Commissioner of Internal Revenue vs.

St Luke's Medical Center

Facts:
St. Lukes Medical Center, Inc. (St. Lukes) is a hospital organized as a non-stock and non-profit
corporation. St. Lukes accepts both paying and non-paying patients. The BIR assessed St. Lukes
deficiency taxes for 1998 comprised of deficiency income tax, value-added tax, and withholding tax.
The BIR claimed that St. Lukes should be liable for income tax at a preferential rate of 10% as
provided for by Section 27(B). Further, the BIR claimed that St. Lukes was actually operating for profit
in 1998 because only 13% of its revenues came from charitable purposes. Moreover, the hospitals
board of trustees, officers and employees directly benefit from its profits and assets.
On the other hand, St. Lukes maintained that it is a non-stock and non-profit institution for
charitable and social welfare purposes exempt from income tax under Section 30(E) and (G) of the
NIRC. It argued that the making of profit per se does not destroy its income tax exemption.
Issue:
The sole issue is whether St. Lukes is liable for deficiency income tax in 1998 under Section
27(B) of the NIRC, which imposes a preferential tax rate of 10^ on the income of proprietary non-profit
hospitals.
Ruling:
Section 27(B) of the NIRC does not remove the income tax exemption of proprietary non-profit
hospitals under Section 30(E) and (G). Section 27(B) on one hand, and Section 30(E) and (G) on the
other hand, can be construed together without the removal of such tax exemption.
Section 27(B) of the NIRC imposes a 10% preferential tax rate on the income of (1)
proprietary non-profit educational institutions and (2) proprietary non-profit hospitals. The only
qualifications for hospitals are that they must be proprietary and non-profit. Proprietary means
private, following the definition of a proprietary educational institution as any private school
maintained and administered by private individuals or groups with a government permit. Nonprofit means no net income or asset accrues to or benefits any member or specific person, with
all the net income or asset devoted to the institutions purposes and all its activities conducted not for
profit.
Non-profit does not necessarily mean charitable. In Collector of Internal Revenue v. Club
Filipino Inc. de Cebu, this Court considered as non-profit a sports club organized for recreation and
entertainment of its stockholders and members. The club was primarily funded by membership fees
and dues. If it had profits, they were used for overhead expenses and improving its golf course. The
club was non-profit because of its purpose and there was no evidence that it was engaged in a
profit-making enterprise.
The sports club in Club Filipino Inc. de Cebu may be non-profit, but it was not charitable. The
Court defined charity in Lung Center of the Philippines v. Quezon City as a gift, to be
applied consistently with existing laws, for the benefit of an indefinite number of persons, either by
bringing their minds and hearts under the influence of education or religion, by assisting them to
establish themselves in life or [by] otherwise lessening the burden of government. However, despite
its being a tax exempt institution, any income such institution earns from activities conducted for
profit is taxable, as expressly provided in the last paragraph of Sec. 30.
To be a charitable institution, however, an organization must meet the substantive test of
charity in Lung Center. The issue in Lung Center concerns exemption from real property tax and
not income tax. However, it provides for the test of charity in our jurisdiction. Charity is essentially a
gift to an indefinite number of persons which lessens the burden of government. In other words,
charitable institutions provide for free goods and services to the public which would otherwise
fall on the shoulders of government. Thus, as a matter of efficiency, the government forgoes taxes
which should have been spent to address public needs, because certain private entities already
assume a part of the burden. This is the rationale for the tax exemption of charitable institutions.
The loss of taxes by the government is compensated by its relief from doing public works which
would have been funded by appropriations from the Treasury
The Constitution exempts charitable institutions only from real property taxes. In the NIRC,
Congress decided to extend the exemption to income taxes. However, the way Congress crafted Section
30(E) of the NIRC is materially different from Section 28(3), Article VI of the Constitution.

Section 30(E) of the NIRC defines the corporation or association that is exempt from income
tax. On the other hand, Section 28(3), Article VI of the Constitution does not define a charitable
institution, but requires that the institution actually, directly and exclusively use the property for a
charitable purpose.
To be exempt from real property taxes, Section 28(3), Article VI of the Constitution requires
that a charitable institution use the property actually, directly and exclusively for charitable
purposes.
To be exempt from income taxes, Section 30(E) of the NIRC requires that a charitable
institution must be organized and operated exclusively for charitable purposes. Likewise, to be
exempt from income taxes, Section 30(G) of the NIRC requires that the institution be operated
exclusively for social welfare.
However, the last paragraph of Section 30 of the NIRC qualifies the words organized and
operated exclusively by providing that:

Notwithstanding the provisions in the preceding paragraphs, the income of whatever

kind and character of the foregoing organizations from any of their properties, real or
personal, or from any of their activities conducted for profit regardless of the
disposition made of such income, shall be subject to tax imposed under this Code.

In short, the last paragraph of Section 30 provides that if a tax exempt charitable institution
conducts any activity for profit, such activity is not tax exempt even as its not-for-profit
activities remain tax exempt.
Thus, even if the charitable institution must be organized and operated exclusively for
charitable purposes, it is nevertheless allowed to engage in activities conducted for profit without
losing its tax exempt status for its not-for-profit activities. The only consequence is that the income
of whatever kind and character of a charitable institution from any of its activities
conducted for profit, regardless of the disposition made of such income, shall be subject to tax.
Prior to the introduction of Section 27(B), the tax rate on such income from for-profit activities was the
ordinary corporate rate under Section 27(A). With the introduction of Section 27(B), the tax rate is
now 10%.
The Court finds that St. Lukes is a corporation that is not operated exclusively for charitable
or social welfare purposes insofar as its revenues from paying patients are concerned. This ruling is
based not only on a strict interpretation of a provision granting tax exemption, but also on the clear
and plain text of Section 30(E) and (G). Section 30(E) and (G) of the NIRC requires that an institution be
operated exclusively for charitable or social welfare purposes to be completely exempt from income
tax. An institution under Section 30(E) or (G) does not lose its tax exemption if it earns income
from its for-profit activities. Such income from for-profit activities, under the last paragraph of
Section 30, is merely subject to income tax, previously at the ordinary corporate rate but now at the
preferential 10% rate pursuant to Section 27(B).
St. Lukes fails to meet the requirements under Section 30(E) and (G) of the NIRC to
be completely tax exempt from all its income. However, it remains a proprietary non-profit hospital
under Section 27(B) of the NIRC as long as it does not distribute any of its profits to its members and
such profits are reinvested pursuant to its corporate purposes. St. Lukes, as a proprietary non-profit
hospital, is entitled to the preferential tax rate of 10% on its net income from its for-profit activities.
St. Lukes is therefore liable for deficiency income tax in 1998 under Section 27(B) of the NIRC.
However, St. Lukes has good reasons to rely on the letter dated 6 June 1990 by the BIR, which opined
that St. Lukes is a corporation for purely charitable and social welfare purposes and thus exempt
from income tax.
In Michael J. Lhuillier, Inc. v. Commissioner of Internal Revenue, the Court said that good faith
and honest belief that one is not subject to tax on the basis of previous interpretation of government
agencies tasked to implement the tax law, are sufficient justification to delete the imposition of
surcharges and interest.
WHEREFORE, St. Lukes Medical Center, Inc. is ORDERED TO PAY the deficiency income tax in
1998 based on the 10% preferential income tax rate under Section 27(8) of the National Internal
Revenue Code. However, it is not liable for surcharges and interest on such deficiency income
tax under Sections 248 and 249 of the National Internal Revenue Code. All other parts of the
Decision and Resolution of the Court of Tax Appeals are AFFIRMED.

Commissioner for Internal Revenue v St Lukes Medical Center Inc. G.R. No. 195909
(2012) (Supreme Court of The Philippines, Carpio, Leonardo-De Castro, Brion, Perez,
Perlas-Bernabe JJ, 26 September 2012) St Lukes Medical Center Inc. (St Lukes) is a
nonprofit hospital in Manila. On 16 December 2002, the Bureau of Internal Revenue
(BIR) assessed St Lukes deficiency taxes amounting to 76,063,116.06 for 1998,
comprising deficiency income tax, value-added tax, withholding tax on
compensation and expanded withholding tax. The BIR reduced the amount to
63,935,351.57 during trial in the First Division of the Court of Tax Appeals (CTA).
This was a review on certiorari under Rule 45 of the Rules of Court of the Decision of
19 November 2010 of the CTA and its Resolution of 1 March 2011 in CTA Case No.
6746. The Supreme Court resolved this case on a pure question of law, which
involved the interpretation of sub-section 27(B) and its interaction with sub-sections
30(E) and (G) of the National Internal Revenue Code of the Philippines (NIRC), on the
income tax treatment of proprietary nonprofit hospitals. St Lukes stated purposes
were: (a) To establish, equip, operate and maintain a non-stock, non-profit Christian,
benevolent, charitable and scientific hospital which shall give curative, rehabilitative
and spiritual care to the sick, diseased and disabled persons; provided that purely
medical and surgical services shall be performed by duly licensed physicians and
surgeons who may be freely and individually contracted by patients; (b) To provide a
career of health science education and provide medical services to the community
through organized clinics in such specialties as the facilities and resources of the
corporation make possible; (c) To carry on educational activities related to the
maintenance and promotion of health as well as provide facilities for scientific and
medical researches which, in the opinion of the Board of Trustees, may be justified
by the facilities, personnel, funds, or other requirements that are available; (d) To
cooperate with organized medical societies, agencies of both government and
private sector; establish rules and regulations consistent with the highest
professional ethics. The BIR had argued before the CTA that section 27(B) of the
NIRC, which imposes a 10% preferential tax rate on the income of proprietary
nonprofit hospitals, should be applicable to St. Lukes. According to the BIR, section
27(B), introduced in 1997, is a new provision intended to amend the exemption on
non-profit hospitals that were previously categorized as non-stock, non-profit
corporations under Section 26 of the 1997 Tax Code.... It is a specific provision
which prevails over the general exemption on income tax granted under
subsections 30(E) and (G) for non-stock, non-profit charitable institutions and civic
organisations promoting social welfare. The BIR contended that St Lukes was not
really operating for charitable purposes, but was for profit, on the basis that only
13% of its revenues came from its charitable purposes. St Lukes took the position
that the BIR should not consider its total revenues, because its free services to
patients amounted to 218,187,498 or 65.20% of its 1998 operating income (i.e.
total revenues less operating expenses) of 334,642,615. St Lukes also claimed
that its income did not inure to the benefit of any individual, and that its making a
profit did not affect its status as exempt from taxation under sub-sections 30(E) and
(G) of the NIRC. The CTA had held that section 27(B) did not apply to St Lukes. It
was exempt from taxation on income derived from all services to patients, whether

