2015 Tax Syllabus Updated-final PALS

8/19/2019 2015 Tax Syllabus Updated-final PALS

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COVERAGELAW ON TAXATION2015 BAR EXAMINATIONS

I. General Principle !" Ta#a$i!nA. %e&ni$i!n an' c!ncep$ !" $a#a$i!n

Taxation is the power by which the sovereign raises revenue to defray the necessaryexpenses of the government. It is merely a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benetsand must bear its burdens. It includes, in its broadest and most general sense,every charge or burden imposed by the sovereign power upon persons, property, orproperty rights for the use and support of the government and to enable it todischarge its appropriate functions, and in that broad denition there is included aproportionate levy upon persons or property and all the various other methods anddevices by which revenue is exacted from persons and property for public purposes.(1 !m. "ur #$%#&

Taxation is described as a destructive power which interferes with the personal andproperty rights of the people and ta'es from them a portion of their property for thesupport of the government. (Paseo Realty & Development Corporation v. Court of

Appeals, GR No. 11928, !"to#er 1$, 2%%'

B. Na$(re !" $a#a$i!n

Taxation is inherent in nature, being an attribute of sovereignty. (Cam#er of Real)state an* +uil*ers Asso"iation, -n". v. Romulo, 1 CRA %/ (2%1%''

!s an incident of sovereignty, the power to tax has been described as unlimited inits range, ac'nowledging in its very nature no limits, so that security against itsabuse is to be found only in the responsibility of the legislature which imposes thetax on the constituency who are to pay it. (0a"tan Ce#u -nternational Airport

Autority v. 0ar"os, 21 CRA (199''

The power of taxation is an essential and inherent attribute of sovereignty,belonging as a matter of right to every independent government, without beingexpressly conferred by the people. (PepsiCola +ottlin3 Company of te Pil. 4. 0un.of 5anauan, 6eyte, 9 CRA %'

The power to tax is inherent in the tate, such power being inherently legislative,based on the principle that taxes are a grant of the people who are taxed, and thegrant must be made by the immediate representative of the people, and where thepeople have laid the power, there it must remain and be exercised. (Commissioner of -nternal Revenue v. 7ortune 5o#a""o Corporation, //9 CRA 1% (2%%8''

The power of taxation is essentially a legislative function. The power to tax includesthe authority to)(1& determine the

(a& nature ('ind&*(b& object (purpose&*

+ar ps -ilipinas /1-hilippine !ssociation of 0aw chools



(c& extent (amount of rate&*(d& coverage (subjects and objects&*(e& apportionment of the tax (general or limited application&*(f& situs (place& of the imposition* and(g& method of collection*

(& grant tax exemptions or condonations* and(#& specify or provide for the administrative as well as judicial remedies that eitherthe government or the taxpayer may avail themselves in the proper implementationof the tax measure. (Petron v. Pililla, GR No. 1/8881, April 1, 2%%8'

In other words, the legislature wields the power to dene what tax shall be imposed,why it should be imposed, how much tax shall be imposed, against whom (or what&it shall be imposed and where it shall be imposed. (Cam#er of Real )state an*+uil*ers Asso"iation, -n". v. Romulo, 1 CRA %/ (2%1%''

C. C)arac$eri$ic !" $a#a$i!n

!s a principal attribute of sovereignty, the exercise of taxing power derives itssource from the very existence of the state whose social contract with its citiensobliges it to promote public interest and common good. (National Poer Corporationv. City of Ca#anatuan, GR No. 1911%, April 9, 2%%$'

The power to tax is so unlimited in force and so searching in extent, that courtsscarcely venture to declare that it is subject to any restrictions whatever, exceptsuch as rest in the discretion of the authority which exercises it. (5io v. 4i*eo3ramRe3ulatory +oar* et al., 1/1 CRA 21$'

It is a settled principle that the power of taxation by the state is plenary.2omprehensive and supreme, the principal chec' upon its abuse resting in theresponsibility of the members of the legislature to their constituents. (P6AN5)RPR!DC5, -NC. v. 7)R5-P:-6 C!RP!RA5-!N, G.R. No. 1%%, 0ar" 1, 2%%8'

Taxes being the lifeblood of the government that should be collected withoutunnecessary hindrance, every precaution must be ta'en not to unduly suppress it.(Repu#li" v. Ca3uioa, /$ CRA 19$ (2%%''

The power to tax is sometimes called the power to destroy. Therefore, it should beexercised with caution to minimie injury to the proprietary rights of the taxpayer. Itmust be exercised fairly, e3ually and uniformly, lest the tax collector 'ills the 4henthat lays the golden egg.5 (Commissioner of -nternal Revenue v. 0 Prime :ol*in3s,-n"., 1$ CRA (2%1%''

In order to maintain the general public5s trust and condence in the government,this power must be used justly and not treacherously. (Ro;as y Cia v. Court of 5a;

Appeals, 2$ CRA 2'

Tax laws are prospective in operation, unless the language of the statute clearlyprovides otherwise. (Commissioner of -nternal Revenue v. A"osta, /29 CRA 1(2%%''




#

%. P!*er !" $a#a$i!n c!+pare' *i$) !$)er p!*er

1. P!lice p!*er

-olice -ower is the power to ma'e, ordain and establish all manner of wholesomeand reasonable laws, statutes and ordinances whether with penalties or without, notrepugnant to the 2onstitution, the good and welfare of the commonwealth, and forthe subjects of the same. (0etropolitan 0anila Development Autority v. Garin, GRNo. 1$%2$%, April 1/, 2%%/'

The main purpose of police power is the regulation of a behavior or conduct, whiletaxation is revenue generation. The 6lawful subjects6 and 6lawful means6 tests areused to determine the validity of a law enacted under the police power. The powerof taxation, on the other hand, is circumscribed by inherent and constitutionallimitations. (P6AN5)R PR!DC5, -NC. v. 7)R5-P:-6 C!RP!RA5-!N, G.R. No.1%%, 0ar" 1, 2%%8'

The motivation behind many taxation measures is the implementation of policepower goals. -rogressive income taxes alleviate the margin between rich and poor*the so%called 7sin taxes8 on alcohol and tobacco manufacturers help dissuade theconsumers from excessive inta'e of these potentially harmful products. (!5:)RNCR! C)0)N5 C!RP!RA5-!N v. C)0)N5 0AN7AC5R)R A!C-A5-!N !7 5:)P:-6-PP-N), G.R. No. 1/8/%, Au3ust $, 2%%/'

Taxation is distinguishable from police power as to the means employed toimplement these public good goals. Those doctrines that are uni3ue to taxationarose from peculiar considerations such as those especially punitive e9ects of taxation, and the belief that taxes are the lifeblood of the state yet at the sametime, it has been recognied that taxation may be made the implement of thestate5s police power. (!5:)RN CR! C)0)N5 C!RP!RA5-!N v. C)0)N5 0AN7AC5R)R A!C-A5-!N !7 5:) P:-6-PP-N), G.R. No. 1/8/%, Au3ust $,2%%/'

:nli'e ordinary revenue laws, ;.!. <</ and -.=. >< did not raise money to boostthe government5s general funds but to provide means for the rehabilitation andstabiliation of a threatened industry, the coconut industry, which is so a9ected withpublic interest as to be within the police power of the tate. The subject laws area'in to the sugar liens imposed by ec. >(b& of -.=. #??, and the oil pricestabiliation funds under -.=. 1@<, as amended by A.. 1#>. (PA0+ANANG<!A6-=!N NG 0GA A0A:ANG 0AGAA<A A5 0ANGGAGA>A A N-=GAN v.)?)C5-4) )CR)5AR= G.R. Nos. 1%$$ April 1%, 2%12'

If generation 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 thatrevenue is incidentally raised does not ma'e the imposition a tax. (G)R!C:- v.D)PAR50)N5 !7 )N)RG=, /2 CRA 9 (2%%''




$

Bhile it is true that the power of taxation can be used as an implement of policepower, the primary purpose of the levy is revenue generation. If the purpose isprimarily revenue, or if revenue is, at least, one of the real and substantialpurposes, then the exaction is properly called a tax. (P6AN5)R PR!DC5, -NC. v.7)R5-P:-6 C!RP!RA5-!N, G.R. No. 1%%, 0ar" 1, 2%%8'

It has been the settled law that municipal license fees could be classied into thoseimposed for regulating occupations or regular enterprises, for the regulation orrestriction of non%useful occupations or enterprises and for revenue purposes only.0icenses for non%useful occupations are also incidental to the police power and theright to exact a fee may be implied from the power to license and regulate, but inxing the amount of the license fees the municipal corporations are allowed a muchwider discretion in this class of cases. ()R0-5A0A6A5) :!5)6 AND 0!5)6!P)RA5!R A!C-A5-!N, -NC., :!5)6 D)6 0AR -NC. an* G! C:- v. 5:):!N!RA+6) C-5= 0A=!R !7 0AN-6A, G.R. No. 629$, @uly $1, 19'

ince the main purpose of rdinance Co. 1? is to regulate certain construction

activities of the identied special projects, which includes 7cell sites8 ortelecommunications towers, the fees imposed in rdinance Co. 1? are primarilyregulatory in nature, and not primarily revenue%raising. Bhile the fees maycontribute to the revenues of the Dunicipality, this e9ect is merely incidental. Thus,the fees imposed in rdinance Co. 1? are not taxes. 0AR5 C!00N-CA5-!N -NC.,vs. 0N-C-PA6-5= !7 0A64AR, +A5ANGA, G.R. No. 2%29, 7e#ruary 18, 2%1, @.Carpio

2. P!*er !" e+inen$ '!+ain+e it stressed that the privilege enjoyed by senior citiens does notcome directly from the tate, but rather from the private establishments concerned.!ccordingly, the tax credit benet granted to these establishments can be deemed

as their just compensation for private property ta'en by the tate for public use.(C!00--!N)R !7 -N5)RNA6 R)4)N) v. C)N5RA6 6!N DRG C!RP!RA5-!NG.R. No. 1/9 April 1/, 2%%/'

+esides, the taxation power can also be used as an implement for the exercise of the power of eminent domain. Tax measures are but 6enforced contributionsexacted on pain of penal sanctions6 and 6clearly imposed for a public purpose.6 Inrecent years, the power to tax has indeed become a most e9ective tool to realiesocial justice, public welfare, and the e3uitable distribution of wealth.(C!00--!N)R !7 -N5)RNA6 R)4)N) v. C)N5RA6 6!N DRG C!RP!RA5-!NG.R. No. 1/9 April 1/, 2%%/'

E. P(rp!e !" $a#a$i!n1. Re,en(e-raiin2. N!n-re,en(e/pecial !r re(la$!r

The 2ourt was satised that the coco%levy funds were raised pursuant to law tosupport a proper governmental purpose. They were raised with the use of the policeand taxing powers of the tate for the benet of the coconut industry and itsfarmers in general. (PA0+ANANG <!A6-=!N NG 0GA A0A:ANG 0AGAA<A A5




0ANGGAGA>A A N-=GAN v. )?)C5-4) )CR)5AR= G.R. Nos. 1%$$ April1%, 2%12'

In relation to the regulatory purpose of the imposed fees, 7the imposition3uestioned must relate to an occupation or activity that so engages the publicinterest, morals, safety and development as to re3uire regulation for the protection

and promotion of such public interest* the imposition must also bear a reasonablerelation to the probable expenses of regulation, ta'ing into account not only thecosts of direct regulation, but also its incidental conse3uences as well.8 (C:)4R!NP:-6-PP-N), -NC. v. +A) C!N4)R-!N D)4)6!P0)N5 A5:!R-5=, $% CRA /19(2%1%''

!s an elementary principle of law, license taxation must not be 7so onerous to showa purpose to prohibit a business which is not injurious to health or morals.8(TA;DIC!0 E!2I0ITIA !C= A;FI2A 2;-;!TIC v. -GI0I--ICA -;T!:TG;ITH, #>? 2;! ? (//&&

It is a police power measure. The objectives behind its enactment are) 6(1& To beable to impose payment of the license fee for engaging in the business of massageclinic (& in order to forestall possible immorality which might grow out of theconstruction of separate rooms for massage of customers.6 (5!0A 4)6AC! v.:!N. AN5!N-! @. 4-66)GA, G.R. No. 621/$, 7e#ruary 1, 198$'

. Principle !" !(n' $a# $e+1. ical a'e(ac

2ertainly, to continue collecting real property taxes based on valuations arrived atseveral years ago, in disregard of the increases in the value of real properties thathave occurred since then, is not in consonance with a sound tax system. Eiscal

ade3uacy, which is one of the characteristics of a sound tax system, re3uires thatsources of revenues must be ade3uate to meet government expenditures and theirvariations. (7RANC-C! -. C:A4) v. @A-0) +. !NGP-N, G.R. No. 8, @une ,199%'

2. A'+ini$ra$i,e "eai3ili$4. T)e!re$ical ($iceG. T)e!r an' 3ai !" $a#a$i!n1. Li"e3l!!' $)e!r

!s well said in a prior case, revenue laws are not intended to be liberally construed.2onsidering that taxes are the lifeblood of the government and in Golmes5s

memorable metaphor, the price we pay for civiliation, tax laws must be faithfullyand strictly implemented. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. R!)0AR-) AC!5A G.R. No. 1/%8 Au3ust $, 2%%'

Taxes being the lifeblood of the government should be collected promptly. Co courtshall have the authority to grant an injunction to restrain the collection of anyinternal revenue tax, fee or charge imposed by the Cational Internal ;evenue 2ode.(ANG)6) C-5= v. ANG)6) )6)C5R-C C!!P)RA5-!N, 22 CRA $ (2%1%''




<

Be are not unaware of the doctrine that taxes are the lifeblood of the government,without which it can not properly perform its functions* and that appeal shall notsuspend the collection of realty taxes. Gowever, there is an exception to theforegoing rule, i.e., where the taxpayer has shown a clear and unmista'able right torefuse or to hold in abeyance the payment of taxes. ()0)R6-NDA . 5A6)N5! vs.:!N. R)0-G-! 0. )CA6ADA, @R., G.R. No. 18%88, @une 2, 2%%8'

2. Necei$ $)e!r

The theory behind the exercise of the power to tax emanates from necessity,without taxes, government cannot fulll its mandate of promoting the generalwelfare and well being of the people. (G)R!C:- v. D)PAR50)N5 !7 )N)RG=, /2CRA 9 (2%%''

4. Bene&$-pr!$ec$i!n $)e!r 6S+3i!$ic rela$i!n)ip7

=espite the natural reluctance to surrender part of ones hard earned income to thetaxing authorities, every person who is able to must contribute his share in therunning of the government. The government for its part is expected to respond inthe form of tangible and intangible benets intended to improve the lives of thepeople and enhance their moral and material values. This symbiotic relationship isthe rationale of taxation and should dispel the erroneous notion that it is anarbitrary method of exaction by those in the seat of power. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. A6G), -NC., an* 5:) C!R5 !7 5A? APP)A6, G.R. No. 62889, 7e#ruary 1, 1988'

The expenses of government, having for their object the interest of all, should beborne by everyone, and the more man enjoys the advantages of society, the morehe ought to hold himself honored in contributing to those expenses. (A+A<ADA

GR! PAR5= 6-5 (7ormerly AA@A' !77-C)R A0!N . A6CAN5ARA an* )D4-NC)N5 . A6+AN! v. 5:) :!N!RA+6) )?)C5-4) )CR)5AR= )DARD! )R0-5A,G.R. No. 18%/, eptem#er 1, 2%%/'

8. 9(ri'ic$i!n !,er (3ec$ an' !3ec$

:. %!c$rine in $a#a$i!n1. Pr!pec$i,i$ !" $a# la*

Cote that the issue on the retroactivity of ection /$(c& of the 1@@> CI;2 arosebecause the last paragraph of ection /$(c& was not found in ection #/ of theold 2ode. !fter a thorough consideration of this matter, we nd that we cannot give

retroactive application to ection /$(c& abovecited. Be have to stress that tax lawsare prospective in operation, unless the language of the statute clearly providesotherwise. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. R!)0AR-) AC!5A G.R. No.1/%8 Au3ust $, 2%%'

2. I+precrip$i3ili$4. %!(3le $a#a$i!na7 S$ric$ ene




>

=ouble taxation means taxing the same property twice when it should be taxed onlyonce* that is, 6taxing the same person twice by the same jurisdiction for the samething.6 It is obnoxious when the taxpayer is taxed twice, when it should be but once.therwise described as 6direct duplicate taxation,6 the two taxes must be imposedon the same subject matter, for the same purpose, by the same taxing authority,within the same jurisdiction, during the same taxing period* and they must be of the

same 'ind or character. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. !6-D+AN< C!RP!RA5-!N G.R. No. 18191 Novem#er 2/, 2%%$'

Eor =ouble taxation to ta'e place, the two taxes must be imposed on the samesubject matter, for the same purpose, by the same taxing authority, within thesame jurisdiction, during the same taxing period* and the taxes must be of thesame 'ind or character. +ecause ection 1 of the ;evenue 2ode of Danilaimposed the tax on a person who sold goods and services in the course of trade orbusiness based on a certain percentage of his gross sales or receipts in thepreceding calendar year, while ection 1 and ection 1> li'ewise imposed the taxon a person who sold goods and services in the course of trade or business but onlyidentied such person with particularity, namely, the wholesaler, distributor or

dealer (ection 1&, and the retailer (ection 1>&, all the taxes being imposed on theprivilege of doing business in the 2ity of Danila in order to ma'e the taxpayerscontribute to the city5s revenues J were imposed on the same subject matter andfor the same purpose. NR)R= CAR) C!RP!RA5-!NB :!)0AR5, -NC.B 5AR

APP6-ANC) C)N5)R, -NC.B :&+, -NC.B PP6-) 5A5-!N, -NC.B an* :ARD>AR)>!R<:!P, -NC. vs. AN5:!N= AC)4)D!, in is "apa"ity as 5:) 5R)AR)R !7 0AN-6AB an* 5:) C-5= !7 0AN-6A, G.R. No. 18%/1, @uly $%, 2%1, @. +ersamin

temmed leaf tobacco is subject to the specic tax under ection 1$1(b&. It is apartially prepared tobacco. The removal of the stem or midrib from the leaf tobaccoma'es the resulting stemmed leaf tobacco a prepared or partially prepared tobacco.ince the Tax 2ode contained no denition of 7partially prepared tobacco,8 then theterm should be construed in its general, ordinary, and comprehensive sense.Gowever, importation of stemmed leaf tobacco is not included in the exemptionunder ection 1#>. The transaction contemplated in ection 1#> does not includeimportation of stemmed leaf tobacco for the reason that the law uses the word7sold8 to describe the transaction of transferring the raw materials from onemanufacturer to another. Einally, excise taxes are essentially taxes on propertybecause they are levied on certain specied goods or articles manufactured orproduced in the -hilippines for domestic sale or consumption or for any otherdisposition, and on goods imported. In this case, there is no double taxation in theprohibited sense despite the fact that they are paying the specic tax on the rawmaterial and on the nished product in which the raw material was a part, becausethe specic tax is imposed by explicit provisions of the Tax 2ode on two di9erentarticles or products) (1& on the stemmed leaf tobacco* and (& on cigar or cigarette.6A )R5) C-GAR & C-GAR)55) 7AC5!R= vs. C!R5 !7 APP)A6 ANDC!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 12/$, G.R. Nos. 1$$2829,G.R. No. 192, G.R. No. 18%/, G.R. No. 1/819, G.R. No. 1/99, Novem#er 11, 2%1, @. 6eonen

37 Br!a' ene




?

ubjecting interest income to a /K EBT and including it in the computation of theK L;T is clearly not double taxation) Eirst, the taxes herein are imposed on twodi9erent subject matters* econd, although both taxes are national in scopebecause they are imposed by the same taxing authority %% the national governmentunder the Tax 2ode %% and operate within the same -hilippine jurisdiction for thesame purpose of raising revenues, the taxing periods they a9ect are di9erent* Third,

these two taxes are of di9erent 'inds or characters. (C!00--!N)R !7 -N5)RNA6R)4)N) v. !6-D+AN< C!RP!RA5-!N G.R. No. 18191 Novem#er 2/, 2%%$'

;egulation and taxation are two di9erent things, the rst being an exercise of policepower, whereas the latter involves the exercise of the power of taxation. Bhile ;.!.<$ provides that no city may impose taxes on forest products and althoughlumber is a forest product, the tax in 3uestion is imposed not on the lumber butupon its sale* thus, there is no double taxation and even if there was, it is notprohibited. ()RA7-CA v. C-5= 5R)AR)R !7 !R0!C, G.R. No. 6281$, April 28,198'

+oth a license fee and a tax may be imposed on the same business or occupation,

or for selling the same article. This is not being in violation of the rule againstdouble taxation. (C!0PAN-A G)N)RA6 D) 5A+AC! D) 7-6-P-NA v. C-5= !7 0AN-6A, 8 CRA $'

c7 C!n$i$($i!nali$ !" '!(3le $a#a$i!n

:nli'e the :nited tates 2onstitution, double taxation is not specially prohibited inthe -hilippine 2onstitution. (0anufa"turers 6ife v. 0eer, 89 Pil 21%'

'7 M!'e !" eli+ina$in '!(3le $a#a$i!n

=ouble taxation usually ta'es place when a person is resident of a contracting stateand derives income from, or owns capital in the other contracting state and bothstates impose tax on that income or capital. In order to eliminate double taxation, atax treaty resorts to several methods.

Eirst, it sets out the respective rights to tax of the state of source or situs and of thestate of residence with regard to certain classes of income or capital. In some cases,an exclusive right to tax is conferred on one of the contracting states* however, forother items of income or capital, both states are given the right to tax, although theamount of tax that may be imposed by the state of source is limited.

The second method for the elimination of double taxation applies whenever thestate of source is given a full or limited right to tax together with the state of residence. In this case, the treaties ma'e it incumbent upon the state of residenceto allow relief in order to avoid double taxation. There are two methods of relief% theexemption method and the credit method. In the exemption method, the income orcapital which is taxable in the state of source or situs is exempted in the state of residence, although in some instances it may be ta'en into account in determiningthe rate of tax applicable to the taxpayer5s remaining income or capital. n theother hand, in the credit method, although the income or capital which is taxed inthe state of source is still taxable in the state of residence, the tax paid in the




@

former is credited against the tax levied in the latter. The basic di9erence betweenthe two methods is that in the exemption method, the focus is on the income orcapital itself, whereas the credit method focuses upon the tax. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. .C. @!:N!N AND !N, -NC. G.R. No. 121%/ @une 2/,1999'

In negotiating tax treaties, the underlying rationale for reducing the tax rate is thatthe -hilippines will give up a part of the tax in the expectation that the tax given upfor this particular investment is not taxed by the other country. Thus, if the rates of tax are lowered by the state of source, in this case, by the -hilippines, there shouldbe a concomitant commitment on the part of the state of residence to grant someform of tax relief, whether this be in the form of a tax credit or exemption.(C!00--!N)R !7 -N5)RNA6 R)4)N) v. .C. @!:N!N AND !N, -NC. G.R. No.121%/ @une 2/, 1999'

8. Ecape "r!+ $a#a$i!na7 S)i"$in !" $a# 3(r'en

ection 1#(a& should be construed as prohibiting the shifting of the burden of theexcise tax to the international carriers who buy petroleum products from the localmanufacturers. aid international carriers are thus allowed to purchase thepetroleum products without the excise tax component which otherwise would havebeen added to the cost or price xed by the local manufacturers ordistributorsMsellers. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. P-6-P-NA :)66P)5R!6)0 C!RP!RA5-!N, G.R. No. 1889, 7e#ruary 19, 2%1'

6i7 Wa !" )i"$in $)e $a# 3(r'en

It may indeed be that the economic burden of the tax nally falls on the purchaser*

when it does the tax becomes a part of the price which the purchaser must pay. Itdoes not matter that an additional amount is billed as tax to the purchaser. Themethod of listing the price and the tax separately and dening taxable grossreceipts as the amount received less the amount of the tax added, merely avoidspayment by the seller of a tax on the amount of the tax. (P:-6-PP-N) AC)5=6)N)C!., -NC. v. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 619%, Au3ust 1,19'

6ii7 Ta#e $)a$ can 3e )i"$e'6iii7 Meanin !" i+pac$ an' inci'ence !" $a#a$i!n

In indirect taxation, a distinction is made between the liability for the tax and

burden of the tax) The seller who is liable for the F!T may shift or pass on theamount of F!T it paid on goods, properties or services to the buyer. In such a case,what is transferred is not the sellers liability but merely the burden of theF!T. (R)NA5! 4. D-A an* AR!RA 0A. 7. 5-0+!6 v. 5:) )CR)5AR= !7 7-NANC),G.R. No. 19$%%, @uly 19, 2%11'

37 Ta# a,!i'ance




1/

Tax avoidance is the tax saving device within the means sanctioned by law. Thismethod should be used by the taxpayer in good faith and at arms length.(C!00--!N)R !7 -N5)RNA6 R)4)N) v. 5:) )5A5) !7 +)N-GN! P. 5!DA, @R.G.R. No. 1188 eptem#er 1, 2%%'

c7 Ta# e,ai!n

Tax evasion, on the other hand, is a scheme used outside of those lawful means andwhen availed of, it usually subjects the taxpayer to further or additional civil orcriminal liabilities. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. 5:) )5A5) !7 +)N-GN! P. 5!DA, @R. G.R. No. 1188 eptem#er 1, 2%%'

Tax evasion connotes the integration of three factors) (1& the end to be achieved,i.e., the payment of less than that 'nown by the taxpayer to be legally due, or thenon%payment of tax when it is shown that a tax is due* (& an accompanying state of mind which is described as being 6evil,6 in 6bad faith,6 6willfull,6 or 6deliberate andnot accidental6* and (#& a course of action or failure of action which is unlawful.(C!00--!N)R !7 -N5)RNA6 R)4)N) v. 5:) )5A5) !7 +)N-GN! P. 5!DA, @R.

G.R. No. 1188 eptem#er 1, 2%%'

Gere, it is obvious that the objective of the sale to !ltonaga was to reduce theamount of tax to be paid especially that the transfer from him to ;DI would thensubject the income to only K individual capital gains tax, and not the #Kcorporate income tax. !ltonaga5s sole purpose of ac3uiring and transferring title of the subject properties on the same day was to create a tax shelter. (C!00--!N)R!7 -N5)RNA6 R)4)N) v. 5:) )5A5) !7 +)N-GN! P. 5!DA, @R. G.R. No. 1188eptem#er 1, 2%%'

5. E#e+p$i!n "r!+ $a#a$i!na7 Meanin !" e#e+p$i!n "r!+ $a#a$i!n

It is the legislature, unless limited by a provision of the state constitution, that hasfull power to exempt any person or corporation or class of property from taxation,its power to exempt being as broad as its power to tax. ther than 2ongress, the2onstitution may itself provide for specic tax exemptions, or local governmentsmay pass ordinances on exemption only from local taxes. (@!:N :A= P)!P6)

A65)RNA5-4) C!A6-5-!N, et al. v. 4-C5!R 6-0, et al., G. R. No. 119/, !"to#er 2,2%%$'

37 Na$(re !" $a# e#e+p$i!n

Taxation is the rule and exemption is the exception. (7)6 )N)RG=, -NC. v.PR!4-NC) !7 +A5ANGA, /1 CRA 18 (2%%''

ince the power to tax includes the power to exempt thereof which is essentially alegislative prerogative, it follows that a municipal mayor who is an executive oNcermay not unilaterally withdraw such an expression of a policy thru the enactment of a tax. (P:-6-PP-N) P)5R!6)0 C!RP!RA5-!N v. 0N-C-PA6-5= !7 P-6-66A, G.R. No.9%, @une $, 1991'




11

! tax exemption being enjoyed by the buyer cannot be the basis of a claim for taxexemption by the manufacturer or seller of the goods for any tax due to it as themanufacturer or seller. The excise tax imposed on petroleum products underection 1$? is the direct liability of the manufacturer who cannot thus invo'e theexcise tax exemption granted to its buyers who are international carriers*nevertheless, the manufacturer, as the statutory taxpayer who is directly liable to

pay the excise tax on its petroleum products, is entitled to a refund or credit of theexcise taxes it paid for petroleum products sold to international carriers(C!00--!N)R !7 -N5)RNA6 R)4)N) v. P-6-P-NA :)66 P)5R!6)0C!RP!RA5-!N, G.R. No. 1889, 7e#ruary 19, 2%1'

c7 ;in' !" $a# e#e+p$i!n6i7 E#pre6ii7 I+plie'

It bears repeating that the law loo's with disfavor on tax exemptions and he whowould see' to be thus privileged must justify it by words too plain to be mista'en

and too categorical to be misinterpreted. (>)5)RN 0-N!6C! C!RP!RA5-!N v.C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 61$2, Au3ust 1, 198$'

6iii7 C!n$rac$(al

Cevertheless, since taxation is the rule and exemption therefrom the exception, theexemption may thus be withdrawn at the pleasure of the taxing authority. The onlyexception to this rule is where the exemption was granted to private parties basedon material consideration of a mutual nature, which then becomes contractual andis thus covered by the non%impairment clause of the 2onstitution. (0C-AA v. 0ar"os,G.R. No. 12%%82 eptem#er 11, 199'

'7 Ra$i!nale/r!(n' "!r e#e+p$i!n

In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has become a tool to realie social justice and thee3uitable distribution of wealth, economic progress and the protection of localindustries as well as public welfare and similar objectives. Taxation assumes evengreater signicance with the ratication of the 1@?> 2onstitution. (+A5ANGAP!>)R C!RP!RA5-!N v. +A5ANGA C-5= an* NA5-!NA6 P!>)R C!RP!RA5-!N,G.R. No. 1/2/, April 28, 2%%'

The --I says that the discriminatory treatment of the press is highlighted by the factthat transactions, which are prot oriented, continue to enjoy exemption under ;.!.

Co. >>1< but an enumeration of some of these transactions will suNce to show thatby and large this is not so and that the exemptions are granted for a purpose. !sthe olicitor Leneral says, such exemptions are granted, in some cases, toencourage agricultural production and, in other cases, for the personal benet of the end%user rather than for prot. (AR5R! 0. 5!6)N5-N! v. 5:) )CR)5AR= !7 7-NANC) an* 5:) C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 11///,!"to#er $%, 199/'

e7 Re,!ca$i!n !" $a# e#e+p$i!n




1

ince the law granted the press a privilege, the law could ta'e bac' the privilegeanytime without o9ense to the 2onstitution. The reason is simple) by grantingexemptions, the tate does not forever waive the exercise of its sovereignprerogative* indeed, in withdrawing the exemption, the law merely subjects thepress to the same tax burden to which other businesses have long ago beensubject. (AR5R! 0. 5!6)N5-N! v. 5:) )CR)5AR= !7 7-NANC) an* 5:)C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 11///, !"to#er $%, 199/'

The rule is that a special and local statute applicable to a particular case is notrepealed by a later statute which is general in its terms, provisions and applicationeven if the terms of the general act are broad enough to include the cases in thespecial law unless there is manifest intent to repeal or alter the special law. (5:)PR!4-NC) !7 0-A0- !R-)N5A6, represente* #y its PR!4-NC-A6 5R)AR)R v.CAGA=AN )6)C5R-C P!>)R AND 6-G:5 C!0PAN=, -NC., G.R. No. 6/$//, @anuary 12, 199%'

This 2ourt recognied the removal of the blan'et exclusion of governmentinstrumentalities from local taxation as one of the most signicant provisions of the1@@1 0L2. pecically, we stressed that ection 1@# of the 0L2, an express andgeneral repeal of all statutes granting exemptions from local taxes, withdrew thesweeping tax privileges previously enjoyed by the C-2 under its 2harter.(+A5ANGA P!>)R C!RP!RA5-!N v. +A5ANGA C-5= an* NA5-!NA6 P!>)RC!RP!RA5-!N, G.R. No. 1/2/, April 28, 2%%'

Arroneous application and enforcement of the law by public oNcers do not precludesubse3uent correct application of the statute, and the government is neverestopped by the mista'e or error on the part of its agents. (-GI0I--ICA +!OAT+!00!2I!TIC v. 2:;T E !--A!0, ##> 2;! #?&

<. C!+pena$i!n an' e$-!=

Taxes cannot be the subject of set%o9 or compensation for the following reasons) (1&taxes are of distinct 'ind, essence and nature, and these impositions cannot beclassed in the same category as ordinary obligations* (& the applicable laws andprinciples governing each are peculiar, not necessarily common to each* and (#&public policy is better subscribed if the integrity and independence of taxes aremaintained. (R)P+6-C v. 0A0+6A! 60+)R C!0PAN=, CRA 22 (192''

Taxes cannot be subject to compensation for the simple reason that theLovernment and the taxpayers are not creditors and debtors of each other, debts

are due to the Lovernment in its corporate capacity, while taxes are due to theLovernment in its sovereign capacity. (!5: A7R-CAN A-R>A= v. C!00--!N)R!7 -N5)RNA6 R)4)N), 12 CRA / (2%1%''

Gowever, if the obligation to pay taxes and the taxpayer5s claim against thegovernment are both overdue, demandable, as well as fully li3uidated,compensation ta'es place by operation of law and both obligations are extinguishedto their concurrent amounts. (D!0-NG! v. GAR6-5!, 8 CRA $ (19$''




1#

>. C!+pr!+ie?. Ta# a+ne$a7 %e&ni$i!n

! tax amnesty is a general pardon or the intentional overloo'ing by the tate of itsauthority to impose penalties on persons otherwise guilty of violating a tax law. It

parta'es of an absolute waiver by the government of its right to collect what is dueit and to give tax evaders who wish to relent a chance to start with a clean slate.(A-A -N5)RNA5-!NA6 AC5-!N))R, -NC. v. C!00--!N)R !7 -N5)RNA6R)4)N) G.R. No. 1911/ eptem#er 2, 2%12'

! tax amnesty, much li'e a tax exemption, is never favored or presumed in law. Thegrant of a tax amnesty, similar to a tax exemption, must be construed strictlyagainst the taxpayer and liberally in favor of the taxing authority. (A-A-N5)RNA5-!NA6 AC5-!N))R, -NC. v. C!00--!N)R !7 -N5)RNA6 R)4)N) G.R.No. 1911/ eptem#er 2, 2%12'

The claim of a taxpayer under a tax amnesty shall be allowed when the liability

involves the deciency in payment of income tax. Gowever, it must be disallowedwhen the taxpayer is assessed on his capacity as a withholding tax agent becausethe person who earned the taxable income was another person other than thewithholding agent. 6G )6)C5R!N-C P:-6-PP-N), -NC. vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 1//1, De"em#er %$, 2%1, @. 6eonen

Ceither the law nor the implementing rules state that a court ruling that has notattained nality would preclude the availment of the benets of the Tax !mnesty0aw. Bhile tax amnesty, similar to a tax exemption, must be construed strictlyagainst the taxpayer and liberally in favor of the taxing authority, it is also a well%settled doctrine that the rule%ma'ing power of administrative agencies cannot beextended to amend or expand statutory re3uirements or to embrace matters notoriginally encompassed by the law. !dministrative regulations should always be inaccord with the provisions of the statute they see' to carry into e9ect, and anyresulting inconsistency shall be resolved in favor of the basic law. C GAR0)N5,-NC., vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 182$99, 0ar" 12, 2%1,C@. ereno

37 %i$in(i)e' "r!+ $a# e#e+p$i!n

@. C!n$r(c$i!n an' in$erpre$a$i!n !"a7 Ta# la*6i7 General r(le

Ferily, taxation is a destructive power which interferes with the personal andproperty for the support of the government. !ccordingly, tax statutes must beconstrued strictly against the government and liberally in favor of thetaxpayer. (0C-AA v. 0ar"os, G.R. No. 12%%82 eptem#er 11, 199'

The rule that tax exemptions should be construed strictly against the taxpayerpresupposes that the taxpayer is clearly subject to the tax being levied against him.:nless a statute imposes a tax clearly, expressly and unambiguously, what applies




1$

is the e3ually well%settled rule that the imposition of a tax cannot be presumed. Thisis because taxes are burdens on the taxpayer, and should not be unduly imposed orpresumed beyond what the statutes expressly and clearly import. (C!00--!N)R!7 -N5)RNA6 R)4)N) v. 5:) P:-6-PP-N) A0)R-CAN ACC-D)N5 -NRANC)C!0PAN=, -NC. G.R. No. 11/8 0ar" 18, 2%%/'

6ii7 E#cep$i!n37 Ta# e#e+p$i!n an' e#cl(i!n6i7 General r(le

+ut since taxes are what we pay for civilied society, or are the lifeblood of thenation, the law frowns against exemptions from taxation and statutes granting taxexemptions are thus construed in strictissimi juris against the taxpayers andliberally in favor of the taxing authority. (0C-AA v. 0ar"os, G.R. No. 12%%82eptem#er 11, 199'

Antrenched in our jurisprudence is the principle that tax refunds are in the nature of tax exemptions which are construed in strictissimi juris against the taxpayer and

liberally in favor of the government. !s tax refunds involve a return of revenue fromthe government, the claimant must show indubitably the specic provision of lawfrom which her right arises* it cannot be allowed to exist upon a mere vagueimplication or inference nor can it be extended beyond the ordinary and reasonableintendment of the language actually used by the legislature in granting the refund.(C!00--!N)R !7 -N5)RNA6 R)4)N) v. R!)0AR-) AC!5A G.R. No. 1/%8

Au3ust $, 2%%'

Bell%settled in this jurisdiction is the fact that actions for tax refund, as in this case,are in the nature of a claim for exemption and the law is construed in strictissimi

juris against the taxpayer. The pieces of evidence presented entitling a taxpayer toan exemption are also strictissimi scrutinied and must be duly proven. (<)PC!P:-6-PP-N) C!RP!RA5-!N v. C!00--!N)R !7 -N5)RNA6 R)4)N) G.R. No.1991 @anuary $1, 2%11'

The legislative intent, as shown by the discussions in the +icameral 2onferenceDeeting, is to re3uire -!L2; to pay corporate income tax* hence, the omission orremoval of -!L2; from exemption from the payment of corporate income tax. It isa basic precept of statutory construction that the express mention of one person,thing, act, or conse3uence excludes all others as expressed in the familiar maximexpressio unius est exclusio alterius. (P:-6-PP-N) A0)0)N5 AND GA0-NGC!RP!RA5-!N (PAGC!R' v. 5:) +R)A !7 -N5)RNA6 R)4)N) G.R. No. 12%80ar" 1/, 2%11'

It is a basic precept of statutory construction that the express mention of oneperson, thing, act, or conse3uence excludes all others as expressed in the familiarmaxim e;pressio unius est e;"lusio alterius. Cot being a local water district, acooperative registered under ;.!. Co. <@#?, or a non%stoc' and non%prot hospital oreducational institution, petitioner clearly does not belong to the exception and it istherefore incumbent upon it to point to some provisions of the 0L2 that expresslygrant its exemption from local taxes. (NA5-!NA6 P!>)R C!RP!RA5-!N v. C-5= !7 CA+ANA5AN G.R. No. 1911% April 9, 2%%$'




1

=enitely, the taxability of a party cannot be blandly glossed over on the basis of asupposed 6broad, pragmatic analysis6 alone without substantial supportiveevidence, lest governmental operations su9er due to diminution of much neededfunds. Bhile international comity is invo'ed in this case on the nebulousrepresentation that the funds involved in the loans are those of a foreign

government, scrupulous care must be ta'en to avoid opening the Poodgates to theviolation of our tax laws. (2DDIICA; E ICTA;C!0 ;AFAC:A v. DIT:+IGIDAT!0 2;-;!TIC L.;. Co. 0%$@/? "anuary , 1@@/&

The claimed statutory exemption of the "ohn Gay AQ from taxation should bemanifest and unmista'able from the language of the law on which it is based* itmust be expressly granted in a statute stated in a language too clear to bemista'en. If it were the intent of the legislature to grant to the "ohn Gay AQ thesame tax exemption and incentives given to the ubic AQ, it would have soexpressly provided in the ;.!. Co. >>. (@!:N :A= P)!P6) A65)RNA5-4)C!A6-5-!N, et al. v. 4-C5!R 6-0, et al., G. R. No. 119/, !"to#er 2, 2%%$'

The 2ourt in -0=T v. 2ity of =avao, held that in approving ection # of ;! Co.>@, 2ongress did not intend it to operate as a blan'et tax exemption to alltelecommunications entities. The 2ourt also claried the meaning of the word6exemption6 in ection # of ;! >@) that the word 6exemption6 as used in thestatute refers or pertains merely to an exemption from regulatory or reportingre3uirements of the =epartment of Transportation and 2ommunication or theCational Transmission 2orporation and not to an exemption from the grantee5s taxliability. (0AR5 C!00N-CA5-!N, -NC. v.5:) C-5= !7 DA4A!, G.R. No. 1//91,

@uly 21, 2%%9'

In -hilippine 0ong =istance Telephone 2ompany (-0=T& v. -rovince of 0aguna, theissue that the 2ourt had to resolve was whether -0=T was liable to pay franchisetax to the -rovince of 0aguna in view of the 6in lieu of all taxes6 clause in itsfranchise and ection # of ;! >@. !pplying the rule of strict construction of lawsgranting tax exemptions and the rule that doubts are resolved in favor of municipalcorporations in interpreting statutory provisions on municipal taxing powers, the2ourt held that ection # of ;! >@ could not be considered as having amendedpetitioners franchise so as to entitle it to exemption from the imposition of localfranchise taxes. (0AR5 C!00N-CA5-!N, -NC. v.5:) C-5= !7 DA4A!, G.R. No.1//91, @uly 21, 2%%9'

The 6in lieu of all taxes6 clause in a legislative franchise should categorically statethat the exemption applies to both local and national taxes* otherwise, the

exemption claimed should be strictly construed against the taxpayer and liberally infavor of the taxing authority. (0AR5 C!00N-CA5-!N, -NC. v.5:) C-5= !7 DA4A!,G.R. No. 1//91, @uly 21, 2%%9'

-0=T5s contention that the 7in%lieu%of%all%taxes8 clause does not refer to 7taxexemption8 but to 7tax exclusion8 and hence, the stri"tissimi uris rule does notapply. The upreme 2ourt explains that these two terms actually mean the samething, such that the rule that tax exemption should be applied in stri"tissimi

uris against the taxpayer and liberally in favor of the government applies e3ually to




1<

tax exclusions (P:-6-PP-N) 6!NG D-5ANC) 5)6)P:!N) C!0PAN= vs PR!4-NC) !7 6AGNA G.R. No. 1/1899, Au3ust 1, 2%%/'

! tax credit or refund is strictly construed against the taxpayer. trict compliancewith the mandatory and jurisdictional conditions prescribed by law to claim such taxrefund or credit is essential and necessary for such claim to prosper. Concompliance

with the mandatory periods, nonobservance of the prescriptive periods, andnonadherence to exhaustion of administrative remedies bar a taxpayer5s claim fortax refund or credit, whether or not the 2I; 3uestions the numerical correctness of the claim of the taxpayer. -6-C!N P:-6-PP-N), -NC., (formerly -N5)6 P:-6-PP-N)0AN7AC5R-NG -NC.', vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No.18$% & 18$1C!00--!N)R !7 -N5)RNA6 R)4)N) vs. -6-C!N P:-6-PP-N),-NC., (formerly -N5)6 P:-6-PP-N) 0AN7AC5R-NG, -NC.' G.R. No. 18$8,7e#ruary 19, 2%1, @. 4illarama, @r.

