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FACTS:
BIR investigated the income tax liability of FACTS:
Anastacio Pineda’s estate for the years The BIR assessed Algue a total amount of
1945, 1946, 1947, and 1948 and it found delinquency taxes of Php 83,183.85 for the
that the corresponding income tax return years 1958 and 1959. It contends that the
were not filed. This resulted to a P760.28 company's claimed deduction of Php 75,000
deficiency income tax for 1945 and 1946 in the form of promotional fees is disallowed
and real estate dealer’s fixed tax for the because it was not ordinary reasonable or
4th quarter of 1946 and for the whole year necessary business expenses. Algue filed a
1947. Manuel Pineda, eldest son of protest.
Anastacio, received the assessment. He
contested the same alleging that only a BIR did not take any action. So, Algue filed
proportionate part should be his liability. a petition for review with the Court of Tax
CTA ruled that Pineda is liable only for taxes Appeals which rule in favor of Algue. Thus,
corresponding to his share in the estate. the current petition.
Hence, the present petition.
ISSUE:
ISSUE: Whether the BIR correctly disallowed the
Whether the Government can require deduction
Manuel Pineda to pay the full amount of the
tax assessed RULING:
No.
RULING:
Yes. As a holder of property belonging to the The burden is on the taxpayer to prove the
estate, Pineda is liable for the tax up to the validity of the claimed deduction. Here, the
amount of the property in his possession. onus has been discharged satisfactorily.
The BIR is given the discretion to avail of Here, the onus has been discharged
the most expeditious way to collect the tax. satisfactorily. The promotional fees were
This is, of course, without prejudice to necessary and reasonable in the light of the
Pineda’s right of contribution for his co- efforts exerted by the payees in the
heirs. Put simply, the Supreme Court held inducement of investors to venture in an
that the rule on solidarity applies to taxes experimental enterprise. Thus, the payees
because it is not an ordinary contract. Two should be sufficiently recompensed.
persons liable for payment of estate tax:
FACTS:
Engracio Francia was the registered owner
of a house and lot located in Pasay City. A
portion of such property was
expropriated by the Republic of the
Philippines in 1977. It appeared that Francia
did not pay his real estate taxes from 1963 Progressive Development Corporation v.
to 1977. Thus, his property was sold in a Quezon City
public auction by the City Treasurer of
Pasay City. Francia filed a complaint to Facts:
annual the auction sale. The lower court The City Council of QC passed an
dismissed the complaint and the ordinance known as the Market Code of
Intermediate Appellate Court affirmed the QC, which imposed a 5% supervision fee on
decision of the lower court in toto. Hence, gross receipts on rentals or lease of
this petition for review. Francia contends privately-owned market spaces in QC. In
that his tax delinquency of P 2,400 has been case of failure of the owners of the market
extinguished by legal compensation. He spaces to pay the tax for three consecutive
claims that the government owed him P months, the City shall revoke the permit of
4,116 when a portion of his land was the privately-owned market to operate.
expropriated on October 15, 1977. Progressive Development Corp, owner and
operator of Farmer’s Market, filed a petition
ISSUE: for prohibition against QC on the ground
May the expropriation payment compensate that the tax imposed by the Market Code
for the real estate taxes due? was in reality a tax on income, which the
municipal corporation was prohibited by law
RULING: to impose.
