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1. PBCOM V CIR

FACTS:

Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly organized under Philippine laws, filed its quarterly income tax returns for the first and second quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00 by applying PBCom's tax credit memos for P3,401,701.00 and P1,615,253.00, respectively. Subsequently, however, PBCom suffered net loss of P25,317,228.00, thereby showing no income tax liability in its Annual Income Tax Returns for the year-ended December 31, 1985. For the succeeding year, ending December 31, 1986, the petitioner likewise reported a net loss of P14,129,602.00, and thus declared no tax payable for the year.

But during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986. On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a tax credit of P5,016,954.00 representing the overpayment of taxes in the first and second quarters of 1985.

Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69.

Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA). The petition was docketed as CTA Case No. 4309 entitled: "Philippine Bank of Communications vs. Commissioner of Internal Revenue."

The CTA decided in favor of the BIR on the ground that the Petition was filed out of time as the same was filed beyond the two-year reglementary period. A motion for Reconsideration was denied and the appeal to Court of Appeals was likewise denied. Thus, this appeal to Supreme Court.

Issues:a) Whether or not Revenue Regulations No. 7-85 which alters the reglementary period from two (2) years to ten (10) years is valid.b) Whether or not the petition for tax refund had already prescribed.

Ruling:

RR 7-85 altering the 2-year prescriptive period imposed by law to 10-year prescriptive period is invalid.

Administrative issuances are merely interpretations and not expansions of the provisions of law, thus, in case of inconsistency, the law prevails over them. Administrative agencies have no legislative power.

“When the Acting Commissioner of Internal Revenue issued RMC 7-85,

changing the prescriptive period of two years to ten years on claims of excess quarterly income tax payments, such circular created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by Congress.”

“It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with, the law they seek to apply and implement.”

“Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. As pointed out by the respondent courts, the nullification of RMC No. 7-85 issued by the Acting Commissioner of Internal Revenue is an administrative interpretation which is not in harmony with Sec. 230 of 1977 NIRC, for being contrary to the express provision of a statute. Hence, his interpretation could not be given weight for to do so would, in effect, amend the statute.”

By implication of the above, claim for refund had already prescribed.

Since the petition had been filed beyond the prescriptive period, the same has already prescribed. The fact that the final adjusted return show an excess tax credit does not automatically entitle taxpayer claim for refund without any express intent.

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WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals appealed from is AFFIRMED, with COSTS against the petitioner.

2. CIR V REYES

Taxation – Contents of a Formal Assessment Notice

In 1993, Maria Tancino died leaving behind an estate worth P32 million. In 1997, a tax audit was conducted on the estate. Meanwhile, the National Internal Revenue Code (NIRC) of 1997 was passed. Eventually in 1998, the estate was issued a final assessment notice (FAN) demanding the estate to pay P14.9 million in taxes inclusive of surcharge and interest; the estate’s liability was based on Section 229 of the [old] Tax Code. Azucena Reyes, one of the heirs, protested the FAN. The Commissioner of Internal Revenue (CIR) nevertheless issued a warrant of distraint and/or levy. Reyes again protested the warrant but in March 1999, she offered a compromise and was willing to pay P1 million in taxes. Her offer was denied. She continued to work on another compromise but was eventually denied. The case reached the Court of Tax Appeals where Reyes was also denied. In the Court of Appeals, Reyes received a favorable judgment.

ISSUE: Whether or not the formal assessment notice is valid.

HELD: No. The NIRC of 1997 was already in effect when the FAN was issued. Under Section 228 of the NIRC, taxpayers shall be informed in writing of the law and the facts on which the assessment is made: otherwise, the assessment shall be void. In the case at bar, the FAN merely stated the amount of liability to be shouldered by the estate and the law upon which such liability is based. However, the estate was not informed in writing of the facts on which the assessment of estate taxes had been made. The estate was merely informed of the findings of the CIR. Section 228 of the NIRC being remedial in nature can be applied retroactively even though the tax investigation was conducted prior to the law’s passage. Consequently, the invalid FAN cannot be a basis of a compromise, any proceeding emanating from the invalid FAN is void including the issuance of the warrant of distraint and/or levy.

