Law on Taxation

MUST READ CASES (LAW ON TAXATION)

TAX I

Paseo Realty & Development Corporation v. Court of Appeals, GR No. 119286,

October 13, 2004

Taxation is described as a destructive power which interferes with the personal and
property rights of the people and takes from them a portion of their property for the
support of the government.

Commissioner of Internal Revenue v. Fortune Tobacco Corporation, 559 SCRA

160 (2008)

The power to tax is inherent in the State, such power being inherently legislative, based
on the principle that taxes are a grant of the people who are taxed, and the grant must
be made by the immediate representative of the people, and where the people have laid
the power, there it must remain and be exercised.

Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667 (1996)

As an incident of sovereignty, the power to tax has been described as 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 are to pay it.

PLANTERS PRODUCTS, INC. v. FERTIPHIL CORPORATION,

G.R. No. 166006, March 14, 2008

It is a settled principle that the power of taxation by the state is plenary. Comprehensive
and supreme, the principal check upon its abuse resting in the responsibility of the
members of the legislature to their constituents.

Commissioner of Internal Revenue v. SM Prime Holdings, Inc., 613 SCRA 774

(2010)

The power to tax is sometimes called the power to destroy. Therefore, it should be
exercised with caution to minimize injury to the proprietary rights of the taxpayer. It must
be exercised fairly, equally and uniformly, lest the tax collector kills the ‘hen that lays the
golden egg.’

MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC. vs.

SECRETARY OF THE DSWD, G.R. No. 175356 (2013).

The 20% senior citizen discount and tax deduction scheme are valid exercises of police
power of the State absent a clear showing that it is arbitrary, oppressive or confiscatory.
Law on Taxation

The discount is intended to improve the welfare of the senior citizens who, at their age,
are less likely to be gainfully employed, more prone to illnesses and other disabilities,
and thus, in need of subsidy in purchasing commodities. As to its nature an effects,
although the regulation affects the pricing, and, hence, the profitability of a private
establishment, it does not purport to appropriate or burden specific properties, used in
the operation or conduct of the business of private establishments, for the use or benefit
of the public, or senior citizens for that matter, but merely regulates the pricing of goods
and services relative to, and the amount of profits or income/gross sales that such
private establishments may derive from, senior citizens. The State can employ police
power measures to regulate the pricing of goods and services, and, hence, the
profitability of business establishments in order to pursue legitimate State objectives for
the common good, provided, the regulation does not go too far as to amount to “taking.”

SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS

ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005

The motivation behind many taxation measures is the implementation of police power
goals. Progressive income taxes alleviate the margin between rich and poor; the so-
called “sin taxes” on alcohol and tobacco manufacturers help dissuade the consumers
from excessive intake of these potentially harmful products.

ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.

ALCANTARA and ED VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE
SECRETARY EDUARDO ERMITA, G.R. No. 168056, September 1, 2005

The expenses of government, having for their object the interest of all, should be borne
by everyone, and the more man enjoys the advantages of society, the more he ought to
hold himself honored in contributing to those expenses.

RENATO V. DIAZ and AURORA MA. F. TIMBOL v. THE SECRETARY OF FINANCE,

G.R. No. 193007, July 19, 2011

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. Taxes may be imposed
only by the government under its sovereign authority, toll fees may be demanded by
either the government or private individuals or entities, as an attribute of ownership.

PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT

MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos. 147036-37
April 10, 2012

The Court was satisfied that the coco-levy funds were raised pursuant to law to support
a proper governmental purpose. They were raised with the use of the police and taxing
powers of the State for the benefit of the coconut industry and its farmers in general.
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GEROCHI v. DEPARTMENT OF ENERGY, 527 SCRA 696 (2007

The theory behind the exercise of the power to tax emanates from necessity, without
taxes, government cannot fulfill its mandate of promoting the general welfare and well
being of the people.

COMMISSIONER OF INTERNAL REVENUE v. ALGUE, INC., and THE COURT OF

TAX APPEALS, G.R. No. L-28896, February 17, 1988

Despite the natural reluctance to surrender part of one's hard earned income to the
taxing authorities, every person who is able to must contribute his share in the running
of the government. 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.

COMMISSIONER OF INTERNAL REVENUE v. ROSEMARIE ACOSTA G.R. No.

154068 August 3, 2007

As well said in a prior case, revenue laws are not intended to be liberally construed.
Considering that taxes are the lifeblood of the government and in Holmes’s memorable
metaphor, the price we pay for civilization, tax laws must be faithfully and strictly
implemented.

SWEDISH MATCH PHILIPPINES INC. v. THE TREASURER OF THE CITY OF

MANILA, G.R. No. 181277, July 3, 2013

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.
There is indeed double taxation if a taxpayer is subjected to the taxes under both
Section 14 (Tax on Manufacturers, Assemblers and other Processors) and Section 21
(Tax on Business Subject to the Excise, Value-Added or Percentage Taxes under the
NIRC) of the Tax Ordinance No. 7794.

SERAFICA v. CITY TREASURER OF ORMOC, G.R. No. L- 24813, April 28, 1968

Regulation and taxation are two different things, the first being an exercise of police
power, whereas the latter involves the exercise of the power of taxation. While R.A.
2264 provides that no city may impose taxes on forest products and although lumber is
a forest product, the tax in question is imposed not on the lumber but upon its sale;
thus, there is no double taxation and even if there was, it is not prohibited.

COMMISSIONER OF INTERNAL REVENUE v. S.C. JOHNSON AND SON, INC. G.R.

No. 127105 June 25, 1999
Law on Taxation

In negotiating tax treaties, the underlying rationale for reducing the tax rate is that the
Philippines will give up a part of the tax in the expectation that the tax given up for this
particular investment is not taxed by the other country. Thus, if the rates of tax are
lowered by the state of source, in this case, by the Philippines, there should be a
concomitant commitment on the part of the state of residence to grant some form of tax
relief, whether this be in the form of a tax credit or exemption.

DEUTSCHE BANK AG MANILA BRANCH v. COMMISSIONER OF INTERNAL

REVENUE, G.R. No. 188550, August 19, 2013

Tax conventions are drafted with a view towards the elimination of international juridical
double taxation, which is defined as the imposition of comparable taxes in two or more
states on the same taxpayer in respect of the same subject matter and for identical
periods. A corporation who has paid 15% Branch Profit Remittance Tax (BPRT) has the
right to avail (by way of refund ) of the benefit of a preferential tax rate of 10% BPRT in
accordance with the RP-Germany Tax Treaty despite non-compliance with an
application with ITAD at least 15 days before the transaction for the lower rate. Bearing
in mind the rationale of tax treaties, the requirements for the application for availment of
tax treaty relief as required by RMO No. 1-2000 should not operate to divest entitlement
to the relief as it would constitute a violation of the duty required by good faith in
complying with a tax treaty.

CBK Power Company Limited vs. Commissioner of Internal

Revenue/Commissioner of Internal Revenue vs. CBK Power Company Limited,
G.R. No. 193383-84/G.R. No. 193407-08 (January 14, 2015).

The Philippine Constitution provides for adherence to the general principles of

international law as part of the law of the land. The time-honored international principle
of pacta sunt servanda demands the performance in good faith of treaty obligations on
the part of the states that enter into the agreement. In this jurisdiction, treaties have the
force and effect of law. The obligation to comply with a tax treaty must take precedence
over the objective of RMO No. 1-2000. Logically, noncompliance with tax treaties has
negative implications on international relations, and unduly discourages foreign
investors. The objective of RMO No. 1-2000 in requiring the application for treaty relief
with the ITAD before a party’s availment of the preferential rate under a tax treaty is to
avert the consequences of any erroneous interpretation and/or application of treaty
provisions, such as claims for refund/credit for overpayment of taxes, or deficiency tax
liabilities for underpayment. However, the underlying principle of prior application with
the BIR becomes moot in refund cases – where the very basis of the claim is erroneous
or there is excessive payment arising from the non-availment of a tax treaty relief at the
first instance. CBK Power could not have applied for a tax treaty relief 15 days prior to
its payment of the final withholding tax on the interest paid to its lenders precisely
because it erroneously paid said tax on the basis of the regular rate as prescribed by
the NIRC, and not on the preferential tax rate provided under the different treaties. The
prior application requirement under RMO No. 1-2000 is not only illogical, but is also an
imposition that is not found at all in the applicable tax treaties. BIR should not impose
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additional requirements that would negate the availment of the reliefs provided for under
international agreements, especially since said tax treaties do not provide for any
prerequisite at all for the availment of the benefits under said agreements.

