CIR v.
P & G Philippine Manufacturing Corp and The submission of the Commissioner of Internal
CTA, gr l-66838
Facts:
Private respondent is P&G Philippine
Manufacturing Corp., engaged in business in the
Philippines, and a subsidiary of P&G USA which is a
foreign non-resident corporation. P&G USA
receives income from P&G Phil. In the form of
dividends.
Private respondent contends that it has the
personality to claim tax refund in behalf of its
mother company, P&G USA and that pursuant to
the US internal revenue code, it is entitled to a tax
return of 15% it already paid as taxes on dividends
pursuant to said foregin law.
The CIR on the other hand contends that
P&G PH. Is a mere withholding agent of the
government and thus not the proper party to claim
reimbursement of alleged over paid taxes.
Issue: WON the Private respondet is the proper
party to claim tax refund? Won the PR is entitled to
a tax return of 15%?
Ruling:
1. No. The real party in interest is the
mother Corporation which is the P&G
US. COnsequnetly, said foreign
corporation, as the payor, should be the
one claiming for the tax refund and not
the subsidiary corporation.
2. NO. Nothing in the US internal revenue
code warrants the return of the 15% of
the paid taxes on dividends. Further, PR
failed to show the actual amount
allegedly credited by the US
government, the taxable income of P&G
US and submit any documentfrom the
US government supporting its claim.
Personal end notes:
Nonetheless it is axiomatic that the State can never
be in estoppel, and this is particularly true in matters
involving taxation. The errors of certain administrative
officers should never be allowed to jeopardize the
government's financial position.
Revenue that PMC-Phil. is but a withholding agent of
the government and therefore cannot claim
reimbursement of the alleged over paid taxes, is
completely meritorious. The real party in interest
being the mother corporation in the United States, it
follows that American entity is the real party in
interest, and should have been the claimant in this
case.
CIR v. Lingayen Gulf Electric power Co and CTA
gr l-23771
Facts:
Private respondent, lingayen, is an operator of
an electric plantserving various municiplaites of
Lingayen and BInmaley Pangasinan, pursuant to a
Municipal Franchise. Said franchise provides that it
shall pay1 percent of gross earnings as franchise tac
for the first 20 years and 2 % for the remaining 15
years.
Pet contends that pr should pay a franchise tax of 5%
based on the NIRC instead of the lower rates
provided in the municipal franchise, since the NIRC
allegedly impliedly amended PR’s franchise.
Pending the case, RA 3848 was passed granting to
PR a legislative franchise providing among others a
2% franchise tax.
PR contends that the lower rate should apply because
RA 3848 applies retroactively up to the issuance of its
franchise.
Issue: what tax rate should apply?
Ruling:
The rate pursuant to PR’s franchise, not the
NIRC franchise tax rate, should apply.
RA 3848 specifically provides that its provision shall
be effective upon the date the orginal franchise was
granted and it shall pay taxes under the legislative
franchise in lieu of any and all taxes.
However, it should be noted that the PR is still liable
for taxes accruing before the approval of its municipal
taxes because the exemption granted by the
legislative franchise does not cover said taxes.
Personal end notes:
"uniformity and equality of taxation
A tax is uniform when it operates with the same force
and effect in every place where the subject of it is
found. Uniformity means that all property belonging to
the same class shall be taxed alike The Legislature
has the inherent power not only to select the subjects
of taxation but to grant exemptions. Tax exemptions
have never been deemed violative of the equal
protection clause.
Xcxcx
CIR vs. CA, Central Vegetable Manufacturing Co.
Inc. and the CTA
Facts:
The Private respondent, CENVOCO, is a
manufacturer of coconut cake and other coconut oil
related food. Thus, it is subject to a miller’s tax of 3%.
It purchased packaging materials for its product and
paid the sales tax due thereon. The law provides that
the sales, miller’s and excise taxes paid on all other
materials, except raw materials used in the milling
process, may be credited against the miller’s tax due.
Thus, CENVOCo contends that the payment of sales
tax from the purchased packaging materials may be
credited for the deficiency in its miller’s tax.
On the other hand, Petitioner argued that such
packaging materials cannot be credited, because the
same are within the coverage of the phrase “raw
materials used in the milling process”.
Issue: Should the sales tax paid by CENVCO for the
purchase of packaging materials can be credited
against the deficiency miller’s tax?
Ruling:
YES. The law is clear and unambiguous.
Containers and packaging materials cannot be
considered as raw materials for the finished product
“coconut edible oil”. Such application is proper
because tax cannot be imposed beyond what the
statute expressly and clearly imports. Taxes should
be construed strictissimi juris against the government.
Personal end notes:
It bears stressing that tax burdens are not to be
imposed, nor presumed to be imposed beyond what
the statute expressly and clearly imports, tax statutes
being construed strictissimi juris against the
government. AND IN FAVOR OF TP LAGAY MO
This Court is mindful of the well-entrenched principle
that the government is never estopped from collecting
taxes because of mistakes or errors on the part of its
agents, but this rule admits of exceptions in the
interest of justice and fairplay.
Xcxcxcx
CIR vs. Insular Life Assuarance co. ltd. Gr 197192
Facts:
Private respondent is a Phil Corp and a non-stock
mutual life insurer. It contends that it is exemptied
from paying Documentary stamp tax by virtue of
the exemption granted to it by the provision of the
NIRC. Said provision provides that insurance
policies issued by cooperative company or assoc
shall not be subject to doc stamp tax.
After issuing an assement notice for the alleged
deficiency Documentary stamp tax for various year,
petitioner contends that Insukar life cannot claim
exemption from the said tax because it is not
registered w/ the Cooperative Development
Authority. Said non registration implies that it is
not a cooperative company.
Issue: WON Insular life should be exempted from
paying Dox stamp tax?
Ruling:
YES. The court ruled, citing RP v. Sunlife by
vrtue of the principle stare dicisis, thatregistration
with CDA is not necessary for an association to be
deemed as cooperative and enjoy tax exemption.
It should bennoted that other provision of NIRC
specifically requires registration to CDA before
granting tax exemption certificate. In this case
however, clear absence of the same requirement
implies that the legislative does not intend to
imose same requirements to cooperative
companies regarding payment of DST.
Second, when the cooperative code was enacted,
all registered under old laws, like insular life, shall
also be deemed registered with the CDA.
Personal end notes:
"While administrative agencies, such as the Bureau of
Internal Revenue, may issue regulations to implement
statutes, they are without authority to limit the scope
