domondon s

SELECTED CASE LAW IN

TAXATION
1
ver. 08.05.01
This Handout is specia! prepared to "eet the needs o#
$re%&ar 'evie(ees in Ta)ation and is intended to suppe"ent
the author*s ectures on the su+,ect. This Handout is +asica!
sourced #ro" the author*s T(o%-ou"e .008 &ar 'evie(er in
Ta)ation and #ro" seected Supre"e Court Decisions up to
Apri 15/ .008. I# the recent decisions are "ere reiterations o#
prior doctrines then the author has decided to stic0 to the
oder cases. The author has #ound out that &ar e)a"iners
have a penchant #or 1ivin1 2uestions that are +ased on
recent! decided cases. 3or a co"prehensive revie( it is
su11ested that the reader shoud use the author*s &ar
'evie(er in Ta)ation. (hich is avaia+e at the Conanan
Educationa &oo0 Supp!/ .014 C.5. 'ecto/ 5ania/ Te. No.
675%55%8.8 675%55%89.
WARNING: The use o# these notes is i"ited on! to
those (ho have attended the $re%&ar 'evie( Lectures o#
$ro#. A+eardo T. Do"ondon and those he has persona!
authori:ed. 'eproduction o# this Handout or cop!in1
contents sha su+,ect the user to the a( o# ;ar"a.
<nauthori:ed users (i not pass the &ar and i# the! do so/
the! sha +e unhapp! in i#e #or steain1 the inteectua
propert! o# the author.
1
$repared +! $ro#. A+eardo T. Do"ondon/ A& =Econ>/
&SC =Acct1>/ LL&/ 5A =Econ>/ LL5/ DCL =Cand.>. La(!er%C$A%
Custo"s &ro0er/ 5ana1e"ent Consutant/ $ro#essor o# La( and
$re%&ar 'evie(er.
GOOD LUCK TO EVERYBODY AND SEE YOU
ALL IN COURT AS WORTHY OPPOSING COUNSELS.
GENERAL PRINCIPLES OF TAXATION
1. The powe !o !"# $% %o&e!$&e% '"((e) "(%o !he
powe !o )e%!o*. The po(er o# ta)ation is so"eti"es caed
aso the po(er to destro!. There#ore it shoud +e e)ercised
(ith caution to "ini"i:e in,ur! to the proprietar! ri1hts o# a
ta)pa!er. It "ust +e e)ercised #air!/ e2ua! and uni#or"!/
est the ta) coector 0i the ?hen that a!s the 1oden e11.@
And/ in the order to "aintain the 1enera pu+ic*s trust and
con#idence in the Aovern"ent this po(er "ust +e used ,ust!
and not treacherous!. =Roxas v. Court of Tax Appeals/ No. L%
.50B7/ Apri .9/ 1498/ .7 SC'A .69/ .8.. cited in Pilipinas Shell
Petroleum Corporation v. Commissioner of Internal Revenue, A. '.
No. 16.548/ Dece"+er .1/ .006>

+. Wh* "e !"# ("w% 'o,%!-e) %!$'!(* "."$,%! !he
S!"!e ",) ($/e"((* $, 0"1o o0 !he S!"!e 2
S<AAESTED ANSWE'C In case o# dou+t/ ta) a(s
"ust +e construed strict! a1ainst the State and i+era! in
#avor o# the ta)pa!er +ecause ta)es/ as +urdens (hich "ust
+e endured +! the ta)pa!er/ shoud not +e presu"ed to 1o
+e!ond (hat the a( e)press! and cear! decares. (Lincoln
Philippine Life Insurance Company, Inc., etc., v. Court of Appeals, et
al., .47 SC'A 4./ 44>
3. T"# e#e&p!$o,% "e %!$'!(* 'o,%!-e) "."$,%!
!he !"#p"*e ",) ($/e"((* $, 0"1o o0 !he S!"!e and "ust +e
cear! sho(n and +ased on an1ua1e in the a( too pain to +e
"ista0en (Davao ulf Lum!er Corporation v. Commissioner of
Internal Revenue, et al., .47 SC'A 69/ 88", +ecause ta)es are
necessar! #or the continued e)istence o# the State.
4. A e1e%"( o0 " BIR -($,. 0"1o"/(e !o " !"#p"*e
wo-() ,o! ,e'e%%"$(* 'e"!e " pepe!-"( e#e&p!$o, $, h$%
0"1o/ #or a#ter a the 1overn"ent is never estopped #ro"
coectin1 ta)es +ecause o# "ista0es or errors on the part o# its
a1ents. (Lincoln Philippine Life Insurance Company, Inc., etc., v.
Court of Appeals, et al., .47 SC'A 4./ 44>
5. I, 1667 Ro%e&"$e8 " ,o,e%$)e,! '$!$9e,8 w"%
'o((e'!e) Ph$($pp$,e $,'o&e !"#e% o, he $,'o&e% )e$1e)
0o& %o-'e% w$!ho-! !he Ph$($pp$,e%. Upo, !he e,"'!&e,!
o0 !he NIRC o0 166: wh$'h !oo; e00e'! o, <",-"* 18 166=8
%he 0$(e) " '("$& 0o e0-,) o0 !he !"#e% %he p"$) p"*$,.
0o !he e!o"'!$1e "pp($'"!$o, o0 !he po1$%$o, !h"! %-/>e'!%
,o,e%$)e,! '$!$9e,% !o !"# o,(* o, !he$ $,'o&e% 0o&
w$!h$,. Sho-() !he e0-,) /e .",!e) 2
S<AAESTED ANSWE'C No. Ta) a(s/ uni0e re"edia
a(s/ are not to +e appied retroactive!. 'evenue a(s are
su+stantive a(s and their appication "ust not +e e2uated
(ith re"edia a(s.
'evenue a(s are not intended to +e i+era! construed/
and e)e"ptions are not 1iven retroactive appication/
considerin1 that ta)es are the i#e+ood o# the 1overn"ent and
in Ho"es* "e"ora+e "etaphor/ the price (e pa! #or
civii:ation/ ta) a(s "ust +e #aith#u! and strict! i"pe"ented.
=Commissioner of Internal Revenue v. Acosta, etc.,A. '. No. 15B098/
Au1ust 7/ .006>
7. The %-&p!-"* p-po%e o0 !"#"!$o, $% !o
po&o!e !he .e,e"( we(0"e ",) !o po!e'! !he he"(!h8
%"0e!* o &o"(% o0 !he $,h"/$!",!%. It is in the ,oint e)ercise
o# the po(er o# ta)ation and poice po(er (here re1uator!
ta)es are coected.
Ta)ation "a! +e "ade the i"pe"ent o# the state*s
poice po(er. The "otivation +ehind "an! ta)ation "easures
is the i"pe"entation o# poice po(er 1oas. DSouthern Cross
Cement Corporation v. Cement #anufacturers Association of the
Philippines, et al., A. '. No. 1585B0/ Au1ust 7/ .005 citin1 Lut$ v.
Araneta, 48 $hi. 1B8/ 15. =1455>8 in turn citin1 reat Atl. % Pac. Tea
Co. v. ros&ean, 70. <.S. B1.8 '.S. v. (iutler, .46 <.S. 18 #cCulloch
v. #arylan), B Wheaton 719E The reader shoud note that the Au1ust
7/ .005 Southern Cross case is the decision on the "otion #or
reconsideration o# the Fu! 8/ .00B Southern Cross decision.
The so%caed ?sin ta)es@ on acoho and to+acco
"anu#acturers hep dissuade the consu"ers #ro" e)cessive
inta0e o# these potentia! har"#u products. =Southern Cross
Cement Corporation v. Cement #anufacturers Association of the
Philippines, et al., A. '. No. 1585B0/ Au1ust 7/ .005>
:. The 'o&pe,%"!o* p-po%e o0 !"#"!$o, is to
i"pe"ent the socia ,ustice provisions o# the constitution
throu1h the pro1ressive s!ste" o# ta)ation/ (hich (oud resut
to e2ua distri+ution o# (eath/ etc.
$ro1ressive inco"e ta)es aeviate the "ar1in +et(een
rich and poor. =Southern Cross Cement Corporation v. Cement
#anufacturers Association of the Philippines, et al., A. '. No. 1585B0/
Au1ust 7/ .005>
=. T"#"!$o, $% )$%!$,.-$%h"/(e 0o& po($'e powe as
to the "eans e"po!ed to i"pe"ent these pu+ic 1oas.
Those doctrines that are uni2ue to ta)ation arose #ro" pecuiar
considerations such as those especia! punitive e##ects
=Southern Cross Cement Corporation v. Cement #anufacturers
Association of the Philippines, et al., A. '. No. 1585B0/ Au1ust 7/
.005 citin1 <. S. Chie# 5arsha (ho once said/ the po(er to ta)
invoves the po(er to destro!/ #cCulloch v. #arylan), B Wheaton
719/ cited in Sison v. Ancheta, A. '. No. L G 54B71/ Fu! .5/ 170
SC'A 95B> and the +eie# that ta)es are i#e+ood o# the state.
=Southern Cross Cement Corporation v. Cement #anufacturers
Association of the Philippines, et al., A. '. No. 1585B0/ Au1ust 7/
.005 citin1 ?DTEa)es +ein1 the i#e+ood o# the 1overn"ent/ their
pro"pt and certain avaia+iit! is o# the essence.@ Sison v. Ancheta,
i)., citin1 *era v. +ernan)e$, A. '. No. L%7179B/ 5arch 70/ 1464/ 84
SC'A 144E
These considerations necessitated the evoution o#
ta)ation as a distinct e1a concept #ro" poice po(er.
=Southern Cross Cement Corporation, supra>
I# the 2uestion as0s #or an enu"eration o# the distinctions
+et(een the po(er o# ta)ation and poice po(er/ the candidate
shoud re#or"uate no. 8 a+ove.
6. The S-." A)>-%!&e,! A'! wh$'h $,'e"%e)
e#$%!$,. !"#e% o, %-." w"% e,"'!e) !o %!"/$($9e !he %-."
$,)-%!* to prepare it #or the oss o# its 2uota in the <.S.
"ar0et w"% (e1$e) 0o " e.-("!o* p-po%e !o po!e'! ",)
po&o!e !he %-." $,)-%!* wh$'h $% "(%o 0o " p-/($'
p-po%e. =Lut$ v. Araneta, 48 $hi. 1B8>
The $hisu1in #und/ an i"position on su1ar/ to raise
#unds to conduct research #or the i"prove"ent o# the su1ar
industr!/ is #or the purpose o# sta+ii:in1 the su1ar industr!
(hich one o# the piars o# the $hiippine econo"! (hich
2
a##ects the (e#are o# the State. The ev! is not so "uch an
e)ercise o# the po(er o# ta)ation/ nor the i"position o# a
specia ev!/ +ut the e)ercise o# poice po(er (hich is #or the
1enera (e#are o# the entire countr!/ there#ore #or a pu+ic
purpose. (Repu!lic v. (acolo),#urcia Co., et al./ A.'. No. L%148.B/
Fu! 4/ 1499>
1?. Se'!$o, 4? @.A o0 !he P-/($' Se1$'e A'!
"-!ho$9e% !he 'o((e'!$o, o0 B# # # 0ee% "% e$&/-%e&e,!
o0 $!% e#pe,%e% $, !he "-!ho$9"!$o,8 %-pe1$%$o, ",)Co
e.-("!$o, o0 !he p-/($' %e1$'e%: # # # .A Fo e"'h pe&$!8
"-!ho$9$,. !he $,'e"%e $, eD-$p&e,!8 !he $,%!"(("!$o, o0
,ew -,$!% o "-!ho$9$,. !he $,'e"%e o0 '"p"'$!*8 o !he
e#!e,%$o, o0 &e",% o .e,e"( e#!e,%$o,% $, !he %e1$'e%8
!we,!* 'e,!"1o% 0o e"'h o,e h-,)e) pe%o% o 0"'!$o, o0
!he "))$!$o,"( '"p$!"( ,e'e%%"* !o '"* o-! !he pe&$!.E
@p""ph"%$,. %-pp($e)A
I% !he $&po%$!$o, " !"# &e"%-e 2 E#p("$,.
S<AAESTED ANSWE'C No. It is not a ta) "easure
+ut a si"pe re1uator! provision #or the coection o# #ees
i"posed pursuant to the e)ercise o# the State*s poice po(er.
A ta) is i"posed under the ta)in1 po(er o# 1overn"ent
principa! #or the purpose o# raisin1 revenues. The a( in
2uestion/ ho(ever/ "ere! authori:es and re2uires the
coection o# #ees #or the rei"+urse"ent o# the Co""ission*s
e)penses in the authori:ation/ supervision andHor re1uation o#
pu+ic services. =Repu!lic, etc., v. International Communications
Corporation (ICC", A. '. No. 1B1996/ Fu! 16/ .009>
11. Powe o0 !"#"!$o, '", "(%o /e -%e) !o
$&p(e&e,! powe o0 e&$,e,! )o&"$,. Ta) "easures are +ut
@en#orced contri+utions e)acted on pain o# pena sanctions@
and ?cear! i"posed #or pu+ic purpose.@ In "ost recent !ears/
the po(er to ta) has indeed +eco"e a "ost e##ective too to
reai:e socia ,ustice/ pu+ic (e#are/ and the e2uita+e
distri+ution o# (eath. =Commissioner of Internal Revenue v.
Central Lu$on Dru- Corporation, A.'. No. 1549B6/ Apri 19/ .005>
NITES AND CI55ENTSC
a. Central Luzon Drug reco1ni:ed the ri1ht o#
esta+ish"ents to utii:e the senior citi:ens* discount as a ta) credit.
The a( has since +een a"ended to ao( the senior citi:ens* discount
as a ta) deduction. DE)panded Senior Citi:ens Act o# .007/ Sec. B
=a>E
+. The %e,$o '$!$9e,%F )$%'o-,!. The senior citi:ens
sha +e entited to the ?1rant o# t(ent! percent =.0J> discount #ro"
a esta+ish"ents reative to the utii:ation o# services in hotes and
si"iar od1in1 esta+ish"ents/ restaurants and recreation centers/
and purchase o# "edicines in a esta+ish"ents #or the e)cusive
use or en,o!"ent o# senior citi:ens/@ DE)panded Senior Citi:ens Act
o# .007/ Sec. B =a>E
c. Se,$o '$!$9e,%F )$%'o-,! ,o! "((owe) ",*&oe
"% " !"# 'e)$! /-! "% " )e)-'!$o, 0o& .o%% $,'o&e. It
ou1ht to +e noted/ ho(ever/ that on 3e+ruar! .9/ .00B/ 'A 4.56/ or
The E)panded Senior Citi:ens Act o# .007/ a"endin1 'A 6B7./ (as
si1ned into a(/ usherin1 in/ upon its e##ectivit! on 5arch .1/ .00B/ a
ne( ta) treat"ent #or saes discount purchases o# 2uai#ied senior
citi:ens o# "edicines.
The esta+ish"ent "a! cai" the discounts 1ranted to senior
citi:nes "% !"# )e)-'!$o, +ased on the net cost o# the 1oods sod or
services renderedC Provi)e)/ That the cost o# the discount sha +e
ao(ed as deduction #ro" 1ross inco"e #or the sa"e ta)a+e !ear
that the discount is 1ranted. Provi)e), further, That the tota a"ount
o# the cai"ed ta) deduction net o# vaue added ta) i# appica+e/
sha +e incuded in their 1ross saes receipts #or ta) purposes and
sha +e su+,ect to proper docu"entation and to the provisions o# the
Nationa Interna 'evenue Code/ as a"ended. D#... /ol)in-
Corporation v. Court of Appeals, et al., A.'. No. 190147/ 5arch 7/
.008 citin1 E)panded Senior Citi:ens Act o# .007/ Sec. B =a>E
1+. The !"# e1e,-e% "e 0o " p-/($' p-po%e $0
-!$($9e) 0o !he /e,e0$! o0 !he 'o&&-,$!* $, .e,e"(. An
aternative "eanin1 is that ta) proceeds shoud +e utii:ed
on! to attain the o+,ectives o# 1overn"ent.
$u+ic use is no on1er con#ined to the traditiona notion
o# use +! the pu+ic +ut hed s!non!"ous (ith pu+ic interest/
pu+ic +ene#it/ pu+ic (e#are/ and pu+ic convenience.
=Commissioner of Internal Revenue v. Central Lu$on Dru-
Corporation, A.'. No. 1549B6/ Apri 19/ .005>
13. T"#p"*e%F %-$! $% " '"%e whee !he "'!
'o&p("$,e) o0 )$e'!(* $,1o(1e% !he $((e."( )$%/-%e&e,! o0
p-/($' 0-,)% )e$1e) 0o& !"#"!$o,. =Fustice 5eo/ dissentin1 in
0ilos!ayan, Inc. v. uin-ona, 1r./ .7. SC'A 110>
14. Wh"! $% locus standi ?
3
S<AAESTED ANSWE'C Locus stan)i is ?a ri1ht o#
appearance in a court o# ,ustice on a 1iven 2uestion. =A!aya v.
.!)ane, A. '. No. 196414/ 3e+ruar! 1B/ .006>
It is a part!*s persona and su+stantia interest in the
case/ such that the part! has sustained or (i sustain
=I!i).>direct in,ur! as a resut o# the 1overn"ent act +ein1
chaen1ed. It cas #or "ore than ,ust a 1enerai:ed 1rievance.
A part! need not +e a part! to the contract to chaen1e
its vaidit!. =I!i).>
NITES AND CI55ENTSCC
a. The !e& B$,!ee%!E &e",% " &"!e$"( $,!ee%!/ an
interest in issue a##ected +! the decree/ as distin1uished #ro" "ere
interest in the 2uestion invoved/ or a "ere incidenta interest.
=A!aya v. .!)ane, A. '. No. 196414/ 3e+ruar! 1B/ .006>
+. R"!$o,"(e 0o locus standi . The rationae #or
re2uirin1 a part! (ho chaen1es the constitutionait! o# a statute to
ae1e such a persona sta0e in the outco"e o# the controvers! is ?to
ensure that a concrete adverseness (hich sharpens the presentation
o# issues upon (hich the court so ar1e! depends #or iu"ination o#
di##erent constitutiona 2uestions.@ =A!aya v. .!)ane, A. '. No.
196414/ 3e+ruar! 1B/ .006>
c. A(!e,"!$1e %!"!e&e,! o0 )o'!$,e o0 /-%h$,.
"%$)e locus standi. In cases o# para"ount i"portance (here
serious constitutiona 2uestions are invoved/ the standin1
re2uire"ents "a! +e rea)ed and a suit "a! +e ao(ed to prosper
even (here there is no direct in,ur! to the part! cai"in1 the ri1ht o#
,udicia revie(. DCoconut 2il Refiners Association, Inc., etc., et al., vs.
Torres, etc., et al., A. '. No. 17.5.6/ Fu! .4/ .005 citin1 (ayan
((a-on- Alyansan- #a3a!ayan" v. 4amora, A. '. No. 178560/
Icto+er 10/ .000/ 7B. SC'A BB4/ in turn citin1 0ilos!ayan, Inc. v.
uin-ona, 1r./ A. '. No. 117765/ 5a! 5/ 144B/ .7. SC'A 110E
15. Wh"! "e !he eD-$e&e,!% !h"! &-%! /e &e!
/e0oe !"#p"*e%8 'o,'e,e) '$!$9e,% ",) (e.$%("!o% &"*
/e "''o)e) %!",)$,. !o %-e 2
S<AAESTED ANSWE'C
a. The case shoud invove constitutiona issues8
+. 3or ta)pa!ers/ there "ust +e a cai" o# ie1a
dis+urse"ent o# pu+ic #unds or that the ta) "easure is
unconstitutiona.
c. 3or voters/ there "ust +e a sho(in1 o# o+vious
interest in the vaidit! o# the eection a( in 2uestion.
d. 3or concerned citi:ens/ there "ust +e a sho(in1
that the issues raised are o# transcendenta i"portance (hich
"ust +e setted ear!.
e. 3or e1isators/ there "ust +e a cai" that the
o##icia action co"pained o# in#rin1es upon their prero1atives
as e1isators. =Davi), et al., v. Presi)ent loria #acapa-al,
Arroyo, etc., et al., A. '. No. 161749/ 5a! 7/ .009>
NITES AND CI55ENTSC
a. I&pope !o $&p(e") $,'-&/e,! Pe%$)e,!.
I"peadin1 the $resident as respondent durin1 her tenure and
incu"+enc! in o##ice de1rades the di1nit! o# the o##ice/ harass her
and detracts her #ro" the per#or"ance o# her #unctions. Whie this
"a! +e so/ she is su+,ect to i"peach"ent. =En +anc/ Sandova%
Autierre:/ F. Davi), et al., v. Presi)ent loria #acapa-al,Arroyo,
etc., et al., A. '. No. 161749/ 5a! 7/ .009>
+. ReD-$%$!e% 0o 'h"((e,.$,. 'o,%!$!-!$o,"($!* o0
("w. The part! +rin1in1 suit "ust sho( ?not on! that the a( or act
is invaid/ +ut aso that he has sustained or is in i""ediate/ or
i""inent dan1er o# sustainin1 so"e direct in,ur! as a resut o# its
en#orce"ent and not "ere! that he su##ers there+! in so"e
inde#inite (a!.@ =Soriano III v. Lista, et al., A. '. No. 157881/ 5arch
.B/ .007>
17. Lo'-% %!",)$ /e$,. &ee(* " &"!!e o0
po'e)-e8 h"1e /ee, w"$1e) $, 'e!"$, $,%!",'e% whee "
p"!* who $% ,o! pe%o,"((* $,>-e) &"* /e "((owe) !o /$,.
%-$!. G$1e %o&e e#"&p(e%.
S<AAESTED ANSWE'C The #oo(in1 are e)a"pes o#
instances (here suits have +een +rou1ht +! parties (ho have
not have +een persona! in,ured +! the operation o# a a( or
an! other 1overn"ent act +ut +! concerned citi:ens/ ta)pa!ers
or voters (ho actua! sue in the pu+ic interestC
a. Ta)pa!er*s suits to 2uestion contracts entered into
+! the nationa 1overn"ent or 1overn"ent%o(ned or controed
corporations ae1ed! in contravention o# the a(.
+. A ta)pa!er is ao(ed to sue (here there is a cai"
that pu+ic #unds are ie1a! dis+ursed/ or that pu+ic "one! is
+ein1 de#ected to an! i"proper purpose/ or that there is a
(asta1e o# pu+ic #unds throu1h the en#orce"ent o# an invaid
or unconstitutiona a(. =A!aya v. .!)ane, A. '. No. 196414/
3e+ruar! 1B/ .006>
4
1:. The pe!$!$o,e% $&p-., !he 1"($)$!* o0 !he
e%!"/($%h&e,! o0 !"# ",) )-!*G0ee %hop% w$!h$, !he S-/$'
Spe'$"( E'o,o&$' Ho,e @SSEHA ",) !he e&o1"( o0
'o,%-&e .oo)% ",) $!e&% 0o& !he 9o,e% w$!ho-!
p"*&e,! o0 'oe%po,)$,. )-!$e% ",) !"#e% 0o !he e"%o,
!h"! !h$% 'o,%!$!-!e e#e'-!$1e (e.$%("!$o, $, 1$o("!$o, o0 !he
-(e o, %ep""!$o, o0 powe%8 !h"! o,(* B"w &"!e$"(8
'"p$!"( ",) eD-$p&e,!E %ho-() /e "((owe) !he p$1$(e.e.
R-(e o, !he o/>e'!$o,% ",) e"%o, o-! *o- ",%we /$e0(*.
S<AAESTED ANSWE'C The o+,ections shoud not +e
1iven credence. It is e1a to setup du! authori:ed dut!%#ree
shops in the SSEK to se ta) and dut!%#ree consu"er ite"s in
the Secured Area. This is in ine (ith the poic! enunciated in
the a( that ?the Su+ic Specia Econo"ic Kone sha +e
deveoped into a se#%sustainin1/ industria/ co""ercia/
#inancia and invest"ent center to 1enerate e"po!"ent
opportunities in and around the :one and to attract and
pro"ote productive #orei1n invest"ents.@
Whie it is true that Section 1. =+> o# 'ep. Act No. 6..6
"entions on! ra( "aterias/ capita and e2uip"ent/ this does
not necessari! "ean that the ta) and dut! #ree +u!in1
privie1e is i"ited to these t!pes o# artices to the e)cusion o#
consu"er 1oods.
It "ust +e re"e"+ered that in construin1 statutes/ the
proper course is to start out and #oo( the true intent o# the
Le1isature and to adopt that sense (hich har"oni:es +est
(ith the conte)t and pro"otes to the #uest "anner the poic!
and o+,ects o# the Le1isature.
The concept o# inclusio unius est exclusio alterius does
not #ind appication +ecause the phrase ?ta) and dut!%#ree
i"portations o# ra( "aterias/ capita and e2uip"ent@ (as
"ere! cited as an e)a"pe o# incentives that the SSEK is
authori:ed to 1rant/ in ine (ith its +ein1 a #ree port :one.
Thus/ the e1isative intent is that consu"er 1oods enterin1 the
SSEK (hich satis#! the needs o# the :one and are consu"ed
there are not su+,ect to duties and ta)es in accordance (ith
$hiippine a(. =Coconut 2il Refiners Association, Inc., etc., et al., v.
Torres, etc., et al., A. '. No. 17.5.6/ Fu! .4/ .005>
L Wo-() *o- ",%we /e !he %"&e $0 " Pe%$)e,!$"(
Po'("&"!$o, "((owe) 0o !he ($&$!e) w$!h)"w"( 0o& !he
C("; Spe'$"( E'o,o&$' Ho,e o !he <oh, H"* E'o,o&$'
Ho,e o0 'o,%-&e .oo)% !"# ",) )-!*G0ee 2
S<AAESTED ANSWE'C The ans(er (oud not +e the
sa"e. This ti"e the $residentia $roca"ation (oud +e invaid
as the statutor! ta) e)e"pt privie1e (as 1ranted on! to the
Su+ic Specia Econo"ic Kone and not to Fohn Ha! or Car0.
This is so +ecause the Constitution "andates that no a(
1rantin1 ta) e)e"ption sha +e passed (ithout the
concurrence o# a "a,orit! o# a the "e"+ers o# Con1ress.
=Coconut 2il Refiners Association, Inc., etc., et al., v. Torres, etc., et
al., A. '. No. 17.5.6/ Fu! .4/ .005 citin1 1ohn /ay People5s
Alternative Coalition, et al., v. Lim, etc., et al., A.'. No. 114665/
Icto+er .B/ .007/ B1B SC'A 759>
3urther"ore/ the a( is ver! cear that the ?e)portation or
re"ova o# 1oods #ro" the territor! o# the Su+ic Specia
Econo"ic Kone to other parts o# the $hiippine territor! sha +e
su+,ect to custo"s duties and ta)es under the Custo"s and
Tari## Code and other reevant ta) a(s o# the $hiippines.@
=I!i).>
1=. The VAT ("w po1$)e% !h"!8 !he Pe%$)e,!8 -po,
!he e'o&&e,)"!$o, o0 !he Se'e!"* o0 F$,",'e8 %h"((8
e00e'!$1e <",-"* 18 +??78 "$%e !he "!e o0 1"(-eG"))e) !"#
!o !we(1e pe'e,! @1+IA "0!e ",* o0 !he 0o((ow$,.
'o,)$!$o,% h"1e /ee, %"!$%0$e). B@$A 1"(-eG"))e) !"#
'o((e'!$o, "% " pe'e,!".e o0 Go%% Do&e%!$' Po)-'!
@GDPA o0 !he pe1$o-% *e" e#'ee)% !wo ",) 0o-G0$0!h
pe'e,! @+ 4C5IA o @$$A ,"!$o,"( .o1e,&e,! )e0$'$! "% "
pe'e,!".e o0 GDP o0 !he pe1$o-% *e" e#'ee)% o,e ",)
o,eGh"(0 pe'e,! @1 JIA.E
W"% !hee ", $,1"($) )e(e."!$o, o0 (e.$%("!$1e powe 2
S<AAESTED ANSWE'C No. There is no undue
dee1ation o# e1isative po(er +ut on! o# the discretion as to
the e)ecution o# the a(. This is constitutiona! per"issi+e.
Con1ress does not a+dicate its #unctions or undu!
dee1ate po(er (hen it descri+es (hat ,o+ "ust +e done/ (ho
"ust do it/ and (hat is the scope o# his authorit!. In the a+ove
case the Secretar! o# 3inance +eco"es "ere! the a1ent o#
the e1isative depart"ent/ to deter"ine and decare the even
upon (hich its e)pressed (i ta0es pace. The $resident
cannot set aside the #indin1s o# the Secretar! o# 3inance/ (ho
is not under the conditions actin1 as the e)ecute ater e1o or
5
su+ordinate. . DA!a3a)a uro Party List (etc." v. .rmita, etc., et al.,
A. '. No. 198059/ Septe"+er 1/ .005 and co"panion cases citin1
various casesEE
16. <-($",e " ,o,Ge%$)e,! "($e, "ppo$,!e) "% "
'o&&$%%$o, ".e,! /* " )o&e%!$' 'opo"!$o, w$!h " %"(e%
'o&&$%%$o, o0 1?I "(( %"(e% "'!-"((* 'o,'(-)e) ",)
'o((e'!e) !ho-.h he e00o!%. The (o'"( 'o&p",* w$!hhe()
!he "&o-,! o0 P1?:8??? 0o& he %"(e% 'o&&$%%$o, ",)
e&$!!e) !he %"&e !o !he BIR.
She 0$(e) " '("$& 0o e0-,) "((e.$,. !h"! he %"(e%
'o&&$%%$o, $% ,o! !"#"/(e /e'"-%e !he %"&e w"% "
'o&pe,%"!$o, 0o he %e1$'e% e,)ee) $, Ge&",* ",)
!hee0oe 'o,%$)ee) "% $,'o&e 0o& %o-'e% o-!%$)e !he
Ph$($pp$,e%.
I% he 'o,!e,!$o, 'oe'! 2
S<AAESTED ANSWE'C Mes. The i"portant #actor
(hich deter"ines the source o# inco"e o# persona services is
not the residence o# the pa!or/ or the pace (here the contract
#or service is entered into/ or the pace o# pa!"ent/ +ut the
pace (here the services (ere actua! per#or"ed.
Since the activit! o# securin1 the saes (ere in Aer"an!/
then the inco"e did not ori1inate #ro" sources #ro" (ithin the
$hiippines. =Commissioner of Internal Revenue v. (aier,6ic3el, A.
'. No. 157647/ Au1ust .4/ .009>
NITES AND CI55ENTSC In the a+ove case/ the
Supre"e Court reiterated the rue that ?%o-'e o0 $,'o&eE reates to
the propert!/ activit! or service that produced the inco"e. With
respect to rendition o# a+or or persona service/ it is the pace (here
the a+or or service (as per#or"ed that deter"ines the source o# the
inco"e.
The a+ove (aier,6ic3el case discussed the i"port o# the
and"ar0 cases =/o7)en and (2AC" invovin1 sources o# inco"e #or
ta) purposes +oth o# (hich "a! +e dan1erous #or &ar purposesC
+?. A )o&e%!$' $,%-",'e 'o&p",* )e'$)e) !o
e$,%-e w$!h " 0oe$., e$,%-e !he $%;% $! h"% -,)e!";e,
w$!h $!% (o'"( '($e,!%. The 0oe$., e$,%-e )oe% ,o! h"1e
", o00$'e8 ,e$!he )oe% $! )o /-%$,e%% $, !he Ph$($pp$,e%.
Ae !he e$,%-",'e pe&$-&% %-/>e'! !o Ph$($pp$,e $,'o&e
!"#"!$o, 2
S<AAESTED ANSWE'C Mes +ecause the underta0in1
o# the #orei1n insurance co"pan! to inde"ni#! the oca
insurance co"pan! is the activit! that produced the inco"e.
The reinsurance pre"iu"s re"itted to the #orei1n
reinsurer had #or their source the underta0in1 to inde"ni#! the
oca insurer a1ainst ia+iit!. Said underta0in1 is the activit!
that produced there insurance pre"iu"s/ and the sa"e too0
pace in the $hiippines. The reinsured/ the ia+iities insured
and the ris0 ori1ina! underta0en +! the oca insurance
co"pan!/ upon (hich the reinsurance pre"iu"s and inde"nit!
(ere +ased/ (ere a situated in the $hiippines. =Alexan)er
/o7)en % Co., Lt). v. Collector of Internal Revenue, 1.1 $hi. 5648 17
SC'A 901 =1495> cited in (aier,6ic3el"
+1. BOAC8 " 0oe$., "$($,e 'o&p",* wh$'h )oe%
,o! &"$,!"$, ",* 0($.h! !o ",) 0o& !he Ph$($pp$,e% %o() "$
!$';e!% $, !he Ph$($pp$,e%8 !ho-.h " .e,e"( %"(e% ".e,!8
e("!$,. !o !he '"$".e o0 p"%%e,.e% ",) '".o /e!wee,
!wo po$,!%8 /o!h o-!%$)e !he Ph$($pp$,e%.
I% BOAC %-/>e'! !o $,'o&e !"#e% o, !he %"(e o0 !he
!$';e!% 2
S<AAESTED ANSWE'C Mes. The source o# inco"e
(hich is ta)a+e is that ?activit!@ (hich produced the inco"e.
The @sae o# tic0ets@ in the $hiippines is the activit! that
deter"ines (hether such inco"e is ta)a+e in the $hiippines.
The tic0ets e)chan1ed hands here and pa!"ents #or
#ares (ere aso "ade here in $hiippine currenc!. The situs o#
the source o# pa!"ents is the $hiippines. the #o( o# (eath
proceeded #ro" and occurred/ (ithin the $hiippine territor!/
en,o!in1 the protection accorded +! the $hiippine
Aovern"ent. In consideration o# such protection/ the #o( o#
(eath shoud share the +urden o# supportin1 the 1overn"ent.
=Commissioner of Internal Revenue v. (ritish 2verseas Air7ays
Corporation ((2AC", 1B4 SC'A 745 cited in (auer,6ic3el"
NITES AND CI55ENTSC I# the 2uestion invoves the air
carrier*s ta)/ then &IAC is not su+,ect to the sa"e +ecause o# the
a"end"ent in the a( (hich re2uires that there "ust +e upi#ts #ro"
(ithin the $hiippines +e#ore the air carrier*s ta) +ased on 1ross
$hiippine +iin1s "a! +e coected.
++. ED-"( po!e'!$o, o0 !he ("w '("-%e $% %-/>e'! !o
e"%o,"/(e '("%%$0$'"!$o,. I# the 1roupin1s are characteri:ed
6
+! su+stantia distinctions that "a0e rea di##erences/ one cass
"a! +e treated and re1uated di##erent! #ro" another. The
cassi#ication "ust aso +e 1er"ane to the purpose o# the a(
and "ust app! to a those +eon1in1 to the sa"e cass. (Tiu,
et al., v. Court of Appeals, et al., A.'. No. 1.6B10/ Fanuar! .0/ 1444>
+3. C("%%$0$'"!$o,8 !o /e 1"($)8 &-%! =a> rest on
su+stantia distinctions/ =+> +e 1er"ane to the purpose o# the
a(/ =c> not +e i"ited to e)istin1 conditions on!/ and =d> app!
e2ua! to a "e"+ers o# the sa"e cass. (Tiu, et al., v. Court of
Appeals, et al., A.'. No. 1.6B10/ Fanuar! .0/ 1444>
+4. The ("w .",! o0 !"# ",) )-!*G0ee %!"!-% -,)e
Rep. A'! No. :++:8 !o e!"$(e% $,%$)e !he SSEH w$!ho-!
.",!$,. !he %"&e !o !ho%e o-!%$)e !he SSEH. I% !hee "
1$o("!$o, o0 !he eD-"( po!e'!$o, '("-%e 2
S<AAESTED ANSWE'C There is no vioation o# e2ua
protection +ecause there e)ists a vaid cassi#ication as sho(n
+eo(C
a. Si1ni#icant distinctions e)ist +et(een the t(o
1roups. Those outside o# the SSEK "aintain their +usiness
(ithin $hiippine custo"s territor! (hie those (ithin the SSEK
operate (ithin the so%caed ?separate custo"s territor!.@ To
1rant the sa"e privie1es (oud cear! de#eat the statue*s
intent to carve a territor! out o# the "iitar! reservations in
Su+ic &a! (here #ree #o( o# 1oods and capita is "aintained.
+. The cassi#ication is 1er"ane to the purpose o#
'ep. Act No. 6..6. As hed in Tiu, the rea concern o# the a(
is to convert the ands #or"er! occupied +! the <S "iitar!