6ii7 E#cep$i!n

Gowever, if the grantee of the exemption is a political subdivision or

instrumentality, the rigid rule of construction does not apply because the practicale9ect of the exemption is merely to reduce the amount of money that has to behandled by the government in the course of its operations. (0C-AA v. 0ar"os, G.R.No. 12%%82, eptem#er 11, 199'

There is parity between tax refund and tax exemption only when the former isbased either on a tax exemption statute or a tax refund statute. bviously, that isnot the situation here since Eortune Tobacco5s claim for refund is premised on itserroneous payment of the tax, or better still, the government5s exaction in theabsence of a law. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. 7!R5N) 5!+ACC!C!RP!RA5-!N, G.R. Nos. 12/, @uly 21, 2%%8'

! claim for tax refund may be based on statutes granting tax exemption or taxrefund and in such case, the rule of strict interpretation against the taxpayer isapplicable as the claim for refund parta'es of the nature of an exemption, alegislative grace, which cannot be allowed unless granted in the most explicit andcategorical language. Tax refunds (or tax credits&, on the other hand, are notfounded principally on legislative grace but on the legal principle which underlies all3uasi%contracts abhorring a person5s unjust enrichment at the expense of another.(C!00--!N)R !7 -N5)RNA6 R)4)N) v. 7!R5N) 5!+ACC! C!RP!RA5-!N, G.R.Nos. 12/, @uly 21, 2%%8'

!s a necessary corollary, when the taxpayer5s entitlement to a refund stands

undisputed, the tate should not misuse technicalities and legalisms, howeverexalted, to 'eep money not belonging to it. The government is not exempt from theapplication of solutio indebiti, a basic postulate proscribing one, including the tate,from enriching himself or herself at the expense of another. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. 7!R5N) 5!+ACC! C!RP!RA5-!N, G.R. Nos. 12/,eptem#er 11, 2%1$'

c7 Ta# r(le an' re(la$i!n6i7 General r(le !nl




1>

Bhile administrative agencies, such as the +ureau of Internal ;evenue, may issueregulations to implement statutes, they are without authority to limit the scope of the statute to less than what it provides, or extend or expand the statute beyond itsterms, or in any way modify explicit provisions of the law. Gence, in case of discrepancy between the basic law and an interpretative or administrative ruling,

the basic law prevails. (7!R5 +!N-7AC-! D)4)6!P0)N5 C!RP!RA5-!N v.C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 1$2/, eptem#er , 2%12'

;evenue Demorandum 2irculars (;D2s& must not override, supplant, or modify thelaw, but must remain consistent and in harmony with the law they see' to applyand implement. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. 0 PR-0) :!6D-NG,-NC. 1$ CRA (2%1%''

!dmittedly the government is not estopped from collecting taxes legally duebecause of mista'es or errors of its agents. +ut li'e other principles of law, thisadmits of exceptions in the interest of justice and fair play, as where injustice willresult to the taxpayer. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. C!R5 !7

APP)A6, G.R. No. 11982, 7e#ruary , 199'

6Bhen a statute is susceptible of the meaning placed upon it by a ruling of thegovernment agency charged with its enforcement and the RlSegislature thereafterRreenactsS the provisions RwithoutS substantial change, such action is to someextent conrmatory that the ruling carries out the legislative purpose.6(C!00--!N)R !7 -N5)RNA6 R)4)N) v. A0)R-CAN )?PR) -N5)RNA5-!NA6,-NC. (P:-6-PP-N) +RANC:', G.R. No. 1/2%9, @une 29, 2%%/'

+I; ;uling Co. =!%$?@%/# is a general interpretative rule because it is a response toa 3uery made, not by a particular taxpayer, but by a government agency tas'edwith processing tax refunds and credits. Thus, all taxpayers can rely on +I; ;ulingCo. =!%$?@%/# from the time of its issuance on 1/ =ecember //# up to its reversalby this 2ourt in !ichi on < ctober /1/, where this 2ourt held that the 1/#/ dayperiods are mandatory and jurisdictional. (5)A0 )N)RG= C!RP!RA5-!N (7ormerly 0-RAN5 PAG+-6A! C!RP!RA5-!N' v. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R.No. 19%, @anuary 1$, 2%1'

It is of course axiomatic that a rule or regulation must bear upon, and be consistentwith, the provisions of the enabling statute if such rule or regulation is to be valid. Incase of conPict between a statute and an administrative order, the former mustprevail. To be valid, an administrative rule or regulation must conform, notcontradict, the provisions of the enabling law. !n implementing rule or regulation

cannot modify, expand, or subtract from the law it is intended to implement. !nyrule that is not consistent with the statute itself is null and void. To recapitulate, ;;>%@, insofar as it restricts the denition of 6goods6 as basis of transitional input taxcredit under ection 1/ is a nullity. 7!R5 +!N-7AC-! D)4)6!P0)N5 C!RP!RA5-!Nvs. C!00--!N)R !7 -N5)RNA6 R)4)N) an* R)4)N) D-5R-C5 !77-C)R,R)4)N) D-5R-C5 N!. , 5AG-G an* PA5)R!, +R)A !7 -N5)RNA6 R)4)N),G.R. No. 1/%, Novem#er 19, 2%1, @. 6eonar*oDe Castro

'7 Penal pr!,ii!n !" $a# la*




1?

In criminal cases, statutes of limitations are acts of grace, a surrendering by thesovereign of its right to prosecute. They receive strict construction in favour of theLovernment and limitations in such cases will not be presumed in the absence of clear legislation. (6-0, et al. v. C!R5 !7 APP)A6, G.R. No. 81$$, !"to#er 18,199%'

e7 N!n-re$r!ac$i,e applica$i!n $! $a#paer

;evenue statutes are substantive laws and in no sense must their application bee3uated with that of remedial laws. !s well said in a prior case, revenue laws arenot intended to be liberally construed. (C!00--!N)R !7 -N5)RNA6 R)4)N) v.R!)0AR-) AC!5A, G.R. No. 1/%8, Au3ust $, 2%%'

6i7 E#cep$i!n

Bhile it is a settled principle that rulings, circulars, rules and regulationspromulgated by the +I; have no retroactive application if to so apply them would beprejudicial to the taxpayers, this rule does not apply) (a& where the taxpayerdeliberately misstates or omits material facts from his return or in any documentre3uired of him by the +ureau of Internal ;evenue* (b& where the facts subse3uentlygathered by the +ureau of Internal ;evenue are materially di9erent from the factson which the ruling is based* or (c& where the taxpayer acted in bad faith. Cot beingthe taxpayer who, in the rst instance, sought a ruling from the 2I;, however, E=2cannot invo'e the foregoing principle on non%retroactivity of +I; rulings.(C!00--!N)R !7 -N5)RNA6 R)4)N) v. 7-6-N4)5 D)4)6!P0)N5 C!RP!RA5-!N, G.R. No. 1$/$, @uly 19, 2%11'

I. Sc!pe an' li+i$a$i!n !" $a#a$i!n

1. In)eren$ li+i$a$i!na7 P(3lic p(rp!e

ection of -.=. >, !rticle III, ection of -.=. @<1, and !rticle III, ection of -.=.1$<? completely ignore the fact that coco%levy funds are public funds raisedthrough taxation. !nd since taxes could be exacted only for a public purpose, theycannot be declared private properties of individuals although such individuals fallwithin a distinct group of persons. (PA0+ANANG <!A6-=!N NG 0GA A0A:ANG0AGAA<A A5 0ANGGAGA>A A N-=GAN v. )?)C5-4) )CR)5AR= G.R. Nos.1%$$ April 1%, 2%12'

The 2ourt of course grants that there is no hard%and%fast rule for determining what

constitutes public purpose. +ut the assailed provisions, which removed the coco%levy funds from the general funds of the government and declared them privateproperties of coconut farmers, do not appear to have a color of social justice fortheir purpose. (PA0+ANANG <!A6-=!N NG 0GA A0A:ANG 0AGAA<A A5 0ANGGAGA>A A N-=GAN v. )?)C5-4) )CR)5AR= G.R. Nos. 1%$$ April1%, 2%12'

It would be a robbery for the tate to tax its citiens and use the funds generatedfor a private purpose. Bhen a tax law is only a mas' to exact funds from the public




1@

when its true intent is to give undue benet and advantage to a private enterprise,that law will not satisfy the re3uirement of 6public purpose.6 (P6AN5)R PR!DC5,-NC. v. 7)R5-P:-6 C!RP!RA5-!N, G.R. No. 1%%, 0ar" 1, 2%%8'

"urisprudence states that 6public purpose6 should be given a broad interpretation. Itdoes not only pertain to those purposes which are traditionally viewed as essentially

government functions, such as building roads and delivery of basic services, butalso includes those purposes designed to promote social justice. (P6AN5)RPR!DC5, -NC. v. 7)R5-P:-6 C!RP!RA5-!N, G.R. No. 1%%, 0ar" 1, 2%%8'

37 In)eren$l leila$i,e6i7 General r(le

The power to tax is purely legislative, and which the central legislative body cannotdelegate either to the executive or judicial department of the government withoutinfringing upon the theory of separation of powers. ((PepsiCola +ottlin3 Company of te Pil. 4. 0un. of 5anauan, 6eyte, 9 CRA %'

The powers which 2ongress is prohibited from delegating are those which arestrictly, or inherently and exclusively, legislative. -urely legislative power, which cannever be delegated, has been described as the authority to ma'e a complete law Jcomplete as to the time when it shall ta'e e9ect and as to whom it shall beapplicable J and to determine the expediency of its enactment. ( A+A<ADA GR!PAR5= 6-5 (7ormerly AA@A' !77-C)R A0!N . A6CAN5ARA an* )D 4-NC)N5 .

A6+AN! v. 5:) :!N!RA+6) )?)C5-4) )CR)5AR= G.R. No. 18%/ eptem#er 1,2%%/'

6ii7 E#cep$i!n6a7 %elea$i!n $! l!cal !,ern+en$

The power to tax is primarily vested in the 2ongress* however, in our jurisdiction, itmay be exercised by local legislative bodies, no longer merely by virtue of a validdelegation as before, but pursuant to direct authority conferred by ection , !rticleU of the 2onstitution. (0C-AA v. 0ar"os, G.R. No. 12%%82 eptem#er 11, 199'AT% c!++en$

The power to tax is the most e9ective instrument to raise needed revenues tonance and support myriad activities of local government units. It may also berelevant to recall that the original reasons for the withdrawal of tax exemptionprivileges granted to government%owned and controlled corporations and all otherunits of government were that such privilege resulted in serious tax base erosionand distortions in the tax treatment of similarly situated enterprises. (0C-AA v.0ar"os, G.R. No. 12%%82 eptem#er 11, 199'

Taxation assumes even greater signicance with the ratication of the 1@?>2onstitution. Thenceforth, the power to tax is no longer vested exclusively on2ongress* local legislative bodies are now given direct authority to levy taxes, feesand other charges pursuant to !rticle U, section of the 1@?> 2onstitution.(NA5-!NA6 P!>)R C!RP!RA5-!N v. C-5= !7 CA+ANA5AN G.R. No. 1911% April 9,2%%$'




/

2learly then, while a new slant on the subject of local taxation now prevails in thesense that the former doctrine of local government units5 delegated power to taxhad been e9ectively modied with !rticle U, ection of the 1@?> 2onstitution nowin place, the basic doctrine on local taxation remains essentially the same. Eor asthe 2ourt stressed in Dactan, 6the power to tax is RstillS primarily vested in the

2ongress.6 (E)!N C-5=, et al. v. A+C+N +R!ADCA5-NG C!RP!RA5-!N, G.R.No. 12%1/, 0ar" , 2%%'

ection , !rticle U of the 2onstitution does not change the doctrine that municipalcorporations do not possess inherent powers of taxation* what it does is to confermunicipal corporations a general power to levy taxes and otherwise create sourcesof revenue and they no longer have to wait for a statutory grant of these powersand the power of the legislative authority relative to the scal powers of localgovernments has been reduced to the authority to impose limitations on municipalpowers. The important legal e9ect of ection is thus to reverse the principle thatdoubts are resolved against municipal corporations* henceforth, in interpretingstatutory provisions on municipal scal powers, doubts will be resolved in favor of

municipal corporations. (E)!N C-5=, et al. v. A+C+N +R!ADCA5-NGC!RP!RA5-!N, G.R. No. 12%1/, 0ar" , 2%%'

637 %elea$i!n $! $)e Prei'en$

!ssuming that ection ?(& !rticle FI did not exist, the enactment of the D!Rafeguard Deasure !ctS by 2ongress would be voided on the ground that it wouldconstitute an undue delegation of the legislative power to tax. The constitutionalprovision shields such delegation from constitutional inrmity, and should berecognied as an exceptional grant of legislative power to the -resident, rather thanthe aNrmation of an inherent executive power. (!5:)RN CR! C)0)N5 C!RP!RA5-!N v. C)0)N5 0AN7AC5R)R A!C-A5-!N !7 5:) P:-6-PP-N), G.R.No. 1/8/%, Au3ust $, 2%%/'

Bhen 2ongress tas's the -resident or hisMher alter egos to impose safeguardmeasures under the delineated conditions, the -resident or the alter egos may beproperly deemed as agents of 2ongress to perform an act that inherently belongs asa matter of right to the legislature. It is basic agency law that the agent may not actbeyond the specically delegated powers or disregard the restrictions imposed bythe principal. (!5:)RN CR! C)0)N5 C!RP!RA5-!N v. C)0)N5 0AN7AC5R)R A!C-A5-!N !7 5:) P:-6-PP-N), G.R. No. 1/8/%, Au3ust $,2%%/'

=elegation of legislative powers to the -resident is permitted in ections # (& and? (& of !rticle FI of the 2onstitution. +y virtue of a valid delegation of legislativepower, it may also be exercised by the -resident and administrative boards, as wellas the lawma'ing bodies of all municipal levels, including the barangay. (CamarinesNort )le"tri" Cooperative v. 5orres, GR No. 1229, 7e#ruary 2, 1998'

6c7 %elea$i!n $! a'+ini$ra$i,e aencie




Eor the source of income to be considered as coming from the -hilippines, it issuNcient that the income is derived from activities within this country regardless of the absence of Pight operations within -hilippine territory. Indeed, the sale of tic'etsis the very lifeblood of the airline business, the generation of sales being theparamount objective. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. @APAN A-R 6-N),

-NC., G.R. No. %1, 0ar" , 1991'

627 r!+ !(rce *i$)!($ $)e P)ilippine647 Inc!+e par$l *i$)in an' par$l *i$)!($ $)e P)ilippine6c7 Si$( !" pr!per$ $a#e617 Ta#e !n real pr!per$627 Ta#e !n per!nal pr!per$6'7 Si$( !" e#cie $a#

ince it parta'es of the nature of an excise tax, the situs of taxation is the placewhere the privilege is exercised, in this case in the 2ity of Iriga, where 2!:;A2 IIIhas its principal oNce and from where it operates, regardless of the place where itsservices or products are delivered. (C-5= !7 -R-GA v. CA0AR-N) R --- )6)C5R-CC!!P)RA5-4), -NC., G.R. No. 1929/, eptem#er /, 2%12'

It should be noted that a =T is in the nature of an excise tax because it is imposedupon the privilege, opportunity or facility o9ered at exchanges for the transaction of the business. =T is a tax on documents, instruments, loan agreements, and papersevidencing the acceptance, assignment, or transfer of an obligation, right orproperty incident thereto. =T is thus imposed on the exercise of these privilegesthrough the execution of specic instruments, independently of the legal status of the transactions giving rise thereto. Cotably, ;.!. Co. @$#, entitled 7!n !ct;ationaliing the -rovisions of the =ocumentary tamp Tax of the Cational Internal

;evenue 2ode of 1@@>8 was enacted and too' e9ect on !pril >, //$, whichexempts the transfer of real property of a corporation, which is a party to themerger or consolidation, to another corporation, which is also a party to the mergeror consolidation, from the payment of =T. C!00--!N)R !7 -N5)RNA6 R)4)N)vs. P-6-P-NA :)66 P)5R!6)0 C!RP!RA5-!N, G.R. No. 192$98, eptem#er 29,2%1, @. 4illarama, @r.

617 E$a$e $a#627 %!n!r $a#6e7 Si$( !" 3(ine $a#617 Sale !" real pr!per$627 Sale !" per!nal pr!per$

It is not the place where the contract was perfected, but the place of delivery whichdetermines the taxable situs of the property sought to be taxed. In the casesof oriano y 2ia. v. 2ollector of Internal ;evenue, 1 .L. $$?* Fegetable il2orporation v. Trinidad, $ -hil. ?* and Aarnshaw =oc's and Gonolulu Iron Bor'svs. 2ollector of Internal ;evenue, $ -hil. <@<, it has been ruled that for a sale to betaxed in the -hilippines it must be consummated there* thus indicating that theplace of consummation (associated with the delivery of the things subject matter of the contract& is the accepted criterion in determining the situs of the contract for




#

purposes of taxation, and not merely the place of the perfection of the contract.

(5:) 0N-C-PA6-5= !7 @!) PANGAN-+AN, PR!4-NC) !7 CA0AR-N) N!R5), )5C.v. 5:) :)66 C!0PAN= !7 5:) P:-6-PP-N), 65D., G.R. No. 618$9, @uly $%, 19'

647 Val(e-A''e' Ta# 6VAT7

!s a general rule, the F!T system uses the destination principle as a basis for the jurisdictional reach of the tax. Loods and services are taxed only in the countrywhere they are consumed* thus, exports are ero%rated, while imports are taxed.(C!00--!N)R !7 -N5)RNA6 R)4)N) v.A0)R-CAN )?PR) -N5)RNA5-!NA6,-NC. (P:-6-PP-N) +RANC:', G.R. No. 1/2%9, @une 29, 2%%/'

2onsumption is 6the use of a thing in a way that thereby exhausts it,8 and appliedto services, the term means the performance or 6successful completion of acontractual duty, usually resulting in the performer5s release from any past or futureliability.6 The services rendered by respondent are performed or successfullycompleted upon its sending to its foreign client the drafts and bills it has gathered

from service establishments here* thus, its services, having been performed in the-hilippines, are also consumed in the -hilippines. (C!00--!N)R !7 -N5)RNA6R)4)N) v.A0)R-CAN )?PR) -N5)RNA5-!NA6, -NC. (P:-6-PP-N) +RANC:', G.R.No. 1/2%9, @une 29, 2%%/'

:nli'e goods, services cannot be physically used in or bound for a specic placewhere their destination is determined but instead, there can only be a6predetermined end of a course6 when determining the service 6location or positionfor legal purposes.6 ;espondent5s facilitation service has no physical existence, yetta'es place upon rendition, and therefore upon consumption, in the -hilippines.(C!00--!N)R !7 -N5)RNA6 R)4)N) v.A0)R-CAN )?PR) -N5)RNA5-!NA6,-NC. (P:-6-PP-N) +RANC:', G.R. No. 1/2%9, @une 29, 2%%/'

'7 In$erna$i!nal c!+i$e7 E#e+p$i!n !" !,ern+en$ en$i$ieD aencieD an' in$r(+en$ali$ie

The 2ourt rules that the !uthority R-E=!S is not a L22 but an instrumentality of the national government which is generally exempt from payment of real propertytax. Gowever, said exemption does not apply to the portions of the IE-2 which the!uthority leased to private entities. (Pilippine 7iseries Development Autority v.Court of Appeals, G.R. No. 198$, $1 @uly 2%%'

!s property of public dominion, the 0ucena Eishing -ort 2omplex is owned by the;epublic of the -hilippines and thus exempt from real estate tax. (P:-6-PP-N)

7-:)R-) D)4)6!P0)N5 A5:!R-5= (P7DA' v. C)N5RA6 +!ARD !7 A)0)N5 APP)A6, G.R. No. 18%$%, De"em#er 1/, 2%1%'

2. C!n$i$($i!nal li+i$a$i!na7 Pr!,ii!n 'irec$l a=ec$in $a#a$i!n6i7 Pr!)i3i$i!n aain$ i+pri!n+en$ "!r n!n-pa+en$ !" p!ll $a#6ii7 ni"!r+i$ an' e(ali$ !" $a#a$i!n




$

A3uality and uniformity in taxation means that all taxable articles or 'inds of property of the same class shall be taxed at the same rate. The taxing power hasthe authority to ma'e reasonable and natural classications for purposes of taxation* ine3ualities which result from a singling out of one particular class fortaxation or exemption infringe no constitutional limitation. (<APA5-RAN NG 0GANAG6-6-NG<!D A PA0A:A6AAN NG P-6-P-NA, -NC. v. :!N. +-)N4)N-D! 5AN, G.R.

No. 81$11, @une $%, 1988'

6iii7 Gran$ 3 C!nre !" a($)!ri$ $! $)e prei'en$ $! i+p!e $ari= ra$e

It is 2ongress which authories the -resident to impose tari9 rates, import andexport 3uotas, tonnage and wharfage dues, and other duties or imposts. Thus, theauthority cannot come from the Einance =epartment, the Cational Aconomic=evelopment !uthority, or the Borld Trade rganiation, no matter how insistent orpersistent these bodies may be. (!5:)RN CR! C)0)N5 C!RP!RA5-!N v.C)0)N5 0AN7AC5R)R A!C-A5-!N !7 5:) P:-6-PP-N), G.R. No. 1/8/%,

Au3ust $, 2%%/'

The authoriation granted to the -resident must be embodied in a law. Gence, the justication cannot be supplied simply by inherent executive powers. (!5:)RNCR! C)0)N5 C!RP!RA5-!N v. C)0)N5 0AN7AC5R)R A!C-A5-!N !7 5:)P:-6-PP-N), G.R. No. 1/8/%, Au3ust $, 2%%/'

The authoriation to the -resident can be exercised only within the specied limitsset in the law and is further subject to limitations and restrictions which 2ongressmay impose. 2onse3uently, if 2ongress species that the tari9 rates should notexceed a given amount, the -resident cannot impose a tari9 rate that exceeds suchamount. (!5:)RN CR! C)0)N5 C!RP!RA5-!N v. C)0)N5 0AN7AC5R)R

A!C-A5-!N !7 5:) P:-6-PP-N), G.R. No. 1/8/%, Au3ust $, 2%%/'

!ssuming there is a conPict between the specic limitation in ection ? (&, !rticleFI of the 2onstitution and the general executive power of control and supervision,the former prevails in the specic instance of safeguard measures such as tari9sand imposts, and would thus serve to 3ualify the general grant to the -resident of the power to exercise control and supervision over hisMher subalterns. (!5:)RNCR! C)0)N5 C!RP!RA5-!N v. C)0)N5 0AN7AC5R)R A!C-A5-!N !7 5:)P:-6-PP-N), G.R. No. 1/8/%, Au3ust $, 2%%/'

6i,7 Pr!)i3i$i!n aain$ $a#a$i!n !" relii!(D c)ari$a3le en$i$ieD an'e'(ca$i!nal en$i$ie

The word 6charitable6 is not restricted to relief of the poor or sic'. The test whetheran enterprise is charitable or not is whether it exists to carry out a purposerecoganied in law as charitable or whether it is maintained for gain, prot, orprivate advantage. (6NG C)N5)R !7 5:) P:-6-PP-N) v.E)!N C-5=, G.R. No.11%, @une 29, 2%%'

Aven as we nd that the petitioner is a charitable institution, we hold that thoseportions of its real property that are leased to private entities are not exempt fromreal property taxes as these are not actually, directly and exclusively used for




charitable purposes. n the other hand, the portions of the land occupied by thehospital and portions of the hospital used for its patients, whether paying or non%paying, are exempt from real property taxes. (6NG C)N5)R !7 5:) P:-6-PP-N)v.E)!N C-5=, G.R. No. 11%, @une 29, 2%%'

To be a charitable institution, however, an organiation must meet the substantivetest of charity in 0ung 2enter. 2harity is essentially a gift to an indenite number of persons which lessens the burden of government. In other words, charitableinstitutions provide for free goods and services to the public which would otherwisefall on the shoulders of government. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. 5.6<)F 0)D-CA6 C)N5)R, -NC. G.R. No. 19/9%9 eptem#er 2, 2%12'

In 0ung 2enter, this 2ourt declared) 6exclusive6 is dened as possessed and enjoyedto the exclusion of others* debarred from participation or enjoyment* and6exclusively6 is dened, 6in a manner to exclude* as enjoying a privilegeexclusively.6 The words 6dominant use6 or 6principal use6 cannot be substituted forthe words 6used exclusively6 without doing violence to the 2onstitution and the law.olely is synonymous with exclusively. (C!00--!N)R !7 -N5)RNA6 R)4)N) v.5. 6<)F 0)D-CA6 C)N5)R, -NC. G.R. No. 19/9%9 eptem#er 2, 2%12'

ervices to paying patients are activities conducted for prot. There is a 6purpose toma'e prot over and above the cost6 of services. (C!00--!N)R !7 -N5)RNA6R)4)N) v. 5. 6<)F 0)D-CA6 C)N5)R, -NC. G.R. No. 19/9%9 eptem#er 2,2%12'

ection #/(A& and (L& of the CI;2 re3uires that an institution be 6operatedexclusively6 for charitable or social welfare purposes to be completely exempt fromincome tax. !n institution under ection #/(A& or (L& does not lose its tax exemptionif it earns income from its for%prot activities. uch income from for%prot activities,under the last paragraph of ection #/, is merely subject to income tax, previouslyat the ordinary corporate rate but now at the preferential 1/K rate pursuant toection >(+&. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. 5. 6<)F 0)D-CA6C)N5)R, -NC. G.R. No. 19/9%9 eptem#er 2, 2%12'

! gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos, the imposition of which on property usedexclusively for religious purposes, does not constitute an impairment of the2onstitution. The phrase 6exempt from taxation,6 as employed in the 2onstitutionshould not be interpreted to mean exemption from all 'inds of taxes. (R)4. 7R.CA-0-R! 66AD!C v. 5e C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 6192%1,

@une 1, 19/'

6,7 Pr!)i3i$i!n aain$ $a#a$i!n !" n!n-$!cFD n!n-pr!&$ in$i$($i!n

!n organiation may be considered as non%prot if it does not distribute any part of its income to stoc'holders or members. Gowever, despite its being a tax exemptinstitution, any income such institution earns from activities conducted for prot istaxable, as expressly provided in the last paragraph of ection #/. (C!00--!N)R!7 -N5)RNA6 R)4)N) v. 5. 6<)F 0)D-CA6 C)N5)R, -NC. G.R. No. 19/9%9eptem#er 2, 2%12'




<

6,i7 Ma!ri$ ,!$e !" C!nre "!r ran$ !" $a# e#e+p$i!n

The incentives under ;.!. Co. >> are exclusive only to the ubic AQ, hence, theextension of the same to the "ohn Gay AQ nds no support therein. The challengedgrant of tax exemption would circumvent the 2onstitutions imposition that a law

granting any tax exemption must have the concurrence of a majority of all themembers of 2ongress. (@!:N :A= P)!P6) A65)RNA5-4) C!A6-5-!N, et al. v.4-C5!R 6-0, et al., G. R. No. 119/, !"to#er 2, 2%%$'

6,ii7 Pr!)i3i$i!n !n (e !" $a# le,ie' "!r pecial p(rp!e

The coco%levy funds, on the other hand, belong to the government and are subjectto its administration and disposition. Thus, these funds, including its incomes,interests, proceeds, or prots, as well as all its assets, properties, and shares of stoc's procured with such funds must be treated, used, administered, and managedas public funds* the coco%levy funds are evidently special funds. (PA0+ANANG<!A6-=!N NG 0GA A0A:ANG 0AGAA<A A5 0ANGGAGA>A A N-=GAN v.

)?)C5-4) )CR)5AR= G.R. Nos. 1%$$ April 1%, 2%12'

6,iii7 Prei'en$ ,e$! p!*er !n appr!pria$i!nD re,en(eD $ari= 3ill

!n 6item6 in a revenue bill does not refer to an entire section imposing a particular'ind of tax, but rather to the subject of the tax and the tax rate* thus, in the portionof a revenue bill which actually imposes a tax, a section identies the tax andenumerates the persons liable therefor with the corresponding tax rate. To construethe word 6item6 as referring to the whole section would tie the -residents hand inchoosing either to approve the whole section at the expense of also approving aprovision therein which he deems unacceptable or veto the entire section at theexpense of foregoing the collection of the 'ind of tax altogether. (C!00--!N)R!7 -N5)RNA6 R)4)N) v. :!N. C!R5 !7 5A? APP)A6, G.R. No. 621, 0ay 1,199%'

6i#7 N!n-i+pair+en$ !" (ri'ic$i!n !" $)e S(pre+e C!(r$6#7 Gran$ !" p!*er $! $)e l!cal !,ern+en$ (ni$ $! crea$e i$ !*n !(rce!" re,en(e

Eor a long time, the countrys highly centralied government structure has bred aculture of dependence among local government leaders upon the nationalleadership. The only way to shatter this culture of dependence is to give the 0L:s awider role in the delivery of basic services, and confer them suNcient powers togenerate their own sources for the purpose. (NA5-!NA6 P!>)R C!RP!RA5-!N v.C-5= !7 CA+ANA5AN G.R. No. 1911% April 9, 2%%$'

;epublic !ct Co. >>1<, otherwise 'nown as the 6Axpanded F!T 0aw,6 did not removeor abolish the payment of local franchise tax* it merely replaced the nationalfranchise tax that was previously paid by telecommunications franchise holders andin its stead F!T. The imposition of local franchise tax is not inconsistent with theadvent of the F!T, which renders functus oNcio the franchise tax paid to thenational government for F!T inures to the benet of the national government, while




>

a local franchise tax is a revenue of the local government unit. (0AR5 C!00N-CA5-!N, -NC. v.5:) C-5= !7 DA4A!, G.R. No. 1//91, @uly 21, 2%%9'

6#i7 le#i3le $ari= cla(e6#ii7 E#e+p$i!n "r!+ real pr!per$ $a#e

Eor real property taxes, the incidental generation of income is permissible becausethe test of exemption is the use of the property and this test re3uires that theinstitution use the property in a certain way, i.e. for a charitable purpose. Thus, the2ourt held that the 0ung 2enter of the -hilippines did not lose its charitablecharacter when it used a portion of its lot for commercial purposes since the e9ectof failing to meet the use re3uirement is simply to remove from the tax exemptionthat portion of the property not devoted to charity. (C!00--!N)R !7 -N5)RNA6R)4)N) v. 5. 6<)F 0)D-CA6 C)N5)R, -NC. G.R. No. 19/9%9 eptem#er 2,2%12'

The 2onstitution exempts charitable institutions only from real property taxes whilethe CI;2 extends the exemption to income taxes. Gowever, the way 2ongresscrafted ection #/(A& of the CI;2 is materially di9erent from ection ?(#&, !rticle FIof the 2onstitution) ection #/(A& of the CI;2 denes the corporation or associationthat is exempt from income tax while ection ?(#&, !rticle FI of the 2onstitutiondoes not dene a charitable institution, but re3uires that the institution 6actually,directly and exclusively6 use the property for a charitable purpose. (C!00--!N)R!7 -N5)RNA6 R)4)N) v. 5. 6<)F 0)D-CA6 C)N5)R, -NC. G.R. No. 19/9%9eptem#er 2, 2%12'

To be exempt from real property taxes, ection ?(#&, !rticle FI of the 2onstitutionre3uires that a charitable institution use the property 6actually, directly andexclusively6 for charitable purposes. To be exempt from income taxes, ection #/(A&of the CI;2 re3uires that a charitable institution must be 6organied and operatedexclusively6 for charitable purposes. (C!00--!N)R !7 -N5)RNA6 R)4)N) v. 5.6<)F 0)D-CA6 C)N5)R, -NC. G.R. No. 19/9%9 eptem#er 2, 2%12'

6#iii7 N! appr!pria$i!n !r (e !" p(3lic +!ne "!r relii!( p(rp!e37 Pr!,ii!n in'irec$l a=ec$in $a#a$i!n6i7 %(e pr!ce

In ison, "r. v. !ncheta, et al., we held that the due process clause may properly beinvo'ed to invalidate, in appropriate cases, a revenue measure when it amounts toa conscation of property. +ut in the same case, we also explained that we will notstri'e down a revenue measure as unconstitutional (for being violative of the dueprocess clause& on the mere allegation of arbitrariness by the taxpayer. (Cam#er of Real )state an* +uil*ers Asso"iation, -n". v. Romulo, 1 CRA %/ (2%1%''

The support for the poor is generally recognied as a public duty and has long beenan accepted exercise of police power in the promotion of the common good but, inthe instant case, the declarations do not distinguish between wealthy coconutfarmers and the impoverished ones. 2onse3uently, such declarations are void sincethey appropriate public funds for private purpose and, therefore, violate thecitiens5 right to substantive due process. (PA0+ANANG <!A6-=!N NG 0GA




?

A0A:ANG 0AGAA<A A5 0ANGGAGA>A A N-=GAN v. )?)C5-4) )CR)5AR= G.R. Nos. 1%$$ April 1%, 2%12'

6ii7 E(al pr!$ec$i!n

The real estate industry is, by itself, a class and can be validly treated di9erently

from other business enterprises. Bhat distinguishes the real estate business fromother manufacturing enterprises, for purposes of the imposition of the 2BT, is nottheir production processes but the prices of their goods sold and the number of transactions involved. (Cam#er of Real )state an* +uil*ers Asso"iation, -n". v.Romulo, 1 CRA %/ (2%1%''

-!L2; cannot nd support in the e3ual protection clause of the 2onstitution, asthe legislative records of the +icameral 2onference Deeting dated ctober >,1@@>, of the 2ommittee on Bays and Deans, show that -!L2;5s exemption frompayment of corporate income tax, as provided in ection > (c& of ;.!. Co. ?$$, orthe Cational Internal ;evenue 2ode of 1@@>, was not made pursuant to a validclassication based on substantial distinctions. The legislative records show that the

basis of the grant of exemption to -!L2; from corporate income tax was-!L2;5s own re3uest to be exempted. (P:-6-PP-N) A0)0)N5 AND GA0-NGC!RP!RA5-!N (PAGC!R' v. 5:) +R)A !7 -N5)RNA6 R)4)N) G.R. No. 12%80ar" 1/, 2%11'

6iii7 Relii!( "ree'!+

The constitutional guaranty of the free exercise and enjoyment of religiousprofession and worship carries with it the right to disseminate religious information.!ny restraints of such right can only be justied li'e other restraints of freedom of expression on the grounds that there is a clear and present danger of anysubstantive evil which the tate has the right to prevent. (A0)R-CAN +-+6) !C-)5= v. C-5= !7 0AN-6A, G.R. No. 69$, April $%, 19/'

It may be true that in the case at bar the price as'ed for the bibles and otherreligious pamphlets was in some instances a little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in the business oroccupation of selling said 6merchandise6 for prot. Eor this reason Be believe thatthe 2ity of Danila rdinance Co. @ re3uiring the payment of license fee cannotbe applied to appellant, for in doing so it would impair its free exercise andenjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs. (A0)R-CAN +-+6) !C-)5= v. C-5= !7 0AN-6A,G.R. No. 69$, April $%, 19/'

Bith respect to rdinance Co. #/// which re3uires the obtention of the Dayorspermit before any person can engage in any of the businesses, trades oroccupations enumerated therein, Be do not nd that it imposes any charge uponthe enjoyment of a right granted by the 2onstitution, nor tax the exercise of religious practices. +ut as the 2ity of Danila is powerless to license or tax thebusiness of plainti9 ociety, Be nd that rdinance Co. #/// is also inapplicable tosaid business, trade or occupation of the plainti9. (A0)R-CAN +-+6) !C-)5= v. C-5= !7 0AN-6A, G.R. No. 69$, April $%, 19/'




@

The -hilippine +ible ociety, Inc. claims that although it sells bibles, the proceedsderived from the sales are used to subsidie the cost of printing copies which aregiven free to those who cannot a9ord to pay so that to tax the sales would be toincrease the price, while reducing the volume of sale. Lranting that to be the case,the resulting burden on the exercise of religious freedom is so incidental as to ma'e

it diNcult to di9erentiate it from any other economic imposition that might ma'ethe right to disseminate religious doctrines costly. (AR5R! 0. 5!6)N5-N! v. 5:))CR)5AR= !7 7-NANC) an* 5:) C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No.11///, !"to#er $%, 199/'

n the other hand the registration fee of -1,///.// imposed by ec. 1/> of theCI;2, as amended by ec. > of ;.!. Co. >>1<, although xed in amount, is really justto pay for the expenses of registration and enforcement of provisions such as thoserelating to accounting in ec. 1/? of the CI;2. That the -+ distributes free biblesand therefore is not liable to pay the F!T does not excuse it from the payment of this fee because it also sells some copies. (AR5R! 0. 5!6)N5-N! v. 5:))CR)5AR= !7 7-NANC) an* 5:) C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No.

11///, !"to#er $%, 199/'

The withdrawal of the exemption did not also violate freedom of religion as regardsthe activities of -+ on religious articles, as the Eree Axercise of ;eligious clausedoes not prohibit imposing a generally applicable sale and use tax on the sale of religious materials by a religious organiation as held by the : upreme 2ourt in

@immy a33art 0inistries v. +oar* of )ualiHation (199%'. The F!T registration fee does not constitute censorship of such freedom as held inthe Ameri"an +i#le o"iety "ase. The fee is a mere administrative fee and notimposed on the exercise of a privilege, much less a constitutional right. +ut for thepurpose of defraying cost of registration which is a re3uirement and a centralfeature in the F!T system so as to provide record of tax credits of the taxpayer.

(AR5R! 0. 5!6)N5-N! v. 5:) )CR)5AR= !7 7-NANC) an* 5:) C!00--!N)R!7 -N5)RNA6 R)4)N), G.R. No. 11///, !"to#er $%, 199/'

6i,7 N!n-i+pair+en$ !" !3lia$i!n !" c!n$rac$

2ontractual tax exemptions, in the real sense of the term and where the non%impairment clause of the 2onstitution can rightly be invo'ed, are those agreed to bythe taxing authority in contracts, such as those contained in government bonds ordebentures, lawfully entered into by them under enabling laws in which thegovernment, acting in its private capacity, sheds its cloa' of authority and waivesits governmental immunity. Truly, tax exemptions of this 'ind may not be revo'edwithout impairing the obligations of contracts. but these contractual tax exemptionsare not to be confused with tax exemptions granted under franchisesVthe latterparta'es the nature of a grant which is beyond the purview of the non%impairmentclause of the 2onstitution. (P:-6-PP-N) A0)0)N5 AND GA0-NG C!RP!RA5-!N(PAGC!R' v. 5:) +R)A !7 -N5)RNA6 R)4)N) G.R. No. 12%8 0ar" 1/, 2%11' Aven though such taxation may a9ect particular contracts, as it may increase thedebt of one person and lessen the security of another, or may impose additionalburdens upon one class and release the burdens of another, still the tax must be




#/

paid unless prohibited by the 2onstitution, nor can it be said that it impairs theobligation of any existing contract in its true legal sense.6 Indeed not only existinglaws but also 6te reservation of te essential attri#utes of soverei3nty , is read intocontracts as a postulate of the legal order.6 (AR5R! 0. 5!6)N5-N! v. 5:))CR)5AR= !7 7-NANC) an* 5:) C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No.11///, !"to#er $%, 199/'

9. S$ae !" $a#a$i!n1. Le,

0evy is an exercise of the power to tax, which is exclusively legislative in nature andcharacter. 2learly, taxes are not levied by the executive branch of government.(NPC v. Al#ay, 18 CRA 198 (199%''

2. Ae+en$ an' c!llec$i!n4. Pa+en$8. Re"(n'

;. %e&ni$i!nD na$(reD an' c)arac$eri$ic !" $a#e

Taxes are enforced proportional contributions from persons and property, levied bythe tate by virtue of its sovereignty for the support of the government and for allits public needs. (PA0+ANANG <!A6-=!N NG 0GA A0A:ANG 0AGAA<A A5 0ANGGAGA>A A N-=GAN v. )?)C5-4) )CR)5AR= G.R. Nos. 1%$$ April1%, 2%12'

L. Re(ii$e !" a ,ali' $a#M. Ta# a 'i$in(i)e' "r!+ !$)er "!r+ !" e#ac$i!n1. Tari=2. T!ll

! tax is imposed under the taxing power of the government principally for thepurpose of raising revenues to fund public expenditures* toll fees, on the otherhand, are collected by private tollway operators as reimbursement for the costs andexpenses incurred in the construction, maintenance and operation of the tollways.

