UPDATES IN TAXATION LAW

(Significant Laws, Regulations, Circulars and Supreme Court Decisions

for the period January 2010 to February 2012)

By:
Jason R. Barlis
Head of the Department of Commercial Laws and Taxation,
Saint Louis University School of Law, Baguio City
Bar Reviewer in Commercial Laws and Taxation, Albano Bar Review Center and
ChanRobles Internet Bar Review


GENERAL PRINCIPLES

The power of taxation

CREBA v. Executive Secretary Romulo, GR No. 160756, 09 March 2010

Taxation is an inherent attribute of sovereignty. It is a power that is purely legislative.
Essentially, this means that in the legislature primarily lies the discretion to determine the
nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of
taxation. It has the authority to prescribe a certain tax at a specific rate for a particular
public purpose on persons or things within its jurisdiction. In other words, the legislature
wields the power to define what tax shall be imposed, why it should be imposed, how
much tax shall be imposed, against whom (or what) it shall be imposed and where it
shall be imposed.

As a general rule, the power to tax is plenary and unlimited in its range, acknowledging
in its very nature no limits, so that the principal check against its abuse is to be found
only in the responsibility of the legislature (which imposes the tax) to its constituency
who are to pay it.

Nevertheless, it is circumscribed by constitutional limitations. At the
same time, like any other statute, tax legislation carries a presumption of
constitutionality.


Equal Protection Clause

Commissioner of Customs v. Hypermix Feeds Corporation, G.R. No. 179579, 01
February 2012

Facts: The Commissioner of Customs issued CMO 27-2003 which provides that for tariff
purposes, wheat was classified according to the following: (1) importer or consignee; (2)
country of origin; and (3) port of discharge. The regulation provided an exclusive list of
corporations, ports of discharge, commodity descriptions and countries of origin.
Depending on these factors, wheat would be classified either as food grade or feed
grade. The corresponding tariff for food grade wheat was 3%, for feed grade, 7%.

Taxpayer questioned the validity of the CMO before the Regional Trial Court on the
ground, among others, that it violates equal protection clause.

Issue: Is the CMO valid?

Ruling: The CMO is invalid for being violative of the equal protection clause.

The equal protection clause means that no person or class of persons shall be deprived
of the same protection of laws enjoyed by other persons or other classes in the same
place in like circumstances. Thus, the guarantee of the equal protection of laws is not
violated if there is a reasonable classification. For a classification to be reasonable, it
must be shown that (1) it rests on substantial distinctions; (2) it is germane to the
purpose of the law; (3) it is not limited to existing conditions only; and (4) it applies
equally to all members of the same class.

Unfortunately, CMO 27-2003 does not meet these requirements. There is no connection
between the purpose of the law which is to determine the quality of wheat (whether
food grade or feed grade), with the standards used--who imports it, where it is
discharged, or which country it came from.
Thus, on the one hand, even if other millers excluded from CMO 27-2003 have imported
food grade wheat, the product would still be declared as feed grade wheat, a
classification subjecting them to 7% tariff. On the other hand, even if the importers listed
under CMO 27-2003 have imported feed grade wheat, they would only be made to pay
3% tariff, thus depriving the state of the taxes due. The regulation, therefore, does not
become disadvantageous to respondent only, but even to the state.


Tax v. Toll

Diaz v. Secretary of Finance, G.R. No. 193007, 19 July 2011

Issue: Is a toll fee a users tax? Is the VAT imposed on toll fees tantamount to taxing a
tax?

Ruling: Toll fees paid by the public to tollway operators for use of the tollways, are not
taxes in any sense. A tax is imposed under the taxing power of the government
principally for the purpose of raising revenues to fund public expenditures. Toll fees, on
the other hand, are collected by private tollway operators as reimbursement for the costs
and expenses incurred in the construction, maintenance and operation of the tollways,
as well as to assure them a reasonable margin of income. Although toll fees are charged
for the use of public facilities, therefore, they are not government exactions that can be
properly treated as a tax. Taxes may be imposed only by the government under its
sovereign authority, toll fees may be demanded by either the government or private
individuals or entities, as an attribute of ownership.

The VAT on tollway operations is not really a tax on the tollway user, but on the tollway
operator. Under the NIRC, VAT is imposed on any person who, in the course of trade or
business, sells or renders services for a fee. In other words, the seller of services, who in
this case is the tollway operator, is the person liable for VAT. The latter merely shifts the
burden of VAT to the tollway user as part of the toll fees. For this reason, VAT on
tollway operations cannot be a tax on tax even if toll fees were deemed as a users tax.
VAT is assessed against the tollway operators gross receipts and not necessarily on the
toll fees. Although the tollway operator may shift the VAT burden to the tollway user, it
will not make the latter directly liable for the VAT. The shifted VAT burden simply
becomes part of the toll fees that one has to pay in order to use the tollways.

Second Issue: Is the imposition of the VAT on toll fee impractical and incapable of
implementation; thus, it is void for being not administratively feasible?

Ruling: Administrative feasibility is one of the canons of a sound tax system. It simply
means that the tax system should be capable of being effectively administered and
enforced with the least inconvenience to the taxpayer. Non-observance of the canon,
however, will not render a tax imposition invalid except to the extent that specific
constitutional or statutory limitations are impaired. Thus, even if the imposition of VAT
on tollway operations may seem burdensome to implement, it is not necessarily invalid
unless some aspect of it is shown to violate any law or the Constitution.



INCOME TAX

What constitutes income

CIR v. Filinvest Development Corporation, G.R. No. 163653, 19 July 2011

Facts: FDC extended advances to its various affiliates to finance their business
activities. It appears that in order to generate funds for the advances, FDC resorted to
interest-bearing fund borrowings from commercial banks, for which FDC paid
considerable interest expenses. The CIR theorizes that theoretical interest income may
be imputed on these advances FDC extended to its affiliates. The CIR maintains that he
is vested with the power to allocate, distribute or apportion income or deductions
between or among controlled organizations, trades or businesses even in the absence of
fraud, since said power is intended to prevent evasion of taxes or clearly to reflect the
income of any such organizations, trades or businesses.

Issue: Does the CIR possess the power to impute theoretical interest on the income of
FDC?

