TAX 1 Algue obtained an order of distraint and levy two months later,

(ATTY. ACAS) which it refused to accept because the protest was still
All Cases ongoing. BIR did not take any action in response to Algue's
protest, it was later discovered.
MODULE 1
CIR
CIR vs. ALGUE, INC. [G.R. No. L-28896. February 17, The Commissioner of Internal Revenue (CIR) released its
1988.] - LACAP resolution and contended that the claimed deduction is not
allowed because it was not an ordinary reasonable or
PETITIONER: COMMISSIONER ON INTERNAL necessary business expense.
REVENUE
RESPONDENTS: ALGUE, INC. & COURT OF TAX NO REQUEST FOR RECONSIDERATION WAS FILED -
APPEALS USELESS SINCE IT WILL BE AN OUTRIGHT DENIAL)

FACTS: CTA
Therefore, Algue filed a petition for review of the decision of
Algue Inc. had previously been appointed as the Philippine the Commissioner with the Court of Tax Appeals.
Sugar Estate Development Company's agent, allowing it to sell
the company's land, factories, and oil manufacturing process. The Court of Tax Appeals had seen it differently. Agreeing with
As a result, until they were able to purchase the PSEDC Algue Inc., it held that the said amount had been legitimately
properties, the corporation worked to construct the Vegetable paid by the private respondent for actual services rendered.
Oil Investment Corporation. The P75, 000.00 promotional fees The payment was in the form of promotional fees.
were given to Alberto Guevara, Jr, Eduardo Guevara, Isabel
Guevara, Edith O'Farell, and Pablo Sanchez from the P126, Hence, CIR submitted the decision rendered by CTA to the
000.00 commission obtained by Algue Inc. as agent for this Supreme Court for review.
sale.
ISSUE: Whether or not the Collector of Internal Revenue
The Commissioner of Internal Revenue sent the private correctly disallowed the P75, 000.00 deduction claimed by
respondent a notice assessing delinquent income taxes in the private respondent Algue Inc., as legitimate business
amount of P83,183.85 for the fiscal year 1958 to 1959. expenses in its income tax returns.

On the same day, Algue filed a letter of protest or request for RULING:
reconsideration, which was stamped-received in the
petitioner's office. No, The Supreme Court agrees with the respondent court that
the amount of the promotional fees was not excessive. The
P75,000.00 was 60% of the total commission. This was a
reasonable proportion, considering that it was the payees who REPUBLIC vs. MAMBULAO LUMBER [G.R. No. L-17725.
did practically everything, from the formation of the Vegetable February 28, 1962.] - CHOI
Oil Investment Corporation to the actual purchase by it of the
Sugar Estate properties. FACTS:
Republic of the Philippines as the plaintiff-apellee and
Pursuant to Sec. 30 of the Tax Code: the payor is allowed Mambulao Lumber as defendants-appellant
deductions in its net income – wherein expenses - whether
ordinary and necessary expenses paid or incurred during the Procedural:
taxable year in carrying on any trade or business, including a • For the period between 1947 and 1956, Mambulao
reasonable allowance for salaries or other compensation for Lumber Company paid the Government a total of P 9,127.50
personal services actually rendered xxx as reforestation charges.
• The company, however, claimed that the sum of
Generally, the burden to prove the validity of the claimed 9,127.50, was not used in the reforestation of the area covered
deduction falls on the taxpayer. In the case being discussed, by its license.
Algue proved that the payment of the fees was necessary and • Therefore, it is refundable to it or may be applied as
reasonable in the light of the efforts exerted by the payees. compensation of P 4,802.37 due from it as forest charges.

The claimed deduction by the private respondent was ISSUE: Whether or not the 9,127.50 pesos is refundable or
permitted under the Internal Revenue Code and should may be used as compensation.
therefore not have been disallowed by the petitioner.
RULING: No.
DOCTRINE:
There is nothing in the law that requires that the amount
The Court noted the Lifeblood Doctrine, wherein taxes are the collected as reforestation charges be used exclusively for the
lifeblood of the government and so should be collected without reforestation of the area covered by the license, and that if not
unnecessary hindrance. On the other hand, such collection used, it may be refunded to him.
should be made in accordance with law as any arbitrariness The amount paid by the holder of the license as
will negate the very reason for government itself. reforestation charges is in the nature of a tax which forms part
of the Forestation Fund, payable by him irrespective of whether
Therefore, the appealed decision of the CTA was affirmed by the area covered by his license is reforested or not.
the Court. The rule is that internal revenue taxes, such as the
forest charges is not subject to set-off or compensation.
Further, the Court stated that taxes are not contracts
between the taxpayer and the government, it is a duty to which
should be enforced, regardless of whether the taxpayer
consents to it or not.
 owed him P4,116.00 when a portion of his land was
DOCTRINE: Taxes are not in the nature of contracts between expropriated.
the parties but grow out of a duty to, and are positive acts of,
the government, to the making and enforcing of which, the RULING: No.
personal consent of the individual taxpayer is not required.
• Internal Revenue Taxes can not be the subject of set-
off or compensation.
• The reason for this rule is that government and
taxpayer are not mutually creditors and debtors of each other
under Article 1278 of the Civil Code and a claim for taxes is not
such a debt, demand, contract or judgment as is allowed to be
set-off.
[G.R. No. L-67649. June 28, 1988.] - LANTO • Legal compensation requires that each one of the
obligors be bound principally and that he be at the same time
FACTS: a principal creditor of the other and that the two debts be due.
Taxes are not in the nature of contracts.
Parties: Francia as the petitioner and Intermediate Appellate • A person cannot refuse to pay a tax on the ground that
Court as the respondent the government owes him an amount equal to or greater than
Procedural: Francia owned a lot which was expropriated by the the tax being collected.
Republic of the Philippines for the sum of P4,116.00 • The collection of a tax cannot await the results of a
representing the estimated amount equivalent to the assessed lawsuit against the government.
value of the aforesaid portion.
• The expropriation payment was deposited with the DOCTRINE: A person cannot refuse to pay a tax on the ground
Philippine National Bank but Francia did not withdraw the that the government owes him an amount equal to or greater
proceeds. than the tax being collected. The collection of a tax cannot
• Francia failed to pay his real estate taxes for 14 years await the results of a lawsuit against the government.
from 1963 to 1977. To satisfy the tax delinquency of P2,400.00,
his property was sold at public auction by the City Treasurer of
Pasay City pursuant to Section 73 of Presidential Decree No. MELECIO R. DOMINGO vs. HON. LORENZO C. GARLITOS
464 known as the Real Property Tax Code. [G.R. No. L-18994. June 29, 1963.] - TAPIA
• However, he was not present during the auction sale FACTS:
wherein Ho Fernandez was the highest bidder for the property. In special proceedings No. 14 entitled “In the matter of the
Intestate Estate of the Late Walter Scott Price”, the Court of
First Instance of Leyte ordered the payment of the estate and
ISSUE: Whether or not his tax delinquency of P2,400.00 has inheritance taxes, charges and penalties, amounting to
been extinguished by legal compensation as the government P40,058.55 by the estate. It became final and executory so the
fiscal applied for the execution of the judgment which was
denied on the ground that the Government was indebted to the The Court allowed the compensation since the Government
estate in the amount of P262,200 which had been appropriated had not denied it owed the estate’s claim. It considered that
for the purposes of R.A. No. 2700. both the claim of the Government for inheritance taxes and the
Furthermore, the Court ordered that the payment of the claim claim of the intestate for services rendered had already
of the Collector of Internal Revenue be deferred until the become overdue and demandable as well as fully liquidated.
Government shall have paid its accounts to the administratrix In fact, a law (Republic Act No. 2700) has appropriated a fund
herein amounting to P262,200.00 for its payment.

Executive Secretary vs. Southwing Heavy Industries (G.R.

No. 164171, February 20, 2006)
ISSUE:
Are compensation and writ of execution the proper procedure HON. EXECUTIVE SECRETARY, HON. SECRETARY OF
for the payment of debts and expenses of administration? FINANCE, THE CHIEF OF THE LAND TRANSPORTATION
OFFICE, THE COMMISSIONER OF CUSTOMS, and THE
RULING: COLLECTOR OF CUSTOMS, SUBIC SPECIAL ECONOMIC
No, a writ of execution is not the proper procedure for the ZONE, Petitioners,
payment of debts and expenses of administration. The proper
procedure is for the court to order the sale of personal estate vs.
or the sale or mortgage of real property of the deceased and
all debts or expenses of the administrator and with the written MOTOR VEHICLE IMPORTERS ASSOCIATION OF SUBIC
notice to all the heirs, legatees and devisees residing in the BAY FREEPORT, INC., represented by its President
Philippines. And when sale or mortgage of real estate is to be ALFREDO S. GALANG, Respondent.
made, the regulations contained in Rule 90, section 7, of the
Rules of Court should be complied with.
President Gloria Macapagal-Arroyo, through Executive
Secretary Alberto G. Romulo, issued EO 156, entitled
Execution may issue only where the devisees, legatees or
"Providing for a comprehensive industrial policy and directions
heirs have entered into possession of their respective portions
for the motor vehicle development program and its
in the estate prior to settlement and payment of the debts and
implementing guidelines.
expenses of administration and it is later ascertained that there
are such debts and expenses to be paid, in which case “the
The assailed provision stated: “3.1 The importation into the
court having jurisdiction of the estate may, by order for that
country, inclusive of the Freeport, of all types of used motor
purpose, after hearing, settle the amount of their several
vehicles is prohibited, except for the following:”
liabilities, and order how much and in what manner each
person shall contribute, and may issue execution if
The issuance of EO 156 spawned three separate actions for
circumstances require”
declaratory relief before Branch 72 of the Regional Trial Court
of Olongapo City, all seeking the declaration of the Held:
unconstitutionality of Article 2, Section 3.1 of said executive
order. The cases were filed by herein respondent entities, who Petitioners’ arguments lack merit.
or whose members, are classified as Subic Bay Freeport
Enterprises and engaged in the business of, among others, The established rule that the constitutionality of a law or
importing and/or trading used motor vehicles. administrative issuance can be challenged by one who will
sustain a direct injury as a result of its enforcement has been
RTC: satisfied in the instant case. The broad subject of the prohibited
importation is "all types of used motor vehicles." Respondents
Subic Integrated Macro Ventures Corporation (Macro would definitely suffer a direct injury from the implementation
Ventures), Southwing Heavy Industries, Inc., (Southwing) of EO 156 because their certificate of registration and tax
United Auctioneers, Inc. (United Auctioneers), and Microvan, exemption authorize them to trade and/or import new and used
Inc. (Microvan), Motor Vehicle Importers Association of Subic motor vehicles and spare parts, except "used cars." Other
Bay Freeport, Inc. (Association), all filed for declaratory relief types of motor vehicles imported and/or traded by respondents
and had the same decision in which judgment is hereby and not falling within the category of used cars would thus be
rendered in favor of petitioner declaring Executive Order 156 subjected to the ban to the prejudice of their business.
[Article 2, Section] 3.1 for being unconstitutional and illegal; Undoubtedly, respondents have the legal standing to assail the
directing respondents Collector of Customs based at SBMA to validity of EO 156.
allow the importation and entry of used motor vehicles
pursuant to the mandate of RA 7227; directing respondent As to the propriety of declaratory relief as a vehicle for assailing
Chief of the Land Transportation Office and its subordinates the executive issuance, suffice it to state that any breach of the
inside the Subic Special Economic Zone or SBMA to process rights of respondents will not affect the case. In Commission
the registration of imported used motor vehicles; directing the on Audit of the Province of Cebu v. Province of Cebu, the Court
respondent Chairman of the SBMA to allow the entry into the entertained a suit for declaratory relief to finally settle the doubt
Subic Special Economic Zone or SBMA imported used motor as to the proper interpretation of the conflicting laws involved,
vehicle; and in general, to allow unimpeded entry and notwithstanding a violation of the right of the party affected. We
importation of used motor vehicles to the Philippines subject find no reason to deviate from said ruling mindful of the
only to the payment of the required customs duties. significance of the present case to the national economy.

CA: So also, summary judgments were properly rendered by the

The instant petition for certiorari is hereby DENIED. trial court because the issues involved in the instant case were
pure questions of law. A motion for summary judgment is
Issue: premised on the assumption that the issues presented need
Whether or not Article 2, Section 3.1 of EO 156 is valid and not be tried either because these are patently devoid of
applicable to the entire country, including the Freeeport. substance or that there is no genuine issue as to any pertinent
fact. It is a method sanctioned by the Rules of Court for the
prompt disposition of a civil action in which the pleadings raise • In maintaining the validity of Proclamation No. 420,
only a legal issue, not a genuine issue as to any material fact. respondents contend that among the six (6) allegations that the
GRANTING OF TAX EXEMPTIONS OF PRESIDENTIAL
PROCLAMATION NO. 420 to JOHN HAY SEZ IS INVALID
John Hay People’s Alternative Coalition vs. VICTOR LIM AND ILLEGAL AS IT IS AN UNCONSTITUTIONAL
PRESIDENT, BASES CONVERSION DEVELOPMENT EXERCISE BY THE PRESIDENT OF A POWER GRANTED
AUTHORITY - (G.R. No. 119775, October 24, 2003) - ONLY TO THE LEGISLATURE.
DELOS SANTOS
IT LIMITS THE POWERS AND INTERFERES WITH THE
FACTS: AUTONOMY OF THE CITY OF BAGUIO IS INVALID,
ILLEGAL AND UNCONSTITUTIONAL.
• Parties: John Hay People’s Alternative Coalition as
petitioner and Lim as respondent IT VIOLATES THE RULE THAT ALL TAXES SHOULD BE
UNIFORM AND EQUITABLE.
• Procedural: Section 12 of R.A. No. 7227 (Bases
Conversion and Development Act) created and granted the
Subic Special Economic Zone SEZ incentives ranging from tax
and duty-free importations, exemption of businesses therein And by extending to the John Hay SEZ economic incentives
from local and national taxes, to other hallmarks of a liberalized similar to those enjoyed by the Subic SEZ which was
financial and business climate. established under R.A. No. 7227, the proclamation is merely
implementing the legislative intent of said law to turn the US
• While R.A. No. 7227 expressly gave authority to the military bases into hubs of business activity or investment.
President to create through executive proclamation, subject to
the concurrence of the local government units directly affected, ISSUE: Whether or not Proclamation No. 420 is constitutional
other Special Economic Zones (SEZ) in the areas covered by providing for national and local tax exemption within and
respectively by the Clark military reservation, the Wallace Air granting other economic incentives to the John Hay SEZ.
Station in San Fernando, La Union, and Camp John Hay. Thus,
President Ramos issued Proclamation No. 420 in 1994 which RULING: No.
established a SEZ on a portion of Camp John Hay.
• No but only to Section 3 that provides tax exemptions
The petitioners in this case filed a petition for prohibition, and granting other economic incentives.
mandamus and declaratory relief with prayer for a temporary
restraining order (TRO) and/or writ of preliminary injunction, Nowhere in RA 7227 is there a grant of tax exemption to SEZs
petitioners assail, in the main, the constitutionality of yet to be established in base areas, unlike the grant under
Presidential Proclamation No. 420 Section 12 which provides for tax exemption to the established
Subic SEZ. The tax exemption grant to John Hay SEZ
contravenes Article VI, Section 28 (4) of the 1987 Constitution
which provides that “No law granting any tax exemption shall RESPONDENTS: INTERMEDIATE APPELLATE COURT and
be passed without the concurrence of a majority of all the HYDRO PIPES PHILIPPINES, INC
members of Congress.
Facts:
• Furthermore, it is the Legislature, unless limited by a Delfin Pacheco and his sister, Pelagia Pacheco, owned 27,169
provision of the state constitution, which has the full power to square meters of land in the Municipality of Polo (now
exempt any person or corporation or class of property from Valenzuela), Bulacan Province, in 1974. (now Metro Manila).
taxation, its power to exempt being as broad as its power to The said co-owners leased the same property to Construction
tax. Components International Inc., with the provision that if the
lessor decides to sell the leased property during or after the
The grant by the second sentence of Section 3 ofProclamation term of this lease, he must first offer it to the lessee, and the
No. 420 that the zone shall have all the applicable letter has priority to buy under similar conditions. With the
incentives of the Special Economic Zone under Section 12 written compliance and consent of lessors Delfin Pacheco and
of R.A. No. 7227 and those applicable incentives granted Pelagia Pacheco, lessee Construction Components
in the Export Processing Zones, the Omnibus Investment International, Inc. surrendered its rights and obligations under
Code of 1987, the Foreign Investment Act of 1991, and new the lease contract in favor of Hydro Pipes Philippines, Inc. on
investment laws that may hereinafter be enacted. (this is August 3, 1974. On January 3, 1976, lessors Delfin and
required to be the power of the legislature or a specific Pelagia Pacheco and defendant Delpher Trades Corporation
delegation by the legislature to the President in terms of tax executed a deed of exchange in which the former conveyed to
exemption and other privileges to the John Hay SEZ. the latter the leased property as well as another parcel of land
in Malinta Estate, Valenzuela, Metro Manila for 2,500 shares
Therefore, since the other provisions of Proclamation 420 of defendant corporation stock valued at P1,500,000.00.
complied with the requirements of a valid proclamation since it
was concurred by the city of baguio, only the second sentence On the ground that it was not given the first option to buy the
of section 3 is VOID for being violative of the Constitution. leased property pursuant to the proviso in the lease
agreement, respondent Hydro Pipes Philippines, Inc., filed an
DOCTRINE: The Legislature, unless limited by a provision of amended complaint for reconveyance of Lot. No. 1095 in its
the state constitution, has the full power to exempt any person favor under conditions similar to those whereby Delpher
or corporation or class of property from taxation, its power to Trades Corporation acquired the property from Pelagia
exempt being as broad as its power to tax. Pacheco and Delphin Pacheco.

Delpher Trades Corp and Pacheco vs. IAC (G.R. No. L- CFI
69259, January 26, 1988) - TEJADA Accordingly, the judgment is hereby rendered declaring the
valid existence of the plaintiffs preferential right to acquire the
PETITIONERS: DELPHER TRADES CORPORATION, and subject property (right of first refusal) and ordering the
DELPHIN PACHECO defendants and all persons deriving rights therefrom to convey
the said property to plaintiff who may offer to acquire the same merely changed their ownership from one form to another. The
at the rate of P14.00 per square meter, more or less, for Lot ownership remained in the same hands. Hence, the private
1095 whose area is 27,169 square meters only. Without respondent has no basis for its claim of a light of first refusal
pronouncement as to attorney's fees and costs. under the lease contract.

IAC Doctrine:
The lower court's decision was affirmed on appeal by the After incorporation, one becomes a stockholder of a
Intermediate Appellate Court. The defendants-appellants, now corporation by subscription or by purchasing stock directly
the petitioners, filed a petition for certiorari to review the from the corporation or from the individual owners thereof.
appellate court's decision.
Wherefore, the instant petition is hereby granted, The
Issue: questioned decision and resolution of the then Intermediate
Whether or not the heirs of the Pacheco are guilty of tax Appellate Court are reversed and set aside.
evasion by taking refuge in the tax benefits of a corporation.

Ruling:
The court ruled in favor of the petitioners. In the case at bar, in
exchange for their properties, the Pachecos acquired 2,500
original unissued no par value shares of stocks of the Delpher
Trades Corporation. Consequently, the Pachecos became
stockholders of the corporation by subscription. “The essence
of the stock subscription is an agreement to take and pay for COMMISSIONER OF INTERNAL REVENUE, petitioner,
original unissued shares of a corporation, formed or to be vs. LINCOLN PHILIPPINE LIFE INSURANCE COMPANY,
formed.” INC.
(now JARDINE-CMA LIFE INSURANCE COMPANY, INC.)
The records do not point to anything wrong or objectionable and
about this “estate planning” scheme resorted to by the THE COURT OF APPEALS, respondents.
Pachecos. The court held that “the legal right of a taxpayer to [G.R. No. 119176. March 19, 2002.]
decrease the amount of what otherwise could be his taxes or
altogether avoid them, by means which the law permits, cannot Juanito C. Castañeda, Jr. for private respondent.
be doubted.” The Solicitor General for public respondent.

The “Deed of Exchange” of property between the Pachecos FACTS:

and Delpher Trades Corporation cannot be considered a
contract of sale. There was no transfer of actual ownership This is a petition for review on certiorari filed by the
interests by the Pachecos to a third party. The Pacheco family Commission of Internal Revenue of the decision of the Court
of Appeals which reversed in part the decision of the Court of the CTA's decision insofar as it nullified the deficiency
Tax Appeals. assessment on the insurance policy, but reversing the
same with regard to the deficiency assessment on the
Private respondent Lincoln Philippine Life Insurance Co., Inc., stock dividends. The CTA ruled that the correct basis of the
(now Jardine-CMA Life Insurance Company, Inc.) is a documentary stamp tax due on the stock dividends is the
domestic corporation registered with the Securities and actual value or book value represented by the shares.
Exchange Commission and engaged in life insurance
business. A motion for reconsideration of the decision having been
denied, both the Commissioner of Internal Revenue and
In the years prior to 1984, private respondent issued a special private respondent appealed to this Court, private respondent
kind of life insurance policy known as the "Junior Estate Builder appealed the decision of the Court of Appeals insofar as it
Policy," the distinguishing feature of which is a clause providing upheld the validity of the deficiency tax assessment on the
for an automatic increase in the amount of life insurance stock dividends.
coverage upon attainment of a certain age by the insured
without the need of issuing a new policy. The Court of Appeals sustained the CTA's ruling that there was
only one transaction involved in the issuance of the insurance
The clause was to take effect in the year 1984. Documentary policy and that the "automatic increase clause" is an integral
stamp taxes due on the policy were paid by petitioner only on part of that policy.
the initial sum assured.
The Commissioner of Internal Revenue, on his part, filed the
Documentary stamp taxes were paid based only on the par present petition questioning that portion of the Court of
value of P5,000,000.00 and not on the book value. Appeals' decision which invalidated the deficiency assessment
on the insurance policy.
Subsequently, petitioner issued deficiency documentary
stamps tax assessment for the year 1984. ISSUE: WHETHER THE HONORABLE COURT OF
APPEALS ERRED IN NOT COMPUTING THE AMOUNT OF
Private respondent questioned the deficiency TAX ON THE TOTAL VALUE OF THE INSURANCE
assessments and sought their cancellation in a petition ASSURED IN THE POLICY INCLUDING THE ADDITIONAL
filed in the Court of Tax Appeals. INCREASE ASSURED BY THE AUTOMATIC INCREASE
CLAUSE DESPITE ITS RULING THAT THE ORIGINAL
On March 30, 1993, the Court of Tax Appeals found no valid POLICY AND THE AUTOMATIC CLAUSE CONSTITUTED
basis for the deficiency tax assessment on the stock ONLY A SINGULAR TRANSACTION.
dividends, as well as on the insurance policy.
RULING: The petition is impressed with merit.
Petitioner appealed the CTA's decision to the Court of
Appeals. Court of Appeals promulgated a decision affirming
The subject insurance policy at the time it was issued requiring that the tax be computed on the basis of the amount
contained an "automatic increase clause." Although the clause insured by the policy.
was to take effect only in 1984, it was written into the policy at
the time of its issuance. The distinctive feature of the "junior
estate builder policy" called the "automatic increase clause" CIR vs. Estate of Benigno Toda (G.R. No. 147188,
already formed part and parcel of the insurance contract, September 14, 2004) - CUEVAS
hence, there was no need for an execution of a separate PETITIONERS: Commissioner of Internal Revenue
agreement for the increase in the coverage that took effect in RESPONDENTS: The Estate of Benigno P. Toda, Jr.,
1984 when the assured reached a certain age. Represented by Special Co-administrators Lorna Kapunan
and Mario Luza Bautista
It is clear from Section 173 that the payment of documentary
stamp taxes is done at the time the act is done or transaction FACTS:
had and the tax base for the computation of documentary A Notice of Assessment (NOA) was sent to the Cibeles
stamp taxes on life insurance policies under Section 183 is the Insurance Corporation (CIC) by the petitioner for deficiency
amount fixed in policy, unless the interest of a person insured income tax arising from an alleged simulated sale of the
is susceptible of exact pecuniary measurement. Cibeles Building, a 16-storey commercial building situated on
two parcels of land on Ayala Avenue, Makati City.
In the instant case, the additional insurance that took effect in Benigno P. Toda, Jr. is the President and owner of the
1984 was an obligation subject to a suspensive obligation, but 99.991% of its issued and outstanding capital stock. On March
still a part of the insurance sold to which private respondent 2, 1989, CIC authorized Toda to sell the building and two
was liable for the payment of the documentary stamp tax. parcels of land on which it stands for not less than 90 million.
On August 30, 1987, Toda purportedly sold the property for
The deficiency of documentary stamp tax imposed on private 100 million to Rafael Altonaga, who, in turn, sold the same on
respondent is definitely not on the amount of the original the same day to Royal Match Inc. (RMI) for 200 million. Both
insurance coverage, but on the increase of the amount insured transactions were evidenced by notarized Deeds of Absolute
upon the effectivity of the "Junior Estate Builder Policy." Sale. CIC included gains from sale of real property of
P75,728.021 in its annual income tax return. For the sale of the
Finally, it should be emphasized that while tax avoidance property to RMI, Altonaga paid a 5% capital gains tax in the
schemes and arrangements are not prohibited, tax laws cannot amount of P10 million.
be circumvented in order to evade the payment of just taxes. 3 years before Toda died, he had sold his entire shares of
In the case at bar, to claim that the increase in the amount stocks in CIC to Le Hun T. Choa for 12.5 million pesos,
insured (by virtue of the automatic increase clause evidenced by a Deed of Sale of Shares of Stock which provides
incorporated into the policy at the time of issuance) should not that the buyer is free from all income tax liabilities for 1987,
be included in the computation of the documentary stamp 1988 and 1989.
taxes due on the policy would be a clear evasion of the law On March 29, 1994, BIR issued the 79-million NOA and
demand letter against CIC. CIC moved to reconsider because
it has a new set of stockholders which it called "new CIC." It "willful," or "deliberate and not accidental"; and (3) a course of
also pointed out Toda's undertaking to keep CIC and its action or failure of action which is unlawful.
stockholdings free from all tax liabilities during the period within
which the realty was sold. In the case at bar, all these three factors are present. The trial
On January 27, 1995, BIR issued a NOA against the Estate of balance showed that RMI debited P40M as "other-inv. Cibeles
Toda. The Estate filed a protest but the BIR rejected arguing Building" that indicates RMI paid CIC and not Altonaga. The
that a fraudulent scheme was deliberately perpetuated by the intermediary transaction, i.e., the sale of Altonaga, which was
CIC wholly owned and controlled by Toda by covering up the prompted more on the mitigation of tax liabilities than for
additional gain of P100 million, which resulted in the change in legitimate business purposes, constitutes one of tax evasion.
the income structure of the proceeds of the sale of the two
parcels of land and the building thereon to an individual capital Generally, a sale or exchange of assets will have an income
gains, thus evading the higher corporate income tax rate of tax incidence only when it is consummated. The incidence of
35%. Since it is falsity or fraud, the prescription period is 10 taxation depends upon the substance of a transaction. A sale
years from the discovery of the falsity or fraud as prescribed by one person cannot be transformed for tax purposes into a
under Sec. 223 (a) of the NIRC. sale by another by using the latter as a conduit through which
to pass title. Hence, the sale to Altonaga should be disregarded
Court of Tax Appeals – No proof of fraudulent transaction, so for income tax purposes.
the applicable period is three (3) years after the last day
prescribed by law for filing the return. No, the period has not prescribed.
Court of Appeals – Affirmed the decision of the CTA. According to the Tax Code, in cases of (1) fraudulent returns;
Commissioner of Internal Revenue – Appealed the decision. (2) false returns with intent to evade tax; and (3) failure to file
a return, the period within which to assess tax is ten years from
ISSUE/S: discovery of the fraud, falsification or omission, as the case
Whether this is a case of tax evasion or tax avoidance; may be.
Whether or not the period for assessment of deficiency income
tax for the year 1989 has already prescribed; and In the case at bar, the false return was filed on April 15 1990,
Whether or not the respondent Estate can be held liable for the and the falsity thereof was claimed to have been discovered
deficiency IT of CIC for the year 1989, if any. only on March 8 1991. The assessment for the 1989 deficiency
income tax of CIC was issued on January 9 1995. Clearly, the
RULING: issuance of the correct assessment for deficiency income tax
This case involves tax evasion. was well within the prescriptive period.
Tax evasion connotes the integration of three factors: (1) the
end to be achieved, i.e., the payment of less than that known Yes, the Estate of Toda can be held liable for the
by the taxpayer to be legally due, or the non-payment of tax deficiency income tax of CIC.
when it is shown that a tax is due; (2) an accompanying state
of mind which is described as being "evil," in "bad faith,"
Generally, a corporation has a juridical personality distinct and
separate from the persons owning or composing it. However, City of Iloilo vs. Smart Communications (G.R. No. 167260,
certain instances in which personal liability may arise. February 27, 2009) - FORTUNO

He assents to the (a) patently unlawful act of the corporation, Petitioner: City of Iloilo
(b) bad faith or gross negligence in directing its affairs, or (c) Respondent: Smart Communications
conflict of interest, resulting in damages to the corporation, its
stockholders, or other persons; Facts:
He consents to the issuance of watered down stocks or, having
knowledge thereof, does not forthwith file with the corporate Before this Court is the appeal by certiorari filed by the City of
secretary his written objection thereto; Iloilo (petitioner) under Rule 45 of the Rules of Court seeking
He agrees to hold himself personally and solidarily liable with to set aside the decision of the Regional Trial Court (RTC) of
the corporation; or Iloilo City, Branch 28, which declared that respondent SMART
He is made, by specific provision of law, to personally answer Communications, Inc. (SMART) is exempt from the payment of
for his corporate action. local franchise and business taxes.