Taxes may be imposed only by the government under its sovereign authority, tollfees may be demanded by either the government or private individuals or entities,as an attribute of ownership. (R)NA5! 4. D-A an* AR!RA 0A. 7. 5-0+!6 v. 5:))CR)5AR= !7 7-NANC), G.R. No. 19$%%, @uly 19, 2%11'

Eees paid by the public to tollway operators for use of the tollways, are not taxes inany sense. -arenthetically, F!T on tollway operations cannot be deemed a tax ontax due to the nature of F!T as an indirect tax. (R)NA5! 4. D-A an* AR!RA 0A. 7.5-0+!6 v. 5:) )CR)5AR= !7 7-NANC), G.R. No. 19$%%, @uly 19, 2%11'

4. Licene "ee

To be considered a license fee, the imposition must relate to an occupation oractivity that so engages the public interest in health, morals, safety anddevelopment as to re3uire regulation for the protection and promotion of such




#1

public interest* the imposition must also bear a reasonable relation to the probableexpenses of regulation, ta'ing into account not only the costs of direct regulationbut also its incidental conse3uences as well. !ccordingly, a charge of a xed sumwhich bears no relation at all to the cost of inspection and regulation may be held tobe a tax rather than an exercise of police power. (PR!GR)-4) D)4)6!P0)N5 C!RP. v. E)!N C-5=, G.R. No. 6$%81, April 2, 1989'

If the purpose is primarily revenue, or if revenue is at least, one of the real andsubstantial purposes, then the exaction is properly called a tax. (6AND5RANP!R5A5-!N !77-C) v. C-5= !7 +5AN, G.R. No. 1$1/12, @anuary 2%, 2%%%'

8. Special ae+en$5. %e3$

Taxes cannot be the subject of compensation because the government and taxpayerare not mutually creditors and debtors of each other and a claim for taxes is notsuch a debt, demand, contract or judgment as is allowed to be set%o9. (CA65)? P:-6-PP-N), -NC. v. 5:) :!N!RA+6) C!00--!N !N AD-5, G.R. No. 92/8/, 0ay 8, 1992'

N. ;in' !" $a#e1. A $! !3ec$a7 Per!nalD capi$a$i!nD !r p!ll $a#37 Pr!per$ $a#c7 Pri,ilee $a#

! contractors tax is generally in the nature of an excise tax on the exercise of aprivilege of selling services or labor rather than a sale on products* and is directlycollectible from the person exercising the privilege. +eing an excise tax, it can be

levied by the taxing authority only when the acts, privileges or business are done orperformed within the jurisdiction of said authority. (C!00--!N)R !7 -N5)RNA6R)4)N) v. 0AR+)N- C!RP!RA5-!N, G.R. No. 1$$, De"em#er 18, 2%%1'

! franchise tax is a tax on the privilege of transacting business in the state andexercising corporate franchises granted by the state. It is not levied on thecorporation simply for existing as a corporation, upon its property or its income, buton its exercise of the rights or privileges granted to it by the government. (C-5= !7 -R-GA v. CA0AR-N) R --- )6)C5R-C C!!P)RA5-4), -NC., G.R. No. 1929/,eptem#er /, 2%12'

2. A $! 3(r'en !r inci'ence

a7 %irec$37 In'irec$

In context, direct taxes are those that are exacted from the very person who, it isintended or desired, should pay them* they are impositions for which a taxpayer isdirectly liable on the transaction or business he is engaged in. n the other hand,indirect taxes are those that are demanded, in the rst instance, from, or are paidby, one person in the expectation and intention that he can shift the burden to




#

someone else. (C!00--!N)R !7 -N5)RNA6 R)4)N) 4 P:-6-PP-N) 6!NGD-5ANC) 5)6)P:!N) C!0PAN=, G.R. No. 1%2$%, De"em#er 1/, 2%%/'

Indirect taxes, li'e F!T and excise tax, are di9erent from withholding taxes) Todistinguish, in indirect taxes, the incidence of taxation falls on one person but theburden thereof can be shifted or passed on to another person, such as when the tax

is imposed upon goods before reaching the consumer who ultimately pays for it. nthe other hand, in case of withholding taxes, the incidence and burden of taxationfall on the same entity, the statutory taxpayer. The burden of taxation is not shiftedto the withholding agent who merely collects, by withholding, the tax due fromincome payments to entities arising from certain transactions and remits the sameto the government. (A-A -N5)RNA5-!NA6 AC5-!N))R, -NC. v. C!00--!N)R !7 -N5)RNA6 R)4)N) G.R. No. 1911/ eptem#er 2, 2%12'

The 2onstitution does not really prohibit the imposition of indirect taxes which, li'ethe F!T, are regressive since what it simply provides is that 2ongress shall 6evolve aprogressive system of taxation.6 The constitutional provision has been interpretedto mean simply that 6direct taxes are to be preferred RandS as much as possible,

indirect taxes should be minimied.6 (AR5R! 0. 5!6)N5-N! v. 5:) )CR)5AR= !7 7-NANC) an* 5:) C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 11///,!"to#er $%, 199/'

The seller remains directly and legally liable for payment of the F!T, but the buyerbears its burden since the amount of F!T paid by the former is added to the sellingprice. nce shifted, the F!T ceases to be a tax and simply becomes part of the costthat the buyer must pay in order to purchase the good, property orservice. (R)NA5! 4. D-A an* AR!RA 0A. 7. 5-0+!6 v. 5:) )CR)5AR= !7 7-NANC), G.R. No. 19$%%, @uly 19, 2%11'

4. A $! $a# ra$ea7 Speci&c37 A' ,al!re+c7 Mi#e'8. A $! p(rp!ea7 General !r &cal37 SpecialD re(la$!rD !r (+p$(ar5. A $! c!pe !r a($)!ri$ $! i+p!ea7 Na$i!nal in$ernal re,en(e $a#e37 L!cal real pr!per$ $a#D +(nicipal $a#<. A $! ra'(a$i!na7 Pr!rei,e37 Rerei,ec7 Pr!p!r$i!na$e

INCOME TAXATIONA. Inc!+e $a#a$i!n

1. Inc!+e $a# $e+a7 Gl!3al $a# $e+




##

Llobal treatment is a system where the tax treatment viewsindi9erently the tax base and generally treats in common all categoriesof taxable income of the taxpayer. (T!C v. =A0 ;!;I, ";. #> 2;!#$&37 Sc)e'(lar $a# $e+chedular approach is a system employed where the income tax

treatment varies and made to depend on the 'ind or category of taxable income of the taxpayer. (T!C v. =A0 ;!;I, ";. #> 2;!#$&c7 Se+i-c)e'(lar !r e+i-l!3al $a# $e+

2. ea$(re !" $)e P)ilippine inc!+e $a# la*a7 %irec$ $a#37 Pr!rei,ec7 C!+pre)eni,e'7 Se+i-c)e'(lar !r e+i-l!3al $a# $e+

4. Cri$eria in i+p!in P)ilippine inc!+e $a#a7 Ci$iHen)ip principle37 Rei'ence principle

c7 S!(rce principle! non%resident Lerman citien, president of a domestic corporation,led a claim for refund with the +I;, contending that her salescommission income is not taxable in the -hilippines because the samewas a compensation for her services rendered in Lermany andtherefore considered as income from sources outside the -hilippines.Bhile it is the rule that 7source of income8 relates to the property,activity or service that produced the income, the documents presentedby respondent did not constitute substantial evidence that it was inLermany where she performed the income%producing service and thusthe tax refund should be denied. (Commissioner of -nternal Revenue

vs. @uliane +aierNi"Iel, G.R. No. 1/$9$, Au3ust 29, 2%%&

8. Tpe !" P)ilippine inc!+e $a#5. Ta#a3le peri!'

a7 Calen'ar peri!'37 ical peri!'c7 S)!r$ peri!'

<. ;in' !" $a#paera7 In'i,i'(al $a#paer

6i7 Ci$iHen6a7 Rei'en$ ci$iHen

637 N!n-rei'en$ ci$iHen6ii7 Alien6a7 Rei'en$ alien637 N!n-rei'en$ alien

617 Enae' in $ra'e !r 3(ine627 N!$ enae' in $ra'e !r 3(ine

6iii7 Special cla !" in'i,i'(al e+pl!ee6a7 Mini+(+ *ae earner637 C!rp!ra$i!n




#$

6i7 %!+e$ic c!rp!ra$i!n6ii7 !rein c!rp!ra$i!n

Darubeni "apan claimed a refund for excess taxes it hadpaid, contending that since it had a -hilippine branch, it isa resident foreign corporation liable to pay only 1/Kintercorporate nal tax on dividends received from adomestic corporation (and not to the branch protremittance tax& following the principal%agent theory.Darubeni "apan is considered a non%resident foreigncorporation as to the dividends because when the foreigncorporation transacts business in the -hilippinesindependently of its branch, the principal%agentrelationship is set aside. (0aru#eni Corp. vs.Commissioner of -nternal Revenue, et al., G.R. No. /$,eptem#er 1, 1989&

+!2 is a resident foreign corporation because itmaintained a general sales agent in the -hilippines. Thereis no specic criterion as to what constitutes 7doing8 or7engaging in8 or 6transacting8 business. The term impliesa continuity of commercial dealings and arrangements,and contemplates, to that extent, the performance of actsor wor's or the exercise of some of the functions normallyincident to, and in progressive prosecution of commercialgain or for the purpose and object of the businessorganiation. In order that a foreign corporation may beregarded as doing business within a tate, there must becontinuity of conduct and intention to establish a

continuous business, such as the appointment of a localagent, and not one of a temporary character. (C-R vs+!AC, G.R. No. 6/$ April $%, 198&

6a7 Rei'en$ "!rein c!rp!ra$i!n637 N!n-rei'en$ "!rein c!rp!ra$i!n

6iii7 9!in$ ,en$(re an' c!n!r$i(+c7 Par$ner)ip-ursuant to 7reinsurance treaties,8 a number of local insurance rmsformed themselves into a 7pool8 in order to facilitate the handling of business contracted with a nonresident foreign reinsurance company.

The insurance pool is deemed a partnership or association taxable as a

corporation under the CI;2 because ection $ (on tax oncorporations& Rnow ec. > of the 1@@> CI;2S covered theseunregistered partnerships and even associations or joint accounts,which had no legal personalities apart from their individual members*moreover, the insurance pool, though unregistered, satises there3uisites of a partnership) (1& mutual contribution to a common stoc',and (& joint interest in the prots. ( AJs"o -nsuran"e Corp., et al. vs.Court of Appeals, et al., G.R. No. 112/, @anuary 2/, 1999&




#

The original purpose of the co%owners of the two lots was to divide thelots for residential purposes. If later on they found it not feasible tobuild their residences on the lots because of the high cost of construction, then they had no choice but to resell the same todissolve the co%ownership. The division of the prot was merelyincidental to the dissolution of the co%ownership which was in the

nature of things a temporary state. The sharing of gross returns doesnot of itself establish a partnership, whether or not the persons sharingthem have a joint or common right or interest in any property (!#illos

@r. vs C-R, G.R. No. 68118, !"to#er 29, 198/&'7 General pr!"ei!nal par$ner)ipe7 E$a$e an' $r($"7 C!-!*ner)ip

>. Inc!+e $a#a$i!na7 %e&ni$i!n37 Na$(rec7 General principle

?. Inc!+e

a7 %e&ni$i!n37 Na$(rec7 W)en inc!+e i $a#a3le

6i7 E#i$ence !" inc!+e6ii7 RealiHa$i!n !" inc!+e

6a7 Te$ !" realiHa$i!n637 Ac$(al ,i--,i c!n$r(c$i,e receip$

6iii7 Rec!ni$i!n !" inc!+e6i,7 Me$)!' !" acc!(n$in

6a7Ca) +e$)!' ,i--,i accr(al +e$)!' The accrual method relies upon the taxpayer5s right toreceive amounts or its obligation to pay them, inopposition to actual receipt or payment, whichcharacteries the cash method of accounting. !mountsof income accrue where the right to receive thembecome xed, where there is created an enforceableliability. imilarly, liabilities are accrued when xedand determinable in amount, without regard toindeterminacy merely of time of payment. Eor ataxpayer using the accrual method, the determinative3uestion is, when do the facts present themselves insuch a manner that the taxpayer must recognieincome or expenseW The accrual of income andexpense is permitted when the all%events test hasbeen met. This test re3uires) (1& xing of a right toincome or liability to pay* and (& the availability of thereasonable accurate determination of such income orliability. (C-R vs -sa#ela Cultural Corp., GR 122$1,7e#ruary 12, 2%%&

637 In$all+en$ pa+en$ ,i--,i 'e"erre' pa+en$,i--,i percen$ae c!+ple$i!n 6in l!n-$er+c!n$rac$7




#<

'7 Te$ in 'e$er+inin *)e$)er inc!+e i earne' "!r $a#p(rp!e

6i7 RealiHa$i!n $e$6ii7 Clai+ !" ri)$ '!c$rine !r '!c$rine !" !*ner)ipDc!++an'D !r c!n$r!l6iii7 Ec!n!+ic 3ene&$ $e$D '!c$rine !" pr!prie$ar

in$ere$6i,7 Se,erance $e$6,7 All e,en$ $e$

@. Gr! inc!+ea7 %e&ni$i!n37 C!ncep$ !" inc!+e "r!+ *)a$e,er !(rce 'eri,e'c7 Gr! inc!+e ,i--,i ne$ inc!+e ,i--,i $a#a3le inc!+e'7 Clai&ca$i!n !" inc!+e a $! !(rce

6i7 Gr! inc!+e an' $a#a3le inc!+e "r!+ !(rce *i$)in$)e P)ilippine6ii7 Gr! inc!+e an' $a#a3le inc!+e "r!+ !(rce*i$)!($ $)e P)ilippine

6iii7 Inc!+e par$l *i$)in !r par$l *i$)!($ $)e P)ilippinee7 S!(rce !" inc!+e (3ec$ $! $a#

6i7 C!+pena$i!n inc!+e6ii7 rine 3ene&$

6a7 Special $rea$+en$ !" "rine 3ene&$637 %e&ni$i!n6c7 Ta#a3le an' n!n-$a#a3le "rine 3ene&$

6iii7 Pr!"ei!nal inc!+e6i,7 Inc!+e "r!+ 3(ine6,7 Inc!+e "r!+ 'ealin in pr!per$

6a7 Tpe !" pr!per$ie617 Or'inar ae$627 Capi$al ae$

The proceeds from the inherited land of petitioners,which they subdivided into small lots and in theprocess converted into a residential subdivision andgiven the name =on Dariano ubdivision, is taxableas ordinary income. -roperty initially classied as acapital asset may thereafter be treated as anordinary asset if a combination of the factorsindubitably tend to show that the activity was infurtherance of or in the course of the taxpayerstrade or business* thus, a sale of inherited realproperty usually gives capital gain or loss eventhough the property has to be subdivided orimproved or both to ma'e it salable%%however, if theinherited property is substantially improved or veryactively sold or both it may be treated as heldprimarily for sale to customers in the ordinarycourse of the heirs business. (5omas CalasanH, et al. vs. Commissioner of -nternal Revenue, et al.,G.R. No. 6228, !"to#er 9, 198&




#>

637 Tpe !" ain "r!+ 'ealin in pr!per$617 Or'inar inc!+e ,i--,i capi$al ain627 Ac$(al ain ,i--,i pre(+e' ain647 L!n $er+ capi$al ain ,i--,i )!r$-$er+capi$al ain

687 Ne$ capi$al ainD ne$ capi$al l!657 C!+p($a$i!n !" $)e a+!(n$ !" ain !r l!6<7 Inc!+e $a# $rea$+en$ !" capi$al l!

6a7 Capi$al l! li+i$a$i!n r(le6applica3le $! 3!$) c!rp!ra$i!n an'in'i,i'(al7637 Ne$ l! carr-!,er r(le 6applica3le!nl $! in'i,i'(al7

6>7 %ealin in real pr!per$ i$(a$e' in $)eP)ilippine6?7 %ealin in )are !" $!cF !" P)ilippinec!rp!ra$i!n

6a7 S)are li$e' an' $ra'e' in $)e $!cF e#c)ane637 S)are n!$ li$e' an' $ra'e' in $)e$!cF e#c)ane

6@7 Sale !" principal rei'ence6,i7 Pai,e in,e$+en$ inc!+e

6a7 In$ere$ inc!+e637 %i,i'en' inc!+e

617 Ca) 'i,i'en'627 S$!cF 'i,i'en'toc' dividends, strictly spea'ing, represent capital anddo not constitute income to itsrecipient. o that the mere issuance thereof is not yetsubject to income tax as they are nothing but anenrichment through increase in value of capitalinvestment. Gowever, the redemption or cancellation of stoc' dividends, depending on the time and manner itwas made, is essentially e3uivalent to a distribution of taxable dividends, ma'ing the proceeds thereof taxableincome to the extent it represents prots. The exceptionwas designed to prevent the issuance and cancellation orredemption of stoc' dividends, which is fundamentally nottaxable, from being made use of as a device for the actualdistribution of cash dividends, which is taxable. (C-R vsCA, G.R. No. 1%8/ @anuary 2%, 1999&647 Pr!per$ 'i,i'en'687 Li(i'a$in 'i,i'en'

6c7 R!al$ inc!+e6'7 Ren$al inc!+e

617 Leae !" per!nal pr!per$627 Leae !" real pr!per$647 Ta# $rea$+en$ !"




#?

6a7 Leae)!l' i+pr!,e+en$ 3 leee637 VAT a''e' $! ren$al/pai' 3 $)e leee6c7 A',ance ren$al/l!n $er+ leae

6,ii7 Ann(i$ieD pr!cee' "r!+ li"e in(rance !r !$)er $pe !" in(rance6,iii7 PriHe an' a*ar'

6i#7 Peni!nD re$ire+en$ 3ene&$D !r epara$i!n pa6#7 Inc!+e "r!+ an !(rce *)a$e,er

6a7 !ri,ene !" in'e3$e'ne637 Rec!,er !" acc!(n$ pre,i!(l *ri$$en-!= *)en$a#a3le/*)en n!$ $a#a3le6c7 Receip$ !" $a# re"(n' !r cre'i$6'7 Inc!+e "r!+ an !(rce *)a$e,er6e7 S!(rce r(le in 'e$er+inin inc!+e "r!+ *i$)in an'*i$)!($

617 In$ere$627 %i,i'en'647 Ser,ice

687 Ren$al657 R!al$ie6<7 Sale !" real pr!per$6>7 Sale !" per!nal pr!per$6?7 S)are !" $!cF !" '!+e$ic c!rp!ra$i!n

6"7 Si$( !" inc!+e $a#a$i!n 6ee pae 2 (n'er in)eren$li+i$a$i!nD $erri$!rial767 E#cl(i!n "r!+ r! inc!+e

617 Ra$i!nale "!r $)e e#cl(i!n627 Ta#paer *)! +a a,ail !" $)e e#cl(i!n647 E#cl(i!n 'i$in(i)e' "r!+ 'e'(c$i!n an'$a# cre'i$687 n'er $)e C!n$i$($i!n

6a7 Inc!+e 'eri,e' 3 $)e !,ern+en$ !r i$p!li$ical (3'i,ii!n "r!+ $)e e#ercie !" aneen$ial !,ern+en$al "(nc$i!n

657 n'er $)e Ta# C!'e6a7 Pr!cee' !" li"e in(rance p!licie637 Re$(rn !" pre+i(+ pai'6c7 A+!(n$ recei,e' (n'er li"e in(ranceDen'!*+en$ !r ann(i$ c!n$rac$6'7 Val(e !" pr!per$ ac(ire' 3 i"$D3e(e$D 'e,ie !r 'ecen$6e7 A+!(n$ recei,e' $)r!() acci'en$ !r)eal$) in(rance6"7 Inc!+e e#e+p$ (n'er $a# $rea$67 Re$ire+en$ 3ene&$D peni!nD ra$(i$ieDe$c.

;espondent terminated petitioner5s services due to herillness, rendering her incapable of continuing to wor', andgave her retirement benets but withheld the tax duethereon. The retirements benets are taxable because the




#@

petitioner was only $1 yrs old at the time of retirementand had rendered only ? years of service* for thesebenets to be exempt from tax, the following re3uisitesmust concur) (1& a reasonable private benet plan ismaintained by the employer* (& the retiring oNcial or

employee has been in the service of the same employerfor at least ten (1/& years* (#& the retiring oNcial oremployee is not less than fty (/& years of age at thetime of his retirement* and ($& the benet had beenavailed of only once. (0a. -sa#el 5. antos vs. ervier Pil., -n"., et al., G.R. No. 1$, Novem#er 28, 2%%8&

;espondents contend that petitioner did not withhold thetaxes due on their retirement benets because it hadobliged itself to pay the taxes due thereon. This was doneto induce respondents to agree to avail of the optionalretirement scheme. It was only when respondents

demanded the payment of their salary di9erentials thatpetitioner alleged, for the rst time, that it had failed topresent the 1@@# 2+! to the +I; for approval, renderingsuch retirement benets not exempt from taxes*conse3uently, they were obliged to refund to it theamounts it had remitted to the +I; in payment of theirtaxes. -etitioner used this 7failure8 as an afterthought, asan excuse for its refusal to remit to the respondents theirsalary di9erentials. -atently, petitioner is estopped fromdoing so. It cannot renege on its commitment to pay thetaxes on respondents5 retirement benets on the pretext

that the 7new management8 had found the policydisadvantageous. (-nter"ontinental +roa*"astin3 Corp. vs.Noemi +. Amarilla, et al., G.R. No. 12/, !"to#er 2,2%%&

everance of employment is a condition sine 3ua non forthe release of retirement benets. ;etirement benets arenot meant to recompense employees who are still in theemploy of the government. (Devt. +anI of te Pil. vs.Commission on Au*it, G.R. No. 1/1, 7e#ruary 11,2%%&

6)7 WinninD priHeD an' a*ar'D incl('in$)!e in p!r$ c!+pe$i$i!n

6<7 n'er pecial la*6a7 Per!nal E(i$ an' Re$ire+en$ Acc!(n$

6)7 %e'(c$i!n "r!+ r! inc!+e617 General r(le




$/

6a7 %e'(c$i!n +($ 3e pai' !r inc(rre' inc!nnec$i!n *i$) $)e $a#paer $ra'eD3(ine !r pr!"ei!n637 %e'(c$i!n +($ 3e (pp!r$e' 3a'e(a$e receip$ !r in,!ice 6e#cep$$an'ar' 'e'(c$i!n7

6c7 A''i$i!nal re(ire+en$ rela$in $!*i$))!l'in

627 Re$(rn !" capi$al 6c!$ !" ale !r er,ice76a7 Sale !" in,en$!r !" !!' 3+an("ac$(rer an' 'ealer !" pr!per$ie637 Sale !" $!cF in $ra'e 3 a real e$a$e'ealer an' 'ealer in ec(ri$ie6c7 Sale !" er,ice

647 I$e+iHe' 'e'(c$i!n6a7 E#pene

617 Re(ii$e "!r 'e'(c$i3ili$6a7 Na$(re !r'inar an'

necear The expenses paid by !tlas for theservices rendered by a public relationsrm, aimed at creating a favorableimage for !tlas, is not an allowablededuction as business expense underthe CI;2. A9orts to establishreputation are a'in to ac3uisition of capital assets and, therefore,expenses related thereto are notbusiness expense but capital

expenditures. ( Atlas Consoli*ate*0inin3 & Devt. Corp. vs.Commissioner of -nternal Revenue,G.R. No. 62911, @anuary 2, 1981&

! stoc' listing fee paid annually to astoc' exchange for the privilege of having a corporation5s stoc' listed isan ordinary and business expense.

This is distinguished from a singlepayment made to the stoc' exchange,

which is considered a capitalexpenditure. ( Atlas Consoli*ate*0inin3 & Devt. Corp. vs.Commissioner of -nternal Revenue,G.R. No. 62911, @anuary 2, 1981'

The subject media advertising

expense for 7Tang8 incurred by




$1

respondent corporation was not an

ordinary and necessary expense, but

rather a capital expenditure because it

failed the two conditions set by :..

jurisprudence in determining whether

or not it is an 7ordinary8 expense) rst,reasonableness of the amount

incurred and second, the amount

incurred must not be a capital outlay

to create 7goodwill8 for the product

andMor private respondent5s business.

The subject expense for the

advertisement of a single product is

inordinately large* furthermore, the

corporation5s venture to protect its

brand franchise was tantamount to

e9orts to establish a reputation and

was a'in to the ac3uisition of capital

assets. (Commissioner of -nternalRevenue vs. General 7oo*s, -n"., G.R.No. 1$2, April 2, 2%%$&

637 Pai' an' inc(rre' '(rin$a#a3le ear627 SalarieD *ae an' !$)er "!r+ !" c!+pena$i!n "!r per!nal er,iceac$(all ren'ere'D incl('in $)e

r!e'-(p +!ne$ar ,al(e !" $)e "rine3ene&$ (3ec$e' $! "rine 3ene&$ $a#*)ic) $a# )!(l' )a,e 3een pai' -ayment by the taxpayer%corporation to itscontrolling stoc'holder (Gos'ins& of /K of its supervision fees (paid by a client of thecorporation for the latters services asmanaging agent of a subdivision project& orthe amount of -@@,@>>.@1 is not a deductibleordinary and necessary expense because itdoes not pass the test of reasonablecompensation. If independently, a one%time

-1//,///.//%fee to plan and lay down therules for supervision of a subdivision projectwere to be paid to an experienced realtorsuch as Gos'ins, its fairness and deductibilityby the taxpayer could be conceded*however, the fee paid to Gos'ins continuedevery year since 1@ up to 1@<# and for aslong as its contract with the subdivision




$

owner subsisted, regardless of whetherservices were actually rendered by Gos'ins.(C. 0. :osIins & Co., -n". vs. Commissioner of -nternal Revenue, G.R. No. 62%/9,Novem#er 28, 199&647 Tra,ellin/$ranp!r$a$i!n e#pene

687 C!$ !" +a$erial657 Ren$al an'/!r !$)er pa+en$ "!r(e !r p!ei!n !" pr!per$6<7 Repair an' +ain$enance6>7 E#pene (n'er leae aree+en$6?7 E#pene "!r pr!"ei!nal6@7 En$er$ain+en$/Repreen$a$i!ne#pene6107 P!li$ical ca+pain e#pene6117 Trainin e#pene

637 In$ere$617 Re(ii$e "!r 'e'(c$i3ili$

627 N!n-'e'(c$i3le in$ere$ e#pene647 In$ere$ (3ec$ $! pecial r(le

6a7 In$ere$ pai' in a',ance637 In$ere$ peri!'icall a+!r$iHe'6c7 In$ere$ e#pene inc(rre' $!ac(ire pr!per$ "!r (e in$ra'e/3(ine/pr!"ei!n6'7 Re'(c$i!n !" in$ere$e#pene/in$ere$ ar3i$rae

6c7 Ta#e Dargin fees paid by the petitioner to the 2entral+an' on its prot remittances to its Cew Hor' headoNce are not allowable deductions as taxesbecause it is not a tax but an exaction designed tocurb the excessive demands upon our internationalreserve. Dargin fees are also not ordinary andnecessary business expenses because they are notexpenses in connection with the production orearning of petitioners incomes in the -hilippines*they were expenses incurred in the disposition of said incomes. ()sso tan*ar* )astern, -n". vs.Commissioner of -nternal Revenue, G.R. Nos.28/%89, @uly , 1989&

617 Re(ii$e "!r 'e'(c$i3ili$627 N!n-'e'(c$i3le $a#e647 Trea$+en$ !" (rc)are/in$ere$/&ne "!r'elin(enc687 Trea$+en$ !" pecial ae+en$657 Ta# cre'i$ ,i--,i 'e'(c$i!n

6'7 L!e




$#

617 Re(ii$e "!r 'e'(c$i3ili$627 O$)er $pe !" l!e

6a7 Capi$al l!e637 Sec(ri$ie 3ec!+in *!r$)le 7ecurities becoming worthless8resulting from 2hina +an'5s e3uity

investment in the Eirst 2+2 2apital(!sia& 0td., a Gong'ong subsidiary, iscapital loss and not an ordinary loss.!n e3uity investment is a capital, notordinary, asset of the investor the saleor exchange of which results in eithera capital gain or a capital loss* sharesof stoc' would be ordinary assets onlyto a dealer in securities or a personengaged in the purchase and sale of,or an active trader (for his ownaccount& in, securities. (Cina +anIin3

Corp. vs. Court of Appeals, et al., G.R.No. 12//%8, @uly 19, 2%%%&6c7 L!e !n *a) ale !" $!cF!r ec(ri$ie6'7 Waerin l!e6e7 Ne$ Opera$in L! Carr-O,er6NOLCO7

6e7 Ba' 'e3$ In claiming deductions for bad debts, the onlyevidentiary support given by -;2 was theexplanation posited by its accountant, whose

allegations were not supported by anydocumentary evidence. ne of the re3uisites to3ualify as 7bad debt8 is that the debt must beactually ascertained to be worthless anduncollectible during the taxable year, and thetaxpayer must prove that he exerted diligent e9ortsto collect the debts by (1& sending of statement of accounts* (& sending of collection letters* (#&giving the account to a lawyer for collection* and($& ling a collection case in court. (PilippineReJnin3 Company vs. Court of Appeals, et al., G.R.No. 1189, 0ay 8, 199&

617 Re(ii$e "!r 'e'(c$i3ili$627 E=ec$ !" rec!,er !" 3a' 'e3$

6"7 %eprecia$i!n =epreciation is the gradual diminution in the usefulvalue of tangible property resulting from wear andtear and normal obsolescense. The term is alsoapplied to amortiation of the value of intangible




$$

assets, the use of which in the trade or business isdenitely limited in duration. =epreciationcommences with the ac3uisition of the propertyand its owner is not bound to see his propertygradually waste, without ma'ing provision out of earnings for its replacement. (+asilan )states, -n".

vs. Commissioner of -nternal Revenue, et al., G.R.No. 62292, eptem#er /, 19&

+oth depletion and depreciation are predicated onthe same basic promise of avoiding a tax oncapital. The allowance for depletion is based on thetheory that the extraction of minerals graduallyexhausts the capital investment in the mineraldeposit. The purpose of the depiction deduction isto permit the owner of a capital interest in mineralin place to ma'e a tax%free recovery of thatdepleting capital asset. ! depletion is based upon

the concept of the exhaustion of a natural resourcewhereas depreciation is based upon the concept of the exhaustion of the property, not otherwise anatural resource, used in a trade or business orheld for the production of income. Thus, depletionand depreciation are made applicable to di9erenttypes of assets. !nd a taxpayer may not deductthat which the 2ode allows as of another.(Consoli*ate* 0ines, -n". vs. Court of 5a; Appeals,et al., G.R. Nos. 6188$ & 188, Au3ust 29, 19&

617 Re(ii$e "!r 'e'(c$i3ili$627 Me$)!' !" c!+p($in 'eprecia$i!nall!*ance

6a7 S$rai)$-line +e$)!'637 %eclinin-3alance +e$)!'6c7 S(+-!"-$)e-ear-'ii$ +e$)!'

67 C)ari$a3le an' !$)er c!n$ri3($i!n617 Re(ii$e "!r 'e'(c$i3ili$627 A+!(n$ $)a$ +a 3e 'e'(c$e'

6)7 C!n$ri3($i!n $! peni!n $r($617 Re(ii$e "!r 'e'(c$i3ili$

6i7 %e'(c$i!n (n'er pecial la*687 Op$i!nal $an'ar' 'e'(c$i!n

6a7 In'i,i'(alD e#cep$ n!n-rei'en$ alien637 C!rp!ra$i!nD e#cep$ n!n-rei'en$ "!reinc!rp!ra$i!n6c7 Par$ner)ip

657 Per!nal an' a''i$i!nal e#e+p$i!n 6R.A. N!. @508DMini+(+ Wae Earner La*7




$

The increased personal and additional exemptions under theCI;2 cannot be availed of by the petitioner for purposes of computing his income tax liability for the taxable year 1@@>.ince the CI;2 too' e9ect on "anuary 1, 1@@?, the increasedamounts of personal and additional exemptions under ection#, can only be allowed as deductions from the individual

taxpayer5s gross or net income, as the case maybe, for thetaxable year 1@@? to be led in 1@@@* the CI;2 made noreference that the personal and additional exemptions shallapply on income earned before "anuary 1, 1@@?, and it is a rulethat tax laws are to be applied prospectively unless itsretroactive application is expressly provided. (Carmelino 7.Pansa"ola vs. C-R, G.R. No. 1/9991, Novem#er 1, 2%%&

6a7 Baic per!nal e#e+p$i!n637 A''i$i!nal e#e+p$i!n "!r $a#paer *i$)'epen'en$6c7 S$a$(-a$-$)e-en'-!"-$)e-ear r(le6'7 E#e+p$i!n clai+e' 3 n!n-rei'en$ alien

6<7 I$e+ n!$ 'e'(c$i3le6a7 General r(le637 Per!nalD li,in !r "a+il e#pene6c7 A+!(n$ pai' "!r ne* 3(il'in !r "!r per+anen$i+pr!,e+en$ 6capi$al e#pen'i$(re76'7 A+!(n$ e#pen'e' in re$!rin pr!per$ 6+a!r

repair76e7 Pre+i(+ pai' !n li"e in(rance p!lic c!,erinli"e !r an !$)er !Jcer !r e+pl!ee &nanciallin$ere$e'6"7 In$ere$ e#peneD 3a' 'e3$D an' l!e "r!+ale !" pr!per$ 3e$*een rela$e' par$ie67 L!e "r!+ ale !r e#c)ane !r pr!per$6)7 N!n-'e'(c$i3le in$ere$6i7 N!n'e'(c$i3le $a#e67 N!n-'e'(c$i3le l!e6F7 L!e "r!+ *a) ale !" $!cF !r ec(ri$ie

6>7 E#e+p$ c!rp!ra$i!n6a7 Pr!prie$ e'(ca$i!nal in$i$($i!n an' )!pi$al637 G!,ern+en$-!*ne' !r c!n$r!lle' c!rp!ra$i!n6c7 O$)er

10. Ta#a$i!n !" rei'en$ ci$iHenD n!n-rei'en$ ci$iHenD an' rei'en$alien

a7 General r(le $)a$ rei'en$ ci$iHen are $a#a3le !n inc!+e"r!+ all !(rce *i$)in an' *i$)!($ $)e P)ilippine

6i7 N!n-rei'en$ ci$iHen37 Ta#a$i!n !n c!+pena$i!n inc!+e

6i7 Incl(i!n6a7 M!ne$ar c!+pena$i!n

617 Re(lar alar/*ae




$<

627 Separa$i!n pa/re$ire+en$ 3ene&$ n!$!$)er*ie e#e+p$647 B!n(eD 14$) +!n$) paD an' !$)er3ene&$ n!$ e#e+p$687 %irec$!r "ee

637 N!n-+!ne$ar c!+pena$i!n

617 rine 3ene&$ n!$ (3ec$ $! $a#6ii7 E#cl(i!n

6a7 rine 3ene&$ (3ec$ $! $a#637 %e +ini+i 3ene&$6c7 14$) +!n$) pa an' !$)er 3ene&$D an'pa+en$ peci&calle#cl('e' "r!+ $a#a3le c!+pena$i!n inc!+e

6iii7 %e'(c$i!n6a7 Per!nal e#e+p$i!n an' a''i$i!nal e#e+p$i!n637 :eal$) an' )!pi$aliHa$i!n in(rance6c7 Ta#a$i!n !" c!+pena$i!n inc!+e !" a +ini+(+*ae earner

617 %e&ni$i!n !" $a$($!r +ini+(+ *ae627 %e&ni$i!n !" +ini+(+ *ae earner647 Inc!+e al! (3ec$ $! $a# e#e+p$i!n)!li'a paD !,er$i+e paD ni)$-)i"$'i=eren$ialD an' )aHar' pa

c7 Ta#a$i!n !" 3(ine inc!+e/inc!+e "r!+ prac$ice !" pr!"ei!n

'7 Ta#a$i!n !" pai,e inc!+e6i7 Pai,e inc!+e (3ec$ $! &nal $a#

6a7 In$ere$ inc!+e6i7 Trea$+en$ !" inc!+e "r!+ l!n-$er+

'ep!i$637 R!al$ie6c7 %i,i'en' "r!+ '!+e$ic c!rp!ra$i!n6'7 PriHe an' !$)er *innin

6ii7 Pai,e inc!+e n!$ (3ec$ $! &nal $a#e7 Ta#a$i!n !" capi$al ain

6i7 Inc!+e "r!+ ale !" )are !" $!cF !" aP)ilippine c!rp!ra$i!n

6a7 S)are $ra'e' an' li$e' in $)e $!cF e#c)ane637 S)are n!$ li$e' an' $ra'e' in $)e$!cF e#c)ane

6ii7 Inc!+e "r!+ $)e ale !" real pr!per$i$(a$e' in $)e P)ilippine6iii7 Inc!+e "r!+ $)e aleD e#c)aneD !r !$)er'ip!i$i!n !" !$)er capi$al ae$

The ac3uisition by the Lovernment of privateproperties through the exercise of the power of eminent domain, said properties being justlycompensated, is embraced within the meaning of the term 7sale8 or 7disposition of property8 and the




$>

denition of gross income. -rot from thetransaction constitutes capital gain. (GonHales vsC5A, GR 61/$2, 0ay 2, 19/&

2apital gains is a tax on passive income, it is theseller, not the buyer, who generally would shoulder

the tax. !s a general rule, therefore, any of theparties to a transaction shall be liable for the fullamount of the documentary stamp tax due, unlessthey agree among themselves on who shall beliable for the same. 2apital gains tax due on thesale of real property is a liability for the account of the seller. It has been held that since capital gainsis a tax on passive income, it is the seller, not thebuyer, who generally would shoulder the tax. !lso,there is no agreement as to the party liable for thedocumentary stamp tax due on the sale of the landto be expropriated. +ut while =-BG rejects anyliability for the same, this 2ourt must ta'e note of petitioner5s 2itien5s 2harter, which functions as aguide for the procedure to be ta'en by the =-BG inac3uiring real property through expropriation under;! ?@>$. The 2itien5s 2harter, issued by =-BGitself on =ecember $, /1#, explicitly provides thatthe documentary stamp tax, transfer tax, andregistration fee due on the transfer of the title of land in the name of the ;epublic shall beshouldered by the implementing agency of the=-BG, while the capital gains tax shall be paid bythe a9ected property owner. R)P+6-C !7 5:)P:-6-PP-N), R)PR))N5)D += 5:) D)PAR50)N5 !7 P+6-C >!R< AND :-G:>A= vs. AR6)N) R.!R-AN!, G.R. No. 211, 7e#ruary 2/, 2%1/, @.Peralta

G+2 issued BIET messages to its clientscontaining instructions about their accounts. G+2paid =T on the said messages. Gowever, later on,G+2 led for tax refund for the =T it paid. 2I;denied their claim. n review with the upreme2ourt, it held that an electronic message containinginstructions to debit their respective local or foreigncurrency accounts in the -hilippines and pay acertain named recipient also residing in the-hilippines is not transaction contemplated underection 1?1 of the Tax 2ode. They are also not billsof exchange due to their non%negotiability. Gence,they are not subject to =T. 5:) :!NG<!NG AND:ANG:A- +AN<-NG C!RP!RA5-!N 6-0-5)DP:-6-PP-N) +RANC:) vs. C!00--!N)R !7




$?

-N5)RNA6 R)4)N), G.R. No. 1%18 & 128, @une , 2%1, @. 6eonar*oDe Castro

11. Ta#a$i!n !" n!n-rei'en$ alien enae' in $ra'e !r 3(inea7 General r(le

37 Ca) an'/!r pr!per$ 'i,i'en'c7 Capi$al ain

E#cl('e n!n-rei'en$ alien n!$ enae' in $ra'e !r 3(ine12. In'i,i'(al $a#paer e#e+p$ "r!+ inc!+e $a#

a7 Seni!r ci$iHen37 Mini+(+ *ae earnerc7 E#e+p$i!n ran$e' (n'er in$erna$i!nal aree+en$

14. Ta#a$i!n !" '!+e$ic c!rp!ra$i!na7 Ta# paa3le

6i7 Re(lar $a#6ii7 Mini+(+ C!rp!ra$e Inc!+e Ta# 6MCIT7Eor its scal year ending #1 Darch //1 (EH ///%//1&, -!0

incurred ero taxable income and did not pay D2IT, for which+I; assessed -!0 for deciency D2IT. -!0 is not liable to payD2IT because under its franchise, -!0 has the option to paybasic corporate income tax or franchise tax, whichever is lower*and the tax so paid shall be in lieu of all other taxes, except realproperty tax. D2IT falls within the category of 7all other taxes8from which -!0 is exempted because although both are incometaxes, the D2IT is di9erent from the basic corporate income tax,not just in the rates, but also in the bases for their computation.(Commissioner of -nternal Revenue vs. PA6, -n"., G.R. No.18%%, @uly , 2%%9&

6a7 I+p!i$i!n !" MCITD+2 being a new thrift ban' is not yet liable to the D2ITsince it will apply only beginning on the $ th years fromcommencement of its operations. The date of commencement of operations of a thrift ban' is the dateit was registered with the A2 or the date it was grantedauthority by +- to operate as such, whichever comeslater. !s newly operated thrift ban' it is entitled to a graceperiod of $ years counted from the date when it wasauthoried by +- to operate as thrift ban'. D+2 is

entitled to the refund of the taxes paid under the D2IT.

