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Coverage Law On Taxation 2015 Bar Examinations I. General Principles of Taxation A. Definition and Concept of Taxation
Coverage Law On Taxation 2015 Bar Examinations I. General Principles of Taxation A. Definition and Concept of Taxation
Coverage Law On Taxation 2015 Bar Examinations I. General Principles of Taxation A. Definition and Concept of Taxation
COVERAGE
LAW ON TAXATION
2015 BAR EXAMINATIONS
Taxation is the power by which the sovereign raises revenue to defray the necessary
expenses of the government. It is merely a way of apportioning the cost of
government among those who in some measure are privileged to enjoy its benefits
and must bear its burdens. It includes, in its broadest and most general sense,
every charge or burden imposed by the sovereign power upon persons, property, or
property rights for the use and support of the government and to enable it to
discharge its appropriate functions, and in that broad definition there is included a
proportionate levy upon persons or property and all the various other methods and
devices by which revenue is exacted from persons and property for public purposes.
(51 Am. Jur 34-35)
Taxation is described as a destructive power which interferes with the personal and
property rights of the people and takes from them a portion of their property for the
support of the government. (Paseo Realty & Development Corporation v. Court of
Appeals, GR No. 119286, October 13, 2004)
B. Nature of taxation
The power to tax is inherent in the State, such power being inherently legislative,
based on the principle that taxes are a grant of the people who are taxed, and the
grant must be made by the immediate representative of the people, and where the
people have laid the power, there it must remain and be exercised. (Commissioner
of Internal Revenue v. Fortune Tobacco Corporation, 559 SCRA 160 (2008))
The power of taxation is essentially a legislative function. The power to tax includes
the authority to:
(1) determine the
(a) nature (kind);
(b) object (purpose);
In other words, the legislature wields the power to define what tax shall be imposed,
why it should be imposed, how much tax shall be imposed, against whom (or what)
it shall be imposed and where it shall be imposed. (Chamber of Real Estate and
Builders’ Association, Inc. v. Romulo, 614 SCRA 605 (2010))
C. Characteristics of taxation
The power to tax is so unlimited in force and so searching in extent, that courts
scarcely venture to declare that it is subject to any restrictions whatever, except
such as rest in the discretion of the authority which exercises it. (Tio v. Videogram
Regulatory Board et al., 151 SCRA 213)
Taxes being the lifeblood of the government that should be collected without
unnecessary hindrance, every precaution must be taken not to unduly suppress it.
(Republic v. Caguioa, 536 SCRA 193 (2007))
The power to tax is sometimes called the power to destroy. Therefore, it should be
exercised with caution to minimize injury to the proprietary rights of the taxpayer. It
must be exercised fairly, equally and uniformly, lest the tax collector kills the ‘hen
that lays the golden egg.’ (Commissioner of Internal Revenue v. SM Prime Holdings,
Inc., 613 SCRA 774 (2010))
In order to maintain the general public’s trust and confidence in the government,
this power must be used justly and not treacherously. (Roxas y Cia v. Court of Tax
Appeals, 23 SCRA 276)
Tax laws are prospective in operation, unless the language of the statute clearly
provides otherwise. (Commissioner of Internal Revenue v. Acosta, 529 SCRA 177
(2007))
1. Police power
Police Power is the power to make, ordain and establish all manner of wholesome
and reasonable laws, statutes and ordinances whether with penalties or without, not
repugnant to the Constitution, the good and welfare of the commonwealth, and for
the subjects of the same. (Metropolitan Manila Development Authority v. Garin, GR
No. 130230, April 15, 2005)
The main purpose of police power is the regulation of a behavior or conduct, while
taxation is revenue generation. The "lawful subjects" and "lawful means" tests are
used to determine the validity of a law enacted under the police power. The power
of taxation, on the other hand, is circumscribed by inherent and constitutional
limitations. (PLANTERS PRODUCTS, INC. v. FERTIPHIL CORPORATION, G.R. No.
166006, March 14, 2008)
Unlike ordinary revenue laws, R.A. 6260 and P.D. 276 did not raise money to boost
the government’s general funds but to provide means for the rehabilitation and
stabilization of a threatened industry, the coconut industry, which is so affected with
public interest as to be within the police power of the State. The subject laws are
akin to the sugar liens imposed by Sec. 7(b) of P.D. 388, and the oil price
stabilization funds under P.D. 1956, as amended by E.O. 137. (PAMBANSANG
KOALISYON NG MGA SAMAHANG MAGSASAKA AT MANGGAGAWA SA NIYUGAN v.
EXECUTIVE SECRETARY G.R. Nos. 147036-37 April 10, 2012)
While it is true that the power of taxation can be used as an implement of police
power, the primary purpose of the levy is revenue generation. If the purpose is
primarily revenue, or if revenue is, at least, one of the real and substantial
purposes, then the exaction is properly called a tax. (PLANTERS PRODUCTS, INC. v.
FERTIPHIL CORPORATION, G.R. No. 166006, March 14, 2008)
It has been the settled law that municipal license fees could be classified into those
imposed for regulating occupations or regular enterprises, for the regulation or
restriction of non-useful occupations or enterprises and for revenue purposes only.
Licenses for non-useful occupations are also incidental to the police power and the
right to exact a fee may be implied from the power to license and regulate, but in
fixing the amount of the license fees the municipal corporations are allowed a much
wider discretion in this class of cases. (ERMITA-MALATE HOTEL AND MOTEL
OPERATORS ASSOCIATION, INC., HOTEL DEL MAR INC. and GO CHIU v. THE
HONORABLE CITY MAYOR OF MANILA, G.R. No. L-24693, July 31, 1967)
Besides, the taxation power can also be used as an implement for the exercise of
the power of eminent domain. Tax measures are but "enforced contributions
exacted on pain of penal sanctions" and "clearly imposed for a public purpose." In
recent years, the power to tax has indeed become a most effective tool to realize
social justice, public welfare, and the equitable distribution of wealth.
(COMMISSIONER OF INTERNAL REVENUE v. CENTRAL LUZON DRUG CORPORATION
G.R. No. 159647 April 15, 2005)
E. Purpose of taxation
1. Revenue-raising
2. Non-revenue/special or regulatory
The Court was satisfied that the coco-levy funds were raised pursuant to law to
support a proper governmental purpose. They were raised with the use of the police
and taxing powers of the State for the benefit of the coconut industry and its
farmers in general. (PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT
As an elementary principle of law, license taxation must not be “so onerous to show
a purpose to prohibit a business which is not injurious to health or morals.”
(TERMINAL FACILITIES AND SERVICES CORPORATION v. PHILIPPINE PORTS
AUTHORITY, 378 SCRA 82 (2002))
It is a police power measure. The objectives behind its enactment are: "(1) To be
able to impose payment of the license fee for engaging in the business of massage
clinic (2) in order to forestall possible immorality which might grow out of the
construction of separate rooms for massage of customers." (TOMAS VELASCO v.
HON. ANTONIO J. VILLEGAS, G.R. No. L-24153, February 14, 1983)
2. Administrative feasibility
3. Theoretical justice
G. Theory and basis of taxation
1. Lifeblood theory
As well said in a prior case, revenue laws are not intended to be liberally construed.
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. (COMMISSIONER OF INTERNAL REVENUE v. ROSEMARIE
ACOSTA G.R. No. 154068 August 3, 2007)
Taxes being the lifeblood of the government should be collected promptly. No court
shall have the authority to grant an injunction to restrain the collection of any
internal revenue tax, fee or charge imposed by the National Internal Revenue Code.
(ANGELES CITY v. ANGELES ELECTRIC COOPERATION, 622 SCRA 43 (2010))
We are not unaware of the doctrine that taxes are the lifeblood of the government,
without which it can not properly perform its functions; and that appeal shall not
suspend the collection of realty taxes. However, there is an exception to the
foregoing rule, i.e., where the taxpayer has shown a clear and unmistakable right to
refuse or to hold in abeyance the payment of taxes. (EMERLINDA S. TALENTO vs.
HON. REMIGIO M. ESCALADA, JR., G.R. No. 180884, June 27, 2008)
2. Necessity theory
The theory behind the exercise of the power to tax emanates from necessity,
without taxes, government cannot fulfill its mandate of promoting the general
welfare and well being of the people. (GEROCHI v. DEPARTMENT OF ENERGY, 527
SCRA 696 (2007))
Despite the natural reluctance to surrender part of one's hard earned income to the
taxing authorities, every person who is able to must contribute his share in the
running of the government. The government for its part is expected to respond in
the form of tangible and intangible benefits intended to improve the lives of the
people and enhance their moral and material values. This symbiotic relationship is
the rationale of taxation and should dispel the erroneous notion that it is an
arbitrary method of exaction by those in the seat of power. (COMMISSIONER OF
INTERNAL REVENUE v. ALGUE, INC., and THE COURT OF TAX APPEALS, G.R. No. L-
28896, February 17, 1988)
The expenses of government, having for their object the interest of all, should be
borne by everyone, and the more man enjoys the advantages of society, the more
he ought to hold himself honored in contributing to those expenses. (ABAKADA
GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and ED
VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA,
G.R. No. 168056, September 1, 2005)
H. Doctrines in taxation
1. Prospectivity of tax laws
Note that the issue on the retroactivity of Section 204(c) of the 1997 NIRC arose
because the last paragraph of Section 204(c) was not found in Section 230 of the
old Code. After a thorough consideration of this matter, we find that we cannot give
retroactive application to Section 204(c) abovecited. We have to stress that tax laws
are prospective in operation, unless the language of the statute clearly provides
otherwise. (COMMISSIONER OF INTERNAL REVENUE v. ROSEMARIE ACOSTA G.R. No.
154068 August 3, 2007)
2. Imprescriptibility
3. Double taxation
a) Strict sense
Double taxation means taxing the same property twice when it should be taxed only
once; that is, "taxing the same person twice by the same jurisdiction for 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 they must be of the
same kind or character. (COMMISSIONER OF INTERNAL REVENUE v. SOLIDBANK
CORPORATION G.R. No. 148191 November 25, 2003)
For Double taxation to take place, 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. Because Section 21 of the Revenue Code of Manila
imposed the tax on a person who sold goods and services in the course of trade or
business based on a certain percentage of his gross sales or receipts in the
preceding calendar year, while Section 15 and Section 17 likewise imposed the tax
on a person who sold goods and services in the course of trade or business but only
identified such person with particularity, namely, the wholesaler, distributor or
dealer (Section 15), and the retailer (Section 17), all the taxes – being imposed on
the privilege of doing business in the City of Manila in order to make the taxpayers
contribute to the city’s revenues – were imposed on the same subject matter and
for the same purpose. NURSERY CARE CORPORATION; SHOEMART, INC.; STAR
APPLIANCE CENTER, INC.; H&B, INC.; SUPPLIES STATION, INC.; and HARDWARE
WORKSHOP, INC. vs. ANTHONY ACEVEDO, in his capacity as THE TREASURER OF
MANILA; and THE CITY OF MANILA, G.R. No. 180651, July 30, 2014, J. Bersamin
Stemmed leaf tobacco is subject to the specific tax under Section 141(b). It is a
partially prepared tobacco. The removal of the stem or midrib from the leaf tobacco
makes the resulting stemmed leaf tobacco a prepared or partially prepared tobacco.
Since the Tax Code contained no definition of “partially prepared tobacco,” then the
term should be construed in its general, ordinary, and comprehensive sense.
However, importation of stemmed leaf tobacco is not included in the exemption
under Section 137. The transaction contemplated in Section 137 does not include
importation of stemmed leaf tobacco for the reason that the law uses the word
“sold” to describe the transaction of transferring the raw materials from one
manufacturer to another. Finally, excise taxes are essentially taxes on property
because they are levied on certain specified goods or articles manufactured or
produced in the Philippines for domestic sale or consumption or for any other
disposition, and on goods imported. In this case, there is no double taxation in the
prohibited sense despite the fact that they are paying the specific tax on the raw
material and on the finished product in which the raw material was a part, because
the specific tax is imposed by explicit provisions of the Tax Code on two different
articles or products: (1) on the stemmed leaf tobacco; and (2) on cigar or cigarette.
LA SUERTE CIGAR & CIGARETTE FACTORY vs. COURT OF APPEALS AND
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 125346, G.R. Nos. 136328-29,
G.R. No. 144942, G.R. No. 148605, G.R. No. 158197, G.R. No. 165499, November
11, 2014, J. Leonen
b) Broad sense
Subjecting interest income to a 20% FWT and including it in the computation of the
5% GRT is clearly not double taxation: First, the taxes herein are imposed on two
different subject matters; Second, although both taxes are national in scope
because they are imposed by the same taxing authority -- the national government
under the Tax Code -- and operate within the same Philippine jurisdiction for the
same purpose of raising revenues, the taxing periods they affect are different; Third,
these two taxes are of different kinds or characters. (COMMISSIONER OF INTERNAL
REVENUE v. SOLIDBANK CORPORATION G.R. No. 148191 November 25, 2003)
Regulation and taxation are two different things, the first being an exercise of police
power, whereas the latter involves the exercise of the power of taxation. While R.A.
2264 provides that no city may impose taxes on forest products and although
lumber is a forest product, the tax in question is imposed not on the lumber but
upon its sale; thus, there is no double taxation and even if there was, it is not
prohibited. (SERAFICA v. CITY TREASURER OF ORMOC, G.R. No. L-24813, April 28,
1968)
Both a license fee and a tax may be imposed on the same business or occupation,
or for selling the same article. This is not being in violation of the rule against
double taxation. (COMPANIA GENERAL DE TABACOS DE FILIPINAS v. CITY OF
MANILA, 8 SCRA 367)
Unlike the United States Constitution, double taxation is not specially prohibited in
the Philippine Constitution. (Manufacturers Life v. Meer, 89 Phil 210)
Double taxation usually takes place when a person is resident of a contracting state
and derives income from, or owns capital in the other contracting state and both
states impose tax on that income or capital. In order to eliminate double taxation, a
tax treaty resorts to several methods.
First, it sets out the respective rights to tax of the state of source or situs and of the
state of residence with regard to certain classes of income or capital. In some cases,
an exclusive right to tax is conferred on one of the contracting states; however, for
other items of income or capital, both states are given the right to tax, although the
amount of tax that may be imposed by the state of source is limited.
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. (COMMISSIONER OF
INTERNAL REVENUE v. S.C. JOHNSON AND SON, INC. G.R. No. 127105 June 25,
1999)
In negotiating tax treaties, the underlying rationale for reducing the tax rate is that
the Philippines will give up a part of the tax in the expectation that the tax given up
for this particular investment is not taxed by the other country. Thus, if the rates of
tax are lowered by the state of source, in this case, by the Philippines, there should
be a concomitant commitment on the part of the state of residence to grant some
form of tax relief, whether this be in the form of a tax credit or exemption.
(COMMISSIONER OF INTERNAL REVENUE v. S.C. JOHNSON AND SON, INC. G.R. No.
127105 June 25, 1999)
Section 135(a) should be construed as prohibiting the shifting of the burden of the
excise tax to the international carriers who buy petroleum products from the local
manufacturers. Said international carriers are thus allowed to purchase the
petroleum products without the excise tax component which otherwise would have
been added to the cost or price fixed by the local manufacturers or
distributors/sellers. (COMMISSIONER OF INTERNAL REVENUE v. PILIPINAS SHELL
PETROLEUM CORPORATION, G.R. No. 188497, February 19, 2014)
It may indeed be that the economic burden of the tax finally falls on the purchaser;
when it does the tax becomes a part of the price which the purchaser must pay. It
does not matter that an additional amount is billed as tax to the purchaser. The
method of listing the price and the tax separately and defining taxable gross
receipts as the amount received less the amount of the tax added, merely avoids
payment by the seller of a tax on the amount of the tax. (PHILIPPINE ACETYLENE
CO., INC. v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. L-19707, August 17,
1967)
In indirect taxation, a distinction is made between the liability for the tax and
burden of the tax: The seller who is liable for the VAT may shift or pass on the
amount of VAT it paid on goods, properties or services to the buyer. In such a case,
what is transferred is not the seller's liability but merely the burden of the
VAT. (RENATO V. DIAZ and AURORA MA. F. TIMBOL v. THE SECRETARY OF FINANCE,
G.R. No. 193007, July 19, 2011)
b) Tax avoidance
Tax avoidance is the tax saving device within the means sanctioned by law. This
method should be used by the taxpayer in good faith and at arms length.
(COMMISSIONER OF INTERNAL REVENUE v. THE ESTATE OF BENIGNO P. TODA, JR.
G.R. No. 147188 September 14, 2004)
c) Tax evasion
Tax evasion, on the other hand, is a scheme used outside of those lawful means and
when availed of, it usually subjects the taxpayer to further or additional civil or
criminal liabilities. (COMMISSIONER OF INTERNAL REVENUE v. THE ESTATE OF
BENIGNO P. TODA, JR. G.R. No. 147188 September 14, 2004)
Tax evasion connotes the integration of three factors: (1) the end to be achieved,
i.e., the payment of less than that known by the taxpayer to be legally due, or the
non-payment of tax when it is shown that a tax is due; (2) an accompanying state of
mind which is described as being "evil," in "bad faith," "willfull," or "deliberate and
not accidental"; and (3) a course of action or failure of action which is unlawful.
(COMMISSIONER OF INTERNAL REVENUE v. THE ESTATE OF BENIGNO P. TODA, JR.
G.R. No. 147188 September 14, 2004)
Here, it is obvious that the objective of the sale to Altonaga was to reduce the
amount of tax to be paid especially that the transfer from him to RMI would then
subject the income to only 5% individual capital gains tax, and not the 35%
corporate income tax. Altonaga’s sole purpose of acquiring and transferring title of
the subject properties on the same day was to create a tax shelter. (COMMISSIONER
OF INTERNAL REVENUE v. THE ESTATE OF BENIGNO P. TODA, JR. G.R. No. 147188
September 14, 2004)
It is the legislature, unless limited by a provision of the state constitution, that has
full power to exempt any person or corporation or class of property from taxation,
its power to exempt being as broad as its power to tax. Other than Congress, the
Constitution may itself provide for specific tax exemptions, or local governments
may pass ordinances on exemption only from local taxes. (JOHN HAY PEOPLES
ALTERNATIVE COALITION, et al. v. VICTOR LIM, et al., G. R. No. 119775, October 24,
2003)
Taxation is the rule and exemption is the exception. (FELS ENERGY, INC. v.
PROVINCE OF BATANGAS, 516 SCRA 186 (2007))
Since the power to tax includes the power to exempt thereof which is essentially a
legislative prerogative, it follows that a municipal mayor who is an executive officer
may not unilaterally withdraw such an expression of a policy thru the enactment of
a tax. (PHILIPPINE PETROLEUM CORPORATION v. MUNICIPALITY OF PILILLA, G.R. No.
90776, June 3, 1991)
A tax exemption being enjoyed by the buyer cannot be the basis of a claim for tax
exemption by the manufacturer or seller of the goods for any tax due to it as the
manufacturer or seller. The excise tax imposed on petroleum products under
Section 148 is the direct liability of the manufacturer who cannot thus invoke the
excise tax exemption granted to its buyers who are international carriers;
nevertheless, the manufacturer, as the statutory taxpayer who is directly liable to
pay the excise tax on its petroleum products, is entitled to a refund or credit of the
excise taxes it paid for petroleum products sold to international carriers
(COMMISSIONER OF INTERNAL REVENUE v. PILIPINAS SHELL PETROLEUM
CORPORATION, G.R. No. 188497, February 19, 2014)
It bears repeating that the law looks with disfavor on tax exemptions and he who
would seek to be thus privileged must justify it by words too plain to be mistaken
and too categorical to be misinterpreted. (WESTERN MINOLCO CORPORATION v.
COMMISSIONER OF INTERNAL REVENUE, G.R. No. L-61632, August 16, 1983)
(iii) Contractual
Nevertheless, since taxation is the rule and exemption therefrom the exception, the
exemption may thus be withdrawn at the pleasure of the taxing authority. The only
exception to this rule is where the exemption was granted to private parties based
on material consideration of a mutual nature, which then becomes contractual and
is thus covered by the non-impairment clause of the Constitution. (MCIAA v. Marcos,
G.R. No. 120082 September 11, 1996)
In recent years, the increasing social challenges of the times expanded the scope of
state activity, and taxation has become a tool to realize social justice and the
equitable distribution of wealth, economic progress and the protection of local
industries as well as public welfare and similar objectives. Taxation assumes even
greater significance with the ratification of the 1987 Constitution. (BATANGAS
POWER CORPORATION v. BATANGAS CITY and NATIONAL POWER CORPORATION,
G.R. No. 152675, April 28, 2004)
The PPI says that the discriminatory treatment of the press is highlighted by the fact
that transactions, which are profit oriented, continue to enjoy exemption under R.A.