3. CITY OF MANILA V COCA COLA

FACTS:

Respondent paid the local business tax only as a manufacturers as it was expressly exempted from the business tax under a different section and which applied to

businesses subject to excise, VAT or percentage tax under the Tax Code. The City of Manila subsequently amended the ordinance by deleting the provision exempting businesses under the latter section if they have already paid taxes under a different section in the ordinance. This amending ordinance was later declared by the Supreme Court null and void. Respondent then filed a protest on the ground of double taxation. RTC decided in favor of Respondent and the decision was received by Petitioner on April 20, 2007. On May 4, 2007, Petitioner filed with the CTA a Motion for Extension of Time to File Petition for Review asking for a 15-day extension or until May 20, 2007 within which to file its Petition. A second Motion for Extension was filed on May 18, 2007, this time asking for a 10-day extension to file the Petition. Petitioner finally filed the Petition on May 30, 2007 even if the CTA had earlier issued a resolution dismissing the case for failure to timely file the Petition.

ISSUES:(1) Has Petitioner’s the right to appeal with the CTA lapsed?(2) Does the enforcement of the latter section of the tax ordinance constitute double taxation?HELD:

(1) NO. Petitioner complied with the reglementary period for filing the petition. From April 20, 2007, Petitioner had 30 days, or until May 20, 2007, within which to file their Petition for Review with the CTA. The Motion for Extension filed by the petitioners on May 18, 2007, prior to the lapse of the 30-day period on 20 May 2007, in which they prayed for another extended period of 10 days, or until 30 May 2007, to file their Petition for Review was, in reality, only the first Motion for Extension of petitioners. Thus, when Petitioner filed their Petition via registered mail their Petition for Review on 30 May 2007, they were able to comply with the period for filing such a petition.

(2) YES. There is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of the tax ordinance since these are being imposed: (1) on the same subject matter — the privilege of doing business in the City of Manila; (2) for the same purpose — to make persons conducting business within the City of Manila contribute to city revenues; (3) by the same taxing authority — petitioner City of Manila; (4) within the same taxing jurisdiction — within the territorial jurisdiction of the City of Manila; (5) for the same taxing periods — per calendar year; and (6) of the same kind or character — a local business tax imposed on gross sales or receipts of the business.

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4. VILLANUEVA V ILOILO

Facts: On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86. The Supreme Court, however, declared the ordinance ultra vires. On January 15, 1960 the municipal board of Iloilo City, believing that with the passage of Republic Act 2264, otherwise known as the Local Autonomy Act, it had acquired the authority or power to enact an ordinance similar to that previously declared by the Supreme Court as ultra vires, enacted Ordinance 11 (eleven), series of 1960, imposing municipal license tax on persons engaged in the business of operating tenement houses.

In Iloilo City, the appellees Eusebio Villanueva and Remedios S. Villanueva are owners of five tenement houses, aggregately containing 43 apartments, while the other appellees and the same Remedios S. Villanueva are owners of ten apartments. By virtue of the ordinance in question, the appellant City collected from spouses Eusebio Villanueva and Remedios S. Villanueva, for the years 1960-1964, the sum of P5,824.30, and from the appellees Pio Sian Melliza, Teresita S. Topacio, and Remedios S. Villanueva, for the years 1960-1964, the sum of P1,317.00.

On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed a complaint, and an amended complaint, respectively, against the City of Iloilo, praying that Ordinance 11, series of 1960, be declared "invalid for being beyond the powers of the Municipal Council of the City of Iloilo to enact, and unconstitutional for being violative of the rule as to uniformity of taxation and for depriving said plaintiffs of the equal protection clause of the Constitution," and that the City be ordered to refund the amounts collected from them under the said ordinance. The lower court rendered judgment declaring the ordinance illegal.

Issues: (1) Whether or not the City of Iloilo is empowered by the Local Autonomy Act to impose tenement taxes. (2) Whether or not Ordinance 11, series of 1960, does violate the rule of uniformity of taxation. Held:

(1) Yes. The lower court has interchangeably denominated the tax in question as a tenement tax or an apartment tax. Called by either name, it is not among the exceptions listed in Section 2 of the Local Autonomy Act. The imposition by the

ordinance of a license tax on persons engaged in the business of operating tenement houses finds authority in Section 2 of the Local Autonomy Act which provides that chartered cities have the authority to impose municipal license taxes or fees upon persons engaged in any occupation or business, or exercising privileges within their respective territories, and "otherwise to levy for public purposes, just and uniform taxes, licenses, or fees."

