o on on’s SELECTED CASE LAW IN TAXATION 1 ver. 08.05.01 This Handout is specia! prepared to "eet the needs o# $re%&ar 'evie(ees in Ta)ation and is intended tosuppe"ent the author*s ectures on the su+,ect. This Handout is +asica! sourced #ro" the author*s T(o%-ou"e 008 &ar 'evie(e r in Ta)ation an d #ro" seected Supr e"e Court Dec isions up to Apri15/ 008. I# the rec ent decisions are "ere reiterations o# prior doctrines then the author has decided to sticto the oder ca ses. The autho r has #ound out tha t &ar e)a"iners have a pench ant #or i vi n2uestions tha t are +ased on rece nt! deci ded cases . 3or a co"prehensive revi e( it is suested tha t the reader shoud use the author* s &ar 'evi e(er in Ta)atio n. (hi ch is avai a+ e at the Conanan Educationa&ooSupp!/ 014 C.. 'ecto/ ania/ Te. No. 675%55%8675%55%89. WARNING: The use o# these notes is i"ited on! to those (ho have attended the $re%&ar 'evie( Lectures o# $ro#. A+eardo T. Do"ondon and those he has persona! autho ri :ed . 'epr oduct ion o# thi s Handout or cop !i ncontents shasu+, ect the user to the a( o# ;a r"a. <nauthori:ed users (inot pass the &ar and i# the! do so/ the! sha+e unhapp! in i# e #or stea inthe inteectu apropert! o# the author. 1 $repared +! $ro#. A+eardo T. Do"ondon/ A& =Econ>/ &SC =Acct>/ LL&/ A =Econ>/ LL/ DCL =Cand.>. La(! er%C$A% Cus to"s &roer/ ana e"en t Con sut ant/ $ro#es sor o# La( and $re%&ar 'evie(er. GOOD LUCK TO EVER YBODY AND SEE YOU ALL IN COURT AS WORTHY OPPOSING COUNSELS. GENERAL PRINCIPLES OF TAXATION 1. Th e powe !o !" # $% %o&e !$&e% '"((e) "( %o !h e powe!o )e%!o*. The po(er o# ta)ation is so"eti"es caed aso the po(er to destro! . There#ore it sh oud +e e)erci sed (ith caution to "ini"i:e in,ur! to the proprietar! rihts o# a ta)pa!e r. It "ust +e e)er cised #air!/ e2ua! and un i#or"! / est the ta) coector ithe ?hen that a!s the oden e.@ And/ in the order to "aintain the enerapu+ic*s trust and con#idenc e in the overn"ent this po(er "ust +e used ,ust! and not treache rous!. =Roxas v. Court of Tax Appeals / No. L% 50B 7/ Apri9/ 1498/ 7 SC'A 69/ 8. cited in Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue, . '. No. 16548/ Dece"+er 1/ 006> +. Wh* "e !"# ("w% 'o,%!-e) %!$'!(* ""$,%! !he S!"!e ",) ($/e"((* $, 0"oo0 !he S!"!e 2 S<ES TED ANSWE'In case o# dou+t / ta) a( s "ust +e const rued strict! aain st the State and i+era! in #avor o# the ta)pa!er +ecause ta)es/ as +urdens (hich "ust +e endured +! the ta)pa!er/ shoud not +e presu"ed to o +e!ond (hat the a( e)press! and cear! decares. (Lincoln Phili ppine Life Insura nce Compan y, Inc., etc., v. Court of Appeal s, et al., 47 SC'A 4/ 44> 3. T"# e#e&p!$o,% "e %!$'!(* 'o,%!-e) ""$,%! !he !"#p"*e",) ($/e"((* $, 0"oo0 !he S!"!e and "ust +e cear! sho(n and +ased on anuae in the a( too pain to +e "i st aen (Da vao ul f Lum!er Cor pora tion v. Commis sio ner of Int ernal Rev enu e, et al., 47 SC'A 69/ 88 ",+ecause ta)es are necessar! #or the continued e)istence o# the State. 4. A e e%"( o0 " BIR - ($,0"o"/(e !o " !"#p"* ewo-() ,o! ,e'e%%"$(* 'e"!e " pepe!-"( e#e&p!$o, $, h$% 0"o/ #or a#ter athe over n"e nt is never estop ped #ro " coectinta)es +ecause o# "istaes or errors on the part o# its
This Handout is specia! prepared to "eet the needs o#$re%&ar 'evie(ees in Ta)ation and is intended to suppe"entthe author*s ectures on the su+,ect. This Handout is +asica!sourced #ro" the author*s T(o%-ou"e 008 &ar 'evie(er inTa)ation and #ro" seected Supre"e Court Decisions up to
Apri 15/ 008. I# the recent decisions are "ere reiterations o#prior doctrines then the author has decided to stic to theoder cases. The author has #ound out that &ar e)a"inershave a penchant #or ivin 2uestions that are +ased onrecent! decided cases. 3or a co"prehensive revie( it issuested that the reader shoud use the author*s &ar'evie(er in Ta)ation. (hich is avaia+e at the ConananEducationa &oo Supp!/ 014 C.. 'ecto/ ania/ Te. No.675%55%8 675%55%89.
WARNING: The use o# these notes is i"ited on! tothose (ho have attended the $re%&ar 'evie( Lectures o#$ro#. A+eardo T. Do"ondon and those he has persona!authori:ed. 'eproduction o# this Handout or cop!incontents sha su+,ect the user to the a( o# ;ar"a.<nauthori:ed users (i not pass the &ar and i# the! do so/the! sha +e unhapp! in i#e #or steain the inteectuapropert! o# the author.
1 $repared +! $ro#. A+eardo T. Do"ondon/ A& =Econ>/&SC =Acct>/ LL&/ A =Econ>/ LL/ DCL =Cand.>. La(!er%C$A%Custo"s &roer/ anae"ent Consutant/ $ro#essor o# La( and
$re%&ar 'evie(er.
GOOD LUCK TO EVERYBODY AND SEE YOUALL IN COURT AS WORTHY OPPOSING COUNSELS.
GENERAL PRINCIPLES OF TAXATION
1. The powe !o !"# $% %o&e!$&e% '"((e) "(%o !he
powe !o )e%!o*. The po(er o# ta)ation is so"eti"es caedaso the po(er to destro!. There#ore it shoud +e e)ercised(ith caution to "ini"i:e in,ur! to the proprietar! rihts o# ata)pa!er. It "ust +e e)ercised #air!/ e2ua! and uni#or"!/est the ta) coector i the ?hen that a!s the oden e.@ And/ in the order to "aintain the enera pu+ic*s trust andcon#idence in the overn"ent this po(er "ust +e used ,ust!and not treacherous!. =Roxas v. Court of Tax Appeals/ No. L%50B7/ Apri 9/ 1498/ 7 SC'A 69/ 8. cited in Pilipinas ShellPetroleum Corporation v. Commissioner of Internal Revenue, . '.No. 16548/ Dece"+er 1/ 006>
S<ESTED ANSWE' In case o# dou+t/ ta) a(s"ust +e construed strict! aainst the State and i+era! in#avor o# the ta)pa!er +ecause ta)es/ as +urdens (hich "ust+e endured +! the ta)pa!er/ shoud not +e presu"ed to o+e!ond (hat the a( e)press! and cear! decares. (LincolnPhilippine Life Insurance Company, Inc., etc., v. Court of Appeals, etal., 47 SC'A 4/ 44>
3. T"# e#e&p!$o,% "e %!$'!(* 'o,%!-e) ""$,%!
!he !"#p"*e ",) ($/e"((* $, 0"o o0 !he S!"!e and "ust +ecear! sho(n and +ased on anuae in the a( too pain to +e"istaen (Davao ulf Lum!er Corporation v. Commissioner of
Internal Revenue, et al., 47 SC'A 69/ 88 ", +ecause ta)es arenecessar! #or the continued e)istence o# the State.
4. A ee%"( o0 " BIR -($, 0"o"/(e !o " !"#p"*ewo-() ,o! ,e'e%%"$(* 'e"!e " pepe!-"( e#e&p!$o, $, h$%0"o / #or a#ter a the overn"ent is never estopped #ro"coectin ta)es +ecause o# "istaes or errors on the part o# its
S<ESTED ANSWE' No. Ta) a(s/ unie re"ediaa(s/ are not to +e appied retroactive!. 'evenue a(s aresu+stantive a(s and their appication "ust not +e e2uated(ith re"edia a(s.
'evenue a(s are not intended to +e i+era! construed/and e)e"ptions are not iven retroactive appication/considerin that ta)es are the i#e+ood o# the overn"ent and
in Ho"es* "e"ora+e "etaphor/ the price (e pa! #orcivii:ation/ ta) a(s "ust +e #aith#u! and strict! i"pe"ented.=Commissioner of Internal Revenue v. Acosta, etc.,. '. No. 15B098/
Auust 7/ 006>
7. The %-&p!-"* p-po%e o0 !"#"!$o, $% !opo&o!e !he e,e"( we(0"e ",) !o po!e'! !he he"(!h8%"0e!* o &o"(% o0 !he $,h"/$!",!%. It is in the ,oint e)erciseo# the po(er o# ta)ation and poice po(er (here reuator!ta)es are coected.
Ta)ation "a! +e "ade the i"pe"ent o# the state*spoice po(er. The "otivation +ehind "an! ta)ation "easuresis the i"pe"entation o# poice po(er oas. Southern CrossCement Corporation v. Cement #anufacturers Association of thePhilippines, et al., . '. No. 1585B0/ Auust 7/ 005 citin Lut$ v.
Araneta, 48 $hi. 1B8/ 15 =1455> in turn citin reat Atl. % Pac. TeaCo. v. ros&ean, 70 <.S. B1 '.S. v. iutler, 46 <.S. 1 #cCullochv. #arylan), B Wheaton 719 The reader shoud note that the Auust7/ 005 Southern Cross case is the decision on the "otion #orreconsideration o# the Fu! 8/ 00B Southern Cross decision.
The so%caed ?sin ta)es@ on acoho and to+acco"anu#acturers hep dissuade the consu"ers #ro" e)cessiveintae o# these potentia! har"#u products. =Southern Cross
Cement Corporation v. Cement #anufacturers Association of thePhilippines, et al., . '. No. 1585B0/ Auust 7/ 005>
. The 'o&pe,%"!o* p-po%e o0 !"#"!$o, is toi"pe"ent the socia ,ustice provisions o# the constitutionthrouh the proressive s!ste" o# ta)ation/ (hich (oud resutto e2ua distri+ution o# (eath/ etc.
$roressive inco"e ta)es aeviate the "arin +et(eenrich and poor. =Southern Cross Cement Corporation v. Cement
#anufacturers Association of the Philippines, et al., . '. No. 1585B0/ Auust 7/ 005>
=. T"#"!$o, $% )$%!$,-$%h"/(e 0o& po($'e powe asto the "eans e"po!ed to i"pe"ent these pu+ic oas.Those doctrines that are uni2ue to ta)ation arose #ro" pecuiarconsiderations such as those especia! punitive e##ects=Southern Cross Cement Corporation v. Cement #anufacturers
Association of the Philippines, et al., . '. No. 1585B0/ Auust 7/005 citin <. S. Chie# arsha (ho once said/ the po(er to ta)invoves the po(er to destro!/ #cCulloch v. #arylan), B Wheaton719/ cited in Sison v. Ancheta, . '. No. L G 54B71/ Fu! 5/ 170
SC'A 95B> and the +eie# that ta)es are i#e+ood o# the state.=Southern Cross Cement Corporation v. Cement #anufacturers
Association of the Philippines, et al., . '. No. 1585B0/ Auust 7/005 citin ?Ta)es +ein the i#e+ood o# the overn"ent/ theirpro"pt and certain avaia+iit! is o# the essence.@ Sison v. Ancheta,i)., citin *era v. +ernan)e$, . '. No. L%7179B/ arch 70/ 1464/ 84SC'A 144
These considerations necessitated the evoution o#ta)ation as a distinct ea concept #ro" poice po(er.=Southern Cross Cement Corporation, supra>
I# the 2uestion ass #or an enu"eration o# the distinctions+et(een the po(er o# ta)ation and poice po(er/ the candidateshoud re#or"uate no. 8 a+ove.
6. The S-" A)>-%!&e,! A'! wh$'h $,'e"%e)e#$%!$, !"#e% o, %-" w"% e,"'!e) !o %!"/$($9e !he %-"$,)-%!* to prepare it #or the oss o# its 2uota in the <.S."aret w"% (e$e) 0o " e-("!o* p-po%e !o po!e'! ",)po&o!e !he %-" $,)-%!* wh$'h $% "(%o 0o " p-/($'p-po%e. =Lut$ v. Araneta, 48 $hi. 1B8>
The $hisuin #und/ an i"position on suar/ to raise#unds to conduct research #or the i"prove"ent o# the suarindustr!/ is #or the purpose o# sta+ii:in the suar industr!
(hich one o# the piars o# the $hiippine econo"! (hich
a##ects the (e#are o# the State. The ev! is not so "uch ane)ercise o# the po(er o# ta)ation/ nor the i"position o# aspecia ev!/ +ut the e)ercise o# poice po(er (hich is #or theenera (e#are o# the entire countr!/ there#ore #or a pu+icpurpose. (Repu!lic v. acolo)#urcia Co., et al ./ .'. No. L%148B/Fu! 4/ 1499>
S<ESTED ANSWE' No. It is not a ta) "easure+ut a si"pe reuator! provision #or the coection o# #eesi"posed pursuant to the e)ercise o# the State*s poice po(er. A ta) is i"posed under the ta)in po(er o# overn"entprincipa! #or the purpose o# raisin revenues. The a( in2uestion/ ho(ever/ "ere! authori:es and re2uires thecoection o# #ees #or the rei"+urse"ent o# the Co""ission*se)penses in the authori:ation/ supervision andor reuation o#pu+ic services. =Repu!lic, etc., v. International CommunicationsCorporation (ICC", . '. No. 1B1996/ Fu! 16/ 009>
11. Powe o0 !"#"!$o, '", "(%o /e -%e) !o$&p(e&e,! powe o0 e&$,e,! )o&"$,. Ta) "easures are +ut@en#orced contri+utions e)acted on pain o# pena sanctions@and ?cear! i"posed #or pu+ic purpose.@ In "ost recent !ears/the po(er to ta) has indeed +eco"e a "ost e##ective too toreai:e socia ,ustice/ pu+ic (e#are/ and the e2uita+edistri+ution o# (eath. =Commissioner of Internal Revenue v.Central Lu$on Dru- Corporation, .'. No. 1549B6/ Apri 19/ 005>
NTES AND CENTSa. Central Luzon Drug reconi:ed the riht o#
esta+ish"ents to utii:e the senior citi:ens* discount as a ta) credit.The a( has since +een a"ended to ao( the senior citi:ens* discount
as a ta) deduction. E)panded Senior Citi:ens Act o# 007/ Sec. B=a>
+. The %e,$o '$!$9e,% )$%'o-,!. The senior citi:ens
sha +e entited to the ?
rant o# t(ent! percent =0J> discount #ro"a esta+ish"ents reative to the utii:ation o# services in hotes andsi"iar odin esta+ish"ents/ restaurants and recreation centers/and purchase o# "edicines in a esta+ish"ents #or the e)cusive
use or en,o!"ent o# senior citi:ens/@ E)panded Senior Citi:ens Acto# 007/ Sec. B =a>
c. Se,$o '$!$9e,% )$%'o-,! ,o! "((owe) ",*&oe"% " !"# 'e)$! /-! "% " )e)-'!$o, 0o& o%% $,'o&e. Itouht to +e noted/ ho(ever/ that on 3e+ruar! 9/ 00B/ 'A 456/ orThe E)panded Senior Citi:ens Act o# 007/ a"endin 'A 6B7/ (assined into a(/ usherin in/ upon its e##ectivit! on arch 1/ 00B/ ane( ta) treat"ent #or saes discount purchases o# 2uai#ied seniorciti:ens o# "edicines.
The esta+ish"ent "a! cai" the discounts ranted to seniorciti:nes "% !"# )e)-'!$o, +ased on the net cost o# the oods sod orservices rendered Provi)e) / That the cost o# the discount sha +eao(ed as deduction #ro" ross inco"e #or the sa"e ta)a+e !earthat the discount is ranted. Provi)e), further, That the tota a"ounto# the cai"ed ta) deduction net o# vaue added ta) i# appica+e/sha +e incuded in their ross saes receipts #or ta) purposes andsha +e su+,ect to proper docu"entation and to the provisions o# theNationa Interna 'evenue Code/ as a"ended. #.. /ol)in-Corporation v. Court of Appeals, et al., .'. No. 190147/ arch 7/008 citin E)panded Senior Citi:ens Act o# 007/ Sec. B =a>
1+. The !"# ee,-e% "e 0o " p-/($' p-po%e $0-!$($9e) 0o !he /e,e0$! o0 !he 'o&&-,$!* $, e,e"(. Anaternative "eanin is that ta) proceeds shoud +e utii:ed
on! to attain the o+,ectives o# overn"ent.$u+ic use is no oner con#ined to the traditiona notiono# use +! the pu+ic +ut hed s!non!"ous (ith pu+ic interest/pu+ic +ene#it/ pu+ic (e#are/ and pu+ic convenience.=Commissioner of Internal Revenue v. Central Lu$on Dru-Corporation, .'. No. 1549B6/ Apri 19/ 005>
S<ESTED ANSWE' Locus stan)i is ?a riht o#appearance in a court o# ,ustice on a iven 2uestion. = A!aya v.!)ane, . '. No. 196414/ 3e+ruar! 1B/ 006>
It is a part!*s persona and su+stantia interest in thecase/ such that the part! has sustained or (i sustain=I!i).>direct in,ur! as a resut o# the overn"ent act +einchaened. It cas #or "ore than ,ust a enerai:ed rievance.
A part! need not +e a part! to the contract to chaeneits vaidit!. =I!i).>
NTES AND CENTSa. The !e& $,!ee%! &e",% " &"!e$"( $,!ee%!/ an
interest in issue a##ected +! the decree/ as distinuished #ro" "ereinterest in the 2uestion invoved/ or a "ere incidenta interest.= A!aya v. !)ane, . '. No. 196414/ 3e+ruar! 1B/ 006>
+. R"!$o,"(e 0o locus standi . The rationae #orre2uirin a part! (ho chaenes the constitutionait! o# a statute toaee such a persona stae in the outco"e o# the controvers! is ?toensure that a concrete adverseness (hich sharpens the presentationo# issues upon (hich the court so are! depends #or iu"ination o#
c. A(!e,"!$e %!"!e&e,! o0 )o'!$,e o0 /-%h$,"%$)e locus standi. In cases o# para"ount i"portance (hereserious constitutiona 2uestions are invoved/ the standinre2uire"ents "a! +e rea)ed and a suit "a! +e ao(ed to prospereven (here there is no direct in,ur! to the part! cai"in the riht o#
,udicia revie(. Coconut 2il Refiners Association, Inc., etc., et al., vs.Torres, etc., et al., . '. No. 1756/ Fu! 4/ 005 citin ayan(a-on- Alyansan- #a3a!ayan" v. 4amora, . '. No. 178560/cto+er 10/ 000/ 7B SC'A BB4/ in turn citin 0ilos!ayan, Inc. v.uin-ona, 1r ./ . '. No. 117765/ a! 5/ 144B/ 7 SC'A 110
S<ESTED ANSWE'a. The case shoud invove constitutiona issues+. 3or ta)pa!ers/ there "ust +e a cai" o# iea
dis+urse"ent o# pu+ic #unds or that the ta) "easure isunconstitutiona.
c. 3or voters/ there "ust +e a sho(in o# o+viousinterest in the vaidit! o# the eection a( in 2uestion.
d. 3or concerned citi:ens/ there "ust +e a sho(inthat the issues raised are o# transcendenta i"portance (hich"ust +e setted ear!.
e. 3or eisators/ there "ust +e a cai" that theo##icia action co"pained o# in#rines upon their preroativesas eisators. =Davi), et al., v. Presi)ent loria #acapa-al
Arroyo, etc., et al., . '. No. 161749/ a! 7/ 009>
NTES AND CENTSa. I&pope !o $&p(e") $,'-&/e,! Pe%$)e,!.
I"peadin the $resident as respondent durin her tenure andincu"+enc! in o##ice derades the dinit! o# the o##ice/ harass herand detracts her #ro" the per#or"ance o# her #unctions. Whie this"a! +e so/ she is su+,ect to i"peach"ent. =En +anc/ Sandova%utierre:/ F. Davi), et al., v. Presi)ent loria #acapa-alArroyo,etc., et al., . '. No. 161749/ a! 7/ 009>
+. Re-$%$!e% 0o 'h"((e,$, 'o,%!$!-!$o,"($!* o0("w. The part! +rinin suit "ust sho( ?not on! that the a( or actis invaid/ +ut aso that he has sustained or is in i""ediate/ ori""inent daner o# sustainin so"e direct in,ur! as a resut o# its
en#orce"ent and not "ere! that he su##ers there+! in so"einde#inite (a!.@ =Soriano III v. Lista, et al., . '. No. 157881/ archB/ 007>
S<ESTED ANSWE' The #oo(in are e)a"pes o#instances (here suits have +een +rouht +! parties (ho havenot have +een persona! in,ured +! the operation o# a a( or
an! other overn"ent act +ut +! concerned citi:ens/ ta)pa!ersor voters (ho actua! sue in the pu+ic interesta. Ta)pa!er*s suits to 2uestion contracts entered into
+! the nationa overn"ent or overn"ent%o(ned or controedcorporations aeed! in contravention o# the a(.
+. A ta)pa!er is ao(ed to sue (here there is a cai"that pu+ic #unds are iea! dis+ursed/ or that pu+ic "one! is+ein de#ected to an! i"proper purpose/ or that there is a(astae o# pu+ic #unds throuh the en#orce"ent o# an invaidor unconstitutiona a(. = A!aya v. !)ane, . '. No. 196414/3e+ruar! 1B/ 006>
S<ESTED ANSWE' The o+,ections shoud not +eiven credence. It is ea to setup du! authori:ed dut!%#reeshops in the SSEK to se ta) and dut!%#ree consu"er ite"s inthe Secured Area. This is in ine (ith the poic! enunciated inthe a( that ?the Su+ic Specia Econo"ic Kone sha +edeveoped into a se#%sustainin/ industria/ co""ercia/#inancia and invest"ent center to enerate e"po!"entopportunities in and around the :one and to attract andpro"ote productive #orein invest"ents.@
Whie it is true that Section 1 =+> o# 'ep. Act No. 66"entions on! ra( "aterias/ capita and e2uip"ent/ this doesnot necessari! "ean that the ta) and dut! #ree +u!inpriviee is i"ited to these t!pes o# artices to the e)cusion o#consu"er oods.
It "ust +e re"e"+ered that in construin statutes/ theproper course is to start out and #oo( the true intent o# theLeisature and to adopt that sense (hich har"oni:es +est(ith the conte)t and pro"otes to the #uest "anner the poic!and o+,ects o# the Leisature.
The concept o# inclusio unius est exclusio alterius does
not #ind appication +ecause the phrase ?ta) and dut!%#reei"portations o# ra( "aterias/ capita and e2uip"ent@ (as"ere! cited as an e)a"pe o# incentives that the SSEK isauthori:ed to rant/ in ine (ith its +ein a #ree port :one.Thus/ the eisative intent is that consu"er oods enterin theSSEK (hich satis#! the needs o# the :one and are consu"edthere are not su+,ect to duties and ta)es in accordance (ith$hiippine a(. =Coconut 2il Refiners Association, Inc., etc., et al., v.Torres, etc., et al., . '. No. 1756/ Fu! 4/ 005>
S<ESTED ANSWE' The ans(er (oud not +e thesa"e. This ti"e the $residentia $roca"ation (oud +e invaidas the statutor! ta) e)e"pt priviee (as ranted on! to theSu+ic Specia Econo"ic Kone and not to Fohn Ha! or Car.This is so +ecause the Constitution "andates that no a(
rantin ta) e)e"ption sha +e passed (ithout theconcurrence o# a "a,orit! o# a the "e"+ers o# Conress.=Coconut 2il Refiners Association, Inc., etc., et al., v. Torres, etc., etal., . '. No. 1756/ Fu! 4/ 005 citin 1ohn /ay People5s
Alternative Coalition, et al., v. Lim, etc., et al., .'. No. 114665/cto+er B/ 007/ B1B SC'A 759>
3urther"ore/ the a( is ver! cear that the ?e)portation orre"ova o# oods #ro" the territor! o# the Su+ic SpeciaEcono"ic Kone to other parts o# the $hiippine territor! sha +esu+,ect to custo"s duties and ta)es under the Custo"s andTari## Code and other reevant ta) a(s o# the $hiippines.@=I!i).>
W"% !hee ", $,"($) )e(e"!$o, o0 (e$%("!$e powe 2S<ESTED ANSWE' No. There is no undue
deeation o# eisative po(er +ut on! o# the discretion as tothe e)ecution o# the a(. This is constitutiona! per"issi+e.
Conress does not a+dicate its #unctions or undu!deeate po(er (hen it descri+es (hat ,o+ "ust +e done/ (ho"ust do it/ and (hat is the scope o# his authorit!. In the a+ovecase the Secretar! o# 3inance +eco"es "ere! the aent o#the eisative depart"ent/ to deter"ine and decare the evenupon (hich its e)pressed (i taes pace. The $residentcannot set aside the #indins o# the Secretar! o# 3inance/ (ho
is not under the conditions actin as the e)ecute ater eo or
I% he 'o,!e,!$o, 'oe'! 2S<ESTED ANSWE' Mes. The i"portant #actor
(hich deter"ines the source o# inco"e o# persona services is
not the residence o# the pa!or/ or the pace (here the contract#or service is entered into/ or the pace o# pa!"ent/ +ut thepace (here the services (ere actua! per#or"ed.