No. 7716 but an enumeration of some of these transactions will suffice to show that
by and large this is not so and that the exemptions are granted for a purpose. As
the Solicitor General says, such exemptions are granted, in some cases, to
encourage agricultural production and, in other cases, for the personal benefit of
the end-user rather than for profit. (ARTURO M. TOLENTINO v. THE SECRETARY OF
FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455,
October 30, 1995)
Since the law granted the press a privilege, the law could take back the privilege
anytime without offense to the Constitution. The reason is simple: by granting
exemptions, the State does not forever waive the exercise of its sovereign
prerogative; indeed, in withdrawing the exemption, the law merely subjects the
press to the same tax burden to which other businesses have long ago been
subject. (ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995)
The rule is that a special and local statute applicable to a particular case is not
repealed by a later statute which is general in its terms, provisions and application
even if the terms of the general act are broad enough to include the cases in the
special law unless there is manifest intent to repeal or alter the special law. (THE
PROVINCE OF MISAMIS ORIENTAL, represented by its PROVINCIAL TREASURER v.
CAGAYAN ELECTRIC POWER AND LIGHT COMPANY, INC., G.R. No. L-45355, January
12, 1990)
Erroneous application and enforcement of the law by public officers do not preclude
subsequent correct application of the statute, and the government is never
estopped by the mistake or error on the part of its agents. (PHILIPPINE BASKETBALL
ASSOCIATION v. COURT OF APPEALS, 337 SCRA 358)
Taxes cannot be the subject of set-off or compensation for the following reasons: (1)
taxes are of distinct kind, essence and nature, and these impositions cannot be
classed in the same category as ordinary obligations; (2) the applicable laws and
principles governing each are peculiar, not necessarily common to each; and (3)
public policy is better subscribed if the integrity and independence of taxes are
maintained. (REPUBLIC v. MAMBULAO LUMBER COMPANY, 4 SCRA 622 (1962))
Taxes cannot be subject to compensation for the simple reason that the
Government and the taxpayers are not creditors and debtors of each other, debts
are due to the Government in its corporate capacity, while taxes are due to the
Government in its sovereign capacity. (SOUTH AFRICAN AIRWAYS v. COMMISSIONER
OF INTERNAL REVENUE, 612 SCRA 665 (2010))
However, if the obligation to pay taxes and the taxpayer’s claim against the
government are both overdue, demandable, as well as fully liquidated,
compensation takes place by operation of law and both obligations are extinguished
to their concurrent amounts. (DOMINGO v. GARLITOS, 8 SCRA 443 (1963))
7. Compromise
8. Tax amnesty
a) Definition
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 violating 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.
(ASIA INTERNATIONAL AUCTIONEERS, INC. v. COMMISSIONER OF INTERNAL
REVENUE G.R. No. 179115 September 26, 2012)
A tax amnesty, much like a tax exemption, is never favored or presumed in law. The
grant of a tax amnesty, similar to a tax exemption, must be construed strictly
against the taxpayer and liberally in favor of the taxing authority. (ASIA
INTERNATIONAL AUCTIONEERS, INC. v. COMMISSIONER OF INTERNAL REVENUE G.R.
No. 179115 September 26, 2012)
The claim of a taxpayer under a tax amnesty shall be allowed when the liability
involves the deficiency in payment of income tax. However, it must be disallowed
when the taxpayer is assessed on his capacity as a withholding tax agent because
the person who earned the taxable income was another person other than the
withholding agent. LG ELECTRONICS PHILIPPINES, INC. vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 165451, December 03, 2014, J. Leonen
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. While tax amnesty, similar to a tax exemption, must be construed strictly
against the taxpayer and liberally in favor of the taxing authority, it is also a well-
settled doctrine that the rule-making power of administrative agencies cannot be
extended to amend or expand statutory requirements or to embrace matters not
originally encompassed by the law. Administrative regulations should always be in
accord with the provisions of the statute they seek to carry into effect, and any
resulting inconsistency shall be resolved in favor of the basic law. CS GARMENT,
INC., vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 182399, March 12, 2014,
CJ. Sereno
Verily, taxation is a destructive power which interferes with the personal and
property for the support of the government. Accordingly, tax statutes must be
construed strictly against the government and liberally in favor of the
taxpayer. (MCIAA v. Marcos, G.R. No. 120082 September 11, 1996)
The rule that tax exemptions should be construed strictly against the taxpayer
presupposes that the taxpayer is clearly subject to the tax being levied against him.
Unless a statute imposes a tax clearly, expressly and unambiguously, what applies
is the equally well-settled rule that the imposition of a tax cannot be presumed. This
is because taxes are burdens on the taxpayer, and should not be unduly imposed or
presumed beyond what the statutes expressly and clearly import. (COMMISSIONER
OF INTERNAL REVENUE v. THE PHILIPPINE AMERICAN ACCIDENT INSURANCE
COMPANY, INC. G.R. No. 141658 March 18, 2005)
(ii) Exception
b) Tax exemption and exclusion
(i) General rule
But since taxes are what we pay for civilized society, or are the lifeblood of the
nation, the law frowns against exemptions from taxation and statutes granting tax
exemptions are thus construed in strictissimi juris against the taxpayers and
liberally in favor of the taxing authority. (MCIAA v. Marcos, G.R. No. 120082
September 11, 1996)
Entrenched in our jurisprudence is the principle that tax refunds are in the nature of
tax exemptions which are construed in strictissimi juris against the taxpayer and
liberally in favor of the government. As tax refunds involve a return of revenue from
the government, the claimant must show indubitably the specific provision of law
from which her right arises; it cannot be allowed to exist upon a mere vague
implication or inference nor can it be extended beyond the ordinary and reasonable
intendment of the language actually used by the legislature in granting the refund.
(COMMISSIONER OF INTERNAL REVENUE v. ROSEMARIE ACOSTA G.R. No. 154068
August 3, 2007)
Well-settled in this jurisdiction is the fact that actions for tax refund, as in this case,
are in the nature of a claim for exemption and the law is construed in strictissimi
juris against the taxpayer. The pieces of evidence presented entitling a taxpayer to
an exemption are also strictissimi scrutinized and must be duly proven. (KEPCO
PHILIPPINES CORPORATION v. COMMISSIONER OF INTERNAL REVENUE G.R. No.
179961 January 31, 2011)
Definitely, the taxability of a party cannot be blandly glossed over on the basis of a
supposed "broad, pragmatic analysis" alone without substantial supportive
evidence, lest governmental operations suffer due to diminution of much needed
funds. While international comity is invoked in this case on the nebulous
representation that the funds involved in the loans are those of a foreign
government, scrupulous care must be taken to avoid opening the floodgates to the
violation of our tax laws. (COMMISSIONER OF INTERNAL REVENUE v. MITSUBISHI
METAL CORPORATION G.R. No. L-54908 January 22, 1990)
The claimed statutory exemption of the John Hay SEZ from taxation should be
manifest and unmistakable from the language of the law on which it is based; it
must be expressly granted in a statute stated in a language too clear to be
mistaken. If it were the intent of the legislature to grant to the John Hay SEZ the
same tax exemption and incentives given to the Subic SEZ, it would have so
expressly provided in the R.A. No. 7227. (JOHN HAY PEOPLES ALTERNATIVE
COALITION, et al. v. VICTOR LIM, et al., G. R. No. 119775, October 24, 2003)
The Court in PLDT v. City of Davao, held that in approving Section 23 of RA No.
7925, Congress did not intend it to operate as a blanket tax exemption to all
telecommunications entities. The Court also clarified the meaning of the word
"exemption" in Section 23 of RA 7925: that the word "exemption" as used in the
statute refers or pertains merely to an exemption from regulatory or reporting
requirements of the Department of Transportation and Communication or the
National Transmission Corporation and not to an exemption from the grantee’s tax
liability. (SMART COMMUNICATIONS, INC. v.THE CITY OF DAVAO, G.R. No. 155491,
July 21, 2009)
The "in lieu of all taxes" clause in a legislative franchise should categorically state
that the exemption applies to both local and national taxes; otherwise, the
exemption claimed should be strictly construed against the taxpayer and liberally in
favor of the taxing authority. (SMART COMMUNICATIONS, INC. v.THE CITY OF DAVAO,
G.R. No. 155491, July 21, 2009)
PLDT’s contention that the “in-lieu-of-all-taxes” clause does not refer to “tax
exemption” but to “tax exclusion” and hence, the strictissimi juris rule does not
apply. The Supreme Court explains that these two terms actually mean the same
thing, such that the rule that tax exemption should be applied in strictissimi
juris against the taxpayer and liberally in favor of the government applies equally to
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A tax credit or refund is strictly construed against the taxpayer. Strict compliance
with the mandatory and jurisdictional conditions prescribed by law to claim such tax
refund or credit is essential and necessary for such claim to prosper. Noncompliance
with the mandatory periods, nonobservance of the prescriptive periods, and
nonadherence to exhaustion of administrative remedies bar a taxpayer’s claim for
tax refund or credit, whether or not the CIR questions the numerical correctness of
the claim of the taxpayer. SILICON PHILIPPINES, INC., (formerly INTEL PHILIPPINES
MANUFACTURING INC.), vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
184360 & 184361/COMMISSIONER OF INTERNAL REVENUE vs. SILICON PHILIPPINES,
INC., (formerly INTEL PHILIPPINES MANUFACTURING, INC.) G.R. No. 184384,
February 19, 2014, J. Villarama, Jr.
(ii) Exception
There is parity between tax refund and tax exemption only when the former is
based either on a tax exemption statute or a tax refund statute. Obviously, that is
not the situation here since Fortune Tobacco’s claim for refund is premised on its
erroneous payment of the tax, or better still, the government’s exaction in the
absence of a law. (COMMISSIONER OF INTERNAL REVENUE v. FORTUNE TOBACCO
CORPORATION, G.R. Nos. 167274-75, July 21, 2008)
A claim for tax refund may be based on statutes granting tax exemption or tax
refund and in such case, the rule of strict interpretation against the taxpayer is
applicable as the claim for refund partakes of the nature of an exemption, a
legislative grace, which cannot be allowed unless granted in the most explicit and
categorical language. Tax refunds (or tax credits), on the other hand, are not
founded principally on legislative grace but on the legal principle which underlies all
quasi-contracts abhorring a person’s unjust enrichment at the expense of another.
(COMMISSIONER OF INTERNAL REVENUE v. FORTUNE TOBACCO CORPORATION, G.R.
Nos. 167274-75, July 21, 2008)
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. Hence, in case of
discrepancy between the basic law and an interpretative or administrative ruling,
the basic law prevails. (FORT BONIFACIO DEVELOPMENT CORPORATION v.
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 173425, September 4, 2012)
Revenue Memorandum Circulars (RMCs) must not override, supplant, or modify the
law, but must remain consistent and in harmony with the law they seek to apply
and implement. (COMMISSIONER OF INTERNAL REVENUE v. SM PRIME HOLDINGS,
INC. 613 SCRA 774 (2010))
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. (COMMISSIONER OF INTERNAL REVENUE v. COURT OF
APPEALS, G.R. No. 117982, February 6, 1997)
It is of course axiomatic that a rule or regulation must bear upon, and be consistent
with, the provisions of the enabling statute if such rule or regulation is to be valid. In
case of conflict between a statute and an administrative order, the former must
prevail. To be valid, an administrative rule or regulation must conform, not
contradict, the provisions of the enabling law. An implementing rule or regulation
cannot modify, expand, or subtract from the law it is intended to implement. Any
rule that is not consistent with the statute itself is null and void. To recapitulate, RR
7-95, insofar as it restricts the definition of "goods" as basis of transitional input tax
credit under Section 105 is a nullity. FORT BONIFACIO DEVELOPMENT CORPORATION
vs. COMMISSIONER OF INTERNAL REVENUE and REVENUE DISTRICT OFFICER,
REVENUE DISTRICT NO. 44, TAGUIG and PATEROS, BUREAU OF INTERNAL REVENUE,
G.R. No. 175707, November 19, 2014, J. Leonardo-De Castro
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. (COMMISSIONER OF INTERNAL REVENUE v.
ROSEMARIE ACOSTA, G.R. No. 154068, August 3, 2007)
(i) Exceptions
Section 2 of P.D. 755, Article III, Section 5 of P.D. 961, and Article III, Section 5 of P.D.
1468 completely ignore the fact that coco-levy funds are public funds raised
through taxation. And since taxes could be exacted only for a public purpose, they
cannot be declared private properties of individuals although such individuals fall
within a distinct group of persons. (PAMBANSANG KOALISYON NG MGA SAMAHANG
MAGSASAKA AT MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos.
147036-37 April 10, 2012)
The Court of course grants that there is no hard-and-fast rule for determining what
constitutes public purpose. But the assailed provisions, which removed the coco-
levy funds from the general funds of the government and declared them private
properties of coconut farmers, do not appear to have a color of social justice for
their purpose. (PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT
MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos. 147036-37 April
10, 2012)
It would be a robbery for the State to tax its citizens and use the funds generated
for a private purpose. When a tax law is only a mask to exact funds from the public
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when its true intent is to give undue benefit and advantage to a private enterprise,
that law will not satisfy the requirement of "public purpose." (PLANTERS PRODUCTS,
INC. v. FERTIPHIL CORPORATION, G.R. No. 166006, March 14, 2008)
b) Inherently legislative
(i) General rule
The power to tax is purely legislative, and which the central legislative body cannot
delegate either to the executive or judicial department of the government without
infringing upon the theory of separation of powers. ((Pepsi-Cola Bottling Company
of the Phil. V. Mun. of Tanauan, Leyte, 69 SCRA 460)
The powers which Congress is prohibited from delegating are those which are
strictly, or inherently and exclusively, legislative. Purely legislative power, which can
never be delegated, has been described as the authority to make a complete law –
complete as to the time when it shall take effect and as to whom it shall be
applicable – and to determine the expediency of its enactment. (ABAKADA GURO
PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and ED VINCENT S.
ALBANO v. THE HONORABLE EXECUTIVE SECRETARY G.R. No. 168056 September 1,
2005)
(ii) Exceptions
(a) Delegation to local governments
The power to tax is primarily vested in the Congress; however, in our jurisdiction, it
may be exercised by local legislative bodies, no longer merely by virtue of a valid
delegation as before, but pursuant to direct authority conferred by Section 5, Article
X of the Constitution. (MCIAA v. Marcos, G.R. No. 120082 September 11, 1996)
The power to tax is the most effective instrument to raise needed revenues to
finance and support myriad activities of local government units. It may also be
relevant to recall that the original reasons for the withdrawal of tax exemption
privileges granted to government-owned and controlled corporations and all other
units of government were that such privilege resulted in serious tax base erosion
and distortions in the tax treatment of similarly situated enterprises. (MCIAA v.
Marcos, G.R. No. 120082 September 11, 1996)
Taxation assumes even greater significance with the ratification of the 1987
Constitution. Thenceforth, the power to tax is no longer vested exclusively on
Congress; local legislative bodies are now given direct authority to levy taxes, fees
and other charges pursuant to Article X, section 5 of the 1987 Constitution.
(NATIONAL POWER CORPORATION v. CITY OF CABANATUAN G.R. No. 149110 April 9,
2003)
Clearly then, while a new slant on the subject of local taxation now prevails in the
sense that the former doctrine of local government units’ delegated power to tax
had been effectively modified with Article X, Section 5 of the 1987 Constitution now
in place, the basic doctrine on local taxation remains essentially the same. For as
the Court stressed in Mactan, "the power to tax is [still] primarily vested in the
Congress." (QUEZON CITY, et al. v. ABS-CBN BROADCASTING CORPORATION, G.R.
No. 162015, March 6, 2006)
Section 5, Article X of the Constitution does not change the doctrine that municipal
corporations do not possess inherent powers of taxation; what it does is to confer
municipal corporations a general power to levy taxes and otherwise create sources
of revenue and they no longer have to wait for a statutory grant of these powers
and the power of the legislative authority relative to the fiscal powers of local
governments has been reduced to the authority to impose limitations on municipal
powers. The important legal effect of Section 5 is thus to reverse the principle that
doubts are resolved against municipal corporations; henceforth, in interpreting
statutory provisions on municipal fiscal powers, doubts will be resolved in favor of
municipal corporations. (QUEZON CITY, et al. v. ABS-CBN BROADCASTING
CORPORATION, G.R. No. 162015, March 6, 2006)
Assuming that Section 28(2) Article VI did not exist, the enactment of the SMA
[Safeguard Measure Act] by Congress would be voided on the ground that it would
constitute an undue delegation of the legislative power to tax. The constitutional
provision shields such delegation from constitutional infirmity, and should be
recognized as an exceptional grant of legislative power to the President, rather than
the affirmation of an inherent executive power. (SOUTHERN CROSS CEMENT
CORPORATION v. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, G.R.
No. 158540, August 3, 2005)
When Congress tasks the President or his/her alter egos to impose safeguard
measures under the delineated conditions, the President or the alter egos may be
properly deemed as agents of Congress to perform an act that inherently belongs as
a matter of right to the legislature. It is basic agency law that the agent may not act
beyond the specifically delegated powers or disregard the restrictions imposed by
the principal. (SOUTHERN CROSS CEMENT CORPORATION v. CEMENT
MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3,
2005)
Clearly, the legislature may delegate to executive officers or bodies the power to
determine certain facts or conditions, or the happening of contingencies, on which
the operation of a statute is, by its terms, made to depend, but the legislature must
prescribe sufficient standards, policies or limitations on their authority. While the
power to tax cannot be delegated to executive agencies, details as to the
enforcement and administration of an exercise of such power may be left to them,
including the power to determine the existence of facts on which its operation
depends. (ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.
ALCANTARA and ED VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE
SECRETARY G.R. No. 168056 September 1, 2005)
c) Territorial
(i) Situs of taxation
(a) Meaning
(b) Situs of income tax
The important factor therefore which determines the source of income of personal
services is not the residence of the payor, or the place where the contract for
service is entered into, or the place of payment, but the place where the services
were actually rendered. (COMMISSIONER OF INTERNAL REVENUE v. JULIANE BAIER-
NICKEL, G.R. No. 153793, August 29, 2006)
The "sale of tickets" in the Philippines is the "activity" that produced the income and
therefore BOAC should pay income tax in the Philippines because it undertook an
income producing activity in the country. The tickets exchanged hands here and
payments for fares were also made here in Philippine currency; thus, the situs of the
source of payments is the Philippines. (Commissioner of Internal Revenue v. British
Overseas Airways Corporation (BOAC) as cited in COMMISSIONER OF INTERNAL
REVENUE v. JULIANE BAIER-NICKEL, G.R. No. 153793, August 29, 2006)
Since it partakes of the nature of an excise tax, the situs of taxation is the place
where the privilege is exercised, in this case in the City of Iriga, where CASURECO III
has its principal office and from where it operates, regardless of the place where its
services or products are delivered. (CITY OF IRIGA v. CAMARINES SUR III ELECTRIC
COOPERATIVE, INC., G.R. No. 192945, September 5, 2012)
It should be noted that a DST is in the nature of an excise tax because it is imposed
upon the privilege, opportunity or facility offered at exchanges for the transaction of
the business. DST is a tax on documents, instruments, loan agreements, and papers
evidencing the acceptance, assignment, or transfer of an obligation, right or
property incident thereto. DST is thus imposed on the exercise of these privileges
through the execution of specific instruments, independently of the legal status of
the transactions giving rise thereto. Notably, R.A. No. 9243, entitled “An Act
Rationalizing the Provisions of the Documentary Stamp Tax of the National Internal
Revenue Code of 1997” was enacted and took effect on April 27, 2004, which
exempts the transfer of real property of a corporation, which is a party to the
merger or consolidation, to another corporation, which is also a party to the merger
or consolidation, from the payment of DST. COMMISSIONER OF INTERNAL REVENUE
vs. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. No. 192398, September 29,
2014, J. Villarama, Jr.
It is not the place where the contract was perfected, but the place of delivery which
determines the taxable situs of the property sought to be taxed. In the cases
of Soriano y Cia. v. Collector of Internal Revenue, 51 O.G. 4548; Vegetable Oil
Corporation v. Trinidad, 45 Phil. 822; and Earnshaw Docks and Honolulu Iron Works
vs. Collector of Internal Revenue, 54 Phil. 696, it has been ruled that for a sale to be
taxed in the Philippines it must be consummated there; thus indicating that the
place of consummation (associated with the delivery of the things subject matter of
the contract) is the accepted criterion in determining the situs of the contract for
purposes of taxation, and not merely the place of the perfection of the contract.
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As a general rule, the VAT system uses the destination principle as a basis for the
jurisdictional reach of the tax. Goods and services are taxed only in the country
where they are consumed; thus, exports are zero-rated, while imports are taxed.
