#12. CIR v.
Santos legislature, are beyond the reach of judicial
FACTS: Guild of Phil. Jewellers questions the
constitutionality of certain provisions of the NIRC
and Tariff and Customs Code of the Philippines.
Their contention is that present Tariff and tax
structure increases manufacturing costs and render
local jewelry manufacturers uncompetitive against
other countries., in support of their position, they
submitted what they purported to be an exhaustive
study of the tax rates on jewelry prevailing in other
Asian countries, in comparison to tax rates levied in
the country. Judge Santos of RTC Pasig, ruled that
the laws in question are confiscatory and oppressive
and declared them inoperative and without force
and effect. CIR assailed the decision rendered
contending that the latter has no authority to pass
judgment upon the taxation policy of the
government. CIR also impugn the decision by
asserting that there was no showing that the tax
laws on jewelry are confiscatory.
ISSUE: Whether or not the Regional Trial Court
has authority to pass judgment upon taxation policy
of the government.
HELD: The policy of the courts is to avoid ruling
on constitutional questions and to presume that the
acts of the political departments are valid in the
absence of a clear and unmistakable showing to the
contrary. This is not to say that RTC has no power
whatsoever to declare a law unconstitutional. But
this authority does not extend to deciding questions
which pertain to legislative policy. RTC have the
power to declare the law unconstitutional but this
authority does not extend to deciding questions
which pertain to legislative policy. RTC can only
look into the validity of a provision, that is whether
or not it has been passed according to the provisions
laid down by law, and thus cannot inquire as to the
reasons for its existence.
There is no doubt in the Courts mind, despite
protestations to the contrary, that respondent judge
encroached upon matters properly falling within the
province of legislative functions. In citing as basis
for his decision unproven comparative data
pertaining to differences between tax rates of
various Asian countries, and concluding that the
jewelry industry in the Philippines suffers as a
result, the respondent judge took it upon himself to
supplant legislative policy regarding jewelry
taxation. In advocating the abolition of local tax
and duty on jewelry simply because other countries
have adopted such policies, the respondent judge
overlooked the fact that such matters are not for
him to decide. There are reasons why jewelry, a
non-essential item, is taxed as it is in this country,
and these reasons, deliberate upon by our
questioning. As held in Macasiano vs. National
Housing Authority:
The policy of our courts is to avoid ruling on
constitutional questions and to presume that the
acts of the political departments are valid in the
absence of a clear and unmistakable showing to the
contrary. To doubt is to sustain, this presumption is
based on the doctrine of separation of powers which
enjoins upon each department a becoming respect
for the acts of the other departments. The theory is
that as the joint act of Congress and the President
of the Philippines, a law has been carefully studied
and determined to be in accordance with the
fundamental law before it was finally enacted.
There is a debate on the WISDOM of the laws in
question. This is a matter on which the RTC is not
competent to rule.
13. Kilosbayan Incorporated vs. Guingona Jr.
G.R. No. 113375. May 5, 1994.
DAVIDE, JR., J.:
FACTS: Pursuant to a law that authorized PCSO to
conduct charity sweepstakes races, lotteries, and
other similar activities, it decided to establish an on-
line lottery system for the purpose of increasing its
revenue base and diversifying its sources of funds.
A foreign company, through its local subsidiary,
PGMC, proposed to operate the said project and
was later on given a go signal by the President. This
news was published wherein Kilosbayan sent an
open letter to the President strongly opposing the
setting up of the same on the basis of serious moral
and ethical considerations. Nevertheless, the
contract was executed between PCSO and PGMC
and was approved by the president. A suit was filed
in court for the declaration of such contract void
was made by the members of Kilosbayan in their
capacity as taxpayer.
ISSUE: Do the petitioners have standing to
maintain the instant suit?
RULING: As understood in this jurisdiction, a
taxpayers suit refers to a case where the act
complained of directly involves the illegal
disbursement of public funds derived from taxation.
