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Republic v. IAC and Sps.

26 April 1991 | Ponente: Grino-Aquino, J.Notes:1 . O n T a x A m n e s t y
general pardon or intentional overlooking by the State of its authority to
imposepenalties on persons otherwise guilty of evasion or violation of
a revenue or tax law.
partakes of an absolute forgiveness or waiver by the Government of its right
tocollect what otherwise would be due it, and in this sense prejudicial
thereto,particularly to give tax evaders, who wish to relent and are willing to
reform a chanceto do so and thereby become a part of the new society with a
clean slate2.This case also reiterated the principle that in case of
doubt, tax statutes are to beconstrued strictly against the Government and
liberally in favor of the taxpayer, for taxes, being burdens are not to be
presumed beyond what the applicable statute expressly and clearly declares.
RP filed a case in the CFI to collect from Sps. Antonio and Clara Pastor,
deficiency income taxes for years 1955-1959 amounting to P17,117.08
+ 5%surcharge + 1% monthly interest and costs.
Sps Pastors defense in their Answer:- t h e r e w a s a n
a s s e s s m e n t b u t n o l i a b i l i t y t h e r e f o r -th e y av ail ed of th e t ax
amn es t y und er P D Nos . 23 , 2 13 and 370 and p aid corresponding
amnesty taxes- th at G ov ern men t is in esto pp el to dema n d
and co mp el furth er p ayment of income taxes
Whether or not the payment of deficiency income tax under PD 23 and
the acceptance bythe Government operated to divest the Government the
right to further recover from thetaxpayer, even if there was an existing
assessment against the latter at the time theamnesty tax was paid. YES. BY

D ef end ants h ad s et tl ed th eir in co me t ax d efi ci en c y for th e
years 1966 to 195 9 under PD 213 as evidenced by the Annual Income
Tax Returns SummaryStatement and the Payment Acceptance Order with
O Tax amnesty payment was made by defendants under PD 213, henceit had
the effect of remission of the Income Tax deficiency
O PD 213 did not make any exceptions nor impose any conditions
forapplication. Revenue Regulation 7-73 which excludes taxpayers isnull and
void because there was nothing in the LOI which can beconstrued as
authority for the BIR to introduce exceptionsCA Dismissed Governments
appeal- A cc ept an ce of th e t ax amn est y p ay men t oper at ed to
div es t th e Gov ern ment of its right to further recover-Rev enu e
Regul at ion 7-73 providing for an ex eption to the c ov er ag e of
P D 213

G.R. No. 18019723 June 2009
People of the Philippines,
v.Hon. Mariano Casta

eda, Jr., Judge of theCourt of First Instance of Pampanga,

BranchIII, Vicente Lee Teng, Priscilla Castillo vda. DeCura,
and Francisco Valencia,

A tax amnesty, much like toa tax exemption, is never favored

nor presumed in law and if granted by statute,the terms of the
amnesty like that of a taxexemption must be construed
strictlyagainst the taxpayer and liberally in favorof the taxing
Petition for
Sometime in 1971, 2 informantssubmitted sworn information
underRepublic Act No. 2338 ("An Act toProvide for Reward to
Informers ofViolations of the Internal Revenue andCustoms

Laws" to the BIR concerningalleged violations of provisions of

theInternal Revenue Code committed bythe private
Following an investigation andexamination by the BIR, the
StateProsecutor filed with the CFI ofPampanga several
informationsagainst private respondents
Respondents were charged withvarious violations of the
possession of counterfeitinternal revenue labels
(170, par2, NIRC), possession of liquors andspirits whose
specific taxes have notbeen paid
(174, (c)), and finally,
manufacture of alcoholic productswithout paying the
privilege taxtherefor
(178 in rel. 182 and 208,NIRC)
After arraignment, accused Valenciafiled a Motion to Quash
upon thegrounds that the informations hadbeen filed without
conducting thenecessary preliminary investigationand that he
was entitled to thebenefits of the tax amnesty providedby
P.D. No. 370
The State Prosecutor opposed sayingthat the lack of a
preliminaryinvestigation is not grounds forquashal.
The prosecutor further argued that theaccused Valencia was
not entitled toavail himself of the benefits of P.D. No.370
since his tax cases were thesubject of valid information
submittedunder R.A. No. 2338 as of 31December 1973

The trial court judge granted theMotion to Quash.

