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Commissioner vs. Algue

158 SCRA 9

Facts:

The Philippine Sugar Estate Development Company (PSEDC).
Appointed Algue Inc. as its` agent. Algue received a commission oI
125,000.00 and it was Irom their commission that it paid organizers oI
VOICP 75,000.00 in proportional Iees. He received an assessment Irom
the CIR. He Iiled a letter oI protest or reconsideration. The CIR contends
that the claimed deduction was properly disallowed because it was not an
ordinary, reasonable or necessary expense.

Issue: Is the CIR correct?

Ruling:

No. taxes are the liIeblood oI the government and should be
collected without unnecessary hindrance. Every person who is able to pay
must contribute his share in the running oI the government. The government
Ior its` part is expected to respond in the Iorm oI tangible and intangible
beneIits intended to improve the lives oI the people and enhance their moral
and material values. This symbiotic relationship is the rationale oI taxation
and should dispel the erroneous notion that is an arbitrary method oI
exaction by those in the seat oI power.

On the other hand, such collection should be made in accordance
with law as any arbitrariness will negate the very reason Ior government
itselI.

Sison vs. Ancheta

GR L- 59431 1une 25. 1984



Facts:

BP 135 was enacted. Sison, as a taxpayer alleged that Sison is
thereoI unduly discriminated against him by the imposition oI higher rate
upon his income as a proIessional, that it amounts to class legislation, and
that it transgresses against the equal protection and due process clauses oI
the 1987 Constitution as well as the rule requiring the uniIormity in
taxation.

Issue: is the contention meritorious?

Ruling:

No. it is maniIest that the Iield oI state activity has assumed a
much wider scope. The reason was clearly set Iorth by iustice Makalintal,
thus: the areas which need to be leIt with private enterprise and initiative
and which the government was called upon to enter optionally, and only
because it was better equipped to administer Ior the public welIare than any
individual or groups and individual continue to lose their well-deIined
boundaries and to be absorbed within the activities that the government
must undertake in the sovereign capacity iI it is to meet the increasing social
challenges oI the times. Hence, there is a need Ior more revenues. The
power to tax, on inherent prerogative, has to be reconciled to assure the
perIormance oI vital state Iunctions. It is the source oI public Iunds. Taxes,
being the liIeblood oI the government, their prompt and certain availability
is oI the essence.


Marcos II vs. CA

273 SCRA 47 1997

Facts:

Ferdinand Marcos II assailed the decision oI the CA declaring the
deIiciency income tax assessments upon the estate and the properties oI his
late Iather Iinal despite the pendency oI the probate proceedings oI the will
oI the late president. On the other hand, the BIR argued that the state
authority to collect taxes is paramount.

Issue: is the approval oI the court mandatory requirement in the collection
oI taxes?

Ruling:

No. the enIorcement oI tax laws and collection oI taxes are oI
paramount importance Ior the sustenance oI government. Taxes are the
liIeblood oI the government and should be collected without unnecessary
hindrance. However, such collection should be made in accordance with
law as any arbitrariness will negate the very reason Ior government itselI. It
is thereIore necessary to reconcile the apparently conIlicting interest oI the
authorities and the taxpayers so that the real purpose oI taxation, which is
the promotion oI the common good, may be achieved.

(Ferdinand R. Marcos assailed the decision of the Court of
Appeals declaring the deficiency income tax assessments and
estate tax assessments upon the estate and properties of his
late father despite the pendency of the probate proceedings of
the will of the late President. On the other hand, the BR
argued that the State's authority to collect internal revenue
taxes is paramount.

Petitioner further argues that "the numerous pending court
cases questioning the late president's ownership or interests in
several properties (both real and personal) make the total
value of his estate, and the consequent estate tax due,
incapable of exact pecuniary determination at this time. Thus,
respondents' assessment of the estate tax and their issuance
of the Notices of Levy and sale are premature and
oppressive." He points out the pendency of Sandiganbayan
Civil Case Nos. 0001-0034 and 0141, which were filed by the
government to question the ownership and interests of the late
President in real and personal properties located within and
outside the Philippines. Petitioner, however, omits to allege
whether the properties levied upon by the BR in the collection
of estate taxes upon the decedent's estate were among those
involved in the said cases pending in the Sandiganbayan.
ndeed, the court is at a loss as to how these cases are
relevant to the matter at issue. The mere fact that the
decedent has pending cases involving ill-gotten wealth does
not affect the enforcement of tax assessments over the
properties indubitably included in his estate.

ssue: s the contention of Marcos correct?

Held: No. The approval of the court, sitting in probate or as a
settlement tribunal over the deceased's estate, is not a
mandatory requirement in the collection of estate taxes.

There is nothing in the Tax Code, and in the pertinent remedial
laws that implies the necessity of the probate or estate
settlement court's approval of the state's claim for estate
taxes, before the same can be enforced and collected.

The enforcement of tax laws and the collection of taxes are of
paramount importance for the sustenance of government.
Taxes are the lifeblood of government and should be collected
without unnecessary hindrance. However, such collection
should be made in accordance with law as any arbitrariness
will negate the existence of government itself.

t is not the Department of Justice which is the government agency
tasked to determine the amount of taxes due upon the subject
estate, but the Bureau of nternal Revenue whose determinations
and assessments are presumed correct and made in good faith. The
taxpayer has the duty of proving otherwise. n the absence of proof
of any irregularities in the performance of official duties, an
assessment will not be disturbed. Even an assessment based on
estimates is prima facie valid and lawful where it does not appear to
have been arrived at arbitrarily or capriciously. The burden of proof
is upon the complaining party to show clearly that the assessment is
erroneous. Failure to present proof of error in the assessment will
justify the judicial affirmance of said assessment. n this instance,
petitioner has not pointed out one single provision in the
Memorandum of the Special Audit Team which gave rise to the
questioned assessment, which bears a trace of falsity. ndeed, the
petitioner's attack on the assessment bears mainly on the alleged
improbable and unconscionable amount of the taxes charged. But
mere rhetoric cannot supply the basis for the charge of impropriety of
the assessments made.)


Lorenzo vs. Posadas

64 Phil 353

Facts:

Thomas Hanley died in Zamboanga, leaving a will which
provided among others that the property given to Matthew Henley will
belong to him only aIter 10 years aIter Thomas death. Consequently, the
CIR assessed inheritance tax against the estate. Lorenzo, the trustee oI the
estate paid the assessments on protest. He contended that the inheritance tax
should have been aIter 10 years.

Issue: is the contention meritorious?

Ruling:

No. the only beneIit on which the taxpayer is entitled is that
derived Irom the enioyment oI the privileges oI living in an organized
society established and saIeguarded by the devotion oI taxes to the public
purpose. The government promised nothing to the person taxed beyond
what maybe anticipated Irom administration oI the laws Ior the general
good.

Taxes are essential Ior the existence oI the government. The
obligation to pay taxes rest not upon the privileges enioyed by or the
protection aIIorded to the citizen by the government, but upon the necessity
oI money Iort the support oI the estate. For this reason, no one is allowed to
obiect or resist payment oI taxes solely because no personal beneIit to him
can be pointed out as arising Irom the tax.

Philex Mining vs. CIR

GR 125704. August 28. 1998

Facts:

Philex Mining Corporation assails the decision oI the court oI
appeals which aIIirmed the decision oI the court oI tax appeals ordering
philex to pay its excise tax liability philex reIused to pay and contended it
has pending claims Ior vat input credit or reIund against the government
which should be made compensate or set-oII its tax liability.

Issue: can tax be subiect Ior set-oII?

Ruling:

No. tax cannot be the subiect Ior compensation Ior simple reason
that the government and the tax payer are not mutual creditors and debtors
oI each other. Debts are due in the government in its` corporate capacity
while taxes are due to the government in its` sovereign capacity. A tax
payer cannot reIuse to pay his taxes when they Iall due simply because he
has a claim against the government that the collection oI the tax is
contingent on the result oI the law suit it Iiled against the government.

rancia vs. IAC

162 SCRA 753

FACTS:

Francia was the registered owner oI a house and lot in Pasay City.
A portion oI said property was expropriated by the republic. It appeared that
Francia did not pay his real estate taxes Irom 1963 to 1977. He contended
that his tax delinquency had been extinguished by legal compensation since
the government owed him 4,116 when a portion oI his land was
expropriated.

ISSUE: can there be oII-setting oI debts and taxes?

RULING:

No. there can be no oII-setting oI taxes original the claims against
the claims that the taxpayer may have against the government. Taxes cannot
be the subiect oI compensation. The government and the taxpayer are not
mutually creditor and debtors oI each other and a claim Ior each other and a
claim Ior taxes is not such a debt demand, contract or iudgement as is
allowed to be set-oII. Furthermore, the tax was due to the city government.
While the expropriation eIIected by the national government. In Iact, the
expropriation payment was already deposited with the PNB long beIore the
sale at public auction oI his property was conducted.

Domingo vs. Garlitos

8 SCRA 443

FACTS:

In Domingo vs. Moscoso, the Supreme Court declared at Iinal and
executor the order oI the court oI Iirst instance oI Leyte Ior the payment oI
estate and inheritance taxes, charges and penalties amounting to 40,
058.55 by the estate oI the late Walter Scott Pine. He petition Ior execution
Iiled by the Iiscal, however, was denied by the lower court the court held
that the execution is uniustiIied as the government itselI is indebted to the
estate Ior 262,200; and ordered the amount oI inheritance taxes be deducted
Irom the governments` indebtedness to the estate.

Issues: Can there be legal compensation?

Ruling:

Yes. The Iact that the court having iurisdiction oI the estate had
Iound that the claim oI the estate against the government has been
appropriated Ior the purpose by a corresponding law ( RA 2700) shows that
both the claim oI the government Ior inheritance taxes and the claim oI the
intestate Ior services regarded have already become overdue and
demandable as well as Iully liquidated. Compensation, thereIore, take
place by operation oI law, in accordance with the provisions oI article 1279
and 1290 oI the civil code, and both debts are extinguished to the amount.


PAL vs. Edu

164 SCRA 320

Facts:

The Philippine airlines is engaged in the air transportation
business under a legislative Iranchise, Act 4271, wherein it is exempt Irom
the payment oI taxes. On the strength oI an opinion oI the secretary oI
iustice, PAL was determined not to have been paying motor vehicle
registration Iees since 1956. The Land Transportation Commissioner
required all tax exempt entities, including PAL, to pay motor vehicle
registration Iees, PAL protested.

Issue: Are motor vehicle registration Iees taxes?

Ruling:

It is possible Ior an exaction to be both a tax and a regulation.
License Iees and charges, looked to as a source oI revenue as well as a
means oI regulation. The money collected under the motor vehicle law is
not intended Ior the expenditures oI the motor vehicle oIIice but accrue to
the Iunds Ior the construction and maintenance oI the public roads, streets,
and bridges. As the Iees are not collected Ior regulatory purpose as an
incident to the enIorcement oI regulational governing operation oI motor
vehicles on public highways, but to provide revenue with which the
government is to construct and maintain public highways Ior everyone`s
use, they are taxes, not merely Iees.


Lutz vs. Araneta

G.R. L - 7859 12/22/55

Facts:

Walter Lutz, as iuridical administrator oI the intestate estate oI
Antonio Ledesma, sought to recover the sum oI 14,666.40 paid by the
estate as taxes Irom the commissioner under section V oI the
commonwealth act 567 the sugar adiustment act. He alleged that such tax is
unconstitutional as it is levied Ior the aid and support oI the sugar industry
exclusively, which is in his opinion, not a public purpose.

Issue: Is the taxes valid?

Ruling:

Yes. The tax is levied with regulatory purpose; is to provide
means Ior the rehabilitation and stabilization oI the sugar industry. The act
is a primarily an exercise oI police power, and not a pure exercise oI taxing
power. As sugar production is one oI the great industries oI the Philippines,
and that its` promotion, protection and advancement redounds greatly to the
general welIare. The legislature Iound that the general welIare demands that
the industry should be stabilized, and provided that the distribution oI
beneIits thereIrom be readiusted among its component to enable it to resist
the added strain oI the increase in tax that it had to sustain.


Roxas et al vs CTA

GR L - 25043 April 26. 1968



Facts:

The Roxas brothers owned agricultural lands with a total area oI
19,000 hectares. At the end oI the second world war, the tenant express
their desire to purchase Irom the brothers the parcels where they actually
occupy. For its` part, the government, in consonance with the constitutional
mandate to acquire big landed estate and apportion them among landless
tenants, persuaded the brothers to part with their landholdings. However,
the government did not have the Iunds to cover the purchase price, so Roxas
allowed the Iarmers to buy the land Ior the same price but by instalment.
Subsequently, the CIR demanded that the brothers to pay real estate dealers`
tax Ior the sale oI the said land.

Issue: Are petitioners liable?

Ruling:

No. the contention oI the CIR Roxas y Cia should be considered a
real estate dealer because it engaged in the selling oI real estate as without
merit. The sale oI the Iarm was not only in consonance with but in
obedience to the request and pursuant to the policy oI the government to
allocate lands to the landless. It is the duty oI the government to pay the
agreed compensation aIter it persuaded Roxas y Cia to sell the hacienda,
and to subsequently subdivide them among the Iarmers at very reasonable
terms and prices.

Pascual vs. Secretary of Public Works

110 SCRA 331

Facts:

Petitioner seeks to declare RA 920 as unconstitutional as as
declaring the donation by Sen. Zulueta as invalid. RA 920 contained an
item appropriating 85,000 which the petitioner alleged that it was Ior the
construction oI roads improving the private property oI Zulueta. He alleges
that the said law was not Ior a public purpose.

Issue: Is R.A. 920 unconstitutional?

Ruling:

Yes. R.A. 920 is an invalid imposition, since it results in
promotion oI a private enterprise as it beneIit the property oI a private
individual. The provision that the land thereaIter be donated to the
government has not cure the deIect. The rule is that if the public advantage
or benefit is merelv incidental in promotion of a particular enterprise. such
defect shall render the law invalid. On the other hand. if what is incidental
is the promotion of a private enterprise the tax law shall be deemed for a
public purpose.

smea vs. rbos

220 SCRA 703

Facts:

Petitioner seeks to have Sec.8, paragraph 1 C oI PD 1956, as
amended by EO 137 declared unconstitutional Ior being undue and invalid
delegation oI legislative power to the Energy regulatory Board. Under the
assailed law, the ERB is given the authority to impose additional amounts
on petroleum products and to impose additional amounts to augment the
resources oI the Iund. He argue that the money collected pursuant to PD
1956 must be treated as a special Iund, not as a trust account or a trust Iund,
and that iI a special tax is collected Ior a special purpose it shall be treated
as a special Iund to be used only Ior the purpose indicated.

Issue: is there undue delegation oI legislative power?

Ruling:

No. Ior a valid delegation oI power, it is essential that the law
delegating the power must be 1. Complete in itselI, that it must set Iorth the
policy to be executed by the delegate 2. It must Iix the standard limits oI
which are suIIiciently determinate or determined to which the delegate
must conIorm. While the Iunds may be reIerred to as taxes, they are
enacted in the exercise oI the police power oI the state. The Iund remains
subiect to the review and accounting oI the COA. These measures comply
with the constitutional description oI a special Iund.


Basco vs. PAGCR

GR 91649 May 14.1991

Facts:

PAGCOR was created by virtue oI PD 1067 A dated January 1,
1977 and granted a Iranchise under PD 1067 B. subsequently. On July 11,
1983, it was created under PD 1869 to enable the government to regulate
and centralize all games oI chance authorize by existing Iranchise or
permitted by law. Petitioners contend that the exemption clause in PD 1869
is violative oI the principle oI local autonomy.

Issue: is the contention meritorious?

Ruling:

No. LGUs` has no power to tax instrumentalities oI the national
government. PAGCOR is a GOCC with an original charter. All oI its`
stocks are owned by the national government. In addition to its` corporate
power it also exercises regulatory powers. It should be exempt Irom local
taxes otherwise its` operation might be burdened, impeded or subiected to
control by any local government. Local Government are not sovereign
within the state or an imperium in imperio.

MCIAA vs. Marcos

GR 120082. September 11. 1996

Facts:

MCIAA was created by virtue oI RA 6958. Since the time oI its
creator, MCIAA enioyed the privilege oI exemption Irom payment oI realty
taxes in accordance with sec. 14 oI its charter. On October 11, 1994
however The treasurer oI Cebu city demanded payments Ior realty taxes on
several parcels oI lands belonging to the petitioners. MCIAA obiected to
such demand Ior payment as baseless and uniustiIied, claiming in its`
Iavour Sec. 14 oI R.A. 6958 which exempt it Irom payment oI realty taxes.
Respondent reIuse to cancel MCIAAs` tax account, insisting that it is the
GOCCs` whose tax exemption privilege has been withdrawn by virtue oI
Sec 193 and 234 oI the LGC.

Issue: is the contention meritorious?

Ruling:

No. Sec 193 LGC prescribe the general rule that they are
withdrawn upon the eIIectivity oI the code except those granted to local
water districts, cooperative duly registered under R.A. 6938, non-stock,
non-proIit hospitals and educational institutions, and unless otherwise
provided in the LGC the latter provision called only reIer to Sec 234 which
enumerate the properties exempt Irom real property tax but the last
paragraph oI sec 234 Iurther qualiIies the retention oI the exemption. Only
to those enumerated therein. Thus, Ior petitioner to be exempt must show
that the parcels oI land in question any oI those enumerated in 234.

MIAA vs. City of Paraaque

GR 155650 1uly 20. 2006

Facts:

MIAA operates the NAIA complex in paraaque under EO 903.
On June 28, 2001 MIAA received Iinal notices oI real estate tax
delinquency Irom the city Ior the taxable year 1992-2001. Consequently,
the city issue notice Ior levy on the airport land and buildings. MIAA
opposed the levy and contended that SEC. 21 oI EO 903 speciIically
exempts it Irom the payment oI real estate tax. MIAA invokes the principle
that the government cannot tax itselI.

Issue: Is the MIAA liable Ior real estate taxes?

Ruling:

No. MIAA is not a GOCC but a government instrumentality
vested with corporate powers to perIorm eIIiciently government Iunctions.
A government instrumentality Ialls under sec 133(o) oI the LGC which
limits the taxing powers oI LGUs. The LGC recognize that the LGUs`
cannot tax the national government, which delegated the power to tax.
Moreover, the airport lands and buildings oI MIAA are owned by the
republic is not taxable pursuant to Sec 234 (a) oI the LGC.

Taada vs. Angara

GR 118295. May 2. 1992

Facts:

The suit was Iiled to nulliIy the concurrence oI the Philippine
senate to the presidents` notiIication oI the WTO argument. It was
contended that the argument places nationals and products oI member
countries on the same Iooting as Filipinos and local products in
contravention oI the Filipino Iirst policy. Petitioners maintain that the
Philippines because it meant that congress could not pass legislation that
would be good Ior national interest and general welIare iI each legislation
would not conIorm to the WTO agreement.

Issue: as the contention meritorious?

Ruling:

No. while sovereignty has traditional been deemed absolute and
all-encompassing in the domestic level. It is however subiect to restrictions
and limitations voluntarily agreed to by the Philippines expressly or
impliedly, as a member oI the Iamily nations. Unquestionably, the
constitution did not envision hermit-type solution oI the country Irom the
rest oI the world.

By the inherent nature, Treaties limit or restrict the absoluteness
oI sovereignty. By their voluntary act, nations may surrender some aspects
oI their state power in exchange Ior greater beneIits granted by a derived
Irom a convention or pact.

Commissioner vs BAC

149 SCRA 395

Facts:

British overseas airways corp. (BOAC) a wholly owned British
Corporation, is engaged in international airlines business. From 1959to
1972, it has no loading rights Ior traIIic purposes in the Philippines but
maintained a general sales agent in the Philippines which was responsible
Ior selling, BOAC tickets covering passengers and cargoes the CIR
assessed deIiciency income taxes against.

Issue: Is BOAC liable to pay taxes?

Ruling:

Yes. The source oI income is the property, activity oI service that
produces the income. For the source oI income to be considered coming
Irom the Philippines, it is suIIicient that the income is derived Irom the
activity coming Irom the Philippines. The tax code provides that Ior
revenue to be taxable, it must constitute income Irom Philippine sources. In
this case, the sale oI tickets is the source oI income. The situs oI the source
oI payments is the Philippines.


Tan vs. Del Rosario

237 SCRA 324

Facts:

Petitioners challenge the constitutionality oI RA 7496 or the
simpliIied income taxation scheme (SNIT) under Arts (26) and (28) and III
(1). The SNIT contained changes in the tax schedules and diIIerent
treatment in the proIessionals which petitioners assail as unconstitutional
Ior being isolative oI the equal protection clause in the constitution.

Issue: is the contention meritorious?

Ruling:

No. uniIormity oI taxation, like the hindered concept oI equal
protection, merely require that all subiects or obiects oI taxation similarly
situated are to be treated alike both privileges and liabilities. UniIormity,
does not oIIend classiIication as long as it rest on substantial distinctions, it
is germane to the purpose oI the law. It is not limited to existing only and
must apply equally to all members oI the same class.

The legislative intent is to increasingly shiIt the income tax
system towards the scheduled approach in taxation oI individual taxpayers
and maintain the present global treatment on taxable corporations. This
classiIication is neither arbitrary nor inappropriate.

Abra Va||ey Co||ege v Aqu|no

Gk L39086 15 Iune 1988

lacLs eLlLloner Abra vallev Colleae ls an educaLlonal corporaLlon
and lnsLlLuLlon of hlaher learnlna dulv lncorporaLed wlLh Lhe SLC ln
1948 Cn 6 !ulv 1972 Lhe Munlclpal and rovlnclal Lreasurers
(Caspar 8osque and Armln Carlaaa respecLlvelv) and lssued a
noLlce of Selzure upon Lhe peLlLloner for Lhe colleae loL and bulldlna
(CC1 C83) for Lhe saLlsfacLlon of sald Laxes Lhereon 1he Lreasurers
served upon Lhe peLlLloner a noLlce of Sale on 8 !ulv 1972 Lhe sale
belna held on Lhe same dav ur aLerno Mlllare Lhen munlclpal
mavor of 8anaued Abra offered Lhe hlahesL bld of 6000 on
publlc aucLlon lnvolvlna Lhe sale of Lhe colleae loL and bulldlna 1he
cerLlflcaLe of sale was correspondlnalv lssued Lo hlm

1he peLlLloner flled a complalnL on 10 !ulv 1972 ln Lhe courL a quo
Lo annul and declare vold Lhe noLlce of Selzure" and Lhe noLlce of
Sale" of lLs loL and bulldlna locaLed aL 8anaued Abra for non
pavmenL of real esLaLe Laxes and penalLles amounLlna Lo 314031
Cn 12 Aprll 1973 Lhe parLles enLered lnLo a sLlpulaLlon of facLs
adopLed and embodled bv Lhe Lrlal courL ln lLs quesLloned declslon
1he Lrlal courL ruled for Lhe aovernmenL holdlna LhaL Lhe second
floor of Lhe bulldlna ls belna used bv Lhe dlrecLor for resldenLlal
purposes and LhaL Lhe around floor used and renLed bv norLhern
MarkeLlna CorporaLlon a commerclal esLabllshmenL and Lhus Lhe
properLv ls noL belna used excluslvelv" for educaLlonal purposes
lnsLead of perfecLlna an appeal peLlLloner avalled of Lhe lnsLanL
peLlLlon for revlew on cerLlorarl wlLh praver for prellmlnarv
ln[uncLlon before Lhe Supreme CourL bv flllna sald peLlLlon on 17
AuausL 1974

1he Supreme CourL afflrmed Lhe declslon of Lhe Cll Abra (8ranch l)
sub[ecL Lo Lhe modlflcaLlon LhaL half of Lhe assessed Lax be reLurned
Lo Lhe peLlLloner 1he modlflcaLlon ls derlved from Lhe facL LhaL Lhe
around floor ls belna used for commerclal purposes (leased) and Lhe
second floor belna used as lncldenLal Lo educaLlon (resldence of Lhe
dlrecLor)

Issue: Should there be tax exemption?


lnLerpreLaLlon of Lhe phrase used excluslvelv for
educaLlonal purposes"
SecLlon 22 paraaraph 3 ArLlcle vl of Lhe Lhen 1933 hlllpplne
ConsLlLuLlon expresslv aranLs exempLlon from realLv Laxes for
CemeLerles churches and parsonaaes or convenLs appurLenanL
LhereLo and all lands bulldlnas and lmprovemenLs used excluslvelv
for rellalous charlLable or educaLlonal purposes" 1hls consLlLuLlon
ls relaLlve Lo SecLlon 34 paraaraph c CommonwealLh AcL 470 as
amended bv 8A 409 (AssessmenL Law) An lnsLlLuLlon used
excluslvelv for rellalous charlLable and educaLlonal purposes and as
such lL ls enLlLled Lo be exempLed from LaxaLlon noLwlLhsLandlna
LhaL lL keeps a lodalna and a boardlna house and malnLalns a
resLauranL for lLs members (?MCA case) A loL whlch ls noL used for
commerclal purposes buL serves solelv as a sorL of lodalna place
also quallfles for exempLlon because Lhls consLlLuLes lncldenLal use
ln rellalous funcLlons (8lshop of nueva Seaovla case)

xemptloo lo fovoot of ptopettv oseJ excloslvelv fot
cbotltoble ot eJocotloool potposes ls oot llmlteJ to ptopettv
octoollv loJlspeosoble tbetefot bot exteoJs to focllltles wblcb ote
loclJeotol to ooJ teosoooblv oecessotv fot tbe occompllsbmeot of
solJ potposes (netteto v Ooezoo cltv 8ootJ of Assessmeot
Appeols) wblle tbe coott ollows o mote llbetol ooJ oootesttlctlve
lotetptetotloo of tbe pbtose excloslvelv oseJ fot eJocotloool
potposes teosoooble empbosls bos olwovs beeo moJe tbot
exemptloo exteoJs to focllltles wblcb ote loclJeotol to ooJ
teosoooblv oecessotv fot tbe occompllsbmeot of tbe molo potposes
1he use of Lhe school bulldlna or loL for commerclal purposes ls
nelLher conLemplaLed bv law nor bv [urlsprudence ln Lhe case aL
bar Lhe lease of Lhe flrsL floor of Lhe bulldlna Lo Lhe norLhern
MarkeLlna CorporaLlon cannoL bv anv sLreLch of Lhe lmaalnaLlon be
consldered lncldenLal Lo Lhe purpose of educaLlon

Amer|can 8|b|e 5oc|ety v C|ty of Man||a

Gk L9637 30 Apr|| 1957

lacLs lalnLlffappellanL Amerlcan 8lble SocleLv ls a forelan non
sLock nonproflL rellalous mlsslonarv corporaLlon dulv realsLered
and dolna buslness ln Lhe hlllpplnes Lhrouah lLs hlllpplne aaencv
esLabllshed ln Manlla ln november 1898 1he defendanLappellee
ClLv of Manlla ls a munlclpal corporaLlon wlLh powers LhaL are Lo be
exerclsed ln conformlLv wlLh Lhe provlslons of 8A 409 (8evlsed
CharLer of Lhe ClLv of Manlla) ln Lhe course of lLs mlnlsLrv plalnLlff's
hlllpplne aaencv has been dlsLrlbuLlna and selllna blbles and/or
aospel porLlons Lhereof (excepL durlna Lhe !apanese occupaLlon)
LhrouahouL Lhe hlllpplnes and LranslaLlna Lhe same lnLo several
hlllpplne dlalecLs

Cn 29 Mav 1933 Lhe acLlna ClLv 1reasurer of Lhe ClLv of Manlla
lnformed plalnLlff LhaL lL was conducLlna Lhe buslness of aeneral
merchandlse slnce november 1943 wlLhouL provldlna lLself wlLh
Lhe necessarv Mavor's permlL and munlclpal llcense ln vlolaLlon of
Crdlnance 3000 as amended and Crdlnances 2329 3028 and 3364
and requlred plalnLlff Lo secure wlLhln 3 davs Lhe correspondlna
permlL and llcense fees LoaeLher wlLh compromlse coverlna Lhe
perlod from Lhe 4Lh quarLer of 1943 Lo Lhe 2nd quarLer of 1933 ln
Lhe LoLal sum of 382143 Cn 24 CcLober 1933 plalnLlff pald Lo Lhe
defendanL under proLesL Lhe sald permlL and llcense fees alvlna aL
Lhe same Llme noLlce Lo Lhe ClLv 1reasurer LhaL sulL would be Laken
ln courL Lo quesLlon Lhe leaallLv of Lhe ordlnances under whlch Lhe
sald fees were belna collecLed whlch was done on Lhe same daLe bv
flllna Lhe complalnL LhaL aave rlse Lo Lhls acLlon AfLer hearlna Lhe
lower courL dlsmlssed Lhe complalnL for lack of merlL lalnLlff
appealed Lo Lhe CA whlch ln Lurn cerLlfled Lhe case Lo Lhe Supreme
CourL for Lhe reason LhaL Lhe errors asslaned lnvolved onlv
quesLlons of law

1he Supreme CourL reversed Lhe declslon appealed and orderlna
Lhe defendanL Lo reLurn Lo plalnLlff Lhe sum of 389143 undulv
collecLed from lL wlLhouL pronouncemenL as Lo cosLs



lssue ls Lhe Amerlcan 8lble SocleLv Llable?

8ullna

A munlclpal llcense Lax on Lhe sale of blbles and rellalous arLlcles
bv a nonsLock nonproflL mlsslonarv oraanlzaLlon aL a mlnlmal proflL
consLlLuLes a curLallmenL of rellalous freedom and worshlp whlch ls
auaranLeed bv Lhe consLlLuLlon nowevet tbe locome of socb otooolzotloo
ftom oov octlvltv fot ptoflt ot ftom oov of tbelt ptopettv teol ot petsoool
teootJless of tbe Jlsposltloo moJe of socb locome ls toxoble

@o|ent|no vs 5ecretary of I|nance

Gk 115455 Cct 30 1995

lacLs

1he vA1 ls levled on Lhe sale barLer or exchanaed of Lhe aoods
and properLles as well as on Lhe sale of servlces 8A7116 seeks Lo wlder Lhe
Lax base of Lhe exlsLlna vA1 svsLem and enhance lL admlnlsLraLlon on bv
amendlna Lhe nl8C C818A asserLs LhaL 8A 7116 ls unconsLlLuLlonal as lL
vlolaLe Lhe rule LhaL Laxes should be unlform and equlLable

lssue ls lL merlLorlous?

8ullna

no LqulLv and unlformlLv ln LaxaLlon means LhaL all Lhe Laxable
arLlcles or klnds of properLles of Lhe same class be Laxed aL Lhe same raLe
1he Laxlna power has Lhe auLhorlLv Lo make reasonable and naLural
classlflcaLlons for purposes of LaxaLlon @o sotlsfv tbls teooltemeot lt ls
eoooob tbot tbe stotote ot otJloooce opplles eooollv to oll petsoos fltms
ooJ cotpototloos ploceJ lo o slmllot sltootloo

errera vs Cuezon C|ty 8oard of Assessment Appea|s

Gk L15270

acts:

In 1952, the Director oI the Bureau oI Hospitals authorized Jose
V. Herrera and Ester Ochangco Herrera to establish and operate the St.
Catherine`s Hospital. In 1953, the Herreras sent a letter to the Quezon City
Assessor requesting exemption Irom payment oI real estate tax on the
hospital, stating that the same was established Ior charitable and
humanitarian purposes and not Ior commercial gain. The exemption was
granted eIIective years 1953 to 1955. In 1955, however, the Assessor
reclassiIied the properties Irom 'exempt to 'taxable eIIective 1956, as it
was ascertained that out 32 beds in the hospital, 12 oI which are Ior pay-
patients. A school oI midwiIery is also operated within the premises oI the
hospital.

Issue: Whether St. Catherine`s Hospital is exempt Irom reallty tax.

Ruling:

The admission oI pay-patients does not detract Irom the charitable character
oI a hospital, iI all its Iunds are devoted exclusively to the maintenance oI
the institution as a public charity. The exemption in Iavour oI property used
exclusively Ior charitable or educational purpose is not limited to property
actually indispensable thereIore, but extends to Iacilities which are
incidental to and reasonably necessary Ior the accomplishment oI said
purpose, such as in the case oI hospitals a school Ior training nurses; a
nurses` home; property used to provide housing Iacilities Ior interns,
resident doctors, superintendents and other members oI the hospital staII;
and recreational Iacilities Ior student nurses, interns and residents. Within
the purview oI the Constitution, St. Catherine`s Hospital is a charitable
institution exempt Irom taxation.
SongDIurv
Taxation

Philam Asset vs CTA

G.R.156637 / 62004Dec. 14, 2005



Facts:

Petitioner acts as invesment manager oI PFI &PBFI. It provides
management &technical services and thus respectively paid Ior it`s services.
PFI & PBFI withhold the amount oI equivalent to 5 creditable tax
regulation. On April 3, 1998, Iiled itrwith a net loss thus incurred with
holding tax. Petitioner Iiled Ior reIund Irom BIR but was unanswered . CTA
denied the petition Ior review. CA held that to request Ior either a reIund or
credit oI income taxpaid, a corporation must signiIy it`s intention by
marking the corresponding box on it`s annual corporate adiustment return.

Issue:

Whether or not petitioner is entitled to a reIund oI it`s creditible taxes.

Ruling:

Any tax income that is paid in excess oI it`s amount due to the government
may be reIunded, provided that a taxpayer properly applies Ior the reIund.
One can not get a tax reIund and a tax credit at the same time Ior the same
excess to income taxes paid. Failure to signiIy one`s intention in Final
Assessment Return (FAR) does not mean outright barring oI a valid request
Ior a reIund

Requiring that the ITR on the FAR oI the succeeding year be presented to
the BIR in requesting a tax reIund has no basis in law and iurisprudence.
The Tax Code likewise allows the reIund oI taxes to taxpayer that claims it
in writing within 2 years aIter payment oI the taxes. Technicalities and
legalism should not be misused by the government to keep money not
belonging to it, and thereby enriched itselI at the expense oI it`s law-abiding
citizens.

Samahan vs. Sec. oI Labor and Filsystems , Inc
GRN.: 128067 June 5,1998
Puno J.:

Facts:
Samahan (union petitioner) , a registered union Iiled a petition Ior
certiIication election. Private responded questioned the status oI petitioner
as LLO on the ground oI lack oI prooI that its contract oI aIIiliation with
NAFLU-KMU has been submitted to BLR. Samahan averred that as an
independent and duly registered union, it has all the rights and privileges to
act as a representative oI its members Ior the purpose oI collecting
bargaining with employers. Med-arbiter dismissed the petition. Meanwhile
FWU was allowed to conduct certiIication election, and eventually
negotiated a CBA Private respondent Iiled a motion to dismiss.

Issue:
Whether or not legal personality oI the union (Samahan) having been
established could be subiect to collateral attack.

Ruling:

Petitioner is an independently registered labor union thus its right to Iile
petition Ior certiIication election on its own is beyond question. Its Iailure to
prove its aIIiliation with NAFLU-KMU cannot aIIect its right to Iile
petition as an independent union.

Petitioner seasonably appealed, thus it stopped the holding oI any
certiIication election. Accordingly, there was an unresolved representation
case at the time the CBA was entered by FWU and private respondent.
There should be no obstacle to the right oI the employees oI petitioner Ior a
certiIication election at the proper time, that is within 60 days prior to the
expiration oI the liIe oI a certiIied CBA. not even by a collective
agreement submitted during the pendency oI the representation case.
(ALU-TUCP vs Traiano)

CAIN VS IAC

GRN 72706

OCTOBER 27, 1987

PARAS, J.:



FACTS:



Constantitno Iiled Ior probate oI the will oI his decased brother Nemesio.
The spouse and adopted child oI the decedent opposed the probate oI will
because oI preterition. RTC dismissed the petition oI the wiIe. CA reversed
and the probate thus was dismissed



ISSUE:



Whether or not there was preterition oI 'compulsory heirs in the direct line
thus their omission shall not annul the institution oI heirs.



RULING:



Preterition consists in the omission oI the Iorced heirs because they are not
mentioned there in, or trough mentioned they are neither instituted as heirs
nor are expressly disinherited. As Ior the widow there is no preterit ion
because she is not in the direct line. However, the same cannot be said Ior
the adopted child whose legal adoption has not been questioned by the
petitioner. Adoption gives to the adopted person the same rights and duties
as iI he where a legitimate child oI the adopter and makes the adopted
person a legal heir hence, this is a clear case oI preterition.



The universal institution oI petitioner together with his brothers and sisters
to the entire inheritance oI the testator results in totally abrogating the will
because the nulliIication oI such institution oI universal heirs without any
other testamentary disposition in the will amounts to a declaration that
nothing was written. No legacies and devisees having been provided in the
will, the whole property oI the deceased has been leIt by universal title to
petitioner and his brothers and sisters.

PASCUAL & DRAGONVS CIR AND CTA

GRN 78133October 18, 1988

Gancayco, J.:



FACTS:

Petitioners bought two parcels oI land and another 3 parcels the Iollowing
year.The 2 parcels were sold in 1968 while the other 3 were sold in
1970.Realizing proIits Irom the sale, petitioners Iiled capital gains
tax.However, they were assessed with deIiciency tax Ior corporate income
taxes.



ISSUE:

Whether or not petitioners Iormed an unregistered partnership thereby
assessed with corporate income tax.



RULING:

By the contract oI partnership, two or more persons bind themselves to
contribute money, industry or property to a common Iund with the intention
oI dividing proIits among themselves.There is no evidence though, that
petitioners entered into an agreement to contribute MPI to a common Iund
and that they intend to divide proIits among themselves.The petitioners
purchased parcels oI land and became co-owners thereoI.Their transactions
oI selling the lots were isolated cases.The character oI habituality peculiar
to the business transactions Ior the purpose oI gain was not present.



The sharing oI returns Ioes not in itselI establish a partnership whether or
not the persons sharing therein have a ioint or common right or interest in
the property.There must be a clear intent to Iorm partnership, the existence
oI a iuridical personality diIIerent Irom the individual partners, and the
Ireedom oI each party to transIer or assign the whole property.




SARDANE VS ACOJEDO

GRN L-47045November 22, 1988

Regalado, J.:



FACTS:

Sardane executed promissory notes in the amount oI PhP5, 217.25.Because
oI Iailure to pay, Acoiedo brought an action Ior collection oI sum oI
money.Sardane alleged that a partnership existed.MTC granted the petition
but RTC reversed upholding reason that there existed partnership between
the 2 which could then vary the meaning oI the promissory notes.RTC
concluded that PN involved were merely receipts Ior the contributions to
said partnership and upheld the claim that there was ambiguity in the PN
hence, parol evidence was allowable to contradict the terms oI the
represented loan contract.



ISSUE:

Whether or not partnership existed when petitioner received proIits.



RULING:

Even iI evidence other than PN may be admitted to alter the meaning
conveyed thereby, still the evidence is insuIIicient to prove that partnership
existed between the private parties.The Iact that he had received 50 oI the
net proIits does not conclusively establish that he was a partner oI
Acoieda.Article 1769 NCC explicitly provides that the receipt oI a person
oI a share oI the proIits oI the business is prima Iacie evidence that he is a
partner in the business; no such inIerence shall be drawn iI such proIits
were received in payment as wages oI an employee.

ALTERNATIVE CENTER FOR ORGANIZATION REFORMS VS
ZAMORA
GRN 144256 June 8, 2005
Carpio-Morales, J.:

FACTS:
In the year 2000, the GAA appropriated PhP 111,778,000,000.00 oI IRA as
programmed Iund. It appropriated a separate amount oI P10B oI IRA under
the classiIication oI unprogrammed Iund, the latter amount to be released
only upon th occurrence oI the conditions stated in the GAA.

ISSUE:
Whether or not the questioned provision violate the constitutional iniunction
that the iust share oI local governments in the national taxes oI the IRA
shall be automatically released.

RULING:
Article X Section 6 oI the Constitution provides: 'LGUs shall have a iust
share, as determined by law, in the national taxes which shall be
automatically released to them. While automatice release implies that the
iust share should be released to them as a matter oI course, withholding its
release pending an event contravened the constitutional mandate.



AMERICAN BIBLE SOCIETY VS MANILA
GRN 9637 April 30, 1957
Felix, J.:

FACTS:
PlaintiII-appellant is a Ioreign, non-stock, non-proIit, religious, missionary
corporation and in the course oI its ministry, it has been selling bible and or
gospel portions throughout the country and translating the same into several
Philippine dialects. The City oI Manila considered appellant as conducting
the business oI general merchandize and required it to secure the necessary
permit and license Iees.

ISSUE:
Whether or not appellant iI engaged in business as a religious corporation
and thus be made to pay Iees or taxes.

RULING:
It may be true that the price oI bibles and pamphlets was a bit higher than
the actual cost oI the same, but this could not mean that appellant is
engaged in business Ior proIit. For this reason, we believe that the ordinance
requiring them to pay Iees or taxes would impair its Iree exercise oI its
religious Ireedom thru distribution oI pamphlets.


CIR VS. BRITISH OVERSEAS AIRWAYS
GRN L-65773-74 April 30, 1987
En Banc, Melecio-Herrera, J.:

FACTS:
British Overseas Airways is a 100 British Government-owned corporation
engaged in international airline business and is a member oI the Interline
Air Transport Association and thus it operates air transportation service and
sells transportation tickets over the routes oI the other airline members.
From 1959 to 1972, BOAC had no landing rights Ior traIIic purposes in the
Philippines but maintained a general sales agent in the country. Warner
Barnes was responsible Ior selling BOAC tickets covering passengers oI
and cargos. The CIR assessed deIiciency income taxes against BOAC.

ISSUE:
Whether or not the revenue derived by BOAC Irom ticket sales in the
Philippines Ior its transportation constitute income Irom Philippine sources
and accordingly taxable.

RULING:
The source oI an income is the property, activity or service that produced
the income. For the source oI income to be considered as coming Irom the
Philippines, it is suIIicient that the income is derived Irom activity within
the Philippines. Herein, the sale oI tickets is the activity that produced the
income. The tickets exchanged hands here and payment Ior Iares were also
made here in the Philippine currency. The situs or the source oI the payment
is the Philippines. The Ilow oI wealth proceeded Irom, and occurred within,
Philippine territory, enioying the protection accorded by Philippine
government. In consideration oI such protection, the Ilow oI wealth should
share the burden oI supporting the government. PD 68, in relation to
PD1355, ensures that international airlines are taxed on their income Irom
Philippine sources. The 2.5 tax on gross billings is an income tax. II it had
been intended as an excise tax, it would have been placed under Title V oI
the Tax Code covering taxes on business.

SARKIES TOURS vs. COURT OF APPEALS / FORTADES
G.R. No. 108897 October 2, 1997
ROMERO, J.:

FACTS:
Private respondent Fortades boarded a Sarkies bus with 3 luggage
containing important documents and personal things. All were kept in the
baggage compartment oI the bus but dring the stop over, passenger noticed
her lost luggage. Passengers suggested to the driver to trace the route oI the
bust but were ignored. AIter nine months oI trying to recover the luggage,
Fortades Iiled a case to recover the value oI her lost things including moral
and exemplary damages against petitioner. Lower court decided Iavorably
while CA concurred but deleted the award Ior moral and exemplary
damages

ISSUE:
Whether or not private respondent was entitled to moral and exemplary
damages.

RULING:

The Court agrees with the Court oI Appeals in awarding P30,000.00 Ior the
lost items and P30,000.00 Ior the transportation expenses, but disagrees
with the deletion oI the award oI moral and exemplary damages which, in
view oI the Ioregoing proven Iacts, with negligence and bad Iaith on the
Iault oI petitioner having been duly established, should be granted to
respondents in the amount oI P20,000.00 and P5,000.00, respectively.



SARKIES TOURS PHILIPPINES vs IAC / DIzon
MELENCIO-HERRERA, J :

FACTS:
Petitioner Sarkies advertised Ior a Corregidor tour Ior Independence Day
1971. Dizon Iamily availed oI the promo and were brought to Corregidor,
together with other excursionists, through a motorized boat owned by
Mendoza. A daughter oI the Dizons died when the boat accidentally
capsized on its way back to Manila. A case was Iiled against Sarkies and
Dizon, and the CA Iound them both liable Ior the reason that the
relationship between Sarkies and the excursionists was a 'single operation
which in eIIect guaranteed them saIe passage all through out. Exemplary
damages in the amount oI 50,000 was likewise awarded.

ISSUE:
Whether or not the award Ior exemplary damages was with legal basis.

RULING:
The award oI exemplary damages should be eliminated. In Munsayac vs.
De Lara, 23 SCRA 1086, 1089 (1968), it was said:

"It is not enough to say that an example should be made, or corrective
measures be employed, Ior the public good especially in accident cases
where public carriers are involved. The causative negligence in such cases
is personal to the employees actually in charge oI the vehicles, and it is they
who should be made to pay this kind oI damages by way oI example or
correction, unless by the demonstrative tolerance or approval oI the owners
they themselves can be held at Iault and their Iault is oI the character
described in article 2232 oI the Civil Code."

In the case at bar, there is no showing that SARKIES acted "in a wanton . . .
or malevolent manner" (Art. 2232, Civil Code).

CITY ASSESSOR OF CEBU VS. ASSOCIATION OF BENEVOLA DE
CEBU
G.R 152904 June 28, 2007
Velasco, Jr. J.:
FACTS:
Benevola de Cebu is a non-stock non-proIit organization which in 1990, a
medical arts building was constructed and in 1998 was issued with a
certiIication classiIying the building as commercial. City assessor oI Cebu
assessed the building with a market value oI Php 28,060,520 and on
assessed value oI Php 9,821,180 at the assessment level oI 35 and not
10 which is currently imposed on private respondent herein. Petitioner
claimed that the building is used as commercial clinic/spaces Ior renting out
to physicians and thus classiIied as commercial. Benevola de Cebu
contended that the building is used actually, directly and exclusively part oI
hospital and should have an assessment level oI 10

ISSUE:
Whether or not the new building is liable to pay the 35 assessment level?
RULING:
We hold that the new building is an integral part oI the hospital and should
not be assessed as commercial. Being a tertiary hospital, it is mandated to
Iully departmentalized and be equipped with the service capabilities needed
to support certiIied medical specialist and other licensed physicians. The
Iact that they are holding oIIice is a separate building does not take away
the essence and nature oI their services vis-a-vis the overall operation oI the
hospital and to its patients.
Under the Local Government Code, Sec. 26: All lands, buildings and other
improvements thereon actually, directly and exclusively used Ior hospitals,
cultural or scientiIic purposes and those owned and used by local water
districts. shall be classiIied as special.


Associaiton oI Customs Brokers vs Manila
GRN L-4376 May 22, 1953
En Banc
FACTS:
The Municipal Board oI Manila passed ordinance No. 3379 which imposes
a property tax that is within the power oI the City under its revised charter.
The ordinance was passed by the Municipal Board under the authority
conIerred by section 18 oI RA 409

ISSUE:
Whether or not the ordinance inIringes on the uniIormity oI taxes as
ordained by the Constitution.
RULING:
The Ordinance exacts the tax upon all motor vehicles operating within
Manila and does not distinguish between a motor vehicle registered in the
City and one registered in another place nor does it distinguish private oI
vehicle Ior hire. The distinction is important iI we note that the ordinance
intends to burden with the tax only those registered in Manila. There is no
pretense that the Ordinance equally applies to vehicles who come to Manila
Ior a temporary purpose.

BENGZON VS. DRILON
G.R. 103524 April 15, 1992 208 SCRA 133
Gutierrez, J.:

FACTS:
Petitioners are retired iustices oI the Supreme Court and Court oI Appeals
who are currently receiving pensions under RA 910 as amended by RA
1797. President Marcos issued a decree repealing section 3-A oI RA 1797
which authorized the adiustment oI the pension oI retired iustices and
oIIicers and enlisted members oI the AFP. PD 1638 was eventually issued
by Marcos which provided Ior the automatic readiustment oI the pension oI
oIIicers and enlisted men was restored, while that oI the retired iustices was
not. RA 1797 was restored through HB 16297 in 1990. When her advisers
gave the wrong inIormation that the questioned provisions in 1992 GAA
were an attempt to overcome her earlier veto in 1990, President Aquino
issued the veto now challenged in this petition.
It turns out that PD 644 which repealed RA 1797 never became a valid law
absent its publication, thus there was no law. It Iollows that RA 1797 was
still in eIIect and HB 16297 was superIluous because it tried to restore
beneIits which were never taken away validly. The veto oI HB 16297 did
not also produce any eIIect.
ISSUE:
Whether or not the veto oI the President oI certain provisions in the GAA oI
FY 1992 relating to the payment oI the adiusted pensions oI retired Justices
is constitutional or valid.
RULING:
The veto oI these speciIic provisions in the GAA is tantamount to dictating
to the Judiciary ot its Iunds should be utilized, which is clearly repugnant to
Iiscal autonomy. Pursuant to constitutional mandate, the Judiciary must
enioy Ireedom in the disposition oI the Iunds allocated to it in the
appropriations law.
Any argument which seeks to remove special privileges given by law to
Iormer Justices on the ground that there should be no grant oI distinct
privileges or 'preIerential treatment to retired Justices ignores these
provisions oI the Constitution and in eIIect asks that these Constitutional
provisions on special protections Ior the Judiciary be repealed.
The petition is granted and the questioned veto is illegal and the provisions
oI 1992 GAA are declared valid and subsisting.

REYES VS. ALMANZOR
GR 43839-46 April 26, 1991 196 SCRA 322
Paras, J.:
FACTS:
Petitioner are owners oI parcels oI land leased to tenants. RA 6359 was
enacted prohibiting Ior one year an increase in monthly rentals oI dwelling
units and said Act also disallowed eiectment oI lessees upon the expiration
oI the usual period oI lease. City assessor oI Manila assessed the value oI
petitioner`s property based on the schedule oI market values duly reviewed
by the Secretary oI Finance. The revision entailed an increase to the tax
rates and petitioners averred that the reassessment imposed upon them
greatly exceeded the annual income derived Irom their properties.
ISSUE:
Whether or not income approach is the method to be used in the tax
assessment and not the comparable sales approach.
RULING:
By no stretch oI the imagination can the market value oI properties covered
by PD 20 be equated with the market value oI properties not so covered. In
the case at bar, not even Iactors determinant oI the assessed value oI subiect
properties under the comparable sales approach were presented by
respondent namely:
1. That the sale must represent a bonaIide arm`s length transaction between
a willing seller and a willing buyer
2. The property must be comparable property.
As a general rule, there were no takers so that there can be no reasonable
basis Ior the conclusion that these properties are comparable.
Taxes are liIeblood oI government, however, such collection should be
made in accordance with the law and thereIore necessary to reconcile
conIlicting interests oI the authorities so that the real purpose oI taxation,
promotion oI the welIare oI common good can be achieved.

LLADOC V CIR & CTA
GR 19201 June 16, 1965 14 SCRA 293
Paredes, J.:

FACTS:
MB Estate oI Bacolod City donated Php 10,000 in cash to Fr. Ruiz, then the
Parish Priest oI Victorias, who was the predecessor oI petitioner. MB Estate
Iiled their donor`s giIt tax but petitioner is on protest regarding donee`s tax
claiming that assessment oI giIt tax against the Catholic Church is against
the law; that when the donation was made. He was not yet the parish priest.
ISSUE:
Whether or not petitioner should be liable Ior assessed donee`s giIt tax
dontated.

RULING:
A giIt tax is not a property tax, but an excise tax imposed on the transIer oI
property by way oI giIt inter vivos, the imposition oI which on property
used exclusively Ior religious purposes, does not constitute an impairment
oI Constitution. 'exempt Irom taxation as employed in the Constitution
should not be interpreted to mean exemption Irom all kinds oI taxes. And
there being no clear, positive or express grant oI such privilege by law, in
Iavor oI petitioner, the exemption herein must be denied.


LUNG CENTER VS. QUEZON CITY
GR 144104 June29, 2004
En Banc, Calleio J:
Facts:
The lung center is a charitable institution within the context oI 1973 and
1987 constitutions. The elements considered in determining a charitable
institution are: the statue creating the enterprise; its corporate purposes;
constitution and by-laws, methods oI administration, nature oI actual work
perIormed, character oI the services rendered, indeIiniteness oI the
beneIiciaries, and the use occupation oI properties. As a gen. principle, a
charitable institution doe not lose its character as such and its exemption
Iorm taxes simply because it derives income Irom paying patients, or
receives subsidies Irom government; and no money insures to the private
beneIit oI the persons managing or operating the institution.
Issue:
Whether or not the real properties oI the lung center are exempt Irom real
property taxes.
Ruling.
Partly No. Those portions oI its real property that are leased to private
entities are not exempt Irom actually, direct and exclusively used Ior
charitable purpose. Under PD 1823, the lung center does not enioy any
property tax exemption privileges Ior its real properties as well as the
building constructed thereon.
The property tax exemption under Sec. 28(3), Art. Vi oI the property taxes
only. This provision was implanted by Sec.243 (b) oI RA 7160.which
provides that in order to be entitled to the exemption, the lung center must
be able to prove that: it is a charitable institution and; its real properties are
actually, directly and exclusively used Ior charitable purpose. Accordingly,
the portions occupied by the hospital used Ior its patients are exempt Irom
real property taxes while those leased to private entities are not exempt
Irom such taxes.

LUTZ VS. ARANETA

GR L-7859 December 22, 1955
Reyes, J.:
FACTS:
Walter Lutz, Judicial Administrator oI the intestate estate oI Ledesma,
sought to recover the sum oI Php14, 666.40 paid by the estate as taxes,
alleging that such tax is unconstitutional as it levied Ior the aid and support
oI the sugar industry exclusively which is in his opinion not a public
purpose.
ISSUE:
Whether or not tax is valid in supporting the sugar industry?
RULING:
The court ruled that the tax is valid as it served public purpose. The tax
provided Ior in CA 567 is primarily an exercise oI police power since sugar
is a great source oI income Ior the country and employs thousands oI
laborers. Hence, it was competent Ior the legislature to Iind that the general
welIare demanded that the sugar industry should be stabilized in turn; and
in the wide Iield oI its police power, the lawmaking body could provide that
the distribution oI beneIits thereIrom be readiusted among its components
to enable it to resist the added strain oI the increase in taxes that it had to
sustain.

COMMISSIONER OF IR VS CENTRAL LUZON DRUG CORP
GR 148512 June 26, 2006
Azcuna, J.:
FACTS:
This is a petition Ior review under Rule 45 oI Rules oI Court seeking the
nulliIication oI CA decision granting respondent`s claim Ior tax equal to the
amount oI the 20 that it extended to senior citizens on the latter`s
purchases pursuant to Senior Citizens Act. Respondent deducted the total
amount oI Php219,778 Irom its gross income Ior the taxable year 1995
whereby respondent did not pay tax Ior that year reporting a net loss oI
Php20,963 in its corporate income tax. In 1996, claiming that the
Php219,778 should be applied as a tax credit, respondent claimed Ior reIund
in the amount oI Php150, 193.
ISSUE:
Whether or not the 20 discount granted by the respondent to qualiIied
senior citizens may be claimed as tax credit or as deduction Irom gross
sales?
RULING:
'Tax credit is explicitly provided Ior in Sec4 oI RA 7432. The discount
given to Senior citizens is a tax credit, not a deduction Irom the gross sales
oI the establishment concerned. The tax credit that is contemplated under
this Act is a Iorm oI iust compensation, not a remedy Ior taxes that were
erroneously or illegally assessed and collected. In the same vein, prior
payment oI any tax liability is a pre-condition beIore a taxable entity can
beneIit Irom tax credit. The credit may be availed oI upon payment, iI any.
Where there is no tax liability or where a private establishment reports a net
loss Ior the period, the tax credit can be availed oI and carried over to the
next taxable year.

APOSTOLIC PREFECT VS CITY TREASURER OF BAGUIO CITY
GR 4752 April 18, 1941
Imperial, J.:
FACTS:
The Apostolic PreIect is a corporation , oI religious character, organized
under the Philippine laws, and with residence in Baguio. The City imposed
a special assessment against properties within its territorial iurisdiction,
including those oI the Apostolic PreIect, which beneIits Irom its drainage
and sewerage system. The Apostolic PreIect contends that its properties
should be Iree oI tax being oI religious in character.
ISSUE:
Whether or not Apostolic PreIect, as a religious entity is exempt Irom the
payment oI the special assessment.
RULING:
A special assessment is not a tax; and neither the decree nor the
Constitution exempt petitioner Irom payment oI said special assessment.
Although it its broad meaning, tax includes both general taxes and special
assessment, yet there is a recognized distinction: Assessment is conIined to
local impositions upon property Ior the payment oI the cost oI public
improvements in its immediate vicinity and levied with special beneIits to
the property assessed. Petitioner likewise, has proven that the property in
question is used exclusively Ior religious purposes; but that it appears the
same is being used to other non-religious purposes. Thus, petitioner is
required to pay the special assessment.

PAL VS EDU
HR L-41383 August 15, 1988
Gutierrez, J.:
FACTS:
PAL is engaged in air transportation business under a legislative Iranchise
wherein it is exempt Irom tax payment. PAL has not been paying motor
vehicle registration since 1956. The Land Registration Commissioner
required all tax exempt entities including PAL to pay motor vehicle
registration Iees.
ISSUE:
Whether or not registration Iees as to motor vehicles are taxes to which
PAL is exempted.
RULING:
Taxes are Ior revenue whereas Iees are exactions Ior purposes oI regulation
and inspection, and are Ior that reason limited in amount to what is
necessary to cover the cost oI the services rendered in that connection. It is
the obiect oI the charge, and not the name, that determines whether a charge
is a tax or a Iee. The money collected under Motor Vehicle Law is not
intended Ior the expenditures oI the MV OIIice but accrues to the Iunds Ior
the construction and maintenance oI public roads, streets and bridges.
As Iees are not collected Ior regulatory purposes as an incident to the
enIorcement oI regulations governing the operation oI motor vehicles on
public highways but to provide revenue with which the Government is to
construct and maintain public highways Ior everyone`s use, they are
veritable taxes, not merely Iees. PAL is thus exempt Irom paying such Iees,
except Ior the period between June 27, 1968 to April 9, 1979 where its tax
exemption in the Iranchise was repealed.

CALTEX PHILIPPINES VS CA
G.R. 925585 MAY 8, 1992
Davide, J.:
FACTS:
In 1989, COA sent a letter to Caltex directing it to remit to OPSF its
collection oI the additional tax on petroleum authorized under PD 1956 and
pending such remittance, all oI its claims Irom the OPSF shall be held in
abeyance. Petitioner requested COA Ior the early release oI its
reimbursement certiIicates Irom the OPSF covering claims with the OIIice
oI Energy AIIairs. COA denied the same.
ISSUE:
Whether oI not petitioner can avail oI the right to oIIset any amount that it
may be required under the law to remit to the OPSF against any amount that
it may receive by way oI reimbursement.
RULING:
It is a settled rule that a taxpayer may not oIIset taxes due Irom the claims
that he may have against the government. Taxes cannot be the subiect oI
compensation because the government and taxpayer are not mutually
debtors and creditors oI each other and a claim Ior taxes is not such a debt,
demand, contract or iudgment as is allowed to be set-oII.
The oil companies merely acted as agents Ior the government in the latter`s
collection since taxes are passed unto the end-users, the consuming public.

DOMINGO VS GARLITOS
G.R. NO. 18993 June 29, 1963
Labrador, J.:
FACTS:
In Domingo vs. Moscoso, the Supreme Court declared as Iinal and executor
the order oI the lower court Ior the payment oI estate and inheritance taxes,
charges and penalties amounting to Php 40,058.55 by the estate oI the oI the
late Walter Price. The petitioner Ior execution Iiled by the Iiscal was denied
by the lower court. The court held that the execution is uniustiIied as the
Government is indebted to the estate Ior Php262,200 and ordered the
amount oI inheritance taxes can be deducted Irom the Government`s
indebtedness to the estate.
ISSUE:
Whether oI not a tax and a debt may be compensated.
RULING:
The court having iurisdiction oI the Estate had Iound that the claim oI the
Estate against the government has been recognized and the amount has
already been appropriated by a corresponding law. Both the claim oI the
Government Ior inheritance taxes and the claim oI the intestate Ior services
rendered have already become overdue and demandable is well as Iully
liquidated. Compensation takes place by operation oI law and both debts are
extinguished to the concurrent amount. ThereIore the petitioner has no clear
right to execute the iudgment Ior taxes against the estate oI the deceased
Walter Price.

GARCIA VS. EXECUTIVE SECRETARY
211 SCRA 219 July 3, 1992
Feliciano, J.:

FACTS:
The President issued an EO which imposed, across the board, including
crude oil and other oil products, additional duty ad valorem. The TariII
Commission held public hearings on said EO and submitted a report to the
President Ior consideration and appropriate action. The President, on the
other hand issued an EO which levied a special duty oI P0.95 per liter oI
imported crude oil and P1.00 per liter oI imported oil products.
ISSUE:
Whether oI not the President may issue an EO which is tantamount to
enacting a bill in the nature oI revenue-generating measures.
RULING:
The Court said that although the enactment oI appropriation, revenue and
tariII bills is within the province oI the Legislative, it does not Iollow that
EO in question, assuming they may be characterized as revenue measure are
prohibited to the President, that they must be enacted instead by Congress.
Section 28 oI Article VI oI the 1987 Constitution provides:
'The Congress may, by law authorize the President to Iix. tariII rates and
other duties or imposts.
The relevant Congressional statute is the TariII and Customs Code oI the
Philippines and Sections 104 and 401, the pertinent provisions thereoI.
2006 Bar Operations Commission Team Research Head:
Sheila Panganiban

Political Law: Lei Almero, Flai Gregorio, Kat Dilao
Criminal Law: Bing Torrecampo
Labor Law: Selch Sancho, Mhe Sangalang, Shei Panganiban
Legal Ethics: Gerlie Admana
Mercantile Law: Bunny Santayana, Shei Panganiban, Selch Sancho
Remedial Law: Mhe Sangalang, Shei Panganiban
Taxation Law: Gerlie Admana
Civil Law: Shie Labro, Bing Torrecampo, Bernice Catherine Santayana,
Shei Panganiban, Gerlie Admana Posted by &C Bar perations
Commission 2007
at 3:35 AM 37 comments 2006 Taxation Case Digests

PERID T ASSESS AD CLLECT TAX DEICIECY

ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL vs.
COMMISSIONER OF INTERNAL REVENUE
GR. No. 155541. January 27, 2004

Facts: During the liIetime oI the decedent Juliana vda. De Gabriel, her
business aIIairs were managed by the Philippine Trust Company
(PhilTrust). The decedent died on April 3, 1979 but two days aIter her
death, PhilTrust Iiled her income tax return Ior 1978 not indicating that the
decedent had died. The BIR conducted an administrative investigation oI
the decedent`s tax liability and Iound a deIiciency income tax Ior the year
1997 in the amount oI P318,233.93. Thus, in November 18, 1982, the BIR
sent by registered mail a demand letter and assessment notice addressed to
the decedent 'c/o PhilTrust, Sta. Cruz, Manila, which was the address stated
in her 1978 income tax return. On June 18, 1984, respondent Commissioner
oI Internal Revenue issued warrants oI distraint and levy to enIorce the
collection oI decedent`s deIiciency income tax liability and serve the same
upon her heir, Francisco Gabriel. On November 22, 1984, Commissioner
Iiled a motion to allow his claim with probate court Ior the deIiciency tax.
The Court denied BIR`s claim against the estate on the ground that no
proper notice oI the tax assessment was made on the proper party. On
appeal, the CA held that BIR`s service on PhilTrust oI the notice oI
assessment was binding on the estate as PhilTrust Iailed in its legal duty to
inIorm the respondent oI antecedent`s death. Consequently, as the estate
Iailed to question the assessment within the statutory period oI thirty days,
the assessment became Iinal, executory, and incontestable.

Issue: (1) Whether or not the CA erred in holding that the service oI
deIiciency tax assessment on Juliana through PhilTrust was a valid service
as to bind the estate.
(2) Whether or not the CA erred in holding that the tax assessment had
become Iinal, executory, and incontestable.

Held: (1) Since the relationship between PhilTrust and the decedent was
automatically severed the moment oI the taxpayer`s death, none oI the
PhilTrust`s acts or omissions could bind the estate oI the taxpayer.
Although the administrator oI the estate may have been remiss in his legal
obligation to inIorm respondent oI the decedent`s death, the consequence
thereoI merely reIer to the imposition oI certain penal sanction on the
administrator. These do not include the indeIinite tolling oI the prescriptive
period Ior making deIiciency tax assessment or waiver oI the notice
requirement Ior such assessment.
(2) The assessment was served not even on an heir or the estate but on a
completely disinterested party. This improper service was clearly not
binding on the petitioner. The most crucial point to be remembered is that
PhilTust had absolutely no legal relationship with the deceased or to her
Estate. There was thereIore no assessment served on the estate as to the
alleged underpayment oI tax. Absent this assessment, no proceeding could
be initiated in court Ior collection oI said tax; thereIore, it could not have
become Iinal, executory and incontestable. Respondent`s claim Ior
collection Iiled with the court only on November 22, 1984 was barred Ior
having been made beyond the Iive-year prescriptive period set by law.

TAX EXEMPTION; WITHDRAWAL OF TAX PRIVILEGES OF
ELECTRIC COOPERATIVES BY THE LOCAL GOVERNMENT CODE

PHILIPPINE RURAL ELECTRIC COOPERATIVES ASSOCIATION,
INC., et al. vs. THE SECRETARY OF DEPARTMENT OF INTERIOR
AND LOCAL GOVERNMENT
GR. No. 143076. June 10, 2003

Facts: On May 23, 2003, a class suit was Iiled by petitioners in their own
behalI and in behalI oI other electric cooperatives organized and existing
under PD 269 which are members oI petitioner Philippine Rural Electric
Cooperatives Association, Inc. (PHILRECA). The other petitioners, electric
cooperatives oI Agusan del Norte (ANECO), Iloilo 1 (ILECO 1) and
Isabela 1 (ISELCO 1) are non-stock, non-proIit electric cooperatives
organized and existing under PD 269, as amended, and registered with the
National ElectriIication Administration (NEA).
Under Sec. 39 oI PD 269 electric cooperatives shall be exempt Irom the
payment oI all National Government, local government, and municipal
taxes and Iee, including Iranchise, Iling recordation, license or permit Iees
or taxes and any Iees, charges, or costs involved in any court or
administrative proceedings in which it may be party.
From 1971to 1978, in order to Iinance the electriIication proiects envisioned
by PD 269, as amended, the Philippine Government, acting through the
National Economic council (now National Economic Development
Authority) and the NEA, entered into six loan agreements with the
government oI the United States oI America, through the United States
Agency Ior International Development (USAID) with electric cooperatives
as beneIiciaries. The loan agreements contain similarly worded provisions
on the tax application oI the loan and any property or commodity acquired
through the proceeds oI the loan.
Petitioners allege that with the passage oI the Local Government Code their
tax exemptions have been validly withdrawn. Particularly, petitioners assail
the validity oI Sec. 193 and 234 oI the said code. Sec. 193 provides Ior the
withdrawal oI tax exemption privileges granted to all persons, whether
natural or iuridical, except cooperatives duly registered under RA 6938,
while Sec. 234 exempts the same cooperatives Irom payment oI real
property tax.

Issue: (1) Does the Local Government Code (under Sec. 193 and 234)
violate the equal protection clause since the provisions unduly discriminate
against petitioners who are duly registered cooperatives under PD 269, as
amended, and no under RA 6938 or the Cooperatives Code oI the
Philippines?
(2) Is there an impairment oI the obligations oI contract under the loan
entered into between the Philippine and the US Governments?

Held: (1) No. The guaranty oI the equal protection clause is not violated by
a law based on a reasonable classiIication. ClassiIication, to be reasonable
must (a) rest on substantial classiIications; (b) germane to the purpose oI the
law; (c) not limited to the existing conditions only; and (d) apply equally to
all members oI the same class. We hold that there is reasonable
classiIication under the Local Government Code to iustiIy the diIIerent tax
treatment between electric cooperatives covered by PD 269 and electric
cooperatives under RA 6938.
First, substantial distinctions exist between cooperatives under PD 269 and
those under RA 6938. In the Iormer, the government is the one that Iunds
those so-called electric cooperatives, while in the latter, the members make
equitable contribution as source oI Iunds.
a. Capital Contributions by Members Nowhere in PD 269 doe sit require
cooperatives to make equitable contributions to capital. Petitioners
themselves admit that to qualiIy as a member oI an electric cooperative
under PD 269, only the payment oI a P5.00 membership Iee is required
which is even reIundable the moment the member is no longer interested in
getting electric service Irom the cooperative or will transIer to another place
outside the area covered by the cooperative. However, under the
Cooperative Code, the articles oI cooperation oI a cooperative applying Ior
registration must be accompanied with the bonds oI the accountable oIIicers
and a sworn statement oI the treasurer elected by the subscribers showing
that at least 25 oI the authorized share capital has been subscribed and at
least 25 oI the total subscription has been paid and in no case shall the
paid-up share capital be less than P2,000.00.
b. Extent oI Government Control over Cooperatives The extent oI
government control over electric cooperatives covered by PD 269 is largely
a Iunction oI the role oI the NEA as a primary source oI Iunds oI these
electric cooperatives. It is crystal clear that NEA incurred loans Irom
various sources to Iinance the development and operations oI these electric
cooperatives. Consequently, amendments were primarily geared to expand
the powers oI NEA over the electric cooperatives o ensure that loans
granted to them would be repaid to the government. In contrast,
cooperatives under RA 6938 are envisioned to be selI-suIIicient and
independent organizations with minimal government intervention or
regulation.
Second, the classiIication oI tax-exempt entities in the Local Government
Code is germane to the purpose oI the law. The Constitutional mandate that
'every local government unit shall enioy local autonomy, does not mean
that the exercise oI the power by the local governments is beyond the
regulation oI Congress. Sec. 193 oI the LGC is indicative oI the legislative
intent to vet broad taxing powers upon the local government units and to
limit exemptions Irom local taxation to entities speciIically provided
therein.
Finally, Sec. 193 and 234 oI the LGC permit reasonable classiIication as
these exemptions are not limited to existing conditions and apply equally to
all members oI the same class.

(2) No. It is ingrained in iurisprudence that the constitutional prohibition on
the impairment oI the obligations oI contracts does not prohibit every
change in existing laws. To Iall within the prohibition, the change must not
only impair the obligation oI the existing contract, but the impairment must
be substantial. Moreover, to constitute impairment, the law must aIIect a
change in the rights oI the parties with reIerence to each other and not with
respect to non-parties.
The quoted provision under the loan agreement does not purport to grant
any tax exemption in Iavor oI any party to the contract, including the
beneIiciaries thereoI. The provisions simply shiIt the tax burden, iI any, on
the transactions under the loan agreements to the borrower and/or
beneIiciary oI the loan. Thus, the withdrawal by the Local Government
Code under Sec. 193 and 234 oI the tax exemptions previously enioyed by
petitioners does not impair the obligation oI the borrower, the lender or the
beneIiciary under the loan agreements as, in Iact, no tax exemption is
granted therein.

TARIFF AND CUSTOMS LAWS; PRIMARY JURISDICTION OVER
SEIZURE AND FORFEITURE CASES

ChieI State Prosecutor JOVENCITO R. ZUO, ATTY. CLEMENTE P.
HERALDO, ChieI oI the Internal Inquiry and Prosecution Division-customs
Intelligence and Investigation Service (IIPD-CIIS), and LEONITO A.
SANTIAGO, Special Investigator oI the IIPD-CIIS vs. JUDGE ARNULFO
G. CABREDO, Regional Trial Court, Branch 15, Tabaco City, Albay
AM. No. RTJ-03-1779, April 30, 2003

Facts: Atty. Winston Florin, the Deputy Collector oI Customs oI the Sub-
Port oI Tabaco, Albay, issued on September 3, 2001 Warrant oI Seizure and
Detention (WSD) No. 06-2001against a shipment oI 35, 000 bags oI rice
aboard the vessel M/V Criston Ior violation oI Sec. 2530 oI the TariII and
Customs Code oI the Philippines (TCCP).
A Iew days, aIter the issuance oI the warrant oI seizure and detention,
Antonio Chua, Jr. and Carlos Carillo, claiming to be consignees oI the
subiect goods, Iiled beIore the Regional Trial Court oI Tabaco City, Albay a
Petition with Prayer Ior the Issuance oI Preliminary Iniunction and
Temporary Restraining Order (TRO). The said petition sought to enioin the
Bureau oI Customs and its oIIicials Irom detaining the subiect shipment.
By virtue oI said TRO, the 35,000 bags oI rice were released Irom customs
to Antonio Chua, Jr. and Carlos Carillo.
In his complaint, ChieI State Prosecutor Zuo alleged that respondent Judge
violated Administrative Circular No. 7-99, which cautions trial court iudges
in their issuance oI TROs and writs oI preliminary iniunctions. Said circular
reminds iudges oI the principle, enunciated in Mison vs. Natividad, that the
Collector oI Customs has exclusive iurisdiction over seizure and IorIeiture
proceedings, and regular courts cannot interIere with his exercise thereoI or
stiIle or put it to naught.

Issue: Whether or not the issuance oI the TRO was illegal and beyond the
iurisdiction oI the RTC.

Held: The collection oI duties and taxes due on the seized goods is not the
only reason why trial courts are enioined Irom issuing orders releasing
imported articles under seizure and IorIeiture proceedings by the Bureau oI
Customs. Administrative Circular No. 7-99 takes into account the Iact that
the issuance oI TROs and the granting oI writs oI preliminary iniunction in
seizure and IorIeiture proceedings beIore the Bureau oI Customs may
arouse suspicion that the issuance or grant was Iro considerations other than
the strict merits oI the case. Furthermore, respondent Judge`s actuation goes
against settled iurisprudence that the Collector oI Customs has exclusive
iurisdiction over seizure and IorIeiture proceedings, and regular courts
cannot interIere with his exercise thereoI or stiIle and put it to naught.
Respondent Judge cannot claim that he issued the questioned TRO because
he honestly believed tat the Bureau oI Customs was eIIectively divested oI
its iurisdiction over the seized shipment.
Even iI it be assumed that in the exercise oI the Collector oI Customs oI its
exclusive iurisdiction over seizure and IorIeiture cases, a taint oI illegality is
correctly imputed, the most that can be said is that under these
circumstance, grave abuse oI discretion may oust it oI its iurisdiction. This
does mean, however, that the trial court is vested with competence to
acquire iurisdiction over these seizure and IorIeiture cases. The proceedings
beIore the Collector oI Customs are not Iinal. An appeal lies to the
Commissioner oI Customs and, thereaIter, to the Court oI Tax Appeals. It
may even reach this Court through an appropriate petition Ior review.
Certainly, the RTC is not included therein. Hence, it is devoid oI
iurisdiction.
Clearly, thereIore, respondent Judge had no iurisdiction to take cognizance
oI the petition and issue the questioned TRO.
It is a basic principle that the Collector oI Customs has exclusive
iurisdiction over seizure and IorIeiture proceedings oI dutiable goods. A
studious and conscientious iudge can easily be conversant with such an
elementary rule.

NATURE OF FRANCHISE TAX; TAX EXEMPTION; WITHDRAWAL
OF TAX PRIVILEGES BY THE LOCAL GOVERNMENT CODE

NATIONAL POWER CORPORATION vs. CITY OF CABANATUAN
GR. No. 149110, April 9, 2003

Facts: NAPOCOR, the petitioner, is a government-owed and controlled
corporation created under Commonwealth Act 120. It is tasked to undertake
the 'development oI hydroelectric generations oI power and the production
oI electricity Irom nuclear, geothermal, and other sources, as well as, the
transmission oI electric power on a nationwide basis.
For many years now, NAPOCOR sells electric power to the resident
Cabanatuan City, posting a gross income oI P107,814,187.96 in 1992.
Pursuant to Sec. 37 oI Ordinance No. 165-92, the respondent assessed the
petitioner a Iranchise tax amounting to P808,606.41, representing 75 oI
1 oI the Iormer`s gross receipts Ior the preceding year.
Petitioner, whose capital stock was subscribed and wholly paid by the
Philippine Government, reIused to pay the tax assessment. It argued that the
respondent has no authority to impose tax on government entities. Petitioner
also contend that as a non-proIit organization, it is exempted Irom the
payment oI all Iorms oI taxes, charges, duties or Iees in accordance with
Sec. 13 oI RA 6395, as amended.
The respondent Iiled a collection suit in the RTC oI Cabanatuan City,
demanding that petitioner pay the assessed tax, plus surcharge equivalent to
25 oI the amount oI tax and 2 monthly interest. Respondent alleged that
petitioner`s exemption Irom local taxes has been repealed by Sec. 193 oI
RA 7160 (Local Government Code). The trial court issued an order
dismissing the case. On appeal, the Court oI Appeals reversed the decision
oI the RTC and ordered the petitioner to pay the city government the tax
assessment.

Issues: (1) Is the NAPOCOR excluded Irom the coverage oI the Iranchise
tax simply because its stocks are wholly owned by the National
Government and its charter characterized is as a non-proIit organization`?
(2) Is the NAPOCOR`s exemption Irom all Iorms oI taxes repealed by the
provisions oI the Local Government Code (LGC)?

Held: (1) NO. To stress, a Iranchise tax is imposed based not on the
ownership but on the exercise by the corporation oI a privilege to do
business. The taxable entity is the corporation which exercises the
Iranchise, and not the individual stockholders. By virtue oI its charter,
petitioner was created as a separate and distinct entity Irom the National
Government. It can sue and be sued under its own name, and can exercise
all the powers oI a corporation under the Corporation Code.
To be sure, the ownership by the National Government oI its entire capital
stock does not necessarily imply that petitioner is no engage din business.
(2) YES. One oI the most signiIicant provisions oI the LGC is the removal
oI the blanket exclusion oI instrumentalities and agencies oI the National
Government Irom the coverage oI local taxation. Although as a general rule,
LGUs cannot impose taxes, Iees, or charges oI any kind on the National
Government, its agencies and instrumentalities, this rule now admits an
exception, i.e. when speciIic provisions oI the LGC authorize the LGUs to
impose taxes, Iees, or charges on the aIorementioned entities. The
legislative purpose to withdraw tax privileges enioyed under existing laws
or charter is clearly maniIested by the language used on Sec. 137 and 193
categorically withdrawing such exemption subiect only to the exceptions
enumerated. Since it would be tedious and impractical to attempt to
enumerate all the existing statutes providing Ior special tax exemptions or
privileges, the LGC provided Ior an express, albeit general, withdrawal oI
such exemptions or privileges. No more unequivocal language could have
been used.

TAX EXEMPTIONS vs. TAX EXCLUSION; 'IN LIEU OF ALL TAXES
PROVISION

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC.
(PLDT) vs. CITY OF DAVAO and ADELAIDA B. BARCELONA, in her
capacity as City Treasurer oI Davao
GR. No. 143867, March 25, 2003

Facts: PLDT paid a Iranchise tax equal to three percent (3) oI its gross
receipts. The Iranchise tax was paid 'in lieu oI all taxes on this Iranchise or
earnings thereoI pursuant to RA 7082. The exemption Irom 'all taxes on
this Iranchise or earnings thereoI was subsequently withdrawn by RA 7160
(LGC), which at the same time gave local government units the power to
tax businesses enioying a Iranchise on the basis oI income received or
earned by them within their territorial iurisdiction. The LGC took eIIect on
January 1, 1992.
The City oI Davao enacted Ordinance No. 519, Series oI 1992, which in
pertinent part provides: Notwithstanding any exemption granted by law or
other special laws, there is hereby imposed a tax on businesses enioying a
Iranchise, a rate oI seventy-Iive percent (75) oI one percent (1) oI the
gross annual receipts Ior the preceding calendar year based on the income
receipts realized within the territorial iurisdiction oI Davao City.
Subsequently, Congress granted in Iavor oI Globe Mackay Cable and Radio
Corporation (Globe) and Smart InIormation Technologies, Inc. (Smart)
Iranchises which contained 'in leiu oI all taxes provisos.
In 1995, it enacted RA 7925, or the Public Telecommunication Policy oI the
Philippines, Sec. 23 oI which provides that any advantage, Iavor, privilege,
exemption, or immunity granted under existing Iranchises, or may hereaIter
be granted, shall ipso Iacto become part oI previously granted
telecommunications Iranchises and shall be accorded immediately and
unconditionally to the grantees oI such Iranchises. The law took eIIect on
March 16, 1995.
In January 1999, when PLDT applied Ior a mayor`s permit to operate its
Davao Metro exchange, it was required to pay the local Iranchise tax which
then had amounted to P3,681,985.72. PLDT challenged the power oI the
city government to collect the local Iranchise tax and demanded a reIund oI
what had been paid as a local Iranchise tax Ior the year 1997 and Ior the
Iirst to the third quarters oI 1998.

Issue: Whether or not by virtue oI RA 7925, Sec. 23, PLDT is again entitled
to the exemption Irom payment oI the local Iranchise tax in view oI the
grant oI tax exemption to Globe and Smart.

Held: Petitioner contends that because their existing Iranchises contain 'in
lieu oI all taxes clauses, the same grant oI tax exemption must be deemed
to have become ipso Iacto part oI its previously granted telecommunications
Iranchise. But the rule is that tax exemptions should be granted only by a
clear and unequivocal provision oI law 'expressed in a language too plain
to be mistaken and assuming Ior the nonce that the charters oI Globe and
oI Smart grant tax exemptions, then this runabout way oI granting tax
exemption to PLDT is not a direct, 'clear and unequivocal way oI
communicating the legislative intent.
Nor does the term 'exemption in Sec. 23 oI RA 7925 mean tax exemption.
The term reIers to exemption Irom regulations and requirements imposed
by the National Telecommunications Commission (NTC). For instance, RA
7925, Sec. 17 provides: The Commission shall exempt any speciIic
telecommunications service Irom its rate or tariII regulations iI the service
has suIIicient competition to ensure Iair and reasonable rates oI tariIIs.
Another exemption granted by the law in line with its policy oI deregulation
is the exemption Irom the requirement oI securing permits Irom the NTC
every time a telecommunications company imports equipment.
Tax exemptions should be granted only by clear and unequivocal provision
oI law on the basis oI language too plain to be mistaken.

REMEDIES OF A TAXPAYER UNDER THE NIRC; POWER OF THE
CTA TO REVIEW RULINGS OR OPINIONS OF COMMISSIONER

COMMISSIONER OF INTERNAL REVENUE vs. LEAL
GR. No. 113459, November 18, 2002

Facts: Pursuant to Sec. 116 oI the Tax Code which imposes percentage tax
on dealers in securities and lending investors, the Commissioner oI Internal
Revenue issued Memorandum Order (RMO) No. 15-91 dated March 11,
1991, imposing Iive percent (5) lending investor`s tax on pawnshops
based on their gross income and requiring all investigating units oI the
Bureau to investigate and assess the lending investor`s tax due Irom them.
The issuance oI RMO No. 15-91 was an oIIshoot oI petitioner`s evaluation
that the nature oI pawnshop business is akin to that oI lending investors.
Subsequently, petitioner issued Revenue Memorandum Circular No. 43-91
dated May 27, 1992, subiecting the pawn ticket to the documentary stamp
tax as prescribed in Title VII oI the Tax Code.
Adversely aIIected by those revenue orders, herein respondent JoseIina
Leal, owner and operator oI JoseIina Pawnshop in San Mateo, Rizal, asked
Ior a reconsideration oI both RMO No. 15-91 and RMC No. 43-91 but the
same was denied with Iinality by petitioner in October 30, 1991.
Consequently, on March 18, 1992, respondent Iiled with the RTC a petition
Ior prohibition seeking to prohibit petitioner Irom implementing the revenue
orders.
Petitioner, through the OIIice oI the Solicitor-General, Iiled a motion to
dismiss the petition on the ground that the RTC has no iurisdiction to
review the questioned revenue orders and to enioin their implementation.
Petitioner contends that the subiect revenue orders were issued pursuant to
his power 'to make rulings or opinions in connection with the
Implementation oI the provisions oI internal revenue laws. Thus, the case
Ialls within the exclusive appellate iurisdiction oI the Court oI Tax Appeals,
citing Sec. 7(1) oI RA 1125.
The RTC issued an order denying the motion to dismiss holding that the
revenue orders are not assessments to implement a Tax Code provision, but
are 'in eIIect new taxes (against pawnshops) which are not provided Ior
under the Code, and which only Congress is empowered to impose. The
Court oI Appeals aIIirmed the order issued by the RTC.

Issue: Whether or not the Court oI Tax Appeals has iurisdiction to review
rulings oI the Commissioner implementing the Tax Code.

Held: The iurisdiction to review rulings oI the Commissioner pertains to the
Court oI Tax Appeals and NOT to the RTC. The questioned RMO and
RMC are actually rulings or opinions oI the Commissioner implementing
the Tax Code on the taxability oI the Pawnshops.
Under RA 1125, An Act Creating the Court oI Tax Appeals, such rulings oI
the Commissioner oI Internal Revenue are appealable to that court:
Sec. 7 Jurisdiction The Court oI Tax Appeals shall exercise exclusive
appellate iurisdiction to review by appeal, as herein provided--
1. Decisions oI the Commissioner oI Internal Revenue in cases involving
disputed assessments, reIunds oI internal revenue taxes, Iees or other
charges, penalties imposed in relation thereto, or other matters arising under
the National Revenue Code or other laws or part oI law administered by the
Bureau oI Internal Revenue.
xxxxxx

tax remedies; section 220; who should institute appeal in tax cases

COMMISSIONER OF INTERNAL REVENUE vs. LA SUERTE CIGAR
AND CIGARETTE FACTORY
GR. No. 144942, July 4, 2002

Facts: In its resolution, dated 15 November 2000, the Supreme Court denied
the Petition Ior Review on Certiorari submitted by the Commissioner oI
Internal Revenue Ior non-compliance with the procedural requirement oI
veriIication explicit in Sec. 4, Rule 7 oI the 1997 Rules oI Civil Procedure
and, Iurthermore, because the appeal was not pursued by the Solicitor-
General. When the motion Ior reconsideration Iiled by the petitioner was
likewise denied, petitioner Iiled the instant motion seeking an elucidation on
the supposed discrepancy between the pronouncement oI this Court, on the
one hand that would require the participation oI the OIIice oI the Solicitor-
General and pertinent provisions oI the Tax Code, on the other hand, that
allow legal oIIicers oI the Bureau oI Internal Revenue (BIR) to institute and
conduct iudicial action in behalI oI the Government under Sec, 220 oI the
Tax ReIorm Act oI 1997.

Issue: Are the legal oIIicer oI the BIR authorized to institute appeal
proceedings (as distinguished Irom commencement oI proceeding) without
the participation oI the Solicitor-General?

Held: NO. The institution or commencement beIore a proper court oI civil
and criminal actions and proceedings arising under the Tax ReIorm Act
which 'shall be conducted y legal oIIicers oI the Bureau oI Internal
Revenue is not in dispute. An appeal Irom such court, however, is not a
matter oI right. Sec. 220 oI the Tax ReIorm Act must not be understood as
overturning the long-established procedure beIore this Court in requiring
the Solicitor-General to represent the interest oI the Republic. This court
continues to maintain that it is the Solicitor-General who has the primary
responsibility to appear Ior the government in appellate proceedings. This
pronouncement Iinds iustiIication in the various laws deIining the OIIice oI
the Solicitor-General, beginning with Act No. 135, which took eIIect on 16
June 1901, up to the present Administrative Code oI 1987. Sec. 35, Chapter
12, Title III, Book IV oI the said code outlines the powers and Iunctions oI
the OIIice oI the Solicitor General which includes, but not limited to, its
duty to--
1. Represent the Government in the Supreme Court and the Court oI
Appeals in all criminal proceedings; represent the Government and its
oIIicers in the Supreme Court, the Court oI Appeals, and all other courts or
tribunals in all civil actions and special proceedings in which the
Government or any oIIicer thereoI in his oIIicial capacity is a party.
2. Appear in any court in any action involving the validity oI any treaty,
law, executive order, or proclamation, rule or regulation when in his
iudgment his intervention is necessary or when requested by the Court.

TAX EXEMPTIONS; EXECUTIVE LEGISLATION

COCONUT OIL REFINERS ASSOCIATION, INC. et al vs. RUBEN
TORRES, as Executive Secretary, et al
G.R. No. 132527. July 29, 2005

Facts: On March 13, 1992, RA No. 7227 was enacted, providing Ior, among
other things, the sound and balanced conversion oI the Clark and Subic
military reservations and their extensions into alternative productive uses in
the Iorm oI special economic zones in order to promote the economic and
social development oI Central Luzon in particular and the country in
general. The law contains provisions on tax exemptions Ior importations oI
raw materials, capital and equipment. AIter which the President issued
several Executive Orders as mandated by the law Ior the implementation oI
RA 7227. Herein petitioners contend the validity oI the tax exemption
provided Ior in the law.

Issue: Whether or not the Executive Orders issued by President Ior the
implementation oI the tax exemptions constitutes executive legislation.

Held: To limit the tax-Iree importation privilege oI enterprises located
inside the special economic zone only to raw materials, capital and
equipment clearly runs counter to the intention oI the Legislature to create a
Iree port where the 'Iree Ilow oI goods or capital within, into, and out oI the
zones is insured.
The phrase 'tax and duty-Iree importations oI raw materials, capital and
equipment was merely cited as an example oI incentives that may be given
to entities operating within the zone. Public respondent SBMA correctly
argued that the maxim expressio unius est exclusio alterius, on which
petitioners impliedly rely to support their restrictive interpretation, does not
apply when words are mentioned by way oI example. It is obvious Irom the
wording oI RA No. 7227, particularly the use oI the phrase 'such as, that
the enumeration only meant to illustrate incentives that the SSEZ is
authorized to grant, in line with its being a Iree port zone.
The Court Iinds that the setting up oI such commercial establishments
which are the only ones duly authorized to sell consumer items tax and
duty-Iree is still well within the policy enunciated in Section 12 oI RA No.
7227 that '. . .the Subic Special Economic Zone shall be developed into a
selI-sustaining, industrial, commercial, Iinancial and investment center to
generate employment opportunities in and around the zone and to attract
and promote productive Ioreign investments. However, the Court reiterates
that the second sentences oI paragraphs 1.2 and 1.3 oI Executive Order No.
97-A, allowing tax and duty-Iree removal oI goods to certain individuals,
even in a limited amount, Irom the Secured Area oI the SSEZ, are null and
void Ior being contrary to Section 12 oI RA No. 7227. Said Section clearly
provides that 'exportation or removal oI goods Irom the territory oI the
Subic Special Economic Zone to the other parts oI the Philippine territory
shall be subiect to customs duties and taxes under the Customs and TariII
Code and other relevant tax laws oI the Philippines.

TAX EXEMPTIONS; NULLITY OF TAX DECLARATIONS AND TAX
ASSESSMENTS

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), vs.
PROVINCIAL ASSESOR OF SOUTH COTABATO, et al.
G.R. No. 144486. April 13, 2005

Facts: RCPI was granted a Iranchise under RA 2036, the law provides tax
exemption Ior several properties oI the company. Section 14 oI RA 2036
reads: 'In consideration oI the Iranchise and rights hereby granted and any
provision oI law to the contrary notwithstanding, the grantee shall pay the
same taxes as are now or may hereaIter be required by law Irom other
individuals, co partnerships, private, public or quasi-public associations,
corporations or ioint stock companies, on real estate, buildings and other
personal property except radio equipment, machinery and spare parts
needed in connection with the business oI the grantee, which shall be
exempt Irom customs duties, tariIIs and other taxes, as well as those
properties declared exempt in this section. In consideration oI the Iranchise,
a tax equal to one and one-halI per centum oI all gross receipts Irom the
business transacted under this Iranchise by the grantee shall be paid to the
Treasurer oI the Philippines each year, within ten days aIter the audit and
approval oI the accounts as prescribed in this Act. Said tax shall be in lieu
oI any and all taxes oI any kind, nature or description levied, established or
collected by any authority whatsoever, municipal, provincial or national,
Irom which taxes the grantee is hereby expressly exempted. ThereaIter, the
municipal treasurer oI Tupi, South Cotabato assessed RCPI real property
taxes Irom 1981 to 1985. The municipal treasurer demanded that RCPI pay
P166,810 as real property tax on its radio station building in Barangay
Kablon, as well as on its machinery shed, radio relay station tower and its
accessories, and generating sets. The Local Board oI Assessment Appeals
aIIirmed the assessment oI the municipal treasurer. When the case reach the
C A, it ruled that, petitioner is exempt Irom paying the real property taxes
assessed upon its machinery and radio equipment mounted as accessories to
its relay tower. However, the decision assessing taxes upon petitioner`s
radio station building, machinery shed, and relay station tower is valid.

Issue: (1) Whether or not appellate court erred when it excluded RCPI`s
tower, relay station building and machinery shed Irom tax exemption.
(2) Whether or not appellate court erred when it did not resolve the issue oI
nullity oI the tax declarations and assessments due to non-inclusion oI
depreciation allowance.

Held: (1) RCPI`s radio relay station tower, radio station building, and
machinery shed are real properties and are thus subiect to the real property
tax. Section 14 oI RA 2036, as amended by RA 4054, states that 'in
consideration oI the Iranchise and rights hereby granted and any provision
oI law to the contrary notwithstanding, the grantee shall pay the same taxes
as are now or may hereaIter be required by law Irom other individuals, co
partnerships, private, public or quasi-public associations, corporations or
ioint stock companies, on real estate, buildings and other personal
property. The clear language oI Section 14 states that RCPI shall pay the
real estate tax.
(2) The court held the assessment valid. The court ruled that, records oI the
case shows that RCPI raised beIore the LBAA and the CBAA the nullity oI
the assessments due to the non-inclusion oI depreciation allowance.
ThereIore, RCPI did not raise this issue Ior the Iirst time. However, even iI
we consider this issue, under the Real Property Tax Code depreciation
allowance applies only to machinery and not to real property.