In the case at bar, when the late Toda undertook and agreed
to hold the BUYER and Cibeles free from any and all income SMART received a letter of assessment dated February 12,
tax liabilities of Cibeles for the fiscal years 1987, 1988, and 2002 from petitioner requiring it to pay deficiency local
1989, he thereby voluntarily held himself personally liable franchise and business taxes, in the amount of P764,545.29,
therefor. Respondent estate cannot, therefore, deny liability for which it incurred for the years 1997 to 2001. SMART protested
CICs deficiency income tax for the year 1989 by invoking the the assessment, claiming exemption from payment of local
separate corporate personality of CIC, since its obligation franchise and business taxes based on Section 9 of its
arose from Todas contractual undertaking, as contained in the legislative franchise under Republic Act (R.A.) No.7294
Deed of Sale of Shares of Stock. (SMART’s franchise). Under SMART’s franchise, it was
required to pay a franchise tax equivalent to 3% of all gross
DOCTRINE: TAX EVASION AND TAX AVOIDANCE receipts, which amount shall be in lieu of all taxes. SMART
DISTINGUISHED; Tax avoidance and tax evasion are the two contends that the “in lieu of all the taxes” clause covers local
most common ways used by taxpayers in escaping from franchise and business taxes. SMART contends that by virtue
taxation. Tax avoidance is the tax saving device within the of Section 23, tax exemptions granted by the legislature to
means sanctioned by law. This method should be used by the other holders of telecommunications franchise may be
taxpayer in good faith and at arms length. Tax evasion, on the extended to and availed of by SMART.
other hand, is a scheme used outside of those lawful means
and when availed of, it usually subjects the taxpayer to further The petitioner posits that SMART’s claim for exemption under
or additional civil or criminal liabilities. its franchise is not equivocal enough to prevail over the
specific grant of power to local government units to exact taxes
from businesses operating within its territorial jurisdiction under assessed against it by petitioner, plus the surcharges and
Section 137 in relation to Section 151 of the LGC.More interest due thereon.
importantly, it claimed that exemptions from taxation have
already been removed by Section 193 of the LGC, which Doctrine:
provides that tax exemptions or incentives granted to, or The basic principle in the construction of laws granting tax
presently enjoyed by all persons, yed by all persons, whether exemptions is he who claims an exemption from his share of
natural or juridical, including government-owned or controlled the common burden of taxation must justify his claim by
corporations, except local water districts, cooperatives duly showing that the Legislature intended to exempt him by words
registered under RA No. 6938, non-stock and non-profit too plain to be beyond doubt or mistake.
hospitals and educational institutions, are hereby withdrawn
upon the effectivity of this Code.

Issue: Whether or not SMART is exempt from the payment of

local franchise and business taxes under Section 9 of its
franchise.

Ruling: National Power Corporation vs. CBAA (G.R. No. 171470,

January 30, 2009) - SAVEDIA
No. The Court failed to find a categorical and encompassing
grant of tax exemption to SMART covering exemption from Petitioner: National Power Corporation
both national and local taxes. R.A 7294 does not expressly
provide what kind of taxes SMART is exempt from. It is not Respondent: Central Board of Assessment Appeals
clear whether the “in lieu of all taxes” provision in the franchise
of SMART would include exemption from local or national
taxation. What is clear is that SMART shall pay franchise tax
equivalent to 3% of all gross receipts of the business Facts:
transacted under its franchise. But whether the franchise tax
exemption would include exemption from exactions by both the On January 11, 1993, First Private Power Corporation
local and the national government is not unequivocal. The (FPPC) entered into a BOT (Build-Operate-Transfer)
uncertainty in the “in lieu of all taxes” clause in R.A No. 7294 agreement with NAPOCOR for the construction of the 215-
on whether SMART to be exempt from both local and national Megawatt Bauang Diesel Power Plant in Payocpoc, Bauang,
franchise tax must be construed strictly against SMART which La Union. The BOT Agreement provided, via an Accession
claims the exemption. SMART’s claim for exemption from local Undertaking, for the creation of the Bauang Private Power
and franchise taxes based on Sec. 9 of its franchise is Corporation (BPPC) that will own, manage and operate the
therefore unfounded Hence, SMART is liable to pay the local power plant/station, and assume and perform FPPC's
franchise and business taxes amounting to ₱764,545.29, obligations under the BOT agreement. For a fee, BPPC will
convert NAPOCOR's supplied diesel fuel into electricity and The LBAA denied the petition. It ruled that the
deliver the product to NAPOCOR. exemption as provided by the Local Government Code applies
only when a GOCC like NAPOCOR owns and/or actually uses
The BOT agreement contains that the BPPC shall the machinery and equipment for the generation and
directly own the power station and all the machineries and transmission of electric power. It ruled that NAPOCOR does
equipment on the site or used in connection with the Power not own and does not even actually and directly use the
Station for the purpose of converting fuel of NAPOCOR into machineries. And that it is the BPPC which is a non-
electricity. government entity, which owns, maintains, and operates the
machinery and equipment.
The Officer-in-Charge of the Municipal Assessor's
Office of Bauang, La Union initially issued Declaration of Real NAPOCOR appealed the LBAA ruling to the CBAA.
Property Nos. 25016 and 25022 to 25029 declaring BPPC's CBAA then dismissed the appeal based on its finding that the
machinery and equipment as tax-exempt. On the initiative of BPPC, and not NAPOCOR, is the actual, direct and exclusive
the Bauang Vice Mayor, the municipality questioned before the user of the equipment and machineries, thus the exemption
Regional Director of the Bureau of Local Government Finance under the local government code does not apply.
(BLGF) the declared tax exemption.

The Bureau ruled that the BPPC’s machineries and

equipment are subject to real property tax and directed the NAPOCOR filed with the Court of Tax Appeals a
Assessors’ Office to take appropriate action. The petition for review, to challenge the CBAA Decision.
Provincial/Municipal Assessors thereupon issued Revised Tax
Declaration Nos. 30026 to 30033 and 30337, and cancelled
the earlier issued Declarations of Real Property. The Municipal
Assessor of Baang then issued a Notice of Assessment and CTA
Tax Bill to BPPC assessing/taxing the machinery and
equipment in the total sum of P288,582,848.00 for the 1995- The CTA dismissed the petition. The CTA ruled that the
1998 period. NAPOCOR is not the registered owner of the machineries and
equipment. These are registered in BPCC’s name as
NAPOCOR then filed a petition to declare the subject confirmed by the BOT Agreement, and therefore has no legal
tax declaration to be exempted with the Local Board of right or interest over these properties.
Assessment Appeals.
That the exemption under the law does not apply
because BPPC is not a GOCC. Thus, the BOT agreement
cannot be the basis for the claimed exemption since tax
LBAA and CBAA exemption cannot be agreed upon by mere contract between
the parties.
 Also, the CTA found NAPOCOR's petition to be an equipment and therefore the tax exemption under Section 234
inappropriate remedy, as it is not the appeal contemplated by of the Local Government Code cannot apply.
law; NAPOCOR was in fact asserting an exemption on the
basis of the provisions of the BOT Agreement. An exemption
is an evidentiary matter for the assessors, not for the LBAA, to
decide pursuant to Section 206 of the LGC; NAPOCOR cannot Doctrine
simply bypass the authority granted to concerned
administrative agencies, as these available administrative Tax exemption cannot be agreed upon by mere
remedies must first be exhausted. contract between the parties as it must be expressly granted
by the Constitution, statute, or franchise. A tax exemption, if
Thus, NAPOCOR sought the review of the CTA and when granted, is also not transferable, as it is a personal
decision in the Supreme Court. privilege and it must be strictly construed.

ISSUE:
Winebrenner & Inigo Insurance Brokers, Inc. vs. CIR (G.R.
Whether the machineries and equipment are actually, 206526, January 28, 2015) - DELOS REYES
directly, and exclusively used by NAPOCOR in the generation
and transmission of electric power, and are therefore not Petition for review under Rule 45 ROC and Rule 16 of the
subject to tax. revised rules of the CTA.
CWT; creditable withholding tax; CWT is not an internal
revenue tax but a method of collecting income tax “in advance”
(because the tax has already been withheld even before the
Ruling: payee has received his income) from the recipient of income
through the payor thereof, which is constituted by law as the
No. Section 234 of the Local government code provides withholding agent of government.
that all machineries and equipment that are actually, directly FAR; financial adjustment return
and exclusively used by local water districts and government- Petitioner, Winebrenner vs. Commissioner of IR
owned or controlled corporations engaged in the supply and
distribution and/ or generation and transmission of electric Facts / Procedural:
power are exempted from the payment of real property tax. On April 15, 2004, petitioner filed Annual ITR. Two years after,
it claimed for administrative tax credit/refund for its unutilized
In the case, NAPOCOR admits by virtue of the BOT CWT CY 2003.
that BPPC owns the machinery and equipment in the power Petitioner filed a claim at RDO 50, there being no action,
plant. By its express terms, BPPC has complete ownership of petition for review was filed before the CTA which was raffled
the project. Thus, BPPC is the actual user of its machinery and to the special first division.
CTA division partially granted the petitioner’s claim for refund return is indispensable to prove that it did not carry over or
and CTA ordered to issue a tax credit certificate. utilized the claimed excess creditable withholding taxes.
Petitioner filed a motion for partial recon. With leave to Submit Absent thereof, there will be no basis for a taxpayer's claim for
Supplemental Evid. to be granted the entirety of its claim for refund since there will be no evidence that the taxpayer did not
refund, or in the alternative, that it be allowed to submit and carry over or utilize the claimed excess creditable withholding
offer relevant documents as supplemental evidence taxes to the succeeding taxable quarters.
CIR also moved for recon. praying for the denial of the entire SC:
amount of refund because petitioner failed to present the Petitioner: echos dissenting opinions of CTA that the SC ruled
quarterly Income Tax Returns (ITRs) for CY 2004. that the requiring ITR and FAR for the succeeding year in a
Grounds: ITRS indispensable in proving petitioner’s claim for a refund has no basis in law and jurisprudence
entitlement to the claim because it would prove that no carry- CIR, in a comment: that even if a taxpayer signifies the option
over of unutilized and excess CWT for the four (4) quarters of for a tax refund or tax credit, this does not ipso facto confer the
CY 2003 to the succeeding four (4) quarters of CY 2004 was right to avail the option immediately. Kailangan pa ng
made. In the absence of said ITRs, CIR view’s that no refund investigation ng CIR to ascertain the correctness of the
could be granted as provided by sec. 76 of NIRC. corporate returns.
CTA division reversed itself and amended the decision. Denied
the entire claim Issue: The sole issue here is whether the submission and
Grounds: Petitioner should have presented evidence first to presentation of the quarterly ITRs of the succeeding quarters
prove utilized CWT. of a taxable year is indispensable in a claim for refund.
Aggrieved, elevated the case to the CTA en banc praying for
the reversal. Held: NO
CTA en banc affirmed the amended decision of the CTA Presentation of the claimant's quarterly returns is not a
division. requirement to prove entitlement to the refund.
Grounds: It stated that before a cash refund or an issuance of What sec. 76 requires is to prove prima facie entitlement to a
tax credit certificate for unutilized excess tax credits could be claim, including the fact of not having carried over the excess
granted, it was essential for petitioner to establish and prove, credits to the subsequent quarters or taxable year. Any
by presenting the quarterly ITRs of the succeeding years, that document other than ITRs may be used to establish that
the excess CWT was not carried over to the succeeding indeed the non-carry over clause has been complied with,
taxable quarters considering that the option to carry over in the provided that such is competent, relevant and part of the
succeeding taxable quarters could not be modified in the final records.
adjustment returns. Because the petitioner did not present ITS,
no refund can be granted.
To justify: cited jurisprudence stating that since the burden of
proof is upon the claimant to show that the amount claimed
was not utilized or carried over to the succeeding taxable
quarters, the presentation of quarterly itr and final adjustment
Fluor Daniel Phil. Inc. vs. CIR (G.R. 200620, March 18, POTC and PHILCOMSAT board of directors. The appointed
2015) nominee directors aligned with Nieto Family against Africa and
SILVA Illusurio (Africa-Bildner) to ensure control over the boards of
Petitioners: Abad, Andal, Araneta, Brodett, Locsin, San Jose POTC, PHILCOMSAT and PHC.
Respondent: PH Communications Satellite Corporation
(PHILCOMSAT) & PH Overseas Telecommunications In the August 2004 annual stocholder’s meeting conducted by
Corporation (POTC) - PCGG sequestered corporations the Nieto-PCGG group, an offshoot of separate elections
conducted by the 2 factions (Africa-Bildner & Nieto-PCGG) in
FACTS: POTC and PHILCOMSAT elected its board members having;
A petition for review of the decision and resolution of CA Locsin
reversing the RTC order which dismissed the complaint filed Laperal
by PHILCOMSAT for Inspection of Books against the Nieo, jr
incumbent PHC directors and/or officers to enforce its right Brodett
under Sections 74 and 75 of the Corporation Code, ruling that Andal
it lacked jurisdiction. RTC held that it is the Sandiganbayan San Jose
which has jurisdiction since the plaintiff is a sequestered Lokin, jr
corporation of the PH through PCGG with the allegation that Somera
the right of inspection over PHC is a right or authority raised as Abad
defense by the defendants. Araneta

Assailed RTC decision was preceded by a dispute on the On the other hand, on July 2004, Victor Africa from the Africa-
financial document inspection which would have been done by Bildner faction was elected as director at the POTC &
Africa as President and CEO of PHILCOMSAT which was PHILCOMSAT shareholder’s meeting, and was designated as
refused by Brodett, thus a complaint was filed by proxy to the PHILCOMSAT stockholder’s meeting.
PHILCOMSAT before the RTC.
However, prior to all the dispute on legitimate ownership of
Respondents are private companies sequestered by PCGG stock shares and positions in the boards, there was a pending
after EDSA people power in 1986. PHILCOMSAT owns 81% case which involved a compromise agreement dated June 28,
of the outstanding capital stock of PHILCOMSAT Holdings 1996 entered into by Atty Illusurio with the government and
Corporation (PHC) and the majority stockholders of PCGG regarding the Illusurio family shareholdings in POTC,
PHILCOMSAT are 7 families who owned and controlled POTC which include the shares forcibly taken from Atty Illusurio
- illusurio, nieto, poblador, africa, benedicto, africa, ponce himself by P-Marcos and was placed under the name of
enrile and elizalde. Independent Realty Corporation (IRC) and (Mid-Pasig) Land
Development (Mid-Pasig). In 2005, the SC affirmed the validity
During the P-GMA administration, Locsin, Andal, and of the subject compromise agreement, thus rendered the
Jalandoni were appointed nominee-directors of PCGG in the families Illusurio, Africa, Poblador, Benedicto and Ponce Enrile
families to have major control with 51.37% of stockshares, and A compromise agreement has the force of res judicata
the Nieto family nad PCGG as minorities. between the parties and should be complied with in
accordance with its terms.
CA
PHILCOMSAT appealed thru a Petition for Review arguing that RULING:
RTC has jurisdiction over the case involving the right of the Yes
stockholders to inspect corporate books and records.CA
granted the petition, thus reversed and set aside the RTC The SC under the doctrine of stare decisis echoed its decision
decision, and remanded the case for further proceedings. in the case of POTC vs Africa, a precedent of the present case,
where it upheld the validity of the compromise agreement
Contentions of the petitioners: between the government and Atty Illususrio.
The issue is who are the rightful representative and board of
directors of PHILCOMSAT The court further cited various jurisprudence which in summary
The right of PHILCOMSAT is hinged on the resolution of the held that PCGG has the authority to enter into Compromise
power struggle for legitimate board of directors, within Agreements in civil cases and to grant under certain
PHILCOMSAT between Africa and Nieto-Locsin group circumstances in criminal cases such that in avoiding litigation
Respondent corporation are both sequestered by the PCGG or putting an end to one which has already commenced.
hence all issues and controversies, related or incidental fall
under the exclusve and original jurisdiction of Sandiganbayan Amicable settlements and compromises are allowed and
Petition should be dismissed on the ground of litis pendentia encouraged in civil cases, moreover, a specific grant of
as CA may take judicial notice of the many pending cases immunity from criminal prosecutions was also sustained.
before serval courts regarding the authority of Africa to
represent PHILCOMSAT - an issue which must necessarily be Thus, as a result of the express recognition by the government
resolved to determine who has the right to inspect the books that 673 POTC shares belonged to Atty. Illusurio, he and his
and records of PHC group have the majority control of POTC. Accordingly, the
Nieto-PCGG group could not validly convene and hold a
ISSUE/S: stockholder’s meeting for the purpose of election of POTC
w/n the majority shareholdings in POTC and PHILCOMSAT officers, all the more to have a proxy to vote in the
rightfully and validly belonged to the Illusurio, Africa, Poblador, PHILCOMSAT meeting
Benedicto, Ponce and Enrile families, by virtue of the
compromise agreement entered into by Atty. Illusurio with the FLUOR DANIEL, INC.-PHILIPPINES vs. FIL-ESTATE
government PROPERTIES, INC.
G.R. No. 212895
DOCTRINE: November 27, 2019*

PETITIONER/S: Fluor Daniel, Inc-Philippines (FDIP)

RESPONDENT/S: Fil-Estate Properties, Inc (FEPI)
CA
FACTS: Petitioner filed a Motion for Additional Time to File Petition for
A petition for review under r145 of the Revised RoC, which Certiorari with the CA, which was denied in a resolution issued
assailed the CA resolutions which denied the Motion for by the court on the ground that there was no exceptional and
Additional Time to File Petition for Certiorari. meritorious circumstance to enable the appellate court to
exercise its discretion to grant an extension of time to file a
Precedent to the filing of the motion for additional time to file a petition for certiorari. Further, it held that the case being highly
petition for certiorari was the issuance of Construction Industry meritorious, should have promptly utilized the 60-day
Arbitrary Commission (CIAC) of a Notice of Award to reglementary period to conduct investigation against the
Respondent, which ordered the respondent to pay the assets of FEPI.
petitioner 13 579 599.57 plus interest. Such award was
affirmed by the CA IN 2008 and attained finality in 2009. Thereafter, petitioner filed a motion for reconsideration to
which the CA likewise denied, for the same reason as the first
In effect CIAC issued a writ of execution to which the denial in the motion for additional time to file petition for
respondent FEPI offered real properties to satisfy the judgment certiorari and reiterated its findings.
but it was refused by petitioner FDIP reasoning that such
offered property is foreign-owned corporation, which cannot ISSUE/S:
own real properties in this jurisdiction. w/n CA erred in denying the Motion for Additional Time to File
a Petition for Certiorari by the petitioner, FDIP
In an investigation, FDIP discovered that respondent owned
stock shares with the Fil-Estate Industrial Park (FEIP), and DOCTRINE
such were relayed to the sheriff and were garnished. Hence, Instances a petition for certiorari may be extended
the shares were auctioned and awarded to FDIP as the highest 1. Most persuasive and weighty reasons
bidder. 2. To relieve a litigant from an injustice not commensurate
with his failure to comply with the prescribed procedure
FDIP subsequently discovered that FEPI ceased its operations 3. Good faith of the defaulting party by immediately paying
thus rendered its shares worthless. Petitioner decided not to within a reasonable time from the time of the default
pay the sheriffs commission, and the corresponding certificate 4. The existence of special or compelling circumstances
of sale was not executed. Thus the award being unsatisfied, 5. The merits of the case
FDIP filed with CIAC a motion for issuance of alias writ of 6. A cause not entirely attributable to the fault or negligence
execution which was denied. of the party favored by the suspension of the rules
7. A lack of any showing that the review sought is merely
FDIP then filed for a motion for reconsideration and was frivolous and dilatory
likewise denied by the CIAC and reiterated its denial for the 8. The other party will not be unjustly prejudiced thereby
motion for an alias writ of execution.
9. Fraud, accident, mistake, or excusable negligence without 5. CA already granted an extension but reversed itself
appellant's fault
10. Peculiar legal and equitable circumstances attendant to RULING:
each case Yes.
11. In the name of substantial justice and fair play
12. Importance of the issues involved The SC reversed and set aside the resolutions of CA and
13. Exercise of sound discretion by the judge guided by all the ordered such lower court to reinstate and admit the petition for
attendant circumstances certiorari by FDIP to resolve the matter of collection based on
the decision rendered in favor of FDIP more than 20 years ago.
With the currently in force RoC and the amendment with regard
to the motion for extension of time to file petitions for certiorari On record, the court found the grant to the motion for additional
and jurisprudence, the conflict had been resolved in a time for its petition for certiorari, meritorious. FEPI has been
summary of case decisions. Thus jurisprudence had settled successfully evading its legal obligation for almost 20 years by
how and when a petition for certiorari and motion for extension simple expedient of a denial of motion for additional time to file
of time to file a petition for certiorari may be granted by the SC. a petition for certiorari, and in granting the contended petition,
no prejudice or unjust deprivation of any benefit will affect
Jurisprudence has settled that the general rule for a Petition for FEPI.
Certiorari must be filed within 60 days from notice of the
judgement, order, or resolution sought to be assailed, as China Banking Corp. vs. CIR (G.R. 172509, February 4,
provided by Section 4, R65 of the RoC. Similarly, when a 2015) - ADLAWAN
motion for reconsideration or new trial was timely filed, the
petition must filed must not be later than 60 days the motion Petitioner: China Banking Corporation
has been denied. However, such general rule may be relaxed Respondent: Commissioner of Internal Revenue
in instances such that;
1. The assailed decision was contradictory to the evidence Facts:
presented
2. The relief sought in a Motion for Consolidation of several Petitioner CBC is a universal bank duly organized and existing
criminal cases would be in keeping with law and equity, and to under the laws of the Philippines. For the taxable years 1982
facilitate speedy trial, provided there is a substantial identity in to 1986, CBC was engaged in transactions involving sales of
the information filed and witnesses to be presented foreign exchange to the Central Bank of the Philippines (now
3. Public interest necessitates the resolution of a dispute in Bangko Sentral ng Pilipinas), commonly known as SWAP
the operation of a major power plant to be resolved on its transactions. Petitioner did not file tax returns or pay tax on the
merits SWAP transactions for those taxable years.
4. Expropriation of private property to build a major highway
and no undue prejudice or delay caused to either party in
admitting the petition
On 19 April 1989, petitioner CBC received an assessment from Denied the Petition of CBC. The CTA ruled that a SWAP
the BIR finding CBC liable for deficiency DST on the sales of arrangement should be treated as a telegraphic transfer
foreign bills of exchange to the Central Bank. subject to documentary stamp tax.

On 8 May 1989, petitioner CBC, through its vice-president, Petitioner CBC filed a Motion for Reconsideration, but it was
sent a letter of protest to the BIR. denied in a Resolution.

CBC raised the following defenses: Petitioner appealed to the CTA En Banc:
Dismissed the Petition for Review
(1) double taxation, as the bank had previously paid the DST
on all its transactions involving sales of foreign bills of CBC filed a Motion for Reconsideration, but it was denied in a
exchange to the Central Bank; Resolution.
(2) absence of liability, as the liability for the DST in a sale of
foreign exchange through telegraphic transfers to the Central The taxpayer now comes to this Court with a Rule 45 Petition,
Bank falls on the buyer ―in this case, the Central Bank; reiterating the arguments it raised at the CTA level and
(3) due process violation, as the bank’s records were never invoking for the first time the argument of prescription.
formally examined by the BIR examiners; Petitioner CBC states that the government has three years
(4) validity of the assessment, as it did not include the factual from the date the former received the assessment of the CIR,
basis therefore; to collect the tax. Within that time frame, however, neither a
(5) exemption, as neither the tax exempt entity nor the other warrant of distraint or levy was issued, nor a collection case
party was liable for the payment of DST before the effectivity filed in court.
of Presidential Decree Nos. (PD) 1177 and 1931 for the years
1982 to 1986.7 In the protest, the taxpayer requested a Respondent CIR submitted its Comment in compliance with
reinvestigation so as to substantiate its assertions. the Court’s Resolution. The Comment did not have any
discussion on the question of prescription.
CIR:
More than 12 years after the filing of the protest, rendered a The Court issued a Resolution directing the parties to file their
decision reiterating the deficiency DST assessment and respective Memoranda. Petitioner CBC filed its Memorandum.
ordered the payment thereof plus increments within 30 days The CIR, on the other hand, filed a Manifestation stating that it
from receipt of the Decision. was adopting the allegations and authorities in its Comment in
lieu of the required Memorandum.
On 18 January 2002, CBC filed a Petition for Review with the
CTA. On 11 March 2002, the CIR filed an Answer with a Issue:
demand for CBC to pay the assessed DST. Whether the right of the BIR to collect the assessed DST from
CBC is barred by prescription
CTA Second Division:
Ruling: Petition granted by law. Under the rule prevailing at the time the BIR filed its
ground - the right of the BIR to collect the assessed DST is answer, the regular courts, and not the CTA, had jurisdiction
barred by the statute of limitations. over judicial actions for collection of internal revenue taxes. It
was only on 23 April 2004, when Republic Act Number 9282
BIR issued the assessment for deficiency DST on 19 April took effect, that the jurisdiction of the CTA was expanded to
1989, when the applicable rule was Section 319(c) of the include, among others, original jurisdiction over collection
National Internal Revenue Code of 1977, as amended. In that cases in which the principal amount involved is one million
provision, the time limit for the government to collect the pesos or more. Consequently, the claim of the CIR for
assessed tax is set at three years, to be reckoned from the deficiency DST from petitioner is forever lost, as it is now
date when the BIR mails/releases/sends the assessment barred by time.
notice to the taxpayer. Further, Section 319(c) states that the
assessed tax must be collected by distraint or levy and/or court The running of the statute of limitations was not suspended by
proceeding within the three-year period. the request for reinvestigation.