A partys standing before this Court is a procedural
technicality which it may, in the exercise of its
discretion, set aside in view of the importance of the
issues raised. In this case, the court found the
instant petition to be of transcendental importance
to the public. The issues it raised are of paramount
public interest. The ramifications of such issues
immeasurably affect the social, economic, and
moral well-being of the people even in the remotest
barangays of the country and the counterproductive
and retrogressive effects of the envisioned online
lottery system are as staggering as the billions in
pesos it is expected to raise. The legal standing then
of the petitioners deserves recognition and, in the
exercise of its sound discretion, this Court hereby
brushes aside the procedural barrier which the
respondents tried to take advantage of.
14. CIR v. Estate of Benigno Toda Jr. (2004)
G.R. No. 147188
FACTS:
March 2, 1989: Cibeles Insurance Corp. (CIC)
authorized Benigno P. Toda Jr., President and
Owner of 99.991% of outstanding capital stock, to
sell the Cibeles Building and 2 parcels of land
which he sold to Rafael A. Altonaga on August 30,
1987 for P 100M who then sold it on the same day
to Royal Match Inc. for P 200M.
CIC included gains from sale of real property of P
75,728.021 in its annual income tax return while
Altonaga paid a 5% capital gains tax of P 10M
July 12, 1990: Toda sold his shares to Le Hun T.
Choa for P 12.5M evidenced by a deed of ale of
shares of stock which provides that the buyer is free
from all income tax liabilities for 1987, 1988 and
1989. Toda Jr. died 3 years later.
March 29, 1994: BIR sent an assessment notice and
demand letter to CIC for deficiency of income tax
of P 79,099, 999.22
January 27, 1995: BIR sent the same to the estate of
Toda Jr.
Estate filed a protest which was dismissed -
fraudulent sale to evade the 35% corporate income
tax for the additional gain of P 100M and that there
is in fact only 1 sale. Since it is falsity or fraud, the
prescription period is 10 years from the discovery of
the falsity or fraud as prescribed under Sec. 223 (a)
of the NIRC.
CTA: No proof of fraudulent transaction so the
applicable period is 3 years after the last day
prescribed by law for filing the return.
ISSUE: W/N there is falsity or fraud resulting to tax
evasion rather than tax avoidance so the period for
assessment has not prescribed.
RULING: YES. Estate shall be liable since NOT
yet prescribed.
Tax avoidance and tax evasion are the two most
common ways used by taxpayers in escaping from
taxation. ax avoidance is the tax saving device
within the means sanctioned by law. This method
should be used by the taxpayer in good faith and at
arms length. Tax evasion, on the other hand, is a
scheme used outside of those lawful means and
when availed of, it usually subjects the taxpayer to
further or additional civil or criminal liabilities.
Tax evasion connotes the integration of three
factors:
(1) the end to be achieved, i.e., the payment of less
than that known by the taxpayer to be legally due,
or the non-payment of tax when it is shown that a
tax is due
(2) an accompanying state of mind which is
described as being evil, in bad faith, willfull,or
deliberate and not accidental; and
(3) a course of action or failure of action which is
unlawful.
All are present in this case. The trial balance
showed that RMI debited P 40M as "other-inv.
Cibeles Building" that indicates RMI Paid CIC
(NOT Altonaga)
Fraud in its general sense, is deemed to comprise
anything calculated to deceive, including all acts,
omissions, and concealment involving a breach of
legal or equitable duty, trust or confidence justly
reposed, resulting in the damage to another, or by
which an undue and unconscionable advantage is
taken of another.
Here, it is obvious that the objective of the sale to
Altonaga was to reduce the amount of tax to be paid
especially that the transfer from him to RMI would
then subject the income to only 5% individual
capital gains tax, and not the 35% corporate income
tax.
Generally, a sale of or exchange of assets will have
an income tax incidence only when it is
consummated but such tax incidence depends upon
the substance of the transaction rather them mere
formalities.