Ruling: The term gross income is understood to mean all income from whatever
source derived, including, but not limited to the following items: compensation for
services, including fees, commissions, and similar items; gross income derived from
business; gains derived from dealings in property; interest; rents; royalties; dividends;
annuities; prizes and winnings; pensions; and partners distributive share of the gross
income of general professional partnership. While it has been held that the phrase "from
whatever source derived" indicates a legislative policy to include all income not
expressly exempted within the class of taxable income under our laws, the term
"income" has been variously interpreted to mean "cash received or its
equivalent", "the amount of money coming to a person within a specific time" or
"something distinct from principal or capital." Otherwise stated, there must be
proof of the actual or, at the very least, probable receipt or realization by the
controlled taxpayer of the item of gross income sought to be distributed, apportioned or
allocated by the CIR.

Even if we were, therefore, to accord precipitate credulity to the CIR's bare assertion that
FDC had deducted substantial interest expense from its gross income, there would still
be no factual basis for the imputation of theoretical interests on the subject advances
and assess deficiency income taxes thereon. More so, when it is borne in mind that,
pursuant to Article 1956 of the Civil Code of the Philippines, no interest shall be due
unless it has been expressly stipulated in writing. Considering that taxes, being
burdens, are not to be presumed beyond what the applicable statute expressly and
clearly declares, the rule is likewise settled that tax statutes must be construed strictly
against the government and liberally in favor of the taxpayer. Accordingly, the general
rule of requiring adherence to the letter in construing statutes applies with peculiar
strictness to tax laws and the provisions of a taxing act are not to be extended by
implication. While it is true that taxes are the lifeblood of the government, it has been
held that their assessment and collection should be in accordance with law as any
arbitrariness will negate the very reason for government itself.



Tax-Free Exchange

CIR v. Filinvest Development Corporation, G.R. No. 163653, 19 July 2011

Facts: FDC owns 80% of FAI and 67.42% of FLI. FDC and FAI entered into an
agreement with FLI that FDC and FAI will transfer lands to FLI, and the FLI, in turn, will
issue shares of stocks to FDC and FAI. Prior to this transaction, FAI is not a
shareholder of FLI. However, after the transaction, FDCs ownership in FLI was
reduced to 61.03% (from 67.42%), while FAI became the owner of 9.96% of FLI. The
CIR assessed FDC of income tax arising from the transfer of property because it
allegedly did not qualify as a tax-free exchange under the provisions of Section 40 (c)(2)
of the NIRC (previously Section 34(c)(2)).

Issue: Is the transaction qualified as an income tax-free exchange (no gain or loss to be
recognized) even if FDCs shareholdings in FLI decreased after the transaction?

Ruling: The paucity of merit in the CIR's position is evident from the categorical language
of Section 34 (c) (2) of the 1993 NIRC (now Section 40(c)(2)) which provides that gain or
loss will not be recognized in case the exchange of property for stocks results in the
control of the transferee by the transferor, alone or with other transferors not exceeding
four persons. Rather than isolating the same as proposed by the CIR, FDC's 61.03%
control of FLI's outstanding shares should, therefore, be appreciated in combination with
the new shares issued to FAI which represents 9.96% control of said transferee
corporation. Together FDC's shares (61.03%) and FAI's shares (9.96%) clearly add up
to 70.99% of FLI's shares. Since the term "control" is clearly defined as "ownership of
stocks in a corporation possessing at least fifty-one percent of the total voting power of
classes of stocks entitled to one vote", the exchange of property for stocks between
FDC, FAI and FLI clearly qualify as a tax-free transaction.



Capital Gains Tax

Revenue Memorandum Circular No. 55-2011

The reckoning period of the liability for capital gains tax or CWT and DST on the
foreclosure sale of real estate mortgage is from the date of registration of the sale in
the Office of the Register of Deeds.

Thus, ordinarily, when there is an extrajudicial foreclosure sale of a property mortgaged,
the mortgagor still has a one year period from the registration of the Certificate of Sale to
redeem the property. Consequently, the liability for capital gains tax will attach only
once the period of redemption expires, and not from the moment of public auction sale of
the property.

However, taking into consideration the right of redemption of juridical persons in an
extrajudicial foreclosure under Section 47 of RA No. 8791 (The General Banking Law of
2000) which provides that the right of redemption will be until, but not after, the
registration of the certificate of foreclosure sale with the applicable Register of Deeds,
which in no case will be more than 3 months after foreclosure, whichever is earlier, the
liability for capital gains tax will be reckoned from the date of approval by the executive
judge of the Certificate of Sale.


Supreme Transliner Inc. v. BPI Family Savings Bank, G.R. No. 165617, 25 February
2011

If the period of redemption has not yet lapsed, but the mortgagee paid the capital gains
tax, the same should not be shouldered by the mortgagee as part of the redemption
price. This is because in a foreclosure sale, there is no actual transfer of the mortgaged
real property until after the expiration of the one-year redemption period as provided in
Act No. 3135 and title thereto is consolidated in the name of the mortgagee in case of
non-redemption. In the interim, the mortgagor is given the option whether or not to
redeem the real property. The issuance of the Certificate of Sale does not by itself
transfer ownership; hence, no liability for capital gains tax attaches.


Withholding Tax

RCBC v. CIR, G.R. No. 170257, 07 September 2011

Query: Can an income earner, whose earnings are subject to final withholding tax at
source, be liable for such tax if the payor failed to withhold the tax on such income?

Answer: Yes. In a withholding tax system, the liability of the withholding agent is
independent from that of the taxpayer. The withholding agent may be made liable due to
his failure to perform his duty to withhold the tax and remit the same to the government.
The liability for the tax, however, remains with the taxpayer because the gain was
realized and received by him. While the payor can be held accountable for its
negligence in performing its duty to withhold the amount of tax due on the transaction,
the taxpayer which earned the income remains liable for the payment of tax as the
taxpayer shares the responsibility of making certain that the tax is properly withheld by
the withholding agent, so as to avoid any penalty that may arise from the non-payment
of the withholding tax due. Taxpayer cannot evade its liability for by shifting the blame
on the payor as the withholding agent.

(Note: The RCBC case, although decided in 2011, involved withholding transactions
during the years 1994 and 1995. However, the present rule is found in Section
2.57(A) of Revenue Regulations No. 2-98 which states: (A) Final
Withholding Tax. -- Under the final withholding tax system the amount of
income tax withheld by the withholding agent is constituted as a full and final
payment of the income tax due from the payee on the said income. The
liability for payment of the tax rests primarily on the payor as a
withholding agent. Thus, in case of his failure to withhold the tax or
in case of under withholding, the deficiency tax shall be collected
from the payor/withholding agent. The payee is not required to file an
income tax return for the particular income.)


