Atty. Bobby Lock - Chair's Cases (Final)

Chair’s Cases on Taxation
2018 Bar Examinations

General Principles
Manila Memorial Park Inc. vs. DSWD, GR No. 175356 dated
December 3, 2013:
Sec. 4 of RA No. 7432, as amended by RA No. 9257 partly provides:
“(a) the grant of twenty percent (20%) discount from all

establishments relative to the utilization of services xxx. The
establishment may claim the discounts granted under (a), (f), (g) and
(h) as tax deduction based on the net cost of the goods sold or
services rendered: Provided, That the cost of the discount shall be
allowed as deduction from gross income for the same taxable year
that the discount is granted. xxx”
General Principles
December 3, 2013:
Whether the tax deduction scheme under RA No. 9257 is

unconstitutional?
General Principles
December 3, 2013:
1.a. In Carlos Superdrug Corporation vs. DSWD, the Supreme Court

categorically ruled that the 20% discount is a valid exercise of police
power. Thus, even if the current law, through its tax deduction scheme
(which abandoned the tax credit scheme under the previous law), does
not provide for a peso for peso reimbursement of the 20% discount
given by private establishments, no constitutional infirmity obtains
because, being a valid exercise of police power, payment of just
compensation is not warranted.
General Principles
December 3, 2013:
1.b. The 20% discount is intended to improve the welfare of senior

citizens who, at their age, are less likely to be gainfully employed, more
prone to illnesses and other disabilities, and, thus, in need of subsidy
in purchasing basic commodities. It may not be amiss to mention also
that the discount serves to honor senior citizens who presumably
spent the productive years of their lives on contributing to the
development and progress of the nation. This distinct cultural Filipino
practice of honoring the elderly is an integral part of this law.
General Principles
December 3, 2013:
2. The 20% discount is not an exercise of the power of eminent

domain. It does not purport to appropriate or burden specific
properties, used in the operation or conduct of the business of private
establishments, for the use or benefit of the public, or senior citizens
for that matter, but merely regulates the pricing of goods and services
relative to, and the amount of profits or income/gross sales that such
private establishments may derive from, senior citizens.
General Principles
Mamba vs. Lara, GR No. 165109 dated December 14, 2009:
Whether petitioners have standing to sue as taxpayers?

General Principles
1.a. For a taxpayer’s suit to prosper, two requisites must be met:
(1) public funds derived from taxation are disbursed by a political

subdivision or instrumentality and in doing so, a law is violated or
some irregularity is committed; and,
(2) the petitioner is directly affected by the alleged act.
General Principles
1.b. As to the second requisite, the Supreme Court, in recent cases,

has relaxed the stringent "direct injury test" bearing in mind that locus
standi is a procedural technicality. By invoking "transcendental
importance", "paramount public interest", or "far-reaching
implications", ordinary citizens and taxpayers were allowed to sue
even if they failed to show direct injury. In cases where serious legal
issues were raised or where public expenditures of millions of pesos
were involved, the Supreme Court did not hesitate to give standing to
taxpayers.
General Principles
2. A taxpayer need not be a party to the contract to challenge its

validity. As long as taxes are involved, people have a right to question
contracts entered into by the government.
Income Tax
Dumaguete Cathedral Credit Cooperative (“DCCCO”) vs. CIR, GR No.
182722 dated January 22, 2010:
Are interest from members’ savings and time deposits with duly
registered cooperatives subject to income and withholding tax under
Sec. 24(B) of the Tax Code?
Income Tax
Sec. 24(B) of the Tax Code provides:
“(B) Rate of Tax on Certain Passive Income: (1) Interests, Royalties,

Prizes, and Other Winnings. A final tax at the rate of twenty percent
(20%) is hereby imposed upon the amount of interest from any
currency bank deposit and yield or any other monetary benefit from
deposit substitutes and from trust funds and similar arrangements;
xxx”
Income Tax
1. Citing a BIR ruling, the Supreme Court held that: “the ruling clearly
states, without any qualification, that since interest from any
Philippine currency bank deposit and yield or any other monetary
benefit from deposit substitutes are paid by banks, cooperatives are
not required to withhold the corresponding tax on the interest from
savings and time deposits of their members.”
Income Tax
2. In another BIR ruling cited by the Supreme Court, it held: “xxx.

Considering the members deposits with the cooperatives are not
currency bank deposits nor deposit substitutes, Section 24(B)(1) and
Section 27(D)(1), therefore, do not apply to members of cooperatives
and to deposits of primaries with federations, respectively.”
Income Tax
3.a. Arts. 61 and 62 of RA No. 6938 (“Cooperative Code of the

Philippines”) merely provides for tax exemption in favor of the
cooperatives.
However, members of cooperatives deserve a preferential tax

treatment pursuant to RA No. 6938.
Income Tax
3.b. The exemption in favor of cooperatives under RA No. 6938

extends to its members. It must be emphasized that cooperatives
exist for the benefit of their members. In fact, the primary objective
of every cooperative is to provide goods and services to its members
to enable them to attain increased income, savings, investments, and
productivity. Therefore, limiting the application of the tax exemption
to cooperatives would go against the very purpose of a credit
cooperative. Extending the exemption to members of cooperatives,
on the other hand, would be consistent with the intent of the
legislature. Thus, although the tax exemption only mentions
cooperatives, this should be construed to include the members.
Income Tax
3.c. Art. 61 of RA No. 9520 (“the Philippine Cooperative Code of 2008”)

now states that transactions of members with the cooperatives are
not subject to any taxes and fees.
This amendment in Article 61 of RA 9520, specifically providing that

members of cooperatives are not subject to final taxes on their
deposits, affirms the interpretation that Section 24(B)(1) of the NIRC
does not apply to cooperatives and confirms that such ruling carries
out the legislative intent.
Income Tax
CIR vs. St. Luke’s Medical Center, Inc., GR No. 203514 dated February
13, 2017:
St. Luke’s is a non-stock non-profit hospital. It accepts paying and non-

paying patients. During taxable year 1998, it had the following data:
Revenues from Paying Patients: P1,730,000,000.00
Net Income From Paying Patients: P334,000,000.00 (100%)

Free Services (Charity Ward): P218,000,000.00 (65%)
Net Income, Net of Free Services: P116,000,000.00 (35%)
Other Income P 17,000,000.00
Total Net Income P133,000,000.00
Income Tax
13, 2017:
1. Is St. Luke’s exempt from income tax on its income from paying
patients on this basis of Sec. 30(E) of the NIRC as a Charitable
Institution?
Income Tax
13, 2017:
1.a. No. In order to be exempt from income tax as a Charitable

Institution under Sec. 30(E) of the NIRC, the non-stock non-profit
hospital must be “organized and operated exclusively” for charitable
purposes.
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. Thus, insofar as its as its
revenues from paying patients are concerned, St. Luke’s is not
“operated exclusively” for charitable purposes.
Income Tax
13, 2017:
2. St. Luke’s charity expenditure of P218,000,000.00 is 65.00% of its

operating income in 1998, will this fact entitle it to income tax
exemption?
Income Tax
13, 2017:
2.a. No. A charitable institution does not lose its character as such and
its exemption from taxes simply because it derives income xxx so long
as the money received is devoted or used altogether to the charitable
object which it is intended to achieve; and no money inures to the
private benefit of the persons managing or operating the institution.
Income Tax
13, 2017:
2.b. St. Luke’s claims that its charity expenditure of P218,000,000.00 is

