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.
COMMISSIONER v. ALGUE, INC.
GR No. L-28896, February 17, 1988
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 experimental 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.
Francia vs. Intermediate Appellate Court
GR L-67649, 28 June 1988
Third Division, Gutierrez Jr. (J): 4 concur
Facts: Engracio Francia was the registered owner of a house and lot located in Pasay City. A
portion of such property was expropriated by the Republic of the Philippines in 1977. It
appeared that Francia did not pay his real estate taxes from 1963 to 1977. Thus, his
property was sold in a public auction by the City Treasurer of Pasay City.
Issue: Whether the expropriation payment may compensate for the real estate taxes due.
Held: 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 agianst the government. Internal
revenue taxes cannot be the subject of compensation. The Government and the taxpayer
are not mutually creditors and debtors of each other under Article 1278 of the Civil Code and
a claim of taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.

Progressive Development Corporation vs. Quezon City

GR 36081, 24 April 1989
Third Division, Feliciano (J): 4 concur
Facts: The City Council of Quezon City adopted Ordinance 7997 (1969) where privately
owned and operated public markets to pay 10% of the gross receipts from stall rentals to the
City, as supervision fee. Such ordinance was amended by Ordinance 9236 (1972), which
imposed a 5% tax on gross receipts on rentals or lease of space in privately-owned public
markets in Quezon City. Progressive Development Corp., owned and operator of Farmers
Market and Shopping Center, filed a petition for prohibition against the city on the ground
that the supervision fee or license tax imposed is in reality a tax on income the city cannot
impose.
Issue: Whether the supervision fee / license tax is a tax on income.

Held: The 5% tax imposed in Ordinance 9236 does not constitute a tax on income, nor a city
income tax (distinguished from the national income tax by the Tax Code) within the meaning
of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation
of business in which the company is engaged. To be considered a license fee, the imposition
must relate to an occupation or activity that so engages the public interest in health, morals,
safety and development as to require regulations for the protection and promotion of such
public interest; the imposition must also bear a reasonable relation to the probable expenses
of the regulation, taking into account not only the costs of direct regulation but also its
incidental consequences as well. The gross receipts from stall rentals have been used only
as a basis for computing the fees or taxes due to the city to cover the latters administrative
expenses. The use of the gross amount of stall rentals, as basis for the determination of the
collectible amount of license tax, does not by itself convert or render the license tax into a
prohibited city tax on income. For ordinarily, the higher the amount of stall rentals, the
higher the aggregate volume of foodstuffs and related items sold in the privately owned
market; and the higher the volume of goods sold in such market, the greater extent and
frequency of inspection and supervision that may be reasonably required in the interest of
the buying public.
Apostolic Prefect of Mountain Province vs. City Treasurer of Baguio City
GR 47252, 18 April 1941
En Banc, Imperial (J): 4 concur
Facts: The Apostolic Prefect is a corporation sole, of religious character, organized under the
Philippine laws, and with residence in Baguio, The City imposed a special assessment
against properties within its territorial jurisdiction, including those of the Apostolic Prefect,
which benefits from its drainage and sewerage system. The Apostolic Prefect contends that
its properties should be free of tax.
Issue: Whether the Apostolic Prefect, as a religious entity, is exempt from the payment of the
special assessment.
Held: In its broad meaning, tax includes both general taxes and special assessment. Yet
actually, there is a recognized distinction between them in that assessment is confined to
local impositions upon property for the payment of the cost of public improvements in its
immediate vicinity and levied with reference to special benefits to the property assessed. A
special assessment is not, strictly speaking, a tax; and neither the decree nor the
Constitution exempt the Apostolic Prefect from payment of said special assessment.
Furthermore, arguendo that exemption may encompass such assessment, the Apostolic
Prefect cannot claim exemption as it has not proven the property in question is used
exclusively for religious purposes; but that it appears that the same is being used to other
non-religious purposes. Thus, the Apostolic Prefect is required to pay the special
assessment.
Diaz vs. Secretary of Finance (2011)
Facts: Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed this petition for
declaratory relief assailing the validity of the impending imposition of value-added
tax (VAT) by the Bureau of Internal Revenue (BIR) on the collections of tollway

