CIR v CTA

GR No 106611, July 21, 1994

FACTS:
Citytrust filed a petition with the Court of Tax Appeals claiming the refund of its income
tax overpayments for the years 1983, 1984 and 1985 in the total amount of
P19,971,745. The CIR could not present any evidence due to the repeated failure of the
tax credit/refund division of the BIR to transmit the records of the case and the
investigation report to the Solicitor General. The case was decided in favor of City Trust.
Upon motion of reconsideration, petitioner alleged that through an inter-office
memorandum of the Tax Credit/Refund Division, dated August 8, 1991, he came to
know only that Citytrust had outstanding tax liabilities for 1984 in the amount of
P56,588,740.91 representing deficiency income and business taxes.

ISSUES:
1. Whether the BIR was denied its day in court
2. Whether the CTA erred in denying petitioner’s supplemental motion for
reconsideration alleging bringing to said court’s attention the existence of deficiency
income and business taxes

RULING:
1. Yes, the BIR is denied its day in court. When it was petitioner’s turn to present
evident evidence, several postponements were sought by its counsel, the Solicitor
General, due to the unavailability of the necessary records which were not transmitted
by the Refund Audit Division of the BIR to said counsel. It was under such predicament
and in deference to the tax court that the counsel was constrained to submit the case
for decision without presenting any evidence. It is a long and firmly settled rule of law
that the Government is not bound by the errors committed by its agents.
2. Yes. The fact of such deficiency assessment is intimately related and inextricably
intertwined with the right of the bank. The private respondent cannot be entitled to
refund and at the same time be liable for a deficiency tax assessment for the same
year.
Commissioner of Internal Revenue vs. Cebu Portland Cement Co.
G.R. No. L-29059, 15 December 1987

Facts: CTA decision ordered the petitioner CIR to refund to the Cebu Portland Cement
Company, respondent, P 359,408.98 representing overpayments of ad valorem taxes
on cement sold by it. Execution of judgement was opposed by the petitioner citing that
private respondent had an outstanding sales tax liability to which the judgment debt had
already been credited. In fact, there was still a P4 M plus balance they owed. The Court
of Tax Appeals, in holding that the alleged sales tax liability of the private respondent
was still being questioned and therefore could not be set-off against the refund, granted
private respondent's motion. The private respondent questioned the assessed tax
based on Article 186 of the Tax Code, contending that cement was adjudged a mineral
and not a manufactured product; and thusly they were not liable for their alleged tax
deficiency. Thereby, petitioner filed this petition for review.

Issue: Whether or not assessment of taxes can be enforced even if there is a case
contesting it.

Held: The argument that the assessment cannot as yet be enforced because it is still
being contested loses sight of the urgency of the need to collect taxes as "the lifeblood
of the government." If the payment of taxes could be postponed by simply questioning
their validity, the machinery of the state would grind to a halt and all government
functions would be paralyzed. That is the reason why, save for the exception in RA
1125 , the Tax Code provides that injunction is not available to restrain collection of tax.
Thereby, we hold that the respondent Court of Tax Appeals erred in its order.
REYES v. ALMANZOR
GR Nos. L-49839-46, April 26, 1991
196 SCRA 322

FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased
and occupied as dwelling units by tenants who were paying monthly rentals of not
exceeding P300. Sometimes in 1971 the Rental Freezing Law was passed prohibiting
for one year from its effectivity, an increase in monthly rentals of dwelling units where
rentals do not exceed three hundred pesos (P300.00), so that the Reyeses were
precluded from raising the rents and from ejecting the tenants. In 1973, respondent City
Assessor of Manila re-classified and reassessed the value of the subject properties
based on the schedule of market values, which entailed an increase in the
corresponding tax rates prompting petitioners to file a Memorandum of Disagreement
averring that the reassessments made were "excessive, unwarranted, inequitable,
confiscatory and unconstitutional"considering that the taxes imposed upon them greatly
exceeded the annual income derived from their properties. They argued that the income
approach should have been used in determining the land values instead of the
comparable sales approach which the City Assessor adopted.

ISSUE: Is the approach on tax assessment used by the City Assessor reasonable?

HELD: No. The taxing power has the authority to make a reasonable and natural
classification for purposes oftaxation but the government's act must not be prompted by
a spirit of hostility, or at the very least discrimination that finds no support in reason. It
suffices then that the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the conditions
not being different both in the privileges conferred and the liabilities imposed.
Consequently, it stands to reason that petitioners who are burdened by the government
by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of
social justice should not now be penalized by the same government by the imposition of
excessive taxes petitioners can ill afford and eventually result in the forfeiture of their
properties.
Philippine Guaranty Co. Inc. v CIR (1965)

Philippine Guaranty Co. Inc. v CIR GR No L-22074, September 6, 1965

FACTS:
The grounds raised in the instant motion all spring from movant’s view that the Court of
Tax Appeals and the Supreme Court, found it innocent of the charges of violating
subsection c of Sections 53 and 54 of the NIRC. It alleges that it subsequently cannot
be held liable for the assessment of P375,345 based on said sections.

