Philippine Health Care Providers v.
CIR
G.R. No. 167330| Sept. 18, 2009 | Corona
Digest by: CHANG
Petitioners:PHILIPPINE HEALTH CARE PROVIDERS, INC.,
Respondents: COMMISSIONER OF INTERNAL REVENUE (CIR)
Doctrine:
Taking into account that health care agreements are clearly not within the ambit of
Section 185 of the NIRC and there was never any legislative intent to impose the
same on HMOs like petitioner, the same should not be arbitrarily and unjustly
included in its coverage.
Facts:
● Petitioner is a domestic corporation whose primary purpose is to establish,
maintain, conduct and operate a prepaid group practice health care
delivery system or a health maintenance organization to take care of the
sick and disabled persons enrolled in the health care plan and to provide for
the administrative, legal, and financial responsibilities of the organization.
o Individuals enrolled in its health care programs pay an annual
membership fee and are entitled to various preventive, diagnostic
and curative medical services.
● Jan. 2000: Respondent CIR sent petitioner a formal demand letter and the
corresponding assessment notices demanding the payment of deficiency
taxes, including surcharges and interest, for the taxable years 1996 and
1997 in the total amount of ₱224,702,641.18.
● The deficiency documentary stamp tax (DST) assessment was imposed on
petitioner’s health care agreement with the members of its health care
program pursuant to Section 185 of the 1997 Tax Code
● Court of Tax Appeals: Phil Health Care should pay the VAT deficiency but
cancelled the DST assessment.
● The CIR then appealed the CTA decision to the CA insofar as it cancelled
the DST assessment. He claimed that petitioner’s health care agreement
was a contract of insurance subject to DST under Section 185 of the 1997
Tax Code.
● Aug. 2004: CA held that petitioner’s health care agreement was in the nature
of a non-life insurance contract subject to DST.
● Petitioner moved for reconsideration but the CA denied it. Hence, petitioner
filed this case.
● Petitioner’s Arguments:
o The DST under Section 185 of the National Internal Revenue of
1997 is imposed only on a company engaged in the business of
fidelity bonds and other insurance policies. Petitioner, as an HMO,
is a service provider, not an insurance company.
Issue/s:
● WON Phil Health is an HMO and does not offer insurance services,
therefore exempted from paying the DST? YES!!!
Ratio:
Health Maintenance Organizations Are Not Engaged In The Insurance Business.
(Read Sec. 185 in the NOTES)
● It is a cardinal rule in statutory construction that no word, clause, sentence,
provision or part of a statute shall be considered surplusage or superfluous,
meaningless, void and insignificant. So, a construction which renders every
word operative is preferred over that which makes some words idle and
nugatory. This principle is expressed in the maxim Ut magis valeat quam
pereat, that is, we choose the interpretation which gives effect to the whole
of the statute – its every word.
● From the language of Section 185, it is evident that two requisites must
concur before the DST can apply, namely:
○ (1) the document must be a policy of insurance or an obligation
in the nature of indemnity and
○ (2) the maker should be transacting the business of accident,
fidelity, employer’s liability, plate, glass, steam boiler, burglar,
elevator, automatic sprinkler, or other branch of insurance (except
life, marine, inland, and fire insurance).
● Petitioner is admittedly an HMO. Under The National Health Insurance Act of
1995, an HMO is "an entity that provides, offers or arranges for coverage of
designated health services needed by plan members for a fixed prepaid
premium.
● Section 2 of the Insurance Code enumerates what constitutes "doing an
insurance business" or "transacting an insurance business:"
○ a) making or proposing to make, as insurer, any insurance contract;
○ b) making or proposing to make, as surety, any contract of
suretyship as a vocation and not as merely incidental to any other
legitimate business or activity of the surety;
○ c) doing any kind of business, including a reinsurance business,
specifically recognized as constitu
○ ting the doing of an insurance business within the meaning of this
Code;
○ d) doing or proposing to do any business in substance equivalent to
any of the foregoing in a manner designed to evade the provisions
of this Code.
● Overall, petitioner appears to provide insurance-type benefits to its members
(with respect to its curative medical services), but these are incidental to the
principal activity of providing them medical care. The "insurance-like" aspect
of petitioner’s business is miniscule compared to its non-insurance activities.
Therefore, since it substantially provides health care services rather than
insurance services, it cannot be considered as being in the insurance
business.
● Petitioner, as an HMO, is not part of the insurance industry. This is evident
because it is supervised by the Department of Health.
● Section 2 (1) of the Insurance Code defines a contract of insurance as an
agreement whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent
event. An insurance contract exists where the following elements concur:
○ 1. The insured has an insurable interest;
TAX1 Digests 2-D | 1
 ○ 2. The insured is subject to a risk of loss by the happening of the
designed peril;
○ 3. The insurer assumes the risk;
○ 4. Such assumption of risk is part of a general scheme to distribute
actual losses among a large group of persons bearing a similar risk
and
○ 5. In consideration of the insurer’s promise, the insured pays a
premium.
● The agreements between petitioner and its members do NOT possess all
these elements.
There Was No Legislative Intent To Impose DST On Health Care Agreements Of
HMOs
● If it had been the intent of the legislature to impose DST on health care
agreements, it could have done so in clear and categorical terms. It had
many opportunities to do so. But it did not. The fact that the NIRC contained
no specific provision on the DST liability of health care agreements of HMOs
at a time they were already known as such, belies any legislative intent to
impose it on them. As a matter of fact, petitioner was assessed its DST
liability only on January 27, 2000, after more than a decade in the
business as an HMO.
● Considering that Section 185 did not change since 1904 (except for the rate
of tax), it would be safe to say that health care agreements were never, at
any time, recognized as insurance contracts or deemed engaged in the
business of insurance within the context of the provision.
WHEREFORE, the motion for reconsideration is GRANTED. The August 16, 2004
decision of the Court of Appeals in CA-G.R. SP No. 70479 is REVERSED and SET
ASIDE. The 1996 and 1997 deficiency DST assessment against petitioner is hereby
CANCELLED and SET ASIDE. Respondent is ordered to desist from collecting the
said tax.
Notes:
● Section 185. Stamp tax on fidelity bonds and other insurance policies. – On
all policies of insurance or bonds or obligations of the nature of
indemnity for loss, damage, or liability made or renewed by any
person, association or company or corporation transacting the
business of accident, fidelity, employer’s liability, plate, glass, steam boiler,
burglar, elevator, automatic sprinkler, or other branch of insurance
(except life, marine, inland, and fire insurance), and all bonds,
undertakings, or recognizances, conditioned for the performance of the
duties of any office or position, for the doing or not doing of anything therein
specified, and on all obligations guaranteeing the validity or legality of any
bond or other obligations issued by any province, city, municipality, or other
public body or organization, and on all obligations guaranteeing the title to
any real estate, or guaranteeing any mercantile credits, which may be made
or renewed by any such person, company or corporation, there shall be
collected a documentary stamp tax of fifty centavos (₱0.50) on each four
pesos (₱4.00), or fractional part thereof, of the premium charged. (Emphasis
supplied)

