Taxation 2 Case Digests

Taxation 2
ESTATE TAX
1. Lorenzo v Posadas 64 Phil 353

2. Dizon v Posadas 57 Phil 465
3. Villa de Roces v Posadas 58 Phil 108
4. Collector v Fischer L-11621, January 28, 1961
5. Wells Fargo v Collector 70 Phil 505
6. Velilla v Posadas 62 Phil 624
7. Collector v Lara 102 Phil 813
8. Delpher v IAC 157 SCRA 349
9. Gallardo v Morales 107 Phil 903
10. BPI v Posadas 56 Phil 215
11. Marcos II v CA GR No. 120880, June 5, 1997
12. Balboa v Fanales 51 Phil 498
13. Vera v Navarro 79 SCRA 408
14. Ozaeta v Palanca 101 Phil. 976
15. Sison v Teodoro 100 Phil. 1056
16. Vera v Fernandez 89 SCRA 199
17. Estate of Hilario Ruiz v CA 252 SCRA 541
18. Elegado v CTA 173 SCRA 285
19. Commissioner v Pineda 21 SCRA 104
20. Gonzales v CTA 101 SCRA 633
21. CIR v CA GR No. 123206, March 22, 2000
22. Dizon v CTA GR No 140944, April 30, 2008
DONOR’S TAX
23. Pirovano v Commissioner 14 SCRA 832

24. Lladoc v Commissioner 14 SCRA 293
25. Tang Ho v CA 97 Phil 890
Additional cases
36. Del Rosario v Ferrer GR No. L-19201, June 16, 1965
37. Arangote v Maglunob 579 SCRA 620
38. Guerrero v RTC 229 SCRA 274
39. Siochi v Gozon 616 SCRA 87
40. Abello v CIR GR No. 129721, February 23, 2005
41. Collector v Campos-Rueda 42 SCRA 23
VALUE-ADDED TAX
26. Tolentino v CIR 235 SCRA 630

27. Tolentino v CIR GR No. 115455, October 30, 1995
28. ABAKADA v Ermita GR No. 168056, September 1, 2005
29. Philamlife v CA GR SP 31283, April 25, 1995
30. CIR v CA GR No. 125355, March 30, 2000
31. American Express v CIR GR No. 62727, February 28, 2002
32. - GR No. 152609, June 28, 2005
33. CIR v Burmeister & Wain GR No. 153205, January 22, 2007
34. CIR v Magsaysay Lines GR No. 146984, July 28, 2006
35. CIR v Seagate Tech GR No. 153811, February 11, 2005
42. Microsoft Philippines Inc. v CIR GR No. 180172, April 6, 2011

43. CIR v Sony Philippines GR No. 178697, November 17, 2010
44. KEPCO Phils v CIR GR No. 181858, November 24, 2010
45. AT&T Communications v CIR GR No. 182364, August 3, 2010
46. Silicon Philippines v CIR GR No. 172378, January 12, 2011
47. Diaz v Secretary of Finance GR No. 193007, July 9, 2011
48. PAGCOR v BIR GR No. 172087, March 15, 2011
49. Atlas v CIR GR No. 141104 & 148763, June 8, 2007
VPV & JGM

50. CIR v Aichi Forging Company GR No. 184923, October 6, 2010
51. Mirant v CIR GR No. 172129, September 12, 2008
52. CIR v San Roque GR No. 187485, February 12, 2013
53. CIR v San Roque GR No. 187485, October 8, 2013
54. Fort Bonifacio v CIR GR No. 158885 & 170680, April 2, 2009
55. CIR v Benguet GR No. 134587 & 134588, July 8, 2005
56. CIR v SM Prime Holdings GR No. 183505, February 26, 2010
57. CIR v Phil American Accident GR No. 141658, March 18, 2005
OTHER PERCENTAGE TAXES
58. Chinabanking Corp v CTA GR No. 146749, June 10, 2003

59. RP v Sunlife GR No. 158085, October 14, 2005
60. CIR v Lhuillier GR No. 150947, July 15, 2005
61. First Planters v CIR GR No. 174134, July 30, 2008
62. CIR v Solidbank GR No. 148191, November 25, 2003
63. CIR v Bank of Commerce GR No. 149636, June 8, 2005
64. CIR v BPI GR No. 147375, June 26, 2006
65. CIR v Citytrust GR No. 139786
66. Asianbank Corp. v CIR GR No. 140857, September 27, 2006
68. PBA v CTA GR No. 119122, August 8, 2000
EXCISE TAXES ON CERTAIN GOODS
69. British American v Camacho GR No. 163583, August 20, 2008

70. Exxonmobil Petroleum v CIR GR No. 180909, January 19, 2011
71. CIR v Pilipinas Shell GR No. 188497, April 23, 2012
72. Phil Geothermal v CIR GR No. 154028, July 29, 2005
73. SILKAIR v CIR GR No. 173594, February 6, 2005
74. Apex Mining v CIR GR No. 122472, October 20, 2005
DOCUMENTARY STAMP TAX
75. Del Rosario v Hamoy GR No. L-77154, June 30, 1987

76. CIR v Fireman’s Fund GR No. L-30644, March 9, 1987
77. CIR v Heald Lumber 10 SCRA 376
78. Gabucan v Manta 95 SCRA 752
79. Lincoln v CA GR No. 118043, July 23, 1998
80. Int’l Exchange Bank v CIR GR No. 171266, April 4, 2007
81. BDO v CIR GR No. 173602, January 15, 2007
82. Chinabank v CIR CTA 6400, January 3, 2006
83. Int’l Exchange Bank v CIR GR No. 171266, April 4, 2007
84. CIR v Lincoln GR No. 119176, March 19, 2002
86. Blue Healthcare v Olivares GR No. 169737, February 12, 2008
87. Philhealthcare v CIR GR No. 167330, June 12, 2008
88. CIR v Construction Resources 145 SCRA 673
89. Phil Consolidated Coconut 70 SCRA 22
90. BDO v CIR CTA EB 165 August 15, 2005
91. CIR v First Express GR Nos. 172045-172046, June 16, 2009
92. CIR v Manila Bankers GR No. 169103, March 16, 2011
93. Supreme Transliner v BPI GR No. 165617, February 25, 2011
REMEDIES
94. RP v CTA GR No. L-38540, 149 SCRA 351

95. Collector v Bautista L-12250, L-12259, May 27, 1959 (Not found)
96. CIR v Metro Star Superama GR No. 185371, December 8, 2010
97. Republic v Ricarte GR No. L-46893, November 12, 1985
98. Advertising Assoc v CTA 133 SCRA 765
99. CIR v Union Shipping GR No. 66160, May 21, 1990
100. Surigao Electric v CTA 57 SCRA 523
101. CIR v Isabela Cultural GR No. 135210, July 11, 2001
102. Oceanic Wireless v CIR GR No. 148380, December 9, 2005
103. Gibbs v Commissioner GR No. L-17406, November 29, 1965
104. Gibbs v Collector GR No. L-13453, February 29, 1960
105. CIR v TMX Sales & CTA GR No. 83736, January 16, 1992
106. Commissioner v Philamlife GR No. 105208, May 29, 1995
107. Pacific Pro Ltd Case GR No. 68013, November 12, 1984 (Not found)
108. United Airlines v CIR GR No. 178788, September 29, 2010
109. CIR v Wyeth GR No. 76281, September 30, 1991
110. ABS-CBN v CTA 108 SCRA 143
111. Lim v CA GR No. L-48134-37, October 18, 1990
112. CIR v CA & Lucio Tan GR No. 119322, June 4, 1996
113. CIR v CTA & Fortune GR No. 119761, August 29, 1996
114. CIR v Pascor Realty GR No. 128315, June 29, 1999
115. CIR v Lascona GR No. 58061, October 25, 2005
116. San Agustin v CIR GR No. 138485, September 10, 2001
117. Phil Journalists v CIR GR No. 162852, December 16, 2004
118. CIR v Phil Global GR No. 167146, October 31, 2006
119. RCBC v CIR GR No. 168498, April 24, 2007
120. BPI v CIR GR No. 174942 (Not found)
121. Petron v CIR GR No. 180385, July 28, 2010 (Not found)
122. CIR v Gonzales GR No. 177279, October 13, 2010 (Not found)
123. Estate of Diez v CIR GR No. 15554, January 27, 2004
124. Asianbank v Commissioner CTA 6095, October 9, 2001 (Not found)
125. CIR v Enron GR No. 166387, January 19, 2009
126. CIR v FMF Development Corp GR No. 167766, June 30, 2008
127. FEBTC v CIR GR No. 138919, May 2, 2006
128. CIR v Reyes GR No. 159694, January 27, 2006
129. Santos v People GR No. 173176, August 26, 2008
130. Fitness v CIR GR No. 177982, October 17, 1008
131. Asia Int’l v Parayno 540 SCRA 536 (2007)
132. British American v Camacho 562 SCRA 611 (2008)
COMPLIANCE REQUIREMENTS
133. Thomson Shirt v CIR CTA 377, 8/27/1963 (Not found)