COMMISSIONER OF INTERNAL REVENUE v. PILIPINAS SHELL PETROLEUM

CORPORATION, G.R. No. 188497, February 19, 2014

Section 135(a) should be construed as prohibiting the shifting of the burden of the
excise tax to the international carriers who buy petroleum products from the local
manufacturers. Said international carriers are thus allowed to purchase the petroleum
products without the excise tax component which otherwise would have been added to
the cost or price fixed by the local manufacturers or distributors/sellers.

COMMISSIONER OF INTERNAL REVENUE v. THE ESTATE OF BENIGNO P. TODA,

JR. G.R. No. 147188 September 14, 2004

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.

(FELS ENERGY, INC. v. PROVINCE OF BATANGAS, 516 SCRA 186 (2007))

Taxation is the rule and exemption is the exception.

BATANGAS POWER CORPORATION BATANGAS CITY and NATIONAL POWER

CORPORATION, G.R. No. 152675, April 28, 2004

This Court recognized the removal of the blanket exclusion of government

instrumentalities from local taxation as one of the most significant provisions of the 1991
LGC. Specifically, we stressed that Section 193 of the LGC, an express and general
repeal of all statutes granting exemptions from local taxes, withdrew the sweeping tax
privileges previously enjoyed by the NPC under its Charter.

ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE

COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995

Since the law granted the press a privilege, the law could take back the privilege
anytime without offense to the Constitution. The reason is simple: by granting
exemptions, the State does not forever waive the exercise of its sovereign prerogative;
indeed, in withdrawing the exemption, the law merely subjects the press to the same tax
burden to which other businesses have long ago been subject.

MCIAA v. Marcos, G.R. No. 120082 September 11, 1996

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Nevertheless, since taxation is the rule and exemption therefrom the exception, the
exemption may thus be withdrawn at the pleasure of the taxing authority. The only
exception to this rule is where the exemption was granted to private parties based on
material consideration of a mutual nature, which then becomes contractual and is thus
covered by the non-impairment clause of the Constitution.

SOUTH AFRICAN AIRWAYS v. COMMISSIONER OF INTERNAL REVENUE, 612

SCRA 665 (2010)

Taxes cannot be subject to compensation for the simple reason that the Government
and the taxpayers are not creditors and debtors of each other, debts are due to the
Government in its corporate capacity, while taxes are due to the Government in its
sovereign capacity.

DOMINGO v. GARLITOS, 8 SCRA 443 (1963)

However, if the obligation to pay taxes and the taxpayer’s claim against the government
are both overdue, demandable, as well as fully liquidated, compensation takes place by
operation of law and both obligations are extinguished to their concurrent amounts.

ASIA INTERNATIONAL AUCTIONEERS, INC. v. COMMISSIONER OF INTERNAL

REVENUE G.R. No. 179115 September 26, 2012
A tax amnesty, much like a tax exemption, is never favored or presumed in law. The
grant of a tax amnesty, similar to a tax exemption, must be construed strictly against the
taxpayer and liberally in favor of the taxing authority.

FORT BONIFACIO DEVELOPMENT CORPORATION v. COMMISSIONER OF

INTERNAL REVENUE, G.R. No. 173425, September 4, 2012

While administrative agencies, such as the Bureau of Internal Revenue, may issue
regulations to implement statutes, they are without authority to limit the scope of the
statute to less than what it provides, or extend or expand the statute beyond its terms,
or in any way modify explicit provisions of the law. Hence, in case of discrepancy
between the basic law and an interpretative or administrative ruling, the basic law
prevails.

COMMISSIONER OF INTERNAL REVENUE v. SM PRIME HOLDINGS, INC. 613

SCRA 774 (2010)

Revenue Memorandum Circulars (RMCs) must not override, supplant, or modify the
law, but must remain consistent and in harmony with the law they seek to apply and
implement.

TEAM ENERGY CORPORATION (Formerly MIRANT PAGBILAO CORPORATION) v.

COMMISSIONER OF INTERNAL REVENUE, G.R. No. 197760, January 13, 2014
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BIR Ruling No. DA-489-03 is a general interpretative rule because it is a response to a

query made, not by a particular taxpayer, but by a government agency tasked with
processing tax refunds and credits. Thus, all taxpayers can rely on BIR Ruling No. DA-
489-03 from the time of its issuance on 10 December 2003 up to its reversal by this
Court in Aichi on 6 October 2010, where this Court held that the 120+30 day periods are
mandatory and jurisdictional.

PLANTERS PRODUCTS, INC. v. FERTIPHIL CORPORATION, G.R. No. 166006,

March 14, 2008)

It would be a robbery for the State to tax its citizens and use the funds generated for a
private purpose. When a tax law is only a mask to exact funds from the public when its
true intent is to give undue benefit and advantage to a private enterprise, that law will
not satisfy the requirement of "public purpose."

ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.

ALCANTARA and ED VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE
SECRETARY G.R. No. 168056 September 1, 2005
The powers which Congress is prohibited from delegating are those which are strictly,
or inherently and exclusively, legislative. Purely legislative power, which can never be
delegated, has been described as the authority to make a complete law – complete as
to the time when it shall take effect and as to whom it shall be applicable – and to
determine the expediency of its enactment.

NATIONAL POWER CORPORATION v. CITY OF CABANATUAN G.R. No. 149110

April 9, 2003

Taxation assumes even greater significance with the ratification of the 1987
Constitution. Thenceforth, the power to tax is no longer vested exclusively on Congress;
local legislative bodies are now given direct authority to levy taxes, fees and other
charges pursuant to Article X, section 5 of the 1987 Constitution.

QUEZON CITY, et al. v. ABS-CBN BROADCASTING CORPORATION, G.R. No.

162015, March 6, 2006

Clearly then, while a new slant on the subject of local taxation now prevails in the sense
that the former doctrine of local government units’ delegated power to tax had been
effectively modified with Article X, Section 5 of the 1987 Constitution now in place, the
basic doctrine on local taxation remains essentially the same. For as the Court stressed
in Mactan, "the power to tax is [still] primarily vested in the Congress."

SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS

ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005

Assuming that Section 28(2) Article VI did not exist, the enactment of the SMA
[Safeguard Measure Act] by Congress would be voided on the ground that it would
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constitute an undue delegation of the legislative power to tax. The constitutional

provision shields such delegation from constitutional infirmity, and should be recognized
as an exceptional grant of legislative power to the President, rather than the affirmation
of an inherent executive power.

Alexander Howden & Co., Ltd. v. Collector of Internal Revenue as cited in

COMMISSIONER OF INTERNAL REVENUE v. JULIANE BAIER-NICKEL, G.R. No.
153793, August 29, 2006

The reinsurance premiums remitted to appellants by virtue of the reinsurance contracts,

accordingly, had for their source the undertaking to indemnify Commonwealth Insurance
Co. against liability. Said undertaking is the activity that produced the reinsurance
premiums, and the same took place in the Philippines.

COMMISSIONER OF INTERNAL REVENUE v. JAPAN AIR LINES, INC., G.R. No.

60714, March 6, 1991

For the source of income to be considered as coming from the Philippines, it is sufficient
that the income is derived from activities within this country regardless of the absence of
flight operations within Philippine territory. Indeed, the sale of tickets is the very lifeblood
of the airline business, the generation of sales being the paramount objective.

CITY OF IRIGA v. CAMARINES SUR III ELECTRIC COOPERATIVE, INC., G.R. No.
192945, September 5, 2012

Since it partakes of the nature of an excise tax, the situs of taxation is the place where
the privilege is exercised, in this case in the City of Iriga, where CASURECO III has its
principal office and from where it operates, regardless of the place where its services or
products are delivered.

COMMISSIONER OF INTERNAL REVENUE v.AMERICAN EXPRESS

INTERNATIONAL, INC. (PHILIPPINE BRANCH), G.R. No. 152609, June 29, 2005

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.

PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY (PFDA) v. CENTRAL BOARD

OF ASSESSMENT APPEALS, G.R. No. 178030, December 15, 2010

As property of public dominion, the Lucena Fishing Port Complex is owned by the
Republic of the Philippines and thus exempt from real estate tax.

KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC. v.