15. NURSERY CARE CORPORATION VS
ACEVEDO
Facts:
The City of Manila assessed and collected taxes
from the individual establishments pursuant to
Section 15(Tax on Wholesalers, Distributors, or
Dealers) and Section 17 (Tax on Retailers) of the
Revenue Code ofManila. At the same time, the City
of Manila imposed additional taxes upon the same
establishments pursuant to Section 21 of the
Revenue Code of Manila, as amended, as a
condition for the renewal of their respective
business licenses for the year 1999. Section 21 of
the Revenue Code of Manila stated: To comply with
the City of Manilas assessment of taxes under
Section 21, the establishments paid under protest
the amounts demanded corresponding to the first
quarter of 1999. A request for refund of the taxes
paid under protest was denied by the City Treasurer,
and a motion for reconsideration was likewise
denied.
Issue:Is there double taxation when the City
imposed additional taxes pursuant to Section 21 of
the Revenue Code of Manila?
Held: Yes. Double taxation means taxing the same
property twice when it should be taxed only once;
that is,"taxing the same person twice by the same
jurisdiction for the same thing." It is obnoxious
when the taxpayer is taxed twice, when it should be
but once. Otherwise described as "direct duplicate
taxation," the two taxes must be imposed on the
same subject matter, for the same purpose, by the
same taxing authority, within the same jurisdiction,
during the same taxing period; and the taxes must
be of the same kind or character. The Court now
holds that all the elements of double taxation
concurred upon the Cityof Manilas assessment on
and collection from the petitioners of taxes for the
first quarter of 1999 pursuant to Section 21 of the
Revenue Code of Manila.
Firstly, because Section 21 of the Revenue Code of
Manila imposed the tax on a person who sold goods
and services in the course of trade or business based
on a certain percentage of his gross sales or receipts
in the preceding calendar year, while Section 15 and
Section 17 likewise imposed the tax on a person
who sold goods and services in the course of trade
or business but only identified such person with
particularity,namely, the wholesaler, distributor or
dealer (Section 15), and the retailer (Section 17), all
the taxes being imposed on the privilege of doing
business in the City of Manila in order to make the
taxpayers contribute to the citys revenues were
imposed on the same subject matter and for the
same purpose. Secondly, the taxes were imposed by
the same taxing authority (the City of Manila) and
within the same jurisdiction in the same taxing
period (i.e., per calendar year).Thirdly, the taxes
were all in the nature of local business taxes.
#16. LA SUERTE CIGAR & CIGARETTE
FACTORY vs. COURT OF APPEALS
FACTS:
La Suerte received a letter from then Commissioner
Jose U. Ong demanding
the payment of as deficiency excise tax on La
Suerte's entire importation and local
purchase of stemmed leaf tobacco. La Suerte
protested the excise tax deficiency
assessment stressing that the BIR assessment was
based solely on Section 141(b) of
the Tax Code without, however, applying Section
137 thereof, the more specific
provision, which expressly allows the sale of
stemmed leaf tobacco as raw material
by one manufacturer directly to another without
payment of the excise tax. However,
in a letter, Commissioner Jose U. Ong denied La
Suerte's protest, insisting that
stemmed leaf tobacco is subject to excise tax, unless
there is an express grant of
exemption from the payment of tax. La Suerte
contended that the tax on both
stemmed leaf tobacco and cigarettes into which it is
manufactured constitutes double
taxation.
ISSUE: Was there double taxation?
HELD:
No. The contention that the cigarette manufacturers
are doubly taxed because
they are paying the specific tax on the raw material
and on the finished product in
which the raw material was a part is devoid of
merit.
For double taxation in the objectionable or
prohibited sense to exist, the same
property must be taxed twice, when it should be
taxed but once. Both taxes must be
imposed on the same property or subject-matter, for
the same purpose, by the same
taxing authority, within the same jurisdiction or
taxing district, during the same
taxing period, and they must be the same kind or
character of tax.
