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CIR v. Solidbank (Double Taxation: Strict Sense) Facts: For the calendar year 1995, [respondent] seasonablyfiled its Quarterly Percentage Tax Returns reflecting grossreceipts (pertaining to 5% [Gross Receipts Tax] rate) in thetotal amount of P1,474,691,693.44 with corresponding grossreceipts tax payments in the sum of P73,734,584.60.On January 30, 1996, [the Court of Tax Appeals]rendered a decision in CTA Case No. 4720 entitled Asian BankCorporation vs. Commissioner of Internal Revenue[,] wherein itwas held that the 20% final withholding tax on [a] banksinterest income should not form part of its taxable grossreceipts for purposes of computing the gross receipts tax.On June 19, 1997, on the strength of theaforementioned decision, [respondent] filed with the Bureau of Internal Revenue [BIR] a letter-request for the refund or issuance of [a] tax credit certificate in the aggregate amount of P3,508,078.75, representing allegedly overpaid gross receiptstax for the year 1995.The CTA rendered its decision ordering petitioner torefund in favor of respondent the reduced amount of P1,555,749.65 as overpaid [gross receipts tax] for the year 1995.The CA held that the 20% FWT on a banks interestincome did not form part of the taxable gross receipts incomputing the 5% GRT, because the FWT was not actuallyreceived by the bank but was directly remitted to thegovernment. The appellate court curtly said that while the TaxCode does not specifically state any exemption, x x x thestatute must receive a sensible construction such as will giveeffect to the legislative intention, and so as to avoid an unjustor absurd conclusion. Issue/s: W/N the 20% final withholding tax on [a] banksinterest income forms part of the taxable gross receipts incomputing the 5% gross receipts tax. Held/Ratio: Yes, the amount of interest income withheld inpayment of the 20% FWT forms part of gross receipts incomputing for the GRT on banks.Two types of taxes are involved in the presentcontroversy: (1) the GRT, which is a percentage tax; and (2)the FWT, which is an income tax. As a bank, petitioner iscovered by both taxes.Gross receipts refer to the total, as opposed to thenet, income. These are therefore the total receipts before anydeduction for the expenses of management. Websters NewInternational Dictionary, in fact, defines gross as whole or entire. No Double Taxation The two taxes, subject of this litigation, are differentfrom each other. The basis of their imposition may be thesame, but their natures are different, thus leading us to a finalpoint. Double taxation means taxing the same property twice when it should be taxed only once; that is, x x x taxing the same person twice by the same jurisdiction for the samething. It is obnoxious when the taxpayer is taxed twice, whenit should be but once. Otherwise described as direct duplicate taxation, the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority,within the same jurisdiction, during the same taxing period; and they must be of the same kind or character. First, the taxes herein are imposed on twodifferent subject matters. The subject matter of the FWT isthe passive income generated in the form of interest ondeposits and yield on deposit substitutes, while the subjectmatter of the GRT is the privilege of engaging in the businessof banking. A tax based on receipts is a tax on business rather than on the property; hence, it is an excise rather than aproperty tax. It is not an income tax, unlike the FWT. Thesetwo taxes are entirely distinct and are assessed under differentprovisions. Second, although both taxes are national in scopebecause they are imposed by the same taxing authority --the national government under the Tax Code -- andoperate within the same Philippine jurisdiction for thesame purpose of raising revenues, the taxing periods theyaffect are different. The FWT is deducted and withheld assoon as the income is earned, and is paid after every calendar quarter in which it is earned. On the other hand, the GRT isneither deducted nor withheld, but is paid only after everytaxable quarter in which it is earned. Third, these two taxes are of different kinds or characters. The FWT is an income tax subject to withholding,while the GRT is a percentage tax not subject to withholding.

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In short, there is no double taxation, becausethere is no taxing twice, by the same taxing authority,within the same jurisdiction, for the same purpose, indifferent taxing periods, some of the property in theterritory. Subjecting interest income to a 20% FWT andincluding it in the computation of the 5% GRT is clearlynot double taxation. Petition granted 22 CIR v. SC Johnson & Son(Tax Treaties) Facts: S. C. Johnson and Son, Inc. entered into a licenseagreement with SC Johnson and Son, United States of America (USA) For the use of the trademark or technology, S. C. Johnsonand Son, Inc. was obliged to pay SC Johnson and Son,USA royalties based on a percentage of net sales andsubjected the same to 25% withholding tax on royaltypayments S. C. Johnson and Son, Inc. filed with the InternationalTax Affairs Division (ITAD) of the BIR a claim for refund of overpaid withholding tax on royalties arguing that thepreferential tax rate of 10% should apply to them Issue Whether or not SC Johnson and Son, USA is entitled to the"most favored nation" tax rate of 10% on royalties as providedin the RP-US Tax Treaty in relation to the RP-West GermanyTax Treaty. Held/Ratio NO. Under Article 13 of the RP-US Tax Treaty, the Philippinesmay impose one of three rates 25 percent of the grossamount of the royalties; 15 percent when the royalties are paidby a corporation registered with the Philippine Board of Investments and engaged in preferred areas of activities; or the lowest rate of Philippine tax that may be imposed onroyalties of the same kind paid under similar circumstances toa resident of a third state.The RP-US and the RP-West Germany Tax Treaties do notcontain similar provisions on tax crediting.Since the RP-US Tax Treaty does not give a matching taxcredit of 20 percent for the taxes paid to the Philippines onroyalties as allowed under the RP-West Germany Tax Treaty,private respondent cannot be deemed entitled to the 10percent rate granted under the latter treaty for the reason thatthere is no payment of taxes on royalties under similar circumstances. 19 CIR v. Estate of Benigno Toda(Tax evasion) Facts: CIC authorized Benigno P. Toda, Jr., President andowner of 99.991% of its issued and outstanding capital stock,to sell the Cibeles Building and the two parcels of land onwhich the building stands for an amount of not less than P90million.30 August 1989, Toda purportedly sold the property for P100million to Altonaga, who, in turn, sold the same property on thesame day to Royal Match Inc. (RMI) for P200 million. Thesetwo transactions were evidenced by Deeds of Absolute Salenotarized on the same day by the same notary public.For the sale of the property to RMI, Altonaga paid capital gainstax in the amount of P10 million.On 16 April 1990, CIC filed its corporate annual income taxreturn for the year 1989, declaring, among other things, its gainfrom the sale of real property in the amount of P75,728.021.After crediting withholding taxes of P254,497.00, it paidP26,341,207 for its net taxable income of P75,987,725.On 12 July 1990, Toda sold his entire shares of stocks in CICto Le Hun T. Choa for P12.5 million, as evidenced by a Deedof Sale of Shares of Stocks. Issue: WON this is a case of tax evasion or tax avoidance. Held/Ratio: Tax avoidance and tax evasion are the two mostcommon ways used by taxpayers in escaping from taxation. Tax avoidance - is the tax saving device within the meanssanctioned by law. It should be used by the taxpayer in goodfaith and at arms length . Tax evasion - is a scheme usedoutside of those lawful means and when availed of, it usuallysubjects the taxpayer to further or additional civil or criminalliabilities. Tax evasion connotes the integration of three factors (1)the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due; (2)an accompanying state of mind which is described as being" evil," in "bad faith," "willfull," or "deliberate and not accidental";

