TAXATION I- CASES (LIFEBLOOD DOCTRINE) ISSUE: W/N the argument of PMFC is correct.

PILMICO-MAURI FOODS RULING:

CORP., Petitioner, v. COMMISSIONER OF
NO.
INTERNAL REVENUE, Respondent.
The Court finds that the alleged differences between the
FACTS:
requirements of Section 29 of the 1977 NIRC invoked by
The books of accounts of [PMFC] pertaining to 1996 were PMFC, on one hand, and Section 238 relied upon by the
examined by the [CIR]. Assessment notices were the CTA, on the other, are more imagined than real.
issued demanding payment for deficiency withholding
The law intends for Sections 29 and 238 of the 1977 NIRC
tax, value added tax and income tax.
to be read together, and not for one provision to be
After receiving the assessments, PMFC filed a protest accorded preference over the other.
letter. Their liabilities were then reduced from 9 million
to 3 million pesos. It is undisputed that among the evidence adduced by
PMFC on it behalf are the official receipts of alleged
PMFC then filed a petition for review. They claim that
purchases of raw materials. Thus, the CTA cannot be
they should not be liable to pay the said deficiencies and
faulted for making references to the same, and for
that their receipts and sales invoices, which allegedly
applying Section 238 of the 1977 NIRC in rendering its
support their claim for income tax deduction, must be
judgment. Required or not, the official receipts were
allowed. [PMFC's] argues that there was no substantiation
submitted by PMFC as evidence. Inevitably, the said
requirement under the 1977 NIRC and thus, their claim
receipts were subjected to scrutiny, and the CTA
for tax deduction must be allowed.
exhaustively explained why it had found them wanting.
The CTA ruled that [PMFC] failed to comply with the
PMFC cites Atlas to contend that the statutory test, as
requirements of Section 238 of the NIRC of 1977, the
provided in Section 29 of the 1977 NIRC, is sufficient to
disallowance by the [CIR] of the claimed deduction for
allow the deductibility of a business expense from the
raw materials is proper. This is because the official
gross income. As long as the expense is: (a) both ordinary
receipts were not in the name of [PMFC] but in the name
and necessary; (b) incurred in carrying a business or trade;
of Golden Restaurant. And second, these receipts were
and (c) paid or incurred within the taxable year, then, it
issued by PFC and not the alleged seller, JTE.
shall be allowed as a deduction from the gross income.
CTA en banc affirmed the said decision. It ruled that the
It is clear that Section 29 of the 1977 NIRC does not
purpose of the law in requiring the preservation by the
exempt the taxpayer from substantiating claims for
purchaser of the official receipts or sales invoices for a
deductions. While official receipts are not the only pieces
period of three years is two-fold: 1) to enable said
of evidence which can prove deductible expenses, if
purchaser to substantiate his claimed deductions from
presented, they shall be subjected to examination. PMFC
the gross income, and 2) to enable the Bureau of Internal
submitted official receipts as among its evidence, and the
Revenue to verify the accuracy of the gross income of the
CTA doubted their veracity. PMFC was, however, unable
seller from external sources such as the customers of said
to persuasively explain and prove through other
seller. Hence, [PMFC's] argument that there was no
documents the discrepancies in the said receipts.
substantiation requirement under the 1977 NIRC is
Consequently, the CTA disallowed the deductions
without basis.
claimed, and in its ruling, invoked Section 238 of the 1977
PMFC further argues that in determining the deductibility NIRC considering that official receipts are matters
of the purchase of raw materials from gross income, provided for in the said section.
Section 29 of the 1977 NIRC is the applicable provision.
The principle is recognized that when a taxpayer claims a
According to the said section, for the deduction to be
deduction, he must point to some specific provision of the
allowed, the expenses must be (a) both ordinary and
statute in which that deduction is authorized and must be
necessary; (b) incurred in carrying on a trade or business;
able to prove that he is entitled to the deduction which the
and (c) paid or incurred within the taxable year. PMFC,
law allows.
thus, claims that prior to the promulgation of the 1997
NIRC, the law does not require the production of official
receipts to prove an expense.
CIR VS. NEXT MOBILE
FACTS:
Respondent filed with BIR its ITR. It also filed its
Monthly Remittance Returns of Final Income Taxes.