The Power To Tax Is Not The Power To Destroy

● As a general rule, the power to tax is an incident of sovereignty and is
unlimited in its range, acknowledging in its very nature no limits, so that
security against its abuse is to be found only in the responsibility of the
legislature which imposes the tax on the constituency who is to pay it.
● Petitioner claims that the assessed DST to date which amounts to ₱376M is
way beyond its net worth of ₱259M. The CIR never disputed these
assertions. Given the realities on the ground, imposing the DST on petitioner
would be highly oppressive. It is not the purpose of the government to
throttle private business. On the contrary, the government ought to
encourage private enterprise.
● The power of taxation is sometimes called also the power to destroy.
Therefore it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer. It must be exercised fairly, equally and
uniformly, lest the tax collector kill the "hen that lays the golden egg."
● Legitimate enterprises enjoy the constitutional protection not to be taxed out
of existence. Incurring losses because of a tax imposition may be an
acceptable consequence but killing the business of an entity is another
matter and should not be allowed. It is counter-productive and ultimately
subversive of the nation’s thrust towards a better economy which will
ultimately benefit the majority of our people.

Dispositive:

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TAX1 Digests 2-D | 3
 ABAKADA v ERMITA (MR)
G.R. No. 168056| OCTOBER 18, 2005| EN BANC
Digest by: DE LA TORRE
Petitioners: ABAKADA
Respondents: Executive Secretary Eduardo Ermita
Doctrine:
It is the revenue bill which is constitutionally required to originate exclusively in the
House of Representatives, and not the law. Because a bill originating from the House
may go through a lot of changes in the Senate in that it might come out as a whole new
thing altogether. A distinct bill may be produced. To insist that the statute and not the
bill which initiated the legislative process must be the same as the House bill would
deny the Senate’s power not only to concur with amendments but to propose
amendments as well. The Senate can propose its own version.
Input tax is not property. Therefore, it is not a property right. A VAT-Registered person’s
entitlement to the creditable input tax is a mere statutory privilege; a mere creation of
law. Thus, the law can limit. A person has no vested right in statutory privileges. Rights
can only be considered vested when the right to enjoyment is a present interest,
absolute, unconditional, and irrefutable. There are no vested rights in generally
accepted accounting principles. To state otherwise and recognize such vested rights is
to limit the State’s taxing power.
Note:
This is a Motion for Reconsideration. Please read the main decision first. Parang lang
siyang reiteration of the main decision, to be honest.
Facts:
- GR 168463.
o Escudero argues:
§ That RA 9337 grossly violates the constitutional
requirement (Section 24, Article VI) that revenue bills
should originate from the House of Representatives.
§ That the stand-by authority of the President to increase
the VAT Rate (on the basis of the Secretary of
Finance’s recommendation) to 12% constitutes an
undue delegation of legislative authority.
- GR 168730. (Medyo walang kwenta kasi binalewala lang ‘to ng Court.)
o Bataan Governor Enrique Garcia, Jr. argues:
§ The law’s unconstitutionality because of burdening the
consumers with significantly higher prices under a
VAT regime vis-à-vis the 3% gross tax is arbitrary and
oppressive.
- GR 168461.
o The Association of Pilipinas Shell Dealers argues, regarding the
70% limitation on the creditable input tax (please read the main
decision), that:
§ The Court erred in upholding the constitutionality of
Section 110(A)(2) and Section 110(B) of the NIRC, as
amended by the EVAT Law, imposing limitations on
the amount of input VAT that may be claimed as a
credit against output VAT, as well as Section 114(C)
of the NIRC, as amended by the EVAT Law, requiring
the government or any of its instrumentalities to
withhold a 5% final withholding VAT on their gross
payments on purchases of goods and services.
§ The Court erred in upholding the constitutionality of
Section 110(B) of the NIRC, as amended by the
EVAT Law, imposing a limitation on the amount of
input VAT that may be claimed as a credit against
output VAT notwithstanding the finding that the tax is
not progressive.
§ That input tax is a property right, thus the government
cannot confiscate property arbitrarily.
Issue/s:
● W/N RA 9337 is unconstitutional? – NO, it is not.
Ratio:
● It is the revenue bill which is constitutionally required to originate
exclusively in the House of Representatives, and not the law.
○ Because a bill originating from the House may go through a
lot of changes in the Senate in that it might come out as a
whole new thing altogether. A distinct bill may be produced.
○ To insist that the statute and not the bill which initiated the
legislative process must be the same as the House bill would
deny the Senate’s power not only to concur with amendments
but to propose amendments as well.
■ The Senate can propose its own version.
● This is because the House focuses on
local needs and problems.
● The Senate has a national overview on
everything.
● The Senate’s proposals regarding
percentage, franchise, amusement, and
excise taxes are needed to cushion VAT’s
effects on consumers.
○ If these did not exist, consumers
would still pay VAT in addition to
the taxes imposed upon certain
goods and services.
● The President’s stand-by authority is valid.
○ The Secretary, in recommending the existence of the two
conditions needed to increase the VAT rate to 12%, acts as an
TAX1 Digests 2-D | 4
 agent of the Legislative department and not as the President’s and thus cannot
alter ego. be unduly
■ Because he becomes the Legislative’s “tool” in restricted by mere
gathering data/information regarding the conditions’ creations of the
existence. State.
■ The Congress merely described what job must be done
and who does it, including the scope of his authority. Dispositive:
● There is no undue delegation of WHEREFORE, the Motions for Reconsideration are hereby DENIED WITH
legislative, but only discretion as to the law’s FINALITY. The temporary restraining order issued by the Court is LIFTED.
execution.
● Regarding Garcia’s argument, the Court cannot strike the law down
as unconstitutional “simply because of its yokes.”
○ The Legislature has spoken and the Court’s job is merely to
determine if the law is in consonance with the Constitution.
■ I swear, bale ito lang talaga sinabi ng Courttungkol dito.
Don’t even bother, tbh.
● The error in the argument of petitioner Association Pilipinas Shell
Dealers is that it presents figures of a possibleevent and the
possibleeffects of the 70% limitation. It’s merely theoretical.
○ The 70% limitation’s effects impact depends on how people
manage their businesses.
○ The Court can only deal with matters that are appropriate
and ripe for judicial determination.
● Input tax is not property. Therefore, it is not a property right.
○ A VAT-Registered person’s entitlement to the creditable
input tax is a mere statutory privilege; a mere creation of law.
■ Thus, the law can limit.
● A person has no vested right in statutory
privileges.
○ Rights can only be considered
vested when the right to enjoyment
is a present interest, absolute,
unconditional, and irrefutable.
○ There are no vested rights in
generally accepted accounting
principles.
■ These refer to accounting
concepts, techniques, and
standards of presentation in
a company’s financial
statements.
● Not rooted in
laws of nature.
■ To state otherwise and
recognize such vested rights
is to limit the State’s taxing
power.
● The taxing
power of the
State is supreme
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 David v. Ramos
G.R. L-4300. | October 31, 1951 | Jugo, J.
Digest by: ABALOS
Petitioners: SATURNO DAVID in his cappacity as Collector of Internal Revenue
Respondents: Hon. RAMOS as judge of CFI Manila, Maria B. CASTRO
Doctrine: The word "tax," as used in section 305 of the Internal Revenue
● No. The word "tax," as used in section 305 of the Internal Revenue
Code, means a tax even if it is disputed by the tax-payer, for
otherwise it would be sufficient to dispute a tax in order to take it out
from the provisions of said section,and cause delay.
a. Moreover, section 306 provides: “... in any case, no such suit
or proceeding shall be begun after the expiration of two years
from the date of payment of the tax or penalty."
cralaw virt ua1aw li bra ry