HON. BIENVENIDO TAN, G.R. No. 81311, June 30, 1988
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Equality and uniformity in taxation means that all taxable articles or kinds of property of
the same class shall be taxed at the same rate. The taxing power has the authority to
make reasonable and natural classifications for purposes of taxation; inequalities which
result from a singling out of one particular class for taxation or exemption infringe no
constitutional limitation.

LUNG CENTER OF THE PHILIPPINES v. QUEZON CITY, G.R. No. 144104, June 29,
2004

Even as we find that the petitioner is a charitable institution, we hold that those portions
of its real property that are leased to private entities are not exempt from real property
taxes as these are not actually, directly and exclusively used for charitable purposes.
On the other hand, the portions of the land occupied by the hospital and portions of the
hospital used for its patients, whether paying or non-paying, are exempt from real
property taxes.

COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC.

G.R. No. 195909 September 26, 2012

Section 30(E) and (G) of the NIRC requires that an institution be "operated exclusively"
for charitable or social welfare purposes to be completely exempt from income tax. An
institution under Section 30(E) or (G) does not lose its tax exemption if it earns income
from its for-profit activities. Such income from for-profit activities, under the last
paragraph of Section 30, is merely subject to income tax, previously at the ordinary
corporate rate but now at the preferential 10% rate pursuant to Section 27(B).

JOHN HAY PEOPLES ALTERNATIVE COALITION, et al. v. VICTOR LIM, et al., G. R.

No. 119775, October 24, 2003

The incentives under R.A. No. 7227 are exclusive only to the Subic SEZ, hence, the
extension of the same to the John Hay SEZ finds no support therein. The challenged
grant of tax exemption would circumvent the Constitution's imposition that a law
granting any tax exemption must have the concurrence of a majority of all the members
of Congress.

COMMISSIONER OF INTERNAL REVENUE v. MARUBENI CORPORATION, G.R.

No. 137377, December 18, 2001

A contractor's tax is generally in the nature of an excise tax on the exercise of a

privilege of selling services or labor rather than a sale on products; and is directly
collectible from the person exercising the privilege. Being an excise tax, it can be levied
by the taxing authority only when the acts, privileges or business are done or performed
within the jurisdiction of said authority.

CITY OF IRIGA v. CAMARINES SUR III ELECTRIC COOPERATIVE, INC., G.R. No.
192945, September 5, 2012
Law on Taxation

A franchise tax is a tax on the privilege of transacting business in the state and
exercising corporate franchises granted by the state. It is not levied on the corporation
simply for existing as a corporation, upon its property or its income, but on its exercise
of the rights or privileges granted to it by the government.

ASIA INTERNATIONAL AUCTIONEERS, INC. v. COMMISSIONER OF INTERNAL

REVENUE G.R. No. 179115 September 26, 2012

Indirect taxes, like VAT and excise tax, are different from withholding taxes: To
distinguish, in indirect taxes, the incidence of taxation falls on one person but the
burden thereof can be shifted or passed on to another person, such as when the tax is
imposed upon goods before reaching the consumer who ultimately pays for it. On the
other hand, in case of withholding taxes, the incidence and burden of taxation fall on the
same entity, the statutory taxpayer. The burden of taxation is not shifted to the
withholding agent who merely collects, by withholding, the tax due from income
payments to entities arising from certain transactions and remits the same to the
government.

ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE

COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995
The Constitution does not really prohibit the imposition of indirect taxes which, like the
VAT, are regressive since what it simply provides is that Congress shall "evolve a
progressive system of taxation." The constitutional provision has been interpreted to
mean simply that "direct taxes are to be preferred [and] as much as possible, indirect
taxes should be minimized."

CHINA BANKING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE,

G.R. No. 175108 (2013).
The 20% final tax withheld on a bank’s passive income should be included in the
computation of the Gross Receipts Tax (GRT). Bureau of Internal Revenue (BIR) has
consistently ruled that the term gross receipts do not admit of any deduction. It
emphasized that interest earned by banks, even if subject to the final tax and excluded
from taxable gross income, forms part of its gross receipt for GRT purposes. The
interest earned refers to the gross interest without deduction, since the regulations do
not provide for any deduction. Absent a statutory definition of the term, the BIR had
consistently applied it in its ordinary meaning, i.e., without deduction.

TAN v. DEL ROSARIO, JR. 237 SCRA 324

Global treatment is a system where the tax treatment views indifferently the tax base
and generally treats in common all categories of taxable income of the taxpayer.
Schedular approach is a system employed where the income tax treatment varies and
made to depend on the kind or category of taxable income of the taxpayer.

CIR vs Isabela Cultural Corp., GR 172231, February 12, 2007

Law on Taxation

The accrual method relies upon the taxpayer’s right to receive amounts or its obligation
to pay them, in opposition to actual receipt or payment, which characterizes the cash
method of accounting. Amounts of income accrue where the right to receive them
become fixed, where there is created an enforceable liability. Similarly, liabilities are
accrued when fixed and determinable in amount, without regard to indeterminacy
merely of time of payment. For a taxpayer using the accrual method, the determinative
question is, when do the facts present themselves in such a manner that the taxpayer
must recognize income or expense? The accrual of income and expense is permitted
when the all-events test has been met. This test requires: (1) fixing of a right to income
or liability to pay; and (2) the availability of the reasonable accurate determination of
such income or liability.

Tomas Calasanz, et al. vs. Commissioner of Internal Revenue, et al., G.R. No. L-
26284, October 9, 1986
The proceeds from the inherited land of petitioners, which they subdivided into small
lots and in the process converted into a residential subdivision and given the name Don
Mariano Subdivision, is taxable as ordinary income. Property initially classified as a
capital asset may thereafter be treated as an ordinary asset if a combination of the
factors indubitably tend to show that the activity was in furtherance of or in the course of
the taxpayer's trade or business; thus, a sale of inherited real property usually gives
capital gain or loss even though the property has to be subdivided or improved or both
to make it salable--however, if the inherited property is substantially improved or very
actively sold or both it may be treated as held primarily for sale to customers in the
ordinary course of the heir's business.

CIR vs CA, G.R. No. 108576 January 20, 1999

Stock dividends, strictly speaking, represent capital and do not constitute income to its
recipient. So that the mere issuance thereof is not yet subject to income tax as they are
nothing but an enrichment through increase in value of capital investment. However, the
redemption or cancellation of stock dividends, depending on the time and manner it was
made, is essentially equivalent to a distribution of taxable dividends, making the
proceeds thereof taxable income to the extent it represents profits. The exception was
designed to prevent the issuance and cancellation or redemption of stock dividends,
which is fundamentally not taxable, from being made use of as a device for the actual
distribution of cash dividends, which is taxable.

Ma. Isabel T. Santos vs. Servier Phil., Inc., et al., G.R. No. 166377, November 28,
2008

Respondent terminated petitioner’s services due to her illness, rendering her incapable
of continuing to work, and gave her retirement benefits but withheld the tax due thereon.
The retirements benefits are taxable because the petitioner was only 41 yrs old at the
time of retirement and had rendered only 8 years of service; for these benefits to be
exempt from tax, the following requisites must concur: (1) a reasonable private benefit
plan is maintained by the employer; (2) the retiring official or employee has been in the
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service of the same employer for at least ten (10) years; (3) the retiring official or
employee is not less than fifty (50) years of age at the time of his retirement; and (4) the
benefit had been availed of only once.

C. M. Hoskins & Co., Inc. vs. Commissioner of Internal Revenue, G.R. No. L-24059,
November 28, 1969

Payment by the taxpayer-corporation to its controlling stockholder (Hoskins) of 50% of

its supervision fees (paid by a client of the corporation for the latter's services as
managing agent of a subdivision project) or the amount of P99,977.91 is not a
deductible ordinary and necessary expense because it does not pass the test of
reasonable compensation. If independently, a one-time P100,000.00-fee to plan and lay
down the rules for supervision of a subdivision project were to be paid to an
experienced realtor such as Hoskins, its fairness and deductibility by the taxpayer could
be conceded; however, the fee paid to Hoskins continued every year since 1955 up to
1963 and for as long as its contract with the subdivision owner subsisted, regardless of
whether services were actually rendered by Hoskins.

Philippine Refining Company vs. Court of Appeals, et al., G.R. No. 118794, May 8,
1996

In claiming deductions for bad debts, the only evidentiary support given by PRC was the
explanation posited by its accountant, whose allegations were not supported by any
documentary evidence. One of the requisites to qualify as “bad debt” is that the debt
must be actually ascertained to be worthless and uncollectible during the taxable year,
and the taxpayer must prove that he exerted diligent efforts to collect the debts by (1)
sending of statement of accounts; (2) sending of collection letters; (3) giving the account
to a lawyer for collection; and (4) filing a collection case in court.

