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CIR vs.

Algue
Facts: Algue, engaged in an engineering corporation, claims tax deductions in the
amount of P75,000.00 alleging that such amount are promotional fees, thus, in
accord with the provisions of the Tax Code as being ordinary and necessary
expenses. The CIR disallowed the deductions.
Issue: WON the CIR was correct in disallowing the tax deductions.
Held: Negative.
The claimed deduction by the private respondent was permitted under the Internal
Revenue Code and should therefore not have been disallowed by the CIR.
It is said that taxes are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power to activate and
operate it. The government for its part, is expected to respond in the form of
tangible and intangible benefits intended to improve the lives of the people and
enhance their moral and material values. This symbiotic relationship is the rationale
of taxation and should dispel the erroneous notion that it is an arbitrary method of
exaction by those in the seat of power.
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.

CIR vs. Tokyo Shipping Co., Ltd.


Facts: Tokyo shipping is a foreign corporation which owns and operates a vessel. The
vessel was chartered by a certain Nasutra to load raw sugar in the Phil thru its
representative. Thus, Tokyo Shippings representative made a pre-payment of the
required income and common carriers taxes. Upon arrival at the port, the vessel
found no sugar for loading, thus, claimed for a tax refund. The CIR failed to act
promptly, thus, respondent went to CTA which decided in their favor. The CIR claims
otherwise.
Issue: WON Tokyo Shipping is entitled to a tax refund.
Held: Affirmative.
Pursuant to section 24 (b) (2) of the National Internal Revenue Code, a resident
foreign corporation engaged in the transport of cargo is liable for taxes depending
on the amount of income it derives from sources within the Philippines. Thus, before
such a tax liability can be enforced the taxpayer must be shown to have earned
income sourced from the Philippines. The respondent court held that sufficient
evidence has been adduced by the private respondent proving that it derived no
receipt from its charter agreement with NASUTRA.
Fair deal is expected by our taxpayers from the BIR and the duty demands that BIR
should refund without any unreasonable delay what it has erroneously collected.
The power of taxation is sometimes called also the power to destroy. Therefore it
should be exercised with caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the hen that lays the golden egg. And, in order to maintain the general publics
trust and confidence in the Government this power must be used justly and not
treacherously.

BPI-Family Savings Bank vs. CA


Facts: BPI claims for a tax refund of P112,491. As appearing in its 1989 ITR, BPI has
a total of P297,492 refundable taxes. BPI declared in its 1989 ITR that it would apply
the excess withholding tax as a tax credit for the year 1990. Subsequently,
however, BPI claimed for a tax refund since in the year 1990 it suffered losses, thus,
could not have applied said amount as tax credit. The CIR and CTA denied this on
the ground that BPI failed to show its 1990 ITR which would show that the amount
claimed was not applied as a tax credit.
Issue: WON BPI is entitled to a tax refund.
Held: Affirmative.
Evidence shows that petitioner suffered a net loss in 1990, thus, it could not have
applied the amount claimed as tax credits.
Substantial justice, equity and fair play are on the side of petitioner. Technicalities
and legalisms, however exalted, should not be misused by the government to keep
money not belonging to it and thereby enrich itself at the expense of its law-abiding
citizens. If the State expects its taxpayers to observe fairness and honesty in paying
their taxes, so must it apply the same standard against itself in refunding excess
payments of such taxes. Indeed, the State must lead by its own example of honor,
dignity and uprightness.

PBCom vs. CA
Facts: PBCom in 1985 were issued tax debits in the total amount of P5,016,954. In
1986 it reported a net loss of P14,129,602, thus, declared no tax for that year.
During these two years, however, PBCOm withheld and remitted to the
BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986.
On 1987, PBCom requested CIR to grant them a tax credit in the amount of
P5,016,954 representing the overpayment in 1986. On 1988, it filed a claim for
refund for property rentals (P282,795.50 in 1985 and P234,077.69). The CIR,
affiermed by the CA, denied the claim for refund of P5,016,954 on the ground that it
was filed beyond the reglementary period and also the claim for P234,077.69 on the
ground that PBCom has opted and in all likelihood automatically credited the same
to the succeeding year.
Issue: WON PBCom is entitled to tax refund.
Held: Negative.
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.The rule states that the taxpayer may file a claim for refund or
credit with the Commissioner of Internal Revenue, within two (2) years after
payment of tax, before any suit in CTA is commenced. The two-year prescriptive
period provided, should be computed from the time of filing the Adjustment Return
and final payment of the tax for the year.
The non-retroactivity of rulings by the Commissioner of Internal Revenue is not
applicable in this case because the nullity of RMC No. 7-85 was declared by
respondent courts and not by the Commissioner of Internal Revenue. Lastly, it must
be noted that, as repeatedly held by this Court, a claim for refund is in the nature of