Code, means a tax even if it is disputed by the tax-payer, for otherwise it
would be sufficient to dispute a tax in order to take it out from the provisions
of said section, rendering them practically nugatory.
"SEC. 305. Injunction not available to restrain collection of tax. — No court
shall have authority to grant an injunction to restrain the collection of any
national internal-revenue tax, fee, or charge imposed by this Code."
No suit for enjoining the collection of a tax, disputed or undisputed,
can be brought, the remedy being to pay the tax first
Facts:
● Respondent CASTRO filed a complaint against petitioner DAVID the
Collector of Internal Revenue, claiming Res Judicata; that she had
been acquitted in a criminal case for the nonpayment of War Profits
Tax. She prayed that a preliminary injunction be issued enjoining the
Collector of Internal Revenue from proceeding with the sale of her
properties.
● No. Said criminal case was dismissed with defendant’s consent, on the
ground that a larger amount than that stated in the information in the
criminal case was due from Maria B. Castro
Note: The respondents cite some cases in the United States in which the
principle that the collection of taxes should not be restrained by injunction has
been found subject to certain exceptions. (but the Court found it too long to
discuss these exceptions.) BUT it has not been shown in the present case that
extra-ordinary and exceptional circumstances exist so as to take this case out
of the rule.
Dispositive:
WHEREFORE. In view of the foregoing, the respondent Court of First Instance
of Manila is declared without jurisdiction to proceed with the trial of Civil Case
No. 12356 entitled "Maria B. Castro v. Saturnino David," and its order dated
November 8, 1950, in so far as it orders the continuation of the proceedings, is
set aside. With costs against the respondents. It is so ordered.

o CASTRO also assailed the constitutionality of RA55 or the War

Profits Tax Law.

● DAVID files to the Court a petition for certiorari, prohibition, and

injunction, alleging that the Court of First Instance has no jurisdiction
to restrain the collection of taxes, the remedy being to pay and sue for
recovery.
● The lower court entered an order dated November 8, 1950, declaring
that it had authority to proceed with the case, but DENIED the petition
of castro for a preliminary injunction.
● Inasmuch as no preliminary injunction was issued by the respondent
court, DAVID,proceeded with the distraint and levy and sale at public
auction of the properties of CASTRO, which has not been stopped up to
the present.

Issue/s:
● W/N the courts can restrain the collection of taxes on the
ground that their validity is disputed by the taxpayer.
● W/N Res judicata applies

Ratio:

TAX1 Digests 2-D | 6

 Angeles City v. Angeles City elec. o proceedings to invalidate a levy to restrain the collection of taxes do
G.R. No. 166134 | June 29, 2010 | Del Castillo, J. not violate the prohibition against injunction to restrain the collection
Digest by: AVILLON of taxes because the proceedings are directed at the right of the
City Treasurer to collect the tax by levy.
Petitioners: Angeles City Issue/s:
Respondents: Angeles City Electric Corporation and RTC Branch 57, Angeles City
● W/N RTC can restrain the collection of local taxes - YES
Ratio:
Doctrine:
● A principle deeply embedded in our jurisprudence is that taxes being the
The prohibition on the issuance of a writ of injunction to enjoin the collection of
lifeblood of the government should be collected promptly without
taxes applies only to national internal revenue taxes, and not to local taxes.
unnecessary hindrance or delay.
● The National Internal Revenue Code expressly provides that no court shall
Facts: have the authority to grant an injunction to restrain the collection of any
● In 1964, Angeles Electric Corporation (AEC) was granted a legislative national internal revenue tax, fee or charge imposed by the code.
franchise under RA 4079 to operate an electric system for the purpose of ● The situation, however, is different in the case of the collection of local
generating and distributing electric light, heat and power for sale in Angeles taxes as there is no express provision in the LGC prohibiting courts from
City, Pampanga. issuing an injunction to restrain local governments from collecting taxes.
● Sec. 3-A thereof provides that AECs payment of franchise tax for gross ● Although there is no express prohibition in the LGC, injunctions enjoining the
earnings from electric current sold was in lieu of all taxes, fees and collection of local taxes are frowned upon. Courts therefore should exercise
assessments extreme caution in issuing such injunctions.
● In 1992, the LGC was passed into law, conferring upon provinces and cities
the power to impose tax on businesses with a franchise. Dispositive: WHEREFORE, the petition is hereby DISMISSED.
● The Sangguniang Panlungsod of Angeles City enacted a Tax Ordinance.
● Starting July 1995, AEC has been paying the local franchise tax to the
Office of the City Treasurer on a quarterly basis, in addition to the national
franchise tax it pays every quarter to the BIR.
● In 2004, the City Treasurer issued a Notice of Assessment to AEC for
payment of business tax, license fee and other charges for the period 1993
to 2004 in the total amount of P94,861,194.10.
● Within the period prescribed by law, AEC protested the assessment claiming
that:
o pursuant to RA 4079, it is exempt from paying local business tax
o since it is already paying franchise tax on business, the payment of
business tax would result in double taxation
o the assessment and collection of taxes under the Tax Ordinance
cannot be made retroactive to 1993 or prior to its effectivity
● City Treasurer denied the protest for lack of merit and proceeded to levy the
real properties of AEC
● This prompted AEC to file with the RTC an Urgent Motion for Issuance of
Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin
Angeles City and its City Treasurer from levying, selling and disposing at
public auction the properties of AEC.
● RTC issued a TRO and granted the injunction.
● Angeles City argues that:
o the collection of taxes cannot be enjoined by the RTC,
o since the levy and auction of the properties of a delinquent taxpayer
are proper and lawful acts specifically allowed by the LGC, these
cannot be the subject of an injunctive writ.
● AEC argues that:

TAX1 Digests 2-D | 7

 Ermita v. Aldecoa-Delorino
G.R. No. | Date | Ponente
Digest by: BALAGTAS
Petitioners: HON. EDUARDO ERMITA in his official capacity as THE EXECUTIVE
SECRETARY
Respondents: HON. JENNY LIND R. ALDECOA- DELORINO, Presiding Judge,
Branch 137, Regional Trial Court, Makati City, ASSOCIATION OF
PETROCHEMICAL MANUFACTURERS OF THE PHILIPPINES, representing JG
Summit Petrochemical Corporation, et al.
Issue/s:
Doctrine:
The input tax is not a property or a property right within the constitutional purview of
the due process clause.
Ratio:
A VAT-registered person's entitlement to the creditable input tax is a mere statutory
privilege.
The distinction between statutory privileges and vested rights must be borne in
mind for persons have no vested rights in statutory privileges. The state may
change or take away rights, which were created by the law of the state, although it
may not take away property, which was vested by virtue of such rights.
Facts:
1) E.O. 486 was signed by PGMA.
a) LIFTING THE SUSPENSION OF THE APPLICATION OF THE
TARIFF REDUCTION SCHEDULE ON PETROCHEMICALS AND
CERTAIN PLASTIC PRODUCTS UNDER THE COMMON
EFFECTIVE PREFERENTIAL TARIFF (CEPT) SCHEME FOR THE
ASEAN FREE TRADE AREA (AFTA)
b) EO 486 reduces protective tariff rates from 10% to 5% on the entry
of inexpensive products, particularly plastic food packaging and
petrochemicals, from ASEAN Free Trade (AFTA) member countries
into the Philippines.
2) The Association of Petrochemical Manufacturers of the Philippines (APMP)
filed a case for a Writ of Preliminary Injunction
a) Enjoining the Government from implementing EO 486.
b) APMP argued that EO 486 is violative of:
i) Sec. 4 of Republic Act No. 6647
(1) Which prohibits the President from increasing or
reducing taxes while Congress is in session
ii) and Sec. 402 (e)3 of the Tariff and Customs Code.
c) APMP also anchored their case on their fear of loss or reduction of
their income once E.O. 486 is implemented and imported plastic
and similar products flood the domestic market due to reduced tariff
rates.
3) Judge Aldecoa-Delorina granted the WPI.
4) Executive Secretary Ermita assailed the WPI granted by Judge Aldecoa-
Delorina.
a) Executive Secretary Ermita argues that E.O. 486 is not
constitutionally infirm,
i) it having been issued under the authority of Secs. 401 and
402 of the Tariff and Customs Code
(1) which set no limitations on the President's power
to adjust tariff rate
(2) and serve as the government's response to its
AFTA commitment on Common Effective
Preferential Tariff (CEPT).
● WoN Judge Aldecoa-Delorino erred in granting the writ of preliminary
injunction in favor of APMP -- YES.
1) The grant or denial of a writ of preliminary injunction in a pending case rests
on the sound discretion of the court taking cognizance thereof.
a) In the present case, however, where it is the Government which is
being enjoined from implementing an issuance which enjoys the
presumption of validity, such discretion must be exercised with
utmost caution.
2) following jurisprudence, these requisites must be proved before a writ of
preliminary injunction, be it mandatory or prohibitory, will issue: HcDATC
a) The applicant must have a clear and unmistakable right to be
protected, that is a right in esse;
b) There is a material and substantial invasion of such right;
c) There is an urgent need for the writ to prevent irreparable
injury to the applicant; and
d) No other ordinary, speedy, and adequate remedy exists to
prevent the infliction of irreparable injury.
3) For it to be entitled to the writ, the APMP must show that it has a clear and
unmistakable right that is violated and that there is an urgent necessity for its
issuance.
a) That APMP had cause of action and the standing to interpose the
action for prohibition did not ipso facto call for the grant of injunctive
relief in its favor without it proving its entitlement thereto.
4) APMP failed to adduce any evidence to prove that it had a clear and
unmistakable right which was or would be violated by the enforcement of
E.O. 486.
a) The filing of the petition at the court a quo was anchored on APMP
and its members' fear of loss or reduction of their income once E.O.
486 is implemented and imported plastic and similar products flood
the domestic market due to reduced tariff rates.
b) As correctly posited by the Executive Secretary, APMP was
seeking protection over "future economic benefits" which, at
best, it had an inchoate right to.
TAX1 Digests 2-D | 8
 5) More importantly, tariff protection is not a right, but a privilege granted by the
government and, therefore, APMP cannot claim redress for alleged violation
thereof.
a) In a similar case wherein the validity of R.A. 9337 with respect to
provisions authorizing the President to increase the value-added
tax (VAT) rates, the Court held:
i) The input tax is not a property or a property right within the
constitutional purview of the due process clause.
(1) A VAT-registered person's entitlement to the
creditable input tax is a mere statutory privilege.
ii) The distinction between statutory privileges and vested
rights must be borne in mind for persons have no vested
rights in statutory privileges.
(1) The state may change or take away rights, which
were created by the law of the state, although it
may not take away property, which was vested by
virtue of such rights.
6) Assuming arguendo that it was upon the government's assurances that the
members of APMP allegedly "invested hundred of millions of dollars in
putting up the necessary infrastructure,":
a) That does not vest upon APMP a right which must be protected.

Dispositive:

WHEREFORE, the petition is PARTLY GRANTED.The Omnibus Order

dated February 6, 2007 issued by public respondent Hon. Judge Jenny Lind R.
Aldecoa- Delorino is REVERSED insofar as it granted a Writ of Preliminary Injunction
in favor of private respondent, Association of Petrochemical Manufacturers of the
Philippines (APMP). Accordingly, the Writ is DISSOLVED, and the case REMANDED
to the court of origin for further appropriate proceedings.

SO ORDERED.

