TIU vs.

Video gram Regulatory Board

151 SCRA 208
GR No. L-75697, June 18, 1987
"The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax
was to favor one industry over another."
FACTS: The petitioner assails the validity of PD 1987 entitled an "Act creating the Videogram Regulatory Board,"
citing especially Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local
government. Petitioner contends that aside from its being a rider and not germane to the subject matter thereof,
and such imposition was being harsh, confiscatory, oppressive and/or unlawfully restraints trade in violation of the
due process clause of the Constitution.
ISSUE: Is PD 1987 a valid exercise of taxing power of the state?
HELD: Yes. It is beyond serious question that a tax does not cease to be valid merely because it regulates,
discourages, or even definitely deters the activities taxed. The power to impose taxes is one so unlimited in force
and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever,
except such as those rest in the discretion of the authority which exercises it. In imposing a tax, the legislature acts
upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation.
The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the
video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights,
and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the
movie
industry,
the
tax
remains
a
valid
imposition.
The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax
was to favor one industry over another.
COMMISSIONER v. ALGUE, INC.
GR No. L-28896, February 17, 1988
158 SCRA 9
FACTS: Private respondent corporation Algue, Inc. filed its income tax returns for 1958 and 1959 showing
deductions, for promotional fees paid, from their gross income, thus lowering their taxable income. The BIR
assessed Algue based on such deductions contending that the claimed deduction is disallowed because it was not
an ordinary, reasonable and necessary expense.
ISSUE: Should an uncommon business expense be disallowed as a proper deduction in computation of income
taxes, corollary to the doctrine that taxes are the lifeblood of the government?
HELD: No. Private respondent has proved that the payment of the fees was necessary and reasonable in the light of
the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an xperimental
enterprise and involve themselves in a new business requiring millions of pesos. This was no mean feat and should
be,
as
it
was,
sufficiently
recompensed.
It is well-settled that taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance On the other hand, such collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting
interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the
common
good,
may
be
achieved.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic
regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the
taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax
collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not
been observed.
Philippine Air Lines V Edu
164 SCRA 320 (1988)
Facts of the case: The disputed registration fees were imposed by the commissioner Elevate pursuant to Section 8,
RA 4136, the Land Transportation and Traffic Code.PAL as a corporation is engaged in the air transportation business
under the legislative franchise. Under its franchise, PAL is exempt from the payment of taxes. In 1971 however, appellee
Commissioner elevate issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle
registration fees. Despite PALs protest, appellee refused to register the appellants motor vehicles unless the
amounts imposed were paid. PAL thus paid, under protest, P19,529.75 as registration fees of its motor vehicles. After paying
under protest, PAL wrote to Commissioner Edu demanding a refund of the amounts paid, invoking Calalang vs.
Lorenzo where it was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is
exempt by virtue of its legislative franchise.Edu denied request for refund based on Republic v. Phil. Rabbit Bus, that
motor vehicle registration fees are regulatory and not revenue measures and, therefore, do not come within the
exemption granted to PAL under itsfranchise.PAL filed the complaint against LTC Commissioner Edu and National
Treasurer Carbonell.
ISSUE: What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?
RULING ON TAX V LICENSE AND REGULATORY FEE
SC ruled that motor vehicles registration fees are TAXES. Fees may be regarded as taxes even though theyalso
serve as instruments of regulation because taxation may be made as an implementation of the States
policepower. But if the purpose is primarily REVENUE, or if revenue is atleast, one of the real and substantial
purposes,then the exaction is properly called a TAX.
RULING ON PURPOSES OF TAX, OBJECTIVE OF TAXATION: GENERAL, FISCAL REVENUE
The Legislative intent and purpose behind the law requiring owners of vehicles , to pay for their registration is
mainly to raise funds for the construction and maintenance of highways and, to a much lesser degree, pay for
the operating expenses of the administering agency. It is possible for an exaction to be both a tax and
a regulation. License fees are charges, looked to as a source of revenue as well as a means of regulation. The fees
may be properly regarded as taxes even though they also serve as an instrument of regulation. If the purpose is

primarily revenue, or if revenue is at least one of the real and substantial purposes, then the exaction is properly
called a TAX.
RULING ON NON-DELEGABILITY OF THE POWER TO TAX
It is clear from the provisions of section 73 of Commonwealth Act 123 and section 61 of the Land Transportation and
Traffic Code that the legislative intent and purpose behind the law requiring owners of vehicles

Domingo v. GarlitosG R N o . L - 1 8 9 9 3 2 9 J u n e 1 9 6 3
F A C T S:
In Domingo vs. Moscoso (106 PHIL 1138), the Supreme Court declared as fi nal and executory the order
of the Court of First Instance of Leyte for the payment of estate and inheritance taxes, charges and
penalties amounting to P40,058.55 by the Estate of the late Walter Scott Price. The petition for
execution fi led by the fi scal, h o w e v e r , w a s d e n i e d b y t h e l o w e r c o u r t . T h e C o u r t h e l d t h a t t h e
execution is unjustifi ed as the Government itself is indebted to the Estate for 262,200; and ordered the
amount of inheritance taxes be deducted from the Governments indebtedness to the Estate.
I S S U E:
Whether a tax and a debt may be compensated.
H E L D:
The court having jurisdiction of the Estate had found that the claim of the Estate against the
Government has been recognized a n d a n a m o u n t o f P 2 6 2 , 2 0 0 h a s a l r e a d y b e e n
a p p r o p r i a t e d b y a corresponding law (RA 2700). Under the circumstances, both the claim of the
Government for inheritance taxes and the claim of the intestate for services rendered have already
become overdue and demandable as well as fully liquidated. Compensation, therefore, takes place by operation
of law, in accordance with Article 1279 and 1290 of the Civil Code, and both debts are extinguished to the
concurrent amount. In other words, the estate and inheritance taxes are set off, by virtue of the governments
indebtedness to the estate.

JOSE REYES v. PEDRO ALMANZOR

GR Nos. L-49839-46, April 26, 1991
196 SCRA 322
FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased and occupied as dwelling units
by tenants who were paying monthly rentals of not exceeding P300. Sometimes in 1971 the Rental Freezing Law
was passed prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units where
rentals do not exceed three hundred pesos (P300.00), so that the Reyeses were precluded from raising the rents
and from ejecting the tenants. In 1973, respondent City Assessor of Manila re-classified and reassessed the value of
the subject properties based on the schedule of market values, which entailed an increase in the corresponding tax
rates prompting petitioners to file a Memorandum of Disagreement averring that the reassessments made were
"excessive, unwarranted, inequitable, confiscatory and unconstitutional" considering that the taxes imposed upon
them greatly exceeded the annual income derived from their properties. They argued that the income approach
should have been used in determining the land values instead of the comparable sales approach which the City
Assessor adopted.
ISSUE: Is the approach on tax assessment used by the City Assessor reasonable?
HELD: No. The taxing power has the authority to make a reasonable and natural classification for purposes of
taxation but the government's act must not be prompted by a spirit of hostility, or at the very least discrimination
that finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons under
similar circumstances or that all persons must be treated in the same manner, the conditions not being different
both
in
the
privileges
conferred
and
the
liabilities
imposed.
Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing
Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same
government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of
their properties.

VILLEGAS vs. HIU CHIONG

86 SCRA 270
GR No. L-29646, November 10, 1978
"A tax law should be declared invalid if it fails to lay down standards to guide or limit the actions of the taxing
authority."
FACTS: The Municipal Board of Manila enacted Ordinance No. 6537 which prohibits aliens from being employed or to
engage or participate in any position or occupation or business, without first securing an employment permit from
the Mayor of Manila and paying the permit fee of P50.00. The respondent challenged the validity of the ordinance
upon the contention that it does not qualify as a valid exercise of the power to tax for, as a revenue measure
imposed on aliens employed in the City of Manila, the ordinance is discriminatory and violative of the rule of the
uniformity in taxation, and as a police power measure, it makes no distinction between useful and non-useful
occupations, imposing a fixed P50.00 employment permit, which is out of proportion to the cost of registration and
that it fails to prescribe any standard to guide and/or limit the action of the Mayor, thus, violating the fundamental
principle on delegation of legislative powers:
ISSUE: Is there a valid exercise of the taxing power of the local government?
HELD: None. First, the ordinance is not a regulatory or police power measure; it is but a revenue measure guised in
a police power measure. Second, the P50.00 fee is unreasonable not only because it is excessive but because it fails
to consider valid substantial differences in situation among individual aliens who are required to pay it. Although the

equal protection clause of the Constitution does not forbid classification, it is imperative that the classification
should be based on real and substantial differences having a reasonable relation to the subject of the particular
legislation. The same amount of P50.00 is being collected from every employed alien whether he is casual or
permanent, part time or full time or whether he is a lowly employee or a highly paid executive.
On the illegal delegation part of the argument, Ordinance No. 6537 is void for it does not lay down any criterion or
standard to guide the Mayor in the exercise of his discretion. It has been held that where an ordinance of a
municipality fails to state any policy or to set up any standard to guide or limit the mayor's action, expresses no
purpose to be attained by requiring a permit, enumerates no conditions for its grant or refusal, and entirely lacks
standard, thus conferring upon the Mayor arbitrary and unrestricted power to grant or deny the issuance of permits,
such ordinance is invalid, being an undefined and unlimited delegation of power to allow or prevent an activity per
se lawful.
LUTZ v. ARANETA
GR No. L-7859, December 22, 1955
98 PHIL 148
FACTS: Plaintiff Walter Lutz, in his capacity as judicial administrator of the intestate estate of Antionio Ledesma,
sought to recover from the CIR the sum of P14,666.40 paid by the estate as taxes, under section 3 of the CA 567 or
the Sugar Adjustment Act thereby assailing its constitutionality, for it provided for an increase of the existing tax on
the manufacture of sugar, alleging that such enactment is not being levied for a public purpose but solely and
exclusively for the aid and support of the sugar industry thus making it void and unconstitutional. The sugar
industry situation at the time of the enactment was in an imminent threat of loss and needed to be stabilized by
imposition of emergency measures.
ISSUE: Is CA 567 constitutional, despite its being allegedly violative of the equal protection clause, the purpose of
which is not for the benefit of the general public but for the rehabilitation only of the sugar industry?
HELD: Yes. The protection and promotion of the sugar industry is a matter of public concern, it follows that the
Legislature may determine within reasonable bounds what is necessary for its protection and expedient for its
promotion. Here, the legislative discretion must be allowed to fully play, subject only to the test of reasonableness;
and it is not contended that the means provided in the law bear no relation to the objective pursued or are
oppressive in character. If objective and methods are alike constitutionally valid, no reason is seen why the state
may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made the implement of the
state's police power.
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 for, among other things, the sound and balanced
conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the
form of special economic zones in order to promote the economic and social development of Central Luzon in
particular and the country in general. The law contains provisions on tax exemptions for importations of raw
materials, capital and equipment. After which the President issued several Executive Orders as mandated by the
law for the implementation of RA 7227. Herein petitioners contend the validity of the tax exemption provided for in
the law.
Issue: Whether or not the Executive Orders issued by President for the implementation of the tax exemptions
constitutes executive legislation.
Held: To limit the tax-free importation privilege of enterprises located inside the special economic zone only to raw
materials, capital and equipment clearly runs counter to the intention of the Legislature to create a free port where
the free flow of goods or capital within, into, and out of the zones is insured.
The phrase tax and duty-free importations of raw materials, capital and equipment was merely cited as an
example of 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 of example. It is obvious from the
wording of RA No. 7227, particularly the use of 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 free port zone.
The Court finds that the setting up of such commercial establishments which are the only ones duly authorized to
sell consumer items tax and duty-free is still well within the policy enunciated in Section 12 of RA No. 7227 that
. . .the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and
investment center to generate employment opportunities in and around the zone and to attract and promote
productive foreign investments. However, the Court reiterates that the second sentences of paragraphs 1.2 and
1.3 of Executive Order No. 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a limited
amount, from the Secured Area of the SSEZ, are null and void for being contrary to Section 12 of RA No. 7227. Said
Section clearly provides that exportation or removal of goods from the territory of the Subic Special Economic Zone
to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and
Tariff Code and other relevant tax laws of the Philippines.