a claim for exemption and should be construed in strictissimi juris against the
taxpayer.

Chavez vs. Ongpin


Facts: Chavez, owner of some number of parcels of land challenges the
constitutionality of EO 73, which increased the assessment for real property taxes.
Intervenor Realty Owners Association of the Phil (ROAP) also challenged the
constitutionality of EO 73 and EO 464, the latter order having been the basis for the
enactment of EO 73.
Issue: Whether EO 73 imposes unreasonable increase in real property taxes, thus,
should be declared unconstitutional.
Held: Negative.
The attack on Executive Order No. 73 has no legal basis as the general revision of
assessments is a continuing process mandated by Section 21 of Presidential Decree
No. 464. If at all, it is Presidential Decree No. 464 which should be challenged as
constitutionally infirm. However, Chavez failed to raise any objection against said
decree. It was ROAP, the intervenor, which questioned the constitutionality thereof.
To continue collecting real property taxes based on valuations arrived at several
years ago, in disregard of the increases in the value of real properties that have
occurred since then, is not in consonance with a sound tax system. Fiscal adequacy,
which is one of the characteristics of a sound tax system, requires that sources of
revenues must be adequate to meet government expenditures and their variations.

Philex Mining Corp vs. CIR


Facts: The BIR sent a letter to Philex asking the latter to settle its tax liabilities.
Philex protested the demand contending that it has pending claims for VAT input
credit/refund for taxes it paid for the previous years. Thus, Philex wants to set-off or
apply the concept of compensation in its favor. The BIR refused. The CTA, affirmed
by CA, ruled against Philex stating that taxes cannot be subject to set-off on
compensation since claim for taxes is not a debt or contract.
Issue: WON the pending claim for refund of Philex may be applied against an
existing tax liability; or, WON Philex may set-off its tax liability against its pending
claims for refund.
Held: Negative.
1. 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;
2. Philexs reliance on our holding in Commissioner of Internal Revenue v. ItogonSuyoc Mines Inc., wherein the SC ruled that a pending refund may be set off against
an existing tax liability even though the refund has not yet been approved by the
Commissioner, is no longer without any support in statutory law.
It is important to note, that the premise of our ruling in the aforementioned case
was anchored on Section 51 (d) of the National Revenue Code of 1939. However,
when the National Internal Revenue Code of 1977 was enacted, the same provision
upon which the Itogon-Suyoc pronouncement was based was omitted. Accordingly,
the doctrine enunciated in Itogon-Suyoc cannot be invoked by Philex.

Gerochi, et al vs. Dept of Energy


Facts: Gerochi et al seeks the declaration of Sec. 34 of RA 9136 (Electric Power
Industry Refor Act of 1991-EPIRA) which imposes a Universal Charge against all
electric end-users on a monthly basis, as unconstitutional on the ground of: such
universal charge is a tax, which power to impose is a strictly legislative function,
thus, constitutes an undue delegation of legislative power on the part of the Energy
Regulatory Commission (ERC).
Issue: Whether the universal charge is a tax; and, whether there is an undue
delegation of legislative taxing power to ERC.
Held: Both negative.
1. The conservative and pivotal distinction between power to tax and police power
rests in the purpose for which the charge is made. If generation of revenue is the
primary purpose and regulation is merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that revenue is incidentally raised does
not make the imposition a tax.
It can be gleaned that the assailed Universal Charge is not a tax, but an exaction in
the exercise of the States police power. Public welfare is surely promoted.

