a tax on capital as it
constitutes an unconstitutional confiscation of
property.

The Court  DECLARES that membership fees,

assessment dues, and fees of similar nature
collected by clubs which are organized and
operated exclusively for pleasure, recreation, and
other nonprofit purposes do not constitute

PSALM vs. CIR, G.R. No. Through the EPIRA Law, PSALM was created to facilitate
226556, 3 July 2019, the sale and privatization of the National Power
Corporation. Two power plants was sold by PSALM. The
BIR assessed the petitioner with VAT for the said sale.
Petitioner then paid the assessed tax in protest and raised
the issue with the DOJ. The DOJ rendered its judgement in
favor of the Petitioner. The respondent appealed to the CA
who reversed DOJ’s resolution. Petitioner then appealed to
the SC, hence this case.
as:  (a)  "the income of recreational clubs from
whatever source" that are "subject to income tax";
and (b)  part of the "gross receipts of recreational
clubs" that are "subject to [Value Added Tax]."
Accordingly, Revenue Memorandum Circular No.
35-2012 should be interpreted in accordance with
this Decision.
Whether the sale of the No, The phrase ‘in the course of trade or
power plants is subject to business’ means the regular conduct or pursuit of
VAT? a commercial or an economic activity, including
transactions incidental thereto, by any person
regardless of whether or not the person engaged
therein is a nonstock, nonprofit private
organization (irrespective of the disposition of its
net income and whether or not it sells exclusively
to members or their guests), or government entity.
The sale of the power plants is not “in the course
of trade or business” as contemplated under
Section 105 of the NIRC, and thus, not subject to
VAT.
The sale of the power plants is not in pursuit of a
commercial or economic activity but a
governmental function mandated by law to
privatize NPC generation assets. PSALM was
created primarily to liquidate all NPC financial
obligations and stranded contract costs in an
optimal manner. The purpose and objective of
PSALM are explicitly stated in Section 50 of the
EPIRA law.
PSALM is limited to selling only NPC assets and
IPP contracts of NPC. The sale of NPC assets by
PSALM is not “in the course of trade or business”
but purely for the specific purpose of privatizing
NPC assets in order to liquidate all NPC financial
 obligations. PSALM is tasked to sell and privatize
the NPC assets within the term of its existence.

Contex vs. CIR, GR No. Facts: (1) Whether or not Ruling:

151135, 2 July 2004 the VAT
Petitioner filed a petition assailing the decision of (1) No, it does not apply to Contex as a
exemption
the CA reversing the decision of the CTA which purchaser. Although it is true that it
ordered CIR to refund to petitioner the erroneously
embodied under should not be held liable for the VAT
paid input VAT or issue a tax credit certificate for RA 7227 is unintentionally passed on to it by its
said amount. applicable to supplier since such sale to an SBMA
Contex as a registered enterprise is a zero rated
According to the petitioner, it is not liable for VAT purchaser? sale on the part of the supplier,
being a duly registered with the SBMA as a Subic contex copr is not the proper party
Bay Freeport Enterprise. The petitioner said that to claim such refund. As a non-vat
under RA 7227, SBMA registered enterprise is registered taxpayer, it is not allowed
exempt from all local and national internal revenue any tax credit on VAT previously
taxes except for the preferential tax. paid.
(2) The petitioner is liable for
VAT on its purchases of supplies
and raw materials. The
exemption under Rep. Act
No. 7227 is limited only to
the VAT on which it is
directly liable as a seller
and hence, it cannot claim
any refund or exemption
for any input VAT it paid, if
any, on its purchases of
raw materials and supplies.
CIR vs. Seagate FACTS:
Technology, GR No.
153866, 11 Feb 2005
A VAT-registered enterprise, STP
has principal office address at the new Cebu
Township One, Special Economic Zone,
Barangay Cantao-an, Naga, Cebu. STP
is registered with the Philippine Export Zone
Authority (PEZA) and certified to engage in
the manufacture of recording components
primarily used in computers for export. VAT
returns were filed for the period 1 April 1998
to 30 June 1999. With supporting documents,
a claim for refund of VAT input taxes in the
amount of 28 million pesos (inclusive of the
12-million VAT input taxes subject of this
Petition for Review) was filed on 4 October
1999.
CIR did not act promptly upon STP's claim so
the latter elevated the case to the CTA for
review in order to toll the running of the two-
year prescriptive period.
On appeal, CIR asserted that by virtue of the
PEZA registration alone of STP, the latter is
not subject to the VAT. According to CIR,
STP's sales transactions intended for export
are not exempt.
ISSUE: HELD:
[1] Is STP entitled to [1] Yes, STP is entitled to refund or tax
refund or tax credit credit
for puchases?
As a PEZA-registered enterprise
within a special economic zone, STP is
entitled to the fiscal incentives and
benefit provided for in either PD 66 or
EO 226. It shall, moreover, enjoy all
privileges, benefits, advantages or
exemptions under both Republic Act
Nos. (RA) 7227 and 7844.
Its sales transactions intended for
export may not be exempt, but like its
purchase transactions, they are zero-
rated. No prior application for the
effective zero rating of its transactions
is necessary. Being VAT-registered
and having satisfactorily complied
with all the requisites for claiming a
tax refund of or credit for the input
VAT paid on capital goods purchased,
STP is entitled to such VAT refund or
credit.
STP, which as an entity is exempt, is
different from its transactions which
are not exempt. The end result,
however, is that it is not subject to the
 VAT. The non-taxability of
transactions that are otherwise taxable
is merely a necessary incident to the
tax exemption conferred by law upon
it as an entity, not upon the
transactions themselves.
PRINCIPLE:
Business companies registered in and
operating from the Special Economic
Zone in Naga, Cebu are entities
exempt from all internal revenue taxes
and the implementing rules relevant
thereto, including the value-added
taxes or VAT. Although export sales
are not deemed exempt transactions,
they are nonetheless zero-rated.
Hence, the distinction between
exempt entities and exempt
transactions has little significance,
because the net result is that the
taxpayer is not liable for the VAT. A
VAT-registered enterprise may comply
with all requisites to claim a tax refund
of or credit for the input VAT it paid
on capital goods it purchased. In
short, after compliance with all
requisites, such enterprise is entitled
to refund or credit.

Coral Bay Nickel

Corporation VS. CIR, GR
No. 190506, 13 June
2016
CIR, v. United Cadiz
Sugar Farmers MPC,
G.R. No. 209776, 7 Dec
2016
CIR vs. Negros
Consolidated Framers
MPC, GR No. 212735, 5
Dec 5 2018
Fort Bonifacio
Development Corp. vs.
CIR, G.R. No.173425, 4
Sep 2012
CIR vs. Team Energy
Corporation, GR No.
230412, 27 March 2019
Steag State Power, Inc.
vs. CIR, GR No. 205282,
14 January 2019
Eastern Telecom Phils.,
Inc., vs. CIR, G.R. No.
183531, March 25, 2015
CIR vs. Euro-Philippines
Airline Services, Inc., GR
No. 222436, 23 Jul 2018