Philippine Air Lines v. Sec of Finance GR No. 115852; 30 October 1995

F A C T S:
The Value-Added Tax [VAT] is levied on the sale, barter or exchange of goods and properties as well as
on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money
of goods or properties sold, bartered or exchanged or of the gross receipts from the sale or exchange
of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and enhance
itsadministration by amending the National Internal RevenueCode.T h e s e a r e v a r i o u s s u i t s f o r c e r t
i o r a r i a n d p r o h i b i t i o n challenging the constitutionality of RA 7716:
In the case at bar, PAL attacks the formal validity of Republic Act No. 7716. PAL contends that it violates Art.
VI, Section 26[1] which provides that "Every bill passed by Congress shall embrace only one subject which shall be
expressed in the title thereof." It is contended that neither H. No. 11197 nor S. No.1630 provided for
removal of exemption of PAL transactions from the payment of the VAT and that this was made only in

the Conference Committee bill which became Republic Act No.7716 without reflecting this fact in its title. The title of
Republic Act No. 7716 is: A N A C T R E S T R U C T U R I N G T H E VA LU E - A D D E D TAX [VAT] SYSTEM, WIDENING ITS
TAX BASE
ANDE N H A N C I N G I T S A D M I N I S T RAT I O N , A N D F O R T H E S E P U R P O S E S A M E N D I N G A N D R E P E A L I N G T
HE RELEVANT PROVISIONS OF THE NATIONALINTERNAL REVENUE CODE, AS AMENDED, ANDFOR OTHER
PURPOSES. Furthermore, section 103 of RA 7716 states the following: Section 103.
Exempt Transactions.T h e f o l l o w i n g s h a l l b e exempt from the value-added tax: [q] Transactions which are exempt under special
laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, 1590.T h e e ff e c t o f t h e
a m e n d m e n t i s t o r e m o v e t h e exe m p t i o n granted to PAL, as far as the VAT is concerned. Philippine
Airlines [PAL] claims that its franchise under P.D. No. 1590 which makes it liable for a franchise tax of only 2%
of gross revenues "in lieu of all the other fees and charges
of any k i n d , n a t u r e o r d e s c r i p t i o n , i m p o s e d , l e v i e d , e s t a b l i s h e d , a s s e s s e d o r c o l l e c t e d b y a n y
m u n i c i p a l , c i t y , p r o v i n c i a l , o r n a t i o n a l a u t h o r i t y o r g o v e r n m e n t a g e n c y , n o w o r i n t h e future,"
cannot be amended by Rep. Act No. 7716 as to make it[PAL] liable for a 10% value-added tax on revenues,
because Sec. 24 of P.D. No. 1590 provides that PAL's franchise can only be amended, modified or repealed by a
special law specifically for that purpose.
I S S U E:
Whether or not this amendment of Section 103 of the NIRC is fairly embraced in the title of Republic
Act No.7716, although no mention is made therein of P. D. No. 1590
H E L D:
The court ruled in in the affirmative. The title states that the purpose of the statute is to expand the VAT
system, and one way of doing this is to widen its base by withdrawing some of the exemptions granted
before. To insist that P. D. No.1590 be mentioned in the title of the law, in addition to Section103 of the NIRC, in
which it is specifically referred to, would be to insist that the title of a bill should be a complete index of
itscontent.T h e c o n s t i t u t i o n a l r e q u i r e m e n t t h a t e v e r y b i l l p a s s e d b y C o n g r e s s s h a l l e m b r a c e o
n l y o n e s u b j e c t w h i c h s h a l l b e expressed in its title is intended to prevent surprise upon the
m e m b e r s o f C o n g r e s s a n d t o i n f o r m t h e p e o p l e o f p e n d i n g legislation so that, if they wish to, they can
be heard regarding it. If, in the case at bar, petitioner did not know before that its exemption had been withdrawn, it
is not because of any defect in the title but perhaps for the same reason other statutes, although published,
pass unnoticed until some event somehow calls attention to their existence.
Republic Act No. 7716 expressly amends PAL's franchise
[P.D.N o . 1 5 9 0 ] b y s p e c i fi c a l l y e x c e p t i n g f r o m t h e g r a n t o f exemptions from the VAT PAL's
exemption under P. D. No.1590. This is within the power of Congress to do under Art.XII, Section 11 of
the Constitution, which provides that theg r a n t o f a f r a n c h i s e f o r t h e o p e r a t i o n o f a p u b l i c u t i l i t y
i s subject to amendment, alteration or repeal by Congress whenthe common good so requires

A B A K A D A v . E r m i t a ( D e l e g a t i o n t o t h e President) 469 SCRA 1: September 1, 2005

Facts:
RA 9337: VAT Reform Act enacted on May 24, 2005.Sec. 4 (sales of goods and properties), Sec. 5
(importation of goods) and Sec. 6 (services and lease of property) of RA 9337, in collective, granted the Secretary
of Finance the authority to ascertain: (a) whether by 12/31/05, the VAT collection as a percentage of the
2004 GDP exceeds 2.8% or (b) the national government defi cit as a percentage of the 2004 GDP
exceeds1.5%. If either condition is met, the Sec of Finance must inform the President who, in turn, must
impose the 12% VAT rate (from 10%) effective January 1, 2006. ABAKADA maintained that Congress abandoned
its exclusive authority to fi x taxes and that RA 9337 contained a uniform proviso authorizing the
President upon recommendation by the DOF Secretary to raise VAT to
12%.S e n Pi m e n t e l m a i n t a i n e d t h a t RA 9 3 3 7 c o n s t i t u t e d u n d u e delegation of legislative powers and a
violation of due process since the law was ambiguous and arbitrary. Same with
Rep.Escudero.P i l i p i n a s S h e l l d e a l e r s a r g u e d t h a t t h e V A T r e f o r m w a s arbitrary, oppressive and
confiscatory.
Respondents countered that the law was complete, that it left no discretion to the President, and that it
merely charged the President with carrying out the rate increase once any of the two conditions arise.
Issue:
WON there was undue delegation.
Held:
No delegation but mere implementation of the
law.C o n s t i t u t i o n a l l o w s a s u n d e r e x e m p t e d d e l e g a t i o n t h e delegation of tariffs, customs duties,
and other tolls, levies on goods imported and exported. VAT is tax levied on sales of goods and services
which could not fall under this exemption. Hence, its delegation if unqualified is unconstitutional. Legislative power
is authority to make a complete law. Thus, to be valid, a law must be complete in itself, setting forth therein t h e
p o l i c y a n d i t m u s t fi x a s t a n d a r d , l i m i t s o f w h i c h a r e sufficiently determinate and determinable. No
undue delegation when congress describes what job must be done who must do it and the scope of the
authority given.(Edu v Ericta)Sec of Finance was merely tasked to ascertain the existence of facts. All else was
laid out. Mainly ministerial for the Secretary to ascertain the facts and for the president to carry out
thei m p l e m e n t a t i o n f o r t h e V A T. T h e y w e r e a g e n t s o f t h e legislative department.
CIR v. PINEDA
GR No. L-22734, September 15, 1967
21 SCRA 105
FACTS: Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is Atty.
Manuel Pineda. Estate proceedings were had in Court so that the estate was divided among and awarded to the
heirs. Atty Pineda's share amounted to about P2,500.00. After the estate proceedings were closed, the BIR
investigated the income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that the
corresponding income tax returns were not filed. Thereupon, the representative of the Collector of Internal Revenue
filed said returns for the estate issued an assessment and charged the full amount to the inheritance due to Atty.
Pineda who argued that he is liable only to extent of his proportional share in the inheritance.
ISSUE: Can BIR collect the full amount of estate taxes from an heir's inheritance.
HELD: Yes. The Government can require Atty. Pineda to pay the full amount of the taxes assessed.
The reason is that the Government has a lien on the P2,500.00 received by him from the estate as his share in the

inheritance, for unpaid income taxes for which said estate is liable. By virtue of such lien, the Government has the
right to subject the property in Pineda's possession to satisfy the income tax assessment. After such payment,
Pineda will have a right of contribution from his co-heirs, to achieve an adjustment of the proper share of each heir
in
the
distributable
estate.
All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and
collecting from each one of them the amount of the tax proportionate to the inheritance received; and second, is by
subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due.
This second remedy is the very avenue the Government took in this case to collect the tax. The Bureau of Internal
Revenue should be given, in instances like the case at bar, the necessary discretion to avail itself of the most
expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted,
because taxes are the lifeblood of government and their prompt and certain availability is an imperious need.
VERA v. FERNANDEZ
GR No. L-31364 March 30, 1979
89 SCRA 199
FACTS: The BIR filed on July 29, 1969 a motion for allowance of claim and for payment of taxes representing the
estate's tax deficiencies in 1963 to 1964 in the intestate proceedings of Luis Tongoy. The administrator opposed
arguing that the claim was already barred by the statute of limitation, Section 2 and Section 5 of Rule 86 of the
Rules of Court which provides that all claims for money against the decedent, arising from contracts, express or
implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last
sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in
the notice; otherwise they are barred forever.
ISSUE: Does the statute of non-claims of the Rules of Court bar the claim of the government for unpaid taxes?
HELD: No. The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of
exception from the application of the statute of non-claims, is not hard to find. Taxes are the lifeblood of the
Government and their prompt and certain availability are imperious need. (CIR vs. Pineda, 21 SCRA 105). Upon
taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard
such interest, neglect or omission of government officials entrusted with the collection of taxes should not be
allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer
individually on account of his own negligence, the presumption being that they take good care of their personal
affairs. This should not hold true to government officials with respect to matters not of their own personal concern.
This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of
estoppel.
CIR v. CA, CITY TRUST BANKING CORP.
GR No. 86785, November 21, 1991
234 SCRA 348
FACTS: Respondent corporation Citytrust filed a refund of overpaid taxes with the BIR by which the latter denied on
the ground of prescription. Citytrust filed a petition for review before the CTA. The case was submitted for decision
based solely on the pleadings and evidence submitted by the respondent because the CIR could not present any
evidence by reason of the repeated failure of the Tax Credit/Refud Division of the BIR to transmit the records of the
case, as well as the investigation report thereon, to the Solicitor General. CTA rendered the decision ordering BIR to
grant the respondent's request for tax refund amounting to P 13.3 million.
ISSUE: Failure of the CIR to present evidence to support the case of the government, should the respondent's claim
be granted?
HELD: Not yet. It is a long and firmly settled rule of law that the Government is not bound by the errors committed
by its agents. In the performance of its governmental functions, the State cannot be estopped by the neglect of its
agent and officers. Although the Government may generally be estopped through the affirmative acts of public
officers acting within their authority, their neglect or omission of public duties as exemplified in this case will not
and
should
not
produce
that
effect.
Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that the Government cannot
and must not be estopped particularly in matters involving taxes. Taxes are the lifeblood of the nation through
which the government agencies continue to operate and with which the State effects its functions for the welfare of
its constituents. The errors of certain administrative officers should never be allowed to jeopardize the
Government's financial position, especially in the case at bar where the amount involves millions of pesos the
collection whereof, if justified, stands to be prejudiced just because of bureaucratic lethargy. Thus, it is proper that
the case be remanded back to the CTA for further proceedings and reception of evidence.
CIR v. YMCA
GR No. 124043, October 14, 1998
298 SCRA 83
FACTS: Private Respondent YMCA--a non-stock, non-profit institution, which conducts various programs beneficial to
the public pursuant to its religious, educational and charitable objectives--leases out a portion of its premises to
small shop owners, like restaurants and canteen operators, deriving substantial income for such. Seeing this, the
commissioner of internal revenue (CIR) issued an assessment to private respondent for deficiency income tax,
deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages.
YMCA opposed arguing that its rental income is not subject to tax, mainly because of the provisions of Section 27 of
NIRC which provides that civic league or organizations not organized for profit but operate exclusively for promotion
of social welfare and those organized exclusively for pleasure, recreation and other non-profitble businesses shall
not be taxed.
ISSUE: Is the contention of YMCA tenable?
HELD: No. Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in
interpretation in construing tax exemptions. Furthermore, a claim of statutory exemption from taxation should be

manifest and unmistakable from the language of the law on which it is based. Thus, the claimed exemption "must
expressly be granted in a statute stated in a language too clear to be mistaken."
DAVAO GULF LUMBER CORP v. CIR
GR No. 117359, July 23, 1998
293 SCRA 77
FACTS: Republic Act No. 1435 entitles miners and forest concessioners to the refund of 25% of the specific taxes
paid by the oil companies, which were eventually passed on to the user--the petitioner in this case--in the purchase
price of the oil products. Petitioner filed before respondent Commissioner of Internal Revenue (CIR) a claim for
refund in the amount representing 25% of the specific taxes actually paid on the above-mentioned fuels and oils
that were used by petitioner in its operations. However petitioner asserts that equity and justice demands that the
refund should be based on the increased rates of specific taxes which it actually paid, as prescribed in Sections 153
and 156 of the NIRC. Public respondent, on the other hand, contends that it should be based on specific taxes
deemed paid under Sections 1 and 2 of RA 1435.
ISSUE: Should the petitioner be entitled under Republic Act No. 1435 to the refund of 25% of the amount of specific
taxes it actually paid on various refined and manufactured mineral oils and other oil products, and not on the taxes
deemed paid and passed on to them, as end-users, by the oil companies?
HELD: No. According to an eminent authority on taxation, "there is no tax exemption solely on the ground of equity."
Thus, the tax refund should be based on the taxes deemed paid. Because taxes are the lifeblood of the nation,
statutes that allow exemptions are construed strictly against the grantee and liberally in favor of the government.
Otherwise stated, any exemption from the payment of a tax must be clearly stated in the language of the law; it
cannot be merely implied therefrom.
MARCOS II v. CA
GR No. 120880, June 5, 1997
293 SCRA 77
"The approval of the court sitting in probate is not a mandatory requirement in the collection of estate taxes."
"In case of failure to file a return, the tax may be assessed at anytime within 10 years after the omission."
FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's petition to levy
the properties of the late Pres. Marcos to cover the payment of his tax delinquencies during the period of his exile in
the US. The Marcos family was assessed by the BIR, and notices were constructively served to the Marcoses,
however the assessment were not protested administratively by Mrs. Marcos and the heirs of the late president so
that they became final and unappealable after the period for filing of opposition has prescribed. Marcos contends
that the properties could not be levied to cover the tax dues because they are still pending probate with the court,
and settlement of tax deficiencies could not be had, unless there is an order by the probate court or until the
probate proceedings are terminated.
Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Notices of Levy on the Marcos
properties were issued beyond the allowed period, and are therefore null and void.
ISSUE: Is the contention of Bongbong Marcos correct?
HELD: No. The deficiency income tax assessments and estate tax assessment are already final and unappealable
-and-the subsequent levy of real properties is a tax remedy resorted to by the government, sanctioned by Section
213 and 218 of the National Internal Revenue Code. This summary tax remedy is distinct and separate from the
other tax remedies (such as Judicial Civil actions and Criminal actions), and is not affected or precluded by the
pendency
of
any
other
tax
remedies
instituted
by
the
government.
The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory
requirement in the collection of estate taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding
with the levying and sale of the properties allegedly owned by the late President, on the ground that it was required
to seek first the probate court's sanction. 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.
On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden not to
authorize the executor or judicial administrator of the decedent's estate to deliver any distributive share to any
party interested in the estate, unless it is shown a Certification by the Commissioner of Internal Revenue that the
estate taxes have been paid. This provision disproves the petitioner's contention that it is the probate court which
approves the assessment and collection of the estate tax.
On the issue of prescription, the omission to file an estate tax return, and the subsequent failure to contest or
appeal the assessment made by the BIR is fatal to the petitioner's cause, as under Sec.223 of the NIRC, in case of
failure to file a return, the tax may be assessed at anytime within 10 years after the omission, and any tax so
assessed may be collected by levy upon real property within 3 years (now 5 years) following the assessment of the
tax. Since the estate tax assessment had become final and unappealable by the petitioner's default as regards
protesting the validity of the said assessment, there is no reason why the BIR cannot continue with the collection of
the said tax.