(COMMISSIONER OF INTERNAL REVENUE v.AMERICAN EXPRESS INTERNATIONAL,
INC. (PHILIPPINE BRANCH), G.R. No. 152609, June 29, 2005)
Consumption is "the use of a thing in a way that thereby exhausts it,” and applied
to services, the term means the performance or "successful completion of a
contractual duty, usually resulting in the performer’s release from any past or future
liability." The services rendered by respondent are performed or successfully
completed upon its sending to its foreign client the drafts and bills it has gathered
from service establishments here; thus, its services, having been performed in the
Philippines, are also consumed in the Philippines. (COMMISSIONER OF INTERNAL
REVENUE v.AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE BRANCH), G.R.
No. 152609, June 29, 2005)
Unlike goods, services cannot be physically used in or bound for a specific place
where their destination is determined but instead, there can only be a
"predetermined end of a course" when determining the service "location or position
for legal purposes." Respondent’s facilitation service has no physical existence, yet
takes place upon rendition, and therefore upon consumption, in the Philippines.
(COMMISSIONER OF INTERNAL REVENUE v.AMERICAN EXPRESS INTERNATIONAL,
INC. (PHILIPPINE BRANCH), G.R. No. 152609, June 29, 2005)
d) International comity
e) Exemption of government entities, agencies, and instrumentalities
The Court rules that the Authority [PFDA] is not a GOCC but an instrumentality of
the national government which is generally exempt from payment of real property
tax. However, said exemption does not apply to the portions of the IFPC which the
Authority leased to private entities. (Philippine Fisheries Development Authority v.
Court of Appeals, G.R. No. 169836, 31 July 2007)
As property of public dominion, the Lucena Fishing Port Complex is owned by the
Republic of the Philippines and thus exempt from real estate tax. (PHILIPPINE
FISHERIES DEVELOPMENT AUTHORITY (PFDA) v. CENTRAL BOARD OF ASSESSMENT
APPEALS, G.R. No. 178030, December 15, 2010)
2. Constitutional limitations
a) Provisions directly afecting taxation
(i) Prohibition against imprisonment for non-payment of poll tax
(ii) Uniformity and equality of taxation
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
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It is Congress which authorizes the President to impose tariff rates, import and
export quotas, tonnage and wharfage dues, and other duties or imposts. Thus, the
authority cannot come from the Finance Department, the National Economic
Development Authority, or the World Trade Organization, no matter how insistent or
persistent these bodies may be. (SOUTHERN CROSS CEMENT CORPORATION v.
CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540,
August 3, 2005)
The authorization granted to the President must be embodied in a law. Hence, the
justification cannot be supplied simply by inherent executive powers. (SOUTHERN
CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS ASSOCIATION OF THE
PHILIPPINES, G.R. No. 158540, August 3, 2005)
The authorization to the President can be exercised only within the specified limits
set in the law and is further subject to limitations and restrictions which Congress
may impose. Consequently, if Congress specifies that the tariff rates should not
exceed a given amount, the President cannot impose a tariff rate that exceeds such
amount. (SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS
ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005)
Assuming there is a conflict between the specific limitation in Section 28 (2), Article
VI of the Constitution and the general executive power of control and supervision,
the former prevails in the specific instance of safeguard measures such as tariffs
and imposts, and would thus serve to qualify the general grant to the President of
the power to exercise control and supervision over his/her subalterns. (SOUTHERN
CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS ASSOCIATION OF THE
PHILIPPINES, G.R. No. 158540, August 3, 2005)
The word "charitable" is not restricted to relief of the poor or sick. The test whether
an enterprise is charitable or not is whether it exists to carry out a purpose
recoganized in law as charitable or whether it is maintained for gain, profit, or
private advantage. (LUNG CENTER OF THE PHILIPPINES v.QUEZON CITY, G.R. No.
144104, June 29, 2004)
Even as we find that the petitioner is a charitable institution, we hold that those
portions of its real property that are leased to private entities are not exempt from
real property taxes as these are not actually, directly and exclusively used for
charitable purposes. On the other hand, the portions of the land occupied by the
hospital and portions of the hospital used for its patients, whether paying or non-
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paying, are exempt from real property taxes. (LUNG CENTER OF THE PHILIPPINES
v.QUEZON CITY, G.R. No. 144104, June 29, 2004)
In Lung Center, this Court declared: "exclusive" is defined as possessed and enjoyed
to the exclusion of others; debarred from participation or enjoyment; and
"exclusively" is defined, "in a manner to exclude; as enjoying a privilege
exclusively." The words "dominant use" or "principal use" cannot be substituted for
the words "used exclusively" without doing violence to the Constitution and the law.
Solely is synonymous with exclusively. (COMMISSIONER OF INTERNAL REVENUE v.
ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26, 2012)
Services to paying patients are activities conducted for profit. There is a "purpose to
make profit over and above the cost" of services. (COMMISSIONER OF INTERNAL
REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26,
2012)
Section 30(E) and (G) of the NIRC requires that an institution be "operated
exclusively" for charitable or social welfare purposes to be completely exempt from
income tax. An institution under Section 30(E) or (G) does not lose its tax exemption
if it earns income from its for-profit activities. Such income from for-profit activities,
under the last paragraph of Section 30, is merely subject to income tax, previously
at the ordinary corporate rate but now at the preferential 10% rate pursuant to
Section 27(B). (COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL
CENTER, INC. G.R. No. 195909 September 26, 2012)
A gift tax is not a property tax, but an excise tax imposed on the transfer of
property by way of gift inter vivos, the imposition of which on property used
exclusively for religious purposes, does not constitute an impairment of the
Constitution. The phrase "exempt from taxation," as employed in the Constitution
should not be interpreted to mean exemption from all kinds of taxes. (REV. FR.
CASIMIRO LLADOC v. The COMMISSIONER OF INTERNAL REVENUE, G.R. No. L-19201,
June 16, 1965)
The incentives under R.A. No. 7227 are exclusive only to the Subic SEZ, hence, the
extension of the same to the John Hay SEZ finds no support therein. The challenged
grant of tax exemption would circumvent the Constitution's imposition that a law
granting any tax exemption must have the concurrence of a majority of all the
members of Congress. (JOHN HAY PEOPLES ALTERNATIVE COALITION, et al. v.
VICTOR LIM, et al., G. R. No. 119775, October 24, 2003)
The coco-levy funds, on the other hand, belong to the government and are subject
to its administration and disposition. Thus, these funds, including its incomes,
interests, proceeds, or profits, as well as all its assets, properties, and shares of
stocks procured with such funds must be treated, used, administered, and managed
as public funds; the coco-levy funds are evidently special funds. (PAMBANSANG
KOALISYON NG MGA SAMAHANG MAGSASAKA AT MANGGAGAWA SA NIYUGAN v.
EXECUTIVE SECRETARY G.R. Nos. 147036-37 April 10, 2012)
An "item" in a revenue bill does not refer to an entire section imposing a particular
kind of tax, but rather to the subject of the tax and the tax rate; thus, in the portion
of a revenue bill which actually imposes a tax, a section identifies the tax and
enumerates the persons liable therefor with the corresponding tax rate. To construe
the word "item" as referring to the whole section would tie the President's hand in
choosing either to approve the whole section at the expense of also approving a
provision therein which he deems unacceptable or veto the entire section at the
expense of foregoing the collection of the kind of tax altogether. (COMMISSIONER
OF INTERNAL REVENUE v. HON. COURT OF TAX APPEALS, G.R. No. L-47421, May 14,
1990)
For a long time, the country's highly centralized government structure has bred a
culture of dependence among local government leaders upon the national
leadership. The only way to shatter this culture of dependence is to give the LGUs a
wider role in the delivery of basic services, and confer them sufficient powers to
generate their own sources for the purpose. (NATIONAL POWER CORPORATION v.
CITY OF CABANATUAN G.R. No. 149110 April 9, 2003)
Republic Act No. 7716, otherwise known as the "Expanded VAT Law," did not remove
or abolish the payment of local franchise tax; it merely replaced the national
franchise tax that was previously paid by telecommunications franchise holders and
in its stead VAT. The imposition of local franchise tax is not inconsistent with the
advent of the VAT, which renders functus officio the franchise tax paid to the
national government for VAT inures to the benefit of the national government, while
a local franchise tax is a revenue of the local government unit. (SMART
COMMUNICATIONS, INC. v.THE CITY OF DAVAO, G.R. No. 155491, July 21, 2009)
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For real property taxes, the incidental generation of income is permissible because
the test of exemption is the use of the property and this test requires that the
institution use the property in a certain way, i.e. for a charitable purpose. Thus, the
Court held that the Lung Center of the Philippines did not lose its charitable
character when it used a portion of its lot for commercial purposes since the effect
of failing to meet the use requirement is simply to remove from the tax exemption
that portion of the property not devoted to charity. (COMMISSIONER OF INTERNAL
REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26,
2012)
The Constitution exempts charitable institutions only from real property taxes while
the NIRC extends the exemption to income taxes. However, the way Congress
crafted Section 30(E) of the NIRC is materially different from Section 28(3), Article VI
of the Constitution: Section 30(E) of the NIRC defines the corporation or association
that is exempt from income tax while Section 28(3), Article VI of the Constitution
does not define a charitable institution, but requires that the institution "actually,
directly and exclusively" use the property for a charitable purpose. (COMMISSIONER
OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909
September 26, 2012)
To be exempt from real property taxes, Section 28(3), Article VI of the Constitution
requires that a charitable institution use the property "actually, directly and
exclusively" for charitable purposes. To be exempt from income taxes, Section 30(E)
of the NIRC requires that a charitable institution must be "organized and operated
exclusively" for charitable purposes. (COMMISSIONER OF INTERNAL REVENUE v. ST.
LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26, 2012)
In Sison, Jr. v. Ancheta, et al., we held that the due process clause may properly be
invoked to invalidate, in appropriate cases, a revenue measure when it amounts to
a confiscation of property. But in the same case, we also explained that we will not
strike down a revenue measure as unconstitutional (for being violative of the due
process clause) on the mere allegation of arbitrariness by the taxpayer. (Chamber
of Real Estate and Builders’ Association, Inc. v. Romulo, 614 SCRA 605 (2010))
The support for the poor is generally recognized as a public duty and has long been
an accepted exercise of police power in the promotion of the common good but, in
the instant case, the declarations do not distinguish between wealthy coconut
farmers and the impoverished ones. Consequently, such declarations are void since
they appropriate public funds for private purpose and, therefore, violate the
citizens’ right to substantive due process. (PAMBANSANG KOALISYON NG MGA
SAMAHANG MAGSASAKA AT MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY
G.R. Nos. 147036-37 April 10, 2012)
The real estate industry is, by itself, a class and can be validly treated differently
from other business enterprises. What distinguishes the real estate business from
other manufacturing enterprises, for purposes of the imposition of the CWT, is not
their production processes but the prices of their goods sold and the number of
transactions involved. (Chamber of Real Estate and Builders’ Association, Inc. v.
Romulo, 614 SCRA 605 (2010))
PAGCOR cannot find support in the equal protection clause of the Constitution, as
the legislative records of the Bicameral Conference Meeting dated October 27,
1997, of the Committee on Ways and Means, show that PAGCOR’s exemption from
payment of corporate income tax, as provided in Section 27 (c) of R.A. No. 8424, or
the National Internal Revenue Code of 1997, was not made pursuant to a valid
classification based on substantial distinctions. The legislative records show that the
basis of the grant of exemption to PAGCOR from corporate income tax was
PAGCOR’s own request to be exempted. (PHILIPPINE AMUSEMENT AND GAMING
CORPORATION (PAGCOR) v. THE BUREAU OF INTERNAL REVENUE G.R. No. 172087
March 15, 2011)
It may be true that in the case at bar the price asked for the bibles and other
religious pamphlets was in some instances a little bit higher than the actual cost of
the same but this cannot mean that appellant was engaged in the business or
occupation of selling said "merchandise" for profit. For this reason We believe that
the City of Manila Ordinance No. 2529 requiring the payment of license fee cannot
be applied to appellant, for in doing so it would impair its free exercise and
enjoyment of its religious profession and worship as well as its rights of
dissemination of religious beliefs. (AMERICAN BIBLE SOCIETY v. CITY OF MANILA,
G.R. No. L-9637, April 30, 1957)
With respect to Ordinance No. 3000 which requires the obtention of the Mayor's
permit before any person can engage in any of the businesses, trades or
occupations enumerated therein, We do not find that it imposes any charge upon
the enjoyment of a right granted by the Constitution, nor tax the exercise of
religious practices. But as the City of Manila is powerless to license or tax the
business of plaintiff Society, We find that Ordinance No. 3000 is also inapplicable to
said business, trade or occupation of the plaintiff. (AMERICAN BIBLE SOCIETY v. CITY
OF MANILA, G.R. No. L-9637, April 30, 1957)
The Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds
derived from the sales are used to subsidize the cost of printing copies which are
given free to those who cannot afford to pay so that to tax the sales would be to
increase the price, while reducing the volume of sale. Granting that to be the case,
the resulting burden on the exercise of religious freedom is so incidental as to make
it difficult to differentiate it from any other economic imposition that might make
the right to disseminate religious doctrines costly. (ARTURO M. TOLENTINO v. THE
SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No.
115455, October 30, 1995)
On the other hand the registration fee of P1,000.00 imposed by Sec. 107 of the
NIRC, as amended by Sec. 7 of R.A. No. 7716, although fixed in amount, is really just
to pay for the expenses of registration and enforcement of provisions such as those
relating to accounting in Sec. 108 of the NIRC. That the PBS distributes free bibles
and therefore is not liable to pay the VAT does not excuse it from the payment of
this fee because it also sells some copies. (ARTURO M. TOLENTINO v. THE
SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No.
115455, October 30, 1995)
The withdrawal of the exemption did not also violate freedom of religion as regards
the activities of PBS on religious articles, as the Free Exercise of Religious clause
does not prohibit imposing a generally applicable sale and use tax on the sale of
religious materials by a religious organization as held by the US Supreme Court in
Jimmy Swaggart Ministries v. Board of Equalization (1990).
The VAT registration fee does not constitute censorship of such freedom as held in
the American Bible Society case. The fee is a mere administrative fee and not
imposed on the exercise of a privilege, much less a constitutional right. But for the
purpose of defraying cost of registration which is a requirement and a central
feature in the VAT system so as to provide record of tax credits of the taxpayer.
(ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE COMMISSIONER
OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995)
Contractual tax exemptions, in the real sense of the term and where the non-
impairment clause of the Constitution can rightly be invoked, are those agreed to by
the taxing authority in contracts, such as those contained in government bonds or
debentures, lawfully entered into by them under enabling laws in which the
government, acting in its private capacity, sheds its cloak of authority and waives
its governmental immunity. Truly, tax exemptions of this kind may not be revoked
without impairing the obligations of contracts. but these contractual tax exemptions
are not to be confused with tax exemptions granted under franchises—the latter
partakes the nature of a grant which is beyond the purview of the non-impairment
clause of the Constitution. (PHILIPPINE AMUSEMENT AND GAMING CORPORATION
(PAGCOR) v. THE BUREAU OF INTERNAL REVENUE G.R. No. 172087 March 15, 2011)
Even though such taxation may affect particular contracts, as it may increase the
debt of one person and lessen the security of another, or may impose additional
burdens upon one class and release the burdens of another, still the tax must be
paid unless prohibited by the Constitution, nor can it be said that it impairs the
obligation of any existing contract in its true legal sense." Indeed not only existing
laws but also "the reservation of the essential attributes of sovereignty, is read into
contracts as a postulate of the legal order." (ARTURO M. TOLENTINO v. THE
SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No.
115455, October 30, 1995)
J. Stages of taxation
1. Levy
Levy is an exercise of the power to tax, which is exclusively legislative in nature and
character. Clearly, taxes are not levied by the executive branch of government.
(NPC v. Albay, 186 SCRA 198 (1990))
Taxes are enforced proportional contributions from persons and property, levied by
the State by virtue of its sovereignty for the support of the government and for all
its public needs. (PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT
MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos. 147036-37 April
10, 2012)
A tax is imposed under the taxing power of the government principally for the
purpose of raising revenues to fund public expenditures; toll fees, on the other
hand, are collected by private tollway operators as reimbursement for the costs and
expenses incurred in the construction, maintenance and operation of the tollways.
Taxes may be imposed only by the government under its sovereign authority, toll
fees may be demanded by either the government or private individuals or entities,
as an attribute of ownership. (RENATO V. DIAZ and AURORA MA. F. TIMBOL v. THE
SECRETARY OF FINANCE, G.R. No. 193007, July 19, 2011)
Fees paid by the public to tollway operators for use of the tollways, are not taxes in
any sense. Parenthetically, VAT on tollway operations cannot be deemed a tax on
tax due to the nature of VAT as an indirect tax. (RENATO V. DIAZ and AURORA MA. F.
TIMBOL v. THE SECRETARY OF FINANCE, G.R. No. 193007, July 19, 2011)
3. License fee
expenses of regulation, taking into account not only the costs of direct regulation
but also its incidental consequences as well. Accordingly, a charge of a fixed sum
which bears no relation at all to the cost of inspection and regulation may be held to
be a tax rather than an exercise of police power. (PROGRESSIVE DEVELOPMENT
CORP. v. QUEZON CITY, G.R. No. L-36081, April 24, 1989)
If the purpose is primarily revenue, or if revenue is at least, one of the real and
substantial purposes, then the exaction is properly called a tax. (LAND
TRANSPORTATION OFFICE v. CITY OF BUTUAN, G.R. No. 131512, January 20, 2000)
4. Special assessment
5. Debt
Taxes cannot be the subject of compensation because the government and taxpayer
are not mutually creditors and debtors of each other and a claim for taxes is not
such a debt, demand, contract or judgment as is allowed to be set-off. (CALTEX
PHILIPPINES, INC. v. THE HONORABLE COMMISSION ON AUDIT, G.R. No. 92585, May
8, 1992)
N. Kinds of taxes
1. As to object
a) Personal, capitation, or poll tax
b) Property tax
c) Privilege tax
A franchise tax is a tax on the privilege of transacting business in the state and
exercising corporate franchises granted by the state. It is not levied on the
corporation simply for existing as a corporation, upon its property or its income, but
on its exercise of the rights or privileges granted to it by the government. (CITY OF
IRIGA v. CAMARINES SUR III ELECTRIC COOPERATIVE, INC., G.R. No. 192945,
September 5, 2012)
2. As to burden or incidence
a) Direct
b) Indirect
In context, direct taxes are those that are exacted from the very person who, it is
intended or desired, should pay them; they are impositions for which a taxpayer is
directly liable on the transaction or business he is engaged in. On the other hand,
indirect taxes are those that are demanded, in the first instance, from, or are paid
by, one person in the expectation and intention that he can shift the burden to
someone else. (COMMISSIONER OF INTERNAL REVENUE VS PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY, G.R. No. 140230, December 15, 2005)
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Indirect taxes, like VAT and excise tax, are different from withholding taxes: To
distinguish, in indirect 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 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. (ASIA INTERNATIONAL AUCTIONEERS, INC. v. COMMISSIONER OF
INTERNAL REVENUE G.R. No. 179115 September 26, 2012)
The Constitution does not really prohibit the imposition of indirect taxes which, like
the VAT, are regressive since what it simply provides is that Congress shall "evolve a
progressive system of taxation." The constitutional provision has been interpreted
to mean simply that "direct taxes are to be preferred [and] as much as possible,
indirect taxes should be minimized." (ARTURO M. TOLENTINO v. THE SECRETARY OF
FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455,
October 30, 1995)
The seller remains directly and legally liable for payment of the VAT, but the buyer
bears its burden since the amount of VAT paid by the former is added to the selling
price. Once shifted, the VAT ceases to be a tax and simply becomes part of the cost
that the buyer must pay in order to purchase the good, property or
service. (RENATO V. DIAZ and AURORA MA. F. TIMBOL v. THE SECRETARY OF
FINANCE, G.R. No. 193007, July 19, 2011)
3. As to tax rates
a) Specific
b) Ad valorem
c) Mixed
4. As to purposes
a) General or fiscal
b) Special, regulatory, or sumptuary
5. As to scope or authority to impose
a) National – internal revenue taxes
b) Local – real property tax, municipal tax
6. As to graduation
a) Progressive
b) Regressive
c) Proportionate
INCOME TAXATION
A. Income taxation
1. Income tax systems
a) Global tax system
Global treatment is a system where the tax treatment views
indifferently the tax base and generally treats in common all categories
of taxable income of the taxpayer. (TAN v. DEL ROSARIO, JR. 237 SCRA
324)
b) Schedular tax system
Schedular approach is a system employed where the income tax
treatment varies and made to depend on the kind or category of
taxable income of the taxpayer. (TAN v. DEL ROSARIO, JR. 237 SCRA
324)
c) Semi-schedular or semi-global tax system
2. Features of the Philippine income tax law
a) Direct tax
b) Progressive
c) Comprehensive
d) Semi-schedular or semi-global tax system
3. Criteria in imposing Philippine income tax
a) Citizenship principle
b) Residence principle
c) Source principle
A non-resident German citizen, president of a domestic corporation,
filed a claim for refund with the BIR, contending that her sales
commission income is not taxable in the Philippines because the same
was a compensation for her services rendered in Germany and
therefore considered as income from sources outside the Philippines.