134. Lim Hoa Ting v Central 104 Phil 573
STATUTORY OFFENSES & PENALTIES
135. Castro v CIR GR No. L-12174, April 26, 1962

136. Hilado v CIR GR No. L-9408, October 31, 1956
137. CIR v Citytrust GR No. 106611, July 21, 1994
138. Collector v Clement GR No. L-12194, January 24, 1959
139. Collector v Solano GR No. L-11475, July 31, 1958 (Not found)
140. Bisaya Land v Collector GR No. L-12100, May 23, 1959
141. Bollozos v CTA GR No. L-16441
142. Republic v Patanao GR No. L-22356, July 21, 1967
143. People v Balagtas GR No. L-10210, July 29, 1959 (Not found)
144. Phil. Int’l Fair v Collector GR No. L-12928, March 31, 1962
145. People v Tierra GR No. L-17177-17180, December 28, 1964
1. Lorenzo v Posadas
GR No L-43082, June 18, 1937
FACTS:
Lorenzo, in his capacity as trustee of the estate of Thomas Hanley, brought an action against the
Collector of Internal Revenue Posadas for the refund of P2,052.74 inheritance taxes. The
properties under the will were to pass to Matthew Hanley after 10 years.
ISSUE:
(a) When does the inheritance tax accrue and when must it be satisfied?
(b) Should the inheritance tax be computed on the basis of the value of the estate at the time
of the testator’s death or on its value ten years later?
(c) In determining the net value of the estate subject to tax, is it proper to deduct the
compensation due to trustees?
(d) What law governs the case?
(e) Has there been delinquency in the payment of the inheritance tax?
RULING:
(a) Thomas Hanley having died on May 27, 1922, the inheritance tax accrued as of that date.
But it must be paid before the delivery of the properties in question to PJM Moore as
trustee on March 10, 1924.
(b) It should be computed at the time of the decedent’s death, regardless of any subsequent
contingency value of any increase or decrease, and notwithstanding the postponement of
the actual possession or enjoyment of the estate by the beneficiary and tax measured by
the value of the property transmitted at that time regardless of its appreciation or
depreciation.
(c) No. The compensation of a trustee, earned not in the administration of the estate, but in
the management thereof for the benefit of the legatees or devises, does not come properly
within the class or reason for exempting administration expenses.
(d) Act 3031 and not Act 3606 applies. Even if Act 3606 is more favorable to the taxpayer,
revenue laws, generally, which impose taxes collected by means ordinarily resorted to for
the collection of taxes are not classed as penal laws.
(e) Yes. That taxes must be collected promptly is a policy deeply entrenched in our tax
system. Thus, no court is allowed to grant injunction to restrain the collection of any
internal revenue tax. The mere fact that the estate of the deceased was placed in trust did
not remove it from the operation of our inheritance tax laws or exempt it from the payment
of the inheritance tax.
2. Dison v Posadas, Jr.
GR No. L-36770, November 4, 1932
FACTS:
Luis Dison, son of decedent, received from his father before his death by a deed of gift
inter vivos property which was duly accepted and registered before the death of his father. Dison
filed suit for recovery of the inheritance tax amounting to P2,808.73 he paid under protest.
ISSUE:
Does Section 1540 of the Administrative Code subject to plaintiff-appellant to the payment
of an inheritance tax?
RULING:
Yes. The facts warrant the inference that the transfer was an advance upon the inheritance
that the donee as the sole and forced heir of the donor, would be entitled to receive upon the death
of the donor.
Section 1540 plainly does not tax gifts per se but only when those gifts are made to those
who shall prove to be the heirs, devisees, legatees or donees mortis causa of the donor.
3. Vidal de Roces v Posadas
GR No. 34937, March 13, 1933
FACTS:
Sometime in 1925, plaintiffs Concepcion Vidal de Roces and her husband as well as Elvira
Richards received as donation several parcels of land from Esperanza Tuazon.
Tuazon died a year later with a will on which she bequeathed to each of the donees the
sum of P5,000. After the distribution of the estate but before the delivery of their respective shares,
the CIR ruled that the donees should pay inheritance tax. The same was paid under protest.
The plaintiffs contend that Section 1540 of the Administrative Code which reads – “after
deductions have been made, there shall be added to the resulting amount the value of all gifts or
advances made by the predecessor to any of those who, after his death, shall prove to be his heirs,
devisees, legatees or donees mortis causa.”
ISSUE:
Are the properties received by plaintiffs subject to inheritance tax?
RULING:
Yes. The Court referred to the allegations that the transmissions were effected in the
month of March 1925, that the donor died in January 1926 and that the donees were instituted
legatees in the donor’s will which was admitted to probate. It is from these allegations, especially
the last that the Court infers a presumption juris tantum that the donations were made mortis causa
and as such, are subject to the payment of inheritance taxes.
The same was imposed on the transmission of said properties in contemplation or in
consideration of the donor’s death and under the circumstance that the donees were later instituted
as the former’s legatees.
4. CIR v Fischer
GR No. L-11622, 1/28/1961
FACTS:
Walter Stevenson, decedent, a British national, was born and married in the Philippines. In
his will, he instituted his wife Beatrice Stevenson as sole heiress to his real and personal properties
acquired in the Philippines. The CIR and the administrator of the estate had different opinions
regarding exemptions and deductions from the estate.
ISSUES:
(1) In determining the taxable net estate of the decedent, should ½ of the net estate be
deducted as share of the surviving spouse in accordance with our law on conjugal
partnership?
(2) May the estate avail of the reciprocity proviso of the NIRC granting exemption from the
payment of estate and inheritance taxes on the 210,000 shares of stock in the Mindanao
Mother Lode Mines, Inc.?
(3) Whether or not the estate is entitled to the deduction of P4,000 allowed by Sec 861 of the
US Internal Revenue Code
(4) Whether the real estate properties located in Baguio and the 210,000 shares of stocks in
the Mindanao Mother Lode Mines, Inc. were correctly appraised by the lower court
(5) Is the estate entitled to the following deductions:
P 8,604 for judicial and administration expenses;
P 2,087 for funeral expenses;
P 653 for real estate taxes
P 10,022 for representing the amount of indebtedness allegedly incurred by the decedent
during his lifetime;
(6) Is the estate entitled to the payment of interest on the amount it claims to have overpaid
the government and to be refundable to it?
RULING:
(1) Yes. In the absence of proof, the doctrine of processual presumption applies. The Court is
justified is presuming that the law of England on this matter is that same as our law.
(2) Yes. The testimony of an attorney-at-law of San Francisco, California who quoted verbatim
a section of the California Civil Code and stated that it was in force is sufficient evidence to
establish the existence of said law.
(3) No. Under the Federal Law, which is equally enforceable in California, a Filipino is bound
to pay the same, there being no reciprocity recognized in respect thereto.
(4) The appraisal of the land is presumed valid unless contrary is shows. As regards the
stocks, the fair market value should be taxed on the basis of the price prevailing in our
country.
(5) Only the P10,000 indebtedness is disallowed. This was incurred outside the country and
the value of the estate outside should have been reported in order to have proper
computation of the deduction.
(6) No. In the absence of contrary statutory provision, the National Government cannot be
required to pay interest.
5. Wells Fargo Bank & Union Trust Company v CIR
GR No. L-46720, June 28, 1940
FACTS:
Birdie Lillian Eye died on September 16, 1932 at Los Angeles California, the place of her
alleged last residence and domicile. Among the properties she left was her ½ conjugal shares of
stock in the Benguet Consolidated Mining Co., an anonymous partnership, organized under the
laws of the Philippines. She left a will duly admitted to probate in California where her estate was
administered and settled. Wells Fargo was the duly appointed trustee. The Federal and California
State’s inheritance taxes due thereon have been duly paid. The CIR in the Philippines, however,
sought to subject the shares of stock to inheritance tax, to which Wells Fargo objected.
ISSUE:
Whether the shares of stock are subject to Philippine inheritance tax
RULING:
Yes. Originally, the settled law in the United States is that intangibles have only one situs
for the purpose of inheritance tax and such situs is in the domicile the decedent at the time of his or
her death. But, the rule has been relaxed.
The maxim “mobilia sequunter personam” upon which the rule rests, has been decried as
a mere fiction of law having its origin in considerations of general convenience and public policy
and cannot be applied to limit or control the right of the state to tax property within its jurisdiction
and must yield to established fact of legal ownership, actual presence and control elsewhere, and
cannot be applied if to do so would result in inescapable and patent injustice.
This rests on either of two fundamental considerations:
(1) Upon the recognition of the inherent power of each government to tax persons, properties
and rights within its jurisdiction and enjoying, thus, the protection of its laws and
(2) Upon the principle that as to intangibles, a single location in space is hardly possible,
considering the multiple, distinct relationships that may be entered into with respect
thereto.
Herein, the actual situs of the shares of stock is in Philippines, the corporation being domiciled
therein.
Accordingly, the jurisdiction of the Philippine Government to tax must be upheld.
6. Velilla v Posadas, Jr.
GR No. : L-43314, December 19, 1935
FACTS:
Arthur Graydon Moody died in India. He executed a will in the Philippines, instituting his
sister Ida Palmer as sole heir. The estate of Moody paid the inheritance tax under protest. It is
alleged that Moody was a non-resident of the Philippine Island.
ISSUE:
Whether Arthur Moody was legally domiciled in the Philippine Islands on the day of his
death
RULING:
Yes. Moody was never married and had his legal domicile in the Philippines from 1902 or
1903 forward during which time he accumulated a fortune from his business in the Philippines.
There is no statement of Moody, oral or written, in the record that he had adopted a new
domicile while he was absent from Manila. Moody’s continued absence was due to and reasonably
accounted for. He knew that on his return he would be immediately confined in the Cullion Leper
Colony.
7. CIR v De Lara
GR Nos. L-9456 and L-9481, January 6, 1958
FACTS:
Hugo Miller is an American citizen. In 1905, he came to the Philippines lived here until his
death in 1931. He lived at the Manila Hotel but transferred from the Manila Hotel to the Army and
Navy Club upon the death of his wife. He executed a will in which he declared that he was of Santa
Cruz, California. He was taken prisoner by the Japanese forces and since then, nothing has been
heard from him. The estate protested the assessment of liability for estate and inheritance taxes.
ISSUE:
Whether the decedent was a resident or a non-resident of the Philippines at the time of his
death
RULING:
He is a non-resident. Miller had his domicile or residence at Santa Cruz, California. During
his stay in the country, Miller never acquired a house for residential purpose. Also, his wife never
stayed in the Philippines. The bulk of his savings and properties were in the US.
Thus, the only properties of his estate subject to estate and inheritance taxes are those
shares of stock issued by Philippine corporations valued at P 51,906.45.
Residence and domicile are used interchangeably for tax purposes and without distinction.
Also, considering the State of California as a foreign country in relation to Section 122 of our Tax
Code, the Ancillary Administrator is entitled the exemption from the inheritance tax on the
intangible personal property found in the Philippines.
8. Delpher Trades Corporation v IAC
GR No L-69259, 1/26/1988
FACTS:
Delfin and Pelagia Pacheco, siblings, were the owners of real estate that was leased to
Construction Components International Inc. The latter’s right of first refusal were assigned to Hydro
Pipes Philippines Inc. with the consent of the Pachecos. On 1976, a deed of exchange was
executed between lessors Delfin and Pelagia Pacheco and Delpher where the leased property and
another parcel of land for 2,500 shares of stock of Delpher Trades with a total value of P1,500,000.
ISSUE:
Whether the Deed of Exchange of the properties executed by the Pachecos and Delpher
trades was meant to be a contract of sale which in effect prejudiced the respondent’s right of first
refusal
RULING:
No, the transfer of properties to a corporation in exchange for shares of stock of the
corporation where the transferors gain control of the said corporation does not constitute a sale of
properties. The transaction merely involves a change in the nature of the ownership of properties
from unincorporated to incorporated. Ownership over the properties remains the same.
The records do not point to anything wrong or objectionable about this “estate planning”
scheme resorted to by the Pachecos. The legal right of a taxpayer to decrease the amount of what
otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be
doubted.
9. Gallardo v Morales
FACTS:
In accordance with a compromise agreement, a decision was rendered therein by the Court of First
Instance of Manila, on February 3, 1956, sentencing defendant Morales to pay to plaintiff Gallardo
P7,000.00. In due course, the corresponding writ of execution was issued and delivered to the
Sheriff of Manila, who, on August 8, 1956, garnished and levied execution on the sum of
P7,000.00, out of the P30,000.00 due from the Capital Insurance & Surety Co., Inc., to said
defendant, as beneficiary under a personal accident policy issued by said company to defendant’s
husband, Luis Morales, who died, on August 26, 1950, by assassination.
Defendant asked the sheriff to quash and lift said garnishment or levy on execution.
ISSUE:
whether a personal accident insurance that "insures for injuries and/or death as a result of murder
or assault or attempt thereat" is a life insurance, within the purview of Rule 39, section 12,
subdivision (k), of the Rules of Court, exempting from execution.
RULING
Yes.
Indeed, it has been held that statutes of this nature seek to enable the head of the family to secure
his widow and children from becoming a burden upon the community and, accordingly, should
merit a liberal interpretation.
exemption statutes or rules should be liberally construed with a view to giving effect to their
beneficent and humane purpose. To this end, every reasonable doubt as to whether a given
property is or is not exempt should be resolved in favor of exemption
10. BPI v Posadas
G.R. No. L-34583 October 22, 1931
FACTS:
The present complaint seeks to recover from the defendant Juan Posadas, Jr., Collector of Internal
Revenue, the amount of P1,209 paid by the plaintiff under protest, in its capacity of administrator of
the estate of the late Adolphe Oscar Schuetze, as inheritance tax upon the sum of P20,150, which
is the amount of an insurance policy on the deceased's life, wherein his own estate was named the
beneficiary.
ISSUES:
1. whether the amount thereof is paraphernal or community property.
2. whether an insurance policy on said Adolphe Oscar Schuetze's life was, by reason of its
ownership, subject to the inheritance tax
RULING:
1. With the exception of the premium for the first year covering the period from January 14, 1913 to
January 14, 1914, all the money used for paying the premiums, i. e., from the second year, or
January 16, 1914, or when the deceased Adolphe Oscar Schuetze married the plaintiff-appellant
Rosario Gelano, until his death on February 2, 1929, is conjugal property inasmuch as it does not
appear to have exclusively belonged to him or to his wife
2. Yes. the proceeds of a life-insurance policy payable to the insured's estate as the beneficiary, if
delivered to the testamentary administrator of the former as part of the assets of said estate under
probate administration, are subject to the inheritance tax according to the law on the matter, if they
belong to the assured exclusively, and it is immaterial that the insured was domiciled in these
Islands or outside.
Wherefore, the judgment appealed from is reversed, and the defendant is ordered to return to the
plaintiff the one-half of the tax collected upon the amount of P20,150, being the proceeds of the
insurance policy on the life of the late Adolphe Oscar Schuetze, after deducting the proportional
part corresponding to the first premium
11. Marcos II v CA
GR No 120880, June 5, 1997
FACTS:
The CIR is being questioned by petitioner for assessing and collecting through the summary
remedy of levy on real property, estate and income tax delinquencies upon the estate and
properties of the late Ferdinand Marcos despite the pendency of the proceedings on the probate of
the will of the late president.
ISSUE:
Are summary tax remedies affected by the probate proceedings?
RULING:
No. It is discernible that the approvable of the court, sitting in probate or as a settlement tribunal
over the deceased is not a mandatory requirement in the collection of estate taxes. It cannot
therefore be argued that the tax bureau erred in proceeding with the levying sale of the properties
on the ground that it was required to seek court approval.
12. Balboa v Farrales
G.R. No. L-27059 February 14, 1928
FACTS:
Sometime in the year 1913, the plaintiff Buenaventura Balboa filled with the Bureau of Lands an
application for homestead, No. 10619, under the provisions of Act No. 926, covering a tract of land
in Culis, Hermosa, Bataan. On July 1, 1919, said Act No. 926 was repealed by Act No. 2874.
On August 11, 1924, said Buenaventura Balboa, for and in consideration of the sum of P950, sold
said land to the defendant Cecilio L. Farrales.
On March 6, 1926, the plaintiff commenced the present action for the purpose of having said sale
declared null and void on the ground of lack of consent on his part and fraud on the part of the
defendant, and on the further ground that said sale was contrary to, and in violation of the
provisions of section 116 of Act No. 2874.
trial judge rendered a judgment in favor of the plaintiff and against the defendant, ordering the latter
to return to the plaintiff the land
ISSUE:
which of the two Acts — 926 and 2874 — shall be applied in determining whether the sale in
question is valid or not?
RULING:
Act 926 applies and the sale is valid.
The moment the plaintiff had received a certificate from the Government and had done all that was
necessary under the law to secure his patent, his right had become vested before the patent was
issued. His right had already vested prior to the issuance of the patent, and his rights to the land
cannot be affected by a subsequent law or by a subsequent grant by the Government to any other
person.
It follows, therefore that the sale of the land in question by the plaintiff Buenventura Balboa to the
defendant Cecilio L. Farrales does not infringe said prohibition, and consequently said sale is valid
and binding, and should be given full force and effect.
13. Vera v Navarro
G.R. No. L-27745 October 18, 1977
FACTS:
Elsie M. Gaches died on March 9, 1966 without a child. The deceased, however, left a last will and
testament giving properties to several persons.
Judge Tan was appointed as executor of the testate estate of Elsie M. Gaches without a bond.
In a letter, dated June 3, 1966, Judge Tan informed the Commissioner that the testate estate was
worth about ten million (P10 million) pesos and that the estate and inheritance taxes due thereon
were about P9.5 million.
After several reassessments, the case ultimately came to the Supreme Court.
ISSUES:
(1) Should the herein respondent heirs be required to pay first the inheritance tax before the
probate court may authorize the delivery of the hereditary share pertaining to each of them?
(2) Are the respondent heirs herein who are citizens and residents of the Philippines liable for the
payment of the Philippine inheritance tax corresponding to the hereditary share of another heir who
is a citizen and resident of the United States of America. said share of the latter consisting of
personal (cash deposits and, shares) properties located in the mentioned court
(3) Does the assignment of a certificate of time deposit to the commissioner of Internal Revenue for
the purpose of paying t I hereby the estate tax constitute payment of such tax?
(4) Should the herein respondent heirs be held liable for the payment of surcharge and interest on
the amount (P700,000.00) representing the face value of time deposit certificates assigned to the
Commissioner that could not be converted into cash?
RULING:
(1) No. the distribution of a decedent's assets may only be ordered under any of the following three
circumstances, namely, (1) when the inheritance tax, among others, is paid; (2) who bond a
suffered bond is given to meet the payment of the tax and all the other options of the nature
enumerated in the above-cited provision; etc. This was not complied with
(2) No. An analysis of our tax statutes supplies no sufficient indication that the inheritance tax, as
a rule, was meant to be the joint and solidary liability of the heirs of a decedent. the payment of the
inheritance tax should be taken as the individual responsibility, to the extent of the benefits
received, of each heir.
3. No. a time deposit certificate is a mercantile document and is essentially a promissory note. 5 By
the express terms of Article 1249 of the Civil Code of the Philippines, the use of this medium to
clear an obligation will "produce the effect of payment only when they have been cashed, or when
through the fault of the creditor they have been impaired." Consequently, the value of the said
certificates (P700,000.00) should still be considered outstanding.
4. Yes. The Interest charge for 1% per month imposed under Section 101 (a) (1) of the Tax Code is
essentially a commotion to the State for delay in the payment of the tax due thereto
The estate cannot likewise be exempted from the payment of the 5% surcharge imposed by
Section 101 (c) of the Tax Code.
14. G.R. No. L-9776 July 31, 1957
Ozaeta v Palanca
FACTS:
On May 5, 1955, the special administrator filed a petition in court for authority to pay the accounting
firm of Sycip, Gorres, Velayo& Co. the sum of P3,650, for services rendered in taking inventory of
assets in 1950, tax consultations in 1950 to 1954, and preparation of income tax returns for 1953
and 1954. The court below denied this motion, on the ground that the services covered by the fees
of the accounting firm were rendered to the former special administrator Philippine Trust Company
ISSUE:
Whether the services rendered to the special administrator named in the will, previous to his actual
appointment as such and at his instance, are chargeable against the estate.
RULING:
Yes.
Whoever may have contracted the services of the accountants, whether it was Mr. Ozaeta before
his appointment or the Philippine Trust, such services were for the benefit of the estate and have
redounded to the estate's benefit.
The general rule is that acts done by an executor in the interest of his trust, prior to his qualification
as such, become binding on the estate upon his qualification
There is no question that the services rendered were for the benefit of the estate. The Rules
require that the administrator should submit an inventory of the properties of the estate within three
months from his appointment
15. Sison v Teodoro
GR No. L-9271, March 29, 1957
FACTS:
The CA of Manila, which has jurisdiction over the estate of the late Margarita David, appointed
Carlos Moran Sison as judicial administrator, without compensation, after filing a bond of P5,000.
ISSUE:
Whether a judicial administrator, serving without compensation, is entitled to charge as an expense
of administration the premiums paid on his bond
RULING:
No. Appellant having waived compensation, he cannot now be heard to complain of the expenses
incident to his qualification. It is farfetched to conclude that the giving of a bond by an administrator
is a necessary expense in the care, management and settlement of the estate because these
expenses are incurred after the executor or administrator has met the requirement of the law and
has entered upon the performance of his duties.
16. Vera v Fernandez
GR No L-31364, March 30, 1979
FACTS:
This case is an appeal from the two orders of the Court of First Instance of Negros
Occidental, Branch V in Special Proceeding which dismissed the motion for allowance of claim and
for an order of payment of taxes by the Government against the Estate of the late Luis D. Tongoy
for deficiency taxes for the years 1963 and 1964 of the decedent.
ISSUE:
Whether or not the statute f non-claims Section 5, Rule 86 of the New Rule of Court bars
claim of the government for unpaid taxes, still within the period of limitation prescribed in Section
331 and 332 of the National Internal Revenue Code
RULING:
No. A perusal of the law shows that it makes no mention of claims for monetary obligation
of the decedent created by law such as taxes.
Under the familiar rule of statutory construction, the mention of one thing implies the
exclusion of another thing not mentioned. The reason is that taxes are the lifeblood of the
Government and their prompt and certain availability are imperious need.
17. Estate of Hilario Ruiz v CA
G.R. No. 118671. January 29, 1996
FACTS:
Hilario M. Ruiz executed a holographic will naming as his heirs his only son, Edmond Ruiz, his
adopted daughter, private respondent Maria Pilar Ruiz Montes, and his three granddaughters,
On April 12, 1988, Hilario Ruiz died.
On June 29, 1992, four years after the testator’s death, it was private respondent Maria Pilar Ruiz
Montes who filed before the Regional Trial Court, Branch 156, Pasig, a petition for the probate and
approval of Hilario Ruiz’s will and for the issuance of letters testamentary to Edmond Ruiz
ISSUE:
Whether the probate court, after admitting the will to probate but before payment of the estate’s
debts and obligations, has the authority: (1) to grant an allowance from the funds of the estate for
the support of the testator’s grandchildren; (2) to order the release of the titles to certain heirs; and
(3) to grant possession of all properties of the estate to the executor of the will.
RULING:
1. No. Be that as it may, grandchildren are not entitled to provisional support from the funds of the
decedent’s estate. The law clearly limits the allowance to “widow and children” and does not
extend it to the deceased’s grandchildren, regardless of their minority or incapacity.
2. No. No distribution shall be allowed until the payment of the obligations above-mentioned has
been made or provided for, unless the distributees, or any of them, give a bond, in a sum to be
fixed by the court, conditioned for the payment of said obligations within such time as the court
directs.
3. No. The right of an executor or administrator to the possession and management of the real and
personal properties of the deceased is not absolute and can only be exercised “so long as it is
necessary for the payment of the debts and expenses of administration, He cannot unilaterally
assign to himself and possess all his parents’ properties and the fruits thereof without first
submitting an inventory and appraisal of all real and personal properties of the deceased, rendering
a true account of his administration, the expenses of administration, the amount of the obligations
and estate tax, all of which are subject to a determination by the court as to their veracity, propriety
and justness.
18. Elegado v CTA
GR No. L-68385, May 12, 1989
FACTS:
Warren Taylor Graham, an American national formerly resident in the Philippines, died in Oregon,
USA. As he left certain shares of stock in the Philippines, his son filed an estate tax return on
September 16, 1976, with the Philippine Revenue Representative in San Francisco, USA. The
ancillary administrator of his estate filed a second estate tax return.
While the protest to the assessment of the first estate tax return was pending, the
Commissioner filed a motion for the allowance of the basic estate tax of P96,509.35 that was
assessed on the basis of the first estate tax return. The current petition is on certiorari.
ISSUES:
(1) Whether the shares of stocks left by the decedent should be treated as his exclusive property
and not conjugal
(2) Whether the said stocks should be assessed as of the time of the owner’s death or six months
thereafter
(3) Whether the appeal filed with the court of tax appeals should be considered moot and academic
RULING:
(1&2) The issues are immaterial in these proceedings. So too is the time at which the assessment
of these shares of stock should have been made by the BIR. These questions were not resolved by
the CTA because it had no jurisdiction to act on the petitioner’s appeal from an assessment that
had already been cancelled.
(3) Yes. It is illogical to suggest that a provisional assessment can supersede an earlier
assessment that had clearly become final and executory. The first assessment is already final and
executory and can no longer be questioned at this late hour. The assessment was made on
February 9, 1978. It was protested on March 7, 1978. The protest was denied on July 7, 1978. As
no further action was taken therefrom by the decedent’s estate, there is no question that the
assessment has become final and executory.
19. CIR v Pineda
GR No. L-22734, September 15, 1967
FACTS:
BIR investigated the income tax liability of Anastacio Pineda’s estate for the years 1945, 1946,
1947 and 1948 and it found that the corresponding income tax returns were not filed. This resulted
to a P760.28 deficiency income tax for 1945 and 1946 and real estate dealer’s fixed tax for the 4th
quarter of 1946 and for the whole 1947. Manuel Pineda, eldest son of Anastacio, received the
assessment. He contested the same alleging that only a proportionate part should be his liability.
CTA ruled that Pineda is liable only for taxes corresponding to his share in the estate. Hence, the
present petition.
ISSUE:
Whether the Government can require Manuel B. Pineda to pay the full amount of the taxes
assessed
RULING:
Yes. As a holder of property belonging to the estate, Pineda is liable for the tax up to the amount of
the property in his possession. The BIR is given the discretion to avail of the most expeditious way
to avail of the most expeditious way to collect the tax. This is, of course, without prejudice to
Pineda’s right of contribution for his co-heirs.
Put simple, the Supreme Court held that the rule on solidarity applies to taxes because it is not an