paying or non-paying. Thus, the sole issue before the Supreme Court was whether
that decision was correct, i.e. whether section 27(B) did or did not apply. If it did,
then St Lukes would have to pay the 10% reduced tax rate on the income of
proprietary nonprofit hospitals. The Court held that: ...Section 27(B) of the NIRC
does not remove the income tax exemption of proprietary non-profit hospitals under
Section 30(E) and (G). Section 27(B) on one hand, and Section 30(E) and (G) on the
other hand, can be construed together without the removal of such tax exemption.
The effect of the introduction of Section 27(B) is to subject the taxable income of
two specific institutions, namely, proprietary non-profit educational institutions and
proprietary non-profit hospitals, among the institutions covered by Section 30, to
the 10% preferential rate under Section 27(B) instead of the ordinary 30% corporate
rate under the last paragraph of Section 30 in relation to Section 27(A)(1). Section
27(B) of the NIRC imposes a 10% preferential tax rate on the income of (1)
proprietary non-profit educational institutions and (2) proprietary non-profit
hospitals. The only qualifications for hospitals are that they must be proprietary and
non-profit. Proprietary means private... Non-profit means no net income or asset
accrues to or benefits any member or specific person, with all the net income or
asset devoted to the institutions purposes and all its activities conducted not for
profit. Non-profit does not necessarily mean charitable. The Court said that
charitable institutions were not automatically granted tax exemptions. Tax
exemptions are given by the Congress under specific laws (except for exemption
from real property taxation which was given by the Constitution of the Philippines).
Section 30(E) of the NIRC defines a charitable institution as: (1) a non-stock
corporation or association; (2) organised exclusively for charitable purposes; (3)
operated exclusively for charitable purposes; and (4) with no part of its net income
or assets belonging to or inuring to the benefit of any member, organiser, officer or
any specific person. There was no doubt that St Lukes was organised as a nonstock, non-profit charitable institution. However, this did not automatically exempt it
from paying taxes. The last paragraph of section 30 of the NIRC stated that:
Notwithstanding the provisions in the preceding paragraphs, the income of
whatever kind and character of the foregoing organizations from any of their
properties, real or personal, or from any of their activities conducted for profit
regardless of the disposition made of such income, shall be subject to tax imposed
under this Code. (emphasis added) Therefore, the Court said that if a tax exempt
charitable institution conducts any activity for profit, such activity is not tax
exempt even if its not-for profit activities remain tax exempt. The Court added that:
The Court cannot expand the meaning of the words operated exclusively without
violating the NIRC. Services to paying patients are activities conducted for profit.
They cannot be considered any other way. There is a purpose to make profit over
and above the cost of services. The 1.73 billion total revenues from paying
patients is not even incidental to St. Lukes charity expenditure of 218,187,498 for
non-paying patients. (emphasis in original) The Court therefore held that St Lukes
was not operated exclusively for charitable or social welfare purposes. It received
income from paying patients. This income was subject to 10% taxation under
section 27(B) of the NIRC. As the Court held: St. Lukes fails to meet the
requirements under Section 30(E) and (G) of the NIRC to be completely tax exempt
from all its income. However, it remains a proprietary nonprofit hospital under

Section 27(B) of the NIRC as long as it does not distribute any of its profits to its
members and such profits are reinvested pursuant to its corporate purposes. St.
Lukes, as a proprietary non-profit hospital, is entitled to the preferential tax rate of
10% on its net income from its for-profit activities. Thus, St Lukes was liable for tax
at the rate of 10% in the 1998 year under section 27(B) of the NIRC. It was held not
liable for surcharges or interest on the amount of tax owin

(7)

CIR vs CA and YMCA, [298 SCRA 83]

Post under case digests, Taxation at Sunday, February 26, 2012 Posted by Schizophrenic Mind

Facts: The main question in this case is: is the income

derived from rentals of real property owned by Young
Mens Christian Association of the Philippines (YMCA)
established as a welfare, educational and charitable nonprofit corporation subject to income tax under the NIRC
and the Constitution? In 1980, YMCA earned an income of
P676,829 from leasing out a portion of its premises to
small shop owners, like restaurants and canteen operators
and P44k form parking fees.
Issue: Is the rental income of the YMCA taxable?
Held: Yes. The exemption claimed by the YMCA is
expressly disallowed by the very wording of the last
paragraph of then Sec. 27 of the NIRC; court is dutybound to abide strictly by its literal meaning and to refrain
from resorting to any convoluted attempt at construction.
The said provision mandates that the income
of exempt organizations (such as YMCA) from any of their
properties, real or personal, be subject to the tax imposed
by the same Code. Private respondent is exempt from the

payment of property tax, but nit income tax on rentals from

its property.
COMMISSIONER OF INTERNAL REVENUE v. YMCA
G.R. No. 124043 October 14, 1998
Panganiban, J.
Doctrine:
Rental income derived by a tax-exempt organization from the lease of its properties, real or personal, is not exempt
from income taxation, even if such income is exclusively used for the accomplishment of its objectives.
A claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on
which it is based. Thus, it must expressly be granted in a statute stated in a language too clear to be mistaken. Verba
legis non est recedendum where the law does not distinguish, neither should we.
The bare allegation alone that one is a non-stock, non-profit educational institution is insufficient to justify its
exemption from the payment of income tax. It must prove with substantial evidence that (1) it falls under the
classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is
used actually, directly, and exclusively for educational purposes.
The Court cannot change the law or bend it to suit its sympathies and appreciations. Otherwise, it would be
overspilling its role and invading the realm of legislation. The Court, given its limited constitutional authority, cannot
rule on the wisdom or propriety of legislation. That prerogative belongs to the political departments of government.
Facts:
Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that
are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable
objectives.
YMCA earned income from leasing out a portion of its premises to small shop owners, like restaurants and canteen
operators, and from parking fees collected from non-members. Petitioner issued an assessment to private
respondent for deficiency taxes. Private respondent formally protested the assessment. In reply, the CIR denied the
claims of YMCA.
Issue:
Whether or not the income derived from rentals of real property owned by YMCA subject to income tax

Held:
Yes. Income of whatever kind and character of non-stock non-profit organizations from any of their properties, real or
personal, or from any of their activities conducted for profit, regardless of the disposition made of such income, shall
be subject to the tax imposed under the NIRC.
Rental income derived by a tax-exempt organization from the lease of its properties, real or personal, is not exempt
from income taxation, even if such income is exclusively used for the accomplishment of its objectives.
Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation in
construing tax exemptions (Commissioner of Internal Revenue v. Court of Appeals, 271 SCRA 605, 613, April 18,
1997). Furthermore, a claim of statutory exemption from taxation should be manifest and unmistakable from the
language of the law on which it is based. Thus, the claimed exemption must expressly be granted in a statute stated
in a language too clear to be mistaken (Davao Gulf Lumber Corporation v. Commissioner of Internal Revenue and
Court of Appeals, G.R. No. 117359, p. 15 July 23, 1998).
Verba legis non est recedendum. The law does not make a distinction. The rental income is taxable regardless of
whence such income is derived and how it is used or disposed of. Where the law does not distinguish, neither should
we.
Private respondent also invokes Article XIV, Section 4, par. 3 of the Constitution, claiming that it is a non-stock, nonprofit educational institution whose revenues and assets are used actually, directly and exclusively for educational
purposes so it is exempt from taxes on its properties and income. This is without merit since the exemption provided
lies on the payment of property tax, and not on the income tax on the rentals of its property. The bare allegation alone
that one is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of
income tax.
For the YMCA to be granted the exemption it claims under the above provision, it must prove with substantial
evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the income it
seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. Unfortunately
for respondent, the Court noted that not a scintilla of evidence was submitted to prove that it met the said requisites.
The Court appreciates the nobility of respondents cause. However, the Courts power and function are limited merely
to applying the law fairly and objectively. It cannot change the law or bend it to suit its sympathies and appreciations.
Otherwise, it would be overspilling its role and invading the realm of legislation. The Court regrets that, given its
limited constitutional authority, it cannot rule on the wisdom or propriety of legislation. That prerogative belongs to the
political departments of government.

