CASE TITLE DOCTRINE
MADRIGAL VS RAFFERTY - Fruit and tree metaphor
- Capital = fund, wealth, tree
- Income = flow, service of wealth,
fruit
CONWI VS CTA - Assigned to P&G outside PH
- Dollar earnings = ✓subject to
income tax
CONSOLIDATED MINES INC VS - Rate of mine depletion (?)
CTA
CIR VS TOURS SPECIALIST INC - Gross receipts subject to taxed = X
include monies or receipts
ENTRUSTED to taxpayer
- Room charges entrusted to foreign
travel agencies = X form part of
gross receipts
CIR VS JAVIER - Wrong remittance of 1M under
litigation = x taxable gain
- X estafa
- X tax fraud
- No actual & intention fraud
ROXAS VS CTA - Sold to farmlands to tenants
- X tax 100%
- 50% only
- Real estate dealer’s tax = X
applicable
- Gain = capital gain = 50%
- Lifeblood doctrine
- “Should not kill the hen that lays
the golden egg”
FISHER VS TRINIDAD - Stock dividend = X income = X
taxable
- Stock dividend = undistributed
increase in the capital of a corp
LIMPAN INVESTMENT CORP VS - Non-collection of rent = fault of
CIR petitioner = ✓constructively
received
- ✓liable for deficiency taxes
GARRISON VS CA - Alien actually present in the PH =
✓resident alien
- RP US military bases agreement
=✓exempt from income tax à only
liable for tax on PH source income
- BUT must still file ITR
CIR VS BOAC - Income from sale of tickets within
© Michelle Duguil TAX 2 CASE DOCTRINES
the PH = income from within PH à
✓taxable
NV REEDERIJ VS CIR - Petitioner = FC X doing business
in the PH
- X continuous business transaction
MARUBENI CORP VS CIR - Marubeni Japan = NRFC
- Set aside principal agent
relationship
- Services were performed in Japan
= X taxable in PH
ACCENTURE INC VS CIR - Zero-rated
- X tax refund
- X establish that recipients of its
service do business outside PH
GATCHAILAN VS CIR - ✓partnership
- sweepstakes ticket
- ✓liable income tax
- X merely formed community of
property
PASCUAL VS CIR - X partnership
- Selling land = isolated case
- Co-ownership
- X liable for corporate income tax
CIR VS SC JOHNSON AND SON - Royalties
INC - Tax refund = tax exemption
- X able to justify claim = X claim tax
refund
REYES VS CIR - X valid assessment against estate
à X informed in writing of law and
facts
- Premature to determine validity of
compromise
EVANGELISTA VS CIR - ✓ income tax and residence tax for
corp
- Lease of land to tenants
- ✓ engaged in real estate
transaction = ✓ partnership
ROYAL INTEROCEAN LINES VS - 2x transaction only à no branch
CIR office in the PH
- ✓casual business activity
- FC X doing business in the PH à
taxable on income from all sources
within PH à 35% of gross income
ONA VS CIR - Settlement of estate à leased or
sold properties
- ✓partnership
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 -
✓income tax for corporation
-
Co-ownership of inherits properties
is automatically converted into an
unregistered partnership the
moment said common properties
and/or income derived therefrom
are used as common fund with the
intent to produce profits for the
heirs in proportion to their
respectibe shares in the
inheritance
CHAPTER 3- INCOME
CIR VS CITY TRUST INVESTMENT - Gross receipts = entire receipts
PHILS INC without any deduction
- Actual receipt of interest income =
X limited to physical receipt
- Imposition of 20% FWT & 5% GRT
= X double taxation
- GRT = percentage tax
- FWT = income tax
- Being originally owned by these
financial institutions as part of their
interest income, the FWT should
form part of their taxable gross
receipts
CIR VS MANNING - Newly acquired shares = X
treasury shares
- Declaration of shares as TS =
complete nullity
- Earnings should be taxed because
X TS (?)
BACHRACH VS SEIFERT AND - Estate of Bachrach
ELIANOFF - Stock dividend = fruit or income
- Massachusetts rule à SD =
Capital
- Pennsylvania à SD = fruit/income
=> FOLLOW THIS IN PH
WISE & CO VS MEER - Liquidating dividend = taxable
income
CIR VS CA - Proceeds from redemption =
✓taxable
- Trust fund doctrine
- Soriano estate profited
- Sale of stock dividends = taxable
(?)
