COLLEGE OF MAASIN

COLLEGE OF LAW
FINAL EXAMINATION
LAW ON TAXATION

5 points for each question and sub-question. No credit points for answers with no
explanation.

I
What is a subsidy? Is subsidy a tax?

II
Madam X owns real property in Caloocan City. On July 1, 2021, she received a notice of
assessment from the City Assessor, informing her of a deficiency tax on her property. She
wants to contest the assessment.
(A) What are the administrative remedies available to Madam X in order to
contest the assessment and their respective prescriptive periods?
(B) May Madam X refuse to pay the deficiency tax assessment during the
pendency of her appeal?

III
On October 15, 2017, ABC Corp. imported 1,000 kilos of steel ingots and paid customs
duties and VAT to the Bureau of Customs on the importation. On February 17, 2021, the
Bureau of Customs, citing provisions of the Tariff and Customs Code on post-audit,
investigated and assessed ABC Corp. for deficiency customs duties and VAT.
Is the Bureau of Customs correct?

IV

A religious organization which enjoys tax exemption under Section 28 (3), Art VI of the
Constitution seeks your legal advise and want to know if tax exemption can be obtained
under the following impositions:

a) The 5% tax on idle lands levied under Sec. 236 of the Local Government
Code. This tax is being assessed against uncultivated parcel of land owned by
the religious organization which it intends to sell so that the proceeds thereof
could be used to finance the education of two seminarians in Rome, Italy.
 b) Building permit for renovation of the west wing of the church building.

c) Registration fees for the car of Fr. Dalmacio, the Parish Priest. The car is used
to attend to sick calls of parishioners and related church functions.

d) Real estate tax assessed on a portion of the church lot planted to vegetables for
the use of the priests who all reside in the convent.

A is engaged in the re-insurance business. In 2020, A asked for an opinion from the CIR
on whether or not there is a need to withhold tax on re-insurance premiums upon which
the CIR replied in the negative. In 2021, A was assessed for non-payment of withholding
taxes on re-insurance premiums in 2020. Naturally, A’s defense was good faith of his
reliance to the erroneous opinion of the CIR. Will this defense save A from paying the
taxes?

VI
Enumerate the five (5) inherent limitations on taxation. Explain each item briefly.
1. public purpose. the imposition of taxes must be for some public purpose
2. situs of taxation. the imposition of taxes is jurisdictional

VII

Petitioner at the Regional Trial Court seeks the annulment of the act of the Collector of
Customs declaring the subject importation abandoned and ordering it to be sold at public
auction on the ground that the abandonment proceeding was irregular since the Collector
of Customs did not give notice to the Petitioner of the abandonment before declaring the
importation abandoned. Rule on the Petitioner’s claim.

VIII
In 2020, pursuant to a Letter of Authority (LA) issued by the Regional Director, Mr.
Abcede was assessed deficiency income taxes by the BIR for the year 2019. He paid the
deficiency. In 2021, Mr. Abcede received another LA for the same year 2019, this time
from the National Investigation Division, on the ground that Mr. Abcede's 2019 return
was fraudulent.
Mr. Abcede contested the LA on the ground that he can only be investigated once in a
taxable year. Decide.
 IX
The Municipality of Pasig passed an ordinance imposing franchise tax on all business
venture operations carried out through a franchise within the municipality.
If you are one of the franchise holder, what defense would you advance to declare the
ordinance unconstitutional?

A disgruntled employee of AC Corporation reported to the Commissioner of Customs

that the company is illegally importing electronic equipment by way of unlawful
“shipside” activities thereby evading the payment of custom duties and taxes on the
goods. According, the Commissioner of Customs issued warrants of seizure and
detention and seized the goods listed in the warrants. After the seizure of the goods and
considering the magnitude of the value of the goods, counsel for AC Corporation filed a
petition with the Supreme Court for certiorari, prohibition and mandamus to enjoin the
Commissioner of Customs and his agents from continuing further with the forfeiture
proceedings and praying that the Commissioner return the confiscated articles on the
ground that the warrants were in violation of the Rules of Court and the Bill of Rights.

a) If you were a newly appointed Solicitor in the Office of the Solicitor General
representing the Commissioner of Customs, how would you defend the latter?

b) Assuming the enforcement of the warrant had been extend to the residence of
the President of AC Corporation, is such enforcement valid?

XI

RV’s newly acquired house and lot in Cainta was assessed in the amount of P1.5MM. He
contends that the municipal assessor made a grave mistake in valuing he land itself and
the improvements thereon. He approaches you as a law practitioner and want to know
what remedies he could resort to in order to obtain reduction of his tax liability. What
will be your advise.
Ans:
 I will advise RV to file a protest against the assessment. but to validly raise his
protest, he must first pay or deposit the tax due. Another remedy he could do is to resort
to tax avoidance which is a legal way to lessen his tax liabilities.

XII

In his letter of Protest, Mr. X did not invoke the defense of prescription of the right to
issue deficiency assessment. When his protest was denied, Mr. X invoked the defense in
the Petition for Review with the CTA. Counsel for the Commissioner of Internal
Revenue moved to strike out the defense. How will you resolve the motion?

XIII

The BIR Regional Director pursuant to the authority given to Regional Directors to issue
deficiency assessment not exceeding P100000, issued one against Mr. Yu. The latter
protested on time but his protest was denied with the warning “that the decision was the
final decision of the Regional Director and if not satisfied, Mr. Yu could appeal to the
CTA within 30 days from receipt”. The Regional Director moved to dismiss the case on
the ground that there was no final decision yet from the Commissioner. Resolve the
Motion to Dismiss.

XIV
How does the local government exercise its power to impose a tax?

XV

In 2014, Kerwin bought a three-story house and lot in Kidapawan, North Cotabato. The
property has a floor area of 600 sq.m. and is located inside a gated subdivision. Kerwin
initially declared the property as residential for real property tax purposes.

In 2020, Kerwin started using the property in his business of manufacturing garments for
export. The entire ground floor is now occupied by state-of-the-art sewing machines and
other equipment, while the second floor is used as offices. The third floor is retained by
Kerwin as his family's residence. Kerwin's neighbors became suspicious of the activities
going on inside the house, and they decided to report it to the Kidapawan City Hall. Upon
inspection, the local government discovered that the property was being utilized for
commercial use. Immediately, the Kidapawan Assessor reclassified the property as
commercial with an assessment level of 50% effective January 2021, and assessed
Kerwin back taxes and interest. Kerwin claims that only 2/3 of the building was used for
commercial purposes since the third floor remained as family residence. He argues that
the property should have been classified as partly commercial and partly residential.

(a) Is the Kidapawan assessor correct in assessing back taxes and

interest?

(b) Is Kerwin correct that only 2/3 of the property should be considered
commercial?

(c) Without paying the assessment, can Kerwin wants to file an administrative protest
against the assessment?

XVI
Vanderful, lnc.'s income tax return for taxable year 2015 showed an overpayment due to
excess creditable withholding taxes in the amount of ₱750,000.00. The company opted to
carry over the excess income tax credits as tax credit against its quarterly income tax
liabilities for the next succeeding years. For taxable year 2016, the company's income tax
return showed an overpayment due to excess creditable withholding taxes in the amount
of ₱1,100,000.00, which included the carry-over from year 2015 in the amount of
₱750,000.00 because its operations resulted in a net loss; hence, there was no application
for any tax liability. This time, the company opted and marked the box "To be
refunded' in respect of the total amount of ₱1,100,000.00.
Vanderful, Inc. now files in the BIR a claim for refund of unutilized overpayments of
₱1,100,00.00. Is the claim meritorious? (4%)