At all events, there is no constitutional prohibition
against double taxation in
the Philippines. It is something not favored, but is
permissible, provided some other
constitutional requirement is not thereby violated.
In this case, there is no double
taxation in the prohibited sense because the specific
tax is imposed by explicit
provisions of the Tax Code on two different articles
or products: (1) on the stemmed
leaf tobacco; and (2) on cigar or cigarette.
#17 SMART COMMUNICATION, INC. VS.
MUNICIPALITY OF MALVAR, BATANGAS
FACTS: Smart constructed a telecommunications
tower within the territorial jurisdiction of the
Municipality of Malvar, Batangas. The construction
of the tower was for the purpose of receiving and
transmitting cellular communications within the
covered area. On 30 July 2003, the Municipality
passed Ordinance No. 18, series of 2003, entitled
An Ordinance Regulating the Establishment of
Special Projects. On 24 August 2004, Smart
received from the Permit and Licensing Division of
the Office of the Mayor of the Municipality an
assessment letter with a schedule of payment for the
total amount of P389,950.00 for Smarts
telecommunications tower. Due to the alleged
arrears in the payment of the assessment, the
Municipality also caused the posting of a closure
notice on the telecommunications tower. On 9
September 2004, Smart filed a protest, claiming
lack of due process in the issuance of the
assessment and closure notice. In the same protest,
Smart challenged the validity of Ordinance No. 18
on which the assessment was based. On 17
November 2004, Smart filed with Regional Trial
Court of Tanauan City, Batangas, Branch 6, an
Appeal/ Petition assailing the validity of
Ordinance No. 18.
RTC Ruling: Partly granted Smarts
Appeal/Petition. The trial court confined its
resolution of the case to the validity of the
assessment, and did not rule on the legality of
Ordinance No. 18. The trial court held that the
assessment covering the period from 2001 to July
2003 was void since Ordinance No. 18 was
approved only on 30 July 2003. However, the trial
court declared valid the assessment starting 1
October 2003, citing Article 4 of the Civil Code of
the Philippines, in relation to the provisions of
Ordinance No. 18 and Section 166 of Republic Act
No. 7160 or the Local Government Code of 1991
(LGC). Smart filed a petition for review before the
CTA. CTA First Division denied the petition for
lack of merit. Smart filed a motion for
reconsideration before the CTA En banc. CTA En
Banc dismissed the petition on the ground of lack of
jurisdiction. CTA En Banc held that the CTA has
exclusive appellate jurisdiction to review on appeal,
decisions, orders or resolutions of the Regional
Trial Courts in local tax cases originally resolved by
them in the exercise of their original or appellate
jurisdiction. However, the same provision does not
confer on the CTA jurisdiction to resolve cases
where the constitutionality of a law or rule is
challenged.
ISSUE: Whether the fees imposed under Ordinance
No. 18 are in fact taxes.
RULING: The Court finds that the fees imposed
under Ordinance No. 18 are not taxes. In this case,
the Municipality issued Ordinance No. 18, which is
entitled An Ordinance Regulating the
Establishment of Special Projects, to regulate the
placing, stringing, attaching, installing, repair and
construction of all gas mains, electric, telegraph and
telephone wires, conduits, meters and other
apparatus, and provide for the correction,
condemnation or removal of the same when found
to be dangerous, defective or otherwise hazardous
to the welfare of the inhabitant[s]. It was also
envisioned to address the foreseen environmental
depredation to be brought about by these special
projects to the Municipality. Pursuant to these
objectives, the Municipality imposed fees on
various structures, which included
telecommunications towers. As clearly stated in its
whereas clauses, the primary purpose of Ordinance
No. 18 is to regulate the placing, stringing,
attaching, installing, repair and construction of all
gas mains, electric, telegraph and telephone wires,
conduits, meters and other apparatus listed therein,
which included Smarts telecommunications tower.