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(3)a course of action or failure of action which is unlawful. All these factors are present in the instant case. That Altonaga was a mere conduit finds support in theadmission of respondent .Estate that the sale to him was partof the tax planning scheme of CIC.The scheme resorted to by CIC in making it appear that there were two sales of the subject properties, i.e., fromCIC to Altonaga, and then from Altonaga to RMI cannot beconsidered a legitimate tax planning. It is tainted with fraud.Here, it is obvious that the objective of the sale to Altonaga was to reduce the amount of tax to be paid. The transfer from him to RMI would result to 5% individual capital gains tax, instead of 35% corporate income tax. Altonagas sole purpose of acquiring and transferring title of the propertieson the same day was to create a tax shelter. Altonaga never controlled the property and did not enjoy the normal benefits and burdens of ownership. The sale to him was merely a tax ploy, a sham, and without business purpose and economic substance. Doubtless, the execution of the two sales was calculated to mislead the BIR with the end in view of reducing the consequent income tax liability. In a nutshell, the intermediary transaction, i.e., the sale of Altonaga, which was prompted more on the mitigation of tax liabilities than for legitimate business purposes constitutes tax evasion. 29 MACEDA v. MACARAIG(Rationale/Ground for tax exemption & Construction of Statutes Granting Tax Exemption Exemption) FACTS: (same as 1991 case)* CA 120 created NAPOCOR as a public corporation toundertake the development of hydraulic power and the production of power from other sources.* RA 358 (1949) granted NAPOCOR tax and duty exemption privileges. RA 6395 (1971) revised the charter of the NAPOCOR, tasking it to carry out the policy of the national electrification, and provided in detail NAPOCORs tax exceptions. PD 380 (1974) specified that NAPOCORs exemption includes all taxes, etc. imposed directly or indirectly.* PD 938 integrated the exemptions in favor of GOCCs including their subsidiaries; however, empowering the President or the Minister of Finance, upon recommendation of the Fiscal Incentives Review Board (FIRB) to restore, partially or completely, the exemptions withdrawn or revised.* The FIRB issued Resolution 10-85 (7 February 1985)restoring the duty and tax exemptions privileges of NAPOCOR for period 11 June 1984- 30 June 1985. Resolution 186(1January 1986) restored such exemption indefinitely effective1 July 1985. EO 93 (1987) again withdrew the exemption. FIRB issued Resolution 17-87 (24 June 1987) restoring NAPOCORs exemption, which was approved by the President on 5 October 1987.* Since 1976, oil firms never paid excise or specific and advalorem taxes for petroleum products sold and delivered to NAPOCOR. Oil companies started to pay specific and advalorem taxes on their sales of oil products to NAPOCOR only in 1984.* NAPOCOR claimed for a refund (P468.58 million). Only portion thereof, corresponding to Caltex, was approved and released by way of a tax credit memo. The claim for refund of taxes paid by Petro Phil, Shell and Caltex amounting toP410.58 million was denied.* NAPOCOR moved for reconsideration, starting that all deliveries of petroleum products to NAPOCOR are tax exempt, regardless of the period of delivery. ISSUE: WON NAPOCOR cease to enjoy exemption from indirect tax when exemption in PD 938 is in general terms. HELD: NO, NAPOCOR still exempt. Tax exemptions are undoubtedly to be construed strictly but not so grudgingly asknowledge that many impositions taxpayers have to pay are inthe nature of indirect taxes. To limit the exemption granted theNational Power Corporation to direct taxes notwithstanding thegeneral and broad language of the statute will be to thwart thelegislative intention in giving exemption from all forms of taxesand impositions without distinguishing between those that aredirect and those that are not. 1991 case held: NAPOCOR is a non-profit public corporationcreated for the general good and welfare, and wholly owned bythe government of the Republic of the Philippines. From thevery beginning of the corporations existence, NAPOCORenjoyed preferential tax treatment to enable the corporation topay the indebtness and obligation and effectiveimplementation of the policy enunciated in Section 1 of RA6395. From the preamble of PD 938, it is evident that theprovisions of PD 938 were not intended to be strictly construedagainst NAPOCOR. On the contrary, the law mandates that itshould be interpreted

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liberally so as to enhance the tax exemptstatus of NAPOCOR. It is recognized principle that the rule onstrict interpretation does not apply in the case of exemptions infavor of government political subdivision or instrumentality. The basis for applying the rule of strict construction tostatutory provisions granting tax exemptions or deductions, even more obvious than with reference to theaffirmative or levying provisions of tax statutes, is tominimize differential treatment and foster impartiality,fairness, and equality of treatment among tax payers. The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or itsagencies. In such case the practical effect of an exemption ismerely to reduce the amount of money that has to be handledby government in the course of its operations. For thesereasons, provisions granting exemptions to governmentagencies may be construed liberally, in favor of non tax liabilityof such agencies. In the case of property owned by the state or a city or other public corporations, the express exemption shouldnot be construed with the same degree of strictness thatapplies to exemptions contrary to the policy of the state,since as to such property exemption is the rule andtaxation the exception. DISPOSITIVE: NAPOCOR exempt from tax 29 Maceda v. Macaraig (Delegation to Admin Agencies) Facts: 1. Senator Maceda, through this taxpayers suit, sought toprevent the Fiscal Incentives Review Board (FIRB) fromprocessing and granting the tax refunds/credits claimed bythe National Power Corp (NPC).2. The NPC used to enjoy an absolute and unqualified taxexemption under RA 358 so as to allow the NPC toaccomplish its task of nationwide electrification. Suchexemption was withdrawn and reinstated partially or completely, with provisions qualified or unqualified, severaltimes.3. Most pertinent was E.O. # 93 which once again withdrewall tax and duty incentives to all government and privateentities including the NPC. Moreover, E.O. # 93 gave theauthority to the FIRB to restore, revise the scope and prescribe the date of effectivity of such tax/duty exemptions. (Sec 2 (a), (b) and (d) of E.O. # 93)4. FIRB issued Resolution # 17-87 which restored NPCs taxand duty exemption privileges. Issue: WON E.O. # 93 was unconstitutional for being anundue delegation of legislative power No; E.O. # 93 wascomplete in itself and was valid; the FIRB Resolutionrestoring NPC tax exemptions was also valid. Ratio: 1. Though the Secretary of Justice opined that Sec. 2 (a) to(d) of E.O. # 93 constituted undue delegation of legislative power, he was overruled by the respondent Executive Secretary. The Executive Secretary has the power tomodify, alter or reverse the statutory construction given by a dept secretary.2.STANDARD: Greater national interest along with therest of Sec. 3 of E.O. # 93: effect on relative price levels,contribution of beneficiary to revenue generation andnature of the beneficiarys activities3. The maxim delegatus non potest delegare has beenrelaxed to adapt itself to the complexities of modern government. (admin law: why is it important? time, orgzaptitute and expertise)4. HOW THE CASE WAS DECIDED: The petition itself was dismissed for lack of merit. NPC should be granted the taxrefunds it asked for because the legislative intent was for the NPC to enjoy extensive, if not absolute, tax exemption so as to expedite its task of nationwide electrification. The allegation that this in effect allowed tax evasion by the 3 oil companies which supplied NPC with crude oil was refuted 29 MACEDA v. MACARAIG (Construction of StatutesGranting Tax Exemption Exemption) FACTS: * CA 120 created NAPOCOR as a public corporation toundertake the development of hydraulic power and theproduction of power from other sources.* RA 358 (1949) granted NAPOCOR tax and duty exemptionprivileges. RA 6395 (1971) revised the charter of theNAPOCOR, tasking it to carry out the policy of the nationalelectrification, and provided in detail NAPOCORs taxexceptions. PD 380 (1974)