of the statute to less than what it provides, or extend
or expand the statute beyond its terms, or in any way
modify explicit provisions of the law. Indeed, a quasi-
judicial body or an administrative agency for that
matter cannot amend an act of Congress. Hence, in
case of a discrepancy between the basic law and an
interpretative or administrative ruling, the basic law
prevails.
Also, registration with CDA not pre req to be entitled
emxemtion form DST.
xcxcxcxcxxcx
CIR vs. Hantex Trading Co. Inc. GR 136975
Facts:
Hantex trading is a Philippine Corporation
engaged in the sale of plastic products. It pays
import taxes for the importation of resin and other
chemical for the manufacture of its plastic goods.
The petitioner with the Economic
Intelligence and investigation Bureau, relying on
photocopy of import entries, issued an assessment
against Hantex for its alleged deficiency import
taxes and alleged misdeclaration of imported
goods.
Hantex contends that such assessment is
baseless and unlawful since photocopy evidence
has no probative weight of offered as proof.
Petitioner on the other hand argued that
photocopies are admissible pursuant to the “best
evidence obtainable rule” and that assessments are
presumed valid and the burden to prove otherwise
lies with Hantex. It further contends that
technicalities cannot be made a defense in tax
cases.
Issue: WON the contention of Petitioner correct?
Ruling:
NO. The SC agreed with the CA’s contention
that the assessments are unlawful.
First, the best evidence obtainable rule under the
NIRC does not include mere photocopies. Such
copies are treated mere scraps of paper and are of
no probative value as basis against taxpayers.
Assessments must be based on actual facts.
Second, it is correct that as a rule, tax assesssments
are presumed correct, made in GF and based on
sufficient evidence. However, such rule does not
apply if tax assement is without foundation like in
this case. Hence, assessments are arbitrary.
It should ne noted however that the case must be
remanded for the proper determination of
Hantex’s liability.
Personal end notes:
We agree with the contention of the petitioner that, as
a general rule, tax assessments by tax examiners are
presumed correct and made in good faith. All
presumptions are in favor of the correctness of a tax
assessment. It is to be presumed, however, that such
assessment was based on sufficient evidence.
Mere disputable presumption thoug, it may be
overturned by defendant by proving that there was
no sufficient eveidence . or no foundation.
Also best evidence rule. We agree with the
contention of the petitioner that the best evidence
obtainable may consist of hearsay evidence, such as
the testimony of third parties or accounts or other
records of other taxpayers similarly circumstanced as
the taxpayer subject of the investigation, hence,
inadmissible in a regular proceeding in the regular
courts
Xcxcxcx
Nursery Care Corp et al. vs. Acevedo (Manila
Tresurer) 180651
Facts:
Petitioners are entities engaged in business
in Manila. The city of manila assessed and collected
from said petitioners business taxes (wholesalers’,
Distributors’ and Retailers’ taxes) pursuant to
Revenue code of Manila.
Respndent further imposed additional
business taxes upon petitioners pursuant to the
same code code this time as a condition to renew
of their respective business licenses.
Petitioners contends that the imposition amounted
to DT since they are already paying business taxes
in the form of taxes on retaliers, wholesalers and
distributors.
Respondent argued that the imposition does not
amount to DT because the second imposition is an
indirect tax on end consumers not on the business
intself.
Issue: WON there is DT?
Ruling:
YES. There is DT because:
1. Both taxes are imposed on the same subject
matter – privilege to engage business in
manila
2. It is for the same purpose – to collect taxes
from business owners in Manila
3. Imposed by the same taxing authority – City
of Manila
4. Within the same taxing period
5. It is of same kind or character – both are
business taxes
Thus, there is double taxation. It is also worth
noting that the imposition amounted to DT
because the City of Manila did not consider the
provision of the code wich provides that payment
of business tax under the first imposition exempts
the payor from paying business tax under the
second impostion.
Personal end notes:
Double taxation means taxingthe same property twice
when it should be taxed only once; that is, "taxing the
same person twice by the same jurisdictionfor the
same thing." It is obnoxious when the taxpayer is
taxed twice, when it should be but once. Otherwise
described as "direct duplicate taxation," the two taxes
must be imposed on the same subject matter, for the
same purpose, by the same taxing authority, within
the same jurisdiction, during the same taxing period;
and the taxes must be of the same kind or character.
Using the aforementioned test, the Court finds that
there is indeed double taxation if respondent is
subjected to the taxes under both Sections 14 and 21
of Tax Ordinance No. 7794, since these are being
imposed: (1) on the same subject matter – the
privilege of doing business in the City of Manila; (2)
for the same purpose – to make persons conducting
business within the City of Manila contribute tocity
revenues; (3) by the same taxing authority – petitioner
Cityof Manila; (4) within the same taxing jurisdiction –
within the territorial jurisdiction of the City of Manila;
(5) for the same taxing periods – per calendar year;
and (6) of the same kind or character – a local
business tax imposed on gross sales or receipts of
the business.
Xcxcxcxcxc
Phil. Bank of Communications vs. CIR, CTA, CA
112024
Facts:
Petitioner is a Philippine corporation who
claims for a tax refund in the amount of
approximately 5 million which it allegedly overpaid
in the preceeding quarters.
Respondent, however, denied said claim on
the ground that said request was filed beyond the
2-year regelementary period provided by the NIRC.
Petitioner, on the other hand, contends that
it filed in good faith said request beyond the 2 year
period relying on a revenue memorandum circular
which states that refunds for the excess quarterly
income may be claime with the BIR within 10 years
from date of payment pursuant to the prescriptive
period set forth in the civil code.
Issue: WON the tax refund should be granted?
Ruling:
NO. Taxes are the lifeblood of the nation.
Thus, claims for refund should be exercised within
the time fixed by law and since refund are in nature
exemptions, it must be construed strictissimi juris
against the taxpayer.
The revenue memorandum being invoke by
the petitioner changing the prescriptive period is
void since it did not simply interpret the law but
rather, it performed a legislative function changing
the substance of the law. Such memorandums,
being an administrative ruling, shall be ignored by
the courts if found erroneous. Thus, the petitioner
cannot claim refund under said memorandum.
Personal end notes:
Art. 8 of the Civil Code   recognizes judicial decisions,
26
applying or interpreting statutes as part of the legal
system of the country. But administrative decisions do
not enjoy that level of recognition. A memorandum-