Exclusions from Gross Income

RMC 27-2011

CIR ruled that PAG-IBIG, GSIS and SSS contributions in excess of the mandatory
monthly contribution required by law are considered as investments; hence, should not
be excluded from gross income.


Irrevocability of an option to carry-over the excess quarterly income tax

CIR v. Mirant (Philippines) Operations Corporation, G.R. No. 171742, 15 June 2011
CIR v. PL Management International Philippines, Inc., G.R No. 160949, April 4,
2011.

Once a corporation exercises the option to carry-over and apply the excess quarterly
income tax against the tax due for the taxable quarters of the succeeding taxable years,
such option is irrevocable for that taxable period. Having chosen to carry-over the
excess quarterly income tax, the corporation cannot thereafter choose to apply for a
cash refund or for the issuance of a tax credit certificate for the amount representing
such overpayment.


De Minimis Benefits

Revenue Regulations 5-2011

The list of de minimis benefits has been revised under Revenue Regulations 5-2011 to
the following:

(a) Monetized unused vacation leave credits of private employees not exceeding 10
days during the year
(b) Monetized value of vacation and sick leave credits paid to government officials
and employees;
(c) Medical cash allowance to dependents of employees not exceeding P750.00 per
employee per semester or P125 per month;
(d) Rice subsidy of P1,500.00 or one (1) sack of 50-kg rice per month amounting to
not more than P1,500.00;
(e) Uniforms and clothing allowance not exceeding P4,000 per annum (Note: Under
Revenue Regulations 8-2012, this has been increased to P5,000.00 per annum);
(f) Actual medical assistance, e.g. medical allowance to cover medical and
healthcare needs, annual medical/executive check-up, maternity assistance, and
routine consultations, not exceeding P10,000 per annum;
(g) Laundry allowance not exceeding P300 per month;
(h) Employees achievement awards, e.g., for length of service or safety
achievement, which must be in the form of a tangible personal property other
than cash or gift certificate, with an annual monetary value not exceeding
P10,000.00 received by the employee under an established written plan which
does not discriminate in favor of highly paid employees;
(i) Gifts given during Christmas and major anniversary celebrations not exceeding
P5,000 per employee per annum; and
(j) Daily meal allowance for overtime work and night/graveyard shift not exceeding
25% of the basic minimum wage.

Notes: It appears now that the above enumeration is exclusive. The regulation
now contains the following: all other benefits which do not fall in the above
enumeration shall not be considered as de minimis which is not found in the
past regulations.

The previous inclusion of flowers, fruits, books and similar items of small value given to
employees during special circumstances was removed from the list.

Daily meal allowance not exceeding 25% of the minimum wage is now considered de
minimis benefits under any of the two situations on account of overtime work and if
given to employees on night/graveyard shift.


Validity of the MCIT

CREBA v. Executive Secretary Romulo, GR No. 160756, 09 March 2010

Queries: If a law imposes an income tax upon capital, is the law valid? What about if
the income tax is imposed upon gross receipts or gross income, is it valid? Is the
imposition of an MCIT (minimum corporate income tax) violative of due process?

Answers:

Certainly, an income tax is arbitrary and confiscatory if it taxes capital because capital is
not income. In other words, it is income, not capital, which is subject to income tax.

On the other hand, statutes taxing the gross "receipts," "earnings," or "income" of
particular corporations are found in many jurisdictions. Tax thereon is generally held to
be within the power of a state to impose; or constitutional, unless it interferes with
interstate commerce or violates the requirement as to uniformity of taxation

The MCIT is not a tax on the capital. The MCIT is imposed on gross income which is
arrived at by deducting the capital spent by a corporation in the sale of its goods, i.e., the
cost of goods and other direct expenses from gross sales. Clearly, the capital is not
being taxed.

Furthermore, the MCIT is not an additional tax imposition. It is imposed in lieu of the
normal net income tax, and only if the normal income tax is suspiciously low. The MCIT
merely approximates the amount of net income tax due from a corporation, pegging the
rate at a very much reduced 2% and uses as the base the corporations gross income.
Besides, there is no legal objection to a broader tax base or taxable income by
eliminating all deductible items and at the same time reducing the applicable tax rate.


Power of the Commissioner to Revalue Properties

CIR v. Aquafresh Seafoods, Inc., G.R. No. 170389, 20 October 2010.

While the CIR, under Section 6(E) of the NIRC, has the authority to prescribe real
property values and divide the Philippines into zones, the law is clear that the same has
to be done upon consultation with competent appraisers both from the public and
private sectors. It is undisputed that at the time of the sale of the subject properties
were classified as "RR," or residential, based on the 1995 Revised Zonal Value of Real
Properties. The CIR, thus, cannot unilaterally change the zonal valuation of such
properties to "commercial" without first conducting a re-evaluation of the zonal values as
mandated under Section 6(E) of the NIRC.
The act of re-classifying the subject properties from residential to commercial cannot be
done without first complying with the procedures prescribed by law. It bears to stress
that ALL the properties in Barrio Banica were classified as residential, under the 1995
Revised Zonal Values of Real Properties. Thus, petitioner's act of classifying the subject
properties involves a re-classification and revision of the prescribed zonal values.

Moreover, even assuming arguendo that the subject properties were used for
commercial purposes, the same remains to be residential for zonal value purposes. It
appears that actual use is not considered for zonal valuation, but the predominant
use of other classification of properties located in the zone. Again, it is undisputed that
the entire Barrio Banica has been classified as residential.

South African Airways v. CIR, GR No. 180356, February 16, 2010
A foreign airline carrier has no landing rights in the Philippines but is selling tickets here.
Is the airline subject to Philippine income taxes? How will it be taxed?

