Beruflich Dokumente
Kultur Dokumente
1 Paseo Realty and On April 16, 1990, petitioner filed its Income Tax Whether or not No.The confusion as to petitioners entitlement to a refund could
Development Return for the calendar year 1989 declaring a gross the petitioner can altogether have been avoided had it presented its tax return for 1990.
Corporation income of P1,855,000.00, deductions of claim the refund
P1,775,991.00, net income of P79,009.00, an of its creditable
vs income tax due thereon in the amount of taxes withheld in The grant of a refund is founded on the assumption that the tax return
P27,653.00, prior years excess credit of 1989 as the same is valid, i.e., that the facts stated therein are true and correct.
CA P146,026.00, and creditable taxes withheld in 1989 had been
of P54,104.00 or a total tax credit of P200,130.00 allegedly applied Without the tax return, it is error to grant a refund since it would be
and credit balance of P172,477.00. against its 1990 virtually impossible to determine whether the proper taxes have been
GR No.119286 tax due. assessed and paid.
On December 27, 1991 alleging that the prescriptive In case the corporation is entitled to a refund of the excess estimated
period for refunds for 1989 would expire on quarterly income taxes paid, the refundable amount shown on its final
December 30, 1991 and that it was necessary to adjustment return may be credited against the estimated quarterly
interrupt the prescriptive period, petitioner filed income tax liabilities for the taxable quarters of the succeeding year.
with the respondent Court of Tax Appeals a petition
for review praying for the refund of P54,104.00 The carrying forward of any excess or overpaid income tax for a given
representing creditable taxes withheld from income taxable year is limited to the succeeding taxable year only.
payments of petitioner for the calendar year ending
December 31, 1989.
While a taxpayer is given the choice whether to claim for refund or
have its excess taxes applied as tax credit for the succeeding taxable
year, such election is not final.
Prior verification and approval by the Commissioner of Internal
Revenue is required.
The availment of the remedy of tax credit is not absolute and
mandatory.
It does not confer an absolute right on the taxpayer to avail of the tax
credit scheme if it so chooses.
Neither does it impose a duty on the part of the government to sit
back and allow an important facet of tax collection to be at the sole
control and discretion of the taxpayer.
2 Pelizloy Realty Pelizloy owns Palm Grove Resort, which is designed 1. The power to tax "is an attribute of sovereignty," and as such, inheres
Corporation for recreation and which has facilities like swimming in the State.
Whether or not
pools, a spa and function halls.
vs Section 59, Article Such, however, is not true for provinces, cities, municipalities and
X of Provincial Tax barangays as they are not the sovereign; rather, they are mere
Province of Ordinance No. "territorial and political subdivisions of the Republic of the
The Prov.
Benguet Philippines".
05-107, otherwise
Board of the Prov.
known as the
of Benguet approved Prov. Benguet Revenue
GR No. 183137 A municipal corporation unlike a sovereign state is clothed with no
Code of 2005,
Tax Ordinance No. inherent power of taxation.
April 10, 2013 levies a
05-107, otherwise known as the Benguet Revenue percentage tax. The charter or statute must plainly show an intent to confer that
Code of 2005 ("Tax Ordinance"). power or the municipality, cannot assume it.
Section 59, Article X of the Tax Ordinance levied a And the power when granted is to be construed in strictissimi juris.
2.
ten percent (10%) amusement tax on gross receipts
Any doubt or ambiguity arising out of the term used in granting that
from admissions to "resorts, swimming pools, bath Whether or not
power must be resolved against the municipality.
houses, hot springs and tourist spots." provinces are
authorized to Inferences, implications, deductions all these have no place in the
impose interpretation of the taxing power of a municipal corporation.
It was Pelizloy's position that the Tax Ordinance's amusement taxes
imposition of a 10% amusement tax on gross on admission fees
receipts from admission fees for resorts, swimming to resorts, Therefore, the power of a province to tax is limited to the extent that
pools, bath houses, hot springs, and tourist spots is swimming pools, such power is delegated to it either by the Constitution or by statute.
an ultra vires act on the part of the Province of bath houses, hot
springs, and Section 5, Article X of the 1987 Constitution is clear on this point.
Benguet. Thus, it filed an appeal/petition before the
Secretary of Justice on January 27, 2006. tourist spots for
being
"amusement 1.Percentage Tax.
places" under the Supreme Court defined percentage tax as a "tax measured by a certain
Local Government percentage of the gross selling price or gross value in money of goods
Code. sold, bartered or imported; or of the gross receipts or earnings derived
by any person engaged in the sale of services." Also, Republic Act No.
8424, , in Section 125, Title V,lists amusement taxes as among the
(other) percentage taxes which are levied regardless of whether or not
a taxpayer is already liable to pay value-added tax (VAT).
2.
No.
Section 131 (c) of the LGC already provides a clear definition of
amusement places.
Thus, resorts, swimming pools, bath houses, hot springs and tourist
spots do not belong to the same category or class as theaters,
cinemas, concert halls, circuses, and boxing stadia.
It follows that they cannot be considered as among the other places
of amusement contemplated by Section 140 of the LGC and which
may properly be subject to amusement taxes.
3 CIR On November 8, 2001, Revenue District Officer Whether or not Denied due process.
issued a Preliminary 15-day Letter which stated that Metro Star was
vs The Supreme Court has consistently held that while a mailed letter is
a post audit review was held and it was ascertained denied due
deemed received by the addressee in the course of mail, this is merely
that there was deficiency value-added and process.
Metro Star a disputable presumption subject to controversion and a direct denial
withholding taxes due from petitioner in the
Superama Inc. thereof shifts the burden to the party favored by the presumption to
amount of P 292,874.16.
prove that the mailed letter was indeed received by the addressee.
Section 228 of the Tax Code clearly requires that the taxpayer must
Denying that it received a Preliminary Assessment
first be informed that he is liable for deficiency taxes through the
Notice (PAN) and claiming that it was not accorded
sending of a PAN.
due process, Metro Star filed a petition for review
with the CTA. He must be informed of the facts and the law upon which the
assessment is made.
The CIR insisting that Metro Star received the PAN,
dated January 16, 2002, and that due process was The law imposes a substantive, not merely a formal, requirement.
served nonetheless because the latter received the
To proceed heedlessly with tax collection without first establishing a
Final Assessment Notice (FAN).
valid assessment is evidently violative of the cardinal principle in
administrative investigations that taxpayers should be able to
present their case and adduce supporting evidence.
Thus, for its failure to send the PAN stating the facts and the law on
which the assessment was made as required by Section 228 of R.A.
No.
8424, the assessment made by the CIR is void.
5 Pepsi Cola Pepsi Cola has a bottling plant in the Municipality of Whether or not No.
Bottling Tanauan, Leyte. there is undue
It is a power that is purely legislative and which the central legislative
Philippines delegation of
In September 1962, the Municipality approved body cannot delegate either to the executive or judicial department
taxing powers.
Company Ordinance No. of the government without infringing upon the theory of separation
Whether or not of powers.
vs 23 which levies and collects from soft drinks
there is double
producers and manufacturers a tai of one-sixteenth The exception, however, lies in the case of municipal corporations, to
Municipality of taxation.
(1/16) of a centavo for every bottle of soft drink which, said theory does not apply.
Tanuan corked. In December 1962, the Municipality also
Legislative powers may be delegated to local governments in respect
approved Ordinance No.
of matters of local concern.
27 which levies and collects on soft drinks
GR No. L-31156
produced or manufactured within the territorial
February 27, 1976 jurisdiction of this municipality a tax of one centavo Under the New Constitution, local governments are granted the
P0.01) on each gallon of volume capacity. Pepsi autonomous authority to create their own sources of revenue and to
Cola assailed the validity of the ordinances as it levy taxes.
alleged that they constitute double taxation in two
instances: a) double taxation because Ordinance Section 5, Article XI provides: "Each local government unit shall have
No. the power to create its sources of revenue and to levy taxes, subject
to such limitations as may be provided by law." Withal, it cannot be
27 covers the same subject matter and impose said that Section 2 of Republic Act No.
practically the same tax rate as with Ordinance No.
2264 emanated from beyond the sphere of the legislative power to
23, b) double taxation because the two ordinances enact and vest in local governments the power of local taxation.
impose percentage or specific taxes.
Pepsi Cola also questions the constitutionality of
Republic Act 2264 which allows for the delegation The plenary nature of the taxing power thus delegated, contrary to
of taxing powers to local government units; that plaintiff-appellant's pretense, would not suffice to invalidate the said
allowing local governments to tax companies like law as confiscatory and oppressive.
Pepsi Cola is confiscatory and oppressive. In delegating the authority, the State is not limited 6 the exact
measure of that which is exercised by itself.
6 Tio The petitioner assails the validity of PD 1987 Is PD 1987 a valid Yes.
entitled an "Act creating the Videogram Regulatory exercise of taxing
vs A tax does not cease to be valid merely because it regulates,
Board," citing especially Section 10 thereof, which power of the
discourages, or even definitely deters the activities taxed.
imposes a tax of 30% on the gross receipts payable state?
Videogram
to the local government. 8 The power to impose taxes is one so unlimited in force and so
Regulatory
searching in extent, that the courts scarcely venture to declare that it
Board Petitioner contends that aside from its being a rider
is subject to any restrictions whatever, except such as rest in the
and not germane to the subject matter thereof, and
discretion of the authority which exercises it.
such imposition was being harsh, confiscatory,
GR No. 75697 oppressive and/or unlawfully restraints trade in
violation of the due process clause of the
June 19, 1987 Constitution. The levy of the 30% tax is for a public purpose.
It was imposed primarily to answer the need for regulating the video
industry, particularly because of the rampant film piracy, the flagrant
violation of intellectual property rights, and the proliferation of
pornographic video tapes.
And while it was also an objective of the DECREE to protect the movie
industry, the tax remains a valid imposition.
The public purpose of a tax may legally exist even if the motive which
impelled the legislature to impose the tax was to favor one industry
over another.
It is inherent in the power to tax that a state be free to select the
subjects of taxation, and it has been repeatedly held that "inequities
which result from a singling out of one particular class for taxation or
exemption infringe no constitutional limitation".
Taxation has been made the implement of the state's police power.
7 Planters Marcos issued Letter of Instruction (LOI) 1465, WON the LOI is No.
Products Inc. imposing a capital recovery component of Php10.00 constitutional.
per bag of fertilizer.
vs The LOI is still unconstitutional even if enacted under the police
The levy was to continue until adequate capital was
power; it did not promote public interest.
Fertiphil Corp. raised to make PPI financially viable.
Taxes are exacted only for a public purpose.
Fertiphil remitted to the Fertilizer and Pesticide
Authority (FPA), which was then remitted the The P10 levy is unconstitutional because it was not for a public
GR No. 166006 depository bank of PPI. purpose.
March 14, 2008 Fertiphil paid P6,689,144 to FPA from 1985 to 1986. The levy was imposed to give undue benefit to PPI.
An inherent limitation on the power of taxation is public purpose.
After the 1986 Edsa Revolution, FPA voluntarily Taxes are exacted only for a public purpose.
stopped the imposition of the P10 levy.
They cannot be used for purely privatepurposes or for the exclusive
Fertiphil demanded from PPI a refund of the benefit of private persons.
amount it remitted, however PPI refused.
The reason for this is simple.
Fertiphil filed a complaint for collection and
damages, questioning the constitutionality of LOI The power to tax exists for the general welfare; hence, implicit in its
1465, claiming that it was unjust, unreasonable, power is the limitation that it should be used only for a public purpose.
oppressive, invalid and an unlawful imposition that It would be a robbery for the State to tax its citizens and use the funds
amounted to a denial of due process. generated for a private purpose.
PPI argues that Fertiphil has no locus standi to As an old United States case bluntly put it: "To lay with one hand, the
question the constitutionality of LOI No. power of the government on the property of the citizen, and with the
1465 because it does not have a "personal and other to bestow it upon favored individuals to aid private enterprises
substantial interest in the case or will sustain direct and build up private fortunes, is nonetheless a robbery because it is
injury as a result of its enforcement." It asserts that done under the forms of law and is called taxation." The term "public
Fertiphil did not suffer any damage from the purpose" is not defined.
imposition because "incidence of the levy fell on the It is an elastic concept that can be hammered to fit modern standards.
ultimate consumer or the farmers themselves, not
on the seller fertilizer company. Jurisprudence states that "public purpose" should be given a broad
interpretation.
It does not only pertain to those purposes which are traditionally
viewed as essentially government functions, such as building roads
and delivery of basic services, but also includes those purposes
designed to promote social justice.
Thus, public money may now be used for the relocation of illegal
settlers, low-cost housing and urban or agrarian reform.
Police power and the power of taxation are inherent powers of the
State.
8 CIR Central Luzon Drug Corporation is a retailer of Whether or not The Petition is DENIED.
medicines and other pharmaceutical products. the 20% discount
vs granted by Central
For the period January 1995 to December 1995,
Luzon Drug to Sec.
Central Luzon pursuant to the mandate of Section 4(a) of
qualified senior
Corporation citizens pursuant 4(a) of the Senior Citizens Act provides:
Republic Act No.
to Sec.
7432, otherwise known as the Senior Citizens Act, it
GR No. 159647 granted a twenty percent 4(a) of the Senior Sec.
Citizens Act may
April 15, 2005 (20%) discount on the sale of medicines to qualified be claimed as a 4.
senior citizens amounting to P219,778.00. tax credit or as a Privileges for the Senior Citizens.
It then deducted the same amount from its gross deduction from
income for the taxable year 1995, pursuant to gross sales in The senior citizens shall be entitled to the following:
accordance with
Revenue Regulations No. Sec.
2-94 implementing the Senior Citizens Act, which (a) the grant of twenty percent (20%) discount from all
2(1) of Revenue establishments relative to utilization of transportations
states that the discount given to senior citizens shall Regulations No.
be deducted by the establishment from its gross services, hotels and similar lodging establishments,
2-94 restaurants and recreation centers and purchase of
Also, no refund can be granted as no tax was 4 of the Senior Citizens Act because the former provision governs
erroneously, illegally and actually collected. exclusively all kinds of refund or credit of internal revenue taxes that
were erroneously or illegally imposed and collected pursuant to the
Tax Code while the latter extends the tax credit benefit to the private
establishments concerned even before tax payments have been
Furthermore, the law does not state that a refund
made.
can be claimed by the establishment concerned as
an alternative to the tax credit. The tax credit that is contemplated under the Senior Citizens Act is a
form of just compensation, not a remedy for taxes that were
erroneously or illegally assessed and collected.
Central Luzon Drug filed a Petition for Review with
In the same vein, prior payment of any tax liability is not a
the Court of Appeals.
precondition before a taxable entity can benefit from the tax credit.
The appellate court held that the 20% discount
The credit may be availed of upon payment of the tax due, if any.
given to senior citizens which is treated as a tax
credit is considered just compensation and, as such, Where there is no tax liability or where a private establishment
may be carried over to the next taxable period if reports a net loss for the period, the tax credit can be availed of and
there is no current tax liability. carried over to the next taxable year.
9 Carlos Superdrug Petitioners are domestic corporations and Whether or not YES.
Corporation proprietors operating drugstores in the Philippines. RA 9257 is
constitutional
vs Petitioners assail the constitutionality of Section
The law is a legitimate exercise of police power which, similar to the
4(a) of RA 9257, otherwise known as the Expanded
power of eminent domain, has general welfare for its object.
DSWD Senior Citizens Act of 2003. Section 4(a) of RA 9257
grants twenty percent (20%) discount as privileges
for the Senior Citizens.
