TAX PRINCIPLES

AND REMEDIES
By:
JUSTICE JAPAR B. DIMAAMPAO

Transcribed by:
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos

Updated by:
Anonymous Lawyer
(2019)

House Rules:
1. Do not come to class unprepared.
2. Class recitations will include probable bar questions and recent jurisprudence.
3. Do not pull a sleep in class, or else, you will be asked to step out of the room.
4. Do not talk to your seatmate or classmate. Listen to your classmate’s recitation instead.
5. Observe proper court decorum in class as if you are already a lawyer.
6. Raise your hand if you want to go to the restroom.
7. Answer the questions briefly, concisely, and with legal basis.
8. I am only here to guide you, not to terrorize you.

--xXx--
Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
GENERAL PRINCIPLES
Part I
TAXATION
Taxation is a mode of raising revenue for public
purpose.
Taxes, on the other hand, are enforced proportional
contributions from persons and property, levied by
the state by virtue of its sovereignty for the support
of the government and for all its public needs.
NATURE OF THE TAXING POWER
The taxing power has two natures;
1. Taxation as an inherent Attribute of
Sovereignty;
2. Taxation is Legislative in Character
Inherent Attribute of Sovereignty
The power of taxation is an incident of sovereignty
as it is inherent in the state, belonging as a matter of
right to every independent government. It does not
need constitutional conferment.
Constitutional provisions do not give rise to the
power to tax but merely impose limitations on
what would otherwise be an invincible power.
Legislative in Character
The power to tax is inherent in the State, and the
state is free to select the object of taxation, such as
being exclusively vested in the legislature, except
where the constitution provides otherwise. [1]
Q: What is the Life Blood Doctrine
A: The lifeblood doctrine is one that is enunciated
by the Supreme Court in Commissioner of Internal
Revenue v. Pineda,[2] as follows: taxes are the
lifeblood of the government and their prompt and
certain availability is an imperious need.” This
means that, without taxes, the State can neither
exist nor endure. Taxes should be collected without
unnecessary hindrance.
Q: What is the Necessity Theory?
A: The necessity theory, as pronounced by the
Supreme Court in Philippine Guaranty Co., Inc. v.
Commissioner of Internal Revenue, [3] states that
taxation is a power predicated upon necessity. It is
a necessary burden to preserve the State’s
sovereignty and a means to give the citizenry an
army to resist aggression, a navy to defend its
shores from invasion, a corps of civil servants to
1
Article VI, Sec. 28[2].
2 G.R. No. L-22734. September 15, 1967 (21 SCRA
105)
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serve, public improvements for the enjoyment of
the citizenry, and those which come within the
State’s territory and facilities and protection which
a government is supposed to provide.
Q: What is the Symbiotic Theory?
A: The doctrine of symbiotic relationship is a term
culled from the ruling of the Supreme Court in
Commissioner of Internal Revenue v Algue, Inc.,
4which stressed that: “Taxes are what we pay for a
civilized society. Without taxes, the government
would be paralyzed for lack of the motive power to
activate and operate it. Hence, 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 burden
of running 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 material and
moral values.”
LIFEBLOOD THEORY
Dimaampao: Now, holistic approach --- interplay
of lifeblood theory and tax remedies. This
happened in the last bar exams. In enunciating
certain rule, the court cited lifeblood theory and
you must mark this with Sec. 112 of NIRC. Sec. 112
was asked in the bar for three consecutive bar
exams. It will come out again.
Now you must know how the court mentioned
lifeblood theory here. Sec. 112 is about tax remedy
on value-added tax. Sec. 112 provides for remedies
on tax refund or tax credit involving VAT.
There are three prescriptive periods there: the 2-
year period, the 90-day period under the TRAIN
Law (no longer 120 days), and the 30-day period.
Explain how they are applied.
The 2-year period must be observed in filing tax
refund with the BIR, reckoned from the close of
taxable year.
The 90-day period refers to the period within
which the BIR Commissioner must render decision
from the submission of the claim.
The 30-day period must be observed in appealing
the decision of the BIR Commissioner to the Court
of Tax Appeals from the receipt of the adverse
decision.
3 G.R. No. L-22074. April 30, 1965 (13 SCRA 775)
4 G.R. No. L-28896. February 17, 1988
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
Q:What does lifeblood doctrine dictate
regarding the application of these rules in
Section 112? What is the ruling in CIR v. San
Roque Power Corporation? [1]
A: The lifeblood doctrine dictates that the rules in
Section 112 must be applied strictly. Tax refunds
are in the nature of tax exemptions which must be
strictly construed against the taxpayers and
liberally in favor of the government. This is so
because taxes are the lifeblood of the nation.
Dimaampao: Camp John Hay Development
Corporation v. CBAA,[2] also appeared in the bar
exam. It is about the interplay of the lifeblood
theory and another tax remedy - one of the rules
under real property taxation. Mentioned therein is
the provision of Sec. 252 of R.A. No. 7160, which is
denominated as payment under protest.
Q:When must the payment under protest be
lodged?
A: It must be lodged within 30 days from payment
of the tax.
Q: Explain the rule of payment under protest?
A: Payment under protest means payment of real
property tax before filing a protest.
Q: What does the lifeblood doctrine dictate or
require regarding the application of Sec. 252?
A: Before you can protest, you must first pay the
real property tax.
Q: What does lifeblood doctrine require
regarding the rule of payment under protest?
A: The lifeblood doctrine requires strict
compliance of this rule.
Dimaampao: Payment under protest is thus
consistent with the lifeblood doctrine, and as such
their collection cannot be curtailed by injunction or
any like action; otherwise, the state or, in this case,
the local government unit, shall be crippled in
dispensing the needed services to the people, and
its machinery gravely disabled.
CIR v. Pineda,[3] came out in the difficult bar exam
in 1999 where only 5% passed taxation.
Q: What is the ruling of the Court in this case?
A: This case enunciates that the Bureau of Internal
Revenue has the necessary discretion to avail itself
of the most expeditious way to collect taxes
because taxes are the lifeblood of the government
and their prompt and certain availability is an
imperious need.
1 690 SCRA 336.
2 706 SCRA 547.
3 See note 1.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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DIMAAMPAO: The ruling means that no one
should interfere with the remedy availed of by the
BIR to collect taxes because it has the discretion to
do so.
Q: What was the administrative remedy resorted
to by the BIR in that case, which may in effect
bring about speedy collection of taxes?
A: Enforcement of tax lien was resorted to by the
BIR.
Q: Why is enforcement of a tax lien the most
expeditious way to collect taxes?
A: It is the most expeditious way to collect taxes
because it is an administrative remedy which may
require no judicial proceedings.
DIMAAMPAO: Davao Gulf Lumber Corporation v.
CIR,[4] came out in the bar exam in 1998.
Q: Why are tax exemptions strictly construed
against the taxpayer and liberally construed in
favor of the government?
A: Tax exemptions are strictly construed against
the taxpayer and liberally construed in favor of the
government because taxes are the lifeblood of the
government. This is so because by the
government’s relinquishment of its power to tax, it
loses revenue. Thus, exemptions from taxation are
highly disfavored, so much so that they may almost
be said to be odious to the law.
Q: What is the principle of strictissimi juris?
A: This principle states that tax exemptions are
strictly construed against the taxpayer and
liberally construed in favor of the government.
Q: What are the exceptions to the principle of
strictissimi juris?
A: The exceptions to the principle of strictissimi
juris are:
1. When the law expressly provides for
liberal interpretation or construction of
tax exemptions;
2. When the grantee of tax exemption is a
religious or charitable institution;
3. When the grantee of tax exemption is the
government, its political subdivisions or
instrumentalities; [5]
4. When the taxpayer falls within the
purview of exemption by clear legislative
intent; [6]
4 293 SCRA 77.
5 Maceda v. Macaraig, Jr., 197 SCRA 771.
6 CIR v. Arnoldus Carpentry Shop, 159 SCRA 199.
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
5. When the grantee is a municipal
corporation with respect to its public
property only; [1] and
6. When the imposition is special taxes
relating to special cases and affecting only
special classes of persons.
Q: What is a political subdivision?
A: Political subdivisions include provinces,
municipalities, cities, and barangays.
Q: Is GSIS an instrumentality or GOCC?
A: GSIS is a government instrumentality.
Q: Why does the principle of strictissimi juris not
apply to government, its political subdivisions or
instrumentalities?
A: It is because it will result in the absurd situation
of the government taking money from one pocket
and putting it in another.
When do you apply this rule; that “tax exemption
is the general rule and taxation is the
exemption”?
A: The general rule is that taxation is the rule and
exemption is the exemption. It shall apply when the
grantee is a municipal corporation, and the
property is not held in private ownership but a
public property.
Dimaampao: This case is asked thrice already in
the bar examinations.
Q: What is the jurisprudential ruling of the Court
in Ferdinand Marcos II v. Court of Appeals, [2]?
A: The Court ruled therein that the approval of the
court, sitting in probate or as a settlement tribunal
over the deceased’s estate, is not a mandatory
requirement in the collection of estate taxes.
Explanation: The collection of taxes does not
necessitate the approval of the probate court
because taxes are the lifeblood of the government
and should be collected without unnecessary
hindrance. To require the approval of the probate
court is a cause of delay to the collection of taxes.
Q: Is there a provision that before the BIR can
collect taxes there must be approval of the
probate court?
A: No. There is none.
Q: Is there a revenue regulation to that effect?
A: No. There is none.
1 J. Cooley, pp. 1414-1415.
2 273 SCRA 47.
3 294 SCRA 687.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
DIMAAMPAO: Philex Mining Corporation v. CIR,[3],
was also asked in the bar exam. It is about setoff of
taxes.
Q: What is the ruling of the Court in that case?
A: The Court did not allow the setoff of taxes. The
lifeblood doctrine disfavors the setoff of taxes
because it will reduce tax collection and there will
be less revenue for the government.
Q: May the taxes be the subject of setoff or
compensation?
No. Taxes may not be the subject of setoff or
compensation because:
(1) Taxes are not ordinary obligations which
may be governed by the Civil Code;
(2) Taxes are not based on a contract, debt or
judgment, but on legal impositions; and
(3) The government and the taxpayer are not
creditors and debtors of each other. [4]
Q: Is there an exception to this rule?
A: Yes, that is the case of Domingo v. Garlitos. [5] The
peculiar circumstance therein is the enactment of
R.A. No. 2700 appropriating certain amount of
money for the taxpayer’s claim that made such
claim due and demandable or liquidated. Thus, the
Court allowed compensation.
Dimaampao: YMCA v. CIR, [6] also came out in the
bar exams. YMCA claimed that as a non-stock, non-
profit organization, it should be exempt from
income taxation with regard to its profits on
leasing its facilities to non-exempt entities.
Q: What is ruling in that landmark case?
A: YMCA is taxable on its rental income. The
exemption provided in Section 30(e) of the NIRC
must be strictly construed against YMCA.
Moreover, it is taxable because the Tax Code
provides that the income of charitable
organizations, such as YMCA, 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, shall be subject
to tax.
Q: What does YMCA stand for?
A: YMCA is short for Young Men’s Christian
Association.
Read Section 30(e) of the NIRC;
Non-stock corporation or association
organized and operated exclusively for
4 Republic v. Mambulao Lumber Co., 4 SCRA 622;
Francia v. IAC, 162 SCRA 753
5 8 SCRA 443 (1962)
6 298 SCRA 83.
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
religious, charitable, scientific, athletic,
or cultural purposes, or for the
rehabilitation of veterans, no part of its
net income or asset shall belong to or
inures to the benefit of any member,
organizer, officer or any specific
person.
Read the last paragraph of Section 30 of the NIRC.
That is the YMCA doctrine;
Notwithstanding the provisions in the
preceding paragraphs, the income of
whatever kind and character of the
foregoing organizations 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, shall be subject to
tax imposed under this Code.
(Emphasis supplied)
Stages, Aspects, and Phases of taxation
Explain the stages or aspects of taxation. These
aspects do not refer to the fundamental principles
of taxation. This is so basic.
The stages of taxation are; (L-A-P)
(1) Levy or imposition, which refers to the
enactment of tax laws;
(2) Assessment and collection, which provides for
the implementation, enforcement or
administration of tax laws; and
(3) Payment, which is defined as the compliance
by the taxpayer.
Q: What is the nature of levy or imposition?
A: It is legislative in nature.
Q: What is the nature of assessment and
collection?
A: They are administrative in nature.
Q: What is the technical term for levy or
imposition?
A: It is the impact of taxation.
Q: What is the technical term for payment?
A: It is the incidence of taxation.
DIMAAMPAO: You take note of these cases:
1. Adamson v. Court of Appeals; [1]
2. Meralco v. Narvales; [2]
3. Pilipinas Shell Petroleum Corporation v.
Commissioner of Customs; [3]
1 588 SCRA 27.
2 433 SCRA 11.
3 G.R. No. 195876, December 05, 2016.
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Q: How is assessment under the internal revenue
taxation?
A: In Adamson v. Court of Appeals, assessment
under the internal revenue taxation is defined as
“the written notice and demand made by the BIR on
the taxpayer for the settlement of a tax due liability
that is definite, final and fixed.”
Q: Is the letter of the BIR to the taxpayer
qualified?
A: No, because the assessment must contain final
assessment or determination.
Q: What is assessment in real property taxation?
A: Assessment under real property taxation is the
act or process of determining the value of a
property, or proportion thereof subject to tax,
including the discovery, listing, classification, and
appraisal of properties. [4]
Q: What are the requisites or conditions for a
valid assessment of real property tax? There are
five requisites.
A: In Meralco v. Narvales, the Supreme Court
enumerated the following guideline: (K-A-L-M-A)
1. The assessment must contain the kind of
property;
2. It must set forth the assessed value of the
real property;
3. It must indicate the level of assessment;
4. It must specify the fair market value of the
property;
5. It must clearly indicate the actual use of
property.
Q:What is assessment in customs law?
A: In Pilipinas Shell Petroleum Corporation v.
Commissioner of Customs, [5] the Supreme Court
ruled that assessment in customs law is known as
liquidation. It refers to the final computation and
ascertainment of the collector of duties on
imported merchandise, based on official reports as
to the quantity, character and value thereof, and
the collector’s finding of the applicable rate of duty.
Taxation as Inherent Power of the state
Q: Why is the power to tax inherent in a
sovereign State?
A: It is considered inherent in a sovereign State
because it is a necessary attribute of sovereignty.
Without this power, no sovereign State can exist
nor endure. The power to tax proceeds upon the
theory that the existence of a government is a
necessity and this power is an essential and
inherent attribute of sovereignty, belonging as a
4 (Section 199(f) of R.A. No. 7160).
5 589 SCRA 574.
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
matter of right to every independent State or
government. No sovereign State can continue to
exist without the means to pay its expenses, and
that for those means, it has the right to compel all
citizens and property within its limits to
contribute, hence, the emergence of the power to
tax.
Q: Explain the two-fold nature of taxation?
A: Taxation is an (1) inherent attribute of
sovereignty, and it is also (2) legislative in
character. Such power is exclusively vested in the
Congress. This is based upon the principle that
“taxes are a grant of the people who are taxed, and
the grant must be made by the immediate
representatives of the people. And where the
people have laid the power, there it must remain
and be exercised.”
Dimaampao: If you can cite that, the bar examiner
will surely be impressed. Try to memorize.
NON-DELEGATIONS OF POWER
The power to tax is exclusively vested in the
legislative body.
Q: What are the exceptions to the principle of
non-delegation of powers?
A: Delegation of the powers of the Congress is
allowed in:
1. Article VI, Section 28(2) of the
Constitution, which states that “The
Congress may, by law, authorize the
President to fix within specified limits, and
subject to such limitations and restrictions
as it may impose, tariff rates, import and
export quotas, tonnage and wharfage dues,
and other duties or imposts within the
framework of the national development
program of the Government.”
2. Article X, Section 5 of the Constitution,
which states that “Each local government
unit shall have the power to create its own
sources of revenues and to levy taxes, fees
and charges subject to such guidelines and
limitations as the Congress may provide,
consistent with the basic policy of local
autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local
governments.”
Flexible Tariff Clause
Q: What is the law allowing the exercise by the
President of tariff power?
A: It is the flexible tariff clause.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
DIMAAMPAO: Read the Customs Modernization
and Tariff Act or R.A. No. 10863, Sec. 102 in relation
to Section 1608.
Legal parameters where the President may
exercise its tariff powers;
Sec. 102(u). Flexible Clause refer to the
power of the President upon
recommendation of the National Economic
and Development Authority (NEDA): (1) to
increase, reduce or remove existing
protective tariff rates of import duty, but in
no case shall be higher than one hundred
percent (100%) ad valorem; (2) to establish
import quota or to ban importation of any
commodity as may be necessary; and (3) to
impose additional duty on all import not
exceeding ten percent (10%) ad valorem,
whenever necessary.
Sec. 1608. Flexible Clause. –
a) In the interest of the general welfare
and national security, and, subject to
the limitations prescribed under this
Act, the President, upon the
recommendation of the NEDA, is
hereby empowered to:
1. Increase, reduce, or remove
existing rates of import duty
including any necessary change
in classification. The existing
rates may be increased or
decreased to any level, in one or
several stages, but in no case
shall the increased rate of
import duty be higher than a
maximum of one hundred
percent (100%) ad valorem;
2. Establish import quotas or ban
imports of any commodity, as
may be necessary; and
3. Impose an additional duty on all
imports not exceeding ten
percent (10%) ad valorem
whenever necessary: Provided,
That upon periodic
investigations by the
Commission and
recommendation of the NEDA,
the President may cause a
gradual reduction of rates of
import duty granted in Section
1611 of this Act, including those
subsequently granted pursuant
to this section.
b) Before any recommendation is
submitted to the President by the NEDA
pursuant to the provisions of this
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
section, except in the imposition of an
additional duty not exceeding ten
percent (10%) ad valorem, the
Commission shall conduct an
investigation and shall hold public
hearings wherein interested parties
shall be afforded reasonable
opportunity to be present, to produce
evidence and to be heard. The
Commission shall also hear the views
and recommendations of any
government office, agency, or
instrumentality. The Commission shall
submit its findings and
recommendations to the NEDA within
thirty (30) days after the termination of
the public hearings;
c) The power of the President to increase
or decrease rates of import duty within
the limits fixed in subsection (a) hereof
shall include the authority to modify
the form of duty. In modifying the form
of duty, the corresponding ad valorem
or specific equivalents of the duly with
respect to imports from the principal
competing foreign country for the most
recent representative period shall be
used as basis;
d) Any order issued by the President
pursuant to the provisions of this
section shall take effect thirty (30) days
after promulgation, except in the
imposition of additional duty not
exceeding ten percent (10%) ad
valorem which shall take effect at the
discretion of the President.
e) The power delegated to the President
as provided for in this section shall be
exercised only when Congress is not in
session.
f) The power herein delegated may be
withdrawn or terminated by Congress
through a joint resolution.
The NEDA shall promulgate rules and
regulations necessary to carry out the
provisions of this section.
DIMAAMPAO: Read Sections 130, 133 and 198 of
the Local Government Code.
Section 130. Fundamental Principles. - The
following fundamental principles shall govern the
exercise of the taxing and other revenue-raising
powers of local government units:
a. Taxation shall be uniform in each local
government unit;
b. Taxes, fees, charges and other impositions
shall:
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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1. Be equitable and based as far as
practicable on the taxpayer's ability to
pay;
2. Be levied and collected only for public
purposes;
3. Not be unjust, excessive, oppressive, or
confiscatory;
4. Not be contrary to law, public policy,
national economic policy, or in the
restraint of trade;
c. The collection of local taxes, fees, charges
and other impositions shall in no case be let
to any private person;
d. The revenue collected pursuant to the
provisions of this Code shall inure solely to
the benefit of, and be subject to the
disposition by, the local government unit
levying the tax, fee, charge or other
imposition unless otherwise specifically
provided herein; and,
e. Each local government unit shall, as far as
practicable, evolve a progressive system of
taxation.
Section 133. Common Limitations on the
Taxing Powers of Local Government
Units. - Unless otherwise provided herein,
the exercise of the taxing powers of
provinces, cities, municipalities, and
barangays shall not extend to the levy of the
following:
a. Income tax, except when levied on
banks and other financial
institutions;
b. Documentary stamp tax;
c. Taxes on estates, inheritance, gifts,
legacies and other acquisitions
mortis causa, except as otherwise
provided herein;
d. Customs duties, registration fees of
vessel and wharfage on wharves,
tonnage dues, and all other kinds
of customs fees, charges and dues
except wharfage on wharves
constructed and maintained by the
local government unit concerned;
e. Taxes, fees, and charges and other
impositions upon goods carried
into or out of, or passing through,
the territorial jurisdictions of local
government units in the guise of
charges for wharfage, tolls for
bridges or otherwise, or other
taxes, fees, or charges in any form
whatsoever upon such goods or
merchandise;
f. Taxes, fees or charges on
agricultural and aquatic products
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
when sold by marginal farmers or
fishermen;
g. Taxes on business enterprises
certified to by the Board of
Investments as pioneer or non-
pioneer for a period of six (6) and
four (4) years, respectively from
the date of registration;
h. Excise taxes on articles
enumerated under the national
Internal Revenue Code, as
amended, and taxes, fees or
charges on petroleum products;
i. Percentage or value-added tax
(VAT) on sales, barters or
exchanges or similar transactions
on goods or services except as
otherwise provided herein;
j. Taxes on the gross receipts of
transportation contractors and
persons engaged in the
transportation of passengers or
freight by hire and common
carriers by air, land or water,
except as provided in this Code;
k. Taxes on premiums paid by way or
reinsurance or retrocession;
l. Taxes, fees or charges for the
registration of motor vehicles and
for the issuance of all kinds of
licenses or permits for the driving
thereof, except tricycles;
m. Taxes, fees, or other charges on
Philippine products actually
exported, except as otherwise
provided herein;
n. Taxes, fees, or charges, on
Countryside and Barangay
Business Enterprises and
cooperatives duly registered under
R.A. No. 6810 and Republic Act
Numbered Sixty-nine hundred
thirty-eight (R.A. No. 6938)
otherwise known as the
"Cooperative Code of the
Philippines" respectively; and
o. Taxes, fees or charges of any kind
on the National Government, its
agencies and instrumentalities,
and local government units.
Section 198. Fundamental Principles. -
The appraisal, assessment, levy and
collection of real property tax shall be
guided by the following fundamental
principles:
1 130 SCRA 654.
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a. Real property shall be appraised at
its current and fair market value;
b. Real property shall be classified for
assessment purposes on the basis
of its actual use;
c. Real property shall be assessed on
the basis of a uniform classification
within each local government unit;
d. The appraisal, assessment, levy
and collection of real property tax
shall not be let to any private
person; and
e. The appraisal and assessment of
real property shall be equitable.
Dimaampoa: These all came out in the bar.
Power to Tax is the Power to Destroy
DIMAAMPAO: Reconcile these seemingly
conflicting views.
Chief Justice Marshall opines that the power to tax
is the power to destroy. Justice Malcolm opines that
the power to tax does not include the power to
destroy. This is worth 5 points.
“The conflict is more apparent than real. Chief
Justice Marshall is correct in the sense that the
power to tax is the power to destroy if it is used
validly as an implement of the police power of the
State. Justice Malcolm is likewise correct in this
perspective: where the power to tax is used solely for
the purpose of raising revenues, it cannot be allowed
to confiscate or destroy.” (J. Isagani Cruz)
Q: What is the meaning of the phrase “the
conflict is more apparent than real”?
A: It means that there is no real conflict here.
Q: What does this mean: “the power to tax is not
the power to destroy, so long as the Supreme
Court sits”?
A: In the case of Sison v. Ancheta, [1], the Supreme
Court held that, “While taxation is said to be the
power to destroy, it is by no means unlimited. If so
great an abuse is manifested as to destroy natural
and fundamental rights which no free government
could consistently violate, it is the duty of the
judiciary to hold such an act unconstitutional. The
Constitution as the fundamental law of the land
overrides any legislative or executive act that runs
counter to it. In any case, therefore, where it can be
demonstrated that the challenged statutory
provision fails to abide by its command, then the
court must so declare and adjudge it null.”
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
Scope of taxation (C-U-P-S)
Taxation is said to be comprehensive, unlimited,
plenary and supreme.
It is comprehensive as it covers persons, businesses,
activities, professions, rights and privileges.
It is unlimited because the tax does not cease to be
valid merely because it regulates, discourages or
even definitely deters the activities taxed, and the
courts scarcely venture to declare that it is subject
to any restrictions whatever, except such as rest in
the discretion of the authority which exercises it.
It is plenary in the sense that it is complete.
It is supreme insofar as the selection of the subject
of taxation is concerned.
Dimaampao: J. Malcolm stresses that taxation is
the strongest of all the powers of the government.
Q: What does that mean? It is strongest in what
sense?
A: The police power of the State is supreme under
the principle of salus populi est suprema lex. The
power of eminent domain is supreme under the
concept of expropriation. Taxation thus, although
referred to as the strongest of all the powers of the
government, cannot be interpreted to mean that it is
superior to the other inherent powers of the
government. It is supreme insofar as the selection of
the subject of taxation is concerned.
Fundamental Principles of a Sound Tax System
Q: What are the three fundamental principles of
a sound taxation system? Briefly explain each.
A: The three fundamental principles of a sound
taxation are fiscal adequacy, theoretical justice, and
administrative feasibility.
Fiscal adequacy dictates that sources of revenue
must be sufficient to meet government
expenditures.
Theoretical justice mandates that taxes must be
imposed based on the taxpayer’s ability to pay.
Administrative feasibility requires that tax laws
must be capable of effective and efficient
enforcement.
Q: If a tax law violates any of these principles,
will it render the tax law invalid?
A: The purpose of these principles is to make tax
laws sound. A tax law will therefore retain its
1 456 SCRA 414.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
validity even if it is not in consonance with the
principles of fiscal adequacy and administrative
feasibility because the Constitution does not
expressly require so. However, if a tax law runs
contrary to the principle of theoretical justice, such
violation will render the law unconstitutional
