SOUTH AFRICAN AIRWAYS v.

CIR
CTA 6067, June 9, 2005
KEYWORD: Off-line / Sales agent / Set-off of taxes
TAXATION The South African Airways v. CIR case established that off-line
CONCEPT/ international air carriers with sales agents in the Philippines
DOCTRINE: (e.g.: are subject to a 32% income tax, emphasized the strict
life-blood theory) construction of tax exemptions, and highlighted the necessity
to determine tax liability under specific sections while
prohibiting set-off of taxes and refunds.
Type of Case: (e.g.): Claim for Refund
case for refund etc.
Petitioners: South African Airways, a foreign corporation organized under
the laws of the Republic of South Africa.
Respondents: Commissioner of Internal Revenue (CIR)
Why Petitioner filed The petitioner, South African Airways, filed the case to seek a
a case: refund of the amount it claimed as erroneously paid tax on
Gross Philippine Billings (GPB) for the taxable year 2000. The
Brief facts okay lng petitioner contested the assessment and sought relief from the
with tagalog basta Court of Tax Appeals, asserting that it was exempt from
magets. certain taxes and entitled to a refund based on its
interpretation of the relevant tax provisions.
Arguments of the The petitioner, South African Airways, argued that it was
Petitioners (Lista) exempt from income tax in the Philippines based on its
interpretation of the amended definition of Gross Philippine
Billings (GPB) and the non-applicability of Section 28(A)(3)(a)
of the 1997 NIRC. The petitioner also cited legislative intent as
expressed by Senator Juan Ponce Enrile during deliberations.
The main contention was that the airline, not maintaining
flights to or from the Philippines, should be excluded from
income tax liabilities.
Arguments of the The specific arguments presented by the respondent, the
Respondents (Lista) Commissioner of Internal Revenue (CIR), are not provided in
the case details. However, typical counterarguments in tax
cases may include asserting the petitioner's tax liability under
applicable laws, offering an alternative interpretation of tax
provisions, denying the validity of a refund claim, and
emphasizing compliance with legal procedures.
Who won in **CTA Decision (First Division):**
RTC/CIR, CTA, SC? The CTA denied the petition, considering the petitioner as a
(as applicable) resident foreign corporation engaged in trade or business in
the Philippines. It held that petitioner was not liable for GPB
tax but was subject to a 32% income tax on its income from the
sales of passage documents in the Philippines. The denial of
the refund claim was based on this ground.

**CTA En Banc Decision:**

The CTA En Banc affirmed the decision of the First Division,
rejecting petitioner's argument that the amended definition of
 GPB exempted it from income tax. The court ruled that off-line
air carriers with general sales agents in the Philippines are
engaged in or doing business in the country, subjecting them to
the 32% income tax.

**Supreme Court’s Ruling:**

The court held that petitioner is subject to income tax at the
rate of 32% on its taxable income, rejecting its claim for
exemption. The court emphasized that petitioner failed to
prove its exemption convincingly. It clarified that the amended
definition of GPB did not exempt off-line air carriers from
income tax.

Regarding the refund claim, the court found that the denial
was based on petitioner's liability under Section 28(A)(1) of the
National Internal Revenue Code (NIRC). The court
emphasized the necessity to determine petitioner's liability
under this section and remanded the case to the CTA En Banc
for further proceedings, including the reception of evidence on
petitioner's taxable income.

ISSUE/S: (in relation 1. Whether petitioner, as an off-line international carrier with

to taxation) an independent sales agent in the Philippines, is engaged in
trade or business, subject to the 32% income tax.
2. Whether the income derived from the sale of passage
documents covering off-line flights is Philippine-source
income.
3. Whether petitioner is entitled to a refund of the erroneously
paid GPB tax for the year 2000.

