Notre Dame University - College of Law

Atty. Sittie Nadia M. Karim, CPA

TAXATION II – COURSE OUTLINE

SY 2022-2023
A. TRANSFER TAXES, VALUE ADDED TAXES & PERCENTAGE TAXES
National Internal Revenue Code (NIRC)
I. Transfer taxes
a) Estate tax
1. Basic principles, concept, and definition
Sections 84 and 88, NIRC

Case(s)

- G.R. No. L-43082, Lorenzo vs Posadas 18 June 1937

Facts: Herein petitioner Lorenzo, in his capacity as trustee of the estate of a certain Thomas Hanley, deceased,
brought an action against respondent Posadas, Collector of Internal Revenue. Petitioner alleges the respondent to
have exceeded in its tax collection, which, as assessed by the former, should only be in the amount of PhP1,434.24
instead of PhP2,052.74. Disregarding the allegation, respondent filed a motion in the CFI of Zamboanga praying
that the trustee be made to pay such tax. The motion was granted. Petitioner paid the amount in protest, however
notified the respondent that until a refund is prompted, suit would be bought for its recovery. Respondent overruled
the protest. Hence, the case at bar.

Issue/s:

1. Whether or not the provisions of Act No. 3606 (Tax Law) which is favorable to the taxpayer be given retroactive
effect?

Held and Reasoning: No. The respondent levied and assessed the inheritance tax collected from the petitioner
under the provisions of section 1544 of the Revised Administrative Code as amended by Act No. 3606. However,
the latter only enacted in 1930 – not the law in force when the testator died in 1922. Laws cannot be applied
retroactively. The Court states that it is a well-settled principle that inheritance taxation is governed by the statue
in force at the time of the death of the decendent. The Court also emphasized that “a statute should be considered
as prospective in its operation, unless the language of the statute clearly demands or expresses that it shall have
retroactive effect…” Act No. 3606 does not contain any provisions indicating a legislative intent to give it a
retroactive effect. Therefore, the provisions of Act No. 3606 cannot be applied to the case at bar.

2. Classification of decedent
Section 84, NIRC
3. Determination of gross and net estate
Sections 85 and 104
Case(s)
- Tuason vs Posadas G.R. No. L-30885 23 January 1930
-Topic: Gross Estate
Relevant Laws: Sec. 85 & 104 NIRC
G.R. No. L-30885 January 23, 1930
AVANCEÑA, C.J.:
Petitioners: ALFONSO TUASON Y ANGELES and MARIANO TUASON Y ANGELES
Respondents: JUAN POSADAS, JR., Collector of Internal Revenue
Facts:
 On September 15, 1922, Esperanza Tuason y Chuajap made a donation inter vivos of
certain property to plaintiff Mariano Tuason y Angeles. On April 30, 1923, she
made another donation inter vivos to Alfonso Tuason y Angeles, the other
plaintiff. On January 5, 1926, she died of senile weakness at the age of 73,
leaving a will bequeathing of P5,025 to Mariano Tuason y Angeles. Her judicial
administratrix paid the prescribed inheritance tax on these two bequests.
Issues:
1. Are the donations inter vivos made in anticipation of death part of Gross
Estate? - YES
Held:
 Petition DISMISSED.
 Decision of lower court REVERSED.
Ratio:
1. When the law say all gifts, it doubtless refers to gifts inter vivos, and not
mortis causa. Both the letter and the spirit of the law leave no room for any
other interpretation. Such, clearly, is the tenor of the language which refers
to donation that took effect before the donor's death, and not to mortis causa
donations, which can only be made with the formalities of a will, and can only
take effect after the donor's death. When such gifts have been made in
anticipation of inheritance, devise, bequest, or gift mortis causa, when the
donee, after the death of the donor proves to be his heir, devisee or donee
mortis causa, for the purpose of evading the tax, and it is to prevent this that
it provides that they shall be added to the resulting amount.
This being so, and it appearing that the appellees after the death of Esperanza
Tuason y Chuajap, were found to be legatees under her will, the donation inter
vivos she had made to them in 1922 and 1923, must be added to the net amount
that is to be taxed.

- Vidal de Roces vs Posadas G.R. No. L-34937 13 March 1933

Vidal de Roces vs. Posadas (Digest)
G.R. No. 34937 March 13, 1933
Imperial, J.:
Facts:
1. Sometime in 1925, plaintiffs Concepcion Vidal de Roces and her husband, as well as one Elvira Richards,
received as donation several parcel s of l and from Esperanza Tuazon. They t ook possession of
the lands thereafter and likewise obtained the respective transfer certificates.

2.The donor died a year after without leaving any forced heir. In her will, which was admitted to probate, she
bequeathed to each of the donees the sum of P5,000. After the distribution of the e s t a t e b u t b e f o r e t h e
d e l i v e r y o f t h e i r sh a r e s , t h e C IR (appellee) ruled that plaintiffs as donees and legatees should
pay inheritance taxes. The plaintiffs paid the taxes under protest.

3. CIR filed a demurrer on ground that the facts alleged were not sufficient to constitute a cause of action. The
court sustained the demurrer and ordered the amendment of the complaint but the appellants failed to do so.
Hence, the trial court dismissed the action on ground that plaintiffs, herein appellants, did not
really have a right of action.

4. Plaintiffs (appellant) contend that S e c . 1 5 4 0 o f t h e Administrative Code does not include

donation inter vivos and if it does, it is unconstitutional, null and void for violating SEC. 3 of the Jones
Law (providing that no law shall embrace more than one subject and that the subject should be
expressed in its t i t l e s ; t h a t t h e L e g i s l a t u r e h a s n o a u t h o r i t y t o t a x donation inter vivos;
finally, that said provision violates the rule on uniformity of taxation.

5. CIR however contends that the word 'all gifts' refer clearly to donation inter vivos and cited the doctrine in
Tuason v. Posadas.

Issue: Whether or not the donations should be subjected to inheritance tax

Held:
YES. Sec. 1540 of the Administrative Code clearly refers to those donation inter vivos that take effect
immediately or during the lifetime of the donor, but made in consideration of the death of the decedent.
Those donations not made in contemplation of the decedent's death are not included as it would be
equivalent to imposing a direct tax on property and not on its transmission. Th e p hr as e 'a l l g i f t s ' as h el d
i n Tuason v. Posadas refers to gifts inter vivos as they are considered as advances in anticipation of
inheritance since they are made in consideration of death.