considering that under the Constitution, the rule of
taxation should be uniform and equitable. (Section
28(1), Article VI)
Secondary Purpose of Taxation
Q: What are the non-revenue /regulatory
/secondary purposes of taxation? There are four.
Explain each.
A:The secondary purposes of taxation are as
follows; (R-I-P-E)
1. Reduction of social inequality;
2. Implement of the police power of the
State:
3. Protection of the local industry against
unfair competition;
4. Encouragement of the growth of local
industries.
Taxation is used to reduce the inequality in the
distribution of wealth by preventing its undue
concentration in the hands of a few individuals.
It is likewise used in the form of exemptions and
reliefs to serve as incentives to encourage
investment in the local industry and thereby
promote economic growth.
It protects the local industry by imposing certain
taxes upon imported goods or articles.
It may be used as an implement of the police power
of the State through the imposition of taxes with
the end in view of regulating a particular activity.
Dimaampao: The Supreme Court ruled in CIR v.
Central Luzon Drug Corporation,[1] that in recent
years, the power to tax has become the most
effective tool to realize social justice, public
welfare, and the equitable distribution of wealth.
This is an abandoned doctrine.
Mark the case of Manila Memorial Park, Inc. v.
DSWD Secretary,[2], which abandons the Central
Luzon ruling. The power of taxation was used as an
implement of police power in this case.
Q: What is that ruling?
A: The senior’s citizen discount is an exercise of
police power. In holding so, the Court explained
that the 20% discount is intended to improve the
2 711 SCRA 302.
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
welfare of 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 basic commodities. The 20%
discount may be properly viewed as belonging to
the category of price regulatory measures which
affect the profitability of establishments subjected
thereto. On this face, the subject regulation is a
police power measure. (Manila Memorial Park v.
DSWD Secretary)
Dimaampao: We really look for keywords. The
keyword here is price regulatory measures.
TAXES ARE NOT SUBJECT OF SET OFF
As a rule, taxes cannot be subject to compensation
because the government and the taxpayer are not
creditors and debtors of each other.
However, the Supreme Court allowed offsetting of
taxes only because the determination of the
taxpayer’s liability is intertwined with the
resolution of the claim for tax refund of
erroneously or illegally collected taxes under
Section 229 of the NIRC.
--xXx--
Assignment
1. Start from the inherent and constitutional
limitations of taxation.
 Exemption of the government from
taxation is an emerging favorite bar
question.
2. Find the 16 instrumentalities exempt from
taxation in the following cases:
 Manila International Airport
Authority v. Court of Appeals, 495
SCRA 591, 618, 632, 633
MIAA is one.
On page 618, there are four other instrumentalities
enumerated by the Supreme Court.
On pages 632-633, there are eight more.
1. Manila International Airport Authority
2. Mactan-Cebu International Airport
Authority
3. Philippine Ports Authority
4. University of the Philippines
5. Bangko Sentral ng Pilipinas
6. Philippine Rice Research Institute
7. Laguna Lake Development Authority
8. Philippine Fisheries Development
Authority
9. Bases Conversion Development
Authority
10. Philippine National Railways
11. Cagayan de Oro Port Authority
12. San Fernando Port Authority
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
13. Cebu Port Authority
 Republic of the Philippines v. City
of Parañaque, 677 SCRA 246
There is only one mentioned in this case. This is the
one asked in the bar.
14. Philippine Reclamation Authority,
formerly Public Estates Authority
 City of Lapu-Lapu v. Philippine
Economic Zone Authority, 742
SCRA 524
The remaining two instrumentalities can be found
in this case.
15. Philippine Economic Zone Authority
16. Government Service Insurance System
3. Learn why the instrumentalities in those cases
are exempt from taxation by determining their
distinct characteristics or features in the
following case: Manila International Airport
Authority v. City of Lapu-Lapu, 757 SCRA 323.
These are the reasons why instrumentalities
are exempt from tax.
 Instrumentality refers to any agency of
the National Government,
1. not integrated within the
department framework,
2. vested with special functions or
jurisdiction by law,
3. endowed with some if not all
corporate powers,
4. administering special funds,
and
5. enjoying operational autonomy,
usually through a charter.
(Section 2(10) of the
Introductory Provisions of the
Administrative Code)
4. Research about technical smuggling.
 Smuggling refers to the fraudulent act of
importing any goods into the Philippines,
or the act of assisting in receiving,
concealing, buying, selling, disposing or
transporting such goods, with full
knowledge that the same has been
fraudulently imported, or the fraudulent
exportation of goods. Goods referred to
under this definition shall be known as
smuggled goods. (Section 102(nn), R.A.
No. 10863)
 Technical Smuggling refers to the act of
importing goods into the country by
means of fraudulent, falsified or erroneous
declaration of the goods to its nature, kind,
quality, quantity or weight, for the
purpose of reducing or avoiding payment
of prescribed taxes, duties and other
charges. (Section 102(pp), R.A. No. 10863)
--xXx--
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
GENERAL PRINCIPLES
Part II
DIMAAMPAO: You must know the prevailing
jurisprudence here on pages 33-34 of your book.
You must have noticed the decided cases there.
There are mentioned 1,2,3,4. These were asked
twice already in the bar exams.
In Progressive Development Corp. vs Quezon City, [1]
the case involves a market in Cubao – the Farmers’
Market. So, there is this issue whether the market
stall fee collected by the city government is a tax or
a license. What is the prevailing jurisprudence?
Q: Is market stall fee a license or a tax?
A: The market stall fees are considered as license
because the objective of imposing market stall fees is
regulation and not revenue generation. Tax is
imposed in the exercise of police power primarily
for purposes of regulation, while the latter is
imposed under the taxing power primarily for
purposes of raising revenues. Thus, if the
generating of revenue is the primary purpose and
regulation is merely incidental, the imposition is a
tax; but if regulation is the primary purpose, the
fact that incidentally revenue is also obtained does
not make the imposition a tax.
Q: What is the reason behind this ruling?
A: Tax is imposed in the exercise of police power
primarily for purposes of regulation, while the latter
is imposed under the taxing power primarily for
purposes of raising revenues. Thus, if the generating
of revenue is the primary purpose and regulation is
merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that
incidentally revenue is also obtained does not
make the imposition a tax.
Dimaampao: Based on my experience as bar
examiner for two bar exams, some examinees
never take full credit though their answers were
correct because their reasons are not enough to
explain the SC ruling.
This came out in the bar examination.
Q: What are the distinctions between a license
and a tax?
A: The distinctions between a license and a tax are
as follows;
1 172 SCRA 629.
2 527 SCRA 696.
3 686 SCRA 472.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
1. As to the exercise of power – a tax is levied
in the exercise of the taxing power, while
license fees emanate from the police
power of the State;
2. As to purpose – the primary purpose of
taxation is to generate revenues, while
license fees are imposed primarily for
regulation;
3. As to subject – the subject of taxation is
persons, properties, activities, while the
subject of license is limited to the right to
engage in a business or activity;
4. As to consequence in case of non-payment –
failure to pay tax makes your business
illegal. While failure to pay does not have
that effect as it is merely a regulatory fee.
DIMAAMPAO: Let’s have another case. This has yet
to be asked in the bar exam. This is about the
charge imposed under the EPIRA Law (Electric
Power Industry Reform Act of 2001) called the
Universal Charge.
Q: Is that a license or a tax?
A: It is a license. In Gerochi v. Department of Energy,
[2] the Supreme Court held that the Universal
Charge is a license. It is imposed and can be amply
discerned as regulatory in character because in the
EPIRA Law, the State’s police power, particularly
its regulatory dimension, is invoked.
Q: Is the Coco Levy Fund a tax or a license? Is it a
regulatory imposition or tax?
A: It is a tax. In Cojuangco, Jr. vs. Republic,[3] the
Court ruled that the coco levy funds are taxes since
the purpose of its imposition is to raise revenue for
the rehabilitation of the coconut industry.
Q: Is the building permit fee a tax or a license?
A: NO. It is a regulatory fee. [4]
Q: Why is a building permit a regulatory fee?
A: That a building permit fee is a regulatory
imposition is highlighted by the fact that:
1. In processing an application for a building
permit, the Building Official shall see to it that
the applicant satisfies and conforms to the
approved standard requirements on zoning
and land use, lines and grades, structural
design, sanitary and sewerage, environmental
health, electrical and mechanical safety;
2. Clearances from various government
authorities exercising and enforcing
regulatory functions affecting buildings
/structures may be required before a building
permit may be issued.
4 (Angeles University Foundation vs. Angeles City,
675 SCRA 359)
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
Q: Is the Socialized Housing Tax a tax or a
regulatory fee?
A: NO. It is not a tax imposed by the local
government but a license/regulatory fee. Its name
is misleading. [1]
Q: What is the reason behind this ruling?
A: It is levied with a regulatory purpose. The levy is
primarily in the exercise of the police power for the
general welfare of the entire city. It is greatly
imbued with public interest. Removing slum areas
in Quezon City is not only beneficial to the
underprivileged and homeless constituents but
advantageous to the real property owners as well.
The situation will improve the value of the their
property investments, fully enjoying the same in
view of an orderly, secure, and safe community,
and will enhance the quality of life of the poor,
making them law-abiding constituents and better
consumers of business products.
INHERENT LIMITATIONS
The inherent limitations on taxation are as follows;
1. Public purpose;
2. Territoriality;
3. International comity;
4. Exemption from taxation of government
agencies and instrumentalities;
5. Non-delegation of the power to tax;
Public purpose
The Supreme Court ruled that the term “public
purpose” is not defined. It is an elastic concept that
can be hammered to fit modern standards. It
should be given a broad interpretation. [2]
Q: What is the test to determine if the purpose is
for the public? Is it the number of persons
benefitted?
A: “Public” may refer to a special group of persons.
The senior citizens are a special group of persons
who have contributed to the general welfare and
common good of the nation in the prime of their
lives. [3]
TERRITORIALITY
Let us focus on the principle of territoriality. This
might come out in the bar exam. It is about a
doctrine in value-added tax.
Q: What is the meaning of Destination Principle?
A: It is a principle applied in value-added tax. It
dictates that value-added tax may be imposed on
1 Ferrer Jr. vs. Bautista, 760 SCRA 652
2 Planters Products, Inc. v. Fertiphil Corporation, 548
SCRA 485.
3 Ibid.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
goods and services only in the country where these
are consumed. [4]
Q: What is the tax situs of VAT?
A: Its tax situs is the place where the transaction is
made.
Q: What is the situs of real property tax?
A: Its situs is the state or country where it is
located, regardless whether its owner is a resident
or a non-resident.
Q: What about income tax? Can we tax income
derived from sources without? Whose income
derived from sources without is subject to
Philippine income tax? So, when we tax the
income of a resident citizen derived from sources
without, what is the criterion?
A: The situs of income tax depends upon the
nationality and residence of the taxpayer. If the
taxpayer is both a resident and a national of the
Philippines, the income is taxed upon sources
derived from within and without the Philippines.
Otherwise, the taxpayer is taxed upon sources
derived from within the Philippines only.
Q: What about community tax?
A: Community taxes are imposed on the residence
of the taxpayer.
Q: Can estate tax be imposed upon property
situated outside the Philippines?
A: Yes, if the decedent is a citizen of the Philippines.
Dimaampao: The same is true in case of donor’s
tax. Provided that the donor is a citizen, even if the
property donated is situated outside the
Philippines, the same can be the subject of donor’s
tax.
Q: What is the Cross Border Doctrine?
A: 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.
Q: What are export processing zones? What is
the tax treatment on the sales of goods or
services within these export processing zones?
4 Atlas Consolidated Mining and Development
Corporation v. CIR, 524 SCRA 73.
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
A: Export processing zones are to be managed as a
separate customs territory from the rest of the
Philippines and, thus, for tax purposes, are
effectively considered as foreign territory. For this
reason, sales by persons from the Philippine
customs territory to those inside the export
processing zones are effectively zero-rated.
INTERNATIONAL COMITY
Q: Can the income of the Ambassador of the
United States derived from sources within the
Philippines be subject to income tax?
A: NO, because it is one of the inherent limitations
– international comity. Subjecting their income to
income tax will violate the internationally accepted
principle of sovereign equality among nations.
Q: Does it have a constitutional basis?
A: YES. Article 2, Section 2 of the Constitution states
that the Philippines adopts the generally accepted
principles of international law as the law of the
land. Such generally accepted principle pertains to
the sovereign equality of nations. Neither can we
impose real property tax on the foreign embassies
as these are extension of territories of sovereign
states.
EXEMPTION FROM TAXATION OF
GOVERNMENT AGENCIES AND
INSTRUMENTALITIES
Q: What are the 16 Exempt Instrumentalities of
the National Government?
A: The following instrumentalities are exempt from
tax;
1. Philippine Economic Zone Authority;
2. Government Service Insurance System;
3. Bangko Sentral ng Pilipinas;
4. Mactan-Cebu International Airport
Authority;
5. Philippine Ports Authority;
6. San Fernando Port Authority;
7. University of the Philippines;
8. Philippine Fisheries Development
Authority;
9. Philippine Rice Research Institute;
10. Cagayan De Oro Port Authority;
11. Cebu Port Authority;
12. Manila International Airport Authority;
13. Philippine Reclamation Authority;
14. Laguna Lake Development Authority;
15. Bases Conversion Development Authority;
16. Philippine National Railways;
Q: What must be the reasons why they are
exempt?
1 G.R. No. 184203, November 26, 2014
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
A: The Supreme Court explained in the case of PEZA
vs Lapu-Lapu City[1] that they must possess the
characteristics of an instrumentality of the national
government.
Manila International Airport Authority v. CA
G.R. No. 155650. July 20, 2006
CARPIO, J.:
Facts: Petitioner Manila International Airport Authority (MIAA)
operates the Ninoy Aquino International Airport (NAIA) Complex
in Parañaque City under Executive Order No. 903, otherwise known
as the Revised Charter of the Manila International Airport Authority
("MIAA Charter").
On 21 March 1997, the Office of the Government Corporate
Counsel (OGCC) issued Opinion No. 061 withdrawing the
exemption from real estate tax granted to MIAA under Section 21
of the MIAA Charter. The City of Parañaque, through its City
Treasurer, issued notices of levy and warrants of levy on the Airport
Lands and Buildings.
MIAA filed with the Court of Appeals an original petition for
prohibition and injunction, with prayer for preliminary injunction or
temporary restraining order. MIAA argues that the Airport Lands
and Buildings are for the benefit of the general public thus, the
ownership of these properties remains with the State and are not
subject to real estate tax by local governments.
Respondents invoke Section 193 of the Local Government Code,
which expressly withdrew the tax exemption privileges of
"government-owned and-controlled corporations" upon the
effectivity of the Local Government Code. Respondents also argue
that a basic rule of statutory construction is that the express mention
of one person, thing, or act excludes all others. An international
airport is not among the exceptions mentioned in Section 193 of the
Local Government Code. Thus, respondents assert that MIAA
cannot claim that the Airport Lands and Buildings are exempt from
real estate tax.
ISSUE: whether the Airport Lands and Buildings of MIAA are
exempt from real estate tax under existing laws.
HELD: Yes. First, MIAA is not a government-owned or controlled
corporation but an instrumentality of the National Government and
thus exempt from local taxation. Second, the real properties of
MIAA are owned by the Republic of the Philippines and thus
exempt from real estate tax.
A government-owned or controlled corporation must be "organized
as a stock or non-stock corporation." MIAA is not organized as a
stock or non-stock corporation. MIAA is not a stock corporation
because it has no capital stock divided into shares. MIAA has no
stockholders or voting shares. Clearly, under its Charter, MIAA
does not have capital stock that is divided into shares.
MIAA is also not a non-stock corporation because it has no
members. Section 87 of the Corporation Code defines a non-stock
corporation as "one where no part of its income is distributable as
dividends to its members, trustees or officers." A non-stock
corporation must have members. Even if we assume that the
Government is considered as the sole member of MIAA, this will
not make MIAA a non-stock corporation. Non-stock corporations
cannot distribute any part of their income to their members. Section
11 of the MIAA Charter mandates MIAA to remit 20% of its annual
gross operating income to the National Treasury. This prevents
MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock
corporations are "organized for charitable, religious, educational,
professional, cultural, recreational, fraternal, literary, scientific,
social, civil service, or similar purposes, like trade, industry,
12
Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
agriculture and like chambers." MIAA is not organized for any of
these purposes. MIAA, a public utility, is organized to operate an
international and domestic airport for public use.
MIAA is a government instrumentality vested with corporate
powers to perform efficiently its governmental functions. MIAA is
like any other government instrumentality, the only difference is that
MIAA is vested with corporate powers.
When local governments invoke the power to tax on national
government instrumentalities, such power is construed strictly
against local governments. The rule is that a tax is never presumed
and there must be clear language in the law imposing the tax. Any
doubt whether a person, article or activity is taxable is resolved
against taxation. This rule applies with greater force when local
governments seek to tax national government instrumentalities.
Another rule is that a tax exemption is strictly construed against the
taxpayer claiming the exemption. However, when Congress grants
an exemption to a national government instrumentality from local
taxation, such exemption is construed liberally in favor of the
national government instrumentality.
Q: What are the 5 characteristics of an
instrumentality of the national government
under Sec. 2 (10) of the 1987 Administrative
Code?
A: The reasons are as follows;
1. They are not integrated within the
department network;
2. They are vested with special functions or
jurisdiction by law;
3. They are endowed with some if not all
corporate powers;
4. They are administering special fund;
5. hey are enjoying operational autonomy,
usually through a charter
MCIAA vs. City of Lapu-Lapu
G.R. No. 181756. June 15, 2015
Leonardo-De Castro, J;
FACTS: Petitioner Mactan-Cebu International Airport Authority
(MCIAA) was created by Congress on July 31, 1990 under Republic
Act No. 69583 to "undertake the economical, efficient and effective
control, management and supervision of the Mactan International
Airport in the Province of Cebu and the Lahug Airport in Cebu City
x x x and such other airports as may be established in the Province
of Cebu.Upon its creation, petitioner enjoyed exemption from realty
taxes under Republic Act No. 6958.
On September 11, 1996, however, this Court rendered a decision in
Mactan-Cebu International Airport Authority v. Marcos4 (the 1996
MCIAA case) declaring that upon the effectivity of Republic Act
No. 7160 (The Local Government Code of 1991), petitioner was no
longer exempt from real estate taxes.
On January 7, 1997, respondent City issued to petitioner a Statement
of Real Estate Tax assessing the lots comprising the Mactan
International Airport in the amount of ₱151,376,134.66.
Petitioner is before us now claiming that this Court, in the 2006
MIAA case, had expressly declared that petitioner, while vested
with corporate powers, is not considered a government-owned or
controlled corporation, but is a government instrumentality like the
Manila International Airport Authority (MIAA), Philippine Ports
Authority (PPA), University of the Philippines, and Bangko Sentral
ng Pilipinas (BSP). Petitioner alleges that as a government
instrumentality, all its airport lands and buildings are exempt from
real estate taxes imposed by respondent City.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
Respondents point out that petitioner and MIAA are two very
different entities. Respondents argue that petitioner is a GOCC
contrary to its assertions, based on its Charter and on DOJ Opinion
No. 50. Respondents argue that MCIAA properties such as the
terminal building, taxiway and runway are not exempt from real
property taxation. As discussed in the 1996 MCIAA case, Section
234 of the LGC omitted GOCCs such as MCIAA from entities
enjoying tax exemptions. Said decision also provides that the
transfer of ownership of the land to petitioner was absolute and
petitioner cannot evade payment of taxes.
ISSUE: Whether or not Mactan International Airport is exempt from
real estate tax.
HELD: YES. The petitioner is an instrumentality of the government;
thus, its properties actually, solely and exclusively used for public
purposes, consisting of the airport terminal building, airfield,
runway, taxiway and the lots on which they are situated, are not
subject to real property tax and respondent City is not justified in
collecting taxes from petitioner over said properties.
While it is true, as respondents allege, that the 1996 MCIAA case
was cited in a long line of cases, still, in 2006, the Court en banc
decided a case that in effect reversed the 1996 Mactan ruling. The
2006 MIAA case had, since the promulgation of the questioned
Decision and Resolution, reached finality and had in fact been either
affirmed or cited in numerous cases by the Court. The decision
became final and executory on November 3, 2006. Furthermore, the
2006 MIAA case was decided by the Court en banc while the 1996
MCIAA case was decided by a Division. Hence, the 1996 MCIAA
case should be read in light of the subsequent and unequivocal ruling
in the 2006 MIAA case.
Petitioner MCIAA is vested with corporate powers but it is not a
stock or non-stock corporation, which is a necessary condition
before an agency or instrumentalityis deemed a government-owned
or controlled corporation. Like MIAA, petitioner MCIAA has
capital under its charter but it is not divided into shares of stock. It
also has no stockholders or voting shares.
Like in MIAA, the airport lands and buildings of MCIAA are
properties of public dominion because they are intended for public
use. As properties of public dominion, they indisputably belong to
the State or the Republic of the Philippines, and are outside the
commerce of man. This, unless petitioner leases its real property to
a taxable person, the specific property leased becomes subject to real
property tax; in which case, only those portions of petitioner’s
properties which are leased to taxable persons like private parties
are subject to real property tax by the City of Lapu-Lapu.
Under Section 2(10) and (13) of the Introductory Provisions of the
Administrative Code, which governs the legal relation and status of
government units, agencies and offices within the entire government
machinery, MIAA is a government instrumentality and not a
government-owned or controlled corporation. Under Section 133(o)
of the Local Government Code, MIAA as a government
instrumentality is not a taxable person because it is not subject to
"[t]axes, fees or charges of any kind" by local governments. The
only exception is when MIAA leases its real property to a "taxable
person" as provided in Section 234(a) of the Local Government
Code, in which case the specific real property leased becomes
subject to real estate tax. Thus, only portions of the Airport Lands
and Buildings leased to taxable persons like private parties are
subject to real estate tax by the City of Parañaque.
Under Article 420 of the Civil Code, the Airport Lands and
Buildings of MIAA, being devoted to public use, are properties of
public dominion and thus owned by the State or the Republic of the
Philippines. Article 420 specifically mentions "ports x x x
constructed by the State," which includes public airports and
seaports, as properties of public dominion and owned by the
Republic. As properties of public dominion owned by the Republic,
there is no doubt whatsoever that the Airport Lands and Buildings
are expressly exempt from real estate tax under Section 234(a) of
the Local Government Code. This Court has also repeatedly ruled
13
Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
that properties of public dominion are not subject to execution or Government,” meaning in the interest of the
foreclosure sale.
national economy.
NON-DELEGATION OF POWER TO TAX
Unfortunately, this is now deleted. I could not
understand why it was deleted! It’s what the
Q: What underlying settled doctrine/principle
Constitution says! That’s how brilliant our
will be violated if we allow the delegation of
Congressmen are. The most important criterion is
power to tax?
deleted. What are left are “in the interest of
A: Delegation of power to tax violates the principle
national security,” “in the interest of the general
of separation of powers. Delegation is allowed
welfare of the people.” Read Sec. 1608, you will not
when expressly authorized by the Constitution.
find therein this constitutional criterion “within the
national development program of the
Under the Constitution, there are two provisions;
Government.”
1. Art. VI, Sec. 28 (2) – Tariff powers of the
President;
Q: What is that provision in the Constitution that
2. Art. X, Sec. 5 – Delegation to Local
likewise allow the delegation of the power to tax?
Government
A: Art. X, Sec. 5. Delegation to Local Government.
Congress passed a law authorizing the President to
Dimaampao: The Constitution made mention of
impose income tax on certain items of income.
these two striking words: guidelines and
limitations.
Q: Is that covered by that constitutional
provision?
Q: What do you understand by the word
A: NO. It is not covered by that constitutionally
guidelines?
delegated power.
A: R.A. No. 7160 does not use the word guidelines.
It uses “fundamental principles.” These principles
Q: So, what are the taxes covered by that
are found in two sections:
constitutionally delegated power?
1. Sec. 130 – Fundamental principles of local
A: It made no mention about income tax, donor’s
government taxation; and
tax, estate tax, value-added tax. The taxes covered
2. Sec. 198 – Fundamental principles of real
are customs duties.
property taxation.
Dimaampao: The constitutional provision says
SECTION 130. Fundamental Principles. - The
that the Congress may, by law, authorize the
following fundamental principles shall govern the
President to fix within specified limits, and subject
exercise of the taxing and other revenue-raising
to such limitations and restrictions as it may
powers of local government units:
impose, tariff rates, import and export quotas,
1. Taxation shall be uniform in each local
tonnage and wharfage dues, and other duties or
government unit;
imposts within the framework of the national
2. Taxes, fees, charges and other impositions
development program of the Government.
shall:
a. be equitable and based as far as
Q: What is that law authorizing the President to
practicable on the taxpayer's ability to
increase or decrease tariff rates?
pay;
A: That law is the flexible power clause under Sec.
b. be levied and collected only for public
221 of the Old Tariff and Customs Law. However,
purposes;
there is a new law: R.A. No. 10863 – Customs
c. not be adjust, excessive, oppressive, or
Modernization and Tariff Act.
confiscatory;
d. not be contrary to law, public policy,
Dimaampao: Read Sec. 102 (u) in relation to Sec.
national economic policy, or in
1608 of RA 10863.
restraint of trade;
3. The collection of local taxes, fees, charges
Explain the flexible power clause. The Constitution
and other impositions shall in no case be let
says, “within the national development program of
to any private person;
the Government.”
4. The revenue collected pursuant to the
provisions of this Code shall inure solely to
Q: Under what conditions or criteria will the
the benefit of, and be subject to disposition
President increase or decrease tariff rates?
by, the local government unit levying the
A: Under the Constitution, it says “within the
tax, fee, charge or other imposition unless
national development program of the
otherwise specifically provided herein; and,