RULING/s: The court ruled against the petitioner, stating that it is liable for
a 32% income tax on its taxable income, rejecting the claim for
exemption and emphasizing the petitioner's failure to
convincingly prove its exemption. The court clarified that the
amended definition of Gross Philippine Billings (GPB) did not
exempt off-line air carriers from income tax. Concerning the
refund claim, the denial was attributed to the petitioner's
liability under Section 28(A)(1) of the National Internal
Revenue Code (NIRC). The court stressed the need to
determine the petitioner's liability under this section and
remanded the case to the CTA En Banc for further proceedings,
including the reception of evidence on the petitioner's taxable
income.
 CHAVEZ v. ONGPIN
G.R. No. 76778 June 6, 1990
KEYWORD: E.O. no. 73
TAXATION constitutionality of Executive Order No. 73, which directed the
CONCEPT/ implementation of the general revision of real property
DOCTRINE: (e.g.: assessments.
life-blood theory)
Type of Case: (e.g.): Constitutionality of E.O. no. 73
case for refund etc.
Petitioners: FRANCISCO I. CHAVEZ
Respondents: Jaime B. Ongpin, in his capacity as Minister of Finance, and
Fidelina Cruz, in her capacity as Acting Municipal Treasurer of
the Municipality of Las Piñas.
Why Petitioner filed The petitioner, Francisco I. Chavez, filed the case to question
a case: the constitutionality of Executive Order No. 73. He argued that
the executive order, which accelerated the application of the
Brief facts okay lng general revision of assessments to January 1, 1987, resulted in
with tagalog basta an excessive increase in real property taxes. Chavez claimed
magets. that this increase was oppressive, especially during a period of
economic difficulty, and that it amounted to a confiscation of
property, violating the constitutional guarantee of due process.
The petitioner sought to declare Executive Order No. 73
unconstitutional.
Arguments of the Chavez argues further that the unreasonable increase in real
Petitioners (Lista) property taxes brought about by Executive Order No. 73
amounts to a confiscation of property repugnant to the
constitutional guarantee of due process, invoking the cases
of Ermita-Malate Hotel, et al. v. Mayor of Manila (G.R. No. L-
24693, July 31, 1967, 20 SCRA 849) and Sison v. Ancheta, et
al. (G.R. No. 59431, July 25, 1984, 130 SCRA 654).
Arguments of the The respondent, represented by the Office of the Solicitor
Respondents (Lista) General, argued against the petitioner's claims. They
contended that Executive Order No. 73 did not impose new
taxes or increase existing taxes but merely directed the
implementation of the general revision of assessments, which
was a continuing process mandated by Section 21 of
Presidential Decree No. 464. The government recognized the
financial burden resulting from increased real property taxes
and had deferred the implementation through Executive Order
No. 1019 until January 1, 1988. Executive Order No. 73,
changing the date back to January 1, 1987, aimed to address the
urgent need for local governments to augment their financial
resources. The respondents asserted that the petitioner's
reliance on cases related to the "power to tax" was misplaced,
as Executive Order No. 73 did not impose new taxes. They also
argued that the issues raised by the intervenor, Realty Owners
Association of the Philippines, Inc. (ROAP), regarding the
constitutionality of Presidential Decree No. 464 were not
 proper for resolution in the present petition, which was limited
to the constitutionality of Executive Order No. 73.
Who won in The Supreme Court upheld the constitutionality of Executive
RTC/CIR, CTA, SC? Order No. 73, emphasizing that it merely directed the
(as applicable) implementation of the general revision of assessments, a
continuing process mandated by Presidential Decree No. 464.