SECRETARY OF FINANCE CANNOT PROMULGATE
REGULATIONS FIXING A RATE OF PENALTY ON DELINQUENT
TAXES

The Honorable Secretary oI Finance vs. THE HONORABLE RICARDO
M. ILARDE, Presiding Judge, Regional Trial Court, 6th Judicial Region,
Branch 26, Iloilo City, and CIPRIANO P. CABALUNA, JR
G.R. No. 121782. May 9, 2005

Facts: Cabaluna with his wiIe owns several real property located in Iloilo
City. Cabaluana is the Regional Director oI Regional OIIice No. VI oI the
Department oI Finance in Iloilo City. AIter his retirement, there are tax
delinquencies on his properties; he paid the amount under protest
contending that the penalties imposed to him are in excess than that
provided by law. AIter exhausting all administrative remedies, he Iiled a
suit beIore the RTC which Iound that Section 4(c) oI Joint Assessment
Regulation No. 1-85 and Local Treasury Regulation No. 2-85 issued on
August 1, 1985 by respondent Secretary (Iormerly Minister) oI Finance is
null and void; (2) declaring that the penalty that should be imposed Ior
delinquency in the payment oI real property taxes should be two per centum
on the amount oI the delinquent tax Ior each month oI delinquency or
Iraction thereoI, until the delinquent tax is Iully paid but in no case shall the
total penalty exceed twenty-Iour per centum oI the delinquent tax as
provided Ior in Section 66 oI P.D. 464 otherwise known as the Real
Property Tax Code.

Issue: Whether or not the then Ministry oI Finance could legally promulgate
Regulations prescribing a rate oI penalty on delinquent taxes other than that
provided Ior under Presidential Decree (P.D.) No. 464, also known as the
Real Property Tax Code.

Held: The Ministry oI Finance now Secretary oI Finance cannot promulgate
regulations prescribing a rate oI penalty on delinquent taxes. The Court
ruled that despite the promulgation oI E.O. No. 73, P.D. No. 464 in general
and Section 66 in particular, remained to be good law. To accept the
Secretary`s premise that E.O. No. 73 had accorded the Ministry oI Finance
the authority to alter, increase, or modiIy the tax structure would be
tantamount to saying that E.O. No. 73 has repealed or amended P.D. No.
464. Repeal oI laws should be made clear and expressed. Repeals by
implication are not Iavored as laws are presumed to be passed with
deliberation and Iull knowledge oI all laws existing on the subiect. Such
repeals are not Iavored Ior a law cannot be deemed repealed unless it is
clearly maniIest that the legislature so intended it. Assuming argumenti that
E.O. No. 73 has authorized the petitioner to issue the obiected Regulations,
such conIerment oI powers is void Ior being repugnant to the well-encrusted
doctrine in political law that the power oI taxation is generally vested with
the legislature. Thus, Ior purposes oI computation oI the real property taxes
due Irom private respondent Ior the years 1986 to 1991, including the
penalties and interests, is still Section 66 oI the Real Property Tax Code oI
1974 or P.D. No. 464. The penalty that ought to be imposed Ior delinquency
in the payment oI real property taxes should, thereIore, be that provided Ior
in Section 66 oI P.D. No. 464, i.e., two per centum on the amount oI the
delinquent tax Ior each month oI delinquency or Iraction thereoI but 'in no
case shall the total penalty exceed twenty-Iour per centum oI the delinquent
tax.

EVIDENCE IN TAX ASSESSMENTS; MACHINE COPIES OF
RECORDS/ DOCUMENTS HAVE NO PROBATIVE VALUE

COMMISSION OF INTERNAL REVENUE vs. HANTEX TRADING
CO., INC
G.R. No. 136975. March 31, 2005

Facts: Hantex Trading Co is a company organized under the Philippines. It
is engaged in the sale oI plastic products, it imports synthetic resin and
other chemicals Ior the manuIacture oI its products. For this purpose, it is
required to Iile an Import Entry and Internal Revenue Declaration
(Consumption Entry) with the Bureau oI Customs under Section 1301 oI the
TariII and Customs Code. Sometime in October 1989, Lt. Vicente Amoto,
Acting ChieI oI Counter-Intelligence Division oI the Economic Intelligence
and Investigation Bureau (EIIB), received conIidential inIormation that the
respondent had imported synthetic resin amounting to P115,599,018.00 but
only declared P45,538,694.57. Thus, Hentex receive a subpoena to present
its books oI account which it Iailed to do. The bureau cannot Iind any
original copies oI the products Hentex imported since the originals were
eaten by termites. Thus, the Bureau relied on the certiIied copies oI the
respondent`s ProIit and Loss Statement Ior 1987 and 1988 on Iile with the
SEC, the machine copies oI the Consumption Entries, Series oI 1987,
submitted by the inIormer, as well as excerpts Irom the entries certiIied by
Tomas and Danganan. The case was submitted to the CTA which ruled that
Hentex have tax deIiciency and is ordered to pay, per investigation oI the
Bureau. The CA ruled that the income and sales tax deIiciency assessments
issued by the petitioner were unlawIul and baseless since the copies oI the
import entries relied upon in computing the deIiciency tax oI the respondent
were not duly authenticated by the public oIIicer charged with their
custody, nor veriIied under oath by the EIIB and the BIR investigators.

Issue: Whether or not the Iinal assessment oI the petitioner against the
respondent Ior deIiciency income tax and sales tax Ior the latter`s 1987
importation oI resins and calcium bicarbonate is based on competent
evidence and the law.

Held: Central to the second issue is Section 16 oI the NIRC oI 1977, as
amended which provides that the Commissioner oI Internal Revenue has the
power to make assessments and prescribe additional requirements Ior tax
administration and enIorcement. Among such powers are those provided in
paragraph (b), which provides that 'Failure to submit required returns,
statements, reports and other documents. When a report required by law
as a basis Ior the assessment oI any national internal revenue tax shall not
be Iorthcoming within the time Iixed by law or regulation or when there is
reason to believe that any such report is Ialse, incomplete or erroneous, the
Commissioner shall assess the proper tax on the best evidence obtainable.
This provision applies when the Commissioner oI Internal Revenue
undertakes to perIorm her administrative duty oI assessing the proper tax
against a taxpayer, to make a return in case oI a taxpayer`s Iailure to Iile
one, or to amend a return already Iiled in the BIR. The 'best evidence
envisaged in Section 16 oI the 1977 NIRC, as amended, includes the
corporate and accounting records oI the taxpayer who is the subiect oI the
assessment process, the accounting records oI other taxpayers engaged in
the same line oI business, including their gross proIit and net proIit sales.
Such evidence also includes data, record, paper, document or any evidence
gathered by internal revenue oIIicers Irom other taxpayers who had personal
transactions or Irom whom the subiect taxpayer received any income; and
record, data, document and inIormation secured Irom government oIIices or
agencies, such as the SEC, the Central Bank oI the Philippines, the Bureau
oI Customs, and the TariII and Customs Commission. However, the best
evidence obtainable under Section 16 oI the 1977 NIRC, as amended, does
not include mere photocopies oI records/documents. The petitioner, in
making a preliminary and Iinal tax deIiciency assessment against a
taxpayer, cannot anchor the said assessment on mere machine copies oI
records/documents. Mere photocopies oI the Consumption Entries have no
probative weight iI oIIered as prooI oI the contents thereoI. The reason Ior
this is that such copies are mere scraps oI paper and are oI no probative
value as basis Ior any deIiciency income or business taxes against a
taxpayer.

Companies exempt Irom zero-rate tax

COMMISSIONER OF INTERNAL REVENUE vs. AMERICAN
EXPRESS INTERNATIONAL, INC.
(PHILIPPINE BRANCH),
G.R.No. 152609. June 29, 2005

Facts: American Express international is a Ioreign corporation operating in
the Philippines, it is a registered taxpayer. On April 13, 1999, |respondent|
Iiled with the BIR a letter-request Ior the reIund oI its 1997 excess input
taxes in the amount oI P3,751,067.04, which amount was arrived at aIter
deducting Irom its total input VAT paid oI P3,763,060.43 its applied output
VAT liabilities only Ior the third and Iourth quarters oI 1997 amounting to
P5,193.66 and P6,799.43, respectively. The CTA ruled in Iavor oI the
herein respondent holding that its services are subiect to zero-rate pursuant
to Section 108(b) oI the Tax ReIorm Act oI 1997 and Section 4.102-2 (b)(2)
oI Revenue Regulations 5-96. The CA aIIirmed the decision oI the CTA.

Issue: Whether or not the company is subiect to zero-rate tax pursuant to the
Tax ReIorm Act oI 1997.

Held: Services perIormed by VAT-registered persons in the Philippines
(other than the processing, manuIacturing or repacking oI goods Ior persons
doing business outside the Philippines), when paid in acceptable Ioreign
currency and accounted Ior in accordance with the rules and regulations oI
the BSP, are zero-rated. Respondent is a VAT-registered person that
Iacilitates the collection and payment oI receivables belonging to its non-
resident Ioreign client, Ior which it gets paid in acceptable Ioreign currency
inwardly remitted and accounted Ior in conIormity with BSP rules and
regulations. Certainly, the service it renders in the Philippines is not in the
same category as 'processing, manuIacturing or repacking oI goods and
should, thereIore, be zero-rated. In reply to a query oI respondent, the BIR
opined in VAT Ruling No. 080-89 that the income respondent earned Irom
its parent company`s regional operating centers (ROCs) was automatically
zero-rated eIIective January 1, 1988. Service has been deIined as 'the art oI
doing something useIul Ior a person or company Ior a Iee or 'useIul labor
or work rendered or to be rendered by one person to another. For
Iacilitating in the Philippines the collection and payment oI receivables
belonging to its Hong Kong-based Ioreign client, and getting paid Ior it in
duly accounted acceptable Ioreign currency, respondent renders service
Ialling under the category oI zero rating. Pursuant to the Tax Code, a VAT
oI zero percent should, thereIore, be levied upon the supply oI that service.
As a general rule, the VAT system uses the destination principle as a basis
Ior the iurisdictional reach oI the tax. Goods and services are taxed only in
the country where they are consumed. Thus, exports are zero-rated, while
imports are taxed. VAT rate Ior services that are perIormed in the
Philippines, 'paid Ior in acceptable Ioreign currency and accounted Ior in
accordance with the rules and regulations oI the BSP. Thus, Ior the supply
oI service to be zero-rated as an exception, the law merely requires that
Iirst, the service be perIormed in the Philippines; second, the service Iall
under any oI the However, the law clearly provides Ior an exception to the
destination principle; that is, Ior a zero percent categories in Section 102(b)
oI the Tax Code; and, third, it be paid in acceptable Ioreign currency
accounted Ior in accordance with BSP rules and regulations. Indeed, these
three requirements Ior exemption Irom the destination principle are met by
respondent. Its Iacilitation service is perIormed in the Philippines. It Ialls
under the second category Iound in Section 102(b) oI the Tax Code,
because it is a service other than 'processing, manuIacturing or repacking oI
goods as mentioned in the provision. Undisputed is the Iact that such
service meets the statutory condition that it be paid in acceptable Ioreign
currency duly accounted Ior in accordance with BSP rules. Thus, it should
be zero-rated. Posted by &C Bar perations Commission 2007 at 3:29
AM 1 comments 2006 Remedial Law Case Digests


CRIMIAL PRCED&RE

PRELIMINARY INVESTIGATION
SPO4 EDUARDO ALONZO VS. JUDGE CRISANTO C. CONCEPCION,
Presiding Judge, Regional Trial Court oI Malolos City, Branch 12, Province
oI Bulacan
A.M. No. RTJ-04-1879. January 17, 2005

Facts: In a wedding party, SPO4 Eduardo Alonzo, Jun Rances, Zoilo
Salamat and Rey Santos were drinking together at the same table. While
waiting to be seated, Pedrito Alonzo was introduced by SPO4 Alonzo to
Rances as his nephew and as the son oI ex-Captain Alonzo. SPO4 Alonzo
then introduced him to Salamat. Pedrito and his companions took their seats
and started drinking at the table across SPO4 Alonzo`s table. AIter some
time, Pedrito stood up to urinate at the back oI the house. Santos passed a
bag to Salamat, and they Iollowed Pedrito. Rances likewise Iollowed them.
A shot rang out. Salamat was seen placing a gun inside the bag as he
hurriedly leIt. The wedding guests ran aIter Salamat. They saw him and
Rances board a vehicle being driven by Santos. Pedrito`s uncle, Jose
Alonzo, sought the help oI SPO4 Alonzo to chase the culprits. He reIused
and even disavowed any knowledge as to their identity.
Jose Alonzo Iiled a complaint Ior murder against Salamat, Rances, Santos,
SPO4 Alonzo and a certain Isidro Atienza. A preliminary investigation1
was conducted by the Assistant Provincial Prosecutor where Jose Alonzo
and his Iour witnesses testiIied. Upon review oI the records oI the case by
the 3rd Assistant Provincial Prosecutor, it was recommended that Salamat
be charged with murder as principal, and Santos and Rances as accessories.
With regard to SPO4 Alonzo and Isidro Atienza, the prosecutor Iound that
no suIIicient evidence was adduced to establish their conspiracy with
Salamat. Judge Concepcion oI the RTC issued an Order directing the OIIice
oI the Provincial Prosecutor to amend the inIormation, so as to include all
the aIorenamed persons as accused in this case, all as principals.

Issue: Whether or not the court has authority to review and reverse the
resolution oI the OIIice oI the Provincial Prosecutor or to Iind probable
cause against a respondent Ior the purpose oI amending the InIormation.

Held: The Iunction oI a preliminary investigation is to determine whether
there is suIIicient ground to engender a well-Iounded belieI that a crime has
been committed and the respondent is probably guilty thereoI, and should
be held Ior trial. It is through the conduct oI a preliminary investigation that
the prosecutor determines the existence oI a prima Iacie case that would
warrant the prosecution oI a case. As a rule, courts cannot interIere with the
prosecutor's discretion and control oI the criminal prosecution. The reason
Ior placing the criminal prosecution under the direction and control oI the
Iiscal is to prevent malicious or unIounded prosecution by private persons.
However, while prosecuting oIIicers have the authority to prosecute persons
shown to be guilty oI a crime they have equally the legal duty not to
prosecute when aIter an investigation, the evidence adduced is not suIIicient
to establish a prima Iacie case.
In a clash oI views between the iudge who did not investigate and the
prosecutor who did, or between the Iiscal and the oIIended party or the
accused, that oI the prosecutor's should normally prevail.

MELBA QUINTO VS. DANTE ANDRES and RANDYVER PACHECO
G.R. No. 155791. March 16, 2005

Facts: An InIormation was Iiled with the Regional Trial Court that the
accused Dante Andres and Randyver Pacheco, conspiring, conIederating,
and helping one another, did then and there willIully, unlawIully, and
Ieloniously attack, assault, and maul Wilson Quinto inside a culvert where
the three were Iishing, causing Wilson Quinto to drown and die. The
respondents Iiled a demurer to evidence which the trial court granted on the
ground oI insuIIiciency oI evidence. It also held that it could not hold the
respondents liable Ior damages because oI the absence oI preponderant
evidence to prove their liability Ior Wilson`s death. The petitioner appealed
the order to the Court oI Appeals insoIar as the civil aspect oI the case was
concerned. The CA ruled that the acquittal in this case is not merely based
on reasonable doubt but rather on a Iinding that the accused-appellees did
not commit the criminal acts complained oI. Thus, pursuant to the above
rule and settled iurisprudence, any civil action ex delicto cannot prosper.
Acquittal in a criminal action bars the civil action arising thereIrom where
the iudgment oI acquittal holds that the accused did not commit the criminal
acts imputed to them.

Issue: Whether or not the extinction oI respondent`s criminal liability
carries with it the extinction oI their civil liability.

Held: When a criminal action is instituted, the civil action Ior the recovery
oI civil liability arising Irom the oIIense charged shall be deemed instituted
with the criminal action unless the oIIended party waives the civil action,
reserves the right to institute it separately or institutes the civil action prior
to the criminal action.
The prime purpose oI the criminal action is to punish the oIIender in order
to deter him and others Irom committing the same or similar oIIense, to
isolate him Irom society, to reIorm and rehabilitate him or, in general, to
maintain social order. The sole purpose oI the civil action is the restitution,
reparation or indemniIication oI the private oIIended party Ior the damage
or iniury he sustained by reason oI the delictual or Ielonious act oI the
accused.
The extinction oI the penal action does not carry with it the extinction oI the
civil action. However, the civil action based on delict shall be deemed
extinguished iI there is a Iinding in a Iinal iudgment in the criminal action
that the act or omission Irom where the civil liability may arise does not
exist. In this case, the petitioner Iailed to adduce prooI oI any ill-motive on
the part oI either respondent to kill the deceased and as held by the the trial
court and the CA, the prosecution Iailed to adduce preponderant evidence to
prove the Iacts on which the civil liability oI the respondents rest, i.e., that
the petitioner has a cause oI action against the respondents Ior damages.

SEARCH WARRANT; PROBABLE CAUSE; WAIVER OF RIGHT TO
QUESTION LEGALITY OF SEARCH; EVIDENCE IN ILLEGAL
SEARCH

PEOPLE VS. BENHUR MAMARIL
G.R. No. 147607. January 22, 2004

Facts: SPO2 Chito Esmenda applied beIore the RTC Ior a search warrant
authorizing the search Ior mariiuana at the Iamily residence oI appellant
Benhur. During the search operation, the searching team conIiscated sachets
oI suspected mariiuana leaves. Police oIIicers took pictures oI the
conIiscated items and prepared a receipt oI the property seized and certiIied
that the house was properly searched which was signed by the appellant and
the barangay oIIicials who witnessed the search.
AIter the search, the police oIIicers brought appellant and the conIiscated
articles to the PNP station. AIter weighing the specimens and testing the
same, the PNP Crime Laboratory issued a report Iinding the specimens to
be positive to the test Ior the presence oI mariiuana. Moreover, the person
who conducted the examination on the urine sample oI appellant aIIirmed
that it was positive Ior the same.
Appellant denied that he was residing at his parent`s house since he has
been residing at a rented house and declared that it was his brother and the
latter`s Iamily who were residing with his mother, but on said search
operation, his brother and Iamily were out. He testiIied that he was at his
parent`s house because he visited his mother, that he saw the Receipt oI
Property Seized Ior the Iirst time during the trial and admitted that the
signature on the certiIication that the house was properly search was his.

Issues: 1) Whether or not the trial court erred in issuing a search warrant.

2) Whether or not the accused-appellant waived his right to question the
legality oI the search.

3) Whether or not evidence seized pursuant to an illegal search be used as
evidence against the accused.

Held: 1) The issuance oI a search warrant is iustiIied only upon a Iinding oI
probable cause. Probable cause Ior a search has been deIined as such Iacts
and circumstances which would lead a reasonably discreet and prudent man
to believe that an oIIense has been committed and that the obiects sought in
connection with the oIIense are in the place sought to be searched. In
determining the existence oI probable cause, it is required that: 1) The iudge
must examine the complaint and his witnesses personally; 2) the
examination must be under oath; 3) the examination must be reduced in
writing in the Iorm oI searching questions and answers. The prosecution
Iailed to prove that the iudge who issued the warrant put into writing his
examination oI the applicant and his witnesses on the Iorm oI searching
questions and answers beIore issuance oI the search warrant. Mere
aIIidavits oI the complainant and his witnesses are not suIIicient. Such
written examination is necessary in order that the iudge may be able to
properly determine the existence and non-existence oI probable cause.
ThereIore, the search warrant is tainted with illegality by Iailure oI the
iudge to conIorm with the essential requisites oI taking the examination in
writing and attaching to the record, rendering the search warrant invalid.
2) At that time the police oIIicers presented the search warrant, appellant
could not determine iI the search warrant was issued in accordance with
law. It was only during the trial that appellant, through his counsel, had
reason to believe that the search warrant was illegally issued. Moreover,
appellant seasonably obiected on constitutional grounds to the admissibility
oI the evidence seized pursuant to said warrant during the trial, aIter the
prosecution Iormally oIIered its evidence. Under the circumstances, no
intent to waive his rights can reasonably be inIerred Irom his conduct beIore
or during the trial.
3) No matter how incriminating the articles taken Irom the appellant may
be, their seizure cannot validate an invalid warrant. The requirement
mandated by the law that the examination oI the complaint and his
witnesses must be under oath and reduced to writing in the Iorm oI
searching questions and answers was not complied with, rendering the
search warrant invalid. Consequently, the evidence seized pursuant to
illegal search warrant cannot be used in evidence against appellant in
accordance with Section 3 (2) Article III oI the Constitution.

JURISDICTION OVER THE PERSON; MOTION TO QUASH; ARREST
WITHOUT WARRANT

PEOPLE VS. CRISPIN BILLABER
G.R. No. 114967-68. January 26, 2004

Facts: Private complainant Elizabeth Genteroy was introduced to accused
Crispin Billaber by her Iriends. The accused told Genteroy that he could
help her acquire the necessary papers and Iind her a iob abroad. Genteroy
introduced the accused to Raul Durano. The accused oIIered Durano a iob
as his personal driver in the U.S. Durano and Genteroy paid the accused and
asked Ior receipt, but the accused said that it was not necessary since they
will leave together.
Meanwhile, Genteroy introduced the accused to Tersina Onza and oIIered a
iob abroad. ThereaIter, the accused instructed the three private
complainants, Genteroy, Durano and Onza to meet him at the airport on the
agreed date, however, the accused Iailed to show up.
Durano chanced upon the accused at the canteen. A commotion ensued
when Durano tried to stop the accused Irom leaving. A police oIIicer
brought both Durano and the accused to the PNP station. The prosecution
oIIered in evidence a certiIicate Irom the POEA stating that the accused was
not licensed or authorized to recruit workers Ior employment abroad. The
accused denied receiving money Irom private complainants and interposed
a deIense oI Irame-up and extortion against Durano.

Issues: 1) Whether or not the trial court erred in not considering that the
accused arrested without warrant.

2) Whether or not the court acquired iurisdiction over the person oI the
accused.

Held: 1) It appears that accused-appellant was brought to the police station,
together with the complainant Durano, not because oI the present charges
but because oI the commotion that ensued between the two at the canteen.
At the police station, Durano and the other complainants then executed
statements charging appellant with illegal recruitment and estaIa. As to
whether there was an actual arrest or whether, in the commotion, the
appellant committed, was actually committing, or was attempting to commit
an oIIense, have been rendered moot.
2) Appellant did not allege any irregularity in a motion to quash beIore
entering his plea, and is thereIore deemed to have waived any question oI
the trial court`s iurisdiction over his person.


UNREASONABLE SEARCHES AND SEIZURES

PEOPLE VS. NOEL TUDTUD AND DINDO BOLONG
G.R. No. 144037, Sept.ember 26, 2003

Facts: Solier inIormed the police that Tudtud would come back with new
stocks oI mariiuana. Policemen saw two men alighted Irom the bus, helping
each other carry a carton/ box, one oI them Iitted the description oI Tudtud.
They approached the two and Tudtud denied that he carried any drugs. The
latter opened the box, beneath dried Iish where two bundles, one wrapped in
a plastic bag and another in newspapers. Policemen asked Tudtud to unwrap
the packages and contained what seemed to the police as mariiuana leaves.
The two did not resist the arrest. Charged with illegal possession oI
prohibited drugs, they pleaded not guilty and interposed the deIense that
they were Iramed up. The trial court convicted them with the crime charged
and sentenced them to suIIer the penalty oI reclusion perpetua.

Issue: Whether or not searches and seizures without warrant may be validly
obtained.

Held: The rule is that a search and seizure must be carried out through or
with a iudicial warrant; otherwise such 'search and seizure becomes
reasonable within the meaning oI the constitutional provision, and any
evidence secured thereby will be inadmissible in evidence Ior any purpose
in any proceeding. Except with the Iollowing instances even in the absence
oI a warrant: 1) Warrantless search incidental to a lawIul arrest, 2) Search in
evidence in plain view, 3) Search oI a moving vehicle, 4) Consented
warrantless search, 5) Customs search, 6) Stop and Irisk and 7) Exigent and
emergency circumstances.
The long standing rule in this iurisdiction, applied with a degree oI
consistency, is that, a reliable inIormation alone is not suIIicient to iustiIy a
warrantless arrest. Hence, the items seized were held inadmissible, having
been obtained in violation oI the accused`s constitutional rights against
unreasonable searches and seizures.

CIVIL ACTION ARISING FROM DELICT; EFFECT OF ACQUITTAL
ON THE CIVIL ASPECT; EFFECT OF GRANT OF DEMURRER ON
THE CIVIL ASPECT OF THE CASE

ANAMER SALAZAR VS. PEOPLE AND J.Y. BROTHERS
MARKETING CORP.
G.R. No. 151931, September 23, 2003

Facts: Petitioner Anamer Salazar purchased 300 cavans oI rice Irom J.Y.
Brothers Marketing. As payment Ior these, she gave a check drawn against
the Prudential Bank by one Nena Timario. J.Y. accepted the check upon the
petitioner`s assurance that it was good check. Upon presentment, the check
was dishonored because it was drawn under a closed account. Upon being
inIormed oI such dishonor, petitioner replaced the check drawn against the
Solid Bank, which, however, was returned with the word 'DAUD (Drawn
against uncollected deposit).
AIter the prosecution rested its case, the petitioner Iiled a Demurrer to
Evidence with Leave oI Court. The trial court rendered iudgment acquitting
the petitioner oI the crime charged but ordering her to pay, as payment oI
her purchase. The petitioner Iiled a motion Ior reconsideration on the civil
aspect oI the decision with a plea that she be allowed to present evidence
pursuant to Rule 33 oI the Rules oI Court, but the court denied the motion.

Issues: 1) Does the acquittal oI the accused in the criminal oIIense prevent a
iudgment against her on the civil aspect oI the case?
2) Was the denial oI the motion Ior reconsideration proper?

Held: 1) The rule on the Criminal Procedure provides that the extension oI
the penal action does not carry with it the extension oI the civil action.
Hence, the acquittal oI the accused does not prevent a iudgment against him
on the civil aspect oI the case where a) the acquittal is based on reasonable
doubt as only preponderance oI evidence is required; b) where the court
declared that the liability oI the accused is only civil; c) where the civil
liability oI the accused does not arise Irom or is not based upon the crime oI
which the accused was acquitted.
2) No, because aIter an acquittal or grant oI the demurrer, the trial shall
proceed Ior the presentation oI evidence on the civil aspect oI the case. This
is so because when the accused Iiles a demurrer to evidence, the accused
has not yet adduced evidence both on the criminal and civil aspect oI the
case. The only evidence on record is the evidence Ior the prosecution. What
the trial court should do is to set the case Ior continuation oI the trail Ior the
petitioner to adduce evidence on the civil aspect and Ior the private
oIIended party adduce evidence by way oI rebuttal as provided Ior in
Sec.11, Rule 119 oI the Revised Rules on Criminal Procedure. Otherwise, it
would be a nullity Ior the reason that the constitutional right oI the accused
to due process is thereby violated.

AMENDED RULES ON DEATH PENALTY CASES` REVIEW
PEOPLE OF THE PHILIPPINES VS. MATEO
G.R. No. 147678-87, July 7, 2004

Facts: Appellant EIren Mateo was charged with ten counts oI rape by his
step-daughter Imelda Mateo. During the trial, Imelda`s testimonies
regarding the rape incident were inconsistent. She said in one occasion that
incident oI rape happened inside her bedroom, but other times, she told the
court that it happened in their sala. She also told the court that the appellant
would cover her mouth but when asked again, she said that he did not.
Despite the irreconcilable testimony oI the victim, the trial court Iound the
accused guilty oI the crime oI rape and sentenced him the penalty oI
reclusion perpetua. The Solicitor General assails the Iactual Iindings oI the
trial and recommends an acquittal oI the appellant.
Issue: Whether or not this case is directly appeallable to the Supreme Court.
Held: While the Fundamental Law requires a mandatory review by the
Supreme Court oI cases where the penalty imposed is reclusion perpetua,
liIe imprisonment, or death, nowhere, however, has it proscribed an
intermediate review. II only to ensure utmost circumspection beIore the
penalty oI death, reclusion perpetua or liIe imprisonment is imposed, the
Court now deems it wise and compelling to provide in these cases a review
by the Court oI Appeals beIore the case is elevated to the Supreme Court.
Where liIe and liberty are at stake, all possible avenues to determine his
guilt or innocence must be accorded an accused, and no case in the
evaluation oI the Iacts can ever be overdone. A prior determination by the
Court oI Appeals on, particularly, the Iactual issues, would minimize the
possibility oI an error oI iudgment. II the Court oI Appeals should aIIirm
the penalty oI death, reclusion perpetua or liIe imprisonment, it could then
render iudgment imposing the corresponding penalty as the circumstances
so warrant, reIrain Irom entering iudgment and elevate the entire records oI
the case to the Supreme Court Ior its Iinal disposition.
Under the Constitution, the power to amend rules oI procedure is
constitutionally vested in the Supreme Court
Article VIII, Section 5. The Supreme Court shall have the Iollowing
powers:
'(5) Promulgate rules concerning the protection and enIorcement oI
constitutional rights, pleading, practice, and procedure in all courts.
Procedural matters, Iirst and Ioremost, Iall more squarely within the rule-
making prerogative oI the Supreme Court than the law-making power oI
Congress. The rule here announced additionally allowing an intermediate
review by the Court oI Appeals, a subordinate appellate court, beIore the
case is elevated to the Supreme Court on automatic review is such a
procedural matter.
Pertinent provisions oI the Revised Rules on Criminal Procedure, more
particularly Section 3 and Section 10 oI Rule 122, Section 13 oI Rule 124,
Section oI Rule 125, and any other rule insoIar as they provide Ior direct
appeals Irom the Regional Trial Courts to the Supreme Court in cases where
the penalty imposed is death reclusion perpetua or liIe imprisonment, as
well as the resolution oI the Supreme Court en banc, dated 19 September
1995, in 'Internal Rules oI the Supreme Court in cases similarly involving
the death penalty, are to be deemed modiIied accordingly.
A.M. No. 00-5-03-SC

RE: AMENDMENTS TO THE
REVISED RULES OF CRIMINAL PROCEDURE
TO GOVERN DEATH PENALTY CASES

RESOLUTION
Acting on the recommendation oI the Committee on Revision oI the Rules
oI Court submitting Ior this Court`s consideration and approval the
Proposed Amendments to the Revised Rules oI Criminal Procedure to
Govern Death Penalty Cases, the Court Resolved to APPROVE the same.
The amendment shall take eIIect on October 15, 2004 Iollowing its
publication in a newspaper oI general circulation not later than September
30, 2004
September 28, 2004

AMENDED RULES TO GOVERN REVIEW OF
DEATH PENALTY CASES
Rule 122, Sections 3 and 10, and Rule 124, Sections 12 and 13, oI the
Revised Rules oI Criminal Procedure, are amended as Iollows:
RULE 122
Sec. 3. How appeal taken (a) The appeal to the Regional Trial Court, or to
the Court oI Appeals in cases decided by the Regional Trial Court in the
exercise oI its original iurisdiction, shall be by notice oI appeal Iiled with
the court which rendered the iudgment or Iinal order appealed Irom and by
serving a copy thereoI upon the adverse party.
(b) The appeal to the Court oI Appeals in cases decided by the Regional
Trial Court in the exercise oI its appellate iurisdiction shall be by petition
Ior review under Rule 42.
(c) The appeal in cases whereby the penalty imposed by the Regional Trial
Court is reclusion perpetua, liIe imprisonment or where a lesser penalty is
imposed Ior oIIenses committed on the same occasion on the or which arose
out oI the same occurrence that gave rise to the more serious oIIense Ior
which the penalty oI death, reclusion perpetua, or liIe imprisonment is
imposed, shall be by notice oI appeal to the Court oI Appeals in accordance
with paragraph (a) oI this Rule.
(d) No notice oI appeal is necessary in cases where the Regional Trial Court
imposed the death penalty. The Court oI Appeals shall automatically review
the iudgment as provided in Section 10 oI this Rule. (3a)
xxx
RULE 124
Sec. 12. Power to receive evidence. The Court oI Appeals shall have the
power to try cases and conduct hearings, receive evidence and perIorm all
acts necessary to resolve the Iactual issues raised in cases Ialling within its
original and appellate iurisdiction, including the power to grant and conduct
new trials or Iurther proceedings. Trials or hearing in the Court oI Appeals
must be continuous and must be completed within three months, unless
extended by the ChieI Justice. (12a)
Sec. 13. CertiIication or appeal oI case to the Supreme Court. (a)
Whenever the Court oI Appeals Iinds that the penalty oI death should be
imposed, the court shall render iudgment but reIrain Irom making an entry
oI iudgment and Iorthwith certiIy the case and elevate its entire record to
the Supreme Court Ior review.
(b) Where the iudgment also imposes a lesser penalty Ior oIIenses
committed on the same occasion or which arose out oI the same occurrence
that gave rise to the more severe oIIense Ior which the penalty is imposed,
and the accused appeals, the appeal shall be included in the case certiIied
Ior review to the Supreme Court.
(c) In cases where the Court oI Appeals imposes reclusion perpetua, liIe
imprisonment or a lesser penalty, it shall render and enter iudgment
imposing such penalty. The iudgment may be appealed to the Supreme
Court by notice oI appeal Iile with the Court oI Appeals. (13a)



EVIDECE

INOCELIA S. AUTENCIO VS. CITY ADMINISTRATOR, RODEL M.
MAARA ET AL.
G.R. No. 152752. January 19, 2005

Facts: City Administrator Rodel M. Maara lodged a complaint against
petitioner Inocelia S. Autencio with the OIIice oI the City Mayor Ior
dishonesty and misconduct in oIIice. The complaint alleged that Riza
Bravo, an employee oI the City Assessor`s OIIice charged with the
preparation oI the payroll oI casual employees, changed the September
1996 payroll prepared by her upon the order oI petitioner. AIter hearing, the
OIIice Ior Legal Services issued a resolution/decision, declaring the
petitioner guilty oI misconduct in oIIice Ior allowing irregularities to
happen which led to illegal payment oI salaries to casuals. However, as
regards to the charge oI dishonesty, the same was Iound wanting due to
insuIIiciency oI evidence. A penalty oI Iorced resignation with IorIeiture oI
retirement beneIits except Ior earned leave accumulated beIore the Iiling oI
the complaint was imposed. In return, petitioner alleged that she had waived
her right to present her evidence at a Iormal hearing and agreed to submit
the case Ior resolution, only because oI the maniIestation oI the complainant
and the hearing oIIicer that she could be held liable only Ior the lesser
oIIense oI simple negligence.

Issue: Was the petitioner deprived oI substantial due process?

Held: Petitioner was aIIorded due process. On the Iormal charge against
her, she had received suIIicient inIormation which, in Iact, enabled her to
prepare her deIense. She Iiled her Answer controverting the charges against
her and submitted AIIidavits oI personnel in the Assessor`s OIIice to
support her claim oI innocence. A pre-hearing conIerence was conducted by
the legal oIIicer, during which she -- assisted by her counsel -- had
participated. Finally, she was able to appeal the ruling oI City Mayor Badoy
to the CSC, and then to the CA.
Finally, settled is the rule in our iurisdiction that the Iindings oI Iact oI an
administrative agency must be respected, so long as they are supported by
substantial evidence. It is not the task oI this Court to weigh once more the
evidence submitted beIore the administrative body and to substitute its own
iudgment Ior that oI the latter in respect oI the suIIiciency oI evidence. In
any event, the Decisions oI the CSC and the Court oI Appeals Iinding
petitioner guilty oI the administrative charge prepared against her are
supported by substantial evidence.

TURADIO C. DOMINGO VS. JOSE C. DOMINGO ET AL.
G.R. No. 150897. April 11, 2005

Facts: Petitioner Turadio Domingo is the oldest oI the Iive children oI the
late Bruno B. Domingo, Iormerly the registered owner oI the properties
subiect oI this dispute. Private respondents Leonora Domingo-Castro,
Nuncia Domingo-Balabis, Abella Domingo, and Jose Domingo are
petitioner`s siblings. A Iamily quarrel arose over the validity oI the
purported sale oI the house and lot by their Iather to private respondents.
Sometime in 1981 petitioner, who by then was residing on the disputed
property, received a notice, declaring him a squatter. Petitioner learned oI
the existence oI the assailed Deed oI Absolute Sale when an eiectment suit
was Iiled against him. Subsequently, he had the then Philippine
Constabulary-Integrated National Police (PC-INP, now Philippine National
Police or PNP) Crime Laboratory compare the signature oI Bruno on the
said deed against specimen signatures oI his Iather. As a result, the police
issued him Questioned Document Report to the eIIect that the questioned
signature and the standard signatures were written by two diIIerent persons
Thus; petitioner Iiled a complaint Ior Iorgery, IalsiIication by notary public,
and IalsiIication by private individuals against his siblings. But aIter it
conducted an examination oI the questioned documents, the National
Bureau oI Investigation (NBI) came up with the conclusion that the
questioned signature and the specimen signatures were written by one and
the same person, Bruno B. Domingo. Consequently, petitioner instituted a
case Ior the declaration oI the nullity oI the Deed oI Sale, reconveyance oI
the disputed property, and cancellation oI TCT.

Issue: Whether or not the court errs when it held that the trial court correctly
applied the rules oI evidence in disregarding the conIlicting PC-INP and
NBI questioned document reports.

Held: Petitioner has shown no reason why the ruling made by the trial court
on the credibility oI the respondent`s witnesses below should be disturbed.
Findings by the trial court as to the credibility oI witnesses are accorded the
greatest respect, and even Iinality by appellate courts, since the Iormer is in
a better position to observe their demeanor as well as their deportment and
manner oI testiIying during the trial.
Finally, the questioned Deed oI Absolute Sale in the present case is a
notarized document. Being a public document, it is prima Iacie evidence oI
the Iacts therein expressed. It has the presumption oI regularity in its Iavor
and to contradict all these, evidence must be clear, convincing, and more
than merely preponderant. Petitioner has Iailed to show that such
contradictory evidence exists in this case. Posted by UNC Bar Operations
Commission 2007 at 3:23 AM 0 comments 2006 Criminal Law Case
Digests
EVANGELINE LADONGA VS. PEOPLE OF THE PHILIPPINES
G.R. No. 141066. February 17, 2005


Facts: In 1989, spouses Adronico and Evangeline Ladonga became AlIredo
Oculam`s regular customers in his pawnshop business. Sometime in May
1990, the Ladonga spouses obtained a P9,075.55 loan Irom him, guaranteed
by United Coconut Planters Bank (UCPB) Check No. 284743, post dated to
July 7, 1990 issued by Adronico; sometime in the last week oI April 1990
and during the Iirst week oI May 1990, the Ladonga spouses obtained an
additional loan oI P12,730.00, guaranteed by UCPB Check No. 284744,
post dated to July 26, 1990 issued by Adronico; between May and June
1990, the Ladonga spouses obtained a third loan in the amount oI
P8,496.55, guaranteed by UCPB Check No. 106136, post dated to July 22,
1990 issued by Adronico; the three checks bounced upon presentment Ior
the reason 'CLOSED ACCOUNT; when the Ladonga spouses Iailed to
redeem the check, despite repeated demands, he Iiled a criminal complaint
against them. While admitting that the checks issued by Adronico bounced
because there was no suIIicient deposit or the account was closed, the
Ladonga spouses claimed that the checks were issued only to guarantee the
obligation, with an agreement that Oculam should not encash the checks
when they mature; and, that petitioner is not a signatory oI the checks and
had no participation in the issuance thereoI. The RTC rendered a ioint
decision Iinding the Ladonga spouses guilty beyond reasonable doubt oI
violating B.P. Blg. 22. Petitioner brought the case to the Court oI Appeals.
The Court oI Appeals aIIirmed the conviction oI petitioner.

Issue: Whether or not the petitioner who was not the drawer or issuer oI the
three checks that bounced but her co-accused husband under the latter`s
account could be held liable Ior violations oI Batas Pambansa Bilang 22 as
conspirator.

Held: The conviction must be set aside. Article 8 oI the RPC provides that
'a conspiracy exists when two or more persons come to an agreement
concerning the commission oI a Ielony and decide to commit it. To be held
guilty as a co-principal by reason oI conspiracy, the accused must be shown
to have perIormed an overt act in pursuance or Iurtherance oI the
complicity. The overt act or acts oI the accused may consist oI active
participation in the actual commission oI the crime itselI or may consist oI
moral assistance to his co-conspirators by moving them to execute or
implement the criminal plan. In the present case, the prosecution Iailed to
prove that petitioner perIormed any overt act in Iurtherance oI the alleged
conspiracy. Apparently, the only semblance oI overt act that may be
attributed to petitioner is that she was present when the Iirst check was
issued. However, this inIerence cannot be stretched to mean concurrence
with the criminal design. Conspiracy must be established, not by
coniectures, but by positive and conclusive evidence. Conspiracy transcends
mere companionship and mere presence at the scene oI the crime does not
in itselI amount to conspiracy. Even knowledge, acquiescence in or
agreement to cooperate, is not enough to constitute one as a party to a
conspiracy, absent any active participation in the commission oI the crime
with a view to the Iurtherance oI the common design and purpose

PEOPLE OF THE PHILIPPINES VS. ANTONIO MENDOZA Y
BUTONES
G.R. No. 152589 & 152758. January 31, 2005

Facts: BeIore us is the Motion Ior Reconsideration Iiled by herein accused-
appellant oI our Decision dated 24 October 2003 in G.R. No. 152589 and
No. 152758. In said decision, we modiIied the ruling oI the Regional Trial
Court (RTC), Branch 61, Gumaca, Quezon, in Crim. Case No. 6636-G
Iinding accused-appellant guilty oI rape under Articles 266-A and 266-B oI
the Revised Penal Code and instead, we adiudged him guilty only oI
attempted rape. We, however, upheld the ruling oI the court a quo with
regard to Crim. Case No. 6637-G Iinding accused-appellant guilty oI
incestuous rape oI a minor under Art. 266-B oI the Revised Penal Code as
amended by Republic Act No. 8353 and Ior this, we sentenced accused-
appellant to suIIer the ultimate penalty oI death.

Issue: Whether or not the accused committed attempted rape or acts oI
lasciviousness.

Held: AIter a thorough review and evaluation oI the records oI this case, we
Iind no suIIicient basis to modiIy our earlier decision convicting accused-
appellant oI attempted rape in Crim. Case No. 6636-G.There is an attempt
to commit rape when the oIIender commences its commission directly by
overt acts but does not perIorm all the acts oI execution which should
produce the Ielony by reason oI some cause or accident other than his own
spontaneous desistance. Upon the other hand, Article 366 oI the Revised
Penal Code states: '(a)ny person who shall commit any act oI
lasciviousness upon the other person oI either sex, under any oI the
circumstances mentioned in the preceding article, shall be punished by
prision correccional. As explained by an eminent author oI criminal law,
rape and acts oI lasciviousness have the same nature. There is, however, a
Iundamental diIIerence between the two. In rape, there is the intent to lie
with a woman whereas this element is absent in acts oI lasciviousness. In
this case, the series oI appalling events which took place on the night oI 18
March 1998 inside the humble home oI private complainant and oI accused-
appellant, establish beyond doubt that the latter intended to ravish his very
own Ilesh and blood. As vividly narrated by private complainant beIore the
trial court, accused-appellant, taking advantage oI the cover oI darkness and
oI the absence oI his wiIe, removed her (private complainant`s) clothing
and thereaIter placed himselI on top oI her. Accused-appellant, who was
similarly naked as private complainant, then proceeded to kiss the latter and
he likewise touched her breasts until Iinally, he rendered private
complainant unconscious by boxing her in the stomach. These dastardly
acts oI accused-appellant constitute 'the Iirst or some subsequent step in a
direct movement towards the commission oI the oIIense aIter the
preparations are made. Far Irom being mere obscenity or lewdness, they
are indisputably overt acts executed in order to consummate the crime oI
rape against the person oI private complainant.

SALVADOR D. FLOR VS. PEOPLE OF THE PHILIPPINES
G.R. No. 139987. March 31, 2005


Facts: InIormation Ior libel was Iiled beIore the RTC, Branch 20, Naga
City, against the petitioner and Ramos who were then the managing editor
and correspondent, respectively, oI the Bicol Forum, a local weekly
newspaper circulated in the Bicol Region. It states: On or about the 18th
day up to the 24th day oI August, 1986, in the Bicol Region comprised by
the Provinces oI Albay, Catanduanes, Sorsogon, Masbate, Camarines Sur,
and Camarines Norte, and the Cities oI Iriga and Naga, Philippines, and
within the iurisdiction oI this Honorable Court under R.A. No. 4363, and
B.P. Blg. 129, the above-named accused who are the news correspondent
and the managing editor, respectively, oI the local weekly newspaper Bicol
Forum, did then and there willIully, unlawIully and Ieloniously, without
iustiIiable motive and with malicious intent oI impeaching, discrediting and
destroying the honor, integrity, good name and reputation oI the
complainant as Minister oI the Presidential Commission on Government
Reorganization and concurrently Governor oI the Province oI Camarines
Sur, and to expose him to public hatred, ridicule and contempt, write, edit,
publish and circulate an issue oI the local weekly newspaper BICOL
FORUM throughout the Bicol Region, with banner headline and Iront page
news item read by the public throughout the Bicol Region
'VILLAFUERTE`S DENIAL CONVINCES NO ONE. The trial court
Iound the petitioner guilty. The Court oI Appeals likewise upheld the
decision oI the trial court.

Issue: Whether or not the questioned news item is libelous.

Held: No. Libel is deIined as 'a public and malicious imputation oI a crime,
or oI a vice or deIect, real or imaginary, or any act, omission, condition,
status, or circumstance tending to cause the dishonor, discredit, or contempt
oI a natural person or iuridical person, or to blacken the memory oI one who
is dead. The law recognizes two kinds oI privileged matters. First are those
which are classiIied as absolutely privileged which enioy immunity Irom
libel suits regardless oI the existence oI malice in Iact. The other kind oI
privileged matters are the qualiIiedly or conditionally privileged
communications which, unlike the Iirst classiIication, may be susceptible to
a Iinding oI libel provided the prosecution establishes the presence oI
malice in Iact. The exceptions provided Ior in Article 354 oI the Revised
Penal Code Iall into this category. The interest oI society and the
maintenance oI good government demand a Iull discussion oI public aIIairs.
Complete liberty to comment on the conduct oI public men is a scalpel in
the case oI Iree speech. The sharp incision oI its probe relieves the
abscesses oI oIIicialdom. Men in public liIe may suIIer under a hostile and
an uniust accusation; the wound can be assuaged with the balm oI a clear
conscience. Rising superior to any oIIicial, or set oI oIIicials, to the ChieI
Executive, to the Legislature, to the Judiciary to any or all the agencies oI
Government public opinion should be the constant source oI liberty and
democracy.

NORMA A. ABDULLA versus PEOPLE OF THE PHILIPPINES
G.R. NO. 150129 April 6, 2005

Facts: Convicted by the Sandiganbayan in its Crim. Case No. 23261 oI the
crime oI illegal use oI public Iunds deIined and penalized under Article 220
oI the Revised Penal Code, or more commonly known as technical
malversation, appellant Norma A. Abdulla is now beIore this Court on
petition Ior review under Rule 45. Along with Nenita Aguil and Mahmud
Darkis, appellant was charged under an InIormation which pertinently
reads: That on or about November, 1989 or sometime prior or subsequent
thereto, in Jolo, Sulu, Philippines and within the iurisdiction oI this
Honorable Court, the above-named accused: NORMA A. ABDULLA and
NENITA P. AGUIL, both public oIIicers, being then the President and
cashier, respectively, oI the Sulu State College, and as such by reason oI
their positions and duties are accountable Ior public Iunds under their
administration, while in the perIormance oI their Iunctions, conspiring and
conIederating with MAHMUD I. DARKIS, also a public oIIicer, being then
the Administrative OIIicer V oI the said school, did then and there willIully,
unlawIully and Ieloniously, without lawIul authority, apply Ior the payment
oI wages oI casuals, the amount oI FORTY THOUSAND PESOS
(P40,000.00), Philippine Currency, which amount was appropriated Ior the
payment oI the salary diIIerentials oI secondary school teachers oI the said
school, to the damage and preiudice oI public service .Appellant`s co-
accused, Nenita Aguil and Mahmud Darkis, were both acquitted. Only
appellant was Iound guilty and sentenced by the Sandiganbayan in its
decision. Upon motion Ior reconsideration, the Sandiganbayan amended
appellant`s sentence by deleting the temporary special disqualiIication
imposed upon her. Still dissatisIied, appellant, now beIore this Court,
persistently pleas innocence oI the crime charged.
Issue: 1) Whether or not there was unlawIul intent on the appellant`s part.

2) Whether or not the essential elements oI the crime oI technical
malversation is present.

Held: The Court must have to part ways with the Sandiganbayan in its
reliance on Section 5 (b) oI Rule 131 as basis Ior its imputation oI criminal
intent upon appellant. The presumption oI criminal intent will not
automatically apply to all charges oI technical malversation because
disbursement oI public Iunds Ior public use is per se not an unlawIul act.
Here, appellant cannot be said to have committed an unlawIul act when she
paid the obligation oI the Sulu State College to its employees in the Iorm oI
terminal leave beneIits such employees were entitled to under existing civil
service laws. There is no dispute that the money was spent Ior a public
purpose payment oI the wages oI laborers working on various proiects in
the municipality. It is pertinent to note the high priority which laborers`
wages enioy as claims against the employers` Iunds and resources. Settled
is the rule that conviction should rest on the strength oI evidence oI the
prosecution and not on the weakness oI the deIense. Absent this required
quantum oI evidence would mean exoneration Ior accused-appellant. The
Sandiganbayan`s improper reliance on Sec. 5(b) oI Rule 131 does not save
the day Ior the prosecution`s deIiciency in proving the existence oI criminal
intent nor could it ever tilt the scale Irom the constitutional presumption oI
innocence to that oI guilt. In the absence oI criminal intent, this Court has
no basis to aIIirm appellant`s conviction. 2. The Court notes that there is no
particular appropriation Ior salary diIIerentials oI secondary school teachers
oI the Sulu State College in RA 6688. The third element oI the crime oI
technical malversation which requires that the public Iund used should have
been appropriated by law, is thereIore absent. The authorization given by
the Department oI Budget and Management Ior the use oI the Iorty
thousand pesos (P40,000.00) allotment Ior payment oI salary diIIerentials oI
34 secondary school teachers is not an ordinance or law contemplated in
Article 220 oI the Revised Penal Code. Appellant herein, who used the
remainder oI the Iorty thousand pesos (P40,000.00) released by the DBM
Ior salary diIIerentials, Ior the payment oI the terminal leave beneIits oI
other school teachers oI the Sulu State College, cannot be held guilty oI
technical malversation in the absence, as here, oI any provision in RA 6688
speciIically appropriating said amount Ior payment oI salary diIIerentials
only. In Iine, the third and Iourth elements oI the crime deIined in Article
220 oI the Revised Penal Code are lacking in this case. Acquittal is thus in
order.

ENRIQUE 'TOTOY RIVERA Y DE GUZMAN VS. PEOPLE OF THE
PHILIPPINES
G.R. No. 138553. June 30, 2005

Facts: On May 6, 1993, in the Regional Trial Court at La Trinidad, Benguet
an inIormation Ior direct assault was Iiled against petitioner, allegedly
committed, as Iollows: That on or about the 20th day oI March, 1993, at
Tomay, Shilan, Municipality oI La Trinidad, Province oI Benguet,
Philippines, and within the iurisdiction oI this Honorable Court, the above-
named accused, did then and there willIully, unlawIully and Ieloniously
attack, employ Iorce and seriously resist one Lt. EDWARD M. LEYGO,
knowing him to be a policeman, by then and there challenging the latter to a
IistIight and thereaIter grappling and hitting the said policeman on his Iace,
thus iniuring him in the process while the latter was actually engaged in the
perIormance oI his oIIicial duties. The trial court convicted petitioner oI the
crime oI direct assault. The Court oI Appeals aIIirmed the decision oI the
trial court.
Issue: Whether or not the Court oI Appeals erred in aIIirming the iudgment
oI conviction rendered by the trial court.

Held: Direct assault, a crime against public order, may be committed in two
ways: Iirst, by any person or persons who, without a public uprising, shall
employ Iorce or intimidation Ior the attainment oI any oI the purposes
enumerated in deIining the crimes oI rebellion and sedition; and second, by
any person or persons who, without a public uprising, shall attack, employ
Iorce, or seriously intimidate or resist any person in authority or any oI his
agents, while engaged in the perIormance oI oIIicial duties, or on occasion
oI such perIormance. Unquestionably, petitioner`s case Ialls under the
second mode, which is the more common Iorm oI assault and is aggravated
when: (a) the assault is committed with a weapon; or (b) when the oIIender
is a public oIIicer or employee; or (c) when the oIIender lays hand upon a
person in authority. In any event, this Court has said time and again that the
assessment oI the credibility oI witnesses and their testimonies is best
undertaken by the trial court, what with reality that it has the opportunity to
observe the witnesses Iirst-hand and to note their demeanor, conduct, and
attitude while testiIying. Its Iindings on such matters, absent, as here, oI any
arbitrariness or oversight oI Iacts or circumstances oI weight and substance,
are Iinal and conclusive upon this Court and will not to be disturbed on
appeal.

FRUSTRATED HOMICIDE- ESSENTIAL REQUISITES FOR
COMPLETE SELF-DEFENSE

CONRADO CASITAS VS. PEOPLE OF THE PHILIPPINES
G.R. No.152358, February 5, 2004

Facts: Early in the morning oI August 25, 1994, Romeo C. Boringot was
awakened by his wiIe Aida, the latter having heard somebody shouting
invectives at her husband, viz: 'You ought to be killed, you devil. So
Romeo stood up and peeped to see who was outside. When he did not see
anybody, he proceeded towards the road.
Upon passing by a coconut tree, he was suddenly hacked at the back with
bolo which was more that 1 Ioot long. He looked back at his assailant and
he recognized him to be appellant Conrado whom he knew since the 1970`s
and whose Iace he clearly saw as light Irom the moon illuminated the place.
Appellant went on hacking him, hitting him in diIIerent parts oI the body,
including ears and the head. While hitting him, appellant was shouting
invectives at him. Appellant also hit him with a guitar causing Romeo to
sustain an iniury on his Iorehead. All in all, he sustained 11 wounds.
Petitioner invoked selI-deIense. The trial court reiected petitioner`s plea oI
selI-deIense and convicted him oI Irustrated homicide.

Issue: Whether or not petitioner acted in selI-deIense.

Held: The petitioner was burdened to prove, with clear and convincing
evidence, the conIluence oI the three essential requisites Ior complete selI-
deIense: (a) unlawIul aggression on the part oI the victim; (b) reasonable
means used by the person deIending himselI to repel or prevent the
unlawIul to repel or prevent the unlawIul aggression; (c) lack oI suIIicient
provocation on the part oI the person deIending himselI. By invoking selI-
deIense, the petitioner thereby submitted having deliberately caused the
victim`s iniuries. The burden oI prooI is shiIted to him to prove with clear
and convincing all the requisites oI his aIIirmative deIense. He must rely on
the strength oI his own evidence and not the weakness oI that oI the
disbelieved aIter the petitioner admitted inIlicting the mortal iniuries on the
victim. In this case, the petitioner Iailed to prove his aIIirmative deIense.
The number, nature and location oI the victim`s wounds belie the
petitioner`s claim that the said wounds or the victim were inIlicted as they
duel with each other.
Witness Ior the petitioner testiIied that the wounds sustained by petitioner
could not have been caused by bolo.
Petitioner never surrendered voluntarily to the police and admitted that he
had iniured the victim. This would have bolstered his claim that he hacked
the victim to deIend himselI. The petitioner did not do so.

BIGAMY; ELEMENTS, EFFECT OF DECLARATION OF NULLITY
OFSECOND MARRIAGE ON THE GROUND OF PSYCHOLOGICAL
INCAPACITY; PENALTY

VERONICO TENEBRO VS. THE HONORABLE COURT OF APPEALS
G.R. No. 150758, February 18, 2004

Facts: Veronico Tenebro contracted marriage with Leticia Ancaias on April
10, 1990. The two were wed by a iudge at Lapu-Lapu City. The two lived
together continuously and without interruption until the later part oI 1991,
when Tenebro inIormed Ancaias that he had been previously married to a
certain Hilda Villareyes on Nov. 10, 1986. Tenebro showed Ancaias a
photocopy oI a marriage contract between him and Villareyes. Invoking this
previous marriage, petitioner thereaIter leIt the coniugal dwelling which he
shared with Ancaias, stating that he was going to cohabit with Villareyes.
On January 25, 1993, petitioner contracted yet another marriage, this one
with a certain Nilda Villegas. When Ancaias learned oI this third marriage,
she veriIied Irom Villareyes whether the latter was indeed married to the
petitioner. Villareyes conIirmed in handwritten letter that indeed Tenebro
was her husband.
Ancaias thereaIter Iiled a complaint Ior bigamy against petitioner. During
trial, Tenebro admitted having married to Villareyes and produced two
children. However, he denied that he and Villareyes were validly married to
each other, claiming that no marriage ceremony took place. He alleged that
he signed a marriage contract merely to enable her to get the allotment Irom
his oIIice in connection with his work as a seaman. The trial court Iound
him guilty oI bigamy.

Issues: (1) Whether or not the petitioner is guilty oI the crime oI bigamy.
(2) What is the eIIect oI declaration oI nullity oI the second marriage oI the
petitioner on the ground oI psychological incapacity?

Held: (1) Yes, petitioner is guilty oI the crime oI bigamy. Under Article 349
oI the Revised Penal Code, the elements oI the crime oI bigamy are: (1) that
the oIIender has been legally married; (2) that the Iirst marriage has not
been legally dissolved or, in case his or her spouse is absent, the absent
spouse could not yet be presumed dead according to the Civil Code; (3) that
he contracts a second or subsequent marriage; and (4) that the second or
subsequent marriage has all the essential requisites Ior validity. The
prosecution suIIicient evidence, both documentary and oral, proved the
existence oI the marriage between petitioner and Villareyes.
(2) A second or subsequent marriage contracted during subsistence oI
petitioner`s valid marriage to Villareyes, petitioner`s marriage to Ancaias
would be null and void ab initio completely regardless oI petitioner`s
psychological capacity or incapacity. Since a marriage contracted during the
subsistence oI a valid marriage is automatically void, the nullity oI this
second marriage is not per se an argument Ior the avoidance oI criminal
liability Ior bigamy. Pertinently, Article 349 oI the RPC criminalizes 'any
person who shall contract a second or subsequent marriage beIore the
Iormer marriage has been legally dissolved, or beIore the absent spouse has
been declared presumptively dead by means oI a iudgment rendered in the
proper proceedings. A plain reading oI the law, thereIore, would indicate
that the provision penalizes the mere act oI contracting a second or
subsequent marriage during the subsistence oI a valid marriage.

KIDNAPPING FOR RANSOM

PEOPLE OF THE PHILIPPINES VS. ABDILA SILONGAN, ET. AL.
G.R. No. 137182, Apirl 24, 2003

Facts: On March 16, 1996, businessman Alexander Saldaa went to Sultan
Kudarat with three other men to meet a certain Macapagal Silongan alias
Commander Lambada. They arrived in the morning and were able to talk to
Macapagal concerning the gold nuggets that purportedly being sold by the
latter. The business transaction was postponed and continued in the
aIternoon due to the death oI Macapagal`s relative and that he has to pick
his brother in Cotabato City.
Then at around 8:30 PM, as they headed to the highway, Macapagal ordered
the driver to stop. Suddenly, 15 armed men appeared. Alexander and his
three companions were ordered to go out oI the vehicle, they were tied up,
and blindIolded. Macapagal and Teddy were also tied and blindIolded, but
nothing more was done to them. Alexander identiIied all the abductors
including the brothers oI Macapagal.
The Iour victims were taken to the mountain hideout in Maguindanao. The
kidnappers demanded P15, 000,000 Irom Alexander`s wiIe Ior his release,
but the amount was reduced to twelve million. The victims were then
transIerred Irom one place to another. They made Alexander write a letter to
his wiIe Ior his ransom. But on several occasions, a person named
Mayangkang himselI would write to Alexander`s wiIe. The two other
victims managed to escape but Alexander was released aIter payment oI
ransom. The trial court convicted Macapagal and his companions oI the
crime oI Kidnapping Ior Ransom with Serious Illegal Detention.

Issue: Whether it is necessary that there is actual payment oI ransom in the
crime oI Kidnapping.

Held: No, it is necessary that there is actual payment oI ransom in the crime
oI Kidnapping. For the crime to be committed, at least one overt act oI
demanding ransom must be made. It is not necessary that there be actual
payment oI ransom because what the law requires is merely the existence oI
the purpose oI demanding ransom. In this case, the records are replete with
instances when the kidnappers demanded ransom Irom the victim. At the
mountain hideout where Alexander was Iirst taken, he was made a letter to
his wiIe asking her to pay ransom oI twelve million. Also Mayangkang
himselI wrote more letters to his Iamily threatened the Iamily to kill
Alexander iI the ransom was not paid.

ESTAFA; TRUST RECEIPTS LAW

EDWARD ONG VS. COURT OF APPEALS
G.R. No. 119858, April 29, 2003

Facts: Petitioner Edward Ong, representing ARMAGRI International
Corporation (ARMAGRI), executed two trust receipts acknowledging
receipt Irom the Solid Bank Corp. oI goods valued at P 2,532,500 and P 2,
050,000. In addition, he bounded himselI to any increase or decrease oI
interest rate in case Central Bank Iloated rates and to pay any additional
penalty until the trust receipts are Iully paid.
When the trust receipts became due and demandable, ARMAGRI Iailed to
pay or deliver the goods to the Bank despite several demand letters. The
trial court convicted Ong oI two counts oI estaIa Ior violation oI the Trust
Receipts Law.

Issue: Whether the appellant is guilty oI two counts estaIa Ior violation oI
the Trust Receipts Law.

Held: Yes, he is guilty Ior Iailure by the entrustee to account Ior the goods
received in trust constitutes estaIa. The Trust Receipts Law is violated
whenever the entrustee Iails to: (1) turn over the proceeds oI the sale oI
goods, or (2) return the goods covered by the trust receipts iI the good are
not sold. The mere Iailure to account or return gives rise to the crime which
is malum prohibitum. There is no requirement to prove intent to deIraud.
The Bank released the goods to ARMAGRI upon execution oI the trust
receipts and as part oI the loan transactions oI ARMAGRI. The Bank had a
right to demand Irom ARMAGRI payment or at least a return oI the goods.
ARMAGRI Iailed tom pay or return the goods despite repeated demands by
the Bank.
It is well-settled doctrine long beIore the enactment oI the Trust Receipts
Law, that the Iailure to account, upon demand, Ior Iunds or property held in
trust is evidence oI conversion or misappropriation. Under the law, mere
Iailure by the entrustee to account Ior the goods received in trust constitutes
estaIa. The Trust Receipts Law punishes dishonesty and abuse oI
conIidence in the handling oI money or goods to preiudice the public order.
The mere Iailure to deliver proceeds oI the sale or the goods iI not sold
constitutes a criminal oIIense that causes preiudice not only to the creditor,
but also to the public interest. Evidently, the Bank suIIered preiudice Ior
neither money nor the goods were turned over the Bank.

PARRICIDE; ELEMENTS

PEOPLE OF THE PHILIPPINES VS. PO3 ARMANDO DALAG
G.R. No. 129895, April 30, 2003

Facts: Armando Dalag, a member oI the Philippine National Police, was
lawIully married to Leah Nolido Dalag. They had three children. Their
marriage was Iar Irom idyllic. Their covertures were marred by violent
quarrels, with Leah always at the losing end. Each time the couple had a
quarrel, she sustained contusions, bruises and lumps on diIIerent parts oI
her body.
On August 15, 1996, Armando was drinking when Leah admonished him
not to do so. Leah was then banged on the wall by Armando. Then he
pushed and kicked Leah on the leIt side oI her body which caused her to Iall
on the ground. Even as Leah was already lying prostrate, Armando
continued to beat her up, punching her on the diIIerent parts oI her body.
Leah then Iled to the house oI Felia Horilla but Armando ran aIter her and
herded her back to their house. Leah Iell again to the ground and lost her
consciousness. The trial court convicted Armando oI parricide.

Issue: Whether the trial court correctly convicted the accused.

Held: Yes, the trial court correctly concluded that the iniuries sustained by
Leah that caused her death were the consequence oI the appellant`s
deliberate and intentional acts.
The crime oI parricide is deIined by Article 246 oI the Revised Penal Code
thus: Any person who shall kill his Iather, mother, or child, whether
legitimate or illegitimate, or any oI his ascendants, or descendants, or his
spouse, shall be guilty oI parricide and shall be punished by the penalty oI
reclusion perpetua to death.
The prosecution is mandated to prove the Iollowing essential elements: (1) a
person is killed; (2) the deceased is killed by the accused; and (3) the
deceased is the Iather, mother or child, whether legitimate or illegitimate, or
a legitimate other ascendant or other descendant, or the legitimate spouse oI
the accused. The prescribed penalty Ior the crime is reclusion perpetua to
death. The key element in parricide oI a spouse, the best prooI oI the
relationship between the accused and the deceased would be the marriage
certiIicate.

STATUTORY RAPE; INFORMATION; TIME NOT AN ESSENTIAL
ELEMENT

PEOPLE OF THE PHILIPPINES VS. BENJAMIN HILET
G.R. No. 146685-86, April 30, 2003

Facts: Sometime in 1998, ten-year old Richelle Cosada was told by
appellant Beniamin Hilet, the common law husband oI her mother not to go
to school and watch the house. At about 10 AM, while her mother was out
selling Iish, Richelle saw appellant sharpening his bolo. Moments later,
appellant dragged her towards the room and raped her. She kept the
aIternoon oI March 17, 1999. Richelle Iinally conIided to her mother. The
latter asked their neighbor to report the incident to the police. The trial court
convicted the appellant guilty oI two counts oI statutory rape.

Issue: Whether time is an essential element oI statutory rape.

Held: No, time is not an essential element oI statutory rape. An inIormation
is valid as long as it distinctly states the elements oI the oIIense and the acts
or omission constitutive thereoI. The exact date oI the commission oI a
crime is not an essential element oI rape. Thus, in a prosecution oI rape, the
material Iact or circumstance to be considered is the occurrence oI rape, not
the time oI its commission.
It is not necessary to state the precise time when the oIIense was committed
except when time is a material ingredient oI the oIIense. In statutory rape,
time is not an essential element. What is important is the inIormation
alleges that the victim is a minor under twelve years oI age and the accused
had carnal knowledge oI her, even iI no Iorce or intimidation was used or
she was not otherwise deprived oI reason.

STATUTORY RAPE; INFORMATION; TIME IS NOT AN ESSENTIAL
ELEMENT

PEOPLE OF THE PHILIPPINES VS. LOZADA

Facts: Reynaldo Diaz, a tricycle driver, went to a coIIee shop to meet
Ronnie Sanchez and this Sanchez disclosed to Diaz his plan to rob Rosita
Sy. ThereaIter Belleza Lozada arrived. They planned to wait Rosita Sy as
she would normally leave her drugstore between 10:30 and 11 PM. They
have also planned to kill Rosita Sy, upon realizing that Sy would be killed,
Diaz excused himselI on the pretext that he would get a weapon but he
delayed himselI and the plan was not implemented that night because oI the
delay. They have agreed to pursue it the next day. Diaz deliberately stayed
away Irom their meeting place the next day. The Iollowing day, he learned
over the radio that a liIeless body oI Rosita was Iound in a remote area.

Issue: Whether or not all elements oI a Robbery with Homicide are present
to constitute a penalty oI death.

Held: The SC ruled that all the elements were present. The taking with
animo lurid or personal property belonging to another person by means oI
violence against or intimidation oI person or using Iorce upon thing
constitutes robbery, and the complex crime oI robbery with homicide arises
when by reason or on the occasion oI robbery, someone is killed. All these
elements have satisIactorily been shown by the prosecution.

'BATTERED WOMAN SYNDROMEAS A VIABLE PLEA WITHIN
THE CONCEPT OF SELF-DEFENSE

PEOPLE OF THE PHILIPPINES VS. MARIVIC GENOSA
G.R. No. 135981. September 29, 2000

Facts: On or about the 15th day oI November 1995, at Barangay Bilwang,
Municipality oI Isabel, province oI Leyte, accused Marivic Genosa, with
intent to kill, with treachery and evident premeditation, did then and there
willIully, unlawIully and Ieloniously attack, assault, hit and wound BEN
GENOSA, her legitimate husband, with the use oI a hard deadly weapon,
which the accused had provided herselI Ior the purpose, inIlicting several
wounds which caused his death.
The lower court Iound the accused, Marivic Genosa y Isidro, GUILTY
beyond reasonable doubt oI the crime oI parricide and sentenced the
accused with the penalty oI DEATH.
On appeal, the appellant alleged that despite the evidence on record oI
repeated and severe beatings she had suIIered at the hands oI her husband,
the lower court Iailed to appreciate her selI-deIense theory. She claimed that
under the surrounding circumstances, her act oI killing her husband was
equivalent to selI-deIense.
Issue: Whether or not the 'battered woman syndrome as a viable plea
within the concept oI selI-deIense is applicable in this case.
Held: No. The court, however, is not discounting the possibility oI selI-
deIense arising Irom the battered woman syndrome. We now sum up our
main points. First, each oI the phases oI the cycle oI violence must be
proven to have characterized at least two battering episodes between the
appellant and her intimate partner. Second, the Iinal acute battering episode
preceding the killing oI the batterer must have produced in the battered
person`s mind an actual Iear oI an imminent harm, Irom her batterer and an
honest belieI that she needed to use Iorce in order to save her liIe. Third, at
the time oI the killing, the batterer must have posed probablenot
necessarily immediate and actualgrave harm to the accused, based on the
history oI violence perpetrated by the Iormer against the latter. Taken
altogether, these circumstances could satisIy the requisites oI selI-deIense.
Under the existing Iacts oI the present case, however, not all oI these
elements were duly established.

RAPE; 'TOUCHING WHEN APPLIED TO RAPE CASES

PEOPLE OF TH PHILIPPINES vs. LEVI SUMARAGO
G.R. No. 140873-77, February 6, 2004

Facts: The spouses Vivencio and Teodora Brigole had Iour children. Two oI
them were girls and named- Norelyn and Doneza. Teodora leIt Vivencio
and kept custody oI their Ipur children. Then, Teodora and Levi started
living together as husband and wiIe.
Sometime in 1995, Norelyn, who was barely ten years old, was gathering
Iirewood with the appellant Levi in his Iarm. While they were nearing a
guava tree, the appellant suddenly boxed her on the stomach. Norelyn lost
consciousness. She had her clothes when she woke up. She had a terrible
headache and Ielt pain in her vagina. She also had a bruise in the middle
portion oI her right leg. The appellant warned not to tell her mother about it,
otherwise he would kill her.
The sexual assaults were repeated several times so she decided to tell her
sister and eventually her mother. The trial court Iound the accused guilty oI
the crime rape and sentenced him to death.

Issue: Whether or not the accused is guilty oI the crime charged.

Held: Yes, the accused is guilty oI the crime charged. For the accused to
held guilty oI consummated rape, the prosecution must prove beyond
reasonable doubt that: 1) there had been carnal knowledge oI the victim by
the accused; 20 the accused achieves the act through Iorce or intimidation
upon the victim because the latter is deprived oI reason or otherwise
unconscious. Carnal knowledge oI the victim by the accused may be proved
either by direct evidence or by circumstantial evidence that rape had been
committed and that the accused is the perpetrator thereoI. A Iinding oI guilt
oI the accused Ior rape may be based solely on the victim`s testimony iI
such testimony meets the test oI credibility. Corroborating testimony
Irequently unavailable in rape cases is not indispensable to warrant a
conviction oI the accused Ior the crime. This Court has ruled that when a
woman states that she has been raped, she says in eIIect all that would
necessary to show rape did take place. However, the testimony oI the victim
must be scrutinized with extreme caution. The prosecution must stand or
Iall on its own merits.
The credibility oI Norelyn and the probative weight oI her testimony cannot
be assailed simply because her admission that it took the appellant only
short time to insert his penis into her vagina and to satiate his lust. The mere
entry oI his penis into the labia oI the pudendum, even iI only Ior a short
while, is enough insoIar as the consummation oI the crime oI rape is
concerned, the brevity oI time that the appellant inserted penis into the
victim`s vagina is oI no particular importance.
Posted by UNC Bar Operations Commission



TAXATO
CMMISSIER ITERAL REVE&E vs. CEB&
PRTLAD CEMET CMPAY and C&RT TAX APPEALS

G.R. o. L-29059 December 15. 1987

FACTS: By virtue oI a decision oI the Court oI Tax Appeals rendered on
June 21, 1961, as modiIied on appeal by the Supreme Court on February 27,
1965, the Commissioner oI Internal Revenue was ordered to reIund to the
Cebu Portland Cement Company the amount oI P359,408.98, representing
overpayments oI ad valorem taxes on cement produced and sold by it aIter
October 1957.

On March 28, 1968, Iollowing denial oI motions Ior reconsideration Iiled
by both the petitioner and the private respondent, the latter moved Ior a writ
oI execution to enIorce the said iudgment.

The motion was opposed by the petitioner on the ground that the private
respondent had an outstanding sales tax liability to which the iudgment debt
had already been credited. In Iact, it was stressed, there was still a balance
owing on the sales taxes in the amount oI P 4,789,279.85 plus 28
surcharge.

On April 22, 1968, the Court oI Tax Appeals granted the motion, holding
that the alleged sales tax liability oI the private respondent was still being
questioned and thereIore could not be set-oII against the reIund.

ISSUE:

Whether or not the iudgment debt can be enIorced against private
respondent`s sales tax liability, the latter still being questioned.

RULING:

The argument that the assessment cannot as yet be enIorced because it is
still being contested loses sight oI the urgency oI the need to collect taxes as
"the liIeblood oI the government." II the payment oI taxes could be
postponed by simply questioning their validity, the machinery oI the state
would grind to a halt and all government Iunctions would be paralyzed.

The Tax Code provides: Sec. 291. Iniunction is not available to restrain
collection oI tax. - No court shall have authority to grant an iniunction to
restrain the collection oI any national internal revenue tax, Iee or charge
imposed by this Code.

It goes without saying that this iniunction is available not only when the
assessment is already being questioned in a court oI iustice but more so iI,
as in the instant case, the challenge to the assessment is still-and only-on the
administrative level. There is all the more reason to apply the rule here
because it appears that even aIter crediting oI the reIund against the tax
deIiciency, a balance oI more than P 4 million is still due Irom the private
respondent.

CMMISSIER ITERAL REVE&E vs. ALG&E and THE
C&RT TAX APPEALS

G.R. o. L-28896 ebruary 17. 1988

FACTS: The Philippine Sugar Estate Development Company had earlier
appointed Algue as its agent, authorizing it to sell its land, Iactories and oil
manuIacturing process. Pursuant to such authority, Alberto Guevara, Jr.,
Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez,
worked Ior the Iormation oI the Vegetable Oil Investment Corporation,
inducing other persons to invest in it. Ultimately, aIter its incorporation
largely through the promotion oI the said persons, this new corporation
purchased the PSEDC properties. For this sale, Algue received as agent a
commission oI P126, 000.00, and it was Irom this commission that the P75,
000.00 promotional Iees were paid to the a Iorenamed individuals.

The petitioner contends that the claimed deduction oI P75, 000.00 was
properly disallowed because it was not an ordinary reasonable or necessary
business expense. The Court oI Tax Appeals had seen it diIIerently.
Agreeing with Algue, it held that the said amount had been legitimately
paid by the private respondent Ior actual services rendered. The payment
was in the Iorm oI promotional Iees.

ISSUE:

Whether or not the Collector oI Internal Revenue correctly disallowed the
P75, 000.00 deduction claimed by private respondent Algue as legitimate
business expenses in its income tax returns.

RULING:

The Supreme Court agrees with the respondent court that the amount oI the
promotional Iees was not excessive. The amount oI P75,000.00 was 60 oI
the total commission. This was a reasonable proportion, considering that it
was the payees who did practically everything, Irom the Iormation oI the
Vegetable Oil Investment Corporation to the actual purchase by it oI the
Sugar Estate properties.

It is said that taxes are what we pay Ior civilization society. Without taxes,
the government would be paralyzed Ior lack oI the motive power to activate
and operate it. Hence, despite the natural reluctance to surrender part oI
one's hard earned income to the taxing authorities, every person who is able
to must contribute his share in the running oI the government.

C.. HDGES vs. M&ICIPAL BARD THE CITY ILIL

G.R. o. L-18129 1anuary 31. 1963

FACTS: On June 13, 1960, the Municipal Board oI the City oI Iloilo
enacted Ordinance No. 33, series oI 1960, pursuant to the provisions oI
Republic Act No. 2264, known as the Local Autonomy Act, requiring any
person, Iirm, association or corporation to pay a sales tax oI 1/2 oI 1 oI
the selling price oI any motor vehicle and prohibiting the registration oI the
sale oI the motor vehicle in the Motor Vehicles OIIice oI the City oI Iloilo
unless the tax has been paid.

C. N. Hodges, who was engaged in the business oI buying and selling
second-hand motor vehicles in the City oI Iloilo, is one oI those aIIected by
the enactment oI the ordinance, and believing that the same is invalid Ior
having been passed in excess oI the authority conIerred by law upon the
municipal board, he Iiled on June 27, 1960 a petition Ior declaratory
iudgment with the Court oI First Instance oI Iloilo praying that said
ordinance be declared void ab initio.

The court a quo rendered decision on December 8, 1960 holding that that
part oI the ordinance which requires the owner oI a used motor vehicle to
pay a sales tax oI 1/2 oI 1 oI the selling price is valid, but the portion
thereoI which requires the payment oI the tax as a condition precedent Ior
the registration oI the sale in the Motor Vehicles OIIice is invalid Ior being
repugnant to Section 2(h) oI Republic Act 2264. Both parties have
appealed.

ISSUE:

Whether or not the ordinance in question is valid even with regard to the
portion which requires the payment oI the tax as a condition precedent Ior
the registration oI the sale in the Motor Vehicles OIIice oI said city.

RULING:

The City oI Iloilo has the authority and power to approve the ordinance in
question Ior it merely imposes a percentage tax on the sale oI a second-hand
motor vehicle that may be carried out within the city by any person, Iirm,
association or corporation owning or dealing with it who may come within
the iurisdiction.

The requirement oI the ordinance cannot be considered a tax in the light
viewed by the court a quo Ior the same is merely a coercive measure to
make the enIorcement oI the contemplated sales tax more eIIective. Well-
settled is the principle that taxes are imposed Ior the support oI the
government in return Ior the general advantage and protection which the
government aIIords to taxpayers and their property. Taxes are the liIeblood
oI the government.

ASSCIATI C&STM BRERS. IC. vs. M&ICIPAL
BARD

G.R. o. L-4376 May 22. 1953

FACTS: The Association oI Customs Brokers, Inc., which is composed oI
all brokers and public service operators oI motor

vehicles in the City oI Manila challenge the validity Ordinance No. 3379 on
the ground that (1) while it levies a so-called property tax it is in reality a
license tax which is beyond the power oI the Municipal Board oI the City oI
Manila; (2) said ordinance oIIends against the rule oI uniIormity oI
taxation; and (3) it constitutes double taxation.

The respondents contend on their part that the challenged ordinance
imposes a property tax which is within the power oI the City oI Manila to
impose under its Revised Charter |Section 18 (p) oI Republic Act No. 409|,
and that the tax in question does not violate the rule oI uniIormity oI
taxation, nor does it constitute double taxation.

ISSUE:

Whether or not the ordinance is null and void

RULING:

The ordinance inIringes the rule oI the uniIormity oI taxation ordained by
our Constitution. Note that the ordinance exacts the tax upon all motor
vehicles operating within the City oI Manila. It does not distinguish
between a motor vehicle Ior hire and one which is purely Ior private use.
Neither does it distinguish between a motor vehicle registered in the City oI
Manila and one registered in another place but occasionally comes to
Manila and uses its streets and public highways. This is an inequality which
we Iind in the ordinance, and which renders it oIIensive to the Constitution.

ESS STADARD EASTER. IC v. CMMISSIER
ITERAL REVE&E

G.R. os. L-28508-9. 1uly 7. 1989

FACTS: In CTA Case No. 1251, Esso Standard Eastern Inc. (Esso)
deducted Irom its gross income Ior 1959, as part oI its ordinary and
necessary business expenses, the amount it had spent Ior drilling and
exploration oI its petroleum concessions. This claim was disallowed by the
Commissioner oI Internal Revenue (CIR) on the ground that the expenses
should be capitalized and might be written oII as a loss only when a "dry
hole" should result. Esso then Iiled an amended return where it asked Ior the
reIund oI P323,279.00 by reason oI its abandonment as dry holes oI several
oI its oil wells. Also claimed as ordinary and necessary expenses in the
same return was the amount oI P340, 822.04, representing margin Iees it
had paid to the Central Bank on its proIit remittances to its New York head
oIIice.

On August 5, 1964, the CIR granted a tax credit oI P221, 033.00 only,
disallowing the claimed deduction Ior the margin Iees paid on the ground
that the margin Iees paid to the Central Bank could not be considered taxes
or allowed as deductible business expenses.

Esso appealed to the Court oI Tax Appeals (CTA) Ior the reIund oI the
margin Iees it had earlier paid contending that the margin Iees were
deductible Irom gross income either as a tax or as an ordinary and necessary
business expense. However, Esso`s appeal was denied.

ISSUE:

(1) Whether or not the margin Iees are taxes.

(2) Whether or not the margin Iees are necessary and ordinary business
expenses.

RULING:

(1) No. A tax is levied to provide revenue Ior government operations, while
the proceeds oI the margin Iee are applied to strengthen our country's
international reserves. The margin Iee was imposed by the State in the
exercise oI its police power and not the power oI taxation.

(2) No. Ordinarily, an expense will be considered 'necessary' where the
expenditure is appropriate and helpIul in the development oI the taxpayer's
business. It is 'ordinary' when it connotes a payment which is normal in
relation to the business oI the taxpayer and the surrounding circumstances.
Since the margin Iees in question were incurred Ior the remittance oI Iunds
to Esso's Head OIIice in New York, which is a separate and distinct income
taxpayer Irom the branch in the Philippines, Ior its disposal abroad, it can
never be said thereIore that the margin Iees were appropriate and helpIul in
the development oI Esso's business in the Philippines exclusively or were
incurred Ior purposes proper to the conduct oI the aIIairs oI Esso's branch in
the Philippines exclusively or Ior the purpose oI realizing a proIit or oI
minimizing a loss in the Philippines exclusively.



PRGRESSIVE DEVELPMET CRPRATI v. Q&EZ
CITY

G.R. o. L-36081. April 24. 1989

FACTS: On December 24, 1969, the City Council oI Quezon City adopted
Ordinance No. 7997, otherwise known as the Market Code oI Quezon City.
Section 3 oI said ordinance provides that 'privately owned and operated
public markets shall submit monthly to the Treasurer's OIIice, a certiIied list
oI stallholders showing the amount oI stall Iees or rentals paid daily by each
stallholder, ... and shall pay 10 oI the gross receipts Irom stall rentals to
the City, ... , as supervision Iee.

On July 15, 1972, Progressive Development Corporation (Progressive),
owner and operator oI a public market known as the "Farmers Market &
Shopping Center" Iiled a Petition Ior Prohibition with Preliminary
Iniunction against Quezon City on the ground that the supervision Iee or
license tax imposed by the above-mentioned ordinance is in reality a tax on
income which Quezon City may not impose, the same being expressly
prohibited by Republic Act No. 2264, as amended, otherwise known as the
Local Autonomy Act.

In its Answer, Quezon City, through the City Fiscal, contended that it had
authority to enact the questioned ordinances, maintaining that the tax on
gross receipts imposed therein is not a tax on income.

The lower court ruled that the questioned imposition is not a tax on income,
but rather a privilege tax or license Iee which local governments, like
Quezon City, are empowered to impose and collect.

ISSUE:

Whether the tax imposed by Quezon City on gross receipts oI stall rentals is
properly characterized as partaking oI the nature oI an income tax.

RULING:

No. The tax imposed in the controverted ordinance constitutes, not a tax on
income, not a city income tax (as distinguished Irom the national income
tax imposed by the National Internal Revenue Code) within the meaning oI
Section 2 (g) oI the Local Autonomy Act, but rather a license tax or Iee Ior
the regulation oI the business in which Progressive is engaged. While it is
true that the amount imposed by the questioned ordinances may be
considered in determining whether the exaction is really one Ior revenue or
prohibition, instead oI one oI regulation under the police power, it
nevertheless will be presumed to be reasonable.



PHILIPPIE AIRLIES. IC. v. ED&

G.R. o. L- 41383. August 15. 1988

FACTS: The Philippine Airlines (PAL) is a corporation engaged in the air
transportation business under a legislative Iranchise, Act No. 42739. Under
its Iranchise, PAL is exempt Irom the payment oI taxes.

Sometime in 1971, however, Land Transportation Commissioner Romeo F.
Elevate (Elevate) issued a regulation pursuant to Section 8, Republic Act
4136, otherwise known as the Land and Transportation and TraIIic Code,
requiring all tax exempt entities, among them PAL to pay motor vehicle
registration Iees.

Despite PAL's protestations, Elevate reIused to register PAL's motor
vehicles unless the amounts imposed under Republic Act 4136 were paid.
PAL thus paid, under protest, registration Iees oI its motor vehicles. AIter
paying under protest, PAL through counsel, wrote a letter dated May
19,1971, to Land Transportation Commissioner Romeo Edu (Edu)
demanding a reIund oI the amounts paid. Edu denied the request Ior reIund.
Hence, PAL Iiled a complaint against Edu and National Treasurer Ubaldo
Carbonell (Carbonell).

The trial court dismissed PAL's complaint. PAL appealed to the Court oI
Appeals which in turn certiIied the case to the Supreme Court.

ISSUE:

Whether or not motor vehicle registration Iees are considered as taxes.

RULING:

Yes. II the purpose is primarily revenue, or iI revenue is, at least, one oI the
real and substantial purposes, then the exaction is properly called a tax.
Such is the case oI motor vehicle registration Iees. The motor vehicle
registration Iees are actually taxes intended Ior additional revenues oI the
government even iI one IiIth or less oI the amount collected is set aside Ior
the operating expenses oI the agency administering the program.



VILLEGAS v. HI& CHIG TSAI PA H

G.R. o. L-29646. ovember 10. 1978

FACTS: On February 22, 1968, the Municipal Board oI Manila passed City
Ordinance No. 6537. The said city ordinance was also signed by then
Manila Mayor Antonio J. Villegas (Villegas).

Section 1 oI the said city ordinance prohibits aliens Irom being employed or
to engage or participate in any position or occupation or business
enumerated therein, whether permanent, temporary or casual, without Iirst
securing an employment permit Irom the Mayor oI Manila and paying the
permit Iee oI P50.00 except persons employed in the diplomatic or consular
missions oI Ioreign countries, or in the technical assistance programs oI
both the Philippine Government and any Ioreign government, and those
working in their respective households, and members oI religious orders or
congregations, sect or denomination, who are not paid monetarily or in
kind.

Hiu Chiong Tsai Pao Ho (Tsai Pao Ho) who was employed in Manila Iiled
a petition with the CFI oI Manila to declare City Ordinance No. 6537 as
null and void Ior being discriminatory and violative oI the rule oI the
uniIormity in taxation. The trial court declared City Ordinance No. 6537
null and void. Villegas Iiled the present petition.

ISSUE:

Whether or not City Ordinance No. 6537 is a tax or revenue measure.

RULING:

Yes. The contention that City Ordinance No. 6537 is not a purely tax or
revenue measure because its principal purpose is regulatory in nature has no
merit. While it is true that the Iirst part which requires that the alien shall
secure an employment permit Irom the Mayor involves the exercise oI
discretion and iudgment in the processing and approval or disapproval oI
applications Ior employment permits and thereIore is regulatory in character
the second part which requires the payment oI P50.00 as employee's Iee is
not regulatory but a revenue measure. There is no logic or iustiIication in
exacting P50.00 Irom aliens who have been cleared Ior employment. It is
obvious that the purpose oI the ordinance is to raise money under the guise
oI regulation.

CMPAIA GEERAL DE TABACS DE ILIPIAS vs.

CITY MAILA. ET AL

G.R. o. L-16619 1une 29. 1963

FACTS: Petitioner Iiled an action in the CFI Manila to recover Irom City oI
Manila(City ) the sum oI P15,280.00 allegedly overpaid by it as taxes on its
wholesale and retail sales oI liquor Ior the period Irom the third quarter oI
1954 to the second quarter oI 1957, inclusive, under Ordinances Nos. 3634,
3301, and 3816.

Tabacalera's action Ior reIund is based on the theory that, in connection with
its liquor sales, it should pay the license Iees but not the municipal sales
taxes; and since it already paid the license Iees aIoresaid, the sales taxes
paid by it amounting to the sum oI P15, 208.00 under the three
ordinances is an overpayment made by mistake, and thereIore reIundable.

The City contends that Ior the permit issued to it Tabacalera is subiect to
pay the license Iees prescribed by Ordinance No. 3358, aside Irom the sales
taxes imposed by Ordinances Nos. 3634, 3301, and 3816.

ISSUE:

Whether or not the taxes imposed are valid

RULING:

Ordinance No. 3358 is clearly one that prescribes municipal license Iees Ior
the privilege to engage in the business oI selling liquor or alcoholic
beverages. On the other hand, it is clear that Ordinances Nos. 3634, 3301,
and 3816 impose taxes on the sales oI general merchandise, wholesale or
retail, and are revenue measures enacted by the Municipal Board oI Manila
by virtue oI its power to tax dealers Ior the sale oI such merchandise.

That Tabacalera is being subiected to double taxation is more apparent than
real. As already stated what is collected under Ordinance No. 3358 is a
license Iee Ior the privilege oI engaging in the sale oI liquor. On the other
hand, what the three ordinances mentioned heretoIore impose is a tax Ior
revenue purposes based on the sales made oI the same article or
merchandise. It is already settled in this connection that both a license Iee
and a tax may be imposed on the same business or occupation, or Ior selling
the same article, this not being in violation oI the rule against double
taxation.

AMERICA MAIL LIE. ET AL vs. CITY BASILA. ET AL

G.R. o. L-12647 May 31. 1961

FACTS: Appellees are Ioreign shipping companies licensed to do business
in the Philippines, with oIIices in Manila. Their vessels call at Basilan City
and anchor in the bay or channel within its territorial waters. As the city
treasurer assessed and attempted to collect Irom them the anchorage Iees
prescribed in the aIoresaid amendatory ordinance, they Iiled the present
action Ior Declaratory RelieI to have the courts determine its validity. Upon
their petition the lower court issued a writ oI preliminary iniunction
restraining appellants Irom collecting or attempting to collect Irom them the
Iees prescribed therein.

Appellant contended that, through its city council, it had authority to enact
the questioned ordinance in the exercise oI either its revenue-raising power
or oI its police power. The question to be resolved is whether the City oI
Basilan has the authority to enact Ordinance 180 and to collect the
anchorage Iees prescribed therein.

ISSUE:

Is the ordinance valid exercise oI taxing power oI the City oI Basilan.

RULING:

Under paragraph (a) sec. 14, R.A. 288, it is clear that the City oI Basilan
may only levy and collect taxes Ior general and special purposes in
accordance with or as provided by law; in other words, the city oI Basilan
was not granted a blanket power oI taxation. The use oI the phrase "in
accordance with law" which, in our opinion, means the same as
"provided by law" clearly discloses the legislative intent to limit the
taxing power oI the City.

It has been held that the power to regulate as an exercise oI police power
does not include the power to impose Iees Ior revenue purposes. Appellant
city's own contention that the questioned ordinance was enacted in the
exercise oI its power oI taxation makes it obvious that the Iees imposed are
not merely regulatory.

1H H. SMEA vs. SCAR RBS et al

G.R. o. 99886 March 31. 1993

FACTS: October 10, 1984, President Ferdinand Marcos issued P.D. 1956
creating a Special Account in the General Fund, designated as the Oil Price
Stabilization Fund (OPSF). The OPSF was designed to reimburse oil
companies Ior cost increases in crude oil and imported petroleum products
resulting Irom exchange rate adiustments and Irom increases in the world
market prices oI crude oil. Subsequently, the OPSF was reclassiIied into a
"trust liability account,". President Corazon C. Aquino promulgated E. O.
137 expanding the grounds Ior reimbursement to oil companies Ior possible
cost under recovery incurred as a result oI the reduction oI domestic prices
oI petroleum products.

The petitioner argues inter alia that "the monies collected pursuant to . .
P.D. 1956, as amended, must be treated as a 'SPECIAL FUND,' not as a
'trust account' or a 'trust Iund,' and that "iI a special tax is collected Ior a
speciIic purpose, the revenue generated thereIrom shall 'be treated as a
special Iund' to be used only Ior the purpose indicated, and not channelled
to another government obiective." Petitioner Iurther points out that since "a
'special Iund' consists oI monies collected through the taxing power oI a
State, such amounts belong to the State, although the use thereoI is limited
to the special purpose/obiective Ior which it was created."

ISSUE:

Whether or not the Iunds collected under PD 1956 is an exercise oI the
power oI taxation

RULING:

The levy is primarily in the exercise oI the police power oI the State. While
the Iunds collected may be reIerred to as taxes, they are exacted in the
exercise oI the police power oI the State.

What petitioner would wish is the Iixing oI some deIinite, quantitative
restriction, or "a speciIic limit on how much to tax." The Court is cited to
this requirement by the petitioner on the premise that what is involved here
is the power oI taxation; but as already discussed, this is not the case. What
is here involved is not so much the power oI taxation as police power.
Although the provision authorizing the ERB to impose additional amounts
could be construed to reIer to the power oI taxation, it cannot be overlooked
that the overriding consideration is to enable the delegate to act with
expediency in carrying out the obiectives oI the law which are embraced by
the police power oI the State.