© Michelle Duguil TAX 2 CASE DOCTRINES
AFISCO INSURANCE CORP VS CA
BANCO DE ORO VS REPUBLIC
CIR VS ANGLO CALIFORNIA
NATIONAL BANK
PH GUARANTY CO INC VS CIR
ALEXANDER HOWDEN VS CIR
CIR VS MARUBENI
CIR VS AMERICAN AIRLINES INC
CIR VS PLACER DOME
TECHNICAL SERVICES INC
CHAPTER 4 – EXCLUSIONS, DEDUCTIONS AND EXEMPTIONS
EL ORIENTE FABRICA VS
POSADAS
CIR VS CA
CIR VS HENDERSON
CIR VS CA
CIR VS CA
CIR VS CA & SORIANO
- Pool of insurance companies = ✓
taxable
- X double taxation
- ✓partnership taxable as a corp
under Section 24
- Quota share reinsurance treaty
- Deposit substitutes
-
-
Domestic insurance company
entered reinsurance contract with
foreign company
- Reinsurance premiums = ✓taxable
- “Income from whatever source”
- ✓taxable
- Reinsurance contract with
insurance companies
- ✓ exempt from tax
- Service rendered outside
Philippine = X taxable within PH
- AMEX PHILS = ✓refund
- X consumption in PH
- ✓0% rated
- Destination principle
- Exports = 0 rated
- Imports = ✓ taxed
- Destination principles
- Placer (NRFC) = ✓refund
- 0% rated sales
- Proceeds of life insurance = X
income = X taxable
- GCL retirement plan = ✓ exempt
from income
- Rental and travel allowance = X
income = X taxable as income
- X redound to persona benefit
-
- Terminal leave pay = X taxable as
income
- Terminal leave pay are given not
only at the same time but also for
the same policy as retirement
benefits
- Commutation of leave credits
- Proceeds of redemption =
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CIR VS MITSUBISHI METAL CORP
SANTOS VS SERVIER
CIR VS SORIANO
NITAFAN VS CIR
CIR VS BOAC
CIR VS AIR INDIA
CIR VS ATLAS CONSOLIDATED
ZAMORA VS CIR
GREGORY VS HELVERING
CALANOC VS CIR
KUENZIE & SCREIFF VS CIR
PAPER INDUSTRIES CORP VS CA
© Michelle Duguil
✓taxable
- Soriano estate profited from the
redemption and such profit is
taxable
- Interest income from the loans =
✓taxable
- ✓deduction of taxes from
retirement benefits à X comply
with requisites à petitioner was
only 41 yrs old (dapat not less than
50) and 8 yrs of service only (10
dapat)
- Proceeds of redemption =
✓taxable
- Soriano estate profited from the
redemption and such profit is
taxable
- Income of judges = X exempt from
income tax
- Sale of tickets within PH =
✓taxable
- Sale of tickets in the PH =
✓taxable
- business or trade of TP
- Promotion/entertainment expense
- Must prove that it was ordinary &
necessary
- Dollar allocation for combined
medical and business trip à x
ordinary and necessary expense;
personal expense(50% business
expense, 50% personal expense)
- X valid reorganization = no
business purpose except to avoid
tax
- Police payment = illegal
- Expenditures = excessive
- Amusement tax is valid
- Test of reasonableness of bonuses
- No fixed test
- Amount and quality of the services
performed; good faith; character of
TP’s business, volume and amount
of its net earnings, size of the
particular business
- ✓deduction against income of
TAX 2 CASE DOCTRINES
interest payments on loans for the
purchase of machinery and
equipment
CIR VS VDA DE PRIETO - Donor’s tax
- Interest on taxes = interest on
indebtedness = ✓deductible
- Interest paid by respondent for the
late payment of her donor’s tax =
deductible from her gross income
CIR VS LEDNICKY - X claim deduction for taxed paid to
US
- X obnoxious double taxation
- RA deriving income from PH
PH REFINING COMPANY VS CA - Requisites for bad debts and
interest expense to be deductible
1. Valid and subsisting debt
2. Debt must be actually
ascertained to be worthless
and uncollectible during the
taxable year
3. Debt must be charged off
during the taxable year
4. Debt must arise from the
- This case = X deductible à only
showed testimony of accounting to
prove bad debts à self-serving
HERMANOS VS CIR - Bad debts
- This case à X deductible because
x worthless debt as Palawan was
still in operation and Fernandez
continued to give advances in
those years
3M PH INC VS CIR - Improper payment of royalties = X
deductible
CALASANZ VS CIR - ✓real estate dealer
- ✓ordinary income; X capital gains
- graduated 5 to 32% or 30%
TUASON VS LINGAD - X capital assets
- Ordinary income
CIR VS RUFINO -
ESSO STANDARD EASTERN INC - Margin tax fees = X tax = X