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specified that NAPOCORsexemption includes all taxes, etc. imposed directly or indirectly.* PD 938 integrated the exemptions in favor of GOCCsincluding their subsidiaries; however, empowering thePresident or the Minister of Finance, upon recommendation of the Fiscal Incentives Review Board (FIRB) to restore, partiallyor completely, the exemptions withdrawn or revised.* The FIRB issued Resolution 10-85 (7 February 1985)restoring the duty and tax exemptions privileges of NAPOCORfor period 11 June 1984- 30 June 1985. Resolution 1-86(1January 1986) restored such exemption indefinitely effective1 July 1985. EO 93 (1987) again withdrew the exemption.FIRB issued Resolution 17-87 (24 June 1987) restoringNAPOCORs exemption, which was approved by the Presidenton 5 October 1987.* Since 1976, oil firms never paid excise or specific and advalorem taxes for petroleum products sold and delivered toNAPOCOR. Oil companies started to pay specific and advalorem taxes on their sales of oil products to NAPOCOR onlyin 1984.* NAPOCOR claimed for a refund (P468.58 million). Onlyportion thereof, corresponding to Caltex, was approved andreleased by way of a tax credit memo. The claim for refund of taxes paid by PetroPhil, Shell and Caltex amounting toP410.58 million was denied.* NAPOCOR moved for reconsideration, starting that alldeliveries of petroleum products to NAPOCOR are tax exempt,regardless of the period of delivery. ISSUE: WON NAPOCOR cease to enjoy exemption fromindirect tax when PD 938 stated the exemption in generalterms. HELD: NO, NAPOCOR still exempt.NAPOCOR is a non-profit public corporation created for thegeneral good and welfare, and wholly owned by the government of the Republic of the Philippines. From the very beginning of the corporations existence, NAPOCOR enjoyed preferential tax treatment to enable the corporation to pay the indebtness and obligation and effective implementation of the policy enunciated in Section 1 of RA 6395. From the preamble of PD 938, it is evident that the provisions of PD 938 were not intended to be strictly construed against NAPOCOR. On the contrary, the law mandates that it should be interpreted liberally so as to enhance the tax exempt status of NAPOCOR. It is recognized principle that the rule on strict interpretation does not apply in the case of exemptions in favor of government political subdivision or instrumentality .The basis for applying the rule of strict construction to statutory provisions granting tax exemptions or deductions, even more obvious than with reference to the affirmative or levying provisions of tax statutes, is to minimize differential treatment and foster impartiality, fairness, and equality of treatment among tax payers. The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax liability of such agencies. In the case of property owned by the state or a city or other public corporations, the express exemption should not be construed with the same degree of strictness that applies to exemptions contrary to the policy of the state, since as to such property exemption is the rule and taxation the exception. DISPOSITIVE: NAPOCOR exempt from tax. DISSENTING,Cruz: It is important to note that when P.D. Nos.1931 and 1955 were issued by President Marcos, the ruleunder the 1973 Constitution was that "no law granting a taxexemption shall be passed without the concurrence of amajority of all the members of the Batasang Pambansa." (Art.VIII, Sec. 17[4]). Laws are usually passed by only a majority of those present in the chamber, there being a quorum, but notwhere it grants a tax exemption. This requires an absolutemajority. Yet, despite this stringent limitation on the nationallegislature itself, such stricture does not inhibit the Presidentand the FIRB in the exercise of their delegated power. It wouldseem that the delegate has more power than the principal.Significantly, this limitation is maintained in the presentConstitution under Article VI, Section 28(4).The ponencia holds that the rule of strict construction is notapplicable where the grantee is an agency of the governmentitself, like the MPC in the case before us. I notice, however,that the ultimate beneficiaries of the expected tax credit will bethe oil companies, which certainly are not

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part of the Republicof the Philippines. As the tax refunds will not be enjoyed by theMPC itself, I see no reason why we should be exceptionallylenient in applying the exception.Sarmiento: Acetylene's pronouncement is founded on the veryscience of taxationthat indirect taxes are no taxes for purposes of exemption, and that consequently, one who didnot pay taxes can not claim an exemption although the pricehe paid for the goods included taxes. To enable him to claiman exemption, as the majority would now enable him( Acetylene having been "abrogated"), is, I submit, to defeat thevery laws of science.The theory of "indirect taxes" and that no exemption is possibletherefrom, so I reiterate, are well-settled concepts of taxation,as the law of supply and demand is to the law of economics. APresident is said (unfairly) to have attempted it, but one cannot repeal the law on supply and demand. 24 PHILEX. v. CIR, CA, CTA(Set- Off) FACTS: * BIR sent a letter to Philex asking it to settle its tax liabilities.* Philex protested the demand stating that it has pendingclaims for VAT input credit/refund. Therefore these claims for tax credit/refund should be applied against the tax liabilities.* BIRfound no merit in Philex's position since these pendingclaims have not yet been established or determined withcertainty.* Philex raised the issue to the CTA and CA which bothfavored CIR.* A few days after the denial of its MfR on the CA decision,Philex was able to obtain its VAT input credit/refund. Hence,this petition.* Philex argues that that the refund/credit should off-set its taxliabilities since both had already become "due anddemandable, as well as fully liquidated;" hence, legalcompensation can properly take place.* Respondents argues that taxes cannot be subject to set-off on compensation since claim for taxes is not a debt or contract. ISSUE: Whether tax liabilities could be subject to set-off?HELD: NO, tax liabilities could not be set-off. Taxes cannot be subject to compensation for the simplereason that the government and the taxpayer are not creditorsand debtors of each other.Taxes cannot be subject to set-off or compensation, thus:...there can be no off-setting of taxes against the claims thatthe taxpayer may have against the government. A personcannot refuse to pay a tax on the ground that the governmentowes him an amount equal to or greater than the tax beingcollected. The collection of a tax cannot await the results of alawsuit against the government. (Francia v. Intermediate Appellate Court ).Aforementioned ruling has been applied in Caltex Philippines,Inc. v. Commission on Audit , which reiterated that: ...ataxpayer may not offset taxes due from the claims that he mayhave against the government. Taxes cannot be the subject of compensation because the government and taxpayer are notmutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as isallowed to be set-off.A taxpayer cannot refuse to pay his taxes when they fall duesimply because he has a claim against the government or thatthe collection of the tax is contingent on the result of thelawsuit it filed against the government. 1. Philex Mining Corporation vs.CIR, G.R No. 125704 August 28, 1998 FACTS: The Court of Tax Appeals ordered Philex to pay the amount of P110, 677,668.52as excise tax liability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from August 6, 1994 until fully paid.Philex refused to pay and argued that it had pending claims for VAT inputcredit/refund for the taxes it paid for the years 1989-1991 in the amount of P119,977,037.02 plus interest and therefore should be applied against the said excisetax liabilities in a manner of a setoff or legal compensation. ISSUE:WON taxes could be the subject of a set-off or legal compensation? RULING:No. Taxes could not be the subject of a set-off or legal compensation for thesimple reason that the government and the taxpayer are not mutual creditors and debtors of each other. Claims for taxes are neither debts nor contracts A taxpayer cannot refuse to pay his taxes when they fall due simply because he has aclaim against the government that the collection of the tax is contingent on the result of the lawsuit it filed against the government. In the case at bar, the claims of Philex for VAT refund is still pending litigation. Moreover, taxes are the lifeblood of thegovernment and should be collected without unnecessary hindrance. Citing Francia v. Intermediate Appellate Court,