The intent of 2ongress relative to the D2IT is to grant a $year suspension of tax payment to newly formedcorporations. 2orporations still starting have to stabilietheir venture in order to obtain stronghold in the industry.It is not a surprise when many corporations reportedlosses in their initial years of operations. (Danila +an'ing2orp. v. 2I;, $@@ 2;! >?&




$@

637 Carr "!r*ar' !" e#ce +ini+(+ $a#6c7 Relie" "r!+ $)e MCIT (n'er cer$ain c!n'i$i!n6'7 C!rp!ra$i!n e#e+p$ "r!+ $)e MCIT6e7 Applica3ili$ !" $)e MCIT *)ere a c!rp!ra$i!n i!,erne' 3!$) (n'er $)e re(lar $a# $e+ an' a

pecial inc!+e $a# $e+37 All!*a3le 'e'(c$i!n

6i7 I$e+iHe' 'e'(c$i!n6ii7 Op$i!nal $an'ar' 'e'(c$i!n

c7 Ta#a$i!n !" pai,e inc!+e6i7 Pai,e inc!+e (3ec$ $! $a#

6a7 In$ere$ "r!+ 'ep!i$ an' iel'D !r an !$)er+!ne$ar 3ene&$ "r!+ 'ep!i$ (3$i$($e an'"r!+ $r($ "(n' an' i+ilar arrane+en$ an'r!al$ie637 Capi$al ain "r!+ $)e ale !" )are !" $!cF n!$ $ra'e' in $)e $!cF e#c)ane

6c7 Inc!+e 'eri,e' (n'er $)e e#pan'e' "!reinc(rrenc 'ep!i$ $e+6'7 In$er-c!rp!ra$e 'i,i'en'6e7 Capi$al ain realiHe' "r!+ $)e aleD e#c)aneD!r 'ip!i$i!n !" lan' an'/!r 3(il'in

6ii7 Pai,e inc!+e n!$ (3ec$ $! $a#'7 Ta#a$i!n !" capi$al ain

6i7 Inc!+e "r!+ ale !" )are !" $!cF6ii7 Inc!+e "r!+ $)e ale !" real pr!per$ i$(a$e' in $)eP)ilippine6iii7 Inc!+e "r!+ $)e aleD e#c)aneD !r !$)er 'ip!i$i!n!" !$)er capi$al ae$

e7 Ta# !n pr!prie$ar e'(ca$i!nal in$i$($i!n an' )!pi$alt. 0u'e5s is a proprietary non%stoc' and non%prot hospital catering tonon%paying patients but also derives prot from paying patients. It issubject to the preferential tax rate of 1/K for its prot%generatingactivities under sec. >(+& of CI;2* it cannot be exempt from incometax under sec. #/(A& and (L& because it is not 7organied and operatedexclusively8 for charitable purposes, which is a re3uirement under theaforementioned provision. (C-R vs. t. 6uIeFs 0e*i"al Center, -n"., G.R.Nos. 19/9%9 & 19/9%, eptem#er 2, 2%12&

"7 Ta# !n !,ern+en$-!*ne' !r c!n$r!lle' c!rp!ra$i!nD

aencie !r in$r(+en$ali$ie18. Ta#a$i!n !" rei'en$ "!rein c!rp!ra$i!na7 General r(le37 Wi$) repec$ $! $)eir inc!+e "r!+ !(rce *i$)in $)eP)ilippinec7 Mini+(+ C!rp!ra$e Inc!+e Ta#'7 Ta# !n cer$ain inc!+e




/

6i7 In$ere$ "r!+ 'ep!i$ an' iel'D !r an !$)er+!ne$ar 3ene&$ "r!+ 'ep!i$ (3$i$($eD $r($ "(n'an' i+ilar arrane+en$ an' r!al$ie6ii7 Inc!+e 'eri,e' (n'er $)e e#pan'e' "!rein c(rrenc'ep!i$ $e+6iii7 Capi$al ain "r!+ ale !" )are !" $!cF n!$ $ra'e'

in $)e $!cFe#c)ane6i,7 In$er-c!rp!ra$e 'i,i'en'

E#cl('e6i7 In$erna$i!nal carrier6ii7 O=)!re 3anFin (ni$6iii7 Branc) pr!&$ re+i$$ance6i,7 Rei!nal !r area )ea'(ar$er an' rei!nal !pera$in)ea'(ar$er !" +(l$ina$i!nal c!+panie15. Ta#a$i!n !" n!n-rei'en$ "!rein c!rp!ra$i!n

a7 General r(le37 Ta# !n cer$ain inc!+e

6i7 In$ere$ !n "!rein l!an6ii7 In$er-c!rp!ra$e 'i,i'en'6iii7 Capi$al ain "r!+ ale !" )are !" $!cF n!$ $ra'e'in $)e $!cF e#c)ane

E#cl('e6i7 N!n-rei'en$ cine+a$!rap)ic &l+-!*nerD le!r !r 'i$ri3($!r6ii7 N!n-rei'en$ !*ner !r le!r !" ,eel c)ar$ere' 3 P)ilippinena$i!nal6iii7 N!n-rei'en$ !*ner !r le!r !" aircra"$ +ac)inerie an' !$)ere(ip+en$1<. I+pr!perl acc(+(la$e' earnin !" c!rp!ra$i!n-etitioner cannot avoid paying surtax on improperly accumulated earningsbecause the purchase of the :..!. Treasury bonds were in no way related topetitioner5s business of importing and selling wines li3uors. The 7immediacytest8 determines the 7reasonable needs8 of the business in order to justify anaccumulation of earningsVthat is, if the corporation did not prove animmediate need for the accumulation of the earnings and prots, theaccumulation was not for the reasonable needs of the business, and thepenalty tax would apply* investment of the earnings and prots of thecorporation in stoc' or securities of an unrelated business usually indicatesan accumulation beyond the reasonable needs of the business (0anila >ine0er"ants, -n". vs. Commissioner of -nternal Revenue, G.R. No. 621/,7e#ruary 2%, 198&

+I; assessed petitioner for surtax on improperly accumulated prots, whichpetitioner contested. In order to determine whether prots are accumulatedfor the reasonable needs of the business, it must be shown that) (1& thecontrolling intention of the taxpayer is manifest at the time of accumulation,not intentions declared subse3uently, which are mere afterthoughts* and (&the accumulated prots must be used within a reasonable time after the




1

close of the taxable year. (Cyanami* Pilippines, -n". vs. Court of Appeals, et al., G.R. No. 1%8%, @anuary 2%, 2%%%&

-revious accumulations should be considered in determining unreasonableaccumulations for the year concerned. In determining whetheraccumulations of earnings or prots in a particular year are within the

reasonable needs of a corporation, it is necessary to ta'e into account prioraccumulations, since accumulations prior to the year involved may havebeen suNcient to cover the business needs and additional accumulationsduring the year involved would not reasonably be necessary. (+asilan)states, -n". vs. Commissioner of -nternal Revenue, et al., G.R. No. 62292,eptem#er /, 19&

1>. E#e+p$i!n "r!+ $a# !n c!rp!ra$i!n HD2!, a non%stoc' non%prot corporation with charitable objectives, claimedexemption from payment of income tax by invo'ing the CI;2 and the2onstitution. Bhile the income received by the organiations enumerated inection < of the CI;2 is, as a rule, exempted from the payment of tax 7inrespect to income received by them as such,8 the exemption does not apply

to income derived 7from any of their properties, real or personal, or fromany of their activities conducted for prot, regardless of the dispositionmade of such income8* Doreover, charitable institutions under !rt. FI, sec.? of the 2onstitution are only exempted from property taxes, and HD2! isnot an educational institution under !rticle UIF, ection $ of the2onstitution. (Commissioner of -nternal Revenue vs. Court of Appeals, et al.,G.R. No. 12%$, !"to#er 1, 1998&

0ung 2enter, charitable institution, does not lose its character as such andits exemption from taxes simply because it derives income from payingpatients, whether out%patient, or conned in the hospital, or receivessubsidies from the government, so long as the money received is devotedor used altogether to the charitable object which it is intended to achieve*and no money inures to the private benet of the persons managing oroperating the institution. Gowever, it is not exempt from real property taxas to the portions of the land leased to private entities as well as thoseparts of the hospital leased to private individuals because under the2onstitution, it is only exempt when its real properties are actually,directly, and exclusively used for charitable purposes. (6un3 Center of tePil. vs. EueHon City, et al., G.R. No. 11%, @une 29, 2%% &

1?. Ta#a$i!n !" par$ner)ip1@. Ta#a$i!n !" eneral pr!"ei!nal par$ner)ip20. Wi$))!l'in $a#

a7 C!ncep$37 ;in'6i7 Wi$))!l'in !" &nal $a# !n cer$ain inc!+e6ii7 Wi$))!l'in !" cre'i$a3le $a# a$ !(rce

c7 Wi$))!l'in !" VAT'7 ilin !" re$(rn an' pa+en$ !" $a#e *i$))el'

6i7 Re$(rn an' pa+en$ in cae !" !,ern+en$ e+pl!ee6ii7 S$a$e+en$ an' re$(rn

e7 inal *i$))!l'in $a# a$ !(rce




2itytrust and !sianban' are domestic corporations which paid grossreceipts tax and claimed a refund on the basis of a 2T! ruling that the/K EBT on a ban'5s passive income does not form part of the taxablegross receipts. The /K EBT on a ban'5s interest income forms part of the taxable gross receipts because 7gross receipts8 means 7the entirereceipts without any deduction8* moreover, the imposition of the /K

EBT and K L;T does not constitute double taxation because L;T is apercentage tax while EBT is an income tax, and the two concepts aredi9erent from each other. (Commissioner of -nternal Revenue vs.Citytrust -nvestment Pils., -n"., G.R. Nos. 1$98 & 1%8/,eptem#er 2, 2%%&

hould there have been a simultaneous sale to / or morelendersMinvestors, the -overty Aradication and !lleviation 2erticatesor the -A!2e +onds are deemed deposit substitutes within themeaning of ec. (H& of the 1@@> CI;2 and ;2+2 2apital would havebeen obliged to pay the /K EBT on the interest or discount from the-A!2e +onds. Eurther, the obligation to withhold the /K nal tax on

the corresponding interest from the -A!2e +onds would li'ewise bere3uired of any lenderMinvestor had the latter turned around and soldsaid -A!2e +onds, whether in whole or part, simultaneously to / ormore lenders or investors.

The 2ourt notes, however, that under ection $ of the 1@@> CI;2,interest income received by individuals from longterm deposits orinvestments with a holding period of not less than ve (& years isexempt from the nal tax.

Thus, should the -A!2e +onds be found to be within the coverage of deposit substitutes, the proper procedure was for the +ureau of

Treasury to pay the face value of the -A!2e +onds to the bondholdersand for the +I; to collect the unpaid EBT directly from ;2+2 2apital, orany lender or investor if such be the case, as the withholding agents.BANCO DE ORO, et al. vs. REPUBLIC OF THE PHILIPPINES, et al.,G.R. No. 1987!, "a#$a%& 1', ()1, ". Leo#e#

"7 Cre'i$a3le *i$))!l'in $a#

Bhile perhaps it may be necessary to prove that the taxpayer did notuse the claimed creditable withholding tax to pay for hisMits taxliabilities, there is no basis in law or jurisprudence to say that +I; EormCo. #/> is the only evidence that may be adduced to prove such non%use. P:-6-PP-N) NA5-!NA6 +AN< vs. C!00--!N)R !7 -N5)RNA6R)4)N), G.R. No. 2%%19, 0ar" 18, 2%1/, @. 4elas"o @r.

6i7 E#pan'e' *i$))!l'in $a#6ii7 Wi$))!l'in $a# !n c!+pena$i!n

7 Ti+in !" *i$))!l'in




#

B. E$a$e $a#

1. Baic principle2. %e&ni$i!n4. Na$(re8. P(rp!e !r !3ec$

5. Ti+e an' $ran"er !" pr!per$ie

-ost%mortem dispositions typically J

(1& 2onvey no title or ownership to the transferee before the death of the transferor* or, what amounts to the same thing, that the transferorshould retain the ownership (full or na'ed& and control of the propertywhile alive* (& That before the Rdonor5sS death, the transfer should be revocableby the transferor at will, a* nutum* but revocability may be providedfor indirectly by means of a reserved power in the donor to dispose of

the properties conveyed*

(#& That the transfer should be void if the transferor should survive thetransferee*

R$S RTShe specication in a deed of the causes whereby the act may berevo'ed by the donor indicates that the donation is inter vivos, ratherthan a disposition mortis "ausa* RS That the designation of the donation as mortis "ausa, or a provision

in the deed to the e9ect that the donation is 7to ta'e e9ect at thedeath of the donor8 are not controlling criteria* such statements are tobe construed together with the rest of the instrument, in order to givee9ect to the real intent of the transferor* and (<& That in case of doubt, the conveyance should be deemeddonation inter vivos rather than mortis "ausa, in order to avoid uncertainty asto the ownership of the property subject of the deed. (G!NA6! 4-66AN)4Avs. P!) 7R!-6AN, G.R. No. 128%, @anuary 2, 2%11'

The conveyance in 3uestion is not, rst of all, one of mortis "ausa, which should beembodied in a will. In this case, the monies subject of savings account were in the

nature of conjugal funds. In the case relied on, Rivera v. PeopleFs +anI an* 5rust Co., we rejected claims that a survivorship agreement purports to deliver onepartys separate properties in favor of the other, but simply, their joint holdings.(R!0AR-C! G. 4-5G vs. 5:) :!N!RA+6) C!R5 !7 APP)A6 an* R!>)NA7A5-N!C!R!NA, G.R. No. 82%2, 0ar" 29, 199%'

+ut although the survivorship agreement is per se not contrary to law its operationor e9ect may be violative of the law. Eor instance, if it be shown in a given case that




$

such agreement is a mere cloa' to hide an inoNcious donation, to transfer propertyin fraud of creditors, or to defeat the legitime of a forced heir, it may be assailedand annulled upon such grounds. (R!0AR-C! G. 4-5G vs. 5:) :!N!RA+6) C!R5 !7 APP)A6 an* R!>)NA 7A5-N!C!R!NA, G.R. No. 82%2, 0ar" 29, 199%'

<. Clai&ca$i!n !" 'ece'en$

>. Gr! e$a$e ,i--,i ne$ e$a$e?. %e$er+ina$i!n !" r! e$a$e an' ne$ e$a$e@. C!+p!i$i!n !" r! e$a$e10. I$e+ $! 3e incl('e' in r! e$a$e11. %e'(c$i!n "r!+ e$a$e

!s held in Propstra v. .., where a lien claimed against the estate was certain andenforceable on the date of the decedents death, the fact that the claimantsubse3uently settled for lesser amount did not preclude the estate from deductingthe entire amount of the claim for estate tax purposes. These pronouncementsessentially conrm the general principle that post%death developments are notmaterial in determining the amount of the deduction. (RA7A)6 AR)N-! . D-!N

vs. C!R5 !7 5A? APP)A6, G.R. No. 1%9, April $%, 2%%8'

Be express our agreement with the date%of%death valuation rule. There is no law,nor do we discern any legislative intent in our tax laws, which disregards the date%of%death valuation principle and particularly provides that post%death developmentsmust be considered in determining the net value of the estate. It bears emphasisthat tax burdens are not to be imposed, nor presumed to be imposed, beyond whatthe statute expressly and clearly imports, tax statutes being construed stri"tissimi

uris against the government. (RA7A)6 AR)N-! . D-!N vs. C!R5 !7 5A? APP)A6, G.R. No. 1%9, April $%, 2%%8'

uch construction nds relevance and consistency in our ;ules on pecial-roceedings wherein the term 6claims6 re3uired to be presented against adecedents estate is generally construed to mean debts or demands of a pecuniarynature which could have been enforced against the deceased in his lifetime, orliability contracted by the deceased before his death. Therefore, the claims existingat the time of death are signicant to, and should be made the basis of, thedetermination of allowable deductions. (RA7A)6 AR)N-! . D-!N vs. C!R5 !7 5A? APP)A6, G.R. No. 1%9, April $%, 2%%8'

!dministration expenses, as an allowable deduction from the gross estate of thedecedent for purposes of arriving at the value of the net estate, have beenconstrued by the federal and state courts of the :nited tates to include allexpenses 6essential to the collection of the assets, payment of debts or thedistribution of the property to the persons entitled to it.6 In other words, theexpenses must be essential to the proper settlement of the estate and expendituresincurred for the individual benet of the heirs, devisees or legatees are notdeductible. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. C!R5 !7 APP)A6, G.R.No. 12$2%, 0ar" 22, 2%%%'

Thus, in 6orenHo v . Posa*as, the 2ourt construed the phrase 6judicial expenses of the testamentary or intestate proceedings6 as not including the compensation paid




to a trustee of the decedents estate when it appeared that such trustee wasappointed for the purpose of managing the decedents real estate for the benet of the testamentary heir. In another case, the 2ourt disallowed the premiums paid onthe bond led by the administrator as an expense of administration since the givingof a bond is in the nature of a 3ualication for the oNce, and not necessary in thesettlement of the estate. Ceither may attorneys fees incident to litigation incurred

by the heirs in asserting their respective rights be claimed as a deduction from thegross estate. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. C!R5 !7 APP)A6, G.R.No. 12$2%, 0ar" 22, 2%%%'

The notarial fee paid for the extrajudicial settlement is clearly a deductible expensesince such settlement e9ected a distribution of -edro -ajonars estate to his lawfulheirs. imilarly, the attorneys fees paid to -C+ for acting as the guardian of -edro-ajonars property should also be considered as a deductible administration expenseas -C+ provided a detailed accounting of decedents property and gave advice as tothe proper settlement of the latters estate, acts which contributed towards thecollection of decedents assets and the subse3uent settlement of the estate.(C!00--!N)R !7 -N5)RNA6 R)4)N) vs. C!R5 !7 APP)A6, G.R. No. 12$2%,0ar" 22, 2%%%'

12. E#cl(i!n "r!+ e$a$e14. Ta# cre'i$ "!r e$a$e $a#e pai' in a "!rein c!(n$r18. E#e+p$i!n !" cer$ain ac(ii$i!n an' $ran+ii!n15. ilin !" n!$ice !" 'ea$)1<. E$a$e $a# re$(rn

C. %!n!r $a#1. Baic principle2. %e&ni$i!n4. Na$(re8. P(rp!e !r !3ec$5. Re(ii$e !" ,ali' '!na$i!n

Ceither is the survivorship agreement a donation inter vivos, for obvious reasons,because it was to ta'e e9ect after the death of one party. econdly, it is not adonation between the spouses because it involved no conveyance of a spousesown properties to the other. (R!0AR-C! G. 4-5G vs. 5:) :!N!RA+6) C!R5 !7

APP)A6 an* R!>)NA 7A5-N!C!R!NA, G.R. No. 82%2, 0ar" 29, 199%'

In the case at bar, when the spouses Fitug opened savings account, they merely put

what rightfully belonged to them in a money%ma'ing venture. They did not disposeof it in favor of the other, which would have arguably been sanctionable as aprohibited donation. (R!0AR-C! G. 4-5G vs. 5:) :!N!RA+6) C!R5 !7 APP)A6an* R!>)NA 7A5-N!C!R!NA, G.R. No. 82%2, 0ar" 29, 199%'

The granting clause shows that =iego donated the properties out of love anda9ection for the donee which is a mar' of a donation inter vivos* second, thereservation of lifetime usufruct indicates that the donor intended to transfer thena'ed ownership over the properties* third, the donor reserved suNcient properties




<

for his maintenance in accordance with his standing in society, indicating that thedonor intended to part with the six parcels of land* lastly, the donee accepted thedonation. (P. AGR-P-N! G)5!PA an* -A+)6 -6AR-! G)5!PA vs. C!R5 !7

APP)A6, G.R. No. 1119%, !"to#er /, 2%%%'

In the case of Alean*ro vs. Geral*eH, 8 CRA 2/ (19', we said that an

acceptance clause is a mar' that the donation is inter vivos. !cceptance is are3uirement for donations inter vivos. =onations mortis "ausa, being in the form of a will, are not re3uired to be accepted by the donees during the donors lifetime.(P. AGR-P-N! G)5!PA an* -A+)6 -6AR-! G)5!PA vs. C!R5 !7 APP)A6,G.R. No. 1119%, !"to#er /, 2%%%'

2rucial in resolving whether the donation was inter vivos or mortis "ausa is thedetermination of whether the donor intended to transfer the ownership over theproperties upon the execution of the deed. (P. AGR-P-N! G)5!PA an* -A+)6-6AR-! G)5!PA vs. C!R5 !7 APP)A6, G.R. No. 1119%, !"to#er /, 2%%%'

! remuneratory donation is one where the donee gives something to reward past or

future services or because of future charges or burdens, when the value of saidservices, burdens or charges is less than the value of the donation. (=e 0una v.!brigo, L.;. Co. 0%>$, "anuary 1?, 1@@/&

<. Tran"er *)ic) +a 3e c!n$i$($e' a '!na$i!na7 Sale/e#c)ane/$ran"er !" pr!per$ "!r in(Jcien$ c!ni'era$i!n37 C!n'!na$i!n/re+ii!n !" 'e3$>. Tran"er "!r le $)an a'e(a$e an' "(ll c!ni'era$i!n?. Clai&ca$i!n !" '!n!r@. %e$er+ina$i!n !" r! i"$10. C!+p!i$i!n !" r! i"$11. Val(a$i!n !" i"$ +a'e in pr!per$

12. Ta# cre'i$ "!r '!n!r $a#e pai' in a "!rein c!(n$r14. E#e+p$i!n !" i"$ "r!+ '!n!r $a#18. Per!n lia3le15. Ta# 3ai

%. Val(e-A''e' Ta# 6VAT71. C!ncep$

!s its name implies, the Falue%!dded Tax system is a tax on the value added by thetaxpayer in the chain of transactions. Eor simplicity and eNciency in tax collection,the F!T is imposed not just on the value added by the taxpayer, but on the entire

selling price of his goods, properties or services. (C!00--!N)R !7 -N5)RNA6R)4)N) vs. AN R!E) P!>)R C!RP!RA5-!N, G.R. No. 188/, 7e#ruary 12,2%1$'

Gowever, the taxpayer is allowed a refund or credit on the F!T previously paid bythose who sold him the inputs for his goods, properties, or services. The net e9ect isthat the taxpayer pays the F!T only on the value that he adds to the goods,properties, or services that he actually sells. (C!00--!N)R !7 -N5)RNA6




>

R)4)N) vs. AN R!E) P!>)R C!RP!RA5-!N, G.R. No. 188/, 7e#ruary 12,2%1$'

F!T is a tax on transactions, imposed at every stage of the distribution process onthe sale, barter, exchange of goods or property, and on the performance of services,even in the absence of prot attributable thereto. The term 6in the course of trade

or business6 re3uires the regular conduct or pursuit of a commercial or an economicactivity, regardless of whether or not the entity is prot%oriented. (C!00--!N)R!7 -N5)RNA6 R)4)N) vs. C!R5 !7 APP)A6, G.R. No. 12/$//, 0ar" $%, 2%%%'

The F!T is not a license tax* it is not a tax on the exercise of a privilege, much less aconstitutional right. It is imposed on the sale, barter, lease or exchange of goods orproperties or the sale or exchange of services and the lease of properties purely forrevenue purposes. (AR5R! 0. 5!6)N5-N! v. 5:) )CR)5AR= !7 7-NANC) an* 5:)C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 11///, !"to#er $%, 199/'

2. C)arac$eri$ic/Ele+en$ !" a VAT-Ta#a3le $ranac$i!n

F!T is not a singular%minded tax on every transactional level* its assessment bearsdirect relevance to the taxpayers role or lin' in the production chain. Gence, asaNrmed by ection @@ Rnow ec. 1/S of the Tax 2ode and its subse3uentincarnations, the tax is levied only on the sale, barter or exchange of goods orservices by persons who engage in such activities, in the course of trade orbusiness. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. 0AGA=A= 6-N), -NC., G.R.No. 198. @uly 28, 2%%'

The 2ourt rules that given the undisputed nding that the transaction in 3uestionwas not made in the course of trade or business of the seller, C=2 that is, the sale isnot subject to F!T pursuant to ection @@ Rnow ec. 1/S of the Tax 2ode, no matterhow the said sale may hew to those transactions deemed sale as dened underection 1// Rnow ec. 1/<S. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs.0AGA=A= 6-N), -NC., G.R. No. 198. @uly 28, 2%%'

Thus, there must be a sale, barter or exchange of goods or properties before anyF!T may be levied. 2ertainly, there was no such sale, barter or exchange in thesubsidy given by I to ony* it was but a dole out by I and not in payment forgoods or properties sold, bartered or exchanged by ony. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. !N= P:-6-PP-N), -NC., G.R. No. 189, Novem#er 1,2%1%'

Loods or properties must be used directly or indirectly in the production or sale of taxable goods and services. (Oepco -hilipppines 2orp. v. 2I;, L.;. Co. 1>@#<,=ecember 1$, //@&

it is immaterial whether the primary purpose of a corporation indicates that itreceives payments for services rendered to its aNliates on a reimbursement%on%costbasis only, without realiing prot, for purposes of determining liability for F!T onservices rendered. !s long as the entity provides service for a fee, remuneration or




?

consideration, then the service rendered is subject to F!T. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. C!R5 !7 APP)A6, G.R. No. 12/$//, 0ar" $%, 2%%%'

4. I+pac$ !" $a#

:nder ection 1/ of the Tax 2ode, F!T is imposed on any person who, in thecourse of trade or business, sells or renders services for a fee. In other words, theseller of services, who in this case is the tollway operator, is the person liable forF!T. The latter merely shifts the burden of F!T to the tollway user as part of the tollfees. (R)NA5! 4. D-A an* AR!RA 0A. 7. 5-0+!6 vs. 5:) )CR)5AR= !7 7-NANC),G.R. No. 19$%%, @uly 19, 2%11'

8. Inci'ence !" $a#

The seller who is liable for the F!T may shift or pass on the amount of F!T it paid ongoods, properties or services to the buyer. In such a case, what is transferred is notthe sellers liability but merely the burden of the F!T. (R)NA5! 4. D-A an* AR!RA

0A. 7. 5-0+!6 vs. 5:) )CR)5AR= !7 7-NANC), G.R. No. 19$%%, @uly 19, 2%11'

Thus, the seller remains directly and legally liable for payment of the F!T, but thebuyer bears its burden since the amount of F!T paid by the former is added to theselling price. nce shifted, the F!T ceases to be a tax and simply becomes part of the cost that the buyer must pay in order to purchase the good, property or service.(R)NA5! 4. D-A an* AR!RA 0A. 7. 5-0+!6 vs. 5:) )CR)5AR= !7 7-NANC), G.R.No. 19$%%, @uly 19, 2%11'

! seller who is directly and legally liable for the payment of an indirect tax, such asthe F!T on goods or services is not necessarily the person who ultimately bears theburden of the same tax. It is the nal purchaser of consumer of such goods or

services who, although not directly and legally liable for the payment thereof,ultimately bears the burden of the tax. (Conte; v. C-R, G.R. No. 1/11$/, @uly 2,2%%'

In the case of the F!T, the law minimies the regressive e9ects of indirect taxationby providing for Hero ratin3 of certain transactions, while granting e;emptions toother transactions. n the other hand, the transactions which are subject to the F!Tare those which involve goods and services which are used or availed of mainly byhigher income groups. (AR5R! 0. 5!6)N5-N! v. 5:) )CR)5AR= !7 7-NANC) an*5:) C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 11///, !"to#er $%, 199/'

5. Ta# cre'i$ +e$)!'

<. %e$ina$i!n principle

!ccording to the =estination -rinciple, goods and services are taxed only in thecountry where these are consumed. In connection with the said principle, the 2ross+order =octrine mandates that no F!T shall be imposed to form part of the cost of the goods destined for consumption outside the territorial border of the taxingauthority. Gence, actual export of goods and services from the -hilippines to aforeign country must be free of F!T, while those destined for use or consumptionwithin the -hilippines shall be imposed with 1/K F!T. (A56A C!N!6-DA5)D




@

0-N-NG AND D)4)6!P0)N5 C!RP!RA5-!N vs. C!00--!N)R !7 -N5)RNA6R)4)N), G.R. Nos. 111% & 18$, @une 8, 2%%'

!pplying the *estination prin"iple to the exportation of goods, automatic erorating is primarily intended to be enjoyed by the seller who is directly and legallyliable for the F!T, ma'ing such seller internationally competitive by allowing the

refund or credit of input taxes that are attributable to export sales. (C!00--!N)R!7 -N5)RNA6 R)4)N) vs. )AGA5) 5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8,7e#ruary 11, 2%%/'

:nder the "ross#or*er prin"iple of the F!T system being enforced by the +ureau of Internal ;evenue (+I;&, no F!T shall be imposed to form part of the cost of goodsdestined for consumption outside of the territorial border of the taxing authority. If exports of goods and services from the -hilippines to a foreign country are free of the F!T, then the same rule holds for such exports from the national territory Vexcept specically declared areas V to an ecoone. (C!00--!N)R !7 -N5)RNA6R)4)N) vs. )AGA5) 5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8, 7e#ruary 11,2%%/'

Bhile an ecoone is geographically within the -hilippines, it is deemed a separatecustoms territory and is regulated in laws as foreign soul. ales by supplies outsidethe borders of ecoone to this separate customs territory are deemed exports andtreated as export sales. (C-R v. eIsui @usi Pils, -n". G.R. No. 191, @uly 21,2%%'

Eor as long as the goods remain within the one, whether we call it an economicone or a freeport one, for as long as we say in this law that all goods entering thisparticular territory will be duty%free and tax%free, for as long as they remain there,consumed there or re%exported or destroyed in that place, then they are not subjectto duties and taxes in accordance with the laws of the -hilippines. (Co"onut !ilReJners Asso"iation v. );e"utive e"retary, G.R. No. 1$2/2, @uly 29, 2%%/'

>. Per!n lia3le?. VAT !n ale !" !!' !r pr!per$ie

Loods, as commonly understood in the business sense, refer to the product whichthe F!T%registered person o9ers for sale to the public. Bith respect to real estatedealers, it is the real properties themselves which constitute their goods. uch realproperties are the operating assets of the real estate dealer. (7ort +onifa"ioDevelopment Corporation vs. C-R, G.R. Nos. 1/888/ an* 1%$%, April 2, 2%%9'

a7 Re(ii$e !" $a#a3ili$ !" ale !" !!' !r pr!per$ie

Dindanao II5s sale of the Cissan -atrol is said to be an isolated transaction.Gowever, it does not follow that an isolated transaction cannot be an incidentaltransaction for purposes of F!T liability. Indeed, a reading of ection 1/ of the1@@> Tax 2ode would show that a transaction 6in the course of trade or business6includes 6transactions incidental thereto.6 (0-NDANA! -- G)!5:)R0A6PAR5N)R:-P vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 19$$%1, 0ar"11, 2%1$'




</

-rior to the sale, the Cissan -atrol was part of Dindanao II5s property, plant, ande3uipment. Therefore, the sale of the Cissan -atrol is an incidental transactionmade in the course of Dindanao II5s business which should be liable for F!T.(0-NDANA! -- G)!5:)R0A6 PAR5N)R:-P vs. C!00--!N)R !7 -N5)RNA6R)4)N), G.R. No. 19$$%1, 0ar" 11, 2%1$'

@. Ker!-ra$e' ale !" !!' !r pr!per$ieD an' e=ec$i,el Her!-ra$e' ale!" !!' !r pr!per$ie

Qero%rated transactions generally refer to the export sale of goods and supply of services. The tax rate is set at ero and when applied to the tax base, such rateobviously results in no tax chargeable against the purchaser. The seller of suchtransactions charges no output tax, but can claim a refund of or a tax creditcerticate for the F!T previously charged by suppliers. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. )AGA5) 5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8,7e#ruary 11, 2%%/'

A9ectively ero%rated transactions, however, refer to the sale of goods or supply of services to persons or entities whose exemption under special laws or internationalagreements to which the -hilippines is a signatory e9ectively subjects suchtransactions to a ero rate. !gain, as applied to the tax base, such rate does notyield any tax chargeable against the purchaser. The seller who charges ero outputtax on such transactions can also claim a refund of or a tax credit certicate for theF!T previously charged by suppliers. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs.)AGA5) 5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8, 7e#ruary 11, 2%%/'

If respondent is located in an export processing one within that ecoone, sales tothe export processing one, even without being actually exported, shall in fact beviewed as "onstru"tively e;porte* under A <. 2onsidered as export sales, suchpurchase transactions by respondent would indeed be subject to a erorate. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. )AGA5) 5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8, 7e#ruary 11, 2%%/'

-!L2;s exemption from F!T under ection 1/? (+& (#& of ;.!. Co. ?$$ has beenthoroughly and extensively discussed in Commissioner of -nternal Revenue v.

A"esite (Pilippines' :otel Corporation. !cesite sought the refund of the amount itpaid as F!T on the ground that its transaction with -!L2; was subject to ero rateas it was rendered to a tax%exempt entity. The 2ourt ruled that -!L2; and !cesitewere both exempt from paying F!T. (P:-6-PP-N) A0)0)N5 AND GA0-NGC!RP!RA5-!N (PAGC!R' vs. 5:) +R)A !7 -N5)RNA6 R)4)N), G.R. No. 12%8,0ar" 1/, 2%11'

Co prior application for the e9ective ero rating of its transactions is necessary. The+I; regulations additionally re3uiring an approved prior application for e9ective erorating cannot prevail over the clear F!T nature of respondents transactions. therthan the general registration of a taxpayer the F!T status of which is aptlydetermined, no provision under our F!T law re3uires an additional application to bemade for such taxpayers transactions to be considered e9ectively ero%rated.(C!00--!N)R !7 -N5)RNA6 R)4)N) vs. )AGA5) 5)C:N!6!G= (P:-6-PP-N)',G.R. No. 1/$8, 7e#ruary 11, 2%%/'




<1

The mnibus Investments 2ode of 1@?> recognies as export sales the sales of export products to another producer or to an export trader, provided that the exportproducts are actually exported. Eor purposes of F!T ero%rating, such producer orexport trader must be registered with the +I and is re3uired to actually exportmore than >/K of its annual production. (A56A C!N!6-DA5)D 0-N-NG ANDD)4)6!P0)N5 C!RP!RA5-!N vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R.Nos. 111% & 18$, @une 8, 2%%'

In terms of the F!T "omputation, ero rating and exemption are the same, butthe e;tent of relief that results from either one of them is not. In both instances of ero rating, there is total relief for the purchaser from the burden of the tax but inan exemption there is only partial relief, because the purchaser is not allowed anytax refund of or credit for input taxes paid. (C!00--!N)R !7 -N5)RNA6 R)4)N)vs. )AGA5) 5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8, 7e#ruary 11, 2%%/'

10. Tranac$i!n 'ee+e' ale

a7 Tran"erD (e !r c!n(+p$i!n n!$ in $)e c!(re !" 3(ine !" !!'/pr!per$ie !riinall in$en'e' "!r ale !r (e in $)e c!(re !" 3(ine37 %i$ri3($i!n !r $ran"er $! )are)!l'erD in,e$!r !r cre'i$!rc7 C!nin+en$ !" !!' i" ac$(al ale n!$ +a'e *i$)in <0 'a "r!+ 'a$e!" c!nin+en$'7 Re$ire+en$ "r!+ !r cea$i!n !" 3(ine *i$) repec$ $! in,en$!rie !n)an'11. C)ane !r cea$i!n !" $a$( a VAT-rei$ere' per!na7 S(3ec$ $! VAT6i7 C)ane !" 3(ine ac$i,i$ "r!+ VAT $a#a3le $a$( $! VAT-e#e+p$$a$(

6ii7 Appr!,al !" re(e$ "!r cancella$i!n !" a rei$ra$i!n '(e $! re,eri!n$! e#e+p$ $a$(6iii7 Appr!,al !" re(e$ "!r cancella$i!n !" rei$ra$i!n '(e $! 'eire $!re,er$ $! e#e+p$ $a$( a"$er lape !" 4 c!nec($i,e ear37 N!$ (3ec$ $! VAT6i7 C)ane !" c!n$r!l !" a c!rp!ra$i!n6ii7 C)ane in $)e $ra'e !r c!rp!ra$e na+e6iii7 Merer !r c!n!li'a$i!n !" c!rp!ra$i!n12. VAT !n i+p!r$a$i!n !" !!'a7 Tran"er !" !!' 3 $a# e#e+p$ per!n14. VAT !n ale !" er,ice an' (e !r leae !" pr!per$ie

ervice has been dened as the art of doing something useful for a person orcompany for a fee or useful labor or wor' rendered or to be rendered another for afee. (2I; v. !merican Axpress International, Inc., L.;. Co. 1</@, "une @, //&

+y 3ualifying 6services6 with the words 6all 'inds,6 2ongress has given the term6services6 an all%encompassing meaning. The listing of specic services areintended to illustrate how pervasive and broad is the F!Ts reach rather thanestablish concrete limits to its application* thus, every activity that can be imaginedas a form of 6service6 rendered for a fee should be deemed included unless some




<

provision of law especially excludes it. (R)NA5! 4. D-A an* AR!RA 0A. 7. 5-0+!6vs. 5:) )CR)5AR= !7 7-NANC), G.R. No. 19$%%, @uly 19, 2%11'

Tollway operators not only come under the broad term 6all 'inds of services,6 theyalso come under the specic class described in ection 1/? as 6all other franchisegrantees6 who are subject to F!T, 6except those under ection 11@ of this 2ode.6

Tollway operators are franchise grantees and they do not belong to exceptions (thelow%income radio andMor television broadcasting companies with gross annualincomes of less than -1/ million and gas and water utilities& that ection 11@ sparesfrom the payment of F!T. (R)NA5! 4. D-A an* AR!RA 0A. 7. 5-0+!6 vs. 5:))CR)5AR= !7 7-NANC), G.R. No. 19$%%, @uly 19, 2%11'

In specically including by way of example electric utilities, telephone, telegraph,and broadcasting companies in its list of F!T%covered businesses, ection 1/? opensother companies rendering public service for a fee to the imposition of F!T.+usinesses of a public nature such as public utilities and the collection of tolls orcharges for its use or service is a franchise. (R)NA5! 4. D-A an* AR!RA 0A. 7.

5-0+!6 vs. 5:) )CR)5AR= !7 7-NANC), G.R. No. 19$%%, @uly 19, 2%11'

In the case of C-R v. Court of Appeals (CA', the 2ourt had the occasion to rule thatservices rendered for a fee even on reimbursement%on%cost basis only and withoutrealiing prot are also subject to F!T. In that case, 2D!A;2 rendered service toits aNliates and, in turn, the aNliates paid the former reimbursement%on%cost whichmeans that it was paid the cost or expense that it incurred although without prot.(C!00--!N)R !7 -N5)RNA6 R)4)N) vs. !N= P:-6-PP-N), -NC., G.R.No. 189, Novem#er 1, 2%1%'

!mong those included in the enumeration is the 7lease of motion picture lms, lms, tapesand discs.8 This, however, is not the same as the showing or exhibition of motion pictures

or lms. The legislative intent is not to impose F!T on persons already covered by theamusement tax and this holds true even in the case of cinemaMtheater operators taxedunder the 0L2 of 1@@1 precisely because the F!T law was intended to replace thepercentage tax on certain services. (C-R v. 0 Prime :ol*in3s, -n". an* 7irst AsiaRealty Development Corp., G.R. No. 18$/%/, 7e#ruary 2, 2%1%'

a7 Re(ii$e "!r $a#a3ili$18. Ker!-ra$e' ale !" er,ice15. VAT e#e+p$ $ranac$i!n

!n e;empt transa"tion involves goods or services which, by their nature, arespecically listed in and expressly exempted from the F!T under the Tax 2ode,

without regard to the tax status V F!T%exempt or not V of the party to thetransaction. Indeed, such transa"tion is not subject to the F!T, but the seller is notallowed any tax refund of or credit for any input taxes paid. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. )AGA5) 5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8,7e#ruary 11, 2%%/'

!n e;empt party , on the other hand, is a person or entity granted F!T exemptionunder the Tax 2ode, a special law or an international agreement to which the




<#

-hilippines is a signatory, and by virtue of which its taxable transactions becomeexempt from the F!T. uch party is also not subject to the F!T, but may be alloweda tax refund of or credit for input taxes paid, depending on its registration as a F!Tor non%F!T taxpayer. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. )AGA5)5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8, 7e#ruary 11, 2%%/'

a7 VAT e#e+p$ $ranac$i!nD in eneral

+y extending the exemption to entities or individuals dealing with -!L2;, thelegislature clearly granted exemption also from indirect taxes. It must be noted thatthe indirect tax of F!T, as in the instant case, can be shifted or passed to the buyer,transferee, or lessee of the goods, properties, or services subject to F!T. Thus, byextending the tax exemption to entities or individuals dealing with -!L2; incasino operations, it is exempting -!L2; from being liable to indirect taxes.(P:-6-PP-N) A0)0)N5 AND GA0-NG C!RP!RA5-!N (PAGC!R' vs. 5:) +R)A!7 -N5)RNA6 R)4)N), G.R. No. 12%8, 0ar" 1/, 2%11'

The rationale for the exemption from indirect taxes provided for in -.=. 1?<@ and theextension of such exemption to entities or individuals dealing with -!L2; in casinooperations are best elucidated from the 1@?> case of Commissioner of -nternalRevenue v. @on Gotam"o & ons, -n"., where the absolute tax exemption of theBorld Gealth rganiation (BG& upon an international agreement was upheld. Beheld in said case that the exemption of contractee BG should be implemented tomean that the entity or person exempt is the contractor itself who constructed thebuilding owned by contractee BG, and such does not violate the rule that taxexemptions are personal because the manifest intention of the agreement is toexempt the contractor so that no contractors tax may be shifted to the contracteeBG. (P:-6-PP-N) A0)0)N5 AND GA0-NG C!RP!RA5-!N (PAGC!R' vs. 5:)+R)A !7 -N5)RNA6 R)4)N), G.R. No. 12%8, 0ar" 1/, 2%11'

-awnshops% considered as non%ban' nancial intermediary is exempted from F!Tbut liable to percentage tax. (Tambunting -awnshop, Inc. v. 2I;, L.;. Co. 1>@/?,

"anuary 1, /1/&

37 E#e+p$ $ranac$i!nD en(+era$e'1<. Inp($ $a# an' !($p($ $a#D 'e&ne'

:nder the present method that relies on invoices, an entity can credit against orsubtract from the F!T charged on its sales or outputs the F!T paid on its purchases,inputs and imports. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. )AGA5)5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8, 7e#ruary 11, 2%%/'

If at the end of a taxable 3uarter the output taxes charged by a seller are e3ual tothe input taxes passed on by the suppliers, no payment is re3uired. It is when theoutput taxes exceed the input taxes that the excess has to bepaid. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. )AGA5) 5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8, 7e#ruary 11, 2%%/'

1>. S!(rce !" inp($ $a#a7 P(rc)ae !r i+p!r$a$i!n !" !!'




