TAX BURDEN

PHILACOR CREDIT CORPORATION V. COMMISSIONER OF INTERNAL REVENUE

FACTS:
Philacor, herein petitioner, seeks the reversal of the decision rendered by the Court of Tax
Appeals which held the petitioner liable deficiency documentary stamp tax (DST) on (1) the
issuance of promissory notes; and (2) the assignment of promissory notes for the fiscal year
ended 1993.
Philacor is engaged in retail financing. Through retail financing, a prospective buyer of a home
appliance – with neither cash nor any credit card – may purchase appliances on installment basis
from an appliance dealer.
On July 6, 1974, Revenue Officer Celestino Mejia examined Philacor’s books of accounts and
other accounting records for the fiscal year August 1, 1992 to July 31, 1993. Philacor then
received Pre-Assessment Notices (PANs), all dated July 18, 1996, covering the alleged deficiency
income, percentage and DSTs, including increments.
On February 3, 1998, Philacor received demand letters and the corresponding assessment
notices, all dated January 28, 1998.
In a protest, Philacor argued, among others, that the assessed deficiency tax was erroneously
computed and that were void for void for failure to state the law and the facts on which they were
based. As for the deficiency DST, Philacor claims that the accredited appliance dealers were
required by law to affix the documentary stamps on all promissory notes purchased until the
enactment of Republic Act No. 7660 which took effect on January 15, 1994.
The CTA partially granted Philacor’s motion in the resolution of April 6, 2004,15 wherein it
cancelled the assessment for deficiency income tax and deficiency percentage tax. Nevertheless,
the CTA Division sustained the assessment for deficiency DST. Hence, this petition.

ISSUE : Whether Philacor is liable for the deficiency DST.

RULING: No. Philacor is not liable for deficiency DST.

The 1986 Tax Code clearly specifies those that are liable for tax - The persons primarily liable for
the payment of the DST are the person (1) making; (2) signing; (3) issuing; (4) accepting; or (5)
transferring the taxable documents, instruments or papers. Clearly, Philacor does not fall within the
ambit of such law.

The settled rule is that in case of doubt, tax laws must be construed strictly against the State and
liberally in favor of the taxpayer. Tax as burdens which must be endured by the taxpayer, should not
be presumed to go beyond what the law expressly and clearly declares.
TAX EXEMPTION

COMMISSIONER OF INTERNAL REVENUE V. A.D. GUERRERO

FACTS:
A novel question, one of importance and significance, is before this Court in this petition for the
review of a decision of the Court of Tax Appeals. For the first time, the Ordinance appended to
the Constitution calls for interpretation, having been invoked to justify a claim for refund of taxes
by the estate of an American national, who in his life-time was engaged in the air transportation
business. More specifically, the issue is whether Section 142 of the National Internal Revenue
Code allowing Filipinos a refund of 50 percentum of the specific tax paid on aviation oil, could be
availed of by citizens of the United States and all forms of business enterprises owned or
controlled directly by them in view of the privilege under the Ordinance to operate public utilities.
The deceased operated an air transportation business under the business name and style of
Philippine Aviation Development. The administrator, accordingly, claimed that the estate was
entitled to the same rights and privileges as Filipino citizens operating public utilities including
privileges in the matter of taxation
The Commissioner of Internal Revenue, now petitioner before this Court, denied the claim for
refund filed by the administrator of the estate of Paul I. Gunn. The Commissioner argued that
partial exemption from the gasoline tax was not included under the terms of the Ordinance and
that in accordance with the statute, to be entitled to its benefits, there must be a showing that the
United States of which the deceased was a citizen granted a similar exemption to Filipinos.
The matter was brought to the CTA. Judgment rendered in favor of the administrator of the estate.
Hence, this petition.

ISSUE: Whether the estate of the deceased is entitled to a tax refund.

RULING: No. The estate is not entitled to a tax refund.