The BIR then went to respondent to examine its books of
accounts and other accounting records for income and
withholding taxes
Ma. Lida Sarmiento (Sarmiento), respondent's Director of
Finance, subsequently executed several waivers of the
statute of limitations to extend the prescriptive period of
assessment for taxes.
Respondent then received a Formal Letter of Demand
(FLD) and Assessment Notices from the BIR demanding
payment of deficiency taxes.
Respondent filed its protest against the FLD and
requested the reinvestigation of the assessments but the
same was denied which prompted them to file a petition
for review before the CTA.
CTA (First Division) rendered a Decision granting
respondent's Petition for Review and declared the FLD
and Assessment Notices cancelled and withdrawn for
being issued beyond the three-year prescriptive period
provided by law.
It held that the five (5) Waivers of the statute of
limitations were not valid and binding; thus, the three-
year period of limitation within which to assess deficiency
taxes was not extended. It also held that the records belie
the allegation that respondent filed false and fraudulent
tax returns; thus, the extension of the period of limitation
from three (3) to ten (10) years does not apply. CTA en
banc affirmed said decision.
ISSUE:
W/N the CIR's right to assess respondent's deficiency
taxes had already prescribed.
RULING:
NO.
Section 203 of the 1997 NIRC mandates the BIR to assess
internal revenue taxes within three years from the last day
prescribed by law for the filing of the tax return or the
actual date of filing of such return, whichever comes later.
Section 222(b) of the NIRC provides that the period to
assess and collect taxes may only be extended upon a
written agreement between the CIR and the taxpayer
executed before the expiration of the three-year period.
RMO 20-90 and RDAO 05-01 provide the procedure for
the proper execution of a waiver.
The Court has consistently held that a waiver of the statute
of limitations must faithfully comply with the provisions
of RMO No. 20-90 and RDAO 05-01 in order to be valid
and binding.
In the instant case, the CTA found the Waivers because
of the following flaws: (1) they were executed without a
notarized board authority; (2) the dates of acceptance by
the BIR were not indicated therein; and (3) the fact of
receipt by respondent of its copy of the Second Waiver
was not indicated on the face of the original Second
Waiver.
To be sure, both parties in this case are at fault. Apart from
the respondent’s failure to comply with the procedures
required by law for a waiver to be valid, similarly, the BIR
violated its own rules and was careless in performing its
functions with respect to these Waivers.
It is very clear that under RDAO 05-01 it is the duty of
the authorized revenue official to ensure that the waiver
is duly accomplished and signed by the taxpayer or his
authorized representative before affixing his signature
to signify acceptance of the same. It also instructs that in
case the authority is delegated by the taxpayer to a
representative, the concerned revenue official shall see
to it that such delegation is in writing and duly
notarized. Furthermore, it mandates that the waiver
should not be accepted by the concerned BIR office
and official unless duly notarized.
The general rule is that when a waiver does not comply
with the requisites for its validity specified under RMO
No. 20-90 and RDAO 01-05, it is invalid and ineffective
to extend the prescriptive period to assess taxes. However,
due to its peculiar circumstances, We shall treat this case
as an exception to this rule and find the Waivers valid.
The parties in this case are in pari delicto or "in equal
fault." Here, to uphold the validity of the Waivers would
be consistent with the public policy embodied in the
principle that taxes are the lifeblood of the government,
and their prompt and certain availability is an imperious
need. Taxes are the nation's lifeblood through which
government agencies continue to operate and which the
State discharges its functions for the welfare of its
constituents. As between the parties, it would be more
equitable if petitioner's lapses were allowed to pass and
consequently uphold the Waivers in order to support this
principle and public policy.
CIR VS. NIPPON EXPRESS (PHILS.) CORP.
FACTS:
Nippon filed an administrative claim for refund of its
unutilized input VAT before the BIR. A day later, it filed
a judicial claim for tax refund, by way of petition for
review, before the CTA.
Petitioner the CIR asserted that the amounts being
claimed by Nippon as unutilized input VAT were not
properly documented, hence, should be denied.