PHIL. BANK OF COMMUNICATIONS v. CIR

GR No. 112024, January 28, 1999
302 SCRA 250
FACTS: Petitioner PBCom filed its first and second quarter income tax returns, reported profits, and paid income
taxes amounting to P5.2M in 1985. However, at the end of the year PBCom suffered losses so that when it filed its
Annual Income Tax Returns for the year-ended December 31, 1986, the petitioner likewise reported a net loss of
P14.1 M, and thus declared no tax payable for the year. In 1988, the bank requested from CIR for a tax credit and
tax refunds representing overpayment of taxes. Pending investigation of the respondent CIR, petitioner instituted a
Petition for Review before the Court of Tax Appeals (CTA). CTA denied its petition for tax credit and refund for failing
to file within the prescriptive period to which the petitioner belies arguing the Revenue Circular No.7-85 issued by
the CIR itself states that claim for overpaid taxes are not covered by the two-year prescriptive period mandated
under the Tax Code.

ISSUE: Is the contention of the petitioner correct? Is the revenue circular a valid exemption to the NIRC?
HELD: No. The relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-year
prescriptive
period
set
by
law.
Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate funds for the
State to finance the needs of the citizenry and to advance the common weal. Due process of law under the
Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon
taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost
importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with
as
little
as
possible.
From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law
because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed
or hampered by incidental matters.
PHIL. GUARANTY CO., INC. v. CIR
GR No. L-22074, April 30, 1965
13 SCRA 775
FACTS: The petitioner Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance
contracts with foreign insurance companies not doing business in the country, thereby ceding to foreign reinsurers
a portion of the premiums on insurance it has originally underwritten in the Philippines. The premiums paid by such
companies were excluded by the petitioner from its gross income when it file its income tax returns for 1953 and
1954. Furthermore, it did not withhold or pay tax on them. Consequently, the CIR assessed against the petitioner
withholding taxes on the ceded reinsurance premiums to which the latter protested the assessment on the ground
that the premiums are not subject to tax for the premiums did not constitute income from sources within the
Philippines because the foreign reinsurers did not engage in business in the Philippines, and CIR's previous rulings
did not require insurance companies to withhold income tax due from foreign companies.
ISSUE: Are insurance companies not required to withhold tax on reinsurance premiums ceded to foreign insurance
companies, which deprives the government from collecting the tax due from them?
HELD: No. The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary
burden to preserve the State's sovereignty and a means to give the citizenry an army to resist an aggression, a
navy to defend its shores from invasion, a corps of civil servants to serve, public improvement designed for the
enjoyment of the citizenry and those which come within the State's territory, and facilities and protection which a
government is supposed to provide. Considering that the reinsurance premiums in question were afforded
protection by the government and the recipient foreign reinsurers exercised rights and privileges guaranteed by our
laws, such reinsurance premiums and reinsurers should share the burden of maintaining the state.
The petitioner's defense of reliance of good faith on rulings of the CIR requiring no withholding of tax due on
reinsurance premiums may free the taxpayer from the payment of surcharges or penalties imposed for failure to
pay the corresponding withholding tax, but it certainly would not exculpate it from liability to pay such withholding
tax. The Government is not estopped from collecting taxes by the mistakes or errors of its agents.
PHILEX MINING CORP. v. CIR
GR No. 125704, August 28, 1998
294 SCRA 687
FACTS: Petitioner Philex Mining Corp. assails the decision of the Court of Appeals affirming the Court of Tax Appeals
decision ordering it to pay the amount of P110.7 M as excise tax liability for the period from the 2nd quarter of 1991
to the 2nd quarter of 1992 plus 20% annual interest from 1994 until fully paid pursuant to Sections 248 and 249 of
the Tax Code of 1977. Philex protested the demand for payment of the tax liabilities stating that it has pending
claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of P120 M plus
interest. Therefore these claims for tax credit/refund should be applied against the tax liabilities.
ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims of tax refund of the petitioner?
HELD: No. Philex's claim is an outright disregard of the basic principle in tax law that taxes are the lifeblood of the
government and so should be collected without unnecessary hindrance. Evidently, to countenance Philex's
whimsical reason would render ineffective our tax collection system. Too simplistic, it finds no support in law or in
jurisprudence.
To be sure, Philex cannot be allowed to refuse the payment of its tax liabilities on the ground that it has a pending
tax claim for refund or credit against the government which has not yet been granted.Taxes cannot be subject to
compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each
other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate
capacity, while taxes are due to the Government in its sovereign capacity. xxx There can be no off-setting of taxes
against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the
ground that the government owes him an amount equal to or greater than the tax being collected. The collection of
a tax cannot await the results of a lawsuit against the government.
NORTH CAMARINES LUMBER CO., INC. v. CIR
GR No. L-12353, September 30, 1960
109 PHIL 511
FACTS: The petitioner sold more than 2M boardfeet of logs to General Lumber Co. with the agreement that the latter
would pay the sales taxes. The CIR, upon consultation officially advised the parties that the bureau interposes no
objection so long as the tax due shall be covered by a surety. General Lumber complied, but later failed, with the
surety, to pay the tax liabilities, and so the respondent collector required the petitioner to pay thru a letter dated
August 30, 1955. Twice did the petitioner filed a request for reconsideration before finally submitting the denied
request for appeal before the Court of Tax Appeals. The CTA dismissed the appeal as it was clearly filed out of time.
The petitioner had consumed thirty-three days from the receipt of the demand, before filing the appeal. Petitioner
argued that in computing the 30-day period in perfecting the appeal the letter of the respondent Collector dated

January 30, 1956, denying the second request for reconsideration, should be considered as the final decision
contemplated in Section 7, and not the letter of demand dated August 30, 1955.
ISSUE: Is the contention of the petitioner tenable?
HELD: No. This contention is untenable. We cannot countenance that theory that would make the commencement
of the statutory 30-day period solely dependent on the will of the taxpayer and place the latter in a position to put
off indefinitely and at his convenience the finality of a tax assessment. Such an absurd procedure would be
detrimental to the interest of the Government, for "taxes are the lifeblood of the government, and their prompt and
certain availability is an imperious need."

GOMEZ v. PALOMAR
GR No. L-23645, October 29, 1968
25 SCRA 827
FACTS: Petitioner Benjamin Gomez mailed a letter at the post office in San Fernando, Pampanga. It did not bear the
special anti-TB stamp required by the RA 1635. It was returned to the petitioner. Petitioner now assails the
constitutionality of the statute claiming that RA 1635 otherwise known as the Anti-TB Stamp law is violative of the
equal protection clause because it constitutes mail users into a class for the purpose of the tax while leaving
untaxed the rest of the population and that even among postal patrons the statute discriminatorily grants
exemptions. The law in question requires an additional 5 centavo stamp for every mail being posted, and no mail
shall be delivered unless bearing the said stamp.
ISSUE: Is the Anti-TB Stamp Law unconstitutional, for being allegedly violative of the equal protection clause?
HELD: No. It is settled that the legislature has the inherent power to select the subjects of taxation and to grant
exemptions. This power has aptly been described as "of wide range and flexibility." Indeed, it is said that in the field
of taxation, more than in other areas, the legislature possesses the greatest freedom in classification. The reason
for this is that traditionally, classification has been a device for fitting tax programs to local needs and usages in
order
to
achieve
an
equitable
distribution
of
the
tax
burden.
The classification of mail users is based on the ability to pay, the enjoyment of a privilege and on administrative
convenience. Tax exemptions have never been thought of as raising revenues under the equal protection clause.
PUNSALAN v. MUN. BOARD OF CITY OF MANILA
GR No. L-23645, October 29, 1968
95 PHIL 46
FACTS: The plaintiffs--two lawyers, medical practitioner, a dental surgeon, a CPA, and a pharmacist--sought the
annulment of Ordinance No.3398 of the City of Manila which imposes a municipal occupation tax on persons
exercising various professions in the city and penalizes non-payment of the tax, contending in substance that this
ordinance and the law authorizing it constitute class legislation, are unjust and oppressive, and authorize what
amounts to double taxation. The burden of plaintiffs' complaint is not that the professions to which they
respectively belong have been singled out for the imposition of this municipal occupation tax, but that while the law
has authorized the City of Manila to impose the said tax, it has withheld that authority from other chartered cities,
not to mention municipalities.
ISSUE: Does the law constitute a class legislation? Is it for the Court to determine which political unit should impose
taxes and which should not?
HELD: No. It is not for the courts to judge what particular cities or municipalities should be empowered to impose
occupation taxes in addition to those imposed by the National Government. That matter is peculiarly within the
domain of the political departments and the courts would do well not to encroach upon it. Moreover, as the seat of
the National Government and with a population and volume of trade many times that of any other Philippine city or
municipality, Manila, no doubt, offers a more lucrative field for the practice of the professions, so that it is but fair
that the professionals in Manila be made to pay a higher occupation tax than their brethren in the provinces.
CIR vs. VILLA
22 SCRA 3
GR No. L-23988, January 2, 1968
"What may be the subject of a judicial review is the decision of the Commissioner on the protest against
assessment, not the assessment itself."
FACTS: The spouses Villa filed joint income tax returns for the years 1951 to 1956. The BIR issued assessments for
deficiency of income tax for the said years. Without contesting the said assessments with the CIR, they filed a
petition for review with the CTA. The CTA took cognizance of the of the appeal and rendered favorable judgment to
the spouses. The CIR appealed to the SC questioning the jurisdiction of the CTA.
ISSUE: Is an appeal to the CTA proper in this case? Is the CTA vested with jurisdiction?
HELD: No. The rule is that where a taxpayer questions an assessment and asks the Collector to reconsider or cancel
the same because he (the taxpayer) believes he is not liable therefor, the assessment becomes a "disputed
assessment" that the Collector must decide, and the taxpayer can appeal to the Court of Tax Appeals only upon
receipt of the decision of the Collector on the disputed assessment. Since in the instant case the taxpayer
appealed the assessment of the Commissioner of Internal Revenue without previously contesting the same, the
appeal was premature and the Court of Tax Appeals had no jurisdiction to entertain said appeal. For, as stated, the
jurisdiction of the Tax Court is to review by appeal decisions of Internal Revenue on disputed assessments. The Tax
Court is a court of special jurisdiction. As such, it can take cognizance only of such matters as are clearly within its
jurisdiction.

REPUBLIC vs. HIZON

320 SCRA 574
GR No. 130430, December 13, 1999
"A request for reconsideration of the tax assessment does not effectively suspend the running of the precriptive
period if the same is filed after the assessment had become final and unappealable."
FACTS: On July 18, 1986, the BIR issued to respondent Salud V. Hizon a deficiency income tax assessment covering
the fiscal year 1981-1982. Respondent not having contested the assessment, petitioner BIR, on January 12, 1989,
served warrants of distraint and levy to collect the tax deficiency. However, for reasons not known, it did not
proceed to dispose of the attached properties.
More than three years later, the respondent wrote the BIR requesting a reconsideration of her tax deficiency
assessment. The BIR, in a letter dated August 11, 1994, denied the request. On January 1, 1997, it filed a case with
the RTC to collect the tax deficiency. Hizon moved to dismiss the case on two grounds: (1) that the complaint was
not filed upon authority of the BIR Commissioner as required by Sec. 221 of the NIRC, and (2) that the action had
already prescribed. Over petitioner's objection, the trial court granted the motion and dismissed the complaint.
BIR on the other hand contends that respondent's request for reinvestigation of her tax deficiency assessment on
November 1992 effectively suspended the running of the period of prescription.
ISSUE: Has the action for collection of the tax prescribed?
HELD: Yes. Sec. 229 of the NIRC mandates that a request for reconsideration must be made within 30 days from the
taxpayer's receipt of the tax deficiency assessment, otherwise the assessment becomes final, unappealable and,
therefore, demandable. The notice of assessment for respondent's tax deficiency was issued by petitioner on July
18, 1986. On the other hand, respondent made her request for reconsideration thereof only on November 3, 1992,
without stating when she received the notice of tax assessment. Hence, her request for reconsideration did not
suspend the running of the prescriptive period provided under Sec. 223(c). Although the Commissioner acted on her
request by eventually denying it on August 11, 1994, this is of no moment and does not detract from the fact that
the assessment had long become demandable.
REPUBLIC vs. ARANETA
2 SCRA 144
GR No. L-14142, May 30, 1961
"Where the tax obligation is secured by a bond, the prescriptive period for the action for the forfeiture of the bond is
governed by the Civil Code."
FACTS: The Solicitor General, in behalf of the Republic of the Philippines, filed before CFI of Manila an action against
the defendant Araneta, as principals, and Manila Surety, as surety, to recover the internal revenue taxes including
surcharges, the payment of which was guaranteed by a bond executed when the first extrajudicial demand for
payment was made. The appellant-taxpayers contend that the appellee's cause of action has prescribed, because
the action for recovery of internal revenue taxes and surcharge due brought on 22 February 1957, was not
commenced within the period of five years after the assessment dated 15 May 1948 had been made, as provided
for in Section 331 of the Tax Code.
ISSUE: Has the action to recover the taxes due from the taxpayer and the surety already prescribed?
HELD: No. The appellant-taxpayers cannot invoke prescription under the provisions of Section 331 of the NIRC
because the government is suing on the bond executed and filed by them to guarantee payment in 6 monthly
installments of the tax liability due from 1946 to 1948, which is a separate and distinct obligation of the parties
thereto. The action to enforce the obligation on the bond executed on March 18, 1949, having been filed in court on
February 22, 1957, was within the 10-year prescriptive period to enforce a written contractual obligation, as set by
the Civil Code.
FERNANDOS HERMANOS, INC. vs. COMMISSIONER
29 SCRA 552
GR No. No. L-21551, September 30, 1969
"The filing of an answer to taxpayer's petition for review is considered as institution of judicial action."
FACTS: The Commissioner of Internal Revenue assessed the petitioner investment corporation of deficiency income
taxes for the years 1950 to 1954 and for 1957. There were two conflicting dates of assessment, which are vital to
the compliance with the statute of limitations, based on each claim of the petitioner and the respondent; the
Commisioner's record of date of assesment is February 27, 1956 while the petitioner believes the demand was
made on December 27, 1955 so that, as the petitioner corporation claims, the Commissioner's action to recover its
tax liability should be deemed to have prescribed for failure on the part of the Commissioner to file a complaint for
collection against it in an appropriate civil action.
ISSUE: Has the action for collection prescribed?
HELD: No. It has been held that "a judicial action for the collection of a tax is begun by the filing of a complaint with
the proper court of first instance, or where the assessment is appealed to the Court of Tax Appeals, by filing an
answer to the taxpayer's petition for review wherein payment of the tax is prayed for." This is but logical for where
the taxpayer avails of the right to appeal the tax assessment to the Court of Tax Appeals, the said Court is vested
with the authority to pronounce judgment as to the taxpayer's liability to the exclusion of any other court. In the
present case, regardless of whether the assessments were made on February 24 and 27, 1956, as claimed by the
Commissioner, or on December 27, 1955 as claimed by the taxpayer, the government's right to collect the taxes
due has clearly not prescribed, as the taxpayer's appeal or petition for review was filed with the Tax Court on May 4,
1960, with the Commissioner filing on May 20, 1960 his Answer with a prayer for payment of the taxes due, long
before the expiration of the five-year period to effect collection by judicial action counted from the date of
assessment.