Since the activit! o# securin the saes (ere in er"an!/then the inco"e did not oriinate #ro" sources #ro" (ithin the$hiippines. =Commissioner of Internal Revenue v. aier6ic3el, .'. No. 157647/ Auust 4/ 009>
NTES AND CENTS In the a+ove case/ theSupre"e Court reiterated the rue that ?%o-'e o0 $,'o&e reates tothe propert!/ activit! or service that produced the inco"e. Withrespect to rendition o# a+or or persona service/ it is the pace (herethe a+or or service (as per#or"ed that deter"ines the source o# the
inco"e.The a+ove aier6ic3el case discussed the i"port o# the
S<ESTED ANSWE' Mes +ecause the undertaino# the #orein insurance co"pan! to inde"ni#! the ocainsurance co"pan! is the activit! that produced the inco"e.
The reinsurance pre"iu"s re"itted to the #oreinreinsurer had #or their source the undertain to inde"ni#! theoca insurer aainst ia+iit!. Said undertain is the activit!that produced there insurance pre"iu"s/ and the sa"e too
pace in the $hiippines. The reinsured/ the ia+iities insuredand the ris oriina! undertaen +! the oca insuranceco"pan!/ upon (hich the reinsurance pre"iu"s and inde"nit!(ere +ased/ (ere a situated in the $hiippines. = Alexan)er/o7)en % Co., Lt). v. Collector of Internal Revenue, 11 $hi. 564 17
(hich is ta)a+e is that ?activit!@ (hich produced the inco"e.The @sae o# ticets@ in the $hiippines is the activit! thatdeter"ines (hether such inco"e is ta)a+e in the $hiippines.
The ticets e)chaned hands here and pa!"ents #or#ares (ere aso "ade here in $hiippine currenc!. The situs o#the source o# pa!"ents is the $hiippines. the #o( o# (eathproceeded #ro" and occurred/ (ithin the $hiippine territor!/
en,o!in the protection accorded +! the $hiippineovern"ent. In consideration o# such protection/ the #o( o#(eath shoud share the +urden o# supportin the overn"ent.=Commissioner of Internal Revenue v. ritish 2verseas Air7aysCorporation (2AC", 1B4 SC'A 745 cited in auer6ic3el"
NTES AND CENTS I# the 2uestion invoves the aircarrier*s ta)/ then &AC is not su+,ect to the sa"e +ecause o# thea"end"ent in the a( (hich re2uires that there "ust +e upi#ts #ro"(ithin the $hiippines +e#ore the air carrier*s ta) +ased on ross$hiippine +iins "a! +e coected.
+! su+stantia distinctions that "ae rea di##erences/ one cass"a! +e treated and reuated di##erent! #ro" another. Thecassi#ication "ust aso +e er"ane to the purpose o# the a(and "ust app! to a those +eonin to the sa"e cass. (Tiu,et al., v. Court of Appeals, et al., .'. No. 16B10/ Fanuar! 0/ 1444>
+3. C("%%$0$'"!$o,8 !o /e "($)8 &-%! =a> rest on
su+stantia distinctions/ =+> +e er"ane to the purpose o# thea(/ =c> not +e i"ited to e)istin conditions on!/ and =d> app!e2ua! to a "e"+ers o# the sa"e cass. (Tiu, et al., v. Court of
S<ESTED ANSWE' There is no vioation o# e2uaprotection +ecause there e)ists a vaid cassi#ication as sho(n
+eo(a. Sini#icant distinctions e)ist +et(een the t(oroups. Those outside o# the SSEK "aintain their +usiness(ithin $hiippine custo"s territor! (hie those (ithin the SSEKoperate (ithin the so%caed ?separate custo"s territor!.@ Torant the sa"e priviees (oud cear! de#eat the statue*sintent to carve a territor! out o# the "iitar! reservations inSu+ic &a! (here #ree #o( o# oods and capita is "aintained.
+. The cassi#ication is er"ane to the purpose o#'ep. Act No. 66. As hed in Tiu, the rea concern o# the a(is to convert the ands #or"er! occupied +! the <S "iitar!+ases into econo"ic or industria areas. In #urtherance o# sucho+,ective/ Conress dee"ed it necessar! to e)tend econo"icincentives/ in ter"s o# a co"pete pacae o# ta) incentivesand other +ene#its/ to the esta+ish"ents (ithin the :one toattract and encourae #orein and oca investors.
c. The cassi#ication is not i"ited to the e)istinconditions (hen the a( (as pro"uated +ut to #utureconditions as (e/ inas"uch as the a( envisioned the #or"er"iitar! reservation to uti"ate! deveop into a se#%sustainininvest"ent center.
d. The cassi#ication appies e2ua! to a retaiers#ound (ithin the ?secured area.@ As rued in Tiu/ the individuasand +usinesses (ithin the ?secured area/@ +ein in ie
circu"stances or contri+utin direct! to the achieve"ent o# theend purposes o# the a(/ are not cateori:ed #urther. The! area si"iar! treated/ +oth in priviees ranted and in o+iationsre2uired. =Coconut 2il Refiners Association, Inc., etc., et al., v.Torres, etc., et al., . '. No. 1756/ Fu! 4/ 005 citin Tiu, et al.,v. Court of Appeals, et al., .R. 6o. 89:;8<, Fanuar! 0/ 1444/ 701SC'A 68>
S<ESTED ANSWE' No. The "ere #act that thea( authori:es the i"portation and trade o# #orein oods doesnot su##ice to decare it unconstitutiona on this round.
Whie the Constitution does not encourae the uni"itedentr! o# #orein oods/ services and invest"ents into thecountr!/ it does not prohi+it the" either. In #act/ it ao(s ane)chane on the +asis o# e2uait! and reciprocit!/ #ro(nin
on! in #orein co"petition that is un#air. =Coconut 2il Refiners Association, Inc., etc., et al., v. Torres, etc., et al., . '. No. 1756/Fu! 4/ 005 citin Tana)a v. An-ara, . '. No. 11845/ a! /1446/ 6 SC'A 18>
+7. I! $% $,hee,! $, !he powe !o !"# !h"! !he S!"!e/e 0ee !o %e(e'! !he %-/>e'!% o0 !"#"!$o,8 and it has +eenrepeated! hed that/ ine2uaities (hich resut #ro" a sininout o# one particuar cass o# ta)ation/ or e)e"ption/ in#rine noconstitutiona i"itation. (Commissioner of Internal Revenue, et al.,v. Santos, et al., 66 SC'A 916>
+. A ("w0-( !"# o, " ,ew %-/>e'!8 o ", $,'e"%e)!"# o, ", o() o,e8 )oe% ,o! $,!e0ee w$!h " 'o,!"'! o$&p"$% $!% o/($"!$o,/ (ithin the "eanin o# the constitution.Even thouh such ta)ation "a! a##ect particuar contracts/ as it"a! increase the de+t o# one person and essen the securit! o#another/ or "a! i"pose additiona +urdens upon one cass andreease the +urdens o# another/ sti the ta) "ust +e paiduness prohi+ited +! the constitution/ nor can it +e said that iti"pairs the o+iations o# an! e)istin contract in its true andea sense. (Tolentino v. Secretary of +inance, et al., an)companion cases, 75 SC'A 970>
+=. U,)e !he ,ow pe"$($, Co,%!$!-!$o,8 whee!hee $% ,e$!he " ",! ,o poh$/$!$o, /* %!"!-!e8 !he!"#$, powe o0 (o'"( oe,&e,!% &-%! /e )ee&e) !oe#$%! "(!ho-h Co,e%% &"* po$)e %!"!-!o* ($&$!"!$o,%",) -$)e($,e% in order to sa#euard the via+iit! and se#%su##icienc! o# oca overn"ent units +! direct! rantin the"enera and +road ta) po(ers. =City overnment of San Pa!lo,
La-una, et al., v. Reyes, et al., .'. No. 16608/ arch 5/ 1444>
+6. The Lo'"( Goe,&e,! Co)e e#p($'$!(*"-!ho$9e% po$,'e% ",) '$!$e%8 ,o!w$!h%!",)$, ",*e#e&p!$o, ",!e) /* ",* ("w o o!he %pe'$"( ("w !o$&po%e " !"# o, /-%$,e%%e% e,>o*$, " 0",'h$%e. Indicativeo# the eisative intent to carr! out the constitutiona "andateo# vestin +road ta) po(ers to oca overn"ent units/ theLoca overn"ent Code has (ithdra(n ta) e)e"ptions orincentives thereto#ore en,o!ed +! certain entities. (Cityovernment of San Pa!lo, La-una, et al., v. Reyes, et al., .'. No.
16608/ arch 5/ 1444>
3?. Philippine Lon- Distance Telephone Company,Inc., v. City of Davao, et al., etc., . '. No. 1B7896/ Auust /001/ uphed the authorit! o# the Cit! o# Davao/ a ocaovern"ent unit/ to i"pose and coect a oca #ranchise ta)+ecause the Loca overn"ent has (ithdra(n a ta)e)e"ptions previous! en,o!ed +! a persons and authori:edoca overn"ent units to i"pose a ta) on +usiness en,o!in a#ranchise ta) not(ithstandin the rant o# ta) e)e"ption tothe".
31. P"")$& %h$0! 0o& e#'(-%$e Co,e%%$o,"(powe !o )$e'! ",! o0 !"#$, powe !o (o'"( (e$%("!$e/o)$e%. The po(er to ta) is no oner vested e)cusive! onConress oca eisative +odies are no( iven directauthorit! to ev! ta)es/ #ees and other chares pursuant to Artice O/ section 5 o# the 1486 Constitution. =atan-as Po7erCorporation v. atan-as City, et al. . '. No. 15965/ and co"panioncase/ Apri 8/ 00B citin 6ational Po7er Corporation v. City ofCa!anatuan, . '. No. 1B4110/ Apri 4/ 007>
WARNING: The 0o((ow$, )o'!$,e $% "(e")* "/",)o,e).$o(er o# oca overn"ents to ta) is on! a deeated po(er. Locaovern"ents do not have the inherent po(er to ta) e)cept to thee)tent that such po(er "iht +e deeated to the" either +! the +asica( or statute. $resent!/ under Artice O o# the 1486 Constitution aenera deeation o# that po(er has +een iven in #avor o# ocaovern"ent units. =#anila lectric Company v. Province of La-una, etal ./ .'. No. 171754/ a! 5/ 1444>
3+. The 0-,)"&e,!"( ("w )$) ,o! $,!e,) !he )$e'!",! !o (o'"( oe,&e,! -,$!% !o /e "/%o(-!e ",)-,'o,)$!$o,"( / the constitutiona o+,ective o+vious! is toensure that/ (hie oca overn"ent units are +einstrenthened and "ade "ore autono"ous/ the eisature"ust sti see to it that
a. the ta)pa!er (i not +e over%+urdened or sadded(ith "utipe and unreasona+e i"positions
+. each oca overn"ent unit (i have its #air shareo# avaia+e resources
c. the resources o# the nationa overn"ent (i +eundu! distur+ed and
d. oca ta)ation (i +e #air/ uni#or" and ,ust. =#anilalectric Company v. Province of La-una, et al., .'. No. 171754/ a!
5/ 1444> NTES AND CENTS #anila lectric Company v.
Province of La-una, et al., .'. No. 171754/ a! 5/ 1444/re#erred tothe po(er as "ere! a deeated po(er hence the i"itations.
The author ho(ever hods that (hether the po(er is directrant or "ere! a deeated po(er/ the a+ove i"itations #indappication/ +ecause the po(er is su+,ect to such uideines andi"itations as Conress "a! provide.
. 33. The w$!h)"w"( o0 " !"# e#e&p!$o, %ho-() ,o!/e 'o,%!-e) "% poh$/$!$, 0-!-e ",!% o0 e#e&p!$o,0o& "(( !"#e%. Indeed/ the rant o# ta)in po(ers to ocaovern"ent units under the Loca overn"ent Code does nota##ect the po(er o# Conress to rant e)e"ptions to certainpersons/ pursuant to a decared nationa poic!. The eae##ect o# the constitutiona rant to oca overn"ents si"p!"eans that in interpretin statutor! provisions on "unicipata)in po(ers/ dou+ts "ust +e resoved in #avor o# "unicipacorporations. (Philippine Lon- Distance Telephone Company, Inc., v.
City of Davao, et al., etc., . '. No. 1B7896/ Auust / 001>
34. Whe, Co,e%% "ppoe) " po$%$o, that/ ?An!advantae/ #avor/ priviee/ e)e"ption/ or i""unit! rantedunder e)istin #ranchises/ or "a! herea#ter +e ranted/ shaipso #acto +eco"e part o# previous! rantedteeco""unications #ranchises and sha +e accordedi""ediate! and unconditiona! to the rantees o# such
#ranchises $rovided/ ho(ever/ That the #oreoin sha neitherapp! to nor a##ect provisions o# teeco""unications #ranchisesconcernin territor! covered +! the #ranchise/ the i#e span o#the #ranchise/ or the t!pe o# service authori:ed +! the#ranchise.@ =<nderscorin suppied> !hee w"% ,o $,!e,!$o,0o $! !o ope"!e "% " /(",;e! !"# e#e&p!$o, !o "((!e(e'o&&-,$'"!$o,% e,!$!$e%. App!in the rue o# strictconstruction o# a(s rantin ta) e)e"ptions and the rue thatdou+ts shoud +e resoved in #avor o# "unicipa corporations ininterpretin statutor! provisions on "unicipa ta)ation/ it (ashed that said provisions cannot +e considered as e)tendin its
appication to #ranchises such as that o# $LDT. (Philippine Lon-Distance Telephone Company, Inc., v. City of Davao, et al., etc ./ . '.No. 1B7896/ Auust / 001 "
35. Whe, ", $!e& o0 $,'o&e $% !"#e) $, !hePh$($pp$,e% ",) !he %"&e $,'o&e $% !"#e) $, ",o!he'o-,!*8 !h$% wo-() /e ;,ow, "% $,!e,"!$o,"( >-$)$'"()o-/(e !"#"!$o, (hich is the i"position o# co"para+e ta)es int(o or "ore states on the sa"e ta)pa!er in respect o# thesa"e su+,ect "atter and #or identica rounds. (Commissioner ofInternal Revenue v. S.C. 1ohnson an) Son, Inc., et al., .'. No.16105/ Fune 5/ 1444>
37. A !"# )e)-'!$o, is de#ined as a su+traction #roinco"e #or ta) purposes/ or an a"ount that is ao(ed +! a( toreduce inco"e prior to the appication o# the ta) rate toco"pute the a"ount o# ta) (hich is due.
A ta) deduction reduces the inco"e that is su+,ect to ta)in order to arrive at ta)a+e inco"e. =Commissioner of InternalRevenue v. Central Lu$on Dru- Corporation, . '. No. 1549B6/ Apri15/ 005>
S<ESTED ANSWE' No. There (as no ravea+use o# discretion +ecause a the chanes and "odi#ications"ade +! the &ica"era Con#erence Co""ittee (ere er"aneto su+,ects o# the provisions re#erred to it #or reconciiation.
The &ica"era Con#erence Co""ittee "ere! e)ercisedthe ,udicia! reconi:ed on%standin eisative practice o#ivin said con#erence co""ittee a"pe atitude #orco"pro"isin di##erences +et(een the Senate and the House. A!a3a)a uro Party List (etc." v. rmita, etc., et al., . '. No.198059/ Septe"+er 1/ 005 and co"panion cases citin Philippine1u)-es Association v. Par)o, . '. No. 105761/ Nove"+er 11/ 1447/6 SC'A 607 Tolentino v. Secretary of +inance, et al., . '. No.115B55/ Auust 5/ 144B/ 75SC'A 970
S<ESTED ANSWE' No. The -AT does not vioatethe proressive s!ste" o# ta)ation. The "andate to Conressis not to prescri+e +ut to evove a proressive s!ste" o#ta)ation. ther(ise/ saes ta)es (hich perhaps are the odest#or" o# indirect ta)es/ (oud have +een prohi+ited (ith theproca"ation o# the constitutiona provision. Saes ta)es are
aso reressive. . A!a3a)a uro Party List (etc." v. rmita, etc., et
al., . '. No. 198059/ Septe"+er 1/ 005 and co"panion cases citinTolentino v. Secretary of +inance, et al., . '. No. 115B55/ Auust 5/144B/ 75 SC'A 970
36. Wh"! $% " !"# "&,e%!* 2S<ESTED ANSWE' A ta) a"nest! is a enera
pardon or intentiona overooin +! the State o# its authorit! to
i"pose penaties on persons other(ise uit! o# evasion orvioation o# a revenue or a ta) a(. (Commissioner of InternalRevenue v. #aru!eni Corporation, .'. No. 176766/ Dece"+er 18/001>
NTES AND CENTSa. The p-po%e o0 !"# "&,e%!* is to
1> ive ta) evaders (ho (ish to reent a chance tostart a cean sate/ and to
> ive the overn"ent a chance to coectuncoected ta) #ro" ta) evaders (ithout havin to othrouh the tedious process o# a ta) case. (anas, 1r. v.
Court of Appeals, et al., .'. No. 10496/ 3e+ruar! 10/ 000 "
4?. D$%!$,-$%h !"# "&,e%!* 0o& !"# e#e&p!$o,.S<ESTED ANSWE'a. Ta) a"nest! is an i""unit! #ro" a cri"ina/ civi
and ad"inistrative ia+iities arisin #ro" nonpa!"ent o# ta)es=People v. Castane)a, .'. No. L%B9881/ Septe"+er 15/ 1488>WHILE a ta) e)e"ption is an i""unit! #ro" civi ia+iit! on!.It is an i""unit! or priviee/ a #reedo" #ro" a chare or+urden to (hich others are su+,ected. (+lorer v. Sheri)an, 8=:In). 9>, =? 6 =?@"
+. Ta) a"nest! appies on! to past ta) periods/hence o# retroactive appication (Castane)a, supra> WHILE ta)e)e"ption has prospective appication.
41. De0$,e !"# "o$)",'e ",) !"# e"%$o,.S<ESTED ANSWE' Ta) avoidance is the use o#
ea! per"issi+e "eans to reduce the ta) (hie ta) evasion isthe use o# iea "eans to escape the pa!"ent o# ta)es.
NTES AND CENTSa. T"# "o$)",'e 'o,,o!e% !he $,!e"!$o, o0 !hee
0"'!o%:1> the end to +e achieved/ i.e./ the pa!"ent o# ess
than that no(n +! the ta)pa!er to +e ea! due/ or the non%pa!"ent o# ta) (hen it is sho(n that a ta) is due
> an acco"pan!in state o# "ind (hich is descri+edas +ein ?evi@ on ?+ad #aith/@ ?(i#u/@ or @dei+erate and notaccidenta@ and
7> a course o# action or #aiure o# action (hich isuna(#u. =Commissioner of Internal Revenue v. The state ofeni-no P. To)a, 1r., , etc., . '. No. 1B6188/ Septe"+er 1B/00B>
S<ESTED ANSWE'a. The i#e+ood theor!+. Ta)es are not contractua o+iations +ut arise out
o# a dut! to/ and are the positive acts o# overn"ent/ to the"ain and en#orcin o# (hich the persona consent o# theindividua ta)pa!er is not re2uired. (Repu!lic v. #am!ulaoLum!er Co., B SC'A 9>
c. The overn"ent and the ta)pa!er are not "utua!creditors and de+tors o# each other and a cai" #or ta)es is no
such de+t/ de"and/ contract or ,ud"ent as is ao(ed to +eset%o##. (Caltex Philippines, Inc. v. Commission on Au)it, 08 SC'A69/ 659>
43. Co&pe,%"!$o, taes pace +! operation o# a(/(here the oca overn"ent and the ta)pa!er are in their o(nriht reciproca! de+tors and creditors o# each other/ and thatthe de+ts are +oth due and de"anda+e/ in conse2uence o# Artices 168 and 164 o# the Civi Code. (Domin-o v. arlitos, 8SC'A BB7>
44. I, '"%e o0 " !"# oep"*&e,!8 whee !he BIR%o/($"!$o, !o e0-,) o %e!o00 "$%e% 0o& !he &o&e,! !he!"# w"% p"$) -,)e !he p$,'$p(e o0 solutio indebeti .(Commissioner of Internal Revenue v. sso Stan)ar) astern, Inc,16 S'CA 79B>
45. B-! ,o!e Nestle Phil. v. Court of Appeals, et al.,G.R. No. 1341148 <-(* 78 +??1 (hich hed that in order #or therue on solutio in)e!eti to app! it is an essentia condition thatthe petitioner "ust #irst sho( that its pa!"ent o# the custo"sduties (as in e)cess o# (hat (as re2uired +! the a( at theti"e the su+,ect 19 i"portations o# "i and "i products (ere
"ade. <ness sho(n other(ise/ the disputa+e presu"ption o#
A'e%$!e '$!e% !he !"# e#e&p!$o, ",! $, PAGCOR%0",'h$%e "% 0o((ow%: The exemptions herein -rante) forearnin-s )erive) from the operations con)ucte) un)er thefranchise specifically from the payment of any tax, income, orother7ise, as 7ell as any form of char-es, fees or levies, shallinure to the benefit of and extend to corporation(s,association (s, agenc! (cies, or individual(s "ith "ho#the Corporation or operator has an! contractualrelationship in connection "ith the operations of the
casino (s authorized to be conducted under this$ranchise an) to those receivin- compensation or otherremuneration from the Corporation or operator as a result ofessential facilities furnishe) an)Bor technical services ren)ere)to the Corporation or operator. (emphasis supplie)"
The BIR )e,$e) !he '("$& o, !he o-,) !h"!PAGCOR $% e#e&p! o,(* 0o& )$e'! !"#e% ",) ,o! 0o&$,)$e'! !"#e% %o A'e%$!e &"* ,o! ""$( o0 !he e#e&p!$o,. I%!h$% 'oe'! 2
S<ESTED ANSWE' No. As the a( is (orded thee)e"ption #o(s to Acesite. The a( is cear that the
e)e"ption e)tends the e)e"ption to entities or individuas
deain (ith $AC'. =Commissioner of Internal Revenue v. Acesite (Philippines" /otel Corporation, . '. No. 1B645/ 3e+ruar!19/ 006>
NTES AND CENTS The a+ove hodin shoud +edi##erentiated #ro" Philippine Acetylene Co. v. Commissioner ofInternal Revenue, 0 SC'A 1059, (here the ta) e)e"ption did not#o( to private entities. =cited in A!aya v. !)ane, . '. No. 196414/3e+ruar! 1B/ 006>/ and in the #oo(in case o# Sil3air (Sin-apore"PT, Lt)., v. Commissioner of Internal Revenue, .'. No. 16754B/3e+ruar! 9/ 008.
treaties/ conventions/ and other internationa aree"ents #ortheir use and consu"ption Provi)e), ho7ever, That thecountr! o# said #orein internationa carrier or e)e"pt entitiesor aencies e)e"pts #ro" si"iar ta)es petroeu" productssod to $hiippine carriers/ entities or aencies@
taen on +oard aircra#t in the territor! o# one Contractin part!+!/ or on +eha# o#/ a desinated airine o# the otherContractin $art! and intended soe! #or use in the operationo# the areed services sha/ (ith the e)ception o# charescorrespondin to the service per#or"ed/ +e e)e"pt #ro" thesa"e custo"s duties/ inspection #ees and other duties orta)es i"posed in the territories o# the #irst Contractin $art! /even (hen these suppies are to +e used on the parts o# the ,ourne! per#or"ed over the territor! o# the Contractin $art! in(hich the! are introduced into or taen on +oard. The"aterias re#erred to a+ove "a! +e re2uired to +e ept under
S<ESTED ANSWE' Siair is not entited to ta)re#und or credit #or the #oo(in reasons
a. The e)cise ta) on aviation #ue is an indirect ta).The proper part! to 2uestion/ or see a re#und o#/ an indirectta) is the statutor! ta)pa!er/ the person on (ho" the ta) isi"posed +! a( and (ho paid the sa"e even i# he shi#ts the
+urden thereo# to another. =Philippine eothermal, Inc. v.Commissioner of Internal Revenue, .'. No. 15B08/ Fu! 4/ 005/
B95 SC'A 708/ 716%718> The NI'C provides that the e)ciseta) shoud +e paid +! the "anu#acturer or producer +e#orere"ova o# do"estic products #ro" pace o# production. Thus/$etron Corporation/ not Siair/ is the statutor! ta)pa!er (hichis entited to cai" a re#und +ased on Section 175 o# the NI'Co# 1446 and Artice B=> o# the Air Transport Aree"ent+et(een '$ and Sinapore.
Even i# $etron Corporation passed on to Siair the+urden o# the ta)/ the additiona a"ount +ied to Siair #or ,et
#ue is not a ta) +ut part o# the price (hich Siair had to pa!as a purchaser. Philippine Acetylene Co., Inc. v. Commissioner ofInternal Revenue, 16 $hi. B91/ B60 =1496>
+. Siair coud not see re#ue under #ace)a v.#acarai-, 1r., .'. No. 8841/ a! 71/ 1441/ 146 SC'A661.(hich uphed the cai" #or ta) credit or re#und +! theNationa $o(er Corporation =N$C> on the round that the N$Cis e)e"pt even #ro" the pa!"ent o# indirect ta)es.
In Commissioner of Internal Revenue v. PhilippineLon- Distance Telephone Company / .'. No. 1B070/Dece"+er 15/ 005/ B68 SC'A 91 the Supre"e Courtcari#ied the ruin in #ace)a v. #acarai-, 1r., vi$ It "a! +e so
that in #ace)a vs. #acarai-, 1r./ the Court hed that ane)e"ption #ro" ?all taxes@ ranted to the Nationa $o(erCorporation =N$C> under its charter incudes +oth direct andindirect ta)es.
An e)e"ption #ro" ?a ta)es@ e)cudes indirect ta)es/uness the e)e"ptin statute/ ie N$C*s charter/ is socouched as to incude indirect ta) #ro" the e)e"ption. The
a"end"ent under 'epu+ic Act No. 9745 enu"erated thedetais covered +! N$C*s e)e"ption. Su+se2uent!/ $.D. 780/"ade even "ore speci#ic the detais o# the e)e"ption o# N$Cto cover/ a"on others/ !oth )irect an) in)irect taxes on apetroeu" products used in its operation. $residentia DecreeNo. 478 N$C*s a"ended charter a"ended the ta) e)e"ption+! si"pi#!in the sa"e a( in enera ter"s. It succinct!e)e"pts N$C #ro" ?a #or"s o# ta)es/ duties/ #eesP@ Theuse o# the phrase ?a #or"s@ o# ta)es de"onstrates theintention o# the a( to ive N$C a the ta) e)e"ptions it has+een en,o!in +e#ore.