It would seem that Irom the above-quoted ruling, the petition Ior prohibition
should Iail.

REP&BLIC THE PHILIPPIES vs. BACLD-M&RCIA
MILLIG C.. IC.. MA-A S&GAR CETRAL C.. IC.. and
TALISAY-SILAY MILLIG CMPAY

G.R. os. L-19824. L-19825 and 19826 1uly 9. 1966

FACTS: Joint appeal by three sugar centrals, respondents herein. Irom a
decision oI the Court oI First Instance oI Manila Iinding them liable Ior
special assessments under Section 15 oI Republic Act No. 632.

The appellants' thesis is simply to the eIIect that the "10 centavos per picul
oI sugar" authorized to be collected under Sec. 15 oI Republic 632 is a
special assessment. As such, the proceeds thereoI may be devoted only to
the speciIic purpose Ior which the assessment was authorized; a special
assessment being a levy upon property predicated on the doctrine that the
property against which it is levied derives some special beneIit Irom the
improvement. It is not a tax measure intended to raise revenues Ior the
Government.

ISSUE:

Is the imposition oI special assessment an exercise oI the taxing power?

RULING:

The Court deemed it relevant to discuss its holding in Lutz v. Araneta. For
in this Lutz case, Commonwealth Act 567, otherwise known as the Sugar
Adiustment Act, all collections made thereunder "shall accrue to a special
Iund in the Philippine Treasury, to be known as the 'Sugar Adiustment and
Stabilization Fund,' and shall be paid out only Ior any or all oI the Iollowing
purposes or to attain any or all oI the Iollowing obiectives, as may be
provided by law." Analysis oI the Act, and particularly Section 6, will show
that the tax is levied with a regulatory purpose, to provide means Ior the
rehabilitation and stabilization oI the threatened sugar industry. In other
words, the act is primarily an exercise oI the police power.

On the authority oI the above case, then, We hold that the special
assessment at bar may be considered as similarly as the above, that is, that
the levy Ior the Philsugin Fund is not so much an exercise oI the power oI
taxation, nor the imposition oI a special assessment, but, the exercise oI the
police power Ior the general welIare oI the entire country. It is, thereIore, an
exercise oI a sovereign power which no private citizen may lawIully resist.

VICTRIAS MILLIG C.. IC. vs. THE M&ICIPALITY
VICTRIAS. PRVICE EGRS CCIDETAL

G.R. o. L-21183 September 27. 1968

FACTS:

This case calls into question the validity oI Ordinance No. 1, series oI 1956,
oI the Municipality oI Victorias, Negros Occidental.

The disputed ordinance imposed license taxes on operators oI sugar centrals
and sugar reIineries. The changes were: with respect to sugar centrals, by
increasing the rates oI license taxes; and as to sugar reIineries, by increasing
the rates oI license taxes as well as the range oI graduated schedule oI
annual output capacity.

For, the production oI plaintiII Victorias Milling Co., Inc. in both its sugar
central and its sugar reIinery located in the Municipality oI Victorias comes
within these items.

PlaintiII Iiled suit below to ask Ior iudgment declaring Ordinance No. 1,
series oI 1956, null and void. The plaintiII contends that the ordinance is
discriminatory since it singles out plaintiII which is the only operator oI a
sugar central and a sugar reIinery within the iurisdiction oI deIendant
municipality.

The trial court rendered its iudgment declaring that the ordinance in
question reIers to license taxes or Iees. Both plaintiII and deIendant directly
appealed to the Supreme Court.

ISSUE:

Was Ordinance No. 1, series oI 1956, passed by deIendant's municipal
council as a regulatory enactment or as a revenue measure?

RULING:

The present imposition must be treated as a levy Ior revenue purposes. A
quick glance at the big amount oI maximum annual tax set Iorth in the
ordinance, P40, 000. 00 Ior sugar centrals, and P40, 000.00 Ior sugar
reIineries, will readily convince one that the tax is really a revenue tax. And
then, we read in the ordinance nothing which would as much as indicate
that the tax imposed is merely Ior police inspection, supervision or
regulation. Given the purposes iust mentioned, we Iind no warrant in logic
to give our assent to the view that the ordinance in question is solely Ior
regulatory purpose. Plain is the meaning conveyed. The ordinance is Ior
raising money. To say otherwise is to misread the purpose oI the ordinance.

WALTER L&TZ vs. 1. ATI ARAETA

G.R. o. L-7859 December 22. 1955

FACTS: This case was initiated in the Court oI First Instance oI Negros
Occidental to test the legality oI the taxes imposed by Commonwealth Act
No. 567, otherwise known as the Sugar Adiustment Act.

PlaintiII, Walter Lutz seeks to recover Irom the Collector oI Internal
Revenue the sum oI P14, 666.40 paid by the estate as taxes, under section 3
oI the Act, Ior the crop years 1948-1949 and 1949-1950; alleging that such
tax is unconstitutional and void, being levied Ior the aid and support oI the
sugar industry exclusively, which in plaintiII's opinion is not a public
purpose Ior which a tax may be constitutionally levied. The action having
been dismissed by the Court oI First Instance, the plaintiIIs appealed the
case directly to the Supreme Court.

ISSUE:

Is the tax provided Ior in Commonwealth Act No. 567 a pure exercise oI the
taxing power?

RULING:

Analysis oI the Act, and particularly oI section 6 will show that the tax is
levied with a regulatory purpose, to provide means Ior the rehabilitation and
stabilization oI the threatened sugar industry. In other words, the act is
primarily an exercise oI the police power.

The protection and promotion oI the sugar industry is a matter oI public
concern, it Iollows that the Legislature may determine within reasonable
bounds what is necessary Ior its protection and expedient Ior its promotion.
II obiective and methods are alike constitutionally valid, no reason is seen
why the state may not levy taxes to raise Iunds Ior their prosecution and
attainment. Taxation may be made the implement oI the state's police
power.

REP&BLIC THE PHILIPPIES. represented by the
PRESIDETIAL CMMISSI GD GVERMET

(PCGG) vs. CCED. ET AL. and BALLARES. ET AL..
ED&ARD M. C1&AGC 1R. and the

SADIGABAYA (irst Division)

G.R. o. 147062-64 December 14. 2001

FACTS: The PCGG issued and implemented numerous sequestrations,
Ireeze orders and provisional takeovers oI allegedly ill-gotten companies,
assets and properties, real or personal.

Among the properties sequestered by the Commission were shares oI stock
in the United Coconut Planters Bank (UCPB) registered in the names oI the
alleged "one million coconut Iarmers," the so-called Coconut Industry
Investment Fund companies (CIIF companies) and Private Respondent
Eduardo Coiuangco Jr... On January 23, 1995, the trial court rendered its
Iinal Decision nulliIying and setting aside the Resolution oI the
Sandiganbayan which liIted the sequestration oI the subiect UCPB shares.

ISSUE:

Are the Coconut Levy Funds raised through the State`s police and taxing
powers?

RULING:

Indeed, coconut levy Iunds partake oI the nature oI taxes which, in general,
are enIorced proportional contributions Irom persons and properties,
exacted by the State by virtue oI its sovereignty Ior the support oI
government and Ior all public needs.

Based on this deIinition, a tax has three elements, namely: a) it is an
enIorced proportional contribution Irom persons and properties; b) it is
imposed by the State by virtue oI its sovereignty; and c) it is levied Ior the
support oI the government.

Taxation is done not merely to raise revenues to support the government,
but also to provide means Ior the rehabilitation and the stabilization oI a
threatened industry, which is so aIIected with public interest as to be within
the police power oI the State.

WECESLA PASC&AL vs. THE SECRETARY P&BLIC
WRS AD CMM&ICATIS. ET AL.

G.R. o. L-10405 December 29. 1960

FACTS: On August 31, 1954, petitioner Wenceslao Pascual instituted this
action Ior declaratory relieI, with iniunction, upon the ground that Republic
Act No. 920, entitled "An Act Appropriating Funds Ior Public Works",
approved on June 20, 1953, contained, in section 1-C (a) thereoI, an item
(43|h|) oI P85,000.00 "Ior the construction, reconstruction, repair, extension
and improvement" oI Pasig Ieeder road terminals; that, at the time oI the
passage and approval oI said Act, the aIorementioned Ieeder roads were
"nothing but proiected and planned subdivision roads, not yet constructed, .
. . within the Antonio Subdivision . . . situated at . . . Pasig, Rizal" which
proiected Ieeder roads "do not connect any government property or any
important premises to the main highway";

Respondents moved to dismiss the petition upon the ground that petitioner
had "no legal capacity to sue", and that the petition did "not state a cause oI
action".

ISSUE:

Should appropriation using public Iunds be made Ior public purposes only?

RULING:

The right oI the legislature to appropriate Iunds is correlative with its right
to tax, and, under constitutional provisions against taxation except Ior
public purposes and prohibiting the collection oI a tax Ior one purpose and
the devotion thereoI to another purpose, no appropriation oI state Iunds can
be made Ior other than Ior a public purpose.

The test oI the constitutionality oI a statute requiring the use oI public Iunds
is whether the statute is designed to promote the public interest, as opposed
to the Iurtherance oI the advantage oI individuals, although each advantage
to individuals might incidentally serve the public.

SMEA vs. RBS

G.R. o. 99886 March 31. 1993

FACTS: October 10, 1984, President Ferdinand Marcos issued P.D. 1956
creating a Special Account in the General Fund, designated as the Oil Price
Stabilization Fund (OPSF). The OPSF was designed to reimburse oil
companies Ior cost increases in crude oil and imported petroleum products
resulting Irom exchange rate adiustments and Irom increases in the world
market prices oI crude oil. Subsequently, the OPSF was reclassiIied into a
"trust liability account,". President Corazon C. Aquino promulgated E. O.
137 expanding the grounds Ior reimbursement to oil companies Ior possible
cost under recovery incurred as a result oI the reduction oI domestic prices
oI petroleum products.

The petitioner argues inter alia that "the monies collected pursuant to . .
P.D. 1956, as amended, must be treated as a 'SPECIAL FUND,' not as a
'trust account' or a 'trust Iund,' and that "iI a special tax is collected Ior a
speciIic purpose, the revenue generated thereIrom shall 'be treated as a
special Iund' to be used only Ior the purpose indicated, and not channelled
to another government obiective." Petitioner Iurther points out that since "a
'special Iund' consists oI monies collected through the taxing power oI a
State, such amounts belong to the State, although the use thereoI is limited
to the special purpose/obiective Ior which it was created."

ISSUE:

Do the powers granted to the ERB under P.D. 1956 partake oI the nature oI
the taxation power oI the State?

RULING:

NO. The OPSF was established "Ior the purpose oI minimizing the Irequent
price changes brought about by exchange rate adiustment and/or changes in
world market prices oI crude oil and imported petroleum products. While
the Iunds collected may be reIerred to as taxes, they are exacted in the
exercise oI the police power oI the State.

PEPSI-CLA BTTLIG CMPAY THE PHIILIPPIES.
IC. vs. M&ICIPALITY TAA&A

G.R. o. L-31156 ebruary 27. 1976

FACTS: In February 1963, plaintiII commenced a complaint seeking to
declare Section 2 oI R.A. 2264 (Local Autonomy Act) unconstitutional as
an undue delegation oI taxing power and to declare Ordinance Nos. 23 and
27 issued by the Municipality oI Tanauan, Leyte as null and void.

Municipal Ordinance No. 23 levies and collects Irom soIt drinks producers
and manuIacturers one-sixteenth (1/16) oI a centavo Ior every bottle oI soIt
drink corked. On the other hand, Municipal Ordinance No. 27 levies and
collects on soIt drinks produced or manuIactured within the territorial
iurisdiction oI the municipality a tax oI one centavo (P0.01) on each gallon
oI volume capacity. The tax imposed in both Ordinances Nos. 23 and 27 is
denominated as "municipal production tax.

ISSUES:

1. Is Section 2 oI R.A. 2264 an undue delegation oI the power oI taxation?

2. Do Ordinance Nos. 23 and 24 constitute double taxation and impose
percentage or speciIic taxes?

RULING:

1. NO. The power oI taxation is purely legislative and cannot be delegated
to the executive or iudicial department oI the government without inIringing
upon the theory oI separation oI powers. But as an exception, the theory
does not apply to municipal corporations. Legislative powers may be
delegated to local governments in respect oI matters oI local concern.

2. NO. The Municipality oI Tanauan discovered that manuIacturers could
increase the volume contents oI each bottle and still pay the same tax rate
since tax is imposed on every bottle corked. To combat this scheme,
Municipal Ordinance No. 27 was enacted. As such, it was a repeal oI
Municipal Ordinance No. 23. In the stipulation oI Iacts, the parties admitted
that the Municipal Treasurer was enIorcing Municipal Ordinance No. 27
only. Hence, there was no case oI double taxation.

SCIAL SEC&RITY SYSTEM vs. CITY BACLD

G.R. o. L-35726 1uly 21. 1982

FACTS: Petitioner Social Security System, Ior operation purposes,
maintains a Iive-storey building in Bacolod City occupying Iour parcels oI
land. Said lands and buildings were assessed Ior taxation. Petitioner Iailed
to pay the realty taxes Ior the years 1968, 1969 and 1970. Consequently, the
City oI Bacolod levied upon said lands and buildings and declared them
IorIeited in its Iavour. In protest, petitioner wrote the city mayor through the
city treasurer seeking reconsideration oI the IorIeiture proceeding on the
ground that it is a government-owned and controlled corporation and as
such, should be exempt Irom payment oI real estate taxes. No action was
however taken. ThereaIter, petitioner Iiled an action in court Ior the
nulliIication oI the court proceedings. The court ruled that the properties oI
petitioner are not exempt Irom the payment oI real property tax because
these are not one oI the exemptions under Section 29 oI the Charter oI
Bacolod City and there is no other law providing Ior its exemption.

ISSUE:

Should the subiect properties maintained by petitioner SSS be exempt Irom
payment oI real property tax?

RULING:

YES. Whether a government owned and controlled corporation is
perIorming governmental or proprietary Iunction is immaterial. Section 29
oI the Charter oI Bacolod City does not contain any qualiIication
whatsoever in providing Ior the exemption Irom real estate taxes oI "lands
and buildings owned by the Commonwealth or Republic oI Philippines."
Hence, when the legislature exempted lands and buildings owned by the
government Irom payment oI said taxes, what it intended was a broad and
comprehensive application oI such mandate, regardless oI whether such
property is devoted to governmental or proprietary purpose.

Further, P.D. 24 has amended the Social Security Act oI 1954 expressly
exempting the SSS Irom payment oI any tax thereby removing all doubts as
to its exemption.

SEA-LAD SERVICE. IC. vs. C&RT APPEALS

G.R. o. 122605 April 30. 2001

FACTS: Petitioner Sea-Land Service Incorporated, an American
international shipping company licensed by the Securities and Exchange
Commission to do business in the Philippines entered into a contract with
the United States Government to transport military household goods and
eIIects oI U.S. military personnel assigned to the Subic Naval Base. Sea-
Land paid its corresponding corporate income tax Ior the taxable year 1984
at the rate oI 1.5 in accordance with Section 25(a) (2) oI the National
Internal Revenue Code in relation to Article 9 oI the RP-US Tax Treaty.
Subsequently, Sea-Land Iiled a claim Ior reIund alleging that the taxes it
paid were made in mistake because under the RP-US Military Base
Agreement, it is exempt Irom the payment oI taxes.

ISSUE:

Does the income that petitioner derived Irom services in transporting the
household goods and eIIects oI U.S. military personnel Iall within the tax
exemption provided in the RP-US Military Bases Agreement?

RULING:

NO. Laws granting exemption Irom tax are construed strictissimi iuris
against the taxpayer and liberally in Iavour oI the taxing power. The
transport or shipment oI household goods and eIIects oI U.S. military
personnel is not included in the term "construction, maintenance, operation
and deIense oI the bases. Neither could the perIormance oI this service to
the U.S. government be interpreted as directly related to the deIence and
security oI the Philippine territories

CMMISSIER ITERAL REVE&E vs. MITS&BISHI
METAL CRPRATI

G.R. o. L-54908. 1anuary 22. 1990

FACTS: On April 17, 1970, Atlas Consolidated Mining and Development
Corporation entered into a Loan and Sales Contract with Mitsubishi Metal
Corporation Ior purposes oI the proiected expansion oI the productive
capacity oI the Iormer's mines in Toledo, Cebu. Under said contract,
Mitsubishi agreed to extend a loan to Atlas 'in the amount oI
$20,000,000.00, United States currency. Atlas, in turn undertook to sell to
Mitsubishi all the copper concentrates produced Ior a period oI IiIteen (15)
years. Mitsubishi thereaIter applied Ior a loan with the Export-Import Bank
oI Japan (Eximbank) Ior purposes oI its obligation under said contract. Its
loan application was approved on May 26, 1970 in the equivalent sum oI
$20,000,000.00 in United States currency at the then prevailing exchange
rate.

Pursuant to the contract between Atlas and Mitsubishi, interest payments
were made by the Iormer to the latter totalling P13, 143,966.79 Ior the years
1974 and 1975. The corresponding 15 tax thereon in the amount oI P1,
971,595.01 was withheld pursuant to Section 24 (b) (1) and Section 53 (b)
(2) oI the National Internal Revenue Code, as amended by Presidential
Decree No. 131, and duly remitted to the Government.

ISSUE:

Whether or not the interest income Irom the loans extended to Atlas by
Mitsubishi is excludible Irom gross income taxation pursuant to Section 29
oI the tax code and, thereIore, exempt Irom withholding tax.

RULING:

The court ruled in the negative. Eximbank had nothing to do with the sale oI
the copper concentrates since all that Mitsubishi stated in its loan
application with the Iormer was that the amount being procured would be
used as a loan to and in consideration Ior importing copper concentrates
Irom Atlas. Such an innocuous statement oI purpose could not have been
intended Ior, nor could it legally constitute, a contract oI agency. The
conclusion is indubitable; MITSUBISHI, and NOT EXIMBANK, is the
sole creditor oI ATLAS, the Iormer being the owner oI the $20 million
upon completion oI its loan contract with EXIMBANK oI Japan.

It is settled a rule in this iurisdiction that laws granting exemption Irom tax
are construed strictissimi iuris against the taxpayer and liberally in Iavour oI
the taxing power. Taxation is the rule and exemption is the exception.

31st IATRY PST EXCHAGE vs. PSADAS

G.R. o. 33403. September 4. 1930

FACTS: The 31st InIantry Post Exchange is a post exchange constituted in
accordance with Army regulations and the laws oI the United States. in the
course oI its duly authorized business transactions, the Exchange made
many purchases oI various and diverse commodities, goods, wares and
merchandise Irom various merchants in the Philippines. The Commissioner
collected a sales tax oI 1 1/2 oI the gross value oI the commodities, etc.
Irom the merchants who sold said commodities to the Exchange. A Iormal
protest was lodged by the Exchange.

ISSUE:

Whether or not the petitioner is exempt Irom the sales tax imposed against
its suppliers.

RULING:

The court ruled in the negative. Taxes have been collected Irom merchants
who made sales to Army Post Exchanges since 1904 (Act 1189, Section
139). Similar taxes are paid by those who sell merchandise to the Philippine
Government, and by those who do business with the US Army and Navy in
the Philippines. Herein, the merchants who eIIected the sales to the Post
Exchange are the ones who paid the tax; and it is the oIIicers, soldiers, and
civilian employees and their Iamilies who are beneIited by the post
exchange to whom the tax is ultimately shiIted.

An Army Post Exchange, although an agency within the US Army, cannot
secure exemption Irom taxation Ior merchants who make sales to the Post
Exchange.

CMMISSIER ITERAL REVE&E vs. MAR&BEI
CRPRATI

G.R. o. 137377. December 18. 2001

FACTS: Respondent Marubeni Corporation is a Ioreign corporation and is
duly registered to engage in business in the Philippines. Sometime in
November 1985, petitioner Commissioner oI Internal Revenue issued a
letter oI authority to examine the books oI accounts oI the Manila branch
oIIice oI Respondent Corporation.

In the course oI the examination, petitioner Iound respondent to have
undeclared income Irom two (2) contracts in the Philippines. Petitioner's
revenue examiners recommended an assessment Ior deIiciency income,
branch proIit remittance, and contractor`s and commercial broker's taxes.
Respondent questioned this assessment. Respondent then received a letter
Iorm petitioner assessing respondent several deIiciency taxes. On
September 26, 1986, respondent Iiled two (2) petitions Ior review with the
Court oI Tax Appeals.

Earlier, on August 2, 1986, Executive Order (E.O.) No. 41 declaring a one-
time amnesty covering unpaid income taxes Ior the years 1981 to 1985 was
issued. Under this E.O., a taxpayer who wished to avail oI the income tax
amnesty should comply with certain requirements. In accordance with the
terms oI E.O. No. 41, respondent Iiled its tax amnesty return dated October
30, 1986. On November 17, 1986, the scope and coverage oI E.O. No. 41
was expanded by Executive Order (E.O.) No. 64.

ISSUE:

Whether or not herein respondent's deIiciency tax liabilities were
extinguished upon respondent's availment oI tax amnesty under Executive
Orders Nos. 41 and 64.

RULING:

Section 4 (b) oI E.O. No. 41 is very clear and unambiguous. It excepts Irom
income tax amnesty those taxpayers "with income tax cases already Iiled in
court as oI the eIIectivity hereoI." The point oI reIerence is the date oI
eIIectivity oI E.O. No. 41. The diIIiculty lies with respect to the contractor's
tax assessment and respondent's availment oI the amnesty under E.O. No.
64 including estate and donor's taxes and tax on business.

In the instant case, the vagueness in Section 4 (b) brought about by E.O.
No. 64 should be construed strictly against the taxpayer. The term "income
tax cases" should be read as to reIer to estate and donor's taxes and taxes on
business while the word "hereoI," to E.O. No. 64. Since Executive Order
No. 64 took eIIect on November 17, 1986, consequently, insoIar as the
taxes in E.O. No. 64 are concerned, the date oI eIIectivity reIerred to in
Section 4 (b) oI E.O. No. 41 should be November 17, 1986. There is
nothing in E.O. No. 64 that provides that it should retroact to the date oI
eIIectivity oI E.O. No. 41, the original issuance. Neither is it necessarily
implied Irom E.O. No. 64 that it or any oI its provisions should apply
retroactively.

REAGA vs. CMMISSIER ITERAL REVE&E

G.R. o. L-26379. 27. December 27. 1969

FACTS: William Reagan imported a tax-Iree 1960 Cadillac car with
accessories valued at US $ 6,443.83, including Ireight, insurance and other
charges. AIter acquiring a permit to sell the car Irom the base commander oI
Clark Air Base, Reagan sold the car to a certain Willie Johnson Jr. oI the
US Marine Corps stationed in Sangley Point, Cavite Ior US$ 6,600.
Johnson sold the same, on the same day to Fred Meneses, a Filipino. As a
result oI the transaction, the Commissioner rendered Reagan liable Ior
income tax in the sum oI P2,970. Reagan claimed that he was exempt as the
transaction occurred in Clark Air Base, which as he contends is 'a base
outside the Philippines.

ISSUE:

Whether or not petitioner Reagan was covered by the tax exemption.

RULING:

The court ruled in the negative. The Philippines, as an independent and
sovereign country, exercises its authority over its entire domain. Any state
may, however, by its consent, express or implied, submit to a restriction oI
its sovereign rights. It may allow another power to participate in the
exercise oI iurisdictional right over certain portions oI its territory. By doing
so, it by no means Iollows that such areas become impressed with an alien
character. The areas retain their status as native soil. Clark Air Base is
within Philippine territorial iurisdiction to tax, and thus, Reagan was liable
Ior the income tax arising Irom the sale oI his automobile in Clark. The law
does not look with Iavour on tax exemptions and that he who would seek to
be thus privileged must iustiIy it by words too plain to be mistaken and too
categorical to be misinterpreted. Reagan has not done so, and cannot do so.

TI& vs. C&RT APPEALS

GR. o. 127410 1anuary 20. 1999

FACTS: Congress, with the approval oI the President, passed into law RA
7227 entitled "An Act Accelerating the Conversion oI Military Reservations
Into Other Productive Uses, Creating the Bases Conversion and
Development Authority Ior this Purpose, Providing Funds ThereIor and Ior
Other Purposes." Section 12 thereoI created the Subic

Special Economic Zone and granted there to special privileges. President
Ramos issued Executive Order No. 97, clariIying the application oI the tax
and duty incentives. The President issued Executive Order No. 97-A,
speciIying the area within which the tax-and-duty-Iree privilege was
operative. The petitioners challenged beIore this Court the constitutionality
oI EO 97-A Ior allegedly being violative oI their right to equal protection oI
the laws. This Court reIerred the matter to the Court oI Appeals.
Proclamation No. 532 was issued by President Ramos. It delineated the
exact metes and bounds oI the Subic Special Economic and Free Port Zone,
pursuant to Section 12 oI RA 7227. Respondent Court held that "there is no
substantial diIIerence between the provisions oI EO 97-A and Section 12 oI
RA 7227. In both, the 'Secured Area' is precise and well-deIined as '. . . the
lands occupied by the Subic Naval Base and its contiguous extensions as
embraced, covered and deIined by the 1947 Military Bases Agreement
between the Philippines and the United States oI America, as amended . . .'"

ISSUE:

Whether or not Executive Order No. 97-A violates the equal protection
clause oI the Constitution

RULING:

No. The Court Iound real and substantive distinctions between the
circumstances obtaining inside and those outside the Subic Naval Base,
thereby iustiIying a valid and reasonable classiIication. The Iundamental
right oI equal protection oI the laws is not absolute, but is subiect to
reasonable classiIication. II the groupings are characterized by substantial
distinctions that make real diIIerences, one class may be treated and
regulated diIIerently Irom another. The classiIication must also be germane
to the purpose oI the law and must apply to all those belonging to the same
class.

1H PEPLES ALTERATIVE CALITI vs. BCDA

GR. o. 119775 ctober 24. 2003

FACTS: Republic Act No. 7227 set out the policy oI the government to
accelerate the sound and balanced conversion into alternative productive
uses oI the Iormer military bases. It created Bases Conversion and
Development Authority. It also created the Subic Special Economic and
Free Port Zone. It granted the Subic SEZ incentives. It expressly gave
authority to the President to create through executive proclamation, subiect
to the concurrence oI the local government units directly aIIected, other
Special Economic Zones in the areas covered. BCDA entered into a
Memorandum oI Agreement and Escrow Agreement with Tuntex and
Asiaworld. BCDA, Tuntex and Asiaworld executed a Joint Venture
Agreement. The Sangguniang Panlungsod oI Baguio City asked BCDA to
exclude all the barangays partly or totally located within Camp John Hay
Irom the reach or coverage oI any plan or program Ior its development. The
sanggunian adopted and submitted a 15-point concept Ior the development
oI Camp John Hay. BCDA, Tuntex and AsiaWorld agreed to some, but
reiected or modiIied the other proposals. They stressed the need to declare
Camp John Hay a SEZ as a condition precedent in accordance R.A. No.
7227. The sanggunian requested the Mayor to order the determination oI
realty taxes which may be collected Irom real properties oI Camp John Hay.
It was intended to intelligently guide the sanggunian in determining its
position on whether Camp John Hay be declared a SEZ, it being oI the view
that such declaration would exempt the camp`s property and the economic
activity therein Irom local or national taxation. The sanggunian passed a
resolution seeking the issuance by President Ramos oI a presidential
proclamation declaring an area oI 288.1 hectares oI the camp as a SEZ.
President Ramos issued Proclamation No. 420 which established a SEZ on
a portion oI Camp John Hay.

ISSUE:

Whether Proclamation No. 420 is constitutional

RULING:

While the grant oI economic incentives may be essential to the creation and
success oI SEZs, Iree trade zones and the like, the grant thereoI to the John
Hay SEZ cannot be sustained. The incentives under R.A. No. 7227 are
exclusive only to the Subic SEZ, hence, the extension oI the same to the
John Hay SEZ Iinds no support therein. Neither does the same grant oI
privileges to the John Hay SEZ Iind support in the other laws speciIied
under Section 3 oI Proclamation No. 420, which laws were already extant
beIore the issuance oI the proclamation or the enactment oI R.A. No. 7227.
More importantly, the nature oI most oI the assailed privileges is one oI tax
exemption. It is the legislature, unless limited by a provision oI the state
constitution that has Iull power to exempt any person or corporation or class
oI property Irom taxation, its power to exempt being as broad as its power
to tax. The challenged grant oI tax exemption would circumvent the
Constitution`s imposition that a law granting any tax exemption must have
the concurrence oI a maiority oI all the members oI Congress.

CC&T IL REIERS ASSCIATI IC. vs. BCDA

G.R. o. 132527 1uly 29. 2005

FACTS: Republic Act No. 7227 was enacted providing Ior the sound and
balanced conversion oI the Clark and Subic military reservations and their
extensions into alternative productive uses in the Iorm oI special economic
zones in order to promote the economic and social development oI Central
Luzon in particular and the country in general. President Ramos issued
Executive Order No. 80 which declared that Clark shall have all the
applicable incentives granted to the Subic Special Economic and Free Port
Zone under Republic Act No. 7227. The CSEZ shall have all the applicable
incentives in the Subic Special Economic and Free Port Zone under RA
7227. The CSEZ Main Zone covering the Clark Air Base proper shall have
all the investment incentives, while the CSEZ Sub-Zone covering the rest oI
the CSEZ shall have limited incentives. The Iull incentives in the Clark SEZ
Main Zone and the limited incentives in the Clark SEZ Sub-Zone shall be
determined by the BCDA. BCDA passed Board Resolution No. 93-05-034
allowing the tax and duty-Iree sale at retail oI consumer goods imported via
Clark Ior consumption outside the CSEZ. The President issued EO No. 97,
'ClariIying the Tax and Duty Free Incentive Within the Subic Special
Economic Zone Pursuant to R.A. No. 7227. EO 97-A was issued, 'Further
ClariIying the Tax and Duty-Free Privilege within the Subic Special
Economic and Free Port Zone.

ISSUE:

Whether or not Executive Order No. 97-A, Section 5 oI Executive Order
No. 80, and Section 4 oI BCDA Board

Resolution No. 93-05-034 are null and void

RULING:

The Court Iinds that the setting up oI such commercial establishments
which are the only ones duly authorized to sell consumer items tax and
duty-Iree is still well within the policy enunciated in Section 12 oI Republic
Act No. 7227 that '. . . the Subic Special Economic Zone shall be
developed into a selI-sustaining, industrial, commercial, Iinancial and
investment centre to generate employment opportunities in and around the
zone and to attract and promote productive Ioreign investments. The Court
reiterates that the second sentences oI paragraphs 1.2 and 1.3 oI Executive
Order No. 97-A, allowing tax and duty-Iree removal oI goods to certain
individuals, even in a limited amount, Irom the Secured Area oI the SSEZ,
are null and void Ior being contrary to Section 12 oI Republic Act No.
7227. Said Section clearly provides that 'exportation or removal oI goods
Irom the territory oI the Subic Special Economic Zone to the other parts oI
the Philippine territory shall be subiect to customs duties and taxes under
the Customs and TariII Code and other relevant tax laws oI the
Philippines.

PRVICE ABRA vs. HERAD

G.R. o. L-49336 August 31. 1981

FACTS: On the Iace oI this certiorari and mandamus petition, it clearly
appears that the actuation oI respondent Judge Hernando leIt much to be
desired. There was a denial oI a motion to dismiss an action Ior declaratory
relieI by Roman Catholic Bishop oI Bangued desirous oI being exempted
Irom a real estate tax Iollowed by a summary iudgment granting such
exemption, without even hearing the side oI petitioner. It was the
submission oI counsel that an action Ior declaratory relieI would be proper
only beIore a breach or violation oI any statute, executive order or
regulation. Moreover, there being a tax assessment made by the Provincial
Assessor on the properties oI respondent, petitioner Iailed to exhaust the
administrative remedies available under PD No. 464 beIore Iiling such court
action. Respondent Judge alleged that there "is no question that the real
properties sought to be taxed by the Province oI Abra are properties oI the
respondent Roman Catholic Bishop oI Bangued, Inc." The very next
sentence assumed the very point it asked when he categorically stated:
"Likewise, there is no dispute that the properties including their procedure
are actually, directly and exclusively used by the Roman Catholic Bishop oI
Bangued, Inc. Ior religious or charitable purposes." For him then: "The
proper remedy oI the petitioner is appeal and not this special civil action."

ISSUE:

Whether or not the properties oI respondent Roman Catholic Bishop should
be exempt Irom taxation

RULING:

Respondent Judge would not have erred so grievously had he merely
compared the provisions oI the present Constitution with that appearing in
the 1935 Charter on the tax exemption oI "lands, buildings, and
improvements." There is a marked diIIerence. Under the 1935 Constitution:
"Cemeteries, churches, and parsonages or convents appurtenant thereto, and
all lands, buildings, and improvements used exclusively Ior religious,
charitable, or educational purposes shall be exempt Irom taxation." The
present Constitution added "charitable institutions, mosques, and non-proIit
cemeteries" and required that Ior the exemption oI "lands, buildings, and
improvements," they should not only be "exclusively" but also "actually and
"directly" used Ior religious or charitable purposes. The Constitution is
worded diIIerently. The change should not be ignored. It must be duly taken
into consideration.

TLETI vs. SECRETARY IACE

G.R. o. 115455 ctober 30. 1995

FACTS: Motions were Iiled seeking reconsideration oI the Supreme Court
decision dismissing the petitions Ior the declaration oI unconstitutionality oI
R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law.
The motions, oI which there are 10 in all, have been Iiled by the several
petitioners in these cases.

ISSUES:

1. Whether or not R.A. No. 7716 did not "originate exclusively" in the
House oI Representatives as required by Art. VI Sec. 24 oI the Constitution.

2. Whether or not R.A. No. 7716 is violative oI press Ireedom and religious
Ireedom under Art. III Secs. 4 and 5 oI the Constitution.

3. Whether or not there is violation oI the rule on taxation under Art. VI
Sec. 28 (1) oI the Constitution.

4. Whether or not there is an impairment oI obligation oI contracts under
Art. III Sec. 10 oI the Constitution.

5. Whether or not there is violation oI the due process clause under Art. III
Sec. 1 oI the Constitution.

RULING:

1. While Art. VI Sec. 24 provides that all appropriation, revenue or tariII
bills, bills authorizing increase oI the public debt, bills oI local application,
and private bills must "originate exclusively in the House oI
Representatives," it also adds, "but the Senate may propose or concur with
amendments." In the exercise oI this power, the Senate may propose an
entirely new bill as a substitute measure.

2. Since the law granted the press a privilege, the law could take back the
privilege anytime without oIIense to the Constitution. The VAT is not a
license tax. It is not a tax on the exercise oI a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease or exchange oI
goods or properties or the sale or exchange oI services and the lease oI
properties purely Ior revenue purposes. To subiect the press to its payment
is not to burden the exercise oI its right any more than to make the press pay
income tax or subiect it to general regulation is not to violate its Ireedom
under the Constitution.

3. The Constitution does not really prohibit the imposition oI indirect taxes
which, like the VAT, are regressive.

What it simply provides is that Congress shall "evolve a progressive system
oI taxation."

4. Contracts must be understood as having been made in reIerence to the
possible exercise oI the rightIul authority oI the government and no
obligation oI contract can extend to the deIeat oI that authority.

5. On the alleged violation oI due process, hardship to taxpayers alone is not
an adequate iustiIication Ior adiudicating abstract issues. Otherwise,
adiudication would be no diIIerent Irom the giving oI advisory opinion that
does not really settle legal issues. We are told that it is our duty under Art.
VIII, Sec. 1 (2) to decide whenever a claim is made that "there has been a
grave abuse oI discretion amounting to lack or excess oI iurisdiction on the
part oI any branch or instrumentality oI the government." This duty can
only arise iI an actual case or controversy is beIore us.

ABAADA Guro Party List vs. Ermita

G.R. o. 168056 September 1. 2005

FACTS: BeIore R.A. No. 9337 took eIIect, petitioners ABAKADA GURO
Party List, et al., Iiled a petition Ior prohibition on May 27, 2005
questioning the constitutionality oI Sections 4, 5 and 6 oI R.A. No. 9337,
amending Sections 106, 107 and 108, respectively, oI the National Internal
Revenue Code (NIRC). Section 4 imposes a 10 VAT on sale oI goods and
properties, Section 5 imposes a 10 VAT on importation oI goods, and
Section 6 imposes a 10 VAT on sale oI services and use or lease oI
properties. These questioned provisions contain a uniIormp ro v is o
authorizing the President, upon recommendation oI the Secretary oI
Finance, to raise the VAT rate to 12, eIIective January 1, 2006, aIter
speciIied conditions have been satisIied. Petitioners argue that the law is
unconstitutional.

ISSUES:

1. Whether or not there is a violation oI Article VI, Section 24 oI the
Constitution.

2. Whether or not there is undue delegation oI legislative power in violation
oI Article VI Sec 28(2) oI the Constitution.

3. Whether or not there is a violation oI the due process and equal
protection under Article III Sec. 1 oI the Constitution.

RULING:

1. Since there is no question that the revenue bill exclusively originated in
the House oI Representatives, the Senate was acting within its constitutional
power to introduce amendments to the House bill when it included
provisions in Senate Bill No. 1950 amending corporate income taxes,
percentage, and excise and Iranchise taxes.

2. There is no undue delegation oI legislative power but only oI the
discretion as to the execution oI a law. This is constitutionally permissible.
Congress does not abdicate its Iunctions or unduly delegate power when it
describes what iob must be done, who must do it, and what is the scope oI
his authority; in our complex economy that is Irequently the only way in
which the legislative process can go Iorward.

3. The power oI the State to make reasonable and natural classiIications Ior
the purposes oI taxation has long been established. Whether it relates to the
subiect oI taxation, the kind oI property, the rates to be levied, or the
amounts to be raised, the methods oI assessment, valuation and collection,
the State`s power is entitled to presumption oI validity. As a rule, the
iudiciary will not interIere with such power absent a clear showing oI
unreasonableness, discrimination, or arbitrariness.

MISAMIS RIETAL ASSCIATI CC TRADERS. IC.
vs. DEPARTMET IACE SECRETARY

G.R. o. 108524 ovember 10. 1994

FACTS: Petitioner Misamis Oriental Association oI Coco Traders, Inc. is a
domestic corporation engaged in the buying and selling oI copra in Misamis
Oriental. The petitioner alleges that prior to the issuance oI Revenue
Memorandum Circular 47-91 on June 11, 1991, which implemented VAT
Ruling 190-90, copra was classiIied as agricultural Iood product under Sec.
103(b) oI the National Internal Revenue Code and, thereIore, exempt Irom
VAT at all stages oI production or distribution.

Petitioner sought to nulliIy Revenue Memorandum Circular No. 47-91 and
enioin the collection by respondent revenue oIIicials oI the Value Added
Tax (VAT) on the sale oI copra by members oI petitioner organization as
the classiIication had the eIIect oI denying to the petitioner the exemption it
previously enioyed when copra was classiIied as an agricultural Iood
product under Sec. 103(b) oI the NIRC

ISSUE:

Whether there is violation oI equal protection clause because while coconut
Iarmers and copra producers are exempt, traders and dealers are not,
although both sell copra in its original state.

RULING:

There is a material or substantial diIIerence between coconut Iarmers and
copra producers, on the one hand, and copra traders and dealers, on the
other. The Iormer produce and sell copra, the latter merely sell copra. The
Constitution does not Iorbid the diIIerential treatment oI persons so long as
there is a reasonable basis Ior classiIying them diIIerently.

CMMISSIER ITERAL REVE&E vs. C&RT
APPEALS

G.R. o. 119761 August 29. 1996

ACTS:

ortune Tobacco Corporation ("ortune Tobacco") is engaged in the
manufacture of different brands of cigarettes. The Philippine Patent
ffice issued to the corporation separate certificates of trademark
registration over "Champion." "Hope." and "More" cigarettes. The
initial position of the CIR was to classify 'Champion.' 'Hope.' and
'More' as foreign brands since they were listed in the World Tobacco
Directory as belonging to foreign companies. However. ortune
Tobacco changed the names of 'Hope' to 'Hope Luxury ' and 'More' to
'Premium More.' thereby removing the said brands from the foreign
brand category.



RA o. 7654. was enacted and became effective on 03 1uly 1993. It
amended Section 142(c)(1) of the IRC. About a month after the
enactment and two (2) days before the effectively of RA 7654. Revenue
Memorandum Circular o. 37-93 ("RMC 37-93") Reclassification of
Cigarettes Subject to Excise Tax. was issued by the BIR. ortune
Tobacco requested for a review. reconsideration and recall of RMC 37-
93. The request was denied on 29 1uly 1993. The following day. or on 30
1uly 1993. the CIR assessed ortune Tobacco for ad valorem tax
deficiency amounting to P9. 598. 334. 00.

n 03 August 1993. ortune Tobacco filed a petition for review with
the CTA. The CTA upheld the position of ortune Tobacco and
adjudged RMC o. 37-93 as defective.

ISS&E:

Whether or not there is a violation of the due process of law.

R&LIG:



A reading of RMC 37-93. particularly considering the circumstances
under which it has been issued. convinces us that the circular cannot be
viewed simply as a corrective measure or merely as construing Section
142(c)(1) of the IRC. as amended. but has. in fact and most
importantly. been made in order to place "Hope Luxury." "Premium
More" and "Champion" within the classification of locally
manufactured cigarettes bearing foreign brands and to thereby have
them covered by RA 7654.



In so doing. the BIR not simply interpreted the law; verily. it legislated
under its quasi-legislative authority. The due observance of the
requirements of notice. of hearing. and of publication should not have
been then ignored. The Court is convinced that the hastily promulgated
RMC 37-93 has fallen short of a valid and effective administrative
issuance.

CMMISSIER ITERAL REVE&E vs. LIGAYE G&L
ELECTRIC PWER

G.R. o. L-23771 August 4. 1988

FACTS: The respondent taxpayer, Lingayen GulI Electric Power Co., Inc.,
operates an electric power plant serving the adioining municipalities oI
Lingayen and Binmaley, Pangasinan, pursuant to the municipal Iranchise
granted it by their respective municipal councils, under Resolution Nos. 14
and 25 oI June 29 and July 2, 1946, respectively. Section 10 oI these
Iranchises provides that said grantee shall pay 2 oI their gross earnings
obtained thru this privilege. On November 21, 1955, the Bureau oI Internal
Revenue (BIR) assessed against and demanded Irom the private respondent
the total amount oI P19,293.41 representing deIiciency Iranchise taxes and
surcharges Ior the years 1946 to 1954 applying the Iranchise tax rate oI 5
on gross receipts Irom March 1, 1948 to December 31, 1954 as prescribed
in Section 259 oI the National Internal Revenue Code, instead oI the lower
rates as provided in the municipal Iranchises. Pending the hearing oI the
said cases, Republic Act (R.A.) No. 3843 was passed on June 22, 1 963,
granting to the private respondent a legislative Iranchise Ior the operation oI
the electric light, heat, and power system in the same municipalities oI
Pangasinan. Section 4 thereoI provides that: In consideration oI the
Iranchise and rights hereby granted, the grantee shall pay into the Internal
Revenue oIIice oI each Municipality in which it is supplying electric current
to the public under this Iranchise, a tax equal to two per centum oI the gross
receipts Irom electric current sold or supplied under this Iranchise. The
petitioner submits that the said law is unconstitutional insoIar as it provides
Ior the payment by the private respondent oI a Iranchise tax oI 2 oI its
gross receipts, while other taxpayers similarly situated were subiect to the
5 Iranchise tax imposed in Section 259 oI the Tax Code, thereby
discriminatory and violative oI the rule on uniIormity and equality oI
taxation.

ISSUE:

Whether or not Section 4 oI R.A. No. 3843 is unconstitutional Ior being
violative oI the "uniIormity and equality oI taxation" clause oI the
Constitution.

RULING:

UniIormity means that all property belonging to the same class shall be
taxed alike The Legislature has the inherent power not only to select the
subiects oI taxation but to grant exemptions. Tax exemptions have never
been deemed violative oI the equal protection clause. Charters or special
laws granted and enacted by the Legislature are in the nature oI private
contracts. They do not constitute a part oI the machinery oI the general
government.

APATIRA G MGA AGLILIGD SA PAMAHALAA vs.
TA

G.R. o. 81311 1une 30. 1988

FACTS: This petition seeks to nulliIy Executive Order No. 273 (EO 273,
Ior short), issued by the President oI the

Philippines on 25 July 1987, to take eIIect on 1 January 1988, and which
amended certain sections oI the National Internal Revenue Code and
adopted the value-added tax (VAT, Ior short), Ior being unconstitutional in
that its enactment is not allegedly within the powers oI the President; that
the VAT is oppressive, discriminatory, regressive, and violates the due
process and equal protection clauses and other provisions oI the 1987
Constitution.

ISSUE:

Whether or not EO 273 was enacted by the president with grave abuse oI
discretion and whether or not such law is unconstitutional.

RULING:

Petitioners have Iailed to show that EO 273 was issued capriciously and
whimsically or in an arbitrary or despotic manner by reason oI passion or
personal hostility. It appears that a comprehensive study oI the VAT had
been extensively discussed by these Iramers and other government agencies
involved in its implementation, even under the past administration. The
petitioners have Iailed to adequately show that the VAT is oppressive,
discriminatory or uniust. Petitioners merely rely upon newspaper articles
which are actually hearsay and have evidentiary value. To iustiIy the
nulliIication oI a law, there must be a clear and unequivocal breach oI the
Constitution, not a doubtIul and argumentative implication. The disputed
sales tax is also equitable. It is imposed only on sales oI goods or services
by persons engage in business with an aggregate gross annual sales
exceeding P200, 000.00. Small corners a r i- s a r i stores are consequently
exempt Irom its application.

SIS vs. ACHETA

G.R. o. L-59431 1uly 25. 1984

FACTS: Petitioner assailed the validity oI Section 1 oI Batas Pambansa
Blg. 135 which Iurther amends Section 21 oI the

National Internal Revenue Code oI 1977, which provides Ior rates oI tax on
citizens or residents on (a) taxable compensation income, (b) taxable net
income, (c) royalties, prizes, and other winnings, (d) interest Irom bank
deposits and yield or any other monetary beneIit Irom deposit substitutes
and Irom trust Iund and similar arrangements, (e) dividends and share oI
individual partner in the net proIits oI taxable partnership, (I) adiusted gross
income.

Petitioner as taxpayer alleges that by virtue thereoI, "he would be unduly
discriminated against by the imposition oI higher rates oI tax upon his
income arising Irom the exercise oI his proIession vis -a- vis those which
are imposed upon Iixed income or salaried individual taxpayers. He
characterizes the above section as arbitrary amounting to class legislation,
oppressive and capricious in character.

ISSUE:

Whether or not BP 135 Sec 1 is violative oI due process and equal
protection clause.

RULING:

The diIIiculty conIronting petitioner is thus apparent. He alleges
arbitrariness. A mere allegation, as here does not suIIice. There must be a
Iactual Ioundation oI such unconstitutional taint. Considering that petitioner
here would condemn such a provision as void or its Iace, he has not made
out a case. This is merely to adhere to the authoritative doctrine that were
the due process and equal protection clauses are invoked, considering that
they are not Iixed rules but rather broad standards, there is a need Ior oI
such persuasive character as would lead to such a conclusion. Absent such a
showing, the presumption oI validity must prevail. Due process was not
violated.

VILLEGAS vs. H&I CHIG TSAI PA

G.R. o. L-29646 ovember 10. 1978

FACTS:

On February 22, 1968, the Municipal Board oI Manila passed City
Ordinance No. 6537. The said city ordinance was also signed by then
Manila Mayor Antonio J. Villegas (Villegas).

Section 1 oI the said city ordinance prohibits aliens Irom being employed or
to engage or participate in any position or occupation or business
enumerated therein, whether permanent, temporary or casual, without Iirst
securing an employment permit Irom the Mayor oI Manila and paying the
permit Iee oI P50.00 except persons employed in the diplomatic or consular
missions oI Ioreign countries, or in the technical assistance programs oI
both the Philippine Government and any Ioreign government, and those
working in their respective households, and members oI religious orders or
congregations, sect or denomination, who are not paid monetarily or in
kind.

Hiu Chiong Tsai Pao Ho (Tsai Pao Ho) who was employed in Manila Iiled
a petition with the CFI oI Manila to declare City Ordinance No. 6537 as
null and void Ior being discriminatory and violative oI the rule oI the
uniIormity in taxation. The trial court declared City Ordinance No. 6537
null and void. Villegas Iiled the present petition.

ISSUE:

Whether or not the 50.00 employment permit Iee imposed by virtue oI
Ordinance No. 6537 is a violation oI the equal protection clause.

RULING:

The P50.00 Iee is unreasonable not only because it is excessive but because
it Iails to consider valid substantial diIIerences in situation among
individual aliens who are required to pay it. Although the equal protection
clause oI the Constitution does not Iorbid classiIication, it is imperative that
the classiIication should be based on real and substantial diIIerences having
a reasonable relation to the subiect oI the particular legislation. The same
amount oI P50.00 is being collected Irom every employed alien whether he
is casual or permanent, part time or Iull time or whether he is a lowly
employee or a highly paid executive.

Ordinance No. 6537 is void because it does not contain or suggest any
standard or criterion to guide the mayor in the exercise oI the power which
has been granted to him by the ordinance.

VILLANUEVA v. CITY OF ILOILO

G.R. No. 26521 December 28, 1968

FACTS: The municipal board oI Iloilo City enacted Ordinance 86,
imposing license tax Iees as Iollows: 1) tenement house, P25.00anually; 2)
tenement house, partly or wholly engaged in or dedicated to business in the
streets oI J.M. Basa, Iznart Aldequer, and P24.00 per apartment; 3)
tenement house, partly or wholly engaged in business in any other streets,
P12.00 per apartment.

The validity and constitutionality oI this ordinance were challenged by the
spouses Villanueva, owners oI 4 tenement houses containing 34 apartments.

ISSUE:

Does Ordinance 11 violate the rules oI uniIormity oI taxation?

RULING:

No. This court has ruled that tenement houses constitute a distinct class oI
property. It has likewise ruled that taxes are uniIorm and equal when
imposed upon all properties oI the same class or character within the taxing
authority. The Iact, thereIore, that the owners oI other classes oI buildings
in the City oI Iloilo do not pay the taxes imposed by the ordinance in
question is no argument at all against uniIormity and equality oI the tax
imposition.

PEPSI-CLA BTTLIG C. THE PHILIPPIES. IC. v.
CITY B&T&A

G.R. o. 22814 August 28. 1968

FACTS: The City oI Butuan enacted Ordinance No. 110 which was
subsequently amended by Ordinance No. 122. Ordinance No. 110 as
amended, imposes a tax on any person, association, etc. oI P0.10 per case oI
24 bottles oI Pepsi- Cola and the plaintiII Pepsi-Cola paid under protest.
The plaintiII Iiled a complaint Ior the recovery oI the amount paid under
protest on the ground that Ordinance No. 110 is illegal, that the tax imposed
is excessive and that it is unconstitutional. PlaintiII maintains that the
ordinance is null and void because it is uniust and discriminatory.

ISSUE:

Whether or not the ordinance in question is violative oI the uniIormity
required by the Constitution?

RULING:

Yes. Only sales by 'agents or consignees oI outside dealers would be
subiect to the tax. Sales by local dealers, not acting Ior or on behalI oI other
merchants, regardless oI the volume oI their sales, and even iI the same
exceeded those made by said agents or consignees oI producers or
merchants established outside the City oI Butuan, would be exempt Irom
the disputed tax. The classiIication to be valid and reasonable must be: 1)
based upon substantial distinctions; 2)germane to the purpose oI the
ordinance; 3) applicable, not only to present conditions, but also to Iuture
conditions substantially identical to those present; and 4) applicable equally
to all those who belong to the same class. These conditions are not Iully met
by the ordinance in question.

RMC S&GAR CMPAY. IC. v. TREAS&RER RMC
CITY

G.R. o. 23794 ebruary 17. 1968

FACTS: The Municipal Board oI Ormoc City passed Ordinance No. 4
imposing 'on any and all productions oI centriIugal sugar milled at the
Ormoc Sugar Company, Inc., in Ormoc City a municipal tax equivalent to
one per centum (1) per export sale to USA and other Ioreign countries.
Payments Ior said tax were made, under protest, by Ormoc Sugar Company,
Inc. Ormoc Sugar Company, Inc. Iiled beIore the Court oI First Instance oI
Leyte a complaint against the City oI Ormoc as well as its Treasurer,
Municipal Board and Mayor alleging that the ordinance is unconstitutional
Ior being violative oI the equal protection clause and the rule oI uniIormity
oI taxation. The court rendered a decision that upheld the constitutionality
oI the ordinance. Hence, this appeal.

ISSUE:

Whether or not constitutional limits on the power oI taxation, speciIically
the equal protection clause and rule oI uniIormity oI taxation, were
inIringed?

RULING:

Yes. Equal protection clause applies only to persons or things identically
situated and does not bar a reasonable classiIication oI the subiect oI
legislation, and a classiIication is reasonable where 1) it is based upon
substantial distinctions; 2) these are germane to the purpose oI the law; 3)
the classiIication applies not only to present conditions, but also to Iuture
conditions substantially identical to those present; and 4) the classiIication
applies only to those who belong to the same class.

A perusal oI the requisites shows that the questioned ordinance does not
meet them, Ior it taxes only centriIugal sugar produced and exported by the
Ormoc Sugar Company, Inc. and none other. The taxing ordinance should
not be singular and exclusive as to exclude any subsequently established
sugar central Ior the coverage oI the tax.

L&TZ v. ARAETA

G.R. o. 7859 December 22. 1955

FACTS: This case was initiated in the Court oI First Instance oI Negros
Occidental to test the legality oI the taxes imposed by Commonwealth Act
No. 567 (Sugar Adiustment Act). Section 3 oI the said law levies on owners
or persons in control oI lands devoted to the cultivation oI sugar cane and
ceded to others Ior a consideration, on lease or otherwise a tax equivalent to
the diIIerence between the money value oI the rental or consideration
collected and the amount representing 12 per centum oI the assessed value
oI such land. PlaintiII Lutz, in his capacity as Judicial Administrator oI the
Intestate Estate oI Ledesma, seeks to recover Irom the Collector oI Internal
Revenue the sum paid by him as taxes alleging that such tax is
unconstitutional and void, being levied Ior the aid and support oI the sugar
industry exclusively, which in plaintiII`s opinion is not a public purpose Ior
which a tax may be constitutionally levied. The action having been
dismissed by the Court oI First Instance, the plaintiIIs appealed the case.

ISSUE:

Whether or not the law in question is constitutional?

A tax is uniIorm, within the constitutional requirement, when it operates
with the same Iorce and eIIect in every place where the subiect oI it is
Iound. "UniIormity," as applied to the constitutional provision that all taxes
shall be uniIorm, means that all property belonging to the same class shall
be taxed alike. The statute under consideration imposes a tax oI P2 per
square meter or Iraction thereoI upon every electric sign, bill-board, etc.,
wherever Iound in the Philippine Islands. Or in other words, "the rule oI
taxation" upon such signs is uniIorm throughout the Islands. The
Legislature selected signs and billboards as a subiect Ior taxation and it
must be presumed that it, in so doing, acted with a Iull knowledge oI the
situation.



MAILA ELECTRIC CMPAY v. PRVICE LAG&A and
BEIT BALAZ in his capacity as Provincial Treasurer of Laguna

G.R. o. 131359. May 5. 1999.

FACTS:

Manila Electric Company (MERALCO) was granted a Iranchise Irom
certain municipalities oI Laguna. On September 13, 1991, Republic Act
7160, otherwise known as the Local Government Code oI 1991 was
enacted, enioining local government units to create their own sources oI
revenue and to levy taxes, Iees and charges, subiect to the limitations
expressed therein, consistent with the basic policy oI local autonomy.
Pursuant to this Code, respondent province enacted a Provincial Ordinance
providing that 'a tax on business enioying Iranchise, at a rate oI 50 oI 1
oI the gross annual receipts... On the basis oI such ordinance, the
Provincial Treasurer sent a demand letter to MERALCO Ior the tax
payment. MERALCO paid under protest. ThereaIter, a Iormal claim Ior
reIund was sent by MERALCO to the Provincial Treasurer claiming that the
Iranchise tax it had paid and continue to pay to the National Government
already includes the Iranchise tax as provided under Presidential Decree
551.

The claim was denied. MERALCO Iiled an appeal with the trial court but
was dismissed. Thus the petition.

ISSUE

Whether the imposition oI a Iranchise tax under section 2.09 oI the Laguna
Provincial Ordinance No. 01-92 violates the non-impairment clause oI the
Constitution.

RULING

No. Although local governments do not have the inherent power to tax,
such power may be delegated to them either by basic law or by statute. This
is provided under Article X oI the 1987 Constitution. The rationale Ior the
current rule is to saIeguard the viability and selI-suIIiciency oI local
government units by directly granting them general and broad tax powers.

The Local Government Code oI 1991 repealed the Tax Code. It explicitly
authorizes provincial governments, notwithstanding 'any exemption
granted by any law, or other special laws, xxx (to) impose a tax on business
enioying a Iranchise.

The phrase, 'in lieu oI all taxes has to give way to the peremptory
language oI the Local Government Code.

THE PRVICE MISAMIS RIETAL represented by its
PRVICIAL TREAS&RER v. CAGAYA ELECTRIC PWER
AD LIGHT CMPAY

G.R. o. L-45355. 1anuary 12. 1990

FACTS:

Cagayan Electric Power and Light Company, Inc. (CEPALCO) was granted
a Iranchise on June 17, 1961 under Republic Act 3247. It was amended by
Republic Act 3570 and Republic Act 6020. On June 28, 1973, the Local
Tax Code was promulgated which provides that the province may impose a
tax on businesses enioying Iranchise. Pursuant thereto, the Province oI
Misamis enacted Provincial Revenue Ordinance No. 19. It demanded
payment. CEPALCO reIused to pay, alleging that it is exempt Irom all taxes
except the Iranchise tax required by Republic Act 6020. The provincial
Iiscal upheld the ordinance. CEPALCO paid under protest. On appeal to the
Secretary oI Justice, ruled in Iavour oI CEPALCO. The province Iiled a
petition with the trial court but was dismissed. Thus, the petition.

ISSUE

Whether CEPALCO is exempt Irom paying the provincial Iranchise tax.

RULING

Yes. First oII, there is no provision in PD No. 231 expressly or impliedly
amending or repealing sec. 3 oI RA 6020 which exempts CEPALCO. The
rule is that a special and local statute applicable to a particular case is not
repealed by a later statute which is general in its terms, provisions and
application even iI the terms oI the general act are broad enough to include
the cases in the special law unless there is maniIest intent to repeal or alter
the special law.

The Iranchise oI CEPALCO expressly exempts it Irom payment oI 'all
taxes oI whatever authority except 3 tax on its gross earnings. Such
exemption is part oI the inducement Ior the acceptance oI the Iranchise and
the rendition oI public service by the grantee.

Local Tax Regulation No. 3-75 issued by the Secretary oI Finance on June
26, 1976, has made it crystal clear that the Iranchise tax provided in the
Local Tax Code (P.D. No. 231, Sec. 9) may only be imposed on companies
with Iranchises that do not contain the exempting clause 'in-lieu-oI-all-
taxes.

CAGAYA ELECTRIC PWER AD LIGHT C.. IC v.
CMMISSIER ITERAL REVE&E and C&RT TAX
APPEALS

G.R. o. L-60126. September 25. 1985

FACTS: Petitioner Cagayan Electric Power and Light Co., Inc (CEPALCO)
is the holder oI a legislative Iranchise, Republic

Act 3247 under which, it is exempted Irom 'taxes, and assessments oI
whatever authority upon privileges, earnings, income, Iranchise, and poles,
wires transIormers, and insulators.

On June 27, 1968, Republic Act 5431 amended Section 24 oI the Tax Code,
making the petitioner liable Ior income tax in addition to Iranchise tax. On
August 4, 1969, Republic Act 6020 was enacted under which, the petitioner
was again tax exempted.

The Commissioner oI Internal Revenue (CIR) sent a demand letter on
February 15, 1973, requiring petitioner to pay the deIiciency Ior income
taxes Ior 1968-1971. Upon petitioner's contention, the CIR cancelled the
assessments Ior 1970 but insisted those Ior 1968 and 1969.

Petitioner Iiled a petition Ior review with the tax court which held petitioner
responsible only Ior the period Irom January 1 to August 3, 1969, or beIore
the passage oI Republic Act 6420 which reiterated its tax exemption. Thus,
the appeal.

ISSUE:

Whether petitioner's Iranchise is a contract which can be impaired by an
implied appeal.

RULING:

Yes. Congress could impair petitioner's Iranchise by making it liable Ior
income tax Irom which heretoIore it was exempted by virtue oI the
exemption provided in its Iranchise. The Constitution provides that a
Iranchise is subiect to amendment, alteration, or repeal by Congress when
public interest so requires. Petitioner's Iranchise, under the Republic Act
3247 also provides it is subiect to the Constitution.

Republic Act 5431 withdrew petitioner's exemption but was restored by
subsequent enactment. Thus, it is only liable Ior the period oI January 1 to
August 3, 1969 when its tax exemption was modiIied.

LEALDA ELECTRIC C.. IC v. CMMISSIER ITERAL
REVE&E and C&RT TAX APPEALS

G.R. o. L-16428. April 30. 1963

FACTS: On June 11, 1949, AlIredo, Mario and Beniamin Benito Iormed a
partnership to operate an electric plant. Such electric plant was granted a
Iranchise in the year 1915 to supply electric current to the municipalities oI
Albay. The Iranchise, the CertiIicate oI public convenience and the electric
plant was transIerred to the said partnership. Under its Iranchise, the
original grantee and successors-in-interest paid a Iranchise tax oI 2 on the
gross earnings, until October 1, 1946, when section 259 oI the National
Internal Revenue Code was amended by Republic Act 39, which increased
the Iranchise tax to 5.

On a date undisclosed, petitioner Iiled a petition Ior reIund contending that
on its charter, it was liable to pay a Iranchise tax oI 2 and not 5 oI its
earnings and receipts.

As several petitions were not given deIinite action, thus petitioner Iiled with
the Court oI Tax Appeals (CTA) a petition, praying Ior reIund Irom the
period oI January 20, 1947 to October 14, 1958. The CTA dismissed the
petition.

Thus, the petition, on the ground that Act No.2475, as amended by Act
2620, granting its Iranchise constitute a private contract between the
petitioner and the Government and such cannot be amended, altered or
repealed by Section 259 oI the Tax Code.

ISSUE

Whether petitioner should pay 5 oI his gross earnings.

RULING

Yes. Petitioner's Iranchise does not speciIically state that the rate oI the
Iranchise tax shall be 2 oI his gross earnings or receipts. It simply
provides that the grantee and successors-in-interest shall pay the same
Iranchise tax imposed upon other grantees at the time Act No. 2475 was
enacted. Franchise holders did pay the rate oI 2 until the rate was
increased to 5.

Also, prior to its amendment, Section 259 oI the Tax Code merely provided
that grantees oI Iranchises should pay on their gross earnings or receipts
'such taxes...as are speciIied in special charters upon whom Iranchises are
conIerred. This does not cover Iranchise holders whose charters did not
speciIy the rate oI Iranchise tax. It was covered under Section 10 oI Act No.
3636. Consequently, section 259 oI the Tax Code became the basic
Iranchise tax to be paid by holders oI all existing and Iuture Iranchises.
Such being the case, the act amending the section must be deemed applied
to petitioner.

1. CASAVAS vs. 1. S. HRD

G.R. o. 3473 March 22. 1907

FACTS:

In 1897, the Spanish Government, in accordance with the provisions oI the
royal decree oI 14 may 1867, granted J. Casanovas certain mines in the
province oI Ambos Camarines, oI which mines the latter is now the owner.
That these were validly perIected mining concessions granted to prior to 11
April 1899 is conceded. They were so considered by the Collector oI
Internal Revenue and were by him said to Iall within the provisions oI
Section 134 oI Act 1189 (Internal Revenue Act). The deIendant
Commissioner, JNO S. Hord, imposed upon these properties the tax
mentioned in Section 134, which plaintiII Casanovas paid under protest.

ISSUE:

Whether or not Section 134 oI Act 1189 is valid.

RULING:

The deed constituted a contract between the Spanish Government and
Casanovas. The obligation in the contract was impaired by the enactment oI
Section 134 oI the Internal Revenue Law, thereby inIringing the provisions
oI Section 5 oI the Act oI Congress oI 1 July 1902. Furthermore, the section
conIlicts with Section 60 oI the Act oI Congress oI 1 July 1902, which
indicate that concessions can be cancelled only by reason oI illegality in the
procedure by which they were obtained, or Ior Iailure to comply with the
conditions prescribed as requisites Ior their retention in the laws under
which they were granted. There is no claim in this case that there was any
illegality in the procedure by which these concessions were obtained, nor is
there any claim that the plaintiII has not complied with the conditions
prescribed in the royal decree oI 1867. As to the allegation that the section
violates uniIormity oI taxation, the Court Iound it unnecessary to consider
the claim in view oI the result at which the Court has arrived.

AMERICA BIBLE SCIETY vs. CITY MAILA

G.R. o. L-9637 April 30. 1957

FACTS:

PlaintiII-appellant is a Ioreign, non-stock, non-proIit, religious, missionary
corporation duly registered and doing business in the Philippines. The
deIendant appellee is a municipal corporation with powers that are to be
exercised in conIormity with the provisions oI the Revised Charter oI the
City oI Manila. In the course oI its ministry, the Philippine agency oI the
American Bible Society has been distributing and selling bibles and/or
gospel portions thereoI throughout the Philippines and translating the same
into several Philippine dialects. The acting City Treasurer oI Manila
required the society to secure the corresponding Mayors` permit and
municipal license Iees, together with compromise covering the period Irom
the 4th quarter oI 1945 to the 2nd quarter oI 1953. The society paid such
under protest, and Iiled suit questioning the legality oI the ordinances under
which the Iees are being collected.

ISSUE:

Whether or not the municipal ordinances violate the Ireedom oI religious
proIession and worship.

RULING:

A tax on the income oI one who engages in religious activities is diIIerent
Irom a tax on property used or employed in connection with those activities.
It is one thing to impose a tax on the income or property oI a preacher, and
another to exact a tax Ior him Ior the privilege oI delivering a sermon. The
power to tax the exercise oI a privilege is the power to control or suppress
its enioyment. Even iI religious groups and the press are not altogether Iree
Irom the burdens oI the government, the act oI distributing and selling
bibles is purely religious and does not Iall under Section 27 (e) oI the Tax
Code (CA 466). The Iact that the price oI bibles, etc. is a little higher than
actual cost oI the same does not necessarily mean it is already engaged in
business Ior proIit. Ordinance 2529 and 3000 are not applicable to the
Society Ior in doing so it would impair its Iree exercise and enioyment oI its
religious proIession and worship as well as its rights oI dissemination oI
religious belieIs.

ABRA VALLEY CLLEGE. IC vs. H. 1&A P. AQ&I.
1udge. Court of irst Instance. Abra

G.R. . 39086 1une 15. 1988

FACTS:

Petitioner, an educational corporation and institution oI higher learning duly
incorporated with the Securities and Exchange Commission in 1948, Iiled a
complaint to annul and declare void the "Notice oI Seizure' and the "Notice
oI Sale" oI its lot and building located at Bangued, Abra, Ior non-payment
oI real estate taxes and penalties amounting to P5,140.31. Said "Notice oI
Seizure" by respondents Municipal Treasurer and Provincial Treasurer,
deIendants below, was issued Ior the satisIaction oI the said taxes thereon.

The parties entered into a stipulation oI Iacts adopted and embodied by the
trial court in its questioned decision. The trial court ruled Ior the
government, holding that the second Iloor oI the building is being used by
the director Ior residential purposes and that the ground Iloor used and
rented by Northern Marketing Corporation, a commercial establishment,
and thus the property is not being used exclusively Ior educational
purposes. Instead oI perIecting an appeal, petitioner availed oI the instant
petition Ior review on certiorari with prayer Ior preliminary iniunction
beIore the Supreme Court, by Iiling said petition on 17 August 1974.

ISSUE:

Whether or not the lot and building are used exclusively Ior educational
purposes.

RULING:

Section 22, paragraph 3, Article VI, oI the then 1935 Philippine
Constitution, expressly grants exemption Irom realty taxes Ior cemeteries,
churches and parsonages or convents appurtenant thereto, and all lands,
buildings, and improvements used exclusively Ior religious, charitable or
educational purposes. Reasonable emphasis has always been made that the
exemption extends to Iacilities which are incidental to and reasonably
necessary Ior the accomplishment oI the main purposes. The use oI the
school building or lot Ior commercial purposes is neither contemplated by
law, nor by iurisprudence. In the case at bar, the lease oI the Iirst Iloor oI
the building to the Northern Marketing Corporation cannot by any stretch oI
the imagination be considered incidental to the purpose oI education. The
test oI exemption Irom taxation is the use oI the property Ior purposes
mentioned in the Constitution.

The decision oI the CFI Abra (Branch I) is aIIirmed subiect to the
modiIication that halI oI the assessed tax be returned to the petitioner. The
modiIication is derived Irom the Iact that the ground Iloor is being used Ior
commercial purposes (leased) and the second Iloor being used as incidental
to education (residence oI the director).

CMMISSIER ITERAL REVE&E. vs. BISHP THE
MISSIARY DISTRICT THE PHILIPPIE ISLADS THE
PRTESTAT EPISCPAL

CH&RCH I THE &.S.A. and THE C&RT TAX APPEALS

G.R. o. L-19445 August 31. 1965

FACTS:

Respondent Bishop oI the Missionary District oI the Philippines Islands oI
the Protestant, Episcopal Church in the U.S.A. is a corporation sole duly
registered with the Securities and Exchange Commission. On the other
hand, the Missionary District oI the Philippine Islands oI the Protestant
Episcopal Church the U.S.A. (hereinaIter reIerred to as Missionary District)
is a duly incorporated and established religious society and owns and
operates the St. Luke's Hospital in Quezon City, the Brent Hospital in
Zamboanga City and the St. Stephen's High School in Manila.

In 1957 to 1959, the Missionary District received various shipments oI
materials, supplies, equipment and other articles intended Ior use in the
construction and operation oI the new St. Luke`s Hospital. On these
shipments, the Commissioner collected compensation tax. The Missionary
District Iiled claims Ior reIund, but which was denied by the Commissioner
on the ground that St. Luke`s Hospital was not a charitable institution and
thereIore was not exempt Irom taxes because it admits pay patients.

ISSUE: Whether or not the shipments Ior St. Luke`s Hospital are tax-
exempt.

RULING:

The Iollowing requisites must concur in order that a taxpayer may claim
exemption under the law (1) the imported articles must have been donated;
(2) the donee must be a duly incorporated or established international civic
organization, religious or charitable society, or institution Ior civic religious
or charitable purposes; and (3) the articles so imported must have been
donated Ior the use oI the organization, society or institution or Ior Iree
distribution and not Ior barter, sale or hire.

As the law does not distinguish or qualiIy the enioyment or the exemption
(as the Secretary oI Finance did in Department Order 18, series oI 1958),
the admission oI pay patients does not detract Irom the charitable character
oI a hospital, iI its Iunds are devoted exclusively to the maintenance oI the
institution. Thus, the shipments are tax exempt.

LLADC v. Commissioner of Internal Revenue

G.R. o. L-19201 1une 16. 1965

FACTS: Sometime in 1957, the M.B. Estate, Inc., oI Bacolod City, donated
P10, 000.00 in cash to Rev. Fr. Crispin Ruiz, then parish priest oI Victorias,
Negros Occidental, and predecessor oI herein petitioner, Ior the
construction oI a new Catholic Church in the locality. The total amount was
actually spent Ior the purpose intended.

On March 3, 1958, the donor M.B. Estate, Inc., Iiled the donor's giIt tax
return. Under date oI April 29, 1960, the respondent Commissioner oI
Internal Revenue issued an assessment Ior donee's giIt tax against the
Catholic Parish oI Victorias, Negros Occidental, oI which petitioner was the
priest.

Petitioner lodged a protest to the assessment and requested the withdrawal
thereoI. The protest and the motion Ior reconsideration presented to the
Commissioner oI Internal Revenue were denied. The petitioner appealed to
the Court oI Tax Appeals.

ISSUE:

Whether or not the assessment Ior donee`s giIt tax was valid, considering
the Iact that the Constitution exempts petitioner Irom taxation

RULING:

Section 22 (3), Art. VI oI the Constitution oI the Philippines, exempts Irom
taxation cemeteries, churches and parsonages or convents, appurtenant
thereto, and allla n d s,b u ild in g s, and improvements used exclusively Ior
religious purposes. The exemption is only Irom the payment oI taxes
assessed on such properties enumerated, as property taxes, as contra
distinguished Irom excise taxes. In the present case, what the Collector
assessed was a donees` giIt tax; the assessment was not on the properties
themselves. It did not rest upon general ownership; it was an excise upon
the use made oI the properties, upon the exercise oI the privilege oI
receiving the properties. ManiIestly, giIt tax is not within the exempting
provisions oI the section iust mentioned. A giIt tax is not a property tax, but
an excise tax imposed on the transIer oI property by way oI giIt inter vivo,
the imposition oI which on property used exclusively Ior religious purposes,
does not constitute an impairment oI the Constitution.

HERRERA v. Q&EZ CITY BARD ASSESSMET

GR.o.L-15270 September 30. 1961

FACTS: On July 24, 1952, the Director oI the Bureau oI Hospitals
authorized the petitioners to establish and operate the "St. Catherine's
Hospital", located at 58 D. Tuazon, Sta. Mesa Heights, Quezon City
(Exhibit "F-1", p. 7, BIR rec.). On or about January 3, 1953, the petitioners
sent a letter to the Quezon City Assessor requesting exemption Irom
payment oI real estate tax on the lot, building and other improvements
comprising the hospital stating that the same was established Ior charitable
and humanitarian purposes and not Ior commercial gain. AIter an inspection
oI the premises in question and aIter a careIul study oI the case, the
exemption Irom real property taxes was granted eIIective the years 1953,
1954 and 1955.

Subsequently, however, the Quezon City Assessor notiIied the petitioners
that the aIoresaid properties were re- classiIied Irom exempt to "taxable"
and thus assessed Ior real property taxes. The petitioners appealed the
assessment to the Quezon City Board oI Assessment Appeals, which
aIIirmed the decision oI the City Assessor. A motion Ior reconsideration
thereoI was denied. From this decision, the petitioners instituted the instant
appeal. The building involved in this case is principally used as a hospital.

ISSUE:

Whether or not the lot, building and other improvements occupied by the St.
Catherine Hospital are exempt Irom the real property tax.

RULING:

It is well settled, that the admission oI pay-patients does not detract Irom
the charitable character oI a hospital, iI all its Iunds are devoted
"exclusively to the maintenance oI the institution" as a "public charity". In
other words, where rendering charity is its primary obiect, and the Iunds
derived Irom payments made by patients able to pay are devoted to the
benevolent purposes oI the institution, the mere Iact that a proIit has been
made will not deprive the hospital oI its benevolent character"

Moreover, the exemption in Iavour oI property used exclusively Ior
charitable or educational purposes is "not limited to property actually
indispensable" thereIor, but extends to Iacilities which are "incidental to and
reasonably necessary Ior" the accomplishment oI said purposes.

Within the purview oI the Constitutional exemption Irom taxation, the St.
Catherine's Hospital is, thereIore, a charitable institution, and the Iact that it
admits pay-patients does not bar it Irom claiming that it is devoted
exclusively to benevolent purposes, it being admitted that the income
derived Irom pay-patients is devoted to the improvement oI the charity
wards, which represent almost two-thirds (2/3) oI the bed capacity oI the
hospital, aside Irom "out-charity patients" who come only Ior consultation.

BISHP &EVA SEGVIA v. PRVICIAL BARD
ILCS RTE

G.Ro.L-27588 December 31. 1927

FACTS: The plaintiII, the Roman Catholic Apostolic Church, represented
by the Bishop oI Nueva Segovia, possesses and is the owner oI a parcel oI
land in the municipality oI San Nicolas, Ilocos Norte, all Iour sides oI which
Iace on public streets. On the south side is a part oI the churchyard, the
convent and an adiacent lot used Ior a vegetable garden, containing an area
oII 1,624 square meters, in which there is a stable and a well Ior the use oI
the convent. In the center is the remainder oI the churchyard and the church.
On the north is an old cemetery with two oI its walls still standing, and a
portion where Iormerly stood a tower, the base oI which still be seen,
containing a total area oI 8,955 square meters.

As required by the deIendants, on July 3, 1925 the plaintiII paid, under
protest, the land tax on the lot adioining the convent and the lot which
Iormerly was the cemetery with the portion where the tower stood.

The plaintiII Iiled this action Ior the recovery oI the sum paid by to the
deIendants by way oI land tax, alleging that the collection oI this tax is
illegal. The lower court absolved the deIendants Irom the complaint in
regard to the lot adioining convent and declared that the tax collected on the
lot, which Iormerly was the cemetery and on the portion where the lower
stood, was illegal. Both parties appealed Irom this iudgment.

ISSUE

Whether or not the lots oI petitioner are exempted Irom land tax

RULING

The exemption in Iavour oI the convent in the payment oI the land tax (sec.
344 |c| Administrative Code) reIers to the home oI the parties who presides
over the church and who has to take care oI himselI in order to discharge his
duties. In thereIore must, in the sense, include not only the land actually
occupied by the church, but also the adiacent ground destined to the
ordinary incidental uses oI man.

The iudgment appealed Irom is reversed in all it parts and it is held that both
lots are exempt Irom land tax and the deIendants are ordered to reIund to
plaintiII whatever was paid as such tax, without any special pronouncement
as to costs.

Commissioner of Internal Revenue v. Court of Appeals and YMCA

G.R.o.L-124043 ctober 14. 1998

FACTS: Private Respondent YMCA is a non-stock, non-proIit institution,
which conducts various programs and activities that are beneIicial to the
public, especially the young people, pursuant to its religious, educational
and charitable obiectives.

In 1980, private respondent earned, among others, an income oI P676,
829.80 Irom leasing out a portion oI its premises to small shop owners, like
restaurants and canteen operators, and P44,259.00 Irom parking Iees
collected Irom non-members. On July 2, 1984, the commissioner oI internal
revenue (CIR) issued an assessment to private respondent, in the total
amount oI P415,615.01 including surcharge and interest, Ior deIiciency
income tax, deIiciency expanded withholding taxes on rentals and
proIessional Iees and deIiciency withholding tax on wages. Private
respondent Iormally protested the assessment and, as a supplement to its
basic protest, Iiled a letter dated October 8, 1985. In reply, the CIR denied
the claims oI YMCA.

Contesting the denial oI its protest, the YMCA Iiled a petition Ior review at
the Court oI Tax Appeals (CTA) on

March 14, 1989. In due course, the CTA issued this ruling in Iavor oI the
YMCA:

ISSUE:

Whether or not the YMCA is exempted Irom rental income derived Irom
the lease oI its properties

RULING

Petitioner argues that while the income received by the organizations
enumerated in Section 27 (now Section 26)

oI the NIRC is, as a rule, exempted Irom the payment oI tax "in respect to
income received by them as such," the exemption does not apply to income
derived "xxx Irom any oI their properties, real or personal, or Irom any oI
their activities conducted Ior proIit, regardless oI the disposition made oI
such income xxx" We agree with the commissioner.

In the instant case, the exemption claimed by the YMCA is expressly
disallowed by the very wording oI the last paragraph oI then Section 27 oI
the NIRC which mandates that the income oI exempt organizations (such as
the YMCA) Irom any oI their properties, real or personal, be subiect to the
tax imposed by the same Code.

L&G CETER THE PHILIPPIES vs. Q&EZ CITY and
CSTATI P. RSAS

G.R. o. 144104 1une 29. 2004

FACTS: The petitioner, a non-stock and non-proIit entity is the registered
owner oI a parcel oI land where erected in the middle oI the aIoresaid lot is
a hospital known as the Lung Center oI the Philippines. A big space at the
ground Iloor is being leased to private parties, Ior canteen and small store
spaces, and to medical or proIessional practitioners who use the same as
their private clinics Ior their patients whom they charge Ior their
proIessional services. Almost one-halI oI the entire area on the leIt side oI
the building along Quezon Avenue is vacant and idle, while a big portion on
the right side, at the corner oI Quezon Avenue and Elliptical Road, is being
leased Ior commercial purposes to a private enterprise known as the
Elliptical Orchids and Garden Center.

On June 7, 1993, both the land and the hospital building oI the petitioner
were assessed Ior real property taxes in the amount oI P4, 554,860 by the
City Assessor oI Quezon City but the Iormer Iiled a Claim Ior Exemption
Irom real property taxes with the City Assessor, predicated on its claim that
it is a charitable institution.

ISSUE:

Whether or not the petitioner`s real properties are exempted Irom realty tax
exemptions.

RULING:

Even as we Iind that the petitioner is a charitable institution, those portions
oI its real property that are leased to private entities are not exempt Irom
real property taxes as these are not actually, directly and exclusively used
Ior charitable purposes. What is meant by actual, direct and exclusive use oI
the property Ior charitable purposes is the direct and immediate and actual
application oI the property itselI to the purposes Ior which the charitable
institution is organized.

Hence, a claim Ior exemption Irom tax payments must be clearly shown and
based on language in the law too plain to be mistaken. Under Section 2 oI
Presidential Decree No. 1823, the petitioner does not enioy any property tax
exemption privileges Ior its real properties as well as the building
constructed thereon. II the intentions were otherwise, the same should have
been among the enumeration oI tax exempt privileges under Section 2.

Procter and Gamble Philippines Manufacturing Corp. vs. Municipality
of 1agna

G. R. o. L-24265

28 December 1979

FACTS: Petitioner Procter and Gamble Philippines ManuIacturing Corp. is
a consolidated corporation oI Procter and

Gamble Trading Company engaged in the manuIacture oI soap, edible oil,
margarine and other similar products. Petitioner maintains a 'bodega in the
municipality oI Jagna, where it stores copra purchased in the municipality
and ships the same Ior its manuIacturing and other operations. In 1954, the
Municipal Council oI Jagna enacted Ordinance 4, imposing storage Iees oI
all exportable copra deposited in the bodega within the iurisdiction oI the
municipality oI Jagna, Bohol. From 1958 to 1963, the company paid the
municipality, allegedly under protest, storage Iees. In 1964, it Iiled suit,
wherein it prayed that the Ordinance be declared inapplicable to it, and iI
not, that it be declared ultra vires and void.

ISSUE:

Whether the Ordinance is void, as it amounts to double taxation.

RULING:

The validity oI the Ordinance must be upheld pursuant to the broad
authority conIerred upon municipalities by Commonwealth Act 472
(promulgated 1939), which was the prevailing law when the Ordinance is
actually a municipal license tax or Iee on persons, Iirms and corporations
exercising the privilege oI storing copra within the municipality`s territorial
iurisdiction. Such Iees imposed do not amount to double taxation. For
double taxation to exist, the same property must be taxed twice, when it
should be taxed but once. A tax on the company`s products is diIIerent Irom
the tax on the privilege oI storing copra in a bodega situated within the
territorial boundary oI the municipality.

PEPSI-CLA BTTLIG CMPAY THE PHILIPPIES. IC.
vs. M&ICIPALITY TAA&A. LEYTE. THE M&ICIPAL
MAYR. ET AL.

G.R. o. L-31156

ebruary 27. 1976

FACTS: On February 14, 1963, the plaintiII-appellant, Pepsi-Cola Bottling
Company commenced a complaint beIore the

Court oI First Instance oI Leyte Ior that court to declare Section 2 oI
Republic Act No. 2264-the Local Autonomy Act, unconstitutional as an
undue delegation oI taxing authority as well as to declare Ordinances Nos.
23 and 27, series oI 1962, oI the municipality oI Tanauan, Leyte, null and
void. M. O. No. 23, levies and collects "Irom soIt drinks producers and
manuIacturers a tai oI one-sixteenth (1/16) oI a centavo Ior every bottle oI
soIt drink corked." On the other hand, M. O. No. 27, which was approved
on October 28, 1962, levies and collects "on soIt drinks produced or
manuIactured within the territorial iurisdiction oI this municipality a tax oI
ONE CENTAVO (P0.01) on each gallon (128 Iluid ounces, U.S.) oI volume
capacity." The tax imposed in both Ordinances Nos. 23 and 27 is
denominated as "municipal production tax.' The CFI oI Leyte rendered
iudgment "dismissing the complaint and upholding the constitutionality oI
|Section 2, Republic Act No. 2264| declaring Ordinance Nos. 23 and 27
legal. Hence this petition. The petitioner contends Ordinances Nos. 23 and
27 constitute double taxation because these two ordinances cover the same
subiect matter and impose practically the same tax rate and impose
percentage or speciIic taxes.

ISSUES:

Do Ordinances Nos. 23 and 27 constitute double taxation and impose
percentage or speciIic taxes?

RULING:

No, the Ordinances does not constitute double taxation. The diIIerence
between the two ordinances clearly lies in the tax rate oI the soIt drinks
produced: in Ordinance No. 23, it was 1/16 oI a centavo Ior every bottle
corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128
Iluid ounces, U.S.) oI volume capacity. The intention oI the Municipal
Council oI Tanauan in enacting Ordinance No. 27 is thus clear: it was
intended as a plain substitute Ior the prior

Ordinance No. 23, and operates as a repeal oI the latter, even without words
to that eIIect.

E&SEBI VILLA&EVA. ET AL.. vs. CITY ILIL

G.R. o. L-26521 December 28. 1968

FACTS:

On January 15, 1960 the municipal board oI Iloilo City, believing,
obviously, that with the passage oI Republic Act 2264, otherwise known as
the Local Autonomy Act, it had acquired the authority or power to enact an
ordinance similar to that previously declared by this Court as ultra vires
(taxing tenement houses), enacted Ordinance 11, series oI 1960 which taxes
those involve in the business oI renting apartment houses.

In Iloilo City, the appellees Eusebio Villanueva and Remedios S.
Villanueva are owners oI Iive tenement houses, aggregately containing 43
apartments, while the other appellees and the same Remedios S. Villanueva
are owners oI ten apartments.

On July 11, 1962 and April 24, 1964, the plaintiIIs-appellees Iiled a
complaint, and an amended complaint, respectively, against the City oI
Iloilo, in the aIorementioned court, praying that Ordinance 11, series oI
1960, be declared "invalid Ior being beyond the powers oI the Municipal
Council oI the City oI Iloilo to enact, and unconstitutional Ior being
violative oI the rule as to uniIormity oI taxation and Ior depriving said
plaintiIIs oI the equal protection clause oI the Constitution," and that the
City be ordered to reIund the amounts collected Irom them under the said
ordinance.

On March 30, 1966,1 the lower court rendered iudgment declaring the
ordinance illegal.

ISSUE:

Is Ordinance 11, series oI 1960, oI the City oI Iloilo, illegal because it
imposes double taxation?

RULING:

There is no double taxation. It is a well-settled rule that a license tax may be
levied upon a business or occupation although the land or property used in
connection therewith is subiect to property tax. In order to constitute double
taxation in the obiectionable or prohibited sense the same property must be
taxed twice when it should be taxed but once; both taxes must be imposed
on the same property or subiect-matter, Ior the same purpose, by the same
State, Government, or taxing authority, within the same iurisdiction or
taxing district, during the same taxing period, and they must be the same
kind or character oI tax." It has been shown that a real estate tax and the
tenement tax imposed by the ordinance, although imposed by the same
taxing authority, are not oI the same kind or character.

Delpher Trades Corporation vs. IAC

G.R. o. L-69259. 1anuary 26. 1988.

FACTS: DelIin Pacheco and his sister, Pelagia Pacheco, were the owners oI
27,169 square meters oI real estate in the Municipality oI Polo (now
Valenzuela), Province oI Bulacan (now Metro Manila). The said co-owners
leased to Construction Components International Inc. the same property and
providing that during the existence or aIter the term oI this lease the lessor
should he decide to sell the property leased shall Iirst oIIer the same to the
lessee and the letter has the priority to buy under similar conditions. On
August 3, 1974, lessee Construction Components International, Inc.
assigned its rights and obligations under the contract oI lease in Iavor oI
Hydro Pipes Philippines, Inc. with the conIormity and consent oI lessors
DelIin Pacheco and Pelagia Pacheco. On January 3, 1976, a deed oI
exchange was executed between lessors DelIin and Pelagia Pacheco and
deIendant Delpher Trades Corporation whereby the Iormer conveyed to the
latter the leased property together with another parcel oI land Ior 2,500
shares oI stock oI deIendant corporation with a total value oI
P1,500,000.00.

On the ground that it was not given the Iirst option to buy the property,
respondent Hydro Pipes Philippines, Inc., a complaint Ior reconveyance oI
Lot. No. 1095 in its` Iavour. The Court oI First Instance oI Bulacan ruled in
Iavor oI the plaintiII. The lower court's decision was aIIirmed on appeal by
the Intermediate Appellate Court.

ISSUE:

Whether or not the "Deed oI Exchange" oI the properties executed by the
Pachecos on the one hand and the Delpher Trades Corporation on the other
was meant to be a contract oI sale.

RULING:

We rule Ior the petitioners. In the case at bar, in exchange Ior their
properties, the Pachecos acquired 2,500 original unissued no par value
shares oI stocks oI the Delpher Trades Corporation. Consequently, the
Pachecos became stockholders oI the corporation by subscription. "The
essence oI the stock subscription is an agreement to take and pay Ior
original unissued shares oI a corporation, Iormed or to be Iormed."

In eIIect, the Delpher Trades Corporation is a business conduit oI the
Pachecos. What they really did was to invest their properties and change the
nature oI their ownership Irom unincorporated to incorporated Iorm by
organizing Delpher Trades Corporation to take control oI their properties
and at the same time save on inheritance taxes.

The records do not point to anything wrong or obiectionable about this
"estate planning" scheme resorted to by the Pachecos. "The legal right oI a
taxpayer to decrease the amount oI what otherwise could be his taxes or
altogether avoid them, by means which the law permits, cannot be
doubted."

Heng Tong Textiles Co.. Inc. vs. CIR

G.R. o. L-19737. August 26. 1968.

FACTS: In 1952 the Collector oI Internal Revenue assessed against the
petitioner deIiciency sales taxes and surcharges Ior the year 1949 and the
Iirst Iour months oI 1950 in the aggregate sum oI P89,123.58. The
assessment was appealed to the Board oI Tax Appeals, whence the case was
transIerred to the Court oI Tax Appeals upon its organization in 1954, and
there was aIIirmed in its decision dated February 28, 1952. The deIiciency
taxes in question were assessed on importations oI textiles Irom abroad. The
goods were withdrawn Irom Customs by Pan- Asiatic Commercial Co.,
Inc., which paid, in the name oI the petitioner, the corresponding advance
sales tax under section 183(b) oI the Internal Revenue Code. The
assessment Ior the deIiciency was made against the petitioner, Heng Tong
Textiles Co., Inc. on the ground that it was the real importer oI the goods
and did not pay the taxes due on the basis oI the gross selling prices thereoI.

ISSUE:

Whether or not petitioner was guilty oI Iraud so as to warrant the imposition
oI a penalty oI 50 on the deIiciency.

RULING:

Petitioner excepts to the conclusion oI the Court oI Tax Appeals and avers
that the importation papers were placed in the name oI the petitioner only
Ior purposes oI accommodation, that is, to introduce the petitioner to textile
suppliers abroad; and that the petitioner was not in a Iinancial position to
make the importations in question. These circumstances show nothing but a
private arrangement between the petitioner and Pan-Asiatic Commercial,
which in no way aIIected the role oI the petitioner as the importer.

The arrangement resorted to does not by itselI alone iustiIy the penalty
imposed. Section 183(a), paragraph 3, oI the Internal Revenue Code, as
amended by Republic Act No. 253, speaks oI willIul neglect to Iile the
return or wilIul making oI a Ialse or Iraudulent return. An attempt to
minimize one's tax does not necessarily constitute Iraud. It is a settled
principle that a taxpayer may diminish his liability by any means which the
law permits.

Commissioner of Internal Revenues vs. Toda

G.R. o. 147188. September 14. 2004

FACTS: On 2 March 1989, CIC authorized Benigno P. Toda, Jr., President
and owner oI 99.991 oI its outstanding capital stock, to sell the Cibeles
Building. On 30 August 1989, Toda purportedly sold the property Ior P100
million to RaIael A. Altonaga, who, in turn, sold the same property on the
same day to Royal Match Inc. (RMI) Ior P200 million. Three and a halI
years later Toda died. On 29 March 1994, the BIR sent an assessment notice
and demand letter to the CIC Ior deIiciency income tax Ior the year 1989.
On 27 January 1995, the Estate oI Benigno P. Toda, Jr., represented by
special co-administrators Lorna Kapunan and Mario Luza Bautista, received
a Notice oI Assessment Irom the CIR Ior deIiciency income tax Ior the year
1989. The Estate thereaIter Iiled a letter oI protest. The Commissioner
dismissed the protest. On 15 February 1996, the Estate Iiled a petition Ior
review with the CTA. In its decision the CTA held that the Commissioner
Iailed to prove that CIC committed Iraud to deprive the government oI the
taxes due it. It ruled that even assuming that a pre-conceived scheme was
adopted by CIC, the same constituted mere tax avoidance, and not tax
evasion. Hence, the CTA declared that the Estate is not liable Ior deIiciency
oI income tax. The Commissioner Iiled a petition Ior review with the Court
oI Appeals. The Court oI Appeals aIIirmed the decision oI the CTA. Hence,
this recourse to the SC.

ISSUE:

Whether or not this is a case oI tax evasion or tax avoidance.