CTA granted the petition of the respondent. It awarded tax
credit in the amount of 2.6 million. However, the
respondent, before receiving the said resolution by the
CTA, filed a motion to withdraw because the BIR issued
a tax credit certificate which amounts to 21.6 million
pesos.
CIR moved for reconsideration claiming that the CTA had
already resolved the issue and that said motion to
withdraw should not be allowed. CTA ruled in favor of
the respondent and granted the latter’s motion to
withdraw. CTA en banc affirmed said decision. Hence,
this petition.
ISSUE:
W/N the CTA properly granted Nippon's motion to
withdraw.
RULING:
NO.
While it is true that the CTA Division has the prerogative
to grant a motion to withdraw under the authority of the
foregoing legal provisions, the attendant circumstances in
this case should have incited it to act otherwise.
The primary reason, however, that militates against the
granting of the motion to withdraw is the fact that the
CTA Division, had already determined that Nippon was
only entitled to refund the reduced amount
of P2,614,296.84. Markedly different from this is the
BIR's determination that Nippon should
receive P21,675,128.91 Tax Credit Certificate, which is,
in all, P19,060,832.07 larger than the amount found due
by the CTA Division. Therefore, the massive discrepancy
alone between the administrative and judicial
determinations of the amount to be refunded to Nippon
should have already raised a red flag to the CTA Division.
In this relation, it deserves mentioning that the CIR is not
estopped from assailing the validity of the July 27, 2011
Tax Credit Certificate which was issued by her
subordinates in the BIR. In matters of taxation, the
government cannot be estopped by the mistakes, errors or
omissions of its agents for upon it depends the ability of
the government to serve the people for whose benefit
taxes are collected.
All told, the CTA committed a reversible error in granting
Nippon's motion to withdraw. The August 10, 2011
Decision of the CTA Division should therefore be
reinstated.
COMMISSIONER OF INTERNAL
REVENUE, Petitioner,
vs.
DASH ENGINEERING PHILIPPINES,
INC., Respondent.
FACTS:
Respondent filed a claim for tax credit refund. CIR failed
to act on the said claim which prompted the respondent to
file a petition before the CTA.
CTA granted the respondent’s petition for tax refund.
Petitioner now claims that said petition was filed out of
time. CTA en banc also ruled in favor of the respondent.
According to them, the petition was properly filed as it
was made within the 2-year prescriptive period. Also,
because of the use of the word “may” in the NIRC, the
judicial recourse within thirty (30) days after the lapse of
the 120-day period is only directory and permissive and
not mandatory and jurisdictional, as long as the petition
was filed within the two-year prescriptive period.
ISSUE:
W/N the CTA erred in holding that respondent’s judicial
claim for refund was filed within the prescriptive period
provided under the Tax Code.
RULING:
YES.
The court ruled that the rule for filing the judicial claim,
which is within 30 days after the lapse of 120 days, is
mandatory and jurisdictional.
In this case, the respondent filed the judicial claim beyond
the 30-day period prescribed by law.
The Court has held time and again that taxes are the
lifeblood of the government and, consequently, tax laws
must be faithfully and strictly implemented as they are not
intended to be liberally construed.
CAMP JOHN HAY DEVELOPMENT CORP VS
CBAA
FACTS:
Petitioner questioned the assessments in for lack of legal
basis due to the City Assessor’s failure to identify the
specific properties and its corresponding assessed values.
Consequently, they filed a petition with BTAA
challenging the validity of the assessments and issuances.
Petitioner claims that it is exempted for taxes.
BTAA ruled that the petitioner should pay the
assessments first and later file its protest. CTA en banc
ruled that before a protest may be entertained, the tax
should have been paid first.
ISSUE:
W/N the CTA erred in rendering its decision
RULING: NO.
To begin with, Section 252 emphatically directs that the
taxpayer/real property owner questioning the assessment
should first pay the tax due before his protest can be
entertained. As a matter of fact, the words "paid under
protest" shall be annotated on the tax receipts.
Accordingly, the CBAA and the CTA En Banc correctly
ruled that real property taxes should first be paid before
any protest thereon may be considered. It is without a
doubt that such requirement of "payment under protest" is
a condition sine qua non before an appeal may be
entertained.
