Municipality of Makati vs CA190 SCRA 206Oct.

1, 1990FACTS:

Petitioner Municipality of Makati expropriated a portion of land owned by private respondent Admiral
Finance Creditors Consortium, Inc. After hearing, the RTC fixed the appraised value of the property at
P5,291,666.00, and ordered petitioner to pay this amount minus the advanced payment of P338,160.00
which was earlier released to private respondent. It then issued the corresponding writ of execution
accompanied with a writ of garnishment of funds of the petitioner which was deposited in PNB.
Petitioner filed a motion for reconsideration, contending that its funds at the PNB could neither be
garnished nor levied upon execution, for to do so would result in the disbursement of public funds
without the proper appropriation required under the law. The RTC denied the motion. CA affirmed.
Hence, petitioner filed a petition for review before the SC.

ISSUE:

Whether the funds of the Municipality of Makati is exempt from garnishment and levy upon execution?

RULING:

Yes. In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution,
unless otherwise provided for by statute. More particularly, the properties of a municipality, whether
real or personal, which are necessary for public use cannot be attached and sold at execution sale to
satisfy a money judgment against the municipality. Municipal revenues derived from taxes, licenses and
market fees, and which are intended primarily and exclusively for the purpose of financing the
governmental activities and functions of the municipality, are exempt from execution. Absent a showing
that the municipal council of Makati has passed an ordinance appropriating from its public funds an
amount corresponding to the balance due under the RTC decision, no levy under execution may be
validly affected on the public funds of petitioner. Nevertheless, this is not to say that private respondent
and PSB are left with no legal recourse. Where a municipality fails or refuses, without justifiable reason,
to effect payment of a final money judgment rendered against it, the claimant may avail of the remedy of
mandamus in order to compel the enactment and approval of the necessary appropriation ordinance,
and the corresponding disbursement of municipal funds therefor. For three years now, petitioner has
enjoyed possession and use of the subject property notwithstanding its inexcusable failure to comply
with its legal obligation to pay just compensation. Petitioner has benefited from its possession of the
property since the same has been the site of Makati West High School since the school year 1986-1987.
This Court will not condone petitioner's blatant refusal to settle its legal obligation arising from
expropriation proceedings it had in fact initiated. The State's power of eminent domain should be
exercised within the bounds of fair play and justice. Hence, the Court Resolved to ORDER petitioner
Municipality of Makati to immediately pay Philippine Savings Bank, Inc. and private respondent the
amount of P4,953,506.45.
(121) PILMICO-MAURI FOODS CORP., v. CIR G.R. No. 175651, September 14, 2016

FACTS:

Pilmico-Mauri Foods Corp (PMFC) is a corporation, organized and existing under the laws of the
Philippines, with principal place of business at Aboitiz Corporate Center, Banilad, Cebu City.

The books of accounts of PMFC pertaining to 1996 were examined by the CIR for deficiency income,
value-added [tax] (VAT) and withholding tax liabilities.

PMFC filed a protest letter against the aforementioned deficiency tax assessments amounting to
P9,761,750.02.

In a final decision of the CIR on the disputed assessments. the deficiency tax liabilities of PMFC were
reduced from P9,761,750.02 to P3,020,259.30. On the basis of the foregoing facts, PMFC filed its Petition
for Review

After trial on the merits, the CTA rendered the assailed Decision affirming the assessments but in the
reduced amount of P2,804,920.36 (inclusive of surcharge and deficiency interest) representing PMFC’s
Income, VAT and Withholding Tax deficiencies for the taxable year 1996 plus 20% delinquency interest
per annum until fully paid. The CTA ruled that the contention of PMFC that the NIRC of 1977 did not
impose substantiation requirements on deductions from gross income is bereft of merit. Section 238 of
the 1977 Tax Code provides:

SEC. 238. xxx The original of each receipt or invoice shall be issued to the purchaser, customer or client
at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall
keep and preserve the same in his place of business for a period of three (3) years from the close of the
taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved
by the issuer, also in his place of business for a like period. Xxx

The rationale behind the latter requirement is the duty of the taxpayer to keep adequate records of each
and every transaction entered into in the conduct of its business. So that when their 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. Hence, PMFC’s claim that the NIRC of 1977 did not
require substantiation requirements is erroneous.