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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
5. Each local government unit shall, as far as
practicable, evolve a progressive system of
taxation.
Section 198. Fundamental Principles. - The
appraisal, assessment, levy and collection of real
property tax shall be guided by the following
fundamental principles:
a. Real property shall be appraised at its
current and fair market value;
b. Real property shall be classified for
assessment purposes on the basis of its
actual use;
c. Real property shall be assessed on the
basis of a uniform classification within
each local government unit;
d. The appraisal, assessment, levy and
collection of real property tax shall not
be let to any private person; and
e. The appraisal and assessment of real
property shall be equitable.
Dimaampao: Tax ordinance is valid if complies
with these fundamental principles of local
government taxation. Assessment, or appraisal or
collection or real property tax is valid if it complies
with these fundamental principles of real property
taxation.
Q: What are the common principles?
A: (1) Rule on uniformity; (2) That taxes must be
equitable; (3) No let principle.
Q: What is the “no let principle”?
A: The appraisal, assessment, levy and collection of
real property tax cannot be delegated to any
private person.
Q: Can the collection of income tax or internal
revenue tax that be delegated to private
corporations such as banks?
A: YES. You should know that distinction. In the
case of local tax or real property tax, in the light of
that honored principle, the collection thereof
should not be delegated or entrusted to private
corporations. That’s why you must have noticed
that banks are not authorized to collect local taxes
or real property tax. But in the case of income tax,
donor’s tax, estate tax, and other internal revenue
taxes, these can be collected by authorized agents.
Dimaampao: In the last bar examination, this was
asked: common limitations on local government
taxation, meaning these taxes cannot be imposed
by local government units. When the Constitution
says under Art. X, Sec. 5 “subject to limitations as
the Congress may provide,” that refers to Sec. 133
of R.A. No. 7160 which enumerates 15 taxes or
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
charges which could not be imposed by local
government units. Can you mention some of them?
SECTION 133. Common Limitations on
the Taxing Powers of Local Government
Units. - Unless otherwise provided herein,
the exercise of the taxing powers of
provinces, cities, municipalities, and
Barangays shall not extend to the levy of the
following:
1. Income tax, except when levied on
banks and other financial institutions;
2. Documentary stamp tax;
3. Taxes on estates, inheritance, gifts,
legacies and other acquisitions mortis
causa, except as otherwise provided
herein;
4. Customs duties, registration fees
vessels and wharfage on wharves,
tonnage dues, and all other kinds of
customs fees, charges and dues except
wharfage on wharves constructed and
maintained by the local government
unit concerned;
5. Taxes, fee and charges and other
impositions upon goods carried into or
out of, or passing through, the
territorial jurisdictions of local
government units in the guise of
charges for wharfage, tolls for bridges
or otherwise, or other taxes, fees or
charges in any form whatsoever upon
such goods or merchandise;
6. Taxes, fees, or charges on agricultural
and aquatic products when sold by
marginal farmers or fishermen;
7. Taxes on business enterprises certified
to by the Board of Investments as
pioneer or non-pioneer for a period of
six (6) and (4) four years, respectively
from the date of registration;
8. Excise taxes on articles enumerated
under the National Internal Revenue
Code, as amended, and taxes, fees or
charges on petroleum products;
9. Percentage or value added tax (VAT)
on sales, barters or exchanges or
similar transactions on goods or
services except as otherwise provided
herein;
10. Taxes on the gross receipts of
transaction contractors and persons
engaged in the transportation of
passengers or freight by hire and
common carriers by air, land or water,
except as provided in this Code;
11. Taxes on premium paid by way or
reinsurance or retrocession;
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
12. Taxes, fees or charges for the
registration of motor vehicle and for
the issuance of all kinds of licenses or
permits for the driving thereof, except
tricycles;
13. Taxes, fees or charges on Philippine
products actually exported, except as
otherwise provided herein;
14. Taxes, fees, or charges, on Countryside
and Barangay Business Enterprises
and cooperatives duly registered under
R.A. No. 6810 and Republic Act
Numbered Sixty-nine hundred thirty-
eight (R.A. No. 6938) otherwise known
as the "Cooperatives Code of the
Philippines" respectively; and
15. Taxes, fees or charges, of any kind on
the National Government, its agencies
and instrumentalities, and local
government units.
Dimaampao: You note here that all national
internal revenue taxes are not within the taxing
authority of the local government units. You must
memorize these.
In the last item there, (15) Taxes, fees or charges, of
any kind on the National Government, its agencies
and instrumentalities, and local government units, it
was cited in the landmark case of Manila
International Airport Authority. Justice Carpio
mentioned that. Since Manila International Airport
Authority is an instrumentality of the national
government, the City Government of Paranaque
cannot impose real property tax against it. Now, he
cited this Doctrine of Supremacy of National
Government over Local Government Units. Explain
the Doctrine of Supremacy of National Government
over Local Government Units based on three
American cases.
The basis of these limitations proceeds from this
Doctrine of Pre-emption.
Q: What is this Doctrine of Pre-emption?
A: The imposition of these limitations is a classic
application of that Doctrine. Pre-empt. To pre-empt
the exercise. Here, where it not for these
limitations, local government units may impose
these taxes. But the national government elects to
over these field or area of taxation thereby
withholding this power to tax on the part of local
government units. So those taxes which may not be
covered by these, they can be imposed by local
government units. In other words, if the national
government does not impose taxes on certain
subject, that may be taxed by the LGU. [1]
1 Victorias Milling vs. Municipality of Victorias, 25
SCRA 192
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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CONSTITUTIONAL LIMITATIONS
These are provisions affecting the power of
taxation.
Q: How do you classify these constitutional
provisions?
A: The classifications are as follows;
1. Constitutional Limitations - these
provisions involve restrictions, direct or
indirect;
2. Constitutional Conferment; (delegation)
3. Constitutional Exemptions;
EQUAL PROTECTION CLAUSE
Equal Protection Clause – There are so many cases
here. It boils down to the application of the
requisites of a valid classification.
Q: What are these requisites?
A: The requisites are as follows;
1. It must be based on substantial
distinctions;
2. It must apply to both present and future
conditions;
3. It must be germane to the purpose of the
law;
4. It must apply to all members of the same
class
Dimaampao: So, there may be differential tax
treatment or classification as long as it has these 4
requisites, that law does not violate equal
protection clause. Jurisprudence in a long line of
cases classify things or articles for purposes of
taxation. There may be differential tax treatment
but for as long as the classification has these
requisites, that law is still constitutional.
There are so many cases decided by the Supreme
Court on this. I must tell you that in the previous
bar exams cases involving violations are the ones
being asked.
Q: Can you think of a case where the Supreme
Court held that this ordinance is discriminatory?
A: Ormoc Sugar Co. vs. Treasurer of Ormoc City;
Motor vehicles in Manila; Association of Customs
Brokers vs. Manila
Dimaampao: There was this tax imposed on
export sale made by Ormoc Sugar Co. The ruling of
the Court was clearly, the tax was discriminatory. It
singled out a particular sugar industry. It applied
only to existing conditions. To conform with that
condition number 2 that it must apply to both
present and future conditions
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Q: How do you cure the defect in the Ormoc Sugar
Co. case?
A: If an ordinance was passed imposing tax on
installation manager conditioned on the ground
that it singled out a particular group of people, will
you challenge that claiming that you were singled
out and therefore it violates the equal protection
clause. This is where the Supreme Court applies
this- inequality or inequity, resulting from singling
out a particular class for taxation or exemption
infringe no constitutional limitation. The mere fact
that he is singled out does not necessarily infringe
constitutional limitations since all the requisites
are present. Differential tax treatment or
classification that will result in singling out a
particular class provided that all the requisites of a
valid classification are present. In other words,
differential tax treatment is allowed as long as the
classification is valid, meaning it must have all the
requisites of a valid classification.
UNIFORMITY IN TAXATION
Equal protection clause, Art. 3, Sec. 1, you cannot
avoid equality here that’s why you jump to Art. VI,
Sec. 28 (1) (Question No. 1 in Bar Exam 1996).
Q: What is the rule of uniformity in taxation?
A: Uniformity means that things belonging to the
same class shall be treated alike - impositions,
privileges conferred, limitation imposed. Uniform
requires that persons, corporations, associations
similarly situated must be taxed similarly. So, the
important word there is “similarly situated” to
make it allowed.
PROGRESSIVE SYSTEM OF TAXATION
Let’s go to this principle that the Congress shall
evolve a progressive system of taxation.
Q: What do you mean by this constitutional
provision?
A: It means that direct taxes are to be preferred and
indirect taxes, as much as possible, should be
minimized.
Dimaampao: These are the words of the Supreme
Court in the ponencia of Chief Justice Enrique
Fernando, which was given judicial imprimatur by
the Supreme Court. I will look for these words
which were mentioned in the recent case of
Camacho: Directive; Not judicially imposable right;
moral incentives.
Q: Is it a directive to Congress? Is it mandatory?
A: No. That’s why the word “shall” is misleading.
The operative word there is “evolve.”
1 G.R. Nos. 49839-46. April 26, 1991.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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Q: Now what does evolve mean?
Definitely it does not mean prescribe, it means to
develop. So it’s not mandatory.
Dimaampao: That’s why this Value Added Tax
Law, which is a regressive tax, has been challenged
for no less than 4 times before the Court. The Court
consistently held that it does not violate this
because it is not mandatory upon Congress to
prescribe or impose direct tax. That’s why as much
as possible, indirect taxes must be minimized.
It is not a directive to Congress to pass a law
imposing progressive tax. To pass a law imposing
progressive tax, is that a legally enforceable or
justiciable right? No! It is just a moral incentive.
This is where you apply the art of articulation.
Pagalingan yan ng English! We are impressed by
answers that contain no grammatical error.
Q: What do you understand by progressive
system of taxation?
A: It is a system of taxation that imposes
progressive rates, which provides that the tax rates
increase as the tax base increases. It means that the
bigger your income, the higher your taxes; the
lower your income, the lower your taxes.
DUE PROCESS
The due process clause prohibits the taking of
property, deprivation of property without due
process of law.
Dimaampao: So here, in taxation, the government
is in effect taking your money. That’s why due
process must be observed. Can you think of a case
wherein the Supreme Court held that a tax law is
not valid or unconstitutional because it violated the
due process of law? Relate this to tax remedies. If
you fail to pay your tax, the government will resort
to these remedies- distraint of personal property,
levy of real property, tax lien. These are taking of
property. But these could only be done with due
regard with the requirement of due process law.
Before the government will take your property as a
result of your failure to pay your tax, there has to
be notice. That is why we have this Notice of
Assessment. That is mandated by due process.
In your book, I hope you have come across the case
of Reyes vs. Almanzor. [1] That’s a case that shows a
classic violation of due process. It is about a land in
Tondo, Manila that has been the subject of real
property assessment. That the land was in the
nature of a residential and therefore subject to the
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
Rental Control Law. So here, the Court ruled that
there is a violation of due process. The assessment
of real property tax is unjust, oppressive, and
confiscatory. It is in this case that the Supreme
Court recognized two (2) methods of making an
assessment – comparable sales approach method
and income approach method.
So, when a local government unit will make an
assessment, it must be governed by this. It must
observe either comparable sales approach method
and income approach method. It turned out that
the real property tax exceeded the income derived
from the lease of the property, that’s why it is
unjust, oppressive and confiscatory. So, if the
property is leased, income is derived therefrom,
this jurisprudence tells us that if the real property
tax is more than the income derived from the lease
of the property, is unjust, oppressive and
confiscatory and is a violation of the due process of
law.
This question came out in Political Law. The
question in taxation has something to do with
Value Added Tax. These are the two cases: (1)
Tolentino et al vs. Secretary of Finance [1] and (2)
American Bible Society vs. City of Manila. [2]
In the latter case, the City of Manila is requiring a
religious society to pay a certain fee or amount
before it could sell its religious articles. Is that
valid?
That’s an undue restraint in the exercise of
religious profession.
On the other hand, in the Tolentino case, there is no
violation. VAT can be imposed on the sale of
religious articles. What cannot be imposed are
regulatory fees. The right is the religious freedom
to disseminate, to sell. That could not be the subject
of a fee because that is a regulation. You cannot
regulate that. But the imposition of sales tax or
VAT, that’s allowed.
NON-IMPAIRMENT CLAUSE
The old case is the Tolentino case. Casanova vs
Court - new case. Justice Vitug asked this in the bar
exams. It has something to do with revocation of
tax exemptions. You associate that with revocation
of tax exemption.
Exemption may be granted under Congressional
franchise. Congress may grant a franchise subject
to amendment or repeal.
Q: Can that be revoked unilaterally?
1 G.R. No. 115455. October 30, 1995
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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A: Yes. Congress can unilaterally revoke a franchise
it granted because the provision says “subject to
amendment or repeal.”
Q: When will the revocation of tax exemption
constitute impairment of contract?
When the exemption is based on contract whereby
valuable consideration has been given. (Casanova
ruling).
In the case of Tolentino et al. vs. Secretary of
Finance, it was an imposition of Value Added Tax
on the sale of real property. At the time of the
passage of that Act, VAT, which imposes VAT on the
sale of real property, there were contracts executed
for the sale of real estate. The parties argued it is a
violation of non-impairment. Is there a violation?
No. There can only be a violation when it involves
revocation of tax exemption based on contract
whereby valuable consideration has been given.
That’s the settled jurisprudence.
That where contracts were executed before the
passage of a law, a subsequent tax law may be filed
by Congress imposing tax on these certain
contracts, that is allowed. Because it does not
involve exemption. So, your knowledge of
exemption comes into play.
Q: When is tax exemption irrevocable? When is it
revocable?
A: It is revocable if it is based on franchise, equity,
public policy, economic policy, the state can
unilaterally revoke that. On the other hand, tax
exemption is irrevocable if that revocation would
result in violation of non-impairment clause- and
that is when it is based on contract whereby
valuable consideration is given.
BILLS TO ORIGINATE FROM THE HOUSE OF
REPRESENTIVES
We now come to the most important, and this is the
issue that will eventually be passed upon by the
Court in the TRAIN Law and this I think has been
raised by the petitioners. You read again Tolentino
et al. vs. Secretary of Finance. You read the original,
235 SCRA 630.
The contention of Speaker Alvarez, as you might
have heard him, is that the insertion of the tax on
coal is unconstitutional because it was not in the
version of the House. On the other hand, Senator
Drilon, opines otherwise – we have the power to
amend. Is the Senate making an amendment? Is
that tax on coal found in the original version of the
House? I’m sure the court will be guided by this.
What’s the ruling of the Court here? How did the
2 G.R. No. L-9637. April 30, 1957
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Court construe that Article VI, Sec. 24? So please

read that case and let us pre-empt the ruling of the
Court. Let us discuss this in the light of the TRAIN
Act. Is there a violation of Art. VI, Sec. 24?

--xXx—

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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
GENERAL PRINCIPLES
Part III
Dimaampao: We will finish General Principles
today, so that next week we will start with Tax
Remedies.
TOLENTINO V. SECRETARY OF FINANCE
So we will start with a very interesting case, the
case of Tolentino, et.al., vs. Secretary of Finance. Two
prominent senators of the Republic questioned the
constitutionality of the Expanded Value Added Tax
(VAT) Law, on the ground that the same fails to
comply with the constitutional requirement under
Art. 6, Sec. 2 of the Constitution.
Q:What was the main argument of Senators’
Tolentino & Salonga?
A: In that case they are questioning the
constitutionality of RA 7716 or the Expanded Value
Added Tax Law because according to them it did
not follow the procedural requirement in the
constitution regarding the tax bills, which should
originate from the House of Representatives
(HOR). According to them the law that was passed
was the consolidation of the senate and the HOR’s
version, thus, unconstitutional. But, according to
the Supreme Court
Q: So, House Bill No. 1197 and Senate Bill 1630,
what happened to this two?
A: When House Bill No. 1197 was brought to the
Senate, they made their own version and what was
passed was merely a consolidation of the distinct
versions of the HOR and the Senate.
Q: Is there no single provision of House Bill No.
1197 has been enacted?
A: There are similar provisions coming from the
House.
Q: Did the bicameral committee adopt majority
of the provisions of House Bill No. 1197 or
majority of the provisions of Senate Bill 1630?
A: Yes, these two were consolidated.
Q: Constitutional or not?
A: It is constitutional.
Dimaampao: Reason out in accordance with the
ruling of the court. That was already asked in the
bar exams, 10 points. Ruling of the Court, RA 7716
is declared constitutional, in other words it
complies with the constitutional requirement
under Art. 6, Sec. 2 of the Constitution.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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Q: What was the reason?
A: The reason for that, what was required by the
Constitution, is that the bill and not the law which
must originate exclusively in the HOR, to insist that
the bill must originate exclusively in the HOR,
would undermine the power of the Senate.
Dimaampao: There are two reasons cited by the
Supreme Court.
Q: What are they?
A: The first is that, to insist that the revenue statute
must be substantially the same as that of the HOR’s
version would be to deprive the Senate of their power
not only to concur but also to propose amendments.
Second, this will violate the principle of co-equality
of legislative powers as it would make the House
superior to the Senate. In other words, what the
constitution simply requires is that the initiative or
the filing of the Revenue and Tariff bills must
originate from the HOR. (as synthesized by J.
Dimaampao)
Q: Why does the constitution require that the
initiative of filing the revenue and tariff bill
originate from the House of Representatives?
A: Because as local representatives elected by their
own districts, they are expected to be more
sensitive to the local needs and problems. The
Senate on the other hand, given that they are
nationally (nationwide) elected, they are expected
to approach these problems from the national
perspective.
Dimaampao: Let us focus on the TRAIN Law. With
regard to Speaker Alvarez’ contention that the
excise tax on coal was not on the version of HOR,
answered by Senator Drilon that “ e have the power
to propose amendments.”
Q: Now, whose contention is tenable?
A: It is the Senator’s contention that is more
tenable. The Constitution merely requires that
Revenue and Tariff bills must originate from the
HOR, not the statute itself.
Q: What do you mean by the word amend?
A: Amendment, according to Tolentino vs Secretary
of Finance, may include modification of the terms of
the house bill. It may likewise include rewording,
or a total overhaul of the provision included in the
House Bill.
Dimaampao: You focus on pages 631 (661) and
633 (663) of Tolentino, et. al vs Secretary of
Finance. In pg. 631, there you will find the ruling of
the case citing the 2 reasons. In pg. 663, there the
Court said what the constitution simply requires is
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that the initiative or the filing of the Revenue and 2. Public; and
Tariff bills must originate from the HOR. 3. Non-stock non-profit.

TAX EXEMPTIONS Q: Which of these 3 are exempt?

Another favorite question of Bar Examiners is that A: Non-stock non-profit educational institutions.
which is found in Art. 6, Sec. 28 par. 3 of the
Constitution as discussed there in your book. Dimaampao: You must read Sec. 30 (e) of the
NIRC (National Internal Revenue Code), because it
Compare this with another constitutional likewise provides exemptions for religious and
provision Art. 14, Sec. 4, par. 3. Now, point out the charitable institutions from corporate income tax.
distinctions.
SECTION 28. (1) The rule of taxation
ART. VI, ART. XIV shall be uniform and equitable. The
Sec. 28(3) Sec. 4(3) Congress shall evolve a progressive system
Non-stock of taxation.
Religious,
and Non-
Institution Charitable, and
Profit
Exempt Educational xxx
Educational
Institutions;
Institutions;
Income Tax, (3) Charitable institutions, churches and
Taxes Custom parsonages or convents appurtenant
Property Tax;
Covered Duties, and thereto, mosques, non-profit cemeteries,
Property Tax; and all lands, buildings, and improvements,
Lands, actually, directly, and exclusively used for
Revenues
Scope Buildings, and
and Assets; religious, charitable, or educational
Improvements;
Actually, Actually, purposes shall be exempt from taxation.
Directly, and Directly, and
Criteria xxx
Exclusively Exclusively
Used; Used;
Q: Now what are the constitutional criteria?
Tax Exemptions under NIRC A: It must be actually, directly, and exclusively
used for that purpose.
Section 30. Exemptions from Tax on
Corporations. - The following Q: What is the Ruling of the Supreme Court in the
organizations shall not be taxed under this case of Lung Center v. Quezon City? [1]
Title in respect to income received by them A: The commercial establishments are not tax
as such; exempt. Only those properties, directly, &
Exclusively Used shall be exempt from tax.
xxx
Q: What was the definition of the court of the
(E) Nonstock corporation or association word exclusively?
organized and operated exclusively for A: Apart from all others; without admission of
religious, charitable, scientific, athletic, or others to participation; in a manner to exclude. [2]
cultural purposes, or for the rehabilitation
of veterans, no part of its net income or Q: What do you mean by the word “Actually”?
asset shall belong to or inures to the benefit A: Actually- opposed to seemingly, pretendedly, or
of any member, organizer, officer or any feignedly as actually engaged in farming means,
specific person; truly in fact.

xxx Q: What do you mean by the word “Directly”?