Moreover, it is a well-established doctrine that the taxing power may be used as an


implement of police power.
The Special Trust Fund reasonably serves and assures the attainment and
perpetuity of the purposes for which the Universal Charge is imposed, i.e., to ensure
the viability of the countrys electric power industry.

2. A logical corollary to the doctrine of separation of powers is the principle of nondelegation of powers, as expressed in the Latin maxim potestas delegata non
delegari potest (what has been delegated cannot be delegated).
All that is required for the valid exercise of this power of subordinate legislation is
that the regulation be germane to the objects and purposes of the law and that the
regulation be not in contradiction to, but in conformity with, the standards
prescribed by the law. These requirements are denominated as the completeness
test and the sufficient standard test.
The Court finds that the EPIRA, read and appreciated in its entirety, in relation to
Sec. 34 thereof, is complete in all its essential terms and conditions, and that it
contains sufficient standards.

Roxas et al vs CTA
Facts: Roxas Y Cia is a partnership managing agricultural lands with a total land area
of 19,000 ha (Known as the Nasugbu farmlands). The tenants therein wanted to
acquire the land they till, thus the government persuaded Roxas Y Cia to sell to it
some of its lands. Roxas Y Cia agreed but it turned out that the govt does not have
sufficient funds to pay for such lands, hence, Roxas Y Cia took the burden of selling
the lands directly to the tenants on installment basis. Because of Roxas Y Cias act
of making profits from the purchase and sale of securities, the Commissioner of
Internal Revenue demanded from it fixed tax of dealers securities, hence, 100% of
the profits made therefrom was taxed.
Issue: WON the assessment made by the CIR is correct (of taxing 100% of the
profits made from the sale of the lands to the tenants made by Roxas).
Held: Negative.
It should be borne in mind that the sale of the Nasugbu farm lands to the very
farmers who tilled them for generations was not only in consonance with, but more
in obedience to the request and pursuant to the policy of our Government to
allocate lands to the landless.
The power of taxation is sometimes called also the power to destroy. Therefore it
should be exercised with caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the hen that lays the golden egg. And, in order to maintain the general publics
trust and confidence in the Government this power must be used justly and not

treacherously. It does not conform with Our sense of justice in the instant case for
the Government to persuade the taxpayer to lend it a helping hand and later on to
penalize him for duly answering the urgent call.
In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in
question. Hence, pursuant to Section 34 of the Tax Code the lands sold to the
farmers are capital assets, and the gain derived from the sale thereof is capital gain,
taxable only to the extent of 50%.

Phil Health Care Providers Inc vs CIR


Facts: Phil Health Care Providers is a corporationengaged in providing
medical/health care programs to its members who pay annual membership fees.
The CIR demanded from the corporation deficiency taxes, constituting Documentary
Stamp Tax (DST) imposed upon on its health care agreements. The corporation
sought the cancellation of the DST assessments, among others, contending that it is
a Health Maintenance Org (HMO) and not an insurance company, thus, not liable for
DST on its health care agreements. It also asserts that the assessed DST which
amounts to P376 million is way beyond its net worth ofP259 million.
Issue: WON the corporation is liable for the payment of DST on its health care
agreements.
Held: Negative.
As a general rule, the power to tax is an incident of sovereignty and is unlimited in
its range, acknowledging in its very nature no limits, so that security against its
abuse is to be found only in the responsibility of the legislature which imposes the
tax on the constituency who is to pay it.So potent indeed is the power that it was
once opined that the power to tax involves the power to destroy.
Given the realities on the ground, imposing the DST on petitioner would be highly
oppressive. It is not the purpose of the government to throttle private business. On

the contrary, the government ought to encourage private enterprise. The


corporation, just like any concern organized for a lawful economic activity, has a
right to maintain a legitimate business. As aptly held in Roxas, et al. v. CTA, et al.:
The power of taxation is sometimes called also the power to destroy. Therefore it
should be exercised with caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the hen that lays the golden egg.
Legitimate enterprises enjoy the constitutional protection not to be taxed out of
existence. Incurring losses because of a tax imposition may be an acceptable
consequence but killing the business of an entity is another matter and should not
be allowed. It is counter-productive and ultimately subversive of the nations thrust
towards a better economy which will ultimately benefit the majority of our people.

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