65.00% of its operating income in 1998. However, if a part of the
remaining 35.00% of the operating income is reinvested in property,
equipment or facilities used for services to paying and non-paying
patients, then it cannot be said that the income is “devoted or used
altogether to the charitable object which it is intended to achieve.”
The income is plowed back to the corporation not entirely for
charitable purposes, but for profit as well.
Income Tax
13, 2017:
3. Assuming that St. Luke’s uses and devotes 100% of its income on
services, property and facilities relative to non-paying patients, will its
income from paying patients now be exempt from income tax?
Income Tax
13, 2017:
3.a. No. 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 last paragraph of Sec. 30 of the NIRC provides: “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 income tax.”
Income Tax
13, 2017:
4. If a charitable Institution has income from activities conducted for

profit and income from not-for-profit activities, will it lose its tax
exemption on its income from not-for-profit activities?
Income Tax
13, 2017:
4.a. No. A charitable institution under Sec. 30(E) is nevertheless

allowed to engage in “activities conducted for profit” without losing
its tax exempt status for its not-for-profit activities. If it earns income
from its for-profit activities, such income from for-profit activities is
taxable under the last paragraph of Sec. 30.
Income Tax
13, 2017:
5. Since St. Luke’s is subject to income tax on its income from paying
patients, what is the correct income tax rate applicable?
Income Tax
13, 2017:
5.a. 10% imposed on taxable income under Sec. 27(B).
St. Luke’s fails to meet the requirements under Sec. 30(E) to be

completely tax exempt from all its income. However, it remains a
proprietary non-profit hospital under Sec. 27(B) as long as it does not
distribute any of its profits to its members and such profits are
reinvested pursuant to its corporate purposes. St. Luke’s, as a
proprietary non-profit hospital, is entitled to the preferential tax rate
of 10% on its net income from its for-profit activities.
Income Tax
Republic vs. Spouses Salvador, GR No. 205428 dated June 7, 2017:
In expropriation proceedings, between the government and the

property owner, who is liable to pay the capital gains tax?
The Regional Trial Court ordered the Republic to pay the property
owner(s) the capital gains tax in the form of consequential damages.
Income Tax
1.a. It is settled that the transfer of property through expropriation

proceedings is a sale or exchange within the meaning of Sections
24(D) and 56(A)(3) of the NIRC, and profit from the transaction
constitutes capital gain. Since capital gains tax is a tax on passive
income, it is the seller, or respondents in this case, who are liable to
shoulder the tax.
Income Tax
1.b. In fact, the Bureau of Internal Revenue (“BIR”), in BIR Ruling No.
476-2013 dated December 18, 2013, has constituted the DPWH as a
withholding agent tasked to withhold the 6% final withholding tax in
the expropriation of real property for infrastructure projects. Thus, as
far as the government is concerned, the capital gains tax in
expropriation proceedings remains a liability of the seller, as it is a
tax on the seller's gain from the sale of real property.
Income Tax
2. Besides, consequential damages are only awarded if as a result of

the expropriation, the remaining property of the owner suffers from an
impairment or decrease in value. In this case, no evidence was
submitted to prove any impairment or decrease in value of the subject
property as a result of the expropriation. More significantly, given that
the payment of capital gains tax on the transfer of the subject
property has no effect on the increase or decrease in value of the
remaining property, it can hardly be considered as consequential
damages that may be awarded to respondents.
Value-added Tax
CIR vs. SM Prime Holdings, Inc., GR No. 183505 dated February 26,
2010:
Whether the gross receipts derived by operators or proprietors of

cinema/theater houses from admission tickets are subject to VAT?
Value-added Tax
2010:
1. The enumeration of services subject to VAT under Section 108 of the

NIRC is not exhaustive. The words, “including,” “similar services,” and
“shall likewise include,” indicate that the enumeration is by way of
example only.
Value-added Tax
2010:
2.a. Among those included in the enumeration is the lease of motion

picture films, films, tapes and discs. This, however, is not the same as
the showing or exhibition of motion pictures or films.
Exhibition is defined as To show or display. x x x To produce anything in

public so that it may be taken into possession. While the word lease is
defined as a contract by which one owning such property grants to
another the right to possess, use and enjoy it on specified period of
time in exchange for periodic payment of a stipulated price, referred to
as rent.
Value-added Tax
2010:
2.b. Since the activity of showing motion pictures, films or movies by

cinema/theater operators or proprietors is not included in the
enumeration, it is incumbent upon the court to the determine
whether such activity falls under the phrase “similar services”. The
intent of the legislature must therefore be ascertained.
Value-added Tax
2010:
3.a. The legislature never intended operators or proprietors of

cinema/theater houses to be covered by VAT. Only lessors or
distributors of cinematographic films are included in the coverage of
VAT. The legislative intent is not to impose VAT on persons already
covered by the amusement tax
Value-added Tax
2010:
3.b. To hold otherwise would impose an unreasonable burden on

cinema/theater houses operators or proprietors, who would be paying
an additional 10% VAT (now 12%) on top of the 30% amusement tax
(now 10%) imposed by Section 140 of the LGC of 1991, or a total of
40% tax. Such imposition would result in injustice, as persons taxed
under the NIRC of 1997 would be in a better position than those taxed
under the LGC of 1991. We need not belabor that a literal application
of a law must be rejected if it will operate unjustly or lead to absurd
results. Thus, we are convinced that the legislature never intended to
include cinema/theater operators or proprietors in the coverage of
VAT.
Value-added Tax
TFS, Inc. vs. CIR, GR No. 166829 dated April 19, 2010:
For the year 1998, are pawnshops subject to VAT?

Value-added Tax
1. Timelines of VAT on Pawnshops (considered non-bank financial

intermediaries):
a. First time banks and other non-bank financial intermediaries were

subject to VAT in 1996 but to take effect in 1998 per RA No. 7716;
b. Various laws deferred the effectivity of VAT on banks and other non-
bank financial intermediaries: RA No. 8241 – 1998, RA No. 8424 -
1999, RA No. 8761 - 2001 and, RA No. 9010 – 2003. Thus, banks and
other non-bank financial intermediaries were not subject to VAT for
the period 1996-2002;
c. Starting January 1, 2004, banks and other non-bank financial
intermediaries not subject to VAT – RA No. 9238.
Value-added Tax
2. Since petitioner is a non-bank financial intermediary, it is subject to