The e)e"ption ranted under Section 175 =+> o# theNI'C o# 1446 and Artice B=> o# the Air Transport Aree"ent+et(een '$ and Sinapore cannot/ (ithout a cear sho(in o#eisative intent/ +e construed as incudin indirect ta)es.Statutes rantin ta) e)e"ptions "ust +e construed instrictissimi &uris aainst the ta)pa!er and i+era! in #avor o#the ta)in authorit!/ and i# an e)e"ption is #ound to e)ist/ it"ust not +e enared +! construction. =Sil3air (Sin-apore" PT,Lt)., v. Commissioner of Internal Revenue, .'. No. 16754B/ 3e+ruar!9/ 008>
NATIONAL INTERNAL REVENUE CODE
INCOE TAXATION
1. In van-elista v. Collector, 10 $hi. 1B<, theSupre"e Court hed/ citin ertens/ that !he !e& p"!,e%h$p$,'(-)e% a s!ndicate/ roup/ poo/ ,oint venture or otherunincorporated orani:ation/ throuh or +! "eans o# (hich an!+usiness/ #inancia operation/ or venture is carried on.
a. The sharin o# ross returns does not o# itse#esta+ish a partnership/ (hether or not the persons sharinthe" have a ,oint or co""on riht or interest in an! propert!#ro" (hich the returns are derived. There "ust +e anun"istaa+e intention to #or" a partnership or ,oint venture.
(2!illos, 1r. v. Commissioner of Internal Revenue, 174 SC'A B79>+. There is no contri+ution or invest"ent o# additiona
capita to increase or e)pand the inherited properties/ "ere!continuin the dedication o# the propert! to the use to (hich ithad +een put +! their #ore+ears. =I!i).>
c. $ersons (ho contri+ute propert! or #unds to aco""on enterprise and aree to share the ross returns o#that enterprise in proportion to their contri+ution/ +ut (hosevera! retain the tite to their respective contri+ution/ are notthere+! rendered partners. The! have no co""on stoccapita/ and no co""unit! o# interest as principa proprietors in
the +usiness itse# #ro" (hich the proceeds (ere derived.=Ee"ents o# the La( o# $artnership +! 3o!d '. eche"/ nd Ed./Sec. 87/ p. 6B cited in Pascual v. Commissioner of Internal Revenue,199 SC'A 590>
3. The 'o&&o, ow,e%h$p o0 pope!* )oe% ,o!$!%e(0 'e"!e " p"!,e%h$p /e!wee, !he ow,e%/ thouh the!"a! use it #or purpose o# "ain ains/ and the! "a!/ (ithout+eco"in partners/ are a"on the"seves as to the"anae"ent and use o# such propert! and the appication o#the proceeds there#ro".. =Spurloc3 v,. ilson, 1B S.W. 797/ 1906o. App. 8;/ cited in Pascual v. Commissioner of Internal Revenue,
199 SC'A 590>
4. I,'o&e is ain derived and severed #ro" capita/#ro" a+or or #ro" +oth co"+ined. 3or e)a"pe/ to ta) a stocdividend (oud +e to ta) a capita increase rather than theinco"e. (Commissioner of Internal Revenue v. Court of Appeals, etal ./ .'. No. 108569/ Fanuar! 0/ 1444>
5. An insovent de+tor does not reai:e ta)a+einco"e #ro" the canceation or #oriveness . (Commissioner v.Simmons in Co., B7 3d 76 CCA 10 th>
7. The insovent de+tor reai:es inco"e resutin #ro"the canceation or #oriveness o# inde+tedness (hen he+eco"es sovent. (La3elan) rocery Co., v. Commissioner 79 &TA=3> 84>
. The G(o/"( %*%!e& o0 $,'o&e !"#"!$o, is as!ste" e"po!ed (here the ta) s!ste" vie(s indi##erent! the
ta) +ase and enera! treats in co""on a cateories o#ta)a+e inco"e o# the individua. (Tan v. )el Rosario, 1r., 76SC'A 7B/ 771>
=. The S'he)-(" %*%!e& o0 $,'o&e !"#"!$o, is as!ste" e"po!ed (here the inco"e ta) treat"ent varies and is"ade to depend on the ind or cateor! o# ta)a+e inco"e o#the ta)pa!er. (Tan v. )el Rosario, 1r., 9=: SCRA =9;, ==8"
S<ESTED ANSWE'a. the e)pense "ust +e ordinar! and necessar!+. it "ust have +een paid or incurred durin the
ta)a+e !ear dependent upon the "ethod o# accountin uponthe +asis o# (hich the net inco"e is co"puted.
c. it "ust +e supported +! receipts/ records or otherpertinent papers. =Commissioner of Internal Revenue v, Isa!elacultural Corporation, . '. No. 1671/ 3e+ruar! 1/ 006>
Who $% 'oe'!8 TG o BIR 2 E#p("$,.S<ESTED ANSWE' The &I' is correct. T
shoud have deducted the pro#essiona and ea #ees in the!ear the! (ere incurred in 005 and not in 009 +ecause atthe ti"e the services (ere rendered in 005/ there (as aread!
The accrua o# inco"e and e)pense is per"itted (hen the a%events test has +een "et. =I!i).>
c. A((ee,!% !e%!. This test re2uires
1> #i)in o# a riht to inco"e or ia+iit! to pa! and> the avaia+i i t! o# the reasona+e accuratedeter"ination o# such inco"e or ia+iit!.The test does not de"and that the a"ount o# such inco"e or
ia+iit! +e no(n a+soute!/ on! that a ta)pa!er has at his disposathe in#or"ation necessar! to co"pute the a"ount (ith reasona+eaccurac!.
The a%events test is satis#ied (here co"putation re"ainsuncertain i# its +asis is unchanea+e/ the test is satis#ied (here aco"putation "a! +e unno(n/ +ut is not as "uch as unno(a+e/(ithin the ta)a+e !ear. The a"ount o# ia+iit! does not have to +edeter"ined e)act!/ it "ust +e deter"ined (ith ?reasona+eaccurac!@ i"pies so"ethin ess than an e)act or co"pete!accurate a"ount.
The propriet! o# an accrua "ust +e ,uded +! the #act that ata)pa!er ne(/ or coud reasona+! +e e)pected to have no(n/ atthe cosin o# its +oos #or the ta)a+e !ear. Accrua "ethod o#accountin presents are! a 2uestion o# #act such that the ta)pa!er+ears the +urden o# proo# o# esta+ishin the accrua o# an ite" o#inco"e or deduction. =Commissioner of Internal Revenue v, Isa!elacultural Corporation, . '. No. 1671/ 3e+ruar! 1/ 006>
d. <nder the '"%h &e!ho) inco"e is to +e construed asinco"e #or ta) purposes on! upon actua receipt o# the cashpa!"ent. It is aso re#erred to as the ?cash receipts anddis+urse"ents "ethod@ +ecause +oth the receipt and dis+urse"ents
are considered. Thus/ inco"e is reconi:ed on! upon actua receipt
o# the cash pa!"ent +ut no deductions are ao(ed #ro" the cashinco"e uness actua! dis+ursed throuh an actua pa!"ent in cash.
11. Re-$%$!e% 0o "($) )e)-'!$o, o0 /") )e/!% 0o&o%% $,'o&e: a. There "ust +e an e)istin inde+tedness due to theta)pa!er (hich "ust +e vaid and ea! de"anda+e
+. The sa"e "ust +e connected (ith the ta)pa!er*strade/ +usiness or practice o# pro#ession c. The sa"e "ust not +e sustained in a transactionentered into +et(een reated parties d. The sa"e "ust +e actua! chared o## the +oos o#accounts o# the ta)pa!er as o# the end o# the ta)a+e !ear and e. The de+t "ust +e actua! ascertained to +e(orthess and uncoecti+e durin the ta)a+e !ear #. The de+ts are uncoecti+e despite diient e##orte)erted +! the ta)pa!er . Sec. 7B =E> =1>/ NI'C o# 1446 Sec. 7/'ev. 'es. No. 5%44 reiterated in 'ev. 'es. No. 5%00 PhilippineRefinin- Corporation v. Court of Appeals, et al., 9@? SCRA ??:
. ust have +een reported as receiva+es in theinco"e ta) return o# the current or prior !ears. =Sec. 107/ 'ev.'es. No. >
1+. Wh"! "e pe%o,"( ",) "))$!$o,"( e#e&p!$o,% 2S<ESTED ANSWE' These are the theoretica
persona/ ivin and #a"i! e)penses o# an individua ao(ed to+e deducted #ro" the ross or net inco"e o# an individuata)pa!er.
These are ar+itrar! a"ounts (hich have +een cacuated+! our a("aers to +e rouh! e2uivaent to the "ini"u" o#
su+sistence/ tain into account the persona status andadditiona 2uai#ied dependents o# the ta)pa!er. The! are #i)eda"ounts in the sense that the a"ounts have +eenpredeter"ined +! our a("aers and unti our a("aers"ae ne( ad,ust"ents on these persona e)e"ptions/ thea"ounts ao(ed to +e deducted +! a ta)pa!er are #i)ed aspredeter"ined +! Conress. Pansacola v. Commissioner ofInternal Revenue, . '. No. 154441/ Nove"+er 19/ 009 citin#a)ri-al an) Paterno v. Rafferty an) Concepcion, 78 $hi. B1B/ B18=1418>
13. C"p$!"( "%%e!% sha re#er to a rea properties hed+! a ta)pa!er/ (hether or not connected (ith his trade or+usiness/ and (hich are not incuded a"on the reaproperties considered as ordinar! assets. =Sec. .a/ 'ev.'es. No. 6%007>
The ter" ?capita assets@ "eans propert! hed +! theta)pa!er =(hether or not connected (ith his trade or +usiness>/
&<T DES NT INCL<DEa. Stoc in trade o# the ta)pa!er/ or
+. ther propert! o# a ind (hich (oud proper! +eincuded in the inventor! o# the ta)pa!er i# on hand at the coseo# the ta)a+e !ear/ or c. $ropert! hed +! the ta)pa!er pri"ari! #or sae tocusto"ers in the ordinar! course o# his trade or +usiness/ or d. $ropert! used in the trade or +usiness/ o# a character (hichis su+,ect to the ao(ance #or depreciation or rea propert!used in the trade or +usiness o# the ta)pa!er . Sec. 74 =A> =1>/NI'C o# 1446/ capitai:ed (ords/ nu"+erin and arrane"ent
suppied Sec. .a/ 'ev. 'es. No. 6%007
14. E#"&p(e% o0 '"p$!"( "%%e!%:a. Stoc and securities hed +! ta)pa!ers other than
deaers in securities +. Fe(er! not used #or trade and +usiness c. 'esidentia houses and ands o(ned and used assuch d. Auto"o+ies not used in trade and +usiness
e. $aintins/ scuptures/ sta"p coections/ o+,ects o#arts (hich are not used in trade or +usiness
#. Inherited are tracts o# aricutura and (hich (eresu+divided pursuant to the overn"ent "andate under andre#or"/ then sod to tenants. (Roxas v. Court of Tax Appeals, etc.L9@<;=, April 9?, 8E?>"
. ?'ea propert! used +! an e)e"pt corporation in itse)e"pt operations/ such as a corporation incuded in theenu"eration o# Section 70 o# the Code/ sha not +econsidered used #or +usiness purposes/ and there#oreconsidered as capita asset.@ =ast sentence/ 7rd par./ Sec. 7.+/'ev. 'es. No. 6%007>
h. ?'ea propert!/ (hether sine detached/to(nhouse/ or condo"iniu" unit/ not used in trade or +usiness
as evidenced +! a certi#ication #ro" the &arana! Chair"an or
#ro" the head o# ad"inistration/ in case o# condo"iniu" unit/to(nhouse or apart"ent/ and as vaidated #ro" the e)istinavaia+e records o# the &ureau o# Interna 'evenue/ o(ned +!an individua enaed in +usiness/ sha +e treated as capitaasset.@ =ast par./ Sec. 7.+./ 'ev. 'es. No. 6%007>
15.. E#"&p(e% o0 o)$,"* "%%e!% he,'e ,o! '"p$!"(
"%%e!%:a. The "achiner! and e2uip"ent o# a "anu#acturin
concern su+,ect to depreciation +. The tractors/ traiers and trucs o# a hauin co"pan!
c. The condo"iniu" +uidin o(ned +! a reat!co"pan! the units o# (hich are #or rent or #or sae
d. The (ood/ paint/ varnish/ nais/ ue/ etc. (hich arethe ra( "aterias o# a #urniture #actor!
e. Inherited parces o# and o# su+stantia areasocated in the heart o# etro ania/ (hich (ere su+dividedinto s"aer ots then sod on insta"ent +asis a#ter introducin
co"parative! vaua+e i"prove"ents not #or the purpose o#si"p! i2uidatin the estate +ut to "ae the" "ore saea+e the e"po!"ent o# an attorne!%in%#act #or the purpose o#deveopin/ "anain/ ad"inisterin and sein the ots saes"ade (ith #re2uenc! and continuit! annua saes inco"e #ro"the saes (as considera+e and the heir (as not a straner tothe rea estate +usiness. (Tua$on, 1r. v. Lin-a), @> SCRA 8:<"
#. Inherited aricutura propert! i"proved +!introduction o# ood roads/ concrete utters/ drainae andihtin s!ste"s converts the propert! to an ordinar! asset.The propert! #or"s part o# the stoc in trade o# the o(ner/
hence an ordinar! asset. This is so/ as the o(ner is no(enaed in the +usiness o# su+dividin rea estate. =Calasan$ v.Commissioner of Internal Revenue, 1BB SC'A at p. 96>
17. The !"# $% $&po%e) -po, '"p$!"( "$,% pe%-&e)!o h"e /ee, e"($9e) 0o& !he %"(e8 e#'h",e8 o o!he)$%po%$!$o, o0 e"( pope!* (o'"!e) $, !he Ph$($pp$,e%8'("%%$0$e) "% '"p$!"( "%%e!%. Sec. B =D> =1>/ NI'C o# 1446'evenue 'euations No. 6%007 has de#ined rea propert! ashavin ?the sa"e "eanin attri+uted to that ter" under ArticeB15 o# 'epu+ic Act No. 789/ other(ise no(n as the QCivilCo)e of the Philippines.5 =Sec. .c/ 'ev. 'es. No. 6%007>
1. T",%"'!$o,% 'oee) /* !he pe%-&e) '"p$!"("$,% !"# o, e"( pope!*: a. sae/ +. e)chane/ c. or other disposition/ incudin pacto )e retro saesand other #or"s o# conditiona saes . Sec. B =D> =1>/ NI'C o#1446/ nu"+erin and arrane"ent suppied
d. ?Sae/ e)chane/ or other disposition@ incudes tain+! the overn"ent throuh conde"nation proceedins.(utierre$ v. Court of Tax Appeals, et al., 101 $hi. 617F on$ales v.Court of Tax Appeals, et al., 11 $hi. 891>
S<ESTED ANSWE' No. The (ord ?ross@ "ust +eused in its pain and ordinar! "eanin. It is de#ined as ?(hoe/entire/ tota/ (ithout deduction.@ Thus/ the 0J shoud not +ededucted #or purposes o# co"putin the 5J ross receipts ta).
'eceipt "a! either +e actua or constructive. There isprior to the (ithhodin a constructive receipt o# the interest/other(ise there (oud +e no interest #ro" (here the 0J ta)"a! +e (ithhed #ro".
There is no dou+e ta)ation +ecause there are t(o indso# ta)es/ the 0J 3WT (hich is an inco"e ta) and the 5J'T (hich is a percentae ta). =Commissioner of InternalRevenue v. Citytrust Investment Phils., Inc., . '. No. 174689/Septe"+er 6/ 009 and co"panion case>
NTES AND CENTS
a. Co##issioner of 'nternal evenue v. %anila&oc)e! Club, 1?= Ph$(. =+1 @167? $% )$00ee,! 0o& Co##issioner of 'nternal evenue v. Cit!trust 'nvest#entPhils., 'nc., G. R. No. 136=78 Sep!e&/e +8 +??7 ",) 'o&p",$o, '"%e. ania Foce! Cu+ paid a"use"ent ta)es onits co""ission in the tota a"ount o# +ets caed (aer #unds and didnot incude the 5RJ o# the #und (hich (ent to the &oard on 'aces
and to the o(ners o# horses and ,oce!s. The Supre"e Court ruesthat the ross receipts o# ania Foce! Cu+ shoud not incude the5RJ +ecause athouh deivered to the Cu+/ such "one! has +eenespecia! ear"ared +! a( or reuation #or other persons.
ania Foce! does not app! +ecause (hat happened there(as ear"arin and not (ithhodin. Ear"arin is not the sa"e as(ithhodin. A"ounts ear"ared do not #or" part o# ross receipts+ecause these are +! a( or reuation reserved #or so"e personother than the ta)pa!er/ athouh deivered or received. n thecontrar!/ a"ounts (ithhed #or" part o# ross receipts +ecause thereare in constructive possession and not su+,ect to an! reservation/ the(ithhodin aent +ein "ere! a conduit in the coection process.=Commissioner of Internal Revenue v. Citytrust Investment Phils., Inc.,. '. No. 174689/ Septe"+er 6/ 009 and co"panion case>
1> 3WT is an inco"e ta) under Tite II o# the Code=Ta) on Inco"e> (hie 'T is a percentae ta) under Tite - o#the Ta) Code.
> $ercentae ta) is a nationa ta) "easured +! acertain percentae o# the ross sein price or ross vaue in"one! o# oods sod/ +artered or i"ported or o# the rossreceipts or earnins derived +! an! person enaed in the saeo# services (hie an inco"e ta) is a nationa ta) i"posed onthe net or ross inco"e reai:ed in a ta)a+e !ear.
7> Inco"e ta) is su+,ect to (ithhodin (hiepercentae is not. =Commissioner of Internal Revenue v.Citytrust Investment Phils., Inc., . '. No. 174689/ Septe"+er6/ 009 and co"panion case>
i"posed +einnin in the #ourth ta)a+e !ear i""ediate!#oo(in the !ear in (hich the corporation co""enced its+usiness operations. Sec. 6 =E> =1>/ NI'C o# 1446
The date o# co""ence"ent o# operations o# a thri#t +anis the date it (as reistered (ith the SEC or the date (hen the
Certi#icate o# Authorit! to perate (as issued to it +! theonetar! &oard/ (hichever co"es ater. =Sec. 9/ 'ev. 'es. No.B%45>
Cear! then. &C is entited to the race period o# #our!ears #ro" Fune 7/ 1444 (hen it (as authori:ed +! the &S$to operate as a thri#t +an +e#ore the CIT shoud +e appiedto it. =#anila an3in- Corporation v. Commissioner of InternalRevenue, . '. No. 198118/ Auust 9/ 009>
NTES AND CENTSa. The CIT ",) whe, %ho-() /e $&po%e) ",) !he
0o- @4 *e" "'e pe$o). ?A "ini"u" corporate inco"e ta) o#t(o percent =J> o# the ross inco"e as o# the end o# the ta)a+e
!ear/ as de#ined herein/ is here+! i"posed on a corporation ta)a+e
under this Tite/ +einnin on the #ourth ta)a+e !ear i""ediate!#oo(in the !ear in (hich such corporation co""enced its +usinessoperations/ (hen the "ini"u" corporate inco"e ta) is reater thanthe ta) co"puted under Su+section =A> o# this section #or the ta)a+e!ear.@ Sec. 6 =E> =1>/ NI'C o# 1446
+. Pe$o) whe, " 'opo"!$o, /e'o&e% %-/>e'! !o!he CIT. ?=5> Speci#ic rues #or deter"inin the period (hen acorporation +eco"es su+,ect to the CIT ="ini"u" corporateinco"e ta)> %
3or purposes o# the CIT/ the ta)a+e !ear in (hich +usinessoperations co""enced sha +e the !ear in (hich the do"esticcorporation reistered (ith the &ureau o# Interna 'evenue =&I'>.
3ir"s (hich (ere reistered (ith &I' in 144B and earier !earssha +e covered +! the CIT +einnin Fanuar! 1/ 1448. ) ) )@='ev. 'es. No. 4%48>
#anila an3in- Corporation v. Commissioner of InternalRevenue, . '. No. 198118/ Auust 9/ 009 did not app! 'ev.'es. No. 4%48 +ecause 'ev. 'es. No. B%45 speci#ica! re#ers tothri#t +ans.>
c. P-po%e o0 !he 0o- @4 *e" "'e pe$o). The
intent o# Conress reative to the CIT is to rant a #our =B7> G !earsuspension o# ta) pa!"ent to ne(! orani:ed corporations.Corporations sti startin their +usiness operations have to sta+ii:etheir venture in order to o+tain a stronhod in the industr!. It does notco"e as a surprise then (hen "an! co"panies reported osses intheir initia !ears o# operations.
Thus/ in order to ao( ne( corporations to ro( and deveop atthe initia staes o# their operations/ the a("ain +od! sa( the needto provide a race period o# #our !ears #ro" their reistration +e#orethe! pa! their "ini"u" corporate inco"e ta). =#anila an3in-Corporation v. Commissioner of Internal Revenue, . '. No. 198118/
Auust 9/ 009>
TRANSFER TAXES
1. The "ppo"( o0 !he 'o-! %$!!$, $, po/"!e8 o"% " %e!!(e&e,! !$/-,"( oe !he e%!"!e o0 !he )e'e"%e) $%,o! " &",)"!o* e-$e&e,! 0o !he 'o((e'!$o, o0 !hee%!"!e. The pro+ate court is deter"inin issues (hich are notaainst the propert! o# the decedent/ or a cai" aainst theestate as such/ +ut is aainst the interest or propert! riht(hich the heir/ eatee/ devisee/ etc. has in the propert!#or"er! hed +! the decedent.
The notices o# ev! (ere reuar! issued (ithin theprescriptive period.
The ta) assess"ent havin +eco"e #ina/ e)ecutor! anden#orcea+e/ the sa"e can no oner +e contested +! "eanso# a disuised protest. (#arcos, II v. Court of Appeals, et al ./ 67SC'A B6>
RETURNS AND WITHHOLDING
1. I,'o&e !"# e!-,% +ein p-/($' )o'-&e,!%/ unticontroverted +! co"petent evidence/ are co"petent evidence/are prima facie correct (ith respect to the entries therein.(Ropali Tra)in- v. 6LRC, et al., 49 SC'A 704/ 716>
+. A w$!hho()$, "e,! $% e#p($'$!(* &")epe%o,"((* ($"/(e -,)e !he T"# Co)e 0o !he p"*&e,! o0 !he!"# e-$e) !o /e w$!hhe()8 in order to co"pe the(ithhodin aent to (ithhod the ta) under an! and acircu"stances. In e##ect/ the responsi+iit! #or the coection o#the ta) as (e as the pa!"ent thereo# is concentrated uponthe person over (ho" the overn"ent has ,urisdiction.=3iipinas S!nthetic 3i+er Corporation v. Court o# Appeas/ et a./ .'.
Nos. 118B48 1B766/ cto+er 1/ 1444> The s!ste" #aciitatesta) coection.
3. A eo,eo-%(* w$!hhe() !he "&o-,! o0 15 0o&!he %e(($, p$'e o0 /oo;% "-!hoe) /* W whe, !he'oe'! "!e %ho-() h"e /ee, 1? o,(*. S$,'e W $% o-!o0 !he 'o-,!*8 A "pp($e) 0o " e0-,) o0 !he e#'e%%w$!hho()$, o0 5. "* A pope(* "pp(* 0o !he e0-,) 2
E#p("$,.S<ESTED ANSWE' Mes. In appications #or re#und/
the (ithhodin aent is a ta)pa!er +ecause i# he does not pa!the ta) sha +e coected #ro" hi". (Commissioner of InternalRevenue v. Procter % am!le Philippine #anufacturin- Corporation,
"e,! $% ,o! " !"#p"*e +ecause he is "ade to pa! the ta) (herehe #ais to (ithhod as a penat! and not that the ta) is due #ro" hi".=Commissioner of Internal Revenue v. Court of Appeals, et al ./ .'.
ANSWE' Mes. The intention o# the a( is todiscourae dea! in the pa!"ent o# ta)es due to the State andin this sense the surchare and interest chared are not pena+ut co"pensator! in nature G the! are co"pensation to theState #or the dea! in pa!"ent/ or #or the conco"itant tuse o#the #unds +! the ta)pa!er +e!ond the date he is supposed tohave paid the" to the State. =an3 of the Philippine Islan)s v.Commissioner of Internal Revenue, . '. No. 17600/ Fu! 6/ 009>
ANSWE' The ta)pa!er is correct. The setted rue isthat ood #aith and honest +eie# that one is not su+,ect to ta)on the +asis o# previous interpretation o# overn"ent aenciestased to i"pe"ent the ta)/ are su##icient ,usti#ication to deetethe i"position o# surchares. =#ichel 1. Lhuillier Pa7nshop, Inc. v.Commissioner of Internal Revenue, . '. No. 199689/ Septe"+er 11/
009>
TARIFF AND CUSTOS CODE
1. C-%!o&% )-!$e% )e0$,e). Custo"s duties is thena"e iven to ta)es on the i"portation and e)portation o#co""odities/ the tari## or ta) assessed upon "erchandisei"ported #ro"/ or e)ported to/ a #orein countr!. =6estle Phils.v. Court of Appeals, et al., .'. No. 17B11B/ Fu! 9/ 001>
+. S"0e-") &e"%-e% are e"erenc! "easures/
incudin tari##s/ to protect do"estic industries and producers
The CTA is vested (ith ,urisdiction to revie( decisions o#the Secretar! o# Trade and Industr! i"posin sa#euard"easures as provided under 'ep. Act No. 8800 the Sa#euardeasures Act =SA>. =Southern Cross Cement Corporation v. ThePhilippine Cement #anufacturers Corp., et al., . '. No. 1585B0/ Fu!
8/ 00B>The DTI Secretar! cannot i"pose the sa#euard
"easures i# the Tari## Co""ission does not #avora+!reco""end its i"position.
3. Wh"! $% &e", /* !he !e& e,!* $, C-%!o&%L"w 2
S<ESTED ANSWE' It has a tripe "eanin.a. the docu"ents #ied at the Custo"s house+. the su+"ission and acceptance o# the
docu"ents andc. Custo"s decaration #or"s or custo"s entr!