ordinary contract.
Two persons liable for payment of estate tax:
(1) executor or administrator;
(2) heirs up to the extent of their inheritance.
20. Gonzales v CTA
G.R. No. L-14532 May 26, 1965
FACTS:
Both petitioners Jose and Juana Gonzales are co-heirs and co-owners, (one-sixth each) of a tract
of land of 871, [982.] square meters that they, along with four other co-heirs, inherited from their
mother. So on November 15, 1956, Jose Leon Gonzales and Juana F. Gonzales submitted to the
Court of Tax Appeals a joint petition seeking a refund, this time of the amount of P86,166.00 for
each of the two petitioners.
ISSUES:
(1) Whether or not petitioners' claim for refund of the total of P86,166.00 may be properly
entertained; and
(2) Whether or not the sum of P89,309.61 which each of the petitioners received as interest on the
value of the land expropriated is taxable as ordinary income, and not as capital gain.
RULING:
1. No. the requirement of prior timely claim for refund of the sum of P86,166.00 had not been met
in this case. The demand for refund must precede the suit, and this requirement is mandatory; so
much so that non-compliance therewith bars the action
2. It is ordinary income. "The acquisition by the Government of private properties through the
exercise of the power of eminent domain, said properties being justly compensated, is embraced
within the meaning of the term 'sale' or 'disposition of property'" and the definition of gross income
laid down by Section 29 of the Tax Code of the Philippines. We also adhered to the view that the
transfer of property through condemnation proceedings is a sale or exchange and that profit from
the transaction constitutes capital gain.
In fact, the authorities support the conclusion that for income tax purposes, interest does not form
part of the price paid by the Government in condemnation proceedings; and may not be treated as
part of the capital gain.
21. CIR v CA
GR No. 123206, March 22, 2000
FACTS:
By reason of the Bataan Death March death during World War II, Pedro Pajonar became
insane. His property was placed under guardianship of PNB, while his sister Josefina became the
guardian over his person and eventually the administratix of his estate when he died. After his
death, his heirs executed an extrajudicial settlement and paid the estate tax. Thereafter, BIR
assessed the estate of Pedro deficiency taxes. The estate paid under protest and filed a case with
the CTA, which in turn allowed P60,753 representing the notarial fee for the Extrajudicial
settlement and P50,000 attorney’s fees for guardianship proceedings as among the allowed
deductions from the gross estate.
ISSUE:
Whether the notarial fee and attorney’s fees allowed as deductions from the gross estate
RULING:
Yes. The notarial fee paid for the extrajudicial settlement is clearly a deductible expense since such
settlement effected a distribution of Pedro Pajonar’s estate to his lawful heirs. Similarly, the
attorney’s fees paid to PNB for acting as the guardian of Pedro Pajonar’s property should also be
considered as a deductible administration expense as PNB provided a detailed accounting of
decedent’s property and gave advice as to the proper settlement of the latter’s estate, acts which
contributed towards the collection of decedent’s assets and the subsequent settlement of the
estate.
22. Dizon v CTA
G.R. No. 140944,April 30, 2008
FACTS:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the probate of his
will was filed with Branch 51 of the Regional Trial Court (RTC) of Manila (probate court).The
probate court then appointed retired Supreme Court Justice Arsenio P. Dizon (Justice Dizon) and
petitioner, Atty. Rafael Arsenio P. Dizon (petitioner) as Special and Assistant Special Administrator,
respectively, of the Estate of Jose (Estate). Petitioner alleged that several requests for extension of
the period to file the required estate tax return were granted by the BIR since the assets of the
estate, as well as the claims against it, had yet to be collated, determined and identified.
ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of
evidence which were not formally offered by the BIR; and
2. Whether the actual claims of the aforementioned creditors may be fully allowed as deductions
from the gross estate of Jose despite the fact that the said claims were reduced or condoned
through compromise agreements entered into by the Estate with its creditors Or Whether or not the
CA erred in affirming the CTA in the latter's determination of the deficiency estate tax imposed
against the Estate.
RULING:
1. Yes. While the CTA is not governed strictly by technical rules of evidence, as rules of procedure
are not ends in themselves and are primarily intended as tools in the administration of justice, the
presentation of the BIR's evidence is not a mere procedural technicality which may be disregarded
considering that it is the only means by which the CTA may ascertain and verify the truth of BIR's
claims against the Estate. The BIR's failure to formally offer these pieces of evidence, despite
CTA's directives, is fatal to its cause
2. Yes. The claims existing at the time of death are significant to, and should be made the basis of,
the determination of allowable deductions. Also, as held in Propstra v. U.S., where a lien claimed
against the estate was certain and enforceable on the date of the decedent's death, the fact that
the claimant subsequently settled for lesser amount did not preclude the estate from deducting the
entire amount of the claim for estate tax purposes. This is called the date-of-death valuation rule.
23. G.R. No. L-19865July 31, 1965
MARIA CARLA PIROVANO, etc., et al., petitioners-appellants, vs. THE COMMISSIONER OF
INTERNAL REVENUE, respondent-appellee.
FACTS:
Sometime in the early part of 1941, De la Rama Steamship Co. insured the life of said Enrico
Pirovano, who was then its President and General Manager until the time of his death, with various
Philippine and American insurance companies for a total sum of one million pesos, designating
itself as the beneficiary of the policies, obtained by it. Due to the Japanese occupation of the
Philippines during the second World War, the Company was unable to pay the premiums on the
policies issued by its Philippine insurers and these policies lapsed, while the policies issued by its
American insurers were kept effective and subsisting, the New York office of the Company having
continued paying its premiums from year to year.
During the Japanese occupation , or more particularly in the latter part of 1944, said Enrico
Pirovano died.
Board of Directors of the Company renounced all its rights title, and interest amount of
P643,000.00 of insurance proceeds in favor of the minor children of the deceased, subject to the
express condition that said amount should be retained by the Company in the nature of a loan to it,
drawing interest at the rate of five per centum (5%) per annum, and payable to the Pirovano
children after the Company shall have first settled in full the balance of its present remaining
bonded indebtedness in the sum of approximately P5,000,000.00.
On February 26, 1948, Mrs. Estefania R. Pirovano, in behalf of her children, executed a public
document formally accepting the donation; and, on the same date, the Company through its Board
of Directors, took official notice of this formal acceptance. On March 8, 1951, however, the majority
stockholders of the Company voted to revoke the resolution approving the donation in favor of the
Pirovano children.
As a consequence of this revocation and refusal of the Company to pay the balance of the
donation amounting to P564,980.90 despite demands therefor, the herein petitioners-appellants
represented by their natural guardian, Mrs. Estefania R. Pirovano, brought an action for the
recovery of said amount, which they won.
On March 6, 1955, respondent Commissioner of Internal Revenue assessed the amount of
P60,869.67 as donees' gift tax, inclusive of surcharges, interests and other penalties, against each
of the petitioners-appellants, or for the total sum of P243,478.68; and, on April 23, 1955, a donor's
gift tax in the total amount of P34,371.76 was also assessed against De la Rama Steamship Co.,
which the latter paid.
ISSUE:
Whether the decision of the lower court ordering the payment of donees' gift taxes as assessed by
respondent as well as the imposition of surcharge and interest on the amount of donees' gift taxes
was proper
RULING:
Yes.
There is nothing on record to show that when the late Enrico Pirovano rendered services as
President and General Manager of the De la Rama Steamship Co. he was not fully compensated
for such services, or that, because they were "largely responsible for the rapid and very successful
development of the activities of the company"
The fact that his services contributed in a large measure to the success of the company did not
give rise to a recoverable debt, and the conveyances made by the company to his heirs remain a
gift or donation.
This is emphasized by the directors' Resolution of January 6, 1947, that "out of gratitude" the
company decided to renounce in favor of Pirovano's heirs the proceeds of the life insurance
policies in question. The true consideration for the donation was, therefore, the company's
gratitude for his services, and not the services themselves.
Whether remuneratory or simple, the conveyance remained a gift, taxable under Chapter 2, Title III
of the Internal Revenue Code.
24.Lladoc v CIR
GR No. L-19201, June 16, 1965
FACTS:
In 1957, MB Estate Inc. of Bacolod City donated P10,000 in cash to Reverend Father Ruiz, then
parish priest of Victorias, Negros Occidental for the construction of a new Catholic Church. Under
date of April 29, 1960, the Commissioner of Internal Revenue issued an assessment amounting to
P1,370for donee’s gift tax against the Catholic Parish of Victorias. Petitioner lodged a protest that
was substantially affirmed by the Court of Tax Appeals. Hence, this petition.
ISSUE:
(1) Whether petitioner should be liable for the assessed donee’s gift tax on the P10,000 donation
(2) Who should be called upon to pay the tax?
RULING:
(1) The petitioner is liable. What the Collector assessed was a donee’s gift tax; the assessment
was not on the properties themselves and is thus, not subject to the exemption in the Constitution.
It did not rest upon general ownership; it was an excise upon the use made of the properties, upon
the exercise of the privilege of receiving the properties.
(2) The Head of the Diocese, to which the parish of Victorias pertains, is liable for the payment
therefor.
(Update – now, gifts in favor of religious institutions are now exempt from donor’s tax)
25. G.R. No. L-5949November 19, 1955
TANG HO, WILLIAM LEE, HENRI LEE, SOFIA LEE TEEHANKEE, THOMAS LEE, ANTHONY
LEE, JULIA LEE KAW, CHARLES LEE, VALERIANA LEE YU, VICTOR LEE, SILVINO LEE,
MARY LEE, JOHN LEE, and PETER LEE, for themselves and as heirs of LI SENG GIAP,
deceased, petitioners, vs.
THE BOARD OF TAX APPEALS and THE COLLECTOR OF INTERNAL REVENUE,
respondents.
FACTS:
Li SengGiap (who died during the pendency of this appeal) and his wife Tang Ho and their thirteen
children appear to be the stockholder of two close family corporations named Li SengGiap& Sons,
Inc. and Li SengGiap& Co. The examiners of the Bureau of Internal Revenue found that each of Li
SengGiap's 13 children had a total investment therein of approximately P63,195.00, in shares
issued to them by their father Li SengGiap
The Collector of Internal Revenue regarded these transfers as undeclared gifts made in the
respective years, and assessed against Li SengGiap and his children donor's and donee's taxes in
the total amount of P76,995.31, including penalties, surcharges, interests, and compromise fee due
to the delayed payment of the taxes.
The petitioners paid the sum of P53,434.50, representing the amount of the basic taxes, and put up
a surety bond to guarantee payment of the balance demanded. And on June 25, 1951, they
requested the Collector of Internal Revenue for a revision of their tax assessments, alleging that
the children's stockholding in the two family corporations were purchased by them with savings
from the aforesaid cash donations received from their parents.
Claiming the benefit of gift tax exemptions (under section 110 and 112 of the Internal Revenue
Code) at the rate of P2000 a year for each donation, plus P10,000 for each gift propter nuptias
made by either parent, and appellants' aggregate tax liability, according to their returns, would only
be P4,599.94 for the year 1949, and P228,28 for the year 1950, or a total of P4,838.22 The
Collector refused to revise his original assessments.
ISSUES:
(1) Whether or not the dates and amounts of the donations taxable against petitioners were as
found by the Collector of Internal Revenue from the books of the corporations Li SengGiap& Sons,
Inc. and Li SengGiap& Co., or as set forth in petitioners' gift tax returns;
(2) Whether or not the donations made by petitioner Li SengGiap to his children from the conjugal
property should be taxed against the husband alone, or against husband and wife; and
(3) Whether or not petitioners should be allowed the tax deduction claimed by them.
RULING:
(1) The CIR is affirmed. The filing of the gift tax returns only after assessments and part payment of
the taxes demanded by the Collector, and the lack of corroboration of the alleged donations in
cash, amply justify the Tax Board's distrust of the veracity of the appellants' belated tax returns "on
or before the first of March following the close of the calendar year" when the gifts were made Any
other view would leave the collection of taxes at the mercy of explanations concocted ex post facto
by evading taxpayers, drafted to suit any facts disclosed upon investigation, and safe from
contradiction because the passing years have erased all trace of the truth.
(2) No. under the old Civil Code, to be a donation by both spouses, taxable to both, the wife must
expressly join the husband in making the gift; her participation therein cannot be implied. . The
consequence of the husband's legal power to donate community property is that, where made by
the husband alone, the donation is taxable as his own exclusive act.
(3) No. only one exemption or deduction (from their father) can be claimed for every such gift, and
not two, as claimed by appellants herein.
26. G.R. No. 115455 October 30, 1995 ARTURO M. TOLENTINO, petitioner, vs. THE
SECRETARY OF FINANCE and THE COMMISSIONER OF
INTERNAL REVENUE, respondents.
FACTS: These are motions seeking reconsideration of our decision dismissing the petitions filed in
these cases for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the
Expanded Value-Added Tax Law.
They reiterate previous claims made by them that R.A. No. 7716 did not "originate exclusively" in
the House of Representatives as required by Art. VI, §24 of the Constitution. They complain that
the Senate did not pass it on second and third readings. Instead what the Senate did was to pass
its own version (S. No. 1630) that it approved on May 24, 1994.
ISSUE: Whether RA 7716 is constitutional
RULING:
Yes. The enactment of S. No. 1630 is not the only instance in which the Senate proposed an
amendment to a House revenue bill by enacting its own version of a revenue bill. because revenue
bills are required to originate exclusively in the House of Representatives, the Senate cannot enact
revenue measures of its own without such bills. After a revenue bill is passed and sent over to it by
the House, however, the Senate certainly can pass its own version on the same subject matter.
This follows from the coequality of the two chambers of Congress.
In sum, while Art. VI, §24 provides that all appropriation, revenue or tariff bills, bills authorizing
increase of the public debt, bills of local application, and private bills must "originate exclusively in
the House of Representatives," it also adds, "but the Senate may propose or concur with
amendments." In the exercise of this power, the Senate may propose an entirely new bill as a
substitute measure.
27. Tolentino v Secretary of Finance
GR No. 115455, October 30, 1995
FACTS:
These are motions seeking reconsideration of the Supreme Court’s decision dismissing
the petitions filed in the cases for the declaration of unconstitutionality of RA 7716, otherwise
known as the Expanded Value-Added Tax Law.
The petitions reiterate previous claims made by them that RA 7716 did not “originate
exclusively” in the House of Representatives as required by Article VI, Section 24 of the
Constitution. They complain that the Senate did not pass it on second and third readings. Instead,
what the Senate did was to pass its own person (S. No. 1630) that it approved on May 24, 1994.
ISSUE:
Whether RA 7716 is constitutional
RULING:
Yes. The enactment of S No. 1630 is not the only instance in which the Senate proposed
an amendment to a House revenue bill by enacting its own version of a revenue bill. Because
revenue bills are required to originate exclusively in the House of Representatives, the Senate
cannot enact revenue measures of its own without such bills. After a revenue bill is passed and
sent over to it by the House, however, certainly can pass its own version on the same subject
matter. This follows from the coequality of the two chambers of Congress.
In sum, while Article VI, Section 24 provides that all appropriate, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application and private bills must originate
exclusively in the House of Representatives – it also adds, but the Senate may propose or concur
with amendments. In the exercise of this power, the Senate may propose an entirely new bill as a
substitute measure.
28. G.R. No. 168056 September 1, 2005
ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and
ED VINCENT S. ALBANO, Petitioners, vs. THE HONORABLE EXECUTIVE SECRETARY
EDUARDO ERMITA; HONORABLE SECRETARY OF THE DEPARTMENT OF FINANCE
CESAR PURISIMA; and HONORABLE COMMISSIONER OF INTERNAL REVENUE
GUILLERMO PARAYNO, JR., Respondent.
FACTS:
RA 9337, an act amending certain sections of the National Internal Revenue Code of 1997, is
questioned by petitioners for being unconstitutional. Procedural issues raised by petitioners are the
legality of the bicameral proceedings, exclusive origination of revenue measures and the power of
the Senate concomitant thereto. Also, an issue was raised with regard to the undue delegation of
legislative power to the President to increase the rate of value-added tax to 12%.
Petitioners also argue that the increase to 12%, as well as the 70% limitation on the creditable
input tax, the 60- month amortization on the purchase or importation of capital goods exceeding
P1,000,000.00, and the 5% final withholding tax by government agencies, is arbitrary, oppressive,
and confiscatory, and that it violates the constitutional principle on progressive taxation, among
others.
ISSUE:
Whether RA 9337 is constitutional
RULING:
Yes. Mounting budget deficit, revenue generation, inadequate fiscal allocation for education,
increased emoluments for health workers, and wider coverage for full value-added tax benefits ...
these are the reasons why Republic Act No. 9337 (R.A. No. 9337) was enacted. Reasons, the
wisdom of which, the Court even with its extensive constitutional power of review, cannot probe.
It has been said that taxes are the lifeblood of the government. In this case, it is just an enema, a
first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a
deaf ear on the plight of the masses. But it does not have the panacea for the malady that the law
seeks to remedy. As in other cases, the Court cannot strike down a law as unconstitutional simply
because of its yokes.
29. Philamlife v CTA
CA-GR SP No. 31283 4/25/1995
FACTS:
Philamlife entered into a Management Services with American International Group, Inc. (AIGI), a
non-resident foreign corporation. On November 18, 1980, the CIR issued in favor of Philamlife a
tax credit memo in the amount of P643,125 representing erroneous payment of withholding tax at
source on remittances to AIGI for services rendered abroad in 1979. On the basis of the issuance
of said tax credit, Philamlife filed a claim for refund of the second erroneous payment in 1980. The
CIR denied the claim for refund and cancelled the Tax Credit Memo previously issued. Philamlife
contends that services performed by AIGI outside the Philippines are not subject to Philippine
withholding income tax.
ISSUE:
Whether said services are taxable in the Philippines
RULING:
Yes. In our jurisprudence, the test of taxability is the source and the source of an income is “that
activity which produced the income.” It is not the presence of any property from which one derives
rentals and royalties that is controlling, but rather as expressed under the expanded meaning of
“royalties”, it includes “royalties for the supply of scientific, technical, industrial or commercial
knowledge or information; and the technical advice, assistance or services rendered in connection
with the technical management and administration of any scientific, industrial or commercial
undertaking, venture, project or scheme.”
30. CIR v CA
GR No. 125355, March 30, 2000
FACTS:
Commonwealth Management and Services Corporation (COMASERCO) is an affiliate of
Philamlife organized by the latter to perform collection, consultative and other technical services,
including functioning as an internal auditor, of Philamlife and its other affiliates. BIR issued an
assessment to COMASERCO for deficiency VAT amounting to P351,851.01 for taxable year 1988.
COMASERCO then filed with the BIR, a letter-protest. COMASERCO asserted that the services it
rendered to Philamlife and its affiliates were on a “no-profit, reimbursement-of-cost only” basis. It
stressed that it was not profit motivated thus not engaged in business. Since it was not engaged in
business, it was not liable to pay VAT. The CIR maintains that the services rendered by
COMASERCO to Philamlife and its affiliates, for a fee or consideration, are subject to VAT. It is
immaterial whether profit is derived from rendering the service.
ISSUE:
Whether COMASERCO was engaged in the sale of services and thus liable to pay VAT
thereon
RULING:
Yes. Section 108 of the NIRC defines the phrase “sale of services” as the performance of
all kinds of services for others for a fee, remuneration or consideration”. BIR Ruling No. 10-98
emphasizes that a domestic corporation that provided research, management and technical
assistance to its affiliated companies and received payments on a reimbursement-of-cost basis,
without any intention of realizing profit, was subject to VAT on services rendered.
In fact, even if such corporation was organized without any intention, realized profit, any
income or profit generated by the entity in the conduct of its activities was subject to income tax.
Hence, it is immaterial whether the primary purpose of a corporation indicates that it receives
payments for services rendered to its affiliates on a reimbursement-on-cost basis only, without
realizing profit, for purposes of determining liability for VAT on services rendered. As long as the
entity provides service for a fee, remuneration or consideration, then the service rendered is
subject to VAT.
31. CIR v American Express
GR No. 152609, June 29, 2005
FACTS:
American Express International, Inc. – Philippine Branch is a servicing unit of American Express
International, Inc. – Hongkong Branch and is engaged primarily to facilitate the collections of
AMEX-HK receivables from card members situated in the Philippines and payment to service
establishments in the Philippines. Respondent filed with the BIR a letter-request for the refund of its
1997 excess input taxes in the amount of P3,751,067.04. It based its assertion on the ground that
its services are zero-rated. However, petitioner claims otherwise.
ISSUE:
Whether respondent is entitled to a refund
RULING:
Yes. As a general rule, the VAT system uses the destination principle. However, our VAT law itself
provides for a clear exception, under which the supply of service shall be zero-rated, when the
following requirements are met -
(1) the service is performed in the Philippines;
(2) the service falls under any of the categories provided in the Section 102b of the Tax Code; and
(3) it is paid for in acceptable foreign currency that is accounted for in accordance with the
regulations of the Bangko Sentral ng Pilipinas.
Since respondent’s services meet these requirements, they are zero-rated. Thus, respondent is
entitled to a refund.
32. Case not found, similar to #31
33. CIR v Burmeister
GR No. 153205, January 22, 2007
FACTS:
A foreign consortium composed of Burmeister and Wain Scandinavian Contractor A/S
(BWSC-Denmark), Mitsui Engineering and Shipbuilding, Ltd. And Mitsui and Co., Ltd entered into a
contract with the NAPOCOR. BWSC-Denmark established respondent that subcontracted the
actual operation and maintenance of NAPOCOR’s two power barges. BIR Ruling No. 23-95
declared that if respondent chooses to register as a VAT person and the consideration for its
services is paid for in acceptable foreign currency and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipinas, the said services shall be subject to VAT at
zero-rate. Also, VAT Ruling 3-99 from the VAT review Committee reconfirmed BIR Ruling No. 23-
95. On the strength of the said rulings, respondent filed a claim for a refund of P6,994,659.67 as
erroneously paid output VAT in 1996.
ISSUE:
Whether respondent is entitled to a refund
RULING:
Yes. An essential condition for entitlement to O% VAT under Section 102(b)(1) and (2) is
that the recipient of the services is a person doing business outside the Philippines.
In this case, the recipient of the services is the Consortium, which is doing business not
outside, but within the Philippines because it has a 15-year contract to operate and maintain
NAPOCOR’s two power barges in Mindanao. Hence, respondent’s services are not subject to 0%
VAT. However, in seeking a refund of its excess output tax, respondent relied on the BIR Rulings
insofar as it held that the services being rendered by respondent are subject to 0% VAT.
Respondent’s reliance on these BIR rulings bind petitioner. Any revocation of a ruling by the CIR
shall not be given retroactive application if the revocation will prejudice the taxpayer.
34. CIR v Magsaysay Lines
GR No. 146984, July 26, 2006
FACTS:
Pursuant to a government program of privatization, NDC decided to sell in one lot its NMC shares
and five of its ships. The bid made by respondents, Magsaysay Lines, Baliwag Navigation and FIM
Limited, was then approved. Subsequently, respondents received VAT Ruling No. 568-88 from the
BIR, holding that the sale of the vessels was subject to the 10% VAT. Respondents then contested
this ruling on the ground that the sale of vessels was subject to the 10% VAT. Respondents then
contested this ruling on the ground that the sale of the vessels were among those transactions
“deemed sale”, as enumerated in Section 4 of RR 5-87.
ISSUE:
Whether the sale was made in the course of trade or business
RULING:
No. “Course of business” or “doing business” connotes regularity of activity. In the instance
case, the sale was an isolated transaction. The sale, which was involuntary and made pursuant to
the declared policy of Government for privatization, could no longer be repeated or carried on with
regularity. Any sale, barter or exchange of goods or services not in the course of trade or business
is not subject to VAT. If the transaction transpired outside the course of trade or business, it would
be irrelevant for the purpose of determining VAT liability whether the transaction may be deemed
sale, since it anyway is not subject to VAT.
35. CIR v Seagate Technology Phils.
FACTS:
Respondent is foreign corporation registered with SEC to do business in the Philippines
and registered with PEZA to engage in the manufacture of recording components used in
computers for export. It is VAT-registered, having filed VAT returns for the period of 4/1/1998 to
6/30/1999. An administrative claim for refund of VAT input taxes was filed by it on October 4, 1999.
Petitioner alleged that respondent is not subject to VAT since the capital goods and services it
alleged to have purchases are not considered used in VAT taxable refund. Said claim was not
acted upon by CIR. Respondent elevated the case to the CTA that granted the refund. The CA
affirmed on the ground that respondent, having paid the input VAT on the capital goods it
purchased, correctly filed the administrative and judicial claims for its refund. Hence, this petition.
ISSUE:
Whether respondent is entitled to the refund or tax credit of unutilized input VAT
RULING:
Yes. Under various laws, as a PEZA registered enterprise, it enjoys preferential tax
treatment. It is not subject to internal revenue laws and regulations and is even entitled to tax
credits. The VAT on capital goods is an internal revenue tax from which petitioner as an entity is
exempt. Although respondent as an entity is exempt from VAT, the transactions it enters into are
not necessarily so. This is the scenario of the purchases it made in the case at bar.
Said purchases are subject to VAT, since VAT is a consumption tax and not business tax.
However, since respondent operates within an economic zone, which is considered by law as a
foreign soil, the cross-border principle and the destination principle is applicable. Because it is
considered export sale that would be subject to zero-rate VAT. Thus, since respondent is a VAT-
registered entity and subject to zero-rated VAT, having complied with all other requisites, it is
entitled to VAT refund on credit.
36. JARABINI G. DEL ROSARIO, Petitioner, - versus - ASUNCION G. FERRER, substituted by her
heirs, VICENTE, PILAR, ANGELITO, FELIXBERTO, JR., all surnamed G. FERRER, and
MIGUELA FERRER ALTEZA, Respondents. (2010)
FACTS:
On August 27, 1968 the spouses Leopoldo and Guadalupe Gonzales executed a document
entitled “Donation Mortis Causa” in favor of their two children, Asuncion and Emiliano, and their
granddaughter, Jarabini. Although denominated as a donation mortis causa, which in law is the
equivalent of a will, the deed had no attestation clause and was witnessed by only two persons.
The named donees, however, signified their acceptance of the donation on the face of the
document. Guadalupe, the donor wife, died in September 1968. A few months later or on
December 19, 1968, Leopoldo, the donor husband, executed a deed of assignment of his rights
and interests in subject property to their daughter Asuncion. Leopoldo died in June 1972.
ISSUE: Whether or not the spouses Leopoldo and Guadalupe’s donation to Asuncion, Emiliano,
and Jarabini was a donation mortis causa, as it was denominated, or in fact a donation inter vivos.
RULING:
That the document in question in this case was captioned “Donation Mortis Causa” is not
controlling. This Court has held that, if a donation by its terms is inter vivos, this character is not
altered by the fact that the donor styles it mortis causa.
A donation mortis causa has the following characteristics:

1. It conveys no title or ownership to the transferee before the death of the transferor; or, what
amounts to the same thing, that the transferor should retain the ownership (full or naked) and
control of the property while alive;
2. That before his death, the transfer should be revocable by the transferor at will, ad nutum; but
revocability may be provided for indirectly by means of a reserved power in the donor to dispose of
the properties conveyed; and
3. That the transfer should be void if the transferor should survive the transferee.
“irrevocability” of the donation is the “distinctive standard that identifies the document as a donation
inter vivos.”
The donors in this case of course reserved the “right, ownership, possession, and administration of
the property” and made the donation operative upon their death. But this Court has consistently
held that such reservation (reddendum) in the context of an irrevocable donation simply means that
the donors parted with their naked title, maintaining only beneficial ownership of the donated
property while they lived.
This Court has held that an acceptance clause indicates that the donation is inter vivos, since
acceptance is a requirement only for such kind of donations.
in case of doubt, the conveyance should be deemed a donation inter vivos rather than mortis
causa, in order to avoid uncertainty as to the ownership of the property subject of the deed.
37. ELVIRA T. ARANGOTE, Petitioner, - versus - SPS. MARTIN MAGLUNOB and LOURDES S.
MAGLUNOB, and ROMEO SALIDO, Respondents. (2009)
FACTS:
Elvira T. Arangote, herein petitioner married to Ray Mars E. Arangote, is the registered owner of
the subject property, as evidenced by Original Certificate of Title (OCT) No. CLOA-1748.6[6]
Respondents Martin (Martin II) and Romeo are first cousins and the grandnephews of Esperanza
Maglunob-Dailisan (Esperanza), from whom petitioner acquired the subject property.
The Petition stems from a Complaint filed by petitioner and her husband against the respondents
for Quieting of Title.
ISSUE: Whether Arangote has legal title to the land
RULING:
No. It is clear from the records that the subject property was not Esperanza’s exclusive share, but
also that of the other heirs of her father, Martin I. Esperanza expressly affixed her thumbmark to
the Deed of Extrajudicial Settlement of July 1981 not only for herself, but also on behalf of the other
heirs of Martin I.
Logically, if Esperanza fully owned the subject property, she would have simply waived her rights
to and interest in the subject property, without mentioning her “share” and “participation” in the
same. By including such words in her Affidavit, Esperanza was aware of and was limiting her
waiver, renunciation, and quitclaim to her one-third share and participation in the subject property.
Esperanza’s Affidavit is, in fact, a Donation. Esperanza’s real intent in executing the said Affidavit
was to donate her share in the subject property to petitioner and her husband. As no onerous
undertaking is required of petitioner and her husband under the said Affidavit, the donation is
regarded as a pure donation of an interest in a real property.
Three requisites for the validity of a simple donation of a real property, to wit:
(1) it must be made in a public instrument;
(2) it must be accepted, which acceptance may be made either in the same Deed of Donation or in
a separate public instrument; and
(3) if the acceptance is made in a separate instrument, the donor must be notified in an authentic
form, and the same must be noted in both instruments.
The title to immovable property does not pass from the donor to the donee by virtue of a Deed of
Donation until and unless it has been accepted in a public instrument and the donor duly notified
thereof.
Therefore, the Affidavit executed by Esperanza in favor of petitioner and her husband is null and
void.
38. G.R. No. 109068 January 10, 1994
GAUDENCIO GUERRERO, petitioner, vs. REGIONAL TRIAL COURT OF ILOCOS NORTE, BR.
XVI, JUDGE LUIS B. BELLO, JR., PRESIDING, and PEDRO G. HERNANDO, respondents.
FACTS Filed by petitioner as an accion publicana against private respondent, this case assumed
another dimension when it was dismissed by respondent Judge on the ground that the parties
being brother-in-law the complaint should have alleged that earnest efforts were first exerted
towards a compromise.
ISSUES:
(a) whether brothers by affinity are considered members of the same family contemplated in Art.
217, par. (4), and Art. 222 of the New Civil Code, as well as under Sec. 1, par. (j), Rule 16, of the
Rules of Court requiring earnest efforts towards a compromise before a suit between them may be
instituted and maintained; and,
(b) whether the absence of an allegation in the complaint that earnest efforts towards a
compromise were exerted, which efforts failed, is a ground for dismissal for lack of jurisdiction.
RULING:
(a) No. the enumeration of "brothers and sisters" as members of the same family does not
comprehend "sisters-in- law". In that case, then Chief Justice Concepcion emphasized that
"sisters-in-law" (hence, also "brothers- in-law") are not listed under Art. 217 of the New Civil Code
as members of the same family. Consequently, the court a quo erred in ruling that petitioner
Guerrero, being a brother-in-law of private respondent Hernando, was required to exert earnest
efforts towards a compromise before filing the present suit.
(b) No. the attempt to compromise as well as the inability to succeed is a condition precedent to the
filing of a suit between members of the same family, the absence of such allegation in the
complaint being assailable at any stage of the proceeding, even on appeal, for lack of cause of
action.
It is not therefore correct, as petitioner contends, that private respondent may be deemed to have
waived the aforesaid defect in failing to move or dismiss or raise the same in the Answer. On the
other hand, we cannot sustain the proposition of private respondent that the case was, after all,
also dismissed pursuant to Sec. 3, Rule 17, of the Rules of Court for failure of petitioner to comply
with the court's order to amend his complaint.
A review of the assailed orders does not show any directive that Guerrero supposedly defied.
39. G.R. No. 169900 March 18, 2010 MARIO SIOCHI, Petitioner, vs. ALFREDO GOZON,
WINIFRED GOZON, GIL TABIJE, INTER-DIMENSIONAL REALTY, INC., and ELVIRA GOZON,
Respondents.
FACTS: This case involves a 30,000 sq.. parcel of land (property) covered by TCT No. 5357. The
property is situated in Malabon, Metro Manila and is registered in the name of "Alfredo Gozon
(Alfredo), married to Elvira Gozon (Elvira)."
On 23 December 1991, Elvira filed with the Cavite City Regional Trial Court (Cavite RTC) a petition
for legal separation against her husband Alfredo. On 2 January 1992, Elvira filed a notice of lis
pendens, which was then annotated on TCT No. 5357.
On 31 August 1993, while the legal separation case was still pending, Alfredo and Mario Siochi
(Mario) entered into an Agreement to Buy and Sell (Agreement) involving the property for the price
of P18 million. Among the stipulations in the Agreement were that Alfredo would secure an Affidavit
from Elvira that the property is Alfredo’s exclusive property and to annotate the Agreement at the
back of TCT No. 5357, etc. However, despite repeated demands from Mario, Alfredo failed to
comply with these stipulations.
ISSUE: Whether the sale is valid
RULING:
This case involves the conjugal property of Alfredo and Elvira. Since the disposition of the property
occurred after the effectivity of the Family Code, the applicable law is the Family Code. Article 124
of the Family Code provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to
both spouses jointly. In case of disagreement, the husband’s decision shall prevail, subject to the
recourse to the court by the wife for a proper remedy, which must be availed of within five years
from the date of the contract implementing such decision.
The absence of the consent of one of the spouse renders the entire sale void, including the portion
of the conjugal property pertaining to the spouse who contracted the sale. Even if the other spouse
actively participated in negotiating for the sale of the property, that other spouse’s written consent
to the sale is still required by law for its validity. As regards Mario’s contention that the Agreement
is a continuing offer that may be perfected by Elvira’s acceptance before the offer is withdrawn, the
fact that the property was subsequently donated by Alfredo to Winifred and then sold to IDRI
clearly indicates that the offer was already withdrawn.
Among the effects of the decree of legal separation is that the conjugal partnership is dissolved
and liquidated and the offending spouse would have no right to any share of the net profits
earned by the conjugal partnership. It is only Alfredo’s share in the net profits that is forfeited in
favor of Winifred.
Under Article 125 of the Family Code, a conjugal property cannot be donated by one spouse
without the consent of the other spouse.
40. [G.R. No. 120721. February 23, 2005]
MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA, AVELINO V. CRUZ,
petitioners, vs. COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS,
respondents.
FACTS:
During the 1987 national elections, petitioners, who are partners in the (ACCRA) law firm,
contributed P882,661.31 each to the campaign funds of Senator Edgardo Angara, then running for
the Senate. In letters dated April 21, 1988, the Bureau of Internal Revenue (BIR) assessed each of
the petitioners P263,032.66 for their contributions. On August 2, 1988, petitioners questioned the
assessment through a letter to the BIR. They claimed that political or electoral contributions are not
considered gifts under the National Internal Revenue Code (NIRC), and that, therefore, they are
not liable for donor's tax. The claim for exemption was denied by the Commissioner.
ISSUE: Whether petitioners are liable for donor's tax
RULING:
A gift is generally defined as a voluntary transfer of property by one to another without any
consideration or compensation therefor (28 C.J. 620; Santos vs. Robledo, 28 Phil. 250).
In the instant case, the contributions are voluntary transfers of property in the form of money from
private respondents to Sen. Angara, without considerations therefor.
The fact that the contributions were given to be used as campaign funds of Sen. Angara does not
affect the character of the fund transfers as donation or gift. There was thereby no retention of
control over the disposition of the contributions. There was simply an indication of the purpose for
which they were to be used. For as long as the contributions were used for the purpose for which
they were intended, Sen. Angara had complete and absolute power to dispose of the contributions.
He was fully entitled to the economic benefits of the contributions.
The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988, which reads:
Political Contributions. – For internal revenue purposes, political contributions in the Philippines are
considered taxable gift rather than taxable income. This is so, because a political contribution is
indubitably not intended by the giver or contributor as a return of value or made because of any
intent to repay another what is his due, but bestowed only because of motives of philanthropy or
charity.
Accordingly, in the absence of an express exempting provision of law, political contributions in the
Philippines are subject to the donor's gift tax.
Petitioners attempt to place the barrier of mutual exclusivity between donative intent and the
purpose of political contributions (influence the results of the election). This Court reiterates that
donative intent is not negated by the presence of other intentions, motives or purposes that do not
contradict donative intent.
BUT NOW- NO LONGER TAXABLE Congress approved Republic Act No. 7166 on November 25,
1991, providing in Section 13 thereof that political/electoral contributions, duly reported to the
Commission on Elections, are not subject to the payment of any gift tax. This all the more shows
that the political contributions herein made are subject to the payment of gift taxes, since the same
were made prior to the exempting legislation, and Republic Act No. 7166 provides no retroactive
effect on this point.
41. G.R. No. L-13250 October 29, 1971 THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs. ANTONIO CAMPOS RUEDA, respondent..
FACTS:
The deceased is a Spanish national having been a resident of Tangier, Morocco from 1931 up to
the time of her death in 1955. Antonio Campos Rueda, as administrator of the estate of the late
Estrella Soriano Vda. de Cerdeira, was held liable for the sum of P161,874.95 as deficiency estate
and inheritance taxes for the transfer of intangible personal properties in the Philippines
ISSUE: Whether or not the requisites of statehood, or at least so much thereof as may be
necessary for the acquisition of an international personality, must be satisfied for a "foreign
country" like Tangier to fall within the exemption of Section 122 of the National Internal Revenue
Code
RULING:
No, international law do not exact independence as a condition of statehood. Thus, it falls under
the exemption.
The controlling legal provision as noted is a proviso in Section 122 of the National Internal
Revenue Code. It reads thus: "That no tax shall be collected under this Title in respect of intangible
personal property (a) if the decedent at the time of his death was a resident of a foreign country
which at the time of his death did not impose a transfer tax or death tax of any character in respect
of intangible person property of the Philippines not residing in that foreign country, or (b) if the laws
of the foreign country of
which the decedent was a resident at the time of his death allow a similar exemption from transfer
taxes or death taxes of every character in respect of intangible personal property owned by citizens
of the Philippines not residing in that foreign country."
Even on the assumption then that Tangier is bereft of international personality, petitioner has not
successfully made out a case.
42. Microsoft v CIR
FACTS:
Microsoft, a VAT taxpayer, renders marketing services to Microsoft Operations Pte Ltd
(MOP) and Microsoft Licensing Inc. (MLI) both nonresident foreign corporations. The services are
paid for in acceptable foreign currency and qualify as zero-rated sales for VAT purposes under
Section 108b(2) of the NIRC. For the year 2001, Microsoft paid VAT input taxes on its domestic
purchases. It then filed a claim for tax credit of said VAT input taxes with the BIR. CTA denied the
said claim for failing to comply with the invoicing requirements of Sections 113 and 237 of the
NIRC requiring that Microsoft’s official receipt bear the imprinted word “zero-rated” on its face.
ISSUE:
Whether Microsoft is entitled to a claim for a tax credit or refund of VAT input taxes
RULING:
No. The taxpayer claiming the tax credit or refund has the burden of proving that he is entitled to
the refund or credit by submitting evidence that he has complied with the requirements laid down in
the tax code. All purchases covered by invoices other than a VAT invoice shall not give rise to any
input tax. Microsoft’s invoice, lacking the word “zero-rated” is not a “VAT invoice” and thus cannot
give rise to any input tax.
43. CIR v Sony Philippines
FACTS:
A deficiency assessment for VAT, Expanded Withholding Tax (EWT) and penalties for late
remittance was issued by CIR against Sony, Sony filed a petition for review before the CTA which
disallowed the deficiency assessment because the subsidized advertising expense paid by Sony
which was duly covered by a VAT invoice resulted in an input VAT credit, but upheld the deficiency
EWT assessment, as well as the penalties.
ISSUE:
Whether Sony is liable for deficiency VAT
RULING:
No. Sony’s deficiency VAT assessment stemmed from the CIR’s disallowance of the input
VAT credits that should have been realized from the advertising expense of the latter. It is evident
under Section 110 of the Tax Code that an advertising expense duly covered by a VAT invoice is a
legitimate business expense. Where the money come from is another matter all together but will
definitely not change said fact. Insofar as the above-mentioned subsidy may be considered as
income and, therefore, subject to income tax, the Court agrees.
However, SC does not agree that the same subsidy should be subject to the 10% VAT, for
there must be a sale, barter or exchange of goods or properties, or supply services before any VAT
may be levied. There was no such sale, barter or exchange or supply of service in the subsidy
given by SIS to Sony.
44. Kepco Philippines Corp. v CIR
FACTS:
Petitioner is a VAT-registered entity that exclusively sells electricity to NPC, an entity
exempt from taxes under RA 6395. On December 2001, Kepco filed an application for zero-rated
sales with the BIR that approved the same. In the course of its business, it allegedly paid input VAT
attributing the same to its zero-rate sales of electricity with NPC. It filed with the CIR a claim for tax
refund of unutilized input VAT payments attributable to its zero-rated sales transactions for taxable
year 2002. It filed a petition for review before the CTA, which ruled that only 44.19%of the validly
supported input VAT payments being claimed could be considered for failing to comply with the
substantiation requirement. Hence, this petition.
ISSUE:
Whether the word “zero-rated” should be imprinted on invoices and/or official receipts as
part of the invoicing requirement
RULING:
Yes. A VAT-registered person shall issue a VAT invoice and VAT official receipt which
contain and indicate, among others, that, if the sale is subject to 0% VAT, the term “zero-rated
sale” shall be written or printed prominently on the invoice or receipt. Evidently, as it failed to
indicate in its VAT invoices and receipts that the transactions were zero-rated, Kepco failed to
comply with the correct substantiation requirement for zero-rated transactions.
Contrary to KEPCO’s allegation, the regulation specifically requires the VAT registered
person to imprint TIN-VAT on its invoices or receipts. Only VAT-registered person to imprint their
TIN followed by the word “VAT” in their invoice or receipts and this shall be considered as a “VAT”
invoice. All purchases covered by invoices other than “VAT invoice” shall not give rise to any input
tax.
45. AT&T v CIR
FACTS:
Petitioner is a domestic corporation engaged in the business of providing, among others,
information and promotional services to foreign corporations and registered with the PEZA.
Remuneration is paid in US dollars and inwardly remitted in accordance with BSP rules and
regulations. Petitioner incurred input VAT when it generated zero-rated sales in connection with its
Service Agreement. It filed with the CIR an application for tax refund or tax credit of its unutilized
input VAT from zero rated sales, with sales invoices as support thereof.
ISSUE:
Whether VAT official receipts or invoices are sufficient to substantiate a claim for tax
refund
RULING:
Yes. Section 113 of the Tax Code does not create a distinction between a sales invoice
and an official receipt. It provides that a VAT registered person shall, for every sale, issue an
invoice or receipt.
Section 110 of the same Code states that “any input tax evidenced by a VAT invoice or
official receipt issued in accordance with Section 113 hereof on the certain transactions shall be
creditable against the output tax.”
Parenthetically, to determine the validity of petitioner’s claim as to unutilized input VAT, an
invoice would suffice provided the requirements under Section 113 and 127 of the Tax Code are
met. Sales invoices are proofs that a business transaction has been concluded, hence, should not
be considered bereft of probative value. Only the preponderance of evidence threshold as applied
in ordinarily civil cases is needed to substantiate a claim for tax refund proper.
46. Silicon v CIR
FACTS:
Petitioner, a VAT registered Philippine Corp. is engaged in the business of, among others,
manufacturing and exporting advance and large scale integrated circuit components. It filed with
the CIR an application for credit/refund of unutilized input VAT for the 4th quarter of 1998. It then
filed a petition for review with the CTA, alleging that for the same period, it generated and recorded
zero-rated export sales; and that it also paid input VAT which have not been applied to any output
VAT. The CTA partially granted the claim for refund of unutilized input VAT on capital goods
because not all items fall within the definition of capital goods under the law. On its claim for
credit/refund of input taxes on capital goods because not all items fall within the definition of capital
goods under the law. On its claim for credit/refund of input VAT attributable to zero-rated export
sales, the CTA denied the same because petitioner failed to present to present an Authority to Print
(ATP) from the BIR; neither did it print on its export sales invoices the ATP and the word “zero-
rated.”
ISSUE:
Whether Silicon is entitled to the refund/credit of unutilized input VAT on all purchased
capital goods and on those attributable to exported sales
RULING:
Yes, but only to the extent of the capital goods that fall within the definition of “capital
goods” under the law. Under Section 4.106-1b of RR No 7-95, “capital goods or properties” refer to
those with an estimated useful life greater than one year and which are treated as depreciable
assets under the law, used directly or indirectly with the production of taxable goods or services.
Office supplies, posters, books and other similar items purchased by petitioner clearly do not fall
within that category.
The NIRC requires persons engaged in business to secure an ATP from the BIR prior to
printing invoices or receipts for registration purposes. The only way to verify whether the invoices
or receipts are duly registered is by requiring the claimant to present its ATP from the BIR. Without
this proof, the invoices or receipts would have no probative value for the purpose of refund failure
also to print the word “zero-rated” is fatal to a claim for refund of input VAT.
47. Diaz and Timbol v Secretary of Finance
FACTS:
Petitioners assail the validity of the impending imposition of VAT of the BIR on the
collections of tollway operators. They hold the view, among others, that Congress did not, when it
enacted the NIRC, intend to include toll fees would amount to a tax on public service and that
tollway operators cannot be regarded as franchise grantees under the NIRC since they do not hold
legislative franchises. The Solicitor General, on behalf of the government deny and disagree with
such allegations.
ISSUE:
Whether VAT may be imposed on the collection of tollway operators
RULING:
Yes. It is plain from Section 108 of the NIRC that it imposes VAT on “all kinds of services
rendered for a fee.” Thus, every activity that can be imagined as a form of service rendered for a
fee should be deemed included unless the law especially excludes such activity. When a toll
operator takes a toll fee from a motorist, the fee is in effect for the latter’s use of the tollway
facilities over which the operator enjoys private proprietary rights recognized by the law, in which
sense said operator is not in any way different from those enumerated by the NIRC as allowing
their use of their property for a fee, such as lessors, among others, who are subject to VAT.
In fact, tollway operators come under the specific class described therein as “all other
franchise grantees” who are subject to VAT, except those under Section 109 of the NIRC. The law
does not require that they be legislative franchises, for franchises may be conferred by other
government agencies to which Congress has delegated the power to grant franchises.
48. PAGCOR v BIR
FACTS:
PAGCOR seeks the declaration of nullity of Sec 1 of RA 9337 insofar as it amends Section
27c of the National Internal Revenue Code of 1997, by excluding petitioner from exemption from
corporate income tax for being repugnant to Sections 1 and 10 of Article III of the Constitution. It
further seeks to prohibit the implementation of BIR Revenue Regulations No. 16-2005, which
imposes VAT on PAGCOR, for being contrary to law.
ISSUE:
Whether PAGCOR is exempted from VAT with the enactment of RA 9337
RULING:
Yes. Although RA 9337 now validly subjects PAGCOR to corporate income tax, nowhere
does it provide that petitioner be subjected to VAT. PAGCOR is given a blanket exemption to
taxes, except those excluded by law such as corporate income tax, with no distinction whether
direct or indirect taxes. The manner of charging VAT does not make PAGCOR liable to said tax. It
is true that VAT can either be incorporated in the value of the goods, properties or services sold or
leased or charged as an additional 10% to the value. Be that as it may, the use of either method,
and in particular, the first method, does not denigrate the fact that PAGCOR is exempt from an
indirect tax, like VAT, since PAGCOR is exempt from VAT under RA 9337, the BIR exceeded its
authority in subjecting PAGCOR to 10% VAT under RR No. 16-2005. Hence, the said regulatory
provision is hereby nullified.
49. Atlas Consolidated v CIR
FACTS:
Petitioner Corporation filed with the BIR its VAT return for the first quarter of 1992. It
alleged that it likewise filed with the BIR the corresponding application for the refund/credit of its
input VAT on its purchases of capital goods and on its zero-rated sales in the amount of 26 million.
When its application for refund/credit remained unresolved by the BIR, petitioner filed on April 20,
1994 its petitioner for review with the CTA. The CTA denied Atlas claim for refund due to Atlas’
failure to comply with the documentary requirements prescribed. The CA affirmed CTA’s ruling.
ISSUE:
What are the documents required to claim for VAT input refund of whether Atlas is entitled
to refund
RULING:
When claiming tax refund/credit, the VAT-registered taxpayer must be able to establish
that it does not have refundable or creditable input VAT, and the same has not been applied
against its output VAT liabilities – information which is supposed to be reflected in the taxpayer’s
VAT returns. Thus, an application for tax refund/credit must be accompanied by copies of the
taxpayer’s VAT return/s for the taxable quarter/s concerned. The formal offer of evidence of Atlas
failed to include photocopy of its export documents, as required without the export documents, the
purchase invoice/receipts submitted by Atlas as proof of its input taxes cannot be verified as being
directly attributable to the goods so exported. Atlas claim for credit or refund of input taxes cannot
be granted due to its failure to show convincingly that the same has not been applied to any of its
output tax liability as provided under the Tax Code.
50. CIR v Aichi Forging
FACTS:
Petitioner filed a claim of refund/credit of input VAT in relation to its zero-rated sales from
July 1, 2002 to September 30, 2002. The CTA 2nd Division partially granted respondent’s claim for
refund/credit. Petitioner filed a motion for partial reconsideration, insisting that the administrative
and the judicial claims were filed beyond the two-year period to claim a tax refund/credit provided
for under Sections 112A and 229 of the NIRC. He reasoned that since the year 2004 was a leap
year, the filing of the claim for tax refund/credit on September 30, 2004 was beyond the 2-year
period, which expired on September 29, 1004. He cited as basis Article 13 of the Civil Code, which
provides that when the law speaks of a year, it is equivalent to 365 days. The CTA denied the MPR
thus the case was elevated to the CTA en banc for review. The decision was affirmed.
ISSUE:
Whether the claim for refund was filed within the prescribed period
RULING:
Yes. As ruled in the case of CIR v Pagbilao, the 2-year period should be reckoned from the
close of the taxable quarter when the sales were made. In CIR v Primetown (2007), we said that as
between the Civil Code which provides that a year is equivalent to 365 days and the Administrative
Code of 1987, which states a year is composed of 12 calendar months, it is the latter that must
prevail being the more recent law, following the legal maxim, lex posteriori derogate priori.
Thus, applying this to the present case, the two-year to file a claim for tax refund/credit for
the period July 1, 2002 to September 30, 2002 expired on September 30, 2004. Hence,
respondent’s administrative claim was timely filed.
51. Mirant Pagbilao v CIR
FACTS:
MPC is a domestic firm engaged in the generation of power, which it sells to the National
Power Corporation (NPC). For the construction of the electrical and mechanical equipment portion
of its Pagbilao, Quezon plant, which appears to have been undertaken from 1993 to 1996, MPC
secured the services of Mitsubishi Corporation of Japan.
Under RA 6395, the NPC’s revised charter, NPC is exempt from all taxes. In Maceda v
Macaraig, the Court construed the exemption as covering both direct and indirect taxes in the light
of NPC’s tax exempt status, MPC, on the belief that its sale of power generation services to NPC
is, pursuant to Section 108B3 of the Tax Code, zero-rated for VAT purposes, filed an Application
for effective zero-rating. The application covered the construction and operation of its Pagbilao
power station under a Build, Operate and Transfer scheme. Pursuant to the procedure prescribed
in Revenue Regulations No. 7-95, MPC an administrative claim for refund of unutilized input VAT in
the amount of 148 million.
ISSUE:
Whether MPC is entitled to the refund of its input VAT payments
RULING:
Yes except for those claims that already prescribed. For perspective, under Section 105 of
the NIRC, creditable input VAT is an indirect tax that can be shifted or passed on to the buyer,
transferee or lessee of the goods, properties, or services of the taxpayer. The fact that the
subsequent sale or transaction involves a wholly-tax exempt client, resulting in a zero-rated or
effectively zero-rated transaction, does not, standing alone, deprive the taxpayer of its right to a
refund for any unutilized creditable input VAT, albeit the erroneous, illegal or wrongful payment
angle does not enter the equation.
If the input taxes exceed the output taxes, the excess shall be carried over to the
succeeding quarter or quarters. Should the input taxes result from zero-rated or effectively zero-
rated transactions or from the acquisition of capital goods, any excess over the output taxes shall
instead be refunded to the taxpayer or credited against other internal revenue taxes.
52. CIR v San Roque
FACTS:
SRPC, a vat registered seller of services entered into Power Purchase Agreement (PPA)
with the National Power Corporation (NPC) to develop hydro-potential of the lower Agno River and
generate additional power and energy for the Luzon Power additional power and energy for the
Luzon Power Grid, by building the SRPC Multi-purpose project located in San Manuel,
Pangasinan. On the construction and development of the SRPC Multipurpose project which
comprises of the dam, spillway and power plant, allegedly incurred, excess input VAT in the
amount of P559 million for taxable year 2001 which it declared in its Quarterly VAT returns filed for
the same year. SRPC duly filed with the BIR separate claims for refund, in the total amount of 559
million, representing unutilized input taxes as declared in its VAT returns for taxable year 2001.
ISSUE:
Whether SRPC failed to prove the zero-rated or effectively zero-rated sales that it made
RULING:
Yes. The following criteria governing claims for refund or tax credit under Section 112A of
the NIRC:
(1) taxpayer is VAT-registered;
(2) taxpayer is engaged in zero-rated or effectively zero-rated sales;
(3) input taxes are due or paid;
(4) input taxes are not transitional input taxes;
(5) input taxes have not been applied against output taxes during and in the succeeding
quarters;
(6) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales;
(7) the acceptable foreign currency exchange proceeds have been duly accounted for;
(8) where there are both zero-rated or effectively zero-rated sales and taxable or exempt
sales, and the input taxes cannot be directly and entirely attributable to any of these sales,
the input taxes shall be proportionately allocated on the basis of sales volume; and
(9) claim is filed within 2 years after the close of the taxable quarter when such sales were
made.
While acknowledging that SPP’s sale of electricity to NPC is a zero-rated transaction, the CTA
en banc ruled that SPP failed to establish that it made zero-rated sales. True, SPP submitted
official receipts and sales invoices stamped with the words BIR VAT zero rate application but
the CTA en banc held that these were not sufficient to prove the fact of sale.
53. same as #52
54. CIR v Fort Bonifacio
FACTS:
FBDC, following the effectivity of RA 7716, real estate transactions such as those in by
FBDC have since been made subject to VAT. As the vendor, FBDC from thereon has been
made subject to VAT. As the vendor, FBDC from thereon has become obliged to remit to the
BIR output VAT payments it received from the sale of its properties to the BIR. FBDC likewise
invoked its right to avail of the transitional input tax credit and accordingly submitted an
inventory list of real properties it owned, with a total book value of P71 billion. On October 14,
1996, FBDC executed in favor of Metro Pacific Corporation 2 contracts to sell, separately
conveying 2 parcels of land within the Global City in consideration of the purchase prices at
P1.5 billion and 785 million, bot payable installments. For the 4th quarter of 1996, FBDC earned
a total of 3.5 billion from the sale of its lots, on which the output VAT payable to the BIR was
318 million. In the context of remitting its output VAT payments to the BIR, FBDC paid a total of
269 million and utilized 28 million representing a portion of its then total
transitional/presumptive input tax credit of 5 billion, which petitioner allocated for the 2 lots sold
to Metro Pacific; and its regular input tax credit of 20 million on the purchase of goods and
services. After investigating the matter, the BIR recommended that the claimed presumptive
input tax credit be disallowed.
ISSUE:
Whether the FBDC is entitled to a presumptive input tax
RULING:
Yes. Transitional input tax is allowed on a person’s beginning inventory of goods, materials
and supplies. RA 7716 clarifies that it is real properties “held primarily for sale to customers or
held for lease in the ordinary course of trade or business” that are subject to the VAT and not
when the real estate transactions are engaged in by persons who do not sell or lease
properties in the ordinary course of trade or business. It is clear that those regularly engaged in
the real estate business are accorded the same treatment as the merchants of other goods or
properties available in the market. In the same way that a milliner considers hats as his goods
and a rancher considers cattle as his goods, a real estate dealer holds real property, whether
or not it contains improvements, as his goods.
55. CIR v Benguet
FACTS:
In January of 1988, Benguet applied for and was granted by the BIR zero-rated status on
its sale of gold to Central Bank. On August 28, 1988, VAT ruling no. 3788-88 was issued which
declared that the sale of gold to Central Bank is considered as export sale subject to zero-rate
pursuant to Section 100 of the Tax Code, as amended by EO 273. Relying on its zero-rated
status and the above issuances, Benguet sold gold to the Central Bank during the period of
August 1, 1989 to July 31, 1991 and entered into transactions that resulted in input VAT
incurred in relation to the subject sales of gold. It then filed applications for tax refunds/credits
corresponding to input VAT. However, such request was not granted due to BIR VAT ruling
008-92 dated January 23, 1992 that was issued subsequent to the consummation of the
subject sales which provides that sales of gold to the Central Bank shall not be considered as
export sales and thus, subject to VAT.
ISSUE:
Whether the sale of gold is zero-rated
RULING:
Yes. At the time when the subject transactions were consummated, the prevailing BIR
regulations relied upon by Benguet ordained that gold sales to the Central Bank were zero-
rated. Benguet should not be faulted for relying on the BIR’s interpretation of the said laws and
regulations.
While it is true, as CIR alleges, that government is not estopped from collecting taxes
which remain unpaid on account of the errors or mistakes of its agents and/or officials and
there could be no vested right arising from an erroneous interpretation of law, these principles
must give way to exceptions based on and in keeping with the interest of justice and fairplay.
56. CIR v SM Prime Holding, Inc.
FACTS:
Respondents SM Prime and First Asia are domestic corporations duly organized and
existing under the laws of the Republic of the Philippines. Both are engaged in the business of
operating cinema house, among others. The BIR sent SM Prime and First Asia a Preliminary
Assessment Notice (PAN) for value added tax (VAT) deficiency on cinema ticket sales.
ISSUE:
Whether the gross receipts derived by operators or proprietors of cinema/theater houses
from admission tickets subject to VAT
RULING:
No. While the enumeration under Section 108 on the VAT-taxable services is not
exhaustive and the said list includes “the lease of motion picture films, tapes and discs”, the
said activity however is not in the enumeration, the CIR must show that it falls under the
phrase “similar services”.
The repeal of the Local Tax Code by the LGC of 1991 is not a legal basis for the imposition
of cinema/theater operators or proprietors derives from admission tickets. The removal of the
prohibition (on the national government to tax certain activities) under the Local Tax Code did
not grant nor restore to the national government the power to impose amusement tax on
cinema/theater operators or proprietors. Neither did it expand the coverage of VAT.
57. CIR v Philippine American Accident Insurance Company Inc.
FACTS:
Respondents are domestic corporations licensed to transact insurance business in the country.
They paid the Bureau of Internal Revenue under protest the 3% tax imposed on lending in the
following accounts: P7,985.25 from the Philippine American (“PHILAM”) Accident Insurance
Company; P7,047.8 from PHILAM Assurance Company; and P14,541.97 from PHILAM General
Insurance Company. These amounts represented 3% of each company’s interest income from
mortgage and other loans. Respondent also paid the taxes required of insurance companies under
CA 466. On January 31, 1973, respondents sent a letter-claim to petitioner seeking a refund of the
taxes paid under protest. When respondents did not receive a response, each respondent filed on
April 26, 1973 a petition for review with the CTA.
ISSUE:
Whether respondent insurance companies are subject to the 3% percentage tax as lending
investors under NIRC
RULING:
No. True, respondents granted mortgage and other kinds of loan. However, this was not done
independently of respondent’s insurance business. The granting of certain loans is one of several
means of investment allowed to insurance companies. No less than the Insurance Code mandates
and regulates this practice.
Unlike the practice of lending investors, the lending activities of insurance companies are
circumscribed and strictly regulated by the State. Insurance companies cannot freely lend to
“themselves or others” as lending investors can, nor can insurance companies grant simply any
kind of loan. Even prior to 1978, the Insurance Code prescribed strict rules for the granting of loans
by insurance companies. These provisions on mortgage, collateral and policy loans were reiterated
in the Insurance Code of 1978 and are still in force today.
As such, the creation of “investment income” has long been held to be generally, if not
necessarily, essential to the business of insurance.
58. Chinabank v CA
GR No 146749, June 10, 2003
FACTS:
Petitioner made a 53% equity investment in First CBC Capital – a HK subsidiary engaged in
financing and investment with deposit – taking function. It was shown that CBC has become
insolvent so Chinabank wrote-off its investment as worthless and treated it as bad debt or as an
ordinary loss deductible from gross income. CIR disallowed the deduction, stating it should be
classified as capital loss.
ISSUE:
Whether the investment should be classified as a capital loss
RULING:
Yes. The NIRC contains provisions on securities becoming worthless. When securities
become worthless, there is strictly no sale or exchange but the law deems it to be a loss.
59. same as #67
60. CIR v Lhuillier
GR No. 150947, July 15, 2005
FACTS:
Revenue Memorandum Orders (RMOs) were issued imposing a 5% lending investor’s tax
on pawnshops. Pursuant to this, the BIR issued an assessment against Lhuillier Pawnshop
demanding payment of deficiency percentage tax. Lhuillier filed an administrative protest,
contending inter alia, that pawnshops are different from lending investors, which are subject to the
5% percentage tax under the specific provision of the Tax Code. Its protest having been unacted
upon, Lhuillier appealed to the CTA that declared the RMOs null and void.
ISSUE:
Are pawnshops included in the term lending investors for the purpose of imposing the 5%
percentage tax under Sec. 116 of the NIRC?
RULING:
No. While it is true that pawnshops are engaged in the business of lending money, they
are not considered “lending investors” since –
(1) prior to amendments of the NIRC, pawnshops and lending investors were subjected to
different tax treatments;
(2) Congress never intended pawnshops treated in the same way as lending investors, since
the amendments of the NIRC treated both tax subjects differently;
(3) Under the maxim expression uniuses exclusion alterius.
61. First Planters v CIR
GR No. 174134, July 30, 2008
FACTS:
Petitioner received a formal assessment notice directing payment of VAT deficiency and
documentary stamp tax deficiency, inclusive of surcharge and interest for the year 2000. Petitioner
protests such assessment.
ISSUE:
Is petitioner subject to value-added tax for the year 2000?
RULING:
No, petitioner is a non-bank financial intermediary and is subject to 10% VAT from the
years 1996-2002. However, with the levy, assessment and collection of VAT from non-bank
financial intermediaries being specifically deferred by law, the petitioner is not liable for VAT during
the said tax year.
However, beginning 2004, petitioner is no longer subject to VAT but to percentage tax as
gross receipts from 0% to 5% as the case may be.
62. CIR v Solidbank
GR No. 148191, November 25, 2003
FACTS:
Solidbank filed its quarterly percentage tax returns reflecting gross receipts amounting to P
1,474,693.44 and alleges that the total included gross receipts from passive income that was
already subjected to 20% final withholding tax (FWT). Thus, it filed with the BIR a letter request for
refund or tax credit. The Commissioner claims that although the FWT was not actually received by
Solidbank, the fact that the amount redounded to the bank’s benefit makes it part of the taxable
gross receipts in computing the gross receipts tax.
ISSUE:
Whether the FWT forms part of the gross receipts tax
RULING:
Yes. The processes of bookkeeping and accounting for interest on deposits and yield on deposit
substitutes that are subjected to FWT are tantamount to delivery, receipt or remittance. There
being constructive receipt, part of which is withheld, that income is included as part of the tax base
on which the gross receipts tax is imposed.
63. CIR v Bank of Commerce
GR No. 149636, June 8, 2005
FACTS:
In 1994 and 1995, the Bank of Commerce derived passive income in the form of interest or
discounts from its investments in government securities and private commercial papers. The bank
filed an administrative claim for refund with the CIR. It claimed that it had overpaid its gross
receipts tax because the passive income as indicated was included in the tax base, amounting to
double taxation.
ISSUE:
Was there double taxation?
RULING:
No. Firstly, the subject matter of final withholding tax (FWT) on passive income is the passive
income generated in the form of interest on deposits and yield on deposit substitutes while the
subject matter of gross receipts tax (GRT) is the privilege of engaging in banking.
FWT is an income tax while the GRT is an excise tax. Secondly, the tax periods they affect are
different. FWT is deducted and withheld as soon as the income is earned and is paid after every
calendar quarter in which it is earned. GRT is neither deducted nor withheld but is paid only after
every taxable quarter in which it is earned.
Thus, there is no double taxation.