From 1906, in Catholic Church vs. Hastings3 to 1966, in Esso Standard Eastern, Inc. vs. Acting
Commissioner of Customs,4 it has been the constant and uniform holding that exemption from
taxation is not favored and is never presumed, so that if granted it must be strictly construed
against the taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence, an
exempting provision should be construed strictissimi juris.
At the time then when the Ordinance took effect in April, 1947, the strict rule against tax exemption
was undisputed and indisputable. Such being the case, it would be a plain departure from the
terms of the Ordinance to predicate a tax exemption where none was intended. No such grant
was apparent on the face of the Ordinance. No such grant could be implied from its history, much
less from its transitory character. To the extent that a refund is allowable, there is in reality a tax
exemption. The rule applied with undeviating rigidity in the Philippines is that for a tax exemption
to exist, it must be so categorically declared in words that admit of no doubt. No such language
may be found in the Ordinance.
TAX REFUND

APPLIED FOOD INGREDIENTS COMPANY INC. V. COMMISSIONER OF INTERNAL

REVENUE

FACTS:
Herein petitioner filed a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of
Civil Procedure to assail the decision of the CTA denying petitioner’s claim for the issuance of a
tax credit certificate.
Petitioner is registered with the Regional District Office (RDO) No. 43 of the BIR in Pasig City
(BIR-Pasig) as, among others, a Value-Added Tax (VAT) taxpayer engaged in the importation
and exportation business, as a pure buy-sell trader.
In 2002, petitioner applied for the issuance of a tax credit certificate. However, the same was
allegedly under examination by respondent’s examiner. Respondent further said that taxes paid
and collected are presumed to have been made in accordance with law and regulations, hence
not refundable; petitioner’s allegation that it erroneously and excessively paid the tax during the
year under review does not ipso facto warrant the refund/credit or the issuance of a certificate
thereto; petitioner must prove that it has complied with the governing rules with reference to tax
recovery or refund, which are found in Sections 204(C) and 229 of the Tax Code, as amended.

ISSUE: Whether the petitioner is entitled to the issuance of a tax credit certificate.

RULING: No. Petitioner is not entitled to the issuance of a tax credit certificate.
Section 112 of the NIRC of 1997 laid down the manner in which the refund or credit of input tax
may be made, which among others, provided when the claim should be filed. [SEC. 112. Refunds or Tax
Credits of Input Tax. - (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance
of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the
extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under
Section 106(A)(2)(a)(1), (2) and (B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had
been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That
where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties
or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions,
it shall be allocated proportionately on the basis of the volume of sales.]

Records, however, show that the judicial claim of petitioner was filed on 24 July 2002.15 Petitioner
clearly failed to observe the mandatory 120-day waiting period. Thus in Commissioner of Internal
Revenue v. San Roque Power Corporation, this Court held that “Failure to comply with the 120-
day waiting period violates a mandatory provision of law. It violates the doctrine of exhaustion of
administrative remedies and renders the petition premature and thus without a cause of action,
with the effect that the CTA does not acquire jurisdiction over the taxpayer’s petition.
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly
against the taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT
System is with the 120+30 day mandatory and jurisdictional periods. Thus, strict compliance with
the 120+30 day periods is necessary for such a claim to prosper, whether before, during, or after
the effectivity of the Atlas doctrine, except for the period from the issuance of BIR Ruling No. DA-
489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which
again reinstated the 120+30 day periods as mandatory and jurisdictional.
Considering that petitioner’s judicial claim was filed on 24 July 2002, when the 120+30 day
mandatory periods were already in the law and BIR Ruling No. DA-489-03 had not yet been
issued, petitioner does not have an excuse for not observing the 120+30 day period. Failure of
petitioner to observe the mandatory 120-day period is fatal to its claim and rendered the CTA
devoid of jurisdiction over the judicial claim. Petition denied.
NATURALIZATION LAW

