7.4.14 Red Notes Tax

T A X A T I O N L A W
2005 CENTRALIZED BAR OPERATIONS

MOST FREQUENTLY ASKED TOPICS
Source: UP Law Center
General Principles
1. Why is the power to tax considered inherent in a sovereign State? [2003 Bar Exams]
It is considered inherent in a soverein State !eca"se it is a necessar# attri!"te o$
sovereint#% &itho"t this 'o(er no soverein State can e)ist or end"re% The 'o(er to ta)
'roceeds "'on the theor# that the e)istence o$ a overn*ent is a necessit# and this 'o(er
is an essentia+ and inherent attri!"te o$ sovereint#, !e+onin as a *atter o$ riht to ever#
inde'endent state or overn*ent% No soverein State can contin"e to e)ist (itho"t *eans
to 'a# its e)'enses- and that $or those *eans, it has the riht to co*'e+ a++ citi.ens and
'ro'ert# (ithin its +i*its to contri!"te, hence, the e*erence o$ the 'o(er to ta)% /01 A*%
2"r%, Ta)ation 345
2. he !ity o" #ani$a% in order to so$ve the tra""ic pro&$em in its &'siness districts% decided to
impose a tax% to &e paid &y the driver% on a$$ private cars entering the city d'ring pea( ho'rs
"rom )*00 a.m. to +*00 a.m. "rom #ondays to ,ridays% &'t exempts those cars carrying more
than two occ'pants% exc$'ding the driver. -s the ordinance va$id? [2003 Bar Exams]
The ordinance is in vio+ation o$ the R"+e o$ Uni$or*it# and E6"a+it#, (hich re6"ires that
a++ s"!7ects or o!7ects o$ ta)ation, si*i+ar+# sit"ated *"st !e treated a+i8e in e6"a+ $ootin
and *"st not c+assi$# the s"!7ects in an ar!itrar# *anner% In the case at !ar, the ordinance
e)e*'ts cars carr#in *ore than t(o occ"'ants $ro* coverae o$ the said ordinance%
F"rther*ore, the ordinance on+# i*'oses the ta) on 'rivate cars, and e)e*'ts '"!+ic
vehic+es $ro* the i*'osition o$ the ta), a+tho"h !oth contri!"te to the tra$$ic 'ro!+e*%
There e)ists no s"!stantia+ standard "sed in the c+assi$ication !# the Cit# o$ Mani+a%
Another iss"e is the $act that the ta) is i*'osed on the driver o$ the vehic+e and not on
the reistered o(ner o$ the sa*e% The ta) does not on+# vio+ate the re6"ire*ent o$
"ni$or*it#, !"t the sa*e is a+so "n7"st !eca"se it '+aces the !"rden on so*eone (ho has
no contro+ over the ro"te o$ the vehic+e.
3. !ongress% a"ter m'ch p'&$ic hearing and cons'$tations with vario's sectors o" society% came
to the conc$'sion that it wi$$ &e good "or the co'ntry to have on$y one system o" taxation &y
centra$i.ing the imposition and co$$ection o" taxes in the nationa$ government. /ccording$y% it
is thin(ing o" passing a $aw that wo'$d a&o$ish the taxing power o" a$$ $oca$ government 'nits.
-n yo'r opinion% wo'$d s'ch a $aw &e va$id 'nder the present !onstit'tion? Exp$ain yo'r answer.
[2001 Bar Exams]
No% The +a( centra+i.in the i*'osition and co++ection o$ a++ ta)es in the nationa+
overn*ent (o"+d contravene the Constit"tion (hich *andates that9 :;;%Each +oca+
overn*ent "nit sha++ have the 'o(er to create their o(n so"rces o$ reven"e and to +ev#
ta)es, $ees and chares s"!7ect to s"ch "ide+ines and +i*itations as Conress *a# 'rovide
consistent (ith the !asic 'o+ic# o$ +oca+ a"tono*#%< It is c+ear that Conress can on+# ive
the "ide+ines and +i*itations on the e)ercise !# the +oca+ overn*ents o$ the 'o(er to ta)
!"t (hat (as ranted !# the $"nda*enta+ +a( cannot !e (ithdra(n !# the Conress%
0. /mong the taxes imposed &y the B'rea' o" -nterna$ 1even'e are income tax% estate and
donor2s tax% va$'e added tax% excise tax% other percentage taxes% and doc'mentary stamp tax.
!$assi"y these taxes into direct and indirect taxes% and di""erentiate direct "rom indirect taxes.
[2000 Bar Exams]
Inco*e ta), estate ta) and donor=s ta) are considered as direct ta)es% On the other
hand, va+"e added ta), e)cise ta), other 'ercentae ta)es, and doc"*entar# sta*' ta) are
indirect ta)es%
Direct ta)es are de*anded $ro* the ver# 'erson (ho, as intended, sho"+d 'a# the ta)
(hich he cannot shi$t to another- (hi+e an indirect ta) is de*anded in the $irst instance

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T A X A T I O N
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$ro* one 'erson (ith the e)'ectation that he can shi$t the !"rden to so*eone e+se, not as
a ta) !"t as a 'art o$ the '"rchase 'rice%
3. /n Exec'tive 4rder was iss'ed p'rs'ant to $aw% granting tax and d'ty incentives on$y to
&'sinesses and residents within the 5sec'red area6 o" the S'&ic Economic Specia$ 7one% and
denying said incentives to those who $ive within the 7one &'t o'tside s'ch 5sec'red area6. -s
the constit'tiona$ right to e8'a$ protection o" the $aw vio$ated &y the Exec'tive 4rder?
Exp$ain. [2000 Bar Exams]
No% E6"a+ 'rotection o$ the +a( c+a"se is s"!7ect to reasona!+e c+assi$ication%
C+assi$ications, to !e va+id, *"st /15 rest on s"!stantia+ distinctions, /@5 !e er*ane to the
'"r'ose o$ the +a(, />5 not !e +i*ited to e)istin conditions on+#, /35 e6"a++# to a++ *e*!ers
o$ the sa*e c+ass%
There are s"!stantia+ di$$erences !et(een !i investors !ein enticed to the :sec"red
area< and the !"siness o'erators o"tside that are in accord (ith the e6"a+ 'rotection
c+a"se that does not re6"ire territoria+ "ni$or*it# o$ +a(s% The c+assi$ication a''+ies
e6"a++# to a++ resident individ"a+s and !"sinesses (ithin the :sec"red area<% The residents,
!ein in +i8e circ"*stances to contri!"tin direct+# to the achieve*ent o$ the end '"r'ose
o$ the +a(, are not cateori.ed $"rther% Instead, the# are si*i+ar+# treated, !oth in
'rivi+ees and o!+iations re6"ired. (Tiu, et al. vs. Court of Appeals. GR No. 1!"1#.
$anuar% #, 1&&&'
9. : is the owner o" a residentia$ $ot sit'ated at ;'rino /ven'e% <asay !ity. he $ot has an
area o" 300 s8'are meters. 4n ='ne 1% 1++0% 100 s8'are meters o" said $ot owner &y : was
expropriated &y the government to &e 'sed in the widening o" ;'irino /ven'e% "or <hp300%000
representing the estimated assessed va$'e o" said portion. ,orm 1++1 to 1++3% :% who is a
&'sinessman% has not &een paying his income taxes. : is now &eing assessed "or the 'npaid
income taxes in the tota$ amo'nt o" <hp130%000. : c$aims the income tax $ia&i$ity has a$ready
&een compensated &y the amo'nt o" <hp300%000 which the government owes him "or the
expropriation o" his property. >ecide. [1++9 Bar Exams]
The inco*e ta) +ia!i+it# o$ A can not !e co*'ensated (ith the a*o"nt o(ed !# the
Bovern*ent as co*'ensation $or his 'ro'ert# e)'ro'riated% Ta)es are o$ distinct 8ind,
essence and nat"re than ordinar# o!+iations% Ta)es and de!ts cannot !e the s"!7ect o$
co*'ensation !eca"se the Bovern*ent and A are not *"t"a++# creditors and de!tors o$
each other and a c+ai* $or ta)es is not a de!t, de*and, contract, or 7"d*ent as is
a++o(a!+e to !e setCo$$. ((rancia vs. )AC. GR No. !*!"&. $une +, 1&++'
?. :% a $essor o" a property% pays rea$ estate taxes on the premises% a rea$ estate dea$er2s tax
&ased on renta$ receipts and income tax on the renta$s. : c$aims that this is do'&$e taxation.
>ecide. [1++9 Bar Exams]
There is no do"!+e ta)ation% Do"!+e ta)ation *eans ta)in $or the sa*e ta) 'eriod the
sa*e thin or activit# t(ice, (hen it sho"+d !e ta)ed !"t once, !# the sa*e ta)in
a"thorit# $or the sa*e '"r'ose and (ith the sa*e 8ind and character o$ ta)% The rea+
estate ta) is a ta) on 'ro'ert#- the rea+ estate dea+er=s ta) is a ta) on the 'rivi+ee to
enae in !"siness- (hi+e the inco*e ta) is a ta) on the 'rivi+ee to earn an inco*e% The
ta)es are i*'osed !# di$$erent ta)in a"thorities and are essentia++# o$ di$$erent 8ind and
character% (,illanueva vs. Cit% of )loilo. * SCRA -!+'
)nco.e Ta/ation
). :% whi$e driving home "rom his o""ice% was serio's$y in@'red when his a'tomo&i$e was
&'mped "rom &ehind &y a &'s driven &y a rec($ess driver. /s% a res'$t% he had to pay <200%000
to his doctor and <100%000 to the hospita$ where he was con"ined "or treatment. Ae "i$ed a s'it
against the &'s driver and the &'s company and was awarded and paid act'a$ damages o"

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<300%000 &y way o" mora$ damages and <30%000"or what he had to pay his attorney "or &ringing
his case to co'rt.
Which% i" any% o" the "oregoing awards are taxa&$e income to : and which are not? Exp$ain.
[2003 Bar Exams]
Nothin is ta)a!+e% Under the Ta) Code, an# a*o"nt received as co*'ensation $or
'ersona+ in7"ries or sic8ness, '+"s the a*o"nts $or an# da*aes received (hether !# s"it or
aree*ent, on acco"nt o$ s"ch in7"ries or sic8ness sha++ !e e)c+"ded $ro* ross inco*e%
Since the entire a*o"nt o$ P304,444 received are a(ards o$ da*aes o$ the in7"ries
s"stained, a++ sha++ !e e)c+"ded $ro* his ross inco*e% O!vio"s+#, these da*aes are
considered !# +a( as *ere ret"rn o$ ca'ita+ /Sec%>@ /E5/35, 1FF? Ta) Code5%
+. 4n 03 =an'ary 1++)% :% a ,i$ipino citi.en residing in the <hi$ippines% p'rchased one h'ndred
B100C shares in the capita$ stoc( o" D !orporation% a domestic company. 4n 03 =an'ary 2000% D
!orp. dec$ared% o't o" the pro"its o" the company earned a"ter 01 =an'ary 1++)% a h'ndred
percent B100EC stoc( dividends on a$$ stoc(ho$ders o" record as o" 31 >ecem&er 1+++ as a res'$t
o" which : ho$ding in D !orp. &ecame two h'ndred B200C shares. /re the stoc( dividends
received &y : s'&@ect to income tax? Exp$ain. [2003 Bar Exams]
NO% Stoc8 dividends are not rea+i.ed inco*e% Accordin+#, the di$$erent 'rovisions o$
the Ta) Code i*'osin a ta) on dividend inco*e on+# inc+"des (ithin its '"rvie( cash and
'ro'ert# dividends *a8in stoc8 dividends e)e*'t $ro* inco*e ta)% Go(ever, i$ the
distri!"tion o$ stoc8 dividends is the e6"iva+ent o$ cash or 'ro'ert#, as (hen the
distri!"tion res"+ts in a chane o$ o(nershi' interest o$ the shareho+ders, the stoc8
dividends (i++ !e s"!7ect to inco*e ta)% 3Section " (0' ('4 Section - (A'5(0'4 Section +
(0'(-'(6', 1&&! Ta/ Co1e7
10. :D7 ,o'ndation is a nonFstoc(% nonFpro"it association d'$y accredited "or re$igio's%
charita&$e and socia$ we$"are p'rposes. Gast =an'ary 3% 2000 it so$d a portion o" its $ot 'sed "or
re$igio's p'rposes and 'ti$i.ed the entire proceeds "or the constr'ction o" a &'i$ding to ho'se
its "ree >ay and Hight !are !enter "or chi$dren o" sing$e parents. -n order to s'&sidi.e the
expenses o" the !enter and to s'pport its re$igio's% charita&$e and socia$ we$"are pro@ects% the
,o'ndation $eased the 300Fs8'are meter area o" the second and third "$oors o" the &'i$ding "or
'se as a &oarding ho'se. he ,o'ndation a$so operates a canteen and a gi"t shop within the
premises% a$$ the income "rom which is 'sed act'a$$y% direct$y% and exc$'sive$y "or the p'rposes
"or which the ,o'ndation was organi.ed.
a. !onsidering the !onstit'tiona$ provision granting tax exemption to nonFstoc(
corporations s'ch as those "ormed exc$'sive$y "or re$igio's% charita&$e and socia$
we$"are p'rposes% exp$ain the meaning o" the $ast paragraph o" said Sec.30 o" the 1++?
ax !ode which states that 5income o" whatever (ind and character o" the "oregoing
organi.ations "rom any o" their properties% rea$ or persona$% or "rom any o" their
activities cond'cted "or pro"it regard$ess o" the disposition made o" s'ch income sha$$
&e s'&@ect to tax 'nder this !ode6. [2003 Bar Exams]
The e)e*'tion conte*'+ated in the Constit"tion covers rea+ estate ta) on rea+
'ro'erties act"a++#, direct+# and e)c+"sive+# "sed $or re+iio"s, charita!+e and socia+ (e+$are
'"r'oses% It does not cover e)e*'tion $ro* the i*'osition o$ the inco*e ta), (hich is
(ithin the conte)t o$ Sec%>4 o$ the Ta) Code% As a r"+e, nonCstoc8, nonC'ro$it cor'orations
orani.ed $or re+iio"s, charita!+e or socia+ (e+$are '"r'oses are e)e*'t $ro* inco*e ta)
on their inco*e receive !# the* as s"ch% Go(ever, i$ these re+iio"s, charita!+e and socia+
(e+$are cor'orations derived inco*e $ro* their 'ro'erties or an# o$ their activities
cond"cted $or 'ro$it, the inco*e ta) sha++ !e i*'osed on said ite*s o$ inco*e irres'ective
o$ their dis'osition% (Sec.8#, N)RC4 C)R vs. 9:CA. G.R. No. 1"#"8. 31&&+7'
&. -s the income derived &y :D7 ,o'ndation "rom the sa$e o" a portion o" its $ot% renta$s
"rom its &oarding ho'se and the operation o" its canteen and the gi"t shop s'&@ect to
tax? Exp$ain.
Yes% The inco*e derived $ro* the sa+e o$ +ot and renta+s $ro* its !oardin ho"se are
considered as inco*e $ro* 'ro'erties (hich are s"!7ect to ta)% Li8e(ise the inco*e $ro*

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the o'erations o$ the canteen and the i$t sho' are inco*e $ro* its activities cond"cted $or
'ro$it that are s"!7ect to ta)% The inco*e attaches irres'ective o$ the dis'osition o$ these
inco*es% (Sec.8#, N)RC4 C)R vs. 9:CA. G.R. No. 1"#"8. 31&&+7'
11. / 5"ringe &ene"it6 is de"ined as &eing any good% service or other &ene"it "'rnished
or granted in cash or in (ind &y an emp$oyer to an individ'a$ emp$oyee. Wo'$d it &e the
emp$oyer or the emp$oyee who is $ega$$y re8'ired to pay an income tax on it? [2003 Bar
Exams]
It is the e*'+o#er (ho is +ea++# re6"ired to 'a# an inco*e ta) on the $rine !ene$it%
The $rine !ene$it ta) is i*'osed as a $ina+ (ithho+din ta) '+acin the +ea+ o!+iation to
re*it the ta) on the e*'+o#er, s"ch that, i$ the ta) is not 'aid the +ea+ reco"rse o$ the EIR
is to o to a$ter the e*'+o#er% An# a*o"nt or va+"e received !# the e*'+o#ee as a $rine
!ene$it is considered ta) 'aid hence, net o$ the inco*e ta) d"e thereon% The 'erson (ho
is +ea++# re6"ired to 'a# /sa*e as stat"tor# incidence as distin"ished $ro* econo*ic
incidence5 is that 'erson (ho, in case o$ nonC'a#*ent, can !e +ea++# de*anded to 'a# the
ta)%
12. aC Aow o"ten does a domestic corporation "i$e income tax ret'rn "or income earned
d'ring a sing$e taxa&$e year? Exp$ain the process. [2001 Bar Exams]
A do*estic cor'oration is re6"ired to $i+e an inco*e ta) ret"rns $o"r /35 ti*es $or
inco*e earned d"rin a sin+e ta)a!+e #ear% Q"arter+# ret"rns are re6"ired to !e $i+ed $or
the $irst three 6"arters (here the cor'oration sha++ dec+are its 6"arter+# s"**ar# o$ ross
inco*e and ded"ctions on a c"*"+ative !asis% (Sec. !-, N)RC'% Then a $ina+ ad7"st*ent
ret"rn is re6"ired to !e $i+ed coverin the tota+ ta)a!+e inco*e $or the entire #ear,
ca+endar or $isca+% (Sec. !*, N)RC'
&C What is the reason "or s'ch proced're?
The reason $or s"ch 'roced"re is to ens"re the ti*e+iness o$ co++ection to *eet the
!"detar# needs o$ the overn*ent% Li8e(ise, it is desined to ease the !"rden on the
ta)'a#er !# 'rovidin it (ith an insta++*ent 'a#*ent sche*e, rather than re6"irin the
'a#*ent o$ the ta) on a +"*'Cs"* !asis a$ter the end o$ the #ear% It is a+so to i*'rove the
+i6"idit# o$ the overn*ent%
13. /% doctor &y pro"ession% so$d in the year 2000 a parce$ o" $and which he &o'ght as a "orm o"
investment in 1++0 "or <hp 1 mi$$ion. he $and was so$d to B% his co$$eag'e% at a time when the
rea$ estate prices had gone down and so the $and was so$d on$y "or <hp)00%000 which was then
the "air mar(et va$'e o" the $and. Ae 'sed the proceeds to "inance his trip to the Inited
States. Ae c$aims that he sho'$d not &e made to pay the 9E "ina$ tax &eca'se he did not have
any act'a$ gain on the sa$e. -s his contention correct? Why? [2001 Bar Exams]
No% The DH ca'ita+ ains ta) on sa+e o$ a rea+ 'ro'ert# he+d as ca'ita+ asset is i*'osed
on the inco*e 'res"*ed to have !een rea+i.ed $ro* the sa+e (hich is the $air *ar8et va+"e
or se++in 'rice thereo$, (hichever is hiher% /Section ";, N)RC' Act"a+ ain is not
re6"ired $or the i*'osition o$ the ta) !"t it is the ain !# $iction o$ +a( (hich is ta)a!+e%
10. >isting'ish /$$owa&$e >ed'ctions "rom <ersona$ Exemptions. Jive an examp$e o" an
a$$owa&$e ded'ction and another examp$e "or persona$ exemption. [2001 Bar Exams]
The distinctions are as $o++o(s9
a5 As to a*o"nt I A++o(a!+e ded"ctions enera++# re$er to act"a+ e)'enses inc"rred
in the '"rs"it o$ trade, !"siness or 'ractice o$ 'ro$ession (hi+e 'ersona+- e)e*'tions
are ar!itrar# a*o"nts a++o(ed !# +a(%
!5 As to nat"re I A++o(a!+e ded"ctions constit"te !"siness e)'enses (hi+e 'ersona+
e)e*'tions 'ertain to 'ersona+ e)'enses%

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c5 As to '"r'ose I Ded"ctions are a++o(ed to ena!+e the ta)'a#er to reco"' his
cost o$ doin !"siness (hi+e 'ersona+ e)e*'tions are a++o(ed to cover 'ersona+, $a*i+#
and +ivin e)'enses%
d5 As to c+ai*ants I A++o(a!+e ded"ctions can !e c+ai*ed !# a++ ta)'a#ers,
cor'orate or other(ise, (hi+e 'ersona+ e)e*'tions can !e c+ai*ed on+# !# individ"a+
ta)'a#ers%
13. -n order to "aci$itate the processing o" its app$ication "or a $icense
"rom a government o""ice% !orporation / "o'nd it necessary to pay the amo'nt o" <hp100%000
as a &ri&e to the approving o""icia$. -s the <hp100%000 ded'cti&$e "orm the gross income o"
!orporation /? 4n the other hand% is the <hp100%000 taxa&$e income o" the approving o""icia$?
Exp$ain yo'r answers. [2001 Bar Exams]
Since the a*o"nt o$ Ph'144,444 constit"tes a !ri!e, it is not a++o(ed as a ded"ction
$or* ross inco*e o$ Cor'oration A% (Section 8"(A'(1'(c', N)RC'. Go(ever, to the reci'ient
overn*ent o$$icia+, the sa*e constit"tes a ta)a!+e inco*e% A++ inco*e $ro* +ea+ or i++ea+
so"rces are ta)a!+e a!sent an# c+ear 'rovision o$ +a( e)e*'tin the sa*e% This is the
reason (h# ross inco*e had !een de$ined to inc+"de inco*e $ro* (hatever so"rce
derived% (Section 8(A', N)RC'. I++ea++# ac6"ired inco*e constit"tes rea+i.ed inco*e
"nder the c+ai* o$ riht doctrine. (Rut<in vs. US. 8"8 US 18#'
19. -s a nonFresident a$ien who is not engaged in trade or &'siness or in the exercise o"
pro"ession in the <hi$ippines &'t who derived renta$ income "rom the <hi$ippines re8'ired to
"i$e an income tax ret'rn on /pri$ o" the year "o$$owing his receipt o" said income? -" not% why
not? Exp$ain yo'r answer. [2001 Bar Exams]
No% The inco*e ta) on a++ inco*e derived $ro* Phi+i''ine so"rces !# a nonCresident
a+ien (ho is not enaed in trade or !"siness in the Phi+i''ines is (ithhe+d !# the +essee as
a Fina+ &ithho+din Ta)% (Section -!(A', N)RC'. The overn*ent can not re6"ire 'ersons
o"tside o$ its territoria+ 7"risdiction to $i+e a ret"rn- $or this reason, the inco*e ta) on
inco*e derived $ro* (ithin *"st !e co++ected thro"h the (ithho+din ta) s#ste* and
th"s, re+ieve the reci'ient o$ the inco*e the d"t# to $i+e inco*e ta) ret"rns% (Section -1,
N)RC'
1?. #r. =avier is a nonFresident senior citi.en. Ae receives a month$y
pension "orm the JS-S% which he deposits with the <HBF#a(ati Branch. -s he exempt "rom
income tax and there"ore not re8'ired to "i$e an income tax ret'rn? [2000 Bar Exams]
Mr% 2avier is e)e*'t $ro* inco*e ta) on his *onth+# BSIS 'ension (Sec. 8(0'(*'(f',
N)RC' !"t not on the interest inco*e that *iht accr"e on the 'ensions de'osited (ith PNE
(hich are s"!7ect to $ina+ (ithho+din ta)%
Conse6"ent+#, since Mr% 2avier=s so+e ta)a!+e inco*e (o"+d have !een s"!7ected to a
$ina+ (ithho+din ta), he is not re6"ired an#*ore to $i+e an inco*e ta) ret"rn. (Sec. -1(A'
('(c', N)RC'
1). / !o.% a <hi$ippine corporation% has an exec'tive B<C who is a ,i$ipino
citi.en. / !o. has a s'&sidiary in Aong Kong BAK !o.C and wi$$ assign < "or an inde"inite period
to wor( "'$$ time "or AK !o. < wi$$ &ring his "ami$y to reside in AK and wi$$ $ease o't his
residence in the <hi$ippines. he sa$ary o" < wi$$ &e sho'$dered 30E &y / !o. whi$e the other
30E p$'s ho'sing% cost o" $iving and ed'cationa$ a$$owances o" <2s dependents wi$$ &e
sho'$dered &y AK !o. / !o. wi$$ credit the 30E o" <2s sa$ary to <2s <hi$ippine &an( acco'nt. <
wi$$ a$so &e receiving renta$ income "or the $ease o" his <hi$ippine residence.
/re these sa$aries% a$$owances and renta$s s'&@ect to the <hi$ippine income tax? [1+++ Bar
Exams]
The sa+aries and a++o(ances received !# P are not s"!7ect to Phi+i''ine inco*e ta)% P
6"a+i$ies as a nonCresident citi.en !eca"se he +eaves the Phi+i''ines $or e*'+o#*ent
re6"irin hi* to !e 'h#sica++# 'resent a!road *ost o$ the ti*e d"rin the ta)a!+e #ear%
(Section (=', N)RC'. A nonCresident citi.en is ta)a!+e on+# on inco*e derived $ro*
Phi+i''ine so"rces% /Section @>, NIRC5% The sa+aries and a++o(ances received $ro* !ein