CIR v CA & YMCA (1998)

CIR v CA & YMCA
GR No 124043, October 14, 1998
FACTS:
In 1980, YMCA earned an income of 676,829.80 from leasing out a portion of its premises to small shop owners, like
restaurants and canteen operators and 44,259 from parking fees collected from non-members. On July 2, 1984, the
CIR issued an assessment to YMCA for deficiency taxes which included the income from lease of YMCAs real
property. YMCA formally protested the assessment but the CIR denied the claims of YMCA. On appeal, the CTA
ruled in favor of YMCA and excluded income from lease to small shop owners and parking fees. However, the CA
reversed the CTA but affirmed the CTA upon motion for reconsideration.
ISSUE:
Whether the rental income of YMCA is taxable
RULING:
Yes. The exemption claimed by YMCA is expressly disallowed by the very wording of then Section 27 of the NIRC
which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or
personal, be subject to the tax imposed by the same Code. While the income received by the organizations
enumerated in Section 26 of the NIRC is, as a rule, exempted from the payment of tax in respect to income received
by them as such, the exemption does not apply to income derived from any of their properties, real or personal or
from any of their activities conducted for profit, regardless of the disposition made of such income.
(8)

Asia International Auctioneers, Inc. vs. Commissioner of

Internal Revenue (CIR)
Post under case digests, Taxation at Monday, February 01, 2016 Posted by Schizophrenic Mind

ISSUE: Whether or not a deficiency VAT assessment is tantamount to an assessment for withholding tax
liabilities such that the taxpayer cannot avail of a tax amnesty program

RULING: No. The CIR did not assess AIA as a withholding agent that failed to withhold or remit the
deficiency VAT and excise tax to the BIR under relevant provisions of the Tax Code. Hence, the argument
that AIA is deemed a withholding agent for these deficiency taxes is fallacious. Indirect taxes, like VAT and
excise tax, are different from withholding taxes. To distinguish, in indirect taxes, the incidence of taxation
falls on one person but the burden thereof can be shifted or passed on to another person, such as when
the tax is imposed upon goods before reaching the consumer who ultimately pays for it. On the other
hand, in case of withholding taxes, the incidence and burden of taxation fall on the same entity, the

statutory taxpayer. The burden of taxation is not shifted to the withholding agent who merely collects, by
withholding, the tax due from income payments to entities arising from certain transaction and remits the
same to the government.

Facts:
Asia International Auctioneers (AIA), a duly organized corporation operating within the Subic Special
Economic Zone, is engaged in the importation of used motor vehicles and heavy equipment which it
sells to the public through auction. When the BIR assessed AIA for deficiency taxes, AIA filed a
protest which was not acted upon by the BIR. AIA filed a petition for review before the CTA. BIR filed
a motion to dismiss for AIAs failure to timely appeal the protest, which was granted both by the CTA
Division and En Banc.
While the case was pending before the SC, AIA availed of the Tax Amnesty Program under RA 9840
to which it submitted a certificate of qualification issued by the BIR. The CIR contends however that
AIA is disqualified under Sec 8 (a) of the RA 9840 because it is deemed a withholding agent for the
deficiency taxes. Also, the CIR argues that AIA, being an accredited investor/taxpayer situated at the
Subic Special Economic Zone, should have availed of the tax amnesty granted under RA 9399 and
not under RA 9480.
Issue 1: W/N AIA is deemed a withholding agent for the deficiency VAT and excise taxes
No. The CIR did not assess AIA as a withholding agent that failed to withhold or remit the deficiency
VAT and excise tax to the BIR under relevant provisions of the Tax Code. Hence, the argument that
AIA is deemed a withholding agent for these deficiency taxes is fallacious.
Indirect taxes, like VAT and excise tax, are different from withholding taxes. In indirect taxes, the
incidence of taxation falls on one person but the burden thereof can be shifted or passed on to
another person, such as when the tax is imposed upon goods before reaching the consumer who
ultimately pays for it. On the other hand, in case of withholding taxes, the incidence and burden of
taxation fall on the same entity, the statutory taxpayer. The burden of taxation is not shifted to the
withholding agent who merely collects, by withholding, the tax due from income payments to entities
arising from certain transactions27and remits the same to the government. Due to this difference, the
deficiency VAT and excise tax cannot be deemed as withholding taxes merely because
they constitute indirect taxes.

Issue 2: W/N the tax amnesty under RA 9399 is the only available program for
business enterprises operating within special economic zones or freeports
No. RA 9399 was passed prior to the passage of RA 9480. RA 9399 does not preclude taxpayers
within its coverage from availing of other tax amnesty programs available or enacted in futuro like RA
9480. More so, RA 9480 does not exclude from its coverage taxpayers operating within
special economic zones. As long as it is within the bounds of the law, a taxpayer has the liberty to
choose which tax amnesty program it wants to avail.

ASIA INTERNATIONAL
AUCTIONEERS V. CIR
G.R. No. 179115,
September 26,2012
Topic: Direct vs. Indirect
Taxes
FACTS:
AIA is engaged in the
importation of used
motor vehicles and heavy

equipment which it sells

to
the public through
auction.
Later, AIA received from
the CIR a Formal Letter of
Demand containing an
assessment for VAT
and excise tax, a total
amount of P
106,870,235.00, inclusive
of penalties and interest.
AIA

claimed that it filed a

protest letter.
The CIR failed to act on
the protest, prompting
AIA to file a petition for
review before the CTA
to which the CIR filed its
Answer. The CIR filed a
motion to dismiss on the
ground of lack of
jurisdiction citing the
alleged failure of AIA to
timely file its protest

which thereby rendered

the
assessment final and
executory.
While the case is pending
before the CTA, AIA filed
a Manifestation and
Motion with Leave of
the Honorable Court to
Defer or Suspend Further
Proceedings on the
ground that it availed of
the

Tax Amnesty Program

under RA 9480.
Subsequently, it
submitted to the Court a
Certification of
Qualification issued by
the BIR.
However, the CIR
contends that AIA is
disqualified under
Section 8(a) of RA 9480
from
availing itself of the Tax
Amnesty Program

because it is "deemed" a
withholding agent for the
deficiency taxes.
ISSUE:
Whether or not the
contention of the CIR that
AIA is disqualified from
availing itself of the Tax
Amnesty Program
because it is "deemed" a
withholding agent for the
deficiency taxes.
HELD:

No, the contention of the

CIR is untenable.
(9)

CS Garment, Inc. v CIR, G.R. No. 182399, March 12, 2014

I.

The Tax Amnesty Law intended the immediate enjoyment of the immunities
and privileges after the requirements are fulfilled by the taxpayer.

The OSG has already confirmed26 to this Court that CS Garment has
complied with all of the documentary requirements of the law. Consequently,
and contrary to the assertion of the OSG, no further assessment by the BIR is
necessary. CS Garment is now entitled to invoke the immunities and
privileges under Section 6 of the law.

Similarly, we reject the contention of OSG that the BIR was given a one-year
period to contest the correctness of the SALN filed by CS Garment, thus
making petitioners motion premature. Neither the 2007 Tax Amnesty Law
nor Department of Finance (DOF) Order No. 29-07 (Tax Amnesty Law IRR)
imposes a waiting period of one year before the applicant can enjoy the
benefits of the Tax Amnesty Law. It can be surmised from the cited provisions
that the law intended the immediate enjoyment of the immunities and
privileges of tax amnesty upon fulfilment of the requirements. Further, a
reading of Sections 4 and 6 of the 2007 Tax Amnesty Law shows that
Congress has adopted a no questions asked policy, so long as all the
requirements of the law and the rules are satisfied. The one-year period
referred to in the law should thus be considered only as a prescriptive period
within which third parties, meaning parties other than the BIR or its
agents, can question the SALN not as a waiting period during which the
BIR may contest the SALN and the taxpayer prevented from enjoying the
immunities and privileges under the law.

This clarification, however, does not mean that the amnesty taxpayers would
go scot-free in case they substantially understate the amounts of their net
worth in their SALN. The 2007 Tax Amnesty Law imposes a resolutory
condition insofar as the enjoyment of immunities and privileges under the
law is concerned. Pursuant to Section 4 of the law, third parties may initiate
proceedings contesting the declared amount of net worth of the amnesty
taxpayer within one year following the date of the filing of the tax amnesty
return and the SALN. Section 6 then states that All these immunities and
privileges shall not apply x x x where the amount of networth as of
December 31, 2005 is proven to be understated to the extent of thirty
percent (30%) or more, in accordance with the provisions of Section 3
hereof.

Accordingly, Section 10 provides that amnesty taxpayers who willfully

understate their net worth shall be (a) liable for perjury under the Revised
Penal Code; and (b) subject to immediate tax fraud investigation in order to
collect all taxes due and to criminally prosecute those found to have willfully
evaded lawful taxes due.