The Court rejected claims of due process violation, citing the
established procedure for appealing tax assessments. The
petition and intervention were dismissed.
ISSUE/S: (in relation Constitutionality of Executive Order No. 73 and related
to taxation) matters.
RULING/s: The Court affirmed the legality of Executive Order No. 73,
emphasizing the necessity of periodic revisions in property
assessments. It dismissed the petition and intervention, stating
that issues beyond the constitutionality of Executive Order No.
73 were not appropriate for the present case.
 Diaz vs. Secretary of Finance
G.R. No. 193007, July 19, 2011
KEYWORD: Toll Fee/ VAT / E-VAT
TAXATION The doctrine of non-interference recognizes that the power to
CONCEPT/ tax is primarily vested in the legislative branch of the
DOCTRINE: (e.g.: government. Courts are generally hesitant to declare tax laws
life-blood theory) unconstitutional unless there is a clear violation of
constitutional provisions. The case underscores the deference
accorded to the legislature in making tax-related decisions, as
long as these decisions fall within the bounds of
constitutionality and are designed to serve a legitimate
government purpose, such as raising revenue for public
services. This doctrine promotes stability in the legal
framework for taxation and acknowledges the complexities
involved in crafting tax policies.
Type of Case: (e.g.): Due Process and Equal Protection Clause // Petition for
case for refund etc. Declaratory Relief
Petitioners: Renato V. Diaz and Aurora Ma. F. Timbol
Respondents: The Secretary of Finance and The Commissioner of Internal
Revenue
Why Petitioner filed Petitioners Renato V. Diaz and Aurora Ma. F. Timbol contested
a case: the constitutionality of certain provisions of Republic Act No.
9337, particularly Sections 4, 5, and 6. These provisions
Brief facts okay lng amended the National Internal Revenue Code (NIRC) of 1997,
with tagalog basta introducing changes to the expanded value-added tax (EVAT)
magets. system. The petitioners, who were lawyers and law professors,
argued that the amendments violated the due process and
equal protection clauses of the Constitution.
Arguments of the Petitioners, regular tollway users, oppose the imposition of
Petitioners (Lista) VAT on toll fees. Diaz, a lawmaker, sponsored the EVAT Law
and NIRC. Timbol, with TRB background, also opposes. BIR
previously attempted VAT on toll fees, deferred due to
opposition. Revived under President Aquino, set for August
16, 2010, unless halted. Petitioners argue Congress didn't
intend toll fees as VAT subject, it's a "user's tax," not a service
sale, taxing it violates non-impairment clause.
Arguments of the The respondents argue that toll fees fall under the definition of
Respondents (Lista) "sale of services" and are subject to VAT. They contend that the
law doesn't exclude toll fees from VAT, and the imposition is
in line with the government's power to tax. The BIR asserts that
VAT is applied uniformly to all goods and services, including
toll fees, promoting fairness and equity in taxation. They
maintain that the non-impairment clause doesn't apply as the
imposition is a valid exercise of the state's taxing power.
Who won in The Supreme Court, in a decision dated July 19, 2011, upheld
RTC/CIR, CTA, SC? the constitutionality of Sections 4, 5, and 6 of Republic Act No.
(as applicable) 9337. It dismissed the petition and affirmed the validity of the
amendments to the EVAT system. The Court held that the
 changes were within the bounds of legislative power and did
not infringe on constitutional guarantees.
ISSUE/S: (in relation 1. Whether or not the government is unlawfully expanding
to taxation) VAT coverage by including tollway operators and tollway
operations in the terms "franchise grantees" and "sale of
services" under Section 108 of the Code; and