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e*'+o#ed a!road are inco*e $ro* (itho"t !eca"se these are co*'ensation $or services
rendered o"tside o$ the Phi+i''ines% (Section ", N)RC'
Go(ever, P is ta)a!+e on renta+ inco*e $or the +ease o$ his Phi+i''ine residence
!eca"se this is an inco*e derived $ro* (ithin, the +eased 'ro'ert# !ein +ocated in the
Phi+i''ines% (Section ", N)RC'
1+. /rno$d% who is sing$e% coha&its with Li$ma% who is $ega$$y married to 7achary. /rno$d and
Li$ma have six minor chi$dren who $ive and depend 'pon /rno$d "or their chie" s'pport. he
chi$dren are not married and not gain"'$$y emp$oyed. [1++) Bar Exams]
aC ,or income tax p'rposes% may /rno$d &e considered as 5head o" a "ami$y?6
Yes% An "n*arried *an (ho has i++eiti*ate *inor chi+dren (ho +ive (ith hi* and
de'end "'on hi* $or their chie$ s"''ort is considered as :head o$ the $a*i+#%< (RR No. >
&+ i.ple.entin2 Section 8-, N)RC'
&C -s /rno$d entit$ed to ded'ct "rom his gross income% an additiona$ exemption "or
each o" his i$$egitimate chi$d?
No% Arno+d is on+# entit+ed to ded"ct additiona+ 'ersona+ e)e*'tion $or $o"r /35 o"t o$
the si) /D5 i++eiti*ate chi+dren% The *a)i*"* n"*!er o$ de'endents $or '"r'oses o$ the
additiona+ 'ersona+ e)e*'tion is $o"r% (Section 8-, N)RC'
20. BaC >isc'ss the meaning o" the J$o&a$ and Sched'$ar systems o" taxation. [1++? Bar Exams]
A +o!a+ s#ste* o$ ta)ation is one (here the ta)'a#er is re6"ired to +"*' "' a++ ite*s
o$ inco*e earned d"rin a ta)a!+e 'eriod and 'a# "nder a sin+e set o$ inco*e ta) r"+es on
these di$$erent ite*s o$ inco*e%
A sched"+ar s#ste* o$ ta)ation 'rovides $or a di$$erent ta) treat*ent o$ di$$erent t#'es
o$ inco*e so that a se'arate ta) ret"rn is re6"ired to !e $i+ed $or each t#'e o$ inco*e and
the ta) is co*'"ted on a 'er ret"rn or 'er sched"+e !asis%
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B&C o which system wo'$d yo' say that the method o" taxation 'nder the Hationa$ -nterna$
1even'e !ode &e$ongs? [1++? Bar Exams]
The *ethod o$ ta)ation "nder the NIRC is a co*!ination o$ !oth s#ste*s, th"s 'art+#
sched"+ar and 'art+# +o!a+%
21. #r. Santos died intestate in 1+)+ $eaving his spo'se and "ive chi$dren as the on$y heirs. he
estate consisted o" a "ami$y home and a "o'rFdoor apartment which was &eing rented to
tenants. Within the year% an extra@'dicia$ sett$ement o" the estate was exec'ted &y the heirs%
each o" them receiving hisMher d'e share. he s'rviving spo'se ass'med administration o" the
property. Each year% the net income "rom the renta$ property was distri&'ted to a$$%
proportionate$y% on which they paid respective$y% the corresponding income tax.
-n 1++0% the income tax ret'rns o" the heirs were examined and de"iciency income tax
assessments were iss'ed against each o" them "or the years 1+)+ to 1++3% inc$'sive% as having
entered into an 'nregistered partnership. Were the assessments @'sti"ied? [1++? Bar Exams]
Yes, the assess*ents (ere 7"sti$ied !eca"se $or inco*e ta) '"r'oses, the coCo(nershi'
o$ inherited 'ro'ert# is a"to*atica++# converted into an "nreistered 'artnershi' $ro* the
*o*ent the said 'ro'erties are "sed as co**on $"nd (ith intent to 'rod"ce 'ro$its $or the
heirs in 'ro'ortion to their shares in the inheritance%
Fro* the *o*ent o$ s"ch 'artition, the heirs are entit+ed a+read# to their res'ective
de$inite shares o$ the estate and the inco*e thereo$, $or each o$ the* to *anae and
dis'ose o$ as e)c+"sive+# his o(n (itho"t the intervention o$ the other heirs, and,
accordin+#, he !eco*es +ia!+e individ"a++# $or a++ ta)es in connection there(ith% I$ a$ter
s"ch 'artition, he a++o(s his shares to !e he+d in co**on (ith his coCheir "nder a sin+e
*anae*ent to !e "sed (ith the intent o$ *a8in 'ro$it there!# in 'ro'ortion to his share,
there can !e no do"!t that, even i$ no doc"*ent or instr"*ent (ere e)ec"ted $or the

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'"r'ose, $or ta) '"r'oses, at +east an "nreistered 'artnershi' is $or*ed% (?@a vs. C)R, "-
SCRA !"'
22. >isg'ised dividends in income taxation? Jive an examp$e. [1++0 Bar Exams]
Dis"ised dividends are those inco*e 'a#*ents *ade !# a do*estic cor'oration, (hich
is a s"!sidiar# o$ a nonCresident $orein cor'oration, to the +atter ostensi!+# $or services
rendered !# the +atter to the $or*er, !"t (hich 'a#*ents are dis'ro'ortionate+# +arer
than the act"a+ va+"e o$ the services rendered% In s"ch case, the a*o"nt over and a!ove
the tr"e va+"e o$ the service rendered sha++ !e treated as a dividend and sha++ !e s"!7ected
to the corres'ondin ta) o$ >@H on Phi+i''ine so"rce ross inco*e or s"ch other
're$erentia+ rate as *a# !e 'rovided "nder a corres'ondin Ta) Treat#%
Note: ;ivi1en1s receive1 6% a 1o.estic corporation for. anotAer 1o.estic
corporation sAall not 6e su6Bect to ta/. 3Sec. ! (;' ("', N)RC7
=state Ta/ an1 ;onorCs Ta/
23. 4n the "irst anniversary o" the death o" D% his heirs hosted a s'mpt'o's dinner "or his
doctors% n'rses and others who attended to D d'ring his $ast i$$ness. he cost o" the dinner
amo'nted to <hp30%000. !ompared to his gross estate% the <hp30%000 did not exceed "ive
percent o" the estate. -s the said cost o" the dinner to commemorate his one year death
anniversary ded'cti&$e "rom his gross estate? Exp$ain yo'r answer. [2001 Bar Exams]
No% This e)'ense (i++ not $a++ "nder an# o$ the a++o(a!+e ded"ctions $ro* ross estate%
&hether vie(ed in the conte)t o$ either $"nera+ e)'enses or *edica+ e)'enses, the sa*e
(i++ not 6"a+i$# as a ded"ction% E)'enses inc"rred a$ter the intern*ent, s"ch as 'ra#ers,
*asses, entertain*ent, or the +i8e are not ded"cti!+e% An# 'ortion o$ the $"nera+ and
!"ria+ e)'enses !orne or de$ra#ed !# re+atives and $riends o$ the deceased are not
ded"cti!+e% J3
th
'ar%, Sec% D /A5 /15 Rev% Res% No% @C@44>K% Medica+ e)'enses, on the other
hand, are a++o(ed on+# i$ inc"rred !# the decedent (ithin one #ear 'rior to his death%
3Section +* (A'(*', N)RC7
Note: Dowever, pursuant to Rev. Re2s. No. E##8, .e1ical e/penses as of tAe last
illness will not for. part of funeral e/penses 6ut sAoul1 6e clai.e1 as .e1ical e/penses
incurre1 witAin one (1' %ear 6efore tAe 1eatA of tAe 1ece1ent.
20. What conditions m'st occ'r in order that a$$ grants% donations and contri&'tions to nonF
stoc(% nonFpro"it private ed'cationa$ instit'tions may &e exempt "rom the donor2s tax 'nder
Sec. 101 BaC o" the ax !ode? [2000 Bar Exams]
The $o++o(in are the conditions9
15 Not *ore than thirt# />4H5 o$ said i$ts sha++ !e "sed !# s"ch donee $or
ad*inistration '"r'oses-
2) The ed"cationa+ instit"tions is incor'orated as a nonCstoc8 entit#, 'a#in
no dividends, overned !# tr"stees (ho receive no co*'ensation, and devotin a++ its
inco*e, (hether st"dents= $ees or i$ts, donations, s"!sidies or other $or*s o$
'hi+anthro'#, to the acco*'+ish*ent and 'ro*otion o$ '"r'oses en"*erated in its
Artic+es o$ Incor'oration% (Sec. 1#1 (A' (8' N)RC of 1&&!'
23% >isc'ss the r'$e on sit's o" taxation with respect to the imposition o" the estate tax on property
$e"t &ehind &y a nonFresident decedent. [2000 Bar Exams]
The va+"e o$ the ross estate o$ a nonCresident decedent (ho is a Fi+i'ino citi.en at the
ti*e o$ his death sha++ !e deter*ined !# inc+"din the va+"e at the ti*e o$ his death o$ a++
'ro'ert#, rea+ or 'ersona+, tani!+e or intani!+e, (herever sit"ated to the e)tent o$ the
interest therein o$ the decedent at the ti*e o$ his death Jsec% L0 /A5, NIRC o$ 1FF?K% These

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'ro'erties sha++ have a sit"s o$ ta)ation in the Phi+i''ines hence s"!7ect to Phi+i''ine
estate ta)es%
On the other hand, in the case o$ a nonCresident decedent (ho at the ti*e o$ his death
(as not a citi.en o$ the Phi+i''ines, on+# that 'art o$ the entire ross estate (hich is
sit"ated in the Phi+i''ines to the e)tent o$ the interest therein o$ the decedent at the ti*e
o$ his death sha++ !e inc+"ded in his ta)a!+e estate% Provided, that, (ith res'ect to
intani!+e 'ersona+ 'ro'ert#, (e a''+# the r"+e o$ reci'rocit#% ()6i1'
29. /% an individ'a$% so$d to B% his &rotherFinF$aw% his $ot with a mar(et va$'e o"
<hp 4ne mi$$ion "or <hp900%000. /2s cost in the $ot is <hp100%000. B is "inancia$$y capa&$e o"
&'ying the $ot.
/ a$so owns : !o.% which has a "ast growing &'siness. / so$d some o" his shares o" stoc( in :
!o. to his (ey exec'tives in : !o. hese exec'tives are not re$ated to /. he se$$ing price is
<hp 3 mi$$ion% which is the &oo( va$'e o" the shares so$d &'t with a mar(et va$'e o" <hp 3
mi$$ion. /2s cost in the shares so$d is <hp 1 mi$$ion. he p'rpose o" / in se$$ing the shares is to
ena&$e his (ey exec'tives to ac8'ire a propriety o" / in se$$ing the shares is to ena&$e his (ey
exec'tives to ac8'ire a propriety interest in the &'siness and have a persona$ sta(e in its
&'siness.
Exp$ain i" the a&ove transactions are s'&@ect to donor2s tax. [1+++ Bar Exams]
The $irst transaction (here a +ot (as so+d !# A to his !rotherCinC+a( $or a 'rice !e+o( its
$air *ar8et va+"e (i++ not !e s"!7ect to donor=s ta) i$ the +ot 6"a+i$ies as a ca'ita+ asset%
The trans$er $or +ess than an ade6"ate and $"++ consideration, (hich ives rise to a dee*ed
i$t, does not a''+# to a sa+e o$ 'ro'ert# s"!7ect to ca'ita+ ains ta)% (Section 1##, N)RC'.
Go(ever, i$ the +ot so+d is an ordinar# asset, the e)cess o$ the $air *ar8et va+"e over the
consideration received sha++ !e considered as a i$t s"!7ect to the donor=s ta)%
The sa+e o$ shares o$ stoc8 !e+o( the $air *ar8et va+"e thereo$ is s"!7ect to the donor=s
ta) '"rs"ant to the 'rovisions o$ Section 144 o$ the Ta) Code% The e)cess o$ the $air
*ar8et va+"e over the se++in 'rice is a dee*ed i$t%
2?. / died% s'rvived &y his wi"e and three chi$dren. he estate tax was
proper$y paid and the estate sett$ed and divided and distri&'ted among the "o'r heirs. Gater%
the B-1 "o'nd o't that the estate "ai$ed to report the income received &y the estate d'ring
administration. he B-1 iss'ed a de"iciency income tax assessment p$'s interest% s'rcharges
and pena$ties. Since the three chi$dren are residing a&road% the B-1 so'ght to co$$ect the "'$$
tax de"iciency on$y against the widow. -s the B-1 correct? [1+++ Bar Exams]
Yes, the EIR is correct% In a case (here the estate ta) has !een distri!"ted to the
heirs, the co++ection re*edies avai+a!+e to the EIR in co++ectin ta) +ia!i+ities o$ an estate
*a# either /15 s"e a++ the heirs and co++ect $ro* each o$ the* the a*o"nt o$ ta)
'ro'ortionate to the inheritance received or /@5 !# virt"e o$ the +ien created "nder Section
@1F, s"e on+# one heir and s"!7ect the 'ro'ert# he received $ro* the estate to the
'a#*ent o$ the estate ta)% The EIR, there$ore, is correct in '"rs"in the second re*ed#
a+tho"h this (i++ ive rise to the riht o$ the heir (ho 'a#s to see8 rei*!"rse*ent $ro*
the other heirs% (C)R vs. Pine1a. 1 SCRA 1#-'. In no case, ho(ever, can the EIR en$orce
the ta) +ia!i+it# in e)cess o$ the share o$ the (ido( in the inheritance%
2). -s the B-1 a'thori.ed to co$$ect estate tax de"iciencies &y the s'mmary remedy o" $evy 'pon
and sa$e o" rea$ properties o" the decedent witho't "irst sec'ring the a'thority o" the co'rt
sitting in pro&ate over the s'pposed wi$$ o" the decedent? [1++) Bar Exams]
Yes% The EIR is a"thori.ed to co++ect estate ta) de$icienc# thro"h the s"**ar#
re*ed# o$ +ev#in "'on and sa+e o$ rea+ 'ro'erties o$ a decedent, (itho"t the conition and
a"thorit# o$ the co"rt sittin in 'ro!ate over the s"''osed (i++ o$ the deceased% As s"ch
the estate ta) is e)e*'t, it is e)e*'ted $ro* the a''+ication o$ the stat"te o$ nonCc+ai*s,
and this is 7"sti$ied !# the necessit# o$ overn*ent $"ndin, i**orta+i.ed in the *a)i*
that ta)es are the +i$e!+ood o$ the overn*ent% (:arcos vs. C)R. GR No. 1#++#. $une -,
1&&!'

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2+. /re contri&'tions to a candidate in an e$ection s'&@ect to donor2s tax? 4n
the part o" the contri&'tor% is it a$$owa&$e as a ded'ction "rom gross income? [1++) Bar Exams]
a5 No, 'rovided the reci'ient candidate had co*'+ied (ith the re6"ire*ent $or $i+in
o$ ret"rns o$ contri!"tions (ith the Co**ission on E+ections as re6"ired "nder the O*ni!"s
E+ection Code%
b) The contri!"tor is not a++o(ed to ded"ct the contri!"tions !eca"se the said
e)'ense is not direct+# attri!"ta!+e to, the deve+o'*ent, *anae*ent, o'eration andMor
cond"ct o$ a trade, !"siness or 'ro$ession (Section 8"(A'(1'(a', N)RC'. F"rther*ore, i$ the
candidate is an inc"*!ent overn*ent o$$icia+ or e*'+o#ee, it *a# even !e considered as a
!ri!e or 8ic8!ac8% (Section 8"(A'(1'(a', N)RC'
Note: )n tAe recent case of A6ello vs. C)R, GR. No. 1#!1, (e6ruar% 8, ##-, tAe
Supre.e Court Ael1 tAat politicalFelectoral contri6utions 1ul% reporte1 to tAe Co..ission
on =lections .a1e after tAe passa2e of RA No. !1**, as provi1e1 in Section 18 tAereof,
are not su6Bect to tAe pa%.ent of an% 2ift ta/. As sucA political contri6utions .a1e
6efore RA No. !1**, are su6Bect to tAe pa%.ent of 2ift ta/es, an1 RA No. !1** provi1es
no retroactive effect on tAis point.
Ta/ A1.inistration
30. #r. <asc'a$2s income "rom $easing his property reaches the maxim'm rate
o" tax 'nder the $aw. Ae donated oneFha$" o" his said property to a nonFstoc(% nonFpro"it
ed'cationa$ instit'tion whose income and assets are act'a$$y% direct$y and exc$'sive$y 'sed "or
ed'cationa$ p'rposes% and there"ore 8'a$i"ied "or tax exemption 'nder /rtic$e :-L% Section 0B3C
o" the !onstit'tion and Section 30BAC o" the ax !ode. Aaving th's trans"erred a portion o" his
said asset% #r. <asc'a$ s'cceeded in paying a $esser tax on the renta$ income derived "rom his
property. -s there tax avoidance or tax evasion? Exp$ain. [2000 Bar Exams]
There is ta) avoidance% Mr% Pasc"a+ has e)'+oited a +ea++# 'er*issive a+ternative
*ethod to red"ce his inco*e ta) !# trans$errin 'art o$ his renta+ inco*e to a ta)Ce)e*'t
entit# thro"h a donation o$ oneCha+$ o$ the inco*e 'rod"cin 'ro'ert#% The donation is
+i8e(ise e)e*'t $ro* the donor=s ta)% The donation is the +ea+ *eans e*'+o#ed to
trans$er the incidence o$ inco*e ta) on the renta+ inco*e%
31. / taxpayer is s'spected not to have dec$ared his correct gross income in his
ret'rn "i$ed "or 1++?. he examiner re8'ested the !ommissioner to a'thori.e him to in8'ire
into the &an( deposits o" the taxpayer so that he co'$d proceed with the net worth method o"
investigation to esta&$ish "ra'd. #ay the examiner &e a$$owed to $oo( into the taxpayer2s &an(
deposits? -n what cases may the !ommissioner or his d'$y a'thori.ed representative &e a$$owed
to in8'ire or $oo( into the &an( deposits o" a taxpayer? [2000 Bar Exams]
No, as this (o"+d !e vio+ative o$ Re'"!+ic Act No% 1340, the Ean8s De'osits Secrec#
La(%
The Co**issioner o$ Interna+ Reven"e or his d"+# a"thori.ed re'resentative *a# !e
a++o(ed to in6"ire or +oo8 into the !an8 de'osits o$ a ta)'a#er in the $o++o(in cases9
a5 For the '"r'ose o$ deter*inin the ross estate o$ a decedent-
b) &here the ta)'a#er has $i+ed an a''+ication $or co*'ro*ise o$ his ta) +ia!i+it#
!# reason o$ $inancia+ inca'acit# to 'a# s"ch ta) +ia!i+it#% (Section *(f', N)RC'
c5 &here the ta)'a#er has sined a (aiver a"thori.in the Co**issioner or his
d"+# a"thori.ed re'resentatives to in6"ire into the !an8 de'osits%
32. / !o.% a <hi$ippine corporation% is a &ig man'"act'rer o" cons'mer goods
and has severa$ s'pp$iers o" raw materia$s. he B-1 s'spects that some o" the s'pp$iers are not
proper$y reporting their income on their sa$es to / !o. he !-1 there"ore*
a. -ss'ed an access $etter to / !o. to "'rnish the B-1 in"ormation on sa$es and payment to
its s'pp$iers.