To reiterate, the restriction upon the power of courts to
impeach tax assessment without a prior payment, under
protest, of the taxes assessed is consistent with the
doctrine that taxes are the lifeblood of the nation and as
such their collection cannot be curtailed by injunction or
any like action; otherwise, the state or, in this case, the
local government unit, shall be crippled in dispensing the
needed services to the people, and its machinery gravely
disabled.
The right of local government units to collect taxes due
must always be upheld to avoid severe erosion. This
consideration is consistent with the State policy to
guarantee the autonomy of local governments and the
objective of RA No. 7160 or the LGC of 1991 that they
enjoy genuine and meaningful local autonomy to
empower them to achieve their fullest development as
self-reliant communities and make them effective
partners in the attainment of national goals.
FIRST LEPANTO TAISHO INSURANCE
CORPORATION VS CIR
FACTS: Petitioner is a non-life insurance corporation
and a Large Taxpayer under Revenue Regulation. Upon
examination of their books of acct, CIR issued internal
revenue tax assessments for deficiency income,
withholding, expanded withholding, final withholding,
value-added, and documentary stamp taxes. Petitioner
protested. It filed a petition for review of assessment, but
was later on withdrawn because it availed of a tax
amnesty program. However, despite availing such
program, CTA Second Division and CTA En Banc still
assessed taxes against it to wit: (1) withholding taxes on
compensation of Directors; (2) deficiency withholding tax
assessment on transportation, subsistence and lodging,
and representation expense, commission expense, direct
loss expense, occupancy cost, service/contractor and
purchases; (3) deficiency final withholding tax
assessments for payments of dividends and
computerization expenses; and (4) delinquency interest.
ISSUE: W/N the CTA En Banc erred in holding the
petitioner liable for (1) withholding taxes on
compensation of Directors; (2) deficiency withholding tax
assessment on transportation, subsistence and lodging,
and representation expense, commission expense, direct
loss expense, occupancy cost, service/contractor and
purchases; (3) deficiency final withholding tax
assessments for payments of dividends and
computerization expenses; and (4) delinquency interest.
RULING: No, CTA En Banc did not err in such ruling.
As regards #1, petitioner is liable because Directors are
still considered employees of the company.
As regards #2 and 3, petitioner is liable because it failed
to present evidence why these taxes should not be
assessed against it. As to service/contractors and
purchases, petitioner contends that both parties already
stipulated that it correctly withheld the taxes due. Thus,
petitioner is of the belief that it is no longer required to
present evidence to prove the correct payment of taxes
withheld. As correctly ruled by the CTA Second Division
and En Banc, however, stipulations cannot defeat the
right of the State to collect the correct taxes due on an
individual or juridical person because taxes are the
lifeblood of our nation so its collection should be actively
pursued without unnecessary impediment.
As regards #4, the delinquency interest is proper because
petitioner failed to pay the tax assessed within the
prescribed period.
It is worthy to note that tax revenue statutes are not
generally intended to be liberally construed. Moreover,
the CTA being a highly specialized court particularly
created for the purpose of reviewing tax and customs
cases, it is settled that its findings and conclusions are
accorded great respect and are generally upheld by this
Court, unless there is a clear showing of a reversible error
or an improvident exercise of authority.19 Absent such
errors, the challenged decision should be maintained.
CIR VS SAN ROQUE POWER CORPORATION
FACTS: San roque power corp entered into a power
purchase agreement with the NPC by building the San
Roque Multi-purpose project in San Miguel, Pangasinan.
Because of the said project, San Roque allegedly incurred
excess input VAT. San Roque then filed with the BIR a
claim for refund. 13 days after filing such claim, San
Roque filed with the CTA a petition for review. CIR
contend that the claim was prematurely filed with the
CTA.
ISSUE: W/N San roque is entitled to tax refund
RULING: No, because it failed to comply with the
mandatory and jurisdictional requirement of waiting 120
days before filing its judicial claim.
Clearly, San Roque failed to comply with the 120-day
waiting period, the time expressly given by law to the
Commissioner to decide whether to grant or deny San
Roque’s application for tax refund or credit. It is
indisputable that compliance with the 120-day waiting
period is mandatory and jurisdictional.