operators. Court treated the case as one of prohibition. Petitioners hold the view that
Congress did not, when it enacted the NIRC, intend to include toll fees within the meaning of
"sale of services" that are subject to VAT; that a toll fee is a "user's tax," not a sale of
services; that to impose VAT on toll fees would amount to a tax on public
service; and that, since VAT was never factored into the formula for computing toll
fees, its imposition would violate the non-impairment clause of the constitution. The government
avers that the NIRC imposes VAT on all kinds of services of franchise grantees,
including tollway operations; that the Court should seek the meaning and intent of the law
from the words used in the statute; and that the imposition of VAT on tollway operations has
been the subject as early as 2003 of several BIR rulings and circulars. The government also
argues that petitioners have no right to invoke the non-impairment of contracts
clause since they
clearly
have no personal interest in existing toll
operating agreements (TOAs) between the government and tollway operators. At any
rate, the non-impairment clause cannot limit the State's sovereign taxing power which is generally
read into contracts.
Issue: May toll fees collected by tollway operators be subjected to VAT (Are tollway operations
a franchise and/or a service that is subject to VAT)?
Ruling: When a tollway operator takes a toll fee from a motorist, the fee is in effect for the
latter's use of the tollway facilities over which the operator enjoys private proprietary rights
that its contract and the law recognize. In this sense, the tollway operator is no different
from the service providers under Section108 who allow others to use their properties
or facilities for a fee. Tollway operators are franchise grantees and they do not belong to
exceptions that Section 119 spares from the payment of VAT. The word "franchise" broadly
covers government grants of a special right to do an act or series of acts of public concern.
Tollway operators are, owing to the nature and object of their business, "franchise grantees."
The construction, operation, and maintenance of toll facilities on public improvements are
activities of public consequence that necessarily require a special grant of authority from the
state. A tax is imposed under the taxing power of the government principally for
the purpose of raising revenues to fund public expenditures. Toll fees, on the
other hand, are collected by private tollway operators as reimbursement for the costs
and expenses incurred in the construction, maintenance and operation of the tollways, as
well as to assure them a reasonable margin of income. Although toll fees are charged for the
use of public facilities, therefore, they are not government exactions that can be
properly treated
a s a t a x . Ta x e s
may
be imposed only by
the
g o v e r n m e n t u n d e r i t s s o v e r e i g n authority, toll fees may be demanded by either the
government or private individuals or entities, as an attribute of ownership.
Hydro Resources Contractors Corporation v CTA
Facts:
National Irrigation Administration (NIA) entered into an agreement with Hydro Resources for
the construction of the Magat River Multipurpose Project in Isabela. Under their contract,
Hydro was allowed to procure new construction equipment, the payment for which will be
advanced by NIA. Hydro shall repay NIA the costs incurred and the manner of repayment
shall be through deductions from each monthly payment due to Hydro. Hydro shall repay NIA
the full value of the construction before the eventual transfer of ownership.

Upon transfer, Hydro was assessed an additional 3% ad valorem duty which it paid under
protest. The Collector of Customs then ordered for the refund of the ad valorem duty in the
form of tax credit. This was then reversed by the Deputy Minister of Finance.
Issue:
Whether or not the imposition of the 3% ad valorem tax on importations is valid.
Held:
No. EO 860 which was the basis for the imposition of the ad valorem duty took effect
December 1982. The importations were effected in 1978 and 1979 by NIA. It is a cardinal
rule that laws shall have no retroactive effect unless contrary is provided. EO 860 does not
provide for its retroactivity. The Deputy Minister of Finance even clarified that letters of
credit opened prior to the effectivity of EO 860 are not subject to its provisions.
In the case, the procurement of the equipment was not on a tax exempt basis as the import
liabilities have been secured to paid under a financial scheme. It is a matter of implementing
a pre-existing agreement, hence, the imported articles can only be subject to the rates of
import duties prevailing at the time of entry or withdrawal from the customs custody.
CIR v Ayala Securities Corp