II.

Only a final and executory decision will preclude the availment of the
benefits of the Tax Amnesty Law.
We cull from the aforementioned provisions that neither the law nor the
implementing rules state that a court ruling that has not attained finality
would preclude the availment of the benefits of the Tax Amnesty Law.
FACTS
We reproduce the narration of facts culled by the CTA en banc as follows:
5

Petitioner [CS Garment] is a domestic corporation duly organized and existing under and by virtue of
the laws of the Philippines with principal office at Road A, Cavite Ecozone, Rosario, Cavite. On the
other hand, respondent is the duly appointed Commissioner of Internal Revenue of the Philippines
authorized under law to perform the duties of said office, including, inter alia, the power to assess
taxpayers for [alleged] deficiency internal revenue tax liabilities and to act upon administrative
protests or requests for reconsideration/reinvestigation of such assessments.
Petitioner is registered with the Philippine Economic Zone Authority (PEZA) under Certificate of
Registration No. 89-064, duly approved on December 18, 1989. As such, it is engaged in the
business of manufacturing garments for sale abroad.

On November 24, 1999, petitioner [CS Garment] received from respondent [CIR] Letter of Authority
No. 00012641 dated November 10, 1999, authorizing the examination of petitioners books of
accounts and other accounting records for all internal revenue taxes covering the period January 1,
1998 to December 31, 1998.
On October 23, 2001, petitioner received five (5) formal demand letters with accompanying
Assessment Notices from respondent, through the Office of the Revenue Director of Revenue
Region No. 9, San Pablo City, requiring it to pay the alleged deficiency VAT, Income, DST and
withholding tax assessments for taxable year 1998 in the aggregate amount of P2,046,580.10
broken down as follows:
Deficiency VAT
Basic tax due

P 314,194.00

Add: Surcharge

157,097.00

Interest

188,516.00

Total Amount Payable

P 659,807.00

Deficiency Income Tax (at Normal Rate of 34%)

Basic tax due

P 78,639.00

Add: Surcharge

39,320.00

Interest

43,251.00

Total Amount Payable

P 161,210.00

Deficiency Income Tax (at Normal Rate of 34%)

Basic tax due

P 78,639.00

Add: Surcharge

39,320.00

Interest

43,251.00

Total Amount Payable

P 161,210.00

Deficiency DST
Basic tax due
Add: Surcharge

P 806.00
403.00

Interest

484.00

Total Amount Payable

P 1,693.00

Deficiency EWT
Basic tax due

P 22,800.00

Add: Surcharge

11,400.00

Interest

13,680.00

Total Amount Payable

P 47,880.00

GRAND TOTAL

P 2,046,580.10

On November 20, 2001, or within the 30-day period prescribed under Section 228 of the Tax Code,
as amended, petitioner filed a formal written protest with the respondent assailing the above
assessments.
On January 11, 2002, or within the sixty-day period after the filing of the protest, petitioner submitted
to the Assessment Division of Revenue Region No. 9, San Pablo City, additional documents in
support of its protest.
Respondent failed to act with finality on the protest filed by petitioner within the period of one
hundred eighty (180) days from January 11, 2002 or until July 10, 2002. Hence, petitioner appealed
before [the CTA] via a Petition for Review filed on August 6, 2002 or within thirty (30) days from the
last day of the aforesaid 180-day period.
The case was raffled to the Second Division of [the CTA] for decision. After trial on the merits, the
Second Division rendered the Assailed Decision on January 4, 2007 upon which the Second Division
cancelled respondents assessment against CS Garments for deficiency expanded withholding taxes
for CY 1998 amounting to P47,880.00, and partially cancelled the deficiency DST assessment
amounting to P1,963.00. However, the Second Division upheld the validity of the deficiency income
tax assessments by subjecting the disallowed expenses in the amount of P14,851,478.83 and a
portion of the undeclared local sales P1,541,936.60 (amounting to P1,500,000.00) to income tax at
the special rate of 5%. The remainder of undeclared local sales of P1,541,936.06 (amounting
to P41,936.60) was subjected to income tax at the rate of 34%. The Second Division found that total
tax liability of CS Garments amounted to P2,029,570.12, plus 20% delinquency interest pursuant to
Section 249(C)(3), and computed the same as follows:
Income Tax
Deficienc
y Tax

VAT

DST

at 5%

at 34%

TOTAL

Basic Tax
Due

P 314,194.00

P 145.00

P 817,573.94

P 1,789.44

25%
Surcharg
e

78,548.50

36.25

204,393.49

447.36

188,516.00

102.02

422,898.52

925.6

20%
Interest

P 581,258.50
P 283.27 P 1,444,865.95
P 3,162.40 P 2,029,570.12
============ ============ ============ ============ ============
=
=
=
=
=
On January 29, 2007, CS Garments filed its "Motion for Partial Reconsideration" of the said decision.
On May 25, 2007, in a resolution, the Second Division denied CS Garments motion for lack of merit.
(Citations omitted)
Petitioner appealed the case to the CTA en banc and alleged the following: (1) the Formal
Assessment Notices (FAN) issued by the Commissioner of Internal Revenue (CIR) did not comply
with the requirements of the law; (2) the income generated by CS Garment from its participation in
the Cavite Export Processing Zones trade fairs and from its sales to employees were not subject to
10% VAT; (3) the sale of the company vehicle to its general manager was not subject to 10% VAT; (4)
it had no undeclared local sales in the amount of P1,541,936.60; and (5) Rule XX, Section 2 of the
PEZA Rules and Regulations allowed deductions from the expenses it had incurred in connection
with advertising and representation; clinic and office supplies; commissions and professional fees;
transportation, freight and handling, and export fees; and licenses and other taxes.
The CTA en banc affirmed the Decision and Resolution of the CTA Second Division. As regards the
first issue, the banc ruled that the CIR had duly apprised CS Garment of the factual and legal bases
for assessing the latters liability for deficiency income tax, as shown in the attached Schedule of
Discrepancies provided to petitioner; and in the subsequent reference of the CIR to Rule XX, Section
2 of the Rules and Regulations of R.A. 7916. With respect to the second issue, the CTA pronounced
that the income generated by CS Garment from the trade fairs was subject to internal revenue taxes,
as those transactions were considered "domestic sales" under R.A. 7916, otherwise known as the
Special Economic Zone Act. With respect to the third issue, the CTA en banc declared that the sale
of the motor vehicle by CS Garment to the latters general manager in the amount of P1.6 million
was subject to VAT, since the sale was considered an incidental transaction within the meaning of
Section 105 of the NIRC. On the fourth issue, the CTA found that CS Garment had failed to declare
the latters total local sales in the amount of P1,541,936.60 in its 1998 income tax return. The tax
court then calculated the income tax liability of petitioner by subjecting P1.5 million of that liability to
the preferential income tax rate of 5%. This amount represented the extent of the authority of CS
Garment, as a PEZA-registered enterprise, to sell in the local market. The normal income tax rate of
34% was then charged for the excess amount of P41,936.60. Finally, as regards the fifth issue, the
CTA ruled that Section 2, Rule XX of the PEZA Rules which enumerates the specific deductions for
ECOZONE Export Enterprises does not mention certain claims of petitioner as allowable
deductions.
Aggrieved, CS Garment filed the present Petition for Review assailing the Decision of the CTA en
banc. However, on 26 September 2008, while the instant case was pending before this Court,
petitioner filed a Manifestation and Motion stating that it had availed itself of the governments tax
amnesty program under the 2007 Tax Amnesty Law. It thus prays that we take note of its availment

of the tax amnesty and confirm that it is entitled to all the immunities and privileges under the law. It
has submitted to this Court the following documents, which have allegedly been filed with Equitable
PCI BankCavite EPZA Branch, a supposed authorized agent-bank of the BIR:
6

1. Notice of Availment of Tax Amnesty under R.A. 9480

2. Statement of Assets, Liabilities, and Net worth (SALN)
3. Tax Amnesty Return (BIR Form No. 2116)
4. Tax Amnesty Payment Form (Acceptance of Payment Form or BIR Form No. 0617)
5. Equitable PCI Banks BIR Payment Form indicating that CS Garment deposited the
amount of P250,000 to the account of the Bureau of TreasuryBIR
On 26 January 2009, the Office of the Solicitor General (OSG) filed its Comment objecting to the
Manifestation and Motion of CS Garment.
7

The OSG asserts that the filing of an application for tax amnesty does not by itself entitle petitioner
to the benefits of the law, as the BIR must still assess whether petitioner was eligible for these
benefits and whether all the conditions for the availment of tax amnesty had been satisfied. Next, the
OSG claims that the BIR is given a one-year period to contest the correctness of the SALN filed by
CS Garment, thus making petitioners motion premature. Finally, the OSG contends that pursuant to
BIR Revenue Memorandum Circular No. (RMC) 19-2008, petitioner is disqualified from enjoying the
benefits of the Tax Amnesty Law, since a judgment was already rendered in favor of the BIR prior to
the tax amnesty availment. The OSG points out that CS Garment submitted its application for tax
amnesty only on 6 March 2008, which was almost two months after the CTA en banc issued its 14
January 2008 Decision and more than one year after the CTA Second Division issued its 4 January
2007 Decision.
On 8 February 2010, the Court required both parties to prepare and file their respective memoranda
within 30 days from notice. After this Court granted the motions for extension filed by the parties, the
OSG eventually filed its Memorandum on 18 May 2010, and CS Garment on 7 June 2010. It is
worthy to note that in its Memorandum, the OSG did not raise any argument with respect to
petitioners availment of the tax amnesty program. Neither did the OSG deny the authenticity of the
documents submitted by CS Garments or mention that a case had been filed against the latter for
availing itself of the tax amnesty program, taking into account the considerable lapse of time from
the moment petitioner filed its Tax Amnesty Return and Statement of Assets, Liabilities, and Net
Worth in 2008.
8

