Commissioner vs. Algue, Inc.

COMMISSIONER v. ALGUE, INC.

GR No. L-28896, February 17, 1988
158 SCRA 9
FACTS: Private respondent corporation Algue Inc. filed its income tax returns for 1958 and 1959showing deductions, for promotional fees paid, from
their gross income, thus lowering their taxable income. The BIR assessed Algue based on such deductions contending that the claimed deduction is
disallowed because it was not an ordinary, reasonable and necessary expense.
ISSUE: Should an uncommon business expense be disallowed as a proper deduction in computation of income taxes, corollary to the doctrine that
taxes are the lifeblood of the government?
HELD: No. Private respondent has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees
in inducing investors and prominent businessmen to venture in an xperimental enterprise and involve themselves in a new business requiring millions
of pesos. This was no mean feat and should be, as it was, sufficiently recompensed.
It is well-settled that taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such
collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to
reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the
common good, may be achieved.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably
and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For
all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not
been observed.
CIR vs. BPI
G.R. No. 134062
April 17, 2007
Corona, J.:
FACTS:
In October 28, 1988, petitioner assessed BPI of deficiency percentage and documentary stamp tax for the year 1986, in the total amount of
P129,488,056.63. A letter reply by respondent was sent on December 10, 1988 stating among other:
... we shall inform you the taxpayers decision on whether to pay of protest the assessment, CTA ruled that BPI failed to protest on time under Sec
270 of NIRC of 1986.
ISSUE:
Whether or not the assessments issued to BPI for deficiency percentage and documentary stamp taxes for 1986 had already become final
and un-appealable.
RULING:
In merely notifying BPI of his findings. CIR relied on the provisions of the former Section 270 prior to its amendment by RA 8424. The
sentence
the taxpayers shall be informed in writing of the law and the facts on which the assessment is made
Was not in the old Section 270 but was only later on inserted in the renumbered Section 228 in 1997.
Tax assessments by tax examiners are presumed correct and are made in good faith. The taxpayer has the duty to prove otherwise. In the
absence of proof of any irregularities in the performance of duties, an assessment duly made by BIR examiner and approved by his superior officers
will not be distributed. All presumptions are in favor of the correctness of tax assessments.
Facts: The case is a petition filed by petitioner on behalf of videogram operators adversely affected by Presidential Decree No. 1987, An Act
Creating the Videogram Regulatory Board with broad powers to regulate and supervise the videogram industry.
A month after the promulgation of the said Presidential Decree, the amended the National Internal Revenue Code provided that:
SEC. 134. Video Tapes. There shall be collected on each processed video-tape cassette, ready for playback, regardless of length, an annual tax of
five pesos; Provided, That locally manufactured or imported blank video tapes shall be subject to sales tax.
Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any provision of law to the contrary, the province shall collect a
tax of thirty percent (30%) of the purchase price or rental rate, as the case may be, for every sale, lease or disposition of a videogram containing a
reproduction of any motion picture or audiovisual program.
Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty percent (50%) shall accrue to the
municipality where the tax is collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the
Metropolitan Manila Commission.
The rationale behind the tax provision is to curb the proliferation and unregulated circulation of videograms including, among others, videotapes,
discs, cassettes or any technical improvement or variation thereof, have greatly prejudiced the operations of movie houses and theaters. Such
unregulated circulation have caused a sharp decline in theatrical attendance by at least forty percent (40%) and a tremendous drop in the collection of
sales, contractors specific, amusement and other taxes, thereby resulting in substantial losses estimated at P450 Million annually in government
revenues.
Videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales and disposition of videograms, and these earnings
have not been subjected to tax, thereby depriving the Government of approximately P180 Million in taxes each year.
The unregulated activities of videogram establishments have also affected the viability of the movie industry.
Issues:
(1) Whether or not tax imposed by the DECREE is a valid exercise of police power.
(2) Whether or nor the DECREE is constitutional.
Held: Taxation has been made the implement of the states police power. The levy of the 30% tax is for a public purpose. It was imposed primarily to
answer the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights,
and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a
valid imposition.
We find no clear violation of the Constitution which would justify us in pronouncing Presidential Decree No. 1987 as unconstitutional and void.
While the underlying objective of the DECREE is to protect the moribund movie industry, there is no question that public welfare is at bottom of its
enactment, considering the unfair competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought about by
the availability of unclassified and unreviewed video tapes containing pornographic films and films with brutally violent sequences; and losses in
government revenues due to the drop in theatrical attendance, not to mention the fact that the activities of video establishments are virtually untaxed
since mere payment of Mayors permit and municipal license fees are required to engage in business.
WHEREFORE, the instant Petition is hereby dismissed. No costs.