circular of a bureau head could not operate to vest a
taxpayer with shield against judicial action. For there
are no vested rights to speak of respecting a wrong
construction of the law by the administrative officials
and such wrong interpretation could not place the
Government in estoppel to correct or overrule the
same.  government are not creditors and debtors. Taxes
Sec. 246 Non-retroactivity of rulings— Any
revocation, modification or reversal of any of the rules
and regulations promulgated in accordance with the
preceding section or any of the rulings or circulars
promulgated by the Commissioner shall not be given
retroactive application if the revocation, modification
or reversal will be prejudicial to the taxpayers except
in the following cases:
a). where the taxpayer deliberately misstates or omits
material facts from his return or in any document
required of him by the Bureau of Internal Revenue;
b). where the facts subsequently gathered by the
Bureau of Internal Revenue are materially different
from the facts on which the ruling is based;
c). where the taxpayer acted in bad faith.
Xcxcxcx
Philex Mining Corporation v. CIR, CA and CTA
125704
Facts:
Philex Mining Coro. (Philex) was ordered to
pay an amount of approx. 110M as it axcise tax
liability by the BIR. Philex however refused to pay
on the ground that it has a pending tax refund
claim before the CTA and thus it cannot be
compelled to pay at the moment because it may
apply said refund to the pending liability.
Public respondents on the other hand, still
denied Philex’s claim and still demanded payment.
They contend that there can be no legal
compensation because the claim is not yet
liquidated and demandable since it is still pending
before the CTA.
Issue: WON Philex can validly claim legal
compensation in view of the pending tax credit
claim?
Ruling:
NO. Taxes cannot be subject to set-off
because the same are not debts or contracts. In
taxation, the relationship of TP’s and the
are due to the government in its sovereign capacity
thus, taxes cannot be subject to compensation.
Consequently, Philex cannot claim legal
compensation by virtue of its tax credit for
payment of its excise tax liabilities.
Personal end notes:
In several instances prior to the instant case, we have
already made the pronouncement that taxes cannot
be subject to compensation for the simple reason that
the government and the taxpayer are not creditors
and debtors of each other.   There is a material
17
distinction between a tax and debt. Debts are due to
the Government in its corporate capacity, while taxes
are due to the Government in its sovereign
capacity.   We find no cogent reason to deviate from
18
the aforementioned distinction.
If any taxpayer can defer the payment of taxes by
raising the defense that it still has a pending claim for
refund or credit, this would adversely affect the
government revenue system. A taxpayer cannot
refuse to pay his taxes when they fall due simply
because he has a claim against the government or
that the collection of the tax is contingent on the result
of the lawsuit it filed against the
government.   Moreover, Philex's theory that would
27
automatically apply its VAT input credit/refund against
its tax liabilities can easily give rise to confusion and
abuse, depriving the government of authority over the
manner by which taxpayers credit and offset their tax
liabilities.
Xcxcxc
127105
CIR vs. S.C Johnson & Son inc.
Facts:
A domestic corporation entered into an
agreement with herein private respondent SC
Johnson & Son inc. (Johnson). The agreement
provides that the former was granted right to use
the latter’s trademark, patents and technology.
Consequently, for the use of the trademark the
domestic corporation is obliged to pay Johnson
royalites.
Johnson now contends that, instead of the
25% withholding tax on royalty payments, it is
entitled to use a preferential tax rate of 10%
pursuant to the most-favored nation clause of the
RP-US tax treaty in relation to the RP-West
Germany treaty. Thus, it contends that it is entitled
for a tax refund because it used the 25% tax rate.
Petitioner on the other hand contends that
the the most favored nation clause cannot be
applied because the treaty provides that it may be
onvoked only if circumstances on RP-US tax treaty
and RP-West Germany treaty is similar.
Issue: WON the most favored nation clause may be
applied in the case at hand?
Ruling:
NO. Tax refund are in the nature of
exemptions thus must be construed strictissimi
juris against the claimant. Thus, the claimant has
the burden to prove that exemptions could apply.
The clause could apply only if the tax under
the RP-Gernmay tax treaty and the RP-US traty “are
paid under similar circumstances”. In this case
however, said treaties do not contain similar
provision on tax crediting. In the former, it allows
crediting tax of 20% of the gross amount of the
royalties paid under PH laws while RP-US treaty
does not provide for similar crediting of 20%
percent.
Personal end notes:
The purpose of a most favored nation clause is to
grant to the contracting party treatment not less
favorable than that which has been or may be granted
to the "most favored" among other countriesThe
essence of the principle is to allow the taxpayer in one
state to avail of more liberal provisions granted in
another tax treaty to which the country of residence of
such taxpayer is also a party provided that the subject
matter of taxation
The RP-US Tax Treaty is just one of a number of
bilateral treaties which the Philippines has entered
into for the avoidance of double taxation
The second method for the elimination of double
taxation applies whenever the state of source is given
a full or limited right to tax together with the state of
residence. In this case, the treaties make it incumbent
upon the state of residence to allow relief in order to
avoid double taxation. There are two methods of relief
— the exemption method and the credit method. In
the exemption method, the income or capital which is
taxable in the state of source or situs is exempted in
the state of residence, although in some instances it
may be taken into account in determining the rate of
tax applicable to the taxpayer's remaining income or
capital. On the other hand, in the credit method,
although the income or capital which is taxed in the
state of source is still taxable in the state of residence,
the tax paid in the former is credited against the tax
levied in the latter. The basic difference between the
two methods is that in the exemption method, the
focus is on the income or capital itself, whereas the
credit method focuses upon the tax.
Xcxcxcxcx
Phil. Airlines inc. v. Seccretary of Finance and CIR
115852
Facts:
PAL, by virtue of PD no 1590, pays a
franchise tax of 2% on its revenue “in lieu of all
other taxes, royalties, registration, license and
other fees. It is exempt from paying VAT pursuant
to the tax code. However, RA 7716 seeks to
withdraw the exemption from VAT and that
granted by PD 1590.
PAL contends that RA 7716 violates the
constitutional mandate “one subject one title rule”.
It argues that withdrawal of its exemption cannot
be a subject in a law which deals with imposition of
VAT or that the title of RA 7716 must reference
that it amends PAL’s franchise.