Failure to comply with the 120-day waiting period
violates a mandatory provision of law. It violates the
doctrine of exhaustion of administrative remedies and
renders the petition premature and thus without a cause of
action, with the effect that the CTA does not acquire
jurisdiction over the taxpayer’s petition.
San Roque’s failure to comply with the 120-
day mandatory period renders its petition for review
with the CTA void.
Strict compliance with the mandatory and jurisdictional
conditions prescribed by law to claim such tax refund or
credit is essential and necessary for such claim to
prosper. Well-settled is the rule that tax refunds or
credits, just like tax exemptions, are strictly construed
against the taxpayer. The burden is on the taxpayer to
show that he has strictly complied with the conditions for
the grant of the tax refund or credit.
As the law states, the taxpayer may, if he wishes, appeal
the decision of the Commissioner to the CTA within 30
days from receipt of the Commissioner’s decision, or if
the Commissioner does not act on the taxpayer’s claim
within the 120-day period, the taxpayer may appeal to the
CTA within 30 days from the expiration of 120 days.
Taxes are the lifeblood of the nation. The Philippines has
been struggling to improve its tax efficiency collection for
the longest time with minimal success. Consequently, the
Philippines has suffered the economic adversities arising
from poor tax collections, forcing the government to
continue borrowing to fund the budget deficits. This
Court cannot turn a blind eye to this economic malaise by
being unduly liberal to taxpayers who do not comply with
statutory requirements for tax refunds or credits. The tax
refund claims in the present cases are not a pittance. Many
other companies stand to gain if this Court were to rule
otherwise.
CIR VS BPI
FACTS: Petitioner CIR assessed respondent BPI
deficiency percentage and documentary stamp taxes. In a
letter, the BPI requested to be informed why a deficiency
tax is being assessed so that he can make an intelligent
decision on whether to pay or to protest the assessment.
CIR, through a letter, stated that BPI’s letter failed to
qualify as a protest.
BPI filed for reconsideration of the assessment, but was
denied. It then filed a petition for review in the CTA but
was dismissed for lack of jurisdiction because the
assessment had become final and unappealable for failure
to protest on time.
The CA revered the CTA’s decision ruling that the
assessments were not valid because of failure to inform
the taxpayer of the legal and factual bases.
ISSUES:
1. W/N the notices deemed as valid assessment?
2. W/N the assessments were final and
unappealable?
RULING:
#1 – Yes, the notices are valid. RA 8424 has already
amended the provision of Section 229 on protesting an
assessment. The old requirement of merely notifying
the taxpayer of the CIR's 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.
Because of this, the CA’s theory was that BPI was
deprived of due process when the CIR failed to inform it
in writing of the factual and legal bases of the
assessments.
However, the SC disagrees. BPI was indeed aware of the
nature and basis of the assessments, and was given all the
opportunity to contest the same but ignored it despite the
notice conspicuously written on the assessments which
states that "this ASSESSMENT becomes final and
unappealable if not protested within 30 days after
receipt." Counsel resorted to dilatory tactics and
dangerously played with time. Unfortunately, such
strategy proved fatal to the cause of his client.
Moreover, [T]his Court recognizes that the [CTA], which
by the very nature of its function is dedicated exclusively
to the consideration of tax problems, has necessarily
developed an expertise on the subject, and its conclusions
will not be overturned unless there has been an abuse or
improvident exercise of authority. Such findings can only
be disturbed on appeal if they are not supported by
substantial evidence or there is a showing of gross error
or abuse on the part of the [CTA].
#2 – Yes, the assessments became final and unappealable.
Under the former Section 270, there were two instances
when an assessment became final and unappealable: (1)
when it was not protested within 30 days from receipt and
(2) when the adverse decision on the protest was not
appealed to the CTA within 30 days from receipt of the
final decision.
Since the assessments were valid, BPI should have
protested the same within 30 days from receipt thereof.
The December 10, 1988 reply it sent to the CIR did not
qualify as a protest since the letter itself stated that "[a]s
soon as this is explained and clarified in a proper letter of
assessment, we shall inform you of the taxpayer’s
decision on whether to pay or protest the
assessment." Hence, by its own declaration, BPI did not
regard this letter as a protest against the assessments. As
a matter of fact, BPI never deemed this a protest since it
did not even consider the October 28, 1988 notices as
valid or proper assessments.