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&. -ss'ed an access $etter to a &an( B: Ban(C to "'rnish the B-1 on deposits o" some
s'pp$iers o" / !o. on the a$$eged gro'nd that the s'pp$iers are committing tax evasion.
/ !o.% : Ban( and the s'pp$iers have not &een iss'ed &y the B-1 $etter o" a'thority to
examine. / !o. and : Ban( &e$ieve that the B-1 is on a 5"ishing expedition6 and come to yo' "or
co'nse$. What is yo'r advice. [1+++ Bar Exams]
I (i++ advise A Co% and A Ean8 that the EIR is 7"sti$ied on+# in ettin in$or*ation $ro*
the $or*er !"t not $ro* the +atter% The EIR is a"thori.ed to o!tain in$or*ation $ro* other
'ersons other than those (hose interna+ reven"e ta) +ia!i+it# is s"!7ect to a"dit or
investiation% Go(ever this 'o(er sha++ not !e constr"ed as rantin the Co**issioner the
a"thorit# to in6"ire into !an8 de'osits%
33. #ay the !ommissioner o" the -nterna$ 1even'e compromise the payment o"
the withho$ding tax Btax ded'cted and withhe$d at so'rceC where the "inancia$ position o" the
taxpayer demonstrates a c$ear ina&i$ity to pay the assessed tax? [1++) Bar Exams]
No% A ta)'a#er (ho is constit"ted as (ithho+din aent (ho has ded"cted and (ithhe+d
at so"rce the ta) on the inco*e 'a#*ent *ade !# hi* ho+ds the ta)es as tr"st $"nds $or the
overn*ent (Section -+(;', N)RC' and is o!+iated to re*it the* to the EIR% The
s"!se6"ent ina!i+it# o$ the (ithho+din aent to 'a#Mre*it the ta) (ithhe+d is not a ro"nd
$or co*'ro*ise !eca"se the (ithho+din ta) is not a ta) "'on the (ithho+din aent !"t it
is on+# a 'roced"re $or the co++ection o$ a ta)%
30. he Secretary o" ,inance% 'pon recommendation o" the !ommissioner o"
-nterna$ 1even'e% iss'ed a 1even'e 1eg'$ation 'sing gross income as the tax &ase "or
corporations doing &'siness in the <hi$ippines.
-s the 1even'e 1eg'$ation va$id? [1++0 Bar Exams]
The re"+ation esta!+ishin ross inco*e as the ta) !ase $or cor'orations doin !"siness
in the Phi+i''ines /do*estic as (e++ as resident $orein5 is not va+id% This is no +oner
i*'+e*entation o$ the +a( !"t act"a++# it constit"tes +eis+ation !eca"se a*on the 'o(ers
that are e)c+"sive+# (ithin the +eis+ative a"thorit# to ta) is the 'o(er to deter*ine the
a*o"nt o$ the ta). (see 1 Coole% 1!*E1+"'% Certain+#, i$ the ta) is +i*ited to ross inco*e
(itho"t ded"ctions o$ these cor'orations, this is chanin the a*o"nt o$ the ta) as said
a*o"nt "+ti*ate+# de'ends on the ta)a!+e !ase%
Note: TAe Presi1ent, Aowever, upon tAe reco..en1ation of tAe Secretar% of
(inance, .a% effective $anuar% 1, ###, allow corporations tAe option to 6e ta/e1 at
(1-G of 2ross inco.e, after tAe followin2 con1itions Aave 6een satisfie1:
1. A ta/ effort ration of twent% percent (#G' of Gross National Pro1uct (GNP'4
. A ration of fort% percent ("#G' of inco.e ta/ collection to total ta/ revenues4
8. A ,AT ta/ effort of four percent ("G' GNP4 an1
". A #.& percent (#.&G ratio of tAe Consoli1ate1 Pu6lic Sector (inancial
Position (CPS(P' to GNP.
Ta/ Re.e1ies un1er tAe N)RC
35. -n the investigation o" the withho$ding tax ret'rns o" AZ Medina Security
Agency (AZ Medina) "or the taxa&$e years 1++? and 1++)% a discrepancy &etween the taxes
withhe$d "rom its emp$oyees and the amo'nts act'a$$y remitted to the government was "o'nd.
/ccording$y% &e"ore the period o" prescription commenced to r'n% the B-1 iss'ed an assessment
and a demand $etter ca$$ing "or the immediate payment o" the de"iciency withho$ding taxes in
the tota$ amo'nt o" <230%000.00. !o'nse$ "or AZ Medina protested the assessment "or &eing
n'$$ and void on the gro'nd that no preFassessment notice had &een iss'ed. Aowever% the

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protest was denied. !o'nse$ then "i$ed a petition "or prohi&ition with the !o'rt o" ax /ppea$s
to restrain the co$$ection o" the tax. [2002 Bar Exams]
/. -s the contention o" the co'nse$ tena&$e? Exp$ain.
No, the contention o$ the co"nse+ is "ntena!+e% Section @@L o$ the Ta) Code e)'ress+#
'rovides that no 'reCassess*ent notice is re6"ired (hen a discre'anc# has !een
deter*ined !et(een the ta) (ithhe+d and the a*o"nt act"a++# re*itted !# the
(ithho+din aent% Since the a*o"nt assessed re+ates to de$icienc# (ithho+din ta)es, the
EIR is correct in iss"in the assess*ent and de*and +etter ca++in $or the i**ediate
'a#*ent o$ the de$icienc# (ithho+din ta)es% (Sec. +, N)RC'
B. Wi$$ the specia$ civi$ action "or prohi&ition &ro'ght &e"ore the !/ 'nder Sec.11 o"
1./. Ho. 1123 prosper? >isc'ss yo'r answer.
The S'ecia+ Civi+ action $or 'rohi!ition (i++ not 'ros'er, !eca"se the CTA has no
7"risdiction to entertain the sa*e% The 'o(er to iss"e (rit o$ in7"nction 'rovided $or "nder
Sec% 11 o$ R%A% 11@0 is on+# anci++ar# to its a''e++ate 7"risdiction to iss"e (rits o$
'rohi!ition or in7"nction inde'endent+# o$ and a'art $ro* an a''ea+ed case% The re*ed# is
to a''ea+ the decision o$ the EIR% /Collector v. 9useco. 8 SCRA 818 31&*17'
39. #r. !astro inherited "rom his "ather% who died on ='ne 10% 1++0% severa$ pieces o"
rea$ property in #etro #ani$a. he estate tax ret'rn was "i$ed and the estate tax d'e in
the amo'nt o" <230%000.00 was paid on >ecem&er 9% 1++0. he ax ,ra'd >ivision o" the
B-1 investigated the case on the &asis o" con"identia$ in"ormation given &y #r. Santos on
=an'ary 9% 1++) that the ret'rn "i$ed &y #r. !astro was "ra'd'$ent and that he "ai$ed to
dec$are a$$ properties $e"t &y his "ather with intent to evade payment o" the correct tax.
/s a res'$t% a de"iciency estate tax assessment "or <1%230%000.00% inc$'sive o" 30E
s'rcharge "or "ra'd% interest and pena$ty% was iss'ed against him on =an'ary 10% 2001. #r.
!astro protested the assessment% on the gro'nd o" prescription. [2002 Bar Exams]
aC >ecide #r. !astroNs protest.
The 'rotest sho"+ d !e reso+ved aainst Mr% Castro% &hat (as $i+ed is a $ra"d"+ent
ret"rn *a8in the 'rescri'tive 'eriod $or assess*ent ten #ears /145 $ro* discover# o$ the
$ra"d (Section , N)RC'% Accordin+#, the assess*ent (as iss"ed (ithin the 'rescri'tive
'eriod to *a8e an assess*ent !ased on a $ra"d"+ent ret"rn%
&C What $ega$ re8'irements m'st #r. Santos comp$y with so that he can c$aim his
reward? Exp$ain.
The +ea+ re6"ire*ents that *"st !e co*'+ied !# Mr% Santos to entit+e hi* to
re(ard are as $o++o(s9
Ge sho"+d vo+"ntari+# $i+e a con$identia+ in$or*ation "nder oath (ith the La( Division
o$ the E"rea" o$ Interna+ Reven"e a++ein therein the s'eci$ic vio+ations constit"tin
$ra"d-
The in$or*ation *"st not #et !e in the 'ossession o$ the E"rea" o$ Interna+ Reven"e, or
re$er to a case a+read# 'endin or 'revio"s+# investiated !# the E"rea" o$ Interna+
Reven"e-
Mr% Santos sho"+d not !e a overn*ent e*'+o#ee or a re+ative o$ a overn*ent
e*'+o#ee (ithin the si)th deree o$ consan"init#- and
The in$or*ation *"st res"+t to co++ections o$ reven"es andMor $ines and 'ena+ties (Sec.
+, N)RC'%
Note: TAe tAirt% percent (8#G' rule un1er Sec. "+ (0' of tAe N)RC, tAat is, tAe failure
to report sales, receipts or inco.e in an a.ount e/cee1in2 tAirt% percent (8#G' of tAat
1eclare1 per return, an1 a clai. of 1e1uctions in an a.ount e/cee1in2 tAirt% percent
(8#G' of actual 1e1uctions, sAall ren1er tAe ta/pa%er lia6le for su6stantial
un1er1eclaration of sales, receipts or inco.e or for overstate.ent of 1e1uctions, applies

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onl% for purposes of i.posin2 tAe surcAar2e, i.e. twent% five percent (-G' versus fift%
percent (-#G'.
(or purposes of prescription, i.e., tAe tAree (8' %ear prescriptive perio1 (Sec. #8,
N)RC' versus tAe ten (1#' %ear perio1 in case of false or frau1ulent return (Sec. ,
N)RC', tAe 8# G rule 1oes not appl%4 intent to 1efrau1 .ust still 6e esta6lisAe1.
3?. Inder what conditions may the !ommissioner o" -nterna$ 1even'e &e a'thori.ed to*
a.C !ompromise the payment o" any interna$ reven'e tax? [2000 Bar Exams]
The Co**issioner o$ Interna+ Reven"e *a# !e a"thori.ed to co*'ro*ise the 'a#*ent
o$ an# interna+ reven"e ta) (here9
1% A reasona!+e do"!t as to the va+idit# o$ the c+ai* aainst the ta)'a#er e)ist- or
2. The $inancia+ 'osition o$ the ta)'a#er de*onstrates a c+ear ina!i+it# to 'a# the
assessed ta)% /Revenue Re2ulation No. 8#E#'
&.C /&ate or cance$ a tax $ia&i$ity?
The Co**issioner o$ Interna+ Reven"e *a# a!ate or cance+ a ta) +ia!i+it# (hen9
1% The ta) or an# 'ortion thereo$ a''ears to !e "n7"st+# or e)cessive+# assessed- or
2. The ad*inistration and co++ection costs invo+ved do not 7"sti$# the co++ection o$ the
a*o"nt d"e% 3Sec. #" (0', N)RC of 1&&!7
3). #r. 1eyes% a ,i$ipino citi.en engaged in the rea$ estate &'siness% "i$ed his 1++0 income tax
ret'rn on #arch 20% 1++3. 4n >ecem&er 13% 1++3% he $e"t the <hi$ippines as an immigrant to
@oin his "ami$y in !anada. /"ter the investigation o" said ret'rn% the B-1 iss'ed a notice o"
de"iciency income tax assessment on /pri$ 13% 1++). #r. 1eyes ret'rned to the <hi$ippines as a
&a$i(&ayan on >ecem&er )% 1++). ,inding his name to &e in the $ist o" de$in8'ent taxpayers% he
"i$ed a protest against the assessment on the gro'nd that he did not receive the notice o"
assessment and that the assessment had prescri&ed. Wi$$ the protest prosper? Exp$ain. [2000
Bar Exams]
No% Prescri'tion has not set in !eca"se the 'eriod o$ +i*itations $or the E"rea" o$
Interna+ reven"e to iss"e an assess*ent (as s"s'ended d"rin the ti*e that Mr% Re#es (as
o"t o$ the Phi+i''ines or $ro* the 'eriod Dece*!er 10, 1FF0 "' to Dece*!er L, 1FFL%
(Section 8 in relation to Section #8, N)RC'
3+. / !o.% a <hi$ippine !orporation% "i$ed its 1++3 -ncome ax 1et'rn B-1C on /pri$ 13% 1++9
showing a net $oss. 4n Hovem&er 10% 1++9% it amended its 1++3 -1 to show more $osses. /"ter
a tax investigation% the B-1 disa$$owed certain ded'ctions c$aimed &y / !o.% p'tting / !o. in a
net income position. /s a res'$t% on /'g'st 3% 1+++% the B-1 iss'ed a de"iciency income
assessment against / !o. / !o. protested the assessment on the gro'nd that it has prescri&ed.
>ecide. [1+++ Bar Exams]
The riht o$ the EIR to assess the ta) has not 'rescri!ed% The r"+e is that interna+
Reven"e ta)es sha++ !e assessed (ithin three #ears a$ter the +ast da# 'rescri!ed !# +a( $or
the $i+in o$ the ret"rn% (Section #8, N)RC'. Go(ever, i$ the ret"rn oriina++# $i+ed is
a*ended s"!stantia++#, the co"ntin o$ the three #ear 'eriod starts $ro* the date the
a*ended ret"rn (as $i+ed. (C)R vs. PAoeni/ Assurance Co., 1" SCRA -'. There is
s"!stantia+ a*end*ent in this case !eca"se a ne( ret"rn (as $i+ed dec+arin *ore +osses,
(hich can on+# !e done either /15 in red"cin ross inco*e or /@5 in increasin the ite*s o$
ded"ctions, c+ai*ed%
00. / !o.% a <hi$ippine corporation% received an income tax de"iciency assessment "rom the B-1
on #ay 3% 1++3. 4n #ay 31% 1++3% / !o. "i$ed its protest with the B-1. 4n ='$y 30% 1++3% / !o.
s'&mitted to the B-1 a$$ re$evant s'pporting doc'ments. he !-1 did not "orma$$y r'$e on the
protest &'t on =an'ary 23% 1++9% / !o. was served a s'mmons and a copy o" the comp$aint "or
co$$ection o" the tax de"iciency "i$ed &y the B-1 with the 1egiona$ ria$ !o'rt B1!C. 4n

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,e&r'ary 20% 1++9% / !o. &ro'ght a <etition "or review &e"ore the !/. he B-1 contended that
the <etition is premat're since there was no "orma$ denia$ o" the protest o" / !o. and sho'$d
there"ore &e dismissed. [1+++ Bar Exams]
aC >oes the !/ have @'risdiction over the case?
Yes, the CTA has 7"risdiction over the case !eca"se this 6"a+i$ies as an a''ea+ $ro* the
Co**issioner=s decision on dis'"ted assess*ent% &hen the Co**issioner decided to
co++ect the ta) assessed (itho"t $irst decidin on the ta)'a#er=s 'rotest, the e$$ect o$ the
Co**issioner=s action o$ $i+in a 7"dicia+ action $or co++ection is a decision o$ denia+ o$ the
'rotest, in (hich event the ta)'a#er *a# $i+e an a''ea+ (ith the CTA% (Repu6lic vs. Li.
Tian Ten2 5 Sons, )nc. 1* SCRA -+"4 ;a%rit vs. CruH. LE8&&1#. Sept. *, 1&&+'
&C >oes the 1! have @'risdiction over the co$$ection case "i$ed &y the B-1? Exp$ain.
The RTC has no 7"risdiction over the co++ection case $i+ed !# the EIR% The $i+in o$ an
a''ea+ (ith the CTA has the e$$ect o$ divestin the RTC o$ 7"risdiction over the co++ection
case% At the *o*ent the ta)'a#er a''ea+s the case to the CTA in vie( o$ the
Co**issioner=s $i+in o$ the co++ection case (ith the RTC (hich (as considered as a
decision o$ denia+, it ives a 7"sti$ia!+e !asis $or the ta)'a#er to *ove $or dis*issa+ in the
RTC o$ the Bovern*ent=s action to co++ect the ta) +ia!i+it# "nder dis'"te% (9a6es vs. (loBo.
1- SCRA !+4 San $uan vs. ,asIueH. 8 SCRA &'% There is no $ina+, e)ec"tor# and
de*anda!+e assess*ent (hich can !e en$orced !# the EIR, once a ti*e+# a''ea+ is $i+ed%
01. / !o.% a <hi$ippine corporation received an income tax de"iciency assessment "rom the B-1
on Hovem&er 23% 1++9. 4n >ecem&er 10% 1++9% / !o. "i$ed its protest with the B-1. 4n #ay 20%
1++?% the B-1 iss'ed a warrant o" distraint to en"orce the assessment. his warrant was served
on / !o. on #ay 23% 1++?. -n a $etter dated ='ne 0% 1++? and received &y / !o. "ive days $ater%
the !-1 "orma$$y denied / !o.2s protest stating that it constit'tes his "ina$ decision on the
matter. 4n ='$y 9% 1++?% / !o. "i$ed a <etition "or 1eview with !/. he B-1 moved to dismiss
the <etition on the gro'nd that the !/ has no @'risdiction over the case. >ecide. [1+++ Bar
Exams]
The CTA has 7"risdiction over the case% The a''ea+a!+e decision is the one (hich
cateorica++# stated that the Co**issioner=s action on the dis'"ted assess*ent is $ina+ and,
there$ore, the rec8onin o$ the >4 da# 'eriod to a''ea+ (as on 2"ne F, 1FF?% The $i+in o$
the 'etition $or revie( (ith the CTA (as ti*e+# *ade% The S"'re*e Co"rt has r"+ed that
the CIR *"st cateorica++# state that his action on a dis'"ted assess*ent is $ina+- other(ise,
the 'eriod to a''ea+ (i++ not co**ence to r"n% That $ina+ action cannot !e i*'+ied $ro*
the *ere iss"ance o$ a (arrant o$ distraint and +ev#% (C)R vs. Union SAippin2 Corp. 1+-
SCRA -"!'
02. / !o. is the who$$y owned s'&sidiary o" B !o.% a nonFresident Jerman company. / !o. has a
trademar( $icensing agreement with B !o. 4n ,e&. 10% 1++3% / !o. remitted to B !o. roya$ties
o" <hp 10 mi$$ion% which / !o. s'&@ected to a W o" 23E or <hp 2%300%000. Ipon advice o"
co'nse$% / !o. rea$i.ed that the proper W rate is 10E. 4n #arch 20% 1++9% / !o. "i$ed a c$aim
"or re"'nd o" <2% 300% 000 with the B-1. he B-1 denied the c$aim on Hov. 13% 1++9. 4n Hov.
2)% 1++9% / !o. "i$ed a <etition "or 1eview with the !/. he B-1 attac(ed the capacity o" /
!o.% as agent% to &ring the re"'nd case. >ecide the iss'e. [1+++ Bar Exams]
A Co%, the (ithho+din aent o$ the nonCresident $orein cor'oration is entit+ed to c+ai*
$or re$"nd o$ e)cess (ithho+din ta) 'aid on the inco*e o$ said cor'oration in the
Phi+i''ines% Eein a (ithho+din aent, it is the one he+d +ia!+e $or an# vio+ation o$ the
(ithho+din ta) +a( sho"+d s"ch a vio+ation occ"r% In the sa*e vein, it sho"+d !e a++o(ed to
c+ai* a re$"nd in case o$ over(ithho+din% (C)R vs. Jan1er PAils. 1*# SCRA -!84 C)R vs.
Procter an1 Ga.6le P:C. #" SCRA 8!!'
03. -s assessment necessary &e"ore a taxpayer may &e prosec'ted "or wi$$"'$$y attempting in
any manner to evade or de"eat any tax imposed &y the -nterna$ 1even'e !ode? [1++) Bar
Exams]

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No% Assess*ent is not necessar# !e$ore a ta)'a#er *a#!e 'rosec"ted i$ there is a
'ri*a $acie sho(in o$ a (i++$"+ atte*'t to evade ta)es as in the ta)'a#er=s $ai+"re to
dec+are a s'eci$ic ite* o$ ta)a!+e inco*e in his inco*e ta) ret"rns. (Un2a6 vs. Cusi. &!
SCRA +!!'. On the contrar#, i$ the ta)es a++eed to have !een evaded is co*'"ted !ased
on re'orts a''roved !# the EIR there is a 'res"*'tion o$ re"+arit# o$ the 'revio"s
'a#*ent o$ ta)es, so that "n+ess and "nti+ the EIR has *ade a $ina+ deter*ination o$ (hat is
s"''osed to !e the correct ta)es, the ta)'a#er sho"+d not !e '+aced in the cr"ci!+e o$
cri*ina+ 'rosec"tion. (C)R vs. (ortune To6acco Corp. GR No. 11&8. $une ", 1&&*'
00. / corporation "i$es its income tax ret'rn on a ca$endar year &asis. ,or the "irst 8'arter o"
1++3% it paid on 30 #ay 1++3 its 8'arter$y income tax in the amo'nt o" <hp 3 mi$$ion. 4n 20
/'g'st 1++3% it paid the second 8'arter$y income tax o" <hp 0.3 mi$$ion. he third 8'arter
res'$ted in a net $oss% and no tax was paid. ,or the "o'rth and "ina$ ret'rn "or 1++3% the
company reported a net $oss "or the year% and the taxpayer indicated in the income tax ret'rn
that it opted to c$aim a re"'nd o" the 8'arter$y tax payments.
4n 10 =an'ary 1++0% the corporation "i$ed with the B-1 a written c$aim "or the re"'nd o"
<hp 3.3 mi$$ion.
B-1 "ai$ed to act on the c$aim "or re"'ndO hence% on 02 #arch 1++9% the corporation "i$ed a
petition "or review with the !/ on its c$aim "or re"'nd o" the overpayment o" its 1++3
8'arter$y income tax. B-1% in its answer to the petition% a$$eged that the c$aim "or re"'nd was
"i$ed &eyond the reg$ementary period.
>id the c$aim "or re"'nd prescri&e? [1++? Bar Exams]
The c+ai* $or re$"nd has 'rescri!ed% The co"ntin o$ the t(o #ear 'rescri'tive 'eriod
$or $i+in a c+ai* $or re$"nd is co"nted not $ro* the date (hen the 6"arter+# inco*e ta)es
(ere 'aid !"t on the date (hen the $ina+ ad7"st*ent ret"rn (as $i+ed% (C)R vs. T:K Sales,
)nc. GR No. +8!8*. $an. 1-, 1&&4 C)R vs. PAilA. Life )nsurance Co., )nc.. GR No. 1#-#+.
:a% &, 1&&-'% It is o!vio"s that the ann"a+ inco*e ta) ret"rn (as $i+ed !e$ore 2an"ar#
14, 1FF3 !eca"se the (ritten c+ai* $or re$"nd (as $i+ed (ith the EIR on 2an"ar# 14, 1FF3%
Since the t(o #ear 'rescri'tive 'eriod is not on+# a +i*itation o$ action $or !rinin the case
to the 7"dicia+ stae, the 'etition $or revie( $i+ed (ith the CTA on March 4@, 1FFD is
!e#ond the re+e*entar# 'eriod%
Note: (or ,AT refun1s, tAe countin2 of tAe two %ear prescriptive perio1 is counte1
fro. tAe close of tAe ta/a6le Iuarter (Sec. 11, N)RC'
03. / taxpayer received% on 13 =an'ary 1++9% an assessment "or an interna$ reven'e tax
de"iciency. 4n 10 ,e&r'ary 1++9% the taxpayer "orthwith "i$ed a petition "or review with the
!/. !o'$d the ax !o'rt entertain the petition? [1++? Bar Exams]
No% Ee$ore a ta)'a#er can avai+ o$ 7"dicia+ re*ed# he *"st $irst e)ha"st ad*inistrative
re*edies !# $i+in a 'rotest (ithin >4 da#s $ro* recei't o$ the assess*ent% It is the
Co**issioner=s decision on the 'rotest that ive the Ta) Co"rt 7"risdiction over the case
'rovided that the a''ea+ is $i+ed (ithin >4 da#s $ro* recei't o$ the Co**issioner=s
decision% An assess*ent !# the EIR is not the Co**issioner=s decision $ro* (hich a
'etition $or revie( *a# !e $i+ed (ith the CTA% Rather, it is the action ta8en !# the
Co**issioner in res'onse to the ta)'a#er=s 'rotest on the assess*ent that (o"+d
constit"te the a''ea+a!+e decision% (Section !, RA No. 11-'
Local Govern.ent Co1e
09. :% a taxpayer who &e$ieves that an ordinance passed &y the !ity !o'nci$ o"
<asay is 'nconstit'tiona$ "or &eing discriminatory against him% wants to (now "rom yo'% his tax
$awyer% whether or not he can "i$e an appea$. -n the a""irmative% he as(s yo' where s'ch
appea$ sho'$d &e made* the Secretary o" ,inance% or the Secretary o" ='stice% or the !o'rt o"
ax /ppea$s% or the reg'$ar co'rts. What wo'$d yo'r advice &e to yo'r c$ient% :? [2003 Bar
Exams]