Dimaampao: Sec. 30(e) of NIRC, grant exemptions
from income tax to Religious and Charitable
Institutions, but for Educational Institutions, it
depends.
There are 3 kinds of educational institutions;
1. Private;
A: Directly- in a direct way without anything
intervening; not by secondary, but by direct means.
J. DIMAAMPAO: You answer this basic question.
You always hear about these, “exemptions”.
Exemptions are granted to charitable institutions.
So now, I ask you, what is the rational of granting
these exemptions? You must have a mastery of that,

1 G.R. No. 144104. June 29, 2004 2 National Power Corp. vs. Central Board of

Assessment Appeals (G.R. No. 171470, January 30, 2009)

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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
because you might be asked why we grant
exemptions.
Q: What is the rationale of granting tax
exemptions?
A: Charitable institutions provide for free goods
and services to the public which would otherwise
fall on the shoulders of the government. Thus, as a
matter of efficiency, the government forgoes taxes
which should have been spent to address public
needs, because certain private entities already
assume a part of the burden. This is the rationale
for the tax exemption of charitable institutions. The
loss of taxes by the government is compensated by
its relief from doing public works which would
have been funded from the appropriations from
the Treasury.
Q: So, what are the three reasons for the grant of
exemptions?
A: The reasons for the grant of tax exemptions are;
1. They perform ministrant functions that
would have done by the government;
2. In exchange for those taxes that have been
forgone, are the services that these
charitable institutions render;
3. The loss of taxes is compensated by the
relief it gives to the government to
perform certain acts that may require
appropriation from the Treasury;
TAX AVOIDANCE AND TAX EVASION
Now, let’s go to tax evasion.
Q: In 1998 Bar Exam, it asked, what is the
distinction between tax avoidance and tax
evasion?
A: Tax Evasion (Tax Dodging) - Willful act to defeat
or circumvent the law in order to illegally reduce
one’s tax liability.
Tax Avoidance (Tax Minimization) - It is the act of
taking advantage of legally available tax
opportunities in order to minimize one’s tax
liability.
Dimaampao: Can you give an example of tax
avoidance relative to income tax? Okay, I will give
you an example. When you sell capital assets,
personal property. Apply this holding period rule.
Holding period rule, Sec. 39 (b) [1] of the National
Internal Revenue Code. When you sell capital asset,
this is what you should do, so that, should gain be
1 (B) Percentage Taken into Account - In the case of a
taxpayer, other than a corporation, only the following
percentages of the gain or loss recognized upon the sale or
exchange of a capital asset shall be taken into account in
computing net capital gain, net capital loss, and net income:
(1)One hundred percent (100%) if the capital asset has been
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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derived from that transaction, only half of it will be
subjected to capital gains tax.
So, this is a legally available tax opportunity. You
can take advantage of that. So when are you going
to sell your capital asset, within what period? Sell it
after twelve months.
Dimaampao: What about a classic example of tax
evasion? Have you read the case of CIR v. Toda, Jr.
[2] case? The mother of all tax evasion cases
according to one author. There the Court cited the
elements of Tax evasion, what are the elements? I
must pressure you to memorize this.
Q: What are the elements of tax evasion?
A: Tax evasion connotes 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 tax is due;
2. An accompanying state of mind which is
described as being “evil”, in “bad faith”,
“willful”, or “deliberate and not
accidental”;
3. A course of action or failure of action which
is unlawful;
Dimaampao: Have you heard of estate planning
scheme? Did I not mention the case of Delcar Trade
vs IAC[3] ? Read that, I might ask you that in your
exam.
Q: What is estate planning? Please memorize
that.
A: The preparation of the management of the
person’s estate through wills, trust, insurance
policies, and other arrangements designed to
reduce administration costs and estate tax
liabilities.
Q: If a person fails to pay tax, will he be liable for
tax evasion? Mere understatement of income,
will that amount to tax evasion?
A: No, there has to be fraud! That is the defense of
a taxpayer, e.g. honest mistake.
Dimaampao: I mentioned in my example tax
avoidance with regard to sale of capital asset.
Q: What is another form of tax avoidance? When
you deposit your money in the bank, that would
earn interest income, hence it will be subject to
20% final tax. Now, how do you minimize it?
held for not more than twelve (12) months; and (2)Fifty percent
(50%) if the capital asset has been held for more than twelve
(12) months;
2 G.R. No. 147188. September 14, 2004
3 159 SCRA 349
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
A: Through Long Term deposits. The term of which
is 5 years are exempt from tax. [1]
Dimaampao: Double Taxation was asked in the
last Bar Exam as we predicted. That’s a favorite bar
question. There are two kinds of Double Taxation.
Q: What are the two kinds of double taxation?
A: Direct double taxation and indirect double
taxation.
Q: how do you distinguish one from the other?
A: There is direct double taxation when the same
property is taxed twice when it should only be tax
once, and both taxes are imposed;
1. On the same property or subject matter;
2. For the same purpose;
3. By the same taxing authority;
4. Within the same taxing jurisdiction;
5. During the same taxing period; and
6. Must be of the same kind/character of tax;
There is indirect taxation if among the elements of
direct double taxation, one of them is absent.
Q: Which of the kinds double taxation is
prohibited?
A: Direct double Taxation.
Q: Why is direct double taxation prohibited?
A: Direct double taxation is prohibited because it
would amount to confiscation of property without
due process of law.
Dimaampao: Another probable bar question is
International Juridical Double Taxation as
enunciated in CIR v S. C. Johnson & Sons. [2]
Q: What do you understand by that?
A: International Juridical Double Taxation refers to
the imposition of comparable taxes in two or more
states on the same taxpayer in respect of the same
subject matter and for incidental periods.
Double taxation usually takes place when a person
is resident of a contracting state and derives
income from, or owns capital in, the other
contracting state and both states impose tax on that
income or capital.
Q: Is that an example of direct or indirect double
taxation?
A: This is an example of indirect double taxation
because the tax is imposed by different jurisdiction
and taxing authority.
1 Section 24(B) of NIRC.
2 G.R. No. 127105. June 25, 1999.
3 Caveat: This is supplemented only by me according
to the definition given by the Supreme Court.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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Q: What are its elements?
A: The elements of International Juridical Double
Taxation are;
1. There are two or more states;
2. There is one and the same taxpayer;
3. The same subject matter is taxed;
4. The same period; [3]
Q: what are the ways enunciated by this case to
eliminate/minimize double taxation?
A: In order to eliminate double taxation, a tax
treaty may be entered into, resorting to two
methods;
1. Tax Exemption Method;
2. Tax Credit Method;
Exemption Method
The income or capital which is taxable in the state
of source or situs is exempted in the state of
residence, although in some instances it may be
taken into account in determining the rate of tax
applicable to the taxpayer’s remaining income or
capital.
The focus is on the income or capital itself. It
eliminates double taxation.
Credit Method
The tax paid or levied in the state of source is
credited against the tax levied in the state o
residence.
The focus is upon the tax. It only minimizes double
taxation.
Dimaampao: Think of Manny Pacquiao, for you to
understand this tax credit method. He earns
income from the US, he also earns income here. He
is taxed in both jurisdictions; thus he is claiming the
taxes he paid in the US as a deduction from his tax
liability in the Phils. It’s a classical definition of that.
Again there is that double taxation, but to minimize
its effect there is that tax credit. So, it does not
eliminate double taxation here, it only minimizes.
There is a case I mentioned in your book, which
involves double taxation. It’s about Ericsson
Telecommunications vs. City of Pasig. You mark
that case, it’s a possible bar question. It’s a classic
case of direct double taxation. It boils down to the
tax base.
Q: What is that case all about? What must be the
tax base?
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
A: The imposition of local business tax based on
gross revenue will inevitably result in the
constitutionally proscribed double taxation –
taxing the same person twice by the same
jurisdiction for the same thing- inasmuch as
petitioner’s gross 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.
Dimaampao: Sec. 143 of RA 7160 provides that
the tax base for local business tax should be gross
sales or gross receipts, not gross revenue. Gross
Sales are derived from the sale of goods and
properties, on the other hand, gross receipts are
derived from sale of services.
Q: So, with that, how will that amount to double
taxation? Which is broader, gross sales or gross
revenue?
A: Gross revenue, because it covers both gross sales
and gross receipts. So that, when the local
government of Pasig prescribed it as the tax base,
that compounded the tax because a portion of it has
already been paid in the previous year. That is the
simplification of the ruling.
Q: In case of a building can it be taxed twice?
A: YES.
Q: What is the tax that is imposed by the local
and national government?
A: Real Property tax for the local government and
income tax imposed by the National Government
for the lease of the building because rent Income is
subject to income tax.
Q: In estate tax, what is that form of or
method/device which may minimize the effect of
double taxation?
A: Vanishing deduction.
Dimaampao: Do you recall there is double taxation
there? This property has been taxed in the previous
decedent, and when its transferred it was taxed in
the present decedent.Vanishing deduction
presupposes double taxation. Because the same
property forms part of the two estate, hence it is
taxed twice. The purpose of double taxation is to
reduce, minimize, lessen double taxation.
Q: What are its elements?
A: Its elements are as follows;
1. Death of the decedent occurring within 5
years from the transfer of the property
through succession;
1 RA 10963.
2 Book II Title 1, RA 7160.
3 Book II Title 2, RA 7160
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2. Identity of property;
3. The same property is taxed;
4. It was previously taxed;
5. No previous vanishing deduction;
IMPRESCRIPTIBILITY OF TAXES
As a general rule, taxes are imprescriptible as they
are the life blood of the government. However, tax
statutes may provide for statute of limitations.
Dimaampao: You must bear in mind that there are
four major tax statutes, namely;
1. National Internal Revenue Code, as
amended by the TRAIN Act; [1]
2. Local Government Code; [2]
3. Real Property Taxation; [3]
4. Customs Modernization and Tariffs Act; [4]
Q: What is the general rule?
A: As a general rule, taxes are imprescriptible as
they are the life blood of the government. However,
tax statutes may provide for statute of limitations.
Q: What are the period for the statute of
limitations?
A: Under the NIRC – the statute of limitation for
assessment of tax if a return is filed is within three
(3) years from the last day prescribed by law for
the filing of the return or if filed after the last day,
within three (3) years from the date of actual filing.
If no return is filed or the return filed is false or
fraudulent, the period to assess is within ten (10)
years from the discovery of the omission, fraud, or
falsity.
Any internal revenue tax which has been assessed
within the period of limitation as prescribed in
paragraph (a) of Section 22 may be collected by
distraint or levy or by proceeding in court within
five (5) years following the assessment of the tax.
Under the tariff and Customs Code – it does not
express any general statute of limitations; it
provides, however, that “when articles have been
entered and passed free of duty of final
adjustments of duties made, with subsequent
delivery, such entry and passage free of duty or
settlements of duties will after the expiration of
three (3) years from the date of the final payment
of duties, in the absence of fraud or protest or
compliance audit pursuant to the provision of this
Code, be final and conclusive upon all parties,
unless the liquidation of the import entry was
merely tentative. [5]
4 RA 10863.
5 Sec 480, R.A. 10863.
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)
Local Government Code - Local taxes, fees, or
charges shall be assessed within five (5) years from
the date they became due. In case of fraud or intent
to evade the payment of taxes, fees, or charges, the
same may be assessed within ten (10) years from
discovery of the fraud or intent to evade payment.
They shall also be collected either by
administrative or judicial action within five (5)
years from date of assessment. [1]
i. Local taxes, fees, or charges may be
collected within five (5) years from the
date of assessment by administrative
or judicial action. No such action shall
be instituted after the expiration of said
period. [2]
ii. The basic real property tax and any
other tax levied under this Title shall be
collected within five (5) years from the
date they become due. No action for the
collection of the tax, whether
administrative or judicial, shall be
instituted after the expiration of such
period. In case of fraud or intent to
evade payment of the tax, such action
may be instituted for the collection of
the same within ten (10) years from the
discovery of such fraud or intent to
evade payment. [3]
Dimaampao: You memorize those periods!
Q: When do you apply the general rule that taxes
are imprescriptible?
A: Taxes as a rule are imprescriptible for those
which are not covered by any statute of limitations!
Q: What is that tax?
A: Improperly Accumulated Earnings Tax.
Dimaampao: You cannot compel corporations to
report this. In effect its imprescriptible.
Q: Now when do you apply or consider that Taxes
are imprescriptible?
A: If the law is silent.
Dimaampao: Yes! If the law is silent, if it did not
provide for any limitations! Thus, you cannot apply
this rule to those 4 kinds of tax since the law
provides for prescriptive periods.
NATURE AND PROSEPCTIVITY OF TAX LAWS
As a rule tax laws apply prospectively, except when
it provides for its retroactive application.
Exception to the exception as held in Republic vs
Oasan Vda. De Fernandez, is when its retroactive
1 Sec. 194, Local Government Code.
2 Sec. 194, Local Government Code.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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application will impose harsh and oppressive tax
or would amount to denial of due process.
That is the time when you will disregard the
retroactive application of tax.
TAX PAYER’S SUIT
There have been rulings in taxpayer’s suit.
Q: What are the two indispensable requisites of
taxpayer’s suit as held in Gonzales vs Marcos [4]?
A: The requisites of taxpayer’s suit under Gonzales
vs Marcos are;
1. Illegal or unlawful disbursement of public
funds;
2. The public funds must be derived from
taxes;
Dimaampao: Did I not mention that the coverage
of your Bar Exam includes the distinction of
taxpayers’ suit and citizens suit? What do you mean
by a citizen’s suit? You discuss that under the
Constitution. Did I not ask you to research on that?
Its discussed in David vs Arroyo. Including the
doctrine of transcendental importance. This
doctrine is always discussed in all these landmark
cases. It’s there in the case of 489 SCRA 160.
Q: What do you mean by a citizen’s suit.
A: In citizen’s suit the petitioner is just an
instrument of public concern.
Dimaampao: There is a public concern there, it’s
just that it don’t involve disbursement of public
funds.
Q: If you question this TRAIN Law, what will you
file, a taxpayer suit or a citizen suit?
A: A citizen’s suit because there is a public concern
which may affect the people. It involves the general
welfare of the people.
Dimaampao: What about this doctrine of
transcendental importance? There are tax cases
which involves matters of transcendental
importance. Its an exception of the requirement of
locus standi.
In making this one of the coverage, it only pertains
to tax cases.
So locus standi may be relaxed when a cases has
transcendental importance. So, you need not prove
this so called locus standi.
Q: does the doctrine of locus standii this apply to
the TRAIN Act?
3 Sec. 270, Local Government Code.
4 G.R. No. L-31685. July 31, 1975.
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Smuggled Notes – Tax principles and remedies (DIMAAMPAO 2019)

A: Yes, it applies to the TRAIN Act. Can you think of

other tax cases that are of transcendental
importance, that’s why that doctrine is now
included in the coverage? E-Vat Law RA 7716.