From the total purchases of P5,893,694.64 which have been disallowed, it seems that a portion thereof
amounting to P1,280,268.19 (729,663.64 + 550,604.55) has no supporting sales invoices because of
PMFC’s failure to present said invoices. A scrutiny of the invoices supporting the remaining balance of
P4,613,426.45 (P5,893,694.64 less P1,280,268.19) revealed that the other sales invoices contain
alterations particularly in the name of the purchaser giving rise to serious doubts regarding their
authenticity and if they were really issued to PMFC. Exhibit B-11 does not even have any date indicated
therein, which is a clear violation of Section 238 of the NIRC of 1977 which required that the official
receipts must show the date of the transaction.

Likewise, the official receipts presented by PMFC, cannot be considered as valid proof of PMFC claimed
deduction for raw materials purchases. The said receipts did not conform to the requirements provided
for under Section 238 of the NIRC of 1977, as amended
First the official receipts were not in the name of PMFC but in the name of Golden Restaurant. And
second, these receipts were issued by PFC and not the alleged seller, JTE. Likewise, PMFC’s allegations
regarding the offsetting of accounts between PMFC, PFC and JTE is untenable. Considering that the
official receipts and sales invoices presented by PMFC failed to comply with the requirements of Section
238 of the NIRC of 1977, the disallowance by the CIR of the claimed deduction for raw materials is
proper.

ISSUES:

1. Whether the CTA erred in rendering the assailed decision since the legal basis cited by the CTA
supporting the validity of the assessment was never raised bu the CIR, thus depriving PMFC its
constitutional right to be apprised of the legal basis of the assessment

2. Whether Section 29 of the 1977 NIRC or Sec. 238 of the 1977 NIRC shall be applicable

RULING:

1. On the procedural issues raised by PMFC

In the petition for review filed by PMFC before the CTA, it was the former's burden to properly invoke the
applicable legal provisions in pursuit of its goal to reduce its tax liabilities. The CTA, on the other hand, is
not bound to rule solely on the basis of the laws cited by the CIR. Were it otherwise, the tax court's
appellate power of review shall be rendered useless. An absurd situation would arise leaving the CTA
with only two options, to wit: (a) affirming the CIR's legal findings; or (b) altogether absolving the
taxpayer from liability if the CIR relied on misplaced legal provisions. The foregoing is not what the law
intends.

2. Whether Section 29 of the 1977 NIRC shall apply

However, while the CTA ruled on the basis of Section 238 of the 1977 NIRC, PMFC now insists that
Section 29 of the same code should be applied instead. PMFC argues that Section 29 imposes less
stringent requirements and the presentation of official receipts as evidence of the claimed deductions
dispensable.

The Court ruled that in statutory construction every part of the statute must be considered together with
the other parts, and kept subservient to the general intent of the whole enactment. The law must not be
read in truncated parts, its provisions must be read in relation to the whole law. The law, thus, intends
for Sections 29 and 238 of the 1977 NIRC to be read together, and not for one provision to be accorded
preference over the other.

It is undisputed that among the evidence adduced by PMFC on it behalf are the official receipts of
alleged purchases of raw materials. Thus, the CTA cannot be faulted for making references to the same,
and for applying Section 238 of the 1977 NIRC in rendering its judgment. Required or not, the official
receipts were submitted by PMFC as evidence. Inevitably, the said receipts were subjected to scrutiny,
and the CTA exhaustively explained why it had found them wanting.

PMFC contended that the statutory test, as provided in Section 29 of the 1977 NIRC, is sufficient to
allow the deductibility of a business expense from the gross income. As long as the expense is: (a) both
ordinary and necessary; (b) incurred in carrying a business or trade; and (c) paid or incurred within the
taxable year, then, it shall be allowed as a deduction from the gross income. 32chanrobleslaw

However, the Court declared that not only must the taxpayer meet the business test, he must
substantially prove by evidence or records the deductions claimed under the law, otherwise, the same
will be disallowed. The mere allegation of the taxpayer that an item of expense is ordinary and necessary
does not justify its deduction.

It is, thus, clear that Section 29 of the 1977 NIRC does not exempt the taxpayer from substantiating
claims for deductions. While official receipts are not the only pieces of evidence which can prove
deductible expenses, if presented, they shall be subjected to examination. PMFC submitted official
receipts as among its evidence, and the CTA doubted their veracity. PMFC was, however, unable to
persuasively explain and prove through other documents the discrepancies in the said receipts.
Consequently, the CTA disallowed the deductions claimed, and in its ruling, invoked Section 238 of the
1977 NIRC considering that official receipts are matters provided for in the said section.