+ases into econo"ic or industria areas. In #urtherance o# such
o+,ective/ Con1ress dee"ed it necessar! to e)tend econo"ic
incentives/ in ter"s o# a co"pete pac0a1e o# ta) incentives
and other +ene#its/ to the esta+ish"ents (ithin the :one to
attract and encoura1e #orei1n and oca investors.
c. The cassi#ication is not i"ited to the e)istin1
conditions (hen the a( (as pro"u1ated +ut to #uture
conditions as (e/ inas"uch as the a( envisioned the #or"er
"iitar! reservation to uti"ate! deveop into a se#%sustainin1
invest"ent center.
d. The cassi#ication appies e2ua! to a retaiers
#ound (ithin the ?secured area.@ As rued in Tiu/ the individuas
and +usinesses (ithin the ?secured area/@ +ein1 in i0e
circu"stances or contri+utin1 direct! to the achieve"ent o# the
end purposes o# the a(/ are not cate1ori:ed #urther. The! are
a si"iar! treated/ +oth in privie1es 1ranted and in o+i1ations
re2uired. =Coconut 2il Refiners Association, Inc., etc., et al., v.
Torres, etc., et al., A. '. No. 17.5.6/ Fu! .4/ .005 citin1 Tiu, et al.,
v. Court of Appeals, et al., .R. 6o. 89:;8<, Fanuar! .0/ 1444/ 701
SC'A .68>
+5. I% !he %!"!-!o* .",! o0 !"# ",) )-!*G0ee
$&po!"!$o, $,!o !he S-/$' Spe'$"( E'o,o&$' Ho,e 1$o("!$1e
!he Bpe0ee,!$"( -%eE 'o,'ep! o0 !he Co,%!$!-!$o, 2
S<AAESTED ANSWE'C No. The "ere #act that the
a( authori:es the i"portation and trade o# #orei1n 1oods does
not su##ice to decare it unconstitutiona on this 1round.
Whie the Constitution does not encoura1e the uni"ited
entr! o# #orei1n 1oods/ services and invest"ents into the
countr!/ it does not prohi+it the" either. In #act/ it ao(s an
e)chan1e on the +asis o# e2uait! and reciprocit!/ #ro(nin1
on! in #orei1n co"petition that is un#air. =Coconut 2il Refiners
Association, Inc., etc., et al., v. Torres, etc., et al., A. '. No. 17.5.6/
Fu! .4/ .005 citin1 Tana)a v. An-ara, A. '. No. 118.45/ 5a! ./
1446/ .6. SC'A 18>
+7. I! $% $,hee,! $, !he powe !o !"# !h"! !he S!"!e
/e 0ee !o %e(e'! !he %-/>e'!% o0 !"#"!$o,8 and it has +een
repeated! hed that/ Nine2uaities (hich resut #ro" a sin1in1
out o# one particuar cass o# ta)ation/ or e)e"ption/ in#rin1e no
constitutiona i"itation.N (Commissioner of Internal Revenue, et al.,
v. Santos, et al., .66 SC'A 916>

+:. A ("w0-( !"# o, " ,ew %-/>e'!8 o ", $,'e"%e)
!"# o, ", o() o,e8 )oe% ,o! $,!e0ee w$!h " 'o,!"'! o
$&p"$% $!% o/($."!$o,/ (ithin the "eanin1 o# the constitution.
Even thou1h such ta)ation "a! a##ect particuar contracts/ as it
"a! increase the de+t o# one person and essen the securit! o#
another/ or "a! i"pose additiona +urdens upon one cass and
reease the +urdens o# another/ sti the ta) "ust +e paid
uness prohi+ited +! the constitution/ nor can it +e said that it
i"pairs the o+i1ations o# an! e)istin1 contract in its true and
e1a sense. (Tolentino v. Secretary of +inance, et al., an)
companion cases, .75 SC'A 970>

7
+=. U,)e !he ,ow pe1"$($,. Co,%!$!-!$o,8 whee
!hee $% ,e$!he " .",! ,o poh$/$!$o, /* %!"!-!e8 !he
!"#$,. powe o0 (o'"( .o1e,&e,!% &-%! /e )ee&e) !o
e#$%! "(!ho-.h Co,.e%% &"* po1$)e %!"!-!o* ($&$!"!$o,%
",) .-$)e($,e% in order to sa#e1uard the via+iit! and se#%
su##icienc! o# oca 1overn"ent units +! direct! 1rantin1 the"
1enera and +road ta) po(ers. =City overnment of San Pa!lo,
La-una, et al., v. Reyes, et al., A.'. No. 1.6608/ 5arch .5/ 1444>
+6. The Lo'"( Go1e,&e,! Co)e e#p($'$!(*
"-!ho$9e% po1$,'e% ",) '$!$e%8 ,o!w$!h%!",)$,. B",*
e#e&p!$o, .",!e) /* ",* ("w o o!he %pe'$"( ("wE !o
$&po%e " !"# o, /-%$,e%%e% e,>o*$,. " 0",'h$%e. Indicative
o# the e1isative intent to carr! out the constitutiona "andate
o# vestin1 +road ta) po(ers to oca 1overn"ent units/ the
Loca Aovern"ent Code has (ithdra(n ta) e)e"ptions or
incentives thereto#ore en,o!ed +! certain entities. (City
overnment of San Pa!lo, La-una, et al., v. Reyes, et al., A.'. No.
1.6608/ 5arch .5/ 1444>
3?. Philippine Lon- Distance Telephone Company,
Inc., v. City of Davao, et al., etc., A. '. No. 1B7896/ Au1ust ../
.001/ uphed the authorit! o# the Cit! o# Davao/ a oca
1overn"ent unit/ to i"pose and coect a oca #ranchise ta)
+ecause the Loca Aovern"ent has (ithdra(n a ta)
e)e"ptions previous! en,o!ed +! a persons and authori:ed
oca 1overn"ent units to i"pose a ta) on +usiness en,o!in1 a
#ranchise ta) not(ithstandin1 the 1rant o# ta) e)e"ption to
the".
31. BP"")$.& %h$0!E 0o& e#'(-%$1e Co,.e%%$o,"(
powe !o )$e'! .",! o0 !"#$,. powe !o (o'"( (e.$%("!$1e
/o)$e%. The po(er to ta) is no on1er vested e)cusive! on
Con1ress8 oca e1isative +odies are no( 1iven direct
authorit! to ev! ta)es/ #ees and other char1es pursuant to
Artice O/ section 5 o# the 1486 Constitution. =(atan-as Po7er
Corporation v. (atan-as City, et al. A. '. No. 15.965/ and co"panion
case/ Apri .8/ .00B citin1 6ational Po7er Corporation v. City of
Ca!anatuan, A. '. No. 1B4110/ Apri 4/ .007>
NITES AND CI55ENTSC
a. A/",)o,e) )o'!$,e. Powe !o !"# o0 LGU% ,o!
)$e'! .",! /-! &ee(* )e(e."!e) powe.
WARNING: The 0o((ow$,. )o'!$,e $% "(e")* "/",)o,e).
$o(er o# oca 1overn"ents to ta) is on! a dee1ated po(er. Loca
1overn"ents do not have the inherent po(er to ta) e)cept to the
e)tent that such po(er "i1ht +e dee1ated to the" either +! the +asic
a( or statute. $resent!/ under Artice O o# the 1486 Constitution a
1enera dee1ation o# that po(er has +een 1iven in #avor o# oca
1overn"ent units. =#anila .lectric Company v. Province of La-una, et
al./ A.'. No. 171754/ 5a! 5/ 1444>
3+. The 0-,)"&e,!"( ("w )$) ,o! $,!e,) !he )$e'!
.",! !o (o'"( .o1e,&e,! -,$!% !o /e "/%o(-!e ",)
-,'o,)$!$o,"(/ the constitutiona o+,ective o+vious! is to
ensure that/ (hie oca 1overn"ent units are +ein1
stren1thened and "ade "ore autono"ous/ the e1isature
"ust sti see to it thatC
a. the ta)pa!er (i not +e over%+urdened or sadded
(ith "utipe and unreasona+e i"positions8
+. each oca 1overn"ent unit (i have its #air share
o# avaia+e resources8
c. the resources o# the nationa 1overn"ent (i +e
undu! distur+ed8 and
d. oca ta)ation (i +e #air/ uni#or" and ,ust. =#anila
.lectric Company v. Province of La-una, et al., A.'. No. 171754/ 5a!
5/ 1444>
NITES AND CI55ENTSC #anila .lectric Company v.
Province of La-una, et al., A.'. No. 171754/ 5a! 5/ 1444/re#erred to
the po(er as "ere! a dee1ated po(er hence the i"itations.
The author ho(ever hods that (hether the po(er is direct
1rant or "ere! a dee1ated po(er/ the a+ove i"itations #ind
appication/ +ecause the po(er is su+,ect to such 1uideines and
i"itations as Con1ress "a! provide.
. 33. The w$!h)"w"( o0 " !"# e#e&p!$o, %ho-() ,o!
/e 'o,%!-e) "% poh$/$!$,. 0-!-e .",!% o0 e#e&p!$o,
0o& "(( !"#e%. Indeed/ the 1rant o# ta)in1 po(ers to oca
1overn"ent units under the Loca Aovern"ent Code does not
a##ect the po(er o# Con1ress to 1rant e)e"ptions to certain
persons/ pursuant to a decared nationa poic!. The e1a
e##ect o# the constitutiona 1rant to oca 1overn"ents si"p!
"eans that in interpretin1 statutor! provisions on "unicipa
ta)in1 po(ers/ dou+ts "ust +e resoved in #avor o# "unicipa
corporations. (Philippine Lon- Distance Telephone Company, Inc., v.
City of Davao, et al., etc., A. '. No. 1B7896/ Au1ust ../ .001>
8
34. Whe, Co,.e%% "ppo1e) " po1$%$o, that/ ?An!
advanta1e/ #avor/ privie1e/ e)e"ption/ or i""unit! 1ranted
under e)istin1 #ranchises/ or "a! herea#ter +e 1ranted/ sha
ipso #acto +eco"e part o# previous! 1ranted
teeco""unications #ranchises and sha +e accorded
i""ediate! and unconditiona! to the 1rantees o# such
#ranchisesC $rovided/ ho(ever/ That the #ore1oin1 sha neither
app! to nor a##ect provisions o# teeco""unications #ranchises
concernin1 territor! covered +! the #ranchise/ the i#e span o#
the #ranchise/ or the t!pe o# service authori:ed +! the
#ranchise.@ =<nderscorin1 suppied> !hee w"% ,o $,!e,!$o,
0o $! !o ope"!e "% " /(",;e! !"# e#e&p!$o, !o "((
!e(e'o&&-,$'"!$o,% e,!$!$e%. App!in1 the rue o# strict
construction o# a(s 1rantin1 ta) e)e"ptions and the rue that
dou+ts shoud +e resoved in #avor o# "unicipa corporations in
interpretin1 statutor! provisions on "unicipa ta)ation/ it (as
hed that said provisions cannot +e considered as e)tendin1 its
appication to #ranchises such as that o# $LDT. (Philippine Lon-
Distance Telephone Company, Inc., v. City of Davao, et al., etc./ A. '.
No. 1B7896/ Au1ust ../ .001"
35. Whe, ", $!e& o0 $,'o&e $% !"#e) $, !he
Ph$($pp$,e% ",) !he %"&e $,'o&e $% !"#e) $, ",o!he
'o-,!*8 !h$% wo-() /e ;,ow, "% $,!e,"!$o,"( >-$)$'"(
)o-/(e !"#"!$o, (hich is the i"position o# co"para+e ta)es in
t(o or "ore states on the sa"e ta)pa!er in respect o# the
sa"e su+,ect "atter and #or identica 1rounds. (Commissioner of
Internal Revenue v. S.C. 1ohnson an) Son, Inc., et al., A.'. No.
1.6105/ Fune .5/ 1444>
37. A !"# )e)-'!$o, is de#ined as a su+traction #ro
inco"e #or ta) purposes/ or an a"ount that is ao(ed +! a( to
reduce inco"e prior to the appication o# the ta) rate to
co"pute the a"ount o# ta) (hich is due.
A ta) deduction reduces the inco"e that is su+,ect to ta)
in order to arrive at ta)a+e inco"e. =Commissioner of Internal
Revenue v. Central Lu$on Dru- Corporation, A. '. No. 1549B6/ Apri
15/ .005>
3:. The pe!$!$o,e% "((e.e !h"! !he RGVAT ("w $%
'o,%!$!-!$o,"( /e'"-%e !he B$'"&e"( Co,0ee,'e
Co&&$!!e) h"% e#'ee)e) $!% "-!ho$!* $, $,'(-)$,.
po1$%$o,% wh$'h wee ,e1e $,'(-)e) $, !he 1e%$o,% o0
/o!h !he Ho-%e ",) Se,"!e %-'h "% $,%e!$,. !he %!",)G/*
"-!ho$!* !o !he Pe%$)e,! !o $,'e"%e !he VAT 0o& 1?I !o
1+IK )e(e!$,. e,!$e(* !he ,o p"%%Go, po1$%$o,% 0o-,) $,
/o!h !he Ho-%e ",) Se,"!e B$((%K $,%e!$,. !he po1$%$o,
$&po%$,. " :?I ($&$! o, !he "&o-,! o0 $,p-! !"# !o /e
'e)$!e) "."$,%! !he o-!p-! !"#K ",) $,'(-)$,. !he
"&e,)&e,!% $,!o)-'e) o,(* /* Se,"!e B$(( No. 165?
e.")$,. o!he ;$,)% o0 !"#e% $, "))$!$o, !o !he 1"(-eG
"))e) !"#. Th-%8 !hee w"% " 1$o("!$o, o0 !he 'o,%!$!-!$o,"(
&",)"!e !h"! e1e,-e /$((% %h"(( o$.$,"!e e#'(-%$1e(* 0o&
!he Ho-%e o0 Repe%e,!"!$1e%.
Ae !he 'o,!e,!$o,% o0 %-'h we$.h! "% !o 'o,%!$!-!e
."1e "/-%e o0 )$%'e!$o, wh$'h &"* $,1"($)"!e !he ("w 2
E#p("$, /$e0(*.
S<AAESTED ANSWE'C No. There (as no 1rave
a+use o# discretion +ecause a the chan1es and "odi#ications
"ade +! the &ica"era Con#erence Co""ittee (ere 1er"ane
to su+,ects o# the provisions re#erred to it #or reconciiation.
The &ica"era Con#erence Co""ittee "ere! e)ercised
the ,udicia! reco1ni:ed on1%standin1 e1isative practice o#
1ivin1 said con#erence co""ittee a"pe atitude #or
co"pro"isin1 di##erences +et(een the Senate and the House.
DA!a3a)a uro Party List (etc." v. .rmita, etc., et al., A. '. No.
198059/ Septe"+er 1/ .005 and co"panion cases citin1 Philippine
1u)-es Association v. Par)o, A. '. No. 105761/ Nove"+er 11/ 1447/
..6 SC'A 6078 Tolentino v. Secretary of +inance, et al., A. '. No.
115B55/ Au1ust .5/ 144B/ .75SC'A 970E
3=. The VAT $% "%%"$(e) "% /e$,. e.e%%$1e ",)
!hee0oe 1$o("!$1e o0 !he &",)"!e !o e1o(1e " po.e%%$1e
%*%!e& o0 !"#"!$o,. Do *o- ".ee 2 E#p("$, *o- ",%we.
S<AAESTED ANSWE'C No. The -AT does not vioate
the pro1ressive s!ste" o# ta)ation. The "andate to Con1ress
is not to prescri+e +ut to evove a pro1ressive s!ste" o#
ta)ation. Ither(ise/ saes ta)es (hich perhaps are the odest
#or" o# indirect ta)es/ (oud have +een prohi+ited (ith the
proca"ation o# the constitutiona provision. Saes ta)es are
aso re1ressive. . DA!a3a)a uro Party List (etc." v. .rmita, etc., et
9
al., A. '. No. 198059/ Septe"+er 1/ .005 and co"panion cases citin1
Tolentino v. Secretary of +inance, et al., A. '. No. 115B55/ Au1ust .5/
144B/ .75 SC'A 970E
36. Wh"! $% " !"# "&,e%!* 2
S<AAESTED ANSWE'C A ta) a"nest! is a 1enera
pardon or intentiona overoo0in1 +! the State o# its authorit! to
i"pose penaties on persons other(ise 1uit! o# evasion or
vioation o# a revenue or a ta) a(. (Commissioner of Internal
Revenue v. #aru!eni Corporation, A.'. No. 176766/ Dece"+er 18/
.001>
NITES AND CI55ENTSC
a. The p-po%e o0 !"# "&,e%!* is to
1> 1ive ta) evaders (ho (ish to reent a chance to
start a cean sate/ and to
.> 1ive the 1overn"ent a chance to coect
uncoected ta) #ro" ta) evaders (ithout havin1 to 1o
throu1h the tedious process o# a ta) case. ((anas, 1r. v.
Court of Appeals, et al., A.'. No. 10.496/ 3e+ruar! 10/ .000"
4?. D$%!$,.-$%h !"# "&,e%!* 0o& !"# e#e&p!$o,.
S<AAESTED ANSWE'C
a. Ta) a"nest! is an i""unit! #ro" a cri"ina/ civi
and ad"inistrative ia+iities arisin1 #ro" nonpa!"ent o# ta)es
=People v. Castane)a, A.'. No. L%B9881/ Septe"+er 15/ 1488>
WHILE a ta) e)e"ption is an i""unit! #ro" civi ia+iit! on!.
It is an i""unit! or privie1e/ a #reedo" #ro" a char1e or
+urden to (hich others are su+,ected. (+lorer v. Sheri)an, 8=:
In). 9>, =? 6. =?@"
+. Ta) a"nest! appies on! to past ta) periods/
hence o# retroactive appication (Castane)a, supra> WHILE ta)
e)e"ption has prospective appication.
41. De0$,e !"# "1o$)",'e ",) !"# e1"%$o,.
S<AAESTED ANSWE'C Ta) avoidance is the use o#
e1a! per"issi+e "eans to reduce the ta) (hie ta) evasion is
the use o# ie1a "eans to escape the pa!"ent o# ta)es.
NITES AND CI55ENTSC
a. T"# "1o$)",'e 'o,,o!e% !he $,!e."!$o, o0 !hee
0"'!o%:
1> the end to +e achieved/ i.e./ the pa!"ent o# ess
than that 0no(n +! the ta)pa!er to +e e1a! due/ or the non%
pa!"ent o# ta) (hen it is sho(n that a ta) is due8
.> an acco"pan!in1 state o# "ind (hich is descri+ed
as +ein1 ?evi@ on ?+ad #aith/@ ?(i#u/@ or @dei+erate and not
accidenta@8 and
7> a course o# action or #aiure o# action (hich is
una(#u. =Commissioner of Internal Revenue v. The .state of
(eni-no P. To)a, 1r., , etc., A. '. No. 1B6188/ Septe"+er 1B/
.00B>
4+. Wh"! "e !he e"%o,% wh* ,"!$o,"( !"#e% '",,o!
/e !he %-/>e'! o0 'o&pe,%"!$o, ",) %e!Go00 w$!h )e/!% 2
S<AAESTED ANSWE'C
a. The i#e+ood theor!8
+. Ta)es are not contractua o+i1ations +ut arise out
o# a dut! to/ and are the positive acts o# 1overn"ent/ to the
"a0in1 and en#orcin1 o# (hich the persona consent o# the
individua ta)pa!er is not re2uired. (Repu!lic v. #am!ulao
Lum!er Co., B SC'A 9..>
c. The 1overn"ent and the ta)pa!er are not "utua!
creditors and de+tors o# each other and a cai" #or ta)es is no
such de+t/ de"and/ contract or ,ud1"ent as is ao(ed to +e
set%o##. (Caltex Philippines, Inc. v. Commission on Au)it, .08 SC'A
6.9/ 659>
43. Co&pe,%"!$o, ta0es pace +! operation o# a(/
(here the oca 1overn"ent and the ta)pa!er are in their o(n
ri1ht reciproca! de+tors and creditors o# each other/ and that
the de+ts are +oth due and de"anda+e/ in conse2uence o#
Artices 1.68 and 1.64 o# the Civi Code. (Domin-o v. arlitos, 8
SC'A BB7>
44. I, '"%e o0 " !"# o1ep"*&e,!8 whee !he BIRF%
o/($."!$o, !o e0-,) o %e!Go00 "$%e% 0o& !he &o&e,! !he
!"# w"% p"$) -,)e !he p$,'$p(e o0 solutio indebeti.
(Commissioner of Internal Revenue v. .sso Stan)ar) .astern, Inc,
16. S'CA 79B>
45. B-! ,o!e Nestle Phil. v. Court of Appeals, et al.,
G.R. No. 1341148 <-(* 78 +??1 (hich hed that in order #or the
rue on solutio in)e!eti to app! it is an essentia condition that
the petitioner "ust #irst sho( that its pa!"ent o# the custo"s
duties (as in e)cess o# (hat (as re2uired +! the a( at the
ti"e the su+,ect 19 i"portations o# "i0 and "i0 products (ere
"ade. <ness sho(n other(ise/ the disputa+e presu"ption o#
10
re1uarit! o# per#or"ance o# dut! ies in #avor o# the Coector o#
Custo"s.
47. A )$e'! !"# $% " !"# 0o wh$'h " !"#p"*e $%
)$e'!(* ($"/(e o, !he !",%"'!$o, o /-%$,e%% $! e,.".e% $,8
w$!ho-! !",%0e$,. !he /-)e, !o %o&eo,e e(%e. E)a"pes
are individua and corporate inco"e ta)es/ trans#er ta)es/ and
residence ta)es. =A!a3a)a uro Party List (etc." v. .rmita, etc., et
al., A. '. No. 198059/ Septe"+er 1/ .005 and co"panion cases/
citin1 #ace)a v. #acarai-, 1r., A.'. No. 88.41/ Fune 8/ 1447/ ..7
SC'A .16>
4:. A'e%$!e $% !he ow,e ",) ope"!o o0 e%!"-",!
wh$'h '"!e% !o !he p"!o,% o0 " '"%$,o ope"!e) /*
PAGCOR w$!h$, $!% pe&$%e%. $! /$((e) PAGCOR 0o !he 'o%!
o0 !he 0oo) ",) /e1e".e% 'o,%-&e) /* !he PAGCORF%
p"!o,% "% we(( "% !he (e"%e o0 !he pe&$%e% p(-% !he VAT
o, !he%e $!e&%. PAGCOR p"$) A'e%$!e &$,-% !he VAT
'("$&$,. e#e&p!$o, wh$(e A'e%$!e8 $, o)e !o "1o$) (e."(
$&p($'"!$o,%8 p"$) !he P3? &$(($o, !"# ",) "pp($e) 0o "
e0-,) o, !he .o-,) o0 %o(-!$o $,)e/e!$.
A'e%$!e '$!e% !he !"# e#e&p!$o, .",! $, PAGCORF%
0",'h$%e "% 0o((ow%: AThe exemptions herein -rante) for
earnin-s )erive) from the operations con)ucte) un)er the
franchise specifically from the payment of any tax, income, or
other7ise, as 7ell as any form of char-es, fees or levies, shall
inure to the benefit of and extend to corporation(s,
association (s, agenc! (cies, or individual(s "ith "ho#
the Corporation or operator has an! contractual
relationship in connection "ith the operations of the
casino (s authorized to be conducted under this
$ranchise an) to those receivin- compensation or other
remuneration from the Corporation or operator as a result of
essential facilities furnishe) an)Bor technical services ren)ere)
to the Corporation or operator.C (emphasis supplie)"
The BIR )e,$e) !he '("$& o, !he .o-,) !h"!
PAGCOR $% e#e&p! o,(* 0o& )$e'! !"#e% ",) ,o! 0o&
$,)$e'! !"#e% %o A'e%$!e &"* ,o! "1"$( o0 !he e#e&p!$o,. I%
!h$% 'oe'! 2
S<AAESTED ANSWE'C No. As the a( is (orded the
e)e"ption #o(s to Acesite. The a( is cear that the
e)e"ption e)tends the e)e"ption to entities or individuas
deain1 (ith $AACI'. =Commissioner of Internal Revenue v.
Acesite (Philippines" /otel Corporation, A. '. No. 1B6.45/ 3e+ruar!
19/ .006>
NITES AND CI55ENTSC The a+ove hodin1 shoud +e
di##erentiated #ro" Philippine Acetylene Co. v. Commissioner of
Internal Revenue, .0 SC'A 1059, (here the ta) e)e"ption did not
#o( to private entities. =cited in A!aya v. .!)ane, A. '. No. 196414/
3e+ruar! 1B/ .006>/ and in the #oo(in1 case o# Sil3air (Sin-apore"
PT., Lt)., v. Commissioner of Internal Revenue, A.'. No. 16754B/
3e+ruar! 9/ .008.
4=. S$(;"$ @S$,."poeA PTE8 L!).8 ", $,!e,"!$o,"(
'"$e8 p-'h"%e) "1$"!$o, ."% 0o& Pe!o, Copo"!$o,8
wh$'h $! -%e% 0o $!% ope"!$o,%. I! ,ow '("$&% 0o e0-,) o
!"# 'e)$! 0o !he e#'$%e !"#e% $! p"$) '("$&$,. !h"! $! $%
e#e&p! 0o& !he p"*&e,! o0 e#'$%e !"#e% -,)e !he
po1$%$o,% o0 Se'. 135 o0 !he NIRC o0 166: wh$'h po1$)e%
!h"! pe!o(e-& po)-'!% "e e#e&p! 0o& e#'$%e !"#e%
whe, %o() !o ?E)e"pt entities or a1encies covered +! ta)
treaties/ conventions/ and other internationa a1ree"ents #or
their use and consu"ptionC Provi)e), ho7ever, That the
countr! o# said #orei1n internationa carrier or e)e"pt entities
or a1encies e)e"pts #ro" si"iar ta)es petroeu" products
sod to $hiippine carriers/ entities or a1encies@
S$(;"$ 0-!he ",'ho% $!% '("$& o, A!$'(e 4@+A o0 !he
A$ T",%po! A.ee&e,! /e!wee, !he Go1e,&e,! o0 !he
Rep-/($' o0 !he Ph$($pp$,e% ",) !he Go1e,&e,! o0 !he
Rep-/($' o0 S$,."poe @A$ T",%po! A.ee&e,! /e!wee,
RP ",) S$,."poeA wh$'h e")%: ?3ue/ u+ricants/ spare
parts/ re1uar e2uip"ent and aircra#t stores introduced into/ or
ta0en on +oard aircra#t in the territor! o# one Contractin1 part!
+!/ or on +eha# o#/ a desi1nated airine o# the other
Contractin1 $art! and intended soe! #or use in the operation
o# the a1reed services sha/ (ith the e)ception o# char1es
correspondin1 to the service per#or"ed/ +e e)e"pt #ro" the
sa"e custo"s duties/ inspection #ees and other duties or
ta)es i"posed in the territories o# the #irst Contractin1 $art! /
even (hen these suppies are to +e used on the parts o# the
,ourne! per#or"ed over the territor! o# the Contractin1 $art! in
(hich the! are introduced into or ta0en on +oard. The
"aterias re#erred to a+ove "a! +e re2uired to +e 0ept under
custo"s supervision and contro.@
11
S$(;"$ ($;ew$%e ".-e% !h"! $! $% e#e&p! 0o& $,)$e'!
!"#e% /e'"-%e !he A$ T",%po! A.ee&e,! /e!wee, RP
",) S$,."poe .",!% e#e&p!$o, B0o& !he %"&e '-%!o&%
)-!$e%8 $,%pe'!$o, 0ee% ",) o!he )-!$e% o !"#e% $&po%e)
$, !he !e$!o* o0 !he 0$%! Co,!"'!$,. P"!*. I! $,1o;e%
%aceda v. %acaraig, &r., G.R. No. ==+618 L"* 318 16618
16: SCRA ::1.wh$'h -phe() !he '("$& 0o !"# 'e)$! o
e0-,) /* !he N"!$o,"( Powe Copo"!$o, @NPCA o, !he
.o-,) !h"! !he NPC $% e#e&p! e1e, 0o& !he p"*&e,! o0
$,)$e'! !"#e%.
I% S$(;"$ e,!$!(e) !o !he !"# e0-,) o 'e)$! $! %ee;% 2
Re"%o, o-! *o- ",%we.
S<AAESTED ANSWE'C Si0air is not entited to ta)
re#und or credit #or the #oo(in1 reasonsC
a. The e)cise ta) on aviation #ue is an indirect ta).
The proper part! to 2uestion/ or see0 a re#und o#/ an indirect
ta) is the statutor! ta)pa!er/ the person on (ho" the ta) is
i"posed +! a( and (ho paid the sa"e even i# he shi#ts the
+urden thereo# to another. =Philippine eothermal, Inc. v.
Commissioner of Internal Revenue, A.'. No. 15B0.8/ Fu! .4/ .005/
B95 SC'A 708/ 716%718> The NI'C provides that the e)cise
ta) shoud +e paid +! the "anu#acturer or producer +e#ore
re"ova o# do"estic products #ro" pace o# production. Thus/
$etron Corporation/ not Si0air/ is the statutor! ta)pa!er (hich
is entited to cai" a re#und +ased on Section 175 o# the NI'C
o# 1446 and Artice B=.> o# the Air Transport A1ree"ent
+et(een '$ and Sin1apore.
Even i# $etron Corporation passed on to Si0air the
+urden o# the ta)/ the additiona a"ount +ied to Si0air #or ,et
#ue is not a ta) +ut part o# the price (hich Si0air had to pa!
as a purchaser.

DPhilippine Acetylene Co., Inc. v. Commissioner of
Internal Revenue, 1.6 $hi. B91/ B60 =1496>E
+. Si0air coud not see0 re#u1e under #ace)a v.
#acarai-, 1r., A.'. No. 88.41/ 5a! 71/ 1441/ 146 SC'A
661.(hich uphed the cai" #or ta) credit or re#und +! the
Nationa $o(er Corporation =N$C> on the 1round that the N$C
is e)e"pt even #ro" the pa!"ent o# indirect ta)es.
In Commissioner of Internal Revenue v. Philippine
Lon- Distance Telephone Company/ A.'. No. 1B0.70/
Dece"+er 15/ .005/ B68 SC'A 91 the Supre"e Court
cari#ied the ruin1 in #ace)a v. #acarai-, 1r., vi$C It "a! +e so
that in #ace)a vs. #acarai-, 1r./ the Court hed that an
e)e"ption #ro" ?all taxes@ 1ranted to the Nationa $o(er
Corporation =N$C> under its charter incudes +oth direct and
indirect ta)es.
An e)e"ption #ro" ?a ta)es@ e)cudes indirect ta)es/
uness the e)e"ptin1 statute/ i0e N$C*s charter/ is so
couched as to incude indirect ta) #ro" the e)e"ption. The
a"end"ent under 'epu+ic Act No. 9745 enu"erated the
detais covered +! N$C*s e)e"ption. Su+se2uent!/ $.D. 780/
"ade even "ore speci#ic the detais o# the e)e"ption o# N$C
to cover/ a"on1 others/ !oth )irect an) in)irect taxes on a
petroeu" products used in its operation. $residentia Decree
No. 478 DN$C*s a"ended charterE a"ended the ta) e)e"ption
+! si"pi#!in1 the sa"e a( in 1enera ter"s. It succinct!
e)e"pts N$C #ro" ?a #or"s o# ta)es/ dutiesD/E #eesP@ The
use o# the phrase ?a #or"s@ o# ta)es de"onstrates the
intention o# the a( to 1ive N$C a the ta) e)e"ptions it has
+een en,o!in1 +e#ore.
The e)e"ption 1ranted under Section 175 =+> o# the
NI'C o# 1446 and Artice B=.> o# the Air Transport A1ree"ent
+et(een '$ and Sin1apore cannot/ (ithout a cear sho(in1 o#
e1isative intent/ +e construed as incudin1 indirect ta)es.
Statutes 1rantin1 ta) e)e"ptions "ust +e construed in
strictissimi &uris a1ainst the ta)pa!er and i+era! in #avor o#
the ta)in1 authorit!/ and i# an e)e"ption is #ound to e)ist/ it
"ust not +e enar1ed +! construction. =Sil3air (Sin-apore" PT.,
Lt)., v. Commissioner of Internal Revenue, A.'. No. 16754B/ 3e+ruar!
9/ .008>
NATIONAL INTERNAL REVENUE CODE
INCOLE TAXATION
1. In .van-elista v. Collector, 10. $hi. 1B<, the
Supre"e Court hed/ citin1 5ertens/ that !he !e& p"!,e%h$p
$,'(-)e% a s!ndicate/ 1roup/ poo/ ,oint venture or other
unincorporated or1ani:ation/ throu1h or +! "eans o# (hich an!
+usiness/ #inancia operation/ or venture is carried on.
+. CoGhe$% who ow, $,he$!e) pope!$e% wh$'h
po)-'e $,'o&e %ho-() ,o! "-!o&"!$'"((* /e 'o,%$)ee) "%
12
p"!,e% o0 ", -,e.$%!ee) 'opo"!$o, %-/>e'! !o $,'o&e
!"# 0o !he 0o((ow$,. e"%o,%:
a. The sharin1 o# 1ross returns does not o# itse#
esta+ish a partnership/ (hether or not the persons sharin1
the" have a ,oint or co""on ri1ht or interest in an! propert!
#ro" (hich the returns are derived. There "ust +e an
un"ista0a+e intention to #or" a partnership or ,oint venture.
(2!illos, 1r. v. Commissioner of Internal Revenue, 174 SC'A B79>
+. There is no contri+ution or invest"ent o# additiona
capita to increase or e)pand the inherited properties/ "ere!
continuin1 the dedication o# the propert! to the use to (hich it
had +een put +! their #ore+ears. =I!i).>
c. $ersons (ho contri+ute propert! or #unds to a
co""on enterprise and a1ree to share the 1ross returns o#
that enterprise in proportion to their contri+ution/ +ut (ho
severa! retain the tite to their respective contri+ution/ are not
there+! rendered partners. The! have no co""on stoc0
capita/ and no co""unit! o# interest as principa proprietors in
the +usiness itse# #ro" (hich the proceeds (ere derived.
=Ee"ents o# the La( o# $artnership +! 3o!d '. 5eche"/ .
nd
Ed./
Sec. 87/ p. 6B cited in Pascual v. Commissioner of Internal Revenue,
199 SC'A 590>
3. The 'o&&o, ow,e%h$p o0 pope!* )oe% ,o!
$!%e(0 'e"!e " p"!,e%h$p /e!wee, !he ow,e%/ thou1h the!
"a! use it #or purpose o# "a0in1 1ains/ and the! "a!/ (ithout
+eco"in1 partners/ are a"on1 the"seves as to the
"ana1e"ent and use o# such propert! and the appication o#
the proceeds there#ro".. =Spurloc3 v,. Dilson, 1B. S.W. 797/ 190
6o. App. 8;/ cited in Pascual v. Commissioner of Internal Revenue,
199 SC'A 590>
4. I,'o&e is 1ain derived and severed #ro" capita/
#ro" a+or or #ro" +oth co"+ined. 3or e)a"pe/ to ta) a stoc0
dividend (oud +e to ta) a capita increase rather than the
inco"e. (Commissioner of Internal Revenue v. Court of Appeals, et
al./ A.'. No. 108569/ Fanuar! .0/ 1444>
5. An insovent de+tor does not reai:e ta)a+e
inco"e #ro" the canceation or #or1iveness. (Commissioner v.
Simmons in Co., B7 3d 7.6 CCA 10
th
>
7. The insovent de+tor reai:es inco"e resutin1 #ro"
the canceation or #or1iveness o# inde+tedness (hen he
+eco"es sovent. (La3elan) rocery Co., v. Commissioner 79 &TA
=3> .84>
:. The G(o/"( %*%!e& o0 $,'o&e !"#"!$o, is a
s!ste" e"po!ed (here the ta) s!ste" vie(s indi##erent! the
ta) +ase and 1enera! treats in co""on a cate1ories o#
ta)a+e inco"e o# the individua. (Tan v. )el Rosario, 1r., .76
SC'A 7.B/ 771>
=. The S'he)-(" %*%!e& o0 $,'o&e !"#"!$o, is a
s!ste" e"po!ed (here the inco"e ta) treat"ent varies and is
"ade to depend on the 0ind or cate1or! o# ta)a+e inco"e o#
the ta)pa!er. (Tan v. )el Rosario, 1r., 9=: SCRA =9;, ==8"
6. Wh"! "e !he eD-$%$!e% 0o !he )e)-'!$/$($!* o0
o)$,"* ",) ,e'e%%"* !")e8 /-%$,e%%8 o po0e%%$o,"(
e#pe,%e%8 ($;e e#pe,%e% p"$) 0o (e."( ",) "-)$!$,.
%e1$'e% 2
S<AAESTED ANSWE'C
a. the e)pense "ust +e ordinar! and necessar!8
+. it "ust have +een paid or incurred durin1 the
ta)a+e !ear dependent upon the "ethod o# accountin1 upon
the +asis o# (hich the net inco"e is co"puted.
c. it "ust +e supported +! receipts/ records or other
pertinent papers. =Commissioner of Internal Revenue v, Isa!ela
cultural Corporation, A. '. No. 16..71/ 3e+ruar! 1./ .006>
1?. TLG Copo"!$o, $%%-$,. !he "''-"( &e!ho) o0
"''o-,!$,.. I, +??5 XYH L"w F$& ",) ABC A-)$!$,. F$&
e,)ee) 1"$o-% %e1$'e% wh$'h wee /$((e) /* !he%e 0$&%
o,(* )-$,. !he 0o((ow$,. *e" +??7. S$,'e !he /$((% 0o
(e."( ",) "-)$!$,. %e1$'e% wee e'e$1e) o,(* $, +??7 ",)
p"$) $, !he %"&e *e"8 TLG )e)-'!e) !he %"&e 0o& $!%
+??7 .o%% $,'o&e. The BIR )$%"((owe) !he )e)-'!$o, 2
Who $% 'oe'!8 TLG o BIR 2 E#p("$,.