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the SC categorically held that taxes cannot be subject to set-off or compensation, thus: We have consistently ruled that there can be no off -setting of taxes against the claimsthat the taxpayer may have against the government. A person cannot refuse to pay atax on the ground that the government owes him an amount equal to or greater than thetax being collected. The collection of tax cannot await the results of a lawsuit against the government. 24 PHILEX V. CIR (tax v. ordinary debt) FACTS: BIR asked Philex to pay tax for 1991-1992 in the totalamount of P123,821,982.52. Philex refused stating that ithas pending claims for VAT input credit/refund for thetaxes it paid for the years 1989 to 1991 in the amount of P119,977,037.02 plus interest. Therefore asking for an off-set. Philex filed a case with the CTA. Philex was able to obtain its VAT input credit/refund notonly for the taxable year 1989 to 1991 but also for 1992and 1994 In view of the grant of its VAT input credit/refund, Philexnow contends that the same should, ipso jure, off-set itsexcise tax liabilities, since both had already become dueand demandable, as well as fully liquidated; hence, legalcompensation can properly take place. ISSUE: WON there should be an offset? HELD: NO.Taxes cannot be subject to compensation for the simplereason that the government and the taxpayer are not creditorsand debtors of each other. There is a material distinctionbetween a tax and debt. DEBTS are due to the Government initscorporate capacity, while TAXES are due to theGovernment in its sovereign capacity.Philexs claim is an outright disregard of the basic principle intax law that taxes are the lifeblood of the government andso should be collected without unnecessary hindrance .A distinguishing feature of a tax is that it is compulsory rather than a matter of bargain. Hence, a tax does not depend uponthe consent of the taxpayer. A taxpayer cannot refuse to payhis taxes when they fall due simply because he has a claimagainst the government or that the collection of the tax iscontingent on the result of the lawsuit it filed against thegovernment.Moreover, Philex's theory that would automatically apply itsVAT input credit/refund against its tax liabilities can easily giverise to confusion and abuse, depriving the government of authority over the manner by which taxpayers credit and offsettheir tax liabilities. 14 CIR v. CA, ROH Auto (BIR Rules and Regulations) Facts: EO41 was promulgated declaring a one-time tax amnestyon unpaid income taxes, later amended to include estate anddonor's taxes and taxes on business, for the taxable years1981 to 1985.Availing itself of the amnesty, R.O.H. Auto Products filed,tax amnesty returnms and paid the amnesty taxes due.Prior to this availment, CIR assessed the ROH deficiencyincome and business taxes in an aggregate amount of P1,410,157.71.ROH wrote back to state that since it had been able toavail itself of the tax amnesty, the deficiency tax notice shouldforthwith be cancelled and withdrawn.The request was denied by the Commissioner on theground that Revenue Memorandum Order No. 4-87, dated 09February 1987, implementing Executive Order No. 41, hadconstrued the amnesty coverage to include only assessmentsissued by the Bureau of Internal Revenue after thepromulgation of the executive order on 22 August 1986 and notto assessments theretofore made. ISSUE:Is ROH covered by the tax amnesty?----YES. Was the CIRs position correct?-------------------NO.Ratio Decidendi: 1. The added exception urged by petitioner Commissioner based on Revenue Memorandum Order No. 4-87, further restricting the scope of the amnesty clearly amounts to anact of administrative legislation quite contrary to themandate of the law which the regulation ought toimplement.2. The authority of the Secretary of Finance, in conjunction withthe CIR, to promulgate rules and regulations for theenforcement of internal revenue laws cannot becontroverted. Neither can it be disputed that such rules andregulations, as well as administrative opinions and rulings,ordinarily should deserve

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weight and respect by the courts.Much more fundamental than either of the above, however,is that all such issuances must not override, but mustremain consistent and in harmony with, the law they seek toapply and implement. Administrative rules and regulationsare intended to carry out, neither to supplant nor to modify,the law. 3. If, as the Commissioner argues, EO 41 had not beenintended to include 1981-1985 tax liabilities alreadyassessed prior to 22 August 1986, the law could havesimply so provided in its exclusionary clauses. It did not.The conclusion is unavoidable, and it is that the executiveorder has been designed to be in the nature of a generalgrant of tax amnesty subject only to the cases specifically excepted by it Holding: CA affirmed 1 CIR V. CA, CTA, & Fortune Tobacco (BIR Rules and Regulations) Facts: CIR, through RMC 37-93, aims to collect deficiencies onad valorem taxes against Fortune Tobacco following areclassification of foreign branded cigarettes, as per RA 7654.Fortune Tobacco raised the issue of the propriety of theassessment to the CTA, which decided against the CIR. CTAwas affirmed by CA. ISSUE: Is RMC 37-93 a mere interpretative ruling, therefore notrequiring, for its effectivity, hearing and filing with the UP LawCenter? NO.Ratio Decidendi: 1. When an administrative rule is merely interpretative, itsapplicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself has already prescribed.2. When, upon the other hand, the administrative rule goesbeyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law butsubstantially adds to or increases the burden of thosegoverned, it behooves the agency to accord at least tothose directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given theforce and effect of law. 3. A reading of RMC 37-93, particularly considering thecircumstances under which it has been issued, convincesus that the circular cannot be viewed simply as a corrective measure or merely as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" within the classification of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654.4. Specifically, the new law would have its amendatory provisions applied to locally manufactured cigarettes which at the time of its effectivity were not so classified as bearingforeign brands. (Prior to the issuance of the questioned circular, "Hope Luxury," "Premium More," and "Champion" cigarettes were in the category of locally manufactured cigarettes not bearing foreign brand subject to 45% ad valorem tax.)5. Hence, without RMC 37-93, the enactment of RA 7654,would have had no new tax rate consequence on private respondent's products.6. Evidently, in order to place "Hope Luxury," "Premium More," and "Champion" cigarettes within the scope of the amendatory law and subject them to an increased tax rate, the now disputed RMC 37-93 had to be issued.7. In so doing, the BIR not simply interpreted the law; verily, it legislated under its quasilegislative authority. The due observance of the requirements of notice, of hearing, and of publication should not have been then ignored. Holding:CTA, CA affirmed 5 PLANTERS. V. FERTIPHIL CORP (public purpose) Facts: Marcos issued LOI 1465, imposing a capital recoverycomponent of Php10.00 per bag of fertilizer ovLevy to continue until adequate capital is raisedto make PPI financially viable Fertiphil remitted to the Fertilizer and Pesticide Authority(FPA), which then remitted said amount to Far East Bankand Trust Company, the depository bank of PPI