<$

37 P(rc)ae !" real pr!per$ie "!r *)ic) a VAT )a ac$(all 3een pai'c7 P(rc)ae !" er,ice in *)ic) VAT )a ac$(all 3een pai''7 Tranac$i!n 'ee+e' alee7 Pre(+p$i,e inp($"7 Trani$i!nal inp($

-rior payment of taxes is not necessary before a taxpayer could avail of the ?Ktransitional input tax credit) rst, it was never mentioned in ection 1/ of the oldCI;2 Rnow ec. 111S that prior payment of taxes is a re3uirement* second, since thelaw (ection 1/ of the CI;2& does not provide for prior payment of taxes, to re3uireit now would be tantamount to judicial legislation which, to state the obvious, is notallowed* third, a transitional input tax credit is not a tax refund per se but a taxcredit* fourth, if the intent of the law were to limit the input tax to cases whereactual F!T was paid, it could have simply said that the tax base shall be the actualvalue%added tax paid* and fth, this 2ourt had already declared that prior paymentof taxes is not re3uired in order to avail of a tax credit. * 7!R5 +!N-7AC-!D)4)6!P0)N5 C!RP!RA5-!N ,. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No.1$2/, @anuary 22, 2%1$'

ection 11 of the Tax 2ode does not prohibit cash refund or tax credit of transitional input tax in the case of ero%rated or e9ectively ero%rated F!Tregistered taxpayers, who do not have any output F!T. The phrase 6excepttransitional input tax6 in ection 11 of the Tax 2ode was inserted to distinguishcreditable input tax from transitional input tax credit. * 7!R5 +!N-7AC-!D)4)6!P0)N5 C!RP!RA5-!N ,. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No.1$2/, @anuary 22, 2%1$'

It is apparent that the transitional input tax credit operates to benet newly F!T%registered persons, whether or not they previously paid taxes in the ac3uisition of

their beginning inventory of goods, materials and supplies. =uring that period of transition from non%F!T to F!T status, the transitional input tax credit serves toalleviate the impact of the F!T on the taxpayer. * 7!R5 +!N-7AC-! D)4)6!P0)N5 C!RP!RA5-!N ,. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 1$2/,

@anuary 22, 2%1$'

1?. Per!n *)! can a,ail !" inp($ $a# cre'i$

In a F!T%exempt transaction, the seller is not allowed to charge F!T to his customer.ince no output tax is shifted by the seller, there is no output tax against which therelated input taxes may be credited. Ceither can he credit this input tax against theF!T due on other sales. In this case, he is treated as the end user who will shoulder

the cost of the input F!T. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. AN R!E)P!>)R C!RP!RA5-!N, G.R. No. 188/, 7e#ruary 12, 2%1$'

:nli'e the input taxes related to exempt sales, input taxes related to ero%ratedsales may be credited against output taxes on other sales and in case it is not fullyutilied, the excess may be carried over to the succeeding 3uarter or 3uarters andthere is no prescription period for the carry%over. The law gives the taxpayeranother option for the recovery of used input taxes) application for refund or tax




<

credit certicate. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. AN R!E) P!>)RC!RP!RA5-!N, G.R. No. 188/, 7e#ruary 12, 2%1$'

1@. %e$er+ina$i!n !" !($p($/inp($ $a# VAT paa3le e#ce inp($ $a#cre'i$a7 %e$er+ina$i!n !" !($p($ $a#

37 %e$er+ina$i!n !" inp($ $a# cre'i$a3lec7 All!ca$i!n !" inp($ $a# !n +i#e' $ranac$i!n'7 %e$er+ina$i!n !" $)e !($p($ $a# an' VAT paa3le an' c!+p($a$i!n !" VAT paa3le !r e#ce $a# cre'i$20. S(3$an$ia$i!n !" inp($ $a# cre'i$21. Re"(n' !r $a# cre'i$ !" e#ce inp($ $a#

If, however, the input taxes exceed the output taxes, the excess shall be carriedover to the succeeding 3uarter or 3uarters. hould the input taxes result from ero%rated or e9ectively ero%rated transactions or from the ac3uisition of capital goods,any excess over the output taxes shall instead be refunded to the taxpayer orcredited against other internal revenue taxes. (C!00--!N)R !7 -N5)RNA6

R)4)N) vs. )AGA5) 5)C:N!6!G= (P:-6-PP-N)', G.R. No. 1/$8, 7e#ruary 11,2%%/'

Bhile a tax liability is essential to the availment or use of any tax credit, prior taxpayments are not. n the contrary, for the existence or grant solely of such credit,neither a tax liability nor a prior tax payment is needed. * 7!R5 +!N-7AC-!D)4)6!P0)N5 C!RP!RA5-!N ,. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No.1$2/, @anuary 22, 2%1$'

!s regards ection 11/, while the law only provides for a tax credit, a taxpayer whoerroneously or excessively pays his output tax is still entitled to recover the

payments he made either as a tax credit or a tax refund. In this case, sincepetitioner still has available transitional input tax credit, it led a claim for refund torecover the output F!T it erroneously or excessively paid for the 1st 3uarter of 1@@>. Thus, there is no reason for denying its claim for tax refundMcredit. * 7!R5 +!N-7AC-! D)4)6!P0)N5 C!RP!RA5-!N ,. C!00--!N)R !7 -N5)RNA6R)4)N), G.R. No. 1$2/, @anuary 22, 2%1$'

Aven if the law does not expressly state that the Ironcon5s excess creditable F!Twithheld is refundable, it may be the subject%of a claim for refund as an erroneouslycollected tax under ec. /$ (2& and @ of the CI;2. It should be claried that thisruling only refers to creditable F!T withheld pursuant to ec. 11$ of the CI;2 priorto its amendment. !fter its amendment by ;.!. @##>, the amount withheld under

ec. 11$ of the CI;2 is now treated as nal F!T, no longer under the creditablewithholding tax system (2I; v. Ironcon +uilders and =evelopment 2orp., L.;. Co.1?//$, Eebruary ?, /1/&

The input F!T is n!$ 6excessively6 collected as understood under ection @because a$ $)e $i+e $)e inp($ VAT i c!llec$e' $)e a+!(n$ pai' i c!rrec$an' pr!per. The person legally liable for the input F!T cannot claim that heoverpaid the input F!T by the mere existence of an 6excess6 input F!T. The term6excess6 input F!T simply means that the input F!T available as credit exceeds the




<<

output F!T, not that the input F!T is excessively collected because it is more thanwhat is legally due. Thus, the taxpayer who legally paid the input F!T cannot claimfor refund or credit of the input F!T as 6excessively6 collected under ection @.(C!00--!N)R !7 -N5)RNA6 R)4)N) vs. AN R!E) P!>)R C!RP!RA5-!N,G.R. No. 188/, 7e#ruary 12, 2%1$'

If such 6excess6 input F!T is an 6excessively6 collected tax, the taxpayer should beable to see' a refund or credit for such 6excess6 input F!T whether or not he hasoutput F!T. The F!T ystem does not allow such refund or credit and such 6excess6input F!T is not an 6excessively6 collected tax under ection @. (C!00--!N)R!7 -N5)RNA6 R)4)N) vs. AN R!E) P!>)R C!RP!RA5-!N, G.R. No. 188/,7e#ruary 12, 2%1$'

a7 W)! +a clai+ "!r re"(n'/appl "!r i(ance !" $a# cre'i$ cer$i&ca$e

Gaving determined that respondents purchase transactions are subject to a eroF!T rate, the tax refund or credit is in order. To repeat, the F!T is a tax imposed onconsumption, not on business. !lthough respondent as an entity is exempt, the

transactions it enters into are not necessarily so. The F!T payments made in excessof the ero rate that is imposable may certainly be refunded or credited.(C!00--!N)R !7 -N5)RNA6 R)4)N) vs. )AGA5) 5)C:N!6!G= (P:-6-PP-N)',G.R. No. 1/$8, 7e#ruary 11, 2%%/'

37 Peri!' $! &le clai+/appl "!r i(ance !" $a# cre'i$ cer$i&ca$e

The 2ourt, in an ;o3ue, ruled that e3uitable estoppel had set in when respondentissued +I; ;uling Co. =!%$?@%/# which was a general interpretative rule, whiche9ectively misled all taxpayers into ling premature judicial claims with the 2T!.

Thus, taxpayers could rely on the ruling from its issuance on 1/ =ecember //# upto its reversal on < ctober /1/, when 2I; v. !ichi Eorging 2ompany of !sia,lnc. was promulgated. (PR!C5)R & GA0+6) A-A P5) 65D. vs.C!00--!N)R !7 -N5)RNA6 R)4)N), Procter & Gamble Asia Pte Ltd., v. Commissioner of I nternal Revenue, L.;. Co.//>1, Eebruary 1@, /1$&

In a nutshell, the rules on the determination of the prescriptive period for ling a taxrefund or credit of unutilied input F!T, as provided in ection 11 of the Tax 2ode,are as follows)

(1& !n administrative claim must be led with the 2I; within two years afterthe close of the taxable 3uarter when the ero%rated or e9ectively ero%ratedsales were made.

(& The 2I; has 1/ days from the date of submission of complete documentsin support of the administrative claim within which to decide whether to granta refund or issue a tax credit certicate. The 1/%day period may extendbeyond the two%year period from the ling of the administrative claim if theclaim is led in the later part of the two%year period. If the 1/%day periodexpires without any decision from the 2I;, then the administrative claim maybe considered to be denied by inaction.




<>

(#& ! judicial claim must be led with the 2T! within #/ days from the receiptof the 2I;5s decision denying the administrative claim or from the expirationof the 1/%day period without any action from the 2I;.

($& !ll taxpayers, however, can rely on +I; ;uling Co. =!%$?@%/# from thetime of its issuance on 1/ =ecember //# up to its reversal by this 2ourt in!ichi on < ctober /1/, as an exception to the mandatory and jurisdictional1/#/ day periods. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs.5!6)D!P!>)R, -NC., G.R. No. 18$88%, @anuary 2%, 2%1' Commissioner of -nternalRevenue v. 5ole*o Poer, -n"., L.;. Co. 1?#??/, "anuary /, /1$&

The lessons of this case may be summed up as follows)

!. Two%Hear -rescriptive -eriod

1. It is only the administrative claim that must be led within the two%yearprescriptive period. (!ichi&

. The proper rec'oning date for the two%year prescriptive period is the closeof the taxable 3uarter when the relevant sales were made. (an ;o3ue&

#. The only other rule is the !tlas ruling, which applied only from ? "une //>to 1 eptember //?. !tlas states that the two%year prescriptive period forling a claim for tax refund or credit of unutilied input F!T payments shouldbe counted from the date of ling of the F!T return and payment of the tax.(an ;o3ue&

The Atlas doctrine, which held that claims for refund or credit of input VAT mustcomply with the two-year prescriptive period under Sec. 229, should be effective only

from its promulgation on une !, 2""# until its abandonment on $September %2, 2""!& in'irant. The Atlas doctrine was limited to the rec(oning of the two-year prescriptiveperiod from the date of payment of the output VAT. The 'irant ruling, which abandonedthe Atlas doctrine, adopted the verba legis rule, thus applying Sec. %%2)A* in computingthe two-year prescriptive period in claiming refund or credit of input VAT. Since uly 2+,2""! falls within the window of effectivity of Atlas, /s administrative claim for thesecond 0uarter of 2""1 was filed on time considering that it filed the original VAT returnfor the second 0uarter on uly 2, 2""1. CB+ POER CO-PAN LI-ITED vs.CO--ISSIONER OF INTERNAL RE/ENUE, G.R. No. ()()!!*0o#sol2ate23, Se4te56e% '), ()1, ". Leo#e#

The %year period under ection @ does not apply to appeals before

the 2T! in relation to claims for a refund or tax credit for unutilied creditableinput F!T. ection @ pertains to the recovery of taxes erroneously, illegally,or excessively collected. an ;o3ue stressed that 7input F!T is not4excessively5 collected as understood under ection @ because, at the timethe input F!T is collected, the amount paid is correct and proper.8 It is,therefore, ection 11 which applies specically with regard to claiming arefund or tax credit for unutilied creditable input F!T. 4-A=AG)!5:)R0A6 P!>)R C!0PAN= vs. C!00--!N)R !7 -N5)RNA6 R)4)N),G.R. No. 19/2/, @une , 2%1, @. 0en*oHa




<?

+. 1/#/ =ay -eriod

1. The taxpayer can le an appeal in one of two ways) (1& le the judicialclaim within thirty days after the 2ommissioner denies the claim within the

1/%day period, or (& le the judicial claim within thirty days from theexpiration of the 1/%day period if the 2ommissioner does not act within the1/%day period.

. The #/%day period always applies, whether there is a denial or inaction onthe part of the 2I;.

#. !s a general rule, the # /%day period to appeal is both mandatory and jurisdictional. (!ichi and an ;o3ue&

$. !s an exception to the general rule, premature ling is allowed only if ledbetween 1/ =ecember //# and ctober /1/, when +I; ;uling Co. =!%

$?@%/# was still in force. (an ;o3ue&

. 0ate ling is absolutely prohibited, even during the time when +I; ;ulingCo. =!%$?@%/# was in force. (an ;o3ue& (C!00--!N)R !7 -N5)RNA6R)4)N) vs. 0-NDANA! -- G)!5:)R0A6 PAR5N)R:-P, G.R. No. 19198,

@anuary 1/, 2%1'

It is indisputable that compliance with the 1/%day waiting period is mandatory and jurisdictional. Eailure to comply with the 1/%day waiting period violates amandatory provision of law. It violates the doctrine of exhaustion of administrativeremedies and renders the petition premature and thus without a cause of action,

with the e9ect that the 2T! does not ac3uire jurisdiction over the taxpayer5spetition. (0-NDANA! -- G)!5:)R0A6 PAR5N)R:-P vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 19$$%1, 0ar" 11, 2%1$'

tated otherwise, the two%year prescriptive period does not refer to the ling of the judicial claim with the 2T! but to the ling of the administrative claim with the2ommissioner. !s held in !ichi, the 6phrase 4within two years x x x apply for theissuance of a tax credit or refund5 refers to applications for refundMcredit with the2I; and not to appeals made to the 2T!.6 (0-NDANA! -- G)!5:)R0A6PAR5N)R:-P vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 19$$%1, 0ar"11, 2%1$'

an ;o3ues failure to comply with the 1/%day +an'a$!r period renders itspetition for review with the 2T! void as !rticle of the 2ivil 2ode provides, 6!ctsexecuted against provisions of mandatory or prohibitory laws shall be void, exceptwhen the law itself authories their validity.6 an ;o3ues void petition for reviewcannot be legitimied by the 2T! or this 2ourt because !rticle of the 2ivil 2odestates that such void petition cannot be legitimied 6except when the law itself authories RitsS validity,6 and there is no law authoriing the petitions validity.




<@

(C!00--!N)R !7 -N5)RNA6 R)4)N) vs. AN R!E) P!>)R C!RP!RA5-!N,G.R. No. 188/, 7e#ruary 12, 2%1$'

ec. 11(!& clearly provides in no uncertain terms that unutilied input F!Tpayments not otherwise used for any internal revenue tax due the taxpayer mustbe claimed within two years recF!ne' "r!+ $)e cl!e !" $)e $a#a3le (ar$er

*)en $)e rele,an$ ale *ere +a'e per$ainin $! $)e inp($ VAT rear'le!" *)e$)er ai' $a# *a pai' !r n!$. The rec'oning frame would always be theend of the 3uarter when the pertinent sales or transaction was made, regardlesswhen the input F!T was paid. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. 0-RAN5 PAG+-6A! C!RP!RA5-!N, G.R. No. 12129. eptem#er 12, 2%%8'

This prescriptive period has no relation to the date of payment of the6excess6 #4$t F!T since the 6excess6 input F!T may have been paid for more thantwo years but this does not bar the ling of a judicial claim for 6excess6 F!T underection 11 (!&, which has a di9erent rec'oning period from ection @. Doreover,the person claiming the refund or credit of the input F!T is not the person wholegally paid the input F!T. (C!00--!N)R !7 -N5)RNA6 R)4)N) vs. AN R!E)

P!>)R C!RP!RA5-!N, G.R. No. 188/, 7e#ruary 12, 2%1$'

The mere ling by a taxpayer of a judicial claim with the 2T! before the expirationof the 1/%day period cannot operate to divest the 2ommissioner of his jurisdictionto decide an administrative claim within the 1/%day mandatory period, unless the2ommissioner has clearly given cause for e3uitable estoppel to apply as expresslyrecognied in ection $< of the Tax 2ode. (C!00--!N)R !7 -N5)RNA6 R)4)N)vs. AN R!E) P!>)R C!RP!RA5-!N, G.R. No. 188/, 7e#ruary 12, 2%1$'

+ecause the 1/#/ day period is jurisdictional, the issue of whether petitionercomplied with the said time frame may be broached at any stage, even on appeal.(N-PP!N )?PR) (P:-6-PP-N)' C!RP!RA5-!N vs. C!00--!N)R !7 -N5)RNA6R)4)N), G.R. No. 199%, 0ar" 1$, 2%1$'

Bhile petitioner led its administrative and judicial claims during the period of applicability of +I; ;uling Co. =!%$?@%/#, it cannot claim the benet of theexception period as it did not le its judicial claim prematurely, but did so long afterthe lapse of the #/%day period following the expiration of the 1/%day period. !gain,+I; ;uling Co. =!%$?@%/# allowed premature ling of a judicial claim, which meansnon%exhaustion of the 1/%day period for the 2ommissioner to act on anadministrative claim, but not its late ling.

Eor failure of petitioner to comply with the 1/#/ day mandatory and jurisdictionalperiod, petitioner lost its right to claim a refund or credit of its alleged excess inputF!T. C+< P!>)R C!0PAN= 6-0-5)D vs. C!00--!N)R !7 -N5)RNA6 R)4)N),G.R. Nos.19829$% @anuary 1/, 2%1, C@. )R)N!

T-I led its third and fourth 3uarterly F!T returns for //1 on ctober , //1 and "anuary , //, respectively. It then led an administrative claim for refund of itsunutilied input F!T for the third and fourth 3uarters of //1 on eptember #/,//#. Thus, the 2I; had 1/ days or until "anuary ?, //$, after the submission of

T-I5s administrative claim and complete documents in support of its application,




>/

within which to decide on its claim. Then, it is only after the expiration of the 1/%day period, if there is inaction on the part of the 2I;, where T-I may elevate itsclaim with the 2T! within #/ days. 2learly, therefore, T-I5s refund claim of unutiliedinput F!T for the third 3uarter of //1 was denied for being prematurely led withthe 2T!, while its refund claim of unutilied input F!T for the fourth 3uarter of //1may be entertained since it falls within the exception provided in the 2ourt5s most

recent rulings. C!00--!N)R !7 -N5)RNA6 R)4)N) vs. 5!6)D! P!>)R, -NC,G.R. No. 18$88% @anuary 2%, 2%1, @. P)RA65A

Bhat is important, as far as the present cases are concerned, is that the mere lingby a taxpayer of a judicial claim with the 2T! before the expiration of the 1/%dayperiod cannot operate to divest the 2ommissioner of his jurisdiction to decide anadministrative claim within the 1/%day mandatory period, unless the 2ommissionerhas clearly given cause for e3uitable estoppel to apply as expressly recognied inection $< of the Tax 2ode. C!00--!N)R !7 -N5)RNA6 R)4)N) vs. 5)A0A6 C!RP!RA5-!N (formerly 0-RAN5 A6 C!RP!RA5-!N, G.R. No. 191%/7e#ruary /, 2%1, @. R)=)

! claim for tax refund or credit, li'e a claim for tax refund exemption, is construedstrictly against the taxpayer. ne of the conditions for a judicial claim of refund orcredit under the F!T ystem is compliance with the 1/#/ day mandatory and

jurisdictional periods. Thus, strict compliance with the 1/#/ day periods isnecessary for such a claim to prosper, whether before, during, or after thee9ectivity of the !tlas doctrine, except for the period from the issuance of +I;;uling Co. =!%$?@%/# on 1/ =ecember //# to < ctober /1/ when the !ichidoctrine was adopted, which again reinstated the 1/#/ day periods asmandatory and jurisdictional. 0-RA0AR 7-: C!0PAN=, -NC., vs. C!00--!N)R!7 -N5)RNA6 R)4)N), G.R. No. 18/$2, @une , 2%1, @. PereH

The taxpayer can le the appeal in one of two ways) (1& le the judicial claim withinthirty days after the 2ommissioner denies the claim within the 1/%day period, or(& le the judicial claim within thirty days from the expiration of the 1/%day periodif the 2ommissioner does not act within the 1/%day period. Dindanao II led itsadministrative claim for refund or credit for the second, third, and fourth 3uarters of //$ on < ctober //. The 2I;, therefore, had a period of 1/ days, or until #Eebruary //<, to act on the claim. The 2I;, however, failed to do so. Dindanao IIthen could treat the inaction as a denial and appeal it to the 2T! within #/ daysfrom # Eebruary //<, or until Darch //<.

Dindanao II, however, led a -etition for ;eview only on 1 "uly //<, 1#? daysafter the lapse of the #/%day period on Darch //<. The judicial claim wastherefore led late. The 2T! therefore lost jurisdiction over Dindanao Il5s claims forrefund or credit. C!00--!N)R !7 -N5)RNA6 R)4)N) vs. 0-NDANA! --G)!5:)R0A6 PAR5N)R:-P G.R. No. 19198 @anuary 1/, 2%1, C@. )R)N!

!s a general rule, compliance with the 1/%day period stated in ection 11(=& of CI;2 is mandatory. Gowever, a F!T%registered taxpayer claiming refund for inputF!T may not wait for the lapse of the 1/%day period when the claim is ledbetween =ecember 1/, //# (the time of promulgation of +I; ;uling Co. =!%$?@%/#&to ctober <, /1/ (the time of promulgation of the !ichi case&. 5AGAN-5! 0-N-NG




>1

C!RP!RA5-!N vs. C!00--!N)R !7 -N5)RNA6 R)4)N), 5a3anito 0inin3 Corporation

v. Commissioner of -nternal Revenue, L.;. Co. 1@>@1, "une 1?, /1$, @. Perlas+erna#e

Bhen a taxpayer see'ing refund or tax credit under F!T les a judicial claim beyondthe #/%day period provided by the law, the same shall be dismissed for lac' of

jurisdiction. ! taxpayer see'ing refund or tax credit under F!T must strictly follow

the 71/#/8 rule to be entitled thereof, otherwise, the claim shall be barred. Inthe present case, the respondent led its administrative claim on Day #/, //#. Thepetitioner 2I; therefore had only until eptember >, //# to decide the claim, andfollowing the petitioner5s inaction, the respondent had until ctober >, //#, thelast day of the #/%day period to le its judicial claim. Gowever, the respondent ledits judicial claim with the 2T! only on Darch #1, //$ or 1 days late. 2learly, therespondents judicial claim has prescribed and the 2T! did not ac3uire jurisdictionover the claim. C!00--!N)R !7 -N5)RNA6 R)4)N) vs. 0-NDANA! --G)!5:)R0A6 PAR5N)R:-P, Commissioner of Internal Revenue v. Mindanao II Geothermal Partnership,

3.4. 5o. %!966", une %!, 2"%6, @. 4illarama, @r.

ection 11(!& and (2& must be interpreted according to its clear, plain, and

une3uivocal language. The taxpayer can le his administrative claim for refund orcredit at anytime within the two%year prescriptive period. If he les his claim on thelast day of the two%year prescriptive period, his claim is still led on time. The2ommissioner will have 1/ days from such ling to decide the claim. If the2ommissioner decides the claim on the 1/th day, or does not decide it on thatday, the taxpayer still has #/ days to le his judicial claim with the 2T!. This is notonly the plain meaning but also the only logical interpretation of ection 11(!& and(2&. AN R!E) P!>)R C!RP!RA5-!N vs. C!00--!N)R !7 -N5)RNA6 R)4)N),G.R. No. 2%//$, @une $%, 2%1, @. 6eonar*oDe Castro

2A 0uon led an action for refund of the F!T. The court ruled that while both claimsfor refund were led within the two (&%year prescriptive period, 2A 0uon failed tocomply with the 1/%day period as it led its judicial claim in 2.T.!. 2ase Co. <>@four ($& days after the ling of the administrative claim, while in 2.T.!. 2ase Co.<?#>, the judicial claim was led a day after the ling of the administrative claim.-roceeding from the aforementioned jurisprudence, only 2.T.!. 2ase Co. <>@should be dismissed on the ground of lac' of jurisdiction for being prematurely led.In contrast, 2A 0uon led its administrative and judicial claims for refund in 2.T.!.2ase Co. <?#> during the period, i.e., from =ecember 1/, //# to ctober <, /1/,when +I; ;uling Co. =!%$?@%/# was in place. !s such, the aforementioned rule one3uitable estoppel operates in its favor, thereby shielding it from any supposed

jurisdictional defect which would have attended the ling of its judicial claim beforethe expiration of the 1/%day period. C!00--!N)R !7 -N5)RNA6 R)4)N) vs. C)6!N G)!5:)R0A6 P!>)R C!0PAN=, -NC., G.R. No. 19%198, eptem#er 1,2%1, @. Perlas +erna#e

Its petition for review having been denied by the 2T! for being prematurely led,petitioner led the instant petition arguing that since it led its judicial claim afterthe issuance of +I; ;uling Co. =!%$?@%/#, but before the adoption of the !ichidoctrine, it can invo'e the said +I; ;uling. The 2 ruled that the jurisdiction of the2T! over decisions or inaction of the 2I; is only appellate in nature and, thus,necessarily re3uires the prior ling of an administrative case before the 2I; under




>

ection 11. ! petition led prior to the lapse of the 1/%day period prescribedunder said ection would be premature for violating the doctrine on the exhaustionof administrative remedies. There is, however, an exception to the mandatory and

jurisdictional nature of the 1/#/ day period. The 2ourt in an ;o3ue noted that+I; ;uling Co. =!%$?@%/#, dated =ecember 1/, //#, expressly stated that the6taxpayer%claimant need not wait for the lapse of the 1/%day period before it could

see' judicial relief with the 2T! by way of -etition for ;eview.6 Gence, taxpayers canrely on +I; ;uling Co. =!%$?@%/# from the time of its issuance on =ecember 1/,//# up to its reversal by this 2ourt in !ichi on ctober <, /1/, where it was heldthat the 1/#/ day period was mandatory and jurisdictional. 5AGAN-5! 0-N-NGC!RP!RA5-!N vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 2%119/,Novem#er 2, 2%1, @. 0en*oHa

ection 11(=& of the 1@@> Tax 2ode states the time re3uirements for ling a judicial claim for the refund or tax credit of input F!T. The legal provision spea's of two periods) the period of 1/ days, which serves as a waiting period to give timefor the 2I; to act on the administrative claim for a refund or credit* and the periodof #/ days, which refers to the period for ling a judicial claim with the 2T!. It is the

#/%day period that is at issue in this case. R!:0 AP!66! )0-C!NDC5!RP:-6-PP-N) vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 189/%, @anuary 1, 2%1/, C@ ereno

2argill led two claims for refund. Gowever, the court ruled that the rule musttherefore be that during the period =ecember 1/, //# (when +I; ;uling Co. =!%$?@%/# was issued& to ctober <, /1/ (when the !ichi case waspromulgated&,taxpayers%claimants need not observe the 1/%day period before itcould le a judicial claim for refund of excess input F!T before the 2T!. +efore andafter the aforementioned period (i.e., =ecember 1/, //# to ctober <, /1/&, theobservance of the 1/%day period is mandatory and jurisdictional to the ling of such claim. CARG-66 P:-6-PP-N), -NC vs. C!00--!N)R !7 -N5)RNA6 R)4)N),G.R. No. 2%$, 0ar" 11, 2%1/, @. Perlas +erna#e

ection 11 (=& (now renumbered as ection 11R2S& of ;! ?$$, which is expliciton the mandatory and jurisdictional nature of the 1/#/%day period, was alreadye9ective on "anuary 1, 1@@?. That being said, and notwithstanding the fact thatrespondents administrative claim had been timely led, the 2ourt is nonethelessconstrained to deny the averred tax refund or credit, as its judicial claim thereforewas led beyond the 1/#/%day period, and, hence % as earlier stated % deemed tobe led out of time. !s the records would show, the 2I; had 1/ days from the lingof the administrative claim on "uly 1, 1@@@, or until Covember 1?, 1@@@, to decideon respondents application. ince the 2I; did not act at all, respondent had until=ecember 1?, 1@@@, the last day of the #/%day period, to le its judicial claim.;espondent led its petition for review with the 2T! only on "anuary @, //1 and,thus, was one (1& year and days late . C!00--!N)R !7 -N5)RNA6 R)4)N) vs.+R0)-5)R AND >A-N CAND-NA4-AN C!N5RAC5!R 0-NDANA!, -NC., Commissioner

of Internal Revenue v. Burmeister and ain !candinavian Contractor Mindanao, Inc., 3.4. 5o. %9""2%, 7ctober 22,

2"%6, @. Perlas+erna#e

!ichi led an application for tax creditMrefund with the +I; on Darch @, //. n#1 Darch //, respondent led judicial claim before the 2T!. +I; contends that




>#

!ichi failed to observe the 1/%day reglementary period provided by CI;2 for the2I; to act on the claim. In this issue the upreme court ruled that the 2ourt agreewith petitioner that the judicial claim was prematurely led on #1 Darch //, sincerespondent failed to observe the mandatory 1/day waiting period to give the 2I;an opportunity to act on the administrative claim. Gowever, the 2ourt ruled in an;o3ue that +I; ;uling Co. =!%$?@%/# allowed the premature ling of a judicial claim,

which means non%exhaustion of the 1/%day period for the 2ommissioner to act onan administrative claim. !ll taxpayers can rely on +I; ;uling Co. =!%$?@%/# from thetime of its issuance on 1/ =ecember //# up to its reversal by this 2ourt in !ichi on< ctober /1/, where this 2ourt held that the 1/#/ day periods are mandatoryand jurisdictional. Therefore, respondents ling of the judicial claim barely two daysafter the administrative claim is acceptable, as it fell within the period during whichthe 2ourt recognied the validity of +I; ;uling Co. =!%$?@%/#. C!00--!N)R !7 -N5)RNA6 R)4)N) vs. A-C:- 7!RG-NG C!0PAN= !7 A-A, -NC., Commissioner of Internal

Revenue v. Aichi "or#in# Compan$ of Asia, Inc., 3.4. 5o. %!+62%, 7ctober 22, 2"%6, C@ ereno

!s a general rule, a taxpayer%claimant needs to wait for the expiration of the onehundred twenty (1/&%day period before it may be considered as 6inaction6 on the

part of the 2ommissioner of Internal ;evenue (2I;&. Thereafter, the taxpayer%claimant is given only a limited period of thirty (#/& days from said expiration to leits corresponding judicial claim with the 2T!. Gowever, with the exception of claimsmade during the e9ectivity of +I; ;uling Co. =!%$?@%/# (from 1/ =ecember //# to ctober /1/&, !TXT 2ommunications has indeed properly and timely led its

judicial claim covering the econd, Third, and Eourth Yuarters of taxable year //#,within the bounds of the law and existing jurisprudence. A5&5 C!00N-CA5-!N)R4-C) P:-6-PP-N), -NC. vs. C!00--!N)R !7 -N5)RNA6 R)4)N), A% & %

Communications !ervices Philippines, Inc., v. Commissioner of Internal Revenue, 3.4. 5o. %!919, 5ovember %9,

2"%6, @. PereH

2+O -ower led its judicial claim for refundMcredit just / days after it led its

administrative claim. 2T! An +anc dismissed the case for lac' of jurisdiction as itfailed to observe the mandatory and jurisdictional 1/%day period provided underection 11 (=& of the Cational Internal ;evenue 2ode. The 2ourt found that the2T! An +anc was incorrect. The 2ourt recognied an exception in which the existing+I; ;uling applicable to this case in which it held that taxpayer%claimant need notwait for the lapse of the 1/%day period before it could see' judicial relief. C+< P!>)R C!0PAN= 6-0-5)D vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No.198928, De"em#er %$, 2%1, @. Perlas+erna#e

! F!T%registered taxpayer need not wait for the lapse of the 1/%day period to le a judicial claim for unutilied F!T inputs before the 2T! when the claim was led on=ecember 1/, //# up to ctober <, /1/. If the claim is led within those dates,

the same shall not be considered prematurely led. In this case, records disclosethat petitioner led its administrative and judicial claims for refundMcredit of its inputF!T in 2T! 2ase Co. ?/? on =ecember ?, //@ and Darch #/, /1/, respectively,or during the period when +I; ;uling Co. =!%$?@%/# was in place, i.e., from=ecember 1/, //# to ctober <, /1/. !s such, it need not wait for the expirationof the 1/%day period before ling its judicial claim before the 2T!, and hence, isdeemed timely led. In view of the foregoing, both the 2T! =ivision and the 2T! An+anc erred in dismissing outright petitioner5s claim on the ground of prematurity.




>$

0-NDANA! -- G)!5:)R0A6 PAR5N)R:-P vs. C!00--!N)R !7 -N5)RNA6R)4)N), G.R. No. 2"6#6, 8ecember "!, 2"%6, @. Perlas+erna#e

In ;econciling the pronouncements in the !ichi and an ;o3ue cases, the rule musttherefore be that during the period =ecember 1/, //# (when +I; ;uling Co. =!%$?@%/# was issued& to ctober <, /1/ (when the !ichi case was promulgated&,

taxpayers%claimants need not observe the 1/%day period before it could le a judicial claim for refund of excess input F!T before the 2T!. +efore and after theaforementioned period (i.e., =ecember 1/, //# to ctober <, /1/&, theobservance of the 1/%day period is mandatory and jurisdictional to the ling of such claim. PANA= P!>)R C!RP!RA5-!N (7ormerly Avon River Poer :ol*in3sCorp.' vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 2%$$/1, @anuary 21,2%1/, @. Perlas+erna#e

The 2I; has 1/ days from the date of submission of complete documents insupport of the administrative claim within which to decide whether to grant a refundor issue a tax credit certicate. In case of failure on the part of the 2I; to act on theapplication within the 1/%day period prescribed by law, the taxpayer has only has

#/ days after the expiration of the 1/%day period to appeal the unacted claim withthe 2T!. ince petitioner5s judicial claim was led before the 2T! only way beyondthe mandatory 1/#/ days to see' judicial recourse, such non%compliance withthe mandatory period of #/ days is fatal to its refund claim on the ground of prescription. 2onse3uently, the 2T! has no jurisdiction over its judicial appealconsidering that its -etition for ;eview was led out of time. 2onse3uently, theclaim for refund must be denied. N-PP!N )?PR) (P:-6-PP-N)' C!RP. vs.C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 18/, 7e#ruary %, 2%1/, @.PereH

Eor failure of ilicon to comply with the provisions of ection 11(2& of the CI;2, its judicial claims for tax refund or credit should have been dismissed by the 2T! forlac' of jurisdiction. The 2ourt stresses that the 1/M#/%day prescriptive periods aremandatory and jurisdictional, and are not mere technical re3uirements. -6-C!NP:-6-PP-N), -NC. (7!R0)R6= -N5)6 P:-6-PP-N) 0AN7AC5R-NG, -NC.' vs.C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 1$21, 0ar" 2/, 2%1/, @.6eonar*oDe Castro

c7 Manner !" i,in re"(n''7 %e$ina$i!n principle !r cr!-3!r'er '!c$rine22. In,!icin re(ire+en$

Eor a judicial claim for refund to prosper, however, respondent must not only provethat it is a F!T registered entity and that it led its claims within the prescriptiveperiod. -t must s$6sta#tate te input 4A5 pai* #y pur"ase #vo0es or o0al %e0e4ts) 1& ! 6sales or commercial invoice6 is a written account of goods sold orservices rendered indicating the prices charged therefor or a list by whatever nameit is 'nown which is used in the ordinary course of business evidencing sale andtransfer or agreement to sell or transfer goods and services* and & ! 6receipt6 onthe other hand is a written ac'nowledgment of the fact of payment in money orother settlement between seller and buyer of goods, debtor or creditor, or personrendering services and client or customer. (A56A C!N!6-DA5)D 0-N-NG AND




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D)4)6!P0)N5 C!RP!RA5-!N vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R.Nos. 111% & 18$, @une 8, 2%%'

a7 In,!icin re(ire+en$ in eneral

The re3uisite that the receipt be issued showing the name, business style, if any,and address of the purchaser, customer or client is precise so that when the boo'sof accounts are subjected to a tax audit examination, all entries therein could beshown as ade3uately supported and proven as legitimate business transactions. Theabsence of oNcial receipts issued in the taxpayers name is tantamount to non%compliance with the substantiation re3uirements provided by law. (+!N-7AC-!>A5)R C!RP!RA5-!N (formerly +!N-7AC-! 4-4)ND- >A5)R C!RP!RA5-!N' vs. 5:)C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 1/12, @uly 22, 2%1$'

Taxpayers claiming for a refund or tax credit certicate must comply with the strictand mandatory invoicing and accounting re3uirements provided under the 1@@>CI;2, as amended, and its implementing rules and regulations. Thus, the change of petitioners name to 6+onifacio L=A Bater 2orporation,6 being unauthoried andwithout approval of the A2, and the issuance of oNcial receipts under that namewhich were presented to support petitioners claim for tax refund, cannot be used toallow the grant of tax refund or issuance of a tax credit certicate in petitionersfavor. (+!N-7AC-! >A5)R C!RP!RA5-!N (formerly +!N-7AC-! 4-4)ND- >A5)RC!RP!RA5-!N' vs. 5:) C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 1/12,

@uly 22, 2%1$'

Eailure to print the word 7ero%rated8 on the invoices or receipts is fatal to a claimfor credit of refund of input F!T on ero%rated sales (".;.!. -hilippines, Inc. v. 2I;,L.;. Co. 1>>1>, ctober 11, /1/&

If the claim for refundM tax credit certicate is based on the existence of ero%ratedsales by the taxpayer but it fails to comply with the invoicing re3uirements in theissuance of sales invoices (e.g. failure to indicate the TIC&, its claim for taxcreditMrefund of F!T on its purchases shall be denied considering that the invoice itis issuing to its customers does not depict its being a F!T%registered taxpayer whosesales are classied as ero%rated sales. Conetheless, this treatment is withoutprejudice to the right of the taxpayer to charge the input taxes to the appropriateexpense account or asset account subject to depreciation, whichever is applicable(-anasonic 2omm. Imaging 2orp. of the -hil. v. 2I;, L.;. Co. 1>?/@/, Eebruary ?,/1/&

This 2ourt has consistently held as fatal the failure to print the word 7ero%rated8 on

the F!T invoices or oNcial receipts in claims for a refund or credit of input F!T onero%rated sales, even if the claims were made prior to the e9ectivity of ;.!. @##>.!s to the suNciency of a Corthern Dindanao5s company invoice to prove the salesof services to C-2, the 2ourt nds that this claim is without suNcient legal basis. !F!T invoice is the seller5s best proof of the sale of goods or services to the buyer,while a F!T receipt is the buyer5s best evidence of the payment of goods or servicesreceived from the seller. The re3uirement of imprinting the word 7ero%rated8proceeds from the rule%ma'ing authority granted to the ecretary of Einance by theCI;2 for the eNcient enforcement of the same Tax 2ode and its amendments. !




><

F!T%registered person whose sales are ero%rated or e9ectively ero%rated, ection11(!& specically provides for a two%year prescriptive period after the close of thetaxable 3uarter when the sales were made within which such taxpayer may applyfor the issuance of a tax credit certicate or refund of creditable input tax.N!R5:)RN 0-NDANA! P!>)R C!RP!RA5-!N vs. C!00--!N)R !7 -N5)RNA6R)4)N), G.R. No. 18/11/, 7e#ruary 18, 2%1/, C@. ereno

The failure to indicate the words 7ero%rated8 on the invoices and receipts issued bya taxpayer would result in the denial of the claim for refund or tax credit. The 2ourthas consistently ruled on the denial of a claim for refund or tax credit whenever theword 7ero%rated8 has been omitted on the invoices or sale receipts of the taxpayer%claimant. Eurthermore, the 2T! is a highly specialied court dedicated exclusively tothe study and consideration of revenue%related problems, in which it has necessarilydeveloped an expertise. Gence, its factual ndings, when supported by substantialevidence, will not be disturbed on appeal. )A5)RN 5)6)C!00N-CA5-!NP:-6-PP-N), -NC., vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 18$/$1,0ar" 2/, 2%1/, @. Reyes

37 In,!icin an' rec!r'in 'ee+e' ale $ranac$i!nc7 C!ne(ence !" i(in err!ne!( VAT in,!ice !r VAT !Jcial receip$24. ilin !" re$(rn an' pa+en$28. Wi$))!l'in !" &nal VAT !n ale $! !,ern+en$

TAX REME%IES N%ER T:E NIRCa7 Ae+en$

!n assessment contains not only a computation of tax liabilities, but also ademand for payment within a prescribed period. It also signals the time whenpenalties and protests begin to accrue against the taxpayer. To enable thetaxpayer to determine his remedies thereon, due process re3uires that it

must be served on and received by the taxpayer. !ccordingly, an aNdavit,which was executed by revenue oNcers stating the tax liabilities of ataxpayer and attached to a criminal complaint for tax evasion, cannot bedeemed an assessment that can be 3uestioned before the 2ourt of Tax!ppeals. (C-R vs Pas"or Realty an* Development Corp., GR no. 128$1/, @une29, 1999&

6i7 C!ncep$ !" ae+en$6a7 Re(ii$e "!r ,ali' ae+en$637 C!n$r(c$i,e +e$)!' !" inc!+e 'e$er+ina$i!n

The rule is that in the absence of the accounting records of ataxpayer, his tax liability may be determined by estimation. Thepetitioner is not re3uired to compute such tax liabilities withmathematical exactness. !pproximation in the calculation of thetaxes due is justied. To hold otherwise would be tantamount toholding that s'illful concealment is an invincible barrier toproof. Gowever, the rule does not apply where the estimation isarrived at arbitrarily and capriciously. In ne, then, the petitioneracted arbitrarily and capriciously in relying on and giving weightto the machine copies of the 2onsumption Antries in xing the




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tax deciency assessments against the respondent. (C-R vs:ante; 5ra*in3 Co., GR no. 1$9/, 0ar" $1, 2%%/&

The 6best evidence6 envisaged in ection 1< of the 1@>> CI;2Rnow ec. <, 1@@> CI;2S, as amended, includes the corporateand accounting records of the taxpayer who is the subject of theassessment process, the accounting records of other taxpayersengaged in the same line of business, including their gross protand net prot sales. The law allows the +I; access to all relevantor material records and data in the person of the taxpayer. Itplaces no limit or condition on the type or form of the mediumby which the record subject to the order of the +I; is 'ept. Thepurpose of the law is to enable the +I; to get at the taxpayer5srecords in whatever form they may be 'ept. uch recordsinclude computer tapes of the said records prepared by thetaxpayer in the course of business.<? In this era of developinginformation%storage technology, there is no valid reason toimmunie companies with computer%based, record%'eepingcapabilities from +I; scrutiny. 5e stan*ar* is not te form of te re"or* #ut ere it mi3t se* li3t on te a""ura"y of teta;payers return. Gowever, the best evidence obtainable underection 1< of the 1@>> CI;2 Rnow ec. <, 1@@> CI;2S, asamended, does not include mere photocopies of recordsMdocuments. The petitioner, in ma'ing a preliminary andnal tax deciency assessment against a taxpayer, cannotanchor the said assessment on mere machine copies of recordsMdocuments. Dere photocopies of the 2onsumptionAntries have no probative weight if o9ered as proof of thecontents thereof. (C-R vs :ante; 5ra*in3 Co., GR no. 1$9/,0ar" $1, 2%%/&

6c7 In,en$!r +e$)!' "!r inc!+e 'e$er+ina$i!n6'7 9e!par' ae+en$6e7 Ta# 'elin(enc an' $a# 'e&cienc

6ii7 P!*er !" $)e C!++ii!ner $! +aFe ae+en$ an' precri3ea''i$i!nal re(ire+en$ "!r $a# a'+ini$ra$i!n an' en"!rce+en$

6a7P!*er !" $)e C!++ii!ner $! !3$ain in"!r+a$i!nD an' $!(++!n/e#a+ineD an' $aFe $e$i+!n !" per!n

Eor the purpose of safeguarding taxpayers from any unreasonableexamination, investigation or assessment, our tax law provides astatute of limitations in the collection of taxes. Thus, the law onprescription, being a remedial measure, should be liberally

construed in order to a9ord such protection. !s a corollary, theexceptions to the law on prescription should perforce be strictlyconstrued. ec. 1 of the CI;2, on the other hand, provides that6RwShen a report re3uired by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming withinthe time xed by law or regulation, or when there is reason tobelieve that any such report is false, incomplete, or erroneous, the2ommissioner of Internal ;evenue shall assess the proper tax onthe best evidence obtainable.6 2learly, ection 1 does not provide


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an exception to the statute of limitations on the issuance of anassessment, by allowing the initial assessment to be made on thebasis of the best evidence available. Gaving made its initialassessment in the manner prescribed, the commissioner could nothave been authoried to issue, beyond the ve%year prescriptiveperiod, the second and the third assessments under consideration

before us. (C-R vs +7 Goo*ri" Pils., -n"., GR no. 1%11, 7e#ruary 2, 1999&

6iii7 W)en ae+en$ i +a'e!n assessment is deemed made only when the collector of internalrevenue releases, mails or sends such notice to the taxpayer. (C-R vsPas"or Realty an* Development Corp., GR no. 128$1/, @une 29, 1999&

6a7Precrip$i,e peri!' "!r ae+en$ The statute of limitations on assessment and collection of taxes isfor the protection of the taxpayer and, thus, shall be construedliberally in his favor. Though the statute of limitations onassessment and collection of national internal revenue taxesbenets both the Lovernment and the taxpayer, it principallyintends to a9ord protection to the taxpayer against unreasonableinvestigation. The indenite extension of the period for assessmentis unreasonable because it deprives the said taxpayer of theassurance that he will no longer be subjected to furtherinvestigation for taxes after the expiration of a reasonable period of time. (+P- vs C-R, GR 1$9$, !"to#er 1, 2%%/&

+oth !rticle 1# of the 2ivil 2ode and ection #1, 2hapter FIII, +oo'I of the !dministrative 2ode of 1@?> deal with the same subjectmatter V the computation of legal periods. :nder the 2ivil 2ode, ayear is e3uivalent to #< days whether it be a regular year or a leapyear. :nder the !dministrative 2ode of 1@?>, however, a year iscomposed of 1 calendar months. Ceedless to state, under the!dministrative 2ode of 1@?>, the number of days is irrelevant.