S<AAESTED ANSWE'C The &I' is correct. T5A
shoud have deducted the pro#essiona and e1a #ees in the
!ear the! (ere incurred in .005 and not in .009 +ecause at
the ti"e the services (ere rendered in .005/ there (as aread!
13
an o+i1ation to pa! the". =Commissioner of Internal Revenue v,
Isa!ela Cultural Corporation, A. '. No. 16..71/ 3e+ruar! 1./ .006>
NITES AND CI55ENTSC
a. A''o-,!$,. &e!ho)% #or ta) purposes co"prise a set
o# rues #or deter"inin1 (hen and ho( to report inco"e and
deductions. =Commissioner of Internal Revenue v, Isa!ela cultural
Corporation, A. '. No. 16..71/ 3e+ruar! 1./ .006>
The t(o =.> principa accountin1 "ethods #or reco1nition o#
inco"e are the =a> accrua "ethod8 and the =+> cash "ethod.
+. Re'o.,$!$o, o0 $,'o&e ",) e#pe,%e% -,)e !he
"''-"( &e!ho) o0 "''o-,!$,.. A"ounts o# inco"e accrue
(here the ri1ht to receive the" +eco"es #i)ed/ (here there is created
an en#orcea+e ia+iit!. Lia+iities/ are incurred (hen #i)ed and
deter"ina+e in nature (ithout re1ard to indeter"inac! "ere! o# ti"e
o# pa!"ent.. =Commissioner of Internal Revenue v, Isa!ela cultural
Corporation, A. '. No. 16..71/ 3e+ruar! 1./ .006>
The accrua o# inco"e and e)pense is per"itted (hen the a%
events test has +een "et. =I!i).>
c. A((Ge1e,!% !e%!. This test re2uiresC
1> #i)in1 o# a ri1ht to inco"e or ia+iit! to pa!8 and
.> the avaia+iit! o# the reasona+e accurate
deter"ination o# such inco"e or ia+iit!.
The test does not de"and that the a"ount o# such inco"e or
ia+iit! +e 0no(n a+soute!/ on! that a ta)pa!er has at his disposa
the in#or"ation necessar! to co"pute the a"ount (ith reasona+e
accurac!.
The a%events test is satis#ied (here co"putation re"ains
uncertain8 i# its +asis is unchan1ea+e/ the test is satis#ied (here a
co"putation "a! +e un0no(n/ +ut is not as "uch as un0no(a+e/
(ithin the ta)a+e !ear. The a"ount o# ia+iit! does not have to +e
deter"ined e)act!/8 it "ust +e deter"ined (ith ?reasona+e
accurac!@ i"pies so"ethin1 ess than an e)act or co"pete!
accurate a"ount.
The propriet! o# an accrua "ust +e ,ud1ed +! the #act that a
ta)pa!er 0ne(/ or coud reasona+! +e e)pected to have 0no(n/ at
the cosin1 o# its +oo0s #or the ta)a+e !ear. Accrua "ethod o#
accountin1 presents ar1e! a 2uestion o# #act8 such that the ta)pa!er
+ears the +urden o# proo# o# esta+ishin1 the accrua o# an ite" o#
inco"e or deduction. =Commissioner of Internal Revenue v, Isa!ela
cultural Corporation, A. '. No. 16..71/ 3e+ruar! 1./ .006>
d. <nder the '"%h &e!ho) inco"e is to +e construed as
inco"e #or ta) purposes on! upon actua receipt o# the cash
pa!"ent. It is aso re#erred to as the ?cash receipts and
dis+urse"ents "ethod@ +ecause +oth the receipt and dis+urse"ents
are considered. Thus/ inco"e is reco1ni:ed on! upon actua receipt
o# the cash pa!"ent +ut no deductions are ao(ed #ro" the cash
inco"e uness actua! dis+ursed throu1h an actua pa!"ent in cash.
11. ReD-$%$!e% 0o 1"($) )e)-'!$o, o0 /") )e/!% 0o&
.o%% $,'o&e:
a. There "ust +e an e)istin1 inde+tedness due to the
ta)pa!er (hich "ust +e vaid and e1a! de"anda+e8
+. The sa"e "ust +e connected (ith the ta)pa!er*s
trade/ +usiness or practice o# pro#ession8
c. The sa"e "ust not +e sustained in a transaction
entered into +et(een reated parties8
d. The sa"e "ust +e actua! char1ed o## the +oo0s o#
accounts o# the ta)pa!er as o# the end o# the ta)a+e !ear8 and
e. The de+t "ust +e actua! ascertained to +e
(orthess and uncoecti+e durin1 the ta)a+e !ear8
#. The de+ts are uncoecti+e despite dii1ent e##ort
e)erted +! the ta)pa!er. DSec. 7B =E> =1>/ NI'C o# 14468 Sec. 7/
'ev. 'e1s. No. 5%44 reiterated in 'ev. 'e1s. No. .5%.00.8 Philippine
Refinin- Corporation v. Court of Appeals, et al., 9@? SCRA ??:E
1. 5ust have +een reported as receiva+es in the
inco"e ta) return o# the current or prior !ears. =Sec. 107/ 'ev.
'e1s. No. .>
C
1+. Wh"! "e pe%o,"( ",) "))$!$o,"( e#e&p!$o,% 2
S<AAESTED ANSWE'C These are the theoretica
persona/ ivin1 and #a"i! e)penses o# an individua ao(ed to
+e deducted #ro" the 1ross or net inco"e o# an individua
ta)pa!er.
These are ar+itrar! a"ounts (hich have +een cacuated
+! our a("a0ers to +e rou1h! e2uivaent to the "ini"u" o#
su+sistence/ ta0in1 into account the persona status and
additiona 2uai#ied dependents o# the ta)pa!er. The! are #i)ed
a"ounts in the sense that the a"ounts have +een
predeter"ined +! our a("a0ers and unti our a("a0ers
"a0e ne( ad,ust"ents on these persona e)e"ptions/ the
a"ounts ao(ed to +e deducted +! a ta)pa!er are #i)ed as
predeter"ined +! Con1ress. DPansacola v. Commissioner of
Internal Revenue, A. '. No. 154441/ Nove"+er 19/ .009 citin1
#a)ri-al an) Paterno v. Rafferty an) Concepcion, 78 $hi. B1B/ B18
=1418>E
14
13. C"p$!"( "%%e!% sha re#er to a rea properties hed
+! a ta)pa!er/ (hether or not connected (ith his trade or
+usiness/ and (hich are not incuded a"on1 the rea
properties considered as ordinar! assets. =Sec. ..a/ 'ev.
'e1s. No. 6%.007>
The ter" ?capita assets@ "eans propert! hed +! the
ta)pa!er =(hether or not connected (ith his trade or +usiness>/
&<T DIES NIT INCL<DEC
a. Stoc0 in trade o# the ta)pa!er/ or
+. Ither propert! o# a 0ind (hich (oud proper! +e
incuded in the inventor! o# the ta)pa!er i# on hand at the cose
o# the ta)a+e !ear/ or
c. $ropert! hed +! the ta)pa!er pri"ari! #or sae to
custo"ers in the ordinar! course o# his trade or +usiness/ or
d. $ropert! used in the trade or +usiness/ o# a character (hich
is su+,ect to the ao(ance #or depreciation8 or rea propert!
used in the trade or +usiness o# the ta)pa!er. DSec. 74 =A> =1>/
NI'C o# 1446/ capitai:ed (ords/ nu"+erin1 and arran1e"ent
suppied8 Sec. ..a/ 'ev. 'e1s. No. 6%.007E

14. E#"&p(e% o0 '"p$!"( "%%e!%:
a. Stoc0 and securities hed +! ta)pa!ers other than
deaers in securities8
+. Fe(er! not used #or trade and +usiness8
c. 'esidentia houses and ands o(ned and used as
such8
d. Auto"o+ies not used in trade and +usiness8
e. $aintin1s/ scuptures/ sta"p coections/ o+,ects o#
arts (hich are not used in trade or +usiness8
#. Inherited ar1e tracts o# a1ricutura and (hich (ere
su+divided pursuant to the 1overn"ent "andate under and
re#or"/ then sod to tenants. (Roxas v. Court of Tax Appeals, etc.
L,9@<;=, April 9?, 8E?>"
1. ?'ea propert! used +! an e)e"pt corporation in its
e)e"pt operations/ such as a corporation incuded in the
enu"eration o# Section 70 o# the Code/ sha not +e
considered used #or +usiness purposes/ and there#ore
considered as capita asset.@ =ast sentence/ 7
rd
par./ Sec. 7.+/
'ev. 'e1s. No. 6%.007>
h. ?'ea propert!/ (hether sin1e detached/
to(nhouse/ or condo"iniu" unit/ not used in trade or +usiness
as evidenced +! a certi#ication #ro" the &aran1a! Chair"an or
#ro" the head o# ad"inistration/ in case o# condo"iniu" unit/
to(nhouse or apart"ent/ and as vaidated #ro" the e)istin1
avaia+e records o# the &ureau o# Interna 'evenue/ o(ned +!
an individua en1a1ed in +usiness/ sha +e treated as capita
asset.@ =ast par./ Sec. 7.+./ 'ev. 'e1s. No. 6%.007>
15.. E#"&p(e% o0 o)$,"* "%%e!% he,'e ,o! '"p$!"(
"%%e!%:
a. The "achiner! and e2uip"ent o# a "anu#acturin1
concern su+,ect to depreciation8
+. The tractors/ traiers and truc0s o# a hauin1 co"pan!8
c. The condo"iniu" +uidin1 o(ned +! a reat!
co"pan! the units o# (hich are #or rent or #or sae8
d. The (ood/ paint/ varnish/ nais/ 1ue/ etc. (hich are
the ra( "aterias o# a #urniture #actor!8
e. Inherited parces o# and o# su+stantia areas
ocated in the heart o# 5etro 5ania/ (hich (ere su+divided
into s"aer ots then sod on insta"ent +asis a#ter introducin1
co"parative! vaua+e i"prove"ents not #or the purpose o#
si"p! i2uidatin1 the estate +ut to "a0e the" "ore saea+e 8
the e"po!"ent o# an attorne!%in%#act #or the purpose o#
deveopin1/ "ana1in1/ ad"inisterin1 and sein1 the ots8 saes
"ade (ith #re2uenc! and continuit!8 annua saes inco"e #ro"
the saes (as considera+e8 and the heir (as not a stran1er to
the rea estate +usiness. (Tua$on, 1r. v. Lin-a), @> SCRA 8:<"
#. Inherited a1ricutura propert! i"proved +!
introduction o# 1ood roads/ concrete 1utters/ draina1e and
i1htin1 s!ste"s converts the propert! to an ordinar! asset.
The propert! #or"s part o# the stoc0 in trade o# the o(ner/
hence an ordinar! asset. This is so/ as the o(ner is no(
en1a1ed in the +usiness o# su+dividin1 rea estate. =Calasan$ v.
Commissioner of Internal Revenue, 1BB SC'A at p. 96.>
17. The !"# $% B$&po%e) -po, '"p$!"( ."$,% pe%-&e)
!o h"1e /ee, e"($9e) 0o& !he %"(e8 e#'h",.e8 o o!he
)$%po%$!$o, o0 e"( pope!* (o'"!e) $, !he Ph$($pp$,e%8
'("%%$0$e) "% '"p$!"( "%%e!%.E DSec. .B =D> =1L>/ NI'C o# 1446E
'evenue 'e1uations No. 6%.007 has de#ined rea propert! as
havin1 ?the sa"e "eanin1 attri+uted to that ter" under Artice
B15 o# 'epu+ic Act No. 789/ other(ise 0no(n as the QCivil
Co)e of the Philippines.5 =Sec. ..c/ 'ev. 'e1s. No. 6%.007>
15
1:. T",%"'!$o,% 'o1ee) /* !he pe%-&e) '"p$!"(
."$,% !"# o, e"( pope!*:
a. sae/
+. e)chan1e/
c. or other disposition/ incudin1 pacto )e retro saes
and other #or"s o# conditiona saes. DSec. .B =D> =1>/ NI'C o#
1446/ nu"+erin1 and arran1e"ent suppiedE
d. ?Sae/ e)chan1e/ or other disposition@ incudes ta0in1
+! the 1overn"ent throu1h conde"nation proceedin1s.
(utierre$ v. Court of Tax Appeals, et al., 101 $hi. 617F on$ales v.
Court of Tax Appeals, et al., 1.1 $hi. 891>
1=. A 0$,"( w$!hho()$,. !"# @FWTA o0 +?I o, p"%%$1e
$,'o&e $% 'o((e'!e) 0o& !he $,!ee%! $,'o&e o0 /",;%. I!
($;ew$%e h"% !o p"* " 5I .o%% e'e$p!% !"# @GRTA o, .o%%
e'e$p!% wh$'h $,'(-)e% !he$ p"%%$1e $,'o&e. XYH B",;
,ow '("$&% !h"! !he GRT %ho-() /e 'o&p-!e) "0!e
)e)-'!$,. !he +?I p"%%$1e $,'o&e !"# o, !he .o-,) !h"!
!he &o,$e% o e'e$p!% !h"! )o ,o! e)o-,) !o !he /e,e0$! o0
!he !"#p"*e "e ,o! p"! o0 $!% .o%% e'e$p!%. To $&po%e
!he GRT w$!ho-! )e)-'!$,. !he +?I wo-() /e )o-/(e
!"#"!$o,. I! "(%o 'o,!e,)% !h"! %$,'e !he +?I w"% w$!hhe()
"! %o-'e ",) $% p"$) )$e'!(* !o !he .o1e,&e,!8 !he, !he
/",; h"% ,o! e'e$1e) !he %"&e. Th-%8 $! %ho-() ,o! /e
$,'(-)e) $, !he .o%% e'e$p!% %-/>e'! !o !"#.
Re%o(1e !he $%%-e o0 whe!he !he +?I FWT o, !he
/",;F% p"%%$1e $,'o&e 0o& p"! o0 !he !"#"/(e .o%%
e'e$p!% 0o !he p-po%e o0 'o&p-!$,. !he 5I GRT.
S<AAESTED ANSWE'C No. The (ord ?1ross@ "ust +e
used in its pain and ordinar! "eanin1. It is de#ined as ?(hoe/
entire/ tota/ (ithout deduction.@ Thus/ the .0J shoud not +e
deducted #or purposes o# co"putin1 the 5J 1ross receipts ta).
'eceipt "a! either +e actua or constructive. There is
prior to the (ithhodin1 a constructive receipt o# the interest/
other(ise there (oud +e no interest #ro" (here the .0J ta)
"a! +e (ithhed #ro".
There is no dou+e ta)ation +ecause there are t(o 0inds
o# ta)es/ the .0J 3WT (hich is an inco"e ta) and the 5J
A'T (hich is a percenta1e ta). =Commissioner of Internal
Revenue v. Citytrust Investment Phils., Inc., A. '. No. 174689/
Septe"+er .6/ .009 and co"panion case>
NITES AND CI55ENTSC
a. Co##issioner of 'nternal (evenue v. %anila
&oc)e! Club, 1?= Ph$(. =+1 @167?A $% )$00ee,! 0o&
Co##issioner of 'nternal (evenue v. Cit!trust 'nvest#ent
Phils., 'nc., G. R. No. 136:=78 Sep!e&/e +:8 +??7 ",)
'o&p",$o, '"%e. 5ania Foc0e! Cu+ paid a"use"ent ta)es on
its co""ission in the tota a"ount o# +ets caed (a1er #unds and did
not incude the 5RJ o# the #und (hich (ent to the &oard on 'aces
and to the o(ners o# horses and ,oc0e!s. The Supre"e Court rues
that the 1ross receipts o# 5ania Foc0e! Cu+ shoud not incude the
5RJ +ecause athou1h deivered to the Cu+/ such "one! has +een
especia! ear"ar0ed +! a( or re1uation #or other persons.
5ania Foc0e! does not app! +ecause (hat happened there
(as ear"ar0in1 and not (ithhodin1. Ear"ar0in1 is not the sa"e as
(ithhodin1. A"ounts ear"ar0ed do not #or" part o# 1ross receipts
+ecause these are +! a( or re1uation reserved #or so"e person
other than the ta)pa!er/ athou1h deivered or received. In the
contrar!/ a"ounts (ithhed #or" part o# 1ross receipts +ecause there
are in constructive possession and not su+,ect to an! reservation/ the
(ithhodin1 a1ent +ein1 "ere! a conduit in the coection process.
=Commissioner of Internal Revenue v. Citytrust Investment Phils., Inc.,
A. '. No. 174689/ Septe"+er .6/ .009 and co"panion case>
+. Thee "e )$%!$,'!$o,% /e!wee, !he +?I FWT o,
$,!ee%! $,'o&e ",) !he 5I GRT o, /",;%. S$,'e !he !wo
"e )$00ee,! !hee $% ,o )o-/(e !"#"!$o,.
1> 3WT is an inco"e ta) under Tite II o# the Code
=Ta) on Inco"e> (hie A'T is a percenta1e ta) under Tite - o#
the Ta) Code.
.> $ercenta1e ta) is a nationa ta) "easured +! a
certain percenta1e o# the 1ross sein1 price or 1ross vaue in
"one! o# 1oods sod/ +artered or i"ported8 or o# the 1ross
receipts or earnin1s derived +! an! person en1a1ed in the sae
o# services (hie an inco"e ta) is a nationa ta) i"posed on
the net or 1ross inco"e reai:ed in a ta)a+e !ear.
7> Inco"e ta) is su+,ect to (ithhodin1 (hie
percenta1e is not. =Commissioner of Internal Revenue v.
Citytrust Investment Phils., Inc., A. '. No. 174689/ Septe"+er
.6/ .009 and co"panion case>
16. LBC w"% $,'opo"!e) $, 1671 ",) e,.".e) $,
'o&&e'$"( /",;$,. ope"!$o,% %$,'e 16=:. O, L"* ++8
16=:8 $! 'e"%e) ope"!$o,% !h"! *e" /* e"%o, o0
$,%o(1e,'* ",) $!% "%%e!% ",) ($"/$($!$e% wee p("'e) -,)e
!he 'h".e o0 " .o1e,&e,!G"ppo$,!e) e'e$1e. O, <-,e
16
+38 16668 !he BSP "-!ho$9e) LBC !o ope"!e "% " !h$0!
/",;.
I, +???8 I! 0$(e) $!% !"# e!-, 0o !he *e" 1666 p"*$,.
!he "&o-,! o0 P33 &$(($o, 'o&p-!e) $, "''o)",'e w$!h !he
&$,$&-& 'opo"!e $,'o&e !"# @LCITA. I! %o-.h! !he BIRF%
-($,. o, whe!he $! $% e,!$!(e) !o !he 0o- @4A *e" ."'e
pe$o) 0o p"*$,. o, !he /"%$% o0 LCIT e';o,e) 0o& 1666.
BIR !he, -(e) !h"! 'e%%"!$o, o0 /-%$,e%% "'!$1$!$e% "% "
e%-(! o0 /e$,. p("'e) -,)e $,1o(-,!"* e'e$1e%h$p &"*
/e ", e'o,o&$' e"%o, 0o %-%pe,)$,. !he $&po%$!$o, o0
!he LCIT.
A% " e%-(! o0 !he -($,. LBC 0$(e) ", "pp($'"!$o, 0o
e0-,) o0 !he P33 &$(($o,. D-e !o !he BIRF% $,"'!$o,8 LBC
0$(e) " pe!$!$o, 0o e1$ew w$!h !he CTA.
The CTA )e,$e) !he pe!$!$o, o, !he .o-,) !h"! LBC
$% ,o! " ,ew(* o.",$9e) 'opo"!$o,. I, " 1o(!e 0"'$e !he
BIR ,ow &"$,!"$,% !h"! LBC %ho-() p"* !he LCIT
/e.$,,$,. <",-"* 18 166= "% $! )$) ,o! '(o%e $!% /-%$,e%%
ope"!$o,% $, 16=: /-! &ee(* %-%pe,)e) !he %"&e. E1e,
$0 p("'e) -,)e e'e$1e%h$p8 !he 'opo"!e e#$%!e,'e w"%
,e1e "00e'!e). Th-%8 $! 0"((% -,)e !he '"!e.o* o0 ",
e#$%!$,. 'opo"!$o, e'o&&e,'$,. $!% /",;$,. ope"!$o,%.
Sho-() !he e0-,) /e .",!e) 2
S<AAESTED ANSWE'C Mes. The 5CIT sha +e
i"posed +e1innin1 in the #ourth ta)a+e !ear i""ediate!
#oo(in1 the !ear in (hich the corporation co""enced its
+usiness operations. DSec. .6 =E> =1>/ NI'C o# 1446E
The date o# co""ence"ent o# operations o# a thri#t +an0
is the date it (as re1istered (ith the SEC or the date (hen the
Certi#icate o# Authorit! to Iperate (as issued to it +! the
5onetar! &oard/ (hichever co"es ater. =Sec. 9/ 'ev. 'e1s. No.
B%45>
Cear! then. 5&C is entited to the 1race period o# #our
!ears #ro" Fune .7/ 1444 (hen it (as authori:ed +! the &S$
to operate as a thri#t +an0 +e#ore the 5CIT shoud +e appied
to it. =#anila (an3in- Corporation v. Commissioner of Internal
Revenue, A. '. No. 198118/ Au1ust .9/ .009>
NITES AND CI55ENTSC
a. The LCIT ",) whe, %ho-() /e $&po%e) ",) !he
0o- @4A *e" ."'e pe$o) . ?A "ini"u" corporate inco"e ta) o#
t(o percent =.J> o# the 1ross inco"e as o# the end o# the ta)a+e
!ear/ as de#ined herein/ is here+! i"posed on a corporation ta)a+e
under this Tite/ +e1innin1 on the #ourth ta)a+e !ear i""ediate!
#oo(in1 the !ear in (hich such corporation co""enced its +usiness
operations/ (hen the "ini"u" corporate inco"e ta) is 1reater than
the ta) co"puted under Su+section =A> o# this section #or the ta)a+e
!ear.@ DSec. .6 =E> =1>/ NI'C o# 1446E
+. Pe$o) whe, " 'opo"!$o, /e'o&e% %-/>e'! !o
!he LCIT. ?=5> Speci#ic rues #or deter"inin1 the period (hen a
corporation +eco"es su+,ect to the 5CIT ="ini"u" corporate
inco"e ta)> %
3or purposes o# the 5CIT/ the ta)a+e !ear in (hich +usiness
operations co""enced sha +e the !ear in (hich the do"estic
corporation re1istered (ith the &ureau o# Interna 'evenue =&I'>.
3ir"s (hich (ere re1istered (ith &I' in 144B and earier !ears
sha +e covered +! the 5CIT +e1innin1 Fanuar! 1/ 1448. ) ) )@
='ev. 'e1s. No. 4%48>
#anila (an3in- Corporation v. Commissioner of Internal
Revenue, A. '. No. 198118/ Au1ust .9/ .009 did not app! 'ev.
'e1s. No. 4%48 +ecause 'ev. 'e1s. No. B%45 speci#ica! re#ers to
thri#t +an0s.>
c. P-po%e o0 !he 0o- @4A *e" ."'e pe$o). The
intent o# Con1ress reative to the 5CIT is to 1rant a #our =B7> G !ear
suspension o# ta) pa!"ent to ne(! or1ani:ed corporations.
Corporations sti startin1 their +usiness operations have to sta+ii:e
their venture in order to o+tain a stron1hod in the industr!. It does not
co"e as a surprise then (hen "an! co"panies reported osses in
their initia !ears o# operations.
Thus/ in order to ao( ne( corporations to 1ro( and deveop at
the initia sta1es o# their operations/ the a("a0in1 +od! sa( the need
to provide a 1race period o# #our !ears #ro" their re1istration +e#ore
the! pa! their "ini"u" corporate inco"e ta). =#anila (an3in-
Corporation v. Commissioner of Internal Revenue, A. '. No. 198118/
Au1ust .9/ .009>
TRANSFER TAXES
1. The "ppo1"( o0 !he 'o-! %$!!$,. $, po/"!e8 o
"% " %e!!(e&e,! !$/-,"( o1e !he e%!"!e o0 !he )e'e"%e) $%
,o! " &",)"!o* eD-$e&e,! 0o !he 'o((e'!$o, o0 !he
e%!"!e. The pro+ate court is deter"inin1 issues (hich are not
a1ainst the propert! o# the decedent/ or a cai" a1ainst the
estate as such/ +ut is a1ainst the interest or propert! ri1ht
(hich the heir/ e1atee/ devisee/ etc. has in the propert!
#or"er! hed +! the decedent.
17
The notices o# ev! (ere re1uar! issued (ithin the
prescriptive period.
The ta) assess"ent havin1 +eco"e #ina/ e)ecutor! and
en#orcea+e/ the sa"e can no on1er +e contested +! "eans
o# a dis1uised protest. (#arcos, II v. Court of Appeals, et al./ .67
SC'A B6>
RETURNS AND WITHHOLDING
1. I,'o&e !"# e!-,% +ein1 p-/($' )o'-&e,!%/ unti
controverted +! co"petent evidence/ are co"petent evidence/
are prima facie correct (ith respect to the entries therein.
(Ropali Tra)in- v. 6LRC, et al., .49 SC'A 704/ 716>
+. A w$!hho()$,. ".e,! $% e#p($'$!(* &")e
pe%o,"((* ($"/(e -,)e !he T"# Co)e 0o !he p"*&e,! o0 !he
!"# eD-$e) !o /e w$!hhe()8 in order to co"pe the
(ithhodin1 a1ent to (ithhod the ta) under an! and a
circu"stances. In e##ect/ the responsi+iit! #or the coection o#
the ta) as (e as the pa!"ent thereo# is concentrated upon
the person over (ho" the Aovern"ent has ,urisdiction.
=3iipinas S!nthetic 3i+er Corporation v. Court o# Appeas/ et a./ A.'.
Nos. 118B48 S 1.B766/ Icto+er 1./ 1444> The s!ste" #aciitates
ta) coection.
3. BAF eo,eo-%(* w$!hhe() !he "&o-,! o0 15I 0o&
!he %e(($,. p$'e o0 /oo;% "-!hoe) /* BWE whe, !he
'oe'! "!e %ho-() h"1e /ee, 1?I o,(*. S$,'e BWE $% o-!
o0 !he 'o-,!*8 BAE "pp($e) 0o " e0-,) o0 !he e#'e%%
w$!hho()$,. o0 5I. L"* BAE pope(* "pp(* 0o !he e0-,) 2
E#p("$,.
S<AAESTED ANSWE'C Mes. In appications #or re#und/
the (ithhodin1 a1ent is a ta)pa!er +ecause i# he does not pa!
the ta) sha +e coected #ro" hi". (Commissioner of Internal
Revenue v. Procter % am!le Philippine #anufacturin- Corporation,
.0B SC'A 766/ 787%789>/
NITES AND CI55ENTSC
a. Fo !"# "&,e%!* p-po%e%8 !he w$!hho()$,.
".e,! $% ,o! " !"#p"*e +ecause he is "ade to pa! the ta) (here
he #ais to (ithhod as a penat! and not that the ta) is due #ro" hi".
=Commissioner of Internal Revenue v. Court of Appeals, et al./ A.'.
No. 108569/ Fanuar! .0/ 1444/ the Anscor case"
PENALTIES8 INTERESTS AND SURCHARGES
1. A0!e e%o(1$,. !he $%%-e% !he BIR
Co&&$%%$o,e e)-'e) !he "%%e%%&e,!. W"% $! pope !o
$&po%e )e($,D-e,'* $,!ee%! )e%p$!e !he e)-'!$o, o0 !he
"%%e%%&e,! 2 Wh* 2
ANSWE'C Mes. The intention o# the a( is to
discoura1e dea! in the pa!"ent o# ta)es due to the State and
in this sense the surchar1e and interest char1ed are not pena
+ut co"pensator! in nature G the! are co"pensation to the
State #or the dea! in pa!"ent/ or #or the conco"itant tuse o#
the #unds +! the ta)pa!er +e!ond the date he is supposed to
have paid the" to the State. =(an3 of the Philippine Islan)s v.
Commissioner of Internal Revenue, A. '. No. 17600./ Fu! .6/ .009>
+. A% " e%-(! o0 )$1e.e,! -($,.% o, whe!he $! $%
%-/>e'! !o !"# o ,o!8 !he !"#p"*e w"% ,o! "/(e !o p"* h$%
!"#e% o, !$&e. I&po%e) %-'h".e% ",) $,!ee%!% 0o %-'h
)e("*8 !he !"#p"*e ,o! $,1o;e% .oo) 0"$!h w$!h !he BIR
'o-,!e$,. /* %"*$,. !h"! .oo) 0"$!h $% ,o! " 1"($) )e0e,%e
0o 1$o("!$o, o0 " %pe'$"( ("w. F-!he&oe8 !he BIR 0-!he
"$%e% !he )e0e,%e !h"! !he .o1e,&e,! $% ,o! /o-,) /* !he
eo% o0 $!% ".e,!%. Who $% 'oe'! 2
ANSWE'C The ta)pa!er is correct. The setted rue is
that 1ood #aith and honest +eie# that one is not su+,ect to ta)
on the +asis o# previous interpretation o# 1overn"ent a1encies
tas0ed to i"pe"ent the ta)/ are su##icient ,usti#ication to deete
the i"position o# surchar1es. =#ichel 1. Lhuillier Pa7nshop, Inc. v.
Commissioner of Internal Revenue, A. '. No. 199689/ Septe"+er 11/
.009>
TARIFF AND CUSTOLS CODE
1. C-%!o&% )-!$e% )e0$,e). Custo"s duties is the
na"e 1iven to ta)es on the i"portation and e)portation o#
co""odities/ the tari## or ta) assessed upon "erchandise
i"ported #ro"/ or e)ported to/ a #orei1n countr!. =6estle Phils.
v. Court of Appeals, et al., A.'. No. 17B11B/ Fu! 9/ .001>
+. S"0e.-") &e"%-e% are e"er1enc! "easures/
incudin1 tari##s/ to protect do"estic industries and producers
18
#ro" increased i"ports (hich in#ict or coud in#ict serious in,ur!
on the".
The CTA is vested (ith ,urisdiction to revie( decisions o#
the Secretar! o# Trade and Industr! i"posin1 sa#e1uard
"easures as provided under 'ep. Act No. 8800 the Sa#e1uard
5easures Act =S5A>. =Southern Cross Cement Corporation v. The
Philippine Cement #anufacturers Corp., et al., A. '. No. 1585B0/ Fu!
8/ .00B>
The DTI Secretar! cannot i"pose the sa#e1uard
"easures i# the Tari## Co""ission does not #avora+!
reco""end its i"position.
3. Wh"! $% &e", /* !he !e& Be,!*E $, C-%!o&%
L"w 2
S<AAESTED ANSWE'C It has a tripe "eanin1.
a. the docu"ents #ied at the Custo"s house8
+. the su+"ission and acceptance o# the
docu"ents8 and
c. Custo"s decaration #or"s or custo"s entr!
#or"s re2uired to +e acco"pished +! passen1ers o#
inco"in1 vesses or passen1er panes as envisa1ed under
Sec. .505 o# the TCC$ =3aiure to decare +a11a1e>.
=1ar)ele$a v. People, A.'. No. 195.95/ 3e+ruar! 9/ .009>
4. A 0($.h! %!ew")e%% "$1e) 0o& S$,."poe.
Upo, he "$1"( %he w"% "%;e) whe!he %he h"% ",*!h$,.
!o )e'("e. She ",%wee) ,o,e8 ",) %he %-/&$!!e) he
BC-%!o&% B"..".e De'(""!$o, Fo&E wh$'h %he
"''o&p($%he) ",) %$.,e) w$!h ,o!h$,. o w$!!e, o, !he
%p"'e 0o $!e&% !o /e )e'("e). Whe, he h",.e /". w"%
e#"&$,e) %o&e p$e'e% o0 >ewe(* wee 0o-,) 'o,'e"(e)
w$!h$, !he ($,$,. o0 %"$) /"..
She w"% !he, 'o,1$'!e) o0 1$o("!$,. o0 Se'. 37?1 o0
!he T"$00 ",) C-%!o&% Co)e 0o -,("w0-( $&po!"!$o,
wh$'h pe,"($9e% ",* pe%o, who %h"(( 0"-)-(e,!(* $&po!
o /$,. $,!o !he Ph$($pp$,e% ",* "!$'(e 'o,!"* !o ("w.
She ,ow "ppe"(% '("$&$,. !h"! (owe 'o-! ee) ,
'o,1$'!$,. he -,)e Se'. 37?1 whe, !he 0"'!% "((e.e) /o!h
$, !he $,0o&"!$o, ",) !ho%e %how, /* !he po%e'-!$o,
'o,%!$!-!e !he o00e,%e -,)e Se'. +5?5 BF"$(-e !o De'("e
B"..".e8E o0 wh$'h %he w"% "'D-$!!e). I% %he 'oe'! 2
S<AAESTED ANSWE'C No. Sec. 7901 does not
de#ine a cri"e. It "ere! provides/ inter alia, the ad"inistrative
re"edies (hich can +e resorted to +! the &ureau o# Custo"s
(hen sei:in1 dutia+e artices #ound the +a11a1e o# an!
person arrivin1 in the $hiippines (hich is not incuded in the
acco"pished +a11a1e decaration su+"itted to the custo"s
authorities/ and the ad"inistrative penaties that such person
"ust pa! #or the reease o# such 1oods i# not i"ported contrar!
to a(.
Such ad"inistrative penaties are independent o# the
cri"ina ia+iit! #or s"u11in1 that "a! +e i"posed under Sec.
7901/ and other provisions o# the TCC (hich can on! +e
deter"ined a#ter the appropriate cri"ina proceedin1s/
prescindin1 #ro" the outco"e in an! ad"inistrative case that
"a! have +een #ied and disposed o# +! the custo"s
authorities.
Indeed the second para1raph o# Sec. .505 provides that
nothin1 sha prevent the +rin1in1 o# a cri"ina action a1ainst
the o##ender #or s"u11in1 under Section 7901. =1ar)ele$a v.
People, A. '. No. 195.95/ 3e+ruar! 9/ .009>
NITES AND CI55ENTSC
a. D-!* o0 pe%o, "$1$,. $, !he Ph$($pp$,e%. A
person arrivin1 in the $hiippines (ith +a11a1e containin1 dutia+e
artices is +ound to decare the sa"e in a respects. In order to "eet
the convenience o# the traveers/ a si"pe and "ore e)peditious
"ethod o# custo"s cearance is provided #or +a11a1es occup!in1 the
passa1e therein #or 1oods i"ported in the re1uar "anner. I##icia
entr! #or"s and #or"s o# +a11a1e decaration are suppied to the
passen1ers to +e #ied +e#ore the custo"s o##icer.
The traveer has the +urden o# carr!in1 #or(ard ite"s that have
to +e decared +e#ore e)a"ination o# the car1o has +e1un. Ade2uate
reportin1 o# dutia+e "erchandise +ein1 +rou1ht into the countr! is
a+soute! necessar! to the en#orce"ent o# custo"s a(s/ and #aiure
to co"p! (ith those re2uisites is as conde"na+e as #aiure to pa!
custo"s duties. =1ar)ele$a v. People, A. '. No. 195.95/ 3e+ruar! 9/
.009 citin1 various cases>
+. S&-..($,.8 )e0$,e). The act o# i"portin1 or
e)portin1 an! artice contrar! to a(. Le1a!/ it is de#ined as una(#u
i"portation or e)portation. ?<na(#u I"portation. G An! person (ho
sha #rauduent! i"port or +rin1 into the $hiippines/ or assist in so
doin1/ an! artice/ contrar! to a(/ or sha receive/ concea/ +u!/ se/
or in an! "anner #aciitate the transportation/ concea"ent/ or sae o#
such artice a#ter i"portation/ 0no(in1 the sa"e to have +een
19
i"ported contrar! to a(/ sha +e 1uit! o# s"u11in1.@ =1
st
par./ Sec.
7901/ TCC>
Sec. 7901 is a pena provision. It de#ines the cri"e o#
s"u11in1 and provides co"pound penaties o# 1raduated #ine and
i"prison"ent +ased on the appraised vaues o# the i"ported artices
to +e deter"ined in the "anner provided in the TCC.
Sec. 7901 (as desi1ned to suppe"ent the e)istin1 provisions
o# the TCC a1ainst the "eans eadin1 up to s"u11in1 (hich "i1ht
render it +ene#icia +! a su+stantive and cri"ina state"ent separate!
providin1 #or the punish"ent o# s"u11in1. =1ar)ele$a v. People, A.