TAX1 Digests 2-D | 9

BIR Ruling 18-80
G.R. No. | Date | Ponente
Digest by: BULATAO
Petitioners: (Put Petitioner/s Here)
Respondents: (Put Respondent/s Here)

Doctrine:
(Put Doctrine Here)

Facts:
● Type Facts Here

Issue/s:
● W/N (Issue) – YES/NO
● W/N (Issue) – YES/NO

Ratio:
● Ratio to Issue 1
● Ratio to Issue 2

Dispositive:
WHEREFORE, (copy and paste the entire dispositive portion here)

TAX1 Digests 2-D | 10

 BIR Ruling 99-90
G.R. No. | Date | Ponente
Digest by: CAPACITE
Petitioners: (Put Petitioner/s Here)
Respondents: (Put Respondent/s Here)

Doctrine:
(Put Doctrine Here)

Facts:
● Type Facts Here

Issue/s:
● W/N (Issue) – YES/NO
● W/N (Issue) – YES/NO

Ratio:
● Ratio to Issue 1
● Ratio to Issue 2

Dispositive:
WHEREFORE, (copy and paste the entire dispositive portion here)

TAX1 Digests 2-D | 11

 City Assessor of Cebu City v. Association of Benevola de Cebu Inc.
G.R. No. | Date | Ponente
Digest by: CASAMA
Petitioners: (Put Petitioner/s Here)
Respondents: (Put Respondent/s Here)

Doctrine:
(Put Doctrine Here)

Facts:
● Type Facts Here

Issue/s:
● W/N (Issue) – YES/NO
● W/N (Issue) – YES/NO

Ratio:
● Ratio to Issue 1
● Ratio to Issue 2

Dispositive:
WHEREFORE, (copy and paste the entire dispositive portion here)

TAX1 Digests 2-D | 12

 St. Luke’s v. CIR
G.R. No. | Date | Ponente
Digest by: CORPUS
Petitioners: (Put Petitioner/s Here)
Respondents: (Put Respondent/s Here)

Doctrine:
(Put Doctrine Here)

Facts:
● Type Facts Here

Issue/s:
● W/N (Issue) – YES/NO
● W/N (Issue) – YES/NO

Ratio:
● Ratio to Issue 1
● Ratio to Issue 2

Dispositive:
WHEREFORE, (copy and paste the entire dispositive portion here)