A foreign airline carrier which is selling tickets in the Philippines is classified for
income tax purposes as a resident foreign corporation. Since it cannot be subjected
to the gross Philippine billings tax as it doesnt have landing rights in the Philippines,
then, the general rule on liability of resident foreign corporations shall apply, in that
its taxable income from within the Philippines shall be subject to the normal tax of
30%. (South African Airways v. CIR, GR No. 180356, February 16, 2010)


VALUE ADDED TAX

Revenue Regulations 16-2011:

Beginning 01 January 2012

(a) The threshold amount to be liable for VAT was adjusted to Php1,919,500 annual
gross sales/receipts (Previously Php1,500,00.00)
(b) Sale of real properties held primarily for sale to customers or held for lease in
the ordinary course of trade or business of the seller shall be subject to VAT if
the gross selling price exceeds P1,919,500.00 (for residential lots) and
P3,199,200.00 (for residential house and lot or other residential dwellings)
Note: Previously, the amounts were Php1,500,000 and Php2,500,000
respectively)
(c) Sale of services shall also be subject to VAT only if the gross annual
sales/receipts exceed Php1,919,500
(d) Lease of residential units with a monthly rental per unit not exceeding Twelve
Thousand Eight Hundred Pesos (P12,800.00) shall be exempt from VAT (this
was previously Php10,000 per month)


Revenue Regulations 10-2011:

Clarifying the liability for VAT on certain transactions:

No output tax shall be imposed on goods or properties which are originally intended for
sale or for use in the course of business existing as of the occurrence of the following:
1. Change of control of a corporation by acquisition of the controlling interest of
such corporation by another stockholder (individual or corporate) or group of
stockholders. The goods or properties used in business (including those held for
lease) or those comprising the stock in trade of the corporation having a change
in corporate control will not be considered sold, bartered, or exchanged despite
the change of ownership in the said corporation. However, the exchange of
goods or properties, including the real estate properties used in business or held
for sale or for lease by the transferor, for shares of stocks, whether resulting in
corporate control or not, is subject to VAT
Example: X Corporation is engaged in selling goods. Y Corporation, a real
estate developer, exchanged its real properties for shares of stocks of X
Corporation, resulting in Y Corporation gaining control of X Corporation. The
inventory of goods of X Corporation is NOT subject to VAT, but the exchange of
real properties of Y Corporation for the shares of X Corporation shall be subject
to VAT.
2. Change in trade or corporate name of the business
3. Merger or consolidation of corporations


Southern Philippines Power Corporation v. CIR, G.R. No. 179632, 19 October 2011

What are the requirements for a VAT refund or credit under Section 112(A) of the NIRC?

The requirements are:
a) The taxpayer is VAT-registered;
b) The taxpayer is engaged in zero-rated or effectively zero-rated sales;
c) The input taxes are due or paid;
d) The input taxes are not transitional input taxes;
e) The input taxes have not been applied against output taxes during and
in the succeeding quarters;
f) The input taxes claimed are attributable to zero-rated or effectively
zero-rated sales;
g) For zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and
108(B)(1) and (2), the acceptable foreign currency exchange proceeds
have been duly accounted for in accordance with BSP rules and
regulations;
h) Where there are both zero-rated or effectively zero-rated sales and
taxable or exempt sales, and the input taxes cannot be directly and
entirely attributable to any of these sales, the input taxes shall be
proportionately allocated on the basis of sales volume; and
i) The claim is filed within two years after the close of the taxable quarter
when such sales were made. (citing San Roque Power Corporation v.
CIR, G.R. No. 180345, November 25, 2009, 605 SCRA 536, 555.)

Query: Is the printing of the words ZERO-RATED on the official receipt required prior to
a claim for a VAT refund even if the same already appears on the VAT invoice?

Ruling: Prior to R.A. 9337, the input tax subject of tax refund is to be evidenced by a
VAT invoice or official receipt. Thus, the indication of the words zero-rated on the
VAT invoice is already sufficient. (See also: AT&T Communications Services Phil.,
Inc. v. Commissioner of Internal Revenue, G.R. No. 182364 dated August 3, 2010.)


HOWEVER

After R.A. 9337, the indication of the words zero-rated on the receipt is necessary.

(See: Microsoft Phil., Inc. v. Commissioner of Internal Revenue, G.R. No. 180173,
April 6, 2011 and the previous cases of Kepco Philippines Corporation v.
Commissioner of Internal Revenue, G.R. No. 179961, 31 January 2011; Silicon
Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 172378, 17 January
2011; Kepco Philippines Corporation v. Commissioner of Internal Revenue, G.R. No.
181858, 24 November 2010; Hitachi Global Storage Technologies Philippines
Corporation v. Commissioner of Internal Revenue, G.R. No. 174212, 20 October 2010;
J.R.A. Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 177127, 11
October 2010; Panasonic Communications Imaging Corporation of the Philippines v.
Commissioner of Internal Revenue, G.R. No. 178090, 8 February 2010)

Query: What is the purpose of the requirement of indicating the words zero-rated on
the face of the VAT invoice?

In Panasonic v. Commissioner of Internal Revenue, the Supreme Court held that the
appearance of the word zero-rated on the face of invoices covering zero-rated sales
prevents buyers from falsely claiming input VAT from their purchases when no
VAT is actually paid. Absent such word, the government may be refunding taxes it did
not collect.

Note:
However, the mere failure to indicate the authority to print (ATP) number on the
invoice/receipt is not fatal to a claim for refund but the taxpayer shall be required to show
the ATP. (Silicon Philippines, Inc v. Commissioner of Internal Revenue, G.R. No.
172378, dated January 17, 2011; Kepco Philippines Corporation v. Commissioner
of Internal Revenue, G.R. No 179961, dated January 31, 2011.)


CIR v. Aichi Forging Company of Asia, GR No. 184823, 06 October 2010

Discuss the period of prescription in filing a claim for VAT refund by reason of unutilized
input tax credits due to zero-rated transactions.

Subsection (A) of Section 112 of the NIRC states that "any VAT-registered
person, whose sales are zero-rated or effectively zero-rated may, within two years
after the close of the taxable quarter when the sales were made, apply for the
issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales." The phrase "within two (2) years x x x apply for the
issuance of a tax credit certificate or refund" refers to applications for refund/credit
filed with the CIR and not to appeals made to the CTA. This is apparent in the first
paragraph of subsection (D) of the same provision, which states that the CIR has
"120 days from the submission of complete documents in support of the application
filed in accordance with Subsections (A) and (B)" within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory
Section 112(D) of the NIRC, which already provides for a specific period within which
a taxpayer should appeal the decision or inaction of the CIR. The second paragraph
of Section 112(D) of the NIRC envisions two scenarios: (1) when a decision is issued
by the CIR before the lapse of the 120-day period; and (2) when no decision is made
after the 120-day period. In both instances, the taxpayer has 30 days within which to
file an appeal with the CTA. As we see it then, the 120-day period is crucial in filing
an appeal with the CTA. (CIR v. Aichi Forging Company of Asia, GR No. 184823, 06
October 2010)
(Note: Section 229 of the NIRC is not applicable to VAT Refund cases: CIR v.
Mirant Pagbilao Corporation, G.R. No. 172129, September 12, 2008)


TAX REMEDIES

Who has the personality to file a claim for refund?