On 17 July 2013, the parties were ordered to "move in the premises" by informing the Court of the
status of the tax amnesty availment of petitioner CS Garment, including any supervening event that
may be of help to the Court in its immediate disposition of the present case. Furthermore, the parties
were directed to indicate inter alia (a) whether CS Garment had complied with the requirements of
the 2007 Tax Amnesty Law, taking note of the aforementioned documents submitted; (b) whether a
case had been initiated against petitioner, with respect to its availment of the tax amnesty program;
and (c) whether respondent CIR was still interested in pursuing the case. Petitioner eventually filed
its Compliance on 27 August 2013, and the OSG on 29 November 2013.
9

11

10

12

According to the OSG, CS Garment had already complied with all documentary requirements of the
2007 Tax Amnesty Law. It also stated that the BIR Litigation Division had not initiated any case
13

against petitioner relative to the latters tax amnesty application. However, the OSG reiterated that
the CIR was still interested in pursuing the case.
ISSUE
The threshold question before this Court is whether or not CS Garment is already immune from
paying the deficiency taxes stated in the 1998 tax assessments of the CIR, as modified by the CTA.

(10)

RIZAL COMMERCIAL BANKING

CORPORATION vs.
COMMISSIONER OF INTERNAL
REVENUE- Protest Tax
Assessments
FACTS:
RCBC received the final assessment notice on July 5, 2001. It filed a protest on July 20, 2001. As
the protest was not acted upon, it filed a Petition for Review with the Court of Tax Appeals (CTA) on
April 30, 2002, or more than 30 days after the lapse of the 180-day period reckoned from the
submission of complete documents. The CTA dismissed the Petition for lack of jurisdiction since the
appeal was filed out of time.

ISSUE:
Has the action to protest the assessment judicially prescribed?

HELD:
YES. The assessment has become final. The jurisdiction of the CTA has been expanded to include
not only decision but also inactions and both are jurisdictional such that failure to observe either is
fatal.
However, if there has been inaction, the taxpayer can choose between (1) file a Petition with the CTA
within 30 days from the lapse of the 180-day period OR (2) await the final decision of the CIR and
appeal such decision to the CTA within 30 days after receipt of the decision. These options are
mutually exclusive and resort to one bars the application of the other. Thus, if petitioner belatedly
filed an action based on inaction, it can not subsequently file another petition once the decision
comes out.

RCBC vs CIR 522 SCRA 144Facts:

RCBC received a Formal Letter of Demand dated May 25, 2001 from the respondent CIR for its taxliabilities
particularly
for
Gross
Onshore
Tax
in
the
amount
of
P53,998,428.29
and
Documentary
StampTax for its Special Savings Placements in the amount of P46,717,952.76, for the taxable year 1997.Petitioner
filed a protest letter/request for reconsideration/reinvestigation pursuant to Section 228 of the NIRC. As the protest
was not acted upon by the respondent, petitioner filed a petition for review withthe CTA for the cancellation of the
assessments. Respondent filed a motion to resolve first the issue of CTAs jurisdiction, which was granted by the
CTA in a Resolution dated September 10, 2003.8 The petition for review was dismissed because it was filed beyond
the 30-day period following the lapse of 180 days from petitioners submission of documents in support of its
protest, as provided under Section228 of the NIRC and Section 11 of R.A. No. 1125, otherwise known as the Law
Creating the Court of Tax Appeals. Petitioner did not file a motion for reconsideration or an appeal to the CTA En
Banc fromthe dismissal of its petition for review. Consequently, the September 10, 2003 Resolution became
finaland executory on October 1, 2003 and Entry of Judgment was made on December 1,
2003.9Thereafter, respondent sent a Demand Letter to petitioner for the payment of the deficiency taxassessments
. On February 20, 2004, petitioner filed a Petition for Relief from Judgment on the ground of excusable negligence
of its counsels secretary who allegedly misfiled and lost the September 10, 2003Resolution. The CTA
Second Division set
the case for hearing on April 2, 200411
during which petitioners counsel was present.12
Respondent filed an Opposition13 while petitioner submitted itsManifestation and Counter-Motion. On May 3, 2004,
the CTA Second Division rendered a Resolution15denying petitioners Petition for Relief from Judgment. Petitioners
motion for reconsideration wasdenied in a Resolution dated November 5, 2004, hence it filed a petition for review
with the CTA En Banc, docketed as C.T.A. EB No. 50, which affirmed the assailed Resolutions of the CTA
SecondDivision in a Decision dated June 7, 2005.
Ruling:
As provided in Sec. 228, the failure of the taxpayer to appeal from an assessment on time rendered the
assessment final, executory and demandable. RCBC is precluded from disputing the correctness of the assessment.
While the right to appeal a decision of the Commissioner of CTA is merely a statutory remedy, nevertheless the
requirement that it must be brought within 30 days is jurisdictional. If a statutory remedy provides as a condition
precedent that the action to enforce it must be commenced within a prescribed time, such requirement is
jurisdictional and failure to comply therewith may be raised in a MTD.
-------------------------

(11)

Silkair (Singapore) Pte. Ltd. V. CIR

Petitioner Silkair (Singapore) Pte. Ltd. is a foreign corporation duly licensed by the Securities and Exchange
Commission (SEC) to do business in the Philippines as an on-line international carrier operating the CebuSingapore-Cebu and Davao-Singapore-Davao routes. In the course of its international flight operations, petitioner
purchased aviation fuel from Petron Corporation (Petron) from July 1, 1998 to December 31, 1998, paying the

excise taxes thereon in the sum of P5,007,043.39. The payment was advanced by Singapore Airlines, Ltd. on
behalf of petitioner.
On October 20, 1999, petitioner filed an administrative claim for refund in the amount of P5,007,043.39
representing excise taxes on the purchase of jet fuel from Petron, which it alleged to have been erroneously paid.
The claim is based on Section 135 (a) and (b) of the 1997 Tax Code, which provides:
SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. Petroleum products
sold to the following are exempt from excise tax:

(a) International carriers of Philippine or foreign registry on their use or consumption outside the
Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in
abonded storage tank and may be disposed of only in accordance with the rules and regulations to be
prescribed by the Secretary of Finance, upon recommendation of the Commissioner;
(b) Exempt entities or agencies covered by tax treaties, conventions and other international
agreements for their use or consumption: Provided, however, That the country of said foreign
international carrier or exempt entities or agencies exempts from similar taxes petroleum products sold to
Philippine carriers, entities or agencies; and
x x x x (Emphasis supplied.)
Petitioner also invoked Article 4(2) of the Air Transport Agreement between the Government of the Republic of the
Philippines and the Government of the Republic of Singapore 3 (Air Transport Agreement between RP and
Singapore) which reads:
ART. 4
xxxx
2. Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into, or taken on board aircraft in
the territory of one Contracting Party by, or on behalf of, a designated airline of the other Contracting Party and
intended solely for use in the operation of the agreed services shall, with the exception of charges corresponding to
the service performed, be exempt from the same customs duties, inspection fees and other duties or taxes
imposed in the territory of the first Contracting Party, even when these supplies are to be used on the parts of the
journey performed over the territory of the Contracting Party in which they are introduced into or taken on board.
The materials referred to above may be required to be kept under customs supervision and control. 4
Due to the inaction by respondent CIR , petitioner filed a petition for review with the Court of Tax Appeals (CTA) on
June 30, 2000.
On July 28, 2003, the CTA rendered its decision 5 denying petitioners claim for refund. Said court ruled that while
petitioners country indeed exempts from similar taxes petroleum products sold to Philippine carriers, petitioner
nevertheless failed to comply with the second requirement under Section 135 (a) of the 1997 Tax Code as it failed
to prove that the jet fuel delivered by Petron came from the latters bonded storage tank. Presiding Justice Ernesto
D. Acosta dissented from the majority view that petitioners claim should be denied, stating that even if the bonded
storage tank is required under Section 135 (a), the claim can still be justified under Section 135 (b) in view of our
countrys existing Air Transport Agreement with the Republic of Singapore which shows the reciprocal enjoyment of
the privilege of the designated airline of the contracting parties.
Its motion for reconsideration having been denied by the CTA, petitioner elevated the case to the CA. Petitioner
assailed the CTA in not holding that there are distinct and separate instances of exemptions provided in paragraphs
(a), (b) and (c) of Section 135, and therefore the proviso found in paragraph (a) should not have been applied to
the exemption granted under paragraph (b).