The records do not show when the assessment notice was The fact that the taxpayer in this case may have requested a
mailed, released or sent to CBC. Nevertheless, the latest reinvestigation did not toll the running of the three-year
possible date that the BIR could have released, mailed or sent prescriptive period. Section 320 of the 1977 Tax Code states:
the assessment notice was on the same date that CBC
received it, 19 April 1989. Sec. 320. Suspension of running of statute.—The running of
the statute of limitations provided in Sections 318 or 319 on the
Assuming therefore that 19 April 1989 is the reckoning date, making of assessment and the beginning of distraint or levy or
the BIR had three years to collect the assessed DST. However, a proceeding in court for collection, in respect of any
the records of this case show that there was neither a warrant deficiency, shall be suspended for the period during which the
of distraint or levy served on CBC's properties nor a collection Commissioner is prohibited from making the assessment or
case filed in court by the BIR within the three-year period. beginning distraint or levy or a proceeding in court and for sixty
days thereafter; when the taxpayer requests for a re-
The attempt of the BIR to collect the tax through its Answer investigation which is granted by the Commissioner;when the
with a demand for CBC to pay the assessed DST in the CTA taxpayer cannot be located in the address given by him in the
on 11 March 2002 did not comply with Section 319(c) ofthe return filed upon which a tax is being assessed or collected:
1977 Tax Code, as amended. The demand was made almost Provided, That if the taxpayer informs the Commissioner of any
thirteen years from the date from which the prescriptive period change in address, the running of the statute of limitations will
is to be reckoned. Thus, the attempt to collect the tax was not be suspended; when the warrant of distraint and levy is
made way beyond the three-year prescriptive period. duly served upon the taxpayer, his authorized representative,
or a member of his household with sufficient discretion, and no
The BIR’s Answer in the case filed before the CTA could not, property could be located; and when the taxpayer is out of the
by any means, have qualified as a collection case as required Philippines.
 In February 2001, CBK Power borrowed money from Industrial
The provision is clear. A request for reinvestigation alone will Bank of Japan, Fortis-Netherlands, Raiffesen Bank, Fortis-
not suspend the statute of limitations. Two things must concur: Belgium, and Mizuho Bank for which it remitted interest
there must be a request for reinvestigation and the CIR must payments from May 2001 to May 2003. It allegedly withheld
have granted it. final taxes from said payments based on the following rates:
(a) fifteen percent (15%) for Fortis-Belgium, Fortis-
There is no showing from the records that the CIR ever granted Netherlands, and Raiffesen Bank; and (b) twenty percent
the request for reinvestigation filed by CBC. That being the (20%) for Industrial Bank of Japan and Mizuho Bank.
case, it cannot be said that the running of the three-year
prescriptive period was effectively suspended. However, according to CBK Power, under the relevant tax
treaties between the Philippines and the respective countries
Doctrines: in which each of the banks is a resident, the interest income
Section 319(c) of the National Internal Revenue Code of 1977, derived by the aforementioned banks are subject only to a
as amended preferential tax rate of 10%
The time limit for the government to collect the assessed tax is
set at three years, to be reckoned from the date when the BIR Accordingly, on April 14, 2003, CBK Power filed a claim for
mails/releases/sends the assessment notice to the taxpayer. refund of its excess final withholding taxes allegedly
Further, Section 319(c) states that the assessed tax must be erroneously withheld and collected.
collected by distraint or levy and/or court proceeding within the
three-year period. Due to CIR’s inaction, CBK Power appealed to CTA Division.
A request for reinvestigation alone will not suspend the statute The latter partially granted the refund. One of the refunds was
of limitations. Two things must concur: there must be a request disallowed because of failure on the part of CBK Power to
for reinvestigation and the CIR must have granted it. obtain an ITAD ruling with respect to its transactions with
Fortis-Netherlands. CTA En Banc affirmed said decision.
CBK Power Co. Ltd. Vs. CIR (G.R. 193383-84, January 14,
2015) - CABAUATAN

TOPIC: Tax treaty, ITAD ruling, tax refund

FACTS: ISSUE:

CBK Power is a limited partnership duly organized and existing Whether or not the BIR may add a requirement– prior
under the laws of the Philippines, and primarily engaged in the application for an ITAD ruling – that is not found in the income
development and operation of hydro electric power generating tax treaties signed by the Philippines before a taxpayer can
plants in Laguna. avail of preferential tax rates under said treaties.
 Facts: GotescoTyan Ming Development, Inc. (Gotesco), a
HELD: Filipino corporation engaged in the real estate business,
entered into a syndicate loan agreement with Petitioner and
NO. The Court held that the obligation to comply with a tax three other banks. To secure the loan, Gotesco mortgaged a 6
treaty must take precedence over the objective of RMO No. 1- hectare expanse (Ever Ortigas Commercial Complex) in favor
2000. of PNB. Gotesco defaulted on its loan obligation then the
petitioner foreclosed the mortgaged property.
A certificate of sale was issued in favor of the PNB. Gotesco
Bearing in mind the rationale of tax treaties, the period of filed a civil case against PNB before the RTC of Pasig for the
application for the availment of tax treaty relief as required by annulment of the foreclosure proceedings, specific
RMO No. 1-2000 should not operate to divest entitlement to performance and damages with prayer for TRO and/or
the relief as it would constitute a violation of the duty required preliminary injunction.
by good faith in complying with a tax treaty. The denial of the PNB went to CA and filed a petition for certiorari. CA ruled in
availment of tax relief for the failure of a taxpayer to apply favor of the PNB, reversing and setting aside the decision of
within the prescribed period under the administrative issuance the RTC. as Gotesco did not challenge the CA ruling, it became
would impair the value of the tax treaty. At most, the application final and executory.
for a tax treaty relief from the BIR should merely operate to As PNB prepared for the consolidation of its ownership over
confirm the entitlement of the taxpayer to the relief. the foreclosed property, PNB paid the BIR Php18,615,00 as
DST assessed by the BIR. PNB also withheld and remitted to
Logically, noncompliance with tax treaties has negative the BIR withholding taxes equivalent to 6%
implications on international relations, and unduly discourages (Php74,400,028.49) of the bid price of Php1,240,000,469.82.
foreign investors. While the consequences sought to be Pending the issuance of the CAR, the BIR informed PNB that
prevented by RMO No. 1-2000 involve an administrative it is imposing interests, penalties and surcharges
procedure, these may be remedied through other system (Php61,678,490.28) and on DST (Php15,494,065). To
management processes, e.g., the imposition of a fine or facilitate the release of the CAR, the PNB paid
penalty. But we cannot totally deprive those who are entitled to Php77,172,555.28. PNB thereafter filed an administrative
the benefit of a treaty for failure to strictly comply with an claim for excess withholding taxes with the BIR contending
administrative issuance requiring prior application for tax treaty that what it paid was not entirely due. In its claim for refund,
relief. PNB explained that it inadvertently applied the 6% creditable
withholding tax rate on the sale of real property classified as
Philippine National Bank vs. CIR (G.R. 206019, March 18, ordinary assets, when it should have applied the 5% creditable
2015) - MOJICA withholding tax rate on the sale of ordinary assets. PNB filed
another claim for refund claiming erroneous assessment and
Petitioner: Philippine National Bank payment of the surcharges, penalties and interests.
Respondents: Commissioner of Internal Revenue
CTA Decision: CTA Special First division ordered the CIR to In this case, PNB was able to establish, through evidence it
refund to PNB the Php77,172,555.28 representing the refund presented that Gotesco did not in fact use the claimed
of interests, surcharges and penalties on capital gain taxes and creditable withholding taxes to settle its tax liabilities, to
DST for the year 2003. However, the CTA first division denied reiterate: (1) Gotesco’s 2003 Audited Financial Statements,
the PNB’s claim for the refund of excess creditable withholding which still included the mortgaged property in the asset
taxes for insufficiency of evidence. It also denied the PNB’s account “Properties and Equipment,” proving that Gotesco did
Motion for Reconsideration mainly because there were no not recognize the foreclosure sale and therefore, the payment
documents or schedules to support the claim. CTA stated that by PNB of the creditable withholding taxes corresponding to
PNB should have presented the Certificate of Creditable Tax the same; (2) Gotesco’s 2003 ITRs, which the CTA Special
Withheld at Source (BIR Form No. 2307- will confirm whether First Division required to show that the excess creditable
or not that the amont being claimed by the PNB was indeed withholding tax claimed for refund was not used by Gotesco,
not utilized by Gotesco to offset its taxes) issued to Gotesco in along with the 2003 Schedule of Prepaid Tax which itemized
relation to the creditable taxes withheld reported in its 2003 in detail the withholding taxes claimed by Gotesco for the year
ITR. 2003 amounting Php6,014,433; (3) the testimony of Gotesco’s
former accountant, providing that the amount subject of PNB’s
PNB filed an appeal before CTA En Banc by way of Petition for claim for refund was not included among the creditable
review however, it was denied. withholding Tax Remittance Returns (BIR Form 1606)
providing that the amount of Php74,400,028.49 was withheld
Issue: Whether or not PNB is entitled to the refund of and paid by the PNB in the year 2003. The evidence on record
creditable withholding taxes erroneously paid to the BIR. sufficiently proves that the claimed withholding tax was
withheld and remitted to the BIR.
Ruling: YES. Petition is impressed with merit. As PNB insists
at every turn, it has presented sufficient evidence showing its Doctrine: In claims for excess and unutilized creditable
entitlement to the refund of the excess creditable taxes it withholding tax, the submission of BIR Forms 2307 is to prove
erroneously withheld and paid to the BIR. Although PNB was that the fact of withholding of the excess creditable withholding
not able to submit Gotesco’s BIR Form No. 2307, the court is tax being claimed for refund… Hence, the provocative value of
persuaded and so declares that PNB submitted evidence BIR Form 2307, which is basically a statement showing the
sufficiently showing Gotesco’s non-utilization of the taxes amount paid for the subject transaction and the amount of the
withheld subject of the refund. The evidence presented by the tax withheld therefore, is to establish only the fact of
petitioner sufficiently proved its entitlement to the claim refund. withholding of the claimed creditable withholding tax. There is
There is no need for PNB to present Gotesco’s BIR Form No. nothing in BIR Form No. 2307 which would establish either
2307, as insisted by the First Division, because the information utilization or non-utilization, as the case may be, of the
contained in the said form may be very well gathered from creditable withholding tax.
other documents already presented by PNB. Thus, the
presentation of BIR Form No. 2307 would be in the final CIR vs. Covanta Energy Philippine Holdings Inc., G.R.
analysis a superfluity, of little or no value. 203160, January 24, 2018 - EVANGELISTA
 deficiency EWT assessment plus additional deficiency and
Petitioner: Commission of Internal Revenue delinquency interest.
Respondent: Covanta Energy Philippine Holdings Inc.,
(CEPHI) CIR:
The CIR was of the position that CEPHI is not entitled to the
Facts: immunities and privileges under R.A. No. 9480 because its
On Dec. 6, 2004, the CIR issued Formal Letters of Demand documentary submissions failed to comply witht the
and Assessment Notices against CEPHI for deficiency value- requirements under the tax amnesty law.
added tax (VAT) and expanded withholding tax (EWT). The
deficiency assessments were respectively in the amounts of The CIR reiterated its argument that CEPHI’s failure to provide
P465,593.21 and P288,903.78, or an aggregate amount of complete information in its Statement of Assets, Liabilities and
P754,496, representing CEPHI’s VAT and EWT liabilities for Net Worth (SALN), particularly the columns requiring the
taxable year 2001. Reference and Basis of Valuation, is sufficient basis to
CEPHI protested the assessments by filing 2 separate Letters disqualify CEPHI from the tax amnesty program. It also alleged
of Protest. However, the CIR issues another Formal Letter of that there is no period of limitation in challenging CEPHI’s
Demand and Assessment Notice, assessing CEPHI for compliance with the requirements of the tax amnesty program.
deficiency minimum corporate income tax (MCIT) in the
amount of P467,801.99, which is also taxable on year 2001. CTA En Banc:
The CTA en banc upheld the ruling that, without any evidence
The protests remained unacted upon. Thus, CEPHI filed that CEPHI’s net worth was undeclared by at least 30%, there
separate petitions before the CTA, seeking the cancellation is a presumption of compliance with the requirements of the
and withdrawal of the deficiency assessments. The cases were tax amnesty law. For this reason, CEPHI may immediately
eventually consolidated upon the CIR’s motion. enjoy the privileges of the tax amnesty program.

After the parties’ respective submission of their formal offer of

evidence, CEPHI filed a Supplemental Petition on October 7, Issue:
2008, informing the CTA that it availed of the tax amnesty Whether or not CEPHI is entitled to the immunities and
under R.A. No. 9480. CEPHI afterwards submitted a privileges of the tax amnesty program upon full compliance
Supplemental Formal Offer of Evidence, together with the with the requirements of R.A. No. 9480.
documents relevant to its tax amnesty.
Ruling:
CTA Second Division: YES. R.A. No. 9480 governs the tax amnesty program for
The CTA Second Division partially granted the petitions of national internal revenue taxes for the taxable year 2005 and
CEPHI with respect to the deficiency VAT and MCIT prior years. Subject to certain exceptions, a taxpayer may avail
assessments for 2001. The CTA-SD ruled, after computation, of this program by complying with the documentary submission
that CEPHI is liable to pay the amount of P131, 791.02 for the
to the Bureau of Internal Revenue (BIR) and thereafter, paying information statutorily mandated in R.A. No. 9480 were all
the applicable amnesty tax. reflected in its submission to the BIR. While the columns for
Reference and Basis for Valuation were indeed left blank,
CEPHI attached schedules to its SALN (Schedules 1 to 7),
The implementing rules and regulations of R.A. No. 9480, as both original and amended, which provide the required
embodied in Department of Finance (DOF) Department Order information under R.A. No. 9480 and its implementing rules
No. 29-07, laid down the procedure for availing of the tax and regulations. A review of the SALN form likewise reveals
amnesty. Upon the taxpayer’s full compliance with these that the information required in the Reference and Basis for
requirements, the taxpayer is immediately entitled to the Valuation columns are actually the specific description of the
enjoyment of the immunities and privileges of the tax amnesty taxpayer’s declared assets. As such, these were deemed filled
program. But when: (a) the taxpayer fails to file a SALN and when CEPHI referred to the attached schedules in its SALN.
the Tax Amnesty Return; or (b) the net worth of the taxpayer in On this basis, the CIR cannot disregard or simply set aside the
the SALN as of December 31, 2005 is proven to be SALN submitted by CEPHI.
understated to the extent of 30% or more, the taxpayer shall
cease to enjoy these immunities and privileges. More importantly, CEPHI’s SALN is presumed true and
correct, pursuant to Section 4 of R.A. No. 9480. This
The underdeclaration of a taxpayer’s net worth, as referred in presumption may be overturned if the CIR is able to establish
the second instance above, is proven through: (a) proceedings that CEPHI understated its net worth by the required threshold
initiated by parties other than the BIR or its agents, within one of at least 30%.
(1) year from the filing of the SALN and the Tax Amnesty
Return; or (b) findings or admissions in congressional hearings However, aside from the bare allegations of the CIR, there is
or proceedings in administrative agencies, and in courts. no evidence on record to prove that the amount of CEPHI’s net
Otherwise, the taxpayer’s SALN is presumed true and correct. worth was understated. Parties other than the BIR or its agents
The tax amnesty law thus places the burden of overturning this did not initiate proceedings within one year from the filing of the
presumption to the parties who claim that there was an SALN or Tax Amnesty Return, in order to challenge the net
underdeclaration of the taxpayer’s net worth. worth of CEPHI. Neither was the CIR able to establish that
there were findings or admissions in a congressional,
In this case, it is undisputed that CEPHI submitted all the administrative, or court proceeding that CEPHI indeed
documentary requirements for the tax amnesty program. The understated its net worth by 30%.
CIR specifically points to CEPHI’s supposed omission of the
information relating to the Reference and Basis for Valuation Considering that CEPHI completed the requirements and paid
columns in CEPHI’s original and amended SALNs. the corresponding amnesty tax, it is considered to have totally
complied with the tax amnesty program. As a matter of course,
The required information that should be reflected in the CEPHI is entitled to the immediate enjoyment of the immunities
taxpayer’s SALN is enumerated in Section 3 of R.A. No. 9480. and privileges of the tax amnesty program. Nonetheless, the
It is evident from CEPHI’s original and amended SALN that the Court emphasizes that the immunities and privileges granted
to taxpayers under R.A. No. 9480 is not absolute. It is subject Facts: These are two (2) consolidated Petitions for Review on
to a resolutory condition insofar as the taxpayers’ enjoyment of Certiorari under Rule 45 of the Rules of Court assailing the
the immunities and privileges of the law is concerned. These August 14, 2012 Decision and February 25, 2013 Resolution
immunities cease upon proof that they underdeclared their net of the CTA En Banc in CTA EB Nos. 749 and 757. These
worth by 30%. consolidated cases stem from a refund claim by Philippine
Airlines, Inc. (PAL) for final taxes withheld on its interest
Unfortunately for the CIR, however, there is no such proof in income from its peso and dollar deposits with China Banking
CEPHI’s case. The Court, thus, finds it necessary to deny the Corporation (Chinabank), JP Morgan Chase Bank
present petition. While tax amnesty is in the nature of a tax (JPMorgan), Philippine Bank of Communications (PBCom),
exemption, which is strictly construed against the taxpayer, the and Standard Chartered Bank (Standard Chartered)
Court cannot disregard the plain text of R.A. No. 9480. (collectively, Agent Banks).

Doctrine: G.R. Nos. 206079-80 involves the Petition filed by PAL

While tax amnesty is in the nature of a tax exemption, which is questioning the denial of its claim for refund of P510,233.16
strictly construed against the taxpayer, the Court cannot and US$65,877.07, representing the final income tax withheld
disregard the plain text of R.A. No. 9480. The implementing by Chinabank, PBCom, and Standard Chartered. Meanwhile,
rules and regulations of R.A. No. 9480, as embodied in G.R. No. 206309 involves the Petition filed by the
Department of Finance (DOF) Department Order No. 29- 07, Commissioner of Internal Revenue (Commissioner) assailing
laid down the procedure for availing of the tax amnesty. Upon the grant to PAL of the tax refund of P1,237,646.43,
the taxpayer’s full compliance with these requirements, the representing the final income tax withheld and remitted by
taxpayer is immediately entitled to the enjoyment of the JPMorgan.
immunities and privileges of the tax amnesty program. But
when: (a) the taxpayer fails to file a SALN and the Tax Amnesty Sometime in 2002, PAL made US dollar and Philippine peso
Return; or (b) the net worth of the taxpayer in the SALN as of deposits and placements in the following Philippine banks:
December 31, 2005 is proven to be understated to the extent Chinabank, JPMorgan, PBCom, and Standard Chartered. PAL
of 30% or more, the taxpayer shall cease to enjoy these earned interest income from these deposits and the Agent
immunities and privileges. Banks deducted final withholding taxes

From Chinabank, PAL claimed that it earned interest income

Philippine Airlines vs. CIR, G.R. 206079-80, January 17, net of withholding tax in the amount of US$480,688.76 in its
2018 - VALDEZ US dollar time deposit for the year 2002. Substantiating this
claim was Chinabank's Certification which stated that
Petitioner: PHILIPPINE AIRLINES, INC. (PAL) withholding taxes were deducted from PAL's interest income in
Respondent: COMMISSIONER OF INTERNAL REVENUE the amount of US$38,974.75. These taxes were remitted to the
Bureau of Internal Revenue on different dates from February
11, 2002 to January 10, 2003. From JP Morgan, PAL alleged
that it earned interest income in its peso deposit in the amount income, it must be refunded. 48 It maintains that proof of actual
of P6,188,232.17, from September 2002 to December 2002. remittance is not necessary. PAL further claims that it need not
JPMorgan deducted withholding tax totalling P1,237,646.43. establish the remittance of income taxes to the Bureau of
From PBCom, PAL maintained that it earned interest income Internal Revenue because this function is vested with the
from its various dollar placements for the year 2002. PAL's Agent Banks as the payors and withholding agents of the
peso deposit account with PBCom also allegedly earned Commissioner.
interest income for the year 2002.
Respondent’s Argument: The Commissioner questions the
A letter from PBCom stated that the taxes withheld from PAL's grant of refund to PAL for the final income taxes withheld by
interest income had been remitted by PBCom to the BIR. From JPMorgan. She argues that PAL is not entitled to the refund as
Standard Chartered, PAL stated that it earned interest income it failed to present its documentary evidence before the BIR
in its dollar time deposit account from May 2002 to December when it filed its administrative claim. The Commissioner argues
2002, amounting to US$86,107.55. The amount of that PAL needed to prove, but did not prove, that the withheld
US$6,458.14 was deducted and allegedly remitted to the BIR taxes were remitted to the BIR. The Commissioner contended
as final withholding tax. Claiming that it was exempt from final that PAL's claim was subject to administrative routinary
withholding taxes under its franchise, PD 1590, PAL filed with investigation or examination by the Bureau of Internal
the Commissioner on a written request for a tax refund 20 of Revenue. She also alleged that PAL's claim was not properly
the withheld amounts of P1,747,869.59 and US$65,877.07. 21 documented, and that it must show that it complied with the
The Commissioner failed to act on the request. Thus, PAL prescriptive period for filing refunds under Sections 204 (C)
elevated the case to the Court of Tax Appeals in Division and 229 of the National Internal Revenue Code. It likewise
asserted that claims for refund are of the same nature as a tax
Petitioner’s Argument: PAL asserts that it is entitled to a refund exemption, and thus, are strictly construed against the
of the withheld taxes because it is exempted from paying the claimant.
tax on interest income under its franchise, PD 1590. PAL
argues that it adequately established the withholding and CTA Special First Division: Ordered the refund to PAL of
remittance of final taxes through the Certificates of Final Taxes P1,237,646.43 representing the final income tax withheld and
Withheld issued to it by these Agent Banks. It contends that remitted by JPMorgan on PAL's interest income. However, it
these Certificates are prima facie evidence of actual denied the refund of P510,223.16 and US$65,877.07,
remittance, and if they are uncontroverted, as in this case, they representing the final income tax withheld by Chinabank,
are sufficient proof of remittance. It holds that the rule PBCom, and Standard Chartered. The CTA Special First
pertaining to Creditable Taxes Withheld in CIR v. Asian Division found that PAL was exempted from final withholding
Transmission Corporation and other Court of Tax Appeals En tax on interest on bank deposits. However, it ruled that PAL
Banc cases should apply to Final Taxes Withheld, as these are failed to adequately substantiate its claim because it did not
of the same nature. PAL also insists that it is unequivocally prove that the Agent Banks, with the exception of JPMorgan,
exempt from final withholding taxes, and consequently, for as remitted the withheld amounts to the BIR. PAL only presented
long as it duly establishes that taxes were withheld from its documents which showed the total amount of final taxes
withheld for all branches of the banks. As such, the amount of withheld and deducted from its accounts; (iii) and the
tax withheld from and to be refunded to PAL could not be Commissioner did not contest the withholding of these
ascertained with particularity. It ruled that the Certificates of amounts and only raises that they were not proven to be
Final Tax Withheld at Source are not sufficient to prove remitted, this Court finds that PAL sufficiently proved that it is
remittance. entitled to its claim for refund. Both the Commissioner and the
Court of Tax Appeals should have appreciated the
CTA En Banc: Affirmed the Decision of the Court of Tax unreasonable difficulty that it would have put the taxpayer —
Appeals Special First Division. The Court of Tax Appeals En in this case PAL — to claim a statutory exemption granted to
Banc sustained that PAL needed to prove the remittance of the it. In requiring that it prove actual remittance, the court a quo
withheld taxes because although remittance is the and the Commissioner effectively put the burden on the payee
responsibility of the banks as withholding agents, remittance to prove that both government and the banks complied with
was put in issue in this case. Thus, the Court of Tax Appeals their legal obligation. It would have been near impossible for
Special First Division correctly made a ruling on it.The Court of the taxpayer to demand to see the records of the payor bank
Tax Appeals En Banc denied the motions for reconsideration. or the ledgers of the government. The legislative policy was to
40 Hence, the present Petitions via Rule 45 have been filed. provide incentives to the taxpayer by unburdening it of taxes.
By administrative and judicial interpretation, such policy would
Issue: Whether or not PAL is required to prove the remittance have been unreasonably reversed. This is not this Court's view
to the BIR of the final withholding tax on its interest from of equity. Clearly, the taxpayer in this case is entitled to relief.
currency bank deposits to be entitled to tax refund.
Doctrine: While tax exemptions are strictly construed against
Ruling: No. Certificates of Final Tax Withheld, complete in the taxpayer, the government should not misuse technicalities
relevant details, were declared under the penalty of perjury. As to keep money it is not entitled to. Substantial justice, equity
such, they may be taken at face value. Considering that these and fair play are on the side of the petitioner. Technicalities and
Certificates were presented, the burden of proof shifts to the legalisms, however exalted, should not be misused by the
Commissioner, who needs to establish that they were government to keep money not belonging to it, thereby
incomplete, false, or issued irregularly. However, the enriching itself at the expense of its law-abiding citizens. Under
Commissioner did no such thing. Thus, these Certificates are the principle of solutio indebiti provided in Art. 2154, Civil Code,
sufficient evidence to establish the withholding of the taxes. the BIR received something "when there [was] no right to
The taxes withheld from PAL are considered its full and final demand it," and thus, it has the obligation to return it. Heavily
payment of taxes. Necessarily, when taxes were withheld and militating against the respondent Commissioner is the ancient
deducted from its income, PAL is deemed to have paid them. principle that no one, not even the state, shall enrich oneself at
Considering that PAL is exempted from paying the withholding the expense of another. Indeed, simple justice requires the
tax, it is rightfully entitled to a refund speedy refund of the wrongly held taxes.

Considering that PAL presented sufficient proof that: (i) it is University Physicians Services Inc. vs. CIR, G.R. 205955,
exempted from paying withholding taxes; (ii) amounts were March 7, 2018 - VELASCO
 The CTA En Banc ruled that UPSI-MI is barred by Section 76
Petitioners: UNIVERSITY PHYSICIANS SERVICES, INC.- of the NIRC from claiming a refund of its excess tax credits for
MANAGEMENT, INC. the taxable year 2006. The barring effect applied after UPSI-
Respondents: COMMISSIONER OF INTERNAL REVENUE MI carried over its excess tax credits to the succeeding
quarters of 2007, even if such carry-over was allegedly done
Facts: inadvertently. The Court emphasized that the prevailing law
and jurisprudence admit no exception or qualification to the
UPSI-MI filed its Annual ITR for the year ended December 31, irrevocability rule. Hence this appeal.
2006, reflecting an income tax overpayment of 5,159,341.00.
In November 2007, petitioner filed an Annual ITR for the short UPSI-MI contends that even the option to be refunded through
period fiscal year ended March 31 2007. It filed an amended the issuance of a TCC is likewise irrevocable.
Annual ITR for the short period fiscal year ended March 31,
2007, reflecting the removal of the amount of the instant claim Issue: WON UPSI-MI entitled to the refund of its 2006 excess
in the ''Prior Year's Excess Credit". Thus, the amount thereof tax credits
was changed from ₱5, 159,341 to ₱2,231,507. In October
2008, UPSI-Mi filed a claim for refund and/or issuance of a Tax Ruling:
Credit Certificate in the amount of ₱2,927.834.00, representing No. To insist on giving due course to the refund claim only
the alleged excess and unutilized creditable withholding taxes because it was the first option taken, and consequently
for 2006. disallowing the automatic tax credit, is to encourage
inefficiency or to suppress administrative feasibility, as
CIR previously explained. Otherwise put, imbuing upon the choice
The CIR did not act upon the claim for refund/tax, UPSI-Mi then of refund or tax credit certificate the character of irrevocability
filed a Petition for Review. would bring about an irrational situation that Congress did not
intend to remedy by means of an assessment through the
CTA issuance of a FAN (Final Assessment Notice) without a prior
The CTA denied the petition on the ground that UPSI-MI PAN (Preliminary Assessment Notice), as provided in
effectively exercised the carry-over option under Section 76 of paragraph (c) of Section 228. It should be remembered that
the NIRC. UPSI-MI filed a motion for reconsideration arguing Congress' declared national policy in passing the NIRC of 1997
that the irrevocability rule under Section 76 is not applicable for is to rationalize the internal revenue tax system of the
the reason that it did not carry over to the succeeding taxable Philippines, including tax administration.
period of the 2006 excess income tax credit. It added that the
subject excess tax credits were inadvertently included in its There are two options available to the corporation whenever it
original 2007 ITR and such mistake was rectified in the overpays its income tax for the taxable year: (1) to carry over
amended 2007. and apply the overpayment as tax credit against the estimated
quarterly income tax liabilities of the succeeding taxable years
(also known as automatic tax credit) until fully utilized
(meaning, there is no prescriptive period); and (2) to apply for Respondents: BPI & CBC merged (1996)
a cash refund or issuance of a tax credit certificate within the Petitioner for review on certiorari under Rule 45
prescribed period. Such overpayment of income tax is usually
occasioned by the over-withholding of taxes on the income FACTS:
payments to the corporate taxpayer. Citytrust Banking Corporation (CBC) filed its Annual Income
Tax Returns for its Regular Banking Unit, and Foreign
The irrevocability rule is provided in the last sentence of Currency Deposit Unit for taxable year 1986 on April 15, 1987.
Section 76. A perfunctory reading of the law unmistakably CBC executed Waivers of the Statute of Limitations under the
discloses that the irrevocable option referred to is the carry- National Internal Revenue Code (NIRC).
over option choice only. There appears nothing therein from
which to infer that the other choice, i.e., cash refund or tax On March 7, 1991, petitioner CIR issued a Pre-Assessment
credit certificate, is also irrevocable. If the intention of the Notice (PAN) against CBC for deficiency taxes, among which
lawmakers was to make such option of cash refund or tax is for deficiency Income Tax for taxable year 1986. The counsel
credit certificate also irrevocable, then they would have clearly for CBC filed its protest against the PAN.
provided so.
Petitioner issued a Letter, with attached Assessment Notices,
demanding for the payment of the deficiency taxes within thirty
Doctrine: The irrevocability rule is provided in the last (30) days from receipt thereof. The counsel for CBC filed its
sentence of Section 76. A perfunctory reading of the law Protest against the assessments on May 27, 1991 and another
unmistakably discloses that the irrevocable option referred to Protest on February 17, 1992.
is the carry-over option only. There appears nothing therein
from which to infer that the other choice, i.e., cash refund or tax On May 26, 2011, petitioner issued a notice of denial
credit certificate, is also irrevocable. If the intention of the addressed to the respondent, requesting for the payment of
lawmakers was to make such option of cash refund or tax CBC’s deficiency income tax for taxable year 1986. Petitioner
credit certificate also irrevocable, then they would have clearly then issued another letter denying the offer of compromise
provided so. penalty and requesting for full payment. Consequently,
petitioner issued a Warrant of Distraint and/or Levy against
xxx respondent BPI which prompted the latter to file a Petition for
“(2) to apply for a cash refund or issuance of a tax credit Review with the CTA on October 7, 2011.
certificate within the prescribed period. Such overpayment of
income tax is usually occasioned by the over-withholding of CTA:
taxes on the income payments to the corporate taxpayer.” BPI can validly assail the Warrant of Distraint and/or Levy as
its appellate jurisdiction is not limited to cases which involve
Bank of the Philippine Islands vs. CIR, G.R. 224327, June decisions of the CIR on matters relating to assessments or
11, 2018 - LEE refunds.
Correct: CIR v. BPI
Assessment notices being issued only on May 6, 1991 were
beyond the 3-year period to access (counting from April 15 Such assessment may be protested administratively by filing a
1987) request for reconsideration or reinvestigation in such form and
Waivers if Statute of Limitation were not in proper form of a manner as may be prescribed by implementing regulations
valid waiver, as such, these waivers failed to extend the period within thirty (30) days from receipt of the assessment;
given to petitioner to assess otherwise, the assessment shall become final and
CIR’s petition for reconsideration was denied unappealable.
Petition for review was also denied
If the protest is denied in whole and in part, the individual,
ISSUE: association or corporation adversely affected by the decision
WON the CTA erred in affirming the CTA Special Third on the protest may appeal to the Court of Tax Appeals within
division’s exercise of jurisdiction thirty (30) days from receipt of the said decision; otherwise, the
WON the CTA erred in affirming the annulment of the warrant decision shall become final, executory and demandable.
of distraint and/or levy against respondent given petitioner’s
clear right to the same Petitioner insists that respondent failed to elevate the tax
assessment against it to the CTA within the required period.
Respondent, on the other hand, claims that it never received
HELD: any final decision on the disputed assessment from petitioner
CTA did not err in its ruling that it has jurisdiction over cases granting or denying the same, whether in whole or in part.
asking for the cancellation and withdrawal of a warrant of
distraint and/or levy. Under Section 7 of RA 9282 CTA shall The CTA was correct in ruling that petitioner failed to prove that
exercise exclusive appellate jurisdiction to review by appeal it sent a notice of assessment and that it was received by
inaction by the CIR in cases involving disputed assessments, respondent, thus:
refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matter arising under the Thus, the failure of petitioner to prove the receipt of the
NIRC or other laws administered by the BIR, where the assessment by respondent would necessarily lead to the
NIRC provide a specific period of action, in which case the conclusion that no assessment was issued.
inaction shall be deemed a denial;
The right of the petitioner to assess respondent has already
prescribed and respondent is not liable to pay the deficiency
tax assessment. The period of collection has also prescribed.