MAMBULAO LUMBER CO. vs. REPUBLIC

132 SCRA 1
GR No. L-37061, September 5, 1984
"Forest charges are internal revenue taxes and the BIR has the sole power and duty to collect them. Thus, an
assessment made by the Bureau of Forestry cannot be considered an assessment made by the BIR."
FACTS: The Bureau of Forestry sent a demand letter dated January 15, 1949 to Mambulao Lumber Co. demanding
for the payment of forest charges and surcharges. Mambulao protested the assessment. On August 29,1958, the
BIR likewise wrote a letter to the company demanding payment, which subsequently requested reinvestigation. The
BIR gave the company twenty (20) days from receipt within which to submit the results of its verification of
payments. For failure to comply and failure to pay its tax liability despite demands, CIR filed a complaint for
collection with CFI-Manila on August 25, 1961. The CFI-Manila and Court of Appeals decided against Mambulao
ordering it to pay the tax liability. Petitioner argued that the collection is barred by the statute of limitations under
Sections 332 of the NIRC. As stated, the collection should be made within the five (5) year period. From 1949 (date
when the Bureau of Forestry assessed and demand payment as forestry charges and surcharges) up to 1961 (date
of filing of complaint), it is already more than five years.
ISSUE: Has the period of filing of collection complaint prescribed?
HELD: No. The action for collection is not barred by prescription. The basis of the complaint filed on August 1961
was the demand letter made by the CIR on August 29, 1958 and not the demand letter of the Bureau of Forestry on
January 1949. So that the reckoning date of the 5-year period should be from the date of the BIR letter and not that
of the Bureau of Forestry. This must be so because forest charges are internal revenue taxes and the BIR has the
sole power and duty to collect them.
CABRERA vs. THE PROVINCIAL TREASURER OF TAYABAS
GR No. 502, January 29, 1946
"The taxpayer should at least be apprised of the exact date of the proceeding by which she is to lose her property.
Failure of the taxpayer to accordingly correct or change name in the assessment record cannot supplant such
absence of notice."
FACTS: The Provincial Treasurer of Tayabas issued a notice for the sale at public auction of the real properties of
Nemesio Cabrera forfeited for tax delinquency on December 15, 1940. The letter sent to Nemesio Cabrera was
returned marked Unclaimed for the latter was already dead in 1935. The land was actually sold in a rescheduled
public auction sale on May 1941 to Catigbac and was finalized in May 1942. Basilia Cabrera, the registered owner of
the land subject to attachment, filed a complaint with the CFI-Tayabas against the Provincial Treasurer and Catigbac
attacking the validity of the sale on the grounds that she was not notified, even though the property had remained
in the assessment book in the name of Nemesio Cabrera, because she became the registered owner thereof since
1934 when a Torrens Title was issued to her by the Register of Deeds of Tayabas.
ISSUE: Is there a need for new notices if the land was not sold on the date specified in the previous notice?
HELD: Yes. Under the law, even if the notice state that the sale would take place on a specified date and every day
thereafter, it is a general and indefinite notice. In order to protect the taxpayers rights, the taxpayer should at least
be apprised of the exact date of the proceeding by which she is to lose her property. Besides, the appellee
admittedly being not notified also vitiates the proceeding. She is the registered owner of the land and had become
liable for taxes thereon. For all purposes, she is the delinquent taxpayer "against whom the taxes were assessed." It
cannot be Nemesio for the latter's obligation to pay ended where Basilia's liability began.
Basilia may be criticized for failure to have changed the name in the assessment record. However, such
circumstance, nevertheless, cannot supplant the absence of notice.
COLLECTOR OF INTERNAL REVENUE vs. VDA. DE CODIERA
102 PHIL 1165
GR No. L-9675, September 28, 1957
"The property levied by a competent court may, with the consent thereof, be distrained, subject to the prior lien of
the attachment creditor."
FACTS: The Collector of Internal Revenue sent a warrant of distraint and levy against the properties of Restituto
Codiera for collection of certain deficiency specific tax. However, it could not be effected in view of the attachment
of the said properties of the CFI-Manila of another case. After seven years, the Collector of Internal Revenue issued
a warrant of distraint and levy commanding the City Treasurer of Cebu City to distrain the goods, chattels, or effects
and other personal property of whatever character, and levy upon the real property and interest in or rights to real
property of the estate of the deceased. The heirs of the deceased filed the action with the CTA barring the
government to collect said deficiency on the ground of prescription therefore praying to declare null and void, and
of no legal force and effect the warrant of distraint and levy which the respondent issued on March 7, 1955.
ISSUE: Does the attachment made by a court in a civil case over certain properties of a taxpayer bar the
government from enforcing a warrant of distraint and levy over the aforesaid properties in order to collect the taxes
due?
HELD: No. There may be a valid reason for non-distraint of the property which was due to the attachment of the CFIManila in another case. However, such property levied by a competent court may, with the consent thereof, be
subsequently distrained, subject to the prior lien of the attachment creditor. The attachment merely deprives the
Collector of Internal Revenue the power to divest the Court of its jurisdiction over said property but it does not
impair such rights as the Government may have for the collection of taxes.
REPUBLIC vs. CA, and NIELSON & CO.,INC.
149 SCRA 351

GR No. L-38540 April 30, 1987

"The follow-up letter reiterating demand for payment could be considered a notice of assessment in itself if duly
received by the taxpayer."
FACTS: The petitioner sought the review on certiorari of the decision of the respondent Court of Appeals reversing
the decision of the then Court of First Instance of Manila which ordered private respondent Nielson & Co., Inc. to pay
the Government the amount of P11,496.00 as ad valorem tax, occupation fees, additional residence tax and 25%
surcharge for late payment, for the years 1949 to 1952. Petitioner claims that the demand letter of 16 July 1955
showed an imprint indicating that the original thereof was released and mailed on 4 August 1955 by the Chief,
Records Section of the Bureau of Internal Revenue, and that the original letter was not returned to said Bureau;
thus, said demand letter must be considered to have been received by the private respondent. According to
petitioner, if service is made by ordinary mail, unless the actual date of receipt is shown, service is deemed
complete and effective upon the expiration of five (5) days after mailing. As the letter of demand dated 16 July
1955 was actually mailed to private respondent, there arises the presumption that the letter was received by
private respondent in the absence of evidence to the contrary. More so, where private respondent did not offer any
evidence, except the self-serving testimony of its witness, that it had not received the original copy of the demand
letter dated 16 July 1955.
ISSUE: Was notice of assessment or demand properly served to the respondent? Should the receipt by the
respondent of the succeeding follow-up demand notices be construed as receipt of the original demand?
HELD: As to the first issue, no. As correctly observed by the respondent court in its appealed decision, while the
contention of petitioner is correct that a mailed letter is deemed received by the addressee in the ordinary course of
mail, still this is merely a disputable presumption, subject to controversion, and a direct denial of the receipt thereof
shifts the burden upon the party favored by the presumption to prove that the mailed letter was indeed received by
the addressee. Since petitioner has not adduced proof that private respondent had in fact received the demand
letter of 16 July 1955, it can not be assumed that private respondent received said letter.
As to the second
issue, Yes. Records show that petitioner wrote private respondent a follow-up letter dated 19 September 1956,
reiterating its demand for the payment of taxes as originally demanded in petitioner's letter dated 16 July 1955.
This follow-up letter is considered a notice of assessment in itself which was duly received by private respondent in
accordance with its own admission. And consequently, under Section 7 of Republic Act No. 1125, the assessment is
appealable to the Court of Tax Appeals within thirty (30) days from receipt of the letter. The taxpayer's failure to
appeal in due time, as in the case at bar, makes the assessment in question final, executory and demandable. Thus,
private respondent is now barred from disputing the correctness of the assessment or from invoking any defense
that would reopen the question of its liability on the merits.
CIR vs. CA, ACMDC
242 SCRA 289
GR No. 104151 March 10, 1995
"Assessments are prima facie presumed correct and made in good faith. So that, in the absence of proof of any
irregularities in the performance of official duties, an assessment will not be disturbed."
FACTS: The Commissioner of Internal Revenue served two notices and demand for payment of the respective
deficiency ad valorem and buiness taxes for taxable years 1975 and 1976 against the respondent Atlas
Consolidated Mining and Development Corporation (ACMDC). The latter protested both assessments but the same
were denied, hence it filed two separate petitions for review in the Court of Tax Appeals. The CTA rendered a
consolidated decision holding, inter alia, that ACMDC was not liable for deficiency ad valorem taxes on copper and
silver for 1975 and 1976 thereby effectively sustaining the theory of ACMDC that in computing the ad valorem tax
on copper mineral, the refining and smelting charges should be deducted, in addition to freight and insurance
charges.
However, the tax court held ACMDC liable for the amount consisting of 25% surcharge for late payment of the ad
valorem tax and late filing of notice of removal of silver, gold and pyrite extracted during certain periods, and for
alleged deficiency manufacturer's sales tax and such contractor's tax for leasing out of its personal properties.
ACDMC elevated the matter to the Supreme Court claiming that the leasing out was a mere isolated transaction,
hence should not be subjected to contractor's tax.
ISSUE: Is the claim of the private respondent, with respect to the contractor's tax, impressed with merit?
HELD: No. It is being held that ACMDC was not a manufacturer subject to the percentage tax imposed by Section
186 of the tax code. However such conclusion cannot be made with respect to the contractor's tax being imposed
on ACMDC. It cannot validly claim that the leasing out of its personal properties was merely an isolated transaction.
Its book of accounts shows that several distinct payments were made for the use of its personal properties such as
its plane, motor boat and dump truck. The series of transactions engaged in by ACMDC for the lease of its aforesaid
properties could also be deduced from the fact that during the period there were profits earned and reported
therefor. The allegation of ACMDC that it did not realize any profit from the leasing out of its said personal
properties, since its income therefrom covered only the costs of operation such as salaries and fuel, is not
supported by any documentary or substantial evidence.
Assessments are prima facie presumed correct and made in good faith. Contrary to the theory of ACMDC, it is the
taxpayer and not the BIR who has the duty of proving otherwise. It is an elementary rule that in the absence of
proof of any irregularities in the performance of official duties, an assessment will not be disturbed. All
presumptions are in favor of tax assessments. Verily, failure to present proof of error in assessments will justify
judicial affirmance of said assessment.
ABAYA vs. EBDANE, JR.
515 SCRA 720
GR No. 167919, February 14, 2007
"A taxpayer need not be a party to the contract to challenge its validity."
FACTS: The petitioners, Plaridel M. Abaya who claims that he filed the instant petition as a taxpayer, former
lawmaker, and a Filipino citizen, and Plaridel C. Garcia likewise claiming that he filed the suit as a taxpayer, former

military officer, and a Filipino citizen, mainly seek to nullify a DPWH resolution which recommended the award to
private respondent China Road & Bridge Corporation of the contract for the implementation of the civil works known
as Contract Package No. I (CP I). They also seek to annul the contract of agreement subsequently entered into by
and between the DPWH and private respondent China Road & Bridge Corporation pursuant to the said resolution.
ISSUE: Has petitioners the legal standing to file the instant case against the government?
HELD: Petitioners, as taxpayers, possess locus standi to file the present suit. Briefly stated, locus standi is a right of
appearance in a court of justice on a given question. More particularly, it is a partys personal and substantial
interest in a case such that he has sustained or will sustain direct injury as a result of the governmental act being
challenged. Locus standi, however, is merely a matter of procedure and it has been recognized that in some cases,
suits are not brought by parties who have been personally injured by the operation of a law or any other
government act but by concerned citizens, taxpayers or voters who actually sue in the public interest.
Consequently, the Court, in a catena of cases, has invariably adopted a liberal stance on locus standi, including
those cases involving taxpayers.
The prevailing doctrine in taxpayers suits is to allow taxpayers to question contracts entered into by the national
government or government- owned or controlled corporations allegedly in contravention of law. A taxpayer is
allowed to sue where there is a claim that public funds are illegally disbursed, or that public money is being
deflected to any improper purpose, or that there is a wastage of public funds through the enforcement of an invalid
or unconstitutional law. Significantly, a taxpayer need not be a party to the contract to challenge its validity.
GONZALES vs. MARCOS
65 SCRA 624
GR No. L-31685 July 31, 1975
"With the absence of any pecuniary or monetary interest owing from the public, a taxpayer may not have the right
to question the legality of an issuance creating a trust for the benefit of the people but purely funded by charity."
FACTS: The petitioner questioned the validity of EO No. 30 creating the Cultural Center of the Philippines, having as
its estate the real and personal property vested in it as well as donations received, financial commitments that
could thereafter be collected, and gifts that may be forthcoming in the future. It was likewise alleged that the Board
of Trustees did accept donations from the private sector and did secure from the Chemical Bank of New York a loan
of $5 million guaranteed by the National Investment & Development Corporation as well as $3.5 million received
from President Johnson of the United States in the concept of war damage funds, all intended for the construction of
the Cultural Center building estimated to cost P48 million. The petition was denied by the trial court arguing that
with not a single centavo raised by taxation, and the absence of any pecuniary or monetary interest of petitioner
that could in any wise be prejudiced distinct from those of the general public.
ISSUE: Has a taxpayer the capacity to question the validity of the issuance in this case?
HELD: No. It was therein pointed out as "one more valid reason" why such an outcome was unavoidable that "the
funds administered by the President of the Philippines came from donations [and] contributions [not] by taxation."
Accordingly, there was that absence of the "requisite pecuniary or monetary interest." The stand of the lower court
finds support in judicial precedents. This is not to retreat from the liberal approach followed in Pascual v. Secretary
of Public Works, foreshadowed by People v. Vera, where the doctrine of standing was first fully discussed. It is only
to make clear that petitioner, judged by orthodox legal learning, has not satisfied the elemental requisite for a
taxpayer's suit. Moreover, even on the assumption that public funds raised by taxation were involved, it does not
necessarily follow that such kind of an action to assail the validity of a legislative or executive act has to be passed
upon. This Court, as held in the recent case of Tan v. Macapagal, "is not devoid of discretion as to whether or not it
should be entertained." The lower court thus did not err in so viewing the situation.
MACEDA vs. MACARAIG, JR.
197 SCRA 771
GR No. 88291 May 31, 1991
"A taxpayer may question the legality of a law or regulation when it involves illegal expenditure of public money."
FACTS: Senator Ernesto Maceda sought to nullify certain decisions, orders, rulings, and resolutions of respondents
Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner of Customs and the
Fiscal Incentives Review Board FIRB for exempting the National Power Corporation (NPC) from indirect tax and
duties. RA 358, RA 6395 and PD 380 expressly grant NPC exemptions from all taxes whether direct or indirect. In
1984, however, PD 1931 and EO 93 withdrew all tax exemptions granted to all GOCCs including the NPC but
granted the President and/or the Secretary of Finance by recommendation of the FIRB the power to restore certain
tax exemptions. Pursuant to the latter law, FIRB issued a resolution restoring the tax and duty exemption privileges
of the NPC. The actions of the respondents were thus questioned by the petitioner by this petition for certiorari,
prohibition and mandamus with prayer for a writ of preliminary injunction and/or restraining order. To which public
respondents argued, among others, that petitioner does not have the standing to challenge the questioned orders
and resolution because he was not in any way affected by such grant of tax exemptions.
ISSUE: Has a taxpayer the capacity to question the legality of the resolution issued by the FIRB restoring the tax
exemptions?
HELD: Yes. In this petition it is alleged that petitioner is "instituting this suit in his capacity as a taxpayer and a dulyelected Senator of the Philippines." Public respondent argues that petitioner must show that he has sustained direct
injury as a result of the action and that it is not sufficient for him to have a mere general interest common to all
members of the public. The Court however agrees with the petitioner that as a taxpayer he may file the instant
petition following the ruling in Lozada when it involves illegal expenditure of public money. The petition questions
the legality of the tax refund to NPC by way of tax credit certificates and the use of said assigned tax credits by
respondent oil companies to pay for their tax and duty liabilities to the BIR and Bureau of Customs.
CIR vs. PASCOR
309 SCRA 402