While it is the rule that “source of income” relates to the property,
activity or service that produced the income, the documents presented
by respondent did not constitute substantial evidence that it was in
Germany where she performed the income-producing service and thus
the tax refund should be denied. (Commissioner of Internal Revenue
vs. Juliane Baier-Nickel, G.R. No. 153793, August 29, 2006)
The original purpose of the co-owners of the two lots was to divide the
lots for residential purposes. If later on they found it not feasible to
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(d) Losses
(1) Requisites for deductibility
(2) Other types of losses
(a) Capital losses
(f) Depreciation
Depreciation is the gradual diminution in the useful
value of tangible property resulting from wear and
tear and normal obsolescense. The term is also
applied to amortization of the value of intangible
assets, the use of which in the trade or business is
definitely limited in duration. Depreciation
commences with the acquisition of the property
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FWT and 5% GRT does not constitute double taxation because GRT is a
percentage tax while FWT is an income tax, and the two concepts are
different from each other. (Commissioner of Internal Revenue vs.
Citytrust Investment Phils., Inc., G.R. Nos. 139786 & 140857,
September 27, 2006)
The Court notes, however, that under Section 242 of the 1997 NIRC,
interest income received by individuals from longterm deposits or
investments with a holding period of not less than five (5) years is
exempt from the final tax.
While perhaps it may be necessary to prove that the taxpayer did not
use the claimed creditable withholding tax to pay for his/its tax
liabilities, there is no basis in law or jurisprudence to say that BIR Form
No. 2307 is the only evidence that may be adduced to prove such non-
use. PHILIPPINE NATIONAL BANK vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 206019, March 18, 2015, J. Velasco Jr.
B. Estate tax
1. Basic principles
2. Definition
3. Nature
4. Purpose or object
5. Time and transfer of properties
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(2) That before the [donor’s] death, the transfer should be revocable
by the transferor at will, ad nutum; but revocability may be provided
for indirectly by means of a reserved power in the donor to dispose of
the properties conveyed;
(3) That the transfer should be void if the transferor should survive the
transferee;
[4] [T]he specification in a deed of the causes whereby the act may be
revoked by the donor indicates that the donation is inter vivos, rather
than a disposition mortis causa;
The conveyance in question is not, first of all, one of mortis causa, which should be
embodied in a will. In this case, the monies subject of savings account were in the
nature of conjugal funds. In the case relied on, Rivera v. People's Bank and Trust
Co., we rejected claims that a survivorship agreement purports to deliver one
party's separate properties in favor of the other, but simply, their joint holdings.
(ROMARICO G. VITUG vs. THE HONORABLE COURT OF APPEALS and ROWENA
FAUSTINO-CORONA, G.R. No. 82027, March 29, 1990)
But although the survivorship agreement is per se not contrary to law its operation
or effect may be violative of the law. For instance, if it be shown in a given case that
such agreement is a mere cloak to hide an inofficious donation, to transfer property
in fraud of creditors, or to defeat the legitime of a forced heir, it may be assailed
and annulled upon such grounds. (ROMARICO G. VITUG vs. THE HONORABLE COURT
OF APPEALS and ROWENA FAUSTINO-CORONA, G.R. No. 82027, March 29, 1990)
6. Classification of decedent
7. Gross estate vis-à-vis net estate
As held in Propstra v. U.S., where a lien claimed against the estate was certain and
enforceable on the date of the decedent's death, the fact that the claimant
subsequently settled for lesser amount did not preclude the estate from deducting
the entire amount of the claim for estate tax purposes. These pronouncements
essentially confirm the general principle that post-death developments are not
material in determining the amount of the deduction. (RAFAEL ARSENIO S. DIZON
vs. COURT OF TAX APPEALS, G.R. No. 140944, April 30, 2008)
We express our agreement with the date-of-death valuation rule. There is no law,
nor do we discern any legislative intent in our tax laws, which disregards the date-
of-death valuation principle and particularly provides that post-death developments
must be considered in determining the net value of the estate. It bears emphasis
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. (RAFAEL ARSENIO S. DIZON vs. COURT OF TAX
APPEALS, G.R. No. 140944, April 30, 2008)
Thus, in Lorenzo v. Posadas, the Court construed the phrase "judicial expenses of
the testamentary or intestate proceedings" as not including the compensation paid
to a trustee of the decedent's estate when it appeared that such trustee was
appointed for the purpose of managing the decedent's real estate for the benefit of
the testamentary heir. In another case, the Court disallowed the premiums paid on
the bond filed by the administrator as an expense of administration since the giving
of a bond is in the nature of a qualification for the office, and not necessary in the
settlement of the estate. Neither may attorney's fees incident to litigation incurred
by the heirs in asserting their respective rights be claimed as a deduction from the
The notarial fee paid for the extrajudicial settlement is clearly a deductible expense
since such settlement effected a distribution of Pedro Pajonar's estate to his lawful
heirs. Similarly, the attorney's fees paid to PNB for acting as the guardian of Pedro
Pajonar's property should also be considered as a deductible administration expense
as PNB provided a detailed accounting of decedent's property and gave advice as to
the proper settlement of the latter's estate, acts which contributed towards the
collection of decedent's assets and the subsequent settlement of the estate.
(COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS, G.R. No. 123206,
March 22, 2000)
C. Donor’s tax
1. Basic principles
2. Definition
3. Nature
4. Purpose or object
5. Requisites of valid donation
Neither is the survivorship agreement a donation inter vivos, for obvious reasons,
because it was to take effect after the death of one party. Secondly, it is not a
donation between the spouses because it involved no conveyance of a spouse's
own properties to the other. (ROMARICO G. VITUG vs. THE HONORABLE COURT OF
APPEALS and ROWENA FAUSTINO-CORONA, G.R. No. 82027, March 29, 1990)
In the case at bar, when the spouses Vitug opened savings account, they merely put
what rightfully belonged to them in a money-making venture. They did not dispose
of it in favor of the other, which would have arguably been sanctionable as a
prohibited donation. (ROMARICO G. VITUG vs. THE HONORABLE COURT OF APPEALS
and ROWENA FAUSTINO-CORONA, G.R. No. 82027, March 29, 1990)
The granting clause shows that Diego donated the properties out of love and
affection for the donee which is a mark of a donation inter vivos; second, the
reservation of lifetime usufruct indicates that the donor intended to transfer the
naked ownership over the properties; third, the donor reserved sufficient properties
for his maintenance in accordance with his standing in society, indicating that the
donor intended to part with the six parcels of land; lastly, the donee accepted the
donation. (SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA vs. COURT OF
APPEALS, G.R. No. 111904, October 5, 2000)
In the case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said that an
acceptance clause is a mark that the donation is inter vivos. Acceptance is a
requirement for donations inter vivos. Donations mortis causa, being in the form of
a will, are not required to be accepted by the donees during the donors' lifetime.
(SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA vs. COURT OF APPEALS,
G.R. No. 111904, October 5, 2000)
Crucial in resolving whether the donation was inter vivos or mortis causa is the
determination of whether the donor intended to transfer the ownership over the
properties upon the execution of the deed. (SPS. AGRIPINO GESTOPA and ISABEL
SILARIO GESTOPA vs. COURT OF APPEALS, G.R. No. 111904, October 5, 2000)
A remuneratory donation is one where the donee gives something to reward past or
future services or because of future charges or burdens, when the value of said
services, burdens or charges is less than the value of the donation. (De Luna v.
Abrigo, G.R. No. L-57455, January 18, 1990)
As its name implies, the Value-Added Tax system is a tax on the value added by the
taxpayer in the chain of transactions. For simplicity and efficiency in tax collection,
the VAT is imposed not just on the value added by the taxpayer, but on the entire
selling price of his goods, properties or services. (COMMISSIONER OF INTERNAL
REVENUE vs. SAN ROQUE POWER CORPORATION, G.R. No. 187485, February 12,
2013)
However, the taxpayer is allowed a refund or credit on the VAT previously paid by
those who sold him the inputs for his goods, properties, or services. The net effect is
that the taxpayer pays the VAT only on the value that he adds to the goods,
properties, or services that he actually sells. (COMMISSIONER OF INTERNAL
REVENUE vs. SAN ROQUE POWER CORPORATION, G.R. No. 187485, February 12,
2013)
The VAT 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. (ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995)
VAT is not a singular-minded tax on every transactional level; its assessment bears
direct relevance to the taxpayer's role or link in the production chain. Hence, as
affirmed by Section 99 [now Sec. 105] of the Tax Code and its subsequent
incarnations, the tax is levied only on the sale, barter or exchange of goods or
services by persons who engage in such activities, in the course of trade or
business. (COMMISSIONER OF INTERNAL REVENUE vs. MAGSAYSAY LINES, INC., G.R.
No. 146984. July 28, 2006)
The Court rules that given the undisputed finding that the transaction in question
was not made in the course of trade or business of the seller, NDC that is, the sale is
not subject to VAT pursuant to Section 99 [now Sec. 105] of the Tax Code, no matter
how the said sale may hew to those transactions deemed sale as defined under
Section 100 [now Sec. 106]. (COMMISSIONER OF INTERNAL REVENUE vs.
MAGSAYSAY LINES, INC., G.R. No. 146984. July 28, 2006)
Thus, there must be a sale, barter or exchange of goods or properties before any
VAT may be levied. Certainly, there was no such sale, barter or exchange in the
subsidy given by SIS to Sony; it was but a dole out by SIS and not in payment for
goods or properties sold, bartered or exchanged by Sony. (COMMISSIONER OF
INTERNAL REVENUE vs. SONY PHILIPPINES, INC., G.R. No. 178697, November 17,
2010)
3. Impact of tax
Under Section 105 of the Tax Code, VAT is imposed on any person who, in the
course of trade or business, sells or renders services for a fee. In other words, the
seller of services, who in this case is the tollway operator, is the person liable for
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VAT. The latter merely shifts the burden of VAT to the tollway user as part of the toll
fees. (RENATO V. DIAZ and AURORA MA. F. TIMBOL vs. THE SECRETARY OF FINANCE,
G.R. No. 193007, July 19, 2011)
4. Incidence of tax
The seller who is liable for the VAT may shift or pass on the amount of VAT it paid on
goods, properties or services to the buyer. In such a case, what is transferred is not
the seller's liability but merely the burden of the VAT. (RENATO V. DIAZ and AURORA
MA. F. TIMBOL vs. THE SECRETARY OF FINANCE, G.R. No. 193007, July 19, 2011)
Thus, the seller remains directly and legally liable for payment of the VAT, but the
buyer bears its burden since the amount of VAT paid by the former is added to the
selling price. Once shifted, the VAT ceases to be a tax and simply becomes part of
the cost that the buyer must pay in order to purchase the good, property or service.
(RENATO V. DIAZ and AURORA MA. F. TIMBOL vs. THE SECRETARY OF FINANCE, G.R.
No. 193007, July 19, 2011)
A seller who is directly and legally liable for the payment of an indirect tax, such as
the VAT on goods or services is not necessarily the person who ultimately bears the
burden of the same tax. It is the final purchaser of consumer of such goods or
services who, although not directly and legally liable for the payment thereof,
ultimately bears the burden of the tax. (Contex v. CIR, G.R. No. 151135, July 2,
2004)
In the case of the VAT, the law minimizes the regressive effects of indirect taxation
by providing for zero rating of certain transactions, while granting exemptions to
other transactions. On the other hand, the transactions which are subject to the VAT
are those which involve goods and services which are used or availed of mainly by
higher income groups. (ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and
THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995)
According to the Destination Principle, goods and services are taxed only in the
country where these are consumed. In connection with the said principle, the Cross
Border Doctrine mandates that no VAT shall be imposed to form part of the cost of
the goods destined for consumption outside the territorial border of the taxing
authority. Hence, actual export of goods and services from the Philippines to a
foreign country must be free of VAT, while those destined for use or consumption
within the Philippines shall be imposed with 10% VAT. (ATLAS CONSOLIDATED
MINING AND DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. Nos. 141104 & 148763, June 8, 2007)
Under the cross-border principle of the VAT system being enforced by the Bureau of
Internal Revenue (BIR), no VAT shall be imposed to form part of the cost of goods
destined for consumption outside of the territorial border of the taxing authority. If
exports of goods and services from the Philippines to a foreign country are free of
the VAT, then the same rule holds for such exports from the national territory —
except specifically declared areas — to an ecozone. (COMMISSIONER OF INTERNAL
REVENUE vs. SEAGATE TECHNOLOGY (PHILIPPINES), G.R. No. 153866, February 11,
2005)
For as long as the goods remain within the zone, whether we call it an economic
zone or a freeport zone, for as long as we say in this law that all goods entering this
particular territory will be duty-free and tax-free, for as long as they remain there,
consumed there or re-exported or destroyed in that place, then they are not subject
to duties and taxes in accordance with the laws of the Philippines. (Coconut Oil
Refiners Association v. Executive Secretary, G.R. No. 132527, July 29, 2005)
7. Persons liable
8. VAT on sale of goods or properties
Goods, as commonly understood in the business sense, refer to the product which
the VAT-registered person offers for sale to the public. With respect to real estate
dealers, it is the real properties themselves which constitute their goods. Such real
properties are the operating assets of the real estate dealer. (Fort Bonifacio
Development Corporation vs. CIR, G.R. Nos. 158885 and 170630, April 2, 2009)
Prior to the sale, the Nissan Patrol was part of Mindanao II’s property, plant, and
equipment. Therefore, the sale of the Nissan Patrol is an incidental transaction
made in the course of Mindanao II’s business which should be liable for VAT.
(MINDANAO II GEOTHERMAL PARTNERSHIP vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 193301, March 11, 2013)
Zero-rated transactions generally refer to the export sale of goods and supply of
services. The tax rate is set at zero and when applied to the tax base, such rate
obviously results in no tax chargeable against the purchaser. The seller of such
transactions charges no output tax, but can claim a refund of or a tax credit
certificate for the VAT previously charged by suppliers. (COMMISSIONER OF
INTERNAL REVENUE vs. SEAGATE TECHNOLOGY (PHILIPPINES), G.R. No. 153866,
February 11, 2005)
PAGCOR's exemption from VAT under Section 108 (B) (3) of R.A. No. 8424 has been
thoroughly and extensively discussed in Commissioner of Internal Revenue v.
Acesite (Philippines) Hotel Corporation. Acesite sought the refund of the amount it
paid as VAT on the ground that its transaction with PAGCOR was subject to zero rate
as it was rendered to a tax-exempt entity. The Court ruled that PAGCOR and Acesite
were both exempt from paying VAT. (PHILIPPINE AMUSEMENT AND GAMING
CORPORATION (PAGCOR) vs. THE BUREAU OF INTERNAL REVENUE, G.R. No. 172087,
March 15, 2011)
No prior application for the effective zero rating of its transactions is necessary. The
BIR regulations additionally requiring an approved prior application for effective zero
rating cannot prevail over the clear VAT nature of respondent's transactions. Other
than the general registration of a taxpayer the VAT status of which is aptly
determined, no provision under our VAT law requires an additional application to be
made for such taxpayer's transactions to be considered effectively zero-rated.
(COMMISSIONER OF INTERNAL REVENUE vs. SEAGATE TECHNOLOGY (PHILIPPINES),
G.R. No. 153866, February 11, 2005)
The Omnibus Investments Code of 1987 recognizes as export sales the sales of
export products to another producer or to an export trader, provided that the export
products are actually exported. For purposes of VAT zero-rating, such producer or
export trader must be registered with the BOI and is required to actually export
more than 70% of its annual production. (ATLAS CONSOLIDATED MINING AND
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In terms of the VAT computation, zero rating and exemption are the same, but
the extent of relief that results from either one of them is not. In both instances of
zero rating, there is total relief for the purchaser from the burden of the tax but in
an exemption there is only partial relief, because the purchaser is not allowed any
tax refund of or credit for input taxes paid. (COMMISSIONER OF INTERNAL REVENUE
vs. SEAGATE TECHNOLOGY (PHILIPPINES), G.R. No. 153866, February 11, 2005)
Service has been defined as the art of doing something useful for a person or
company for a fee or useful labor or work rendered or to be rendered another for a
fee. (CIR v. American Express International, Inc., G.R. No. 152609, June 29, 2005)
By qualifying "services" with the words "all kinds," Congress has given the term
"services" an all-encompassing meaning. The listing of specific services are
intended to illustrate how pervasive and broad is the VAT's reach rather than
establish concrete limits to its application; thus, every activity that can be imagined
as a form of "service" rendered for a fee should be deemed included unless some
provision of law especially excludes it. (RENATO V. DIAZ and AURORA MA. F. TIMBOL
vs. THE SECRETARY OF FINANCE, G.R. No. 193007, July 19, 2011)
Tollway operators not only come under the broad term "all kinds of services," they
also come under the specific class described in Section 108 as "all other franchise
grantees" who are subject to VAT, "except those under Section 119 of this Code."
Tollway operators are franchise grantees and they do not belong to exceptions (the
low-income radio and/or television broadcasting companies with gross annual
incomes of less than P10 million and gas and water utilities) that Section 119 spares
from the payment of VAT. (RENATO V. DIAZ and AURORA MA. F. TIMBOL vs. THE
SECRETARY OF FINANCE, G.R. No. 193007, July 19, 2011)
In the case of CIR v. Court of Appeals (CA), the Court had the occasion to rule that
services rendered for a fee even on reimbursement-on-cost basis only and without
realizing profit are also subject to VAT. In that case, COMASERCO rendered service to
its affiliates and, in turn, the affiliates paid the former reimbursement-on-cost which
means that it was paid the cost or expense that it incurred although without profit.
(COMMISSIONER OF INTERNAL REVENUE vs. SONY PHILIPPINES, INC., G.R.
No. 178697, November 17, 2010)
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. The legislative intent is not to impose VAT on persons already covered by the
amusement tax and this holds true even in the case of cinema/theater operators taxed
under the LGC of 1991 precisely because the VAT law was intended to replace the
percentage tax on certain services. (CIR v. SM Prime Holdings, Inc. and First Asia
Realty Development Corp., G.R. No. 183505, February 26, 2010)
An exempt party, on the other hand, is a person or entity granted VAT exemption
under the Tax Code, a special law or an international agreement to which the
Philippines is a signatory, and by virtue of which its taxable transactions become
exempt from the VAT. Such party is also not subject to the VAT, but may be allowed
a tax refund of or credit for input taxes paid, depending on its registration as a VAT
or non-VAT taxpayer. (COMMISSIONER OF INTERNAL REVENUE vs. SEAGATE
TECHNOLOGY (PHILIPPINES), G.R. No. 153866, February 11, 2005)
The rationale for the exemption from indirect taxes provided for in P.D. 1869 and the
extension of such exemption to entities or individuals dealing with PAGCOR in casino
operations are best elucidated from the 1987 case of Commissioner of Internal
Revenue v. John Gotamco & Sons, Inc., where the absolute tax exemption of the
World Health Organization (WHO) upon an international agreement was upheld. We
held in said case that the exemption of contractee WHO should be implemented to
mean that the entity or person exempt is the contractor itself who constructed the
building owned by contractee WHO, and such does not violate the rule that tax
exemptions are personal because the manifest intention of the agreement is to
exempt the contractor so that no contractor's tax may be shifted to the contractee
WHO. (PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) vs. THE
BUREAU OF INTERNAL REVENUE, G.R. No. 172087, March 15, 2011)
Under the present method that relies on invoices, an entity can credit against or
subtract from the VAT charged on its sales or outputs the VAT paid on its purchases,
inputs and imports. (COMMISSIONER OF INTERNAL REVENUE vs. SEAGATE
TECHNOLOGY (PHILIPPINES), G.R. No. 153866, February 11, 2005)
If at the end of a taxable quarter the output taxes charged by a seller are equal to
the input taxes passed on by the suppliers, no payment is required. It is when the
output taxes exceed the input taxes that the excess has to be
paid. (COMMISSIONER OF INTERNAL REVENUE vs. SEAGATE TECHNOLOGY
(PHILIPPINES), G.R. No. 153866, February 11, 2005)
Prior payment of taxes is not necessary before a taxpayer could avail of the 8%
transitional input tax credit: first, it was never mentioned in Section 105 of the old
NIRC [now Sec. 111] that prior payment of taxes is a requirement; second, since the
law (Section 105 of the NIRC) does not provide for prior payment of taxes, to require
it now would be tantamount to judicial legislation which, to state the obvious, is not
allowed; third, a transitional input tax credit is not a tax refund per se but a tax
credit; fourth, if the intent of the law were to limit the input tax to cases where
actual VAT was paid, it could have simply said that the tax base shall be the actual
value-added tax paid; and fifth, this Court had already declared that prior payment
of taxes is not required in order to avail of a tax credit. (FORT BONIFACIO
DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
173425, January 22, 2013)
Section 112 of the Tax Code does not prohibit cash refund or tax credit of
transitional input tax in the case of zero-rated or effectively zero-rated VAT
registered taxpayers, who do not have any output VAT. The phrase "except
transitional input tax" in Section 112 of the Tax Code was inserted to distinguish
creditable input tax from transitional input tax credit. (FORT BONIFACIO
DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
173425, January 22, 2013)
It is apparent that the transitional input tax credit operates to benefit newly VAT-
registered persons, whether or not they previously paid taxes in the acquisition of
their beginning inventory of goods, materials and supplies. During that period of
transition from non-VAT to VAT status, the transitional input tax credit serves to
alleviate the impact of the VAT on the taxpayer. (FORT BONIFACIO DEVELOPMENT
CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 173425,
January 22, 2013)
In a VAT-exempt transaction, the seller is not allowed to charge VAT to his customer.