BENJAMIN CO V. REPUBLIC OF THE PHILIPPINES

FACTS:
The instant case in an appeal brought by the government assailing the decision of the trial court
in finding Banjamin Co to possess all the qualifications for naturalization and none of the
disqualifications mentioned in the law, hence granting his petition for naturalization.
The facts of his compliance with the requirements were presented. Among others, he presented
that he was born in Bangued, Abra. His parents and his wife are all Chinese nationals. Benjamin
Co alleged that he has spent his entire life in the Philippines where he finished his primary,
secondary, and tertiary education and that since his birth, he has never gone abroad. He has
never been accused of any crime involving moral turpitude and is not opposed to the government.
He also mingles with the Filipinos. Further, he pronounced that he prefers a democratic form of
government and stated that should his petition be granted, he would serve the government either
in the military of civil department.
However, the government contends that from the evidence introduced, it would appear that he
failed to comply with some of the requirements prescribed by law to qualify for citizenship. Among
others, he failed to establish that he believes in the principle underlying the Philippine constitution.
On cross-examination he made mention that he believes in the law of the Philippines. But as to
what those laws he believes, he gave an answer which conveys the meaning that he believes in
democracy or in a democratic form of government.

ISSUE: Whether the trial court erred in granting Co’s petition for naturalization.

RULING. Yes. The trial court erred in granting Co’s petition for naturalization.
In Co Quing y Reyes vs Republic, the Court ruled that naturalization laws should be rigidly
enforced and strictly construed in favor of the government and against the applicant.
Here, the scope of the word law in ordinary legal parlance does not necessarily include the
constitution which is the fundamental law of the land, nor does it cover all the principles underlying
out constitution. In so stating that he believes merely in our laws, he did not necessarily refer to
the principles embodied in our constitution. Further, it appeared that Co failed to conduct himself
in a proper and irreproachable manner in his relation with our government by not registering his
wife and child with the Bureau of Immigration as required by law. He also failed to file his income
tax return.
Decision appealed from is therefore reversed.
 RICHARD VELASCO V. REPUBLIC OF THE PHILIPPINES
FACTS:
A petition for naturalization was filed by herein appellant in CFI Manila. After trial, the same was
denied for failure of the petitioner to meet the requirements of law.
Among others, petitioner presented that he was born in the Philippines in 1932 of Chinese
spouses who became naturalized citizens in 1956. Petitioner alleges that since his birth, he
continuously resided in the country. He also finished his education in the Philippines where he
graduated in dentistry. Further, it was also presented that he knows how to speak and write in
English and Tagalog; that he has never been convicted of any crime involving moral turpitude and
that he does not believe nor practice polygamy and anarchy.
His qualifications as to moral character were further attested by three witnesses, among others,
include his prospective mother-in-law. It was also found out that the petitioner’s income was
neither lucrative nor substantial to meet the requirement of law.
With the foregoing, the trial court declared him not qualified to become a Filipino citizen.

ISSUE: Whether petitioner is not qualified to become a Filipino citizen.

RULING: Yes. Petitioner is not qualified to become a Filipino citizen.

