I-B1

Topic: Tax Returns and Other Administrative Requirements

PASEO REALTY AND DEVELOPMENT CORP. vs.COURT OF APPEALSG.R. No. 119286 October 13, 2004FACTS:
Paseo Realty and Development Corporation, a domestic corporation engaged in the lease of two parcels of land at Paseo de Roxas in Makati City. On April 16, 1990,
petitioner filed its Income Tax Return for the calendar year1989 declaring a gross income of P1,855,000.00, deductions of P1,775,991.00, net income of P79,009.00, an
income tax due thereon in the amount of P27,653.00, prior
year‘s excess credit of P146,026.00, and creditable taxes withheld in 1989 of P54,104.00 or a total tax credit of P200,130.00 and credit balance of P172,477.00.In a
resolution dated October 21, 1993 Respondent Court reconsidered its decision of July 29, 1993 and dismissed the petition for review, stating that it has ―overlooked
the fact that the petitioner‘s 1989 Corporate Income Tax Return (Exh. ―A‖) indicated that the amount of P 54,104.00 subject of petitioner‘s claim for refund has
already been included as part and parcel of the P172,477.00 which the petitioner automatically applied as tax credit for the succeeding taxable year 1990.‖
Petitioner filed a Motion for Reconsideration which was denied by respondent Court on March 10, 1994.Petitioner filed a Petition for Review dated April 3, 1994with
the Court of Appeals. Resolving the twin issues of whether petitioner is entitled to a refund of P54,104.00 representing creditable taxes withheld in 1989 and whether
petitioner applied such creditable taxes withheld to its 1990 income tax liability, the appellate court held that petitioner is not entitled to a refund because it had
already elected to apply the total amount of P172,447.00, which includes the P54,104.00 refund claimed, against its income tax liability for 1990. The appellate court
elucidated on the reason for its dismissal of petitioner‘s claim for refund.

ISSUE:
Whether or not the alleged excess taxes paid by a corporation during a taxable year should be refunded or credited against its tax liabilities for the succeeding year?

RULING:
The petition must be denied. As a matter of principle, it is not advisable for this Court to set aside theconclusion reached by an agency such as the CTA which is, by the
very nature of its functions, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject, unless
there has been an abuse or improvident exercise of its authority. This interdiction finds particular application in this case since the CTA, after careful consideration of
the merits of the Commissioner of Internal Revenue‘s motion for reconsideration, reconsidered its earlier decision which ordered the latter to refund the amount of
P54,104.00 to petitioner. Its resolution cannot be successfully assailed based, as it is, on the pertinent laws as applied to the facts.

Petitioner‘s 1989 tax return indicates an aggregate creditable tax of P172,477.00, representing its 1988 excess credit of P146,026.00 and 1989 creditable tax
of P54,104.00 less tax due for 1989, which it elected to apply as tax credit for the succeeding taxable year.

According to petitioner, it successively utilized this amount when it obtained refunds in CTA Case No. 4439 and CTA Case No. 4528 and applied its1990 tax liability,
leaving a balance of P54,104.00, the amount subject of the instant claim for refund. The confusion as to petitioner‘s entitlement to a refund could altogether have been
avoided had it presented its tax return for 1990. Such return would have shown whether petitioner actually applied its 1989 tax credit of P172,477.00, which includes
the P54,104.00 creditable taxes withheld for 1989 subject of the instant claim for refund, against its 1990 tax liability as it had elected in its 1989 return, or at least,
whether petitioner‘s tax credit of P172,477.00 was applied to its approved refunds as itclaims. As clearly shown from the above-
quoted provisions, in case the corporation isentitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final
adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding year. The carrying forward of any
excess or overpaid income tax for a given taxable year is limited to the succeeding taxable year only. Taxation is a destructive power which interferes with the personal
and property rights of the people and takes from them a portion of their property for the support of the government. And since taxes are what we pay for civilized
society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris
against the taxpayer and liberally in favor of the taxing authority. A claim of refund or exemption from tax payments must be clearly shown and be based on language
in the law too plain to be mistaken. Else wise stated, taxation is the rule, exemption therefrom is the exception.

I-B2

FELS ENERGY, INC. V THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS
G.R. No. 168557 February 16, 2007

FACTS
Two consolidated cases were filed by FELS Energy, Inc. (FELS) and National Power Corporation (NPC), respectively.

NPC entered into a lease contract with Polar Energy, Inc. over diesel engine power barges moored at Batangas. The contract, denominated as an Energy Conversion
Agreement, was for a period of five years wherein, NPC shall be responsible for the payment of:
(a) all taxes, import duties, fees, charges and other levies imposed by the National Government
(b) all real estate taxes and assessments, rates and other charges in respect of the Power Barges

Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. Thereafter, FELS received an assessment of real property taxes on the power barges.
The assessed tax, which likewise covered those due for 1994, amounted to P56,184,088.40 per annum. FELS referred the matter to NPC, reminding it of its obligation
under the Agreement to pay all real estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding the real property assessment of
the Provincial Assessor.