Consolidated Mines, Inc. vs. Court of Tax Appeals, et al., G.R. Nos. L-18843 &
18844, August 29, 1974

Both depletion and depreciation are predicated on the same basic promise of avoiding a
tax on capital. The allowance for depletion is based on the theory that the extraction of
minerals gradually exhausts the capital investment in the mineral deposit. The purpose
of the depiction deduction is to permit the owner of a capital interest in mineral in place
to make a tax-free recovery of that depleting capital asset. A depletion is based upon
the concept of the exhaustion of a natural resource whereas depreciation is based upon
the concept of the exhaustion of the property, not otherwise a natural resource, used in
a trade or business or held for the production of income. Thus, depletion and
depreciation are made applicable to different types of assets. And a taxpayer may not
deduct that which the Code allows as of another.

COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE AIRLINES, INC. (PAL),

G.R. No. 179259 (2013).
Law on Taxation

A corporation like the Philippine Airlines who has a franchise of its own cannot be
subject to the minimum corporate income tax. The reason being- as provided in PD
1590, Section 13 of PAL's franchise, its taxation shall be strictly governed by two
fundamental rules, to wit: (1) respondent shall pay the Government either the basic
corporate income tax or franchise tax, whichever is lower; and (2) the tax paid by
respondent, under either of these alternatives, shall be in lieu of all other taxes, duties,
royalties, registration, license, and other fees and charges, except only real property
tax.

Manila Banking Corp. v. CIR, 499 SCRA 782

The intent of Congress relative to the MCIT is to grant a 4 year suspension of tax
payment to newly formed corporations. Corporations still starting have to stabilize their
venture in order to obtain stronghold in the industry. It is not a surprise when many
corporations reported losses in their initial years of operations.

Commissioner of Internal Revenue vs. Court of Appeals, et al., G.R. No. 124043,
October 14, 1998

YMCA, a non-stock non-profit corporation with charitable objectives, claimed exemption

from payment of income tax by invoking the NIRC and the Constitution. While the
income received by the organizations enumerated in Section 26 of the NIRC is, as a
rule, exempted from the payment of tax “in respect to income received by them as
such,” the exemption does not apply to income derived “from any of their properties,
real or personal, or from any of their activities conducted for profit, regardless of the
disposition made of such income”; Moreover, charitable institutions under Art. VI, sec.
28 of the Constitution are only exempted from property taxes, and YMCA is not an
educational institution under Article XIV, Section 4 of the Constitution.

Commissioner of Internal Revenue vs. Citytrust Investment Phils., Inc., G.R. Nos.
139786 & 140857, September 27, 2006

Citytrust and Asianbank are domestic corporations which paid gross receipts tax and
claimed a refund on the basis of a CTA ruling that the 20% FWT on a bank’s passive
income does not form part of the taxable gross receipts. The 20% FWT on a bank’s
interest income forms part of the taxable gross receipts because “gross receipts” means
“the entire receipts without any deduction”; moreover, the imposition of the 20% FWT
and 5% GRT does not constitute double taxation because GRT is a percentage tax
while FWT is an income tax, and the two concepts are different from each other.

COMMISSIONER OF INTERNAL REVENUE vs. TEAM (PHILIPPINES) OPERATIONS

CORPORATION, G.R. No. 185728 (2013).

For a taxpayer to be entitled to a tax credit or refund of creditable withholding tax, the
following requisites must be complied with: First, The claim must be filed with the CIR
within the two-year period from the date of payment of the tax; Second, It must be
Law on Taxation

shown on the return of the recipient that the income received was declared as part of
the gross income; and Third, The fact of withholding is established by a copy of the
statement duly issued by the payor to the payee showing the amount paid and the
amount of tax withheld.

TAX II

GONZALO VILLANUEVA vs. SPOUSES FROILAN, G.R. No. 172804, January 24,
2011

Post-mortem dispositions typically –

(1) Convey no title or ownership to the transferee before the death of the transferor; or,
what amounts to the same thing, that the transferor should retain the ownership (full or
naked) and control of the property while alive;
(2) That before the [donor’s] death, the transfer should be revocable by the transferor at
will, ad nutum; but revocability may be provided for indirectly by means of a reserved
power in the donor to dispose of the properties conveyed;
(3) That the transfer should be void if the transferor should survive the transferee;
[4] [T]he specification in a deed of the causes whereby the act may be revoked by the
donor indicates that the donation is inter vivos, rather than a disposition mortis causa;
[5] That the designation of the donation as mortis causa, or a provision in the deed to
the effect that the donation is “to take effect at the death of the donor” are not controlling
criteria; such statements are to be construed together with the rest of the instrument, in
order to give effect to the real intent of the transferor; and
(6) That in case of doubt, the conveyance should be deemed donation inter vivos rather
than mortis causa, in order to avoid uncertainty as to the ownership of the property
subject of the deed.

ROMARICO G. VITUG vs. THE HONORABLE COURT OF APPEALS and ROWENA

FAUSTINO-CORONA, G.R. No. 82027, March 29, 1990

The conveyance in question is not, first of all, one of mortis causa, which should be
embodied in a will. In this case, the monies subject of savings account were in the
nature of conjugal funds. In the case relied on, Rivera v. People's Bank and Trust Co.,
we rejected claims that a survivorship agreement purports to deliver one party's
separate properties in favor of the other, but simply, their joint holdings.

RAFAEL ARSENIO S. DIZON vs. COURT OF TAX APPEALS, G.R. No. 140944, April
30, 2008
As held in Propstra v. U.S., where a lien claimed against the estate was certain and
enforceable on the date of the decedent's death, the fact that the claimant subsequently
settled for lesser amount did not preclude the estate from deducting the entire amount
of the claim for estate tax purposes. These pronouncements essentially confirm the
general principle that post-death developments are not material in determining the
amount of the deduction.
Law on Taxation

COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS, G.R. No.

123206, March 22, 2000
Administration expenses, as an allowable deduction from the gross estate of the
decedent for purposes of arriving at the value of the net estate, have been construed by
the federal and state courts of the United States to include all expenses "essential to the
collection of the assets, payment of debts or the distribution of the property to the
persons entitled to it." In other words, the expenses must be essential to the proper
settlement of the estate and expenditures incurred for the individual benefit of the heirs,
devisees or legatees are not deductible.

SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA vs. COURT OF

APPEALS, G.R. No. 111904, October 5, 2000
The granting clause shows that Diego donated the properties out of love and affection
for the donee which is a mark of a donation inter vivos; second, the reservation of
lifetime usufruct indicates that the donor intended to transfer the naked ownership over
the properties; third, the donor reserved sufficient properties for his maintenance in
accordance with his standing in society, indicating that the donor intended to part with
the six parcels of land; lastly, the donee accepted the donation.

The Philippine American Life and General Insurance Company vs. The Secretary
of Finance and the Commissioner of Internal Revenue, G.R. No. 210987
(November 24, 2014).
The absence of donative intent does not exempt the sales of stock transaction from
donor’s tax since Sec. 100 of the NIRC categorically states that the amount by which
the fair market value of the property exceeded the value of the consideration shall
be deemed a gift. Thus, even if there is no actual donation, the difference in price is
considered a donation by fiction of law. Moreover, Sec. 7(c.2.2) of RR 06-08 does not
alter Sec. 100 of the NIRC but merely sets the parameters for determining the “fair
market value” of a sale of stocks. Lastly, RMC 25-11, even if issued after the sale, was
not being applied retroactively since it merely called for the strict application of Sec.
100, which was already in force the moment the NIRC was enacted.

COMMISSIONER OF INTERNAL REVENUE vs. SONY PHILIPPINES, INC., G.R. No.

178697, November 17, 2010

Thus, there must be a sale, barter or exchange of goods or properties before any VAT
may be levied. Certainly, there was no such sale, barter or exchange in the subsidy
given by SIS to Sony; it was but a dole out by SIS and not in payment for goods or
properties sold, bartered or exchanged by Sony.