An assessment becomes final and unappealable if within thirty

(30) days from receipt of the assessment, the taxpayer fails to Asian Transmission Corp. vs. CIR, G.R. 230861, Sept. 19,
file his or her protest requesting for reconsideration or 2018 - BALONGLONG
reinvestigation as provided in Section 229 of the NIRC, thus: PETITIONER: Asian Transmission Corporation
RESPONDENT: Commissioner of Internal Revenue BIR did not specify the amounts and particular taxes involve
CIR did not sign the waivers
FACTS:
CIR filed a petition for review in the CTA En Banc.
Asian Transmission Corporation is a manufacturer of motor
vehicle transmission component parts and engines of RULING OF THE CTA En Banc:
Mitsubishi vehicles. ATC filed its Annual Information Return of
Income Taxes Withheld on Compensation and Final CTA En Banc reversed and set aside the decision of the CTA
Withholding Taxes and Annual Information Return of in Division, holding that the waivers were valid. Moreover, the
Creditable Income Tax Withheld (Expanded)/ Income CIR’s right to assess deficiency taxes for the year 2002 had
Payments Exempt from Withholding Tax, respectively. not yet been prescribed.

ATC received a Letter of Authority where the CIR informed the Hence, ATC filed an appeal with the Supreme Court
former that its revenue officers shall examine its books of contending that the CTA En Banc acted in excess of
accounts and other accounting records. Thereafter, CIR issued jurisdiction or with grave abuse of discretion amounting to lack
a Preliminary Assessment Notice to ATC. Consequently, the or excess of jurisdiction in applying the ruling of CIR V. Next
Vice President for Personnel and Legal Affairs, executed Mobile Inc. as well as the equitable principles of in pari delicto,
several documents denominated as “Waiver of the Defense of unclean hands and estoppel.
Prescription Under the Statute of Limitations of the National ISSUE:
Internal Revenue Code.
Whether or not the subject waivers in this case are valid.
ATC received a Formal Letter of Demand from the CIR for the
amount of its deficiency taxes to which ATC filed its Protest HELD:
Letter in regard thereto. ATC received the Final Decision on
Disputed Assessment where the CIR found ATC liable to pay Yes.
the deficiency tax. ATC filed an appeal but CIR denied it. ATC
filed the instant Petition for Review with the CTA in Division. In Commissioner of Internal Revenue v. Next Mobile Inc., the
Court declared that as a general rule a waiver that did not
RULING OF THE CTA IN DIVISION: comply with the requisites for validity specified in RMO No. 20-
90 and RDAO 01-05 was invalid and ineffective to extend the
CTA granted the petition for review of ATC. It ruled that ATC prescriptive period to assess the deficiency taxes. However,
was not estopped from raising the invalidity of the waivers due to peculiar circumstances obtaining, the Court treated the
inasmuch as the BIR had caused the defects, namely: case as an exception to the rule, and considered the waivers
The waivers were notarized by its own employees without concerned as valid for the following reasons:
having the authority to perform notarial acts First, the parties in this case are in pari delicto or "in
BIR did not indicate the date of its acceptance equal fault." However, although the parties are in pari delicto,
the Court may grant relief at the suit of one of them, where Land Bank of the Phil. Vs. Cacayuran, G.R. 191667, April
public policy requires its intervention, even though the result 22, 2015 - MENDOZA
may be that a benefit will be derived by one party who is in
equal guilt with the other. It would be consistent with the public PETITIONER: LAND BANK OF THE PHILIPPINES
policy embodied in the principle that taxes are the lifeblood of RESPONDENTS: EDUARDO M. CACAYURAN
the government, and their prompt and certain availability is an
imperious need.Second, the Court has repeatedly pronounced FACTS:
that parties must come to court with clean hands. Following the
foregoing principle, respondent should not be allowed to The Sangguniang Bayan of the Municipality of Agoo, La Union
benefit from the flaws in its own Waivers and successfully insist passed resolutions implementing a multi-phased plan to
on their invalidity in order to evade its responsibility to pay redevelop the Agoo Public Plaza.
taxes.Third, respondent is estopped from questioning the
validity of its Waivers. The application of estoppel in this case For the first loan, a resolution was passed authorizing then
would promote the administration of the law, prevent injustice Mayor Eriguel to obtain a loan from Land Bank and to
and avert the accomplishment of a wrong and undue mortgage a 2,323.75 square meter lot as collateral. To serve
advantage.Finally, the Court cannot tolerate this highly as additional security, it further authorized the assignment of a
suspicious situation. In this case, the taxpayer, on the one portion of its internal revenue allotment (IRA) and the monthly
hand, after voluntarily executing waivers, insisted on their income from the proposed project in favor of Land Bank.
invalidity by raising the very same defects it caused. On the Consequently, Land Bank extended a ₱4,000,000.00 loan in
other hand, the BIR miserably failed to exact from respondent favor of the Municipality (First Loan), the proceeds of which
compliance with its rules. Such a situation is dangerous and were used to construct ten (10) kiosks. After completion, these
open to abuse by unscrupulous taxpayers who intend to kiosks were rented out. Another resolution was passed
escape their responsibility to pay taxes by mere expedient of approving the construction of a commercial center on the Plaza
hiding behind technicalities. Lot. Mayor Eriguel was again authorized to obtain a loan from
Land Bank, posting as well the same securities as that of the
It is true that the petitioner was also at fault here because it First Loan. Land Bank granted a second loan in favor of the
was careless in complying with the requirements of RMO No. Municipality on October 20, 2006 in the principal amount of
20-90 and RDAO 01-05. Nevertheless, petitioner's negligence ₱28,000,000.00 (Second Loan).
may be addressed by enforcing the provisions imposing
administrative liabilities upon the officers responsible for these The construction of the commercial center at the Agoo Plaza
errors. The BIR's right to assess and collect taxes should not was vehemently objected to by some residents of the
be jeopardized merely because of the mistakes and lapses of Municipality. Led by respondent Eduardo Cacayuran
its officers, especially in cases like this where the taxpayer is (Cacayuran), these residents claimed that the conversion of
obviously in bad faith. the Agoo Plaza into a commercial center, as funded by the
proceeds from the First and Second Loans (Subject Loans),
were "highly irregular, violative of the law, and detrimental to
public interests, and will result to wanton desecration of the
said historical and public park." The foregoing was embodied said loans were passed in a highly irregular manner and thus,
in a Manifesto, launched through a signature campaign ultra vires; as such, the Municipality is not bound by the same.
conducted by the residents and Cacayuran. Cacayuran wrote Moreover, it found that the Plaza Lot is proscribed from
a letter addressed to Mayor Eriguel, Vice Mayor Antonio Eslao collateralization given its nature as property for public use.
(Vice Mayor Eslao), and the members of the SB, expressing
the growing public clamor against the conversion of the Agoo Aggrieved, Land Bank filed its Notice of Appeal on April 23,
Plaza into a commercial center. He then requested the 2007. On the other hand, the Implicated Officers’ appeal was
foregoing officers to furnish him certified copies of various deemed abandoned and dismissed for their failure to file an
documents related to the aforementioned conversion appellants’ brief despite due notice. In this regard, only Land
including, among others, the resolutions approving the Bank’s appeal was given due course by the CA.
Redevelopment Plan as well as the loan agreements for the
sake of public information and transparency. CA

Unable to get any response, Cacayuran, invoking his right as The Court of Appeals affirmed with modification the RTC’s
a taxpayer, filed a Complaint against the Implicated Officers ruling, excluding Vice Mayor Eslao from any personal liability
and Land Bank, assailing, among others, the validity of the arising from the Subject Loans.
Subject Loans on the ground that the Plaza Lot used as
collateral thereof is property of public dominion and therefore, It held that:
beyond the commerce of man. 1) Cacayuran had locus standi to file his complaint, considering
that, a) he was born, raised and a bona fide resident of the
Upon denial of the Motion to Dismiss, the Implicated Officers Municipality; and b) the issue at hand involved public interest
and Land Bank filed their respective Answers. Land Bank of transcendental importance,
claimed that it is not privy to the Implicated Officers’ acts of 2) Subject Resolutions were invalidly passed due to the SB’s
destroying the Agoo Plaza. It further asserted that Cacayuran non-compliance with certain sections of RA 7160;
did not have a cause of action against it since he was not privy 3) the Plaza lot which served as collateral for the Subject
to any of the Subject Loans. Loans, is property of public dominion and thus, cannot be
appropriated either by the State or by private persons, and;
During the pendency of the proceedings, the construction of 4) the Subject Loans are ultra vires because they were
the commercial center was completed and the said structure transacted without proper authority and their collateralization
later became known as the Agoo’s People Center (APC). On constituted improper disbursement of public funds.
May 8, 2007, the SB passed Municipal Ordinance No. 02-
2007, declaring the area where the APC stood as patrimonial Dissatisfied, Petitioner Land Bank filed the instant petition.
property of the Municipality.
ISSUE: Whether or not:
RTC
The RTC ruled in favor of Cacayuran, declaring the nullity of Cacayuran has standing to sue;
the Subject Loans. It found that the resolutions approving the The Subject Resolutions were validly passed; and
Subject Loans are ultra vires ensuring that the Agoo Plaza would not be exploited for
commercial purposes through the APC’s construction.
RULING: Moreover, Cacayuran need not be privy to the Subject Loans
YES. A taxpayer is allowed to sue where there is a claim that in order to proffer his objections thereto. In Mamba v. Lara, it
public funds are illegally disbursed, or that public money is has been held that a taxpayer need not be a party to the
being deflected to any improper purpose, or that there is contract to challenge its validity; as long as taxes are involved,
wastage of public funds through the enforcement of an invalid people have a right to question contracts entered into by the
or unconstitutional law. A person suing as a taxpayer, however, government.
must show that the act complained of directly involves the
illegal disbursement of public funds derived from taxation. In NO. While Mayor Eriguel’s authorization to contract the
other words, for a taxpayer’s suit to prosper, two requisites Subject Loans was not contained in the form of an ordinance,
must be met namely, (1) public funds derived from taxation are the said loans and even the Redevelopment Plan itself were
disbursed by a political subdivision or instrumentality and in not approved pursuant to any law or ordinance but through
doing so, a law is violated or some irregularity is committed; mere resolutions. The distinction between ordinances and
and (2) the petitioner is directly affected by the alleged act. resolutions is well-perceived. While ordinances are laws and
possess a general and permanent character, resolutions are
Although the construction of the APC would be primarily merely declarations of the sentiment or opinion of a lawmaking
sourced from the proceeds of the Subject Loans, which Land body on a specific matter and are temporary in nature. As
Bank insists are not taxpayer’s money, there is no denying that opposed to ordinances, "no rights can be conferred by and be
public funds derived from taxation are bound to be expended inferred from a resolution." In this accord, it cannot be denied
as the Municipality assigned a portion of its IRA as a security that the SB violated Section 444(b)(1)(vi) of the LGC
for the foregoing loans. The Municipality’s IRA, which serves altogether.
as the local government unit’s just share in the national taxes,
is in the nature of public funds derived from taxation. The Court Noticeably, the passage of the Subject Resolutions was also
believes, however, that although these funds may be posted tainted with other irregularities, such as (1) the SB’s failure to
as a security, its collateralization should only be deemed submit the Subject Resolutions to the Sangguniang
effective during the incumbency of the public officers who Panlalawigan of La Union for its review contrary to Section 56
approved the same, else those who succeed them be of the LGC; and (2) the lack of publication and posting in
effectively deprived of its use. contravention of Section 59 of the LGC.

As a resident-taxpayer of the Municipality, Cacayuran is In fine, Land Bank cannot rely on the Subject Resolutions as
directly affected by the conversion of the Agoo Plaza which basis to validate the Subject Loans.
was funded by the proceeds of the Subject Loans. It is well-
settled that public plazas are properties for public use and YES. Generally, an ultra vires act is one committed outside the
therefore, belongs to the public dominion. As such, it can be object for which a corporation is created as defined by the law
used by anybody and no one can exercise over it the rights of of its organization and therefore beyond the powers conferred
a private owner. In this light, Cacayuran had a direct interest in upon it by law. Records disclose that the said loans were
executed by the Municipality for the purpose of funding the of an invalid or unconstitutional law. A person suing as a
conversion of the Agoo Plaza into a commercial center taxpayer, however, must show that the act complained of
pursuant to the Redevelopment Plan. However, the conversion directly involves the illegal disbursement of public funds
of the said plaza is beyond the Municipality’s jurisdiction derived from taxation. In other words, for a taxpayer’s suit to
considering the property’s nature as one for public use and prosper, two requisites must be met namely, (1) public funds
thereby, forming part of the public dominion. Given the unlawful derived from taxation are disbursed by a political subdivision
purpose behind the Subject Loans which is to fund the or instrumentality and in doing so, a law is violated or some
commercialization of the Agoo Plaza pursuant to the irregularity is committed; and (2) the petitioner is directly
Redevelopment Plan, they are considered as ultra vires in the affected by the alleged act.
primary sense thus, rendering them void and in effect, non-
binding on the Municipality. Therefore, the petition is denied. accordingly , the decision of
the Court of Appeals is affirmed.
At this juncture, it is equally observed that the land on which
the Agoo Plaza is situated cannot be converted into patrimonial
property – as the SB tried to when it passed Municipal
Ordinance No. 02-2007 – absent any express grant by the
national government. As public land used for public use, the
foregoing lot rightfully belongs to and is subject to the
administration and control of the Republic of the Philippines.
Hence, without the said grant, the Municipality has no right to
claim it as patrimonial property.

Nevertheless, while the Subject Loans cannot bind the

Municipality for being ultra vires, the officers who authorized
the passage of the Subject Resolutions are personally liable.
Case law states that public officials can be held personally
accountable for acts claimed to have been performed in
connection with official duties where they have acted ultra
vires, as in this case.

DOCTRINE:

It is hornbook principle that a taxpayer is allowed to sue where

there is a claim that public funds are illegally disbursed, or that
public money is being deflected to any improper purpose, or
that there is wastage of public funds through the enforcement
 respondents failed to exhaust all administrative remedies
MODULE 2 before instituting an action in court.

MODULE 2 CASES
ISSUES: (1) What law shall govern the publication of tax
TAPIA (i) Bagatsing vs. Ramirez [G.R. No. L-41631. ordinance enacted by Municipal Board of Manila, The
December 17, 1976.] Revised City Charter or the Local Tax Code.
(2) Whether the principle of exhaustion of administrative
PETITIONER/S: Hon. Ramon Bagatsing, Manila Mayor, remedies has been violated by private respondent.
Roman Gargantiel, Market Administrator, Municipal Board (3) Whether the Ordinance No. 7522 was validly enacted.
of Manila
RESPONDENT/S: Hon. Pedro Ramirez, Federation of HELD: (1) The Local Tax Code should govern. There is no
Manila Market Vendors question that the Revised Charter of the City of Manila is a
FACTS: special act, whereas the Local Tax Code is a general law
because it applies universally to all LGUs. The rule commonly
On June 12, 1974, Municipal Board of Manila enacted said is that the fact that one is special and the other is general
Ordinance No. 7522, regulating the operation of public markets creates a presumption that the special is to be considered.
and prescribing fees for the rentals of stalls and providing However, the rule yields to a situation where the special statute
penalties for violation thereof. refers to a subject in general which the general statute treats
in particular. This exactly is the circumstance in this case. The
The responded Federation of Manila Vendors commenced Revised Charter of the City of Manila refers merely to
Civil Case 96787 seeking declaration of nullity if Ordinance “ordinances,” while the Local Tax Code refers to “ordinances
7522 contending that the publication requirement under levying or imposing taxes, fees and other charges” in
Revised Charter of the City (Ra. 409 as amended) has not particular. Thus, in the realm of “ordinances levying or
been complied. imposing taxes, fees and other charges” the Local Tax Code
governs. This is especially true since the Local Tax Code was
RA 409 provides that Each proposed ordinance shall be enacted later than the Charter
published in two daily newspapers of general circulation in the (2) No. The petition below plainly shows that the controversy
city, and shall not be discussed or enacted by the Board until between the parties is deeply rooted in a pure question of law:
after the third day following such publication. * * * Each whether it is the Revised Charter of the City of Manila or the
approved ordinance * * * shall be published in two daily Local Tax Code that should govern the publication of the tax
newspapers of general circulation in the city, within ten days ordinance. In other words, the dispute is sharply focused on
after its approval. the applicability of the Revised City Charter or the Local Tax
Code on the point at issue, and not on the legality of the
Petitioners stressed that only post-publication is required by imposition of the tax. Exhaustion of administrative remedies
the Local Tax Code. Petitioners also contended that private before resort to judicial bodies is not an absolute rule. It admits
of exceptions. Where the question litigated upon is purely a exceeding P1,000,000.00, and the 5% final withholding tax by
legal one, the rule does not apply. government agencies, is arbitrary, oppressive, and
confiscatory, and that it violates the constitutional principle on
(3) Yes. The decision of the court below is hereby reversed and progressive taxation, among others.
set aside. Ordinance No. 7522 of the City of Manila, dated June
15, 1975, is hereby held to have been validly enacted. No.
costs. ISSUES:
WON Sections 4, 5 and 6 of R.A. No. 9337, amending Sections
DOCTRINE: 106, 107 and 108, respectively, of the NIRC giving the
President the stand-by authority to raise the VAT rate from
DELOS SANTOS (ii) Abakada Guro Party List vs. 10% to 12% when a certain condition is met, constitutes undue
Executive Secretary [G.R. No. 168056. September 1, 2005.] delegation of the legislative power to tax.

PETITIONER/S: ABAKADA GURO PARTY LIST (Formerly HELD:

AASJAS) OFFICERS SAMSON S. ALCANTARA and ED NO. The case before the Court is not a delegation of legislative
VINCENT S. ALBAN power. It is simply a delegation of ascertainment of facts upon
RESPONDENT/S: THE HONORABLE EXECUTIVE which enforcement and administration of the increase rate
SECRETARY EDUARDO ERMITA; HONORABLE under the law is contingent. The legislature has made the
SECRETARY OF THE DEPARTMENT OF FINANCE CESAR operation of the 12% rate effective January 1, 2006, contingent
PURISIMA; and HONORABLE COMMISSIONER OF upon a specified fact or condition. It leaves the entire operation
INTERNAL REVENUE GUILLERMO PARAYNO, JR or non-operation of the 12% rate upon factual matters outside
of the control of the executive.
FACTS:
RA 9337, an act amending certain sections of the National No discretion would be exercised by the President.
Internal Revenue Code of 1997, is questioned by petitioners Highlighting the absence of discretion is the fact that the word
for being unconstitutional. Procedural issues raised by shall is used in the common proviso. The use of the word shall
petitioners are the legality of the bicameral proceedings, connotes a mandatory order. Its use in a statute denotes an
exclusive origination of revenue measures and the power of imperative obligation and is inconsistent with the idea of
the Senate concomitant thereto. discretion.Where the law is clear and unambiguous, it must be
taken to mean exactly what it says, and courts have no choice
Also, Substantive issue was raised with regard to the undue but to see to it that the mandate is obeyed
delegation of legislative power to the President to increase the
rate of value-added tax to 12%. Thus, it is the ministerial duty of the President to immediately
impose the 12% rate upon the existence of any of the
Petitioners also argue that the increase to 12%, as well as the conditions specified by Congress. This is a duty which cannot
70% limitation on the creditable input tax, the 60- month be evaded by the President. Inasmuch as the law specifically
amortization on the purchase or importation of capital goods uses the word shall, the exercise of discretion by the President
does not come into play. It is a clear directive to impose the
12% VAT rate when the specified conditions are present. The DOCTRINE:
time of taking into effect the 12% VAT rate is based on the
happening of a certain specified contingency, or upon the BRIONES (iii) Eastern Theatrical vs. Alfonso [G.R. No. L-
ascertainment of certain facts or conditions by a person or 1104. May 31, 1949.]
body other than the legislature itself.
PETITIONER/S: Eastern Theatrical Co., Et Al.
The Court finds no merit to the contention of petitioners RESPONDENT/S: Victor Alfonso as City Treasurer of
ABAKADA GURO Party List, et al. that the law effectively Manila, THE MUNICIPAL BOARD OF THE CITY OF
nullified the Presidents power of control over the Secretary of MANILA, and JUAN NOLASCO, as Mayor of the City of
Finance by mandating the fixing of the tax rate by the President Manila
upon the recommendation of the Secretary of Finance. The
Court cannot also subscribe to the position of petitioners FACTS:
Pimentel, et al. that the word shall should be interpreted to There were 12 corporations engaged in motion picture
mean may in view of the phrase upon the recommendation of business who initiated a complaint to impugn the validity of
the Secretary of Finance. Ordinance No. 2958 of the City of Manila. The Ordinance,
which was passed by the City of Manila, requires that there be
Furthermore, Congress simply granted the Secretary of additional fees imposed upon cinematographers, theaters,
Finance the authority to ascertain the existence of a fact, vaudeville companies, theatrical shows and boxing exhibitions
namely, whether by December 31, 2005, the value-added tax other than the present fees paid by them. These shall be
collection as a percentage of Gross Domestic Product (GDP) charged through admission tickets sold by such enterprises.
of the previous year exceeds two and four-fifth percent 2.80%
or the national government deficit as a percentage of GDP of Indicated in the Ordinance:
the previous year exceeds one and one-half percent (1%). If Additional fee to be collected for every ticket sold the price from
either of these two instances has occurred, the Secretary of P0.25 - P.099 (pay P0.05) etc..
Finance, by legislative mandate, must submit such information Tickets shall be presented before being sold to the office of the
to the President. Then the 12% VAT rate must be imposed by City Treasurer for registration;
the President effective January 1, 2006. There is no undue Proprietor lessee, promoter, or operator must deliver to the
delegation of legislative power but only of the discretion as to office of the City Treasurer the fees corresponding to the
the execution of a law. This is constitutionally number of tickets sold by him within 2 days after the
permissible.Congress does not abdicate its functions or unduly performances or exhibition has taken place
delegate power when it describes what job must be done, who
must do it, and what is the scope of his authority; in our PLAINTIFFS ALLEGED:
complex economy that is frequently the only way in which the ordinance is null and void upon the following grounds:
legislative process can go forward.
for violation the Constitution - the provision regarding the
uniformity and equality of taxation and the equal protection of SEC. 260 of the NIRC: “There shall be collected from the
the laws; proprietor, lessee, or operation of theater cinematographs,
Municipal Board of Manila exceeded and overstepped the concert halls, circuses, boxing exhibition and other places of
power granted it the Charter of the City of Manila; - Section amusement the following taxes:
2444(m) of the Revised Administrative Code confers upon the (a) When the amount paid for admission exceeds twenty-nine
City of Manila the power to impose a tax on business but not centavos, two centavos on each admission...etc”
on amusement
Although Ordinance No. 2958 does not specify the kind of the
DEFENDANTS ALLEGED: tax sought to be imposed, the seven schedules and other
ordinance was passed by the Municipal Board of Manila by details of said ordinance are identical with the amusement tax
virtue of its express legislative power to tax for revenue provided by Sec. 260 of NIRC.
that the graduated tax on admission tickets to theaters and
other places of amusement imposed by the NIRC is collected Regarding the issue that local governments cannot impose tax
by and for the purposes of the National Government upon amusements: The plaintiff’s allegation that defendants
Ordinance No. 2958 imposes and requires the collection of a only had the power to tax on business and not on amusement
similar tax by and for the purposes of the Government of the has no ground under the provisions of Sec. 2444(m) of the
City of Manila, and there is no case of double taxation Revised Administrative Code. The very fact that Sec. 2444(m)
when the ordinance took effect plaintiffs have been charging of the Revised Administrative Code includes theaters,
the public increased prices for admission to the cinemagraphs cinematographs and other performances and places of
but refused to pay said tax; plaintiffs have taken undue amusement, shows that the power to tax amusement is
advantage of said ordinance expressly included within the power granted by section
2444(m) of the Revised Administrative Code.
CFI: Rendered that the Ordinance was valid
Appellate Court: Ordinance was valid The contention of Plaintiffs that the City of Manila’s power
granted by Sec. 2444(m) of the Revised Administrative Code
ISSUE: Whether or not the City of Manila has the power to has been repealed by the enactment of the National Internal
enact an Ordinance to tax amusements Revenue Code has no contention as both provisions of law
may stand together and be enforced at the same time without
HELD: YES. any incompatibility among themselves.
SEC. 2444(m) of the Revised Administrative Code: “To tax
fix the license fee and regulate the business Regarding the issue that the tax imposed was in violation of
of...cinematographs; and further to fix the location of and to tax equality and uniformity: The fact that some places of
fix the license fee for and regulate the business of...theatrical amusement are not taxed while others, such as
performances, public exhibitions, circus and other cinematographs, theaters, vaudeville companies, theatrical
performances and places of amusements'' shows, and boxing exhibitions and other kinds of amusements
or places of amusement are taxed, is no argument at all This case revolves around the validity of Section 145 of
against the equality and uniformity of the tax imposition. NIRC as recodified by RA 8424, as well as RA 9334
Equality and uniformity in taxation means that all taxable amending Section 145 of the NIRC, several Revenue
articles or kinds of property of the same class shall be taxed at Regulations and Revenue Memorandum Order No. 6-2003,
the same rate. The taxing power has the authority to make as the petitioner argues that these are violative of the
reasonable and natural classifications for purposes of taxation; equal protection and uniformity clauses of the
and the appellants cannot point out what places of amusement Constitution.
taxed by the ordinance do not constitute a class by themselves
and which can be confused with those not included in the RA 8240 is an act amending sections 138-140 and 142 of the
ordinance. NIRC. RA 8424 re-codified NIRC where because of such,
Section 142 was renumbered as Section 145 of the NIRC.
DOCTRINE: Local Governments have the power to tax Section 145, paragraph C provides for 4 tiers of tax rates based
amusements as provided in the NIRC. The taxing power has on the net retail price per pack of cigarettes. As such, new
the authority to make reasonable and natural classifications for brands of cigarettes shall be taxed according to their current
purposes of taxation. Equality and uniformity in taxation means net retail price while existing or “old” brands shall be taxed
that all taxable articles or kinds of property of the same class based on their net retail price as of October 1, 1996. To
shall be taxed at the same rate. implement RA 8240, the Bureau of Internal Revenue (BIR)
issued Revenue Regulations No. 1-97,which classified the
existing brands of cigarettes as those duly registered or active
brands prior to January 1, 1997. New brands, or those
MENDOZA (iv) British American Tobacco vs. registered after January 1, 1997, shall be initially assessed at
Camacho [G.R. No. 163583. August 20, 2008 and April 15, their suggested retail price until such time that the appropriate
2009.] survey to determine their current net retail price is conducted.
In June 2001, petitioner British American Tobacco
PETITIONER/S: BRITISH AMERICAN TOBACCO
introduced into the market Lucky Strike Filter, Lucky
RESPONDENT/S: JOSE ISIDRO CAMACHO, in his
Strike Lights and Lucky Strike Menthol Lights cigarettes,
capacity as Secretary of the Department of Finance and
with a suggested retail price of P9.90 per pack. Pursuant
GUILLERMO L. PARAYNO, JR., in his capacity as
to Sec. 145 (c), the Lucky Strike brands were initially
Commissioner of the Bureau of Internal Revenue; PHILIP
assessed the excise tax at P8.96 per pack.
MORRIS PHILIPPINES MANUFACTURING, INC., FORTUNE
TOBACCO CORP., and JT INTERNATIONAL, S.A. On February 17, 2003, Revenue Regulations No. 9-2003,
(respondents-in-intervention) amended Revenue Regulations No. 1-97 by providing,
FACTS: among others, a periodic review every two years or earlier of
2008 Decision the current net retail price of new brands and variants thereof
for the purpose of establishing and updating their tax
classification.
Pursuant thereto, Revenue Memorandum Order No. 6-2003 In an Order dated March 4, 2004, the trial court denied
was issued on March 11, 2003, prescribing the guidelines the motion to dismiss and issued a writ of preliminary
and procedures in establishing current net retail prices of injunction to enjoin the implementation of Revenue
new brands of cigarettes and alcohol products. Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue
Subsequently, Revenue Regulations No. 22-2003 was Memorandum Order No. 6-2003. Respondents filed a
issued on August 8, 2003 to implement the revised tax Motion for Reconsideration and Supplemental Motion
classification of certain new brands introduced in the market for Reconsideration. At the hearing on the said motions,
after January 1, 1997, based on the survey of their current petitioner and respondent Commissioner of Internal
net retail price. The survey revealed that Lucky Strike Filter, Revenue stipulated that the only issue in this case is the
Lucky Strike Lights, and Lucky Strike Menthol Lights, are constitutionality of the assailed law, order, and
sold at the current net retail price of P22.54, P22.61 and regulations.
P21.23, per pack, respectively. Respondent Commissioner
On May 12, 2004, the trial court rendered a decision
of the Bureau of Internal Revenue thus recommended the
upholding the constitutionality of Section 145 of the
applicable tax rate of P13.44 per pack inasmuch as Lucky
NIRC, Revenue Regulations Nos. 1-97, 9-2003, 22-2003
Strike's average net retail price is above P10.00 per pack.
and Revenue Memorandum Order No. 6-2003. The trial
Thus, on September 1, 2003, petitioner filed before the court also lifted the writ of preliminary injunction.
Regional Trial Court (RTC) of Makati, Branch 61, a
Petitioner brought the instant petition for review directly
petition for injunction with prayer for the issuance of a
with this Court on a pure question of law.
temporary restraining order (TRO) and/or writ of
preliminary injunction, docketed as Civil Case No. 03- While the petition was pending, RA 9334 (An Act
1032. Said petition sought to enjoin the implementation Increasing The Excise Tax Rates Imposed on Alcohol
of Section 145 of the NIRC, Revenue Regulations Nos. 1- And Tobacco Products, Amending For The Purpose
97, 9-2003, 22-2003 and Revenue Memorandum Order Sections 131, 141, 143, 144, 145 and 288 of the NIRC of
No. 6-2003 on the ground that they discriminate against 1997, As Amended), took effect on January 1, 2005. The
new brands of cigarettes, in violation of the equal statute, among others, increased the excise tax rates
protection and uniformity provisions of the Constitution. provided in paragraph (c) of Section 145.
Respondent Commissioner of Internal Revenue filed an Under RA 9334, the excise tax due on petitioner's
Opposition to the application for the issuance of a TRO. products was increased to P25.00 per pack. In the
On September 4, 2003, the trial court denied the implementation thereof, respondent Commissioner
application for TRO, holding that the courts have no assessed petitioner's importation of 911,000 packs of
authority to restrain the collection of taxes. Meanwhile, Lucky Strike cigarettes at the increased tax rate of
respondent Secretary of Finance filed a Motion to P25.00 per pack, rendering it liable for taxes in the total
Dismiss, contending that the petition is premature for sum of P22,775,000.00.
lack of an actual controversy or urgent necessity to Hence, petitioner filed a Motion to Admit Attached
justify judicial intervention. Supplement and a Supplement to the petition for review,
assailing the constitutionality of RA 9334 insofar as it by machine are invalid insofar as they grant the BIR the
retained Annex "D" and praying for a downward power to reclassify or update the classification of new
classification of Lucky Strike products at the bracket brands every two years or earlier.
taxable at P8.96 per pack. Petitioner contended that the
continued use of Annex "D" as the tax base of existing In its Motion for Reconsideration, petitioner British
brands of cigarettes gives undue protection to said American Tobacco argues that the assailed provisions
brands which are still taxed based on their price as of violate the equal protection and uniformity of taxation
October 1996 notwithstanding that they are now sold at clauses of the Constitution.
the same or even at a higher price than new brands like
Lucky Strike. Thus, old brands of cigarettes such as ISSUES:
Marlboro and Philip Morris which, like Lucky Strike, are WHETHER OR NOT THE ASSAILED LAW VIOLATES
sold at or more than P22.00 per pack, are taxed at the EQUAL PROTECTION AND UNIFORMITY OF TAXATION
rate of P10.88 per pack, while Lucky Strike products are CLAUSES
taxed at P26.06 per pack. WHETHER OR NOT THE ASSAILED PROVISIONS
VIOLATE THE CONSTITUTIONAL PROVISION ON UNFAIR
On March 20, 2006, Philip Morris Philippines
COMPETITION
Manufacturing Incorporated filed a Motion for Leave to
Intervene with attached Comment-in-Intervention. This
was followed by the Motions for Leave to Intervene of
HELD:
Fortune Tobacco Corporation, Mighty Corporation, and
JT International, S.A., with their respective Comments-
NO.
in-Intervention. The Intervenors claim that they are
parties-in-interest who stand to be affected by the ruling
As held in the assailed Decision, the instant case neither
of the Court on the constitutionality of Section 145 of the
involves a suspect classification nor impinges on a
NIRC and its Annex "D" because they are manufacturers
fundamental right. Consequently, the rational basis test
of cigarette brands which are included in the said Annex.
was properly applied to gauge the constitutionality of the
Hence, their intervention is proper since the protection
assailed law in the face of an equal protection challenge.
of their interest cannot be addressed in a separate
It has been held that "in the areas of social and economic
proceeding.
policy, a statutory classification that neither proceeds
along suspect lines nor infringes constitutional rights
2009 Decision must be upheld against equal protection challenge if there
is any reasonably conceivable state of facts that could
In the 2008 Decision, the Supreme Court partially granted provide a rational basis for the classification." Under the
the petition where the decision of the RTC of Makati has rational basis test, it is sufficient that the legislative
been affirmed with modification where the Court held that classification is rationally related to achieving some
Section 145 of the NIRC is Constitutional and that the legitimate State interest.
Revenue Regulations insofar as to the cigarettes packed
 interests. In particular, the questioned provision
A legislative classification that is reasonable does not addressed Congress's administrative concerns regarding
offend the constitutional guaranty of the equal protection delegating too much authority to the DOF and BIR as this
of the laws. The classification is considered valid and will open the tax system to potential areas for abuse and
reasonable provided that: (1) it rests on substantial corruption. Congress may have reasonably conceived
distinctions; (2) it is germane to the purpose of the law; (3) that a tax system which would give the least amount of
it applies, all things being equal, to both present and discretion to the tax implementers would address the
future conditions; and (4) it applies equally to all those problems of tax avoidance and tax evasion.||
belonging to the same class. ||
Petitioner's contention that the assailed provisions
The first, third and fourth requisites are satisfied. The
violate the uniformity of taxation clause is similarly
classification freeze provision was inserted in the law for
unavailing. In Churchill v. Concepcion, we explained that
reasons of practicality and expediency. That is, since a
a tax "is uniform when it operates with the same force
new brand was not yet in existence at the time of the
and effect in every place where the subject of it is
passage of RA 8240, then Congress needed a uniform
found." It does not signify an intrinsic but simply a
mechanism to fix the tax bracket of a new brand. The
geographical uniformity. A levy of tax is not
current net retail price, similar to what was used to classify
unconstitutional because it is not intrinsically equal and
the brands under Annex "D" as of October 1, 1996, was
uniform in its operation. The uniformity rule does not
thus the logical and practical choice. Further, with the
prohibit classification for purposes of taxation. As ruled
amendments introduced by RA 9334, the freezing of the
in Tan v. Del Rosario, Jr.:
tax classifications now expressly applies not just to
Annex "D" brands but to newer brands introduced after Uniformity of taxation, like the kindred concept of
the effectivity of RA 8240 on January 1, 1997 and any new equal protection, merely requires that all subjects
brand that will be introduced in the future. (However, as or objects of taxation, similarly situated, are to be
will be discussed later, the intent to apply the freezing treated alike both in privileges and liabilities.
mechanism to newer brands was already in place even Uniformity does not forfend classification as long
prior to the amendments introduced by RA 9334 to RA as: (1) the standards that are used therefor are
8240.) This does not explain, however, why the substantial and not arbitrary, (2) the categorization
classification is "frozen" after its determination based on is germane to achieve the legislative purpose, (3)
current net retail price and how this is germane to the the law applies, all things being equal, to both
purpose of the assailed law. present and future conditions, and (4) the
classification applies equally well to all those
The classification freeze provision was in the main the belonging to the same class.
result of Congress's earnest efforts to improve the
efficiency and effectivity of the tax administration over sin In the instant case, there is no question that the
products while trying to balance the same with other State classification freeze provision meets the geographical
uniformity requirement because the assailed law applies
to all cigarette brands in the Philippines. And, for effect thus negating petitioner's sweeping claim that the
reasons already adverted to in our August 20, 2008 classification freeze provision is an insurmountable
Decision, the above four-fold test has been met in the barrier to the entry of new brands. We also noted that price
present case. is not the only factor affecting competition in the market
The classification freeze provision uniformly applies to all for there are other factors such as taste, brand loyalty, etc.
cigarette brands whether existing or to be introduced in
the market at some future time. It does not purport to DOCTRINE:
exempt any brand from its operation nor single out a
brand for the purpose of imposition of excise taxes. A legislative classification that is reasonable does
not offend the constitutional guaranty of the equal
NO. protection of the laws. The classification is
considered valid and reasonable provided that: (1)
While previously arguing that the rational basis test was it rests on substantial distinctions; (2) it is germane
not satisfied, petitioner now asserts that this test does not to the purpose of the law; (3) it applies, all things
apply in this case and that the proper matrix to evaluate being equal, to both present and future conditions;
the constitutionality of the assailed law is the prohibition and (4) it applies equally to all those belonging to
on unfair competition under Section 19, Article XII of the the same class.
Constitution. It should be noted that during the trial below, Uniformity of taxation, like the kindred concept of
petitioner did not invoke said constitutional provision as equal protection, merely requires that all subjects
it relied solely on the alleged violation of the equal or objects of taxation, similarly situated, are to be
protection and uniformity of taxation clauses. Well-settled treated alike both in privileges and liabilities.
is the rule that points of law, theories, issues and Uniformity does not forfend classification as long
arguments not adequately brought to the attention of the as: (1) the standards that are used therefor are
lower court will not be ordinarily considered by a substantial and not arbitrary, (2) the categorization
reviewing court as they cannot be raised for the first time is germane to achieve the legislative purpose, (3)
on appeal. At any rate, even if we were to relax this rule, the law applies, all things being equal, to both
as previously stated, the evidence presented before the present and future conditions, and (4) the
trial court is insufficient to establish the alleged violation classification applies equally well to all those
of the constitutional proscription against unfair belonging to the same class.
competition.

The petitioner failed to convincingly prove that there is a LEE (v) La Sallian Educational Innovators
substantial barrier to the entry of new brands in the Foundation vs. CIR, G.R. 202792, February 27, 2019
cigarette market due to the classification freeze provision.
We further observed that several new brands were
introduced in the market after the assailed law went into
PETITIONER/S: La Sallian Educational Innovators Foundation consistently argued that it enjoys a tax-exempt
Foundation, Inc. (De La Salle University-College of St. status from all taxes as a non-stock, non-profit educational
Benilde Foundation institution as expressly provided under Paragraph 4, Section 4,
RESPONDENT/S: Commissioner of Internal Revenue Article XIV of the 1987 Constitution. Moreover, petitioner
FACTS: Foundation denied the respondent's allegations that it
Procedural Facts: engaged in disproportionate profit-earning activities contrary to
Petition for Review on Certiorari its educational purpose. Contrary to the allegations, it
explained that the sum of P643,279,148.00 is not profit, but
CIR - Income Tax Deficiency merely the gross receipts from school-year 2002. Bearing in
Special First Division of the CTA Division - ruling in favor of mind that the total expenses of the Foundation is in the amount
Foundation cancelling Assessment Notice of P582,903,965.00, the net receipt of petitioner Foundation is
CTA En Banc - reversed CTA Division only P60,375,183. This was corroborated by the Foundation's
Supreme Court - Petitioner is exempted from paying taxes Audited Financial Statement. 16 Remarkably, this amount is
equivalent to just 9.38% of its total operating receipts.
On June 17, 2005, Respondent issued two Assessment
Notices. The notices have demand letters against petitioner for CTA Division ruled in favor of the petitioner Foundation,
deficiency of income tax. The alleged deficiency income tax in cancelling the assessment notice with demand letter.
the amount of P122, 414, 521.70. On the same date, a
separate demand letter was also sent by respondent to CTA En Banc promulgated a decision granting respondent’s
petitioner for a compromise penalty in deficiency VAT in the petition for review and reversing decision of the CTA
amount of P25,000.00. To contest the deficiency taxes
assessed, petitioner Foundation filed a Protest or Request for ISSUES: Whether the petitioner foundation has lost its
Reconsideration to respondent on July 20, 2005. After the tax-exempt status under the 1987 Constitution
petitioner Foundation has submitted all the documents in
support of its protest, and in view of respondent's inaction HELD: No, the Supreme Court said that Petitioner
thereto, petitioner Foundation filed a Petition for Review before Foundation has presented adequate legal and factual basis to
the Special First Division of the CTA Division. It was sent prove that it remains as a tax-exempt entity under Article XIV,
through registered mail on April 17, 2006, the last day of filing Section 4, Paragraph 3 of the 1987 Constitution. Non-stock,
the appeal. However, petitioner was only able to pay the docket non-profit educational institutions are not required to pay
and other legal fees nine days after or on April 26, 2006. taxes on all their revenues and assets if they are used
Notably, petitioner Foundation executed an Agreement Form actually, directly and exclusively for educational
with the Bureau of Internal Revenue (BIR) on April 21, 2006, purposes. Based on jurisprudence and tax rulings, a taxpayer
and paid the deficiency VAT liability of P601,487.70 on May 9, shall be granted with this tax-exemption after proving that: (1)
2006. However, respondent alleged that the petitioner it falls under the classification of non-stock, non-profit
Foundation has already lost its tax-exempt status, making it educational institution; and (2) the income it seeks to be
liable to deficiency income tax. On the other hand, petitioner exempted from taxation is used actually, directly and
exclusively for educational purposes. Petitioner Foundation Foundation for the fiscal year ended May 31, 2002. Thus, the
has fulfilled both of the abovementioned requirements. income of petitioner Foundation is only P60,375,183.00 or
9.38% of its operating receipts. This is way below the average
Petitioner Foundation’s primary and secondary purposes in its gross profit margin rate of 20% for most business enterprises.
Amended Articles of Incorporation clearly provide that it is a
non-stock, non-profit educational entity. Moreover, petitioner Furthermore, a simple reading of the Constitution would show
Foundation has no capital divided into shares. No part of its that Article XIV, Section 4 (3) does not require that the
income can be distributed as dividends to its members, revenues and income must have also been earned from
trustees and officers. educational activities or activities related to the purposes of an
educational institution. The phrase "all revenues" is unqualified
It is also important to mention that in BIR Ruling No. 176-88 by any reference to the source of revenues. Thus, so long as
dated August 23, 1988, the BIR already declared that petitioner the revenues and income are used actually, directly and
Foundation is a non-stock, non-profit educational institution exclusively for educational purposes, then said revenues and
that is exempt from certain taxes. As pointed out by income shall be exempt from taxes and duties. In the instant
respondent, petitioner Foundation did not secure a new BIR case, petitioner Foundation firmly and adequately argued that
Ruling on its claim for exemption after the Tax Code has been none of its income goes to the benefit of any officer or entity.
amended. However, this Court finds such fact insignificant. Instead, its income has been actually, exclusively and directly
The application for a new BIR Ruling is unnecessary used for performing its purpose as an educational institution.
considering that the BIR Ruling was never revoked, and the Undoubtedly, petitioner Foundation has also proven this
primary purpose of petitioner Foundation remained the same. second requisite.
Notably, respondent also failed to mention any legal basis that
will require petitioner Foundation to secure a new BIR Ruling
to confirm its tax- exempt status. Furthermore, the respondent DOCTRINE: Article XIV, Sec. 4 (3) All revenues and assets
claimed that petitioner Foundation is not a non-profit of non-stock, non-profit educational institutions used
educational institution anymore due to its alleged enormous actually, directly, and exclusively for educational
profits. Respondent accused it of operating contrary to the purposes shall be exempt from taxes and duties.
nature of a non- profit educational institution by generating
massive profits in the amount of P643,000,000.00 from tuition Module 3
fees, and having cash worth P775,000,000 in its bank.
However, these allegations were completely unsupported by FORTUNO (i) Commissioner of Internal Revenue vs.
facts and evidence. Based on the evidence presented, the Isabela Cultural (361 SCRA 71);
P643,000,000.00 is not petitioner Foundation's profit as it is
just the gross receipt from school year 2002. The respondent PETITIONER/S: Commissioner of Internal Revenue
easily overlooked petitioner Foundation's administrative and RESPONDENT/S: Isabela Cultural Corporation
non-administrative expenses amounting to P582,903,965.00.
This sum constituted the total operating expenses of petitioner FACTS:
 by ICC in 1986 because it was only in the said year when the
On February 23, 1990, ICC received from the BIR Assessment bills demanding payment were sent to ICC. ICC could not
Notice A2 for deficiency income tax of P333,196.86, and declare the same as deduction for the years 1984 and 1985 as
Assessment Notice B for deficiency expanded withholding tax the amount thereof could not be determined at that time.
of P4,897.79, inclusive of surcharges and interest, both for the 2) The ICC did not understate its interest income on the subject
taxable year 1986. promissory notes. It was the BIR which made an overstatement
The deficiency income tax of P333,196.86, arose from:
 of said income when it compounded the interest income
(1) BIR’s disallowance of ICC’s claimed expense deductions receivable by ICC from the promissory notes of Realty
for professional and security services billed to and paid Investment, Inc., despite the absence of a stipulation in the
by ICC in 1986, to wit:
 contract providing for a compounded interest; nor of a
circumstance, like delay in payment or breach of contract, that
(a) Expenses for the auditing services of SGV & Co., for the would justify the application of compounded interest.
year 1985; 3) The ICC in fact withheld 1% expanded withholding tax on its
(b) Expenses for the legal services of the law firm Bengzon claimed deduction for security services as shown by the
Zarraga Narciso Cudala Pecson Azcuna & Bengson (Bengzon various payment orders and confirmation receipts it presented
Law Firm) for the years 1984 and 1985. as evidence.
(c) Expense for security services of El Tigre Security &
Investigation Agency for the months of April and May 1986. CA

(2) The alleged understatement of ICC’s interest income on the CA affirmed the CTA decision.
three promissory notes due from Realty Investment, Inc. Arguments before SC:
The deficiency expanded withholding tax of P4,897.79
(inclusive of interest and surcharge) was allegedly due to the Petitioner argues that since ICC is using the accrual method of
failure of ICC to withhold 1% expanded withholding tax on its accounting, the expenses for the professional services that
claimed P244,890.00 deduction for security services. accrued in 1984 and 1985, should have been declared as
On February 9, 1995, it received a final notice before seizure deductions from income during the said years and the failure
demanding payment of the amounts stated in the said notices. of ICC to do so bars it from claiming said expenses as
Hence, it brought the case to the CTA. deduction for the taxable year 1986. As to the alleged
deficiency of interest income and failure to withhold expanded
CTA withholding tax assessment, petitioner invoked the
On February 26, 2003, the CTA rendered a decision canceling presumption that the assessment notices issued by the BIR
and setting aside the assessment notices issued against are valid.
ICC.
CTA held that:
1) The claimed deductions for professional and security ISSUES: WON ICC’s auditing, legal and security expenses for
services (performed in 1984 and 1985) were properly claimed 1984 and 1985 can be deducted from its gross income for
taxable year 1986. (Expenses for auditing and legal services the current year but failed to do so cannot deduct the same for
CANNOT BE DEDUCTED) the next year.
The accrual method relies upon the taxpayer’s right to receive
HELD: amounts or its obligation to pay them, in opposition to actual
NO – Expenses for auditing and legal services availed of in receipt or payment, which characterizes the cash method of
1984 and 1985 cannot be deducted from the gross income for accounting.
taxable year 1986. The accrual of income and expense is permitted when the all-
Re: Requisites for Deductibility events test has been met. This test requires: (1) fixing of a right
The requisites for the deductibility of ordinary and necessary to income or liability to pay; and (2) the availability of the
trade, business, or professional expenses, like expenses paid reasonable accurate determination of such income or liability.
for legal and auditing services, are: The all-events test requires the right to income or liability be
(a) the expense must be ordinary and necessary; fixed, and the amount of such income or liability be determined
(b) it must have been paid or incurred during the taxable year; with reasonable accuracy.
(c) it must have been paid or incurred in carrying on the trade However, the test does not demand that the amount of income
or business of the taxpayer; and or liability be known absolutely, only that a taxpayer has at his
(d) it must be supported by receipts, records or other pertinent disposal the information necessary to compute the amount
papers. with reasonable accuracy.
The requisite that ‘it must have been paid or incurred during The all-events test is satisfied where computation remains
the taxable year’ is further qualified by Sec. 45 of the NIRC uncertain, if its basis is unchangeable; the test is satisfied
which states that: where a computation may be unknown, but is not as much as
“The deduction provided for in this Title shall be taken for the unknowable, within the taxable year. The amount of liability
taxable year in which ‘paid or accrued’ or ‘paid or incurred,’ does not have to be determined exactly; it must be determined
dependent upon the method of accounting upon the basis of with “reasonable accuracy.” Accordingly, the term “reasonable
which the net income is computed x x x.” accuracy” implies something less than an exact or completely
Accounting methods for tax purposes comprise a set of rules accurate amount.
for determining when and how to report income and
deductions. The propriety of an accrual must be judged by the fact that a
In this case, the accounting method used by ICC is the accrual taxpayer knew, or could reasonably be expected to have
method. Re: Accrual Method of Accounting known, at the closing of its books for the taxable year. Accrual
Revenue Audit Memorandum Order No. 1-2000, provides that method of accounting presents largely a question of fact, such
under the accrual method of accounting, expenses not being that the taxpayer bears the burden of proof of establishing the
claimed as deductions by a taxpayer in the current year when accrual of an item of income or deduction.
they are incurred cannot be claimed as deduction from income
for the succeeding year. Thus, a taxpayer who is authorized to In this case, ICC thus failed to discharge the burden of proving
deduct certain expenses and other allowable deductions for that the claimed expense deductions for the professional
services were allowable deductions for the taxable year 1986.
The expenses for legal services pertain to the 1984 and 1985 amount of income or liability be known absolutely, only that a
legal and retainer fees of the Bengzon law firm, and for taxpayer has at his disposal the information necessary to
reimbursement of the expenses of said firm in connection with compute the amount with reasonable accuracy. The propriety
ICC’s tax problems for the year 1984. As testified by the of an accrual must be judged by the fact that a taxpayer knew,
Treasurer of ICC, the firm has been its counsel since the or could reasonably be expected to have known, at the closing
1960’s. of its books for the taxable year. Accrual method of accounting
As to when the firm’s performance of its services in connection presents largely a question of fact, such that the taxpayer
with the 1984 tax problems were completed, or whether ICC bears the burden of proof of establishing the accrual of an item
exercised reasonable diligence to inquire about the amount of of income or deduction.
its liability, or whether it does or does not possess the
information necessary to compute the amount of said liability
with reasonable accuracy, are questions of fact which ICC VELASCO (ii) Commissioner of Internal Revenue vs.
never established. Moreover, the professional fees of SGV & Union Shipping Corp (185 SCRA 547);
Co. for auditing the financial statements of ICC for the year
1985 cannot be validly claimed as expense deductions in PETITIONER/S: Commissioner of Internal RevenuecO
1986. This is because ICC failed to present evidence showing RESPONDENT/S: Union Shipping Corp and CTA
that even with only “reasonable accuracy,” as the standard to
ascertain its liability to. FACTS: In a letter dated December 27, 1974 herein petitioner
Commissioner of Internal Revenue assessed against Tee
ICC thus failed to discharge the burden of proving that the Fong Hong Ltd. and/or herein private respondent Union
claimed expense deductions for the professional services were Shipping Corporation, the total sum of Php 583,155.22 as
allowable deductions for the taxable year 1986. Hence, ICC deficiency income taxes due for the years 1971 and 1972.
cannot be validly deducted from its gross income for the said
year and were therefore properly disallowed by the BIR. Said letter was received on January 4, 1975, and in a letter
dated January 10, 1975, received by petitioner on January 13,
Therefore, the case is remanded to the BIR for the computation 1975, private respondent protested the assessment.
of Isabela Cultural Corporation’s liability under Assessment
Notice No. FAS-1-86-90-000680. Petitioner, without ruling on the protest, issued a warrant of
distraint and levy, which was served on private respondent’s
counsel, Clemente Celso, on November 25, 1976.

DOCTRINE:The accrual of income and expense is permitted In a letter dated November 27, 1976, received by petitioner on
when the all-events test has been met. This test requires: (1) November 29, 1976, private respondent reiterated its request
fixing of a right to income or liability to pay; and (2) the for reinvestigation of the assessment and for the
availability of the reasonable accurate determination of such reconsideration of the summary collection thru the warrant of
income or liability. However, the test does not demand that the distraint and levy.
Petitioner again, without acting on the request for We deem it appropriate to state that the Commissioner of
reinvestigation and reconsideration of the warrant of distraint Internal Revenue should always indicate to the taxpayer in
and levy, filed a collection suit before branch XXI of the the CFI clear and unequivocal language whenever his action on an
of Manila and docketed as civil case no. 120459 against private assessment questioned by a taxpayer constitutes his final
respondent. Summons in the said collection case issued to determination on the disputed assessment, as contemplated
private respondent on December 28, 1978. by sections 7 and 11 of Republic Act 1125, as amended. On
the basis of this statement indubitably showing that the
On January 10, 1979, private respondent filed with respondent Commissioner's communicated action is his final decision on
court its Petition for Review of the petitioner's assessment of the contested assessment, the aggrieved taxpayer would then
its deficiency income taxes in a letter dated December 27, be able to take recourse to the tax court at the opportune time.
1974, docketed therein as CTA Case No. 2989 (Rollo, pp. 44- Without needless difficulty, the taxpayer would be able to
49), wherein it prays that after hearing, judgment be rendered determine when his right to appeal to the tax court accrues.
holding that it is not liable for the payment of the income tax This rule of conduct would also obviate all desire and
herein involved, or which may be due from foreign shipowner opportunity on the part of the taxpayer to continually delay the
Yee Fong Hong, Ltd.; to which petitioner filed his answer on finality of the assessment — and, consequently, the collection
March 29, 1979. of the amount demanded as taxes — by repeated requests for
recomputation and reconsideration. On the part of the
Petitioner argues that the period to appeal to the Court of Tax Commissioner, this would encourage his office to conduct a
Appeals commenced to run from receipt of said warrant on careful and thorough study of every questioned assessment
November 25, 1976, so that on January 10, 1979 when and render a correct and definite decision thereon in the first
respondent corporation sought redress from the Tax Court, instance. This would also deter the Commissioner from unfairly
petitioner's decision has long become final and executory. making the taxpayer grope in the dark and speculate as to
which action constitutes the decision appealable to the tax
ISSUES: court. Of greater import, this rule of conduct would meet a
WON petitioner's decision (CIR) has long become final and pressing need for fair play, regularity, and orderliness in
executory administrative action.
Union Shipping Corporation acting as a mere "husbanding
agent" of Yee Fong Hong Ltd. is liable for payment of taxes on Section 11. Who may appeal; effect of appeal. - Any person,
the gross receipts or earnings of the latter. association, or corporation adversely affected by a decision or
ruling of the Collector of Internal Revenue, the Collector of
HELD: Customs or any provincial or city Board of Assessment
On this issue, this Court had already laid down the dictum that Appeals may file an appeal in the Court of Tax Appeals within
the Commissioner should always indicate to the taxpayer in thirty days after the receipt of such decision or ruling.
clear and unequivocal language what constitutes his final
determination of the disputed assessment.
Union Shipping Corporation acting as a mere "husbanding Neither can private respondent be liable for withholding tax
agent" of Yee Fong Hong Ltd. is liable for payment of taxes on under Section 53 of the Internal Revenue Code since it is not
the gross receipts or earnings of the latter. in possession, custody or control of the funds received by and
remitted to Yee Fong Hong, Ltd., a non-resident taxpayer. As
Coming to the second issue, petitioner contended and was correctly ruled by the Court of Tax Appeals, "if an individual or
substantiated by satisfactory uncontradicted testimonies of corporation like the petitioner in this case, is not in the actual
Clemente Celso, Certified Public Accountant, and Rodolfo C. possession, custody, or control of the funds, it can neither be
Cabalquinto, President and General Manager, of petitioner that physically nor legally liable or obligated to pay the so-called
it is actually and legally the husbanding agent of the vessel of withholding tax on income claimed by Yee Fong Hong, Ltd."
Yee Fong Hong, Ltd. as (1) it neither performed nor transacted
any shipping business, for and in representation, of Yee Fong DOCTRINE: The Commissioner should always indicate to the
Hong, Ltd. or its vessels or otherwise negotiated or procured taxpayer in clear and unequivocal language what constitutes
cargo to be loaded in the vessels of Yee Fong Hong, Ltd. (p. his final determination of the disputed assessment.
21, t.s.n., July 16, 1980); (2) it never solicited or procured cargo
or freight in the Philippines or elsewhere for loading in said
vessels of Yee Fong Hong, Ltd. (pp. 21 & 38, ibid.); (3) it had
not collected any freight income or receipts for the said Yee
Fong Hong, Ltd. (pp. 22 & 38, ibid; pp. 46 & 48, t.s.n., Nov. 14,
1980.); (4) it never had possession or control, actual or
constructive, over the funds representing payment by
Philippine shippers for cargo loaded on said vessels (pp. 21 &
38, ibid; p. 48, ibid); petitioner never remitted to Yee Fong
Hong, Ltd. any sum of money representing freight incomes of
Yee Fong Hong, Ltd. (p. 21, ibid.; p. 48, ibid); and (5) that the
freight payments made for cargo loaded in the Philippines for
foreign destination were actually paid directly by the shippers
to the said Yee Fong Hong, Ltd. upon arrival of the goods in
the foreign ports.