issue: WON Pal’s contention is correct?
Ruling:
NO. Said reference is unnecessary because
the title already provides that the law seeks to
amend provsions of the NIRC which is the root of
PAL’s exemption.
Also, the constitutional mandate pertains to
titles of bills and it is worth noting that both the
house bill’s and the senate bill’s title specifically
referred to the 103 of NIRC’s provision as among
the provision sought to be amended. In conclusion,
matters properly connected with the subject as
expressed in the title need not to have special
mention in the title pursuant to the case Phil
JudgesAssoc. V. Prado.
Personal End notes:
The reason is simple: by granting exemptions, the
State does not forever waive the exercise of its
sovereign prerogative.
The VAT is, however, different. It is not a license tax.
It is not a tax on the exercise of a privilege, much less
a constitutional right. It is imposed on the sale, barter,
lease or exchange of goods or properties or the sale
or exchange of services and the lease of properties
purely for revenue purposes. To subject the press to
its payment is not to burden the exercise of its right
any more than to make the press pay income tax or
subject it to general regulation is not to violate its
freedom under the Constitution.
Xcxcxcx
CIR v. CA, CTA and Young Men’s Christian Assoc of
the Phil 124043
Facts:
Private respondent, YMCA, is a non-stock,
non-profit institution. It conducts various program
promoting social welfare. It earns incomes from 1.
Leasing out a portion of its properties to small
businesses and 2. Parking fees collection also
through its real property.
YMCA contends that said incomes should be
xempt from income taxation because the same are
used not for the benefit of private individuals or for
mere profit but for charitable programs that it
seeks to fund.
Petitioner on the other hand contends that
income derived from activities intended for profit
like in this case, the leasing of properties and
parking fees.
issue: WON YMCA’s income from leasing out its
properties and parking fees collection should be
subject to income tax?
Ruling:
YES. The law is clear and unambiguous. The
NIRC provides that income of whatever kind from
exempt organizations from any of their properties
shall be subjected to tax if said income was derived
from activities conducted for profit. Thus, leasing
and any other profit activities are taxable
regardless of how said income shall be used,
wether for profit or non-profit.
The SC commends noble works of the YMCA but it
cannot bend laws. It merely has the duty to apply
and interpret it.
Personal end notes:
Ito sa consti ". . . what is exempted is not the
institution itself . . .; those exempted from real
estate taxes are lands, buildings and
improvements actually, directly and exclusively
used for religious, charitable or educational
purposes.
 income of exempt organizations (such as the
YMCA) from any of their properties, real or
personal, be subject to the tax imposed by the
same Code. Because the last paragraph of said
section unequivocally subjects to tax the rent
income of the YMCA from its real property,
xcxcxcxc
Eusebio Villanueva vs. City of IloIlo l-26521
Facts:
Respondent City enacted Ordinance 86
which imposes license fees to persons engaged in
the business of operating tenement houses.
Petitioner herein, being of tenement
houses, assails the validty of the ordinance on the
ground that the City council has no power to enact
such ordinance. He further contends that it
amounts to double taxation since he already pays
real estate taxes and it violates the rule of
uniformity of taxes because it applies only to
tenement houses located in Iloilo as compared to
other cities which do not enact similar ordinances.
On the other hand, the City of ilolilo argues
that it is well within its powers to enact such
ordinance thus the ordinance enjoys validity.
Issue: WON the ordinance is valid?
Ruling:
YES. First, the subject ordinance imposes
fees licnese fees which are imposed on the
operation of tenement houses and not a real
property tax. Thus, it is not a tax on the tenement
houses itself but a tax on the right to operate a
business. Consequently, couble taxation does not
exist since the both exaction are different in
nature.
Second, the ordinance is not violative of the rule on
uniformity of taxation. Said rule is followed as long
as all properties of the same class are taxed
similarly. In this case, the fees are imposed on all
properties within the jurisdiction of the city.
Moreover, tenement houses constitute a distinc
class of property.
Personal end notes:
A real estate tax is a direct tax on the ownership of
lands and buildings or other improvements thereon,
not specially exempted,8 and is payable regardless of
whether the property is used or not, although the
value may vary in accordance with such factor.9 The
tax is usually single or indivisible, although the land
and building or improvements erected thereon are
assessed separately, except when the land and
building or improvements belong to separate
owners.10 It is a fixed proportion11 of the assessed
value of the property taxed, and requires, therefore,
the intervention of assessors
The character of a tax is not to be fixed by any