#or"s re2uired to +e acco"pished +! passeners o#inco"in vesses or passener panes as envisaed underSec. 505 o# the TCC$ =3aiure to decare +aae>.=1ar)ele$a v. People, .'. No. 19595/ 3e+ruar! 9/ 009>
4. A 0($h! %!ew")e%% "$e) 0o& S$,"poe.Upo, he "$"( %he w"% "%;e) whe!he %he h"% ",*!h$,!o )e'("e. She ",%wee) ,o,e8 ",) %he %-/&$!!e) heC-%!o&% B""e De'(""!$o, Fo& wh$'h %he"''o&p($%he) ",) %$,e) w$!h ,o!h$, o w$!!e, o, !he%p"'e 0o $!e&% !o /e )e'("e). Whe, he h",e /" w"%
S<ESTED ANSWE' No. Sec. 7901 does notde#ine a cri"e. It "ere! provides/ inter alia, the ad"inistrativere"edies (hich can +e resorted to +! the &ureau o# Custo"s(hen sei:in dutia+e artices #ound the +aae o# an!person arrivin in the $hiippines (hich is not incuded in theacco"pished +aae decaration su+"itted to the custo"sauthorities/ and the ad"inistrative penaties that such person
"ust pa! #or the reease o# such oods i# not i"ported contrar!to a(.
Such ad"inistrative penaties are independent o# thecri"ina ia+iit! #or s"uin that "a! +e i"posed under Sec.7901/ and other provisions o# the TCC (hich can on! +edeter"ined a#ter the appropriate cri"ina proceedins/prescindin #ro" the outco"e in an! ad"inistrative case that"a! have +een #ied and disposed o# +! the custo"sauthorities.
Indeed the second pararaph o# Sec. 505 provides thatnothin sha prevent the +rinin o# a cri"ina action aainst
the o##ender #or s"uin under Section 7901. =1ar)ele$a v.People, . '. No. 19595/ 3e+ruar! 9/ 009>
NTES AND CENTSa. D-!* o0 pe%o, "$$, $, !he Ph$($pp$,e%. A
person arrivin in the $hiippines (ith +aae containin dutia+eartices is +ound to decare the sa"e in a respects. In order to "eetthe convenience o# the traveers/ a si"pe and "ore e)peditious"ethod o# custo"s cearance is provided #or +aaes occup!in thepassae therein #or oods i"ported in the reuar "anner. ##iciaentr! #or"s and #or"s o# +aae decaration are suppied to thepasseners to +e #ied +e#ore the custo"s o##icer.
The traveer has the +urden o# carr!in #or(ard ite"s that have
to +e decared +e#ore e)a"ination o# the caro has +eun. Ade2uatereportin o# dutia+e "erchandise +ein +rouht into the countr! isa+soute! necessar! to the en#orce"ent o# custo"s a(s/ and #aiureto co"p! (ith those re2uisites is as conde"na+e as #aiure to pa!custo"s duties. =1ar)ele$a v. People, . '. No. 19595/ 3e+ruar! 9/009 citin various cases>
+. S&-($,8 )e0$,e). The act o# i"portin ore)portin an! artice contrar! to a(. Lea!/ it is de#ined as una(#ui"portation or e)portation. ?<na(#u I"portation. G An! person (hosha #rauduent! i"port or +rin into the $hiippines/ or assist in sodoin/ an! artice/ contrar! to a(/ or sha receive/ concea/ +u!/ se/or in an! "anner #aciitate the transportation/ concea"ent/ or sae o#
such artice a#ter i"portation/ no(in the sa"e to have +een
Sec. 7901 is a pena provision. It de#ines the cri"e o#s"uin and provides co"pound penaties o# raduated #ine andi"prison"ent +ased on the appraised vaues o# the i"ported articesto +e deter"ined in the "anner provided in the TCC.
Sec. 7901 (as desined to suppe"ent the e)istin provisionso# the TCC aainst the "eans eadin up to s"uin (hich "iht
render it +ene#icia +! a su+stantive and cri"ina state"ent separate!providin #or the punish"ent o# s"uin. =1ar)ele$a v. People, .'. No. 19595/ 3e+ruar! 9/ 009>
c. P-po%e o0 Se'. 37?1. The a( (as not intended to"ere into one and the sa"e o##ense a the "an! acts (hich arecassi#ied and punished +! di##erent penaties/ pena or ad"inistrative/+ut to eisate aainst the overt act o# s"uin itse#. This is"ani#ested +! the use o# the (ords ?#rauduent!@ and @contrar! to a(@in the a(. . =1ar)ele$a v. People, . '. No. 19595/ 3e+ruar! 9/009>
c. P"*&e,! $% ,o! " )e0e,%e $, %&-($,. ?Whenupon tria #or vioation o# this section/ the de#endant is sho(n to have
possession o# the artice in 2uestion/ possession sha +e dee"edsu##icient evidence to authori:e conviction/ uness the de#endant shae)pain the possession to the satis#action o# the court $rovided/ho(ever/ That pa!"ent o# the ta) due a#ter apprehension sha notconstitute a vaid de#ense in an! prosecution under this section.@ =astpar./ Sec. 7901/ TCC>
5. How $% %&-($, 'o&&$!!e) 2S<ESTED ANSWE' S"uin is co""itted +!
an! person (hoa. #rauduent! i"ports or +rins into the countr! an!
artice contrar! to a(
+. assists in so doin an! artice contrar! to a( or c. receives/ conceas/ +u!s/ ses or in an! "anner
#aciitates the transportation/ concea"ent or sae o# suchoods a#ter i"portation/ no(in the sa"e to have +eeni"ported contrar! to a(. =1ar)ele$a v. People, .'. No. 19595/3e+ruar! 9/ 009 citin Ro)ri-ue$ v. Court of Appeals, . '. No.11518/ Septe"+er 18/ 1445/ B8 SC'A 88/ 49>
NTES AND CENTSa. I&po!"!$o, consists o# +rinin an artice into the
countr! #ro" the outside. I"portation +eins (hen the conve!invesse or aircra#t enters the ,urisdiction o# the $hiippines (ith
intention to unoad therein.
+. Whe, -,("w0-( $&po!"!$o, $% 'o&p(e!e. In thea+sence o# a +ona #ide intent to "ae entr! and pa! duties (hen theprohi+ited artice enters the $hiippine territor!. I"portation isco"pete (hen the ta)a+e/ dutia+e co""odit! is +rouht (ithin thei"its o# the port o# entr!. Entr! throuh a custo" house is not theessence o# the act. =1ar)ele$a v. People, .'. No. 19595/3e+ruar! 9/ 009>
7. The Co((e'!o o0 C-%!o&% %$!!$, $, %e$9-e ",)0o0e$!-e po'ee)$,% h"% e#'(-%$e >-$%)$'!$o, !o he"",) )e!e&$,e "(( -e%!$o,% !o-'h$, o, !he %e$9-e ",)0o0e$!-e o0 )-!$"/(e oo)%. RTC% "e pe'(-)e) 0o&"%%-&$, 'o,$9",'e oe %-'h &"!!e% ee, !ho-hpe!$!$o,% o0 'e!$o"$8 poh$/$!$o, o &",)"&-%. (Theureau of Customs, et al., v. 2-ario, et al., .'. No. 178081/ arch0/ 000>
Wh"! $% !he "!$o,"(e 0o !h$% )o'!$,e 2S<ESTED ANSWE'a. 'eiona Tria Courts have no ,urisdiction to
repevin a propert! (hich is su+,ect to sei:ure and #or#eitureproceedins #or vioation o# the Tari## and Custo"s Codeother(ise/ actions #or #or#eiture o# propert! #or vioation o# theCusto"s a(s coud easi! +e under"ined +! the si"pe deviceo# repevin. =De la +uente v. De *eyra, et al., 10 SC'A B55>
+. The doctrine o# e)cusive custo"s ,urisdiction overcusto"s cases to the e)cusion o# the 'TCs is anchored uponthe poic! o# pacin no unnecessar! hindrance on theovern"ent*s drive/ not on! to prevent s"uin and other#rauds upon Custo"s/
c. +ut "ore i"portant!/ to render e##ective and
e##icient the coection o# i"port and e)port duties due theState/ (hich ena+es the overn"ent to carr! out the #unctionsit has +een instituted to per#or". (1ao, et al., v. Court of Appeals,et al., an) companion case, B4 SC'A 75/ B7>
d. The issuance +! reuar courts o# (rits o#prei"inar! in,unction in sei:ure and #or#eiture proceedins+e#ore the &ureau o# Custo"s "a! arouse suspicion that theissuance or rant (as #or consideration other than the strict"erits o# the case. =4uno v. Ca!re)o, B0 SC'A 65 007>
e. <nder the doctrine o# pri"ar! ,urisdiction/ the &ureauo# Custo"s has e)cusive ad"inistrative ,urisdiction to conduct
searches/ sei:ures and #or#eitures o# contra+and (ithout
inter#erence #ro" the courts. It coud conduct searches andsei:ures (ithout need o# a ,udicia (arrant e)cept i# the searchis to +e conducted in a d(ein pace.
Where an ad"inistrative o##ice has o+tained a technicae)pertise in a speci#ic su+,ect/ even the courts "ust de#er tothis e)pertise.
S<ESTED ANSWE' No. His re"ed! (as not (iththe 'TC +ut (ith the CTA/ as issues o# o(nership o# oods inthe custod! o# custo"s o##icias are (ithin the po(er o# theCTA to deter"ine.
The Coector o# Custo"s has e)cusive ,urisdiction oversei:ure and #or#eiture proceedins and tria courts are
precuded #ro" assu"in coni:ance over such "atters eventhrouh petitions #or certiorari/ prohi+ition or "anda"us.=Commissioner of Customs v. Court of Appeals, et al., . '. Nos.1110%05/ Fanuar! 71/ 009>
=. The '-%!o&% "-!ho$!$e% )o ,o! h"e !o poe !o!he %"!$%0"'!$o, o0 !he 'o-! !h"! !he "!$'(e% o, /o") "e%%e( wee $&po!e) 0o& "/o") o "e $,!e,)e) !o /e%h$ppe) "/o") /e0oe !he* &"* e#e'$%e !he powe !oe00e'! '-%!o&% %e"'he%8 %e$9-e%8 o "e%!% po$)e) /*("w ",) 'o,!$,-e w$!h !he ")&$,$%!"!$e he"$,%. (Theureau of Customs, et al., v. 2-ario, et al ./ .'. No. 178081/ arch
a. There is #raud+. The i"portation is a+soute! prohi+ited/ or c. The reease o# the propert! (oud +e contrar! to a(.
(Trans-lo!e International, Inc. v. Court of Appeals, et al., .'. No.1997B/ Fanuar! 5/ 1444>
1?. In A$nar v. Court of Tax Appeals, @> SCRA @8E/
reiterated in +arolan, 1r. v. Court of Tax Appeals, et al., 16
SC'A 48/ the Supre"e Court cari#ied that !he 0"-)'o,!e&p("!e) /* ("w &-%! /e "'!-"( ",) ,o! 'o,%!-'!$e.It "ust +e intentiona/ consistin o# deception/ (i#u! anddei+erate! done or resorted to in order to induce another toive up so"e riht.
11. Re-$%$!e% 0o 0o0e$!-e o0 $&po!e) oo)%:
a. Wron#u "ain +! the o(ner/ i"porter/ e)porteror consinee o# an! decaration or a##idavit/ or the (ron#u"ain or deiver! +! the sa"e person o# an! invoice/ etter orpaper G a touchin on the i"portation or e)portation o#"erchandise.
+. the #asit! o# such decaration/ a##idavit/ invoice/etter or paper and
c. an intention on the part o# the i"porterconsineeto evade the pa!"ent o# the duties due. (Repu!lic, etc., v. TheCourt of Appeals, et al ./ .'. No. 174050/ cto+er / 001>
S<ESTED ANSWE' No. The &ureau o# Custo"shavin #irst o+tained possession o# the vesse and its oodshas o+tained ,urisdiction to the e)cusion o# the tria courts.
When Cesar has i"peaded the vesse as a de#endant toen#orce his aeed "ariti"e ien/ in the 'TC/ he +rouht anaction in rem under the Code o# Co""erce under (hich thevesse "a! +e attached and sod.
Ho(ever/ the +asic operative #act is the actua orconstructive possession o# the res +! the tri+una e"po(ered+! a( to conduct the proceedins. This "eans that to ac2uire ,urisdiction over the vesse/ as a de#endant/ the tria court "ust
have o+tained either actua or constructive possession over it.Neither (as acco"pished +! the 'TC as the vesse (asaread! in the possession o# the &ureau o# Custo"s.=Commissioner of Customs v. Court of Appeals, et al., . '. Nos.1110%05/ Fanuar! 71/ 009>
C-%!o&% $% $, !he ,"!-e o0 " po'ee)$, in re# 8 i.e. directedaainst the res or i"ported oods and entais a deter"ination o# theeait! o# their i"portation. In this proceedin/ it is in eaconte"pation the propert! itse# (hich co""its the vioation and istreated as the o##ender/ (ithout re#erence (hatsoever to the characteror conduct o# the o(ner.
The issue is i"ited to (hether the i"ported oods shoud +e#or#eited and disposed o# in accordance (ith a( #or vioation o# theTari## and Custo"s Code. .(Trans-lo!e International, Inc. v. Court of
Appeals, et al ./ .'. No. 1997B/ Fanuar! 5/ 1444>3or#eiture o# sei:ed oods in the &ureau o# Custo"s is a
proceedin aainst the oods and not aainst the o(ner. = AsianTerminals, Inc. v. autistaRicafort, .'. No. 199401/ cto+er 6/009 citin Trans-lo!e"
REPUBLIC ACT NO. 11+58 CREATING THECOURT OF TAX APPEALS INCLUDING<URISDICTION OF THE CTA8 AS AENDED
1. Wh* w"% !he Co-! o0 T"# Appe"(% 'e"!e) 2S<ESTED ANSWE'a. To prevent dea! in the disposition o# ta) cases +!
the then Courts o# 3irst Instance =no( 'TCs>/ in vie( o# the
+aco o# civi/ cri"ina/ and cadastra cases accu"uatin inthe docets o# such courts and
+. To have a +od! (ith specia no(ede (hichordinar! Fudes o# the then Courts o# 3irst Instance =no('TCs>/ are not ie! to possess/ thus providin #or anade2uate re"ed! #or a speed! deter"ination o# ta) cases.='rsal v. Court of Tax Appeals, et al., 101 $hi. 04 Lacsamana, etal., etc., v. CTA, et al., 10 $hi. 471>
NTES AND CENTS
a. CTA %pe'$"($9e) 'o-!. &! the ver! nature o# its#unctions/ the CTA is a hih! speciai:ed court speci#ica! created #orthe purpose o# revie(in ta) and custo"s cases. it is dedicated
e)cusive! to the stud! and consideration o# revenue%reated
pro+e"s and has necessari! deveoped an e)pertise on the su+,ect.=F. $anani+an in Southern Cross Cement Corporation v. Cement#anufacturers Association of the Philippines, et al., . '. No. 1585B0/
Auust 7/ 005/ citin various cases in his separate opinion to thedecision on the "otion #or reconsideration>
+. Co-! o0 T"# Appe"(% $% ,o! oe,e) %!$'!(* /*!e'h,$'"( -(e% o0 e$)e,'e. =Sec. 8/ 'ep. Act No. 115> Whiethis "a! +e so rues o# procedure are not ends in the"seves +ut are
pri"ari! intended as toos in the ad"inistration o# ,ustice/ thepresentation o# the purchase receipts andor invoices is not "ereprocedura technicait! (hich "a! +e disrearded considerin that it isthe on! "eans +! (hich the CTA "a! ascertain and veri#! the trutho# the ta)pa!er*s cai"s. =Commissioner of Internal v. #anila #inin-Corporation, . '. No. 1570B/ Auust 71/ 005>
c. Co-! o0 T"# Appe"(% 0$,)$, o0 0"'! /$,)% !heS-pe&e Co-!. It is doctrina that the #actua #indins o# theCourt o# Ta) Appeas/ (hen supported +! su+stantia evidence/ (inot +e distur+ed on appea/ uness it is sho(n that it co""ittedross error in the appreciation o# #acts. =Commissioner of InternalRevenue v. #anila lectric Company, . '. No. 11999/ cto+er
10/ 006 citinCommissioner of Internal Revenue v. Court of Appeals/ .'. No.
1B0B7/ cto+er 1B/ 1448/ 48 SC'A 87/ 41 citin Commissioner ofInternal Revenue v. #itsu!ishi #etal Corp., .'. Nos. 5B404 and800B1/ Fanuar! / 1440/ 181 SC'A 1B/ 0 Philippine Refinin-Company v. Court Commissioner of Internal Revenue v. Court of
Appeals/ .'. No. 1B0B7/ cto+er 1B/ 1448/ 48 SC'A 87/ 41citin Commissioner of Internal Revenue v. #itsu!ishi #etal Corp.,.'. Nos. 5B404 and 800B1/ Fanuar! / 1440/ 181 SC'A 1B/ 0Philippine Refinin- Company v. Court of Appeals, .'. No. 11864B/a! 8/ 1449/ 59 SC'A 996/ 969>
Hence/ as a "atter o# practice and principe/ the Supre"e
Court (i not set aside the concusion reached +! the Court o# Ta) Appeas/ especia! i# a##ir"ed +! the Court o# Appeas as in thepresent case. 3or +! the nature o# its #unctions/ the ta) courtdedicates itse# to the stud! and consideration o# ta) pro+e"s andnecessari! deveops e)pertise thereon/ uness there has +een ana+use or i"provident e)ercise o# authorit! on its part. = I!i). citinCompa-nie +inanciere Sucres et Denrees v. Commissioner ofInternal Revenue/ .'. No. 17787B/ Auust 8/ 009/ B44 SC'A99B/ 994 Commissioner of Internal Revenue v. eneral +oo)s(Phils." Inc., .'. No. 1B796/ Apri B/ 007/ B01 SC'A 5B5/ 557.
S<ESTED ANSWE'. The ea re"ed! under theNI'C o# 1446 at the ,udicia eve (ith respect to re#und orrecover! o# ta) erroneous! or iea! coected/ is the #iin o#a suit or proceedin (ith the Court o# Ta) Appeas
a. +e#ore the e)piration o# t(o => !ears #ro" the dateo# pa!"ent o# the ta) reardess o# an! supervenin causethat "a! arise a#ter pa!"ent =nd par./ Sec. 4/ NI'C o# 1446>/ or
+. (ithin thirt! =70> da!s #ro" receipt o# the denia +!the Co""issioner o# the appication #or re#und or credit. =Sec.11/ '.A. No. 115>
3. The t(o => !ear period and the thirt! =70> da!period shoud +e appied on a (hichever co"es #irst +asis.Thus/ i# the 70 da!s is (ithin the !ears/ the 70 da!s appies/i# the !ear period is a+out to apse +ut there is no decision
!et +! the Co""issioner (hich (oud trier the 70%da!period/ the ta)pa!er shoud #ie an appea/ despite the a+senceo# a decision. (Commissioners, etc. v. Court of Tax Appeals, et al.,. R. 6o. >9?8>, #arch 8?, 8E>E, unrep."
4. Where the ta)pa!er is a corporation the t(o !earprescriptive period #ro" ?date o# pa!"ent@ #or re#und o# inco"eta)es shoud +e the date (hen the corporation #ied its #inaad,ust"ent return not on the date (hen the ta)es (ere paid ona 2uarter! +asis. (Philippine an3 of Communications v.Commissioner of Internal Revenue, et al., .R. 6o. 889<9;, 1anuary9>, 8EEE"
enera! speain it is the 3ina Ad,ust"ent 'eturn/ in(hich a"ounts o# the ross receipts and deductions have+een audited and ad,usted/ (hich is re#ective o# the resuts o#the operations o# a +usiness enterprise. It is on! (hen thereturn/ coverin the (hoe !ear/ is #ied that the ta)pa!er (i +ea+e to ascertain (hether a ta) is sti due or re#und can +ecai"ed +ased on the ad,usted and audited # iures. (an3 of thePhilippine Islan)s v. Commissioner of Internal Revenue, .R. 6o.8;;?@=, Au-ust 9>, 9<<8>
5. Wh"! $% !he /-)e, o0 !"#p"*e% %ee;$, !"#
e0-,)% o 'e)$!% 2
S<ESTED ANSWE' It has a(a!s +een the ruethat those seein ta) re#unds or credits +ear the +urden o#provin the #actua +asis o# their cai"s and o# sho(in/ +!(ords too pain to +e "istaen/ that the eisature intended toentite the" to such cai"s. = Atlas Consoli)ate) #inin- an)Development Corporation v. Commissioner of Internal Revenue, . '.No. 1B559/ arch 19/ 006/ See Commissioner of Internal Revenue
S<ESTED ANSWE'3irst/ a ,udicia cai" #or re#und or ta) credit in the CTA is
+! no "eans an oriina action/ +ut rather an appea +! (a! o#petition #or revie( o# a previous/ unsuccess#u ad"inistrativecai".
There#ore/ as in ever! appea or petition #or revie(/ apetitioner has to convince the appeate court that the 2uasi%
,udicia aenc! a Guo did not have an! reason to den! itscai"s.
Second/ cases #ied in the CTA are itiated )e novo.Thus/ a petitioner shoud prove ever! "inute aspect o# its case+! presentin/ #or"a! o##erin and su+"ittin its evidence tothe CTA.
Since it is crucia #or a petitioner in a ,udicia cai" #orre#und or ta) credit to sho( that its ad"inistrative cai" shoudhave +een ranted in the #irst pace/ part o# the evidence to +esu+"itted to the CTA "ust necessari! incude (hatever isre2uired #or the success#u prosecution o# an ad"inistrative
cai". = Atlas Consoli)ate) #inin- an) Development Corporation v.Commissioner of Internal Revenue, . '. No. 1B559/ arch 119/006>
. App($'"/$($!* o0 Proton Pilipinas Corporation vs.epublic, etc., G. R. No. 175?+8 O'!o/e 178 +??7. Thecase (as decided on #actua antecedents +e#ore '. A. No.48 (hich rants cri"ina ,urisdiction to the Court o# Ta) Appeas i# the vaue o# the ta) is $1 "iion or "ore.
Interpretin the provisions o# 'epu+ic Act No. 8B4/(hich provides that the civi action #or recover! o# civi ia+iit!
shoud +e ,oint! deter"ined in the cri"ina proceedin +! the
Sandian+a!an or appropriate courts/ the prohi+ition o#reservation o# the cri"ina aspect/ the Supre"e Court said thatta) coection cases "a! +e tried separate!/ and not +e#orethe Sandian+a!an in 'ep. Act No. 7014 cases. This is so+ecause/ 'ep. Act No. 7014 is sient on the de#inition o# civiia+iit! and the appication o# Art. 10B o# the 'evised $enaCode does not cover ta)es. Conse2uent!/ the Supre"e Court
rued that on the ta) coection case the 'TC (oud have ,urisdiction.
I,!epe!"!$o, /* !he "-!ho $, !he ($h! o0 Rep. A'!.6+=+. I# it is a cri"ina case coni:a+e +! the Sandian+a!an/then this court retains ,urisdiction/ (ith the civi ,urisdiction+ein coni:a+e +! the CTA or the o(er courts dependin onthe a"ount.
I# the issue is a pure! ta) case/ even i# it invoves casesconi:a+e +! the Sandian+a!an/ then ,urisdiction vests uponthe CTA or the o(er courts dependin on the a"ount o# theta).
Doe% !he RTC h"e >-$%)$'!$o, 2S<ESTED ANSWE' No. It is the Court o# Ta) Appeas that has e)cusive ,urisdiction.
In the case at +ar/ the assaied revenue reuationsand revenue "e"orandu" circuars are actua! ruins oropinions o# the CI' on the ta) treat"ent o# "otor vehicessod at pu+ic auction (ithin the SSEK to i"pe"ent Section1 o# '.A. No. 66 (hich provides that ?e)portation orre"ova o# oods #ro" the territor! o# the SSEK to the otherparts o# the $hiippine territor! sha +e su+,ect to custo"sduties and ta)es under the Custo"s and Tari## Code andother reevant ta) a(s o# the $hiippines.@ The! (ere issued
pursuant to the po(er o# the CI' under Section B o# theNationa Interna 'evenue Code/ vi$
Section B. $o(er o# the Co""issioner to InterpretTa) La(s and to Decide Ta) Cases.%% The po(er to interpretthe provisions o# this Code and other ta) a(s sha +e underthe e)cusive and oriina ,urisdiction o# the Co""issioner/su+,ect to revie( +! the Secretar! o# 3inance.
The po(er to decide disputed assess"ents/ re#unds o#interna revenue ta)es/ #ees or other chares/ penatiesi"posed in reation thereto/ or other "atters arisin under thisCode or other a(s or portions thereo# ad"inistered +! the&ureau o# Interna 'evenue is vested in the Co""issioner/su+,ect to the e)cusive appeate ,urisdiction o# the Court o#Ta) Appeas. =as a"ended +! the NI'C o# 1446/ emphasessupplie), Asia International Auctioneers, Inc., etc et al., .v. Parayno,1r., etc.,, et al., . '. No. 107BB5/ Dece"+er 18/ 006>
S<ESTED ANSWE' The Co""issioner o# Interna'evenue shoud a(a!s indicate to the ta)pa!er in cear andune2uivoca anuae (henever his action on an assess"ent2uestioned +! a ta)pa!er constitutes his #ina deter"ination onthe disputed assess"ent.
n the +asis o# his state"ent indu+ita+! sho(in thatthe Co""issioner*s co""unicated action is his #ina decisionon the contested assess"ent/ the arieved ta)pa!er (oudthen +e a+e to tae recourse to the ta) court at the opportuneti"e. Without needess di##icut!/ the ta)pa!er (oud +e a+e to
deter"ine (hen his riht to appea to the ta) court accrues.=Commissioner of Internal Revenue v. an3 of the Philippines Islan)s,. '. No. 17B09/ Apri 16/ 006 citin 2ceanic ireless 6et7or3,Inc. v. Commissioner of Internal Revenue, . '. No. 1B8780/ 4Dece"+er 005/ B66 SC'A 05/ 11%1/ citin Suri-ao lectric Co.,Inc. v. Court of Tax Appeals, . '. No. L%5B84/ 8 Fune 146B/ 56SC'A 57>
NTES AND CENTSa. Re"%o,% 0o !he -(e e-$$, CIR%
-,e-$o'"( (",-"e o, h$% "'!$o, o, !he po!e%!.1> It (oud o+viate a desire and opportunit! on the
part o# the ta)pa!er to continua! dea! the #inait! o# the
assess"ent G and/ conse2uent!/ the coection o# the a"ountde"anded as ta)es G +! repeated re2uests #or reco"putationand reconsideration.