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The a''ea+ sho"+d !e *ade (ith the Secretar# o$ 2"stice% An# 6"estion on the
constit"tiona+it# or +ea+it# o$ a ta) ordinance *a# !e raised on a''ea+ (ith the Secretar# o$
2"stice (ithin >4 da#s $ro* the e$$ectivit# thereo$% (Section 1+!, LGC4 Da2ono% :ar<et
,en1or Association vs. :unicipalit% of Da2ono%. 8!* SCRA 8!*'
0?. Inder /rt. 013 o" the !ivi$ !ode% in order "or machinery and e8'ipment to &e considered
rea$ property% they m'st &e p$aced &y the owner o" the $and and in addition% m'st tend to
direct$y meet the needs o" the ind'stry or wor(s carried on the owner. 4i$ companies s'ch as
!a$tex and She$$% insta$$ 'ndergro'nd tan(s in the gaso$ine station $ocated on $and $eased &y
these companies "rom others. /re those 'ndergro'nd tan(s which were not p$aced &y the owner
o" the $and &'t were instead p$aced there &y the $essee o" the $and% considered rea$ property
"or p'rposes o" rea$ property taxation 'nder the GJ!? Exp$ain. [2001 P 2003 Bar Exams]
Yes% The "nderro"nd tan8s a+tho"h insta++ed !# the +essee, She++ and Ca+te), are
considered rea+ 'ro'ert# $or '"r'oses o$ the i*'osition o$ the rea+ 'ro'ert# ta)es% It is on+#
$or '"r'oses o$ e)ec"tin a $ina+ 7"d*ent that these *achiner# and e6"i'*ent, insta++ed
!# the +essee on a +eased +and, (o"+d not !e considered as rea+ 'ro'ert#% E"t in the
i*'osition o$ the rea+ 'ro'ert# ta), the "nderro"nd tan8s are ta)a!+e as necessar#
$i)t"res o$ the aso+ine station (itho"t (hich the aso+ine station (o"+d not !e o'erationa+%
/Calte/ PAils. )nc. vs C0AA. 11" SCRA &*5
0). he rea$ property o" #r. and #rs. /nge$es% sit'ated in a commercia$ area in
"ront o" the p'&$ic #ar(et% was dec$ared in their ax >ec$aration as residentia$ &eca'se it
had &een 'sed &y them as their "ami$y residence "rom the time o" its constr'ction in 1++0.
Aowever% since =an'ary 1++?% when the spo'ses $e"t "or the Inited States to stay there
permanent$y with their chi$dren% the property has &een rented to a sing$e proprietor
engaged in the sa$e o" app$iances and agriFprod'cts. he <rovincia$ /ssessor rec$assi"ied the
property as commercia$ "or tax p'rposes starting =an'ary 1++). #r. and #rs. /nge$es
appea$ed to the Goca$ Board o" /ssessment /ppea$s contending that the ax >ec$aration
previo's$y c$assi"ying their property as residentia$ is &inding.
Aow sho'$d the appea$ &e decided? [2002 Bar Exams]
The a''ea+ sho"+d !e decided aainst Mr% and Mrs% Ane+es% The +a( $oc"ses on the act"a+ "se
o$ the 'ro'ert# $or c+assi$ication, va+"ation and assess*ent '"r'oses reard+ess o$ o(nershi'%
Section @1? o$ the Loca+ Bovern*ent Code 'rovides that Nrea+ 'ro'ert#, sha++ !e c+assi$ied,
va+"ed, and assessed on the !asis o$ its act"a+ "se reard+ess o$ (here +ocated, (hoever o(ns it,
and (hoever "ses itN%
0+. /side "rom the &asic rea$ estate tax% give three other taxes that may&e imposed &y
provincia$ and city government as we$$ as &y m'nicipa$ities in the #etro #ani$a area? [2002 Bar
Exams]
The $o++o(in rea+ 'ro'ert# ta)es area aside $ro* the !asic rea+ 'ro'ert# ta), *a# !e
i*'osed !# 'rovincia+ and cit# overn*ent as (e++ as !# *"nici'a+ities in the Metro Mani+a
area9
a% Additiona+ +ev# on rea+ 'ro'ert# $or the S'ecia+ Ed"cation F"nd /Sec%@>0,
LBC5-
!% Additiona+ AdCva+ore* ta) on id+e +ands /Sec%@>D, LBC5-
c% S'ecia+ Lev# /SEC%@345%
A+ternative Ans(er9
A% The $o++o(in ta)es, aside $ro* the !asic rea+ estate ta) *a# !e i*'osed !#9
1% Cit#MProvincia+ Bovern*ent
a5 Printer=s or '"!+isher=s ta)
!5 Franchise ta)
c5 Pro$essiona+ ta)
@% M"nici'a+ities in the Metro Mani+a area
a5 Ann"a+ $i)ed ta) on *an"$act"rers, asse*!+ers, re'ac8ers,
'rocessors, !re(ers, disti++ers, recti$iers, and co*'o"nders o$ +i6"ors,

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disti++ed s'irits and (ines or *an"$act"re o$ an# artic+e o$ co**erce o$
(hatever 8ind or nat"re-
!5 Ann"a+ $i)ed ta) on (ho+esa+ers, distri!"tors, or dea+ers in an#
artic+e o$ co**erce o$ (hatever 8ind or nat"re-
c5 Percentae ta) on retai+ers%
30. / !o.% a <hi$ippine corporation% is the owner o" machinery% e8'ipment and "ixt'res
$ocated at its p$ant in #'ntin$'pa !ity. he !ity /ssessor characteri.ed a$$ these properties as
rea$ properties s'&@ect to the rea$ property tax. / !o. appea$ed the matter to the #'ntin$'pa
Board o" /ssessment /ppea$s. he Board r'$ed in "avor o" the !ity. -n accordance with 1/ Ho.
1123% / !o. &ro'ght a petition "or review &e"ore the !/ to appea$ the decision o" the !ity
Board o" /ssessment /ppea$s.
-s the <etition "or 1eview proper? Exp$ain. [1+++ Bar Exams]
No% The CTA is devoid o$ 7"risdiction to entertain a''ea+s $ro* the decision o$ the Cit#
Eoard o$ Assess*ent A''ea+s% Said decision is instead a''ea+a!+e to the Centra+ Eoard o$
Assess*ent A''ea+s, (hich "nder the Loca+ Bovern*ent Code, has a''e++ate 7"risdiction
over decisions o$ Loca+ Eoard o$ Assess*ent A''ea+s% (Calte/ PAils. )nc. vs. Central 0oar1
of Assess.ent Appeals. LE-#"**. :a% 81, 1&+'
Note: Un1er tAe new CTA law, RA No. &+ wAicA a.en1e1 RA No. 11-, 1ecisions of
tAe Central 0oar1 of Assess.ent Appeals are now appeala6le to tAe Court of Ta/ Appeals
an1 no lon2er to tAe Court of Appeals.
31. he #'nicipa$ity o" #a$o$os passed an ordinance imposing a tax on any sa$e or
trans"er o" rea$ property $ocated within the m'nicipa$ity at a rate o" oneF"o'rth B1M0C o" one
percent'm B1EC o" the tota$ consideration o" s'ch transaction. : so$d a parce$ o" $and in #a$o$os
which he inherited "rom his deceased parents and re"'sed to pay the a"oresaid tax. Ae instead
"i$ed appropriate case as(ing that the ordinance &e dec$ared n'$$ and void since s'ch a tax can
on$y &e co$$ected &y the nationa$ government% as in "act he has paid B-1 the re8'ired capita$
gains tax. he m'nicipa$ity co'ntered that 'nder the constit'tion% each $oca$ government is
vested with the power to create its own so'rces o" reven'e and to $evy taxes% and it imposed
the s'&@ect tax in the exercise o" said constit'tiona$ a'thority.
1eso$ve the controversy. [1++2 Bar Exams]
The ordinance 'assed !# the M"nici'a+it# o$ Ma+o+os i*'osin a ta) on the sa+e or
trans$er o$ rea+ 'ro'ert# is void% The Loca+ Ta) Code on+# a++o(s 'rovinces and cities to
i*'ose Ta) on the trans$er o$ o(nershi' o$ rea+ 'ro'ert#% (Sec ! an1 8, Local Ta/ Co1e'%
M"nici'a+ities are 'rohi!ited $ro* i*'osin said ta) that 'rovinces are s'eci$ica++#
a"thori.ed to +ev# (Sec. , Local Ta/ Co1e'
&hi+e it is tr"e that the Constit"tion has iven !road 'o(ers o$ ta)ation to +oca+
overn*ent "nits, this de+eation ho(ever, is s"!7ect to s"ch +i*itations as *a# !e
'rovided !# +a(% (Sec -, Art K, 1&+! Constitution'
Tariff an1 Custo.s Co1e
32. : and his wi"e% D% ,i$ipinos $iving in the <hi$ippines% went on a threeFmonth p$eas're trip
aro'nd the wor$d d'ring the months o" ='ne% ='$y and /'g'st 2002. -n the co'rse o" their trip%
they acc'm'$ated some persona$ e""ects which were necessary% appropriate and norma$$y 'sed
in $eis're trips% as we$$ as so'venirs in nonFcommercia$ 8'antities. /re they 5ret'rning
residents6 "or p'rposes o" Section 103 o" the ari"" and !'stoms !ode? Exp$ain. [2003 Bar
Exams]
No% The ter* :ret"rnin residents< re$ers to nationa+s (ho have sta#ed in a $orein
co"ntr# $or a 'eriod o$ at +east si) /D5 *onths% /Section 140/$5 o$ the Tari$$ and C"sto*s
Code5% D"e to their +i*ited d"ration o$ sta# a!road A and Y are not considered as
:ret"rnin residents< !"t the# are *ere+# considered as trave+ers or to"rists (ho en7o# the
!ene$it o$ conditiona++# $ree i*'ortation%

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JNote9 Credit *"st +i8e(ise !e iven i$ the ans(ers is in the a$$ir*ative, considerin
that trave+ers or to"rists are iven the sa*e ta) treat*ent as that o$ ret"rnin residents,
treatin their 'ersona+ e$$ects, not in co**ercia+ 6"antities, as conditiona++# $ree
i*'ortation%K
33. Whenever the decision o" the !o$$ector o" !'stoms is adverse to the government% it is
a'tomatica$$y e$evated to the !ommissioner "or review% and i" it is a""irmed &y him% it is
a'tomatica$$y e$evated to the Secretary o" ,inance "or review.
What is the &asis o" the a'tomatic review proced're in the B'rea' o" !'stoms? Exp$ain.
[2002 Bar Exams]
A"to*atic revie( is intended to 'rotect the interest o$ the Bovern*ent in the
co++ection o$ ta)es and c"sto*s d"ties in sei."re and 'rotest cases% &itho"t s"ch a"to*atic
revie(, neither the Co**issioner o$ C"sto*s nor the Secretar# o$ Finance (o"+d 8no(
a!o"t the decision +aid do(n !# the Co++ector $avorin the ta)'a#er% The 'o(er to decide
sei."re and 'rotest cases *a# !e a!"sed i$ no chec8s are instit"ted% A"to*atic revie( is
necessar# !eca"se no!od# is e)'ected to a''ea+ the decision o$ the Co++ector (hich is
$avora!+e to the ta)'a#er and adverse to the Bovern*ent% This is the reason (h#
(henever the decision o$ the Co++ector is adverse to the Bovern*ent, the said decision is
a"to*atica++# e+evated to the Co**issioner $or revie(- and i$ s"ch decision is a$$ir*ed !#
the Co**issioner, the sa*e sha++ !e a"to*atica++# e+evated to and !e $ina++# revie(ed !#
the Secretar# o$ Finance /9ao<asin vs. Co..issioner of Custo.s. 1+# SCRA -&1. 1&+&5
30. 4n the &asis o" a warrant o" sei.'re and detention iss'ed &y the !o$$ector o"
!'stoms "or the p'rpose o" en"orcing the ari"" and !'stoms Gaws% assorted &rands o"
cigarettes said to have &een i$$ega$$y imported into the <hi$ippines were sei.ed "rom a store
where they were open$y o""ered "or sa$e. >issatis"ied with the decision rendered a"ter hearing
&y the !o$$ector o" !'stoms on the con"iscation o" the artic$es% the importer "i$ed a petition "or
review with the !o'rt o" ax /ppea$s. he !o$$ector moved to dismiss the petition "or $ac( o"
@'risdiction. 1'$e on the motion. [2000 Bar Exams]
Motion ranted% The Co"rt o$ Ta) A''ea+s has 7"risdiction on+# over decisions o$ the
Co**issioner o$ C"sto*s in cases invo+vin sei."res, detention or re+ease o$ 'ro'ert#
a$$ected% (Section !, RA No. 11-'. There is no decision #et o$ the Co**issioner (hich is
s"!7ect to revie( !# the Co"rt o$ Ta) A''ea+s%
33. Inder the same "acts a&ove% co'$d the importer "i$e an action in the 1egiona$ ria$ !o'rt
"or rep$evin on the gro'nd that the artic$es are &eing wrong"'$$y detained &y the !o$$ector o"
!'stoms since the importation was not i$$ega$ and there"ore exempt "rom sei.'re? [2000 Bar
Exams]
No% The +eis+ators intended to divest the Reiona+ Tria+ Co"rts o$ the 7"risdiction to
re'+evin a 'ro'ert# (hich is a s"!7ect o$ sei."re and $or$eit"re 'roceedins $or vio+ation o$
the Tari$$ and C"sto*s Code other(ise, actions $or $or$eit"re o$ 'ro'ert# $or vio+ation o$
the C"sto*s +a(s co"+d easi+# !e "nder*ined !# the si*'+e device o$ re'+evin% (;e La
(uente vs. ;e ,e%ra, et al. 1# SCRA "--'
There sho"+d !e no "nnecessar# hindrance on the overn*ent=s drive to 'revent
s*"+in and other $ra"ds "'on the C"sto*s% F"rther*ore, the Reiona+ Tria+ Co"rt do
not have 7"risdiction in order to render e$$ective and e$$icient the co++ection o$ i*'ort and
e)'ort d"ties d"e the State, (hich ena!+es the overn*ent to carr# o"t the $"nctions it has
!een instit"ted to 'er$or*% ($ao, et al vs. Court of Appeals, et al., an1 co.panion case.
"& SCRA 8-, "8'
Note: TAe Secretar% of tAe ;epart.ent of Tra1e an1 )n1ustr% in case of nonE
a2ricultural pro1ucts or tAe Secretar% of tAe ;epart.ent of A2riculture in tAe case of
a2ricultural pro1ucts sAall appl% a 2eneral safe2uar1 .easure upon a positive final
1eter.ination of tAe Tariff Co..ission tAat a pro1uct is 6ein2 i.porte1 into tAe countr%
in increase1 Iuantities, wAetAer a6solute or relative to tAe 1o.estic pro1uction, as to 6e
a su6stantial cause of serious inBur% or tAreat tAereof to tAe 1o.estic in1ustr%. TAe

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li.itation .a% ta<e in tAe for. of an% a11itional 1ut% wAicA .a% 6e specific an1For a1
valore., or a Iuantitative restriction. (RA No. ++##, Safe2uar1 :easures Act'
39. -n sm'gg$ing a shipment o" gar$ic% the sm'gg$ers 'sed an eightFwhee$er tr'c( which they
hired "or the p'rpose o" ta(ing o't the shipment "rom the c'stoms .one. >anny% the tr'c(
owner% did not have a certi"icate o" p'&$ic convenience to operate his tr'c(ing &'siness. >anny
did not (now that the shipment o" gar$ic was i$$ega$$y imported.
!an the co$$ector o" c'stoms o" the port sei.e and "or"eit the tr'c( as an instr'ment in the
sm'gg$ing? [1++0 Bar Exams]
Yes, the Co++ector o$ C"sto*s o$ the 'ort can sei.e and $or$eit the tr"c8 as an
instr"*ent in the s*"+in activit#, since the sa*e (as "sed "n+a($"++# in the i*'ortation
o$ s*"+ed artic+es% The *ere carr#in o$ s"ch artic+es on !oard the tr"c8 /in co**ercia+
6"antities5 sha++ s"!7ect the tr"c8 to $or$eit"re, since it (as not !ein "sed as a d"+#
a"thori.ed co**on carrier, (hich (as chartered or +eased as s"ch% /Sec. -8# 3a7 TCC'
Moreover, a+tho"h $or$eit"re o$ the vehic+e (i++ not !e e$$ected i$ it is esta!+ished that
the o(ner thereo$ had no 8no(+ede o$ or 'artici'ation in the "n+a($"+ acts, there arises a
'ri*a $acie 'res"*'tion o$ 8no(+ede or 'artici'ation i$ the o(ner is not in the !"siness
$or (hich the conve#ance is enera++# "sed% Th"s, not havin a certi$icate o$ '"!+ic
convenience to o'erate a tr"c8in !"siness, he is +ea++# dee*ed not to have !een
enaed in the tr"c8in !"siness% /Sec -81, Tariff an1 Custo.s Co1e'
EAR TYPE QUESTIONS
I% he Sangg'niang Bayan o" #a(ati enacted #'nicipa$% 4rdinance Ho. +2F0?2 which provides%
inter a$ia% "or the sched'$e o" rea$ estate% &'siness and "ranchise taxes in the #'nicipa$ity o"
#a(ati. herea"ter% the >epartment o" ='stice came o't with a reso$'tion a"ter an appea$ "rom a
taxpayer% dec$aring Qn'$$ and void and witho't $ega$ e""ectQ the said ordinance "or having &een
enacted in contravention o" Section 1)? o" the Goca$ Jovernment !ode o" 1++1. #a(ati there&y "i$e
a petition with the 1! o" #a(ati. -n the meantime% #a(ati contin'ed to imp$ement the ordinance.
=ardine >avies -ns'rance Bro(ers% -nc.% a d'$yForgani.ed corporation% was assessed and &i$$ed &y
#a(ati an amo'nt "or taxes% "ees and charges. <etitioner did not protest the assessment &'t in "act%
paid the said amo'nts witho't any protest.
he 1! rendered @'dgment dec$aring the ordinance va$id. =ardine >avies% re$ying on the
reso$'tion o" the >4=% "i$ed a comp$aint with the 1! o" #a(ati against #a(ati and its /cting
#'nicipa$ reas'rer "or a re"'nd or tax credit. he de"endants "i$ed a motion to dismiss the
comp$aint on the gro'nd o" premat'rity.

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-s =ardine >avies proscri&ed "rom "i$ing its comp$aint with the 1! "or a re"'nd o" the
a$$eged payment witho't any protest o" the taxes d'e and witho't any appea$ with the Secretary o"
='stice as to $ega$ity or constit'tiona$ity o" the ordinance?
YES% As a enera+ 'rece't, a ta)'a#er *a# $i+e a co*'+aint assai+in the va+idit# o$ the
ordinance and 'ra#in $or a re$"nd o$ its 'erceived over'a#*ents (itho"t $irst $i+in a 'rotest
to the 'a#*ent o$ ta)es d"e "nder the ordinance%
As he+d in the case o$ Re%es vs. Court of Appeals />@4 SCRA 3LD% 1FFF5,
:C+ear+#, the +a( re6"ires that the dissatis$ied ta)'a#er (ho 6"estions the va+idit# or
+ea+it# o$ a ta) ordinance *"st $i+e his a''ea+ to the Secretar# o$ 2"stice, (ithin >4 da#s $ro*
e$$ectivit# thereo$% In case the Secretar# decides the a''ea+, a 'eriod a+so o$ >4 da#s is a++o(ed
$or an arieved 'art# to o to co"rt% E"t i$ the Secretar# does not act thereon, a$ter the +a'se
o$ D4 da#s, a 'art# co"+d a+read# 'roceed to see8 re+ie$ in co"rt% These three se'arate 'eriods
are c+ear+# iven $or co*'+iance as a 'rere6"isite !e$ore see8in redress in a co*'etent co"rt%
S"ch stat"tor# 'eriods are set to 'revent de+a#s as (e++ as enhance the order+# and s'eed#
dischare o$ 7"dicia+ $"nctions% For this reason the co"rts constr"e these 'rovisions o$ stat"tes
as *andator#%<
In the instant case, the $ai+"re o$ 2ardine Davies to a''ea+ to the Secretar# o$ 2"stice
(ithin >4 da#s as re6"ired !# Sec% 1L? o$ R%A% ?1D4 is $ata+ to their ca"se% Moreover, 2ardine
Davies even 'aid (itho"t an# 'rotest the a*o"nts o$ ta)es assessed !# res'ondents Ma8ati and
Actin Treas"rer as 'rovided $or in the ordinance% /$ar1ine ;avies )nsurance 0ro<ers, )nc. vs.
Aliposa. G.R. No. 11+&##4 (e6ruar% !, ##85
II% G'ng !enter o" the <hi$ippines is a nonFpro"it and nonFstoc( corporation which was
organi.ed "or the we$"are and &ene"it o" the ,i$ipino peop$e principa$$y to he$p com&at the high
incidence o" $'ng and p'$monary diseases in the <hi$ippines. -ts medica$ services are to &e rendered
to the p'&$ic in genera$. -t accepts paying and nonFpaying patients% inc$'ding o'tFpatients. -t a$so
receives ann'a$ s'&sidies "rom the government.
-t owns o" a parce$ o" $and with a hospita$ in the midd$e% $ocated at ;'e.on !ity. / &ig
space at the gro'nd "$oor is &eing $eased to private parties% "or canteen and sma$$ store spaces% and
to medica$ or pro"essiona$ practitioners who 'se the same as their private c$inics. / &ig portion o"
the $and is &eing $eased "or commercia$ p'rposes to a private enterprise. Both the $and and the
hospita$ &'i$ding were assessed "or rea$ property taxes. here&y the entity "i$ed a !$aim "or
Exemption "rom rea$ property taxes with the !ity /ssessor% predicated on its c$aim that it is a
charita&$e instit'tion.
1. -s the G'ng !enter o" the <hi$ippines a charita&$e instit'tion?
2. /re its rea$ properties exempt "rom rea$ property taxes?
1% YES% As a enera+ 'rinci'+e, a charita!+e instit"tion does not +ose its character as s"ch
and its e)e*'tion $ro* ta)es si*'+# !eca"se it derives inco*e $ro* 'a#in 'atients, (hether
o"tC'atient, or con$ined in the hos'ita+, or receives s"!sidies $ro* the overn*ent, so +on as
the *one# received is devoted or "sed a+toether to the charita!+e o!7ect (hich it is intended
to achieve- and no *one# in"res to the 'rivate !ene$it o$ the 'ersons *anain or o'eratin
the instit"tion%
The $"nda*enta+ ro"nd "'on (hich a++ e)e*'tions in $avor o$ charita!+e instit"tions
are !ased is the !ene$it con$erred "'on the '"!+ic !# the*, and a conse6"ent re+ie$, to so*e
e)tent, o$ the !"rden "'on the state to care $or and advance the interests o$ its citi.ens%
@% NO% Even tho"h the 'etitioner is a charita!+e instit"tion, those 'ortions o$ its rea+
'ro'ert# that are +eased to 'rivate entities are not e)e*'t $ro* rea+ 'ro'ert# ta)es as these
are not act"a++#, direct+# and e)c+"sive+# "sed $or charita!+e '"r'oses%
The sett+ed r"+e in this 7"risdiction is that +a(s rantin e)e*'tion $ro* ta) are
constr"ed strictissi.i Buris aainst the ta)'a#er and +i!era++# in $avor o$ the ta)in 'o(er%
Ta)ation is the r"+e and e)e*'tion is the e)ce'tion%
The ta) e)e*'tion "nder Section @L/>5, Artic+e OI o$ the 1FL? Phi+i''ine Constit"tion
covers 'ro'ert# ta)es on+#% &hat is e)e*'ted is not the instit"tion itse+$- those e)e*'ted $ro*
rea+ estate ta)es are +ands, !"i+dins and i*'rove*ents act"a++#, direct+# and e)c+"sive+# "sed
$or re+iio"s, charita!+e or ed"cationa+ '"r'oses%