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O Php6,689,144 was remitted from 1985 to 1986 After EDSA, Fertiphil demanded from PPI a refund of theamount it remitted; PPI refused Fertiphil filed a complaint for collection and damages oQuestioned constitutionality of LOI 1465 Claimed it was unjust, unreasonable,oppressive, invalid and an unlawfulimposition that amounted to a denial of due process FPA: oIssuance of LOI 1465 was a valid exercise of police power of the state in insuring the fertilizer industry oFertiphil did not sustain any damage because theburden imposed by the levy fell on the ultimateconsumer, not the seller Issues: 1. WON the issuance of LOI 1465 was an exercise of the police power of the state2. WON the levy was for a public purpose Ratio: 1. The imposition of the levy was a exercise of the taxationpower of the state. Both the power of taxation and policepower are inherent powers of the state. But each one isdistinct from the other police power is for the regulationof a behavior or conduct, while taxation is for revenuegeneration.While it is true that the power to tax can be usedas an implement of police power, the primary purpose of the levy was revenue generation. If the purpose isprimarily revenue, or if revenue is, at least, one of the realand substantial purposes, then the exaction is properlycalled a taxIn the present case, the imposition of Php10 per bag is too excessive to serve a mere regulatory purpose.Even if it was an exercise of the police power of the state, the LOI would still be invalid as it did not complywith the test of lawful subjects and lawful means.Specifically, that the interest of the public, generally,requires its exercise, and that the means employed arereasonably necessary for the accomplishment of thepurpose and not unduly oppressive upon individuals.2. An inherent limitation on the power of taxation is publicpurpose. Taxes are exacted for a purely public purpose,and thus cannot be used for purely private purposes or for the exclusive benefit of private persons.LOI 1465 is not for a public purpose. First, it isexpressly provided that the levy be imposed to benefit a privatecompany PPI. Second, the levy was conditional anddependent on PPI becoming financially viable. Third, the levieswere directly remitted and deposited in FEBTC, the bank of PPI, which used said remittances to pay of PPIs debts. All of these show that the purpose for the issuance of LOI 1465 wasto support a private company which clearly did not comply withthe public purpose requirement for the imposition of taxes Commissioner v. CA(Delegation to Admin Agency) Facts: 1. RA 7654 was enacted by Congress on June 10, 1993 and took effect July 3, 1993. It amended partly Sec. 142 (c)of the NIRC 3 2. Fortune Tobacco manufactured the following cigaretter brands: Hope, More and Champion. Prior to RA 7654,these 3 brands were considered local brands subjected toan ad valorem tax of 20 to 45%. Applying the amendmentand nothing else, (see footnote below) the 3 brandsshould fall under Sec 142 (c) (2) NIRC and be taxed at 20to 45%.3. However, on July 1, 1993, petitioner Commissioner of Internal Revenue issued Revenue MemorandumCircular37-93 which reclassified the 3 brands as locally manufactured cigarettes bearing a foreign brand subject tothe 55% ad valorem tax. The reclassification was before RA 7654 took effect. In effect, the memo circular subjected the 3 brands to the provisions of Sec 142 (c) (1) NIRC imposing upon these brands a rate of 55% instead of just 20 to 45%under Sec 142 (c) (2) NIRC.5. There was no notice and hearing. CIR argued that the memo circular was merely an interpretative ruling of theBIR which did not require notice and hearing. Issue:

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WON RMC 37-93 was valid and enforceable No; lack of notice and hearing violated due process required for promulgated rules. Moreover, it infringed on uniformity of taxation / equal protection since other local cigarettesbearing foreign brands had not been included within thescope of the memo circular. Ratio: 1. Contrary to petitioners contention, the memo was not amere interpretative rule but a legislative rule in the natureof subordinate legislation, designed to implement aprimary legislation by providing the details thereof.Promulgated legislative rules must be published.2. On the other hand, interpretative rules only provideguidelines to the law which the administrative agency is incharge of enforcing.3. BIR, in reclassifying the 3 brands and raising their applicable tax rate, did not simply interpret RA 7654 butlegislated under its quasi-legislative authority.4. BELLOSILLO separate opinion: the administrativeissuance was not quasi-legislative but quasi-judicial. Dueprocess should still be observed of course but use ----Ang Tibay v. CIR ================================ Lung Center v. QC (Prohibition Against Taxation of Religious, Charitable Entities and Educational Entities) Facts: Lung Center of the Philippines (both land and hospital)was assessed for tax purposes.In the middle of the lot is the hospital. A big space at theground floor is being leased to private parties, for canteen andsmall store spaces, and to medical or professional practitionerswho use the same as their private clinics for their patientswhom they charge for their professional services. The corner right side of Quezon Avenue and Elliptical Road, is beingleased for commercial purposes to Elliptical Orchids andGarden Center.The petitioner accepts paying and non-paying patients. Thepetitioner receives annual subsidies from the government.The institution filed a claim for exemption predicated on itsclaim that its a charitable institution.It averred that a minimum of 60% of its hospital beds areexclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The petitioner contends that it is a charitable institution and, as such, isexempt from real property taxes.Central Board of Assessment Appeals of Quezon City thinksotherwise: Before a patient is admitted for treatment in theCenter, first impression is that it is pay-patient and required topay a certain amount as deposit. That even if a patient is livingbelow the poverty line, he is charged with high hospital bills. Held: Portions of the land leased to private entities as well asthose parts of the hospital leased to private individuals are notexempt from such taxes. Portions of the land occupied by thehospital and portions of the hospital used for its patients,whether paying or non-paying, are exempt from real propertytaxes.Petitioner is a charitable institution within the context of the1973 and 1987 Constitutions. To determine whether anenterprise is a charitable institution/entity or not, the elementswhich should be considered include the statute creating theenterprise, its corporate purposes, its constitution and by-laws,the methods of administration, the nature of the actual workperformed, the character of the services rendered, theindefiniteness of the beneficiaries, and the use and occupationof the properties.In the legal sense, a charity may be fully defined as a gift, to beapplied consistently with existing laws, for the benefit of anindefinite number of persons, either by bringing their minds andhearts under the influence of education or religion, by assistingthem to establish themselves in life or otherwise lessening theburden of government. It may be applied to almost anythingthat tend to promote the well-doing and well-being of socialman. It embraces the improvement and promotion of thehappiness of man. The word "charitable" is not restricted torelief of the poor or sick. The test of a charity and a charitableorganization are in law the same. The test whether anenterprise is charitable or not is whether it exists to carry out apurpose reorganized in law as charitable or whether it ismaintained for gain, profit, or private advantage.Under P.D. No. 1823, the petitioner is a nonprofit and non-stock corporation which, subject to the provisions of thedecree, organized for the welfare and benefit of the Filipinopeople principally to help combat the high incidence of lungand pulmonary diseases in the Philippines