> n the part o# the Co""issioner o# Interna'evenue/ this (oud encourae his o##ice to conduct a care#uand thorouh stud! o# ever! 2uestioned assess"ent andrender a correct and de#ine decision thereon in the #irstinstance.
7> This (oud aso deter the Co""issioner o#Interna 'evenue #ro" un#air! "ain the ta)pa!er rope inthe dar and specuate as to (hich action constitutes thedecision appeaa+e to the ta) court.
B> # reater i"port/ this rue o# conduct (oud "eeta pressin need #or #air pa!/ reuarit!/ and orderiness in
ad"inistrative action. . =Commissioner of Internal Revenue v.an3 of the Philippines Islan)s, . '. No. 17B09/ Apri 16/006 citin 2ceanic ireless 6et7or3, Inc. v. Commissioner ofInternal Revenue, . '. No. 1B8780/ 4 Dece"+er 005/ B66SC'A 05/ 11%1/ citin Suri-ao lectric Co., Inc. v. Court ofTax Appeals, . '. No. L%5B84/ 8 Fune 146B/ 56 SC'A
S<ESTED ANSWE'a. 3iin +! the &I' o# a civi suit #or coection o# the
de#icienc! ta) is considered a denia o# the re2uest #orreconsideration. =Commissioner of Internal Revenue v. 'nionShippin- Corporation, 185 SC'A 5B6>
+. An indication to the ta)pa!er +! the Co""issioner?in cear and une2uivoca anuae@ o# his #ina denia not theissuance o# the (arrant o# distraint and ev!. What is thesu+,ect o# the appea is the #ina decision not the (arrant o#distraint. (Commissioner of Internal Revenue v. 'nion Shippin-Corporation, 185 SC'A 5B6 "
c. A &I' de"and etter sent to the ta)pa!er a#ter hisprotest o# the assess"ent notice is considered as the #inadecision o# the Co""issioner on the protest. (Suri-ao lectricCo., Inc. v. Court of Tax Appeals, et al., 56 SC'A 57>
d. A etter o# the &I' Co""issioner reiteratin to ata)pa!er his previous de"and to pa! an assess"ent isconsidered a denia o# the re2uest #or reconsideration or
protest and is appeaa+e to the Court o# Ta) Appeas.(Commissioner v. Ayala Securities Corporation, 60 SC'A 0B>
e. 3ina notice +e#ore sei:ure considered asco""issioner*s decision o# ta)pa!er*s re2uest #orreconsideration (ho received no other response.Commissioner of Internal Revenue v. Isa!ela Cultural Corporation/
.'. No. 17510/ Fu! 11/ 001 hed that not on! is the Notice the
on! response received its content and tenor supports thetheor! that it (as the CI'*s #ina act reardin the re2uest #orreconsideration. The ver! tite e)press! indicated that it (as afinal notice prior to sei:ure o# propert!. The etter itse# cear!stated that the ta)pa!er (as +ein iven ?this LAST$$'T<NITM@ to pa! other(ise/ its properties (oud +esu+,ected to distraint and ev!.
S<ESTED ANSWE' The ta)pa!er shoud appea/+! (a! o# a petition #or revie(/ to the Court o# Ta) Appeas noton the round o# the denia o# the protest +ut on other "atterarisin under the provisions o# the Nationa Interna 'evenueCode. The actua issuance o# a (arrant o# distraint and ev! incertain cases cannot +e considered a #ina decision on adisputed assess"ent.
To +e a vaid decision on a disputed assess"ent/ the
decision o# the Co""issioner or his du! authori:edrepresentative sha =a> state the #acts/ the appica+e a(/ ruesand reuations/ or ,urisprudence on (hich such decision is+ased/ other(ise/ the decision sha +e void/ in (hich case thesa"e sha not +e considered a decision on the disputedassess"ent and =+> that the sa"e is his #ina decision. =Sec.
7.1.9/ 'ev. 'es. 1%44> These conditions are not co"pied (ith+! the "ere issuance o# a (arrant o# distraint and ev!.(Commissioner of Internal Revenue v. 'nion Shippin- Corp., 185SC'A 5B6 "
3urther"ore/ a "otion #or the suspension o# the
coection o# the ta) "a! +e #ied toether (ith the petition #or
a. Where the Co""issioner has not acted on thedisputed assess"ent a#ter a period o# 180 da!s #ro"su+"ission o# co"pete supportin docu"ents/ the ta)pa!erhas a period o# 70 da!s #ro" the e)piration o# the 180 da!period (ithin (hich to appea to the Court o# Ta) Appeas. =astpar./ Sec. 8 =e>/ NI'C o# 1446F Commissioner of Internal Revenuev. Isa!ela Cultural Corporation, .R. 6o. 8=@98<, 1uly 88, 9<<8"
+. Where the Co""issioner has not acted on anappication #or re#und or credit and the t(o !ear period #ro" theti"e o# pa!"ent is a+out to e)pire/ the ta)pa!er has to #ie hisappea (ith the Court o# Ta) Appeas +e#ore the e)piration o#t(o !ears #ro" the ti"e the ta) (as paid.
It is disheartenin enouh to a ta)pa!er to +e ept(aitin #or an inde#inite period #or the ruin/. It (oud "ae"atters "ore e)asperatin #or the ta)pa!er i# the doors o# ,ustice (oud +e cosed #or such a reie# unti a#ter theCo""issioner/ (oud have/ at his persona convenience/ ivenhis o sina. (Commissioner of Customs, et al, v. Court of Tax
Appeals, et al., .R. 6o. >9?8>, #arch 8?, 8E>E, unrep."
NI'C>?No appea taen to the CTA #ro" the decision o# the
Co""issioner o# Interna 'evenue or the Co""issioner o#Custo"s or the 'eiona Tria Court/ provincia/ cit! or"unicipa treasurer or the Secretar! o# 3inance/ the Secretar!o# Trade and Industr! and Secretar! o# Aricuture/ as the case"a! +e sha suspend the pa!"ent/ ev!/ distraint/ andor saeo# an! propert! o# the ta)pa!er #or the satis#action o# his ta)ia+iit! as provided +! e)istin a( $rovided/ ho(ever/ That(hen in the opinion o# the Court the coection +! thea#ore"entioned overn"ent aencies "a! ,eopardi:e the
interest o# the overn"ent andor the ta)pa!er the Court at
an! stae o# the proceedin "a! suspend the said coectionand re2uire the ta)pa!er either to deposit the a"ount cai"edor to #ie a suret! +ond #or not "ore than dou+e the a"ount(ith the Court.@ =Sec. 11/ 'ep. Act No. 115/ as a"ended +! Sec.4/'ep. Act No. 48 >
The Supre"e Court "a! en,oin the coection o# ta)esunder its enera ,udicia po(er +ut it shoud +e apparent that
the source o# the po(er is not statutor! +ut constitutiona.The Supre"e Court did not rant the provisiona re"ed!pra!ed #or in Southern Cross Cement Corporation v. ThePhilippine Cement #anufacturers Corp., et al., . '. No.1585B0/ Fu! 8/ 00B #or it (oud +e tanta"ount to en,oininthe coection o# ta)es/ a pere"ptor! ,udicia act (hich istraditiona! #ro(ned upon uness there is a cear statutor!+asis #or it. Evident is the cear eisative intent that thei"position o# sa#euard "easures/ despite the avaia+iit! o# ,udicia revie(/ shoud not +e en,oined not(ithstandin an!ti"e! appea o# the i"position. This so +ecause the
Sa#euard easures Act states that the #iin o# a petition #orrevie( +e#ore the CTA does not stop/ suspend/ or other(iseto the i"position or coection o# the appropriate tari## duties orthe adoption o# other appropriate sa#euard "easures.
14. Ge,e"( -(e: ?The rue is that in the a+sence o#accountin records o# a ta)pa!er/ his ta) ia+iit! "a! +edeter"ined +! esti"ation. The petitioner =Co""issioner o#Interna 'evenue> is not re2uired to co"pute such ta)ia+iities (ith "athe"atica e)actness. Appro)i"ation in thecacuation o# ta)es due is ,usti#ied. To hod other(ise (oud+e tanta"ount to hodin that si#u concea"ent is aninvinci+e +arrier to proo#.@ Commissioner of Internal Revenue v./antex Tra)in- Co., Inc. . '. No. 179465/ arch 71/ 005 citin
'nite) States v. 1ohnson, 714 <.S. 177 =14B7> ?Ho(ever/ therue does not app! (here the esti"ation is arrived at ar+itrari!and capricious!.@ Commissioner of Internal Revenue v. /antexTra)in- Co., Inc., citin 'nite) States v. Rin)s3opf, 105 <.S.B18=1881>
15. e",$, o0 /e%! e$)e,'e o/!"$,"/(e underSec. 9 =&>/ NI'C o# 1446. This "eans that the oriinadocu"ents "ust +e produced. I# it coud not +e produced/
secondar! evidence "ust +e adduced. =/antex Tra)in- Co., Inc.
v. Commissioner of Internal Revenue/ CA % .'. S$ No. B616/Septe"+er 70/ 1448>
NTES AND CENTSa. The %e'o,)"* e$)e,'e re#erred to are those that
"a! +e adduced usin the enera "ethods #or reconstructin ata)pa!er*s inco"e or the indirect approach to ta) investiation.
The ?+est evidence@ envisaed in Section 19 o# the 1466 NI'Cno( Sec. 9 =&>/NI'C o# 1446 ?incudes the corporate and accountin
records o# the ta)pa!er (ho is the su+,ect o# the assess"ent process/the accountin records o# other ta)pa!ers enaed in the sa"e ine o#+usiness/ incudin their ross pro#it and net pro#it saes.@=Commissioner of Internal Revenue v. /antex Tra)in- Co., Inc. . '.No. 179465/ arch 71/ 005 citin De Leon/ The 6ational InternalRevenue Co)e Annotate), p. 76>
?Such evidence aso incudes data/ record/ paper/ docu"ent oran! evidence athered +! interna revenue o##icers #ro" otherta)pa!ers (ho had persona transactions or #ro" (ho" the su+,ectta)pa!er received an! inco"e and record/ data/ docu"ent andin#or"ation secured #ro" overn"ent o##ices or aencies/ such as theSEC/ the Centra &an o# the $hiippines/ the &ureau o# Custo"s/ and
the ?Tari## and Custo"s Co""ission.@ =sic, Commissioner v. /antexTra)in- Co., Inc., supra> The a( ao(s the &I' access to areevant or "ateria records or data in the person o# the ta)pa!er. Itpaces no i"it or condition on the t!pe or #or" o# the "ediu" +!(hich the record su+,ect o# the order o# the &I' is ept.@ = I!i).>
$urpose o# the ?+est evidence o+taina+e@ rue underSec/ 9 =&>/ NI'C o# 1446. ?The purpose o# the a( is to ena+e the&I' to et at the ta)pa!er*s records in (hatever #or" the! "a! +eept.@ =Commissioner of Internal Revenue v. /antex Tra)in- Co., Inc.. '. No. 179465/ arch 71/ 005>
17. Se'. 7 @B o0 !he NIRC o0 166 "((ow% !he BIR !o&";e o "&e,) " !"# e!-, 0o& h$% ow, ;,ow(e)e oo/!"$,e) !ho-h !e%!$&o,* o o!hew$%e. Thus/ theCo""issioner o# Interna 'evenue investiates @an!circu"stance (hich ed hi" to +eieve that the ta)pa!er hadta)a+e inco"e arer than that reported. Necessari!/ thisin2uir! (oud have to +e outside o# the +oos +ecause the!supported the return as #ied. He "a! tae the s(orntesti"on! o# the ta)pa!er/ he "a! tae the testi"on! o# thirdparties he "a! e)a"ine and su+poena/ i# necessar!/ traders*and +roers* accounts and +oos and the ta)pa!er*s +oos o#accounts. The Co""issioner is not +ound to #oo( an! set o#patterns. The e)istence o# unreported inco"e "a! +e sho(n
+! an! particuar proo# that is avaia+e in the circu"stances o#the particuar situation. Commissioner of Internal Revenue v./antex Tra)in- Co., Inc. citin Camp!ell, 1r., v. uetersloh, 86 3.d868 =1491>
Citin its ruin in a previous case/ a ?<.S. appeate courtdecared that (here the records o# the ta)pa!er are "ani#est!inaccurate and inco"pete/ the Co""issioner "a! oo to
other sources o# in#or"ation to esta+ish inco"e "ade +! theta)pa!er durin the !ears in 2uestion. =I!i)., in turn citin 0enneyv. Commissioner, 111 3.d 76B>
1. The (ord assess"ent (hen used in connection(ith ta)ation/ "a! have "ore than one "eanin. oe'o&&o,(* !he wo) "%%e%%&e,! &e",% !he o00$'$"("(-"!$o, o0 " !"#p"*e% pope!* 0o p-po%e o0 !"#"!$o,.The "/oe )e0$,$!$o, o0 "%%e%%&e,! 0$,)% "pp($'"!$o, -,)e!"$00 ",) '-%!o&% !"#"!$o, "% we(( "% (o'"( oe,&e,!!"#"!$o,.
3or e"( pope!* !"#"!$o,8 !hee &"* /e " %pe'$"(&e",$, !o !he /-)e,% !h"! "e $&po%e) -po, e"(pope!$e% !h"! h"e /ee, /e,e0$!e) /* " p-/($' wo;%e#pe,)$!-e o0 " (o'"( oe,&e,!. It is so"eti"es caed aspecia assess"ent or a specia ev!. (Commissioner of InternalRevenue v. Pascor Realty an) Development Corporation, et al., .'.No. 18715/ Fune 4/ 1444>
Fo $,!e,"( ee,-e !"#"!$o, "%%e%%&e,! "% ("*$, "!"#. The uti"ate purpose o# an assess"ent to such aconnection is to ascertain the a"ount that each ta)pa!er is topa!. (Commissioner of Internal Revenue v. Pascor Realty an)Development Corporation, et al., .'. No. 18715/ Fune 4/ 1444>
1=. A, "%%e%%&e,! $% " ,o!$'e )-(* %e,! !o !he!"#p"*e wh$'h $% )ee&e) &")e o,(* whe, !he BIRe(e"%e%8 &"$(% o %e,)% %-'h ,o!$'e !o !he !"#p"*e.(Commissioner of Internal Revenue v. Pascor Realty an)Development Corporation, et al., .'. No. 18715/ Fune 4/ 1444>
16. Wh"! $% " %e(0"%%e%%e) !"# 2S<ESTED ANSWE' A ta) that the ta)pa!er hi"se#
assesses or co"putes and pa!s to the ta)in authorit!. It is ata) that se#%assessed +! the ta)pa!er (ithout the intervention
o# an assess"ent +! the ta) authorit! to create the ta) ia+iit!.
The Ta) Code #oo(s the pa!%as%!ou%#ie s!ste" o#ta)ation under (hich the ta)pa!er co"putes his o(n ta)ia+iit!/ prepares the return/ and pa!s the ta) as he #ies thereturn. The pa!%as%!ou%#ie s!ste" is a se#%assessin ta)return.
Interna revenue ta)es are se#%assessin. Dissent o# F.Carpio in Philippine 6ational 2il Company v. Court of Appeals, et al.,
. '. No. 104469/ Apri 9/ 005 and co"panion case citin Tupa$ v.'lep, 719 SC'A 118 =1444> in turn citin -itu and Acosta/ Tax La7an) 1urispru)ence, 1st edition/ 1446/ p. 96
A cear e)a"pe o# a se#%assessed ta) is the annuainco"e ta)/ (hich the ta)pa!er hi"se# co"putes and pa!s(ithout the intervention o# an! assess"ent +! the &I'. Theannua inco"e ta) +eco"es due and pa!a+e (ithout need o#an! prior assess"ent +! the &I'. The &I' "a! or "a! notinvestiate or audit the annua inco"e ta) return #ied +! theta)pa!er. The ta)pa!er*s ia+iit! #or the inco"e ta) does notdepend on (hether or not the &I' conducts such su+se2uentinvestiation or audit.
Ho(ever/ i# the ta)in authorit! is #irst re2uired toinvestiate/ and a#ter such investiation to issue the ta)assess"ent that creates the ta) ia+iit!/ then the ta) is nooner se#%assessed. =Dissent o# F. Carpio in Philippine 6ational2il Company v. Court of Appeals, et al., . '. No. 104469/ Apri 9/005 and co"panion case>
The ta)pa!er +an counse*s Dece"+er 10/ 1488 etter isnot a seasona+e protest +ecause it (as #ied thirt! =70> da!sa#ter receipt o# the assess"ent on cto+er 8/ 1488.=Commissioner of Internal Revenue v. an3 of Philippine Islan)s, .'. No. 17B09/ Apri 16/ 006>
NTES AND CENTS The state"ent/ ?Theta)pa!er sha +e in#or"ed in (ritin o# the a( and the #acts on
(hich the assess"ent is "ade other(ise the assess"entsha +e void@ is an a"end"ent to Sec. 60 =no( renu"+eredto Sec. 8> (hich too e##ect on! on Fanuar! 1/ 1448 uponthe e##ectivit! o# the Ta) 'e#or" Act o# 1446.
S<ESTED ANSWE'a. Three =7> !ears #ro" the ast da! (ithin (hich to #ie
a return or (hen the return (as actua! # ied/ (hichever is ater=Sec. 07/ NI'C o# 1446>. The CI' has three =7> !ears #ro" thedate o# actua #iin o# the ta) return to assess a nationainterna revenue ta) or to co""ence court proceedins #orthe coection thereo# (ithout an assess"ent. an3 ofPhilippine Islan)s (+ormerly +ar ast an3 an) Trust Company" v.Commissioner of Internal Revenue, . '. No. 16B4B/ arch 6/008
+. ten !ears #ro" discover! o# the #aiure to #ie the ta)return or discover! o# #asit! or #raud in the return Sec. =a>/
NI'C o# 1446> or c. (ithin the period areed upon +et(een the
overn"ent and the ta)pa!er (here there is a (aiver o# theprescriptive period #or assess"ent =Sec. =+>/ NI'C o# 1446>.
++. P-po%e o0 pe$o) o0 ($&$!"!$o,% $, !"#"!$o,. 3orthe purpose o# sa#euardin ta)pa!ers #ro" an! unreasona+ee)a"ination/ investiation or assess"ent/ our ta) a( providesa statute o# i"itations in the coection o# ta)es. Commissionerof Internal Revenue v. .+. oo)rich Phils, Inc., =no7 Sime Dar!yInternational Tire Co., Inc.>, et al., .'. No. 10B161/ 3e+ruar! B/1444/ 707 SC'A 5B9 Philippine 1ournalists, Inc. v. Commissioner of
Internal Revenue, . '. No. 1985/ Dece"+er 19/ 00B/ as (eas their assess"ents.
The a( prescri+in a i"itation o# actions #or the
coection o# the inco"e ta) is +ene#icia +oth to the
overn"ent and to its citi:ens to the overn"ent +ecauseta) o##icers (oud +e o+ied to act pro"pt! in the "ain o#assess"ent/ and to citi:ens +ecause a#ter the apse o# theperiod o# prescription citi:ens (oud have a #eein o# securit!aainst unscrupuous ta) aents (ho (i a(a!s #ind ane)cuse to inspect the +oos o# ta)pa!ers/ not to deter"ine theatter*s rea ia+iit!/ +ut to tae advantae o# ever! opportunit!
to "oest peace#u/ a(%a+idin citi:ens. Without such a eade#ense ta)pa!ers (oud #urther"ore +e under o+iation toa(a!s eep their +oos and eep the" open #or inspectionsu+,ect to harass"ent +! unscrupuous ta) aents. The a( onprescription +ein a re"edia "easure shoud +e interpreted ina (a! conducive to +rinin a+out the +ene#icent purpose o#a##ordin protection to the ta)pa!er (ithin the conte"pation o#the Co""ission (hich reco""end the approva o# the a(.Repu!lic of the Philippines v. A!la$a, 108 $hi. 1105/ 1108/ cited inan3 of Philippine Islan)s (+ormerly +ar ast an3 an) TrustCompany" v. Commissioner of Internal Revenue, . '. No. 16B4B/arch 6/ 008
+3. U,e"%o,"/(e $,e%!$"!$o, 'o,!e&p("!e% '"%e%whee !he pe$o) 0o "%%e%%&e,! e#!e,)% $,)e0$,$!e(*+ecause this deprives the ta)pa!er o# the assurance that it (inot oner +e su+,ected to #urther investiation #or ta)es a#terthe e)piration o# a reasona+e period o# ti"e. =Philippine1ournalists, Inc. v. Commissioner of Internal Revenue, . '. No.1985/ Dece"+er 19/ 00B (ith note to see Repu!lic v. A!la$a, 108$hi. 1105. 1108>
La(s on prescription shoud +e i+era! construed in#avor o# the ta)pa!er. 'eason #or the purpose o#
sa#euardin ta)pa!ers #ro" an unreasona+e e)a"ination/investiation or assess"ent/ our ta) a(s provide a statute o#i"itation on the coection o# ta)es. Thus/ the a( onprescription/ +ein a re"edia "easure/ shoud +e i+era!construed in order to a##ord such protection/ As a coroar!/ thee)ceptions to the a( on prescription shoud per#orce +e strict!construed. Philippine 1ournalists, Inc. v. Commissioner of InternalRevenue, . '. No. 1985/ Dece"+er 19/ 00B citin Commissionerof Internal Revenue v. .+. oo)rich Phils, Inc (no7 Sime Dar!yInternational Tire Co., Inc.",., et al., .'. No. 10B161/ 3e+ruar! B/1444/ 707 SC'A 5B9
The prescriptive period (as precise! intended to ivethe ta)pa!ers peace o# "ind. (Commissioner of Internal Revenuev. .+. oo)rich Phils., Inc., et al ./ .'. No. 10B161/ 3e+ruar! B/1444>
+4. D-$, <-($","% ($0e!$&e8 he /-%$,e%% "00"$%wee &","e) /* !he Ph$($pp$,e T-%! Co&p",* @Ph$(!-%!.She )$e) o, Ap$( 38 +??1.Two )"*% "0!e he )e"!h8Ph$(!-%!8 !ho-h $!% T-%! O00$'e8 0$(e) he I,'o&e T"#Re!-, 0o +???8 w$!ho-! $,)$'"!$, !h"! <-($"," )$e).
R-(e o, !he 'o,0($'!$, '("$&% o0 !he p"!$e%.S<ESTED ANSWE' I (oud rue in #avor o# the
heir.There (as no proper service o# the notice o# assess"ent
+ecause the death o# Fuiana auto"atica! severed the eareationship o# principa and aent +et(een her and $hitrust.The severed reationship coud not +e revived on the "ere #act
that $hitrust #ied her Ta) 'eturn t(o da!s a#ter her death.
$hitrust*s #aiure to #ie a notice o# death su+,ects it topena sanctions (hich do not incude the inde#inite toin o# theprescriptive period #or "ain de#icienc! ta) assess"ents/ orthe (aiver o# the notice re2uire"ent #or such assess"ents.=state of the late 1uliana Die$ *)a. )e a!riel v. Commissioner ofInternal Revenue, .'. No. 1555B1/ Fanuar! 6/ 00B>
S<ESTED ANSWE' ?Ta) assess"ents +! ta)e)a"iners are presu"ed correct and "ade in ood #aith. Theta)pa!er has the dut! to prove other(ise. In the a+sence o#proo# o# an! irreuarities in the per#or"ance o# duties/ anassess"ent du! "ade +! a &ureau o# Interna 'evenuee)a"iner and approved +! his superior o##icers (i not +edistur+ed. A presu"ptions are in #avor o# the correctness o#ta) assess"ents.@ =Commissioner of Internal Revenue v. an3 ofPhilippine Islan)s., / '. No. 17B09/ Apri 16/ 006 citin Sy Po v.Court of Appeals, . '. No. L%81BB9/ 18 Auust 1488/ 19B SC'A
005> in the per#or"ance o# pu+ic #unctions. =Commissioner ofInternal Revenue v. Tua$on, Inc., 167 SC'A 746>
c. The ieihood that the ta)pa!er (i have access to
the reevant in#or"ation Commissioner of Internal Revenue, supracitin 'nite) States v. Rexach, B8 3.d 10 =1467>. The certiorari(as denied +! the <nited States Supre"e Court on Nove"+er 14/1467>
d. The desira+iit! o# +osterin the record%eepinre2uire"ents o# the NI'C. =I!i).>
S<ESTED ANSWE' The ? prima facie correctnesso# a ta) assess"ent does not app! upon proo# that anassess"ent is utter! (ithout #oundation/ "eanin it is ar+itrar!
and capricious. Where the &I' has co"e out (ith a ?naedassess"ent@ i.e./ (ithout an! #oundation character/ thedeter"ination o# the ta) due is (ithout rationa +asis.@Commissioner of Internal Revenue v. /antex Tra)in- Co., Inc., / '.No. 179465/ arch 71/ 005 citin 'nite) States v. 1anis, B4 L. Ed.
d 10B9 =1469> B8 <S B77 =1469> In such a situation/ ?thedeter"ination o# the Co""issioner contained in a de#icienc!
notice disappears.@ Commissioner of Internal Revenue, supra citina <.S. Court o# Appeas ruin/ in Clar3 an) Clar3 v. Commissioner of
Internal Revenue, 99 3. d 948 =1454> ?Hence/ thedeter"ination +! the CTA "ust rest on a the evidenceintroduced and its uti"ate deter"ination "ust #ind support incredi+e evidence.@ Commissioner of Internal Revenue, supra
S<ESTED ANSWE'a. When the Co""issioner is prohi+ited #ro" "ain
the assess"ent/ or +einnin distraint/ or ev! or proceedin incourt and #or si)t! =90> da!s therea#ter
+. When the ta)pa!er re2uests #or and is ranted areinvestiation +! the co""issioner
c. When the ta)pa!er coud not +e ocated in theaddress iven +! hi" in the return #ied upon (hich the ta) is+ein assessed or coected
d. When the (arrant o# distraint and ev! is du! servedupon the ta)pa!er/ his authori:ed representative/ or a "e"+er
o# his househod (ith su##icient discretion/ and no propert!coud +e ocated and
e. When the ta)pa!er is out o# the $hiippines.NTES AND CENTSThe hodin in Commissioner of Internal Revenue v.