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Under the 1F?> and 1FL? Constit"tions and Re'% Act No% ?1D4 in order to !e entit+ed to
the e)e*'tion, the 'etitioner is !"rdened to 'rove, !# c+ear and "ne6"ivoca+ 'roo$, that /a5 it
is a charita!+e instit"tion- and /!5 its rea+ 'ro'erties are ACTUALLY, DIRECTLY and EACLUSIOELY
"sed $or charita!+e '"r'oses% I$ rea+ 'ro'ert# is "sed $or one or *ore co**ercia+ '"r'oses, it is
not e)c+"sive+# "sed $or the e)e*'ted '"r'oses !"t is s"!7ect to ta)ation% The (ords
Ndo*inant "seN or N'rinci'a+ "seN cannot !e s"!stit"ted $or the (ords N"sed e)c+"sive+#N
(itho"t doin vio+ence to the Constit"tions and the +a(% /Lun2 Center of tAe PAilippines vs.
LueHon Cit% an1 Rosas. G.R. No. 1""1#". $une &, ##"%5
III% #E1/G!4 "i$ed its tax dec$arations covering its S'cat power p$ants% inc$'ding the &'i$dings
thereon as we$$ as the machineries and e8'ipment. ,rom 1++3 to 1++)% #E1/G!4 paid the rea$
property taxes on the said properties on the &asis o" their assessed va$'e as stated in its tax
dec$arations. herea"ter% #E1/G!4 so$d a$$ the powerFgenerating p$ants inc$'ding the $andsite to
the H/<4!41.
-n 2003% the #'nicipa$ /ssessor o" #'ntin$'pa discovered that #E1/G!4% "or the years 1++9F
1++)% misdec$ared andMor "ai$ed to dec$are "or taxation p'rposes a n'm&er o" rea$ properties
consisting o" severa$ e8'ipment and machineries "o'nd in the said power p$ants. herea"ter% the
#'nicipa$ reas'rer o" #'ntin$'pa iss'ed three notices to #E1/G!4% re8'esting it to pay the "'$$
amo'nt o" the c$aimed de"iciency with a warning that its properties co'$d &e so$d at p'&$ic a'ction
'n$ess the tax d'e was paid. Sti$$% #E1/G!4 did not pay% nor ta(e other steps.
#E1/G!4 "i$ed &e"ore the 1! o" #a(ati a <etition "or <rohi&ition en@oining the #'nicipa$
reas'rer o" #'ntin$'pa "rom en"orcing the warrants o" garnishment. he #'nicipa$ reas'rer "i$ed
a #otion to >ismiss on gro'nd o" $ac( o" @'risdiction.
1. -s #E1/G!4 $ia&$e "or the de"iciency in rea$ property taxes "or the years 1++9F1++)?
2. /re the $etters sent to the #E1/G!4 &y the m'nicipa$ treas'rer mere co$$ection $etters or
notices o" assessment?
3. Wi$$ the #otion to >ismiss prosper?
1% YES% The $act that NAPOCOR is the 'resent o(ner o$ the S"cat 'o(er '+ant *achineries
and e6"i'*ent does not constit"te a +ea+ !arrier to the co++ection o$ de+in6"ent ta)es $ro*
the 'revio"s o(ner, MERALCO, (ho has de$a"+ted in its 'a#*ent% In Testate =state of
Concor1ia T. Li. vs. Cit% of :anila, the Co"rt he+d that the "n'aid ta) attaches to the
'ro'ert# and is charea!+e aainst the 'erson (ho had act"a+ or !ene$icia+ "se and 'ossession
o$ it reard+ess o$ (hether or not he is the o(ner% To i*'ose the rea+ 'ro'ert# ta) on the
s"!se6"ent o(ner that (as neither the o(ner nor the !ene$icia+ "ser o$ the 'ro'ert# d"rin
the desinated 'eriods (o"+d not on+# !e contrar# to +a( !"t a+so "n7"st%
@% NO% The +etters cannot 6"a+i$# as notices o$ ta) assess*ent% A notice o$ assess*ent as
'rovided $or in the Rea+ Pro'ert# Ta) Code sho"+d e$$ective+# in$or* the ta)'a#er o$ the va+"e
o$ a s'eci$ic 'ro'ert#, or 'ro'ortion thereo$ s"!7ect to ta), inc+"din the discover#, +istin,
c+assi$ication, and a''raisa+ o$ 'ro'erties% The notices do not contain the essentia+ in$or*ation
that a notice o$ assess*ent *"st s'eci$#, na*e+#, the va+"e o$ a s'eci$ic 'ro'ert# or 'ro'ortion
thereo$ (hich is !ein ta)ed, nor does it state the discover#, +istin, c+assi$ication and a''raisa+
o$ the 'ro'ert# s"!7ect to ta)ation% In $act, the tenor o$ the notices !es'ea8s an intention to
co++ect "n'aid ta)es, th"s the re*inder to the ta)'a#er that the $ai+"re to 'a# the ta)es sha++
a"thori.e the overn*ent to a"ction o$$ the 'ro'erties s"!7ect to ta)es%
>% YES% The Motion to Dis*iss (i++ 'ros'er since the tria+ co"rt is (itho"t a"thorit# to
address the a++eed irre"+arit# in the iss"ance o$ the notices o$ assess*ent (itho"t 'rior ta)
'a#*ent, "nder 'rotest, !# 'etitioner% Section D3 o$ the RPTC, 'rohi!its co"rts $ro* dec+arin
an# ta) inva+id !# reason o$ irre"+arities or in$or*a+ities in the 'roceedins o$ the o$$icers
chared (ith the assess*ent or co++ection o$ ta)es e)ce't "'on the condition that the ta)'a#er
'a#s the 7"st a*o"nt o$ the ta), as deter*ined !# the co"rt in the 'endin 'roceedin% As
MERALCO $ai+ed to *a8e a 'rotest 'a#*ent o$ the ta) assessed, an# ar"*ent reardin the
'roced"re o!served in the 're'aration o$ the notice o$ assess*ent and co++ection is $"ti+e as
the tria+ co"rt in s"ch a scenario cannot ass"*e 7"risdiction over the *atter% /:=RALC? vs.
0arlis. G.R. No. 11"81. $une &, ##"5

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IO% 1aw materia$s consigned to 11! #an'"acting arrived in the wareho'se o" !G ,reight -nc.
he B'rea' o" !'stoms treated the raw materia$s as s'&@ect to ordinary import taxes. he
consignee "ai$ed to "i$e the re8'isite import entry o" cargo and to c$aim the cargo immediate$y.
h's% the >istrict !o$$ector o" !'stoms initiated an a&andonment proceedings over said cargo and
iss'ed a notice to the 11! #an'"act'ring giving them "i"teen B13C days "rom notice thereo" to "i$e
entry o" the cargoesO otherwise% the cargoes wo'$d &e deemed a&andoned and so$d at p'&$ic
a'ction. he dec$aration o" a&andonment &ecame "ina$ and exec'tory.
11! #an'"act'ring "i$ed a comp$aint "or damages &e"ore the 1! against !G ,reight -nc.
he $atter contends that the 1! has no @'risdiction to review and n'$$i"y the dec$aration &y the
!o$$ector o" !'stoms. -s the contention o" !G ,reight -nc. tena&$e?
YES% The tria+ co"rt has no 7"risdiction% The RTC is devoid o$ an# co*'etence to 'ass
"'on the va+idit# or re"+arit# o$ sei."re and $or$eit"re 'roceedins cond"cted !# the E"rea"
o$ C"sto*s, and to en7oin or other(ise inter$ere (ith the said 'roceedins even i$ the sei."re
(as i++ea+% S"ch act does not de'rive the E"rea" o$ C"sto*s o$ 7"risdiction thereon% The
Co++ector o$ C"sto*s sittin in sei."re and $or$eit"re 'roceedins has e)c+"sive 7"risdiction to
hear and deter*ine a++ 6"estions to"chin on the sei."re and $or$eit"re o$ d"tia!+e oods% The
Reiona+ Tria+ Co"rts are 'rec+"ded $ro* ass"*in coni.ance over s"ch *atters even thro"h
'etitions o$ certiorari, 'rohi!ition or *anda*"s% /R.,. :arHan (rei2At, )nc. vs Court of
Appeals. G.R. No. 1+#*". :arcA ", ##"5

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San Beda
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T A X A T I O N
L A W
@443 EAR EAAM QUESTIONS P SUBBESTED ANS&ERS
QUESTION NO% I
axes are assessed "or the p'rpose o" generating reven'e to &e 'sed "or p'&$ic needs.
axation itse$" is the power &y which the State raises reven'e to de"ray the expenses o"
government. / @'rist said that a tax is what we pay "or civi$i.ation.
/. -n o'r @'risdiction% which o" the "o$$owing statements may &e erroneo's*
1. axes are pec'niary in nat're.
2. axes are en"orced charges and contri&'tions.
3. axes are imposed on persons and property within the territoria$ @'risdiction o"
a State.
0. axes are $evied &y the exec'tive &ranch o" the government.
3. axes are assessed according to a reasona&$e r'$e o" apportionment.
='sti"y yo'r answer or choice &rie"$y.
The state*ent that ta)es are +evied !# the e)ec"tive !ranch o$ the overn*ent *a# !e
erroneo"s% One characteristic or attri!"te o$ ta)es is that it is +evied !# the +eis+ative !od# o$
the state !eca"se the ta)in 'o(er is 'ec"+iar+# and e)c+"sive+# +eis+ative in character% As a
enera+ r"+e, the 'o(er to ta) is '"re+# +eis+ative and (hich the +eis+ative !od# cannot
de+eate either to the e)ec"tive or 7"dicia+ de'art*ent o$ the overn*ent (itho"t in$rinin
"'on the theor# o$ se'aration o$ 'o(ers (PepsiECola 0ottlin2 Co.pan% of tAe PAilippines vs.
:unicipalit% of Tanauan, Le%te4 NPC vs. Al6a%, 1+* SCRA 1&+'.
B. Which o" the "o$$owing propositions may now &e 'ntena&$e*
1. he co'rt sho'$d constr'e a $aw granting tax exemption strict$y against the taxpayer.
2. he co'rt sho'$d constr'e a $aw granting a m'nicipa$ corporation the power to tax
most strict$y.
3. he !o'rt o" ax /ppea$s has @'risdiction over decisions o" the !'stoms !ommissioner in
cases invo$ving $ia&i$ity "or c'stoms d'ties.
0. he !o'rt o" /ppea$s has @'risdiction to review decisions o" the !o'rt o" ax
/ppea$s.
3. he S'preme !o'rt has @'risdiction to review decisions o" the !o'rt o" /ppea$s.
The 'ro'osition that the co"rt sho"+d constr"e a +a( rantin a *"nici'a+ cor'oration
the 'o(er to ta) *ost strict+# *a# no( !e "ntena!+e% The 'o(er to ta) is 'ri*ari+# vested in
Conress- ho(ever, in o"r 7"risdiction, it *a# !e e)ercised !# +oca+ +eis+ative !odies, no
+oner !# virt"e o$ a va+id de+eation as !e$ore !"t '"rs"ant to direct a"thorit# con$erred !#
Section 0, Artic+e A o$ the Constit"tion% /:actan Ce6u )nternational Airport vs. :arcos. GR No.
1##+, Septe.6er 11, 1&&*5% The !asic rationa+e $or the rant o$ ta) 'o(er to +oca+
overn*ent "nits is to sa$e"ard their via!i+it# and se+$Cs"$$icienc# !# direct+# rantin the*
enera+ and !road ta) 'o(ers% /Mani+a E+ectric Co% vs% Province o$ La"na, >4D SCRA ?04,
J1FFFK5
Accordin+#, inas*"ch as the 'o(er to ta) *a# !e e)ercised !# +oca+ +eis+ative !odies
no +oner !# va+id de+eation o$ said 'o(er !# Conress, !"t !# direct a"thorit# con$erred !#
the Constit"tion, in inter'retin stat"tor# 'rovisions on *"nici'a+ $isca+ 'o(ers, do"!ts (i++
have to !e reso+ved in $avor o$ *"nici'a+ cor'orations% /Cit% Govern.ent of San Pa6lo, La2una
vs. Re%es. GR No. 1!!#+. :arcA -, 1&&&'
Note: TAe proposition tAat tAe Court of Appeals Aas Buris1iction to review 1ecisions
of tAe Court of Ta/ Appeals is also untena6le, consi1erin2 tAat tAe present CTA Act
(R.A.&+' Aas .a1e tAe CTA a coEeIual Bu1icial 6o1% of tAe Court of Appeals. R.A.&+ was
passe1 on :arcA 8#, ##".

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QUESTION II
/. 1! is $awFa&iding citi.en who pays his rea$ estate taxes prompt$y. >'e to a series o"
typhoons and adverse economic conditions% an ordinance is passed &y ## !ity granting a 30E
disco'nt "or payment o" 'npaid rea$ estate taxes "or the preceding year and the condonation o" a$$
pena$ties on "ines res'$ting "rom the $ate payment.
/rg'ing that the ordinance rewards de$in8'ent taxpayers and discriminates against prompt
ones% 1! demands that he &e re"'nded an amo'nt e8'iva$ent to oneFha$" o" the rea$ taxes he paid.
he m'nicipa$ attorney rendered an opinion that 1! cannot &e reim&'rsed &eca'se the ordinance
did not provide "or s'ch reim&'rsement. 1! "i$es s'it to dec$are the ordinance void on the gro'nd
that it is a c$ass $egis$ation. Wi$$ his s'it prosper? Exp$ain yo'r answer &rie"$y.

The s"it (i++ not 'ros'er% The re*ission or condonation o$ ta)es d"e and 'a#a!+e to the
e)c+"sion o$ ta)es a+read# co++ected does not constit"te "n$air discri*ination% Each set o$
ta)es is a c+ass !# itse+$ and the +a( (o"+d !e o'en to attac8 as c+ass +eis+ation on+# i$ a++
ta)'a#ers !e+onin to one c+ass (ere not treated a+i8e /2"an L"na S"!division, inc% vs%
Sar*iento, F1 Phi+% >?1 J1F0@K5%
B. / $aw was passed granting tax exemption to certain ind'stries and investments "or a period
o" "ive years. B't three years $ater% the $aw was repea$ed. With the repea$% the exemptions were
considered revo(ed &y the B-1% which assessed the investing companies "or 'npaid taxes e""ective
on the date o" the repea$ o" the $aw.
H<! and K1 companies 8'estioned the assessments on the gro'nd that% having made their
investments in "'$$ re$iance with the period o" exemption granted &y the $aw% its repea$ vio$ated
their constit'tiona$ right against the impairment o" the o&$igations o" contract. -s the contention o"
the companies tena&$e or not? 1eason &rie"$y.
The contention o$ the co*'anies is not tena!+e% The +a( 'rovidin $or ta) e)e*'tion is
ranted "ni+atera++# and rat"ito"s+# !# Conress in the e)ercise o$ its ta)in 'o(er% Since
ta)ation is the r"+e and ta) e)e*'tion, the e)ce'tion, an# ta) e)e*'tion "ni+atera++# ranted
can !e (ithdra(n at the '+eas"re o$ the ta)in a"thorit# (itho"t vio+atin the Constit"tion
(:actan Ce6u )nternational Airport vs. :arcos. G.R. No. 1##+. Septe.6er 11, 1&&*'
&hat constit"tes an i*'air*ent o$ the o!+iation o$ contracts is the revocation o$ an
e)e*'tion (hich is $o"nded on a va+"a!+e consideration !eca"se it ta8es the $or* and essence
o$ a contract /Casanova vs. Dor1, + PAil. 1- 31&#!7'.
QUESTION NO% III
/. :D7 !o$$eges is a nonFstoc(% nonFpro"it ed'cationa$ instit'tion r'n &y the /rchdiocese o" B<
!ity. -t co$$ected and received the "o$$owing* Which o" these a&ovecited income and donation
wo'$d not &e exempt "rom taxation? Exp$ain &rie"$y.
a. 'ition "ees
&. >ormitory "ees
c. 1enta$ "rom canteen concessionaires
d. -nterest "rom moneyFmar(et p$acements o" the t'ition "ees.
e. >onation o" a $ot and &'i$ding &y schoo$ a$'mni
A++ o$ the inco*e derived !# the nonCstoc8, nonC'ro$it ed"cationa+ instit"tion (i++ !e
e)e*'t $ro* ta)ation 'rovided the# are "sed act"a++#, direct+# and e)c+"sive+# $or ed"cationa+
'"r'oses% The Constit"tion 'rovides that a++ reven"es and assets o$ nonCstoc8, nonC'ro$it
ed"cationa+ instit"tion (hich are act"a++#, direct+# and e)c+"sive+# "sed $or ed"cationa+
'"r'oses are e)e*'t $ro* ta)ation (Sec. ", par 8, Art. K),, 1&+! Constitution'
The donation is, +i8e(ise, e)e*'t $ro* the donor=s ta) i$ act"a++#, direct+# and
e)c+"sive+# "sed $or ed"cationa+ '"r'oses, 'rovided not *ore than >4H o$ the donation is "sed
!# the donee $or ad*inistration '"r'oses% The donee, !ein a nonCstoc8, nonC'ro$it
ed"cationa+ instit"tion, is a 6"a+i$ied entit# to receive an e)e*'t donation s"!7ect to
conditions 'rescri!ed !# +a( JSec. ", par ", Art. K),, 1&+! Constitution, in relation to Sec.
1#1 (A' (8', N)RC7
Accordin+#, none o$ the cited inco*e and donation co++ected and received !# the nonC
stoc8, nonC'ro$it ed"cationa+ instit"tion (o"+d not !e e)e*'t $ro* ta)ation%

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San Beda
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T A X A T I O N
L A W
ALTERNATIOE ANS&ER9
The $o++o(in recei'ts !# the nonCstoc8, nonC'ro$it ed"cationa+ instit"tion are not
e)e*'t $ro* ta)ation9
c% Renta+s $ro* canteen concessionaires% Renta+ inco*e is considered as "nre+ated to
the schoo+ o'erations, hence, ta)a!+e /DOF Order No%1>?CL?, Dec%1D, 1FL?5%
d% Interest $ro* *one#C*ar8et '+ace*ents o$ the t"ition $ees% The interest on the
'+ace*ent is ta)a!+e /DOF Order No%1>?CL?5% I$ ho(ever, the said interest is "sed act"a++#,
direct+# and e)c+"sive+# $or ed"cationa+ '"r'oses as 'roven !# s"!stantia+ evidence, the sa*e
(i++ !e e)e*'t $ro* ta)ation /CIR vs% CA, @FL SCRA L> J1FFLK5%
The other ite*s o$ inco*e (hich (ere a++ derived $ro* schoo+Cre+ated activities (i++ !e
e)e*'t $ro* ta)ation in the hands o$ the reci'ient i$ "sed act"a++#, direct+# and e)c+"sive+# $or
ed"cationa+ '"r'oses /Sec%3 'ar%>, Art% AIO, 1FL? Constit"tion5%
The donation to a nonCstoc8, nonC'ro$it ed"cationa+ instit"tion (i++ !e e)e*'t $ro* the
donor=s ta) i$ "sed act"a++#, direct+# and e)c+"sive+# $or ed"cationa+ '"r'oses and 'rovided,
that, not *ore than >4H o$ the donation is "sed $or ad*inistration '"r'oses /Sec,3, 'ar%3, Art%
AIO, 1FL? Constit"tion, in re+ation to Sec% 141 /A5/>5, NIRC5%
Note: Revenues 1erive1 fro. assets use1 in tAe operation of cafeteriasFcanteens an1
6oo<stores are e/e.pt fro. ta/ation provi1e1 tAe% are owne1 an1 operate1 6% tAe
e1ucational institution as ancillar% activities an1 tAe sa.e are locate1 witAin tAe scAool
pre.ises.
Dowever, tAe% sAall 6e su6Bect to internal revenue ta/es on inco.e fro.
tra1e, 6usiness or otAer activit%, tAe con1uct of wAicA is not relate1 to tAe e/ercise or
perfor.ance 6% sucA e1ucational institutions of tAeir e1ucational purposes or functions
(i.e. rental pa%.ent fro. tAeir 6uil1in2Fpre.ises'.
TAeir interest inco.e fro. currenc% 6an< 1eposits an1 %iel1 fro. 1eposit
su6stitutes instru.ents use1 actuall%, 1irectl% an1 e/clusivel% in pursuance of tAeir
purposes as an e1ucational institution are e/e.pt fro. tAe #G final ta/ an1 ! MG ta/ on
interest inco.e un1er tAe e/pan1e1 forei2n currenc% 1eposit s%ste. upon co.pliance of
certain con1itions. (Revenue :e.oran1u. Circular No. !* > #8'
B. S'ppose that :D7 !o$$eges is a proprietary ed'cationa$ instit'tion owned &y the
/rch&ishop2s "ami$y% rather than the /rchdiocese% which o" those a&ovecited income and donation
wo'$d &e exempt "rom taxation? Exp$ain &rie"$y.
I$ AYQ Co++ees is a 'ro'rietar# ed"cationa+ instit"tion, a++ o$ its inco*e $ro* schoo+
re+ated and nonCschoo+ re+ated activities (o"+d !e s"!7ect to the inco*e ta) !ased on its
areate net inco*e derived $ro* !oth activities% &ith reard to +etters /a5 to /d5, it sha++ !e
s"!7ect to a 14H ta), 'rovided, that i$ the ross inco*e $ro* "nre+ated trade, !"siness or other
activit# e)ceeds 04H o$ the ross inco*e derived !# said schoo+, it sha++ !e s"!7ect to the
nor*a+ cor'orate inco*e ta)% (Sec. !307, N)RC'
The donation o$ +ot and !"i+din (i++ +i8e(ise !e s"!7ect to the donor=s ta) !eca"se a
donation to an ed"cationa+ instit"tion is e)e*'t on+# i$ the schoo+ is incor'orated as a nonC
stoc8 entit# 'a#in no dividends% Since the donee is a 'ro'rietar# ed"cationa+ instit"tion, the
donation is ta)a!+e (Section 1#1 (A' (8', N)RC'%
QUESTION NO% IO
/. !iting Section 10% /rtic$e L--- o" the 1+)? !onstit'tion which provides that sa$aries o" @'dges
sha$$ &e "ixed &y $aw and that d'ring their contin'ance in o""ice their sa$ary sha$$ not &e decreased%
a @'dge o" ## 1egiona$ ria$ !o'rt 8'estioned the ded'ction o" withho$ding taxes "rom his sa$ary
since it res'$ts into a net ded'ction o" his pay.
-s the contention o" the @'dge correct? 1eason &rie"$y.