RULING:

Tax evasion connotes the integration oI three Iactors: (1) the end to be
achieved, i.e . , the payment oI less than that known by the taxpayer to be
legally due, or the non-payment oI tax when it is shown that a tax is due; (2)
an accompanying state oI mind which is described as being 'evil, in 'bad
Iaith, 'willIull,or 'deliberate and not accidental; and (3) a course oI
action or Iailure oI action which is unlawIul. All these Iactors are present in
the instant case. The scheme resorted to by CIC in making it appear that
there were two sales oI the subiect properties, i.e., Irom CIC to Altonaga,
and then Irom Altonaga to RMI cannot be considered a legitimate tax
planning. Such scheme is tainted with Iraud. Altonaga`s sole purpose oI
acquiring and transIerring title oI the subiect properties on the same day
was to create a tax shelter. The sale to him was merely a tax ploy, a sham,
and without business purpose and economic substance. Doubtless, the
execution oI the two sales was calculated to mislead the BIR with the end in
view oI reducing the consequent income tax liability.

Davao Gulf Lumber Corporation vs. CIR

G.R. o. 117359. 1uly 23. 1998.

FACTS: From July 1, 1980 to January 31, 1982 petitioner purchased, Irom
various oil companies, reIined and manuIactured mineral oils as well as
motor and diesel Iuels. Said oil companies paid the speciIic taxes imposed
on the sale oI said products. Being included in the purchase price oI the oil
products, the speciIic taxes paid by the oil companies were eventually
passed on to the petitioner in this case.

Petitioner Iiled beIore Respondent CIR a claim Ior reIund in the amount oI
P120, 825.11, representing 25 oI the speciIic taxes actually paid on the
above-mentioned Iuels and oils that were used by petitioner in its operations
as Iorest concessionaire.

On January 20, 1983, petitioner Iiled at the CTA a petition Ior review. The
CTA rendered its decision Iinding petitioner entitled to a partial reIund oI
speciIic taxes in the reduced amount oI P2, 923.15. In regard to the other
purchases, the CTA granted the claim, but it computed the reIund based on
rates deemed paid under RA 1435, and not on the higher rates actually paid
by petitioner under the NIRC.

Insisting that the basis Ior computing the reIund should be the increased
rates prescribed by Sections 153 and 156 oI the NIRC, petitioner elevated
the matter to the Court oI Appeals. The Court oI Appeals aIIirmed the CTA
Decision. Hence, this petition Ior review.

ISSUE:

Whether or not petitioner is entitled to the reIund oI 25 oI the amount oI
speciIic taxes it actually paid on various reIined and manuIactured mineral
oils.

RULING:

At the outset, it must be stressed that petitioner is entitled to a partial reIund
under Section 5 oI RA 1435, which was enacted to provide means Ior
increasing the Highway Special Fund.

A tax cannot be imposed unless it is supported by the clear and express
language oI a statute; on the other hand, once the tax is unquestionably
imposed, '|a| claim oI exemption Irom tax payments must be clearly shown
and based on language in the law too plain to be mistaken. Since the partial
reIund authorized under Section 5, RA 1435, is in the nature oI a tax
exemption, it must be construed strictissimi iuris against the grantee. Hence,
petitioner`s claim oI reIund on the basis oI the speciIic taxes it actually paid
must expressly be granted in a statute stated in a language too clear to be
mistaken.

PHILIPPIE ACETYLEE C.. IC. vs. CMMISSIER
ITERAL REVE&E and C&RT TAX APPEALS

G.R. o. L-19707

August 17. 1967

FACTS: The petitioner is a corporation engaged in the manuIacture and sale
oI oxygen and acetylene gases. It made various sales oI its products to the
National Power Corporation and to the Voice oI America an agency oI the
United States Government. The sales to the NPC amounted to P145, 866.70,
while those to the VOA amounted to P1,683, on account oI which the
respondent Commission oI Internal Revenue assessed against, and
demanded Irom, the petitioner the payment oI P12,910.60 as deIiciency
sales tax and surcharge, pursuant to the Sec.186 oI the National Internal
Revenue Code.

The petitioner denied liability Ior the payment oI the tax on the ground that
both the NPC and the VOA are exempt Irom taxation.

ISSUE:

Is the petitioner exempt Irom paying tax on sales it made to the 1) NPC and
the 2) VOA because both entities are exempt Irom taxation?

RULING:

1) No. SC holds that the tax imposed by section 186 oI the National Internal
Revenue Code is a tax on the manuIacturer or producer and not a tax on the
purchaser except probably in a very remote and inconsequential sense.
Accordingly its levy on the sales made to tax-exempt entities like the NPC
is permissible.

2) No. Only sales made "Ior exclusive use in the construction, maintenance,
operation or deIense oI the bases," in a word, only sales to the
quartermaster, are exempt under Article V Irom taxation. Sales oI goods to
any other party even iI it be an agency oI the United States, such as the
VOA, or even to the quartermaster but Ior a diIIerent purpose, are not Iree
Irom the payment oI the tax.

Commissioner of Internal Revenue vs. Courts of Tax Appeal. et al

G.R. o. 115349 April 18. 1997

FACTS: Ateneo de Manila is an educational institution with auxiliary units
and branches all over the Philippines. One such auxiliary unit is the Institute
oI Philippine Culture (IPC), which has no legal personality separate and
distinct Irom that oI private respondent. The IPC is a Philippine unit
engaged in social science studies oI Philippine society and culture.
Occasionally, it accepts sponsorships Ior its research activities Irom
international organizations, private Ioundations and government agencies.

On July 8, 1983, private respondent received Irom petitioner Commissioner
oI Internal Revenue a demand letter dated June 3, 1983, assessing private
respondent the sum oI P174,043.97 Ior alleged deIiciency contractor's tax
the value oI which was later on, upon private respondent`s request Ior
reinvestigation, reduced to P46,516.41,

UnsatisIied, Private respondent Iiled in the Court oI Tax Appeals a petition
Ior review oI the said letter-decision oI the petitioner which rendered a
decision in its Iavour and ordered the tax assessment cancelled.

ISSUE:

Is Ateneo de Manila University, through its auxiliary unit or branch the
Institute oI Philippine Culture perIorming the work oI an independent
contractor and, thus, subiect to the three percent contractor's tax levied by
then Section 205 oI the National Internal Revenue Code?

RULING:

No, The Supreme Court held that Ateneo de Manila University is not
subiect to the contractor`s tax. It explained that to Iall under its coverage,
Section 205 oI the National Internal Revenue Code requires that the
independent contractor be engaged in the business oI selling its services.
The Court, however, Iound no evidence that Ateneo's Institute oI Philippine
Culture ever sold its services Ior a Iee to anyone or was ever engaged in a
business apart Irom and independently oI the academic purposes oI the
university.

Moreover, the Court oI Tax Appeals accurately and correctly declared that
the 'Iunds received by the Ateneo de Manila University are technically not
a Iee. They may however Iall as giIts or donations which are tax-exempt" as
shown by private respondent's compliance with the requirement oI Section
123 oI the National Internal Revenue Code providing Ior the exemption oI
such giIts to an educational institution.

Caltex Philippines. Inc. v. Commission on Audit

G.R. o. 92585 May 8. 1992

FACTS: Respondent Commission on Audit (COA) directed petitioner
Caltex Philippines, Inc. (CPI) to remit to the Oil Price Stabilization Fund
(OPSF) its collection oI the additional tax on petroleum products pursuant
to P.D. 1956, as well as unremitted collections oI the above tax covering the
years 1986, 1987 and 1988, with interests and surcharges, and advising it
that all its claims Ior reimbursements Irom the OPSF shall be held in
abeyance pending such remittance. COA Iurther directed petitioner oil
company to desist Irom Iurther oIIsetting the taxes collected against
outstanding claims Ior 1989 and subsequent periods.

Its motion Ior reconsideration oI the eventual decision oI the COA on the
matter having been denied, CPI imputes that respondent commission erred
in preventing the Iormer Irom exercising the right to oIIset its remittances
against the reimbursement vis-a-vis the OPSF.

ISSUE:

Whether or not the amounts due to the OPSF Irom petitioner may be oIIset
against the latters` outstanding claims Irom said Iund?

RULING:

No. It is settled that a taxpayer may not oIIset taxes due Irom claims that he
may have against the Government. Taxes cannot be the subiect oI
compensation because the Government and the taxpayer are not mutually
creditors and debtors oI each other and a claim Ior taxes is not such a debt,
demand, contract or iudgment as is allowed to be set oII.

The Court Iurther ruled that taxation is no longer envisioned as a measure
merely to raise revenue to support the existence oI the Government. Taxes
may be levied Ior a regulatory purpose such as to provide means Ior the
rehabilitation and stabilization oI a threatened industry which is aIIected
with public interest, a concern which is within the police power oI the State
to address.

L&Z STEVEDRIG CRPRATI vs. C&RT TAX
APPEALS and the HRABLE CMMISSIER ITERAL
REVE&E

G.R. o. o. L-30232 1uly 29. 1988

FACTS: Herein petitioner imported various engine parts and other
equipment Ior which it paid, under protest, the assessed compensating tax.
Unable to secure a tax reIund Irom the Commissioner oI Internal Revenue,
it Iiled a Petition Ior Review with the Court oI Tax Appeals in order to be
granted a reIund. Petitioner contends that tugboats are included in the term
'cargo vessels which are exempted Irom compensating tax under article
190 oI the National Internal Revenue Code. He argues that in legal
contemplation, the tugboat and a barge loaded with cargoes with the Iormer
towing the latter Ior loading and unloading oI a vessel in part constitute a
single vessel. Accordingly, it concludes that the engines, spare parts and
equipment imported by it and used in the repair and maintenance oI its
tugboats are exempt Irom compensating tax. On the other hand, respondent
contends that "tugboats" are not "Cargo vessel" because they are neither
designed nor used Ior carrying and/or transporting persons or goods by
themselves but are mainly employed Ior towing and pulling purposes.

ISSUE:

Whether or not tugboats are included in the term 'cargo vessels which are
exempted Irom compensating tax under article 190 oI the National Internal
Revenue Code.

RULING:

No. tugboats are not included in the term 'cargo vessels which are
exempted Irom compensating tax under article 190 oI the National Internal
Revenue Code. The Supreme Court explained that under the deIinition oI
tugboat, 'a diesel or steam power vessel designed primarily Ior moving
large ships to and Irom piers Ior towing barges and lighters in harbors,
rivers and canals. Which clearly do not Iall under the categories oI
passenger and/or cargo vessels. Thus, it is a cardinal principle oI statutory
construction that where a provision oI law speaks categorically, the need Ior
interpretation is obviated, no plausible pretence being entertained to iustiIy
non-compliance. All that has to be done is to apply it in every case that Ialls
within its terms.

ATIAL DEVELPMET CMPAY vs. CMMISSIER
ITERAL REVE&E

G.R. o. o. L-53961 1une 30. 1987

FACTS: National Development Company (NDC) is a domestic corporation
with principal oIIices in Manila. It entered into contracts in Tokyo with
several Japanese shipbuilding companies Ior the construction oI twelve
ocean-going vessels.

Initial payments were made in cash and through irrevocable letters oI credit.
Fourteen promissory notes were signed Ior the balance by the NDC and, as
required by the shipbuilders, guaranteed by the Republic oI the Philippines.
ThereaIter, remaining payments and the interests thereon were remitted in
due time by the NDC to Tokyo. AIter the vessels were delivered, the NDC
remitted to the shipbuilders in Tokyo the interest on the balance oI the
purchase price. No tax was withheld. The Commissioner oI Internal
Revenue held that the interest remitted to the Japanese shipbuilders on the
unpaid balance oI the purchase price oI the vessels acquired by petitioner is
subiect to income tax under the Tax Code. The petitioner argues that the
Japanese shipbuilders were not subiect to tax under the Tax Code. Petitioner
contends that the interest payments were obligations oI the Republic oI the
Philippines and that the promissory notes oI the NDC were government
securities exempt Irom taxation under Section 29(b)|4| oI the Tax Code.

ISSUE:

Whether petitioner should not be held liable due to the undertaking signed
by the Secretary oI Finance and because the interest payments were
obligations oI the Republic oI the Philippines and that the promissory notes
oI the NDC were government securities exempt Irom taxation under Section
29(b)|4| oI the Tax Code as alleged by petitioner.

RULING: No. Petitioner should be held liable. There is nothing in Section
29(b)|4| oI the Tax Code exempting the interests Irom taxes. Furthermore
in the said undertaking, petitioner has not established a clear waiver therein
oI the right to tax interests. Tax exemptions cannot be merely implied but
must be categorically and unmistakably expressed. Any doubt concerning
this question must be resolved in Iavour oI the taxing power. It is not the
NDC that is being taxed. It was the income oI the Japanese shipbuilders and
not the Republic oI the Philippines that was subiect to the tax the NDC did
not withhold. In eIIect, thereIore, the imposition oI the deIiciency taxes on
the NDC is a penalty Ior its Iailure to withhold the same Irom the Japanese
shipbuilders.

MAILA ELECTRIC CMPAY vs. Commissioner of Internal
Revenue

G.R. os. o. L-29987s and L-23847 ctober 22. 1975

FACTS: MERALCO is the holder oI a Iranchise by the Municipal Board oI
the City oI Manila to Mr Charles M. SwiIt and later assumed and taken over
by petitioner to construct, maintain, and operate an electric light, heat, and
power system in the City oI Manila and its suburbs. In two separate
occasions, MERALCO imported copper wires, transIormers, and insulators
Ior use in the operation oI its business. The Collector oI Customs, as Deputy
oI Commissioner oI Internal Revenue, levied and collected a compensating
tax Ior the said importation. MERALCO claims Ior a reIund alleging that it
was exempted Irom such compensating tax based on paragraph 9 oI its
Iranchise.

The court stated that MERALCO's claim Ior exemption Irom the payment
oI the compensating tax is not clear or expressed. Hence, this appeal.

ISSUE:

Whether or not petitioner is exempted to pay compensating tax Ior its
purchase or receipt oI commodities, goods, wares, or merchandise outside
the Philippines.

RULING: No. One who claims to be exempt Irom the payment oI a
particular tax must do so under clear and unmistakable terms Iound in the
statute. Tax exemptions are strictly construed against the taxpayer. In the
case at bar, the Court is not aware whether or not the tax exemption
provisions contained in Par. 9, Part Two oI Act No. 484 oI the Philippine
Commission oI 1902 was incorporated in the municipal Iranchise granted
because no admissible copy oI Ordinance oI the said Board was ever
presented in evidence by the petitioner. Furthermore there is no "plain and
unambiguous terms" declaring petitioner MERALCO exempt Irom paying a
compensating tax on its imports oI poles, wires, transIormers, and
insulators. The last clause oI paragraph 9 merely reaIIirms, what has been
expressed in the Iirst sentence that petitioner is exempted Irom payment oI
property tax. A compensating tax is not a property tax but an excise tax
imposed on the perIormance oI an act, the engaging in an occupation, or the
enioyment oI a privilege.

EREST M. MACEDA vs. H. CATALI MACARAIG. 1R.. et
al.

G.R. o. o. 88291 May 31. 1991 and G.R. o. o. 88291 1une 8. 1993

FACTS:

Commonwealth Act No. 120 created the NPC as a public corporation to
undertake the development oI hydraulic power and the production oI power
Irom other sources. Several laws were enacted granting NPC tax and duty
exemption privileges such as taxes, duties, Iees, imposts, charges and
restrictions oI the Republic oI the Philippines, its provinces, cities and
municipalities "directly or indirectly," on all petroleum products used by
NPC in its operation. However P.D. No. 1931 withdrew all tax exemption
privileges granted in Iavour oI government-owned or controlled
corporations including their subsidiaries but empowered the President
and/or the then Minister oI Finance, upon recommendation oI the FIRB to
restore, partially or totally, the exemption withdrawn. BIR ruled that the
exemption privilege enioyed by NPC under said section covers only taxes
Ior which it is directly liable and not on taxes which are only shiIted to it.

In 1986, BIR Commissioner Tan, Jr. states that all deliveries oI petroleum
products to NPC are tax exempt, regardless oI the period oI delivery.
ThereaIter, the FIRB issued several Resolutions in diIIerent occasions
restoring the tax and duty exemption privileges oI NPC indeIinite period
due to the restoration oI the tax exemption privileges oI NPC, NPC applied
with the BIR Ior a "reIund oI SpeciIic Taxes paid on petroleum products.
On August 6, 1987, the Secretary oI Justice, Opinion opined that "the power
conIerred upon Fiscal Incentives Review Board constitute undue delegation
oI legislative power and, thereIore, unconstitutional. However, respondents
Finance Secretary and the Executive Secretary declared that "NPC under
the provisions oI its Revised Charter retains its exemption Irom duties and
taxes imposed on the petroleum products purchased locally and used Ior the
generation oI electricity. ThereaIter investigations were made Ior the reIund
oI the tax payments oI the NPC which includes Millions oI pesos Tax
reIund. Petitioner, as member oI the Philippine Senate introduced as
Resolution Directing the Senate Blue Ribbon Committee, In Aid oI
Legislation, to conduct a Formal and Extensive Inquiry into the Reported
Massive Tax Manipulations and Evasions by Oil Companies, particularly
Caltex (Phils.) Inc., Pilipinas Shell and Petrophil, Which Were Made
Possible By Their Availing oI the Non-Existing Exemption oI National
Power Corporation (NPC) Irom Indirect Taxes, Resulting Recently in Their
Obtaining A Tax ReIund Totalling P1.55 Billion From the Department oI
Finance.

ISSUE:

Whether or not respondent NPC is legally entitled to the questioned tax and
duty reIunds.

RULING:

Yes. In G.R. No. No. 88291 the Supreme Court ruled in Iavour oI
exempting NPC to the said taxes. Also in G.R. No. No. 88291 the Supreme
Court ruled in Iavour oI respondents. NPC under the provisions oI its
Revised Charter retains its exemption Irom duties and taxes imposed on the
petroleum products purchased locally and used Ior the generation oI
electricity. Presidential Decree No. 938 amended the tax exemption oI NPC
by simpliIying the same law in general terms. It succinctly exempts NPC
Irom "all Iorms oI taxes, duties, Iees, imposts, as well as costs and service
Iees including Iiling Iees, appeal bonds, supersedeas bonds, in any court or
administrative proceedings." the NPC electric power rates did not carry the
taxes and duties paid on the Iuel oil it used. The point is that while these
levies were in Iact paid to the government, no part thereoI was recovered
Irom the sale oI electricity produced. As a consequence, as oI our most
recent inIormation, some P1.55 B in claims represent amounts Ior which the
oil suppliers and NPC are "out-oI-pocket. There would have to be speciIic
order to the Bureaus concerned Ior the resumption oI the processing oI
these claims.

CMMISSIER ITERAL REVE&E vs. 1H GTAMC
& SS. IC. and THE C&RT TAX

APPEALS

G.R. o. o. L-31092 ebruary 27. 1987

FACTS: The World Health Organization (WHO Ior short) is an
international organization which has a regional oIIice in Manila. An
agreement was entered into between the Republic oI the Philippines and the
said Organization on July 22, 1951. Section 11 oI that Agreement provides,
inter alia, that "the Organization, its assets, income and other properties
shall be: (a) exempt Irom all direct and indirect taxes. The WHO decided
to construct a building to house its own oIIices, as well as the other United
Nations oIIices stationed in Manila. A bidding was held Ior the building
construction. The WHO inIormed the bidders that the building to be
constructed belonged to an international organization exempted Irom the
payment oI all Iees, licenses, and taxes, and that thereIore their bids "must
take this into account and should not include items Ior such taxes, licenses
and other payments to Government agencies." ThereaIter, the construction
contract was awarded to John Gotamco & Sons, Inc. (Gotamco Ior short).
Subsequently, the Commissioner oI Internal Revenue sent a letter oI
demand to Gotamco demanding payment oI Ior the 3 contractor's tax plus
surcharges on the gross receipts it received Irom the WHO in the
construction oI the latter's building. WHO. The WHO issued a certiIication
that the bid oI John Gotamco & Sons, should be exempted Irom any taxes in
connection with the construction oI the World Health Organization oIIice
building because such can be considered as an indirect tax to WHO.
However, The Commissioner oI Internal Revenue contends that the 3
contractor's tax is not a direct nor an indirect tax on the WHO, but a tax that
is primarily due Irom the contractor, and thus not covered by the tax
exemption agreement

ISSUE:

Whether or not the said 3 contractor`s tax imposed upon petitioner is
covered by the 'direct and indirect tax exemption granted to WHO by the
government.

RULING:

Yes. The 3 contractor`s tax imposed upon petitioner is covered by the
'direct and indirect tax exemption granted to WHO. Hence, petitioner
cannot be held liable Ior such contractor`s tax. The Supreme Court
explained that direct taxes are those that are demanded Irom the very person
who, it is intended or desired, should pay them; while indirect taxes are
those that are demanded in the Iirst instance Irom one person in the
expectation and intention that he can shiIt the burden to someone else.
While it is true that the contractor's tax is payable by the contractor,
However in the last analysis it is the owner oI the building that shoulders
the burden oI the tax because the same is shiIted by the contractor to the
owner as a matter oI selI-preservation. Thus, it is an indirect tax against the
WHO because, although it is payable by the petitioner, the latter can shiIt its
burden on the WHO.

Commissioner of Internal Revenue vs. Court of Appeals and YMCA

G.R. o. 124043. ctober 14. 1998

FACTS: Private Respondent YMCA is a non-stock, non-proIit institution,
which conducts various programs and activities that are beneIicial to the
public, especially the young people, pursuant to its religious, educational
and charitable obiectives.

The Commissioner oI Internal Revenue issued an assessment to private
respondent, in the total amount oI P415,615.01 including surcharge and
interest, Ior deIiciency income tax, deIiciency expanded withholding taxes
on rentals and proIessional Iees and deIiciency withholding tax on wages.
Private respondent Iormally protested the assessment and, as a supplement
to its basic protest, Iiled a letter dated October 8, 1985. In reply, the
Commissioner denied the claims oI YMCA.

YMCA Iiled a petition Ior review at the Court oI Tax Appeals. The CTA
ruled in Iavor oI the YMCA. The Commissioner elevated the case to the
Court oI Appeals which initially decided in its Iavor by reinstating the
assessment oI deIiciency Iixed, contract oI Appeals which initially decided
in its Iavor by reinstating the assessment oI deIiciency Iixed, contractor`s
and income taxes. However, Iinding merit in YMCA`s motion Ior
reconsideration, the appellate court reversed itselI and promulgated the Iirst
assessed resolution dated September 28, 1995 granting said motion oI
YMCA by aIIirming the CTA`s decision in toto. On February 29, 1996, the
Court oI Appeals denied the Commissioner`s motion Ior reconsideration.

ISSUE:

Whether or not the rental income oI YMCA on its real estate is subiect to
tax.

RULING:

The Court ruled that the exemption claimed by the YMCA is expressly
disallowed by the very wording oI the last paragraph oI then Section 27 oI
the NIRC which mandates that the income oI exempt organizations (such as
the YMCA) Irom any oI their properties, real or personal, be subiect to the
tax imposed by the same Code. Because the last paragraph oI said section
unequivocally subiects to tax the rent income oI the YMCA Irom its real
property, the Court is duty-bound to abide strictly by its literal meaning and
to reIrain Irom resorting to any convoluted attempt at construction.

itafan vs. Commissioner of Internal Revenue

G.R. o. L-78780. 1uly 23. 1987

FACTS: The ChieI Justice has previously issued a directive to the Fiscal
Management and Budget OIIice to continue the deduction oI withholding
taxes Irom salaries oI the Justices oI the Supreme Court and other members
oI the iudiciary. This was aIIirmed by the Supreme Court en banc on
December 4, 1987.

Petitioners are the duly appointed and qualiIied Judges presiding over
Branches 52, 19 and 53, respectively, oI the RTC, National Capital Judicial
Region, all with stations in Manila. They seek to prohibit and/or perpetually
enioin the Commissioner oI Internal Revenue and the Financial OIIicer oI
the Supreme Court, Irom making any deduction oI withholding taxes Irom
their salaries. They contend that this constitutes diminution oI salary
contrary to Section 10, Article VIII oI the 1987 Constitution, which
provides that the salary oI the members oI the Supreme Court and iudges oI
lower courts shall be Iixed by law and that 'during their continuance in
oIIice, their salary shall not be decreased. With the Iiling oI the petition,
the Court deemed it best to settle the issue through iudicial pronouncement,
even iI it had dealt with the matter administratively.

The Supreme Court dismissed the petition Ior prohibition.

ISSUE:

Whether or not the salaries oI iudges are subiect to tax.

RULING:

The salaries oI members oI the Judiciary are subiect to the general income
tax applied to all taxpayers. Although such intent was somehow and
inadvertently not clearly set Iorth in the Iinal text oI the 1987 Constitution,
the deliberations oI the 1986 Constitutional Commission negate the
contention that the intent oI the Iramers is to revert to the original concept
oI 'non-diminution oI salaries oI iudicial oIIicers. Hence, the doctrine in
PerIecto v. Meer and Endencia vs. David do not apply anymore. Justices
and iudges are not only the citizens whose income has been reduced in
accepting service in government and yet subiect to income tax. Such is true
also oI Cabinet members and all other employees.

Province of Abra vs. Hernando

G.R. o. L-49336. August 31. 1981

FACTS: The provincial assessor made a tax assessment on the properties oI
the Roman Catholic Bishop oI Bangued. The bishop claims tax exemption
Irom real estate tax based on the provisions oI Section 17, paragraph 3,
Article VII oI the 1973 Constitution. He Iiled an action Ior declaratory
relieI. Judge Hernando oI the CFI Abra presided over the case. The
petitioner province Iiled a motion to dismiss, based on lack oI iurisdiction,
which was denied. It was Iollowed by a summary iudgment granting the
exemption without hearing the side oI the petitioner.

The Supreme Court granted the petition, set aside the June 19, 1978
resolution, and ordered the respondent iudge, or whoever is acting on his
behalI, to hear the case on merit; without costs.

ISSUE:

Whether or not the properties oI the Bishop oI Bangued are tax-exempt.

RULING: The 1935 and the 1973 Constitutions diIIer in language as to the
exemption oI religious property Irom taxes as they should not only be
'exclusively but also 'actually and 'directly used Ior religious purposes.
Herein, the iudge accepted at its Iace the allegation oI the Bishop instead oI
demonstrating that there is compliance with the constitutional provision that
allows an exemption. There was an allegation oI lack oI iurisdiction and oI
lack oI cause oI action, which should have compelled the iudge to accord a
hearing to the province rather than deciding the case immediately in Iavor
oI the Bishop. Exemption Irom taxation is not Iavored and is never
presumed, so that iI granted, it must be strictly construed against the
taxpayer. There must be prooI oI the actual and direct use oI the lands,
buildings, and improvements Ior religious (or charitable) purposes to be
exempted Irom taxation.

The case was remanded to the lower court Ior a trial on merits.

Commissioner of Internal Revenue vs. Mitsubishi Metal Corporation

G.R. o. 54908 and G.R. o. 80041. 1anuary 22. 1990

FACTS: Mitsubishi Metal Corporation, a Japanese corporation licensed to
do business in the Philippines, entered into a

Loan and Sale Contract with Atlas Consolidated Mining and Development
Coporation whereby Mitsubishi lent $20,000,000 Ior the expansion oI the
latter`s mines, particularly the installation oI a new concentrator Ior copper
production. Atlas, in turn, undertook to sell to Mitsubishi all oI the copper
concentrates produced by said machine Ior 15 years.

For this purpose, Mitsubishi applied Ior and was granted a loan by the
Export- Import Bank oI Japan (Eximbank) and a consortium oI Japanese
banks. As agreed upon between Mitsubishi and Atlas, the latter gave
interest payments Ior 1974 and 1975 amounting to P13,143,966.79, with the
corresponding 15 tax thereon withheld and remitted to the Government as
required by the Tax Code.

On March 5, 1976, Mitsubishi Iiled a claim Ior tax credit oI the sum oI
P1,972,595.01 representing the tax withheld on the interest payment. That
claim, not having been acted upon by the BIR, Mitsubishi then Iiled a
petition contending that Mitsubishi was a mere agent oI Eximbank, a
Japanese Government Iinancing institution which Iinanced the loan. Such
governmental status oI Eximbank was the basis oI Mitsubishi`s claim Ior
exemption Irom paying tax on the interest payments pursuant to Section 29
(b) (8) (A) (now, Section 32 |B||7||a|, 1997 NIRC). The CTA granted the
tax credit in Iavor oI Mitsubishi, which later executed a waiver in Iavour oI
Atlas.

ISSUE:

Whether or not the interest income Irom the loans extended to Atlas by
Mitsubishi is excludible Irom gross income taxation and thus exempt Irom
withholding tax.

RULING:

It is settled that laws granting exemption Irom tax are construed strictissimi
iuris against the taxpayer and liberally in Iavour oI the taxing power.
Taxation is the rule and exemption is the exception. The burden oI prooI
rests upon the party claiming exemption to prove that it is in Iact covered by
the exemption so claimed, which onus private respondents have Iailed to
discharge.

The taxability oI a party cannot be blandly glossed over on the basis oI a
supposed 'broad, pragmatic analysis alone without substantial supportive
evidence, lest governmental operations suIIer due to diminution oI much
needed Iunds.

Commissioner of Internal Revenue vs. Gotamco and Sons. Inc.

G.R. o. L-31092 ebruary 27. 1987

FACTS: The World Health Organization (WHO) entered into a Host
Agreement with the Republic oI the Philippines which provides that "the
Organization, its assets, income and other properties shall be exempt Irom
all direct and indirect taxes. When the WHO decided to construct a building
to house its own oIIices in Manila, it entered into a Iurther agreement with
the Government that it may import into the country materials and Iixtures
required Ior the construction Iree Irom all duties and taxes. AIter inviting
bids, the contract was awarded to respondent John Gotamco & Sons, Inc.
Ior the stipulated price oI P370,000.00. ThereaIter, the Commissioner oI
Internal Revenue sent a letter oI demand to Gotamco demanding payment
oI P16,970.40, representing the 3 contractor's tax plus surcharges on the
gross receipts it received Irom the WHO in the construction oI the latter's
building. Respondent Gotamco appealed the Commissioner's decision to the
Court oI Tax Appeals, which aIter trial rendered a decision, in Iavor oI
Gotamco and reversed the Commissioner's decision. Hence, petitioner
brought the case to the Supreme Court.

Petitioner maintains the position that the contractor's tax is a tax due
primarily and directly on the contractor, not on the owner oI the building.
Since this tax has no bearing upon the WHO, it cannot be deemed an
indirect taxation upon it.

ISSUE:

Whether or not John Gotamco & Sons, Inc. should pay the 3 contractor's
tax under Section 191 oI the National Internal Revenue Code.

RULING:

No, The Supreme Court held that Respondent John Gotamco and Sons, Inc.
is not required to pay the 3 contractor`s tax under the National Internal
Revenue Code. It explained that direct taxes are those that are demanded
Irom the very person who, it is intended or desired, should pay them; while
indirect taxes are those that are demanded in the Iirst instance Irom one
person in the expectation and intention that he can shiIt the burden to
someone else. The contractor's tax is oI course payable by the contractor but
in the last analysis it is the owner oI the building that shoulders the burden
oI the tax because the same is shiIted by the contractor to the owner as a
matter oI selI-preservation. Thus, it is an indirect tax. And it is an indirect
tax on the WHO because, although it is payable by the petitioner, the latter
can shiIt its burden on the WHO. It is the WHO that will pay the tax
indirectly through the contractor and it certainly cannot be said that 'this tax
has no bearing upon the World Health Organization. Accordingly, Iinding
no reversible error committed by the respondent Court oI Tax Appeals, the
Supreme Court aIIirmed the appealed decision.

31st Infantry Post Exchange vs. Posadas

G.R. o. 33403

September 4. 1930

FACTS: Petitioner Thirty-Iirst InIantry Post Exchange is an agency within
the United States Army, under the control oI the oIIicers oI the Army. All
oI the goods sold to and purchased by the petitioner are intended Ior resale
to and are in Iact resold to the oIIicers, soldiers and the civilian employees
oI the Army, and their Iamilies. Juan Posadas, Jr., Collector oI Internal
Revenue oI the Philippine Islands, and his predecessors in that oIIice, have
collected Irom the merchants who made the sales oI the commodities,
goods, wares, and merchandise to the plaintiII Exchange, taxes at the rate oI
one and one-halI per centum on the gross value in money oI the
commodities. The eIIect oI the demand and collection oI taxes was to
increase the cost thereoI to the plaintiII Exchange. Contending that the
merchandises are exempted Irom taxes, petitioner brought the case beIore
the Supreme Court.

ISSUE:

Whether or not merchandise is relieved Irom said tax when it is sold to the
Army or Navy oI the United States Ior resale to individuals by means or
through the post exchanges or ship's stores

RULING:

No, The Supreme Court ruled that merchandise is not exempted Irom taxes
when it is sold to the Army oI the United States Ior resale. It explained that
although The revenue laws at that time provided that "no speciIic tax shall
be collected on any articles sold and delivered directly to the United States
Army or Navy Ior actual use or issue by the Army or Navy, and any taxes
which have been paid on articles so sold and delivered Ior such use or issue
shall be reIunded upon such sale and delivery, the Court is not inclined to
believe that goods sold to the soldiers and sailors oI the Army and Navy,
even though they be sold through said exchanges by the intervention oI
oIIicers oI the Army and Navy, are goods sold directly to the United States
Army or Navy Ior actual use or issue by the Army or Navy.

PLDT vs. City of Davao

G.R. o. 143867 August 22. 2001

FACTS: Petitioner Philippine Long Distance Telephone Co., Inc. (PLDT)
applied Ior a Mayor's Permit to operate its Davao Metro Exchange.
However, Respondent City oI Davao withheld action on the application
pending payment by petitioner oI the local Iranchise tax in the amount oI
P3,681,985.72 Ior the Iirst to the Iourth quarter oI 1999. Petitioner protested
the assessment oI the local Iranchise tax and requested a reIund oI the
Iranchise tax paid by it Ior the year 1997 and the Iirst to the third quarters oI
1998. Petitioner contended that it was exempted Irom the payment oI
Iranchise tax based on an opinion oI the Bureau oI Local Government
Finance (BLGF) citing Section 23 oI RA 7925 which provides equality oI
treatment in the telecommunication industry. Nevertheless, respondent
Adelaida B. Barcelona, City Treasurer oI Davao, denied the protest and
claim Ior tax reIund oI petitioner.

ISSUE:

Whether or not PLDT is exempted to pay the local Iranchise tax.

RULING:

No, the Supreme Court held that Petitioner PLDT is not exempted Irom the
local Iranchise tax because it does not appear that, in approving 23 oI R.A.
No. 7925, Congress intended it to operate as a blanket tax exemption to all
telecommunications entities. It explained that the acceptance oI petitioner's
theory would result in absurd consequences. It is diIIerent iI Congress
enacts a law speciIically granting uniIorm advantages, Iavour, privilege,
exemption, or immunity to all telecommunications entities. Furthermore,
the court emphasized that tax exemptions are highly disIavoured.

Sea-Land Services. Inc. vs. Court of Appeals

G.R. o. 122605

April 30. 2001

FACTS:

Petitioner Sea-Land Service Incorporated (SEA-LAND), an American
international shipping company licensed by the Securities and Exchange
Commission to do business in the Philippines entered into a contract with
the United States Government to transport military household goods and
eIIects oI U.S. military personnel assigned to the Subic Naval Base. SEA-
LAND Iiled with the Bureau oI Internal Revenue (BIR) the corresponding
corporate Income Tax Return (ITR) and paid the income tax due thereon oI
1.5 as required in Section 25 (a) (2) oI the National Internal Revenue
Code (NIRC) in relation to Article 9 oI the RP-US Tax Treaty, amounting
to P870, 093.12.

Claiming that it paid the aIorementioned income tax by mistake, a written
claim Ior reIund was Iiled with the BIR. However, beIore the said claim Ior
reIund could be acted upon by public respondent Commissioner oI Internal
Revenue, petitioner Iiled a petition Ior review with the Court oI Tax
Appeals (CTA) to iudicially pursue its claim Ior reIund and to stop the
running oI the two-year prescriptive period under the then Section 243 oI
the NIRC. The CTA rendered its decision denying SEA-LAND`s claim Ior
reIund oI the income tax it paid in 1984.

ISSUE:

Whether or not the income that petitioner derived Irom services in
transporting the household goods and eIIects oI U.S. military personnel Ialls
within the tax exemption provided in Article XII, paragraph 4 oI the RP-US
Military Bases Agreement.

RULING:

No, The Supreme Court held that the petitioner is not included in the tax
exemption provided in the RP-US Military Bases Agreement. It explained
that although the Military Bases agreement provides that no US national
shall be liable to pay income tax in the Philippines in respect oI any proIits
derived under a contract made in the United States with the government oI
the United States in connection with the construction, maintenance,
operation and deIense oI the bases it is obvious that the transport or
shipment oI household goods and eIIects oI U.S. military personnel is not
included in the term "construction, maintenance, operation and deIense oI
the bases." Neither could the perIormance oI this service to the U.S.
government be interpreted as directly related to the deIence and security oI
the Philippine territories.

MAILA ELECTRIC CMPAY vs. PRVICE LAG&A

G.R. o. 131359. May 5. 1999

FACTS: Province oI Laguna by virtue oI existing laws then in eIIect, issued
resolutions through their respective municipal councils granting Iranchise in
Iavor oI petitioner Manila Electric Company ('MERALCO) Ior the supply
oI electric light, heat and power within their concerned areas. On 19 January
1983, MERALCO was likewise granted a Iranchise by the National
ElectriIication Administration to operate an electric light and power service
in the Municipality oI Calamba, Laguna. On 12 September 1991, 'Local
Government Code oI 1991, was enacted enioining (directing) local
government units to create their own sources oI revenue and to levy taxes,
Iees and charges, subiect to the limitations expressed therein, consistent
with the basic policy oI local autonomy. Pursuant to the provisions oI the
Code, respondent province enacted Laguna Provincial Ordinance No. 01-
92.

Respondent Provincial Treasurer sent a demand letter to MERALCO Ior the
corresponding tax payment. Petitioner MERALCO paid the tax, which then
amounted to P19, 520,628.42, under protest. A Iormal claim Ior reIund was
thereaIter sent by MERALCO to the Provincial Treasurer oI Laguna
claiming that the Iranchise tax it had paid and continued to pay to the
National Government pursuant to P.D. 551 already included the Iranchise
tax imposed by the Provincial Tax Ordinance. MERALCO contended that
the imposition oI a Iranchise tax under Section 2.09 oI Laguna Provincial
Ordinance No. 01-92, insoIar as it concerned MERALCO, contravened the
provisions oI Section 1 oI P.D. 551.

ISSUE:

Whether or not the tax exemption should be withdrawn to give way to the
authoritative language oI the Local Government Code speciIically
providing Ior the withdrawal oI such exemption without violating the
Constitution.

RULING:

Yes. Truly, tax exemptions oI this kind may not be revoked without
impairing the obligations oI contracts. These contractual tax exemptions,
however, are not to be conIused with tax exemptions granted under
Iranchises. A Iranchise partakes the nature oI a grant which is beyond the
purview oI the non-impairment clause oI the Constitution. Indeed, Article
XII, Section 11, oI the 1987 Constitution, like its precursor provisions in the
1935 and the 1973 Constitutions, is explicit that no Iranchise Ior the
operation oI a public utility shall be granted except under the condition that
such privilege shall be subiect to amendment, alteration or repeal by
Congress as and when the common good so requires.

TI& vs. C&RT APPEALS

G.R. . 127410. 1A&ARY 20. 1999

FACTS: Congress passed into law RA 7227. Section 12 thereoI created the
Subic Special Economic Zone and granted thereto special privileges. The
President issued Executive Order No. 97-A (EO 97-A), speciIying within
which the tax-and-duty-Iree privilege was operative.

On October 26, 1994, the petitioners challenged beIore this Court the
constitutionality oI EO 97-A Ior allegedly being violative oI their right to
equal protection oI the laws. In a Resolution dated June 27, 1995, this Court
reIerred the matter to the Court oI Appeals, pursuant to Revised
Administrative Circular No. 1-95.

Petitioners contend that the SSEZ encompasses (1) the City oI Olongapo,
(2) the Municipality oI Subic in Zambales, and (3) the area Iormerly
occupied by the Subic Naval Base. However, EO 97-A, according to them,
narrowed down the area within which the special privileges granted to the
entire zone would apply to the present 'Ienced-in Iormer Subic Naval Base
only. It has thereby excluded the residents oI the Iirst two components oI
the zone Irom enioying the beneIits granted by the law. It has eIIectively
discriminated against them, without reasonable or valid standards, in
contravention oI the equal protection guarantee.

ISSUE:

Whether the provisions oI Executive Order No. 97-A conIining the
application oI R.A. 7227 granting tax and duty incentives only to businesses
and residents within the secured area and excluding the residents oI the
zone outside oI the secured area is discriminatory or not.

RULING:

No. We rule in Iavour oI the constitutionality and validity oI the assailed
EO. Said Order is not violative oI the equal protection clause; neither is it
discriminatory. Rather, we Iind real and substantive distinctions between
the circumstances obtaining inside and those outside the Subic Naval Base,
thereby iustiIying a valid and reasonable classiIication.

There are substantial diIIerences between the big investors who are being
lured to establish and operate their industries in the so-called 'secured area
and the present business operators outside the area. On the one hand, we are
talking oI billion-peso investments and thousands oI new iobs. On the other
hand, deIinitely none oI such magnitude. In the Iirst, the economic impact
will be national; in the second, only local. Even more important, at this time
the business activities outside the 'secured area are not likely to have any
impact in achieving the purpose oI the law, which is to turn the Iormer
military base top r o d u c t iv e use Ior the beneIit oI the Philippine
economy. There is, then, hardly any reasonable basis to extend to them the
beneIits and incentives accorded in RA 7227.

MACTA CEB& ITERATIAL AIRPRT vs. MARCS

G.R. o. 120082. September 11. 1996

FACTS: Petitioner Mactan Cebu International Airport Authority (MCIAA)
was created by virtue oI Republic Act No. 6958, mandated to 'principally
undertake the economical, eIIicient and eIIective control, management and
supervision oI the Mactan International Airport in the Province oI Cebu and
the Lahug Airport in Cebu City, x x x and such other airports as may be
established in the Province oI Cebu x x x (Sec. 3, RA 6958).

Since the time oI its creation, petitioner MCIAA enioyed the privilege oI
exemption Irom payment oI realty taxes in accordance with Section 14 oI
its Charter On October 11, 1994, however, Mr. Eustaquio B. Cesa, OIIicer-
in-Charge, OIIice oI the Treasurer oI the City oI Cebu, demanded payment
Ior realty taxes on several parcels oI land belonging to the petitioner.

Petitioner obiected to such demand Ior payment as baseless and uniustiIied,
claiming in its Iavour the aIorecited Section 14 oI RA 6958 which exempts
it Irom payment oI realty taxes. It was also asserted that it is an
instrumentality oI the government perIorming governmental Iunctions,
citing Section 133 oI the Local Government Code oI 1991 which puts
limitations on the taxing powers oI local government units.

ISSUE:

Can the City oI Cebu demand payment oI realty taxes on several parcels oI
land belonging to the petitioner?

RULING:

Yes. Since the last paragraph oI Section 234 unequivocally withdrew, upon
the eIIectivity oI the LGC, exemptions Irom payment oI real property taxes
granted to natural or iuridical persons, including government-owned or
controlled corporations, except as provided in the said section, and the
petitioner is, undoubtedly, a government-owned corporation, it necessarily
Iollows that its exemption Irom such tax granted it in Section 14 oI its
Charter, R.A. No. 6958, has been withdrawn.

CMMISSIER ITERAL REVE&E vs. RA
RBERTS

G.R. os. 70116-19. August 12. 1986

FACTS: The question involving this case is the scope oI the tax exemption
provision in Article XII, Par. 2, oI the RP-US Military Bases Agreement oI
1947.

The private respondents are citizens oI the United States; holders oI
American passports and admitted as Special Temporary Visitors under
Section 9 (a) visa oI the Philippine Immigration Act oI 1940, as amended;
civilian employees in the U.S. Military Base in the Philippines in
connection with its construction, maintenance, operation, and deIence; and
incomes are solely derived Irom salaries Irom the U.S. government by
reason oI their employment in the U.S. Bases in the Philippines."

The Court a quo aIter due hearing, rendered its iudgment in Iavour oI
respondents cancelling and setting aside the assessments Ior deIiciency
income taxes oI respondents Ior the taxable years 1969-1972, inclusive oI
interests and penalties.

ISSUE:

Whether or not the public respondent erred in holding that private
respondents are exempted Irom paying Philippine income tax.

RULING:

The law and the Iacts oI the case are so clear that there is no room leIt Ior
Us to doubt the validity oI private respondents' deIence. In order to avail
oneselI oI the tax exemption under the RP-US Military Bases Agreement:
he must be a national oI the United States employed in connection with the
construction, maintenance, operation or deIence, oI the bases, residing in
the Philippines by reason oI such employment, and the income derived is
Irom the U.S. Government (Art. XII par. 2 oI PI-US Military Bases
Agreement oI 1947). Said circumstances are all present in the case at bar.
Likewise, We Iind no iustiIiable reason to disturb the Iindings and rulings
oI the lower court in its decision.

Basco vs. PAGCR

G.R. o. 91649. May 14. 1991

FACTS: On July 11, 1983, PAGCOR was created under P.D. 1869 to
enable the Government to regulate and centralize all games oI chance
authorized by existing Iranchise or permitted by law. To attain these
obiectives PAGCOR is given territorial iurisdiction all over the Philippines.
Under its Charter's repealing clause, all laws, decrees, executive orders,
rules and regulations, inconsistent therewith, are accordingly repealed,
amended or modiIied.

But petitioners contend that P.D. 1869 constitutes a waiver oI the right oI
the City oI Manila to impose taxes and legal Iees; that the exemption clause
in P.D. 1869 is violative oI the principle oI local autonomy. They must be
reIerring to Section 13 par. (2) oI P.D. 1869 which exempts PAGCOR, as
the Iranchise holder Irom paying any "tax oI any kind or Iorm, income or
otherwise, as well as Iees, charges or levies oI whatever nature, whether
National or Local."

ISSUE:

Whether or not P.D. 1869 constitutes a waiver oI the right oI the city oI
Manila to impose taxes and legal Iees to PAGCOR.

RULING:

The City oI Manila, being a mere Municipal corporation has no inherent
right to impose taxes. Thus, "the Charter or statute must plainly show an
intent to conIer that power or the municipality cannot assume it". Its "power
to tax" thereIore must always yield to a legislative act which is superior
having been passed upon by the state itselI which has the "inherent power to
tax". The Charter oI the City oI Manila is subiect to control by Congress.

Republic vs. IAC

G.R. o. L-69344. April 26. 1991

FACTS: On April 15, 1980, the Republic oI the Philippines, through the
Bureau oI Internal Revenue, commenced an action to collect Irom the
spouses Antonio Pastor and Clara Reyes-Pastor deIiciency income taxes Ior
the years 1955 to 1959. The Pastors Iiled a motion to dismiss the complaint,
but the motion was denied. On August 2, 1975, they Iiled an answer
admitting there was an assessment against them oI P17,117.08 Ior income
tax deIiciency but denying liability thereIor. They contended that they had
availed oI the tax amnesty under P.D.'s Nos. 23, 213 and 370 and had paid
the corresponding amnesty taxes amounting to P10,400 or 10 oI their
reported untaxed income under P.D. 23, P2,951.20 or 20 oI the reported
untaxed income under P.D. 213, and a Iinal payment on October 26, 1973
under P.D. 370 evidenced by the Government's OIIicial Receipt No.
1052388. Consequently, the Government is in estoppel to demand and
compel Iurther payment oI income taxes by them.

ISSUE:

Whether or not the payment oI deIiciency income tax under the tax amnesty
and its acceptance by the Government operated to divest the Government oI
the right to Iurther recover Irom the taxpayer, even iI there was an existing
assessment against the latter at the time he paid the amnesty tax.

RULING:

Even assuming that the deIiciency tax assessment oI P17,117.08 against the
Pastor spouses were correct, since the latter have already paid almost the
equivalent amount to the Government by way oI amnesty taxes under P.D.
No. 213, and were granted not merely an exemption, but an amnesty, Ior
their past tax Iailings, the Government is estopped Irom collecting the
diIIerence between the deIiciency tax assessment and the amount already
paid by them as amnesty tax.

A tax amnesty, being a general pardon or intentional overlooking by the
State oI its authority to impose penalties on persons otherwise guilty oI
evasion or violation oI a revenue or tax law, partakes oI an absolute
Iorgiveness or waiver by the Government oI its right to collect what
otherwise would be due it, and in this sense, preiudicial thereto, particularly
to give tax evaders, who wish to relent and are willing to reIorm a chance to
do so and thereby become a part oI the new society with a clean slate.

Commissioner of Internal Revenue vs. CA

G.R. o. 108358. 1anuary 20. 1995

FACTS: On 22 August 1986, E.O. 41 was promulgated declaring a one-
time tax amnesty on unpaid income taxes, later amended to include estate
and donor's taxes and taxes on business, Ior the taxable years 1981 to 1985.

Availing itselI oI the amnesty, respondent R.O.H. Auto Products
Philippines, Inc., Iiled, in October 1986 and November 1986, its Tax
Amnesty Return and Supplemental Tax Amnesty Return, respectively, and
paid the corresponding amnesty taxes due. Prior to this availment, petitioner
Commissioner oI Internal Revenue, in a communication received by private
respondent on 13 August 1986, assessed the latter deIiciency income and
business taxes Ior its Iiscal years ended 30 September 1981 and 30
September 1982 in an aggregate amount oI P1,410,157.71. The taxpayer
wrote back to state that since it had been able to avail itselI oI the tax
amnesty, the deIiciency tax notice should Iorthwith be cancelled and
withdrawn. The request was denied by the Commissioner, on the ground
that Revenue Memorandum Order 4-87, implementing E.O. 41, had
construed the amnesty coverage to include only assessments issued by the
Bureau oI Internal Revenue aIter the promulgation oI the executive order on
22 August 1986 and not to assessments theretoIore made.

ISSUE:

Whether or not the position taken by the Commissioner coincides with the
meaning and intent oI E.O. 41.

RULING:

The period oI the amnesty was later extended to 05 December 1986 Irom 31
October 1986 by E.O. 54, dated 04 November 1986, and, its coverage
expanded, under E.O. 64, dated 17 November 1986, to include estate and
honors taxes and taxes on business.

II, as the Commissioner argues, E.O. 41 had not been intended to include
1981-1985 tax liabilities already assessed (administratively) prior to 22
August 1986, the law could have simply so provided in its exclusionary
clauses. It did not. The conclusion is unavoidable, and it is that the
executive order has been designed to be in the nature oI a general grant oI
tax amnesty subiect only to the cases speciIically excepted by it.

Hilado vs. Collector of Internal Revenue

GR L-9408. ctober 31. 1956

FACTS: Emilio Hilado Iiled his income tax return Ior 1951 with the
treasurer oI Bacolod City. He is claiming a deductible item oI P12, 837.65
Irom his gross income under the General Circular V-123 issued by the
Collector oI Internal Revenue. Subsequently, the Secretary oI Finance,
through the Collector, issued General Circular V-139 which revoked and
declared void Circular V-123. It provided that losses oI property which
occurred in World War II Irom Iires, storms, shipwreck or other casualty, or
Irom robbery, theIt, or embezzlement are deductible in the year oI actual
loss or destruction oI said property. ThereaIter, the deductions were
disallowed.

ISSUE:

Whether or not Hilado can claim compensation Ior destruction oI his
property during the war under the laws in eIIect at that time.

RULING: Philippines Internal Revenue Laws are not political in nature and
as such were continued in Iorce during the period oI enemy occupation and
in eIIect were actually enIorced by the occupation government. Such tax
laws are deemed to be laws oI the occupied territory and not oI the
occupying enemy. As oI the end oI 1945, there was no law which Hilado
could claim Ior the destruction oI his properties during the battle Ior the
liberation oI the Philippines. Under the Philippine Rehabilitation Act oI
1948, the payment oI claims by the War Damage Commission depended
upon its discretions non-payment oI which does not give rise to any
enIorceable right. Assuming that the loss (deductible item) represents a
portion oI the 75 oI his war damage claim, the amount would be at most a
proper deduction oI his 1950 gross income (not on his 1951 gross income)
as the last instalment and notice oI discontinuation oI payment by the War
Damage Commission was made in 1950.

Misamis riental Association of Coco Traders. Inc. vs. Department of
inance Secretary

G.R. o. 108524. ovember 10. 1994

FACTS: Petitioner Misamis Oriental Association oI Coco Traders, Inc. is a
domestic corporation whose members, individually or collectively, are
engaged in the buying and selling oI copra in Misamis Oriental. The
petitioner alleges that prior to the issuance oI Revenue Memorandum
Circular 47-91 on June 11, 1991, which implemented VAT Ruling 190-90,
copra was classiIied as agricultural Iood product under $ 103(b) oI the
National Internal Revenue Code and, thereIore, exempt Irom VAT at all
stages oI production or distribution. Under Sec. 103(b) oI the NIRC, the
sale oI agricultural Iood products in their original state is exempt Irom VAT
at all stages oI production or distribution. The reclassiIication had the eIIect
oI denying to the petitioner the exemption it previously enioyed when copra
was classiIied as an agricultural Iood product under 103(b) oI the NIRC.
Petitioner challenges RMC No. 47-91 on various grounds.

ISSUE:

Whether RMC No. 47-91 is discriminatory and violative oI the equal
protection clause oI the Constitution.

RULING:

The court ruled in the negative. Petitioner claims that RMC No. 47-91 is
violative oI the equal protection clause because while coconut Iarmers and
copra producers are exempt, traders and dealers are not, although both sell
copra in its original state. Petitioners add that oil millers do not enioy tax
credit out oI the VAT payment oI traders and dealers. The argument has no
merit. There is a material or substantial diIIerence between coconut Iarmers
and copra producers, on the one hand, and copra traders and dealers, on the
other. The Iormer produce and sell copra, the latter merely sell copra. The
Constitution does not Iorbid the diIIerential treatment oI persons so long as
there is a reasonable basis Ior classiIying them diIIerently. It is not true that
oil millers are exempt Irom VAT. Pursuant to 102 oI the NIRC, they are
subiect to 10 VAT on the sale oI services.

Commissioner of Internal Revenue vs. Court of Appeals and Alhambra
Industries. Inc.

G.R. o. 117982. ebruary 6. 1997

ACTS:

Alhambra Industries, Inc. is a domestic corporation engaged in the
manuIacture and sale oI cigar and cigarette products. On 7 May 1991
private respondent received a letter dated 26 April 1991 Irom the
Commissioner oI Internal Revenue assessing it deIiciency Ad Valorem Tax
(AVT) in the amount P 488,396.62. Private respondent Iiled a protest
against the proposed assessment with a request that the same be withdrawn
and cancelled. Petitioner denied such protest. The dispute arose Irom the
discrepancy in the taxable base on which the excise tax is to apply on
account oI two incongruous BIR Rulings: (1) BIR Ruling 473-88 dated 4
October 1988 which excluded the VAT Irom the tax base in computing the
IiIteen percent (15) excise tax due; and, (2) BIR Ruling 017-91 dated 11
February 1991 which included back the VAT in computing the tax base Ior
purposes oI the IiIteen percent (15) ad valorem tax.

ISSUE:

Whether Sec. 142 (d) oI the Tax Code, which provides Ior the inclusion oI
the VAT in the tax base Ior purposes oI computing the 15 ad valorem tax,
is the applicable law in the instant case as it speciIically applies to the
manuIacturer's wholesale price oI cigar and cigarette products and not Sec.
127 (b) oI the Tax Code which applies in general to the wholesale oI goods
or domestic products.

RULING:

Sec. 142 being a speciIic provision applicable to cigar and cigarettes must
prevail over Sec. 127 (b), a general provision oI law insoIar as the
imposition oI the ad valorem tax on cigar and cigarettes is concerned.
Consequently, the application oI Sec. 127 (b) to the wholesale price oI cigar
and cigarette products Ior purposes oI computing the ad valorem tax is
patently erroneous. Accordingly, BIR Ruling 473-88 is void ab initio as it
contravenes the express provisions oI Sec. 142 (d) oI the Tax Code.

However, well-entrenched is the rule that rulings and circulars, rules and
regulations promulgated by the Commissioner oI Internal Revenue would
have no retroactive application iI to so apply them would be preiudicial to
the taxpayers. The BIR is now ordered to reIund private respondent oI the
collected taxes Iorm the latter.

Commissioner of Internal Revenue vs. Lingayen Gulf Electric Power
Co.. Inc.

G.R. o. L-23771. August 4. 1988

FACTS: The respondent taxpayer, Lingayen GulI Electric Power Co., Inc.,
operates an electric power plant serving the adioining municipalities oI
Lingayen and Binmaley, both in the province oI Pangasinan, pursuant to the
municipal Iranchise granted it by their respective municipal councils.

On November 21, 1955, the Bureau oI Internal Revenue (BIR) assessed
against and demanded Irom the private respondent the total amount oI P19,
293.41 representing deIiciency Iranchise taxes and surcharges Ior the years
1946 to 1954 applying the Iranchise tax rate oI 5 on gross receipts. The
private respondent requested Ior a reinvestigation oI the case on the ground
that instead oI incurring a deIiciency liability, it made an overpayment oI
the Iranchise tax. In its letters dated July 2, and August 9, 1958 to the
petitioner Commissioner, the private respondent protested the said
assessment and requested Ior a conIerence with a view to settling the
liability amicably. In his letters dated July 25 and August 28, 1958, the
Commissioner denied the request oI the private respondent. Thus, the
appeal to the respondent Court oI Tax Appeals. Pending the hearing oI the
said cases, Republic Act (R.A.) No. 3843 was passed on June 22, 1 963,
granting to the private respondent a legislative Iranchise Ior the operation oI
the electric light, heat, and power system in the same municipalities oI
Pangasinan and comes with it a tax equal to two per centum oI the gross
receipts Irom electric current sold or supplied under this Iranchise.

ISSUES:

(1) Whether or not the 5 Iranchise tax prescribed in Section 259 oI the
National Internal Revenue Code assessed against the private respondent on
its gross receipts realized beIore the eIIectivity oI R.A- No. 3843 is
collectible.

(2) Whether or not the respondent taxpayer is liable Ior the Iixed and
deIiciency percentage taxes in the amount oI P3, 025.96 Ior the period
beIore the approval oI its municipal Iranchises.

RULING:

R.A. No. 3843 provided that the private respondent should pay only a 2
Iranchise tax on its gross receipts, "in lieu oI any and all taxes and/or
licenses oI any kind, nature or description levied, established, or collected
by any authority whatsoever, municipal, provincial, or national, now or in
the Iuture ... and eIIective Iurther upon the date the original Iranchise was
granted, no other tax and/or licenses other than the Iranchise tax oI two per
centum on the gross receipts ... shall be collected, any provision oI law to
the contrary notwithstanding." Thus, by virtue oI R.A- No. 3843, the private
respondent was liable to pay only the 2 Iranchise tax, eIIective Irom the
date the original municipal Iranchise was granted. As to the second issue,
the legislative Iranchise (R.A. No. 3843) exempted the grantee Irom all
kinds oI taxes other than the 2 tax Irom the date the original Iranchise was
granted. The exemption, thereIore, did not cover the period beIore the
Iranchise was granted, i.e. beIore February 24, 1948. However, as pointed
out by the respondent court in its Iindings, during the period covered by the
instant case, that is Irom January 1, 1946 to December 31, 1961, the private
respondent paid the amount oI P34,184.36, which was very much more than
the amount rightIully due Irom it. Hence, the private respondent should no
longer be made to pay Ior the deIiciency tax in the amount oI P3, 025.98 Ior
the period Irom January 1, 1946 to February 29, 1948.

ABS-CB Broadcasting Corp. vs. Court of Tax Appeals

G.R. o. L-52306. ctober 12. 1981

FACTS: During the period pertinent to this case, Petitioner Corporation was
engaged in the business oI telecasting local as well as Ioreign Iilms acquired
Irom Ioreign corporations not engaged in trade or business within the
Philippines Ior which petitioner paid rentals aIter withholding income tax oI
30oI one-halI oI the Iilm rentals. In implementing Section 4(b) oI the Tax
Code, the Commissioner issued General Circular V-334. Pursuant thereto,
ABS-CBN Broadcasting Corp. dutiIully withheld and turned over to the
BIR 30 oI oI the Iilm rentals paid by it to Ioreign corporations not
engaged in trade or business in the Philippines. The last year that the
company withheld taxes pursuant to the Circular was in 1968. On 27 June
1908, RA 5431 amended Section 24 (b) oI the Tax Code increasing the tax
rate Irom 30 to 35 and revising the tax basis Irom 'such amount
reIerring to rents, etc. to 'gross income. In 1971, the Commissioner issued
a letter oI assessment and demand Ior deIiciency withholding income tax
Ior years 1965 to 1968. The company requested Ior reconsideration; where
the Commissioner did not act upon.

ISSUES:

Whether Revenue Memorandum Circular 4-71, revoking General Circular
V-334, may be retroactively applied.

RULING:

Rulings or circulars promulgated by the Commissioner have no retroactive
application where to so apply them would be preiudicial to taxpayers.
Herein, the preiudice the company oI the retroactive application oI
Memorandum Circular 4-71 is beyond question. It was issued only in 1971,
or three years aIter 1968, the last year that petitioner had withheld taxes
under General Circular No. V-334. The assessment and demand on
petitioner to pay deIiciency withholding income tax was also made three
years aIter 1968 Ior a period oI time commencing in 1965. The company
was no longer in a position to withhold taxes due Irom Ioreign corporations
because it had already remitted all Iilm rentals and had no longer control
over them when the new circular was issued. InsoIar as the enumerated
exceptions are concerned, the company does not Iall under any oI them.

Philippine Bank of Commerce (PBcom) v. Commissioner of Internal
Revenue (CIR)

G.R. o. 112024. 1anuary 28. 1999

FACTS: Petitioner PBcom paid its quarterly income tax Ior the Iirst and
second quarters oI 1985 totalling to P5, 016,954.00. Subsequently, PBcom
suIIered losses so that when it Iiled its Annual Income Tax Ior the year-
ended December 31, 1986, it reported a net loss and declared no tax payable
Ior the year. Petitioner also earned rental income Ior both 1985 and 1986
and the corresponding tax thereoI was withheld and remitted by the lessees
to the BIR.

On August 7, 1987 or aIter more than two years Irom payment oI taxes,
PBcom Iiled Ior a tax reIund. Pending investigation oI the BIR, petitioner
Iiled a petition Ior review with the Court oI Tax Appeals. The CTA denied
the tax reIund on the ground that application Ior reIund must be made
within two years Irom the payment oI tax as provided by the National
Internal Revenue Code. Petitioner contended that the two year period has
been changed to ten years upon a memorandum issued by the
Commissioner oI Internal Revenue. The Court oI Appeal aIIirmed in toto
the ruling oI the CTA.

ISSUE:

Did the CTA err in denying the plea Ior tax reIund on the ground oI
prescription?

RULING:

No. The relaxation oI revenue regulation by a memorandum issued by the
BIR is not warranted as it disregards the two year period set by law. Section
230 oI the National Internal Revenue Code oI 1977 provides Ior the two
year period Ior Iiling a claim Ior reIund or credit. When the Acting
Commissioner oI Internal Revenue issued a memorandum changing the
prescriptive period oI two years to ten years, such circular created a clear
inconsistency with the provision oI Section 230 oI NIRC. In so doing, the
BIR did not simply interpret the law, rather it legislated guidelines contrary
to the statute passed by the congress.

Commissioner of Internal Revenue v. Tokyo Shipping Co. LTD.

G.R. o. L-68252. May 26. 1995

FACTS: Private Respondent is a Ioreign corporation represented in the
Philippines by Soriamont Steamship Agencies, Incorporated. It owns and
operates tramper vessel M/V Gardenia. Nasutra chartered M/V Gardenia to
load raw sugar in the Philippines. Soriamont Agency paid the required
income and common carrier taxes Ior its transaction with Nasutra.
However, upon arrival, the vessel Iound no sugar Ior loading. Private
respondent, thereIore, Iiled a claim Ior tax credit beIore the petitioner
Commissioner oI Internal Revenue Ior erroneous payment. Due to the
Iailure oI petitioner to act promptly on the matter, private respondent Iiled a
petition Ior review beIore the Court oI Tax Appeals (CTA) which Iavoured
the tax credit.

Petitioner Iiled a motion Ior reconsideration, but it was denied by the CTA,
hence this petition contending that private respondent has the burden oI
prooI to support its claim oI reIund, that it Iailed to prove that it did not
realize any receipt Irom its charter agreement and it suppressed evidence
when it did not present its charter agreement.

ISSUE:

Whether or not private respondent Iailed to prove that it derived no receipt
Irom its charter agreement, hence, not entitled to a reIund.

RULING:

We Iind no merit in the petition.

The respondent Court oI Tax Appeals held that suIIicient evidence has been
adduced by private respondent proving that it derived no receipt Irom its
charter agreement with Nasutra. The Clearance Vessel to a Foreign Port
issued by the District Collector oI Customs support such Iinding. Moreover,
the BIR examiner and its appellate division both recommended the approval
oI private respondent`s claim oI tax reIund.

Reyes v. Almonzor

G.R. os. L-49839 - 46. April 26. 1991

FACTS: The National legislature enacted R.A. 6359 which prohibits an
increase in monthly rentals oI dwelling unit or land on which another`s
dwelling is located, where the rental does not exceed Php300.00. The act
also suspended article 1673 oI the Civil Code thereby disallowing eiectment
oI lessees. These prohibitions were made absolute by the Iiling oI
Presidential Decree 20. Consequently, petitioners herein are precluded Irom
increasing monthly rentals and in eiecting the lessees.The respondent city
assessor oI Manila reassessed the value oI the petitioners` properties based
on the scheduled market value thereoI. This entailed an increase in the tax
rates prompting petitioners to Iile a Memorandum oI Disagreement with the
Board oI Tax Assessment Appeals averring that the reassessment was
excessive, unwarranted, inequitable, conIiscatory and unconstitutional
considering that the tax imposed upon them is greater than the annual
income derived Irom the property. They also argued that the income
approach should have been used in determining the land values instead oI
the comparable sales approach. The Board oI tax Assessment Appeals
considered the assessment valid and the same was aIIirmed by the Central
Board oI Assessment appeals, hence this petition.

ISSUE:

Did the board err in adopting the comparable sales approach in Iixing the
assessed value oI the properties?

RULING:

The petition is impressed with merit.

It is unquestionable that both the Comparable Sales Approach and the
Income Approach are generally acceptable methods oI appraisal Ior taxation
purposes. However, it is conceded that the proprietary oI one, as against the
other would depend on several Iactors. Hence, as early as 1923, it has been
stressed that the assessors , in Iinding the value oI the property, have to
consider all the circumstances and elements oI value and must exercise a
prudent discretion in reaching conclusions.

Commissioner of Internal Revenue v. Algue. Inc.. and the Court of Tax
Appeals

G.R. o. L - 28896. ebruary 17. 1988

FACTS: On January 14, 1965, the private respondent, a domestic
corporation engaged in engineering, construction and other allied activities,
received a letter Irom the petitioner assessing it a delinquency income tax
Ior the year 1958 and 1959. AIter Iour days Irom its receipt, Algue Iiled a
letter oI protest which was stamped and received by the petitioner. Despite
the protest, private respondent received a warrant oI distraint and levy.
Algue reIused to receive it on the ground oI pending protest until it was
Iinally inIormed that the BIR was not taking any action on the protest. It
thereIore Iiled a petition Ior review oI the decision oI the Commissioner oI
Internal Revenue (CIR) with the Court oI Tax Appeals. The CTA ruled in
Iavour oI Algue holding that the Php75, 000.00 in dispute shall be
considered as deductible Irom income it being in the Iorm oI promotional
expense and contrary to petitioner`s contention that it was not an ordinary
and reasonable business expense.

ISSUE:

Did the Collector oI Internal Revenue correctly disallow the deduction
claimed by private respondent Algue as legitimate business expense in its
Income Tax Return?

RULING:

We agree with respondent court that the amount oI promotional Iee was not
excessive and was reasonable, hence, allowing the deduction oI the disputed
amount in the Income Tax Return oI private respondent. The Iinding oI
respondent court is in accordance with the provision oI the Tax Code on
deductions Irom gross income.

The solicitor general is correct in saying that the burden to prove the
validity oI claimed deduction is on the tax payer. The private respondent
has proved this. The amount in dispute was necessary and reasonable in the
light oI the eIIorts oI the respondent corporation to induce investors.

EGRACI RACIA vs. ITERMEDIATE APPELLATE C&RT

G.R. o. L-67649. 1une 28. 1988

FACTS: Engracio Francia is the registered owner oI a residential lot and a
two-story house located in Pasay City. On October 15, 1977, a 125 square
meter portion oI Francia's property was expropriated by the Republic Ior the
sum oI P4,116.00. Since 1963 up to 1977 inclusive, Francia Iailed to pay his
real estate taxes. Thus, on December 5, 1977, his property was sold at
public auction pursuant the Real Property Tax Code in order to satisIy a tax
delinquency oI P2, 400.00. Ho Fernandez was the highest bidder Ior the
property. Francia was not present during the auction sale since he was in
Iligan City at that time helping his uncle ship bananas. On March 3, 1979,
Francia received a notice oI hearing 'In re: Petition Ior Entry oI New
CertiIicate oI Title" Iiled by Ho Fernandez, seeking the cancellation oI TCT
and the issuance in his name oI a new certiIicate oI title. Upon veriIication
through his lawyer, Francia discovered that a Final Bill oI Sale had been
issued in Iavour oI Ho Fernandez by the City Treasurer on December 11,
1978. The auction sale and the Iinal bill oI sale were both annotated at the
back oI TCT No. 4739 (37795) by the Register oI Deeds. On March 20,
1979, Francia Iiled a complaint to annul the auction sale. The lower court
rendered a decision against his Iavour. The Intermediate Appellate Court
aIIirmed the decision oI the lower court in toto. Hence, this petition Ior
review.

ISSUE:

Whether or not the contention oI Francia that his tax delinquency oI
P2,400.00 has been extinguished by legal compensation is correct claiming
that the government owed him P4,116.00 when a portion oI his land was
expropriated on October 15, 1977.

RULING:

This principal contention oI the petitioner has no merit. We have
consistently ruled that there can be no oII-setting oI taxes against the claims
that the taxpayer may have against the government. A person cannot reIuse
to pay a tax on the ground that the government owes him an amount equal
to or greater than the tax is being collected. The collection oI a tax cannot
await the results oI a lawsuit against the government. A claim Ior taxes is
not such a debt, demand, contract or iudgment as is allowed to be set-oII
under the statutes oI set-oII, which are construed uniIormly, in the light oI
public policy, to exclude the remedy in an action or any indebtedness oI the
state or municipality to one who is liable to the state or municipality Ior
taxes. Neither are they a proper subiect oI recoupment since they do not
arise out oI the contract or transaction sued on.

CMMISSIER ITERAL REVE&E vs. ITG-S&YC
MIES. IC.

G.R. o. L-25299. 1uly 29. 1969

FACTS: Respondent Itogon-Suyoc Mines, Inc. Iiled on January 13, 1961,
its income tax return Ior the Iiscal year 1959- 1960. It declared a taxable
income oI P114,368.04 and a tax due thereon amounting to P26,310.41, Ior
which it paid on the same day, the amount oI P13,155.20 as the Iirst
installment oI the income tax due. On May 17, 1961, petitioner Iiled an
amended income tax return, reporting therein a net loss oI P331, 707.33. It
thus sought a reIund Irom the Commissioner oI Internal Revenue, now the
petitioner. On February 14, 1962, respondent Itogon-Suyoc Mines, Inc.
Iiled its income tax return Ior the Iiscal year 1960-1961, setting Iorth its
income tax liability to the tune oI P97,345.00, but deducting the amount oI
P13,155.20 representing alleged tax credit Ior overpayment oI the preceding
Iiscal year 1959- 1960. 0n December 18, 1962, petitioner Commissioner oI
Internal Revenue assessed against the respondent the amount oI P1, 512.83
as 1 monthly interest on the aIoresaid amount oI P13,155.20 Irom January
16, 1962 to December 31, 1962. The basis Ior such an assessment was the
absence oI legal right to deduct said amount beIore the reIund or tax credit
thereoI was approved by petitioner Commissioner oI Internal Revenue.
Such an assessment was contested by respondent beIore the Court oI Tax
Appeals which ruled in its Iavour. Hence this petition Ior review.

ISSUE:

Whether or not the Court oI Tax Appeals erred when it absolved
Respondent Corporation "Irom liability to pay the sum oI P1, 512.83 as 1
monthly interest Ior delinquency in the payment oI income tax Ior the Iiscal
year 1960-1961.

RULING:

It could not be error Ior the Court oI Tax Appeals, considering the admitted
Iact oI overpayment, entitling respondent to reIund, to hold that petitioner
should not repose an interest on the aIoresaid sum oI P13,155.20 "which
aIter all was paid to and received by the government even beIore the
incidence oI the tax in question." It would be, according to the Court oI Tax
Appeals, "unIair and uniust" to do so. The National Internal Revenue Code
provides that interest upon the amount determined as a deIiciency shall be
assessed and shall be paid upon notice and demand Irom the Commissioner
oI Internal Revenue at the speciIied. It is made clear, however, in an earlier
provision Iound in the same section that iI in any preceding year, the
taxpayer was entitled to a reIund oI any amount due as tax, such amount, iI
not yet reIunded, may be deducted Irom the tax to be paid. There is no
question respondent was entitled to a reIund. Instead oI waiting Ior the sum
involved to be delivered to it, it deducted the said amount Irom the tax that
it had to pay. That it had a right to do according to the law.

MELECI R. DMIG vs. H. LREZ C. GARLITS

G.R. o. L-18994. 1une 29. 1963

FACTS: This is a petition Ior certiorari and mandamus against respondent
iudge seeking to annul certain orders oI the court and Ior an order in this
Court to direct respondent to execute the iudgment in Iavor oI the
Government against the estate oI Walter Scott Price Ior internal revenue
taxes. It appears that in Melecio R. Domingo vs. Hon. Judge S. C. Moscoso,
G.R. No. L-14674, January 30, 1960, this Court declared as Iinal and
executory the order Ior the payment by the estate oI the estate and
inheritance taxes, charges and penalties, amounting to P40,058.55, issued
by the Court oI First Instance oI Leyte in, special proceedings No. 14
entitled "In the matter oI the Intestate Estate oI the Late Walter Scott Price."
In order to enIorce the claims against the estate the Iiscal presented a
petition dated June 21, 1961, to the court below Ior the execution oI the
iudgment. The petition was, however, denied by the court which held that
the execution is not iustiIiable

ISSUE:

Whether or not the petitioner has the clear right to execute the iudgment Ior
taxes against the estate oI the deceased Walter Scott Price.

RULING:

The petition to set aside the above orders oI the court below and Ior the
execution oI the claim oI the Government against the estate must be denied
Ior lack oI merit. The ordinary procedure by which to settle claims oI
indebtedness against the estate oI a deceased person, as an inheritance tax,
is Ior the claimant to present a claim beIore the probate court so that said
court may order the administrator to pay the amount thereoI. Another
ground Ior denying the petition is the Iact that the court having iurisdiction
oI the estate had Iound that the claim oI the estate against the Government
has been recognized and an amount oI P262,200 has already been
appropriated Ior the purpose by a corresponding law (Rep. Act No. 2700).
Under the above circumstances, both the claim oI the Government Ior
inheritance taxes and the claim oI the intestate Ior services rendered have
already become overdue and demandable is well as Iully liquidated.
Compensation, thereIore, takes place by operation oI law, in accordance
with the provisions oI Articles 1279 and 1290 oI the Civil Code, and both
debts are extinguished to the concurrent amount. It is clear, thereIore, that
the petitioner has no clear right to execute the iudgment Ior taxes against the
estate oI the deceased Walter Scott Price.

REP&BLIC THE PHILIPPIES vs. MAMB&LA L&MBER
CMPAY. ET AL.

G.R. o. L-17725. ebruary 28. 1962

FACTS: There are three causes oI action in this case in which the
deIendants admitted all these three liabilities with an aggregate amount oI
P4, 802.37. Though such liabilities are admitted it interposed the deIence
though exhibits that Irom July 31, 1948 to December 29, 1956, deIendant
Mambulao Lumber Company paid to the Republic oI the Philippines
P8,200.52 Ior 'reIorestation charges' and Ior the period commencing Irom
April 30, 1947 to June 24, 1948, said deIendant paid P927.08 to the
Republic oI the Philippines Ior 'reIorestation charges'. These reIorestation
were paid to the plaintiII in pursuance oI Section 1 oI Republic Act 115
which provides that there shall be collected, in addition to the regular Iorest
charges provided under Section 264 oI Commonwealth Act 466 known as
the National Internal Revenue Code, the amount oI P0.50 on each cubic
meter oI timber... cut out and removed Irom any public Iorest Ior
commercial purposes. The total amount oI the reIorestation charges paid by
Mambulao Lumber Company is P9,127.50, and it is the contention oI the
deIendant that since the Republic oI the Philippines has not made use oI
those reIorestation charges collected Irom it Ior reIoresting the denuded area
oI the land covered by its license, the Republic oI the Philippines should
reIund said amount, or, iI it cannot be reIunded, at least it should be
compensated with what Mambulao Lumber Company owed the Republic oI
the Philippines Ior reIorestation charges.

ISSUE:

Whether or not the sum oI P9, 127.50 paid by deIendant company to
plaintiII as reIorestation charges Irom 1947 to 1956 may be set oII or
applied to the payment oI the sum oI P4,802.37 as Iorest charges due and
owing Irom deIendant to plaintiII.

RULING:

The court Iind deIendants claim devoid oI any merit. Note that there is
nothing in the law which requires that the amount collected as reIorestation
charges should be used exclusively Ior the reIorestation oI the area covered
by the license oI a licensee or concessionaire, and that iI not so used; the
same should be reIunded to him. The general rule, based on grounds oI
public policy is well-settled that no set-oII is admissible against demands
Ior taxes levied Ior general or local governmental purposes. The reason on
which the general rule is based, is that taxes are not in the nature oI
contracts between the party and party but grow out oI a duty to, and are the
positive acts oI the government, to the making and enIorcing oI which, the
personal consent oI individual taxpayers is not required.

The Anti-Graft League of the Philippines. Inc. vs. San 1uan

G.R. o. 97787. August 1. 1996

FACTS: Acting upon an authority granted by the OIIice oI the President,
the Province was able to negotiate with respondent Ortigas & Co., Ltd.
(Ortigas) Ior the acquisition oI Iour parcels oI land located in Ugong Norte,
Pasig. Three deeds oI absolute sale were executed on April 22 and May 9,
1975, whereby Ortigas transIerred its ownership over a total oI 192,177
square meters oI land to the Province at P110.00 per square meter. The
proiected construction, however, never materialized because oI the
decimation oI the Province`s resources brought about by the creation oI the
Metro Manila Commission (MMC) in 1976. The said property was
eventually sold to Valley View Realty Development Corporation (Valley
View) Ior P700.00 per square meters. The said property was eventually sold
to Valley View Realty Development Corporation (Valley View) Ior
P700.00 per square meter or a total oI P134,523,900.00, oI which 30 million
was given as down payment. On May 10, 1988, aIter learning about the
sale, Ortigas Iiled beIore Branch 151 oI the Regional Trial Court oI Pasig
an action Ior rescission oI contract plus damages with preliminary
iniunction against the Province. Docketed as Civil No. 55904, the complaint
alleged that the Province violated one oI the terms oI its contracts with
Ortigas by selling the subiect lots which were intended to be utilized solely
as a site Ior the construction oI the Rizal Technological Colleges and the
Rizal Provincial Hospital.

ISSUE:

Is the present action a taxpayer`s suit?

RULING:

Petitioner and respondents agree that to constitute a taxpayer`s suit, two
requisites must be met, namely, that public Iunds are disbursed by a
political subdivision or instrumentality and in doing so, a law is violated or
some irregularity is committed, and that the petitioner is directly aIIected by
the alleged ultra vires act. In the case at bar, disbursement oI public Iunds
was only made in 1975 when the Province bought the lands Irom Ortigas at
P110.00 per square meter in line with the obiectives oI P.D. 674.

Undeniably, as a taxpayer, petitioner would somehow be adversely aIIected
by an illegal use oI public money. When, however, no such unlawIul
spending has been shown, as in the case at bar, petitioner, even as a
taxpayer cannot question the transaction validly executed by and between
the Province and Ortigas Ior the simple reason that it is not privy to said
contract. In other words, petitioner has absolutely no cause oI action, and
consequently no locus standi, in the instant case.

1oya. ET. al. vs. PCGG.

G.R. o. 96541 August 24. 1993

FACTS:

All thirty-Iive (35) petitioners in this Special Civil Action Ior Prohibition
and Mandamus with Prayer Ior Preliminary Iniunction and/or Restraining
Order seek to enioin the Presidential Commission on Good Government
(PCGG) Irom proceeding with the auction sale scheduled on 11 January
1991 by Christie's oI New York oI the Old Masters Paintings and 18th and
19th century silverware seized Irom Malacaang and the Metropolitan
Museum oI Manila and placed in the custody oI the Central Bank.

On 9 August 1990, Mateo A.T. Caparas, then Chairman oI PCGG, wrote
then President Corazon C. Aquino, requesting her Ior authority to sign the
proposed Consignment Agreement between the Republic oI the Philippines
through PCGG and Christie, Manson and Woods International, Inc.
concerning the scheduled sale on 11 January 1991 oI eighty-two (82) Old
Masters Paintings and antique silverware seized Irom Malacaang and the
Metropolitan Museum oI Manila alleged to be part oI the ill-gotten wealth
oI the late President Marcos, his relatives and cronies.

On 14 August 1990, then President Aquino, through Iormer Executive
Secretary Catalino Macaraig, Jr., authorized Chairman Caparas to sign the
Consignment Agreement allowing Christie's oI New York to auction oII the
subiect art pieces Ior and in behalI oI the Republic oI the Philippines. On 15
August 1990, PCGG, through Chairman Caparas, representing the
Government oI the Republic oI the Philippines, signed the Consignment
Agreement with Christie's oI New York.

ISSUE:

Can petitioners as taxpayer`s challenge the validity oI the acts oI the
PCGG?

RULING:

No. They lack basis in Iact and in law. These paintings legally belongs to
the Ioundation or corporation or the members thereoI, although the public
has been given the opportunity to view and appreciate these paintings when
they were placed on exhibit. Similarly, as alleged in the petition, the pieces
oI antique silverware were given to the Marcos couple as giIts Irom Iriends
and dignitaries Irom Ioreign countries on their silver wedding and
anniversary, an occasion personal to them

Not every action Iiled by a taxpayer can qualiIy to challenge the legality oI
oIIicial acts done by the government. A taxpayer's suit can prosper only iI
the governmental acts being questioned involve disbursement oI public
Iunds upon the theory that the expenditure oI public Iunds by an oIIicer oI
the state Ior the purpose oI administering an unconstitutional act constitutes
a misapplication oI such Iunds, which may be enioined at the request oI a
taxpayer.

Lozada vs. CMELEC

G.R. o. L-59068 1anuary 27. 1983

FACTS:

This is a petition Ior mandamus Iiled by Jose Mari Eulalio C. Lozada and
Romeo B. Igot as a representative suit Ior and in behalI oI those who wish
to participate in the election irrespective oI party aIIiliation, to compel the
respondent COMELEC to call a special election to Iill up existing vacancies
numbering twelve (12) in the Interim Batasan Pambansa.

Petitioner Lozada claims that he is a taxpayer and a bonaIide elector oI
Cebu City and a transient voter oI Quezon City, Metro Manila, who desires
to run Ior the position in the Batasan Pambansa; while petitioner Romeo B.
Igot alleges that, as a taxpayer, he has standing to petition by mandamus the
calling oI a special election as mandated by the 1973 Constitution.

The respondent COMELEC, represented by counsel, opposes the petition
alleging, substantially, that petitioners lack standing to Iile the instant
petition Ior they are not the proper parties to institute the action

ISSUE:

As taxpayers, may the petitioners Iile the instant petition?

RULING:

As taxpayers, petitioners may not Iile the instant petition, Ior nowhere
therein is it alleged that tax money is being illegally spent. The act
complained oI is the inaction oI the COMELEC to call a special election, as
is allegedly its ministerial duty under the constitutional provision above
cited, and thereIore, involves no expenditure oI public Iunds. It is only
when an act complained oI, which may include a legislative enactment or
statute, involves the illegal expenditure oI public money that the so-called
taxpayer suit may be allowed

http://www.scribd.com/doc/38458348/Taxation-Ior-Digest
UNDER: ATTY. BOBBY LOCK

BY: MEL ANDREW YU REYES

TAXATION 02

PART I

REMEDIES UNDER THE NIRC

I. ASSESSMENT OF INTERNAL REVENUE TAXES

A. DEFINITION, NATURE, EFFECT AND BASIS

1) LOA, AUDIT NOTICE, TAX VERIFICATION NOTICE

RAMO 1-00

CIR v. SY PHILIPPIES. IC.

MAY 17. 2007 - CTA 90

The revenue examiner went beyond the authority conIerred by LOA. A
LOA authorizes or empowers a designated revenue oIIicer to examine,
veriIy and scrutinize a taxpayer`s books and records in relation to his
internal revenue tax liability Ior a particular period. The LOA, the
examiners were authorize to examine Sony`s book oI accounts and other
accounting records Ior the period '1997 and unveriIied prior years.
However, CIR`s basis Ior deIiciency vat Ior 1997 was 1998. They acted
without authority in arriving at the deIiciency vat assessment. It should be
considered without Iorce and eIIect a nullity.

A LOA should cover a taxable period not exceeding 1 year. The practice oI
issuing LOA covering audit oI 'unveriIied prior years is prohibited.

2) TAX ASSESSMENT

CIR v. PASCR REALTY AD DEVELPMET CRPRATI

1&E 29. 1999 - GR. 128315

An assessment contains not only a computation oI tax liabilities, but also a
demand Ior payment within a prescribed period. It also signals the time
when penalties and interests begin to accrue against the taxpayer. To enable
the taxpayer to determine the remedies thereon, due process requires that it
must be served and received by the taxpayer. Accordingly, an aIIidavit
which was executed by the revenue oIIicer stating the tax liabilities oI a
taxpayer and attached to a criminal complaint Ior tax evasion cannot be
deemed an assessment that can be questioned beIore the CTA. The Iact that
the complaint itselI was speciIically directed and sent to DOJ and not to
Pascor shows that the intent oI the CIR was to Iile a criminal complaint Ior
tax evasion and not to issue an assessment.

B. PERIOD TO ASSESS DEFICIENCY TAX

1) PRESCRIPTION

a) RATIONALE, CONSTRUCTION, INTERPRETATION

REP&BLIC THE PHILIPPIES v. L&IS ABLAZA

The law prescribing a limitation oI actions Ior collection oI income tax is
beneIicial both to the government and to its citizens.

a) The Government because tax oIIicers would be obliged to act promptly
in making oI assessment.

b) The Citizens because aIter the lapse oI the period oI prescription,
citizens would have the Ieeling oI security against unscrupulous tax agents
who will always Iind an excuse to inspect the books oI taxpayers, not to
determine the latter`s real liability, but to take advantage oI every
opportunity to molest, peaceIul law-abiding citizens. Without such legal
deIenses, taxpayers would Iurthermore be under obligation to always keep
their books and keep them open Ior inspection subiect to harassment by
unscrupulous tax agents. The law on prescription being a remedial measure
should be interpreted in a way conducive to bring about the beneIicent
purpose oI aIIording protection to the taxpayer within the contemplation oI
the Commissioner which recommends the approval oI the law.

b) COUNTING OF PERIODS

CIR v. PRIMETW PRPERTY GR&P

A&G. 28. 2007 - GR. 162155

The 2-year prescriptive period is reckoned Irom the Iiling oI the Iinal
adiusted return. Art. 13 NCC, provides that when the law speaks oI a year,
it is understood to be equivalent to 365 days. A year is equivalent to 365
days regardless oI whether it is a regular year or a leap year.

c) RULE ON WRONG RETURNS OR AMENDED RETURNS



CIR v. AYALA SEC&RITIES C.

V. 21. 1980 - GR. L-29485

The SC is persuaded by the Iundamental principle invoked by CIR that
limitations upon the right oI the government to assess and collect taxes will
not be presumed in the absence oI clear legislation to the contrary and that
where the government has not by express statutory provision provided a
limitation upon its right to assess unpaid taxes, such right is imprescriptible.

The SC, thereIore, reconsiders its ruling in its decision under
reconsideration that the right to assess and collect the assessment in
question had prescribed aIter 5 years, and instead rules that there is no such
time limit on the right oI the CIR to assess the 25 tax on unreasonably
accumulated surplus provided in Sec. 25 oI NIRC, since there is no express
statutory provision limiting such right or providing Ior its prescription. The
underlying purpose oI the additional tax in question on a corporation's
improperly accumulated proIits or surplus is as set Iorth in the text oI Sec.
25 oI NIRC itselI to avoid the situation where a corporation unduly retains
its surplus instead oI declaring and paving dividends to its shareholders or
members who would then have to pay the income tax due on such dividends
received by them. The record amply shows that Ayala Securities is a mere
holding company oI its shareholders through its mother company, a
registered co-partnership then set up by the individual shareholders
belonging to the same Iamily and that the prima Iacie evidence and
presumption set up by the Tax Code, thereIore applied without having been
adequately rebutted by the Ayala Securities.

CIR`s plausible alternative contention is that even iI the 25 surtax were to
be deemed subiect to prescription, computed Irom the Iiling oI the income
tax return in 1955, the intent to evade payment oI the surtax is an inherent
quality oI the violation and the return Iiled must necessarily partake oI a
Ialse and/or Iraudulent character which would make applicable the 10-year
prescriptive period provided in Sec. 332(a) oI the Tax Code and since the
assessment was made in 1961 (the 6th year), the assessment was clearly
within the 10-year prescriptive period. The Court sees no necessity,
however, Ior ruling on this point in view oI its adherence to the ruling in the
earlier raise oI United Equipment & Supply Co., supra, holding that the
25 surtax is not subiect to any statutory prescriptive period.

B&T&A SAWMILL IC. v. CTA

EB. 28. 1966 - GR. L-20601

ILIG WRG RET&R -

Since no percentage tax return was actually Iiled by taxpayer to reIlect the
sales oI its logs to Japan, the 10-year prescriptive period Ior cases where
returns are not Iiled applies. Even iI an ITR which happens to be the wrong
return had been Iiled, and even considering that the income Irom said sales
were all reIlected therein, still, this would not take the place oI the correct
return which Ior purposes oI tax in question should actually be the
percentage tax return.

The percentage tax on sale has now been replaced by the 10 VAT.

WHEN THERE IS FRAUD

ere understatement of gross earnings not of itself proves fraud. The
allegation of fraud with intention to evade the franchise tax has not been
proved satisfactorilv. The 1st quarter oI 1960, the gross receipts oI Butuan
Sawmill as a Iranchise grantee amounted to P1, 369,383.10. Only P16,
799.56 represented the alleged unrecorded and under reported receipts oI
Butuan Sawmill. However, a big portion oI the unrecorded receipts oI P16,
799.56 was not reIlected in the book oI accounts oI the taxpayer because it
represented the cost oI the electric current used Iree oI charge by its oIIicer
and employees. It cannot be charged that Butuan Sawmill intended to
deIraud the government oI the Iranchise tax. Fraud, being absent, the right
oI the government to assess the Iranchise tax had already prescribed.

CIR vs. Phoenix Assurance Co.

MAY 20. 1965 - GR. L-19727

Where the amended return is substantially diIIerent Irom the original return,
the right oI the BIR to assess the tax counted Irom the Iiling oI the amended
return. II the assessment is counted Irom the Iiling oI the original return,
this would permit taxpayers to evade taxes by simply reporting in their
original return, heavy losses and amending the same aIter the lapse oI the
prescriptive period when the Commissioner has already lost his authority to
assess the tax. The obiective oI the Tax Code is to impose taxes, not to
enhance tax avoidance to the preiudice oI the government.

CIR. v. LILIA GZALES

here the return was made in the wrong form. the filing thereof did not
start the running of the period of limitations. and where the return was verv
deficient, there was no return at all. II the taxpayer Iailed to observe the
law, Sec. 332 oI NIRC grants CIR a 10 year period within which to bring
an action Ior tax collection, applies. Sec. 94 obligates him to make a return
or amend one already Iiled based on his own knowledge and inIormation
obtained through testimony or otherwise, and subsequently to assess
thereon the taxes due. The running of the period of limitations should be
reckoned from the date the fraud was discovered.

2) SUSPENSION OF PRESCRIPTIVE PERIODS/ EXCEPTIONS



SEC. 203, 222, 223 OF NIRC
RMO 20-90
ORDER 05-01

CIR v. CTA

MAR. 20. 1991 - GR. 44007

Sec. 203 oI NIRC states that internal revenue taxes shall be assessed within
5 years aIter the taxpayer`s return was Iiled. It is undisputed that Eastern
Iailed to Iile any corporate ITR Ior a period oI 20-years Irom 1952-1971.
CIR argued that under Sec. 223(a), Eastern`s Iailure to Iile ITR authorizes
him to assess income tax due Irom Eastern with 10 years, aIter the
discovery oI Ialsity, Iraud or omission. The omission was discovered only
in 1971. # has 10 vears from 1971 or until 1981 within which to assess.
The assessment oI deIiciency income tax was issued on 1973, which is well
within the period prescribed by law. But while it is true that the assessment
is within the prescribed period. it does not follow that it is a valid statement
in its entiretv. RA 808 is an operative act. Eastern is exempted Irom
payment oI all taxes, whether local, provincial or national, except Iranchise
and real property taxes. It goes without saying that the assessment cannot be
held valid against the income derived Irom Eastern`s operation authorized
by the Iranchise. It can only stand valid insoIar as the assessment is Ior
income derived Irom services within the Philippines and which is beyond
the scope oI RA 808.