64. CIR v BPI, GR No. 147375, June 26, 2006
Facts:
For the four (4) quarters of the year 1996, BPI computed its 5% gross receipts tax payments by
including in its tax base the 20% final tax on interest income that had been withheld and remitted
directly to the Bureau of Internal Revenue (BIR). On 30 January 1996, the CTA rendered a
decision in Asian Bank Corporation v. Commissioner of Internal Revenue, holding that the 20%
final tax withheld on a bank’s interest income did not form part of its taxable gross receipts for the
purpose of computing gross receipts tax. BPI wrote the BIR a letter dated July 15, 1998 citing the
CTA Decision in Asian Bank and requesting a refund of alleged overpayment of taxes representing
5% gross receipts taxes paid on the 20% final tax withheld at source.
Issue:
Whether or not the 20% final tax on a banks passive income, withheld from the bank at source, still
forms part of the banks gross income for the purpose of computing its gross receipts tax liability
Ruling:
Yes. The Tax Code does not provide a definition of the term gross receipts. Accordingly, the term
is properly understood in its plain and ordinary meaning and must be taken to comprise of the
entire receipts without any deduction. Further, the exclusion of the 20% final tax on passive income
from the taxpayer’s tax base is effectively a tax exemption, the application of which is highly
disfavored. Furthermore, the current revenue regulations require interest income, whether actually
received or merely accrued, to form part of the banks taxable gross receipts.
65. CIR v Citytrust, GR No. 139786
(Consolidated with Asianbank Corp. v CIR, GR No. 140857)
Facts:
Citytrust, respondent, is a domestic corporation engaged in quasi-banking activities. In 1994,
Citytrust reported the amount of P110,788,542.30 as its total gross receipts and paid the amount of
P5,539,427.11 corresponding to its 5% GRT. Meanwhile, on January 30, 1996, the CTA, in Asian
Bank Corporation v. Commissioner of Internal Revenue (ASIAN BANK case), ruled that the basis
in computing the 5% GRT is the gross receipts minus the 20% FWT. In other words, the 20% FWT
on a bank's passive income does not form part of the taxable gross receipts.
On July 19, 1996, Citytrust, inspired by the above-mentioned CTA ruling, sought to be reimbursed
of the 5% GRT it paid on the portion of 20% FWT or the amount of P326,007.01.
Issue:
WON the twenty percent (20%) final withholding tax (FWT) on a bank's passive income form part of
the taxable gross receipts for the purpose of computing the five percent (5%) gross receipts tax
(GRT)
Ruling:
Yes, the issue of whether the 20% FWT on a bank's interest income forms part of the taxable gross
receipts for the purpose of computing the 5% GRT is no longer novel. This has been previously
resolved by this Court in a catena of cases, such as China Banking Corporation v. Court of
Appeals, Commissioner of Internal Revenue v. Solidbank Corporation, Commissioner of Internal
Revenue v. Bank of Commerce, and the latest, Commissioner of Internal Revenue v. Bank of the
Philippine Islands.
The above cases are unanimous in defining "gross receipts" as "the entire receipts without any
deduction.
66. Asianbank Corp. v CIR, GR No. 140857, September 27, 2006
(Consolidated with Citytrust v CIR, GR 139786)
Facts:
Asianbank, petitioner, is a domestic corporation also engaged in banking business. For the taxable
quarters ending June 30, 1994 to June 30, 1996, Asianbank filed and remitted to the Bureau of
Internal Revenue (BIR) the 5% GRT on its total gross receipts. On the strength of the January 30,
1996 CTA Decision in the ASIAN BANK case, Asianbank filed with the Commissioner a claim for
refund of the overpaid GRT amounting to P2,022,485.78.
To toll the running of the two-year prescriptive period for filing of claims, Asianbank also filed a
petition for review with the CTA. On February 3, 1999, the CTA allowed refund in the reduced
amount of P1,345,743.01,11 the amount proven by Asianbank. Unsatisfied, the Commissioner filed
with the Court of Appeals a petition for review. On November 22, 1999, the Court of Appeals
reversed the CTA Decision and ruled in favor of the Commissioner
Issue:
WON the twenty percent (20%) final withholding tax (FWT) on a bank's passive income form part of
the taxable gross receipts for the purpose of computing the five percent (5%) gross receipts tax
(GRT)
Ruling:
Yes, the issue of whether the 20% FWT on a bank's interest income forms part of the taxable gross
receipts for the purpose of computing the 5% GRT is no longer novel. This has been previously
resolved by this Court in a catena of cases, such as China Banking Corporation v. Court of
Appeals, Commissioner of Internal Revenue v. Solidbank Corporation, Commissioner of Internal
Revenue v. Bank of Commerce, and the latest, Commissioner of Internal Revenue v. Bank of the
Philippine Islands.
The above cases are unanimous in defining "gross receipts" as "the entire receipts without any
deduction.
67. Republic v Sunlife Assurance Co.
FACTS:
CTA rendered a decision that held that mutual life insurance companies are purely
cooperative companies and are exempt from the payment of premium tax and DST. Sunlife
surmised that being a mutual life insurance company, it was likewise exempt from the payment of
premium tax and DST. Hence, Sunlife filed with the CIR an administrative claim for tax credit of its
alleged erroneously paid premium tax and DST for the stated tax periods
ISSUE:
Whether or not respondent is exempted from payment of tax on life insurance premiums
and documentary stamp tax
RULING:
Yes. The Tax Code defines a cooperative as an association “conducted by the members
thereof with the money collected by the members thereof with the money collected from among
themselves and solely for their own protection and not for profit.” Without a doubt, respondent is
cooperative engaged in a mutual life insurance business. A mutual life insurance company is
conducted for the benefit of its member-policyholders, who pay into its capital by way of premiums.
Under the Tax Code although respondent is a cooperative registration with the Cooperative
Development Authority (CDA) is not necessary in order for it to be exempt from the payment of
both percentage taxes on insurance premiums, under Section 121; and documentary stamp taxes
on policies of insurance or annuities it grants, under Section 199.
68. Philippine Basketball Association v CIR
FACTS:
PBA, the petitioner in this case received an assessment letter from the Commissioner of Internal
Revenue for the payment of deficiency amusement tax for a total of 5.8 million. Thereafter,
petitioner contested the assessment by filing a protest with respondent Commissioner who denied
the same. Petitioner then filed a petition for review with the Court of Tax Appeals questioning the
denial by respondent Commissioner of its tax protest, which dismissed the same also. Petitioner
contends that income from the cession of streamer and in case they are made liable to pay the
deficiency amusement tax, they should not be charged with 75% surcharge. Hence, this petition.
ISSUE:
Whether income from the cession of streamer and advertising spaces is subject to amusement
taxes
RULING:
Yes. PD 1456 provides that for the purpose of the amusement tax, the term gross receipts’
embraces all the receipts of the proprietor, lessee or operator of the amusement place. That
definition of gross receipts is broad enough to embrace the cession of advertising and streamer
spaces as the same embraces all the receipts of the propriety, lessee or operator of the
amusement place. The issue on the payment of surcharge was never posed as an issue before the
respondent court so it must necessarily fail.
69. British American Tobacco v Comacho
GR No. 163583, August 20, 2008
FACTS:
Petitioner, in this motion for reconsideration, argues that it is entitled to a downward
reclassification of lucky strike from the premium priced to the high priced tax bracket. It reiterates
that the classification freeze provision violates the equal protection and uniformity of taxation
clauses because older bananas are taxed based on their 1996 net retail prices while new brands
are taxed based on their present day net retail prices.
ISSUE:
Is the petition meritorious?
RULING:
No. The classification freeze provisions were inserted in the law for reasons of practicality
and expediency. It was in the main the result of Congress’ earnest efforts to improve the efficiency
and effectively of the tax administration over sin products while trying to balance the same with
other state interests.
70. Exxonmobil v CIR
FACTS:
Exxonmobil was a US corporation engaged in selling petroleum products to domestic and
international carriers. It purchased petroleum products from local suppliers (Caltex and Petron), the
excise taxes on which were remitted by the said suppliers but the amount of which were, however,
passed on to Exxonmobil. It then filed a claim for refund of excise taxes paid on its purchase of
petroleum products from its suppliers.
ISSUE:
Is Exxonmobil entitled to file a claim for the refund of the excise taxes passed on by Caltex
and Petron
RULING:
No. The proper party to seek a refund of an indirect tax is the statutory taxpayer, the
person on whom law imposes the tax and who paid the same even if he shifts the burden to
another. Although the burden of an indirect tax can be shifted to the purchaser, the amount added
or shifted becomes part of the price. Thus, the purchaser does not really pay the tax per se but
only the price of the commodity. Indirect taxes were defined as those that are demanded, in the
first instance, from, or are paid by, one person to someone else. When the seller passes on the tax
to the buyer he is effect shifts only the tax burden and not the liability to pay for it.
71. CIR v Pilipinas Shell
FACTS:
Shell is engaged in the business or processing, treating and refining petroleum for the
purpose of producing marketable products and the subsequent sale thereof. Shell filed with the BIR
a formal claim for refund or tax credit representing excise taxes it allegedly paid on sales and
deliveries of gas and fuel oils to various international carriers during the period October to
December 2001. Subsequently, a similar claim for refund or credit was filed by Shell with the BIR
covering the period January to March 2002. Again, on July 3, 2003, Shell filed another formal claim
for refund or tax credit covering deliveries for April to June 2002. Since no action was taken by CIR
on its claims, Shell filed petitions for review before the CTA ruled that Shell is entitled to the refund
of excise taxes in the reduced amount.
ISSUE:
Whether Shell as manufacturer or producer of petroleum products is exempt from the
payment of excise tax on such petroleum products it sold to international carriers
RULING:
No. The statutory taxpayer, the local manufacturer of the petroleum products who is
directly liable for the payment of excise tax on the said goods, is the proper party to seek a tax
refund. Thus, a foreign oil company who likewise bought petroleum products from local
manufacturers and later sold these to international carriers, have no legal personality to file a claim
for tax refund or credit of excise taxes previously paid by the local manufacturers even if the latter
passed on the said buyers the tax burden in the form of additional amount in the price. Excise
taxes, as the term is used in the NIRC, refer to taxes applicable to certain specified goods or
articles manufactured or produced in the Philippines for domestic sales or consumption or for any
other disposition and to things imported into the Philippines. These taxes are imposed in addition to
the value-added tax.
72. Phil Geothermal v CIR, GR No. 154028, July 29, 2005
Facts:
Petitioner filed an administrative claim for refund with the Bureau of Internal Revenue on July 10,
1996. According to petitioner, the sale of steam to NPC is a VAT-exempt transaction under Sec.
103 of the Tax Code. Since respondent failed to act on the claim, on July 2, 1997, petitioner filed a
petition to toll the running of the two-year prescriptive period before the Court of Tax Appeals,
which stated categorically that the supply of steam to NPC is exempt from, VAT.
However, it only granted a partial VAT refund of P9,012,310.26, believing that only this amount
was not reimbursed by NPC. The CTA ruled that petitioner was no longer entitled to a refund of the
remaining balance of P30,316,465.15, since it appears that the official receipts petitioner issued to
NPC included the VAT payable shown in the Summary of Payments Received from NPC for each
production period.
Issue:
What is the amount of refund to be granted?
Ruling:
The amount of refund should have been based on the VAT Returns filed by the taxpayer. Whether
NPC had reimbursed petitioner is not the concern of the CTA. It is solely a matter between
petitioner and NPC. For indirect taxes like VAT, the proper party to question or seek a refund of the
tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the
same even when he shifts the burden thereof to another.
Petitioner has the legal personality to apply for a refund since it is the one who made the erroneous
VAT payments and who will suffer financially by paying in good faith what it had believed to be its
potential VAT liability. Under the principle of solutio indebiti, the government has to restore to
petitioner the sums representing erroneous payments of taxes. It is of no moment whether NPC
had already reimbursed petitioner or not because in this case, there should have been no VAT paid
at all.
73. SILKAIR v CIR
FACTS:
Petitioner Silkair is a corporation organized under the laws of Singapore that has a
Philippine Representative Office, is an online international air carrier. Later, Silkair filed with the
BIR a written application for the refund of 4.5 million excise taxes it claimed to have paid on its
purchases of jet fuel from Petron Corporation from January to June 2000. CTA denied Silkair’s
petition on the ground that as the excise tax was imposed on Petron as the manufacturer of
petroleum products, any claim for refund should be filed by the latter; and where the burden of tax
is shifted to the purchaser, the amount passed on to it is no longer a tax but becomes an added
cost of the goods purchased.
ISSUE:
Whether the petitioner is the proper party to claim for refund or tax credit
RULING:
No. The proper party to question or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts
the burden thereof to another. Section 130(a)(2) of the NIRC provides that “unless otherwise
specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or
produces before removal of domestic products from place of production. Thus, Petron, not Silkair,
is the statutory taxpayer which is entitled to claim a refund based on Section 135 of the NIRC of
1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore. The exemption
granted under Section 135(b) of the NIRC cannot, without a clear showing of legislative intent, be
construed as including indirect taxes.
74. Apex Mining v CIR
FACTS:
Apex Mining is engaged in the business of mining, concentrating, converting and otherwise
producing and dealing in all kinds of ores, metals and others. In 1988, Apex bought from small
miners and from these transactions the BIR assessed an ad valorem tax. On 1990, Apex reiterated
its protest for ad valorem taxes as applied to the transactions with small miners. The application
was denied and coupled with demand to pay the taxes. CTA ruled that Apex should pay the
delinquency taxes plus surcharges and interest. The ad valorem taxes were cancelled due to lack
of legal basis.
ISSUE:
Whether or not the motion for reconsideration should not be dismissed for being filed out of
time
RULING:
A judicious perusal of the records shows that the decision of the appellate court had
became final and executory due to the untimely filing of the motion for reconsideration. Thus, the
ad valorem assessment for the purchases to small miners stands.
75. Del Rosario v Hamoy
GR No. 77154, June 30, 1987
FACTS:
For want of a one-peso documentary stamp in a special power of attorney for pre-trial
purposes, in lieu of the personal appearance of the plaintiff, the respondent Judge declared him
non-suited and dismissed the complaint for failure of the plaintiff to appear for pre-trial conference.
ISSUE:
Whether the failure of the petitioner to provide the documentary stamp warranted the
dismissal of his case
RULING:
No. The Judge could have easily required the counsel for the plaintiff to buy the required
one-peso documentary stamp outside the courtroom and affix the same to the special power of
attorney and that respite would not have taken ten minutes.
76. CIR v Fireman’s Fund
FACTS:
Respondent is a resident foreign corporation organized under the laws of the US,
authorized and licensed to do business in the Philippines. From 1952-1958, the company entered
into various insurance contracts involving casualty, fire and marine risks for which the
corresponding insurance policies were issued. From 1952-1956, documentary stamp were bought
and affixed to the corresponding pages of the policy register, instead of on the insurance policy
issued. The CIR assessed and demanded from the company the payment of the documentary
stamp for the years 1952-1958, plus penalties.
ISSUE:
Whether the affixture of documentary stamp on pages other than those authorized by law
is tantamount to failure to pay the same
RULING:
No. Although the insurance policies with the corresponding documentary stamp affixed are
the best evidence to prove payment of said DST, it does not preclude the admissibility of other
proofs that are uncontradicted and considerable weight.
77.G.R. No. L-16340 | February 29, 1964
COMMISSIONER OF INTERNAL REVENUE v.HEALD LUMBER COMPANY
FACTS
At the time of the original issuance by Heald Lumber of the 1,000 shares of stock without par value,
defendant paid the documentary stamp tax based on the actual consideration it had received from
the subscribers. In 1956, the BIR assessed defendant with an additional document stamp tax of
P1.00 for each share of no par value stock or total sum of P1,000.00 for the reasons that the
increase of Heald Lumber's capitalization which was brought about by the transfer of P300,000.00
from its surplus to its capital account resulted in an increase of P300.00 share. The case was taken
to the CIR, which found against the defendant. The CTA, in turn, reversed the decision of the
petitioner.
ISSUE
Whether the actual consideration, upon which the DST is computed, includes all amounts received
by the corporation for issuing no par value certificates although said amounts may have been paid
after the stock have been issued.
HOLDING
NO. Under the Section 212 of the Tax Code, the documentary stamp tax is collectible only from
"every original issue" of stock certificates, and that, as expressed in its proviso, "in the case of the
original issue of stock without par value the amount of the documentary stamp tax ... shall be
based upon the actual consideration received by the association, company or corporation ... ."
Read together with Section 210 of the same Tax Code Under and under our revenue system, the
basis for the documentary stamp tax on certificates without par value shall only be the actual
consideration received by the corporation at the time of the original issuance of the certificates.
Additional considerable considerations, which may be received therefor in the future, are neither of
any consequence. Otherwise, the phrase "at time such act is done or transaction had" in Section
210 shall have no meaning, no sense.
Further, with respect to stock certificates, it is levied upon the privilege of issuing them; not on the
money or property received by the issuing company of certificates. Neither is it imposed upon the
share of stock. . As Justice Learned Hand pointed out in one case, documentary stamp tax is
levied on the document and not on the property which it described. (Empire Trust Co. v. Hoey, 103
F 2d. 430) If, therefore, as is apparent from the foregoing discussion, that the tax in question
imposed on the privilege of issuing certificates, then the tax may be collected only once: when the
certificates are first or originally issued. The reason is because a certificate is issued only once.
Whatever documentary tax due, is due at that time.
A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business
transacted but is an excise upon the privilege, opportunity or facility offered at exchanges for the
transaction of the business. It is an excise upon the facilities used in the transaction of the business
separate and apart from the business itself.
78. Gabucan v Manta
GR No. L-51546, January 28, 1980
FACTS:
The CFI of Camiguin in its decision in Special Proceeding No. 41 for the probate of the will
of the late Gabucan, dismissed the proceeding because the requisite documentary stamp was not
affixed to the notarial acknowledgment in the will and hence, according to respondent Judge, it was
not admissible in evidence, citing Section 238 of the Tax Code, now Section 250 of the 1977 Tax
Code.
ISSUE:
Whether failure to pay DST warrants the dismissal of the proceeding for probate of a will
RULING:
No. What the probate court should have done was to require the petitioner to affix the
requisite 30-centavo documentary stamp to the notarial acknowledgment of the will, which is the
taxable portion of that document.
The non-admissibility of the document subsists only until the requisite documentary stamp,
subsists only until the requisite stamp, subsists only until the requisite stamp or stamps shall have
been affixed thereto and cancelled. The lack of the documentary stamp does not invalidate such
document.
79. Lincoln v CIR
GR No. 118043, July 23, 1998
FACTS:
In 1984, Lincoln issued 50,000 shares of stock as stock dividends, with a par value of
P100 or a total of 5 million. Petitioner paid documentary stamp taxes on each certificate on the
basis of its par value. In its assessment, the CIR used the book value as the basis of determining
the amount for DST. When the case was brought to the CTA, the latter Tax Court found for
petitioner. The CA, in turn, sustained the CIR.
ISSUE:
Whether in determining the amount to be paid as documentary stamp tax, the par value or
the book value of the shares which should be considered
RULING:
Par value. Documentary stamp tax is not levied upon the shares of stock per se but rather
on the privilege of issuing certificates of stock. A stock certificate is merely evidence of a share of
stock and not the share itself. There is therefore no reason for determining the actual value of such
dividends.
80. International Exchange Bank v CIR
GR No. 171266, April 4, 1007
FACTS:
In January 2000, petitioner was personally served with an undated pre-assessment notice
(PAN) assessing it of deficiency on its purchases of securities from the BSP or Government
Securities from the BSP or Government Securities Purchased Reverse Repurchase Agreement
(RRPA) and its FSD (Fixed Savings Deposit) for the taxable years 1996 and 1997. Subsequently,
petitioner received a formal assessment notice (FAN) for deficiency DST on its RRPA and FSP,
including surcharges and an accompanying demand letter. Petitioner filed a protest letter claiming,
among other things, that there is no law imposing DST on its FSD.
ISSUE:
Whether a savings account – fixed savings deposit (FSD) evidenced by a passbook is
subject to DST
RULING:
Yes. A passbook representing an interest earning deposit account issued by a bank
qualifies as a certificate of deposit drawing interest. A document to be deemed a certificate of
deposit requires no specific form as long as there is some written memorandum that the bank
accepted a deposit of a sum of money from a depositor. What is important and controlling is the
nature or meaning conveyed by the passbook and not the particular label or nomenclature
attached to it, inasmuch as substance, not form, is paramount. Having a fixed term and reduction
of interest rate in case of pre-termination are essentially the features of a time deposit.
81. BDO v CIR
GR No. 173602, January 15, 2007
FACTS:
In June 2002, the CIR issued demanded the petitioner to pay its liability in the amount of
13.8 million representing documentary stamp tax (DST) deficiencies accruing from special savings
account product denominated as Investment Savings Account (ISA) for the fiscal year ending June
30, 1998. Petitioner protested the assessment on the ground that ISA is not subject to DST
because under Section 180 of the Tax Code, a certificate of deposit subject to DST must have the
features of a time deposit; petitioner’s ISA is an innovative product which is a crossbreed between
a regular savings deposit and a time deposit. When the case reached the CTA, it ultimately found
against petitioner.
ISSUE:
Whether the ISA is subject to DST
RULING:
Yes. Despite the differences in the form of the documents, the CTA en banc ruled that a
time deposit and ISA have essentially the same attributes and features. Like time deposit, ISA
transactions bear a fixed term or maturity because the bank acknowledges receipt of a sum of
money on deposit which the bank promises to pay the depositor, bearer or to the order of a bearer
on a specified period of time.
The definition of a certificate of deposit is all encompassing to include a savings account
deposit such as ISA.
82. Chinabank v CIR
CTA Case 6400, January 3, 2006
FACTS:
Chinabank was engaged in the transactions involving purchases/sales of securities to the
Bangko Sentral ng Pilipinas or commonly known as reverse repurchase agreements (RRP).
Likewise, petitioner was engaged in the transactions of accepting Special Savings Deposits (SSD)
from its clientele. Petitioner received a pre-assessment notice (PAN)issued by CIR assessing it of
deficiency documentary stamp taxes on RRPs and SSDs.
ISSUE:
Whether the SSD is subject to DST
RULING:
Yes. A deposit account which has the same features as a time deposit account i.e. a fixed
term in order to earn a higher interest rate is subject to the DST. The DST is imposed on all
certificates of deposit drawing interest without any qualification. SSD is a deposit account with a
fixed term.
83. International Exchange Bank v CIR
GR No. 171266, April 4, 2007
FACTS:
The International Exchange Bank (IEB) personally received an assessment for deficiency
Documentary Stamp Tax (DST) on its purchases of securities from the Bangko Sentral ng Pilipinas
(BSP) or Government Securities Purchased – Reverse Repurchase Agreement and its Savings
Account – Fixed Savings Deposit for the taxable years 1996 and 1997.
ISSUE:
Whether or not the IEB’s Fixed Savings Deposit evidenced by a passbook is subject to
Documentary Stamp Tax for the years assessed
RULING:
Yes. A regular savings account with a passbook that is withdrawable at any time is not
subject to DST, unlike a time deposit which is payable on a fixed maturity date. Substance, not
form, is paramount. What is important and controlling is the nature and meaning conveyed by the
passbook and not the particular label or nomenclature attached to it.
84. same as #79
85. same as #67
86. Bluecross Healthcare v Olivares
GR No. 169737, February 12, 2008
FACTS:
Respondent Neomi Olivares applied for health care program with petitioner, a health
maintenance firm. For a period of 1 year, it paid an amount of P11,117and additional amount for
service of limitless consultation. In the health care agreement, ailments due to “pre-existing
conditions” were excluded from the coverage. Barely 38 days from the effectivity of her health
insurance, respondent suffered a stroke and was admitted in the Medical City. When she was
discharged, she demanded that the petitioner should pay her medical expenses.
ISSUE:
Whether the petitioner is liable under the insurance contract
RULING:
Limitation of liability on the part of the insurer must be construed as to preclude it from
evading its obligation. Accordingly, they should be scrutinized by the courts with “extreme jealousy”
and “care”.
87. Philhealthcare v CIR
GR No. 167330, June 12, 2008
FACTS:
Petitioner, a prepaid health-care organization offering benefits to its members was
assessed by the BIR for deficiency in the payment of the DST under Sec 185 of the Tax Code.
ISSUE:
Whether a healthcare agreement in the nature of an insurance contract and therefore
subject to the documentary stamp tax (DST) imposed under Section 185 of RA 8424
RULING:
Yes. DST under Section 185 is imposed on the privilege of making or renewing any policy
of insurance (except life, marine, inland and fire insurance), bond or obligation in the nature of
indemnity for loss, damage or liability. Here, the healthcare agreement was in the nature of non-life
insurance that is primarily a contract of indemnity.
88. CIR v Construction Resources of Asia, Inc.
GR No. L-68230, November 25, 1986
FACTS:
Respondent is a domestic corporation duly registered with the Overseas Construction
Board as an overseas contractor. It entered into contract with Malaysian Government for the
construction of a road at Sabah. In connection therewith, petitioner incurred foreign loans. In an
investigation conducted by CIR examiners, it was ascertained that the respondent failed to file
withholding tax return on foreign loans remitted abroad and documentary and science stamp tax to
the share of stocks it issued.
ISSUE:
Whether the respondent is liable for DST on the shares of stock it issued
RULING:
No. For the DST to attach, certificates of stocks only need to be issued but not delivered.
The delivery of certificates of stocks to the private respondent’s stockholders whether actual or
constructive, is not essential for the DST to attach. What is taxed is the privilege of issuing shares
of stocks and, therefore, taxes accrue at the time the shares are issued.
89. Phil Consolidated Coconut, 70 SCRA 22
Facts:
Petitioner's incorporators-subscribers deposited with the Securities and Exchange Commission
P14,000,000 worth of shares of stock. The deposit was thereby conditioned that "no sale or
transfer, conveyance, pledge or encumbrance of any kind or nature shall be made on these
deposited shares ..." and "shall continue until such time as the said Securities and Exchange
Commission shall release the same or any portion thereof upon the declaration of a dividend in
such an amount as the Securities and Exchange Commission may deem adequate, or under
conditions and circumstances that the said Commission may deem such release justified".
Issue:
For the purpose of imposition of documentary stamp tax, shall the certificate of stock be considered
as "issued" even if held on mandatory deposit by the Securities and Exchange Commission?
Ruling:
No. It is very manifest that in so far as the fifteen (15) certificates of stocks are concerned, they
nominally appear in the names of the incorporators-subscribers appearing therein but actually none
among them can exercise any attribute of ownership over said stocks until the Securities and
Exchange Commission decides otherwise. If it is an act of the Government that temporarily
deprived these fifteen (15) certificates of stocks of any value in favor of their owners, it is absurd
why that same Government shall consider said certificates issued and with practical value for the
purpose of imposing the documentary stamp tax.
90. same as #81
91. CIR v First Express
GR No. 172045-46, June 16, 2009
FACTS:
CIR issued an assessment notices against First Express Pawnshop Company for
deficiency documentary stamp tax on deposit on subscription with compromise penalty and on
pawn tickets with compromise penalty. The respondent company contends that it is not liable for
deficiency in DST on deposit on subscription.
ISSUE:
Whether respondent is liable to pay DST on deposit on subscription of capital stock
RULING:
No. The deposit on stock subscription is merely an amount of money received by a
corporation with a view of applying the same as payment for additional issuance of shares in the
future, an event which may or may not happen.
Thus, respondent is not liable for the payment of DST on its deposit on subscription for the
reason that there is yet no subscription that creates rights and obligations between the subscriber
and the corporation.
92.
93. Supreme Transliner v BPI
FACTS:
Supreme Transliner took out a loan from respondent and was unable to pay. The
respondent bank extrajudicially foreclosed the collateral and before the expiration of the one-year
redemption period, the mortgagors notified the bank of its intention to redeem the property.
ISSUE:
Is the mortgagee-bank liable to pay the capital gains tax upon the execution of the
certificate of sale and before the expiry of the redemption period?
RULING:
No. It is clear that in foreclosure sale there is no actual transfer of the mortgaged real
property until after the expiration of the one-year period and title is consolidated in the name of the
mortgagee in case of non-redemption.
Before the period expires there is yet no transfer of title and no profit or gain is realized by
the mortgagor.
94.REPUBLIC vs. CA, and NIELSON & CO.,INC. L-38540 149 SCRA 351
Facts:
The petitioner sought the review on certiorari of the decision of the respondent Court of Appeals
reversing the decision of the then Court of First Instance of Manila which ordered private
respondent Nielson & Co., Inc. to pay the Government the amount of P11,496.00 as ad valorem
tax, occupation fees, additional residence tax and 25% surcharge for late payment, for the years
1949 to 1952. Petitioner claims that the demand letter of 16 July 1955 showed an imprint indicating
that the original thereof was released and mailed on 4 August 1955 by the Chief, Records Section
of the Bureau of Internal Revenue, and that the original letter was not returned to said Bureau;
thus, said demand letter must be considered to have been received by the private respondent.
According to petitioner, if service is made by ordinary mail, unless the actual date of receipt is
shown, service is deemed complete and effective upon the expiration of five (5) days after mailing.
As the letter of demand dated 16 July 1955 was actually mailed to private respondent, there arises
the presumption that the letter was received by private respondent in the absence of evidence to
the contrary. More so, where private respondent did not offer any evidence, except the self-serving
testimony of its witness, that it had not received the original copy of the demand letter dated 16
July 1955.
Issue:
1. Whether or not the notice of assessment or demand properly served to the respondent
2. Whether or not the receipt by the respondent of the succeeding follow-up demand notices be
construed as receipt of the original demand
Ruling:
1. No. As correctly observed by the respondent court in its appealed decision, while the contention
of petitioner is correct that a mailed letter is deemed received by the addressee in the
ordinary course of mail, still this is merely a disputable presumption, subject to
controversion, and a direct denial of the receipt thereof shifts the burden upon the party
favored by the presumption to prove that the mailed letter was indeed received by the
addressee. Since petitioner has not adduced proof that private respondent had in fact
received the demand letter of 16 July 1955, it cannot be assumed that private respondent
received said letter.
2. Yes. Records show that petitioner wrote private respondent a follow-up letter dated 19
September 1956, reiterating its demand for the payment of taxes as originally demanded in
petitioner's letter dated 16 July 1955. This follow-up letter is considered a notice of
assessment in itself which was duly received by private respondent in accordance with its
own admission. And consequently, under Section 7 of Republic Act No. 1125, the
assessment is appealable to the Court of Tax Appeals within thirty (30) days from receipt
of the letter. The taxpayer's failure to appeal in due time, as in the case at bar, makes the
assessment in question final, executory and demandable. Thus, private respondent is now
barred from disputing the correctness of the assessment or from invoking any defense that
would reopen the question of its liability on the merits.
95.
96. CIR v Metro Star Superama
FACTS:
Metro Star Superama was audited for taxable year 1999 and received a preliminary 15-day
letter on November 15, 2001. On April 11, 2002, it received a formal letter of demand dated April 3,
2002. Denying that it received a pre-assessment notice and thus not accorded due process, Metro
Star Superama filed a petition with the CTA.
ISSUE:
Was petitioner accorded the required due process?
RULING:
No. Since the petitioner denied receipt of the Pre-Assessment Notice, the burden of
proving the same shifts to the BIR. To raise the presumption of receipt, it must be shown that:
(a) letter was properly addressed with postage prepaid;
(b) it was mailed.
If receipt is denied, the BIR must then show actual receipt through presentation of the registry
receipt or, if the same cannot be located, at least a certification from the Bureau of Posts.
97. Republic v Ricarte, GR No. L-46893, November 12, 1985
Facts:
For failure of defendant to pay his deficiency income tax liability, plaintiff, on January 14, 1966,
plaintiff filed a complaint for collection of unpaid taxes before the City Court of Cebu.
After trial and hearing, the court a quo rendered a decision dated October 29, 1966 dismissing the
case on the ground of prescription of action. The trial court reasoned out that the assessment was
made by the Bureau of Internal Revenue on April 6, 1959, but the present case was filed only on
January 14, 1966 or more than the prescriptive period of five years as provided for in Section
332(c) of the National Internal Revenue Code.
Issue:
Whether the appellant can still collect the alleged deficiency income tax liability thru judicial
proceeding
Ruling:
No. Appellee filed his income tax return for the year 1958 on March 2, 1959 and the same was
assessed by the Bureau of Internal Revenue on April 6, 1959. The tax was paid in two installments.
The Bureau of Internal Revenue reviewed the said return and found out a deficiency in the
assessment it previously made and the income tax paid by the appellee. A notice of assessment
was sent to the appellee on January 19, 1961. Such subsequent assessment undertaken by the
Bureau of Internal Revenue was based merely on the income tax return filed by the appellee where
no assessment has been made by him. As has been said, the amount of tax due was previously
computed by the Bureau of Internal Revenue. Finding that it made an error, the Bureau reassessed
the income tax return of the appellee; but such reassessment was made pursuant to the old law
and not under the amendatory act.
However, the lower court was correct that the present action was filed after the prescriptive period
of five (5) years provided for in Section 332(c) of the National Internal Revenue Code.
98. Advertising Assoc. v CTA
133 SCRA 765
FACTS:
On June 18, 1973 and March 5, 1974 Advertising Associates received a deficiency tax
assessment. On April 18 and May 25, 1978, the warrants of distraint and levy were served upon
Advertising Associates. In then filed a protest. The enforcement of the warrant of distraint and levy
was not implemented. When the issue was finally resolved, the CIR sought to collect the taxes but
Advertising filed an opposition claiming that the collection of tax had already prescribed because it
was done beyond the 5-year period.
ISSUE:
Whether the prescriptive period has elapsed due to failure to enforce the warrant of
distraint and levy
RULING:
No. The warrants were served on April 18 and May 25, 1975 or within 5 years after the
assessment of the tax. Obviously, the warrants were issued to interrupt the 5-year prescriptive
period. His enforcement was not implemented because of the pending protests of the taxpayer and
its requests for withdrawal of the warrants.
99. CIR v Union Shipping
GR No. 66160, May 21, 1990
FACTS:
CIR assessed Yee Fong Hong, Ltd total sum of 500,000 as deficiency income taxes due
for the years 1971 and 1972. Yee protested the assessment. The CIR, without ruling on the protest
by Yee, issued a warrant of distraint and levy which was served on private respondent’s counsel. It
then filed its petition for review of the petitioner’s assessment in the Court of Tax Appeals.
ISSUE:
Whether the CTA has jurisdiction over the case
RULING:
Yes. Under the circumstances, the CIR, not having clearly signified his final action on the
disputed assessment, legally the period to appeal has not commenced to run.
100. Surigao Electric v CTA
57 SCRA 523
FACTS:
Petitioner, a grantee of legislative electric franchise, contested a warrant of distraint and
levy to enforce the collection of a deficiency franchise tax plus surcharge. Thereafter, the CIR, by a
letter dated April 2, 1961 advised the petitioner to take up the matter with the General Auditing
Office. The petitioner then requested a recomputation of the revised assessment in a letter to the
Commissioner dated June 6, 1963. The CIR denied the same in a letter dated June 28, 1963.
Petitioner appealed to the CTA.
ISSUE:
Whether petitioner’s appeal was time-barred
RULING:
Yes, to sustain the petitioner’s contention that the 30-day period should be counted from
July 16, 1963, the day it received the June 28, 1963 letter would in effect, leave solely to the
petitioner’s will the determination of the commencement of the statutory 30-day period and place
the petitioner and for that matter, any taxpayer in a position to delay at will and on convenience the
finality of the assessment.
101. CIR v Isabela Cultural
GR No. 135210, July 11, 2001
FACTS:
In an investigation conducted on the 1986 books of account of Isabela Cultural Corporation
had the preliminary finding that the corporation incurred a total income tax deficiency of
P9,985,392.15. Upon protest, this was reduced to P325,869.44. The corporation requested a
reconsideration. The corporation received from the Commissioner a Final Notice before seizure
dated December 22, 1994. Corporation appealed to the CTA.
ISSUE:
Whether the final notice before seizure is the final decision of the Commissioner
RULING:
Yes. Not only notice the only response received, its content and tenor supported the theory
that it was the CIR’s final act regarding the request for reconsideration. The letter itself stated that it
was the last opportunity to pay.
102. Oceanic Wireless Network v CIR
GR No. 148380, December 9, 2005
FACTS:
In December 1996, petitioner received a letter from the Revenue District Officer
authorizing Revenue Officers to examine the books of accounts and other records for the period
January to December 1995. Inasmuch as the authority of respondent to assess was about to
prescribe in July 31, 1999, demand letters were sent on July 30, 1999. The extended period was
pursuant to a waiver it executed.
ISSUE:
Whether or not the BIR’s right to assess has already prescribed
RULING:
No. The assessments are valid. At the time of the execution of the waiver, there was no
preliminary assessment issued yet against petitioner where the kind and amount of tax could be
referred. Such details cannot be specified in the waiver since it was still unascertainable at the
time. Following the rule that the period of respondent to assess was extended up to July 31, 1999
of the waiver, the deficiency assessment issued against petitioner on July 30, 1999 one within the
period allowed by law.
103. Gibbs v CIR
GR No. L-17406, November 29, 1965
FACTS:
On February 1956, CIR issued against Finley Gibbs a deficiency income tax assessment
notice. One month after, Allison Gibbs, signing as attorney in fact for her brother, acknowledged
receipt of the above assessment notice and notified the CIR that Finley Gibb was then living in
California and that the latter was notified by him of the said deficiency assessment.
ISSUE:
Whether Gibbs claims have already prescribed
RULING:
Yes, Gibbs claims have already prescribed. Allison is not a mere attorney-in-fact but
counsel of Gibbs and thus, upon receipt she should have immediately filed an appeal upon denial.
104. same as #103
105. CIR v TMX Sales
GR No. 83736, January 16, 1992
FACTS:
Respondent TMX Sales, Inc., a domestic corporation, filed its quarterly income tax return
for the first quarter of 1981, declaring an income of P571,174.31 and consequently paying an
income tax thereon of P247,010 on May 15, 1981. During the subsequent quarters, TMX suffered
losses. Thereafter, it filed with the BIR a claim for refund representing overpaid income tax on July
9, 1982.
ISSUE:
In a case involving corporate quarterly income tax, does the 2-year prescriptive period to
claim a refund of erroneously collected tax run from the date the quarterly income tax was paid, as
contended by the petitioner or from filing of the final adjustment return
RULING:
It should be computed from the date of filing the adjustment return or annual income tax
return and final payment of income tax where the tax account was paid on installment, the
computation of the 2-year prescriptive period should be from the date of the last installment.
106. CIR v Philamlife
GR No. 105208, May 29, 1995
FACTS:
Philamlife sought refund of excess quarterly income tax paid by it in the amount of
P3,643,125 representing excess corporate income taxes for the first and second quarters of 1983.
The CTA ruled in favor of Philamlife when it filed its appeal seeking for refund. Hence, this instant
review on certiorari filed by the CIR.
ISSUE:
Whether the claim for refund has prescribed
RULING:
No. The two-year prescriptive period for refunds should be counted from date of payment
of the tax sought to be refunded.
107.
108. Limited Airlines v CIR
GR No. 178788, September 29, 2010
FACTS:
International Airline, petitioner United Airlines, filed a claim for income tax refund.
Petitioner sought to be refunded the erroneously collected income tax in the amount of 5 million on
passenger revenue from tickets sold in the Philippines, the uplifts of which did not originate in the
Philippines. The airlines ceased operation originating from the Philippines since February 21, 1998.
ISSUE:
Whether petitioner is entitled to a refund
RULING:
No. Having underpaid the gross Philippine billings tax due on its cargo revenues for 1999,
the amount of the former being even much higher than the tax refund sought.
109. CIR v Wyeth
GR No. 762281, September 30, 1991
FACTS:
On December 16 and 17, 1974, CIR issued two assessment notices to Wyeth. Wyeth
protested. In 1980, Wyeth filed a petition for review with the Court of Tax Appeals asking the court
to enjoin the CIR from enforcing the assessment due to prescription.
ISSUE:
Whether the prescriptive period was suspended
RULING:
Yes. The assessment issued in 1974 are not yet final. This assessment only became final
in December 1974 when the CIR finally denied its protest filed by Wyeth. Hence, the warrant of
distraint or levy was issued by the CIR in February 1980 was issued well within the prescriptive
period for the government to collect the assessed taxes.
110. ABS-CBN v CTA
FACTS:
On June 27, 1908, RA 5431 amended Section 246 of the Tax Code increasing the tax rate
from 30% to 35% and revising the tax basis from “such amount” referring to rents, etc. to gross
income. In 1971, the Commissioner issued a letter of assessment and demand for deficiency
withholding income tax for years 1965 to 1968. The company requested for reconsideration where
the Commissioner did not act upon.
ISSUE:
Whether the new rates are to be applied retroactively
RULING:
No. Rulings or circulars promulgated by the Commissioner have no retroactive application
where to so apply them would be prejudicial to taxpayers. The company was no longer in a position
to withhold taxes due from foreign corporations because it had already remitted all film rentals and
had no longer control over them when the new circular was issued.
111. Lim v CA
FACTS:
Spouses Lim were engaged in the dealership of various household appliances. CIR
informed the couple that there are deficiency taxes. The spouses asked for reinvestigation. BIR
rendered a final decision holding that there was no cause for reversal of the assessment. BIR
referred the matter to the Manila Fiscal’s Office for Investigation and Prosecution. Four criminal
informations were filed against petitioners.
ISSUE:
Whether the offenses prescribe after 5 years or 10 years
RULING:
5 years but the government instituted the case within the prescriptive period. The period is
commenced from the date of the final notice. In criminal cases, statute of limitations are acts of
grace, a surrendering by the sovereign of its right to prosecute. They received strict construction in
favor of the Government and limitations in such cases will not be presumed in the absence of clear
legislation.
112.CIR vs Lucio Tan GR 119322
Facts:
The CIR assessed Fortune Tobacco Corp for 7.6 Billion Pesos representing deficiency income, ad
valorem and value-added taxes for the year 1992 to which Fortune moved for reconsideration of
the assessments. Later, the CIR filed a complaint with the Department of Justice against the
respondent Fortune, its corporate officers, nine (9) other corporations and their respective
corporate officers for alleged fraudulent tax evasion for supposed non-payment by Fortune of the
correct amount of taxes, alleging among others the fraudulent scheme of making simulated sales
to fictitious buyers declaring lower wholesale prices, as allegedly shown by the great disparity on
the declared wholesale prices registered in the "Daily Manufacturer's Sworn Statements" submitted
by the respondents to the BIR. Such documents when requested by the court were not however
presented by the BIR, prompting the trial court to grant the prayer for preliminary injunction sought
by the respondent upon the reason that tax liability must be duly proven before any criminal
prosecution be had. The petitioner relying on the Ungab Doctrine sought the lifting of the writ of
preliminary mandatory injunction issued by the trial court.
Issue:
Whose contention is correct?
Ruling:
In view of the foregoing reasons, misplaced is the petitioners' thesis citing Ungab v. Cusi, that the
lack of a final determination of Fortune's exact or correct tax liability is not a bar to criminal
prosecution, and that while a precise computation and assessment is required for a civil action to
collect tax deficiencies, the Tax Code does not require such computation and assessment prior to
criminal prosecution.
Reading Ungab carefully, the pronouncement therein that deficiency assessment is not necessary
prior to prosecution is pointedly and deliberately qualified by the Court with following statement
quoted from Guzik v. U.S.: "The crime is complete when the violator has knowingly and willfully
filed a fraudulent return with intent to evade and defeat a part or all of the tax." In plain words, for
criminal prosecution to proceed before assessment, there must be a prima facie showing of a
willful attempt to evade taxes. There was a willful attempt to evade tax in Ungab because of the
taxpayer's failure to declare in his income tax return "his income derived from banana sapplings."
In the mind of the trial court and the Court of Appeals, Fortune's situation is quite apart factually
since the registered wholesale price of the goods, approved by the BIR, is presumed to be the
actual wholesale price, therefore, not fraudulent and unless and until the BIR has made a final
determination of what is supposed to be the correct taxes, the taxpayer should not be placed in the
crucible of criminal prosecution. Herein lies a whale of difference between Ungab and the case at
bar.
113. CIR v CTA & Fortune, GR No. 119761, August 29, 1996
Facts:
Fortune tobacco changed the names of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,'
thereby removing the said brands from the foreign brand category. Subsequently, a 45% Ad
Valorem taxes were imposed on these brands. Then Republic Act ("RA") No. 7654 was enacted –
55% for locally manufactured foreign brand while 45% for locally manufactured brands. 2 days
before the effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was
issued by the BIR saying since there is no showing who the real owner/s are of Champion, Hope
and More, it follows that the same shall be considered locally manufactured foreign brand for
purposes of determining the ad valorem tax - 55%. BIR sent via telefax a copy of RMC 37-93 to
Fortune Tobacco addressed to no one in particular. Then Fortune Tobacco received, by ordinary
mail, a certified xerox copy of RMC 37-93.
Issue:
WON it was necessary for BIR to follow the legal requirements when it issued its RMC
Ruling:
YES. CIR may not disregard legal requirements in the exercise of its quasi-legislative powers
which publication, filing, and prior hearing.
RMC 37-93 cannot be viewed simply as construing Section 142(c)(1) of the NIRC, as amended,
but has, in fact and most importantly, been made in order to place "Hope Luxury," "Premium More"
and "Champion" within the classification of locally manufactured cigarettes bearing foreign brands
and to thereby have them covered by RA 7654 which subjects mentioned brands to 55% the BIR
not simply interpreted the law; verily, it legislated under its quasi-legislative authority. The due
observance of the requirements of notice, of hearing, and of publication should not have been then
ignored.
114.CIR vs Pascor 309 SCRA 402
Facts:
The CIR authorized certain BIR officers to examine the books of accounts and other accounting
records of Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and 1988. The
examination resulted in recommendation for the issuance of an assessment of P7,498,434.65 and
P3,015,236.35 for 1986 and 1987, respectively. On March 1, 1995, Commissioner filed a criminal
complaint for tax evasion against PRDC, its president and treasurer before the DOJ. Private
respondents filed immediately an urgent request for reconsideration on reinvestigation disputing
the tax assessment and tax liability.
On March 23, 1995, private respondents received a subpoena from the DOJ in connection with the
criminal complaint. In a letter dated, May 17, 1995, the Commissioner denied private respondent’s
request for reconsideration (reinvestigation on the ground that no formal assessment has been
issued which the latter elevated to the CTA on a petition for review. The Commissioner’s motion to
dismiss on the ground of the CTA’s lack of jurisdiction inasmuch as no formal assessment was
issued against private respondent was denied by CTA and ordered the Commissioner to file an
answer but did not instead filed a petition with the CA alleging grave abuse of discretion and lack of
jurisdiction on the part of CTA for considering the affidavit/report of the revenue officers and the
endorsement of said report as assessment which may be appealed to he CTA. The CA sustained
the CTA decision and dismissed the petition.
Issue:
1. Whether or not the criminal complaint for tax evasion can be construed as an assessment 2.
Whether or not an assessment is necessary before criminal charges for tax evasion may be
instituted
Ruling:
1. No. The filing of the criminal complaint with the DOJ cannot be construed as a formal
assessment. Neither the Tax Code nor the revenue regulations governing the protest assessments
provide a specific definition or form of an assessment.
An assessment must be sent to and received by the taxpayer, and must demand payment of the
taxes described therein within a specific period. The revenue officer’s affidavit merely contained a
computation of respondent’s tax liability. It did not state a demand or period for payment. It was
addressed to the Secretary of Justice not to the taxpayer. They joint affidavit was meant to support
the criminal complaint for tax evasion; it was not meant to be a notice of tax due and a demand to
private respondents for the payment thereof. The fact that the complaint was sent to the DOJ, and
not to private respondent, shows that commissioner intended to file a criminal complaint for tax
evasion, not to issue an assessment.
2. No. An assessment is not necessary before criminal charges can be filed. A criminal charge
need not only be supported by a prima facie showing of failure to file a required return. The CIR
had, in such tax evasion cases, discretion on whether to issue an assessment, or to file a criminal
case against the taxpayer, or to do both.
115. CIR v Lascona , GR No. 58061, October 25, 2005
Facts:
In March 1998, the Commissioner of Internal Revenue (CIR) issued a formal assessment notice
(FAN) to Lascona Land Co., Inc. (LLCI) demanding the latter to pay P753k in taxes. LLCI filed a
timely protest on April 20, 1998. From said date (since no supporting document was required to be
submitted), the CIR has 180 days to decide on the protest. However, the CIR promulgated its
decision on March 3, 1999. LLCI received a copy of the decision on March 12, 1999. On April 12,
1999, LLCI appealed the decision to the Court of Tax Appeals (CTA). The CIR moved for the
dismissal of the appeal on the ground that under a revenue regulation issued by the Bureau of
Internal Revenue (RR No. 12-99), if the CIR or its representative failed to act on a protest within
the 180-day period the taxpayer may appeal within 30 days from the lapse of the 180-day period to
the CTA otherwise, the decision shall become final and executory; that LLCI failed to appeal within
the said period hence the CTA has no jurisdiction over the case appealed by LLCI.
Issue:
Whether or not the CIR is correct
Ruling:
No. The revenue regulation in question is invalid because in effect, it limited the remedy provided
for by the law. Section 228 of the NIRC prevails over the said revenue regulation. The said revenue
regulation cannot validly take away the option of the taxpayer to continue waiting, even after the
lapse of the 180 day period, for the CIR to decide on the case and just appeal, within 30 days from
receipt, if the CIR’s ruling is adverse.
It must however be noted that these two remedies are mutually exclusive.
116. San Agustin v CIR, GR No. 138485, September 10, 2001
Facts:
On October 4, 1991, the Commissioner issued an Assessment Notice reiterating the demand in the
pre-assessment notice and requesting payment on or before thirty (30) days upon receipt thereof.
In a letter, dated October 31, 1991, the executor requested the Commissioner a reconsideration of
the assessment of P976,549.00 and waiver of the surcharge, interest, etc. The request for
reconsideration was not acted upon until January 21, 1993, when the executor received a letter,
dated September 21, 1992, signed by the Commissioner, stating that there is no legal justification
for the waiver of the interests, surcharge and compromise penalty in this case, and requiring full
payment of P438,040.38 representing such charges within ten (10) days from receipt thereof. On
February 18, 1993, a Petition for Review was filed by the executor with the CTA with the prayer
that the Commissioner's letter/decision, dated September 21, 1992 be reversed and that a refund
of the amount of P438,040.38 be ordered.
Issues:
1. WON the filing of a claim for refund [is] not essential before the filing of the petition for
review
2. WON the imposition by the respondent of surcharge, interest and penalties on the
deficiency estate tax is not in accord with the law and therefore illegal
Ruling:
1. Yes. As what the SC ruled in Roman Catholic Archbishop of Cebu vs Collector, to hold that
the taxpayer has now lost the right to appeal from the ruling on, the disputed assessment but must
prosecute his appeal under section 306 of the Tax Code, which requires a taxpayer to file a claim
for refund of the taxes paid as a condition precedent to his right to appeal, would in effect require of
him to go through a useless and needless ceremony that would only delay the disposition of the
case, for the Collector (now Commissioner) would cer1ainly disallow the claim for refund in the
same way as he disallowed the protest against the assessment. The law, should not be interpreted
as to result in absurdities.
2. No. The delay in the payment of the deficiency tax within the time prescribed for its
payment in the notice of assessment justifies the imposition of a 25% surcharge in consonance
with Section 248A(3) of the Tax Code. The basic deficiency tax in this case being P538,509.50, the
twenty-five percent thereof comes to P134,627.37. Section 249 of the Tax Code states that any
deficiency in the tax due would be subject to interest at the rate of twenty percent (20%) per
annum, which interest shall be assessed and collected from the date prescribed for its payment
until full payment is made.
117.Philippine Journalist vs CA 447 SCRA 214
Facts:
The Revenue District Office of the BIR issued a letter of authority for the examination of petitioner
Philippine Journalists books of accounts. From the examination, the petitioner was told that there
were deficiency taxes, inclusive of surcharges, interest and compromise penalty. Then, petitioner,
through its Comptroller, Lorenza Tolentino, executed a waiver of statute of limitations pursuant to
Sec.223 and Sec.224 and consented to the assessment and collection of taxes which may be
found due after the examination at any time after the lapse of the period of limitations fixed by said
Sections 223 and 224and other relevant provisions of the NIRC, until the completion of the
investigation. Petitioner had a deficiency of P136,952,408.97. On October 5, 1998, the Assessment
Division of the BIR issued Pre-Assessment Notices which informed petitioner of the results of the
investigation. A Final Notice Before Seizure was sent to the petitioner but the latter merely
questioned the amount of the deficiency and how the same was arrived. A Warrant of
Distraint/Levy was received by petitioner for the deficiency. Petitioner filed a Petition for Review
with the CTA, contending that no assessment was received by him; that the warrant of
distraint/levy was issued prematurely; and that the assessment was made beyond the 3-year
period. Regarding the assessment, the CTA ruled that the assessment was sufficiently proven by
the receipts of the Post Master. As to the premature distraint/levy and the assessment made
beyond the 3-year period, the CTA ruled in favor of the petitioner. The waiver of statute of
limitations by the petitioner was invalid which resulted in the lapse of the 3 year period for
assessment. Consequently, the petition was granted, declaring the order for payment of deficiency
tax null and void. The CIR filed a motion for reconsideration but the same was denied. Undaunted,
the CIR filed an appeal with the CA. The CA reversed the ruling of the CTA, stating that the waiver
of limitations was valid and that the assessment notices was final and executory. Hence, this
appeal.
Issue:
Whether or not the waiver of limitations was invalid, making the assessment beyond the 3 year
period
Ruling:
Yes, the court ruled that the waiver of limitation was invalid, making the assessment beyond the
allowable period of 3 years.
The waiver of the statute of limitations is not a waiver of the right to invoke the defense of
prescription as erroneously held by the Court of Appeals. It is an agreement between the taxpayer
and the BIR that the period to issue an assessment and collect the taxes due is extended to a date
certain. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription
unequivocally particularly where the language of the document is equivocal. For the purpose of
safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax
law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being a
remedial measure, should be liberally construed in order to afford such protection. As a corollary,
the exceptions to the law on prescription should perforce be strictly construed.
118. CIR v Phil Global, GR No. 167146, October 31, 2006
Facts:
On 16 October 2002, more than eight years after the assessment was presumably issued, the
Ponce Enrile Cayetano Reyes and Manalastas Law Offices received from the CIR a Final Decision
dated 8 October 2002 denying the respondent’s protest against Assessment Notice No. 000688-
80-7333, and affirming the said assessment in toto.
On 15 November 2002, respondent filed a Petition for Review with the CTA. After due notice and
hearing, the CTA rendered a Decision in favor of respondent on 9 June 2004. The CTA ruled on
the primary issue of prescription and found it unnecessary to decide the issues on the validity and
propriety of the assessment
Issue:
Whether or not CIR’s right to collect respondent’s alleged deficiency income tax is barred by
prescription under Section 269(c) of the Tax Code of 1977
Ruling:
Yes. The assessment, in this case, was presumably issued on 14 April 1994 since the respondent
did not dispute the CIR’s claim. Therefore, the BIR had until 13 April 1997. However, as there was
no Warrant of Distraint and/or Levy served on the respondents nor any judicial proceedings
initiated by the BIR, the earliest attempt of the BIR to collect the tax due based on this assessment
was when it filed its Answer in CTA Case No. 6568 on 9 January 2003, which was several years
beyond the three-year prescriptive period. Thus, the CIR is now prescribed from collecting the
assessed tax.
119. RCBC v CIR
April 24, 2007
FACTS:
RCBC received the final assessment notice on July 5, 2001. As the protest was not acted
upon, it filed a petition for review with the Court of Tax Appeals on April 30, 2002, or more than 30
days after the lapse of the 180-day period reckoned from the submission of complete document.
The CTA dismissed the petition for lack of jurisdiction since the appeal was filed out of time.
ISSUE:
Has the action to protest the assessment judicially prescribed?
RULING:
Yes. The assessment has become final. If there has been inaction, the taxpayer can
choose between –
(1) file a petition with the CTA within 30 days from the lapse of the 180-day period or
(2) await the final decision of the CIR and appeal such decision to the CTA within 30 days
after receipt of the decision.
These options are mutually exclusive and resort to one bars the application of the other. Thus, if
the petitioner belatedly filed an action based on inaction, it cannot subsequently file another petition
once the decision comes out.
120.
121.
122.
123.Estate of Diez vs CIR 421 SCRA 266
Facts:
During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs were managed by
the Philippine Trust Company (PhilTrust). The decedent died on April 3, 1979 but two days after
her death, PhilTrust filed her income tax return for 1978 not indicating that the decedent had died.
The BIR conducted an administrative investigation of the decedent’s tax liability and found a
deficiency income tax for the year 1997 in the amount of P318,233.93. Thus, in November 18,
1982, the BIR sent by registered mail a demand letter and assessment notice addressed to the
decedent “c/o PhilTrust, Sta. Cruz, Manila, which was the address stated in her 1978 income tax
return. On June 18, 1984, respondent Commissioner of Internal Revenue issued warrants of
distraint and levy to enforce the collection of decedent’s deficiency income tax liability and serve
the same upon her heir, Francisco Gabriel. On November 22, 1984, Commissioner filed a motion
to allow his claim with probate court for the deficiency tax. The Court denied BIR’s claim against
the estate on the ground that no proper notice of the tax assessment was made on the proper
party. On appeal, the CA held that BIR’s service on PhilTrust of the notice of assessment was
binding on the estate as PhilTrust failed in its legal duty to inform the respondent of antecedent’s
death. Consequently, as the estate failed to question the assessment within the statutory period of
thirty days, the assessment became final, executory, and incontestable.
Issues:
3. Whether or not the CA erred in holding that the service of deficiency tax assessment on Juliana
through PhilTrust was a valid service as to bind the estate
4. Whether or not the CA erred in holding that the tax assessment had become final, executory,
and incontestable
Ruling:
3. No. Since the relationship between PhilTrust and the decedent was automatically severed the
moment of the taxpayer’s death, none of the PhilTrust’s acts or omissions could bind the
estate of the taxpayer. Although the administrator of the estate may have been remiss in
his legal obligation to inform respondent of the decedent’s death, the consequence thereof
merely refer to the imposition of certain penal sanction on the administrator. These do not
include the indefinite tolling of the prescriptive period for making deficiency tax assessment
or waiver of the notice requirement for such assessment.
4. No. The assessment was served not even on an heir or the estate but on a completely
disinterested party. This improper service was clearly not binding on the petitioner. The
most crucial point to be remembered is that PhilTrust had absolutely no legal relationship
with the deceased or to her Estate. There was therefore no assessment served on the
estate as to the alleged underpayment of tax. Absent this assessment, no proceeding
could be initiated in court for collection of said tax; therefore, it could not have become
final, executory and incontestable. Respondent’s claim for collection filed with the court
only on November 22, 1984 was barred for having been made beyond the five-year
prescriptive period set by law.
124.
125. CIR v Enron, GR No. 166387, January 19, 2009
Facts:
On May 26, 1999, Enron received from the CIR a formal assessment notice requiring it to pay the
alleged deficiency income tax of P2,880,817.25 for the taxable year 1996. Enron protested this
deficiency tax assessment.
Due to the non-resolution of its protest within the 180-day period, Enron filed a petition for review in
the Court of Tax Appeals (CTA). It argued that the deficiency tax assessment disregarded the
provisions of Section 228 of the National Internal Revenue Code (NIRC), as amended, and Section
3.1.4 of Revenue Regulations (RR) No. 12-99 by not providing the legal and factual bases of the
assessment. Enron likewise questioned the substantive validity of the assessment. CTA ruled in
favor of Enron. The CIR appealed the decision of the CTA to the CA but CA affirmed CTA.
Issue:
WON the CA and CTA are incorrect
Ruling:
No. The law requires that the legal and factual bases of the assessment be stated in the formal
letter of demand and assessment notice. Thus, such cannot be presumed. Otherwise, the express
provisions of Article 228 of the NIRC and RR No. 12-99 would be rendered nugatory. The alleged
factual bases in the advice, preliminary letter and audit working papers did not suffice. There was
no going around the mandate of the law that the legal and factual bases of the assessment be
stated in writing in the formal letter of demand accompanying the assessment notice.
In [this] case, [the CIR] merely issued a formal assessment and indicated therein the supposed tax,
surcharge, interest and compromise penalty due thereon. The Revenue Officers of the [the CIR] in
the issuance of the Final Assessment Notice did not provide Enron with the written bases of the
law and facts on which the subject assessment is based. [The CIR] did not bother to explain how it
arrived at such an assessment. Moreso, he failed to mention the specific provision of the Tax Code
or rules and regulations which were not complied with by Enron.
126. CIR v FMF Development Corp, GR No. 167766, June 30, 2008
Facts:
The BIR then sent FMF pre-assessment notices informing it of its alleged tax liabilities. FMF filed a
protest against these notices with the BIR and requested for a reconsideration/reinvestigation.
RDO Rogelio Zambarrano informed FMF that the reinvestigation had been referred to Revenue
Officer Alberto Fortaleza.
On February 9, 1999, FMF President executed a waiver of the three-year prescriptive period for the
BIR to assess internal revenue taxes to extend the assessment period until October 31, 1999. The
waiver was accepted and signed by RDO Zambarrano. On October 18, 1999, FMF received
amended pre-assessment notices dated October 6, 1999 from the BIR. FMF immediately filed a
protest on November 3, 1999 but on the same day, it received BIR’s Demand Letter and
Assessment Notice dated October 25, 1999 reflecting FMF’s alleged deficiency taxes and accrued
interests the total of which amounted to P2,053,698.25. On November 24, 1999, FMF filed a letter
of protest on the assessment invoking the defense of prescription by reason of the invalidity of the
waiver.
Issue:
1. WON the waiver valid
2. WON the three-year period to assess internal revenue taxes already prescribe
Ruling:
1. No. Firstly, it was not proven that respondent was furnished a copy of the BIR-accepted
waiver. Secondly, the waiver was signed only by a revenue district officer, when it should have
been signed by the Commissioner as mandated by the NIRC and RMO No. 20-90, considering that
the case involves an amount of more than P1 million, and the period to assess is not yet about to
prescribe. Lastly, it did not contain the date of acceptance by the Commissioner of Internal
Revenue, a requisite necessary to determine whether the waiver was validly accepted before the
expiration of the original three-year period. Bear in mind that the waiver in question is a bilateral
agreement, thus necessitating the very signatures of both the Commissioner and the taxpayer to
give birth to a valid agreement.
2. Yes. An exception to the three-year prescriptive period on the assessment of taxes is