Silkair (Singapore) Pte., Ltd. v. Commissioner on Internal Revenue, G.R. No.
166482, 25 January 2012

Facts: Petitioner Silkair (Singapore) Pte. Ltd. is a foreign corporation duly licensed by
the Securities and Exchange Commission (SEC) to do business in the Philippines as an
on-line international carrier operating the Cebu-Singapore-Cebu and Davao-Singapore-
Davao routes. In the course of its international flight operations, petitioner purchased
aviation fuel from Petron Corporation (Petron) from July 1, 1998 to December 31, 1998,
paying the excise taxes thereon in the sum of P5,007,043.39. The payment was
advanced by Singapore Airlines, Ltd. on behalf of petitioner. On October 20, 1999,
petitioner filed an administrative claim for refund in the amount of P5,007,043.39
representing excise taxes on the purchase of jet fuel from Petron, which it alleged to
have been erroneously paid.

Question: Does the petitioner have the personality to file a claim for refund of the excise
tax it paid to Petron?

Ruling:

Petitioner as the purchaser and end-consumer of the aviation fuel is not the proper party
to claim for refund of excise taxes paid thereon.

The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even if
he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC provides that
[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid
by the manufacturer or producer before removal of domestic products from place of
production. Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is
entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article
4(2) of the Air Transport Agreement between RP and Singapore. Even if Petron
Corporation passed on to Silkair the burden of the tax, the additional amount
billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to pay
as a purchaser.


A withholding agent has the personality to file a claim for refund of the withheld
taxes, even if the withholding agent and the income earner do not have a parent-
subsidiary relationship

Commissioner of Internal Revenue v. Smart Communication, Inc., G.R. No.
179045-46, August 25, 2010.

While a parent-subsidiary relation between the taxpayer and the withholding agent is a
factor that increases the withholding agents legal interest to file a claim for refund, it is,
however, not required for the withholding agent to have the right to file claim for
refund. A claim for refund should be filed by a taxpayer, and a taxpayer is one who
could be made liable for a tax. Thus, the right of a withholding agent to file a claim for
refund may be anchored on two reasons: (1) he is considered a taxpayer under the
National Internal Revenue Code as he is personally liable for the withholding tax as well
as for deficiency assessments, surcharges, and penalties, should the amount of the tax
withheld be finally found to be less than the amount that should have been withheld
under the law; and (2) as an agent of the taxpayer, his authority to file the necessary
income tax return and to remit the tax withheld to the government impliedly includes the
authority to file a claim for refund and to bring an action for recovery of such claim.


Refund of CWT: The taxpayer filing a claim for refund of a creditable withholding
tax must show that the income received which was the subject of such
withholding tax was declared as part of the gross income.

Commissioner of Internal Revenue v. Far East Bank & Trust Co., G.R. No. 173854
dated March 16, 2010

Among the income items of X Corp. is its income from rentals and sale of real property.
These income items were subjected to creditable withholding taxes. It appears,
however, that in the tax return of X Corp., the phrase NOT APPLICABLE was printed
on the space provided for rent, sale of real property and trust income. X Corp. thereafter
filed a claim for refund of said creditable withholding taxes. Should the claim for refund
be granted?

No. X Corp. failed to comply with an essential requirement for a valid claim for refund.
A perusal of its annual income tax return shows that the gross income was derived
solely from sales of services and does not include income derived from rentals and sales
of real property, to which the creditable withholding tax, sought to be refunded, pertains.
Since no income was reported, it follows that no tax was withheld, and consequently, no
tax could be refunded.



Waiver of the prescriptive period to assess v. Principle of estoppel

RCBC v. CIR, G.R. No. 170257, 07 September 2011

Facts: During an audit investigation, taxpayer signed a waiver of the statue of limitations
under the NIRC, thus extending the BIRs period to assess the taxpayer. The said
waiver was attested to by the Coordinator for the CIR and not personally by the CIR
herself. When the assessment came out within the extended period authorized in the
waiver, the taxpayer protested the assessment. Subsequently, the assessment was
modified reducing the liabilities of the taxpayer. Taxpayer paid some of the taxes
assessed in the revised assessment, but refused to pay the others. As regards the
taxes that the taxpayer refused to pay, the taxpayer contests the assessment on the
ground that the waiver that has been executed is void because it was not accepted by
the CIR herself.

Issue: Whether taxpayer, by paying the other tax assessment covered by the waivers of
the statute of limitations, is rendered estopped from questioning the validity of the said
waivers with respect to the assessment of deficiency onshore tax

Ruling: Taxpayer is estopped. Under Article 1431 of the Civil Code, the doctrine of
estoppel is anchored on the rule that "an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against the
person relying thereon." A party is precluded from denying his own acts, admissions or
representations to the prejudice of the other party in order to prevent fraud and
falsehood.

Estoppel is clearly applicable to the case. Taxpayer, through its partial payment of the
revised assessments issued within the extended period as provided for in the questioned
waivers, impliedly admitted the validity of those waivers. Had taxpayer truly
believed that the waivers were invalid and that the assessments were issued beyond the
prescriptive period, then it should not have paid the reduced amount of taxes in the
revised assessment. Its subsequent action effectively belies its insistence that the
waivers are invalid. The records show that taxpayer upon receipt of the revised
assessment immediately made payment on the uncontested taxes. Thus, it is estopped
from questioning the validity of the waivers. To hold otherwise and allow a party to
gainsay its own act or deny rights which it had previously recognized would run counter
to the principle of equity which this institution holds dear.

(Note: Compare with the case below)


Waiver of the prescriptive period to assess must be strictly complied with

CIR v. Kudos Metal Corporation, G.R. No. 178087, 5 May 2010

The requirements for the validity of a waiver of the period to assess are:

1. The waiver must be in the proper form prescribed by RMO 20-90. The
phrase but not after ______ 19 ___, which indicates the expiry date of
the period agreed upon to assess/collect the tax after the regular three-
year period of prescription, should be filled up.

2. The waiver must be signed by the taxpayer himself or his duly authorized
representative. In the case of a corporation, the waiver must be signed
by any of its responsible officials. In case the authority is delegated by the
taxpayer to a representative, such delegation should be in writing and
duly notarized.