On this issue, the Commissioner of Internal Revenue Misael P.

Vera, on query of respondent's counsel, opined that
respondent corporation being merely a husbanding agent is
not liable for the payment of the income taxes due from the
foreign ship owners loading cargoes in the Philippines
 Procedural:
(iii) Advertising Associates vs. CA (133 SCRA 765); · September 13 and November 21, 1974 – requested 2
letters of cancellation
PETITIONER/S: Advertising Associates · March 31, 1978 - the Commissioner resorted to the
RESPONDENT/S: CIR summary remedy of issuing two warrants of distraint
FACTS: Advertising Associates is being held liable for 3% · May 23, 1979 - Acting Commissioner Efren I. Plana
Contractor’s percentage tax for rental income from the lease of wrote a letter in answer to the requests of the taxpayer for the
neon signs and billboards imposed by 1933 tax code on cancellation of the assessments and denied the withdrawal of
business agents and independent contractors. the warrants of distraint. He also indicated the finality of his
petitioner relies on the Collector's rulings dated September 12, decision.
1960 and June 20, 1967 that it is neither an independent · June 18, 1979 - Advertising Associates received that
contractor nor a business agent (Exh. G and H). letter and Nineteen days later or on July 7, it filed its petition
for review. In its resolution of August 28, 1979, the Tax Court
As already stated, it considers itself a media company, like a enjoined the enforcement of the warrants of distraint.
newspaper or a radio broadcasting company, but not an · CTA ruling - did not resolve the case on the merits. It
advertising agency in spite of the purpose stated in its articles ruled that the warrants of distraint were the Commissioner's
of incorporation.It stresses that it is a mere lessor of neon signs appealable decisions. Since Advertising Associates appealed
and billboards and does not perform advertising services. from the decision of May 23, 1979, the petition for review was
Section 191 defines an independent contractor as including all filed out of time. It was dismissed. The taxpayer appealed to
persons whose activity consists essentially of the sale of all this Court.
kinds of services for a fee. Section 194(v) of the Tax Code
defines a business agent as including persons who conduct
advertising agencies. The Commissioner required Advertising ISSUES: Whether or not the petitioner is liable to pay
Associates to pay P297,927.06 and P84,773.10 as contractor's deficiency tax? And whether or not the petition for review
tax for 1967-1971 and 1972, respectively, including 25% was filed on time?
surcharge (the latter amount includes interest) on its income HELD: Issue 1: The Court held that: the undeniable fact is that
from billboards and neon signs. neon signs and billboards are primarily designed for
advertising. We hold that the petitioner is a business agent and
The basis of the assessment is the fact that the taxpayer's an independent contractor as contemplated by law. However,
articles of incorporation provide that its primary purpose is to in view of the prior rulings that the taxpayer is not a business
engage in general advertising business. Its income tax returns agent nor an independent contractor and in view of the
indicate that its business was advertising. However, the controversial nature of the deficiency assessments, the 25%
petitioners argue that there was a previous Civil Case which surcharge should be eliminated.
held that it is indeed not an advertising company, but a media
company. Issue 2: The petitioner for review was filed on time. The
reviewable decision is that contained in Commissioner Plana's
letter of May 23, 1979 and not the warrants of distraint which
were served upon the taxpayer on April 18 and May 25, 1978. several requests of the presentation of records and subpoena
No amount of quibbling or sophistry can blink the fact that said duces tecum , the BIR legal division issued an Indorsement to
letter embodies the Commissioner s final decision within the proceed with the investigation based on the best evidence
meaning of section 7 of Republic Act No. 1125. The obtained preparatory to the issuance of the assessment notice.
Commissioner said so. He even directed the taxpayer to
appeal it to the Tax Court. That was the same situation in St. The respondent received a preliminary 15-day letter November
Stephen's Association and St. Stephen's Chinese Girl's School 9, 2001 and a formal Demand Letter on April 11. 2002
vs. Collector of Internal Revenue. The directive is in assessing it with the deficiency vat and withholding tax for the
consonance with the Supreme Court's dictum that the taxable year of 1999.
Commissioner should always indicate to the taxpayer in clear
and unequivocal language what constitutes his final ISSUES: Whether or not the failure to strictly comply with
determination of the disputed assessment. That procedure is notice requirements prescribed under Section 228 of the
demanded by the pressing need for fair play, regularity and National Internal Revenue Code and R-R . No. 12-99 is
orderliness in administrative action||| tantamount to denial of due process.

HELD:
DOCTRINE:
Yes.
The sending of a PAN to a taxpayer to inform him of the
“The sending of a PAN to a taxpayer to inform him of the assessment made is but part of the due process requirement
assessment made is but part of the due process in the issuance of the deficiency tax assessment, the absence
requirement in the issuance of the deficiency tax of which renders nugatory any assessment made by the tax
assessment, the absence of which renders nugatory any authorities. The persuasiveness of the right to due process
assessment made by the tax authorities”. reaches both substantial and procedural rights and the failure
of the CIR to strictly comply with the requirements laid down by
law and its own rules is a denial of Metro Star’s right to due
CABAUATAN (iv) Commissioner of Internal Revenue process. Thus, for its failure to send the PAN stating the facts
vs. Metro Star Superama Inc. (GR No. 185371, Dec 8, 2010); and the law on which the assessment was made as required
by Sec. 28 of R.A. No. 8424, the assessment made by the CIR
PETITIONER/S: Commissioner of Internal Revenue is void.
RESPONDENT/S: Metro Star Superama, Inc.
FACTS: DOCTRINE:
The BIR through a Letter of Authority caused the examination
of the respondent’s books of accounts and other accounting
records for income tax and other internal revenue taxes for the DE GUZMAN (v) Lascona Land vs. Commissioner of
taxable year 1999. For the latter’s failure to comply with the Internal Revenue (GR No. 171251, March 5, 2012);
PETITIONER/S: The CIR, however, maintained that Lascona’s failure to timely
file an appeal with the CTA after the lapse of the 180-day
LASCONA LAND CO., INC., reglementary period provided under Section 228 of the
National Internal Revenue Code (NIRC) resulted to the finality
RESPONDENT/S: of the assessment.

COMMIS-SIONER OF INTERNAL REVENUE ISSUES:

FACTS: Whether the subject assessment has become final, executory

and demandable due to the failure of petitioner to file an appeal
Petition for Review on Certiorari under Rule 45 of the Rules of before the CTA within thirty (30) days from the lapse of the One
Court seeking the reversal of the Decision and Resolution of Hundred Eighty (180)-day period pursuant to Section 228 of
the Court of Appeals (CA) which set aside the Decision and the NIRC.
Resolution of the Court of Tax Appeals (CTA) and declared
Assessment Notice to be final, executory and demandable. HELD:

On March 27, 1998, the Commissioner of Internal Revenue

(CIR) issued Assessment Notice against Lascona Land Co., No. In case the Commissioner failed to act on the disputed
Inc. (Lascona) informing the latter of its alleged deficiency assessment within the 180-day period from date of submission
income tax for the year 1993 in the amount of P753,266.56. of documents, a taxpayer can either: (1) file a petition for
review with the Court of Tax Appeals within 30 days after the
Consequently, on April 20, 1998, Lascona filed a letter protest expiration of the 180-day period; or (2) await the final decision
to the BIR, questioning the said assessment. of the Commissioner on the disputed assessments and appeal
such final decision to the Court of Tax Appeals within 30 days
On March 3, 1999, the Bureau of Internal Revenue denied the after receipt of a copy of such decision.
protest on the ground that it failed to elevated to the Court of
Tax Appeals within thirty (30) days from the lapse of the One In arguing that the assessment became final and executory by
Hundred Eighty (180)-day period pursuant to Section 228 of the sole reason that petitioner failed to appeal the inaction of
the NIRC. the Commissioner within 30 days after the 180-day
reglementary period, respondent, in effect, limited the remedy
On April 12, 1999, Lascona appealed the decision before the of Lascona, as a taxpayer, under Section 228 of the NIRC to
Court of Tax Appeals. Lascona alleged that the Regional just one is incorrect because Section 228 of the NIRC is
Director erred in ruling that the failure to appeal to the CTA instructional as to the remedies of a taxpayer in case of the
within thirty (30) days from the lapse of the 180-day period inaction of the Commissioner on the protested assessment.
rendered the assessment final and executory.
Taxes are the lifeblood of the government and so should be LAOT (vi) Rohm vs. CIR (GR No. 168950, Jan 14, 2015);
collected without unnecessary hindrance. On the other hand,
such collection should be made in accordance with law as any PETITIONER/S:ROHM APOLLO SEMICONDUCTOR
arbitrariness will negate the very reason for government itself. PHILIPPINES
It is therefore necessary to reconcile the apparently conflicting RESPONDENT/S:COMMISSIONER OF INTERNAL
interests of the authorities and the taxpayers so that the real REVENUE
purpose of taxation, which is the promotion of the common FACTS: Petitioner Rohm Apollo is a domestic corporation
good, may be achieved. registered with the Securities and Exchange Commission. It is
also registered with the Philippine Economic Zone Authority as
an Ecozone Export Enterprise. Rohm Apollo is in the business
DOCTRINE: of manufacturing semiconductor products, particularly
In case the Commissioner failed to act on the disputed microchip transistors and tantalium capacitors at the People’s
assessment within the 180-day period from date of submission Technology Complex – Special Economic Zone, Barangay
of documents, a taxpayer can either: (1) file a petition for Maduya, Carmona Cavite. Further, it is registered with the
review with the Court of Tax Appeals within 30 days after the Bureau of Internal Revenue (BIR) as a value-added taxpayer.
expiration of the 180-day period; or (2) await the final decision
of the Commissioner on the disputed assessments and appeal Sometime in June 2000, prior to the commencement of its
such final decision to the Court of Tax Appeals within 30 days operations on 1 September 2001, Rohm Apollo engaged the
after receipt of a copy of such decision. services of Shimizu Philippine Contractors, Inc. (Shimizu) for
the construction of a factory. For services rendered by
Therefore, as in Section 228, when the law provided for the Shimizu, petitioner made initial payments of P198,551,884.28
remedy to appeal the inaction of the CIR, it did not intend to on 7 July 2000 and P132,367,923.58 on 3 August 2000.
limit it to a single remedy of filing of an appeal after the lapse
of the 180-day prescribed period. Precisely, when a taxpayer Petitioner treated the payments as capital goods purchases
protested an assessment, he naturally expects the CIR to and thus filed with the BIR an administrative claim for the
decide either positively or negatively. A taxpayer cannot be refund or credit of accumulated unutilized creditable input
prejudiced if he chooses to wait for the final decision of the CIR taxes on 11 December 2000.14 As the close of the taxable
on the protested assessment. More so, because the law and quarter when the purchases were made was 30 September
jurisprudence have always contemplated a scenario where the 2000, the administrative claim was filed well within the two-year
CIR will decide on the protested assessment. prescriptive period.

Taxes are the lifeblood of the government and so should be Pursuant to Section 112(D) of the 1997 Tax Code, the
collected without unnecessary hindrance. On the other hand, Commissioner of Internal Revenue (CIR) had a period of 120
such collection should be made in accordance with law as any days from the filing of the application for a refund or credit on
arbitrariness will negate the very reason for government itself. 11 December 2000, or until 10 April 2001, to act on the claim.
The waiting period, however, lapsed without any action by the period of 120 days, which serves as a waiting period to give
CIR on the claim. time for the CIR to act on the administrative claim for a refund
or credit; and the period of 30 days, which refers to the period
Instead of filing a judicial claim within 30 days from the lapse for filing a judicial claim with the CTA. It is the 30-day period
of the 120-day period on 10 April, or until 10 May 2001, Rohm that is at issue in this case.
Apollo filed a Petition for Review with the CTA on 11
September 2002. It was under the belief that a judicial claim The judicial claim was filed out of time. In the landmark case of
had to be filed within the two-year prescriptive period ending CIR v. San Roque Power Corporation, the Court has
on 30 September 2002. interpreted Section 112 (D). The Court held that the taxpayer
can file an appeal in one of two ways: (1) file the judicial claim
The CTA First Division denied the claim for a refund or tax within 30 days after the Commissionerdenies the claim within
credit, ruling among others, that petitioner must have at least the 120-day waiting period, or (2) file the judicial claim within
submitted its VAT return for the third quarter of 2001, since it 30 days from the expiration of the 120-day period if the
was in that period that it began its operations. The purpose was Commissioner does not act within that period.
to verify if indeed petitioner did not carry over the claimed input
VAT to the third or succeeding quarters. In this case, on December 11, 2000, petitioner filed with the
BIR an application for the refund or credit of accumulated
Rohm Apollo’s MR was denied, it elevated the case to the CTA unutilized creditable input taxes. Thus, the CIR had a period of
En Banc. It held that the failure to present the VAT returns for 120 days from December 11, 2000, or until April 10, 2001, to
the subsequent taxable year proved to be fatal to the claim for act on the claim. It failed to do so, however.Rohm Apollo
refund/tax credit, considering that it could not be determined should then have treated the CIR's inaction as a denial of its
whether the claimed amount to be refunded remain unutilized. claim. Petitioner Would then have had 30 days, or until May
MR denied. 10, 2001, to file a judicial claim with the CTA. But Rohm Apollo
filed a Petition for Review with the CTA only on September 11,
ISSUES: 2002. The judicial claim was thus filed late.
Whether the CTA acquired jurisdiction over the claim for the
refund or tax credit of unutilized input VAT The error of the taxpayer lies in the fact that it had mistakenly
believed that a judicial claim need not be filed within 30 days
HELD: from the lapse of the 120-day period. It had believed that the
No. The judicial claim for the refund or credit of unutilized input only requirement was that the judicial claim must be filed within
VAT was belatedly filed.Hence, the CTA lost jurisdiction over the two-year period under Sections 112(A) and (B) of the 1997
Rohm Apollo's claim for a refund or credit. Tax Code.

Section 112 (D) of the 1997 Tax Code states the time
requirements for filing a judicial claim for the refund or tax credit DOCTRINE:
of input VAT. The legal provision speaks of two periods: the
Section 112 (D) of the 1997 Tax Code states the time On january 27, 2000, RCBC received a Formal Demand letter
requirements for filing a judicial claim for the refund or tax credit together with the assessment notices from the BIR amounting
of input VAT. The legal provision speaks of two periods: the almost 4.2B. disagreeing with the said deficiency tas
period of 120 days, which serves as a waiting period to give assessment, RCBC filed a protest and later submitted the
time for the CIR to act on the administrative claim for a refund relevant documentary evidence to support it and filed petition
or credit; and the period of 30 days, which refers to the period for review before the CTA pursuant to section 228 of the 1997
for filing a judicial claim with the CTA. It is the 30-day period Tax code.
that is at issue in this case. On december 6, 2000, RCBC received another Formal letter of
demand with assessment notice which drastically reduced the
The 30-day period to appeal is mandatory and jurisdictional. original amount of deficiency to 3M.
RCBC argued the validity of the waivers for not being signed
The taxpayers are reminded that when the 120-day period and for the onshore tax, it should not be primarily liable since
lapses and there is inaction on the part of the CIR, they must it is only a withholding agent.
no longer wait for it to come up with a decision thereafter. The CTA: partially granted the petition for review and terminated
CAR's inaction is the decision itself. It is already a denial of the the assessment for other deficiency except for the Foreign
refund claim. Thus, the taxpayer must file an appeal within 30 Currency Deposit Unit shore tax and DST charging 20%
days from the lapse of the 120-day waiting period deficiency tax. Being denied in the CTA en banc, it raised the
matter to the SC. While the case is pending, the DST
MOJICA (vii) RCBC vs. CIR (GR No. 170257, Sept 7, 2011); deficiency was paid after the BIR approved its application for
abatement.
PETITIONER/S: Rizal Commercial Banking Corporation
RESPONDENT/S: Commissioner of Internal Revenue ISSUES: Whether or not the RCBC as payee bank can be
held liable for deficiency on shore tax which is mandatory by
FACTS: RCBC is a corporation engaged in general banking law to be collected at source in the form of a final withholding
operations. It seasonably filed its Corporation Annual Income tax.
Tax Returns for Foreign Currency Deposit Unit for the calendar
years 1994 and 1995. HELD: Yes. As held in chamber of Real Estate Builder’s
On August 15, 1996, RCBC received a LOA No. 133959 issued Asociation Inc. v. Executive Sec., the purpose of the
by the CIR authorizing a special audit team to examine the withholding tax system are:
books of accounts and other accounting records for all internal To provide the taxpayer with a convenient way of paying his
revenue taxes from January 1, 1994 to December 31, 1995. tax liability
On January 23, 1997, RCBC executed 2 waivers of the To ensure the collection of tax
defense prescription under the statute of limitations of the To improve the government cashflows
NIRC covering the internal revenue taxes due for the years Under the withholding tax system, the payor is the taxpayer
1994 and 1995, effectively extending the period of assessment upon whom the tax is imposed, while the withholding agent
upto December 31, 2000.
simply acts as an agent or a collector of the government to SILVA (viii) CIR vs. Hambrecht (GR No. 169225, Nov 17,
ensure the collection of taxes. 2010);
The liability if the withholding agent is independent from that of PETITIONER/S: CIR
the taxpayer. The former cannot be made liable for the tax due RESPONDENT/S: Hambrecht & Quist Philippines, Inc
because it is the latter who earned the income subject to FACTS:
withholding tax. The withholding agent is liable only insofar as A petition for review on Certiorari which sought to set aside the
he failed to perform his duty to withhold the tax and remit the CTA En Banc Decision affirming the CTA Original Division
same to the government. The liability for the tax, however, Decision ruling for the cancellation of the assessment against
remains with the taxpayer because the gain was realized and respondent for deficiency income and expanded withholding
received by him. tax for failure of CIR to enforce collection within the period
While the payor-borrower can be held accountable for its allowed by law.
negligence in performing its duty to withhold the amount of tax
due on the transaction, RCBC, as the taxpayer and the one In a letter dated Feb. 15, 1993, respondent informed BIR of its
which earned income on the transaction, remains liable for the change of business address, which was duly received by BIR
payment of tax as the taxpayer shares the responsibility of on Feb. 18, 1993
making certain that the tax is properly withheld by the
withholding agent, so as to avoid any penalty that may arise In 1993, through a letter, respondent received a tracer letter,
from the non-payment of the withholding tax due. or a follow-up letter issued by the BIR National Officer
RCBC cannot evade its liability for FCDU Onshore Tax by Receivable/Billing Division, demanding for payment of the
shifting the blame on the payor-borrower as the withholding alleged deficiency income and expanded withholding taxes
agent. amounting to 2,936,560.87PHP for taxable year 1989, from the
CTA, as specialized court dedicated exclusively to the study adjustment made in its taxable income – disallowance of
and resolution of tax problems, has developed an expertise on professional fees paid, donations, repairs and maintenance,
the subject of taxation and shall be accorded the highest salaries and wages, and management fees.
respect and shall be presumed valid, in the absence of any
clear and convincing proof to the contrary. Management fees made up the bulk of the disallowance, and
it was alleged that CIR failed to withhold the appropriate tax.
DOCTRINE: In the operation of the withholding tax system,
the withholding agent is the payor, a separate entity acting no Respondent filed with BIR National Office Accounts
more than an agent of the government for the collection of the Receivable/Billing Division a protest letter against the alleged
tax in order to ensure its payments; the payer is the taxpayer - deficiency tax assessment for 1989, which was provided in the
he is the person subject to tax imposed by law; and the payee tracer letter.
is the taxing authority. In other words, the withholding agent is
merely a tax collector, not a taxpayer. Nearly 8 years later, respondent received a letter from CIR
advising it that the CIR had already rendered a final decision
denying the protest, on the ground that it had been filed beyond
the 30-day reglementary period prescribed in section 229 of Accordingly, the right of BIR to collect taxes is within the “other
the NIRC. matters” which the CTA has appellate jurisdiction. Such right is
provided under section 223(c) of the NIRC, which was the
In 2001, respondent filed a Petition for review before the CTA applicable law at the time the disputed assessment against the
pursuant to RA 1125(7) and section 228 of the NIRC to appeal respondent was made – “any internal revenue tax assessed
the final decision of the CIR which denied their protest against may be collected within 3 years following the assessment of
the deficiency income and withholding tax assessments issued tax.”
for taxable year 1989.
Thus, the issue on prescription, which is a matter provided by
CTA Original Dvision rendered their decision holding that the the NIRC, is within the CTA jurisdiction, hence it may rule on
assessment notice sent to the former address of business of it.
respondent was valid and binding since the formal notice of its
change of address took place a month after, In effect, the 2. The insistence of CIR that its right to collect the tax
assessment had become final and unappealable since their deficiency it assessed on the respondent is not barred by
protest had been filed after the 30-day period provided by law. prescription because the prescription was suspended since the
respondent requested for a reinvestigation.
Assailed CTA En banc held that CIR failed to collect the
assessed taxes with the prescriptive period and directed the The court cited section 224 of the 1986 NIRC “making of
cancellation and withdrawal of the subject assessment notice. assessment and beginning of a distraint or levy or proceeding
in court of collection shall be suspended, prohibiting the
ISSUES: Commissioner from making the assessment or beginning
1. w/n CTA has jurisdiction to rule on the prescription of the distraint or levy or proceeding in court and for 60 days when
right of the government to tax the taxpayer requests for a re-investigation xxx.
2. w/n the collection for the assessment has prescribed
The wording of the provision is unambiguous. Thus the 2
HELD: requisites before the period to enforce collection may be
1. The stance of CIR cannot stand, asserting that CTA had suspended are (1) taxpayer requests for reinvestigation, and
no jurisdiction since it ruled that the assessment had become (2) Commissioner grants the request.
final and unappealable, thus the assailed CTA En Banc
Decision was correct. Accordingly, the mere filing of a protest letter, which was not
The court cited RA 1125[7(1)] which provides the phrase “other granted, cannot suspend the running of the period to collect
matters” which was qualified by the following phrase – “other taxes.
matters arising under the NIRC or other law as part of law
administered by the BIR.” The request for reinvestigation by the respondent was not
acted upon by the CIR, as held by the CTA Original Division,
the protest was dismissed on the ground that the assessment
has become final and executory. There was no communication Respondent received a copy of the Letter of Authority from the
from the CIR with regard to the protest, not until nearly 8 years Regional Director Nestor S. Valeroso to examine respondent’s
later, thus the request for reinvestigation was not granted. books of accounts and other accounting records and
withholding taxes for the period covering January 1, 2001 –
CIR failed to disprove the findings of fact by CTA, which December 31, 2001.
constrained the SC to uphold sich as binding and true.
Ma. Lida Sarmiento, respondent’s Director of Finance,
The nature of the functions of CTA is exclusive to the resolution subsequently executed several waivers of the Statute of
of tax problems, it has developed expertise on the subject. Limitations to extend the prescriptive period of assessment of
Hence the SC found no cogent reason to reverse the decision taxes due in taxable year ending 2001.
of CTA ruling that the prescriptive period for the right of the CIR
to collect, was not suspended. On September 26, 2005, respondent received from the BIR
Preliminary Assessment Notice dated September 16, 2005 to
DOCTRINE: which it filed a Reply. On October 25, 2005, respondent
CTA has jurisdiction over matters pertaining to prescription, as received a Formal Letter of Demand and Assessment
conferred by RA 1125[7(1)] and that the enforcement of Notices/Demand, demanding the payment of deficiency
collection may be suspended when the taxpayer requests for income tax, final withholding tax, expanded withholding tax,
reinvestigation and such was granted increments for late remittance of taxes withheld, and
compromise penalty for failure to file returns/late filing/late
LACAP (ix) CIR vs. Next Mobile (GR No. 212825, Dec. 7, remittance of taxes withheld.
2015);
CTA Former First Division Ruling – Granted respondent’s
PETITIONER/S: COMMISSIONER OF INTERNAL Petition for Review and declared the Formal Letter of Demand
REVENUE (FLD) and Final Assessment Notices (FANs) cancelled and
RESPONDENT/S: NEXT MOBILE, INC. (FORMERLY withdrawn for being issued beyond the three-year prescriptive
NEXTEL COMMUNICATIONS PHILS., INC.) period provided by law. It was held that the subject FLD and
FACTS: the FAN were issued beyond the three-year prescriptive
period. Petitioner failed to substantiate its allegation by clear
On April 15, 2002, respondent Next Mobile filed with the BIR and convincing proof that respondent filed a false or fraudulent
its Annual Income Tax Return for the taxable year ending return. Also, the Waivers executed by Sarmiento did not validly
December 31, 2001. Respondent also filed its Monthly extend the three-year prescriptive period to assess
Remittance Returns of Final Income Taxes Withheld, its respondents for deficiency income tax.
Monthly Remittance Return of Expanded Withholding Taxes
and its Monthly Remittance Returns of Income Taxes Withheld CTA En Banc Ruling – Denied Petition for Review and
on Compensation. affirmed the Decision of the former CTA First Division.
 In this case, the respondent, after deliberately executing
ISSUE: Whether the CIR’s right to assess respondent’s defective waivers, raised the very same deficiencies it caused
deficiency taxes had already been prescribed. to avoid the tax liability determined by the BIR during the
extended assessment period. It must be remembered that by
HELD: NO. Section 203 of NIRC mandates BIR to assess virtue of these waivers, the respondent was given the
internal revenue taxes within 3 years from the last day opportunity to gather and submit documents to substantiate its
prescribed by law for the filing of the tax return. Hence, an claims before the CIR during the investigation. It was able to
assessment notice issued after the three-year prescriptive postpone the payment of taxes, as well as to negotiate the
period is not valid and effective but with exceptions provided. assessment against it. Yet after enjoying these benefits,
respondent challenged the validity of the Waivers when the
Section 222(b) of the NIRC provides that the period to assess consequences thereof were not in its favour.
and collect taxes may only be extended upon a written
agreement between the CIR and the taxpayer executed before It is true that the petitioner was also at fault here because it
the expiration of the three-year prescriptive period. was careless in complying with the requirements of RMO No.
20-90 and RDAO 01-05. Nevertheless, petitioner’s negligence
In the instant case, the CTA found the Waivers defective may be addressed by enforcing the provisions imposing
because of the following: administrative liabilities upon the officers responsible for these
errors. The BIR’s right to assess and collect taxes should not
a. They were executed without a notarized board authority; be jeopardized merely because of the mistakes and lapses of
b. The dates of acceptance by the BIR were not indicated its officers, especially in cases like this where the taxpayer is
therein; and obviously in bad faith.
c. The fact of receipt by respondent of its copy of the Second
Waiver was not indicated on the face of the original Second DOCTRINE: The general rule is that when a waiver does not
Waiver. comply with the requisites for its validity specified under the
following orders (specifically RMO No. 20-90 and RDAO 01-
Here, respondent through Sarmiento, executed five Waivers in 05), it is invalid and ineffective to extend the prescriptive period
favour of petitioner. However, her authority to sign these to assess taxes. However, if peculiar circumstances arise, then
Waivers was not presented upon their submission to the BIR. the period shall not be affected or be treated as an exception
In fact, later on, her authority to sign was questioned by and find the said waivers be declared valid.
respondent itself, the very same entity that caused her to sign
such in the first place. Thus it is clear that respondent violated The peculiar circumstances were enumerated by the Court:
RMO No. 20-90 which stated that in case of a corporate
taxpayer, the waiver must be signed by its responsible officials 1. Parties are in pari delicto - In terms of public policy, it would
and RDAO 01-05 which requires presentation of a written and be more equitable if petitioner's lapses were allowed to pass
notarized authority to the BIR. and, as a result, the Waivers were upheld in order to support
this principle and public policy, but the case was the opposite.;
 This case stemmed from when the petitioner received the LOA
2. The parties did not come to court with clean hands - The issued by the BIR Revenue Region in CDO, authorizing the
Court stated that the respondent should not be permitted to revenue officers to examine petitioner’s books of accounts for
profit from the defects in its own Waivers by successfully its calendar year 2008. Petitioner received the First Notice and
arguing that they are invalid in order to avoid paying taxes. As the Second Notice informing the them of such examination to
a result, the petitioner tolerated the respondent's behavior. determine its tax liabilities for 2008.