10% VAT for the tax years 1996 to 2002; however, with the levy,
assessment and collection of VAT from non-bank financial
intermediaries being specifically deferred by law, then petitioner is
not liable for VAT during these tax years. But with the full
implementation of the VAT system on non-bank financial
intermediaries starting January 1, 2003, petitioner is liable for 10%
VAT for said tax year. And beginning 2004 up to the present, by virtue
of R.A. No. 9238, petitioner is no longer liable for VAT but it is subject
to percentage tax on gross receipts from 0% to 5%, as the case may be.
Value-added Tax
J.R.A. Philippines, Inc. vs. CIR, GR No. 177127 dated October 11,
2010:
Whether the failure to print the word zero-rated on the

invoices/receipts is fatal to a claim for credit/ refund of input VAT on
zero-rated sales?
Value-added Tax
2010:
1. The question of whether the absence of the word zero-rated on the

invoices/receipts is fatal to a claim for credit/refund of input VAT is not
novel. This has been squarely resolved in Panasonic Communications
Imaging Corporation of the Philippines (formerly Matsushita Business
Machine Corporation of the Philippines) v. Commissioner of Internal
Revenue. In that case, we sustained the denial of petitioners claim for
tax credit/refund for non-compliance with Section 4.108-1 of Revenue
Regulations No. 7-95, which requires the word zero-rated to be
printed on the invoices/receipts covering zero-rated sales.
Value-added Tax
2010:
2.a. Section 4.108-1 of RR No. 7-95 proceeds from the rule-making

authority granted to the Secretary of Finance under Section 245 of
the 1977 NIRC (now Sec. 244) for the efficient enforcement of the tax
code and of course its amendments. The requirement is reasonable
and is in accord with the efficient collection of VAT from the covered
sales of goods and services.
Value-added Tax
2010:
2.b. Section 4.108-1 of RR No. 7-95 was issued on December 9, 1995

and [which] took effect on January 1, 1996. It already required the
printing of the word zero-rated on the invoices covering zero-rated
sales.
When R.A. No. 9337 amended the 1997 NIRC on November 1, 2005, it
made this particular revenue regulation a part of the tax code. This
conversion from regulation to law did not diminish the binding force
of such regulation with respect to acts committed prior to the
enactment of that law.
Value-added Tax
2010:
3. Further, the printing of the word zero-rated on the invoice helps

segregate sales that are subject to 10% (now 12%) VAT from those
sales that are zero-rated. Unable to submit the proper invoices,
petitioner Panasonic has been unable to substantiate its claim for
refund.
In addition, the appearance of the word zero-rated on the face of

invoices covering zero-rated sales prevents buyers from falsely
claiming input VAT from their purchases when no VAT was actually
paid. If, absent such word, a successful claim for input VAT is made, the
government would be refunding money it did not collect.
Value-added Tax
2010:
4. Consistent with the foregoing jurisprudence, petitioners claim for

credit/ refund of input VAT for the taxable quarters of 2000 must be
denied. Failure to print the word zero-rated on the invoices/receipts
is fatal to a claim for credit/ refund of input VAT on zero-rated sales.
Value-added Tax
CIR vs. Aichi Forging Company of Asia, Inc., GR No. 184823 dated
October 6, 2010:
a. Can the taxpayer appeal to the CTA, without a decision, during the
120-day period under Sec. 112(C) of the Tax Code?
b. Must the judicial claim for refund be filed within two (2) years under
Sec. 112(A) of the Tax Code?
Value-added Tax
October 6, 2010:
1.a. Sec. 112 (C) of the NIRC clearly provides that:
(1) the CIR has "120 days, from the date of the submission of the
complete documents in support of the application [for tax
refund/credit]," within which to grant or deny the claim. In case of full
or partial denial by the CIR, the taxpayer’s recourse is to file an
appeal before the CTA within 30 days from receipt of the decision of
the CIR; (2) However, if after the 120-day period the CIR fails to act on
the application for tax refund/credit, the remedy of the taxpayer is to
appeal the inaction of the CIR to CTA within 30 days.
Value-added Tax
October 6, 2010:
1.b. In this case, the administrative and the judicial claims were
simultaneously filed on September 30, 2004. Obviously, respondent
did not wait for the decision of the CIR or the lapse of the 120-day
period. For this reason, we find the filing of the judicial claim with the
CTA premature.
Value-added Tax
October 6, 2010:
2.a. Sec. 112 (A) of the NIRC refers to applications for refund/credit
filed with the CIR and not to appeals made to the CTA.
Value-added Tax
October 6, 2010:
2.b. In fact, applying the two-year period to judicial claims would

render nugatory Section 112(C) of the NIRC, which already provides
for a specific period within which a taxpayer should appeal the
decision or inaction of the CIR. The second paragraph of Section 112(C)
of the NIRC envisions two scenarios: (1) when a decision is issued by
the CIR before the lapse of the 120-day period; and (2) when no
decision is made after the 120-day period. In both instances, the
taxpayer has 30 days within which to file an appeal with the CTA. As
we see it then, the 120-day period is crucial in filing an appeal with the
CTA.
Value-added Tax
Fort Bonifacio Development Corporation vs. CIR, GR No. 173425
dated September 4, 2012:
a. Whether prior payment of taxes is necessary in order to claim

transitional input VAT under Sec. 111(A) of the Tax Code?
b. Whether Sec. 4.105-1 of RR No. 7-95 is consistent with the Tax Code
in so far as it limits the transitional input VAT to the improvements on
the land?
Value-added Tax
1.a. Prior payment of taxes is not required for a taxpayer to avail of

the transitional input VAT credit. There is nothing in Sec. 111(A) of the
Tax Code that indicates that prior payment of taxes is necessary for the
availment of the 2% transitional input tax credit. Obviously, all that is
required is for the taxpayer to file a beginning inventory with the BIR.
Value-added Tax
1.b. To require prior payment of taxes, is not only tantamount to

judicial legislation but would also render nugatory the provision that
the transitional input tax credit shall be 2% of the value of [the
beginning] inventory or the actual [VAT] paid on such goods, materials
and supplies, whichever is higher" because the actual VAT paid on the
goods, materials, and supplies would always be higher than the 2% of
the beginning inventory. Clearly, limiting the value of the beginning
inventory only to goods, materials, and supplies, where prior taxes
were paid, was not the intention of the law. Otherwise, it would have
specifically stated that the beginning inventory excludes goods,
materials, and supplies where no taxes were paid.
Value-added Tax
1.c. Moreover, prior payment of taxes is not required to avail of the

transitional input tax credit because it is not a tax refund per se but a
tax credit. Tax credit is not synonymous to tax refund. Tax refund is
defined as the money that a taxpayer overpaid and is thus returned by
the taxing authority. Tax credit, on the other hand, is an amount
subtracted directly from one’s total tax liability. It is any amount given
to a taxpayer as a subsidy, a refund, or an incentive to encourage
investment. Thus, unlike a tax refund, prior payment of taxes is not a
prerequisite to avail of a tax credit.
Value-added Tax
2.a. As regards Section 4.105-147 of RR No. 7-95 which limited the 2%

transitional input tax credit to the value of the improvements on the
land, the same contravenes the provisions of Sec. 105 of the old NIRC,
in relation to Sec. 100 of the same Code, as amended by RA 7716,
which defines "goods or properties," to wit:
(1) The term "goods or properties" shall mean all tangible and
intangible objects which are capable of pecuniary estimation and shall
include:
(A) Real properties held primarily for sale to customers or held for
lease in the ordinary course of trade or business; xxx
Value-added Tax
2.b. As mandated by Article 7 of the Civil Code, an administrative rule

or regulation cannot contravene the law on which it is based. RR No.
7-95 is inconsistent with Section 105 (now Sec. 106) insofar as the
definition of the term "goods" is concerned. This is a legislative act
beyond the authority of the CIR and the Secretary of Finance.
As we see it then, the 2% transitional input tax credit should not be

limited to the value of the improvements on the real properties but
should include the value of the real properties as well.
Remedies
Allied Banking Corporation vs. CIR, GR No. 175097 dated February 5,
2010:
Without filing a protest, may the Formal Letter of Demand and