Ayala Securities Corp filed its ITR w/ the CIR for the fiscal year w/c ended on Sept 30,
1955.
Attached to its ITR was the audited financial statements showing a surplus of P2M+.
Income tax due on the return was duly paid w/in the period prescribed by law.
CIR then advised Ayala for the assessment of P758k unpaid tax on its accumulated
surplus.
Ayala protested ate assessment and sought reconsideration given that the
accumulation was 1) for a bona fide business purpose and not to avoid imposition of tax,
and 2) assessment was issued beyond 5 yrs.
CTA and SC both held that the assessment was made beyond the 5-year period and
thus had no binding force and effect.
I: W/n the assessment was done beyond the prescriptive period
R: YES.
In this case, the applicable provision is NOT Sec 332a but Sec 331.
Sec 332 should apply when there is fraud / falsity on the return with intent to evade
payment of tax.
There is no evidence presented by the CIR in this case as to any fraud/falsity on the
return w/ intent to avoid payment.
Fraud is a question of fact, circumstances must be proven and alleged.
In this case, the assessment issued on Feb 21, 1961, received by Ayala on March 22,
1961, was made BEYOND the 5 year period prescribed under Sec331 (Ayala could file its
income tax on or before Jan 1956 thus, assessment must be made NOT later than Jan
1961). Thus, it was no longer binding on Ayala Securities.

Villanueva vs. Iloilo City GR L-26521, 28 December 1968 En Banc, Castro (J): 8
concur
Facts: On 30 September 1946, the Municipal Board of Iloilo City enacted Ordinance 86
imposing license tax fees upon tenement house (P25); tenemen house partly engaged or
wholly engaged in and dedicated to business in Baza, Iznart, and Aldeguer Streets (P24 per
apartment); and tenement house, padtly or wholly engaged in business in other streets (P12
per apartment). The validity of such ordinance was challenged by Eusebio and Remedios
Villanueva, owners of four tenement houses containing 34 apartments. The Supreme Court

held the ordinance to be ultra vires. On 15 January 1960, however, the municipal board,
believing that it acquired authority to enact an ordinance of the same nature pursuant to the
Local Autonomy Act, enacted Ordinance 11 (series of 1960), Eusebio and Remedios
Villaniueva assailed the ordinance anew.
Issue: Whether Ordinance 11 violate the rule of uniformity of taxation.
Held: The Court has ruled that tenement houses constitute a distinct class of property; and
that taxes are uniform and equal when imposed upon all property of the same class or
character within the taxing authority. The fact that the owners of the other classes of
buildings in Iloilo are not imposed upon by the ordinance, or that tenement taxes are
imposed in other cities do not violate the rule of equality and uniformity. The rule does not
require that taxes for the same purpose should be imposed in different territorial
subdivisions at the same time. So long as the burden of tax falls equally and impartially on
all owners or operators of tenement houses similarly classified or situated, equality and
uniformity is accomplished. The presumption that tax statutes are intended to operate
uniformly and equally was not overthrown herein

CITY OF MANILA vs. COCA-COLA BOTTLERS PHILIPPINES, INC.- CTA, Double

Taxation
FACTS:
Respondent paid the local business tax only as a manufacturers as it was expressly
exempted from the business tax under a different section and which applied to businesses
subject to excise, VAT or percentage tax under the Tax Code. The City of Manila
subsequently amended the ordinance by deleting the provision exempting businesses under
the latter section if they have already paid taxes under a different section in the ordinance.
This amending ordinance was later declared by the Supreme Court null and void.
Respondent then filed a protest on the ground of double taxation. RTC decided in favor of
Respondent and the decision was received by Petitioner on April 20, 2007. On May 4, 2007,
Petitioner filed with the CTA a Motion for Extension of Time to File Petition for Review asking
for a 15-day extension or until May 20, 2007 within which to file its Petition. A second Motion
for Extension was filed on May 18, 2007, this time asking for a 10-day extension to file the
Petition. Petitioner finally filed the Petition on May 30, 2007 even if the CTA had earlier
issued a resolution dismissing the case for failure to timely file the Petition.