REP&BLIC THE PHILIPPIES v. DAMIA RET

MAR. 31. 1962 - GR. L-13754

The cause oI action has already prescribed. $ec. 332 of N# does not applv
to income taxes if the collection of said taxes will be made bv summarv
proceedings, but iI the collection is to be eIIected by court action, Sec. 332
oI NIRC will be the controlling provision. The BIR only made the
assessment on 1951 and had up to 1956 to Iile the necessary action. It was
only on 1957 that the action was Iiled in court Ior collection oI alleged
deIiciency income tax Iar beyond the 5 year period.

BA THE PHILIPPIE ISLADS (BPI) v. CIR

CT. 17. 2005 - GR. 139736



PHILIPPIE 1&RALISTS. IC. v. CIR

DEC. 16. 2004 - GR. 162852

A waiver oI statute oI limitations, to a certain extent, is a derogation oI the
taxpayer`s right to security against prolonged and unscrupulous
investigations and must thereIore be careIully and strictly construed. The
waiver of statute of limitations is not a waiver of the right to invoke the
defense of prescription as erroneouslv held bv the . It is an agreement
between the taxpaver and the B# that the period to issue an assessment
and collect the taxes due is extended to a date certain. The waiver does not
mean that the taxpaver relinquishes the right to invoke prescription
unequallv particular where the language of the document is equivocal. For
the purpose oI saIeguarding taxpayers Irom an unreasonable examination,
investigation or assessment, our tax law provides a statute oI limitations in
the collection oI taxes. The law oI prescription being a remedial measure
should be liberally construed in order to aIIord such protection. The
exception to the law on prescription should perIorce be strictly construed.

1SE AZAR v. CTA. & CIR

A&G. 23. 1974 - GR. 20569



In three diIIerent cases oI (1) Ialse return, (2) Iraudulent return with intent
to evade tax, and (3) Iailure to Iile a return, the tax may be assessed, or a
proceeding in court Ior the collection oI such tax may begin without
assessment, at any time within 10 years aIter discovery oI the Ialsity, Iraud
or omission.

The ordinary period oI prescription oI 5 years within which to assess tax
liabilities under Sec. 331 oI NIRC should be applicable to normal
circumstances, but where the government is placed at a disadvantage so as
to prevent its lawIul agents Irom proper assessment oI tax liabilities due to
Ialse return, Iraudulent returns intended to evade payment oI tax or Iailure
to Iile returns, the period oI 10 years provided in Sec. 332(a) oI NIRC, Irom
time oI discovery oI the Ialsity, Iraud or omission even seems to be
inadequate and should be the one enIorced.

REP&BLIC THE PHILIPPIES v. ER & C.. LTD.

SEP. 29. 1966 - GR. L-21609

Under Sec. 333 oI the Tax Code, the running oI the prescriptive period to
collect deIiciency taxes shall be suspended Ior the period during which the
BIR Commissioner is prohibited Irom beginning a distraint and levy or
instituting a proceeding in court, and Ior 60 days thereaIter. In the case at
bar, the pendency oI the taxpayer`s appeal in CTA and in SC had the eIIect
oI temporarily staying the hands oI the Commissioner. II the taxpayer`s
stand that the pendency oI the appeal did not stop the running oI the period
because the CTA did not have iurisdiction over the case is upheld, taxpayers
would be encouraged to delay the payment oI taxes in the hope oI
ultimately avoiding the same. Under the circumstances, the running oI the
prescriptive period was suspended.

CIR v. S&YC CSLIDATED MIIG C.

V. 25. 1958 - GR. L-11527

mere request for re-examination or reinvestigation of assessment mav not
suspend the running of the period of limitation for in such a case there is a
need of a written agreement to extend the period between the collector and
the taxpaver. There are cases, however, where a taxpayer may be prevented
Irom setting-up the deIense oI prescription even iI he has not previously
waived it in writing as when by his repeated requests or positive acts, the
government has been Ior good reasons persuaded to postponed collection to
make himselI Ieel that the demand was not unreasonable or that no
harassment or iniustice is meant by the government, and when such
situation comes to pass there are authorities that hold, based on weighty
reason, that such an attitude or behaviour should not be countenanced iI
only to protect the interest oI the government.

He who prevents a thing from being done mav not avail himself of the non-
performance which he has himself occasioned. for the law savs to him in
effect 'this is vour own act. and therefore vou are damnified.` The tax
could have been collected, but the government withheld action at the
speciIic request oI plaintiII. The plaintiII is now stopped and should not be
permitted to raise the deIense oI statute oI limitations.

CIR v. PHILIPPIE GLBAL CMM&ICATI. IC.

CT. 31. 2006 - GR. 167146

The 3 year statute oI limitations on the tax collection oI an assessed tax
provided under Sec. 269(c) oI the Tax Code oI 1977, a law enacted to
protect the interests oI taxpayers, must be given eIIect. In providing Ior
exception, the law strictly limits the suspension oI the running oI the
prescription period to, among other instances, protest wherein the taxpayer
requests Ior a reinvestigation. In this case, the taxpayer merely Iiled 2
protest letters requesting Ior reconsideration, and where the BIR could not
have conducted a reinvestigation because oI new or additional evidence was
submitted, the running oI statute oI limitations cannot be interrupted. The
tax which is the subiect oI the decision issued by CIR on October 08, 2002
aIIirming the Iormal assessment issued on April 14, 1994 can no longer be
the subiect oI any proceeding Ior its collection. The right of the government
to collect the alleged deficiencv tax is barred bv prescription.

C. REQUISITES OF A VALID ASSESSMENT

SEC. 3, RR 12-99

1) DUE PROCESS



CIR v. ALBERT BEIPAY

1A. 31. 1962 - GR. L-13656

To sustain the deIiciency tax assessed against Benipayo would amount to a
Iinding that he had, Ior a considerable period oI time, cheated and deIrauded
the government by selling each adult patron 2 children`s tax-Iree tickets
instead oI 1 ticket subiect to the amusement tax. Fraud is a serious charge
and to sustained, must be supported by clear and convincing prooI which, in
this case, is lacking.

BIACIA SY P v. CTA. & CIR

The law is speciIic and clear. The rule on 'The Best Evidence Obtainable
applies when a tax report required by law Ior the purpose oI assessment is
not available or when tax report is incomplete or Iraudulent.

The tax assessment by tax examiners are presumed correct and made in
good Iaith. The taxpayer has the duty to prove otherwise. In the absence oI
prooI oI irregularities in the perIormance oI duties, an assessment duly
made by the BIR examiner and approved by his superior oIIicers will not be
disturbed. All presumptions are in Iavour oI the correctness oI tax
assessments. The Iraudulent acts detailed in the decision under review had
not been satisIactorily rebutted by Sy Po. There are indeed clear indications
on the part oI taxpayer to deprive the government oI the tax due.

CIR v. AZ&CEA REYES

1A. 27. 2006 - GR. 159694

The 2nd paragraph oI Sec. 228 oI NIRC is clear and mandatory. The
taxpayers shall be inIormed in writing oI the law and the Iacts on which the
assessment is made; otherwise the assessment shall be void. RA 8424 has
already amended the provisions oI Sec. 229 oI NIRC on protesting an
assessment. The old requirement oI merely notiIying the taxpayer oI the
CIR`s Iindings was changed in 1998 oI inIorming the taxpayer oI not only
the law, but also oI the Iacts on which an assessment would be made,
otherwise, the assessment itselI would be invalid.

A. BRW C.. IC. v. CIR

1&. 07. 2004 - CTA 6357

The record shows that CIR Iailed to comply with the procedural due process
requirement in order to sustain the validity and legality oI an assessment.

First, the report oI investigation sent prior to the issuance oI PAN indicated
that there is a Iinding oI deIiciency income tax oI only P4, 511,035.67. II
ever they should properly issue against ABC the same should have reIlected
the Iinding made on report. Instead, the PAN completely departed Irom the
result by increasing the alleged tax liability oI ABC.

Secondly, the law and rules and regulation is issued pursuant thereto clearly
gives the taxpayer the right to reply to the PAN. The period given to
taxpayer is 15 days Irom receipt oI PAN. Here, the CIR withheld PAN to
ABC. CIR through registered mail sent the PAN to ABC`s Iormer address.
Further, merely 4 days aIter the PAN was received and without waiting Ior
the lapse oI the mandatory 15 day period to reply, CIR issued the
assessment, even beIore it could be given a chance to be heard.

The sending oI PAN and assessment notice to the wrong address may only
be seen as an attempt to mislead or conIuse ABC.

In the observance oI procedural due process, the SC is always
mindIul that a taxpayer being made liable with his property be given an
opportunity to be heard which is one oI its essential elements. With the
Iailure oI CIR to strictly comply with the procedure prescribed by law, and
Iailure oI ABC to receive a copy oI the alleged assessment, the latter was
not aIIorded its right to be heard Ior it was denied the opportunity to protest
or dispute the alleged assessment.

CIR v. METR S&PERAMA. IC.

SEP. 16. 2008 - CTA 306

Assessment is a notice to the eIIect that the amount stated is due as a
tax and a demand Ior the payment thereoI. It Iixes and determines the tax
liability oI a taxpayer. As soon as it served, an obligation arises on the part
oI the taxpayer concerned to pay the amount assessed and demanded. Sec.
228 oI NIRC does not only require that there must be an investigation and
determination oI taxpayer`s liability. The ommissioner or his dulv
authorized representative is required to send notice of assessment to the
taxpaver in order to give the latter an opportunitv to file a protest. An
assessment is deemed made only when the same is actually received by the
taxpayer.

The document is a notice duly sent to the taxpayer. Indeed, an assessment is
deemed made only when the CIR releases, mails or sends such notice to the
taxpayer. Although, there is no speciIic requirement that the taxpayer
should receive the notice within the prescriptive period, due process
requires at the very least that such notice actually be received. II it appears
that the person liable Ior payment did not receive the assessment, the
assessment could not become Iinal and executory.

CIR v. DMIADR MEG&IT

SEP. 17. 2008 - GR. 167560

While the lack oI PRN and PAN is a deviation Irom the
requirements under Sec. 1 and 2 oI RR 12-85, the same cannot detract Irom
the Iact that the FAN were issued to and actually received by Menguito in
accordance with Sec. 228 oI NIRC. The stringent requirement that an
assessment notice is satisIactorily proven to have been issued and released
or, iI receipt thereoI is denied that the said assessment notice have been
served on taxpayer, applies only to FAN but not PRN or PAN. The issuance
oI valid FAN is a substantive pre-requisite to tax collection, Ior it contains
not only a computation oI tax liabilities but also a demand Ior payment
within a prescribed period, thereby signalling the time when penalties and
interests begin to accrue against the taxpayer and enabling the latter to
determine his remedies thereoI. Due process requires that it must be served
on and received by taxpayer.

A PRN and PAN do not bear the gravity oI a FAN. The PRN and PAN
merely hint at the initial Iindings oI the BIR against a taxpayer and invited
the latter to an 'InIormal ConIerence or ClariIicatory Meeting. Neither
notice contains a declaration oI the tax liability oI the taxpayer or a demand
Ior payment thereoI. Hence, the lack oI such notices inIlicts no preiudice on
taxpayer Ior as long as the latter is properly served with FAN. In the case oI
Menguito, a FAN was received by him as acknowledge in his petition Ior
review and ioint stipulation, and on the basis thereoI, he Iiled a protest with
the BIR and eventually a petition Ior CA.

2) POWER OF CIR TO ISSUE ASSESSMENTS



MERALC SEC&RITIES CRPRATI v. VICTRI
SAVELLA

CT. 23. 1982 - GR. L-36748

Since the oIIice oI the CIR is charged with the administration oI
revenue laws, which is the primary responsibility oI the executive branch oI
the government, mandamus may not lie against the Commissioner to
compel him to impose a tax assessment not Iound by him to be due or
proper Ior that would be tantamount to a usurpation oI executive Iunction.

Such absence oI arbitrariness or grave abuse so as to go beyond the
statutory authority is not subiect to the contrary iudgment or control oI
others. 'Discretion when applied to public Iunctionaries, means a power or
right conIerred upon them by law oI acting oIIicially, under certain
circumstances, uncontrollable by the iudgment or conscience oI others. A
purely ministerial act or duty in contradiction to a discretional act is one
which an oIIicer or tribunal perIorms in a given state oI Iacts, in a
prescribed manner in obedience to the mandate oI a legal authority, without
regard to or the exercise oI his own iudgment upon the propriety or
impropriety oI the act done. f the law imposes a dutv upon a public officer
and gives him the right to decide how or when the dutv shall be performed.
such dutv is discretionarv and not ministerial. The duty is ministerial only
when the discharge oI the same requires neither the exercise oI oIIicial
discretion or iudgment.

EREST MACEDA v. CATALI MACARAIG

NPC availed oI subsidy granted to GOCC that were made subiect to tax
payments. Sec. 23 oI PD 1177, mandates that the Secretary oI Finance and
Commissioner oI Budget had to establish the necessary procedures to
accomplish the tax payment/ tax subsidy scheme oI the government in
eIIect, NPC did not put out any cash to pay any tax as it got Irom the
general Iund the amounts necessary to pay the diIIerent revenue collector
Ior the taxes it had to pay.

The tax exemption withdrawn by Sec. 1 oI PD 1931 was thereIore
the same NPC tax exemption privileges withdrawn by Sec. 23 oI PD 1177.
NPC could no longer obtain a subsidy Ior the taxes it had to pay. It could
however, under PD 1931 ask Ior a total restoration oI its tax exemption
privileges, which it did, and the same were granted under FIRB Resolution
10-85 and 1-86 as approved by the Minister oI Finance.

The oil companies which supply bunker Iuel oil to NPC have to pay
taxes imposed upon said bunker Iuel oil sold to NPC. By indirect taxation,
the economic burden is expected to be passed on through the channels oI
commerce to the user or consumer oI the goods sold. The NPC has been
exempted Irom both direct and indirect taxation, the NPC must be held
exempted Irom absorbing the economic burden oI indirect taxation.

3) WHEN ASSESSMENT MADE

GZAL AVA v. CIR

1A. 30. 1965 - GR. L-19470

The presumption that a letter duly directed and mailed was received
in the regular course oI mail cannot apply where none oI the required Iacts
to raise this presumption, i.e., that the letter was properly addressed with
postage prepaid and that it was mailed, have been shown.

Mere notations on the records oI the tax collector oI the mailing oI a notice
oI a deIiciency tax assessment to a taxpayer, made without the supporting
evidence, cannot suIIice to prove that such notice was sent and received;
otherwise, the taxpayer would be at the mercy oI the revenue oIIicers,
without adequate protection or deIense.

BARCEL. RXAS SEC&RITIES. IC. v. CIR

A&G. 07. 2006 - GR. 157064

When a mail matter is sent by registered mail, there exists a
presumption set Iorth under Sec. 3(v) Rule 131 oI the Rules oI Court, that it
was received in the regular course oI mail. The Iacts to be proved in order to
raise this presumption are:

a) The letter was properly addressed with postage prepaid; and

b) That it was mailed.

While a mailed letter is deemed received by the addressee in the
ordinary course oI mail, this is still merely a disputable presumption subiect
to contravention, and a direct denial oI the receipt thereoI shiIts the burden
upon the party Iavoured by the presumption to prove that the mailed letter
was indeed received by the addressee.

Entries in oIIicial records made in the perIormance oI a duty
specially enioined by law, are prima Iacie evidence oI the Iacts therein
stated. Where it has been held that an entrant must have personal knowledge
oI the Iacts stated by him or such Iacts were acquired by him Irom reports
made by persons under a legal duty to submit the same. There are 3
requisites Ior admissibility:

a) Entry was made by a public oIIicer, or by another person specially
enioined by law to do so;
b) It was made by public oIIicer in the perIormance oI his duties; and
c) The public oIIicer or other person had suIIicient knowledge oI Iacts by
him.

In this case, the entries made by Versola were not based on her
personal knowledge as she did not attest to the Iact that she personally
prepared and mailed the assessment notice, nor was it stated in the transcript
oI stenographic notes how and Irom whom she obtained the pertinent
inIormation.

II. PROTESTING AN ASSESSMENT/ REMEDY BEFORE PAYMENT

A. HOW TO PROTEST OR DISPUTE AN ASSESSMENT
ADMINISTRATIVELY
SEC. 228 OF NIRC
SEC. 3.1.5, RR 12-99

1) REIVESTIGATI v. RECSIDERATI

BA THE PHILIPPIE ISLADS (BPI) v. CIR

CT. 17. 2005 - GR. 139736

With the issuance oI RR 12-85 providing Ior the distinction between
a request Ior reconsideration and a request Ior reinvestigation. It bears to
emphasize that under Sec. 224 oI NIRC the running oI the prescriptive
period Ior collection oI taxes can only be suspended by a 'request Ior
reinvestigation, and not a request Ior reconsideration.

a) Request Ior Reinvestigation

- Entails the reception and evaluation oI additional evidences.

- Can suspend the running oI the statute oI limitations on collection oI
assessed tax.

b) Request Ior Reconsideration

- Is limited to the evidence already at hand.

- Does not suspend the running oI the statute oI limitations on collection oI
assessed tax.

The BIR Commissioner must Iirst grant the request Ior reinvestigation as a
requirement Ior suspension oI the statute oI limitations. 'The act of
requesting a reinvestigation alone does not suspend the period. The request
should first be granted in order to effect suspension.`

2) EFFECTS OF FAILURE TO FILE PROTEST/ FAILURE TO SUBMIT
RELEVANT DOCUMENTS

ERDIAD MARCS II v. CA. & CIR

1&E 05. 1997 - GR. 120880



The obiections to the assessment should have been raised,
considering the ample remedies aIIorded the taxpayer by the Tax Code,
with the BIR and the CTA, and cannot be raised now via Petition Ior
Certiorari, under the pretext oI grave abuse oI discretion. The course oI
action taken by Marcos II reIlects his disregard or even repugnance oI the
established institutions Ior governance in the scheme oI a well-ordered
society. The subiect tax assessments having become Iinal, executory and
enIorceable, the same can no longer be contested by means oI a disguise
protest. ertiorari mav not be used as a substitute for a lost appeal or
remedv. This iudicial policv becomes more pronounced in view of the
absence of sufficient attack against the actuations of government.

Where there was an opportunity to raise obiections to government action,
and such opportunity was disregarded, Ior no iustiIiable reason, the party
claiming oppression then becomes the oppressor oI the orderly Iunctions oI
the government. He who comes to court must come with clean hands.
Otherwise, he not only taints his name, but ridicules the very structure oI
established authority.

RIZAL CMMERCIAL BAIG CRP. (RCBC) v. CIR

1&E 16. 2006 - GR. 168498

As provided in Sec. 228, the Iailure oI the taxpayer to appeal Irom
an assessment on time rendered the assessment Iinal, executory and
demandable. RCBC is precluded Irom disputing the correctness oI the
assessment. While the right to appeal a decision oI the Commissioner oI
CTA is merely a statutory remedy, nevertheless the requirement that it must
be brought within 30 days is iurisdictional. II a statutory remedy provides as
a condition precedent that the action to enIorce it must be commenced
within a prescribed time, such requirement is iurisdictional and Iailure to
comply therewith may be raised in a MTD.

REP&BLIC THE PHILIPPIES v. ER & C.. LTD.

SEP. 29. 1966 - GR. L-21609

The assessment Ior deIiciency income tax Ior 1947 has become Iinal
and executory, and thereIore, Ker, may not anymore raise deIenses which
go into the merits oI assessment, i.e. prescription oI the Commissioner`s
right to assess the tax. However. Ker raised the defense of prescription in
the proceedings below. and the #epublic. instead of questioning the right of
Ker to raise such defense. litigated on it and submitted the issue for
resolution of the court. Bv its actuation, the government should be
considered to have waived its right to object to the setting up of such
defenses.

MAMB&LA L&MBER CMPAY v. REP&BLIC THE
PHILIPPIES

SEP. 05. 1984

The commencement oI the 5-year period should be counted Irom
Aug. 29, 1958, the date oI the letter oI demand oI the BIR Commissioner to
Mambulao. It is this demand or assessment that is appealable to the CTA.
The complaint Ior collection was Iiled in the CFI on Aug. 25, 1961, very
much within the 5-year period prescribed by Sec. 332 (c) oI the Tax Code.
The right oI the Commissioner to collect the Iorest charges and surcharges
in the amount oI P15, 443.55 has not prescribed.

It is also not disputed the Mambulao requested Ior a reinvestigation
oI its tax liability. In reply, Republic gave Mambulao 20-days Irom receipt
thereto to submit the results oI its veriIication oI payments and Iailure to
comply would be an abandonment oI the request Ior reinvestigation. Neither
did it appeal to the CTA within 30-days Irom receipt oI the letter, thus
making the assessment Iinal and executory.

PR&LIE & IS&RACE CRPRATI v. CIR

SEP. 11. 207 - CTA 6774

The eIIect oI PruliIe`s lack oI supporting documents submitted is
that, it lost its chance to Iurther contesting the premium tax assessment. The
Iinality oI the assessment simply means that where the taxpayer decides to
Iorgo with the opportunity to present the documents in support oI its claim
within 60 days Irom the Iiling oI its protest, it merely lost its chance to
Iurther contest the assessment.

Its non-compliance with the submission oI the necessary documents
would either mean that PruliIe no longer wishes to Iurther submit any
document Ior the reason that its protest letter Iiled was more than enough to
support its claim, or that PruliIe Iailed to comply thus it can no longer give
iustiIication with regard to its obiections as to the correctness oI the
assessment notices.

The necessity oI the submission oI the supporting documents lies on
PruliIe. It cannot be leIt to the discretion oI the CIR Ior in doing so would
leave PruliIe`s case at the mercy oI the whims oI the CIR. It is Ior PruliIe to
decide whether or not supporting documents are necessary to support its
protest Ior it is the best position, being the aIIected party to the assessment
to determine which documents are necessary and essential to garner a
Iavourable decision Irom CIR.

The mere claim oI PruliIe that its cash collection did not comprise
entirely oI premiums collected cannot be given credence. PruliIe should
have presented supporting documents to prove such claim. Since PruliIe
Iailed to present a scintilla oI evidence to that eIIect, CTA sustains CIR`s
basis oI such collections. Assessments should not be based on presumption
no matter how logical the presumption might be. In order to stand the test oI
iudicial scrutiny, the assessment must be based on actual Iacts.

AB-AMR SAVIGS BA CRP. v. CIR

SEP. 10. 2008 - CTA 7089

Where a taxpayer Iailed to submit relevant supporting documents
within the 60-day period Irom Iiling oI the protest, and in case oI inaction
by CIR and the taxpayer chooses to appeal to the CTA, the same must be
made within 30-days Irom the lapse oI the 180-day period, the 180-day
period must be reckoned Irom the date the protest was Iiled. The 60-day
period shall not be added to the computation oI the 180-days because in
case the taxpayer Iails to submit relevant supporting documents, the
assessment becomes Iinal. The 180 day period, thereIore, commenced to
run Irom the date protest was Iiled. Failure on the part oI ABN-AMRO to
Iile a Petition Ior Review with the CTA within 30-days Irom the lapse oI
180-day period reckoned Irom the date the protest was Iiled renders the
assessment Iinal, executory and demandable.

The case at bar, reveals that ABN-AMRO Iiled its letter oI protest
on January 28, 2004, it has 60-days until March 28, 2004 within which to
submit the relevant supporting documents. Records oI the case, is bereIt oI
prooI that ABN-AMRO had submitted the relevant documents on or beIore
March 28, 2004. The 180-day period shall be reckoned Irom the Iiling oI
the protest on January 28, 2004 which ends on July 26, 2004.

CIR v. 1SE CCEPCI

MAR. 15. 1968 - GR. L-23912

Where a taxpayer seeking a reIund oI estate and inheritance taxes
whose request is denied and whose appeal to the CTA was dismissed Ior
being Iiled out oI time, sues anew to recover such taxes already paid under
protest, his action is devoid oI merit. For in the same way that the expedient
oI an appeal Irom a denial oI a tax request Ior cancellation oI warrant oI
distraint and levy cannot be utilized to test the legality oI an assessment
which is Sec. 360 oI the Tax Code not available to revive the right to
contest the validity oI an assessment which had become Iinal Ior Iailure to
appeal the same on time.

B. COMMISSIONER OF INTERNAL REVENUE RENDERS DECISION
ON DISPUTED ASSESSMENT

1) PERIOD TO DECIDE

SEC. 228 OF NIRC

CEAIC WIRELESS ETWR. IC. v. CIR. CTA. & CA

DEC. 09. 2005 - GR. 148380

The general rule is that the CIR Commissioner may delegate any power
vested upon him by law to Division ChieIs or to oIIicials oI higher rank. He
cannot, however, delegate the Iour powers granted to him under Sec. 7 oI
NIRC.

Sec. 7 Authority oI the Commissioner to Delegate Power The
Commissioner may delegate the power vested in him under the pertinent
provisions oI this Code to any or such subordinate oIIicials with the rank
equivalent to a division chieI or higher, subiect to such limitations and
restrictions as may be imposed under rules and regulations to be
promulgated by the Secretary oI Finance, upon recommendation oI the
Commissioner. Provided, however, that the Iollowing powers oI the
Commissioner shall not be delegated:

a) The power to recommend the promulgation oI rules and regulations by
the Secretary oI Finance;
b) The power to issue rulings oI Iirst impression or to reverse, revoke or
modiIy any existing ruling oI the Bureau;
c) The power to compromise or abate;

d) The power to assign or reassign internal revenue oIIicers to establishment
where articles subiect to excise tax are produce and kept.

The authority to make tax assessments may be delegated to subordinate
oIIicers. Said assessment has the same Iorce and eIIect as that issued by the
Commissioner himselI, iI not reviewed or revised by the latter such as in the
case.

C. REMEDY OF TAXPAYER



SEC.3.5.1,RR12-99
SEC.228 OF NIRC
RA 9282, as amended by RA 9503
RR OF CTA, AM 05-11-07-CTA

1) CIR FAILS TO ACT ON PROTEST WITHIN 180 DAYS FROM
SUBMISSION OF RELEVANT

DOCUMENTS

LASCA LAD C.. IC. v. CIR. & RBERT D&LI

1A. 04. 2000 - CTA 5777

Lascona argues that its Iailure to appeal to the CTA within 30 days Irom the
lapse oI the 180-day period did not make the assessment Iinal and executory
simply because CIR did not act upon the protest within the 180-day period.
In such a situation, Lascona contends that it had the option to appeal to the
CTA or to continue with the proceedings on its protest in the administrative
level. Once a decision is rendered by the Commissioner on the protest, the
30-day period to appeal Irom receipt oI the decision is mandatory.

In case oI inaction, Sec. 228 oI the Tax Code merely gave the taxpayer an
option: Iirst, he may appeal to the CTA within 30 days Irom the lapse oI the
180-day period; or second, he may wait until the Commissioner decides on
his protest beIore he elevates his case. The court believes that the taxpayer
was given this option so that in case his protest is not acted upon within the
180-day period, he may be able to seek immediate relieI and need not wait
Ior an indeIinite period oI time Ior the Commissioner to decide. But iI he
chooses to wait Ior a positive action on the part oI the Commissioner, then
the same could not result in the assessment becoming Iinal, executory and
demandable.

RIZAL CMMERCIAL BAIG CRPRATI (RCBC) v. CIR

1&E 16. 2006 - GR. 168498

As provided in Sec. 228, the Iailure oI a taxpayer to appeal Irom an
assessment on time rendered the assessment Iinal, executory and
demandable. Consequently, RCBC is precluded Irom disputing the
correctness oI the assessment. While the right to appeal a decision o the
Commissioner to the CTA is merely a statutory remedy, nevertheless the
requirement that it must be brought within 30 days is iurisdictional. II a
statutory remedy provides as a condition precedent that the action to enIorce
it must be commenced within a prescribed time, such requirement is
iurisdictional and Iailure to comply therewith may be raised in a MTD.

2) APPEAL TO THE CTA EN BANC, SC

REP&BLIC THE PHILIPPIES v. LIM TIA SS & C.. IC.

MAR. 31. 1966 - GR. L-21731

Nowhere in the Tax Code is the CIR required to rule Iirst on a taxpayer's
request Ior reinvestigation beIore he can go to court Ior the purpose oI
collecting the tax assessed. On the contrary, Sec. 305 withholds Irom all
courts, except the CTA the authority to restrain the collection oI any
national internal-revenue tax, Iree oI charge, thereby indicating the
legislative policy to allow the CIR much latitude in the speedy and prompt
collection oI taxes.

BeIore the creation oI the CTA the remedy oI a taxpayer who desired to
contest an assessment issued by the CIR was to pay the tax and bring an
action in the ordinary courts Ior its recovery pursuant to Sec. 306 oI the Tax
Code. Collection or payment oI the tax was not made to wait until aIter the
CIR has resolved all issues raised by the taxpayer against an assessment.
RA 1125 creating the CTA allows the taxpayer to dispute the correctness oI
legality oI an assessment both in the purely administrative level and in said
court, but it does not stop or prohibit the CIR Irom collecting the tax
through any oI the means provided in Sec. 316 oI the Tax Code, except
when enioined by CTA.

ADVERTISIG ASSCIATES. IC. v. CA. & CIR

DEC. 26. 1984 - GR. L-59758

Acting Commissioner Plana wrote a letter in an answer to the request oI the
taxpayer Ior the cancellation oI the assessments and the withdrawal oI the
warrants oI distraint. He iustiIied the assessments by stating that the rental
income oI Advertising Associates Irom the billboards and neon signs
constituted Iees or compensation Ior its advertising services. He requested
the taxpayer to pay the deIiciency taxes with 10-days Irom receipt oI the
demand; otherwise, the Bureau would enIorce the warrants oI distraint. In
his demand letter, he states that:

'This constitutes our Iinal decision on the matter. II you are not agreeable,
you may appeal to the CTA within 30 days Irom receipt oI this letter.

No amount oI quibbling or sophistry can blink the Iact that said letter, as its
tenor shows, embodies the Commissioner's Iinal decision within the
meaning oI Sec. 7 RA 1125. The Commissioner said so. He even directed
the taxpayer to appeal it to the Tax Court. The directive is in consonance
with this Court's dictum that the Commissioner should always indicate to
the taxpayer in clear and unequivocal language what constitute his Iinal
determination oI the disputed assessment. That procedure is demanded by
the pressing need Ior Iair play, regularity and orderliness in administrative
action.

CIR v. ALG&E. IC.. & CTA

EB. 17. 1988 - GR. L-28896

The record shows that on January 14, 1965, Algue received a letter Irom
CIR assessing it Ior delinquency income taxes Ior 1958 and 1959. Four days
thereaIter, Algue Iiled a letter oI protest or request Ior reconsideration
which letter was stamp-received on the same day in the oIIice oI the CIR.
On March 12, 1965, a warrant oI distraint and levy was presented to Algue
who reIused to receive it on the ground oI the pending protest. A photocopy
was given to the BIR agent, who deIerred service oI the warrant. On April
7, 1965, Algue was Iinally inIormed that the BIR was not taking any action
on the protest and it was only then that he accepted the warrant oI distraint
and levy. 16 days later, Algue Iiled a petition Ior review on the decision oI
the CIR with the CTA.

The Iorgoing circumstances show that the petition was Iiled seasonably. RA
1125 states that the appeal may be made within 30 days aIter receipt oI the
decision or ruling challenged.

It is true that as a rule the warrant oI distraint and levy is 'prooI oI the
Iinality oI the assessment and renders hopeless a request Ior
reconsideration, being tantamount to an outright denial thereoI and makes
the said request deemed reiected. But there is a special circumstance in the
case at bar that prevents application oI this accepted doctrine. The proven
Iact is that 4 days aIter Algue received the notice oI assessment; it Iiled its
letter oI protest. This was apparently not taken into account beIore the
warrant oI distraint and levy was issued; indeed, such protest could not be
located in the oIIice oI CIR. It was only aIter Atty. Guevara gave the BIR a
copy oI the protest that it was, iI at all, considered by the tax authorities.
During the intervening period, the warrant was premature and could
thereIore not be served.

ELPIDI YABES & SEVERI YABES v. H. APLE
L1

1&LY 20. 1982 - GR. L-46954

There is no reason Ior the Court to disagree Irom or reverse the CTA`s
conclusion that under the circumstances oI the case, what may be
considered as Iinal decision or assessment oI the Commissioner is the Iiling
oI the complaint Ior collection in the CFI. The summons oI which was
served on Yabes on January 20, 1971, and that thereIore the appeal with the
CTA was Iiled on time.

The dismissal oI the complaint is not suIIicient. The ends oI iustice would
best be served by considering the complaint Iiled in the Civil case not only
as a Iinal notice oI assessment but also as a counterclaim in the CTA case,
in order to avoid multiplicity oI suits, as well as to expedite the settlement
oI the controversy between the parties. The 2 case involves the same
parties, the same subiect matter and the same issue, which is the liability oI
the heirs oI Yabes Ior commercial broker`s Iixed and percentage taxes due
Irom Yabes. WhereIore, the petition is granted and the writs prayed Ior are
issued. The question orders are annulled and set aside and the complaint in
the Civil case should be dismissed, the same to be transIerred to the CTA to
be considered therein as a counterclaim in the CTA case. The TRO is made
permanent.

CIR v. &I SHIPPIG CRPRATI. & CTA

MAY 21. 1990 - GR. 66160

There appears to be no dispute that CIR did not rule on Union Shipping`s
motion Ior reconsideration but contrary to the ruling oI the Court, leIt Union
Shipping in the dark as to which action oI the Commissioner is the decision
appealable to CTA. Had he categorically stated that he denies Union
Shipping`s motion Ior reconsideration and that his action constitutes his
Iinal determination oI the disputed assessment, Union Shipping without
needless diIIiculty would have been able to determine when his right to
appeal accrues and the resulting conIusion would have been avoided.

Under the circumstances, CIR, not having clearly signiIied his Iinal action
on the disputed assessment, legally the period to appeal has not commenced
to run. Thus, it was only when Union Shipping received the summons on
the civil suit Ior collection oI deIiciency income on December 1978 that the
period to appeal commenced to run.

The request Ior reinvestigation and reconsideration was in eIIect considered
denied by CIR when the latter Iiled a civil suit Ior collection oI deIiciency
income. So that when Union Shipping Iiled an appeal with the CTA, it
consumed a total oI only 13 days, well within the 30 day period to appeal.

CIR v. ISABELA C&LT&RAL CRPRATI

1&LY 11. 2001 - GR. 135210

The Final Notice BeIore Seizure cannot but be considered as the
Commissioner`s decision disposing oI the request Ior reconsideration Iiled
by Isabela, who received no other response to its request. Not only was the
Notice the only response received; its content and tenor supported the
theory that it was the CIR`s Iinal act regarding the request Ior
reconsideration. The very title expressly indicated that it was a Iinal notice
prior to seizure oI property. The letter itselI clearly stated that Isabela was
being given 'this Last Opportunity to pay; otherwise, its properties would
be subiected to distraint and levy.

Sec. 228 oI NIRC states that a delinquent taxpayer may nevertheless
directly appeal a disputed assessment, iI its request Ior reconsideration
remains unacted upon 180 days aIter submission thereoI. In this case, the
period oI 180 days had already lapsed when Isabela Iiled its request Ior
reconsideration on March 1990, without any action on the part oI the CIR.

Jurisprudence dictates that a Iinal demand letter Ior payment oI delinquent
taxes may be considered a decision on a disputed or protested assessment.

D. NON-RETROACTIVITY OF RULINGS

SEC. 246 OF NIRC

1) REVIEW, APPEAL TO SECRETARY OF FINANCE

SEC. 4 OF NIRC



CIR v. PHILIPPIE HEALTH CARE PRVIDERS IC.

APR. 24. 2007 - GR. 168129

Sec. 246 oI the 1997 Tax Code, as amended provides that rulings, circulars,
rules and regulations promulgated by the CIR Commissioner have no
retroactive application iI to apply them would preiudice the taxpayer. The
exceptions to this rule are:

Where the taxpayer deliberately misstates or omits material Iacts Irom his
return or in any document required oI him by the BIR; Where the Iacts
subsequently gathered by the BIR are materially diIIerent Irom the Iacts on
which the ruling is based;
Where the taxpayer acted in bad Iaith.

Philhealth`s Iailure to describe itselI as a 'health maintenance organization
which is subiect to VAT, is not tantamount to bad Iaith. It is apparent that
when VAT Ruling was issued in Philhealth`s Iavor, the term 'health
maintenance organization was yet unknown or had no signiIicance Ior
taxation purposes.

Under Sec. 246, the CIR Commissioner is precluded Irom adopting a
position contrary to one previously taken where iniustice would result to the
taxpayer. Hence, where an assessment Ior deIiciency withholding income
taxes was made, 3 years aIter a new BIR Circular reversed a previous one,
upon which the taxpayer had relied upon; such an assessment was
preiudicial to the taxpayer. The rule, otherwise, opined the Court, would be
contrary to the tenets oI good Iaith, equity and Iair play. The rule is that the
BIR rulings have no retroactive eIIect where a grossly unIair deal would
result to the preiudice oI the taxpayer, as in this case.

PHILIPPIE BA CMM&ICATIS (PBCM) v. CIR.
CTA. & CA

1A. 28. 1999 - GR. 112024

The rule states that the taxpayer may Iile a claim Ior reIund or credit with
the BIR Commissioner, within 2 years aIter payment oI tax, beIore any suit
in CTA is commenced. The 2-year prescriptive period provided, should be
computed Irom the time oI Iiling the Adiustment Return and Iinal payment
oI the tax Ior the year. When the Acting Commissioner issued RMC 7-85,
changing the prescriptive period oI 2 years to 10 years on claims oI excess
quarterly income tax payments, such circular created a clear inconsistency
with the provision oI Sec. 230 oI NIRC. The BIR did not simply interpret
the law; rather it legislated guidelines contrary to the statute passed by the
Congress.

The Revenue Memorandum circulars are considered administrative rulings
which are issued Irom time to time by the BIR Commissioner. The
interpretation placed upon a statute by the executive oIIicers, whose duty is
to enIorce it, is entitled to great respect by the courts. Nevertheless, such
interpretation is not conclusive and will be ignored iI iudicially Iound to be
erroneous. Courts will not countenance administrative issuances that
override, instead oI remaining consistent and in harmony with, the law they
seek to apply and implement.

III. JURISDICTION OF CTA

RA 9282, as amended by RA 9503

RR OF CTA, AM 05-11-07-CTA

1) WHY WAS CTA CREATED?

PHILIPPIE REIIG CMPAY (&ILEVER PHILS.. IC.) v.
CA. CTA. & CIR

MAY 08. 1996 - GR. 118794

The contentions oI PRC that nobody is in a better position to determine
when an obligation becomes a bad debt that the creditor itselI, and that its
iudgment should not be substituted by that oI CTA as it is the PRC which
has the Iacilities in ascertaining the collectability or un-collectability oI
these debts, are presumptuous and uncalled Ior. The CTA is a highly
specialized body speciIically created Ior the purpose oI reviewing tax cases.
Through its expertise, it is undeniably competent to determine the issue oI
whether or not the debt is deductible through the evidence presented beIore
it. Because oI this recognizable expertise, the Iinding oI the CTA will not
ordinarily be reviewed absent a showing oI gross error or abuse on its part.
The Iindings oI Iact oI the CTA are binding on the SC and in the absence oI
strong reason Ior the SC to delve into Iacts, only questions oI law are open
Ior determination.

IV. REMEDIES AVAILABLE TO GOVERNMENT

A.ADMINISTRATIVE REMEDIES, SUMMARY REMEDIES

1) TAX LIEN

SEC. 219 OF NIRC

REP&BLIC v. RAM ERIQ&EZ

CT. 21. 1988 - GR. L- 78391

It is settled that the claim oI the government predicated on a tax lien is
superior to the claim oI a private litigant on a iudgment. The tax lien
attaches not only Irom the service oI the warrant oI distraint oI personal
property but Irom the time the tax become due and payable.

CIR v. LRC

V. 09. 1994 - GR. 74965

It is settled that the claim oI the government predicated on a tax lien is
superior to the claim oI a private litigant predicated on a iudgment. The tax
lien attaches not only Irom the service oI the warrant oI distraint oI personal
property but Irom the time the tax became due and payable. Besides, the
distraint on the subiect properties oI Maritime Company oI the Philippines
as well as the notice oI their seizure were made by CIR, through the
Commissioner, long beIore the writ oI execution was issued by the RTC.
There is no question then that at the time the writ oI execution was issued,
the 2 barges were no longer properties oI the Maritime Company oI the
Philippines. The power oI the court in execution oI iudgments extends only
to the properties unquestionably belonging to the iudgment debtor.

Art. 110 oI the Labour Code do not purport to create a lien in Iavour oI
workers or employees Ior unpaid wages either upon all oI the properties or
upon any particular property owned by their employer. Claims Ior unpaid
wages do not Iall at all time within the category oI specially preIerred
claims established under Art. 2241 and Art. 2242 oI the CC, except to the
extent that such claims Ior unpaid wages are already covered by Art.
2241(6): 'claims Ior labourers` wages, on the goods manuIactured or the
work done; or by Art. 2242(3): 'claims oI labourers and other workers
engaged in the construction, reconstruction or repair oI buildings, canals
and other works, upon said buildings, canals and other works. To the
extent that claims Ior unpaid wages Iall outside the scope oI Art. 2241(6)
and Art. 2242(3), they would come within the ambit oI the category oI
ordinary preIerred credits under Art. 2244.

Art. 110 oI the Labour Code applies only in case oI bankruptcy or iudicial
liquidation oI an employer`s business, his workers shall enioy Iirst
preIerence as regards wages due them Ior services rendered during the
period prior to the bankruptcy or liquidation, any provision oI law to the
contrary notwithstanding. Unpaid wages shall be paid in Iull beIore other
creditors may establish any claims to a share in the assets oI the employer.

THE HGG & SHAGHAI BAIG CRP. (HSBC) v.
1AMES REERTY

V. 15. 1918 - GR. 13188

A lien in its modern acceptation is understood to denote a legal claim or
charge on property, either real or personal, as security Ior the payment oI
some debt or obligation. The tax lien does not establish itselI upon property
which has UNDER: ATTY. BOBBY LOCK

BY: MEL ANDREW YU REYES

been transIerred to innocent purchasers prior to demand. In order that a lien
may Iollow the property into the hands oI a third party; it is Iurther essential
that the latter should have notice, either actual or constructive.

B. JUDICIAL REMEDIES

SEC. 205

SEC. 220-221, OF NIRC

MAMB&LA L&MBER CMPAY v. REP&BLIC THE
PHILIPPIES

SEP. 05. 1984 - GR. L-37061

The taxpayer`s deIenses are similar to those oI the Republic in a case Ior the
enIorcement oI a iudgement by iudicial action under Sec. 6 oI Rule 39 oI
Rules oI Court. No inquiry can be made therein as to the merits oI the
original case or the iustness oI the iudgement relied upon, other than by
evidence oI want oI iurisdiction, oI collusion between the parties, or oI
Iraud in the party oIIering the record with respect to the proceedings. The
taxpayer may raise only the question whether or not the Collector oI
Internal Revenue had iurisdiction to do the particular act, and whether any
Iraud was committed in the doing oI that act.

ERADEZ HERMAS. IC. v. CIR. & CTA

SEP. 30, 1969 GR. L-21551

A iudicial action Ior the collection oI a tax begins by the Iiling oI a
complaint with the proper court oI Iirst instance or where the assessment is
appealed to the CTA, by Iiling an answer to the taxpayer`s petition Ior
review wherein payment oI the tax is prayed Ior. This is but logical Ior
where the taxpayer avails oI the right to appeal the tax assessment to the
CTA, the said Court is vested with the authority to pronounce iudgment as
to the taxpayer`s liability to the exclusion oI any other court.

The 'capital investment method is not a method oI depletion, but the Tax
Code provision, prior to its amendment by Sec. 1 oI RA 3698, expressly
provided that when the allowances shall equal the capital invested no
Iurther allowances shall be made; in other words, the capital investment was
but the limitation oI the amount oI depletion that could be claimed. The
outright deduction by the taxpayer oI 1/5 oI the cost oI the mines, as iI it
were a 'straight line rate oI depreciation is not authorized by the Tax Code.

V. STATUTORY OFFENSES AND PENALTIES

A. CIVIL PENALTIES, SURCHARGES, INTEREST
SEC. 247-251 OF NIRC
RR 12-99

1) R&LES ITERESTBA THE PHILIPPIE ISLAD
(BPI) v. CIR

1&L. 27. 2006 - GR. 137002

In the case oI PRC v. CA, the SC ruled that even iI an assessment was later
reduced by the courts, a delinquency interest should still be imposed Irom
the time demand was made by the CIR. As correctly pointed out by the
Solicitor General, the deIiciency tax assessment, which was the subiect oI
the demand letter oI the Commissioner, should have been paid within 30
days Irom receipt thereoI. By reason oI PRC's deIault thereon, the
delinquency penalties oI 25 surcharge and interest oI 20 accrued Irom
April 11, 1989. The Iact that PRC appealed the assessment to the CTA and
that the same was modiIied does not relieve PRC oI the penalties incident to
delinquency. The reduced amount oI P237,381.25 is but a part oI the
original assessment oI P1,892,584.00.

The legal provision makes no distinctions nor does it establish exceptions. It
directs the collection oI the surcharge and interest at the stated rate upon
any sum/s due and unpaid aIter the dates prescribed in subsections (b), (c),
and (d) oI the Act Ior the payment oI the amounts due. The provision
thereIore is mandatory in case oI delinquency. This is iustiIied because the
intention oI the law is precisely to discourage delay in the payment oI taxes
due to the State and, in this sense, the surcharge and interest charged are not
penal but compensatory in nature they are compensation to the State Ior
the delay in payment, or Ior the concomitant use oI the Iunds by the
taxpayer beyond the date he is supposed to have paid them to the State.

In Ross v. U.S., When the U.S. SC ruled that it was only equitable Ior the
government to collect interest Irom a taxpayer who, by the government's
error, received a reIund which was not due him. Even though the taxpayer
did not request the reIund made to him, and the situation is entirely due to
an error on the part oI the government, taxpayer and not the government has
had the use oI the money during the period involved and it is not uniustly
penalizing taxpayer to require him to pay compensation Ior this use oI
money.


Based on established doctrine, these charges incident to delinquency are
compensatory in nature and are imposed Ior the taxpayers' use oI the Iunds
at the time when the State should have control oI said Iunds. Collecting
such charges is mandatory. ThereIore, the Decision oI the CA imposing a
20 delinquency interest over the assessment reduced by the CTA was
iustiIied and in accordance with Sec. 249(c)(3) oI NIRC.

2) SURCHARGE: 25 OR 50

SEC. 248 OF NIRC

a) MANDATORY IMPOSITION OF PENALTIES

PHILIPPIE REIIG CMPAY (&ILEVER PHILS.. IC.) v.
CA. CTA. & CIR

MAY 08. 1996 - GR. 118794

Tax laws imposing penalties Ior delinquencies, are intended to hasten tax
payments by punishing evasions or neglect oI duty in respect thereoI. II
penalties could be condoned Ior Ilimsy reasons, the law imposing penalties
Ior delinquencies would be rendered nugatory, and the maintenance oI the
Government and its multiIarious activities will be adversely aIIected. The
intention oI the law is to discourage delay in the payment oI taxes due the
Government and, the penalty and interest are not penal but compensatory
Ior the concomitant use oI the Iunds by the taxpayer beyond the date when
he is supposed to have paid them to the Government. Unquestionably, PRC
chose to turn a deaI ear to these iniunctions.

CIR v. AIR IDIA. & CTA

1A. 29. 1998 - GR. 72443

The 50 surcharge or Iraud penalty provided in Sec. 72 oI the NIRC is
imposed on a delinquent taxpayer who willIully neglects to Iile the required
tax return within the period prescribed by the law, or who willIully Iiles a
Ialse or Iraudulent tax return. On the other hand, iI the Iailure to Iile the
required tax return is not due to willIul neglect, a penalty oI 25 is to be
added to the amount oI the tax due Irom the taxpayer.

The SC is not convinced that Air India can be considered to have willIully
neglected to Iile the required tax return thereby warranting the imposition oI
the 50 Iraud penalty provided in Sec. 72. At the most, there is the barren
claim that such Iailure was Iraudulent in character, without any evidence or
iustiIication Ior the same. The willIul neglect to Iile the required tax return
or the Iraudulent intent to evade the payment oI taxes, considering that the
same is accompanied by legal consequences, cannot be presumed.

In the case oI Aznar v. CA. The lower court's conclusion regarding the
existence oI Iraudulent intent to evade payment oI taxes was based merely
on a presumption and not on evidence establishing a willIul Iiling oI Ialse
and Iraudulent returns so as to warrant the imposition oI the Iraud penalty.
The Iraud contemplated by law is actual and not constructive. It must be
intentional Iraud, consisting oI deception willIully and deliberately done or
resorted to in order to induce another to give up some legal right.
Negligence, whether slight or gross, is not equivalent to the Iraud with
intent to give up some legal right or to evade the tax contemplated by the
law. It must amount to intentional wrongdoing with the sole obiect oI
avoiding the tax. It necessarily Iollows that a mere mistake cannot be
considered as Iraudulent intent, and iI both Aznar and the CIR committed
mistakes in making entries in the returns and in the assessment,
respectively, under the inventory method oI determining tax liability, it
would be unIair to treat the mistakes oI Aznar as tainted with Iraud and
those oI the CIR as made in good Iaith.

There being no cogent basis to Iind willIul neglect to Iile the required tax
return on the part oI Air India, the 50 surcharge or Iraud penalty imposed
upon it is improper. Nonetheless, such Iailure subiects Air India to a 25
penalty pursuant to Section 72 oI NIRC. P74,203.90 constitutes the tax
deIiciency oI Air India. 25 oI this amount is P37,101.95.

MICHEL 1. LH&ILLIER PAWSHP. IC. v. CIR

SEP. 11. 2006 - GR. 166786

Documentary Stamp Tax (DST) is essentially an excise tax; it is not an
imposition on the document itselI but on the privilege to enter into a taxable
transaction oI pledge. Sec. 195 oI NIRC imposes a DST on every pledge
regardless oI whether the same is a conventional pledge governed by the
Civil Code or one that is governed by the provision oI PD 114. All pledges
are subiect to DST, unless there is a law exempting them in clear and
categorical language. This explains why the Legislature did not see the need
to explicitly impose a DST on pledges entered into by pawnshops. These
pledges are already covered by Sec. 195 and to create a separate provision
especially Ior them would be superIluous.

It is the exercise oI the privilege to enter into an accessory contract oI
pledge, as distinguished Irom contract oI loan, which give rise to the
obligation to pay DST. II the DST under Sec. 195 is levied on the loan or
the exercise oI the


privilege to contract a loan, then there would be no use Ior Sec. 179 oI the
NIRC, to separately impose stamp tax on all debt instruments, like a simple
loan agreement. It is Ior this reason why the deIinition oI pawnshop ticket,
as not an evidence oI indebtedness, is inconsequential to and has no bearing
on the taxability oI contracts oI pledge entered into by pawnshops. For
purposes oI Sec. 195, pawnshop tickets need not be an evidence oI
indebtedness nor a debt instrument because it taxes the same as a pledge
instrument. Neither should the deIinition oI pawnshop ticket, as not a
security, exempt it Irom the imposition I DST. It was correctly deIined as
such because the ticket itselI is not the security but the pawn or the personal
property pledge to the pawnbroker.

b) RULE ON PRIMA FACIE FRAUD

SEC. 248(B) OF NIRC

1SE AZAR v. CTA. & CIR

A&G. 23. 1974 - GR. L-20569

The lower court`s conclusion regarding the existence oI Iraudulent intent to
evade payment oI taxes was based merely on a presumption and not on
evidence establishing a wilIul Iiling oI Ialse and Iraudulent returns as to
warrant the imposition oI the Iraud penalty. The Iraud contemplated by law
is actual and not constructive. It must be intentional Iraud, consisting oI
deception wilIully and deliberately done or resorted to in order to induce
another to give up some legal right. Negligence, whether slight or gross, is
not equivalent to the Iraud with intent to evade the tax contemplated by law.
It must amount to intentional wrong-doing with the sole obiect oI avoiding
the tax.

CIR v. MELCHR 1AVIER 1R.. & CTA

1&LY 31. 1991 - GR. 78953

Fraud is never imputed and the courts never sustain Iindings oI Iraud upon
circumstances which, at most, create only suspicion and the mere
understatement oI a tax is not itselI prooI oI Iraud Ior the purpose oI tax
evasion.

In the case at bar, there was no actual and intentional Iraud through wilIul
and deliberate misleading oI the government agency concerned, the BIR,
headed by CIR. The government was not induced to give up some legal
right and place itselI at a disadvantage so as to prevent its lawIul agents
Irom proper assessment oI tax liabilities because Javier did not conceal
anything. Error or mistake oI law is not Iraud. The CIR`s zealousness to
collect taxes Irom the unearned windIall to Javier is highly commendable.
UnIortunately, the imposition oI the Iraud penalty in this case is not
iustiIied by the extant Iacts.

B. CRIMES, OFFENSES, PENALTIES, FORFEITURES
SEC. 220-221, 224-226 OF NIRC
SEC. 253-281 OF NIRC
RMC 101-90

1) PRECONDITIONED BEFORE A CRIMINAL CASE MAY BE FILED

REP&BLIC THE PHILIPPIES v. SAL&D HIZ

DEC. 31. 1999 - GR. 130430

Sec. 221 oI NIRC provides:

Form and mode oI proceeding in actions arising under this Code. Civil
and criminal actions and proceedings instituted in behalI oI the Government
under the authority oI this Code or other law enIorced by the BIR shall be
brought in the name oI the Government oI the Philippines and shall be
conducted by the provincial or city Iiscal, or the Solicitor General, or by the
legal oIIicers oI the BIR deputized by the Secretary oI Justice, but no civil
and criminal actions Ior the recovery oI taxes or the enIorcement oI any
Iine, penalty or IorIeiture under this Code shall begun without the approval
oI the Commissioner.

To implement this provision RAO 5-83 oI the BIR provides in pertinent
portions:

The Iollowing civil and criminal cases are to be handled by Special
Attorneys and Special Counsels assigned in the

Legal Branches oI Revenues Regions:

xxx

xxx

xxx

II. Civil Cases

1. Complaints Ior collection on cases Ialling within the iurisdiction oI the
Region. . . .



In all the above mentioned cases, the Regional Director is authorized to sign
all pleadings Iiled in connection therewith which, otherwise, requires the
signature oI the Commissioner.

xxx

xxx

xxx

RAO 10-95 speciIically authorizes the Litigation and Prosecution Section oI
the Legal Division oI RDO to institute the necessary civil and criminal
actions Ior tax collection. As the complaint Iiled in this case was signed by
the BIR's ChieI oI Legal Division Ior Region 4 and veriIied by the Regional
Director, there was, thereIore, compliance with the law.

However, the lower court reIused to recognize RAO 10-95 and, by
implication, RAO 5-83. It held:

Memoranda, circulars and orders emanating Irom bureaus and agencies
whether in the purely public or quasi-public corporations are mere
guidelines Ior the internal Iunctioning oI the said oIIices. They are not laws
which courts can take iudicial notice oI. As such, they have no binding
eIIect upon the courts Ior such memoranda and circulars are not the oIIicial
acts oI the legislative, executive and iudicial departments oI the Philippines.
...

This is erroneous. The rule is that as long as administrative issuances relate
solely to carrying into eIIect the provisions oI the law, they are valid and
have the Iorce oI law. The governing statutory provision in this case is Sec.
4(d) oI the NIRC which provides:

SpeciIic provisions to be contained in regulations. The regulations oI the
BIR shall, among other things, contain provisions speciIying, prescribing,
or deIining:

xxx xxx xxx

(d) The conditions to be observed by revenue oIIicers, provincial Iiscals and
other oIIicials respecting the institution and conduct oI legal actions and
proceedings.

RAO 5-83 and 10-95 are in harmony with this statutory mandate.

As amended by R.A. 8424, the NIRC is now even more categorical. Sec. 7
oI the present Code authorizes the BIR Commissioner to delegate the
powers vested in him under the pertinent provisions oI the Code to any
subordinate oIIicial with the rank equivalent to a division chieI or higher,
except the Iollowing:

a) The power to recommend the promulgation oI rules and regulations by
the Secretary oI Finance;

b) The power to issue rulings oI Iirst impression or to reverse, revoke or
modiIy any existing ruling oI the Bureau;

c) The power to compromise or abate under Sec. 204 (A) and (B) oI this
Code, any tax deIiciency: Provided, however, that assessment issued by the
Regional OIIices involving basic deIiciency taxes oI Iive hundred thousand
pesos (P500,000.00) or less, and minor criminal violations as may be
determined by rules and regulations to be promulgated by the Secretary oI
Finance, upon the recommendation oI the Commissioner, discovered by
regional and district oIIicials, may be compromised by a regional evaluation
board which shall be composed oI the Regional Director as Chairman, the
Assistant Regional Director, heads oI the Legal, Assessment and Collection
Divisions and the Revenue District OIIicer having iurisdiction over the
taxpayer, as members; and

d) The power to assign or reassign internal revenue oIIicers to
establishments where articles subiect to excise tax

are produced or kept.

None oI the exceptions relates to the Commissioner's power to approve the
Iiling oI tax collection cases.

Q&IRIC &GAB v. H. VICETE C&SI. CIR CMMISSIER.
& 1ES&S ACEBES

MAY 30. 1980 - GR. L-41919-24

What is involved is not the collection oI taxes where the assessment oI the
CIR Commissioner may be reviewed by CTA, but a criminal prosecution
Ior violations oI NIRC which is within the recognizance oI CFI. While there
can be no civil action to enIorce collection beIore the assessment
procedures provided in the Code have been Iollowed, there is no
requirement Ior the precise computation and assessment oI the tax beIore
there can be a criminal prosecution under the Code.

It has been ruled that a petition Ior reconsideration oI an assessment ay
aIIect the suspension oI the prescriptive period Ior the collection oI taxes,
but not the prescriptive period oI a criminal action Ior violation oI law. The
protest oI Ungab against the assessment oI the District Revenue OIIicer
cannot stop his prosecution Ior violation oI NIRC. Accordingly, Judge Cusi
did not abuse his discretion in denying the motion to quash Iiled by Ungab.



CIR v. CA. RT&E TBACC CRP.. & L&CI TA

1&E 04. 1996 - GR. 119322

In every step in the production oI cigarettes was closely monitored and
supervised by the BIR personnel speciIically assigned to Fortune`s
premises, and considering that the ManuIacturer`s Sworn Declarations on
the data required to be submitted by the manuIacturer were scrutinized and
veriIied by the BIR, and since the manuIacturer`s wholesale price was duly
approved by the BIR, then it is presumed that such registered wholesale
price is the same as, or approximates 'the price, excluding the VAT, at
which the goods are sold at wholesale in the place oI production,
otherwise, the BIR would not have approved the registered wholesale price
oI the goods Ior purposes oI imposing the ad valorem tax due. In such case,
and in the absence oI contrary evidence, it was precipitate and premature to
conclude that Fortune made Iraudulent returns or wilIully attempted to
evade payment oI taxes due.

II there was Iraud or wilIul attempt to evade payment oI ad valorem taxes
by Fortune through the manipulation oI the registered wholesale price oI the
cigarettes, it must have been with the connivance or cooperation oI certain
BIR oIIicials and employees who supervised and monitored Fortune`s
production activities to see to it that the correct taxes were paid. But there is
no allegation, much less evidence oI BIR personnel`s malIeasance. There is
the presumption that the BIR personnel perIormed their duties in the regular
course in ensuing that the correct taxes were paid by Fortune.

The SC share the same view oI both the trial court and CA that beIore the
tax liabilities oI Fortune are Iirst Iinally determined, it cannot be correctly
asserted that Fortune have wilIully attempted to evade or deIeat the taxes
sought to be collected Irom Fortune. BeIore one is prosecuted Ior wilIul
attempt to evade or deIeat any tax under Sec. 253 and Sec. 255 oI the Tax
Code, the Iact that a tax is due must Iirst be proved.

DISTINGUISHED FROM UNGAB v. CUSI

The pronouncement therein that deIiciency assessment is not necessary
prior to prosecution is pointed and deliberately qualiIied by the Court. 'The
crime is complete when the violator has knowingly and wilIully Iiled a
Iraudulent return with the intent to evade and deIeat a part or all oI the tax.
For criminal prosecution to proceed beIore assessment there must be a
prima Iacie showing oI a wilIul attempt to evade taxes. There was a wilIul
attempt to evade taxes because oI the taxpayer`s Iailure to declare in his
ITR his income derived Irom banana saplings. In the mind oI the trial court
and CA, Fortune`s situation is quite apart Iactually since the registered
wholesale price oI the goods, approved by the BIR, is presumed to be the
actual wholesale price, thereIore, not Iraudulent and unless and until the
BIR has made a Iinal determination oI what is supposed to be the correct
taxes, the taxpayer should not be placed in the crucible I criminal
prosecution. Herein lies a WHALE oI diIIerence between Ungab and
Fortune.

CIR v. PASCR REALTY AD DEVELPMET CRPRATI
1&E 29. 1999 - GR. 128315

Pascor maintain that the Iiling oI a criminal complaint must be preceded by
an assessment. This is incorrect, because Sec. 222 oI NIRC speciIically
states that in cases where Ialse or Iraudulent return is submitted or in case oI
Iailure to Iile a return such as in this case, proceedings in court may be
commenced without an assessment. Sec. 205 clearly mandates that the civil
and criminal aspects oI the case may be pursued simultaneously. In Ungab
v. Cusi, Ungab sought the dismissal oI the criminal complaints Ior being
premature since his protest to the CTA had not yet been resolved. The Court
held that such protests could not stop or suspend the criminal action which
was independent oI the resolution oI the protest in the CTA. This was
because the CIR Commissioner had, in such tax evasion cases, discretion on
whether to issue an assessment or to Iile a criminal case against the taxpayer
or to do both.

Pascor insist that Sec. 222 should be read in relation to Sec. 255 oI NIRC,
which penalizes Iailure to Iile a return. Pascor add that a tax assessment
should precede a criminal indictment. The SC disagrees. Sec. 222 states that
an assessment is not necessary beIore a criminal charge can be Iiled. This is
the general rule. Pascor Iailed to show that they are entitled to an exception.
The criminal charge need only be supported by a prima Iacie showing oI
Iailure to Iile a required return. This Iact need not be proven by an
assessment.

The issuance oI an assessment must be distinguished Irom the Iiling oI a
complaint. BeIore an assessment is issued, there is a PAN sent to the
taxpayer. The taxpayer is then given a chance to submit position papers and
documents to prove that the assessment is unwarranted. II the
Commissioner is unsatisIied, an assessment signed by him is then sent to
the taxpayer inIorming the latter speciIically and clearly that an assessment
has been made against him. In contrast, the criminal charge need not go
through all these. The criminal charge is Iiled directly with the DOJ.


ThereaIter, the taxpayer is notiIied that a criminal case had been Iiled
against him, not that the Commissioner has issued an assessment. It must be
stressed that a criminal complaint is institute not to demand payment, but to
penalize the taxpayer Ior violation oI the Tax Code.

2) COMPROMISE PENALTY

RMO 19-07

CIR v. LIAGA BAY LGGIG C.. IC.. & CTA
1A. 21. 1991 - GR. 35266

Sec. 11 oI Regulations No. 85 applies, as the CTA points out, to a 'Iorest
concessionaire who is the holder oI an ordinary license;but there are
separate provisions 'on invoicing and payment oI Iorest charges in the case
oI owners or operators oI sawmills who are Iorest concessionaire, like
Lianga. For purposes oI said regulations, 'sawmills are classiIied into Class
A, B, C and D. The Tax Court`s Iinding on the basis oI the evidence is that
Lianga is a Class C sawmill. The record does indeed establish its character
as such: in accordance with said regulation, Iorest oIIicers have been
permanently assigned to its concession Ior the purpose oI scaling all logs
Ielled and it has posted a bond to guarantee the payment oI the Iorest
charges that may be due Irom it. It is not thereIore required by the
regulation to accomplish and submit auxiliary invoices required only oI
Class A sawmills, i.e., holders oI ordinary timber licenses. What is required
in lieu thereoI, pursuant to said regulation, are monthly scale reports (BIR
Form 14.15) as well as the Daily Trimmer Tally (BIR Form 14.11), and
monthly Abstract oI Sawmill invoice (BIR Form 14.14). It is noteworthy
that the CIR does not claim and has made no eIIort whatever to prove that
these Iorms were not accomplished. Thus, as the Tax Court declares, it is
presumed that Lianga 'has complied with the requirements regarding the
keeping and use oI the records and documents required oI Class C sawmills,
among which are the Daily Trimmer Tally and commercial invoices. In
Iact, it appears that the Iorest oIIicers` reports and computations were the
basis Ior the payment oI Iorest charges by Lianga, and the basis, as well oI
the Commissioner`s computation oI the alleged 25 surcharge. Sec. 267
imposing a surcharge oI 25 oI the regular Iorest charges iI Iorest products
are removed Irom the Iorest concession 'without invoice does not speciIy
the nature oI the invoice contemplated. The term is not limited to auxiliary
invoices. It may reIer as well to 'oIIicial or 'commercial invoices such as
those prepared by Class C sawmills. This is the interpretation placed on the
term by said regulation themselves, which declare that the 25 surcharge is
imposable on 'Forest products transported without oIIicial invoice or
commercial invoice, as the case requires. And since sawmill or commercial
invoices were in Iact prepared by Lianga, no violation oI the rule may be
imputed to it at all.

3) ELEMENTS OF TAX EVASION

CIR v. THE ESTATE BEIG TDA. 1R.

SEP. 14, 2006 GR. 147188

4) PAYMENT OF TAX IN CRIMINAL CASES
SEC. 253(d) OF NIRC
SEC. 205 (b)

REP&BLIC v. PEDR PATAA
1&LY 21. 1967 - GR. L-22356

Under the Penal Coe, the civil liability is incurred by reason oI the
oIIender`s criminal act. The criminal liability gives birth to the civil
obligation such that, generally, iI one is not criminally liable under the
Penal Code, he cannot be civilly liable there under. The situation under the
income tax law is the exact opposite. Civil liability to pay taxes arises Irom
the Iact, Ior instance, that one has engaged himselI in business and not
because oI any criminal at committed by him. The criminal liability arises
upon Iailure oI the debtor to satisIy his civil obligation. The incongruity oI
the Iactual premises and Ioundation principles oI the two cases is one oI the
reasons Ior not imposing civil indemnity on the criminal inIractor oI the
income tax law. Another reason, while Sec. 73 oI NIRC has provided Ior
the imposition oI the penalty oI imprisonment or Iine, or both, Ior reIusal or
neglect to pay income tax or to make a return thereoI, it does not provide
the collection oI said tax in criminal proceedings.

Since taxpayer`s civil liability is not included in the criminal action, his
acquittal in the criminal proceeding does not necessarily entail exoneration
Irom his liability to pay the taxes. His legal duty to pay taxes cannot be
aIIected by his attempt to evade payment. Said obligation is not a
consequence oI the Ielonious acts charged in the criminal proceeding nor is
it a mere civil liability arising Irom a crime that could be wiped out by the
iudicial declaration oI non- existence oI the criminal acts charged.

MARIA B. CASTR v. CIR
APR. 26. 1962 - GR. L-12174

With regard to the tax proper, the state correctly points out in its brieI that
the acquittal in the criminal case could not operate to discharge Castro Irom
the duty to pay the tax, since that duty is imposed by statute prior to and
independently oI any attempts on the part oI the taxpayer to evade payment.
The obligation to pay the tax is not a mere consequence oI the Ielonious
acts charged in the inIormation, nor is it a mere civil liability derived Irom
crime that would be wiped out by the iudicial declaration that the criminal
acts charged did not exist.

As to the 50 surcharge, in CoIIey v. U.S., the U.S. SC states that additions
oI this kind to the main tax are not penalties but civil administrative
sanctions, provided primarily as a saIeguard Ior the protection oI the state
revenue and to reimburse the government Ior the heavy expense oI
investigation and the loss resulting Irom the taxpayer's Iraud. This is made
plain by the Iact that such surcharges are enIorceable, like the primary tax
itselI, by distraint or civil suit, and that they are provided in a section oI
Sec. 5 and Sec. 7, RA 55 that is separate and distinct Irom that providing Ior
criminal prosecution. The SC concludes that the deIense oI ieopardy and
estoppel by reason oI Castro`s acquittal is untenable and without merit.
Whether or not there was Iraud committed by the taxpayer iustiIying the
imposition oI the surcharge is an issue oI Iact to be inIerred Irom the
evidence and surrounding circumstances; and the Iinding oI its existence by
the Tax Court is conclusive upon the SC.

5) PRESCRIPTION OF VIOLATION OF NIRC

EMILI S. LIM. SR. & ATIA S& LIM v. CA & PEPLE
THE PHILIPPIES

CT. 18. 1990 - GR. 48134-37

Relative to Criminal Cases Nos. 1788 and 1789 which involved Lim`s
reIusal to pay deIiciency income taxes due, again both parties are in accord
that by their nature, the violations as charged could only be committed aIter
service oI notice and demand Ior payment oI the deIiciency taxes upon the
taxpayers. Lim maintains that the 5-year period oI limitation under Sec. 354
should be reckoned Irom April 7, 1965, the date oI the original assessment
while the Government insist that it should be counted Irom July 3, 1968
when Iinal notice and demand was served on Lim`s daughter-in-law. The
SC holds Ior the Government.

Sec. 51 (b) oI the Tax Code provides: '(b) Assessment and payment oI
deIiciency tax AIter the return is Iiled, the BIR Commissioner shall
examine it and assess the correct amount oI the tax. The tax or deIiciency in
tax so discovered shall be paid upon notice and demand Irom the BIR
Commissioner. Inasmuch as the Iinal notice and demand Ior payment oI the
deIiciency taxes was served on Lim on July 3, 1968, it was only then that
the cause oI action on the part o the BIR accrued. This is so because prior to
the receipt oI the letter-assessment, no violation has yet been committed by
the taxpayers. The oIIense was committed only aIter receipt was coupled
with the wilIul reIusal to pay the taxes due within the allotted period. The
two criminal inIormation, having been Iiled on June 23, 1970, are well
within the 5-year prescriptive period and are not time-barred.

VI. CLAIMS FOR REFUND AND CREDIT OF TAXES/ REMEDY
AFTER PAYMENT

A. WHO MAY FILE CLAIM FOR REFUND/ TAX CREDIT

1) BASIS OF TAX REFUNDS

CIR v. ACESITE (PHILIPPIES) HTEL CRPRATI

EB. 16. 2007 - GR. 147295

Tax reIunds are based on the principle oI quasi-contract or solutio indebeti
and the pertinent laws governing this principle are Iound in Art. 2142 and
Art. 2154 oI the NCC. When money is paid to another under the inIluence
oI a mistake oI Iact, on the mistaken supposition oI the existence oI a
speciIic Iact, where it would not have been known that the Iact was
otherwise, it may be recovered. The ground upon which the right oI
recovery rests is that money paid through misapprehension oI Iacts belongs
in equity and in good conscience to the person who paid it.

The government comes within the scope oI solution indebeti principle,
where that: 'enshrined in the basic legal principles is the time honoured
doctrine that no person shall uniustly enrich himselI at the expense oI
another. It goes without saying that the Government is not exempt Irom the
application oI this doctrine.

2) TAXPAYER, WITHHOLDING AGENT

CIR v. PRCTER & GAMBLE PHILIPPIES MA&ACT&RIG
CRPATI. & CTA

DEC. 02. 1991 - GR. 66838


The SC believes that the BIR should not be allowed to deIeat an otherwise
valid claim Ior reIund by raising the question oI alleged incapacity. CIR
does not pretend that P&G-Phil., should it succeed in the claim Ior reIund
instead oI transmitting such reIund, is likely to run away with the reIund
instead oI transmitting such reIund or tax credit to its parent or sole
stockholder. It is commonplace that in the absence oI explicit statutory
provisions to the contrary, the government must Iollow the same rules oI
procedure which bind private parties. It is, Ior instance, clear that the
government is held to compliance with the provisions oI Circular No. 1-88
oI the SC in exactly the same way that private litigants are held to such
compliance, save only in respect oI the matter oI Iiling Iees Irom which the
Republic is exempt by the Rules oI Court.

A 'taxpayer is any person subiect to tax imposed by the Tax Code. Under
Sec. 53(c), the withholding agent who is required to deduct and withhold
any tax is made 'personally liable Ior such tax and is indemniIied against
any claims and demands which the stockholder might wish to make in
questioning the amount oI payments eIIected by the withholding agent in
accordance with the provisions oI NIRC. The withholding agent, P&G-
Phil., is directly and independently liable Ior the correct amount oI the tax
that should be withheld Irom the dividend remittances. The withholding
agent is, moreover, subiect to and liable Ior deIiciency assessments,
surcharges and penalties should the amount oI the tax withheld be Iinally
Iound to be less than the amount that should have been withheld under the
law. A 'person liable Ior tax has been held to be a 'person subiect to tax
and 'subiect to tax both connote legal obligation or duty to pay a tax. By
any reasonable standard, such a person should be regarded as a party-in-
interest or as a person having suIIicient legal interest, to bring a suit Ior
reIund oI taxes he believes were illegally collected Irom him.

TAX PAIRING RULE

The ordinary 35 tax rate applicable to dividend remittances to non-
resident corporate stockholders oI a Philippine corporation, goes down to
15 iI the country oI domicile oI the Ioreign stockholder corporation 'shall
allow such Ioreign corporation a tax credit Ior 'taxes deemed paid in the
Philippines, applicable against the tax payable to the domiciliary country
by the Ioreign stockholder corporation.

In the instant case, the reduced 15 dividend tax rate is applicable iI the
USA 'shall allow to P&G-USA a tax credit Ior 'taxes deemed paid in the
Philippines applicable against the US taxes oI P&G-USA. The NIRC
speciIies that such tax credit Ior 'taxes deemed paid in the Philippines
must, as a minimum, reach an amount equivalent to 20 points which
represents the diIIerence between the regular 35 dividend tax rate and the
preIerred 15 dividend tax rate. However, Sec. 24(b)(1), does not require
that the US must give a 'deemed paid tax credit Ior the dividend tax (20
points) waived by the Philippines in making applicable the preIerred
dividend tax rate oI 15. In other words, NIRC does not require that the US
tax law deemed the parent-corporation to have paid the 20 points oI
dividend tax waived by the Philippines. The NIRC only requires that the US
'shall allow P&G-USA a 'deemed paid tax credit in an amount
equivalent to the 20 points waived by the Philippines.

3) REQUISITES FOR A VALID CLAIM FOR REFUND

ILEY 1. GIBBS & DIAE P. GIBBS v. CIR. CTA

V. 29. 1965 - GR. L-17406

AJG, signing as attorney-in-Iact, acknowledged Ior the Gibbs receipt oI the
deIicient income tax assessment; Iormally protested the same in writing,
paid the assessment and likewise Iormally demanded in writing its reIund.
Besides, in one oI his letters to the Commissioner, he stated that iI his
demand Ior reIund Ior the Gibbs was not eIIected, he would collect Irom
CIR certain charges including attorney`s Iees.

The Iorgoing circumstances show that AJG acted not merely an agent or
attorney-in-Iact oI the Gibbs but as their legal counsel. The receipt,
thereIore by AJG oI the Commissioner`s decision denying the claim Ior
reIund was receipt oI the same by the Gibbs, and the 30-day prescriptive
period Ior Iiling oI a petition Ior review should be computed Irom the date
oI such receipt.

A taxpayer, resident or non-resident, who contributes to the withholding tax
system, does not really deposit an amount to the BIR Commissioner, but, to
perIorm or extinguish his tax obligation Ior the year concerned. He is
paying his tax liabilities Ior that year. Consequently, a taxpayer whose
income is withheld at the source will be deemed to have paid his tax
liability when the same Ialls due at the end oI the tax year. It is Irom this
latter date then, or when the tax liability Ialls due, that the 2-year
prescriptive period under Sec. 306 oI the Revenue Code starts to run with
respect to payments eIIected through the withholding tax system. It is oI no
consequence whatever that a claim Ior reIund or credit against the amount
withheld at the source may have been presented and may have remained
unresolved since the delay oI the Collector is rendering the decision does
not extend the peremptory period Iixed by the statute.

PPEL (PHILIPPIES). IC. v. CIR

SEP. 19. 1961 - GR. L-10550



It is the duty oI the taxpayer to urge the Collector Ior his decision and wake
him up Irom his lethargy or Iile his action within the time prescribed by
law. Koppel not having Iiled his claim within the time Iixed by law, his
cause oI action has prescribed, and the court should not give a premium to a
litigant who sleeps on his rights.

Having Iailed to Iile his action Ior reIund on time oI Koppel may not now
invoke estoppels when he himselI is guilty oI laches. The government is
never stopped by error or mistake on the part oI its agents.

CIR v. 1SE CCEPCI

MAR. 15. 1968 - GR. L-23912

Where a taxpayer seeking a reIund oI estate and inheritance taxes whose
request is denied and whose appeal to the CTA was dismissed Ior being
Iiled out oI time, sues anew to recover such taxes, already paid under
protest, his action is devoid oI merit. For in the same way that the expedient
oI an appeal Irom a denial oI a tax request Ior cancellation oI warrant oI
distraint and levy cannot be utilized to test the legality oI an assessment
which had become conclusive and binding on the taxpayer, so is Sec. 360 oI
the Tax Code not available to revive the right to contest the validity oI an
assessment which had become Iinal Ior Iailure to appeal the same on time.

CIR v. VICTRIAS MILLIG C.. & CTA

1A. 03. 1968 - GR. L-24108

Sec. 306 and 309 oI NIRC were intended to govern all kinds oI reIunds oI
internal revenue taxes those taxes imposed and collected pursuant to the
NIRC. Thus, this Court stated that "this provision" reIerring to Sec. 306,
"which is mandatory, is not subiect to qualiIication, and hence, it applies
regardless oI the conditions under which payment has been made." And to
hold that the instant claim Ior reIund oI a speciIic tax, an internal revenue
tax imposed in Sec. 142 oI NIRC, is beyond the scope oI Sec. 306 and 309
as to thwart the aIoresaid intention and spirit underlying said provisions.

xxx xxx xxx

. . . The intention is clear that reIunds oI internal revenue taxes are generally
governed by Sec. 306 and 309 oI the Tax Code. Since in those cases the tax
sought to be reIunded was collected legally, the running oI the 2-year
prescriptive period provided Ior in Sec. 306 should commence, not Irom the
date the tax was paid, but Irom the happening oI the supervening cause
which entitled the taxpayer to a tax reIund. And the claim Ior reIund should
be Iiled with the CIR, and the subsequent appeal to the CTA must be
instituted, within the said 2-year period.

xxx xxx xxx

In Iine, when the tax sought to be reIunded is illegally or erroneously
collected, the period oI prescription starts Irom the date the tax was paid;
but when the tax is legally collected, the prescriptive period commences to
run Irom the date oI occurrence oI the supervening cause which gave rise to
the right oI reIund. The ruling in Muller & Phipps is accordingly modiIied.

It is not disputed that the oils and Iuels involved in this case were used
during the period Irom June 1952 to December 1955; that the claim Ior
reIund was Iiled on December 1957; and that the appeal to the Court CTA
was instituted only on February 1962. The taxpayer's claim Ior reIund with
the BIR oI December 1957 is within 2 years Irom December 1955 the
last month oI the period during which the Iuels and oils were used. The
appeal to the CTA however, was instituted more than 6 years. The SC has
repeatedly held that the claim Ior reIund with the BIR and the subsequent
appeal to the CTA must be Iiled within the 2-year period. "II, however, the
Collector takes time in deciding the claim, and the period oI 2 years is about
to end, the suit or proceeding must be started in the CTA beIore the end oI
the 2- year period without awaiting the decision oI the Collector." In the
light oI the above quoted ruling, the SC Iinds that the right oI Victorias
Milling to claim reIund oI P2,817.08 has prescribed.

CIR v. CA. & CITYTR&ST BAIG CRPRATI. & CTA

1&LY 21. 1994 - GR. 106611

The CTA erred in denying CIR`s supplemental motion Ior reconsideration
alleging and bringing to said court`s attention the existence oI the
deIiciency income and business tax assessment against Citytrust. The Iact oI
such deIiciency assessment is intimately related to and inextricably
intertwined with the right oI Citytrust Bank to claim Ior a tax reIund Ior the
same year. To award such reIund despite the existence oI that deIiciency
assessment is an absurdity and a polarity in conceptual eIIects. Citytrust
cannot be entitled to reIund and at the same time be liable Ior a tax
deIiciency assessment Ior the same year.

The grant oI a reIund is Iounded on the assumption that the tax return is
valid, the Iacts stated therein are true and correct. The deIiciency
assessment, although not yet Iinal, created a doubt as to and constitute a
challenge against the truth and accuracy oI the Iacts stated in said return
which, by itselI and without unquestionable evidence, cannot be the basis
Ior the grant oI the reIund.


To grant the reIund without determination oI the proper assessment and the
tax due would inevitably result in multiplicity oI proceedings or suits. II the
deIiciency assessment should be subsequently be upheld, the Government
will be Iorced to institute anew a proceeding Ior the recovery oI erroneously
reIunded taxes which recourse must be Iiled within the prescriptive period
oI 10-years aIter discovery oI the Ialsity, Iraud or omission in the Ialse or
Iraudulent return involved. This would necessarily require and entail
additional eIIorts and expenses on the part oI the Government impose a
burden on and a drain oI government Iunds, and impedes or delays the
collection oI much- needed revenue Ior government operations.

DR. FELISA L. VDA. DE SAN AGUSTIN v. CIR

The estate received a PAN indicating a deIiciency estate tax oI
P538,509.50. Within the 10-day period given in the PAN, CIR received a
letter Irom San Agustin expressing the latter's readiness to pay the basic
deIiciency estate tax oI P538,509.50 as soon as the trial court would have
approved the withdrawal oI that sum Irom the estate but requesting that the
surcharge, interests and penalties be waived. However, San Agustin
received Irom the CIR notice insisting payment oI the tax due on or beIore
the lapse oI 30 days Irom receipt thereoI. The deIiciency estate tax oI
P538,509.50 was not paid until December 1991.

The delay in the payment oI the deIiciency tax within the time prescribed
Ior its payment in the notice oI assessment iustiIies the imposition oI a 25
surcharge in consonance with Sec. 248A(3) oI NIRC. The basic deIiciency
tax in this case being P538,509.50, the 25 thereoI comes to P134,627.37.
Sec. 249 oI NIRC states that any deIiciency in the tax due would be subiect
to interest at the rate oI 20 per annum, which interest shall be assessed
and collected Irom the date prescribed Ior its payment until Iull payment is
made. The computation oI interest by the CTA -

"DeIiciency estate tax

P538,509.50

x

Interest Rate

20 per annum

x

Terms
11/2 mo./12 mos
(11/04/91 to 12/19/91)

P13,462.74

conIorms with the law, i.e., computed on the deIiciency tax Irom the date
prescribed Ior its payment until it is paid.

The CTA correctly held that the compromise penalty oI P20,000.00 could
not be imposed on San Agustin, a compromise being, by its nature, mutual
in essence. The payment made under protest by San Agustin could only
signiIy that there was no agreement that had eIIectively been reached
between the parties.

Regrettably Ior San Agustin, the need Ior an authority Irom the probate
court in the payment oI the deIiciency estate tax, over which CIR has hardly
any control, is not one that can negate the application oI the Tax Code
provisions. Taxes, the liIeblood oI the government, are meant to be paid
without delay and oIten oblivious to contingencies or conditions.

4) REFUNDS OF CORPORATE TAXPAYERS, IRREVOCABILITY
RULE

SEC. 76 OF IRCACCRA IVESTMETS CRPRATI v. CA.
CIR. & CTA

DEC. 20. 1991 - GR. 96322

There is a need to Iile a return Iirst beIore a claim Ior reIund can prosper
inasmuch as the Commissioner by his own rules and regulations mandates
that the corporate taxpayer opting to ask Ior a reIund must show in its Iinal
adiustment return the income it received Irom all sources and the amount oI
withholding taxes remitted by its withholding agents to the BIR. ACCRA
Iiled its Iinal adiustment return Ior its 1981 taxable year on April 15, 1982.
The 2-year prescriptive period within which to claim a reIund commences
to run at the earliest, on the date oI the Iiling oI the adiusted Iinal tax return.
Hence, ACCRA had until April 15, 1984 within which to Iile its claim Ior
reIund.

CIR v. TMX SALES IC.. & CTA

1A. 15. 1992 - GR. 83736

The Iiling oI quarterly ITRs required in Sec. 68 and implemented per BIR
Form 1702-Q and payment oI quarterly income tax should only be
considered mere instalments oI the annual tax due. These quarterly tax
payments which are computed based on the cumulative Iigures oI gross
receipts and deductions in order to arrive at a net taxable income, should be
treated as advances or portions oI the annual income tax due, to be adiusted
at the end oI the calendar or Iiscal year. This is reinIorced by Sec. 69 which
provides Ior the Iiling oI adiustment returns and Iinal payment oI income
tax. Consequently, the 2-year prescriptive period provided in Sec. 230 oI
the Tax Code should be computed Irom the time oI Iiling oI the Adiustment
Return or Annual ITR and Iinal payment oI income tax.


In the instant case, TMX Sales, Iiled a suit Ior a reIund on March 14, 1984.
Since the 2-year prescriptive period should

be counted Irom the Iiling oI the Adiustment Return on April 15, 1982,
TMX Sales is not yet barred by prescription.

SYSTRA PHILIPPIES. IC. v. CIR

SEP. 21. 2007 - GR. 176290

A corporation entitled to a tax credit or reIund oI the excess estimated
quarterly income taxes paid has 2 options:

To carry over the excess credit;

To apply Ior the issuance oI a tax credit certiIicate or to claim a cash reIund.

II the option to carry over the excess credit is exercised, the same shall be
irrevocable Ior that taxable period. In exercising its option, the corporation
must signiIy in its annual corporate adiustment return (by marking the
option box provided in the BIR Form) its intention either to carry over the
excess credit or to claim a reIund. To Iacilitate tax collection, these
remedies are in the alternative and the choice oI one precludes the other.
This is known as the irrevocability rule and is embodied in the last sentence
oI Sec. 76 oI the Tax Code. The phrase 'such option shall be considered
irrevocable Ior that taxable period means that the option to carry over the
excess tax credits oI a particular taxable year can no longer be revoked. The
rule prevents a taxpayer Irom claiming twice the excess quarterly taxes
paid:

As automatic credit against taxes Ior the taxable quarters oI the succeeding
years Ior which no tax credit certiIicate has been issued and; As a tax credit
either Ior which a tax credit certiIicate will be issued or which will be
claimed Ior cash reIund.

SITHE PHILIPPIES HLDIGS. IC. v. CIR

APR. 04. 2003 - CTA 6274

By the clear wording oI Sec. 76, every taxpayer-corporation is required to
Iile a Iinal adiustment return reIlecting therein all the items oI gross income
and deductions as well as the total taxable income Ior the taxable year. By
the Iiling thereoI, it enables a taxpayer to ascertain whether it has a tax still
due or an excess and overpaid income tax based on the adiusted and audited
Iigures. II it is shown that the taxpayer has a tax still due, then he must pay
the balance thereoI and on the other hand, iI he has an excess or overpaid
income tax, then he could carry it over to the succeeding taxable year or he
may credit or reIund the excess amount paid as the case may be.

Sec. 76, gives the taxpayer the privilege to carry over its excess credit or
crediting/ claiming Ior the reIund oI the excess amount paid, as the case
may be. II Sithe believes that Sec. 76 is inapplicable to its case, then why
did they carry over to the succeeding taxable year its 1998 excess credit?

Sec. 204 and Sec. 229 oI the 1997 Tax Code, iI treated in isolation, vest no
right. Sec. 204 merely provides Ior the authority oI the Commissioner to
compromise, abate and reIund/ credit taxes and the period oI time within
which a taxpayer may claim a reIund o tax credit. The same holds true with
regard to Sec. 22, which merely sets a period oI limitation within which to
recover an erroneously or illegally collected tax. Thus, a taxpayer`s option
to carry over the excess credit or to reIund/ credit the excess amount paid is
actually provided Ior by Sec. 76. In order to give eIIect to its provisions, it
is important that Sec. 76 should be read together with Sec. 204 and Sec. 229
oI the Tax Code.

In the case at bar, when Sithe opted to carry over its excess tax credit to the
succeeding taxable year, it has in eIIect availed oI the privilege allowed
only by Sec. 76. Thus, it is absurd Ior Sithe to exercise the option to carry
over the excess amount paid and on the same breath, invoke the
inapplicability oI Sec. 76 to his case.

BPI-AMILY SAVIGS BA. IC. v. CA. CTA. & CIR

APR. 12. 2000 - GR. 122480

It should be stressed that the rationale oI the rules oI procedure is to secure
a iust determination oI every action. They are tools designed to Iacilitate the
attainment oI iustice. But there can be no iust determination oI the present
action iI we ignore, on the grounds oI strict technicality, the Return
submitted beIore the CTA and even beIore this Court. The undisputed Iact
is that BPI suIIered a net loss in 1990; accordingly, it incurred no tax
liability to which the tax credit could be applied. Consequently, there is no
reason Ior the BIR and this Court to withhold the tax reIund which
rightIully belongs to BPI.

CIR argues that tax reIunds are in the nature oI tax exemptions and are to be
construed strictissimi iuris against the claimant. Under the Iacts oI the case,
the SC holds that BPI has established its claim. BPI may have Iiled to
strictly comply with the rules oI procedure; it may have even been
negligent. These circumstances, however, should not compel the Court to
disregard this cold, undisputed Iact: that BPI suIIered a net loss in 1990, and
that it could not have applied the amount claimed as tax credits. Substantial
iustice, equity and Iair play are on the side oI BPI.



Technicalities, and legalism, however exalted, should not be misused by the
Government to keep money not belonging to it and thereby enrich itselI at
the expense oI its law abiding citizens. II the State expects its taxpayers to
observe Iairness and honesty in paying their taxes, so must it apply the same
standard against itselI in reIunding excess payments oI such taxes. Indeed,
the State must lead by its own example oI honour, dignity and uprightness.

PHILAM ASSET MAAGEMET. IC. v. CIR

DEC. 14. 2005 - GR. 156637 AD 162004

PAID ON OPTIONS: NO DILIGENCE ON PART OF PHILAM

Sec. 76 oIIers 2 options to a taxable corporation whose total quarterly
income tax payments in a given taxable year

exceed its total income tax due. These options are:

a) Filing Ior a tax reIund;

b) Availing oI a tax credit.

The Iirst option is relatively simple. Any tax on income that is paid in
excess oI the amount due the government may be reIunded, provided that a
taxpayer properly applies Ior the reIund. The second option works by
applying the reIundable amount, as shown on the FAR oI a given taxable
year, against the estimated quarterly income tax liabilities oI the succeeding
taxable year.

These 2 options are alternative in nature. The choice oI one precludes the
other. A corporation must signiIy its intention whether to request a tax
reIund or claim a tax credit by marking the corresponding option box
provided in the FAR. While a taxpayer is required to mark its choice in the
Iorm provided by the BIR, this requirement is only Ior the purpose oI
Iacilitating tax collection. One cannot get a tax reIund and a tax credit at the
same time Ior the same excess income taxes paid. Failure to signiIy one`s
intention in the FAR does not mean outright barring oI a valid request Ior a
reIund, should one still choose this option later on. A tax credit should be
construed merely as an alternative remedy to a tax reIund under Sec. 76,
subiect to prior veriIication and approval by CIR. The reason Ior requiring
that a choice be made in the FAR upon its Iiling is to ease tax
administration, particularly the selI-assessment and collection aspects. A
taxpayer that makes a choice expresses certainty or preIerence and thus
demonstrates clear diligence. Conversely, a taxpayer that makes no choice
expresses uncertainty or lack oI preIerence and hence shows simple
negligence or plain oversight.

In the present case, CIR denied the claim oI Philam Ior a tax reIund oI
excess taxes withheld in 1997, because the latter (1) had not indicated in its
ITR Ior that year whether it was opting Ior a credit or a reIund; and (2) had
not submitted as evidence is 1998 ITR, which could have been applied
against its 1998 tax liabilities. Requiring that he ITR or the FAR oI the
succeeding year be presented to the BR in requesting a tax reIund has no
basis in law and iurisprudence.

TWO YEAR PRESCRIPTIVE PERIOD, NOT APPLICABLE

The Tax Code allows the reIund oI taxes to a taxpayer that claims it in
writing within 2 years aIter payment oI the taxes erroneously received by
the BIR. Despite the Iailure oI Philam to make the appropriate marking in
the BIR Iorm, the Iiling oI its written claim eIIectively serves as an
expression oI its choice to request a tax reIund, instead oI a tax credit. To
assert that any Iuture claim Ior reIund will be instantly hindered by a Iailure
to signiIy one`s intention in the FAR is to render nugatory the clear
provision that allows Ior a 2-year prescriptive period. In BPI-Family
Savings Bank v. CA, the court ordered the reIund oI a taxpayer`s excess
creditable taxes, despite the express declaration in the FAR to apply the
excess to the succeeding year. When circumstances show that a choice oI
tax credit has been made, it should be respected. But when indubitable
circumstances clearly show that another choice a tax reIund is in order,
it should be granted. 'Technicalities and legalisms, however exalted, should
not be misused by the government to keep money not belonging to it and
thereby enrich itselI at the expense oI its law abiding citizens.

5) RULE IN CASE OF MERGER, CORPORATE TAXPAYERS
CONTEMPLATING DISSOLUTION

SEC. 52(c) OF NIRC

BA THE PHILIPPIE ISLADS (BPI) v. CIR

CT. 25. 2005 - GR. 161997

It is the Final Adiustment Return, in which amounts oI the gross receipts
and deductions have been audited and adiusted, which is reIlective oI the
results oI the operations oI a business enterprise. It is only when the return,
covering the whole year, is Iiled that the taxpayer will be able to ascertain
whether a tax is still due or a reIund can be claimed based on the adiusted
and audited Iigures. Hence, this Court has ruled that at the earliest, the 2-
year prescriptive period Ior claiming a reIund commences to run on the date
oI Iiling oI the adiusted Iinal tax return.