Accordingly, it has been described as the most essential, insistent and
GR No. 166494 Petitioner contends that said law is unconstitutional the least limitable of powers, extending as it does to all the great
June 29, 2007 because it constitutes deprivation of private public needs. It is the power vested in the legislature by the
property. constitution to make, ordain, and establish all manner of wholesome
and reasonable laws, statutes, and ordinances, either with penalties
or without, not repugnant to the constitution, as they shall judge to
be for the good and welfare of the commonwealth, and of the subjects
of the same.
10 Manila Memorial On April 23, 1992, RA 7432 was passed into law, WHETHER No.
Park, Inc. and La granting senior citizens numerous privileges. SECTION 4 OF
Funeraria Paz- REPUBLIC ACT NO.
Petitioners emphasize that they are not questioning
Sucat, Inc A fair reading of Carlos Superdrug Corporation52 would show that we
the 20% discount granted to senior citizens but are 9257 AND ITS
categorically ruled therein that the 20% discount is a valid exercise of
only assailing the constitutionality of the tax IMPLEMENTING
vs deduction scheme prescribed under RA 9257 and RULES AND
police power.
Secretary of the implementing rules and regulations issued by REGULATIONS, Thus, even if the current law, through its tax deduction scheme (which
DSWD and DOF the DSWD and the DOF. INSOFAR AS THEY abandoned the tax credit scheme under the previous law), does not
PROVIDE THAT provide for a peso for peso reimbursement of the 20% discount given
Petitioners posit that the tax deduction scheme
THE TWENTY by private establishments, no constitutional infirmity obtains because,
contravenes Article III, Section 9 of the Constitution,
PERCENT (20%) being a valid exercise of police power, payment of just compensation
GR No. 175356 which provides that: "[p]rivate property shall not be
DISCOUNT TO is not warranted.
taken for public use without just compensation." In
December 3, 2013 SENIOR CITIZENS
support of their position, petitioners cite Central In the exercise of police power (as distinguished from eminent
MAY BE CLAIMED
Luzon Drug Corporation, where it was ruled that the domain), although the regulation affects the right of ownership, none
AS A TAX
20% discount privilege constitutes taking of private of the bundle of rights which constitute ownership is appropriated for
DEDUCTION BY
property for public use which requires the payment use by or for the benefit of the public.
THE PRIVATE
of just compensation, and Carlos Superdrug
ESTABLISHMENTS,
Corporation v.
ARE INVALID AND
Department of Social Welfare and Development, UNCONSTITUTION On the other hand, in the exercise of the power of eminent domain,
where it was acknowledged that the tax deduction AL. property interests are appropriated and applied to some public
scheme does not meet the definition of just purpose which necessitates the payment of just compensation
compensation. therefor.
They assert that "[a]lthough both police power and Normally, the title to and possession of the property are transferred
the power of eminent domain have the general to the expropriating authority.
welfare for their object, there are still traditional Examples include the acquisition of lands for the construction of
distinctions between the two" and that "eminent public highways as well as agricultural lands acquired by the
domain cannot be made less supreme than police government under the agrarian reform law for redistribution to
power." qualified farmer beneficiaries.
We now look at the nature and effects of the 20% discount to
Respondents, maintain that the tax deduction determine if it constitutes an exercise of police power or eminent
scheme is a legitimate exercise of the States police domain.
power. The 20% discount is intended to improve the welfare of senior citizens
who, at their age, are less likely to be gainfully employed, more prone
to illnesses and other disabilities, and, thus, in need of subsidy in
purchasing basic commodities.
It may not be amiss to mention also that the discount serves to honor
senior citizens who presumably spent the productive years of their
lives on contributing to the development and progress of the nation.
As to its nature and effects, the 20% discount is a regulation affecting
the ability of private establishments to price their products and
services relative to a special class of individuals, senior citizens, for
1 Pascual A law was enacted in 1953 containing a provision for Is the No.
the construction, reconstruction, repair, extension appropriation
vs The appropriation of amount for the construction on a land owned by
and improvement of Pasig feeder road terminals valid?
private individual is invalid imposition since it results in the promotion
within Antonio Subdivision owned by Senator Jose
Secretary of of private enterprise; it benefits the property of a particular
C.
Public Works, et. individual.
al. Zulueta.
The provision that the land thereafter be donated to the government
Zulueta donated said parcels of land to the does not cure this defect.
Government 5 months after the enactment of the
G.R. No. L-10405. The rule is that if the public advantage or benefit is merely incidental
law, on the condition that if the Government
in the promotion of a particular enterprise, such defect shall render
violates such condition the lands would revert to
the law invalid.
Zulueta.
On the other hand, if what is incidental is the promotion of a private
The provincial governor of Rizal, Wenceslao Pascual,
enterprise, the tax law shall be deemed for public purpose.
questioned the validity of the donation and the
Constitutionality of the particular provision, it being
an appropriation not for a public purpose.
2 Lutz The Sugar Adjustment Act was passed which Whether or not The Sugar Adjustment Act was regulatory and primarily an exercise of
provided, among others, for an increase of the the tax imposed is police power.
vs existing tax on the manufacture of sugar and levy on constitutional.
Sugar Industrys promotion, protection and advancement greatly
owners or persons in control of lands devoted to the
Araneta, et. al. redound to the general welfare.
cultivation of sugar cane and ceded to others for a
consideration on lease or otherwise. Hence, it was competent for legislature to find that the general
welfare demanded for the stabilization of the sugar industry.
G.R. No. L-7859,
November 22, All collections made shall accrue to a special fund
1955. named SUGAR ADJUSTMENT AND STABILIZATION It is inherent in the power to tax that a state be free to select the
FUND. This whole law was enacted with a subjects of taxation, and it has been repeatedly held that inequalities
declaration of emergency due to the imminent which result from the singling out of one particular class for taxation
imposition of export taxes upon sugar as provided or exemption infringe no constitutional limitation.
under the Tydings-Mcduffie Act.
The funds raised under the Act should be exclusively spent in aid of
Lutz, the judicial administrator of the estate of one the sugar industry, since it is that very enterprise that is being
Antonio Ledesma, which was taxed by the protected.
Commissioner on Internal Revenue, questioned the
constitutionality of said act contending that it is for It may be that other industries are also in need of similar protection;
the aid and support of the sugar industry but the legislature is not required by the Constitution to adhere to a
exclusively, which is not for a public purpose. policy of all or none.
3 Caltex On February 2, 1989, the Commission on Audit Whether or not YES, OPSF are for non-revenue purposes and is in the nature of taxes.
(COA) sent a letter to Caltex requesting the latter to OPSF
vs remit its tax contributions amounting to contributions are
P335,037,649 to Oil Price Stabilization Fund (OPSF) for non-revenue The Supreme Court found no merit in petitioner's contention that the
Commission on
pursuant to Section 8 of P.D. No.1956. purposes of the OPSF contributions are not for a public purpose because they go to a
Audit government and it special fund of the government.
Another letter was sent to the petitioner, stating
is still in the form
that the total amount of its unremitted tax was Taxation is no longer envisioned as a measure merely to raise revenue
of taxation.
G.R. No. 92585 P1,287,668,820.00 from 1986-1988 as verified by to support the existence of the government; taxes may be levied with
the Office of Energy Affairs (OEA). a regulatory purpose to provide means for the rehabilitation and
May 8, 1992. stabilization of a threatened industry which is affected with public
interest as to be within the police power of the state.
Denying such request, Caltex answered to COAs
There can be no doubt that the oil industry is greatly imbued with
letters asking OEA for early release of
public interest as it vitally affects the general welfare.
reimbursement certificates from OPSF.
Any unregulated increase in oil prices could hurt the lives of a majority
COA denied petitioners request but instead asked
of the people and cause economic crisis of untold proportions.
Caltex to remit its collection.
It would have a chain reaction in terms of, among others, demands
As a reply, Caltex gave a proposal for its payment
for wage increases and upward spiralling of the cost of basic
based on PD 1956, as amended by E.O 137;
commodities.
Department of Finance Circular No.
The stabilization then of oil prices is of prime concern which the state,
1-87; the New Civil Code as to compensation; and
via its police power, may properly address.
the Revised Administrative Code.
Also, P.D.
COA accepted the proposal except those matters
involving offsetting the remittances and No.
reimbursements.
1956, as amended by E.O.
No.
Pursuant to such agreement, COA informed OEA as
to Caltexs remittances amounting to P1, 137, explicitly provides that the source of OPSF is taxation.
505,668,906 to OPSF and allowing OEA to reimburse No amount of semantical juggleries could dim this fact.
Caltex the amount of P1, 959,182,612.
Caltex, however, disagreed with such arrangement.
Caltex thereby insisted that its remittances and
reimbursements must be offset. But COA
disregarded such contention holding as a basis the
case of Francia vs.
IAC and Fernandez, arguing that OPSF is not in the
form of taxation, therefore not for revenue
purposes.
4 Lozada Petitioner Lozada claims that he is a taxpayer and a Whether or not As taxpayers, petitioners may not file the instant petition, for
bonafide elector of Cebu City and a transient voter petitioners lack nowhere therein is it alleged that tax money is being illegally spent.
vs of Quezon City, Metro Manila, who desires to run standing to file the
The act complained of is the inaction of the COMELEC to call a special
for the position in the Batasan Pambansa; while instant petition for
Commission on election, as is allegedly its ministerial duty under the constitutional
petitioner Romeo B. they are not the
Elections provision above cited, and therefore, involves no expenditure of
proper parties to
Igot alleges that, as a taxpayer, he has standing to public funds.
institute the
petition by mandamus the calling of a special
action. It is only when an act complained of, which may include a legislative
G.R. No. L-59068 election as mandated by the 1973 Constitution.
enactment or statute, involves the illegal expenditure of public money
January 27, 1983. As reason for their petition, petitioners allege that that the so-called taxpayer suit may be allowed.
they are "...
What the case at bar seeks is one that entails expenditure of public
deeply concerned about their duties as citizens and funds which may be illegal because it would be spent for a purpose
desirous to uphold the constitutional mandate and that of calling a special election which, as will be shown, has no
rule of law ...; that they have filed the instant authority either in the Constitution or a statute.
petition on their own and in behalf of all other
Filipinos since the subject matters are of profound
and general interest. As voters, neither have petitioners the requisite interest or
personality to qualify them to maintain and prosecute the present
petition.
The respondent COMELEC, represented by counsel,
The unchallenged rule is that the person who impugns the validity of
opposes the petition alleging, substantially, that 1)
a statute must have a personal and substantial interest in the case
petitioners lack standing to file the instant petition
such that he has sustained, or will sustain, direct injury as a result of
for they are not the proper parties to institute the
its enforcement.
action; 2) this Court has no jurisdiction to entertain
this petition; and 3) Section 5(2), Article VIII of the In the case before Us, the alleged inaction of the COMELEC to call a
1973 Constitution does not apply to the Interim special election to fill-up the existing vacancies in the Batasan
Batasan Pambansa. Pambansa, standing alone, would adversely affect only the
generalized interest of all citizens.
Petitioners' standing to sue may not be predicated upon an interest
of the kind alleged here, which is held in common by all members of
the public because of the necessarily abstract nature of the injury
supposedly shared by all citizens.
Concrete injury, whether actual or threatened, is that indispensable
element of a dispute which serves in part to cast it in a form
traditionally capable of judicial resolution.
When the asserted harm is a "generalized grievance" shared in
substantially equal measure by all or a large class of citizens, that
harm alone normally does not warrant exercise of jurisdiction.
As adverted to earlier, petitioners have not demonstrated any
permissible personal stake, for petitioner Lozadas interest as an
alleged candidate and as a voter are not sufficient to confer standing.
5 National The President issued Proclamation no. Whether or not While it might be stated that the Republic owns NDC, it does not
Development the properties of necessarily follow that the properties owned by NDC are also owned
430 reserving Block no.
Company NDC, namely the by the Republic.
4, Reclamation Area no. land and
vs warehouse, are
4 for warehousing purposes under the tax-exempt. Tax exemption of property owned by the Republic refers to properties
Cebu City, et. al. administration of the National Warehousing
owned by the Government and by its agencies which do not have
Corporation (NWC), which was later on dissolved
separate and distinct personalities (unincorporated entities).
and was taken over by the National Development
G.R. No. 51593 Company (NDC). Once government ownership is determined, the nature of the use of
the property, whether proprietary or for sovereign purposes, is
November 5, 1992. Cebu assessed and collected real estate taxes on the
immaterial.
land and warehouse where NDC paid under protest,
claiming that the land and warehouse were owned What appears to be ceded to NWC is merely the administration of the
by the Republic and therefore, exempt from property while the Government retains ownership of what has been
taxation. declared reserved for warehousing purposes under Proclamation no.
430.
6 Arturo M. Herein various petitioners seek to declare RA 7166 Whether or not RA No, there is no justification for passing upon the claims that the law
Tolentino, as unconstitutional as it seeks to widen the tax base 7166 violates the also violates the rule that taxation must be progressive and that it
of the existing VAT system and enhance its principle of denies petitioners' right to due process and that equal protection of
vs administration by amending the National Internal progressive system the laws.
Revenue Code. of taxation.
The Secretary of The reason for this different treatment has been cogently stated by
Finance and The The value-added tax (VAT) is levied on the sale, an eminent authority on constitutional law thus: "When freedom of
Commissioner of barter or exchange of goods and properties as well the mind is imperiled by law, it is freedom that commands a
Internal Revenue as on the sale or exchange of services. momentum of respect; when property is imperiled it is the
lawmakers' judgment that commands respect.
It is equivalent to 10% of the gross selling price or
gross value in money of goods or properties sold, This dual standard may not precisely reverse the presumption of
G.R. No. 115455 bartered or exchanged or of the gross receipts from constitutionality in civil liberties cases, but obviously it does set up a
the sale or exchange of services. hierarchy of values within the due process clause."
August 25, 1994.
CREBA asserts that R.A. Petitioners contend that as a result of the uniform 10% VAT, the tax
on consumption goods of those who are in the higher-income bracket,
No.
which before were taxed at a rate higher than 10%, has been reduced,
7716 (1) impairs the obligations of contracts, (2) while basic commodities, which before were taxed at rates ranging
classifies transactions as covered or exempt without from 3% to 5%, are now taxed at a higher rate.
reasonable basis and (3) violates the rule that taxes
should be uniform and equitable and that Congress
shall "evolve a progressive system of taxation." Just as vigorously as it is asserted that the law is regressive, the
opposite claim is pressed by respondents that in fact it distributes the
tax burden to as many goods and services as possible particularly to
With respect to the first contention, it is claimed those which are within the reach of higher-income groups, even as
that the application of the tax to existing contracts the law exempts basic goods and services.
of the sale of real property by installment or on
It is thus equitable.
deferred payment basis would result in substantial
increases in the monthly amortizations to be paid The goods and properties subject to the VAT are those used or
because of the 10% VAT. consumed by higher-income groups.
The additional amount, it is pointed out, is These include real properties held primarily for sale to customers or
something that the buyer did not anticipate at the held for lease in the ordinary course of business, the right or privilege
time he entered into the contract. to use industrial, commercial or scientific equipment, hotels,
restaurants and similar places, tourist buses, and the like.
On the other hand, small business establishments, with annual gross
It is next pointed out that while Section 4 of R.A.
sales of less than P500,000, are exempted.
No.
This, according to respondents, removes from the coverage of the law
7716 exempts such transactions as the sale of some 30,000 business establishments.
agricultural products, food items, petroleum, and
On the other hand, an occasional paper of the Center for Research
medical and veterinary services, it grants no
and Communication cities a NEDA study that the VAT has minimal
exemption on the sale of real property which is
impact on inflation and income distribution and that while additional
equally essential.