3. The waiver should be duly notarized.

4. The CIR or the revenue official authorized by him must sign the waiver
indicating that the BIR has accepted and agreed to the waiver. The date
of such acceptance by the BIR should be indicated. However, before
signing the waiver, the CIR or the revenue official authorized by him must
make sure that the waiver is in the prescribed form, duly notarized, and
executed by the taxpayer or his duly authorized representative.

5. Both the date of execution by the taxpayer and date of acceptance by the
Bureau should be before the expiration of the period of prescription or
before the lapse of the period agreed upon in case a subsequent
agreement is executed.

6. The waiver must be executed in three copies, the original copy to be
attached to the docket of the case, the second copy for the taxpayer and
the third copy for the Office accepting the waiver. The fact of receipt by
the taxpayer of his/her file copy must be indicated in the original copy to
show that the taxpayer was notified of the acceptance of the BIR and the
perfection of the agreement.

A perusal of the waivers executed by respondents accountant reveals the following
infirmities:

1. The waivers were executed without the notarized written authority of
Pasco to sign the waiver in behalf of respondent.

2. The waivers failed to indicate the date of acceptance.

3. The fact of receipt by the respondent of its file copy was not indicated in
the original copies of the waivers.


Moreover, the doctrine of estoppel will not apply against the taxpayer considering that
there is a detailed procedure for the proper execution of the waiver which the BIR must
strictly follow. The BIR cannot hide behind the doctrine to cover its failure to comply with
Revenue Memorandum Order No. 20-90 which the BIR itself issued


Service of the Preliminary Assessment Notice

CIR v. Metro Star Superama, G.R. No. 185371, 08 December 2010

The sending of a PAN to taxpayer to inform him of the assessment made is but part of
the due process requirement in the issuance of a deficiency tax assessment, the
absence of which renders nugatory any assessment made by the tax authorities. The
use of the word shall in subsection 3.1.2 describes the mandatory nature of the service
of a PAN. The persuasiveness of the right to due process 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 Stars right to due process. Thus, for
its failure to send the PAN stating the facts and the law on which the assessment was
made as required by Section 228 of R.A. No. 8424, the assessment made by the CIR is
void.


Normally, what may be appealed to the CTA is an adverse decision of the BIR
concerning a protest of an assessment. However, a denial of the protest of a PAN
which indicates that such denial is the CIRs final determination of the issue could
be appealed to the CTA.

Allied Banking Corp. v. CIR, G.R. No. 175097, 05 February 2010.

A Pre-Assessment Notice (PAN) issued by the BIR was protested by the taxpayer. The
protest was subsequently denied in a Formal Letter of Demand with Assessment
Notices which reads: This is our final decision based on investigation. If you disagree,
you may appeal the final decision within thirty (30) days from receipt hereof, otherwise
said deficiency tax assessment shall become final, executory and demandable. The
letter was accompanied by assessment notices. Instead of filing a protest on the
assessment, the taxpayer filed a petition for review with the CTA.

Should the CTA take cognizance of the case?

Yes. The taxpayer cannot be blamed for not filing a protest against the Formal Letter of
Demand with Assessment Notices since the language used and the tenor of the
demand letter of the BIR shows that it is the final decision of the CIR on the matter. It is
the obligation of the CIR to indicate in a clear and unequivocal language whether his
action constitutes his final determination of the issue so that the taxpayer will know
whether or not to appeal the action. In this case, the statement of the BIR clearly
indicates that the denial is the final decision of the BIR, and if the taxpayer disagrees, it
may appeal the final decision from receipt thereof. Thus, the CIR is estopped in claiming
that he did not intend the Formal Letter of Demand with Assessment Notices to be a final
decision. This case, therefore, is excepted from the requirement of exhaustion of
administrative remedies.


The letter of authority must indicate with definiteness the period subject of the
audit investigation

CIR v. Sony Philippines, Inc., G.R. No. 178697, 17 November 2010

A Letter of Authority (LOA) was issued to a team of BIR examiners to audit the taxpayer
Sonyt for the period 1997 and unverified prior years. It appears, however, that Sony
was using the fiscal year, in that it reported its tax liabilities for the period April 1, 1997
to March 31, 1998. Deficiency taxes were discovered by the team of examiners
covering the period 01 January 1998 to 31 March 1998. This was contested by Sony as
the same was not covered by the LOA. BIR argued that the contested period is part of
the taxable year of Sony.
Did the BIR act properly in assessing Sony for taxes covering the period 01 January
1998 to 31 March 1998?
No. The BIR team of examiners went beyond the scope of its authority because the
deficiency tax assessment was based on records from January to March 1998 or using
the fiscal year which ended in March 31, 1998. The CIR knew which period should be
covered by the investigation. If the CIR wanted to or intended the investigation to include
the year 1998, it should have done so by amending the LOA to include the said period,
or by issuing another LOA. Moreover, the statement in the LOA and unverified prior
years, violated section C of Revenue Memorandum Order No. 43-90 dated September
20, 1990, which provides that a LOA should cover a taxable period not exceeding one
taxable year.

Lack of control number in the assessment does not affect the validity thereof

CIR v. Hon. Gonzalez and L.M. Camus Engineering Corporation, G.R. No. 177279,
13 October 2010
The formality of a control number in the assessment notice is not a requirement for its
validity. The mandatory requirement of Section 228 of the NIRC refers to the contents of
the assessment; i.e., that the assessment should inform the taxpayer of the tax liability
and the basis thereof. Both the formal letter of demand and the notice of assessment
shall be void if the former failed to state the fact, the law, rules and regulations or
jurisprudence on which the assessment is based.



The CTA has jurisdiction to decide issues involving prescription of the right of the
government to collect the tax even if the assessment has reached finality

CIR v. Hambrecht and Quist Philippines, G.R. No. 169225, 17 November 2010

Facts: The BIR assessed the taxpayer for internal revenue tax liabilities. Taxpayer
protested the assessment, but the protest was filed beyond the 30-day reglementary
period. More than eight (8) years later, the taxpayer received a notice from the BIR that
the protest was denied for having been filed beyond the 30-day period. Subsequently,
the taxpayer filed a Petition for Review with the CTA. The CTA held that although the
assessment has become final and unappealable, the CIR failed to collect the tax within
the prescribed period; hence, the right of the government to collect has prescribed.

Issue: Does the CTA possess jurisdiction to rule that the governments right to collect
has prescribed?

Ruling: The appellate jurisdiction of the CTA is not limited to cases which involve
decisions of the CIR on matters relating to assessments or refunds. It also has
jurisdiction over other cases that arise out of the NIRC or related laws administered by
the BIR.