Section 222 (b) of the NIRC, which provides:
(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both
the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the
tax may be assessed within the period agreed upon. The period so agreed upon may be extended
by subsequent written agreement made before the expiration of the period previously agreed upon.
127. FEBTC v CIR, GR No. 138919, May 2, 2006
Facts:
Petitioner is the trustee of various retirement plans established by several companies for its
employees. As trustee of the retirement plans, petitioner was authorized to hold, manage, invest
and reinvest the assets of these plans. Petitioners claim for refund centers on the tax withheld by
the various withholding agents, and paid to the CIR for the four (4) quarters of 1993, on the
aforementioned interest income.
Hoping to comply with the two (2)-year period within which to file an action for refund under Section
230 of the then Tax Code, petitioner filed a Motion to Admit Supplemental Petition in CTA Case
No. 4848 on 28 April 1995, seeking to include in that case the tax refund claimed for the year 1993.
The CTA advised that petitioner could instead file a separate petition for review for the refund of
the withholding taxes paid in 1993. Petitioner followed the advice of CTA and filed a separate
action. In that separate action, however, the CTA noted that the income from employees trust
funds were exempt from income taxes, but the claims for refund had already prescribed insofar as
they covered the first, second and third quarters of 1993, as well as from the period of 1 October to
8 October 1993.
Issue:
1. WON the refund should be granted
2. WON the claims for refund had prescribed
Ruling:
1. Yes. We hold, as the CTA did, that the exemption from income tax of income from
employees trusts still stands. The Court had first recognized such exemption in the aforementioned
CIR v. Court of Appeals case, arising as it did from the enactment of Republic Act No. 4917 which
granted exemption from income tax to employees trusts. The same exemption was provided in
Republic Act No. 8424, the Tax Reform Act of 1997, and may now be found under Section 60(B) of
the present National Internal Revenue Code. Admittedly, such interest income of the petitioner for
1993 was not subject to income tax. Still, petitioner did pay the income tax it was not liable for
when it withheld such tax on interest income for the year 1993. Such taxes were erroneously
assessed or collected, and thus, refund should’ve been proper.
2. Yes. The dismissal engaged in by the Court of Appeals on procedural grounds is wholly
sanctioned by the relevant provisions of the Rules of Court. Section 6 of Rule 43, 1997 Rules of
Civil Procedure, then governing the procedure of appeals from decisions of the CTA to the Court of
Appeals, explicitly provides that the petition for review be accompanied by certified true copies of
such material portions of the record referred to [in the petition] and other supporting papers. Under
Section 7, Rule 43, the failure to attach such documents which should accompany the petition is
sufficient ground for the dismissal of the petition.
128. CIR v Reyes, GR No. 159694, January 27, 2006
Facts:
On July 8, 1993, Maria C. Tancinco (or decedent) died, leaving a 1,292 square-meter residential lot
and an old house thereon (or subject property) located at 4931 Pasay Road, Dasmarias Village,
Makati City. On February 12, 1998, the Chief, Assessment Division, Bureau of Internal Revenue
(or BIR), issued a preliminary assessment notice against the estate in the amount of
P14,580,618.67. On May 10, 1998, the heirs of the decedent (or heirs) received a final estate tax
assessment notice and a demand letter, both dated April 22, 1998, for the amount of
P14,912,205.47, inclusive of surcharge and interest.
On January 5, 1999, a Warrant of Distraint and/or Levy was served upon the estate, followed on
February 11, 1999 by Notices of Levy on Real Property and Tax Lien against it. On March 2, 1999,
[Reyes] protested the notice of levy. However, on March 11, 1999, the heirs proposed a
compromise settlement of P1,000,000.00.
Issues:
1. Whether petitioners assessment against the estate is valid
2. Whether respondent can validly argue that she, as well as the other heirs, was not aware
of the facts and the law on which the assessment in question is based, after she had opted to
propose several compromises on the estate tax due, and even prematurely acting on such
proposal by paying 20% of the basic estate tax due
Ruling:
1. No. In the present case, Reyes was not informed in writing of the law and the facts on
which the assessment of estate taxes had been made. She was merely notified of the findings by
the CIR, who had simply relied upon the provisions of former Section 229 prior to its amendment
by Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997. First, RA 8424
has already amended the provision of Section 229 on protesting an assessment. The old
requirement of merely notifying the taxpayer of the CIRs findings was changed in 1998 to informing
the taxpayer of not only the law, but also of the facts on which an assessment would be made;
otherwise, the assessment itself would be invalid.
2. Yes. It would be premature for this Court to declare that the compromise on the estate tax
liability has been perfected and consummated, considering the earlier determination that the
assessment against the estate was void. Nothing has been settled or finalized. Under Section
204(A) of the Tax Code, where the basic tax involved exceeds one million pesos or the settlement
offered is less than the prescribed minimum rates, the compromise shall be subject to the approval
of the NEB composed of the petitioner and four deputy commissioners.
129. Santos v People, GR No. 173176, August 26, 2008
Facts:
Judy Anne Santos underdeclared an amount equivalent to at least 84.18% of the income declared
in her return. This was considered a substantial underdeclaration of income, which constituted
prima facie evidence of false or fraudulent return under Section 248(B) of the NIRC. Hence, The
CTA First Division then issued on 9 December 2005 a warrant for the arrest of petitioner.
On 10 January 2006, petitioner filed with the CTA First Division a Motion to Quash. The CTA First
Division denied petitioners Motion to Quash. Hence, petitioner filed with the CTA en banc a Motion
for Extension of Time to File Petition for Review. However, the CTA en banc denied petitioner’s
Motion for Extension of Time to File Petition for Review on the ground that denial of a Motion to
Quash is an interlocutory order which is not appealable. Hence, going for a Motion for Review is
futile.
Issues:
Whether a resolution of a CTA division denying a motion to quash is a proper subject of an appeal
to the CTA en banc under section 11 of republic act no. 9282, amending section 18 of republic act
no. 1125
Ruling:
No. There is no dispute that a court order denying a motion to quash is interlocutory. The denial of
the motion to quash means that the criminal information remains pending with the court, which
must proceed with the trial to determine whether the accused is guilty of the crime charged therein.
Equally settled is the rule that an order denying a motion to quash, being interlocutory, is not
immediately appealable, nor can it be the subject of a petition for certiorari. Such order may only be
reviewed in the ordinary course of law by an appeal from the judgment after trial.
130. Fitness v CIR, GR No. 177982, October 17, 2008
Facts:
On February 1, 2005, respondent issued a warrant of distraint and/or levy against petitioner,
drawing petitioner to file on March 1, 2005 a Petition for Review (with Motion to Suspend Collection
of Income Tax, Value Added Tax, Documentary Stamp Tax and Surcharges and Interests subject
of this Petition) before the Court of Tax Appeals (CTA) before which it reiterated its defense of
prescription.
On motion of petitioner in CTA Case No. 7160, a preliminary hearing on the issue of prescription
was conducted during which petitioners former bookkeeper attested that a former colleague
certified public accountant Leonardo Sablan (Sablan) illegally took custody of petitioners
accounting records, invoices, and official receipts and turned them over to the BIR. On petitioners
request, a subpoena ad testificandum was issued to Sablan for the hearing before the CTA
scheduled on September 4, 2006 but he failed to appear. Petitioner thus requested for the
issuance of another subpoena ad testificandum to Sablan for the hearing scheduled on October
23, 2006, and of subpoena duces tecum to the chief of the National Investigation Division of the
BIR for the production of the Affidavit of the Informer bearing on the assessment in question.
Petitioners requests were granted.
Issue:
WON the legality of the mode of acquiring the documents which are the bases of the above
discussed deficiency tax assessments, the subject matter of the Petition for Review now pending in
the Honorable Second Division, is not material and relevant to the issue of prescription
Ruling:
Yes. The fact that Sablan was not a party to the case aside, the testimonies, documents, and
admissions sought by petitioner are not indeed relevant to the issue before the CTA. For in
requesting the issuance of the subpoenas and the submission of written interrogatories, petitioner
sought to establish that its accounting records and related documents, invoices, and receipts which
were the bases of the assessment against it were illegally obtained. The only issues, however,
which surfaced during the preliminary hearing before the CTA, were whether respondents issuance
of assessment against petitioner had prescribed and whether petitioners tax return was false or
fraudulent.
Besides, as the CTA held, the subpoenas and answers to the written interrogatories would violate
Section 2 of Republic Act No. 2338 as implemented by Section 12 of Finance Department Order
No. 46-66.
131. Asia Int’l v Parayno, 540 SCRA 536 (2007)
Facts:
Petitioners filed a complaint before the RTC of Olongapo City, praying for the nullification of RMC
No. 31-2003 for being unconstitutional and an ultra vires act. On August 1, 2003, the trial court
issued its order granting the application for a writ of preliminary injunction. Consequently,
respondents CIR, the BIR Regional Director of Region III, the BIR Revenue District Officer of the
SSEZ, and the OSG filed with the CA a petition for certiorari under Rule 65 of the Rules of Court.
CA ruled that respondent Regional Trial Court, Branch 74, of Olongapo City is bereft of jurisdiction.
Issue:
WON the regular courts of justice established under Batas Pambansa Blg. 129 has jurisdiction to
hear a case to declare Revenue Memorandum Circulars unconstitutional
Ruling:
No. R.A. No. 1125, as amended, states:
Sec. 7. Jurisdiction.—The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to
review by appeal, as herein provided—
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or
other matters arising under the National Internal Revenue Code or other laws or part of law
administered by the Bureau of Internal Revenue; x x x (emphases supplied)
We have held that RMCs are considered administrative rulings which are issued from time to time
by the CIR.
132. British American v Camacho, 562 SCRA 611 (2008)
Facts:
On September 1, 2003, petitioner filed before the Regional Trial Court (RTC) of Makati, Branch 61,
a petition for injunction with prayer for the issuance of a temporary restraining order (TRO) and/or
writ of preliminary injunction. Said petition sought to enjoin the implementation of Section 145 of
the NIRC, Revenue Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue Memorandum Order
No. 6-2003 on the ground that they discriminate against new brands of cigarettes, in violation of the
equal protection and uniformity provisions of the Constitution.
Fortune Tobacco, the intervenor, claims that the challenge to the validity of the BIR issuances
should have been brought by petitioner before the Court of Tax Appeals (CTA) and not the RTC
because it is the CTA which has exclusive appellate jurisdiction over decisions of the BIR in tax
disputes.
Issue:
WON the CTA has jurisdiction to declare unconstitutional the challenge law
Ruling:
No. While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this
does not include cases where the constitutionality of a law or rule is challenged. Where what is
assailed is the validity or constitutionality of a law, or a rule or regulation issued by the
administrative agency in the performance of its quasi-legislative function, the regular courts have
jurisdiction to pass upon the same.
133.
134. Lim Hoa Ting v Central, 104 Phil 573
Facts:
For revenue purposes, defendant Bank contends that mono-sodium glutamate is not a flavoring
extract but rather a condiment, cites articles published in the Chemical Engineering Progress of the
American Institute of Chemical Engineers, Science on the March in Scientific Monthly, and from the
book entitled, "Foods, their Selection and Preparation" by Stanley and Kline. The defendant further
claims that the term "flavor" refers only to the substances for the manufacture of soft drinks, ice
cream, or drugs and medicines.
Issue:
Is defendant bank correct?
Ruling:
No, It would seem that the main reason for the defendant Bank in holding to reclassify and remove
it from the category of flavor or flavoring extract was for revenue purposes. Under the exemption or
right to refund, said substance of mono-sodium glutamate had considerably increased in
importation and the Bank sadly realized the loss of revenue to the Government. If the Government
desires to make a reclassification so as to impose the exchange tax on the importation of this
substance for revenue purposes, the Legislature can easily do so in the form of an amendment to
the law. We hold, as did the trial court, that the subsequent interpretation given by the defendant
Bank not to consider mono-sodium glutamate as a flavor or flavoring extract, is rather arbitrary, if
not beyond the scope of its powers and authority.
135. Castro v CIR, GR No. L-12174, April 26, 1962
Facts:
Petitioner Maria B. Castro, who is authorized to manage her own property, is a duly licensed
merchant. Pursuant to the provisions of Section 4 (b) and (c) of Republic Act No. 55, she filed with
the Bureau of Internal Revenue on February 28, 1947, her war profits tax returns. Although there is
indicated an increase in net worth in the amount of P22,302.43, she is totally exempted from
paying any war profits tax therefore as the deduction of six per centum (6%) per annum of the net
worth on December 8, 1941 therefrom would show only a taxable increase in net worth in the
amount of P5,574.61 which is not taxable under the said law.
On November 22, 1947, however, Criminal Case No. 4976 was filed against her in the Court of
First Instance of Manila for violation of Section 4, in connection with Section 8, of the War Profits
Tax Law, for allegedly defrauding the Republic of the Philippines in the total amount of
P1,048,687.76.
Issue:
WON Republic Act No. 55 levies that tax only on the value of the taxpayer's assets (including real
and personal property and/or cash in banks) as of February 26, 1945, minus his liabilities
Ruling:
No. This argument misconceives the process whereby the Tax Court (and the Pedrosa Committee)
arrived at the petitioner's net worth as of February 26,1945. Because of the difficulty in determining
the taxpayer's cash on hand on said date (since her books and records did not show her invested
capital in 1945), said tax authorities adopted the method of starting from her reported cash on hand
on December 31, 1946, and working backwards to February,1945, by adding to the reported cash
the disbursements made by Castro during1945 and 1946, and then deducting her receipts from the
same period. We see nothing fundamentally erroneous in this method for, as pointed out in the
appealed decision, "if cash on hand at the beginning of the period, plus receipts during the period
minus disbursements during the period, equals cash on hand at the end of the period, the converse
must necessarily be true.".
Such method is in effect but an application (in reverse) of the inventory or networth system that,
contrary to appellants contention (Error XIII), has been approved by this Court in Perez vs.
Collector of Internal Revenue, G.R. No. L-10507, May 30, 1958; Collector vs. A. P. Reyes, L-
11534, November 25, 1958; and Commissioner of Internal Revenue vs. Avelino, L-14847,
September 19, 1961.
136.Hilado v CIR
GR No. L-9408, October 31, 1956
FACTS:
Petitioner filed his ITR where he claimed a certain amount as a deductible item from his
gross income pursuant to the CIR’s General Circular No. V-123 issued pursuant to certain rules
laid down by the Secretary of Finance. Subsequently, the CIR issued GC No. V-139 which revoked
the previous general circular and laid down the rule that property losses which occurred during the
World War II are deductible in the year of actual loss or destruction of property.
ISSUE:
Whether the Secretary of Finance acted with valid authority in revoking GC No. V-123 and
approving GC V-139
RULING:
Yes. The Secretary of Finance is vested with authority to revoke, appeal or repeal or
abrogate the acts or previous rulings of his predecessors in office because the construction of a
statute by those administering it is not binding on their successors if the latter becomes satisfied
that a different construction should be given.
137. CIR v Citytrust
GR No. 106611, July 21, 1994
FACTS:
Respondent filed a refund of overpaid taxes with the BIR by which the latter denied on the
ground of prescription. It filed a petition for review before the CTA. The case was submitted for
decision based solely on the pleadings and evidence submitted by the respondent because the
CIR could not present any evidence by reason of the repeated failure of the tax credit or refund of
the BIR to transmit records and report of the case.
ISSUE:
Whether respondent’s claim should be granted
RULING:
No. The government is not bound by the errors committed by its agents. It is axiomatic that
the government cannot and must not be estopped particularly in matters involving taxes.
138. Collector v Clement, GR No. L-12194, January 24, 1959
Facts:
Respondent Anna Harriet Clement is the only daughter of the spouses, A. Clinton Clemente and
Harriet K. Clement, both residents of the State of New Jersey, U.S.A. After her mother's death on
February 14, 1930, Anna came to the Philippines to live with her uncle and aunt, Herbert C. Heald
and her wife Florence C. Heald, respectively, who were then both residing in Baguio City On the
basis of this value manifested in the inventory, the Collector, on July 12, 1941, caused an
assessment to be made in the amount of P1,806.40 as inheritance tax, interest up to August 22,
1941 and compromise penalty. Counsel for respondent protested this assessment in his letter to
the Collector, dated August 5, 1941. In view of the outbreak of the war in December of 1941, the
contemplated examination was not undertaken.
The next attempt of the Collector to enforce the tax liability was in February, 1954, followed-up with
another demand on April 14, 1954. The respondent Anna Harriet Clemente contested the
imposition on the ground, among others, that the right of the government to collect the tax had
already prescribed.
Issue:
WON the right of government to collect tax had already prescribed
Ruling:
Yes. There is no controversy that the inheritance tax sought to be collected was assessed on July
12, 1941, from which date the five-year period of limitation for its collection (section 332 (c), supra)
started to run in this particular case. The running of the period, although interrupted from
December 8, 1941 to the last day of February, 1946 (see Section 4, Com. Act No. 722), started
anew from March 1, 1946; and up to February 22, 1956, when the Collector filed its answer with
the Court of Tax Appeals, a period of more than 10 years had elapsed.
139.
140. Bisaya Land v Collector, GR No. L-12100, May 23, 1959
Facts:
PHILMAROA presented its demands on Sept. 26, 1953. On October 24th of the same year, notice
of intention to strike was filed against Bisaya Land. The case was certified by the Pres to CIR and
pending resolution of the dispute, Nadanza and Ouano abandoned the ships owned by Bisaya
Land. Thereafter, the radio operators were readmitted upon their request to come back.
On the other hand, Bisaya Land alleged in the CIR that the strike was unlawful for failure to directly
serve the company with a notice notice of the strike and that there was no longer any cause of
action against it because of the reinstatement of the radio operators. CIR rendered a decision
which prompted Bisaya Land to file an appeal by certiorari to SC.
Issues:
1. WON Union has cause of action against Bisaya Land
2. WON Union has power to bargain collectively
3. WON Union has power to bargain collectively for Nadanza and Ouano
4. WON the strike/abandoning of posts was illegal
5. WON certification of the case to CIR by the Pres was null and void
Ruling:
1. Yes. The return of the radio operators did not imply the waiver of the original demands.
They only desisted from the strike, an act which is personal to the strikers, and cannot be
interpreted as waiver of the union’s original demands.
2. Yes. As expressly recognized under the Industrial Peace Act
3. Yes. There is no law prohibiting employees from affiliating with a craft union. In this case,
PHILMAROA represents Nadanza and Ouano as radio operators and not as mere employees of
Bisaya Land
4. No. Bisaya Land waived such illegality by voluntarily agreeing to reinstate the operators
5. No. Even after a strike has been declared, the Pres may certify the case for arbitration and
conciliation where public interest so demands
141. Bollozos v CTA, GR No. L-16441
Facts:
In contending that prescription has set in his favor, appellant argues that it should be assumed that
the required returns were filed on the dates they were due since the filing of the same is required
by Secs. 208 and 209 of the Revenue Code and the presumption is that he has complied with its
requirements, per Sec. 99 (ee), Rule 123, Rules of Court. (now Sec. 5[ff], Rule 131.)
Consequently, he concludes that he "did not fail to file his tax returns, or at least, the respondent
collector did not prove his failure to file his returns."
Issue:
WON the right of the Commissioner of Internal Revenue to collect the same has already prescribed
Ruling:
No. The appellant has offered no proof whatsoever that he did file the said return. In the premises,
he merely relies upon the rebuttable presumption established by the Rules of Court that he so filed
the same. He argues that inasmuch as the respondents-appellees "did not prove his failure to file
his return," he must be deemed or presumed to have complied with that requirement.
Against the above contention, however, is the factual finding of the Court of Tax Appeals that "from
the record of the case at bar, it appears that the petitioner herein failed to file his tax returns,
except for the first and fourth quarters of the year 1950." Furthermore, while it is true that the
appellant is entitled to the presumption he invokes, it is likewise true that the same presumption no
longer obtains in his case since it has been squarely and explicitly questioned or challenged. And,
not only does the appellant no longer enjoy the above presumption: He is now charged with the
burden of proving his assertion that he has complied with the law. It must be stressed that the
defense of prescription is an affirmative allegation and the burden of proof is upon the party laying
claim to it.1äwphï1.ñët
In brief, then, as appellant's failure to file the required returns was discovered only on November
29, 1955, the appellee has up to November 29, 1965 within which to collect the assessment in
dispute. And, as the lower court held, "considering that the petitioner filed the instant appeal on
January 24, 1959, and the respondent submitted his answer to the petition for review on March 13,
1959, which is equivalent to a court proceeding to collect the deficiency fixed and percentage taxes
under review (Collector of Internal Revenue v. Clement, G.R. No. L-12194, January 24, 1959;
Collector of Internal Revenue v. Solano, G.R. No. L-11475, July 31, 1958), We believe and so hold
that the right of the respondent to collect the disputed deficiency assessment for the periods not
covered by any tax return has not yet prescribed (Bisaya Land Transportation Co., Inc. v. Collector
of Internal Revenue, G.R. No. L-12100, May 29, 1959).
142. Republic of the Philippines v Patanao GR No L-22356, July 21, 1967
FACTS: Defendant was the holder of an ordinary timber license with concession at Esperanza,
Agusan. The defendant failed to file income tax returns for 1953 and 1954 and although he filed
income tax returns for 1951, 1952, and 1955, the same were false and fraudulent because he did
not report substantial income earned by him from his business. He was acquitted by the lower
court. But, the Deputy Commissioner of Internal Revenue contends that the assessment for the
payment of the taxes in question has become final because it was not appealed.
ISSUE: Whether the action is barred by prior judgment, defendant having been acquitted
RULING: No. Under the Penal Code the civil liability is incurred by reason of the offender’s criminal
act. The situation under the income tax law is the exact opposite. Civil liability to pay taxes arises
from the fact that one has engaged himself in business and not because of any criminal act
committed by him. The acquittal in the said criminal case cannot operate to discharge defendant
from the duty of paying the taxes which the law requires to be paid, since that duty is imposed by
statute prior to and independently of any attempts by the taxpayer to evade payment.
143.
144. Phil. Int’l Fair v Collector (PIF), GR No. L-12928, March 31, 1962
Facts:
A request for an investigation having been made by the PIF, the Collector of Internal Revenue
referred the case to the Conference Staff. After a hearing before the latter it recommended the
enforcement of the assessment. Notice of the adverse decision was received by the PIF on April
20, 1956, and on May 19, 1956, the latter appealed to the Court of Tax Appeals. The CTA ordered
petitioner to pay to the respondent the amounts of P97,972.65 and P24,493.16 as amusement tax
and surcharge, respectively, on its gross receipts from admission tickets to the exposition ground
and auditorium during the months of March, April and May, 1953 and held that petitioner is exempt
from the payment of the amounts of P32,877.66 and P8,219.42 or a total of P41,097.08
representing amusement tax and surcharge, respectively, on its receipts from admission tickets to
the Aquacade Show, for the month of February, 1953. However, the CTA did not order petitioner to
pay any compromise penalty
Issue:
1. WON the Court of Tax Appeals erred in holding that the Aquacade Show is a water ballet
and therefore within the term "art exhibition" which falls under the exemptions provided for in
Republic Act No. 722, and in exempting the respondent from the payment of the sum of
P13,200.00 as compromise penalty.
2. WON the Court of Tax Appeals erred in not holding the PIF liable for the payment of the
sum of P13,200.00 as compromise penalty
Ruling:
1. No. Following the literal interpretation as well as the spirit behind the enactment of
Republic Act No. 722, we hold, therefore, that the petitioner did not exempt from payment of
amusement taxes and surcharges in the amounts of P97,972.65 and P24,493.16, respectively, on
its receipts from admission tickets sold to the exposition ground and auditorium during the months
of March, April and May 1953.
Likewise, the petitioner is not exempt from payment of amusement tax and surcharge in the
amounts of P1,370.16 and P342.54, respectively, on its receipts from admission tickets to the
benefit dances held at the National Fair Auditorium from April 23 to May 9, 1954.
2. No. The present is not a criminal action instituted against the PIF or its officers for having
violated the provisions of Section 260, in relation to Section 352 of the Tax Code, but a tax
assessment or demand made by the Collector of Internal Revenue upon the PIF, from which the
latter appealed to the Court of Tax Appeals and ultimately to this Court. It is clear, therefore, that
the PIF resisted the assessment. Consequently, the result of the proceedings cannot be
considered as a "compromise", because the decision of the Court of Tax Appeals as well as the
present decision constitute an adjudication upon the issue arising from the assessment made by
the Collector of Internal Revenue, on the one hand, and the PIF's refusal to pay the same, on the
other.
145. People v Tierra, GR No. L-17177-17180, December 28, 1964
Facts:
In a tax investigation, the appellant could not produce to examiner Robles, all the pertinent
vouchers, sales invoices and other accounting records for the Purpose) of verifying the correctness
of the returns. In view of the inability of the appellant to produce said books and records, examiner
Robles resorted to the so-called "percentage basis" of computing net income. Under this method,
net income was computed by the use of an average percentage method based on the returns of
taxpayers engaged in the same line of business.
On the basis of the reports of examiner Robles, the Collector of Internal Revenue made a formal
demand dated December 23, 1950, on the accused for the payment of his deficiency income taxes
for 1946, 1947 and 1949, including surcharges thereon, in the respective sums of P30,632.51
P376,303.16, and P60,205.80, and asked him to show cause why he should not be prosecuted for
his failure to preserve his books of accounts, vouchers and invoices, for a period of five years from
the date of the last entry therein. The Collector found that the income tax returns should have
stated that his income was P93,886.55, P621,072.80 and P359,310.18 for the years 1946, 1947
and 1949.
Issue/s:
1. WON the criminal liability of the accused, if any in the first three informations (L-17177-9)
has been extinguished by reason of the extinguishment of his civil liability to pay taxes
2. WON Section 51(d) of the National Internal Revenue Code upon which the informations in
the first three cases were based, has already been repealed, and, therefore, he can no longer be
prosecuted for its violation
Ruling:
1. No. The filing of a false and fraudulent income tax return and the failure to pay the tax
necessarily makes the delinquent taxpayer amenable to the penal provisions of Section 73 of the
Code. Any subsequent satisfaction of the tax liability, by payment or prescription, will not operate to
extinguish such criminal liability, since the duty to pay the tax is imposed by statute independent of
any attempt on the part of the taxpayer to evade payment. Whether under the National Internal
Revenue Code or under the Revised Penal Code, the satisfaction of civil liability is not one of the
grounds for the extinction of criminal action.
2. It is not now necessary to discuss the effect of the suppression of this provision by virtue of
Republic Act No. 2343. Suffice it to say that the accused is charged not only for failure to pay
deficiency taxes as assessed under section 51 (d) of the Revenue Code prior to its amendment,
but also under sections 45 and 46 in relation to section 73 for filing false and fraudulent returns.
Even without alleging a violation of section 51(d), the indictments can still stand.