7 Herrera In 1952, the Director of the Bureau of Hospitals Whether St. The admission of pay-patients does not detract from the charitable
authorized Jose V. character of a hospital, if all its funds are devoted exclusively to the
vs Catherines
maintenance of the institution as a public charity.
Herrera and Ester Ochangco Herrera to establish Hospital is exempt
Quezon City and operate the St. from realty tax. The exemption in favor of property used exclusively for charitable or
Board educational purpose is not limited to property actually indispensable
Catherines Hospital.
Assessment therefore, but extends to facilities which are incidental to and
Appeals In 1953, the Herreras sent a letter to the Quezon reasonably necessary for the accomplishment of said purpose, such
City Assessor requesting exemption from payment as in the case of hospitals -- a school for training nurses; a nurses
of real estate tax on the hospital, stating that the home; property used to provide housing facilities for interns, resident
same was established for charitable and doctors, superintendents and other members of the hospital staff;
G.R. No. L-1527
humanitarian purposes and not for commercial and recreational facilities for student nurses, interns and residents.
gain.
Within the purview of the Constitution, St.
The exemption wasgranted effective years 1953 to
Catherines Hospital is a charitable institution exempt from taxation.
1955.
8 Philippine Lung Lung Center of the Philippines is a non-stock and Is the Lung Center The Lung Center of the Philippines is a charitable institution.
Center non-profit entity established by virtue of PD No. of the Philippines
To determine whether an enterprise is a charitable institution or not,
a charitable
vs 1823. the elements which should be considered include the statute creating
institution within
the enterprise, its corporate purposes, its constitution and by-laws,
It is the registered owner of the land on which the the context of the
Quezon City the methods of administration, the nature of the actual work
Lung Center of the Philippines Hospital is erected. Constitution, and
performed, that character of the services rendered, the indefiniteness
therefore, exempt
A big space in the ground floor of the hospital is of the beneficiaries and the use and occupation of the properties.
from real property
G.R. No. 144104. being leased to private parties, for canteen and tax? However, under the Constitution, in order to be entitled to exemption
small store spaces, and to medical or professional
from real property tax, there must be clear and unequivocal proof
practitioners who use the same as their private
that (1) it is a charitable institution and (2)its real properties are
clinics.
ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes.
Also, a big portion on the right side of the hospital is
While portions of the hospital are used for treatment of patients and
being leased for commercial purposes to a private
the dispensation of medical services to them, whether paying or non-
enterprise known as the Elliptical Orchids and
paying, other portions thereof are being leased to private individuals
Garden Center.
and enterprises.
When the City Assessor of Quezon City assessed
Exclusive is defined as possessed and enjoyed to the exclusion of
both its land and hospital building for real property
others, debarred from participation or enjoyment.
taxes, the Lung Center of the Philippines filed a
claim for exemption on its averment that it is a If real property is used for one or more commercial purposes, it is not
charitable institution with a minimum of 60% of its exclusively used for the exempted purposes but is subject to taxation.
hospital beds exclusively used for charity patients
and that the major thrust of its hospital operation is
to serve charity patients.
The claim for exemption was denied, prompting a
petition for the reversal of the resolution of the City
Assessor with the Local Board of Assessment
Appeals of Quezon City, which denied the same.
On appeal, the Central Board of Assessment
Appeals of Quezon City affirmed the local boards
decision, finding that Lung Center of the Philippines
is not a charitable institution and that its properties
were not actually, directly and exclusively used for
charitable purposes.
Hence, the present petition for review with
averments that the Lung Center of the Philippines is
a charitable institution under Section 28(3), Article
VI of the Constitution, notwithstanding that it
accepts paying patients and rents out portions of
the hospital building to private individuals and
enterprises.
9 Abra Valley Abra Valley, an educational corporation and The proper Constitutional provision Section 22, paragraph 3, Article VI, of the
College, Inc. institution of higher learning duly incorporated with interpretation of then 1935 Philippine Constitution, expressly grants exemption from
the SEC was assessed with payment of real estate the phrase used realty taxes for "Cemeteries, churches and parsonages or convents
vs. tax for their schools lot and building. exclusively for appurtenant thereto, and all lands, buildings, and improvements used
educational exclusively for religious, charitable or educational purposes.
Aquino Abra Valley failed to pay so a notice of seizure of the
purposes.
property was made. The phrase "exclusively used for educational purposes" was clarified
in the cases of Herrera vs.
The school is offering primary, high school, college
G.R. No. L-39086 courses and has a population of more than 1000 Quezon City Board of assessment Appeals, where such means not
June 15, 1988. students. limited to property actually indispensable' therefor but extends to
facilities which are incidental to and reasonably necessary for the
The elementary students are housed in a two-storey
accomplishment of said purposes, such as in the case of hospitals, "a
building across the street, while the highschool and
school for training nurses, a nurses' home, property use to provide
college students are housed in the main building.
housing facilities for interns, resident doctors, superintendents, and
The director with his family is in the second floor of other members of the hospital staff, and recreational facilities for
the main building. student nurses, interns, and residents'.
Also, the ground floor of the college building is used The test of exemption from taxation is the use of the property for
and rented by a commercial establishment, the purposes mentioned in the Constitution.
Northern Marketing Corporation.
It must be stressed however, that while this Court allows a more
Abra Valleys contention is that the primary use of liberal and non-restrictive interpretation of the phrase "exclusively
the lot and building for educational purposes and used for educational purposes", reasonable emphasis has always
not the incidental use thereof determines been made that exemption extends to facilities which are incidental
exemption from property taxes under Sec22 Art6 to and reasonably necessary for the accomplishment of the main
1935Consitution. purposes.
Thus the assessment of tax for the real property tax Otherwise stated, the use of the school building or lot for commercial
by respond is without basis. purposes is neither contemplated by law, nor by jurisprudence.
Thus, while the use of the second floor of the main building in the case
at bar for residential purposes of the Director and his family, may find
justification under the concept of incidental use, which is
complimentary to the main or primary purposeeducational, the
lease of the first floor thereof to the Northern Marketing Corporation
cannot by any stretch of the imagination be considered incidental to
the purpose of education.
10 City Assessor of Respondent Association of Benevola de Cebu, Inc. Whether or not Yes.
Cebu City the medical arts
is a non-stock, non-profit organization and is the The CHH Medical Arts Center (CHHMAC) is an integral part of CHH.
center built by
vs owner of Chong Hua Hospital (CHH) in Cebu City.
Chong Hua It is definitely incidental to and reasonably necessary for the
In the late 1990s, respondent constructed the CHH Hospital to house operations of Chong Hua Hospital.
Association of
Medical Arts Center (CHHMAC). its doctors a
Benevola de separate
Cebu commercial It is undisputed that the doctors and medical specialists holding clinics
Petitioner City Assessor of Cebu City assessed the establishment or in CHHMAC are those duly accredited by CHH, that is, they are
CHHMAC building as commercial at the an appurtenant to consultants of the hospital and the ones who can treat CHHs patients
G.R. No. 152904 assessment level of 35% for commercial buildings, the hospital. confined in it.
June 8, 2007 and not at the 10% special assessment currently
This fact alone takes away CHHMAC from being categorized as
imposed for CHH and its other separate buildings
commercial since a tertiary hospital like CHH is required by law to
the CHHs Dietary and Records Departments.
have a pool of physicians who comprises the required medical
He further ascertained that it is not a part of the departments in various medical fields.
CHH building but a separate building which is
actually used as commercial clinic/room spaces for
renting out to physicians and, thus, classified as The fact that the physicians are holding office in a separate building
commercial. does not take away the essence and nature of their services vis--vis
the over-all operation of the hospital and the benefits to the hospitals
On the other hand, respondent contended that
patients.
CHHMAC building is actually, directly, and
exclusively part of CHH and should have a special Their transfer to a more spacious and, perhaps, convenient place and
assessment level of 10% as provided under City Tax location for the benefit of the hospitals patients does not remove
Ordinance LXX. them from being an integral part of the overall operation of the
hospital.
Respondent asserted that the CHHMAC building is
similarly situated as the buildings of CHH, housing
its Dietary and Records Departments, are
completely separate from the main CHH building Respondents charge of rentals for the offices and clinics its accredited
and are imposed the 10% special assessment level. physicians occupy cannot be equated to a commercial venture, which
is mainly for profit.
In fine, respondent argued that the CHHMAC,
though not actually indispensable, is nonetheless
incidental and reasonably necessary to CHHs First, CHHMAC is only for its consultants or accredited doctors and
operations. medical specialists.
Second, the charging of rentals is a practical necessity: (1) to recoup
the investment cost of the building, (2) to cover the rentals for the lot
CHHMAC is built on, and (3) to maintain the CHHMAC building and its
facilities.
Third, as correctly pointed out by respondent, it pays the proper taxes
for its rental income.
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.
12 Chamber of Real Petitioner Chamber of Real Estate and Builders (1) Is the : (1) Yes.
Estate and Associations, Inc. imposition of MCIT
The imposition of the MCIT is constitutional.
Builders constitutional? (2)
(CREBA), an association of real estate developers
Is the imposition An income tax is arbitrary and confiscatory if it taxes capital, because
Associations Inc. and builders in the Philippines, questioned the
of CWT on income it is income, and not capital, which is subject to income tax.
validity of Section 27(E) of the Tax Code which
vs from sales of real
imposes the minimum corporate income tax (MCIT) However, MCIT is imposed on gross income which is computed by
properties
Romulo, et. al. on corporations. deducting from gross sales the capital spent by a corporation in the
classified as
ordinary assets sale of its goods, i.e., the cost of goods and other direct expenses from
constitutional? gross sales.
G.R. No. 160756 Under the Tax Code, a corporation can become
Clearly, the capital is not being taxed.
subject to the MCIT at the rate of 2% of gross
March 9, 2010. income, beginning on the 4th taxable year
immediately following the year in which it
commenced its business operations, when such Various safeguards were incorporated into the law imposing MCIT.
MCIT is greater than the normal corporate income
tax.
Firstly, recognizing the birth pangs of businesses and the reality of the
If the regular income tax is higher than the MCIT, the need to recoup initial major capital expenditures, the MCIT is imposed
corporation does not pay the MCIT. only on the 4th taxable year immediately following the year in which
the corporation commenced its operations.
CREBA also sought to invalidate the provisions of RR Thirdly, since certain businesses may be incurring genuine repeated
No. losses, the law authorizes the Secretary of Finance to suspend the
2-98, as amended, otherwise known as the imposition of MCIT if a corporation suffers losses due to prolonged
Consolidated Withholding Tax Regulations, which labor dispute, force majeure and legitimate business reverses.
prescribe the rules and procedures for the
collection of CWT on sales of real properties
classified as ordinary assets, on the grounds that (2) Yes.
these regulations: Despite the imposition of CWT on GSP or FMV, the income tax base
for sales of real property classified as ordinary assets remains as the
entitys net taxable income as provided in the Tax Code, i.e., gross
Use gross selling price (GSP) or fair market income less allowable costs and deductions.
value (FMV) as basis for determining
The seller shall file its income tax return and credit the taxes withheld
the income tax on the sale of real estate classified by the withholding agent-buyer against its tax due.
as ordinary assets, instead of the entitys net taxable
income as provided for under the Tax Code; If the tax due is greater than the tax withheld, then the taxpayer shall
pay the difference.
13 People Cayat was a native of Baguio, Benguet, Mountain Whether or not No.
Province. the said Act is
vs As early as 1551, the Spanish Government had assumed a solicitous
violative of the
He was accused for violating Act No. attitude toward these inhabitants.
equal protection
Cayat
1639 which declared unlawful for any native of the clause of the It had been regarded by the Spanish Government as a sacred "duty to
Philippine islands who is a member of a non- constitution. conscience and humanity" to civilize these less fortunate people living
Christian Tribe to have in his possession, drink any "in the obscurity of ignorance" and to accord them the "the moral and
G.R. No. L-45987
beer, wine or intoxicating liquors of any kind, other material advantages" of community life and the "protection and
than the so-called native wines and liquors which vigilance afforded them by the same laws." Constant and active effort
the members of the tribes have been accustomed. had been exercised to prevent barbarous practices and introduce
civilized customs.
It was alleged that Cayat had received, acquired and
had in his possession and control, one bottle of gin Guaranty of the equal protection of the laws is not equal protection
which is an intoxicating liquor other than the so- of the laws is not violated by a legislation based on reasonable
called native wines and liquors which the member classification.
of such tribe have been accustomed to.
And the classification, to be reasonable, (1) must rest on substantial
Cayat was found guilty of such. distinctions; (2) must be germane to the purposes of the law; (3) must
not be limited to existing conditions only; and (4) must apply equally
Accused challenged the constitutionality of the Act.
to all members of the same class.
One of the grounds was that the said act is
Act No.
discriminatory and denies the equal protection
laws. 1639 satisfies these requirements.
The classification rests on real and substantial, not merely imaginary
or whimsical, distinctions.
It is based upon the degree of civilization and culture.
"The term 'non-Christian tribes' refers, not to religious belief, but, in
a way, to the geographical area, and, more directly, to natives of the
Philippine Islands of a low grade of civilization, usually living in tribal
relationship apart from settled communities."
14 Ormoc Sugar In 1964, Ormoc City passed a bill which read: There Whether or not The SC held in favor of Ormoc Sugar.
Company shall be paid to the City Treasurer on any and all constitutional
It ruled that the equal protection clause applies only to persons or
productions of centrifugal sugar milled at the Ormoc limits on the
vs things identically situated and does not bar a reasonable classification
Sugar Company Incorporated, in Ormoc City a power of taxation,
of the subject of legislation, and a classification is reasonable where
municipal tax equivalent to one per centum (1%) specifically the
Conejos, et. al. (1) it is based on substantial distinctions which make real differences;
per export sale to the United States of America and equal protection
(2) these are germane to the purpose of the law; (3) the classification
other foreign countries. Though referred to as a clause and rule of
applies not only to present conditions but also to future conditions
production tax, the imposition actually amounts uniformity of
G.R. No. L-23794 which are substantially identical to those of the present; (4) the
to a tax on the export of centrifugal sugar produced taxation, were
classification applies only to those who belong to the same class.
February 17, 1968 at Ormoc Sugar Company, Inc. infringed.
For production of sugar alone is not taxable; the
only time the tax applies is when the sugar Though Ormoc Sugar Company Inc.
produced is exported.
is the only sugar central in the city of Ormoc at the time, the
Ormoc Sugar paid the tax (P7,087.50) in protest classification, to be reasonable, should be in terms applicable to
averring that the same is violative of Sec 2287 of the future conditions as well.
Revised Administrative Code which provides: It
shall not be in the power of the municipal council to Said ordinance shoouldnt be singular and exclusive as to exclude any
impose a tax in any form whatever, upon goods and subsequently established sugar central, of the same class as plaintiff,
merchandise carried into the municipality, or out of for coverage of the tax.
the same, and any attempt to impose an import or
export tax upon such goods in the guise of an
unreasonable charge for wharfage, use of bridges or
otherwise, shall be void. And that the ordinance is
violative to equal protection as it singled out Ormoc
Sugar As being liable for such tax impost for no
other sugar mill is found in the city.
15 Tiu Congress, with the approval of the President, Whether the No.
passed into law RA 7227 entitled "An Act provisions of
vs The Court found real and substantive distinctions between the
Accelerating the Conversion of Military Executive Order
circumstances obtaining inside and those outside the Subic Naval
Reservations Into Other Productive Uses, Creating No.