GR No. 128315 June 29, 1999

"An assessment is not necessary before a criminal charge can be filed."
FACTS: The BIR examined the books of account of Pascor Realty and Devt Corp for years 1986, 1987 and 1988, from
which a tax liability of 10.5 Million Pesos was found. Based on the recommendations of the examiners, the CIR filed
an information with the DOJ for tax evasion against the officers of Pascor. Upon receipt of the subpoena, the latter
filed an urgent request for reconsideration/reinvestigation with the CIR, which was immediately denied upon the
ground that no formal assessment has yet been issued by the Commisioner. Pascor elevated the CIR's decision to
the CTA on a petition for review. The CIR filed a Motion to Dismiss on the ground of lack of jurisdiction of CTA as
there was no formal assessment made against the respondents. The CTA dismissed the motion, hence this petition.
ISSUE: Is a formal assessment necessary in the filing of a criminal complaint?
HELD: No. Section 222 of the NIRC states that an assessment is not necessary before a criminal charge can be filed.
This is the general rule. Private respondents failed to show that they are entitled to an exception. Moreover, the
criminal charge need only be supported by a prima facie showing of failure to file a required return. This fact need
not be proven by an assessment.
The issuance of an assessment must be distinguished from the filing of a complaint. Before an assessment is
issued, there is, by practice, a pre-assessment notice sent to the taxpayer. The taxpayer is then given a chance to
submit position papers and documents to prove that the assessment is unwarranted. If the commissioner is
unsatisfied, an assessment signed by him or her is then sent to the taxpayer informing the latter specifically and
clearly that an assessment has been made against him or her. In contrast, the criminal charge need not go through
all these. The criminal charge is filed directly with the DOJ. Thereafter, the taxpayer is notified that a criminal case
had been filed against him, not that the commissioner has issued an assessment. It must be stressed that a
criminal complaint is instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code.
CIR vs. CA
257 SCRA 200
GR No. 119322 June 4, 1996
"Before one is prosecuted for willful attempt to evade or defeat any tax, the fact that a tax is due must first be
proved."
FACTS: The CIR assessed Fortune Tobacco Corp for 7.6 Billion Pesos representing deficiency income, ad valorem and
value-added taxes for the year 1992 to which Fortune moved for reconsideration of the assessments. Later, the CIR
filed a complaint with the Department of Justice against the respondent Fortune, its corporate officers, nine (9)
other corporations and their respective corporate officers for alleged fraudulent tax evasion for supposed nonpayment by Fortune of the correct amount of taxes, alleging among others the fraudulent scheme of making
simulated sales to fictitious buyers declaring lower wholesale prices, as allegedly shown by the great disparity on
the declared wholesale prices registered in the "Daily Manufacturer's Sworn Statements" submitted by the
respondents to the BIR. Such documents when requested by the court were not however presented by the BIR,
prompting the trial court to grant the prayer for preliminary injuction sought by the respondent upon the reason
that tax liabiliity must be duly proven before any criminal prosecution be had. The petitioner relying on the Ungab
Doctrine sought the lifting of the writ of preliminary mandatory injuction issued by the trial court.
ISSUE: Whose contention is correct?
HELD: In view of the foregoing reasons, misplaced is the petitioners' thesis citing Ungab v. Cusi, that the lack of a
final determination of Fortune's exact or correct tax liability is not a bar to criminal prosecution, and that while a
precise computation and assessment is required for a civil action to collect tax deficiencies, the Tax Code does not
require such computation and assessment prior to criminal prosecution.
Reading Ungab carefully, the pronouncement therein that deficiency assessment is not necessary prior to
prosecution is pointedly and deliberately qualified by the Court with following statement quoted from Guzik v. U.S.:
"The crime is complete when the violator has knowingly and wilfully filed a fraudulent return with intent to evade
and defeat a part or all of the tax." In plain words, for criminal prosecution to proceed before assessment, there
must be a prima facie showing of a wilful attempt to evade taxes. There was a wilful attempt to evade tax in Ungab
because of the taxpayer's failure to declare in his income tax return "his income derived from banana sapplings." In
the mind of the trial court and the Court of Appeals, Fortune's situation is quite apart factually since the registered
wholesale price of the goods, approved by the BIR, is presumed to be the actual wholesale price, therefore, not
fraudulent and unless and until the BIR has made a final determination of what is supposed to be the correct taxes,
the taxpayer should not be placed in the crucible of criminal prosecution. Herein lies a whale of difference between
Ungab and the case at bar.
UNGAB vs. CUSI
97 SCRA 877
GR No. L-41919-24 May 30, 1980
"An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt to defeat and evade the
income tax."
FACTS: The BIR filed six criminal charges against Quirico Ungab, a banana saplings producer, for allegedly evading
payment of taxes and other violations of the NIRC. Ungab, subsequently filed a motion to quash on the ground that
(1) the information are null and void for want of authority on the part of the State Prosecutor to initiate and
prosecute the said cases; and (2)that the trial court has no jurisdiction to take cognizance of the case in view of his
pending protest against the assessment made by the BIR examiner. The trial court denied the motion prompting the
petitioner to file a petition for certiorari and prohibition with preliminary injunction and restraining order to annul
and set aside the information filed.
ISSUE: Is the contention that the criminal prosecution is premature since the CIR has not yet resolved the protest
against the tax assessment tenable?
HELD: No. The contention is without merit. What is involved here is not the collection of taxes where the

assessment of the Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals, but a criminal
prosecution for violations of the National Internal Revenue Code which is within the cognizance of courts of first
instance. While there can be no civil action to enforce collection before the assessment procedures provided in the
Code have been followed, there is no requirement for the precise computation and assessment of the tax before
there can be a criminal prosecution under the Code.
An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt to defeat and evade
the income tax. A crime is complete when the violator has knowingly and wilfully filed a fraudulent return with
intent to evade and defeat the tax. The perpetration of the crime is grounded upon knowledge on the part of the
taxpayer that he has made an inaccurate return, and the government's failure to discover the error and promptly to
assess has no connections with the commission of the crime.
CITY OF BAGUIO vs. DE LEON
25 SCRA 938
GR No. L-24756, October 31, 1968
"There is no double taxation where one tax is imposed by the state and the other is imposed by the city."
FACTS: The City of Baguio passed an ordinance imposing a license fee on any person, entity or corporation doing
business in the City. The ordinance sourced its authority from RA No. 329, thereby amending the city charter
empowering it to fix the license fee and regulate businesses, trades and occupations as may be established or
practiced in the City. De Leon was assessed for P50 annual fee it being shown that he was engaged in property
rental and deriving income therefrom. The latter assailed the validity of the ordinance arguing that it is ultra vires
for there is no statury authority which expressly grants the City of Baguio to levy such tax, and that there it
imposed double taxation, and violates the requirement of uniformity.
ISSUE: Are the contentions of the defendant-appellant tenable?
HELD: No. First, RA 329 was enacted amending Section 2553 of the Revised Administrative Code empowering the
City Council not only to impose a license fee but to levy a tax for purposes of revenue, thus the ordinance cannot be
considered ultra vires for there is more than ample statury authority for the enactment thereof.
Second, an argument against double taxation may not be invoked where one tax is imposed by the state and the
other is imposed by the city, so that where, as here, Congress has clearly expressed its intention, the statute must
be
sustained
even
though
double
taxation
results.
And third, violation of uniformity is out of place it being widely recognized that there is nothing inherently
obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or
activity by both the state and the political subdivisions thereof.
BAGATSING vs. RAMIREZ
74 SCRA 306
GR No. L-41631, December 17, 1976
"The entrusting of the tax collection to private entities does not destroy the public purpose of a tax ordinance."
FACTS: Aside from the issue on publication, private respondent bewails that the market stall fees imposed in the
disputed City Ordinance No. 7522, which regulates public markets and prescribes fees for rentals of stalls, are
diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been
let by the City of Manila to the said corporation in a "Management and Operating Contract."
ISSUE: Does the delegation of the collection of taxes to a private entity invalidates a tax ordinance and defeats its
public purpose?
HELD: No. The assumption is of course saddled on erroneous premise. The fees collected do not go direct to the
private coffers of the corporation. Ordinance No. 7522 was not made for the corporation but for the purpose of
raising revenues for the city. That is the object it serves. The entrusting of the collection of the fees does not
destroy the public purpose of the ordinance. So long as the purpose is public, it does not matter whether the
agency through which the money is dispensed is public or private. The right to tax depends upon the ultimate use,
purpose and object for which the fund is raised. It is not dependent on the nature or character of the person or
corporation whose intermediate agency is to be used in applying it. The people may be taxed for a public purpose,
although it be under the direction of an individual or private corporation.
PASCUAL vs. SECRETARY OF PUBLIC WORKS
110 PHIL 331
GR No. L-10405, December 29, 1960
"A law appropriating the public revenue is invalid if the public advantage or benefit, derived from such expenditure,
is merely incidental in the promotion of a particular enterprise."
FACTS: Governor Wenceslao Pascual of Rizal instituted this action for declaratory relief, with injunction, upon the
ground that RA No. 920, which apropriates funds for public works particularly for the construction and improvement
of Pasig feeder road terminals. Some of the feeder roads, however, as alleged and as contained in the tracings
attached to the petition, were nothing but projected and planned subdivision roads, not yet constructed within the
Antonio Subdivision, belonging to private respondent Zulueta, situated at Pasig, Rizal; and which projected feeder
roads do not connect any government property or any important premises to the main highway. The respondents'
contention is that there is public purpose because people living in the subdivision will directly be benefitted from
the construction of the roads, and the government also gains from the donation of the land supposed to be
occupied by the streets, made by its owner to the government.
ISSUE: Should incidental gains by the public be considered "public purpose" for the purpose of justifying an
expenditure of the government?
HELD: No. It is a general rule that the legislature is without power to appropriate public revenue for anything but a
public purpose. It is the essential character of the direct object of the expenditure which must determine its validity