Assessment Notice (“FLDAN”) below be appealed with the CTA?
“It is requested that the above deficiency tax be paid immediately

upon receipt hereof, inclusive of penalties incident to delinquency. This
is our final decision based on investigation. If you disagree, you may
appeal the final decision within thirty (30) days from receipt hereof,
otherwise said deficiency tax assessment shall become final, executory
and demandable.”
Remedies
2010:
1.a. In the instant case, Allied Bank timely filed a protest after receiving
the PAN. In response thereto, the BIR issued the subject FLDAN.
Pursuant to Section 228 of the NIRC, the proper recourse of petitioner
was to dispute the FLDAN by filing an administrative protest within 30
days from receipt thereof. Allied Bank, however, did not protest the
FLDAN. Instead, it filed a Petition for Review with the CTA. Thus, if we
strictly apply the rules, the dismissal of the Petition for Review by the
CTA was proper.
Remedies
2010:
1.b. However, a careful reading of the FLDAN leads us to agree with

Allied Bank that the instant case is an exception to the rule on
exhaustion of administrative remedies, i.e., estoppel on the part of the
administrative agency concerned.
Remedies
2010:
2.a. In this case, records show that petitioner disputed the PAN but not
the FLDAN. Nevertheless, we cannot blame petitioner for not filing a
protest against the FLDAN since the language used and the tenor of
the demand letter indicate that it is the final decision of the
respondent on the matter. We have time and again reminded the CIR
to indicate, in a clear and unequivocal language, whether his action on
a disputed assessment constitutes his final determination thereon in
order for the taxpayer concerned to determine when his or her right to
appeal to the tax court accrues. Viewed in the light of the foregoing,
respondent is now estopped from claiming that he did not intend the
FLDAN to be a final decision.
Remedies
2010:
2.b. Moreover, we cannot ignore the fact that in the FLDAN,

respondent used the word appeal instead of protest, reinvestigation,
or reconsideration. Although there was no direct reference for
petitioner to bring the matter directly to the CTA, it cannot be denied
that the word appeal under prevailing tax laws refers to the filing of a
Petition for Review with the CTA. As aptly pointed out by petitioner,
under Section 228 of the NIRC, the terms protest, reinvestigation and
reconsideration refer to the administrative remedies a taxpayer may
take before the CIR, while the term appeal refers to the remedy
available to the taxpayer before the CTA.
Remedies
2010:
3. To be clear, we are not disregarding the rules of procedure under

Section 228 of the NIRC.
What we are saying in this particular case is that, the FLDAN which was
not administratively protested by the petitioner can be considered a
final decision of the CIR appealable to the CTA because the words
used, specifically the words final decision and appeal, taken together
led petitioner to believe that the FLDAN of the CIR on the letter-
protest it filed and that the available remedy was to appeal the same
to the CTA.
Remedies
CIR vs. Kudos Metal Corporation, GR No. 166829 dated April 29,
2010:
May Estoppel invalidate a defective waiver?

Remedies
2010:
1. The doctrine of estoppel cannot be applied in this case considering

that there is a detailed procedure for the proper execution of the
waiver, which the BIR must strictly follow. As we have often said, the
doctrine of estoppel is predicated on, and has its origin in, equity. As
such, the doctrine of estoppel cannot give validity to an act that is
prohibited by law or one that is against public policy. It should be
resorted to solely as a means of preventing injustice and should not be
permitted to defeat the administration of the law, or to accomplish a
wrong or secure an undue advantage, or to extend beyond them
requirements of the transactions in which they originate. Simply put,
the doctrine of estoppel must be sparingly applied.
Remedies
2010:
2. Moreover, the BIR cannot hide behind the doctrine of estoppel to

cover its failure to comply with RMO No. 20-90 and RDAO No. 05-01,
which the BIR itself issued. As stated earlier, the BIR failed to verify
whether a notarized written authority was given by the respondent to
its accountant, and to indicate the date of acceptance and the receipt
by the respondent of the waivers. Having caused the defects in the
waivers, the BIR must bear the consequence. It cannot shift the
blame to the taxpayer. To stress, a waiver of the statute of limitations,
being a derogation of the taxpayer’s right to security against prolonged
and unscrupulous investigations, must be carefully and strictly
construed.
Remedies
CIR vs. Far East Bank & Trust Company, GR No. 173854 dated March
15, 2010:
Whether Far East Bank & Trust Company (“FEBTC”) is entitled to a

claim for refund of creditable withholding tax?
Remedies
15, 2010:
1. A taxpayer claiming for a tax credit or refund of creditable

withholding tax must comply with the following requisites:
1) The claim must be filed with the CIR within the two-year period
from the date of payment of the tax;
2) It must be shown on the return that the income received was
declared as part of the gross income; and
3) The fact of withholding must be established by a copy of a
statement duly issued by the payor to the payee showing the amount
paid and the amount of the tax withheld.
Remedies
15, 2010:
2.a. To establish the fact of withholding, FEBTC submitted Certificates

of Creditable Tax Withheld at Source and Monthly Remittance Returns
of Income Taxes Withheld, which pertain to rentals and sales of real
property, respectively. However, a perusal of respondents Annual ITR
shows that the gross income was derived solely from sales of
services. In fact, the phrase NOT APPLICABLE was printed on the
schedules pertaining to rent, sale of real property, and trust income.
Remedies
15, 2010:
2.b. FEBTC’s explanation that its income derived from rentals and sales
of real properties were included in the gross income but were
classified as Other Earnings in its Schedule of Income attached to the
return is not supported by the evidence. There is nothing in the
Schedule of Income to show that the income under the heading Other
Earnings includes income from rentals and sales of real property. No
documentary or testimonial evidence was presented by respondent to
prove this.
Remedies
15, 2010:
3. The CA likewise failed to consider in its Decision the absence of

several Certificates of Creditable Tax Withheld at Source. It
immediately granted the refund without first verifying whether the
fact of withholding was established by the Certificates of Creditable
Tax Withheld at Source as required under Section 10 of Revenue
Regulation No. 6-85. As correctly pointed out by the CTA, the
certifications issued by respondent cannot be considered in the
absence of the required Certificates of Creditable Tax Withheld at
Source.
Remedies
15, 2010:
4. Moreover, the fact that the petitioner failed to present any