VS CIR deductible as business expense
- Margin = exaction designed to curb
the excessive demands upon our
international reserves
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CIR VS GENERAL FOOD PHILS INC
ATLAS CONSOLIDATED
PIROVANO VS CIR
CIR VS PALANCA
BASILAN ESTATES INC VS CIR
PRC/UNILEVER VS CA
AGUINALDO INDUSTRIES COR VS
CIR
CM HOSKINS CO INC VS CIR
HOSPITAL DE SAN JUAN DE DIOS
VS CIR
© Michelle Duguil
- In this case, bonus = X deductible
- X ordinary and necessary business
expense
- No evidence of any service
actually rendered by petitioner’s
offic e
- Extraordinary and unusual
amounts
- Annual public relations expense
(aka SH relation service fee) paid
to PR consultant =X deductible
- Efforts to establish reputation are
akin to capital assets and therefore
expenses related thereto are not
business expense but capital
expenditures
- ✓ pay donee’s gift tax
- Consideration for donation was the
company’s gratitude for his
services
- Interest on delinquent estate and
inheritance tax = ✓deductible from
gross income
- Depreciation of asset beyond its
acquisition cost = X allowed
- Deduction over and above such
cost = X allowed
- Deduction from gross income =
privilege
- Bad debts
- X satisfy worthlessness of debt
- Bonus here = X deductible
- X ordinary and necessary business
expense
- Extraordinary and unusual
amounts given to directors without
any relation to the measure of their
actual service = X deductible
bonus
- Conditions for bonuses to be
deductible
- X pass test of reasonableness
- Payment to Hoskins of 99K was
inordinately large
- Admin expenses = X deduction or
allocated to interest and dividend
TAX 2 CASE DOCTRINES
REPUBLIC VS MANILA ELECTRIC
COMPANY
CHINA BANKING CORP VS CA
CIR VS ISABELA CULTURAL CORP
CIR VS CENTRAL LUZON DRUG
CORP
income for income tax purpose
- Income tax = X included in
computation of operating expenses
of public utility
-
- X bad debt
- Equity investment in shares of
stock = X indebtedness
- Capital asset; ordinary asset
- X deductible professional and
security services expense
- Should be paid or incurred during
the taxable year
- Accrual method of accounting – an
expense is recognized when it is
incurred
- When accrual method of
accounting is used à expenses
not being claimed as deductions by
a taxpayer in the current year
when they are incurred = X
claimed the succeeding year
- Cannot give as an excuse their
delayed billing, since it could have
inquired into the amount of their
obligation and reasonably
determine the amount
- ✓tax credit
- Senior citizens = 20% discount on
medicine
- Private establishment selling
medicine = ✓ claim the cost of
discount as a tax credit
- Such credit can be claimed even if
the establishment is operating at a
loss
- Tax credit – amount subtracted
from one’s total tax liability;
allowance against tax itself;
reduces tax due
- Tax deduction = reduce the
income subject to tax in order to
arrive at taxable income
- For the losing establishment to
immediately apply such credit,
where there is no tax due = X
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 correct -
15% BPRT
- There ought to be tax liability -
Equity share transferred from
before the tax credit can be applied Makati Shang to ____ = CGT,
BICOLANDIA DRUG CORP VS CIR - 20% discount granted to senior presumption of gain
citizens - Depreciation determined at
- Tax relief equivalent to 35% acquisition cost
(corporate income tax rate) of the - Deduction over and above such
deduction cost = x claimed and allowed
- If there is no current tax due and - IAET
the establishment reports a net - Immediacy test – reasonable
loss for the period à the credit needs of the business = immediate
may be carried over to the needs of the business
succeeding taxable year - Controlling intention of the TP is
- Remedy of refund is not available manifested at the time of
à discount given to senior citizens accumulation, not intentions
may be claimed as tax credit and subsequently, which are mere
not as refunds afterthoughts
CARLOS SUPERDRUG CORP VS - Expended senior citizens act = ESTATE AND DONOR’S TAX
DSWD constitutional - Date of death valuation rule
PANSACOLA VS CIR - X retroactive application of - St. Catherine Hispital = 32 beds