In Co Quing y Reyes vs Republic, the Court ruled that naturalization laws should be rigidly
enforced and strictly construed in favor of the government and against the applicant.
It appears from evidence that petitioner was employed in a drug store barely a month before he
filed the instant petition and that said store is partly owned by his mother. This leads to believe
that, even if his employment was true, it is but a convenient arrangement planned out by him and
his family in order to show compliance with the requirement of law for citizenship.
Decision appealed from is therefore affirmed.
 CELESTINO CO Y QUING REYES V. REPUBLIC OF THE PHILIPPINES
FACTS:
The OSG filed an appeal before the SC to assail the decision of the CFI Manila granting the
petition for naturalization of one Celestino Co y Quing Reyes in that the latter failed to comply with
all the requirements prescribed by the law to acquire Philippine citizenship.
Accordingly, it was undisputed that the requirement of publication provided for in Section 9 of
Commonwealth Act 473 was not fully complied. The OSG further argued that although there was
substantial compliance of the law because the notice of hearing in question was published three
times in the Voz de Manila and once in the Official Gazette; but since the law expressly provides
that the notice of hearing be published three times, this should be strictly observed. A single
publication therefore of the notice where the law requires 3 is an incomplete publication, and an
incomplete publication is not a valid publication. The grant of citizenship is only a mere privilege,
and a strict compliance with law on the part of the applicant is essential.".
Appellee argued however that because he had the notice of hearing in question published, once,
in the Official Gazette, he should be given the benefit of having followed the law. He further argued
that that the sufficiency of said publication was not questioned in the lower court and cannot be
raised for the first time on appeal; that the duty to publish the petition is imposed by law upon the
clerk of court, not upon petitioner; and that non-compliance with said section 9 "is not a fatal defect
unless it is actually established that it prejudices the opposition to the application."
ISSUE: Whether the required publication prescribed by law was complied.
RULING: No.
The decision of the lower court granting appellee's petition for naturalization affected his personal
status and accordingly, it "is in the nature of a judgment in rem. Accordingly, the decision of the
lower court, in the case at bar, if valid, would be binding upon "all the world". Upon on the other
hand, in order that a court could validly try and decide any case, "it must have jurisdiction both
over the subject matter and over the persons of the parties.” Jurisdiction over the plaintiff or
petitioner is acquired by his voluntary submission to the authority of the Court, resulting from the
filing of the complaint or petition. Jurisdiction over other parties may be obtained, either by their
voluntary appearance or by service of summons . In a proceeding in rem, which binds the "whole
world", the latter is, in legal contemplation, a party therein, for, otherwise, it could not be bound
by the result thereof. It being impossible to serve summons personally upon every human being
in this world, the summons must be published as-provided by law. Otherwise, the court would
have no jurisdiction over all parties concerned and, as a consequence, any decision rendered in
the case would be a nullity .
For this reason, it is well settled that the procedure prescribed by law for the naturalization of an
alien "should be strictly followed". Hence, naturalization laws "should be rigidly enforced and
strictly construed in favor of the government and against applicant for citizenship".
In short, non-compliance with the requirements thereof, relative to the publication of the petition,
affects the jurisdiction of the court. It constitutes a fatal defect, for it impairs the very root or
foundation of the authority to decide the case, regardless of whether the one to blame therefor is
the clerk of court or the petitioner or his counsel. Failure to raise this question in the lower court
would not cure such defect. Decision appealed from is therefore reversed.
ELECTION LAWS

HECTOR T. HIPE v. COMMISSION ON ELECTIONS and MA. CRISTINA L. VICENCIO

G.R. No. 181528 October 2, 2009

Construction of Election Laws | Will of the electorate in the choice of public officials not defeated
by mere technicalities
FACTS: Hipe and Vicencio were candidates for the mayoralty post in in the May 14, 2007. During
the canvass proceedings of the Municipal Board of Canvassers of Catubig, Northern Samar
(MBOC), Vicencio petitioned for the exclusion of seven election returns on grounds that they were
prepared under coercion, and that vote buying, threats & intimidation prevented voters from voting
so that the said returns did not reflect the will of the electorate. Affidavits in support of the petition
were presented by Vicencio. On May 19, the MBOC ruled in favor of Vicencio and excluded the
7 ERs. That same day Hipe filed a notice of appeal, & thereafter a Verified Appeal (VA) with the
COMELEC on May 29. In its Resolution, the COMELEC 2nd Division dismissed Hipe’s appeal for
being filed out of time. Subsequently, Hipe filed a Motion for Reconsideration. COMELEC En
Banc resolved the issue by holding that the MBOC’s ruling has already attained finality
considering that the filing of the VA with the COMELEC was 5 days late. It stated that the filing of
the VA should have been made within the inextendible period of 5 days from the notice of appeal.
COMELEC En Banc affirmed the Resolution of its 2nd Div., denying Hipe’s MR for being filed out
of time. Hence, Hipe’s appeal to the SC.
ISSUE: Whether petitioner’s appeal should be given merit amidst procedural rules.
RULING: The petition was PARTLY meritorious hence PARTLY granted. Court SET ASIDE the
Resolutions of the COMELEC only insofar as they dismissed Hipe’s appeal, but AFFIRMED the
decision as to the declaration of the exclusion of the 7 ERs.
RATIO:
1. Election laws should be reasonably and liberally construed to achieve their purpose - to
effectuate and safeguard the will of the electorate in the choice of their representatives. The courts
frown upon any interpretation that would hinder in any way not only the free and intelligent casting
of votes in any election but also the correct ascertainment of the results thereof.