Clearly, the purpose of the assailed Ordinance is to
regulate the enumerated activities particularly
related to the construction and maintenance of
various structures. The fees in Ordinance No. 18 are
not impositions on the building or structure itself;
rather, they are impositions on the activity subject
of government regulation, such as the installation
and construction of the structures. Since the main
purpose of Ordinance No. 18 is to regulate certain
construction activities of the identified special
projects, which included cell sites or
telecommunications towers, the fees imposed in
Ordinance No. 18 are primarily regulatory in nature,
and not primarily revenue-raising. While the fees
may contribute to the revenues of the Municipality,
this effect is merely incidental. Thus, the fees
imposed in Ordinance No. 18 are not taxes.
ISSUE 2: Whether the imposition of the fees in
Ordinance No. 18 is ultra vires
RULING: No. Ordinance No. 18 aims to regulate
the placing, stringing, attaching, installing, repair
and construction of all gas mains, electric, telegraph
and telephone wires, conduits, meters and other
apparatus within the Municipality. The fees are not
imposed to regulate the administrative, technical,
financial, or marketing operations of
telecommunications entities, such as Smarts;
rather, to regulate the installation and maintenance
of physical structures Smarts cell sites or
telecommunications tower. The regulation of the
installation and maintenance of such physical
structures is an exercise of the police power of the
Municipality. Clearly, the Municipality does not
encroach on NTCs regulatory powers.
#18. Meralco v. City Assessor, GR No. 166102,
August 15, 2015
FACTS: Before the Court is a Petition for Review
on Certiorari seeking the reversal of the Decision1
dated May 13, 2004 and Resolution dated
November 18, 2004 of the Court of Appeals in CA-
G.R. SP No. 67027. The appellate court affirmed
the Decision3 dated May 3, 2001 of the Central
Board of Assessment Appeals (CBAA) in CBAA
Case No. L-20-98, which, in turn, affirmed with
modification the Decision4 dated June 17, 19985 of
the Local Board of Assessment Appeals (LBAA) of
Lucena City, Quezon Province, as regards Tax
Declaration Nos. 019-6500 and 019-7394, ruling
that MERALCO is liable for real property tax on its
transformers, electric posts (or poles), transmission
lines, insulators, and electric meters, beginning
1992.
MERALCO failed to persuade the Court of Appeals
that the transformers, transmission lines, insulators,
and electric meters mounted on the electric posts of
MERALCO were not real properties. The appellate
court invoked the definition of "machinery" under
Section 199(o) of the Local Government Code and
then wrote that:
We firmly believe and so hold that the
wires, insulators, transformers and electric
meters mounted on the poles of
[MERALCO] may nevertheless be
considered as improvements on the land,
enhancing its utility and rendering it useful
in distributing electricity. The said
properties are actually, directly and
exclusively used to meet the needs of
[MERALCO] in the distribution of
electricity.
In addition, "improvements on land are
commonly taxed as realty even though for
some purposes they might be considered
personalty. It is a familiar personalty
phenomenon to see things classed as real
property for purposes of taxation which on
general principle might be considered
personal property."
ISSUE: Are the transformers, electric posts (or
poles), transmission lines, insulators, and electric
meters are real properties subject to real property
tax?
RULING: While the Local Government Code still
does not provide for a specific definition of "real
property," Sections 199(o) and 232 of the said
Code, respectively, gives an extensive definition of
what constitutes "machinery" and unequivocally
subjects such machinery to real property tax. The
Court reiterates that the machinery subject to real
property tax under the Local Government Code
"may or may not be attached, permanently or
temporarily to the real property;" and the physical
facilities for production, installations, and
appurtenant service facilities, those which are
mobile, self-powered or self-propelled, or are not
permanently attached must (a) be actually, directly,
and exclusively used to meet the needs of the
particular industry, business, or activity; and (2) by
their very nature and purpose, be designed for, or
necessary for manufacturing, mining, logging,
commercial, industrial, or agricultural purposes.