isolated words that may beemployed in the statute
creating it, but such words must be taken in the
connection in which they are used and the true
character is to be deduced from the nature and
essence of the subject.
Xcxcxcx
CIR v. Puregold Duty Free Inc. 202789
Facts:
Respindent, Puregold, operates within the
Clark Special Economic Zone and authorized by the
Clark Development Corporation. As such, it is
granted tax incentives (duty-free importation of
goods, exemption from local and national taxes) as
long as it pays 5% preferential tax from 1198 to
2005. However, in 2005, the SC ruled in a latter
case that said preferential tax treatment enjoyed
by businesses in clark eco zone is void. Congress
subsequently enacted a law allowing erring
taxpayers to seek tax amnesty.
The petitioner contends that Puregold is
liable for the deficiency VAT and excise taxes for
the period of 1998 to 2004 (before the 5%
preferential tax was annulled).
Puregold on the other hand contends that it
may avail tax amnesty which extinguishes its
liability giving it a clean slate.
Issue: WON puregold is liable for the deficiency
taxes by virtue of the annulment of the law
granting it preferential tax treatment?
Ruling:
NO. The SC ruled that its RULING in the
Coconut oil case annulling the preferential tax
treatment cannot be applied retroactively and
obliterating all its effects. By virtute of the doctrine
of operative fact, judicial declaration of nullity of
laws does not necessarily obliterate all effects of
said law. In this case, Puregold cannot be made
liable for taxes it failed to pay because of the
subsequent annulment of a rule it relied upon in
1998 to 2004.
Also, a tax amnesty is designed to be a general
grant of clemency. In effect, the state intentionally
overlooks errors of taxpayers and Puregold may
apply for the amnesty to give it a clean slate.
Personal end notes:
A tax amnesty is a general pardon or the intentional
overlooking by the State of its authority to impose
penalties on persons otherwise guilty of violation of a
tax law. It partakes of an absolute waiver by the
government of its right to collect what is due it and to
give tax evaders who wish to relent a chance to start
with a clean slate.
the doctrine of operative fact is incorporated in
Section 246 of the 1997 NIRC, which provides:
what is the doctrine of operative fact then sama
mo to’ SEC. 246. Non-Retroactivity of Rulings. - Any
revocation, modification or reversal of any of the rules
and regulations promulgated in accordance with the
preceding Sections or any of the rulings or circulars
promulgated by the Commissioner shall not be given
retroactive application if the revocation, modification
or reversal will be prejudicial to the taxpayers, except
in the following cases:
(a) Where the taxpayer deliberately misstates
or omits material facts from his return or any
document required of him by the Bureau of
Internal Revenue;
(b) Where the facts subsequently gathered by
the Bureau of Internal Revenue are materially
different from the facts on which the ruling is
based; or
(c) Where the taxpayer acted in bad faith.
Xcxcxcx
Deutsche Bank AG Manila Branch vs. CIR 188550
Facts:
Petitioner withheld and remitted to the BIR
an amount of approx.. 67m representing 15%
branch profit remittance tax. Howver, it made an
overpayment because, pursuant to the RP-
Germany Tax treaty, it is entitled to the preferential
tax rate of 10%. Thus, it claimed for a refund of
issuance of tax credit certificate for the excess
amount.
However, CIR denies petitioners claim on
the ground that it (Petitioner) did not comply with
Revenue Memorandum order 1-2000 which
requires that an availment of the tax treaty must
be preceded by an application with the
International Tax affairs Department at least 15
days before the transaction. In this case, there exist
no application.
Petitioner on the other hand contends that
all conditions provided for the treaty are met, thus
it may avail of the preferential rate in the tax
treaty.
Issue: WON the CIR may deny a tax treaty claim
solely on the ground of the violation of the RMO?
Ruling:
NO. The RMO is not mandatory in
character, it is not a binding precedent.
Tax treaties are international laws and part
of the law of the land by virtue of the incorporation
clause in the constitution. The purpose of the tax
treaty is to eliminate international juridical double
taxation. Thus, the RMO cannot be a ground for the
non-application of a valid treaty entered into by
the state. Denial of claims for failure to comply
with the RMO is not in harmony with the
obejcyives of the contracting state parties. As state
party tp the treaty, the RP must make necessary
measure to ensure fulfillment of the obligations
undertaken, thus laws and issuances must not
impose additional requirement that would negate
releifs from treaties. Also, the RMO does not
provide that failre to follow the 15 day rule would
deprive a party from claiming relief.
Personal end note:
The obligation to comply with a tax treaty must take
precedence over the objective of RMO No. 1-2000
Simply put, tax treaties are entered into to minimize, if
not eliminate the harshness of international juridical
double taxation, which is why they are also known as
double tax treaty or double tax agreements.