Court of Appeals, et al., .'. No. 11561/ 3e+ruar! 5/ 1444=Carnation case> that the (aiver o# the period #or assess"ent"ust +e in (ritin and have the (ritten consent o# the &I'Co""issioner is sti doctrina +ecause o# the provisions o#Sec. 7/ NI'C o# 1446 (hich provides #or the suspension o#the prescriptive period
+6. The %$,"!-e% o0 /o!h !he Co&&$%%$o,e ",)!he !"#p"*e8 "e e-$e) 0o " w"$e o0 !he pe%'$p!$epe$o)/ thus a uniatera (aiver on the part o# the ta)pa!erdoes not suspend the prescriptive period. Commissioner ofInternal Revenue v. Court of Appeals, et al., .'. No. 11561/3e+ruar! 5/ 1444 =Carnation case>
3?. The "'! o0 e-e%!$, " e$,e%!$"!$o,"(o,e )oe% ,o! %-%pe,) !he -,,$, o0 !he pe%'$p!$epe$o). The e-e%! 0o e$,e%!$"!$o, &-%! /e ",!e)/* !he CIR. The Supre"e Court decared that the +urden o#proo# that the re2uest #or reinvestiation had +een actua!ranted sha +e on the Co""issioner o# Interna 'evenue.Such rant "a! +e e)pressed in its co""unications (ith theta)pa!er or i"pied #ro" the action o# the Co""issioner orhis authori:ed representative in response to the re2uest #orreinvestiation. an3 of Philippine Islan)s (+ormerly +ar astan3 an) Trust Company" v. Commissioner of Internal Revenue, .'. No. 16B4B/ arch 6/ 008
S<ESTED ANSWE' Mes/ it (i prosper.a. The CTA has ,urisdict ion to deter"ine i# the
(arrant o# distraint and ev! issued +! the &I' is vaid and torue i# the Waiver o# the Statute o# Li"itations (as vaid!e##ected. This is so +ecause the CTA has e)cusive appeate ,urisdiction to revie( +! appea decisions o# the Co""issionero# Interna 'evenue in cases invovin ?other "atters arisinunder the Nationa Interna 'evenue Code or other a(sad"inistered +! the &ureau o# Interna 'evenue.@ Sec. 6 =a>
=1>. '. A. No. 115/ as a"ended +! '. A. No. 48> Thus it (asprevious! rued that the CTA had ,urisdiction to act on apetition to invaidate and annu the distraint orders o# theCo""issioner. Mnares%Santiao/ F. Philippine 1ournalists, Inc. v.Commissioner of Internal Revenue, . '. No. 1985/ Dece"+er 19/00B citin Panrto&a v. Davi), 111 $hi. 146 1 SC'A 908 =1491>
Lie(ise uphed +! the Supre"e Court (as the decision o# theCTA decarin severa (aivers e)ecuted +! the ta)pa!er asnu and void/ thus invaidatin the assess"ents issued +! the&I'. =I!i)., citin Commissioner of Internal Revenue v. Court of
+. The Waiver o# the Statute o# Li"itations is not vaid+ecause it did not speci#! a de#inite areed date +et(een the&I' and $FI/ (ithin (hich the #or"er "a! assess and coectrevenue ta)es. 3urther"ore/ the (aiver is aso de#ective#ro" the overn"ent side +ecause it (as sined on! +! a
revenue district o##icer/ and not the Co""issioner/ as sore2uired. 3ina!/ $FI (as not #urnished a cop! o# the (aiver.
c. The (aiver docu"ent is inco"pete and de#ectiveand thus the three%!ear prescriptive period (ithin (hich toassess (as not toed or e)tended and continued to run unti Apri 16/ 1448. Conse2uent!/ Assess"entDe"and No. 77%1%000656%4B issued on Dece"+er 4/ 1448 (as invaid +ecause it
(as issued +e!ond the three =7> !ear period. In the sa"e"anner/ the Warrant o# Distraint andor Lev! (hich $FIreceived on arch 8/ 000 is aso nu and void #or havin+een issued pursuant to an invaid assess"ent. =Philippine1ournalists, Inc. v. Commissioner of Internal Revenue, . '. No.1985/ Dece"+er 19/ 00B>
S<ESTED ANSWE'a. 'e2uest #or reconsideration (hich re#ers to a pea
#or re%evauation o# an assess"ent on the +asis o# e)istinrecords (ithout need o# additiona evidence. It "a! invove+oth a 2uestion o# #act or o# a( or +oth.
+. 'e2uest #or reinvestiation (hich re#ers to a pea#or re%evauation o# an assess"ent on the +asis o# ne(!%discovered evidence or additiona evidence that a ta)pa!erintends to present in the investiation. It "a! aso invove a2uestion o# #act or a( or +oth. =Commissioner of InternalRevenue v. Philippine lo!al Communication, Inc., . '. No. 1961B9/cto+er 71/ 009 citin 'ev. 'es. No. 1%85>
S<ESTED ANSWE' It is that t!pe o# protest ?(henthe ta)pa!er re2uests #or a reinvestiation (hich is ranted +!the Co""issioner@ =Sec. 7/ NI'C o# 1446>/ that suspends therunnin o# the statute o# i"itations #or coection o# the ta).=Commissioner of Internal Revenue v. Philippine lo!alCommunication, Inc., . '. No. 1961B9/ cto+er 71/ 009 citin Sec.
61/ no( Sec. 7/ NI'C o# 1446> When a ta)pa!er de"ands a
reinvestiation/ the ti"e e"po!ed in reinvestiation shoud +ededucted #ro" the tota period o# i"itation. Commissioner ofInternal Revenue, supra citin Repu!lic v. Lope$, 116 $hi. 565/ 5686 SC'A 599/ 598%594 =1497>
<ndou+ted!/ a reinvestiation/ (hich entais thereception and evauation o# additiona evidence/ (i tae "oreti"e than a reconsideration o# a ta) assess"ent (hich (i +e
i"ited to the evidence aread! at hand this ,usti#ies (h! the#or"er can suspend the runnin o# the statute o# i"itations oncoection o# the assessed ta)/ (hie the atter cannot.=Commissioner of Internal Revenue v. Philippine lo!alCommunication, Inc., . '. No. 1961B9/ cto+er 71/ 009 citin an3of Philippine Islan)s v. Commissioner of Internal Revenue, . '. No.174679/ 16 cto+er 005/ B67 SC'A 05/ 70%71>
34. A 'o&po&$%e $% " 'o,!"'! (here+! the parties/+! "ain reciproca concessions/ avoid a itiation or put anend to one aread! co""enced. =Art. 08/ Civi Code>
A co"pro"ise penat! coud not +e i"posed +! the
&I'/ i# the ta)pa!er did not aree. A co"pro"ise +ein/ +! itsnature/ "utua in essence re2uires aree"ent. The pa!"ent"ade under protest coud on! sini#! that there (as noaree"ent that had e##ective! +een reached +et(een theparties. =*)a. )e San A-ustin, et al., v. Commissioner of InternalRevenue/ . '. No. 178B85/ Septe"+er 10/ 001>
S<ESTED ANSWE' There are #our =B> prescriptiveperiods #or the coection o# an interna revenue ta)
a. Coection upon a #ase or #rauduent return or noreturn (ithout assess"ent. In case o# a #ase or #rauduentreturn (ith the intent to evade ta) or o# #aiure to #ie a return/ ?aproceedin in court #or the coection o# such ta) "a! +e #ied(ithout assess"ent/ at an! ti"e (ithin ten =10> !ears a#ter thediscover! o# the #asit!/ #raud or o"ission.@ Sec. =a>/ NI'Co# 1446>
+. Coection upon a #ase or #rauduent return or noreturn (ith assess"ent. An! interna revenue ta) (hich has+een assessed =+ecause the return is #ase or #rauduent (ithintent to evade ta) or o# #aiure to #ai a return>/ (ithin a periodo# ten =10> !ears #ro" discover! o# the #asit!/ #raud or o"ission
?&"* /e 'o((e'!e) /* )$%!"$,! o (e* o /* " po'ee)$, $,'o-! w$!h$, 0$e @5 *e"% 0o((ow$, !he "%%e%%&e,! o0 !he!"#.@ Sec. =c>/ in reation to Sec. =a> NI'C o# 1446/e"phasis suppied>
c. Coection upon an e)tended assess"ent. Wherea ta) has +een assessed (ith the period areed upon +et(eenthe Co""issioner and the ta)pa!er in (ritin =(hich shoud
initia! +e (ithin three =7> !ears #ro" the ti"e the return (as#ied or shoud have +een #ied>/ or an! e)tensions +e#ore thee)piration o# the period areed upon/ the !"# &"* /e'o((e'!e) /* )$%!"$,! o (e* o /* " po'ee)$, $, 'o-!w$!h$, !he pe$o) "ee) -po, $, w$!$, /e0oe !hee#p$"!$o, o0 !he 0$e @5 *e" pe$o). The period so areedupon "a! +e e)tended +! su+se2uent (ritten aree"ents"ade +e#ore the e)piration o# the period previous! areedupon.@ Sec. =d>/ in reation to Secs. =+> and 07/ NI'C o#1446/ e"phasis suppied>
d. Coection upon a return that is not #ase or#rauduent/ or (here the assess"ent is not an e)tendedassess"ent. ?E)cept as provided in Section / internarevenue ta)es sha +e assessed (ithin three =7> !ears a#terthe ast da! prescri+ed +! a( #or the #iin o# the return/ and,o po'ee)$, $, 'o-! w$!ho-! "%%e%%&e,! 0o !he'o((e'!$o, o0 %-'h !"#e% %h"(( /e /e-, "0!e !he e#p$"!$o,o0 %-'h pe$o) $rovided/ That in case (here a return is #ied+e!ond the period prescri+ed +! a(/ the three =7> !ear periodsha +e co"puted #ro" the da! the return (as #ied. 3orpurposes o# this Section/ a return #ied +e#ore the ast da!prescri+ed +! a( #or the #iin thereo# sha +e considered #iedon such ast da!.@ =Sec. 07/ NI'C o# 1446/ e"phasis suppied>
When the &I' vaid! issues an assess"ent (ithin thethree =7>%!ear period/ it has another three =7> !ears (ithin(hich to coect the ta) due +! distraint/ ev!/ or courtproceedin. The assess"ent o# the ta) is dee"ed "ade andthe three =7>%!ear period #or coection o# the assessed ta)+eins to run on the date the assess"ent notice had +eenreeased/ "aied or sent to the ta)pa!er. an3 of PhilippineIslan)s (+ormerly +ar ast an3 an) Trust Company" v.Commissioner of Internal Revenue, . '. No. 16B4B/ arch 6/008 citin PI v. Commissioner of Internal Revenue/ .'. No.174679/ 16 cto+er 005/ B67 SC'A 05/ %7>
a. Bo!h !he 0o&e Se'. +768 NIRC o0 16 ",)Se'.+++ o0 NIRC o0 166 )o ,o! e0e !o " e-(" e!-,.It is cear that in enactin Sec. / entited ?E)ceptions as to theperiod o# i"itation o# assess"ent and coection o# ta)es/@ the NI'Co# 1446 has ei"inated su+%pararaph c o# the #or"er Sec. 94 o# theNI'C/ aso entited ?E)ceptions as to the period o# i"itation o#assess"ent and coection o# ta)es.@ Said Sec. 94 =c>/ reads ?An!interna revenue ta) (hich has +een assessed (ithin the period o#
i"itation a+ove%prescri+ed "a! +e coected +! distraint or ev! or +!a proceedin in court (ithin three !ears #oo(in the assess"ent o#the ta).@
A perusa o# Sec. o# the NI'C is cear that it covers on!three scenarios on!. 1> No assess"ent (as "ade upon a #ase or#rauduent return or o"ission to #ie a return > an assess"ent (as"ade upon a #ase or #rauduent return or o"ission to #ie a return and7> an e)tended assess"ent issued (ithin a period areed upon +!the Co""issioner and the ta)pa!er. The sa"e scenarios are thosere#erred to in the #or"er Sec. 94 (hich provided #or a prescriptiveperiod #or coection o# three =7> !ears.
It is cear there#ore that neither Sec. nor the #or"er Sec.
94 provide #or an instance (here the assess"ent (as "ade upon a?reuar return@ or one that is not #ase or #rauduent/ or that there (asan aree"ent to e)tend the period #or assess"ent.
'esort shoud there#ore +e "ade to the three =7> !ear periodre#erred to in Sec. 07 o# the NI'C o# 1446 (hich reads/ ?E)cept asprovided in Section / interna revenue ta)es sha +e assessed(ithin three =7> !ears a#ter the ast da! prescri+ed +! a( #or the #iino# the return/ and ,o po'ee)$, $, 'o-! w$!ho-! "%%e%%&e,! 0o!he 'o((e'!$o, o0 %-'h !"#e% ) ) ) ? =paraphrasin and e"phasissuppied>
37. Wh"! $% %o(-!$o $,)e/e!$ "% "pp($e) !o !"#
'"%e% 2S<ESTED ANSWE' This is erroneous pa!"ent o#ta)es and occurs (hen the ta)pa!er pa!s under a "istae o##act/ as #or the instance in a case (here he is not a(are o# ane)istin e)e"ption in his #avor at the ti"e the pa!"ent (as"ade. Such pa!"ent is hed to +e not vountar! and there#ore/can +e recovered or re#unded. =Commissioner of Internal Revenuev. Acesite (Philippines" /otel Corporation, . '. No. 1B645/ 3e+ruar!19/ 006>
NTES AND CENTS Technicaities and eais"s/ho(ever e)ated/ shoud not +e "isused +! the overn"ent to eep"one! not +eonin to it/ there+! enrichin itse# at the e)pense o#
its a(%a+idin citi:ens. State Lan) Investment Corporation v.
Commissioner of Internal Revenue, . '. No. 161459/ Fanuar! 18/008 citin PI+amily Savin-s an3, Inc. v. Court of Appeals/ .'.No. 1B80/ Apri 1/ 000/ 770 SC'A 506.
<nder the principe o# solutio in)e!iti provided in Art. 15B/Civi Code/ ?I# so"ethin is received (hen there is no riht tode"and it/ and it (as undu! deivered throuh "istae/ theo+iation to return it arises.@ The &I' received so"ethin ?(henthere (as no riht to de"and it/@ and thus/ it has the o+iation to
return it. State Lan) Investment Corporation v. Commissioner ofInternal Revenue supra citin- Citi!an3, 6. A. v. Court of Appeals an)Commissioner of Internal Revenue/ .'. No. 106B7B/ cto+er 10/1446/ 80 SC'A B54/ in turn citin Ramie Textiles, Inc. v. #athay,Sr./ 84 SC'A 589 =1464>. It is an ancient principe that no one/ noteven the state/ sha enrich onese# at the e)pense o# another.Indeed/ si"pe ,ustice re2uires the speed! re#und o# the (ron!hed ta)es. =I!i).>
!he Co-! o0 T"# Appe"(% 2S<ESTED ANSWE' The #i in o# an
ad"inistrative cai" #or re#und (ith the &I'/ +e#ore #iin a case(ith the Court o# Ta) Appeas/ is necessar! #or the #oo(inreasons
a. To a##ord the Co""issioner an opportunit! tocorrect his errors or that o# su+ordinate o##icers. (on$ales v.Court of Tax Appeals, et al., 1B SC'A 64>
+. To noti#! the overn"ent that such ta)es have +een2uestioned and the notice shoud +e +orne in "ind inesti"atin the revenue avaia+e #or e)penditures. (erme&o v.
S<ESTED ANSWE' Mes. The #aiure to #irst #ie a(ritten cai" #or re#und or credit is not #ata to a petition #orrevie( invovin a disputed assess"ent (here an assess"ent(as disputed +ut the protest (as denied +! the &ureau o#Interna 'evenue.
To hod that the ta)pa!er has no( ost the riht toappea #ro" the ruin on the disputed assess"ent and re2uirehi" to #ie a cai" #or a re#und o# the ta)es paid as a conditionprecedent to his riht to appea/ (oud in e##ect re2uire o# hi"to o throuh a useess and needess cere"on! that (oudon! dea! the disposition o# the case/ #or the Co""issioner(oud certain! disao( the cai" #or re#und in the sa"e (a!
as he disao(ed the protest aainst the assess"ent. The a(/shoud not +e interpreted as to resut in a+surdities. (v)a. )eSan A-ustin., etc., v. Commissioner of Internal Revenue, .'. No.178B85/ Septe"+er 10/ 001 citin Roman Catholic Arch!ishop of
Ce!u v. Collector of Internal Revenue, B SC'A 64>NTES AND CENTS Re'o,'$($"!$o, . An
appication #or re#und or credit under Sec. 4 o# the NI'C o# 1446 isre2uired (here the case #ied +e#ore the CTA is a re#und case/ (hichis not pre"ised upon a disputed assess"ent. There is no need #or aprior appication #or re#und or credit/ i# the re#und is "ere! aconse2uence o# the resoution o# the &I'*s denia o# a protestedassess"ent.
ANSWE' Sec. 94 o# the 1466 NI'C =no( Sec. 69 o#the NI'C o# 1446> provides that an! e)cess o# the tota2uarter! pa!"ents over the actua inco"e ta) co"puted in thead,ust"ent or #ina corporate inco"e ta) return/ sha either =a>+e re#unded to the corporation/ or =+> "a! +e credited aainstthe esti"ated 2uarter! inco"e ta) ia+iities #or the 2uarters o#
the succeedin ta)a+e !ear. To ease the ad"inistration o# ta)coection/ these re"edies are in the aternative and the choiceo# one precudes the other. Since the &an has chosen the ta)credit approach it cannot an!"ore avai o# the ta) re#und.(Philippine an3 of Communications v. Commissioner of InternalRevenue, et al., .'. No. 110B/ Fanuar! 8/ 1444>
NTES AND CENTSa. The 'ho$'e8 $% $e, !o !he !"#p"*e8 whe!he !o
'("$& 0o e0-,) -,)e Se'. 7 o h"e $!% e#'e%% ta)esappied as ta) credit #or the succeedin ta)a+e !ear/ such eection isnot #ina. $rior veri#ication and approva +! the Co""issioner o#Interna 'evenue is re2uired. The avai"ent o# the re"ed! o# ta)
credit is not a+soute and "andator!. It does not con#er an a+soute
riht on the part o# the ta)pa!er to avai o# the ta) credit sche"e i# itso chooses. Neither does it i"pose a dut! on the part o# theovern"ent to sit +ac and ao( an i"portant #acet o# ta) coectionto +e at the soe contro and discretion o# the ta)pa!er. =Paseo Realty% Development Corporation v. Court of Appeals, et al., . '. No.11489/ cto+er 17/ 00B>
4?. Wh"! $% !he $eo'"/$($!* -(e $, '("$&% 0o
e0-,) ",) wh"! $% !he "!$o,"(e /eh$,) !h$% 2S<ESTED ANSWE' A corporation entited to a ta)
credit or re#und o# the e)cess esti"ated 2uarter! inco"eta)es paid has t(o options =1> to carr! over the e)cess creditor => to app! #or the issuance o# a ta) credit certi#icate or tocai" a cash re#und. I# the option to carr! over the e)cesscredit is e)ercised/ the sa"e sha +e irrevoca+e #or thatta)a+e period.
In e)ercisin its option/ the corporation "ust sini#! inits annua corporate ad,ust"ent return =+! "arin the option+o) provided in the &I' #or"> its intention either to carr! over
the e)cess credit or to cai" a re#und. To #aciitate ta)coection/ these re"edies are in the aternative and thechoice o# one precudes the other. Systra Philippines, Inc., v.Commissioner of Internal Revenue, . '. No. 16940/ Septe"+er1/ 006 citin Philippine an3 of Communications v. Commissionerof Internal Revenue/ 791 $hi. 419 =1444>
This is no(n as the irrevoca+iit! rue and ise"+odied in the ast sentence o# Section 69 o# the Ta) Code.The phrase ?such option sha +e considered irrevoca+e #orthat ta)a+e period@ "eans that the option to carr! over thee)cess ta) credits o# a particuar ta)a+e !ear can no oner+e revoed.
The rue prevents a ta)pa!er #ro" cai"in t(ice thee)cess 2uarter! ta)es paid =1> as auto"atic credit aainstta)es #or the ta)a+e 2uarters o# the succeedin !ears #or(hich no ta) credit certi#icate has +een issued and => as ata) credit either #or (hich a ta) credit certi#icate (i +e issuedor (hich (i +e cai"ed #or cash re#und. =Systra Philippines,Inc., supra citin De Leon/ Hector/ THE NATINAL INTE'NAL'E-EN<E CDE/ Seventh Edition/ 000/ p. B70>
shoud +e denied. nce the carr! over option (as "ade/actua! or constructive!/ it +eca"e #orever irrevoca+ereardess o# (hether the e)cess ta) credits (ere actua! or#u! utii:ed <nder Section 69 o# the Ta) Code/ a cai" #orre#und o# such e)cess credits can no oner +e "ade. Thee)cess credits (i on! +e appied ?aainst inco"e ta) due #orthe ta)a+e 2uarters o# the succeedin ta)a+e !ears.@
Despite the denia o# its cai" #or re#und/ S!stra doesnot ose the unappied ta) credits. The a"ount (i not +e#or#eited in #avor o# the overn"ent +ut (i re"ain in theta)pa!er*s account. $etitioner "a! cai" and carr! it over in
S<ESTED ANSWE' Where/ the corporationper"anent! ceases its operations +e#ore #u utii:ation o# theta) credits it opted to carr! over/ it "a! then +e ao(ed to
cai" the re#und o# the re"ainin ta) credits. In such a case/the re"ainin ta) credits can no oner +e carried over andthe irrevoca+iit! rue ceases to app!. Cessante ratione le-is,cessat ipse lex . =3ootnote no. 7/ Systra Philippines, Inc., v.Commissioner of Internal Revenue, . '. No. 16940/ Septe"+er1/ 006>
NTES AND CENTS The hodin in State Lan)Investment Corporation v. Commissioner of Internal Revenue, . '.No. 161459/ Fanuar! 18/ 008 that the ta)pa!er is entited to are#und +ecause durin the succeedin !ear there (as no ta) dueaainst (hich the e)cess ta) credits "a! +e appied is not doctrina.This is so +ecause it interpreted the provisions o# then Sec. 94 o# the
NI'C/ (hich did not provide #or the ?irrevoca+iit! rue@ no(contained in Sec. 69 o# the NI'C o# 1446.
4+. T"# 'e)$!8 )e0$,e). A ta) credit is notspeci#ica! de#ined in our Ta) Code/ +ut Art. 1 o# E 9de#ines a ta) credit as ?an! o# the credits aainst ta)es andorduties e2ua to those actua! paid or (oud have +een paid to
evidence (hich a ta) credit certi#icate sha +e issued +! theSecretar! o# 3inance or his representative/ or the &oard =o#Invest"ents>/ i# so deeated +! the Secretar! o# 3inance.@Ta) credits (ere ranted under E 9 as incentives toencourae invest"ents in certain +usinesses. A ta) creditenera! re#ers to an a"ount that "a! +e ?su+tracted direct!#ro" one*s tota ta) ia+i it!.@ Pilipinas Shell PetroleumCorporation v. Commissioner of Internal Revenue, . '. No.16548/ Dece"+er 1/ 006 citin arner/ ed./ &LAC;*S LAWDICTINA'M 1501 =8th ed./ 1444>
It is there#ore an ?ao(ance aainst the ta) itse#@Pilipinas Shell, supra cit in S"ith/ WEST*S TAO LAW
DICTINA'M 166%168 =1447>. or ?a deduction #ro" (hat iso(ed@ I!i)., citin ran and Tosti/ 'AN*S DICTINA'M 3 THE
LAW 1B =7rd ed./ 000>/ +! a ta)pa!er to the overn"ent. In'' 5%000/ ?$rescri+in the 'euations overnin theanner o# the Issuance o# Ta) Credit Certi#icates/ and theConditions #or their <se/ 'evaidation and Trans#er/@ issued+! then Secretar! o# 3inance Fose T. $ardo on Fu! 14/ 000.a ta) credit is de#ined as ?the a"ount due to a ta)pa!erresutin #ro" an overpa!"ent o# a ta) ia+iit! or erroneouspa!"ent o# a ta) due.@ =Id./ Section 1.A>
Ta) credit enera! re#ers to an a"ount that is
su+tracted direct! #ro" one*s tota ta) ia+iit!/ an ao(anceaainst the ta) itse#/ or a deduction #ro" (hat is o(ned.
A ta) credit reduces the ta) due/ incudin G(heneverappica+e G the inco"e ta) that is deter"ined a#ter app!inthe correspondin ta) rates to ta)a+e inco"e. =Commissionerof Internal Revenue v. Central Lu$on Dru- Corporation, . '. No.1549B6/ Apri 15/ 005>
43. T"# 'e)$! 'e!$0$'"!e @TCC8 )e0$,e)8 ",) $!%,"!-e. A certi#ication/ du! issued to the ta)pa!er na"edtherein/ +! the Co""issioner or his du! authori:ed
representative/ reduced in a &I' Accounta+e 3or" in
accordance (ith the prescri+ed #or"aities/ acno(edinthat the rantee%ta)pa!er na"ed therein is ea! entited ata) credit/ the "one! vaue o# (hich "a! +e used in pa!"entor in satis#action o# an! o# his interna revenue ta) ia+iit!=e)cept those e)cuded>/ or "a! +e converted as a cashre#und/ or "a! other(ise +e disposed o# in the "anner and inaccordance (ith the i"itations/ i# an!/ as "a! +e prescri+ed
+! the provisions o# these 'euations. =Pilipinas ShellPetroleum Corporation v. Commissioner of Internal Revenue, .'. No. 16548/ Dece"+er 1/ 006 citin '' 5%000/ ?$rescri+inthe 'euations overnin the anner o# the Issuance o# Ta) CreditCerti#icates/ and the Conditions #or their <se/ 'evaidation andTrans#er/@ issued +! then Secretar! o# 3inance Fose T. $ardo onFu! 14/ 000/ Sec. I/ &>
It is cear that a TCC is an undertain +! theovern"ent throuh the &I' or D3/ acno(edin that ata)pa!er is entited to a certain a"ount o# ta) credit #ro"either an overpa!"ent o# inco"e ta)es/ a direct +ene#itranted +! a( or other sources and instances ranted +! a(
such as on speci#ic unused input ta)es and e)cise ta)es oncertain oods. As such/ ta) credit is trans#era+e inaccordance (ith pertinent a(s/ rues/ and reuations.