The CA affirmed the denial of the claim for tax refund and dismissed the petition. It ruled that while petitioner is
exempt from paying excise taxes on petroleum products purchased in the Philippines by virtue of Section 135 (b),
petitioner is not the proper party to seek for the refund of the excise taxes paid. Petitioners motion for
reconsideration was likewise denied by the appellate court.
In this appeal, petitioner argues that it is the proper party to file the claim for refund, being the entity granted the
tax exemption under the Air Transport Agreement between RP and Singapore. It disagrees with respondents
reasoning that since excise tax is an indirect tax it is the direct liability of the manufacturer, Petron, and not the
petitioner, because this puts to naught whatever exemption was granted to petitioner by Article 4 of the Air
Transport Agreement.
Petitioner further contends that respondent is estopped from questioning the right of petitioner to claim a refund of
the excise taxes paid after issuing BIR Ruling No. 339-92 which already settled the matter. It further points out
that the CTA has consistently ruled in a number of decisions involving the same parties that petitioner is the proper
party to seek the refund of excise taxes paid on its purchases of petroleum products. Finally, it emphasizes that
respondent never raised in issue petitioners legal personality to seek a tax refund in the administrative level. Citing
this Courts ruling in the case of CIR v. Court of Tax Appeals, et al. 6 petitioner asserts that respondent is in
estoppel to question petitioners standing to file the claim for refund for its failure to timely raise the issue in the
administrative level, as well as before the CTA.
On the other hand, the Solicitor General on behalf of respondent, maintains that the excise tax passed on to the
petitioner by Petron being in the nature of an indirect tax, it cannot be the subject matter of an administrative
claim for refund/tax credit, following the ruling in Contex Corporation v. CIR .7 Moreover, assuming arguendo that
petitioner falls under any of the enumerated transactions/persons entitled to tax exemption under Section 135 of
the 1997 Tax Code, what the law merely contemplates is exemption from the payment of excise tax to the
seller/manufacturer, in this case Petron, but not an exemption from payment of excise tax to the BIR, much more
an entitlement to a refund from the BIR. Being the buyer, petitioner is not the person required by law nor the
person statutorily liable to pay the excise tax but the seller, following the provision of Section 130 (A) (1) (2).
The Solicitor General also asserts that contrary to petitioners argument that respondent never raised in the
administrative level the issue of whether petitioner is the proper party to file the claim for refund, records would
show that respondent actually raised the matter of whether petitioner is entitled to the tax refund being claimed in
his Answer dated August 8, 2000, in the Joint Stipulation of Facts, and in his Memorandum submitted before the
CTA where respondent categorically averred that "petitioner x x x is not the entity directly liable for the payment of
the tax, hence, not the proper party who should claim the refund of the excise taxes paid." 8
We rule for the respondent.
The core issue presented is the legal personality of petitioner to file an administrative claim for refund of excise
taxes alleged to have been erroneously paid to its supplier of aviation fuel here in the Philippines.
In three previous cases involving the same parties, this Court has already settled the issue of whether petitioner is
the proper party to seek the refund of excise taxes paid on its purchase of aviation fuel from a local
manufacturer/seller. Following the principle of stare decisis, the present petition must therefore be denied.
Excise taxes, which apply to articles manufactured or produced in the Philippines for domestic sale or consumption
or for any other disposition and to things imported into the Philippines, 9 is basically an indirect tax. While the tax is
directly levied upon the manufacturer/importer upon removal of the taxable goods from its place of production or
from the customs custody, the tax, in reality, is actually passed on to the end consumer as part of the transfer
value or selling price of the goods, sold, bartered or exchanged. 10 In early cases, we have ruled that for indirect
taxes (such as valued-added tax or VAT), the proper party to question or seek a refund of the tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even when he shifts the burden
thereof to another.11 Thus, in Contex Corporation v. CIR ,12 we held that while it is true that petitioner corporation
should not have been liable for the VAT inadvertently passed on to it by its supplier since their transaction is a
zero-rated sale on the part of the supplier, the petitioner is not the proper party to claim such VAT refund. Rather, it
is the petitioners suppliers who are the proper parties to claim the tax credit and accordingly refund the petitioner
of the VAT erroneously passed on to the latter.13

In the first Silkair case14 decided on February 6, 2008, this Court categorically declared:
The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the
tax is imposed by law and who paid the same even if he shifts the burden thereof to another. Section 130 (A) (2) of
the NIRC provides that "[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid by
the manufacturer or producer before removal of domestic products from place of production." Thus, Petron
Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section
135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for jet
fuel is not a tax but part of the price which Silkair had to pay as a purchaser.15 (Emphasis supplied.)
Just a few months later, the decision in the second Silkair case16 was promulgated, reiterating the rule that in the
refund of indirect taxes such as excise taxes, the statutory taxpayer is the proper party who can claim the refund.
We also clarified that petitioner Silkair, as the purchaser and end-consumer, ultimately bears the tax burden, but
this does not transform its status into a statutory taxpayer.
The person entitled to claim a tax refund is the statutory taxpayer. Section 22(N) of the NIRC defines a taxpayer as
"any person subject to tax." In CIR v. Procter and Gamble Phil. Mfg. Corp., the Court ruled that:
A "person liable for tax" has been held to be a "person subject to tax" and properly considered a "taxpayer." The
terms "liable for tax" and "subject to tax" both connote a legal obligation or duty to pay a tax.
The excise tax is due from the manufacturers of the petroleum products and is paid upon removal of the products
from their refineries. Even before the aviation jet fuel is purchased from Petron, the excise tax is already paid by
Petron. Petron, being the manufacturer, is the "person subject to tax." In this case, Petron, which paid the excise
tax upon removal of the products from its Bataan refinery, is the "person liable for tax." Petitioner is neither a
"person liable for tax" nor "a person subject to tax." There is also no legal duty on the part of petitioner to pay the
excise tax; hence, petitioner cannot be considered the taxpayer.
Even if the tax is shifted by Petron to its customers and even if the tax is billed as a separate item in the aviation
delivery receipts and invoices issued to its customers, Petron remains the taxpayer because the excise tax is
imposed directly on Petron as the manufacturer. Hence, Petron, as the statutory taxpayer, is the proper
party that can claim the refund of the excise taxes paid to the BIR. 17 (Emphasis supplied.)1avvphi1
Petitioners contention that the CTA and CA rulings would put to naught the exemption granted under Section 135
(b) of the 1997 Tax Code and Article 4 of the Air Transport Agreement is not well-taken. Since the supplier herein
involved is also Petron, our pronouncement in the second Silkair case, relative to the contractual undertaking of
petitioner to submit a valid exemption certificate for the purpose, is relevant. We thus noted:
The General Terms & Conditions for Aviation Fuel Supply (Supply Contract) signed between petitioner (buyer) and
Petron (seller) provide:
"11.3 If Buyer is entitled to purchase any Fuel sold pursuant to the Agreement free of any taxes, duties or
charges, Buyer shall timely deliver to Seller a valid exemption certificate for such purchase." (Emphasis
supplied)
This provision instructs petitioner to timely submit a valid exemption certificate to Petron in order that Petron will
not pass on the excise tax to petitioner. As correctly suggested by the CTA, petitioner should invoke its tax
exemption to Petron before buying the aviation jet fuel. Petron, however, remains the statutory taxpayer on those
excise taxes.
Revenue Regulations No. 3-2008 (RR 3-2008) provides that "subject to the subsequent filing of a claim for excise
tax credit/refund or product replenishment, all manufacturers of articles subject to excise tax under Title VI of the
NIRC of 1997, as amended, shall pay the excise tax that is otherwise due on every removal thereof from the place
of production that is intended for exportation or sale/delivery to international carriers or to tax-exempt
entities/agencies." The Department of Finance and the BIR recognize the tax exemption granted to international

carriers but they consistently adhere to the view that manufacturers of articles subject to excise tax are the
statutory taxpayers that are liable to pay the tax, thus, the proper party to claim any tax refunds. 18
The above observation remains pertinent to this case because the very same provision in the General Terms and
Conditions for Aviation Fuel Supply Contract also appears in the documentary evidence submitted by petitioner
before the CTA.19 Except for its bare allegation of being "placed in a very complicated situation" because Petron,
"for fear of being assessed by Respondent, will not allow the withdrawal and delivery of the petroleum products
without Petitioners pre-payment of the excise taxes," petitioner has not demonstrated that it dutifully complied
with its contractual undertaking to timely submit to Petron a valid certificate of exemption so that Petron may
subsequently file a claim for excise tax credit/refund pursuant to Revenue Regulations No. 3-2008 (RR 3-2008). It
was indeed premature for petitioner to assert that the denial of its claim for tax refund nullifies the tax exemption
granted to it under Section 135 (b) of the 1997 Tax Code and Article 4 of the Air Transport Agreement.
In the third Silkair case20 decided last year, the Court called the attention to the consistent rulings in the previous
two Silkair cases that petitioner as the purchaser and end-consumer of the aviation fuel is not the proper party to
claim for refund of excise taxes paid thereon. The situation clearly called for the application of the doctrine, stare
decisis et non quieta movere. Follow past precedents and do not disturb what has been settled. Once a case has
been decided one way, any other case involving exactly the same point at issue, as in the case at bar, should be
decided in the same manner.21 The Court thus finds no cogent reason to deviate from those previous rulings on the
same issues herein raised.