ISSUES:
1. Is PhilGuaranty innocent of the charges?
2. Is PhilGuaranty not expected to withhold taxes for reinsurance premiums?
3. Is PhilGuaranty released from liability for the tax after it was advised by the CIR that
reinsurance premiums were not subject to withholding?

RULING:
1. No. Precisely, the mere fact that it was exempted implies violation of Section 53c.
2. No, it should withhold taxes. The law sets no condition for the personal liability of the
withholding agent to attach. The reason is to compel the withholding agent to withhold
the tax under all circumstances.
3. No, it is liable. It has not been shown that it withheld the amount of tax due before it
inquired form the BIR, contrary to the requirements of Section 200. Strict observance of
said steps is required of a withholding agent before he could be released from liability.
Foreign corporations are taxable on their income from sources within the Philippines.
The foreign insurer’s place of business should not be confused with their place of
activity. It suffices that the activity creating the income is performed or done in the
Philippines.
CIR v Algue (Taxation)

CIR v Algue
GR No. L-28896, February 17, 1988

FACTS:

The BIR assessed Algue a total amount of delinquency taxes of Php 83,183.85 for the
years 1958 and 1959. It contends that the company's claimed deduction of Php 75,000
in the form of promotional fees is disallowed because it was not ordinary reasonable or
necessary business expenses. Algue filed a protest.

BIR did not take any action. So, Algue filed a petition for review with the Court of Tax
Appeals which rule in favor of Algue. Thus, the current petition.

ISSUE:
Whether the BIR correctly disallowed the deduction

RULING:
No.

The burden is on the taxpayer to prove the validity of the claimed deduction. Here, the
onus has been discharged satisfactorily. Here, the onus has been discharged
satisfactorily. The promotional fees were necessary and reasonable in the light of the
efforts exerted by the payees in the inducement of investors to venture in an
experimental enterprise. Thus, the payees should be sufficiently recompensed.
Lutz v Araneta (1955)

Lutz v Araneta
GR No L-7859 December 22, 1955

FACTS:
Walter Lutz, as Judicial Administrator of the Intestate Estate of Antonio Jayme
Ledesma, sought to recover the sum of P14,666.40 paid by the estate as taxes from the
Commissioner under Section e of Commonwealth Act 567 or the Sugar Adjustment Act,
alleging that such tax is unconstitutional as it levied for the aid and support of the sugar
industry exclusively, which is in his opinion not a public purpose.

ISSUE:
Is the tax valid?

HELD:
Yes. The tax is levied with a regulatory purpose, i.e. to provide means for the
rehabilitation and stabilization of the threatened sugar industry. The act is primarily an
exercise of police power and is not a pure exercise of taxing power.
As sugar production is one of the great industries of the Philippines and its promotion,
protection and advancement redounds greatly to the general welfare, the legislature
found that the general welfare demanded that the industry should be stabilized, and
provided that the distribution of benefits had to sustain.
Further, it cannot be said that the devotion of tax money to experimental stations to
seek increase of efficiency in sugar production, utilization of by-products, etc., as well as
to the improvement of living and working conditions in sugar mills and plantations
without any part of such money being channeled directly to private persons, constitute
expenditure of tax money for private purposes.
Hence, the tax is valid.
Gomez v Palomar (1968)

Gomez v Palomar
GR No L-23645, October 29, 1968

FACTS:
Petitioners question the constitutionality of the RA 1635 claiming that the law which
helps raise funds for the Philippine Tuberculosis Society violates the equal protection
cause because it constitutes mail users into a class for tax purposes while leaving
untaxed the rest of the population.

ISSUE:
Is the equal protection clause violated?

RULING:
No. The legislature has the inherent power to select the subjects of taxation and to grant
exemptions. Traditionally, classification has been a device for fitting tax programs to
local need and usages in order to achieve an equitable distribution of the tax burden.
Chavez v Ongpin (1990)

Chavez v Ongpin
GR No 76778, June 6, 1990

FACTS:
Section 21 of Presidential Decree 464 provides that every 5 years starting calendar year
1978, there shall be a provincial or city general revision of real property assessments.

The general revision was completed in 1984.

On November 25, 1986, President Corazon Aquino issued EO 73 stating that beginning
January 1, 1987, the 1984 assessments shall be the basis of real property taxes.
Francisco Chavez, a taxpayer and landowner, questioned the constitutionality of EO 74.
He alleges that it will bring unreasonable increase in real property taxes.

ISSUE:
Is EO 73 constitutional?

RULING:
Yes. Without EO 73, the basis for collection of real property taxes will still be the 1978
revision of property values. Certainly, to continue collecting real property taxes based
on valuations arrived at several years ago, in disregard of the increases in the value of
real properties that have occurred since then is not in consonance with a sound tax
system.
Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that
sources of revenue must be adequate to meet government expenditures and their
variations.