There#ore/ the TCCs are i""ediate! vaid ande##ective a#ter their issuance. =Pilipinas Shell PetroleumCorporation, supra"
S<ESTED ANSWE' There are un"istaa+e#or"a and practica di##erences +et(een the t(o "odes.
3or"a!/ a ta) re#und re2uires a ph!sica return o# the su"erroneous! paid +! the ta)pa!er/ (hie a ta) credit invovesthe appication o# the rei"+ursa+e a"ount aainst an! su"that "a! +e due and coecti+e #ro" the ta)pa!er.
n the practica side/ the ta)pa!er to (ho" the ta) isre#unded (oud have the option/ a"on others/ to invest #orpro#it the returned su"/ an option not pro)i"ate! avaia+e i#the ta)pa!er chooses instead to receive a ta) credit.=Commissioner of Customs v. Philippine Phosphate +ertili$erCorporation, . '. No. 1BBBB0/ Septe"+er 1/ 00B>
NTES AND CENTS It "a! +e that there is no
essentia di##erence +et(een a ta) re#und and a ta) credit
since +oth are "oves o# recoverin ta)es erroneous! oriea! paid to the overn"ent. =Commissioner of Customs v.Philippine Phosphate +ertili$er Corporation, . '. No. 1BBBB0/Septe"+er 1/ 00B>
S<ESTED ANSWE' The cai" has not prescri+ed.Sec. 4 o# the Ta) Code/ as couched/ particuar! its statuteo# i"itations co"ponent/ is in conte)t intended to app! to suits#or an! nationa interna revenue ta) ?aeed to have +eenerroneous! or iea! assessed or coected/ or o# an! penat!cai"ed to have +een coected (ithout authorit!/ or o# an! su"
aeed to have e)cessive! or in an! "anner (ron#u!coected.@
Ana!:in the under!in reason +ehind the advancepa!"ent =to hep the overn"ent> "ade +! OMK it (oud +ei"proper to treat the sa"e as erroneous/ (ron#u or ieapa!"ent o# ta) (ithin the "eanin o# Sec. 4 o# the NI'C o#1446.
An avai"ent o# ta) credit due #or reasons other than theerroneous or (ron#u coection o# ta)es "a! have a di##erentprescriptive period. =Commissioner of Internal Revenue v. Philippine6ational an3, .'. No. 191446/ cto+er 5/ 005 citin
Commissioner of Internal Revenue v. The Philippine Life Insurance
Co., et al . .'. No. 10508/ a! 4/ 1445> A+sent an! speci#icprovision in the Ta) Code or specia a(s/ that period (oud +eten =10> !ears under Artice 11BB o# the Civi Code.=Commissioner of Internal Revenue v. Philippine 6ational an3,supra>
I% ABC 'oe'! 2S<ESTED ANSWE' No. A ta) re#und s in the
nature o# a ta) e)e"ption (hich "ust +e construed strictissimi &uris aainst the ta)pa!er. The ta)pa!er "ust presentconvincin evidence to su+stantiate a cai" #or re#und.Without an! docu"entar! evidenced on record/ A&C #aied todischare the +urden o# provin its riht to a ta) creditta)re#und. =+ar ast an3 % Trust Company v. Commissioner of
4. A %$&-(!",eo-% 0$($, o0 !he "pp($'"!$o, w$!h !heBIR 0o e0-,)'e)$! ",) !he $,%!$!-!$o, o0 !he 'o-! %-$!w$!h !he CTA $% "((owe). There is no need to (ait #or a &I'denia. 'EASNS
a. The positive re2uire"ent o# Section 70 NI'C =no(Sec. 4/ NI'C o# 1446>
+. The doctrine that dea! o# the Co""issioner inrenderin decision does not e)tend the pere"ptor! period#i)ed +! the statute
c. The a( #i)ed the sa"e period t(o !ears #or #iin acai" #or re#und (ith the Co""issioner under Sec. 0B/ par. 7/NI'C =no( Sec. 0B C/ NI'C o# 1446>/ and #or #iin suit incourt under Sec. 70/ NI'C =no( Sec. 4/ NI'C o# 1446>/unie in protests o# assess"ents under Sec. 4 =no( Sec.8/ NI'C o# 1446>/ (hich #i)ed the period =thirt! da!s #ro"receipt o# decision> #or appeain to the court/ thus cear!
i"p!in that the prior decision o# the Co""issioner isnecessar! to tae coni:ance o# the case. (Commissioner ofInternal Revenue v. an3 of Philippine Islan)s, etc. et al., CA.R. SP6o. =;8<9, Septem!er E, 8EE;F i!!s v. Collector of InternalRevenue, et al., 8<: Phil, 9=9F 1ohnston Lum!er Co. v. CTA, 8<8 Phil.8@8"
4=. The ",! o0 " e0-,) $% 0o-,)e) o, !he"%%-&p!$o, !h"! !he !"# e!-, $% "($)8 i.e. that the #actsstated therein are true and correct. =Commissioner of InternalRevenue v. Court of Tax Appeals, . '. No. 109911/ Fu! 1/ 144B/7B SC'A 7B8> Without the ta) return it (oud +e virtua! i"possi+e
to deter"ine (hether the proper ta)es have +een assessed and paid. A#ter a/ it is a)io"atic that a cai"ant has the +urden o# proo# toesta+ish the #actua +asis o# his or her cai" #or ta) credit or re#und.
Ta) re#unds/ ie ta) e)e"ptions/ are construed strict! aainst the
ta)pa!er . =Paseo Realty % Development Corporation v. Court of Appeals, et al., . '. No. 11489/ cto+er 17/ 00B>
Ho(ever/ in PI+amily Savin-s an3 v. Court of Appeals/
789 $hi. 614 79 SC'A 9B1 =000>/ re#und (as ranted/ despitethe #aiure to present the ta) return/ +ecause other evidence(as presented to prove that the overpaid ta)es (ere not
and the a"ount o# ta) (ithhed there#ro". =anco +ilipinoSavin-s an) #ort-a-e an3 v. Court of Appeals, et al., . '. No.15598/ arch 6/ 006>
NTES AND CENTSa. Poo0 o0 0"'! o0 w$!hho()$,. ?Sec. 10. Claim for
tax cre)it or refun). H =a> Cai"s #or Ta) Credit or 'e#und o# Inco"eta) deducted and (ithhed on inco"e pa!"ents sha +e iven duecourse on! (hen it is sho(n on the return that the inco"e pa!"ent
received has +een decared as part o# the ross inco"e and the #acto# (ithhodin is esta+ished +! a cop! o# the Withhodin Ta)State"ent du! issued +! the pa!or to the pa!ee sho(in the a"ountpaid and the a"ount o# the ta) (ithhed there#ro" xxx ='ev. 'es.No. 9%85/ as a"ended>
The docu"ent (hich "a! +e accepted as evidence o# the thirdcondition/ that is/ the #act o# (ithhodin/ "ust e"anate #ro" thepa!or itse#/ and not "ere! #ro" the pa!ee/ and "ust indicate thena"e o# the pa!or/ the inco"e pa!"ent +asis o# the ta) (ithhed/ thea"ount o# the ta) (ithhed and the nature o# the ta) paid. . =anco+ilipino Savin-s an) #ort-a-e an3 v. Court of Appeals, et al., . '.No. 15598/ arch 6/ 006>
S<ESTED ANSWE' A ta)pa!er needs to esta+ishnot on! that the re#und is ,usti#ied under the a(/ +ut aso thecorrect a"ount that shoud +e re#unded.
I# the atter re2uisite cannot +e ascertained (ithparticuarit!/ there is cause to den! the re#und/ or ao( it on!to the e)tent o# the su" that is actua! proven as due.
Ta) re#unds partae o# the nature o# ta) e)e"ptions andare thus construed strictissimi &uris aainst the person cai"inthe e)e"ption. The +urden in provin the cai" #or re#und
necessari! #as on the ta)pa!er. =+ar ast an3 Trust an)Company, etc., v. Commissioner of Internal Revenue, et al., . '. No.178414/ a! / 009>
S<ESTED ANSWE' What has to +e esta+ished/as a "atter o# evidence/ is that the a"ount souht to +ere#unded to the +an%trustee corresponds to the ta) (ithhedon the interest inco"e earned #ro" the e)e"pt e"po!ees*trust. The need to +e deter"inate is i"portant/ specia! i# the
+an trustee/ in the ordinar! course o# its +anin +usiness/earns interest inco"e not on! #ro" its invest"ents o#e"po!ees* trusts/ +ut on a (hoe rane o# accounts (hich donot en,o! the sa"e +road e)e"ption as e"po!ees* trusts.=+ar ast an3 Trust an) Company, etc., v. Commissioner of InternalRevenue, et al., . '. No. 178414/ a! / 009>
NTES AND CENTSa. E&p(o*ee% !-%! 0-,)8 )e0$,e). An e"po!ees*
trust #und is a trust esta+ished +! an e"po!er to provide retire"ent/pension/ or other +ene#its to e"po!ees % it is a separate ta)a+eentit! esta+ished #or the e)cusive +ene#it o# the e"po!ees.=Development an3 of the Philippines v. Commission on Au)it, BSC'A B54>
+. I,'o&e o0 e&p(o*ee% !-%! $% !"# e#e&p!. ?An!provision o# a( to the contrar! not(ithstandin/ the retire"ent+ene#its received +! o##icia and e"po!ees o# private #ir"s/ (hetherindividua or corporate/ in accordance (ith a reasona+e private+ene#it pan "aintained +! the e"po!er sha +e e)e"pt #ro" ata)es and sha not +e ia+e to a"end"ent/ ev! or sei:ure +! orunder an! ea or e2uita+e process (hatsoever e)cept to pa! a de+t
o# the o##icia or e"po!ee concerned to the private +ene#it pan orthat arisin #ro" ia+iit! i"posed in a cri"ina action* ) ) ) ? =Sec. 1/'ep. Act B416>
A ta)%e)e"pt e"po!ees* trust #und is re#erred to under theNI'C o# 1446 as a ?reasona+e private retire"ent pan/ (hich "eans?a pension/ ratuit!/ stoc +onus or pro#it%sharin pan "aintained +!an e"po!er #or the +ene#it o# so"e or a o# his o##icias ore"po!ees/ (herein contri+utions are "ade +! such e"po!er #or theo##icias or e"po!ees/ or +oth/ #or the purpose o# distri+utin to sucho##icias and e"po!ees the earnins and principa o# the #und thusaccu"uated/ and (herein it is provided in said pan that at no ti"esha an! part o# the corpus or inco"e o# the #und +e used #or/ or +e
diverted to/ an! purpose other than #or the e)cusive +ene#it o# thesaid o##icias or e"po!ees.@ Sec. 7 =&> =9 > =a>/ NI'C o# 1446
c. E#!e,! o0 e#e&p!$o,. The ta) e)e"ption en,o!ed +!e"po!ees* trust is a+soute irrespective o# the nature o# the ta). Itdoes not app! on! to the ta) on interest inco"e #ro" "one! "aretpace"ents/ +an deposits/ other deposit su+stitute instru"ents andovern"ent securit!/ +ecause the source o# the interest inco"e doesnot have an! e##ect on the e)e"ption en,o!ed +! e"po!ee*s trusts.=+ar ast an3 Trust an) Company, etc., v. Commissioner of InternalRevenue, et al., . '. No. 178414/ a! / 009>
5+. A /",;!-%!ee o0 e&p(o*ee !-%!% 0$(e) ",
"pp($'"!$o, 0o !he e0-,) o0 !"#e% w$!hhe() o, !he $,!ee%!
O, !he "/oe /"%$% w$(( !he "pp($'"!$o, 0o e0-,)po%pe 2S<ESTED ANSWE' No. The appication #or
re#und (i not prosper.The +an%trustee needs to esta+ish not on! that the
re#und is ,usti#ied under the a( =(hich is so +ecause inco"eso# e"po!ees* trusts are ta) e)e"pt>/ +ut aso the correcta"ount that shoud +e re#unded.
Ta) re#unds partae o# the nature o# ta) e)e"ptionsand are thus construed strictissimi &uris aainst the person orentit! cai"in the e)e"ption. The +urden in provin thea"ount to +e re#unded necessari! #as on the +an%trustee/and there is an apparent #aiure to do so.
A necessar! conse2uence o# the specia e)e"ptionen,o!ed aone +! e"po!ees* trusts (oud +e a necessar!sereation in the accountin o# such inco"e/ interest orother(ise/ earned #ro" those trusts #ro" that earned +! theother cients o# the +an%trustee. =+ar ast an3 an) TrustCompany, etc., v. Commissioner, etc., et al., .'. No. 178414/ a!
/ 009> The a"ounts that are the e)e"pt earnins o# thee"po!ee*s trust has not +een sho(n as the! have +eenco""ined (ith the interest inco"e o# the other cients o# the+an%trustee.
?1. The part! (ho desires to introduce as evidence suchvou"inous docu"ents "ust present =a> Su""ar! containin thetota a"ounts o# the ta) account or ta) paid #or the period invovedand a chronooica or nu"erica ist o# the nu"+ers/ dates anda"ounts covered +! the invoices or receipts and =+> a Certi#ication
o# an independent Certi#ied $u+ic Accountant attestin to thecorrectness o# the contents o# the su""ar! a#ter "ain ane)a"ination and evauation o# the vou"inous receipts and invoices.Such su""ar! and certi#ication "ust proper! +e identi#ied +! aco"petent (itness #ro" the accountin #ir".
. The "ethod o# individua presentation o# each and ever!receipt or invoice or other docu"ents #or "arin/ identi#ication andco"parison (ith the oriinas thereo# need not +e done +e#ore the
Court or the Co""issioner an!"ore a#ter the introduction o# thesu""ar! and C$A certi#ication. It is enouh that !he e'e$p!%8$,o$'e% ",) o!he )o'-&e,!% 'oe$, !he %"$) "''o-,!% op"*&e,!% &-%! /e pe&";e) /* !he p"!* 'o,'e,e) ",)%-/&$!!e) !o !he Co-! $, o)e !o /e &")e "''e%%$/(e !o !he")e%e p"!* whe,ee he%he )e%$e% !o 'he'; ",) e$0* !he'oe'!,e%% o0 !he %-&&"* ",) CPA 'e!$0$'"!$o,. Ho(ever/ theoriinas o# the said receipts/ invoices or docu"ents shoud +e read!#or veri#ication and co"parison in case dou+t on the authenticit! o#the particuar docu"ents presented is raised durin the hearin o#the case.@ =E"phasis suppied>
The Co-! o0 T"# Appe"(% ",!e) !he P1?87468+6'("$& 0o e0-,)8 o $, !he "(!e,"!$e 0o !he BIR !o $%%-e "!"# 'e)$!. I% !he Co-! o0 T"# Appe"(% 'oe'! 2
S<ESTED ANSWE' Mes. Section 94 o# theNationa Interna 'evenue Code o# 1489/ no( Sec. 69provides/ i# the su" o# the 2uarter! ta) pa!"ents "adedurin a ta)a+e !ear is not e2ua to the tota ta) due on theentire ta)a+e inco"e o# that !ear as sho(n in its #inaad,ust"ent return/ the corporation has the option to either=a> pa! the e)cess ta) sti due/ or =+> +e re#unded the e)cessa"ount paid. The returns su+"itted are ?"ere! pre%audited(hich consist "ain! o# checin "athe"atica accurac! o#the #iures in the return.@ A#ter such checin/ the purpose o#(hich +ein to ?insure pro"pt action on corporate annuainco"e ta) returns sho(in re#unda+e a"ounts arisin #ro"overpaid 2uarter! inco"e ta)es/@ ='evenue e"orandu"rder No. 7%69 dated Fune 11/ 1469> the re#und or ta) creditis ranted. =Commissioner of Internal Revenue v. #anila lectricCompany, . '. No. 11999/ cto+er 10/ 006>
LOCAL GOVERNENT CODE ON TAXATION
LOCAL TAXATION
1. The Lo'"( Goe,&e,! Co)e poh$/$!% (o'"(oe,&e,! -,$!% 0o& 'o((e'!$, e#'$%e !"#e% o, "!$'(e%
e,-&e"!e) -,)e !he NIRC8 ",) !"#e%8 0ee% o 'h"e% o,pe!o(e-& po)-'!%. =Sec. 177 h/ Loca overn"ent Code in
reation to the Ta) Code>. Whie the Ta) Code evies a ta) on a2uarr! resources/ reardess o# oriin/ (hether e)tracted #ro"pu+ic or private ands/ the Loca overn"ent Code authori:esthe oca overn"ent unit to i"pose such ta)es on those taen#ro" pu+ic ands. Thus/ 2uarr! resources e)tracted #ro"
private ands are ta)a+e under the NI'C and not +! ocaovern"ent units. =The Province of ulacan, et al., v. The Court of Appeals, etc., et al., 44 SC'A BB>
+. The p$&"* e"%o, 0o !he w$!h)"w"( o0 !"#e#e&p!$o, p$$(ee% ",!e) !o oe,&e,! ow,e) ",)'o,!o((e) 'opo"!$o,% and a other units o# overn"ent(as that such priviee resuted to serious ta) +ase erosionand distortions in the ta) treat"ent o# si"iar! situatedenterprises/ hence resutin in the need #or these entities toshare in the re2uire"ents o# deveop"ent/ #isca or other(ise/+! pa!in the ta)es and other chares due the". =Philippine
Ports Authority v. City of Iloilo, . '. No. 104641/ Fu! 1B/ 007>
S<ESTED ANSWE' No. Philippine Lon- DistanceTelephone Company, Inc., v. City of Davao, et al., etc ./ . '.No. 1B7896/ Auust / 001/ uphed the authorit! o# the Cit!o# Davao/ a oca overn"ent unit/ to i"pose and coect aoca #ranchise ta) +ecause the Loca overn"ent Code has(ithdra(n a ta) e)e"ptions previous! en,o!ed +! a personsand authori:ed oca overn"ent units to i"pose a ta) on+usiness en,o!in a #ranchise ta) not(ithstandin the rant o#ta) e)e"ption to the".
S<ESTED ANSWE' A&C is correct. Condo"iniu"corporations are enera! e)e"pt #ro" oca +usiness ta)ationunder the Loca overn"ent Code/ irrespective o# an! ocaordinance that sees to decare other(ise.
O Cit!/ is authori:ed under the Loca overn"ent Code/to i"pose a ta) on +usiness/ (hich is de#ined under the Codeas @trade or co""ercia activit! reuar! enaed in as a"eans o# iveihood or (ith a vie( to pro#it.@ &! its ver! naturea condo"iniu" corporation is not enaed in +usiness/ andan! pro#it that it derives is "ere! incidenta/ hence it "a! not+e su+,ect to +usiness ta)es. =amane , etc. v. A LepantoCon)ominium Corporation, . '. No. 15B447/ cto+er 5/ 005>
S<ESTED ANSWE' No. I# an order or a( such asTa) rdinance No. 6488 is invaid/ then it does not ea!e)ist/ there shoud +e no occasion or need to a"end it. CocaCola ottlers Philippines, Inc. v. City of #anila, et al., . '. No.1595/ Fune 6/ 009 citin People v. Lim, 108 $hi. 1041 =1490>/
hence Ta) rdinance No. 8011 is aso invaid and cannot +een#orced.
S<ESTED ANSWE' The #unda"enta principes o#rea propert! ta)ation are
a. Appraisa at current and #air "aret vaue
+. Cassi#ication #or assess"ent on the +asis o# actuause
c. Assess"ent on the +asis o# uni#or" cassi#icationd. Appraisa/ assess"ent/ ev! and coection sha
not +e et to a private persone. Appraisa and assess"ent sha +e e2uita+e.NTES AND CENTS 'ea properties sha +e
appraised at the current and #air "aret vaue prevaiin in the ocait!(here the propert! is situated and cassi#ied #or assess"ent purposeson the +asis o# its actua use. = Allie) an3in- Corporation, etc., v.Jue$on City overnment, et al., . '. No. 15B19/ cto+er 11/ 005>
+. Wh"! $% !he 0"$ &";e! "(-e o0 pope!$e% 2S<ESTED ANSWE' 3air "aret vaue is the price
at (hich a propert! "a! +e sod +! a seer (ho is notco"peed to se and +ouht +! a +u!er (ho is not co"peedto +u!/ tain into consideration a uses to (hich the propert!is adopted and "iht in reason +e appied.
The criterion esta+ished +! the statute conte"pates ah!pothetica sae. Hence/ the +u!ers need not +e actua ande)istin purchasers. = Allie) an3in- Corporation, etc., v. Jue$onCity overnment, et al., . '. No. 15B19/ cto+er 11/ 005 citin
Army an) 6avy Clu!, #anila v. Trini)a), BB $hi. 787 >
NTE In #i)in the vaue o# rea propert!/ assessors have toconsider a the circu"stances and ee"ents o# vaue and "uste)ercise prudent discretion in reachin concusions. Allie) an3in-Corporation, etc., v. Jue$on City overnment, et al., . '. No.15B19/ cto+er 11/ 005 citin Reyes v. Alman$or, 149 SC'A 7/76 =1441>>
Pep""!$o, o0 0"$ &";e! "(-e%:a. The cit! or "unicipa assessor sha prepare a schedue
o# #air "aret vaues #or the di##erent casses o# rea propert! situatedin their respective Loca overn"ent <nits #or the enact"ent o# anordinance +! the san--unian concerned and
+. The schedue o# #air "aret vaues sha +e pu+ished in a
ne(spaper o# enera circuation in the province/ cit! or "unicipait!
concerned or the postin in the provincia capito or other paces asre2uired +! a(. (Lope$ v. City of #anila, et al., .'. No. 16174/3e+ruar! 14/ 1444>
Popo%e) 0"$ &";e! "(-e% o0 e"( pope!* $, " (o'"(oe,&e,! -,$! "% we(( "% !he o)$,",'e 'o,!"$,$, !he%'he)-(e &-%! /e p-/($%he) $, 0-(( #or three =7> consecutive da!sin a ne(spaper o# oca circuation/ (here avaia+e/ (ithin ten =10>da!s o# its approva/ and posted in at ease t(o => pro"inent paces
in the provincia capito/ cit!/ "unicipa or !aran-ay ha #or a"ini"u" o# three =7> consecutive (ees. (+i-uerres v. Court of Appeals, et al,. .'. No. 11416/ arch 5/ 1444>
S<ESTED ANSWE'a. Saes Ana!sis Approach. The saes price paid in
actua "aret transactions is considered +! tain into accountvaid saes data accu"uated #ro" a"on the 'eistrar o#Deeds/ notaries pu+ic/ appraisers/ +roers/ deaers/ +ano##icias/ and various sources stated under the Locaovern"ent Code.
+. Inco"e Capitai:ation Approach. The vaue o# aninco"e%producin propert! is no "ore than the return derived#ro" it. An ana!sis o# the inco"e produced is necessar! inorder to esti"ate the su" (hich "iht +e invested in thepurchase o# the propert!.
c. 'eproduction cost approach is a #or"a approachused e)cusive! n appraisin "an%"ade i"prove"ents suchas +uidins and other structures/ +ased on such data as"aterias and a+or costs to reproduce a ne( repica o# thei"prove"ent.
The assessor uses an! or a o# these approaches inana!:in the data athered to arrive at the esti"ated #air"aret vaue to +e incuded in the ordinance containin theschedue o# #air "aret vaues. = Allie) an3in- Corporation, etc.,v. Jue$on City overnment, et al., . '. No. 15B19/ cto+er 11/005 citin Loca Assess"ent 'euations No. 1%4>
S<ESTED ANSWE' No. The proviso +eincontrar! to pu+ic poic! and #or restrainin trade is not vaid #orthe #oo(in reasons
a. It "andates an e)cusive rue in deter"inin the#air "aret vaue and departs #ro" the esta+ished proceduressuch as the saes ana!sis approach/ the inco"e capitai:ationapproach and the reproduction approach provided under therues i"pe"entin the statute. It undu! inter#eres (ith theduties statutori! paced upon the oca assessor +! co"pete!dispensin (ith his ana!sis and discretion (hich the Locaovern"ent Code and the reuations re2uire to +e e)ercised.
An ordinance that contravenes an! statute is ultra vires andvoid.+. The ?consideration approach@ in the ordinance is
iea since ?the appraisa/ assess"ent/ ev! and coection o#rea propert! ta) sha not +e et to an! private person@/ it (iaso co"pete! destro! the #unda"enta principe in reapropert! ta)ation G that rea propert! sha +e cassi#ied/ vauedand assessed on the +asis o# its actua use reardess o#(here ocated/ (hoever o(ns it/ and (hoever uses it. Ao(inthe parties to a private sae to dictate the #air "aret vaue o#the propert! (i dispense (ith the distinctions o# actua usestated in the Loca overn"ent Code and in the reuations.
c. The invaidit! is not cured +! the prhase ?(hicheveris hiher@ +ecause an intera part o# that s!ste" sti per"itsvauin rea propert! in disreard o# its ?actua use.@
d. The ordinance (oud resut to rea propert!assess"ents "ore than once ever! three =7> !ears and that isnot the conressiona intent as sho(n in the provisions o# theLoca overn"ent Code and the reuations. Conse2uent!/the rea propert! ta) +urden shoud not +e interpreted toincude those +e!ond (hat the Code or the reuationse)press! cear! state.
e. The proviso (oud provide a chiin e##ect on reapropert! o(ners or ad"inistrators to enter #ree! into contractsre#ectin the increasin vaue o# rea properties in accordance(ith prevaiin "aret conditions.