Court of Appeals Base, thereby justifying a valid and reasonable classification.
the Bases Conversion and Development Authority
97-A confining the
for this Purpose, Providing Funds Therefor and for The fundamental right of equal protection of the laws is not absolute,
application of R.A.
Other Purposes." Section 12 thereof created the but is subject to reasonable classification.
G.R. No. 127410 Subic Special Economic Zone and granted there to 7227 within the
special privileges. If the groupings are characterized by substantial distinctions that
January 20, 1999 secured area and
make real differences, one class may be treated and regulated
excluding the
President Ramos issued Executive Order No. differently from another.
residents of the
97, clarifying the application of the tax and duty zone outside of The classification must also be germane to the purpose of the law and
incentives. the secured area is must apply to all those belonging to the same class.
discriminatory or
The President issued Executive Order No. Classification, to be valid, must (1) rest on substantial distinctions, (2)
not owing to a
violation of the be germane to the purpose of the law, (3) not be limited to existing
97-A, specifying the area within which the tax-and-
equal protection conditions only, and (4) apply equally to all members of the same
duty-free privilege was operative.
clause. class.
The Supreme Court believed it was reasonable for the President to
Petitioners challenged the constitutionality of EO have delimited the application of some incentives to the confines of
97-A for allegedly being violative of their right to the former Subic military base.
equal protection of the laws.
This was due to the limitation of tax incentives to
RA 7227 aims primarily to accelerate the conversion of military
Subic and not to the entire area of Olongapo.
reservations into productive uses.
The case was referred to the Court of Appeals.
This was really limited to the military bases as the law's intent
The appellate court concluded that such being the provides.
case, petitioners could not claim that EO 97-A is
Moreover, the law tasked the BCDA to specifically develop the areas
unconstitutional, while at the same time
the bases occupied.
maintaining the validity of RA 7227.
Even more important, at this time the business activities outside the
Respondent Court held that "there is no substantial
"secured area" are not likely to have any impact in achieving the
difference between the provisions of EO 97-A and
purpose of the law, which is to turn the former military base to
Section 12 of RA 7227.
productive use for the benefit of the Philippine economy.
In both, the 'Secured Area' is precise and well-
Hence, there was no reasonable basis to extend the tax incentives in
defined as '.
RA 7227.
1 VICENTE M and P were legally married prior to January 1, What is the The Income Tax Law of the United States in force in the Philippine
MADRIGAL and 1914. meaning of Islands has selected income as the test of faculty in taxation.
his wife, SUSANA income?
The marriage was contracted under the The aim has been to mitigate the evils arising from the inequalities
PATERNO, provisions concerning conjugal partnerships. of wealth by a progressive scheme of taxation, which places the
burden on those best able to pay.
vs The claim is submitted that the income shown on
the form presented for 1914 was in fact the To carry out this idea, public considerations have demanded an
JAMES J. income of the conjugal partnership existing exemption roughly equivalent to the minimum of subsistence.
RAFFERTY between M and P, and that in computing and
With these exceptions, the Income Tax Law is supposed to reach the
assessing the additional income tax, the income
earnings of the entire non-governmental property of the country.
declared by M should be divided into two equal
38 Phil 415 parts, one-half to be considered the income of M
and the other half the income of P.
Income as contrasted with capital or property is to be the test.
The essential difference between capital and income is that capital
is a fund; income is a flow.
Capital is wealth, while income is the service of wealth.
"The fact is that property is a tree, income is the fruit; labor is a tree,
income the fruit; capital is a tree, income the fruit." (Waring vs.
City of Savannah [1878], 60 Ga., 93.)
2 FREDERICK C. Philippine American Drug Company was a Are the "stock A dividend is defined as a corporate profit set aside, declared, and
FISHER corporation duly organized and existing under the dividends" in the ordered by the directors to be paid to the stockholders on demand
laws of the Philippine Islands, doing business in the present case or at a fixed time.
vs City of Manila; that he appellant was a stockholder "income" and
Until the dividend is declared, the corporate profits belong to the
in said corporation; that said corporation, as result taxable as such
WENCESLAO corporation and not to the stockholders, and are liable for the
of the business for that year, declared a "stock under the
TRINIDAD, payment of the debts of the corporation.
dividend"; that the proportionate share of said provisions of
Collector of stock divided of the appellant was P24,800; that section 25 of Act
Internal Revenue the stock dividend for that amount was issued to No. 2833?
the appellant; that thereafter, in the month of When a cash dividend is declared and paid to the stock holders, such
March, 1920, the appellant, upon demand of the cash dividend is declared and paid to the stockholder, such cash
appellee, paid under protest, and voluntarily, unto becomes the absolute property of the stockholder and cannot be
48 Phil 415
the appellee the sum of P889.91 as income tax on reached by the creditors of the corporation in the absence of fraud.
said stock dividend. A stock dividend, however, still being the property of the
For the recovery of that sum (P889.91) the present corporation, and not of the stockholder, it may be reached by an
action was instituted. execution against the corporation, and sold as a part of the property
of the corporation.
3 CONWI The dollar earnings of petitioners are the fruits of Are the Income may be defined as an amount of money coming to a person or
their labors in the foreign subsidiaries of Procter & petitioners corporation within a specified time, whether as payment for services,
vs Gamble. income earned interest or profit from investment.
outside the
CTA It was a definite amount of money which came to Unless otherwise specified, it means cash or its equivalent.
Philippines
them within a specified period of time of two years
exempt from Income can also be thought of as a flow of the fruits of one's labor.
as payment for their services.
income tax? Does
213 SCRA 83 the Sec. of Finance
Petitioners argue that since there were no
remittances and acceptances of their salaries and possess the power Petitioners forget that they are citizens of the Philippines,
wages in US dollars into the Philippines, they are to promulgate the and their income, within or without, and in these cases
exempt from the coverage of RMC 7-71,41-71. circulars in wholly without, are subject to income tax.
question?
The fact still remains that "taxes are the lifeblood of the
government" and one of the duties of a Filipino citizen is to
pay his income tax.
4 CIR BOAC, A RESIDENT FOREIGN CORPORATION, Did such "flow of The source of an income is the property, activity or service that
impress on the Court that income derived from wealth" come produced the income.
vs transportation is income for services, with the from "sources
For the source of income to be considered as coming from the
result that the place where the services are within the
BOAC Philippines, it is sufficient that the income is derived from activity
rendered determines the source; and since BOAC's Philippines"?
within the Philippines.
service of transportation is performed outside the
Philippines, the income derived is from sources In BOAC's case, the sale of tickets in the Philippines is the activity that
149 SCRA 395 without the Philippines and, therefore, not taxable produces the income.
under our income tax laws.
The tickets exchanged hands here and payments for fares were also
made here in Philippine currency.
The situs of the source of payments is the Philippines.
The flow of wealth proceeded from, and occurred within, Philippine
territory, enjoying the protection accorded by the Philippine
government.
In consideration of such protection, the flow of wealth should share
the burden of supporting the government.
6 BAIER-NICKEL This is actually a Minute Resolution dated February WON the sales The fact that recipient of commission income is President
17, 2003, where the SC sustained the ruling of the commission is and majority stockholder of the Philippine company does
vs Court of Appeals that Baier-Nickel is entitled to taxable in the not alter the source of income.
refund the sum withheld from her sales Philippines?
CIR There are only two ways by which the President and other
commission income for the year 1994
members of the Board can be granted compensation apart
from reasonable per diems: (1) when there is a provision in
GR 156305 the by-laws fixing their compensation; and (2) when the
stockholders agree to give it to them.
FEBRUARY 17, 2003
If none of these conditions are present, commission income
cannot be automatically attributed to petitioners position
in the company .
7 CIR Baier-Nickel is a non-resident alien (a German citizen) Is she entitled to a The important factor which determines the source of income of
and is the president of JUBANITEX, Inc., a domestic refund for the personal services is not the residence of the payor, or the place where
vs corporation engaged in manufacturing, marketing wrongly filed the contract for service is entered into, or the place of payment, but
on wholesale only, buying or otherwise acquiring, taxes? the place where the services were actually rendered.
BAIER-NICKEL
holding, importing and exporting, selling and
disposing embroidered textile products.
Pursuant to Sec 25 of NIRC, non-resident aliens, whether or not
G.R. No. 153793 She was appointed as a commission agent by the
engaged in trade or business, are subject to the Philippine income
domestic corporation with a sales commission of 10%
August 29, 2006 taxation on their income received from all sources in the Philippines.
all sales actually concluded and collected through her
efforts.
8 CIR Marubeni, a Japanese corporation, Whether Marubeni, however, was able to sufficiently prove in trial
engaged in general import and export Marubeni is that not all its work was performed in the Philippines
vs trading, financing and construction, is exempted from because some of them were completed in Japan (and in fact
duly registered in the Philippines with income tax by subcontracted) in accordance with the provisions of the
Marubeni Corp.
Manila branch office. invoking the situs contracts.
of taxation rule?
CIR examined the Manila branchs books All services for the design, fabrication, engineering and
GR 137377 of accounts for fiscal year ending March manufacture of the materials and equipment under
1985, and found that respondent had Japanese Yen Portion I were made and completed in Japan.
December 18, 2001 undeclared income from contracts with
These services were rendered outside Philippines taxing
NDC and Philphos for construction of a
jurisdiction and are therefore not subject to contractors tax.
wharf/port complex and ammonia
storage complex respectively.
9 TUASON The mother of Antonio Tuason owned a 7 hectare Whether or not No.
parcel of land located in the City of Manila. the properties in
vs It is Ordinary Income
question should
She subdivided the land into twenty-nine (29) lots.
be regarded as
LINGAD
Possession of the land was eventually inherited by capital assets.
As thus defined by law, capital assets include all properties of a
Taxpayer in 1948.
taxpayer whether or not connected with his trade or business, EXCEPT:
G.R. No. L-24248.
July 31, 1974 Tuason instructed his attorney-in-fact to
1. stock in trade or other property included in the taxpayer's
sell the lots.
inventory;
Twenty-eight (28) out of the twenty-nine
2. property primarily for sale to customers in the ordinary
parcels were all sold.
course of his trade or business;
In 1953 and 1954 the Taxpayer reported
3. property uised in the trade or business of the taxpayer and
his income from the sale of the small lots
subject to depreciation allowance; and
(P102,050.79 and P103,468.56,
respectively) as long-term capital gains. 4. real property used in trade or business.
The CIR upheld Taxpayer's treatment of
this tax.
If the taxpayer sells or exchanges any of the properties above, any gain
or loss relative thereto is an ordinary gain or an ordinary loss; the loss
or gain from the sale or exchange of all other properties of the
In his 1957 tax return the Taxpayer as before
taxpayer is a capital gain or a capital loss.
treated his income from the sale of the small lots
(P119,072.18) as capital gains.
This treatment was initially approved by the CIR, Under Section 34(b)(2) of the old Tax Code, if a gain is realized by a
but by 1963, the CIR reversed itself and considered taxpayer (other than a corporation) from the sale or exchange of
the Taxpayer's profits from the sales of the lots as capital assets held for more than 12 months, only 50% of the net
ordinary gain. capital gain shall be taken into account in computing the net income.
The CIR assesed a deficiency of P31,095.36 from
the Taxpayer.
10 REPUBLIC Under the doctrine of constructive receipt, a WON there was The so-called personal accounts of Esteban de la Rama were not valid
taxpayer is deemed to have received income where constructive debts.
vs an amount owing to him is set off against his debt receipt of income?
Of the two items, the first was contested and proof was lacking to
by the creditor.
DELA RAMA, show its existence and validity.
Such doctrine, however, is applicable only where
The second was actually the debt of another person, Hijos de I.
the set off is made against a debt acknowledged by
G.R. No. L-21108. the taxpayer or the validity of which is not de la Rama, Inc.
otherwise questioned.
November 29, 1966 It was true that Esteban de la Rama was the principal stockholder of
Where the validity of the debt is contested by the said corporation, but as its personality was separate and distinct, its
taxpayer, the doctrine of constructive receipt is debts could not be charged to the deceased in the absence of proof of
inapplicable. a substitution of debtor.
With such findings, the Court concluded that inasmuch as the
dividends in question had not been received either actually or
The Commissioner sought to apply this doctrine to
constructively in 1950, no tax could be due thereon for said year.
dividends due and payable but not actually rceived.
When such d,ividends were declared in 1950, no
payment was actually made thereof to the The application of the dividends to the alleged personal accounts of
stockholder, Esteban de la Rama. the deceased did not constitute such constructive payment to the
estate or the heirs that could become the basis for a tax assessment
Instead, the 1950 dividends due him were credited
on the said dividends because, with respect to the first debt, there was
to or set-off against his personal accounts with the
no proof adduced to show its existence and validity; and with respect
corporation.
to the second debt, to which the dividends were partly applied, it was
De la Rama died without having actually collected composed of accounts due from an entity separate and distinct from
such dividends and the income tax returns filed in the deceased and whose debts could not be charged against the
behalf of his estate for 1950 did not include them. deceased even if the latter was the principal owner thereof, in the
absence of proof of substitution of debtor.
Subsequently, a deficiency assessment was issued
against the estate, based on the undeclared There being no basis for the assessment of the income tax, the
dividends, which according to the Commissioner assessment and the sending of the corresponding notices did not have
had been constructively received in 1950 when the any basis.
set-off against the personal debts of the deceased
The assessment and the notices did not therefore produce any legal
was made by the corporation.
effect that would warrant the collection of the tax.
Income is deemed constructively received where the
In behalf of the estate, however, it was contended taxpayer has an unqualified right to receive the same but by
that the doctrine of constructive receipt was his own choice the income is not reduced to possession.
inapplicable to the situation.
For the doctrine to apply, the set-off must be
against valid debts of the taxpayer.
But the so-called personal accounts of the late
Esteban de la Rama with the corporation were not
valid debts.
12 THE RENATO V. Petitioners Renato V. 1.Whether or not It is plain that the law imposes VAT on "all kinds of services" rendered
DIAZ the government is in the Philippines for a fee, including those specified in the list.
Diaz and Aurora Ma.
unlawfully
and The enumeration of affected services is not exclusive.
F. expanding VAT
coverage by By qualifying "services" with the words "all kinds,"
AURORA MA. F. Timbol (petitioners) filed this petition for including tollway
TIMBOL declaratory relief 1 assailing the validity of the operators and
impending imposition of value-added tax (VAT) by tollway
vs Section 108 subjects to VAT "all kinds of services" rendered for a fee
the Bureau of Internal Revenue (BIR) on the operations in the "regardless of whether or not the performance thereof calls for the
THE SECRETARY collections of tollway operators. terms "franchise exercise or use of the physical or mental faculties." This means that
OF FINANCE grantees" and "services" to be subject to VAT need not fall under the traditional
"sale of services" concept of services, the personal or professional kinds that require the
and under Section 108 use of human knowledge and skills.
THE of the Code; and
And not only do tollway operators come under the broad term "all
COMMISSIONER kinds of services," they also come under the specific class described in
OF INTERNAL Section 108 as "all other franchise grantees" who are subject to VAT,
2.Whether or not
REVENUE the imposition of "except those under Section 119 of this Code."
VAT on tollway
operators a)
G.R. No. 193007. amounts to a tax Fees paid by the public to tollway operators for use of the tollways,
on tax and not a are not taxes in any sense.