'. No. 195.95/ 3e+ruar! 9/ .009>
c. P-po%e o0 Se'. 37?1 . The a( (as not intended to
"er1e into one and the sa"e o##ense a the "an! acts (hich are
cassi#ied and punished +! di##erent penaties/ pena or ad"inistrative/
+ut to e1isate a1ainst the overt act o# s"u11in1 itse#. This is
"ani#ested +! the use o# the (ords ?#rauduent!@ and @contrar! to a(@
in the a(. . =1ar)ele$a v. People, A. '. No. 195.95/ 3e+ruar! 9/
.009>
c. P"*&e,! $% ,o! " )e0e,%e $, %&-..($,.. ?When
upon tria #or vioation o# this section/ the de#endant is sho(n to have
possession o# the artice in 2uestion/ possession sha +e dee"ed
su##icient evidence to authori:e conviction/ uness the de#endant sha
e)pain the possession to the satis#action o# the courtC $rovided/
ho(ever/ That pa!"ent o# the ta) due a#ter apprehension sha not
constitute a vaid de#ense in an! prosecution under this section.@ =ast
par./ Sec. 7901/ TCC>
5. How $% %&-..($,. 'o&&$!!e) 2
S<AAESTED ANSWE'C S"u11in1 is co""itted +!
an! person (hoC
a. #rauduent! i"ports or +rin1s into the countr! an!
artice contrar! to a(8
+. assists in so doin1 an! artice contrar! to a(8 or
c. receives/ conceas/ +u!s/ ses or in an! "anner
#aciitates the transportation/ concea"ent or sae o# such
1oods a#ter i"portation/ 0no(in1 the sa"e to have +een
i"ported contrar! to a(. =1ar)ele$a v. People, A.'. No. 195.95/
3e+ruar! 9/ .009 citin1 Ro)ri-ue$ v. Court of Appeals, A. '. No.
115.18/ Septe"+er 18/ 1445/ .B8 SC'A .88/ .49>
NITES AND CI55ENTSC
a. I&po!"!$o, consists o# +rin1in1 an artice into the
countr! #ro" the outside. I"portation +e1ins (hen the conve!in1
vesse or aircra#t enters the ,urisdiction o# the $hiippines (ith
intention to unoad therein.
+. Whe, -,("w0-( $&po!"!$o, $% 'o&p(e!e. In the
a+sence o# a +ona #ide intent to "a0e entr! and pa! duties (hen the
prohi+ited artice enters the $hiippine territor!. I"portation is
co"pete (hen the ta)a+e/ dutia+e co""odit! is +rou1ht (ithin the
i"its o# the port o# entr!. Entr! throu1h a custo" house is not the
essence o# the act. =1ar)ele$a v. People, A.'. No. 195.95/
3e+ruar! 9/ .009>
7. The Co((e'!o o0 C-%!o&% %$!!$,. $, %e$9-e ",)
0o0e$!-e po'ee)$,.% h"% e#'(-%$1e >-$%)$'!$o, !o he"
",) )e!e&$,e "(( D-e%!$o,% !o-'h$,. o, !he %e$9-e ",)
0o0e$!-e o0 )-!$"/(e .oo)%. RTC% "e pe'(-)e) 0o&
"%%-&$,. 'o.,$9",'e o1e %-'h &"!!e% e1e, !ho-.h
pe!$!$o,% o0 'e!$o"$8 poh$/$!$o, o &",)"&-%. (The
(ureau of Customs, et al., v. 2-ario, et al., A.'. No. 178081/ 5arch
.0/ .000>
Wh"! $% !he "!$o,"(e 0o !h$% )o'!$,e 2
S<AAESTED ANSWE'C
a. 'e1iona Tria Courts have no ,urisdiction to
repevin a propert! (hich is su+,ect to sei:ure and #or#eiture
proceedin1s #or vioation o# the Tari## and Custo"s Code
other(ise/ actions #or #or#eiture o# propert! #or vioation o# the
Custo"s a(s coud easi! +e under"ined +! the si"pe device
o# repevin. =De la +uente v. De *eyra, et al., 1.0 SC'A B55>
+. The doctrine o# e)cusive custo"s ,urisdiction over
custo"s cases to the e)cusion o# the 'TCs is anchored upon
the poic! o# pacin1 no unnecessar! hindrance on the
1overn"ent*s drive/ not on! to prevent s"u11in1 and other
#rauds upon Custo"s/
c. +ut "ore i"portant!/ to render e##ective and
e##icient the coection o# i"port and e)port duties due the
State/ (hich ena+es the 1overn"ent to carr! out the #unctions
it has +een instituted to per#or". (1ao, et al., v. Court of Appeals,
et al., an) companion case, .B4 SC'A 75/ B7>
d. The issuance +! re1uar courts o# (rits o#
prei"inar! in,unction in sei:ure and #or#eiture proceedin1s
+e#ore the &ureau o# Custo"s "a! arouse suspicion that the
issuance or 1rant (as #or consideration other than the strict
"erits o# the case. =4uno v. Ca!re)o, B0. SC'A 65 D.007E>
e. <nder the doctrine o# pri"ar! ,urisdiction/ the &ureau
o# Custo"s has e)cusive ad"inistrative ,urisdiction to conduct
searches/ sei:ures and #or#eitures o# contra+and (ithout
20
inter#erence #ro" the courts. It coud conduct searches and
sei:ures (ithout need o# a ,udicia (arrant e)cept i# the search
is to +e conducted in a d(ein1 pace.
Where an ad"inistrative o##ice has o+tained a technica
e)pertise in a speci#ic su+,ect/ even the courts "ust de#er to
this e)pertise.
:. BAE '("$&$,. !o /e !he ow,e o0 " 1e%%e( wh$'h
$% !he %-/>e'! o0 '-%!o&% w"",! o0 %e$9-e ",) )e!e,!$o,
%o-.h! !he $,!e'e%%$o, o0 !he RTC !o e%!"$, !he B-e"-
o0 C-%!o&% 0o& $,!e0e$,. w$!h h$% pope!* $.h!% o1e
!he 1e%%e(. Wo-() !he %-$! po%pe2
S<AAESTED ANSWE'C No. His re"ed! (as not (ith
the 'TC +ut (ith the CTA/ as issues o# o(nership o# 1oods in
the custod! o# custo"s o##icias are (ithin the po(er o# the
CTA to deter"ine.
The Coector o# Custo"s has e)cusive ,urisdiction over
sei:ure and #or#eiture proceedin1s and tria courts are
precuded #ro" assu"in1 co1ni:ance over such "atters even
throu1h petitions #or certiorari/ prohi+ition or "anda"us.
=Commissioner of Customs v. Court of Appeals, et al., A. '. Nos.
111.0.%05/ Fanuar! 71/ .009>
=. The '-%!o&% "-!ho$!$e% )o ,o! h"1e !o po1e !o
!he %"!$%0"'!$o, o0 !he 'o-! !h"! !he "!$'(e% o, /o") "
1e%%e( wee $&po!e) 0o& "/o") o "e $,!e,)e) !o /e
%h$ppe) "/o") /e0oe !he* &"* e#e'$%e !he powe !o
e00e'! '-%!o&% %e"'he%8 %e$9-e%8 o "e%!% po1$)e) /*
("w ",) 'o,!$,-e w$!h !he ")&$,$%!"!$1e he"$,.%. (The
(ureau of Customs, et al., v. 2-ario, et al./ A.'. No. 178081/ 5arch
.0/ .000>
6. I,%!",'e% whee !hee $% ,o $.h! o0 e)e&p!$o,
o0 %e$9e) ",) 0o0e$!e) "!$'(e%:
a. There is #raud8
+. The i"portation is a+soute! prohi+ited/ or
c. The reease o# the propert! (oud +e contrar! to a(.
(Trans-lo!e International, Inc. v. Court of Appeals, et al., A.'. No.
1.997B/ Fanuar! .5/ 1444>
1?. In A$nar v. Court of Tax Appeals, @> SCRA @8E/
reiterated in +arolan, 1r. v. Court of Tax Appeals, et al., .16
SC'A .48/ the Supre"e Court cari#ied that !he 0"-)
'o,!e&p("!e) /* ("w &-%! /e "'!-"( ",) ,o! 'o,%!-'!$1e.
It "ust +e intentiona/ consistin1 o# deception/ (i#u! and
dei+erate! done or resorted to in order to induce another to
1ive up so"e ri1ht.
11. ReD-$%$!e% 0o 0o0e$!-e o0 $&po!e) .oo)%:
a. Wron1#u "a0in1 +! the o(ner/ i"porter/ e)porter
or consi1nee o# an! decaration or a##idavit/ or the (ron1#u
"a0in1 or deiver! +! the sa"e person o# an! invoice/ etter or
paper G a touchin1 on the i"portation or e)portation o#
"erchandise.
+. the #asit! o# such decaration/ a##idavit/ invoice/
etter or paper8 and
c. an intention on the part o# the i"porterHconsi1nee
to evade the pa!"ent o# the duties due. (Repu!lic, etc., v. The
Court of Appeals, et al./ A.'. No. 174050/ Icto+er ./ .001>
1+. O, <",-"* :8 16=68 !he 1e%%e( LCV ES!" A'e8
E'o&$,. 0o& S$,."poe (")e, w$!h '".o8 e,!ee) !he Po!
o0 S", Fe,",)o8 L" U,$o, 0o ,ee)e) ep"$%. Whe, !he
B-e"- o0 C-%!o&% ("!e /e'"&e %-%p$'$o-% !h"! !he
1e%%e(F% e"( p-po%e $, )o';$,. w"% !o %&-..(e '".o $,!o
!he 'o-,!*8 %e$9-e po'ee)$,.% wee $,%!$!-!e) ",)
%-/%eD-e,!(* !wo W"",!% o0 Se$9-e ",) De!e,!$o, wee
$%%-e) 0o !he 1e%%e( ",) $!% '".o.
Ce%" )oe% ,o! ow, !he 1e%%e( o ",* o0 $!% '".o /-!
'("$&e) " pe0ee) &"$!$&e ($e,. Ce%" !he, /o-.h!
%e1e"( '"%e% $, !he RTC !o e,0o'e h$% ($e,. Wo-() !he%e
%-$!% po%pe 2
S<AAESTED ANSWE'C No. The &ureau o# Custo"s
havin1 #irst o+tained possession o# the vesse and its 1oods
has o+tained ,urisdiction to the e)cusion o# the tria courts.
When Cesar has i"peaded the vesse as a de#endant to
en#orce his ae1ed "ariti"e ien/ in the 'TC/ he +rou1ht an
action in rem under the Code o# Co""erce under (hich the
vesse "a! +e attached and sod.
Ho(ever/ the +asic operative #act is the actua or
constructive possession o# the res +! the tri+una e"po(ered
+! a( to conduct the proceedin1s. This "eans that to ac2uire
,urisdiction over the vesse/ as a de#endant/ the tria court "ust
21
have o+tained either actua or constructive possession over it.
Neither (as acco"pished +! the 'TC as the vesse (as
aread! in the possession o# the &ureau o# Custo"s.
=Commissioner of Customs v. Court of Appeals, et al., A. '. Nos.
111.0.%05/ Fanuar! 71/ .009>
NITES AND CI55ENTSC
a. Fo0e$!-e o0 %e$9e) .oo)% $, !he B-e"- o0
C-%!o&% $% $, !he ,"!-e o0 " po'ee)$,. in re# 8 i.e. directed
a1ainst the res or i"ported 1oods and entais a deter"ination o# the
e1ait! o# their i"portation. In this proceedin1/ it is in e1a
conte"pation the propert! itse# (hich co""its the vioation and is
treated as the o##ender/ (ithout re#erence (hatsoever to the character
or conduct o# the o(ner.
The issue is i"ited to (hether the i"ported 1oods shoud +e
#or#eited and disposed o# in accordance (ith a( #or vioation o# the
Tari## and Custo"s Code. .(Trans-lo!e International, Inc. v. Court of
Appeals, et al./ A.'. No. 1.997B/ Fanuar! .5/ 1444>
3or#eiture o# sei:ed 1oods in the &ureau o# Custo"s is a
proceedin1 a1ainst the 1oods and not a1ainst the o(ner. =Asian
Terminals, Inc. v. (autista,Ricafort, A .'. No. 199401/ Icto+er .6/
.009 citin1 Trans-lo!e"
REPUBLIC ACT NO. 11+58 CREATING THE
COURT OF TAX APPEALS INCLUDING
<URISDICTION OF THE CTA8 AS ALENDED
1. Wh* w"% !he Co-! o0 T"# Appe"(% 'e"!e) 2
S<AAESTED ANSWE'C
a. To prevent dea! in the disposition o# ta) cases +!
the then Courts o# 3irst Instance =no( 'TCs>/ in vie( o# the
+ac0o1 o# civi/ cri"ina/ and cadastra cases accu"uatin1 in
the doc0ets o# such courts8 and
+. To have a +od! (ith specia 0no(ed1e (hich
ordinar! Fud1es o# the then Courts o# 3irst Instance =no(
'TCs>/ are not i0e! to possess/ thus providin1 #or an
ade2uate re"ed! #or a speed! deter"ination o# ta) cases.
='rsal v. Court of Tax Appeals, et al., 101 $hi. .048 Lacsamana, et
al., etc., v. CTA, et al., 10. $hi. 471>
NITES AND CI55ENTSC
a. CTA %pe'$"($9e) 'o-!. &! the ver! nature o# its
#unctions/ the CTA is a hi1h! speciai:ed court speci#ica! created #or
the purpose o# revie(in1 ta) and custo"s cases. it is dedicated
e)cusive! to the stud! and consideration o# revenue%reated
pro+e"s and has necessari! deveoped an e)pertise on the su+,ect.
=F. $an1ani+an in Southern Cross Cement Corporation v. Cement
#anufacturers Association of the Philippines, et al., A. '. No. 1585B0/
Au1ust 7/ .005/ citin1 various cases in his separate opinion to the
decision on the "otion #or reconsideration>
+. Co-! o0 T"# Appe"(% $% ,o! .o1e,e) %!$'!(* /*
!e'h,$'"( -(e% o0 e1$)e,'e. =Sec. 8/ 'ep. Act No. 11.5> Whie
this "a! +e so rues o# procedure are not ends in the"seves +ut are
pri"ari! intended as toos in the ad"inistration o# ,ustice/ the
presentation o# the purchase receipts andHor invoices is not "ere
procedura technicait! (hich "a! +e disre1arded considerin1 that it is
the on! "eans +! (hich the CTA "a! ascertain and veri#! the truth
o# the ta)pa!er*s cai"s. =Commissioner of Internal v. #anila #inin-
Corporation, A. '. No. 157.0B/ Au1ust 71/ .005>
c. Co-! o0 T"# Appe"(%F 0$,)$,. o0 0"'! /$,)% !he
S-pe&e Co-!. It is doctrina that the #actua #indin1s o# the
Court o# Ta) Appeas/ (hen supported +! su+stantia evidence/ (i
not +e distur+ed on appea/ uness it is sho(n that it co""itted
1ross error in the appreciation o# #acts. =Commissioner of Internal
Revenue v. #anila .lectric Company, A. '. No. 1.1999/ Icto+er
10/ .006 citin1
Commissioner of Internal Revenue v. Court of Appeals/ A.'. No.
1.B0B7/ Icto+er 1B/ 1448/ .48 SC'A 87/ 41 citin1 Commissioner of
Internal Revenue v. #itsu!ishi #etal Corp., A.'. Nos. 5B404 and
800B1/ Fanuar! ../ 1440/ 181 SC'A .1B/ ..08 Philippine Refinin-
Company v. Court Commissioner of Internal Revenue v. Court of
Appeals/ A.'. No. 1.B0B7/ Icto+er 1B/ 1448/ .48 SC'A 87/ 41
citin1 Commissioner of Internal Revenue v. #itsu!ishi #etal Corp.,
A.'. Nos. 5B404 and 800B1/ Fanuar! ../ 1440/ 181 SC'A .1B/ ..08
Philippine Refinin- Company v. Court of Appeals, A.'. No. 11864B/
5a! 8/ 1449/ .59 SC'A 996/ 969>
Hence/ as a "atter o# practice and principe/ the Supre"e
Court (i not set aside the concusion reached +! the Court o# Ta)
Appeas/ especia! i# a##ir"ed +! the Court o# Appeas as in the
present case. 3or +! the nature o# its #unctions/ the ta) court
dedicates itse# to the stud! and consideration o# ta) pro+e"s and
necessari! deveops e)pertise thereon/ uness there has +een an
a+use or i"provident e)ercise o# authorit! on its part. =I!i). citin1
Compa-nie +inanciere Sucres et Denrees v. Commissioner of
Internal Revenue/ A.'. No. 17787B/ Au1ust .8/ .009/ B44 SC'A
99B/ 9948 Commissioner of Internal Revenue v. eneral +oo)s
(Phils." Inc., A.'. No. 1B796./ Apri .B/ .007/ B01 SC'A 5B5/ 557.
22
+. Wh"! $% !he (e."( e&e)* -,)e !he NIRC o0 166:
"! !he >-)$'$"( (e1e( w$!h e%pe'! !o e0-,) o e'o1e* o0 !"#
eo,eo-%(* o $((e."((* 'o((e'!e) 2
S<AAESTED ANSWE'. The e1a re"ed! under the
NI'C o# 1446 at the ,udicia eve (ith respect to re#und or
recover! o# ta) erroneous! or ie1a! coected/ is the #iin1 o#
a suit or proceedin1 (ith the Court o# Ta) Appeas
a. +e#ore the e)piration o# t(o =.> !ears #ro" the date
o# pa!"ent o# the ta) re1ardess o# an! supervenin1 cause
that "a! arise a#ter pa!"ent =.
nd
par./ Sec. ..4/ NI'C o# 1446>/ or
+. (ithin thirt! =70> da!s #ro" receipt o# the denia +!
the Co""issioner o# the appication #or re#und or credit. =Sec.
11/ '.A. No. 11.5>
3. The t(o =.> !ear period and the thirt! =70> da!
period shoud +e appied on a (hichever co"es #irst +asis.
Thus/ i# the 70 da!s is (ithin the . !ears/ the 70 da!s appies/
i# the . !ear period is a+out to apse +ut there is no decision
!et +! the Co""issioner (hich (oud tri11er the 70%da!
period/ the ta)pa!er shoud #ie an appea/ despite the a+sence
o# a decision. (Commissioners, etc. v. Court of Tax Appeals, et al.,
. R. 6o. >9?8>, #arch 8?, 8E>E, unrep."
4. Where the ta)pa!er is a corporation the t(o !ear
prescriptive period #ro" ?date o# pa!"ent@ #or re#und o# inco"e
ta)es shoud +e the date (hen the corporation #ied its #ina
ad,ust"ent return not on the date (hen the ta)es (ere paid on
a 2uarter! +asis. (Philippine (an3 of Communications v.
Commissioner of Internal Revenue, et al., .R. 6o. 889<9;, 1anuary
9>, 8EEE"
Aenera! spea0in1 it is the 3ina Ad,ust"ent 'eturn/ in
(hich a"ounts o# the 1ross receipts and deductions have
+een audited and ad,usted/ (hich is re#ective o# the resuts o#
the operations o# a +usiness enterprise. It is on! (hen the
return/ coverin1 the (hoe !ear/ is #ied that the ta)pa!er (i +e
a+e to ascertain (hether a ta) is sti due or re#und can +e
cai"ed +ased on the ad,usted and audited #i1ures. ((an3 of the
Philippine Islan)s v. Commissioner of Internal Revenue, .R. 6o.
8;;?@=, Au-ust 9>, 9<<8>
5. Wh"! $% !he /-)e, o0 !"#p"*e% %ee;$,. !"#
e0-,)% o 'e)$!% 2
S<AAESTED ANSWE'C It has a(a!s +een the rue
that those see0in1 ta) re#unds or credits +ear the +urden o#
provin1 the #actua +asis o# their cai"s and o# sho(in1/ +!
(ords too pain to +e "ista0en/ that the e1isature intended to
entite the" to such cai"s. =Atlas Consoli)ate) #inin- an)
Development Corporation v. Commissioner of Internal Revenue, A. '.
No. 1B55.9/ 5arch 19/ .006/ See Commissioner of Internal Revenue
v. Sea-ate Technolo-y (Philippines" A. '. No. 157899/ 11 3e+ruar!
.005/ B51 SC'A 17.>
7. Wh"! $% !he ,"!-e o0 po'ee)$,.% /e0oe !he
Co-! o0 T"# Appe"(% 2
S<AAESTED ANSWE'C
3irst/ a ,udicia cai" #or re#und or ta) credit in the CTA is
+! no "eans an ori1ina action/ +ut rather an appea +! (a! o#
petition #or revie( o# a previous/ unsuccess#u ad"inistrative
cai".
There#ore/ as in ever! appea or petition #or revie(/ a
petitioner has to convince the appeate court that the 2uasi%
,udicia a1enc! a Guo did not have an! reason to den! its
cai"s.
Second/ cases #ied in the CTA are iti1ated )e novo.
Thus/ a petitioner shoud prove ever! "inute aspect o# its case
+! presentin1/ #or"a! o##erin1 and su+"ittin1 its evidence to
the CTA.
Since it is crucia #or a petitioner in a ,udicia cai" #or
re#und or ta) credit to sho( that its ad"inistrative cai" shoud
have +een 1ranted in the #irst pace/ part o# the evidence to +e
su+"itted to the CTA "ust necessari! incude (hatever is
re2uired #or the success#u prosecution o# an ad"inistrative
cai". =Atlas Consoli)ate) #inin- an) Development Corporation v.
Commissioner of Internal Revenue, A. '. No. 1B55.9/ 5arch 119/
.006>
:. App($'"/$($!* o0 Proton Pilipinas Corporation vs.
(epublic, etc., G. R. No. 175?+:8 O'!o/e 178 +??7. The
case (as decided on #actua antecedents +e#ore '. A. No.
4.8. (hich 1rants cri"ina ,urisdiction to the Court o# Ta)
Appeas i# the vaue o# the ta) is $1 "iion or "ore.
Interpretin1 the provisions o# 'epu+ic Act No. 8.B4/
(hich provides that the civi action #or recover! o# civi ia+iit!
shoud +e ,oint! deter"ined in the cri"ina proceedin1 +! the
23
Sandi1an+a!an or appropriate courts/ the prohi+ition o#
reservation o# the cri"ina aspect/ the Supre"e Court said that
ta) coection cases "a! +e tried separate!/ and not +e#ore
the Sandi1an+a!an in 'ep. Act No. 7014 cases. This is so
+ecause/ 'ep. Act No. 7014 is sient on the de#inition o# civi
ia+iit! and the appication o# Art. 10B o# the 'evised $ena
Code does not cover ta)es. Conse2uent!/ the Supre"e Court
rued that on the ta) coection case the 'TC (oud have
,urisdiction.
I,!epe!"!$o, /* !he "-!ho $, !he ($.h! o0 Rep. A'!.
6+=+. I# it is a cri"ina case co1ni:a+e +! the Sandi1an+a!an/
then this court retains ,urisdiction/ (ith the civi ,urisdiction
+ein1 co1ni:a+e +! the CTA or the o(er courts dependin1 on
the a"ount.
I# the issue is a pure! ta) case/ even i# it invoves cases
co1ni:a+e +! the Sandi1an+a!an/ then ,urisdiction vests upon
the CTA or the o(er courts dependin1 on the a"ount o# the
ta).
=. O, <",-"* +48 16658 !he !he, Se'e!"* o0
F$,",'e8 !ho-.h !he e'o&&e,)"!$o, o0 !he !he,
Co&&$%%$o,e o0 I,!e,"( Re1e,-e $%%-e) Re1e,-e
Re.-("!$o,% MRe1. Re..N No. 1G658 po1$)$,. !he BR-(e%
",) Re.-("!$o,% !o I&p(e&e,! !he T"# I,'e,!$1e%
Po1$%$o,% U,)e P""."ph% @/A ",) @'A o0 Se'!$o, 1+8
MR.A.N No. :++:8 MoN!hew$%e ;,ow, "% !he B"%e%
Co,1e%$o, ",) De1e(op&e,! A'! o0 166+.E
S-/%eD-e,!(*8 Re1. Re.. No. 1+G6: w"% $%%-e) po1$)$,.
0o !he BRe.-("!$o,% I&p(e&e,!$,. Se'!$o,% 1+@'A ",) 15
o0 MR.A.N No. :++: ",) Se'!$o,% +4@/A ",) @'A o0 MR.A.N No.
:617 A((o'"!$,. Two Pe'e,! @+IA o0 !he Go%% I,'o&e
E",e) /* A(( B-%$,e%%e% ",) E,!ep$%e% W$!h$, !he
S-/$'8 C(";8 <oh, H"*8 Poo Po$,! Spe'$"( E'o,o&$'
Ho,e% ",) o!he Spe'$"( E'o,o&$' Ho,e% -,)e PEHA.E
On Sep!e&/e +:8 16668 Re1. Re.. No. 17G66 w"% $%%-e)
BA&e,)$,. MRRN No. 1G658 "% "&e,)e)8 ",) o!he e("!e)
R-(e% ",) Re.-("!$o,% !o I&p(e&e,! !he Po1$%$o,% o0
p""."ph% @/A ",) @'A o0 Se'!$o, 1+ o0 MR.A.N No. :++:8
o!hew$%e ;,ow, "% !he OB"%e% Co,1e%$o, ",)
De1e(op&e,! A'! o0 166+F Re("!$1e !o !he T"# I,'e,!$1e%
G",!e) !o E,!ep$%e% Re.$%!ee) $, !he S-/$' Spe'$"(
E'o,o&$' ",) Feepo! Ho,e.E
O, <-,e 38 +??38 !he Co&&$%%$o,e o0 I,!e,"(
Re1e,-e $%%-e) Re1e,-e Le&o",)-& C$'-(" @RLCA
No. 31G+??3 %e!!$,. !he BU,$0o& G-$)e($,e% o, !he
T"#"!$o, o0 I&po!e) Lo!o Veh$'(e% !ho-.h !he S-/$'
Fee Po! Ho,e ",) O!he Feepo! Ho,e% !h"! "e So() "!
P-/($' A-'!$o,8E wh$'h po1$)e) 0o !he !"# !e"!&e,!% o,
!he !",%"'!$o,% $,1o(1e) $, !he $&po!"!$o, o0 &o!o
1eh$'(e% !ho-.h !he SSEFH ",) o!he (e.$%("!e) Feepo!
9o,e% ",) %-/%eD-e,! %"(e !heeo0 !ho-.h p-/($'
"-'!$o,. Th$% w"% ("!e "&e,)e) /* RLC No. 3+G+??3.
A%$" I,!e,"!$o,"( A-'!$o,ee% ",) o!he% 0$(e) "
'o&p("$,! /e0oe !he RTC o0 O(o,."po C$!*8 !o )e'("e
Vo$)8 U(!" V$e%8 ",) U,'o,%!$!-!$o,"( MRLCN No. 31G+??3
)"!e) <-,e 38 +??3 ",) MRLCN No. 3+G+??3 )"!e) <-,e 58
+??3, Re1. Re.. No%. 1G658 1+G6: ",) 17G66 )"!e) <",-"*
+48 16658 A-.-%! :8 166: ",) Sep!e&/e +:8 16668
e%pe'!$1e(*,
The* 'o,!e,)e) !h"! >-$%)$'!$o, o1e !he '"%e "!
/" pope(* pe!"$,% !o !he e.-(" 'o-!% "% !h$% $% B",
"'!$o, !o )e'("e "% -,'o,%!$!-!$o,"(8 1o$) ",) "."$,%! !he
po1$%$o,% o0 MR.A. No.N :++:E !he RLC% $%%-e) /* !he
CIR. The* )o B)o ,o! 'h"((e,.e !he "!e8 %!-'!-e o
0$.-e% o0 !he $&po%e) !"#e%8 "!he !he* 'h"((e,.e !he
"-!ho$!* o0 !he e%po,)e,! Co&&$%%$o,e !o $&po%e ",)
'o((e'! !he %"$) !"#e%.E The* "(%o '("$& !h"! !he 'h"((e,.e
o, !he "-!ho$!* o0 !he CIR !o $%%-e !he RLC% )oe% ,o! 0"((
w$!h$, !he >-$%)$'!$o, o0 !he Co-! o0 T"# Appe"(% @CTAA.
Doe% !he RTC h"1e >-$%)$'!$o, 2
S<AAESTED ANSWE'C No. It is the Court o# Ta)
Appeas that has e)cusive ,urisdiction.
In the case at +ar/ the assaied revenue re1uations
and revenue "e"orandu" circuars are actua! ruin1s or
opinions o# the CI' on the ta) treat"ent o# "otor vehices
sod at pu+ic auction (ithin the SSEK to i"pe"ent Section
1. o# '.A. No. 6..6 (hich provides that ?e)portation or
re"ova o# 1oods #ro" the territor! o# the DSSEKE to the other
parts o# the $hiippine territor! sha +e su+,ect to custo"s
duties and ta)es under the Custo"s and Tari## Code and
other reevant ta) a(s o# the $hiippines.@ The! (ere issued
24
pursuant to the po(er o# the CI' under Section B o# the
Nationa Interna 'evenue Code/ vi$C
Section B. $o(er o# the Co""issioner to Interpret
Ta) La(s and to Decide Ta) Cases.%% The po(er to interpret
the provisions o# this Code and other ta) a(s sha +e under
the e)cusive and ori1ina ,urisdiction o# the Co""issioner/
su+,ect to revie( +! the Secretar! o# 3inance.
The po(er to decide disputed assess"ents/ re#unds o#
interna revenue ta)es/ #ees or other char1es/ penaties
i"posed in reation thereto/ or other "atters arisin1 under this
Code or other a(s or portions thereo# ad"inistered +! the
&ureau o# Interna 'evenue is vested in the Co""issioner/
su+,ect to the e)cusive appeate ,urisdiction o# the Court o#
Ta) Appeas. =as a"ended +! the NI'C o# 1446/ emphases
supplie), Asia International Auctioneers, Inc., etc et al., .v. Parayno,
1r., etc.,, et al., A. '. No. 107BB5/ Dece"+er 18/ .006>
6. Wh"! $% !he 'h""'!e$%!$' o0 " BIR )e,$"( o0 "
po!e%! %-'h "% wo-() e,"/(e !he !"#p"*e !o "ppe"( !he
%"&e !o !he Co-! o0 T"# Appe"(% 2
S<AAESTED ANSWE'C The Co""issioner o# Interna
'evenue shoud a(a!s indicate to the ta)pa!er in cear and
une2uivoca an1ua1e (henever his action on an assess"ent
2uestioned +! a ta)pa!er constitutes his #ina deter"ination on
the disputed assess"ent.
In the +asis o# his state"ent indu+ita+! sho(in1 that
the Co""issioner*s co""unicated action is his #ina decision
on the contested assess"ent/ the a11rieved ta)pa!er (oud
then +e a+e to ta0e recourse to the ta) court at the opportune
ti"e. Without needess di##icut!/ the ta)pa!er (oud +e a+e to
deter"ine (hen his ri1ht to appea to the ta) court accrues.
=Commissioner of Internal Revenue v. (an3 of the Philippines Islan)s,
A. '. No. 17B09./ Apri 16/ .006 citin1 2ceanic Direless 6et7or3,
Inc. v. Commissioner of Internal Revenue, A. '. No. 1B8780/ 4
Dece"+er .005/ B66 SC'A .05/ .11%.1./ citin1 Suri-ao .lectric Co.,
Inc. v. Court of Tax Appeals, A. '. No. L%.5B.84/ .8 Fune 146B/ 56
SC'A 5.7>
NITES AND CI55ENTSC
a. Re"%o,% 0o !he -(e eD-$$,. CIRF%
-,eD-$1o'"( (",.-".e o, h$% "'!$o, o, !he po!e%!.
1> It (oud o+viate a desire and opportunit! on the
part o# the ta)pa!er to continua! dea! the #inait! o# the
assess"ent G and/ conse2uent!/ the coection o# the a"ount
de"anded as ta)es G +! repeated re2uests #or reco"putation
and reconsideration.
.> In the part o# the Co""issioner o# Interna
'evenue/ this (oud encoura1e his o##ice to conduct a care#u
and thorou1h stud! o# ever! 2uestioned assess"ent and
render a correct and de#ine decision thereon in the #irst
instance.
7> This (oud aso deter the Co""issioner o#
Interna 'evenue #ro" un#air! "a0in1 the ta)pa!er 1rope in
the dar0 and specuate as to (hich action constitutes the
decision appeaa+e to the ta) court.
B> I# 1reater i"port/ this rue o# conduct (oud "eet
a pressin1 need #or #air pa!/ re1uarit!/ and orderiness in
ad"inistrative action. . =Commissioner of Internal Revenue v.
(an3 of the Philippines Islan)s, A. '. No. 17B09./ Apri 16/
.006 citin1 2ceanic Direless 6et7or3, Inc. v. Commissioner of
Internal Revenue, A. '. No. 1B8780/ 4 Dece"+er .005/ B66
SC'A .05/ .11%.1./ citin1 Suri-ao .lectric Co., Inc. v. Court of
Tax Appeals, A. '. No. L%.5B.84/ .8 Fune 146B/ 56 SC'A
5.7>
1?. C$!e "'!% o0 BIR Co&&$%%$o,e !h"! &"* /e
'o,%$)ee) "% )e,$"( o0 " po!e%! wh$'h %e1e "% /"%$% 0o
"ppe"( !o !he Co-! o0 T"# Appe"(%.
S<AAESTED ANSWE'C
a. 3iin1 +! the &I' o# a civi suit #or coection o# the
de#icienc! ta) is considered a denia o# the re2uest #or
reconsideration. =Commissioner of Internal Revenue v. 'nion
Shippin- Corporation, 185 SC'A 5B6>
+. An indication to the ta)pa!er +! the Co""issioner
?in cear and une2uivoca an1ua1e@ o# his #ina denia not the
issuance o# the (arrant o# distraint and ev!. What is the
su+,ect o# the appea is the #ina decision not the (arrant o#
distraint. (Commissioner of Internal Revenue v. 'nion Shippin-
Corporation, 185 SC'A 5B6"
c. A &I' de"and etter sent to the ta)pa!er a#ter his
protest o# the assess"ent notice is considered as the #ina
decision o# the Co""issioner on the protest. (Suri-ao .lectric
Co., Inc. v. Court of Tax Appeals, et al., 56 SC'A 5.7>
d. A etter o# the &I' Co""issioner reiteratin1 to a
ta)pa!er his previous de"and to pa! an assess"ent is
considered a denia o# the re2uest #or reconsideration or
25
protest and is appeaa+e to the Court o# Ta) Appeas.
(Commissioner v. Ayala Securities Corporation, 60 SC'A .0B>
e. 3ina notice +e#ore sei:ure considered as
co""issioner*s decision o# ta)pa!er*s re2uest #or
reconsideration (ho received no other response.
Commissioner of Internal Revenue v. Isa!ela Cultural Corporation/
A.'. No. 175.10/ Fu! 11/ .001 hed that not on! is the Notice the
on! response receivedC its content and tenor supports the
theor! that it (as the CI'*s #ina act re1ardin1 the re2uest #or
reconsideration. The ver! tite e)press! indicated that it (as a
final notice prior to sei:ure o# propert!. The etter itse# cear!
stated that the ta)pa!er (as +ein1 1iven ?this LAST
I$$I'T<NITM@ to pa!8 other(ise/ its properties (oud +e
su+,ected to distraint and ev!.
11. The !"#p"*e %e"%o,"/(* po!e%!e) !he
"%%e%%&e,! $%%-e) /* !he Co&&$%%$o,e o0 I,!e,"(
Re1e,-e. D-$,. !he pe,)e,'* o0 !he po!e%! !he CIR
$%%-e) " w"",! o0 )$%!"$,! ",) (e1* !o 'o((e'! !he !"#e%
%-/>e'! o0 !he po!e%!.
A% 'o-,%e( wh"! ")1$'e %h"(( *o- .$1e !he !"#p"*e.
E#p("$, /$e0(* *o- ",%we.
S<AAESTED ANSWE'C The ta)pa!er shoud appea/
+! (a! o# a petition #or revie(/ to the Court o# Ta) Appeas not
on the 1round o# the denia o# the protest +ut on other "atter
arisin1 under the provisions o# the Nationa Interna 'evenue
Code. The actua issuance o# a (arrant o# distraint and ev! in
certain cases cannot +e considered a #ina decision on a
disputed assess"ent.
To +e a vaid decision on a disputed assess"ent/ the
decision o# the Co""issioner or his du! authori:ed
representative sha =a> state the #acts/ the appica+e a(/ rues
and re1uations/ or ,urisprudence on (hich such decision is
+ased/ other(ise/ the decision sha +e void/ in (hich case the
sa"e sha not +e considered a decision on the disputed
assess"ent8 and =+> that the sa"e is his #ina decision. =Sec.
7.1.9/ 'ev. 'e1s. 1.%44> These conditions are not co"pied (ith
+! the "ere issuance o# a (arrant o# distraint and ev!.
(Commissioner of Internal Revenue v. 'nion Shippin- Corp., 185
SC'A 5B6"
3urther"ore/ a "otion #or the suspension o# the
coection o# the ta) "a! +e #ied to1ether (ith the petition #or
revie( =Sec. 7/ 'ue 10/ ''CTA e##ective Dece"+er 15/ .005>
+ecause the coection o# the ta) "a! ,eopardi:e the interest o#
the ta)pa!er.