(2) No. The ordinance is not violative of the rule of uniformity in taxation. The Supreme Court has already ruled that tenement houses constitute a distinct class of property. It has likewise ruled that "taxes are uniform and equal when imposed upon all property of the same class or character within the taxing authority." The fact, therefore, that the owners of other classes of buildings in the City of Iloilo do not pay the taxes imposed by the ordinance in question is no argument at all against uniformity and equality of the tax imposition. Neither is the rule of equality and uniformity violated by the fact that tenement taxes are not imposed in other cities, for the same rule does not require that taxes for the same purpose should be imposed in different territorial subdivisions at the same time. So long as the burden of the tax falls equally and impartially on all owners or operators of tenement houses similarly classified or situated, equality and uniformity of taxation is accomplished.

Hence, the judgment of the lower court is reversed. The ordinance in question is valid.

5. COMPANIA GENERAL V CITY OF MANILA

Facts:

Compania General de Tabacos de Filipinas (Tabacalera) paid the City of Manila the fixed license feesprescribed by Ordinance 3358 for the years 1954 to 1957. In 1954, City Ordinance 3634 and 3816 werepassed; where the term “general merchandise” found therein included all articles in Sections 123 to 148 of theTax Code (thus, also liquor under Sedctions 133 to 135). The Tabacalera paid its wholesaler’s and retailer’staxes. In 1954, the City Treasurer addressed a letter to an accounting firm, expressing the view that liquordealers paying the annual wholesale and retail fixed tax under Ordinance 3358 are not subject to thewholesale aand retail deaklers’ taxes prescribed by City Ordinances 3634, 3301, and 3816. The Tabacalera,upon learning of said stopped including quarterly sworn declaratons required by the

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latter ordinances, and in1957, demanded refunde of the alleged overpayment. The claim was disallowed.

Issue:Whether there is a distinction between Ordinance 3358 and Ordinances 3634, 3301 and 3816, toprevent refund to the company.

Held:

Generally, the term “tax” applies to all kinds of exactions which become public funds. Legally,however, a license fee is a legal concept quite distinct from tax: the former is imposed in the exercise ofpolice power for purposes of regulation, while the latter is imposed under the taxing power for the purpose ofraising revenues. Ordinance 3358 prescribes municipal license fees for the privilege to engage in the businessof selling liquor or alcohol beverages; considering that the sale of intoxicating liquor is (potentially) harmfulto public health and morals, and must be subject to supervision or regulation by the State and by cities andmunicipalities authorized to act in the premises. On the other hand, Ordinances 3634 , 3301 and 3816imposed taxes on the sales of general merchandise, wholesale or retail, and are revenue measures enacted bythe Municipal Board of Manila.Both a license fee and a tax may be imposed on the same business or occupation, or for selling the samearticle, without it being in violation of the rule against double taxation. The contrary view of the Treasurer inits letter is of no consequence as the government is not bound by the errors or mistakes committed by itsofficers, specially on matters of law.The company, thus, is not entitled to refund.

6. COMMI V SC JOHNSON

Facts: Respondent is a domestic corporation organized and operating under the Philippine Laws, entered into a licensed agreement with the SC Johnson and Son, USA, a non-resident foreign corporation based in the USA pursuant to which the respondent was granted the right to use the trademark, patents and technology owned by the later including the right to manufacture, package and distribute the products covered by the Agreement and secure assistance in management, marketing and production from SC Johnson and Son USA.

For the use of trademark or technology, respondent was obliged to pay SC Johnson and Son, USA royalties based on a percentage of net sales and subjected the same

to 25% withholding tax on royalty payments which respondent paid for the period covering July 1992 to May 1993 in the total amount of P1,603,443.00.

On October 29, 1993, respondent filed with the International Tax Affairs Division (ITAD) of the BIR a claim for refund of overpaid withholding tax on royalties arguing that, the antecedent facts attending respondents case fall squarely within the same circumstances under which said MacGeorge and Gillette rulings were issued. Since the agreement was approved by the Technology Transfer Board, the preferential tax rate of 10% should apply to the respondent. So, royalties paid by the respondent to SC Johnson and Son, USA is only subject to 10% withholding tax.