ISSUES:
(1) Has Petitioners the right to appeal with the CTA lapsed?
(2) Does the enforcement of the latter section of the tax ordinance constitute double
taxation?
HELD:

(1) NO. Petitioner complied with the reglementary period for filing the petition. From April 20,
2007, Petitioner had 30 days, or until May 20, 2007, within which to file their Petition for
Review with the CTA. The Motion for Extension filed by the petitioners on May 18, 2007, prior
to the lapse of the 30-day period on 20 May 2007, in which they prayed for another
extended period of 10 days, or until 30 May 2007, to file their Petition for Review was, in
reality, only the first Motion for Extension of petitioners. Thus, when Petitioner filed their
Petition via registered mail their Petition for Review on 30 May 2007, they were able to
comply with the period for filing such a petition.
(2) YES. There is indeed double taxation if respondent is subjected to the taxes under both
Sections 14 and 21 of the tax ordinance since these are being imposed: (1) on the same
subject matter the privilege of doing business in the City of Manila; (2) for the same
purpose to make persons conducting business within the City of Manila contribute to city
revenues; (3) by the same taxing authority petitioner City of Manila; (4) within the same
taxing jurisdiction within the territorial jurisdiction of the City of Manila; (5) for the same
taxing periods per calendar year; and (6) of the same kind or character a local business
tax imposed on gross sales or receipts of the business.

ESTATE TAX Case: COMMISSIONER OF INTERNAL REVENUE v. THE ESTATE OF

BENIGNO P. TODA, JR., Represented by Special Co-administrators Lorna
Kapunan and Mario Luza Bautista (G.R. No. 147188)Date: September 14, 2004
Ponente: DAVIDE, JR.,
C.J
.FACTS:
Cibeles Insurance Corporation (CIC) authorized Benigno P. Toda, Jr., President
and owner of 99.991% of its issued and outstanding capital stock, to sell the Cibeles
Building and the two parcels of land on which the building stands for an amount of not
lessthan P90 million. Toda purportedly sold the property to Rafael A. Altonaga, who, in turn,
sold the same property on the same day toRoyal Match Inc. (RMI). For the sale of the
property to RMI, Altonaga paid capital gains tax in the amount of P10 million.CIC filed
itscorporate annual income tax return for the year 1989, declaring, among other
things, its gain from the sale of real property in theamount of P75,728.021. Toda
then sold his entire shares of stocks in CIC to Le Hun T. Choa, as evidenced by a
Deed of Sale of Shares of Stocks. Three and a half years later Toda died.The Bureau of
Internal Revenue (BIR) sent an assessment notice and demand letter to the CIC for
deficiency income tax for theyear 1989.The new CIC asked for a reconsideration, asserting
that the assessment should be directed against the old CIC, and not againstthe new CIC,
which is owned by an entirely diff erent set of stockholders; moreover, Toda had
undertaken to hold the buyer of his stockholdings and the CIC free from all tax liabilities
for the fiscal years 1987-1989. The Estate of Benigno P. Toda, Jr., represented byspecial coadministrators Lorna Kapunan and Mario Luza Bautista, received a Notice of Assessment
from the Commissioner of InternalRevenue for deficiency income tax for the year 1989.The
Estate thereafter filed a letter of protest. The Commissioner dismissed the protest, stating
that a fraudulent scheme wasdeliberately perpetuated by the CIC wholly owned and
controlled by Toda by covering up the additional gain of P100 million, whichresulted in the
change in the income structure of the proceeds of the sale of the two parcels of
land and the building thereon to an individual capital gains, thus evading the
higher corporate income tax rate of 35%.The Estate filed a petition for review with the CTA
alleging that the Commissioner erred in holding the Estate liable for income taxdeficiency.In
its decision, the CTA held that the Commissioner failed to prove that CIC committed fraud to