4. Deductions and exclusions from estate

Section 86, NIRC
Case(s)

- Collector of Internal Revenue vs Fisher G.R. No. L-11622, 28 January 1961

Collector of Internal Revenue vs. Fisher
GR. No. L-11622 January 28, 1961
DOCTRINE: “Reciprocity must be total. If any of the two
states collects or imposes or does not exempt any transfer,
death, legacy or succession tax of any character, the
reciprocity does not work.”
FACTS:
Walter G. Stevenson was born in the Philippines of British
parents, married in Manila to another British subject,
Beatrice. He died in 1951 in California where he and his
wife moved to.
In his will, he instituted Beatrice as his sole heiress to
certain real and personal properties, among which are
210,000 shares of stocks in Mindanao Mother Lode Mines
(Mines).
Ian Murray Statt (Statt), the appointed ancillary
administrator of his estate filed an estate and inheritance
tax return. He made a preliminary return to secure the
waiver of the CIR on the inheritance of the Mines shares of
stock.
In 1952, Beatrice assigned all her rights and interests in the
estate to the spouses Fisher.
Statt filed an amended estate and inheritance tax return
claiming ADDITIOANL EXEMPTIONS, one of which is the
estate and inheritance tax on the Mines’ shares of stock
pursuant to a reciprocity proviso in the NIRC, hence,
warranting a refund from what he initially paid. The collector
denied the claim. He then filed in the CFI of Manila for the
said amount.
CFI ruled that (a) the ½ share of Beatrice should be
deducted from the net estate of Walter, (b) the intangible
personal property belonging to the estate of Walter is
exempt from inheritance tax pursuant to the reciprocity
proviso in NIRC.
ISSUE/S: Whether or not the estate can avail itself of the
reciprocity proviso in the NIRC granting exemption from the
payment of taxes for the Mines shares of stock.
RULING: NO. Reciprocity must be total. If any of the two
states collects or imposes or does not exempt any transfer,
death, legacy or succession tax of any character, the
reciprocity does not work.
In the Philippines, upon the death of any citizen or
resident, or non-resident with properties, there are
imposed upon his estate, both an estate and an
inheritance tax.
But, under the laws of California, only inheritance tax is
imposed. Also, although the Federal Internal Revenue
Code imposes an estate tax, it does not grant exemption on
the basis of reciprocity. Thus, a Filipino citizen shall always
be at a disadvantage. This is not what the legislators
intended.
SPECIFICALLY:
Section122 of the NIRC provides that “No tax shall be
collected under this Title in respect of intangible personal
property
(a) if the decedent at the time of his death was a resident of
a foreign country which at the time of his death did not
impose a transfer of tax or death tax of any character in
respect of intangible personal property of citizens of
the Philippines not residing in that foreign country, or
(b) if the laws of the foreign country of which the decedent
was a resident at the time of his death allow a similar
exemption from transfer taxes or death taxes of every
character in respect of intangible personal property owned
by citizens of the Philippines not residing in that foreign
country."
On the other hand, Section 13851 of the California
Inheritance Tax Law provides that intangible personal
property is exempt from tax if the decedent at the time of
his death was a resident of a territory or another State of
the United States or of a foreign state or country which then
imposed a legacy, succession, or death tax in respect to
intangible personal property of its own residents, but either:.
Did not impose a legacy, succession, or death tax of any
character in respect to intangible personal property of
residents of this State, or Had in its laws a reciprocal
provision under which intangible personal property of a non-
resident was exempt from legacy, succession, or death
taxes of every character if the Territory or other State of the
United States or foreign state or country in which the
nonresident resided allowed a similar exemption in respect
to intangible personal property of residents of the Territory
or State of the United States
- Dizon in his capacity as the Administrator vs CTA G.R. No. 140944 30 April 2008
Facts:
On November 7, 1987, Jose P. Fernandez died. Thereafter, a petition for the probate of his will was filed. The
probate court then appointed retired Supreme Court Justice Arsenio P. Dizon and petitioner, Atty. Rafael Arsenio P.
Dizon as Special and Assistant Special Administrator.Justice Dizon authorized Atty. Jesus M. Gonzales (Atty.
Gonzales) to sign and file on behalf of the Estate the required estate tax return and to represent the same in securing
a Certificate of Tax Clearance. On April 27, 1990, BIR Regional Director issued Certification stating that the taxes
due on the transfer of real and personal properties of Jose had been fully paid and said properties may be transferred
to his heirs.
Petitioner requested the probate court's authority to sell several properties forming part of the Estate, for the purpose
of paying its creditors. Petitioner manifested that Manila Bank, a major creditor of the Estate was not included, as it
did not file a claim with the probate court since it had security over several real estate properties forming part of the
Estate.However, on November 26, 1991, the Assistant Commissioner for Collection of the BIR, issued Estate Tax
Assessment Notice demanding the payment of P66,973,985.40 as deficiency estate tax.

Issue:
            Whether the actual claims of the creditors may be fully allowed as deductions from the gross estate of Jose
despite the fact that the said claims were reduced or condoned through compromise agreements entered into by the
Estate with its creditors

Ruling:
            It is admitted that the claims of the Estate's aforementioned creditors have been condoned - mode of
extinguishing an obligation.
            The U.S. court ruled that the appropriate deduction is the value that the claim had at the date of the
decedent's death. Also, 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.
            The court expresses its agreement with the date-of-death valuation rule.
First. There is no law, nor do we discern any legislative intent in our tax laws, which disregard the date-of-
death valuation principle and particularly provide 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. Any doubt on whether a person, article or activity is taxable is generally resolved against taxation.
Second. Such construction finds relevance and consistency in our Rules on Special Proceedings wherein
the term "claims" required to be presented against a decedent's estate is generally construed to mean debts or
demands of a pecuniary nature which could have been enforced against the deceased in his lifetime, or liability
contracted by the deceased before his death.
Therefore, the claims existing at the time of death are significant to, and should be made the basis of, the
determination of allowable deductions.

