TAXING AUTHORITY

a. Organizational Structure and functions of the BIR

b. Jurisdiction, Power, and Functions of the Commissioner of Internal
Revenue

G.R. No. 130430 December 13, 1999

REPUBLIC OF THE PHILIPPINES, represented by the Commissioner of the Bureau of Internal

Revenue (BIR), petitioner,vs.SALUD V. HIZON, respondent.

Facts: The BIR filed a case with the RTC, Pampanga to collect the tax deficiency against respondent. The
complaint was signed by Norberto Salud, Chief of the Legal Division, BIR Region 4, and verified by
Amancio Saga, the Bureau's Regional Director in Pampanga. Respondent moved to dismiss the case on
two grounds: (1) that the complaint was not filed upon authority of the BIR Commissioner as required by
221 of the National Internal Revenue Code, and (2) that the action had already prescribed.

Issue:WON the institution of the civil case for collection of taxes was without the approval of the
commissioner in violation of section 221 of the national internal revenue code.

Held:No. While it is true that Section 221 of the NIRC  provides that “but no civil and criminal actions for 
the recovery of taxes or the enforcement of any fine, penalty or forfeiture under this Code shall begun w
without the approval of the Commissioner”, it is not, however, one of those enumerated by Sec 7 of the 
zssame Code which cannot be delegated.

A. INCOME TAX
a. Definition, Nature and General Principles

G.R. Nos. L-18169, L-18262 & L-21434             July 31, 1964

COMMISSIONER OF INTERNAL REVENUES, petitioner,vs.V.E. LEDNICKY and MARIA VALERO

LEDNICKY, respondents.

Facts: The respondents are husband and wife, respectively, both American citizens residing in the
Philippines, and have derived all their income from Philippine sources for the taxable years in
question. On 17 March 1959, the respondents Lednickys filed an amended income tax return for
1956. The amendment consists in a claimed deduction of P205,939.24 paid in 1956 to the United
States government as federal income tax for 1956. Simultaneously with the filing of the amended
return, the respondents requested a refund.
Issue: WON a citizen of the United States residing in the Philippines, who derives income wholly
from sources within the Republic of the Philippines, may deduct from his gross income the income
taxes he has paid to the United States government.

Held:No. The right of a government to tax income emanates from its partnership in the production of
income, by providing the protection, resources, incentive, and proper climate for such production.(
STATE PARTNESHIP THEORY ni sya) Here, while the taxpayers would have to pay two taxes on
the same income, the Philippine government only receives the proceeds of one tax.( the production
of the wealth)

G.R. No. L-65773-74 April 30, 1987

COMMISSIONER OF INTERNAL REVENUE, petitioner,vs.BRITISH OVERSEAS AIRWAYS

CORPORATION and COURT OF TAX APPEALS

Facts: BOAC is a 100% British Government-owned corporation, it was granted a temporary landing
permit by the Civil Aeronautics Board (CAB) for nine months. Consequently, it did not carry
passengers and/or cargo to or from the Philippines, although during the period covered by the
assessments, it maintained a general sales agent in the Philippines — Wamer Barnes and
Company, Ltd., and later Qantas Airways — which was engaged in selling BOAC tickets covering
passengers and cargoes.

Issue: WON the revenue derived by private respondent (BOAC) from sales of tickets in the
Philippines for air transportation, while having no landing rights here, constitute income of BOAC
from Philippine sources, and, accordingly, taxable.

Held: Yes. The term "doing" or "engaging in" or "transacting" business, implies a continuity of
commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or
works or the exercise of some of the functions normally incident to, and in progressive prosecution of
commercial gain or for the purpose and object of the business organization.  2

There should be no doubt then that BOAC was "engaged in" business in the Philippines through a
local agent during the period covered by the assessments. Accordingly, it is a resident foreign
corporation subject to tax upon its total net income received in the preceding taxable year from all
sources within the Philippines.