NPC sought reconsideration of the Provincial Assessor’s decision to assess real property taxes on the power barges. However, the motion was denied. The Local Board
of Assessment Appeals (LBAA) ruled that the power plant facilities, while they may be classified as movable or personal property, are nevertheless considered real
property for taxation purposes because they are installed at a specific location with a character of permanency.

FELS appealed the LBAA’s ruling to the Central Board of Assessment Appeals (CBAA). The CBAA rendered a Decision finding the power barges exempt from real
property tax.

It was later reversed by the cbaa upon reconsideration and affirmed by the CA

ISSUE
Whether power barges, which are floating and movable, are personal properties and therefore, not subject to real property tax.

1
 RULING
No. Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which, though floating, are intended by their nature and object to remain at a fixed place
on a river, lake, or coast" are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery
and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs
of said industry or work.
The findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS is the entity being taxed by the local government. As stipulated under
the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the Site used in connection with
the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges for the purpose of converting Fuel of
NAPOCOR into electricity.
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section 234 (c) of R.A. No. 7160,

…the law states that the machinery must be actually, directly and exclusively used by the government owned or controlled corporation;

The agreement POLAR undertakes that until the end of the Lease Period, it will operate the Power Barges to convert such Fuel into electricity. Therefore, FELS shall be
liable for the realty taxes and not the NPC who is not actually, directly and exclusively using the same. It is a basic rule that obligations arising from a contract have the
force of law between the parties

CONCLUSION
Petitions are DENIED.

I-B3

MCIAA vs. MARCOS G.R. No. 120082, September 11, 1996 261 SCRA 667 Public Corporation, Taxation, Local Government Code, Realty Tax,
OCTOBER 30, 2017

FACTS:

Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act 6958. Since the time of its creation, MCIAA enjoyed the privilege of
exemption from payment of realty taxes in accordance with Section 14 of its Charter. However on 11 October 1994, the Office of the Treasurer of Cebu, demanded for
the payment of realty taxes on several parcels of land belonging to the petitioner.

Petitioner objected to such demand for payment as baseless and unjustified and asserted that it is an instrumentality of the government performing governmental
functions, which puts limitations on the taxing powers of local government units.

The City refused to cancel and set aside petitioner’s realty tax account, insisting that the MCIAA is a government controlled corporation whose tax exemption privilege
has been withdrawn by virtue of Sections 193 and 234 of the Local Government Code (LGC), and not an instrumentality of the government but merely a government
owned corporation performing proprietary functions. MCIAA paid its tax account “under protest” when City is about to issue a warrant of levy against the MCIAA’s
properties.

MCIAA filed a Petition of Declaratory Relief with the RTC contending that the taxing power of local government units do not extend to the levy of taxes or fees on an
instrumentality of the national government. It contends that by the nature of its powers and functions, it has the footing of an agency or instrumentality of the national
government; which claim the City rejects. The trial court dismissed the petition, citing that close reading of the LGC provides the express cancellation and withdrawal
of tax exemptions of Government Owned and Controlled Corporations.

ISSUE: Whether the MCIAA is exempted from realty taxes.

RULING:

Tax statutes are construed strictly against the government and liberally in favor of the taxpayer. But since taxes are paid for civilized society, or are the lifeblood of the
nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayer and liberally in
favor of the taxing authority.

A claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Taxation is the rule, exemption therefrom is
the exception. However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not apply because the practical
effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of its operations.

2
Further, since taxation is the rule and exemption therefrom the exception, the exemption may be withdrawn at the pleasure of the taxing authority. The only exception to
this rule is where the exemption was granted to private parties based on material consideration of a mutual nature, which then becomes contractual and is thus covered
by the non-impairment clause of the Constitution.

MCIAA is a “taxable person” under its Charter (RA 6958), and was only exempted from the payment of real property taxes. The grant of the privilege only in respect of
this tax is conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except real property tax.

Since Republic Act 7160 or the Local Government Code (LGC) expressly provides that “All general and special laws, acts, city charters, decrees [sic], executive orders,
proclamations and administrative regulations, or part of parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly.”

With that repealing clause in the LGC, the tax exemption provided for in RA 6958 had been expressly repealed by the provisions of the LGC. Therefore, MCIAA has to
pay the assessed realty tax of its properties effective after January 1, 1992 until the present.

I-B4 ERMITA-MALATE HOTEL & MOTEL OPERATORS v. CITY MAYOR OF MANILA

Facts:
The petitioners filed a petition for prohibition against Ordinance No. 4760 for being violative of the due process clause, contending that said
ordinance is not only arbitrary, unreasonable or oppressive but also vague, indefinite and uncertain, and likewise allege the invasion of the right to privacy
and the guaranty against self-incrimination.