Since no output tax is shifted by the seller, there is no output tax against which the
related input taxes may be credited. Neither can he credit this input tax against the
VAT due on other sales. In this case, he is treated as the end user who will shoulder
the cost of the input VAT. (COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE
POWER CORPORATION, G.R. No. 187485, February 12, 2013)
Unlike the input taxes related to exempt sales, input taxes related to zero-rated
sales may be credited against output taxes on other sales and in case it is not fully
utilized, the excess may be carried over to the succeeding quarter or quarters and
there is no prescription period for the carry-over. The law gives the taxpayer
another option for the recovery of used input taxes: application for refund or tax
credit certificate. (COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE POWER
CORPORATION, G.R. No. 187485, February 12, 2013)
If, however, the input taxes exceed the output taxes, the excess shall be carried
over to the succeeding quarter or quarters. Should the input taxes result from zero-
rated or effectively zero-rated transactions or from the acquisition of capital goods,
any excess over the output taxes shall instead be refunded to the taxpayer or
credited against other internal revenue taxes. (COMMISSIONER OF INTERNAL
REVENUE vs. SEAGATE TECHNOLOGY (PHILIPPINES), G.R. No. 153866, February 11,
2005)
While a tax liability is essential to the availment or use of any tax credit, prior tax
payments are not. On the contrary, for the existence or grant solely of such credit,
neither a tax liability nor a prior tax payment is needed. (FORT BONIFACIO
DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
173425, January 22, 2013)
As regards Section 110, while the law only provides for a tax credit, a taxpayer who
erroneously or excessively pays his output tax is still entitled to recover the
payments he made either as a tax credit or a tax refund. In this case, since
petitioner still has available transitional input tax credit, it filed a claim for refund to
recover the output VAT it erroneously or excessively paid for the 1st quarter of
1997. Thus, there is no reason for denying its claim for tax refund/credit. (FORT
BONIFACIO DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 173425, January 22, 2013)
Even if the law does not expressly state that the Ironcon’s excess creditable VAT
withheld is refundable, it may be the subject-of a claim for refund as an erroneously
collected tax under Sec. 204 (C) and 229 of the NIRC. It should be clarified that this
ruling only refers to creditable VAT withheld pursuant to Sec. 114 of the NIRC prior
to its amendment. After its amendment by R.A. 9337, the amount withheld under
Sec. 114 of the NIRC is now treated as final VAT, no longer under the creditable
withholding tax system (CIR v. Ironcon Builders and Development Corp., G.R. No.
180042, February 8, 2010)
The input VAT is not "excessively" collected as understood under Section 229
because at the time the input VAT is collected the amount paid is correct
and proper. The person legally liable for the input VAT cannot claim that he
overpaid the input VAT by the mere existence of an "excess" input VAT. The term
"excess" input VAT simply means that the input VAT available as credit exceeds the
output VAT, not that the input VAT is excessively collected because it is more than
what is legally due. Thus, the taxpayer who legally paid the input VAT cannot claim
for refund or credit of the input VAT as "excessively" collected under Section 229.
(COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE POWER CORPORATION,
G.R. No. 187485, February 12, 2013)
If such "excess" input VAT is an "excessively" collected tax, the taxpayer should be
able to seek a refund or credit for such "excess" input VAT whether or not he has
output VAT. The VAT System does not allow such refund or credit and such "excess"
input VAT is not an "excessively" collected tax under Section 229. (COMMISSIONER
OF INTERNAL REVENUE vs. SAN ROQUE POWER CORPORATION, G.R. No. 187485,
February 12, 2013)
a) Who may claim for refund/apply for issuance of tax credit certificate
The Court, in San Roque, ruled that equitable estoppel had set in when respondent
issued BIR Ruling No. DA-489-03 which was a general interpretative rule, which
effectively misled all taxpayers into filing premature judicial claims with the CTA.
Thus, taxpayers could rely on the ruling from its issuance on 10 December 2003 up
to its reversal on 6 October 2010, when CIR v. Aichi Forging Company of Asia,
lnc. was promulgated. (PROCTER & GAMBLE ASIA PTE LTD. vs.COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 202071, February 19, 2014)
In a nutshell, the rules on the determination of the prescriptive period for filing a tax
refund or credit of unutilized input VAT, as provided in Section 112 of the Tax Code,
are as follows:
(1) An administrative claim must be filed with the CIR within two years after
the close of the taxable quarter when the zero-rated or effectively zero-rated
sales were made.
(2) The CIR has 120 days from the date of submission of complete documents
in support of the administrative claim within which to decide whether to grant
a refund or issue a tax credit certificate. The 120-day period may extend
beyond the two-year period from the filing of the administrative claim if the
claim is filed in the later part of the two-year period. If the 120-day period
expires without any decision from the CIR, then the administrative claim may
be considered to be denied by inaction.
(3) A judicial claim must be filed with the CTA within 30 days from the receipt
of the CIR’s decision denying the administrative claim or from the expiration
of the 120-day period without any action from the CIR.
(4) All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the
time of its issuance on 10 December 2003 up to its reversal by this Court in
Aichi on 6 October 2010, as an exception to the mandatory and jurisdictional
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1. It is only the administrative claim that must be filed within the two-year
prescriptive period. (Aichi)
2. The proper reckoning date for the two-year prescriptive period is the close
of the taxable quarter when the relevant sales were made. (San Roque)
3. The only other rule is the Atlas ruling, which applied only from 8 June 2007
to 12 September 2008. Atlas states that the two-year prescriptive period for
filing a claim for tax refund or credit of unutilized input VAT payments should
be counted from the date of filing of the VAT return and payment of the tax.
(San Roque)
The Atlas doctrine, which held that claims for refund or credit of input
VAT must comply with the two-year prescriptive period under Sec. 229,
should be effective only from its promulgation on June 8, 2007 until its
abandonment on [September 12, 2008] in Mirant. The Atlas doctrine was
limited to the reckoning of the two-year prescriptive period from the date of
payment of the output VAT. The Mirant ruling, which abandoned the Atlas
doctrine, adopted the verba legis rule, thus applying Sec. 112(A) in
computing the two-year prescriptive period in claiming refund or credit of
input VAT. Since July 23, 2008 falls within the window of effectivity of Atlas,
CBK’s administrative claim for the second quarter of 2006 was filed on time
considering that it filed the original VAT return for the second quarter on July
25, 2006. CBK POWER COMPANY LIMITED vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 202066 (consolidated), September 30,
2014, J. Leonen
The 2-year period under Section 229 does not apply to appeals before
the CTA in relation to claims for a refund or tax credit for unutilized creditable
input VAT. Section 229 pertains to the recovery of taxes erroneously, illegally,
or excessively collected. San Roque stressed that “input VAT is not
‘excessively’ collected as understood under Section 229 because, at the time
the input VAT is collected, the amount paid is correct and proper.” It is,
therefore, Section 112 which applies specifically with regard to claiming a
refund or tax credit for unutilized creditable input VAT. VISAYAS
GEOTHERMAL POWER COMPANY vs. COMMISSIONER OF INTERNAL REVENUE,
G.R. No. 197525, June 4, 2014, J. Mendoza
1. The taxpayer can file an appeal in one of two ways: (1) file the judicial
claim within thirty days after the Commissioner denies the claim within the
120-day period, or (2) file the judicial claim within thirty days from the
expiration of the 120-day period if the Commissioner does not act within the
120-day period.
5. Late filing is absolutely prohibited, even during the time when BIR Ruling
No. DA-489-03 was in force. (San Roque) (COMMISSIONER OF INTERNAL
REVENUE vs. MINDANAO II GEOTHERMAL PARTNERSHIP, G.R. No. 191498,
January 15, 2014)
It is indisputable that compliance with the 120-day waiting period is mandatory and
jurisdictional. Failure to comply with the 120-day waiting period violates a
mandatory provision of law. It violates the doctrine of exhaustion of administrative
remedies and renders the petition premature and thus without a cause of action,
with the effect that the CTA does not acquire jurisdiction over the taxpayer’s
petition. (MINDANAO II GEOTHERMAL PARTNERSHIP vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 193301, March 11, 2013)
Stated otherwise, the two-year prescriptive period does not refer to the filing of the
judicial claim with the CTA but to the filing of the administrative claim with the
Commissioner. As held in Aichi, the "phrase ‘within two years x x x apply for the
issuance of a tax credit or refund’ refers to applications for refund/credit with the
CIR and not to appeals made to the CTA." (MINDANAO II GEOTHERMAL
PARTNERSHIP vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 193301, March
11, 2013)
San Roque's failure to comply with the 120-day mandatory period renders its
petition for review with the CTA void as Article 5 of the Civil Code provides, "Acts
executed against provisions of mandatory or prohibitory laws shall be void, except
when the law itself authorizes their validity." San Roque's void petition for review
cannot be legitimized by the CTA or this Court because Article 5 of the Civil Code
states that such void petition cannot be legitimized "except when the law itself
authorizes [its] validity," and there is no law authorizing the petition's validity.
(COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE POWER CORPORATION,
G.R. No. 187485, February 12, 2013)
Sec. 112(A) clearly provides in no uncertain terms that unutilized input VAT
payments not otherwise used for any internal revenue tax due the taxpayer must
be claimed within two years reckoned from the close of the taxable quarter
when the relevant sales were made pertaining to the input VAT regardless
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of whether said tax was paid or not. The reckoning frame would always be the
end of the quarter when the pertinent sales or transaction was made, regardless
when the input VAT was paid. (COMMISSIONER OF INTERNAL REVENUE vs. MIRANT
PAGBILAO CORPORATION, G.R. No. 172129. September 12, 2008)
The mere filing by a taxpayer of a judicial claim with the CTA before the expiration
of the 120-day period cannot operate to divest the Commissioner of his jurisdiction
to decide an administrative claim within the 120-day mandatory period, unless the
Commissioner has clearly given cause for equitable estoppel to apply as expressly
recognized in Section 246 of the Tax Code. (COMMISSIONER OF INTERNAL REVENUE
vs. SAN ROQUE POWER CORPORATION, G.R. No. 187485, February 12, 2013)
Because the 120+30 day period is jurisdictional, the issue of whether petitioner
complied with the said time frame may be broached at any stage, even on appeal.
(NIPPON EXPRESS (PHILIPPINES) CORPORATION vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 196907, March 13, 2013)
While petitioner filed its administrative and judicial claims during the period of
applicability of BIR Ruling No. DA-489-03, it cannot claim the benefit of the
exception period as it did not file its judicial claim prematurely, but did so long after
the lapse of the 30-day period following the expiration of the 120-day period. Again,
BIR Ruling No. DA-489-03 allowed premature filing of a judicial claim, which means
non-exhaustion of the 120-day period for the Commissioner to act on an
administrative claim, but not its late filing.
For failure of petitioner to comply with the 120+30 day mandatory and jurisdictional
period, petitioner lost its right to claim a refund or credit of its alleged excess input
VAT. CBK POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE,
G.R. Nos.198729-30 January 15, 2014, CJ. SERENO
TPI filed its third and fourth quarterly VAT returns for 2001 on October 25, 2001 and
January 25, 2002, respectively. It then filed an administrative claim for refund of its
unutilized input VAT for the third and fourth quarters of 2001 on September 30,
2003. Thus, the CIR had 120 days or until January 28, 2004, after the submission of
TPI’s administrative claim and complete documents in support of its application,
within which to decide on its claim. Then, it is only after the expiration of the 120-
day period, if there is inaction on the part of the CIR, where TPI may elevate its
claim with the CTA within 30 days. Clearly, therefore, TPI’s refund claim of unutilized
input VAT for the third quarter of 2001 was denied for being prematurely filed with
the CTA, while its refund claim of unutilized input VAT for the fourth quarter of 2001
may be entertained since it falls within the exception provided in the Court’s most
What is important, as far as the present cases are concerned, is that the mere filing
by a taxpayer of a judicial claim with the CTA before the expiration of the 120-day
period cannot operate to divest the Commissioner of his jurisdiction to decide an
administrative claim within the 120-day mandatory period, unless the Commissioner
has clearly given cause for equitable estoppel to apply as expressly recognized in
Section 246 of the Tax Code. COMMISSIONER OF INTERNAL REVENUE vs. TEAM
SUAL CORPORATION (formerly MIRANT SUAL CORPORATION, G.R. No. 194105
February 5, 2014, J. REYES
A claim for tax refund or credit, like a claim for tax refund exemption, is construed
strictly against the taxpayer. One of the conditions for a judicial claim of refund or
credit under the VAT System is compliance with the 120+30 day mandatory and
jurisdictional periods. Thus, strict compliance with the 120+30 day periods is
necessary for such a claim to prosper, whether before, during, or after the
effectivity of the Atlas doctrine, except for the period from the issuance of BIR
Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi
doctrine was adopted, which again reinstated the 120+30 day periods as
mandatory and jurisdictional. MIRAMAR FISH COMPANY, INC., vs. COMMISSIONER
OF INTERNAL REVENUE, G.R. No. 185432, June 4, 2014, J. Perez
The taxpayer can file the appeal in one of two ways: (1) file the judicial claim within
thirty days after the Commissioner denies the claim within the 120-day period, or
(2) file the judicial claim within thirty days from the expiration of the 120-day period
if the Commissioner does not act within the 120-day period. Mindanao II filed its
administrative claim for refund or credit for the second, third, and fourth quarters of
2004 on 6 October 2005. The CIR, therefore, had a period of 120 days, or until 3
February 2006, to act on the claim. The CIR, however, failed to do so. Mindanao II
then could treat the inaction as a denial and appeal it to the CTA within 30 days
from 3 February 2006, or until 5 March 2006.
Mindanao II, however, filed a Petition for Review only on 21 July 2006, 138 days
after the lapse of the 30-day period on 5 March 2006. The judicial claim was
therefore filed late. The CTA therefore lost jurisdiction over Mindanao Il’s claims for
refund or credit. COMMISSIONER OF INTERNAL REVENUE vs. MINDANAO II
GEOTHERMAL PARTNERSHIP G.R. No. 1914498 January 15, 2014, CJ. SERENO
As a general rule, compliance with the 120-day period stated in Section 112(D) of
NIRC is mandatory. However, a VAT-registered taxpayer claiming refund for input
VAT may not wait for the lapse of the 120-day period when the claim is filed
between December 10, 2003 (the time of promulgation of BIR Ruling No. DA-489-03)
to October 6, 2010 (the time of promulgation of the Aichi case). TAGANITO MINING
CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 197591, June
18, 2014, J. Perlas-Bernabe
When a taxpayer seeking refund or tax credit under VAT files a judicial claim beyond
the 30-day period provided by the law, the same shall be dismissed for lack of
jurisdiction. A taxpayer seeking refund or tax credit under VAT must strictly follow
the “120+30” rule to be entitled thereof, otherwise, the claim shall be barred. In
the present case, the respondent filed its administrative claim on May 30, 2003. The
petitioner CIR therefore had only until September 27, 2003 to decide the claim, and
following the petitioner’s inaction, the respondent had until October 27, 2003, the
last day of the 30-day period to file its judicial claim. However, the respondent filed
its judicial claim with the CTA only on March 31, 2004 or 155 days late. Clearly, the
respondent's judicial claim has prescribed and the CTA did not acquire jurisdiction
over the claim. COMMISSIONER OF INTERNAL REVENUE vs. MINDANAO II
GEOTHERMAL PARTNERSHIP, G.R. No. 189440, June 18, 2014, J. Villarama, Jr.
Section 112(A) and (C) must be interpreted according to its clear, plain, and
unequivocal language. The taxpayer can file his administrative claim for refund or
credit at anytime within the two-year prescriptive period. If he files his claim on the
last day of the two-year prescriptive period, his claim is still filed on time. The
Commissioner will have 120 days from such filing to decide the claim. If the
Commissioner decides the claim on the 120th day, or does not decide it on that
day, the taxpayer still has 30 days to file his judicial claim with the CTA. This is not
only the plain meaning but also the only logical interpretation of Section 112(A) and
(C). SAN ROQUE POWER CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE,
G.R. No. 205543, June 30, 2014, J. Leonardo-De Castro
CE Luzon filed an action for refund of the VAT. The court ruled that while both claims
for refund were filed within the two (2)-year prescriptive period, CE Luzon failed to
comply with the 120-day period as it filed its judicial claim in C.T.A. Case No. 6792
four (4) days after the filing of the administrative claim, while in C.T.A. Case No.
6837, the judicial claim was filed a day after the filing of the administrative claim.
Proceeding from the aforementioned jurisprudence, only C.T.A. Case No. 6792
should be dismissed on the ground of lack of jurisdiction for being prematurely filed.
In contrast, CE Luzon filed its administrative and judicial claims for refund in C.T.A.
Case No. 6837 during the period, i.e., from December 10, 2003 to October 6, 2010,
when BIR Ruling No. DA-489-03 was in place. As such, the aforementioned rule on
equitable estoppel operates in its favor, thereby shielding it from any supposed
jurisdictional defect which would have attended the filing of its judicial claim before
the expiration of the 120-day period. COMMISSIONER OF INTERNAL REVENUE vs. CE
LUZON GEOTHERMAL POWER COMPANY, INC., G.R. No. 190198, September 17,
2014, J. Perlas- Bernabe
Its petition for review having been denied by the CTA for being prematurely filed,
petitioner filed the instant petition arguing that since it filed its judicial claim after
the issuance of BIR Ruling No. DA-489-03, but before the adoption of the Aichi
doctrine, it can invoke the said BIR Ruling. The SC ruled that the jurisdiction of the
CTA over decisions or inaction of the CIR is only appellate in nature and, thus,
necessarily requires the prior filing of an administrative case before the CIR under
Section 112. A petition filed prior to the lapse of the 120-day period prescribed
under said Section would be premature for violating the doctrine on the exhaustion
of administrative remedies. There is, however, an exception to the mandatory and
jurisdictional nature of the 120+30 day period. The Court in San Roque noted that
BIR Ruling No. DA-489-03, dated December 10, 2003, expressly stated that the
"taxpayer-claimant need not wait for the lapse of the 120-day period before it could
seek judicial relief with the CTA by way of Petition for Review." Hence, taxpayers can
rely on BIR Ruling No. DA-489-03 from the time of its issuance on December 10,
2003 up to its reversal by this Court in Aichi on October 6, 2010, where it was held
that the 120+30 day period was mandatory and jurisdictional. TAGANITO MINING
CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 201195,
November 26, 2014, J. Mendoza
Section 112(D) of the 1997 Tax Code states the time requirements for filing a
judicial claim for the refund or tax credit of input VAT. The legal provision speaks of
two periods: the period of 120 days, which serves as a waiting period to give time
for the CIR to act on the administrative claim for a refund or credit; and the period
of 30 days, which refers to the period for filing a judicial claim with the CTA. It is the
30-day period that is at issue in this case. ROHM APOLLO SEMICONDUCTOR
PHILIPPINES vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 168950, January
14, 2015, CJ Sereno
Cargill filed two claims for refund. However, the court ruled that the rule must
therefore be that during the period December 10, 2003 (when BIR Ruling No. DA-
489-03 was issued) to October 6, 2010 (when the Aichi case was
promulgated),taxpayers-claimants need not observe the 120-day period before it
could file a judicial claim for refund of excess input VAT before the CTA. Before and
after the aforementioned period (i.e., December 10, 2003 to October 6, 2010), the
observance of the 120-day period is mandatory and jurisdictional to the filing of
such claim. CARGILL PHILIPPINES, INC vs. COMMISSIONER OF INTERNAL REVENUE,
G.R. No. 203774, March 11, 2015, J. Perlas- Bernabe
Section 112 (D) (now renumbered as Section 112[C]) of RA 8424, which is explicit
on the mandatory and jurisdictional nature of the 120+30-day period, was already
effective on January 1, 1998. That being said, and notwithstanding the fact that
respondent's administrative claim had been timely filed, the Court is nonetheless
constrained to deny the averred tax refund or credit, as its judicial claim therefore
was filed beyond the 120+30-day period, and, hence - as earlier stated - deemed to
be filed out of time. As the records would show, the CIR had 120 days from the filing
of the administrative claim on July 21, 1999, or until November 18, 1999, to decide
on respondent's application. Since the CIR did not act at all, respondent had until
December 18, 1999, the last day of the 30-day period, to file its judicial claim.