The Commissioner did not act on said claim for refund. Private respondent SC Johnson & Son, Inc. then filed a petition for review before the CTA, to claim a refund of the overpaid withholding tax on royalty payments from July 1992 to May 1993.

On May 7, 1996, the CTA rendered its decision in favor of SC Johnson and ordered the CIR to issue a tax credit certificate in the amount of P163,266.00 representing overpaid withholding tax on royalty payments beginning July 1992 to May 1993.

The CIR thus filed a petition for review with the CA which rendered the decision subject of this appeal on November 7, 1996 finding no merit in the petition and affirming in toto the CTA ruling.

Issue: Whether or not tax refunds are considered as tax exemptions.

Held: It bears stress that tax refunds are in the nature of tax exemptions. As such they are registered as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the exemption. The burden of proof is upon him who claims the exemption in his favor and he must be able to justify his claim by the clearest grant of organic or statute law. Private respondent is claiming for a refund of the alleged overpayment of tax on royalties; however there is nothing on record to support a claim that the tax on royalties under the RP-US Treaty is paid under similar circumstances as the tax on royalties under the RP-West Germany Tax Treaty.

7. COMMI V ESTATE OF TODA

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.FACTS:

Cibeles Insurance Corporation (CIC) authorized Benigno P. Toda, Jr., President and owner of 99.991% of its issued andoutstanding capital stock, to sell the Cibeles Building and the two parcels of land on which the building stands for an amount of not lessthan P90 million. Toda purportedly sold the property to Rafael A. Altonaga, who, in turn, sold the same property on the same day toRoyal Match Inc. (RMI). For the sale of the property to RMI, Altonaga paid capital gains tax in the amount of P10 million.CIC filed itscorporate annual income tax return for the year 1989, declaring, among other things, its gain from the sale of real property in theamount of P75,728.021. Toda then sold his entire shares of stocks in CIC to Le Hun T. Choa, as evidenced by a Deed of Sale of Shares of Stocks. Three and a half years later Toda died.The Bureau of Internal Revenue (BIR) sent an assessment notice and demand letter to the CIC for deficiency income tax for theyear 1989.The new CIC asked for a reconsideration, asserting that the assessment should be directed against the old CIC, and not againstthe new CIC, which is owned by an entirely different set of stockholders; moreover, Toda had undertaken to hold the buyer of hisstockholdings and the CIC free from all tax liabilities for the fiscal years 1987-1989. The Estate of Benigno P. Toda, Jr., represented byspecial co-administrators Lorna Kapunan and Mario Luza Bautista, received a Notice of Assessment from the Commissioner of InternalRevenue for deficiency income tax for the year 1989.The Estate thereafter filed a letter of protest. The Commissioner dismissed the protest, stating that a fraudulent scheme wasdeliberately perpetuated by the CIC wholly owned and controlled by Toda by covering up the additional gain of P100 million, whichresulted in the change in the income structure of the proceeds of the sale of the two parcels of land and the building thereon to anindividual capital gains, thus evading the higher corporate income tax rate of 35%.The Estate filed a petition for review with the CTA alleging that the Commissioner erred in holding the Estate liable for income taxdeficiency.In its decision, the CTA held that the Commissioner failed to prove that CIC committed fraud to deprive the government of thetaxes due it. It ruled that even assuming that a pre-conceived scheme was adopted by CIC, the same constituted mere tax avoidance,and not tax evasion. Hence, the CTA declared that the Estate is not liable for deficiency income tax and, accordingly, cancelled and setaside the assessment issued by the Commissioner. Court of Appeals affirmed the decision of the CTA.

ISSUE:

WON respondent Estate is liable for the 1989 deficiency income tax of Cibeles Insurance Corporation.

HELD: Yes. A corporation has a juridical personality distinct and separate from the persons owning or composing it. Thus, the owners or stockholders of a corporation may not generally be made to answer for the liabilities of a corporation and vice versa. There are,however, certain instances in which personal liability may arise. It has been held in a number of cases that personal liability of acorporate director, trustee, or officer along, albeit not necessarily, with the corporation may validly attach when:1. He assents to the (a) patently unlawful act of the corporation, (b) bad faith or gross negligence in directing its affairs, or (c) conflict of interest, resulting in damages to the corporation, its stockholders, or other persons;2. He consents to the issuance of watered down stocks or, having knowledge thereof, does not forthwith file with thecorporate secretary his written objection thereto;3. He agrees to hold himself personally and solidarily liable with the corporation; or 4. He is made, by specific provision of law, to personally answer for his corporate action.