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The general purpose of its creation is to ease the burdenamong the Filipinos from contracting respiratory illnesseswhich are considered as among the most prevalent in thecountry.Hence, the medical services of the petitioner are to berendered to the public in general in any and all walks of lifeincluding those who are poor and the needy withoutdiscrimination.As a general principle, a charitable institution does not lose itscharacter as such and its exemption from taxes simplybecause it derives income from paying patients, or receivessubsidies from the government, so long as the money receivedis devoted or used altogether to the charitable object which it isintended to achieve; and no money inures to the private benefitof the persons managing or operating the institutionThe fundamental ground upon which all exemptions in favor of charitable institutions are based is the benefit conferred uponthe public by them, and a consequent relief, to some extent, of the burden upon the state to care for and advance the interestsof its citizens.20Subsidies are like a gift or donation of any other kind exceptthey come from the government. The crux is the presence or absence of material reciprocity.Therefore, the fact that subsidization of part of the cost of furnishing such housing is by the government rather thanprivate charitable contributions does not dictate the denial of acharitable exemption if the facts otherwise support such anexemption, as they do here.In this case, the petitioner adduced substantial evidence that itspent its income, including the subsidies from the governmentfor 1991 and 1992 for its patients and for the operation of thehospital. It even incurred a net loss in 1991 and 1992 from itsoperations.Even as we find that the petitioner is a charitable institution, wehold, that those portions of its real property that are leased toprivate entities are not exempt from real property taxes asthese are not actually, directly and exclusively used for charitable purposes.The settled rule in this jurisdiction is that laws grantingexemption from tax are construed strictissimi juris against thetaxpayer and liberally in favor of the taxing power. Hence, aclaim for exemption from tax payments must be clearly shownand based on language in the law too plain to be mistaken.Section 28(3), Article VI of the 1987 Philippine Constitutionprovides, thus:(3) Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries,and all lands, buildings, and improvements, actually, directlyand exclusively used for religious, charitable or educationalpurposes shall be exempt from taxation.32The tax exemption under this constitutional provision coversproperty taxes only.33 As Chief Justice Hilario G. Davide, Jr.,then a member of the 1986 Constitutional Commission,explained: ". . . what is exempted is not the institution itself . . .;those exempted from real estate taxes are lands, buildings andimprovements actually, directly and exclusively used for religious, charitable or educational purposes."34Under the 1973 and 1987 Constitutions and Rep. Act No. 7160in order to be entitled to the exemption, the petitioner isburdened to prove, by clear and unequivocal proof, that (a) it isa charitable institution; and (b) its real properties areACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is defined as possessed andenjoyed to the exclusion of others; debarred from participationor enjoyment; and "exclusively" is defined, "in a manner toexclude; as enjoying a privilege exclusively."40 If real propertyis used for one or more commercial purposes, it is notexclusively used for the exempted purposes but is subject totaxation.41 The words "dominant use" or "principal use" cannotbe substituted for the words "used exclusively" without doingviolence to the Constitutions and the law.42 Solely issynonymous with exclusively.43What is meant by actual, direct and exclusive use of theproperty for charitable purposes is the direct and immediateand actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes.44The petitioner failed to discharge its burden to prove that theentirety of its real property is actually, directly and exclusivelyused for charitable purposes. While portions of the hospital areused for the treatment of patients and the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being leased to private individuals for their clinics and a canteen. Further, a portion of the land is beingleased to a private individual for her business enterprise under the business name "Elliptical Orchids and Garden Center." Commissioner v. CA (KINDS OF TAXES:Privilege Tax) Facts:

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Atlas Consolidated Mining and DevelopmentCorporation (ACMDC) claims exception from theManufacturers tax since it uses the steel balls it manufacturesfor its purpose. Issue: WON ACMDC is liable for Manufacturers tax Held: No. ACMDC cannot be said to be engaged in the sale,barter or exchange of personal property and as such liableunder the Manufacturers tax.Manufacturers tax: SEC. 186. There shall be levied, assessedand collected once only on every original sale, barter,exchange, or similar transaction either for nominal or valuableconsideration, intended to transfer ownership of, or title to, thearticlesPrivilege taxes on business" are taxes imposed upon theprivilege of engaging in business. They are essentially excisetaxes. To be held liable for the payment of a privilege tax, theperson or entity must be engaged in business."To engage" is to embark on a business or to employ oneself therein. The word "engaged" connotes more than a single actor a single transaction; it involves some continuity of action."To engage in business" is uniformly construed as signifying anemployment or occupation which occupies one's time,attention, and labor for the purpose of a livelihood or profit. Theexpressions "engage in business," "carrying on business" or "doing business" do not have different meanings, butseparately or connectedly convey the idea of progression,continuity, or sustained activity. "Engaged in business" meansoccupied or employed in business; "carrying on business" doesnot mean the performance of a single disconnected act, butmeans conducting, prosecuting, and continuing business byperforming progressively all the acts normally incident thereto;while "doing business" conveys the idea of business beingdone, not from time to time, but all the time.The foregoing notwithstanding, it has likewise been ruled thatone act may be sufficient to constitute carrying on a businessaccording to the intent with which the act is done. A single saleof liquor by one who intends to continue selling is sufficient torender him liable for "engaging in or carrying on" the businessof a liquor dealer.There may be a business without any sequence of acts, for if an isolated transaction, which if repeated would be atransaction in a business, is proved to have been undertakenwith the intent that it should be the first of several transactions,that is, with the intent of carrying on a business, then it is a firsttransaction in an existing business.Under the tax code then in force, the 7% manufacturer's salestax is imposed on the manufacturer for every original sale,barter, exchange and other similar transaction intended totransfer ownership of articles.Thus, a manufacturer, in order to be subjected to the necessityof paying the percentage tax imposed by Section 186 of the taxcode, must be 'engaged' in the sale, barter or exchange of personal property. Under a statute which imposes a tax onpersons engaged in the sale, barter or exchange of merchandise, a person must be occupied or employed in thesale, barter or exchange of personal property. A person canhardly be considered as occupied or employed in the sale,barter or exchange of personal property when he has madeone purchase and sale only. In the case at bar, ACMDC claims exemptions from thepayment of manufacturer's tax. It asserts that it is not engagedin the business of selling grinding steel balls, but it onlyproduces grinding steel balls solely for its own use, or consumption. However, it admits having lent its grinding steelballs to other entities but only in very isolated cases.After a careful review of the records and on the basis of thelegal concept of "engaging in business" hereinbeforediscussed, we are inclined to agree with ACMDC that it shouldnot and cannot be held liable for the payment of themanufacturer's tax. 9.COMMISSIONER OF INTERNAL REVENUE V CA (298 SCRA 83) Topic: Tax exemptioncharitable institutions Facts: Young Mens Christian Association of the Philippines, Inc. (YMCA), a non-stock, non-profit institution, whichconducts various programs and activities that are beneficial to the public pursuant to its religious, educational, andcharitable objectives, is contesting the tax assessment made upon it by the Commissioner of Internal Revenue, citing Article VI, Section 28, paragraph 3 of the 1987 Constitution. Issue and Ruling:

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1. W/N YMCA is exempt from the payment of taxes.NO. What is exempted by Article VI, Section 28, paragraph 3 of the 1987 Constitution is not the institution itself; theexemption pertains only to property taxes. Moreover, Section 27 of the National Internal Revenue Code expressly disallows the exemption claimed by YMCA, as it mandates that the income of exempt organizations from any of theirproperties, real or personal, be subject to the tax imposed by the same Code. Thus, YMCA is exempt from the paymentof property tax, but not income tax on the rentals from its property. The bare allegation alone that it is a non-stock,non-profit educational institution is insufficient to justify its exemption from the payment of income tax. Notes: --A claim of statutory exemption from taxation should be manifest, and unmistakable from the language of the law on which it is based. 10. MARUBENI CORPORATION V COMMISSIONER OF INTERNAL REVENUE (177 SCRA500) Topic: Tax on dividends remitted to foreign corporations Facts: Marubeni Corporation is a Japanese corporation licensed to engage in business in the Philippines.When the profitson Marubenis investments in Atlantic Gulf and Pacific Co. of Manila were declared, a 10% final dividend tax was withheld from it, and another 15% profit remittance tax based on the remittable amount after the final 10% withholding tax were paid to the Bureau of Internal Revenue. Marubeni Corp. now claims for a refund or tax credit forthe amount which it has allegedly overpaid the BIR. STEPHANIE LUZETTE M. MACAPAGAL Issues and Ruling: 1. W/N the dividends Marubeni Corporation received from Atlantic Gulf and Pacific Co. are effectively connected with its conduct or business in the Philippines as to be considered branch profits subject to 15%profit remittance tax imposed under Section 24(b)(2) of the National Internal Revenue Code.NO. Pursuant to Section 24(b)(2) of the Tax Code, as amended, only profits remitted abroad by a branch office to itshead office which are effectively connected with its trade or business in the Philippines are subject to the 15% profitremittance tax. The dividends received by Marubeni Corporation from Atlantic Gulf and Pacific Co. are not incomearising from the business activity in which Marubeni Corporation is engaged. Accordingly, said dividends if remittedabroad are not considered branch profits for purposes of the 15% profit remittance tax imposed by Section 24(b)(2) of the Tax Code, as amended.2. Whether Marubeni Corporation is a resident or non-resident foreign corporation.Marubeni Corporation is a non-resident foreign corporation, with respect to the transaction. Marubeni Corporationshead office in Japan is a separate and distinct income taxpayer from the branch in the Philippines. The investment on Atlantic Gulf and Pacific Co. was made for purposes peculiarly germane to the conduct of the corporate affairs of Marubeni Corporation in Japan, but certainly not of the branch in the Philippines.3. At what rate should Marubeni be taxed?15%. The applicable provision of the Tax Code is Section 24(b)(1)(iii) in conjunction with the Philippine-Japan TaxTreaty of 1980. As a general rule, it is taxed 35% of its gross income from all sources within the Philippines. However,a discounted rate of 15% is given to Marubeni Corporation on dividends received from Atlantic Gulf and Pacific Co. onthe condition that Japan, its domicile state, extends in favor of Marubeni Corporation a tax credit of not less than20% of the dividends received. This 15% tax rate imposed on the dividends received under Section 24(b)(1)(iii) iseasily within the maximum ceiling of 25% of the gross amount of the dividends as decreed in Article 10(2)(b) of theTax Treaty. Notes: Each tax has a different tax basis.Under the Philippine-Japan Tax Convention, the 25% rate fixed is the maximum rate, as reflected in the phrase shallnot exceed. This means that any tax imposable by the contracting state concerned should not exceed the 25%limitation and said rate would apply only if the tax imposed by our laws exceeds the same. 4. Commissioner vs. Algue, GR L-28890, 17 February 1988

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Facts: The Philippine Sugar Estate Development Company (PSEDC) appointed AlgueInc. as its agent, authorizing it to sell its land, factories, and oil manufacturing process.The Vegetable Oil Investment Corporation (VOICP) purchased PSEDC properties. For the sale, Algue received a commission of P125,000 and it was from this commissionthat it paid Guevara, et. al. organizers of the VOICP, P75,000 in promotional fees. In1965, Algue received an assessment from the Commissioner of Internal Revenue in theamount of P83,183.85 as delinquency income tax for years 1958 amd 1959. Algue fileda protest or request for reconsideration which was not acted upon by the Bureau of Internal Revenue (BIR). The counsel for Algue had to accept the warrant of distrant andlevy. Algue, however, filed a petition for review with the Court of Tax Appeals. Issue: Is the Collector of the Internal Revue correct in disallowing the P75,000deduction claimed by Algue as a legitimate business expense on account that it was notan ordinary, reasonable and necessary expense? RULING: No. The Supreme Court ruled in favor of the CTA and Algue. The amount inquestion is a legitimate business expense. The burden on the part of the tax payer toprove that said expenses were necessary and reasonable were satisfactorily compliedwith. With this in mind, the court expounded on the purpose and rationale of taxation,Tax collection should be made in accordance with law as any arbitrariness willnegate the very reason for government itself. For all the awesome power of the taxcollector, he may still be stopped in his tracks if the taxpayer can demonstrate that thelaw has not been observed. Herein, the claimed deduction (pursuant to Section 30 [a][1] of the Tax Code and Section 70 [1] of Revenue Regulation 2: as to compensation for personal services) had been legitimately by Algue Inc. It has further proven that thepayment of fees was reasonable and necessary in light of the efforts exerted by thepayees in inducing investors (in VOICP) to involve themselves in an experimentalenterprise or a business requiring millions of pesos 13. Ernesto M. Maceda, vs. Hon. Catalino Macaraig, Jr., G.R. No. 88291 May 31,1991 Facts: Commonwealth Act 120 created NAPOCOR as a public corporation to undertakethe development of hydraulic power and the production of power from other sources.RA 358 (1949) granted NAPOCOR tax and duty exemption privileges. RA 6395 (1971)revised the charter of the NAPOCOR, tasking it to carry out the policy of the national electrification, and provided in detail NAPOCORs tax exceptions. PD 380 (1974) specified that NAPOCORs exemption includes all taxes, etc. imposed directly or indirectly.PD 938 integrated the exemptions in favor of GOCCs including their subsidiaries;however, empowering the President or the Minister of Finance, upon recommendation of the Fiscal Incentives Review Board (FIRB) to restore, partially or completely, the exemptions withdrawn or revised . The FIRB issued Resolution10-85 (7 February 1985) restoring the duty and tax exemptions privileges of NAPOCORfor period 11 June 1984- 30 June 1985. Resolution 1-86 (1January 1986) restored suchexemption indefinitely effective 1 July 1985. EO 93 (1987) again withdrew theexemption. FIRB issued Resolution 17-87 (24 June 1987) restoring NAPOCORs exemption, which was approved by the President on 5 October 1987.Since 1976, oil firms never paid excise or specific and ad valorem taxes for petroleum products sold and delivered to NAPOCOR. Oil companies started to payspecific and ad valorem taxes on their sales of oil products to NAPOCOR only in 1984. NAPOCOR claimed for a refund (P468.58 million). Only portion thereof,corresponding to Caltex, was approved and released by way of a tax credit memo. Theclaim for refund of taxes paid by PetroPhil, Shell and Caltex amounting to P410.58million was denied. NAPOCOR moved for reconsideration, starting that all deliveries of petroleum products to NAPOCOR are tax exempt, regardless of the period of delivery. ISSUE: Whether or not NPC is exempted from paying indirect tax.Ruling: The NPC is exempted to pay indirect taxes. The court distinguish direct tax fromindirect tax. a. Direct Taxthat where the person supposed to pay the tax really paysit WITHOUT transferring the burden to someone else.