TAX1 Digests 2-D | 13

 CIR v. St. Luke’s
G.R. No. 195909 | September 26, 2012 | Carpio J.
Digest by: CRUZ
Petitioners: Commissioner of Internal Revenue
Respondents: St. Luke’s Medical Center, Inc.
Doctrine: A charitable institution is not exempted from tax on income derived from
non-charitable activities as defined by NIRC.
Facts:
● St. Luke's Medical Center, Inc. (St. Luke's) is a hospital organized as a non-
stock and non-profit corporation.
● BIR assessed St. Luke's deficiency taxes amounting to ₱76,063,116.06 for
1998, comprised of deficiency income tax, value-added tax, withholding tax
on compensation and expanded withholding tax.
● St. Luke's filed an administrative protest with the BIR against the deficiency
tax assessments.
● The BIR did not act on the protest within the 180-day period under Section
228 of the NIRC. Thus, St. Luke's appealed to the CTA.
● The BIR argued before the CTA that Section 27(B) of the NIRC, which
imposes a 10% preferential tax rate on the income of proprietary non-profit
hospitals, should be applicable to St. Luke's.
● According to the BIR, Section 27(B), introduced in 1997, "is a new provision
intended to amend the exemption on non-profit hospitals that were
previously categorized as non-stock, non-profit corporations under Section
26 of the 1997 Tax Code
● The BIR claimed that St. Luke's was actually operating for profit in 1998
because only 13% of its revenues came from charitable purposes.
● Moreover, the hospital's board of trustees, officers and employees directly
benefit from its profits and assets. St. Luke's had total revenues of
₱1,730,367,965 or approximately ₱1.73 billion from patient services in 1998.
● St. Luke's maintained that it is a non-stock and non-profit institution for
charitable and social welfare purposes under Section 30(E) and (G) of the
NIRC. It argued that the making of profit per se does not destroy its income
tax exemption.
● The CTA cancelled the remainder of the ₱63,113,952.79 deficiency
assessed by the BIR based on the 10% tax rate under Section 27(B) of the
NIRC, which the CTA En Banc held was not applicable to St. Luke's.
● The CTA ruled that St. Luke's is a non-stock and non-profit charitable
institution covered by Section 30(E) and (G) of the NIRC.
Issue/s:
● Whether St. Luke's is liable for deficiency income tax in 1998 under Section
27(B) of the NIRC, which imposes a preferential tax rate of 10% on the
income of proprietary non-profit hospitals. YEEEEsssss
Ratio:
● The issue raised by the BIR is a purely legal one. It involves the effect of the
introduction of Section 27(B) in the NIRC of 1997 vis-à-vis Section 30(E) and
(G) on the income tax exemption of charitable and social welfare institutions.
The 10% income tax rate under Section 27(B) specifically pertains to
proprietary educational institutions and proprietary non-profit hospitals.
● The BIR argues that Congress intended to remove the exemption that non-
profit hospitals previously enjoyed under Section 27(E) of the NIRC of 1977,
which is now substantially reproduced in Section 30(E) of the NIRC of 1997.
Section 27(B) of the present NIRC provides:
● SEC. 27. Rates of Income Tax on Domestic Corporations. -
● (B) Proprietary Educational Institutions and Hospitals. - Proprietary
educational institutions and hospitals which are non-profit shall pay a tax of
ten percent (10%) on their taxable income x x x
● St. Luke's claims tax exemption under Section 30(E) and (G) of the NIRC. It
contends that it is a charitable institution and an organization promoting
social welfare. The arguments of St. Luke's focus on the wording of Section
30(E) exempting from income tax non-stock, non-profit charitable institutions.
St. Luke's asserts that the legislative intent of introducing Section 27(B) was
only to remove the exemption for "proprietary non-profit" hospitals. The
relevant provisions of Section 30 state:
● SEC. 30. Exemptions from Tax on Corporations. - The following
organizations shall not be taxed under this Title in respect to income
received by them as such:
● (E) Nonstock corporation or association organized and OPERATED
EXCLUSIVELY for religious, charitable, scientific, athletic, or cultural
purposes, or for the rehabilitation of veterans, no part of its net income or
asset shall belong to or inure to the benefit of any member, organizer, officer
or any specific person;
● (G) Civic league or organization not organized for profit but operated
exclusively for the promotion of social welfare;
● The Court partly grants the petition of the BIR but on a different ground. We
hold that Section 27(B) of the NIRC does not remove the income tax
exemption of proprietary non-profit hospitals under Section 30(E) and (G).
● Section 27(B) on one hand, and Section 30(E) and (G) on the other hand,
can be construed together without the removal of such tax exemption.
● The effect of the introduction of Section 27(B) is to subject the taxable
income of two specific institutions, namely, proprietary non-profit educational
institutions and proprietary non-profit hospitals, among the institutions
covered by Section 30, to the 10% preferential rate under Section 27(B)
instead of the ordinary 30% corporate rate under the last paragraph of
Section 30 in relation to Section 27(A)(1).
● Section 27(B) of the NIRC imposes a 10% preferential tax rate on the
income of (1) proprietary non-profit educational institutions and (2)
proprietary non-profit hospitals.
● The only qualifications for hospitals are that they must be proprietary and
non-profit. "Proprietary" means private, following the definition of a
"proprietary educational institution" as "any private school maintained and
administered by private individuals or groups" with a government permit.
TAX1 Digests 2-D | 14
● "Non-profit" means no net income or asset accrues to or benefits any
member or specific person, with all the net income or asset devoted to the
institution's purposes and all its activities conducted not for profit.
● "Non-profit" does not necessarily mean "charitable."
● The Constitution exempts charitable institutions only from real property
taxes. In the NIRC, Congress decided to extend the exemption to income
taxes. However, the way Congress crafted Section 30(E) of the NIRC is
materially different from Section 28(3), Article VI of the Constitution. Section
30(E) of the NIRC defines the corporation or association that is exempt from
income tax.
● On the other hand, Section 28(3), Article VI of the Constitution does not
define a charitable institution, but requires that the institution "actually,
directly and exclusively" use the property for a charitable purpose.
● Section 30(E) of the NIRC provides a definition of a charitable institution
● There is no dispute that St. Luke's is organized as a non-stock and non-profit
charitable institution. However, this does not automatically exempt St. Luke's
from paying taxes.
● This only refers to the organization of St. Luke's. Even if St. Luke's meets the
test of charity, a charitable institution is not ipso facto tax exempt.
● To be exempt from real property taxes, Section 28(3), Article VI of the
Constitution requires that a charitable institution use the property "actually,
directly and exclusively" for charitable purposes. To be exempt from income
taxes, Section 30(E) of the NIRC requires that a charitable institution must
be "organized and operated exclusively" for charitable purposes. Likewise, to
be exempt from income taxes, Section 30(G) of the NIRC requires that the
institution be "operated exclusively" for social welfare.
● However, the last paragraph of Section 30 of the NIRC qualifies the
words "organized and operated exclusively" by providing that:
Notwithstanding the provisions in the preceding paragraphs, the
income of whatever kind and character of the foregoing organizations
from any of their properties, real or personal, or from any of their
activities conducted for profit regardless of the disposition made of
such income, shall be subject to tax imposed under this Code.
● Thus, even if the charitable institution must be "organized and operated
exclusively" for charitable purposes, it is nevertheless allowed to engage in
"activities conducted for profit" without losing its tax exempt status for its not-
for-profit activities. The only consequence is that the "income of whatever
kind and character" of a charitable institution "from any of its activities
conducted for profit, regardless of the disposition made of such income, shall
be subject to tax."
● In 1998, St. Luke's had total revenues of ₱1,730,367,965 from services to
paying patients. It cannot be disputed that a hospital which receives
approximately ₱1.73 billion from paying patients is not an institution
"operated exclusively" for charitable purposes.
● Clearly, revenues from paying patients are income received from "activities
conducted for profit."
● Indeed, St. Luke's admits that it derived profits from its paying patients.
● St. Luke's declared ₱1,730,367,965 as "Revenues from Services to Patients"
in contrast to its "Free Services" expenditure of ₱218,187,498.
● The Court finds that St. Luke's is a corporation that is not "operated
exclusively" for charitable or social welfare purposes insofar as its revenues
from paying patients are concerned.
● This ruling is based not only on a strict interpretation of a provision granting
tax exemption, but also on the clear and plain text of Section 30(E) and (G).
● Section 30(E) and (G) of the NIRC requires that an institution be "operated
exclusively" for charitable or social welfare purposes to be completely
exempt from income tax.
● An institution under Section 30(E) or (G) does not lose its tax exemption if it
earns income from its for-profit activities. Such income from for-profit
activities, under the last paragraph of Section 30, is merely subject to income
tax, previously at the ordinary corporate rate but now at the preferential 10%
rate pursuant to Section 27(B).
● St. Luke's fails to meet the requirements under Section 30(E) and (G) of the
NIRC to be completely tax exempt from all its income. However, it remains a
proprietary non-profit hospital under Section 27(B) of the NIRC as long as it
does not distribute any of its profits to its members and such profits are
reinvested pursuant to its corporate purposes.
● St. Luke's, as a proprietary non-profit hospital, is entitled to the preferential
tax rate of 10% on its net income from its for-profit activities.
● St. Luke's is therefore liable for deficiency income tax in 1998 under Section
27(B) of the NIRC. However, St. Luke's has good reasons to rely on the
letter dated 6 June 1990 by the BIR, which opined that St. Luke's is "a
corporation for purely charitable and social welfare purposes" and thus
exempt from income tax.
● In Michael J. Lhuillier, Inc. v. Commissioner of Internal Revenue, the Court
said that "good faith and honest belief that one is not subject to tax on the
basis of previous interpretation of government agencies tasked to implement
the tax law, are sufficient justification to delete the imposition of surcharges
and interest."
Dispositive: WHEREFORE, the petition of the Commissioner of Internal Revenue in
G.R. No. 195909 is PARTLY GRANTED. The Decision of the Court of Tax Appeals
En Banc dated 19 November 2010 and its Resolution dated 1 March 2011 in CTA
Case No. 6746 are MODIFIED. St. Luke's Medical Center, Inc. is ORDERED TO PAY
the deficiency income tax in 1998 based on the 10% preferential income tax rate
under Section 27(B) of the National Internal Revenue Code. However, it is not liable
for surcharges and interest on such deficiency income tax under Sections 248 and
249 of the National Internal Revenue Code. All other parts of the Decision and
Resolution of the Court of Tax Appeals are AFFIRMED.