5. Exemption of certain acquisitions and transmissions Section 87

6. Estate tax returns and payment, and other administrative requirements
Sections 90-97, NIRC
- BIR Form No. 1801, BIR Form No. 2118-EA
- Republic Act (RA) No. 11213
- Revenue Regulation (RR) 4-2019 and 6-2019
- Revenue Memorandum Circular (RMC) No. 103-2019
Case(s)
- CIR vs Pineda G.R. No. L-22734, 15 September 1967
FACTS: Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is Atty.
Manuel Pineda. Estate proceedings were had in Court so that the estate was divided among and awarded to the heirs.
Atty Pineda's share amounted to about P2,500.00. After the estate proceedings were closed, the BIR investigated the
income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income
tax returns were not filed. Thereupon, the representative of the Collector of Internal Revenue filed said returns for
the estate issued an assessment and charged the full amount to the inheritance due to Atty. Pineda who argued that
he is liable only to extent of his proportional share in the inheritance.

ISSUE: Can BIR collect the full amount of estate taxes from an heir's inheritance.

HELD: Yes. The Government can require Atty. Pineda to pay the full amount of the taxes assessed.
The reason is that the Government has a lien on the P2,500.00 received by him from the estate as his share in the
inheritance, for unpaid income taxes for which said estate is liable. By virtue of such lien, the Government has the
right to subject the property in Pineda's possession to satisfy the income tax assessment. After such payment, Pineda
will have a right of contribution from his co-heirs, to achieve an adjustment of the proper share of each heir in the
distributable estate.
  All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and
collecting from each one of them the amount of the tax proportionate to the inheritance received; and second, is by
subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due.
This second remedy is the very avenue the Government took in this case to collect the tax. The Bureau of Internal
Revenue should be given, in instances like the case at bar, the necessary discretion to avail itself of the most
expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted,
because taxes are the lifeblood of government and their prompt and certain availability is an imperious need.

- CIR vs Gonzales and CTA G.R. No. L-19495, 24 November 1966

Facts: 
In 1948, Matias Yusay died leaving behind two heirs, namely, Jose Yusay and Lilia Yusay Gonzales. Jose was
appointed as administrator. He filed an estate and inheritance tax return in 1949. The Bureau of Internal Revenue
(BIR) conducted a tax audit and the BIR found that there was an under-declaration in the return filed. In 1953
however, a project of partition between the two heirs was submitted to the BIR. The estate was to be divided as
follows: 1/3 for Gonzales and 2/3 for Jose. The BIR then conducted another investigation in July 1957 with the same
result – there was a huge under-declaration. In February 1958, the Commissioner of Internal Revenue issued a final
assessment notice (FAN) against the entire estate. In November 1959, Gonzales questioned the validity of the FAN
issued in 1958. She averred that it was issued way beyond the prescriptive period of 5 years (under the old tax code).
The return was filed by Jose in 1949 and so the CIR’s right to make an assessment has already prescribed in 1958. 

Issue: 
Whether or not Gonzales is correct 

Ruling: 
No. It was found that Jose filed a return which was so defective that the CIR cannot make a correct computation on
the taxes due. When a tax return is so defective, it is as if there is no return filed, hence, it is considered that the
taxpayer omitted to file a return. As such, the five year prescriptive period to make an assessment (NOTE: Under the
National Internal Revenue Code of 1997, prescriptive period for normal assessment is 3 years) is extended to 10
years. And the counting of the prescriptive period shall run from the discovery of the omission (or fraud or falsity in
appropriate cases). In the case at bar, the omission was deemed to be discovered in the re-investigation conducted in
July 1957. Hence, the FAN issued in February 1958 was well within the ten year prescriptive period. Gonzales was
adjudged to pay the deficiency tax in the FAN, without prejudice to her right to ask reimbursement from Jose’s
estate (Jose already died)

b) Donor’s tax
1. Basic principles, concept, and definition
Section 98 - 99, NIRC
2. Requisites of a valid donation
3. Transfers which may be constituted as donation
i. Transfer of property for insufficient consideration
Section 100, NIRC
ii. Condonation/remission of debt
iii. Bona fide arms-length transfers
4. Determination of gross gift
Section 101 - 102, NIRC
- RR No. 17-2018, RR No 2-2003
5. Exemption of gifts from donor’s tax
Section 28, 99, 101, NIRC and various special laws
- RR No. 12-2018
- RMC No. 53-2013
- RMC No. 31-2019
Case(s)
- G.R. No. 120721, Abello vs CIR, 23 February 2003

FACTS:

During the 1987 national elections, petitioners, who are partners in the ACCRA law firm, contributed P882,661.31
each to the campaign funds of Senator Edgardo Angara, then running for the Senate. The BIR then assessed each of
the petitioners P263,032.66 for their contributions. Petitioners questioned the assessment claiming that political or
electoral contributions are not considered gifts under NIRC therefore, not liable for donors tax. The claim for
exemption was denied by the Commissioner.
The BIR denied their motion. They then filed a petition with the CTA, which was granted. 
On appeal, the CA again held in favor of the BIR.
ISSUE: Whether the contributions are liable for donor's tax.

RULING:
Yes. The NIRC does not define transfer of property by gift. However, the Civil Code, by reference, considers such
as donations. The present case falls squarely within the definition of a donation. There was intent to do an act of
liberality or animus donandi was present since each of the petitioners gave their contributions without any
consideration.

Taken together with the Civil Code definition of donation, Section 91 of the NIRC is clear and unambiguous,
thereby leaving no room for construction. 

Petitioners contribution of money without any material consideration evinces animus donandi. The fact that their
purpose for donating was to aid in the election of the donee does not negate the presence of donative intent.

Petitioners raise the fact that since 1939 when the first Tax Code was enacted, up to 1988 the BIR never attempted
to subject political contributions to donors tax. 

This Court holds that the BIR is not precluded from making a new interpretation of the law, especially when the old
interpretation was flawed. It is a well-entrenched rule that

"erroneous application and enforcement of the law by public officers do not block subsequent correct application of
the statute" (PLDT v. Collector of Internal Revenue, 90 Phil. 676), "and that the Government is never estopped by
mistake or error on the part of its agents" (Pineda v. Court of First Instance of Tayabas, 52 Phil. 803, 807; Benguet
Consolidated Mining Co. v. Pineda, 98 Phil. 711, 724).