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated September 13, 2004 and
Resolution dated December 21, 2004 of the Court of Appeals in CA-G.R. SP No. 82902 are AFFIRMED.
With costs against the petitioner.
SO ORDERED.

SILKAIR (Singapore) PTE. LTD. vs. CIR [GR No. 166482,

January 25, 2012]
Post under case digests, Taxation at Friday, January 08, 2016 Posted by Schizophrenic Mind

ISSUE: The core issue presented is the legal personality of the petitioner to file an administrative claim for
refund of excise taxes alleged to have been erroneously paid to its supplier of aviation fuel here in the
Philippines

RULING: Excise taxes, which apply to articles manufactured or produced in the Philippines for domestic
sale or consumption or for any other disposition and to things imported into the Philippines, is basically
an indirect tax. While the tax is directly levied upon the manufacturer or importer upon removal of the
taxable goods from its place of production or from the customs custody, the tax, in reality, is actually
passed on to the end consumer as part of the transfer value or selling price of the goods, sold, bartered or
exchanged.

Except for its bare allegation of being "placed in a very complicated situation" because Petron "for fear of
being

assessed

by

Respondent,

will

not

allow

the

withdrawal

and

delivery

of

the

petroleum products without Petitioner's pre-payment of the excise taxes," petitioner has not demonstrated
that it dutifully complied with its contractual undertaking to timely submit to Petron a valid certificate of
exemption so that Petron may subsequently file a claim for excise tax credit/refund pursuant to Revenue
Regulations No. 3-2008 (RR 3-2208). It was indeed premature for petitioner to assert that the denial of its
claim for tax refund nullifies the tax exemption granted to it under Section 135(b) of the 1997 Tax Code
and Article 4 of the Air Transport Agreement.

(12)

Planters Products, Inc. v. CA

Facts:
Planters Products, Inc. purchased from Mitsubishi International Corporation
9,329.7069 metric tons of Urea 46% fertilizer, which the latter shipped aboard the cargo
vessel M/V Sun Plum on June 16, 1974. Prior to its voyage, a time-charter party was
entered into between Mitsubishi as shipper, and Kyosei Kisen Kabushiki Kaisha as
shipowner. Before loading the fertilizer aboard the vessel, four of her holds were
presumably inspected by the charterers representative and found it fit to take the load.
After loading the cargo, the steel hatches were closed with heavy iron lids, covered with
3 layers of tarpaulin then tied with steel bonds. It remained sealed throughout the entire
voyage.
Upon arrival of the vessel, petitioner unloaded the cargo, which took 11 days. A private
marine and cargo surveyor, Cargo Superintendents Company, Inc. (CSCI) was hired by
petitioner to determine the outturn of the cargo shipped. CSCI reported shortage of
106.726 metric tons, and contamination of 18 metric tons due to dirt. PPI sent a claim
letter against Soriamont Steamship Agencies, the resident agent of KKKK. The request
was denied, hence, PPI filed an action for damages before the CFI Manila. The lower
court sustained the petitioners claim, but such decision was reversed by the appellate
court, which absolved the carrier from liability. The appellate court ruled that the vessel
was a private carrier and not a common carrier by reason of the charter party.
Issues:
(1) Whether a common carrier becomes a private carrier by reason of a charter party
(2) Whether the ship owner was able to prove the exercise of the diligence required
under the circumstances

Held:
(1) A "charter-party" is defined as a contract by which an entire ship, or some principal
part thereof, is let by the owner to another person for a specified time or use; Charter
parties are of two types: (a) contract of affreightment which involves the use of shipping
space on vessels leased by the owner in part or as a whole, to carry goods for others;
and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is
let to the charterer with a transfer to him of its entire command and possession and
consequent control over its navigation, including the master and the crew, who are his
servants. Contract of affreightment may either be time charter, wherein the vessel is
leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is
leased for a single voyage.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the
Civil Code. The definition extends to carriers either by land, air or water which hold
themselves out as ready to engage in carrying goods or transporting passengers or both
for compensation as a public employment and not as a casual occupation. The
distinction between a "common or public carrier" and a "private or special carrier" lies
in the character of the business, such that if the undertaking is a single transaction, not a
part of the general business or occupation, although involving the carriage of goods for a
fee, the person or corporation offering such service is a private carrier. Article 1733 of
the New Civil Code mandates that common carriers, by reason of the nature of their
business, should observe extraordinary diligence in the vigilance over the goods they
carry. In the case of private carriers, however, the exercise of ordinary diligence in the
carriage of goods will suffice. Moreover, in case of loss, destruction or deterioration of
the goods, common carriers are presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise rests on them. On the contrary, no
such presumption applies to private carriers, for whosoever alleges damage to or
deterioration of the goods carried has the onus of proving that the cause was the
negligence of the carrier.
When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and
compliment were under the employ of the shipowner and therefore continued to be
under its direct supervision and control. Hardly then can we charge the charterer, a
stranger to the crew and to the ship, with the duty of caring for his cargo when the
charterer did not have any control of the means in doing so. This is evident in the
present case considering that the steering of the ship, the manning of the decks, the
determination of the course of the voyage and other technical incidents of maritime
navigation were all consigned to the officers and crew who were screened, chosen and
hired by the shipowner. It is only when the charter includes both the vessel and its crew,
as in a bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned.
(2) In an action for recovery of damages against a common carrier on the goods shipped,
the shipper or consignee should first prove the fact of shipment and its consequent loss
or damage while the same was in the possession, actual or constructive, of the carrier.
Thereafter, the burden of proof shifts to respondent to prove that he has exercised

extraordinary diligence required by law or that the loss, damage or deterioration of the
cargo was due to fortuitous event, or some other circumstances inconsistent with its
liability. To our mind, respondent carrier has sufficiently overcome, by clear and
convincing proof, the prima facie presumption of negligence.
Before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried
and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the
steel pontoon hatches were closed and sealed with iron lids, then covered with three (3)
layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained
close and tightly sealed while the ship was in transit as the weight of the steel covers
made it impossible for a person to open without the use of the ship's boom. It was also
shown during the trial that the hull of the vessel was in good condition, foreclosing the
possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. When M/V "Sun Plum" docked at its berthing place, representatives of the
consignee boarded, and in the presence of a representative of the shipowner, the
foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches
and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo
under the watchful eyes of the shipmates who were overseeing the whole operation on
rotation basis.
The period during which private respondent was to observe the degree of diligence
required of it as a public carrier began from the time the cargo was unconditionally
placed in its charge after the vessel's holds were duly inspected and passed scrutiny by
the shipper, up to and until the vessel reached its destination and its hull was reexamined by the consignee, but prior to unloading. A shipowner is liable for damage to
the cargo resulting from improper stowage only when the stowing is done by stevedores
employed by him, and therefore under his control and supervision, not when the same is
done by the consignee or stevedores under the employ of the latter.
Common carriers are not responsible for the loss, destruction or deterioration of the
goods if caused by the character of the goods or defects in the packaging or in the
containers. The primary cause of these spillages is the clamped shell which does not seal
very tightly. Also, the wind tends to blow away some of the materials during the
unloading process. The probability of the cargo being damaged or getting mixed or
contaminated with foreign particles was made greater by the fact that the fertilizer was
transported in "bulk," thereby exposing it to the inimical effects of the elements and the
grimy condition of the various pieces of equipment used in transporting and hauling it.
If there was loss or contamination of the cargo, it was more likely to have occurred while
the same was being transported from the ship to the dump trucks and finally to the
consignee's warehouse.
Bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or
damage, more so, with a variable weather condition prevalent during its unloading, as
was the case at bar. This is a risk the shipper or the owner of the goods has to face.
Clearly, respondent carrier has sufficiently proved the inherent character of the goods
which makes it highly vulnerable to deterioration; as well as the inadequacy of its
packaging which further contributed to the loss. On the other hand, no proof was

adduced by the petitioner showing that the carrier was remiss in the exercise of due
diligence in order to minimize the loss or damage to the goods it carried.
RULING:

FERTIPHIL has Locus Standi. It suffered direct injury because it was a TAX PAYER.

Actually the doctrine of Locus Standi is a mere procedural technicality which may be
waived. In the Abaya vs. Ebdane case the court even took a liberal stance stating
that a taxpayer need not be a party to the contract in order to challenge its
validity

I think this is more of a question of whether the imposition operated under the basis
of POLICE POWER or the POWER TO TAX which are 2 of the inherent powers of the
state.

Police Power is the power of the state to enact legislation that may interfere with
personal liberty or property in or to promote the general welfare, while Power of
Taxation is the power to levy taxes to be used for public purpose.

The main purpose of each:

Police Power = Regulation of Behavior or Conduct for the Public Welfare
Power of Taxation = Revenue Generation for the Public Welfare

These powers are distinct and have different tests for validity. The lawful subject
and lawful means tests are used to determine the validity of a law enacted under
the Police Power. The power of Taxation, on the other hand, is circumscribed by
inherent and constitutional limitations.