TAX1 Digests 2-D | 15
 American Bible Society v. City of Manila
G.R. No. L-9637| April 30, 1957 | Felix, J
Digest by: CUA
Petitioners: American Bible Society
Respondents: City of Manila
Doctrine:
Ordinances 2529 and 3000 are inapplicable as it would impair plaintiff's right to the
free exercise and enjoyment of its religious profession and worship, as well as its
rights of dissemination of religious beliefs
Facts:
● Plaintiff-appellant, American Bible Society is a foreign, non-stock, non-profit,
religious, missionary corporation duly registered and doing business in the
Philippines
● Plaintiff has been distributing and selling bibles throughout the Philippines
and translating the same into several Philippine dialects
● On May 1953 the city treasurer informed plaintiff that it was conducting the
business of general merchandise since November 1945 without providing
itself with the necessary Mayor’s permit and municipal license, in violation of
Ordinance 3000 as amended and ordinances 2529, 3028 and 3364.
● Plaintiff was required to secure within three days the corresponding permit
and license fees in the total sum of 5821.45
● Plaintiff protested the requirement but the City Treasurer demanded that
plaintiff pay under protest the sum of 5891.45. To avoid the closing of its
business as well as further fines and penalties, American Bible Society paid
to the City of Manila the said permit and license fees under protest
● Plaintiff on the same date filed a complaint praying that it be refunded the
sum of 5891.41
● Lower court dismissed the case
● CA certified the case to the SC for the reason that the error assigned by the
lower court involved only questions of law
Issue/s:
● W/N ordinances are applicable? NO
Ratio: (Relevant issue on freedom of religious worship is found at the end)
● Plaintiff contends that ordinances 2529 and 3000 are unconstitutional and
illegal as they provide for religious censorship and retrain the free exercise
and enjoyment of its religious profession (the distribution and sale of bibles
and other religious literature to the people of the Philippines)
● First ordinance 3000 is of general application and not particularly directed
against institutions like the plaintiff, and it does not contain any provisions
whatever prescribing religious censorship nor restraining the free exercise
and enjoyment of any religious profession.
a. SEC. 1. PERMITS NECESSARY. — It shall be unlawful for any
person or entity to conduct or engage in any of the businesses,
trades, or occupations enumerated in Section 3 of this Ordinance or
other businesses, trades, or occupations for which a permit is
required for the proper supervision and enforcement of existing
laws and ordinances governing the sanitation, security, and welfare
of the public and the health of the employees engaged in the
business specified in said section 3 hereof, WITHOUT FIRST
HAVING OBTAINED A PERMIT THEREFOR FROM THE MAYOR
AND THE NECESSARY LICENSE FROM THE CITY
TREASURER.
● The business of the plaintiff involved is not particularly mentioned in Section
3 of the ordinance . However, section 3 of Ordinance 3000 contains item No.
79 which reads as follows
a. 79. All other businesses, trades or occupations not mentioned in
this Ordinance, except those upon which the City is not empowered
to license or to tax P5.00
● Therefore the need for a permit is made to depend upon the power of the
city to license or tax said business, trade or occupation
● As to the license fees the city treasurer required the society to pay the
sum of 5821.45
● Ordinance No. 2529 as amended by Ordinances Nos. 2779, 2821 and 3028
prescribes the following
a. SEC. 1. FEES. — Subject to the provisions of section 578 of the
Revised Ordinances of the City of Manila, as amended, there shall
be paid to the City Treasurer for engaging in any of the businesses
or occupations below enumerated, quarterly, license fees based on
gross sales or receipts realized during the preceding quarter in
accordance with the rates herein prescribed: PROVIDED,
HOWEVER, That a person engaged in any businesses or
occupation for the first time shall pay the initial license fee based on
the probable gross sales or receipts for the first quarter beginning
from the date of the opening of the business as indicated herein for
the corresponding business or occupation.
b. GROUP 2. — Retail dealers in new (not yet used) merchandise,
which dealers are not yet subject to the payment of any municipal
tax, such as (1) retail dealers in general merchandise; (2) retail
dealers exclusively engaged in the sale of . . . books, including
stationery.
● Here the license fees are imposed on “dealers in general merchandise”
which cover the business or occupation of selling bibles, books, etc.
● Chapter 60 of the Revised Administrative Code which includes section 2444,
subsection (m-2) of said legal body, as amended by Act No. 3659, approved
on December 8, 1929, empowers the Municipal Board of the City of Manila:
a. (M-2) To tax and fix the license fee on (a) dealers in new
automobiles or accessories or both, and (b) retail dealers in new
(not yet used) merchandise, which dealers are not yet subject to the
payment of any municipal tax.
b. For the purpose of taxation, these retail dealers shall be classified
as (1) retail dealers in general merchandise, and (2) retail dealers
exclusively engaged in the sale of (a) textiles . . . (e) books,
TAX1 Digests 2-D | 16
 including stationery, paper and office supplies, . . .: PROVIDED,
HOWEVER, That the combined total tax of any debtor or
manufacturer, or both, enumerated under these subsections (m-1)
and (m-2), whether dealing in one or all of the articles mentioned
herein, SHALL NOT BE IN EXCESS OF FIVE HUNDRED PESOS
PER ANNUM.
● The city of Manila contends that the city ordinances Nos. 2529 and 3000
were enacted in virtue of the power that Act No. 3669 conferred upon Manila
● American Bible Society contends that the ordinances are no longer in force
as the law under which they were promulgated had been repealed by Sec
102 of RA 409
● The court does not consider RA No.409 to be a substantial re-enactment
from the provisions of Sec 2444(m-2)
a. We find between these two provisions that may have any bearing
on the case at bar, is that, while subsection (m-2) prescribes that
the combined total tax of any dealer or manufacturer, or both,
enumerated under subsections (m-1) and (m-2), whether dealing in
one or all of the articles mentioned therein, shall not be in excess of
P500 per annum, the corresponding section 18, subsection (o) of
Republic Act No. 409, does not contain any limitation as to the
amount of tax or license fee that the retail dealer has to pay per
annum.
● Hence the court maintains that all right and liabilities which have accrued
under the original statue are preserved and may be enforced, since the
reenactment neutralizes the repeal, therefore continuing the law in force
without interruption
● Plaintiff also claims that the ordinances to be valid must first be approved by
the President
● Section 18, subsection (ii) of Republic Act No. 409
a. (ii) To tax, license and regulate any business, trade or occupation
being conducted within the City of Manila, not otherwise
enumerated in the preceding subsections, including percentage
taxes based on gross sales or receipts, subject to the approval of
the PRESIDENT, except amusement taxes.
● This requirement, however, was not contained in section 2444 of the former
Charter of the City of Manila under which Ordinance 2529 was promulgated
● Anyways, the business of retail dealers in general merchandise is expressly
enumerated in RA 409 and hence an ordinance prescribing a municipal tax
on said business does not have to be approved by the president to be
effective. Moreover the questioned ordinances are still in force having been
promulgated by the Municipal board of the City of Manila under the authority
granted to it by law
● even though it prohibits him from introducing and carrying out
Freedom of Religious Worship
● Section 1, subsection (7) of Article III of the Constitution of the Republic of
the Philippines, provides that:
● (7) No law shall be made respecting an establishment of religion, or
prohibiting the free exercise thereof, and the free exercise and enjoyment of
religious profession and worship, without discrimination or preference, shall
forever be allowed. No religion test shall be required for the exercise of civil
or political rights.
● Article III, section 1, clause (7) of the Constitution of the Philippines
aforequoted, guarantees the freedom of religious profession and worship
● Section 27 of Commonwealth Act No. 466, otherwise known as the
National Internal Revenue Code, provides:
a. SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. — The
following organizations shall not be taxed under this Title in respect
to income received by them as such —
(e) Corporations or associations organized and operated
exclusively for religious, charitable, . . . or educational purposes, . .
.: Provided, however, That the income of whatever kind and
character from any of its properties, real or personal, or from any
activity conducted for profit, regardless of the disposition made of
such income, shall be liable to the tax imposed under this Code
● Appellant's counsel claims that the Collector of Internal Revenue has
exempted the plaintiff from this tax and says that such exemption clearly
indicates that the act of distributing and selling bibles, etc. is purely religious
and does not fall under the above legal provisions
● According to the Court, it may be true that in the case at bar the price asked
for the bibles and other religious pamphlets was in some instances a little bit
higher than the actual cost of the same but this cannot mean that appellant
was engaged in the business or occupation of selling said "merchandise" for
profit.
● Thus ordinance No. 2529 is inapplicable for it would impair free exercise and
enjoyment of religious profession and worship as well as rights of
dissemination of religious beliefs.
● With respect to Ordinance No. 3000, as amended, which requires the
obtention of the Mayor's permit before any person can engage in any of the
businesses, trades or occupations enumerated therein, the court did not find
that it imposes any charge upon the enjoyment of a right granted by the
Constitution, nor tax the exercise of religious practices
● Coleman v City of Griffin
a. An ordinance by the City of Griffin, declaring that the practice of
distributing either by hand or otherwise, circulars, handbooks,
advertising, or literature of any kind, whether said articles are being
delivered free, or whether same are being sold within the city limits
of the City of Griffin, without first obtaining written permission from
the city manager of the City of Griffin, shall be deemed a nuisance
and punishable as an offense against the City of Griffin, does not
deprive defendant of his constitutional right of the free
exercise and enjoyment of religious profession and worship,
a scheme or purpose which he sees fit to claim as a part of his
religious system.
● It seems clear, therefore, that Ordinance No. 3000 cannot be considered
unconstitutional, even if applied to plaintiff Society. But as Ordinance No.
2529 of the City of Manila, as amended, is not applicable to plaintiff-
appellant and defendant-appellee is powerless to license or tax the business
of plaintiff Society involved herein for, as stated before, it would impair
TAX1 Digests 2-D | 17
 plaintiff's right to the free exercise and enjoyment of its religious profession
and worship, as well as its rights of dissemination of religious beliefs, We
find that Ordinance No. 3000, as amended is also inapplicable to said
business, trade or occupation of the plaintiff.