1+. I,%!",'e% whee !he Co-! o0 T"# Appe"(%
wo-() h"1e >-$%)$'!$o, e1e, $0 !hee $% ,o )e'$%$o, *e! /*
!he Co&&$%%$o,e o0 I,!e,"( Re1e,-e:
a. Where the Co""issioner has not acted on the
disputed assess"ent a#ter a period o# 180 da!s #ro"
su+"ission o# co"pete supportin1 docu"ents/ the ta)pa!er
has a period o# 70 da!s #ro" the e)piration o# the 180 da!
period (ithin (hich to appea to the Court o# Ta) Appeas. =ast
par./ Sec. ..8 =e>/ NI'C o# 1446F Commissioner of Internal Revenue
v. Isa!ela Cultural Corporation, .R. 6o. 8=@98<, 1uly 88, 9<<8"
+. Where the Co""issioner has not acted on an
appication #or re#und or credit and the t(o !ear period #ro" the
ti"e o# pa!"ent is a+out to e)pire/ the ta)pa!er has to #ie his
appea (ith the Court o# Ta) Appeas +e#ore the e)piration o#
t(o !ears #ro" the ti"e the ta) (as paid.
It is disheartenin1 enou1h to a ta)pa!er to +e 0ept
(aitin1 #or an inde#inite period #or the ruin1/. It (oud "a0e
"atters "ore e)asperatin1 #or the ta)pa!er i# the doors o#
,ustice (oud +e cosed #or such a reie# unti a#ter the
Co""issioner/ (oud have/ at his persona convenience/ 1iven
his 1o si1na. (Commissioner of Customs, et al, v. Court of Tax
Appeals, et al., .R. 6o. >9?8>, #arch 8?, 8E>E, unrep."
13. A% " .e,e"( -(e8 BNo 'o-! %h"(( h"1e !he
"-!ho$!* !o .",! ", $,>-,'!$o, !o e%!"$, !he 'o((e'!$o, o0
",* ,"!$o,"( $,!e,"( e1e,-e !"#8 0ee o 'h".e.@ =Sec. .18/
NI'C>
?No appea ta0en to the CTA #ro" the decision o# the
Co""issioner o# Interna 'evenue or the Co""issioner o#
Custo"s or the 'e1iona Tria Court/ provincia/ cit! or
"unicipa treasurer or the Secretar! o# 3inance/ the Secretar!
o# Trade and Industr! and Secretar! o# A1ricuture/ as the case
"a! +e sha suspend the pa!"ent/ ev!/ distraint/ andHor sae
o# an! propert! o# the ta)pa!er #or the satis#action o# his ta)
ia+iit! as provided +! e)istin1 a(C $rovided/ ho(ever/ That
(hen in the opinion o# the Court the coection +! the
a#ore"entioned 1overn"ent a1encies "a! ,eopardi:e the
interest o# the Aovern"ent andHor the ta)pa!er the Court at
26
an! sta1e o# the proceedin1 "a! suspend the said coection
and re2uire the ta)pa!er either to deposit the a"ount cai"ed
or to #ie a suret! +ond #or not "ore than dou+e the a"ount
(ith the Court.@ =Sec. 11/ 'ep. Act No. 11.5/ as a"ended +! Sec.4/
'ep. Act No. 4.8. >
The Supre"e Court "a! en,oin the coection o# ta)es
under its 1enera ,udicia po(er +ut it shoud +e apparent that
the source o# the po(er is not statutor! +ut constitutiona.
The Supre"e Court did not 1rant the provisiona re"ed!
pra!ed #or in Southern Cross Cement Corporation v. The
Philippine Cement #anufacturers Corp., et al., A. '. No.
1585B0/ Fu! 8/ .00B #or it (oud +e tanta"ount to en,oinin1
the coection o# ta)es/ a pere"ptor! ,udicia act (hich is
traditiona! #ro(ned upon uness there is a cear statutor!
+asis #or it. Evident is the cear e1isative intent that the
i"position o# sa#e1uard "easures/ despite the avaia+iit! o#
,udicia revie(/ shoud not +e en,oined not(ithstandin1 an!
ti"e! appea o# the i"position. This so +ecause the
Sa#e1uard 5easures Act states that the #iin1 o# a petition #or
revie( +e#ore the CTA does not stop/ suspend/ or other(ise
to the i"position or coection o# the appropriate tari## duties or
the adoption o# other appropriate sa#e1uard "easures.
14. Ge,e"( -(e: ?The rue is that in the a+sence o#
accountin1 records o# a ta)pa!er/ his ta) ia+iit! "a! +e
deter"ined +! esti"ation. The petitioner =Co""issioner o#
Interna 'evenue> is not re2uired to co"pute such ta)
ia+iities (ith "athe"atica e)actness. Appro)i"ation in the
cacuation o# ta)es due is ,usti#ied. To hod other(ise (oud
+e tanta"ount to hodin1 that s0i#u concea"ent is an
invinci+e +arrier to proo#.@ DCommissioner of Internal Revenue v.
/antex Tra)in- Co., Inc. A. '. No. 179465/ 5arch 71/ .005 citin1
'nite) States v. 1ohnson, 714 <.S. 1.77 =14B7>E ?Ho(ever/ the
rue does not app! (here the esti"ation is arrived at ar+itrari!
and capricious!.@ DCommissioner of Internal Revenue v. /antex
Tra)in- Co., Inc., citin1 'nite) States v. Rin)s3opf, 105 <.S.B18
=1881>E
15. Le",$,. o0 P/e%! e1$)e,'e o/!"$,"/(eN under
Sec. 9 =&>/ NI'C o# 1446. This "eans that the ori1ina
docu"ents "ust +e produced. I# it coud not +e produced/
secondar! evidence "ust +e adduced. =/antex Tra)in- Co., Inc.
v. Commissioner of Internal Revenue/ CA % A.'. S$ No. B616./
Septe"+er 70/ 1448>
NITES AND CI55ENTSC
a. The %e'o,)"* e1$)e,'e re#erred to are those that
"a! +e adduced usin1 the 1enera "ethods #or reconstructin1 a
ta)pa!er*s inco"e or the indirect approach to ta) investi1ation.
The ?+est evidence@ envisa1ed in Section 19 o# the 1466 NI'C
Dno( Sec. 9 =&>/NI'C o# 1446E ?incudes the corporate and accountin1
records o# the ta)pa!er (ho is the su+,ect o# the assess"ent process/
the accountin1 records o# other ta)pa!ers en1a1ed in the sa"e ine o#
+usiness/ incudin1 their 1ross pro#it and net pro#it saes.@
=Commissioner of Internal Revenue v. /antex Tra)in- Co., Inc. A. '.
No. 179465/ 5arch 71/ .005 citin1 De Leon/ The 6ational Internal
Revenue Co)e Annotate), p. 76>
?Such evidence aso incudes data/ record/ paper/ docu"ent or
an! evidence 1athered +! interna revenue o##icers #ro" other
ta)pa!ers (ho had persona transactions or #ro" (ho" the su+,ect
ta)pa!er received an! inco"e8 and record/ data/ docu"ent and
in#or"ation secured #ro" 1overn"ent o##ices or a1encies/ such as the
SEC/ the Centra &an0 o# the $hiippines/ the &ureau o# Custo"s/ and
the ?Tari## and Custo"s Co""ission.@ =sic, Commissioner v. /antex
Tra)in- Co., Inc., supra> The a( ao(s the &I' access to a
reevant or "ateria records or data in the person o# the ta)pa!er. It
paces no i"it or condition on the t!pe or #or" o# the "ediu" +!
(hich the record su+,ect o# the order o# the &I' is 0ept.@ =I!i).>
$urpose o# the ?+est evidence o+taina+e@ rue under
Sec/ 9 =&>/ NI'C o# 1446. ?The purpose o# the a( is to ena+e the
&I' to 1et at the ta)pa!er*s records in (hatever #or" the! "a! +e
0ept.@ =Commissioner of Internal Revenue v. /antex Tra)in- Co., Inc.
A. '. No. 179465/ 5arch 71/ .005>
17. Se'. 7 @BA o0 !he NIRC o0 166: "((ow% !he BIR !o
&";e o "&e,) " !"# e!-, 0o& h$% ow, ;,ow(e).e o
o/!"$,e) !ho-.h !e%!$&o,* o o!hew$%e. Thus/ the
Co""issioner o# Interna 'evenue investi1ates @an!
circu"stance (hich ed hi" to +eieve that the ta)pa!er had
ta)a+e inco"e ar1er than that reported. Necessari!/ this
in2uir! (oud have to +e outside o# the +oo0s +ecause the!
supported the return as #ied. He "a! ta0e the s(orn
testi"on! o# the ta)pa!er/ he "a! ta0e the testi"on! o# third
parties8 he "a! e)a"ine and su+poena/ i# necessar!/ traders*
and +ro0ers* accounts and +oo0s and the ta)pa!er*s +oo0s o#
accounts. The Co""issioner is not +ound to #oo( an! set o#
patterns. The e)istence o# unreported inco"e "a! +e sho(n
27
+! an! particuar proo# that is avaia+e in the circu"stances o#
the particuar situation. DCommissioner of Internal Revenue v.
/antex Tra)in- Co., Inc. citin1 Camp!ell, 1r., v. uetersloh, .86 3..d
868 =1491>E
Citin1 its ruin1 in a previous case/ a ?<.S. appeate court
decared that (here the records o# the ta)pa!er are "ani#est!
inaccurate and inco"pete/ the Co""issioner "a! oo0 to
other sources o# in#or"ation to esta+ish inco"e "ade +! the
ta)pa!er durin1 the !ears in 2uestion. =I!i)., in turn citin1 0enney
v. Commissioner, 111 3..d 76B>
1:. The (ord assess"ent (hen used in connection
(ith ta)ation/ "a! have "ore than one "eanin1. Loe
'o&&o,(* !he wo) B"%%e%%&e,!E &e",% !he o00$'$"(
1"(-"!$o, o0 " !"#p"*eF% pope!* 0o p-po%e o0 !"#"!$o,.
The "/o1e )e0$,$!$o, o0 "%%e%%&e,! 0$,)% "pp($'"!$o, -,)e
!"$00 ",) '-%!o&% !"#"!$o, "% we(( "% (o'"( .o1e,&e,!
!"#"!$o,.
3or e"( pope!* !"#"!$o,8 !hee &"* /e " %pe'$"(
&e",$,. !o !he /-)e,% !h"! "e $&po%e) -po, e"(
pope!$e% !h"! h"1e /ee, /e,e0$!e) /* " p-/($' wo;%
e#pe,)$!-e o0 " (o'"( .o1e,&e,!. It is so"eti"es caed a
specia assess"ent or a specia ev!. (Commissioner of Internal
Revenue v. Pascor Realty an) Development Corporation, et al., A.'.
No. 1.8715/ Fune .4/ 1444>
Fo $,!e,"( e1e,-e !"#"!$o, "%%e%%&e,! "% ("*$,. "
!"#. The uti"ate purpose o# an assess"ent to such a
connection is to ascertain the a"ount that each ta)pa!er is to
pa!. (Commissioner of Internal Revenue v. Pascor Realty an)
Development Corporation, et al., A.'. No. 1.8715/ Fune .4/ 1444>
1=. A, "%%e%%&e,! $% " ,o!$'e )-(* %e,! !o !he
!"#p"*e wh$'h $% )ee&e) &")e o,(* whe, !he BIR
e(e"%e%8 &"$(% o %e,)% %-'h ,o!$'e !o !he !"#p"*e.
(Commissioner of Internal Revenue v. Pascor Realty an)
Development Corporation, et al., A.'. No. 1.8715/ Fune .4/ 1444>
16. Wh"! $% " %e(0G"%%e%%e) !"# 2
S<AAESTED ANSWE'C A ta) that the ta)pa!er hi"se#
assesses or co"putes and pa!s to the ta)in1 authorit!. It is a
ta) that se#%assessed +! the ta)pa!er (ithout the intervention
o# an assess"ent +! the ta) authorit! to create the ta) ia+iit!.
The Ta) Code #oo(s the pa!%as%!ou%#ie s!ste" o#
ta)ation under (hich the ta)pa!er co"putes his o(n ta)
ia+iit!/ prepares the return/ and pa!s the ta) as he #ies the
return. The pa!%as%!ou%#ie s!ste" is a se#%assessin1 ta)
return.
Interna revenue ta)es are se#%assessin1. DDissent o# F.
Carpio in Philippine 6ational 2il Company v. Court of Appeals, et al.,
A. '. No. 104469/ Apri .9/ .005 and co"panion case citin1 Tupa$ v.
'lep, 719 SC'A 118 =1444> in turn citin1 -itu1 and Acosta/ Tax La7
an) 1urispru)ence, 1
st
edition/ 1446/ p. .96E
A cear e)a"pe o# a se#%assessed ta) is the annua
inco"e ta)/ (hich the ta)pa!er hi"se# co"putes and pa!s
(ithout the intervention o# an! assess"ent +! the &I'. The
annua inco"e ta) +eco"es due and pa!a+e (ithout need o#
an! prior assess"ent +! the &I'. The &I' "a! or "a! not
investi1ate or audit the annua inco"e ta) return #ied +! the
ta)pa!er. The ta)pa!er*s ia+iit! #or the inco"e ta) does not
depend on (hether or not the &I' conducts such su+se2uent
investi1ation or audit.
Ho(ever/ i# the ta)in1 authorit! is #irst re2uired to
investi1ate/ and a#ter such investi1ation to issue the ta)
assess"ent that creates the ta) ia+iit!/ then the ta) is no
on1er se#%assessed. =Dissent o# F. Carpio in Philippine 6ational
2il Company v. Court of Appeals, et al., A. '. No. 104469/ Apri .9/
.005 and co"panion case>
+?. O, O'!o/e +=8 16== !"#p"*e /",; e'e$1e) "
,o!$'e o0 "%%e%%&e,! 0o& !he BIR $,0o&$,. $! !h"!
)e0$'$e,'* !"#e% "e )-e 0o& !he %"$) !"#p"*e /",;
w$!ho-! ",* 0$,)$,.% o0 ("w o 0"'! /-! %-ppo!e) o,(* w$!h
" 'o&p-!"!$o,. O, De'e&/e 1?8 16==8 !he !"#p"*e /",;
'o-,%e( 0$(e) " (e!!e !h"! B"% %oo, "% !h$% $% e#p("$,e) ",)
'("$0$e) $, " pope ,o!$'e o0 "%%e%%&e,!8 we %h"(( $,0o&
*o- o0 !he !"#p"*eF% )e'$%$o, o, whe!he !o p"* o po!e%!
!he "%%e%%&e,!.E The !"#p"*e /",; $,%$%!% !h"! !he
"%%e%%&e,! w"% ,o! 1"($). O0 'o-%e8 BIR !oo; !he
oppo%$!e 1$ew 'o,!e,)$,. 0-!he !h"! !hee w"% ,o
%e"%o,"/(e po!e%!8 he,'e !he !"# $% %-e ",) 'o((e'!$/(e.
Who $% 'oe'! 2
S<AAESTED ANSWE'C The &I' is correct. <nder the
od a( Sec. .60/ it is enou1h "ere! that the &I'
Co""issioner sha ?noti#! the ta)pa!er o# his #indin1s
28
The ta)pa!er +an0 counse*s Dece"+er 10/ 1488 etter is
not a seasona+e protest +ecause it (as #ied thirt! =70> da!s
a#ter receipt o# the assess"ent on Icto+er .8/ 1488.
=Commissioner of Internal Revenue v. (an3 of Philippine Islan)s, A.
'. No. 17B09./ Apri 16/ .006>
NITES AND CI55ENTSC The state"ent/ ?The
ta)pa!er sha +e in#or"ed in (ritin1 o# the a( and the #acts on
(hich the assess"ent is "ade8 other(ise the assess"ent
sha +e void@ is an a"end"ent to Sec. .60 =no( renu"+ered
to Sec. ..8> (hich too0 e##ect on! on Fanuar! 1/ 1448 upon
the e##ectivit! o# the Ta) 'e#or" Act o# 1446.
+1. Wh"! "e !he pe%'$p!$1e pe$o)% 0o &";$,.
"%%e%%&e,!% o0 $,!e,"( e1e,-e !"#e% 2
S<AAESTED ANSWE'C
a. Three =7> !ears #ro" the ast da! (ithin (hich to #ie
a return or (hen the return (as actua! #ied/ (hichever is ater
=Sec. .07/ NI'C o# 1446>. The CI' has three =7> !ears #ro" the
date o# actua #iin1 o# the ta) return to assess a nationa
interna revenue ta) or to co""ence court proceedin1s #or
the coection thereo# (ithout an assess"ent. D(an3 of
Philippine Islan)s (+ormerly +ar .ast (an3 an) Trust Company" v.
Commissioner of Internal Revenue, A. '. No. 16B4B./ 5arch 6/
.008E
+. ten !ears #ro" discover! o# the #aiure to #ie the ta)
return or discover! o# #asit! or #raud in the return DSec. ... =a>/
NI'C o# 1446> 8 or
c. (ithin the period a1reed upon +et(een the
1overn"ent and the ta)pa!er (here there is a (aiver o# the
prescriptive period #or assess"ent =Sec. ... =+>/ NI'C o# 1446>.
++. P-po%e o0 pe$o) o0 ($&$!"!$o,% $, !"#"!$o,. 3or
the purpose o# sa#e1uardin1 ta)pa!ers #ro" an! unreasona+e
e)a"ination/ investi1ation or assess"ent/ our ta) a( provides
a statute o# i"itations in the coection o# ta)es. DCommissioner
of Internal Revenue v. (.+. oo)rich Phils, Inc., =no7 Sime Dar!y
International Tire Co., Inc.>, et al., A.'. No. 10B161/ 3e+ruar! .B/
1444/ 707 SC'A 5B98 Philippine 1ournalists, Inc. v. Commissioner of
Internal Revenue, A. '. No. 19.85./ Dece"+er 19/ .00B8E/ as (e
as their assess"ents.
The a( prescri+in1 a i"itation o# actions #or the
coection o# the inco"e ta) is +ene#icia +oth to the
Aovern"ent and to its citi:ens8 to the Aovern"ent +ecause
ta) o##icers (oud +e o+i1ed to act pro"pt! in the "a0in1 o#
assess"ent/ and to citi:ens +ecause a#ter the apse o# the
period o# prescription citi:ens (oud have a #eein1 o# securit!
a1ainst unscrupuous ta) a1ents (ho (i a(a!s #ind an
e)cuse to inspect the +oo0s o# ta)pa!ers/ not to deter"ine the
atter*s rea ia+iit!/ +ut to ta0e advanta1e o# ever! opportunit!
to "oest peace#u/ a(%a+idin1 citi:ens. Without such a e1a
de#ense ta)pa!ers (oud #urther"ore +e under o+i1ation to
a(a!s 0eep their +oo0s and 0eep the" open #or inspection
su+,ect to harass"ent +! unscrupuous ta) a1ents. The a( on
prescription +ein1 a re"edia "easure shoud +e interpreted in
a (a! conducive to +rin1in1 a+out the +ene#icent purpose o#
a##ordin1 protection to the ta)pa!er (ithin the conte"pation o#
the Co""ission (hich reco""end the approva o# the a(.
DRepu!lic of the Philippines v. A!la$a, 108 $hi. 1105/ 1108/ cited in
(an3 of Philippine Islan)s (+ormerly +ar .ast (an3 an) Trust
Company" v. Commissioner of Internal Revenue, A. '. No. 16B4B./
5arch 6/ .008E
+3. U,e"%o,"/(e $,1e%!$."!$o, 'o,!e&p("!e% '"%e%
whee !he pe$o) 0o "%%e%%&e,! e#!e,)% $,)e0$,$!e(*
+ecause this deprives the ta)pa!er o# the assurance that it (i
not on1er +e su+,ected to #urther investi1ation #or ta)es a#ter
the e)piration o# a reasona+e period o# ti"e. =Philippine
1ournalists, Inc. v. Commissioner of Internal Revenue, A. '. No.
19.85./ Dece"+er 19/ .00B (ith note to see Repu!lic v. A!la$a, 108
$hi. 1105. 1108>
La(s on prescription shoud +e i+era! construed in
#avor o# the ta)pa!er. 'easonC #or the purpose o#
sa#e1uardin1 ta)pa!ers #ro" an unreasona+e e)a"ination/
investi1ation or assess"ent/ our ta) a(s provide a statute o#
i"itation on the coection o# ta)es. Thus/ the a( on
prescription/ +ein1 a re"edia "easure/ shoud +e i+era!
construed in order to a##ord such protection/ As a coroar!/ the
e)ceptions to the a( on prescription shoud per#orce +e strict!
construed. DPhilippine 1ournalists, Inc. v. Commissioner of Internal
Revenue, A. '. No. 19.85./ Dece"+er 19/ .00B citin1 Commissioner
of Internal Revenue v. (.+. oo)rich Phils, Inc (no7 Sime Dar!y
International Tire Co., Inc.",., et al., A.'. No. 10B161/ 3e+ruar! .B/
1444/ 707 SC'A 5B9E
29
The prescriptive period (as precise! intended to 1ive
the ta)pa!ers peace o# "ind. (Commissioner of Internal Revenue
v. (.+. oo)rich Phils., Inc., et al./ A.'. No. 10B161/ 3e+ruar! .B/
1444>
+4. D-$,. <-($","F% ($0e!$&e8 he /-%$,e%% "00"$%
wee &",".e) /* !he Ph$($pp$,e T-%! Co&p",* @Ph$(!-%!A.
She )$e) o, Ap$( 38 +??1.Two )"*% "0!e he )e"!h8
Ph$(!-%!8 !ho-.h $!% T-%! O00$'e8 0$(e) he I,'o&e T"#
Re!-, 0o +???8 w$!ho-! $,)$'"!$,. !h"! <-($"," )$e).
O, L"* ++8 +??18 Ph$(!-%! 0$(e) " 1e$0$e) pe!$!$o, w$!h
!he RTC 0o "ppo$,!&e,! "% Spe'$"( A)&$,$%!"!o. Th$%
w"% )e,$e) /* !he 'o-! who "ppo$,!e) o,e o0 !he he$% "%
Spe'$"( A)&$,$%!"!o. Ph$(!-%!F% &o!$o, 0o
e'o,%$)e"!$o, w"% )e,$e).
A0!e ", $,1e%!$."!$o, /* !he BIR o0 !he )e'e)e,!F%
$,'o&e !"# ($"/$($!*8 $! %e,!8 o, No1e&/e 1=8 +??38 "
)e&",) (e!!e ",) " No!$'e o0 A%%e%%&e,! !o <-($"," 'Co
Ph$(!-%! "! !he ("!!eF% "))e%% wh$'h w"% %!"!e) $, !he
166= I,'o&e T"# Re!-,. No e%po,%e w"% &")e ,e$!he
w"% !he BIR ")1$%e) !h"! <-($"," "(e")* )$e).
O, <-,e 1=8 +??58 !he BIR Co&&$%%$o,e $%%-e)
w"",!% o0 )$%!"$,! ",) (e1* !o e,0o'e 'o((e'!$o, o0 !he
)e0$'$e,'* $,'o&e !"# ($"/$($!* wh$'h w"% %e1e) o,
<-($","F% he$. O, No1e&/e ++8 +??58 !he BIR 0$(e) w$!h
!he e%!"!e 'o-! " &o!$o, 0o "((ow",'e o0 '("$&. The he$
'("$&e) !h"! !hee w"% ,o pope %e1$'e o0 !he ,o!$'e o0
"%%e%%&e,! ",) !h"! !he 0$($,. o0 !he &o!$o, w"% !$&eG
/"e). O, !he o!he h",) !he BIR &")e !he %-/&$%%$o,
!h"! /o!h !he $%%-",'e o0 !he "%%e%%&e,! ,o!$'e ",) !he
&o!$o, wee "(( pope(* &")e o, Ph$(!-%!. F-!he&oe
!he ("p%e o0 !he 3?G)"* pe$o) w$!h$, wh$'h !o po!e%! &")e
!he "%%e%%&e,! 0$,"(8 e#e'-!o* ",) -,'o,!e%!"/(e ",) ,o!
!$&e /"e).
R-(e o, !he 'o,0($'!$,. '("$&% o0 !he p"!$e%.
S<AAESTED ANSWE'C I (oud rue in #avor o# the
heir.
There (as no proper service o# the notice o# assess"ent
+ecause the death o# Fuiana auto"atica! severed the e1a
reationship o# principa and a1ent +et(een her and $hitrust.
The severed reationship coud not +e revived on the "ere #act
that $hitrust #ied her Ta) 'eturn t(o da!s a#ter her death.
$hitrust*s #aiure to #ie a notice o# death su+,ects it to
pena sanctions (hich do not incude the inde#inite toin1 o# the
prescriptive period #or "a0in1 de#icienc! ta) assess"ents/ or
the (aiver o# the notice re2uire"ent #or such assess"ents.
=.state of the late 1uliana Die$ *)a. )e a!riel v. Commissioner of
Internal Revenue, A.'. No. 1555B1/ Fanuar! .6/ .00B>
+5. Wh"! $% !he pe%-&p!$o, !h"! 0(ow% 0o& "
!"#p"*eF% 0"$(-e !o po!e%! ", "%%e%%&e,! 2
S<AAESTED ANSWE'C ?Ta) assess"ents +! ta)
e)a"iners are presu"ed correct and "ade in 1ood #aith. The
ta)pa!er has the dut! to prove other(ise. In the a+sence o#
proo# o# an! irre1uarities in the per#or"ance o# duties/ an
assess"ent du! "ade +! a &ureau o# Interna 'evenue
e)a"iner and approved +! his superior o##icers (i not +e
distur+ed. A presu"ptions are in #avor o# the correctness o#
ta) assess"ents.@ =Commissioner of Internal Revenue v. (an3 of
Philippine Islan)s., A/ '. No. 17B09./ Apri 16/ .006 citin1 Sy Po v.
Court of Appeals, A. '. No. L%81BB9/ 18 Au1ust 1488/ 19B SC'A
5.B/ 570/ citations o"itted>
+7. Wh"! "e !he e"%o,% 0o pe%-&p!$o, o0
'oe'!,e%% o0 "%%e%%&e,!% 2
S<AAESTED ANSWE'C
a. Li#e+ood theor!
+. $resu"ption o# re1uarit! =Commissioner of Internal
Revenue v. /antex Tra)in- Co., Inc., A/ '. No. 179465/ 5arch 71/
.005> in the per#or"ance o# pu+ic #unctions. =Commissioner of
Internal Revenue v. Tua$on, Inc., 167 SC'A 746>
c. The i0eihood that the ta)pa!er (i have access to
the reevant in#or"ation DCommissioner of Internal Revenue, supra
citin1 'nite) States v. Rexach, B8. 3..d 10 =1467>. The certiorari
(as denied +! the <nited States Supre"e Court on Nove"+er 14/
1467>
d. The desira+iit! o# +osterin1 the record%0eepin1
re2uire"ents o# the NI'C. =I!i).>
+:. G$1e $,%!",'e% whee p$&" 0"'$e 'oe'!,e%% o0
" !"# "%%e%%&e,! )oe% ,o! "pp(*.
S<AAESTED ANSWE'C The ?prima facie correctness
o# a ta) assess"ent does not app! upon proo# that an
assess"ent is utter! (ithout #oundation/ "eanin1 it is ar+itrar!
30
and capricious. Where the &I' has co"e out (ith a ?na0ed
assess"ent@ i.e./ (ithout an! #oundation character/ the
deter"ination o# the ta) due is (ithout rationa +asis.@
DCommissioner of Internal Revenue v. /antex Tra)in- Co., Inc., A/ '.
No. 179465/ 5arch 71/ .005 citin1 'nite) States v. 1anis, B4 L. Ed.
.d 10B9 =1469>8 B.8 <S B77 =1469>E In such a situation/ ?the
deter"ination o# the Co""issioner contained in a de#icienc!
notice disappears.@ DCommissioner of Internal Revenue, supra citin1
a <.S. Court o# Appeas ruin1/ in Clar3 an) Clar3 v. Commissioner of
Internal Revenue, .99 3. .d 948 =1454>E ?Hence/ the
deter"ination +! the CTA "ust rest on a the evidence
introduced and its uti"ate deter"ination "ust #ind support in
credi+e evidence.@ DCommissioner of Internal Revenue, supraE
+=. Wh"! "e !he $,%!",'e% !h"! %-%pe,)% !he
-,,$,. o0 !he pe%'$p!$1e pe$o)% @S!"!-!e o0 L$&$!"!$o,%A
w$!h$, wh$'h !o &";e ", "%%e%%&e,! ",) !he /e.$,,$,. o0
)$%!"$,! o (e1* o o0 " po'ee)$,. $, 'o-! 0o !he
'o((e'!$o,8 $, e%pe'! o0 ",* !"# )e0$'$e,'$e%2
S<AAESTED ANSWE'C
a. When the Co""issioner is prohi+ited #ro" "a0in1
the assess"ent/ or +e1innin1 distraint/ or ev! or proceedin1 in
court and #or si)t! =90> da!s therea#ter8
+. When the ta)pa!er re2uests #or and is 1ranted a
reinvesti1ation +! the co""issioner8
c. When the ta)pa!er coud not +e ocated in the
address 1iven +! hi" in the return #ied upon (hich the ta) is
+ein1 assessed or coected8
d. When the (arrant o# distraint and ev! is du! served
upon the ta)pa!er/ his authori:ed representative/ or a "e"+er
o# his househod (ith su##icient discretion/ and no propert!
coud +e ocated8 and
e. When the ta)pa!er is out o# the $hiippines.
NITES AND CI55ENTSC
The hodin1 in Commissioner of Internal Revenue v.
Court of Appeals, et al., A.'. No. 11561./ 3e+ruar! .5/ 1444
=Carnation case> that the (aiver o# the period #or assess"ent
"ust +e in (ritin1 and have the (ritten consent o# the &I'
Co""issioner is sti doctrina +ecause o# the provisions o#
Sec. ..7/ NI'C o# 1446 (hich provides #or the suspension o#
the prescriptive periodC
+6. The %$.,"!-e% o0 /o!h !he Co&&$%%$o,e ",)
!he !"#p"*e8 "e eD-$e) 0o " w"$1e o0 !he pe%'$p!$1e
pe$o)/ thus a uniatera (aiver on the part o# the ta)pa!er
does not suspend the prescriptive period. DCommissioner of
Internal Revenue v. Court of Appeals, et al., A.'. No. 11561./
3e+ruar! .5/ 1444 =Carnation case>E
3?. The "'! o0 eD-e%!$,. " e$,1e%!$."!$o,
"(o,e )oe% ,o! %-%pe,) !he -,,$,. o0 !he pe%'$p!$1e
pe$o). The eD-e%! 0o e$,1e%!$."!$o, &-%! /e .",!e)
/* !he CIR. The Supre"e Court decared that the +urden o#
proo# that the re2uest #or reinvesti1ation had +een actua!
1ranted sha +e on the Co""issioner o# Interna 'evenue.
Such 1rant "a! +e e)pressed in its co""unications (ith the
ta)pa!er or i"pied #ro" the action o# the Co""issioner or
his authori:ed representative in response to the re2uest #or
reinvesti1ation. D(an3 of Philippine Islan)s (+ormerly +ar .ast
(an3 an) Trust Company" v. Commissioner of Internal Revenue, A.
'. No. 16B4B./ 5arch 6/ .008E
31. Ph$($pp$,e <o-,"($%!%8 I,'. @P<IA 0$(e) $!% A,,-"(
I,'o&e T"# Re!-, 0o !he '"(e,)" *e" e,)e) De'e&/e
318 1664 wh$'h %howe) " ,e! $,'o&e o0 P3? &$(($o, ",) !he
!"# )-e "% P1? &$(($o,. A, e#"&$,"!$o, o0 P<IF% /oo;% o0
"''o-,! ",) o!he "''o-,!$,. e'o)% 0o !he pe$o)
<",-"* 18 1664 !o De'e&/e 318 1664 %howe) )e0$'$e,'*
VAT8 I,'o&e T"# ",) W$!hho()$,. T"# $, !he !o!"( "&o-,!
o0 P1Q+: &$(($o,. D-$,. !he Sep!e&/e ++8 166: $,0o&"(
'o,0ee,'e w$!h !he Re1e,-e D$%!$'! O00$'e8 P<IF%
Co&p!o((e e#e'-!e) " w"$1e o0 %!"!-!e o0 ($&$!"!$o,%
po1$)e) 0o -,)e %e'!$o,% ++3 ",) ++4 o0 !he NIRC. O,
O'!o/e 58 166=8 !he BIR $%%-e) " PeGA%%e%%&e,! No!$'e
wh$'h w"% 0o((owe) /* A%%e%%&e,!CDe&",) No.33G1G
???:5:G64 %!"!$,. " !o!"( )e0$'$e,'* !"#e% $, !he "&o-,! o0
P111 &$(($o, 0o $,'o&e !"#8 VAT ",) e#p",)e)
w$!hho()$,. !"#e%8 $,'(-%$1e o0 $,!ee%! ",) 'o&po&$%e
pe,"(!*.
O, L"'h 178 16668 !he BIR %e,! !o P<I " Pe($&$,"*
Co((e'!$o, Le!!e !o p"* !he "%%e%%&e,! w$!h$, 1? )"*%
0o& e'e$p!. O, No1e&/e 1?816668 " F$,"( No!$'e Be0oe
Se$9-e w"% $%%-e) .$1$,. P<I 1? )"*% 0o& e'e$p! w$!h$,
wh$'h !o p"*. P<I e'e$1e) !he 0$,"( ,o!$'e o, No1e&/e
31
+48 1666 ",) o, No1e&/e +78 1666 P<I "%;e) !h"! $! /e
'("$0$e) o, how !he !"# ($"/$($!* o0 P111 &$(($o, w"% "$1e)
"! ",) eD-e%!e) 0o ", e#!e,%$o, o0 3? )"*% 0o& e'e$p!
o0 !he '("$0$'"!$o, w$!h$, wh$'h !o ep(*. P<I8 !ho-.h "
0o((owG-p (e!!e8 "%%e!e) $! ,e1e e'e$1e)
A%%e%%&e,!CDe&",) No. 33G1G???:5:G64. O, L"'h +=8
+??? P<I e'e$1e) " W"",! o0 D$%!"$,! ",)Co Le1*. P<I
!he, "ppe"(e) !o !he CTA.
The 0o((ow$,. $%%-e% "e 0o e%o(-!$o, $, !he "ppe"(:
". Doe% !he CTA h"1e >-$%)$'!$o, o1e !he
"ppe"( 2
/. W"% !he W"$1e o0 !he S!"!-!e o0 L$&$!"!$o,%
1"($) 2
'. Wee !he A%%e%%&e,!CDe&",) ",) !he W"",!
o0 D$%!"$,! ",)Co Le1* 1"($) 2
W$(( !he "ppe"( po%pe2 E#p("$, /$e0(* *o- ",%we.
S<AAESTED ANSWE'C Mes/ it (i prosper.
a. The CTA has ,urisdiction to deter"ine i# the
(arrant o# distraint and ev! issued +! the &I' is vaid and to
rue i# the Waiver o# the Statute o# Li"itations (as vaid!
e##ected. This is so +ecause the CTA has e)cusive appeate
,urisdiction to revie( +! appea decisions o# the Co""issioner
o# Interna 'evenue in cases invovin1 ?other "atters arisin1
under the Nationa Interna 'evenue Code or other a(s
ad"inistered +! the &ureau o# Interna 'evenue.@ DSec. 6 =a>
=1>. '. A. No. 11.5/ as a"ended +! '. A. No. 4.8.> Thus it (as
previous! rued that the CTA had ,urisdiction to act on a
petition to invaidate and annu the distraint orders o# the
Co""issioner. DMnares%Santia1o/ F. Philippine 1ournalists, Inc. v.
Commissioner of Internal Revenue, A. '. No. 19.85./ Dece"+er 19/
.00B citin1 Panrto&a v. Davi), 111 $hi. 1468 1 SC'A 908 =1491>E
Li0e(ise uphed +! the Supre"e Court (as the decision o# the
CTA decarin1 severa (aivers e)ecuted +! the ta)pa!er as
nu and void/ thus invaidatin1 the assess"ents issued +! the
&I'. =I!i)., citin1 Commissioner of Internal Revenue v. Court of
Appeals, A. '. No. 11561./ .5 3e+ruar! 1444/ 707 SC'A 91B>
+. The Waiver o# the Statute o# Li"itations is not vaid
+ecause it did not speci#! a de#inite a1reed date +et(een the
&I' and $FI/ (ithin (hich the #or"er "a! assess and coect
revenue ta)es. 3urther"ore/ the (aiver is aso de#ective
#ro" the 1overn"ent side +ecause it (as si1ned on! +! a
revenue district o##icer/ and not the Co""issioner/ as so
re2uired. 3ina!/ $FI (as not #urnished a cop! o# the (aiver.
c. The (aiver docu"ent is inco"pete and de#ective
and thus the three%!ear prescriptive period (ithin (hich to
assess (as not toed or e)tended and continued to run unti
Apri 16/ 1448. Conse2uent!/ Assess"entHDe"and No. 77%1%
000656%4B issued on Dece"+er 4/ 1448 (as invaid +ecause it
(as issued +e!ond the three =7> !ear period. In the sa"e
"anner/ the Warrant o# Distraint andHor Lev! (hich $FI
received on 5arch .8/ .000 is aso nu and void #or havin1
+een issued pursuant to an invaid assess"ent. =Philippine
1ournalists, Inc. v. Commissioner of Internal Revenue, A. '. No.