MINDANAO II GEOTHERMAL PARTNERSHIP vs. COMMISSIONER OF INTERNAL

REVENUE, G.R. No. 193301, March 11, 2013
Mindanao II’s sale of the Nissan Patrol is said to be an isolated transaction. However, it
does not follow that an isolated transaction cannot be an incidental transaction for
purposes of VAT liability. Indeed, a reading of Section 105 of the 1997 Tax Code would
Law on Taxation

show that a transaction "in the course of trade or business" includes "transactions
incidental thereto."

CIR v. SM Prime Holdings, Inc. and First Asia Realty Development Corp., G.R. No.
183505, February 26, 2010

Among those included in the enumeration is the “lease of motion picture films, films,
tapes and discs.” This, however, is not the same as the showing or exhibition of motion
pictures or films. The legislative intent is not to impose VAT on persons already covered
by the amusement tax and this holds true even in the case of cinema/theater operators
taxed under the LGC of 1991 precisely because the VAT law was intended to replace
the percentage tax on certain services.

ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION vs.

COMMISSIONER OF INTERNAL REVENUE, G.R. Nos. 141104 & 148763, June 8,
2007

According to the Destination Principle, goods and services are taxed only in the country
where these are consumed. In connection with the said principle, the Cross Border
Doctrine mandates that no VAT shall be imposed to form part of the cost of the goods
destined for consumption outside the territorial border of the taxing authority. Hence,
actual export of goods and services from the Philippines to a foreign country must be
free of VAT, while those destined for use or consumption within the Philippines shall be
imposed with 10% VAT.

CIR v. Seksui Jushi Phils, Inc. G.R. No. 149671, July 21, 2006

While an ecozone is geographically within the Philippines, it is deemed a separate

customs territory and is regulated in laws as foreign soul. Sales by supplies outside the
borders of ecozone to this separate customs territory are deemed exports and treated
as export sales.

PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) vs. THE

BUREAU OF INTERNAL REVENUE, G.R. No. 172087, March 15, 2011
The rationale for the exemption from indirect taxes provided for in P.D. 1869 and the
extension of such exemption to entities or individuals dealing with PAGCOR in casino
operations are best elucidated from the 1987 case of Commissioner of Internal
Revenue v. John Gotamco & Sons, Inc., where the absolute tax exemption of the World
Health Organization (WHO) upon an international agreement was upheld. We held in
said case that the exemption of contractee WHO should be implemented to mean that
the entity or person exempt is the contractor itself who constructed the building owned
by contractee WHO, and such does not violate the rule that tax exemptions are
personal because the manifest intention of the agreement is to exempt the contractor so
that no contractor's tax may be shifted to the contractee WHO.
Law on Taxation

LUZON HYDRO CORPORATION vs. COMMISSION ON INTERNAL REVENUE, G.R.

No. 188260 (2013).
Even though the sale of electricity by a power generation company is subject to zero-
rated VAT, its claim for refund or tax credit cannot be granted where no VAT official
receipts and VAT returns have been presented to prove that it actually made zero-rated
sales of electricity. An entity claiming for refund or tax credit carries with it the burden of
proving that not only is it entitled under the substantive law to the allowance of its claim
for refund or tax credit but also that it met all the requirements for evidentiary
substantiation of its claim before the administrative official concerned.

CBK POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE,

G.R. Nos. 198729-30 (2014).

Under Section 112(A) of the NIRC, for VAT-registered persons whose sales are zero-
rated or effectively zero-rated, a claim for the refund or credit of creditable input tax that
is due or paid, and that is attributable to zero-rated or effectively zero-rated sales, must
be filed within two years after the close of the taxable quarter when such sales were
made. The reckoning frame would always be the end of the quarter when the pertinent
sale or transactions were made, regardless of when the input VAT was paid. Also, in
the filing of judicial claims, the 30-day period to appeal to the CTA is dependent on the
120-day period, compliance with both periods is jurisdictional. The period of 120 days is
a prerequisite for the commencement of the 30-day period to appeal to the CTA.

COMMISSIONER OF INTERNAL REVENUE vs. MINDANAO II PARTNERSHIP, G.R.

No. 191498 (2014).
Section 112(D) speaks of two periods: the period of 120 days, which serves as a waiting
period to give time for the CIR to act on the administrative claim for refund or credit, and
the period of 30 days, which refers to the period for interposing an appeal with the CTA.
The 30-day period applies not only to instances of actual denial by the CIR of the claim
for refund or tax credit, but to cases of inaction by the CIR as well. Therefore,
notwithstanding the timely filing of administrative claims, the CTA does not have
jurisdiction over the case where the taxpayer’s judicial claim was filed beyond the 30
day period, the nature of such time requirement being mandatory.

Commissioner of Internal Revenue vs. Silicon Philippines, Inc. (formerly Intel

Philippines Manufacturing, Inc.), G.R. No. 169778 (March 12, 2014).

Prior to seeking judicial recourse before the CTA, a VAT–registered person may apply
for the issuance of a tax credit certificate or refund of creditable input tax attributable to
zero–rated or effectively zero–rated sales within two (2) years after the close of taxable
quarter when the sales or purchases were made. Additionally, under paragraph (D) of
Section 112, Tax Code, the Commissioner of Internal Revenue is given a 120–day
period, from submission of complete documents in support of the administrative
claim within which to act on claims for refund/applications for issuance of the tax credit
certificate. Upon denial of the claim or application, or upon expiration of the 120–day
Law on Taxation

period, the taxpayer only has 30 days within which to appeal said adverse decision or
unacted claim before the CTA.

Taganito Mining Corporation vs. Commissioner of Internal Revenue, G.R. No.

197591 (June 18, 2014).
The 2010 Aichi case instructs that once the administrative claim is filed within the
prescriptive period, the claimant must wait for the 120-day period to end and, thereafter,
he is given a 30-day period to file his judicial claim before the CTA, even if said 120-day
and 30-day periods would exceed the aforementioned two (2)-year prescriptive period.

Taganito Mining Corporation vs. Commissioner of Internal Revenue, G.R. No.

201195 (November 26, 2014).

The 2-year period under Section 229 does not apply to appeals before the CTA in
relation to claims for a refund or tax credit for unutilized creditable input VAT. Section
229 pertains to the recovery of taxes erroneously, illegally, or excessively
collected. Input VAT is not ‘excessively’ collected as understood under Section 229
because, at the time the input VAT is collected, the amount paid is correct and proper. It
is, therefore, Section 112 which applies specifically with regard to claiming a refund or
tax credit for unutilized creditable input VAT.

FORT BONIFACIO DEVELOPMENT CORPORATION vs. COMMISSIONER OF

INTERNAL REVENUE, G.R. No. 173425, January 22, 2013

Prior payment of taxes is not necessary before a taxpayer could avail of the 8%
transitional input tax credit: first, it was never mentioned in Section 105 of the old NIRC
[now Sec. 111] that prior payment of taxes is a requirement; second, since the law
(Section 105 of the NIRC) does not provide for prior payment of taxes, to require it now
would be tantamount to judicial legislation which, to state the obvious, is not allowed;
third, a transitional input tax credit is not a tax refund per se but a tax credit; fourth, if the
intent of the law were to limit the input tax to cases where actual VAT was paid, it could
have simply said that the tax base shall be the actual value-added tax paid; and fifth,
this Court had already declared that prior payment of taxes is not required in order to
avail of a tax credit.

COMMISSIONER OF INTERNAL REVENUE vs. SEAGATE TECHNOLOGY

(PHILIPPINES), G.R. No. 153866, February 11, 2005
Having determined that respondent's purchase transactions are subject to a zero VAT
rate, the tax refund or credit is in order. To repeat, the VAT is a tax imposed on
consumption, not on business. Although respondent as an entity is exempt, the
transactions it enters into are not necessarily so. The VAT payments made in excess of
the zero rate that is imposable may certainly be refunded or credited.

CIR vs Pascor Realty and Development Corp., GR no. 128315, June 29, 1999
Law on Taxation

An assessment contains not only a computation of tax liabilities, but also a demand for
payment within a prescribed period. It also signals the time when penalties and protests
begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies
thereon, due process requires that it must be served on and received by the taxpayer.
Accordingly, an affidavit, which was executed by revenue officers stating the tax
liabilities of a taxpayer and attached to a criminal complaint for tax evasion, cannot be
deemed an assessment that can be questioned before the Court of Tax Appeals.

SMI-ED Philippine Technology, Inc. vs. Commissioner of Internal Revenue, G.R.