Dispositive:
Wherefore, and on the strength of the foregoing considerations, We hereby reverse
the decision appealed from, sentencing defendant return to plaintiff the sum of
P5,891.45 unduly collected from it. Without pronouncement as to costs. It is so
ordered.

TAX1 Digests 2-D | 18

 Collector v. Bisaya Land Transport
G.R. No. L-121000 | May 29, 1959 | Concepcion
Digest by: DE VERA
Petitioners: Collector of Internal Revenue
Respondents: Bisaya Land Transportation
Note: Syllabus + book says 1958 but the gr number = 1959; also copy-pasted the
whole case it’s just short
Doctrine:
The period of prescription for the payment of compensating tax and residence tax,
which are not “income” is not tolled by the filing of income tax returns.
Facts:
● June 1945 - Jan 1957: Bisaya Land acquired equipment from US
Commercial Co, which it used in the operation of its buses, without paying
the corresponding compensating and specific taxes.
● 1946-1951: gross receipts of Bisaya Land’s business were not declared for
taxation
● 1945-1952: freight receipts were issued by Bisaya Land but the company did
not affix to them the documentary stamps
● A deficiency additional residence tax was also determined.
● The Collector of Internal Revenue assessed Bisaya of deficiency tax
amounting to P4,949.91 consisting of:
o compensating tax
o common carrier’s percentage tax
o documentary stamp tax
o additional residence tax
● Bisaya filed a petition for review of the assessment with the CTA.
o It upheld the assessment, except that the deficiency common
carrier’s percentage tax for 1946 + 1st quarter of 1947 AND the
additional residence tax for 1947 were barred by the statute of
limitations.
○ Secondly, income tax returns contain a statement of the taxpayer's
income for a given year.
■ The taxpayer is not supposed to declare in said returns
that he has purchased or received "from without the
Philippines", commodities or merchandise that are subject
to the compensating tax.
■ Generally, such purchases are not "income," and, hence,
have no place in income tax returns.
SECOND ISSUE
● Under its second assignment of error, the company maintains that the
equipment and materials it purchased from agencies of the U. S.
Government are not subject to compensating tax because they were
acquired, not for business purposes but "in furtherance of the war efforts".
● Suffice it to note that the acquisition of said effects took place between June,
1945 and January, 1947 while the hostilities in Japan and Europe ended in
1945.
● Besides, the company was engaged in business as a public utility operation
and such services as it may have rendered to the armed forces were merely
incidental to said business. Neither is it exempt from common carrier's
percentage tax by reason of such service to the armed forces, because the
party being taxed is not said organization, but the company. This tax is
based upon the gross receipts of carriers, independently of the source of
such receipts.
Dispositive: Decision affirmed.

Issue/s:
● W/N the claim for compensating tax and residence tax has already
prescribed - NO
● W/N the compensating tax, documentary stamp tax and common carrier’s
percentage tax are chargeable - YES

Ratio:
FIRST ISSUE
● Bisaya’s pretense that the period of prescription should be computed from
the filing of its income tax returns, is without merit.
○ To begin with, said income tax returns have not been introduced in
evidence and therefore, there was no means to determine what
data were included in said return to apprise the Bureau of Internal
Revenue that the company should pay the compensating tax.

TAX1 Digests 2-D | 19