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b. Indirect Taxthat where the tax is imposed upon goods BEFORE reaching the consumer who ultimately pays for it, not as a tax, but as a partof the purchase price. The main thrust of the petition is that under the latest amendment to the NPCcharter by Presidential Decree No. 938, the exemption of NPC from indirect taxationwas revoked and repealed. The exemption of NPC from payment of taxes under PD 938 was expressed in general term ALL FORMS OF TAXES wherein there is a deletion of the phrases "directly or indirectly" which is stated under Presidential Decree No. 380 that is repealed and amended by PD 938.The use of the phrase "all forms" of taxes demonstrate the intention of the law to give NPC all the tax exemptions it has been enjoying before. The rationale for this exemption is that being non-profit public corporation created for the general good and welfare wholly owned by the government of the Republic of the Philippines the NPC" shall devote all its returns from its capital investment as well as excess revenues from its operation, for expansion to enable the Corporation to pay the indebtedness and obligations amounting to P12 Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign loans at any one time, as of PD 938. The NPC must be and has to be exempt from all forms of taxes if this goal is to be achieved. RULING: The Board Order authorizing the proceeds generated by the increase to bedeposited to the OPSF is not an act of taxation. It is authorized by Presidential DecreeNo. 1956, as amended by Executive Order No. 137, as follows:SECTION 8. There is hereby created a Trust Account in the books of accounts of theMinistry of Energy to be designated as Oil Price Stabilization Fund (OPSF) for thepurpose of minimizing frequent price changes brought about by exchange rateadjustments and/or changes in world market prices of crude oil and imported petroleumproducts. xxxEvidently, authorities have been unable to collect enough taxes necessary to replenish the OPSF as provided by Presidential Decree No. 1956, and hence, there was no available alternative but to hike existing prices. The OPSF, as the Court held in the a forecited CACP cases, must not be understood to be a funding designed to guarantee oil firms' profits although as a subsidy, or a trust account, the Court has no doubt that oil firms make money from it. As we held there, however, the OPSF was established precisely to protect the consuming public from the erratic movement of oil prices and to preclude oil companies from taking advantage of fluctuations occurring every so often. As a buffer mechanism, it stabilizes domestic prices by bringing about a uniform rate rather than leaving pricing to thecaprices of the market. In all likelihood, therefore, an oil hike would have probably been imminent, with or without trouble in the Gulf, although trouble would have probably aggravated it.: nad (13) Maceda vs. Macaraig, G.R. No. 88291 May 31, 1991 As to the the principle of non-delegation of taxation power: E.O. No. 93 is complete in itself and constitutes a valid delegation of legislative power to the FIRB and as above discussed, the tax exemption privilege that was restored to NPC by FIRB Resolution No. 17-87 of June 1987 includes exemption from indirect taxes and duties on petroleum products used in its operation which was issued pursuant thereto, as it was duly approved by the President as required by said executive order through the respondent Executive Secretary. Moreover, under Section 3, Article XVIII of the Transitory Provisions of the 1987Constitution, it is provided that: All existing laws, decrees, executive orders, proclamation, letters of instructions, and other executive issuances not inconsistent with thisconstitution shall remain operative until amended, repealed or revoked. (13) Maceda vs. Macaraig, G.R. No. 88291 May 31, 1991 As to the issue on the institution of a Taxpayers Suit In resolving the third issue, in the petition it is alleged that petitioner is "instituting this suit in his capacity as a taxpayer and a duly-elected Senator of the Philippines."Public respondent argues that petitioner must show he has sustained direct injury as a result of the action and that it is not sufficient for him to have a mere general interest common to all members of the public. The Court however agrees with the petitioner that as a taxpayer he may file the instant petition following the ruling in Lozada when it involves illegal expenditure of public money. The petition questions the legality of the tax refund to NPC by way of taxcredit certificates and the use of said assigned tax credits by respondent oil companies to pay for their tax and duty liabilities to the BIR

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and Bureau of Customs. Assuming petitioner has the personality to file the petition, public respondentsalso allege that the proper remedy for petitioner is an appeal to the Court of Tax Appeals under Section 7 of R.A. No. 125 instead of this petition. However Section 11 of said law provides Sec. 11. Who may appeal; effect of appeal Any person, association or corporationadversely affected by a decision or ruling of the Commissioner of Internal Revenue, theCollector of Customs (Commissioner of Customs) or any provincial or City Board of Assessment Appeals may file an appeal in the Court of Tax Appeals within thirty daysafter receipt of such decision or ruling.From the foregoing, it is only the taxpayer adversely affected by a decision or ruling of the Commissioner of Internal Revenue, the Commissioner of Customs or anyprovincial or city Board of Assessment Appeal who may appeal to the Court of Tax Appeals. Petitioner does not fall under this category ================= Mactan Cebu International Airport Authority vs. Marcos G.R. No. 120082, September 11, 1996 Facts: Petitioner was created by virtue of RA6958, mandated to "principally undertake the economical, efficient and effective control, management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City. Under Section 1: The authority shall be exempt from realty taxes imposed by the National Government or any of its political subdivisions, agencies and instrumentalities. However, the Officer of the Treasurer of Cebu City demanded payment for realty taxes on parcels of land belonging to petitioner. Petitioner objected invoking its tax exemption. It also asserted that it is an instrumentality of the government performing governmental functions, citing section 133 of the Local Government Code which puts limitations on the taxing powers of LGUs. The city refused insisting that petitioner is a Government Owned and Controlled Corporation performing proprietary functions whose tax exemption was withdrawn by Sections 193 and 234 of the Local Government Code. Petitioner filed a declaratory relief before the Regional Trial Court. The trial court dismissed the petitioner ruling that the Local Government Code withdrew the tax exemption granted the Government Owned and Controlled Corporations. Issue: WON the City of Cebu has the power to impose taxes on petitioner. RULING: Yes. As a general rule, the power to tax is an incident of sovereignty and isunlimited in its range, acknowledging in its very nature no limits, so that security againstits abuse is to be found only in the responsibility of the legislature which imposes the taxon the constituency who are to pay it. Since taxes are what we pay for civilized society,or are the lifeblood of the nation, the law frowns against exemptions from taxation andstatutes granting tax exemptions are thus construed strictissimi juris against thetaxpayers and liberally in favor of the taxing authority. A claim of exemption from taxpayment must be clearly shown and based on language in the law too plain to bemistaken.There can be no question that under Section 14 RA 6958 the petitioner is exemptfrom the payment of realty taxes imposed by the National Government or any of itspolitical subdivisions, agencies, and instrumentalities. Nevertheless, since taxation isthe rule and exemption is the exception, the exemption may thus be withdrawn at thepleasure of the taxing authority.The Local Government Code, enacted pursuant to Section 3, Article X of theconstitution provides for the exercise by Local Government Units of their power to tax,the scope thereof or its limitations, and the exemption from taxation. Section 133 of theLocal Government Code prescribes the common limitations on the taxing powers of Local Government Units. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registeredunder R.A. No. 6938, non stock and non-profit hospitals and educational institutions,and unless otherwise provided in the LGC. The latter proviso could refer to Section 234,which enumerates the properties exempt from real property tax. But the last paragraphof Section 234 further qualifies the retention of the exemption in so far as the realproperty taxes are concerned by limiting the retention only to those enumerated there-in; all others not included in the enumeration lost the privilege upon the effectivity of theLGC.

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