No. 175410 (November 12, 2014)

The power and duty to assess national internal revenue taxes are lodged with the BIR.
The Court of Tax Appeals has no power to make an assessment at the first
instance. On matters such as tax collection, tax refund, and others related to the
national internal revenue taxes, the Court of Tax Appeals’ jurisdiction is appellate in
nature. However, because Republic Act No. 1125 also vests the Court of Tax Appeals
with jurisdiction over the BIR’s inaction on a taxpayer’s refund claim, there may be
instances when the Court of Tax Appeals has to take cognizance of cases that have
nothing to do with the BIR’s assessments or decisions. If the BIR fails to act on the
request for refund, the taxpayer may bring the matter to the Court of Tax Appeals.

Samar-I Electric Cooperative vs. Commissioner of Internal Revenue, G.R. No.

193100 (December 10, 2014).
Our stand that the law should be interpreted to mean a separation of the three different
situations of false return, fraudulent return with intent to evade tax, and failure to file a
return is strengthened immeasurably by the last portion of the provision which
segregates the situations into three different classes, namely “falsity,” “fraud” and
“omission.” That there is a difference between “false return” and “fraudulent return”
cannot be denied. While the first merely implies deviation from the truth, whether
intentional or not, the second implies intentional or deceitful entry with intent to evade
the taxes due.

CIR vs Hantex Trading Co., GR no. 136975, March 31, 2005

The rule is that in the absence of the accounting records of a taxpayer, his tax liability
may be determined by estimation. The petitioner is not required to compute such tax
liabilities with mathematical exactness. Approximation in the calculation of the taxes due
is justified. To hold otherwise would be tantamount to holding that skillful concealment is
an invincible barrier to proof. However, the rule does not apply where the estimation is
arrived at arbitrarily and capriciously. In fine, then, the petitioner acted arbitrarily and
capriciously in relying on and giving weight to the machine copies of the Consumption
Entries in fixing the tax deficiency assessments against the respondent.

PHILIPPINE AIRLINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R.

No. 198759 (2013).
Law on Taxation

Section 204(c) of the NIRC provides that it is the statutory taxpayer which has the legal
personality to file a claim for refund. Accordingly, in cases involving excise tax
exemptions on petroleum products under Section 135, the Court has consistently held
that it is the statutory taxpayer who is entitled to claim a tax refund based thereon and
not the party who merely bears its economic burden. However, the abovementioned
rule should not apply to instances where the law clearly grants the party to which the
economic burden of the tax is shifted an exemption from both direct and indirect taxes.
In which case, the latter must be allowed to claim a tax refund even if it is not
considered as the statutory taxpayer under the law. In this case, PAL’s franchise grants
it an exemption from both direct and indirect taxes on its purchase of petroleum
products. Hence, PAL has the legal personality to file the claim for refund for the passed
on excise taxes because of its franchise.

CIR vs Primetown Property Group Inc., GR 162155, August 28, 2007

Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the
Administrative Code of 1987 deal with the same subject matter — the computation of
legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a
regular year or a leap year. Under the Administrative Code of 1987, however, a year is
composed of 12 calendar months. Needless to state, under the Administrative Code of
1987, the number of days is irrelevant. There obviously exists a manifest incompatibility
in the manner of computing legal periods under the Civil Code and the Administrative
Code of 1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the
Administrative Code of 1987, being the more recent law, governs the computation of
legal periods.

CIR vs Phoenix Assurance Co., L-19127, May 20, 1965

Considering that the deficiency assessment was based on the amended return which,
as aforestated, is substantially different from the original return, the period of limitation
of the right to issue the same should be counted from the filing of the amended income
tax return. We believe that to hold otherwise, we would be paving the way for taxpayers
to evade the payment of taxes by simply reporting in their original return heavy losses
and amending the same more than five years later when the Commissioner of Internal
Revenue has lost his authority to assess the proper tax thereunder. The object of the
Tax Code is to impose taxes for the needs of the Government, not to enhance tax
avoidance to its prejudice.

CIR v. Metro Star Superama, Inc. 637 SCRA 633

Sec. 228 of the Tax Code clearly requires that the taxpayer must be informed that he is
liable for deficiency taxes through the sending of a Preliminary Assessment Notice. The
sending of a PAN to the taxpayer is to inform him of the assessment made is but part of
due process requirement in the issuance of a deficiency tax assessment, the absence
of which renders nugatory any assessment made by the tax authorities.

CIR v. Enron Subic Power Corp. 575 SCRA 212

Law on Taxation

A taxpayer must be informed in writing of the legal and factual bases of the tax
assessment made against him. This is a mandatory requirement. The advice of a tax
deficiency given by the CIR to an employee of Enron as well as the preliminary 5-day
letter notice, were not valid substitutes for the mandatory notice in writing of the legal
and factual bases of the assessment. Sec. 228 of the NIRC requires that the legal and
factual bases be stated in the formal letter of demand and assessment notice.
Otherwise the law and RR 12-99 would be rendered nugatory. In view of the absence of
a fair opportunity for Enron to be informed of the bases of the assessment, the
assessment was void. This is a requirement of due process.

CIR vs First Express Pawnshop Company, GR 172045-46, June 16, 2009

Petitioner cannot insist on the submission of proof of DST payment because such
document does not exist as respondent claims that it is not liable to pay, and has not
paid, the DST on the deposit on subscription. The term “relevant supporting documents”
should be understood as those documents necessary to support the legal basis in
disputing a tax assessment as determined by the taxpayer. The BIR can only inform the
taxpayer to submit additional documents. The BIR cannot demand what type of
supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy
of the BIR, which may require the production of documents that a taxpayer cannot
submit.

Allied Banking Corporation vs CIR, G.R. No. 175097, February 5, 2010

Records show that petitioner disputed the PAN but not the Formal Letter of Demand
with Assessment Notices. Nevertheless, we cannot blame petitioner for not filing a
protest against the Formal Letter of Demand with Assessment Notices since the
language used and the tenor of the demand letter indicate that it is the final decision of
the respondent on the matter. We have time and again reminded the CIR to indicate, in
a clear and unequivocal language, whether his action on a disputed assessment
constitutes his final determination thereon in order for the taxpayer concerned to
determine when his or her right to appeal to the tax court accrues. Viewed in the light of
the foregoing, respondent is now estopped from claiming that he did not intend the
Formal Letter of Demand with Assessment Notices to be a final decision.

CIR vs Union Shipping Corporation, GR L-66160, May 21, 1990

The request for reinvestigation and reconsideration was in effect considered denied by
petitioner when the latter filed a civil suit for collection of deficiency income. Under the
circumstances, the Commissioner of Internal Revenue, not having clearly signified his
final action on the disputed assessment, legally the period to appeal has not
commenced to run. Thus, it was only when private respondent received the summons
on the civil suit for collection of deficiency income on December 28, 1978 that the period
to appeal commenced to run.

CIR vs Kudos Metal Corp., GR 178087, May 5, 2010

Law on Taxation

While we may agree with the Court of Tax Appeals that a mere request for
reexamination or reinvestigation may not have the effect of suspending the running of
the period of limitation for in such case there is need of a written agreement to extend
the period between the Collector and the taxpayer, there are cases however where a
taxpayer may be prevented from setting up the defense of prescription even if he has
not previously waived it in writing as when by his repeated requests or positive acts the
Government has been, for good reasons, persuaded to postpone collection to make him
feel that the demand was not unreasonable or that no harassment or injustice is meant
by the Government.

CIR vs Philippine Global Communication, GR 167146, October 31, 2006

The running of the prescription period where the acts of the taxpayer did not prevent the
government from collecting the tax. Partial payment would not prevent the government
from suing the taxpayer. Because, by such act of payment, the government is not
thereby “persuaded to postpone collection to make him feel that the demand was not
unreasonable or that no harassment or injustice is meant.”

Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v.
Commissioner of Internal Revenue, G. R. No. 174942, March 7, 2008
The law prescribing a limitation of actions for the collection of the income tax is
beneficial both to the Government and to its citizens; to the Government because tax
officers would be obliged to act promptly in the making of assessment, and to citizens
because after the lapse of the period of prescription citizens would have a feeling of
security against unscrupulous tax agents who will always find an excuse to inspect the
books of taxpayers, not to determine the latter’s real liability, but to take advantage of
every opportunity to molest peaceful, law-abiding citizens. Without such a legal defense
taxpayers would furthermore be under obligation to always keep their books and keep
them open for inspection subject to harassment by unscrupulous tax agents.