as justifying a tax, and not the magnitude of the interest to be affected nor the degree to which the general
advantage of the community, and thus the public welfare, may be ultimately benefited by their promotion.
Incidental to the public or to the state, which results from the promotion of private interest and the prosperity of
private
enterprises
or
business,
does
not
justify
their
aid
by
the
use
public
money.
The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to
promote the public interest, as opposed to the furtherance of the advantage of individuals, although each
advantage to individuals might incidentally serve the public.
COMMISSIONER vs. BOAC
149 SCRA 395
GR No. L-65773-74 April 30, 1987
"The source of an income is the property, activity or service that produced the income. For such source to be
considered as coming from the Philippines, it is sufficient that the income is derived from activity within the
Philippines."
FACTS: Petitioner CIR seeks a review of the CTA's decision setting aside petitioner's assessment of deficiency
income taxes against respondent British Overseas Airways Corporation (BOAC) for the fiscal years 1959 to 1971.
BOAC is a 100% British Government-owned corporation organized and existing under the laws of the United
Kingdom, and is engaged in the international airline business. During the periods covered by the disputed
assessments, it is admitted that BOAC had no landing rights for traffic purposes in the Philippines. Consequently, it
did not carry passengers and/or cargo to or from the Philippines, although during the period covered by the
assessments, it maintained a general sales agent in the Philippines Wamer Barnes and Company, Ltd., and later
Qantas Airways which was responsible for selling BOAC tickets covering passengers and cargoes. The CTA sided
with BOAC citing that the proceeds of sales of BOAC tickets do not constitute BOAC income from Philippine sources
since no service of carriage of passengers or freight was performed by BOAC within the Philippines and, therefore,
said income is not subject to Philippine income tax. The CTA position was that income from transportation is income
from services so that the place where services are rendered determines the source.
ISSUE: Are the revenues derived by BOAC from sales of ticket for air transportation, while having no landing rights
here, constitute income of BOAC from Philippine sources, and accordingly, taxable?
HELD: Yes. The source of an income is the property, activity or service that produced the income. For the source of
income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity
within the Philippines. In BOAC's case, the sale of tickets in the Philippines is the activity that produces the income.
The tickets exchanged hands here and payments for fares were also made here in Philippine currency. The site of
the source of payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine
territory, enjoying the protection accorded by the Philippine government. In consideration of such protection, the
flow of wealth should share the burden of supporting the government.
ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR
524 SCRA 73, 103
GR Nos. 141104 & 148763, June 8, 2007
"The taxpayer must justify his claim for tax exemption or refund by the clearest grant of organic or statute law and
should not be permitted to stand on vague implications."
"Export processing zones (EPZA) are effectively considered as foreign territory for tax purposes."
FACTS: Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and sale of various mineral
products, filed claims with the BIR for refund/credit of input VAT on its purchases of capital goods and on its zerorated sales in the taxable quarters of the years 1990 and 1992. BIR did not immediately act on the matter
prompting the petitioner to file a petition for review before the CTA. The latter denied the claims on the grounds
that for zero-rating to apply, 70% of the company's sales must consists of exports, that the same were not filed
within the 2-year prescriptive period (the claim for 1992 quarterly returns were judicially filed only on April 20,
1994), and that petitioner failed to submit substantial evidence to support its claim for refund/credit.
The petitioner, on the other hand, contends that CTA failed to consider the following: sales to PASAR and PHILPOS
within the EPZA as zero-rated export sales; the 2-year prescriptive period should be counted from the date of filing
of the last adjustment return which was April 15, 1993, and not on every end of the applicable quarters; and that
the certification of the independent CPA attesting to the correctness of the contents of the summary of suppliers
invoices or receipts examined, evaluated and audited by said CPA should substantiate its claims.
ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applications for refund/credit of
input VAT?
HELD: No. Although the Court agreed with the petitioner corporation that the two-year prescriptive period for the
filing of claims for refund/credit of input VAT must be counted from the date of filing of the quarterly VAT return, and
that sales to PASAR and PHILPOS inside the EPZA are taxed as exports because these export processing zones are
to be managed as a separate customs territory from the rest of the Philippines, and thus, for tax purposes, are
effectively considered as foreign territory, it still denies the claims of petitioner corporation for refund of its input
VAT on its purchases of capital goods and effectively zero-rated sales during the period claimed for not being
established
and
substantiated
by
appropriate
and
sufficient
evidence.
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the sovereign authority, and
should be construed in strictissimi juris against the person or entity claiming the exemption. The taxpayer who
claims for exemption must justify his claim by the clearest grant of organic or statute law and should not be
permitted to stand on vague implications.
BOARD OF ASSESSMENT APPEALS OF LAGUNA vs. CTA, NWSA
8 SCRA 224
GR No. L-18125, May 31, 1963
"A tax on property of the Government, whether national or local, would merely have the effect of taking money
from one pocket to put it in another pocket."

FACTS: National Waterworks and Sewerage Authority (NWSA), a public corporation owned by the Government of the
Philippines as well as all property comprising waterworks and sewerage systems placed under it, took over the
Cabuyao-Sta. Rosa-Bian Waterworks System in 1956. It was assessed by the Provincial Assessor of Laguna, for
purposes of real estate taxes, on the real properties owned by Cabuyao Waterworks. The respondent protested
claiming it is exempted from the payment of real estate taxes in view of the nature and kind of said property and
functions and activities of petitioner. The petitioner denied the protest arguing that such real properties are subject
to real estate tax because although said properties belong to the Republic of the Philippines, the same holds it, not
in its governmental, political or sovereign capacity, but in a private, proprietary or patrimonial character, which,
allegedly, is not covered by the exemption contained in section 3(a) of Republic Act No. 470.
ISSUE: Are the real properties owned by the respondent public corporation subject to real estate tax?
HELD: No. Republic Act No. 470 makes no distinction between property held in a sovereign, governmental or
political capacity and those possessed in a private, proprietary or patrimonial character. And where the law does not
distinguish neither may we, unless there are facts and circumstances clearly showing that the lawmaker intended
the contrary, but no such facts and circumstances have been brought to our attention. Indeed, the noun "property"
and the verb "owned" used in said section 3(a) strongly suggest that the object of exemption is considered more
from
the
view
point
of
dominion,
than
from
that
of
domain.
Moreover, taxes are financial burdens imposed for the purpose of raising revenues with which to defray the cost
of the operation of the Government, and a tax on property of the Government, whether national or local, would
merely have the effect of taking money from one pocket to put it in another pocket. Hence, it would not serve, in
the final analysis, the main purpose of taxation. What is more, it would tend to defeat it, on account of the paper
work, time and consequently, expenses it would entail.
PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. CITY OF BUTUAN
24 SCRA 789
GR No. L-22814, August 28, 1968
"The classification made in the exercise of power to tax, to be valid, must be reasonable ."
FACTS: Plaintiff-appellant Pepsi-Cola sought to recover the sums paid by it under protest, to the City of Butuan, and
collected by the latter, pursuant to its Municipal Ordinance No. 110 which plaintiff assails as null and void because it
partakes of the nature of an import tax, amounts to double taxation, highly unjust and discriminatory, excessive,
oppressive and confiscatory, and constitutes an invlaid delegation of the power to tax. The ordinance imposes taxes
for every case of softdrinks, liquors and other carbonated beverages, regardless of the volume of sales, shipped to
the agents and/or consignees by outside dealers or any person or company having its actual business outside the
City.
ISSUE: Does the tax ordinance violate the uniformity requirement of taxation?
HELD: Yes. The tax levied is discriminatory. Even if the burden in question were regarded as a tax on the sale of said
beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity required by the
Constitution and the law therefor, since only sales by "agents or consignees" of outside dealers would be subject to
the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their
sales, and even if the same exceeded those made by said agents or consignees of producers or merchants
established
outside
the
City
of
Butuan,
would
be
exempt
from
the
disputed
tax.
It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or
equality under all circumstances, or negate the authority to classify the objects of taxation. The classification made
in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed
satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to
the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to
future conditions substantially identical to those of the present; and (4) the classification applies equally to all those
who belong to the same class.
PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN
69 SCRA 460
GR No. L-31156, February 27, 1976
"Legislative power to create political corporations for purposes of local self-government carries with it the power to
confer on such local governmental agencies the power to tax.
FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to declare Section 2 of
Republic Act No. 2264, otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of
taxing authority as well as to declare Ordinances Nos. 23 and 27 denominated as "municipal production tax" of the
Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and collects from soft drinks producers and
manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked, and Ordinance 27
levies and collects on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a
tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. Aside from the undue
delegation of authority, appellant contends that it allows double taxation, and that the subject ordinances are void
for they impose percentage or specific tax.
ISSUE: Are the contentions of the appellant tenable?
HELD: No. On the issue of undue delegation of taxing power, it is settled that the power of taxation is an essential
and inherent attribute of sovereignty, belonging as a matter of right to every independent government, without
being expressly conferred by the people. It is a power that is purely legislative and which the central legislative
body cannot delegate either to the executive or judicial department of the government without infringing upon the
theory of separation of powers. The exception, however, lies in the case of municipal corporations, to which, said
theory does not apply. Legislative powers may be delegated to local governments in respect of matters of local
concern. By necessary implication, the legislative power to create political corporations for purposes of local selfgovernment carries with it the power to confer on such local governmental agencies the power to tax.
Also, there is no validity to the assertion that the delegated authority can be declared unconstitutional on the

theory of double taxation. It must be observed that the delegating authority specifies the limitations and
enumerates the taxes over which local taxation may not be exercised. The reason is that the State has exclusively
reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our
fundamental law, so that double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit
of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax
is
imposed
by
the
State
and
the
other
by
the
city
or
municipality.
On the last issue raised, the ordinances do not partake of the nature of a percentage tax on sales, or other taxes
in any form based thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The volume
capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on
the products, but there is not set ratio between the volume of sales and the amount of the tax.
OSMEA vs. ORBOS
220 SCRA 703
GR No. 99886, March 31, 1993
" To avoid the taint of unlawful delegation of the power to tax, there must be a standard which implies that the
legislature determines matter of principle and lays down fundamental policy."
FACTS: Senator John Osmea assails the constitutionality of paragraph 1c of PD 1956, as amended by EO 137,
empowering the Energy Regulatory Board (ERB) to approve the increase of fuel prices or impose additional amounts
on petroleum products which proceeds shall accrue to the Oil Price Stabilization Fund (OPSF) established for the
reimbursement to ailing oil companies in the event of sudden price increases. The petitioner avers that the
collection on oil products establishments is an undue and invalid delegation of legislative power to tax. Further, the
petitioner points out that since a 'special fund' consists of monies collected through the taxing power of a State,
such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it
was created. It thus appears that the challenge posed by the petitioner is premised primarily on the view that the
powers granted to the ERB under P.D. 1956, as amended, partake of the nature of the taxation power of the State.
ISSUE: Is there an undue delegation of the legislative power of taxation?
HELD: None. It seems clear that while the funds collected may be referred to as taxes, they are exacted in the
exercise of the police power of the State. Moreover, that the OPSF as a special fund is plain from the special
treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers
to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The
Court is satisfied that these measures comply with the constitutional description of a "special fund." With regard
to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon
the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority
must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and
subsidizing domestic pump rates, P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment
the resources of the Fund.
ESSO STANDARD EASTERN, INC. vs. ACTING COMMISSIONER OF CUSTOMS
18 SCRA 488
GR No. L-21841, October 28, 1966
"Exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority."
FACTS: Petitioner, engaged in the industry of processing gasoline, oils etc., claims for the refund of special import
taxes paid pursuant to the provision of RA 1394 which imposed a special import tax "on all goods, articles or
products imported or brought into the Philippines." Exempt from this tax, by express mandate of Section 6 of the
same law are "machinery, equipment, accessories, and spare parts, for the use of industries, miners, mining
enterprises, planters and farmers". Petitioner argued that the importation it made of gas pumps used by their
gasoline station operators should fall under such exemptions, being directly used in its industry. The Collector of
Customs of Manila rejected the claim, and so as the Court on Tax Appeals. The CTA noted that the pumps imported
were not used in the processing of gasoline and other oil products but by the gasoline stations, owned by the
petitioner, for pumping out, from underground barrels, gasoline sold on retail to customers.
ISSUE: Is the contention of the petitioner tenable? Does the subject imports fall into the exemptions?
HELD: No. The contention runs smack against the familiar rules that exemption from taxation is not favored, and
that exemptions in tax statutes are never presumed. Which are but statements in adherence to the ancient rule
that exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the
taxing authority. Tested by this precept, we cannot indulge in expansive construction and write into the law an
exemption not therein set forth. Rather, we go by the reasonable assumption that where the State has granted in
express terms certain exemptions, those are the exemptions to be considered, and no more. Since the law states
that, to be tax-exempt, equipment and spare parts should be "for the use of industries", the coverage herein should
not be enlarged to include equipment and spare parts for use in dispensing gasoline at retail.
PERIOD TO ASSESS AND COLLECT TAX DEFICIENCY
ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL vs. COMMISSIONER OF INTERNAL REVENUE
GR. No. 155541. January 27, 2004
Facts: During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs were managed by the
Philippine Trust Company (PhilTrust). The decedent died on April 3, 1979 but two days after her death, PhilTrust filed
her income tax return for 1978 not indicating that the decedent had died. The BIR conducted an administrative
investigation of the decedents tax liability and found a deficiency income tax for the year 1997 in the amount of
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 of Internal Revenue issued warrants of distraint and levy to
enforce the collection of decedents deficiency income tax liability and serve the same upon her heir, Francisco

Gabriel. On November 22, 1984, Commissioner filed a motion to allow his claim with probate court for the
deficiency tax. The Court denied BIRs claim against the estate on the ground that no proper notice of the tax
assessment was made on the proper party. On appeal, the CA held that BIRs service on PhilTrust of the notice of
assessment was binding on the estate as PhilTrust failed in its legal duty to inform the respondent of antecedents
death. Consequently, as the estate failed to question the assessment within the statutory period of thirty days, the
assessment became final, executory, and incontestable.
Issue: (1) Whether or not the CA erred in holding that the service of deficiency 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 final, executory, and incontestable.
Held: (1) Since the relationship between PhilTrust and the decedent was automatically severed the moment of the
taxpayers death, none of the PhilTrusts acts or omissions could bind the estate of the taxpayer. Although the
administrator of the estate may have been remiss in his legal obligation to inform respondent of the decedents
death, the consequence thereof merely refer to the imposition of certain penal sanction on the administrator. These
do not include the indefinite tolling of the prescriptive period for making deficiency tax assessment or waiver of the
notice requirement for 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 therefore no assessment served
on the estate as to the alleged underpayment of tax. Absent this assessment, no proceeding could be initiated in
court for collection of said tax; therefore, it could not have become final, executory and incontestable. Respondents
claim for collection filed with the court only on November 22, 1984 was barred for having been made beyond the
five-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 filed by petitioners in their own behalf and in behalf of other electric
cooperatives organized and existing under PD 269 which are members of petitioner Philippine Rural Electric
Cooperatives Association, Inc. (PHILRECA). The other petitioners, electric cooperatives of Agusan del Norte
(ANECO), Iloilo 1 (ILECO 1) and Isabela 1 (ISELCO 1) are non-stock, non-profit electric cooperatives organized and
existing under PD 269, as amended, and registered with the National Electrification Administration (NEA).
Under Sec. 39 of PD 269 electric cooperatives shall be exempt from the payment of all National Government, local
government, and municipal taxes and fee, including franchise, fling recordation, license or permit fees or taxes and
any fees, charges, or costs involved in any court or administrative proceedings in which it may be party.
From 1971to 1978, in order to finance the electrification projects 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 of the United States of America, through the United
States Agency for International Development (USAID) with electric cooperatives as beneficiaries. The loan
agreements contain similarly worded provisions on the tax application of the loan and any property or commodity
acquired through the proceeds of the loan.
Petitioners allege that with the passage of the Local Government Code their tax exemptions have been validly
withdrawn. Particularly, petitioners assail the validity of Sec. 193 and 234 of the said code. Sec. 193 provides for the
withdrawal of tax exemption privileges granted to all persons, whether natural or juridical, except cooperatives duly
registered under RA 6938, while Sec. 234 exempts the same cooperatives from payment of 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 of the Philippines?
(2) Is there an impairment of the obligations of contract under the loan entered into between the Philippine and the
US Governments?
Held: (1) No. The guaranty of the equal protection clause is not violated by a law based on a reasonable
classification. Classification, to be reasonable must (a) rest on substantial classifications; (b) germane to the
purpose of the law; (c) not limited to the existing conditions only; and (d) apply equally to all members of the same
class. We hold that there is reasonable classification under the Local Government Code to justify the different 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 former, the
government is the one that funds those so-called electric cooperatives, while in the latter, the members make
equitable contribution as source of funds.
a. Capital Contributions by Members Nowhere in PD 269 doe sit require cooperatives to make equitable
contributions to capital. Petitioners themselves admit that to qualify as a member of an electric cooperative under
PD 269, only the payment of a P5.00 membership fee is required which is even refundable the moment the member
is no longer interested in getting electric service from the cooperative or will transfer to another place outside the
area covered by the cooperative. However, under the Cooperative Code, the articles of cooperation of a cooperative
applying for registration must be accompanied with the bonds of the accountable officers and a sworn statement of
the treasurer elected by the subscribers showing that at least 25% of the authorized share capital has been
subscribed and at least 25% of the total subscription has been paid and in no case shall the paid-up share capital
be less than P2,000.00.
b. Extent of Government Control over Cooperatives The extent of government control over electric cooperatives
covered by PD 269 is largely a function of the role of the NEA as a primary source of funds of these electric
cooperatives. It is crystal clear that NEA incurred loans from various sources to finance the development and
operations of these electric cooperatives. Consequently, amendments were primarily geared to expand the powers
of 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 self-sufficient and independent organizations with
minimal government intervention or regulation.
Second, the classification of tax-exempt entities in the Local Government Code is germane to the purpose of the
law. The Constitutional mandate that every local government unit shall enjoy local autonomy, does not mean that
the exercise of the power by the local governments is beyond the regulation of Congress. Sec. 193 of the LGC is
indicative of the legislative intent to vet broad taxing powers upon the local government units and to limit

exemptions from local taxation to entities specifically provided therein.