In the case at bar, the issue at hand is whether or not the BIRs right to collect taxes had
already prescribed and that is a subject matter falling within the NIRC. Thus, from the
foregoing, the issue of prescription of the BIRs right to collect taxes may be considered
as covered by the term other matters over which the CTA has appellate jurisdiction.

The fact that an assessment has become final for failure of the taxpayer to file a protest
within the time allowed only means that the validity or correctness of the assessment
may no longer be questioned on appeal. However, the validity of the assessment
itself is a separate and distinct issue from the issue of whether the right of the CIR
to collect the validly assessed tax has prescribed. This issue of prescription, being a
matter provided for by the NIRC, is well within the jurisdiction of the CTA to decide.



The remedy from a denial of a protested assessment is an appeal to the CTA. A
motion for reconsideration of the final decision on disputed assessment does not
toll the period to appaeal.

Fishwealth Canning Corporation v. CIR, G.R. No. 179343, 21 January 2010

On 06 August 2003, Fishwealth received an assessment for deficiency income tax and
VAT liability for the year 1999. In a letter of 23 September 2003, Fishwealth protested
the assessment. On 04 August 2005, Fishwealth received a Final Decision on Disputed
Assessment denying the protest. Instead of appealing the decision within 30 days to the
CTA, Fishwealth filed a motion for reconsideration of the said decision with the BIR. The
Supreme Court ruled that the filing of the motion for reconsideration is not the proper
remedy from the denial of the protest; hence, the same did not toll the period of the
taxpayer to appeal to the CTA.

(Note: If the Final Decision on Disputed Assessment (FDDA) was issued by the CIR, the
taxpayer should not anymore file a motion for reconsideration because this will not toll
the period to appeal to the CTA. However, if the FDDA was issued by a Regional
Director, the taxpayer may consider the filing of an appeal to the CIR.)


An appeal to the CTA en banc must be preceded by a motion for reconsideration
before the CTA division

Commissioner of Customs v. Marina Sales, Inc., G.R. 183868, 22 November 2010

The Court agrees with the CTA En Banc that the Commissioner failed to comply with the
mandatory provisions of Rule 8, Section 1 of the Revised Rules of the Court of Tax
Appeals requiring that the petition for review of a decision or resolution of the Court in
Division must be preceded by the filing of a timely motion for reconsideration or new trial
with the Division. The word "must" clearly indicates the mandatory -- not merely directory --
nature of a requirement.

The rules are clear. Before the CTA En Banc could take cognizance of the petition for
review concerning a case falling under its exclusive appellate jurisdiction, the litigant
must sufficiently show that it sought prior reconsideration or moved for a new trial with
the concerned CTA division. Procedural rules are not to be trifled with or be excused
simply because their non-compliance may have resulted in prejudicing a partys
substantive rights. Rules are meant to be followed. They may be relaxed only for very
exigent and persuasive reasons to relieve a litigant of an injustice not commensurate to
his careless non-observance of the prescribed rules.


Jurisdiction in Tax Cases

Commissioner of Customs v. Hypermix Feeds Corporation, G.R. No. 179579, 01
February 2012

Question: Do the Regional Trial Courts have the jurisdiction to try and decide, in a
Petition for Declaratory Relief, issues involving the validity of a Customs Memorandum
Order involving the proper classification of wheat for duties purposes?

Ruling:

The determination of whether a specific rule or set of rules issued by an administrative
agency contravenes the law or the constitution is within the jurisdiction of the regular
courts. Indeed, the Constitution vests the power of judicial review or the power to
declare a law, treaty, international or executive agreement, presidential decree,
order, instruction, ordinance, or regulation in the courts, including the regional
trial courts. This is within the scope of judicial power, which includes the
authority of the courts to determine in an appropriate action the validity of the
acts of the political departments. Judicial power includes the duty of the courts of
justice to settle actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of
the Government. (Citing Smart Communications v. NTC, 456 Phil. 145 (2003)


Habawel v. Court of Tax Appeals, G.R. No. 174759, 7 September 2011

Facts: Taxpayer filed a claim for refund overpaid real property tax with the City
Treasurer. When the claim was denied, taxpayer filed a special civil action for
mandamus before the Regional Trial Court. RTC dismissed the case on the ground that
there was failure to exhaust administrative remedies, and that mandamus was not
proper because the grant of a tax refund was not a ministerial duty. Thereafter, the
taxpayer appealed the case to the CTA.

Issue: Does the CTA have jurisdiction to entertain the appeal?

Held: The CTA has no jurisdiction. Section 7(a)(3) of Republic Act No. 9282 covers
only appeals of the (d)ecisions, orders or resolutions of the Regional Trial Courts in
local tax cases originally decided or resolved by them in the exercise of their original or
appellate jurisdiction. The provision is clearly limited to local tax disputes decided by
the Regional Trial Courts. In contrast, Section 7(a)(5) of RA 9282 grants the CTA
cognizance of appeals of the (d)ecisions of the Central Board of Assessment Appeals in
the exercise of its appellate jurisdiction over cases involving the assessment and
taxation of real property originally decided by the provincial or city board of
assessment appeals. Section 7(a)(3) is not applicable in this case because a real
property tax, being an ad valorem tax, could not be treated as a local tax.



LOCAL TAXATION

Sand and Gravel Tax

Lepanto Consolidated Mining Company v. Ambanloc, G.R. No. 180639, 29 June
2010

Facts: As part of its mining operations, Lepanto needed to extract sand, gravel and
quarry resources. The earth materials quarried by Lepanto in the course of its mining
operations were used exclusively by Lepanto. The Province of Benguet assessed
Lepanto sand and gravel tax due to its quarrying activities. Lepanto countered that it
should not be liable for the tax because the earth extraction was not for commercial
purposes. Also, since Lepanto already pays taxes for its main business which is mining,
any incidental activity like quarrying should not be separately taxed.
Issue: Is Lepanto liable for the sand and gravel tax?
Ruling: Yes. Section 138 of the Local Government Code which authorizes provinces to
levy and collect tax on ordinary stones, sand, gravel, earth and other quarry resources
extracted from public lands or from beds of seas, lakes, rivers, streams, creeks and
other public waters within its territorial jurisdiction does not qualify whether the quarrying
be for personal or commercial uses. Since the law does not distinguish, the power
should be deemed to cover extractions for both personal and commercial uses.
Moreover, as to the argument that Lepanto already pays the tax on its main business
which is mining, hence, it should not be liable for another tax on an incidental activity,
the said principle is applicable only to imposition of business taxes. Since the sand and
gravel tax is in the nature of an excise tax, the same may be imposed even if Lepanto is
already paying taxes on its main business of mining.