Reconsideration bythe People denied
The co-accused also filed Motions toQuash on the theory that
the dismissalof the action as to Valencia inured totheir
benefit. Such motions were alsogranted by the respondent
Petitioner people now file a petition for
seeking theannulment of the order grantingquashal
1. W/N private respondents are entitled tothe benefits of the
tax amnesty?
1. NO
PD 370 provides for a tax amnesty inbroad terms:

A tax amnesty is hereby granted to any person,natural or juridical,

failed to include all thatwere required to be declared
therein if he nowvoluntarily discloses under this
decree all hispreviously untaxed income and/or wealth
suchas earnings, receipts, gifts, bequests or any
otheracquisitions from any source whatsoever which areor were
previously taxable under the NationalInternal Revenue Code,
realized here or abroad bycondoning all internal revenue taxes
including theincrements or penalties on account of non-paymentas

well as all civil, criminal or administrativeliabilities, under the

National Internal Revenue Code,the Revised Penal Code, the AntiGraft and CorruptPractices Act, the Revised Administrative Code,


APPEALS, respondents.
G.R. No. 78133 October 18, 1988
On June 22, 1965, petitioners bought two (2) parcels
of land from Santiago Bernardino, et al. and on May
28, 1966, they bought another three (3) parcels of
land from Juan Roque. The first two parcels of land
were sold by petitioners in 1968 toMarenir
Development Corporation, while the three parcels of
land were sold by petitioners to Erlinda Reyes and
Maria Samson on March 19,1970. Petitioners
realized a net profit in the sale made in 1968 in the
amount of P165,224.70, while they realized a net
profit of P60,000.00 in the sale made in 1970. The
corresponding capital gains taxes were paid by
petitioners in 1973 and 1974 by availing of the tax
amnesties granted in the said years.
However, in a letter dated March 31, 1979 of then
Acting BIR Commissioner Efren I. Plana, petitioners
were assessed and required to pay a total amount of

P107,101.70 as alleged deficiency corporate income

taxes for the years 1968 and 1970.
respondent Commissioner informed petitioners that
in the years 1968 and 1970, petitioners as coowners in the real estate transactions formed an
unregistered partnership or joint venture taxable as
a corporation under Section 20(b) and its income
was subject to the taxes prescribed under Section
24, both of the National Internal Revenue
Code 1 that the unregistered partnership was subject
to corporate income tax as distinguished from profits
derived from the partnership by them which is
subject to individual income tax; and that the
availment of tax amnesty under P.D. No. 23, as
amended, by petitioners relieved petitioners of their
individual income tax liabilities but did not relieve
them from the tax liability of the unregistered
partnership. Hence, the petitioners were required to
pay the deficiency income tax assessed.
ISSUE: whether petitioners are subject to the tax on
corporations provided for in section 24 of
Commonwealth Act No. 466, otherwise known as
the National Internal Revenue Code, as well as to
the residence tax for corporations and the real
estate dealers' fixed tax.

Article 1767 of the Civil Code of the

Philippines provides:
By the contract of partnership two or more
persons bind themselves to contribute
money, property, or industry to a common
fund, with the intention of dividing the profits
among themselves.
Pursuant to this article, the essential
elements of a partnership are two, namely:
(a) an agreement to contribute money,
property or industry to a common fund; and
(b) intent to divide the profits among the
contracting parties. The first element is
undoubtedly present in the case at bar, for,
admittedly, petitioners have agreed to, and
did, contribute money and property to a
common fund. Hence, the issue narrows
down to their intent in acting as they did.
Upon consideration of all the facts and
circumstances surrounding the case, we are
fully satisfied that their purpose was to
engage in real estate transactions for
monetary gain and then divide the same
among themselves, because:
1. Said common fund was not something
they found already in existence. It was not a

property inherited by them pro indiviso.

They created it purposely. What is more
they jointly borrowed a substantial portion
thereof in order to establish said common
2. They invested the same, not merely in
one transaction, but in a series of
transactions. On February 2, 1943, they
bought a lot for P100,000.00. On April 3,
1944, they purchased 21 lots for
P18,000.00. This was soon followed, on
April 23, 1944, by the acquisition of another
real estate for P108,825.00. Five (5) days
later (April 28, 1944), they got a fourth lot for
P237,234.14. The number of lots (24)
acquired and transcations undertaken, as
well as the brief interregnum between each,
particularly the last three purchases, is
strongly indicative of a pattern or common
design that was not limited to the
conservation and preservation of the
aforementioned common fund or even of the
property acquired by petitioners in February,
1943. In other words, one cannot but
perceive a character of habituality peculiar
to business transactions engaged in for
purposes of gain.

