Digests (Berne Guerrero) through willful and deliberate misleading of the government agency concerned (BIR) committed by Javire.

Javier did not conceal anything to induce the government to give some legal right and place itself at adisadvantage. Error or mistake of law is not fraud. As ruled by the Court of Tax Appeals, the 50% surchargeimposed as fraud penalty in the deficiency assessment should be deleted. [59]Meralco vs. VeraGR L-29987, 22 October 1975 First Division, Munoz Palma (J): 4 concur, 1 took no part Facts: Meralco is the holder of a franchise to construct, maintain, and operate an electric light, heat , andpower system in the City of Manila and its suburbs. In 1962 and 1963, Meralco imported and received fromabroad copper wires, transformers, and insulators for use in the operation of its business. The Collector ofCustoms, as deputy of the Commissioner of Internal Revenue, levied and collected a compensating tax.Meralco claimed for refund for the said yeares, but such claims were either not acted upon or denied by theCommissioner. Issue: Whether Meralco is exempt from payment of a compensating tax on poles, wires, transformers andinsulators imported by it for use in the operation of its electric light, heat, and power system. Held: Meralco is not exempt from paying the compensationg tax provided for in Section 190 of the Tax Code,the prupose of which is to place casual importers, who are not merchants on equal forring with establishedmerchants who pay sales tax on articles imported by them. Meralcos claim for exemption from payment ofthe compensating tax is not clear or expressed, contrary to the rule that exemptions from taxation are highlydisfavored in law, and he who claims exemption must be able to justify his claim by the clearest grant oforganic or statute law. Tax exemptiion are strictly construed against the taxpayer, they being highlydisfavored and may almost be said to be odious to the law. When exemption is claimed, it must be shownindubitably to exist, for every presumption is against it, and a well-founded doubt is fatal to the claim. [60]Commissioner vs. Manila Jockey ClubGR L-8755, 23 March 1956 First Division, Bautista Angelo (J): 9 concur Facts: The Manila Jockey Club is the owner of the San Lazaro Hippodrome, which is used for holding horseraces either by the club itself or by the Philippine Charity Sweepstakes Office (PCSO) or other

charitableinstitutions authorized by law to hold horse races. On 1951 and 1952, the PCSO held benefit races forcharitable, relief and civic purposes in which the Club was paid in the form of rentals, which was included inits declared income taxes in its return for said years. The Club claimed for refund of the sum collected by theCommissioner as to the rentals, contending that it is exempt under Section 3 of RA 79. Issue: Whether the Club is exempt from income derived from the PCSO races. Held: The exemption does not refer to any income tax that may be imposed on the rentals that may be paidfor the use of racing tracks and other paraphernalia. The income earned by the Club herein did not come fromthe horse races held by said club but it came to it as rentals paid for the use of its property. The tax paid forsuch income cannot be considered as one connected with those races within the purview of the exemptionclause in RA 79. By its very nature, the law that exempts one from tax must be clearly expressed because theexemption must be able to justify his claim by the clearest grant of organic or statute law.