No. There can be no offsetting of taxes Issue:
against the claims that the taxpayer may Whether or not the supervision fee is an
have against the government. A person income tax or a license fee
cannot refuse to pay a tax on the ground Held:
that the government owes him an amount It is a license fee. A LICENSE FEE is
equal to or greater than the tax being imposed in the exercise of the police power
collected. The collection of a tax cannot primarily for purposes of regulation, while
await the results of a lawsuit against the TAX is imposed under the taxing power
government. Internal revenue taxes cannot primarily for purposes of raising revenues. If
be the subject of compensation. The the generating of revenue is the primary
Government and the taxpayer are not purpose and regulation is merely incidental,
mutually creditors and debtors of each other the imposition is a tax; but if regulation is
under Article 1278 of the Civil Code and a the primary purpose, the fact that
claim of taxes is not such a debt, demand, incidentally, revenue is also obtained does
contract or judgment as is allowed to be set- not make the imposition a tax. To be
off. considered a license fee, the imposition
must relate to an occupation or activity that
Moreover, the amount of P4,116 paid by the so engages the public interest in health,
national government for the 125 square morals, safety, and development as to
meter portion of his lot was deposited with require regulation for the protection and
the Philippine National Bank long before the promotion of such public interest; the
sale at public auction of his remaining imposition must also bear a reasonable
property. It would have been an easy matter relation to the probable expenses of
to withdraw P 2,400 from the deposit so that regulation, taking into account not only the
he could pay the tax obligation thus aborting costs of direct regulation but also its
the sale at public auction. Thus, the petition incidental consequences. In this case, the
for review is dismissed. The taxes assessed Farmers’ Market is a privately-owned
are the obligations of the taxpayer arising market established for the rendition of
from law, while the money judgment against service to the general public. It warrants
the government is an obligation arising from close supervision and control by the City for
contract, whether express or implied. the protection of the health of the public by
insuring the maintenance of sanitary for the payment of the cost of public
conditions, prevention of fraud upon the improvements in its immediate vicinity and
buying public, etc. Since the purpose of the levied with reference to special benefits to
ordinance is primarily regulation and not the property assessed.
revenue generation, the tax is a license fee. A special assessment is not, strictly
The use of the gross amount of stall rentals speaking, a tax; and neither the decree nor
as basis for determining the collectible the Constitution exempt the Apostolic
amount of license tax does not, by itself, Prefect from payment of said special
convert the license tax into a prohibited tax assessment.
on income. Such basis actually has a
reasonable relationship to the probable Furthermore, arguendo that exemption may
costs of regulation and supervision encompass such assessment, the Apostolic
of Progressive’s kind of business, since Prefect cannot claim exemption as it has not
ordinarily, the higher the amount of rentals, proven the property in question is used
the higher the volume of items sold. The exclusively for religious purposes; but that it
higher the volume of goods sold, the greater appears that the same is being used to
the extent and frequency of supervision and other non-religious purposes.
inspection may be required in the interest of
the buying public. Thus, the Apostolic Prefect is required to
pay the special assessment.
Apostolic Prefect of Mountain Province v
City Treasurer of Baguio City (1941) RENATO V. DIAZ AND AURORA MA. F.
TIMBOL vs. THE SECRETARY OF
Apostolic Prefect of Mountain Province v FINANCE and THE COMMISSIONER OF
City Treasurer of Baguio City GR No 47252, INTERNAL REVENUE
April 18, 1941
Facts:
FACTS: Petitioners Renato Diaz and Aurora Ma. F.
The Apostolic Prefect is a corporation sole, Timbol filed a petition for declaratory relief
of religious character, organized under the assailing the validity of the impending
Philippine laws, and with residence imposition of value-added tax (VAT) by the
in Baguio. The City imposed a special Bureau of Internal Revenue (BIR) on the
assessment against properties within its collections of tollway operators. They
territorial jurisdiction, including those of the alleged that the Congress when it enacted
Apostolic Prefect, which benefits from its the NIRC did not intend to include toll fees
drainage and sewerage system. The within the meaning of "sale of services" that
Apostolic Prefect contends that its are subject to VAT; that a toll fee is a "users
properties should be free from tax. tax," not a sale of services; that to impose
VAT on toll fees would amount to a tax on
ISSUE: public service; and that, since VAT was
Is the Apostolic Prefect exempt from never factored into the formula for
paying? computing toll fees, its imposition would
violate the non-impairment clause of the
RULING: constitution. The government averred that
No, it is liable. the NIRC imposes VAT on all kinds of
services of franchise grantees, including
In its broad meaning, tax includes both tollway operations, except where the law
general taxes and special assessment. Yet provides otherwise; that the Court should
actually, there is a recognized distinction seek the meaning and intent of the law from
between them in that assessment is the words used in the statute; and that the
confined to local impositions upon property imposition of VAT on tollway operations has
been the subject as early as 2003 of several for which will be advanced by NIA. Hydro
BIR rulings and circulars. shall repay NIA the costs incurred and the
manner of repayment shall be through
Issue: Whether or not toll fees collected by deductions from each monthly payment due
tollway operators may be subjected to to Hydro. Hydro shall repay NIA the full
value- added tax. value of the construction before the
eventual transfer of ownership.