3. The aforesaid lots were not devoted to

residential purposes or to other personal
uses, of petitioners herein. The properties
were leased separately to several persons,
who, from 1945 to 1948 inclusive, paid the
total sum of P70,068.30 by way of rentals.
Seemingly, the lots are still being so let, for
petitioners do not even suggest that there
has been any change in the utilization
4. Since August, 1945, the properties have
been under the management of one person,
namely, Simeon Evangelists, with full power
to lease, to collect rents, to issue receipts, to
bring suits, to sign letters and contracts, and
to indorse and deposit notes and
checks. Thus, the affairs relative to said
properties have been handled as if the same
belonged to a corporation or business
enterprise operated for profit.
5. The foregoing conditions have existed for
more than ten (10) years, or, to be exact,
over fifteen (15) years, since the first
property was acquired, and over twelve (12)
years, since Simeon Evangelists became
the manager.

6. Petitioners have not testified or introduced

any evidence, either on their purpose in
creating the set up already adverted to, or
on the causes for its continued existence.
They did not even try to offer an explanation
Although, taken singly, they might not suffice
to establish the intent necessary to
constitute a partnership, the collective effect
of these circumstances is such as to leave
no room for doubt on the existence of said
intent in petitioners herein. Only one or two
of the aforementioned circumstances were
present in the cases cited by petitioners
herein, and, hence, those cases are not in
point. 5
In the present case, there is no evidence that
petitioners entered into an agreement to contribute
money, property or industry to a common fund, and
that they intended to divide the profits among
themselves. Respondent commissioner and/ or his
representative just assumed these conditions to be
present on the basis of the fact that petitioners
purchased certain parcels of land and became coowners thereof.

Topic: Tax on dividends remitted to foreign corporations Facts:
Marubeni Corporation is a Japanese corporation licensed to engage in
business in the Philippines.
When the profits on Marubenis investments in Atlantic Gulf and Pacific Co.
of Manila were declared, a 10% final dividend tax was withheld from it, and
another 15% profit remittance tax based on the remittable amount after the
final 10% withholding tax were paid to the Bureau of Internal Revenue.
Marubeni Corp. now claims for a refund or tax credit forthe amount which it
has allegedly overpaid the BIR
Issues and Ruling:
W/N the dividends Marubeni Corporation received from Atlantic Gulf and
Pacific Co. are effectively connected with its conduct or business in the
Philippines as to be considered branch profits subject to 15%profit remittance
tax imposed under Section 24(b)(2) of the National Internal Revenue Code.NO.
Pursuant to Section 24(b)(2) of the Tax Code, as amended, only profits
remitted abroad by a branch office to its head office which are effectively
connected with its trade or business in the Philippines are subject to the 15%
profit remittance tax. The dividends received by Marubeni Corporation from
Atlantic Gulf and Pacific Co. are not income arising from the business activity in
which Marubeni Corporation is engaged. Accordingly, said dividends if
remitted abroad are not considered branch profits for purposes of the 15%

profit remittance tax imposed by Section 24(b)(2) of the Tax Code, as

Whether Marubeni Corporation is a resident or non-resident foreign
corporation. Marubeni Corporation is a non-resident foreign corporation, with
respect to the transaction. Marubeni Corporations head office in Japan is a
separate and distinct income taxpayer from the branch in the Philippines. The
investment on Atlantic Gulf and Pacific Co. was made for purposes peculiarly
germane to the conduct of the corporate affairs of Marubeni Corporation in
Japan, but certainly not of the branch in the Philippines.3.
At what rate should Marubeni be taxed? 15%. The applicable provision of the
Tax Code is Section 24(b)(1)(iii) in conjunction with the Philippine-Japan Tax
Treaty of 1980. As a general rule, it is taxed 35% of its gross income from all
sources within the Philippines. However, a discounted rate of 15% is given to
Marubeni Corporation on dividends received from Atlantic Gulf and Pacific Co.
on the condition that Japan, its domicile state, extends in favor of Marubeni
Corporation a tax credit of not less than20% of the dividends received. This 15%
tax rate imposed on the dividends received under Section 24(b)(1)(iii) is easily
within the maximum ceiling of 25% of the gross amount of the dividends as
decreed in Article 10(2)(b) of the Tax Treaty
Each tax has a different tax basis. Under the Philippine-Japan Tax Convention,
the 25% rate fixed is the maximum rate, as reflected in the phrase shallnot
exceed. This means that any tax imposable by the contracting state concerned
should not exceed the 25%limitation and said rate would apply only if the tax
imposed by our laws exceeds the same.