- G.R. No. 210987, PhilAmLife and General Insurance vs Sec. of Finance, 24 November 2014

Philam Life sold its shares in Philam Care Health Systems to STI Investments Inc., the highest bidder.  After the sale
was completed, Philam life applied for a tax clearance and was informed by BIR that there is a need to secure a BIR
Ruling due to a potential donor’s tax liability on the sold shares.

ISSUE on DONOR’S TAX: 

W/N the sales of shares sold for less than an adequate consideration be subject to donor’s tax?

PETITIONER’S CONTENTION: 
The transaction cannot attract donor’s tax liability since there was no donative intent and, ergo, no taxable donation,
citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009; that the shares were sold at their actual fair
market value and at arm’s length; that as long as the transaction conducted is at arm’s length––such that a bonafide
business arrangement of the dealings is done in the ordinary course of business––a sale for less than an adequate
consideration is not subject to donor’s tax; and that donor’s tax does not apply to sale of shares sold in an open
bidding process.

CIR DENYING THE REQUEST:

Through BIR Ruling No. 015-12. As determined by the Commissioner, the selling price of the shares thus sold was
lower than their book value based on the financial statements of Philam Care as of the end of 2008.  The
Commissioner held donor’s tax became imposable on the price difference pursuant to Sec. 100 of the National
Internal Revenue Code (NIRC):

SEC. 100. Transfer for Less Than Adequate and full Consideration. - Where property, other than real property
referred to in Section 24(D), is transferred for less than an adequate and full consideration in money or money’s
worth, then the amount by which the fair market value of the property exceeded the value of the consideration shall,
for the purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in computing the amount
of gifts made during the calendar year.

RULING:
The price difference is subject to donor’s tax.        

Petitioner’s substantive arguments are unavailing. The absence of donative intent, if that be the case, does not
exempt the sales of stock transaction from donor’s tax since Sec. 100 of the NIRC categorically states that the
amount by which the fair market value of the property exceeded the value of the consideration shall be deemed a
gift. Thus, even if there is no actual donation, the difference in price is considered a donation by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters for
determining the “fair market value” of a sale of stocks. Such issuance was made pursuant to the Commissioner’s
power to interpret tax laws and to promulgate rules and regulations for their implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being applied
retroactively in contravention to Sec. 246 of the NIRC.26 Instead, it merely called for the strict application of Sec.
100, which was already in force the moment the NIRC was enacted.

ISSUE on TAX REMEDIES:

The issue that now arises is this––where does one seek immediate recourse from the adverse ruling of the Secretary
of Finance in its exercise of its power of review under Sec. 4?

Petitioner essentially questions the CIR’s ruling that Petitioner’s sale of shares is a taxable donation under Sec. 100
of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely questioned incidentally
since it was used by the CIR as bases for its unfavourable opinion. Clearly, the Petition involves an issue on the
taxability of the transaction rather than a direct attack on the constitutionality of Sec. 100, Sec.7 (c.2.2.) of RR 06-08
and RMC 25-11. Thus, the instant Petition properly pertains to the CTA under Sec. 7 of RA 9282.

As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers are now at a quandary on
what mode of appeal should be taken, to which court or agency it should be filed, and which case law should be
followed.

Petitioner’s above submission is specious (erroneous).

CTA, through its power of certiorari, to rule on the validity of a particular administrative rule or regulation so long
as it is within its appellate jurisdiction. Hence, it 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.

Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition not only contested the
applicability of Sec. 100 of the NIRC over the sales transaction but likewise questioned the validity of Sec. 7(c.2.2)
of RR 06-08 and RMC 25-11 does not divest the CTA of its jurisdiction over the controversy, contrary to
petitioner’s arguments.

II. Value-Added Tax (VAT)

1. Concept and elements of VATable transactions

Sections 105, 106 (A) and (B), 108 (A)
i. Impact and incidence of tax
Case(s)
- G.R. No. 173594, Silkair (Singapore) Pte, Ltd., vs. CIR 6 February 2008
 - G.R. No. 88291, Maceda vs. Macaraig 31 May 1991
Facts:
On November 3, 1986, Commonwealth Act No. 120 created the NPC as a public corporation to undertake the
development of hydraulic power and the production of power from other sources.  On June 4, 1949, Republic Act
No. 358 granted NPC tax and duty exemption privileges - exempt from all taxes, duties, fees, imposts, charges and
restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On January 22, 1974,
Presidential Decree No. 380 amended it - the exemption of NPC from such taxes, duties, fees, imposts and other
charges imposed "directly or indirectly," on all petroleum products used by NPC in its operation.  On June 11, 1984,
Presidential Decree No. 1931 withdrew all tax exemption privileges granted in favor of government-owned or
controlled corporations including their subsidiaries. However, said law empowered the President and/or the then
Minister of Finance, upon recommendation of the FIRB to restore, partially or totally, the exemption withdrawn, or
otherwise revise the scope and coverage of any applicable tax and duty. On January 7, 1986, the FIRB issued
resolution No. 1-86 indefinitely restoring the NPC tax and duty exemption privileges effective July 1, 1985.
However, effective March 10, 1987, Executive Order No. 93 once again withdrew all tax and duty incentives
granted to government and private entities which had been restored under Presidential Decree Nos. 1931 and 1955
but it gave the authority to FIRB to restore, revise the scope and prescribe the date of effectivity of such tax and/or
duty exemptions.On June 24, 1987 the FIRB issued Resolution No. 17-87 restoring NPC's tax and duty exemption
privileges effective March 10, 1987. 

Issues:
1.       Whether petitioner have the standing to challenge the questioned orders and resolution.
2.       Whether or not the respondent NPC has ceased to enjoy indirect tax and duty exemption with the enactment of
P.D. No. 938 on May 27, 1976 which amended P.D. No. 380, issued on January 11, 1974.

Ruling:

First issue:
Petitioner, as a taxpayer, may file the instant petition following the ruling in Lozada when it involves illegal
expenditure of public money. The petition questions the legality of the tax refund to NPC by way of tax credit
certificates and the use of said assigned tax credits by respondent oil companies to pay for their tax and duty
liabilities to the BIR and Bureau of Customs.

Difference between Direct tax and an Indirect Tax:

A direct tax is a tax for which a taxpayer is directly liable on the transaction or business it engages in. Examples are
the custom duties and ad valorem taxes paid by the oil companies to the Bureau of Customs for their importation of
crude oil, and the specific and ad valorem taxes they pay to the Bureau of Internal Revenue after converting the
crude oil into petroleum products.