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Taxation 2

1. Lorenzo v Posadas 64 Phil 353

23. Pirovano v Commissioner 14 SCRA 832

26. Tolentino v CIR 235 SCRA 630

42. Microsoft Philippines Inc. v CIR GR No. 180172, April 6, 2011

VPV & JGM

OTHER PERCENTAGE TAXES

58. Chinabanking Corp v CTA GR No. 146749, June 10, 2003

EXCISE TAXES ON CERTAIN GOODS

69. British American v Camacho GR No. 163583, August 20, 2008

DOCUMENTARY STAMP TAX

75. Del Rosario v Hamoy GR No. L-77154, June 30, 1987

94. RP v CTA GR No. L-38540, 149 SCRA 351

133. Thomson Shirt v CIR CTA 377, 8/27/1963 (Not found)

STATUTORY OFFENSES & PENALTIES

135. Castro v CIR GR No. L-12174, April 26, 1962

Are summary tax remedies affected by the probate proceedings?

ISSUE: Whether RA 7716 is constitutional

A donation mortis causa has the following characteristics:

ISSUE: Whether Arangote has legal title to the land

ISSUE: Whether the sale is valid

ISSUE: Whether petitioners are liable for donor's tax

Thus, there is no double taxation.

Whose contention is correct?

2. Yes. An exception to the three-year prescriptive period on the assessment of taxes is

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