exemptions pay patients = x detract from
ROXAS VS CTA - X real estate dealer charitable purpose of hospitals
- Sold land to farmers - Exempt from realty tax
CIR VS YMCA - Rental income tax = X exempt - The fact that a charitable hospital
- YMCA – non-stock, non-profit admits pay patients does not mean
institution that it is detracting from its main
CIR VS CA - ✓tax amnesty purpose
CIR VS CINCO EDUCATION CORP - Educational institution = ✓exempt - Political donations = subject to
- While acquisition of additional donors tax
facilities may redound to the - RA 7166 – Nov 25, 1991
benefit of the institution itself è it o Prior to this, subject to
cannot be positively asserted that donor’s tax
the same will redound to the SH o Now, no more, provided
- The fact that the members may it is duly reported to the
receive benefit on dissolution à comelec
contingency only - Donations of proceeds of
COCONUT OIL REFINERS VS - insurance policy by corp to children
EXECUTIVE SECRETRY of EE = valid donation
COMMISSIONER OF CUSTOMS VS - ??? - Donation to roman catholic church
PHIL PHOSPHATE = liable for donee’s gift tax
FERRER VS CIR - - Religius corps = exempt from RPT
CIR VS ESTATE OF BENIGNO - tax only
FINALS - Sold at price lower
BPRT - Price difference = donor’s tax
- Liable for amount actually remitted, - Even if X donative intent
not applied for

© Michelle Duguil TAX 2 CASE DOCTRINES 5

 VAT
- No undue delegation of powers
- 12% VAT
- PEZA registered = exempt from CEBU TOYO
VAT
Bonifacio - ✓ Claim transition input VAT on
the improvements and entire real INTEL
property
- Real estate dealer
- Transitional Input Tax credit benefit
for newly VAT registered persons
SAN ROQUE - SQ x wait for the 120 period to PLACER DOME
lapse before filing judicial claim =
pre-mature
- Rule: File credit with 2 years from
close of taxable quarter when the
sales were made; 120d from date
of submission of complete docs; ACESITE
30d from receipt of decision
- -
KEPCO - X state zeo-rated on official receipt
= X entitled to claim refund
- Mandatory requirement
- GR: VAT system uses the
destination principle – goods and
services are taxed only in the
country in which they are
consumed MAGSAYSAY
- E: 0% VAT rate for services that
are performed in the PH paid for in
acceptable foreign currency and
accounted for in accordance with
the R&R of BSP
CONTEX - What is transferred is the tax MIRANT
burden not the liability
- Petitioner corp = X liable for VAT
inadvertently passed on to it by
supplier since their transaction is 0
rated
- But petitioner is not the proper
party to claim the refund à it is the
supplier who will petition the refund
of the VAT erroneously paid
CIR VS CA - Any sale of services for a fee is
subject to VAT regardless of the
profit derived therefrom
© Michelle Duguil TAX 2 CASE DOCTRINES
- Sale of service operating on
reimbursement cost basis =
subject to VAT
- ✓ Tax credit
- PEZA registered enterprise = 0
rated
- PEZA registered enterprise = 0
rated
- Not required that BIR authority to
be print be indicated therein
- ATP
- Clean up ad rehab of river in the
PH
- NRFC to perform service
- Paid for in foreign currency and
acct for in BIR à 0 rated
- E to destination principle
- Acesite = operator of Holiday Inn
hotel
Leased portion of premises to
PAGCOR for casino
- W/N Acesite can refund the VAT it
paid on rental income and sale of
food to pacgcor
- EFFECTIVELY ZERO RATED
- Basis of pagcor for claiming
exemption: “In lieu of taxes”
- Sale of vessels = x ordinary course
of business = X VAT
- Isolated transaction = X deemed
sale
- Goevernment privatization
program
- 2 yr prescriptive period in claims
for VAT refund/credit must be
counted from the close of the
taxable qtr when the relevant sales
were made
- Failure to print ATP does not result
in outright denial of a claim for
refund
-
- 0 rate VAT person
- Sale of raw materials to export
oriented enterprise = 0% rate
applies to TOTAL sales not just the
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 ercentage of the sale in proportion
to actual export
PANASONIC - Export sales = 0 rated
JRA - Absence of 0 rated in receipts =
fatal
- Must be printed, not merely
stamped
-

© Michelle Duguil TAX 2 CASE DOCTRINES 7