On the other hand, "indirect taxes are taxes primarily paid by persons who can shift the burden upon someone
else ."For example, the excise and ad valorem taxes that oil companies pay to the Bureau of Internal Revenue upon
removal of petroleum products from its refinery can be shifted to its buyer, like the NPC, by adding them to the
"cash" and/or "selling price."

Second Issue:
It is noted that in the earlier law, R.A. No. 358 the exemption was worded in general terms, as to cover "all taxes,
duties, fees, imposts, charges, etc. . . ." However, the amendment under Republic Act No. 6395 enumerated the
details covered by the exemption. Subsequently, P.D. No. 380, made even more specific the details of the exemption
of NPC to cover, among others, both direct and indirect taxes on all petroleum products used in its operation.
Presidential Decree No. 938 amended the tax exemption by simplifying the same law in general terms. It succinctly
exempts NPC from "all forms of taxes, duties, fees, imposts, as well as costs and service fees including filing fees,
appeal bonds, supersedeas bonds, in any court or administrative proceedings."

The use of the phrase "all forms" of taxes demonstrate the intention of the law to give NPC all the tax exemptions it
has been enjoying before. The rationale for this exemption is that being non-profit the NPC "shall devote all its
returns from its capital investment as well as excess revenues from its operation, for expansion. 

Petitioner cannot invoke the rule on strictissimi juris with respect to the interpretation of statutes granting tax
exemptions to NPC.

Moreover, it is a recognized principle that the rule on strict interpretation does not apply in the case of exemptions in
favor of a government political subdivision or instrumentality.

ii. Destination Principle; Cross-Border Doctrine

Case(s)
- G.R. No. 153866, CIR vs Seagate Technology (Philippines) 11 February 2005
PRINCIPLE:
Business companies registered in and operating from the Special Economic Zone in Naga, Cebu are entities exempt
from all internal revenue taxes and the implementing rules relevant thereto, including the value-added taxes or VAT.
Although export sales are not deemed exempt transactions, they are nonetheless zero-rated. Hence, the distinction
between exempt entities and exempt transactions has little significance, because the net result is that the taxpayer is
not liable for the VAT. A VAT-registered enterprise may comply with all requisites to claim a tax refund of or credit
for the input VAT it paid on capital goods it purchased. In short, after compliance with all requisites, such enterprise
is entitled to refund or credit.

FACTS:
A VAT-registered enterprise, STP has principal office address at the new Cebu Township One, Special Economic
Zone, Barangay Cantao-an, Naga, Cebu. STP is registered with the Philippine Export Zone Authority (PEZA) and
certified to engage in the manufacture of recording components primarily used in computers for export. VAT returns
were filed for the period 1 April 1998 to 30 June 1999. With supporting documents, a claim for refund of VAT input
taxes in the amount of 28 million pesos (inclusive of the 12-million VAT input taxes subject of this Petition for
Review) was filed on 4 October 1999.

CIR did not act promptly upon STP's claim so the latter elevated the case to the CTA for review in order to toll the
running of the two-year prescriptive period.

On appeal, CIR asserted that by virtue of the PEZA registration alone of STP, the latter is not subject to the VAT.
According to CIR, STP's sales transactions intended for export are not exempt.
ISSUE:
[1] Is STP entitled to refund or tax credit for puchases?

HELD:
[1] Yes, STP is entitled to refund or tax credit

As a PEZA-registered enterprise within a special economic zone, STP is entitled to the fiscal incentives and benefit
provided for in either PD 66 or EO 226. It shall, moreover, enjoy all privileges, benefits, advantages or exemptions
under both Republic Act Nos. (RA) 7227 and 7844.
Its sales transactions intended for export may not be exempt, but like its purchase transactions, they are zero-rated.
No prior application for the effective zero rating of its transactions is necessary. Being VAT-registered and having
satisfactorily complied with all the requisites for claiming a tax refund of or credit for the input VAT paid on capital
goods purchased, STP is entitled to such VAT refund or credit.

STP, which as an entity is exempt, is different from its transactions which are not exempt. The end result, however,
is that it is not subject to the VAT. The non-taxability of transactions that are otherwise taxable is merely a
necessary incident to the tax exemption conferred by law upon it as an entity, not upon the transactions themselves.

LAWS MENTIONED IN THIS CASE:

PD 66 = exemption from internal revenue laws and regulations for raw materials, etc. brough into the zone to be
stored, broken up, etc.

Despite availment of PD 66 benefits, the following will still apply: net-operating loss carry over; accelerated
depreciation; foreign exchange and financial assistance; and exemption from export taxes, local taxes and licenses.

EO 226 = income tax holiday; additional deduction for labor expense; simplification of customs procedure;
unrestricted use of consigned equipment; access to a bonded manufacturing warehouse system; privileges for
foreign nationals employed; tax credits on domestic capital equipment, as well as for taxes and duties on raw
materials; and exemption from contractors taxes, wharfage dues, taxes and duties on imported capital equipment and
spare parts, export taxes, duties, imposts and fees, local taxes and licenses, and real property taxes.

Despite availment of EO 226 benefits, the following will still apply: net-operating loss carry over; accelerated
depreciation; foreign exchange and financial assistance; and exemption from export taxes, local taxes and licenses.

RA 7227 = tax and duty-free importation of raw materials, capital and equipment. Availment of RA 7227 benefits
does not stop the ecozone benefits under RA 7916.
RA 7227 = no local or national taxes shall be imposed in the zone. Banking and finance shall also be liberalized
under minimum Bangko Sentral regulation with the establishment of foreign currency depository units of local
commercial banks and offshore banking units of foreign banks
RA 7844 = negotiable tax credits for locally-produced materials used as inputs
PD 1853 = preferential credit facilities

2. Imposition of VAT
i. Transfer of goods by tax exempt persons
ii. Transactions deemed sale subject to VAT
iii. Zero-rated and effectively zero-rated sales of goods or properties
iv. VAT-exempt transactions
 Section 109
- RA No. 9994 and 10378
- RR 16-11
- Customs Administrative Order (CAO) 02-2016
3. Input and output tax
Sections 110, 111, and 114 (C)
- RR No. 16-05, Section 4-110.4
- RMC 57 -2013
4. Tax refund or tax credit
Section 112, RR No. 13-2018, and 26-2018

Case(s)
- G.R. No. 197525 Visayas Geothermal Power Company vs CIR 4 June 2014

Facts:
On December 6, 2006, VGPC filed an administrative claim for refund with the BIR District Office. And on January 
3, 2007, while the administrative claim was pending, VGPC filed its judicial claim via petition for review with the C
TA praying for a refund or the issuance of a tax credit certificate.
CTA En Banc dismissed the petition on the ground that the judicial claim was prematurely filed because according t
o it, 120-day has to expire first before it can be appealed.
Issue:
WON VGPC’s judicial claim for refund was prematurely filed.