2. Disputes in the outcome of elections involve public interest. Technicalities and procedural
barriers should not be allowed to stand if they constitute an obstacle to the determination of the
true will of the electorate in the choice of their elective officials. Laws governing such disputes
must be liberally construed to the end that the will of the people in the choice of public officials
may not be defeated by mere technicalities. Hence, it is submitted that there is a need to suspend
the procedural rules and resolve the merits of the case to promote justice and safeguard the will
of the electorate of Catubig, Northern Samar.
 SERGIO G. AMORA, JR., V. COMELEC
FACTS:
A petition for certiorari was filed by herein petitioner seeking to annul and set aside the
Resolutions dated April 29, 2010 and May 17, 2010, respectively, of the Commission on Elections.
Amora on December 1, 2009, filed a Certificate of Candidacy (COC) for Mayor of Candijay, Bohol.
To oppose Amora, the Nationalist People’s Coalition (NPC) fielded Trygve L. Olaivar (Olaivar) for
the mayoralty post.

On March 5, 2010, Olandria filed before the COMELEC a Petition for Disqualification against
Amora. Olandria alleged that Amora’s COC was not properly sworn contrary to the requirements
of the Omnibus Election Code (OEC) and the 2004 Rules on Notarial Practice. Olandria pointed
out that, in executing his COC, Amora merely presented his Community Tax Certificate (CTC) to
the notary public, Atty. Oriculo Granada (Atty. Granada), instead of presenting competent
evidence of his identity. Consequently, Amora’s COC had no force and effect and should be
considered as not filed.

Amora, countered the allegations and filed a MOR before the COMELEC after the Second
Division of COMELEC granted Olandria’s petition and disqualified the former from running for
Mayor. The same was denied by the COMELEC En Banc and affirmed the resolution of the
Second Division. The COMELEC ratiocinated that CTC is no longer a competent evidence of
identity for purposes of notarization. The COC therefore is rendered invalid when [petitioner] only
presented his CTC to the notary public.

In his rebuttal, Amora maintained that Section 78 of the Election Code governs the Petition and
that his COC is properly notarized and not defective, and the presentation of his CTC to the notary
public to whom he was personally known sufficiently complied with the requirement that the COC
be under oath.

ISSUE: Whether the COMELEC erred in disqualifying Amora.

RULING: Yes.

The Court ruled that the COMELEC ruling smacks of grave abuse of discretion, a capricious and
whimsical exercise of judgment equivalent to lack of jurisdiction. Certiorari lies where a court or
any tribunal, board, or officer exercising judicial or quasi-judicial functions has acted without or in
excess of jurisdiction or with grave abuse of discretion.

In this case, it was grave abuse of discretion to uphold Olandria’s claim that an improperly sworn
COC is equivalent to possession of a ground for disqualification. Not by any stretch of the
imagination can we infer this as an additional ground for disqualification from the specific wording
of the OEC in Section 68.

Technicalities and procedural niceties in election cases should not be made to stand in the way
of the true will of the electorate. Laws governing election contests must be liberally construed to
the end that the will of the people in the choice of public officials may not be defeated by mere
technical objections.
Election contests involve public interest, and technicalities and procedural barriers must yield if
they constitute an obstacle to the determination of the true will of the electorate in the choice of
their elective officials. The Court frowns upon any interpretation of the law that would hinder in
any way not only the free and intelligent casting of the votes in an election but also the correct
ascertainment of the results.