Republic vs Enriquez, GR 78391, October 21, 1988

It is settled that the claim of the government predicated on a tax lien is superior to the
claim of a private litigant predicated on a judgment. The tax lien attaches not only from
the service of the warrant of distraint of personal property but from the time the tax
became due and payable. Besides, the distraint on the subject properties of Maritime
Company of the Philippines as well as the notice of their seizure were made by
petitioner, through the Commissioner of Internal Revenue, long before the writ of
execution was issued by the Regional Trial Court.

Commissioner of Internal Revenue vs. Manila Electric Company, G.R. No. 181459
(June 9, 2014).
The claim for tax refund in the aggregate amount must fail since the same has already
prescribed under Section 229 of the Tax Code. The prescriptive period of two (2) years
commences to run from the time that the refund is ascertained, the propriety thereof is
determined by law (in this case, from the date of payment of tax), and not upon the
discovery by the taxpayer of the erroneous or excessive payment of taxes. The
Law on Taxation

issuance by the BIR of the Ruling declaring the tax-exempt status of NORD/LB, if at all,
is merely confirmatory in nature. BIR Ruling No. DA-342-2003 is not the operative act
from which an entitlement of refund is determined.

Systra Philippines vs CIR, GR 176290, September 21, 2007

A corporation entitled to a tax credit or refund of the excess estimated quarterly income
taxes paid has two options: (1) to carry over the excess credit or (2) to apply for the
issuance of a tax credit certificate or to claim a cash refund. If the option to carry over
the excess credit is exercised, the same shall be irrevocable for that taxable period.
This is known as the irrevocability rule and is embodied in the last sentence of Section
76 of the Tax Code.

Philippine Phosphate Fertilizer Corp. vs CIR, GR 141973, June 28, 2005

In cases before tax courts, Rules of Court applies only by analogy or in a suppletory
character and whenever practicable and convenient shall be liberally construed in order
to promote its objective of securing a just, speedy and inexpensive disposition of every
action and proceeding. Since it is not disputed that petitioner is entitled to tax
exemption, it should not be precluded from presenting evidence to substantiate the
amount of refund it is claiming on mere technicality especially in this case, where the
failure to present invoices at the first instance was adequately explained by petitioner.

ACCRA Investments vs CA, G.R. No. 96322, December 20, 1991

For corporations, the two-year prescriptive period within which to claim a refund
commences to run, at the earliest, on the date of the filing of the adjusted final tax
return. The rationale in computing the two-year prescriptive period with respect to the
petitioner corporation's claim for refund from the time it filed its final adjustment return is
the fact that it was only then that ACCRAIN could ascertain whether it made profits or
incurred losses in its business operations.

Silkair vs CIR, G.R. Nos. 171383 & 172379, November 14, 2008
The proper party to question, or seek a refund of an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even if
he shifts the burden thereof to another. Even if Petron Corporation passed on to Silkair
the burden of the tax, the additional amount billed to Silkair for jet fuel is not a tax but
part of the price which Silkair had to pay as a purchaser.

Angeles City vs. Angeles City Electric Corp., GR 166134, June 29, 2010

The National Internal Revenue Code of 1997 (NIRC) expressly provides that no court
shall have the authority to grant an injunction to restrain the collection of any national
internal revenue tax, fee or charge imposed by the code. The situation, however, is
different in the case of the collection of local taxes as there is no express provision in
the LGC prohibiting courts from issuing an injunction to restrain local governments from
collecting taxes. Such statutory lapse or intent, however it may be viewed, may have
Law on Taxation

allowed preliminary injunction where local taxes are involved but cannot negate the
procedural rules and requirements under Rule 58.

PNOC vs CA, G.R. No. 109976, April 26, 2005

Compromise may be the favored method to settle disputes, but when it involves taxes, it
may be subject to closer scrutiny by the courts. A compromise agreement involving
taxes would affect not just the taxpayer and the BIR, but also the whole nation, the
ultimate beneficiary of the tax revenues collected.

People vs Sandiganbayan, GR 152532, August 16, 2005

The BIR may therefore abate or cancel the whole or any unpaid portion of a tax liability,
inclusive of increments, if its assessment is excessive or erroneous; or if the
administration costs involved do not justify the collection of the amount due. No mutual
concessions need be made, because an excessive or erroneous tax is not
compromised; it is abated or canceled. Only correct taxes should be paid.

PELIZLOY REALTY CORPORATION vs. THE PROVINCE OF BENGUET, G.R. No.

183137 (2013).
Amusement taxes are percentage taxes. Provinces are not barred from levying
amusement taxes even if amusement taxes are a form of percentage taxes. Section
140 of the LGC expressly allows for the imposition by provinces of amusement taxes on
the proprietors, lessees, or operators of theatres, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement. Theatres, cinemas, concert halls,
circuses, and boxing stadia are bound by a common typifying characteristic in that they
are all venues primarily for the staging of spectacles or the holding of public shows,
exhibitions, performances, and other events meant to be viewed by an audience.
Accordingly, ‘other places of amusement’ must be interpreted in light of the typifying
characteristic of being venues “where one seeks admission to entertain oneself by
seeing or viewing the show or performances” or being venues primarily used to stage
spectacles or hold public shows, exhibitions, performances, and other events meant to
be viewed by an audience. Thus, resorts, swimming pools, bath houses, hot springs
and tourist spots do not belong to the same category or class as theatres, cinemas,
concert halls, circuses, and boxing stadia. It follows that they cannot be considered as
among the ‘other places of amusement’ contemplated by Section 140 of the LGC and
which may properly be subject to amusement taxes.

National Power Corporation v. City of Cabanatuan, G.R. No. 149110, April 09, 2003
As commonly used, a franchise tax is "a tax on the privilege of transacting business in
the state and exercising corporate franchises granted by the state." To determine
whether the petitioner is covered by franchise tax, the following requisites should
concur: (1) that petitioner has a "franchise" in the sense of a secondary or special
franchise; and (2) that it is exercising its rights or privileges under this franchise within
the territory of the respondent city government.
Law on Taxation

Municipality of San Fernando, La Union v. Sta. Romana, G.R. No. L-30159, March
31, 1987

Under the Local Tax Code. there is no question that the authority to impose the license
fees collected from the hauling of sand and gravel excavated properly belongs to the
province concerned and not to the municipality where they are found which is
specifically prohibited under Section 22 of the same Code "from levying taxes, fees and
charges that the province or city is authorized to levy in this Code."

Province of Cagayan v. Lara, G.R. No. 188500, July 24, 2013

In order for an entity to legally undertake a quarrying business, he must first comply with
all the requirements imposed not only by the national government, but also by the local
government unit where his business is situated. Particularly, Section 138 (2) of RA 7160
requires that such entity must first secure a governor's permit prior to the start of his
quarrying operations

City of Manila v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 181845, August 04,
2009
When a municipality or city has already imposed a business tax on manufacturers, etc.
of liquors, distilled spirits, wines, and any other article of commerce, pursuant to Section
143 (a) of the LGC, said municipality or city may no longer subject the same
manufacturers, etc. to a business tax under Section 143 (h) of the same Code. Section
143 (h) may be imposed only on businesses that are subject to excise tax, VAT, or
percentage tax under the NIRC, and that are "not otherwise specified in preceding
paragraphs".

Ericsson Telecoms vs. City of Pasig. G.R. NO. 176667, November 22, 2007

Tax should be computed based on gross receipts; the right to receive income, and not
the actual receipt, determines when to include the amount in gross income. The
imposition of local business tax based on petitioner’s gross revenue will inevitably result
in the constitutionally proscribed double taxation – taxing of the same person twice by
the same jurisdiction for the same thing – inasmuch as petitioner’s revenue or income
for a taxable year will definitely include its gross receipts already reported during the
previous year and for which local business tax has already been paid.

Palma Development Corp. v. Municipality of Malangas, G.R. No. 152492, October

16, 2003
Section 133(e) of RA No. 7160 prohibits the imposition, in the guise of wharfage, of fees
— as well as all other taxes or charges in any form whatsoever — on goods or
merchandise. It is therefore irrelevant if the fees imposed are actually for police
surveillance on the goods, because any other form of imposition on goods passing
through the territorial jurisdiction of the municipality is clearly prohibited by Section
133(e).
Law on Taxation

Jardine Davies Insurance Brokers Inc. v. Aliposa, G.R. No. 118900, February 27,
2003
As a general precept, a taxpayer may file a complaint assailing the validity of the
ordinance and praying for a refund of its perceived overpayments without first filing a
protest to the payment of taxes due under the ordinance.