evidence or to refute the evidence presented by respondent does not
ipso facto entitle the respondent to a tax refund. It is not the duty of
the government to disprove a taxpayers claim for refund. Rather, the
burden of establishing the factual basis of a claim for a refund rests
on the taxpayer. The taxpayer must still present substantial evidence
to prove his claim for refund. As we have said, there is no automatic
grant of a tax refund.
Remedies
CIR vs. Smart Communication, Inc. vs. GR Nos. 179045-46 dated
August 25, 2010:
Whether a withholding agent has personality to file a claim for refund

on behalf of the principal taxpayer?
Remedies
August 25, 2010:
1. A withholding agent has a legal right to file a claim for refund for
two reasons:
(1) He is considered a taxpayer under the NIRC as he is personally

liable for the withholding tax as well as for deficiency assessments,
surcharges, and penalties, should the amount of the tax withheld be
finally found to be less than the amount that should have been
withheld under law; and, (2) As an agent of the taxpayer, his authority
to file the necessary income tax return and to remit the tax withheld to
the government impliedly includes the authority to file a claim for
refund and to bring an action for recovery of such claim.
Remedies
August 25, 2010:
2. Although such relation between the taxpayer and the withholding

agent is a factor that increases the latter's legal interest to file a claim
for refund, there is nothing in the decision (Procter and Gamble Case)
to suggest that such relationship is required or that the lack of such
relation deprives the withholding agent of the right to file a claim for
refund. Rather, what is clear in the decision is that a withholding agent
has a legal right to file a claim for refund for the two reasons
mentioned.
Remedies
August 25, 2010:
3. The withholding agent has the right to recover the taxes erroneously
or illegally collected, he nevertheless has the obligation to remit the
same to the principal taxpayer. As an agent of the taxpayer, it is his
duty to return what he has recovered; otherwise, he would be unjustly
enriching himself at the expense of the principal taxpayer from whom
the taxes were withheld, and from whom he derives his legal right to
file a claim for refund.
Remedies
Belle Corporation vs. CIR, GR No. 181298 dated January 10, 2011:
In claims for refund covering taxable year 1997, does Sec. 69 of the Old
NIRC or Sec. 76 of the NIRC apply?
Remedies
1.a. Under Section 69 of the old NIRC, in case of overpayment of

income taxes, a corporation may either file a claim for refund or carry-
over the excess payments to the succeeding taxable year. Availment of
one remedy, however, precludes the other.
Although these remedies are mutually exclusive, we have in several

cases allowed corporations, which have previously availed of the tax
credit option, to file a claim for refund of their unutilized excess
income tax payments. Thus, under Section 69 of the old NIRC,
unutilized tax credits may be refunded as long as the claim is filed
within the two-year prescriptive period. [old rule – no longer
applicable]
Remedies
1.b. Unlike Section 69 of the old NIRC, under the 1997 Tax Code, the
carry-over of excess income tax payments is no longer limited to the
succeeding taxable year. Unutilized excess income tax payments may
now be carried over to the succeeding taxable years until fully utilized.
In addition, the option to carry-over excess income tax payments is
now irrevocable. Hence, (once carried-over) the unutilized excess
income tax payments may no longer be refunded.
Remedies
2. In the instant case, both the CTA and the CA applied Section 69 of
the old NIRC in denying the claim for refund. We find, however, that
the applicable provision should be Section 76 of the 1997 NIRC
because at the time petitioner filed its 1997 final ITR, the old NIRC
was no longer in force.
Section 76 of the NIRC should be applied following the general rule on

the prospective application of laws such that they operate to govern
the conduct of corporate taxpayers the moment the 1997 NIRC took
effect on 1 January 1998.
Remedies
3. Accordingly, since petitioner already carried over its 1997 excess

income tax payments to the succeeding taxable year 1998, it may no
longer file a claim for refund of unutilized tax credits for taxable year
1997.
To repeat, under the new law, once the option to carry-over excess
income tax payments to the succeeding years has been made, it
becomes irrevocable. Thus, applications for refund of the unutilized
excess income tax payments may no longer be allowed.
Remedies
Belle Corporation vs. CIR, GR No. 181298 dated March 2, 2011 –
Resolution on the Motion for Clarification:
In our Decision, we held that Section 76 of the 1997 National Internal

Revenue Code (NIRC) and not Section 69 of the old NIRC applies.
Section 76 provides that a taxpayer has the option to file a claim for
refund or to carry-over its excess income tax payments. The option to
carry-over, however, is irrevocable. Thus, once a taxpayer opted to
carry-over its excess income tax payments, it can no longer seek
refund of the unutilized excess income tax payments. The taxpayer,
however, may apply the unutilized excess income tax payments as a
tax credit to the succeeding taxable years until such has been fully
applied pursuant to Section 76 of the NIRC.
Remedies
Silicon Philippines, Inc. vs. CIR, GR No. 172378 dated January 17,
2011:
Whether the printing of the Authority To Print (“ATP”) on the invoices

and receipts is required to substantiate a claim for refund?
Remedies
2011:
1. It has been settled in Intel Technology Philippines, Inc. v.

Commissioner of Internal Revenue that the ATP need not be reflected
or indicated in the invoices or receipts because there is no law or
regulation requiring it. Thus, in the absence of such law or regulation,
failure to print the ATP on the invoices or receipts should not result in
the outright denial of a claim or the invalidation of the invoices or
receipts for purposes of claiming a refund.
Remedies
2011:
2. But while there is no law requiring the ATP to be printed on the

invoices or receipts, Section 238 of the NIRC expressly requires
persons engaged in business to secure an ATP from the BIR prior to
printing invoices or receipts. Failure to do so makes the person liable
under Section 264 of the NIRC.
Remedies
2011:
3.a. Under Section 112 (A) of the NIRC, a claimant must be engaged in
sales which are zero-rated or effectively zero-rated. To prove this, duly
registered invoices or receipts evidencing zero-rated sales must be
presented. However, since the ATP is not indicated in the invoices or
receipts, the only way to verify whether the invoices or receipts are
duly registered is by requiring the claimant to present its ATP from the
BIR. Without this proof, the invoices or receipts would have no
probative value for the purpose of refund.
Remedies
2011:
3.b. It bears reiterating that while the pertinent provisions of the Tax
Code and the rules and regulations implementing them require
entities engaged in business to secure a BIR authority to print invoices
or receipts and to issue duly registered invoices or receipts, it is not
specifically required that the BIR authority to print be reflected or
indicated therein. Indeed, what is important with respect to the BIR
authority to print is that it has been secured or obtained by the
taxpayer, and that invoices or receipts are duly registered.
Remedies
BIR vs. CA, Spouses Manly, GR No. 197590 dated November 24, 2014:
Whether there is probable cause to indict the Spouses Manly for Tax
Evasion?
Remedies
1. Tax evasion is deemed complete when the violator has knowingly

and willfully filed a fraudulent return with intent to evade and defeat a
part or all of the tax. Corollarily, an assessment of the tax deficiency is
not required in a criminal prosecution for tax evasion. (Ungab v. Cusi,
Jr., GR No. L-41919-24 dated May 30, 1980)
However, the Supreme Court clarified that although a deficiency

assessment is not necessary, the fact that a tax is due must first be
proved before one can be prosecuted for tax evasion. (CIR v. CA, GR
No. 119322 dated June 4, 1996)
Remedies
2.a. The government is allowed to resort to all evidence or resources