Respondent filed its petition for review with the CTA only on January 9, 2001 and,
thus, was one (1) year and 22 days late. COMMISSIONER OF INTERNAL REVENUE vs.
BURMEISTER AND WAIN SCANDINAVIAN CONTRACTOR MINDANAO, INC., G.R. No.
190021, October 22, 2014, J. Perlas-Bernabe
Aichi filed an application for tax credit/refund with the BIR on March 29, 2005. On
31 March 2005, respondent filed judicial claim before the CTA. BIR contends that
Aichi failed to observe the 120-day reglementary period provided by NIRC for the
CIR to act on the claim. In this issue the Supreme court ruled that the Court agree
with petitioner that the judicial claim was prematurely filed on 31 March 2005, since
respondent failed to observe the mandatory 120day waiting period to give the CIR
an opportunity to act on the administrative claim. However, the Court ruled in San
Roque that BIR Ruling No. DA-489-03 allowed the premature filing of a judicial claim,
which means non-exhaustion of the 120-day period for the Commissioner to act on
an administrative claim. All taxpayers can rely on BIR Ruling No. DA-489-03 from the
time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on
6 October 2010, where this Court held that the 120+30 day periods are mandatory
and jurisdictional. Therefore, respondent's filing of the judicial claim barely two days
after the administrative claim is acceptable, as it fell within the period during which
the Court recognized the validity of BIR Ruling No. DA-489-03. COMMISSIONER OF
INTERNAL REVENUE vs. AICHI FORGING COMPANY OF ASIA, INC., G.R. No. 183421,
October 22, 2014, CJ Sereno
As a general rule, a taxpayer-claimant needs to wait for the expiration of the one
hundred twenty (120)-day period before it may be considered as "inaction" on the
part of the Commissioner of Internal Revenue (CIR). Thereafter, the taxpayer-
claimant is given only a limited period of thirty (30) days from said expiration to file
its corresponding judicial claim with the CTA. However, with the exception of claims
made during the effectivity of BIR Ruling No. DA-489-03 (from 10 December 2003 to
5 October 2010), AT&T Communications has indeed properly and timely filed its
judicial claim covering the Second, Third, and Fourth Quarters of taxable year 2003,
within the bounds of the law and existing jurisprudence. AT&T COMMUNICATIONS
SERVICES PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
185969, November 19, 2014, J. Perez
CBK Power filed its judicial claim for refund/credit just 20 days after it filed its
administrative claim. CTA En Banc dismissed the case for lack of jurisdiction as it
failed to observe the mandatory and jurisdictional 120-day period provided under
Section 112 (D) of the National Internal Revenue Code. The Court found that the
CTA En Banc was incorrect. The Court recognized an exception in which the existing
BIR Ruling applicable to this case in which it held that taxpayer-claimant need not
wait for the lapse of the 120-day period before it could seek judicial relief. CBK
POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
198928, December 03, 2014, J. Perlas-Bernabe
A VAT-registered taxpayer need not wait for the lapse of the 120-day period to file a
judicial claim for unutilized VAT inputs before the CTA when the claim was filed on
December 10, 2003 up to October 6, 2010. If the claim is filed within those dates,
the same shall not be considered prematurely filed. In this case, records disclose
that petitioner filed its administrative and judicial claims for refund/credit of its input
VAT in CTA Case No. 8082 on December 28, 2009 and March 30, 2010, respectively,
or during the period when BIR Ruling No. DA-489-03 was in place, i.e., from
December 10, 2003 to October 6, 2010. As such, it need not wait for the expiration
of the 120-day period before filing its judicial claim before the CTA, and hence, is
deemed timely filed. In view of the foregoing, both the CTA Division and the CTA En
Banc erred in dismissing outright petitioner’s claim on the ground of prematurity.
MINDANAO II GEOTHERMAL PARTNERSHIP vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 204745, December 08, 2014, J. Perlas-Bernabe
In Reconciling the pronouncements in the Aichi and San Roque cases, the rule must
therefore be that during the period December 10, 2003 (when BIR Ruling No. DA-
489-03 was issued) to October 6, 2010 (when the Aichi case was promulgated),
taxpayers-claimants need not observe the 120-day period before it could file a
judicial claim for refund of excess input VAT before the CTA. Before and after the
aforementioned period (i.e., December 10, 2003 to October 6, 2010), the
The CIR has 120 days from the date of submission of complete documents in
support of the administrative claim within which to decide whether to grant a refund
or issue a tax credit certificate. In case of failure on the part of the CIR to act on the
application within the 120-day period prescribed by law, the taxpayer has only has
30 days after the expiration of the 120-day period to appeal the unacted claim with
the CTA. Since petitioner’s judicial claim was filed before the CTA only way beyond
the mandatory 120+30 days to seek judicial recourse, such non-compliance with
the mandatory period of 30 days is fatal to its refund claim on the ground of
prescription. Consequently, the CTA has no jurisdiction over its judicial appeal
considering that its Petition for Review was filed out of time. Consequently, the
claim for refund must be denied. NIPPON EXPRESS (PHILIPPINES) CORP. vs.
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 185666, February 04, 2015, J.
Perez
For failure of Silicon to comply with the provisions of Section 112(C) of the NIRC, its
judicial claims for tax refund or credit should have been dismissed by the CTA for
lack of jurisdiction. The Court stresses that the 120/30-day prescriptive periods are
mandatory and jurisdictional, and are not mere technical requirements. SILICON
PHILIPPINES, INC. (FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.) vs.
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 173241, March 25, 2015, J.
Leonardo-De Castro
For a judicial claim for refund to prosper, however, respondent must not only prove
that it is a VAT registered entity and that it filed its claims within the prescriptive
period. It must substantiate the input VAT paid by purchase invoices or official
receipts: 1) A "sales or commercial invoice" is a written account of goods sold or
services rendered indicating the prices charged therefor or a list by whatever name
it is known which is used in the ordinary course of business evidencing sale and
transfer or agreement to sell or transfer goods and services; and 2) A "receipt" on
the other hand is a written acknowledgment of the fact of payment in money or
other settlement between seller and buyer of goods, debtor or creditor, or person
rendering services and client or customer. (ATLAS CONSOLIDATED MINING AND
DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R.
Nos. 141104 & 148763, June 8, 2007)
The requisite that the receipt be issued showing the name, business style, if any,
and address of the purchaser, customer or client is precise so that when the books
of accounts are subjected to a tax audit examination, all entries therein could be
shown as adequately supported and proven as legitimate business transactions. The
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Taxpayers claiming for a refund or tax credit certificate must comply with the strict
and mandatory invoicing and accounting requirements provided under the 1997
NIRC, as amended, and its implementing rules and regulations. Thus, the change of
petitioner's name to "Bonifacio GDE Water Corporation," being unauthorized and
without approval of the SEC, and the issuance of official receipts under that name
which were presented to support petitioner's claim for tax refund, cannot be used to
allow the grant of tax refund or issuance of a tax credit certificate in petitioner's
favor. (BONIFACIO WATER CORPORATION (formerly BONIFACIO VIVENDI WATER
CORPORATION) vs. THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 175142,
July 22, 2013)
Failure to print the word “zero-rated” on the invoices or receipts is fatal to a claim
for credit of refund of input VAT on zero-rated sales (J.R.A. Philippines, Inc. v. CIR,
G.R. No. 177127, October 11, 2010)
If the claim for refund/ tax credit certificate is based on the existence of zero-rated
sales by the taxpayer but it fails to comply with the invoicing requirements in the
issuance of sales invoices (e.g. failure to indicate the TIN), its claim for tax
credit/refund of VAT on its purchases shall be denied considering that the invoice it
is issuing to its customers does not depict its being a VAT-registered taxpayer whose
sales are classified as zero-rated sales. Nonetheless, this treatment is without
prejudice to the right of the taxpayer to charge the input taxes to the appropriate
expense account or asset account subject to depreciation, whichever is applicable
(Panasonic Comm. Imaging Corp. of the Phil. v. CIR, G.R. No. 178090, February 8,
2010)
This Court has consistently held as fatal the failure to print the word “zero-rated” on
the VAT invoices or official receipts in claims for a refund or credit of input VAT on
zero-rated sales, even if the claims were made prior to the effectivity of R.A. 9337.
As to the sufficiency of a Northern Mindanao’s company invoice to prove the sales
of services to NPC, the Court finds that this claim is without sufficient legal basis. A
VAT invoice is the seller’s best proof of the sale of goods or services to the buyer,
while a VAT receipt is the buyer’s best evidence of the payment of goods or services
received from the seller. The requirement of imprinting the word “zero-rated”
proceeds from the rule-making authority granted to the Secretary of Finance by the
NIRC for the efficient enforcement of the same Tax Code and its amendments. A
VAT-registered person whose sales are zero-rated or effectively zero-rated, Section
112(A) specifically provides for a two-year prescriptive period after the close of the
taxable quarter when the sales were made within which such taxpayer may apply
for the issuance of a tax credit certificate or refund of creditable input tax.
NORTHERN MINDANAO POWER CORPORATION vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 185115, February 18, 2015, CJ. Sereno
The failure to indicate the words “zero-rated” on the invoices and receipts issued by
a taxpayer would result in the denial of the claim for refund or tax credit. The Court
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has consistently ruled on the denial of a claim for refund or tax credit whenever the
word “zero-rated” has been omitted on the invoices or sale receipts of the taxpayer-
claimant. Furthermore, the CTA is a highly specialized court dedicated exclusively to
the study and consideration of revenue-related problems, in which it has necessarily
developed an expertise. Hence, its factual findings, when supported by substantial
evidence, will not be disturbed on appeal. EASTERN TELECOMMUNICATIONS
PHILIPPINES, INC., vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 183531,
March 25, 2015, J. Reyes
by which the record subject to the order of the BIR is kept. The
purpose of the law is to enable the BIR to get at the taxpayer’s
records in whatever form they may be kept. Such records
include computer tapes of the said records prepared by the
taxpayer in the course of business.68 In this era of developing
information-storage technology, there is no valid reason to
immunize companies with computer-based, record-keeping
capabilities from BIR scrutiny. The standard is not the form of
the record but where it might shed light on the accuracy of the
taxpayer’s return. However, the best evidence obtainable under
Section 16 of the 1977 NIRC [now Sec. 6, 1997 NIRC], as
amended, does not include mere photocopies of
records/documents. The petitioner, in making a preliminary and
final tax deficiency assessment against a taxpayer, cannot
anchor the said assessment on mere machine copies of
records/documents. Mere photocopies of the Consumption
Entries have no probative weight if offered as proof of the
contents thereof. (CIR vs Hantex Trading Co., GR no. 136975,
March 31, 2005)
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book
I of the Administrative Code of 1987 deal with the same subject
matter — the computation of legal periods. Under the Civil Code, a
year is equivalent to 365 days whether it be a regular year or a leap
year. Under the Administrative Code of 1987, however, a year is
composed of 12 calendar months. Needless to state, under the
Administrative Code of 1987, the number of days is irrelevant.
There obviously exists a manifest incompatibility in the manner of
computing legal periods under the Civil Code and the
Administrative Code of 1987. For this reason, we hold that Section
31, Chapter VIII, Book I of the Administrative Code of 1987, being
the more recent law, governs the computation of legal periods. (CIR
vs Primetown Property Group Inc., GR 162155, August 28, 2007)
agreement between the taxpayer and the BIR that the period to
issue an assessment and collect the taxes due is extended to a date
certain. The waiver does not mean that the taxpayer relinquishes
the right to invoke prescription unequivocally particularly where the
language of the document is equivocal. The Waiver of Statute of
Limitations, signed by petitioner’s comptroller on September 22,
1997 is not valid and binding because it does not conform with the
provisions of RMO No. 20-90. It did not specify a definite agreed
date between the BIR and petitioner, within which the former may
assess and collect revenue taxes. Thus, petitioner’s waiver became
unlimited in time, violating Section 222(b) of the NIRC. (Philippine
Journalists, Inc vs CIR, GR 162852, December 16, 2004)
The waiver required under the Tax Code is one which is not
unilateral nor can it be said that concurrence to such agreement is
a mere formality because it is the very signatures of both the
Commissioner and the taxpayer which give birth to such valid
agreement. (CIR v. CA, G.R. 115712, Feb. 25, 1999)
It is clear that the assailed deficiency tax assessment for the EWT in
1994 disregarded the provisions of Section 228 of the [NIRC], as
amended, as well as Section 3.1.4 of the Revenue Regulations No.
12-99 by not providing the legal and factual bases of the
assessment. Hence, the formal letter of demand and the notice of
assessment issued relative thereto are void.
Sec. 271 [1977 NIRC] (now Sec. 223 of 1997 NIRC) limits the
suspension of the running of prescription to instances when
reinvestigation is requested by a taxpayer and is granted by the
CIR. Only a request for reinvestigation can toll the running of the
period of the statute of limitations because it would entail reception
and evaluation of additional evidence and will take more time than
a request for reconsideration where the evaluation of the evidence
is limited only to the evidence already at hand. (CIR v. Phil. Global
Communications, 506 SCRA 427)
Petitioner questions the decision of the CTA holding that its right to
assess respondent of its tax deficiencies for the taxable year 1999
has already prescribed for its failure to send the Formal Assessment
Notice to respondent’s new address despite respondent’s failure to
give petitioner a formal written notice of its change of address. The
While we may agree with the Court of Tax Appeals that a mere request for
reexamination or reinvestigation may not have the effect of suspending the
running of the period of limitation for in such case there is need of a written
agreement to extend the period between the Collector and the taxpayer,
there are cases however where a taxpayer may be prevented from setting
up the defense of prescription even if he has not previously waived it in
writing as when by his repeated requests or positive acts the Government
has been, for good reasons, persuaded to postpone collection to make him
feel that the demand was not unreasonable or that no harassment or
injustice is meant by the Government. (CIR vs Kudos Metal Corp., GR
178087, May 5, 2010)
The running of the prescription period where the acts of the taxpayer
did not prevent the government from collecting the tax. Partial
payment would not prevent the government from suing the
taxpayer. Because, by such act of payment, the government is not
thereby “persuaded to postpone collection to make him feel that the
demand was not unreasonable or that no harassment or injustice is
meant.” (CIR vs Philippine Global Communication, GR 167146, October
31, 2006)
Sec. 269 [now Sec. 222 of the 1997 NIRC] provides that when
fraudulent tax returns are involved, a proceeding in court after
the collection of such tax may be begun without assessment.
The gross disparity in the taxes due and the amounts actually
declared constitutes badges of fraud. Applying Ungab v. Cusi, 97
SCRA 877 [1980], assessment is not necessary in filing criminal
complaints for tax violations. Assessment of a deficiency is not
necessary to a criminal prosecution for tax evasion. The crime is
complete when the violator knowingly and willfully filed
fraudulent return with intention to evade the tax. (Adamson v.
Court of Appeals, 588 SCRA 27)
c) Refund
A corporation entitled to a tax credit or refund of the excess estimated
quarterly income taxes paid has two options: (1) to carry over the excess
credit or (2) to apply for the issuance of a tax credit certificate or to claim a
cash refund. If the option to carry over the excess credit is exercised, the
same shall be irrevocable for that taxable period. This is known as the
irrevocability rule and is embodied in the last sentence of Section 76 of the
Tax Code. (Systra Philippines vs CIR, GR 176290, September 21, 2007)
No refund for documentary stamp taxes: documentary stamp taxes are levied
on the exercise by persons of certain privileges conferred by law for the
creation, revision, or termination of specific legal relationships through the
execution of specific instruments. Documentary stamp taxes are thus levied
on the exercise of these privileges through the execution of specific
instruments, independently of the legal status of the transactions giving rise
thereto. The documentary stamp taxes must be paid upon the issuance of the
said instruments, without regard to whether the contracts which gave rise to
them are rescissible, void, voidable, or unenforceable. (Philippine Home
Assurance Corp. vs CA, GR 119446, January 21, 1999)
Sec. 79 of the 1997 NIRC laid down the irrevocability rule. The taxpayer with
excess income tax credits is given the option to either (1) to credit the same
to its tax liability for the succeeding taxable periods; or (2) refund the amount
or issue tax credit certificate. Once the carry-over option is taken, actually or
constructively, it becomes irrevocable. It can never be refunded. The
controlling factor for the operation of the irrevocability rule is that the
taxpayer chose an option; and once it had already done so, it could no longer
make another one. No application for refund or tax credit certificate shall be
allowed. The option of the BPI to carry-over the 1998 excess credits is
irrevocable. BPI cannot anymore apply for the refund in the event it is unable
to credit the said excess. The crediting of the excess credits in the succeeding
taxable periods has no prescription unlike the claim for refund which
prescribes after two years from the filing of the ITR. In the event the taxpayer
fails to make an appropriate marking of its option in the ITR, does not mean
that the taxpayer is barred from choosing his option later on. The reason for
requiring that a choice be made upon the filing of the ITR is to ease tax
administration. Failure to make a choice means that the taxpayer is still
uncertain and would show simple negligence or plain oversight. The taxpayer
may still make his choice later but once the choice is made, irrevocability of
the said choice sets in. (CIR vs. BPI, 592 SCRA 219)
Section 230 [now Sec. 229, 1997 NIRC] of the Tax Code, as
couched, particularly its statute of limitations component, is, in
context, intended to apply to suits for the recovery of internal
revenue taxes or sums erroneously, excessively, illegally or
wrongfully collected. Black defines the term erroneous or illegal
tax as one levied without statutory authority. In the strict legal
viewpoint, therefore, PNB’s claim for tax credit did not proceed
from, or is a consequence of overpayment of tax erroneously or
illegally collected. It is beyond cavil that respondent PNB issued
to the BIR the check for P180 Million in the concept of tax
payment in advance, thus eschewing the notion that there was
error or illegality in the payment. (CIR vs PNB, GR 161997,
October 25, 2005)
Tax refunds are based on the general premise that taxes have
either been erroneously or excessively paid. Though the Tax
Code recognizes the right of taxpayers to request the return of
such excess/erroneous payments from the government, they
must do so within a prescribed period. Further, "a taxpayer must
prove not only his entitlement to a refund, but also his
compliance with the procedural due process as non-observance
of the prescriptive periods within which to file the administrative
and the judicial claims would result in the denial of his claim." In
the case at bar, MERALCO had ample opportunity to verify on
the tax-exempt status of NORD/LB for purposes of claiming tax
refund. Nevertheless, it only filed its claim for tax refund ten (10)
Those who claim for refund must not only prove its entitlement
to the excess credits, but likewise must prove that no carry-over
has been made in cases where refund is sought. However,
proving that no carry-over has been made does not absolutely
require the presentation of the quarterly ITRs. With Winebrenner
& Inigo Insurance Brokers, Inc. having complied with the
requirements for refund, and without the CIR showing contrary
evidence other than its bare assertion of the absence of the
quarterly ITRs, copies of which are easily verifiable by its very
own records, the burden of proof of establishing the propriety of
the claim for refund has been sufficiently discharged. Hence, the
grant of refund is proper. WINEBRENNER & IÑIGO INSURANCE
BROKERS, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R.
No. 206526, January 28, 2015, J. Mendoza
There are three essential conditions for the grant of a claim for
refund of creditable withholding income tax, to wit: (1) the claim
is filed with the Commissioner of Internal Revenue within the
two-year period from the date of payment of the tax; (2) it is
shown on the return of the recipient that the income payment
received was declared as part of the gross income; and (3) the
fact of withholding is 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 therefrom. COMMISSIONER OF
INTERNAL REVENUE vs. TEAM [PHILIPPINES] OPERATIONS
CORPORATION [formerly MIRANT (PHILS) OPERATIONS
CORPORATION], G.R. No. 179260, April 2, 2014, J. Perez
The issues raised before the Panel of Voluntary Arbitrators are: (1)
whether the cash conversion of the gasoline allowance shall be subject to
fringe benefit tax or the graduated income tax rate on compensation; and (2)
whether the company wrongfully withheld income tax on the converted gas
allowance.