July 19, 2011
tax on services; b) A tax is imposed under the taxing power of the government principally
will impair the for the purpose of raising revenues to fund public expenditures.
tollway operators'
right to a Toll fees, on the other hand, are collected by private tollway operators
reasonable return as reimbursement for the costs and expenses incurred in the
of investment construction, maintenance and operation of the tollways, as well as to
under their TOAs; assure them a reasonable margin of income.
and c) is not Although toll fees are charged for the use of public facilities, therefore,
administratively they are not government exactions that can be properly treated as a
feasible and tax.
cannot be
implemented. Taxes may be imposed only by the government under its sovereign
authority, toll fees may be demanded by either the government or
private individuals or entities, as an attribute of ownership.
13 PHILIPPINE PAGCOR was created pursuant to P.D. WON PAGCOR is Petitioner further contends that Section 1 (c) of R.A.
AMUSEMENT still exempt from
No. No.
AND GAMING corporate income
1067-A on January 1, 1977. tax and VAT with 9337 is null and void ab initio for violating the non-impairment clause
CORPORATION
the enactment of of the Constitution.
(PAGCOR) Simultaneous to its creation, P.D. R.A.
Petitioners contention lacks merit.
vs No. No.
The non-impairment clause is limited in application to laws that
THE BUREAU OF 1067-B was issued exempting PAGCOR from the 9337. derogate from prior acts or contracts by enlarging, abridging or in any
INTERNAL payment of any type of tax, except a franchise tax
manner changing the intention of the parties.
REVENUE (BIR), of five percent (5%) of the gross revenue.
Thereafter, on June 2, 1978, P.D.
represented
As regards franchises, Section 11, Article XII of the Constitution 31
herein by No.
provides that no franchise or right shall be granted except under the
HON. JOSE MARIO 1399 was issued expanding the scope of PAGCOR's condition that it shall be subject to amendment, alteration, or repeal
BUAG, in his exemption. by the Congress when the common good so requires.
official capacity as PAGCOR's tax exemption was removed in June Under Section 11, Article XII of the Constitution, PAGCOR's franchise
COMMISSIONER 1984 through P.D. is subjecto amendment, alteration or repeal by Congress such as the
OF INTERNAL amendment under Section 1 of R.A.
No.
REVENUE No.
1931, but it was later restored by Letter of
JOHN DOE and Instruction No. 9377.
JANE DOE, who
1430, which was issued in September 1984. Hence, the provision in Section 1 of R.A.
are persons acting
for, in behalf, or R.A. No.
under the 9337, amending Section 27 (c) of R.A.
No.
authority of
Respondent, 8424, National Internal Revenue Code of 1997, No.
public and private took effect.
8424 by withdrawing the exemption of PAGCOR from corporate
respondents. Section 27 (c) of R.A. income tax, which may affect any benefits to PAGCOR's transactions
with private parties, is not violative of the non-impairment clause of
No. the Constitution.
G.R. No. 172087 8424 provides that government-owned and Petitioner is exempt from the payment of VAT, because PAGCOR's
controlled corporations (GOCCs) shall pay charter, P.D.
March 15, 2011
corporate income tax, except petitioner PAGCOR,
GSIS, SSS, PHIC and PCSO. No.
With the enactment of R.A. 1869, is a special law that grants petitioner exemption from taxes.
14 United Airlines International airline, petitioner United Airlines, Whether or not Petitioner was correct in averring that his claim to a refund cannot be
filed a claim for income tax refund. petitioner is subject to offsetting or, as it claimed the offsetting to be, a legal
vs entitled to a compensation under Sec.
Petitioner sought to be refunded the erroneously
refund?
Commissioner of collected income tax from in the amount of 28(A)(3)(a)
Internal Revenue P5,028,813.23 on passenger revenue from tickets
sold in the Philippines, the uplifts of which did not
originate in the Philippines. The Court have consistently ruled that there can be no off-setting [or
G.R. No. 178788 compensation] of taxes against the claims that the taxpayer may have
The airlines ceased operation originating form the
against the government.
Philippines since February 21, 1998.
A person cannot refuse to pay a tax on the ground that the government
owes him an amount equal to or greater than the tax being collected.
Court of Tax appeals ruled the petitioner is not
The collection of a tax cannot await the results of a lawsuit against the
entitled to a refund because under the NIRC,
government.
income tax on GPB also includes gross revenue
from carriage of cargoes from the Philippines. (Francia
And upon assessment by the CTA, it was found out vs
that petitioner deducted items from its cargo
revenues which should have entitled the Intermediate appellate court)
government to an amount of P 31.43 million, which
is obviously higher than the amount the petitioner
prayed to be refunded.
The grant of a refund is founded on the assumption that the tax return
is valid, that is, the facts stated therein are true and correct.
Petitioner argued that the petitioners supposed
underpayment cannot offset his claim to a refund The deficiency assessment, although not yet final, created a doubt as
as established by well-settled jurisprudence. to and constitutes a challenge against the truth and accuracy of the
facts stated in said return which, by itself and without unquestionable
evidence, cannot be the basis for the grant of the refund.
(CIR vs CTA)
16 Miguel J. Ossorio Petitioner, a non-stock and non-profit corporation, Whether Petitioner is a corporation that was formed to administer
Pension was organized for the purpose of holding title to petitioner or the the Employees' Trust Fund.
Foundation, Inc. and administering the employees trust or Employees Trust
Petitioner invested P5,504,748.25 of the funds of the
retirement funds established for the benefit of the Fund is exempt
Employees' Trust Fund to purchase the MBP lot.
vs employees of Victorias Milling Company, Inc. from tax and thus
entitled to refund When the MBP lot was sold, the gross income of the
CA and CIR (VMC).
Employees Trust Fund from the sale of the MBP lot was P40,500,000.
Petitioner, as trustee, claims that the income
The 7.5% withholding tax of P3,037,500 and brokers
earned by the Employees Trust Fund is tax exempt
G.R. No. 162175 commission were deducted from the proceeds.
under Section 53(b) of the National Internal
Revenue Code (Tax Code).
1 Officemetro In 2006, respondent CIR ordered the examination of WON petitioner is For the EWT, the Court agrees with petitioner that condominium dues
Philippines, Inc. petitioners books for tax year 2005. liable for the billed to the company are not subject to EWT.
deficiency
vs After such examination, it issued a deficiency The BIR has held a number of times that association/condominium
assessments and
assessment for expanded withholding tax (EWT), dues, membership fees, and other assessment/charges collected from
if it is, are they
Commissioner of final withholding of VAT (FWVAT), final withholding its members are not included in the corporations gross income as
entirely correct.
Internal Revenue tax (FWT) and a compromise penalty. these are held in trust and used for administrative purposes for the
common benefit of the members.
Thus they are not subject to income tax and withholding tax.
CTA Case No. 8382 The current petition for review was thus filed by
petitioner questioning the assessments.
June 3, 2014
Respondent contends that petitioner failed to prove Petitioner failed to prove that the services in question were performed
with documentary evidence that the Service by its non-resident foreign corporation counterpart.
Agreement with Regus Centres Pty.
Thus, it is liable for the deficiency assessment since it failed to prove
Ltd and petitioner is for services performed outside exemption from coverage.
the Philippines.
2 CIR Shell sold petroleum products to international Whether a No! Excise tax -
carriers who are excise tax exempt. manufacturer or taxes
vs producer of applicable to
On such sale, the taxing authority imposed excise
petroleum (Erroneous or illegal tax- levied without statutory authority or upon certain specific
Pilipinas Shell taxes.
products is property not subject to tax) goods or
Petroleum
exempt for articles
Corporation payment of excise manufactured
tax on such Shell's locally manufactured petroleum products are subject to excise or produced in
products if sold to tax in Sec. the philippines
G.R. No. 188497 international for domestic
carriers? 148 nirc. sales or
February 19, 2104
Thus, no tax refund to speak of coz no erroneous or excess pamyment. consumption
or any
disposition and
Excise tax attaches to petroleum products sold to international to things
carriers. imported into
philippines;
imposed in
addition to
Thus, the excise tax imposed on manufacturers cannot invoke excise
VaT; indirect
tax exemption granted to its buyers who are international carriers.
tax ( subject to
tax exemptions
generated by
law to buyers)
3 Deutsche Bank- In accordance with Section 28 (A) (5) of the National Whether or not No.
AG Manila Internal Revenue Code (NIRC) of 1997, petitioner the failure to
The denial of the availment of tax relief for the failure of a taxpayer to
Branch withheld and remitted to respondent on 21 October strictly comply
apply within the prescribed period under the administrative issuance
2003 the amount of PHP67,688,553.51, with RMO No.
would impair the value of the tax treaty.
vs representing fifteen percent (15%) branch profit
1-2000 will
remittance tax (BPRT) on its regular banking unit At most, the application for a tax treaty relief from the BIR should
CIR deprive persons
(RBU) net income remitted to Deutsche Bank merely operate to confirm the entitlement of the taxpayer to the
or corporations of
Germany (DB Germany) for 2002 and prior taxable relief.
the benefit of a
years.
G.R. No. 188550 tax treaty. "A state that has contracted valid international obligations is bound to
Believing that it made an overpayment of the BPRT, make in its legislations those modifications that may be necessary to
August 19, 2013 petitioner filed with the BIR Large Taxpayers ensure the fulfillment of the obligations undertaken." 20 Thus, laws
Assessment and Investigation Division on 4 October and issuances must ensure that the reliefs granted under tax treaties
2005 an administrative claim for refund or issuance are accorded to the parties entitled thereto.
of its tax credit certificate in the total amount of
PHP22,562,851.17. The obligation to comply with a tax treaty must take precedence over
the objective of RMO No.
On the same date, petitioner requested from the
International Tax Affairs Division (ITAD) a 1-2000.|||It is significant to emphasize that petitioner applied
confirmation of its entitlement to the preferential though belatedly for a tax treaty relief, in substantial compliance
tax rate of 10% under the RP-Germany Tax Treaty. with RMO No.
4 CIR General Foods (Phils), which is engaged in the WON the subject No.
manufacture of Tang, Calumet and Kool-Aid, media advertising
vs Tax exemptions must be construed in stricissimi juris against the
filed its income tax return for the fiscal year ending expense for
taxpayer and liberally in favor of the taxing authority, and he who
February 1985 and claimed as deduction, among Tang was
General Foods claims an exemption must be able to justify his claim by the clearest
other business expenses, P9,461,246 for media ordinary and
(Phils.), Inc. grant of organic or statute law.
advertising for Tang. necessary
expense fully
deductible under
G.R. No. 143672 the NIRC To be deductible from gross income, the subject advertising expense
The Commissioner disallowed 50% of the deduction
must comply with the following requisites: (a) the expense must be
April 24, 2003 claimed and assessed deficiency income taxes of
ordinary and necessary; (b) it must have been paid or incurred during
P2,635,141.42 against General Foods, prompting
the taxable year; (c) it must have been paid or incurred in carrying on
the latter to file an MR which was denied.
the trade or business of the taxpayer; and (d) it must be supported by
receipts, records or other pertinent papers.
General Foods later on filed a petition for review at
CA, which reversed and set aside an earlier decision
The Court finds the subject expense for the advertisement of a single
by CTA dismissing the companys appeal.
product to be inordinately large.
Therefore, even if it is necessary, it cannot be considered an ordinary
expense deductible under then Section 29 (a) (1) (A) of the NIRC.
5 The Late Lino The late Lino Gutierrez was primarily engaed in the 1. 1.
Gutierrez by business of leasing real property for which he paid
WON the Yes, provided such expenses meet the requirements.
Andrea C. vda. real estate broker's privilege tax.
taxpayer's
De Gutierrez et. The said claims for deduction are proper and allowable if such
Subsequently, the Commissioner of Internal aforementioned
expenses are: a) ordinary and necessary, b) paid or incurred within the
al. Revenue assessed Gutierrez a deficiency income tax claims for
taxable year and c) paid or incurred in carrying on a trade or business.
amounting to P11,841.00 which was caused by the deduction are
vs disallowance of the deductions from gross income proper and
Collector of representing depreciation expenses allegedly allowable.
incurred by Gutierrez in carrying on his business and Of those enumerated, what were considered as deductible are the
Internal Revenue following:
the addition to gross income of receipts which he
did not report in his income tax returns. 2.
G.R. No. I-19537 In sum, the disallowed business expenses consisted WON real 1) The cost of furniture given by the taxpayer as commission in
of: properties used in furtherance of a business transaction and the expenses incurred in
May 20, 1965
the trade or attending the National Convention of Filipino Businessmen, luncheon
business of the meeting and cruise to Corregidor of the Homeowners' Association.
1. Transportation expenses incurred to attend taxpayer are
the funeral of his friends considered as According to the Supreme Court, commissions given in consideration
ordinary assets. for bringing about a profitable transaction are part of the cost of the
2. Procurement and installation of an iron door business transaction and are deductible.
3. Cost of furniture given by the taxpayer in
furtherance of a business transaction
2) Membership and activities in connection with the real estate trade
4. Membership fees in organizations established were solely to enhance his business.
by those engaged in the real estate trade
Hence, the expenses incurred thereunder are deductible as ordinary
5. Car expenses, salary of his driver and car and necessary business expenses.
depreciation
6. Repairing taxpayers rental apartments
3) Only of the car expenses, salary of his driver and car depreciation
7. Litigation expenses are allowed as deduction since according to the evidence, the
8. Depreciation of Gutierrez residence taxpayer's car was utilized both for personal and business needs.
2.
Yes.
Before Section 34 was amended by RA 82 in 1947, it considered the
real property used in the trade or business of taxpayer as capital asset.
However, with the passage of RA 82, Congress classified such real
properties as ordinary assets.
This has the effect of withdrawing the gain or loss from the sale or
exchange of real property used in the trade or business of the taxpayer
from the operation of the capital gains and losses provisions.
As such, it is logical that the gain or loss from the sale or exchange of
such real propeties be treated as ordinary income or loss.
From the nature of the claimed deductions and the span of time during
which the firm was retained, ICC can be expected to have reasonably
known the retainer fees charged by the firm.
They cannot give as an excuse the delayed billing, since it could have
inquired into the amount of their obligation and reasonably determine
the amount.
7 H. Tambunting This case stemmed from a pre-assessment issued by Whether the Petitioner contends that it is the document evidencing a pledge of
Pawnshop, Inc. CIR against Tambunting for among others, a petitioner, personal property which is subject to the DST.
deficiency documentary stamp tax of P 50, apawnshop, is
vs Petitioner further contends that the DST is imposed on the documents
910.Thereafter, the CIR issued an assessment notice subject to dst
issued, not the transactions so had or accomplished.
with the corresponding demand letters for the based on itspawn
Commissioner of payment of the DST and the corresponding tickets It insists that the document to be taxed under the transaction
Internal Revenue compromise penalty for taxable year 1997. contemplated should be the pledge agreement, if any is issued, not
the pawn ticket.
G.R. No. 173373 On the other hand, commissioner contented that a documentary
Tambunting filed its written protest to the
stamp tax shall be collected on every pledge of personal property as a
July 29, 2013 assessment notice alleging that it was not subject to
security for the fulfillment of the contract of loan.
documentary stamp tax under Section 195 of the
National Internal Revenue Code (NIRC) because Since the transactions in a pawnshop business partake of the nature
documentary stamp taxes were applicable only to of pledge transactions, then pawn transactions evidenced by pawn
pledge contracts, and the pawnshop business did tickets, are subject to documentary stamp taxes.
not involve contracts of pledge.
Petitioners contention is devoid of merit.