Ruling:
No. The general rule is that the 120+30 day period is mandatory and jurisdictional from the effectivity of the 1997 N
IRC on January 1, 1998 up to present. As an exception, judicial claims filed from December 10, 2003, in view of the 
BIR Ruling No. DA48903, to October 6, 2010, when it was reversed by the Supreme Court in Aichion Case, need n
ot wait for the exhaustion of the 120-day period.
In the case at bar, VGPC filed its administrative claim with the CIR on December 6, 2006 and later, its judicial clai
m with the CTA on January 3, 2007. The judicial claim was clearly filed within the period of exception and was, the
refore,not premature and should not have been dismissed by the CTA En Banc.

5. Filing of returns and payment

Sections 113 and 114

III. Other Business taxes

1. Percentage Taxes
Section 116-128, RA No. 9238, and 10378,
RR No. 9-2007, RMC No. 18-2010
Cases:
- G.R. No. 180066, CIR vs Philippine Airlines Inc, 07 July 2009

FACTS:
PHILIPPINE AIRLINES, INC. had zero taxable income for 2000 but would have been liable for Minimum
Corporate Income Tax based on its gross income. However, PHILIPPINE AIRLINES, INC. did not pay the
Minimum Corporate Income Tax using as basis its franchise which exempts it from “all other taxes” upon payment
of whichever is lower of either (a) the basic corporate income tax based on the net taxable income or (b) a franchise
tax of 2%.

ISSUE:
Is PAL liable for Minimum Corporate Income Tax?

HELD:

NO. PHILIPPINE AIRLINES, INC.’s franchise clearly refers to "basic corporate income tax" which refers to the
general rate of 35% (now 30%). In addition, there is an apparent distinction under the Tax Code between taxable
income, which is the basis for basic corporate income tax under Sec. 27 (A) and gross income, which is the basis for
the Minimum Corporate Income Tax under Section 27 (E). The two terms have their respective technical meanings
and cannot be used interchangeably. Not being covered by the Charter which makes PAL liable only for basic
corporate income tax, then Minimum Corporate Income Tax is included in "all other taxes" from which
PHILIPPINE AIRLINES, INC. is exempted.

The CIR also can not point to the “Substitution Theory” which states that Respondent may not invoke the “in lieu of
all other taxes” provision if it did not pay anything at all as basic corporate income tax or franchise tax. The Court
ruled that it is not the fact tax payment that exempts Respondent but the exercise of its option. The Court even
pointed out the fallacy of the argument in that a measly sum of one peso would suffice to exempt PAL from other
taxes while a zero liability would not and said that there is really no substantial distinction between a zero tax and a
one-peso tax liability. Lastly, the Revenue Memorandum Circular stating the applicability of the MCIT to PAL does
more than just clarify a previous regulation and goes beyond mere internal administration and thus cannot be given
effect without previous notice or publication to those who will be affected thereby

- G.R. No. 175108, China Bank vs CIR, 27 February 2013

Principle: National Internal Revenue Code; gross receipts tax; final withholding tax forms part of gross receipts.
The amount of interest income withheld, in payment of the 20% final withholding tax, forms part of a bank’s gross
receipts in computing the gross receipts tax on banks. “Gross Receipts” comprise the “entire receipts without any
deduction.” Otherwise, if deductions were to be made, it would have been considered as “net receipts.” Moreover,
the exclusion of the final withholding tax from gross receipts operates as a tax exemption which the law must
expressly grant. In this case, petitioner failed to point to any specific provision of law allowing deduction,
exemption or exclusion from its taxable gross receipts, of the amount withheld as final tax. China Banking
Corporation vs. Commissioner of Internal Revenue, G.R. No. 175108. February 27, 2013.

Facts:

For the four quarters of 1996, petitioner paid Il93,119,433.50 as gross receipts tax (GRD on its income from the
interests on loan investments, commissions, service and collection charges, foreign exchange profit and other
operating earnings.

In computing its taxable gross receipts, petitioner included the 20% final withholding tax on its passive interest
income.which should not form part of its taxable gross receipts.

On the strength of the aforementioned decision, petitioner filed with respondent a claim for refund on April 20,
1998, of the alleged overpaid GRT for the four (4) quarters of 1996 in the aggregate amount of ₱6,646,829.67, On
even date, petitioner filed its Petition for Review with the CTA.
The CTA, on November 8, 2000, rendered a Decision5 agreeing with petitioner that the 20% final withholding tax
on interest income does not form part of its taxable gross receipts. However, the CTA dismissed petitioner’s claim
for its failure to prove that the 20% final withholding tax forms part of its 1996 taxable gross receipts. The Decision
states in part:

Moreover, the Court of Appeals in the case of Commissioner of Internal Revenue vs. Citytrust Investment
Philippines, Inc., CA G.R. Sp No. 52707, August 17, 1999, affirmed our stand that the 20% final withholding tax on
interest income should not form part of the taxable gross receipts. Hence, we find no cogent reason nor justification
to depart from the wisdom of our decision in the Asian Bank case, supra.

xxxx

Lastly, since Petitioner failed to prove the inclusion of the 20% final withholding taxes as part of its 1996 taxable
gross receipts (passive income) or gross receipts (passive income) that were subjected to 5% GRT, it follows that
proof was wanting that it paid the claimed excess GRT, subject of this petition.

xxxx

IN THE LIGHT OF ALL THE FOREGOING, the instant Petition for Review is DISMISSED for insufficiency of
evidence.

SO ORDERED.6

Not in conformity with the CTA’s ruling, petitioner interposed an appeal before the CA.

