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i e t
e v e
R MOCK BAR ESSAY EXAMS
MS

r n
a l ON

t e
n In
TION
ON LAW
TAXATION

i o rof.
of Nicasio
By: Prof.

s
icasio
casio Cabaneiro

ss l e
b
I

o
A tax assessment was as filed by tthe BIR against Mr. Mojica, an employee of Filipinas Iron Co.

R
(FIC) earningg minimum w wage, premium overtime pay and service incentive leave (SIL) pay.
In addition,
on,, FIC granted
grant Mr. Mojica an apartment unit, amounting to P90,000 pesos, near

a n
the premises
mises of the former for its convenience. The BIR in interpreting Republic Act 9504
remises
(exempting
exempting
mpting m minimum wage earner [MWE] to income tax) issued a ruling providing that

h
when
whe n an MMWE receives income from whatever source other than its wage in excess of the
P82,000
P82,00 threshold for other benefits, such person would transcend as a rank-and-file, thus,

C subject to the compensation income tax. The BIR officer contends that Mr. Mojica is not
sub
subj
exempted from the payment of income tax. (a) Is the BIR ruling valid? (b) Is Mr. Mojica
liable to pay income tax? Explain your answer.

Suggested Answer: (a) No. In Soriano vs. Sec. of Finance, the Court ruled that the proper
interpretation of Rep. Act 9504 is that it imposes se taxes only on the taxable income

r
received in excess of the minimum wage, but ut MWEs
MWE
MW will not lose their exemption as

a
such. They remain MWEs, entitled to exemption mption as ssuch, but the taxable income they
xemption
receive other than as MWEs may bee subjected to appropriate taxes. In this case, there
is a clear legislative intent to exempt
B
pt MWE who
wh earns additional income on top of the
w

s
minimum wage. Liberal interpretation
erpretat
pret applies in favor of the grantee and against the
n ap

e
government. (Soriano vs. Sec. of Finan
Finance, G.R. No. 184450, January 24, 2017)
Financ

necessary for the

b
(b) No. If the benefits
l
nefits are furnished
enefits
he trade or b
fu by the employer for its convenience, or is
business of the latter, these benefits are not income on the

o
part of thee employee.
mployee. The lodging, being a supplement, provided by FIC for Mr.

R
Mojicaa inures for the
tth convenience of FIC. The P90,000 worth of lodging does not
form the income of Mr. Mojica. Thus, Mr. Mojica is exempted from the
rm part of th

a n
payment
ayment of income tax being a minimum wage earner for income received not
exceeding
exceed
exceedin the P82,000 threshold benefits. (Note: Under the TRAIN law, the

h
thre
thres
threshold benefit was increased to P90,000)

C 1

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i e t
e v II
e
R
A law was enacted imposing
impo
im a tax on manufacturers of coconut

r n
conut
onut oil. The
Th proceeds of which

l e
are to bee u
used
d exclu
ex
exclusively for the protection and promotion
otion
ion of the co
coconut industry, namely,

a
too improve tthe working conditions in coconut mills lls and to con
conduct research on the use of
coconut oiloi for motor fuel. Some of the manufacturers
t
facturers
cturers of cococonut oil challenge the validity

n In
of the llaw, contending that the tax is to be used for a priv
private purpose, and therefore, the law

o
vviolates the rule that public revenues shall
vio all not b
be aappropriated for anything but a public

i s
purpose. Decide with reason.

ss Suggested Answer: The levy

l e
y is for a public
pu
p purpose. It cannot be denied that the coconut
industry is one of the major industries supporting the national economy. It is,
therefore, the state’s
b
te’s concern
concer to make it a strong and secure source not only of the

o
livelihood of the signific
significant segment of the population, but also of export earnings, the