Valley Trading Co., Inc. v. CFI of Isabela, Branch II, G.R. No. L-49529, March 31,
1989
Unlike the National Internal Revenue Code, the Local Tax Code does not contain any
specific provision prohibiting courts from enjoining the collection of local taxes. Such
Statutory lapse or intent, however it may be viewed, may have allowed preliminary
injunction where local taxes are involved but cannot negate the procedural rules and
requirements under Rule 58.

Manila International Airport Authority v. Court of Appeals, G.R. No. 155650, July
20, 2006
Under Section 234(a), real property owned by the Republic is exempt from real estate
tax except when the government gives the beneficial use of the real property to a
taxable entity. The justification for the exception to the exemption is that the real
property, although owned by the Republic, is not devoted to public use or public service
but devoted to the private gain of a taxable person.

Allied Banking Corporation, etc., v. Quezon City Government, et al., G. R. No.

154126, October 11, 2005
Real properties shall be appraised at the current and fair market value prevailing in the
locality where the property is situated and classified for assessment purposes on the
basis of its actual use.

Heirs of Tajonera v. Court of Appeals, G.R. No. L-26677, March 27, 1981
It is `the duty of each person' acquiring real estate in the city to make a new declaration
thereof, with the advertence that failure to do so shall make the assessment in the name
of the previous owner 'valid and binding on all persons interested, and for all purposes,
as though the same had been assessed in the name of its actual owner.'

Spouses Hu v. Spouses Unico, G.R. No. 146534, September 18, 2009

With regard to determining to whom the notice of sale should have been sent, settled is
the rule that, for purposes of real property taxation, the registered owner of the property
is deemed the taxpayer. Thus, in identifying the real delinquent taxpayer, a local
treasurer cannot rely solely on the tax declaration but must verify with the Register of
Deeds who the registered owner of the particular property is.

Ty v. Trampe, G.R. No. 117577, December 01, 1995

The protest contemplated under Sec. 252 of R.A. 7160 is needed where there is a
question as to the reasonableness of the amount assessed. Hence, if a taxpayer
disputes the reasonableness of an increase in a real estate tax assessment, he is
Law on Taxation

required to "first pay the tax" under protest; otherwise, the city or municipal treasurer will
not act on his protest.

Davao Oriental Electric Coop vs. Prov. Dvo. of Oriental, 576 SCRA 645

Under then Sec. 30 of PD 464 [now under Sec. 226, LGC], having failed to appeal the
real property assessments to the LBAA, taxpayer now cannot assail the validity of the
tax assessment before the courts. For failure to exhaust administrative remedies, the
assessment became final. Under Sec. 64 of PD 464 [now under Sec. 252, LGC), the
taxpayer must first pay under protest and then assail the validity of the assessment.
Fels Energy, Inc. v. Province of Batangas, G.R. No. 168557, 170628, February 16,
2007
Under Section 226 of R.A. No 7160, the last action of the local assessor on a particular
assessment shall be the notice of assessment; it is this last action which gives the
owner of the property the right to appeal to the LBAA. The procedure likewise does not
permit the property owner the remedy of filing a motion for reconsideration before the
local assessor.

Nestle Philippines, Inc. v. Court of Appeals, G.R. No. 134114, July 06, 2001
Customs duties" is "the name given to taxes on the importation and exportation of
commodities, the tariff or tax assessed upon merchandise imported from, or exported
to, a foreign country.

Feeder International Line, Pte., Ltd. v. Court of Appeals, G.R. No. 94262, May 31,
1991
Section 1202 of the Tariff and Customs Code provides that importation begins when the
carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to
unload therein. It is clear from the provision of the law that mere intent to unload is
sufficient to commence an importation and "intent," being a state of mind, is rarely
susceptible of direct proof, but must ordinarily be inferred from the facts, and therefore
can only be proved by unguarded, expressions, conduct and circumstances generally.

Jardeleza v. People, G.R. No. 165265, February 06, 2006

Smuggling is committed by any person who: (1) fraudulently imports or brings into the
Philippines any article contrary to law; (2) assists in so doing any article contrary to law;
or (3) receives, conceals, buys, sells or in any manner facilitate the transportation,
concealment or sale of such goods after importation, knowing the same to have been
imported contrary to law.

Carrara Marble Phil., Inc. v. Commissioner of Customs, G.R. No. 129680,

September 01, 1999
The Tariff and Customs law subjects to forfeiture any article which is removed contrary
to law from any public or private warehouse under customs supervision, or released
irregularly from Customs custody. Before forfeiture proceedings are instituted the law
requires the presence of probable cause; once established, the burden of proof is
shifted to the claimant.
Law on Taxation

People v. Court of First Instance of Rizal, G.R. No. L-41686, November 17, 1980
It is quite clear that seizure and forfeiture proceedings under the tariff and customs laws
are not criminal in nature as they do not result in the conviction of the offender nor in the
imposition of the penalty provided for in section 3601 of the Code. As can be gleaned
from Section 2533 of the code, seizure proceedings, such as those instituted in this
case, are purely civil and administrative in character, the main purpose of which is to
enforce the administrative fines or forfeiture incident to unlawful importation of goods or
their deliberate possession.

Subic Bay Metropolitan Authority v. Rodriguez, G.R. No. 160270, April 23, 2010

Regional trial courts are devoid of any competence to pass upon the validity or
regularity of seizure and forfeiture proceedings conducted by the BOC and to enjoin or
otherwise interfere with these proceedings. Regional trial courts are precluded from
assuming cognizance over such matters even through petitions for certiorari, prohibition
or mandamus.

Jao v. Court of Appeals, G.R. No. 104604, 111223, October 06, 1995

Even if the seizure by the Collector of Customs were illegal, which has yet to be proven,
we have said that such act does not deprive the Bureau of Customs of jurisdiction
thereon. The allegations of petitioners regarding the propriety of the seizure should
properly be ventilated before the Collector of Customs.

Transglobe International, Inc. v. Court of Appeals, G.R. No. 126634, January 25,
1999
A forfeiture proceeding is in the nature of a proceeding in rem, i.e., directed against the
res or imported articles and entails a determination of the legality of their importation. In
this proceeding, it is in legal contemplation the property itself which commits the
violation and is treated as the offender, without reference whatsoever to the character or
conduct of the owner.

Commr. v. Hambretch & Quist Philippines, Inc., G.R. No. 169225, November 17,
2010
The appellate jurisdiction of the CTA is not limited to cases which involve decisions of
the CIR on matters relating to assessments or refunds. Section 7 of Republic Act No.
1125 covers other cases that arise out of the National Internal Revenue Code (NIRC) or
related laws administered by the Bureau of Internal Revenue (BIR).

Duty Free Philippines vs. Bureau of Internal Revenue, G.R. No. 197228 (October 8,
2014).
This Court has had a long-standing rule that a court’s jurisdiction over the subject matter
of an action is conferred only by the Constitution or by statute. In this regard, petitioner’s
direct appeal to this Court is fatal to its claim. Section 2, Rule 4 of the Revised Rules of
the CTA reiterates the exclusive appellate jurisdiction of the CTA en banc relative to the
Law on Taxation

review of the court divisions’ decisions or resolutions on motion for reconsideration or

new trial in cases arising from administrative agencies such as the BIR. Clearly, this
Court is without jurisdiction to review decisions rendered by a division of the CTA,
exclusive appellate jurisdiction over which is vested in the CTA en banc.

Yaokasin v. Commissioner of Customs, G.R. No. 84111, December 22, 1989

Without the automatic review by the Commissioner of Customs and the Secretary of
Finance, a collector in any of our country's far-flung ports, would have absolute and
unbridled discretion to determine whether goods seized by him are locally produced,
hence, not dutiable, or of foreign origin, and therefore subject to payment of customs
duties and taxes. His decision, unless appealed by the aggrieved party (the owner of
the goods), would become final with no one the wiser except himself and the owner of
the goods.

Rizal Commercial Banking Corp. v. Commr., G.R. No. 168498, June 16, 2006
If the protest is denied in whole or in part, or is not acted upon within one hundred
eighty (180) days from submission of documents, the taxpayer adversely affected by the
decision or inaction may appeal to the Court of Tax Appeals within (30) days from
receipt of the said decision, or from the lapse of the one hundred eighty (180)-day
period; otherwise the decision shall become final, executory and demandable.