"A state that has contracted valid international
obligations is bound to make in its legislations those
modifications that may be necessary to ensure the
fulfillment of the obligations undertaken."20 Thus, laws
and issuances must ensure that the reliefs granted
under tax treaties are accorded to the parties entitled
thereto. The BIR must not impose additional
requirements that would negate the availment of the
reliefs provided for under international agreements.
More so, when the RP-Germany Tax Treaty does not
provide for any pre-requisite for the availment of the
benefits under said agreement.
Pacta sund servanda
xcxcxcxc
CIR vs. CA, CTA and Alhambra Industries inc.
Facts:
Private Respondent, Alhambra, is a
domestic corporation that manufactures and sells
cigarettes. It paid an ad valorem tax of 15% which
excludes VAT from the tax base pursuant to a BIR
ruling.
The petitioner however demanded payment
of alleged deficiency ad valorem tax pursuant to a
subsequent BIR ruling which, in computing the 15%
tax, excludes VAT as tax base. Petitioner contends
that retroactive application of the ruling may apply
because Ahambra acted in badfaith in applying the
first ruling without consulting the BIR of its validity.
Issue: WON the ruling should apply retroactively?
Ruling:
No. Rulings promulgated by the CIR would
have no retroactive effect if applying them would
be prejudicial to the taxpayers. As exception, it may
apply even prejudicial if the taxpayer acted in
badfaith. In this case, if the ruling would be applied
retroactively, it would be prejudicial to Alhambra
and it shall incur deficiemcy taxes. Alhambra was
not in bad faith by the mere fact that it did not
made consultations with the BIR to ascertain the
correct computation of the old ruling. Such failure
to consult does not imply bad faith. Thus,
Petitioner failed to prove that there was bad faith
on the part of Lahambra.
Personal end notes:
Admittedly the government is not estopped from
collecting taxes legally due because of mistakes or
errors of its agents. But like other principles of law,
this admits of exceptions in the interest of justice and
fair play, as where injustice will result to the taxpayer.
However, well-entrenched is the rule that rulings and
circulars, rules and regulations promulgated by the
Commissioner of Internal Revenue would have no
retroactive application if to so apply them would be
prejudicial to the taxpayers
except in the following cases: a) where the taxpayer
deliberately misstates or omits material facts from his
return or in any document required of him by the
Bureau of Internal Revenue; b) where the facts
subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on
which the ruling is based; or c) where the taxpayer
acted in bad faith.
Xcxcxcxcx
CIR v. Rosemarie Acosta 154068
Facts:
Respondent, Acosta, requests filed an
amended income tax return because there was an
overpayment of income tax withheld by her
employer. By virtue of said amended return,
respondent claims for the excess payment.
However, petitioner argues that the claim
cannot be entertained because a written claim for
refund should have been filed, pursuant to the old
tax law.
Respondent contends that the amended
income tax return may be considered as the
written claim pursuant to the new tax code (NIRC).
Although the transaction occurred in 1996, before
the effectivity of the NIRC, the NIRC may be
retroactively.
Issue: Given the present facts, may the amended
return be considered as the mandatory written
claim for refund?
Ruling:
 NO. NIRC provides that a return, if filed and
showing an overpayment shall be considered as
written claim for refund. The old tax code on the
other hand, provides that a written claim is
mandatory for reimbursement. In this case
however, a 1996 income is in question, and the law
in effect at that time is the old tax law. thus a
written claim is mandatory.
Tax laws are applied prospectively and may
only apply retroactively if the law expressly so
provides.
Personal end notes:
Revenue statutes are substantive laws and in no
sense must their application be equated with that of
remedial laws. As well said in a prior case, revenue
laws are not intended to be liberally
construed.22 Considering that taxes are the lifeblood of
the government and in Holmes’s memorable
metaphor, the price we pay for civilization, tax laws
must be faithfully and strictly implemented.
1997 NIRC (new Tax Code), to wit:
xxxx
…Provided, however, That a return filed
showing an overpayment shall be considered
as a written claim for credit or refund
xcxcxcxcxc
Asia international auctioneers inc. vs. CIR 179115
Facts:
Petitioner, AIA, is a corporation engaged in
importation of used vehicles and equipment which
its sell to the public thru public autction. It is
operating within the Subic Special Economic Zone.
AIA has availed of the tax amnesty program
pursuant to RA 9480.
Public prespondent, CIR, contends that AIA
is disqualified under RA 9480 to avail tax amnesty
because it is deemed a mere “withholding agent”
for the deficiency taxes. Public respondent also
argues that AIA should have availd a different
amnesty program, RA 9399 a tax amnesty program
for businesse located in special economic zones,
because it is operating within the Subic Special
Economic Zone.
Issue: Whether the CIR’s argument is tenable?
Ruling:
NO. First, The CIR assessed AIA not as a
withholding agent that failed to withhold and remit
deficiency VAT and excise tax. Vat and excise taxes
are not withheld because the liability stays on one
person and the burden is merely passed on to
another. Clearly, AIA cannot be a withholding agent
for purposes of VAT collection.
Second, RA 9480 does not preclude taxpaeyrs
operating within the special economic zones. A
taxpayer has the liberty to choose whihch tax
amnesty program it wants to avail.
Personal end notes:
Indirect taxes, like VAT and excise tax, are different
from withholding taxes.  To distinguish, in indirect
1âwphi1
taxes, the incidence of taxation falls on one person
but the burden thereof can be shifted or passed on to
another person, such as when the tax is imposed
upon goods before reaching the consumer who
ultimately pays for it. On the other hand, in case of
26 
withholding taxes, the incidence and burden of
taxation fall on the same entity, the statutory taxpayer.
The burden of taxation is not shifted to the withholding
agent who merely collects, by withholding, the tax due
from income payments to entities arising from certain
transactions and remits the same to the government.
27 
Due to this difference, the deficiency VAT and excise
tax cannot be "deemed" as withholding taxes merely
because they constitute indirect taxes. Moreover,
records support the conclusion that AIA was assessed
not as a withholding agent but, as the one directly
liable for the said deficiency taxes
xcxcxcxcx
CS Garment inc. vs. CIR 182399
Facts:
Petitioner, a domestic corporation engaged
in business was assessed by the CIR for deficiency
VAT, income, dox stamp tax and withholding taxes.
Pending its appeal pertaining to a protest it filed
before the CTA, it availed a tax amnesty program
pursuant to 2007 tax amnesty program.