The inevitable conclusion is that BPI’s failure to protest
the assessments within the 30-day period provided in the
former Section 270 meant that they became final and
unappealable. Thus, the CTA correctly dismissed BPI’s
appeal for lack of jurisdiction. BPI was, from then on,
barred from disputing the correctness of the assessments
or invoking any defense that would reopen the question
of its liability on the merits.
BPI cannot be absolved of its liability to pay taxes. The
public will suffer if taxpayers will not be held liable for
the proper taxes assessed against them:
Taxes are the lifeblood of the government, for without
taxes, the government can neither exist nor endure. A
principal attribute of sovereignty, the exercise of taxing
power derives its source from the very existence of the
state whose social contract with its citizens obliges it to
promote public interest and common good. The theory
behind the exercise of the power to tax emanates from
necessity; without taxes, government cannot fulfill its
mandate of promoting the general welfare and well-being
of the people.
YMCA VS CIR
FACTS: Private Respondent YMCA (Young Men’s
Christian Association) is a non-stock, non-profit
institution, which conducts various programs and
activities that are beneficial to the public, especially the
young people, pursuant to its religious, educational and
charitable objectives.
It leased out a portion of its premises to small shop
owners, like restaurants and canteen operators, and
collected parking fees from non-members.
Taxes were assessed but the association claims exemption
from taxation of its rental income on the ground that it is
a religious, charitable and educational institution
combined.
ISSUES: Is the rental income of the YMCA from its real
estate subject to tax?
RULING: Yes, it is subject to tax.
CIR contends that "rental income derived by a tax-exempt
organization from the lease of its properties, real or
personal, [is] not, therefore, exempt from income
taxation, even if such income [is] exclusively used for the
accomplishment of its objectives."
The Court agrees with the Commissioner. Because taxes
are the lifeblood of the nation, the Court has always
applied the doctrine of strict in interpretation in
construing tax exemptions. Furthermore, a claim of
statutory exemption from taxation should be manifest.
and unmistakable from the language of the law on which
it is based. Thus, the claimed exemption "must expressly
be granted in a statute stated in a language too clear to be
mistaken."
DAVAO GULF LUMBER CORPORATION VS CIR
FACTS: Petitioner is a licensed forest concessionaire
possessing a Timber License Agreement. Petitioner
purchased, from various oil companies, refined and
manufactured mineral oils as well as motor and diesel
fuels. Said oil companies paid the specific taxes imposed
on the sale of said products. Being included in the
purchase price of the oil products, the specific taxes paid
by the oil companies were eventually passed on to the
user, the petitioner in this case.
Petitioner then filed before Respondent CIR a claim for
refund representing 25% of the specific taxes actually
paid on the above-mentioned fuels and oils that were used
by petitioner in its operations.
Later on it filed before the CTA a petition for review. The
CTA granted the claim, but it computed the refund based
on rates deemed paid under RA 1435, and not on the
higher rates actually paid by petitioner under the NIRC.
As regards the computation, petitioner elevated the matter
to CA insisting that the basis should be the higher rates.
But the CA affirmed the decision of the CTA.
ISSUE: W/N petitioner is entitled to the refund of 25%
(higher rate) of the amount of specific taxes it actually
paid
RULING: No.
A tax cannot be imposed unless it is supported by the clear
and express language of a statute; on the other hand, once
the tax is unquestionably imposed, [a] claim of exemption
from tax payments must be clearly shown and based on
language in the law too plain to be mistaken. Since the
partial refund authorized under Section 5, RA 1435, is in
the nature of a tax exemption, it must be
construed strictissimi juris against the grantee. Hence,
petitioners claim of refund on the basis of the specific
taxes it actually paid must expressly be granted in a statute
stated in a language too clear to be mistaken.
We have carefully scrutinized RA 1435 and the
subsequent pertinent statutes and found no expression
of a legislative will authorizing a refund based on the
higher rates claimed by petitioner. The mere fact that the
privilege of refund was included in Section 5, and not in
Section 1, is insufficient to support petitioners
claim. When the law itself does not explicitly provide that
a refund under RA 1435 may be based on higher rates
which were nonexistent at the time of its enactment, this
Court cannot presume otherwise. A legislative lacuna
cannot be filled by judicial fiat
According to an eminent authority on taxation, "there is
no tax exemption solely on the ground of equity." Thus,
the tax refund should be based on the taxes deemed paid.