Ruling: Upon transfer, Hydro was assessed an
Yes. If the legislative intent was to exempt additional 3% ad valorem duty which it paid
tollway operations from VAT, as petitioners under protest. The Collector of Customs
so strongly allege, then it would have been then ordered for the refund of the ad
well for the law to clearly say so. Tax valorem duty in the form of tax credit. This
exemptions must be justified by clear was then reversed by the Deputy Minister of
statutory grant and based on language in Finance.
the law too plain to be mistaken. The
operation by the government of a tollway Issue:
does not change the character of the road Whether or not the imposition of the 3% ad
as one for public use. Someone must pay valorem tax on importations is valid.
for the maintenance of the road, either the
public indirectly through the taxes they pay Held:
the government, or only those among the No. EO 860 which was the basis for the
public who actually use the road through the imposition of the ad valorem duty took effect
toll fees they pay upon using the road. The December 1982. The importations were
tollway system is even a more efficient and effected in 1978 and 1979 by NIA. It is a
equitable manner of taxing the public for the cardinal rule that laws shall have no
maintenance of public roads. The charging retroactive effect unless contrary is
of fees to the public does not determine the provided. EO 860 does not provide for its
character of the property whether it is for retroactivity. The Deputy Minister of Finance
public dominion or not. Article 420 of the even clarified that letters of credit opened
Civil Code defines property of public prior to the effectivity of EO 860 are not
dominion as "one intended for public use." subject to its provisions.
Even if the government collects toll fees, the In the case, the procurement of the
road is still "intended for public use" if equipment was not on a tax exempt basis
anyone can use the road under the same as the import liabilities have been secured
terms and conditions as the rest of the to paid under a financial scheme. It is a
public. The charging of fees, the limitation matter of implementing a pre-existing
on the kind of vehicles that can use the agreement, hence, the imported articles can
road, the speed restrictions and other only be subject to the rates of import duties
conditions for the use of the road do not prevailing at the time of entry or withdrawal
affect the public character of the road. from the customs’ custody.
Facts: Facts:
National Irrigation Administration (NIA) Ayala Securities Corp. (Ayala) failed to file
entered into an agreement with Hydro returns of their accumulated surplus so
Resources for the construction of the Magat Ayala was charged with 25% surtax by the
River Multipurpose Project in Isabela. Under Commissioner of internal Revenue. The
their contract, Hydro was allowed to procure CTA (Court of Tax Appeals) reversed the
new construction equipment, the payment Commissioner’s decision and held that the
assessment made against Ayala was RULING:
beyond the 5-yr prescriptive period as No. The Court has ruled the tenement
provided in section 331 of the National houses constitute a distinct class of property
Internal Revenue Code. Commissioner now and that taxes are uniform and equal when
files a motion for reconsideration of this imposed upon all property of the same class
decision. Ayala invokes the defense of or character within the taxing authority.
prescription against the right of the The fact that the owners of the other
Commissioner to assess the surtax. classes of buildings in Iloilo are not imposed
upon by the ordinance, or that tenement
Issue: taxes are imposed in other cities do not
Whether or not the right to assess and violate the rule of equality and uniformity.
collect the 25% surtax has prescribed after The rule does not require that taxes for the
five years. same purpose should be imposed in
different territorial subdivisions at the same
Held: time. So long as the burden of tax falls
No. There is no such time limit on the right equally and impartially on all owners or
of the Commissioner to assess the 25% operators of tenement houses similarly
surtax since there is no express statutory classified or situated, equality and uniformity
provision limiting such right or providing for is accomplished. The presumption that tax
its prescription. Hence, the collection of statutes are intended to operate uniformly
surtax is imprescriptible. The underlying and equally was not overthrown therein.
purpose of the surtax is to avoid a situation
where the corporation unduly retains its
surplus earnings instead of declaring and CITY OF MANILA vs. COCA-COLA
paying dividends to its shareholders. SC BOTTLERS PHILIPPINES, INC.- CTA,
reverses the ruling of the CTA. Double Taxation