R
sustained
ned growth ofo which is one of the imperatives of economic growth. This is also
an instance where a tax law could be used to implement the police power of the
nstance whe

n
State.(Cocofed
State.
tate.(Cocofe
(Cocofe vs. Presidential Commission on Good Government, G.R. No. 75713, October 2,

a
1989)

h
III

C The BIR assessed St. Ignatius University (SIU) [a non-stock, non-profit educational
Th
institution) of deficiency income tax on its rental earnings from restaurants/canteens and
bookstores operating within the campus; deficiency value-added tax (VAT) on business
income; and deficiency documentary stamp tax (DST) on loans and lease contracts. SIU
protested and anchored its petition on Article XIV, Section 4(3), which exempts all revenues
nstitut
and assets of non-stock, non-profit educational institutions used actually, directly, and
exclusively for educational purposes from taxes and
that Section 30(H) of the Tax Code qualified r
nd duties. On

a
d thee tax exe
O the other hand, the BIR posits
exemption
exem granted to non-stock, non-

B
profit educational institutions such that the revenues and income they derived from their
assets, or from any of their activitiess conducted
co ucted
con cted fo
for profit, are taxable even if these reveues
and income are used for educational
onal

e s
al purposes.
purpos
purpo Decide.

l
Suggested Answer: - I will
ill rule in fa
favor of SIU. The tax exemption granted to non-stock,

b
non-profit educational
cational institutions
tional institu
instit is conditioned only on the actual, direct and

o
exclusive usee of their rev
reve
revenues and asets for educational purposes. A plain reading of
the Constitution would show that it does not require that the reveues and income must
stitution wo
woul

R
havee also been sourced
s from educational activities related to the purposes of an

n
educational institution. The phrase all revenues is unqualified by any reference to the
ducational iin

a
source of revenues. Thus, so long as the revenues and income are used actually,
directly and exclusively for educational purposes, then said revenues and income shall
directl

h be exempt from taxes and duties.

C 2

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i e t
e
NOTE: Taxation
v
axation of rre
revenues differs from the taxation of assets.
e
ssets. When a non-stock,

n
non-profit educational institution proves that it uses its revenues
profit educa
education actually, directly, and
venues actu

R
eexclusively
usively for eeducational purposes, it shall be exempted
lusively

r
mpted from iincome tax, VAT, and
empted

l e
L
Loca
Local Busin
Bus
Business Tax. On the other hand, when n it also shows
show that it uses its assets in

a t
the fo rposes,
poses, it shall be exempt from real property
form of real property for educational purposes,
tax
tax. Proving the actual use of the taxablexable
le item will
wil result in an exemption, but the

n hall be exemp
specific tax from which the entity shall

In
exem
exempted from shall depend on whether the

o
as t.. (Commissioner
item is an item of revenue or asset. ((Comm
Comm of Internal Revenue vs. De La Salle

s i e s
6596,
6, No
University, Inc., G.R. No. 196596, Nov mbe
Novemberbe 9, 2016)

s l
IV

The City of Manila assessed

b
essed and ccollected taxes from Ascano and Evangelista pursuant to

o
Section 15 (Tax on Wholesale
Wholesaler
Wholesalers, Distributors, or Dealers) and Section 17 (Tax on Retailers)

R
of the Revenue ue Code of Manila,
M respectively. It also imposed additional taxes pursuant to
Section 21 1 (Tax on Business
Bus Subject to the Excise, Value-Added or Percentage Taxes under

n
the National Internal Revenue Code) of the same law as a condition for renewal of their
onal Intern

a
business
ess licenses.
usiness license Ascano and Evangelista paid under protest the tax assessed under Section
licen

h
21, but ther
thereafter requested for tax credit or refund. They asserted that the enforcement of
Section 21 constitutes double taxation because the local business taxes under Sections 15 and

C
17 were
w already being paid by the. Is their contention tenable? Explain.