Finally, Sec. 193 and 234 of the LGC permit reasonable classification as these exemptions are not limited to existing
conditions and apply equally to all members of the same class.
(2) No. It is ingrained in jurisprudence that the constitutional prohibition on the impairment of the obligations of
contracts does not prohibit every change in existing laws. To fall within the prohibition, the change must not only
impair the obligation of the existing contract, but the impairment must be substantial. Moreover, to constitute
impairment, the law must affect a change in the rights of the parties with reference 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 favor of any party
to the contract, including the beneficiaries thereof. The provisions simply shift the tax burden, if any, on the
transactions under the loan agreements to the borrower and/or beneficiary of the loan. Thus, the withdrawal by the
Local Government Code under Sec. 193 and 234 of the tax exemptions previously enjoyed by petitioners does not
impair the obligation of the borrower, the lender or the beneficiary under the loan agreements as, in fact, no tax
exemption is granted therein.
TARIFF AND CUSTOMS LAWS; PRIMARY JURISDICTION OVER SEIZURE AND FORFEITURE CASES
Chief State Prosecutor JOVENCITO R. ZUO, ATTY. CLEMENTE P. HERALDO, Chief of the Internal Inquiry
and Prosecution Division-customs Intelligence and Investigation Service (IIPD-CIIS), and LEONITO A.
SANTIAGO, Special Investigator of 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 of Customs of the Sub-Port of Tabaco, Albay, issued on September
3, 2001 Warrant of Seizure and Detention (WSD) No. 06-2001against a shipment of 35, 000 bags of rice aboard the
vessel M/V Criston for violation of Sec. 2530 of the Tariff and Customs Code of the Philippines (TCCP).
A few days, after the issuance of the warrant of seizure and detention, Antonio Chua, Jr. and Carlos Carillo, claiming
to be consignees of the subject goods, filed before the Regional Trial Court of Tabaco City, Albay a Petition with
Prayer for the Issuance of Preliminary Injunction and Temporary Restraining Order (TRO). The said petition sought to
enjoin the Bureau of Customs and its officials from detaining the subject shipment.
By virtue of said TRO, the 35,000 bags of rice were released from customs to Antonio Chua, Jr. and Carlos Carillo.
In his complaint, Chief State Prosecutor Zuo alleged that respondent Judge violated Administrative Circular No. 799, which cautions trial court judges in their issuance of TROs and writs of preliminary injunctions. Said circular
reminds judges of the principle, enunciated in Mison vs. Natividad, that the Collector of Customs has exclusive
jurisdiction over seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise thereof or
stifle or put it to naught.
Issue: Whether or not the issuance of the TRO was illegal and beyond the jurisdiction of the RTC.
Held: The collection of duties and taxes due on the seized goods is not the only reason why trial courts are enjoined
from issuing orders releasing imported articles under seizure and forfeiture proceedings by the Bureau of Customs.
Administrative Circular No. 7-99 takes into account the fact that the issuance of TROs and the granting of writs of
preliminary injunction in seizure and forfeiture proceedings before the Bureau of Customs may arouse suspicion
that the issuance or grant was fro considerations other than the strict merits of the case. Furthermore, respondent
Judges actuation goes against settled jurisprudence that the Collector of Customs has exclusive jurisdiction over
seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise thereof or stifle and put it
to naught.
Respondent Judge cannot claim that he issued the questioned TRO because he honestly believed tat the Bureau of
Customs was effectively divested of its jurisdiction over the seized shipment.
Even if it be assumed that in the exercise of the Collector of Customs of its exclusive jurisdiction over seizure and
forfeiture cases, a taint of illegality is correctly imputed, the most that can be said is that under these circumstance,
grave abuse of discretion may oust it of its jurisdiction. This does mean, however, that the trial court is vested with
competence to acquire jurisdiction over these seizure and forfeiture cases. The proceedings before the Collector of
Customs are not final. An appeal lies to the Commissioner of Customs and, thereafter, to the Court of Tax Appeals. It
may even reach this Court through an appropriate petition for review. Certainly, the RTC is not included therein.
Hence, it is devoid of jurisdiction.
Clearly, therefore, respondent Judge had no jurisdiction to take cognizance of the petition and issue the questioned
TRO.
It is a basic principle that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings
of dutiable goods. A studious and conscientious judge 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 of hydroelectric generations of power and the production of
electricity from nuclear, geothermal, and other sources, as well as, the transmission of electric power on a
nationwide basis.
For many years now, NAPOCOR sells electric power to the resident Cabanatuan City, posting a gross income of
P107,814,187.96 in 1992. Pursuant to Sec. 37 of Ordinance No. 165-92, the respondent assessed the petitioner a
franchise tax amounting to P808,606.41, representing 75% of 1% of the formers gross receipts for the preceding
year.
Petitioner, whose capital stock was subscribed and wholly paid by the Philippine Government, refused 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-profit organization, it is exempted from the payment of all forms of taxes, charges, duties or
fees in accordance with Sec. 13 of RA 6395, as amended.
The respondent filed a collection suit in the RTC of Cabanatuan City, demanding that petitioner pay the assessed
tax, plus surcharge equivalent to 25% of the amount of tax and 2% monthly interest. Respondent alleged that
petitioners exemption from local taxes has been repealed by Sec. 193 of RA 7160 (Local Government Code). The
trial court issued an order dismissing the case. On appeal, the Court of Appeals reversed the decision of the RTC

and ordered the petitioner to pay the city government the tax assessment.
Issues: (1) Is the NAPOCOR excluded from the coverage of the franchise tax simply because its stocks are wholly
owned by the National Government and its charter characterized is as a non-profit organization?
(2) Is the NAPOCORs exemption from all forms of taxes repealed by the provisions of the Local Government Code
(LGC)?
Held: (1) NO. To stress, a franchise tax is imposed based not on the ownership but on the exercise by the
corporation of a privilege to do business. The taxable entity is the corporation which exercises the franchise, and
not the individual stockholders. By virtue of its charter, petitioner was created as a separate and distinct entity from
the National Government. It can sue and be sued under its own name, and can exercise all the powers of a
corporation under the Corporation Code.
To be sure, the ownership by the National Government of its entire capital stock does not necessarily imply that
petitioner is no engage din business.
(2) YES. One of the most significant provisions of the LGC is the removal of the blanket exclusion of
instrumentalities and agencies of the National Government from the coverage of local taxation. Although as a
general rule, LGUs cannot impose taxes, fees, or charges of any kind on the National Government, its agencies and
instrumentalities, this rule now admits an exception, i.e. when specific provisions of the LGC authorize the LGUs to
impose taxes, fees, or charges on the aforementioned entities. The legislative purpose to withdraw tax privileges
enjoyed under existing laws or charter is clearly manifested by the language used on Sec. 137 and 193
categorically withdrawing such exemption subject only to the exceptions enumerated. Since it would be tedious and
impractical to attempt to enumerate all the existing statutes providing for special tax exemptions or privileges, the
LGC provided for an express, albeit general, withdrawal of 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 of Davao
GR. No. 143867, March 25, 2003
Facts: PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise tax was paid in lieu
of all taxes on this franchise or earnings thereof pursuant to RA 7082. The exemption from all taxes on this
franchise or earnings thereof was subsequently withdrawn by RA 7160 (LGC), which at the same time gave local
government units the power to tax businesses enjoying a franchise on the basis of income received or earned by
them within their territorial jurisdiction. The LGC took effect on January 1, 1992.
The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part provides: Notwithstanding
any exemption granted by law or other special laws, there is hereby imposed a tax on businesses enjoying a
franchise, a rate of seventy-five percent (75%) of one percent (1%) of the gross annual receipts for the preceding
calendar year based on the income receipts realized within the territorial jurisdiction of Davao City.
Subsequently, Congress granted in favor of Globe Mackay Cable and Radio Corporation (Globe) and Smart
Information Technologies, Inc. (Smart) franchises which contained in leiu of all taxes provisos.
In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines, Sec. 23 of which provides
that any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter
be granted, shall ipso facto become part of previously granted telecommunications franchises and shall be
accorded immediately and unconditionally to the grantees of such franchises. The law took effect on March 16,
1995.
In January 1999, when PLDT applied for a mayors permit to operate its Davao Metro exchange, it was required to
pay the local franchise tax which then had amounted to P3,681,985.72. PLDT challenged the power of the city
government to collect the local franchise tax and demanded a refund of what had been paid as a local franchise tax
for the year 1997 and for the first to the third quarters of 1998.
Issue: Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption from payment of the
local franchise tax in view of the grant of tax exemption to Globe and Smart.
Held: Petitioner contends that because their existing franchises contain in lieu of all taxes clauses, the same grant
of tax exemption must be deemed to have become ipso facto part of its previously granted telecommunications
franchise. But the rule is that tax exemptions should be granted only by a clear and unequivocal provision of law
expressed in a language too plain to be mistaken and assuming for the nonce that the charters of Globe and of
Smart grant tax exemptions, then this runabout way of granting tax exemption to PLDT is not a direct, clear and
unequivocal way of communicating the legislative intent.
Nor does the term exemption in Sec. 23 of RA 7925 mean tax exemption. The term refers to exemption from
regulations and requirements imposed by the National Telecommunications Commission (NTC). For instance, RA
7925, Sec. 17 provides: The Commission shall exempt any specific telecommunications service from its rate or tariff
regulations if the service has sufficient competition to ensure fair and reasonable rates of tariffs. Another exemption
granted by the law in line with its policy of deregulation is the exemption from the requirement of securing permits
from the NTC every time a telecommunications company imports equipment.
Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of 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 of the Tax Code which imposes percentage tax on dealers in securities and lending
investors, the Commissioner of Internal Revenue issued Memorandum Order (RMO) No. 15-91 dated March 11,
1991, imposing five percent (5%) lending investors tax on pawnshops based on their gross income and requiring all
investigating units of the Bureau to investigate and assess the lending investors tax due from them. The issuance
of RMO No. 15-91 was an offshoot of petitioners evaluation that the nature of pawnshop business is akin to that of
lending investors.
Subsequently, petitioner issued Revenue Memorandum Circular No. 43-91 dated May 27, 1992, subjecting the pawn
ticket to the documentary stamp tax as prescribed in Title VII of the Tax Code.

Adversely affected by those revenue orders, herein respondent Josefina Leal, owner and operator of Josefina
Pawnshop in San Mateo, Rizal, asked for a reconsideration of both RMO No. 15-91 and RMC No. 43-91 but the same
was denied with finality by petitioner in October 30, 1991.
Consequently, on March 18, 1992, respondent filed with the RTC a petition for prohibition seeking to prohibit
petitioner from implementing the revenue orders.
Petitioner, through the Office of the Solicitor-General, filed a motion to dismiss the petition on the ground that the
RTC has no jurisdiction to review the questioned revenue orders and to enjoin their implementation. Petitioner
contends that the subject revenue orders were issued pursuant to his power to make rulings or opinions in
connection with the Implementation of the provisions of internal revenue laws. Thus, the case falls within the
exclusive appellate jurisdiction of the Court of Tax Appeals, citing Sec. 7(1) of 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 effect new taxes (against pawnshops) which are not provided for under
the Code, and which only Congress is empowered to impose. The Court of Appeals affirmed the order issued by the
RTC.
Issue: Whether or not the Court of Tax Appeals has jurisdiction to review rulings of the Commissioner implementing
the Tax Code.
Held: The jurisdiction to review rulings of the Commissioner pertains to the Court of Tax Appeals and NOT to the
RTC. The questioned RMO and RMC are actually rulings or opinions of the Commissioner implementing the Tax Code
on the taxability of the Pawnshops.
Under RA 1125, An Act Creating the Court of Tax Appeals, such rulings of the Commissioner of Internal Revenue are
appealable to that court:
Sec. 7 Jurisdiction The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as
herein provided
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the
National Revenue Code or other laws or part of law administered by the Bureau of 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 for Review on Certiorari
submitted by the Commissioner of Internal Revenue for non-compliance with the procedural requirement of
verification explicit in Sec. 4, Rule 7 of the 1997 Rules of Civil Procedure and, furthermore, because the appeal was
not pursued by the Solicitor-General. When the motion for reconsideration filed by the petitioner was likewise
denied, petitioner filed the instant motion seeking an elucidation on the supposed discrepancy between the
pronouncement of this Court, on the one hand that would require the participation of the Office of the SolicitorGeneral and pertinent provisions of the Tax Code, on the other hand, that allow legal officers of the Bureau of
Internal Revenue (BIR) to institute and conduct judicial action in behalf of the Government under Sec, 220 of the Tax
Reform Act of 1997.
Issue: Are the legal officer of the BIR authorized to institute appeal proceedings (as distinguished from
commencement of proceeding) without the participation of the Solicitor-General?
Held: NO. The institution or commencement before a proper court of civil and criminal actions and proceedings
arising under the Tax Reform Act which shall be conducted y legal officers of the Bureau of Internal Revenue is not
in dispute. An appeal from such court, however, is not a matter of right. Sec. 220 of the Tax Reform Act must not be
understood as overturning the long-established procedure before this Court in requiring the Solicitor-General to
represent the interest of the Republic. This court continues to maintain that it is the Solicitor-General who has the
primary responsibility to appear for the government in appellate proceedings. This pronouncement finds
justification in the various laws defining the Office of the Solicitor-General, beginning with Act No. 135, which took
effect on 16 June 1901, up to the present Administrative Code of 1987. Sec. 35, Chapter 12, Title III, Book IV of the
said code outlines the powers and functions of the Office of the Solicitor General which includes, but not limited to,
its duty to
1. Represent the Government in the Supreme Court and the Court of Appeals in all criminal proceedings; represent
the Government and its officers in the Supreme Court, the Court of Appeals, and all other courts or tribunals in all
civil actions and special proceedings in which the Government or any officer thereof in his official capacity is a
party.
2. Appear in any court in any action involving the validity of any treaty, law, executive order, or proclamation, rule
or regulation when in his judgment his intervention is necessary or when requested by the Court.