CIR vs CA, CTA and Ateneo De Manila

F A C T S:
Private respondent, Ateneo de Manila University, is a non-stock, nonprofit educational institution with auxiliary u ni ts a nd
b r anc h es al l over th e c ou nt ry. Th e Ins ti tu t e
o f P hil i ppi ne Cu lt ur e ( IP C ) i s a n au xil i a ry
u ni t wi th n o l eg al personality separate and distinct from private
respondent. The IPC is a Philippine unit engaged in social
science studies
of P h i l i p p i n e s o c i e t y a n d c u l t u r e . O c c a s i o n a l l y , i t a c c
e p t s s po ns o rs hi ps f or it s r es ea rc h ac ti vit i es f r om i nt ern at
i on al organizations, private foundations and government
agencies.On 8 Ju l y 1983 , pri vat e r es p o nd en t r ec ei ve d fr o m
C IR a demand letter dated 3 June 1983, assessing private
respondentthe sum of P174,043.97 for alleged deficiency contractors
tax,a n d a n a s s e s s m e n t d a t e d 2 7 J u n e 1 9 8 3 i n t h e s
u m o f P1,141,837 for alleged deficiency income tax, both for the
fiscal year ended 31 March 1978. Denying said tax liabilities, private
respondent sent petitioner a letter-protest and
subsequently filed with the latter a memorandum contesting
the validity of the
assessments. A f te r s om e tim e pet iti on er i ss u ed a fi nal d ec is
i on d at ed 3 A u g u s t 1 9 8 8 r e d u c i n g t h e a s s e s s m e n t f
o r d e f i c i e n c y contractors tax from P193,475.55 to
P46,516.41, exclusive of surcharge and interest. Th e l ow er
c our ts
r ul e d i n fa v or o f r es pond ent. H enc e th is petition.Petitioner C
ommissioner of Internal Revenue contends that Private
Respondent Ateneo de Manila University "falls within the definition"
of an independent contractor and "is not one of those mentioned as
excepted"; hence, it is properly a subject of t h e t hr e e per c en t
c ont ra ct o r' s t ax levi ed by th e f or eg oing provision of
law. Petitioner states that the "term 'independent contractor' is not
specifically defined so as to delimit the scope thereof, so much so
that any person who . . . renders physical and mental service for a

fee, is now indubitably considered an independent contractor liable to

3% contractor's tax."
I S S U E:
Whether or not private respondent falls under the purview of
independent contractor pursuant to Section 205 of the Tax Code and
is subject to a 3% contractors tax.
The petition is unmeritorious. T h e t e r m
"independent contractors"
include persons(juridical or natural) not enumerated above (but not
including individuals subject to the occupation tax under
Section 12 of the Local Tax Code) whose activity consists
essentially of the sale of all kinds of services for a fee
regardless of whether or not the performance of the service calls for
the exercise or use of the physical or mental faculties of such
contractors or
theiremployees.P e t i t i o n e r C o m m i s s i o n e r o f I n t e r n a l R e v
e n u e e r r e d i n applying the principles of tax exemption without
first applyingt h e w e l l settled doctrine of strict interpretation in theimposi
t i o n o f t a x e s . I t i s o b v i o u s l y b o t h i l l o g i c a l a n d i m pr ac
t ic al t o d eter min e wh o a r e exem pt ed wit h out f ir st determin
ing who are covered by the aforesaid provision.
TheC o m m i s s i o n e r s h o u l d h a v e d e t e r m i n e d f i r s t i f p r i
v a t e respondent was covered by Section 205, applying the rule
of strict interpretation of laws imposing taxes and other burdenson
the populace, before asking Ateneo to prove its
Interpretation of Tax Laws.
T h e d o c t r i n e i n t h e i n t erp r et ati on of tax la ws
i s th at ( a) s tat u t e wil l n ot be construed as imposing a tax
unless it does so clearly, expressly,and unambiguously. . . . (A) tax
cannot be imposed withoutclear and express words for that
purpose. Accordingly, thegeneral rule of requiring adherence to the
letter in construingstatutes applies with peculiar strictness to tax