In the case at bar, however, the CTA, applying Sec. 78 oI the Tax Code,
held:

BeIore this Court can be rule on the issue oI prescription, it is noteworthy to
point out that based on the Iinancial statements oI FBTC and the
independent auditor's opinion, FBTC operates on a calendar year basis. Its
12 months accounting period was shortened at the time it was merged with
BPI. Thereby, losing its corporate existence on July 1985 when the Articles
oI Merger was approved by the SEC. Thus CIR`s stand that FBTC operates
on a Iiscal year basis, based on its ITR, holds no ground. Third Court
believes that FBTC is operating on a calendar year period based on the
audited Iinancial statements and the opinion thereoI. The Iiscal period
ending June 30, 1985 on the upper leIt corner oI the ITR can be concluded
as an error on the part oI FBTC. It should have been Ior the 6 month period
ending June 30, 1985. It should also be emphasized that "where one
corporation succeeds another both are separate entities and the income
earned by the predecessor corporation beIore organization oI its successor is
not income to the successor."

Ruling now on the issue oI prescription, this Court Iinds that the petition Ior
review is Iiled out oI time. FBTC, aIter the end oI its corporate liIe on June
30, 1985, should have Iiled its ITR within 30 days aIter the cessation oI its
business or 30 days aIter the approval oI the Articles oI Merger. This is
bolstered by Sec. 78 oI NIRC and under Sec. 244 oI RR 2.

As the FBTC did not Iile its quarterly ITR Ior the year 1985, there was no
need Ior it to Iile a Final adiustment Return because there was nothing Ior it
to adiust or to audit. AIter it ceased operations on June 30, 1985, its taxable
year was shortened to 6 months, Irom January 1, 1985 to June 30, 1985.
The situation oI FBTC is precisely what was contemplated under Sec. 78 oI
NIRC. It thus became necessary Ior FBTC to Iile its ITR within 30 days
aIter approval by the SEC oI its plan or resolution oI dissolution. Indeed, it
would be absurd Ior FBTC to wait until the 15th day oI April, or almost 10
months aIter it ceased its operations, beIore Iiling its ITR.

Thus, Sec. 46(a) oI the NIRC applies only to instances in which the
corporation remains subsisting and its business operations are continuing. In
instances in which the corporation is contemplating dissolution, Sec. 78 oI
NIRC applies. It is a rule oI statutory construction that "Where there is in
the same statute a particular enactment and also a general one which in its
most comprehensive sense would include what is embraced in the Iormer,
the particular enactment must be operative, and the general enactment must
be taken to aIIect only such cases within its general language as are not
within the provisions oI the particular enactment.

BPI argues that to hold, as the CTA and CA do, that Sec. 78 applies in case
a corporation contemplates dissolution would lead to absurd results. It
contends that it is not Ieasible Ior the certiIied public accountants to
complete their report and audited Iinancial statements, which are required to
be submitted together with the plan oI dissolution to the SEC, within the
period contemplated by Sec. 78. It maintains that, in turn, the SEC would
not have suIIicient time to process the papers considering that Sec. 78 also
requires the submission oI a tax clearance certiIicate beIore the SEC can
approve the plan oI dissolution. As the CTA observed, however, BPI could
have asked Ior an extension oI time to Iile its ITR under Sec. 47 oI the
NIRC.

BPI Iurther argues that the Iiling oI a FAR would Iall due on July 30, 1985,
even beIore the due date Ior Iiling the quarterly return. This argument begs
the question. It assumes that a quarterly return was required when the Iact is
that, because its taxable year was shortened, the FBTC did not have to Iile a
quarterly return. In Iact, BPI presented no evidence that the FBTC ever Iiled
such quarterly return in 1985.

Finally, BPI cites a hypothetical situation wherein the directors oI a
corporation would convene on June 30, 2000 to plan the dissolution oI the
corporation on December 31, 2000, but would submit the plan Ior
dissolution earlier with the SEC, which, in turn, would approve the same on
October 1, 2000. Following Sec. 78 oI NIRC, the corporation would be
required to submit its complete return on October 31, 2000, although its
actual dissolution would take place only on December 31, 2000.

SuIIice it to say that such a situation may likewise be remedied by resort to
Sec. 47 oI NIRC. The corporation can ask Ior an extension oI time to Iile a
complete income tax return until December 31, 2000, when it would cease
operations. This would obviate any diIIiculty which may arise out oI the
discrepancies not covered by Sec. 78 oI NIRC.

Considering that Sec. 78 oI NIRC, in relation to Sec. 244 oI RR 2 applies to
FBTC, the 2-year prescriptive period should be counted Irom July 30, 1985,
i.e., 30 days aIter the approval by the SEC oI its plan Ior dissolution. In
accordance with Sec. 292 oI NIRC, July 30, 1985 should be considered the
date oI payment by FBTC oI the taxes withheld on the earned income.
Consequently, the 2-year period oI prescription ended on July 30, 1987. As
BPI's claim Ior tax reIund beIore the CTA was Iiled only on December 29,
1987, it is clear that the claim is barred by prescription.

6) WHEN 2 YEAR PERIOD DOES NOT APPLY

CIR v. PHILIPPIE ATIAL BA (PB)

CT. 25. 2005 - GR. 1611887


7) ERRONEOUSLY REFUNDED TAX

G&AG&A ELECTRIC LIGHT C.. IC. v. CIR

APR. 24. 1967 - GR. L-23611

Where the CIR seeks to recover Irom the taxpayer an amount which was
erroneously reIunded to the latter as excess Iranchise tax, said amount is in
eIIect an assessment Ior deIiciency Iranchise tax. And the right to assess or
collect it is governed by Sec. 331 oI the Tax Code rather than by Art. 1145
oI the NCC. A special law (Tax Code) prevails over a general law (NCC).

Where the taxpayer acted in good Iaith in paying the Iranchise tax at the
lower rate Iixed y its Iranchise, it is patently unIair on the part oI the
Government to require him to pay 25 surcharge on the amount correctly
due.

VII.ABATEMENT OF TAX, TAX COMPROMISE
SEC. 7, SEC. 204 OF NIRC
RR 13-01
RR30-02

A. POWER TO COMPROMISE

1) BASIS FOR ACCEPTANCE OF COMPROMISE SETTLEMENT AND
RATES

CIR. v. AZ&CEA T. REYES

1A. 27. 2006 - GR. 159694

been transIerred to innocent purchasers prior to demand. In order that a lien
may Iollow the property into the hands oI a third party; it is Iurther essential
that the latter should have notice, either actual or constructive.

B. JUDICIAL REMEDIES

SEC. 205

SEC. 220-221, OF NIRC

MAMB&LA L&MBER CMPAY v. REP&BLIC THE
PHILIPPIES

SEP. 05. 1984 - GR. L-37061

The taxpayer`s deIenses are similar to those oI the Republic in a case Ior the
enIorcement oI a iudgement by iudicial action under Sec. 6 oI Rule 39 oI
Rules oI Court. No inquiry can be made therein as to the merits oI the
original case or the iustness oI the iudgement relied upon, other than by
evidence oI want oI iurisdiction, oI collusion between the parties, or oI
Iraud in the party oIIering the record with respect to the proceedings. The
taxpayer may raise only the question whether or not the Collector oI
Internal Revenue had iurisdiction to do the particular act, and whether any
Iraud was committed in the doing oI that act.

ERADEZ HERMAS. IC. v. CIR. & CTA

SEP. 30. 1969 - GR. L-21551

A iudicial action Ior the collection oI a tax begins by the Iiling oI a
complaint with the proper court oI Iirst instance or where the assessment is
appealed to the CTA, by Iiling an answer to the taxpayer`s petition Ior
review wherein payment oI the tax is prayed Ior. This is but logical Ior
where the taxpayer avails oI the right to appeal the tax assessment to the
CTA, the said Court is vested with the authority to pronounce iudgment as
to the taxpayer`s liability to the exclusion oI any other court.

The 'capital investment method is not a method oI depletion, but the Tax
Code provision, prior to its amendment by Sec. 1 oI RA 3698, expressly
provided that when the allowances shall equal the capital invested no
Iurther allowances shall be made; in other words, the capital investment was
but the limitation oI the amount oI depletion that could be claimed. The
outright deduction by the taxpayer oI 1/5 oI the cost oI the mines, as iI it
were a 'straight line rate oI depreciation is not authorized by the Tax Code.

V. STATUTORY OFFENSES AND PENALTIES

A. CIVIL PENALTIES, SURCHARGES, INTEREST
SEC. 247-251 OF NIRC
RR 12-99

1) R&LES ITERESTBA THE PHILIPPIE ISLAD
(BPI) v. CIR

1&L. 27. 2006 - GR. 137002

In the case oI PRC v. CA, the SC ruled that even iI an assessment was later
reduced by the courts, a delinquency interest should still be imposed Irom
the time demand was made by the CIR. As correctly pointed out by the
Solicitor General, the deIiciency tax assessment, which was the subiect oI
the demand letter oI the Commissioner, should have been paid within 30
days Irom receipt thereoI. By reason oI PRC's deIault thereon, the
delinquency penalties oI 25 surcharge and interest oI 20 accrued Irom
April 11, 1989. The Iact that PRC appealed the assessment to the CTA and
that the same was modiIied does not relieve PRC oI the penalties incident to
delinquency. The reduced amount oI P237,381.25 is but a part oI the
original assessment oI P1,892,584.00.

The legal provision makes no distinctions nor does it establish exceptions. It
directs the collection oI the surcharge and interest at the stated rate upon
any sum/s due and unpaid aIter the dates prescribed in subsections (b), (c),
and (d) oI the Act Ior the payment oI the amounts due. The provision
thereIore is mandatory in case oI delinquency. This is iustiIied because the
intention oI the law is precisely to discourage delay in the payment oI taxes
due to the State and, in this sense, the surcharge and interest charged are not
penal but compensatory in nature they are compensation to the State Ior
the delay in payment, or Ior the concomitant use oI the Iunds by the
taxpayer beyond the date he is supposed to have paid them to the State.

In Ross v. U.S., When the U.S. SC ruled that it was only equitable Ior the
government to collect interest Irom a taxpayer who, by the government's
error, received a reIund which was not due him. Even though the taxpayer
did not request the reIund made to him, and the situation is entirely due to
an error on the part oI the government, taxpayer and not the government has
had the use oI the money during the period involved and it is not uniustly
penalizing taxpayer to require him to pay compensation Ior this use oI
money.

Based on established doctrine, these charges incident to delinquency are
compensatory in nature and are imposed Ior the taxpayers' use oI the Iunds
at the time when the State should have control oI said Iunds. Collecting
such charges is mandatory. ThereIore, the Decision oI the CA imposing a
20 delinquency interest over the assessment reduced by the CTA was
iustiIied and in accordance with Sec. 249(c)(3) oI NIRC.

2) SURCHARGE: 25 OR 50

SEC. 248 OF NIRC

a) MANDATORY IMPOSITION OF PENALTIES

PHILIPPIE REIIG CMPAY (&ILEVER PHILS.. IC.) v.
CA. CTA. & CIR

MAY 08. 1996 - GR. 118794

Tax laws imposing penalties Ior delinquencies, are intended to hasten tax
payments by punishing evasions or neglect oI duty in respect thereoI. II
penalties could be condoned Ior Ilimsy reasons, the law imposing penalties
Ior delinquencies would be rendered nugatory, and the maintenance oI the
Government and its multiIarious activities will be adversely aIIected. The
intention oI the law is to discourage delay in the payment oI taxes due the
Government and, the penalty and interest are not penal but compensatory
Ior the concomitant use oI the Iunds by the taxpayer beyond the date when
he is supposed to have paid them to the Government. Unquestionably, PRC
chose to turn a deaI ear to these iniunctions.

CIR v. AIR IDIA. & CTA

1A. 29. 1998 - GR. 72443

The 50 surcharge or Iraud penalty provided in Sec. 72 oI the NIRC is
imposed on a delinquent taxpayer who willIully neglects to Iile the required
tax return within the period prescribed by the law, or who willIully Iiles a
Ialse or Iraudulent tax return. On the other hand, iI the Iailure to Iile the
required tax return is not due to willIul neglect, a penalty oI 25 is to be
added to the amount oI the tax due Irom the taxpayer.

The SC is not convinced that Air India can be considered to have willIully
neglected to Iile the required tax return thereby warranting the imposition oI
the 50 Iraud penalty provided in Sec. 72. At the most, there is the barren
claim that such Iailure was Iraudulent in character, without any evidence or
iustiIication Ior the same. The willIul neglect to Iile the required tax return
or the Iraudulent intent to evade the payment oI taxes, considering that the
same is accompanied by legal consequences, cannot be presumed.

In the case oI Aznar v. CA. The lower court's conclusion regarding the
existence oI Iraudulent intent to evade payment oI taxes was based merely
on a presumption and not on evidence establishing a willIul Iiling oI Ialse
and Iraudulent returns so as to warrant the imposition oI the Iraud penalty.
The Iraud contemplated by law is actual and not constructive. It must be
intentional Iraud, consisting oI deception willIully and deliberately done or
resorted to in order to induce another to give up some legal right.
Negligence, whether slight or gross, is not equivalent to the Iraud with
intent to give up some legal right or to evade the tax contemplated by the
law. It must amount to intentional wrongdoing with the sole obiect oI
avoiding the tax. It necessarily Iollows that a mere mistake cannot be
considered as Iraudulent intent, and iI both Aznar and the CIR committed
mistakes in making entries in the returns and in the assessment,
respectively, under the inventory method oI determining tax liability, it
would be unIair to treat the mistakes oI Aznar as tainted with Iraud and
those oI the CIR as made in good Iaith.

There being no cogent basis to Iind willIul neglect to Iile the required tax
return on the part oI Air India, the 50 surcharge or Iraud penalty imposed
upon it is improper. Nonetheless, such Iailure subiects Air India to a 25
penalty pursuant to Section 72 oI NIRC. P74, 203.90 constitutes the tax
deIiciency oI Air India. 25 oI this amount is P37, 101.95.

MICHEL 1. LH&ILLIER PAWSHP. IC. v. CIR

SEP. 11. 2006 - GR. 166786

Documentary Stamp Tax (DST) is essentially an excise tax; it is not an
imposition on the document itselI but on the privilege to enter into a taxable
transaction oI pledge. Sec. 195 oI NIRC imposes a DST on every pledge
regardless oI whether the same is a conventional pledge governed by the
Civil Code or one that is governed by the provision oI PD 114. All pledges
are subiect to DST, unless there is a law exempting them in clear and
categorical language. This explains why the Legislature did not see the need
to explicitly impose a DST on pledges entered into by pawnshops. These
pledges are already covered by Sec. 195 and to create a separate provision
especially Ior them would be superIluous.

It is the exercise oI the privilege to enter into an accessory contract oI
pledge, as distinguished Irom contract oI loan, which give rise to the
obligation to pay DST. II the DST under Sec. 195 is levied on the loan or
the exercise oI the privilege to contract a loan, then there would be no use
Ior Sec. 179 oI the NIRC, to separately impose stamp tax on all debt
instruments, like a simple loan agreement. It is Ior this reason why the
deIinition oI pawnshop ticket, as not an evidence oI indebtedness, is
inconsequential to and has no bearing on the taxability oI contracts oI
pledge entered into by pawnshops. For purposes oI Sec. 195, pawnshop
tickets need not be an evidence oI indebtedness nor a debt instrument
because it taxes the same as a pledge instrument. Neither should the
deIinition oI pawnshop ticket, as not a security, exempt it Irom the
imposition I DST. It was correctly deIined as such because the ticket itselI
is not the security but the pawn or the personal property pledge to the
pawnbroker.

b) RULE ON PRIMA FACIE FRAUD

SEC. 248(B) OF NIRC

1SE AZAR v. CTA. & CIR

A&G. 23. 1974 - GR. L-20569

The lower court`s conclusion regarding the existence oI Iraudulent intent to
evade payment oI taxes was based merely on a presumption and not on
evidence establishing a wilIul Iiling oI Ialse and Iraudulent returns as to
warrant the imposition oI the Iraud penalty. The Iraud contemplated by law
is actual and not constructive. It must be intentional Iraud, consisting oI
deception wilIully and deliberately done or resorted to in order to induce
another to give up some legal right. Negligence, whether slight or gross, is
not equivalent to the Iraud with intent to evade the tax contemplated by law.
It must amount to intentional wrong-doing with the sole obiect oI avoiding
the tax.

CIR v. MELCHR 1AVIER 1R.. & CTA

1&LY 31. 1991 - GR. 78953

Fraud is never imputed and the courts never sustain Iindings oI Iraud upon
circumstances which, at most, create only suspicion and the mere
understatement oI a tax is not itselI prooI oI Iraud Ior the purpose oI tax
evasion.

In the case at bar, there was no actual and intentional Iraud through wilIul
and deliberate misleading oI the government agency concerned, the BIR,
headed by CIR. The government was not induced to give up some legal
right and place itselI at a disadvantage so as to prevent its lawIul agents
Irom proper assessment oI tax liabilities because Javier did not conceal
anything. Error or mistake oI law is not Iraud. The CIR`s zealousness to
collect taxes Irom the unearned windIall to Javier is highly commendable.
UnIortunately, the imposition oI the Iraud penalty in this case is not
iustiIied by the extant Iacts.

B. CRIMES, OFFENSES, PENALTIES, FORFEITURES
SEC. 220-221, 224-226 OF NIRC
SEC. 253-281 OF NIRC
RMC 101-90

1) PRECONDITIONED BEFORE A CRIMINAL CASE MAY BE FILED

REP&BLIC THE PHILIPPIES v. SAL&D HIZ

DEC. 31. 1999 - GR. 130430

Sec. 221 oI NIRC provides:

Form and mode oI proceeding in actions arising under this Code. Civil
and criminal actions and proceedings instituted in behalI oI the Government
under the authority oI this Code or other law enIorced by the BIR shall be
brought in the name oI the Government oI the Philippines and shall be
conducted by the provincial or city Iiscal, or the Solicitor General, or by the
legal oIIicers oI the BIR deputized by the Secretary oI Justice, but no civil
and criminal actions Ior the recovery oI taxes or the enIorcement oI any
Iine, penalty or IorIeiture under this Code shall begin without the approval
oI the Commissioner.

To implement this provision RAO 5-83 oI the BIR provides in pertinent
portions:

The Iollowing civil and criminal cases are to be handled by Special
Attorneys and Special Counsels assigned in the

Legal Branches oI Revenues Regions:

xxx

xxx

xxx

II. Civil Cases

1. Complaints Ior collection on cases Ialling within the iurisdiction oI the
Region. . .

In all the above mentioned cases, the Regional Director is authorized to sign
all pleadings Iiled in connection therewith which, otherwise, requires the
signature oI the Commissioner.

xxx

xxx

xxx

RAO 10-95 speciIically authorizes the Litigation and Prosecution Section oI
the Legal Division oI RDO to institute the necessary civil and criminal
actions Ior tax collection. As the complaint Iiled in this case was signed by
the BIR's ChieI oI Legal Division Ior Region 4 and veriIied by the Regional
Director, there was, thereIore, compliance with the law.

However, the lower court reIused to recognize RAO 10-95 and, by
implication, RAO 5-83. It held:

Memoranda, circulars and orders emanating Irom bureaus and agencies
whether in the purely public or quasi-public corporations are mere
guidelines Ior the internal Iunctioning oI the said oIIices. They are not laws
which courts can take iudicial notice oI. As such, they have no binding
eIIect upon the courts Ior such memoranda and circulars are not the oIIicial
acts oI the legislative, executive and iudicial departments oI the Philippines.
...

This is erroneous. The rule is that as long as administrative issuances relate
solely to carrying into eIIect the provisions oI the law, they are valid and
have the Iorce oI law. The governing statutory provision in this case is Sec.
4(d) oI the NIRC which provides:

SpeciIic provisions to be contained in regulations. The regulations oI the
BIR shall, among other hings, contain provisions speciIying, prescribing, or
deIining:

xxx xxx xxx

(d) The conditions to be observed by revenue oIIicers, provincial Iiscals and
other oIIicials respectingthe institution and conduct oI legal actions and
proceedings.

RAO 5-83 and 10-95 are in harmony with this statutory mandate.

As amended by R.A. 8424, the NIRC is now even more categorical. Sec. 7
oI the present Code authorizes the BIR Commissioner to delegate the
powers vested in him under the pertinent provisions oI the Code to any
subordinate oIIicial with the rank equivalent to a division chieI or higher,
except the Iollowing:

a) The power to recommend the promulgation oI rules and regulations by
the Secretary oI Finance;

b) The power to issue rulings oI Iirst impression or to reverse, revoke or
modiIy any existing ruling oI the Bureau;

c) The power to compromise or abate under Sec. 204 (A) and (B) oI this
Code, any tax deIiciency: Provided, however, that assessment issued by the
Regional OIIices involving basic deIiciency taxes oI Iive hundred thousand
pesos (P500,000.00) or less, and minor criminal violations as may be
determined by rules and regulations to be promulgated by the Secretary oI
Finance, upon the recommendation oI the Commissioner, discovered by
regional and district oIIicials, may be compromised by a regional evaluation
board which shall be composed oI the Regional Director as Chairman, the
Assistant Regional Director, heads oI the Legal, Assessment and Collection
Divisions and the Revenue District OIIicer having iurisdiction over the
taxpayer, as members; and

d) The power to assign or reassign internal revenue oIIicers to
establishments where articles subiect to excise tax

are produced or kept.

None oI the exceptions relates to the Commissioner's power to approve the
Iiling oI tax collection cases.

Q&IRIC &GAB v. H. VICETE C&SI. CIR CMMISSIER.
& 1ES&S ACEBES

MAY 30. 1980 - GR. L-41919-24

What is involved is not the collection oI taxes where the assessment oI the
CIR Commissioner may be reviewed by CTA, but a criminal prosecution
Ior violations oI NIRC which is within the recognizance oI CFI. While there
can be no civil action to enIorce collection beIore the assessment
procedures provided in the Code have been Iollowed, there is no
requirement Ior the precise computation and assessment oI the tax beIore
there can be a criminal prosecution under the Code.

It has been ruled that a petition Ior reconsideration oI an assessment ay
aIIect the suspension oI the prescriptive period Ior the collection oI taxes,
but not the prescriptive period oI a criminal action Ior violation oI law. The
protest oI Ungab against the assessment oI the District Revenue OIIicer
cannot stop his prosecution Ior violation oI NIRC. Accordingly, Judge Cusi
did not abuse his discretion in denying the motion to quash Iiled by Ungab.



CIR v. CA. RT&E TBACC CRP.. & L&CI TA

1&E 04. 1996 - GR. 119322

In every step in the production oI cigarettes was closely monitored and
supervised by the BIR personnel speciIically assigned to Fortune`s
premises, and considering that the ManuIacturer`s Sworn Declarations on
the data required to be submitted by the manuIacturer were scrutinized and
veriIied by the BIR, and since the manuIacturer`s wholesale price was duly
approved by the BIR, then it is presumed that such registered wholesale
price is the same as, or approximates 'the price, excluding the VAT, at
which the goods are sold at wholesale in the place oI production,
otherwise, the BIR would not have approved the registered wholesale price
oI the goods Ior purposes oI imposing the ad valorem tax due. In such case,
and in the absence oI contrary evidence, it was precipitate and premature to
conclude that Fortune made Iraudulent returns or wilIully attempted to
evade payment oI taxes due.

II there was Iraud or wilIul attempt to evade payment oI ad valorem taxes
by Fortune through the manipulation oI the registered wholesale price oI the
cigarettes, it must have been with the connivance or cooperation oI certain
BIR oIIicials and employees who supervised and monitored Fortune`s
production activities to see to it that the correct taxes were paid. But there is
no allegation, much less evidence oI BIR personnel`s malIeasance. There is
the presumption that the BIR personnel perIormed their duties in the regular
course in ensuing that the correct taxes were paid by Fortune.

The SC share the same view oI both the trial court and CA that beIore the
tax liabilities oI Fortune are Iirst Iinally determined, it cannot be correctly
asserted that Fortune have wilIully attempted to evade or deIeat the taxes
sought to be collected Irom Fortune. BeIore one is prosecuted Ior wilIul
attempt to evade or deIeat any tax under Sec. 253 and Sec. 255 oI the Tax
Code, the Iact that a tax is due must Iirst be proved.

DISTIG&ISHED RM &GAB v. C&SI -

The pronouncement therein that deIiciency assessment is not necessary
prior to prosecution is pointed and deliberately qualiIied by the Court. 'The
crime is complete when the violator has knowingly and wilIully Iiled a
Iraudulent return with the intent to evade and deIeat a part or all oI the tax.
For criminal prosecution to proceed beIore assessment there must be a
prima Iacie showing oI a wilIul attempt to evade taxes. There was a wilIul
attempt to evade taxes because oI the taxpayer`s Iailure to declare in his
ITR his income derived Irom banana saplings. In the mind oI the trial court
and CA, Fortune`s situation is quite apart Iactually since the registered
wholesale price oI the goods, approved by the BIR, is presumed to be the
actual wholesale price, thereIore, not Iraudulent and unless and until the
BIR has made a Iinal determination oI what is supposed to be the correct
taxes, the taxpayer should not be placed in the crucible I criminal
prosecution. Herein lies a WHALE oI diIIerence between Ungab and
Fortune.

CIR v. PASCR REALTY AD DEVELPMET CRPRATI

1&E 29. 1999 - GR. 128315

Pascor maintain that the Iiling oI a criminal complaint must be preceded by
an assessment. This is incorrect, because Sec. 222 oI NIRC speciIically
states that in cases where Ialse or Iraudulent return is submitted or in case oI
Iailure to Iile a return such as in this case, proceedings in court may be
commenced without an assessment. Sec. 205 clearly mandates that the civil
and criminal aspects oI the case may be pursued simultaneously. In Ungab
v. Cusi, Ungab sought the dismissal oI the criminal complaints Ior being
premature since his protest to the CTA had not yet been resolved. The Court
held that such protests could not stop or suspend the criminal action which
was independent oI the resolution oI the protest in the CTA. This was
because the CIR Commissioner had, in such tax evasion cases, discretion on
whether to issue an assessment or to Iile a criminal case against the taxpayer
or to do both.

Pascor insist that Sec. 222 should be read in relation to Sec. 255 oI NIRC,
which penalizes Iailure to Iile a return. Pascor add that a tax assessment
should precede a criminal indictment. The SC disagrees. Sec. 222 states that
an assessment is not necessary beIore a criminal charge can be Iiled. This is
the general rule. Pascor Iailed to show that they are entitled to an exception.
The criminal charge need only be supported by a prima Iacie showing oI
Iailure to Iile a required return. This Iact need not be proven by an
assessment.

The issuance oI an assessment must be distinguished Irom the Iiling oI a
complaint. BeIore an assessment is issued, there is a PAN sent to the
taxpayer. The taxpayer is then given a chance to submit position papers and
documents to prove that the assessment is unwarranted. II the
Commissioner is unsatisIied, an assessment signed by him is then sent to
the taxpayer inIorming the latter speciIically and clearly that an assessment
has been made against him. In contrast, the criminal charge need not go
through all these. The criminal charge is Iiled directly with the DOJ.



ThereaIter, the taxpayer is notiIied that a criminal case had been Iiled
against him, not that the Commissioner has issued an assessment. It must be
stressed that a criminal complaint is institute not to demand payment, but to
penalize the taxpayer Ior violation oI the Tax Code.

2) COMPROMISE PENALTY

RMO 19-07

CIR v. LIAGA BAY LGGIG C.. IC.. & CTA

1A. 21. 1991 - GR. 35266

Sec. 11 oI Regulations No. 85 applies, as the CTA points out, to a 'Iorest
concessionaire who is the holder oI an ordinary license;but there are
separate provisions 'on invoicing and payment oI Iorest charges in the case
oI owners or operators oI sawmills who are Iorest concessionaire, like
Lianga. For purposes oI said regulations, 'sawmills are classiIied into Class
A, B, C and D. The Tax Court`s Iinding on the basis oI the evidence is that
Lianga is a Class C sawmill. The record does indeed establish its character
as such: in accordance with said regulation, Iorest oIIicers have been
permanently assigned to its concession Ior the purpose oI scaling all logs
Ielled and it has posted a bond to guarantee the payment oI the Iorest
charges that may be due Irom it. It is not thereIore required by the
regulation to accomplish and submit auxiliary invoices required only oI
Class A sawmills, i.e., holders oI ordinary timber licenses. What is required
in lieu thereoI, pursuant to said regulation, are monthly scale reports (BIR
Form 14.15) as well as the Daily Trimmer Tally (BIR Form 14.11), and
monthly Abstract oI Sawmill invoice (BIR Form 14.14). It is noteworthy
that the CIR does not claim and has made no eIIort whatever to prove that
these Iorms were not accomplished. Thus, as the Tax Court declares, it is
presumed that Lianga 'has complied with the requirements regarding the
keeping and use oI the records and documents required oI Class C sawmills,
among which are the Daily Trimmer Tally and commercial invoices. In
Iact, it appears that the Iorest oIIicers` reports and computations were the
basis Ior the payment oI Iorest charges by Lianga, and the basis, as well oI
the Commissioner`s computation oI the alleged 25 surcharge. Sec. 267
imposing a surcharge oI 25 oI the regular Iorest charges iI Iorest products
are removed Irom the Iorest concession 'without invoice does not speciIy
the nature oI the invoice contemplated. The term is not limited to auxiliary
invoices. It may reIer as well to 'oIIicial or 'commercial invoices such as
those prepared by Class C sawmills. This is the interpretation placed on the
term by said regulation themselves, which declare that the 25 surcharge is
imposable on 'Forest products transported without oIIicial invoice or
commercial invoice, as the case requires. And since sawmill or commercial
invoices were in Iact prepared by Lianga, no violation oI the rule may be
imputed to it at all.

3) ELEMENTS OF TAX EVASION

CIR v. THE ESTATE BEIG TDA. 1R.

SEP. 14. 2006 - GR. 147188

4) PAYMENT OF TAX IN CRIMINAL CASES
SEC. 253(d) OF NIRC
SEC. 205 (b)

REP&BLIC v. PEDR PATAA

1&LY 21. 1967 - GR. L-22356

Under the Penal Coe, the civil liability is incurred by reason oI the
oIIender`s criminal act. The criminal liability gives birth to the civil
obligation such that, generally, iI one is not criminally liable under the
Penal Code, he cannot be civilly liable there under. The situation under the
income tax law is the exact opposite. Civil liability to pay taxes arises Irom
the Iact, Ior instance, that one has engaged himselI in business and not
because oI any criminal at committed by him. The criminal liability arises
upon Iailure oI the debtor to satisIy his civil obligation. The incongruity oI
the Iactual premises and Ioundation principles oI the two cases is one oI the
reasons Ior not imposing civil indemnity on the criminal inIractor oI the
income tax law. Another reason, while Sec. 73 oI NIRC has provided Ior
the imposition oI the penalty oI imprisonment or Iine, or both, Ior reIusal or
neglect to pay income tax or to make a return thereoI, it does not provide
the collection oI said tax in criminal proceedings.

Since taxpayer`s civil liability is not included in the criminal action, his
acquittal in the criminal proceeding does not necessarily entail exoneration
Irom his liability to pay the taxes. His legal duty to pay taxes cannot be
aIIected by his attempt to evade payment. Said obligation is not a
consequence oI the Ielonious acts charged in the criminal proceeding nor is
it a mere civil liability arising Irom a crime that could be wiped out by the
iudicial declaration oI non- existence oI the criminal acts charged.

MARIA B. CASTR v. CIR



APR. 26. 1962 - GR. L-12174

With regard to the tax proper, the state correctly points out in its brieI that
the acquittal in the criminal case could not operate to discharge Castro Irom
the duty to pay the tax, since that duty is imposed by statute prior to and
independently oI any attempts on the part oI the taxpayer to evade payment.
The obligation to pay the tax is not a mere consequence oI the Ielonious
acts charged in the inIormation, nor is it a mere civil liability derived Irom
crime that would be wiped out by the iudicial declaration that the criminal
acts charged did not exist.

As to the 50 surcharge, in CoIIey v. U.S., the U.S. SC states that additions
oI this kind to the main tax are not penalties but civil administrative
sanctions, provided primarily as a saIeguard Ior the protection oI the state
revenue and to reimburse the government Ior the heavy expense oI
investigation and the loss resulting Irom the taxpayer's Iraud. This is made
plain by the Iact that such surcharges are enIorceable, like the primary tax
itselI, by distraint or civil suit, and that they are provided in a section oI
Sec. 5 and Sec. 7, RA 55 that is separate and distinct Irom that providing Ior
criminal prosecution. The SC concludes that the deIense oI ieopardy and
estoppel by reason oI Castro`s acquittal is untenable and without merit.
Whether or not there was Iraud committed by the taxpayer iustiIying the
imposition oI the surcharge is an issue oI Iact to be inIerred Irom the
evidence and surrounding circumstances; and the Iinding oI its existence by
the Tax Court is conclusive upon the SC.

5) PRESCRIPTION OF VIOLATION OF NIRC

EMILI S. LIM. SR. & ATIA S& LIM v. CA & PEPLE
THE PHILIPPIES

CT. 18. 1990 - GR. 48134-37

Relative to Criminal Cases Nos. 1788 and 1789 which involved Lim`s
reIusal to pay deIiciency income taxes due, again both parties are in accord
that by their nature, the violations as charged could only be committed aIter
service oI notice and demand Ior payment oI the deIiciency taxes upon the
taxpayers. Lim maintains that the 5-year period oI limitation under Sec. 354
should be reckoned Irom April 7, 1965, the date oI the original assessment
while the Government insist that it should be counted Irom July 3, 1968
when Iinal notice and demand was served on Lim`s daughter-in-law. The
SC holds Ior the Government.

Sec. 51 (b) oI the Tax Code provides: '(b) Assessment and payment oI
deIiciency tax AIter the return is Iiled, the BIR Commissioner shall
examine it and assess the correct amount oI the tax. The tax or deIiciency in
tax so discovered shall be paid upon notice and demand Irom the BIR
Commissioner. Inasmuch as the Iinal notice and demand Ior payment oI the
deIiciency taxes was served on Lim on July 3, 1968, it was only then that
the cause oI action on the part o the BIR accrued. This is so because prior to
the receipt oI the letter-assessment, no violation has yet been committed by
the taxpayers. The oIIense was committed only aIter receipt was coupled
with the wilIul reIusal to pay the taxes due within the allotted period. The
two criminal inIormation, having been Iiled on June 23, 1970, are well
within the 5-year prescriptive period and are not time-barred.

VI. CLAIMS FOR REFUND AND CREDIT OF TAXES/ REMEDY
AFTER PAYMENT

A. WHO MAY FILE CLAIM FOR REFUND/ TAX CREDIT

1) BASIS OF TAX REFUNDS

CIR v. ACESITE (PHILIPPIES) HTEL CRPRATI

EB. 16. 2007 - GR. 147295

Tax reIunds are based on the principle oI quasi-contract or solutio indebeti
and the pertinent laws governing this principle are Iound in Art. 2142 and
Art. 2154 oI the NCC. When money is paid to another under the inIluence
oI a mistake oI Iact, on the mistaken supposition oI the existence oI a
speciIic Iact, where it would not have been known that the Iact was
otherwise, it may be recovered. The ground upon which the right oI
recovery rests is that money paid through misapprehension oI Iacts belongs
in equity and in good conscience to the person who paid it.

The government comes within the scope oI solution indebeti principle,
where that: 'enshrined in the basic legal principles is the time honoured
doctrine that no person shall uniustly enrich himselI at the expense oI
another. It goes without saying that the Government is not exempt Irom the
application oI this doctrine.

2) TAXPAYER, WITHHOLDING AGENT

CIR v. PRCTER & GAMBLE PHILIPPIES MA&ACT&RIG
CRPATI. & CTA

DEC. 02. 1991 - GR. 66838

The SC believes that the BIR should not be allowed to deIeat an otherwise
valid claim Ior reIund by raising the question oI alleged incapacity. CIR
does not pretend that P&G-Phil., should it succeed in the claim Ior reIund
instead oI transmitting such reIund, is likely to run away with the reIund
instead oI transmitting such reIund or tax credit to its parent or sole
stockholder. It is commonplace that in the absence oI explicit statutory
provisions to the contrary, the government must Iollow the same rules oI
procedure which bind private parties. It is, Ior instance, clear that the
government is held to compliance with the provisions oI Circular No. 1-88
oI the SC in exactly the same way that private litigants are held to such
compliance, save only in respect oI the matter oI Iiling Iees Irom which the
Republic is exempt by the Rules oI Court.

A 'taxpayer is any person subiect to tax imposed by the Tax Code. Under
Sec. 53(c), the withholding agent who is required to deduct and withhold
any tax is made 'personally liable Ior such tax and is indemniIied against
any claims and demands which the stockholder might wish to make in
questioning the amount oI payments eIIected by the withholding agent in
accordance with the provisions oI NIRC. The withholding agent, P&G-
Phil., is directly and independently liable Ior the correct amount oI the tax
that should be withheld Irom the dividend remittances. The withholding
agent is, moreover, subiect to and liable Ior deIiciency assessments,
surcharges and penalties should the amount oI the tax withheld be Iinally
Iound to be less than the amount that should have been withheld under the
law. A 'person liable Ior tax has been held to be a 'person subiect to tax
and 'subiect to tax both connote legal obligation or duty to pay a tax. By
any reasonable standard, such a person should be regarded as a party-in-
interest or as a person having suIIicient legal interest, to bring a suit Ior
reIund oI taxes he believes were illegally collected Irom him.

TAX PAIRING RULE

The ordinary 35 tax rate applicable to dividend remittances to non-
resident corporate stockholders oI a Philippine corporation, goes down to
15 iI the country oI domicile oI the Ioreign stockholder corporation 'shall
allow such Ioreign corporation a tax credit Ior 'taxes deemed paid in the
Philippines, applicable against the tax payable to the domiciliary country
by the Ioreign stockholder corporation.

In the instant case, the reduced 15 dividend tax rate is applicable iI the
USA 'shall allow to P&G-USA a tax credit Ior 'taxes deemed paid in the
Philippines applicable against the US taxes oI P&G-USA. The NIRC
speciIies that such tax credit Ior 'taxes deemed paid in the Philippines
must, as a minimum, reach an amount equivalent to 20 points which
represents the diIIerence between the regular 35 dividend tax rate and the
preIerred 15 dividend tax rate. However, Sec. 24(b)(1), does not require
that the US must give a 'deemed paid tax credit Ior the dividend tax (20
points) waived by the Philippines in making applicable the preIerred
dividend tax rate oI 15. In other words, NIRC does not require that the US
tax law deemed the parent-corporation to have paid the 20 points oI
dividend tax waived by the Philippines. The NIRC only requires that the US
'shall allow P&G-USA a 'deemed paid tax credit in an amount
equivalent to the 20 points waived by the Philippines.

3) REQUISITES FOR A VALID CLAIM FOR REFUND

ILEY 1. GIBBS & DIAE P. GIBBS v. CIR. CTA

V. 29. 1965 - GR. L-17406

AJG, signing as attorney-in-Iact, acknowledged Ior the Gibbs receipt oI the
deIicient income tax assessment; Iormally protested the same in writing,
paid the assessment and likewise Iormally demanded in writing its reIund.
Besides, in one oI his letters to the Commissioner, he stated that iI his
demand Ior reIund Ior the Gibbs was not eIIected, he would collect Irom
CIR certain charges including attorney`s Iees.

The Iorgoing circumstances show that AJG acted not merely an agent or
attorney-in-Iact oI the Gibbs but as their legal counsel. The receipt,
thereIore by AJG oI the Commissioner`s decision denying the claim Ior
reIund was receipt oI the same by the Gibbs, and the 30-day prescriptive
period Ior Iiling oI a petition Ior review should be computed Irom the date
oI such receipt.

A taxpayer, resident or non-resident, who contributes to the withholding tax
system, does not really deposit an amount to the BIR Commissioner, but, to
perIorm or extinguish his tax obligation Ior the year concerned. He is
paying his tax liabilities Ior that year. Consequently, a taxpayer whose
income is withheld at the source will be deemed to have paid his tax
liability when the same Ialls due at the end oI the tax year. It is Irom this
latter date then, or when the tax liability Ialls due, that the 2-year
prescriptive period under Sec. 306 oI the Revenue Code starts to run with
respect to payments eIIected through the withholding tax system. It is oI no
consequence whatever that a claim Ior reIund or credit against the amount
withheld at the source may have been presented and may have remained
unresolved since the delay oI the Collector is rendering the decision does
not extend the peremptory period Iixed by the statute.

PPEL (PHILIPPIES). IC. v. CIR

SEP. 19. 1961 - GR. L-10550



It is the duty oI the taxpayer to urge the Collector Ior his decision and wake
him up Irom his lethargy or Iile his action within the time prescribed by
law. Koppel not having Iiled his claim within the time Iixed by law, his
cause oI action has prescribed, and the court should not give a premium to a
litigant who sleeps on his rights.

Having Iailed to Iile his action Ior reIund on time oI Koppel may not now
invoke estoppels when he himselI is guilty oI laches. The government is
never stopped by error or mistake on the part oI its agents.



CIR v. 1SE CCEPCI

MAR. 15. 1968 - GR. L-23912

Where a taxpayer seeking a reIund oI estate and inheritance taxes whose
request is denied and whose appeal to the CTA was dismissed Ior being
Iiled out oI time, sues anew to recover such taxes, already paid under
protest, his action is devoid oI merit. For in the same way that the expedient
oI an appeal Irom a denial oI a tax request Ior cancellation oI warrant oI
distraint and levy cannot be utilized to test the legality oI an assessment
which had become conclusive and binding on the taxpayer, so is Sec. 360 oI
the Tax Code not available to revive the right to contest the validity oI an
assessment which had become Iinal Ior Iailure to appeal the same on time.

CIR v. VICTRIAS MILLIG C.. & CTA

1A. 03. 1968 - GR. L-24108

Sec. 306 and 309 oI NIRC were intended to govern all kinds oI reIunds oI
internal revenue taxes those taxes imposed and collected pursuant to the
NIRC. Thus, this Court stated that "this provision" reIerring to Sec. 306,
"which is mandatory, is not subiect to qualiIication, and hence, it applies
regardless oI the conditions under which payment has been made." And to
hold that the instant claim Ior reIund oI a speciIic tax, an internal revenue
tax imposed in Sec. 142 oI NIRC, is beyond the scope oI Sec. 306 and 309
as to thwart the aIoresaid intention and spirit underlying said provisions.

xxx xxx xxx

. . . The intention is clear that reIunds oI internal revenue taxes are generally
governed by Sec. 306 and 309 oI the Tax Code. Since in those cases the tax
sought to be reIunded was collected legally, the running oI the 2-year
prescriptive period provided Ior in Sec. 306 should commence, not Irom the
date the tax was paid, but Irom the happening oI the supervening cause
which entitled the taxpayer to a tax reIund. And the claim Ior reIund should
be Iiled with the CIR, and the subsequent appeal to the CTA must be
instituted, within the said 2-year period.

xxx xxx xxx

In Iine, when the tax sought to be reIunded is illegally or erroneously
collected, the period oI prescription starts Irom the date the tax was paid;
but when the tax is legally collected, the prescriptive period commences to
run Irom the date oI occurrence oI the supervening cause which gave rise to
the right oI reIund. The ruling in Muller & Phipps is accordingly modiIied.

It is not disputed that the oils and Iuels involved in this case were used
during the period Irom June 1952 to December 1955; that the claim Ior
reIund was Iiled on December 1957; and that the appeal to the Court CTA
was instituted only on February 1962. The taxpayer's claim Ior reIund with
the BIR oI December 1957 is within 2 years Irom December 1955 the
last month oI the period during which the Iuels and oils were used. The
appeal to the CTA however, was instituted more than 6 years. The SC has
repeatedly held that the claim Ior reIund with the BIR and the subsequent
appeal to the CTA must be Iiled within the 2-year period. "II, however, the
Collector takes time in deciding the claim, and the period oI 2 years is about
to end, the suit or proceeding must be started in the CTA beIore the end oI
the 2- year period without awaiting the decision oI the Collector." In the
light oI the above quoted ruling, the SC Iinds that the right oI Victorias
Milling to claim reIund oI P2,817.08 has prescribed.

CIR v. CA. & CITYTR&ST BAIG CRPRATI. & CTA

1&LY 21. 1994 - GR. 106611

The CTA erred in denying CIR`s supplemental motion Ior reconsideration
alleging and bringing to said court`s attention the existence oI the
deIiciency income and business tax assessment against Citytrust. The Iact oI
such deIiciency assessment is intimately related to and inextricably
intertwined with the right oI Citytrust Bank to claim Ior a tax reIund Ior the
same year. To award such reIund despite the existence oI that deIiciency
assessment is an absurdity and a polarity in conceptual eIIects. Citytrust
cannot be entitled to reIund and at the same time be liable Ior a tax
deIiciency assessment Ior the same year.

The grant oI a reIund is Iounded on the assumption that the tax return is
valid, the Iacts stated therein are true and correct. The deIiciency
assessment, although not yet Iinal, created a doubt as to and constitute a
challenge against the truth and accuracy oI the Iacts stated in said return
which, by itselI and without unquestionable evidence, cannot be the basis
Ior the grant oI the reIund.

To grant the reIund without determination oI the proper assessment and the
tax due would inevitably result in multiplicity oI proceedings or suits. II the
deIiciency assessment should be subsequently be upheld, the Government
will be Iorced to institute anew a proceeding Ior the recovery oI erroneously
reIunded taxes which recourse must be Iiled within the prescriptive period
oI 10-years aIter discovery oI the Ialsity, Iraud or omission in the Ialse or
Iraudulent return involved. This would necessarily require and entail
additional eIIorts and expenses on the part oI the Government impose a
burden on and a drain oI government Iunds, and impedes or delays the
collection oI much- needed revenue Ior government operations.

DR. ELISA L. VDA. DE SA AG&STI v. CIR

The estate received a PAN indicating a deIiciency estate tax oI
P538,509.50. Within the 10-day period given in the PAN, CIR received a
letter Irom San Agustin expressing the latter's readiness to pay the basic
deIiciency estate tax oI P538,509.50 as soon as the trial court would have
approved the withdrawal oI that sum Irom the estate but requesting that the
surcharge, interests and penalties be waived. However, San Agustin
received Irom the CIR notice insisting payment oI the tax due on or beIore
the lapse oI 30 days Irom receipt thereoI. The deIiciency estate tax oI
P538,509.50 was not paid until December 1991.

The delay in the payment oI the deIiciency tax within the time prescribed
Ior its payment in the notice oI assessment iustiIies the imposition oI a 25
surcharge in consonance with Sec. 248A(3) oI NIRC. The basic deIiciency
tax in this case being P538,509.50, the 25 thereoI comes to P134,627.37.
Sec. 249 oI NIRC states that any deIiciency in the tax due would be subiect
to interest at the rate oI 20 per annum, which interest shall be assessed
and collected Irom the date prescribed Ior its payment until Iull payment is
made. The computation oI interest by the CTA -

"DeIiciency estate tax

P538,509.50

x

Interest Rate

20 per annum

x

Terms
11/2 mo./12 mos
(11/04/91 to 12/19/91)

P13, 462.74 conIorms to the law, i.e., computed on the deIiciency tax
Irom the date prescribed Ior its payment until it is paid.

The CTA correctly held that the compromise penalty oI P20,000.00 could
not be imposed on San Agustin, a compromise being, by its nature, mutual
in essence. The payment made under protest by San Agustin could only
signiIy that there was no agreement that had eIIectively been reached
between the parties.

Regrettably Ior San Agustin, the need Ior an authority Irom the probate
court in the payment oI the deIiciency estate tax, over which CIR has hardly
any control, is not one that can negate the application oI the Tax Code
provisions. Taxes, the liIeblood oI the government, are meant to be paid
without delay and oIten oblivious to contingencies or conditions.

4) REFUNDS OF CORPORATE TAXPAYERS, IRREVOCABILITY
RULE

SEC. 76 OF IRCACCRA IVESTMETS CRPRATI v. CA.
CIR. & CTA

DEC. 20. 1991 - GR. 96322

There is a need to Iile a return Iirst beIore a claim Ior reIund can prosper
inasmuch as the Commissioner by his own rules and regulations mandates
that the corporate taxpayer opting to ask Ior a reIund must show in its Iinal
adiustment return the income it received Irom all sources and the amount oI
withholding taxes remitted by its withholding agents to the BIR. ACCRA
Iiled its Iinal adiustment return Ior its 1981 taxable year on April 15, 1982.
The 2-year prescriptive period within which to claim a reIund commences
to run at the earliest, on the date oI the Iiling oI the adiusted Iinal tax return.
Hence, ACCRA had until April 15, 1984 within which to Iile its claim Ior
reIund.

CIR v. TMX SALES IC.. & CTA

1A. 15. 1992 - GR. 83736

The Iiling oI quarterly ITRs required in Sec. 68 and implemented per BIR
Form 1702-Q and payment oI quarterly income tax should only be
considered mere instalments oI the annual tax due. These quarterly tax
payments which are computed based on the cumulative Iigures oI gross
receipts and deductions in order to arrive at a net taxable income, should be
treated as advances or portions oI the annual income tax due, to be adiusted
at the end oI the calendar or Iiscal year. This is reinIorced by Sec. 69 which
provides Ior the Iiling oI adiustment returns and Iinal payment oI income
tax. Consequently, the 2-year prescriptive period provided in Sec. 230 oI
the Tax Code should be computed Irom the time oI Iiling oI the Adiustment
Return or Annual ITR and Iinal payment oI income tax.

In the instant case, TMX Sales, Iiled a suit Ior a reIund on March 14, 1984.
Since the 2-year prescriptive period should be counted Irom the Iiling oI the
Adiustment Return on April 15, 1982, TMX Sales is not yet barred by
prescription.

SYSTRA PHILIPPIES. IC. v. CIR

SEP. 21. 2007 - GR. 176290

A corporation entitled to a tax credit or reIund oI the excess estimated
quarterly income taxes paid has 2 options:

To carry over the excess credit;

To apply Ior the issuance oI a tax credit certiIicate or to claim a cash reIund.

II the option to carry over the excess credit is exercised, the same shall be
irrevocable Ior that taxable period. In exercising its option, the corporation
must signiIy in its annual corporate adiustment return (by marking the
option box provided in the BIR Form) its intention either to carry over the
excess credit or to claim a reIund. To Iacilitate tax collection, these
remedies are in the alternative and the choice oI one precludes the other.
This is known as the irrevocability rule and is embodied in the last sentence
oI Sec. 76 oI the Tax Code. The phrase 'such option shall be considered
irrevocable Ior that taxable period means that the option to carry over the
excess tax credits oI a particular taxable year can no longer be revoked. The
rule prevents a taxpayer Irom claiming twice the excess quarterly taxes
paid:

As automatic credit against taxes Ior the taxable quarters oI the succeeding
years Ior which no tax credit certiIicate has been issued and;

As a tax credit either Ior which a tax credit certiIicate will be issued or
which will be claimed Ior cash reIund.

SITHE PHILIPPIES HLDIGS. IC. v. CIR

APR. 04. 2003 - CTA 6274

By the clear wording oI Sec. 76, every taxpayer-corporation is required to
Iile a Iinal adiustment return reIlecting therein all the items oI gross income
and deductions as well as the total taxable income Ior the taxable year. By
the Iiling thereoI, it enables a taxpayer to ascertain whether it has a tax still
due or an excess and overpaid income tax based on the adiusted and audited
Iigures. II it is shown that the taxpayer has a tax still due, then he must pay
the balance thereoI and on the other hand, iI he has an excess or overpaid
income tax, then he could carry it over to the succeeding taxable year or he
may credit or reIund the excess amount paid as the case may be.

Sec. 76, gives the taxpayer the privilege to carry over its excess credit or
crediting/ claiming Ior the reIund oI the excess amount paid, as the case
may be. II Sithe believes that Sec. 76 is inapplicable to its case, then why
did they carry over to the succeeding taxable year its 1998 excess credit?

Sec. 204 and Sec. 229 oI the 1997 Tax Code, iI treated in isolation, vest no
right. Sec. 204 merely provides Ior the authority oI the Commissioner to
compromise, abate and reIund/ credit taxes and the period oI time within
which a taxpayer may claim a reIund o tax credit. The same holds true with
regard to Sec. 22, which merely sets a period oI limitation within which to
recover an erroneously or illegally collected tax. Thus, a taxpayer`s option
to carry over the excess credit or to reIund/ credit the excess amount paid is
actually provided Ior by Sec. 76. In order to give eIIect to its provisions, it
is important that Sec. 76 should be read together with Sec. 204 and Sec. 229
oI the Tax Code.

In the case at bar, when Sithe opted to carry over its excess tax credit to the
succeeding taxable year, it has in eIIect availed oI the privilege allowed
only by Sec. 76. Thus, it is absurd Ior Sithe to exercise the option to carry
over the excess amount paid and on the same breath, invoke the
inapplicability oI Sec. 76 to his case.

BPI-AMILY SAVIGS BA. IC. v. CA. CTA. & CIR

APR. 12. 2000 - GR. 122480

It should be stressed that the rationale oI the rules oI procedure is to secure
a iust determination oI every action. They are tools designed to Iacilitate the
attainment oI iustice. But there can be no iust determination oI the present
action iI we ignore, on the grounds oI strict technicality, the Return
submitted beIore the CTA and even beIore this Court. The undisputed Iact
is that BPI suIIered a net loss in 1990; accordingly, it incurred no tax
liability to which the tax credit could be applied. Consequently, there is no
reason Ior the BIR and this Court to withhold the tax reIund which
rightIully belongs to BPI.

CIR argues that tax reIunds are in the nature oI tax exemptions and are to be
construed strictissimi iuris against the claimant. Under the Iacts oI the case,
the SC holds that BPI has established its claim. BPI may have Iiled to
strictly comply with the rules oI procedure; it may have even been
negligent. These circumstances, however, should not compel the Court to
disregard this cold, undisputed Iact: that BPI suIIered a net loss in 1990, and
that it could not have applied the amount claimed as tax credits. Substantial
iustice, equity and Iair play are on the side oI BPI.

Technicalities, and legalism, however exalted, should not be misused by the
Government to keep money not belonging to it and thereby enrich itselI at
the expense oI its law abiding citizens. II the State expects its taxpayers to
observe Iairness and honesty in paying their taxes, so must it apply the same
standard against itselI in reIunding excess payments oI such taxes. Indeed,
the State must lead by its own example oI honour, dignity and uprightness.

PHILAM ASSET MAAGEMET. IC. v. CIR

DEC. 14. 2005 - GR. 156637 AD 162004

PAID ON OPTIONS: NO DILIGENCE ON PART OF PHILAM

Sec. 76 oIIers 2 options to a taxable corporation whose total quarterly
income tax payments in a given taxable year exceed its total income tax
due. These options are:

a) Filing Ior a tax reIund;

b) Availing oI a tax credit.

The Iirst option is relatively simple. Any tax on income that is paid in
excess oI the amount due the government may be reIunded, provided that a
taxpayer properly applies Ior the reIund. The second option works by
applying the reIundable amount, as shown on the FAR oI a given taxable
year, against the estimated quarterly income tax liabilities oI the succeeding
taxable year.

These 2 options are alternative in nature. The choice oI one precludes the
other. A corporation must signiIy its intention whether to request a tax
reIund or claim a tax credit by marking the corresponding option box
provided in the FAR. While a taxpayer is required to mark its choice in the
Iorm provided by the BIR, this requirement is only Ior the purpose oI
Iacilitating tax collection. One cannot get a tax reIund and a tax credit at the
same time Ior the same excess income taxes paid. Failure to signiIy one`s
intention in the FAR does not mean outright barring oI a valid request Ior a
reIund, should one still choose this option later on. A tax credit should be
construed merely as an alternative remedy to a tax reIund under Sec. 76,
subiect to prior veriIication and approval by CIR. The reason Ior requiring
that a choice be made in the FAR upon its Iiling is to ease tax
administration, particularly the selI-assessment and collection aspects. A
taxpayer that makes a choice expresses certainty or preIerence and thus
demonstrates clear diligence. Conversely, a taxpayer that makes no choice
expresses uncertainty or lack oI preIerence and hence shows simple
negligence or plain oversight.

In the present case, CIR denied the claim oI Philam Ior a tax reIund oI
excess taxes withheld in 1997, because the latter (1) had not indicated in its
ITR Ior that year whether it was opting Ior a credit or a reIund; and (2) had
not submitted as evidence is 1998 ITR, which could have been applied
against its 1998 tax liabilities. Requiring that he ITR or the FAR oI the
succeeding year be presented to the BR in requesting a tax reIund has no
basis in law and iurisprudence.

TWO YEAR PRESCRIPTIVE PERIOD, NOT APPLICABLE

The Tax Code allows the reIund oI taxes to a taxpayer that claims it in
writing within 2 years aIter payment oI the taxes erroneously received by
the BIR. Despite the Iailure oI Philam to make the appropriate marking in
the BIR Iorm, the Iiling oI its written claim eIIectively serves as an
expression oI its choice to request a tax reIund, instead oI a tax credit. To
assert that any Iuture claim Ior reIund will be instantly hindered by a Iailure
to signiIy one`s intention in the FAR is to render nugatory the clear
provision that allows Ior a 2-year prescriptive period. In BPI-Family
Savings Bank v. CA, the court ordered the reIund oI a taxpayer`s excess
creditable taxes, despite the express declaration in the FAR to apply the
excess to the succeeding year. When circumstances show that a choice oI
tax credit has been made, it should be respected. But when indubitable
circumstances clearly show that another choice a tax reIund is in order,
it should be granted. 'Technicalities and legalisms, however exalted, should
not be misused by the government to keep money not belonging to it and
thereby enrich itselI at the expense oI its law abiding citizens.

5) RULE IN CASE OF MERGER, CORPORATE TAXPAYERS
CONTEMPLATING DISSOLUTION

SEC. 52(c) OF NIRC

BA THE PHILIPPIE ISLADS (BPI) v. CIR

CT. 25. 2005 - GR. 161997

It is the Final Adiustment Return, in which amounts oI the gross receipts
and deductions have been audited and adiusted, which is reIlective oI the
results oI the operations oI a business enterprise. It is only when the return,
covering the whole year, is Iiled that the taxpayer will be able to ascertain
whether a tax is still due or a reIund can be claimed based on the adiusted
and audited Iigures. Hence, this Court has ruled that at the earliest, the 2-
year prescriptive period Ior claiming a reIund commences to run on the date
oI Iiling oI the adiusted Iinal tax return.

In the case at bar, however, the CTA, applying Sec. 78 oI the Tax Code,
held:

BeIore this Court can be rule on the issue oI prescription, it is noteworthy to
point out that based on the Iinancial statements oI FBTC and the
independent auditor's opinion, FBTC operates on a calendar year basis. Its
12 months accounting period was shortened at the time it was merged with
BPI. Thereby, losing its corporate existence on July 1985 when the Articles
oI Merger was approved by the SEC. Thus CIR`s stand that FBTC operates
on a Iiscal year basis, based on its ITR, holds no ground. Third Court
believes that FBTC is operating on a calendar year period based on the
audited Iinancial statements and the opinion thereoI. The Iiscal period
ending June 30, 1985 on the upper leIt corner oI the ITR can be concluded
as an error on the part oI FBTC. It should have been Ior the 6 month period
ending June 30, 1985. It should also be emphasized that "where one
corporation succeeds another both are separate entities and the income
earned by the predecessor corporation beIore organization oI its successor is
not income to the successor."

Ruling now on the issue oI prescription, this Court Iinds that the petition Ior
review is Iiled out oI time. FBTC, aIter the end oI its corporate liIe on June
30, 1985, should have Iiled its ITR within 30 days aIter the cessation oI its
business or 30 days aIter the approval oI the Articles oI Merger. This is
bolstered by Sec. 78 oI NIRC and under Sec. 244 oI RR 2.

As the FBTC did not Iile its quarterly ITR Ior the year 1985, there was no
need Ior it to Iile a Final adiustment Return because there was nothing Ior it
to adiust or to audit. AIter it ceased operations on June 30, 1985, its taxable
year was shortened to 6 months, Irom January 1, 1985 to June 30, 1985.
The situation oI FBTC is precisely what was contemplated under Sec. 78 oI
NIRC. It thus became necessary Ior FBTC to Iile its ITR within 30 days
aIter approval by the SEC oI its plan or resolution oI dissolution. Indeed, it
would be absurd Ior FBTC to wait until the 15th day oI April, or almost 10
months aIter it ceased its operations, beIore Iiling its ITR.

Thus, Sec. 46(a) oI the NIRC applies only to instances in which the
corporation remains subsisting and its business operations are continuing. In
instances in which the corporation is contemplating dissolution, Sec. 78 oI
NIRC applies. It is a rule oI statutory construction that "Where there is in
the same statute a particular enactment and also a general one which in its
most comprehensive sense would include what is embraced in the Iormer,
the particular enactment must be operative, and the general enactment must
be taken to aIIect only such cases within its general language as are not
within the provisions oI the particular enactment.

BPI argues that to hold, as the CTA and CA do, that Sec. 78 applies in case
a corporation contemplates dissolution would lead to absurd results. It
contends that it is not Ieasible Ior the certiIied public accountants to
complete their report and audited Iinancial statements, which are required to
be submitted together with the plan oI dissolution to the SEC, within the
period contemplated by Sec. 78. It maintains that, in turn, the SEC would
not have suIIicient time to process the papers considering that Sec. 78 also
requires the submission oI a tax clearance certiIicate beIore the SEC can
approve the plan oI dissolution. As the CTA observed, however, BPI could
have asked Ior an extension oI time to Iile its ITR under Sec. 47 oI the
NIRC.

BPI Iurther argues that the Iiling oI a FAR would Iall due on July 30, 1985,
even beIore the due date Ior Iiling the quarterly return. This argument begs
the question. It assumes that a quarterly return was required when the Iact is
that, because its taxable year was shortened, the FBTC did not have to Iile a
quarterly return. In Iact, BPI presented no evidence that the FBTC ever Iiled
such quarterly return in 1985.

Finally, BPI cites a hypothetical situation wherein the directors oI a
corporation would convene on June 30, 2000 to plan the dissolution oI the
corporation on December 31, 2000, but would submit the plan Ior
dissolution earlier with the SEC, which, in turn, would approve the same on
October 1, 2000. Following Sec. 78 oI NIRC, the corporation would be
required to submit its complete return on October 31, 2000, although its
actual dissolution would take place only on December 31, 2000.

SuIIice it to say that such a situation may likewise be remedied by resort to
Sec. 47 oI NIRC. The corporation can ask Ior an extension oI time to Iile a
complete income tax return until December 31, 2000, when it would cease
operations. This would obviate any diIIiculty which may arise out oI the
discrepancies not covered by Sec. 78 oI NIRC.

Considering that Sec. 78 oI NIRC, in relation to Sec. 244 oI RR 2 applies to
FBTC, the 2-year prescriptive period should be counted Irom July 30, 1985,
i.e., 30 days aIter the approval by the SEC oI its plan Ior dissolution. In
accordance with Sec. 292 oI NIRC, July 30, 1985 should be considered the
date oI payment by FBTC oI the taxes withheld on the earned income.
Consequently, the 2-year period oI prescription ended on July 30, 1987. As
BPI's claim Ior tax reIund beIore the CTA was Iiled only on December 29,
1987, it is clear that the claim is barred by prescription.

6) WHEN 2 YEAR PERIOD DOES NOT APPLY

CIR v. PHILIPPIE ATIAL BA (PB)

CT. 25. 2005 - GR. 1611887

7) ERRONEOUSLY REFUNDED TAX

G&AG&A ELECTRIC LIGHT C.. IC. v. CIR

APR. 24. 1967 - GR. L-23611

Where the CIR seeks to recover Irom the taxpayer an amount which was
erroneously reIunded to the latter as excess Iranchise tax, said amount is in
eIIect an assessment Ior deIiciency Iranchise tax. And the right to assess or
collect it is governed by Sec. 331 oI the Tax Code rather than by Art. 1145
oI the NCC. A special law (Tax Code) prevails over a general law (NCC).

Where the taxpayer acted in good Iaith in paying the Iranchise tax at the
lower rate Iixed y its Iranchise, it is patently unIair on the part oI the
Government to require him to pay 25 surcharge on the amount correctly
due.

VII.ABATEMENT OF TAX, TAX COMPROMISE
SEC. 7, SEC. 204 OF NIRC
RR 13-01
RR30-02

A. POWER TO COMPROMISE

1) BASIS FOR ACCEPTANCE OF COMPROMISE SETTLEMENT AND
RATES

CIR. v. AZ&CEA T. REYES

1A. 27. 2006 - GR. 159694



Technicalities, and legalism, however exalted, should not be misused by the
Government to keep money not belonging to it and thereby enrich itselI at
the expense oI its law abiding citizens. II the State expects its taxpayers to
observe Iairness and honesty in paying their taxes, so must it apply the same
standard against itselI in reIunding excess payments oI such taxes. Indeed,
the State must lead by its own example oI honour, dignity and uprightness.

PHILAM ASSET MANAGEMENT, INC. v. CIR

DEC. 14, 2005 GR. 156637 AND 162004

PAID ON OPTIONS: NO DILIGENCE ON PART OF PHILAM

Sec. 76 oIIers 2 options to a taxable corporation whose total quarterly
income tax payments in a given taxable year exceed its total income tax
due. These options are:

a) Filing Ior a tax reIund;

b) Availing oI a tax credit.

The Iirst option is relatively simple. Any tax on income that is paid in
excess oI the amount due the government may be reIunded, provided that a
taxpayer properly applies Ior the reIund. The second option works by
applying the reIundable amount, as shown on the FAR oI a given taxable
year, against the estimated quarterly income tax liabilities oI the succeeding
taxable year.

These 2 options are alternative in nature. The choice oI one precludes the
other. A corporation must signiIy its intention whether to request a tax
reIund or claim a tax credit by marking the corresponding option box
provided in the FAR. While a taxpayer is required to mark its choice in the
Iorm provided by the BIR, this requirement is only Ior the purpose oI
Iacilitating tax collection. One cannot get a tax reIund and a tax credit at the
same time Ior the same excess income taxes paid. Failure to signiIy one`s
intention in the FAR does not mean outright barring oI a valid request Ior a
reIund, should one still choose this option later on. A tax credit should be
construed merely as an alternative remedy to a tax reIund under Sec. 76,
subiect to prior veriIication and approval by CIR. The reason Ior requiring
that a choice be made in the FAR upon its Iiling is to ease tax
administration, particularly the selI-assessment and collection aspects. A
taxpayer that makes a choice expresses certainty or preIerence and thus
demonstrates clear diligence. Conversely, a taxpayer that makes no choice
expresses uncertainty or lack oI preIerence and hence shows simple
negligence or plain oversight.

In the present case, CIR denied the claim oI Philam Ior a tax reIund oI
excess taxes withheld in 1997, because the latter (1) had not indicated in its
ITR Ior that year whether it was opting Ior a credit or a reIund; and (2) had
not submitted as evidence is 1998 ITR, which could have been applied
against its 1998 tax liabilities. Requiring that he ITR or the FAR oI the
succeeding year be presented to the BR in requesting a tax reIund has no
basis in law and iurisprudence.

TWO YEAR PRESCRIPTIVE PERIOD, NOT APPLICABLE

The Tax Code allows the reIund oI taxes to a taxpayer that claims it in
writing within 2 years aIter payment oI the taxes erroneously received by
the BIR. Despite the Iailure oI Philam to make the appropriate marking in
the BIR Iorm, the Iiling oI its written claim eIIectively serves as an
expression oI its choice to request a tax reIund, instead oI a tax credit. To
assert that any Iuture claim Ior reIund will be instantly hindered by a Iailure
to signiIy one`s intention in the FAR is to render nugatory the clear
provision that allows Ior a 2-year prescriptive period. In BPI-Family
Savings Bank v. CA, the court ordered the reIund oI a taxpayer`s excess
creditable taxes, despite the express declaration in the FAR to apply the
excess to the succeeding year. When circumstances show that a choice oI
tax credit has been made, it should be respected. But when indubitable
circumstances clearly show that another choice a tax reIund is in order,
it should be granted. 'Technicalities and legalisms, however exalted, should
not be misused by the government to keep money not belonging to it and
thereby enrich itselI at the expense oI its law abiding citizens.

5) RULE IN CASE OF MERGER, CORPORATE TAXPAYERS
CONTEMPLATING DISSOLUTION

SEC. 52(c) OF NIRC

BANK OF THE PHILIPPINE ISLANDS (BPI) v. CIR

OCT. 25, 2005 GR. 161997

It is the Final Adiustment Return, in which amounts oI the gross receipts
and deductions have been audited and adiusted, which is reIlective oI the
results oI the operations oI a business enterprise. It is only when the return,
covering the whole year, is Iiled that the taxpayer will be able to ascertain
whether a tax is still due or a reIund can be claimed based on the adiusted
and audited Iigures. Hence, this Court has ruled that at the earliest, the 2-
year prescriptive period Ior claiming a reIund commences to run on the date
oI Iiling oI the adiusted Iinal tax return.


In the case at bar, however, the CTA, applying Sec. 78 oI the Tax Code,
held:

BeIore this Court can be rule on the issue oI prescription, it is noteworthy to
point out that based on the Iinancial statements oI FBTC and the
independent auditor's opinion, FBTC operates on a calendar year basis. Its
12 months accounting period was shortened at the time it was merged with
BPI. Thereby, losing its corporate existence on July 1985 when the Articles
oI Merger was approved by the SEC. Thus CIR`s stand that FBTC operates
on a Iiscal year basis, based on its ITR, holds no ground. Third Court
believes that FBTC is operating on a calendar year period based on the
audited Iinancial statements and the opinion thereoI. The Iiscal period
ending June 30, 1985 on the upper leIt corner oI the ITR can be concluded
as an error on the part oI FBTC. It should have been Ior the 6 month period
ending June 30, 1985. It should also be emphasized that "where one
corporation succeeds another both are separate entities and the income
earned by the predecessor corporation beIore organization oI its successor is
not income to the successor."

Ruling now on the issue oI prescription, this Court Iinds that the petition Ior
review is Iiled out oI time. FBTC, aIter the end oI its corporate liIe on June
30, 1985, should have Iiled its ITR within 30 days aIter the cessation oI its
business or 30 days aIter the approval oI the Articles oI Merger. This is
bolstered by Sec. 78 oI NIRC and under Sec. 244 oI RR 2.

As the FBTC did not Iile its quarterly ITR Ior the year 1985, there was no
need Ior it to Iile a Final adiustment Return because there was nothing Ior it
to adiust or to audit. AIter it ceased operations on June 30, 1985, its taxable
year was shortened to 6 months, Irom January 1, 1985 to June 30, 1985.
The situation oI FBTC is precisely what was contemplated under Sec. 78 oI
NIRC. It thus became necessary Ior FBTC to Iile its ITR within 30 days
aIter approval by the SEC oI its plan or resolution oI dissolution. Indeed, it
would be absurd Ior FBTC to wait until the 15th day oI April, or almost 10
months aIter it ceased its operations, beIore Iiling its ITR.

Thus, Sec. 46(a) oI the NIRC applies only to instances in which the
corporation remains subsisting and its business operations are continuing. In
instances in which the corporation is contemplating dissolution, Sec. 78 oI
NIRC applies. It is a rule oI statutory construction that "Where there is in
the same statute a particular enactment and also a general one which in its
most comprehensive sense would include what is embraced in the Iormer,
the particular enactment must be operative, and the general enactment must
be taken to aIIect only such cases within its general language as are not
within the provisions oI the particular enactment.

BPI argues that to hold, as the CTA and CA do, that Sec. 78 applies in case
a corporation contemplates dissolution would lead to absurd results. It
contends that it is not Ieasible Ior the certiIied public accountants to
complete their report and audited Iinancial statements, which are required to
be submitted together with the plan oI dissolution to the SEC, within the
period contemplated by Sec. 78. It maintains that, in turn, the SEC would
not have suIIicient time to process the papers considering that Sec. 78 also
requires the submission oI a tax clearance certiIicate beIore the SEC can
approve the plan oI dissolution. As the CTA observed, however, BPI could
have asked Ior an extension oI time to Iile its ITR under Sec. 47 oI the
NIRC.

BPI Iurther argues that the Iiling oI a FAR would Iall due on July 30, 1985,
even beIore the due date Ior Iiling the quarterly return. This argument begs
the question. It assumes that a quarterly return was required when the Iact is
that, because its taxable year was shortened, the FBTC did not have to Iile a
quarterly return. In Iact, BPI presented no evidence that the FBTC ever Iiled
such quarterly return in 1985.

Finally, BPI cites a hypothetical situation wherein the directors oI a
corporation would convene on June 30, 2000 to plan the dissolution oI the
corporation on December 31, 2000, but would submit the plan Ior
dissolution earlier with the SEC, which, in turn, would approve the same on
October 1, 2000. Following Sec. 78 oI NIRC, the corporation would be
required to submit its complete return on October 31, 2000, although its
actual dissolution would take place only on December 31, 2000.

SuIIice it to say that such a situation may likewise be remedied by resort to
Sec. 47 oI NIRC. The corporation can ask Ior an extension oI time to Iile a
complete income tax return until December 31, 2000, when it would cease
operations. This would obviate any diIIiculty which may arise out oI the
discrepancies not covered by Sec. 78 oI NIRC.

Considering that Sec. 78 oI NIRC, in relation to Sec. 244 oI RR 2 applies to
FBTC, the 2-year prescriptive period should be counted Irom July 30, 1985,
i.e., 30 days aIter the approval by the SEC oI its plan Ior dissolution. In
accordance with Sec. 292 oI NIRC, July 30, 1985 should be considered the
date oI payment by FBTC oI the taxes withheld on the earned income.
Consequently, the 2-year period oI prescription ended on July 30, 1987. As
BPI's claim Ior tax reIund beIore the CTA was Iiled only on December 29,
1987, it is clear that the claim is barred by prescription.

6) WHEN 2 YEAR PERIOD DOES NOT APPLY

CIR v. PHILIPPIE ATIAL BA (PB)

CT. 25. 2005 - GR. 1611887



7) ERRONEOUSLY REFUNDED TAX

G&AG&A ELECTRIC LIGHT C.. IC. v. CIR

APR. 24. 1967 - GR. L-23611

Where the CIR seeks to recover Irom the taxpayer an amount which was
erroneously reIunded to the latter as excess Iranchise tax, said amount is in
eIIect an assessment Ior deIiciency Iranchise tax. And the right to assess or
collect it is governed by Sec. 331 oI the Tax Code rather than by Art. 1145
oI the NCC. A special law (Tax Code) prevails over a general law (NCC).

Where the taxpayer acted in good Iaith in paying the Iranchise tax at the
lower rate Iixed y its Iranchise, it is patently

unIair on the part oI the Government to require him to pay 25 surcharge
on the amount correctly due.

VII.ABATEMENT OF TAX, TAX COMPROMISE
SEC. 7, SEC. 204 OF NIRC
RR 13-01
RR30-02

A. POWER TO COMPROMISE

1) BASIS FOR ACCEPTANCE OF COMPROMISE SETTLEMENT AND
RATES

CIR. v. AZUCENA T. REYES

JAN. 27, 2006 GR. 159694

itibank vs. ourt of Appeals; C.R. Ao. 17434, October 1,
1997
FACTS: Citibank is a Ioreign corporation doing business in the Philippines.
In 1979 and 1980, its tenants withheld and paid to the Bureau oI Internal
Revenue its taxes on rents due to Citibank. This is pursuant to Section 1(c)
oI the Expanded Withholding Tax Regulations requiring lessee to withhold
and remit to the BIR Iive percent (5) oI the rental due the lessor, by way
oI advance payment oI the latter`s income liability. The lessor, Citibank
asked Ior tax reIund alleging that it is not liable Ior any income tax liability
because its annual operation resulted in a net loss as shown in its income tax
return Iiled at the end oI the taxable year. The Court oI Tax Appeals
adiudged Citibank`s entitlement to the tax reIund sought Ior. The BIR
Commissioner appealed to the Court oI Appeals who reversed the CTA`s
decision. Hence, this petition Ior review on certiorari.

ISSUE: Whether or not the lessor-Citibank is entitled to a reIund on account
oI its loss in operations.

HELD: The petition is meritorious. Petitioner is entitled to reIund under
Section 230 oI the NIRC. In the present case, there is no question that the
taxes were withheld legally by the tenants. However, the annual income tax
returns oI Citibank Ior tax years 1979 and 1980 undisputedly reIlected the
net losses it suIIered. Taxes withheld do not remain legal and correct at the
end oI the taxable year iI the taxpayer had sustained a loss in its annual
operation. (UB)

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Philippine Jurisprudence Case Digest, Law Subiect Notes,
Commentaries. civil law, political law, criminal law, taxation,
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constitution, case digest, law notes


1AxA1lCn
Lu1Z vS A8AnL1A
C8 L7839 uecember 22 1933
8eves !
lAC1S
WalLer LuLz !udlclal AdmlnlsLraLor of Lhe lnLesLaLe esLaLe of
Ledesma souahL Lo recover Lhe sum of hp14 66640 pald bv Lhe
esLaLe as Laxes allealna LhaL such Lax ls unconsLlLuLlonal as lL levled
for Lhe ald and supporL of Lhe suaar lndusLrv excluslvelv whlch ls ln
hls oplnlon noL a publlc purpose
lSSuL
WheLher or noL Lax ls valld ln supporLlna Lhe suaar lndusLrv?
8uLlnC
1he courL ruled LhaL Lhe Lax ls valld as lL served publlc
purpose 1he Lax provlded for ln CA 367 ls prlmarllv an exerclse of
pollce power slnce suaar ls a areaL source of lncome for Lhe counLrv
and emplovs Lhousands of laborers Pence lL was compeLenL for
Lhe lealslaLure Lo flnd LhaL Lhe aeneral welfare demanded LhaL Lhe
suaar lndusLrv should be sLablllzed ln Lurn and ln Lhe wlde fleld of
lLs pollce power Lhe lawmaklna bodv could provlde LhaL Lhe
dlsLrlbuLlon of beneflLs Lherefrom be read[usLed amona lLs
componenLs Lo enable lL Lo reslsL Lhe added sLraln of Lhe lncrease ln
Laxes LhaL lL had Lo susLaln

CCMMlSSlCnL8 Cl l8 vS CLn18AL LuZCn u8uC CC8
C8 148312 !une 26 2006
Azcuna !
lAC1S
1hls ls a peLlLlon for revlew under 8ule 43 of 8ules of CourL
seeklna Lhe nulllflcaLlon of CA declslon aranLlna respondenL's clalm
for Lax equal Lo Lhe amounL of Lhe 20 LhaL lL exLended Lo senlor
clLlzens on Lhe laLLer's purchases pursuanL Lo Senlor ClLlzens AcL
8espondenL deducLed Lhe LoLal amounL of hp219778 from lLs
aross lncome for Lhe Laxable vear 1993 wherebv respondenL dld noL
pav Lax for LhaL vear reporLlna a neL loss of hp20963 ln lLs
corporaLe lncome Lax ln 1996 clalmlna LhaL Lhe hp219778 should
be applled as a Lax credlL respondenL clalmed for refund ln Lhe
amounL of hp130 193
lSSuL
WheLher or noL Lhe 20 dlscounL aranLed bv Lhe
respondenL Lo quallfled senlor clLlzens mav be clalmed as Lax credlL
or as deducLlon from aross sales?
8uLlnC
1ax credlL" ls expllclLlv provlded for ln Sec4 of 8A 7432 1he
dlscounL alven Lo Senlor clLlzens ls a Lax credlL noL a deducLlon from
Lhe aross sales of Lhe esLabllshmenL concerned 1he Lax credlL LhaL
ls conLemplaLed under Lhls AcL ls a form of [usL compensaLlon noL a
remedv for Laxes LhaL were erroneouslv or llleaallv assessed and
collecLed ln Lhe same veln prlor pavmenL of anv Lax llablllLv ls a
precondlLlon before a Laxable enLlLv can beneflL from Lax credlL
1he credlL mav be avalled of upon pavmenL lf anv Where Lhere ls
no Lax llablllLv or where a prlvaLe esLabllshmenL reporLs a neL loss
for Lhe perlod Lhe Lax credlL can be avalled of and carrled over Lo
Lhe nexL Laxable vear

ACS1CLlC 8LlLC1 vS Cl1? 18LASu8L8 Cl 8ACulC Cl1?
C8 4732 Aprll 18 1941
lmperlal !
lAC1S
1he AposLollc refecL ls a corporaLlon of rellalous
characLer oraanlzed under Lhe hlllpplne laws and wlLh resldence
ln 8aaulo 1he ClLv lmposed a speclal assessmenL aaalnsL properLles
wlLhln lLs LerrlLorlal [urlsdlcLlon lncludlna Lhose of Lhe AposLollc
refecL whlch beneflLs from lLs dralnaae and seweraae svsLem 1he
AposLollc refecL conLends LhaL lLs properLles should be free of Lax
belna of rellalous ln characLer
lSSuL
WheLher or noL AposLollc refecL as a rellalous enLlLv ls
exempL from Lhe pavmenL of Lhe speclal assessmenL
8uLlnC
A speclal assessmenL ls noL a Lax and nelLher Lhe decree
nor Lhe ConsLlLuLlon exempL peLlLloner from pavmenL of sald speclal
assessmenL AlLhouah lL lLs broad meanlna Lax lncludes boLh
aeneral Laxes and speclal assessmenL veL Lhere ls a recoanlzed
dlsLlncLlon AssessmenL ls conflned Lo local lmposlLlons upon
properLv for Lhe pavmenL of Lhe cosL of publlc lmprovemenLs ln lLs
lmmedlaLe vlclnlLv and levled wlLh speclal beneflLs Lo Lhe properLv
assessed eLlLloner llkewlse has proven LhaL Lhe properLv ln
quesLlon ls used excluslvelv for rellalous purposes buL LhaL lL
appears Lhe same ls belna used Lo oLher nonrellalous purposes
1hus peLlLloner ls requlred Lo pav Lhe speclal assessmenL

AL vS Luu
P8 L41383 AuausL 13 1988
CuLlerrez !
lAC1S
AL ls enaaaed ln alr LransporLaLlon buslness under a
lealslaLlve franchlse whereln lL ls exempL from Lax pavmenL AL has
noL been pavlna moLor vehlcle realsLraLlon slnce 1936 1he Land
8ealsLraLlon Commlssloner requlred all Lax exempL enLlLles lncludlna
AL Lo pav moLor vehlcle realsLraLlon fees
lSSuL
WheLher or noL realsLraLlon fees as Lo moLor vehlcles are
Laxes Lo whlch AL ls exempLed
8uLlnC
1axes are for revenue whereas fees are exacLlons for
purposes of reaulaLlon and lnspecLlon and are for LhaL reason
llmlLed ln amounL Lo whaL ls necessarv Lo cover Lhe cosL of Lhe
servlces rendered ln LhaL connecLlon lL ls Lhe ob[ecL of Lhe charae
and noL Lhe name LhaL deLermlnes wheLher a charae ls a Lax or a
fee 1he monev collecLed under MoLor vehlcle Law ls noL lnLended
for Lhe expendlLures of Lhe Mv Cfflce buL accrues Lo Lhe funds for
Lhe consLrucLlon and malnLenance of publlc roads sLreeLs and
brldaes
As fees are noL collecLed for reaulaLorv purposes as an
lncldenL Lo Lhe enforcemenL of reaulaLlons aovernlna Lhe operaLlon
of moLor vehlcles on publlc hlahwavs buL Lo provlde revenue wlLh
whlch Lhe CovernmenL ls Lo consLrucL and malnLaln publlc hlahwavs
for evervone's use Lhev are verlLable Laxes noL merelv fees AL ls
Lhus exempL from pavlna such fees excepL for Lhe perlod beLween
!une 27 1968 Lo Aprll 9 1979 where lLs Lax exempLlon ln Lhe
franchlse was repealed

CAL1Lx PlLllnLS vS CA
C8 923383 MA? 8 1992
uavlde !
lAC1S
ln 1989 CCA senL a leLLer Lo CalLex dlrecLlna lL Lo remlL Lo
CSl lLs collecLlon of Lhe addlLlonal Lax on peLroleum auLhorlzed
under u 1936 and pendlna such remlLLance all of lLs clalms from
Lhe CSl shall be held ln abevance eLlLloner requesLed CCA for
Lhe earlv release of lLs relmbursemenL cerLlflcaLes from Lhe CSl
coverlna clalms wlLh Lhe Cfflce of Lnerav Affalrs CCA denled Lhe
same
lSSuL
WheLher of noL peLlLloner can avall of Lhe rlahL Lo offseL anv
amounL LhaL lL mav be requlred under Lhe law Lo remlL Lo Lhe CSl
aaalnsL anv amounL LhaL lL mav recelve bv wav of relmbursemenL
8uLlnC
lL ls a seLLled rule LhaL a Laxpaver mav noL offseL Laxes due
from Lhe clalms LhaL he mav have aaalnsL Lhe aovernmenL 1axes
cannoL be Lhe sub[ecL of compensaLlon because Lhe aovernmenL
and Laxpaver are noL muLuallv debLors and credlLors of each oLher
and a clalm for Laxes ls noL such a debL demand conLracL or
[udamenL as ls allowed Lo be seLoff
1he oll companles merelv acLed as aaenLs for Lhe
aovernmenL ln Lhe laLLer's collecLlon slnce Laxes are passed unLo Lhe
endusers Lhe consumlna publlc

uCMlnCC vS CA8Ll1CS
C8 nC 18993 !une 29 1963
Labrador !
lAC1S
ln uomlnao vs Moscoso Lhe Supreme CourL declared as
flnal and execuLor Lhe order of Lhe lower courL for Lhe pavmenL of
esLaLe and lnherlLance Laxes charaes and penalLles amounLlna Lo
hp 4003833 bv Lhe esLaLe of Lhe of Lhe laLe WalLer rlce 1he
peLlLloner for execuLlon flled bv Lhe flscal was denled bv Lhe lower
courL 1he courL held LhaL Lhe execuLlon ls un[usLlfled as Lhe
CovernmenL ls lndebLed Lo Lhe esLaLe for hp262200 and ordered
Lhe amounL of lnherlLance Laxes can be deducLed from Lhe
CovernmenL's lndebLedness Lo Lhe esLaLe
lSSuL
WheLher of noL a Lax and a debL mav be compensaLed
8uLlnC
1he courL havlna [urlsdlcLlon of Lhe LsLaLe had found LhaL
Lhe clalm of Lhe LsLaLe aaalnsL Lhe aovernmenL has been recoanlzed
and Lhe amounL has alreadv been approprlaLed bv a correspondlna
law 8oLh Lhe clalm of Lhe CovernmenL for lnherlLance Laxes and Lhe
clalm of Lhe lnLesLaLe for servlces rendered have alreadv become
overdue and demandable ls well as fullv llquldaLed CompensaLlon
Lakes place bv operaLlon of law and boLh debLs are exLlnaulshed Lo
Lhe concurrenL amounL 1herefore Lhe peLlLloner has no clear rlahL
Lo execuLe Lhe [udamenL for Laxes aaalnsL Lhe esLaLe of Lhe
deceased WalLer rlce

CA8ClA vS LxLCu1lvL SLC8L1A8?
211 SC8A 219 !ulv 3 1992
lellclano !

lAC1S
1he resldenL lssued an LC whlch lmposed across Lhe
board lncludlna crude oll and oLher oll producLs addlLlonal duLv ad
valorem 1he 1arlff Commlsslon held publlc hearlnas on sald LC and
submlLLed a reporL Lo Lhe resldenL for conslderaLlon and
approprlaLe acLlon 1he resldenL on Lhe oLher hand lssued an LC
whlch levled a speclal duLv of 093 per llLer of lmporLed crude oll
and 100 per llLer of lmporLed oll producLs
lSSuL
WheLher of noL Lhe resldenL mav lssue an LC whlch ls
LanLamounL Lo enacLlna a blll ln Lhe naLure of revenueaeneraLlna
measures
8uLlnC
1he CourL sald LhaL alLhouah Lhe enacLmenL of
approprlaLlon revenue and Larlff bllls ls wlLhln Lhe provlnce of Lhe
LealslaLlve lL does noL follow LhaL LC ln quesLlon assumlna Lhev
mav be characLerlzed as revenue measure are prohlblLed Lo Lhe
resldenL LhaL Lhev musL be enacLed lnsLead bv Conaress SecLlon
28 of ArLlcle vl of Lhe 1987 ConsLlLuLlon provldes
1he Conaress mav bv law auLhorlze Lhe resldenL Lo flx
Larlff raLes and oLher duLles or lmposLs"
1he relevanL Conaresslonal sLaLuLe ls Lhe 1arlff and CusLoms
Code of Lhe hlllpplnes and SecLlons 104 and 401 Lhe perLlnenL
provlslons Lhereof

8LnCZCn vS u8lLCn
C8 103324 Aprll 13 1992 208 SC8A 133
CuLlerrez !

lAC1S
eLlLloners are reLlred [usLlces of Lhe Supreme CourL and
CourL of Appeals who are currenLlv recelvlna penslons under 8A 910
as amended bv 8A 1797 resldenL Marcos lssued a decree
repeallna secLlon 3A of 8A 1797 whlch auLhorlzed Lhe ad[usLmenL
of Lhe penslon of reLlred [usLlces and offlcers and enllsLed members
of Lhe Al u 1638 was evenLuallv lssued bv Marcos whlch
provlded for Lhe auLomaLlc read[usLmenL of Lhe penslon of offlcers
and enllsLed men was resLored whlle LhaL of Lhe reLlred [usLlces
was noL 8A 1797 was resLored Lhrouah P8 16297 ln 1990 When
her advlsers aave Lhe wrona lnformaLlon LhaL Lhe quesLloned
provlslons ln 1992 CAA were an aLLempL Lo overcome her earller
veLo ln 1990 resldenL Aqulno lssued Lhe veLo now challenaed ln
Lhls peLlLlon
lL Lurns ouL LhaL u 644 whlch repealed 8A 1797 never
became a valld law absenL lLs publlcaLlon Lhus Lhere was no law lL
follows LhaL 8A 1797 was sLlll ln effecL and P8 16297 was
superfluous because lL Lrled Lo resLore beneflLs whlch were never
Laken awav valldlv 1he veLo of P8 16297 dld noL also produce anv
effecL
lSSuL
WheLher or noL Lhe veLo of Lhe resldenL of cerLaln
provlslons ln Lhe CAA of l? 1992 relaLlna Lo Lhe pavmenL of Lhe
ad[usLed penslons of reLlred !usLlces ls consLlLuLlonal or valld
8uLlnC
1he veLo of Lhese speclflc provlslons ln Lhe CAA ls
LanLamounL Lo dlcLaLlna Lo Lhe !udlclarv oL lLs funds should be
uLlllzed whlch ls clearlv repuananL Lo flscal auLonomv ursuanL Lo
consLlLuLlonal mandaLe Lhe !udlclarv musL en[ov freedom ln Lhe
dlsposlLlon of Lhe funds allocaLed Lo lL ln Lhe approprlaLlons law
Anv araumenL whlch seeks Lo remove speclal prlvlleaes
alven bv law Lo former !usLlces on Lhe around LhaL Lhere should be
no aranL of dlsLlncL prlvlleaes or preferenLlal LreaLmenL" Lo reLlred
!usLlces lanores Lhese provlslons of Lhe ConsLlLuLlon and ln effecL
asks LhaL Lhese ConsLlLuLlonal provlslons on speclal proLecLlons for
Lhe !udlclarv be repealed
1he peLlLlon ls aranLed and Lhe quesLloned veLo ls llleaal
and Lhe provlslons of 1992 CAA are declared valld and subslsLlna

8L?LS vS ALMAnZC8
C8 4383946 Aprll 26 1991 196 SC8A 322
aras !
lAC1S
eLlLloner are owners of parcels of land leased Lo LenanLs
8A 6339 was enacLed prohlblLlna for one vear an lncrease ln
monLhlv renLals of dwelllna unlLs and sald AcL also dlsallowed
e[ecLmenL of lessees upon Lhe explraLlon of Lhe usual perlod of
lease ClLv assessor of Manlla assessed Lhe value of peLlLloner's
properLv based on Lhe schedule of markeL values dulv revlewed bv
Lhe SecreLarv of llnance 1he revlslon enLalled an lncrease Lo Lhe
Lax raLes and peLlLloners averred LhaL Lhe reassessmenL lmposed
upon Lhem areaLlv exceeded Lhe annual lncome derlved from Lhelr
properLles
lSSuL
WheLher or noL lncome approach ls Lhe meLhod Lo be used
ln Lhe Lax assessmenL and noL Lhe comparable sales approach
8uLlnC
8v no sLreLch of Lhe lmaalnaLlon can Lhe markeL value of
properLles covered bv u 20 be equaLed wlLh Lhe markeL value of
properLles noL so covered ln Lhe case aL bar noL even facLors
deLermlnanL of Lhe assessed value of sub[ecL properLles under Lhe
comparable sales approach were presenLed bv respondenL namelv
1 1haL Lhe sale musL represenL a bonaflde arm's lenaLh
LransacLlon beLween a wllllna seller and a wllllna buver
2 1he properLv musL be comparable properLv
As a aeneral rule Lhere were no Lakers so LhaL Lhere can be
no reasonable basls for Lhe concluslon LhaL Lhese properLles
are comparable
1axes are llfeblood of aovernmenL however such collecLlon
should be made ln accordance wlLh Lhe law and Lherefore necessarv
Lo reconclle confllcLlna lnLeresLs of Lhe auLhorlLles so LhaL Lhe real
purpose of LaxaLlon promoLlon of Lhe welfare of common aood can
be achleved

LLAuCC v Cl8 C1A
C8 19201 !une 16 1963 14 SC8A 293
aredes !