--xXx--

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Smuggled notes - DIMAAMPAO (2019)
TAX REMEDIES
PART I
Dimaampao: There are remedies that may be
availed of by the government. There are remedies
that may be resorted to by the taxpayer.
Q: What are the remedies of the government?
A: These are:
1. Compromise;
2. Enforcement of a tax lien;
3. Forfeiture;
4. Distraint of personal property;
5. Levy of real property;
6. Civil action;
7. Criminal action;
8. Civil penalties;
Q: What is the purpose of the remedies insofar as
the government is concerned?
A: These remedies available to the government are
designed to ensure the collection of taxes. In
resorting to these remedies, the government must
observe/comply with the legal parameters that are
set forth in the tax laws.
Q: On the other hand, what is the underlying
purpose of the remedies that may be resorted to
by the taxpayer?
A: The purpose of these taxpayer’s remedies is to
safeguard the interests of the taxpayers against
unreasonable or arbitrary assessment, collection
or investigation.
Dimaampao: These remedies are either
administrative or judicial.
Q: What is the difference between these
administrative and judicial remedies?
A: Administrative remedies are those that do not
require judicial proceedings, whereas judicial
remedies are those that require /necessitate
/warrant judicial actions or proceedings.
Dimaampao: Do not use the word “exercise.” We
are not talking about power. Use the words
“resorted to,” “availed of” because these are
remedies.
ASPECTS OF TAXATION
There are two aspects of taxation;
1. Assessment; and
55 Adamson v. Court of Appeals, 588 SCRA 27
56 588 SCRA 27.
57 Section 228, NIRC; Commissioner v. Reyes (G.R. No.
159694. January 27, 2006)
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2. Collection;
In the bar examination, this came out;
Q: What is the difference between assessment
and collection?
A: Assessment is the written notice and demand to
the taxpayer of his due tax liability. Collection is the
enforcement of the assessment.
Q: Which comes first, assessment or collection?
A: Assessment precedes collection except when the
unpaid tax is a tax due per return as in the case of a
self-assessed income tax under the pay-as-you-file
system in which case collection may be instituted
without need of assessment.
Q: Is assessment a condition sine qua non to
collection insofar as the NIRC is concerned?
A: NO. Sections 203 and 222 of the NIRC do not
require prior assessment before collection may be
made. Therefore, collection may be made with or
without prior assessment.
Q: What is meant by assessment?
A: 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 interests 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. [55]
Dimaampao: Adamson v. Court of Appeals [56] is the
authoritative definition. You memorize that.
Q: What is meant by assessment under the NIRC?
A: It is a written notice and demand made by the
BIR on a taxpayer for the settlement of due tax
liability that is set and fixed within a prescribed
period.
Dimaampao: This is a defective definition.
Q: What are the requisites of a valid assessment
under the NIRC?
A: The requisites of a valid assessment under the
NIRC are as follows:
1. It must be a written notice and demand;
2. It must state the due tax liability of a
taxpayer;
3. The taxpayer’s tax liability must be final;
4. It must state the law and the facts upon
which it is based. [57]
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Smuggled notes - DIMAAMPAO (2019)
5. It must be served on and duly received by
the taxpayer; [58]
Example;
The BIR wrote the taxpayer allowing him to
counter or present his side, or asking him if the
assessment is to be his final tax liability.
Q: Will that constitute valid assessment?
A: NO. It does not contain the taxpayer’s final tax
liability.
Example;
An affidavit executed by a revenue officer or agent
setting forth the final tax liability of the taxpayer.
Q: Will that qualify as assessment?
A: No, because there is no written notice and
demand. It is just an affidavit.
Q: If there is a violation of the 4th or the 5th
requisite, what is the effect on the assessment?
A: The assessment is void ab initio because it is a
violation of due process.
Dimaampao: There must be proof of receipt by the
taxpayer of the assessment.
Q: Who has the burden of proof?
A: It is the BIR who must prove that the assessment
is duly received by the taxpayer. This is an
exception to the presumption of regularity in the
performance of official functions.
Q: Can the BIR invoke the presumption of
regularity in the performance of official
functions to discharge the burden of proof?
A: NO. This is an exception to the presumption.
Q: What is assessment for purposes of real
property taxation?
A: Assessment for purposes of real property
taxation is the act or process of determining the
value of a property, or proportion thereof subject
to tax, including the discovery, listing,
classification, and appraisal of properties. [59]
Q: What is assessment for purposes of customs
duties?
A: Assessment for purposes of customs duties
refers to the final computation and ascertainment
by the collector of duties on imported merchandise
based on official reports as to the quantity,
character, and value thereof, and the collector’s
own finding as to the applicable rate of duty. [60]
Commissioner v. Pascor (G.R. No. 128315. June 29, 1999)
58
Section 199(f), Local Government Code.
59
60 Pilipinas Shell Petroleum Corporation v. Customs
Commissioner, 589 SCRA 574
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Q: What are the requisites of a valid assessment
for purposes of customs duties?
A: The requisites are as follows;
1. It must contain the final computation and
ascertainment of duties on imported
merchandise;
2. It must be based on official reports as to
the quantity, character, and value of the
imported merchandise;
3. It must set forth/contain the collector’s
own finding as to the applicable rate of
duty.
Methods of Assessment
Dimaampao: In your book, I mentioned methods
that may be used by the BIR to make an
assessment.
Q: What are these methods?
The methods of assessment are:
1. Networth Method of Investigation; [61]
2. Presumed gross sales or receipts method;
3. Expenditures method; [62]
BEST EVIDENCE OBTAINABLE
The networth method of investigation finds
support in the Best Evidence Obtainable Rule. It is a
different concept in Remedial Law.
Q: What do you mean by best evidence
obtainable?
A: This includes corporate and accounting records
of the taxpayer who is the subject of the assessment
process; the accounting records of other taxpayers
engaged in the same line of business, including
their gross profit and net profit sales; data, record,
paper, document or any evidence gathered by
internal revenue officers from other taxpayers who
had personal transactions or from whom the
subject taxpayer received any income; and record,
data, document and information secured from
government offices or agencies, such as the SEC, the
BSP, the BOC and the TCC.
Q: What are the four instances wherein the BIR
may resort to this best evidence obtainable rule?
A: These are;
1. When a report required by law as a basis
for the assessment of any national internal
revenue tax shall not be forthcoming
within the time fixed by laws or rules and
regulations;
2. When there is reason to believe that any
such report is false;
61 Section 43 of the NIRC.
62 Collector v. Jamir, 4 SCRA 718.
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Smuggled notes - DIMAAMPAO (2019)
3. When there is reason to believe that any
such report is incomplete;
4. When there is reason to believe that any
such report is erroneous; [63]
1. Can you strictly apply the hearsay
evidence rule in tax cases? No. Hearsay is
admissible in tax cases because other sources
may include information or data from third
persons.
Dimaampao: Read Campbell v. Guetersloh and
Kenny v. Commissioner, as cited in CIR v. Hantex
Trading Co., Inc. [64]
Q: Can mere photocopies of records/documents
constitute best evidence obtainable?
A: NO. They have no probative weight if offered as
proof of the contents thereof. [65]
Dimaampao: Best evidence obtainable allows the
BIR to use the networth investigation method.
Q: How do you apply this method?
A: The steps are as follows;
Step 1: Get the difference of networth end
and networth beginning.
Step 2: Add the non-deductible expenses
which understated the income.
Step 3: Deduct the exclusions which
overstated the income.
Step 4: Compare the total amount obtained
with the taxpayer’s taxable income reported in the
return. If there is discrepancy between the two, this
will be the subject of assessment.
Q: When is it proper for the BIR to fix the
presumed gross sales or receipts?
A: It is resorted to in the following cases;
1. When it is found that a person has failed to
issue receipts and invoices in violation of
the requirements of Sections 113 and 237
of this Code; or
2. When there is reason to believe that the
books of accounts or other records do not
correctly reflect the declarations made or
to be made in a return required to be filed
under the provisions of this Code. [66]
Dimaampao: Collector v. Jamir discusses the other
method of assessment: the expenditures method.
Q: How does it apply?
A: It is applied by deducting the aggregate yearly
expenditures from the declared yearly income, not
the expenditures incurred each month, from the
63 Section 6(b), NIRC.
64 454 SCRA 301.
65 CIR v. Hantex Trading Co., Inc., 454 SCRA 301.
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declared income therefor. If the amount spent is
more than the amount earned for the same year,
the excess is the unreported income.
PRESCRIPTIVE PERIODS
Sections 203, 222 and 223 of the NIRC provide for
prescriptive periods. This clearly shows that
internal revenue taxes are prescriptible. Let us
discuss in this regard these three related
provisions.
Q: Does Section 203 apply to assessment and
collection?
A: YES. It is in the law. With due respect to the BIR,
it not only applies to assessment, but also
collection.
Q: When do you reckon the three-year period?
A: It is reckoned from the last day prescribed by
law for the filing of the return or from the day the
return was filed.
Q: In the case of individual taxpayers, when will
be the deadline for filing the return?
A: In case of individual taxpayers, the deadline is
April 15 of the applicable year.
Q: What about the corporate taxpayers?
A: In case of corporate taxpayers, the tax return is
filed quarterly. If it has adopted the calendar year
period, the deadline for filing the final adjusted
return is April 15. If it has adopted the fiscal year
period, the deadline is the 15th day of the fourth
month following the close of the fiscal year. [67]
Q: If the return has been amended, when do you
commence/reckon the three-year period?
A: It depends. If the amendment is substantial, the
three-year period will be reckoned from the filing
of the substantially amended return. Otherwise,
the period will be reckoned from the date of the
original filing.
Q: What is the distinction between Section 203
and Section 222?
A: In Section 203, the return is neither false nor
fraudulent. Section 222, on the other hand,
contemplates three situations *triple F*: when a
false or fraudulent return is filed, or when there is
failure or omission to file a return.
Q: How do you apply the five-year period in
Section 222?
A: The five-year period only applies to collection. It
is reckoned from the assessment of the tax.
66 Section 6(c), NIRC.
67 Section 77(b) of the NIRC.
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Smuggled notes - DIMAAMPAO (2019)
Q: How about the ten-year period?
A: The ten-year period is applied to both
assessment and collection. It is reckoned from the
discovery of the falsity, fraud or omission. This
allows collection even without prior assessment.
Grounds to suspend prescriptive period.
Having discussed these prescriptive periods in
Section 203 and 222, you must know the grounds
in Section 223 to suspend the prescriptive period.
Q: What are these grounds?
A: The grounds for suspension of prescriptive
period are as follows:
1. When the Commissioner is prohibited
from making the assessment or beginning
distraint or levy or a proceeding in court
and for sixty (60) days thereafter;
2. When the taxpayer requests for a
reinvestigation which is granted by the
Commissioner;
3. When the taxpayer cannot be located in
the address given by him in the return filed
upon which a tax is being assessed or
collected;
4. When the warrant of distraint or levy is
duly served upon the taxpayer, his
authorized representative, or a member of
his household with sufficient discretion,
and no property could be located;
5. When the taxpayer is out of the
Philippines; and
6. When there is a waiver of the Statute of
Limitations. [68]
7. When the Commissioner files an answer to
taxpayer’s petition for review; [69]
Q: Who can enjoin the collection of taxes?
A: 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 this
Code. [70]
Dimaampao: The “court” referred to in the “No
Injunction Rule” is limited to “regular courts” only.
Republic Act No. 9282, in Section 9, para. 4 thereof,
confers upon the Court of Tax Appeals the
authority to enjoin/suspend the collection of taxes
under the circumstances stated therein.
Q: What are the grounds upon which the CTA
may restraint/enjoin the collection of taxes?
A: Section 9, para. 4 of R.A. No. 9282 provides for
the following grounds;
68Not found in Section 223.
69Fernandez Hermanos v. Commissioner, 29 SCRA 552.
70 Section 218, NIRC.
71 789 SCRA 19.
72 Collector of Internal Revenue v. Avelino, G.R. No. L-
14847. September 19, 1961
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
1. When in the opinion of the Court the
collection by the government agency may
jeopardize the interest of the Government
or the taxpayer; and
2. When the taxpayer is required either to
deposit the amount claimed or to file a
surety bond for not more than double the
amount of the tax sought to be collected
with the Court.
Dimaampao: Read Pacquiao v. CTA. [71] The Court
reiterated therein that a bond must be posted,
whether cash or surety bond.
Q: If surety bond is posted, what is the
requirement of the law?
A: The surety bond must be posted for more than
double the amount of the tax sought to be collected.
Dimaampao: The posting of the bond in order to
suspend the collection of taxes admits of two
exceptions.
Q: What are these?
A: These are;
1) If the method employed by the Collector of
Internal Revenue in the collection of tax is
not sanctioned by law; [72]
2) If the collection of taxes was made after the
lapse of the three-year limitation period; [73]
The prescriptive periods may be extended by
agreement between the BIR and the taxpayer. Read
the landmark case on the waiver of the prescriptive
period: Commissioner v. Kudos Metal
Corporation.[74] It discussed the requisites in
Revenue Memorandum Order No. 2090.
Q: What are the requisites of valid waiver of
prescriptive period?
A: The requisites of a valid waiver of prescriptive
period are as follows;
1. An agreement must be reached /made
before the expiration of the prescriptive
period;
2. It must be in writing;
3. It must be signed by the BIR authorized
representative and the taxpayer;
4. It must be approved by the BIR;
5. If the taxpayer is a corporation, the Board
must approve the waiver.
Dimaampao: There are five grounds for
suspension of the prescriptive period under
73 Collector of Internal Revenue v. Zulueta, G.R. No. L-8840,
February 8, 1957.
74 620 SCRA 232.
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Smuggled notes - DIMAAMPAO (2019)
Section 223. Another ground is a judicial ground
the waiver of prescriptive period.
Q: What is the other ground for suspension of
prescriptive period?
A: The judicial ground for suspension of
prescriptive period is the filing of Answer to
taxpayer’s petition for review. [75]
COMPROMISE
Let us now discuss one of the most important
topics - compromise.
Dimaampao: The BIR is authorized to compromise
internal revenue tax cases.
Q: What are the grounds upon which the BIR may
compromise an internal revenue tax?
A: The grounds as stated in Section 204 of the NIRC
are:
2. The existence of doubtful validity of the
assessment against the taxpayer; or
3. The financial incapacity of the taxpayer to
pay the assessed tax.
Dimaampao: There are nine doubtful validity
cases in your book. Note that assessment made
based on the best evidence obtainable is one of
them.
Q: Why is it a doubtful validity case? Can you
explain that?
A: It falls under the doubtful validity cases because
the source of information or data may come from
other persons. It may be hearsay. That makes it
doubtful.
Dimaampao: Another one asked in the Bar is
jeopardy assessment. It is another doubtful validity
case.
Q: What is a jeopardy assessment?
A: A jeopardy assessment is a tax assessment made
by an authorized Revenue Officer without the
benefit of complete or partial audit, in light of the
revenue officer's belief that the government’s
interest will be jeopardized by delay caused by the
taxpayer.
Q: Whys is jeopardy assessment doubtful?
A: It is doubtful because there is no audit made by
the BIR. That makes it doubtful.
Dimaampao: Out of these nine cases, these two are
the most important;
1. Assessment based on best evidence
obtainable; and
75 Fernandez Hermanos v. Commissioner, 29 SCRA 552
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
2. Jeopardy assessment.
Read the other seven cases of doubtful validity in
the book. The other seven cases are;
1. Assessment appearing to be arbitrary or
based on presumptions;
2. Failure of taxpayer to file protest on
account of alleged failure to receive notice
of assessment or preliminary assessment;
3. Failure of taxpayer to file request for
reinvestigation or reconsideration within
30 days from receipt of final assessment
notice;
4. Failure of taxpayer to elevate to CTA an
adverse decision of the Commissioner or
his representative within 30 days from
receipt thereof;
5. Assessment issued on or after January 1,
1998, where demand allegedly failed to
comply with the formalities of the Tax
Code of 1997;
6. Assessment issued within the extended
prescriptive period where the waiver of
the statute of limitations is being
questioned or at issue;
7. Assessment based on an issue decided
against the Bureau, but for which the SC
has not decided upon with finality
Q: What are the obvious grounds under the cases
of the taxpayer’s financial incapacity?
A: There are five in your book. These are:
1. When the corporation ceased operation or
is already dissolved;
2. hen the taxpayer is suffering from surplus
or earnings deficit resulting in impairment
of the original capital by at least 50%;
3. When the taxpayer is suffering from a
networth deficit;
4. When the taxpayer is a compensation
income earner with no other source of
income, and the family’s gross monthly
compensation income does not exceed the
levels provided for under the revenue
regulations;
5. When the taxpayer has been granted by
the SEC or the competent tribunal a
moratorium or suspension of payments to
creditors, or otherwise declared bankrupt
or insolvent.
Dimaampao: Memorize those that cannot be
compromised. Memorize those seven and apply
expressio unius. It is a must that you memorize
these. Section 204 mentions only two. It is
incomplete. The other cases are found in revenue
regulations. It is in your book in page 198.
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Q: What are these cases that the Commissioner
cannot compromise?
A: These cases are as follows;
1. Criminal tax fraud cases; [76]
2. Criminal violation already filed in court;
[77]
3. Withholding tax cases;
4. Delinquent accounts with duly approved
schedule of installment payments;
5. Final reports of reinvestigation or
reconsideration resulting in reduction in
the original assessment, and the taxpayer
is agreeable to such decision by signing the
required agreement form for the purpose;
6. Final and executory judgment of a court;
7. Estate tax cases where the ground for
compromise is the financial incapacity of
the taxpayer;
Q: If there is fraud involved, why can we not
compromise it?
A: It is because that will open the floodgates to the
commission of tax fraud. That is contrary to public
policy. When cases are compromised, the law or
jurisprudence allows that if it is not contrary to
public policy.
Q: Why can we not compromise criminal cases
not attended by fraud if it is already filed in
court?
A: It is because the BIR no longer has jurisdiction.
It is now the court which has jurisdiction, and the
BIR can no longer interfere.
Q: Why can we not compromise final judgments
or final reports?
A: It is because they are already binding upon the
taxpayer.
Dimaampao: Take note there is a qualification in
estate tax cases.
Q: What does the qualification imply?
A: It is not an absolute that estate tax cases may be
compromised. This means that estate tax cases
where the ground for compromise is the financial
incapacity of the taxpayer cannot be compromised.
Q: Why can we not compromise estate tax cases
where the request for compromise is based on
financial incapacity of the taxpayer?
A: When there is a case filed with the
Commissioner, all issues are passed upon. That is
why that can no longer be raised. This rule is based
76 Section 204.
77 Ibid.
78 Hong Kong and Shanghai Banking Corp. v. Rafferty (G.R.
No. 13188. November 15, 1918)
79 BPI v. Trinidad, (G.R. No. L-16014. October 4, 1921)
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
on the fact that the taxpayer is given ample time to
settle his tax liability. (5 years in case of judicial
settlement of estate, 2 years in case of extrajudicial
settlement of estate – Section 91 of the NIRC)
Dimaampao: If you can explain that, you are better
than tax authors, revenue officers, and tax lawyers.
If you ask them, they can hardly explain that.
ADMINISTRATIVE REMEDIES AVAILABLE TO
THE GOVERNMENT
Let us have a brief review of these three
administrative remedies that may be availed of the
government;
1. Enforcement of a tax lien;
2. Distraint; and
3. Levy.
Dimaampao: Section 219 – Enforcement of a tax
lien. It is defined in your book.
Q: How is tax lien defined?
A tax lien is a legal claim or charge on property,
whether real or personal, established by law as a
sort of security for the payment of tax obligations.
[78]
Q: What is the difference between tax lien and
forfeiture?
A: In tax lien, the excess, after satisfying the tax
liability, will go to the taxpayer. In forfeiture, all the
proceeds of the sale will go to the coffers of the
government. [79]
Dimaampao: The issue in CIR v. NLRC [80] involves
the determination of who has the superior claim to
the barges.
Q: Between a claim based on judgment and a
claim based on tax lien, which will prevail?
Explain.
A: The government’s claim predicated upon a tax
lien is superior to a claim based on judgment. The
reasons are as follows;
1. A tax lien attaches upon all property and
rights to property of the taxpayer in case
he fails to pay taxes. [81]
2. It attaches from the moment the taxpayer
fails to pay the tax. Thus, there is nothing
left to be attached by the sheriff for a claim
based on judgment because the
government has acquired tax lien on the
property.
80 238 SCRA 42.
81 Section 219
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Q: Can LGUs avail of these administrative
remedies?
A: Yes, as provided for by Section 173 of the Local
Government Code.
Section 173. Local Government's Lien. -
Local taxes, fees, charges and other
revenues constitute a lien, superior to all
liens, charges or encumbrances in favor of
any person, enforceable by appropriate
administrative or judicial action, not only
upon any property or rights therein which
may be subject to the lien but also upon
property used in business, occupation,
practice of profession or calling, or exercise
of privilege with respect to which the lien is
imposed. The lien may only be extinguished
upon full payment of the delinquent local
taxes fees and charges including related
surcharges and interest.
Q: Can LGUs resort to enforcement of tax lien?
A: Yes as provided by Section 257 of the Local
Government Code.
Section 257. Local Governments Lien. -
The basic real property tax and any other
tax levied under this Title constitutes a lien
on the property subject to tax, superior to
all liens, charges or encumbrances in favor
of any person, irrespective of the owner or
possessor thereof, enforceable by
administrative or judicial action, and may
only be extinguished upon payment of the
tax and the related interests and expenses.
Q: May the Collector of Customs avail of the
enforcement of tax lien?
A: Under the Customs and Tariff Modernization Act
(R.A. No. 10863), the answer is NO. However, under
the Old Customs Code, the answer is yes.
Q: What is the subject of distraint?
A: The subject of distraint is personal property,
such as goods, chattels, or effects of the taxpayer, as
well as stocks and other securities, debts, credits,
bank accounts, and interest in and rights to
personal property.
Q: What is the subject of levy?
A: On the other hand, the subject of levy is real
property or any interest therein.
Dimaampao: It is clear under Section 207(a) that
the BIR is allowed to resort to distraint.
Q: Is distraint an available remedy under the
LGC?
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
A: Yes as provided under Section 175 of the Local
Government Code.
Section 175. Distraint of Personal
Property. - The remedy by distraint shall
proceed as follows:
(a) Seizure - Upon failure of the person
owing any local tax, fee, or charge to pay the
same at the time required, the local
treasurer or his deputy may, upon written
notice, seize or confiscate any personal
property belonging to that person or any
personal property subject to the lien in
sufficient quantity to satisfy the tax, fee, or
charge in question, together with any
increment thereto incident to delinquency
and the expenses of seizure.
Q: Is distraint available under real property
taxation?
A: Yes, under Section 254 of the LGC. However, it is
an erroneous provision because the subject of
distraint is personal property.
Section 254. Notice of Delinquency in the
Payment of the Real Property Tax. -
xxx
(b) Such notice shall specify the date upon
which the tax became delinquent and shall
state that personal property may be
distrained to effect payment.
Q: Is distraint available under the Old Customs
Code?
A: No. There is no such remedy in this law to that
effect.
Q: Is distraint available under the CMTA?
A: Yes as provided by Section 1134(a)
Section 1134. Summary Remedies.—
(A) Distraint of Personal
Property.— Upon failure of the person
owing any delinquent duty, tax and other
charges to pay at the time required, the
Commissioner shall seize and distraint the
goods, chattels or effects, and the personal
property, including stocks and other
securities, debts, credits, hank accounts, and
interests in and rights to personal property
of such persons, in sufficient quantity to
satisfy the duty, tax or other charge and the
expenses of the distraint and the cost of the
subsequent sale.
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Smuggled notes - DIMAAMPAO (2019)
The officer serving the warrant of distraint
shall make or cause to be made an account
of the goods, chattels, effects, or other
personal property distrained, a copy of
which, signed by the said officer, shall he left
either with the owner or person from whose
possession such goods, chattels, or effects or
other personal property were taken, or at
the dwelling or other place of business of
such person and with someone of suitable
age and discretion, to which list shall be
added a statement of the sum demanded
and note of the time and place of sale.
Stocks and other securities shall be
distrained by serving a copy of the warrant
of distraint upon the importer and upon the
president, manager, treasurer, or other
responsible officer of the corporation,
company or association, which issued the
said stocks or securities.
Debts and credits shall be distrained by
leaving with the person owing the debts or
having in his/her possession or under
his/her control such credits, or with his/her
agent, a copy of the warrant of distraint.
The warrant of distraint shall be sufficient
authority to the person owing the debts or
having in his possession or under his control
any credits belonging to the importer to pay
to the Commissioner the amount of such
debts of credits.
Bank accounts shall be garnished by serving
a warrant of garnishment upon the
importer and upon the president, manager,
treasurer, or other responsible officer of the
bank Upon the receipt of the warrant of
garnishment, the bank shall turn over to the
Commissioner so much of the bank accounts
as may be sufficient to satisfy the claim of
the government.
A report on the distraint shall, within ten
(10) days from receipt of the warrant, be
submitted by the Commissioner to the
Secretary of Finance: Provided, That the
Commissioner shall have the power to lift
such order of distraint subject to the rules
and regulations promulgated pursuant to
this Act.
Dimaampao: It is clear under Section 207(b) that
the BIR is allowed to resort to levy.
Q: Is levy available under the LGC?
A: Yes as provided by Section 176 of the Local
Government Code.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
Section 176. Levy on Real Property. -
After the expiration of the time required to
pay the delinquent tax, fee, or charge, real
property may be levied on before,
simultaneously, or after the distraint of
personal property belonging to the
delinquent taxpayer.
Q: Is levy available under real property taxation?
A: Yes as provided under Section 258 of the Local
Government Code.
Section 258. Levy on Real Property. -
After the expiration of the time required to
pay the basic real property tax or any other
tax levied under this Title, real property
subject to such tax may be levied upon
through the issuance of a warrant on or
before, or simultaneously with, the
institution of the civil action for the
collection of the delinquent tax.
Q: Is levy available under the Old Customs Code?
A: NO.
Q: Is levy available under the CMTA?
A: Yes as provided under Section 1134(b) of the
CMTA
Section 1134. Summary Remedies.—
xxx
(B) Levy on Real Property.— After the
expiration of the period within which to pay
the duty, tax and other charges as
prescribed in this section, real property may
be levied upon, before, simultaneously, or
after the distraint of personal property
belonging to the importer. To this end, the
Commissioner or the duly authorized
representative shall prepare a duly
authenticated certificate showing the name
of the importer and the amounts of the duty
and tax and penalty due. The certificate
shall operate with the force of a legal
execution throughout the Philippines.
The levy shall be effected by writing upon
the certificate a description of the property
on which levy is made. At the same time,
written notice of the levy shall be mailed to
or served upon the register of deeds of the
province or city where the property is
located and upon the importer, or if the
latter is not in the Philippines, upon the
agent or the manager of the business from
34
Smuggled notes - DIMAAMPAO (2019)
which the liability arose, or if there be none, Q: In levy, is notice of sale still required to be
to the occupant of the property in question. served on the delinquent taxpayer?
A: Yes, because the taxpayer cannot exercise his
In case the warrant of levy on real property right under Section 213 to prevent the sale if he is
is not issued before or simultaneously with not informed of such sale. What you learned that
the warrant of distraint on personal publication is a notice to the whole world does not
property, and the personal property of the apply here because of that provision.
importer is not sufficient to satisfy the duty
and tax due, the Commissioner or a duly SEC. 213. Advertisement and Sale. –
authorized representative shall, within xxx
thirty (30) days after execution of the
distraint, proceed with the levy on the real At any time before the day fixed for the sale,
property of the importer. the taxpayer may discontinue all
proceedings by paying the taxes, penalties
Within ten (10) days after receipt of the and interest.
warrant, a report on any levy shall be
submitted by the levying officer to the Assignment:
Commissioner; Provided, That the Cases which will answer this bar question: what
Commissioner may lift such warrants of levy may constitute decisions of the BIR appealable to
issued, subject to the rules and regulations the CTA?
promulgated pursuant to this Act. 1. Republic v. Lim Tian Teng Sons, 16 SCRA 584
2. Surigao Electric v. CA, 57 SCRA 523
Distraint v. Levy 3. Commissioner v. Ayala Securities
DISTRAINT LEVY Corporation, 70 SCRA 204
Involves Real Involves Personal 4. Yabes v. Flojo, 115 SCRA 278
Property; Property; 5. Commissioner v. Advertising Associates, 133
May be Actual or No such thing as SCRA 765
Constructive; constructive Levy;
6. Commissioner v. Algue, 158 SCRA 9
Requires posting; Requires publication;
7. Commissioner v. Union Shipping Lines, 185
SCRA 547
Q: How is constructive distraint effected?
8. Commissioner v. Isabela Cultural
A: The constructive distraint of personal property
Corporation, 361 SCRA 71
shall be effected by requiring the taxpayer or any
9. Oceanic Wireless Network, Inc. v.
person having possession or control of such
Commissioner, 477 SCRA 205
property to sign a receipt covering the property
10. Allied Banking Corporation v.
distrained and obligate himself to preserve the
Commissioner, 611 SCRA 692
same intact and unaltered and not to dispose of the
I will ask you one or two liner on the
same, in any manner whatever, without the
jurisprudential ruling of the court.
express authority of the Commissioner. [82]

--xXx--
Q: When can the BIR resort to constructive
distraint?
A: To safeguard the interest of the Government, the
Commissioner may place under constructive
distraint the property of any taxpayer:
1. When he is retiring from any business
subject to tax;
2. When he is intending to leave the
Philippines;
3. When he is intending to remove his
property therefrom or to hide or conceal
his property; or
4. When he is intending to perform any act
tending to obstruct the proceedings for
collecting the tax due or which may be due
from him. (Section 206, NIRC)

82
Section 206, NIRC.

Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos 35

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Smuggled notes - DIMAAMPAO (2019)

Q: When do you file?

TAX REMEDIES
A: Within 30 days from the date of payment of
PART II
taxes.

Preliminary Assessment
Protest under the NIRC
Q: Is preliminary assessment notice required?
Q: What must be protested? A: Yes. The sending of a Preliminary Assessment
A: The final assessment notice or final letter of Notice (PAN) to taxpayer to inform him of the
demand assessment made is but part of the due process
requirement in the issuance of a Deficiency Tax
Q: Is notice of informal conference under Rev. Assessment, the absence of which renders
Reg. 12-1999 required? nugatory any assessment by the tax authorities.
A: YES.
Q: What is the prescriptive period to respond?
Q: Is notice of informal conference under Rev. A: 15 days from receipt of PAN.
Reg. 18-2013 required?
A: NO LONGER REQUIRED. Q: When there is no response given within 15
days, what will happen?
Q: What do you file? A: The BIR will issue the Final Assessment Notice
A: Request for reinvestigation or reconsideration (FAN) or Final Letter of Demand (FLD).

Q: Where do you file your protest under Income Reinvestigation v. Reconsideration

Tax?
A: BIR. REQUEST FOR REQUEST FOR
REINVESTIGA RECONSIDERA
Q: When do you file? TION TION
A: Within 30 days from receipt of the final Newly
assessment notice or final letter of demand. Basis discovered Existing records
evidence
Protest under the Local Government Code Suspensi
(Section 195) on of
Allowed
prescript Not allowed
Q: Where do you file? (Section 228)
ive
A: Local treasurer period

Q: When do you file? Q: What is the reason why request for

A: Within 60 days from receipt of the local tax reinvestigation suspends the running of
assessment. prescriptive period?
A: If both suspend the running of prescriptive
Protest under Real Property Tax period, then an erroneous assessment may never
(Section 252) prescribe.

Q: What do you file? General rule: PAN must first be sent before FAN.
A: Payment under protest is required.
Exceptions;
Q: Where do you file?
A: Local treasurer.

Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos 36

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Smuggled notes - DIMAAMPAO (2019)
1. When the finding for any deficiency tax is
the result of mathematical error in the
computation of the tax as appearing on the
face of the return; or
2. When a discrepancy has been determined
between the tax withheld and the amount
actually remitted by the withholding
agent; or
3. When a taxpayer who opted to claim a
refund or tax credit of excess creditable
withholding tax for a taxable period was
determined to have carried over and
automatically applied the same amount
claimed against the estimated tax
liabilities for the taxable quarter or
quarters of the succeeding taxable year; or
4. When the excise tax due on excisable
articles has not been paid; or
5. When the article locally purchased or
imported by an exempt person, such as,
but not limited to, vehicles, capital
equipment, machineries and spare parts,
has been sold, traded or transferred to
non-exempt persons.[83]
Q: What is the purpose of PAN?
A: To rectify the amount. The taxpayer is given
chance to explain why PAN is erroneous.
Q: Why are there 5 exceptions?
A: The ratio decidendi is that in the 5 exceptions,
the BIR can easily rectify the assessment.
Q: Who can issue PAN?
A: BIR and its duly authorized representative
Q: Who are the duly authorized representatives?
A: Regional Revenue Directors.
Q: What is the purpose of the 60-day period after
filing the administrative protest?
A: It is required in request for reinvestigation
where relevant supporting documents shall be
submitted.
Q: Does this apply to reconsideration?
A: NO.
83 Section 228, NIRC.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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Q: What is the 180-day period?
A: It is the period of inaction on the part of BIR. The
taxpayer will have the option to either;
1. File a petition for review under Rule 42
within 30 days after the lapse of 180-day
period; or
2. Await the final decision of the
Commissioner of Internal Revenue.
Q: What happens if there is a decision by the
Commissioner?
A: If there is a decision, the taxpayer may opt to;
1. Appeal to the CTA within 30 days from
receipt of the decision ;or
2. File a request for reinvestigation within 30
days from receipt.
Tax Refund
Tax refund v. Tax credit
Tax credit is not synonymous with tax refund.
Tax refund is defined as the money that a taxpayer
overpaid and is thus returned by the taxing
authority.
Tax credit, on the other hand, is an amount
subtracted directly from one’s total tax liability.
Two Fold purpose of tax refund
The two-fold purpose of the tax refund are as
follows;
1. To afford the collector an opportunity to
correct the action of subordinate officers;
2. To notify the government that such taxes
have been questioned, and the notice
should then be borne in mind in estimating
the revenue available for expenditure;
Q: What is the prescriptive period to file a tax
refund under the NIRC?
A: Under Section 229, the tax refund must be filed
within 2 years from the date of the payment.
Q: Is tax refund available under the Local
Government Code?
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A: YES under Section 196 of the Local Government
Code.
Q: Where do you file the tax refund?
A: The Local Treasurer.
Q: What is the Prescriptive Period?
A: 2 years from the date of payment or from the
time he is entitled thereto.
Justice DIMAAMPAO: You don’t find that in the
NIRC. Under the NIRC sec. 229 is from the date of
payment. Here (LGC) is from the date of payment
or from the time he is entitled thereto. I am talking
about Sec. 196 of RA 7160 of Local Government
Taxation.
Q: What do you think the difference or its legal
implications “from the time he is entitled
thereto”?
A: Under Sec. 229 of the NIRC, it means that the
doctrine of supervening cause or event does not
apply.
Q: Does the doctrine of Supervening event apply
in the Local Government Code?
A: YES. Due to that provision “from the time he is
entitled thereto.”
Example;
For instance, local tax was paid in 2016. In 2017,
there was finding to effect that this taxpayer was
exempt. What’s the reckoning date of the 2-year
period? 2016 or 2017?
2017 is from the time he is entitled thereto. But if it
were a revenue tax, you should count that from the
date of payment.
Q: Is tax refund available to Real property
Taxation?
A: YES. Section 253 allows refund.
Q: What is the Prescriptive period to claim syuch
refund?
A: 2 years from the date of payment or from the
time he is entitled thereto. Therefore, the doctrine
of supervening cause applies.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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Q: Is refund available under the Tariff and
customs Code?
A: YES.
Q: What is the prescription period?
A: Prescription period under Section 193 is Within
12 months from the date of payment of duties and
taxes. This is a new prescriptive period.
Justice DIMAAMPAO: So, it’s 2-2-2 except customs
duties. So, its 12 months or 1 year.
Q: What is the difference between 12 months and
1year?
A: Art. 13 of New Civil Code provides that “It shall
be understood that years are of three hundred
sixty-five days each”. In Administrative Code, a year
is counted 12 months regardless of the number of
the days in each month.
The law says 12 months from the payment of duties
and taxes.
Tax Refund under the NIRC
So Let’s us focus on Sec. 229, we can review here a
lot of jurisprudence. I hope you recall. I think I cited
38 decisions of the court from page 225 to 242.
Some of them has already asked in the bar exam.
With that number of cases, this serve as a notice of
you that this is the most favorite bar question next
to protest.
Q: What are the requisites for a tax refund under
the NIRC?
A: The requisites are as follows;
1. There must be a written claim for refund
filed by the taxpayer with the
commissioner;
2. The claim for refund must be a categorical
demand for reimbursement;
3. The claim for refund must be filed within
two years from date of payment of the tax
or penalty regardless of any supervening
cause;
Q: What do you mean when you say “categorical
demand”?
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A: Since you are requesting for a refund, therefore,
demand for reimbursement of taxes illegally,
erroneously, unlawfully or excessively assessed or
collected.
Q: Under Section 229 of the NIRC, who shall file
such refund?
A: It is the Tax Payer.
Bar Question.
I think it was asked 5 times already.
Q: may a withholding agent file a written claim
for refund?
A: YES. The withholding agent is not only the agent
of the government. It is also an agent of the
taxpayer. As an agent of the taxpayer, the
withholding agent has two fold duties to pay the tax
and to file the return. So with that obligation to pay
the tax, the withholding agent is technically
considered as taxpayer. Withholding agent has the
legal obligation to file the return of the taxpayer to
pay the tax of the taxpayer as such withholding
agent technically considered as taxpayer. That is
the jurisprudence there.
In 1988, there were two conflicting decisions of the
Court, The Proctor & Gamble Case and the Wander
Case. In the Wander Case, Yes, but in Proctor &
Gamble Case, No. But it has been reconciled by the
Supreme Court. The prevailing jurisprudence now
is that the withholding agent may file a claim for tax
refund.
That case that I cited to your book on page 225 on
the case of Commissioner vs. TMX Sales 25 SCRA 184
what asked not less than 5 times in the bar exams.
That is the case explains the meaning of "date of
payment".
Now from the date of payment, what do you mean
by payment? What is the jurisprudence there in
"Date of Payment"? When there is payment in
contemplation of law? Or recall what you learn in
civil law. That’s why civil law in the suppletory law.
When there is payment? Do you recall the three
characteristics of payment? Identity of Payment,
Integrity of Payment and Indivisibility of Payment.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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Which one is clearly applicable to you? Because
that decision is deficient. It should have cited the
payment under the provision of the civil code.
From there, corporate taxpayer was the one
making filing such refund.
Q: Now, when do you apply that the reckoning
date of 2 year period?
A: From the filing of the Final Adjustment
Corporate return where you read sec. 76, NIRC.
There can be payment in contemplation of law
upon the filing of final adjustment corporate
return.
Justice DIMAAMPAO: Remember that corporate
taxpayers file their corporate income tax returns
on quarterly. For instance, excessive payment or
erroneous payment or illegal payment of the
payment of the first quarterly return. So, payment
was made there. Will you count the 2 year period
from the first quarterly return?
Justice DIMAAMPAO: There is no payment in the
contemplation of the law but a partial payment. In
partial payment, there is no payment at all under
the civil code.
There will only be payment when there is Integrity,
when there is a final payment.
Q: In case of a leap year, which will prevail; the
Civil Code or the Administrative Code?
A: The Administrative Code. Lex posterior derogat
prior. It means that recent law prevails over prior
law. The prior law must yield to recent law
otherwise. The recent law is the 1987
Administrative Code. That is you’re your reason
why.
Justice DIMAAMPAO: As the case of CIR v.
Primetown property group, Inc., 531 SCRA 436,
supposed that leap year intervene, there is a
problem now because there seems to be a conflict
between the Civil Code and the 1987
Administrative code. Under the Civil Code, a year
consists of 365 days and how about the declaration
of 1 year in the 1987 Administrative Code? In Sec.
31, Chapter 7, Book I of the Administrative Code
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provides a year is composed of 12 calendar Q: What does jurisdictional mean?