2. Whether or not the imposition of VAT on tollway operators

a) amounts to a tax on tax and not a tax on services; b) will
impair the tollway operators’ right to a reasonable return of
investment under their TOAs; and c) is not administratively
feasible and cannot be implemented.
RULING/s: **Rationale:**
1. The Court emphasized that the legislature has the authority
to enact laws amending tax provisions, and unless there is a
clear showing of constitutional violation, the judiciary must
exercise restraint in overturning such laws.
2. The amendments were found to be rationally related to the
legitimate government interest of raising revenue to fund
essential public services. The Court rejected the petitioners'
argument that the changes violated equal protection, asserting
that such classification was within the prerogative of the
legislature.

**Key Points:**
- The Court affirmed the principle of deference to legislative
authority in matters of taxation.
- The constitutionality of the amendments to the EVAT system
was upheld, emphasizing their valid purpose of revenue
generation.

**Significance:**
The case reinforces the principle that courts should generally
defer to legislative decisions on taxation matters, especially
when the amendments are aimed at raising revenue for
essential public services.
 Philippine Banking Corp. vs CIR,
G.R. No. 170574, January 30, 2009
KEYWORD: Special/Super Savings Deposit Account (SSDA)
TAXATION The key taxation concept in this case is that the tax treatment of
CONCEPT/ a financial product depends on its actual characteristics, not
DOCTRINE: (e.g.: just its name. The court emphasized that features like a holding
life-blood theory) period and a substantial minimum deposit determine whether
a deposit account, such as the Special/Super Savings Deposit
Account (SSDA), is subject to Documentary Stamp Tax (DST).
This highlights the importance of looking at the economic
substance of a transaction rather than its formal label in
taxation.

The case also underscores the principle that tax amnesty

programs offer a chance for taxpayers to settle their tax
liabilities. By complying with the program's requirements, they
may be relieved from certain taxes, including DST, as part of
the government's effort to encourage voluntary compliance
and provide a fresh start for taxpayers.
Type of Case: (e.g.): The case clarifies that the nature and features of a financial
case for refund etc. product, rather than its specific label or form, determine its tax
treatment.
Petitioners: Philippine Banking Corporation (Now: Global Business Bank,
Inc.)
Respondents: Commissioner of Internal Revenue
Why Petitioner filed - Petitioner offered a bank product called "Special/Super
a case: Savings Deposit Account" (SSDA) to depositors.
- SSDA is a form of savings deposit with a higher interest rate
Brief facts okay lng than regular savings accounts.
with tagalog basta - Commissioner of Internal Revenue assessed deficiency
magets. Documentary Stamp Tax (DST) on SSDA for the taxable years
1996 and 1997.
- Petitioner argued that SSDA is not subject to DST under
Section 180 of the 1977 National Internal Revenue Code
(NIRC).
- The Commissioner contended that SSDA is substantially
similar to a time deposit and thus subject to DST.
Arguments of the 1. SSDA is akin to a regular savings account.
Petitioners (Lista) 2. Section 180 of the 1977 NIRC does not include deposits
evidenced by a passbook among the instruments subject to
DST.
3. The SSDA is a product of the deregulated interest rate
regime in bank deposits.
4. The amendment in Republic Act No. 9243 (RA 9243)
subjecting SSDA to DST was not applicable during the taxable
years 1996 and 1997
Arguments of the 1. SSDA is substantially similar to a time deposit account.
Respondents (Lista) 2. Section 180 of the 1977 NIRC imposes DST on certificates of
 deposit drawing interest without any qualification.
3. A passbook representing an interest-earning deposit
qualifies as a certificate of deposit drawing interest.
Who won in - Court of Tax Appeals (CTA) affirmed the deficiency DST
RTC/CIR, CTA, SC? assessment.
(as applicable) - The CTA considered SSDA as a type of certificate of deposit
drawing interest subject to DST.
- The Supreme Court ruled in favor of the Commissioner,
stating that the SSDA has features similar to a certificate of
deposit and is subject to DST under Section 180 of the 1977
NIRC.
- The Supreme Court upheld the CTA decision, ruling that
SSDA is a certificate of deposit drawing interest and is subject
to DST under Section 180 of the 1977 NIRC.
- The Court also considered the petitioner's availment of the
Tax Amnesty Program, granting immunity from tax liabilities
for the taxable year 2005 and prior years.
ISSUE/S: (in relation Whether the SSDA is subject to DST under Section 180 of the
to taxation) 1977 NIRC for the taxable years 1996 and 1997
RULING/s: The Supreme Court affirmed the CTA decision, stating that the
Special/Super Savings Deposit Account (SSDA) is a certificate
of deposit drawing interest and is subject to Documentary
Stamp Tax (DST) under Section 180 of the 1977 NIRC. The
ruling emphasizes that the nature and features of a financial
product, not just its label or form, determine its tax treatment.

Furthermore, the Court took into account the petitioner's

utilization of the Tax Amnesty Program, granting immunity
from tax liabilities for the taxable year 2005 and prior years.
This underscores the significance of complying with the
program's requirements, leading to a statutory discharge of tax
obligations.