lAC1S
M8 LsLaLe of 8acolod ClLv donaLed hp 10000 ln cash Lo lr
8ulz Lhen Lhe arlsh rlesL of vlcLorlas who was Lhe predecessor of
peLlLloner M8 LsLaLe flled Lhelr donor's alfL Lax buL peLlLloner ls on
proLesL reaardlna donee's Lax clalmlna LhaL assessmenL of alfL Lax
aaalnsL Lhe CaLhollc Church ls aaalnsL Lhe law LhaL when Lhe
donaLlon was made Pe was noL veL Lhe parlsh prlesL
lSSuL
WheLher or noL peLlLloner should be llable for assessed
donee's alfL Lax donLaLed

8uLlnC
A alfL Lax ls noL a properLv Lax buL an exclse Lax lmposed on
Lhe Lransfer of properLv bv wav of alfL lnLer vlvos Lhe lmposlLlon of
whlch on properLv used excluslvelv for rellalous purposes does noL
consLlLuLe an lmpalrmenL of ConsLlLuLlon exempL from LaxaLlon"
as emploved ln Lhe ConsLlLuLlon should noL be lnLerpreLed Lo mean
exempLlon from all klnds of Laxes And Lhere belna no clear
poslLlve or express aranL of such prlvlleae bv law ln favor of
peLlLloner Lhe exempLlon hereln musL be denled


Luna CenLer vs Cuezon ClLv
C8 144104 !une29 2004
Ln 8anc Calle[o !
lacLs
1he luna cenLer ls a charlLable lnsLlLuLlon wlLhln Lhe conLexL
of 1973 and 1987 consLlLuLlons 1he elemenLs consldered ln
deLermlnlna a charlLable lnsLlLuLlon are Lhe sLaLue creaLlna Lhe
enLerprlse lLs corporaLe purposes consLlLuLlon and bvlaws
meLhods of admlnlsLraLlon naLure of acLual work performed
characLer of Lhe servlces rendered lndeflnlLeness of Lhe
beneflclarles and Lhe use occupaLlon of properLles As a aen
prlnclple a charlLable lnsLlLuLlon doe noL lose lLs characLer as such
and lLs exempLlon form Laxes slmplv because lL derlves lncome from
pavlna paLlenLs or recelves subsldles from aovernmenL and no
monev lnsures Lo Lhe prlvaLe beneflL of Lhe persons manaalna or
operaLlna Lhe lnsLlLuLlon
lssue
WheLher or noL Lhe real properLles of Lhe luna cenLer are
exempL from real properLv Laxes
8ullna
arLlv no 1hose porLlons of lLs real properLv LhaL are leased
Lo prlvaLe enLlLles are noL exempL from acLuallv dlrecL and
excluslvelv used for charlLable purpose under u 1823 Lhe luna
cenLer does noL en[ov anv properLv Lax exempLlon prlvlleaes for lLs
real properLles as well as Lhe bulldlna consLrucLed Lhereon
1he properLv Lax exempLlon under Sec 28(3) ArL vl of Lhe
properLv Laxes onlv 1hls provlslon was lmplanLed bv Sec243 (b) of
8A 7160whlch provldes LhaL ln order Lo be enLlLled Lo Lhe
exempLlon Lhe luna cenLer musL be able Lo prove LhaL lL ls a
charlLable lnsLlLuLlon and lLs real properLles are acLuallv dlrecLlv
and excluslvelv used for charlLable purpose Accordlnalv Lhe
porLlons occupled bv Lhe hosplLal used for lLs paLlenLs are exempL
from real properLv Laxes whlle Lhose leased Lo prlvaLe enLlLles are
noL exempL from such Laxes



1axaLlon
ClLv Assessore of Cebu vs
AssoclaLlon of 8enevola ue Cebu
C8 132904 !une 28 2007
velasco !r !
lAC1S
8enevola de Cebu ls a nonsLock nonproflL oraanlzaLlon
whlch ln 1990 a medlcal arLs bulldlna was consLrucLed and ln 1998
was lssued wlLh a cerLlflcaLlon classlfvlna Lhe bulldlna as
commerclal ClLv assessor of Cebu assessed Lhe bulldlna wlLh a
markeL value of hp 28060320 and on assessed value of hp
9821180 aL Lhe assessmenL level of 33 and noL 10 whlch ls
currenLlv lmposed on prlvaLe respondenL hereln eLlLloner clalmed
LhaL Lhe bulldlna ls used as commerclal cllnlc/spaces for renLlna ouL
Lo phvslclans and Lhus classlfled as commerclal 8enevola de Cebu
conLended LhaL Lhe bulldlna ls used acLuallv dlrecLlv and excluslvelv
parL of hosplLal and should have an assessmenL level of 10

lSSuL
WheLher or noL Lhe new bulldlna ls llable Lo pav Lhe 33
assessmenL level?
8uLlnC
We hold LhaL Lhe new bulldlna ls an lnLeralcal parL of Lhe
hosplLal and should noL be assessed as commerclal 8elna a LerLlarv
hosplLal lL ls mandaLed Lo fullv deparLmenLallzed and Lhe be
equlpped wlLh Lhe servlce capablllLles needed Lo supporL cerLlfled
medlcal speclallsL and oLher llcensed phvslclans 1he facL LhaL Lhev
are holdlna offlce ls a separaLe bulldlna does noL Lake awav Lhe
essence and naLure of Lhelr servlces vlsavls Lhe overall operaLlon of
Lhe hosplLal and Lo lLs paLlenLs
under Lhe Local CovernmenL Code Sec 26 All lands
bulldlnas and oLher lmprovemenLs Lhereon acLuallv dlrecLlv and
excluslvelv used for hosplLals culLural or sclenLlflc purposes and
Lhose owned and used bv local waLer dlsLrlcLs shall be classlfled as
speclal




Ca|amba 5tee| vsCIk
Iacts
eLlLloner ls a domesLlc corporaLlon enaaaed ln Lhe manufacLure of sLeel
blanks for Lhe use bv manufacLurer of auLomoLlves elecLrlcal elecLronlcs
ln lndusLrlal and household appllances
ln lL's amended CorporaLe Annual lncome 1ax 8eLurn on 1996 lL declared a
neL Laxable lncome of hp 94 Mllllon Lax credlLs of hp 67 Mllllon and Lax
due ln Lhe amounL of hp 33 Mllllon lL also reporLed quarLerlv pavmenLs
for Lhe second and Lhlrd quarLers of 1993 ln Lhe amounL of hp 23 M and
hp 108 M respecLlvelv
1he peLlLloner conLended ln Lhe 1997 case LhaL lL ls enLlLled Lo a refund
1he refund was due Lo Lhe lncome Lax wlLhheld and remlLLed ln lLs behalf
bv wlLhholdlna aaenLs Such wlLhheld as lndlcaLed ln Lhe 1997 reLurn were
no uLlllzed ln 1996 due Lo lLs lncome loss for Lhe Lhree quarLers of 1996
Issue
WheLher or noL a Lax refund mav be clalmed even bevond Lhe Laxable vear
followlna Lhe Lax credlL arlses
e|d
?es 8uL Lhe clalmanL musL prove LhaL lL ls enLlLled Lo such refund 1ax
refund has Lhe same naLure of Lax exempLlon and such musL be consLrued
sLrlcLlv aaalnsL Lhe one clalmlna lL nl8C provlded LhaL Lhe onlv llmlLaLlon
as reaards Lhe Lax refund ls LhaL such musL be made wlLhln Lwo vears for
Lhe pavmenL Calamba sLeel had complled wlLh such requlremenL
1he acL of Lhe counsel ln submlLLlna Lhe flnal ad[usLmenL afLer Lhe Lrlal has
been conducLed was accepLed bv Lhe courL because Lhe rules of ordlnarv
procedure are applled suppleLorllv Moreover Lhe CourL sald LhaL !udlclal
noLlce could have been Laken bv Lhe CA and Lhe C1A of Lhe 1996 flnal
ad[usLmenL reLurn made bv Calamba SLeel ln anoLher case pendlna ln Lhe
C1A

8I vs CIk
Iacts
eLlLloner 8l sold $300000 ln 1983 Lo Lhe CenLral 8ank for Lhe LoLal
amounL of $1000000 Cn CcLober 1989 Lhe 8l8 assessed 8l for Lax
deflclencv of documenLarv Lax on lLs aforemenLloned sales of forelan bllls
of exchanae 8l flled and proLesLed Lhe assessmenL on 1989 Lhrouah lLs
counsel 8l dld noL recelve anv lmmedlaLe replv Lo lLs proLesL Cn 1992
8l8 lssued a warranL of ulsLralnL and/or Levv aaalnsL Lhe peLlLloner 1he
warranL was served on 1992 buL never heard anvLhlna from Lhe 8l8 unLll
Lhe 1997 when Lhe reconslderaLlon was denled
8l flled a peLlLlon for 8evlew wlLh Lhe C1A and ralsed prescrlpLlon as a
defense lL alleaed LhaL Lhe rlahL Lo collecL musL be done wlLhln 3 vears
onlv buL Lhe 8l8 walLed more Lhan 7 vears Lo denv Lhe proLesL 8l8
relLeraLed lLs poslLlon and remalned sllenL as reaards Lhe lssue on
prescrlpLlon
C1A rendered Lhe declslon ln favor 8l8 sLaLlna LhaL Lhe acLlon has noL
prescrlbed buL Lhe sale of forelan currencv ls noL sub[ecL Lo documenLarv
sLamp Lax lurLher Lhe assessmenL was order for cancellaLlon because Lhe
LransacLlon beLween 8l and Lhe CenLral 8ank was Lax exempL
1he CA susLalned Lhe flndlna of Lhe CA1 LhaL Lhe acLlon has noL veL
prescrlbed buL lL adopLed Lhe poslLlon of Lhe 8l8 LhaL Lhe sale of forelan
currencv was noL Lax exempL
Issue
WheLher or noL Lhe rlahL of Lhe 8l8 Lo collecL from 8l Lhe alleaed
deflclencv on documenLarv sLamp Lax had prescrlbed?
e|d
1he Supreme CourL ruled LhaL Lhe acLlon for collecLlon had alreadv
prescrlbed 1he perlod Lo collecL Lhe deflclencv ls llmlLed Lo 3 vears as
provlded bv SecLlon 203 of Lhe 1ax Code
1he sLaLuLe of llmlLaLlon on collecLlon mav be lnLerrupLed or suspended bv
a valld walver execuLed ln accordance wlLh paraaraph (d) of SecLlons 223
and 224 of Lhe 1ax Code as amended 1he purpose of Lhe llmlLaLlon ls Lo
proLecL Lhe Laxpaver form Lhe prolonaed and unreasonable assessmenL
and lnvesLlaaLlon bv Lhe 8l8
At|as Conso||dated M|n|ng vs CIk
Iacts
ALlas flled lLs vA1 reLurn ln 1
sL
quarLer of 1992 llkewlse flllna lLs appllcaLlon
for Lax refund or credlL on lL zeroraLed sales 1he appllcaLlon was noL
acLed upon bv Lhe 8l8 1he case was flled wlLh Lhe C1A asklna LhaL Lhe Cl8
allowed Lhem Lo have credlL or refund for Lhe vA1 lL had pald ln 1992 1he
Cl8 counLered LhaL Lhere ls no cause of acLlon Lhe case Lhe case was
denled due Lo prescrlpLlon of Lhe acLlon 1he case was elevaLed Lo Lhe CA
buL upheld Lhe rulna of Lhe C1A
ALlas ln anoLher case clalms refund or credlL for Lhe vA1 pald coverlna Lhe
2
nd
Lo Lhe 4
Lh
quarLer of 1990 When Lhe 8l8 has noL acLed upon Lhe
requesL ALlas had flled wlLh Lhe C1A peLlLlons for revlew C1A ruled ln
favor of Lhe Cl8 also based on prescrlpLlon
ALlas appealed Lhe case Lo CA and found LhaL Lhouah Lhe acLlon has noL veL
prescrlbed Lhere was a fallure Lo subsLanLlaLe Lhe clalm for refund or
credlL
Issue
WheLher or noL Lhe acLlon ls noL veL barred bv prescrlpLlon ln order Lo
clalm for refund or credlL from Lhe vA1 pald
e|d
1he 2vear prescrlpLlve perlod for flllna a clalm for refund/Lax credlL of
excess lnpuL vA1 aLLrlbuLable Lo zeroraLed sales should be counLed from
Lhe daLe of flllna of Lhe reLurn and pavmenL of Lhe Lax due unllke
corporaLe lncome Lax LhaL ls reporLed and pald on lnsLallmenL everv
quarLer buL ls evenLuallv sub[ecLed Lo a flnal ad[usLmenL aL Lhe end of Lhe
Laxable vear Lhe vA1 ls compuLed and pald on a purelv quarLerlv basls
wlLhouL need for a flnal ad[usLmenL aL Lhe end of Lhe Laxable vear
Pence unLll and unless Lhe Laxpaver prepares and submlLs Lo Lhe 8l8 lLs
quarLerlv vA1 reLurn Lhere ls no wav of knowlna wlLh cerLalnLv [usL how
much lnpuL vA1 Lhe Laxpaver mav applv aaalnsL lLs ouLpuL vA1 how much
ouLpuL vA1 lL ls due Lo pav for Lhe quarLer or how much excess lnpuL vA1 lL
mav carrv over Lo Lhe followlna quarLer or how much of lLs lnpuL vA1 lL
mav clalm as refund/Lax credlL
Cn Lhe aspecL of evldence Lhe LaxpaverclalmanL musL flrsL esLabllsh LhaL
lLs sales quallfv for vA1 zeroraLlna under Lhe exlsLlna laws (leaal basls)
and Lhen presenL sufflclenL evldence LhaL sald sales were acLuallv made
and resulLed ln refundable or credlLable lnpuL vA1 ln Lhe amounL belna
clalmed (facLual basls)
Pence alLhouah Lhls CourL aareed wlLh Lhe peLlLloner corporaLlon LhaL Lhe
Lwovear prescrlpLlve perlod for Lhe flllna of clalms for refund/credlL of
lnpuL vA1 musL be counLed from Lhe daLe of flllna of Lhe quarLerlv vA1
reLurn and LhaL sales Lo LZArealsLered enLerprlses operaLlna wlLhln
economlc processlna zones were effecLlvelv zeroraLed and were noL
covered bv 8evenue 8eaulaLlons no 288 lL sLlll denles Lhe clalms of
peLlLloner corporaLlon for refund of lLs lnpuL vA1 on lLs purchases of
caplLal aoods and effecLlvelv zeroraLed sales durlna Lhe second Lhlrd and
fourLh quarLers of 1990 and Lhe flrsL quarLer of 1992 for noL belna
esLabllshed and subsLanLlaLed bv approprlaLe and sufflclenL evldence
state of Vda De Gabr|e| vs CIk
Iacts
uurlna Lhe llfeLlme of de Cabrlel Lhe buslness affalrs were manaaed bv
Pl18uS1 When she dled Lhe laLLer flled an lncome Lax reLurn buL noL
lnform Lhe 8l8 LhaL she was dead l1 was found LhaL Lhe Lhere was sLlll
unpald Lax llablllLv and Lhe Cl8 senL an assessmenL noLlce Lo PlL1u8S1
1he Cl8 lssued a levv on esLaLe Lo enforce Lhe Lax llablllLv Pelrs opposed lL
and flled a leLLer of proLesL Clr sald LhaL lL ls flnal and execuLorv Lower
courL sals LhaL Lhe charae cannoL be lmposed due Lo lack of noLlce CA
reversed Lhe rullna
Issue
WheLher or noL Lhe levv can be enforced Lo saLlsfv Lhe Lax llablllLv?
e|d
upon Lhe deaLh of Lhe decedenL Lhe laLLer's relaLlon wlLh Pl18uS1 has
been severed 1he sendlna of noLlce Lo PlL18uS1 does noL make Lhe
assessmenL flnal and execuLorv due Lo lmproper noLlce lurLher Lhe
collecLlon was wav bevond Lhe 3 vear perlod for collecLlon of Laxes Lhus lL
became barred bv prescrlpLlon
Apex M|n|ng vs CIk
Iacts
Apex mlnlna ls enaaaed ln Lhe ln Lhe buslness of mlnlna mllllna
concenLraLlna converLlna smelLlna manufacLurlna buvlna selllna and
oLherwlse produclna and deallna ln all klnds of ores meLals and mlneral as
well as Lhe producLs and bvproducLs Lhereof
ln 1988 Apex bouahL from small mlners and from Lhese LransacLlons Lhe
8l8 assessed an ad valorem Lax Apex flled a proLesL reaardlna Lhe sald
assessmenL of ad valorem Lax
Cn 1990 Apex relLeraLed lLs proLesL for ad valorem Laxes as applled Lo Lhe
LransacLlons wlLh small mlners 1he appllcaLlon was denled and coupled
wlLh demand Lo pav Lhe Laxes
C1A ruled LhaL Apex should pav Lhe dellnquencv Laxes plus surcharaes and
lnLeresL 1he ad valorem Laxes were cancelled due Lo lack of leaal basls CA
reveres Lhe rullna of Lhe C1A as reaard Lhe cancellaLlon of Lhe ad valorem
Laxes
1he declslon was recelved Lhru counsel ln SepL 11 1993 and on Lhe 22
nd
a
30 dav exLenslon of Llme Lo flle a moLlon for reconslderaLlon 1he moLlon
for reconslderaLlon was fleld on Lhe 11
Lh
of CcLober 1he CourL ln lLs
resoluLlon denled Lhe reconslderaLlon for belna flled ouL of Llme
Issue
WheLher or noL Lhe moLlon for reconslderaLlon should noL be dlsmlssed for
belna flled ouL of Llme?
e|d
A [udlclous perusal of Lhe records show LhaL Lhe declslon of Lhe appellaLe
courL had became flnal and execuLorv due Lo Lhe unLlmelv flllna of Lhe
moLlon for reconslderaLlon 1hus Lhe ad valorem assessmenL for Lhe
purchases Lo small mlners sLands
5ps @an vs 8atengu|
Iacts
A parcel of land locaLed ln La Loma CC ls realsLered under Lhe name of
8anLeaul 1he sald land was renLed ouL Lo Caedo spouses She wenL Lo Lhe
uSA and upon her reLurn she asslan Ms 8auLlsLa as represenLaLlve Lhen
wenL back Lo Lhe uSA aaaln
1he 81 unLll 1977 was pald buL from 1987 Lo 1983 remalned unpald lor
Lax dellnquencv Lhe properLv was sold ln aucLlon and Lhe Sps CaplsLrano
aoL Lhe properLv for hp 10000 1he properLv was never redeemed bv Lhe
owner as a resulL Lhe LlLle was consolldaLed ln Lhe name of Lhe
CaplsLranos 1he laLLer never Look possesslon nor lnformed Lhe occupanL
abouL Lhe sale and never ask for a renL from Lhe occupanL
1he loL was sold Lo erevras and Lhe LlLle was now ln Lhe name of Lhe
laLLer 1he loL was morLaaae Lo Lhe 8ural 8ank of lmus bv erevras whlch
was annoLaLed ln Lhe LlLle
1he LransacLlons were never known Lo 8anLeaul and Caedos desplLe LhaL
Lhe renLs were pald bv Lhe laLLer Lo Lhe former
8anLeaul asked for a reconsLlLuLlon of LlLle because her LlLle was desLroved
bv flre She also pald Lhe 81 for 1987 Lo 1989
1he land was now sold Lo Sps 1an bv pavlna Lhe morLaaae and Lhe
overdue Laxes and expenses bv erevras 1ans never Look possesslon of
Lhe loL llke Lhelr predecessors LaLer Lhru counsel lnformed LhaL Caedos Lo
vacaLe Lhe properLv and an e[ecLmenL case was flled aaalnsL Lhe Caedos
1he laLLer losL Lhe case and appealed
1he CA rule Lhe case LhaL Lhe purchaser where noL ln aood falLh lurLher
Lhe aucLlon sale was LalnLed wlLh lrreaularlLv for havlna no noLlce of sale Lo
Lhe owner and Lhe owner conLlnued Lo pav Lhe 81 even afLer Lhe sale
Issue
WheLher or noL Lhe aucLlon sale for Lhe enforcemenL of Lax llablllLv for
nonpavmenL of 81 was valld?
e|d
1he aucLlon sale of real properLv for Lhe collecLlon of dellnquenL Laxes ls lo
petsooom noL lo tem ubllcaLlon of Lhe aucLlon sale does noL sufflce
conslderlna LhaL Lax sales are ln personam lL ls lncumbenL upon Lhe clLv
Lreasure LoL senL noLlce dlrecLlv Lo Lhe owner ln order Lo proLecL Lhe
lnLeresL of Lhe laLLer AlLhouah preceded bv proper publlcaLlon and
adverLlsemenL lL ls sLlll vold absenL Lhe acLual noLlce Lo Lhe Laxpaver
CIk vs @u||o
Iacts
Cn leb 28 1991 Lhe Cl8 assessed Mr 1ullo who was enaaaed ln Lhe
consLrucLlon buslness for Lhe pavmenL of deflclencv percenLaae Laxes ln
Lhe amounL of 188 38376 and 243 66933 for Lhe Laxable vears of 1986
and 1987 Mr 1ullo falled Lo acL on Lhe sald assessmenL noLlces maklna lL
flnal and excuLorv
Cn several occaslons noLlces were senL Lo Mr 1ullo Lo seLLle hls deflclencv
Lax llablllLles Sue LoL eh lack of acLlon bv Lhe respondenL Lhe case for
collecLlon was brouahL Lo Lhe 81C wlLh emphasls LhaL Lhe laLLer has
[urlsdlcLlon noL Lhe C1A
1he case was dlsmlssed ln favor of Mr 1ullo due Lo prescrlpLlon of acLlon
Cl8 appealed Lhe case
Issue
WheLher or noL Lhe clvll case on monev clalms mav be dlsmlssed on Lhe
around of prescrlpLlon?
e|d
1he lower courL erroneouslv applled Sec 203 of Lhe Code Lhe 3 vears
prescrlpLlon from Lhe daLe of flllna Lhe Lax reLurn wlLh Lhe 8l8 afLer
assessmenL 1he fallure of Mr 1ullo Lo flle Lhe reLurn ls noL covered bv Lhe
Sec 203 buL Sec 223 whlch provldes for 10 vear prescrlpLlve perlod
Sec 223 speclfles 3 lnsLances whereln 3 vear perlod does noL applv 1) flllna
false reLurn 2) flllna fraudulenL reLurn wlLh lnLenL Lo evade Lax and 3)
fallure Lo flle reLurn 1he perlod wlLhln whlch Lo assess Lax ls 10 vears from
Lhe dlscoverv of Lhe fraud falslflcaLlon or omlsslon
CIk vs N8
Iacts
n8 pald ln advance Lhe amounL of hp 180 Mllllon Lo 8l8 for Lhe purpose
of fuLure Lax obllaaLlon 1he sald acL was pursuanL Lo Lhe res/ Corv's call
Lo aeneraLe revenue for naLlonal developmenL n8 wroLe Lo 8l8
requesLlna Lhe lssuance of 1ax CredlL CerLlflcaLe (1CC) based o Lhe sald
amounL
ln 1991 lncluslve of Lhe advance pavmenL n8 pald ln addlLlonal lncome
Lax due for Lhe 1
sL
and 2
nd
quarLer of 1991 All ln all Lhe credlLs amounLlna
hp 732 Mllllon was never used due Lo Lhe losses lL suffered ln Lhe vears
1992 Lo 1996 ln 1997 Lhe n8 aaaln wroLe Lo 8l8 for Lhe lssuance Cl Lhe
1CC Lhe requesL was forwarded Lo Lhe Cfflce of Lhe uepuLv Comm for
Leaal and lnspecLlon Croup
n8 souahL reconslderaLlon noL Lo Lake [urlsdlcLlon because lL ls llmlLed Lo
hear Lax cases lnvolvlna llleaal and erroneous Laxes where Lhere are
quesLlons of facL and does not c/oim for refund on odvonced poyments
8l8 denled Lhe clalm for refund due Lo prescrlpLlon because lL was fleld
bevond 2 vears from flllna C1A afflrmed Lhe rullna of Lhe Cl8 1he CA
annulled and seL aslde Lhe declslon of Lhe C1A and remanded lL back Lo Cl8
for furLher sLudv
Issue
WheLher or noL Lhe clalm for Lax credlL ls barred bv Lhe 2 vears
prescrlpLlon?
e|d
1he CourL ruled LhaL Lhe advance pavmenLs made bv 8n ls noL classlfled
as llleaallv or erroneouslv pald Laxes 1he prescrlpLlve perlod of 2 vears
applles onlv Lo llleaallv or erroneouslv pald Laxes
ClLlna Lhe case of Cl8 vs PlLAM Llfe Lhe absenL anv provlslon ln Lhe 1Ax
Code and speclal ArLlcle 1444 of Lhe Clvl code would applv speclflcallv 10
vears
lL would Lhus lndeed be unfalr as Lhe CA correcLlv observed Lo leave
respondenL n8 Lo suffer loslna mllllons of pesos advanced bv lL for fuLure
Lax llablllLles 1he cuL becomes all Lhe more palnful when lL ls consldered
LhaL n8's fallure Lo applv Lhe balance of such advance lncome Lax
pavmenL from 1992 Lo 1996 was Lo repeaL due Lo buslness downLurn
experlenced bv Lhe bank so LhaL lL lncurred no Lax llablllLv for Lhe perlod
Ccean|c W|re|ess Network vs CIk
Iacts
Cn March 17 1988 8l8 senL a deflclencv Lax assessmenL for Lhe vear 1984
for Lhe amounL of 8643 Mllllon eLlLloner flled a proLesL and requesLed
reconslderaLlon or cancellaLlon of Lhe same ln replv Lhe 8l8 AccounLs
8ecelvable and 8llllna ulvlslon acLlna ln behalf of Lhe 8l8 Comm
requesLed Cceanlc Lo pav Lhe amounL wlLhln Len davs from Lhe recelpL
Lhereof oLherwlse Lhe case would be referred Lo Lhe CollecLlon
LnforcemenL ulvlslon upon fallure Lo pav Lhe AsslsLanL Comm lssued a
warranL of dlsLranL and/or levv and aarnlshmenL served Lo peLlLloner on
CcL 1999
nov 1991 Cceanlc flled a peLlLlon for 8evlew wlLh Lhe C1A Lo conLesL Lhe
lssuance of Lhe warranL 1he C1A dlsmlssed Lhe case for lack of [urlsdlcLlon
ln Lhe SepL 1994 declslon declarlna LhaL Lhe sald peLlLlon was flled bevond
Lhe 30 dav perlod from Lhe Llme Lhe leLLer from Lhe 8l8 AccounLs
8ecelvables and 8llllna ulvlslon was recelved bv Lhe peLlLloner
lurLher Lhe lssuance of Lhe warranLs was noL barred bv prescrlpLlon uue
Lo Lhe flllna of Lhe proLesL whlch was alven due course bv Lhe 8l8 Lhe
runnlna of prescrlpLlon was suspended
Cceanlc flled a moLlon for reconslderaLlon araulna LhaL Lhe demand leLLer
cannoL be consldered as flnal because lL was slaned bv a subordlnaLe
offlcer 1he moLlon was denled and Lhe case as elevaLed Lo Lhe CA
Issue
WheLher or noL Lhe a demand leLLer for Lax dellnquencv assessmenL lssued
and slaned bv a subordlnaLe offlcer acLlna ln behalf of Lhe Cl8 ls deemed
flnal and execuLorv
e|d
A demand leLLer for pavmenL of Lhe dellnquenL Lax mav be consldered a
declslon on a dlspuLed assessmenL 1he demand leLLer ls deemed flnal
baslna on Lhe Lenor of Lhe leLLer Lo Lhe Laxpaver 1he relLeraLlon of Lhe
8l8's former poslLlon whlch ls Lo pav Lhe Lax llablllLv afLer Lhe requesL from
Lhe Lax paver lndlcaLes LhaL laLLer's requesL was denled
1he powers of Lhe Cl8 mav be deleaaLed sub[ecL Lo a few exempLlons
whlch are
O ower Lo recommend Lhe promulaaLlon of rules and reaulaLlon bv
Lhe Sec of llnance
O ower Lo lssue rullnas of flrsL lmpresslon or Lo reverse revoke or
modlfv anv exlsLlna rullnas of Lhe 8l8
O ower Lo compromlse or abaLe
O ower Lo asslan or reasslan lnLernal revenue offlcers Lo
esLabllshmenL where arLlcles sub[ecL Lo exclse Lax are produced or
kepL
1he acL of Lhe subordlnaLe offlcer does noL fall under Lhe exempLlon 1hus
Lhe assessmenL had become flnal and execuLorv
ILAM Asset vs CIk
Iacts
eLlLloner ls a domesLlc corporaLlon dulv oraanlzed and exlsLlna under Lhe
laws of Lhe hlllpplnes lL acLs as Lhe lnvesLmenL manaaer of hlllpplne
lund lnc (ll) and PlLAM 8ond lund lnc (8ll) whlch are openend
lnvesLmenL companles ln Lhe sale of Lhelr shares of sLocks and ln Lhe
lnvesLmenL of Lhe proceeds of Lhe sale lnLo dlverslfled porLfollo of debL
and equlLv securlLles eLlLloner belna an lnvesLmenL manaaer lL provldes a
manaaemenL and Lechnlcal servlces Lo ll and 8ll Llkewlse lL provldes
Lakes charae of Lhe boLh companles sale of shares Lo prospecLlve lnvesLors
lL ls aareed LhaL beLween Lhe companles and Lhe peLlLloner LhaL laLLer be
pav bv wav of compensaLlon and Lhe former ls allowed Lo wlLhhold 3 of
Lhe manaaemenL fee as equlvalenL credlLable Lax
eLlLloner flled lLs annual lncome Lax reLurn for 1997 wlLh a neL loss of 26
Mllllon pesos lL falled Lo uLlllze Lhe Lax credlL wlLhheld bv Lhe 8ll ad ll
eLlLloner flled an admlnlsLraLlve clalm for refund wlLh Lhe 8l8 on Lhe
unuLlllzed excess Lax credlL for 1997 Powever Lhe 8l8 dld noL acL on Lhe
peLlLloner's clalm for refund Case was flled wlLh Lhe C1A ln 1999
Cn 1999 PlLAM AsseL aaaln flled lLs annual lncome Lax reLurn wlLh Lhe
8l8 for Lhe Laxable vear 1998 declarlna a loss of hp 13 Mllllon AnoLher
amounL wlLhheld bv Lhe companles for 1998 was clalmed as unuLlllzed
credlLable Lax
1he cases for refund were denled bv Lhe C1A 1he CA's declslon reasoned
ouL LhaL Lhe l18s dld noL lndlcaLe lLs opLlon wheLher Lo refund or Lo carrv
over Lhe amounL wlLhheld Lo Lhe succeedlna vear lurLher savlna LhaL a
corporaLlon musL lndlcaLe lLs opLlon lf noL lndlcaLed Lhe amounL would
sLlll remaln ln Lhe accounL of Lhe Laxpaver unLll uLlllzed ln Lhe succeedlna
vear
Issue
WheLher or noL Lhe peLlLloner ls enLlLled for a refund of lLs credlLable Laxes
wlLhheld for Lhe vears 1997 and 1998?
e|d
Sec 76 of Lhe nl8C provldes LhaL a corporaLlon wlLh excess quarLerlv
lncome Lax pavmenLs mav applv for elLher Lax refund or Lax credlL buL noL
boLh lallure Lo lndlcaLe Lhe cholce wlll noL bar a valld requesL for a refund
1he requlremenL for lndlcaLlna Lhe cholce ls merelv for Lhe purpose
faclllLaLlna Lax collecLlon A
1he Code requlres LhaL Lhe cholce Lo be made ln wrlLlna and made know Lo
Lhe 8l8 Lwo vears from Lhe pavmenL of Lhe Laxes erroneouslv made
1he CourL declared LhaL as reaards Lhe refund for 1997 musL be allowed
buL as Lo Lhe 1998 refund should noL be allowed SubsequenL acLs of Lhe
peLlLloner lndlcaLe LhaL lL had chosen Lhe carrvover opLlon 1he Code
provldes LhaL once Lhe opLlon of carrvover was chosen lL would be
lrrevocable



1. Chumber oI Reul Istute und Boilders'
Associutions, Inc., v. The Hon. Ixecotive
Secretury Alberto Romolo, et ul
G.R. No. 16o=6. Murch n, o1o

ucts: PeLILIoner CIumber oI ReuI EsLuLe und BuIIders`
AssocIuLIons, nc. (CREBA), un ussocIuLIon oI reuI esLuLe
deveIopers und buIIders In LIe PIIIIppInes, quesLIoned LIe
vuIIdILv oI SecLIon z;(E) oI LIe Tux Code wIIcI Imposes LIe
mInImum corporuLe Income Lux (MCT) on corporuLIons.

Under LIe Tux Code, u corporuLIon cun become subjecL Lo LIe
MCT uL LIe ruLe oI z% oI gross Income, begInnIng on LIe qLI
LuxubIe veur ImmedIuLeIv IoIIowIng LIe veur In wIIcI IL
commenced ILs busIness operuLIons, wIen sucI MCT Is
greuLer LIun LIe normuI corporuLe Income Lux. I LIe reguIur
Income Lux Is IIgIer LIun LIe MCT, LIe corporuLIon does noL
puv LIe MCT.

CREBA urgued, umong oLIers, LIuL LIe use oI gross Income us
MCT buse umounLs Lo u conIIscuLIon oI cupILuI becuuse gross
Income, unIIke neL Income, Is noL reuIIzed guIn.

CREBA uIso sougIL Lo InvuIIduLe LIe provIsIons oI RR o. z-
8, us umended, oLIerwIse known us LIe ConsoIIduLed
WILIIoIdIng Tux ReguIuLIons, wIIcI prescrIbe LIe ruIes und
procedures Ior LIe coIIecLIon oI CWT on suIes oI reuI properLIes
cIussIIIed us ordInurv usseLs, on LIe grounds LIuL LIese
reguIuLIons:

Use gross seIIIng prIce (GSP) or IuIr murkeL vuIue
(MV) us busIs Ior deLermInIng
LIe Income Lux on LIe suIe oI reuI esLuLe cIussIIIed us ordInurv
usseLs, InsLeud oI LIe enLILv`s neL LuxubIe Income us provIded
Ior under LIe Tux Code;
MunduLe LIe coIIecLIon oI Income Lux on u per
LrunsucLIon busIs, conLrurv Lo LIe Tux Code provIsIon
wIIcI Imposes Income Lux on neL Income uL LIe end oI
LIe LuxubIe perIod;
Go uguInsL LIe due process cIuuse becuuse LIe
governmenL coIIecLs Income Lux even wIen LIe neL
Income Ius noL veL been deLermIned; guIn Is never
ussured bv mere receIpL oI LIe seIIIng prIce; und
ConLruvene LIe equuI proLecLIon cIuuse becuuse LIe
CWT Is beIng cIurged upon reuI esLuLe enLerprIses, buL
noL on oLIer busIness enLerprIses, more purLIcuIurIv,
LIose In LIe munuIucLurIng secLor, wIIcI do busIness
sImIIur Lo LIuL oI u reuI esLuLe enLerprIse.

Issoes: (1) s LIe ImposILIon oI MCT consLILuLIonuI? (z) s LIe
ImposILIon oI CWT on Income Irom suIes oI reuI properLIes
cIussIIIed us ordInurv usseLs consLILuLIonuI?

Held: (1) Yes. TIe ImposILIon oI LIe MCT Is consLILuLIonuI.
An Income Lux Is urbILrurv und conIIscuLorv II IL Luxes cupILuI,
becuuse IL Is Income, und noL cupILuI, wIIcI Is subjecL Lo
Income Lux. However, MCT Is Imposed on gross Income wIIcI
Is compuLed bv deducLIng Irom gross suIes LIe cupILuI spenL bv
u corporuLIon In LIe suIe oI ILs goods, I.e., LIe cosL oI goods und
oLIer dIrecL expenses Irom gross suIes. CIeurIv, LIe cupILuI Is
noL beIng Luxed.

VurIous suIeguurds were IncorporuLed InLo LIe Iuw ImposIng
MCT.

IrsLIv, recognIzIng LIe bIrLI pungs oI busInesses und LIe
reuIILv oI LIe need Lo recoup InILIuI mujor cupILuI expendILures,
LIe MCT Is Imposed onIv on LIe qLI LuxubIe veur ImmedIuLeIv
IoIIowIng LIe veur In wIIcI LIe corporuLIon commenced ILs
operuLIons.

SecondIv, LIe Iuw uIIows LIe currv-Iorwurd oI unv excess oI LIe
MCT puId over LIe normuI Income Lux wIIcI sIuII be credILed
uguInsL LIe normuI Income Lux Ior LIe LIree ImmedIuLeIv
succeedIng veurs.

TIIrdIv, sInce cerLuIn busInesses muv be IncurrIng genuIne
repeuLed Iosses, LIe Iuw uuLIorIzes LIe SecreLurv oI Inunce Lo
suspend LIe ImposILIon oI MCT II u corporuLIon suIIers Iosses
due Lo proIonged Iubor dIspuLe, Iorce mujeure und IegILImuLe
busIness reverses.

(z) Yes. DespILe LIe ImposILIon oI CWT on GSP or MV, LIe
Income Lux buse Ior suIes oI reuI properLv cIussIIIed us ordInurv
usseLs remuIns us LIe enLILv`s neL LuxubIe Income us provIded In
LIe Tux Code, I.e., gross Income Iess uIIowubIe cosLs und
deducLIons. TIe seIIer sIuII IIIe ILs Income Lux reLurn und credIL
LIe Luxes wILIIeId bv LIe wILIIoIdIng ugenL-buver uguInsL ILs
Lux due. I LIe Lux due Is greuLer LIun LIe Lux wILIIeId, LIen LIe
Luxpuver sIuII puv LIe dIIIerence. I, on LIe oLIer Iund, LIe Lux
due Is Iess LIun LIe Lux wILIIeId, LIe Luxpuver wIII be enLILIed
Lo u reIund or Lux credIL.

TIe use oI LIe GSP or MV us busIs Lo deLermIne LIe CWT Is
Ior purposes oI prucLIcuIILv und convenIence. TIe knowIedge oI
LIe wILIIoIdIng ugenL-buver Is IImILed Lo LIe purLIcuIur
LrunsucLIon In wIIcI Ie Is u purLv. Hence, IIs busIs cun onIv be
LIe GSP or MV wIIcI IIgures ure reusonubIv known Lo IIm.

AIso, LIe coIIecLIon oI Income Lux vIu LIe CWT on u per
LrunsucLIon busIs, I.e., upon consummuLIon oI LIe suIe, Is noL
conLrurv Lo LIe Tux Code wIIcI cuIIs Ior LIe puvmenL oI LIe neL
Income uL LIe end oI LIe LuxubIe perIod. TIe Luxes wILIIeId ure
In LIe nuLure oI udvunce Lux puvmenLs bv u Luxpuver In order Lo
cunceI ILs possIbIe IuLure Lux obIIguLIon. TIev ure InsLuIImenLs
on LIe unnuuI Lux wIIcI muv be due uL LIe end oI LIe LuxubIe
veur. TIe wILIIoIdIng ugenL-buver`s ucL oI coIIecLIng LIe Lux uL
LIe LIme oI LIe LrunsucLIon, bv wILIIoIdIng LIe Lux due Irom
LIe Income puvubIe, Is LIe verv essence oI LIe wILIIoIdIng Lux
meLIod oI Lux coIIecLIon.

On LIe uIIeged vIoIuLIon oI LIe equuI proLecLIon cIuuse, LIe
LuxIng power Ius LIe uuLIorILv Lo muke reusonubIe
cIussIIIcuLIons Ior purposes oI LuxuLIon. nequuIILIes wIIcI
resuIL Irom sIngIIng ouL u purLIcuIur cIuss Ior LuxuLIon, or
exempLIon, InIrInge no consLILuLIonuI IImILuLIon. TIe reuI
esLuLe IndusLrv Is, bv ILseII, u cIuss und cun be vuIIdIv LreuLed
dIIIerenLIv Irom oLIer busIness enLerprIses.

WIuL dIsLInguIsIes LIe reuI esLuLe busIness Irom oLIer
munuIucLurIng enLerprIses, Ior purposes oI LIe ImposILIon oI
LIe CWT, Is noL LIeIr producLIon processes buL LIe prIces oI
LIeIr goods soId und LIe number oI LrunsucLIons InvoIved. TIe
Income Irom LIe suIe oI u reuI properLv Is bIgger und ILs
Irequencv oI LrunsucLIon IImILed, mukIng IL Iess cumbersome
Ior LIe purLIes Lo compIv wILI LIe wILIIoIdIng Lux scIeme. On
LIe oLIer Iund, eucI munuIucLurIng enLerprIse muv Iuve Lens
oI LIousunds oI LrunsucLIons wILI severuI LIousund cusLomers
everv monLI InvoIvIng boLI mInImuI und subsLunLIuI umounLs.


z. COMMISSIONIR O INTIRNAL RIVINLI,
peLILIoner, vs. CIBL PORTLAN CIMINT
COMPANY und COLRT O TAX APPIALS,
respondenLs.
G.R. No. L-no=n ecember 1=, 1nS
ACTS: Bv vIrLue oI u decIsIon oI LIe CTA, us modIIIed on
uppeuI bv LIe Supreme CourL, LIe CR wus ordered Lo reIund Lo
Cebu PorLIund CemenL Compunv LIe umounL oI P =,qo8.8,
represenLIng overpuvmenLs oI cd tclorem Luxes on cemenL
produced und soId bv IL. WIen respondenL moved Ior u wrIL oI
execuLIon, peLILIoner opposed on LIe ground LIuL LIe prIvuLe
respondenL Iud un ouLsLundIng suIes Lux IIubIIILv Lo wIIcI LIe
judgmenL debL Iud uIreudv been credILed. n IucL, IL wus
sLressed, LIere wus sLIII u buIunce owIng on LIe suIes Luxes In
LIe umounL oI P q,;8,z;.8= pIus z8% surcIurge. TIe CTA
grunLed LIe CR`s moLIon.
TIe CR cIuIms LIuL LIe reIund sIouId be cIurged uguInsL LIe
Lux deIIcIencv oI LIe prIvuLe respondenL on LIe suIes oI cemenL
under SecLIon 186 oI LIe Tux Code. HIs posILIon Is LIuL cemenL
Is u munuIucLured und noL u mIneruI producL und LIereIore noL
exempL Irom suIes Luxes. TIe peLILIoner uIso denIes LIuL LIe
suIes Lux ussessmenLs Iuve uIreudv prescrIbed becuuse LIe
prescrIpLIve perIod sIouId be counLed Irom LIe IIIIng oI LIe
suIes Lux reLurns, wIIcI Iud noL veL been done bv LIe prIvuLe
respondenL.
MeunwIIIe, LIe prIvuLe respondenL dIscIuIms IIubIIILv Ior LIe
suIes Luxes, on LIe ground LIuL cemenL Is noL u munuIucLured
producL buL u mIneruI producL. As sucI, IL wus exempLed Irom
suIes Luxes. AIso, LIe uIIeged suIes Lux deIIcIencv couId noL us
veL be enIorced uguInsL IL becuuse LIe Lux ussessmenL wus noL
veL IInuI, LIe sume beIng sLIII under proLesL und sLIII Lo be
deIInILeIv resoIved on LIe merILs. BesIdes, LIe ussessmenL Iud
uIreudv prescrIbed, noL IuvIng been mude wILIIn LIe
regIemenLurv IIve-veur perIod Irom LIe IIIIng oI LIe Lux reLurns.
ISSLI: WIeLIer or noL suIes Lux wus properIv Imposed upon
prIvuLe respondenL.
HIL: Yes, becuuse cemenL Ius uIwuvs been consIdered u
munuIucLured producL und noL u mIneruI producL. TIIs muLLer
wus exLensIveIv dIscussed und cuLegorIcuIIv resoIved In
ommissioner o[ Interncl Retenue t. Republic ement
orporction, decIded on AugusL 1o, 18, sLuLIng LIuL cemenL
quc cemenL wus never consIdered us u mIneruI producL wILIIn
LIe meunIng oI SecLIon zq6 oI LIe Tux Code, noLwILIsLundIng
LIuL uL IeusL 8o% oI ILs componenLs ure mIneruIs, Ior LIe
sImpIe reuson LIuL cemenL Is LIe producL oI u mcnu[ccturinq
process und Is no Ionger LIe mIneruI producL conLempIuLed In
LIe Tux Code (I.e.; mIneruIs subjecLed Lo sImpIe LreuLmenLs)
Ior LIe purpose oI ImposIng LIe cd tclorem Lux.
TIe urgumenL LIuL LIe ussessmenL cunnoL us veL be enIorced
becuuse IL Is sLIII beIng conLesLed Ioses sIgIL oI LIe urgencv oI
LIe need Lo coIIecL Luxes us "LIe IIIebIood oI LIe governmenL."
I LIe puvmenL oI Luxes couId be posLponed bv sImpIv
quesLIonIng LIeIr vuIIdILv, LIe mucIInerv oI LIe sLuLe wouId
grInd Lo u IuIL und uII governmenL IuncLIons wouId be
puruIvzed.
. Monicipulity oI Mukuti v. Coort oI Appeuls
GR # SnSnS-n 1oJo1Jno

ucts: An exproprIuLIon proceedIng Ior u pIece oI Iund IIIed bv
LIe MunIcIpuIILv oI MukuLI uguInsL AdmIruI InuncIuI und
CredIL Corp resuILed wILI LIe MunIcIpuIILv IuvIng Lo puv P
=,z1,666.oo Iess InILIuI puvmenLs bv LIe munIcIpuIILv. AILer
LIuL, prIvuLe respondenL IIIed u wrIL Ior execuLIon Ior LIe
buIunce. RegIonuI TrIuI CourL grunLed LIe moLIon und dIrecLed
LIe bunk Lo deIIver LIe suId buIunce. SubsequenL moLIons Ior
reconsIderuLIon und uppeuI Lo LIe respondenL CourL oI AppeuIs
bv LIe munIcIpuIILv In order Lo sLop LIe gurnIsImenL.

Issoes: WIeLIer or noL LIe courL cun vuIIdIv subjecL
governmenL uccounLsJproperLv Lo gurnIsImenL. WIeLIer or
noL LIe LIe courL erred wILI LIe decIsIon oI ussessIng LIe
IIgIer umounL us Lo Iow mucI LIe munIcIpuIILv Is wIIIIng Lo
puv.

Held: TIe courL ruIed LIuL LIe MunIcIpuIILv oI MukuLI's
uccounLs or properLv cunnoL be IeId Ior gurnIsImenL us
governmenL's Iund, IeId Ior pubIIc use, cun noL be IeId Ior
gurnIsImenL. However, LIe courL sLIII IeId LIe MunIcIpuIILv
IIubIe Ior LIe ussessed vuIue oI LIe Iund und ImprovemenLs
becuuse LIe prIvuLe respondenL sIouId be enLILIed Lo jusL
compensuLIon.

A. CIR -v- Aluoe, Inc., & CTA
G.R. No. L-SSn6 ebroury 1, 1nSS

ACTS: AIgue, nc., u domesLIc corporuLIon enguged In
engIneerIng, consLrucLIon und oLIer uIIIed ucLIvILIes. PIIIIppIne
Sugur EsLuLe DeveIopmenL Compunv Iud eurIIer uppoInLed
AIgue us ILs ugenL, uuLIorIzIng IL Lo seII ILs Iund, IucLorIes und
oII munuIucLurIng process. |TIere wus u suIe Ior wIIcI| AIgue
receIved us ugenL u commIssIon oI P1z6,ooo.oo, und IL wus
Irom LIIs commIssIon LIuL LIe P;=,ooo.oo promoLIonuI Iees
were puId Lo LIe uIorenumed IndIvIduuIs. TIe puvees duIv
reporLed LIeIr respecLIve sIures oI LIe Iees In LIeIr Income Lux
reLurns und puId LIe correspondIng Luxes LIereon, und LIere
wus no dIsLrIbuLIon oI dIvIdends wus InvoIved.

|AIgue cIuImed LIe ;=,ooo Lo be deducLIbIe Irom LIeIr Lux, Lo
wIIcI LIe CR dIsuIIowed.|

ISSLI: WIeLIer or noL LIe CoIIecLor oI nLernuI Revenue
correcLIv dIsuIIowed LIe P;=,ooo.oo deducLIon cIuImed bv
prIvuLe respondenL AIgue us IegILImuLe busIness expenses In ILs
Income Lux reLurns.

HIL: O - CR Is noL correcL. TIe burden Is on LIe
Luxpuver Lo prove LIe vuIIdILv oI LIe cIuImed deducLIon. n LIe
presenL cuse, Iowever, we IInd LIuL LIe onus Ius been
dIscIurged suLIsIucLorIIv. TIe prIvuLe respondenL Ius proved
LIuL LIe puvmenL oI LIe Iees wus necessurv und reusonubIe In
LIe IIgIL oI LIe eIIorLs exerLed bv LIe puvees In InducIng
InvesLors und promInenL busInessmen Lo venLure In un
experImenLuI enLerprIse und InvoIve LIemseIves In u new
busIness requIrIng mIIIIons oI pesos. TIIs wus no meun IeuL
und sIouId be, us IL wus, suIIIcIenLIv recompensed.

Tuxes ure LIe IIIebIood oI LIe governmenL und so sIouId be
coIIecLed wILIouL unnecessurv IIndrunce. On LIe oLIer Iund,
sucI coIIecLIon sIouId be mude In uccordunce wILI Iuw us unv
urbILrurIness wIII neguLe LIe verv reuson Ior governmenL ILseII.
L Is LIereIore necessurv Lo reconcIIe LIe uppurenLIv conIIIcLIng
InLeresLs oI LIe uuLIorILIes und LIe Luxpuvers so LIuL LIe reuI
purpose oI LuxuLIon, wIIcI Is LIe promoLIon oI LIe common
good, muv be ucIIeved.

L Is suId LIuL Luxes ure wIuL we puv Ior cIvIIIzuLIon socIeLv.
WILIouL Luxes, LIe governmenL wouId be puruIvzed Ior Iuck oI
LIe moLIve power Lo ucLIvuLe und operuLe IL. Hence, despILe LIe
nuLuruI reIucLunce Lo surrender purL oI one's Iurd eurned
Income Lo LIe LuxIng uuLIorILIes, everv person wIo Is ubIe Lo
musL conLrIbuLe IIs sIure In LIe runnIng oI LIe governmenL.
TIe governmenL Ior ILs purL, Is expecLed Lo respond In LIe Iorm
oI LungIbIe und InLungIbIe beneIILs InLended Lo Improve LIe
IIves oI LIe peopIe und enIunce LIeIr moruI und muLerIuI
vuIues. TIIs svmbIoLIc reIuLIonsIIp Is LIe ruLIonuIe oI LuxuLIon
und sIouId dIspeI LIe erroneous noLIon LIuL IL Is un urbILrurv
meLIod oI exucLIon bv LIose In LIe seuL oI power.

BuL even us we concede LIe InevILubIIILv und IndIspensubIIILv oI
LuxuLIon, IL Is u requIremenL In uII democruLIc regImes LIuL IL be
exercIsed reusonubIv und In uccordunce wILI LIe prescrIbed
procedure. I IL Is noL, LIen LIe Luxpuver Ius u rIgIL Lo
compIuIn und LIe courLs wIII LIen come Lo IIs succor. or uII
LIe uwesome power oI LIe Lux coIIecLor, Ie muv sLIII be sLopped
In IIs Lrucks II LIe Luxpuver cun demonsLruLe, us IL Ius Iere,
LIuL LIe Iuw Ius noL been observed.

=. BPI umily Suvinus Bunk v. CA, et ul.
GR No. 1ASo; April 1, ooo

ucts: PeLILIoner BP umIIv SuvIngs Bunk Iud un excess
wILIIoIdIng Luxes Ior LIe veur 18 umounLIng Lo P11z,q1.o.
L IndIcuLed In ILs 18 ncome Tux ReLurn LIuL IL wouId uppIv
LIe suId umounL us u Lux credIL Ior LIe succeedIng LuxubIe veur,
1o. However becuuse oI busIness Iosses, peLILIoner InIormed
LIe Bureuu oI nLernuI Revenue (BR) LIuL IL wouId cIuIm LIe
umounL us u Lux reIund, InsLeud oI uppIvIng IL us u Lux credIL.
WIen no ucLIon Irom LIe BR wus IorLIcomIng, peLILIoner IIIed
ILs cIuIm wILI LIe CourL oI Tux AppeuIs.

TIe CTA und LIe CA, Iowever, denIed LIe cIuIm Ior Lux reIund.
SInce peLILIoner decIured In ILs 18 ncome Tux ReLurn LIuL IL
wouId uppIv LIe excess wILIIoIdIng Lux us u Lux credIL Ior LIe
IoIIowIng veur, LIe Tux CourL IeId LIuL peLILIoner wus
presumed Lo Iuve done so. TIe CTA und LIe CA ruIed LIuL
peLILIoner IuIIed Lo overcome LIIs presumpLIon becuuse IL dId
noL presenL ILs 1o ReLurn, wIIcI wouId Iuve sIown LIuL LIe
umounL In dIspuLe wus noL uppIIed us u Lux credIL. Hence, LIe
CA concIuded LIuL peLILIoner wus noL enLILIed Lo u Lux reIund.

Issoe: WIeLIer or noL peLILIoner Is enLILIed Lo LIe reIund oI
P11z,q1.o, represenLIng excess credILubIe wILIIoIdIng Lux
puId Ior LIe LuxubIe veur 18.

Held: L Is undIspuLed LIuL peLILIoner Iud excess wILIIoIdIng
Luxes Ior LIe veur 18 und wus LIus enLILIed Lo u reIund
umounLIng Lo P11z,q1. PursuunL Lo SecLIon 6 oI LIe 186 Tux
Code wIIcI sLuLes LIuL u corporuLIon enLILIed Lo u reIund muv
opL eILIer (1) Lo obLuIn sucI reIund or (z) Lo credIL suId umounL
Ior LIe succeedIng LuxubIe veur.

PeLILIoner presenLed evIdence Lo prove ILs cIuIm LIuL IL dId noL
uppIv LIe umounL us u Lux credIL.

A copv oI LIe InuI AdjusLmenL ReLurn Ior 1o wus uLLucIed
Lo peLILIoner's MoLIon Ior ReconsIderuLIon IIIed beIore LIe
CTA. A IInuI udjusLmenL reLurn sIows wIeLIer u corporuLIon
Incurred u Ioss or guIned u proIIL durIng LIe LuxubIe veur. n
LIIs cuse, LIuL ReLurn cIeurIv sIowed LIuL peLILIoner Incurred
P=z,q8o,1; us neL Ioss In 1o. CIeurIv, IL couId noL Iuve
uppIIed LIe umounL In dIspuLe us u Lux credIL.

TIe BR dId noL conLroverL LIe verucILv oI LIe suId reLurn. L
dId noL even IIIe un opposILIon Lo peLILIoner's MoLIon und LIe
1o InuI AdjusLmenL ReLurn uLLucIed LIereLo.

PeLILIoner uIso cuIIs LIe uLLenLIon oI LIIs CourL, us IL Iud done
beIore LIe CTA, Lo u DecIsIon rendered bv LIe Tux CourL In
CTA Cuse o. q8;, InvoIvIng ILs cIuIm Ior reIund Ior LIe veur
1o. n LIuL cuse, LIe Tux CourL IeId LIuL "peLILIoner suIIered
u neL Ioss Ior LIe LuxubIe veur 1o . . . ." RespondenL, Iowever,
urges LIIs CourL noL Lo Luke judIcIuI noLIce oI LIe suId cuse.

RespondenLs' reusonIng underscores LIe weukness oI LIeIr
cuse. or II LIev Iud reuIIv beIIeved LIuL peLILIoner Is noL
enLILIed Lo u Lux reIund, LIev couId Iuve eusIIv proved LIuL IL
dId noL suIIer unv Ioss In 1o. ndeed, IL Is noLeworLIv LIuL
respondenLs opLed noL Lo ussuII LIe IucL uppeurIng LIereIn -
LIuL peLILIoner suIIered u neL Ioss In 1o - In LIe sume wuv
LIuL IL reIused Lo conLroverL LIe sume IucL esLubIIsIed bv
peLILIoner's oLIer documenLurv exIIbILs

TecInIcuIILIes und IeguIIsms, Iowever exuILed, sIouId noL be
mIsused bv LIe governmenL Lo keep monev noL beIongIng Lo IL
und LIerebv enrIcI ILseII uL LIe expense oI ILs Iuw-ubIdIng
cILIzens. I LIe SLuLe expecLs ILs Luxpuvers Lo observe IuIrness
und IonesLv In puvIng LIeIr Luxes, so musL IL uppIv LIe sume
sLundurd uguInsL ILseII In reIundIng excess puvmenLs oI sucI
Luxes. ndeed, LIe SLuLe musL Ieud bv ILs own exumpIe oI Ionor,
dIgnILv und uprIgILness.

6. COMMISSIONIR O INTIRNAL RIVINLI
vs.TOKYO SHIPPING CO. LT., represenLed bv
SORAMOT STEAMSHP AGECES C., und
COURT O TAX APPEAS
zqq SCRA qz; Muv z6, 1=
ucts: Tokvo SIIppIng u IoreIgn corporuLIon represenLed In
LIe PIIIIppInes bv SorIumonL SLeumsIIp AgencIes und owns
und operuLes MJV GurdenIu. ASUTRA

cIurLered MJV
GurdenIu Lo Ioud 16,=oo meLrIc Lons oI ruw sugur In LIe
PIIIIppInes. SorIumonL Agencv,
A
puId LIe requIred Income und
common currIer's Luxes P=,=z.;= und Pq;,61.oo,
respecLIveIv (ToLuI P1o;,1qz.;=). Upon urrIvIng, Iowever, uL
GuImurus PorL oI IoIIo, LIe vesseI Iound no sugur Ior IoudIng.
ASUTRA und SorIumonL muLuuIIv ugreed Lo Iuve LIe vesseI
suII Ior Jupun wILIouL unv curgo. CIuImIng LIe pre-puvmenL oI
Income und common currIer's Luxes us erroneous sInce no
receIpL wus reuIIzed Irom LIe cIurLer ugreemenL, Tokvo
InsLILuLed u cIuIm Ior Lux credIL or reIund oI LIe sum
P1o;,1qz.;= Irom CR. PeLILIoner IuIIed Lo ucL prompLIv on LIe
cIuIm , Ience Tokvo IIIed u peLILIon Ior revIew
6
beIore CourL oI
Tux AppeuIs. CTA decIded Ior Tokvo und denIed MR oI CR.
Issoe: WO Tokvo SIIppIng Co. Ld., Is enLILIed Lo u reIund or
Lux credIL - wIeLIer IL wus ubIe Lo prove LIuL IL derIved no
receIpLs Irom ILs cIurLer ugreemenL, und Ience Is enLILIed Lo u
reIund oI LIe Luxes IL pre-puId Lo LIe governmenL.
Rolinu: Yes. PursuunL Lo SecLIon zq (b) (z) oI LIe uLIonuI
nLernuI Revenue Code wIIcI uL LIuL LIme, u resIdenL IoreIgn
corporuLIon enguged In LIe LrunsporL oI curgo Is IIubIe Ior Luxes
dependIng on LIe umounL oI Income IL derIves Irom sources
wILIIn LIe PIIIIppInes. TIus, beIore sucI u Lux IIubIIILv cun be
enIorced LIe Luxpuver musL be sIown Lo Iuve eurned Income
sourced Irom LIe PIIIIppInes.
ndeed, u cIuIm Ior reIund Is In LIe nuLure oI u cIuIm Ior
exempLIon
S
und sIouId be consLrued In strictissimi
juris uguInsL LIe Luxpuver. And Tokvo Ius LIe burden oI prooI
Lo esLubIIsI LIe IucLuuI busIs oI ILs cIuIm Ior Lux reIund.
BuL suIIIcIenL evIdence Ius uIreudv been udduced bv Tokvo
provIng LIuL IL derIved no receIpL Irom ILs cIurLer ugreemenL
wILI ASUTRA - MJV "GurdenIu" urrIved In IoIIo on Junuurv
1o, 181 buL Iound no ruw sugur Lo Ioud und reLurned Lo Jupun
wILIouL unv curgo Iuden on bourd.
. COMMISSIONIR O INTIRNAL RIVINLI V.
MISTLBISHI MITAL CORPORATION (1S1
SCRA 1A)

ucts: ALIus ConsoIIduLed MInIng undDeveIopmenL
CorporuLIon, u domesLIc corporuLIon, enLered InLo u oun und
SuIes ConLrucL wILI MILsubIsII MeLuI CorporuLIon, u Jupunese
corporuLIon IIcensed Lo enguge In busIness In LIe PIIIIppInes. To
be ubIe Lo exLend LIe Ioun Lo ALIus, MILsubIsII enLered InLo
unoLIer Ioun ugreemenL wILI ExporL-mporL Bunk (ExImbunk),
u IInuncIng InsLILuLIon owned, conLroIIed, und IInunced bv LIe
Jupunese governmenL. AILer mukIng InLeresL puvmenLs Lo
MILsubIsII, wILI LIe correspondIng 1=% Lux LIereon remILLed Lo
LIe GovernmenL oI LIe PIIIIppInes, AILus cIuImed Ior Lux credIL
wILI LIe CommIssIoner oI nLernuI Revenue bused on SecLIon
z(b)(;) (A) oI LIe uLIonuI nLernuI Revenue Code, sLuLIng LIuL
sInce ExImbunk, und noL MILsubIsII, Is wIere LIe monev Ior LIe
Ioun orIgInuLed Irom ExImbunk, LIen IL sIouId be exempL Irom
puvIng Luxes on ILs Ioun LIereon.

Issoe: WO LIe InLeresL Income Irom LIe Iouns exLended Lo
ALIus bv MILsubIsII Is excIudIbIe Irom gross Income LuxuLIon.

O. MILsubIsII secured LIe Ioun Irom ExImbunk In ILs own
IndependenL cupucILv us u prIvuLe enLILv und noL us u conduIL oI
ExImbunk. TIereIore, wIuL LIe subjecL oI LIe 1=% wILIIoIdIng
Lux Is noL LIe InLeresL Income puId bv MILsubIsII Lo ExImbunk,
buL LIe InLeresL Income eurned bv MILsubIsII Irom LIe Ioun Lo
ALIus. TIus, IL does noL come wILIIn LIe umbIL oI SecLIon
z(b)(;)(A), und IL Is noL exempL Irom LIe puvmenL oI Luxes.

Notes: IndIngs oI IucL oI LIe CourL oI Tux AppeuIs ure enLILIed
Lo LIe IIgIesL respecL und cun onIv be dIsLurbed on uppeuI II
LIev ure noL supporLed bv subsLunLIuI evIdence or II LIere Is u
sIowIng oI gross error or ubuse on LIe purL oI LIe Lux courL.
uws grunLIng exempLIon Irom Lux ure consLrued sLrIcLIssImI
jurIs uguInsL LIe Luxpuver und IIberuIIv In Iuvor oI LIe LuxIng
power. TuxuLIon Is LIe ruIe und exempLIon Is LIe excepLIon.


S. Phil Bunk oI Commonicutions vs. CIR, et. ul.
o SCRA A1 Junoury S, 1nnn

ucts: PeLILIoner, PIIIIppIne Bunk oI CommunIcuLIons
(PBCom), u commercIuI bunkIng corporuLIon duIv orgunIzed
under PIIIIppIne Iuws, IIIed ILs quurLerIv Income Lux reLurns
Ior LIe IIrsL und second quurLers oI 18=, reporLed proIILs, und
puId LIe LoLuI Income Lux oI P=,o16,=q.oo. TIe Luxes due were
seLLIed bv uppIvIng PBCom's Lux credIL memos.

SubsequenLIv, Iowever, PBCom suIIered Iosses so LIuL wIen IL
IIIed ILs AnnuuI ncome Tux ReLurns Ior LIe veur-ended
December 1, 186, LIe peLILIoner IIkewIse reporLed u neL Ioss
oI P1q,1z,6oz.oo, und LIus decIured no Lux puvubIe Ior LIe
veur.

BuL durIng LIese Lwo veurs, PBCom eurned renLuI Income Irom
Ieused properLIes. TIe Iessees wILIIeId und remILLed Lo LIe
BR wILIIoIdIng credILubIe Luxes oI Pz8z,;=.=o In 18= und
Pzq,o;;.6 In 186.

SubsequenLIv, PeLILIoner requesLed LIe CommIssIoner oI
nLernuI Revenue, umong oLIers, Ior u Lux credIL oI
P=,o16,=q.oo represenLIng LIe overpuvmenL oI Luxes In LIe
IIrsL und second quurLers oI 18=.

TIereuILer, on JuIv z=, 188, peLILIoner IIIed u cIuIm Ior reIund
oI credILubIe Luxes wILIIeId bv LIeIr Iessees Irom properLv
renLuIs In 18= Ior Pz8z,;=.=o und In 186 Ior Pzq,o;;.6.

PendIng LIe InvesLIguLIon oI LIe respondenL CommIssIoner oI
nLernuI Revenue, peLILIoner InsLILuLed u PeLILIon Ior RevIew
on ovember 18, 188 beIore LIe CourL oI Tux AppeuIs (CTA).

TIe CTA rendered u decIsIon wIIcI, us sLuLed on LIe ouLseL,
denIed LIe requesL oI peLILIoner Ior u Lux reIund or credIL In LIe
sum umounL oI P=,z,;q.=, on LIe ground LIuL IL wus IIIed
bevond LIe Lwo-veur regIemenLurv perIod provIded Ior bv Iuw.
TIe peLILIoner's cIuIm Ior reIund In 186 umounLIng Lo
Pzq,o;;.6 wus IIkewIse denIed on LIe ussumpLIon LIuL IL wus
uuLomuLIcuIIv credILed bv PBCom uguInsL ILs Lux puvmenL In
LIe succeedIng veur.

ISSLI: WIeLIer LIe CourL oI AppeuIs erred In denvIng LIe
pIeu Ior Lux reIund or Lux credILs on LIe ground oI prescrIpLIon

HIL: o. BusIc Is LIe prIncIpIe LIuL "Luxes ure LIe IIIebIood
oI LIe nuLIon." TIe prImurv purpose Is Lo generuLe Iunds Ior
LIe SLuLe Lo IInunce LIe needs oI LIe cILIzenrv und Lo udvunce
LIe common weuI. 1 Due process oI Iuw under LIe
ConsLILuLIon does noL requIre judIcIuI proceedIngs In Lux cuses.
TIIs musL necessurIIv be so becuuse IL Is upon LuxuLIon LIuL LIe
governmenL cIIeIIv reIIes Lo obLuIn LIe meuns Lo currv on ILs
operuLIons und IL Is oI uLmosL ImporLunce LIuL LIe modes
udopLed Lo enIorce LIe coIIecLIon oI Luxes IevIed sIouId be
summurv und InLerIered wILI us IILLIe us possIbIe.

rom LIe sume perspecLIve, cIuIms Ior reIund or Lux credIL
sIouId be exercIsed wILIIn LIe LIme IIxed bv Iuw becuuse LIe
BR beIng un udmInIsLruLIve bodv enIorced Lo coIIecL Luxes, ILs
IuncLIons sIouId noL be unduIv deIuved or Iumpered bv
IncIdenLuI muLLers.

Sec. zo oI LIe uLIonuI nLernuI Revenue Code (RC) oI 1;;
(now Sec. zz, RC oI 1;) provIdes Ior LIe prescrIpLIve
perIod Ior IIIIng u courL proceedIng Ior LIe recoverv oI Lux
erroneousIv or IIIeguIIv coIIecLed.

TIe ruIe sLuLes LIuL LIe Luxpuver muv IIIe u cIuIm Ior reIund or
credIL wILI LIe CommIssIoner oI nLernuI Revenue, wILIIn Lwo
(z) veurs uILer puvmenL oI Lux, beIore unv suIL In CTA Is
commenced. TIe Lwo-veur prescrIpLIve perIod provIded,
sIouId be compuLed Irom LIe LIme oI IIIIng LIe AdjusLmenL
ReLurn und IInuI puvmenL oI LIe Lux Ior LIe veur.


n. Sison v. Anchetu
GR No. L-=nA1; = Joly 1nSA

A C T S: BuLus Pumbunsu 1= wus enucLed. SIson, us
Luxpuver, uIIeged LIuL ILs provIsIon (SecLIon 1) unduIv
dIscrImInuLed uguInsL IIm bv LIe ImposILIon oI IIgIer ruLes
upon IIs Income us u proIessIonuI, LIuL IL umounLs Lo cIuss
IegIsIuLIon, und LIuL IL Lrunsgresses uguInsL LIe equuI
proLecLIon und due process cIuuses oI LIe ConsLILuLIon us weII
us LIe ruIe requIrIng unIIormILv In LuxuLIon.

I S S L I: WIeLIer or noL BP 1= vIoIuLes LIe due process
und equuI proLecLIon cIuuses, und LIe ruIe on unIIormILv In
LuxuLIon.

H I L : TIere Is u need Ior prooI oI sucI persuusIve
cIurucLer us wouId Ieud Lo u concIusIon LIuL LIere wus u
vIoIuLIon oI LIe due process und equuI proLecLIon cIuuses.
AbsenL sucI sIowIng, LIe presumpLIon oI vuIIdILv musL prevuII.
EquuIILv und unIIormILv In LuxuLIon meuns LIuL uII LuxubIe
urLIcIes or kInds oI properLv oI LIe sume cIuss sIuII be Luxed uL
LIe sume ruLe. TIe LuxIng power Ius LIe uuLIorILv Lo muke
reusonubIe und nuLuruI cIussIIIcuLIons Ior purposes oI LuxuLIon.
WIere LIe dIIIerenLIuLIon conIorms Lo LIe prucLIcuI dIcLuLes oI
jusLIce und equILv, sImIIur Lo LIe sLundurds oI equuI proLecLIon,
IL Is noL dIscrImInuLorv wILIIn LIe meunIng oI LIe cIuuse und Is
LIereIore unIIorm. Tuxpuvers muv be cIussIIIed InLo dIIIerenL
cuLegorIes, sucI us recIpIenLs oI compensuLIon Income us
uguInsL proIessIonuIs. RecIpIenLs oI compensuLIon Income ure
noL enLILIed Lo muke deducLIons Ior Income Lux purposes us
LIere Is no prucLIcuIIv overIeud expense, wIIIe proIessIonuIs
und busInessmen Iuve no unIIorm cosLs or expenses necessurv
Lo produce LIeIr Income. TIere Is umpIe jusLIIIcuLIon Lo udopL
LIe gross svsLem oI Income LuxuLIon Lo compensuLIon Income,
wIIIe conLInuIng LIe svsLem oI neL Income LuxuLIon us regurds
proIessIonuI und busIness Income.


1o.Reyes vs. Almunzor
1n6 SCRA ; April 6, 1nn1

ACTS: PeLILIoners J.B.. Reves, Edmundo und MIIugros
Reves ure owners oI purceIs oI Iund sILuuLed In Tondo und SLu.
Cruz DIsLrIcLs, CILv oI MunIIu, wIIcI ure Ieused und enLIreIv
occupIed us dweIIIng sILes bv LenunLs. SuId LenunLs were puvIng
monLIIv renLuIs noL exceedIng LIree Iundred pesos (Poo.oo)
In JuIv, 1;1.

On JuIv 1q, 1;1, LIe uLIonuI egIsIuLure enucLed RepubIIc
AcL o. 6= proIIbILIng Ior one veur Irom ILs eIIecLIvILv, un
Increuse In monLIIv renLuIs oI dweIIIng unILs or oI Iunds on
wIIcI unoLIer's dweIIIng Is IocuLed, wIere sucI renLuIs do noL
exceed LIree Iundred pesos (Poo.oo) u monLI buL uIIowIng
un Increuse In renL bv noL more LIun 1o% LIereuILer.

On OcLober 1z, 1;z, PresIdenLIuI Decree o. zo umended R.A.
o. 6= bv mukIng ubsoIuLe LIe proIIbILIon Lo Increuse
monLIIv renLuIs beIow Poo.oo und bv IndeIInILeIv suspendIng
LIe uIoremenLIoned provIsIon oI LIe CIvII Code, excepLIng
Ieuses wILI u deIInILe perIod. ConsequenLIv, LIe Reveses were
precIuded Irom ruIsIng LIe renLuIs und Irom ejecLIng LIe
LenunLs LIereoI.

TIe CILv Assessor oI MunIIu ussessed LIe vuIue oI LIe Reveses
properLv on LIe scIeduIe oI murkeL vuIues duIv revIewed bv LIe
SecreLurv oI Inunce. TIe revIsIon enLuIIed un Increuse Lo LIe
Lux ruLes und LIe peLILIoners uverred LIuL LIe reussessmenL
Imposed upon LIem greuLIv exceeded LIe unnuuI Income
derIved Irom LIeIr properLIes.

ISSLI: WO Income upproucI Is LIe meLIod Lo be used In
LIe Lux ussessmenL und noL LIe compurubIe suIes upproucI.
HIL: TIe Income upproucI und noL LIe compurubIe suIes
upproucI musL be used.
Bv no sLrengLI oI LIe ImugInuLIon cun LIe murkeL vuIue oI
properLIes covered bv P.D. o. zo be equuLed wILI LIe murkeL
vuIue oI properLIes noL so covered. TIe Iormer Ius nuLuruIIv u
mucI Iesser murkeL vuIue In vIew oI LIe renLuI resLrIcLIons.
n LIe cuse uL bur, noL even LIe IucLors deLermInunL oI LIe
ussessed vuIue oI subjecL properLIes under LIe "compurubIe
suIes upproucI" were presenLed bv LIe pubIIc respondenLs,
numeIv: (1) LIuL LIe suIe musL represenL u bonc[ide urm's
IengLI LrunsucLIon beLween u wIIIIng seIIer und u wIIIIng buver
und (z) LIe properLv musL be compurubIe properLv. oLIIng
cun jusLIIv or supporL LIeIr vIew us IL Is oI judIcIuI noLIce LIuL
Ior properLIes covered bv P.D. zo especIuIIv durIng LIe LIme In
quesLIon, LIere were IurdIv unv wIIIIng buvers. As u generuI
ruIe, LIere were no Lukers so LIuL LIere cun be no reusonubIe
busIs Ior LIe concIusIon LIuL LIese properLIes were compurubIe
wILI oLIer resIdenLIuI properLIes noL burdened bv P.D. zo.

11.PAL v. Sec oI inunce
GR No. 11=S=; o October 1nn=

A C T S: TIe VuIue-Added Tux |VAT| Is IevIed on LIe suIe,
burLer or excIunge oI goods und properLIes us weII us on LIe
suIe or excIunge oI servIces. L Is equIvuIenL Lo 1o% oI LIe gross
seIIIng prIce or gross vuIue In monev oI goods or properLIes
soId, burLered or excIunged or oI LIe gross receIpLs Irom LIe
suIe or excIunge oI servIces. RepubIIc AcL o. ;;16 seeks Lo
wIden LIe Lux buse oI LIe exIsLIng VAT svsLem und enIunce ILs
udmInIsLruLIon bv umendIng LIe uLIonuI nLernuI Revenue
Code.

TIese ure vurIous suILs Ior cerLIorurI und proIIbILIon
cIuIIengIng LIe consLILuLIonuIILv oI RA ;;16:

n LIe cuse uL bur, PA uLLucks LIe IormuI vuIIdILv oI RepubIIc
AcL o. ;;16. PA conLends LIuL IL vIoIuLes ArL. V, SecLIon
z6|1| wIIcI provIdes LIuL "Everv bIII pussed bv Congress sIuII
embruce onIv one subjecL wIIcI sIuII be expressed In LIe LILIe
LIereoI." L Is conLended LIuL neILIer H. o. 111; nor S. o.
16o provIded Ior removuI oI exempLIon oI PA LrunsucLIons
Irom LIe puvmenL oI LIe VAT und LIuL LIIs wus mude onIv In
LIe ConIerence CommILLee bIII wIIcI becume RepubIIc AcL o.
;;16 wILIouL reIIecLIng LIIs IucL In ILs LILIe.

TIe LILIe oI RepubIIc AcL o. ;;16 Is:

A ACT RESTRUCTURG THE VAUE-ADDED
TAX |VAT| SYSTEM, WDEG TS TAX BASE AD
EHACG TS ADMSTRATO, AD OR
THESE PURPOSES AMEDG AD REPEAG
THE REEVAT PROVSOS O THE ATOA
TERA REVEUE CODE, AS AMEDED, AD
OR OTHER PURPOSES.

urLIermore, secLIon 1o oI RA ;;16 sLuLes LIe IoIIowIng:

SecLIon 1o. Exempt Trcnscctions.- TIe IoIIowIng sIuII be
exempL Irom LIe vuIue-udded Lux:

|q| TrunsucLIons wIIcI ure exempL under specIuI Iuws, excepL
LIose grunLed under PresIdenLIuI Decree os. 66, =z, ;z,
1q1, 1=o.

TIe eIIecL oI LIe umendmenL Is Lo remove LIe exempLIon
grunLed Lo PA, us Iur us LIe VAT Is concerned.

PIIIIppIne AIrIInes |PA| cIuIms LIuL ILs IruncIIse under P.D.
o. 1=o wIIcI mukes IL IIubIe Ior u IruncIIse Lux oI onIv z% oI
gross revenues "In IIeu oI uII LIe oLIer Iees und cIurges oI unv
kInd, nuLure or descrIpLIon, Imposed, IevIed, esLubIIsIed,
ussessed or coIIecLed bv unv munIcIpuI, cILv, provIncIuI, or
nuLIonuI uuLIorILv or governmenL ugencv, now or In LIe
IuLure," cunnoL be umended bv Rep. AcL o. ;;16 us Lo muke IL
|PA| IIubIe Ior u 1o% vuIue-udded Lux on revenues, becuuse
Sec. zq oI P.D. o. 1=o provIdes LIuL PA's IruncIIse cun onIv
be umended, modIIIed or repeuIed bv u specIuI Iuw specIIIcuIIv
Ior LIuL purpose.

I S S L I: WIeLIer or noL LIIs umendmenL oI SecLIon 1o oI
LIe RC Is IuIrIv embruced In LIe LILIe oI RepubIIc AcL o.
;;16, uILIougI no menLIon Is mude LIereIn oI P. D. o. 1=o

H I L : TIe courL ruIed In In LIe uIIIrmuLIve. TIe LILIe sLuLes
LIuL LIe purpose oI LIe sLuLuLe Is Lo expund LIe VAT svsLem,
und one wuv oI doIng LIIs Is Lo wIden ILs buse bv wILIdruwIng
some oI LIe exempLIons grunLed beIore. To InsIsL LIuL P. D. o.
1=o be menLIoned In LIe LILIe oI LIe Iuw, In uddILIon Lo SecLIon
1o oI LIe RC, In wIIcI IL Is specIIIcuIIv reIerred Lo, wouId be
Lo InsIsL LIuL LIe LILIe oI u bIII sIouId be u compIeLe Index oI ILs
conLenL.

TIe consLILuLIonuI requIremenL LIuL everv bIII pussed bv
Congress sIuII embruce onIv one subjecL wIIcI sIuII be
expressed In ILs LILIe Is InLended Lo prevenL surprIse upon LIe
members oI Congress und Lo InIorm LIe peopIe oI pendIng
IegIsIuLIon so LIuL, II LIev wIsI Lo, LIev cun be Ieurd regurdIng
IL. I, In LIe cuse uL bur, peLILIoner dId noL know beIore LIuL ILs
exempLIon Iud been wILIdruwn, IL Is noL becuuse oI unv deIecL
In LIe LILIe buL perIups Ior LIe sume reuson oLIer sLuLuLes,
uILIougI pubIIsIed, puss unnoLIced unLII some evenL someIow
cuIIs uLLenLIon Lo LIeIr exIsLence.

RepubIIc AcL o. ;;16 expressIv umends PA's IruncIIse |P. D.
o. 1=o| bv specIIIcuIIv excepLIng Irom LIe grunL oI
exempLIons Irom LIe VAT PA's exempLIon under P. D. o.
1=o. TIIs Is wILIIn LIe power oI Congress Lo do under ArL.
X, SecLIon 11 oI LIe ConsLILuLIon, wIIcI provIdes LIuL LIe
grunL oI u IruncIIse Ior LIe operuLIon oI u pubIIc uLIIILv Is
subjecL Lo umendmenL, uILeruLIon or repeuI bv Congress wIen
LIe common good so requIres.

1.ARTLRO M. TOLINTINO, peLILIoner, vs. THI
SICRITARY O INANCI und THI
COMMISSIONIR O INTIRNAL RIVINLI,
respondenLs. G.R. No. 11=A== Aouost =, 1nnA
ACTS: HereIn vurIous peLILIoners seek Lo decIure RA ;166 us
unconsLILuLIonuI us IL seeks Lo wIden LIe Lux buse oI LIe
exIsLIng VAT svsLem und enIunce ILs udmInIsLruLIon bv
umendIng LIe uLIonuI nLernuI Revenue Code. TIe vuIue-
udded Lux (VAT) Is IevIed on LIe suIe, burLer or excIunge oI
goods und properLIes us weII us on LIe suIe or excIunge oI
servIces. L Is equIvuIenL Lo 1o% oI LIe gross seIIIng prIce or
gross vuIue In monev oI goods or properLIes soId, burLered or
excIunged or oI LIe gross receIpLs Irom LIe suIe or excIunge oI
servIces.
CREBA usserLs LIuL R.A. o. ;;16 (1) ImpuIrs LIe obIIguLIons oI
conLrucLs, (z) cIussIIIes LrunsucLIons us covered or exempL
wILIouL reusonubIe busIs und () vIoIuLes LIe ruIe LIuL Luxes
sIouId be unIIorm und equILubIe und LIuL Congress sIuII
"evoIve u progressIve svsLem oI LuxuLIon."
WILI respecL Lo LIe IIrsL conLenLIon, IL Is cIuImed LIuL LIe
uppIIcuLIon oI LIe Lux Lo exIsLIng conLrucLs oI LIe suIe oI reuI
properLv bv InsLuIImenL or on deIerred puvmenL busIs wouId
resuIL In subsLunLIuI Increuses In LIe monLIIv umorLIzuLIons Lo
be puId becuuse oI LIe 1o% VAT. TIe uddILIonuI umounL, IL Is
poInLed ouL, Is someLIIng LIuL LIe buver dId noL unLIcIpuLe uL
LIe LIme Ie enLered InLo LIe conLrucL.
L Is nexL poInLed ouL LIuL wIIIe SecLIon q oI R.A. o. ;;16
exempLs sucI LrunsucLIons us LIe suIe oI ugrIcuILuruI producLs,
Iood ILems, peLroIeum, und medIcuI und veLerInurv servIces, IL
grunLs no exempLIon on LIe suIe oI reuI properLv wIIcI Is
equuIIv essenLIuI. TIe suIe oI reuI properLv Ior socIuIIzed und
Iow-cosL IousIng Is exempLed Irom LIe Lux, buL CREBA cIuIms
LIuL reuI esLuLe LrunsucLIons oI "LIe Iess poor," I.e., LIe mIddIe
cIuss, wIo ure equuIIv IomeIess, sIouId IIkewIse be exempLed.
InuIIv, IL Is conLended, Ior LIe reusons uIreudv noLed, LIuL
R.A. o. ;;16 uIso vIoIuLes ArL. V, SecLIon z8(1) wIIcI
provIdes LIuL "TIe ruIe oI LuxuLIon sIuII be unIIorm und
equILubIe. TIe Congress sIuII evoIve u progressIve svsLem oI
LuxuLIon."
ISSLI: WIeLIer or noL RA ;166 vIoIuLes LIe prIncIpIe oI
progressIve svsLem oI LuxuLIon.
HIL: o, LIere Is no jusLIIIcuLIon Ior pussIng upon LIe
cIuIms LIuL LIe Iuw uIso vIoIuLes LIe ruIe LIuL LuxuLIon musL be
progressIve und LIuL IL denIes peLILIoners' rIgIL Lo due process
und LIuL equuI proLecLIon oI LIe Iuws. TIe reuson Ior LIIs
dIIIerenL LreuLmenL Ius been cogenLIv sLuLed bv un emInenL
uuLIorILv on consLILuLIonuI Iuw LIus: "WIen Ireedom oI LIe
mInd Is ImperIIed bv Iuw, IL Is Ireedom LIuL communds u
momenLum oI respecL; wIen properLv Is ImperIIed IL Is LIe
Iuwmukers' judgmenL LIuL communds respecL. TIIs duuI
sLundurd muv noL precIseIv reverse LIe presumpLIon oI
consLILuLIonuIILv In cIvII IIberLIes cuses, buL obvIousIv IL does
seL up u IIerurcIv oI vuIues wILIIn LIe due process cIuuse."
PeLILIoners conLend LIuL us u resuIL oI LIe unIIorm 1o% VAT,
LIe Lux on consumpLIon goods oI LIose wIo ure In LIe IIgIer-
Income bruckeL, wIIcI beIore were Luxed uL u ruLe IIgIer LIun
1o%, Ius been reduced, wIIIe busIc commodILIes, wIIcI beIore
were Luxed uL ruLes rungIng Irom % Lo =%, ure now Luxed uL u
IIgIer ruLe.
JusL us vIgorousIv us IL Is usserLed LIuL LIe Iuw Is regressIve, LIe
opposILe cIuIm Is pressed bv respondenLs LIuL In IucL IL
dIsLrIbuLes LIe Lux burden Lo us munv goods und servIces us
possIbIe purLIcuIurIv Lo LIose wIIcI ure wILIIn LIe reucI oI
IIgIer-Income groups, even us LIe Iuw exempLs busIc goods
und servIces. L Is LIus equILubIe. TIe goods und properLIes
subjecL Lo LIe VAT ure LIose used or consumed bv IIgIer-
Income groups. TIese IncIude reuI properLIes IeId prImurIIv
Ior suIe Lo cusLomers or IeId Ior Ieuse In LIe ordInurv course oI
busIness, LIe rIgIL or prIvIIege Lo use IndusLrIuI, commercIuI or
scIenLIIIc equIpmenL, IoLeIs, resLuurunLs und sImIIur pIuces,
LourIsL buses, und LIe IIke. On LIe oLIer Iund, smuII busIness
esLubIIsImenLs, wILI unnuuI gross suIes oI Iess LIun P=oo,ooo,
ure exempLed. TIIs, uccordIng Lo respondenLs, removes Irom
LIe coveruge oI LIe Iuw some o,ooo busIness esLubIIsImenLs.
On LIe oLIer Iund, un occusIonuI puper oI LIe CenLer Ior
ReseurcI und CommunIcuLIon cILIes u EDA sLudv LIuL LIe
VAT Ius mInImuI ImpucL on InIIuLIon und Income dIsLrIbuLIon
und LIuL wIIIe uddILIonuI expendILure Ior LIe IowesL Income
cIuss Is onIv Po1 or 1.q% u veur, LIuL Ior u IumIIv eurnIng
P=oo,ooo u veur or more Is P8,qo or z.z%.
uckIng empIrIcuI duLu on wIIcI Lo buse unv concIusIon
regurdIng LIese urgumenLs, unv dIscussIon wIeLIer LIe VAT Is
regressIve In LIe sense LIuL IL wIII IIL LIe "poor" und mIddIe-
Income group In socIeLv Iurder LIun IL wIII LIe "rIcI," Is IurgeIv
un ucudemIc exercIse. On LIe oLIer Iund, LIe CUP's conLenLIon
LIuL Congress' wILIdruwuI oI exempLIon oI producers
cooperuLIves, murkeLIng cooperuLIves, und servIce
cooperuLIves, wIIIe muInLuInIng LIuL grunLed Lo eIecLrIc
cooperuLIves, noL onIv goes uguInsL LIe consLILuLIonuI poIIcv Lo
promoLe cooperuLIves us InsLrumenLs oI socIuI jusLIce (ArL. X,
1=) buL uIso denIes sucI cooperuLIves LIe equuI proLecLIon oI
LIe Iuw Is ucLuuIIv u poIIcv urgumenL. TIe IegIsIuLure Is noL
requIred Lo udIere Lo u poIIcv oI "uII or none" In cIoosIng LIe
subjecL oI LuxuLIon.
AA

or Is LIe conLenLIon oI LIe CIumber oI ReuI EsLuLe und
BuIIders AssocIuLIon (CREBA), peLILIoner In G.R. 11=;=q, LIuL
LIe VAT wIII reduce LIe murk up oI ILs members bv us mucI us
8=% Lo o% unv more concreLe. L Is u mere uIIeguLIon. On LIe
oLIer Iund, LIe cIuIm oI LIe PIIIIppIne Press nsLILuLe,
peLILIoner In G.R. o. 11==qq, LIuL LIe VAT wIII drIve some oI
ILs members ouL oI cIrcuIuLIon becuuse LIeIr proIILs Irom
udverLIsemenLs wIII noL be enougI Lo puv Ior LIeIr Lux IIubIIILv,
wIIIe purporLIng Lo be bused on LIe IInuncIuI sLuLemenLs oI LIe
newspupers In quesLIon, sLIII IuIIs sIorL oI LIe esLubIIsImenL oI
IucLs bv evIdence so necessurv Ior udjudIcuLIng LIe quesLIon
wIeLIer LIe Lux Is oppressIve und conIIscuLorv.
ndeed, regressIvILv Is noL u neguLIve sLundurd Ior courLs Lo
enIorce. WIuL Congress Is requIred bv LIe ConsLILuLIon Lo do Is
Lo "evoIve u progressIve svsLem oI LuxuLIon." TIIs Is u dIrecLIve
Lo Congress, jusL IIke LIe dIrecLIve Lo IL Lo gIve prIorILv Lo LIe
enucLmenL oI Iuws Ior LIe enIuncemenL oI Iumun dIgnILv und
LIe reducLIon oI socIuI, economIc und poIILIcuI InequuIILIes
(ArL. X, 1), or Ior LIe promoLIon oI LIe rIgIL Lo "quuIILv
educuLIon" (ArL. XV, 1). TIese provIsIons ure puL In LIe
ConsLILuLIon us moruI IncenLIves Lo IegIsIuLIon, noL us judIcIuIIv
enIorceubIe rIgILs.


1.ABAKAA v. Irmitu (eleuution to the
President)
A6n SCRA 1: September 1, oo=

ucts: RA ;: VAT ReIorm AcL enucLed on Muv zq, zoo=.
Sec. q (suIes oI goods und properLIes), Sec. = (ImporLuLIon oI
goods) und Sec. 6 (servIces und Ieuse oI properLv) oI RA ;,
In coIIecLIve, grunLed LIe SecreLurv oI Inunce LIe uuLIorILv Lo
uscerLuIn: (u) wIeLIer bv 1zJ1Jo=, LIe VAT coIIecLIon us u
percenLuge oI LIe zooq GDP exceeds z.8% or (b)LIe nuLIonuI
governmenL deIIcIL us u percenLuge oI LIe zooq GDP exceeds
1.=%. I eILIer condILIon Is meL, LIe Sec oI Inunce musL InIorm
LIe PresIdenL wIo, In Lurn, musL Impose LIe 1z% VAT ruLe
(Irom 1o%) eIIecLIve Junuurv 1, zoo6.

ABAKADA muInLuIned LIuL Congress ubundoned ILs excIusIve
uuLIorILv Lo IIx Luxes und LIuL RA ; conLuIned u unIIorm
provIso uuLIorIzIng LIe PresIdenL upon recommenduLIon bv
LIe DO SecreLurv Lo rusIe VAT Lo 1z%.

Sen PImenLeI muInLuIned LIuL RA ; consLILuLed undue
deIeguLIon oI IegIsIuLIve powers und u vIoIuLIon oI due process
sInce LIe Iuw wus umbIguous und urbILrurv. Sume wILI Rep.
Escudero.

PIIIpInus SIeII deuIers urgued LIuL LIe VAT reIorm wus
urbILrurv, oppressIve und conIIscuLorv.

RespondenLs counLered LIuL LIe Iuw wus compIeLe, LIuL IL IeIL
no dIscreLIon Lo LIe PresIdenL, und LIuL IL mereIv cIurged LIe
PresIdenL wILI currvIng ouL LIe ruLe Increuse once unv oI LIe
Lwo condILIons urIse.

Issoe: WO LIere wus undue deIeguLIon.