G.R. No. 230861, September 19, 2018

ASIAN TRANSMISSION CORPORATION, PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE,

RESPONDENT.

Facts:

ASIAN TRANSMISSION CORPORATION

(ATC) is a manufacturer of motor vehicle transmission component parts and engines for Mitsubishi
vehicles. On January 3,2003 and March 3, 2003, ATC filled its Annual Information Return of Income Taxes
Withheld on Compensation and Final Withholding Taxes and Annual Information Return of Creditable
Income Taxed Withheld (Expanded)/Income Payments Exempt from Withholding Tax, respectively.

On August 11, 2004, ATC received a Letter of Authority (LoA) for BIR’s examination of its books of
accounts and other accounting records for the taxable year 2002.Thereafter, respondent issued a
Preliminary Assessment Notice (PAN) to ATC.

Consequently, on various dates, ATC, through its Vice President for Personnel and Legal Affairs, Mr.
Roderick M. Tan, executed several documents denominated as "Waiver of the Defense of Prescription
Under the Statute of Limitations of the National Internal Revenue Code" (“Waiver”). Meanwhile, on
February 28, 2008, ATC availed itself of the Tax Amnesty Program.

On July 15, 2008, ATC received a FLD for the deficiency EWT and FWT. On April 14, 2009, ATC received
the FDDA. Thus, on May 14, 2009, ATC filledled an appeal letter/request for reconsideration with the
CIR.CIR denied ATC’s request for reconsideration. ATC filled the instant Petition for Review (with
Application for Preliminary Injunction and Temporary Restraining Order).
CTA in Division rendered its decision granting the petition for review of ATC. It held that ATC was not
estopped from raising the invalidity of the waivers inasmuch as the Bureau of Internal Revenue (BIR) had
itself caused the defects thereof, namely: (a) the waivers were notarized by its own employee despite
not being validly commissioned to perform notarial acts; (b) the BIR did not indicate the date of its
acceptance; (c) the BIR did not specify the amounts of and the particular taxes involved; and (d)
respondent CIR did not sign the waivers despite the clear mandate of RMO20-90 to that effect. It ruled
that the waivers, being invalid, did not operate to toll or extend the three-year period of prescription.

The CIR filed a petition for review in the CTA En Banc. Acting on the said petition, the CTA En Banc
reversed and set aside the decision of the CTA in Division and held that the waivers were valid. It
observed that the CIR's right to assess deficiency withholding taxes for CY 2002 against ATC had not yet
been prescribed. It remanded the case to the Court in Division for further proceedings in order to
determine and rule on the merits of respondent's petition.

Issue:

WON the defective Waivers executed by ATC are valid.

Ruling:

Yes, applying in this case the recognized exception to the strict application of RMO 20-90 and RDAO 05-
01. The court agreed that the ATC’s case was similar to the case of the taxpayer involved in
Commissioner of Internal Revenue v. Next Mobile Inc where it held that respondent's act of impugning
the Waivers after benefiting therefrom and allowing petitioner to rely on the same is an act of bad faith.

The waivers executed by ATC contained defects such as 1)The notarization of the Waivers was not in
accordance with the 2004 Rules on Notarial Practice; 2) Several waivers clearly failed to indicate the date
of acceptance by the Bureau of Internal Revenue; 3) The Waivers were not signed by the proper revenue
officer; and 4) The Waivers failed to specify the type of tax and the amount of tax due.

The Court agreed with the CTA En Banc that the foregoing defects noted in the waivers of ATC were not
solely attributable to the CIR. Consequently, ATC was not correct in insisting that the act or omission
giving rise to the defects of the waivers should be ascribed solely to the respondent CIR and her
subordinates. Moreover, the principle of estoppel was applicable. The execution of the waivers was to
the advantage of ATC because the waivers would provide ATC the sufficient time to gather and produce
voluminous records for the audit. It would really be unfair, therefore, were ATC to be permitted to assail
the waivers only after the final assessment proved to be adverse.

In this case, respondent, after deliberately executing defective waivers, raised the very same deficiencies
it caused to avoid the tax liability determined by the BIR during the extended assessment period. It is
now estopped from assailing the waivers’ validity after having benefited from them.

As the Waivers’ validity is upheld, the CIR's right to assess deficiency withholding taxes for CY 2002
against ATC had not yet prescribed. The case was remanded to the CTA Division for further proceedings.