Because taxes are the lifeblood of the nation, statutes that
allow exemptions are construed strictly against the
grantee and liberally in favor of the government.
Otherwise stated, any exemption from the payment of a
tax must be clearly stated in the language of the law; it
cannot be merely implied therefrom.
JOSE REYES vs PEDRO ALMANZOR
FACTS:
Petitioners JBL Reyes et al. owned a parcel of land in
Tondo which are leased and occupied by tenants who
were paying monthly rentals of not exceeding P300.
In 1971, the Rental Freezing Law was passed prohibiting
an increase in monthly rentals of dwelling units where
rentals do not exceed three hundred pesos (P300.00).
Because of the new law, petitioners 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 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.
Petitioners 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. Central Board of Assessment Appeals ruled in
favor of respondent. Hence this petition.
ISSUE: W/N approach on tax assessment used by the City
Assessor reasonable?
RULING: No. Verily, taxes are the lifeblood of the
government and so should be collected without
unnecessary hindrance.
However, such collection should be made in accordance
with law as any arbitrariness will negate the very reason
for government itself It is therefore necessary to reconcile
the apparently conflicting interests of the authorities and
the taxpayers so that the real purpose of taxations, which
is the promotion of the common good, may be achieved.
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.
The respondent Board of Assessment Appeals of Manila
and the City Assessor of Manila are ordered to make a
new assessment by the income approach method to
guarantee a fairer and more realistic basis of computation
PHILIPPINE BANK OF COMMUNICATIONS VS
CIR
FACTS
Petitioner filed its first and second quarter income tax
returns, reported profits, and paid income taxes
amounting to P5.2M in 1985.
However, at the end of the year petitioner suffered losses
so that when it filed its Annual Income Tax Returns for
the year-ended December 31, 1986, the petitioner
reported a net loss of P14.1 M, and thus declared no tax
payable for the year.
In 1988, the bank requested from CIR for a tax credit and
tax refunds representing overpayment of taxes.
Pending investigation of the respondent CIR, petitioner
instituted a Petition for Review before the CTA. CTA
denied its petition for tax credit and refund for failing to
file within the prescriptive period of 2 years to which the
petitioner belies arguing the Revenue Memorandum
Circular No.7-85 issued by the CIR itself states that claim
for overpaid taxes are not covered by the two-year
prescriptive period mandated under the Tax Code. CA
affirmed. Hence this petition.
ISSUE: W/N contention of petitioner is correct.
RULING:
No. The relaxation of revenue regulations by RMC 7-85
is not warranted as it disregards the two-year prescriptive
period set by law.
Basic is the principle that "taxes are the lifeblood of the
nation." The primary purpose is to generate funds for the
State to finance the needs of the citizenry and to advance
the common weal.
Due process of law under the Constitution does not
require judicial proceedings in tax cases. This must
necessarily be so because it is upon taxation that the
government chiefly relies to obtain the means to carry on
its operations and it is of utmost importance that the
modes adopted to enforce the collection of taxes levied
should be summary and interfered with as little as
possible.
From the same perspective, claims for refund or tax credit
should be exercised within the time fixed by law because
the BIR being an administrative body enforced to collect
taxes, its functions should not be unduly delayed or
hampered by incidental matters.
PHIL. GUARANTY CO., INC VS CIR
FACTS
The petitioner is a domestic insurance company, entered
into reinsurance contracts with foreign insurance
companies not doing business in the country, thereby
ceding to foreign reinsurers a portion of the premiums on
insurance it has originally underwritten in the Philippines.
The premiums paid by such companies were excluded by
the petitioner from its gross income when it filed its
income tax returns for 1953 and 1954.
Furthermore, it did not withhold or pay tax on them.
Consequently, the CIR assessed against the petitioner
withholding taxes on the ceded reinsurance premiums to
which the petitioner protested on the ground that the
premiums are not subject to tax for the premiums did not
constitute income from sources within the Philippines
because the foreign reinsurers did not engage in business
in the Philippines, and CIR's previous rulings did not
require insurance companies to withhold income tax due
from foreign companies.