8 Plaridel Surety Petitioner PSIC as surety and Constancio San Jose, Whether the NO.
and Insurance as principal solidarily executed a performance bond entire P44,490.00
Loss is deductible only in the taxable year it actually happens or is
Company in the penal sum of P30,600.00 in favor of the P. paid by it was or
sustained.
was not a
L.
vs deductible loss. However, if it is compensable by insurance or otherwise, deduction for
Galang Machinery Co., Inc. the loss suffered is postponed to a subsequent year, which, to be
Commissioner of precise, is that year in which it appears that no compensation at all can
Internal Revenue Petitioner likewise required Jose and one Ramon
be had, or that there is a remaining or net loss, i.e., no full
Cuervo to execute an indemnity agreement
compensation.
obligating themselves, solidarily, to indemnify
G.R. No. L-21520 petitioner for whatever liability it may incur by The rule is that loss deduction will be denied if there is a measurable
reason of said performance bond. right to compensation for the loss, with ultimate collection reasonably
December 11, 1967 clear.
San Jose failed to perform its obligation of delivering
logs to Galang Machinery, the latter sued on the So where there is reasonable ground for reimbursement, the taxpayer
performance bond. must seek his redress and may not secure a loss deduction until he
establishes that no recovery may be had.
On October 1, 1952, the Court of First Instance
adjudged Jose and petitioner liable; it also directed In other words, as the Tax Court put it, the taxpayer (petitioner) must
Jose and Cuervo to reimburse petitioner for exhaust his remedies first to recover or reduce his loss.
whatever amount it would pay to Galang
It is on record that petitioner had not exhausted its remedies,
Machinery.
especially against Ramon Cuervo who was solidarily liable with San
CA affirmed. Jose for reimbursement to it.
The same was affirmed by the SC with slight Thus, it was too premature for petitioner to claim a loss deduction.
modification of the award on damages.
But assuming that there was no reasonable expectation of recovery,
still no loss deduction can be had.
On February 19 and March 20, 1957, petitioner Sec.
effected payment in favor of Machinery in the total
30 (d) (2) of the Tax Code(old tax code) requires a charge-off as one of
sum of P44,490.00 pursuant to the final decision.
the conditions for loss deduction:
Petitioner, who had the burden of proof failed to adduce evidence that
The Commissioner of Revenue disallowed the
there was a charge-off in connection with the P44,490.00or
claimed deduction of P44,490.00 and assessed
P30,600.00 which it paid to Galang Machinery.
against petitioner the sum of P8,898.00, plus
interest, as deficiency income tax for the year 1957.
Petitioner filed its protest which was denied.
Whereupon, appeal was taken to the Court,
petitioner insisting that the P44,490.00 which it paid
to Machinery was a deductible loss.
9 Philippine Philippine Refining Company (PRC) was assessed by WON the CA was YES.
Refining respondent Commissioner of Internal Revenue to correct in
Company pay a deficiency tax for the year 1985. affirming the CTA
decision in In determining the "worthlessness of a debt" and thereby qualify as
The assessment was timely protested by PRC, on the
vs disallowing PRCs "bad debts" making them deductible, the taxpayer should show that:
ground that it was based on the erroneous
claim of
CA, CTA, and CIR disallowances of "bad debts" on several accounts (1) there is a valid and subsisting debt;
deduction as bad
although the same are both allowable and legal
debts of several (2) the debt must be actually ascertained to be worthless and
deductions.
accounts uncollectible during the taxable year;
G.R. No. 118794
(3) the debt must be charged off during the taxable year; and
May 8, 1996
(4) the debt must arise from the business or trade of the taxpayer.
In this case, the only evidentiary support given by PRC for its aforesaid
claimed deductions was the explanation or justification posited by its
financial adviser or accountant.
Her allegations were not supported by any documentary evidence,
hence, both the Court of Appeals and the CTA ruled that said
contentions per se cannot prove that the debts were indeed
uncollectible and can be considered as bad debts as to make them
deductible.
10 China Banking China Banking Corporation (CBC) made an equity Whether or not NO. At all events, it
Corporation investment in First CBC Capital (Asia) Ltd., a the equity may not be
Hongkong subsidiary engaged in financing and investment made amiss to once
vs investment with deposit-taking function. in First CBC An equity investment is a capital, not ordinary, asset of the investor again stress
Capital, after the sale or exchange of which results in either a capital gain or a capital that the basic
CA, CIR and CTA In the course of the regular examination of the
becoming loss. rule is still that
financial books and investment portfolios of CBC by
worthless, be any capital loss
Bangko Sentral, it was shown that First CBC Capital
deducted from can be
G.R. No. 125508 (Asia), Ltd., has become insolvent.
gross income. A capital gain or a capital loss normally requires the concurrence of deducted only
July 19, 2000 With the approval of Bangko Sentral, CBC write-off two conditions for it to result: from capital
as being worthless its investment in First CBC Capital gains under
(Asia), Ltd. Section 33(c) of
(1) There is a sale or exchange; and the NIRC.
and treated it as a bad debt or as an ordinary loss
deductible from its gross income. (2) the thing sold or exchanged is a capital asset.
However, the Commissioner of Internal Revenue When securities become worthless, there is strictly no sale or
(CIR) disallowed the deduction and assessed exchange but the law deems the loss anyway to be "a loss from the
petitioner for income tax deficiency. sale or exchange of capital assets. In these cases, the NIRC dispenses,
In assuming that the securities had indeed become in effect, with the standard requirement of a sale or exchange for the
worthless, CIR held the view that they should then application of the capital gain and loss provisions of the code.
be classified as "capital loss," and not as a bad debt
expense there being no indebtedness to speak of
between petitioner and its subsidiary. Capital losses are allowed to be deducted only to the extent of capital
gains, i.e., gains derived from the sale or exchange of capital assets,
and not from any other income of the taxpayer.
"(A) Limitations.
- Losses from sales or exchanges of capital assets shall be allowed only
to the extent provided in Section 33."
"Section 33.
Capital gains and losses.
In sum -
(c) The capital loss sustained by CBC can only be deducted from capital
gains if any derived by it during the same taxable year that the
securities have become "worthless."
G.R. No. 148083 recreation centers and purchase of medicines 7432, and in cases of conflict, the implementing rule will not prevail
anywhere in the country. over the law it seeks to implement.
July 21, 2006
The law provided that private establishments giving
discount to senior citizens may claim the cost astax
credit. But even as this particular case is decided in this manner, it must be
noted that the concerns of petitioner have been addressed.
In compliance with the law, BIR issued Revenue
Regulations No. RA No.
2-94 defining tax credit as the amount representing 7432 has been amended by RA No.
the 20% discountwhich discount shall be 9257, the Expanded Senior Citizens Act of 2003. In this, the term tax
deducted by said establishments from their gross credit is no longer used.Under its IRR, Revenue Regulations No.
12 Kuenzle & Petitioner filed its income tax return for the years 1. 1.
Streiff, Inc. 1950, 1951 and 1952 and petitioner deducted from
WoN bonuses are It would appear that all ordinary and necessary expenses paid or
its gross income certain items representing salaries,
vs deductible incurred in carrying on a trade or business, including a reasonable
directors' fees and bonuses of its non-resident
allowance for salaries or other compensation for personal services
president and vice-president; bonuses of its
The Collector of actually rendered, may be allowed as deductions in computing the
resident officers and employees; and interests on
Internal Revenue 2. taxable income during the year.
earned but unpaid salaries and bonuses of its
officers and employees. WoN interests are It likewise appears that the amount of interests paid within the taxable
deductible year on any indebtedness may also be deducted from the gross
G.R. Nos. The income tax computed in accordance with these
income.
returns was duly paid by petitioner.
L-12010 and Here it is admitted that the bonuses paid to the officers and employees
L-12113 of petitioner, whether resident or non-resident, were paid to them as
The CIR, after disallowing the deductions of the additional compensation for personal services actually rendered and
October 20, 1959 items representing director's fees, salaries and as such can be considered as ordinary and necessary expenses
bonuses of petitioner's non-resident president and incurred in the business within the meaning of the law, the only
vice-president; the bonus participation of certain question in dispute being how much of said bonuses may be
resident officers and employees; and the interests considered reasonable in order that it may be allowed as deduction.
on earned but unpaid salaries and bonuses,
respondent assessed and demanded from
petitioner the payment of deficiency income taxes It is a general rule that "Bonuses to employees made in good faith and
in the sums of P26,370.00, P53,865.00 and as additional compensation for the services actually rendered by the
P44,112.00 for the years 1950, 1951 and 1952, employees are deductible, provided such payments, when added to
respectively. the stipulated salaries, do not exceed a reasonable compensation for
the services rendered.
However the respondent modified the same by
allowing as deductible all items comprising The condition precedents to the deduction of bonuses to employees
directors' fees and salaries of the non-resident are: (1) the payment of the bonuses is in fact compensation; (2) it must
president and vice-president, but disallowing the be for personal services actually rendered; and (3) the bonuses, when
bonuses insofar as they exceed the salaries of the added to the salaries, are reasonable when measured by the amount
recipients, as well as the interests on earned but and quality of the services performed with relation to the business of
unpaid salaries and bonuses. the particular taxpayer."
13 Paper Industries In 1969, 1972 and 1977, Picop obtained loans from - Whether or not - SC started by noting that interest payments on loans incurred by a
Corporation of foreign creditors in order to finance the purchase of PICOP is entitled taxpayer (whether BOI-registered or not) are allowed by the NIRC as
the Philippines machinery and equipment needed for its to deductions deductions against the taxpayer's gross income.
operations. against income
(PICOP) In the instant case, the CIR does not dispute that the interest payments
interest payments
In its 1977 Income Tax Return, Picop claimed were made by Picop on loans incurred in connection with the carrying
vs on loans for the
interest payments made in 1977, amounting to on of the registered operations of Picop neither does the CIR deny that
purchase of
CA, CIR, and CTA P42,840,131.00, on these loans as a deduction from such interest payments were legally due and demandable under the
machinery and
its 1977 gross income. terms of such loans, and in fact paid by Picop during the tax year 1977.
equipment.
The CIR disallowed this deduction upon the ground
G.R. Nos. 106949- that, because the loans had been incurred for the
50 The CIR has been unable to point to any provision of the 1977 Tax Code
purchase of machinery and equipment, the interest - Whether or not
or any other statute that requires the disallowance of the interest
payments on those loans should have been PICOP may claim
December 1, 1995 payments made by Picop .
capitalized instead and claimed as a depreciation RPPMs net
deduction taking into account the adjusted basis of operating loss as a The CIR invokes Section 79 of Revenue Regulations No.
the machinery and equipment (original acquisition deduction against
cost plus interest charges) over the useful life of its 1977 gross 2 but the SC ruled that said provision is to be construed as referring to
such assets. income. the so called "theoretical interest," that is to say, interest "calculated"
or computed (and not incurred or paid) for the purpose of determining
Both the CTA and the Court of Appeals sustained the the "opportunity cost" of investing funds in a given business.
position of Picop and held that the interest
deduction claimed by Picop was proper and We have already noted that our 1977 NIRC does not prohibit the
allowable. deduction of interest on a loan incurred for acquiring machinery and
equipment.
In the instant Petition, the CIR insists on its original
position. Neither does our 1977 NIRC compel the capitalization of interest
payments on such a loan.
The 1977 Tax Code is simply silent on a taxpayer's right to elect one or
On the other hand, on 18 January 1977, Picop the other tax treatment of such interest payments.
entered into a merger agreement with the Rustan
Pulp and Paper Mills, Inc. Accordingly, the general rule that interest payments on a legally
demandable loan are deductible from gross income must be applied.
("RPPM") and Rustan Manufacturing Corporation
("RMC").
Under this agreement, the rights, properties, The CIR argues finally that to allow Picop to deduct its interest
privileges, powers and franchises of RPPM and RMC payments against its gross income would be to encourage fraudulent
were to be transferred, assigned and conveyed to claims to double deductions from gross income.
Picop as the surviving corporation. The Court is not persuaded.
Immediately before merger effective date, RPPM So far as the records of the instant cases show, Picop has not claimed
had over preceding years accumulated losses in the to be entitled to double deduction of its 1977 interest payments.
total amount of P81,159,904.00.
The CIR has neither alleged nor proved that Picop had previously
adjusted its cost basis for the machinery and equipment purchased
14 Hospital de San In a letter dated January 15, 1959, the WON the The Court of Tax Appeals found that the interests and dividends
Juan de Dios, Inc. Commissioner of Internal Revenue assessed and expenses incurred received by the petitioner "were merely incidental income to
demanded from the petitioner, Hospital De San by the petitioner petitioner's main activity, which is the operation of its hospital and
vs Juan De Dios, Inc., payment of P51,462 as deficiency for handling its nursing schools the conclusion is inevitable that petitioner's activities
income taxes for 1952 to 1955. funds or income never went beyond that of a passive investor, which under existing
Commissioner of consisting solely jurisprudence do not come within the purview of carrying on any
Internal Revenue The petitioner protested against the assessment
of dividends and 'trade or business'.
and requested the Commissioner to cancel and
interests, were
withdraw it. The fact that petitioner was assessed a real estate dealer's fixed tax of
not expenses
G.R. No. L-31305 P640 on its rental income does not alter its status as a charitable, non-
After reviewing, Commissioner advised petitioner incurred in
stock, non-profit corporation.
May 10, 1990 that the deficiency income tax assessment against it "carrying on any
was reduced to only P16,852.41 but the petitioner trade or Finding no reversible error in the decision of the CTA, the same is
thru its auditors insisted to have the revised business," hence, affirmed in toto.
assessment cancelled but the same was denied. not deductible as
business or
Petitioner sought a review of the assessment by the administrative
Court of Tax Appeals. expenses.
The CTA found out that petitioner failed to establish
by competent proof that its receipt of interests and
dividends constituted the carrying on of a "trade or
business" so as to warrant the deductibility of the
expenses incurred in their realization.
No evidence whatsoever was presented by
petitioner to show how it handled its investment,
the manner it bought, sold and reinvested its
securities, how it made decisions, and whether it
consulted brokers, investment or statistical
services.
Neither is there any showing of the extent of its
activities in stocks or bonds, and participation, if
any, direct or indirect, in the management of the
corporations where it made investments.
In effect, there is total absence of any indication of
a business-like management or operation of its
interests and dividends.
15 Commissioner of The case involves Mercury Drugs (Central Luzon WON the 20% The discount is treated as a tax credit thus entitling Central Luzon to
Internal Revenue Drug Corporation) claim for tax refund arising from senior citizens the tax refund.
an alleged erroneous interpretation of the Senior sales discount
vs This case covers the taxable year 1997 and is governed by the old law,
Citizens Act. should be treated
RA 7432 which expressly allowed private establishment to claim the
as a tax credit to
Central Luzon While complying with RR 2-94 in computing its amount of discounts they grant to senior citizens as tax credit and not
be deducted from
Drug Corporation income tax liability for taxable year 1997, merely as a reduction to the gross income or gross sales.
the income tax
respondent filed such return under protest because
due or as a mere In this case taxation was considered to be an implement for the
of its allegation that RR 2-94, which provides that
deduction from exercise of the power of imminent domain wherein the tax credit is
G.R. No. 159610 the sales discount should be treated as a deduction
gross income or deemed to be the just compensation for private property taken by the
from the gross income or sales, is without force and
June 12, 2008 gross sales. State for public purpose (the reduction of income due to the grant of
effect for being inconsistent with RA 7432 which
the senior citizen discount).
provides for a tax credit treatment for the senior
citizens discount. However, with the effectivity of RA 9257 on 21 March 2004, there is
now a new tax treatment for senior citizens discount granted by all
covered establishments.
This discount should be considered as a deductible expense from gross
income and no longer as tax credit.