If the union disputes the withholding of tax and desires a refund of the
withheld tax, it should have filed an administrative claim for refund with the
CIR. Paragraph 2, Section 4 of the NIRC expressly vests the CIR original
jurisdiction over refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other tax matters. HONDA CARS
PHILIPPINES, INC. vs. HONDA CARS TECHNICAL SPECIALIST AND
SUPERVISORS UNION, G.R. No. 204142. November 19, 2014, J. BRION
Under the first option, any tax on income that is paid in excess of the
amount due the government may be refunded, provided that a taxpayer properly
applies for the refund. On the other hand, the second option works by applying the
refundable amount against the tax liabilities of the petitioner in the succeeding
taxable years. Hence, instead of moving for the issuance of a writ of execution
relative to the aforesaid decision, petitioner should have merely requested for the
approval of the City of Manila in implementing the tax refund or tax credit,
whichever is appropriate. In other words, no writ was necessary to cause the
execution thereof, since the implementation of the tax refund will effectively be a
return of funds by the City of Manila in favor of petitioner while a tax credit will
merely serve as a deduction of petitioner’s tax liabilities in the future. COCA-COLA
BOTTLER’S PHILIPPINES, INC. vs. CITY OF MANILA, ET AL., G.R. No. 197561, April 7,
2014, J. Peralta
2. Government remedies
a) Administrative remedies
(i) Tax lien
(ii) Levy and sale of real property
(iii) Forfeiture of real property to the government for want of
bidder
(iv) Further distraint and levy
(v) Suspension of business operation
(vi) Non-availability of injunction to restrain collection of tax
The National Internal Revenue Code of 1997 (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. 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. 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. (Angeles City vs. Angeles City Electric
Corp., GR 166134, June 29, 2010)
b) Judicial remedies
The taxpayer should be liable only for tax proper and should not be held
liable for the surcharge and interest when it appears that the assessment is
highly controversial. The Commissioner at the outset was not certain as to
petitioner's income tax liability. (Cagayan Electric Power Light vs CIR, G.R. No.
L-60126, September 25, 1985)
(i) Surcharge
(ii) Interest
(a) In general
(b) Deficiency interest
(c) Delinquency interest
(d) Interest on extended payment
4. Compromise and abatement of taxes
a) Compromise
Compromise may be the favored method to settle disputes, but when it
involves taxes, it may be subject to closer scrutiny by the courts. A
compromise agreement involving taxes would affect not just the taxpayer
and the BIR, but also the whole nation, the ultimate beneficiary of the tax
revenues collected. (PNOC vs CA, G.R. No. 109976, April 26, 2005)
CBK Power raised the lone issue of whether or not an ITAD ruling is required
before it can avail of the preferential tax rate. On the other hand, the
Commissioner claimed that CBK Power failed to exhaust administrative
remedies when it filed its petitions before the CTA First Division, and that said
petitions were not filed within the two-year prescriptive period for initiating
judicial claims for refund. The Court categorically held that the BIR should not
impose additional requirements that would negate the availment of the
reliefs provided for under international agreements, especially since said tax
treaties do not provide for any prerequisite at all for the availment of the
benefits under said agreements. Nowhere and in no wise does the law imply
that the Collector of Internal Revenue must act upon the claim, or that the
taxpayer shall not go to court before he is notified of the Collector’s action.
CBK POWER COMPANY LIMITED vs. COMMISSIONER INTERNAL REVENUE, G.R.
Nos. 193383-84, January 14, 2015, J. Perlas-Bernabe
The fundamental law did not intend the delegation to be absolute and
unconditional; the constitutional objective obviously is to ensure that, while the
local government units are being strengthened and made more autonomous, the
legislature must still see to it that (a) the taxpayer will not be over-burdened or
saddled with multiple and unreasonable impositions; (b) each local government unit
will have its fair share of available resources, (c) the resources of the national
government will not be unduly disturbed; and (d) local taxation will be fair, uniform,
and just.(Manila Electric Co. v. Province of Laguna, G.R. No. 131359, May 05, 1999)
Under the now prevailing Constitution, where there is neither a grant nor
prohibition by statute, the taxing power of local governments must be deemed to
exist although Congress may provide statutory limitations and guidelines in order to
safeguard the viability and self-sufficiency of local government units by directly
granting them general and broad tax powers. (City Government of San Pablo,
Laguna, et al., v. Reyes, et al., G.R. No. 127708, March 25, 1999)
Local governments do not have the inherent power to tax except to the
extent that such power might be delegated to them either by the basic law or by
statute. Presently, under Article X of the 1987 Constitution, a general delegation of
that power has been given in favor of local government units. (Manila Electric
Company vs Province of Laguna, G.R. No. 131359, May 5, 1999)
Setting the rate of the additional levy for the special education fund at less than 1%
is within the taxing power of local government units. It is consistent with the
guiding constitutional principle of local autonomy. It was well within the power of the
Sangguniang Panlalawigan of Palawan to enact an ordinance providing for additional
levy on real property tax for the special education fund at the rate of 0.5% rather
than at 1%. LUCENA D. DEMAALA vs. COMMISSION ON AUDIT, REPRESENTED BY ITS
CHAIRPERSON COMMISSIONER MA. GRACIA M. PULIDO TAN, G.R. No. 199752,
February 17, 2015, J. Leonen
It is clear under Sec. 188 of R.A. No. 7160 and Art. 277 of its implementing
rules that the requirement of publication is MANDATORY and leaves no choice. The
use of the word "shall" in both provisions is imperative, operating to impose a duty
that may be enforced (Coca-Cola Bottlers Phil., Inc. v. City of Manila, G.R. No.
156252, June 27, 2006)
The taxing power of cities, municipalities and municipal districts may be used
(1) upon any person engaged in any occupation or business, or exercising any
privilege therein; (2) for services rendered by those political subdivisions or
rendered in connection with any business, profession or occupation being conducted
therein, and (3) to levy, for public purposes just and uniform taxes, licenses or
fees (Philippine Match Co., Ltd. v. City of Cebu, G.R. No. L-30745, January 18, 1978)
Meralco is subject to the local franchise tax. Its exemption has been
withdrawn under Sec. 137 and Sec. 193 of RA 7160. The LGU (San Pablo and
Laguna) is correct on relying the provisions of Secs. 137 & 193 that Meralco’s tax
exemption has been withdrawn. Sec. 137 authorizes the province to impose
franchise tax “notwithstanding any exemption granted by any law or other special
law”. The local franchise tax is imposable despite any exemption enjoyed under
special laws. Sec. 193 provides the withdrawal of all tax exemptions or incentives
granted to or presently enjoyed by all persons whether natural or juridical including
GOCCs. Thus, any existing tax exemption or incentive enjoyed by Meralco under
existing law was clearly intended to be withdrawn. Further, the LGC contains a
general repealing clause in its Sec. 534 (f).
A corporation that has been ordered to pay franchise tax delinquency but which
facilities, including its nationwide franchise, had been transferred to the National
Transmission Corporation (TRANSCO) by operation of law during the time of the
alleged delinquency, cannot be ordered to pay as it is not the proper party subject
to the local franchise tax, the transferee being the one liable. NATIONAL POWER
CORPORATION vs. PROVINCIAL GOVERNMENT OF BATAAN, SANGGUNIANG
PANLALAWIGAN OF BATAAN, PASTOR B. VICHUACO (IN HIS OFFICIAL CAPACITY AS
PROVINCIAL TREASURER OF BATAAN) and THE REGISTER OF DEEDS OF THE
PROVINCE OF BATAAN, G.R. No. 180654, April 21, 2014, J. Abad
Under the Local Tax Code. there is no question that the authority to impose
the license fees collected from the hauling of sand and gravel excavated properly
belongs to the province concerned and not to the municipality where they are found
which is specifically prohibited under Section 22 of the same Code "from levying
taxes, fees and charges that the province or city is authorized to levy in this
Code." (Municipality of San Fernando, La Union v. Sta. Romana, G.R. No. L-30159,
March 31, 1987)
Resorts, swimming pools, bath houses, hot springs, and tourist spots are not
among those places expressly mentioned by Section 140 of the LGC as being
subject to amusement taxes. (Principle of Ejusdem Generis) (Pelizloy Realty
Corp. v. Province of Benguet, G.R. No. 183137, April 10, 2013)
same category as theaters, cinematographs, concert halls and circuses as the latter
basically belong to artistic forms of entertainment while the former caters to sports
and gaming. (Philippine Basketball Assn. v. Court of Appeals, G.R. No. 119122,
August 08, 2000)
Tax should be computed based on gross receipts; the right to receive income,
and not the actual receipt, determines when to include the amount in gross income.
The imposition of local business tax based on petitioner’s gross revenue will
inevitably result in the constitutionally proscribed double taxation – taxing of the
same person twice by the same jurisdiction for the same thing – inasmuch as
petitioner’s revenue or income for a taxable year will definitely include its gross
receipts already reported during the previous year and for which local business tax
has already been paid. (Ericsson Telecoms vs. City of Pasig. G.R. NO. 176667,
November 22, 2007)
The power to levy an excise upon the performance of an act or the engaging
in an occupation does not depend upon the domicile of the person subject to the
excise, nor upon the physical location of the property and in connection with the act
or occupation taxed, but depends upon the place in which the act is performed or
occupation engaged in. (Allied Thread Co., Inc. v. City Mayor of Manila, G.R. No. L-
40296, November 21, 1984)
Under a city ordinance which imposes tax on sales of goods in the city, the
city can validly tax sales to customers outside of the city as long as the orders were
booked and paid for, and the goods were delivered to the carrier, in the city. The
goods can be regarded as sold in the city because delivery to the carrier is delivery
to the buyer.||| (Philippine Match Co., Ltd. v. City of Cebu, G.R. No. L-30745, January
18, 1978)
The fundamental law did not intend the delegation to be absolute and
unconditional; the constitutional objective obviously is to ensure that, while the
local government units are being strengthened and made more autonomous, the
legislature must still see to it that (a) the taxpayer will not be over-burdened or
saddled with multiple and unreasonable impositions; (b) each local government unit
will have its fair share of available resources; (c) the resources of the national
government will not be unduly disturbed; and (d) local taxation will be fair, uniform,
and just. (Manila Electric Company vs Province of Laguna, G.R. No. 131359, May 5,
1999)
The language of Section 133 (h) of RA No. 7160 makes plain that the
prohibition with respect to petroleum products extends not only to excise taxes
thereon, but all "taxes, fees and charges." ||| While local government units are
authorized to burden all such other class of goods with "taxes, fees and charges",
excepting excise taxes, a specific prohibition is imposed barring the levying of any
other type of taxes with respect to petroleum products. (Petron Corporation v.
Tiangco, G.R. No. 158881, April 16, 2008)
Petitioner filed the instant petition assailing the decision of the CTA finding
PAL exempt from payment of excise tax. Affirming the decision of the CTA the SC
ruled that PD 1590 has not been revoked by the NIRC of 1997, as amended. Or to
be more precise, the tax privilege of PAL provided in Sec. 13 of PD 1590 has not
been revoked by Sec. 131 of the NIRC of 1997, as amended by Sec. 6 of RA 9334.
Such being the case, PAL is indeed exempt from payment of excise tax.
COMMISSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMS vs.
PHILIPPINE AIRLINES, INC., G.R. Nos. 212536-37, August 27, 2014, J. Velasco, Jr.
The City’s yearly imposition of the 25% surcharge, which was sustained by
the trial court and the Court of Appeals, resulted in an aggregate penalty that is way
higher than NAPOCOR’s basic tax liabilities. A surcharge regardless of how it is
computed is already a deterrent. While it is true that imposing a higher amount may
be a more effective deterrent, it cannot be done in violation of law and in such a
way as to make it confiscatory. NATIONAL CORPORATION POWER vs. CITY OF
CABANATUAN represented by its CITY MAYOR, HON. HONORATO PEREZ, G.R. No.
177332, October 01, 2014, J. Leonen
implement under the LGC. City of Manila, Hon. Alfredo S. Lim, as Mayor of the City
of Manila, et al. vs. Hon. Angel Valera Colet, as Presiding Judge, Regional Trial Court
of Manila (Br. 43), et al., G.R. No. 120051, December 10, 2014, J. Leonardo-De
Castro
8. Taxpayer’s remedies
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. (Valley Trading Co., Inc. v. CFI of
Isabela, Branch II, G.R. No. L-49529, March 31, 1989)
1. Fundamental principles
2. Nature of real property tax
3. Imposition of real property tax
a) Power to levy real property tax
b) Exemption from real property tax
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be
entitled to the exemption, the petitioner is burdened to prove, by clear and
unequivocal proof, that (a) it is a charitable institution; and (b) its real properties are
ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is
defined as possessed and enjoyed to the exclusion of others; debarred from
participation or enjoyment; and "exclusively" is defined, "in a manner to exclude; as
enjoying a privilege exclusively." (Lung Center of the Phil. v. Quezon City, G.R. No.
144104, June 29, 2004)
Under Section 234(a), real property owned by the Republic is exempt from
real estate tax except when the government gives the beneficial use of the real
property to a taxable entity. The justification for the exception to the exemption is
that the real property, although owned by the Republic, is not devoted to public
use or public service but devoted to the private gain of a taxable person. (Manila
International Airport Authority v. Court of Appeals, G.R. No. 155650, July 20, 2006)
In MIAA v. Court of Appeals & Parañaque City, 495 SCRA 591 [2006], the
Supreme Court resolved this issue that MIAA is not a government owned or
controlled corporation but a government instrumentality vested with corporate
powers and performing essential public services. MIAA is not subject to any local tax
except when its properties are used by taxable entity or if the beneficial use of real
property owned by the Republic is given to a taxable entity.
The airport lands and buildings of MIAA are properties devoted to public use and
thus are properties of public dominion. They are owned by the State or the Republic
under Art. 420 of the NCC. Hence, the properties of MIAA are exempted from the
real property tax under Sec. 234(a) LGC. Only those portions of the NAIA Pasay
properties which are leased to taxable persons like private parties are the ones
subject to the real property tax by Pasay City. (MIAA v. City of Pasay, 583 SCRA 234)
Real properties shall be appraised at the current and fair market value
prevailing in the locality where the property is situated and classified for assessment
purposes on the basis of its actual use. (Allied Banking Corporation, etc., v. Quezon
City Government, et al., G. R. No. 154126, October 11, 2005)
In fixing the value of real property, assessors have to consider all the
circumstances and elements of value and must exercise prudent discretion in
reaching conclusions. (Allied Banking Corporation, etc., v. Quezon City Government,
et al., G. R. No. 154126, October 11, 2005)
With regard to determining to whom the notice of sale should have been
sent, settled is the rule that, for purposes of real property taxation, the registered
owner of the property is deemed the taxpayer. Thus, in identifying the real
delinquent taxpayer, a local treasurer cannot rely solely on the tax declaration but
must verify with the Register of Deeds who the registered owner of the particular
property is. (Spouses Hu v. Spouses Unico, G.R. No. 146534, September 18, 2009)
It has been ruled that the notices and publication, as well as the legal
requirements for a tax delinquency sale, are mandatory; and the failure to comply
therewith can invalidate the sale. The prescribed notices must be sent to comply
with the requirements of due process. (De Knecht v. Court of Appeals, G.R. No.
108015, 109234, May 20, 1998)
The delinquent taxpayer referred to under Sec. 72 of PD No. 464 is the actual
owner of the property at the time of the delinquency and mere compliance by the
provincial or city treasurer with Sec. 65 of the decree is no longer enough. The
notification to the right person, i.e., the real owner, is an essential and
indispensable requirement of the law, non-compliance with which renders the
auction sale void. (Estate of Jacob v. Court of Appeals, G.R. No. 120435, 120974,
December 22, 1997)
7. Taxpayer’s remedies
a) Contesting an assessment of value of real property
(i) Appeal to the Local Board of Assessment Appeals
(ii) Appeal to the Central Board of Assessment Appeals
(iii) Effect of payment of tax
The protest contemplated under Sec. 252 of R.A. 7160 is needed where there
is a question as to the reasonableness of the amount assessed. Hence, if a taxpayer
disputes the reasonableness of an increase in a real estate tax assessment, he is
required to "first pay the tax" under protest; otherwise, the city or municipal
treasurer will not act on his protest. (Ty v. Trampe, G.R. No. 117577, December 01,
1995)
The trial court has no jurisdiction to entertain a Petition for Prohibition absent
petitioner's payment, under protest, of the tax assessed as required by Sec. 64 of
the RPTC. Payment of the tax assessed under protest, is a condition sine qua
non before the trial court could assume jurisdiction over the petition and failure to
do so, the RTC has no jurisdiction to entertain it. (Manila Electric Co. v. Barlis, G.R.
No. 114231, May 18, 2001)
Under then Sec. 30 of PD 464 [now under Sec. 226, LGC], having failed to
appeal the real property assessments to the LBAA, taxpayer now cannot assail the
validity of the tax assessment before the courts. For failure to exhaust
administrative remedies, the assessment became final. Under Sec. 64 of PD 464
[now under Sec. 252, LGC), the taxpayer must first pay under protest and then
assail the validity of the assessment. (Davao Oriental Electric Coop vs. Prov. Dvo. of
Oriental, 576 SCRA 645)
Under Section 226 of R.A. No 7160, the last action of the local assessor on a
particular assessment shall be the notice of assessment; it is this last action which
gives the owner of the property the right to appeal to the LBAA. The procedure
likewise does not permit the property owner the remedy of filing a motion for
reconsideration before the local assessor. (Fels Energy, Inc. v. Province of Batangas,
G.R. No. 168557, 170628, February 16, 2007)
"Customs duties" is "the name given to taxes on the importation and exportation of
commodities, the tariff or tax assessed upon merchandise imported from, or
exported to, a foreign country. (Nestle Philippines, Inc. v. Court of Appeals, G.R. No.
134114, July 06, 2001)
Section 1202 of the Tariff and Customs Code provides that importation begins
when the carrying vessel or aircraft enters the jurisdiction of the Philippines with
intention to unload therein. It is clear from the provision of the law that mere intent
to unload is sufficient to commence an importation and "intent," being a state of
mind, is rarely susceptible of direct proof, but must ordinarily be inferred from the
facts, and therefore can only be proved by unguarded, expressions, conduct and
circumstances generally. (Feeder International Line, Pte., Ltd. v. Court of Appeals,
G.R. No. 94262, May 31, 1991)
Importation is terminated only upon the payment of duties, taxes and other
charges upon the articles, or secured to be paid, at the port of entry and the legal
permit for withdrawal shall have been granted. Payment of the duties, taxes, fees
and other charges must be in full. (Papa v. Mago, G.R. No. L-27360, February 28,
1968)
Under Section 1202 of the TCCP, importation takes place when merchandise
is brought into the customs territory of the Philippines with the intention of
unloading the same at port. An exception to this rule is transit cargo entered for
immediate exportation which may be allowed under Section 2103 of the TCCP
when the following concur:
(a) there is a clear intent to export the article as shown in the bill of
lading, invoice, cargo manifest or other satisfactory evidence;
(b) the Collector must designate the vessel or aircraft wherein the
articles are laden as a constructive warehouse to facilitate the
direct transfer of the articles to the exporting vessel or aircraft;
(c) the imported articles are directly transferred from the vessel or
aircraft designated as a constructive warehouse to the
exporting vessel or aircraft and
2. Obligations of importer
a) Cargo manifest
b) Import entry
The term "entry" in Customs law has a triple meaning. It means (1) the
documents filed at the Customs house; (2) the submission and acceptance of the
documents; and (3) the procedure of passing goods through the Customs
house. (Jardeleza v. People, G.R. No. 165265, February 06, 2006)
The Tariff and Customs law subjects to forfeiture any article which is removed
contrary to law from any public or private warehouse under customs supervision, or
released irregularly from Customs custody. Before forfeiture proceedings are
instituted the law requires the presence of probable cause; once established, the
burden of proof is shifted to the claimant. (Carrara Marble Phil., Inc. v.