There obviously exists a manifest incompatibility in the manner of computing legal periods under the 2ivil 2ode and the!dministrative 2ode of 1@?>. Eor this reason, we hold that ection#1, 2hapter FIII, +oo' I of the !dministrative 2ode of 1@?>, beingthe more recent law, governs the computation of legal periods. (C-Rvs Primeton Property Group -n"., GR 121//, Au3ust 28, 2%%&

2onsidering that the deciency assessment was based on theamended return which, as aforestated, is substantially di9erentfrom the original return, the period of limitation of the right to issuethe same should be counted from the ling of the amended incometax return. Be believe that to hold otherwise, we would be pavingthe way for taxpayers to evade the payment of taxes by simplyreporting in their original return heavy losses and amending thesame more than ve years later when the 2ommissioner of Internal;evenue has lost his authority to assess the proper tax thereunder.

The object of the Tax 2ode is to impose taxes for the needs of the




>@

Lovernment, not to enhance tax avoidance to its prejudice. (C-R vsPoeni; Assuran"e Co., 61912, 0ay 2%, 19/&

! waiver of the statute of limitations under the CI;2, to a certainextent, is a derogation of the taxpayers5 right to security againstprolonged and unscrupulous investigations and must therefore be

carefully and strictly construed. The waiver of the statute of limitations is not a waiver of the right to invo'e the defense of prescription as erroneously held by the 2ourt of !ppeals. It is anagreement between the taxpayer and the +I; that the period toissue an assessment and collect the taxes due is extended to a datecertain. The waiver does not mean that the taxpayer relin3uishesthe right to invo'e prescription une3uivocally particularly where thelanguage of the document is e3uivocal. The Baiver of tatute of 0imitations, signed by petitioner5s comptroller on eptember ,1@@> is not valid and binding because it does not conform with theprovisions of ;D Co. /%@/. It did not specify a denite agreeddate between the +I; and petitioner, within which the former may

assess and collect revenue taxes. Thus, petitioner5s waiver becameunlimited in time, violating ection (b& of the CI;2. (-hilippine

"ournalists, Inc vs 2I;, L; 1<?, =ecember 1<, //$&

The waiver re3uired under the Tax 2ode is one which is notunilateral nor can it be said that concurrence to such agreement isa mere formality because it is the very signatures of both the2ommissioner and the taxpayer which give birth to such validagreement. (2I; v. 2!, L.;. 11>1, Eeb. , 1@@@&

! waiver of the statute of limitations being a derogation of thetaxpayer5s right to security against prolonged and unscrupulousinvestigations must be carefully and strictly construed. (2I; v. EDE=ev5t 2orp., < 2;! <@?&

The re3uirement to furnish the taxpayer a copy of the waiver of thetatute of 0imitations is not only to give notice of the existence of the document but of the acceptance by the +I; and the perfectionof the agreement. (-hil. "ournalists, Inc. v. 2I;, L; 1<?, =ec. 1<,//$&

It is clear that the assailed deciency tax assessment for the ABT in1@@$ disregarded the provisions of ection ? of the RCI;2S, asamended, as well as ection #.1.$ of the ;evenue ;egulations Co.1%@@ by not providing the legal and factual bases of theassessment. Gence, the formal letter of demand and the notice of assessment issued relative thereto are void.

The statute of limitations on assessment and collection of national internal taes wasshortened from five )* years to three )+* years by virtue of atas :ambansa lg.#"". Thus, $:etitioner ;4& has three )+* years from the date of actual filing of the tareturn to assess a national internal revenue ta or to commence court proceedingsfor the collection thereof without an assessment. <owever, when it validly issues an




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assessment within the three )+* year period, it has another three )+* years within

which to collect the ta due by distraint, levy, or court proceeding . RCommissioner of

Internal Revenue v. nited !alva#e and %o'a#e (Phils.), Inc., 3.4. 5o. %9#%, uly 2, 2"%6&

". Pe%alta

The assessment of the tax is deemed made and the three%year

period for collection of the assessed tax begins to run on the datethe assessment notice had been released, mailed or sent by the +I;to the taxpayer. Thus, failure of the +I; to le a warrant of distraintor serve a levy on taxpayers properties nor le collection casewithin the three%year period is fatal. !lso, the attempt of the +I; tocollect the tax through its !nswer with a demand for the taxpayerto pay the assessed =T in the 2T! is not deemed compliance withthe Tax 2ode. CHINA BAN+ING CORPORATION vs.CO--ISSIONER OF INTERNAL RE/ENUE, G.R. No. 17()9,Fe6%$a%& ), ()1, C.". Se%e#o

In 1@@#, the +I; issued against respondent assessment notice for

deciency income tax for 1@?@. ! waiver of the defense of prescription was executed but it was not signed by the2ommissioner or any of his authoried representatives and did notstate the date of acceptance. The 2ourt held that the2ommissioner5s right to collect has prescribed. The period to assessand collect deciency taxes may be extended only upon a writtenagreement between the 2ommissioner and the taxpayer prior tothe expiration of the three%year prescribed period. The +I; cannotclaim the benets of extending the period when it was the +I;5sinaction which is the proximate cause of the defects of the waiver.C!00--!N)R !7 -N5)RNA6 R)4)N) vs. 5:) 5AN6)= >!R<A6) (P:-6.', -NC!RP!RA5)D, G.R. No. 18/89, De"em#er %$,

2%1, C@. ereno

617aleD "ra('(len$D an' n!n-&lin !" re$(rn-etitioner insists that private respondent committed 6falsity6when it sold the property for a price lesser than its declared fairmar'et value. This fact alone did not constitute a false returnwhich contains wrong information due to mista'e, carelessnessor ignorance. 14 It is possible that real property may be sold forless than ade3uate consideration for a #ona J*e businesspurpose* in such event, the sale remains an 6arms length6transaction. In the present case, the private respondent wascompelled to sell the property even at a price less than its

mar'et value, because it would have lost all ownership rightsover it upon the expiration of the parity amendment. (C-R vs +7 Goo*ri" Pils., -n"., GR no. 1%11, 7e#ruary 2, 1999'

Eraud cannot be presumed but must be proven. !s a corollarythereto, we can also state that fraudulent intent could not bededuced from mista'es however fre3uent they may be,especially if such mista'es emanate from erroneous entries or




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erroneous classication of items in accounting methods utiliedfor determination of tax liabilities. The lower courts conclusionregarding the existence of fraudulent intent to evade paymentof taxes was based merely on a presumption and not onevidence establishing a willful ling of false and fraudulentreturns so as to warrant the imposition of the fraud penalty. The

fraud contemplated by law is actual and not constructive. Itmust be intentional fraud, consisting of deception willfully anddeliberately done or resorted to in order to induce another togive up some legal right. Cegligence, whether slight or gross, isnot e3uivalent to the fraud with intent to evade the taxcontemplated by the law. ( AHnar vs C5A, GR 62%/9, Au3ust 2$,19&

ection /# of the CI;2 sets the three%year prescriptive periodto assess. Gowever the exceptions are provided under ection of the CI;2 of 1@@>. In the case at bar, it was petitioner5ssubstantial under declaration of withholding taxes in the amountof -,<@/,?/.@1 which constituted the 7falsity8 in the subjectreturns J giving respondent the benet of the period underection of the CI;2 of 1@@> to assess the correct amount of tax 7at any time within ten (1/& years after the discovery of thefalsity, fraud or omission. A0AR- )6)C5R-C C!!P)RA5-4)4. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 19$1%%.De"em#er 1%, 2%1, @. 4-66ARA0A @R.

(b) S(peni!n !" r(nnin !" $a$($e !" li+i$a$i!n

-etitioners also argue that the government5s right to assess andcollect the subject tax had prescribed. -etitioners admitted in their

Dotion for ;econsideration before the 2ourt of !ppeals that thepool changed its address, for they stated that the pool5s informationreturn led in 1@?/ indicated therein its 7present address.8 The2ourt nds that this falls short of the re3uirement of ection ###Rnow section #S of the CI;2 for the suspension of the prescriptiveperiod. The law clearly states that the said period will besuspended only 7if the taxpayer informs the 2ommissioner of Internal ;evenue of any change in the address.8 ( AJs"o -nsuran"evs CA, GR 112/, @anuary 2/, 1999&

ec. >1 R1@>> CI;2S (now ec. # of 1@@> CI;2& limits thesuspension of the running of prescription to instances when

reinvestigation is re3uested by a taxpayer and is granted by the2I;. nly a re3uest for reinvestigation can toll the running of theperiod of the statute of limitations because it would entail receptionand evaluation of additional evidence and will ta'e more time thana re3uest for reconsideration where the evaluation of the evidenceis limited only to the evidence already at hand. (2I; v. -hil. Llobal2ommunications, /< 2;! $>&




?

-etitioner 3uestions the decision of the 2T! holding that its right toassess respondent of its tax deciencies for the taxable year 1@@@has already prescribed for its failure to send the Eormal !ssessmentCotice to respondent5s new address despite respondent5s failure togive petitioner a formal written notice of its change of address. The2 ruled that despite the absence of a formal written notice of

respondents change of address, the fact remains that petitionerbecame aware of respondents new address as shown by thedocuments replete in its records. !s a conse3uence, the running of the three%year period to assess respondent was not suspended andhas already prescribed. C!00--!N)R !7 -N5)RNA6 R)4)N) vs.+A7 C!A5-NG K -N< P:-6., -NC., G.R. No. 198, Novem#er 2,2%1, @. Peralta

There is a distinction between a re0uest for reconsideration and a re0uest for reinvestigation. A reinvestigation which entails the reception and evaluation of additional evidence will ta(e more time than a reconsideration of a ta assessment,which will be limited to the evidence already at hand= this >ustifies why the

reinvestigation can suspend the running of the statute of limitations on collection of the assessed ta, while the reconsideration cannot. <ence, the period for ;4 tocollect the deficiency 8ST already prescribed as the protest letter of :; was are0uest for reconsideration, which did not suspend the running of the prescriptiveperiod to collect. )Ban* of the Philippine Islands v. Commissioner of Internal

Revenue, 3.4. 5o. %!%!+1, uly 9, 2"%6, @. CARP-!

6i,7 General pr!,ii!n !n a''i$i!n $! $)e $a#6a7 Ci,il penal$ie637 In$ere$6c7 C!+pr!+ie penal$ieIt does not appear that petitioner accepted the imposition of the

compromise amounts. It is now a well settled doctrine thatcompromise penalty cannot be imposed or collected without theagreement or conformity of the taxpayer. (>on*er 0e"ani"al)n3ineerin3 vs C5A, GR 6228%/ & 628/8, @une $%, 19/7

6,7 Ae+en$ pr!ce6a7 Ta# a('i$637 N!$ice !" in"!r+al c!n"erence

:nder ;ev. ;eg. 1%@@, a notice of informal conference is sent to thetaxpayer informing him of the ndings of the audit conducted on hisboo's and records indicating that there is a discrepancy in his taxpayments which has to be paid. Gowever under ;ev. ;eg. 1?%/1#dated Cov. ?, /1# the re3uirement for the issuance of a letter of informal conference has been removed.

6c7 I(ance !" preli+inar ae+en$ n!$iceec. ? of the Tax 2ode clearly re3uires that the taxpayer must beinformed that he is liable for deciency taxes through the sending of a-reliminary !ssessment Cotice. The sending of a -!C to the taxpayer isto inform him of the assessment made is but part of due processre3uirement in the issuance of a deciency tax assessment, the




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absence of which renders nugatory any assessment made by the taxauthorities. (2I; v. Detro tar uperama, Inc. <#> 2;! <##&

The ;4 categorically admitted that it failed to formally offer the :reliminary Assessment5otices as evidence. ?orse, it advanced no >ustifiable reason for such fatal omission.;nstead, it merely alleged that the eistence and due eecution of the :reliminary

Assessment 5otices were duly tac(led by ;4/s witnesses. Such is not sufficient to see(eception from the general rule re0uiring a formal offer of evidence, since no evidence of positive identification of such :reliminary Assessment 5otices by petitioner/s witnesseswas presented. $Commissioner of Internal Revenue v. nited !alva#e and %o'a#e

(Phils.), Inc., 3.4. 5o. %9#%, uly 2, 2"%6& , @. Peralta

6'7 N!$ice !" in"!r+al c!n"erence i $)i a+e a 637 a3!,e6e7 I(ance !" preli+inar ae+en$ n!$ice i $)i a+e a6c76"7 E#cep$i!n $! i(ance !" preli+inar ae+en$ n!$ice67 Repl $! preli+inar ae+en$ n!$ice

6)7 I(ance !" "!r+al le$$er !" 'e+an' an' ae+en$n!$ice/&nal ae+en$ n!$ice Tax assessments by tax examiners are presumed correct and made ingood faith. The taxpayer has the duty to prove otherwise. In theabsence of proof of any irregularities in the performance of duties, anassessment duly made by a +ureau of Internal ;evenue examiner andapproved by his superior oNcers will not be disturbed. !llpresumptions are in favor of the correctness of tax assessments. ( y Po vs C5A, GR 81, Au3ust 18, 1988&

!n assessment xes and determines the tax liability of a taxpayer. !ssoon as it is served, an obligation arises on the part of the taxpayer

concerned to pay the amount assessed and demanded. Gence,assessments should not be based on mere presumptions no matterhow reasonable or logical said presumptions may be. In order to standthe test of judicial scrutiny, the assessment must be based on actualfacts. (C-R vs -slan* Garment 0anufa"turin3 Co., GR 6,eptem#er 11, 1987

Taxpayers shall be informed in writing of the law and the facts onwhich the assessment is made, otherwise, the assessment shall bevoid. The old re3uirement of merely notifying the taxpayer of the 2I;5sndings was changed in 1@@? to inform the taxpayer of not only thelaw but also the facts on which an assessment would be made. Eailure

to comply with ec. ? of the Tax 2ode does not only render theassessment void, but also nds no validation in any provision in the Tax2ode. (2I; vs. ;eyes, $?/ 2;! #?&

! taxpayer must be informed in writing of the legal and factual basesof the tax assessment made against him. This is a mandatoryre3uirement. The advice of a tax deciency given by the 2I; to anemployee of Anron as well as the preliminary %day letter notice, werenot valid substitutes for the mandatory notice in writing of the legal




?$

and factual bases of the assessment. ec. ? of the CI;2 re3uiresthat the legal and factual bases be stated in the formal letter of demand and assessment notice. therwise the law and ;; 1%@@would be rendered nugatory. In view of the absence of a fairopportunity for Anron to be informed of the bases of the assessment,the assessment was void. This is a re3uirement of due process. (2I; v.

Anron ubic -ower 2orp. > 2;! 1&

The notice re3uirement under ection ? of the CI;2 is substantiallycomplied with whenever the taxpayer had been fully informed inwriting of the factual and legal bases of the deciency taxesassessment, which enabled the latter to le an e9ective protest.A0AR- )6)C5R-C C!!P)RA5-4) vs. C!00--!N)R !7 -N5)RNA6R)4)N), G.R. No. 19$1%%, De"em#er 1%, 2%1, @. 4illarama, @r.

The tax assessments by tax examiners are presumed correct andmade in good faith. The taxpayer has the duty to prove otherwise.

Therefore the agreements were considered as deposits subject to =T.

C!00--!N)R !7 -N5)RNA6 R)4)N) 4, 5RAD)R R!=A6 +AN<,G.R. No. 11$. 0ar" 18, 2%1/, @. 6)!NARD!D) CA5R!

6i7 %ip($e' ae+en$67 A'+ini$ra$i,e 'ecii!n !n a 'ip($e' ae+en$

The authority to ma'e tax assessments may be delegated tosubordinate oNcers. aid assessment has the same force and e9ect asthat issued by the 2ommissioner himself, if not reviewed or revised bythe latter. (!"eani" NetorI >ireless -n"., GR 18$8%, De"em#er 9,2%%/&

6,i7 Pr!$e$in ae+en$6a7 Pr!$e$ !" ae+en$ 3 $a#paer

617 Pr!$e$e' ae+en$627 W)en $! &le a pr!$e$647 !r+ !" pr!$e$

This 2ourt had consistently ruled in a number of cases that are3uest for reconsideration or reinvestigation by the taxpayer,without a valid waiver of the prescriptive periods for theassessment and collection of tax, as re3uired by the Tax 2odeand implementing rules, will not suspend the running thereof.(+P- vs C-R, GR 1$9$, !"to#er 1, 2%%/&

It bears to emphasie that under ection $ of the Tax 2ode of 1@>>, as amended, the running of the prescriptive period forcollection of taxes can only be suspended by a reuest for reinvesti3ation, not a re3uest for reconsideration. :ndoubtedly,a reinvestigation, which entails the reception and evaluation of additional evidence, will ta'e more time than a reconsiderationof a tax assessment, which will be limited to the evidencealready at hand* this justies why the former can suspend the




?

running of the statute of limitations on collection of the assessedtax, while the latter can not. (+P- vs C-R, GR 1$9$, !"to#er 1, 2%%/&

687 C!n$en$ an' ,ali'i$ !" pr!$e$

637 S(3+ii!n !" '!c(+en$ *i$)in <0 'a "r!+ &lin !" pr!$e$-etitioner cannot insist on the submission of proof of =T paymentbecause such document does not exist as respondent claims that it isnot liable to pay, and has not paid, the =T on the deposit onsubscription. The term 7relevant supporting documents8 should beunderstood as those documents necessary to support the legal basis indisputing a tax assessment as determined by the taxpayer. The +I;can only inform the taxpayer to submit additional documents. The +I;cannot demand what type of supporting documents should besubmitted. therwise, a taxpayer will be at the mercy of the +I;,which may re3uire the production of documents that a taxpayer cannot

submit. (C-R vs 7irst );press Pansop Company, GR 12%/, @une1, 2%%9&

6c7E=ec$ !" "ail(re $! pr!$e$ The rule is that for the 2ourt of Tax !ppeals to ac3uire jurisdiction, anassessment must rst be disputed by the taxpayer and ruled upon bythe 2ommissioner of Internal ;evenue to warrant a decision from whicha petition for review may be ta'en to the 2ourt of Tax !ppeals. Bherean adverse ruling has been rendered by the 2ommissioner of Internal;evenue with reference to a disputed assessment or a claim for refundor credit, the taxpayer may appeal the same within thirty (#/& daysafter receipt thereof. ! re3uest for reconsideration must be madewithin thirty (#/& days from the taxpayer5s receipt of the tax deciencyassessment, otherwise, the decision becomes nal, unappealable andtherefore, demandable. ! tax assessment that has become nal,executory and enforceable for failure of the taxpayer to assail thesame as provided in ection ? can no longer be contested. (!"eani"NetorI >ireless -n"., GR 18$8%, De"em#er 9, 2%%/'

6'7 Peri!' pr!,i'e' "!r $)e pr!$e$ $! 3e ac$e' (p!n6,ii7 Ren'i$i!n !" 'ecii!n 3 C!++ii!ner

6a7 %enial !" pr!$e$;ecords show that petitioner disputed the -!C but not the Eormal 0etter of =emand with !ssessment Cotices. Cevertheless, we cannot blamepetitioner for not ling a protest against the Eormal 0etter of =emand with!ssessment Cotices since the language used and the tenor of the demandletter indicate that it is the nal decision of the respondent on thematter. Be have time and again reminded the 2I; to indicate, in a clear andune3uivocal language, whether his action on a disputed assessmentconstitutes his nal determination thereon in order for the taxpayerconcerned to determine when his or her right to appeal to the tax court




?<

accrues. Fiewed in the light of the foregoing, respondent is now estoppedfrom claiming that he did not intend the Eormal 0etter of =emand with!ssessment Cotices to be a nal decision. (!llied +an'ing 2orporation vs2I;, L.;. Co. 1>/@>D Eebruary , /1/&

617 C!++ii!ner ac$i!n e(i,alen$ $! 'enial !" pr!$e$

The re3uest for reinvestigation and reconsideration was ine9ect considered denied by petitioner when the latterled a civil suit for collection of deciency income. :nderthe circumstances, the 2ommissioner of Internal ;evenue,not having clearly signied his nal action on the disputedassessment, legally the period to appeal has notcommenced to run. Thus, it was only when privaterespondent received the summons on the civil suit forcollection of deciency income on =ecember ?, 1@>?that the period to appeal commenced to run. (C-R vsnion ippin3 Corporation, GR 61%, 0ay 21, 199%&

The letter of Eebruary 1?, 1@<#, in the view of the 2ourt,is tantamount to a denial of the reconsideration or protestof the respondent corporation on the assessment madeby the petitioner, considering that the said letter is initself a reiteration of the demand by the +ureau of Internal;evenue for the settlement of the assessment alreadymade, and for the immediate payment of the sum of ->?, <?>./$ in spite of the vehement protest of therespondent corporation on !pril 1, 1@<1. This certainly isa clear indication of the rm stand of petitioner againstthe reconsideration of the *ispute* assessment in view of the continued refusal of the respondent corporation toexecute the waiver of the period of limitation upon theassessment in 3uestion. (C-R vs Ayala e"urities Corp.,GR 6298/, 0ar" $1, 19&

:nder ection 11(2& of the CI;2, in case of failure on thepart of the 2I; to act on the application, the taxpayera9ected may, within #/ days after the expiration of the1/%day period, appeal the unacted claim with the 2T!. If the 2ommissioner fails to decide within 7a specic period8re3uired by law, such 7inaction shall be deemed a denial8of the application for tax refund or credit. In this case,when T2 led its administrative claim on 1 =ecember//, the 2I; had a period of 1/ days, or until / !pril//<, to act on the claim. Gowever, the 2I; failed to acton T25s claim within this 1/%day period. Thus, T2 ledits petition for review with the 2T! on $ !pril //< orwithin #/ days after the expiration of the 1/%day period.Gence, the judicial claim was not prematurely led.C!00--!N)R !7 -N5)RNA6 R)4)N) vs. 5)A0 A6C!RP!RA5-!N, G.R. No. 2%/%//, @uly 18, 2%1, @. Carpio




?>

6a7 ilin !" cri+inal ac$i!n aain$ $a#paer

Spouses 'anly were charged with ta evasion due to their under declaration of income in their ;T4. The investigation of the revenue

officers shows that the under declaration eceeded +"@ of the declaredincome of the spouses. The Spouses 'anly opposed the said complaintdue to the lac( of deficiency ta assessment. ;n this case, the ourt ruledthat ta evasion is deemed complete when the violator has (nowinglyand willfully filed a fraudulent return with intent to evade and defeat a partor all of the ta. orollarily, an assessment of the ta deficiency is notre0uired in a criminal prosecution for ta evasion. <owever, inommissioner of ;nternal 4evenue v. ourt of Appeals, it was clarifiedthat although a deficiency assessment is not necessary, the fact that ata is due must first be proved before one can be prosecuted for taevasion. )Bureau of Internal Revenue, etc., v. Court of Appeals, and

!pouses Manl$, 3.4. 5o. %9#9", 5ovember 26, 2"%6* , @. DelCastillo

637 I(in a *arran$ !" 'i$rain$ an' le,627 Inac$i!n 3 C!++ii!ner

6,iii7 Re+e'ie !" $a#paer $! ac$i!n 3 C!++ii!ner6a7 In cae !" 'enial !" pr!$e$637 In cae !" inac$i!n 3 C!++ii!ner *i$)in 1?0 'a "r!+

(3+ii!n !" '!c(+en$In case the 2ommissioner failed to act on the disputedassessment within the 1?/%day period from date of submissionof documents, a taxpayer can either) (1& le a petition for reviewwith the 2ourt of Tax !ppeals within #/ days after the expirationof the 1?/%day period* or (& await the nal decision of the

2ommissioner on the disputed assessments and appeal suchnal decision to the 2ourt of Tax !ppeals within #/ days afterreceipt of a copy of such decision. (RC+C vs C-R, G.R. No.1898, April 2, 2%%&

6c7 E=ec$ !" "ail(re $! appeal37 C!llec$i!n

6i7 Re(ii$e6ii7 Precrip$i,e peri!'

The +I; has three years, counted from the date of actual ling of thereturn or from the last date prescribed by law for the ling of suchreturn, whichever comes later, to assess a national internal revenuetax or to begin a court proceeding for the collection thereof without an

assessment. In case of a false or fraudulent return with intent to evadetax or the failure to le any return at all, the prescriptive period forassessment of the tax due shall be 1/ years from discovery by the +I;of the falsity, fraud, or omission. Bhen the +I; validly issues anassessment, within either the three%year or ten%year period, whicheveris appropriate, then the +I; has another three years Rnow yearsunder ec. , 1@@> CI;2S after the assessment within which to




??

collect the national internal revenue tax due thereon by distraint, levy,andMor court proceeding. (+P- vs C-R, GR 1$9$, !"to#er 1, 2%%/&

:nder ection #(c& of the Tax 2ode of 1@>>, as amended, it is notessential that the Barrant of =istraint andMor 0evy be fully executed sothat it can suspend the running of the statute of limitations on the

collection of the tax. It is enough that the proceedings have validlybegan or commenced and that their execution has not been suspendedby reason of the voluntary desistance of the respondent +I;2ommissioner. Axisting jurisprudence establishes that distraint andlevy proceedings are validly begun or commenced by the issuance of the Barrant and service thereof on the taxpayer. It is only logical tore3uire that the Barrant of =istraint andMor 0evy be, at the very least,served upon the taxpayer in order to suspend the running of theprescriptive period for collection of an assessed tax, because it mayonly be upon the service of the Barrant that the taxpayer is informedof the denial by the +I; of any pending protest of the said taxpayer,and the resolute intention of the +I; to collect the tax assessed. (+P-

vs C-R, GR 1$9$, !"to#er 1, 2%%/&

Bhile we may agree with the 2ourt of Tax !ppeals that a mere re3uest forreexamination or reinvestigation may not have the e9ect of suspending therunning of the period of limitation for in such case there is need of a writtenagreement to extend the period between the 2ollector and the taxpayer,there are cases however where a taxpayer may be prevented from settingup the defense of prescription even if he has not previously waived it inwriting as when by his repeated re3uests or positive acts the Lovernmenthas been, for good reasons, persuaded to postpone collection to ma'e himfeel that the demand was not unreasonable or that no harassment orinjustice is meant by the Lovernment. (C-R vs <u*os 0etal Corp., GR18%8, 0ay /, 2%1%&

The running of the prescription period where the acts of the taxpayerdid not prevent the government from collecting the tax. -artialpayment would not prevent the government from suing thetaxpayer. +ecause, by such act of payment, the government is notthereby 7persuaded to postpone collection to ma'e him feel that thedemand was not unreasonable or that no harassment or injustice ismeant.8 (C-R vs Pilippine Glo#al Communi"ation, GR 11, !"to#er $1, 2%%&

The act of re3uesting a reinvestigation alone does not suspend theperiod. The re3uest should rst be granted, in order to e9ectsuspension. The burden of proof that the taxpayer5s re3uest forreinvestigation had been actually granted shall be on respondent +I;2ommissioner. The grant may be expressed in communications withthe taxpayer or implied from the actions of the respondent +I;2ommissioner or his authoried +I; representatives in response to there3uest for reinvestigation. (+P- vs C-R, GR 1$9$, !"to#er 1, 2%%/&




?@

6iii7 %i$rain$ !" per!nal pr!per$ incl('in arni)+en$ The prohibition against examination of or in3uiry into a ban' depositunder ;epublic !ct 1$/ does not preclude its being garnished toinsure satisfaction of a judgment. Indeed there is no real in3uiry insuch a case, and if existence of the deposit is disclosed the disclosureis purely incidental to the execution process. It is hard to conceive that

it was ever within the intention of 2ongress to enable debtors to evadepayment of their just debts, even if ordered by the 2ourt, through theexpedient of converting their assets into cash and depositing the samein a ban'. (PC-+ vs CA, GR 8/2, @anuary 28, 1991&

6a7 S(++ar re+e' !" 'i$rain$ !" per!nal pr!per$617 P(rc)ae 3 $)e !,ern+en$ a$ ale (p!n'i$rain$627 Rep!r$ !" ale $! $)e B(rea( !" In$ernalRe,en(e 6BIR7647 C!n$r(c$i,e 'i$rain$ $! pr!$ec$ $)e in$ere$ !" $)e !,ern+en$

6i,7 S(++ar re+e' !" le, !n real pr!per$

6a7 A',er$ie+en$ an' ale637 Re'e+p$i!n !" pr!per$ !l'6c7 inal 'ee' !" p(rc)aer

6,7 !r"ei$(re $! !,ern+en$ "!r *an$ !" 3i''er6a7 Re+e' !" en"!rce+en$ !" "!r"ei$(re

617 Ac$i!n $! c!n$e$ "!r"ei$(re !" c)a$$el637 Reale !" real e$a$e $aFen "!r $a#e6c7 W)en pr!per$ $! 3e !l' !r 'e$r!e'6'7 %ip!i$i!n !" "(n' rec!,ere' in leal pr!cee'in !r!3$aine' "r!+ "!r"ei$(re

6,i7 (r$)er 'i$rain$ !r le,6,ii7 Ta# lienIt is settled that the claim of the government predicated on a tax lien issuperior to the claim of a private litigant predicated on a judgment.

The tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax became dueand payable. +esides, the distraint on the subject properties of Daritime 2ompany of the -hilippines as well as the notice of theirseiure were made by petitioner, through the 2ommissioner of Internal;evenue, long before the writ of execution was issued by the ;egional

Trial 2ourt. (Repu#li" vs )nriueH, GR 8$91, !"to#er 21, 1988&6,iii7 C!+pr!+ie

6a7 A($)!ri$ !" $)e C!++ii!ner $! c!+pr!+ie an'a3a$e $a#e

6i#7 Ci,il an' cri+inal ac$i!n6a7 S(i$ $! rec!,er $a# 3ae' !n "ale !r "ra('(len$

re$(rn The contention is made, and is here rejected, that anassessment of the deciency tax due is necessary before thetaxpayer can be prosecuted criminally for the charges preferred.

The crime is complete when the violator has, as in this case,'nowingly and willfully led fraudulent returns with intent to




@/

evade and defeat a part or all of the tax. Bhile there can be nocivil action to enforce collection before the assessmentprocedures provided in the 2ode have been followed, there is nore3uirement for the precise computation and assessment of thetax before there can be a criminal prosecution under the 2ode.(n3a# vs Cusi @r., GR 619192, 0ay $%, 198%&

ec. <@ Rnow ec. of the 1@@> CI;2S provides that whenfraudulent tax returns are involved, a proceeding in court afterthe collection of such tax may be begun without assessment.

The gross disparity in the taxes due and the amounts actuallydeclared constitutes badges of fraud. !pplying :ngab v. 2usi, @>2;! ?>> R1@?/S, assessment is not necessary in ling criminalcomplaints for tax violations. !ssessment of a deciency is notnecessary to a criminal prosecution for tax evasion. The crime iscomplete when the violator 'nowingly and willfully ledfraudulent return with intention to evade the tax. (!damson v.2ourt of !ppeals, ?? 2;! >&

c7 Re"(n'! corporation entitled to a tax credit or refund of the excess estimated3uarterly income taxes paid has two options) (1& to carry over the excesscredit or (& to apply for the issuance of a tax credit certicate or to claim acash refund. If the option to carry over the excess credit is exercised, thesame shall be irrevocable for that taxable period. This is 'nown as theirrevocability rule and is embodied in the last sentence of ection >< of the

Tax 2ode. (ystra Pilippines vs C-R, GR 129%, eptem#er 21, 2%%&

No refun* for *o"umentary stamp ta;es) documentary stamp taxes are leviedon the exercise by persons of certain privileges conferred by law for thecreation, revision, or termination of specic legal relationships through theexecution of specic instruments. =ocumentary stamp taxes are thus leviedon the exercise of these privileges through the execution of specicinstruments, independently of the legal status of the transactions giving risethereto. The documentary stamp taxes must be paid upon the issuance of thesaid instruments, without regard to whether the contracts which gave rise tothem are rescissible, void, voidable, or unenforceable. (Pilippine :ome

Assuran"e Corp. vs CA, GR 119, @anuary 21, 1999&

ec. >@ of the 1@@> CI;2 laid down the irrevocability rule. The taxpayer withexcess income tax credits is given the option to either (1& to credit the sameto its tax liability for the succeeding taxable periods* or (& refund the amountor issue tax credit certicate. nce the carry%over option is ta'en, actually orconstructively, it becomes irrevocable. It can never be refunded. Thecontrolling factor for the operation of the irrevocability rule is that thetaxpayer chose an option* and once it had already done so, it could no longerma'e another one. Co application for refund or tax credit certicate shall beallowed. The option of the +-I to carry%over the 1@@? excess credits isirrevocable. +-I cannot anymore apply for the refund in the event it is unable




@1

to credit the said excess. The crediting of the excess credits in the succeedingtaxable periods has no prescription unli'e the claim for refund whichprescribes after two years from the ling of the IT;. In the event the taxpayerfails to ma'e an appropriate mar'ing of its option in the IT;, does not meanthat the taxpayer is barred from choosing his option later on. The reason forre3uiring that a choice be made upon the ling of the IT; is to ease tax

administration. Eailure to ma'e a choice means that the taxpayer is stilluncertain and would show simple negligence or plain oversight. The taxpayermay still ma'e his choice later but once the choice is made, irrevocability of the said choice sets in. (2I; vs. +-I, @ 2;! 1@&

6i7 Gr!(n' an' re(ii$e "!r re"(n'6ii7 Re(ire+en$ "!r re"(n' a lai' '!*n 3 caeIn cases before tax courts, ;ules of 2ourt applies only by analogy or ina suppletory character and whenever practicable and convenient shallbe liberally construed in order to promote its objective of securing a

just, speedy and inexpensive disposition of every action andproceeding. ince it is not disputed that petitioner is entitled to tax

exemption, it should not be precluded from presenting evidence tosubstantiate the amount of refund it is claiming on mere technicalityespecially in this case, where the failure to present invoices at the rstinstance was ade3uately explained by petitioner. (Pilippine Pospate7ertiliHer Corp. vs C-R, GR 119$, @une 28, 2%%/&

6a7 Necei$ !" *ri$$en clai+ "!r re"(n'! claimant must rst le a written claim for refund, categoricallydemanding recovery of overpaid taxes with the 2I;, beforeresorting to an action in court. This obviously is intended, rst,to a9ord the 2I; an opportunity to correct the action of subordinate oNcers* and second, to notify the government thatsuch taxes have been 3uestioned, and the notice should then beborne in mind in estimating the revenue available forexpenditure. (C-R vs A"osta, GR 1/%8, Au3ust $, 2%%& 637 Clai+ c!n$ainin a ca$e!rical 'e+an' "!rrei+3(re+en$6c7 ilin !" a'+ini$ra$i,e clai+ "!r re"(n' an' $)e(i$/pr!cee'in 3e"!re $)e CTA *i$)in 2 ear "r!+ 'a$e!" pa+en$ rear'le !" an (per,enin ca(e

This two%year prescriptive period is intended to apply to suits orproceedings for the recovery of taxes, penalties or sumserroneously, excessively, illegally or wrongfully collected.!ccordingly, an availment of a tax credit granted by law mayhave a di9erent prescriptive period. !bsent any specicprovision in the Tax 2ode or special laws, that period would beten years under !rticle 11$$ of the 2ivil 2ode. (Con"urrin3opinion of @usti"e 4itu3 in C-R vs 5e Pilippine Ameri"an 6ife-nsuran"e Co., G.R. No. 1%/2%8, 0ay 29, 199/&

ection #/ Rnow ec. @, 1@@> CI;2S of the Tax 2ode, ascouched, particularly its statute of limitations component, is, in




@

context, intended to apply to suits for the recovery of internalrevenue taxes or sums erroneously, excessively, illegally orwrongfully collected. +lac' denes the term erroneous or ille3alta; as one levied without statutory authority. In the strict legalviewpoint, therefore, -C+5s claim for tax credit did not proceedfrom, or is a conse3uence of overpayment of tax erroneously or

illegally collected. It is beyond cavil that respondent -C+ issuedto the +I; the chec' for -1?/ Dillion in the concept of taxpayment in advance, thus eschewing the notion that there waserror or illegality in the payment. (C-R vs PN+, GR 1199,!"to#er 2/, 2%%/&

Bhenever applicable, the two%year prescriptive period startsfrom the full and Jnal payment of the tax sought to berecovered. (Con"urrin3 opinion of @usti"e 4itu3 in C-R vs 5ePilippine Ameri"an 6ife -nsuran"e Co., G.R. No. 1%/2%8, 0ay 29, 199/&

Eor corporations, the two%year prescriptive period within whichto claim a refund commences to run, at the earliest, on the dateof the ling of the adjusted nal tax return. The rationale incomputing the two%year prescriptive period with respect to thepetitioner corporations claim for refund from the time it led itsnal adjustment return is the fact that it was only then that!22;!IC could ascertain whether it made prots or incurredlosses in its business operations. ( ACCRA -nvestments vs CA,G.R. No. 9$22, De"em#er 2%, 1991& Aven if the two (&%year prescriptive period, if applicable, hadalready lapsed, the same is not jurisdictional and may besuspended for reasons of e3uity and other specialcircumstances. ;ecords show that the +I;5s very own conductled -C+ to believe all along that its original intention to applythe advance payment to its future income tax obligations will berespected by the +I;. (C-R vs PN+, GR 1199, !"to#er 2/,2%%/&

The claim for refund with the 2ommissioner of Internal ;evenueand the subse3uent action before the 2ourt of Tax !ppealsregarding the refund should all be done within the said period of two years. (C-R vs NPC, G.R. No. 6188 @anuary $%, 19%&

6iii7 Leal 3ai !" $a# re"(n'6i,7 S$a$($!r 3ai "!r $a# re"(n' (n'er $)e $a# c!'e

6a7 Sc!pe !" clai+ "!r re"(n'637 Necei$ !" pr!!" "!r clai+ !r re"(n'

The certificate of creditable ta withheld at source is the competent proof toestablish the fact that taes are withheld. ;t is not necessary for the person whoeecuted and prepared the certificate of creditable ta withheld at source to bepresented and to testify personally to prove the authenticity of the certificates.;n anco ilipino Savings and 'ortgage an( v. ourt of Appeals, this court




@#

declared that a certificate is complete in the relevant details that would aid thecourts in the evaluation of any claim for refund of ecess creditable withholdingtaes. ;n fine, the document which may be accepted as evidence of the thirdcondition, that is, the fact of withholding, must emanate from the payor itself, andnot merely from the payee, and must indicate the name of the payor, the incomepayment basis of the ta withheld, the amount of the ta withheld and the natureof the ta paid. )Commissioner of Internal Revenue v. Philippine +ational Ban*,

G.4. 5o. %!"29" September 29, 2"%6* @. 6eonen

6c7 B(r'en !" pr!!" "!r clai+ !" re"(n' Tax refunds, li'e tax exemptions, are construed strictly againstthe taxpayer. The claimants have the burden of proof toestablish the factual basis of their claim for refund or tax credit.(:ita"i Glo#al vs C-R, G.R. No. 1212, !"to#er 2%, 2%1%&

The 2ommissioner5s contention that a tax refund parta'es thenature of a tax exemption does not apply to the tax refund towhich Eortune Tobacco is entitled. There is parity between tax

refund and tax exemption only when the former is based eitheron a tax exemption statute or a tax refund statute. bviously,that is not the situation here. Yuite the contrary, Eortune

Tobaccos claim for refund is premised on its erroneous paymentof the tax, or better still the government5s exaction in theabsence of a law. (C-R vs 7ortune 5o#a""o Corp., GR 12/,

@uly 21, 2%%8&

Ta refunds are based on the general premise that taes have either beenerroneously or ecessively paid. Though the Ta ode recogniBes the right of tapayers to re0uest the return of such ecessCerroneous payments from thegovernment, they must do so within a prescribed period. urther, Da tapayer must prove not only his entitlement to a refund, but also his compliance with the

procedural due process as non-observance of the prescriptive periods withinwhich to file the administrative and the >udicial claims would result in the denial of his claim.D ;n the case at bar, 'E4AF7 had ample opportunity to verify on theta-eempt status of 5748CF for purposes of claiming ta refund. 5evertheless,it only filed its claim for ta refund ten )%"* months from the issuance of theaforesaid 4uling. $Commissioner of Internal Revenue v. Manila lectric Compan$

(MRALC-), 3.4. 5o. %!%69, une 9, 2"%6& @. Peralta

Those who claim for refund must not only prove its entitlementto the excess credits, but li'ewise must prove that no carry%overhas been made in cases where refund is sought. Gowever,proving that no carry%over has been made does not absolutely

re3uire the presentation of the 3uarterly IT;s. Bith BinebrennerX Inigo Insurance +ro'ers, Inc. having complied with there3uirements for refund, and without the 2I; showing contraryevidence other than its bare assertion of the absence of the3uarterly IT;s, copies of which are easily veriable by its veryown records, the burden of proof of establishing the propriety of the claim for refund has been suNciently discharged. Gence, thegrant of refund is proper. >-N)+R)NN)R & -L-G! -NRANC)




@$

+R!<)R, -NC. vs. C!00--!N)R !7 -N5)RNA6 R)4)N), G.R.No. 2%/2, @anuary 28, 2%1/, @. 0en*oHa

6'7 Na$(re !" err!ne!(l-pai' $a#/illeall aee'c!llec$e'

6e7 Ta# re"(n' ,i--,i $a# cre'i$Eormally, a tax refund re3uires a physical return of the sumerroneously paid by the taxpayer, while a tax credit involves theapplication of the reimbursable amount against any sum thatmay be due and collectible from the taxpayer. n the practicalside, the taxpayer to whom the tax is refunded would have theoption, among others, to invest for prot the returned sum, anoption not proximately available if the taxpayer chooses insteadto receive a tax credit. (C-R vs Pilippine Pospate 7ertiliHer Corporation, G.R. No. 1%, eptem#er 1, 2%%&

6"7 Een$ial re(ii$e "!r clai+ !" re"(n'

There are three essential conditions for the grant of a claim for refund of creditable withholding income ta, to witG )%* the claim is filed with theommissioner of ;nternal 4evenue within the two-year period from the date of payment of the ta= )2* it is shown on the return of the recipient that the incomepayment received was declared as part of the gross income= and )+* the fact of withholding is established by a copy of a statement duly issued by the payor tothe payee showing the amount paid and the amount of the ta withheldtherefrom. )Commissioner of Internal Revenue v. %eam Philippines/ -perationsCorporation formerl$ Mirant (Phis.) -perations Corporation, 3.4. 5o. %#921",

April 2, 2"%6* @. PereH

The re3uirements for entitlement of a corporate taxpayer for arefund or the issuance of tax credit certicate involving excesswithholding taxes are as follows) 1& That the claim for refundwas led within the two%year reglementary period pursuant toec. @ of the CI;2* & Bhen it is shown on the IT; that theincome payment received is being declared part of thetaxpayer5s gross income* and #& Bhen the fact of withholding isestablished by a copy of the withholding tax statement, dulyissued by the payor to the payee, showing the amount paid andincome tax withheld from that amount.