16 Commissioner of Involves a Petition for Review on Certiorari seeking WON PAL is Petition is denied for the provisions in PD 1590, a special law prevails
Internal Revenue to reverse and set aside the Decision and Resolution required to pay over RA 8424 (NIRC) as regards respondents exemption from the
of the Court of Tax Appeals (CTA) En Bane which MCIT under the MCIT.
vs affirmed the cancellation and withdrawal of income tax
Assessment Notice and Formal Letter of Demand for provision of the
Philippine
the payment by the respondent Philippine Airlines, NIRC of 1997(RA Discussion on the SC RULING
Airlines (PAL) Inc. 8424), as
amended, despite
(respondent), of deficiency Minimum Corporate
the fact that the The NIRC of 1997, as amended, provides as regards MCIT that a
G.R. 179259 Income Tax (MCIT) in the amount of
charter (PD 1590) domestic corporation must pay whichever is the higher of: (1) the
P326,778,723.35, covering the fiscal year ending 31
September 25, creating it income tax under Section 27(A) of the NIRC of 1997,as amended,
March 2000.
2013 provided only two computed by applying the tax rate therein to the taxable income of
options for its the corporation; or (2) the MCIT under Section 27(E), also of the same
liability to pay Code, equivalent to 2% of the gross income of the corporation.
For the fiscal year that ended 31 March 2000, taxes- (a)
respondent filed its Tentative Corporate Income Tax Payment of basic The Court would like to underscore that although this may be the
Return, reflecting a creditable tax withheld for the corporate income general rule in determining the income tax due from a domestic
fourth quarter amounting to P524,957.00, and a tax based on the corporation under the provisions of the NIRC of 1997, as amended,
zero taxable income for said year. its annual net such rule can only be applied to respondent only as to the extent
taxable income or allowed by the provisions of its franchise.
Hence, respondent filed on 16 July 2001 a written
claim for refund before the petitioner. (b) the related 2%
franchise tax
As a consequence thereof, respondent received a based on gross Relevant thereto, PD 1590, during the lifetime of the franchise of
Letter of Authority from the Bureau of Internal revenue, respondent, its taxation shall be strictly governed by two fundamental
Revenue (BIR) Large Taxpayers Service authorizing whichever is rules, to wit: (1) respondent shall pay the Government either the basic
(PD) 1590;3 and (2) that the three-year period 7. There is an apparent distinction under the NIRC of 1997 between
allowed by law for the BIR to assess deficiency taxable income, which is the basis for basic corporate income tax
internal revenue taxes for the taxable year ending under Section 27(A); and gross income, which is the basis for the
31 March 2000 had already lapsed on 15July 2003. MCIT under Section 27(E).
8. The two terms have their respective technical meanings, and
cannot be used interchangeably.
In a Decision, the CTA Second Division granted 11. Not being covered by Section 13(a) of [PD] 1590,which makes PAL
respondents petition and accordingly ordered for liable only for basic corporate income tax, then MCIT is included
the cancellation and withdrawal of Assessment in "all other taxes" from which PAL is exempted.
Notice and Formal Letter of Demand for the
payment of deficiency MCIT in the amount of
P326,778,723.35, covering the fiscal year ending 31 12. The evident intent of Section 13 of [PD] 1520 (sic) is to extend to
March 2000, issued against respondent. PAL tax concessions not ordinarily available to other domestic
corporations.
13. Section 13 of [PD] 1520 (sic) is not unusual.
The CTA Second Division denied petitioners Motion
for Reconsideration for lack of merit. 14. A public utility is granted special tax treatment (including tax
exceptions/exemptions) under its franchise, as an inducement for
Aggrieved, petitioner appealed to the CTA En Banc.
the acceptance of the franchise and the rendition of public
service by the said public utility.
The Ruling of the CTA En Banc 15. In this case, in addition to being a public utility providing air-
transport service, PAL is also the official flag carrier of the
country.
The CTA En Banc affirmed both the aforesaid
Decision and Resolution rendered by the CTA
Second Division in CTA Case No. 16. The CIR posits that PAL may not invoke in the instant case the "in
lieu of all other taxes" clause in Section 13 of [PD] No.
7029,ruling that under Section 13 of PD 1590,
respondent, as consideration for the franchise, is 17. 1520 (sic),if it did not pay anything at all as basic corporate
indeed granted the privilege to choose between two income tax or franchise tax.
options in the payment of its tax liability to the
18. As a result, PAL should be made liable for "other taxes" such as
government.
MCIT.
19. This line of reasoning has been dubbed as the Substitution
Theory, and this is not the first time the CIR raised the same.
20. The Court already rejected the Substitution Theory in
Commissioner of Internal Revenue v.
21. Philippine Airlines, Inc.
22. It is not the fact of tax payment that exempts it, but the exercise
of its option.
17 Maria Carla The heirs of Pirovano received a donation from De WON the heirs YES. Remuneratory
Pirovano La Rama Steamship Co., of which Pirovano was the are liable for donation is still
NCC Art.
former president whose life the company had donees tax subject to both
vs insured. despite an SC 726. donors and
decision that the donees tax.
Commissioner of The heirs contended that since the SC in a related When a person gives to another a thing ...
donation was
Internal Revenue case had declared the donation a remuneratory
remuneratory on account of the latter's merits or of the services rendered by him to
donation and not a simple donation, it was not
subject to donees tax. the donor, provided they do not constitute a demandable debt, ...,
there is also a donation..
G.R. No. L-19865
July 31, 1965
G.R. L-24059 Consequently, the Commissioner of Internal As to the supervision fees for the development and management of
Revenue demanded the payment of the percentage the subdivisions, which fees were paid out of the proceeds of the sales
November 28, tax plus surcharge, contending that said income is of the subdivision lots, they, too, are subject to the real estate broker's
1969 subject to the real estate broker's percentage tax. percentage tax.
On the other hand, petitioner-appellant claimed
that the supervision and collection fees do not form
part of its taxable gross compensation. The development, management and supervision services were
necessary to bring about the sales of the lots and were inseparably
linked thereto.
Hence, there is basis for holding that the operation of subdivisions is
really incidental to the main business of the broker, which is the sale
of the lots on commission.
20 Jose Ledesma For the year 1916, Jose Ledesma (plaintiff) made his Whether or not Plaintiff did not contended that said sum was gifts or bonuses but
declaration for the purpose of paying his income the said sum, were fixed compensations agreed upon, depending upon the value of
vs tax. together with the services of said employees and the importance of the business in
their fixed which they were engaged.
The Collector of In the said declaration, he claimed several
salaries,
Internal Revenue exceptions and one of which is the amount of A corporation or person engaged in a commercial enterprise has a
constituted
and P135,229.10 which he claims should be deducted right to fix the compensation of his employees, and said
reasonable
from his income for the reason that it had been paid compensation shall be considered as part of the expenses in the
the Provincial compensation for
to his employees as compensation for their services. conduct and management of the business.
their services.
Treasurer of
The said exemption was not allowed by the Such expenses should be taken into consideration in ascertaining the
Occidental
Provincial Treasurer and Collector of Internal amount to be paid as income tax.
Negros Revenue (defendants).
By computing such expenses, the net income may be correctly
Hence, the plaintiff paid under protest the income ascertained.
G.R. No. L-15014 tax upon the full amount of his income without the
In the present case, there is not a word of proof in the record which
deductions claimed.
October 2, 1920 disproves the declaration of the plaintiff that the said sum was paid
He then filed a complaint alleging that the persons to the persons mentioned in the complaint as compensation for their
to whom he had paid the said sum are his services.
employees in his business and as such receive a
Said sum, according to proof, did not constitute gifts or bonuses.
certain percentage of his annual gain; and that
percentage is fixed and determined; and is based Hence, the lower court was fully justified in allowing the deduction of
upon the extent of the powers and responsibilities the said sum from the gross income of the plaintiff.
21 Esso Standard petitioner ESSO deducted from its gross income for WON the margin margin fees are not expenses in connection with the production or
Eastern, Inc. 1959, as part of its ordinary and necessary business fees paid by earning of petitioner's incomes in the Philippines.
expenses, the amount it had spent for drilling and petitioner on its
vs They were expenses incurred in the disposition of said incomes;
exploration of its petroleum concessions. profit remittance
expenses for the remittance of funds after they have already been
to its Head Office
Commissioner of This claim was disallowed by the respondent earned by petitioner's branch in the Philippines for the disposal of its
in New York are
Internal Revenue Commissioner of Internal Revenue on the ground Head Office in New York which is already another distinct and separate
deductible
that the expenses should be capitalized and might income taxpayer.
be written off as a loss only when a "dry hole"
it can never be said therefore that the margin fees were appropriate
G.R. No. L-28508-9 should result.
and helpful in the development of petitioner's business in the
July 7, 1989 ESSO then filed an amended return where it asked Philippines exclusively or were incurred for purposes proper to the
for the refund by reason of its abandonment as dry conduct of the affairs of petitioner's branch in the Philippines
holes of several of its oil wells. exclusively or for the purpose of realizing a profit or of minimizing a
loss in the Philippines exclusively.
Also it claimed as ordinary and necessary expenses
in the same return the amount representing margin the margin fees were incurred for purposes proper to the conduct of
fees it had paid to the Central Bank on its profit the corporate affairs of ESSO in New York, but certainly not in the
remittances to its New York head office. Philippines.
CR assessed ESSO a deficiency income tax for the WHEREFORE, the decision of the Court of Tax Appeals denying the
year 1960. petitioner's claims for refund of P102,246.00 for 1959 and
P434,234.92 for 1960, is AFFIRMED, with costs against the petitioner.
The deficiency arose from the disallowance of the
margin fees paid by ESSO to the Central Bank on its SO ORDERED.
profit remittances to its New York head office.
22 Visayan Cebu The appellant, Visayan Cebu Terminal Co. The only issue INCOME TAXES; DETERMINATION OF REPRESENTATION EXPENSE.
Termnial Co., Inc. raised in this
Inc., is a corporation organized for the purpose of The Court of Tax Appeals, in the instant case, had been patently fair
appeal relates to
vs handling arrastre operations in the port of Cebu. and reasonable, if not liberal, in allowing appellant to deduct a certain
the deductibility
amount as representation expenses on the basis of its gross income,
It was awarded the contract for the said arrastre of the sum of
Collector of net income and representation expenses during the prior years,
operations by the Bureau of Customs. P75,855.88 as
Internal Revenue although there was absolutely no concrete evidence of the sums
representation
actually spent for purposes of representation.
expenses.
On March 1, 1952, appellant filed its income tax The explanation to the effect that the supporting papers of some of
G.R. L-12798, return for 1951 reporting a gross income of the expenses had been destroyed when the house of appellant's
May 30, 1960 P420,633.40 and claimed deductions amounting to treasurer was burned, it not satisfactory, for appellant's records were
P379,036.95, leaving a net income of P41,596.45 on supposed to be kept in its offices, not in the residence of one of its
which it paid income tax in the sum of P8,319.29. officers.
(a) that part of the alleged representation expenses had never had any
supporting paper;
(e) that there is no more than oral proof to the effect that payments
had been made to appellant's officers for representation expenses
allegedly made by the latter and about the general nature of such
alleged expenses;
(f) that the gross income in 1950 exceeded the gross income in 1951
and 1952, and
23 Commissioner of Sometime in July, 1950, the late Don Carlos Palanca, Whether or not Yes.
Internal Revenue Sr. deductibility of
In a more recent case, Commissioner of Internal Revenue vs.
"interest on
vs donated in favor of his son, Carlos Palanca, Sr.,
indebtedness" Prieto, we explicitly announced that while the distinction between
shares of stock in La Tondea, Inc.
from a person's "taxes" and "debts" was recognized in this jurisdiction, the variance in
Carlos Palanca,
amounting to 12,500 shares. income tax under their legal conception does not extend to the interests paid on them,
Jr. section 30(b)(1) at least insofar as Section 30(b) (1) of the National Internal Revenue
For failure to file a return on the donation within the extends to Code is concerned.
statutory period, Carlos Palanca, Jr was assessed the "interest on
G.R. No. L-16626 sums of P97,691.23, P24,442.81 and P47,868.70 as taxes." Under the law, for interest to be deductible, it must be shown that
gift tax, 25% surcharge and interest, respectively, or there be an indebtedness, that there should be interest upon it, and
October 29, 1966 a total of P170,002.74, which he paid on June 22, that what is claimed as an interest deduction should have been paid
1955. or accrued within the year.
The year after, Palanca filed with the Bureau of It is here conceded that the interest paid by respondent was in
Internal Revenue his income tax return for the consequence of the late payment of his estate and inheritance, and
calendar year 1955, claiming, among others, a the same was paid within the year it is sought to be deducted.
deduction for interest amounting to P9,706.45 and
The only question to be determined, as stated by the parties, is
reporting a taxable income of P65,982.12.
whether or not such interest was paid upon an indebtedness within
On the basis of this return, he was assessed the sum the contemplation of Section (30) (b) (1) of the Tax Code, the pertinent
of P21,052.91. part of which reads:
Subsequently, Palanca Jr.
BIR denied the claim for refund. The amount of interest paid within the taxable year on
indebtedness, except on indebtedness incurred or
Morever, BIR considered the transfer of shares of continued to purchase or carry obligations the interest upon
stocks to be a transfer in contemplation of death, so which is exempt from taxation as income under this Title.
Palanca Jr was assessed a sum of P191,591.62 as
estate and inheritance taxes.
On August 12, 1958, Palanca, Jr. The term "indebtedness" as used in the Tax Code of the United States
containing similar provisions as in the above-quoted section has been
once more filed an amended income tax return for defined as the unconditional and legally enforceable obligation for the
the calendar year 1955, claiming, in addition to the payment of money.
interest deduction of P9,076.45 appearing in his
original return, a deduction in the amount of Within the meaning of that definition it is apparent that a tax may be
P60,581.80, representing interest on the estate and considered an indebtedness.
inheritance taxes on the 12,500 shares of stock, It follows that the interest paid by herein respondent for the late
thereby reporting a net taxable income for 1955 in payment of his estate and inheritance tax is deductible from his gross
the amount of P5,400.32 and an income tax due income under Section 30(b) of the Tax Code.
thereon in the sum of P428.00.
Attached to this amended return was a letter of the
petitioner, dated August 11, 1958, wherein he
requested the refund of P20,624.01 which is the
difference between the amounts of P21,052.01 he
paid as income tax under his original return and of
P428.00.
CIR denies his claim for refund.
On appeal, the Court of Tax Appeals, finding that the
amount paid by Palanca for interest on his
delinquent estate and inheritance tax is deductible
from the gross income for that year under section
30(b)(1) of the Revenue Code, ordered the CIR to
refund to the Palanca, Jr.
24 Philex Mining Philex Mining entered into an agreement with WON there is a No.
Corporation Baguio Gold for the former to manage and operate bad debt for
There is no bad debt in this case.
the latters mining claim known as Sto. Philex Mining to
vs treat it as a What the parties actually entered into was a partnership wherein each
Nino mine.
deduction of them was bound to contribute.
Commissioner of
Philex Mining made advancements; however, the
Internal Revenue mine still suffered losses which led to Philex
It is unlikely for a corporation to lend millions of pesos to another
corporation without any collateral or security; there was no stipulation
Minings withdrawal as manager of the mine.
for Baguio Gold to actually repay Philex Mining.
G.R. No. 148187 The parties entered into a compromise with dation
in payment where the assets of Baguio Gold were to
April 16, 2008 be transferred to Philex Mining. The inevitable conclusion is that the advances were not loans but
capital contributions to a partnership.
They can also be called investments.
In its annual income tax return, Philex Mining
deducted from its gross income the amount
representing a loss on settlement of receivables
from Baguio Gold. In sum, Philex Mining cannot claim the advances as bad debt
deduction.