In its appeal, petitioner insists that it erroneously included the 20% final withholding tax on the bank’s passive
interest income in computing the taxable gross receipts. Therefore, it argues that it is entitled, as a matter of right, to
a refund or tax credit.

In a Decision7 dated June 16, 2006, the CA denied petitioner’s appeal. It ruled in this wise:

x x x Unfortunately for China Bank, it is flogging a dead horse as this argument has already been shot down
in China Banking Corporation vs. Court of Appeals (G.R. No. 146749 & No. 147983, June 10, 2003) where it was
ruled the Tax Court, which decided Asia Bank on June 30, 1996 not only erroneously interpreted Section 4(e) of
Revenue Regulations No. 12-80, it also cited Section 4(e) when it was no longer the applicable revenue regulation.
The revenue regulations applicable at the time the tax court decided Asia Bank was Revenue Regulations No. 17-84,
not Revenue Regulation 12-80.

xxxx

WHEREFORE, the instant petition is DENIED DUE COURSE and DISMISSED.

SO ORDERED.8

Petitioner sought reconsideration of the aforementioned decision arguing that Section 4 (e) of Revenue Regulations
(RR) No. 12-80 remains applicable as the basis of GRT for banks in taxable year 1996.

On October 17, 2006, the CA issued a Resolution9 denying petitioner’s motion for reconsideration on the ground
that no new or compelling reason was presented by petitioner to warrant the reversal or modification of its decision.

Hence, this petition wherein petitioner contends that:

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS FAILED TO POINT TO THE
LEGAL BASIS FOR THE EXCLUSION OF THE AMOUNT OF TAX WITHHELD ON PASSIVE INCOME
FROM ITS GROSS RECEIPTS FOR PURPOSES OF TAXATION. 10

Issue:

Whether the 20% final tax withheld on a bank’s passive income should be included in the computation of the GRT?

Held:

We do not agree.

In a catena of cases, this Court has already resolved the issue of whether the 20% final withholding tax should form
part of the total gross receipts for purposes of computing the GRT.

In China Banking Corporation v. Court of Appeals,11 we ruled that the amount of interest income withheld, in
payment of the 20% final withholding tax, forms part of the bank’s gross receipts in computing the GRT on banks.
The discussion in this case is instructive on this score:

The gross receipts tax on banks was first imposed on 1 October 1946 by Republic Act No. 39 ("RA No. 39") which
amended Section 249 of the Tax Code of 1939. Interest income on banks, without any deduction, formed part of
their taxable gross receipts. From October 1946 to June 1977, there was no withholding tax on interest income from
bank deposits.

On 3 June 1977, Presidential Decree No. 1156 required the withholding at source of a 15% tax on interest on bank
deposits. This tax was a creditable, not a final withholding tax. Despite the withholding of the 15% tax, the entire
interest income, without any deduction, formed part of the bank’s taxable gross receipts. On 17 September 1980,
Presidential Decree No. 1739 made the withholding tax on interest a final tax at the rate of 15% on savings account,
and 20% on time deposits. Still, from 1980 until the Court of Tax Appeals decision in Asia Bank on 30 January
1996, banks included the entire interest income, without any deduction, in their taxable gross receipts.

In Asia Bank, the Court of Tax Appeals held that the final withholding tax is not part of the bank’s taxable gross
receipts. The tax court anchored its ruling on Section 4(e) of Revenue Regulations No. 12-80, which stated that the
gross receipts "shall be based on all items actually received" by the bank. The tax court ruled that the bank does not
actually receive the final withholding tax. As authority, the tax court cited Collector of Internal Revenue v. Manila
Jockey Club, which held that "gross receipts of the proprietor should not include any money which although
delivered to the amusement place had been especially earmarked by law or regulation for some person other than the
proprietor. x x x

Subsequently, the Court of Tax Appeals reversed its ruling in Asia Bank. In Far East Bank & Trust Co. v.
Commissioner and Standard Chartered Bank v. Commissioner, both promulgated on 16 November 2001, the tax
court ruled that the final withholding tax forms part of the bank’s gross receipts in computing the gross
receipts tax. The tax court held that Section 4(e) of Revenue Regulations 12-80 did not prescribe the computation of
the gross receipts but merely authorized "the determination of the amount of gross receipts on the basis of the
method of accounting being used by the taxpayer.

The tax court also held in Far East Bank and Standard Chartered Bank that the exclusion of the final withholding
tax from gross receipts operates as a tax exemption which the law must expressly grant. No law provides for
such exemption. In addition, the tax court pointed out that Section 7(c) of Revenue Regulations No. 17-84 had
already superseded Section 4(e) of Revenue Regulations No. 12-80. x x x12 (Emphasis supplied)

Notably, this Court, in the same case, held that under RR Nos. 12-80 and 17-84, the Bureau of Internal Revenue
(BIR) has consistently ruled that the term gross receipts do not admit of any deduction. It emphasized that interest
earned by banks, even if subject to the final tax and excluded from taxable gross income, forms part of its gross
receipt for GRT purposes. The interest earned refers to the gross interest without deduction, since the regulations do
not provide for any deduction.13

Further, in Commissioner of Internal Revenue v. Solidbank Corporation,14 this Court held that "gross receipts" refer
to the total, as opposed to the net, income. These are, therefore, the total receipts before any deduction for the
expenses of management.15

In Commissioner of Internal Revenue v. Bank of Commerce,16 we again adhered to the ruling that the term "gross
receipts" must be understood in its plain and ordinary meaning. In this case, we ruled that gross receipts should be
interpreted as the whole amount received as interest, without deductions; otherwise, if deductions were to be made
from gross receipts, it would be considered as "net receipts." The Court ratiocinated as follows:

The word "gross" must be used in its plain and ordinary meaning. It is defined as "whole, entire, total, without
deduction." A common definition is "without deduction." x x x Gross is the antithesis of net. Indeed, in China
Banking Corporation v. Court of Appeals, the Court defined the term in this wise:

As commonly understood, the term "gross receipts" means the entire receipts without any deduction. Deducting any
amount from the gross receipts changes the result, and the meaning, to net receipts. Any deduction from gross
receipts is inconsistent with a law that mandates a tax on gross receipts, unless the law itself makes an exception. As
explained by the Supreme Court of Pennsylvania in Commonwealth of Pennsylvania v. Koppers Company, Inc. –