;elevant to the instant case is re3uirements numbers and #,

which were duly proved by T-A2, as found by the courts a 3uo.

Bith regard to the second re3uirement, it is fundamental thatthe ndings of fact by the 2T! in =ivision are not to be disturbedwithout any showing of grave abuse of discretion consideringthat the members of the =ivision are in the best position toanalye the documents presented by the parties. 2onse3uently,the 2ourt adopts the ndings of the 2T! in =ivision, which the2T! An +anc concurred with. RRepu#li" of te Pilippines, et"., v.




@

5eam (Pis.' )ner3y Corporation (formerly 0irant Pils. )ner3y Corporation', L.;. Co. 1??/1<, "anuary 1$, /1, @. +ersamin

6,7 W)! +a clai+/appl "!r $a# re"(n'/$a# cre'i$6a7 Ta#paer/*i$))!l'in aen$ !" n!n-rei'en$ "!rein

c!rp!ra$i!n The proper party to 3uestion, or see' a refund of an indirect taxis the statutory taxpayer, the person on whom the tax isimposed by law and who paid the same even if he shifts theburden thereof to another. Aven if -etron 2orporation passed onto il'air the burden of the tax, the additional amount billed toil'air for jet fuel is not a tax but part of the price which il'airhad to pay as a purchaser. (ilIair vs C-R, G.R. Nos. 11$8$ &12$9, Novem#er 1, 2%%8&

! withholding agent is a proper party to claim tax refund. Ge is7liable to pay the tax8 7and subject to tax.8 The withholding

agent is constituted the agent of both the Lovernment and thetaxpayer. Bith respect to the collection andMor withholding of the tax, he is the Lovernments agent. In regard to the ling of the necessary income tax return and the payment of the tax tothe Lovernment, he is the agent of the taxpayer. (C-R vs Pro"ter & Gam#le, GR 68$8, De"em#er 2, 1991&

:ilipinas Shell, as the statutory tapayer who is directly liable to pay the eciseta on its petroleum products, is entitled to a refund or credit of the ecise taes itpaid for petroleum products sold to international carriers, the latter having beengranted eemption from the payment of said ecise ta under Sec. %+ )a* of the5;4. )Commissioner of Internal Revenue v. Pilipinas !hell Petroleum

Corporation, 3.4. 5o. %!!69#, ebruary %9, 2"%6* , @. 4illarama @r.

6,i7 Precrip$i,e peri!' "!r rec!,er !" $a# err!ne!(l !rilleall c!llec$e'6,ii7 O$)er c!ni'era$i!n a=ec$in $a# re"(n'

The issues raised before the -anel of Foluntary !rbitrators are) (1&whether the cash conversion of the gasoline allowance shall be subject tofringe benet tax or the graduated income tax rate on compensation* and (&whether the company wrongfully withheld income tax on the converted gasallowance.

The Foluntary !rbitrator has no competence to rule on the taxability of the gas allowance and on the propriety of the withholding of tax. Theseissues are clearly tax matters, and do not involve labor disputes. To be exact,they involve tax issues within a labor relations setting as they pertain to3uestions of law on the application of ection ## (!& of the CI;2. They do notre3uire the application of the 0abor 2ode or the interpretation of the D!andMor company personnel policies. Eurthermore, the company and the unioncannot agree or compromise on the taxability of the gas allowance. Taxation




@<

is the tate5s inherent power* its imposition cannot be subject to the will of the parties.

If the union disputes the withholding of tax and desires a refund of thewithheld tax, it should have led an administrative claim for refund with the2I;. -aragraph , ection $ of the CI;2 expressly vests the 2I; original

jurisdiction over refunds of internal revenue taxes, fees or other charges,penalties imposed in relation thereto, or other tax matters. :!NDA CARP:-6-PP-N), -NC. vs. :!NDA CAR 5)C:N-CA6 P)C-A6-5 ANDP)R4-!R N-!N, G.R. No. 2%12. Novem#er 19, 2%1, @. +R-!N

:nder the rst option, any tax on income that is paid in excess of theamount due the government may be refunded, provided that a taxpayer properlyapplies for the refund. n the other hand, the second option wor's by applying therefundable amount against the tax liabilities of the petitioner in the succeedingtaxable years. Gence, instead of moving for the issuance of a writ of executionrelative to the aforesaid decision, petitioner should have merely re3uested for theapproval of the 2ity of Danila in implementing the tax refund or tax credit,

whichever is appropriate. In other words, no writ was necessary to cause theexecution thereof, since the implementation of the tax refund will e9ectively be areturn of funds by the 2ity of Danila in favor of petitioner while a tax credit willmerely serve as a deduction of petitioner5s tax liabilities in the future. (Co"aCola+ottlers Pilippines, -n". v. City of 0anila, et al., L.;. Co. 1@><1, !pril >, /1$, @.Peralta

!n opportunity must be given the internal revenue branch of thegovernment to investigate and conrm the veracity of the claims of the taxpayer.

The absolute freedom that petitioner see's to automatically credit tax paymentsagainst tax liabilities for a succeeding taxable year, can easily give rise to confusionand abuse, depriving the government of authority and control over the manner bywhich the taxpayers credit and o9set their tax liabilities, not to mention theresultant loss of revenue to the government under such a scheme. C!CAC!6A+!556)R P:-6-PP-N), -NC., vs. C-5= !7 0AN-6AB 6-+)R5= 0. 5!6)D!, in er "apa"ity as !M"erinCar3e (!-C', 5reasurer of te City of 0anilaB @!)P:AN5-AG!, in is "apa"ity as !-C, Cief 6i"ense Division of te City of 0anilaBR)=NA6D! 0!N5A6+!, in is "apa"ity as City Au*itor of te City of 0anila, G.R. No.19/1, April , 2%1, @. Peralta

2. G!,ern+en$ re+e'iea7 A'+ini$ra$i,e re+e'ie

6i7 Ta# lien6ii7 Le, an' ale !" real pr!per$6iii7 !r"ei$(re !" real pr!per$ $! $)e !,ern+en$ "!r *an$ !" 3i''er6i,7 (r$)er 'i$rain$ an' le,6,7 S(peni!n !" 3(ine !pera$i!n6,i7 N!n-a,aila3ili$ !" in(nc$i!n $! re$rain c!llec$i!n !" $a#

The Cational Internal ;evenue 2ode of 1@@> (CI;2& expressly providesthat no court shall have the authority to grant an injunction to restrain




@>

the collection of any national internal revenue tax, fee or chargeimposed by the code. The situation, however, is di9erent in the case of the collection of local taxes as there is no express provision in the 0L2prohibiting courts from issuing an injunction to restrain localgovernments from collecting taxes. uch statutory lapse or intent,however it may be viewed, may have allowed preliminary injunction

where local taxes are involved but cannot negate the procedural rulesand re3uirements under ;ule ?. ( An3eles City vs. An3eles City )le"tri"Corp., GR 11$, @une 29, 2%1%&

37 9('icial re+e'ie

4. S$a$($!r !=ene an' penal$iea7 Ci,il penal$ieIt is mandatory to collect penalty and interest at the stated rate in case of delin3uency. The intention of the law is to discourage delay in the payment of taxes due the Lovernment and, in this sense, the penalty and interest are notpenal but compensatory for the concomitant use of the funds by the taxpayerbeyond the date when he is supposed to have paid them to the

Lovernment. If penalties could be condoned for Pimsy reasons, the lawimposing penalties for delin3uencies would be rendered nugatory, and themaintenance of the Lovernment and its multifarious activities will beadversely a9ected. (Pilippine ReJnin3 Company vs. CA, GR 1189, 0ay 8,199&

The taxpayer should be liable only for ta; proper and should not be heldliable for the surcharge and interest when it appears that the assessment ishighly controversial. The 2ommissioner at the outset was not certain as topetitioners income tax liability. (Ca3ayan )le"tri" Poer 6i3t vs C-R, G.R. No.6%12, eptem#er 2/, 198/&

6i7 S(rc)are6ii7 In$ere$

6a7 In eneral637 %e&cienc in$ere$6c7 %elin(enc in$ere$6'7 In$ere$ !n e#$en'e' pa+en$

8. C!+pr!+ie an' a3a$e+en$ !" $a#ea7 C!+pr!+ie2ompromise may be the favored method to settle disputes, but when itinvolves taxes, it may be subject to closer scrutiny by the courts. !compromise agreement involving taxes would a9ect not just the taxpayerand the +I;, but also the whole nation, the ultimate beneciary of the taxrevenues collected. (PN!C vs CA, G.R. No. 1%99, April 2, 2%%/&

The discretionary authority to compromise granted to the +I; 2ommissioneris never meant to be absolute, uncontrolled and unrestrained. Co suchunlimited power may be validly granted to any oNcer of the government,except perhaps in cases of national emergency. The +I; 2ommissioner wouldhave to exercise his discretion within the parameters set by the law, and in




@?

case he abuses his discretion, the 2T! may correct such abuse if the matter isappealed to them. (PN!C vs CA, G.R. No. 1%99, April 2, 2%%/&;D Co. #@%?< expressly allows a withholding agent, who failed to withholdthe re3uired tax because of neglect, ignorance of the law, or his belief that hewas not re3uired by law to withhold tax, to apply for a compromisesettlement of his withholding tax liability under A.. Co. $$. ! withholdingagent, in such a situation, may compromise the withholding tax assessmentagainst him precisely because he is being held directly accountable for thetax. ;D Co. #@%?< distinguishes between the withholding agent in theforegoing situation from the withholding agent who withheld the tax butfailed to remit the amount to the Lovernment. ! withholding agent in thelatter situation is the one dis3ualied from applying for a compromisesettlement because he is being made accountable as an agent, who heldfunds in trust for the Lovernment. (PN!C vs CA, G.R. No. 1%99, April 2,2%%/&

37 A3a$e+en$ The +I; may therefore abate or cancel the whole or any unpaid portion of atax liability, inclusive of increments, if its assessment is excessive orerroneous* or if the administration costs involved do not justify the collectionof the amount due. Co mutual concessions need be made, because anexcessive or erroneous tax is not compromised* it is abated or canceled.nly correct taxes should be paid. (People vs an*i3an#ayan, GR 1/2/$2,

Au3ust 1, 2%%/&. OraniHa$i!n an' (nc$i!n !" $)e B(rea( !" In$ernal Re,en(e

1. R(le-+aFin a($)!ri$ !" $)e Secre$ar !" inance The authority of the Dinister of Einance (now the ecretary of Einance&, inconjunction with the 2ommissioner of Internal ;evenue, to promulgate allneedful rules and regulations for the e9ective enforcement of internalrevenue laws cannot be controverted. Ceither can it be disputed that such

rules and regulations, as well as administrative opinions and rulings,ordinarily should deserve weight and respect by the courts. Duch morefundamental than either of the above, however, is that all such issuancesmust not override, but must remain consistent and in harmony with, the lawthey see' to apply and implement. !dministrative rules and regulations areintended to carry out, neither to supplant nor to modify, the law. (C-R vs CA,G.R. No. 1%8$/8, @anuary 2%, 199/&

2+O -ower raised the lone issue of whether or not an IT!= ruling is re3uiredbefore it can avail of the preferential tax rate. n the other hand, the2ommissioner claimed that 2+O -ower failed to exhaust administrativeremedies when it led its petitions before the 2T! Eirst =ivision, and that said

petitions were not led within the two%year prescriptive period for initiating judicial claims for refund. The 2ourt categorically held that the +I; should notimpose additional re3uirements that would negate the availment of thereliefs provided for under international agreements, especially since said taxtreaties do not provide for any prere3uisite at all for the availment of thebenets under said agreements. Cowhere and in no wise does the law implythat the 2ollector of Internal ;evenue must act upon the claim, or that thetaxpayer shall not go to court before he is notied of the 2ollector5s action.




@@

C+< P!>)R C!0PAN= 6-0-5)D vs. C!00--!N)R -N5)RNA6 R)4)N), G.R.Nos. 19$$8$8, @anuary 1, 2%1/, @. Perlas+erna#e

a7 A($)!ri$ !" Secre$ar !" inance $! pr!+(la$e r(le an're(la$i!n

37 Speci&c pr!,ii!n $! 3e c!n$aine' in r(le an' re(la$i!n

c7 N!n-re$r!ac$i,i$ !" r(lin2. P!*er !" $)e C!++ii!ner $! (pen' $)e 3(ine !pera$i!n !" a $a#paer

III. L!cal G!,ern+en$ C!'e !" 1@@1D a a+en'e'!. 0ocal government taxation

1. Eundamental principles

The fundamental law did not intend the delegation to be absolute andunconditional* the constitutional objective obviously is to ensure that, while thelocal government units are being strengthened and made more autonomous, the

legislature must still see to it that (a& the taxpayer will not be over%burdened orsaddled with multiple and unreasonable impositions* (b& each local government unitwill have its fair share of available resources, (c& the resources of the nationalgovernment will not be unduly disturbed* and (d& local taxation will be fair, uniform,and just.(0anila )le"tri" Co. v. Provin"e of 6a3una, G.R. No. 1$1$/9, 0ay %/, 1999'

. Cature and source of taxing power

:nder the now prevailing 2onstitution, where there is neither a grant norprohibition by statute, the taxing power of local governments must be deemed toexist although 2ongress may provide statutory limitations and guidelines in order tosafeguard the viability and self%suNciency of local government units by directlygranting them general and broad tax powers. (City Government of an Pa#lo,6a3una, et al., v. Reyes, et al., L.;. Co. 1>>/?, Darch , 1@@@&

a& Lrant of local taxing power under the local government code

0ocal governments do not have the inherent power to tax except to theextent that such power might be delegated to them either by the basic law or bystatute. -resently, under !rticle U of the 1@?> 2onstitution, a general delegation of that power has been given in favor of local government units. (0anila )le"tri"Company vs Provin"e of 6a3una, G.R. No. 1$1$/9, 0ay /, 1999'

b& !uthority to prescribe penalties for tax violationsc& !uthority to grant local tax exemptionsd& Bithdrawal of exemptionse& !uthority to adjust local tax rates

Setting the rate of the additional levy for the special education fund at less than %@ is within the taingpower of local government units. ;t is consistent with the guiding constitutional principle of localautonomy. ;t was well within the power of the Sangguniang :anlalawigan of :alawan to enact anordinance providing for additional levy on real property ta for the special education fund at the rate of




1//

".@ rather than at %@. )0emaala v. Commission on Audit, etc., G.R. +o. 122345, "ebruar$ 13, 5614) @.6eonen

f& ;esidual taxing power of local governmentsg& !uthority to issue local tax ordinances

An ordinance carries with it the presumption of validity. The 0uestion of reasonableness though isopen to >udicial in0uiry.(7ictorias Millin# Co., Inc. v. Municipalit$ of 7ictorias, G.R. +o. L85119:,!eptember 53, 12;9)

#. 0ocal taxing authoritya& -ower to create revenues exercised through 0ocal Lovernment :nitsb& -rocedure for approval and e9ectivity of tax ordinances

It is clear under ec. 1?? of ;.!. Co. >1</ and !rt. >> of its implementingrules that the re3uirement of publication is MAN%ATOR and leaves no choice. Theuse of the word 6shall6 in both provisions is imperative, operating to impose a dutythat may be enforced (Co"aCola +ottlers Pil., -n". v. City of 0anila, G.R. No.

1/2/2, @une 2, 2%%'

;t is categorical, therefore, that a public hearing be held prior to the enactment of an ordinancelevying taes, fees, or charges= and that such public hearing be conducted as provided under Section 2##of the ;mplementing 4ules and 4egulations of the Focal 3overnment ode.(-n#suco v. Malones, 3.4.5o. %!2"1, 7ctober 2#, 2""9*

$. cope of taxing power

The taing power of cities, municipalities and municipal districts may be used )%* upon anyperson engaged in any occupation or business, or eercising any privilege therein= )2* for servicesrendered by those political subdivisions or rendered in connection with any business, profession or occupation being conducted therein, and )+* to levy, for public purposes >ust and uniform taes, licenses

or fees (Philippine Match Co., Ltd. v. Cit$ of Cebu, 3.4. 5o. F-+"#6, anuary %!, %9#!*

. pecic taxing power of 0ocal Lovernment :nitsa& Taxing powers of provinces

(i& Tax on transfer of real property ownership(ii& Tax on business of printing and publication(iii& Eranchise tax

!s commonly used, a fran"ise ta; is 6a tax on the privilege of transactingbusiness in the state and exercising corporate franchises granted by the state.6 Todetermine whether the petitioner is covered by franchise tax, the followingre3uisites should concur) (1& that petitioner has a 6franchise6 in the sense of a

secondary or special franchise* and (& that it is exercising its rights or privilegesunder this franchise within the territory of the respondent city government.(National Poer Corporation v. City of Ca#anatuan, G.R. No. 1911%, April %9, 2%%$'

Deralco is subject to the local franchise tax. Its exemption has beenwithdrawn under ec. 1#> and ec. 1@# of ;! >1</. The 0L: (an -ablo and0aguna& is correct on relying the provisions of ecs. 1#> X 1@# that Deralco5s taxexemption has been withdrawn. ec. 1#> authories the province to impose




1/1

franchise tax 7notwithstanding any exemption granted by any law or other speciallaw8. The local franchise tax is imposable despite any exemption enjoyed underspecial laws. ec. 1@# provides the withdrawal of all tax exemptions or incentivesgranted to or presently enjoyed by all persons whether natural or juridical includingL22s. Thus, any existing tax exemption or incentive enjoyed by Deralco underexisting law was clearly intended to be withdrawn. Eurther, the 0L2 contains a

general repealing clause in its ec. #$ (f&.

!ccordingly, we held in Dactan 2ebu Int5l !irport !uthority v. Darcos, <12;! <<>, that ec. 1@# of the 0L2 prescribes the general rule, vi., the taxexemptions or incentives granted to persons are withdrawn upon e9ectivity of ;!>1</, except to those entities enumerated. Invo'ing the non%impairment clause isnon%availing because a franchise granted is subject to amendment, or repeal by2ongress when public interest so re3uires, which restriction was not only present in1@# 2onstitution (!rt. UIF, ec. ?& but in the 1@># (!rt. UIF, ec. &, as well as inthe 1@?> 2onstitution (!rt. UII, ec. 11&. Bith or without reservation clause,franchises are subject to alterations as an exercise of police power or the power totax. (2ity of an -ablo v. "udge ;eyes, #/ 2;! ##* Deralco v. -rov. f 0aguna,

#/< 2;! >/&

! corporation that has been ordered to pay franchise tax delin3uency but whichfacilities, including its nationwide franchise, had been transferred to the Cational

Transmission 2orporation (T;!C2& by operation of law during the time of thealleged delin3uency, cannot be ordered to pay as it is not the proper party subjectto the local franchise tax, the transferee being the one liable. NA5-!NA6 P!>)RC!RP!RA5-!N vs. PR!4-NC-A6 G!4)RN0)N5 !7 +A5AAN, ANGGN-ANGPAN6A6A>-GAN !7 +A5AAN, PA5!R +. 4-C:AC! (-N :- !77-C-A6 CAPAC-5= APR!4-NC-A6 5R)AR)R !7 +A5AAN' an* 5:) R)G-5)R !7 D))D !7 5:)PR!4-NC) !7 +A5AAN, G.R. No. 18%/, April 21, 2%1, @. A#a*

(iv& Tax on sand, gravel and other 3uarry services

:nder the 0ocal Tax 2ode. there is no 3uestion that the authority to imposethe license fees collected from the hauling of sand and gravel excavated properlybelongs to the province concerned and not to the municipality where they are foundwhich is specically prohibited under ection of the same 2ode 6from levyingtaxes, fees and charges that the province or city is authoried to levy in this2ode.6 (0uni"ipality of an 7ernan*o, 6a nion v. ta. Romana, G.R. No. 6$%1/9,0ar" $1, 198'

In order for an entity to legally underta'e a 3uarrying business, he must rstcomply with all the re3uirements imposed not only by the national government, butalso by the local government unit where his business is situated. -articularly,ection 1#? (& of ;! >1</ re3uires that such entity must rst secure a governorspermit prior to the start of his 3uarrying operationsZZZ (Provin"e of Ca3ayan v. 6ara,G.R. No. 188/%%, @uly 2, 2%1$'

The principle that when a company is taxed on its main business, it is nolonger taxable for engaging in an activity that is but a part of, incidental to, andnecessary to such main business, applies to business taxes and not to taxes such as




1/

the sand and gravel tax imposed by the provincial government, based on thereasoning that the incidental activity could not be treated as a business separateand distinct from the main business of the taxpayer as the sand and gravel tax is anexcise tax imposed on the privilege of extracting sand and gravel. It is settled thatprovincial governments can levy excise taxes on 3uarry resources independentlyfrom national government. (6epanto Consoli*ate* 0inin3 Company v. Am#anlo",

G.R. No. 18%$9, @une 29, 2%1%'

(v& -rofessional tax(vi& !musement tax

;esorts, swimming pools, bath houses, hot springs, and tourist spots are notamong those places expressly mentioned by ection 1$/ of the 0L2 as beingsubject to amusement taxes. ( P%#04le o E:$s2e5 Ge#e%s ' (PeliHloy Realty Corp. v. Provin"e of +en3uet, G.R. No. 18$1$, April 1%, 2%1$'

In determining the meaning of the phrase 6other places of amusement,6under ec. 1# of the 0ocal Tax 2ode, one must refer to the prior enumeration of

theaters, cinematographs, concert halls and circuses with artistic expression astheir common characteristic. -rofessional bas'etball games do not fall under thesame category as theaters, cinematographs, concert halls and circuses as the latterbasically belong to artistic forms of entertainment while the former caters to sportsand gaming. (Pilippine +asIet#all Assn. v. Court of Appeals, G.R. No. 119122,

Au3ust %8, 2%%%'

It is the intent of the legislature not to impose F!T on persons alreadycovered by the amusement tax. (C-R v. 0 Prime :ol*in3s, -n"., G.R. No. 18$/%/,7e#ruary 2, 2%1%'

(vii& Tax on delivery truc'Mvan

b& Taxing powers of citiesc& Taxing powers of municipalities

(i& Tax on various types of businesses

+usiness taxes imposed in the exercise of police power for regulatorypurposes are paid for the privilege of carrying on a business in the year the tax waspaid. It is paid at the beginning of the year as a fee to allow the business to operatefor the rest of the year. It is deemed a prere3uisite to the conduct of business.ZZZ (0o#il Pilippines -n". v. City 5reasurer of 0aIati, G.R. No. 1/%92, @uly 1, 2%%/'

Bhen a municipality or city has already imposed a business tax onmanufacturers, et". of li3uors, distilled spirits, wines, and any other article of commerce, pursuant to ection 1$# (a& of the 0L2, said municipality or city may nolonger subject the same manufacturers, et". to a business tax under ection 1$# (h&of the same 2ode. ection 1$# (h& may be imposed only on businesses that aresubject to excise tax, F!T, or percentage tax under the CI;2, and that are 6 n!$!$)er*ie peci&e' in prece'in pararap)6. (City of 0anila v. Co"aCola+ottlers Pilippines, -n"., G.R. No. 1818/, Au3ust %, 2%%9'




1/#

+y its very nature a condominium corporation is not engaged in business, andany prot that it derives is merely incidental, hence it may not be subject to businesstaxes. (=amane , et". v. +A 6epanto Con*ominium Corporation, L. ;. Co. 1$@@#,ctober , //&

(ii& 2eiling on business tax impossible on municipalities within DetroDanila

(iii& Tax on retirement on business(iv& ;ules on payment of business tax

Tax should be computed based on 3ross re"eipts* the right to receive income,and not the actual receipt, determines when to include the amount in gross income.

The imposition of local business tax based on petitioner5s gross revenue willinevitably result in the constitutionally proscribed double taxation J taxing of thesame person twice by the same jurisdiction for the same thing J inasmuch aspetitioner5s revenue or income for a taxable year will denitely include its grossreceipts already reported during the previous year and for which local business tax

has already been paid. ()ri"sson 5ele"oms vs. City of Pasi3. G.R. N!. 1,Novem#er 22, 2%%'

(v& Eees and charges for regulation X licensing! municipality is authoried to impose three 'inds of licenses) 1& license for

regulation of useful occupations or enterprises* & license for restriction orregulation of non%useful occupations or enterprises* and #& license for revenue. Therst two easily fall within the broad police power granted under the general welfareclause* the third class, however, is for revenue purposes. (4i"torias 0illin3 Co., -n".v. 0uni"ipality of 4i"torias, G.R. No. 62118$, eptem#er 2, 198'

(vi& itus of tax collected

The power to levy an excise upon the performance of an act or the engagingin an occupation does not depend upon the domicile of the person subject to theexcise, nor upon the physical location of the property and in connection with the actor occupation taxed, but depends upon the place in which the act is performed oroccupation engaged in. (Allie* 5rea* Co., -n". v. City 0ayor of 0anila, G.R. No. 6%29, Novem#er 21, 198'

:nder a city ordinance which imposes tax on sales of goods in the city, thecity can validly tax sales to customers outside of the city as long as the orders wereboo'ed and paid for, and the goods were delivered to the carrier, in the city. Thegoods can be regarded as sold in the city because delivery to the carrier is deliveryto the buyer.ZZZ (Pilippine 0at" Co., 6t*. v. City of Ce#u, G.R. No. 6$%/, @anuary 18, 198'

d& Taxing powers of barangayse& 2ommon revenue raising powers

(i& ervice fees and charges(ii& -ublic utility charges(iii& Toll fees or charges




1/$

f& 2ommunity tax

<. 2ommon limitations on the taxing powers of 0L:s

The fundamental law did not intend the delegation to be absolute andunconditional* the constitutional objective obviously is to ensure that, while the

local government units are being strengthened and made more autonomous, thelegislature must still see to it that (a& the taxpayer will not be over%burdened orsaddled with multiple and unreasonable impositions* (b& each local government unitwill have its fair share of available resources* (c& the resources of the nationalgovernment will not be unduly disturbed* and (d& local taxation will be fair, uniform,and just. (0anila )le"tri" Company vs Provin"e of 6a3una, G.R. No. 1$1$/9, 0ay /,1999'

Bhile the power to tax by local governments may be exercised by locallegislative bodies, no longer merely be virtue of a valid delegation as before, butpursuant to direct authority conferred by ection , !rticle U of the 2onstitution, thebasic doctrine on local taxation remains essentially the same, te poer to ta; is

Ostill primarily veste* in te Con3ress.Q (EueHon City, et al., v. A+C+N+roa*"astin3 Corporation, L. ;. Co. 1<<$/?, ctober <, //? citing City Government of EueHon City, et al. v. +ayan 5ele"ommuni"ations, -n"., L.;. Co.1</1, Darch <, //<, $?$ 2;! 1<@ in turn referring to 0a"tan Ce#u-nternational Airport Autority, v. 0ar"os, L.;. Co. 1//?, eptember 11, 1@@<,<1 2;! <<>, <?/ '

ection 1##(e& of ;! Co. >1</ prohibits the imposition, in the guise of wharfage, of fees V as well as all other taxes or charges in any form whatsoever Von 3oo*s or merchandise. It is therefore irrelevant if the fees imposed are actuallyfor police surveillance on the goods, because any other form of imposition on goodspassing through the territorial jurisdiction of the municipality is clearly prohibited byection 1##(e&. (Palma Development Corp. v. 0uni"ipality of 0alan3as, G.R. No.1/292, !"to#er 1, 2%%$'

The language of ection 1## (h& of ;! Co. >1</ ma'es plain that theprohibition with respect to petroleum products extends not only to excise taxesthereon, but all 6taxes, fees and charges.6 ZZZ Bhile local government units areauthoried to burden all such other class of goods with 6taxes, fees and charges6,excepting excise taxes, a specic prohibition is imposed barring the levying of anyother type of taxes with respect to petroleum products. (Petron Corporation v.5ian3"o, G.R. No. 1/8881, April 1, 2%%8'

:etitioner filed the instant petition assailing the decision of the TA finding :AF eempt from

payment of ecise ta. Affirming the decision of the TA the S ruled that :8 %9" has not been revo(edby the 5;4 of %99#, as amended. 7r to be more precise, the ta privilege of :AF provided in Sec. %+ of :8 %9" has not been revo(ed by Sec. %+% of the 5;4 of %99#, as amended by Sec. 1 of 4A 9++6.Such being the case, :AF is indeed eempt from payment of ecise ta. ) Commissioner of Internal

Revenue, et al., v. Philippine Airlines, Inc., 3.4. 5os. 2%2+1-+#, August 2#, 2"%6* , @. 4elas"o, @r.

The 2ity5s yearly imposition of the K surcharge, which was sustained bythe trial court and the 2ourt of !ppeals, resulted in an aggregate penalty that is wayhigher than C!-2;5s basic tax liabilities. ! surcharge regardless of how it is




1/

computed is already a deterrent. Bhile it is true that imposing a higher amount maybe a more e9ective deterrent, it cannot be done in violation of law and in such away as to ma'e it conscatory. NA5-!NA6 C!RP!RA5-!N P!>)R vs. C-5= !7 CA+ANA5AN represente* #y its C-5= 0A=!R, :!N. :!N!RA5! P)R), G.R. No.1$$2, !"to#er %1, 2%1, @. 6eonen

It is already well%settled that although the power to tax is inherent in thetate, the same is not true for the 0L:s to whom the power must be delegated by2ongress and must be exercised within the guidelines and limitations that 2ongressmay provide. In the case at bar, the sanggunian of the municipality or city cannotenact an ordinance imposing business tax on the gross receipts of transportationcontractors, persons engaged in the transportation of passengers or freight by hire,and common carriers by air, land, or water, when said sanggunian was alreadyspecically prohibited from doing so. !ny exception to the express prohibitionunder ection 1##(j& of the 0L2 should be just as specic and unambiguous. ection1(+& of the Danila ;evenue 2ode, as amended, is null and void for being beyondthe power of the 2ity of Danila and its public oNcials to enact, approve, andimplement under the 0L2. City of 0anila, :on. Alfre*o . 6im, as 0ayor of te City

of 0anila, et al. vs. :on. An3el 4alera Colet, as Presi*in3 @u*3e, Re3ional 5rial Court of 0anila (+r. $', et al., G.R. No. 12%%/1, De"em#er 1%, 2%1, @. 6eonar*oDeCastro

+eing an instrumentality of the national government, the -AQ! cannot betaxed by local government units. !lthough a body corporate vested with somecorporate powers, the -AQ! is not a government%owned or controlled corporationtaxable for real property taxes. The -AQ!5s predecessor, the A-Q!, was declarednon%prot in character with all its revenues devoted for its development,improvement, and maintenance. 2onsistent with this non%prot character, the A-Q!was explicitly declared exempt from real property taxes under its charter. Aven the-AQ!5s lands and buildings whose benecial use have been granted to otherpersons may not be taxed with real property taxes. The -AQ! may only lease itslands and buildings to -AQ!%registered economic one enterprises and entities.

These -AQ!%registered enterprises and entities, which operate within economicones, are not subject to real property taxes. C-5= !7 6AP6AP vs. P:-6-PP-N))C!N!0-C !N) A5:!R-5=B PR!4-NC) !7 +A5AAN, R)PR))N5)D += G!4)RN!R)NR-E) 5. GARC-A, @R., AND )0)R6-NDA . 5A6)N5!, -N :)R CAPAC-5= APR!4-NC-A6 5R)AR)R !7 +A5AAN vs. P:-6-PP-N) )C!N!0-C !N) A5:!R-5=,G.R. No. 182%$, G.R. N!. 18/8$, Novem#er 2, 2%1, @. 6eonen

>. 2ollection of business taxa& Tax period and manner of paymentb& !ccrual of taxc& Time of paymentd& -enalties on unpaid taxes, fees or chargese& !uthority of treasurer in collection and inspection of boo's

?. Taxpayer5s remedies

!s a general precept, a taxpayer may le a complaint assailing the validity of the ordinance and praying for a refund of its perceived overpayments without rst




1/<

ling a protest to the payment of taxes due under the ordinance. (@ar*ine Davies-nsuran"e +roIers -n". v. Aliposa, G.R. No. 1189%%, 7e#ruary 2, 2%%$'

a& -eriods of assessment and collection of local taxes, fees or chargesb& -rotest of assessmentc& 2laim for refund of tax credit for erroneously or illegally collected tax,

fee or charge

@. 2ivil remedies by the 0L: for collection of revenues

a& 0ocal government5s lien for delin3uent taxes, fees or chargesb& 2ivil remedies, in general

(i& !dministrative action(ii& "udicial action

:nli'e the Cational Internal ;evenue 2ode, the 0ocal Tax 2ode does not containany specic provision prohibiting courts from enjoining the collection of local taxes.uch tatutory lapse or intent, however it may be viewed, may have allowed

preliminary injunction where local taxes are involved but cannot negate theprocedural rules and re3uirements under ;ule ?. (4alley 5ra*in3 Co., -n". v. C7- of -sa#ela, +ran" --, G.R. No. 69/29, 0ar" $1, 1989'

+. ;eal property taxation

1. Eundamental principles. Cature of real property tax#. Imposition of real property tax

a& -ower to levy real property taxb& Axemption from real property tax

!s a general principle, a charitable institution does not lose its character assuch and its exemption from taxes simply because it derives income from payingpatients, whether out%patient, or conned in the hospital, or receives subsidies fromthe government, so long as the money received is devoted or used altogether to thecharitable object which it is intended to achieve* and no money inures to the privatebenet of the persons managing or operating the institution. (6un3 Center of tePil. v. EueHon City, G.R. No. 11%, @une 29, 2%%'

:nder the 1@># and 1@?> 2onstitutions and ;ep. !ct Co. >1</ in order to beentitled to the exemption, the petitioner is burdened to prove, by clear andune3uivocal proof, that (a& it is a charitable institution* and (b& its real properties are!2T:!00H, =I;A2T0H and AU20:IFA0H used for charitable purposes. 6Axclusive6 isdened as possessed and enjoyed to the exclusion of others* debarred fromparticipation or enjoyment* and 6exclusively6 is dened, 6in a manner to exclude* asenjoying a privilege exclusively.6 (6un3 Center of te Pil. v. EueHon City, G.R. No.11%, @une 29, 2%%'

:nder ection #$(a&, real property owned by the ;epublic is exempt fromreal estate tax except when the government gives the benecial use of the realproperty to a taxable entity. The justication for the exception to the exemption is




1/>

that the real property, although owned by the ;epublic, is not devoted to publicuse or public service but devoted to the private gain of a taxable person. (0anila-nternational Airport Autority v. Court of Appeals, G.R. No. 1///%, @uly 2%, 2%%'

In DI!! v. 2ourt of !ppeals X -ara[a3ue 2ity, $@ 2;! @1 R//<S, theupreme 2ourt resolved this issue that DI!! is not a government owned or

controlled corporation but a government instrumentality vested with corporatepowers and performing essential public services. DI!! is not subject to any local taxexcept when its properties are used by taxable entity or if the benecial use of realproperty owned by the ;epublic is given to a taxable entity.

The airport lands and buildings of DI!! are properties devoted to public use andthus are properties of public dominion. They are owned by the tate or the ;epublicunder !rt. $/ of the C22. Gence, the properties of DI!! are exempted from thereal property tax under ec. #$(a& 0L2. nly those portions of the C!I! -asayproperties which are leased to taxable persons li'e private parties are the onessubject to the real property tax by -asay 2ity. (DI!! v. 2ity of -asay, ?# 2;! #$&

$. !ppraisal and assessment of real property taxa& ;ule on appraisal of real property at fair mar'et value

;eal properties shall be appraised at the current and fair mar'et valueprevailing in the locality where the property is situated and classied for assessmentpurposes on the basis of its actual use. ( Allie* +anIin3 Corporation, et"., v. EueHonCity Government, et al., L. ;. Co. 1$1<, ctober 11, //&

In xing the value of real property, assessors have to consider all thecircumstances and elements of value and must exercise prudent discretion inreaching conclusions. ( Allie* +anIin3 Corporation, et"., v. EueHon City Government,et al., L. ;. Co. 1$1<, ctober 11, //&

b& =eclaration of real property

! tax declaration does not prove ownership* it is merely an indicium of aclaim of ownership. Ceither tax receipts nor declaration of ownership for taxationpurposes are evidence of ownership or of the right to possess realty when notsupported by other e9ective proofs. (De 4eraCruH v. 0i3uel, G.R. No. 11%$,

Au3ust $1, 2%%/'

!lthough tax declarations or realty tax payment of property are notconclusive evidence of ownership, nevertheless, they are good in*i"ia of possessionin the concept of owner, for no one in his right mind would be paying taxes for aproperty that is not in his actual or constructive possession. They constitute at leastproof that the holder has a claim of title over the property. (:eirs of antia3o v.:eirs of antia3o, G.R. No. 1/1%, @une 1, 2%%$'

It is \the duty of each person ac3uiring real estate in the city to ma'e a newdeclaration thereof, with the advertence that failure to do so shall ma'e theassessment in the name of the previous owner valid and binding on all personsinterested, and for all purposes, as though the same had been assessed in the




1/?

name of its actual owner. (:eirs of 5aonera v. Court of Appeals, G.R. No. 62,0ar" 2, 1981'

c& 0isting of real property in assessment rollsd& -reparation of schedules of fair mar'et value

(i& !uthority of assessor to ta'e evidence

(ii& !mendment of schedule of fair mar'et valuee& 2lasses of real propertyf& !ctual use of property as basis of assessmentg& !ssessment of real property

(i& !ssessment levels(ii& Leneral revisions of assessments and property classication(iii& =ate of e9ectivity of assessment or reassessment(iv& !ssessment of property subject to bac' taxes(v& Cotication of new or revised assessment

h& !ppraisal and assessment of machinery

. 2ollection of real property tax

a& =ate of accrual of real property tax and special leviesb& 2ollection of tax

(i& 2ollecting authority(ii& =uty of assessor to furnish local treasurer with assessment rolls(iii& Cotice of time for collection of tax

c& -eriods within which to collect real property taxd& pecial rules on payment

(i& -ayment of real property tax in installments(ii& Interests on unpaid real property tax(iii& 2ondonation of real property tax

e& ;emedies of 0L:s for collection of real property tax(i& Issuance of notice of delin3uency for real property tax payment

Bith regard to determining to whom the notice of sale should have beensent, settled is the rule that, for purposes of real property taxation, the registeredowner of the property is deemed the taxpayer. Thus, in identifying the realdelin3uent taxpayer, a local treasurer cannot rely solely on the tax declaration butmust verify with the ;egister of =eeds who the registered owner of the particularproperty is. (pouses :u v. pouses ni"o, G.R. No. 1/$, eptem#er 18, 2%%9'

It has been ruled that the notices and publication, as well as the legalre3uirements for a tax delin3uency sale, are mandatory* and the failure to complytherewith can invalidate the sale. The prescribed notices must be sent to complywith the re3uirements of due process. (De <ne"t v. Court of Appeals, G.R. No.1%8%1/, 1%92$, 0ay 2%, 1998'

The delin3uent taxpayer referred to under ec. > of -= Co. $<$ is the actualowner of the property at the time of the delin3uency and mere compliance by theprovincial or city treasurer with ec. < of the decree is no longer enough. Thenotication to the right person, i.e., the real owner, is an essential andindispensable re3uirement of the law, non%compliance with which renders the




1/@

auction sale void. ()state of @a"o# v. Court of Appeals, G.R. No. 12%$/, 12%9,De"em#er 22, 199'

There could be no presumption of the regularity of any administrative action which resulted indepriving a tapayer of his property through a ta sale. This is an eception to the rule that administrativeproceedings are presumed to be regular. This >urisprudential tenor clearly demonstrates that the burden

to prove compliance with the validity of the proceedings leading up to the ta delin0uency sale isincumbent upon the buyer or the winning bidder, which, in this case, is Ago>o. This is premised on the rulethat a sale of land for ta delin0uency is in derogation of property and due process rights of the registeredowner. ;n order to be valid, the steps re0uired by law must be strictly followed. Ago>o must be remindedthat the re0uirements for a ta delin0uency sale under the F3 are mandatory. Strict adherence to thestatutes governing ta sales is imperative not only for the protection of the tapayers, but also to allay anypossible suspicion of collusion between the buyer and the public officials called upon to enforce the laws.