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NO% The sa+aries o$ 7"dicia+ o$$icers are not ta)Ce)e*'t and their ta)a!i+it# is not
contrar# to the 'rovisions o$ Sec% 14, Art% OIII o$ the 1FL? Constit"tion on the nonCdi*in"tion
o$ the sa+aries o$ *e*!ers o$ the 2"diciar# d"rin their contin"ance in o$$ice% The c+ear intent
o$ the Constit"tiona+ Co**ission that $ra*ed the Constit"tion is to s"!7ect their sa+aries to ta)
as in the case o$ a++ ta)'a#ers% Gence, the ded"ction o$ (ithho+din ta)es, !ein a *anner o$
co++ectin the inco*e ta) on their sa+ar#, is not a di*in"tion conte*'+ated !# the $"nda*enta+
+a( (Nitafan vs. C)R, 1- SCRA +" 31&+!7'.
B. / m'nicipa$ity% BB% has an ordinance which re8'ires that a$$ stores% resta'rants% and other
esta&$ishments se$$ing $i8'or sho'$d pay a "ixed ann'a$ "ee o" <20%000.00. S'&se8'ent$y% the
m'nicipa$ &oard proposed an ordinance imposing a sa$es tax e8'iva$ent to 3E o" the amo'nt paid
"or the p'rchase or cons'mption o" $i8'or in stores% resta'rants and other esta&$ishments. he
m'nicipa$ mayor% !!% re"'sed to sign the ordinance on the gro'nd that it wo'$d constit'te do'&$e
taxation.
-s the re"'sa$ o" the mayor @'sti"ied? 1eason &rie"$y. B3EC
No, The re$"sa+ o$ the *a#or is not 7"sti$ied% The i*'ositions are o$ di$$erent nat"re
and character% The $i)ed ann"a+ $ee is in the nat"re o$ a +icense $ee i*'osed thro"h the
e)ercise o$ 'o+ice 'o(er (hi+e the 0H ta) on '"rchase or cons"*'tion is a +oca+ ta) i*'osed
thro"h the e)ercise o$ ta)in 'o(ers% Eoth a +icense $ee and a ta) *a# !e i*'osed on the
sa*e !"siness or occ"'ation, or $or se++in the sa*e artic+e and this is not in vio+ation o$ the
r"+e aainst do"!+e ta)ation (Co.pania General 1e Ta6acos 1e (ilipinas vs. Cit% of :anila, +
SCRA 8*! 31&*874 San :i2uel 0rewer%, )nc. vs. Cit% of Ce6u, lE#81, (e6ruar% *, 1&!'
QUESTION NO% O

/. >'e to an 'ncertainty whether or not a new tax $aw is app$ica&$e to printing companies%
>E, <rinters s'&mitted a $ega$ 8'ery to the B'rea' o" -nterna$ 1even'e on that iss'e. he B-1
iss'ed a r'$ing that printing companies are not covered &y the new $aw. 1e$ying on this r'$ing% >E,
<rinters did not pay said tax.
S'&se8'ent$y% however% the B-1 reversed the r'$ing and iss'ed a new one stating that the
tax covers printing companies. !o'$d the B-1 now assess >E, <rinters "or &ac( taxes corresponding
to the years &e"ore the new r'$ing? 1eason &rie"$y.
NO% The EIR cannot assess DEF Printers $or !ac8 ta)es corres'ondin to the #ears
!e$ore the ne( r"+in !eca"se it (o"+d !e vio+ative o$ the 'rinci'+e o$ nonCretroactivit# o$
r"+ins and doin% &e++ sett+ed is the r"+e that r"+ins and circ"+ars, r"+es and re"+ations
'ro*"+ated !# the Co**issioner o$ Interna+ Reven"e (o"+d have no retroactive a''+ication i$
to so a''+# the* (o"+d !e 're7"dicia+ to the ta)'a#ers% This is !eca"se Section @3D o$ the NIRC
'rovides that an# revocation, *odi$ication, or reversa+ o$ an# o$ the r"+es and re"+ations
'ro*"+ated !# the Co**issioner sha++ not !e iven retroactive a''+ication i$ the revocation,
*odi$ication, or reversa+ (i++ !e 're7"dicia+ to the ta)'a#er (C)R vs. Court of Appeals an1
AlAa.6ra )n1ustries. GR No. 11!&+. (e6ruar% *, 1&&!'
B. <;1 !orp. c$aimed as a ded'ction in its tax ret'rns the amo'nt o" <1%000%000 as &ad de&ts.
he corporation was assessed &y the !ommissioner o" -nterna$ 1even'e "or de"iciency taxes on the
gro'nd that the de&ts cannot &e considered as 5worth$ess%6 hence they do not 8'a$i"y as &ad de&ts.
he company as(s "or yo'r advice on 5What "actors wi$$ he$p in determining whether or not the
de&ts are &ad de&ts?6 /nswer and exp$ain &rie"$y.
The ascertain*ent o$ (orth+essness o$ !ad de!ts re6"ires 'roo$ o$ t(o $acts9 /15 that
the ta)'a#er did in $act ascertain the de!t to !e (orth+ess in the #ear the ded"ction is so"ht-
and /@5 in so doin, he acted in ood $aith% Bood $aith is not eno"h% The ta)'a#er sho"+d
esta!+ish that d"rin the #ear $or (hich the ded"ction is so"ht, a sit"ation deve+o'ed as a
res"+t o$ (hich it !eca*e evident in the e)ercise o$ so"nd, o!7ective !"siness 7"d*ent that
there re*ained no 'ractica+, !"t on+# va"e+# theoretica+, 'ros'ect that the de!t (o"+d ever
!e 'aid% (Collector vs. Goo1ricA )nternational Ru66er, GR No. LE*-, ;ec. , 1&*!'
Re6"isites $or va+id ded"ction o$ !ad de!ts $ro* ross inco*e9

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1% There *"st !e an e)istin inde!tedness d"e to the ta)'a#er (hich *"st !e va+id and
+ea++# de*anda!+e-
@% The sa*e *"st !e connected (ith the ta)'a#er=s trade, !"siness or 'ractice o$
'ro$ession-
>% The sa*e *"st not !e s"stained in a transaction entered into !et(een re+ated 'arties
en"*erated "nder Sec% >D/E5 o$ the Ta) Code o$ 1FF?-
3% The sa*e *"st !e act"a++# chared o$$ the !oo8s o$ acco"nts o$ the ta)'a#er as o$ the
end o$ the ta)a!+e #ear- and
0% The sa*e *"st !e act"a++# ascertained to !e (orth+ess and "nco++ecti!+e as o$ the end
o$ the ta)a!+e #ear% /RR No% @0C@44@5
QUESTION NO% OI
/s an incentive "or investors% a $aw was passed giving new$y esta&$ished companies in
certain economic .ones exemption "rom a$$ taxes% d'ties% "ees% imposts and other charges "or a
period o" three years. /B! !orp. was organi.ed and was granted s'ch incentive. -n the co'rse o"
&'siness% /B! !orp. p'rchased mechanica$ e8'ipment "rom :D7 -nc. Horma$$y% the sa$e is s'&@ect
to a sa$es tax.
/. :D7 -nc. c$aims% however% that since it so$d the e8'ipment to /B! !orp. which is tax
exempt% :D7 sho'$d not &e $ia&$e to pay the sa$es tax. -s this c$aim tena&$e?
NO% The c+ai* o$ AYQ, Inc% is not tena!+e% E)e*'tion $ro* ta)es is 'ersona+ in nat"re
and covers on+# ta)es $or (hich the ta)'a#erCrantee is direct+# +ia!+e% The sa+es ta) is a ta)
on the se++er (ho is not e)e*'t $ro* ta)es% Since AYQ Inc% is direct+# +ia!+e $or the sa+es ta)
and no ta) e)e*'tion 'rivi+ee is ever iven to hi*, there$ore, its c+ai* that the sa+e is ta)
e)e*'t is not tena!+e% A ta) e)e*'tion is constr"ed in strictissi*i 7"ris and it can not !e
'er*itted to e)ist "'on va"e i*'+ications (Asiatic Petroleu. Co., LT1. vs. Llanes, "& PAil "**
31&*7'.
B. /ss'me arguendo that :D7 had to and did pay the sa$es tax. /B! !orp. $ater "o'nd o't%
however% that :D7 mere$y shi"ted or passed on to /B! the amo'nt o" the sa$es tax &y increasing the
p'rchase price. /B! !orp. now c$aims "or a re"'nd "rom the B'rea' o" -nterna$ 1even'e in an
amo'nt corresponding to the tax passed on to it since it is tax exempt. -s the c$aim o" /B! !orp.
meritorio's?
No% The c+ai* o$ AEC Cor'% is not *eritorio"s% A+tho"h the ta) (as shi$ted to AEC
Cor'% !# the se++er, (hat is 'aid !# it is not a ta) !"t 'art o$ the cost it has ass"*ed% Since,
AEC Cor'% is not a ta)'a#er, it has no ca'acit# to $i+e a c+ai* $or re$"nd% The ta)'a#er (ho can
$i+e a c+ai* $or re$"nd is the 'erson stat"tori+# +ia!+e $or the 'a#*ent o$ the ta)%
QUESTION NO% OII
/. ,or "ai$'re to comp$y with certain corporate re8'irements% the stoc(ho$ders o" /B! !orp.
were noti"ied &y the Sec'rities and Exchange !ommission that the corporation wo'$d &e s'&@ect to
invo$'ntary disso$'tion. he stoc(ho$ders did not do anything to comp$y with the re8'irements% and
the corporation was disso$ved. !an the stoc(ho$ders &e he$d persona$$y $ia&$e "or the 'npaid taxes
o" the disso$ved corporation? Exp$ain &rie"$y.
NO% Ta)es are 'ersona+ to the ta)'a#er% A cor'oration=s ta) de+in6"enc# cannot, $or
instance !e en$orced aainst its stoc8ho+ders !eca"se not on+# (o"+d this r"n co"nter to the
'rinci'+e that ta)es are 'ersona+, !"t it (o"+d a+so not !e in accord (ith the r"+e that a
cor'oration is vested !# +a( (ith a 'ersona+it# that is se'arate and distinct $ro* those o$ the
'ersons co*'osin it, as (e++ as $ro* that o$ an# other +ea+ entit# to (hich it *a# !e re+ated
(Sunio vs. NLRC. G.R. No. -!!*!. $anuar% 81, 1&+"'
Go(ever, stoc8ho+ders *a# !e he+d +ia!+e $or the "n'aid ta)es o$ a disso+ved
cor'oration i$ it a''ears that the cor'orate assets have 'assed into their hands (Tan Tion2 0io
vs. C)R. LE1-!!+'% A+so a stoc8ho+ders (ho has "n'aid s"!scri'tion is +ia!+e $or the de!ts o$ the

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cor'oration since the "n'aid de!t o$ the stoc8ho+der $or the '"rchase 'rice o$ the s"!scri!ed
shares re'resents an asset o$ the cor'oration in the hands o$ the stoc8ho+ders%

B. /"ter the tax assessment had &ecome "ina$ and 'nappea$a&$e% the !ommissioner o" -nterna$
1even'e initiated the "i$ing o" a civi$ action to co$$ect the tax d'e "rom H:. /"ter severa$ years% a
decision was rendered &y the co'rt ordering H: to pay the tax d'e p$'s pena$ties and s'rcharges.
he @'dgment &ecame "ina$ and exec'tory% &'t attempts to exec'te the @'dgment award were
"'ti$e.
S'&se8'ent$y% H: o""ered the !ommissioner a compromise sett$ement o" 30E o" the
@'dgment award% representing that this amo'nt is a$$ he co'$d rea$$y a""ord. >oes the
!ommissioner have the power to accept the compromise o""er? -s it $ega$ and ethica$? Exp$ain
&rie"$y.
YES% Under Sec% @43 JAK o$ the 1FF? NIRC the Co**issioner *a# co*'ro*ise an#
interna+ reven"e ta) (hen9 /15 A Reasona!+e do"!t as to the va+idit# o$ the c+ai* aainst the
ta)'a#er e)ist- or /@5 The $inancia+ 'osition o$ the ta)'a#er de*onstrates a c+ear ina!i+it# to
'a# the assessed ta)%
As re'resented !# NA in his o$$er, on+# 04H o$ the 7"d*ent a(ard is a++ he co"+d rea++#
a$$ord% This is an o$$er $or co*'ro*ise !ased on $inancia+ inca'acit# (hich the Co**issioner
sha++ not acce't "n+ess acco*'anied !# a (aiver o$ the secrec# o$ !an8 de'osits /Section D/F5,
Nirc5% The (aiver (i++ ena!+e the Co**issioner to ascertain the $inancia+ 'osition o$ the
ta)'a#er, a+tho"h the in6"ir# need not !e +i*ited on+# to the !an8 de'osits o$ the ta)'a#er
!"t a+so to his $inancia+ 'osition as re$+ected in his $inancia+ state*ents or other records "'on
(hich his 'ro'ert# ho+dins can !e ascertained%
I$ indeed the $inancia+ 'osition o$ NA as deter*ined !# the Co**issioner de*onstrates
a c+ear ina!i+it# to 'a# the ta), the acce'tance o$ the o$$er is +ea+ and ethica+ !eca"se the
ro"nd "'on (hich the co*'ro*ise (as anchored is (ithin the conte)t o$ the +a( and the rate
o$ co*'ro*ise is (e++ (ithin and $ar e)ceeds the *ini*"* 'rescri!ed !# +a( (hich is on+# 14H
o$ the !asic ta) assessed%
QUESTION NO% OIII

/. 1/# got married to G-S/ $ast =an'ary 2003. 4n Hovem&er 30% 2003% Gisa gave &irth to
twins. In"ort'nate$y% however% Gisa died in the co'rse o" her de$ivery. >'e to comp$ications% one
o" the twins a$so died on >ecem&er 13% 2003.
-n preparing his -ncome ax 1et'rn B-1C "or the year 2003% what sho'$d 1/# indicate in the
-1 as his civi$ stat's* BaC sing$eO B&C marriedO BcC head o" the "ami$y BdC widowerO BeC none o"
the a&ove? Why? 1eason.
RAM sho"+d indicate :/!5 *arried< as his civi+ stat"s in 're'arin his Inco*e Ta) Ret"rn
$or the #ear @44> and c+ai* the P>@,444 'ersona+ e)e*'tion $or *arried individ"a+ and the
P1D,444 additiona+ e)e*'tion $or his t(ins, that is, PL,444 additiona+ e)e*'tion 'er
de'endent% The death o$ his (i$e d"rin the #ear (i++ not chane his stat"s !eca"se "nder
Section >0 /C5 o$ the NIRC, sho"+d the s'o"se die d"rin the ta)a!+e #ear, the ta)'a#er *a#
sti++ c+ai* the e)e*'tions /that o$ !ein *arried5 as i$ the s'o"se or de'endent died at the
c+ose o$ s"ch #ear%

B. 4:D is the president and chie" exec'tive o""icer o" />> !omp'ters% -nc. When 4:D was
as(ed to @oin the government service as director o" a &'rea' 'nder the >epartment o" rade P
-nd'stry% he too( a $eave o" a&sence "rom />>. Be$ieving that its &'siness o't$oo(% goodwi$$ and
opport'nities improved with 4:D in the government% />> proposed to o&tain a po$icy o" ins'rance
on his $i"e. 4n ethica$ gro'nds% 4:D o&@ected to the ins'rance p'rchase &'t />> p'rchased the
po$icy anyway. -ts ann'a$ premi'm amo'nted to <100%000. -s said premi'm ded'cti&$e &y />>
!omp'ters% -nc.? 1eason.
No% The 're*i"* is not ded"cti!+e !eca"se it is not an ordinar# !"siness e)'ense% The
ter* Rordinar#= is "sed in the inco*e ta) +a( in its co**on sini$icance and it has the
connotation o$ !ein nor*a+, "s"a+ or c"sto*ar#% Pa#in 're*i"*s $or the ins"rance o$ a
'erson not connected to the co*'an# is not nor*a+, "s"a+ or c"sto*ar#%

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Another reason $or its nonCded"cti!i+it# is the $act that it can !e considered as an i++ea+
co*'ensation *ade to a overn*ent e*'+o#ee% This is so !eca"se i$ the ins"red, his estate or
heirs (ere *ade as the !ene$iciar# /!eca"se o$ the re6"ire*ent o$ ins"ra!+e interest5, the
'a#*ent o$ 're*i"* (i++ constit"te !ri!es, (hich are not a++o(ed as ded"ction $ro* ross
inco*e (Sec. 8" 3A73173c7, N)RC'.
On the other hand, i$ the co*'an# (as *ade the !ene$iciar#, (hether direct+# or
indirect+#, the 're*i"* is not a++o(ed as a ded"ction $ro* ross inco*e (Section 8* (A' ("',
N)RC'.

QUESTION NO% IA

/. L!! is the administrator o" the estate o" his "ather HJ!% in the estate proceedings pending
&e"ore the ## 1egiona$ ria$ !o'rt. Gast year% he received "rom the !ommissioner o" -nterna$
1even'e a de"iciency tax assessment "or the estate in the amo'nt o" <1%000%000. B't he ignored
the notice. Gast month% the B-1 e""ected a $evy on the rea$ properties o" the estate to pay the
de$in8'ent tax. L!! "i$ed a motion with the pro&ate co'rt to stop the en"orcement and co$$ection
o" the tax on the gro'nd that the B-1 sho'$d have sec'red "irst the approva$ o" the pro&ate co'rt%
which had @'risdiction over the estate% &e"ore $evying on its rea$ properties. -s L!!2s contention
correct?
NO% OCC=s contention is not correct% The en$orce*ent and co++ection o$ estate ta) is
e)ec"tive in character and tas8 is s'eci$ica++# ascri!ed to the EIR% There is nothin in the Ta)
Code and in the 'ertinent re*edia+ +a( that i*'+ies the necessit# o$ the 'ro!ate co"rt or
estate sett+e*ent o$ co"rt=s a''rova+ o$ the State=s c+ai* $or estate ta)es !e$ore the sa*e can
!e en$orced and co++ected !# the EIR% On the contrar#, "nder Section F3 o$ the 1FF? NIRC, it is
the 'ro!ate or sett+e*ent co"rt, (hich is 'rohi!ited $ro* a"thori.in the de+iver# o$ the
distri!"tive share to an# interested 'art# (itho"t a certi$ication $ro* the CIR sho(in the
'a#*ent o$ the estate ta)% (:arcos )) vs. Court of Appeals, !8 SCRA "!, $une -, 1&&!'
B. 11 disp'ted a de"iciency tax assessment and 'pon receipt o" an adverse decision &y the
!ommissioner o" -nterna$ 1even'e% "i$ed an appea$ with the !o'rt o" ax /ppea$s. Whi$e the appea$
is pending% the B-1 served a warrant o" $evy on the rea$ properties o" 11 to en"orce the co$$ection
o" the disp'ted tax. Jranting arguendo that the B-1 can $ega$$y $evy on the properties% what co'$d
11 do to stop the process? Exp$ain &rie"$y.
RR can $i+e a *otion $or in7"nction (ith the Co"rt o$ Ta) A''ea+s to sto' the
ad*inistrative co++ection 'rocess% An a''ea+ to the CTA sha++ not s"s'end the en$orce*ent o$
the ta) +ia!i+it#, "n+ess a *otion to that e$$ect sha++ have !een 'resented in co"rt and ranted
!# it on the !asis that s"ch co++ection (i++ 7eo'ardi.e the interest o$ the ta)'a#er o$ the
Bovern*ent (Pirovano vs. C)R, 1" SCRA +8, 1&*-'.
The CTA is e*'o(ered to s"s'end the co++ection o$ interna+ reven"e ta)es and c"sto*s
d"ties in cases 'endin a''ea+ on+# (hen9
/15 in the o'inion o$ the co"rt the co++ection !# the EIR (i++ 7eo'ardi.e the interest o$
the Bovern*ent andMor the ta)'a#er- and
/@5 the ta)'a#er is (i++in to de'osit the a*o"nt !ein co++ected or to $i+e a s"ret# !ond
$or not *ore than do"!+e the a*o"nt o$ the ta) to !e $i)ed !# the Co"rt /Sec% 11, RA
No% 11@0, as a*ended !# RA No% F@L@5%
QUESTION NO% A

/. 4n #arch 12% 2001% 1EH paid his taxes. en months $ater% he rea$i.ed that he had overpaid
and so he immediate$y "i$ed a c$aim "or re"'nd with the !ommissioner o" -nterna$ 1even'e.
4n ,e&r'ary 2?% 2003% he received the decision o" the !ommissioner denying 1EH2s c$aim
"or re"'nd. 4n #arch 20% 2003% 1EH "i$ed an appea$ with the !o'rt o" ax /ppea$s. Was his appea$
"i$ed on time or not? 1eason.
NO% The a''ea+ *ade !# REN (as not $i+ed on ti*e% A+tho"h A $i+ed his c+ai* $or
re$"nd (ith the EIR (ithin t(o #ears $ro* the date o$ 'a#*ent, he did not instit"te his action