Held: o deIeguLIon buL mere ImpIemenLuLIon oI LIe Iuw.
ConsLILuLIon uIIows us under exempLed deIeguLIon LIe
deIeguLIon oI LurIIIs, cusLoms duLIes, und oLIer LoIIs, IevIes on
goods ImporLed und exporLed. VAT Is Lux IevIed on suIes oI
goods und servIces wIIcI couId noL IuII under LIIs exempLIon.
Hence, ILs deIeguLIon II unquuIIIIed Is unconsLILuLIonuI.

egIsIuLIve power Is uuLIorILv Lo muke u compIeLe Iuw. TIus, Lo
be vuIId, u Iuw musL be compIeLe In ILseII, seLLIng IorLI LIereIn
LIe poIIcv und IL musL IIx u sLundurd, IImILs oI wIIcI ure
suIIIcIenLIv deLermInuLe und deLermInubIe.

o undue deIeguLIon wIen congress descrIbes wIuL job musL
be done wIo musL do IL und LIe scope oI LIe uuLIorILv gIven.
(Edu v ErIcLu)

Sec oI Inunce wus mereIv Lusked Lo uscerLuIn LIe exIsLence oI
IucLs. AII eIse wus IuId ouL. MuInIv mInIsLerIuI Ior LIe SecreLurv
Lo uscerLuIn LIe IucLs und Ior LIe presIdenL Lo currv ouL LIe
ImpIemenLuLIon Ior LIe VAT. TIev were ugenLs oI LIe
IegIsIuLIve depL


1A.CIR und Commissioner oI Costoms vs. Botelho
Shippinu Corp. & Generul Shippinu Co., Inc.
G.R. Nos. L-16-A Jone n, 1n6

ACTS: RepuruLIons CommIssIon oI LIe PIIIIppInes soId Lo
BoLeIIo LIe vesseI "MJS MurIu RoseIIo" Ior LIe umounL oI
P6,;8,888.88. TIe Iormer IIkewIse soId Lo GeneruI SIIppIng
LIe vesseI "MJS GeneruI Im" uL LIe prIce oI P6,=1,666.66.
Upon urrIvuI uL LIe porL oI MunIIu, LIe Bureuu oI CusLoms
pIuced LIe sume under cusLodv und reIused Lo gIve due course
|Lo uppIIcuLIons Ior regIsLruLIon|, unIess LIe uIoremenLIoned
sums oI Pq8,q und Pqq,8zq be puId us compensuLIng Lux.
TIe buvers subsequenLIv IIIed wILI LIe CTA LIeIr respecLIve
peLILIons Ior revIew. PendIng LIe cuse, RepubIIc AcL o. o;
umended RepubIIc AcL o. 1;8 - LIe OrIgInuI RepuruLIons
AcL, under wIIcI LIe uIoremenLIoned conLrucLs wILI LIe
Buvers Iud been execuLed - bv exempLIng buvers oI
repuruLIons goods ucquIred Irom LIe CommIssIon, Irom
IIubIIILv Ior LIe compensuLIng Lux.

nvokIng |secLIon zo oI LIe RA o;|, LIe Buvers uppIIed, Ior
LIe renovuLIon oI LIeIr uLIIIzuLIons conLrucLs wILI LIe
CommIssIon, wIIcI grunLed LIe uppIIcuLIon, und, LIen, IIIed
wILI LIe Tux CourL, LIeIr suppIemenLuI peLILIons Ior revIew.
TIe CTA ruIed In Iuvor oI LIe buvers.

|On uppeuI, LIe CR und COC muInLuIn LIuL sucI provIso
sIouId noL be uppIIed reLroucLIveIv|, upon LIe ground LIuL u
Lux exempLIon musL be cIeur und expIIcIL; LIuL LIere Is no
express provIsIon Ior LIe reLroucLIvILv oI LIe exempLIon,
esLubIIsIed bv RepubIIc AcL o. o;, Irom LIe compensuLIng
Lux; LIuL LIe IuvorubIe provIsIons, wIIcI ure reIerred Lo In
secLIon zo LIereoI, cunnoL IncIude LIe exempLIon Irom
compensuLIng Lux; und, LIuL Congress couId noL Iuve InLended
unv reLroucLIve exempLIon, consIderIng LIuL LIe resuIL LIereoI
wouId be prejudIcIuI Lo LIe GovernmenL.

ISSLI: WIeLIer or noL LIe Lux exempLIon cun be uppIIed
reLroucLIveIv

HIL: YES. TIe InIerenL weukness oI LIe IusL ground
becomes munIIesL wIen we consIder LIuL, II Lrue, LIere couId
be no Lux exempLIon oI unv kInd wIuLsoever, even II Congress
sIouId wIsI Lo creuLe one, becuuse everv sucI exempLIon
ImpIIes u wuIver oI LIe rIgIL Lo coIIecL wIuL oLIerwIse wouId be
due Lo LIe GovernmenL, und, In LIIs sense, Is prejudIcIuI
LIereLo. L muv noL be umIss Lo udd LIuL no Lux exempLIon -
IIke unv oLIer IeguI exempLIon or excepLIon - Is gIven wILIouL
unv reuson LIereIor. n mucI LIe sume wuv us oLIer sLuLuLorv
communds, ILs uvowed purpose Is some pubIIc beneIIL or
InLeresL, wIIcI LIe Iuw-mukIng bodv consIders suIIIcIenL Lo
oIIseL LIe moneLurv Ioss enLILIed In LIe grunL oI LIe exempLIon.
ndeed, secLIon zo oI RepubIIc AcL o. o; exucLs u vuIuubIe
consIderuLIon Ior LIe reLroucLIvILv oI ILs IuvorubIe provIsIons,
numeIv, LIe voIunLurv ussumpLIon, bv LIe end-user wIo
bougIL repuruLIons goods prIor Lo June 1;, 161 oI "uII LIe new
obIIguLIons provIded Ior In" suId AcL.

urLIermore, SecLIon 1q oI LIe uw on RepuruLIons, us
umended, exempLs Irom LIe compensuLIng Lux, noL purLIcuIur
persons, buL persons beIongIng Lo u purLIcuIur cIuss. ndeed,
uppeIIunLs do noL ussuII LIe consLILuLIonuIILv oI suId secLIon 1q,
InsoIur us IL grunLs exempLIons Lo end-users wIo, uILer LIe
upprovuI oI RepubIIc AcL o. o;, on June 1;, 161,
purcIused repuruLIons goods procured bv LIe CommIssIon.
rom LIe vIewpoInL oI ConsLILuLIonuI uw, especIuIIv LIe equuI
proLecLIon cIuuse, LIere Is no dIIIerence beLween LIe grunL oI
exempLIon Lo suId end-users, und LIe exLensIon oI LIe grunL Lo
LIose wIose conLrucLs oI purcIuse und suIe mere mude beIore
suId duLe, under RepubIIc AcL o. 1;8.

1=.Tun v. el Rosurio
G.R. No. 1onSn. October , 1nnA

ucts: PeLILIoners ussuII RA ;q6, uIso commonIv known us
LIe SImpIIIIed eL ncome TuxuLIon ScIeme ("ST"),
umendIng cerLuIn provIsIons oI LIe uLIonuI nLernuI Revenue
Code, us vIoIuLIve oI LIe consLILuLIonuI requIremenL LIuL
LuxuLIon sIuII be "sIuII be unIIorm und equILubIe." TIe Iuw
wouId now uLLempL Lo Lux sIngIe proprIeLorsIIps und
proIessIonuIs dIIIerenLIv Irom LIe munner IL Imposes LIe Lux on
corporuLIons und purLnersIIps.

PeLILIoner gIves u IuIrIv exLensIve dIscussIon on LIe merILs oI
LIe Iuw, IIIusLruLIng, In LIe process, wIuL Ie beIIeves Lo be un
ImbuIunce beLween LIe Lux IIubIIILIes oI LIose covered bv LIe
umenduLorv Iuw und LIose wIo ure noL.

Issoe: WIeLIer or noL RA ;q6 Is vIoIuLIve oI LIe
consLILuLIonuI requIremenL LIuL LuxuLIon sIuII be unIIorm und
equILubIe.

Held: PeLILIon denIed. UnIIormILv oI LuxuLIon meuns LIuL (1)
LIe sLundurds LIuL ure used LIereIore ure subsLunLIuI und noL
urbILrurv, (z) LIe cuLegorIzuLIon Is germune Lo ucIIeve
IegIsIuLIve purpose, () LIe Iuw uppIIes, uII LIIngs beIng equuI,
Lo boLI presenL und IuLure condILIons und (q) LIe cIussIIIcuLIon
uppIIes equuIIv weII Lo uII LIose beIongIng Lo LIe sume cIuss.

WILI LIe IegIsIuLure prImurIIv IIes LIe dIscreLIon Lo deLermIne
LIe nuLure (kInd), objecL (purpose), exLenL (ruLe), coveruge
(subjecLs) und situs (pIuce) oI LuxuLIon. TIIs courL cunnoL IreeIv
deIve InLo LIose muLLers wIIcI, bv consLILuLIonuI IIuL, rIgILIv
resL on IegIsIuLIve judgmenL. OI course, wIere u Lux meusure
becomes so unconscIonubIe und unjusL us Lo umounL Lo
conIIscuLIon oI properLv, courLs wIII noL IesILuLe Lo sLrIke IL
down, Ior, despILe uII ILs pIenILude, LIe power Lo Lux cunnoL
overrIde consLILuLIonuI proscrIpLIons. TIIs sLuge, Iowever, Ius
noL been demonsLruLed Lo Iuve been reucIed wILIIn unv
upprecIubIe dIsLunce In LIIs conLroversv beIore us.

16.MACIA vs. MACARAIG, JR
SCRA 1 Jone S, 1nn
Topic: ClussiIicution oI Tuxes Accordinu
to Borden or Incidence (irect or
Indirect)

ucts: TIIs muLLer oI IndIrecL Lux exempLIon oI LIe prIvuLe
respondenL uLIonuI Power CorporuLIon (PC) Is brougIL Lo
LIIs CourL u second LIme. UnIuzed bv LIe DecIsIon We
promuIguLed on Muv 1, 11 peLILIoner ErnesLo Mucedu usks
LIIs CourL Lo reconsIder suId DecIsIon.

A CIronoIogIcuI revIew oI LIe reIevunL PC Iuws, specIuIIv wILI
respecL Lo ILs Lux exempLIon provIsIons.
1. On ovember , 16, CommonweuILI AcL o. 1zo:
creuLIng LIe uLIonuI Power CorporuLIon. TIe muIn
source oI Iunds Ior LIe PC wus LIe IIoLuLIon oI bonds
In LIe cupILuI murkeLs
A
und LIese bonds...Issued under
LIe uuLIorILv oI LIIs AcL sIuII be exempL Irom LIe
puvmenL oI uII Luxes bv LIe CommonweuILI oI LIe
PIIIIppInes.
z. On June zq, 18, C.A. o. qq, LIe provIsIon on Lux
exempLIon In reIuLIon Lo LIe Issuunce oI LIe PC bonds
wus neILIer umended nor deIeLed.
. On SepLember o, 1, C.A. o. q=, LIe provIsIon on
Lux exempLIon In reIuLIon Lo LIe Issuunce oI LIe PC
bonds wus neILIer umended nor deIeLed.
q. On June q, 1q, RepubIIc AcL o. =;, unv sucI Ioun
or Iouns sIuII be exempL Irom Luxes, duLIes, Iees,
ImposLs, cIurges, conLrIbuLIons und resLrIcLIons oI LIe
RepubIIc oI LIe PIIIIppInes
=. On LIe sume duLe, R.A. o. =8, Lo IucIIILuLe puvmenL oI
ILs IndebLedness, LIe uLIonuI Power CorporuLIon sIuII
be exempL Irom uII Luxes.
6. On JuIv 1o, 1=z, R.A. o. 81 umended R.A. o. =;.
TIe Lux provIsIon us sLuLed In R.A. o. =;, wus noL
umended.
;. On June z, 1=q, R.A. o. 8; wus enucLed specIIIcuIIv
Lo wILIdruw PC's Lux exempLIon Ior reuI esLuLe Luxes.
8. On SepLember 8, 1==, R.A. o. 1;, LIe Lux
exempLIon provIsIon reIuLed Lo LIe puvmenL oI LIIs
LoLuI IndebLedness wus noL umended nor deIeLed.
. On June 1, 1=8, R.A. o. zo==, LIe Lux provIsIon
reIuLed Lo LIe repuvmenL oI Iouns wus noL umended nor
deIeLed.
1o. On June 18, 16o, R.A. o z6q1 converLed LIe PC
Irom u pubIIc corporuLIon InLo u sLock corporuLIon. o
Lux exempLIon wus IncorporuLed In suId AcL.
11. On June 1;, 161, R.A. o. oq. o Lux provIsIon wus
IncorporuLed In suId AcL.
1z. On June 1;, 16;, R.A. o q8;. o Lux provIsIon wus
IncorporuLed In suId AcL.
1. On SepLember 1o, 1;1, R.A. o. 6= wus enucLed
revIsIng LIe cIurLer oI LIe PC. TIe bonds Issued sIuII
be exempL Irom LIe puvmenL oI uII Luxes. As Lo LIe
IoreIgn Iouns LIe PC wus uuLIorIzed Lo conLrucL, sIuII
uIso be exempL Irom uII Luxes,
1q. On Junuurv zz, 1;q, P.D. o. 8o.sIuII uIso
be exempt [rom cll direct cnd indirect tcxes,
1=. On ebruurv z6, 1;o, P.D. o. =, no Lux exempLIon
provIsIon wus umended, deIeLed or udded.
16. On JuIv 1, 1;=, P.D. o. ;=8 wus Issued dIrecLIng LIuL
Pzoo,ooo,ooo.oo wouId be upproprIuLed unnuuIIv Lo
cover LIe unpuId subscrIpLIon oI LIe GovernmenL In LIe
PC uuLIorIzed cupILuI sLock, wIIcI umounL wouId be
Luken Irom Luxes uccruIng Lo LIe GeneruI unds oI LIe
GovernmenL, proceeds Irom Iouns, Issuunce oI bonds,
Lreusurv bIIIs or noLes Lo be Issued
1;. On Muv z;, 1;6 P.D. o. 8, decIured exempL Irom
LIe puvmenL oI uII Iorms oI Luxes.
18. On Junuurv o, 1;6, P.D. o. 88z wus Issued
wILIdruwIng LIe Lux exempLIon oI PC wILI regurd Lo
ImporLs
1. On JuIv o, 1;;, P.D. 11;;, AII unILs oI governmenL,
IncIudIng governmenL-owned or conLroIIed
corporuLIons, sIuII puv Income Luxes, cusLoms duLIes
und oLIer Luxes und Iees ure Imposed under revenues
Iuws: provIded, LIuL orgunIzuLIons oLIerwIse exempLed
bv Iuw Irom LIe puvmenL oI sucI LuxesJduLIes muv usk
Ior u subsIdv Irom LIe GeneruI und
zo. On JuIv 11, 18q, P.D. o. 11, uII exempLIons Irom
LIe puvmenL oI duLIes, Luxes, Iees, ImposLs und oLIer
cIurges IereLoIore grunLed In Iuvor oI governmenL-
owned or conLroIIed corporuLIons IncIudIng LIeIr
subsIdIurIes, ure Ierebv wILIdruwn.
z1. On December 1;, 186, E.O. o. wus Issued wILI u
vIew Lo correcL presIdenLIuI resLoruLIon or grunL oI Lux
exempLIon Lo oLIer governmenL und prIvuLe enLILIes
wILIouL beneIIL oI revIew bv LIe IscuI ncenLIves
RevIew Bourd, WHEREAS, In uddILIon Lo LIose Lux
und duLv exempLIon prIvIIeges were resLored bv LIe
IscuI ncenLIves RevIew Bourd (RB), u number oI
uIIecLed enLILIes, governmenL und prIvuLe, Iud LIeIr Lux
und duLv exempLIon prIvIIeges resLored

PeLILIoner conLends LIuL P.D. o. 8 repeuIed LIe IndIrecL Lux
exempLIon oI PC.

Issoe: WO PC Is exempLed Lo puv ndIrecL ncome Tux

Held: Yes. CIussIIIcuLIons or kInds oI Tuxes: AccordIng Lo
Persons wIo puv or wIo beur LIe burden:
u. DIrecL Tux - LIuL wIere LIe person supposed Lo puv
LIe Lux reuIIv puvs
IL. ITHDUT LrunsIerrIng LIe burden
Lo someone eIse.
Excmples: Inditiducl income tcx,
corporcte income tcx,
trcns[er tcxes (estcte tcx,
donor's tcx), residence tcx,
immiqrction tcx
b. ndIrecL Tux - LIuL wIere LIe Lux Is Imposed upon
goods EIDRE reucIIng LIe consumer
wIo uILImuLeIv puvs Ior IL, noL us u Lux,
buL us u purL oI LIe purcIuse prIce.
Excmples: the interncl retenue indirect
tcxes (speci[ic tcx,
percentcqe tcxes, (VAT) cnd
the tcri[[ cnd customs
indirect tcxes (import duties,
specicl import tcx cnd other
dues)

A cIronoIogIcuI revIew oI LIe PC Iuws wIII sIow LIuL IL Ius
been LIe Iuwmuker's InLenLIon LIuL LIe PC wus Lo be
compIeLeIv Lux exempL Irom uII Iorms oI Luxes - dIrecL und
IndIrecL.

P.D. o. 8o udded pIruse "dIrecLIv or IndIrecLIv,"

P.D. o. 8 umended InLo exempL Irom LIe puvmenL oI ALL
IDRMS DI Luxes

PresIdenL Murcos musL Iuve consIdered uII LIe PC sLuLuLes
Irom C.A. o. 1zo up Lo P.D. o. 8.

One common LIeme In uII LIese Iuws Is LIuL LIe PC musL be
enubIe Lo puv ILs IndebLedness
=6
wIIcI, us oI P.D. o. 8,
wus P1z BIIIIon In LoLuI domesLIc IndebLedness, uL unv one
LIme, und U$q BIIIIon In LoLuI IoreIgn Iouns uL unv one LIme.
TIe PC musL be und Ius Lo be exempL Irom uII Iorms oI Luxes
II LIIs gouI Is Lo be ucIIeved.

TIe Lux exempLIon sLood us Is - wILI LIe express menLIon oI
"dIrecL und IndIrecL" Lux exempLIons. uwmukers wunLed LIe
PC Lo be exempL Irom A ORMS oI Luxes - dIrecL und
IndIrecL.

TIereIore, LIuL PC Iud been grunLed Lux exempLIon
prIvIIeges Ior boLI dIrecL und IndIrecL Luxes under P.D. o.
8.

TIe CourL ruIes und decIures LIuL LIe oII compunIes wIIcI
suppIv bunker IueI oII Lo PC Iuve Lo puv LIe Luxes Imposed
upon suId bunker IueI oII soId Lo PC. Bv LIe verv nuLure oI
IndIrecL LuxuLIon, LIe economIc burden oI sucI LuxuLIon Is
expecLed Lo be pussed on LIrougI LIe cIunneIs oI commerce Lo
LIe user or consumer oI LIe goods soId. Becuuse, Iowever, LIe
PC Ius been exempLed Irom boLI dIrecL und IndIrecL
LuxuLIon, LIe PC musL be IeId exempLed Irom ubsorbIng LIe
economIc burden oI IndIrecL LuxuLIon

1. ISSO STANAR IASTIRN, INC vs.
COMMISSIONIR O INTIRNAL RIVINLI
G.R. Nos. L-S=oS-n, Joly , 1nSn

ACTS: n CTA Cuse o. 1z=1, Esso SLundurd EusLern nc.
(Esso) deducLed Irom ILs gross Income Ior 1=, us purL oI
ILsor dI nur v und neces s ur v bus I nes s expens es , L Ie
umounL I L Iud s penL I or dr I I I I ng und e xpI or uL I on
oI I L s peL r oI e umconcessIons. TIIs cIuIm wus dIsuIIowed bv
LIe CommIssIoner oI nLernuI Revenue (CR) on LIe ground
LIuL LIe expensessIouId be cupILuIIzed und mIgIL be wrILLen
oII us u Ioss onIv wIen u "drv IoIe" sIouId resuIL. Esso LIen
IIIed un umendedreLurn wIere IL usked Ior LIe reIund oI
Pz,z;.oo bv reuson oI ILs ubundonmenL us drv IoIes oI
severuI oI ILs oII weIIs.AIso cIuImed us ordInurv und
necessurv expenses In LIe sume reLurn wus LIe umounL
oI Pqo,8zz.oq, represenLIngmurgIn Iees IL Iud puId Lo LIe
CenLruI Bunk on ILs proIIL remILLunces Lo ILs ew York Ieud
oIIIce.On AugusL =, 16q, LIe CR grunLed u Lux credIL oI
Pzz1,o.oo onIv, dIsuIIowIng LIe cIuImed deducLIon Ior
LIemurgIn Iees puId on LIe ground LIuL LIe murgIn Iees puId Lo
LIe CenLruI Bunk couId noL be consIdered Luxes or uIIowed
usdeducLIbIe busIness expenses.Esso uppeuIed Lo LIe CourL oI
Tux AppeuIs (CTA) Ior LIe reIund oI LIe murgIn Iees IL Iud
eurIIer puId conLendIngLIuL LIe murgIn Iees were
deducLIbIe Irom gross Income eILIer us u Lux or us un
ordInurv und necessurv busInessexpense. However, Esso`s
uppeuI wus denIed.

ISSLI: (1) WIeLIer or noL LIe murgIn Iees ure Luxes.(z)
WIeLIer or noL LIe murgIn Iees ure necessurv und ordInurv
busIness expenses.

RLLING: (1) o. A Lux Is IevIed Lo provIde revenue Ior
governmenL operuLIons, wIIIe LIe proceeds oI LIe murgIn Iee
ureuppIIed Lo sLrengLIen our counLrv's InLernuLIonuI reserves.
TIe murgIn Iee wus Imposed bv LIe SLuLe In LIe exercIse oI
ILspoIIce power und noL LIe power oI LuxuLIon.(z) o.
OrdInurIIv, un expense wIII be consIdered 'necessurv' wIere LIe
expendILure Is upproprIuLe und IeIpIuI InLIe deveIopmenL oI
LIe Luxpuver's busIness. L Is 'ordInurv' wIen IL connoLes u
puvmenL wIIcI Is normuI In reIuLIon Lo LIebusIness oI LIe
Luxpuver und LIe surroundIng cIrcumsLunces. SInce
LIe murgIn Iees In quesLIon were Incurred Ior
LIeremILLunce oI Iunds Lo Esso's Heud OIIIce In ew York,
wIIcI Is u sepuruLe und dIsLIncL Income Luxpuver Irom LIe
bruncIIn LIe PIIIIppInes, Ior ILs dIsposuI ubroud, IL cun never
be suId LIereIore LIuL LIe murgIn Iees were upproprIuLe und
IeIpIuIIn LIe deveIopmenL oI Esso's busIness In LIe PIIIIppInes
excIusIveIv or were Incurred Ior purposes proper Lo LIe
conducLoI LIe uIIuIrs oI Esso's bruncI In LIe PIIIIppInes
excIusIveIv or Ior LIe purpose oI reuIIzIng u proIIL or oI
mInImIzIng u Ioss InLIe PIIIIppInes excIusIveIv.

1S.PROCTIR & GAMBLI PHILIPPINI
MANLACTLRING CORPORATION
vs. THI MLNICIPALITY O JAGNA,
PROVINCI O BOHOL
G.R. No. L-A6= ecember S, 1nn

TOPIC: Nutore und umoont oI license

ACTS: PIuInLIII-uppeIIunL Is u domesLIc corporuLIon wILI
prIncIpuI oIIIces In MunIIu. IL Is u consoIIduLed corporuLIon oI
ProcLer & GumbIe TrudIng Compunv und PIIIIppIne
MunuIucLurIng Compunv, wIIcI IuLer becume ProcLer &
GumbIe TrudIng Compunv, PIIIIppInes. L Is enguged In LIe
munuIucLure oI soup, edIbIe oII, murgurIne und oLIer sImIIur
producLs, und Ior LIIs purpose muInLuIns u "bodegu" In
deIendunL MunIcIpuIILv wIere IL sLores copru purcIused In LIe
munIcIpuIILv und LIereIrom sIIps LIe sume Ior ILs
munuIucLurIng und oLIer operuLIons.

On December 1, 1=;, LIe MunIcIpuI CouncII oI Jugnu enucLed
MunIcIpuI OrdInunce o. q, SerIes oI 1=; or An OrdInunce
ImposIng sLoruge Iees oI uII exporLubIe copru deposILed In LIe
bodegu wILIIn LIe jurIsdIcLIon oI LIe munIcIpuIILv oI jugnu
boIoI. or u perIod oI sIx veurs, Irom 1=8 Lo 16, pIuInLIII
puId deIendunL MunIcIpuIILv, uIIegedIv under proLesL, sLoruge
Iees In LIe LoLuI sum oI Pqz,z6=.1.

On MurcI , 16q, pIuInLIII IIIed LIIs suIL In LIe CourL oI IrsL
nsLunce oI MunIIu, BruncI V, wIereIn IL pruved LIuL 1)
OrdInunce o. q be decIured InuppIIcubIe Lo IL, or In LIe uILer.
nuLIve, LIuL IL be pronounced uILru-vIres und voId Ior beIng
bevond LIe power oI LIe MunIcIpuIILv Lo enucL; und z) LIuL
deIendunL MunIcIpuIILv be ordered Lo reIund Lo IL LIe umounL
oI Pqz,z6=.1 wIIcI IL Iud puId under proLesL; und cosLs.

TIe LrIuI CourL upIeId ILs jurIsdIcLIon us weII us deIendunL
MunIcIpuIILv's power Lo enucL LIe OrdInunce In quesLIon under
secLIon zz8 oI LIe RevIsed AdmInIsLruLIve Code, oLIerwIse
known us LIe generuI weIIure cIuuse.

ISSLIS: WIeLIer deIendunL MunIcIpuIILv wus uuLIorIzed Lo
Impose und coIIecL LIe sLoruge Iee provIded Ior In LIe
cIuIIenged OrdInunce under LIe Iuws LIen prevuIIIng.

WIeLIer LIe ImposILIon oI Po.1o per 1oo kIIos oI copru sLored
In u bodegu wILIIn LIe munIcIpuIILv oIJugnus' LerrILorv Is
bevond LIe cosL oI reguIuLIon und surveIIIunce

HIL: TIe vuIIdILv oI LIe OrdInunce musL be upIeId
pursuunL Lo LIe broud uuLIorILv conIerred upon munIcIpuIILIes
bv CommonweuILI AcL o. q;z, wIIcI wus LIe prevuIIIng Iuw
wIen LIe OrdInunce wus enucLed.

A munIcIpuIILv Is uuLIorIzed Lo Impose LIree kInds oI IIcenses:
(1) u IIcense Ior reguIuLIon oI useIuI occupuLIon or enLerprIses;
(z) IIcense Ior resLrIcLIon or reguIuLIon oI non-useIuI
occupuLIons or enLerprIses; und () IIcense Ior revenue. q L Is
LIus unnecessurv, us pIuInLIII wouId Iuve us do, Lo deLermIne
wIeLIer LIe subjecL sLoruge Iee Is u Lux Ior revenue purposes or
u IIcense Iee Lo reImburse deIendunL MunIcIpuIILv Ior servIce oI
supervIsIon becuuse deIendunL MunIcIpuIILv Is uuLIorIzed noL
onIv Lo Impose u IIcense Iee buL uIso Lo Lux Ior revenue
purposes.

TIe sLoruge Iee Imposed under LIe quesLIon OrdInunce Is
ucLuuIIv u munIcIpuI IIcense Lux or Iee on persons, IIrms und
corporuLIons, IIke pIuInLIII, exercIsIng LIe prIvIIege oI sLorIng
copru In u bodegu wILIIn LIe MunIcIpuIILv's LerrILorIuI
jurIsdIcLIon. or LIe Lerm "IIcense Lux" Ius noL ucquIred u IIxed
meunIng. L Is oILen used IndIserImInuLeIv Lo desIgnuLe
ImposILIons exucLed Ior LIe exercIse oI vurIous prIvIIeges. n
munv InsLunces, IL reIers Lo revenue-ruIsIng exucLIons on
prIvIIeges or ucLIvILIes.

(z) MunIcIpuI corporuLIons ure uIIowed wIde dIscreLIon In
deLermInIng LIe ruLes oI ImposubIe IIcense Iees even In cuses oI
pureIv poIIce power meusures. n LIe ubsence oI prooI us Lo
munIcIpuI condILIons und LIe nuLure oI LIe busIness beIng
Luxed us weII us oLIer IucLors reIevunL Lo LIe Issue oI
urbILrurIness or unreusonubIeness oI LIe quesLIoned ruLes,
CourLs wIII go sIow In wrILIng oII un OrdInunce. n LIe cuse uL
bur, uppeIIunL Ius noL suIIIcIenLIv sIown LIuL LIe ruLe Imposed
bv LIe quesLIoned OrdInunce Is oppressIve, excessIve und
proIIbILIve.

1n.Golden Ribbon Lomber Co., Inc. v. City oI
Botoun
GR No. L-1S=A A ecember 1n6A

A C T S: GoIden RIbbon umber Co., nc., u duIv orgunIzed
domesLIc corporuLIon, operuLed u Iumber mIII und Iumber vurd
In BuLuun CILv. PursuunL Lo OrdInunce o. =, us umended bv
OrdInunce os. , 1o, q;, und q oI LIe suId cILv, IL puId LIe
Luxes provIded LIereIn. CIuImIng LIuL suId ordInunce, us
umended, wus voId, IL IuLer brougIL LIe presenL ucLIon Lo Iuve
IL so decIured; Lo recover LIe umounL puId, und Lo Iuve
uppeIIunLs permunenLIv enjoIned Irom enIorcIng suId
ordInunce us umended.

I S S L I: WIeLIer or noL OrdInunce o. = IuIIs wILIIn LIe
CIurLer oI LIe CILv oI BuLuun.

H I L : o. TIe Lux Imposed Is und wus reuIIv InLended Lo be
on Iumber soId und noL u Lux on, or, IIcense Iee Ior LIe prIvIIege
oI operuLIng u Iumber mIII undJor u Iumber vurd. L vIoIuLes RA
zz6q us munIcIpuI corporuLIons ure proIIbILed Irom ImposIng
cIurges oI Luxes oI sucI nuLure.

AppeIIunLs` cIuIm LIuL LIe quesLIoned Lux Is one on busIness or
u prIvIIege Lux Ior LIe operuLIon oI u Iumber mIII or u Iumber
vurd Is wILIouL merIL. TIe cIurucLer or nuLure oI u Lux Is
deLermIned bv ILs operuLIon, prucLIcuI resuILs und IncIdenLs.
eILIer LIe orIgInuI ordInunce In quesLIon nor LIe umenduLorv
ones provIde LIuL puvmenL LIereoI Is u condILIon precedenL Lo
LIe enjovmenL oI sucI prIvIIege or LIuL ILs non-puvmenL wouId
resuIL In LIe cunceIIuLIon oI unv prevIous IIcense grunLed.

usLIv, LIe ruIe Is weII-seLLIed LIuL munIcIpuI corporuLIons ure
cIoLIed wILI no power oI LuxuLIon; LIuL ILs cIurLer or u sLuLuLe
musL cIeurIv sIow un InLenL Lo conIer LIuL power or LIe
munIcIpuI corporuLIon cunnoL ussume und exercIse IL, und LIuL
unv sucI power grunLed musL be consLrued sLrIcLIv, unv doubL
or umbIguILv urIsIng ouL Irom LIe Lerms oI LIe grunL Lo be
resoIved uguInsL LIe munIcIpuIILv.

o. VICTORIAS MILLING CO. V PPA
1= SCRA 1; Aouost , 1nS
ACTS: TIIs Is u peLILIon Ior revIew on cerLIorurI oI LIe
JuIv z;, 18q DecIsIon oI LIe OIIIce oI LIe PresIdenLIuI
AssIsLunL or eguI AIIuIrs dIsmIssIng LIe uppeuI Irom LIe
udverse ruIIng oI LIe PIIIIppIne PorLs AuLIorILv on LIe soIe
ground LIuL LIe sume wus IIIed bevond LIe regIemenLurv
perIod.
On AprII z8, 181, LIe IoIIo PorL Munuger oI respondenL
PIIIIppIne PorLs AuLIorILv (PPA Ior sIorL) wroLe peLILIoner
VIcLorIus MIIIIng Co., requIrIng IL Lo Iuve ILs LugbouLs und
burges undergo Iurbor IormuIILIes und puv enLrunceJcIeurunce
Iees us weII us berLIIng Iees eIIecLIve Muv 1, 181. PPA,
IIkewIse, requIrIng peLILIoner Lo secure u permIL Ior curgo
IundIIng operuLIons uL ILs Du-un Bunuu wIurI und remIL 1o%
oI ILs gross Income Ior suId operuLIons us LIe governmenL's
sIure.
VIcLorIus MIIIIng Co. muInLuIned LIuL IL Is excepL Irom puvIng
PPA unv Iee or cIurge becuuse: 1. TIe wIurI und ILs IucIIILIes
ure buIIL und InsLuIIed on IL`s own Iund; z. RepuIrs und
muInLenunce ure soIeIv puId bv IL; . MuInLenunce und
dredgIng oI LIe cIunneI ure done bv LIe Compunv personneI;
q. AL noL LIme Ius LIe governmenL puId unv cenLuvo Ior sucI
ucLIvILIes.
ISSLI: WO LIe VIcLorIus MIIIIng Co. cIuIm oI excepLIon Ior
PPA Iees Is merILorIous.
HIL: o, LIe peLILIoners cIuIm LIuL LIere Is no busIs Ior LIe
PPA Lo ussess und Impose LIe dues und cIurge Is devoId oI
merIL.
As correcLIv sLuLed bv LIe SoIIcILor GeneruI, LIe Iees und
cIurges PPA coIIecLs ure noL Ior LIe use oI LIe wIurI LIuL
peLILIoner owns buL Ior LIe prIvIIege oI nuvIguLIng In pubIIc
wuLers, oI enLerIng und IeuvIng pubIIc Iurbours und berLIIng
on pubIIc sLreums or wuLers.
As Lo LIe requIremenL Lo remIL 1o% oI LIe IundIIng cIurges,
SecLIon 6B-(Ix) oI LIe PresIdenLIuI Decree o. 8=; uuLIorIzed
LIe PPA "To Ievv dues, ruLes, or cIurges Ior LIe use oI LIe
premIses, works, uppIIunces, IucIIILIes, or Ior servIces provIded
bv or beIongIng Lo LIe AuLIorILv, or unv orgunIzuLIon
concerned wILI porL operuLIons." TIIs 1o% governmenL sIure
oI eurnIngs oI urrusLre und sLevedorIng operuLors Is In LIe
nuLure oI conLrucLuuI compensuLIon Lo wIIcI u person desIrIng
Lo operuLe urrusLre servIce musL ugree us u condILIon Lo LIe
grunL oI LIe permIL Lo operuLe.
1.CIR v. CA, CTA, AdML
GR No.11=An; 1S April 1nn

A C T S: PrIvuLe respondenL, ALeneo de MunIIu UnIversILv,
Is u non-sLock, non-proIIL educuLIonuI InsLILuLIon wILI uuxIIIurv
unILs und bruncIes uII over LIe counLrv. TIe nsLILuLe oI
PIIIIppIne CuILure (PC) Is un uuxIIIurv unIL wILI no IeguI
personuIILv sepuruLe und dIsLIncL Irom prIvuLe respondenL. TIe
PC Is u PIIIIppIne unIL enguged In socIuI scIence sLudIes oI
PIIIIppIne socIeLv und cuILure. OccusIonuIIv, IL uccepLs
sponsorsIIps Ior ILs reseurcI ucLIvILIes Irom InLernuLIonuI
orgunIzuLIons, prIvuLe IounduLIons und governmenL ugencIes.

On 8 JuIv 18, prIvuLe respondenL receIved Irom CR u
demund IeLLer duLed June 18, ussessIng prIvuLe respondenL
LIe sum oI P1;q,oq.; Ior uIIeged deIIcIencv conLrucLor`s Lux,
und un ussessmenL duLed z; June 18 In LIe sum oI
P1,1q1,8; Ior uIIeged deIIcIencv Income Lux, boLI Ior LIe IIscuI
veur ended 1 MurcI 1;8. DenvIng suId Lux IIubIIILIes, prIvuLe
respondenL senL peLILIoner u IeLLer-proLesL und subsequenLIv
IIIed wILI LIe IuLLer u memorundum conLesLIng LIe vuIIdILv oI
LIe ussessmenLs.

AILer some LIme peLILIoner Issued u IInuI decIsIon duLed
AugusL 188 reducIng LIe ussessmenL Ior deIIcIencv
conLrucLor`s Lux Irom P1,q;=.== Lo Pq6,=16.q1, excIusIve oI
surcIurge und InLeresL.

TIe Iower courLs ruIed In Iuvor oI respondenL. Hence LIIs
peLILIon.

PeLILIoner CommIssIoner oI nLernuI Revenue conLends LIuL
PrIvuLe RespondenL ALeneo de MunIIu UnIversILv "IuIIs wILIIn
LIe deIInILIon" oI un IndependenL conLrucLor und "Is noL one oI
LIose menLIoned us excepLed"; Ience, IL Is properIv u subjecL oI
LIe LIree percenL conLrucLor's Lux IevIed bv LIe IoregoIng
provIsIon oI Iuw. PeLILIoner sLuLes LIuL LIe "Lerm 'IndependenL
conLrucLor' Is noL specIIIcuIIv deIIned so us Lo deIImIL LIe scope
LIereoI, so mucI so LIuL unv person wIo . . . renders pIvsIcuI
und menLuI servIce Ior u Iee, Is now IndubILubIv consIdered un
IndependenL conLrucLor IIubIe Lo % conLrucLor's Lux."

I S S L I: WIeLIer or noL prIvuLe respondenL IuIIs under LIe
purvIew oI IndependenL conLrucLor pursuunL Lo SecLIon zo= oI
LIe Tux Code und Is subjecL Lo u % conLrucLors Lux.

H I L: TIe peLILIon Is unmerILorIous.

TIe Lerm "independent contructors" IncIude persons
(jurIdIcuI or nuLuruI) noL enumeruLed ubove (buL noL IncIudIng
IndIvIduuIs subjecL Lo LIe occupuLIon Lux under SecLIon 1z oI
LIe ocuI Tux Code) wIose ucLIvILv consIsLs essenLIuIIv oI LIe
suIe oI uII kInds oI servIces Ior u Iee regurdIess oI wIeLIer or
noL LIe perIormunce oI LIe servIce cuIIs Ior LIe exercIse or use
oI LIe pIvsIcuI or menLuI IucuILIes oI sucI conLrucLors or LIeIr
empIovees.
PeLILIoner CommIssIoner oI nLernuI Revenue erred In
uppIvIng LIe prIncIpIes oI Lux exempLIon wILIouL IIrsL uppIvIng
LIe weII-seLLIed docLrIne oI sLrIcL InLerpreLuLIon In LIe
ImposILIon oI Luxes. L Is obvIousIv boLI IIIogIcuI und
ImprucLIcuI Lo deLermIne wIo ure exempLed wILIouL IIrsL
deLermInIng wIo ure covered bv LIe uIoresuId provIsIon. TIe
CommIssIoner sIouId Iuve deLermIned IIrsL II prIvuLe
respondenL wus covered bv SecLIon zo=, uppIvIng LIe ruIe oI
sLrIcL InLerpreLuLIon oI Iuws ImposIng Luxes und oLIer burdens
on LIe popuIuce, beIore uskIng ALeneo Lo prove ILs exempLIon
LIereIrom.

Interpretution oI Tux Luws. TIe docLrIne In LIe
InLerpreLuLIon oI Lux Iuws Is LIuL (u) sLuLuLe wIII noL be
consLrued us ImposIng u Lux unIess IL does so cIeurIv, expressIv,
und unumbIguousIv. . . . (A) Lux cunnoL be Imposed wILIouL
cIeur und express words Ior LIuL purpose. AccordIngIv, LIe
generuI ruIe oI requIrIng udIerence Lo LIe IeLLer In consLruIng
sLuLuLes uppIIes wILI pecuIIur sLrIcLness Lo Lux Iuws und LIe
provIsIons oI u LuxIng ucL ure noL Lo be exLended bv
ImpIIcuLIon. n cuse oI doubL, sucI sLuLuLes ure Lo be
consLrued mosL sLrongIv uguInsL LIe governmenL und In Iuvor
oI LIe subjecLs or cILIzens becuuse burdens ure noL Lo be
Imposed nor presumed Lo be Imposed bevond wIuL sLuLuLes
expressIv und cIeurIv ImporL.

ALeneo`s nsLILuLe oI PIIIIppIne CuILure never soId ILs servIces
Ior u Iee Lo unvone or wus ever enguged In u busIness upurL
Irom und IndependenLIv oI LIe ucudemIc purposes oI LIe
unIversILv. unds receIved bv LIe ALeneo de MunIIu UnIversILv
ure LecInIcuIIv noL u Iee. TIev muv Iowever IuII us gIILs or
donuLIons wIIcI ure Lux-exempL us sIown bv prIvuLe
respondenL`s compIIunce wILI LIe requIremenL oI SecLIon 1z
oI LIe uLIonuI nLernuI Revenue Code provIdIng Ior LIe
exempLIon oI sucI gIILs Lo un educuLIonuI InsLILuLIon.
Trunsuction oI IPC not u contruct oI sule nor u
contruct Ior u piece oI work. TIe LrunsucLIons oI ALeneo`s
nsLILuLe oI PIIIIppIne CuILure cunnoL be deemed eILIer us u
conLrucL oI suIe or u conLrucL Ior u pIece oI work. Bv LIe
conLrucL oI suIe, one oI LIe conLrucLIng purLIes obIIguLes
IImseII Lo LrunsIer LIe ownersIIp oI und Lo deIIver u
deLermInuLe LIIng, und LIe oLIer Lo puv LIereIor u prIce cerLuIn
In monev or ILs equIvuIenL. n LIe cuse oI u conLrucL Ior u pIece
oI work, LIe conLrucLor bInds IImseII Lo execuLe u pIece oI
work Ior LIe empIover, In consIderuLIon oI u cerLuIn prIce or
compensuLIon. . . . I LIe conLrucLor ugrees Lo produce LIe work
Irom muLerIuIs IurnIsIed bv IIm, Ie sIuII deIIver LIe LIIng
produced Lo LIe empIover und LrunsIer domInIon over LIe
LIIng. . . . n LIe cuse uL bencI, IL Is cIeur Irom LIe evIdence on
record LIuL LIere wus no suIe eILIer oI objecLs or servIces
becuuse, us udverLed Lo eurIIer, LIere wus no LrunsIer oI
ownersIIp over LIe reseurcI duLu obLuIned or LIe resuILs oI
reseurcI projecLs underLuken bv LIe nsLILuLe oI PIIIIppIne
CuILure.

.COMMISSIONIR O INTIRNAL RIVINLI,
petitioner, vs. THI HON. COLRT O APPIALS,
R.O.H. ALTO PROLCTS PHILIPPINIS, INC.
und THI HON. COLRT O TAX APPIALS,
respondents. G.R. No. 1oS=S Junoury o, 1nn=
ucts: On zz AugusL 186, ExecuLIve Order o. q1 wus
promuIguLed decIurIng u one-LIme Lux umnesLv on unpuId
Income Luxes, IuLer umended Lo IncIude esLuLe und donor's
Luxes und Luxes on busIness, Ior LIe LuxubIe veurs 181 Lo 18=.
RespondenL R.O.H. AuLo ProducLs PIIIIppInes, nc., uvuIIIng oI
LIe umnesLv, IIIed In OcLober 186 und ovember 186, ILs Tux
AmnesLv ReLurn und SuppIemenLuI Tux AmnesLv ReLurn o.
und puId LIe correspondIng umnesLv Luxes due.
PrIor Lo LIIs uvuIImenL, peLILIoner CommIssIoner oI nLernuI
Revenue, In u communIcuLIon receIved bv prIvuLe respondenL
on AugusL 1, 186, ussessed LIe IuLLer deIIcIencv Income und
busIness Luxes Ior ILs IIscuI veurs 181 und 18z In un uggreguLe
umounL oI P1,q1o,1=;.;1. MeunwIIIe, respondenL uverred LIuL
sInce IL Iud been ubIe Lo uvuII ILseII oI LIe Lux umnesLv, LIe
deIIcIencv Lux noLIce sIouId IorLIwILI be cunceIIed und
wILIdruwn. TIIs wus denIed bv LIe CR Revenue
Memorundum Order o. q-8;, ImpIemenLIng ExecuLIve Order
o. q1, Iud consLrued LIe umnesLv coveruge Lo IncIude onIv
ussessmenLs Issued bv LIe Bureuu oI nLernuI Revenue uILer
LIe promuIguLIon oI LIe execuLIve order on AugusL zz 186
und noL Lo ussessmenLs LIereLoIore mude.
On uppeuI, TIe CourL oI Tux uppeuI upIeId Ior LIe respondenL,
wIIcI wus IurLIer upIeId bv LIe CourL oI AppeuIs.
ISSLI: WIeLIer or noL LIe LIe deIIcIencv ussessmenLs were
exLInguIsIed bv reuson oI respondenL`s uvuIImenL oI LIe Lux
umnesLv.
HIL: Yes, us LIe scope oI LIe umnesLv covers LIe unpuId
Income Luxes Ior LIe veurs 181 Lo 18=. I, us LIe
CommIssIoner urgues, ExecuLIve Order o. q1 Iud noL been
InLended Lo IncIude 181-18= Lux IIubIIILIes uIreudv ussessed
(udmInIsLruLIveIv) prIor Lo AugusL zz, 186, LIe Iuw couId Iuve
sImpIv so provIded In ILs excIusIonurv cIuuses. L dId noL. TIe
concIusIon Is unuvoIdubIe, und IL Is LIuL LIe execuLIve order
Ius been desIgned Lo be In LIe nuLure oI u generuI grunL oI Lux
umnesLv subjecL onIv Lo LIe cuses speci[iccllu excepLed bv IL.
urLIer, LIe Iuw provIdes LIuL, upon IuII compIIunce wILI LIe
condILIons oI LIe Lux umnesLv und LIe ruIes und reguIuLIons
Issued pursuunL Lo LIIs ExecuLIve order, LIe Luxpuver sIuII be
reIIeved oI unv Income Lux IIubIIILv on unv unLuxed Income
Irom Junuurv 1, 181 Lo December 1, 18=, IncIudIng
IncremenLs LIereLo und penuILIes on uccounL oI LIe non-
puvmenL oI LIe suId Lux. CIvII, crImInuI or udmInIsLruLIve
IIubIIILv urIsIng Irom LIe non-puvmenL oI LIe suId Lux, wIIcI
ure ucLIonubIe under LIe uLIonuI nLernuI Revenue Code, us
umended, ure IIkewIse deemed exLInguIsIed.

.HYRO RISOLRCIS V. COLRT O TAX
APPIALS IT AL.
GR So6; ecember 1, 1nno

ACTS Hvdro Resources ConLrucLors CorporuLIon enLered
InLo u conLrucL oI suIe wILI LIe uLIonuI rrIguLIon AuLIorILv
(A) Ior LIe consLrucLIon oI MuguL RIver MuILIpurpose
ProjecL In subeIIu In AugusL 1;8. TIe conLrucL provIded LIuL
Hvdro wIII ImporL purLs, consLrucLIon equIpmenL und LooIs und
Luxes und duLIes Lo be puId bv A. TooIs und equIpmenL
urrIved durIng 1;8 und 1;. A reneged on LIe conLrucL.
TIereIore cuusIng LIe LrunsIer ILs suIe Lo Hvdro In seperuLe
duLes In December 6, 18z und MurcI zq, 18. ExecuLIve
Order 86o Look eIIecL durIng December z1, 18z provIded Ior
% ud vuIorem Lux on ImporLuLIons und IL specIIIcuIIv provIded
LIuL IL sIouId Iuve no reLroucLIve eIIecL. DurIng LIe conLrucL oI
suIe execuLIon, Hvdro wus ussessed und puId LIe suId % ud
vuIorem Lux worLI P z81,=1 under proLesL. TIe Hvdro wIen
IIIIng Ior reIund wILI CusLoms CommIssIoner wIo Indorsed
LIe upprovuI oI LIe reIund buL wus denIed bv LIe SecreLurv oI
Inunce und moLIon wus denIed bv LIe CourL oI Tux AppeuIs.

ISSLI WIeLIer or noL sIouId LIe ExecuLIve Order 86o
sIouId Iuve u reLroucLIve eIIecL.

HIL TIe CourL oI Tux AppeuIs erred In uppIvIng u
reLroucLIve eIIecL Ior LIe ExecuLIve Order LIereIore sIouId noL
Iuve been subjecL Lo LIe uddILIonuI % ud vuIorem Lux. n
generuI Lux Iuws ure noL reLroucLIve In nuLure. oL onIv LIuL
ExecuLIve Order 86o specIIIcuIIv provIdes LIuL IL Is noL
reLroucLIve In nuLure, buL uIso wIen LIe condILIonuI conLrucL oI
suIe wus execuLed, ILs Iud u suspensIve condILIon conLempIuLed
In LIe CIvII Code (ArLIcIe 118;) wIere IL reLurned ownersIIp Lo
LIe seIIer Hvdro becuuse A wus noL ubIe Lo compIv wILI ILs
purL oI LIe conLrucL, IL wus deemed execuLed us II durIng LIe
consLILuLIon oI LIe obIIguLIon wIIcI wus In 1;8 und noL In
18z.


A.Centrul Azocureru on Pedro -v- CIR und CTA
G.R. Nos. L-6 und L-=A Muy 1,
1n6

ACTS: CenLruI Azucureru Don Pedro, u domesLIc corporuLIon
wILI oIIIce uL usugbu, BuLungus, Iud been IIIIng ILs Income
Lux reLurns on LIe "IIscuI veur" busIs endIng AugusL 1, oI everv
veur.

|L Iud been ussessed deIIcIencv Lux pIus InLeresL. L puId LIe
deIIcIencv Lux buL proLesLed on LIe ImposILIon oI LIe InLeresL|,
cIuImIng LIuL LIe ImposILIon oI % monLIIv InLeresL on ILs
deIIcIencv Lux Ior LIe IIscuI veur 1=q Lo 1=8, PursuunL Lo
SecLIon =1 (d) oI LIe Revenue Code, us umended bv RepubIIc
AcL o. zq, Is IIIeguI, becuuse LIe ImposILIon oI InLeresL on
eIIIcIencv Income Lux eurned prIor Lo LIe eIIecLIvILv oI LIe
umenduLorv Iuw (Rep. AcL zq) |on 1=| wIII be LunLumounL
Lo gIvIng IL (Rep. AcL o. zq) reLroucLIve uppIIcuLIon. |L
IurLIer conLends LIuL| LIe uppIIcuLIon oI LIe umended
provIsIon (now Sec. =1-d oI LIe Tux Code) Lo LIe cuses uL bur
wouId run counLer Lo LIe consLILuLIonuI resLrIcLIon uguInsL LIe
enucLmenL oI ex posL IucLo Iuws.

ISSLI: WIeLIer or noL LIe ImposILIon oI LIe InLeresL, Is
unconsLILuLIonuI

HIL: O - |LIe InLeresL wus correcLIv Imposed|. L Is Lo be
noLed LIuL LIe coIIecLIon oI InLeresL In LIese cuses Is noL penuI
In nuLure, LIus -

the imposition o[ . . . interest is but c just
compensction to the stcte [or the delcu in
pcuinq the tcx, cnd [or the concomitcnt use bu
the tcxpcuer o[ [unds thct riqht[ullu should be
in the qoternment's hcnds (U.S. ts. Goldstein,
:8o I lzd] ;=z: Ross ts. U.S., :a8 Ied. Supp.
((o: U.S. ts. 1o[[rcu, o; Ied. lzd] a88). The
[cct thct the interest chcrqed is mcde
proportioncte to the period o[ delcu constitutes
the best etidence thct such interest is not pencl
but compensctoru. (cstro ts. ollector o[
Interncl Retenue, G.R. No. L-:z:;a, Resolution
on Motion [or Reconsiderction, December z8,
:oz)

und we Iud uIreudv IeId LIuL -

The doctrine o[ unconstitutionclitu rcised bu
cppellcnt is bcsed on the prohibition cqcinst ex
post [ccto lcus. ut this prohibition cpplies
onlu to crimincl or pencl mctters, cnd not to
lcus uhich concern citil mctters or
proceedinqs qenercllu, or uhich c[[ect or
requlcte citil or pritcte riqhts (Ex pcrte
Gcrlcnd, :8 Lcu Ed., (: : .1.S., 88o-8o:).
(Republic ts. Dcscn Vdc. de Ierncndez, oo
Phil. o(a, o(;).

InuIIv, secLIon 1 oI LIe umenduLorv RepubIIc AcL o. zq
reIers onIv Lo LIe busIc Lux ruLes, wIIcI ure mude uppIIcubIe Lo
Income receIved In 1= onwurd, buL does noL uIIecL LIe
InLeresL due on deIIcIencIes, wIIcI ure IeIL Lo be governed bv
secLIon =1 (d).


=.Pepsi-Colu Bottlinu Compuny oI the
Philippines, Inc. v. Monicipulity oI Tunuoun
G.R. No. L-11=6; ebroury , 1n6

ucts: n ebruurv 16, pIuInLIII commenced u compIuInL
seekIng Lo decIure SecLIon z oI R.A. zz6q (ocuI AuLonomv
AcL) unconsLILuLIonuI us un undue deIeguLIon oI LuxIng power
und Lo decIure OrdInunce os. z und z; Issued bv LIe
MunIcIpuIILv oI Tunuuun, evLe us nuII und voId.

MunIcIpuI OrdInunce o. z IevIes und coIIecLs Irom soIL
drInks producers und munuIucLurers one-sIxLeenLI (1J16) oI u
cenLuvo Ior everv boLLIe oI soIL drInk corked. On LIe oLIer
Iund, MunIcIpuI OrdInunce o. z; IevIes und coIIecLs on soIL
drInks produced or munuIucLured wILIIn LIe LerrILorIuI
jurIsdIcLIon oI LIe munIcIpuIILv u Lux oI one cenLuvo (Po.o1) on
eucI guIIon oI voIume cupucILv. TIe Lux Imposed In boLI
OrdInunces os. z und z; Is denomInuLed us "munIcIpuI
producLIon Lux.

Issoes: (1) s SecLIon z oI R.A. zz6q un undue deIeguLIon oI
LIe power oI LuxuLIon? (z) Do OrdInunce os. z und zq
consLILuLe doubIe LuxuLIon und Impose percenLuge or specIIIc
Luxes?

Held: (1) O. TIe power oI LuxuLIon Is pureIv IegIsIuLIve und
cunnoL be deIeguLed Lo LIe execuLIve or judIcIuI depurLmenL oI
LIe governmenL wILIouL InIrIngIng upon LIe LIeorv oI
sepuruLIon oI powers. BuL us un excepLIon, LIe LIeorv does noL
uppIv Lo munIcIpuI corporuLIons. egIsIuLIve powers muv be
deIeguLed Lo IocuI governmenLs In respecL oI muLLers oI IocuI
concern. (z) O. TIe MunIcIpuIILv oI Tunuuun dIscovered LIuL
munuIucLurers couId Increuse LIe voIume conLenLs oI eucI
boLLIe und sLIII puv LIe sume Lux ruLe sInce Lux Is Imposed on
everv boLLIe corked. To combuL LIIs scIeme, MunIcIpuI
OrdInunce o. z; wus enucLed. As sucI, IL wus u repeuI oI
MunIcIpuI OrdInunce o. z. n LIe sLIpuIuLIon oI IucLs, LIe
purLIes udmILLed LIuL LIe MunIcIpuI Treusurer wus enIorcIng
MunIcIpuI OrdInunce o. z; onIv. Hence, LIere wus no cuse oI
doubIe LuxuLIon.

6.COMMISSIONIR O INTIRNAL RIVINLI vs.
S.C. JOHNSON AN SON, INC., und COLRT O
APPIALS
on SCRA S ; Jone =, 1nnn

Topic: ooble Tuxution
ucts: SC. JOHSO AD SO, C., u domesLIc
corporuLIon orgunIzed und operuLIng under LIe PIIIIppIne
Iuws, enLered InLo u IIcense ugreemenL wILI SC JoInson und
Son, UnILed SLuLes oI AmerIcu (USA), u non-resIdenL IoreIgn
corporuLIon wus grunLed LIe rIgIL Lo use LIe Lrudemurk,
puLenLs und LecInoIogv owned bv LIe IuLLer IncIudIng LIe rIgIL
Lo munuIucLure, puckuge und dIsLrIbuLe LIe producLs. Icense
AgreemenL wus duIv regIsLered wILI LIe TecInoIogv TrunsIer
Bourd oI LIe Bureuu oI PuLenLs, Trude Murks und TecInoIogv
TrunsIer under CerLIIIcuLe oI RegIsLruLIon o. 8o6q. SC.
JOHSO AD SO, C wus obIIged Lo puv SC JoInson und
Son, USA rovuILIes bused on u percenLuge oI neL suIes und
subjecLed LIe sume Lo z=% wILIIoIdIng Lux on rovuILv
puvmenLs wIIcI |respondenL| puId Irom JuIv 1z Lo Muv
1. RespondenL IIIed wILI LIe nLernuLIonuI Tux AIIuIrs
DIvIsIon (TAD) oI LIe BR u cIuIm Ior reIund oI overpuId
wILIIoIdIng Lux on rovuILIes urguIng LIuL SInce LIe ugreemenL
wus upproved bv LIe TecInoIogv TrunsIer Bourd, LIe
preIerenLIuI Lux ruLe oI 1o% sIouId uppIv Ience rovuILIes puId
bv LIe |respondenL| Lo SC JoInson und Son, USA Is onIv
subjecL Lo 1o% wILIIoIdIng Lux pursuunL Lo LIe mosL-Iuvored
nuLIon cIuuse oI LIe RP-US Tux TreuLv.
TIe CommIssIoner dId noL ucL on suId cIuIm Ior reIund.
RespondenL IIIed u peLILIon Ior revIew beIore LIe CTA Lo cIuIm
u reIund oI LIe overpuId wILIIoIdIng Lux on rovuILv puvmenLs.
CTA decIded Ior RespondenL und ordered CR Lo Issue u Lux
credIL cerLIIIcuLe In LIe umounL oI P6,z66.oo represenLIng
overpuId wILIIoIdIng Lux on rovuILv puvmenLs, begInnIng JuIv,
1z Lo Muv, 1. CR IIIed u peLILIon Ior revIew wILI CA. CA
upIeId CTA.
CR conLends LIuL under RP-US Tux TreuLv, wIIcI Is known us
LIe "mosL Iuvored nuLIon" cIuuse, LIe IowesL ruLe oI LIe
PIIIIppIne Lux uL 1o% muv be Imposed on rovuILIes derIved bv u
resIdenL oI LIe UnILed SLuLes Irom sources wILIIn LIe
PIIIIppInes onIv II LIe cIrcumsLunces oI LIe resIdenL oI LIe
UnILed SLuLes ure sImIIur Lo LIose oI LIe resIdenL oI WesL
Germunv. SInce LIe RP-US Tux TreuLv conLuIns no "muLcIIng
credIL" provIsIon us LIuL provIded In RP-WesL Germunv Tux
TreuLv, LIe Lux on rovuILIes under LIe RP-US Tux TreuLv Is noL
puId under sImIIur cIrcumsLunces us LIose obLuInIng In LIe RP-
WesL Germunv Tux TreuLv. AIso peLILIoner urgues LIuL sInce
S.C. JoInson's InvocuLIon oI LIe "mosL Iuvored nuLIon" cIuuse
Is In LIe nuLure oI u cIuIm Ior exempLIon Irom LIe uppIIcuLIon
oI LIe reguIur Lux ruLe oI z=% Ior rovuILIes, LIe provIsIons oI
LIe LreuLv musL be consLrued sLrIcLIv uguInsL IL.
RespondenL counLered LIuL LIe "mosL Iuvored nuLIon" cIuuse
under LIe RP-US Tux TreuLv reIers Lo rovuILIes puId under
sImIIur cIrcumsLunces us LIose rovuILIes subjecL Lo Lux In oLIer
LreuLIes; LIuL LIe pIruse "puId under sImIIur cIrcumsLunces"
does noL reIer Lo puvmenL oI LIe Lux buL Lo LIe subjecL muLLer
oI LIe Lux, LIuL Is, rovuILIes, becuuse LIe "mosL Iuvored nuLIon"
cIuuse Is InLended Lo uIIow LIe Luxpuver In one sLuLe Lo uvuII oI
more IIberuI provIsIons conLuIned In unoLIer Lux LreuLv
wIereIn LIe counLrv oI resIdence oI sucI Luxpuver Is uIso u
purLv LIereLo, subjecL Lo LIe busIc condILIon LIuL LIe subjecL
muLLer oI LuxuLIon In LIuL oLIer Lux LreuLv Is LIe sume us LIuL In
LIe orIgInuI Lux LreuLv under wIIcI LIe Luxpuver Is IIubIe; LIus,
LIe RP-US Tux TreuLv speuks oI "rovuILIes oI LIe sume kInd
puId under sImIIur cIrcumsLunces".
Issoe: WO SC JoInson cun reIund.
Rolinu: O. TIe Lux ruLes on rovuILIes und LIe cIrcumsLunces
oI puvmenL LIereoI ure LIe sume Ior uII LIe recIpIenLs oI sucI
rovuILIes und LIere Is no dIspurILv bused on nuLIonuIILv In LIe
cIrcumsLunces oI sucI puvmenL.
6
On LIe oLIer Iund, u cursorv
reudIng oI LIe vurIous Lux LreuLIes wIII sIow LIuL LIere Is no
sImIIurILv In LIe provIsIons on reIIeI Irom or uvoIdunce oI
doubIe LuxuLIon

us LIIs Is u muLLer oI negoLIuLIon beLween LIe
conLrucLIng purLIes. TIIs dIssImIIurILv Is Lrue purLIcuIurIv In LIe
LreuLIes beLween LIe PIIIIppInes und LIe UnILed SLuLes und
beLween LIe PIIIIppInes und WesL Germunv.
TIe RP-US Tux TreuLv Is jusL one oI u number oI bIIuLeruI
LreuLIes wIIcI LIe PIIIIppInes Ius enLered InLo Ior LIe
uvoIdunce oI doubIe LuxuLIon.
n
TIe purpose oI LIese
InLernuLIonuI ugreemenLs Is Lo reconcIIe LIe nuLIonuI IIscuI
IegIsIuLIons oI LIe conLrucLIng purLIes In order Lo IeIp LIe
Luxpuver uvoId sImuILuneous LuxuLIon In Lwo dIIIerenL
jurIsdIcLIons.
1o
More precIseIv, LIe Lux convenLIons ure druILed
wILI u vIew Lowurds LIe eIImInuLIon oI InLernuLIonuI jurIdIcuI
doubIe LuxuLIon, wIIcI Is deIIned us LIe ImposILIon oI
compurubIe Luxes In Lwo or more sLuLes on LIe sume Luxpuver
In respecL oI LIe sume subjecL muLLer und Ior IdenLIcuI
perIods.
11
TIe uppurenL ruLIonuIe Ior doIng uwuv wILI doubIe
LuxuLIon Is oI encouruge LIe Iree IIow oI goods und servIces und
LIe movemenL oI cupILuI, LecInoIogv und persons beLween
counLrIes, condILIons deemed vILuI In creuLIng robusL und
dvnumIc economIes.
DoubIe LuxuLIon usuuIIv Lukes pIuce wIen u person Is resIdenL
oI u conLrucLIng sLuLe und derIves Income Irom, or owns cupILuI
In, LIe oLIer conLrucLIng sLuLe und boLI sLuLes Impose Lux on
LIuL Income or cupILuI. n order Lo eIImInuLe doubIe LuxuLIon, u
Lux LreuLv resorLs Lo severuI meLIods. IrsL, IL seLs ouL LIe
respecLIve rIgILs Lo Lux oI LIe sLuLe oI source or sILus und oI LIe
sLuLe oI resIdence wILI regurd Lo cerLuIn cIusses oI Income or
cupILuI. n some cuses, un excIusIve rIgIL Lo Lux Is conIerred on
one oI LIe conLrucLIng sLuLes; Iowever, Ior oLIer ILems oI
Income or cupILuI, boLI sLuLes ure gIven LIe rIgIL Lo Lux,
uILIougI LIe umounL oI Lux LIuL muv be Imposed bv LIe sLuLe oI
source Is IImILed.
DoubIe LuxuLIon usuuIIv Lukes pIuce wIen u person Is resIdenL
oI u conLrucLIng sLuLe und derIves Income Irom, or owns cupILuI
In, LIe oLIer conLrucLIng sLuLe und boLI sLuLes Impose Lux on
LIuL Income or cupILuI. n order Lo eIImInuLe doubIe LuxuLIon, u
Lux LreuLv resorLs Lo severuI meLIods. IrsL, IL seLs ouL LIe
respecLIve rIgILs Lo Lux oI LIe sLuLe oI source or sILus und oI LIe
sLuLe oI resIdence wILI regurd Lo cerLuIn cIusses oI Income or
cupILuI. n some cuses, un excIusIve rIgIL Lo Lux Is conIerred on
one oI LIe conLrucLIng sLuLes; Iowever, Ior oLIer ILems oI
Income or cupILuI, boLI sLuLes ure gIven LIe rIgIL Lo Lux,
uILIougI LIe umounL oI Lux LIuL muv be Imposed bv LIe sLuLe oI
source Is IImILed. On LIe oLIer Iund, In LIe credIL meLIod,
uILIougI LIe Income or cupILuI wIIcI Is Luxed In LIe sLuLe oI
source Is sLIII LuxubIe In LIe sLuLe oI resIdence, LIe Lux puId In
LIe Iormer Is credILed uguInsL LIe Lux IevIed In LIe IuLLer. TIe
busIc dIIIerence beLween LIe Lwo meLIods Is LIuL In LIe
exempLIon meLIod, LIe Iocus Is on LIe Income or cupILuI ILseII,
wIereus LIe credIL meLIod Iocuses upon LIe Lux.
1=
TIe pIruse "rovuILIes puId under sImIIur cIrcumsLunces" In LIe
mosL Iuvored nuLIon cIuuse oI LIe US-RP Tux TreuLv
necessurIIv conLempIuLed "cIrcumsLunces LIuL ure Lux-reIuLed".
n LIe cuse uL bur, LIe sLuLe oI source Is LIe PIIIIppInes becuuse
LIe rovuILIes ure puId Ior LIe rIgIL Lo use properLv or rIgILs, i.e.
Lrudemurks, puLenLs und LecInoIogv, IocuLed wILIIn LIe
PIIIIppInes.
1
TIe UnILed SLuLes Is LIe sLuLe oI resIdence sInce
LIe Luxpuver, S. C. JoInson und Son, U. S. A., Is bused LIere.
Under LIe RP-US Tux TreuLv, LIe sLuLe oI resIdence und LIe
sLuLe oI source ure boLI permILLed Lo Lux LIe rovuILIes, wILI u
resLruInL on LIe Lux LIuL muv be coIIecLed bv LIe sLuLe oI
source.
LIe concessIonuI Lux ruLe oI 1o percenL provIded Ior In LIe RP-
Germunv Tux TreuLv sIouId uppIv onIv II LIe Luxes Imposed
upon rovuILIes In LIe RP-US Tux TreuLv und In LIe RP-
Germunv Tux TreuLv ure puId under sImIIur cIrcumsLunces.
TIIs wouId meun LIuL prIvuLe respondenL musL prove LIuL LIe
RP-US Tux TreuLv grunLs sImIIur Lux reIIeIs Lo resIdenLs oI LIe
UnILed SLuLes In respecL oI LIe Luxes ImposubIe upon rovuILIes
eurned Irom sources wILIIn LIe PIIIIppInes us LIose uIIowed Lo
LIeIr Germun counLerpurLs under LIe RP-Germunv Tux TreuLv.
TIe RP-US und LIe RP-WesL Germunv Tux TreuLIes do noL
conLuIn sImIIur provIsIons on Lux credILIng.
I LIe ruLes oI Lux ure Iowered bv LIe sLuLe oI source, In LIIs
cuse, bv LIe PIIIIppInes, LIere sIouId be u concomILunL
commILmenL on LIe purL oI LIe sLuLe oI resIdence Lo grunL some
Iorm oI Lux reIIeI, wIeLIer LIIs be In LIe Iorm oI u Lux credIL or
exempLIon.
A
OLIerwIse, LIe Lux wIIcI couId Iuve been
coIIecLed bv LIe PIIIIppIne governmenL wIII sImpIv be coIIecLed
bv unoLIer sLuLe, deIeuLIng LIe objecL oI LIe Lux LreuLv sInce LIe
Lux burden Imposed upon LIe InvesLor wouId remuIn
unreIIeved. I LIe sLuLe oI resIdence does noL grunL some Iorm
oI Lux reIIeI Lo LIe InvesLor, no beneIIL wouId redound Lo LIe
PIIIIppInes, i.e., Increused InvesLmenL resuILIng Irom u
IuvorubIe Lux regIme, sIouId IL Impose u Iower Lux ruLe on LIe
rovuILv eurnIngs oI LIe InvesLor, und IL wouId be beLLer Lo
Impose LIe reguIur ruLe ruLIer LIun Iose mucI-needed
revenues Lo unoLIer counLrv.
TIe enLILIemenL oI LIe 1o% ruLe bv U.S. IIrms despILe LIe
ubsence oI u muLcIIng credIL (zo% Ior rovuILIes) wouId
deroguLe Irom LIe desIgn beIInd LIe mosL grunL equuIILv oI
InLernuLIonuI LreuLmenL sInce LIe Lux burden IuId upon LIe
Income oI LIe InvesLor Is noL LIe sume In LIe Lwo counLrIes.
TIe sImIIurILv In LIe cIrcumsLunces oI puvmenL oI Luxes Is u
condILIon Ior LIe enjovmenL oI mosL Iuvored nuLIon LreuLmenL
precIseIv Lo underscore LIe need Ior equuIILv oI LreuLmenL.
RespondenL cunnoL be deemed enLILIed Lo LIe 1o percenL ruLe
grunLed under LIe RP-WesL Germunv Tux TreuLv Ior LIe reuson
LIuL LIere Is no puvmenL oI Luxes on rovuILIes under sImIIur
cIrcumsLunces In RP-US LreuLv.

.CIR v RoIino
GR Nos> L-66=-6S; ebroury , 1nS

ucts: TIIs Is u peLILIon Ior revIew on certiorcri oI LIe CTA
decIsIon wIIcI ubsoIved peLILIoners Irom IIubIIILv Ior cupILuI
guIns Lux on sLocks receIved bv LIem Irom EusLern TIeuLrIcuI,
nc. TIe RuIInos were mujorILv sLockIoIders oI EusLern
TIeuLrIcuI Co., nc (IereInuILer OId ETC) wIIcI Iud u
corporuLe Lerm oI z= veurs, wIIcI LermInuLed on Junuurv z=,
1=, presIdenL oI wIIcI wus ErnesLo RuIIno. On December 8,
1=8, LIe EusLern TIeuLrIcuI Co, nc. (IereInuILer ew ETC,
wILI u corporuLe Lerm oI =o veurs) wus orgunIzed, und LIe
RuIInos were uIso LIe mujorILv sLockIoIders oI LIe corporuLIon,
wILI VIcenLe RuIIno us LIe GeneruI-Munuger. BoLI ETCs were
enguged In LIe sume busIness.

OId ETC IeId u sLockIoIder`s meeLIng Lo merge wILI LIe ew
ETC on December 1;, 1=8 Lo conLInue ILs busIness uILer LIe
end oI OId ETC`s corporuLe Lerm. TIe merger wus uuLIorIzed
bv u bourd resoIuLIon. L wus expressIv decIured LIuL LIe
merger wus necessurv Lo conLInue operuLIng LIe CupILoI und
vrIc TIeuLers In MunIIu even uILer LIe expIruLIon oI corporuLe
exIsLence, Lo preserve boLI ILs bookIng conLrucLs und Lo upIoId
ILs coIIecLIve burguInIng ugreemenLs. TIrougI LIe Lwo RuIInos
(ErnesLo und VIcenLe), u Deed oI AssIgnmenL wus execuLed,
wIIcI conveved und LrunsIerred uII LIe busIness, properLv,
usseLs und good wIII oI LIe OId ETC Lo LIe ew ETC In
excIunge Ior shures oI stock oI the lutter Lo be Issued Lo
LIe sIureIoIders uL LIe rute oI one stock Ior euch stock
held In LIe OId ETC. TIe Deed wus Lo reLroucL Irom Junuurv 1,
1=. ew ETC`s Bourd upproved LIe merger und LIe Deed oI
AssIgnmenL on Junuurv 1z, 1= und uII cIunges duIv
regIsLered wILI LIe SEC.

TIe BR, uILer exumInuLIon, decIured LIuL LIe merger wus noL
underLuken Ior u bonu IIde busIness purpose buL onIv Lo uvoId
IIubIIILv Ior LIe ccpitcl qcins tcx on LIe excIunge oI LIe oId Ior
LIe new sIures oI sLock. He LIen Imposed deIIcIencv
ussessmenLs uguInsL LIe prIvuLe respondenLs, LIe RuIInos. TIe
RuIInos requesLed Ior u reconsIderuLIon, wIIcI wus denIed.
TIereIore, LIev eIevuLed LIeIr muLLer Lo LIe CTA, wIo reversed
LIe judgmenL oI LIe CR, suvIng LIuL LIev Iound LIuL LIere wus
no LuxubIe guIn derIved Irom LIe excIunge oI oId sLocks
sImpIv Ior new sLocks Ior LIe ew CorporuLIon becuuse IL wus
pursuunL Lo u vuIId pIun oI reorgunIzuLIon. TIe CR ruIsed IL Lo
LIe SC on peLILIon Ior revIew on certiorcri.

Issoe: WO LIere wus u vuIId merger und LIuL LIere wus no
LuxubIe guIn derIved LIereIrom.

Held: YES, LIe CTA wus correcL In ruIIng LIuL LIere WAS u
merger und LIuL no LuxubIe guIn wus derIved. CTA decIsIon Is
ARMED.

Rutionule:
O VuIIdILv oI LrunsIer. n supporL oI ILs urgumenL LIuL LIe
RuIInos were LrvIng Lo uvoId LIe puvmenL oI cupILuI
guIns Lux, LIe CR suId LIuL LIe ew ETC dId noL
ucLuuIIv Issue sLocks In excIunge Ior LIe properLIes oI
LIe OId ETC. TIe Increuse In cupILuIIzuLIon onIv
Iuppened In MurcI 1=, or ; duvs uILer LIe OId ETC
expIred. PrIor Lo regIsLruLIon, LIe ew ETC couId noL
Iuve vuIIdIv perIormed LIe LrunsIer. TIe SC ruIed LIuL
LIe reLroucLIvILv oI LIe Deed oI AssIgnmenL cured LIe
deIecL und LIere wus no ImpedImenL.
O onc Iide BusIness Purpose. TIe crILerIon oI LIe Iuw Is
LIuL LIe purpose oI LIe merger musL be Ior u bonc [ide
busIness purpose und noL Ior LIe purpose oI escupIng
Luxes. TIe cuse oI Helterinq t. Greqoru sLuLed LIuL u
mere operuLIon IuvIng no busIness or corporuLe
purpose-u mere devIse wIIcI puL on LIe Iorm oI u
corporuLe reorgunIzuLIon us u dIsguIse Ior conceuIIng ILs
reuI cIurucLer und LIe soIe objecL und uccompIIsImenL
oI wIIcI wus LIe consummuLIon oI u preconceIved
pIun, noL Lo reorgunIze u busIness buL Lo LrunsIer u
purceI oI corporuLe sIures. WIen LIe corporuLIon
creuLed Is noLIIng more LIun u conLrIvunce, LIere Is no
IegILImuLe busIness purpose. TIe CourL sLuLes LIuL
LIere Is no sucI IurLIve InLenLIon In LIIs cuse. n IucL,
LIe ew ETC conLInues Lo operuLe LIe CupILoI und vrIc
movIe LIeuLers even up Lo z; veurs uILer LIe merger.
TIere Is us veL no dIssoIuLIon, so LIe RuIInos Iuven`L
guIned unv beneIIL veL Irom LIe merger, wIIcI mukes
LIem no more IIubIe LIun LIe LIme LIe merger Look
pIuce.

The uovernment's remedy: TIe merger mereIv deIerred
LIe puvmenL Ior Luxes unLII LIe IuLure, wIIcI LIe governmenL
muv usserL IuLer on wIen guIns ure reuIIzed und beneIILs ure
dIsLrIbuLed umong LIe sLockIoIders us u resuIL oI LIe merger.
TIe Luxes ure noL IorIeILed buL mereIv posLponed und muv be
Imposed uL LIe proper LIme IuLer on.

S. ILPHIR TRAIS CORPORATIONvs. IAC
G.R. No. L-6n=n Junoury 6, 1nSS

ucts: DeIIIn PucIeco und sIsLer PeIugIu were LIe owners oI u
purceI oI Iund In PoIo (now VuIenzueIu). On AprII , 1;q, LIev
Ieused Lo ConsLrucLIon ComponenLs nLernuLIonuI nc. LIe
properLv und provIdIng Ior u rIgIL oI IIrsL reIusuI sIouId IL
decIde Lo buv LIe suId properLv.

ConsLrucLIon ComponenLs nLernuLIonuI, nc. ussIgned ILs
rIgILs und obIIguLIons under LIe conLrucL oI Ieuse In Iuvor oI
Hvdro PIpes PIIIIppInes, nc. wILI LIe sIgned conIormILv und
consenL oI DeIIIn und PeIugIu. n 1;6, u deed oI excIunge wus
execuLed beLween Iessors DeIIIn und PeIugIu PucIeco und
deIendunL DeIpIer Trudes CorporuLIon wIerebv LIe PucIecos
conveved Lo LIe IuLLer LIe Ieused properLv LogeLIer wILI
unoLIer purceI oI Iund uIso IocuLed In MuIInLu EsLuLe,
VuIenzueIu Ior z,=oo sIures oI sLock oI deIendunL corporuLIon
wILI u LoLuI vuIue oI P1.=M.

On LIe ground LIuL IL wus noL gIven LIe IIrsL opLIon Lo buv LIe
Ieused properLv pursuunL Lo LIe provIso In LIe Ieuse ugreemenL,
respondenL Hvdro PIpes PIIIIppInes, nc., IIIed un umended
compIuInL Ior reconvevunce oI LIe IoL.

Issoe: WO LIe Deed oI ExcIunge oI LIe properLIes execuLed
bv LIe PucIecos und LIe DeIpIer Trudes CorporuLIon on LIe
oLIer wus meunL Lo be u conLrucL oI suIe wIIcI, In eIIecL,
prejudIced LIe Hvdro PIII's rIgIL oI IIrsL reIusuI over LIe Ieused
properLv IncIuded In LIe "deed oI excIunge,"

Held: o, bv LIeIr ownersIIp oI LIe z,=oo no pur sIures oI
sLock, LIe PucIecos Iuve conLroI oI LIe corporuLIon. TIeIr
equILv cupILuI Is ==% us uguInsL q=% oI LIe oLIer sLockIoIders,
wIo uIso beIong Lo LIe sume IumIIv group. n eIIecL, LIe
DeIpIer Trudes CorporuLIon Is u busIness conduIL oI LIe
PucIecos. WIuL LIev reuIIv dId wus Lo InvesL LIeIr properLIes
und cIunge LIe nuLure oI LIeIr ownersIIp Irom unIncorporuLed
Lo IncorporuLed Iorm bv orgunIzIng DeIpIer Trudes
CorporuLIon Lo Luke conLroI oI LIeIr properLIes und uL LIe sume
LIme suve on InIerILunce Luxes.

TIe "Deed oI ExcIunge" oI properLv beLween LIe PucIecos und
DeIpIer Trudes CorporuLIon cunnoL be consIdered u conLrucL oI
suIe. TIere wus no LrunsIer oI ucLuuI ownersIIp InLeresLs bv LIe
PucIecos Lo u LIIrd purLv. TIe PucIeco IumIIv mereIv cIunged
LIeIr ownersIIp Irom one Iorm Lo unoLIer. TIe ownersIIp
remuIned In LIe sume Iunds. Hence, LIe prIvuLe respondenL
Ius no busIs Ior ILs cIuIm oI u IIgIL oI IIrsL reIusuI


n.CIR v. Todu, Jr.
GR No. 1A1SS; 1A September ooA

A C T S: On z MurcI 18, CC uuLIorIzed BenIgno P. Todu,
Jr., PresIdenL und owner oI .1% oI ILs ouLsLundIng cupILuI
sLock, Lo seII LIe CIbeIes BuIIdIng. On o AugusL 18, Todu
purporLedIv soId LIe properLv Ior P1oo mIIIIon Lo RuIueI A.
AILonugu, wIo, In Lurn, soId LIe sume properLv on LIe sume
duv Lo RovuI MuLcI nc. (RM) Ior Pzoo mIIIIon. TIree und u
IuII veurs IuLer Todu dIed. On z MurcI 1q, LIe BR senL un
ussessmenL noLIce und demund IeLLer Lo LIe CC Ior deIIcIencv
Income Lux Ior LIe veur 18. On z; Junuurv 1=, LIe EsLuLe
oI BenIgno P. Todu, Jr., represenLed bv specIuI co-
udmInIsLruLors ornu Kupunun und MurIo uzu BuuLIsLu,
receIved u oLIce oI AssessmenL Irom LIe CR Ior deIIcIencv
Income Lux Ior LIe veur 18. TIe EsLuLe LIereuILer IIIed u
IeLLer oI proLesL. TIe CommIssIoner dIsmIssed LIe proLesL. On
1= ebruurv 16, LIe EsLuLe IIIed u peLILIon Ior revIew wILI LIe
CTA. n ILs decIsIon LIe CTA IeId LIuL LIe CommIssIoner IuIIed
Lo prove LIuL CC commILLed Iruud Lo deprIve LIe governmenL
oI LIe Luxes due IL. L ruIed LIuL even ussumIng LIuL u pre-
conceIved scIeme wus udopLed bv CC, LIe sume consLILuLed
mere Lux uvoIdunce, und noL Lux evusIon. Hence, LIe CTA
decIured LIuL LIe EsLuLe Is noL IIubIe Ior deIIcIencv oI Income
Lux. TIe CommIssIoner IIIed u peLILIon Ior revIew wILI LIe
CourL oI AppeuIs. TIe CourL oI AppeuIs uIIIrmed LIe decIsIon
oI LIe CTA, Ience, LIIs recourse.

I S S L I: WIeLIer or noL LIIs Is u cuse oI Lux evusIon or Lux
uvoIdunce.

H I L : Tux evusIon connoLes LIe InLegruLIon oI LIree
IucLors: (1) LIe end Lo be ucIIeved, I.e. LIe puvmenL oI Iess LIun
LIuL known bv LIe Luxpuver Lo be IeguIIv due, or LIe non-
puvmenL oI Lux wIen IL Is sIown LIuL u Lux Is due; (z) un
uccompunvIng sLuLe oI mInd wIIcI Is descrIbed us beIng evII,
In bud IuILI, wIIIIuII, or deIIberuLe und noL uccIdenLuI; und
() u course oI ucLIon or IuIIure oI ucLIon wIIcI Is unIuwIuI. AII
LIese IucLors ure presenL In LIe InsLunL cuse. TIe scIeme
resorLed Lo bv CC In mukIng IL uppeur LIuL LIere were Lwo
suIes oI LIe subjecL properLIes, I.e. Irom CC Lo AILonugu, und
LIen Irom AILonugu Lo RM cunnoL be consIdered u IegILImuLe
Lux pIunnIng. SucI scIeme Is LuInLed wILI Iruud. AILonugu`s
soIe purpose oI ucquIrIng und LrunsIerrIng LILIe oI LIe subjecL
properLIes on LIe sume duv wus Lo creuLe u Lux sIeILer. TIe suIe
Lo IIm wus mereIv u Lux pIov, u sIum, und wILIouL busIness
purpose und economIc subsLunce. DoubLIess, LIe execuLIon oI
LIe Lwo suIes wus cuIcuIuLed Lo mIsIeud LIe BR wILI LIe end In
vIew oI reducIng LIe consequenL Income Lux IIubIIILv.


o. CIR v. ISSO (SeL-oII)
1 SCRA 6n; April 1S, 1nSn

ucts: ESSO overpuId ILs 1= Income Lux bv Pzz1, o.oo. L wus uccordIngIv grunLed u Lux
credIL. However, ESSO`s puvmenL oI ILs Income Lux Ior 16o wus Iound Lo be sIorL bvP6;,q.
So LIe CommIssIoner demunded puvmenL oI LIe deIIcIencv, wILI InLeresL. ESSO puId under
proLesL, IncIudIng LIe InLeresL us reckoned bv LIe CommIssIoner. ESSO`s conLenLIon: TIe
InLeresL wus more LIun LIuL properIv
due. L sIouId noL Iuve been requIred Lo puv InLeresL on LIe LoLuI umounL oI LIe deIIcIencv Lux,
P6;,q.oo, buL onIv on LIe
umounL oI P1q6,61.oo-represenLIng LIe dIIIerence beLween suId deIIcIencv und ESSOs eurIIer
overpuvmenL. ESSO LIus usked Ior u reIund.

CR`s conLenLIon: L denIed LIe cIuIm Ior reIund. ncome Luxes ure deLermIned und puId on un
unnuuI busIs, sucI deLermInuLIon und puvmenL ure sepuruLe und IndependenL LrunsucLIons; und
u Lux credIL couId noL be consIdered unLII IL Ius been IInuIIv upproved und LIe Luxpuver noLIIIed.
SInce In LIIs cuse, LIe Lux credIL wus upproved onIv on AugusL =, 16q, IL couId noL be uvuIIed oI
In reducLIon oI ESSOs eurIIer Lux deIIcIencv Ior 16o; us oI LIuL veur LIere wus no Lux credIL Lo
speuk oI. n supporL oI LIIs, LIe CommIssIoner Invokes LIe SecLIon =1 oI LIe Tux Code: (d)
nLeresL on deIIcIencv. - nLeresL upon LIe umounL deLermIned us deIIcIencv sIuII be ussessed uL
LIe sume LIme us LIe deIIcIencv und sIuII be puId upon noLIce und demund Irom LIe
CommIssIoner oI nLernuI Revenue; und sIuII be coIIecLed us u purL oI LIe Lux. ESSO uppeuIed Lo
LIe CourL oI Tux AppeuIs, wIIcI In Lurn ordered puvmenL Lo ESSO oI ILs "reIund-cIuIm. Hence,
LIIs uppeuI bv LIe CommIssIoner.

ISSLI: Wus IL proper Lo uppIv ESSO`s Lux credIL In reducIng LIe LoLuI deIIcIencv subjecL Lo
InLeresL?

HIL: Yes, regurdIess oI CR`s usserLIons, LIe IucL Is LIuL us eurIv us JuIv 1=, 16o, LIe
GovernmenL uIreudv Iud In ILs Iunds LIe sum represenLIng excess puvmenL. HuvIng been puId
und receIved bv mIsLuke, LIuL sum unquesLIonubIv beIonged Lo ESSO, und LIe GovernmenL Iud
LIe obIIguLIon Lo reLurn IL Lo ESSO. TIe obIIguLIon Lo reLurn monev mIsLukenIv puId urIses Irom
LIe momenL LIuL puvmenL Is mude, und noL Irom LIe LIme LIuL LIe puvee udmILs LIe obIIguLIon Lo
reImburse. TIe obIIguLIon oI LIe puvee Lo reImburse resuILs Irom LIe mIsLuke, noL Irom LIe
puvee's conIessIon oI LIe mIsLuke or recognILIon oI LIe obIIguLIon Lo reImburse. n oLIer words,
sInce LIe umounL oI Pzz1,o.oo beIongIng Lo ESSO wus uIreudv In LIe Iunds oI LIe
GovernmenL us oI JuIv, 16o, IL wus neILIer IeguIIv nor IogIcuIIv possIbIe Ior ESSO LIereuILer Lo
be consIdered u debLor oI LIe GovernmenL; und wIuLever oLIer obIIguLIon ESSO mIgIL
subsequenLIv Incur In Iuvor oI LIe GovernmenL wouId Iuve Lo be reduced bv LIuL sum, In respecL
oI wIIcI no InLeresL couId be cIurged.

oLIIng Is beLLer seLLIed LIun LIuL courLs ure noL Lo gIve words u meunIng wIIcI wouId Ieud Lo
ubsurd or unreusonubIe consequences. "SLuLuLes sIouId receIve u sensIbIe consLrucLIon, sucI us
wIII gIve eIIecL Lo LIe IegIsIuLIve InLenLIon und so us Lo uvoId un unjusL or ubsurd concIusIon."



1. ominuo v. Gurlitos
GR No. L-1Snn n Jone 1n6

A C T S: n DomIngo vs. Moscoso (1o6 PH 118), LIe Supreme CourL decIured us IInuI und
execuLorv LIe order oI LIe CourL oI IrsL nsLunce oI evLe Ior LIe puvmenL oI esLuLe und
InIerILunce Luxes, cIurges und penuILIes umounLIng Lo Pqo,o=8.== bv LIe EsLuLe oI LIe IuLe
WuILer ScoLL PrIce. TIe peLILIon Ior execuLIon IIIed bv LIe IIscuI, Iowever, wus denIed bv LIe
Iower courL. TIe CourL IeId LIuL LIe execuLIon Is unjusLIIIed us LIe GovernmenL ILseII Is IndebLed
Lo LIe EsLuLe Ior z6z,zoo; und ordered LIe umounL oI InIerILunce Luxes be deducLed Irom LIe
GovernmenL`s IndebLedness Lo LIe EsLuLe.

I S S L I: WIeLIer u Lux und u debL muv be compensuLed.

H I L : TIe courL IuvIng jurIsdIcLIon oI LIe EsLuLe Iud Iound LIuL LIe cIuIm oI LIe EsLuLe
uguInsL LIe GovernmenL Ius been recognIzed und un umounL oI Pz6z,zoo Ius uIreudv been
upproprIuLed bv u correspondIng Iuw (RA z;oo). Under LIe cIrcumsLunces, boLI LIe cIuIm oI LIe
GovernmenL Ior InIerILunce Luxes und LIe cIuIm oI LIe InLesLuLe Ior servIces rendered Iuve
uIreudv become overdue und demundubIe us weII us IuIIv IIquIduLed. CompensuLIon, LIereIore,
Lukes pIuce bv operuLIon oI Iuw, In uccordunce wILI ArLIcIe 1z; und 1zo oI LIe CIvII Code, und
boLI debLs ure exLInguIsIed Lo LIe concurrenL umounL. n oLIer words, LIe esLuLe und
InIerILunce Luxes ure seL oII, bv vIrLue oI LIe governmenL`s IndebLedness Lo LIe esLuLe.

.COMMISSIONIR O INTIRNAL RIVINLI V. ISABILA CLLTLRAL CORP.
(=1= SCRA ==6); ebroury 1, oo
TopIc: TIe uII-evenLs LesL; wIen deducLIons Irom Income Luxes muv be cIuImed

ucts: WIen LIe Bureuu oI nLernuI Revenue dIsuIIowed subeIu CuILuruI CorporuLIons cIuImed
deducLIons Ior LIe veurs 18q-186 In LIeIr 186 Luxes Ior expense deducLIons, Lo wIL:
(1) Expenses Ior uudILIng servIces Ior LIe veur endIng 1December 18=;
(z) Expenses Ior IeguI servIces Ior LIe veurs 18q und 18=; und
() Expense Ior securILv servIces Ior LIe monLIs oI AprII und Muv 186.

As sucI, LIe Iormer cIurged LIe IuLLer Ior deIIcIencv Income Luxes. subeIu CuILuruI CorporuLIon
conLesLs LIe ussessmenL.

Issoe No. 1. or u Luxpuver usIng LIe uccruuI meLIod, wIen do LIe IucLs presenL LIemseIves In
sucI u munner LIuL LIe Luxpuver musL recognIze Income or expense?

Rolinu: TIe uccruuI oI Income und expense Is permILLed wIen LIe uII-evenLs LesL Ius been meL.
TIIs LesL requIres: (1) IIxIng oI u rIgIL Lo Income or IIubIIILv Lo puv; und (z) LIe uvuIIubIIILv oI LIe
reusonubIe uccuruLe deLermInuLIon oI sucI Income or IIubIIILv. TIe LesL does noL demund LIuL LIe
umounL oI Income or IIubIIILv be known ubsoIuLeIv, onIv LIuL u Luxpuver Ius uL IIs dIsposuI LIe
InIormuLIon necessurv Lo compuLe LIe umounL wILI reusonubIe uccurucv. TIe uII-evenLs LesL Is
suLIsIIed wIere compuLuLIon remuIns uncerLuIn, II ILs busIs Is uncIungeubIe; LIe LesL Is suLIsIIed
wIere u compuLuLIon muv be unknown, buL Is noL us mucI us unknowubIe, wILIIn LIe LuxubIe veur.

Issoe No. . WO LIe deducLIons were properIv cIuImed bv subeIu CuILuruI CorporuLIon.

Rolinu: TIe deducLIons Ior expenses Ior proIessIonuI Iees consIsLIng oI expenses Ior IeguI und
uudILIng servIces ure OT uIIowubIe. However, LIe deducLIons Ior expenses Ior securILv servIces
were properIv cIuImed bv subeIu CuILuruI CorporuLIon. or LIe IeguI und uudILIng servIces, subeIu
CuILuruI CorporuLIon couId Iuve reusonubIv known LIe Iees oI LIose IIrms LIuL IL IIred, LIus
suLIsIvIng LIe uII-evenLs LesL. As sucI, per Revenue AudIL Memorundum Order o. 1-zooo, LIev
cunnoL vuIIdIv be deducLed Irom ILs gross Income Ior LIe suId veur und were LIereIore properIv
dIsuIIowed bv LIe BR. As Ior LIe securILv servIces, becuuse LIev were Incurred In 186, LIev couId
be properIv cIuImed us deducLIons Ior LIe suId veur.

Notes TIe requIsILes Ior LIe deducLIbIIILv oI ordInurv und necessurv Lrude, busIness, or
proIessIonuI expenses, IIke expenses puId Ior IeguI und uudILIng servIces, ure:

u. TIe expense musL be ordInurv und necessurv;
b. L musL Iuve been puId or Incurred durIng LIe LuxubIe veur;
c. L musL Iuve been puId or Incurred In currvIng on LIe Lrude or busIness oI LIe Luxpuver; und
d. L musL be supporLed bv receIpLs, records, or oLIer perLInenL pupers.

Revenue AudIL Memorundum Order o. 1-zooo, provIdes LIuL under LIe uccruuI meLIod oI
uccounLIng, expenses noL beIng cIuImed us deducLIons bv u Luxpuver In LIe currenL veur wIen LIev
ure Incurred cunnoL be cIuImed us deducLIon Irom Income Ior LIe succeedIng veur. TIus, u
Luxpuver wIo Is uuLIorIzed Lo deducL cerLuIn expenses und oLIer uIIowubIe deducLIons Ior LIe
currenL veur buL IuIIed Lo do so cunnoL deducL LIe sume Ior LIe nexL veur.

TIe proprIeLv oI un uccruuI musL be judged bv LIe IucLs LIuL u Luxpuver knew, or couId reusonubIv
be expecLed Lo Iuve known, uL LIe cIosIng oI ILs books Ior LIe LuxubIe veur. AccruuI meLIod oI
uccounLIng presenLs IurgeIv u quesLIon oI IucL; sucI LIuL LIe Luxpuver beurs LIe burden oI prooI oI
esLubIIsIIng LIe uccruuI oI un ILem oI Income or deducLIon.