)Corporate !trate#ies 0evelopment Corp., et al., v. A#o<o, 3.4. 5o. 2"!#6", 5ovember %9, 2"%6* @.0en*oHa

(ii& 0ocal government5s lien(iii& ;emedies in general(iv& ;esale of real estate ta'en for taxes, fees or charges

(v& Eurther levy until full payment of amount due

<. ;efund or credit of real property taxa& -ayment under protestb& ;epayment of excessive collections

>. Taxpayer5s remediesa& 2ontesting an assessment of value of real property

(i& !ppeal to the 0ocal +oard of !ssessment !ppeals(ii& !ppeal to the 2entral +oard of !ssessment !ppeals(iii& A9ect of payment of tax

b& -ayment of real property tax under protest(i& Eile protest with local treasurer

The protest contemplated under ec. of ;.!. >1</ is needed where thereis a 3uestion as to the reasonableness of the amount assessed. Gence, if a taxpayerdisputes the reasonableness of an increase in a real estate tax assessment, he isre3uired to 6rst pay the tax6 under protest* otherwise, the city or municipaltreasurer will not act on his protest. (5y v. 5rampe, G.R. No. 11/, De"em#er %1,199/'

The trial court has no jurisdiction to entertain a -etition for -rohibition absentpetitioners payment, under protest, of the tax assessed as re3uired by ec. <$ of the ;-T2. -ayment of the tax assessed under protest, is a condition sine uanon before the trial court could assume jurisdiction over the petition and failure todo so, the ;T2 has no jurisdiction to entertain it. (0anila )le"tri" Co. v. +arlis, G.R.No. 112$1, 0ay 18, 2%%1'

:nder then ec. #/ of -= $<$ Rnow under ec. <, 0L2S, having failed toappeal the real property assessments to the 0+!!, taxpayer now cannot assail thevalidity of the tax assessment before the courts. Eor failure to exhaust




11/

administrative remedies, the assessment became nal. :nder ec. <$ of -= $<$Rnow under ec. , 0L2&, the taxpayer must rst pay under protest and thenassail the validity of the assessment. (=avao riental Alectric 2oop vs. -rov. =vo. of riental, >< 2;! <$&

(ii& !ppeal to the 0ocal +oard of !ssessment !ppeals

:nder ection < of ;.!. Co >1</, the last action of the local assessor on aparticular assessment shall be the notice of assessment* it is this last a"tion whichgives the owner of the property the right to appeal to the 0+!!. The procedureli'ewise does not permit the property owner the remedy of ling a motion forreconsideration before the local assessor. (7els )ner3y, -n". v. Provin"e of +atan3as,G.R. No. 18//, 1%28, 7e#ruary 1, 2%%'

(iii& !ppeal to the 2entral +oard of !ssessment !ppeals(iv& !ppeal to the 2T!(v& !ppeal to the upreme 2ourt

IV. Tari= an' C($!+ C!'e !" 1@>?D a a+en'e'!. Tari9 and duties, dened

6Customs *uties6 is 6the name given to ta;es on te importation an* e;portation of "ommo*ities, the tari9 or tax assessed upon merchandise imported from, orexported to, a foreign country. (Nestle Pilippines, -n". v. Court of Appeals, G.R. No.1$11, @uly %, 2%%1'

+. Leneral rule) all imported articles are subject to duty.1. Importation by the government taxable

2. -urpose for imposition=. Elexible tari9 clauseA. ;e3uirements of importation

1. +eginning and ending of importation

Section %2"2 of the Tariff and ustoms ode provides that importation begins when the carryingvessel or aircraft enters the >urisdiction of the :hilippines with intention to unload therein. ;t is clear fromthe provision of the law that mere intent to unload is sufficient to commence an importation and Dintent,Dbeing a state of mind, is rarely susceptible of direct proof, but must ordinarily be inferred from the facts,and therefore can only be proved by unguarded, epressions, conduct and circumstances generally.("eeder International Line, Pte., Ltd. v. Court of Appeals, G.R. +o. 2=5;5, Ma$ :1, 1221)

;mportation is terminated only upon the payment of duties, taes and other charges upon thearticles, or secured to be paid, at the port of entry and the legal permit for withdrawal shall have beengranted. :ayment of the duties, taes, fees and other charges must be in full. (Papa v. Ma#o, G.R. +o. L853:;6, "ebruar$ 59, 12;9)

Hnder Section %2"2 of the T:, importation ta(es place when merchandise is brought into thecustoms territory of the :hilippines with the intention of unloading the same at port. An eception to thisrule is transit cargo entered for immediate eportation which may be allowed under Section 2%"+ of theT: when the following concurG




111

)a* there is a clear intent to eport the article as shown in the bill of lading, invoice,cargo manifest or other satisfactory evidence=

)b* the ollector must designate the vessel or aircraft wherein the articles are laden asa constructive warehouse to facilitate the direct transfer of the articles to theeporting vessel or aircraft=

)c* the imported articles are directly transferred from the vessel or aircraft designatedas a constructive warehouse to the eporting vessel or aircraft and

)d* an irrevocable domestic letter of credit, ban( guaranty or bond in an amount e0ualto the ascertained duties, taes and other charges is submitted to the ollector )unless it appears in the bill of lading, invoice, manifest or satisfactory evidencethat the articles are destined for transshipment*. (Commissioner of Customs v.Court of %a> Appeals, G.R. +os. 13141;813, "ebruar$ 1:, 5662)

. bligations of importera& 2argo manifestb& Import entry

The term 6entry6 in 2ustoms law has a triple meaning. It means (1& thedocuments led at the 2ustoms house* (& the submission and acceptance of the

documents* and (#& the procedure of passing goods through the 2ustomshouse. (@ar*eleHa v. People, G.R. No. 1/2/, 7e#ruary %, 2%%'

c& =eclaration of correct weight or valued& 0iability for payment of dutiese& 0i3uidation of dutiesf& Oeeping of records

E. Importation in violation of tax credit certicate1. muggling

muggling is committed by any person who) (1& fraudulently imports or

brings into the -hilippines any article contrary to law* (& assists in so doing anyarticle contrary to law* or (#& receives, conceals, buys, sells or in any mannerfacilitate the transportation, concealment or sale of such goods after importation,'nowing the same to have been imported contrary to law. (@ar*eleHa v. People, G.R.No. 1/2/, 7e#ruary %, 2%%'

The Tariff and ustoms law sub>ects to forfeiture any article which is removed contrary to lawfrom any public or private warehouse under customs supervision, or released irregularly from ustomscustody. efore forfeiture proceedings are instituted the law re0uires the presence of probable cause=once established, the burden of proof is shifted to the claimant. (Carrara Marble Phil., Inc. v.Commissioner of Customs, G.R. +o. 152;96, !eptember 61, 1222)

;n order to warrant forfeiture, it is not necessary that the vessel or aircraft must itself carry thecontraband. There is nothing in the law that so re0uires. (Llamado v. Commissioner of Customs, G.R. +o.L859962, Ma$ 1;, 129:)

. ther fraudulent practices

L. 2lassication of goods1. Taxable importation. -rohibited importation




11

:rohibited importations are sub>ect to forfeiture whether the importation is direct or indirect suchas when the shipper and the consignee are one and the same person. (Patero* v. Bureau of Customs,3.4. 5os. 9"11"-1%, anuary 2%, %99%*

Although the illegally imported articles may not be absolutely prohibited, but only 0ualifiedlyprohibited under Sec. %"2 )* of the Tariff and ustoms ode, for it may be imported sub>ect to certain

conditions, it is nonetheless prohibited and is a contraband )omm. of ustoms vs. TA I 8ichoco, F-++6#%, an. +%, %9#2*, and the legal effects of the importation of 0ualifiedly prohibited articles are thesame as those of absolutely prohibited articles. (Au$on# ?ian v. C%A, 3.4. 5o. F-2!#!2, September %2,%9#6*

#. 2onditionally%free importation

G. 2lassication of duties1. rdinaryMregular duties

a& !d valorem* methods of valuation(i& Transaction value(ii& Transaction value of identical goods(iii& Transaction value of similar goods(iv& =eductive value(v& 2omputed value(vi& Eallbac' value

b& pecic

. pecial dutiesa& =umping dutiesb& 2ountervailing dutiesc& Dar'ing dutiesd& ;etaliatoryMdiscriminatory dutiese& afeguard

I. ;emedies1. Lovernment

a& !dministrativeMextrajudicial(i& earch, seiure, forfeiture, arrest

;t is 0uite clear that seiBure and forfeiture proceedings under the tariff and customs laws are notcriminal in nature as they do not result in the conviction of the offender nor in the imposition of the penaltyprovided for in section +1"% of the ode. As can be gleaned from Section 2++ of the code, seiBureproceedings, such as those instituted in this case, are purely civil and administrative in character, themain purpose of which is to enforce the administrative fines or forfeiture incident to unlawful

importation of goods or their deliberate possession. (People v. Court of "irst Instance of Ri@al, G.R. +o.L8=1;9;, +ovember 13, 1296)

;n administrative proceedings, such as those before the 7, technical rules of procedure andevidence are not strictly applied and administrative due process cannot be fully e0uated with due processin its strict >udicial sense. The essence of due process is simply an opportunity to be heard or, as appliedto administrative proceedings, an opportunity to eplain oneJs side or an opportunity to see(reconsideration of the action or ruling complained of. (l Greco !hip Mannin# and Mana#ement Corporation v. Commissioner of Customs, 3.4. 5o. %##%!!, 8ecember "6, 2""!*




11#

It is settled that the +ureau of 2ustoms ac3uires exclusive jurisdiction overimported goods for purposes of enforcing the 2ustoms laws, from the moment thegoods are actually in possession and control of said +ureau even in the absence of any warrant of seiure or detention. (Papa v. 0a3o, L.;. Co. 0%>#</, Eebruary ?,1@<?&

4egional trial courts are devoid of any competence to pass upon the validity or regularity of seiBure and forfeiture proceedings conducted by the 7 and to en>oin or otherwise interfere with theseproceedings. 4egional trial courts are precluded from assuming cogniBance over such matters eventhrough petitions for certiorari , prohibition or mandamus. (!ubic Ba$ Metropolitan Authorit$ v. Rodri#ue@,3.4. 5o. %1"2#", April 2+, 2"%"*

Even if the seiBure by the ollector of ustoms were illegal, which has yet to be proven, we havesaid that such act does not deprive the ureau of ustoms of >urisdiction thereon. The allegations of petitioners regarding the propriety of the seiBure should properly be ventilated before the ollector of ustoms. (ao v. Court of Appeals, 3.4. 5o. %"61"6, %%%22+, 7ctober "1, %99*

A forfeiture proceeding is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their importation. ;n this proceeding, it is in

legal contemplation the property itself which commits the violation and is treated as the offender, 'ithout reference 'hatsoever to the character or conduct of the o'ner . (%rans#lobe International, Inc. v. Court of

Appeals, 3.4. 5o. %211+6, anuary 2, %999*

Settlement of the case by payment of the fine or redemption of the forfeited property, prior to thefiling of the criminal action, does not etinguish the offenderJs criminal liability under Section +1"% of theTariff and ustoms ode. (People v. 0esiderio, 3.4. 5o. F-2"!", 5ovember 29, %91*

The re0uisites for the forfeiture of goods under Section 2+")f*, in relation to )%* )+-*, of the Tariff and ustoms ode areG )a* the wrongful ma(ing by the owner, importer, eporter or consignee of anydeclaration or affidavit, or the wrongful ma(ing or delivery by the same person of any invoice, letter or paper K all touching on the importation or eportation of merchandise= )b* the falsity of such declaration,affidavit, invoice, letter or paper= and )c* an intention on the part of the importerCconsignee to evade the

payment of the duties due. (Republic v. C%A, 3.4. 5o. %+9"", 7ctober "2, 2""%*

7nce probable cause has been shown for the institution of forfeiture proceedings, the burden of proof is upon claimant to establish that he fell within the purview of the eception. The legal presumptionin Section )>*, 4ule %+% of the 4ules of ourt and Article 6% of the ivil ode are of a general character and cannot prevail over the specific provisions of the Tariff and ustoms ode. (Actin# Commr. of Customs v. C%A, 3.4. 5o. 121+1, April 2#, %9!6*

5S is a apan-based company who sells raw sugar. <owever, 5S was charged by violationof the oint 7rder by the ommissioner ustoms. The court ruled that 5S did not violate the order andsuch was in good faith. The ourt ruled that the onus probandi to establish the eistence of fraud islodged with the ureau of ustoms which ordered the forfeiture of the imported goods. raud is never presumed. ;t must be proved. ailure of proof of fraud is a bar to forfeiture. The reason is that forfeitures

are not favored in law and e0uity. The fraud contemplated by law must be intentional fraud, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up someright. Absent fraud, the ureau of ustoms cannot forfeit the shipment in its favor. )%he Commissioner of Customs, et al. v. +e' "rontier !u#ar Corporation, 3.4. 5o. %1+", une %%, 2"%6, . Pere@

Agrie o. foreign corporation alleges that the ureau of ustoms eclusive original >urisdictionover actual and physical possession of foreign shipments and thus 4T has no >urisdiction over such.The court ruled that it is well settled that the ollector of ustoms has eclusive >urisdiction over seiBureand forfeiture proceedings, and regular courts cannot interfere with his eercise thereof or stifle or put it at




11$

naught. The ollector of ustoms sitting in seiBure and forfeiture proceedings has eclusive >urisdiction tohear and determine all 0uestions touching on the seiBure and forfeiture of dutiable goods. 4egional trialcourts are devoid of any competence to pass upon the validity or regularity of seiBure and forfeitureproceedings conducted by the 7 and to en>oin or otherwise interfere with these proceedings. 4egionaltrial courts are precluded from assuming cogniBance over such matters even through petitions for certiorari, prohibition or mandamus. $ A#rie> Co., Ltd., v. ?on. 7illanueva, etc., et al., 3.4. 5o. %!%",

September %", 2"%6&, @. +ersamin

b& "udicial(i& ;ules on appeal including jurisdiction

The ommissioner of ustoms posits that only when the ensuing decision of theollector and then the adverse decision of the ommissioner of ustoms would it beproper for 7ilin( to see( >udicial relief from the TA. The ourt ruled that the principle of non-ehaustion of administrative remedies was not an iron-clad rule because there wereinstances in which the immediate resort to >udicial action was proper. As the recordsindicate, the ommissioner of ustoms already decided to deny the protest by 7ilin( andstressed then that the demand to pay was final. ;n that instance, the ehaustion of

administrative remedies would have been an eercise in futility because it was alreadythe ommissioner of ustoms demanding the payment of the deficiency taes andduties. )Commissioner of Customs v. -ilin* International Corporation, 3.4. 5o. %1%#9,

uly 2, 2"%6, @. +ersamin

. Taxpayera& -rotestb& !bandonment

oth the ;mport Entry 8eclaration );E8* and ;mport Entry and ;nternal 4evenue 8eclaration);E;48* should be filed within +" days from the date of discharge of the last pac(age from the vessel or aircraft (Chevron Philippines, Inc. v. Commr., 3.4. 5o. %#!#9, August %%, 2""!*, otherwise deemedabandoned and goods ipso facto becomes government property.

c& !batement and refund

V. 9('icial Re+e'ie 6R.A. N!. 1125D a a+en'e'D an' $)e Re,ie' R(le !" $)e C!(r$ !" Ta# Appeal7

!. "urisdiction of the 2ourt of Tax !ppeals1. Axclusive appellate jurisdiction over civil tax cases

a& 2ases within the jurisdiction of the court en banc

The appellate jurisdiction of the 2T! is not limited to cases which involvedecisions of the 2I; on matters relating to assessments or refunds. ection >of ;epublic !ct Co. 11ZZZ covers other cases that arise out of the Cational Internal;evenue 2ode (CI;2& or related laws administered by the +ureau of Internal;evenue (+I;&. (Commr. v. :am#ret" & Euist Pilippines, -n"., G.R. No. 1922/,Novem#er 1, 2%1%'

In line with the lifeblood doctrine, the Cational Internal ;evenue 2ode of 1@@>(CI;2& expressly provides that no court shall have the authority to grant an




11

injunction to restrain the collection of any national internal revenue tax, fee orcharge imposed by the code. !n exception to this rule obtains only when in theopinion of the 2ourt of Tax !ppeals (2T!& the collection thereof may jeopardie theinterest of the government andMor the taxpayer. (An3eles City v. An3eles )le"tri"Corporation, G.R. No. 11$, @une 29, 2%1%'

b& 2ases within the jurisdiction of the court in divisions

Bithout the automatic review by the 2ommissioner of 2ustoms and theecretary of Einance, a collector in any of our countrys far%Pung ports, would haveabsolute and unbridled discretion to determine whether goods seied by him arelocally produced, hence, not dutiable, or of foreign origin, and therefore subject topayment of customs duties and taxes. Gis decision, unless appealed by theaggrieved party (the owner of the goods&, would become nal with no one the wiserexcept himself and the owner of the goods. (=aoIasin v. Commissioner of Customs,L.;. Co. ?$111, =ecember , 1@?@&

ection > of ;epublic !ct Co. 11, creating the 2ourt of Tax !ppeals, in

providing for appeals from V (1& =ecisions of the 2ollector of Internal ;evenue incases involving disputed assessments, refunds of internal revenue taxes, fees orother charges, penalties imposed in relation thereto, or other matters arising underthe Cational Internal ;evenue 2ode or other law or part of the law administered bythe +ureau of Internal ;evenue V allows an appeal from a decision of the 2ollectorin cases involving disputed assessments as distinguished from cases involvingrefunds of internal revenue taxes, fees or other charges, . . .* To hold that thetaxpayer has now lost the right to appeal from the ruling on the disputedassessment but must prosecute his appeal under ection #/< of the Tax 2ode,which re3uires a taxpayer to le a claim for refund of the taxes paid as a conditionprecedent to his right to appeal, would in e9ect re3uire of him to go through auseless and needless ceremony that would only delay the disposition of the case,for the 2ollector (now 2ommissioner& would certainly disallow the claim for refund inthe same way as he disallowed the protest against the assessment. (4*a. *e an

A3ustin v. Commr., G.R. No. 1$88/, eptem#er 1%, 2%%1'

Bhile the law confers on the 2T! jurisdiction to resolve tax disputes ingeneral, this does not include cases where the constitutionality of a law or rule ischallenged. Bhere what is assailed is the validity or constitutionality of a law, or arule or regulation issued by the administrative agency in the performance of its3uasi%legislative function, the regular courts have jurisdiction to pass upon thesame. (+ritis Ameri"an 5o#a""o v. Cama"o, G.R. No. 1$/8$, Au3ust 2%, 2%%8'

The reviewable decision of the +ureau of Internal ;evenue is that containedin the letter of its 2ommissioner, that such constitutes the nal decision on thematter which may be appealed to the 2ourt of Tax !ppeals and not te arrants of *istraint . It was li'ewise stressed that the procedure enunciated is demanded by thepressing need for fair play, regularity and orderliness in administrative action.(Commr. v. nion ippin3 Corp., G.R. No. 1%, 0ay 21, 199%'

! nal demand letter from the +ureau of Internal ;evenue, reiterating to thetaxpayer the immediate payment of a tax deciency assessment previously made,




11<

is tantamount to a denial of the taxpayers re3uest for reconsideration. uch letteramounts to a nal decision on a disputed assessment and is thus appealable to the2ourt of Tax !ppeals (2T!&. (Commr. v. -sa#ela Cultural Corp., G.R. No. 1$/21%, @uly 11, 2%%1'

If the protest is denied in whole or in part, or is not acted upon within one

hundred eighty (1?/& days from submission of documents, the taxpayer adverselya9ected by the decision or inaction may appeal to the 2ourt of Tax !ppeals within(#/& days from receipt of the said decision, or from the lapse of the one hundredeighty (1?/&%day period* otherwise the decision shall become nal, executory anddemandable.ZZZ (RiHal Commer"ial +anIin3 Corp. v. Commr., G.R. No. 1898, @une1, 2%%'

The period to appeal from a decision of the 2ommissioner of Internal ;evenueto the 2ourt of Tax !ppeals under ;epublic !ct Co. 11 is jurisdictional and non%extendible and a taxpayer may not delay indenitely a tax assessment byreiterating his original defenses over and over again, without substantialvariation. (7ilipinas -nvestment & 7inan"e Corp. v. Commr., G.R. No. 62$/%1, 0ay

1, 19'

To allow a litigant to assume a di9erent posture when he comes before thecourt and challenge the position he had accepted at the administrative level, wouldbe to sanction a procedure whereby the 2ourt V which is supposed to reviewadministrative determinations V would not review, but determine and decide forthe rst time, a 3uestion not raised at the administrative forum. Thus, it is wellsettled that under the same underlying principle of prior exhaustion of administrative remedies, on the judicial level, issues not raised in the lower courtcannot be raised for the rst time on appeal. (Commr. v. >an*er Pils., -n"., G.R.No. 8$/, April 1/, 1988'

+y withdrawing the appeal, petitioner is deemed to have accepted thedecision of the 2T!. -etitioner cannot be allowed to circumvent the denial of itsre3uest for a tax credit by abandoning its appeal and ling a new claim. (Central6uHon Dru3 Corp. v. Commr., G.R. No. 181$1, 0ar" %2, 2%11'

ec. > of ;! 11 provides that the 2T! has exclusive appellate jurisdiction toreview by appeal decisions of the 2I; in cases involving disputed assessments.0i'ewise ec. $ of the 1@@> CI;2 R;! ?$$S provides that the 2I; has the power todecide disputed assessments subject to the exclusive appellate jurisdiction of the2T!. The latest law on the jurisdiction of the 2T! under ec. > of ;! @? providesthat the 2T! exercises exclusive appellate jurisdiction to review by appeal decisionsof the 2I; in cases involving disputed assessments. Thus the 2T!5s jurisdiction is toentertain an appeal only from a nal decision or assessment of the 2I; or in caseswhere the 2I; has not acted within the period prescribed by the CI;2. o when the2I; has not issued an assessment, then there is nothing to protest or dispute.(!damson vs. 2ourt of !ppeals, ?? 2;! >&

The period to appeal the decision or ruling of the ;T2 in local tax cases to 2T!via petition for review is governed by ec. 11 of ;! @? and ec. #(a&, ;ule ? of the;evised ;ules of 2T!, which is #/ days from receipt of decision or ruling. To appeal




11>

an adverse ruling of the ;T2 to the 2T! the taxpayer must le a petition for reviewwith the 2T! within #/ days from receipt of the adverse decision or ruling. !nextension may be granted for 1 days. Bith the several extensions as'ed the 2T!can dismiss the petition. Eailure to comply with re3uirements would also be aground to dismiss the petition. (2ity of Danila vs. 2oca 2ola +ottlers -hils., @2;! @@&

The mandatory rule is that a judicial claim must be led with the 2T! within thirty(#/& days from the receipt of the 2ommissioner5s decision denying theadministrative claim or from the expiration of the 1/Jday period without any actionfrom the 2ommissioner. therwise, said judicial claim shall be considered as ledout of time. C!00--!N)R !7 -N5)RNA6 R)4)N), vs. -6-C!N P:-6-PP-N), -NC.(7!R0)R6= -N5)6 P:-6-PP-N) 0AN7AC5R-NG, -NC.', G.R. No. 198, 0ar" 12,2%1, @. P)R)

-hilamlife sold its shares through a public bidding. Gowever, the selling price wasbelow the boo' value of the shares. Gence, the +I; imposed donor5s tax on theprice di9erence. -hilamlife appealed to the ecretary of Einance. =ue to the adverse

ruling, -hilamlife appealed with the 2!. 2! alleged that it does not have jurisdictionfor jurisdiction lies with the 2T!. The 2ourt ruled that, the 2T! can now rule not onlyon the propriety of an assessment or tax treatment of a certain transaction, but alsoon the validity of the revenue regulation or revenue memorandum circular on whichthe said assessment is based. 5:) P:-6-PP-N) A0)R-CAN 6-7) AND G)N)RA6-NRANC) C!0PAN= vs. )CR)5AR= !7 7-NANC) an* C!00--!N)R !7 -N5)RNA6 R)4)N), G.R. No. 21%98, Novem#er 2, 2%1, @. 4elas"o @r.

. 2riminal casesa& Axclusive original jurisdictionb& Axclusive appellate jurisdiction in criminal cases

+. "udicial procedures1. "udicial action for collection of taxes

a& Internal revenue taxes

Cowhere in the Tax 2ode is the 2ollector of Internal ;evenue re3uired to rulerst on a taxpayers re3uest for reinvestigation before he can go to court for thepurpose of collecting the tax assessed. n the contrary, ection #/ of the same2ode withholds from all courts, except the 2ourt of Tax !ppeals under ection 11of ;epublic !ct 11, the authority to restrain the collection of any national internal%revenue tax, fee or charge, thereby indicating the legislative policy to allow the2ollector of Internal ;evenue much latitude in the speedy and prompt collection of taxes. (Repu#li" v. 6im 5ian 5en3 ons & Co., -n"., G.R. No. 621$1, 0ar" $1,19'

Eor the purpose of safeguarding taxpayers from any unreasonableexamination, investigation or assessment, our tax law provides a statute of limitations in the collection of taxes. (2ommissioner of -nternal Revenue v. +.7.Goo*ri" Pils, -n"., (no ime Dar#y -nternational 5ire Co., -n".&, et al., L.;. Co.1/$1>1, Eebruary $, 1@@@, #/# 2;! $<* Pilippine @ournalists, -n". v.




11?

Commissioner of -nternal Revenue, L. ;. Co. 1<?, =ecember 1<, //$&, as well astheir assessments.

The law prescribing a limitation of actions for the collection of the income taxis benecial both to the Lovernment and to its citiens* to the Lovernment becausetax oNcers would be obliged to act promptly in the ma'ing of assessment, and to

citiens because after the lapse of the period of prescription citiens would have afeeling of security against unscrupulous tax agents who will always nd an excuseto inspect the boo's of taxpayers, not to determine the latter5s real liability, but tota'e advantage of every opportunity to molest peaceful, law%abiding citiens.Bithout such a legal defense taxpayers would furthermore be under obligation toalways 'eep their boo's and 'eep them open for inspection subject to harassmentby unscrupulous tax agents. (+anI of Pilippine -slan*s (7ormerly 7ar )ast +anI an*5rust Company' v. Commissioner of -nternal Revenue, L. ;. Co. 1>$@$, Darch >,//?&

:nreasonable investigation contemplates cases where the period forassessment extends indenitely because this deprives the taxpayer of the assurance

that it will no longer be subjected to further investigation for taxes after theexpiration of a reasonable period of time. (Pilippine @ournalists, -n". v. Commissioner of -nternal Revenue, L. ;. Co. 1<?, =ecember 1<, //$&

Eor the purpose of safeguarding taxpayers from any unreasonableexamination, investigation or assessment, our tax law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being a remedialmeasure, should be liberally construed in order to a9ord such protection and theexceptions to the law on prescription should perforce be strictlyconstrued. (Pilippine @ournalists -n". v. Commr., G.R. No. 128/2, De"em#er 1,2%%'

The signatures of both the 2ommissioner and the taxpayer, are re3uired for awaiver of the prescriptive period, thus a unilateral waiver on the part of the taxpayerdoes not suspend the prescriptive period. (Commissioner of -nternal Revenue v.Court of Appeals, et al.,L.;. Co. 11>1, Eebruary , 1@@@&

The act of re3uesting a reinvestigation alone does not suspend the running of the prescriptive period. The re3uest for reinvestigation must be granted by the2I;. (+anI of Pilippine -slan*s (7ormerly 7ar )ast +anI an* 5rust Company' v.Commissioner of -nternal Revenue, L. ;. Co. 1>$@$, Darch >, //?&

b& 0ocal taxes(i& -rescriptive period

. 2ivil casesa& Bho may appeal, mode of appeal, e9ect of appeal

(i& uspension of collection of taxa& Injunction not available to restrain collection

(ii& Ta'ing of evidence(iii& Dotion for reconsideration or new trial




11@

It is true that petitioner could not move for new trial on the basis of newlydiscovered evidence because in order to have a new trial on the basis of newlydiscovered evidence, it must be proved that) (a& the evidence was discovered afterthe trial* (b& such evidence could not have been discovered and produced at thetrial with reasonable diligence* (c& it is material, not merely cumulative,corroborative or impeaching* and (d& it is of such weight that, if admitted, will

probably change the judgment. This does not mean however, that petitioner isaltogether barred from having a new trial if the reasons put forth by petitioner couldfall under mista'e or excusable negligence. (Pilippine Pospate 7ertiliHer Corp. v.Commr., G.R. No. 119$, @une 28, 2%%/'

efore the TA En anc could ta(e cogniBance of the petition for review concerning a case fallingunder its eclusive appellate >urisdiction, the litigant must sufficiently show that it sought prior reconsideration or moved for a new trial with the concerned TA division. :rocedural rules are not to betrifled with or be ecused simply because their non-compliance may have resulted in pre>udicing a partyJssubstantive rights. (Commisioner of Customs v. Marina !ales, Inc., G.R. +o. 19:9;9, +ovember 55,5616)

The 2ommissioner of Internal ;evenue, not having clearly signied his nalaction on the disputed assessment, legally the period to appeal has not commencedto run. The re3uest for reinvestigation and reconsideration was in e9ect considereddenied by 2I; when the latter led a civil suit for collection of deciency income.(Commissioner of -nternal Revenue vs nion ippin3 Corporation an* te Court of 5a; Appeals, G.R. No. 61%, 0ay 21, 199%'

! letter of the +I; 2ommissioner reiterating to a taxpayer his previous demandto pay an assessment is considered a denial of the re3uest for reconsideration orprotest and is appealable to the 2ourt of Tax !ppeals. (Commr. v. Ayala e"uritiesCorp., G.R. No. 6298/, 0ar" $1, 19'

b& !ppeal to the 2T!, en banc

The petition for review to be led with the 2T! en #an" as the mode forappealing a decision, resolution, or order of the 2T! =ivision, under ection 1? of ;epublic !ct Co. 11, as amended, is not a totally new remedy, uni3ue to the 2T!,with a special application or use therein. !ccordingly, doctrines, principles, rules,and precedents laid down in jurisprudence by this 2ourt as regards petitions forreview and appeals in courts of general jurisdiction should li'ewise bind the 2T!,and it cannot depart therefrom. (antos v. People, et al, L. ;. Co. 1>#1><, !ugust<, //?&

;n this case, 8uty ree :hilippines claimed that it was eempted from the epanded withholding ta under

4evenue 4egulation )4.4.* 5o. 1-96. The TA 8ivision ruled that 8uty ree was not a ta-eempt entityin the absence of an epress grant of ta eemption. 8uty ree then directly appealed to the Supremeourt under 4ule 6.

The Supreme ourt said that 8uty ree/s direct appeal to this ourt is fatal to its claim. Hnder 4A 92!2Section %!, LA party adversely affected by a resolution of a 8ivision of the TA on a motion for reconsideration or new trial, may file a petition for review with the TA en banc.M learly, the Supremeourt is without >urisdiction to review decisions rendered by a division of the TA, eclusive appellate

>urisdiction over which is vested in the TA en banc. )0ut$ "ree Philippines v. Bureau of Internal

Revenue, etc., 3.4 5o. %9#22!, 7ctober !, 2"%6 ) ereno.




1/

;n fine, if a tapayer is not satisfied with the decision of the AA or the 4T, as the case maybe, the tapayer may file, within thirty )+"* days from receipt of the assailed decision, a petition for reviewwith the TA pursuant to Section #)a* of 4.A. 92!2. ;n cases where the 0uestion involves the amount of the ta or the correctness thereof, the appeal will be pursuant to Section #)a*)* of 4.A. 92!2. ?hen theappeal comes from a >udicial remedy which 0uestions the authority of the local government to impose the

ta, Section #)a*)+* of 4.A. 92!2 applies. Thereafter, such decision, ruling or resolution may be further reviewed by the T A En anc pursuant to Section 2, 4ule 6 of the 4evised 4ules of the TA. )+ational Po'er Corporation v. Municipal Government of +avotas, et al., 3.4. 5o. %92+"", 5ovember 26, 2"%6*. Peralta

;n case of an illegal assessment where the assessment was issued without authority, ehaustionof administrative remedies is not necessary and the tapayer may directly resort to >udicial action. Thetapayer shall file a complaint for in>unction before the 4egional Trial ourt to en>oin the local governmentunit from collecting real property taes. The party unsatisfied with the decision of the 4egional Trial ourtshall file an appeal, not a petition for certiorari, before the ourt of Ta Appeals, the complaint being alocal ta case decided by the 4egional Trial ourt. The appeal shall be filed within fifteen )%* days fromnotice of the trial court/s decision. ;n this case, the petition for in>unction filed before the 4egional Trialourt of :asay was a local ta case originally decided by the trial court in its original >urisdiction. Sincethe :ENA assailed a >udgment, not an interlocutory order, of the 4egional Trial ourt, the :ENA/s proper remedy was an appeal to the ourt of Ta Appeals. )Cit$ of Lapu8Lapu v. Philippine conomic one

Authorit$, and companion case, 3.4. 5o. %!62"+, 3.4. 57. %!#!+, 5ovember 21, 2"%6 ) n, @. 6eonen

c& -etition for review on certiorari to the upreme 2ourt

7 committed procedural missteps and the decision of the TA division has become final. TheSupreme ourt is without >urisdiction to review decisions rendered by a division of the TA but thedecision of the TA en banc. Hnder Sec. 9 of 4A 92!2, a party affected by the ruling or decision of adivision of the TA may file an '4 within % days. Sec. %% of 4A 92!2 provides that if the '4 is denied, apetition for review is filed with the TA en banc. rom an adverse ruling or decision from the TA en banc,the appeal by way of petition for review on certiorari under 4ule 6 is filed with the Supreme ourt. Thusthe Supreme ourt has no >urisdiction to review the decision of a division of the TA. )om. of ustoms v.3elmart ;ndustries, #9 S4A 2#2*

#. 2riminal casesa& Institution and prosecution of criminal actions

!ny subse3uent satisfaction of the tax liability, by payment orprescription, ill not operate to e;tin3uis "riminal lia#ility, since the duty to paythe tax is imposed by statute independent of any attempt on the part of thetaxpayer to evade payment. The failure of the government, therefore, to enforce byappropriate civil remedies the collection of the taxes, does not detract from its rightcriminally to prosecute violations of the 2ode. (People v. 5ierra, G.R. Nos. 6118%, De"em#er 28, 19'

(i& Institution of civil action in criminal action

ection of the CI;2 specically states that in cases where a false orfraudulent return is submitted or in cases of failure to le a return such as this case,proceedings in court may be commenced itout an assessment . Eurthermore,ection / of the same 2ode clearly mandates that the civil and criminal aspectsof the case may be pursued simultaneously. (Commr. v. Pas"or Realty &Development Corp., G.R. No. 128$1/, @une 29, 1999'




11

ince the civil liability is not deemed included in the criminal action, ac3uittalof the taxpayer in the criminal proceeding does not necessarily entail exonerationfrom his liability to pay the taxes. The ac3uittal in a criminal case cannot operate todischarge defendant from the duty of paying the taxes which the law re3uires to bepaid, since that duty is imposed by statute prior to and independently of anyattempts by the taxpayer to evade payment. (Repu#li" v. Patanao, G.R. No. 6

22$/, @uly 21, 19'

Bith regard to the tax proper, the state correctly points out in its brief thatthe ac3uittal in the criminal case could not operate to discharge petitioner from theduty to pay the tax, since that duty is imposed by statue prior to and independentlyof any attempts on the part of the taxpayer to evade payment. The obligation topay the tax is not a mere conse3uence of the felonious acts charged in theinformation, nor is it a mere civil liability derived from crime that would be wipedout by the judicial declaration that the criminal acts charged did not exist. (Castro v.Colle"tor of -nternal Revenue, G.R. No. 6121, April 2, 192'

b& !ppeal and period to appeal

(i& olicitor Leneral as counsel for the people and governmentoNcials sued in their oNcial capacity

c& -etition for review on certiorari to the upreme 2ourt

2. Taxpayer5s suit impugning the validity of tax measures or acts of taxingauthorities1. Taxpayer5s suit, dened

It is hornboo' principle that a taxpayer is allowed to sue where there is aclaim that public funds are illegally disbursed, or that public money is beingdePected to any improper purpose, or that there is wastage of public funds throughthe enforcement of an invalid or unconstitutional law. Eor a taxpayers suit toprosper, two re3uisites must be met namely, (1& public funds derived from taxationare disbursed by a political subdivision or instrumentality and in doing so, a law isviolated or some irregularity is committed* and (& the petitioner is directly a9ectedby the alleged act. (6+P v. Ca"ayuran, G.R. No. 191, April 1, 2%1$'

Bhat is a taxpayer5s suitW In the case of a taxpayer, he is allowed to suewhere there is a claim that public funds are illegally disbursed, or that public moneyis being dePected to any improper purpose, or that there is a wastage of publicfunds through the enforcement of an invalid or unconstitutional law. +efore he caninvo'e the power of judicial review, however, he must specically prove that he hassuNcient interest in preventing the illegal expenditure of money raised by taxationand that he would sustain a direct injury as a result of the enforcement of the3uestioned statute or contract. It is not suNcient that he has merely a generalinterest common to all members of the public. !t all events, courts are vested withdiscretion as to whether or not a taxpayers suit should be entertained. This 2ourtopts to grant standing to most of the petitioners, given their allegation that anyimpending transmittal to the enate of the !rticles of Impeachment and the ensuingtrial of the 2hief "ustice will necessarily involve the expenditure of public funds.(Erancisco, "r. vs. Cagmamalasa'it na mga Danananggol ng mga Danggagawang-ilipino, $1 2;! $$&




1

. =istinguished from citien5s suit

Taxpayers have been allowed to sue where there is a claim that public fundsare illegally disbursed or that public money is being dePected to any improper

purpose, or that public funds are wasted through the enforcement of an invalid orunconstitutional law. n the other hand, as citiens, petitioners have must fulll thestanding re3uirement given that the issues they have raised may be classied asmatters 6of transcendental importance, of overreaching signicance to society, or of paramount public interest.6 (+el3i"a v. !"oa, G.R. No. 2%8/, 2%89$, 2%92/1, 62%8, Novem#er 19, 2%1$'

Bhat is a citien5s suitW Bhen suing as a citien, the interest of the petitionerassailing the constitutionality of a statute must be direct and personal. Ge must beable to show, not only that the law or any government act is invalid, but also that hesustained or is in imminent danger of sustaining some direct injury as a result of itsenforcement, and not merely that he su9ers thereby in some indenite way. It must

appear that the person complaining has been or is about to be denied some right orprivilege to which he is lawfully entitled or that he is about to be subjected to someburdens or penalties by reason of the statute or act complained of. In ne, when theproceeding involves the assertion of a public right, the mere fact that he is a citiensatises the re3uirement of personal interest. (Erancisco, "r. vs. Cagmamalasa'it namga Danananggol ng mga Danggagawang -ilipino, $1 2;! $$&

#. ;e3uisites for challenging the constitutionality of a tax measure or act of taxing authoritya& 2oncept of locus standi as applied in taxation

70egal standing8 or locus standi has been dened as a personal andsubstantial interest in the case such that the party has sustained or willsustain direct injury as a result of the governmental as that is beingchallenged. The gist of the 3uestion of standing is whether a partyalleges 7such personal sta'e in the outcome of the controversy as toassure the concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of diNcultconstitutional 3uestions. To invest him with locus standi, the plainti9 has to ade3uately showthat he is entitled to judicial protection and has a suNcient interest inthe vindication of the asserted public right. In case of taxpayer5s suits,the party suing as a taxpayer must prove that he has suNcient interestin preventing the illegal expenditure of money raised by taxation.(-ublic Interest 2enter vs. ;oxas, 1# 2;! $>&

0ocus standi, however, is merely a matter of procedure and it has beenrecognied that in some cases, suits are not brought by parties whohave been personally injured by the operation of a law or any othergovernment act but by concerned citiens, taxpayers or voters whoactually sue in the public interest. 2onse3uently, the 2ourt, in a catenaof cases, has invariably adopted a liberal stance on locus standi,




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including those cases involving taxpayers. The prevailing doctrine intaxpayers suits is to allow taxpayers to 3uestion contracts entered intoby the national government or government%owned or controlledcorporations allegedly in contravention of law. ! taxpayer is allowed tosue where there is a claim that public funds are illegally disbursed, orthat money is being dePected to any improper purpose, or that there is

wastage of public funds through the enforcement of an invalid orunconstitutional law. ignicantly, a taxpayer need not be a party tothe contract to challenge its validity. (!baya vs. Abdane, "r. 1 2;!>/&

b& =octrine of transcendental importanceBhat is 7transcendental importance8W There being no doctrinaldenition of transcendental importance, the following instructivedeterminants are instructive) (1& the character of the funds or otherassets involved in the case, (& the presence of a clear case of disregard of a constitutional or statutory prohibition by the public

respondent agency or instrumentality of the government, and the (#&the lac' of any other party with a more direct and specic interest inraising the 3uestions being raised. The 2ourt has adopted a liberalattitude on locus standi where the petitioner is able to craft an issue of transcendental signicance to the people, as when the issues raisedare of paramount importance to the public. (Erancisco, "r. vs.Cagmamalasa'it na mga Danananggol ng mga Danggagawang-ilipino, $1 2;! $$&

nly a person who stands to be beneted or injured by the judgment inthe suit or entitled to the avails of the suit can le a complaint orpetition. ;espondents claim that petitioner is not a proper party%in%interest as he was unable to show that 7he has sustained or is inimmediate or imminent danger of sustaining some direct and personalinjury as a result of the execution and enforcement of the assailedcontracts or agreements.8 Doreover, they assert that not allgovernment contracts can justify a taxpayer5s suit especially when nopublic funds were utilied in contravention of the 2onstitution or a law.Be explicated in CaveH v. PCGG, @@ 2;! >$$ (1@@?&, that in caseswhere issues of transcendental public importance are presented, thereis no necessity to show that petitioner has experienced or is in actualdanger of su9ering direct and personal injury as the re3uisite injury isassumed. Be nd our ruling in CaveH v. P)A, #?$ 2;! 1 (//&, asconclusive authority on lo"us stan*i in the case at bar since the issuesraised in this petition are averred to be in breach of the fair di9usion of the country5s natural resources and the constitutional right of a citiento information which have been declared to be matters of transcendental public importance. Doreover, the pleadings especiallythose of respondents readily reveal that public funds have beenindirectly utilied in the -roject by means of mo'ey Dountain -roject-articipation 2erticates (D--2s& bought by some government




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agencies. Gence, petitioner, as a taxpayer, is a proper party to theinstant petition before the court. (2have vs. CG!, #/ 2;! #&

c& ;ipeness for judicial determination

2015 Tax Syllabus Updated-final PALS

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