ISSUE: W/N insurance companies are not required to
withhold tax on reinsurance premiums ceded to foreign
insurance companies, which deprives the government
from collecting the tax due from them
RULING
No. 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.
The petitioner's defense of reliance of good faith on
rulings of the CIR requiring no withholding of tax due on
reinsurance premiums may free the taxpayer from the
payment of surcharges or penalties imposed for failure to
pay the corresponding withholding tax, but it certainly
would not exculpate it from liability to pay such
withholding tax. The Government is not estopped from
collecting taxes by the mistakes or errors of its agents.
PHILEX MINING CORP VS CIR
FACTS
In its 1982 annual income tax return, petitioner deducted
from its gross income the amount of P112,136,000.00 as
"loss on settlement of receivables from Baguio Gold
against reserves and allowances." However, BIR
disallowed the amount as deduction for bad debt and
assessed petitioner a deficiency income tax of
P62,811,161.39. CTA and CA affirmed.
Petitioner assails the decision of the Court of Appeals
affirming the Court of Tax Appeals decision ordering it to
pay the amount of P110.7 M as excise tax liability for the
period from the 2nd quarter of 1991 to the 2nd quarter of
1992 plus 20% annual interest from 1994 until fully paid
pursuant to Sections 248 and 249 of the Tax Code of
1977.
Philex protested the demand for payment of the tax
liabilities stating that it has pending claims for VAT input
credit/refund for the taxes it paid for the years 1989 to
1991 in the amount of 120 Million plus interest. Therefore
these claims for tax credit/refund should be applied
against the tax liabilities.
ISSUE: W/N there be an off-setting between the tax
liabilities vis-a-vis claims of tax refund of the petitioner
RULING: No. Philex's claim is an outright disregard of
the basic principle in tax law that taxes are the lifeblood
of the government and so should be collected without
unnecessary hindrance. Evidently, to countenance
Philex's whimsical reason would render ineffective our
tax collection system. Too simplistic, it finds no support
in law or in jurisprudence.
To be sure, Philex cannot be allowed to refuse the
payment of its tax liabilities on the ground that it has a
pending tax claim for refund or credit against the
government which has not yet been granted.
Taxes cannot be subject to compensation for the simple
reason that the government and the taxpayer are not
creditors and debtors of each other. There is a material
distinction between a tax and debt.
Debts are due to the Government in its corporate capacity,
while taxes are due to the Government in its sovereign
capacity. There can be no off-setting of taxes against the
claims that the taxpayer may have against the
government.
A person cannot refuse to pay a tax on the ground that the
government owes him an amount equal to or greater than
the tax being collected. The collection of a tax cannot
await the results of a lawsuit against the government.
NORTH CAMARINES LUMBER CO. VS. CIR
FACTS:
The petitioner (engaged in the lumber business) sold more
than 2M boardfeet of logs to General Lumber Co. with the
agreement that the latter would pay the sales taxes. The
CIR, upon consultation officially advised the parties that
the bureau interposes no objection so long as the tax due
shall be covered by a surety.
General Lumber complied, but later failed to pay the tax
liabilities, and so the respondent collector required the
petitioner to pay thru a letter dated August 30, 1955.
Petitioner filed a request for reconsideration twice before
finally submitting the denied request for appeal before the
Court of Tax Appeals.
The CTA dismissed the appeal as it was clearly filed out
of time. The petitioner had consumed thirty-three days
from the receipt of the demand, before filing the appeal.
Petitioner argued that in computing the 30-day period in
perfecting the appeal the letter of the respondent Collector
dated January 30, 1956, denying the second request for
reconsideration, should be considered as the final decision
contemplated in Section 7, and not the letter of demand
dated August 30, 1955.
ISSUE: Whether or not contention of the petitioner is
tenable.
RULING:
No. This contention is untenable. We cannot countenance
that theory that would make the commencement of the
statutory 30-day period solely dependent on the will of the
taxpayer and place the latter in a position to put off
indefinitely and at his convenience the finality of a tax
assessment. Such an absurd procedure would be
detrimental to the interest of the Government, for "taxes
are the lifeblood of the government, and their prompt and
certain availability is an imperious need."