Article 415, paragraph (1) of the Civil Code
declares as immovables or real properties "[l]and,
buildings, roads and constructions of all kinds
adhered to the soil." The land, buildings, and roads
are immovables by nature "which cannot be moved
from place to place," whereas the constructions
adhered to the soil are immovables by incorporation
"which are essentially movables, but are attached to
an immovable in such manner as to be an integral
part thereof."57 Article 415, paragraph (3) of the
Civil Code, referring to "[ejverything attached to an
immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the
material or deterioration of the object," are likewise
immovables by incorporation. In contrast, the Local
Government Code considers as real property
machinery which "may or may not be attached,
permanently or temporarily to the real property,"
and even those which are "mobile."
Article 415, paragraph (5) of the Civil Code
considers as immovables or real properties
"[machinery, receptacles, instruments or
implements intended by the owner of the tenement
for an industry or works which may be carried on in
a building or on a piece of land, and which tend
directly to meet the needs of the said industry or
works." The Civil Code, however, does not define
"machinery."
The properties under Article 415, paragraph (5) of
the Civil Code are immovables by destination, or
"those which are essentially movables, but by the
purpose for which they have been placed in an
immovable, partake of the nature of the latter
because of the added utility derived therefrom."58
These properties, including machinery, become
immobilized if the following requisites concur: (a)
they are placed in the tenement by the owner of
such tenement; (b) they are destined for use in the
industry or work in the tenement; and (c) they tend
to directly meet the needs of said industry or
works.59 The first two requisites are not found
anywhere in the Local Government Code.
Furthermore, in Caltex (Philippines), Inc. v. Central
Board of Assessment Appeals,62 the Court
acknowledged that "[i]t is a familiar phenomenon to
see things classed as real property for purposes of
taxation which on general principle might be
considered personal property[.]" Therefore, for
determining whether machinery is real property
subject to real property tax, the definition and
requirements under the Local Government Code are
controlling.
#19 CIR v Nippon, GR 212920, 16 Sept 2015
PERLAS-BERNABE, J.
FACTS: Nippon is a domestic corporation
primarily engaged in the business of freight
forwarding, namely, in the international and
domestic air and sea freight and cargo forwarding,
hauling, carruomg, handling, distributing, loading,
and unloading general cargoes and all classes of
goods, wares, and mechandise, and the operation of
a container depots, warehousing, storage, hauling,
and packing facilities. It incurred a VAT
attributable to its zero-reated sales in the amount of
P28,405,167.60, from which only P3,760,660.74
was applied as tax credit, reflecting the excess input
VAT of P24,644,506.86. On 22 April 2005, Nippon
filed an administrative claim for refund of its
unutilized input VAT of P24,644,506.86 ofr the
year 2002 before the BIR. The day after, it filed a
judicial claim for tax refund, by way of petition for
review, before the CTA Division.

The CTA partially granted the tax refund claim,

ordering CIR to issue a tax credit certificate of
P2,614,296.84, because it failed to show that the
recipients of its services were non-residents. Before
its receipt of the Decision, Nippon filed a motion to
withdraw, considering that the BIR already issues a
tax credit certificate amounting to P21,675,128.91.
The motion to withdraw was granted by the CTA
Division in a Resolution dated 31 Jul 2012.
Aggrieved, the CIR elevated its case to the CTA En
Banc. However, the CTA En Banc affirmed its
decision.

ISSUE: Is the CIR estopped from assailing the

validity of the 27 July 2011 Tax Credit Certificate
whcih was issued by her subordinates in the BIR?

RULING:In this relation, it deserves mentioning

that the CIR is not estopped from assailing the
validity of the July 27, 2011 Tax Credit Certificate
which was issued by her subordinates in the BIR. In
matters of taxation, the government cannot be
estopped by the mistakes, errors or omissions of its
agents for upon it depends the ability of the
government to serve the people for whose benefit
taxes are collected.