CIR v Tokyo Shipping Co. LTD. GR No L-68252, May 26, 1995

FACTS:
Tokyo Shipping filed a claim for refund from the BIR for erroneous prepayment of income and common carriers taxes amounting to P107,142.75
since no receipt was realized from its charter agreement. BIR failed to act promptly on the claim and thus it was elevated to the Court of Tax Appeals
which decided in favor of the refund. Hence, this petition for review on certiorari.
ISSUE:
Whether Tokyo Shipping is entitled to a refund or tax credit for the prepayment of taxes
RULING:
Yes. The power of taxation is sometimes called also the power to destroy. Therefore, it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the hen that lays the golden egg. Fair
deal is expected by taxpayers from the BIR and the duty demands that BIR should refund without unreasonable delay the erroneous collection.
FELS Energy, Inc.
vs Province of Batangas and the Office of the Provincial Assessor of Batangas
Ponente: Callejo, Sr.
Facts:
January 1993, NPC entered into a lease contract with Polar Energy over MW diesel engine power barges in Batangas for a period of 5 years.
Subsequently, Polar assigned its rights under the agreement to FELS. NPC initially opposed.
August 1995, FELS received an assessment of real property taxes on the barges. FELS referred the matter to NPC reminding it of its obligation under
the agreement to pay the real estate taxes. NPC sought for reconsideration of the decision but the motion was denied.
NPC filed a petition to the Local Board Assessment Appeals. The provincial Assessor averred that the barges were real property for the purpose of
taxation. LBAA still denied the petition filed by NPC and ordered FELS to pay the taxes.
LBAA Ruling: power plant facilities are considered real property because they are installed at a specific location with a character of permanency. The
owner of the barges-FELS is a private corporation-is the one being taxed, not NPC. The agreement will not justify the exemption of FELS.
FELS then appealed to Central BAA. CBAA rendered s decision finding the power barges exempt from real property tax.
CBAA Ruling: the power barges belong to NPC since they are actually used by it. FELS appealed before the CA but was denied as well.
Held:
YES. The CBAA and LBAA power barges are real property and are thus subject to real property tax. This is also the inevitable conclusion,
considering that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners are presumed
correct and made in good faith, with the taxpayer having the burden of proving otherwise. Besides, factual findings of administrative bodies, which
have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not assume to interfere with the sensible exercise
of the judgment of men especially trained in appraising property. Where the judicial mind is left in doubt, it is a sound policy to leave the assessment
undisturbed. We find no reason to depart from this rule in this case.
Moreover, Article 415 (9) of the New Civil Code provides that docks and structures which, though floating, are intended by their nature and object
to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property
by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a
building or on a piece of land and which tend directly to meet the needs of said industry or work.
Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Section 234 (c) of R.A. No. 7160 because they are
actually, directly and exclusively used by petitioner NPC, a government- owned and controlled corporation engaged in the supply, generation, and
transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in fine, is the entity being taxed by
the local government. As stipulated under Section 2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the Site used
in connection with the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges
for the purpose of converting Fuel of NAPOCOR into electricity.
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section 234 (c) of R.A. No. 7160.
Indeed, the law states that the machinery must be actually, directly and exclusively used by the government owned or controlled corporation;
nevertheless, petitioner FELS still cannot find solace.
Pilipinas Shell Petrolium Corp v. CIR
G.R. No. 172598; December 21, 2007
Facts: In 1988, BIR sent a collection letter to Petitioner Pilipinas Shell Petroleum Corporation (PSPC) for alleged deficiency excise tax liabilities of
PhP 1,705,028,008.06 for the taxable years 1992 and 1994 to 1997, inclusive of delinquency surcharges and interest. As basis for the collection
letter, the BIR alleged that PSPC is not a qualified transferee of the TCCs it acquired from other BOI-registered companies. These alleged excise tax
deficiencies covered by the collection letter were already paid by PSPC with TCCs acquired through, and issued and duly authorized by the Center,
and duly covered by Tax Debit Memoranda (TDM) of both the Center and BIR, with the latter also issuing the corresponding Accept Payment for
Excise Taxes (APETs).
PSPC protested the collection letter, but it was denied. Because of respondent inaction on a motion for reconsideration PSPC filed a petition for
review before the CTA.
In 1999, the CTA ruled that the use by PSPC of the TCCs was legal and valid, and that respondents attempt to collect alleged delinquent taxes and
penalties from PSPC without an assessment constitutes denial of due process. Respondent elevated CTA Decision to the Court of Appeals (CA)
through a petition for review.