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$or recover# (ithin the sa*e 'eriod o$ t(o /@5 #ears (ith the CTA% The t(oC#ear 'eriod o$
+i*itation $or $i+in a c+ai* $or re$"nd is not on+# a +i*itation $or '"rs"in the c+ai* at the
ad*inistrative +eve+ !"t a+so a +i*itation $or a''ea+in the case to the Co"rt o$ Ta) A''ea+s%
The +a( 'rovides that :no s"it or 'roceedin sha++ !e $i+ed a$ter the e)'iration o$ t(o #ears
$ro* the date o$ the 'a#*ent o$ the ta) or 'ena+t# reard+ess o$ an# s"'ervenin ca"se that
*a# arise a$ter 'a#*ent /Section @@F, NIRC5% Since the a''ea+ (as on+# *ade on March @3,
@44>, *ore than t(o #ears had a+read# e+a'sed $ro* the ti*e the ta)es (ere 'aid on March
1@, @44>% Accordin+#, REN had +ost his 7"dicia+ re*ed# !eca"se o$ 'rescri'tion%
33. / $aw was passed exempting doctors and $awyers "rom the operation o" the va$'e added
tax. 4ther pro"essiona$s comp$ained and "i$ed s'it 8'estioning the $aw "or &eing
discriminatory and vio$ative o" the e8'a$ protection c$a'se o" the !onstit'tion since
comp$ainants were not given the same exemption. -s the s'it meritorio's or not? 1eason
&rie"$y.
Yes, the s"it is *eritorio"s% The OAT is desined $or econo*ic e$$icienc#- hence sho"+d
!e ne"tra+ to those (ho !e+on to the sa*e c+ass% Pro$essiona+s ARE a c+ass o$ ta)'a#ers !#
the*se+ves (ho, in co*'+iance (ith the r"+e o$ e6"a+it# o$ ta)ation, *"st !e treated a+i8e $or
ta) '"r'oses% E)e*'tin +a(#ers and doctors $ro* a !"rden to (hich other 'ro$essiona+s re
s"!7ected (i++ *a8e the +a( discri*inator# and vio+ative o$ the e6"a+ 'rotection c+a"se o$ the
Constit"tion% &hi+e sin+in o"t a c+ass $or ta)ation '"r'oses (i++ not in$rine "'on this
constit"tiona+ +i*itation /SAell vs. ,a@o, &" PAil 8+&, 1&-"', sin+in o"t a ta)'a#er $ro* a
c+ass (i++ no do"!t transress the constit"tiona+ +i*itation (?r.oc Su2ar Co., )nc. vs. Treasurer
of ?r.oc Cit%, SCRA *#8, 1&*+'. Treatin doctors and +a(#ers as a di$$erent c+ass o$
'ro$essiona+s (i++ not co*'+# (ith the re6"ire*ent o$ a reasona!+e, hence va+id c+assi$ication,
!eca"se the c+assi$ication is not !ased "'on s"!stantia+ distinction (hich *a8es rea+
di$$erences% The c+assi$ication does not co*'+# (ith the re6"ire*ent that it sho"+d !e
er*ane to the '"r'ose o$ the +a( either% (Pepsi Cola 0ottlin2 Co., )nc. vs. Cit% of 0utuan, "
SCRA !+&, 1&*+'
ANOTGER ANS&ER9
The s"it is not *eritorio"s% The +a( does not vio+ate the e6"a+ 'rotection c+a"se o$ the
constit"tion% The e6"a+ 'rotection c+a"se o$ the Constit"tion *ere+# re6"ires that a++ 'ersons
s"!7ected to +eis+ation sha++ !e treated a+i8e, "nder the circ"*stances and conditions, !oth in
the 'rivi+ees con$erred and in the +ia!i+ities i*'osed% The e6"a+it# in ta)ation r"+e is not
vio+ated i$ c+assi$ications or distinctions are *ade as +on as the sa*e are !ased on reasona!+e
and s"!stantia+ di$$erences% (Pepsi Cola 0ottlin2 Co., )nc. vs. Cit% of 0utuan, " SCRA !+&,
1&*+'
In the instant case, the 'ro$essions o$ doctors and +a(#ers are not 'rinci'a++# ai*ed at
earnin *one# !"t $or the service o$ the 'eo'+e% The e)e*'tion ranted to doctors and
+a(#ers $ro* the o'eration o$ the OAT is 7"sti$ied, as it is not discri*inator# aainst the other
'ro$essiona+s !eca"se the# have reasona!+e and s"!stantia+ di$$erences in the cond"ct o$ their
'ro$essions%

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IMPORTANT TOPICS
BENERAL PRINCIPLES
LIMITATIONS ON TGE TAAINB PO&ER
A. )nAerent Li.itations
1. <'&$ic <'rpose o" axes
2. HonF>e$ega&i$ity o" the axing <ower
3. erritoria$ity or Sit's o" axation
0. ax Exemption o" the Jovernment
3. -nternationa$ !omity
0. Constitutional Li.itations
1. >'e process c$a'se
2. E8'a$ protection c$a'se
3. ,reedom o" speech and o" the press
0. HonFin"ringement o" re$igio's "reedom and worship
3. HonFimpairment o" contracts
9. HonFimprisonment "or de&t or nonFpayment o" po$$ tax
?. 1'$e re8'iring that appropriations% reven'e and tari"" &i$$s sha$$ originate
exc$'sive$y "rom the Ao'se o" 1epresentatives
). Ini"ormity% e8'ita&i$ity and progressivity o" taxation
+. Gimitations on the congressiona$ power to de$egate to the <resident the a'thority
to "ix tari"" rates% import and export 8'otas% etc.
10. ax exemption o" properties act'a$$y% direct$y and exc$'sive$y 'sed "or re$igio's%
charita&$e and ed'cationa$ p'rposes.
11. Loting re8'irement in connection with the $egis$ative grant o" tax exemption
12. HonFimpairment o" the @'risdiction o" the S'preme !o'rt in tax cases
13. Exemption "rom taxes o" the reven'es and assets o" ed'cationa$ instit'tions%
inc$'ding grants% endowments% donations and contri&'tions.
INCOME TAAATION
Cor'orations $or inco*e ta) '"r'oses,
a% Inc+"des9
1. <artnerships% no matter how created or organi.ed
2. =oint stoc( companies
3. =oint acco'nts Bc'entas en participationC
0. /ssociations or ins'rance companies
!% Does not inc+"de
1. Jenera$ <ro"essiona$ partnerships
2. =oint vent're or consorti'm "ormed
i. "or p'rpose o" 'nderta(ing constr'ction pro@ects engaging in
<etro$e'm% !oa$% Jeotherma$% and other energy operations%
ii. <'rs'ant to an operation or consorti'm agreement 'nder a service
contract with the Jovernment. (Section 22 (B), NIRCC
Note: TAe .ain cAaracteristic of a Boint venture is tAat tAe Boint control .ust 6e
containe1 in a contractual a2ree.ent.
Example o unregi!tered partner!"ip taxa#le a! a corporation
/"ter an extra@'dicia$ sett$ement% the coFheirs 'sed the inheritance or the incomes
derived there"rom as a common "'nd to prod'ce pro"its "or themse$ves. ($na %!& CIR, '(
SCRA )')
Example o co*o+ner!"ip not deemed unregi!tered partner!"ip taxa#le a! corporation

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!oFheirs who inherited properties which prod'ce income sho'$d not a'tomatica$$y
&e considered as partners o" an 'nregistered partnership or corporation s'&@ect to income
tax. Sharing o" gross ret'rns does not &y itse$" esta&$ish a partnership% there m'st &e an
'nmista(a&$e intention to "orm a partnership or @oint vent're. ($#illo!, ,r& %!& CIR, -./
SCRA '.0)
E)c+"sions $ro* ross inco*e "nder the NIRC
1. Gi"e -ns'rance proceeds
2. /mo'nt received &y ins'red as ret'rn o" premi'm
3. Ji"ts% &e8'est and devices
0. !ompensation "or in@'ries or sic(ness
3. -ncome exempt 'nder treaty
9. 1etirement &ene"its% pensions% grat'ities% etc.
?. #isce$$aneo's items. BSec. 32 BBC% H-1! o" 1++?C
C+asses o$ Ded"ctions
Individ"a+s
a. with gross compensation income "rom emp$oyerFemp$oyee re$ationship on$y
B1C premi'm payments on hea$th andMor hospita$i.ation ins'rance
B2C persona$ additiona$ exemptions
&. gross income "rom &'siness or practice o" pro"ession
B1C 4ptiona$ Standard >ed'ction B4S>C
B2C -temi.ed ded'ctions
B3C premi'm payments on hea$th andMor hospita$i.ation ins'rance
B0C persona$ additiona$ exemptions
@% Cor'orations
-temi.ed >ed'ctions
Ite*i.ed ded"ctions
a. ordinary and necessary expenses
&. interests
c. taxes
d. $osses
e. &ad de&ts
". depreciation o" propertyO
g. dep$etion o" oi$ and gas we$$s and mines
h. charita&$e and other contri&'tions
i. research and deve$opment
j. pension tr'st contri&'tions o" emp$oyees
k. premi'm payments on hea$th andMor hospita$i.ation ins'rance.
Specia$ >ed'ctions "or <rivate Ed'cationa$ -nstit'tions
/ private ed'cationa$ instit'tions may at its option e$ect either*
BaC to ded'ct expendit'res otherwise considered as capita$ o't$ays o"
deprecia&$e assets inc'rred d'ring the taxa&$e year "or the expansion o" schoo$
"aci$ities% or
(b) to ded'ct a$$owance "or depreciation thereo" (Sec& .' (A) (2), NIRC)
E)e*'tions $or Senior Citi.ens
Senior citi.ens sha$$ &e treated as dependents provided "or in the H-1! and as s'ch
individ'a$ taxpayers caring "or them% &e they re$atives or not sha$$ &e accorded the privi$eges
granted &y the !ode inso"ar as having dependents are concerned. (Sec& ((a) RA No& )'.21 Bay#ay
%!& CIR, C2A Ca!e No& (234, 5ecem#er 24, -//0)
-n determining persona$ exemptions a$$owa&$e to individ'a$s 'nder Section 33 o" the H-1!
as amended &y 1/ H4. )020% a senior citi.en may &e treated as dependent. ,or this p'rpose% the
de"inition o" the term 5head o" a "ami$y6 'nder the said section sha$$ &e deemed amended to re"er
to the de"inition 'nder /rt. 3 o" this imp$ementing r'$es and reg'$ations. (Rule 0, Implementing
Rule! and Regulation! o RA No& )'.2)

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he twenty percent B20EC disco'nt re8'ired &y $aw to &e given to senior citi.ens is a tax
credit% not mere$y a tax ded'ction "rom the gross income or gross sa$e o" the esta&$ishment
concerned. / tax credit is 'sed &y a private esta&$ishment on$y a"ter the tax has &een comp'tedO a
tax ded'ction% &e"ore the tax is comp'ted. 1/ Ho. ?032 'nconditiona$$y grants a tax credit to a$$
covered entities. (CIR %!& Central 6u7on 5rug Corp& 8R No& -(/0'), April -(, 244()
Character o$ &ithho+din Aent
he withho$ding agent is not the payor &'t a separate entity acting no more than an agent
o" the government "or the co$$ection o" the tax in order to ens're its payments. he payor o" the
tax is the taxpayer% he is the person s'&@ect to tax imposed &y $awO and the payee is the taxing
a'thority.
he agent is not $ia&$e "or the tax as no wea$th "$owed into him% he earned no income. he
tax !ode on$y ma(es the agent persona$$y $ia&$e "or the tax arising "rom the &reach o" its $ega$ d'ty
to withho$d as disting'ished "rom its d'ty to pay tax% since the government2s ca'se o" action
against the withho$ding agent is not "or the co$$ection o" income tax &'t "or the en"orcement o" the
withho$ding provisions o" the ax !ode% comp$iance with which is imposed on the withho$ding
agent. (CIR %!& Court o Appeal!, 8R N& -43()0, ,anuary 24, -///)
TAA ENFORCEMENT AND ADMINISTRATION
EIR ORBANIQATIONAL STRUCTURE
Aeaded &y a !ommissioner o" -nterna$ 1even'e and "o'r B0C >ep'ty !ommissioners.
Each >ep'ty heads the 4perations Jro'p% Gega$ and -nspection Jro'p% 1eso'rce and
#anagement Jro'p% and -n"ormation Systems Jro'p.
wo more >ep'ty !ommissioners were appointed in 2003 as head o" the
<rosec'tion Jro'p and the Specia$ !oncerns Jro'p.
Note9 2"e!e deputy commi!!ioner! are tec"nically, not deputy commi!!ioner! +it"in
Section . o t"e -//) NIRC&
he !ommissioner and six B9C >ep'ty !ommissioners% together with thirteen B13C
/ssistant !ommissioners "or the di""erent services% comprise t"e !enior le%el o
admini!trati%e aut"ority&
S'pporting them are the nineteen B1+C 1egiona$ >irectors% one h'ndred "i"teen
B113C 1even'e >istrict 4""icers% and tho'sands o" reven'e o""icers cond'cting the a'dit o"
taxpayers2 &oo(s o" acco'nts and acco'nting records.
ABENTS OF TGE CIR9
a. !ommissioner o" !'stoms with respect to taxes on imported goods
&. Aead o" the appropriate government o""ice with respect to energy tax
c. Ban(s d'$y accredited &y the !-1. (Sec& -2, -//) NIRC)
PO&ERS AND DUTIES OF TGE EIR
1. o assess and co$$ect nationa$ interna$ reven'e taxes% "ees% and chargesO
2. o en"orce a$$ "or"eit'res% pena$ties and "ines connected therewithO
3. o exec'te @'dgments in a$$ cases decided in its "avor &y the !/ and the ordinary
co'rtsO and
4. o e""ect and administer the s'pervisory and po$ice powers con"erred 'pon it &y
the ax !ode or other specia$ $aws (Sec& 2, NIRC)
PO&ERS OF TGE CIR
1. <ower to interpret tax $aws s'&@ect to review &y the Secretary o" ,inance
2. <ower to decide tax cases s'&@ect to review &y the !o'rt o" ax /ppea$s
3. <ower to examine &oo(s and other acco'nting records and o&tain in"ormation
0. <ower to in8'ire into &an( deposits o" taxpayers R
Hotwithstanding 1./. 1003 BBan( Secrecy GawC the !ommissioner is a'thori.ed to
in8'ire into the Ban( deposits o"*
a. a decedent to determine his gross estate
&. a taxpayer who has "i$ed an app$ication to compromise payment o" tax $ia&i$ity &y
reason o" "inancia$ incapacity

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Note9 2"e taxpayer:! application or compromi!e !"all not #e con!idered unle!! "e +ai%e!
in +riting "i! pri%ilege under RA -'4( and ot"er general or !pecial la+!& Suc" +ai%er !"all
aut"ori7e t"e Commi!!ioner to in;uire into "i! #an< depo!it!&
3. <ower to assess and co$$ect the correct amo'nt o" tax
TAA REMEDIES OF TGE BOOERNMENT
TAA REMEDIES UNDER TGE 1FF? TAA CODE
1. S'mmary R remedies at the administrative $eve$ or reg'$ation that are exec'ted
witho't ceremony or de$ayO short or conciseO
2. S'&stantive R remedies provided "or &y $aw or reg'$ationO an essentia$ part or
constit'ent or re$ating to what is essentia$O
3. <roced'ra$ R remedies invo$ving $aw o" p$eading% evidence% @'risdiction% etc.
0. /dministrative R remedies avai$a&$e at the administration BB-1C $eve$O
3. ='dicia$ R remedies that are en"orced thro'gh @'dicia$ action% which may &e civi$ or
crimina$
SUESTANTIOE REMEDIES
1. -mposition o" withho$ding tax on certain income payments =Sec& ()(B), NIRC>
2. -ss'ance o" reven'e reg'$ations &y administrative agency =Sec& 2''* 2'(, NIRC>
3. ,ai$'re to o&ey s'mmons =Sec& 200, NIRC>
4. >ec$aration 'nder pena$ties o" per@'ry =Sec& 20), NIRC>
A1.inistrative interpretations sAoul1 6e respecte1
he interpretation given &y the administrative o""icer charged &y reason o" his o""ice to
carry o't the provisions o" a stat'te sho'$d &e respected whenever s'ch interpretation is
assai$ed &y someone who a$$eges no reasons o" weight to contradict or wea(en it&
(Commi!!ioner %!& 6ede!ma& .- SCRA /()
Principle of Le2islative Approval 6% Reenact.ent
he princip$e o" $egis$ative approva$ o" administrative interpretation o" a stat'te is to the
e""ect that the reenactment o" a stat'te s'&stantia$$y 'nchanged is pers'asive indication o" the
adoption &y !ongress o" a prior exec'tive constr'ction& (ABS*CBN Broadca!ting Corp& %!& C2A
and Commi!!ioner& -43 SCRA -'2)
ADMINISTRATIOE REMEDIES OF TGE BOOERNMENT
Power to Assess
<res'mption o" !orrectness o" the assessments made &y the !ommissioner
/ssessment <rocess
1. Examination o" &oo(s o" acco'nts and other acco'nting records o" taxpayers
&y reven'e o""icers to determine his correct tax $ia&i$ity
2. <reparation o" tentative "indings and ho$ding o" in"orma$ con"erence
3. -ss'ance o" <re$iminary /ssessment Hotice B</HC
0. -ss'ance o" ,orma$ /ssessment Hotice B,/HC and $etter o" demand
Power to Collect ;eficienc% or ;elinIuent Ta/es
1. ,i$ing o" administrative protest &y the taxpayer against the assessment B30Fday
periodC
2. S'&mission o" doc'mentary evidence B90Fday periodC
Hote* S'&mission o" doc'ments within the 90 day period is optional to t"e
taxpayer. (Standard C"artered Ban< %!& CIR, C2A Ca!e No& (0/0, Augu!t -0, 244-)
3. >enia$ o" protest &y the !ommissioner or his a'thori.ed representative
0. /ppea$ &y the taxpayer o" the "ina$ decision o" the !ommissioner or his a'thori.ed
representative on the disp'ted assessment to the !/ Bwithin 30 days "rom the receipt
o" the decision% or in case o" inaction "rom the $apse o" the 1)0 day periodC

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Admini!trati%e Remedie! o t"e 8o%ernment
1. ax Gien
2. >istraint o" persona$ property% or $evy o" rea$ property% or garnishment o" &an(
deposits
3. Sa$e o" property o" a de$in8'ent taxpayer
0. ,or"eit're
3. !ompromise and a&atement
9. <ena$ties and "ines
?. S'spension o" &'siness operations
Note9 2"e ollo+ing are t"e ca!e! +"ic" may #e compromi!ed9
-& 5elin;uent account!1
2& Ca!e! under admini!trati%e prote!t ater i!!uance o t"e ?inal A!!e!!ment Notice to
t"e taxpayer +"ic" are !till pending in t"e Regional $ice!, Re%enue 5i!trict $ice!,
6egal Ser%ice, 6arge 2axpayer Ser%ice (62S), Collection Ser%ice, Enorcement Ser%ice
and ot"er oice! in t"e National $ice1
.& Ci%il tax ca!e! #eing di!puted #eore t"e court!1
'& Collection ca!e! iled in court!1
(& Criminal %iolation!, ot"er t"an t"o!e already iled in court or t"o!e in%ol%ing criminal
tax raud& (Re%enue Regulation No& .4*42)
2UDICIAL REMEDIES OF TGE BOOERNMENT
1% Civi+ Action
a. By "i$ing a civi$ case "or the co$$ection o" a s'm o" money with the proper reg'$ar
co'rt
!o$$ecti&i$ity arises*
B1C Se$"Fassessed tax shown in the ret'rn was not paid within the date prescri&ed
&y $aw
B2C ,ina$ assessment is not protested administrative$y within 30 days "rom date o"
receipt
B3C HonFcomp$iance with the condition $aid in the approva$ o" the protest
B0C ,ai$'re to "i$e a time$y appea$ to the !/ on the "ina$ decision o" the
!ommissioner or his a'thori.ed representative on the disp'ted assessment
&. By "i$ing an answer to the petition "or review "i$ed &y the taxpayer with the !/
@% Cri*ina+ Action
a. /ttempt to evade or de"eat tax (Sec& 2(', NIRC)
b. ,ai$'re to "i$e ret'rn% s'pp$y correct and acc'rate in"ormation% pay tax% withho$d
and remit tax and re"'nd excess taxes withhe$d on compensation (Sec& 2((, NIRC)
TAA REMEDIES OF TGE TAAPAYER
REMEDIES OF TAAPAYERS
A1.inistrative Re.e1ies
1. Be"ore payment o" the de"iciency tax assessment R "i$e a written protest within 30
days "rom date o" receipt (Sec& 223, NIRC)
2. /"ter payment o" the de"iciency tax assessment R "i$e a written c$aim "or re"'nd or
tax credit with the appropriate government agency Bthe B-1 or the >epartment o"
,inance 4ne Stop Shop !enterC =Sec!& 24' (C) and 22/, NIRC>
$u1icial Re.e1ies
-" the protest is denied in who$e or in part% or is not acted 'pon% within 1)0 days "rom
s'&mission o" doc'ments% the taxpayer adverse$y a""ected &y the decision or inaction may
appea$ to the !/ within 30 days "rom receipt o" the said decision% or "rom the $apse o" the
1)0 day periodO otherwise% the decision sha$$ &ecome "ina$% exec'tory and demanda&$e.
(Sec& 223, NIRC)

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Note9 It "a! #een "eld #y t"e Court o 2ax Appeal! t"at@ In ca!e! o inaction, Section
223 o t"e 2ax Code merely ga%e t"e taxpayer an option9 ir!t, "e may appeal to t"e Court o
2ax Appeal! +it"in t"irty (.4) day! rom t"e lap!e o t"e one "undred eig"ty (-34) day period
pro%ided or under t"e !aid !ection, or !econd, "e may +ait until t"e Commi!!ioner decide! on
"i! prote!t #eore "e ele%ate! "i! ca!e& 2"e taxpayer +a! gi%en t"i! option !o t"at in ca!e "i!
prote!t i! not acted upon +it"in t"e -34*day period, "e may #e a#le to !ee< immediate relie
and need not +ait or an indeinite period o time or t"e Commi!!ioner to decide& But i "e
c"oo!e! to +ait or a po!iti%e action on t"e part o t"e Commi!!ioner, t"en t"e !ame could not
re!ult in t"e a!!e!!ment #ecoming inal, executory and demanda#le&@ (Lascona Lan1 Co., )nc.
vs. C)R, CTA Case No. -!!!. $anuar% ", ###7
Su6stantive Re.e1ies
1. ;'estioning the constit'tiona$ity or va$idity o" tax stat'tes or reg'$ations
2. HonFretroactivity o" r'$ings (Sec& 2'0, NIRC)
3. ,ai$'re to in"orm the taxpayer in writing o" the $ega$ and "act'a$ &ases o"
assessment ma(es it void (Sec& 223, NIRC)
4. <reservation o" &oo(s o" acco'nts and onceFaFyear examination "or income tax
p'rposes (Sec& 2.(, NIRC)
5. <'&$ication o" 1#! and 1#4 R Whi$e the r'$eFma(ing a'thority o" the !-1 is not
do'&ted% $i(e any other government agency% the !ommissioner may not disregard $ega$
re8'irements or app$ica&$e princip$es in the exercise o" 8'asiF$egis$ative powers. he
d'e o&servance o" the re8'irements o" notice% hearing and p'&$ication sho'$d not have
&een ignored& (CIR %!& Mic"el 6"uillier Aa+n!"op& 8R No& -(4/')& ,uly -(, 244.)
Proce1ural Re.e1ies (Revenue Re2ulations No. 1E&&'
1. Hotice "or -n"orma$ !on"erence
Re%enue $icer
a. /'dits the taxpayer2s records
&. States in his report whether or not the taxpayer agrees with his "indings
that the taxpayer is $ia&$e "or de"iciency tax or taxes.
2. -n"orma$ !on"erence Getter
Re%enue 5i!trict $ice or Special In%e!tigation 5i%i!ion or C"ie o 5i%i!ion concerned
(in ca!e o BIR National $ice)
a. -n"orms the taxpayer in writing% in case the taxpayer is not amena&$e% o"
the discrepancy or discrepancies in the taxpayer2s payment o" his interna$ reven'e
taxes "or the p'rpose o" 5-n"orma$ !on"erence6
1C axpayer respondsO or i"
2C axpayer "ai$s to respond within "i"teen B13C days "rom date or receipt o"
notice o" in"orma$ con"erence% he sha$$ &e considered in de"a'$t.
&. Endorses the case% in case o" de"a'$t or taxpayer2s response is not
accepta&$e% to the /ssessment >ivision o" the 1even'e 1egiona$ 4""ice or to the
!ommissioner or his d'$y a'thori.ed representative
3. <re$iminary /ssessment Hotice B</HC
A!!e!!ment 5i%i!ion or t"e Commi!!ion or "i! duly aut"ori7ed repre!entati%e
a. 1eviews and eva$'ates. -" there exists s'""icient &asis to assess the
taxpayer "or any de"iciency tax or taxes% the said 4""ice sha$$ iss'e to the taxpayer
a </H "or the proposed assessment.
1C axpayer responds within "i"teen B13C days "rom date o" receipt o" the </H
2C -" the taxpayer "ai$s to respond within 13 days "rom receipt o" </H% he sha$$ &e
considered in de"a'$t.
&. -ss'es a "orma$ $etter o" demand and assessment notice% in case o" de"a'$t
or taxpayer2s response is not accepta&$e% ca$$ing "or the payment o" the taxpayer2s
de"iciency tax $ia&i$ity.
Aowever% a preFassessment notice sha$$ not &e re8'ired in the "o$$owing cases% in
which case% a "orma$ assessment notice sha$$ &e s'""icient*
B1C When the "inding "or any de"iciency tax is the res'$t o" mathematica$ error in
the comp'tation o" the tax as appearing on the "ace o" the ret'rnO or