The OSG reiterated that the CIR was still
interested in pursuing the case, although CS
garment complied with all the requirements set
forth by the 2007 tax amnesty program. It argues
that the case may still proceed because the BIR still
has to contest the correctness of the SALN filed by
CS garment in compliance with the amnesty
requirements.
Issue: Is the CS garment already immuned from
paying tax liabilities by virtue of the availment of
the tax amnesty program?
Ruling:
In this case, YES. Amnesty taxpayers may
immediately enjoy immunities under the amnesty
law as soon as they fulfill the suspensive conditions
imposed therein.
CS garment has already complied with dox
requirements to wit: 1. notice of availment of the
program 2. Tax amnesty return 3. SALN 4. Payment
form. In facts the OSG has already confirmed all
these facts.
It should be noted also that the CIR had not filed a
case relative to the CS garment’s application. Thus,
the documents submitted by cs garment enjoy
presumption of validity.
Thus, by virtue of the availment of the program, cs
garment is now deemed to have been absolved of
its past tax obligations.
Personal end notes:
Taxpayers with pending tax cases are still qualified to
avail themselves of the tax amnesty program.
Tax cases subject of final and executory judgment by
the courts. (Emphases supplied)
We cull from the aforementioned provisions that
neither the law nor the implementing rules state that a
court ruling that has not attained finality would
preclude the availment of the benefits of the Tax
Amnesty Law. Both R.A. 9480 and DOF Order No.
29-07 are quite precise in declaring that
"[t]ax cases subject of final and executory judgment
by the courts" are the ones excepted from the benefits
of the law. I
Amnesty taxpayers may immediately enjoy the
privileges and immunities under the 2007 Tax
Amnesty Law, as soon as they fulfill the suspensive
conditions imposed therein
Xcxcxxc
CIR vs. British Overseas Airways Corp and CTA l-
65773-74
Facts:
Private respondent, BOAC, is a foregin
corporation engaged in international airline
business. It does not carry passengers and cargoes
to or from the Philippines but it maintains a general
sales agent in the Phil for the selling of BOAC
tickets.
Petitioner contends that income from such
sale should be taxable because it is income earned
by a foregin resident corporation earned within the
Philippines.
BOAC on the other hand argues that
although the tickets are sold In the Philippines, the
contract of carriage is being performed outside the
Philippines hence, the income should be
considered as derived from sources outside the
Philippines. Thus, not taxable.
Issue: WON BOAC’s income is taxable here in the
Philippines?
Ruling:
YES. The absence of flight operations in the
Philippines does not determine the source of
income. In this case, the income is derived not from
carrying the passengers, but from selling tickets
thru its local agent. The income in question is not a
common carrier’s tax but is a direct tax on income.
Clearly, BOAC is engaged in business in the PH thru
a local agent and thus, its income is taxable
because all income from whatever source is taxable
here. Those exmept from income taxation are only
those expressly provided by law.
Personal end notes:
 the common carrier's tax is an excise tax, being a tax
on the activity of transporting, conveying or removing
passengers and cargo from one place to another. It
purports to tax the business of transportation. 14
Being an excise tax, the same can be levied by the
State only when the acts, privileges or businesses are
done or performed within the jurisdiction of the
Philippines. The subject matter of the case under
consideration is income tax, a direct tax on the
income of persons and other entities "of whatever
kind and in whatever form derived from any source."
Xcxcxcxcxc
Dumaguete Cathedral Credit Coop. vs CIR 182722
Facts:
Petitioner, DCCCo, is a credit cooperative
rgistered with the cooperative development
authority. It maintains savings and depostis
accounts of its memebers.
The CIR contends that the pursuant to the
NIRC, cooperatives are included, together with
banking institution, in paying withholding taxes on
interests from savings and time deposits of its
memebers under the phrase “similar
arrangements”.
Petitioner on the other hand argues that
the provision applies only to banks and “similar
arrangement” pertains to similar banking
transactions. Thus it is not subject to the 20% final
tax on interests.
Issue: WON cooperatives are subject to pay 20%
final tax on interest from savings and time deposits
of its members?
Ruling:
NO. The NIRC expressly provides that
deposits made by cooperative members in the
cooperative are not currency bank deposits nor
substitute deposits and thus, interests therefrom
are not subject to 20% final taxes like in cases of
bank deposits. Mebers of coopertives are entitled
preferential tax treatment pursuant to Cooperative
code of the Philippines. Said law provides that
transations of members of coops shall not be
subject to any taxes and fees including but not
limited to final taxes on deposits and dox stamp
tax.
Personal end notes:
In closing, cooperatives, including their members,
deserve a preferential tax treatment because of the
vital role they play in the attainment of economic
development and social justice. Thus, although taxes
are the lifeblood of the government, the State’s power
to tax must give way to foster the creation and growth
of cooperatives. To borrow the words of Justice
Isagani A. Cruz: "The power of taxation, while
indispensable, is not absolute and may be
subordinated to the demands of social justice.
xcxcxcxc
First Lepanto Taisho insurance Corp. vs CIR 197117
Facts:
Petitioner, Lepanto, is an insurance
corporation. The CIR issued revenue aassessment
against it for deficiency income and withholding tax
on director’s bonus.
Lepanto contentions are:
1. It was not liable to pay withholding tax on
compensation on the deirector’s bonus
because directors are not employees and
they are not listed on the Alpha list of
employees.
2. As to tranposrtation and lodging expenses,
the expenses are not subject to withh tax
because they are actual expenses of the
company.
Issue: WON First Lepanto’s contentions are
correct?
Ruling:
NEIN. First, an individual performing service
for a corporation, whether as an officer or director
whose duties are confined to attendance in the
meetings is deemed an employee. The non-
inclusion of the name in the employees’ list does
not make the individual not an employee. The
imposition of withholding tax on compensation
hinges on the nature of the work performed for the
company. Thus, the director’s bonus is subject to
with tx.