available to determine a taxpayer’s income and to use methods to
reconstruct his income. A method commonly used by the government
is the expenditure method, which is a method of reconstructing a
taxpayer’s income by deducting the aggregate yearly expenditures
from the declared yearly income. The theory of this method is that
when the amount of the money that a taxpayer spends during a
given year exceeds his reported or declared income and the source of
such money is unexplained, it may be inferred that such expenditures
represent unreported or undeclared income.
Remedies
2.b. The BIR used the expenditure method in determining the

spouses’ tax liability. (And) Since the underdeclaration is more than
30% of respondent spouses’ reported or declared income, which
under Section 248(B) of the NIRC constitutes as prima facie evidence
of false or fraudulent return, petitioner (correctly) recommended the
filing of criminal cases against respondent spouses under Sections 254
and 255, in relation to Section 248(B) of the NIRC.
Remedies
3.a. The CA, however, found no probable cause to indict respondent

spouses for tax evasion. It agreed with Acting Justice Secretary
Devanadera that petitioner failed to make “a categorical finding of
the exact amount of tax due from [respondent spouses]” and “to
show sufficient proof of a likely source of [respondent spouses’]
income that enabled them to purchase the real and personal
properties adverted to x x x.”
Remedies
3.b. The amount of tax due from respondent spouses was specifically
alleged in the Complaint-Affidavit. The computation, as well as the
method used in determining the tax liability, was also clearly
explained. The revenue officers likewise showed that the
underdeclaration exceeded 30% of the reported or declared income.
The revenue officers also identified the likely source of the unreported
or undeclared income in their Reply-Affidavit – the rental business of
the Spouses.
Remedies
4. In view of the foregoing, we are convinced that there is probable

cause to indict respondent spouses for tax evasion as petitioner was
able to show that a tax is due from them.
Probable cause, for purposes of filing a criminal information, is defined

as such facts that are sufficient to engender a well-founded belief that
a crime has been committed, that the accused is probably guilty
thereof, and that he should be held for trial. It bears stressing that the
determination of probable cause does not require actual or absolute
certainty, nor clear and convincing evidence of guilt; it only requires
reasonable belief or probability that more likely than not a crime has
been committed by the accused.
Remedies
BIR vs. Manila Home Textile, Inc., GR No. 203057 dated June 6, 2016:
Whether there is probable cause to indict the Manila Home Textile,

Inc., its President and Vice-President for Tax Evasion?
BIR found out that the Company underdeclared its

purchases/importations.
Company’s defense: goods were merely consigned with alleged tax-

free guaranty.
Remedies
1.a. It is easy to see that the BIR has clearly made out a prima facie
case or shown probable cause to indict respondents for tax evasion
under the pertinent sections of the NIRC, Indeed, we believe that by
themselves the annexes appended to the records of this case, Annexes
"A" to "M", submitted in amplification of petitioner's affidavit-
complaint do already provide viable support to petitioner's plea for the
indictment of the said respondents for tax evasion.
Remedies
1.b. By contrast, respondents' argument in this case is the nebulous,

murky and unsubstantiated claim of "consignment" with an alleged
tax-free guaranty, not a shred or scintilla of which has been adduced in
this case. To repeat, respondents have not produced even a slip of
paper purporting to prove that the raw materials valued at hundreds
of millions of pesos were delivered to them on "consignment."
Remedies
2. Corollary thereto, it must be borne in mind that tax exemptions,

which respondents obviously want or desire to avail of in this case, are
strictissimi juris. Indeed, taxation is the rule and tax exemption the
exception. Tax exemptions should be granted only by clear and
unequivocal provision of law on the basis of language too plain to be
misunderstood, We hold that in this case respondents have utterly
failed to make out even a prima facie for tax exemption in their favor.
Remedies
CIR vs. Asiatrust Development Bank, GR Nos. 201680-81 dated April
19, 2017:
The CTA Division issued a decision relative to a tax assessment issued

by the CIR against Asia Trust Development Bank (“Asiatrust”). The CIR
and Asiatrust both moved for reconsideration of the CTA Division’s
Decision. The CTA issued an Amended Decision partially granting
Asiatrust’s motion for reconsideration. Asiatrust filed a motion for
reconsideration against the Amended Decision while the CIR appealed
the Amended Decision before the CTA En Banc.
Does the CTA En Banc have jurisdiction over the appeal of the CIR?
Remedies
19, 2017:
1.a. In order for the CTA En Banc to take cognizance of an appeal via a
petition for review, a timely motion for reconsideration or new trial
must first be filed with the CTA Division that issued the assailed
decision or resolution. Failure to do so is a ground for the dismissal of
the appeal as the word "must" indicates that the filing of a prior
motion is mandatory, and not merely directory.
Remedies
19, 2017:
1.b. The same is true in the case of an amended decision. Section 3,

Rule 14 of the CTA Rules defines an amended decision as "[a]ny action
modifying or reversing a decision of the Court En Banc or in Division."
As explained in CE Luzon Geothermal Power Company, Inc. vs. CIR, an
amended decision is a different decision, and thus, is a· proper subject
of a motion for reconsideration.
Remedies
19, 2017:
2. In this case, the CIR's failure to move for a reconsideration of the

Amended Decision of the CTA Division is a ground for the dismissal of
its Petition for Review before the CTA En Banc. Due to this procedural
lapse, the Amended Decision has attained finality insofar as the CIR is
concerned.
Remedies
Asiatrust Development Bank vs. CIR, GR No. 201530 dated April 19,
2017:
Was Asiatrust Development Bank, Inc.’s application for abatement

under Revenue Regulations (“RR”) No. 15-2006 dated September
approved?
Remedies
2017:
1. Section 204(B) of the 1997 National internal Revenue Code (NIRC)

empowers the CIR to abate or cancel a tax liability.
On September 27, 2006, the BIR issued RR No. 15-06 prescribing the
guidelines on the implementation of the one-time administrative
abatement of all penalties/surcharges and interest on delinquent
accounts and assessments (preliminary or final, disputed or not) as of
.June 30, 2006.
Remedies
2017:
2.a. Based on the guidelines of RR No. 15-06, the last step in the tax
abatement process is the issuance of the termination letter. The
presentation of the termination letter is essential as it proves that the
taxpayer's application for tax abatement has been approved. Thus,
without a termination letter, a tax assessment cannot be considered
closed and terminated.
Remedies
2017:
2.b. In this case, Asiatrust failed to present a termination letter from

the BIR. Instead, it presented a Certification issued by the BIR to prove
that it availed of the Tax Abatement Program and paid the basic tax. It
also attached copies of its BIR Tax Payment Deposit Slips and a letter
issued by RDO Nacar. These documents, however, do not prove that
Asiatrust's application for tax abatement has been approved. If at all,
these documents only prove Asiatrust's payment of basic taxes, which
is not a ground to consider its deficiency tax assessment closed and
terminated.
Local Taxation
Angeles City vs. Angeles City Electric Corporation, GR No. 166134
dated June 29, 2010:
May the collection of local taxes be enjoined?