Ordinance No. 4760 proposes to check the clandestine harboring of transients and guests of these establishments by requiring these transients
and guests to fill up a registration form, prepared for the purpose, in a lobby open to public view at all times, and by introducing several other amendatory
provisions calculated to shatter the privacy that characterizes the registration of transients and guests." Moreover, the increase in the licensed fees was
intended to discourage "establishments of the kind from operating for purpose other than legal" and at the same time, to increase "the income of the city
government."

The lower court ruled in favor of the petitioners. Hence, the appeal.

Issue: Whether or not Ordinance No. 4760 is unconstitutional

Held: No.

Rationale:

The mantle of protection associated with the due process guaranty does not cover petitioners. This particular manifestation of a police power
measure being specifically aimed to safeguard public morals is immune from such imputation of nullity resting purely on conjecture and unsupported by
anything of substance. To hold otherwise would be to unduly restrict and narrow the scope of police power which has been properly characterized as the
most essential, insistent and the least limitable of powers,4 extending as it does "to all the great public needs."

It would be, to paraphrase another leading decision, to destroy the very purpose of the state if it could be deprived or allowed itself to be deprived
of its competence to promote public health, public morals, public safety and the general welfare. Negatively put, police power is that inherent and plenary
power in the State which enables it to prohibit all that is hurt full to the comfort, safety, and welfare of society.

On the legislative organs of the government, whether national or local, primarily rest the exercise of the police power, which, it cannot be too
often emphasized, is the power to prescribe regulations to promote the health, morals, peace, good order, safety and general welfare of the people.

In view of the requirements of due process, equal protection and other applicable constitutional guaranties however, the exercise of such police
power insofar as it may affect the life, liberty or property of any person is subject to judicial inquiry. Where such exercise of police power may be considered
as either capricious, whimsical, unjust or unreasonable, a denial of due process or a violation of any other applicable constitutional guaranty may call for
correction by the courts.

The Court reversed the judgment of the lower court and lifted the injuction on the Ordinance in question.

*** Liberty is a blessing without which life is a misery, but liberty should not be made to prevail over authority because then society will fall into
anarchy. Neither should authority be made to prevail over liberty because then the individual will fall into slavery.

I-B5

G.R. No. 159796 July 17, 2007

ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and ENVIRONMENTALIST CONSUMERS NETWORK, INC. (ECN), petitioners
vs
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC), NATIONAL POWER CORPORATION (NPC), POWER
SECTOR ASSETS AND LIABILITIES MANAGEMENT GROUP (PSALM Corp.), STRATEGIC POWER UTILITIES GROUP (SPUG), and PANAY
ELECTRIC COMPANY INC. (PECO),respondents.
FACTS:
On June 8, 2001 Congress enacted RA 9136 or the Electric Power Industry Act of 2001. Petitioners Romeo P. Gerochi and company assail the validity of Section 34 of
the EPIRA Law for being an undue delegation of the power of taxation. Section 34 provides for the imposition of a “Universal Charge” to all electricity end users after
a period of (1) one year after the effectively of the EPIRA Law. The universal charge to be collected would serve as payment for government debts, missionary
electrification, equalization of taxes and royalties applied to renewable energy and imported energy, environmental charge and for a charge to account for all forms

3
of cross subsidies for a period not exceeding three years. The universal charge shall be collected by the ERC on a monthly basis from all end users and will then be
managed by the PSALM Corp. through the creation of a special trust fund.

ISSUE:
Whether or not there is an undue delegation of the power to tax on the part of the ERC

HELD:
No, the universal charge as provided for in section 34 is not a tax but an exaction of the regulatory power (police power) of the state. The universal charge under
section 34 is incidental to the regulatory duties of the ERC, hence the provision assailed is not for generation of revenue and therefore it cannot be considered as tax,
but an execution of the states police power thru regulation.

Moreover, the amount collected is not made certain by the ERC, but by the legislative parameters provided for in the law (RA 9136) itself, it therefore cannot be
understood as a rule solely coming from the ERC. The ERC in this case is only a specialized administrative agency which is tasked of executing a subordinate legislation
issued by congress; which before execution must pass both the completeness test and the sufficiency of standard test. The court in appreciating Section 34 of RA
9136 in its entirety finds the said law and the assailed portions free from any constitutional defect and thus deemed complete and sufficient in form.

I-B6

CIR v Tokyo Shipping Co. LTD. GR No L-68252, May 26, 1995

FACTS:
Tokyo Shipping filed a claim for refund from the BIR for erroneous prepayment of income and common carrier’s taxes amounting to P107,142.75 since no receipt was
realized from its charter agreement. BIR failed to act promptly on the claim and thus it was elevated to the Court of Tax Appeals which decided in favor of the refund.
Hence, this petition for review on certiorari.

ISSUE:
Whether Tokyo Shipping is entitled to a refund or tax credit for the prepayment of taxes

RULING:
Yes. The power of taxation is sometimes called also the power to destroy. Therefore, it should be exercised with caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden egg”. Fair deal is expected by taxpayers from the BIR
and the duty demands that BIR should refund without unreasonable delay the erroneous collection.