3. The respondent was estopped from questioning the validity Petitioner received a letter requesting them to appear for an
of the waivers - As in this case five Waivers were executed and informal conference. Thereafter, petitioner received the
delivered to the petitioner, one after the other; and Preliminary Assessment Notice dated February 8,2012,
assessing petitioner’s deficiency VAT in the amount of P18,
4. There is a highly suspicious situation - On the one hand, the 469,356.21. On March 9, 2012, they received the Formal Letter
taxpayer, after freely signing waivers, insisted on their invalidity of Demand dated Feb 29,2012.
by citing the same flaws that he generated. The BIR was so
negligent in its oversight that it appeared to agree with the Petitioner, aggrieved, filed its Protest against the said FLD to
inaccuracies in the Waivers. Such a position is risky and the BIR, and subsequently submitted letters requesting the re-
vulnerable to misuse by unscrupulous taxpayers who want to evaluation of the said assessment. On December 18, 2012,
evade their tax obligations by relying solely on technicalities. petitioner received the Final Decision on Disputed Assessment
(FDDA) denying its Protest on the ground that assessment is
The Court resolves to GRANT the petition and let this case now final and executory since the petitioner failed to object
be remanded to the Court of Tax Appeals for further within the prescribed period under the law.
proceedings.
Petitioner filed its Protest against the said FDDA with the BIR
Deputy Comissioner for Operations contending that the
BALONGLONG(x) Lanao Del Norte Electric Cooperative disallowed VAT was already paid. On the decision issued by
vs. CIR, CTA Case No. 8769 dated October 11, 2019; then Commissioner Kim Ynares, she still ruled that
assessment has already been final and executory. Petitioner
PETITIONER/S: Lanao Del Norte Electric Cooperative then, filed its Petition for Review. Respondent filed his answer
(LANECO) interposing the following special and affirmative defenses:

RESPONDENT/S: Commissioner of Internal Revenue Kim

Henares a. Petitioner failed to timely file a protest against
the Formal Letter of Demand and the Final Assessment Notice
FACTS: b. The instant petition was filed beyond the 30-day
period from receipt of the final decision on disputed
assessment
c. Respondent observed both procedural and issuance of the PAN, CIR or his duly authorized
substantial due process in issuing the assessment representative is duty bound to wait for the expiration of
d. Assessment issued against the petitioner is 15 days from the date of receipt. If during the said period,
valid and lawful the taxpayer failed to respond to the PAN, it is only then that
the CIR or his duly authorized representative can consider the
CTA in Division granted respondent’s motion to Dismiss for taxpayer in default, and correspondingly cause the issuance of
lack of jurisdiction and ruled that the assessment has now a formal letter of demand and assessment notice, which shall
become final and executory for failure of the petitioner to be subsequently served to the said taxpayer. Such a process
protest the FLD on time. or procedure is part and parcel of the due process requirement
in the issuance of a deficiency tax assessment.
Petitioner filed a motion for reconsideration and when the Court
denied such motion, petitioner filed a Petition for Review
before the Court En Banc. Court En Banc granted such petition Petitioner raises as one of its arguments, that it was denied
and remanded the case to the CTA in Division. due process considering that the FLD was issued prior to
the lapse of the period of fifteen (15) days given to respond
to the PAN. On the other hand, respondent argues that he
ISSUES: observed both the procedural and substantial due process in
issuing the assessment. Respondent avers that there is a
Whether or not the VAT deficiency assessment of respondent 21-day interval from the issuance of the PAN and the FLD.
in the aggregate amount of P18, 469, 356.21 for 2008 is valid. In this case, petitioner received a copy of the PAN dated
February 8, 2012 on February 20, 2012. It is worthy to note
HELD: that the fifteen (15)-day period to take action on the PAN
starts to run not from respondent's issuance, but from the
No. taxpayer's receipt thereof. Counting fifteen (15) days from
the date of receipt of the PAN on February 20, 2012, petitioner
Congress delegated the assessment and collection of all had until March 6, 2012 to protest or respond to the PAN. Only
national internal revenue taxes, fees, and charges to the BIR. after the lapse of the fifteen (15)-day period without any action
Pursuant to the lifeblood doctrine, the Court has allowed tax on the part of the petitioner would respondent be legally
authorities ample discretion to avail themselves of the most allowed to issue the FLD. Respondent, however,
expeditious way to collect the taxes, including summary prematurely issued the FLD on February 29, 2012,
processes, with as little interference as possible. However, the resulting in the denial of due process on the part of the
BIR's power to collect taxes must yield to the fundamental rule petitioner. To emphasize, the non- compliance with
that no person shall be deprived of his/her property without due statutory and procedural due process renders the
process of law. The rule is that taxes must be collected assessment null and void.
reasonably and in accordance with the prescribed procedure.
Under Section 228 of the NIRC and RR 12-99, after the
Hence, the assessment for CY 2008 is void in violation of of levy and proposed a compromise settlement. The CIR
petitioner’s right to due process. rejected said offer.

When the estate failed to pay its tax liability within deadline,
DOCTRINE: BIR notified Reyes that the subject property would be sold at
public auction, Reyes filed a protest asserting that the
Under Section 228 of the NIRC and RR 12-99, after the assessment, letter of demand and the whole tax proceedings
issuance of the PAN, CIR or his duly authorized representative are void ab initio.
is duty bound to wait for the expiration of 15 days from the date
of receipt. If during the said period, the taxpayer failed to Without acting on Reyes' protest and offer, the CIR proceeded
respond to the PAN, it is only then that the CIR or his duly with the auction sale and filed a Motion to Dismiss the petition
authorized representative can consider the taxpayer in default, on the ground that the assessment is already final and
and correspondingly cause the issuance of a formal letter of executory.
demand and assessment notice, which shall be subsequently
served to the said taxpayer. Such a process or procedure is Reyes filed again an application for the compromise settlement
part and parcel of the due process requirement in the issuance of the assessment against the estate pursuant to Sec. 204(A)
of a deficiency tax assessment. of the Tax Code. She also filed a Motion to declare the
settlement of Disputed Assessment as Perfected Compromise
DY BUNTENG (xi) CIR vs. Azucena Reyes, GR No. alleging that the CIR had not yet signed the compromise
159694 dated January 27, 2006; because of procedural red tape requiring the initials of four
Deputy Commissioners on relevant documents before the
PETITIONER/S: Commissioner of Internal Revenue compromise is signed by the CIR. Reyes posited that the
RESPONDENT/S: Azucena T. Reyes absence of the requisite initials and signatures on said
FACTS: documents does not vitiate the perfected compromise.
Maria Tancinco (or "decedent") died leaving a residential lot
and an old house in Makati City. The BIR conducted an The CIR averred that an application for compromise of a tax
investigation on the her estate and issued a preliminary liability requires the evaluation and approval of either the NEB
assessment notice. The heirs of the decedent received a final or the Regional Evaluation Board,
estate tax assessment, notice and a demand letter. A certain
Felix M. Sumbillo (or "Sumbillo") protested the assessment on ISSUES:
behalf of the heirs on the ground that the subject property had Whether the assessment against the estate is valid
already been sold by the decedent.
HELD:
A Warrant of Distraint and/or Levy was later served upon the Petition is unmeritorious.
estate. Reyes, one of the decedent's heirs, protested the notice Reyes was not informed in writing of the law and the facts on
which the assessment of estate taxes had been made. She
was merely notified of the findings by the CIR, who had simply Clubs, Inc. v. Bureau of Internal Revenue, G.R. No. 228539,
relied upon the provisions of former Section 229 prior to its [June 26, 2019])
amendment by Republic Act (RA) No. 8424, otherwise known RESPONDENT/S:
as the Tax Reform Act of 1997. BUREAU OF INTERNAL REVENUE (BIR), herein
represented by HON. COMMISSIONER KIM S. JACINTO-
The old requirement of merely notifying the taxpayer of the HENARES
CIR's findings was changed in 1998 to informing the
taxpayer of not only the law, but also of the facts on which an
assessment would be made; otherwise, the assessment DOCTRINE:
would be invalid. Before a transaction is imposed VAT, a sale, barter or
exchange of goods or properties, or sale of a service is
When the Preliminary assessment notice and the Final estate required.
tax Assessment was issued, RA 8424 was already in effect.
The notice required under the old law was no longer sufficient FACTS:
under the new law. To be informed in writing of the · On August 3, 2012, respondent the Bureau of Internal
investigation being conducted is nothing but a discharge of Revenue (BIR) issued RMC No. 35-2012, entitled "Clarifying
correctly assessing a taxpayer. This does not mean that Reyes the Taxability of Clubs Organized and Operated Exclusively for
already knew the law and the facts on which the assessment Pleasure, Recreation, and Other Non-Profit Purposes”. It was
was based. It does not conform to the requirement under created to addressed to all revenue officials, employees, and
Section 228. others concerned for their guidance regarding the income tax
and Value n Added Tax (VAT) liability of the said recreational
clubs.
DOCTRINE: · RMC No. 35-2012 states that "[c]lubs which are organized
The Second paragraph of Sec 228 is clear and mandatory and operated exclusively for pleasure, recreation, and other
"The taxpayers shall be informed in writing of the law and non-profit purposes are subject to income tax under the
the facts on which the assessment is made: otherwise, the National Internal Revenue Code.
assessment shall be void." · RMC No. 35-2012 provides that "the gross receipts of
recreational clubs including but not limited to membership fees,
assessment dues, rental income, and service fees are subject
LANTO (xii) Association of Non-Profit Clubs Inc. vs. CIR, to VAT."
G.R. 228539, June 26, 2019; · ANPC submitted its position paper, 16 requesting "the non-
application of RMC No. 35-2012 for income tax and VAT
PETITIONER/S: liability on membership fees, association dues, and fees of
ASSOCIATION OF NON-PROFIT CLUBS, INC. (ANPC), similar nature collected by the exclusive membership clubs
herein represented by its authorized representative, MS. from their members which are used to defray the expenses of
FELICIDAD M. DEL ROSARIO||| (Association of Non-Profit the said clubs.”
· After the lapse of two (2) years, the BIR has not acted · However, RMC No. 35-2012 erroneously foisted a
upon the request, and all the member clubs of ANPC were sweeping interpretation that membership fees and assessment
subjected to income tax and VAT on all membership fees, dues are sources of income of recreational clubs from which
assessment dues, and service fees. income tax liability may accrue.
· ANPC argued that in issuing RMC No. 35-2012, the BIR · The distinction between "capital" and "income" is well-
acted beyond its rule-making authority in interpreting that settled in our jurisprudence. As held in the early case of
payments of membership fees, assessment dues, and service Madrigal v. Rafferty, "capital" has been delineated as a "fund"
fees are considered as income subject to income tax, as well or "wealth," as opposed to "income" being "the flow of services
as a sale of service that is subject to VAT. rendered by capital" or the "service of wealth”.
· The RTC denied the petition for declaratory relief 24 and · ANPC correctly argued that membership fees, assessment
upheld the validity and constitutionality of RMC No. 35-2012. dues, and other fees of similar nature only constitute
· RTC found that given the apparent intent of Congress to contributions to and/or replenishment of the funds for the
subject recreational clubs to taxes, the BIR, being the maintenance and operations of the facilities offered by
administrative agency concerned with the implementation of recreational clubs to their exclusive members. They represent
the law, has the power to make such an interpretation through funds "held in trust" by these clubs to defray their operating and
the issuance of RMC No. 35-2012. As an interpretative rule general costs and hence, only constitute infusion of capital.
issued well within the powers of the BIR, the same need not be · Given the recreational clubs' non-profit nature,
published and neither is a hearing required for its validity. membership fees and assessment dues cannot be considered
as funds that would represent these clubs' interest or profit
ISSUE: from any investment.
Whether or not the RTC erred in upholding in full the validity of · The Court held that for as long as these membership fees,
RMC No. 35-2012. assessment dues, and the like are treated as collections by
recreational clubs from their members as an inherent
HELD: consequence of their membership, and are, by nature,
· YES. intended for the maintenance, preservation, and upkeep of the
· Applying the doctrine of casus omissus pro omisso clubs' general operations and facilities, then these fees cannot
habendus est (meaning, a person, object or thing omitted from be classified as "the income of recreational clubs from
an enumeration must be held to have been omitted whatever source" that are "subject to income tax." Instead,
intentionally), the fact that the 1997 NIRC omitted recreational they only form part of capital from which no income tax may be
clubs from the list of exempt organizations under the 1977 Tax collected or imposed.
Code evinces the deliberate intent of Congress to remove the · The Court highlighted the basic principle that before a
tax income exemption previously accorded to these clubs. As transaction is imposed VAT, a sale, barter or exchange of
such, the income that recreational clubs derive "from whatever goods or properties, or sale of a service is required.
source" is now subject to income tax under the provisions of · The petition was granted.
the 1997 NIRC.
 special education fund collected by the Municipality of Narra.
MODULE 4 (NONE) He questioned the levy of the special education fund at the rate
of only 0.5% rather than at 1%, the rate stated in Section 235
MODULE 5 of Republic Act No. 7160, otherwise known as the Local
Government Code of 1991 (Local Government Code).

(MAXINE LEE) After evaluating AOM No. 03-005, Regional Cluster Director Sy
issued NC No. 2004-04-101 dated August 30, 2004 in the
PETITIONER/S: LUCENA D. DEMAALA, then mayor of amount of P1,125,416.56. He held Demaala, the municipal
Municipality of Narra, Palawan treasurer of Narra, and all special education fund payors liable
RESPONDENTS: Commission on Audit for the deficiency in special education fund collections.
WHAT KIND OF PETITION (RULE 45/65):
FACTS: ISSUES: WON an LGU may impose an additional levy on real
The Sangguniang Panlalawigan of Palawan enacted Provincial property for the Special Education Fund at the rate less than
Ordinance No. 332-A, Series of 1995, entitled “An Ordinance 1%?
Approving and Adopting the Code Governing the Revision of HELD:
Assessments, Classification and Valuation of Real Properties
in the Province of Palawan” (Ordinance). Chapter 5, Section YES. Setting the rate of the additional levy for the Special
48 of the Ordinance provides for an additional levy on real Education Fund is within the taxing power of the LGU; this is
property tax for the special education fund at the rate of one- consistent with the guiding constitutional principle of Local
half percent or 0.5% as follows: Autonomy.
Section 48. Additional Levy on Real Property Tax for Special
Education Fund. — There is hereby levied an annual tax at the Section 235’s permissive language is unqualified. There is no
rate of one-half percent (½ or .5%) of the assessed value limiting qualifier to the articulated rate of 1% which
property tax. The proceeds thereof shall exclusively accrue to unequivocally indicates that any and all special education fund
the Special Education Fund (SEF). collections must be at such rate. At most, there is a seeming
ambiguity in Section 235. Consistent with what has earlier
In conformity with Section 48 of the Ordinance, the Municipality been discussed however, any such ambiguity must be read in
of Narra, Palawan, with Demaala as mayor, collected from favor of local fiscal autonomy. Insisting on uniformity would be
owners of real properties located within its territory an annual a disservice to certain LGU and would ultimately undermine
tax as special education fund at the rate of 0.5% of the the aims of local autonomy and decentralization.
assessed value of the property subject to tax. This collection
was effected through the municipal treasurer. Setting the rate of the additional levy for the special
education fund at less than 1% is within the taxing power of
On post-audit, Audit Team Leader Juanito A. Nostratis issued local government units. It is consistent with the guiding
Audit Observation Memorandum (AOM) No. 03-005 dated constitutional principle of local autonomy. The option given to
August 7, 2003 in which he noted supposed deficiencies in the a local government unit extends not only to the matter of
 whether to collect but also to the rate at which Delgado Prieto, Monica Lopez Prieto, Martin Lopez Prieto,
collection is to be made. The limits on the level of additional Beatriz Prieto De Leon, Rafael Roces Prieto, Benito Legarda,
levy for the special education fund under Section 235 of Inc., Alegar Corporation, Benito Legarda, Jr., Pechaten
the Local Government Code should be read as granting fiscal Corporation, and Rosario M. Llora (collectively, respondents)
flexibility to local government units. to be used for the City of Manila's (petitioner) Land-For-The-
Landless Program

DOCTRINE: Initially, the petitioner attempted to acquire the subject lots by

negotiated sale, offering the amount of P2,000.00 per square
meter, which respondents refused to accept on the ground that
(ii) Prieto vs. City of Manila, G.R. 221366, July their respective properties are worth more than that.
18, 2019;
Thus, the petitioner filed a Complaint dated September 3,
(LEONALD TAPIA) 2004, before the RTC, asserting its authority to expropriate the
subject lots for its project.
PETITIONER/S: City of Manila
RESPONDENTS: LEJANDRO ROCES PRIETO, BENITO Invoking Section 2, Rule 67 of the Rules of Court, the petitioner
ROCES PRIETO, MERCEDES PRIETO DELGADO, MONICA sought the issuance of a writ of possession for it to be able to
, LOPEZ PRIETO, MARTIN LOPEZ PRIETO, BEATRIZ immediately take possession of the subject properties.
PRIETO DE LEON, RAFAEL ROCES PRIETO, BENITO Petitioner manifested that it had already deposited the sum of
LEGARD A, INC., ALEGAR CORPORATION, BENITO P4, 812,920.00 in the bank, representing more than one
LEGARD A, JR., PECHATEN CORPORATION, ESTATE OF hundred percent (100%) of the assessed value of the
ROSARIO M. LLORA, and all persons claiming interests properties as shown in the declarations of real property.[8]
against them,
On February 2, 2005, the RTC issued an Order denying the
WHAT KIND OF PETITION (RULE 45/65): This is a Petition issuance of a writ of possession pending the deposit of the
for Review on Certiorari1 under Rule 45 of the Rules of Court, additional amount of P852,519.00. Instead of the general
assailing the Decision2 dated June 30, 2015 and the provisions on expropriation under Rule 67 of the Rules of
Resolution3 dated November 9, 2015, of the Court of Appeals Court, the RTC applied the provisions of the Local Government
(CA) in CA-G.R. CV No. 101440, which reversed and set aside Code (LGC), mandating the deposit of 15% of the fair market
the Order4 dated June 23, 2011, of the Regional Trial Court value of the properties subject of expropriation, for the
(RTC) of Manila, Branch 52, in Civil Case No. 04-110823. petitioner's immediate possession thereof. Upon compliance,
the petitioner manifested that the additional amount of P852,
FACTS: The City Council of Manila enacted Ordinance No. 519.00 has already been satisfied. Petitioner deposited the
8070 on January 19, 2004, that authorized the City Mayor to amount of P425, 519.00, while the prospective beneficiaries of
acquire certain parcels of land belonging to respondents the project deposited P443, 621.00 to complete the additional
Alejandro Roces Prieto, Benito Roces Prieto, Mercedes
amount. The RTC issued a Writ of Possession on October 6, been met by the petitioner. The RTC found that there was an
2006. ordinance passed by the City Council of Manila to expropriate
the subject lots for a public purpose. The requirement that it
ISSUES:Whether or not the CA erred in finding that petitioner should be for public use was, according to the RTC, satisfied
failed to prove that it complied with pertinent laws in the by the fact that the properties were sought to be expropriated
exercise of its power of an eminent domain. according to the petitioner's "Land for the Landless and Onsite
Development Programs."
HELD: The petition is bereft of merit. In resolving
expropriation cases, this Court has always been reminded that The RTC also noted that before the filing of the complaint in
the exercise of the power of eminent domain necessarily court, the petitioner made "definite and formal offers" to
involves a derogation of fundamental right. The exercise of the respondents to purchase the subject lots, which the latter
power of eminent domain drastically affects a landowner's right rejected. Further, despite "privately-owned lands" being last in
to private property, which is as much a constitutionally- the list of priorities in a land acquisition under Section 9 of the
protected right necessary for the preservation and Republic Act (R.A.) No. 7279 or the Urban Development
enhancement of personal dignity and intimately connected with Housing Act of 1992, the RTC dispensed with a said list,
the rights to life and liberty."[28] Therefore, the exercise of such subscribing to petitioner's allegation that an on-site
power must undergo painstaking scrutiny. development is more practicable and advantageous to the
beneficiaries.

Such scrutiny is especially necessary when eminent domain is DOCTRINE: SEC. 19. Eminent Domain. -A local government
exercised by a local government considering that it merely has unit may, through its chief executive and acting pursuant to an
a delegated power of eminent domain. A local government unit ordinance, exercise the power of eminent domain for public
has no inherent power of eminent domain. Such power is use, or purpose[,] or welfare for the benefit of the poor and the
essentially lodged in the legislature although it may be validly landless, upon payment of just compensation, pursuant to the
delegated to local government units, other public entities and provisions of the Constitution and pertinent laws: Provided,
public utilities. Thus, inasmuch as the principal's exercise of however, That the power of eminent domain may not be
the power of eminent domain is subject to certain conditions, exercised unless a valid and definite offer has been previously
with more reason that the exercise of a delegated power is not made to the owner, and such offer was not accepted: Provided,
absolute. In fact, strictly speaking, the power of eminent further, That the local government unit may immediately take
domain delegated to the local government unit is, in reality, not possession of the property upon the filing of the expropriation
eminent but inferior since it must conform to the limits imposed proceedings and upon making a deposit with the proper court
by the principal. of at least fifteen percent (15%) of the fair market value of the
property based on the current tax declaration of the property to
In granting the petitioner's complaint about expropriation, the be expropriated: Provided, finally, That, the amount to be paid
RTC concluded that all the requisites for the local for the expropriated property shall be determined by the proper
government's exercise of the power of eminent domain have
court, based on the fair market value at the time of the taking
of the property. FACTS: RAVI is one of the Coconut Industry Investment Fund
(CIIF) holding companies established to own and hold the
Several requisites must concur before a local government unit shares of stock of San Miguel Corporation (SMC). The
can exercise the power of an eminent domain, to wit: Supreme Court rendered its decision in Philippine Coconut
Producers Federation, Inc. v. Republic (COCOFED), declaring
(1) an ordinance is enacted by the local legislative council the CIIF companies, including RAVI, and the CIIF block of SMC
authorizing the local chief executive, on behalf of the local shares as "public funds necessarily owned by the
government unit, to exercise the power of eminent domain or Government." RAVI filed with the RTC, a claim for refund or
pursue expropriation proceedings over a particular private credit of erroneously and illegally collected LBT for the taxable
property; year 2010 on the mistaken assumption that it is a non-bank
financial intermediary (NBFI).
(2) the power of eminent domain is exercised for public use,
purpose, or welfare, or the benefit of the poor and the landless; Petitioner’s argument:
RAVI's activities in owning shares and receiving dividends and
(3) there is the payment of just compensation, as required
interest income constitute investing or doing business as an
under Section 9, Article III of the Constitution, and other
NBFI.
pertinent laws; and
The clause in RAVI's Amended Articles of Incorporation (AOI),
(4) a valid and definite offer has been previously made to the which prohibits it from acting as an investment company, is not
owner of the property sought to be expropriated but said the conclusive proof that it has not actually done so.
offer was not accepted
RTC: denied claim for refund or credit
(iii) Randy Allied Ventures Inc. vs. City of Davao, CTA: Petition granted- RAVI not NBFI
G.R. 241697, July 29, 2019; CTA EB: PetRev denied for lack of merit- principal function of
RAVI does not relate to NBFI activities, RAVI is CIIF
(FRANCES VALDEZ)
ISSUES: WON RAVI is a NBFI subject to LBT under Section
PETITIONER/S: CITY OF DAVAO and BELLA LINDA N. 143 (f) of the LGC- NO
TANJILI, City Treasurer RESPONDENTS:RANDY ALLIED
VENTURES, INC. HELD: RAVI's act of placing the dividends from the SMC
WHAT KIND OF PETITION (RULE 45/65): Rule 45. Assailed preferred shares in a trust account, which incidentally earns
in this petition for review on certiorari CTA EB decision which interest, does not convert it into an active investor or dealer in
upheld the CTA First Division in granting respondent Randy securities. The primary test is regularity of function, not on an
Allied Ventures, Inc. (RAVI)'s claim for refund or credit of isolated basis, with the end in mind for self-profit. Being
erroneously and illegally collected local business taxes (LBT) restricted to managing the dividends of the SMC preferred
for the taxable year 2010. shares on behalf of the government, RAVI cannot be said to
be "doing business" as a bank or other financial institution, i.e., equity securities; and make available/lend these funds to
an NBFI. another person or entity, and in the process acquire debt or
equity securities;
As observed in the COCOFED case, RAVI is a CIIF holding Use principally the funds received for acquiring various types
company. Thus, RAVI's management of the dividends from the of debt or equity securities;
SMC preferred shares, including placing the same in a trust Borrow against, or lend on, or buy or sell debt or equity
account yielding interest, is not tantamount to doing business securities
whether as a bank or other financial institution, i.e., an NBFI,
but rather an activity that is essential to its nature as a CIIF Holding Company V. Financial intermediaries
holding company. A "'holding company' is 'organized' and is basically conducting
its business by investing substantially in the equity securities
LBT are taxes imposed by local government units on the of another company for the purpose of controlling their policies
privilege of doing business within their jurisdictions. To be sure, (as opposed to directly engaging in operating activities) and
the phrase "doing business" means some "trade or commercial 'holding' them in a conglomerate or umbrella structure along
activity regularly engaged in as a means of livelihood or with a with other subsidiaries." While holding companies may partake
view to profit. " Particularly, the LBT imposed pursuant to in investment activities, this does not per se qualify them as
Section 143 (f) is premised on the fact that the persons made financial intermediaries that are actively dealing in the same.
liable for such tax are banks or other financial institutions by
virtue of their being engaged in the business as such. Financial intermediaries are regulated by the BSP because
they deal with public funds when they offer quasi-banking
In this case, it is clear that RAVI is neither a bank nor other functions. On the other hand, a holding company is not
financial institution, i.e., an NBFI. In order to be considered as similarly regulated because any investment activities it
an NBFI under the National Internal Revenue Code, banking conducts are mere incidental operations, since its main
laws, and pertinent regulations, the following must concur: purpose is to hold shares for policy-controlling purposes.
The person or entity is authorized by the BSP to perform quasi-
banking functions;
The principal functions of said person or entity include the DOCTRINE: The mere fact that a holding company makes
lending, investing or placement of funds or evidences of investments does not ipso facto convert it to an NBFI.
indebtedness or equity deposited to them, acquired by them, Otherwise, there would be absolutely no distinction between a
or otherwise coursed through them, either for their own mere holding company and financial intermediaries.
account or for the account of others;
and The person or entity must perform any of the following
functions on a regular and recurring, not on an isolated basis,
to wit: (iv) Cosmos Bottling Corp. vs. City of Manila, G.R.
Receive funds from one (1) group of persons, irrespective of 196681, June 27, 2018;
number, through traditional deposits, or issuance of debt or
(PAULO DELOS REYES) ℅ EROS
PETITIONER/S: increased rates under Tax Ordinance Nos. 7988 and 8011
City of Manilla nad Office of the City Treasurer of Manila after the same have been declared null and void.

Instead of filing a motion for reconsideration or new trial, the

RESPONDENTS: petitioners directly filed with the CTA En Banc a petition for
review praying that the decision of the CTA Division be
Cosmos Bottling Corporation reversed or set aside. The CTA En Banc ruled that the direct
resort to it without a prior motion for reconsideration or new trial
WHAT KIND OF PETITION (RULE 45/65): before the CTA Division violated Sec. 18 of R.A. No. 1125, as
amended by R.A. No. 9282 and R.A. No. 9503, and Sec. 1,
This is a petition for review on certiorari under Rule 45 of the Rule 8 of the Revised Rules of the CTA. The petitioners sought
Rules of Court assailing the 16 February 2011 and 20 April reconsideration, but their motion was denied by the CTA En
20112 Resolutions of the CTA En Banc. Banc. Hence, the appeal before this Court.