Whie the Loca overn"ent Code provides that theassess"ent o# rea propert! sha not +e increased once ever!three =7> !ears/ the 2uestioned proviso su+,ects the propert! to
a hiher assess"ent ever! ti"e a saes transaction is "ade.'ea propert! o(ners (oud there#ore postpone saes untia#ter the apse o# the three =7> !ear period/ or i# the! do so(ithin the said period the! sha +e co"peed to dispose o# thepropert! at a price not e)ceedin the ast prior conve!ance inorder to avoid a hiher ta) assess"ent.
In the a+ove t(o scenarios rea propert! o(ners aree##ective! prevented #ro" o+tainin the +est price possi+e #ortheir properties and undu! ha"pers the e2uita+e distri+utiono# (eath. = Allie) an3in- Corporation, etc., v. Jue$on Cityovernment, et al., . '. No. 15B19/ cto+er 11/ 005>
5. Wh"! $% !he ,"!-e o0 " !"# )e'(""!$o, 2S<ESTED ANSWE' As a rue/ ta) decarations or
reat! ta) pa!"ents o# propert! are not concusive evidence o#o(nership/ nevertheess/ the! are ood in)icia o# possessionin the concept o# o(ner/ #or no one in his riht "ind (oud +epa!in ta)es #or a propert! that is not in his actua orconstructive possession. The! constitute at east proo# that thehoder has a cai" o# tite over the propert!.
The vountar! decaration o# a piece o# propert! #orta)ation purposes "ani#ests not on! one*s sincere and honestdesire to o+tain tite to the propert! and announces his adverse
cai" aainst the State and a other interested parties/ +ut asothe intention to contri+ute needed revenues to the overn"ent.Such an act strenthens one*s !ona fi)e cai" o# ac2uisition o#o(nership. =uenaventura, et al., v. Repu!lic, . '. No. 199895/#arch / 006 citin /eirs of Simplicio Santia-o v. /eirs of #ariano. Santia-o, . '. No. 151BB0/ 16 Fune 007/ B0B SC'A 147/ 144 G00>
NTES AND CENTSa. De("*e) !"# )e'(""!$o, ,e"!e% '("$& o0
po%%e%%$o, $, 'o,'ep! o0 ow,e. A ta) decaration is a oodindication o# possession in the concept o# o(ner. Ho(ever/ dea!eddecaration o# propert! #or ta) purposes neates a cai" o#
continuous/ e)cusive/ and uninterrupted possession in the concept o#o(ner. =/eirs of #arina C. Re-ala)o, et al., etc., v. Repu!lic of thePhilippines, . '. No. 198155/ 3e+ruar! 15/ 006>
S<ESTED ANSWE' $ersona propert! under thecivi a( "a! +e considered as rea propert! #or purposes o#ta)es (here the propert! is essentia to the conduct o# the+usiness.
a. <nderround tans are essentia to the conduct o#the +usiness o# a asoine station (ithout (hich it (oud not +eoperationa. =Caltex Phils., Inc. v. Central oar) of Assessment
Appeals, et al., 11B SC'A 49>
+. Liht 'ai Transit =L'T> i"prove"ents such as+uidins/ carriae(a!s/ passener ter"inas stations/ andsi"iar structures do not #or" part o# the pu+ic roads since the#or"er are constructed over the atter in such a (a! that the#o( o# vehicuar tra##ic (oud not +e i"paired. Thecarriae(a!s and ter"inas serve a #unction di##erent #ro" thepu+ic roads. 3urther"ore/ the! are not open to use +! theenera pu+ic hence not e)e"pt #ro" rea propert! ta)es.
Even rantin that the nationa overn"ent o(ns thecarriae(a!s and ter"ina stations/ the propert! is not e)e"pt+ecause their +ene#icia use has +een ranted to L'TA a
ta)a+e entit!. (Li-ht Rail Transit Authority v. Central oar) of Assessment Appeals, et al., . '. No. 16719/ cto+er 1/ 000>
c. The Supre"e Court o# Ne( Mor in Consoli)ate))ison Company of 6e7 or3, Inc., et al., v. The City of 6e7or3, et al., 80 isc. d 1095 =1465> cited in +LS ner-y,Inc., v. Province of atan-as, . '. No. 198556/ 3e+ruar! 19/006 and co"panion case/ hed that +ares on (hich (ere"ounted as tur+ine po(er pants desinated to enerateeectrica po(er/ the #ue oi +ares (hich suppied #ue oi tothe po(er pant +ares/ and the accessor! e2uip"ent"ounted on the +ares (ere su+,ect to rea propert! ta)es.
oreover/ Artice B15=4> o# the Civi Code provides that?docs and structures (hich/ thouh #oatin/ are intended +!their nature and o+,ect to re"ain at a #i)ed pace on a river/ae or coast@ are considered i""ova+e propert! +!destination +ein intended +! the o(ner #or an industr! or(or (hich "a! +e carried on in a +uidin or on a piece o#and and (hich tend direct! to "eet the needs o# said industr!
or (or.
. Re"( pope!* !"# )e'(""!$o,% "e oo) indiciao0 po%%e%%$o, $, !he 'o,'ep! o0 ", ow,e / #or no one in hisriht "ind (oud +e pa!in ta)es #or a propert! that is not in hisactua or constructive possession.@ Consoli)ate) Rural an3(Ca-ayan *alley", Inc. v. Court of Appeals, et al., .'. No. 17191/Fanuar! 16/ 005 citin /eirs of Simplicio Santia-o v. /eirs of#ariano . Santia-o, . '. No. 151BB0/ 16 Fune 007/ B0B SC'A atp. 141 Llarena v. #apili, .'. No.1B97B1/ 6 Auust 007/ B08 B8B/B41>
=. The e%!$'!$o, -po, !he powe o0 'o-!% !o$&pe"'h !"# "%%e%%&e,! w$!ho-! " p$o p"*&e,!8 -,)epo!e%!8 o0 !he !"#e% "%%e%%e) $% 'o,%$%!e,! w$!h !he)o'!$,e !h"! !"#e% "e !he ($0e/(oo) o0 !he ,"!$o,8 and assuch their coection cannot +e curtaied +! in,unction or an!ie action other(ise/ the state or/ in this case/ the ocaovern"ent unit/ sha +e cripped in dispensin the neededservices to the peope/ and its "achiner! rave! disa+ed.(#anila lectric Company v. arlis, .'. No. 11B71/ a! 18/ 001>
Thus/ the tria court has no ,urisdiction to entertain apetition #or prohi+ition a+sent pa!"ent under protest o# the ta)
assessed.=I!i)."NTES AND CENTS Whie the a+ove a! 18/ 001
decision (as set aside +! the Supre"e Court (hen it ranted thepetitioner*s second "otion #or reconsideration on Fune 4/ 00B/ theauthor su+"its that the a+ove ruin in the a! 18/ 001 decision issti vaid/ +ecause (hat (as reversed in the second "otion #orreconsideration (as the arnish"ent o# eraco*s assets +ecause(hether or not an assess"ent (as issued to eraco has to +eresoved +! the o(er court.
6. U,p"$) e"(!* !"#e% "!!"'h !o !he pope!* ",) $%'h"e"/(e ""$,%! !he pe%o, who h") "'!-"( o /e,e0$'$"(
-%e ",) po%%e%%$o, o0 $! e")(e%% o0 whe!he o ,o! he $%
!he ow,e. To i"pose the rea propert! ta) on the su+se2uento(ner (hich (as neither the o(ner not the +ene#icia user o#the propert! durin the desinated periods (oud not on! +econtrar! to a( +ut aso un,ust.
Conse2uent!/ E'ALC the #or"er o(neruser o# thepropert! (as re2uired to pa! the ta) instead o# the ne( o(nerNA$C'. (#anila lectric Company v. arlis, .'. No. 11B71/a! 18/ 001>
NTES AND CENTS The a+ove a! 18/ 001decision (as set aside +! the Supre"e Court (hen it ranted thepetitioner*s second "otion #or reconsideration on Fune 4/ 00B. Theauthor su+"its that the a+ove ruin in the a! 18/ 001 decision issti vaid/ not on the +asis o# the a! 18/ 001 decision/ in the iht o#pronounce"ents o# the Supre"e Court in other cases. Thus/ do notcite the doctrine as e"anatin #ro" the a! 18/ 001 decision.
(+i-uerres v. Court of Appeals, et al ./ .'. No. 11416/ arch 5/1444>
T"#p"*e 0$(e% "ppe"( !o !he Se'e!"* o0 <-%!$'e8w$!h$, 3? )"*% 0o& e00e'!$$!* !heeo0. In case the Secretar!decides the appea/ a period aso o# 70 da!s is ao(ed #or anarieved part! to o to court. &ut i# the Secretar! does notact thereon/ a#ter the apse o# 90 da!s/ a part! coud aread!see reie# in court (ithin 70 da!s #ro" the apse o# the 90 da!period.
These three separate periods are cear! iven #orco"piance as a prere2uisite +e#ore seein redress in aco"petent court. Such statutor! periods are set to preventdea!s as (e as enhance the order! and speed! dischare o# ,udicia #unctions. 3or this reason the courts construe theseprovisions o# statutes as "andator!. (Reyes, et al., v. Court of
Appeals, et al ./ .'. No. 11877/ Dece"+er 10/ 1444>
11. P-/($' he"$,% "e &",)"!o* p$o !o "ppo"(o0 !"# o)$,",'e/ +ut this sti re2uires the ta)pa!er to adduceevidence to sho( that no pu+ic hearins ever too pace.(Reyes, et al., v. Court of Appeals, et al., .'. No. 11877/
Dece"+er 10/ 1444> $u+ic hearins are re2uired to +econducted prior to the enact"ent o# an ordinance i"posin
priviee ranted to N$C cannot +e e)tended to 3ELS.the covenant is +et(een N$C and 3ELs and does not+ind a third person not priv! to the contract such as the$rovince o# &atanas.
> The Supre"e Court o# Ne( Mor inConsoli)ate) )ison Company of 6e7 or3, Inc., et al.,v. The City of 6e7 or3, et al., 80 isc. d 1095 =1465>
cited in +LS ner-y, Inc., v. Province of atan-as, .'. No. 198556/ 3e+ruar! 19/ 006 and co"panion case/hed that +ares on (hich (ere "ounted as tur+inepo(er pants desinated to enerate eectrica po(er/ the#ue oi +ares (hich suppied #ue oi to the po(er pant+ares/ and the accessor! e2uip"ent "ounted on the+ares (ere su+,ect to rea propert! ta)es.
oreover/ Artice B15=4> o# the Civi Code providesthat ?docs and structures (hich/ thouh #oatin/ areintended +! their nature and o+,ect to re"ain at a #i)edpace on a river/ ae or coast@ are considered i""ova+epropert! +! destination +ein intended +! the o(ner #oran industr! or (or (hich "a! +e carried on in a+uidin or on a piece o# and and (hich tend direct! to"eet the needs o# said industr! or (or.+. The Treasurer is correct. The procedure do not
ao( a "otion #or reconsideration to +e #ied (ith the $rovincia Assessor.
To ao( the procedure (oud indeed invite corruption inthe s!ste" o# appraisa and assess"ent. it convenient! courtsa ra#t%prone situation (here vaues o# rea propert! a! +einitia! set unreasona+! hih/ and then su+se2uent! reducedupon the re2uest o# a propert! o(ner. In the atter instance/
ausions o# possi+e cover/ iicit trade%o## cannot +e avoided/and in #act can convenient! tae pace. Such occasion #or"ischie# "ust +e prevented and e)cised #ro" our s!ste".=+LS ner-y, Inc., v. Province of atan-as, . '. No. 198556/3e+ruar! 19/ 006 and co"panion case/ citin Callanta v. 2ffice ofthe 2m!u)sman. . '. Nos. 11557%6B/ Fanuar! 70/ 1448/ 85SC'A 9B8>
NTES AND CENTSa. A ,o!$'e o0 "%%e%%&e,! $%%-e) /* " (o'"(
"%%e%%o $% ,o! !he %-/>e'! o0 " &o!$o, 0o e'o,%$)e"!$o,!h"! &-%! /e "ppe"(e) !o !he LBAA. The ast action o# the oca
assessor on a particuar assess"ent sha +e the notice o#
assess"ent. It is this ast action (hich ives the o(ner o# thepropert! the riht to appea to the L&AA. The procedure does notper"it the propert! o(ner the re"ed! o# #iin a "otion #orreconsideration +e#ore the oca assessor/ =+LS ner-y, Inc., v.Province of atan-as, . '. No. 198556/ 3e+ruar! 19/ 006 andco"panion case/ citin Callanta v. 2ffice of the 2m!u)sman. . '.Nos. 11557%6B/ Fanuar! 70/ 1448/ 85 SC'A 9B8>
S<ESTED ANSWE' No. The entite"ent to a ta)re#und does not necessari! ca #or the auto"atic pa!"ent o#the su" cai"ed. The a"ount o# the cai" +ein a #actua
"atter/ it "ust sti +e proven in the nor"a course and inaccordance (ith the ad"inistrative procedure #or o+tainin are#und o# rea propert! ta)es/ as provided under the Locaovern"ent Code. = Allie) an3in- Corporation, etc., v. Jue$onCity overnment, et al., . '. No. 15B19/ Septe"+er 15/ 009>
NTES AND CENTS In the a+ove Allie) an3in-case/ the Supre"e Court provided #or the startin date o# co"putinthe t(o%!ear prescriptive period (ithin (hich to #ie the cai" (ith theTreasurer/ (hich is #ro" #inait! o# the Decision. The procedure to +e#oo(ed is that sho(n +eo(.
16. Po'e)-e 0o e0-,) o0 e"( pope!* !"#e%
/"%e) o, "($)$!* o0 !he !"# &e"%-e o solutio indebeti.a. $a!"ent under protest not re2uired/ cai" "ust +e
directed to the oca treasurer/ (ithin t(o => !ears #ro" thedate the ta)pa!er is entited to such reduction or read,ust"ent/(ho "ust decide (ithin si)t! =90> da!s #ro" receipt.
+. The denia +! the oca treasurer o# the protest(oud #a (ithin the 'eiona Tria Court*s oriina ,urisdiction/the revie( +ein the initia ,udicia coni:ance o# the "atter.Despite the anuae o# Section 145 o# the Loca overn"entCode (hich states that the re"ed! o# the ta)pa!er (hoseprotest is denied +! the oca treasurer is ?to appea (ith the
court o# co"petent ,urisdiction/@ a+ein the said revie( as an
e)ercise o# appeate ,urisdiction is inappropriate since thedenia o# the protest is not the ,ud"ent or order o# a o(ercourt/ +ut o# a oca overn"ent o##icia. =amane , etc. v. ALepanto Con)ominium Corporation, . '. No. 15B447/ cto+er 5/005>
c. The decision o# the 'eiona Tria Court shoud +eappeaed +! "eans o# a petition #or revie( directed to theCourt o# Ta) Appeas =Division>.
d. The decision o# the Court o# Ta) Appeas =Division>"a! +e the su+,ect o# a revie( +! the Court o# Ta) Appeas=en !anc >.
e. The decision o# the Court o# Ta) Appeas =en !anc >"a! +e the su+,ect o# a petition #or revie( on certiorari on pure2uestions o# a( directed to the Supre"e Court.
+?. The 'o,%!$!-!$o,"( !"# e#e&p!$o,% e0e o,(* !oe"( pope!* that are actua!/ direct! and e)cusive! used#or reiious/ charita+e or educationa purposes/ and that theon! constitutiona! reconi:ed e)e"ption #ro" ta)ation o#
revenues are those earned +! non%pro#it/ non%stoceducationa institutions (hich are actua!/ direct! ande)cusive! used #or educationa purposes. (Commissioner ofInternal Revenue v. Court of Appeals, et al., 48 SC'A 87>
The constitutiona ta) e)e"ption covers propert! ta)eson!. What is e)e"pted is not the institution itse#/ thosee)e"pted #ro" rea estate ta)es are ands/ +uidins andi"prove"ents actua!/ direct! and e)cusive! used #orreiious/ charita+e or educationa purposes. =Lun- Center ofthe Philippines v. Jue$on City, et al., etc., . '. No. 1BB10B/ Fune 4/00B citin Fustice Davide>
+1. The 1635 Co,%!$!-!$o, %!"!e) !h"! !he (",)%8/-$()$,%8 ",) $&poe&e,!% "e -%e) e#'(-%$e(* /-!!he pe%e,! Co,%!$!-!$o, e-$e% !h"! !he (",)%8 /-$()$,%",) $&poe&e,!% "e "'!-"((*8 )$e'!(* ",) e#'(-%$e(*-%e). The chane shoud not +e inored. 'eiance on pastdecisions (oud have su##iced (ere the (ords ?actua!@ as (eas direct!@ are not added. There "ust +e proo# there#ore o#the actua and direct use to +e e)e"pt #ro" ta)ation. =Lun-Center of the Philippines v. Jue$on City, et al., etc., . '. No.1BB10B/ Fune 4/ 00B citin Province of A!ra v. /ernan)o, 106SC'A 105>
++. Wh"! $% &e",! /* "'!-"(8 )$e'! ",) e#'(-%$e-%e o0 !he pope!* 0o 'h"$!"/(e p-po%e% $% !he )$e'!",) $&&e)$"!e ",) "'!-"( "pp($'"!$o, o0 !he pope!* $!%e(0to the purposes #or (hich the charita+e institution is orani:ed.It is not the use o# the inco"e #ro" the rea propert! that isdeter"inative o# (hether the propert! is used #or ta)%e)e"ptpurposes.
I# rea propert! is used #or one or "ore co""erciapurposes/ it is not e)cusive! used #or the e)e"pted purpose+ut is su+,ect to ta)ation/. The (ords ?do"inant use@ or?principa use@ cannot +e su+stituted #or the (ords ?usede)cusive!@ (ithout doin vioence to the Constitution and thea(. Soe! is s!non!"ous (ith e)cusive!. =Lun- Center of thePhilippines v. Jue$on City, et al., etc., . '. No. 1BB10B/ Fune 4/00B>
!ho%e p"!% o0 !he ho%p$!"( (e"%e) !o p$"!e $,)$$)-"(% "e,o! e#e&p! 0o& e"( pope!* !"#e%. n the other hand/ theportion o# the and occupied +! the hospita and portions o# thehospita used #or its patients/ (hether pa!in or non%pa!in/are e)e"pt #ro" rea propert! ta)es. =Lun- Center of thePhilippines v. Jue$on City, et al., etc., . '. No. 1BB10B/ Fune 4/00B>
p"!$e,!%8 whe!he o-!p"!$e,!8 o 'o,0$,e) $, !he ho%p$!"(8 oe'e$e% %-/%$)$e% 0o& !he oe,&e,!. So on as the"one! received is devoted or used atoether to the charita+eo+,ect (hich it is intended to achieve and no "one! inures tothe private +ene#it o# the persons "anain or operatin theinstitution. =Lun- Center of the Philippines v. Jue$on City, et al.,etc., . '. No. 1BB10B/ Fune 4/ 00B>
S<ESTED ANSWE' No. The #act that the port andits #aciities and appurtenances/ o(ned +! the $hiippine $orts Authorit! =$$A>/ are accessi+e to the enera pu+ic does note)e"pt it #ro" the pa!"ent o# rea propert! ta)es. These arepatri"onia properties o# $$A/ not #or pu+ic use/ and that theoperation o# the port and its #aciities and the ad"inistration o#its +uidins are in the nature o# ordinar! +usiness. $$A is apro#it earnin corporation/ hence its patri"onia properties aresu+,ect to ta). Philippine Ports Authority v. City of Iloilo, et al., .'. No. 1B71B/ Nove"+er 11/ 00B citin Li-ht Rail Transit Authorityv. Central oar) of Assessment Appeals, 7B SC'A 94 =000>
NTES AND CENTSa. W"eho-%e% (o'"!e) $, po!% "e pope!* %-/>e'!
!o e"( pope!* !"#e%. $orts constructed +! the State areproperties o# the pu+ic do"inion under Art. B0 o# the CiviCode (hich enu"erates these as properties intended #orpu+ic use.
&e that as it "a!/ a (arehouse/ (hich/ athouh ocated(ithin the port is distinct #ro" the port itse#. Thus/ it is su+,ect
to ta). The (arehouse/ in the case at +ar/ "a! not +e hed aspart o# the port/ considerin its separa+e nature as ani"prove"ent upon the port/ and the #act that it is not open #oruse +! ever!one and #ree! accessi+e to the pu+ic.In the sa"e (a! that the Supre"e Court once rued/ that thee)e"ption o# pu+ic propert! #ro" ta)ation does not e)tend toi"prove"ents "ade thereon +! ho"esteaders or occupants attheir o(n e)pense/ it ie(ise uphed the ta)a+iit! o# the(arehouse/ in the case at +ar/ it +ein a "ere i"prove"ent+uit on an aeed propert! o# pu+ic do"ain. =Philippine Ports
Authority v. City of Iloilo, . '. No. 104641/ Fu! 1B/ 007> This is sti
is not a overn"ent o(ned or controed corporation +ut an
instru"entait! o# the overn"ent that is e)e"pt #ro"ta)ation.
It is not a stoc corporation +ecause its capita is notdivided into shares/ neither is it a non%stoc corporation+ecause there are no "e"+ers. It is instead aninstru"entait! o# the overn"ent upon (hich the ocaovern"ents are not ao(ed to ev! ta)es/ #ees or otherchares.
An instru"entait! ?re#ers to an! aenc! o# theNationa overn"ent/ not interated (ithin the depart"ent#ra"e(or vested (ith specia #unctions or ,urisdiction +! a(/endo(ed (ith so"e i# not a corporate po(ers/ ad"inisterinspecia #unds/ and en,o!in operationa autono"!/ usua!throuh a charter. This ter" incudes reuator! aencieschartered institutions and overn"ent%o(ned or controedcorporations.@ Sec. =10>/ Introductor! $rovisions/ Ad"inistrative
Code o# 1486 It is an instru"entait! e)ercisin not on!overn"enta +ut aso corporate po(ers. It e)ercisesovern"enta po(ers o# e"inent do"ain/ poice po(erauthorit!/ and ev!in o# #ees and chares.
3ina!/ the airport ands and +uidins are propert!o(ned +! the overn"ent that are devoted to pu+ic use andare properties o# the pu+ic do"ain. =#anila International Airport
Authority v. Court of Appeals, et al., . '. No. 155950/ Fu! 0/009>
+. The p$&"* e"%o, 0o !he w$!h)"w"( o0 !"#e#e&p!$o, p$$(ee% ",!e) !o oe,&e,!ow,e) ",)'o,!o((e) 'opo"!$o,% ",) "(( o!he -,$!% o0 oe,&e,!(as that such priviee resuted to serious ta) +ase erosion
and distortions in the ta) treat"ent o# si"iar! situatedenterprises/ hence resutin in the need #or these entities toshare in their re2uire"ents o# deveop"ent/ #isca or other(ise/+! pa!in the ta)es and other chares due #ro" the".=Philippine Ports Authority v. City of Iloilo, .'. No. 104641/ Fu! 1B/00B citin #actan Ce!u International Airport Authority v. #arcos, 91SC'A 996>
I% !he 'o,!e,!$o, o0 GSIS !e,"/(e2S<ESTED ANSWE' No. Even i# the charter o#
SIS enera! e)e"pts it #ro" ta) ia+iities/ the prescription isnot so enco"passin as to "ae the ta) e)e"ption appica+eto the properties in dispute. The properties (ere aread!trans#erred and the aienation o# the properties sod +! SIS(as the pro)i"ate cause and necessar! conse2uence o# thedein2uent ta)es due. =overnment Service Insurance System v.City Assessor of Iloilo City, et al., .'. No. 1B614/ Fune 6/ 009citin City of a-uio v. usue-o, No. L%466/ 18 Septe"+er 1480/100 SC'A 119>
The aeation o# the repea o# '.A. No. 6190 +! '.A.841/ is not convincin. 'epea cannot +e assu"ed theintention to revoe "ust +e cear and "ani#est. To +rin a+outan i"pied repea/ the t(o a(s "ust +e cear! repunant ina(a! that the ater a( '.A. 841 coud not e)ist (ithout
nui#!in the earier a(/ '. A. No. 6190. =overnment ServiceInsurance System, supra>
Sec. 74 o# '.A. No. 841 shoud +e read consistent!(ith its avo(ed purpose G the "aintenance o# its actuariasovenc! to #inance the retire"ent/ disa+iit! and i#e insurance+ene#its o# its "e"+ers. The ta)%e)e"pt properties and assetso# SIS re#erred to those that re"ained at its disposa and use/either #or invest"ent or #or inco"e eneratin purposes.$roperties (hose actua and +ene#icia use had +eentrans#erred to private ta)a+e persons/ #or consideration orother(ise/ are e)cuded and are thus ta)a+e. . =I!i), citin
Ru!ia v. overnment Service Insurance System, .'. No. 151B74/1 Fune 00B/ B7 SC'A54>>
+6. A !e(e'o&&-,$'"!$o,% 'o&p",* w"% ",!e)/* Co,e%% o, <-(* +?8 166+8 "0!e !he e00e'!$$!* o0 !heLo'"( Goe,&e,! Co)e o, <",-"* 18 166+8 " (e$%("!$e0",'h$%e w$!h !"# e#e&p!$o, p$$(ee% wh$'h p"!(*e")%8 The ",!ee8 $!% %-''e%%o% o "%%$,% %h"(( /e
/. The 'o&p",*% pope!$e% "e e#e&p! 0o& !"#-,)e $!% 0",'h$%e.
Re%o(e !he $%%-e% "$%e).S<ESTED ANSWE'Sa. There is no need to e)haust ad"inistrative
re"edies as the appea to the L&AA is not a speed! andade2uate re"ed! (ithin the a(. This is so +ecause theproperties are aread! schedued #or auction sae.
3urther"ore one o# the reconi:ed e)ceptions to therue on e)haustion is that i# the issue is pure! ea incharacter (hich is so in this case.
+. The properties are e)e"pt #ro" ta)ation. Therant o# ta)in po(ers to oca overn"ents under the