19.85./ Dece"+er 19/ .00B>
3+. Wh"! "e !he !wo w"*% o0 po!e%!$,. ",
"%%e%%&e,! ,o!$'e 0o ", $,!e,"( e1e,-e !"# 2
A(!e,"!$1e(*8 wh"! "e !he !wo !*pe% o0 po!e%!% 2 E#p("$,
/$e0(*.
S<AAESTED ANSWE'C
a. 'e2uest #or reconsideration (hich re#ers to a pea
#or re%evauation o# an assess"ent on the +asis o# e)istin1
records (ithout need o# additiona evidence. It "a! invove
+oth a 2uestion o# #act or o# a( or +oth.
+. 'e2uest #or reinvesti1ation (hich re#ers to a pea
#or re%evauation o# an assess"ent on the +asis o# ne(!%
discovered evidence or additiona evidence that a ta)pa!er
intends to present in the investi1ation. It "a! aso invove a
2uestion o# #act or a( or +oth. =Commissioner of Internal
Revenue v. Philippine lo!al Communication, Inc., A. '. No. 1961B9/
Icto+er 71/ .009 citin1 'ev. 'e1s. No. 1.%85>
33. Wh"! $% !h"! !*pe o0 po!e%! !h"! %-%pe,)% !he
-,,$,. o0 !he %!"!-!e o0 ($&$!"!$o,% 0o !he /e.$,,$,. o0
)$%!"$,! o (e1* o " po'ee)$,. $, 'o-! 0o 'o((e'!$o, 2
Wh* 2
S<AAESTED ANSWE'C It is that t!pe o# protest ?(hen
the ta)pa!er re2uests #or a reinvesti1ation (hich is 1ranted +!
the Co""issioner@ =Sec. ..7/ NI'C o# 1446>/ that suspends the
runnin1 o# the statute o# i"itations #or coection o# the ta).
=Commissioner of Internal Revenue v. Philippine lo!al
Communication, Inc., A. '. No. 1961B9/ Icto+er 71/ .009 citin1 Sec.
.61/ no( Sec. ..7/ NI'C o# 1446> When a ta)pa!er de"ands a
32
reinvesti1ation/ the ti"e e"po!ed in reinvesti1ation shoud +e
deducted #ro" the tota period o# i"itation. DCommissioner of
Internal Revenue, supra citin1 Repu!lic v. Lope$, 116 $hi. 565/ 5688
6 SC'A 599/ 598%594 =1497>E
<ndou+ted!/ a reinvesti1ation/ (hich entais the
reception and evauation o# additiona evidence/ (i ta0e "ore
ti"e than a reconsideration o# a ta) assess"ent (hich (i +e
i"ited to the evidence aread! at hand8 this ,usti#ies (h! the
#or"er can suspend the runnin1 o# the statute o# i"itations on
coection o# the assessed ta)/ (hie the atter cannot.
=Commissioner of Internal Revenue v. Philippine lo!al
Communication, Inc., A. '. No. 1961B9/ Icto+er 71/ .009 citin1 (an3
of Philippine Islan)s v. Commissioner of Internal Revenue, A. '. No.
174679/ 16 Icto+er .005/ B67 SC'A .05/ .70%.71>
34. A 'o&po&$%e $% " 'o,!"'! (here+! the parties/
+! "a0in1 reciproca concessions/ avoid a iti1ation or put an
end to one aread! co""enced. =Art. .0.8/ Civi Code>
A co"pro"ise penat! coud not +e i"posed +! the
&I'/ i# the ta)pa!er did not a1ree. A co"pro"ise +ein1/ +! its
nature/ "utua in essence re2uires a1ree"ent. The pa!"ent
"ade under protest coud on! si1ni#! that there (as no
a1ree"ent that had e##ective! +een reached +et(een the
parties. =*)a. )e San A-ustin, et al., v. Commissioner of Internal
Revenue/ A. '. No. 178B85/ Septe"+er 10/ .001>
35. Wh"! $% !he pe%'$p!$1e pe$o) 0o 'o((e'!$,.
$,!e,"( e1e,-e !"#e% 2
S<AAESTED ANSWE'C There are #our =B> prescriptive
periods #or the coection o# an interna revenue ta)C
a. Coection upon a #ase or #rauduent return or no
return (ithout assess"ent. In case o# a #ase or #rauduent
return (ith the intent to evade ta) or o# #aiure to #ie a return/ ?a
proceedin1 in court #or the coection o# such ta) "a! +e #ied
(ithout assess"ent/ at an! ti"e (ithin ten =10> !ears a#ter the
discover! o# the #asit!/ #raud or o"ission.@ DSec. ... =a>/ NI'C
o# 1446>
+. Coection upon a #ase or #rauduent return or no
return (ith assess"ent. An! interna revenue ta) (hich has
+een assessed =+ecause the return is #ase or #rauduent (ith
intent to evade ta) or o# #aiure to #ai a return>/ (ithin a period
o# ten =10> !ears #ro" discover! o# the #asit!/ #raud or o"ission
?&"* /e 'o((e'!e) /* )$%!"$,! o (e1* o /* " po'ee)$,. $,
'o-! w$!h$, 0$1e @5A *e"% 0o((ow$,. !he "%%e%%&e,! o0 !he
!"#.@ DSec. ... =c>/ in reation to Sec. ... =a> NI'C o# 1446/
e"phasis suppied>
c. Coection upon an e)tended assess"ent. Where
a ta) has +een assessed (ith the period a1reed upon +et(een
the Co""issioner and the ta)pa!er in (ritin1 =(hich shoud
initia! +e (ithin three =7> !ears #ro" the ti"e the return (as
#ied or shoud have +een #ied>/ or an! e)tensions +e#ore the
e)piration o# the period a1reed upon/ the !"# B&"* /e
'o((e'!e) /* )$%!"$,! o (e1* o /* " po'ee)$,. $, 'o-!
w$!h$, !he pe$o) ".ee) -po, $, w$!$,. /e0oe !he
e#p$"!$o, o0 !he 0$1e @5A *e" pe$o). The period so a1reed
upon "a! +e e)tended +! su+se2uent (ritten a1ree"ents
"ade +e#ore the e)piration o# the period previous! a1reed
upon.@ DSec. ... =d>/ in reation to Secs. ... =+> and .07/ NI'C o#
1446/ e"phasis suppied>
d. Coection upon a return that is not #ase or
#rauduent/ or (here the assess"ent is not an e)tended
assess"ent. ?E)cept as provided in Section .../ interna
revenue ta)es sha +e assessed (ithin three =7> !ears a#ter
the ast da! prescri+ed +! a( #or the #iin1 o# the return/ and
,o po'ee)$,. $, 'o-! w$!ho-! "%%e%%&e,! 0o !he
'o((e'!$o, o0 %-'h !"#e% %h"(( /e /e.-, "0!e !he e#p$"!$o,
o0 %-'h pe$o)8 $rovided/ That in case (here a return is #ied
+e!ond the period prescri+ed +! a(/ the three =7> !ear period
sha +e co"puted #ro" the da! the return (as #ied. 3or
purposes o# this Section/ a return #ied +e#ore the ast da!
prescri+ed +! a( #or the #iin1 thereo# sha +e considered #ied
on such ast da!.@ =Sec. .07/ NI'C o# 1446/ e"phasis suppied>
When the &I' vaid! issues an assess"ent (ithin the
three =7>%!ear period/ it has another three =7> !ears (ithin
(hich to coect the ta) due +! distraint/ ev!/ or court
proceedin1. The assess"ent o# the ta) is dee"ed "ade and
the three =7>%!ear period #or coection o# the assessed ta)
+e1ins to run on the date the assess"ent notice had +een
reeased/ "aied or sent to the ta)pa!er. D(an3 of Philippine
Islan)s (+ormerly +ar .ast (an3 an) Trust Company" v.
Commissioner of Internal Revenue, A. '. No. 16B4B./ 5arch 6/
.008 citin1 (PI v. Commissioner of Internal Revenue/ A.'. No.
174679/ 16 Icto+er .005/ B67 SC'A .05/ ...%..7>
NITES AND CI55ENTSC
33
a. Bo!h !he 0o&e Se'. +768 NIRC o0 16:: ",)
Se'.+++ o0 NIRC o0 166: )o ,o! e0e !o " Be.-(" e!-,.E
It is cear that in enactin1 Sec. .../ entited ?E)ceptions as to the
period o# i"itation o# assess"ent and coection o# ta)es/@ the NI'C
o# 1446 has ei"inated su+%para1raph c o# the #or"er Sec. .94 o# the
NI'C/ aso entited ?E)ceptions as to the period o# i"itation o#
assess"ent and coection o# ta)es.@ Said Sec. .94 =c>/ reads ?An!
interna revenue ta) (hich has +een assessed (ithin the period o#
i"itation a+ove%prescri+ed "a! +e coected +! distraint or ev! or +!
a proceedin1 in court (ithin three !ears #oo(in1 the assess"ent o#
the ta).@
A perusa o# Sec. ... o# the NI'C is cear that it covers on!
three scenarios on!. 1> No assess"ent (as "ade upon a #ase or
#rauduent return or o"ission to #ie a return8 .> an assess"ent (as
"ade upon a #ase or #rauduent return or o"ission to #ie a return8 and
7> an e)tended assess"ent issued (ithin a period a1reed upon +!
the Co""issioner and the ta)pa!er. The sa"e scenarios are those
re#erred to in the #or"er Sec. .94 (hich provided #or a prescriptive
period #or coection o# three =7> !ears.
It is cear there#ore that neither Sec. ... nor the #or"er Sec.
.94 provide #or an instance (here the assess"ent (as "ade upon a
?re1uar return@ or one that is not #ase or #rauduent/ or that there (as
an a1ree"ent to e)tend the period #or assess"ent.
'esort shoud there#ore +e "ade to the three =7> !ear period
re#erred to in Sec. .07 o# the NI'C o# 1446 (hich reads/ ?E)cept as
provided in Section .../ interna revenue ta)es sha +e assessed
(ithin three =7> !ears a#ter the ast da! prescri+ed +! a( #or the #iin1
o# the return/ and ,o po'ee)$,. $, 'o-! w$!ho-! "%%e%%&e,! 0o
!he 'o((e'!$o, o0 %-'h !"#e% ) ) ) ? =paraphrasin1 and e"phasis
suppied>
37. Wh"! $% %o(-!$o $,)e/e!$ "% "pp($e) !o !"#
'"%e% 2
S<AAESTED ANSWE'C This is erroneous pa!"ent o#
ta)es and occurs (hen the ta)pa!er pa!s under a "ista0e o#
#act/ as #or the instance in a case (here he is not a(are o# an
e)istin1 e)e"ption in his #avor at the ti"e the pa!"ent (as
"ade. Such pa!"ent is hed to +e not vountar! and there#ore/
can +e recovered or re#unded. =Commissioner of Internal Revenue
v. Acesite (Philippines" /otel Corporation, A. '. No. 1B6.45/ 3e+ruar!
19/ .006>
NITES AND CI55ENTSC Technicaities and e1ais"s/
ho(ever e)ated/ shoud not +e "isused +! the 1overn"ent to 0eep
"one! not +eon1in1 to it/ there+! enrichin1 itse# at the e)pense o#
its a(%a+idin1 citi:ens. State Lan) Investment Corporation v.
Commissioner of Internal Revenue, A. '. No. 161459/ Fanuar! 18/
.008 citin1 (PI,+amily Savin-s (an3, Inc. v. Court of Appeals/ A.'.
No. 1..B80/ Apri 1./ .000/ 770 SC'A 506.
<nder the principe o# solutio in)e!iti provided in Art. .15B/
Civi Code/ ?I# so"ethin1 is received (hen there is no ri1ht to
de"and it/ and it (as undu! deivered throu1h "ista0e/ the
o+i1ation to return it arises.@ The &I' received so"ethin1 ?(hen
there D(asE no ri1ht to de"and it/@ and thus/ it has the o+i1ation to
return it. State Lan) Investment Corporation v. Commissioner of
Internal Revenue supra citin- Citi!an3, 6. A. v. Court of Appeals an)
Commissioner of Internal Revenue/ A.'. No. 106B7B/ Icto+er 10/
1446/ .80 SC'A B54/ in turn citin1 Ramie Textiles, Inc. v. #athay,
Sr./ 84 SC'A 589 =1464>. It is an ancient principe that no one/ not
even the state/ sha enrich onese# at the e)pense o# another.
Indeed/ si"pe ,ustice re2uires the speed! re#und o# the (ron1!
hed ta)es. =I!i).>
3:. Wh"! "e !he e"%o,% 0o eD-$$,. !he 0$($,. o0
", ")&$,$%!"!$1e "pp($'"!$o, 0o e0-,) o 'e)$! w$!h !he
B-e"- o0 I,!e,"( Re1e,-e /e0oe " '"%e &"* /e 0$(e) w$!h
!he Co-! o0 T"# Appe"(% 2
S<AAESTED ANSWE'C The #iin1 o# an
ad"inistrative cai" #or re#und (ith the &I'/ +e#ore #iin1 a case
(ith the Court o# Ta) Appeas/ is necessar! #or the #oo(in1
reasonsC
a. To a##ord the Co""issioner an opportunit! to
correct his errors or that o# su+ordinate o##icers. (on$ales v.
Court of Tax Appeals, et al., 1B SC'A 64>
+. To noti#! the Aovern"ent that such ta)es have +een
2uestioned and the notice shoud +e +orne in "ind in
esti"atin1 the revenue avaia+e #or e)penditures. ((erme&o v.
Collector, A.'. No. L%70.8/ Fu! .8/ 1450>
3=. A% " .e,e"( -(e !he 0$($,. o0 ", "pp($'"!$o,
0o e0-,) o 'e)$! w$!h !he B-e"- o0 I,!e,"( Re1e,-e $%
", ")&$,$%!"!$1e pe'o,)$!$o, /e0oe " %-$! &"* /e 0$(e)
w$!h !he Co-! o0 T"# Appe"(%. I% !hee ",* e#'ep!$o, 2
S<AAESTED ANSWE'C Mes. The #aiure to #irst #ie a
(ritten cai" #or re#und or credit is not #ata to a petition #or
revie( invovin1 a disputed assess"ent (here an assess"ent
(as disputed +ut the protest (as denied +! the &ureau o#
Interna 'evenue.
34
To hod that the ta)pa!er has no( ost the ri1ht to
appea #ro" the ruin1 on the disputed assess"ent and re2uire
hi" to #ie a cai" #or a re#und o# the ta)es paid as a condition
precedent to his ri1ht to appea/ (oud in e##ect re2uire o# hi"
to 1o throu1h a useess and needess cere"on! that (oud
on! dea! the disposition o# the case/ #or the Co""issioner
(oud certain! disao( the cai" #or re#und in the sa"e (a!
as he disao(ed the protest a1ainst the assess"ent. The a(/
shoud not +e interpreted as to resut in a+surdities. (v)a. )e
San A-ustin., etc., v. Commissioner of Internal Revenue, A.'. No.
178B85/ Septe"+er 10/ .001 citin1 Roman Catholic Arch!ishop of
Ce!u v. Collector of Internal Revenue, B SC'A .64>
NITES AND CI55ENTSC Re'o,'$($"!$o,. An
appication #or re#und or credit under Sec. ..4 o# the NI'C o# 1446 is
re2uired (here the case #ied +e#ore the CTA is a re#und case/ (hich
is not pre"ised upon a disputed assess"ent. There is no need #or a
prior appication #or re#und or credit/ i# the re#und is "ere! a
conse2uence o# the resoution o# the &I'*s denia o# a protested
assess"ent.
36. Wh"! $% !he ,"!-e o0 !he !"#p"*eF% e&e)* o0
e$!he !o "%; 0o " e0-,) o0 e#'e%% !"# p"*&e,!% o !o
"pp(* !he %"&e $, p"*&e,! o0 %-''ee)$,. !"#"/(e pe$o)%F
!"#e% 2
ANSWE'C Sec. 94 o# the 1466 NI'C =no( Sec. 69 o#
the NI'C o# 1446> provides that an! e)cess o# the tota
2uarter! pa!"ents over the actua inco"e ta) co"puted in the
ad,ust"ent or #ina corporate inco"e ta) return/ sha either =a>
+e re#unded to the corporation/ or =+> "a! +e credited a1ainst
the esti"ated 2uarter! inco"e ta) ia+iities #or the 2uarters o#
the succeedin1 ta)a+e !ear. To ease the ad"inistration o# ta)
coection/ these re"edies are in the aternative and the choice
o# one precudes the other. Since the &an0 has chosen the ta)
credit approach it cannot an!"ore avai o# the ta) re#und.
(Philippine (an3 of Communications v. Commissioner of Internal
Revenue, et al., A.'. No. 11.0.B/ Fanuar! .8/ 1444>
NITES AND CI55ENTSC
a. The 'ho$'e8 $% .$1e, !o !he !"#p"*e8 whe!he !o
'("$& 0o e0-,) -,)e Se'. :7 o h"1e $!% e#'e%% ta)es
appied as ta) credit #or the succeedin1 ta)a+e !ear/ such eection is
not #ina. $rior veri#ication and approva +! the Co""issioner o#
Interna 'evenue is re2uired. The avai"ent o# the re"ed! o# ta)
credit is not a+soute and "andator!. It does not con#er an a+soute
ri1ht on the part o# the ta)pa!er to avai o# the ta) credit sche"e i# it
so chooses. Neither does it i"pose a dut! on the part o# the
1overn"ent to sit +ac0 and ao( an i"portant #acet o# ta) coection
to +e at the soe contro and discretion o# the ta)pa!er. =Paseo Realty
% Development Corporation v. Court of Appeals, et al., A. '. No.
114.89/ Icto+er 17/ .00B>
4?. Wh"! $% !he B$e1o'"/$($!* -(eE $, '("$&% 0o
e0-,) ",) wh"! $% !he "!$o,"(e /eh$,) !h$% 2
S<AAESTED ANSWE'C A corporation entited to a ta)
credit or re#und o# the e)cess esti"ated 2uarter! inco"e
ta)es paid has t(o optionsC =1> to carr! over the e)cess credit
or =.> to app! #or the issuance o# a ta) credit certi#icate or to
cai" a cash re#und. I# the option to carr! over the e)cess
credit is e)ercised/ the sa"e sha +e irrevoca+e #or that
ta)a+e period.
In e)ercisin1 its option/ the corporation "ust si1ni#! in
its annua corporate ad,ust"ent return =+! "ar0in1 the option
+o) provided in the &I' #or"> its intention either to carr! over
the e)cess credit or to cai" a re#und. To #aciitate ta)
coection/ these re"edies are in the aternative and the
choice o# one precudes the other. DSystra Philippines, Inc., v.
Commissioner of Internal Revenue, A. '. No. 169.40/ Septe"+er
.1/ .006 citin1 Philippine (an3 of Communications v. Commissioner
of Internal Revenue/ 791 $hi. 419 =1444>E
This is 0no(n as the irrevoca+iit! rue and is
e"+odied in the ast sentence o# Section 69 o# the Ta) Code.
The phrase ?such option sha +e considered irrevoca+e #or
that ta)a+e period@ "eans that the option to carr! over the
e)cess ta) credits o# a particuar ta)a+e !ear can no on1er
+e revo0ed.
The rue prevents a ta)pa!er #ro" cai"in1 t(ice the
e)cess 2uarter! ta)es paidC =1> as auto"atic credit a1ainst
ta)es #or the ta)a+e 2uarters o# the succeedin1 !ears #or
(hich no ta) credit certi#icate has +een issued and =.> as a
ta) credit either #or (hich a ta) credit certi#icate (i +e issued
or (hich (i +e cai"ed #or cash re#und. =Systra Philippines,
Inc., supra citin1 De Leon/ Hector/ THE NATIINAL INTE'NAL
'E-EN<E CIDE/ Seventh Edition/ .000/ p. B70>
41. I, !he *e" +??? S*%!" )e$1e) e#'e%% !"#
'e)$!% ",) e#e'$%e) !he op!$o, !o '"* !he& o1e "% !"#
35
'e)$!% 0o !he ,e#! !"#"/(e *e". Howe1e8 !he !"# )-e 0o
!he ,e#! !"#"/(e *e" $% (owe !h", e#'e%% !"# 'e)$!%. I!
,ow "pp($e% 0o " e0-,) o0 !he -,"pp($e) !"# 'e)$!%. L"*
$!% e0-,) /e .",!e) 2 I0 !he e0-,) $% )e,$e)8 )oe%
S*%!" (o%e !he -,"pp($e) !"# 'e)$!% 2 E#p("$, /$e0(*
*o- ",%we.
S<AAESTED ANSWE'C S!stra*s cai" #or re#und
shoud +e denied. Ince the carr! over option (as "ade/
actua! or constructive!/ it +eca"e #orever irrevoca+e
re1ardess o# (hether the e)cess ta) credits (ere actua! or
#u! utii:ed <nder Section 69 o# the Ta) Code/ a cai" #or
re#und o# such e)cess credits can no on1er +e "ade. The
e)cess credits (i on! +e appied ?a1ainst inco"e ta) due #or
the ta)a+e 2uarters o# the succeedin1 ta)a+e !ears.@
Despite the denia o# its cai" #or re#und/ S!stra does
not ose the unappied ta) credits. The a"ount (i not +e
#or#eited in #avor o# the 1overn"ent +ut (i re"ain in the
ta)pa!er*s account. $etitioner "a! cai" and carr! it over in
the succeedin1 ta)a+e !ears/ credita+e a1ainst #uture
inco"e ta) ia+iities unti #u! utii:ed. =Systra Philippines, Inc.,
v. Commissioner of Internal Revenue, A. '. No. 169.40/ Septe"+er
.1/ .006 citin1 Philam Asset #ana-ement, Inc. v. Commissioner of
Internal Revenue/ A.'. Nos. 159976H19.00B/ 1B Dece"+er .005/
B66 SC'A 691>
S-ppo%$,. $, !he "/o1e po/(e& !h"! S*%!"
pe&",e,! 'e"%e) ope"!$o,%8 wh"! h"ppe,% !o !he
-,"pp($e) 'e)$!% 2
S<AAESTED ANSWE'C Where/ the corporation
per"anent! ceases its operations +e#ore #u utii:ation o# the
ta) credits it opted to carr! over/ it "a! then +e ao(ed to
cai" the re#und o# the re"ainin1 ta) credits. In such a case/
the re"ainin1 ta) credits can no on1er +e carried over and
the irrevoca+iit! rue ceases to app!. Cessante ratione le-is,
cessat ipse lex. =3ootnote no. .7/ Systra Philippines, Inc., v.
Commissioner of Internal Revenue, A. '. No. 169.40/ Septe"+er
.1/ .006>
NITES AND CI55ENTSC The hodin1 in State Lan)
Investment Corporation v. Commissioner of Internal Revenue, A. '.
No. 161459/ Fanuar! 18/ .008 that the ta)pa!er is entited to a
re#und +ecause durin1 the succeedin1 !ear there (as no ta) due
a1ainst (hich the e)cess ta) credits "a! +e appied is not doctrina.
This is so +ecause it interpreted the provisions o# then Sec. 94 o# the
NI'C/ (hich did not provide #or the ?irrevoca+iit! rue@ no(
contained in Sec. 69 o# the NI'C o# 1446.
4+. T"# 'e)$!8 )e0$,e). A ta) credit is not
speci#ica! de#ined in our Ta) Code/ +ut Art. .1 o# EI ..9
de#ines a ta) credit as ?an! o# the credits a1ainst ta)es andHor
duties e2ua to those actua! paid or (oud have +een paid to
evidence (hich a ta) credit certi#icate sha +e issued +! the
Secretar! o# 3inance or his representative/ or the &oard =o#
Invest"ents>/ i# so dee1ated +! the Secretar! o# 3inance.@
Ta) credits (ere 1ranted under EI ..9 as incentives to
encoura1e invest"ents in certain +usinesses. A ta) credit
1enera! re#ers to an a"ount that "a! +e ?su+tracted direct!
#ro" one*s tota ta) ia+iit!.@ DPilipinas Shell Petroleum
Corporation v. Commissioner of Internal Revenue, A. '. No.
16.548/ Dece"+er .1/ .006 citin1 Aarner/ ed./ &LAC;*S LAW
DICTIINA'M 1501 =8th ed./ 1444>E
It is there#ore an ?ao(ance a1ainst the ta) itse#@
DPilipinas Shell, supra citin1 S"ith/ WEST*S TAO LAW
DICTIINA'M 166%168 =1447>.E or ?a deduction #ro" (hat is
o(ed@ DI!i)., citin1 Iran and Tosti/ I'AN*S DICTIINA'M I3 THE
LAW 1.B =7rd ed./ .000>E/ +! a ta)pa!er to the 1overn"ent. In
'' 5%.000/ ?$rescri+in1 the 'e1uations Aovernin1 the
5anner o# the Issuance o# Ta) Credit Certi#icates/ and the
Conditions #or their <se/ 'evaidation and Trans#er/@ issued
+! then Secretar! o# 3inance Fose T. $ardo on Fu! 14/ .000.
a ta) credit is de#ined as ?the a"ount due to a ta)pa!er
resutin1 #ro" an overpa!"ent o# a ta) ia+iit! or erroneous
pa!"ent o# a ta) due.@ =Id./ Section 1.A>
Ta) credit 1enera! re#ers to an a"ount that is
su+tracted direct! #ro" one*s tota ta) ia+iit!/ an ao(ance
a1ainst the ta) itse#/ or a deduction #ro" (hat is o(ned.
A ta) credit reduces the ta) due/ incudin1 G(henever
appica+e G the inco"e ta) that is deter"ined a#ter app!in1
the correspondin1 ta) rates to ta)a+e inco"e. =Commissioner
of Internal Revenue v. Central Lu$on Dru- Corporation, A. '. No.
1549B6/ Apri 15/ .005>
43. T"# 'e)$! 'e!$0$'"!e @TCCA8 )e0$,e)8 ",) $!%
,"!-e. A certi#ication/ du! issued to the ta)pa!er na"ed
therein/ +! the Co""issioner or his du! authori:ed
representative/ reduced in a &I' Accounta+e 3or" in
36
accordance (ith the prescri+ed #or"aities/ ac0no(ed1in1
that the 1rantee%ta)pa!er na"ed therein is e1a! entited a
ta) credit/ the "one! vaue o# (hich "a! +e used in pa!"ent
or in satis#action o# an! o# his interna revenue ta) ia+iit!
=e)cept those e)cuded>/ or "a! +e converted as a cash
re#und/ or "a! other(ise +e disposed o# in the "anner and in
accordance (ith the i"itations/ i# an!/ as "a! +e prescri+ed
+! the provisions o# these 'e1uations. =Pilipinas Shell
Petroleum Corporation v. Commissioner of Internal Revenue, A.
'. No. 16.548/ Dece"+er .1/ .006 citin1 '' 5%.000/ ?$rescri+in1
the 'e1uations Aovernin1 the 5anner o# the Issuance o# Ta) Credit
Certi#icates/ and the Conditions #or their <se/ 'evaidation and
Trans#er/@ issued +! then Secretar! o# 3inance Fose T. $ardo on
Fu! 14/ .000/ Sec. I/ &>
It is cear that a TCC is an underta0in1 +! the
1overn"ent throu1h the &I' or DI3/ ac0no(ed1in1 that a
ta)pa!er is entited to a certain a"ount o# ta) credit #ro"
either an overpa!"ent o# inco"e ta)es/ a direct +ene#it
1ranted +! a( or other sources and instances 1ranted +! a(
such as on speci#ic unused input ta)es and e)cise ta)es on
certain 1oods. As such/ ta) credit is trans#era+e in
accordance (ith pertinent a(s/ rues/ and re1uations.
There#ore/ the TCCs are i""ediate! vaid and
e##ective a#ter their issuance. =Pilipinas Shell Petroleum
Corporation, supra"
44. D$%'-%% !he )$00ee,'e /e!wee, !"# e0-,) ",)
!"# 'e)$!.
S<AAESTED ANSWE'C There are un"ista0a+e
#or"a and practica di##erences +et(een the t(o "odes.
3or"a!/ a ta) re#und re2uires a ph!sica return o# the su"
erroneous! paid +! the ta)pa!er/ (hie a ta) credit invoves
the appication o# the rei"+ursa+e a"ount a1ainst an! su"
that "a! +e due and coecti+e #ro" the ta)pa!er.
In the practica side/ the ta)pa!er to (ho" the ta) is
re#unded (oud have the option/ a"on1 others/ to invest #or
pro#it the returned su"/ an option not pro)i"ate! avaia+e i#
the ta)pa!er chooses instead to receive a ta) credit.
=Commissioner of Customs v. Philippine Phosphate +ertili$er
Corporation, A. '. No. 1BBBB0/ Septe"+er 1/ .00B>
NITES AND CI55ENTSC It "a! +e that there is no
essentia di##erence +et(een a ta) re#und and a ta) credit
since +oth are "oves o# recoverin1 ta)es erroneous! or
ie1a! paid to the 1overn"ent. =Commissioner of Customs v.
Philippine Phosphate +ertili$er Corporation, A. '. No. 1BBBB0/
Septe"+er 1/ .00B>
45. I, e"(* Ap$( 1666 XYH B",; ")1",'e) !he
"&o-,! o0 P1=? &$(($o, !o !he BIR $!% $,'o&e !"# p"*&e,!
0o !he /",;F% 1666 ope"!$o,% $, e%po,%e 0o !he
.o1e,&e,!F% '"(( !o .e,e"!e &oe e1e,-e% 0o ,"!$o,"(
)e1e(op&e,!. I, %ep""!e (e!!e% )"!e) Ap$( 16 ",) +68
1666 ",) L"* 148 1666 XYH eD-e%!e) 0o !he $%%-",'e o0 "
T"# Ce)$! Ce!$0$'"!e @TCCA !o /e -!$($9e) "."$,%! 0-!-e !"#
o/($."!$o,% o0 !he /",;.
B* !he e,) o0 16668 " 'e)$! /"(",'e $, !he "&o-,! o0
P:3 &$(($o, e&"$, wh$'h w"% '"$e) o1e 0o !he *e"%
+??? !o +??4 /-! w"% ,o! "1"$(e) o0 /e'"-%e XYH $,'-e)
(o%%e% )-$,. !he pe$o). O, <-(* +=8 +??5 PNB e$!e"!e)
$!% eD-e%! 0o !he $%%-",'e o0 " TCC 0o !he P:3 &$(($o,
/"(",'e. The BIR e>e'!e) !he eD-e%! o, !he .o-,) o0
"&o,. o!he% pe%'$p!$o, h"1$,. /ee, "pp($e) 0o /e*o,)
!he !woG*e" e.(e&e,!"* pe$o) 0o 0$($,. '("$&% 0o
e0-,) "% %e! 0o!h $, Se'. ++6 o0 !he NIRC o0 166:.
H"% !he '("$& pe%'$/e) 2 E#p("$, /$e0(* *o-
",%we.
S<AAESTED ANSWE'C The cai" has not prescri+ed.
Sec. ..4 o# the Ta) Code/ as couched/ particuar! its statute
o# i"itations co"ponent/ is in conte)t intended to app! to suits
#or an! nationa interna revenue ta) ?ae1ed to have +een
erroneous! or ie1a! assessed or coected/ or o# an! penat!
cai"ed to have +een coected (ithout authorit!/ or o# an! su"
ae1ed to have e)cessive! or in an! "anner (ron1#u!
coected.@
Ana!:in1 the under!in1 reason +ehind the advance
pa!"ent =to hep the 1overn"ent> "ade +! OMK it (oud +e
i"proper to treat the sa"e as erroneous/ (ron1#u or ie1a
pa!"ent o# ta) (ithin the "eanin1 o# Sec. ..4 o# the NI'C o#
1446.
An avai"ent o# ta) credit due #or reasons other than the
erroneous or (ron1#u coection o# ta)es "a! have a di##erent
prescriptive period. =Commissioner of Internal Revenue v. Philippine
6ational (an3, A.'. No. 191446/ Icto+er .5/ .005 citin1
Commissioner of Internal Revenue v. The Philippine Life Insurance
37
Co., et al. A.'. No. 105.08/ 5a! .4/ 1445> A+sent an! speci#ic
provision in the Ta) Code or specia a(s/ that period (oud +e
ten =10> !ears under Artice 11BB o# the Civi Code.
=Commissioner of Internal Revenue v. Philippine 6ational (an3,
supra>
47. ABC B",; 0$(e) w$!h !he BIR ", "pp($'"!$o, 0o "
!"# 'e)$!Ce0-,) 0o "((e.e) e#'e%% p"*&e,!% o0 $!% .o%%
e'e$p!% !"# @GRTA 0o !he 3
)
",) 4
!h
D-"!e% o0 +??3 ",)
!he e,!$e +??4 "&o-,!$,. !o P14 &$(($o,. S$,'e ,o "'!$o,
w"% !";e, /* !he Co&&$%%$o,e o, $!% '("$&8 ABC 0$(e) "
'"%e w$!h !he CTA o, O'!o/e 1=8 +??5 !o 'o&p(* w$!h !he
!woG*e" e.(e&e,!"* pe$o) ",) "1o$) !he pe%'$p!$o, o0
$!% "'!$o,. O,(* <-(* 3?8 +??:8 !he CTA e,)ee) " )e'$%$o,
)e,*$,. !he '("$& 0o ABCF% 0"$(-e !o 0$(e $!% 0o&"( o00e o0
e1$)e,'e $, !he CTA.
ABC B",; ,ow %ee;% e0-.e $, O,"!e 1. Co-! o0
Appe"(%8 3+? Ph$(. 344K +5? SCRA +=3 @1665A whee !he
S-pe&e Co-! "((owe) e1$)e,'e8 ,o! 0o&"((* o00ee)8 !o
/e 'o,%$)ee) o, 'o,)$!$o, !h"!: @1A e1$)e,'e &-%! h"1e
/ee, $)e,!$0$e) /* !e%!$&o,* )-(* e'o)e) ",) @+A $! &-%!
h"1e /ee, $,'opo"!e) $, !he e'o)% o0 !he '"%e.
I% ABC 'oe'! 2
S<AAESTED ANSWE'C No. A ta) re#und s in the
nature o# a ta) e)e"ption (hich "ust +e construed strictissimi
&uris a1ainst the ta)pa!er. The ta)pa!er "ust present
convincin1 evidence to su+stantiate a cai" #or re#und.
Without an! docu"entar! evidenced on record/ A&C #aied to
dischar1e the +urden o# provin1 its ri1ht to a ta) creditHta)
re#und. =+ar .ast (an3 % Trust Company v. Commissioner of
Internal Revenue, A. '. No. 1B4584/ Septe"+er 15/ .009>
4:. A %$&-(!",eo-% 0$($,. o0 !he "pp($'"!$o, w$!h !he
BIR 0o e0-,)C'e)$! ",) !he $,%!$!-!$o, o0 !he 'o-! %-$!
w$!h !he CTA $% "((owe). There is no need to (ait #or a &I'
denia. 'EASINSC
a. The positive re2uire"ent o# Section .70 NI'C =no(
Sec. ..4/ NI'C o# 1446>8
+. The doctrine that dea! o# the Co""issioner in
renderin1 decision does not e)tend the pere"ptor! period
#i)ed +! the statute8
c. The a( #i)ed the sa"e period t(o !ears #or #iin1 a
cai" #or re#und (ith the Co""issioner under Sec. .0B/ par. 7/
NI'C =no( Sec. .0B DCE/ NI'C o# 1446>/ and #or #iin1 suit in
court under Sec. .70/ NI'C =no( Sec. ..4/ NI'C o# 1446>/
uni0e in protests o# assess"ents under Sec. ..4 =no( Sec.
..8/ NI'C o# 1446>/ (hich #i)ed the period =thirt! da!s #ro"
receipt o# decision> #or appeain1 to the court/ thus cear!
i"p!in1 that the prior decision o# the Co""issioner is
necessar! to ta0e co1ni:ance o# the case. (Commissioner of
Internal Revenue v. (an3 of Philippine Islan)s, etc. et al., CA,.R. SP
6o. =;8<9, Septem!er E, 8EE;F i!!s v. Collector of Internal
Revenue, et al., 8<: Phil, 9=9F 1ohnston Lum!er Co. v. CTA, 8<8 Phil.
8@8"
4=. The .",! o0 " e0-,) $% 0o-,)e) o, !he
"%%-&p!$o, !h"! !he !"# e!-, $% 1"($)8 i.e. that the #acts
stated therein are true and correct. =Commissioner of Internal
Revenue v. Court of Tax Appeals, A. '. No. 109911/ Fu! .1/ 144B/
.7B SC'A 7B8> Without the ta) return it (oud +e virtua! i"possi+e
to deter"ine (hether the proper ta)es have +een assessed and paid.
