Taxation 1

Case Analysis No. 1

EMILIO Y. HILADO vs. THE COLLECTOR OF INTERNAL REVENUE and THE

COURT OF TAX APPEALS
[G.R. No. L-9408. October 31, 1956.]
http://www.chanrobles.com/cralaw/1956octoberdecisions.php?id=358

Discussion Questions:

(1) Discuss the nature of internal revenue laws.

(2) Explain the legal binding effect of an erroneous interpretation by an
administrative officer of a tax law, as to (a) taxpayer and (b)
successor administrative officer.
(3) Is Hilado’s loss consisting of his war damage claim, a valid
deductible item from his gross income? Discuss.

ANTERO M. SISON, JR. vs. RUBEN B. ANCHETA

G.R. No. L-59431 July 25, 1984
https://www.lawphil.net/judjuris/juri1984/jul1984/gr_l59431_1984.html

Discussion Questions:
(1) Explain the lifeblood theory as discussed in the case
(2) Do you agree to the dictum that states, “the power to tax involves
the power to destroy”? Explain
(3) What are the limitations of the power of taxation invoked by the
Court in the instant case? Explain the said limitations.
(4) Explain the rule on equality and uniformity in taxation.
(5) Is there a valid distinction between taxpayers who are earning
purely compensation income, and practicing professionals and
businessmen?
(6) Discuss the system gross system of income taxation.
(7) Discuss the system of net income taxation.

THE PHILIPPINE GUARANTY CO., INC. vs. THE COMMISSIONER OF

INTERNAL REVENUE and THE COURT OF TAX APPEALS
G.R. No. L-22074 April 30, 1965
https://www.lawphil.net/judjuris/juri1965/apr1965/gr_l-22074_1965.html
Discussion Questions:
(1) Explain the theory of necessity as discussed in the case.

The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a

necessary burden to preserve the State's sovereignty and a means to give the citizenry an army to
resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve,
public improvement designed for the enjoyment of the citizenry and those which come within the
State's territory, and facilities and protection which a government is supposed to provide.
Considering that the reinsurance premiums in question were afforded protection by the government
and the recipient foreign reinsurers exercised rights and privileges guaranteed by our laws, such
reinsurance premiums and reinsurers should share the burden of maintaining the state

(2) Are foreign corporations subject to Philippine taxation? Explain.

Sec. 54. Payment of corporation income tax at source. — In the case of foreign corporations subject
to taxation under this Title not engaged in trade or business within the Philippines and not having
any office or place of business therein, there shall be deducted and withheld at the source in the
same manner and upon the same items as is provided in Section fifty-three a tax equal to twenty-
four per centum thereof, and such tax shall be returned and paid in the same manner and subject to
the same conditions as provided in that section.

(3) Is reliance in good faith on the rulings of the Commissioner of BIR a

valid defense? In what instance is it available?

Petitioner would wish to stress that its reliance in good faith on the rulings of the Commissioner of
Internal Revenue requiring no withholding of the tax due on the reinsurance premiums in question
relieved it of the duty to pay the corresponding withholding tax thereon. This defense of petitioner
may free if from the payment of surcharges or penalties imposed for failure to pay the corresponding
withholding tax, but it certainly would not exculpate if from liability to pay such withholding tax The
Government is not estopped from collecting taxes by the mistakes or errors of its agents.3

(4) Discuss the difference between place of business and place of

activity. Which one is applicable for taxation purposes.

The foreign insurers' place of business should not be confused with their place of
activity. Business should not be continuity and progression of transactions 2 while activity may
consist of only a single transaction. An activity may occur outside the place of business. Section 24
of the Tax Code does not require a foreign corporation to engage in business in the Philippines in
subjecting its income to tax. It suffices that the activity creating the income is performed or done in
the Philippines. What is controlling, therefore, is not the place of business but the place
of activity that created an income.
COLLECTOR OF INTERNAL REVENUE vs. J.C. YUSECO and The COURT OF
TAX APPEALS
G.R. No. L-12518 October 28, 1961
https://www.lawphil.net/judjuris/juri1961/oct1961/gr_l-12518_1961.html

Discussion Questions:
(1) Discuss the jurisdiction of the Court of Tax Appeals.

SEC. 7. Jurisdiction. — The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to
review by appeal, as herein provided —

(1) Decisions of the Collector 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 law or part of law administered by
the Bureau of Internal Revenue;

(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or
other money charges; seizure, detention or release of property affected; fines; forfeitures or other
penalties imposed in relation thereto; or other matters arising under the Customs Law or other law or
part of law administered by the Bureau of Customs; and

(3) Decisions of provincial or city Boards of Assessment Appeals in cases involving the assessment
and taxation of real property or other matters arising under the Assessment Law, including rules and
regulations relative thereto.

(2) Can CTA issue writs of prohibition and injunction to suspend the
collection of taxes?

Nowhere does the law expressly vest in the Court of Tax Appeals original jurisdiction to issue writs
of prohibition and injunction independently of, and apart from, an appealed case. The writ of
prohibition or injunction that it may issue under the provisions of section 11, Republic Act No. 1125,
to suspend the collection of taxes, is merely ancillary to and in furtherance of its appellate jurisdiction
in the cases mentioned in section 7 of the Act. The power to issue the writ exists only in cases
appealed to it. This is reflected on the explanatory note of the bill (House No. 175), creating the
Court of Tax Appeals. We quote from the explanatory note:

... It is proposed in the attached bill to establish not merely an administrative body but a
regular court vested with exclusive appellate jurisdiction over cases arising under the
National Internal Revenue Code, Customs Law and the Assessment Law. (Emphasis
supplied, p. 2202, Congressional Record, Third Congress, Vol. I, Part II.)
 (3) May the collection of taxes be enjoined? Discuss the general rule
and its rationale.

(4) Give the exception to the said general rule.

if in the opinion of the Court the collection would jeopardize the interest of the Government and/or
the taxpayer, it could suspend the collection and require the taxpayer either to deposit the amount
claimed or to file a surety bond for not more than double the amount of the tax assessed.

COMMISSIONER OF INTERNAL REVENUE vs. ALGUE, INC., and THE COURT

OF TAX APPEALS
G.R. No. L-28896 February 17, 1988
https://lawphil.net/judjuris/juri1988/feb1988/gr_l_28896_1988.html

Discussion Questions:
(1) Who has the burden to prove validity of claimed deductions?
Explain the rule.

the burden is on the taxpayer to prove the validity of the claimed deduction.

(2) In the instant case, was the Company able to prove the validity of
the deduction? Was is required for a valid deductible item.

Yes. The claimed deduction by the private respondent was permitted under
the Internal Revenue Code and should therefore not be allowed by the
petitioner.

(3) Explain the theory of symbiotic relationship as discussed in the

case.

It is said that taxes are what we pay for civilization society. Without taxes, the government would be
paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural
reluctance to surrender part of one's hard earned income to the taxing authorities, every person who
is able to must contribute his share in the running of the government. The government for its part, is
expected to respond in the form of tangible and intangible benefits intended to improve the lives of
the people and enhance their moral and material values. This symbiotic relationship is the rationale
of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those
in the seat of power.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure.

(4) Do taxpayer has the right to complain the collection of taxes?

Explain.

we concede the inevitability and indispensability of taxation, it is a requirement in all democratic

regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not,
then the taxpayer has a right to complain and the courts will then come to his succor. For all the
awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can
demonstrate, as it has here, that the law has not been observed.