Despite the pendency of this case, PSPC received assessment letter from respondent for excise tax deficiencies, surcharges, and interest based on the
first batch of cancelled TCCs and TDM covering PSPCs use of the TCCs. All these cancelled TDM and TCCs were also part of the subject matter of
the now pending before the CA.
PSPC protested the assessment letter, but the protest was denied by the BIR, constraining it to file another case before the CTA. Subsequently, CTA
ruled in favor of PSPC and accordingly cancelled and set aside the assessment issued by the respondent. Respondent motion for reconsideration of
the above decision which was rejected thus respondent appealed the above decision before the CTA En Banc.
The CTA En Banc ruled in favor of respondent and ordered PSPC to pay the amount of P570,577,401.61 as deficiency excise tax for the taxable
years 1992 and 1994 to 1997, inclusive of 25% surcharge and 20% interest.
Issue: Whether or not petitioner is liable for the assessment of deficiency excise tax after the validly issued TCCs were subsequently cancelled for
having been issued fraudulently
Held: No. Petitioner is not liable for the assessment of deficiency excise tax.
In the instant case, with due application, approval, and acceptance of the payment by PSPC of the subject TCCs for its then outstanding excise tax
liabilities in 1992 and 1994 to 1997, the subject TCCs have been canceled as the money value of the tax credits these represented have been used up.
Therefore, the DOF through the Center may not now cancel the subject TCCs as these have already been canceled and used up after their acceptance
as payment for PSPCs excise tax liabilities. What has been used up, debited, and canceled cannot anymore be declared to be void, ineffective, and
canceled anew.
Besides, it is indubitable that with the issuance of the corresponding TDM, not only is the TCC canceled when fully utilized, but the payment is also
final subject only to a post-audit on computational errors. Under RR 5-2000, a TDM is a certification, duly issued by the Commissioner or his duly
authorized representative, reduced in a BIR Accountable Form in accordance with the prescribed formalities, acknowledging that the taxpayer named
therein has duly paid his internal revenue tax liability in the form of and through the use of a Tax Credit Certificate, duly issued and existing in
accordance with the provisions of these Regulations. TheTax Debit Memo shall serve as the official receipt from the BIR evidencing a taxpayers
payment or satisfaction of his tax obligation. The amount shown therein shall be charged against and deducted from the credit balance of the
aforesaid Tax Credit Certificate.
Thus, with the due issuance of TDM by the Center and TDM by the BIR, the payments made by PSPC with the use of the subject TCCs have been
effected and consummated as the TDMs serve as the official receipts evidencing PSPCs payment or satisfaction of its tax obligation. Moreover, the
BIR not only issued the corresponding TDM, but it also issued ATAPETs which doubly show the payment of the subject excise taxes of PSPC.
Based on the above discussion, we hold that respondent erroneously and without factual and legal basis levied the assessment. Consequently, the
CTA En Banc erred in sustaining respondents assessment.
Coconut Oil Refiners Association, Inc. vs. Ruben Torres (Case Digest)
Filed Under: Confronted Cases Benedict "Jet" Victa Leave a comment
June 29, 2011
Facts:
This is a Petition to enjoin and prohibit the public respondent Ruben Torres in his capacity as Executive Secretary from allowing other private
respondents to continue with the operation of tax and duty-free shops located at the Subic Special Economic Zone (SSEZ) and the Clark Special
Economic Zone (CSEZ). The petitioner seeks to declare Republic Act No. 7227 as unconstitutional on the ground that it allowed only tax-free (and
duty-free) importation of raw materials, capital and equipment. It reads:
The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and
capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw
materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts
of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of
thePhilippines [RA 7227, Sec 12 (b)].
Petitioners contend that the wording of Republic Act No. 7227 clearly limits the grant of tax incentives to the importation of raw materials, capital
and equipment only thereby violating the equal protection clause of the Constitution.
He also assailed the constitutionality of Executive Order No. 97-A for being violative of their right to equal protection. They asserted that private
respondents operating inside the SSEZ are not different from the retail establishments located outside.
The respondent moves to dismiss the petition on the ground of lack of legal standing and unreasonable delay in filing of the petition.
Issues:
(1) Statutory Construction; Political Law; Taxation Law:
Whether or not there is a violation of equal protection clause.
(2) Political Law:
Whether or not the case can be dismiss due to lack of the petitioners legal standing.
(3) Remedial Law:
Whether or not the case can be dismissed due to unreasonable delay in filing of the petition.
Held:
(1) The SC ruled in the negative. The phrase tax and duty-free importations of raw materials, capital and equipment was merely cited as an example
of incentives that may be given to entities operating within the zone. Public respondent SBMA correctly argued that the maxim expressio unius est
exclusio alterius, on which petitioners impliedly rely to support their restrictive interpretation, does not apply when words are mentioned by way of
example.
The petition with respect to declaration of unconstitutionality of Executive Order No. 97-A cannot be, likewise, sustained. The guaranty of the equal
protection of the laws is not violated by a legislation based which was based on reasonable classification. A classification, to be valid, must (1) rest on
substantial distinction, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of
the same class. Applying the foregoing test to the present case, this Court finds no violation of the right to equal protection of the laws. There is a
substantial distinctions lying between the establishments inside and outside the zone. There are substantial differences in a sense that, investors will
be lured to establish and operate their industries in the so-called secured area and the present business operators outside the area. There is, then,
hardly any reasonable basis to extend to them the benefits and incentives accorded in R.A. 7227.
(2) No. Anent the claim on lack of legal standing, respondents argue that petitioners, being mere suppliers of the local retailers operating outside the
special economic zones, do not stand to suffer direct injury in the enforcement of the issuances being assailed herein. Assuming this is true, this Court
has nevertheless held that in cases of paramount importance where serious constitutional questions are involved, the standing requirements may be
relaxed and a suit may be allowed to prosper even where there is no direct injury to the party claiming the right of judicial review.
(3) No. With respect to the other alleged procedural flaws, even assuming the existence of such defects, this Court, in the exercise of its discretion,
brushes aside these technicalities and takes cognizance of the petition considering the importance to the public of the present case and in keeping with
the duty to determine whether the other branches of the government have kept themselves within the limits of the Constitution