Philex Mining failed to substantiate its assertion that the advances
BIR disallowed the deduction as bad debt and were subsisting debts that could be deducted from its gross income.
assessed Philex Mining a deficiency income tax.
25 Fernandez A joint decision involving four appeals, this case Cases L-21551 and Cases L-21551 and L-21557
Hermanos, Inc. deals with Fernandez Hermanos Inc., a domestic L-21557
corporation engaging in business as an investment
vs company that was assessed by the Commissioner I. Losses
of Internal Revenue for deficiency income taxes for I.
CIR and CTA 1. For Makati Lumber Co.
the years 1950 to 1954 and for 1957 due to alleged
discrepancies found upon its income tax returns. WON Tax court
-There was an adequate basis for the writing off of the stock
erred in its ruling
as worthless securities for Makati Lumber ceased operations
G.R. No. L-21551 with respect to
and became insolvent.
items of
September 30, Cases L-21551 and L-21557
disallowances
1969
2. Bad debts of Palawan Manganese Mines, Inc.
The items subject to discussion in these two cases
II. Advances made by Fernandez Hermanos Inc to its 100%
are:
subsidiary ( Palawan Manganese) as a form of financial help
WON
a.) Losses, without expectation of repayment were investments and
governments
not loans.
b.) Excessive depreciation of Houses, right to collect the
deficiency income No bad debt could arise where there is no valid and
c.) Taxable increase in net worth and
taxes in question subsisting debt.
d.) Gain realized from sale of real property. has already
It could not be properly considered worthless and
Prescribed. deductible.
The Tax Court sustained Commissioners Furthermore, neither under the Tax Code specifically Sec.
disallowance of the Losses (i.e.
Cases L-24972 and 30 (d) (2) & (e) (1) can there be a partial writing off of a loss
assailed bad debts of Palawan Manganese Mines, L-24978 or bad debt for such are deductible in full or not at all.
Co) and Excessive depreciation but overruled the
3. Balamban Coal Mines
Commissioners disallowances for items in relation
to taxable net worth, gain realized from real WON Tax court - Losses are deductible in 1952 when the mines are
property and losses in connection to Mati Lumber erred in its ruling abandoned since some definite event must fix time when
Co., Balamban Coal Mines, and Hacienda Dalupiri. with respect to loss is sustained i.e.
items of
disallowances - actual abandonment, and not in 1950 & 1951 when they
were still in operation.
Cases L-24972 and L-24978
4. Hacienda Dalupiri & Samal
- It is operated as a business and therefore, entitled to deduct
These cases refer to the taxpayers income tax
expenses and losses based on the inventory method of
liability for the year 1957.
accounting.
The taxpayer insists in this appeal that it could use
II. Depreciation of building
as a method for depletion under the pertinent
provision of the Tax Code its "capital investment" - The taxpayer did not submit any adequate proof so as to
representing the alleged value of its contractual justify its 10% depreciation per annum claim and thus, would
rights and titles to mining claims in the sum of be considered excessive.
P242,408.10 and thus deduct outright one-fifth
(1/5) of this "Capital investment" ever year,
26 Consolidated The BIR and Consolidated Mines got into a long and 1. 1. 1.
Mines, Inc. complicated court case over how to properly
WON the No. Rate of Mine
compute the companys net income.
vs company was Depletion
The company was consistent in using accrual method.
using a hybrid
CTA and CIR method of The issue was a misunderstanding by the BIR of the terminology used
The Consolidated Mines, Inc.
accounting rather by the company. 2.
(aka. than accrual.
Amount of
G.R. Nos. 2.
Company), a domestic corporation engaged in Depreciation
Here we distinguish between (1) the method of accounting used by the
L-18843 and L- mining, filed its income tax returns for 1951, 1952, Expense
The proper Company in determining its net income for tax purposes; and (2) the
18844 1953 and 1956.
amount of mine method of computation agreed upon between the Company and
August 29, 1974 In 1957, BIR investigated the income tax returns depletion expense Benguet in determining the amount of compensation that was to be
filed by the Company because it claimed the refund paid by the former to the latter.
3.
of the sum of P107,472.00 representing alleged
The parties, being free to do so, had contracted that in the method of
overpayments of income taxes for the year 1951. The amount of
computing compensation the basis were "cash receipts" and "cash
depreciation
payments." Once determined in accordance with the stipulated bases
expense.
and procedure, then the amount due Benguet for each month accrued
BIR found that (A) for the years 1951 to 1954 (1) the
4. at the end of that month, whether the Company had made payment
Company had not accrued as an expense the share
or not (see par.
in the company profits of Benguet Consolidated Disallowance of
Mines as operator of the Company's mines, payments made XIV of the agreement).
although for income tax purposes the Company had as expenses.
To make the Company deduct as an expense one-half of the "Accounts
reported income and expenses on the accrual basis;
Receivable" would, in effect, be equivalent to giving Benguet a right
(2) depletion and depreciation expenses had been
which it did not have under the contract, and to substitute for the
overcharged; and (3) the claims for audit and legal
parties' choice a mode of computation of compensation not
fees and miscellaneous expenses for 1953 and 1954
contemplated by them.
had not been properly substantiated; and that (B)
for the year 1956 (1) the Company had overstated Since Benguet had no right to one-half of the "Accounts Receivable,"
its claim for depletion; and (2) certain claims for the Company was correct in not accruing said one-half as a deduction.
miscellaneous expenses were not duly supported by
evidence. The Company was not using a hybrid method of accounting, but was
consistent in its use of the accrual method of accounting.
Upon motion, Tax Court further reduced the You cannot ascribe depreciation from incomplete constructions,
deficiency income tax liabilities of the Company to because being incomplete; they havent even begun to be used yet.
27 Antonio Roxas, Don Pedro Roxas and Dona Carmen Ayala, Spanish (1) Is the gain (1) NO.
Eduardo Roxas, subjects, transmitted to their grandchildren by derived from the
and hereditary succession the following properties: sale of the
Nasugbu farm In fine, Roxas y Cia.
Roxas Y CIA lands an ordinary
gain, hence 100% cannot be considered a real estate dealer for the sale in question.
(1) Agricultural lands with a total area of 19,000
vs hectares, situated in the municipality of Nasugbu, taxable? Hence, pursuant to Section 34 of the Tax Code the lands sold to the
CTA and CIR Batangas province; farmers are capital assets, and the gain derived from the sale thereof
is capital gain, taxable only to the extent of 50%.
(2) Are the
(2) A residential house and lot located at Wright St., deductions for
G.R. NO. L-25043
Malate, Manila; and business expenses It should be borne in mind that the sale of the Nasugbu farm lands to
April 26, 1968 and contributions the very farmers who tilled them for generations was not only in
deductible? consonance with, but more in obedience to the request and pursuant
(3) Shares of stocks in different corporations. to the policy of our Government to allocate lands to the landless.
(3) Is Roxas y Cia. It was the bounden duty of the Government to pay the agreed
compensation after it had persuaded Roxas y Cia.
To manage the above-mentioned properties, said liable for the
children, namely, Antonio Roxas, Eduardo Roxas payment of the to sell its haciendas, and to subsequently subdivide them among the
and Jose Roxas, formed a partnership called Roxas y fixed tax on real farmers at very reasonable terms and prices.
Compania. estate dealers? However, the Government could not comply with its duty for lack of
funds.
Agricultural Land Obligingly, Roxas y Cia.
shouldered the Government's burden, went out of its way and sold
lands directly to the farmers in the same way and under the same
In consonance with the constitutional mandate to
terms as would have been the case had the Government done it itself.
acquire big landed estates and apportion them
among landless tenants-farmers, the government
persuaded the Roxas brothers to part with their
(2) Tickets to a banquet in honor of Sergio Osmena and San Miguel
landholdings.
Beer given to various persons NOT DEDUCTIBLE
For the reason that Roxas y Cia. The findings of the Court of Tax Appeals or, this point is sustained.
28 Eufemia The petitioners sought for the reversal of the WON petitioners YES.
Evangelista et. decision of the Court of Tax Appeals which held have established
Petitioners have agreed to contribute and did contribute money to a
al. them liable for income tax, real estate dealers tax a partnership and
common fund for the purpose of engaging in real estate transactions
and residence tax for the real properties (parcels of are subject to tax
for monetary gain and divide the same among themselves because of
vs land) they bought within February 1943 to April on corporations
the following observations, among others: (1) Said common fund was
1994 from different persons, whose management under Section 24
The Collector of not something they found already in existence; (2)They invested the
of said properties was charged to their brother of the NIRC
Internal Revenue same, not merely in one transaction, but in a series of transactions; (3)
Simeon, and which were subsequently rented out to
and the CTA The aforesaid lots were not devoted to residential purposes, or to
various tenants from the year 1945-1949.
other personal uses, of petitioners herein.
Petitioners submit that they are mere co-owners of
the properties, not co-partners because some of the
G.R. No. L-9996
characteristics of partnership are not present, Petitioners argument that their being mere co-owners did not create
October 15, 1957 therefore, no legal entity with a personality a separate legal entity was rejected because, according to the Court,
separate from that of the members exists, and thus the tax in question is one imposed upon "corporations", which, strictly
they are excluded from the coverage of Section 24 speaking, are distinct and different from "partnerships".
of the National Internal Revenue Code of the
Philippines. When the NIRC includes "partnerships" among the entities subject to
the tax on "corporations", said Code must allude, therefore, to
organizations which are not necessarily "partnerships", in the
technical sense of the term.
The qualifying expression found in Section 24 and 84(b) clearly
indicates that a joint venture need not be undertaken in any of the
standard forms, or in conformity with the usual requirements of the
law on partnerships, in order that one could be deemed constituted
for purposes of the tax on corporations.
Accordingly, the lawmaker could not have regarded that personality
as a condition essential to the existence of the partnerships therein
referred to.
It also paid the Bureau of Internal Revenue If subject thereto, Section 53 subjects to withholding tax various specified income,
P66,112.00 income tax thereon. whether or not among them, "premiums", the generic connotation of each and every
they are subject word or phrase composing the enumeration in Subsection (b) thereof
to withholding tax is income.
On May 12, 1954, within the two-year period under Section 54
Perforce, the word "premiums", which is neither qualified nor defined
provided for by law, Alexander Howden & Co., Ltd. in relation to
by the law itself, should mean income and should include all premiums
Section 53 of the
filed with the Bureau of Internal Revenue a claim for constituting income, whether they be insurance or reinsurance
Tax Code.
refund of the P66,112.00, later reduced to premiums.
P65,115.00, because Alexander Howden & Co., Ltd.
agreed to the payment of P977.00 as income tax on Assuming that reinsurance premiums are not within the word
the P4,985.77 accrued interest. "premiums" in Section 53, still they may be classified as determinable
But the said claim was denied. and periodical income under the same provision of law.
31 Chamber of Real Chamber of Real Estate and Builders Associations, Whether or not No, Under RR 2-98, the tax base of the income tax from the sale of real
Estate and Inc. the imposition of property classified as ordinary assets remains to be the entitys net
Builders CWT on income income imposed under Section 24 (resident individuals) or Section 27
is questioning the constitutionality of Section 27 (E)
from sales of real (domestic corporations) in relation to Section 31 of RA 8424, i.e.
Associations, Inc. of Republic Act (RA) 8424 and the revenue
properties
regulations (RRs) issued by the Bureau of Internal gross income less allowable deductions.
vs classified as
Revenue (BIR) to implement said provision and
ordinary assets The CWT is to be deducted from the net income tax payable by the
The Hon. those involving creditable withholding taxes.
under RRs 2-98, 6- taxpayer at the end of the taxable year.
Executive 2001 and 7-2003,
Secretary is Precisely, Section 4(a)(ii) and (c)(ii) of RR 7-2003 reiterate that the tax
Petitioner also seeks to nullify Sections 2.57.2(J) (as unconstitutional. base for the sale of real property classified as ordinary assets remains
Alberto Romulo,
amended by RR 6-2001) and 2.58.2 of RR 2-98, and to be the net taxable income.
the Hon. Section 4(a)(ii) and (c)(ii) of RR 7-2003, all of which
Acting Secretary prescribe the rules and procedures for the
of Finance collection of creditable withholding tax (CWT) on Final withholding Tax (FWT) is imposed on the sale of capital assets.
the sale of real properties categorized as ordinary
Juanita D. On the other hand, CWT is imposed on the sale of ordinary assets.
assets.
Amatong, and
Petitioner contends that these revenue regulations The inherent and substantial differences between FWT and CWT
the Hon. CIR
are contrary to law for two reasons: first, they disprove petitioners contention that ordinary assets are being lumped
Guillermo together with, and treated similarly as, capital assets in contravention
Parayno, Jr. ignore the different treatment by RA 8424 of
ordinary assets and capital assets and second, of the pertinent provisions of RA 8424.
respondent Secretary of Finance has no authority to
collect CWT, much less, to base the CWT on the
G.R. No. 160756 The fact that the tax is withheld at source does not automatically mean
gross selling price or fair market value of the real
March 9, 2010 properties classified as ordinary assets. that it is treated exactly the same way as capital gains.
As aforementioned, the mechanics of the FWT are distinct from those
of the CWT.
The withholding agent/buyers act of collecting the tax at the time of
the transaction by withholding the tax due from the income payable is
the essence of the withholding tax method of tax collection.
32 Commissioner of On two occasions, Wander filed its withholding tax Whether or not YES.
Internal Revenue return and remitted to its parent company (Glaro Wander is
Section 24 (b) (1) of the Tax Code as amended provides that the
S.A. entitled to the
vs dividends received from a domestic corporation liable to tax shall be
preferential rate
Ltd, a Swiss Corporation not engaged in trade or 15% of the dividends received, subject to the condition that the
of 15%
Wander business in the Philippines) dividends on which 35% country in which the non-resident foreign corporation is domiciled
withholding tax
Philippines, Inc. withholding tax was withheld and paid to the BIR. shall allow a credit against the tax due from the non-resident foreign
on dividends
corporation taxes deemed to have been paid in the Philippines
and the Court of Later, Wander filed a claim for refund and/or tax declared and
equivalent to 20% which represents the difference between the
credit contending that it is liable only to 15% remitted to its
Tax Appeals regular tax (35%) in corporations and the tax (15%) dividends.
withholding tax in accordance with Section 24 (b) (1) parent
of the Tax Code as amended by PD 369 and 778. corporation,
Glaro.
G.R. No. L-68375 In this case, Switzerland did not impose any tax on the dividends
received by Glaro from the Philippines.
April 15, 1988
It follows then that the condition imposed under the above-
mentioned section is satisfied.
Hence, Wander is entitled to 15% withholding tax rate and the BIR
should make a refund and/or tax credit.
In the present case, the Tax Court opted to determine the working
capital sufficiency by using the ratio between current assets to current
liabilities.
The working capital needs of a business depend upon nature of the
business, its credit policies, the amount of inventories, the rate of the
turnover, the amount of accounts receivable, the collection rate, the
availability of credit to the business, and similar factors.
Petitioner, by adhering to the "Bardahl" formula, failed to impress the
tax court with the required definiteness envisioned by the statute.
We agree with the tax court that the burden of proof to establish that
the profits accumulated were not beyond the reasonable needs of the
company, remained on the taxpayer.
This Court will not set aside lightly the conclusion reached by the Court
of Tax Appeals which, by the very nature of its function, is dedicated
exclusively to the consideration of tax problems and has necessarily
developed an expertise on the subject, unless there has been an abuse
or improvident exercise of authority.31 Unless rebutted, all
presumptions generally are indulged in favor of the correctness of the
CIR's assessment against the taxpayer.