FACTS: ISSUES:
Whether the CTA En Banc correctly dismissed the petition for
For the first quarter of 2007, the City of Manila assessed review before it for failure of the petitioners to file a motion for
Cosmos Bottling Corporation, “Cosmos,” local business taxes reconsideration or new trial with the CTA Division.
and regulatory fees in the total amount of P1,226,781.05.
Cosmos protested the assessment through a letter dated
January 18, 2007, it argued that the collection of local business Whether a taxpayer who had initially protested and paid the
tax under Sec. 21 of the Revenue Code of Manila (RCM) in assessment may shift its remedy to one of refund.
addition to Sec. 14 of the same code constitutes double
taxation. Cosmos tendered payment of only P131,994.23
which they posit is the correct computation of their local HELD:
business tax for the first quarter of 2007. This payment was
refused by the City Treasurer. The City Treasurer denied their
protest. The RTC ruled in favor of Cosmos but denied the claim Yes, the filing of a motion for reconsideration or new trial before
for refund. Cosmos' motion for partial reconsideration was also the CTA Division is an indispensable requirement for filing an
denied, hence, they filed a Petition for Review before the CTA. appeal before the CTA En Banc.
The CTA Division reversed the lower court’s decision and ruled
that the collection by the City Treasurer of Manila of local
business tax under both Sec. 21 and Sec. 14 of the RCM Sec. 18. Appeal to the Court of Tax Appeals En Banc. – No
constituted double taxation. It also ruled that the City Treasurer civil proceeding involving matter arising under the National
cannot validly assess local business tax based on the Internal Revenue Code, the Tariff and Customs Code or the
Local Government Code shall be maintained, except as herein treasurer shall decide the protest within sixty (60) days from
provided, until and unless an appeal has been previously filed the time of its filing. If the local treasurer finds the protest to be
with the CTA and disposed of this Act. A party adversely wholly or partly meritorious, he shall issue a notice cancelling
affected by a resolution of a Division of the CTA on motion for wholly or partially the assessment. However, if the local
reconsideration or new trial, may file a petition for review with treasurer finds the assessment to be wholly or partly correct,
the CTA en banc. Failure to file such motion for reconsideration he shall deny the protest wholly or partly with notice to the
or new trial is cause for dismissal of the appeal before the CTA taxpayer. The taxpayer shall have thirty (30) days from the
En Banc. receipt of the denial of the protest or from the lapse of the sixty
(60)-day period prescribed herein within which to appeal with
Corollarily, Sec. 1, Rule 8 of the CTA Rules provides: the court of competent jurisdiction otherwise the assessment
becomes conclusive and unappealable.
Sec. 1. Review of cases in the Court en banc. — In cases
falling under the exclusive appellate jurisdiction of the Court en
banc, the petition for review of a decision or resolution of the Sec. 196. Claim for Refund of Tax Credit. – No case or
Court in Division must be preceded by the filing of a timely proceeding shall be maintained in any court for the recovery of
motion for reconsideration or new trial with the Division. any tax, fee, or charge erroneously or illegally collected until a
written claim for refund or credit has been filed with the local
Clear it is from the cited rule that the filing of a motion for treasurer. No case or proceeding shall be entertained in any
reconsideration or new trial is mandatory – not merely directory court after the expiration of two (2) years from the date of the
– as indicated by the word "must." payment of such tax, fee, or charge, or from the date the
taxpayer is entitled to a refund or credit.
Yes, a taxpayer who had protested and paid an assessment
may later on institute an action for refund. The taxpayers'
remedies of protesting an assessment and refund of taxes are The foregoing clearly shows that a taxpayer facing an
stated in Sec.s 195 and 196 of the LGC, to wit: assessment may protest it and alternatively: (1) appeal the
assessment in court, or (2) pay the tax and thereafter seek
a refund. Such procedure may find jurisprudential mooring in
Sec. 195. Protest of Assessment. – When the local treasurer San Juan v. Castro wherein the Court described for the first
or his duly authorized representative finds that correct taxes, and only time the alternative remedies for a taxpayer protesting
fees, or charges have not been paid, he shall issue a notice of an assessment – either appeal the assessment before the
assessment stating the nature of the tax, fee, or charge, the court of competent jurisdiction, or pay the tax and then seek a
amount of deficiency, the surcharges, interests and penalties. refund.
Within sixty (60) days from the receipt of the notice of
assessment, the taxpayer may file a written protest with the
local treasurer contesting the assessment; otherwise, the Simply put, there are two conditions that must be satisfied in
assessment shall become final and executory. The local order to successfully prosecute an action for refund in case the
taxpayer had received an assessment. One, pay the tax and
administratively assail within 60 days the assessment before DOCTRINE:
the local treasurer, whether in a letter-protest or in a claim for
refund. Two, bring an action in court within thirty (30) days from The filing of a motion for reconsideration or new trial to
decision or inaction by the local treasurer, whether such action question the decision of a division of the CTA is mandatory. An
1s denominated as an appeal from assessment and/or claim appeal brought directly to the CTA En Banc is dismissible for
for refund of erroneously or illegally collected tax. lack of jurisdiction.

In local taxation, an assessment for deficiency taxes made by

In this case, after Cosmos received the assessment on 15 the local government unit may be protested before the local
January 2007, it protested such assessment through a letter treasurer without necessity of payment under protest. But if
dated 18 January 2007. Constrained to pay the assessed payment is made simultaneous with or following a protest
taxes and charges, Cosmos subsequently wrote the Office of against an assessment, the taxpayer may subsequently
the City Treasurer another letter asking for the refund and maintain an action in court, whether as an appeal from
reiterating the grounds raised in the previous submitted protest assessment or a claim for refund, so long as it is initiated within
letter. In the meantime, Cosmos received on 6 February 2007 thirty (30) days from either decision or inaction of the local
the letter of Toledo denying its protest. Thus, on 8 March 2007, treasurer on the protest.
or exactly thirty (30) days from its receipt of the denial, Cosmos
brought the action before the RTC of Manila. Under the
circumstances, it is evident that Cosmos was fully
justified in asking for the refund of the assailed taxes after (v) Noemi Cruz vs. City of Makati, G.R. 210894,
protesting the same before the local treasurer.Thus, September 12, 2018.
Cosmos may resort to, as it actually did, the alternative
procedure of seeking a refund after timely protesting and (ALEX AZUL)
paying the assessment. Considering that Cosmos initiated
the judicial claim for refund within 30 days from receipt of the PETITIONER/S: Noemi Cruz and the heirs of Hermenigildo
denial of its protest, it stands to reason that the assessment Cruz
which was validly protested had not yet attained finality. RESPONDENTS:City of Makati, City Treasurer of Makati,
Register of Deeds Makati, Laverne Realty & Development
In conclusion, Cosmos, after it had protested and paid the Corporation
assessed tax, is permitted by law to seek a refund having fully WHAT KIND OF PETITION (RULE 45/65):Petition for Review
satisfied the twin conditions for prosecuting an action for refund on Certiorari under Rule 65
before the court. FACTS:
Petitioner Noemi Cruz and her husband Hermenegildo Cruz
owned a condominium unit in Makati.
They instructed their employee-representative to pay their real Whether the City of Makati complied with the requirements
property tax in the amount of PHP 201, 231.17 but the under the LGC
employee absconded, thus the tax was not remitted. HELD:
Because of the non-payment of the real property tax, the condo No.
was levied upon by the City of Makati. Before authorizing the levy and delinquency sale of real
Eventually, the condo was auctioned off and sold to property for non-payment of the real property tax, the Local
respondent Laverne. Government Code requires the following:
Now, the petitioners filed a complaint before the RTC of Makati
for the annulment of the sale to Laverne. Section 254 - that the notice of delinquency be posted at the
The petitioners alleged that the sale between the City of Makati main hall and in a publicly accessible and conspicuous place
and Laverne was null and void because: in each barangay of the local government unit concerned, and
The notice of billing statements for real property were sent to that it be published once a week for 2 consecutive weeks, in a
another unit in the condo; newspaper of general circulation in the province, city, or
That no warrant of levy was ever received by the petitioners; municipality;
That the notice of delinquency sale was not posted, as required
by the Local Government Code; Section 258 - that should the treasurer issue a warrant of levy,
That the City Treasurer’s Office did not notify the petitioners of the same shall be mailed to or served upon the delinquent
the notice of levy, which is also required by the LGC; and owner of the real property;
That the respondent City did not remit to the petitioners the
excess of the proceeds of the sale. Section 260 - that within 30 days after service of the warrant of
Still, the petitioners failed to redeem the property so Laverne levy, the local treasurer shall proceed to publicly advertise for
was prompted to file a petition to surrender the owner’s sale or auction the property, which shall also be effected by
duplicate copy of the title to the property before the RTC of posting a notice at the main entrance of the provincial, city or
Makati. municipal building, and in a publicly accessible and
The petitioners filed a demurrer to evidence, which the RTC conspicuous place in the barangay where the real property is
granted, thereby dismissing Laverne’s petition, based on the located, and by publication once a week for 2 weeks in a
following grounds: newspaper of general circulation in the province, city or
That the Billing Statements were not received by the Spouses municipality where the property is located.
Cruz;
That the Notice of Tax Delinquency, the Warrant of Levy, and Compliance with the aforementioned provisions is mandatory.
the public auction were all defective or non-compliant.
Laverne filed a motion for reconsideration, but the RTC In the present case, there was no proof that the Notice of Tax
dismissed the same. Delinquency was posted in the City Hall of Makati and in the
The case was elevated to the CA, which likewise denied the barangay where the property is located.
petition, as well as the subsequent motion for reconsideration.
ISSUES:
It also appears that the Notice of Tax Delinquency was
published only once, while the Notice of Public Auction was
published thrice.
Moreover, although a warrant of levy was mailed to the
delinquent taxpayer, there was no showing that the same was
actually served or received by the said taxpayer because of the
mistake in the address.
With these, the pieces of evidence presented were insufficient
to establish compliance with the requirements laid out in the
LGC.

DOCTRINE:
In resolving the case, the Supreme Court emphasized that we
must protect private property owners from undue application of
the law authorizing the levy and sale of their properties for non-
payment of the real property tax.
The reason for this is because this power is prone to great
abuse, in that owners of valuable real property are liable to lose
them on account of irregularities committed by these local
government units or officials, done intentionally with the
collusion of third parties and with the deliberate unscrupulous
intent to appropriate these valuable properties for themselves
and profit therefrom.

Example: These unscrupulous parties can commit a simple,

seemingly irrelevant technicality such as deliberately sending
billing statements, notices of delinquency and levy to wrong
addresses under the guise of typographical lapses, as what
happened in this case.
 delinquency in realty tax obligations. Petitioner claims herein
MODULE 6 that it had discovered that respondent City did not pass any
ordinance authorizing the collection of real property tax, a tax
for the special education fund (SEF), and a penalty interest for
its nonpayment. Petitioner argued that without the
(i) Mactan-Cebu Int’l Airport Authority vs. Lapu- corresponding tax ordinances, respondent City could not
Lapu City (G.R. 181756, June 15, 2015); MAXINE LEE impose and collect real property tax, an additional tax for the
SEF, and penalty interest from petitioner.
PETITIONER: Mactan-Cebu International Airport Authority
(MCIAA) RTC ruled in favor of the petitioners, thereby granting the
RESPONDENT: LAPU-LAPU CITY application for a writ of preliminary injunction. But it was
PETITION FOR REVIEW ON CERTIORARI UNDER RULE 45 subsequently lifted by the same court. On appeal, the CA ruled
that petitioner’s airport terminal building, airfield, runway,
FACTS: taxiway, and the lots on which they are situated are not exempt
Petitioner Mactan-Cebu International Airport Authority from real estate tax because as stated in the the Local
(MCIAA) was created by Congress to undertake the effective Government Code (LGC), all natural and juridical persons,
control and management and supervision of the Mactan including government-owned or controlled corporations
International Airport, Lahug Airport, and other airports as may (GOCCs), instrumentalities and agencies, are no longer
be established by the Province of Cebu. MCIAA enjoyed exempt from local taxes even if previously granted an
exemption from realty taxes as per RA 6958. However, the exemption. The only exemptions from local taxes are those
Supreme Court ruled in another case that MCIAA was no specifically provided under the Code itself, or those enacted
longer exempt from real estate taxes upon the effectivity of the through subsequent legislation.
Local Government Code of 1991.
ISSUE: WON the petitioner is a government instrumentality
Respondent City issued to MCIAA a Statement of Real Estate exempt from paying real property taxes
Tax assessment over the lots of Mactan International Airport.
But the Petitioner contends that the said lots are solely utilized RULING:
solely and exclusively for public purposes and should be Yes. Petitioner is an instrumentality of the government; thus,
exempt from real property tax, as per the DOJ Opinion No. 50. its properties actually, solely and exclusively used for public
Respondent still issued notices of levy on the 18 sets of real purposes, consisting of the airport terminal building, airfield,
properties of petitioner. runway, taxiway and the lots on which they are situated, are
not subject to real property tax and respondent City is not
Petitioner filed a petition for prohibition, with a prayer for a justified in collecting taxes from petitioner over said properties.
temporary restraining order and/or writ of preliminary injunction MCIAA is vested with corporate powers but it is not a stock or
before the RTC of Lapu-lapu City which sought to enjoin non-stock corporation, which is a necessary condition before
respondent City from issuing the warrant of levy against an agency or instrumentality is deemed a government-owned
petitioner’s properties from selling them at public auction for
or controlled corporation. MCIAA has capital under its charter Subject Controversy is RPT of TCT No. RT-107350 (192689)
but it is not divided into shares of stock. It also has no owned by UP, a portion of which is leased by Ayala Land, now
stockholders or voting shares. known as UP-Ayala Technohub, along Commonwealth Ave.

The airport lands and buildings of MCIAA are properties of City Treasurer of QC issued multiple notices of delinquency
public dominion because they are intended for public use. As with:
properties of public dominion, they indisputably belong to the
State or the Republic of the Philippines, and are outside the Statement of of delin. 106M on May 27, 2014 and Final notice
commerce of man. This, unless petitioner leases its real of delin. 117M
property to a taxable person, the specific property leased
becomes subject to real property tax; in which case, only those UP Argued:
portions of petitioner's properties which are leased to taxable
persons like private parties are subject to real property tax by 1. UP’s Charter, RA 9500, grants tax exemption from all taxes
the City of Lapu-Lapu. and duties on all revenues and assets used for educational
purposes or in support thereof.
DOCTRINE:
As properties of Public Dominion owned by the Republic, 2. Bureau of Local Government Finance also has the opinion
Airport Lands and Building are expressly exempt from real that Ayala Land, being the lessee, is the legally accountable
estate tax under Section 234 (a) of the LGC. party to the unpaid real property taxes on the government-
owned UP Property." The foregoing opinion of the BLGF
confirms that the University is exempt from real estate taxes,
an absolute right that the University enjoys under R.A. No.
9500.
(ii) National Power Corp. vs. Province of
Pangasinan, G.R. 210191, March 4, 2019; FRANCES QC Argued:
VALDEZ
A full blown trial must first be conducted by the trial court.
(iii) University of the Philippines vs. City Treasurer
of Quezon City, G.R. 214044, June 19, 2019; PAULO DELOS UP is not exempt from real property, as jurisprudence provides
REYES that: “Where the parcels of land owned by the Republic are not
properties of public dominion, portions of the properties leased
Facts: to taxable entities are not only subject to real estate tax, they
can also be sold at public auction to satisfy the tax
Petition for Certiorari / Prohibition seeking to annul Final Notice delinquency.”
of Delinquency / Statement of Delinquency issued by the City
Treasurer of Quezon City. UP merely relied on the opinion of BLGF.
LGC sec. 205, par. D: Real property owned by the Republic of beneficial use of a real property owned by a government
the Philippines, its instrumentalities and political subdivisions, instrumentality is granted to a taxable person, then the taxable
the beneficial use of which has been granted, for consideration person is not exempted from paying real property tax on such
or otherwise, to a taxable person, shall be listed, valued and property.
assessed in the name of the possessor, grantee or of the
public entity if such property has been acquired or held
for resale or lease.
3. However, the enactment and passage of Republic Act No.
LGC sec. 235, par. A: Real property owned by the Republic of 9500 in 2008 superseded Sections 205(d) and 234(a) of the
the Philippines or any of its political subdivisions except when Local Government Code.
the beneficial use thereof has been granted, for consideration
or otherwise, to a taxable person.

Issue: WN UP is liable for real property tax imposed on subject 3.a. Before the passage of Republic Act No. 9500, there was a
land leased by ALI need to determine who had beneficial use of UP’s property
before the property may be subjected to real property tax.
Held:

This Court has the power to decide the present case. This
issue is a pure question of law, not of fact. 3.b. After the passage of Republic Act No. 9500, there is no
longer a need for the determination of the tax status of the
UP is exempt from real property tax on its property (a parcel of possessor or of the beneficial user to further ascertain whether
land where Ayala Technohub is located). However, Ayala (ALI) UP’s revenue or asset is exempt from tax. Instead, the focal
is taxable on the improvements made thereon. point is “whether UP’s property is used for educational
purposes or in support thereof before the property may be
Legal Bases/SC’s Discussion: subjected to real property tax.” (See Sec. 25a of RA 9500.)
Republic Act No. 9500 bases UP’ s tax exemption upon
1. UP is a chartered academic institution with specific compliance with the condition that UP’s revenues and assets
legislated tax exemptions. These tax exemptions come from must be used for educational purposes or in support thereof.
the Local Government Code, as well as from its legislative
charter, Republic Act No. 9500.

2. For LGC: A combined reading of Sections 205 and 234 of Considering that the subject land and the revenue derived from
the Local Government Code also provides for removal of the the lease thereof are used by UP for educational purposes and
exemption to government instrumentalities when beneficial in support of its educational purposes, UP should not be
use of a real property owned by a government instrumentality assessed, and should not be made liable for real property tax
is granted to a taxable person. Stated differently, when on the land subject of this case. Under Republic Act No. 9500,
this tax exemption, however, applies only to "assets of the that allows UP to validly claim exemption from real property
University of the Philippines," referring to assets owned by UP. taxes on the land leased to ALI. Republic Act No. 9500 is UP’s
Under the Contract of Lease between UP and ALI, all congressional authority for this particular exemption from real
improvement on the leased land "shall be owned by, and shall property tax. Thus, when the City Treasurer addressed to UP
be for the account of the LESSEE [ALI]" during the term of the the Statement of Delinquency and the Final Notice of
lease. The improvements are not "assets" owned by UP; and Delinquency dated 11 July 2014 and required UP to pay real
thus, UP's tax exemption under Republic Act No. 9500 does property tax on the subject land, UP was already authorized by
not extend to these improvements during the term of the lease. the legislature to validly claim exemption from real property
taxes on the land leased to ALI.
_________________________________________________
___________________________

4. The contract of lease between UP and Ayala states that UP 5. Considering that the subject land and the revenue derived
will shoulder the real property taxes imposable on such from the lease thereof are used by UP for educational
property. For this one, SC compared the case with NPC vs. purposes and in support of its educational purposes, UP
Province of Quezon. should not be assessed, and should not be made liable for real
property tax on the land.
4.a. SC declared in the NPC case that it is “essentially wrong
to allow the NPC to assume in its BOT contracts the liability of 5.a. Under Republic Act No. 9500, this tax exemption,
the other contracting party for taxes that the government can however, applies only to “assets of the University of the
impose on that other party, and at the same time allow NPC to Philippines,” referring to assets owned by UP. Under the
turn around and say that no taxes should be collected because Contract of Lease between UP and ALI, all improvement~ on
the NPC is tax-exempt as a government-owned and controlled the leased land “shall be owned by, and shall be for the
corporation.” account of the LESSEE [ ALI]” during the term of the lease.
The improvements are not “assets” owned by UP; and thus,
4.b. This was the situation set up by UP with ALI in 2008, UP’s tax exemption under Republic Act No. 9500 does not
before the passage of Republic Act No. 9500. Before the extend to these improvements during the term of the lease.
passage of Republic Act No. 9500, it was essentially wrong for
UP to assume in its lease contract with ALI the liability of ALI
for real property taxes based on its beneficial use of the land, MODULE 7
and then turn around and tell the City Treasurer that UP is
exempt from paying taxes on the land because it is a
government instrumentality. a. V.Y. Domingo Jewellers, Inc. vs. CIR, G.R. 221780,
March 25, 2019; AINAH LANTO
4.c. However, the passage of Republic Act No. 9500 in 2008
obliterated what was essentially wrong in the lease contract Petitioner: COMMISSIONER OF INTERNAL REVENUE
between UP and ALI. The legislature established a tax system
Respondent: V.Y. DOMINGO JEWELLERS, INC · The CTA granted the CIR’s Motion to Dismiss VY
Case: Review on Certiorari which seeked to set aside the Domingo’s Petition for Review. In order for the CTA to acquire
decision of the Court of Tax Appeals granting the petition of VY jurisdiction, the assessment must first be disputed by the
Domingo Jewelers taxpayer and either ruled upon by the CIR to warrant a
decision, or denied by the CIR through inaction.
Facts: · What was being appealed by V.Y. Domingo were the
· Bureau of Internal Revenue (BIR) issued a Preliminary subject assessments, not a decision or the CIR's denial of its
Assessment Notice (PAN) against V.Y. Domingo with a total protest; thus, the said assessments had attained finality, and
assessed amount of P2,781,844.21 as deficiency income tax the CTA in Division was without jurisdiction to entertain the
and value added tax for the taxable year 2006 appeal.
o a corporation primarily engaged in manufacturing and · V.Y. Domingo filed a Motion for Reconsideration but was
selling emblematic jewelry denied, thus prompting its filing a Petition for Review and
· V.Y. Domingo then filed a Request for Re-evaluation/Re- claimed that it was denied due process when the CIR failed to
investigation and Reconsideration with the Regional Director send the Notice of Final Assessment to it. The Petition was
of BIR-Revenue Region No. 6 to verify the accuracy of the granted, and the prior decision was set aside and reversed,
computation as well as the accounts included in the remanding it to the First Court.
Preliminary Assessment Notice.
· V.Y. Domingo received a Preliminary Collection Letter
informing it of the existence of two Assessment Notices for Issue:
collection of its tax liabilities in the amounts of amount of Whether the First Division of the CTA has jurisdiction to
P3,164,617.43. entertain V.Y. Domingo's petition as what is being disputed are
· V.Y. Domingo filed a Petition for Review with the CTA the assessments and not a decision or denial.
praying that the Assessment Notices be declared null and void
for being issued beyond the prescriptive period for assessment Held:
and collection of internal revenue taxes. · NO.
· The CIR filed a Motion to Dismiss the petition for lack of · It was ruled that the CTA, being a court of special
jurisdiction, arguing that under RA No. 1125, it is neither the jurisdiction, can take cognizance only of matters that are
assessment nor the formal letter of demand that is appealable clearly within its jurisdiction.
to the CTA but the decision of the CIR on a disputed · In the case herein, V.Y. Domingo instead of filing an
assessment. V.Y. Domingo's petition was anchored on its administrative protest against the assessment notice within
receipt of the Preliminary Collection Letter, which was treated thirty (30) days from its receipt of the requested copies of the
as a denial of its Request for Re-evaluation/Re-investigation Assessment Notices, elected to file its petition for review before
and Reconsideration, thus there can be no disputed the CTA alleging the finality of the terms used when payment
assessment, and the CTA does not have jurisdiction to was demanded proved that its Request for Re-evaluation/Re-
entertain the said Petition for Review. investigation and Reconsideration was denied by the CIR.
· V.Y. Domingo's immediate recourse to the CTA First Notice (PAN) within which to submit relevant supporting
Division was in violation of the doctrine of exhaustion of documents.
administrative remedies.
· Section 228 of the Tax Code requires taxpayers to exhaust In this case, the respondent filed its protest on April 18, 2013.
administrative remedies by filing a request for reconsideration It had 60 days from that date, or until June 17, 2013, to present
or reinvestigation within 30 days from receipt of the its relevant documents, to support its protest against the PAN.
assessment. Exhaustion of administrative remedies is required Clearly, the Final Assessment Notice issued by the CIR on
prior to resort to the CTA precisely to give the Commissioner April 12, 2013 and received by respondent only on April 19,
the opportunity to "re-examine its findings and conclusions" 2013 violated the latter's right to due process as the latter had
and to decide the issues raised within her competence. only 1 day (instead of 60 days) to present its relevant
· The Court granted the Petition for Review. documents in support of its protest. Besides, the 60-day period
to protest alluded to in Section 228 of the NIRC refers to one
made against the PAN and not the FAN as the CIR insists, as
only upon expiration of the said period does a contested
assessment become final.

b. Roca Security & Investigation Agency Inc. vs. CIR, G.R. Therefore, the CTA En Banc properly found the CIR to have
241338, April 10, 2019; violated the statutory guidelines in terms of affording
respondent taxpayer the right to due process.
ALEX AZUL
c. Misnet Inc. vs. CIR, G.R. 210604, June 3,
This is a case involving the Commissioner of Internal Revenue 2019.EROS CABAUATAN
as petitioner, and Roca Security & Investigation Agency, Inc.
as respondent, denying the petition and affirming the prior DOCTRINE:
decision of the Court of Tax Appeals.
For a party to seek exception for its failure to comply strictly
This notice by the Supreme Court held that the CTA did not with the statutory requirements for perfecting its appeal, strong
commit any reversible error in its decision, which would warrant compelling reasons such as serving the ends of justice and
the exercise of the Supreme Court’s appellate jurisdiction. preventing a grave miscarriage thereof must be shown, in
order to warrant the Court's suspension of the rules. Indeed,
As correctly held by the CTA En Banc, the Final Assessment the Court is confronted with the need to balance stringent
Notice (FAN) issued by the Commissioner of Internal Revenue application of technical rules vis-a-vis strong policy
is void as it violates respondent's right to due process. Section considerations of substantial significance to relax said rules
228 of the National Internal Revenue Code gives the based on equity and justice.
taxpayer being assessed a period of 60 days from the date
of filing a protest assailing the Preliminary Assessment FACTS:
 Petitioner received a PAN. Petitioner then filed a letter-protest Petitioner filed a motion for reconsideration but it was denied.
on the PAN. Petitioner received a FAN. Petitioner paid for Petitioner filed a Petition for Review with the CTA En Banc but
certain undisputed assessments. On the same day, petitioner it was dismissed.
administratively protested the FAN by filing a request for
reconsideration. The CIR acknowledged receipt of the ISSUE:
payment and the protest letter and informed the petitioner that
its tax docket had been forwarded to RDO North Makati. Whether or not the CTA gravely erred in dismissing the
Petitioner sent a letter to Revenue Officer Paralejas reiterating petition for review for lack of jurisdiction.
its protest to the PAN and the FAN. CIR again wrote a letter to
the petitioner informing it that it found additional deficiency
taxes due. Petitioner received an Amended Assessment
Notice reflecting an amended deficiency EWT after Held:
reinvestigation. On the same date, petitioner received an
FDDA stating that after reinvestigation, there was still due from For a party to seek exception for its failure to comply strictly
petitioner. This FDDA was received by the petitioner on March with the statutory requirements for perfecting its appeal, strong
28, 2011. compelling reasons such as serving the ends of justice and
preventing a grave miscarriage thereof must be shown, in
On April 8, 2011, petitioner filed a letter-reply to the Amended order to warrant the Court's suspension of the rules. Indeed,
Assessment Notice and FDDA, which was received by the CIR the Court is confronted with the need to balance stringent
on April 11, 2011. On May 9, 2011, the CIR sent a letter to application of technical rules vis-a-vis strong policy
petitioner which states in part that petitioner's letter-reply dated considerations of substantial significance to relax said rules
April 8, 2011 produced no legal effect since it availed of the based on equity and justice. Petitioner's belated filing of an
improper remedy. It should have appealed the final decision of appeal with the CTA is not without strong, compelling reason.
the CIR to the CTA within thirty days from the date of receipt We could say that the petitioner was merely exhausting all
of the said Decision, otherwise, the assessment became final, administrative remedies available before seeking recourse to
executory and demandable. On May 27, 2011, petitioner filed the judicial courts. While the rule is that a taxpayer has 30 days
a Petition for Relief from Judgment with respondent to appeal to the CTA from the final decision of the CIR, the said
Commissioner arguing that it was not able to file its proper rule could not be applied if the Assessment Notice itself clearly
appeal of the FDDA due to its mistake and excusable states that the taxpayer must file a protest with the CIR or the
negligence as it was not assisted by counsel. On June 29, Regional Director within 30 days from receipt of the
2011, petitioner received a Preliminary Collection Letter dated Assessment Notice. Under the circumstances obtained in this
June 22, 2011, which is deemed a denial of petitioner's Petition case, we opted not to apply the statutory period within which
for Relief. to appeal with the CTA considering that no final decision yet
was issued by the CIR on petitioner's protest. The subsequent
Petitioner filed a Petition for Review with the CTA. Meanwhile, appeal taken by petitioner is from the inaction of the CIR on its
the CIR filed a Motion to Dismiss the petition on the ground of protest.
lack of jurisdiction. The motion to dismiss was granted.