months. A: It means that you cannot appeal to the CTA
before the lapse of that.
Section 112 v. Section 229
SECTION 229 SECTION 112 Justice DIMAAMPAO: But now, the period It is no
Involves longer mandatory and jurisdictional. There is no
internal provision to appeal after the expiration of the
Revenue Tax Covers refund period. There is no provision similar to from NIRC
As to the Tax such as of Value- to the TRAIN act. With that amended provision, the
involve; Income tax Added Tax; ruling of the court is deemed abandoned that it is
other than mandatory and jurisdictional.
Value added
tax; Sec 112, of the NIRC prior to the Train Law, reads;
The running
of the 2-year xxx
period
commence to (D) Period within which Refund or Tax
run from the Credit of Input Taxes shall be Made. - In
date of The running proper cases, the Commissioner shall
payment. In of the 2-year grant a refund or issue the tax credit
the case of period runs certificate for creditable input taxes
As to the corporate from the close within one hundred twenty (120) days
Prescriptive taxpayer, the of the taxable from the date of submission of compete
Period; running of the quarter which documents in support of the
2-year period such sales application filed in accordance with
commence to were made; Subsections (A) and (B) hereof.
run from the
date of filing In case of full or partial denial of the
of the final claim for tax refund or tax credit, or the
adjustment failure on the part of the Commissioner
corporate to act on the application within the
return; period prescribed above, the taxpayer
As amended affected may, within thirty (30) days
by the TRAIN from the receipt of the decision denying
Law, within the claim or after the expiration of the
Period for There is no one hundred twenty day-period (120),
ninety (90)
the BIR to period for the appeal the decision or the unacted
days from the
render a BIR to render claim with the Court of Tax Appeals
date of
decision; a decision; (emphasis supplied)
submission of
compete
documents; xxx

Section 112 On the other hand, Section 112 of the NIRC, as

amended by the TRAIN Law read;
Q: Is the 90 day period in Section112 mandatory
and jurisdictional? xxx
A: NO. It is no longer mandatory and jurisdictional.

Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos 40

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Smuggled notes - DIMAAMPAO (2019)
(C) Period within which Refund of Input
Taxes shall be Made— In proper cases,
the Commissioner shall grant a refund
for creditable input taxes within ninety
(90) days from the date of submission
of the official receipts or invoices and
other documents in support of the
application filed in accordance with
Subsections (A) and (B) hereof:
Provided, That should the
Commissioner find that the grant of
refund is not proper, the Commissioner
must state in writing the legal and
factual basis for the denial.
In case of full or partial denial of the
claim for tax refund, the taxpayer
affected may, within thirty (30) days
from the receipt of the decision denying
the claim, appeal the decision with the
Court of Tax Appeals: Provided,
however, That failure on the part of any
official, agent, or employee of the BIR to
act on the application within the ninety
(90)-day period shall be punishable
under Section 269 of this Code.
xxx
New Rules according to Section 112 as
amended by the TRAIN law;
1. The prescriptive period within which the
CIR shall grant a refund for creditable
input tax is ninety (90) days from the
submission of the official receipts or
invoices and other documents in support
of the application therefore;
2. In case the CIR finds the refund improper,
he must state in writing the legal and
factual basis for the denial;
3. The taxpayer aggrieved may within thirty
(30) days from receipt of the CIR decision
denying the claim, appeal the decision
with the Court of Tax appeals;
4. Any official, agent, or employee of the BIR
who fails to act on the application within
84 Dimaampao, Tax Principles and Remedies, 2018,
p.265.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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the ninety (90) day period shall be
punishable under Section 269; [84]
Q: What is the 30-day period under Section 112?
A: In case of full or partial denial of the claim for tax
refund, the taxpayer affected may, within thirty
(30) days from the receipt of the decision denying
the claim, appeal the decision with the Court of Tax
Appeals.
Q: What is the 90-day period under Section 112?
A: In proper cases, the Commissioner shall grant a
refund for creditable input taxes within ninety (90)
days from the date of submission of the official
receipts or invoices and other documents in
support of the application.
Q: If the decision has been rendered by the BIR
within the 90-day period, what is the remedy of
the taxpayer?
A: The remedy is to file such petition for review on
the BIR’s decision on the Value Added Tax to Court
of Tax Appeals.
Requisites
For claiming unutilized/excess VAT, except
transitional input vat, are as follows;
1. The taxpayer-claimant is VAT-registered;
2. The taxpayer-claimant is engaged in zero-
rated or effectively zero-rated sales;
3. There are creditable input taxes due or
paid attributable to the zero-rated or
effectively zero-rated sales;
4. The input tax has not been applied against
the output tax;
5. The application and claim for refund have
been filed within the prescribed period; [85]
Section 229
Section 229. Recovery of Tax
Erroneously or Illegally Collected. - no
suit or proceeding shall be maintained
in any court for the recovery of any
national internal revenue tax hereafter
alleged to have been erroneously or
85 CIR v. Toledo Power Company, 765 SCRA 511
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Smuggled notes - DIMAAMPAO (2019)
illegally assessed or collected, or of any
penalty claimed to have been collected
without authority, of any sum alleged
to have been excessively or in any
manner wrongfully collected without
authority, or of any sum alleged to have
been excessively or in any manner
wrongfully collected, until a claim for
refund or credit has been duly filed with
the Commissioner; but such suit or
proceeding may be maintained,
whether or not such tax, penalty, or
sum has been paid under protest or
duress.
In any case, no such suit or proceeding
shall be filed after the expiration of two
(2) years from the date of payment of
the tax or penalty regardless of any
supervening cause that may arise after
payment: Provided, however, That the
Commissioner may, even without a
written claim therefor, refund or credit
any tax, where on the face of the return
upon which payment was made, such
payment appears clearly to have been
erroneously paid.
Q: What is the 30-days period in Section 229?
A: The period to appeal the BIR’s decision from the
receipt of said decision, or from the lapse of the 180
day period for the submission of documents. [86]
Under the Rules of Court of the Tax Appeals, there
is under Rule 4, it’s been there that there are two
period that must be observed.
Q: What are these two periods?
A: The 30-days period and the 2 years period.
Q: What is the 2-year period under Section 229?
A: The suit must be filed within 2 years from the
date of payment of the tax or penalty regardless of
86 The 30-day period is under Section 228; xxx 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 thirty (30) days from
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
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any supervening cause that may arise after
payment.
Justice DIMAAMPAO: The appeal of the decision
of the BIR for refund to the CTA must observed
these two periods. One, it must be filed within 30
days from the receipt of the decision and it must
also within 2 years from the date of payment.
Q: Is the 2 year period available in Section 112?
A: NO. Under Section 112, (Last Paragraph), There
is only one period must be observed.
Justice DIMAAMPAO: That why in your bar, you
check the subject tax is a value added tax, income
tax, donor’s tax or other revenue taxes.
The court construed that there is only one period
in the appeal of the decision of the BIR involving
refund of Value added tax. The only remedy is 30
days from the receipt of such decision.
Q: may the 2-year period be suspended by an
intervening cause?
A: NO. These 2-year period must be observed and
cannot be suspended by any supervening cause.
Q: Is there an exception to the rule?
A: YES. In case of CIR v. Philamlife [87] and CIR v.
PNB, [88] the 2 year period may be suspended based
on these two equitable and principle grounds;
1. Assurance on the part of the BIR that steps
were being taken to credit taxpayer with
the amount sought to be refunded;
2. An agreement or understanding with the
BIR that they await the result of a pending
case involving similar issue raised in the
claim for refund;
Q: Why equitable consideration?
A: Because the assurance of the BIR is bound by the
equitable principle of estoppel.
receipt of the said decision, or from the lapse of one hundred
eighty (180)-day period; otherwise, the decision shall become
final, executory and demandable.
87 G.R. No. 105208. May 29, 1995.
88 G.R. No. 161997 October 25, 2005
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Understand before you memorize. If you
understood what the Supreme Court Said, that the
time you memorize that.
CASES
Republic v. Lim Tan Tieng
(G.R. No. L-21731. March 31, 1966)
FACTS: Lim Tian Teng Sons & Co., Inc., a domestic corporation
engaged in the exportation of copra in the year 1951 and 1952.
The copra was weighed before shipment in the port of
departure, called copra outturn, and upon arrival in the port of
destination.
On March 30, 1953 Lim Tian Teng Sons & Co., Inc. filed its
income tax return for 1952 based on accrued income and
expenses. Its return showed a loss of P56,109.98. It took up as
part of the beginning inventory for 1952 the copra outturn
shipped in 1951 in the sum of P95,500.00 already partially
collected, as part of its outstanding stock as of December 31,
1951.
In the audit and examination of taxpayer's 1952 income tax
return, the Collector of Internal Revenue eliminated the
P95,500.00 outturn from the beginning inventory for 1952 and
considered it as accrued income for 1951 which increased
taxpayer's 1952 net income by P95,500.00 and raised the
taxpayer's net taxable income for 1952 to P50,370.87.
The Collector of Internal Revenue assessed a deficiency income
tax of P10,074.00 and 50% surcharge thereon amounting to
P5,037.00.
On January 31, 1957 Lim Tian Teng Sons & Co., Inc. requested
reinvestigation of its 1952 income tax liability. The Collector of
Internal Revenue did not reply; instead, he referred the case to
the Solicitor General for collection by judicial action.
Lim Tian Teng Sons & Co., Inc. reiterated its request for
reinvestigation. Thereupon, the Deputy Collector of Internal
Revenue, informed the taxpayer that its request for
reinvestigation would be granted provided it executed within
ten days a waiver of the statute of limitations.
As Lim Tian Teng Sons & Co., Inc. failed to file a waiver of the
statute of limitations, the Collector of Internal Revenue
instituted eight months after an action in the Court of First
Instance of Cebu for the collection of deficiency income tax.
Plaintiff maintains that the lower court has no jurisdiction to
entertain this case on the ground that the Collector of Internal
Revenue has not yet issued his final decision on its requests for
reinvestigation. The taxpayer's stand is that final decision of the
Collector of Internal Revenue on the disputed assessment is a
condition precedent to the filing of an action in the Court of First
Instance for the collection of a tax.
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ISSUE: whether or not the assessment contained in the letter of
the Collector of Internal Revenue is final and executory.
HELD: YES. Said court, to our mind, committed no error. For
what is more indicative of the Collector's decision against
reinvestigation than his insistence to collect the tax?
On October 15, 1957 the Collector of Internal Revenue wrote
defendant that its "request for a reinvestigation will be granted
only upon compliance with General Circular No. V-258 dated
August 20, 1957, which requires as a prerequisite to the grant
of a reinvestigation the execution of a waiver of the statute of
limitations". In a subsequent letter, he extended the period
within which to submit the aforesaid waiver to December 31,
1957.
In effect, the Collector of Internal Revenue placed in the hands
of the defendant the holding of a reinvestigation. However, no
such reinvestigation was made inasmuch as taxpayer failed to
submit a written waiver of the statute of limitations on or before
December 31, 1957. Such omission automatically brought about
the denial of the request for reinvestigation.
Surigao Electric co. v. CTA
G.R. No. L-25289. June 28, 1974
FACTS: The petitioner Surigao Electric Co., Inc., grantee of a
legislative electric franchise, received a warrant of distraint and
levy to enforce the collection from "Mainit Electric" of a
deficiency franchise tax plus surcharge in the total amount of
P718.59. In a letter to the Commissioner of Internal Revenue,
the petitioner contested this warrant, stating that it did not have
a franchise in Mainit, Surigao.
Thereafter the Commissioner advised the petitioner to take up
the matter with the General Auditing Office. In a letter to the
Auditor General, the petitioner asked for reconsideration of the
assessment, admitting liability only for the 2% franchise tax in
accordance with its legislative franchise and not at the higher
rate of 5% imposed by section 259 of the National Internal
Revenue Code, as amended, which latter rate the Auditor
General used as basis in computing the petitioner's deficiency
franchise tax.
The controversy culminated in a revised assessment in the
amount of P11,533.53, representing the petitioner's deficiency
franchise-tax and surcharges thereon for the period from April
1, 1956 to June 30, 1959. The petitioner then requested a
recomputation of the revised assessment. The Commissioner,
however, denied the request for recomputation.
On August 1, 1963 the petitioner appealed to the Court of Tax
Appeals. The tax court dismissed the appeal on October 1, 1965
on the ground that the appeal was filed beyond the thirty-day
period of appeal provided by section 11 of Republic Act 1125.
ISSUE: whether or not the petitioner's appeal to the Court of Tax
Appeals was time-barred.
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Smuggled notes - DIMAAMPAO (2019)
HELD: YES. A close reading of the numerous letters exchanged
between the petitioner and the Commissioner clearly discloses
that the letter of demand issued by the Commissioner
constitutes the definite determination of the petitioner's
deficiency franchise tax liability or the decision on the disputed
assessment and, therefore, the decision appealable to the tax
court.
Moreover, the letter of demand dated April 29, 1963
unquestionably constitutes the final action taken by the
Commissioner on the petitioner's several requests for
reconsideration and recomputation. In this letter, the
Commissioner not only in effect demanded that the petitioner
pay the amount of P11,533.53 but also gave warning that in the
event it failed to pay, the said Commissioner would be
constrained to enforce the collection thereof by means of the
remedies provided by law. The tenor of the letter, specifically,
the statement regarding the resort to legal remedies,
unmistakably indicates the final nature of the determination
made by the Commissioner of the petitioner's deficiency
franchise tax liability.
To sustain the petitioner's contention that the Commissioner's
letter of June 28, 1963 denying its request for further
amendment of the revised assessment constitutes the ruling
appealable to the tax court and that the thirty-day period
should, therefore, be counted from July 16, 1963, the day it
received the June 28, 1963 letter, would, in effect, leave solely to
the petitioner's will the determination of the commencement of
the statutory thirty-day period, and place the petitioner — and
for that matter, any taxpayer — in a position, to delay at will and
on convenience the finality of a tax assessment. This absurd
interpretation espoused by the petitioner would result in grave
detriment to the interests of the Government, considering that
taxes constitute its life-blood and their prompt and certain
availability is an imperative need.6
The revised assessment embodied in the Commissioner's letter
dated April 29, 1963 being, in legal contemplation, the final
ruling reviewable by the tax court, the thirty-day appeal period
should be counted from May 8, 1963 (the day the petitioner
received a copy of the said letter). From May 8, 1963 to June 7,
1963 (the day the petitioner, by registered mail, sent to the
Commissioner its letter of June 6, 1963 requesting for further
recomputation of the amount demanded from it) saw the lapse
of thirty days. The June 6, 1963 request for further
recomputation, partaking of a motion for reconsideration, tolled
the running of the thirty-day period from June 7, 1963 (the day
the petitioner sent its letter by registered mail) to July 16, 1963
(the day the petitioner received the letter of the Commissioner
dated June 28, 1963 turning down its request). The prescriptive
period commenced to run again on July 16, 1963. The petitioner
filed its petition for review with the tax court on August 1, 1963
— after the lapse of an additional sixteen days. The petition for
review having been filed beyond the thirty-day period, we rule
that the Court of Tax Appeals correctly dismissed the same.
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CIR v. Ayala Securities Corp.
G.R. No. L-29485. March 31, 1976
FACTS: On November 29, 1955, respondent Ayala Securities
Corporation filed its income tax returns for its fiscal year which
ended on September 30, 1955 which showed a surplus of
P2,758,442.37. The income tax due on the return of the
respondent corporation was duly paid for within the time
prescribed by law.
In a letter dated February 21, 1961, petitioner advised the
respondent corporation of the assessment of P758.687.04 on its
accumulated surplus reflected on its income tax return. The
respondent corporation protested against the assessment and
sought reconsideration thereof for the reasons (1) that the
accumulation of the surplus was for a bona fide business
purpose and not to avoid the imposition of income tax on the
individual shareholders, and (2) that the said assessment was
issued beyond the five-year prescriptive period.
On May 30, 1961, petitioner wrote respondent corporation's
auditing and accounting firm with the "advise that your request
for reconsideration will be the subject matter of further
reinvestigation and a thorough analysis of the issues involved
conditioned, however, upon the execution of your client of the
enclosed form for waiver of the defense of prescription". However,
respondent corporation did not execute the requested waiver of
the statute of limitations.
On February 21, 1963, respondent corporation received a letter
dated February 18, 1963, from the Chief, Manila Examiners, of
the Office of the herein petitioner, requesting for the payment of
its outstanding and unpaid tax in the amount of P708,687.04.
Believing the aforesaid letter to be a denial of its protest, the
herein respondent corporation filed with the Court of Tax
Appeals a Petition for Review of the assessment.
After trial the Court of Tax Appeals rendered its decision
reversing the decision of the respondent Commissioner of
Internal Revenue assessing petitioner the amount of
P758,687.04 as surtax.
From this decision, the Commissioner of Internal Revenue
interposed this appeal. Petitioner maintains that respondent
Court of Tax Appeals erred in holding that the letter dated
February 18, 1963, is a denial of the private respondent
corporation's protest against the assessment. Petitioner
contends that the letter dated February 18, 1963, is merely an
ordinary office letter designed to remind delinquent taxpayers
of their obligations to pay their taxes to the Government and,
certainly, not a decision on a disputed or protested assessment
contemplated under Section 7(1) of R.A. 1125.
ISSUE: Whether the letter dated February 18, 1963 is a decision
on a disputed protest.
HELD: YES. It is to be noted that the respondent Court of Tax
Appeals is a court of special appellate jurisdiction created under
R. A. No. 1125. Thus under Section 7 (1), R. A. 1125, the Court of
Tax Appeals exercises exclusive appellate jurisdiction to review
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Smuggled notes - DIMAAMPAO (2019)
by appeal "decisions of the Collector of Internal Revenue in
cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in
relation thereto, or other matters arising under the National
Internal Revenue Code or other law or part of law administered
by the Bureau of Internal Revenue".
The letter of February 18, 1963 (Exh. G), in the view of the Court,
is tantamount to a denial of the reconsideration or protest of the
respondent corporation on the assessment made by the
petitioner, considering that the said letter is in itself a
reiteration of the demand by the Bureau of Internal Revenue for
the settlement of the assessment already made, and for the
immediate payment of the sum of P758, 687.04 in spite of the
vehement protest of the respondent corporation on April 21,
1961. This certainly is a clear indication of the firm stand of
petitioner against the reconsideration of the disputed
assessment in view of the continued refusal of the respondent
corporation to execute the waiver of the period of limitation
upon the assessment in question.
This being so, the said letter amounts to a decision on a disputed
or protested assessment and, therefore, the court a quo did not
err in taking cognizance of this case.
Yabes v. Flojo
G.R. No. L-46954 July 20, 1982
FACTS: Doroteo Yabes of Calamaniugan Cagayan was an
exclusive dealer of products of the International Harvester
Macleod, Inc. He received on or about May 1, 1962, a letter from
the Commissioner of Internal Revenue dated March 27, 1962,
demanding payment of the amount of P15,976.81, as
commercial broker's fixed and percentage taxes plus surcharges
and the sum of P2,530 as compromise penalty alledgely due
from Yabes for the years 1956-1960.
Doroteo Yabes, protested the assessment on the ground that his
agreements with the International Harvester Macleod, Inc. were
of purchase and sale, and not of agency, hence he claimed he was
not able to pay such kind of taxes.
Yabes requested for the reinvestigation, or review of the case by
the appellate division of the Bureau of Internal Revenue. In
reply, the Commissioner informed Doroteo Yabes that his
request for reinvestigation was denied on the ground that he
has "not submitted any evidence to offset the findings of this
Office as to warrant a reinvestigation thereof".
Eight days later, the Commissioner advised Yabes that "the
administrative appeal will be held in abeyance pending the
resolution of the issues in a similar case. To give time for the
Commissioner to study the case, Yabes filed a tax waiver on
October 20, 1962, extending the period of prescription to
December 31, 1967. Doroteo Yabes died on March 13, 1963. The
petitioners are the children of the deceased taxpayer.
After a lapse of about five years, the heirs of the deceased
Doroteo Yabes received on August 4, 1967, a letter from the
Commissioner dated July 27, 1967, requesting that they "waive
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
anew the Statute of Limitations". Conformably with the request
of the Commissioner, the heirs of Doroteo Yabes filed a revised
waiver further extending the period of prescription to
December 31, 1970.
On January 20, 1971, petitioners as heirs of the deceased
Doroteo Yabes received the summons and a copy of the
complaint filed by the Commissioner on December 4, 1970 with
the Court of First Instance of Cagayan which seeks to collect
from the petitioners the sum of P 15,976.82, as deficiency
commercial broker's fixed and percentage taxes.
Taking the complaint as the final decision of the Commissioner,
petitioners filed on February 12, 1971, a petition for review of
said disputed assessment with the Court of Tax Appeals; later
on the same day, February 12, 1971, petitioners filed their
answer to the complaint of the Commissioner before the Court
of First Instance of Cagayan; and alleged therein, by way of
special defense, that the Court of Tax Appeals has exclusive
jurisdiction of the action and that there is another action of the
same nature between the parties relating to the same
assessment pending before the Court of Tax Appeals.
ISSUE: whether or not the assessment made by the
Commissioner of Internal Revenue against the deceased
taxpayer Doroteo Yabes, as contained in the letter dated March
27, 1962, has become final and executory and incontestable.
HELD: YES.There is no reason for Us to disagree from or reverse
the Court of Tax Appeals' conclusion that under the
circumstances of this case, what may be considered as final
decision or assessment of the Commissioner is the filing of the
complaint for collection in the respondent Court of First
Instance of Cagayan, the summons of which was served on
petitioners on January 20, 1971, and that therefore the appeal
with the Court of Tax Appeals in CTA Case No. 2216 was filed on
time.
The respondent Court of First Instance of Cagayan can only
acquire jurisdiction over this case filed against the heirs of the
taxpayer if the assessment made by the Commissioner of
Internal Revenue had become final and incontestable. If the
contrary is established, as this Court holds it to be, considering
the aforementioned conclusion of the Court of Tax Appeals on
the finality and incontestability of the assessment made by the
Commissioner is correct, then the Court of Tax Appeals has
exclusive jurisdiction over this case.
Petitioners received the summons in Civil Case No. II-7 of the
respondent Court of First Instance of Cagayan on January 20,
1971, and petitioners filed their appeal with the Court of Tax
Appeals in CTA Case No. 2216, on February 12, 1971, well within
the thirty-day prescriptive period under Section 11 of Republic
Act No. 1125. The Court of Tax Appeals has exclusive appellate
jurisdiction to review on appeal any decision of the Collector of
Internal Revenue in cases involving disputed assessments and
other matters arising under the National Internal Revenue Code.
For want of jurisdiction over the case, the Court of First Instance
of Cagayan should have dismissed the complaint.
Advertising Assoc. v. CA
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G.R. No. L-59758 December 26, 1984 filed out of time. It was dismissed. The taxpayer appealed to this
Court.
FACTS: Advertising Associates alleged that it sold in 1949 its
advertising agency business to Philippine Advertising Issue: Whether or not the petition for Review was filed on time.
Counsellors, that its business is limited to the making,
construction and installation of billboards and electric signs and HELD: YES. No amount of quibbling or sophistry can blink the
making and printing of posters, signs, handbills, etc. It contends fact that said letter, as its tenor shows, embodies the
that it is a media company, not an advertising company, Commissioner's final decision within the meaning of section 7
of Republic Act No. 1125. The Commissioner said so. He even
It paid sales taxes for selling billboards, electric signs, calendars, directed the taxpayer to appeal it to the Tax Court.
posters, etc., realty dealer's tax for leasing billboards and
electric signs and 3% contractor's tax for repairing electric The directive is in consonance with this Court's dictum that the
signs. Commissioner should always indicate to the taxpayer in clear
and unequivocal language what constitutes his final
The Commissioner required Advertising Associates to pay determination of the disputed assessment. That procedure is
P297,927.06 and P84,773.10 as contractor's tax for 1967-1971 demanded by the pressing need for fair play, regularity and
and 1972, respectively, including 25% surcharge (the latter orderliness in administrative action.
amount includes interest) on its income from billboards and
neon signs.
CIR v. Algue
G.R. No. L-28896 February 17, 1988
The basis of the assessment is the fact that the taxpayer's
articles of incorporation provide that its primary purpose is to
FACTS: The record shows that on January 14, 1965, the private
engage in general advertising business. Its income tax returns
respondent, a domestic corporation engaged in engineering,
indicate that its business was advertising.
construction and other allied activities, received a letter from
the petitioner assessing it in the total amount of P83,183.85 as
Advertising Associates contested the assessments in its 'letters
delinquency income taxes for the years 1958 and 1959.
of June 25, 1973 (for the 1967-71 deficiency taxes) and March
7, 1974 (for the 1972 deficiency). The Commissioner reiterated
On January 18, 1965, Algue flied a letter of protest or request
the assessments in his letters of July 12 and September 16,1974.
for reconsideration, which letter was stamp received on the
same day in the office of the petitioner.
The taxpayer requested the cancellation of the assessments in
its letters of September 13 and November 21, 1974.
On March 12, 1965, a warrant of distraint and levy was
Inexplicably, for about four years there was no movement in the
presented to the private respondent, through its counsel, Atty.
case. Then, on March 31, 1978, the Commissioner resorted to
Alberto Guevara, Jr., who refused to receive it on the ground of
the summary remedy of issuing two warrants of distraint,
the pending protest. A search of the protest in the dockets of the
directing the collection enforcement division to levy on the
case proved fruitless. Atty. Guevara produced his file copy and
taxpayer's personal properties as would be sufficient to satisfy
gave a photostat to BIR agent Ramon Reyes, who deferred
the deficiency taxes. The warrants were served upon the
service of the warrant.
taxpayer on April 18 and May 25, 1978.
On April 7, 1965, Atty. Guevara was finally informed that the BIR
More than a year later, Acting Commissioner Efren I. Plana
was not taking any action on the protest and it was only then
wrote a letter justifying the assessments by stating that the
that he accepted the warrant of distraint and levy earlier sought
rental income of Advertising Associates from billboards and
to be served. Sixteen days later, on April 23, 1965, Algue filed a
neon signs constituted fees or compensation for its advertising
petition for review of the decision of the Commissioner of
services. He requested the taxpayer to pay the deficiency taxes
Internal Revenue with the Court of Tax Appeals.
within ten days from receipt of the demand; otherwise, the
Bureau would enforce the warrants of distraint. He closed his
ISSUE: Whether or not the petition was seasonably filed.
demand letter with this paragraph:
HELD: YES. The above chronology shows that the petition was
“This you may appeal to the Court of Tax Appeals within 30 days
filed seasonably. According to Rep. Act No. 1125, the appeal may
from receipt of this letter constitutes our final decision on the
be made within thirty days after receipt of the decision or ruling
matter. If you are not agreeable.”
challenged. It is true that as a rule the warrant of distraint and
levy is "proof of the finality of the assessment" and renders
Advertising Associates received that letter on June 18, 1979.
hopeless a request for reconsideration," being "tantamount to
Nineteen days later or on July 7, it filed its petition for review.
an outright denial thereof and makes the said request deemed
rejected." But there is a special circumstance in the case at bar
The Tax Court did not resolve the case on the merits. It ruled
that prevents application of this accepted doctrine.
that the warrants of distraint were the Commissioner's
appealable decisions. Since Advertising Associates appealed
The proven fact is that four days after the private respondent
from the decision of May 23, 1979, the petition for review was
received the petitioner's notice of assessment, it filed its letter