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 franchise under RA 2036, the law provides tax exemption for several properties of the
company. Section 14 of RA 2036 reads: In consideration of the franchise and rights hereby granted and any
provision of law to the contrary notwithstanding, the grantee shall pay the same taxes as are now or may hereafter
be required by law from other individuals, co partnerships, private, public or quasi-public associations, corporations
or joint stock companies, on real estate, buildings and other personal property except radio equipment, machinery
and spare parts needed in connection with the business of the grantee, which shall be exempt from customs duties,
tariffs and other taxes, as well as those properties declared exempt in this section. In consideration of the franchise,
a tax equal to one and one-half per centum of all gross receipts from the business transacted under this franchise
by the grantee shall be paid to the Treasurer of the Philippines each year, within ten days after the audit and
approval of the accounts as prescribed in this Act. Said tax shall be in lieu of any and all taxes of any kind, nature or
description levied, established or collected by any authority whatsoever, municipal, provincial or national, from
which taxes the grantee is hereby expressly exempted. Thereafter, the municipal treasurer of Tupi, South Cotabato

assessed RCPI real property taxes from 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 of Assessment Appeals affirmed the
assessment of the municipal treasurer. When the case reach the C A, it ruled that, petitioner is exempt from 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 petitioners radio station building, machinery shed, and relay
station tower is valid.
Issue: (1) Whether or not appellate court erred when it excluded RCPIs tower, relay station building and machinery
shed from tax exemption.
(2) Whether or not appellate court erred when it did not resolve the issue of nullity of the tax declarations and
assessments due to non-inclusion of depreciation allowance.
Held: (1) RCPIs radio relay station tower, radio station building, and machinery shed are real properties and are
thus subject to the real property tax. Section 14 of RA 2036, as amended by RA 4054, states that in consideration
of the franchise and rights hereby granted and any provision of law to the contrary notwithstanding, the grantee
shall pay the same taxes as are now or may hereafter be required by law from other individuals, co partnerships,
private, public or quasi-public associations, corporations or joint stock companies, on real estate, buildings and
other personal property. The clear language of Section 14 states that RCPI shall pay the real estate tax.
(2) The court held the assessment valid. The court ruled that, records of the case shows that RCPI raised before the
LBAA and the CBAA the nullity of the assessments due to the non-inclusion of depreciation allowance. Therefore,
RCPI did not raise this issue for the first time. However, even if 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 of 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 wife owns several real property located in Iloilo City. Cabaluana is the Regional Director of
Regional Office No. VI of the Department of Finance in Iloilo City. After 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. After exhausting all administrative remedies, he filed a suit before the RTC which found that
Section 4(c) of Joint Assessment Regulation No. 1-85 and Local Treasury Regulation No. 2-85 issued on August 1,
1985 by respondent Secretary (formerly Minister) of Finance is null and void; (2) declaring that the penalty that
should be imposed for delinquency in the payment of real property taxes should be two per centum on the amount
of the delinquent tax for each month of delinquency or fraction thereof, until the delinquent tax is fully paid but in
no case shall the total penalty exceed twenty-four per centum of the delinquent tax as provided for in Section 66 of
P.D. 464 otherwise known as the Real Property Tax Code.
Issue: Whether or not the then Ministry of Finance could legally promulgate Regulations prescribing a rate of
penalty on delinquent taxes other than that provided for under Presidential Decree (P.D.) No. 464, also known as the
Real Property Tax Code.
Held: The Ministry of Finance now Secretary of Finance cannot promulgate regulations prescribing a rate of penalty
on delinquent taxes. The Court ruled that despite the promulgation of E.O. No. 73, P.D. No. 464 in general and
Section 66 in particular, remained to be good law. To accept the Secretarys premise that E.O. No. 73 had accorded
the Ministry of Finance the authority to alter, increase, or modify the tax structure would be tantamount to saying
that E.O. No. 73 has repealed or amended P.D. No. 464. Repeal of laws should be made clear and expressed.
Repeals by implication are not favored as laws are presumed to be passed with deliberation and full knowledge of
all laws existing on the subject. Such repeals are not favored for a law cannot be deemed repealed unless it is
clearly manifest that the legislature so intended it. Assuming argumenti that E.O. No. 73 has authorized the
petitioner to issue the objected Regulations, such conferment of powers is void for being repugnant to the wellencrusted doctrine in political law that the power of taxation is generally vested with the legislature. Thus, for
purposes of computation of the real property taxes due from private respondent for the years 1986 to 1991,
including the penalties and interests, is still Section 66 of the Real Property Tax Code of 1974 or P.D. No. 464. The
penalty that ought to be imposed for delinquency in the payment of real property taxes should, therefore, be that
provided for in Section 66 of P.D. No. 464, i.e., two per centum on the amount of the delinquent tax for each month
of delinquency or fraction thereof but in no case shall the total penalty exceed twenty-four per centum of 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 of plastic products,
it imports synthetic resin and other chemicals for the manufacture of its products. For this purpose, it is required to
file an Import Entry and Internal Revenue Declaration (Consumption Entry) with the Bureau of Customs under
Section 1301 of the Tariff and Customs Code. Sometime in October 1989, Lt. Vicente Amoto, Acting Chief of
Counter-Intelligence Division of the Economic Intelligence and Investigation Bureau (EIIB), received confidential
information 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 of account which it failed to do. The bureau
cannot find any original copies of the products Hentex imported since the originals were eaten by termites. Thus,
the Bureau relied on the certified copies of the respondents Profit and Loss Statement for 1987 and 1988 on file
with the SEC, the machine copies of the Consumption Entries, Series of 1987, submitted by the informer, as well as
excerpts from the entries certified by Tomas and Danganan. The case was submitted to the CTA which ruled that
Hentex have tax deficiency and is ordered to pay, per investigation of the Bureau. The CA ruled that the income and
sales tax deficiency assessments issued by the petitioner were unlawful and baseless since the copies of the import
entries relied upon in computing the deficiency tax of the respondent were not duly authenticated by the public

officer charged with their custody, nor verified under oath by the EIIB and the BIR investigators.
Issue: Whether or not the final assessment of the petitioner against the respondent for deficiency income tax and
sales tax for the latters 1987 importation of resins and calcium bicarbonate is based on competent evidence and
the law.
Held: Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides that the
Commissioner of Internal Revenue has the power to make assessments and prescribe additional requirements for
tax administration and enforcement. 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 for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by law
or regulation or when there is reason to believe that any such report is false, incomplete or erroneous, the
Commissioner shall assess the proper tax on the best evidence obtainable. This provision applies when the
Commissioner of Internal Revenue undertakes to perform her administrative duty of assessing the proper tax
against a taxpayer, to make a return in case of a taxpayers failure to file one, or to amend a return already filed in
the BIR. The best evidence envisaged in Section 16 of the 1977 NIRC, as amended, includes the corporate and
accounting records of the taxpayer who is the subject of the assessment process, the accounting records of other
taxpayers engaged in the same line of business, including their gross profit and net profit sales. Such evidence also
includes data, record, paper, document or any evidence gathered by internal revenue officers from other taxpayers
who had personal transactions or from whom the subject taxpayer received any income; and record, data,
document and information secured from government offices or agencies, such as the SEC, the Central Bank of the
Philippines, the Bureau of Customs, and the Tariff and Customs Commission. However, the best evidence obtainable
under Section 16 of the 1977 NIRC, as amended, does not include mere photocopies of records/documents. The
petitioner, in making a preliminary and final tax deficiency assessment against a taxpayer, cannot anchor the said
assessment on mere machine copies of records/documents. Mere photocopies of the Consumption Entries have no
probative weight if offered as proof of the contents thereof. The reason for this is that such copies are mere scraps
of paper and are of no probative value as basis for any deficiency income or business taxes against a taxpayer.

Companies exempt from 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 foreign corporation operating in the Philippines, it is a registered
taxpayer. On April 13, 1999, [respondent] filed with the BIR a letter-request for the refund of its 1997 excess input
taxes in the amount of P3,751,067.04, which amount was arrived at after deducting from its total input VAT paid of
P3,763,060.43 its applied output VAT liabilities only for the third and fourth quarters of 1997 amounting to
P5,193.66 and P6,799.43, respectively. The CTA ruled in favor of the herein respondent holding that its services are
subject to zero-rate pursuant to Section 108(b) of the Tax Reform Act of 1997 and Section 4.102-2 (b)(2) of Revenue
Regulations 5-96. The CA affirmed the decision of the CTA.
Issue: Whether or not the company is subject to zero-rate tax pursuant to the Tax Reform Act of 1997.
Held: Services performed by VAT-registered persons in the Philippines (other than the processing, manufacturing or
repacking of goods for persons doing business outside the Philippines), when paid in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the BSP, are zero-rated. Respondent is a VATregistered person that facilitates the collection and payment of receivables belonging to its non-resident foreign
client, for which it gets paid in acceptable foreign currency inwardly remitted and accounted for in conformity with
BSP rules and regulations. Certainly, the service it renders in the Philippines is not in the same category as
processing, manufacturing or repacking of goods and should, therefore, be zero-rated. In reply to a query of
respondent, the BIR opined in VAT Ruling No. 080-89 that the income respondent earned from its parent companys
regional operating centers (ROCs) was automatically zero-rated effective January 1, 1988. Service has been defined
as the art of doing something useful for a person or company for a fee or useful labor or work rendered or to be
rendered by one person to another. For facilitating in the Philippines the collection and payment of receivables
belonging to its Hong Kong-based foreign client, and getting paid for it in duly accounted acceptable foreign
currency, respondent renders service falling under the category of zero rating. Pursuant to the Tax Code, a VAT of
zero percent should, therefore, be levied upon the supply of that service.
As a general rule, the VAT system uses the destination principle as a basis for the jurisdictional reach of 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 for services that are performed in the Philippines, paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the BSP. Thus, for the supply of service
to be zero-rated as an exception, the law merely requires that first, the service be performed in the Philippines;
second, the service fall under any of the However, the law clearly provides for an exception to the destination
principle; that is, for a zero percent categories in Section 102(b) of the Tax Code; and, third, it be paid in acceptable
foreign currency accounted for in accordance with BSP rules and regulations. Indeed, these three requirements for
exemption from the destination principle are met by respondent. Its facilitation service is performed in the
Philippines. It falls under the second category found in Section 102(b) of the Tax Code, because it is a service other
than processing, manufacturing or repacking of goods as mentioned in the provision. Undisputed is the fact that
such service meets the statutory condition that it be paid in acceptable foreign currency duly accounted for in
accordance with BSP rules. Thus, it should be zero-rated.

Philippine Air Lines VS EDU

H R L - 4 1 3 8 3 A u g u s t
1 5 ,
1 9 8 8 Gutierrez, J.:
FACTS: PAL is engaged in air transportation business under a legislative franchise wherein it is exempt from tax payment. PAL has
not been paying motor vehicle registration since1956. The Land Registration Commissioner required all tax exempt entities
including PAL to pay motor vehicle registration fees.
ISSUE: Whether or not registration fees as to motor vehicles are taxes to which PAL is exempted.
RULING: Taxes are for revenue whereas fees are exactions for purposes of regulation and inspection, and are for that reason
limited in amount to what is necessary to cover the cost of the services rendered in that connection. It is the object
of the charge, and not the name, that determines whether a charge is a tax or a fee. The money collected under
Motor Vehicle Law is not intended for the expenditures of the MV Office but accrues to thefunds for the construction and
maintenance of public roads, streets and bridges. As fees are not collected for regulatory purposes as an incident

to the enforcement of regulations governing the operation of motor vehicles on public highways but to provide
revenue with which the Government is to construct and maintain public highways for everyones use, they are veritable taxes, not
merely fees. PAL is thus exempt from paying such fees, except for the period between June 27, 1968 to April 9,
1979 where its taxexemption in the franchise was repealed.

CALTEX PHILIPPINES VS CA
G . R .
9 2 5 5 8 5 M A Y
8 ,
1 9 9 2 Davide, J.:
FACTS: In 1989, COA sent a letter to Caltex directing it to remit to OPSF its collection of the additional tax on
petroleum authorized under PD 1956 and pending such remittance, all of its claims from the OPSF shall be held
in abeyance. Petitioner requested COA for the early release of its reimbursement certificates from the OPSF covering
claims with the Office of Energy Affairs. COA denied the same.
ISSUE: Whether or not petitioner can avail of the right to offset any amount that it may be required under the law
to remit to the OPSF against any amount that it may receive byway of reimbursement.
RULING: It is a settled rule that a taxpayer may not offset taxes due from the claims that he may have against the
government. Taxes cannot be the subject of compensation because the government and taxpayer are not mutually debtors
and creditors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be setoff. The oil companies merely acted as agents for the government in the latters collection since taxes are passed unto
the end-users, the consuming public.