A#ter a/ it is a)io"atic that a cai"ant has the +urden o# proo# to
esta+ish the #actua +asis o# his or her cai" #or ta) credit or re#und.
Ta) re#unds/ i0e ta) e)e"ptions/ are construed strict! a1ainst the
ta)pa!er. =Paseo Realty % Development Corporation v. Court of
Appeals, et al., A. '. No. 114.89/ Icto+er 17/ .00B>
Ho(ever/ in (PI,+amily Savin-s (an3 v. Court of Appeals/
789 $hi. 6148 7.9 SC'A 9B1 =.000>/ re#und (as 1ranted/ despite
the #aiure to present the ta) return/ +ecause other evidence
(as presented to prove that the overpaid ta)es (ere not
appied. =I!i).>
46. Wh"! "e !he !hee @3A 'o,)$!$o,% 0o !he .",! o0
" '("$& 0o e0-,) o0 'e)$!"/(e w$!hho()$,. !"# 2
S<AAESTED ANSWE'C
a. The cai" is #ied (ith the Co""issioner o# Interna
'evenue (ithin the t(o%!ear period #ro" the date o# the
pa!"ent o# the ta).
+. It is sho(n on the return o# the recipient that the
inco"e pa!"ent received (as decared as part o# the 1ross
inco"e8 and
c. The #act o# (ithhodin1 is esta+ished +! a cop! o#
a state"ent du! issued +! the pa!ee sho(in1 the a"ount paid
38
and the a"ount o# ta) (ithhed there#ro". =(anco +ilipino
Savin-s an) #ort-a-e (an3 v. Court of Appeals, et al., A. '. No.
15598./ 5arch .6/ .006>
NITES AND CI55ENTSC
a. Poo0 o0 0"'! o0 w$!hho()$,.. ?Sec. 10. Claim for
tax cre)it or refun). H =a> Cai"s #or Ta) Credit or 'e#und o# Inco"e
ta) deducted and (ithhed on inco"e pa!"ents sha +e 1iven due
course on! (hen it is sho(n on the return that the inco"e pa!"ent
received has +een decared as part o# the 1ross inco"e and the #act
o# (ithhodin1 is esta+ished +! a cop! o# the Withhodin1 Ta)
State"ent du! issued +! the pa!or to the pa!ee sho(in1 the a"ount
paid and the a"ount o# the ta) (ithhed there#ro" xxxC ='ev. 'e1s.
No. 9%85/ as a"ended>
The docu"ent (hich "a! +e accepted as evidence o# the third
condition/ that is/ the #act o# (ithhodin1/ "ust e"anate #ro" the
pa!or itse#/ and not "ere! #ro" the pa!ee/ and "ust indicate the
na"e o# the pa!or/ the inco"e pa!"ent +asis o# the ta) (ithhed/ the
a"ount o# the ta) (ithhed and the nature o# the ta) paid. . =(anco
+ilipino Savin-s an) #ort-a-e (an3 v. Court of Appeals, et al., A. '.
No. 15598./ 5arch .6/ .006>
5?. Wh"! %ho-() /e e%!"/($%he) /* " !"#p"*e 0o
!he .",! o0 " !"# e0-,) 2 Wh* 2
S<AAESTED ANSWE'C A ta)pa!er needs to esta+ish
not on! that the re#und is ,usti#ied under the a(/ +ut aso the
correct a"ount that shoud +e re#unded.
I# the atter re2uisite cannot +e ascertained (ith
particuarit!/ there is cause to den! the re#und/ or ao( it on!
to the e)tent o# the su" that is actua! proven as due.
Ta) re#unds parta0e o# the nature o# ta) e)e"ptions and
are thus construed strictissimi &uris a1ainst the person cai"in1
the e)e"ption. The +urden in provin1 the cai" #or re#und
necessari! #as on the ta)pa!er. =+ar .ast (an3 Trust an)
Company, etc., v. Commissioner of Internal Revenue, et al., A. '. No.
178414/ 5a! ./ .009>
51. Wh"! "e !he eD-$%$!e% 0o !he e0-,) o0 $((e."((*
)e)-'!e) !"#e% 0o& !he $,'o&e o0 ", e&p(o*ee%F !-%!
0-,) 2
S<AAESTED ANSWE'C What has to +e esta+ished/
as a "atter o# evidence/ is that the a"ount sou1ht to +e
re#unded to the +an0%trustee corresponds to the ta) (ithhed
on the interest inco"e earned #ro" the e)e"pt e"po!ees*
trust. The need to +e deter"inate is i"portant/ specia! i# the
+an0 trustee/ in the ordinar! course o# its +an0in1 +usiness/
earns interest inco"e not on! #ro" its invest"ents o#
e"po!ees* trusts/ +ut on a (hoe ran1e o# accounts (hich do
not en,o! the sa"e +road e)e"ption as e"po!ees* trusts.
=+ar .ast (an3 Trust an) Company, etc., v. Commissioner of Internal
Revenue, et al., A. '. No. 178414/ 5a! ./ .009>
NITES AND CI55ENTSC
a. E&p(o*ee%F !-%! 0-,)8 )e0$,e) . An e"po!ees*
trust #und is a trust esta+ished +! an e"po!er to provide retire"ent/
pension/ or other +ene#its to e"po!ees % it is a separate ta)a+e
entit! esta+ished #or the e)cusive +ene#it o# the e"po!ees.
=Development (an3 of the Philippines v. Commission on Au)it, B..
SC'A B54>
+. I,'o&e o0 e&p(o*ee%F !-%! $% !"# e#e&p!. ?An!
provision o# a( to the contrar! not(ithstandin1/ the retire"ent
+ene#its received +! o##icia and e"po!ees o# private #ir"s/ (hether
individua or corporate/ in accordance (ith a reasona+e private
+ene#it pan "aintained +! the e"po!er sha +e e)e"pt #ro" a
ta)es and sha not +e ia+e to a"end"ent/ ev! or sei:ure +! or
under an! e1a or e2uita+e process (hatsoever e)cept to pa! a de+t
o# the o##icia or e"po!ee concerned to the private +ene#it pan or
that arisin1 #ro" ia+iit! i"posed in a cri"ina action* ) ) ) ? =Sec. 1/
'ep. Act B416>
A ta)%e)e"pt e"po!ees* trust #und is re#erred to under the
NI'C o# 1446 as a ?reasona+e private retire"ent pan/ (hich "eans
?a pension/ 1ratuit!/ stoc0 +onus or pro#it%sharin1 pan "aintained +!
an e"po!er #or the +ene#it o# so"e or a o# his o##icias or
e"po!ees/ (herein contri+utions are "ade +! such e"po!er #or the
o##icias or e"po!ees/ or +oth/ #or the purpose o# distri+utin1 to such
o##icias and e"po!ees the earnin1s and principa o# the #und thus
accu"uated/ and (herein it is provided in said pan that at no ti"e
sha an! part o# the corpus or inco"e o# the #und +e used #or/ or +e
diverted to/ an! purpose other than #or the e)cusive +ene#it o# the
said o##icias or e"po!ees.@ DSec. 7. =&> =9 > =a>/ NI'C o# 1446E
c. E#!e,! o0 e#e&p!$o,. The ta) e)e"ption en,o!ed +!
e"po!ees* trust is a+soute irrespective o# the nature o# the ta). It
does not app! on! to the ta) on interest inco"e #ro" "one! "ar0et
pace"ents/ +an0 deposits/ other deposit su+stitute instru"ents and
1overn"ent securit!/ +ecause the source o# the interest inco"e does
not have an! e##ect on the e)e"ption en,o!ed +! e"po!ee*s trusts.
=+ar .ast (an3 Trust an) Company, etc., v. Commissioner of Internal
Revenue, et al., A. '. No. 178414/ 5a! ./ .009>
5+. A /",;G!-%!ee o0 e&p(o*ee !-%!% 0$(e) ",
"pp($'"!$o, 0o !he e0-,) o0 !"#e% w$!hhe() o, !he $,!ee%!
39
$,'o&e% o0 !he $,1e%!&e,!% &")e o0 !he 0-,)% o0 !he
e&p(o*ee%F !-%!%. I,%!e") o0 pe%e,!$,. %ep""!e
"''o-,!% 0o $,!ee%! $,'o&e% &")e o0 !he%e $,1e%!&e,!%8
!he /",;G!-%!ee $,%!e") pe%e,!e) w$!,e%% !o e%!"/($%h
!h"! $! wo-() ,e#! !o $&po%%$/(e !o %$,.(e o-! !he %pe'$0$'
!",%"'!$o,% $,1o(1$,. !he e&p(o*ee%F !-%! 0-,)% 0o& !he
!o!"($!* o0 "(( $,!ee%! $,'o&e 0o& $!% !o!"( $,1e%!&e,!%.
O, !he "/o1e /"%$% w$(( !he "pp($'"!$o, 0o e0-,)
po%pe 2
S<AAESTED ANSWE'C No. The appication #or
re#und (i not prosper.
The +an0%trustee needs to esta+ish not on! that the
re#und is ,usti#ied under the a( =(hich is so +ecause inco"es
o# e"po!ees* trusts are ta) e)e"pt>/ +ut aso the correct
a"ount that shoud +e re#unded.
Ta) re#unds parta0e o# the nature o# ta) e)e"ptions
and are thus construed strictissimi &uris a1ainst the person or
entit! cai"in1 the e)e"ption. The +urden in provin1 the
a"ount to +e re#unded necessari! #as on the +an0%trustee/
and there is an apparent #aiure to do so.
A necessar! conse2uence o# the specia e)e"ption
en,o!ed aone +! e"po!ees* trusts (oud +e a necessar!
se1re1ation in the accountin1 o# such inco"e/ interest or
other(ise/ earned #ro" those trusts #ro" that earned +! the
other cients o# the +an0%trustee. =+ar .ast (an3 an) Trust
Company, etc., v. Commissioner, etc., et al., A.'. No. 178414/ 5a!
./ .009> The a"ounts that are the e)e"pt earnin1s o# the
e"po!ee*s trust has not +een sho(n as the! have +een
co""in1ed (ith the interest inco"e o# the other cients o# the
+an0%trustee.
53. CTA C$'-(" No. 1G65 '(e"(* eD-$e% !h"!
pho!o'op$e% o0 !he e'e$p!% o $,1o$'e% &-%! /e peG
&";e) ",) %-/&$!!e) !o !he CTA !o 1e$0* !he
'oe'!,e%% o0 !he %-&&"* ($%!$,. ",) !he CPA
'e!$0$'"!$o,. CTA Circuar No. 1%45/ issued on .5 Fanuar! 1445/
readsC
?1. The part! (ho desires to introduce as evidence such
vou"inous docu"ents "ust presentC =a> Su""ar! containin1 the
tota a"ountHs o# the ta) account or ta) paid #or the period invoved
and a chronoo1ica or nu"erica ist o# the nu"+ers/ dates and
a"ounts covered +! the invoices or receipts8 and =+> a Certi#ication
o# an independent Certi#ied $u+ic Accountant attestin1 to the
correctness o# the contents o# the su""ar! a#ter "a0in1 an
e)a"ination and evauation o# the vou"inous receipts and invoices.
Such su""ar! and certi#ication "ust proper! +e identi#ied +! a
co"petent (itness #ro" the accountin1 #ir".
.. The "ethod o# individua presentation o# each and ever!
receipt or invoice or other docu"ents #or "ar0in1/ identi#ication and
co"parison (ith the ori1inas thereo# need not +e done +e#ore the
Court or the Co""issioner an!"ore a#ter the introduction o# the
su""ar! and C$A certi#ication. It is enou1h that !he e'e$p!%8
$,1o$'e% ",) o!he )o'-&e,!% 'o1e$,. !he %"$) "''o-,!% o
p"*&e,!% &-%! /e peG&";e) /* !he p"!* 'o,'e,e) ",)
%-/&$!!e) !o !he Co-! $, o)e !o /e &")e "''e%%$/(e !o !he
")1e%e p"!* whe,e1e heC%he )e%$e% !o 'he'; ",) 1e$0* !he
'oe'!,e%% o0 !he %-&&"* ",) CPA 'e!$0$'"!$o,. Ho(ever/ the
ori1inas o# the said receipts/ invoices or docu"ents shoud +e read!
#or veri#ication and co"parison in case dou+t on the authenticit! o#
the particuar docu"ents presented is raised durin1 the hearin1 o#
the case.@ =E"phasis suppied>
54. L",$(" E(e'!$' Co&p",* " .",!ee o0 "
(e.$%("!$1e 0",'h$%e -,)e A'! No. 4=48 "% "&e,)e) /*
Rep-/($' A'! No. 4156 ",) Pe%$)e,!$"( De'ee No. 5518
h") /ee, p"*$,. " +I 0",'h$%e !"# /"%e) o, $!% .o%%
e'e$p!%8 $, ($e- o0 "(( o!he !"#e% ",) "%%e%%&e,!% o0
wh"!e1e ,"!-e. Upo, !he e00e'!$1$!* o0 E#e'-!$1e O)e
No. :+ o, Fe/-"* 1?8 16=:8 howe1e8 e%po,)e,!
/e'"&e %-/>e'! !o !he p"*&e,! o0 e.-(" 'opo"!e
$,'o&e !"#.
Fo !he ("%! D-"!e e,)$,. De'e&/e 318 16=:8
e%po,)e,! 0$(e) o, Ap$( 158 16== $!% !e,!"!$1e $,'o&e !"#
e0(e'!$,. " e0-,)"/(e "&o-,! o0 P1?18=6:8:418 /-! o,(*
P::86318=1+ w"% "pp($e) "% !"# 'e)$! 0o !he %-''ee)$,.
!"#"/(e *e" 16==.
A'!$,. o, " *e"(* o-!$,"* Le!!e o0 A-!ho$!* No.
??1=?74 NA )"!e) <-,e +:8 16== $%%-e) /* pe!$!$o,e8
)$e'!$,. !he $,1e%!$."!$o, o0 !"# ($"/$($!$e% o0 e%po,)e,!
0o !"#"/(e *e" 16=:8 ", $,1e%!$."!$o, w"% 'o,)-'!e) /*
Re1e,-e O00$'e Fe)e$'; C"p$!", wh$'h %howe) !h"!
e%po,)e,! w"% ($"/(e 0o B1. )e0$'$e,'* $,'o&e !"# $, !he
"&o-,! o0 P+834?86?+.5+K ",) +. )e0$'$e,'* 0",'h$%e !"#
$, !he "&o-,! o0 P+8=3=8335.=4.E
40
O, Ap$( 1:8 16=68 e%po,)e,! 0$(e) ", "&e,)e) 0$,"(
'opo"!e I,'o&e T"# Re!-, e,)$,. De'e&/e 318 16==
e0(e'!$,. " e0-,)"/(e "&o-,! o0 P1?:87468:+6.
Re%po,)e,! !h-% 0$(e) o, L"'h 3?8 166? " (e!!eG
'("$& 0o e0-,) o 'e)$! $, !he "&o-,! o0 P1?:87468:+6
epe%e,!$,. o1ep"$) $,'o&e !"#e% 0o !he *e"% 16=:
",) 16==.
Pe!$!$o,e ,o! h"1$,. "'!e) o, $!% eD-e%!8
e%po,)e,! 0$(e) o, Ap$( 78 166? " >-)$'$"( '("$& 0o
e0-,) o 'e)$! w$!h !he Co-! o0 T"# Appe"(%.
I! $% ."!hee) !h"! e%po,)e,! p"$) !he )e0$'$e,'*
0",'h$%e !"# $, !he "&o-,! o0 P+8=3=8335.=4. I! po!e%!e)
!he p"*&e,! o0 !he "((e.e) )e0$'$e,'* $,'o&e !"# ",)
'("$&e) "% ", "(!e,"!$1e e&e)* !he )e)-'!$o, !heeo0
0o& $!% '("$& 0o e0-,) o 'e)$!.
The Co-! o0 T"# Appe"(% .",!e) !he P1?:87468:+6
'("$& 0o e0-,)8 o $, !he "(!e,"!$1e 0o !he BIR !o $%%-e "
!"# 'e)$!. I% !he Co-! o0 T"# Appe"(% 'oe'! 2
S<AAESTED ANSWE'C Mes. Section 94 o# the
Nationa Interna 'evenue Code o# 1489/ no( Sec. 69
provides/ i# the su" o# the 2uarter! ta) pa!"ents "ade
durin1 a ta)a+e !ear is not e2ua to the tota ta) due on the
entire ta)a+e inco"e o# that !ear as sho(n in its #ina
ad,ust"ent return/ the corporation has the option to eitherC
=a> pa! the e)cess ta) sti due/ or =+> +e re#unded the e)cess
a"ount paid. The returns su+"itted are ?"ere! pre%audited
(hich consist "ain! o# chec0in1 "athe"atica accurac! o#
the #i1ures in the return.@ A#ter such chec0in1/ the purpose o#
(hich +ein1 to ?insure pro"pt action on corporate annua
inco"e ta) returns sho(in1 re#unda+e a"ounts arisin1 #ro"
overpaid 2uarter! inco"e ta)es/@ ='evenue 5e"orandu"
Irder No. 7.%69 dated Fune 11/ 1469> the re#und or ta) credit
is 1ranted. =Commissioner of Internal Revenue v. #anila .lectric
Company, A. '. No. 1.1999/ Icto+er 10/ .006>
LOCAL GOVERNLENT CODE ON TAXATION
LOCAL TAXATION
1. The Lo'"( Go1e,&e,! Co)e poh$/$!% (o'"(
.o1e,&e,! -,$!% 0o& 'o((e'!$,. e#'$%e !"#e% o, "!$'(e%
e,-&e"!e) -,)e !he NIRC8 ",) !"#e%8 0ee% o 'h".e% o,
pe!o(e-& po)-'!%. =Sec. 177 DhE/ Loca Aovern"ent Code in
reation to the Ta) Code>. Whie the Ta) Code evies a ta) on a
2uarr! resources/ re1ardess o# ori1in/ (hether e)tracted #ro"
pu+ic or private ands/ the Loca Aovern"ent Code authori:es
the oca 1overn"ent unit to i"pose such ta)es on those ta0en
#ro" pu+ic ands. Thus/ 2uarr! resources e)tracted #ro"
private ands are ta)a+e under the NI'C and not +! oca
1overn"ent units. =The Province of (ulacan, et al., v. The Court of
Appeals, etc., et al., .44 SC'A BB.>
+. The p$&"* e"%o, 0o !he w$!h)"w"( o0 !"#
e#e&p!$o, p$1$(e.e% .",!e) !o .o1e,&e,! ow,e) ",)
'o,!o((e) 'opo"!$o,% and a other units o# 1overn"ent
(as that such privie1e resuted to serious ta) +ase erosion
and distortions in the ta) treat"ent o# si"iar! situated
enterprises/ hence resutin1 in the need #or these entities to
share in the re2uire"ents o# deveop"ent/ #isca or other(ise/
+! pa!in1 the ta)es and other char1es due the". =Philippine
Ports Authority v. City of Iloilo, A. '. No. 104641/ Fu! 1B/ .007>
3. N"!$o,"( Powe Copo"!$o, @NPCA $% o0 !he
$,%$%!e,'e !h"! $! $% ,o! %-/>e'! !o !he p"*&e,! o0
0",'h$%e% !"#e% $&po%e) /* !he Po1$,'e o0 I%"/e("
/e'"-%e "(( o0 $!% %h"e% "e ow,e) /* !he Rep-/($' o0 !he
Ph$($pp$,e%. I! $% !h-%8 ", $,%!-&e,!"($!* o0 !he N"!$o,"(
Go1e,&e,! wh$'h $% e#e&p! 0o& (o'"( !"#"!$o,. A% %-'h $!
$% ,o! " p$1"!e 'opo"!$o, e,.".e) $, B/-%$,e%% e,>o*$,.
0",'h$%eE
I% %-'h 'o,!e,!$o, &e$!o$o-% 2
S<AAESTED ANSWE'C No. Philippine Lon- Distance
Telephone Company, Inc., v. City of Davao, et al., etc./ A. '.
No. 1B7896/ Au1ust ../ .001/ uphed the authorit! o# the Cit!
o# Davao/ a oca 1overn"ent unit/ to i"pose and coect a
oca #ranchise ta) +ecause the Loca Aovern"ent Code has
(ithdra(n a ta) e)e"ptions previous! en,o!ed +! a persons
and authori:ed oca 1overn"ent units to i"pose a ta) on
+usiness en,o!in1 a #ranchise ta) not(ithstandin1 the 1rant o#
ta) e)e"ption to the".
4. X C$!* $%%-e) " ,o!$'e o0 "%%e%%&e,! "."$,%!
ABC Co,)o&$,$-& Copo"!$o, 0o -,p"$) /-%$,e%% !"#e%.
41
The Co,)o&$,$-& Copo"!$o, $% " )-(* 'o,%!$!-!e)
'o,)o&$,$-& 'opo"!$o, $, "''o)",'e w$!h !he
Co,)o&$,$-& A'! wh$'h ow,% ",) ho()% !$!(e !o !he
'o&&o, ",) ($&$!e) 'o&&o, "e"% o0 !he 'o,)o&$,$-&.
I!% &e&/e%h$p 'o&p$%e% !he -,$! ow,e% ",) $%
"-!ho$9e) -,)e $!% B*GL"w% !o 'o((e'! e.-("
"%%e%%&e,!% 0o& $!% &e&/e% 0o ope"!$,. e#pe,%e%8
'"p$!"( e#pe,)$!-e% o, !he 'o&&o, "e"% ",) o!he
%pe'$"( "%%e%%&e,!% "% po1$)e) 0o $, !he L"%!e Dee)
w$!h 2De'(""!$o, o0 Re%!$'!$o,% o0 !he Co,)o&$,$-&.
ABC Co,)o&$,$-& Copo"!$o, $,%$%!% !h"! !he X C$!*
Re1e,-e Co)e ",) !he Lo'"( Go1e,&e,! Co)e )o ,o!
'o,!"$, po1$%$o,% -po, wh$'h !he "%%e%%&e,! 'o-() /e
/"%e). Re%o(1e !he 'o,!o1e%*.
S<AAESTED ANSWE'C A&C is correct. Condo"iniu"
corporations are 1enera! e)e"pt #ro" oca +usiness ta)ation
under the Loca Aovern"ent Code/ irrespective o# an! oca
ordinance that see0s to decare other(ise.
O Cit!/ is authori:ed under the Loca Aovern"ent Code/
to i"pose a ta) on +usiness/ (hich is de#ined under the Code
as @trade or co""ercia activit! re1uar! en1a1ed in as a
"eans o# iveihood or (ith a vie( to pro#it.@ &! its ver! nature
a condo"iniu" corporation is not en1a1ed in +usiness/ and
an! pro#it that it derives is "ere! incidenta/ hence it "a! not
+e su+,ect to +usiness ta)es. =Iamane , etc. v. (A Lepanto
Con)ominium Corporation, A. '. No. 15B447/ Icto+er .5/ .005>
5. O, 1: A-.-%! +???8 C$!* o0 L",$("8 T"#
O)$,",'e No. :6== w"% )e'("e) ,-(( ",) 1o$) ",) o0 ,o
e00e'! /* !he Se'e!"* o0 <-%!$'e. Fo 0"$(-e o0 !he C$!* !o
&o1e 0o e'o,%$)e"!$o, !he )e'$%$o, ("p%e) $,!o 0$,"($!*.
O, ++ Fe/-"* +??18 !he C$!* e,"'!e) T"# O)$,",'e No.
=?11 wh$'h "&e,)e) 'e!"$, po1$%$o,% o0 T"# O)$,",'e
No. :6==. L"* T"# O)$,",'e No. =?11 /e e,0o'e) 2
S<AAESTED ANSWE'C No. I# an order or a( such as
Ta) Irdinance No. 6488 is invaid/ then it does not e1a!
e)ist/ there shoud +e no occasion or need to a"end it. DCoca,
Cola (ottlers Philippines, Inc. v. City of #anila, et al., A. '. No.
159.5./ Fune .6/ .009 citin1 People v. Lim, 108 $hi. 1041 =1490>E/
hence Ta) Irdinance No. 8011 is aso invaid and cannot +e
en#orced.
REAL PROPERTY TAXATION
1. Wh"! "e !he 0-,)"&e,!"( p$,'$p(e% o0 e"(
pope!* !"#"!$o, 2
S<AAESTED ANSWE'C The #unda"enta principes o#
rea propert! ta)ation areC
a. Appraisa at current and #air "ar0et vaue8
+. Cassi#ication #or assess"ent on the +asis o# actua
use8
c. Assess"ent on the +asis o# uni#or" cassi#ication8
d. Appraisa/ assess"ent/ ev! and coection sha
not +e et to a private person8
e. Appraisa and assess"ent sha +e e2uita+e.
NITES AND CI55ENTSC 'ea properties sha +e
appraised at the current and #air "ar0et vaue prevaiin1 in the ocait!
(here the propert! is situated and cassi#ied #or assess"ent purposes
on the +asis o# its actua use. =Allie) (an3in- Corporation, etc., v.
Jue$on City overnment, et al., A. '. No. 15B1.9/ Icto+er 11/ .005>
+. Wh"! $% !he 0"$ &";e! 1"(-e o0 pope!$e% 2
S<AAESTED ANSWE'C 3air "ar0et vaue is the price
at (hich a propert! "a! +e sod +! a seer (ho is not
co"peed to se and +ou1ht +! a +u!er (ho is not co"peed
to +u!/ ta0in1 into consideration a uses to (hich the propert!
is adopted and "i1ht in reason +e appied.
The criterion esta+ished +! the statute conte"pates a
h!pothetica sae. Hence/ the +u!ers need not +e actua and
e)istin1 purchasers. =Allie) (an3in- Corporation, etc., v. Jue$on
City overnment, et al., A. '. No. 15B1.9/ Icto+er 11/ .005 citin1
Army an) 6avy Clu!, #anila v. Trini)a), BB $hi. 787 >
NITEC In #i)in1 the vaue o# rea propert!/ assessors have to
consider a the circu"stances and ee"ents o# vaue and "ust
e)ercise prudent discretion in reachin1 concusions. DAllie) (an3in-
Corporation, etc., v. Jue$on City overnment, et al., A. '. No.
15B1.9/ Icto+er 11/ .005 citin1 Reyes v. Alman$or, 149 SC'A 7../
7.6 =1441>E>
Pep""!$o, o0 0"$ &";e! 1"(-e%:
a. The cit! or "unicipa assessor sha prepare a schedue
o# #air "ar0et vaues #or the di##erent casses o# rea propert! situated
in their respective Loca Aovern"ent <nits #or the enact"ent o# an
ordinance +! the san--unian concerned8 and
+. The schedue o# #air "ar0et vaues sha +e pu+ished in a
ne(spaper o# 1enera circuation in the province/ cit! or "unicipait!
42
concerned or the postin1 in the provincia capito or other paces as
re2uired +! a(. (Lope$ v. City of #anila, et al., A.'. No. 1.6174/
3e+ruar! 14/ 1444>
Popo%e) 0"$ &";e! 1"(-e% o0 e"( pope!* $, " (o'"(
.o1e,&e,! -,$! "% we(( "% !he o)$,",'e 'o,!"$,$,. !he
%'he)-(e &-%! /e p-/($%he) $, 0-(( #or three =7> consecutive da!s
in a ne(spaper o# oca circuation/ (here avaia+e/ (ithin ten =10>
da!s o# its approva/ and posted in at ease t(o =.> pro"inent paces
in the provincia capito/ cit!/ "unicipa or !aran-ay ha #or a
"ini"u" o# three =7> consecutive (ee0s. (+i-uerres v. Court of
Appeals, et al,. A.'. No. 11416./ 5arch .5/ 1444>
3. Wh"! "e !he "ppo"'he% $, e%!$&"!$,. !he 0"$
&";e! 1"(-e o0 e"( pope!* 0o e"( pope!* !"# p-po%e%
2
S<AAESTED ANSWE'C
a. Saes Ana!sis Approach. The saes price paid in
actua "ar0et transactions is considered +! ta0in1 into account
vaid saes data accu"uated #ro" a"on1 the 'e1istrar o#
Deeds/ notaries pu+ic/ appraisers/ +ro0ers/ deaers/ +an0
o##icias/ and various sources stated under the Loca
Aovern"ent Code.
+. Inco"e Capitai:ation Approach. The vaue o# an
inco"e%producin1 propert! is no "ore than the return derived
#ro" it. An ana!sis o# the inco"e produced is necessar! in
order to esti"ate the su" (hich "i1ht +e invested in the
purchase o# the propert!.
c. 'eproduction cost approach is a #or"a approach
used e)cusive! n appraisin1 "an%"ade i"prove"ents such
as +uidin1s and other structures/ +ased on such data as
"aterias and a+or costs to reproduce a ne( repica o# the
i"prove"ent.
The assessor uses an! or a o# these approaches in
ana!:in1 the data 1athered to arrive at the esti"ated #air
"ar0et vaue to +e incuded in the ordinance containin1 the
schedue o# #air "ar0et vaues. =Allie) (an3in- Corporation, etc.,
v. Jue$on City overnment, et al., A. '. No. 15B1.9/ Icto+er 11/
.005 citin1 Loca Assess"ent 'e1uations No. 1%4.>
4. R-e9o, C$!* p"%%e) ", o)$,",'e whee/* !he
Bp"'e(% o0 (",) %o()8 'e)e). T",%0ee) ",) 'o,1e*e) 0o
e&-,e"!o* 'o,%$)e"!$o, "0!e !he e00e'!$1$!* o0 !h$%
e1$%$o, %h"(( /e %-/>e'! !o e"( e%!"!e !"# /"%e) o, !he
"'!-"( "&o-,! e0(e'!e) $, !he )ee) o0 'o,1e*",'e o !he
'-e,! "ppo1e) 9o,"( 1"(-"!$o, o0 !he B-e"- o0 I,!e,"(
Re1e,-e pe1"$($,. "! !he !$&e o0 %"(e8 'e%%$o,8 !",%0e
",) 'o,1e*",'e8 wh$'he1e $% h$.he8 "% e1$)e,'e) /* !he
'e!$0$'"!e o0 p"*&e,! o0 !he '"p$!"( ."$,% !"# $%%-e)
!hee0oe.E
I% !he po1$%o 0o !he /"%$% $, )e!e&$,$,. !he 1"(-e
0o e"( pope!* !"# p-po%e% 1"($) 2
S<AAESTED ANSWE'C No. The proviso +ein1
contrar! to pu+ic poic! and #or restrainin1 trade is not vaid #or
the #oo(in1 reasonsC
a. It "andates an e)cusive rue in deter"inin1 the
#air "ar0et vaue and departs #ro" the esta+ished procedures
such as the saes ana!sis approach/ the inco"e capitai:ation
approach and the reproduction approach provided under the
rues i"pe"entin1 the statute. It undu! inter#eres (ith the
duties statutori! paced upon the oca assessor +! co"pete!
dispensin1 (ith his ana!sis and discretion (hich the Loca
Aovern"ent Code and the re1uations re2uire to +e e)ercised.
An ordinance that contravenes an! statute is ultra vires and
void.
+. The ?consideration approach@ in the ordinance is
ie1a since ?the appraisa/ assess"ent/ ev! and coection o#
rea propert! ta) sha not +e et to an! private person@/ it (i
aso co"pete! destro! the #unda"enta principe in rea
propert! ta)ation G that rea propert! sha +e cassi#ied/ vaued
and assessed on the +asis o# its actua use re1ardess o#
(here ocated/ (hoever o(ns it/ and (hoever uses it. Ao(in1
the parties to a private sae to dictate the #air "ar0et vaue o#
the propert! (i dispense (ith the distinctions o# actua use
stated in the Loca Aovern"ent Code and in the re1uations.
c. The invaidit! is not cured +! the prhase ?(hichever
is hi1her@ +ecause an inte1ra part o# that s!ste" sti per"its
vauin1 rea propert! in disre1ard o# its ?actua use.@
d. The ordinance (oud resut to rea propert!
assess"ents "ore than once ever! three =7> !ears and that is
not the con1ressiona intent as sho(n in the provisions o# the
Loca Aovern"ent Code and the re1uations. Conse2uent!/
the rea propert! ta) +urden shoud not +e interpreted to
incude those +e!ond (hat the Code or the re1uations
e)press! cear! state.
43
e. The proviso (oud provide a chiin1 e##ect on rea
propert! o(ners or ad"inistrators to enter #ree! into contracts
re#ectin1 the increasin1 vaue o# rea properties in accordance
(ith prevaiin1 "ar0et conditions.
Whie the Loca Aovern"ent Code provides that the
assess"ent o# rea propert! sha not +e increased once ever!
three =7> !ears/ the 2uestioned proviso su+,ects the propert! to
a hi1her assess"ent ever! ti"e a saes transaction is "ade.
'ea propert! o(ners (oud there#ore postpone saes unti
a#ter the apse o# the three =7> !ear period/ or i# the! do so
(ithin the said period the! sha +e co"peed to dispose o# the
propert! at a price not e)ceedin1 the ast prior conve!ance in
order to avoid a hi1her ta) assess"ent.
In the a+ove t(o scenarios rea propert! o(ners are
e##ective! prevented #ro" o+tainin1 the +est price possi+e #or
their properties and undu! ha"pers the e2uita+e distri+ution
o# (eath. =Allie) (an3in- Corporation, etc., v. Jue$on City
overnment, et al., A. '. No. 15B1.9/ Icto+er 11/ .005>
5. Wh"! $% !he ,"!-e o0 " !"# )e'(""!$o, 2
S<AAESTED ANSWE'C As a rue/ ta) decarations or
reat! ta) pa!"ents o# propert! are not concusive evidence o#
o(nership/ nevertheess/ the! are 1ood in)icia o# possession
in the concept o# o(ner/ #or no one in his ri1ht "ind (oud +e
pa!in1 ta)es #or a propert! that is not in his actua or
constructive possession. The! constitute at east proo# that the
hoder has a cai" o# tite over the propert!.
The vountar! decaration o# a piece o# propert! #or
ta)ation purposes "ani#ests not on! one*s sincere and honest
desire to o+tain tite to the propert! and announces his adverse
cai" a1ainst the State and a other interested parties/ +ut aso
the intention to contri+ute needed revenues to the 1overn"ent.
Such an act stren1thens one*s !ona fi)e cai" o# ac2uisition o#
o(nership. =(uenaventura, et al., v. Repu!lic, A. '. No. 199895/
#arch ./ .006 citin1 /eirs of Simplicio Santia-o v. /eirs of #ariano
.. Santia-o, A. '. No. 151BB0/ 16 Fune .007/ B0B SC'A 147/ 144 G
.00>
NITES AND CI55ENTSC
a. De("*e) !"# )e'(""!$o, ,e."!e% '("$& o0
po%%e%%$o, $, 'o,'ep! o0 ow,e. A ta) decaration is a 1ood
indication o# possession in the concept o# o(ner. Ho(ever/ dea!ed
decaration o# propert! #or ta) purposes ne1ates a cai" o#
continuous/ e)cusive/ and uninterrupted possession in the concept o#
o(ner. =/eirs of #arina C. Re-ala)o, et al., etc., v. Repu!lic of the
Philippines, A. '. No. 198155/ 3e+ruar! 15/ .006>
+. No,G)e'(""!$o, o0 " pope!* 0o !"# p-po%e%
)oe% ,o! ,e'e%%"$(* ,e."!e ow,e%h$p. =Sps. A$ana v.
Lum!o, et al., A. '. No. 156547/ 5arch ../ .006 C#. Repu!lic v.
Court of Appeals, A. '. No. 119776./ 18 Fanuar! .001/ 7B4 SC'A
B51/ B9.>
7. G$1e e#"&p(e% o0 pe%o,"( pope!* -,)e !he
'$1$( ("w !h"! &"* /e 'o,%$)ee) "% e"( pope!* 0o
p-po%e% o0 !"#e%.
S<AAESTED ANSWE'C $ersona propert! under the
civi a( "a! +e considered as rea propert! #or purposes o#
ta)es (here the propert! is essentia to the conduct o# the
+usiness.
a. <nder1round tan0s are essentia to the conduct o#
the +usiness o# a 1asoine station (ithout (hich it (oud not +e
operationa. =Caltex Phils., Inc. v. Central (oar) of Assessment
Appeals, et al., 11B SC'A .49>
+. Li1ht 'ai Transit =L'T> i"prove"ents such as
+uidin1s/ carria1e(a!s/ passen1er ter"inas stations/ and
si"iar structures do not #or" part o# the pu+ic roads since the
#or"er are constructed over the atter in such a (a! that the
#o( o# vehicuar tra##ic (oud not +e i"paired. The
carria1e(a!s and ter"inas serve a #unction di##erent #ro" the
pu+ic roads. 3urther"ore/ the! are not open to use +! the
1enera pu+ic hence not e)e"pt #ro" rea propert! ta)es.