While it is true that the power to tax can be used as an implement of Police Power,
the primary purpose of the levy was revenue generation. If the purpose is primarily
revenue then the exaction is properly called a tax.
FertiPhil wins this case.

(13)

[G.R. No. 163583. August 20, 2008.]

BRITISH AMERICAN TOBACCO, petitioner, vs. JOSE ISIDRO N.
CAMACHO, in his capacity as Secretary of the Department of Finance and
GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of the
Bureau of Internal Revenue, respondents.
PHILIP MORRIS PHILIPPINES MANUFACTURING, INC., FORTUNE
TOBACCO, CORP., MIGHTY CORPORATION, AND JT
INTERNATIONAL, S.A., respondents-in-intervention.
YNARES-SANTIAGO, J :
p

Facts:
RA 8240, entitled "An Act Amending Sections 138, 139, 140, and 142 of the NIRC, as
Amended and For Other Purposes", took effect on January 1, 1997. In the same year,
Congress passed RA 8424 or The Tax Reform Act of 1997, re-codifying the NIRC.
Section 142 was renumbered as Section 145 of the NIRC.
Paragraph (c) of Section 145 provides for four tiers of tax rates based on the net retail
price per pack of cigarettes. To determine the applicable tax rates of existing cigarette
brands, a survey of the net retail prices per pack of cigarettes was conducted
As such, new brands of cigarettes shall be taxed according to their current net retail
price while existing or "old" brands shall be taxed based on their net retail price as of
October 1, 1996.
To implement RA 8240, the Bureau of Internal Revenue (BIR) issued Revenue
Regulations No. 1-97, which classified the existing brands of cigarettes as those duly
registered or active brands prior to January 1, 1997. New brands, or those registered after
January 1, 1997, shall be initially assessed at their suggested retail price until such time
that the appropriate survey to determine their current net retail price is conducted.
petitioner British American Tobacco introduced into the market Lucky Strike Filter,
Lucky Strike Lights and Lucky Strike Menthol Lights cigarettes, with a suggested retail

price of P9.90 per pack. Pursuant to Sec. 145 (c) quoted above, the Lucky Strike brands
were initially assessed the excise tax at P8.96 per pack.
H

petitioner filed before the Regional Trial Court (RTC) of Makati, a petition for injunction
with prayer for the issuance of a temporary restraining order (TRO) and/or writ of
preliminary injunction. Said petition sought to enjoin the implementation of Section 145
of the NIRC, Revenue Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue
Memorandum Order No. 6-2003 on the ground that they discriminate against new brands
of cigarettes, in violation of the equal protection and uniformity provisions of the
Constitution.
the trial court rendered a decision upholding the constitutionality of Section 145 of the
NIRC, Revenue Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue Memorandum
Order No. 6-2003. The trial court also lifted the writ of preliminary injunction. The
dispositive portion of the decision reads:
Petitioner brought the instant petition for review directly with this Court on a pure
question of law.
Intervenor Fortune Tobacco further contends that petitioner is estopped from questioning
the constitutionality of Section 145 and its implementing rules and regulations because it
entered into the cigarette industry fully aware of the existing tax system and its
consequences. Petitioner imported cigarettes into the country knowing that its suggested
retail price, which will be the initial basis of its tax classification, will be confirmed and
validated through a survey by the BIR to determine the correct tax that would be levied
on its cigarettes.
Issue:
Whether or not (1) Section 145 of the National Internal Revenue Code (NIRC), as
recodified by Republic Act (RA) 8424; (2) RA 9334, which further amended Section 145
of the NIRC on January 1, 2005; (3) Revenue Regulations Nos. 1-97, 9-2003, and 222003; and (4) Revenue Memorandum Order No. 6-2003 are violative of the equal
protection and uniformity clauses of the Constitution.
Held:
We answer in the negative.
Whether Congress acted improvidently in derogating, to a limited extent, the state's
interest in promoting fair competition among the players in the industry, while pursuing
other state interests regarding the simplification of tax administration of sin products,
elimination of potential areas for abuse and corruption in tax collection, buoyant and

stable revenue generation, and ease of projection of revenues through the classification
freeze provision, and whether the questioned provision is the best means to achieve these
state interests, necessarily go into the wisdom of the assailed law which we cannot
inquire into, much less overrule. The classification freeze provision has not been shown
to be precipitated by a veiled attempt, or hostile attitude on the part of Congress to unduly
favor older brands over newer brands. On the contrary, we must reasonably assume,
owing to the respect due a co-equal branch of government and as revealed by the
Congressional deliberations, that the enactment of the questioned provision was impelled
by an earnest desire to improve the efficiency and effectivity of the tax administration of
sin products. For as long as the legislative classification is rationally related to furthering
some legitimate state interest, as here, the rational-basis test is satisfied and the
constitutional challenge is perfunctorily defeated.
We do not sit in judgment as a supra-legislature to decide, after a law is passed by
Congress, which state interest is superior over another, or which method is better suited
to achieve one, some or all of the state's interests, or what these interests should be in the
first place. This policy-determining power, by constitutional fiat, belongs to Congress as
it is its function to determine and balance these interests or choose which ones to pursue.
Time and again we have ruled that the judiciary does not settle policy issues. The Court
can only declare what the law is and not what the law should be. Under our system of
government, policy issues are within the domain of the political branches of government
and of the people themselves as the repository of all state power. 74 Thus, the legislative
classification under the classification freeze provision, after having been shown to be
rationally related to achieve certain legitimate state interests and done in good faith, must,
perforce, end our inquiry.
THaCAI

WHEREFORE, the petition is PARTIALLY GRANTED and the decision of the Regional
Trial Court of Makati, Branch 61, in Civil Case No. 03-1032, is AFFIRMED with
MODIFICATION. As modified, this Court declares that:
(1) Section 145 of the NIRC, as amended by Republic Act No. 9334, is
CONSTITUTIONAL; and that
(2)Section 4 (B) (e) (c), 2nd paragraph of Revenue Regulations No. 1-97, as amended by
Section 2 of Revenue Regulations 9-2003, and Sections II (1) (b), II (4) (b), II (6), II (7),
III (Large Tax Payers Assistance Division II) II (b) of Revenue Memorandum Order No.
6-2003, insofar as pertinent to cigarettes packed by machine, are INVALID insofar as
they grant the BIR the power to reclassify or update the classification of new brands
every two years or earlier.

(14)
FITNESS BY DESIGN INC V. CIR (*from upper batch)

Facts:

Commissioner on Internal Revenue (respondent) assessed Fitness by Design, Inc. (petitioner)

for deficiency income taxes for the tax year 1995. Petitioner protested and filed a Petition for Review
with Motion to Suspend Collection of Income Tax, before the Court of Tax Appeals and raised
prescription as a defense. A preliminary hearing on the issue of prescription was conducted during
which petitioners former bookkeeper attested that certified public accountant Leonardo Sablan
illegally took custody of petitioners accounting records, invoices, and official receipts and turned them
over to the BIR.

Petitioner requested for the issuance of subpoena ad testificandum to Sablan for the hearing
and of subpoena duces tecum to the BIR for the production of the Affidavit of the Informer bearing on
the assessment in question. In addition, petitioner submitted written interrogatories addressed to
Sablan. The CTA denied petitioners motion for Issuance of Subpoenas and disallowed the submission
by petitioner of written interrogatories to Sablan. The CTA found that to require Sablan to testify would
violate Section 2 of Republic Act No. 2338, as implemented by Section 12 of Finance Department Order
No. 46-66, proscribing the revelation of identities of informers of violations of internal revenue laws,
except when the information is proven to be malicious or false. Petitioner filed a rule 65.

Issue: Did the CTA err in denying the motions for subpoenas and written interrogatories?

Held:
The CTA did NOT err. In requesting the issuance of the subpoenas and the submission of
written interrogatories, petitioner sought to establish that its accounting records and related
documents, invoices, and receipts which were the bases of the assessment against it were illegally
obtained. The only issues, however, which surfaced during the preliminary hearing before the CTA,
were whether respondents issuance of assessment against petitioner had prescribed and whether
petitioners tax return was false or fraudulent.

Besides, as the CTA held, the subpoenas and answers to the written interrogatories would
violate Section 2 of Republic Act No. 2338 as implemented by Section 12 of Finance Department Order
No. 46-66. Petitioner claims, however, that it only intended to elicit information on the whereabouts of
the documents it needs in order to refute the assessment, and not to disclose the identity of the
informer. Petitioners position does not persuade. The interrogatories addressed to Sablan and the
revenue officers show that they were intended to confirm petitioners belief that Sablan was the
informer.

Lastly, Petitioner impugns the manner in which the documents in question reached the BIR,
Sablan having allegedly submitted them to the BIR without its (petitioners) consent. Petitioners lack
of consent does not, however, imply that the BIR obtained them illegally or that the information

received is false or malicious. Nor does the lack of consent preclude the BIR from assessing deficiency
taxes on petitioner based on the documents. Section 5 of the Tax Code allows the BIR access to all
relevant or material records and data in the person of the taxpayer, and the BIR can accept documents
which cannot be admitted in a judicial proceeding where the Rules of Court are strictly observed. To
require the consent of the taxpayer would defeat the intent of the law to help the BIR assess and
collect the correct amount of taxes