Suggested Answer: Yes, this is obnoxious double taxation or direct duplicate taxation
which is prohibited since it taxes the same property twice when it should be taxed only
once. The two taxes were imposed on the same subject matter, for the same purpose,
by the same taxing authority, within the same jurisdiction,
j during the same taxing

r
period; and the taxes are of the same kind and nd character. All the taxes were imposed
d ch
chara

a
on the same subject matter (privilege of doing oing busine
business) and for the same purpose (in
order to make the taxpayers contribute bute to the ci city’s revenues), by the same taxing
authority (City of Manila) and within
B
hin the
the same
sam jurisdiction in the same taxing period

s
(i.e., per calendar year), and lastly,
astl the
d lastly taxes were all in the nature of local business
hee ta

e
taxes. Therefore, the enforcemtn
nforcemtn
orcemtn o of Section 21 constitutes obnoxious or prohibited

l
double taxation . ( (Nursery
rsery Care Corporation,
Nursery Co et al, vs. Anthony Acevedo and City of Manila,

b
G.R. No. 180651, July
uly 30, 2014)

o
V

Dionisio Power
R
wer Corpor
Corporation (DPC) , a VAT entity engaged in the business of power

n
generationon and sale of
tion o electricity, filed a claim for the refund of its unutilized input VAT under

a
Section
tion th Tax Code. The Court of Tax Appeals (CTA) rendered a decision partially
on 112 of the
granting
ranting DPC
DPC’s claim. On its Petition for Review with the Supreme Court, DPC claims that

h
it is entit
entitl
entitled for the full amount of tax refund or credit. On the other hand, the BIR contends

C 3

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i e t
that DPC’s claim

e v
m for refund sh
e
should fail since it is still liable for deviciency
viciency VA
VAT for its sales

n
of electricity
y to some companies
ccom which were denied VAT zero-rating.
ero--rating. Can
C the tax refund
claimed by
R
b DPC be offset
off
o with its liability for deficiency VAT?

r
Explain.
AT? Explain
Expla

a l Suggge tedd Answer: No. While as a rule, taxes

ugg
Suggest
beca
because the government and the taxpayer
t e
xes cannot b be subject to compensation
er are not creditors
cred and debtors of each other,

n In
the Court have allowed the offsetting tting of taxe
taxes where the determination of the

o
taxpayer’s liability is intertwined with the resolution
re of the claim for tax refund of

i s
erroneously or illegally collected
ted ttaxes
ected es uunder Sec. 229 of the Tax Code. Here DPC
un

s e
filed a claim for tax refund
nd or credit
und cred under Section 112 of the Tax Code, where the

s l
issue to be resolved is whether DPDPC is entitled to a refund or credit. And since it is

b
not a claim for refund
fund under Section
efund S 229 of the Tax Code, the correctness of DPC’s
VAT returns is not an issue.
issue
is Thus, offsetting of taxes cannot be allowed in the instant

December

R o
case. (Commissioner
ommissioner
mmissioner of Internal Revenue vs. Toledo Power Company, G.R. No. 196415,
ber 2, 2015)
mber

n
VI

a
Discuss the nature
n of tax amnesty. Can withholding agents with respect to their withholding

h
tax liabil
liabili
liabilities avail of tax amnesty?

C Suggested Answer: A tax amnesty is a general pardon or the intentional overlooking

by the State of its authority to impose penalties on persons otherwise guilty of violation
of a tax law. It partakes of an absolute waiver by the government of its right to collect
what is due it and to give tax evaders who wish to relent a chance to start with a clean
slate.

r
No. Under Republic Act No. 9480, they are ree specific
spec
specifically excluded from the coverage

a
of the tax amnesty program. The withholding holding
lding agent is liable only insofar as he failed

B
to perform his duty to withhold thee tax and remit rem the same to the government. The
liability for the tax remains with the he taxpa
taxpayer because the gain was realized and

s
received by him. Since the liability
bility for
or th
the tax belongs to the taxpayer and not to the

e
withholding agent, only y the former
forme may avail of the tax amnesty. (LG Electronics

l
Philippines, Inc. vs. CIR,, G.R. No. 165451,
1 December 3, 2014)

b
R o
a n
h
C 4

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