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B2C When a discrepancy has &een determined &etween the tax withhe$d and the
amo'nt act'a$$y remitted &y the withho$ding agentO or
B3C When a taxpayer who opted to c$aim a re"'nd or tax credit o" excess credita&$e
withho$ding tax "or a taxa&$e period was determined to have carried over and
a'tomatica$$y app$ied the same amo'nt c$aimed against the estimated tax
$ia&i$ities "or the taxa&$e 8'arter or 8'arters o" the s'cceeding taxa&$e yearO or
B0C When the excise tax d'e on excisa&$e artic$es has not &een paidO
B3C When an artic$e $oca$$y p'rchased or imported &y an exempt person% s'ch as%
&'t not $imited to% vehic$es% capita$ e8'ipment% machineries and spare parts%
has &een so$d% traded or trans"erred to nonFexempt persons.
0. ,orma$ Getter o" >emand and /ssessment Hotice
Commi!!ioner or "i! duly aut"ori7ed repre!entati%e iss'es the "orma$ $etter o" demand
and assessment notice which sha$$ state the "acts% the $aw% r'$es and reg'$ations% or
@'rispr'dence on which the assessment is &asedO otherwise% it sha$$ &e void.
3. >isp'ted /ssessments
2axpayer
a. <rotests administrative$y against the "orma$ $etter o" demand and
assessment notice within thirty B30C days "rom receipt thereo". 4therwise% the
assessment sha$$ &ecome "ina$% exec'tory and demanda&$e.
&. S'&mits re8'ired s'pporting doc'ments within sixty B90C days "rom the date
o" "i$ing his $etter o" protest% otherwise% the assessment sha$$ &ecome "ina$%
exec'tory and demanda&$e.
c. /ppea$s to the !o'rt o" ax /ppea$s% i" protest is denied in who$e or in part
&y the !ommissioner% within thirty B30C days "rom date o" receipt o" decisionO
otherwise% the assessment sha$$ &ecome "ina$% exec'tory and demanda&$e.
-" the !ommissioner "ai$s to act on the taxpayer2s protest within one
h'ndred eighty days B1)0C days "rom date o" s'&mission o" re8'ired
s'pporting doc'ments% the taxpayer may appea$ to the !o'rt o" ax
/ppea$s within thirty B30C days "rom the $apse o" the 1)0Fday periodO
otherwise% the assessment sha$$ &ecome "ina$% exec'tory and demanda&$e.
Con!tructi%e Ser%ice o Notice
here sha$$ &e constr'ctive service o" notice in the "o$$owing cases*
1. -" the notice to the taxpayer is served &y registered mai$% and no
response is received "rom the taxpayer within the prescri&ed period
2. -" the notice is persona$$y served on the taxpayer or his d'$y a'thori.ed
representative% who% however% re"'se to ac(now$edge receipt thereo"
3. By $eaving the notice in the premises o" the taxpayer and this "act o"
service is attested to% witnessed and signed &y at $east two B2C reven'e o""icers
other than the reven'e o""icer who constr'ctive$y served the same. (Sec& .&-&),
Re%& Reg!& No& -2*//)
ASSESSMENT AND PROTEST
A!!e!!ment
he genera$ r'$e is that taxes are se$"Fassessing and th's% do not re8'ire the iss'ance o" an
assessment notice in order to esta&$ish the tax $ia&i$ity o" a taxpayer. he exceptions are*
1. ax period o" a taxpayer is terminated =Sec& 0(5), NIRC>
2. >e"iciency tax $ia&i$ity arising "rom a tax a'dit cond'cted &y the BIR =Sec& (0(B),
NIRC>
3. ax $ien =Sec& 2-/, NIRC>
4. >isso$ving corporation =Sec& (2(c), NIRC>
Signiicance o A!!e!!ment9
a. -n the proper p'rs'it o" @'dicia$ and extra@'dicia$ remedies to en"orce
taxpayer $ia&i$ities and certain matters that re$ate to it% s'ch as the imposition o"
s'rcharges and interests%

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&. -n the app$ication o" stat'te o" $imitations%
c. -n the esta&$ishment o" tax $iens% and
d. -n estimating the reven'es that may &e co$$ected &y government in the
coming year.
Arote!t
1. >irect denia$ o" protest
Admini!trati%e deci!ion on a di!puted a!!e!!ment R he decision o" the !ommissioner or
his d'$y a'thori.ed representative sha$$ BaC state the "acts% the app$ica&$e $aw%
r'$es% and reg'$ations% or @'rispr'dence on which s'ch decision is &asedO
otherwise% the decision sha$$ &e void% in which case% the same sha$$ not &e
considered a decision on a disp'ted assessment% and B&C that the same is his "ina$
decision. (Sec& .&-&(, Re%& Reg!& No& -2 B //)
2. -ndirect denia$ o" protest B='rispr'denceC
a. !ommissioner did not r'$e on the taxpayer2s motion "or reconsideration o"
the assessment R -t was on$y when respondent received the s'mmons on the civi$
action "or the co$$ection o" de"iciency income tax that the period to appea$
commenced to r'n. (Commi!!ioner %!& Cnion S"ipping Corp& -3( SCRA ('))
b. 1e"erra$ &y the !ommissioner o" re8'est "or reinvestigation to the So$icitor
Jenera$ (Repu#lic %!& 6im 2ian 2eng Son!)
c. 1eiterating the demand "or immediate payment o" the de"iciency tax d'e
to taxpayer2s contin'ed re"'sa$ to exec'te waiver (Commi!!ioner %!& Ayala
Securitie! Corp& )4 SCRA 24')
PRESCRIPTIOE PERIODS UNDER TGE TAA CODE
1% Period to assess the ta)
8eneral Rule9
A1EE B3C DE/1S a"ter the date the ret'rn is d'e or "i$ed% whichever is $ater (Sec& 24.,
-//) NIRC)&
Exception!9
1. ,/-GI1E 4 ,-GE / 1EI1H* EH B10C DE/1S "rom the date o" the discovery o" the
omission to "i$e the ret'rn (Sec&222=A>)1
2. ,/GSE 41 ,1/>IGEH 1EI1H with -HEH-4H 4 EL/>E AE /:* EH B10C DE/1S
"rom the date o" the discovery o" the "a$sity or "ra'd (Sec&222 =A>
@% Period to co++ect the assessed ta)
a. ,-LE B3C DE/1S R "rom assessment or within period "or co$$ection agreed 'pon in writing
&e"ore expiration o" the 3Fyear period (Sec& 222, -//) NIRC)&
&. EH B10C DE/1S R witho't assessment in case o" "a$se or "ra'd'$ent ret'rn with intent to
evade or "ai$'re to "i$e ret'rn (Sec& 222, -//) NIRC)&
>% Period to $i+e cri*ina+ action
,-LE B3C DE/1S "rom*
(1) day o" the commi!!ion o t"e %iolation o" the $aw% and
(2) -" the same &e not (nown, rom di!co%ery t"ereo and t"e
in!titution o t"e Dudicial proceeding! "or its investigation and p'nishment.
FALSE RETURN M FRAUDULENT RETURN
he distinction &etween a al!e return and a raudulent return is that the "irst mere$y
imp$ies a deviation "rom the tr'th or "act whether intentiona$ or not% whereas the second is
intentiona$ and deceit"'$ with the so$e aim o" evading the correct tax d'e.
here is "ra'd in the "o$$owing decided cases*
1. ,ra'd m'st &e the prod'ct o" a de$i&erate intent to evade taxes (,alandoni %!&
Repu#lic& -( SCRA (-)
2. Simp$e statement that ret'rn "i$ed was not "ra'd'$ent does not disprove existence
o" "ra'd (2ayengco %!& Collector& C2A Ca!e No& (-& ,uly .-, -/0')
3. S'&stantia$ 'nderFdec$arations o" income "or six consec'tive "ive years demonstrate
"ra'd'$ence o" ret'rn (Aere7 %!& C2A& 6*-4(4)& May .4, -/(3)

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4. <resence o" "ictitio's expenses% with no evidence presented% proves existence o"
"ra'd (2an 8uan %!& Commi!!ioner)
Aowever% the co'rts did not consider the tax ret'rns "i$ed as "a$se or "ra'd'$ent with intent
to evade the payment o" tax in the "o$$owing cases*
1. #ere 'nderstatement in the tax ret'rn wi$$ not necessari$y imp$y "ra'd (,alandoni
%!& Repu#lic)
2. Sa$e o" rea$ property "or a price $ess than its "air mar(et va$'e is not necessari$y a
"a$se ret'rn (Commi!!ioner %!& B&?& 8oodric" A"il!&)
3. ,ra'd is a 8'estion o" "act and the circ'mstances constit'ting "ra'd m'st &e
a$$eged and proved in the tria$ co'rt (Commi!!ioner %!& Ayala Securitie!& )4 SCRA 24')
4. ,ra'd is never imp'ted and the co'rts never s'stain "indings o" "ra'd 'pon
circ'mstances that on$y create s'spicion (Commi!!ioner %!& ,a%ier& -// SCRA 32')
5. #ista(es o" reven'e o""icers on three di""erent occasions remove e$ement o" "ra'd
(A7nar %!& C2A and Collector)
CIOIL PENALTIES
CIOIL PENALTY M SURCGARBE
1% @0H s"rchare
B1C ,ai$'re to "i$e any ret'rn and pay the tax d'e thereon as re8'ired 'nder the provisions
o" this !ode or r'$es and reg'$ations on the date prescri&edO or
B2C In$ess otherwise a'thori.ed &y the !ommissioner% "i$ing a ret'rn with an interna$
reven'e o""icer other than those with whom the ret'rn is re8'ired to &e "i$edO or
B3C ,ai$'re to pay the de"iciency tax within the time prescri&ed "or its payment in the
notice o" assessmentO or
(4) ,ai$'re to pay the "'$$ or part o" the amo'nt o" tax shown on any ret'rn re8'ired to &e
"i$ed 'nder the provisions o" this !ode or r'$es and reg'$ations% or the "'$$ amo'nt o"
tax d'e "or which no ret'rn is re8'ired to &e "i$ed% on or &e"ore the date prescri&ed "or
its payment& (Sec& 2'3, NIRC1 Sec& '&-, Re%& Reg!& No& -2*//)
@% 04H s"rchare
B1C in case o" wi$$"'$ neg$ect to "i$e the ret'rn within the period prescri&ed &y the !ode% or
wi$$ not app$y in case a taxpayer% witho't notice "rom the !ommissioner% or
his d'$y a'thori.ed representative% vo$'ntari$y "i$es the said ret'rn Bon$y 23E sha$$
&e imposedC
30E s'rcharge sha$$ &e imposed in case the taxpayer "i$es the ret'rn on$y
a"ter prior notice in writing "rom the !ommissioner or his d'$y a'thori.ed
representative (Sec& '&2, Re%& Reg& -2*//)
B2C in case a "a$se or "ra'd'$ent ret'rn is wi$$"'$$y made
<rima ,acie evidence
s'&stantia$ 'nderdec$aration (exceeding .4E o t"at declared) o" taxa&$e
sa$es% receipts or income% or
s'&stantia$ overstatement (exceeding .4E o actual deduction!) o"
ded'ctions BSec. 20)C
Note9 / taxpayer may modi"y% change or amend his tax ret'rn within three B3C
years "rom the date o" s'ch "i$ing% provided however that no notice "or a'dit or
investigation o" s'ch ret'rn% statement or dec$aration has% in the meantime &een
act'a$$y served 'pon the taxpayer. (Sec& 0 (A), NIRC)& h's i" the amended ret'rn has
&een "i$ed on$y a"ter the iss'ance o" the Getter o" /'thority "or the investigation or in
the co'rse o" said investigation% the 30E civi$ pena$ty sha$$ &e app$ied. (Sec& '&2&2, Re%&
Reg!& No& -2*//)

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COURT OF TAA APPEALS
Under RA NO% F@L@ /A''roved March >4, @4435
he ran( was e$evated to the $eve$ o" a co$$egiate co'rt with specia$ @'risdiction%
and a new division was created.
Same $eve$ as the !o'rt o" /ppea$s% possessing a$$ the inherent powers o" a !o'rt o"
='stice
!onsists o" a <residing ='stice and "ive B3C /ssociate ='stices
#ay sit en #anc or in two B2C >ivisions% each division consisting o" three B3C ='stices.
,o'r B0C ='stices sha$$ constit'te a 8'or'm "or sessions en #anc and two B2C ='stices "or
sessions o" a >ivision.
he a""irmative votes o" "o'r B0C mem&ers o" the !o'rt en #anc or two B2C mem&ers
o" a >ivision% as the case may &e% sha$$ &e necessary "or the rendition o" a decision or
reso$'tion.
E)'anded 2"risdiction
E)c+"sive a''e++ate 7"risdiction to revie( !# a''ea+
(a) >ecisions o" the Commi!!ioner o Internal Re%enue
B1C in cases invo$ving disp'ted assessments% re"'nds o" interna$ reven'e taxes%
"ees or other charges% pena$ties in re$ation thereto%
B2C or other matters arising 'nder the H-1! or other $aws administered &y the
B-1O
(b) -naction &y the Commi!!ioner o Internal Re%enue
B1C in cases invo$ving disp'ted assessments% re"'nds o" interna$ reven'e taxes%
"ees or other charges% pena$ties in re$ation thereto%
B2C or other matters arising 'nder the H-1! or other $aws administered &y the
B-1% where the H-1! provides a speci"ic period "or action% in which case the
inaction sha$$ &e deemed a denia$O
(c) >ecisions% orders or reso$'tions o" the R2C
R in $oca$ tax cases origina$$y decided or reso$ved &y them in the exercise o"
their origina$ or appe$$ate @'risdictionO
(d) >ecisions o" the Commi!!ioner o Cu!tom!
B1C in cases invo$ving $ia&i$ity "or c'stoms d'ties% "ees or other money charges%
sei.'re% detention or re$ease o" property a""ected% "ines% "or"eit'res or other
pena$ties in re$ation thereto%
B2C or other matters arising 'nder the !'stoms Gaw or other $aws administered
&y the B'rea' o" !'stomsO
(e) >ecisions o" the Central Board o A!!e!!ment Appeal!
R in the exercise o" its appe$$ate @'risdiction over cases invo$ving the
assessment and taxation o" rea$ property origina$$y decided &y the provincia$ or city
&oard o" assessment appea$sO
(f) >ecisions o" the Secretary o ?inance
R on c'stoms cases e$evated to him a'tomatica$$y "or review "rom decisions o"
the !ommissioner o" !'stoms which are adverse to the Jovernment 'nder Section
2313 o" the ari"" and !'stoms !odeO
(g) >ecisions o" the Secretary o 2rade and Indu!try in the case o" nonagric'$t'ra$
prod'ct% commodity or artic$e% and the Secretary o Agriculture in the case o"
agric'$t'ra$ prod'ct% commodity or artic$e%
R invo$ving d'mping and co'ntervai$ing d'ties 'nder Secs. 301and 302%
respective$y% o" the ari"" and !'stoms !ode% and sa"eg'ard meas'res 'nder 1/ Ho%
))00% where either party may appea$ the decision to impose or not to impose said
d'ties.

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2"risdiction over cases invo+vin cri*ina+ cases
(a) Exclu!i%e original @'risdiction over a$$ crimina$ cases arising "rom vio$ations o" the
H-1! or ari"" and !'stoms !ode and other $aws administered &y the B-1 or the
B'rea' o" !'stoms
Where the principa$ amo'nt o" taxes and "ees% exc$'sive o" charges and
pena$ties c$aimed is $ess than one mi$$ion pesos B<1%000%000.00C or where there
is no speci"ied amo'nt c$aimed R the o""enses or pena$ties sha$$ &e tried &y the
regular court! and the @'risdiction o" the !/ sha$$ &e appe$$ate.
/ny provision o" $aw or the 1'$es o" !o'rt to the contrary notwithstanding%
the crimina$ action and the corresponding civi$ action "or the recovery o" civi$
$ia&i$ity "or taxes and pena$ties sha$$ at a$$ times &e sim'$taneo's$y instit'ted
with% and @oint$y determined in the same proceeding &y the !/% the "i$ing o"
the crimina$ action &eing deemed to necessari$y carry with it the "i$ing o" the
civi$ action% and no right to reserve the "i$ing o" s'ch civi$ action separate$y
"rom the crimina$ action wi$$ &e recogni.ed.
(b) Exclu!i%e appellate @'risdiction in crimina$ o""enses
B1C 4ver appea$s "rom the @'dgments% reso$'tions or orders o" the 1! in tax cases
origina$$y decided &y them% in their respective territoria$ @'risdiction.
B2C 4ver petitions "or review o" the @'dgments% reso$'tions% or orders o" the 1! in
the exercise o" their appe$$ate @'risdiction over tax cases origina$$y decided &y
the #etropo$itan ria$ !o'rts% #'nicipa$ ria$ !o'rts% and #'nicipa$ !irc'it ria$
!o'rts in their respective @'risdiction.
2"risdiction over ta) co++ection cases
(a) Exclu!i%e original @'risdiction in tax co$$ection cases invo$ving "ina$ and exec'tory
assessments "or taxes% "ees% charges and pena$ties.
-n co$$ection cases where the principa$ amo'nt o" taxes and "ees% exc$'sive
o" charges and pena$ties% c$aimed is $ess than one mi$$ion pesos B<1%000%000.00C
R sha$$ &e tried &y the proper Municipal 2rial Court% Metropolitan 2rial Court%
and Regional 2rial Court.
(b) Exclu!i%e appellate @'risdiction in tax co$$ection cases
B1C 4ver appea$s "rom the @'dgments% reso$'tions or orders o" 1! in tax co$$ection
cases origina$$y decided &y them% in their respective territoria$ @'risdiction.
B2C 4ver petitions "or review o" the @'dgements% reso$'tions or orders o" the 1! in
the exercise o" their appe$$ate @'risdiction over tax co$$ection cases origina$$y
decided &y the #etropo$itan ria$ !o'rts% #'nicipa$ ria$ !o'rts and #'nicipa$
!irc'it ria$ !o'rts% in their respective @'risdiction.
FFF in crimina$ and co$$ection cases% the Jovernment may direct$y "i$e the said cases
with the !/ covering amo'nts within its exc$'sive and origina$ @'risdiction.
Modes o$ A''ea+
B1C By "i$ing a petition "or review 'nder a proced're ana$ogo's to that provided "or 'nder
1'$e 02 o" 1++? 1'$es on !ivi$ <roced're
decision% r'$ing% or inaction o" the Commi!!ioner o Internal Re%enue%
Commi!!ioner o Cu!tom!% the Secretary o ?inance% the Secretary o 2rade and
Indu!try or the Secretary o Agriculture or the Regional 2rial Court!
this appea$ sha$$ &e heard &y a >ivision o" the !/
B2C By "i$ing a petition "or review 'nder a proced're ana$ogo's to that provided "or 'nder
1'$e 03 o" 1++? 1'$es on !ivi$ <roced're
decisions or r'$ings o" the Central Board o A!!e!!ment! Appeal! and the Regional
2rial Court! in the exercise o" its appellate @'risdiction
this appea$ sha$$ &e heard &y the !/ en &anc.
Proced"re9

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1. he appea$ sha$$ &e "i$ed with the !/ within thirty B30C days a"ter the
receipt o" s'ch decision or r'$ing or a"ter the expiration o" the period "ixed &y $aw "or
s'ch action.
2. / party adverse$y a""ected &y a r'$ing% order or decision o" a >ivision o"
the !/ may "i$e a motion "or reconsideration or new tria$ &e"ore the same >ivision
within 13 days "rom notice.
3. / party adverse$y a""ected &y a reso$'tion o" a >ivision o" the !/ on a
motion "or reconsideration or new tria$ may "i$e a petition "or review with the !/ en
&anc.
0. / party adverse$y a""ected &y a decision or r'$ing o" the !/ en &anc
may "i$e with the S'preme !o'rt a veri"ied petition "or review on certiorari p'rs'ant to
1'$e 03 o" the 1++? 1'$es on !ivi$ <roced're.
-n cases where the B-1 have not decided on the protest a"ter 1)0 days and an
appea$ has &een "i$ed with the !/% the B-1 can not $ater decide on the protest since
'nder 1'$es 02 and 03 o" the 1'$es o" !o'rt% the B-1 has on$y resid'a$ @'risdiction over
the case a"ter the appea$ has &een made.
E$$ect o$ A''ea+
Ho appea$ ta(en to the !/ sha$$ s'spend the payment% $evy% distraint% andMor sa$e o" any
property o" the taxpayer "or the satis"action o" his tax $ia&i$ity as provided &y existing $aw.
Go(ever, when in its opinion the co$$ection may @eopardi.e the interest o" the government
andMor the taxpayer% the !/ may s'spend the said co$$ection and re8'ire the taxpayer either to
deposit the amo'nt c$aimed or to "i$e a s'rety &ond "or not more than do'&$e the amo'nt with the
!o'rt.

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7.4.14 Red Notes Tax

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