Highly refined and technical tax concepts have been developed by the accountant and legal technician primarily
because of the impact of federal income tax legislation. However, this in no way should affect or control the normal
usage of words in the construction of our statutes; x x x Under the ordinary basic methods of handling accounts, the
term gross receipts, in the absence of any statutory definition of the term, must be taken to include the whole total
gross receipts without any deductions, x x x.17

Again, in Commissioner of Internal Revenue v. Bank of the Philippine Islands,18 this Court ruled that "the legislative
intent to apply the term in its ordinary meaning may also be surmised from a historical perspective of the levy on
gross receipts. From the time the gross receipts tax on banks was first imposed in 1946 under R.A. No. 39 and
throughout its successive reenactments, the legislature has not established a definition of the term ‘gross receipts.’
Absent a statutory definition of the term, the BIR had consistently applied it in its ordinary meaning, i.e., without
deduction. On the presumption that the legislature is familiar with the contemporaneous interpretation of a statute
given by the administrative agency tasked to enforce the statute, subsequent legislative reenactments of the subject
levy sans a definition of the term ‘gross receipts’ reflect that the BIR’s application of the term carries out the
legislative purpose."19

In sum, all the aforementioned cases are one in saying that "gross receipts" comprise "the entire receipts without any
deduction." Clearly, then, the 20% final withholding tax should form part of petitioner’s total gross receipts for
purposes of computing the GRT.

Also worth noting is the fact that petitioner’s reliance on Section 4 (e) of RR 12-80 is misplaced as the same was
already superseded by a more recent issuance, RR No. 17-84.

This fact was elucidated on by the Court in the case of Commissioner of Internal Revenue v. Citytrust Investment
Phils. Inc.,20 where it held that RR No. 12-80 had already been superseded by RR No. 17-84, viz.:

x x x Revenue Regulations No. 12-80, issued on November 7, 1980, had been superseded by Revenue
Regulations No. 17-84 issued on October 12, 1984. Section 4 (e) of Revenue Regulations No. 12-80 provides that
only items of income actually received shall be included in the tax base for computing the GRT.1âwphi1 On the
other hand, Section 7 (c) of Revenue Regulations No. 17-84 includes all interest income in computing the GRT,
thus:
Section 7. Nature and Treatment of Interest on Deposits and Yield on Deposit Substitutes. –

(a) The interest earned on Philippine Currency bank deposits and yield from deposit substitutes subjected to
the withholding taxes in accordance with these regulations need not be included in the gross income in
computing the depositor’s investor’s income tax liability. x x x

(b) Only interest paid or accrued on bank deposits, or yield from deposit substitutes declared for purposes
of imposing the withholding taxes in accordance with these regulations shall be allowed as interest expense
deductible for purposes of computing taxable net income of the payor.

(c) If the recipient of the above-mentioned items of income are financial institutions, the same shall be
included as part of the tax base upon which the gross receipt tax is imposed.

Revenue Regulations No. 17-84 categorically states that if the recipient of the above-mentioned items of income
are financial institutions, the same shall be included as part of the tax base upon which the gross receipts tax is
imposed. x x x.21 (Emphasis supplied)

Significantly, the Court even categorically stated in the aforementioned case that there is an implied repeal of
Section 4 (e). It held that there exists a disparity between Section 4 (e) of RR No. 12-80, which imposes the GRT
only on all items of income actually received (as opposed to their mere accrual) and Section 7 (c) of RR No. 17-84,
which includes all interest income (whether actual or accrued) in computing the GRT. Plainly, RR No. 17-84,
which requires interest income, whether actually received or merely accrued, to form part of the bank’s taxable gross
receipts, should prevail.22

All told, petitioner failed to point to any specific provision of law allowing the deduction, exemption or exclusion
from its taxable gross receipts, of the amount withheld as final tax. Besides, the exclusion sought by petitioner of the
20% final tax on its passive income from the taxpayer’s tax base constitutes a tax exemption, which is highly
disfavored. A governing principle in taxation states that tax exemptions are to be construed in strictissimi
juris against the taxpayer and liberally in favor of the taxing authority and should be granted only by clear and
unmistakable terms.23

WHEREFORE, premises considered, the Decision dated June 16, 2006 and Resolution dated October 17, 2006 of
the former Fifth Division of the Court of Appeals are hereby AFFIRMED in toto.

SO ORDERED.

2. Excise Tax
Sections 129-172
- RA No. 9224 (as amended), and 9334.
- RR 2, 3, 5, 20 and 24-2018, 2-2019
Cases:
- G.R. No. 210251, Sec. of Finance vs Phil. Tobacco Institute Inc, 17 April 2017
FACTS:

On December 20, 2012. Pres. Benigno Aquino III signed RA 10351 also known as the Sin Tax Reform Law. The
mentioned Law amended RA 8424.  On December 21, 2012, the Sec. of Finance, upon the CIR’s recommendation,
imposed tax individually on cigarette pouches of 5’s and 10’s even if bundled in packaging combinations not
exceeding 20 sticks.
As a result, the PTI filed a petition before the RTC for declaratory relief with an application for writ of preliminary
injunction. The RTC favored the PTI and granted its petition. Hence, the Sec. of Finance and the CIR through the
Office of the Solicitor General filed an instant petition. Meanwhile, the SC issued a TRO against the PTI and RTC.
ISSUE:
Whether or not the RTC erred in granting the petition to impose tax on combination pouches of 5’s and 10’s not
exceeding 20 sticks rather than taxing individually pouches of 5’s and 10’s.

RULING:
No, the SC affirmed the decision of the RTC.  Basing from the intention and clear interpretation of RA 10351,
combined with the deliberation made during the bicameral conference of Congress, tax should be imposed on
cigarette pouched by machine as packaging combination of 20 cigarette sticks as a whole and not to individual
packaging combinations on pouches of 5’s and 10’s.  The SC stated further that the BIR went beyond its jurisdiction
by imposing additional burden to the Tobacco Sector through issuance of its revenue regulations.  In so doing, the
BIR made an amendment which was not under its functions.  The amendments of laws, according to SC, were one
of Congress’ primary concerns and functions.

- G.R. No. 166482, Silkair Singapore vs CIR, 25 January 2012

3. Documentary Stamp Tax

Sections 173-201
- RA 9648, RR 7-2009, 13-2004, 6-2001