LORENZO vs. POSADAS JR.

G.R. No. L-43082
June 18, 1937
FACTS: Thomas Hanley died, leaving a will and a considerable amount of real and personal properties. Proceedings for the probate of his will and
the settlement and distribution of his estate were begun in the CFI of Zamboanga. The will was admitted to probate.
The CFI considered it proper for the best interests of the estate to appoint a trustee to administer the real properties which, under the will, were to
pass to nephew Matthew ten years after the two executors named in the will was appointed trustee. Moore acted as trustee until he resigned and the
plaintiff Lorenzo herein was appointed in his stead.
During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue (Posadas) assessed against the estate an inheritance tax,
together with the penalties for deliquency in payment. Lorenzo paid said amount under protest, notifying Posadas at the same time that unless the
amount was promptly refunded suit would be brought for its recovery. Posadas overruled Lorenzos protest and refused to refund the said amount.
Plaintiff went to court. The CFI dismissed Lorenzos complaint and Posadas counterclaim. Both parties appealed to this court.
ISSUE:
(e) Has there been delinquency in the payment of the inheritance tax?
HELD: The judgment of the lower court is accordingly modified, with costs against the plaintiff in both instances
YES
The defendant maintains that it was the duty of the executor to pay the inheritance tax before the delivery of the decedents property to the trustee.
Stated otherwise, the defendant contends that delivery to the trustee was delivery to the cestui que trust, the beneficiary in this case, within the
meaning of the first paragraph of subsection (b) of section 1544 of the Revised Administrative Code. This contention is well taken and is sustained. A
trustee is but an instrument or agent for the cestui que trust
The appointment of Moore as trustee was made by the trial court in conformity with the wishes of the testator as expressed in his will. It is true that
the word trust is not mentioned or used in the will but the intention to create one is clear. No particular or technical words are required to create a
testamentary trust. The words trust and trustee, though apt for the purpose, are not necessary. In fact, the use of these two words is not conclusive
on the question that a trust is created. To constitute a valid testamentary trust there must be a concurrence of three circumstances:
(1) Sufficient words to raise a trust;
(2) a definite subject;
(3) a certain or ascertain object; statutes in some jurisdictions expressly or in effect so providing.
There is no doubt that the testator intended to create a trust. He ordered in his will that certain of his properties be kept together undisposed during a
fixed period, for a stated purpose. The probate court certainly exercised sound judgment in appointmening a trustee to carry into effect the provisions
of the will
As the existence of the trust was already proven, it results that the estate which plaintiff represents has been delinquent in the payment of inheritance
tax and, therefore, liable for the payment of interest and surcharge provided by law in such cases.
The delinquency in payment occurred on March 10, 1924, the date when Moore became trustee. On that date trust estate vested in him. The interest
due should be computed from that date.