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Smuggled notes - DIMAAMPAO (2019)
of protest. This was apparently not taken into account before
the warrant of distraint and levy was issued; indeed, such
protest could not be located in the office of the petitioner. It was
only after Atty. Guevara gave the BIR a copy of the protest that
it was, if at all, considered by the tax authorities. During the
intervening period, the warrant was premature and could
therefore not be served.
As the Court of Tax Appeals correctly noted," the protest filed by
private respondent was not pro forma and was based on strong
legal considerations. It thus had the effect of suspending on
January 18, 1965, when it was filed, the reglementary period
which started on the date the assessment was received, viz.,
January 14, 1965. The period started running again only on
April 7, 1965, when the private respondent was definitely
informed of the implied rejection of the said protest and the
warrant was finally served on it. Hence, when the appeal was
filed on April 23, 1965, only 20 days of the reglementary period
had been consumed.
CIR v. Union Shipping
G.R. No. L-66160. May 21, 1990
FACTS: In a letter dated December 27, 1974 herein petitioner
Commissioner of Internal Revenue assessed against Yee Fong
Hong, Ltd. and/or herein private respondent Union Shipping
Corporation, the total sum of P583,155.22 as deficiency income
taxes due for the years 1971 and 1972. Said letter was received
on January 4, 1975, and in a letter dated January 10, 1975 ,
received by petitioner on January 13, 1975, private respondent
protested the assessment.
Petitioner, without ruling on the protest, issued a Warrant of
Distraint and Levy, which was served on private respondent's
counsel, Clemente Celso, on November 25, 1976. In a letter
dated November 27, 1976, received by petitioner on November
29, 1976 private respondent reiterated its request for
reinvestigation of the assessment and for the reconsideration of
the summary collection thru the Warrant of Distraint and Levy.
Petitioner, again, without acting on the request for
reinvestigation and reconsideration of the Warrant of Distraint
and Levy, filed a collection suit before the Court of First Instance
of Manila against private respondent.
On January 10, 1979, private respondent filed with respondent
court its Petition for Review of the petitioner's assessment of its
deficiency income taxes , wherein it prays that judgment be
rendered holding that it is not liable for the payment of the
income tax herein involved.
Petitioner argues therefore that the period to appeal to the
Court of Tax Appeals commenced to run from receipt of said
warrant on November 25, 1976, so that on January 10, 1979
when respondent corporation sought redress from the Tax
Court, petitioner's decision has long become final and executory
ISSUE: Whether or not the Court of Tax Appeals has jurisdiction
over this case.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
HELD: YES. The main thrust of this petition is that the issuance
of a warrant of distraint and levy is proof of the finality of an
assessment because it is the most drastic action of all media of
enforcing the collection of tax, and is tantamount to an outright
denial of a motion for reconsideration of an assessment. Among
others, petitioner contends that the warrant of distraint and
levy was issued after respondent corporation filed a request for
reconsideration of subject assessment, thus constituting
petitioner's final decision in the disputed assessments
On this issue, this Court had already laid down the dictum that
the Commissioner should always indicate to the taxpayer in
clear and unequivocal language what constitutes his final
determination of the disputed assessment.
There appears to be no dispute that petitioner did not rule on
private respondent's motion for reconsideration but contrary to
the above ruling of this Court, left private respondent in the dark
as to which action of the Commissioner is the decision
appealable to the Court of Tax Appeals. Had he categorically
stated that he denies private respondent's motion for
reconsideration and that his action constitutes his final
determination on the disputed assessment, private respondent
without needless difficulty would have been able to determine
when his right to appeal accrues and the resulting confusion
would have been avoided.
Much later, this Court reiterated the above-mentioned dictum in
a ruling applicable on all fours to the issue in the case at bar, that
the reviewable decision of the Bureau of Internal Revenue is
that contained in the letter of its Commissioner, that such
constitutes the final decision on the matter which may be
appealed to the Court of Tax Appeals and not the warrants of
distraint. It was likewise stressed that the procedure enunciated
is demanded by the pressing need for fair play, regularity and
orderliness in administrative action.
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 v. Isabela Cultural Corporation.
G.R. No. 135210. July 11, 2001
FACTS: On February 23, 1990, respondent received from
petitioner an assessment letter, dated February 9, 1990,
demanding payment of the amounts of P333,196.86 and
P4,897.79 as deficiency income tax and expanded withholding
tax for the taxable period from January 1, 1986 to December
31, 1986. Respondent requested a reconsideration of the
subject assessment with a waiver of Statute of Limitation.
On February 9, 1995, respondent received from petitioner a
Final Notice Before Seizure with a demanded payment of the
subject assessment within ten (10) days from receipt thereof.
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Otherwise, failure on its part would constrain petitioner to
collect the subject assessment through summary remedies.
Petitioner maintains that this Final Notice was a mere
reiteration of the delinquent taxpayer's obligation to pay the
taxes due. It was supposedly a mere demand that should not
have been mistaken for a decision on a protested assessment.
Such decision, the commissioner contends, must
unequivocably indicate that it is the resolution of the
taxpayer's request for reconsideration and must likewise state
the reason therefor.
Respondent, on the other hand, points out that the Final
Notice Before Seizure should be considered as a denial of its
request for reconsideration of the disputed assessment. The
Notice should be deemed as petitioner's last act, since failure
to comply with it would lead to the distraint and levy of
respondent's properties, as indicated therein.
ISSUE: Whether or not the Final Notice constitutes a final
decision of the CIR.
HELD: YES. In the light of the above facts, the Final Notice
Before Seizure cannot but be considered as the
commissioner's decision disposing of the request for
reconsideration filed by respondent, who received no other
response to its request. Not only was the Notice the only
response received; its content and tenor supported the theory
that it was the CIR's final act regarding the request for
reconsideration. The very title expressly indicated that it was
a final notice prior to seizure of property. The letter itself
clearly stated that respondent was being given "this LAST
OPPORTUNITY" to pay; otherwise, its properties would be
subjected to distraint and levy. How then could it have been
made to believe that its request for reconsideration was still
pending determination, despite the actual threat of seizure of
its properties?
Oceanic Wireless v. CIR
G.R. No. 148380 December 9, 2005
FACTS: On March 17, 1988, petitioner received from the
Bureau of Internal Revenue (BIR) deficiency tax assessments
for the taxable year 1984 in the total amount of ₱8,644,998.71.
Petitioner filed its protest against the tax assessments and
requested a reconsideration or cancellation of the same in a
letter to the BIR Commissioner dated April 12, 1988.
BIR reiterated the tax assessments while denying petitioner’s
request for reinvestigation in a letter 1 dated January 24, 1991.
Upon petitioner’s failure to pay the subject tax assessments
within the prescribed period, the Assistant Commissioner for
Collection, acting for the Commissioner of Internal Revenue,
issued the corresponding warrants of distraint and/or levy
and garnishment.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
On November 8, 1991, petitioner filed a Petition for Review to
contest the issuance of the warrants to enforce the collection
of the tax assessments.
ISSUE: is whether or not a demand letter for tax deficiency
assessments issued and signed by a subordinate officer who
was acting in behalf of the Commissioner of Internal Revenue,
is deemed final and executory.
A demand letter for payment of delinquent taxes may be
considered a decision on a disputed or protested assessment.
The determination on whether or not a demand letter is final
is conditioned upon the language used or the tenor of the
letter being sent to the taxpayer.
We laid down the rule that the Commissioner of Internal
Revenue should always indicate to the taxpayer in clear and
unequivocal language what constitutes his final
determination of the disputed assessment.
The rule of conduct would also obviate all desire and
opportunity on the part of the taxpayer to continually delay
the finality of the assessment – and, consequently, the
collection of the amount demanded as taxes – by repeated
requests for recomputation and reconsideration. On the part
of the Commissioner, this would encourage his office to
conduct a careful and thorough study of every questioned
assessment and render a correct and definite decision thereon
in the first instance. This would also deter the Commissioner
from unfairly making the taxpayer grope in the dark and
speculate as to which action constitutes the decision
appealable to the tax court. Of greater import, this rule of
conduct would meet a pressing need for fair play, regularity,
and orderliness in administrative action.10
In this case, the letter of demand dated January 24, 1991,
unquestionably constitutes the final action taken by the
Bureau of Internal Revenue on petitioner’s request for
reconsideration when it reiterated the tax deficiency
assessments due from petitioner, and requested its payment.
Failure to do so would result in the "issuance of a warrant of
distraint and levy to enforce its collection without further
notice."11 In addition, the letter contained a notation
indicating that petitioner’s request for reconsideration had
been denied for lack of supporting documents.
Allied Banking Corp. v. CIR.
G.R. No. 175097 February 5, 2010
FACTS:
On April 30, 2004, the Bureau of Internal Revenue (BIR)
issued a Preliminary Assessment Notice (PAN) to petitioner
Allied Banking Corporation for deficiency Documentary
Stamp Tax (DST) in the amount of ₱12,050,595.60 and Gross
Receipts Tax (GRT) in the amount of ₱38,995,296.76 on
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industry issue for the taxable year 2001.Petitioner filed a
protest against it on May 27, 2004.
On July 16, 2004, the BIR wrote a Formal Letter of Demand
with Assessment Notices to petitioner, which partly reads as
follows:
Besides, any doubt in the interpretation or use of the word
"appeal" in the Formal Letter of Demand with Assessment
Notices should be resolved in favor of petitioner, and not the
respondent who caused the confusion.

It is requested that the above deficiency tax be paid

immediately upon receipt hereof, inclusive of penalties
incident to delinquency. This is our final decision based on
investigation. If you disagree, you may appeal the final
decision within thirty (30) days from receipt hereof, otherwise
said deficiency tax assessment shall become final, executory
and demandable.

ISSUE: whether the Formal Letter of Demand can be

construed as a final decision of the CIR.

HELD: YES. It appears from the foregoing demand letter that

the CIR has already made a final decision on the matter and
that the remedy of petitioner is to appeal the final decision
within 30 days.

In this case, 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.

Moreover, we cannot ignore the fact that in the Formal Letter

of Demand with Assessment Notices, respondent used the
word "appeal" instead of "protest", "reinvestigation", or
"reconsideration". Although there was no direct reference for
petitioner to bring the matter directly to the CTA, it cannot be
denied that the word "appeal" under prevailing tax laws
refers to the filing of a Petition for Review with the CTA. As
aptly pointed out by petitioner, under Section 228 of the
NIRC, the terms "protest", "reinvestigation" and
"reconsideration" refer to the administrative remedies a
taxpayer may take before the CIR, while the term "appeal"
refers to the remedy available to the taxpayer before the CTA.
Section 9 of RA 9282, amending Section 11 of RA 1125,27
likewise uses the term "appeal" when referring to the action a
taxpayer must take when adversely affected by a decision,
--xXx--
ruling, or inaction of the CIR. As we see it then, petitioner in
appealing the Formal Letter of Demand with Assessment
Notices to the CTA merely took the cue from respondent.

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Smuggled notes - DIMAAMPAO (2019)

COMPARATIVE REVIEW OF THE TAXPAYER’S REMEDIES

In case of protest
To whom When to
What to file When to File To whom filed
appealed Appeal
Within 30
days from the
receipt of the
decision of
National Request for Within 30 days
Commissioner the
Internal Reinvestigation from the Court of Tax
of Internal Commissioner
Revenue Code or receipt if the Appeals;
Revenue or 180 days
[89] Reconsideration; assessment;
from the date
of submission
of the
documents;
Within sixty
Within 60 days (60) days
Local
from the Regional Trial from the
Government Written protest; Local Treasurer;
notice of Court; receipt of the
Code [90]
Assessment; notice of
assessment;
Within sixty
Provincial (60) days
within thirty
treasurer, City Board of from the date
Real Property Payment under (30) days from
treasurer or Assessment of receipt of
Tax protest; [91] payment of the
municipal Appeals; [92] the written
tax;
treasurer; notice of
assessment
Within 15
days from the
Within 15 days
receipt of the
Payment under from the date Commissioner Court of Tax
Customs Code notice of
protest; [93] of payment of of Customs; Appeals
decision (Rule
taxes;
42, Rules of
Court)

National Internal
Revenue Code; [94]
Local Government
Code; [95]
Real Property Tax; [96]
Customs Code; [97]
Tax Refund
When to File To whom filed
Commissioner of Internal
Within 2 years from the date of payment;
Revenue
2 years from the date of payment or from the
Local Treasurer;
time he is entitled thereto;
Within two (2) years from the date the Provincial treasurer, City
taxpayer is entitled to such reduction or treasurer or municipal
adjustment; treasurer;
Within 12 months from the date of payment
Commissioner of Customs;
of duties and taxes;

--xXx--

89 Section 228, NIRC.

90 Section 195, Local Government Code.
91 Section 252, Local Government Code.
92 Section 226, Local Government Code.
93 Section 1106,R.A. 10863.
94 Section 229, NIRC.
95 Section 196, Local Government Code.
96 Section 253, Local Government Code.
97 Section 193, tariff and Customs Code.

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SMUGGLED NOTES - DIMAAMPAO(2019)
THE NEW
COURT OF TAX APPEALS
Q: Why is it considered a specialized court?
A: It is tasked to resolves tax issues.
JURISDICTION OF THE CTA
Under R.A. 9282, the CTA has two jurisdictions;
1. Exclusive original jurisdiction; and
2. Appellate jurisdiction;
Exclusive Original Jurisdiction
The Court of Tax Appeals has exclusive original
jurisdiction over the following cases;
1. Criminal cases where the principal amount
of taxes and penalties involve one million
pesos or more arising from the violations
of;
a. NIRC;
b. Tariff and Customs Code;
c. Other laws administered by the
BIR and BOC;
2. Tax collection cases where the principal
amount involve one million pesos or more;
Appellate Jurisdiction
The Court of Tax Appeals has appellate jurisdiction
over the following cases;
1. Decisions of the Regional trial Court where
the amount is less than one million pesos;
2. Decisions of the Regional trial Court in
local tax cases;
3. Decision of the Central Board of
Assessment Appeals over cases involving
the assessment of taxation of real
property;
Q: What is the jurisdictional amount?
A: Principal amount of taxes & penalties involved is
1 million or more.
COMPOSITION
The CTA’s membership was increased from one
division of three judges comprised of the Presiding
Judge and two associate judges to three divisions of
nine Justices composed of a Presiding Justice and
eight associate justice.
Q: Since it is a specialized court, is it bound by the
technical rules on Evidence?
A: NO. As a rule, No. It is not bound by basic
evidentiary rules.
2ND MOTION FOR RECONSIDERATION
1 G.R. No. 181845, August 4, 2009.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
As a rule, filing of second motion for
reconsideration is not allowed pursuant to Sec.7
Rule 15 Revised Rules of CTA;
SEC. 7. No second motion for
reconsideration or for new trial. – No party
shall be allowed to file a second motion for
reconsideration of a decision, final
resolution or order; or for new trial.
But BPI v. CIR, the procedural rules were relaxed in
the interest of substantial justice and allowed the
filing of the second motion for reconsideration as
BPI was able to prove that it is entitled to refund.
Q: Can you file a Motion for Reconsideration on
the decision of the BIR before you can file an
appeal with the CTA?
A: No. It is not allowed.
Q: Is motion for extension to file a petition for
review with the CTA allowed?
A: Yes. The Supreme Court allowed a motion for
extension to file a petition for review in the case of
City of Manila v. Coca-Cola Bottlers. [1]
7 DECISIONS APPEALABLE TO THE CTA
Exclusive Appellate Jurisdiction to Review by
Appeal;
1. Decisions of the Commissioner of Internal
Revenue in cases involving disputed
assessments, refunds of internal revenue
taxes, fees or other charges, penalties in
relation thereto, or other matters arising
under the National Internal Revenue or
other laws administered by the Bureau of
Internal Revenue; (via petition for
Review under Rule 42)
2. Inaction by the Commissioner of Internal
Revenue in cases involving disputed
assessments, refunds of internal revenue
taxes, fees or other charges, penalties in
relations thereto, or other matters arising
under the National Internal Revenue Code
or other laws administered by the Bureau
of Internal Revenue, where the National
Internal Revenue Code provides a specific
period of action, in which case the inaction
shall be deemed a denial; (via petition for
Review under Rule 42)
3. Decisions, orders or resolutions of the
Regional Trial Courts in local tax cases
originally decided or resolved by them in
the exercise of their original or appellate
jurisdiction; (via petition for Review
under Rule 43)
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SMUGGLED NOTES - DIMAAMPAO(2019)
4. Decisions of the Commissioner of Customs in
cases involving liability for customs duties,
fees or other money charges, seizure,
detention or release of property affected,
fines, forfeitures or other penalties in
relation thereto, or other matters arising
under the Customs Law or other laws
administered by the Bureau of Customs;
(via petition for Review under Rule 42)
5. Decisions of the Central Board of
Assessment Appeals in the exercise of its
appellate jurisdiction over cases involving
the assessment and taxation of real
property originally decided by the
provincial or city board of assessment
appeals; (via petition for Review under
Rule 43)
6. Decisions of the Secretary of Finance on
customs cases elevated to him
automatically for review from decisions of
the Commissioner of Customs which are
adverse to the Government under Section
2315 of the Tariff and Customs Code; (via
petition for Review under Rule 42)
7. Decisions of the Secretary of Trade and
Industry, in the case of non-agricultural
product, commodity or article, and the
Secretary of Agriculture in the case of
agricultural product, commodity or article,
involving dumping and countervailing
duties under Section 301 and 302,
respectively, of the Tariff and Customs
Code, and safeguard measures under
Republic Act No. 8800, where either party
may appeal the decision to impose or not
to impose said duties. (via petition for
Review under Rule 42)
Q: What is question of law and question of fact?
A: A question of fact is a question that must be
answered by reference to facts and evidence as
well as inferences arising from those facts. A
question of law, which must be answered by
applying relevant legal principles.
Q: What is Automatic review procedure and
what is the purpose?
A: The decisions of the Commissioner of customs
which are adverse to the government shall be
elevated to the Secretary of Finance automatically
for review. The purpose is to protect the
government against corrupt & conniving customs
collector.
APPEAL TO THE CTA EN BANC
2 Section 4, Rule 8, A.M. No. 05-11-07-CTA, Revised
Rules of the Court of Tax Appeals.
3 Section 3(a), Rule 8, A.M. No. 05-11-07-CTA,
Revised Rules of the Court of Tax Appeals.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
In cases falling under the exclusive appellate
jurisdiction of the Court en banc, the petition for
review of a decision or resolution of the Court in
Division must be preceded by the filing of a timely
motion for reconsideration or new trial with the
Division. [2]
Q: Does the CTA En Banc have certiorari
jurisdiction over interlocutory orders issued by
its division?
A: NO. The CTA en banc is devoid of certiorari
jurisdiction over its division’s interlocutory orders.
R.A. No. 9282 conferred no such jurisdiction.
Settled is the rule that jurisdiction is conferred by
law.
Q: What is the period to file an appeal to the CTA?
A: A party adversely affected by a decision, ruling
or the inaction of the Commissioner of Internal
Revenue on disputed assessments or claims for
refund of internal revenue taxes, or by a decision or
ruling of the Commissioner of Customs, the
Secretary of Finance, the Secretary of Trade and
Industry, the Secretary of Agriculture, or a Regional
Trial Court in the exercise of its original jurisdiction
may appeal to the Court by petition for review
filed within thirty (30) days after receipt of a
copy of such decision or ruling, or expiration of
the period fixed by law for the Commissioner of
Internal Revenue to act on the disputed
assessments. [3]
Q: What is the exception to the 30 day period?
A: A party adversely affected by a decision or
resolution of a Division of the Court on a motion for
reconsideration or new trial may appeal to the
Court by filing before it a petition for review
within fifteen (15)days from receipt of a copy of
the questioned decision or resolution. Upon
proper motion and the payment of the full amount
of the docket and other lawful fees and deposit for
costs before the expiration of the reglementary
period herein fixed, the Court may grant an
additional period not exceeding fifteen days from
the expiration of the original period within which
to file the petition for review. [4]
Does the CTA have certiorari jurisdiction over
the decisions of the RTC?
A: YES. Judicial power includes the duty of the
courts of justice to settle actual controversies
involving rights which are legally demandable and
enforceable, and to determine whether or not there
has been grave abuse of discretion amounting to
4 Section 3(b), Rule 8, A.M. No. 05-11-07-CTA, Revised
Rules of the Court of Tax Appeals.
52
SMUGGLED NOTES - DIMAAMPAO(2019)

lack or excess of jurisdiction on the part of any

branch or instrumentality of the government.