Local Taxation
1. A principle deeply embedded in our jurisprudence is that taxes

being the lifeblood of the government should be collected promptly,
without unnecessary hindrance or delay. In line with this principle, the
NIRC expressly provides that no court shall have the authority to
grant an injunction to restrain the collection of any national internal
revenue tax, fee or charge imposed by the code. An exception to this
rule obtains only when in the opinion of the Court of Tax Appeals (CTA)
the collection thereof may jeopardize the interest of the government
and/or the taxpayer.
Local Taxation
2.a. The situation, however, is different in the case of the collection of

local taxes as there is no express provision in the LGC prohibiting
courts from issuing an injunction to restrain local governments from
collecting taxes.
Unlike the National Internal Revenue Code, the Local Tax Code does
not contain any specific provision prohibiting courts from enjoining the
collection of local taxes. Such statutory lapse or intent, however it may
be viewed, may have allowed preliminary injunction where local taxes
are involved but cannot negate the procedural rules and requirements
under Rule 58.
Local Taxation
2.b. Nevertheless, it must be emphasized that although there is no

express prohibition in the LGC, injunctions enjoining the collection of
local taxes are frowned upon. Courts therefore should exercise
extreme caution in issuing such injunctions.
Real Property Taxation
Digital Communications Philippines, Inc. vs. Cantos, GR No. 180200
dated November 25, 2013:
Sec. 5 of RA No. 7678 (“DIGITEL Franchise”) provides:
“Sec. 5. Tax Provisions. -The grantee shall be liable to pay the same
taxes on its real estate, buildings, and personal property exclusive of
this franchise as other persons or corporations are now or hereafter
may be required by law to pay. xxx”
Does the said provision exempt Digitel from real property tax on its
real properties used in the operation of its franchise?
1.a. Nowhere in the language of the first sentence of Section 5 of RA

7678 does it expressly or even impliedly provide that petitioner's real
properties that are actually, directly and exclusively used in its
telecommunications business are exempt from payment of realty tax.
On the contrary, the first sentence of Section 5 specifically states that
the petitioner, as the franchisee, shall pay the “same taxes on its real
estate, buildings, and personal property exclusive of this franchise as
other persons or corporations are now or hereafter may be required
by law to pay.”
1.b. The heading of Section 5 is “Tax Provisions,” not Tax Exemptions.

To reiterate, the phrase “exemption from real estate tax” or other
words conveying exemption from realty tax do not appear in the first
sentence of Section 5.
2. The phrase “exclusive of this franchise” in the first sentence of

Section 5 merely qualifies the phrase “personal property” to exclude
petitioner's legislative franchise, which is an intangible personal
property. Petitioner's franchise is subject to tax in the second sentence
of Section 5 which imposes the “franchise tax.” Thus, there is no grant
of tax exemption in the first sentence of Section 5.
3. In PLDT v. City of Davao, the Court held that “tax exemptions should
be granted only by clear and unequivocal provision of law on the basis
of language too plain to be mistaken. They cannot be extended by
mere implication or inference.”
Tax exemptions must be clear and unequivocal. A taxpayer claiming a

tax exemption must point to a specific provision of law conferring on
the taxpayer, in clear and plain terms, exemption from a common
burden. Any doubt whether a tax exemption exists is resolved against
the taxpayer.
CE Casecnan Water and Energy Company, Inc., vs. The Province of
Nueva Ecija, GR No. 196278 dated June 17, 2015:
Does the Court of Appeals have jurisdiction to rule on a Petition for

Certiorari assailing an interlocutory order of the RTC relating to a local
tax case?
1. It is the CTA which has the power to rule on a Petition for Certiorari
assailing an interlocutory order of the RTC relating to a local tax case.
With respect to the CTA, its jurisdiction was expanded and its rank
elevated to that of a collegiate court with special jurisdiction by virtue
of Republic Act No. 9282. This expanded jurisdiction of the CTA
includes its exclusive appellate jurisdiction to review by appeal the
decisions, orders or resolutions of the RTC in local tax cases originally
decided or resolved by the RTC in the exercise of its original or
appellate jurisdiction.
2. In the recent case of City of Manila v. Grecia-Cuerdo, the Court ruled

that the CTA likewise has the jurisdiction to issue writs of certiorari or
to determine whether there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the RTC in
issuing an interlocutory order in cases falling within the CTA’s
exclusive appellate jurisdiction. The purpose is to avoid split
jurisdiction or an absurd situation where one court decides an appeal
in the main case while another court rules on an incident in the very
same case.
3. In National Power Corporation v. Municipal Government of Navotas,

as well as in City of Lapu-Lapu v. Philippine Economic Zone Authority,
this Court already held that local tax cases include Real Property Tax.
No doubt, the injunction case before the RTC is a local tax case. And as
earlier discussed, a certiorari petition questioning an interlocutory
order issued in a local tax case falls under the jurisdiction of the CTA.
Thus, the CA correctly dismissed the Petition for Certiorari before it for
lack of jurisdiction.
Documentary Stamp Tax
Prudential Bank vs. CIR, GR No. 180390 dated July 27, 2011:
One of Prudential Bank’s deposit products is called Savings Account

Plus (“SAP”). The Bank argues that unlike a time deposit, the same is
payable on demand and is evidenced by a passbook and not by a
certificate of deposit. Thus, it is not subject to DST under Sec. 180 of
the Tax Code (now Sec. 179), as amended, which subjects to DST
“certificates of deposit bearing interest.”
Is the deposit product SAP subject to Documentary Stamp Tax?

Sec. 180. Stamp tax on all loan agreements, promissory notes, bills of
exchange, drafts, instruments and securities issued by the government
or any of its instrumentalities, certificates of deposit bearing interest
and others not payable on sight or demand. - On all loan agreements
including those signed abroad wherein the object of the contract is
located or used in the Philippines; bills of exchange (between points
within the Philippines), drafts, instruments and securities issued by the
Government or any of its instrumentalities, deposit substitute debt
instruments, certificates of deposits drawing interest, or orders for
the payment of any sum of money otherwise than at sight or on
demand, or on all promissory notes, whether negotiable or non-
negotiable, xxx.”
1.a. In China Banking Corporation v. CIR, the Supreme Court held that
the Savings Plus Deposit Account, which has the following features:
a. Amount deposited is withdrawable anytime;

b. The same is evidenced by a passbook;
c. The rate of interest offered is the prevailing market rate,
provided the depositor would maintain his minimum balance in
thirty (30) days at the minimum, and should he withdraw before
the period, his deposit would earn the regular savings deposit rate;
is subject to DST as it is essentially the same as the Special/Super