deprive the government of thetaxes due it. It ruled that even assuming that a pre-conceived
scheme was adopted by CIC, the same constituted mere tax avoidance,and not tax
evasion. Hence, the CTA declared that the Estate is not liable for deficiency income tax and,
accordingly, cancelled and setaside the assessment issued by the Commissioner. Court
of Appeals affirmed the decision of the CTA.
ISSUE: WON respondent Estate is liable for the 1989 deficiency income tax of Cibeles
Insurance Corporation.
HELD: Yes.
RATIO: A corporation has a juridical personality distinct and separate from the
persons owning or composing it. Thus, the owners or stockholders of a corporation may
not generally be made to answer for the liabilities of a corporation and vice
versa. There are,however, certain instances in which personal liability may
arise. It has been held in a number of cases that personal liability of a corporate
director, trustee, or officer along, albeit not necessarily, with the corporation may validly
attach when:1. He assents to the (a) patently unlawful act of the corporation, (b) bad faith or
gross negligence in directing its affairs, or (c) conflict of interest, resulting in damages to the
corporation, its stockholders, or other persons;2. He consents to the issuance
of watered down stocks or, having knowledge thereof, does not forthwith
fi le with thecorporate secretary his written objection thereto;3. He agrees to hold himself
personally and solidarily liable with the corporation; or 4. He is made, by specific provision of
law, to personally answer for his corporate action.
It is worth noting that when the late Toda sold his shares of stock to Le Hun T. Choa, he
knowingly and voluntarily held himself personally liable for all the tax liabilities of CIC and
the buyer for the years 1987, 1988, and 1989. Paragraph g of the Deed of Sale of Shares of
Stocks specifically provides:xxx
SELLER undertakes and agrees to hold the BUYER and Cibeles free from any and
all income tax liabilities of Cibeles for the fiscal years 1987, 1988 and 1989.
When the late Toda undertook and agreed to hold the BUYER and Cibeles free from any all
income tax liabilities of Cibeles for the fi scal years 1987, 1988, and 1989,
he thereby voluntarily held himself personally liable therefor. Respondent
estate cannot,therefore, deny liability for CICs deficiency income tax for the year 1989 by
invoking the separate corporate personality of CIC, since itsobligation arose from Todas
contractual undertaking, as contained in the
Deed of Sale of Shares of Stock.
The decision of the Court of Appeals is reversed and respondent
E s t a t e o f B e n i g n o P. To d a J r . w a s o r d e r e d t o pay
P79,099,999.22
as
deficiency income tax of Cibeles Insurance Corporation for the year 1989

DOCTRINE OF IMPRESCRIPTIBILTY
As a rule, taxes are imprescriptible as they are the lifeblood of the government. However,
tax statutes may provide for statute of limitations.
The rules that have been adopted are as follows:
a

National Internal Revenue Code

The statute of limitation for assessment of tax if a return is filed is within three (3)
years from the last day prescribed by law for the filling of the return or if filed after the last
day, within three years from date of actual filling. If no return is filed or the return filed is
false or fraudulent, the period to assess is within ten years from discovery of the omission,
fraud or falsity.

The period to collect tax is within three years from date of assessment. In the case,
however, of omission to file or if the return filed is false or fraudulent, the period to collect is
within ten years from discovery without need of an assessment.

Tariff and customs code

It does not express any general statute of limitation; it provided, however, that when
articles have entered and passed free of duty or final adjustment of duties made, with
subsequent delivery, such entry and passage free of duty or settlement of duties will, after
the expiration of one (1) year, from the date of the final payment of duties, in the absence
of fraud or protest, be final and conclusive upon all parties, unless the liquidation of import
entry was merely tentative. (Sec 1603,TCC)

c.) Local Government Code

Local Taxes, fees, or charges shall be assessed within five (5) years from the date they
became due. In case of fraud or intent to evade the payment of taxes, fees or charges the
same may be assessed within ten (10) years from discovery of the fraud or intent to evade
payment. They shall also be collected either by administrative or judicial action within five
(5) years from date of assessment (Sec. 194. LGC)