It can be briefly interpreted that the power of the

CTA includes that of determining whether or not
there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the
part of the RTC in issuing an interlocutory order in
cases falling within the exclusive appellate
jurisdiction of the tax court.

Q: May CTA en banc resolve petitions for

annulment of judgment?
A: NO. The law did not confer jurisdiction

--xXx--

Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos 53

Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
SMUGGLED NOTES - DIMAAMPAO(2019)
BPI-FAMILY vs. CA
G.R. No. 122480. April 12, 2000
330 SCRA 507
CASE DOCTRINE: Again, the BIR did not controvert the veracity
of the said return. It did not even file an opposition to petitioner's
Motion and the 1990 Final Adjustment Return attached thereto.
In denying the Motion for Reconsideration, however, the CTA
ignored the said Return. In the same vein, the CA did not pass upon
that significant document.
True, strict procedural rules generally frown upon the
submission of the Return after the trial. The law creating the
Court of Tax Appeals, however, specifically provides that
proceedings before it "shall not be governed strictly by the
technical rules of evidence." The paramount consideration
remains the ascertainment of truth. Verily, the quest for orderly
presentation of issues is not an absolute. It should not bar courts
from considering undisputed facts to arrive at a just
determination of a controversy.
FACTS: This case involves a claim for tax refund in the amount
of P112,491.00 representing petitioner's tax withheld for the
year 1989. It appears from the foregoing 1989 Income Tax
Return that petitioner had a total refundable amount of
P297,492 inclusive of the P112,491.00 being claimed as tax
refund in the present case. However, petitioner declared in the
same 1989 Income Tax Return that the said total refundable
amount of P297,492.00 will be applied as tax credit to the
succeeding taxable year.
On October 11, 1990, petitioner filed a written claim for refund
in the amount of P112,491.00 with the respondent
Commissioner of Internal Revenue alleging that it did not apply
the 1989 refundable amount of P297,492.00 (including
P112,491.00) to its 1990 Annual Income Tax Return or other tax
liabilities due to the alleged business losses it incurred for the
same year. Without waiting for respondent Commissioner of
Internal Revenue to act on the claim for refund, petitioner filed
a petition for review with respondent Court of Tax Appeals,
seeking the refund of the amount of P112,491.00.
CTA Ruling: The respondent Court of Tax Appeals dismissed
petitioner's petition on the ground that petitioner failed to
present as evidence its corporate Annual Income Tax Return for
1990 to establish the fact that petitioner had not yet credited the
amount of P297,492.00 (inclusive of the amount P112,491.00
which is the subject of the present controversy) to its 1990
income tax liability.
ISSUE: Whether or not petitioner is entitled to the refund of
P112,491.90, representing excess creditable withholding tax
paid for the taxable year 1989.
HELD: YES. In the first place, petitioner presented evidence to
prove its claim that it did not apply the amount as a tax credit.
During the trial before the CTA, Ms. Yolanda Esmundo, the
manager of petitioner's accounting department, testified to this
fact.
The Bureau of Internal Revenue, for its part, failed to controvert
petitioner's claim. In fact, it presented no evidence at all.
Because it ought to know the tax records of all taxpayers, the CIR
could have easily disproved petitioner's claim. To repeat, it did
not do so. More important, a copy of the Final Adjustment
Return for 1990 was attached to petitioner's Motion for
Reconsideration filed before the CTA. A final adjustment return
shows whether a corporation incurred a loss or gained a profit
during the taxable year. In this case, that Return clearly showed
that petitioner incurred P52,480,173 as net loss in 1990.
Clearly, it could not have applied the amount in dispute as a tax
credit.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
Again, the BIR did not controvert the veracity of the said return.
It did not even file an opposition to petitioner's Motion and the
1990 Final Adjustment Return attached thereto. In denying the
Motion for Reconsideration, however, the CTA ignored the said
Return. In the same vein, the CA did not pass upon that
significant document.
True, strict procedural rules generally frown upon the
submission of the Return after the trial. The law creating the
Court of Tax Appeals, however, specifically provides that
proceedings before it "shall not be governed strictly by the
technical rules of evidence." The paramount consideration
remains the ascertainment of truth. Verily, the quest for orderly
presentation of issues is not an absolute. It should not bar courts
from considering undisputed facts to arrive at a just
determination of a controversy.
In the present case, the Return attached to the Motion for
Reconsideration clearly showed that petitioner suffered a net
loss in 1990. Contrary to the holding of the CA and the CTA,
petitioner could not have applied the amount as a tax credit. In
failing to consider the said Return, as well as the other
documentary evidence presented during the trial, the appellate
court committed a reversible error.
CIR V. MANILA MINING CORPORATION
G.R. No. 153204 August 31, 2005
568 SCRA 571
CASE DOCTRINE: Under Section 8 of RA 1125, the CTA is
described as a court of record. As cases filed before it are litigated
de novo, party litigants should prove every minute aspect of their
cases. No evidentiary value can be given the purchase invoices or
receipts submitted to the BIR as the rules on documentary
evidence require that these documents must be formally offered
before the CTA. These sales invoices or receipts issued by the
supplier are necessary to substantiate the actual amount or
quantity of goods sold and their selling price, and taken
collectively are the best means to prove the input VAT payments.
FACTS: Respondent, a mining corporation duly organized and
existing under Philippines laws, is registered with the Bureau of
Internal Revenue (BIR) as a VAT-registered enterprise. In 1991,
respondent’s sales of gold to the Central Bank (now Bangko
Sentral ng Pilipinas) amounted to ₱200,832,364.70. On April 22,
1991, July 23, 1991, October 21, 1991 and January 20, 1992, it
filed its VAT Returns for the 1st, 2nd, 3rd and 4th quarters of
1991, respectively, with the BIR.
Respondent, relying on a letter dated October 10, 1988 from
then BIR Deputy Commissioner Victor Deoferio that:
xxx under Sec. 2 of E.O. 581 as amended,
gold sold to the Central Bank is considered
an export sale which under Section
100(a)(1) of the NIRC, as amended by E.O.
273, is subject to zero-rated if such sale is
made by a VAT-registered person[,]
filed an application for tax refund/credit of the input VAT it paid
from July 1- December 31, 1999 in the amount of ₱8,173,789.60.
Petitioner subsequently filed on March 5, 1991 another
application for tax refund/credit of input VAT it paid the amount
of ₱5,683,035.04 from January 1 – June 30, 1991.
As the CIR failed to act upon respondent’s application within
sixty (60) days from the dates of filing, it filed on March 22, 1993
a Petition for Review against the CIR before the CTA seeking the
issuance of tax credit certificate or refund in the amount of
₱5,683,035.04 and ₱8,173,789.60 covering its input VAT
payments for the 1st and 2nd quarters of 1991 and for the 3rd
and 4th quarters of 1991 respectively.
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SMUGGLED NOTES - DIMAAMPAO(2019)
The CIR filed its Answer, it averring that sales of gold to the
Central Bank may not be legally considered export sales for
purposes of Section 100(a) in relation to Section 100(a)(1)21 of
the Tax Code; and that assuming that a refund is proper,
respondent must demonstrate that it complied with the
provisions of Section 204(3) in relation to Section 230 of the Tax
Code.
The CIR subsequently filed its Reply admitting that respondent
filed its VAT returns and VAT applications for tax credit for the
3rd and 4th quarters of 1991, but specifically denying the
correctness and veracity of the amounts indicated in the
schedules and summary of importations, VAT services and
goods, the total input and output taxes, including the amount of
refund claimed.
CTA RULING: Nonetheless, the CTA denied respondent’s claim
for refund of input VAT for failure to prove that it paid the
amounts claimed as such for the year 1991, no sales invoices,
receipts or other documents as required under Section 2(c)(1)
of Revenue Regulations No. 3-88 having been presented. The
CTA explained that a mere listing of VAT invoices and receipts,
even if certified to have been previously examined by an
independent certified public accountant, would not suffice to
establish the truthfulness and accuracy of the contents of such
invoices and receipts unless offered and actually verified by it
(CTA) in accordance with CTA Circular No. 1-95, as amended by
CTA Circular No. 10-97, which requires that photocopies of
invoices, receipts and other documents covering said accounts
of payments be pre-marked by the party concerned and
submitted to the court.
CA RULING: By Decision39 of April 12, 2002, the Court of
Appeals reversed the decision of the CTA and granted
respondent’s claim for refund or issuance of tax credit
certificates in the amounts of ₱5,683,035.04 and ₱8,173,789.60.
In granting the refund, the appellate court held that there was
no need for respondent to present the photocopies of the
purchase invoices or receipts evidencing the VAT paid in view
of Rule 26, Section 2 of the Revised Rules of Court and the
Resolutions of the CTA holding that the matters requested in
respondent’s Request for Admissions in CTA No. 4968 were
deemed admitted by the CIR41 in light of its failure to file a
verified reply thereto.
CIR Contends: The CIR arguing that respondent’s failure to
submit documentary evidence to confirm the veracity of its
claims is fatal; and that the CTA, being a court of record, is not
expected to go out of its way and dig into the records of the BIR
to supply the insufficient evidence presented by a party, and in
fact it may set a definite rule that only evidence formally
presented will be considered in deciding cases before it.44
MMC Contends: Respondent, in its Comment, avers that it
complied with the provisions of Section 2(c)(1) of Revenue
Regulation No. 3-88 when it submitted the original receipts and
invoices to the BIR, which fact of submission had been deemed
admitted by petitioner, as confirmed by the CTA in its
Resolutions in both cases granting respondent’s Requests for
Admissions therein.
ISSUE: whether respondent adduced sufficient evidence to
prove its claim for refund of its input VAT for taxable year 1991
in the amounts of ₱5,683,035.04 and ₱8,173,789.60.
HELD: NO. For a judicial claim for refund to prosper, however,
respondent must not only prove that it is a VAT registered entity
and that it filed its claims within the prescriptive period. It must
substantiate the input VAT paid by purchase invoices or official
receipts. This respondent failed to do.
Revenue Regulation No. 3-88 amending Revenue Regulation No.
5-87 provides the requirements in claiming tax credits/refunds.
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
Sec.2. Section 16 of Revenue Regulations 5-87 is hereby
amended to read as follows:
xxx
(c) Claims for tax credits/refunds. -
Application for Tax Credit/Refund of
Value-Added Tax Paid (BIR Form No.
2552) shall be filed with the Revenue
District Office of the city or municipality
where the principal place of business of
the applicant is located or directly with
the Commissioner, Attention: VAT
Division.
A photocopy of the purchase invoice or
receipt evidencing the value added tax
paid shall be submitted together with the
application. The original copy of the said
invoice/receipt, however, shall be
presented for cancellation prior to the
issuance of the Tax Credit Certificate or
refund. (Emphasis and underscoring
supplied)
xxx
Under Section 8 of RA 1125, the CTA is described as a court of
record. As cases filed before it are litigated de novo, party
litigants should prove every minute aspect of their cases. No
evidentiary value can be given the purchase invoices or receipts
submitted to the BIR as the rules on documentary evidence
require that these documents must be formally offered before
the CTA.
These sales invoices or receipts issued by the supplier are
necessary to substantiate the actual amount or quantity of
goods sold and their selling price, and taken collectively are the
best means to prove the input VAT payments.
Respondent contends, however, that the certification of the
independent CPA attesting to the correctness of the contents of
the summary of suppliers’ invoices or receipts which were
examined, evaluated and audited by said CPA in accordance
with CTA Circular No. 1-95 as amended by CTA Circular No. 10-
97 should substantiate its claims.
There is nothing, however, in CTA Circular No. 1-95, as amended
by CTA Circular No. 10-97, which either expressly or impliedly
suggests that summaries and schedules of input VAT payments,
even if certified by an independent CPA, suffice as evidence of
input VAT payments.
The circular, in the interest of speedy administration of justice,
was promulgated to avoid the time-consuming procedure of
presenting, identifying and marking of documents before the
Court. It does not relieve respondent of its imperative task of
pre-marking photocopies of sales receipts and invoices and
submitting the same to the court after the independent CPA
shall have examined and compared them with the originals.
Without presenting these pre-marked documents as evidence –
from which the summary and schedules were based, the court
cannot verify the authenticity and veracity of the independent
auditor’s conclusions.
Mere listing of VAT invoices and receipts, even if certified to
have been previously examined by an independent certified
public accountant, would not suffice to establish the
truthfulness and accuracy of the contents thereof unless offered
and actually verified by this Court. CTA Circular No. 1-95, as
amended by CTA Circular No. 10-97, requires that the
photocopies of invoices, receipts and other documents covering
2
SMUGGLED NOTES - DIMAAMPAO(2019)
said accounts or payments must be pre-marked by the party and
submitted to this Court. (Underscoring supplied)
While the CTA is not governed strictly by technical rules of
evidence, as rules of procedure are not ends in themselves but
are primarily intended as tools in the administration of justice,
the presentation of the purchase receipts and/or invoices is not
mere procedural technicality which may be disregarded
considering that it is the only means by which the CTA may
ascertain and verify the truth of respondent’s claims.
The records further show that respondent miserably failed to
substantiate its claim for input VAT refund for the first semester
of 1991. Except for the summary and schedules of input VAT
payments prepared by respondent itself, no other evidence was
adduced in support of its claim.
YAOKASIN V. THE COMMISSIONER OF CUSTOMS
G.R G.R. No. 84111 December 22, 1989
180 SCRA 591
CASE DOCTRINE: Taxes being the lifeblood of the Government,
Section 12, which the Commissioner of Customs in his Customs
Memorandum Order No. 20-87, enjoined all collectors to follow
strictly, is intended to protect the interest of the Government in
the collection of taxes and customs duties in those seizure and
protest cases which, without the automatic review provided
therein, neither the Commissioner of Customs nor the Secretary of
Finance would probably ever know about. 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 'the no
one the wiser except himself and the owner of the goods. The
owner of the goods cannot be expected to appeal the collector's
decision when it is favorable to him. A decision that is favorable to
the taxpayer would correspondingly be unfavorable to the
Government, but who will appeal the collector's decision in that
case certainly not the collector.
FACTS: On May 27, 1988, the Philippine Coast Guard seized
9000 bags/ sacks of refined sugar, which were being unloaded
from the M/V Tacloban, and turned them over to the custody of
the Bureau of Customs.
The petitioner presented a sales invoice from the Jordan
Trading of Iloilo (Annex A, Petition) to prove that the sugar was
purchased locally. The District Collector of Customs, however,
proceeded with the seizure of the bags of sugar.
On June 7, 1988, the District Collector of Customs ordered the
release of the sugar.
On June 10, 1988, the decision, together with the entire records
of the case, were transmitted to, and received by, the
Commissioner of Customs.
On July 4, 1988, the Commissioner of Customs by "2nd
Indorsement" returned to the District Collector of Customs the
folder of Tacloban S.I. No. 06-01 (R.P. vs. 9000 bags/sacks of
refined sugar, MR. JIMMY YAOKASIN, consignee/claimant),
together with the proposed decision, for hearing and/or
resolution of the government is motion for reconsideration.
On the same date, July 4, 1988, petitioner applied for and
secured a writ of replevin from the Regional Trial Court of Leyte.
On July 12, 1988, respondent District Collector of Customs filed
an Answer assailing the court's jurisdiction. On the same day,
the District Collector and the Commissioner of Customs filed in
the Court of Appeals a Petition for certiorari and Prohibition
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
with Application for a Writ of Preliminary Injunction and/or
Restraining Order to annul the July 4, 1988 — "Order Granting
Replevin with Temporary Restraining Order" (CA-G.R. SP NO.
15090; p. 396, Rollo).
On July 15, 1988, the Collector of Customs reconsidered his June
7, 1988 decision finding the the 9,000 bags/sacks of refined
sugar in question are of foreign origin, smuggled into the
country, and declares them forfeited in favor of the government.
It is petitioner's contention that the June 7, 1988 decision of the
District Collector of Customs became final and executory, in
view of the absence of an appeal therefrom by the "aggrieved
party" (himself) within the 15-day period provided for in Sec.
2313 of the Tariff and Customs Code. Hence, the release of the
9,000 bags of sugar must be upheld.
On the other hand, the District Collector and the Commissioner
of Customs argue that since the June 7, 1988 decision is adverse
to the government, the case should go to the Commissioner of
Customs on automatic review, pursuant to Memorandum Order
No. 20-87, dated May 18, 1987, of former Acting Commissioner
of Customs Alexander Padilla, which provides:
Decisions of the Collector of Customs in seizure and protest
cases are subject to review by the Commissioner upon appeal as
provided under existing laws; provided, however, that where a
decision of the Collector of Customs in such seizure and protest
cases is adverse to the government it shall automatically be
reviewed by the Commissioner of Customs. (PD. No. 1, Annex C.)
In view thereof, no releases in any seizure or like cases may be
effected unless and until the decision of the Collector has been
confirmed in writing by the Commissioner of Customs.
ISSUE: Whether or not the case should go to the Commissioner
of Customs on Automatic Review
HELD: YES. Taxes being the lifeblood of the Government,
Section 12, which the Commissioner of Customs in his Customs
Memorandum Order No. 20-87, enjoined all collectors to follow
strictly, is intended to protect the interest of the Government in
the collection of taxes and customs duties in those seizure and
protest cases which, without the automatic review provided
therein, neither the Commissioner of Customs nor the Secretary
of Finance would probably ever know about. 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 'the no one the wiser except himself
and the owner of the goods. The owner of the goods cannot be
expected to appeal the collector's decision when it is favorable
to him. A decision that is favorable to the taxpayer would
correspondingly be unfavorable to the Government, but who
will appeal the collector's decision in that case certainly not the
collector.
Evidently, it was to cure this anomalous situation (which may
have already defrauded our government of huge amounts of
uncollected taxes), that the provision for automatic review by
the Commissioner of Customs and the Secretary of Finance of
unappealed seizure and protest cases was conceived to protect
the government against corrupt and conniving customs
collectors.
WHEREFORE, the petition for review is denied for lack of merit.
The temporary restraining order which we issued in this case is
hereby made permanent. Cost against the petitioner. SO
ORDERED.
3
SMUGGLED NOTES - DIMAAMPAO(2019)
Metro Manila Shopping Mecca v. Toledo
G.R. No. 190818. June 5, 2013
697 SCRA 425
CASE DOCTRINE: Although the RRCTA does not explicitly
sanction extensions to file a petition for review with the CTA,
Section 1, Rule 7 thereof reads that in the absence of any express
provision in the RRCTA, Rules 42, 43, 44 and 46 of the Rules of
Court may be applied in a suppletory manner. In this light, Section
1 of Rule 42 states that the period for filing a petition for review
may be extended upon motion of the concerned party. Thus, in City
of Manila v. Coca-Cola Bottlers Philippines, Inc., the Court held
that the original period for filing the petition for review may be
extended for a period of fifteen (15) days, which for the most
compelling reasons, may be extended for another period not
exceeding fifteen (15) days. In other words, the reglementary
period provided under Section 3, Rule 8 of the RRCTA is extendible
and as such, CTA Division’s grant of respondents’ motion for
extension falls squarely within the law.
FACTS: Sometime in October 2001, respondent Liberty M.
Toledo, as Treasurer of respondent City of Manila (City),
assessed petitioners for their fourth quarter local business taxes
pursuant to Section 21 the "Revenue Code of the City of Manila"
(Manila Revenue Code).5 Consequently, on October 20, 2001,
petitioners paid the total assessed amount of ₱5,104,281.26
under protest.
In a letter dated October 19, 2001, petitioners informed the
Office of the City Treasurer of Manila of the nature of the
foregoing payment, assailing as well the unconstitutionality of
Section 21 of the Manila Revenue Code. Petitioners’ protest was
however denied on October 25, 2001.
On October 20, 2003, petitioners filed a case with the Regional
Trial Court of Manila (RTC) against respondents, reiterating
their claim that Section 21 of the Manila Revenue Code is null
and void. Accordingly, they sought the refund of the amount of
local business taxes they previously paid to the City, plus
interest.
Consequently, respondents filed their Answer. Respondents
averred that petitioners failed to file any written claim for tax
refund or credit with the Office of the City Treasurer of Manila.
RTC Ruling: In its Decision dated December 7, 2006, the RTC
held that respondents’ assessment of local business tax under
Section 21 of the Manila Revenue Code is null and void thereby,
warranting the issuance of a tax refund, or tax credit in the
alternative, in the amount of ₱5,104,281.26 in favor of
petitioners.
Respondents filed a Motion for Reconsideration dated January
16, 2007 which the RTC, however, denied. Thereafter, they filed
two (2) Motions for Extension to File Petition for Review with
the CTA, effectively requesting for a period of thirty (30) days
from May 27, 2007, or until June 26, 2007, to file their petition
for review.
On June 26, 2007, respondents filed their Petition for Review
dated June 22, 2007 via registered mail. In its Resolution dated
July 6, 2007, the CTA Division granted respondents’ Motions for
Extension, noted their Manifestation, and admitted their
Petition for Review.
Ruling of CTA Division: In its Decision dated October 31, 2008,
the CTA Division reversed and set aside the RTC’s ruling and in
effect, denied petitioners’ request for tax refund/credit.
On November 19, 2008, petitioners moved for reconsideration,
averring that respondents failed to file their Petition for Review
Abunales, Bernardo, Evidente, Pabalay, Rafael, Ramos
Updated by: Anonymous Lawyer (https://www.facebook.com/Anonymouslawer/)
within the reglementary period thus, making the RTC decision
already final and executory. On March 16, 2009, the CTA
Division issued a Resolution denying petitioners’ motion.
Aggrieved, petitioners elevated the matter to the CTA En Banc.
Ruling of CTA En Banc: In its Decision dated September 8,
2009, the CTA En Banc upheld the CTA Division’s ruling and
found that: (1) respondents were able to file their Petition for
Review within the reglementary period; (2) the assessment of
local business taxes against petitioners had become conclusive
and unappealable; and (3) petitioners’ claim for refund should
be denied for their failure to comply with the requisites
provided for by law.
Petitioner Contends: Petitioners argue that the CTA Division
erred in extending the reglementary period within which
respondents may file their Petition for Review, considering that
Section 3, Rule 8 of the Revised Rules of the CTA (RRCTA) is
silent on such matter. Further, even if it is assumed that an
extension is allowed, the CTA Division should not have
entertained respondents’ Petition for Review for their failure to
comply with the filing requisites set forth in Section 4, Rule 5
and Section 2, Rule 6 of the RRCTA.
ISSUE: Whether or not the CTA Division may extend the
reglementary period to file a Petition for Review.
HELD: YES. Although the RRCTA does not explicitly sanction
extensions to file a petition for review with the CTA, Section 1,
Rule 7 thereof reads that in the absence of any express provision
in the RRCTA, Rules 42, 43, 44 and 46 of the Rules of Court may
be applied in a suppletory manner.
In this light, Section 1 of Rule 42 states that the period for filing
a petition for review may be extended upon motion of the
concerned party. Thus, in City of Manila v. Coca-Cola Bottlers
Philippines, Inc., the Court held that the original period for filing
the petition for review may be extended for a period of fifteen
(15) days, which for the most compelling reasons, may be
extended for another period not exceeding fifteen (15) days.
In other words, the reglementary period provided under Section
3, Rule 8 of the RRCTA is extendible and as such, CTA Division’s
grant of respondents’ motion for extension falls squarely within
the law.
Neither did respondents’ failure to comply with Section 4, Rule
5 and Section 2, Rule 6 of the RRCTA militate against giving due
course to their Petition for Review. Respondents’ submission of
only one copy of the said petition and their failure to attach
therewith a certified true copy of the RTC’s decision constitute
mere formal defects which may be relaxed in the interest of
substantial justice. It is well-settled that dismissal of appeals
based purely on technical grounds is frowned upon as every
party litigant must be afforded the amplest opportunity for the
proper and just determination of his cause, free from the
unacceptable plea of technicalities.41 In this regard, the CTA
Division did not overstep its boundaries when it admitted
respondents’ Petition for Review despite the aforementioned
defects "in the broader interest of justice."
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