[…] It is worth noting that when the late Toda sold his shares of stock to Le Hun T. Choa, he knowingly and voluntarily held himself personally liable for all the tax liabilities of CIC and the buyer for the years 1987, 1988, and 1989. Paragraph g of the Deed of Sale of Shares of Stocks specifically provides:“xxx

SELLER undertakes and agrees to hold the BUYER and Cibeles free from any and all income tax liabilities of Cibeles for the fiscal years 1987, 1988 and 1989.”

When the late Toda undertook and agreed “to hold the BUYER and Cibeles free from any all income tax liabilities of Cibeles for the fiscal years 1987, 1988, and 1989,” he thereby voluntarily held himself personally liable therefor. Respondent estate cannot,therefore, deny liability for CIC’s deficiency income tax for the year 1989 by invoking the separate corporate personality of CIC, since itsobligation arose from Toda’s contractual undertaking, as contained in the

Deed of Sale of Shares of Stock.

The decision of the Court of Appeals is reversed and respondent Estate of Benigno P. Toda Jr. was ordered topay P79,099,999.22 as deficiency income tax of Cibeles Insurance Corporation for the year 1989

8. REP V GONZALES

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Facts

:Defendant-appellant, Blas Gonzales is a private concessionaire in the US military Base at Clark Field,Angeles City, who is engaged in the manufacture of furniture and, per agreement with base authorities, suppliedthem with his manufactured articles.The BIR discovered that for the years 1946-47, appellant have undeclared income for the two yearscausing deficiency in its tax dues. Despite the demand of the BIR to pay its tax due, appellant failed to do so. Indefense, appellant claim that as a concessionaire in an American Air Base, he is not subject to Philippine Tax lawspursuant to the US-Phil. Military Bases Agreement.

Issue: Is appellant is exempt from taxes?

Ruling:

No. A Filipino concessionaire in an American Air Base is subject to Philippine Income Tax laws under theUS-Phil Military Bases Agreement. Non in the provisions of the agreement shields a concessionaire, like theappellant, from the payment of the income tax. For one thing, even the exemption in favor of members of the US armed forces and nationals of the US does not include income derived from Philippine sources.

9. PEREZ V CTA

10. COLLECTOR V UST

11. P V JUDGE CASTANEDA

12. RP V MARTIN

13. COMMI V FIREMANS FUND

Facts:

From January, 1952 to 1958, private respondent Fireman's Fund Insurance Co. entered into variousinsurance contracts involving casualty, fire and marine risks, for which the corresponding insurance policies were issued. From January, 1952 to 1956, documentary stamps were bought and affixed to themonthly statements of policies issues; and from 1957 to 1958 documentary stamps were bought andaffixed to the corresponding pages of the policy register, instead of on the insurance policies issued.In 1959, respondent company discovered that its monthly statements of business and policy register werelost and reported such to the NBI

and the CIR. The CIR through its examiner, after conducting aninvestigation of said loss, ascertained that respondent company failed to affix the required documentarystamps to the insurance policies issued by it and failed to preserve its accounting records within the time prescribed by Sec. of the Revenue Code by using loose leaf forms as registers of documentary stampswithout written authority from the CIR. As a consequence of these findings, petitioner assessed anddemanded from petitioner the payment of documentary stamp taxes for the years 1952 to 1958 in the totalamount of P 79,806.87 and plus compromise penalties, a total of P 81,406.87.

Issue: WON the CIR may impose and require the payment of the subject stamp tax for the documents inquestion.

Ruling:

NO. There is no justification for the government which has already realized the revenue which is theobject of the imposition of subject stamp tax, to require the payment of the same tax for the samedocuments. Enshrined in our basic legal principles is the time honored doctrine that no person shallunjustly enrich himself at the expense of another. It goes without saying that the government is notexempted from the application of this doctrine.While there appears to be no question that the purpose of imposing documentary stamp taxes is to raiserevenue, however, the corresponding amount has already been paid by respondent and has actually become part of the revenue of the government. In the same manner, evidence was shown to prove that theaffixture of the stamps on documents not authorized by law is not attended by bad faith as the practicewas adopted from the authority granted to one of respondent's general agents.

14. CIR V CA