laws and
thep r o v i s i o n s o f a t a x i n g a c t a r e n o t t o b e e x t e n d
e d b y implication. In case of doubt, such statutes a
r e t o b e construed most strongly against the government
and in favoro f th e s ub jec t s o r ci ti zen s b ec au se b ur de ns
a r e n ot t o b e imposed nor presumed to be imposed beyond
what statutesexpressly and clearly import. Ateneos Institute of
Philippine Culture never sold its servicesfor a fee to anyone or was
ever engaged in a business apartf r om and
in d epend en tly o f t h e aca d emic pu r pos e s of th e university.
Funds received by the Ateneo de Manila University a re t ec hnic all y
n ot a f ee. Th ey m ay h ow ev er fa ll a s gift s
ord o n a t i o n s w h i c h a r e t a x e x e m p t a s s h o w n b y p r i v a t e respondents
compliance with the requirement
of Section 123o f t h e Na ti on al In t ern al R ev en ue C ode pr ovi
di ng f or th e exemption of such gifts to an educational institution.
Transaction of IPC not a contract of sale no
r a contract for a piece of work.
The transactions of AteneosInstitute of Philippine Culture cannot
be deemed either as ac on t ra ct of s al e or a c ontr a c t f or a
pi ec e of w ork.
By th ec on t rac t o f s al e, on e o f t h e c on tr ac ting pa rt ie s obli
g at es h i m s e l f t o t r a n s f e r t h e o w n e r s h i p o f a n d t o
d e l i v e r a determinate thing, and the other to pay therefor a price
certainin money or its equivalent. In the case of a contract for a
pieceof work, the contractor binds himself to execute a piece
of work for the employer, in consideration of a certain price
orcompensation. . . . If the contractor agrees to produce the
work from materials furnished by him, he shall deliver the
thingpr o d uc ed t o th e em pl oy er an d t ran sf e r d omini on ov e
r th e thing. . . . In the case at bench, it is clear from the evidence
onr ec ord t ha t th er e w as n o s al e ei th er
o f ob jec ts o r s er vi c es b e cau s e, a s ad v er t ed to ea rli e r, t h er

e w as n o t r an sf e r of ownership over the research data

obtained or the results of research projects undertaken by
the Institute of PhilippineCulture

Misamis Oriental Association vs. Dept. of

Finance Secretary238 SCRA 63
FACTS: Petitioner Misamis Oriental Association of Coco Traders,
Inc. is a domestic corporation whosemembers, are engaged in the
buying and selling of copra. The petitioner alleges that prior to
theissuance of Revenue Memorandum Circular 47-91, which
implemented VAT Ruling 190-90, coprawas classified as
agricultural food product under 103(b) of the National Internal
Revenue Code and,therefore, exempt from VAT at all stages of
production or distribution. Said circular classified copra
as anagricultural nonfood product and declared it "exempt from
VAT only if the sale is made by the primaryproducer pursuant to
Section 103(a) of the Tax Code, as amended." The reclassification
had the effect of denying to the petitioner the exemption it
previously enjoyed when copra was classified as anagricultural
food product under 103(b) of the NIRC.

ISSUES: WON the petitioner is exempt from the tax.

RULING: NO. In interpreting 103(a) and (b) of the NIRC, the

Commissioner of Internal Revenue gave it astrict construction
consistent with the rule that tax exemptions must be strictly

construed against thetaxpayer and liberally in favor of the state.

As the government agency charged with the enforcement of the
law, the opinion of the Commissioner of Internal Revenue, in the
absence of any showing that it isplainly wrong, is entitled to great
weight. Indeed, the ruling was made by the Commissioner of
InternalRevenue in the exercise of his power under 245 of
the NIRC to "make rulings or opinions in connectionwith the
implementation of the provisions of internal revenue laws,
including rulings on theclassification of articles for sales tax and
similar purposes.