Commissioner of Customs, G.R. No. 129680, September 01, 1999)
G. Classification of goods
1. Taxable importation
2. Prohibited importation
Although the illegally imported articles may not be absolutely prohibited, but
only qualifiedly prohibited under Sec. 102 (K) of the Tariff and Customs Code, for it
may be imported subject to certain conditions, it is nonetheless prohibited and is a
contraband (Comm. of Customs vs. CTA & Dichoco, L-33471, Jan. 31, 1972), and the
legal effects of the importation of qualifiedly prohibited articles are the same as
those of absolutely prohibited articles. (Auyong Hian v. CTA, G.R. No. L-28782,
September 12, 1974)
3. Conditionally-free importation
H. Classification of duties
1. Ordinary/regular duties
a) Ad valorem; methods of valuation
(i) Transaction value
(ii) Transaction value of identical goods
(iii) Transaction value of similar goods
(iv) Deductive value
(v) Computed value
(vi) Fallback value
b) Specific
2. Special duties
a) Dumping duties
b) Countervailing duties
c) Marking duties
d) Retaliatory/discriminatory duties
e) Safeguard
I. Remedies
1. Government
a) Administrative/extrajudicial
(i) Search, seizure, forfeiture, arrest
It is quite clear that seizure and forfeiture proceedings under the tariff and
customs laws are not criminal in nature as they do not result in the conviction of the
offender nor in the imposition of the penalty provided for in section 3601 of the
Code. As can be gleaned from Section 2533 of the code, seizure proceedings, such
as those instituted in this case, are purely civil and administrative in character, the
main purpose of which is to enforce the administrative fines or forfeiture incident to
unlawful importation of goods or their deliberate possession. (People v. Court of
First Instance of Rizal, G.R. No. L-41686, November 17, 1980)
cannot be fully equated with due process in its strict judicial sense. The essence of
due process is simply an opportunity to be heard or, as applied to administrative
proceedings, an opportunity to explain one's side or an opportunity to seek
reconsideration of the action or ruling complained of. (El Greco Ship Manning and
Management Corporation v. Commissioner of Customs, G.R. No. 177188, December
04, 2008)
Regional trial courts are devoid of any competence to pass upon the validity
or regularity of seizure and forfeiture proceedings conducted by the BOC and to
enjoin or otherwise interfere with these proceedings. Regional trial courts are
precluded from assuming cognizance over such matters even through petitions for
certiorari, prohibition or mandamus. (Subic Bay Metropolitan Authority v.
Rodriguez, G.R. No. 160270, April 23, 2010)
Even if the seizure by the Collector of Customs were illegal, which has yet to
be proven, we have said that such act does not deprive the Bureau of Customs of
jurisdiction thereon. The allegations of petitioners regarding the propriety of the
seizure should properly be ventilated before the Collector of Customs. (Jao v. Court
of Appeals, G.R. No. 104604, 111223, October 06, 1995)
The requisites for the forfeiture of goods under Section 2530(f), in relation to
(1) (3-5), of the Tariff and Customs Code are: (a) the wrongful making by the owner,
importer, exporter or consignee of any declaration or affidavit, or the wrongful
making or delivery by the same person of any invoice, letter or paper — all touching
on the importation or exportation of merchandise; (b) the falsity of such declaration,
affidavit, invoice, letter or paper; and (c) an intention on the part of the
importer/consignee to evade the payment of the duties due. (Republic v. CTA, G.R.
No. 139050, October 02, 2001)
Once probable cause has been shown for the institution of forfeiture
proceedings, the burden of proof is upon claimant to establish that he fell within the
purview of the exception. The legal presumption in Section 5(j), Rule 131 of the
Rules of Court and Article 541 of the Civil Code are of a general character and
cannot prevail over the specific provisions of the Tariff and Customs Code. (Acting
Commr. of Customs v. CTA, G.R. No. 62636, April 27, 1984)
NFSC is a Japan-based company who sells raw sugar. However, NFSC was
charged by violation of the Joint Order by the Commissioner Customs. The court
ruled that NFSC did not violate the order and such was in good faith. The Court
ruled that the onus probandi to establish the existence of fraud is lodged with the
Bureau of Customs which ordered the forfeiture of the imported goods. Fraud is
never presumed. It must be proved. Failure of proof of fraud is a bar to forfeiture.
The reason is that forfeitures are not favored in law and equity. The fraud
contemplated by law must be intentional fraud, consisting of deception willfully and
deliberately done or resorted to in order to induce another to give up some
right. Absent fraud, the Bureau of Customs cannot forfeit the shipment in its favor.
THE COMMISSIONER OF CUSTOMS & THE DISTRICT COLLECTOR OF CUSTOMS FOR
THE PORT OF ILOILO vs. NEW FRONTIER SUGAR CORPORATION, G.R. No. 163055,
June 11, 2014, J. Perez
Agriex Co. foreign corporation alleges that the Bureau of Customs exclusive
original jurisdiction over actual and physical possession of foreign shipments and
thus RTC has no jurisdiction over such. The court ruled that it is well settled that the
Collector of Customs has exclusive jurisdiction over seizure and forfeiture
proceedings, and regular courts cannot interfere with his exercise thereof or stifle or
put it at naught. The Collector of Customs sitting in seizure and forfeiture
proceedings has exclusive jurisdiction to hear and determine all questions touching
on the seizure and forfeiture of dutiable goods. Regional trial courts are devoid of
any competence to pass upon the validity or regularity of seizure and forfeiture
proceedings conducted by the BOC and to enjoin or otherwise interfere with these
proceedings. Regional trial courts are precluded from assuming cognizance over
such matters even through petitions for certiorari, prohibition or mandamus.
AGRIEX CO., LTD, vs. HON. TITUS B. VILLANUEVA, Commissioner, Bureau of Customs
(now replaced by HON. ANTONIO M. BERNARDO), and HON. BILLY C. BIBIT, Collector
of Customs, Port of Subic (now replaced by HON. EMELITO VILLARUZ), G.R. No.
158150, September 10, 2014, J. Bersamin
b) Judicial
(i) Rules on appeal including jurisdiction
2. Taxpayer
a) Protest
b) Abandonment
Both the Import Entry Declaration (IED) and Import Entry and Internal
Revenue Declaration (IEIRD) should be filed within 30 days from the date of
discharge of the last package from the vessel or aircraft. (Chevron Philippines, Inc.
v. Commr., G.R. No. 178759, August 11, 2008)
V. Judicial Remedies (R.A. No. 1125, as amended, and the Revised Rules of
the Court of Tax Appeals)
The appellate jurisdiction of the CTA is not limited to cases which involve
decisions of the CIR on matters relating to assessments or refunds. Section 7
of Republic Act No. 1125||| covers other cases that arise out of the National Internal
Revenue Code (NIRC) or related laws administered by the Bureau of Internal
Revenue (BIR). (Commr. v. Hambretch & Quist Philippines, Inc., G.R. No. 169225,
November 17, 2010)
In line with the lifeblood doctrine, the National Internal Revenue Code of 1997
(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. (Angeles City v. Angeles Electric
Corporation, G.R. No. 166134, June 29, 2010)
Section 7 of Republic Act No. 1125, creating the Court of Tax Appeals, in
providing for appeals from — '(1) Decisions of the Collector of Internal Revenue in
cases involving disputed assessments, refunds of internal revenue taxes, fees or
other charges, penalties imposed in relation thereto, or other matters arising under
the National Internal Revenue Code or other law or part of the law administered by
the Bureau of Internal Revenue — allows an appeal from a decision of the Collector
in cases involving 'disputed assessments' as distinguished from cases involving
'refunds of internal revenue taxes, fees or other charges, . . .'; To hold that the
taxpayer has now lost the right to appeal from the ruling on the disputed
assessment but must prosecute his appeal under Section 306 of the Tax Code,
which requires a taxpayer to file a claim for refund of the taxes paid as a condition
precedent to his right to appeal, would in effect require of him to go through a
useless and needless ceremony that would only delay the disposition of the case,
for the Collector (now Commissioner) would certainly disallow the claim for refund in
the same way as he disallowed the protest against the assessment. (Vda. de San
Agustin v. Commr., G.R. No. 138485, September 10, 2001)
While the law confers on the CTA jurisdiction to resolve tax disputes in
general, this does not include cases where the constitutionality of a law or rule is
challenged. Where what is assailed is the validity or constitutionality of a law, or a
rule or regulation issued by the administrative agency in the performance of its
quasi-legislative function, the regular courts have jurisdiction to pass upon the
same. (British American Tobacco v. Camacho, G.R. No. 163583, August 20, 2008)
A final demand letter from the Bureau of Internal Revenue, reiterating to the
taxpayer the immediate payment of a tax deficiency assessment previously made,
is tantamount to a denial of the taxpayer's request for reconsideration. Such letter
amounts to a final decision on a disputed assessment and is thus appealable to the
Court of Tax Appeals (CTA). (Commr. v. Isabela Cultural Corp., G.R. No. 135210, July
11, 2001)
If the protest is denied in whole or in part, or is not acted upon within one
hundred eighty (180) days from submission of documents, the taxpayer adversely
affected by the decision or inaction may appeal to the Court of Tax Appeals within
(30) days from receipt of the said decision, or from the lapse of the one hundred
eighty (180)-day period; otherwise the decision shall become final, executory and
demandable.||| (Rizal Commercial Banking Corp. v. Commr., G.R. No. 168498, June
16, 2006)
variation. (Filipinas Investment & Finance Corp. v. Commr., G.R. No. L-23501, May
16, 1967)
Sec. 7 of RA 1125 provides that the CTA has exclusive appellate jurisdiction to
review by appeal decisions of the CIR in cases involving disputed assessments.
Likewise Sec. 4 of the 1997 NIRC [RA 8424] provides that the CIR has the power to
decide disputed assessments subject to the exclusive appellate jurisdiction of the
CTA. The latest law on the jurisdiction of the CTA under Sec. 7 of RA 9282 provides
that the CTA exercises exclusive appellate jurisdiction to review by appeal decisions
of the CIR in cases involving disputed assessments. Thus the CTA’s jurisdiction is to
entertain an appeal only from a final decision or assessment of the CIR or in cases
where the CIR has not acted within the period prescribed by the NIRC. So when the
CIR has not issued an assessment, then there is nothing to protest or dispute.
(Adamson vs. Court of Appeals, 588 SCRA 27)
The period to appeal the decision or ruling of the RTC in local tax cases to CTA
via petition for review is governed by Sec. 11 of RA 9282 and Sec. 3(a), Rule 8 of the
Revised Rules of CTA, which is 30 days from receipt of decision or ruling. To appeal
an adverse ruling of the RTC to the CTA the taxpayer must file a petition for review
with the CTA within 30 days from receipt of the adverse decision or ruling. An
extension may be granted for 15 days. With the several extensions asked the CTA
can dismiss the petition. Failure to comply with requirements would also be a
ground to dismiss the petition. (City of Manila vs. Coca Cola Bottlers Phils., 595
SCRA 299)
The mandatory rule is that a judicial claim must be filed with the CTA within thirty
(30) days from the receipt of the Commissioner’s decision denying the
administrative claim or from the expiration of the 120–day period without any action
from the Commissioner. Otherwise, said judicial claim shall be considered as filed
out of time. COMMISSIONER OF INTERNAL REVENUE, vs. SILICON PHILIPPINES, INC.
(FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.), G.R. No. 169778, March 12,
2014, J. PEREZ
Philamlife sold its shares through a public bidding. However, the selling price was
below the book value of the shares. Hence, the BIR imposed donor’s tax on the
price difference. Philamlife appealed to the Secretary of Finance. Due to the adverse
ruling, Philamlife appealed with the CA. CA alleged that it does not have jurisdiction
for jurisdiction lies with the CTA. The Court ruled that, the CTA can now rule not only
on the propriety of an assessment or tax treatment of a certain transaction, but also
on the validity of the revenue regulation or revenue memorandum circular on which
the said assessment is based. THE PHILIPPINE AMERICAN LIFE AND GENERAL
INSURANCE COMPANY vs. SECRETARY OF FINANCE and COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 210987, November 24, 2014, J. Velasco Jr.
2. Criminal cases
a) Exclusive original jurisdiction
b) Exclusive appellate jurisdiction in criminal cases
B. Judicial procedures
1. Judicial action for collection of taxes
a) Internal revenue taxes
Nowhere in the Tax Code is the Collector of Internal Revenue required to rule
first on a taxpayer's request for reinvestigation before he can go to court for the
purpose of collecting the tax assessed. On the contrary, Section 305 of the same
Code withholds from all courts, except the Court of Tax Appeals under Section 11
of Republic Act 1125, the authority to restrain the collection of any national internal-
revenue tax, fee or charge, thereby indicating the legislative policy to allow the
Collector of Internal Revenue much latitude in the speedy and prompt collection of
taxes. (Republic v. Lim Tian Teng Sons & Co., Inc., G.R. No. L-21731, March 31,
1966)
The law prescribing a limitation of actions for the collection of the income tax
is beneficial both to the Government and to its citizens; to the Government because
tax officers would be obliged to act promptly in the making of assessment, and to
citizens because after the lapse of the period of prescription citizens would have a
feeling of security against unscrupulous tax agents who will always find an excuse
to inspect the books of taxpayers, not to determine the latter’s real liability, but to
take advantage of every opportunity to molest peaceful, law-abiding citizens.
Without such a legal defense taxpayers would furthermore be under obligation to
always keep their books and keep them open for inspection subject to harassment
by unscrupulous tax agents. (Bank of Philippine Islands (Formerly Far East Bank and
Trust Company) v. Commissioner of Internal Revenue, G. R. No. 174942, March 7,
2008)
that it will no longer be subjected to further investigation for taxes after the
expiration of a reasonable period of time. (Philippine Journalists, Inc. v. Commissioner
of Internal Revenue, G. R. No. 162852, December 16, 2004)
The signatures of both the Commissioner and the taxpayer, are required for a
waiver of the prescriptive period, thus a unilateral waiver on the part of the taxpayer
does not suspend the prescriptive period. (Commissioner of Internal Revenue v.
Court of Appeals, et al.,G.R. No. 115712, February 25, 1999)
The act of requesting a reinvestigation alone does not suspend the running of
the prescriptive period. The request for reinvestigation must be granted by the
CIR. (Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v.
Commissioner of Internal Revenue, G. R. No. 174942, March 7, 2008)
b) Local taxes
(i) Prescriptive period
2. Civil cases
a) Who may appeal, mode of appeal, effect of appeal
(i) Suspension of collection of tax
a) Injunction not available to restrain collection
(ii) Taking of evidence
(iii) Motion for reconsideration or new trial
It is true that petitioner could not move for new trial on the basis of newly
discovered evidence because in order to have a new trial on the basis of newly
discovered evidence, it must be proved that: (a) the evidence was discovered after
the trial; (b) such evidence could not have been discovered and produced at the
trial with reasonable diligence; (c) it is material, not merely cumulative,
corroborative or impeaching; and (d) it is of such weight that, if admitted, will
probably change the judgment. This does not mean however, that petitioner is
altogether barred from having a new trial if the reasons put forth by petitioner could
fall under mistake or excusable negligence. (Philippine Phosphate Fertilizer Corp. v.
Commr., G.R. No. 141973, June 28, 2005)
Before the CTA En Banc could take cognizance of the petition for review
concerning a case falling under its exclusive appellate jurisdiction, the litigant must
sufficiently show that it sought prior reconsideration or moved for a new trial with
the concerned CTA division. Procedural rules are not to be trifled with or be excused
simply because their non-compliance may have resulted in prejudicing a party's
substantive rights. (Commisioner of Customs v. Marina Sales, Inc., G.R. No. 183868,
November 22, 2010)
The Commissioner of Internal Revenue, not having clearly signified his final
action on the disputed assessment, legally the period to appeal has not commenced
to run. The request for reinvestigation and reconsideration was in effect considered
denied by CIR when the latter filed a civil suit for collection of deficiency income.
(Commissioner of Internal Revenue vs Union Shipping Corporation and the Court of
Tax Appeals, G.R. No. L-66160, May 21, 1990)
The petition for review to be filed with the CTA en banc as the mode for
appealing a decision, resolution, or order of the CTA Division, under Section 18 of
Republic Act No. 1125, as amended, is not a totally new remedy, unique to the CTA,
with a special application or use therein. Accordingly, doctrines, principles, rules,
and precedents laid down in jurisprudence by this Court as regards petitions for
review and appeals in courts of general jurisdiction should likewise bind the CTA,
and it cannot depart therefrom. (Santos v. People, et al, G. R. No. 173176, August
26, 2008)
In this case, Duty Free Philippines claimed that it was exempted from the expanded
withholding tax under Revenue Regulation (R.R.) No. 6-94. The CTA Division ruled
that Duty Free was not a tax-exempt entity in the absence of an express grant of tax
exemption. Duty Free then directly appealed to the Supreme Court under Rule 45.
The Supreme Court said that Duty Free’s direct appeal to this Court is fatal to its
claim. Under RA 9282 Section 18, “A party adversely affected by a resolution of a
Division of the CTA on a motion for reconsideration or new trial, may file a petition
for review with the CTA en banc.” Clearly, the Supreme Court is without jurisdiction
to review decisions rendered by a division of the CTA, exclusive appellate
jurisdiction over which is vested in the CTA en banc. DUTY FREE PHILIPPINES v
BUREAU OF INTERNAL REVENUE, represented by Hon. Anselmo G. Adriano, Acting
Regional Director, Revenue Region No. 8, Makati City, G.R No. 197228, October 8,
2014. Sereno.
In fine, if a taxpayer is not satisfied with the decision of the CBAA or the RTC, as the
case may be, the taxpayer may file, within thirty (30) days from receipt of the
assailed decision, a petition for review with the CTA pursuant to Section 7(a) of R.A.
9282. In cases where the question involves the amount of the tax or the correctness
thereof, the appeal will be pursuant to Section 7(a)(5) of R.A. 9282. When the
appeal comes from a judicial remedy which questions the authority of the local
government to impose the tax, Section 7(a)(3) of R.A. 9282 applies. Thereafter, such
decision, ruling or resolution may be further reviewed by the CT A En Banc pursuant
to Section 2, Rule 4 of the Revised Rules of the CTA. NATIONAL POWER
CORPORATION vs. MUNICIPAL GOVERNMENT OF NAVOTAS, SANGGUNIANG BAYAN
BOC committed procedural missteps and the decision of the CTA division has
become final. The Supreme Court is without jurisdiction to review decisions
rendered by a division of the CTA but the decision of the CTA en banc. Under Sec. 9
of RA 9282, a party affected by the ruling or decision of a division of the CTA may
file an MR within 15 days. Sec. 11 of RA 9282 provides that if the MR is denied, a
petition for review is filed with the CTA en banc. From an adverse ruling or decision
from the CTA en banc, the appeal by way of petition for review on certiorari under
Rule 45 is filed with the Supreme Court. Thus the Supreme Court has no jurisdiction
to review the decision of a division of the CTA. (Com. of Customs v. Gelmart
Industries, 579 SCRA 272)
3. Criminal cases
a) Institution and prosecution of criminal actions
Section 222 of the NIRC specifically states that in cases where a false or
fraudulent return is submitted or in cases of failure to file a return such as this case,
proceedings in court may be commenced without an assessment. Furthermore,
Section 205 of the same Code clearly mandates that the civil and criminal aspects
of the case may be pursued simultaneously. (Commr. v. Pascor Realty &
Development Corp., G.R. No. 128315, June 29, 1999)
Since the civil liability is not deemed included in the criminal action, acquittal
of the taxpayer in the criminal proceeding does not necessarily entail exoneration
from his liability to pay the taxes. The acquittal in a criminal case cannot operate to
discharge defendant from the duty of paying the taxes which the law requires to be
paid, since that duty is imposed by statute prior to and independently of any
attempts by the taxpayer to evade payment. (Republic v. Patanao, G.R. No. L-
22356, July 21, 1967)
With regard to the tax proper, the state correctly points out in its brief that
the acquittal in the criminal case could not operate to discharge petitioner from the
duty to pay the tax, since that duty is imposed by statue prior to and independently
of any attempts on the part of the taxpayer to evade payment. The obligation to
pay the tax is not a mere consequence of the felonious acts charged in the
information, nor is it a mere civil liability derived from crime that would be wiped
out by the judicial declaration that the criminal acts charged did not exist. (Castro v.
Collector of Internal Revenue, G.R. No. L-12174, April 26, 1962)
impending transmittal to the Senate of the Articles of Impeachment and the ensuing
trial of the Chief Justice will necessarily involve the expenditure of public funds.
(Francisco, Jr. vs. Nagmamalasakit na mga Manananggol ng mga Manggagawang
Pilipino, 415 SCRA 44)
Taxpayers have been allowed to sue where there is a claim that public funds
are illegally disbursed or that public money is being deflected to any improper
purpose, or that public funds are wasted through the enforcement of an invalid or
unconstitutional law. On the other hand, as citizens, petitioners have must fulfill the
standing requirement given that the issues they have raised may be classified as
matters "of transcendental importance, of overreaching significance to society, or of
paramount public interest." (Belgica v. Ochoa, G.R. No. 208566, 208493, 209251, L-
20768, November 19, 2013)
What is a citizen’s suit? When suing as a citizen, the interest of the petitioner
assailing the constitutionality of a statute must be direct and personal. He must be
able to show, not only that the law or any government act is invalid, but also that he
sustained or is in imminent danger of sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby in some indefinite way. It must
appear that the person complaining has been or is about to be denied some right or
privilege to which he is lawfully entitled or that he is about to be subjected to some
burdens or penalties by reason of the statute or act complained of. In fine, when the
proceeding involves the assertion of a public right, the mere fact that he is a citizen
satisfies the requirement of personal interest. (Francisco, Jr. vs. Nagmamalasakit na
mga Manananggol ng mga Manggagawang Pilipino, 415 SCRA 44)