Second, the CTA correctly held that the tranpo and
lodging expnses cannot be considered for failure so
sufficiently establish that they are legitimate
expsnes of the company. The same was not
reflected in the books of accounts violating the
substantiation rule. Thus, expsnes without
supporting dox cannot be deducted as legitimate
expsnes.
Personal end notes:
It is worthy to note that tax revenue statutes are not
generally intended to be liberally
construed.18 Moreover, the CTA being a highly
specialized court particularly created for the purpose
of reviewing tax and customs cases, it is settled that
its findings and conclusions are accorded great
respect and are generally upheld by this Court, unless
there is a clear showing of a reversible error or an
improvident exercise of authority.19 Absent such
errors, the challenged decision should be maintained.
Xcxcxcxc
DAVAO gulf lumber corp vs. CIR 117359
Facts:
Petitioenr is a licensed forest concessionaire
with a timber license agreement with the DENR. It
purchesd various mineral oils and diesel oils for the
its forest concession operation. Taxes on said oils
were included in the purchase price. Petitioner
claimed that it is entitled to a 25% tax refund on
the taxes paid for the oils. The CTA granted the
claim not based a higher 25% rate in NIRC but
instead, based on a lower rate under RA 1435.
Petitioner submits that it is entitled on the
increased rate under the NIRC.
Respondetn on the other hand argues that
the new rate cannot be applied because the NIRC
does not specifically provide that a refund under
RA 1435 may be based on a higher rate.
Issue: WON higher refund rate should apply in this
case?
Ruling:
NO. if a tax is validly imposed, a claim of
exemtion therefrom must be clearly shown and
based must be based on the clear language of the
law. The mere facts that the refund in RA 1435 was
referenced in NIRC means that it shall be subjected
to a higher refund rate based on the latter law. The
NIRC provides no such provision. Refunds are in the
nature of an exemption and thus cannot be
presumed.
Personal end notes:
According to an eminent authority on taxation,
"there is no tax exemption solely on the, ground
of equity.
Since the partial refund authorized under Section
5, RA 1435, is in the nature of a tax exemption,   it
21
must be construed strictissimiJuris against the
grantee
Xcxcxcxcxc
165617 165837
supreme transliner vs. BPI family saving bank
facts:
petitioner acquired a loan with the BPI. In
view of its non-payment, BPI extajudicially
foreclosed the mortagaged property and was sold
to BPI beig the highest biider in the public auction.
Within the period to redeem, petitioner signified its
intention and thereafter paid the redemption price
wich includes documentary stamp tax and capital
gains tax among others.
Respondent now questions the inclusion of
the capital gains tax and dox stamp tax in the
redemption price. They claim that there is no legal
basis on the matter.
Issue: should CPG and DST be included in the
redemption price?
Ruling:
NO. In foreclosure sale, there is no transfer
of ownership of the real property until after the
expiration of the 1 year redemption period. The
issuance of the certificate of sale does not by itself
vest ownership in the bank. A title is consolidated
on the name of the mortgagee only in cases of non-
redemption.
In this case, the patitioners mortgagors validly
redeemed the property within the period of
redemption. CPG and dox stamp tax libility exists
only if there in transactions where real property
ownership is being trnaferrred.
Thus, since there was no actual transfer of
ownership, the inclusion of cpg and dst in the
redemption price was unwarranted. Must be
returned.
Personal end notes:
Considering that herein petitioners-mortgagors
exercised their right of redemption before the
expiration of the statutory one-year period, petitioner
bank is not liable to pay the capital gains tax due on
the extrajudicial foreclosure sale. There was no actual
transfer of title from the owners-mortgagors to the
foreclosing bank. Hence, the inclusion of the said
charge in the total redemption price was unwarranted
and the corresponding amount paid by the petitioners-
mortgagors should be returned to them
Xcxcxcxcxcx
PHIL guaranty Co inc. vs CIR
Facts:
Pet, PGC, is a domestic insurance company.
It entered into resinsurance contrscts with various
foreign insurance company not doing business in
the PH. PGC then pays preimums for said
reinsurance.
PGC contends that prumiums being paid by
it should be excluded from its gross income and it
should not withhold or pay tax on them because
foreign reinsurers are not doing business in the PH
and thus not considered as income from sources
within the PH.
CIR on the other hand denied PGC’s protest.
Issue; WON premiums paid by PGC is subject to
with?
Ruling:
Yes. Foreign insurer’s place of business is not same
with its place of activity. In this case, the foreign
business’ activity outside its place of business. The
activity creating incme is perfomed in the PH thus
subject to Philippine income tax.
Further, the reinsurance contracts show that the
undertaking to reinsure were performed in the PH.
It commenced simulataneously with PGC’s
performance of insurance contract here in the
Philippines.
Personal end notes:
An activity may occur outside the place of business.
Section 24 of the Tax Code does not require a foreign
corporation to engage in business in the Philippines in
subjecting its income to tax. It suffices that the activity
creating t
xcxcxcxcxcxc
Birtish Tobacco inc. v. Camacho
Facts:
To implement RA 8240, The BIR issued RR
no 1-97, which provides that new brands of cigs
shall be initially assessed at their suggested retail
price and those already existing shall be taxed
based on their retail price as of October 1, 1996.
Petitioenr, introduce into the market lucky
strike cig and lucky strike menthol. The congress
enacted a law which, among others, retain the
classification of old cigarette brands and the new
brands, after it is classified based on its current net
retail price, the classification is frozen and only
congress can thereafter reclassify the same.
Petitioner contends that the law gave
undue protection to old brands which are still
taxed based on the old classification
notwithstanding that they are now sold at the
same or even higher price than new brands. Thus,
petitioner assails the constitutionality of the said
law.

Iissue: the constitutionality of the classification

freeze provision of ra 8240 as amended.

Ruling:
The provison thus not violate the EPC and
uniformity clause.

Firs, the classification rests on substantial

distinction. The provision was inserted for practical
reasons. Since new brands was not yet exisiting,
the congress needed a uniform mechanism to fix
the tax bracket of new brands. The provision was
designed to prevent potential absue and corruption
and to simplify tax administration.

Second, the privsion unformly applies to all newly

introduced brads, wether imported locally or
manufactured.

Personal end notes:

The rule of uniformity does not call for perfect uniformity

or perfect equality, because this is hardly attainable."
The problem of classification did not present itself in that
case. It did not arise until nine years later, when the
Supreme Court held: "Equality and uniformity in taxation
means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate. The taxing
power has the authority to make reasonable and
natural classifications for purposes of taxation,

 legislative classification that is reasonable does not

offend the constitutional guaranty of the equal protection
of the laws. The classification is considered valid and
reasonable provided that: (1) it rests on substantial
distinctions; (2) it is germane to the purpose of the law;
(3) it applies, all things being equal, to both present and
future conditions; and (4) it applies equally to all those
belonging to the same class