Savings Deposit Account in Philippine Banking Corporation v.
Commissioner of Internal Revenue, and the Savings Account-Fixed
Savings Deposit in International Exchange Bank v. Commissioner of
Internal Revenue, which are considered certificates of deposit drawing
interests.
2. The fact that the SAP is evidenced by a passbook likewise cannot

remove its coverage from Section 180 of the old NIRC (now Sec. 179),
as amended. A document to be considered a certificate of deposit
need not be in a specific form. Thus, a passbook issued by a bank
qualifies as a certificate of deposit drawing interest because it is
considered a written acknowledgement by a bank that it has
accepted a deposit of a sum of money from a depositor.
3. Take note that under Sec. 179 of the Tax Code (formerly Sec. 180)
now provides:
xxx. For purposes of this section, the term debt instrument shall mean
instruments representing borrowing and lending transactions including
but not limited to xxx deposit substitute debt instruments, certificates
or other evidences of deposits that are either drawing interest
significantly higher than the regular savings deposit taking into
consideration the size of the deposit and the risks involved or drawing
interest and having a specific maturity date, xxx." (Underscoring
supplied),
CIR vs. La Tondena Distillers, Inc., GR No. 175188 dated July 15, 2015:
Is the transfer of real property via merger subject to DST?
Note that RA 9243 dated February 17, 2004 amended the DST
provisions of the Tax Code. Sec. 199 (m) of the Tax Code, as amended
by RA 9243 provides for “Documents and Papers Not Subject to Stamp
Tax: (m) Transfer of property pursuant to Section 40(c)(2) of the NIRC
of 1997, as amended.”
Section 196. Stamp tax on Deeds of Sale and Conveyances of Real

Property. - On all conveyances, deeds, instruments, or writings, other
than grants, patents or original certificates of adjudication issued by
the Government, whereby any land, tenement, or other realty sold
shall be granted, assigned, transferred or otherwise conveyed to the
purchaser, or purchasers, or to any other person or persons designated
by such purchaser or purchasers, there shall be collected a
documentary stamp tax, at the rates herein below prescribed, based
on the consideration contracted to be paid for such realty or on its fair
market value determined in accordance with Section 6(E) of this Code,
whichever is higher xxx.”
1.a. In CIR vs. Pilipinas Shell Petroleum Corporation, the Supreme Court
already ruled that Section 196 of the NIRC does not include the
transfer of real property from one corporation to another pursuant to
a merger. It explained that:
“*W+e do not find merit in petitioner’s contention that Section 196

covers all transfers and conveyances of real property for a valuable
consideration. A perusal of the subject provision would clearly show it
pertains only to sale transactions where real property is conveyed to a
purchaser for a consideration.”
1.b. The phrase "granted, assigned, transferred or otherwise

conveyed" is qualified by the word "sold" which means that
documentary stamp tax under Section 196 is imposed on the transfer
of realty by way of sale and does not apply to all conveyances of real
property. Indeed, as correctly noted by the respondent, the fact that
Section 196 refers to words "sold", "purchaser" and "consideration"
undoubtedly leads to the conclusion that only sales of real property
are contemplated therein.
2. In a merger, the real properties are not deemed "sold" to the

surviving corporation and the latter could not be considered as
"purchaser" of realty since the real properties subject of the merger
were merely absorbed by the surviving corporation by operation of
law and these properties are deemed automatically transferred to
and vested in the surviving corporation without further act or deed.

Atty. Bobby Lock - Chair&#39;s Cases (Final)

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Atty. Bobby Lock - Chair&#39;s Cases (Final)

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Chair’s Cases on Taxation

2018 Bar Examinations

Sec. 4 of RA No. 7432, as amended by RA No. 9257 partly provides:

“(a) the grant of twenty percent (20%) discount from all

Whether the tax deduction scheme under RA No. 9257 is

1.a. In Carlos Superdrug Corporation vs. DSWD, the Supreme Court

1.b. The 20% discount is intended to improve the welfare of senior

2. The 20% discount is not an exercise of the power of eminent

Whether petitioners have standing to sue as taxpayers?

1.a. For a taxpayer’s suit to prosper, two requisites must be met:

(1) public funds derived from taxation are disbursed by a political

1.b. As to the second requisite, the Supreme Court, in recent cases,

2. A taxpayer need not be a party to the contract to challenge its

Sec. 24(B) of the Tax Code provides:

“(B) Rate of Tax on Certain Passive Income: (1) Interests, Royalties,

2. In another BIR ruling cited by the Supreme Court, it held: “xxx.

3.a. Arts. 61 and 62 of RA No. 6938 (“Cooperative Code of the

However, members of cooperatives deserve a preferential tax

3.b. The exemption in favor of cooperatives under RA No. 6938

3.c. Art. 61 of RA No. 9520 (“the Philippine Cooperative Code of 2008”)

This amendment in Article 61 of RA 9520, specifically providing that

St. Luke’s is a non-stock non-profit hospital. It accepts paying and non-

Revenues from Paying Patients: P1,730,000,000.00

Net Income From Paying Patients: P334,000,000.00 (100%)

1.a. No. In order to be exempt from income tax as a Charitable

It cannot be disputed that a hospital which receives approximately

2. St. Luke’s charity expenditure of P218,000,000.00 is 65.00% of its

2.b. St. Luke’s claims that its charity expenditure of P218,000,000.00 is

The last paragraph of Sec. 30 of the NIRC provides: “income of

4. If a charitable Institution has income from activities conducted for

4.a. No. A charitable institution under Sec. 30(E) is nevertheless

5.a. 10% imposed on taxable income under Sec. 27(B).

St. Luke’s fails to meet the requirements under Sec. 30(E) to be

In expropriation proceedings, between the government and the

1.a. It is settled that the transfer of property through expropriation

2. Besides, consequential damages are only awarded if as a result of

Whether the gross receipts derived by operators or proprietors of

1. The enumeration of services subject to VAT under Section 108 of the

2.a. Among those included in the enumeration is the lease of motion

Exhibition is defined as To show or display. x x x To produce anything in

2.b. Since the activity of showing motion pictures, films or movies by

3.a. The legislature never intended operators or proprietors of

3.b. To hold otherwise would impose an unreasonable burden on

For the year 1998, are pawnshops subject to VAT?

1. Timelines of VAT on Pawnshops (considered non-bank financial

a. First time banks and other non-bank financial intermediaries were

2. Since petitioner is a non-bank financial intermediary, it is subject to

Whether the failure to print the word zero-rated on the

1. The question of whether the absence of the word zero-rated on the

2.a. Section 4.108-1 of RR No. 7-95 proceeds from the rule-making

2.b. Section 4.108-1 of RR No. 7-95 was issued on December 9, 1995

3. Further, the printing of the word zero-rated on the invoice helps

In addition, the appearance of the word zero-rated on the face of

4. Consistent with the foregoing jurisprudence, petitioners claim for

1.a. Sec. 112 (C) of the NIRC clearly provides that:

2.b. In fact, applying the two-year period to judicial claims would

a. Whether prior payment of taxes is necessary in order to claim

1.a. Prior payment of taxes is not required for a taxpayer to avail of

1.b. To require prior payment of taxes, is not only tantamount to

1.c. Moreover, prior payment of taxes is not required to avail of the

2.a. As regards Section 4.105-147 of RR No. 7-95 which limited the 2%

2.b. As mandated by Article 7 of the Civil Code, an administrative rule

As we see it then, the 2% transitional input tax credit should not be

Without filing a protest, may the Formal Letter of Demand and

Atty. Bobby Lock - Chair's Cases (Final)

Atty. Bobby Lock - Chair's Cases (Final)