RTC has the power to issue a writ of Injunction to restrain collection of local taxes

Angeles City v. Angeles City Electric Corporation, G.R. No. 166134, 29 June 29
2010

Unlike in Section 218 of the National Internal Revenue Code where there is an express
prohibition for the courts to issue a writ of injunction as regards collection of national
taxes, there is no express provision in the Local Government Code prohibiting courts
from issuing an injunction to restrain local governments from collecting local taxes.
However, injunctions enjoining the collection of local taxes are still frowned upon
extreme caution should be exercised.



REAL PROPERTY TAX


City Mayor of Quezon City v. RCBC, GR No. 171033, 3 August 2010

Under Section 261 of the Local Government Code, owners of real properties sold at
public auction have a period of one year to redeem the property sold. When should the
one-year period be commencedfrom the date of sale or from the registration thereof?

Under Section 261 of the Local Government Code, the owner of the delinquent real
property or person having legal interest therein, or his representative, has the right to
redeem the property within one (1) year from the date of sale upon payment of the
delinquent tax and other fees. Verily, the period of redemption of tax delinquent
properties should be counted not from the date of registration of the certificate of sale, as
previously provided by Section 78 of P.D. No. 464, but rather on the date of sale of the
tax delinquent property, as explicitly provided by Section 261 of R.A. No. 7160.

(Note: In the aforesaid case of City Mayor of Quezon City v. RCBC, the Supreme Court
ruled that since the property is located in Quezon City, the one-year period of
redemption is counted from the registration of the certificate of sale pursuant to the
Quezon City Revenue Code of 1993. The Court treated the QC Revenue Code as a
special law which prevails over a general law like the Local Government Code of 1991)


National Power Corporation v. Province of Quezon and Municipality of Pagbilao,
G.R. No. 171586, 25 January 2010.

Facts: Napocor entered into a Build-Operate-Transfer Agreement with Mirant Pagbilao
Corporation. In the agreement, Napocor agreed to shoulder the burden of all taxes that
may be imposed on the agreement. The Province of Quezon assessed Mirant Pagbilao
Corporation for unpaid real property tax in the amount of P1.5B for machineries located
in Pagbilao, Quezon. A copy of the assessment was furnished Napocor. Thereafter, it
was Napocor and not Mirant which filed a protest of the assessment before the LBAA,
claiming that the machineries are exempted under Section 234(c) of the Local
Government Code.

Question: Does Napocor have the requisite legal standing to protest the assessment?

Ruling: Under Section 226 of the Local Government Code, any owner or person having
legal interest in the property may appeal an assessment for real property taxes to the
LBAA. Legal interest should be one that is actual and material, direct and immediate,
not simply contingent or expectant.

An entity assuming another persons tax liability by contract does not have legal interest
in the real property. This is because legal interest is defined as interest in property or a
claim cognizable at law, equivalent to that of a legal owner who has legal title to the
property. Given this definition, Napocor is clearly not vested with the requisite interest to
protest the tax assessment, as it is not an entity having the legal title over the
machineries.

Question: Assuming that Napocor has the requisite legal standing, should it first pay the
tax under protest before the same will be entertained?

Ruling: The LBAA dismissed Napocors petition for exemption for its failure to comply
with Section 252 of the LGC requiring payment of the assailed tax before any protest
can be made.

The protest contemplated under Section 252 (which requires payment under protest) is
applicable where there is a question as to the reasonableness or correctness of the
amount assessed. Payment under protest is not required if the taxpayer is questioning
the very authority and power of the assessor, acting solely and independently, to impose
the assessment and of the treasurer to collect the tax.

However, a claim for tax exemption, whether full or partial, does not question the
authority of the local assessor to assess real property tax. In this case, petitioner was
claiming tax exemption. Thus, this is a question involving the correctness of the
assessment. Petitioner, therefore, is required to pay the tax under protest



Before a local government can collect real property taxes, it must first be shown
that the property being taxed is unquestionably within its geographical
boundaries.

Sta. Lucia Realty and Development, Inc. v. City of Pasig, G.R. No. 166838, 15 June
2011

Before a local government can collect real estate tax on properties falling under its
territorial jurisdiction, it is imperative to first show that these properties are
unquestionably within its geographical boundaries. A local government unit can
legitimately exercise powers of government only within the limits of its territorial
jurisdiction because beyond these limits, its acts are ultra vires.

Although it is true that Pasig is the locality stated in the transfer certificates of title of
the subject properties, both taxpayer and the municipality of Cainta aver that the metes
and bounds of the subject properties, as they are described in the certificates, reveal
that they are within Caintas boundaries. This only means that there may be a conflict
between the location as stated and the location as technically described in the
certificates. Mere reliance therefore on the face of the certificates will not suffice as they
can only be conclusive evidence of the subject properties locations if both the stated
and described locations point to the same area. The Antipolo regional trial court, wherein
the boundary dispute case between Pasig and Cainta is pending, would be able to best
determine once and for all the precise metes and bounds of both Pasigs and Caintas
respective territorial jurisdictions. The resolution of this dispute would necessarily
ascertain the extent and reach of each local governments authority, a prerequisite in the
proper exercise of their powers, one of which is the power of taxation


Philippine Fisheries Development Authority v. CBAA, et al., G.R. No. 178030, 15
December 2010

Philippine Fisheries Development Authority (PFDA) is a government instrumentality in
charge of various government ports in the country, including the Lucena Fishing Port
Complex.

Under section 234 (a) of the Local Government Code, properties of public dominion
intended for public use are exempt from real property tax. Properties of public dominion
are owned by the state or the national government as defined under section 420 of the
Civil Code. The Lucena Fishing Port Complex, which is one of the major infrastructure
projects undertaken by the national government under the Nationwide Fishing Ports
Package is devoted for public use and falls with the term ports. It serves as [the
Philippine Fisheries Development Authoritys (PFDAs)] commitment to continuously
provide post-harvest infrastructure support to the fishing industry, especially in areas
where productivity among the various players in the fishing industry need to be
enhanced. As property of public dominion, the Lucena Fishing Port Complex is owned
by the Republic of the Philippines and exempt from real property tax except for the
portions that the PFDA has leased to private parties.