Even 1rantin1 that the nationa 1overn"ent o(ns the
carria1e(a!s and ter"ina stations/ the propert! is not e)e"pt
+ecause their +ene#icia use has +een 1ranted to L'TA a
ta)a+e entit!. (Li-ht Rail Transit Authority v. Central (oar) of
Assessment Appeals, et al., A. '. No. 1.6719/ Icto+er 1./ .000>
c. The Supre"e Court o# Ne( Mor0 in Consoli)ate)
.)ison Company of 6e7 Ior3, Inc., et al., v. The City of 6e7
Ior3, et al., 80 5isc. .d 1095 =1465> cited in +.LS .ner-y,
Inc., v. Province of (atan-as, A. '. No. 198556/ 3e+ruar! 19/
.006 and co"panion case/ hed that +ar1es on (hich (ere
"ounted 1as tur+ine po(er pants desi1nated to 1enerate
eectrica po(er/ the #ue oi +ar1es (hich suppied #ue oi to
the po(er pant +ar1es/ and the accessor! e2uip"ent
"ounted on the +ar1es (ere su+,ect to rea propert! ta)es.
44
5oreover/ Artice B15=4> o# the Civi Code provides that
?DdEoc0s and structures (hich/ thou1h #oatin1/ are intended +!
their nature and o+,ect to re"ain at a #i)ed pace on a river/
a0e or coast@ are considered i""ova+e propert! +!
destination +ein1 intended +! the o(ner #or an industr! or
(or0 (hich "a! +e carried on in a +uidin1 or on a piece o#
and and (hich tend direct! to "eet the needs o# said industr!
or (or0.
:. Re"( pope!* !"# )e'(""!$o,% B"e .oo) indicia
o0 po%%e%%$o, $, !he 'o,'ep! o0 ", ow,e/ #or no one in his
ri1ht "ind (oud +e pa!in1 ta)es #or a propert! that is not in his
actua or constructive possession.@ DConsoli)ate) Rural (an3
(Ca-ayan *alley", Inc. v. Court of Appeals, et al., A.'. No. 17.191/
Fanuar! 16/ .005 citin1 /eirs of Simplicio Santia-o v. /eirs of
#ariano .. Santia-o, A. '. No. 151BB0/ 16 Fune .007/ B0B SC'A at
p. 1418 Llarena v. #apili, A.'. No.1B97B1/ 6 Au1ust .007/ B08 B8B/
B41>
=. The e%!$'!$o, -po, !he powe o0 'o-!% !o
$&pe"'h !"# "%%e%%&e,! w$!ho-! " p$o p"*&e,!8 -,)e
po!e%!8 o0 !he !"#e% "%%e%%e) $% 'o,%$%!e,! w$!h !he
)o'!$,e !h"! !"#e% "e !he ($0e/(oo) o0 !he ,"!$o,8 and as
such their coection cannot +e curtaied +! in,unction or an!
i0e action8 other(ise/ the state or/ in this case/ the oca
1overn"ent unit/ sha +e cripped in dispensin1 the needed
services to the peope/ and its "achiner! 1rave! disa+ed.
(#anila .lectric Company v. (arlis, A.'. No. 11B.71/ 5a! 18/ .001>
Thus/ the tria court has no ,urisdiction to entertain a
petition #or prohi+ition a+sent pa!"ent under protest o# the ta)
assessed. =I!i)."
NITES AND CI55ENTSC Whie the a+ove 5a! 18/ .001
decision (as set aside +! the Supre"e Court (hen it 1ranted the
petitioner*s second "otion #or reconsideration on Fune .4/ .00B/ the
author su+"its that the a+ove ruin1 in the 5a! 18/ .001 decision is
sti vaid/ +ecause (hat (as reversed in the second "otion #or
reconsideration (as the 1arnish"ent o# 5eraco*s assets +ecause
(hether or not an assess"ent (as issued to 5eraco has to +e
resoved +! the o(er court.
6. U,p"$) e"(!* !"#e% "!!"'h !o !he pope!* ",) $%
'h".e"/(e "."$,%! !he pe%o, who h") "'!-"( o /e,e0$'$"(
-%e ",) po%%e%%$o, o0 $! e.")(e%% o0 whe!he o ,o! he $%
!he ow,e. To i"pose the rea propert! ta) on the su+se2uent
o(ner (hich (as neither the o(ner not the +ene#icia user o#
the propert! durin1 the desi1nated periods (oud not on! +e
contrar! to a( +ut aso un,ust.
Conse2uent!/ 5E'ALCI the #or"er o(nerHuser o# the
propert! (as re2uired to pa! the ta) instead o# the ne( o(ner
NA$ICI'. (#anila .lectric Company v. (arlis, A.'. No. 11B.71/
5a! 18/ .001>
NITES AND CI55ENTSC The a+ove 5a! 18/ .001
decision (as set aside +! the Supre"e Court (hen it 1ranted the
petitioner*s second "otion #or reconsideration on Fune .4/ .00B. The
author su+"its that the a+ove ruin1 in the 5a! 18/ .001 decision is
sti vaid/ not on the +asis o# the 5a! 18/ .001 decision/ in the i1ht o#
pronounce"ents o# the Supre"e Court in other cases. Thus/ do not
cite the doctrine as e"anatin1 #ro" the 5a! 18/ .001 decision.

1?. Se'e!"* o0 <-%!$'e '", !";e 'o.,$9",'e o0 "
'"%e $,1o(1$,. !he 'o,%!$!-!$o,"($!* o (e."($!* o0 !"#
o)$,",'e% whee !hee "e 0"'!-"( $%%-e% $,1o(1e).
(+i-uerres v. Court of Appeals, et al./ A.'. No. 11416./ 5arch .5/
1444>
T"#p"*e 0$(e% "ppe"( !o !he Se'e!"* o0 <-%!$'e8
w$!h$, 3? )"*% 0o& e00e'!$1$!* !heeo0. In case the Secretar!
decides the appea/ a period aso o# 70 da!s is ao(ed #or an
a11rieved part! to 1o to court. &ut i# the Secretar! does not
act thereon/ a#ter the apse o# 90 da!s/ a part! coud aread!
see0 reie# in court (ithin 70 da!s #ro" the apse o# the 90 da!
period.
These three separate periods are cear! 1iven #or
co"piance as a prere2uisite +e#ore see0in1 redress in a
co"petent court. Such statutor! periods are set to prevent
dea!s as (e as enhance the order! and speed! dischar1e o#
,udicia #unctions. 3or this reason the courts construe these
provisions o# statutes as "andator!. (Reyes, et al., v. Court of
Appeals, et al./ A.'. No. 118.77/ Dece"+er 10/ 1444>
11. P-/($' he"$,.% "e &",)"!o* p$o !o "ppo1"(
o0 !"# o)$,",'e/ +ut this sti re2uires the ta)pa!er to adduce
evidence to sho( that no pu+ic hearin1s ever too0 pace.
(Reyes, et al., v. Court of Appeals, et al., A.'. No. 118.77/
Dece"+er 10/ 1444> $u+ic hearin1s are re2uired to +e
conducted prior to the enact"ent o# an ordinance i"posin1
45
rea propert! ta)es. =+i-uerres v. Court of Appeals, et al., A.'. No.
11416./ 5arch .5/ 1444>
1+. The e&e)* o0 (e1* '", /e p-%-e) /* p-!!$,.
-p 0o %"(e !he e"( pope!* %-/>e'! o0 !"#/ i.e./ the
dein2uent propert! upon (hich the ta) ien attaches/
re1ardess o# the present o(ner or possessor thereo#.
Ho(ever this re"ed! is on! one o# the other re"edies. (#anila
.lectric Company v. (arlis, A.'. No. 11B.71/ 5a! 18/ .001>
NITEC The a+ove 5a! 18/ .001 decision (as set aside +! the
Supre"e Court (hen it 1ranted the petitioner*s second "otion #or
reconsideration on Fune .4/ .00B. The author su+"its that the a+ove
ruin1 in the 5a! 18/ .001 decision is sti vaid/ not on the +asis o# the
5a! 18/ .001 decision/ in the i1ht o# pronounce"ents o# the
Supre"e Court in other cases. Thus/ do not cite the doctrine as
e"anatin1 #ro" the 5a! 18/ .001 decision.
13. The LGU 'o-() "(%o "1"$( o0 !he e&e)* o0
)$%!"$,! ",) (e1* o0 pe%o,"( pope!* %-/>e'!$,. ",*
pe%o,"( pope!* o0 !he !"#p"*e !o e#e'-!$o,. thus/ the
issuance o# the (arrants o# 1arnish"ent over 5E'ALCI*s
+an0 deposits (as not i"proper or irre1uar. (#anila .lectric
Company v. (arlis, et al./ A.'. No. 11B.71/ 5a! 18/ .001>
NITEC The a+ove 5a! 18/ .001 decision (as set aside +! the
Supre"e Court (hen it 1ranted the petitioner*s second "otion #or
reconsideration on Fune .4/ .00B. The author su+"its that the a+ove
ruin1 in the 5a! 18/ .001 decision is sti vaid/ not on the +asis o# the
5a! 18/ .001 decision/ in the i1ht o# pronounce"ents o# the
Supre"e Court in other cases. Thus/ do not cite the doctrine as
e"anatin1 #ro" the 5a! 18/ .001 decision.
14. No!$'e ",) p-/($'"!$o,8 "% we(( "% !he (e."(
eD-$e&e,!% 0o " !"# )e($,D-e,'* %"(e8 "e &",)"!o*/
and the #aiure to co"p! there(ith can invaidate the sae. The
prescri+ed notices "ust +e sent to co"p! (ith the
re2uire"ents o# due process. (De 0necht, et al,. v. Court of
AppealsF De 0necht, et al., v. /onora!le Sayo, .40 SC'A ..7/.79>
15. The e"%o, /eh$,) !he ,o!$'e eD-$e&e,! $%
!h"! !"# %"(e% "e ")&$,$%!"!$1e po'ee)$,.% wh$'h "e in
persona# $, ,"!-e. (Pu$on v. A!ellera, 194 SC'A 684/ 645F De
Asis v. I.A.C., 194 SC'A 71B>
17. Wh"! "e !he %!ep% !o /e 0o((owe) 0o !he
&",)"!o* 'o,)-'! o0 Ge,e"( Re1$%$o, o0 Re"( Pope!*
A%%e%%&e,!% 2
S<AAESTED ANSWE'C
a. $reparation o# Schedue o# 3air 5ar0et -aues8
+ . Enact"ent o# IrdinancesC
1> Lev!in1 an annua ?a) valorem@ ta) on rea
propert! and an additiona ta) accruin1 to the Specia
Education 3und8
.> 3i)in1 the assess"ent eves to +e appied to
the "ar0et vaues o# rea properties8
7> $rovidin1 the necessar! appropriations to
de#ra! e)penses incident to 1enera revision o# rea
propert! assess"ents/8 and
B> Adoptin1 the Schedue o# 3air 5ar0et -aues
prepared +! the assessors. =Lope$ v. City of #anila, et al.,
A.'. No. 1.6174/ 3e+ruar! 14/ 1444>
1:. FELS E,e.*8 I,'.8 h") " 'o,!"'! !o %-pp(*
NPC w$!h !he e(e'!$'$!* .e,e"!e) /* FELSF powe /".e%.
The 'o,!"'! "(%o %!"!e) !h"! NPC %h"(( /e e%po,%$/(e 0o
"(( e"( e%!"!e !"#e% ",) "%%e%%&e,!%. FELS !he, e'e$1e)
", "%%e%%&e,! o0 e"( pope!* !"#e% o, $!% powe /".e%
0o& !he Po1$,'$"( A%%e%%o o0 B"!",."%. I0 0$(e) " &o!$o,
0o e'o,%$)e"!$o, w$!h !he Po1$,'$"( A%%e%%o.
". Upo, )e,$"(8 FELS e(e1"!e) !he &"!!e !o !he
Lo'"( Bo") o0 A%%e%%&e,! Appe"(% @LBAAA8 whee $!
"$%e) !he 0o((ow$,. $%%-e%:
1A S$,'e NPC $% !"#Ge#e&p! !he, FELF%
%ho-() "(%o /e !"#Ge#e&p! /e'"-%e o0 $!% 'o,!"'!
w$!h NPC.
+A The powe /".e% "e ,o! e"( pope!*
%-/>e'! !o e"( pope!* !"#e%.
/. Upo, !he o!he h",) !he Lo'"( Te"%-e $,%$%!%
!h"! !he "%%e%%&e,! h"% "!!"$,e) " %!"!e o0 0$,"($!* he,'e
!he "ppe"( !o !he LBAA %ho-() /e )$%&$%%e).
R-(e o, !he 'o,0($'!$,. 'o,!e,!$o,%.
S<AAESTED ANSWE'C
a. A the contentions o# 3ELS are (ithout "eritC
1> N$C is not the o(ner o# the po(er +ar1es
nor the operator o# the po(er +ar1es. The ta) e)e"ption
46
privie1e 1ranted to N$C cannot +e e)tended to 3ELS.
the covenant is +et(een N$C and 3ELs and does not
+ind a third person not priv! to the contract such as the
$rovince o# &atan1as.
.> The Supre"e Court o# Ne( Mor0 in
Consoli)ate) .)ison Company of 6e7 Ior3, Inc., et al.,
v. The City of 6e7 Ior3, et al., 80 5isc. .d 1095 =1465>
cited in +.LS .ner-y, Inc., v. Province of (atan-as, A.
'. No. 198556/ 3e+ruar! 19/ .006 and co"panion case/
hed that +ar1es on (hich (ere "ounted 1as tur+ine
po(er pants desi1nated to 1enerate eectrica po(er/ the
#ue oi +ar1es (hich suppied #ue oi to the po(er pant
+ar1es/ and the accessor! e2uip"ent "ounted on the
+ar1es (ere su+,ect to rea propert! ta)es.
5oreover/ Artice B15=4> o# the Civi Code provides
that ?DdEoc0s and structures (hich/ thou1h #oatin1/ are
intended +! their nature and o+,ect to re"ain at a #i)ed
pace on a river/ a0e or coast@ are considered i""ova+e
propert! +! destination +ein1 intended +! the o(ner #or
an industr! or (or0 (hich "a! +e carried on in a
+uidin1 or on a piece o# and and (hich tend direct! to
"eet the needs o# said industr! or (or0.
+. The Treasurer is correct. The procedure do not
ao( a "otion #or reconsideration to +e #ied (ith the $rovincia
Assessor.
To ao( the procedure (oud indeed invite corruption in
the s!ste" o# appraisa and assess"ent. it convenient! courts
a 1ra#t%prone situation (here vaues o# rea propert! a! +e
initia! set unreasona+! hi1h/ and then su+se2uent! reduced
upon the re2uest o# a propert! o(ner. In the atter instance/
ausions o# possi+e cover/ iicit trade%o## cannot +e avoided/
and in #act can convenient! ta0e pace. Such occasion #or
"ischie# "ust +e prevented and e)cised #ro" our s!ste".
=+.LS .ner-y, Inc., v. Province of (atan-as, A. '. No. 198556/
3e+ruar! 19/ .006 and co"panion case/ citin1 Callanta v. 2ffice of
the 2m!u)sman. A. '. Nos. 115.57%6B/ Fanuar! 70/ 1448/ .85
SC'A 9B8>
NITES AND CI55ENTS8
a. A ,o!$'e o0 "%%e%%&e,! $%%-e) /* " (o'"(
"%%e%%o $% ,o! !he %-/>e'! o0 " &o!$o, 0o e'o,%$)e"!$o,
!h"! &-%! /e "ppe"(e) !o !he LBAA. The ast action o# the oca
assessor on a particuar assess"ent sha +e the notice o#
assess"ent. It is this ast action (hich 1ives the o(ner o# the
propert! the ri1ht to appea to the L&AA. The procedure does not
per"it the propert! o(ner the re"ed! o# #iin1 a "otion #or
reconsideration +e#ore the oca assessor/ =+.LS .ner-y, Inc., v.
Province of (atan-as, A. '. No. 198556/ 3e+ruar! 19/ .006 and
co"panion case/ citin1 Callanta v. 2ffice of the 2m!u)sman. A. '.
Nos. 115.57%6B/ Fanuar! 70/ 1448/ .85 SC'A 9B8>
1=. A C$!* O)$,",'e ")op!$,. " &e!ho) o0
"%%e%%&e,! w"% ,-(($0$e) /* !he S-pe&e Co-!. A
!"#p"*e who h"% p"$) h$% e"( pope!* !"#e% o, !he /"%$%
o0 !he ,-(($0$e) o)$,",'e ,ow po%$!% !h"! !he e!-, o0 !he
e"( pope!* !"# eo,eo-%(* 'o((e'!e) ",) p"$) $% "
,e'e%%"* 'o,%eD-e,'e o0 !he S-pe&e Co-!F%
,-(($0$'"!$o, o0 !he o)$,",'e ",) !hee $% ,o ,ee) !o '("$&
0o " e0-,). I% !h$% 'oe'! 2
S<AAESTED ANSWE'C No. The entite"ent to a ta)
re#und does not necessari! ca #or the auto"atic pa!"ent o#
the su" cai"ed. The a"ount o# the cai" +ein1 a #actua
"atter/ it "ust sti +e proven in the nor"a course and in
accordance (ith the ad"inistrative procedure #or o+tainin1 a
re#und o# rea propert! ta)es/ as provided under the Loca
Aovern"ent Code. =Allie) (an3in- Corporation, etc., v. Jue$on
City overnment, et al., A. '. No. 15B1.9/ Septe"+er 15/ .009>
NITES AND CI55ENTSC In the a+ove Allie) (an3in-
case/ the Supre"e Court provided #or the startin1 date o# co"putin1
the t(o%!ear prescriptive period (ithin (hich to #ie the cai" (ith the
Treasurer/ (hich is #ro" #inait! o# the Decision. The procedure to +e
#oo(ed is that sho(n +eo(.
16. Po'e)-e 0o e0-,) o0 e"( pope!* !"#e%
/"%e) o, 1"($)$!* o0 !he !"# &e"%-e o solutio indebeti.
a. $a!"ent under protest not re2uired/ cai" "ust +e
directed to the oca treasurer/ (ithin t(o =.> !ears #ro" the
date the ta)pa!er is entited to such reduction or read,ust"ent/
(ho "ust decide (ithin si)t! =90> da!s #ro" receipt.
+. The denia +! the oca treasurer o# the protest
(oud #a (ithin the 'e1iona Tria Court*s ori1ina ,urisdiction/
the revie( +ein1 the initia ,udicia co1ni:ance o# the "atter.
Despite the an1ua1e o# Section 145 o# the Loca Aovern"ent
Code (hich states that the re"ed! o# the ta)pa!er (hose
protest is denied +! the oca treasurer is ?to appea (ith the
court o# co"petent ,urisdiction/@ a+ein1 the said revie( as an
47
e)ercise o# appeate ,urisdiction is inappropriate since the
denia o# the protest is not the ,ud1"ent or order o# a o(er
court/ +ut o# a oca 1overn"ent o##icia. =Iamane , etc. v. (A
Lepanto Con)ominium Corporation, A. '. No. 15B447/ Icto+er .5/
.005>
c. The decision o# the 'e1iona Tria Court shoud +e
appeaed +! "eans o# a petition #or revie( directed to the
Court o# Ta) Appeas =Division>.
d. The decision o# the Court o# Ta) Appeas =Division>
"a! +e the su+,ect o# a revie( +! the Court o# Ta) Appeas
=en !anc>.
e. The decision o# the Court o# Ta) Appeas =en !anc>
"a! +e the su+,ect o# a petition #or revie( on certiorari on pure
2uestions o# a( directed to the Supre"e Court.
+?. The 'o,%!$!-!$o,"( !"# e#e&p!$o,% e0e o,(* !o
e"( pope!* that are actua!/ direct! and e)cusive! used
#or rei1ious/ charita+e or educationa purposes/ and that the
on! constitutiona! reco1ni:ed e)e"ption #ro" ta)ation o#
revenues are those earned +! non%pro#it/ non%stoc0
educationa institutions (hich are actua!/ direct! and
e)cusive! used #or educationa purposes. (Commissioner of
Internal Revenue v. Court of Appeals, et al., .48 SC'A 87>
The constitutiona ta) e)e"ption covers propert! ta)es
on!. What is e)e"pted is not the institution itse#/ those
e)e"pted #ro" rea estate ta)es are ands/ +uidin1s and
i"prove"ents actua!/ direct! and e)cusive! used #or
rei1ious/ charita+e or educationa purposes. =Lun- Center of
the Philippines v. Jue$on City, et al., etc., A. '. No. 1BB10B/ Fune .4/
.00B citin1 Fustice Davide>
+1. The 1635 Co,%!$!-!$o, %!"!e) !h"! !he (",)%8
/-$()$,.%8 ",) $&po1e&e,!% "e B-%e) e#'(-%$1e(*E /-!
!he pe%e,! Co,%!$!-!$o, eD-$e% !h"! !he (",)%8 /-$()$,.%
",) $&po1e&e,!% "e B"'!-"((*8 )$e'!(* ",) e#'(-%$1e(*
-%e).E The chan1e shoud not +e i1nored. 'eiance on past
decisions (oud have su##iced (ere the (ords ?actua!@ as (e
as Cdirect!@ are not added. There "ust +e proo# there#ore o#
the actua and direct use to +e e)e"pt #ro" ta)ation. =Lun-
Center of the Philippines v. Jue$on City, et al., etc., A. '. No.
1BB10B/ Fune .4/ .00B citin1 Province of A!ra v. /ernan)o, 106
SC'A 105>
++. Wh"! $% &e",! /* B"'!-"(8 )$e'! ",) e#'(-%$1e
-%eE o0 !he pope!* 0o 'h"$!"/(e p-po%e% $% !he )$e'!
",) $&&e)$"!e ",) "'!-"( "pp($'"!$o, o0 !he pope!* $!%e(0
to the purposes #or (hich the charita+e institution is or1ani:ed.
It is not the use o# the inco"e #ro" the rea propert! that is
deter"inative o# (hether the propert! is used #or ta)%e)e"pt
purposes.
I# rea propert! is used #or one or "ore co""ercia
purposes/ it is not e)cusive! used #or the e)e"pted purpose
+ut is su+,ect to ta)ation/. The (ords ?do"inant use@ or
?principa use@ cannot +e su+stituted #or the (ords ?used
e)cusive!@ (ithout doin1 vioence to the Constitution and the
a(. Soe! is s!non!"ous (ith e)cusive!. =Lun- Center of the
Philippines v. Jue$on City, et al., etc., A. '. No. 1BB10B/ Fune .4/
.00B>
+3. Po!$o,% o0 !he (",) o0 " 'h"$!"/(e $,%!$!-!$o,8
%-'h "% " ho%p$!"(8 (e"%e) !o p$1"!e e,!$!$e% "% we(( "%
!ho%e p"!% o0 !he ho%p$!"( (e"%e) !o p$1"!e $,)$1$)-"(% "e
,o! e#e&p! 0o& e"( pope!* !"#e%. In the other hand/ the
portion o# the and occupied +! the hospita and portions o# the
hospita used #or its patients/ (hether pa!in1 or non%pa!in1/
are e)e"pt #ro" rea propert! ta)es. =Lun- Center of the
Philippines v. Jue$on City, et al., etc., A. '. No. 1BB10B/ Fune .4/
.00B>
+4. A% " .e,e"( p$,'$p(e8 " 'h"$!"/(e $,%!$!-!$o,
)oe% ,o! (o%e $!% 'h""'!e "% %-'h ",) $!% e#e&p!$o, 0o&
!"#e% %$&p(* /e'"-%e $! )e$1e% $,'o&e 0o& p"*$,.
p"!$e,!%8 whe!he o-!Gp"!$e,!8 o 'o,0$,e) $, !he ho%p$!"(8 o
e'e$1e% %-/%$)$e% 0o& !he .o1e,&e,!. So on1 as the
"one! received is devoted or used ato1ether to the charita+e
o+,ect (hich it is intended to achieve8 and no "one! inures to
the private +ene#it o# the persons "ana1in1 or operatin1 the
institution. =Lun- Center of the Philippines v. Jue$on City, et al.,
etc., A. '. No. 1BB10B/ Fune .4/ .00B>
+5. Ae po! ",) o!he 0"'$($!$e% ow,e) /* !he
Ph$($pp$,e Po!% A-!ho$!* e#e&p! 0o& e"( pope!*
!"#e% 2
48
S<AAESTED ANSWE'C No. The #act that the port and
its #aciities and appurtenances/ o(ned +! the $hiippine $orts
Authorit! =$$A>/ are accessi+e to the 1enera pu+ic does not
e)e"pt it #ro" the pa!"ent o# rea propert! ta)es. These are
patri"onia properties o# $$A/ not #or pu+ic use/ and that the
operation o# the port and its #aciities and the ad"inistration o#
its +uidin1s are in the nature o# ordinar! +usiness. $$A is a
pro#it earnin1 corporation/ hence its patri"onia properties are
su+,ect to ta). DPhilippine Ports Authority v. City of Iloilo, et al., A.
'. No. 1B7.1B/ Nove"+er 11/ .00B citin1 Li-ht Rail Transit Authority
v. Central (oar) of Assessment Appeals, 7B. SC'A 94. =.000>E
NITES AND CI55ENTSC
a. W"eho-%e% (o'"!e) $, po!% "e pope!* %-/>e'!
!o e"( pope!* !"#e% . $orts constructed +! the State are
properties o# the pu+ic do"inion under Art. B.0 o# the Civi
Code (hich enu"erates these as properties intended #or
pu+ic use.
&e that as it "a!/ a (arehouse/ (hich/ athou1h ocated
(ithin the port is distinct #ro" the port itse#. Thus/ it is su+,ect
to ta). The (arehouse/ in the case at +ar/ "a! not +e hed as
part o# the port/ considerin1 its separa+e nature as an
i"prove"ent upon the port/ and the #act that it is not open #or
use +! ever!one and #ree! accessi+e to the pu+ic.
In the sa"e (a! that the Supre"e Court once rued/ that the
e)e"ption o# pu+ic propert! #ro" ta)ation does not e)tend to
i"prove"ents "ade thereon +! ho"esteaders or occupants at
their o(n e)pense/ it i0e(ise uphed the ta)a+iit! o# the
(arehouse/ in the case at +ar/ it +ein1 a "ere i"prove"ent
+uit on an ae1ed propert! o# pu+ic do"ain. =Philippine Ports
Authority v. City of Iloilo, A. '. No. 104641/ Fu! 1B/ .007> This is sti
1ood doctrine.
+7. The L",$(" I,!e,"!$o,"( A$po! A-!ho$!*
@LIAAA w"% %-/>e'! !o e"( pope!* !"#e% /* !he
&-,$'$p"($!* o0 P"","D-e o, $!% "$po! (",)%8 ",)
/-$()$,.% o, !he .o-,) !h"! !he Lo'"( Go1e,&e,! Co)e
h"% w$!h)"w, e#e&p!$o,% pe1$o-%(* e,>o*e) /*
.o1e,&e,!Gow,e) ",) 'o,!o((e) 'opo"!$o,%. LIAA
'o,!e,)% o!hew$%e "% $! '("$&% $! $% ,o! " .o1e,&e,!
ow,e) o 'o,!o((e) 'opo"!$o,. Who $% 'oe'!.
S<AAESTED ANSWE'C 5IAA is correct +ecause it
is not a 1overn"ent o(ned or controed corporation +ut an
instru"entait! o# the 1overn"ent that is e)e"pt #ro"
ta)ation.
It is not a stoc0 corporation +ecause its capita is not
divided into shares/ neither is it a non%stoc0 corporation
+ecause there are no "e"+ers. It is instead an
instru"entait! o# the 1overn"ent upon (hich the oca
1overn"ents are not ao(ed to ev! ta)es/ #ees or other
char1es.
An instru"entait! ?re#ers to an! a1enc! o# the
Nationa Aovern"ent/ not inte1rated (ithin the depart"ent
#ra"e(or0 vested (ith specia #unctions or ,urisdiction +! a(/
endo(ed (ith so"e i# not a corporate po(ers/ ad"inisterin1
specia #unds/ and en,o!in1 operationa autono"!/ usua!
throu1h a charter. This ter" incudes re1uator! a1encies
chartered institutions and 1overn"ent%o(ned or controed
corporations.@ DSec. . =10>/ Introductor! $rovisions/ Ad"inistrative
Code o# 1486E It is an instru"entait! e)ercisin1 not on!
1overn"enta +ut aso corporate po(ers. It e)ercises
1overn"enta po(ers o# e"inent do"ain/ poice po(er
authorit!/ and ev!in1 o# #ees and char1es.
3ina!/ the airport ands and +uidin1s are propert!
o(ned +! the 1overn"ent that are devoted to pu+ic use and
are properties o# the pu+ic do"ain. =#anila International Airport
Authority v. Court of Appeals, et al., A. '. No. 155950/ Fu! .0/
.009>
+:. The p$&"* e"%o, 0o !he w$!h)"w"( o0 !"#
e#e&p!$o, p$1$(e.e% .",!e) !o .o1e,&e,!Gow,e) ",)
'o,!o((e) 'opo"!$o,% ",) "(( o!he -,$!% o0 .o1e,&e,!
(as that such privie1e resuted to serious ta) +ase erosion
and distortions in the ta) treat"ent o# si"iar! situated
enterprises/ hence resutin1 in the need #or these entities to
share in their re2uire"ents o# deveop"ent/ #isca or other(ise/
+! pa!in1 the ta)es and other char1es due #ro" the".
=Philippine Ports Authority v. City of Iloilo, A.'. No. 104641/ Fu! 1B/
.00B citin1 #actan Ce!u International Airport Authority v. #arcos, .91
SC'A 996>
+=. Two @+A p"'e(% o0 (",) pe1$o-%(* ow,e) /*
GSIS ",) %o() !o p$1"!e p"!$e% wee /o-.h! "! p-/($'
"-'!$o, /* " p$1"!e $,)$1$)-"( !o %"!$%0* e"( pope!* !"#
)e($,D-e,'$e%. S$,'e !he o$.$,"( ow,eF% )-p($'"!e TCT
49
'o-() ,o! /e 0o-,)8 !he /-*e %o-.h! !he e.$%!"!$o, o0 !he
(",) $, he ,"&e. The 'o-! o)ee) !he '",'e(("!$o, o0
GSISF !$!(e ",) !he $%%-",'e o0 " ,ew !$!(e $, !he /-*eF%
,"&e.
GSIS ,ow ",,-(&e,! o0 !he )e'$%$o, '("$&$,. !h"! $!
$% e#e&p! 0o& p"*&e,! o0 e"( pope!* !"#e% $,
"''o)",'e w$!h $!% 'h"!e R. A. No. =+61 wh$'h po1$)e%
"&o,. o!he% !h"!8 BA''o)$,.(*8 ,o!w$!h%!",)$,. ",* ("w%
!o !he 'o,!"*8 !he GSIS8 $!% "%%e!%8 e1e,-e%8 $,'(-)$,. "((
"''-"(% !hee!o8 ",) /e,e0$!% p"$) %h"(( /e e#e&p! 0o& "((
!"#e%8 "%%e%%&e,! 0ee%8 'h".e% o )-!$e% o0 "(( ;$,)%.E
@Se'. 36A I! $% !he '("$& o0 GSIS !h"! !he "/o1e po1$%$o,%
o0 R.A. No. =+618 " ("!e ("w8 "/o."!e) !he po1$%$o,% o0
R.A. No. :17?.
I% !he 'o,!e,!$o, o0 GSIS !e,"/(e2
S<AAESTED ANSWE'C No. Even i# the charter o#
ASIS 1enera! e)e"pts it #ro" ta) ia+iities/ the prescription is
not so enco"passin1 as to "a0e the ta) e)e"ption appica+e
to the properties in dispute. The properties (ere aread!
trans#erred and the aienation o# the properties sod +! ASIS
(as the pro)i"ate cause and necessar! conse2uence o# the
dein2uent ta)es due. =overnment Service Insurance System v.
City Assessor of Iloilo City, et al., A.'. No. 1B614./ Fune .6/ .009
citin1 City of (a-uio v. (usue-o, No. L%.466./ 18 Septe"+er 1480/
100 SC'A 119>
The ae1ation o# the repea o# '.A. No. 6190 +! '.A.
8.41/ is not convincin1. 'epea cannot +e assu"ed8 the
intention to revo0e "ust +e cear and "ani#est. To +rin1 a+out
an i"pied repea/ the t(o a(s "ust +e cear! repu1nant in
a(a! that the ater a( '.A. 8.41 coud not e)ist (ithout
nui#!in1 the earier a(/ '. A. No. 6190. =overnment Service
Insurance System, supra>
Sec. 74 o# '.A. No. 8.41 shoud +e read consistent!
(ith its avo(ed purpose G the "aintenance o# its actuaria
sovenc! to #inance the retire"ent/ disa+iit! and i#e insurance
+ene#its o# its "e"+ers. The ta)%e)e"pt properties and assets
o# ASIS re#erred to those that re"ained at its disposa and use/
either #or invest"ent or #or inco"e 1eneratin1 purposes.
$roperties (hose actua and +ene#icia use had +een
trans#erred to private ta)a+e persons/ #or consideration or
other(ise/ are e)cuded and are thus ta)a+e. . =I!i), citin1
Ru!ia v. overnment Service Insurance System, A.'. No. 151B74/
.1 Fune .00B/ B7. SC'A5.4>>
+6. A !e(e'o&&-,$'"!$o,% 'o&p",* w"% .",!e)
/* Co,.e%% o, <-(* +?8 166+8 "0!e !he e00e'!$1$!* o0 !he
Lo'"( Go1e,&e,! Co)e o, <",-"* 18 166+8 " (e.$%("!$1e
0",'h$%e w$!h !"# e#e&p!$o, p$1$(e.e% wh$'h p"!(*
e")%8 BThe .",!ee8 $!% %-''e%%o% o "%%$.,% %h"(( /e
($"/(e !o p"* !he %"&e !"#e% o, !he$ e"( e%!"!e8 /-$()$,.%
",) pe%o,"( pope!*/ e)cusive o# this #ranchise/ "% o!he
pe%o,% o 'opo"!$o,% "e ,ow o hee"0!e &"* /e
eD-$e) /* ("w !o p"*.E Th$% po1$%$o, e#$%!e) $, !he
'o&p",*F% 0",'h$%e p$o !o !he e00e'!$1$!* o0 !he Lo'"(
Go1e,&e,! Co)e. A C$!* !he, e,"'!e) ", o)$,",'e $,
1663 $&po%$,. " e"( pope!* o, "(( e"( pope!$e%
(o'"!e) w$!h$, !he '$!* ($&$!%8 ",) w$!h)"w$,. "(( !"#
e#e&p!$o,% pe1$o-%(* .",!e). A&o,. pope!$e%
'o1ee) "e !ho%e ow,e) /* !he 'o&p",* 0o& wh$'h !he
C$!* $% ,ow 'o((e'!$,. P43 &$(($o,. The pope!$e% o0 !he
'o&p",* wee !he, %'he)-(e) /* !he C$!* 0o %"(e "!
p-/($' "-'!$o,.
The 'o&p",* !he, 0$(e) " pe!$!$o, 0o !he $%%-",'e o0
" w$! o0 poh$/$!$o, '("$&$,. e#e&p!$o, -,)e $!%
(e.$%("!$1e 0",'h$%e. The C$!* )e0e,)e) $!% po%$!$o,
"$%$,. !he 0o((ow$,.:
". Thee w"% ,o e#h"-%!$o, o0 ")&$,$%!"!$1e
e&e)$e% /e'"-%e !he &"!!e %ho-() h"1e 0$%! /ee, 0$(e)
/e0oe !he Lo'"( Bo") o0 A%%e%%&e,! Appe"(%K
/. The 'o&p",*F% pope!$e% "e e#e&p! 0o& !"#
-,)e $!% 0",'h$%e.
Re%o(1e !he $%%-e% "$%e).
S<AAESTED ANSWE'SC
a. There is no need to e)haust ad"inistrative
re"edies as the appea to the L&AA is not a speed! and
ade2uate re"ed! (ithin the a(. This is so +ecause the
properties are aread! schedued #or auction sae.
3urther"ore one o# the reco1ni:ed e)ceptions to the
rue on e)haustion is that i# the issue is pure! e1a in
character (hich is so in this case.
+. The properties are e)e"pt #ro" ta)ation. The
1rant o# ta)in1 po(ers to oca 1overn"ents under the
50
Constitution and the Loca Aovern"ent Code does not a##ect
the po(er o# Con1ress to 1rant ta) e)e"ptions.
The ter" ?e)cusive o# this #ranchise@ is interpreted to
"ean properties actua!/ direct! and e)cusive! used in the
radio or teeco""unications +usiness. The su+se2uent piece
o# e1isation (hich reiterated the phrase ?e)cusive o# this
#ranchise@ #ound in the previous ta) e)e"ption 1rant to the
co"pan! is an e)press and rea intention on the part o#
Con1ress to once a1ainst re"ove #ro" the LAC*s dee1ated
ta)in1 po(er/ a o# the co"pan!*s properties that are actua!/
direct! and e)cusive! used in the pursuit o# its #ranchise.
=The City overnment of Jue$on City, et al., v. (ayan
Telecommunications, Inc., A. '. No. 19.015/ 5arch 9/ .009>
ADVANCE CONGRATULATIONS
AND SEE YOU IN COURT
51