Reyes vs.docx

8/13/2019 Reyes vs.docx

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Reyes vs. Almanzor

REYES v. ALMANZORGR Nos. L-49839-46, April 26, 1991

196 SCRA 322

FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased andoccupied as dwelling units by tenants who were paying monthly rentals of not exceeding P300.Sometimes in 1971 the Rental Freezing Law was passed prohibiting for one year from itseffectivity, an increase in monthly rentals of dwelling units where rentals do not exceed threehundred pesos (P300.00), so that the Reyeses were precluded from raising the rents and fromejecting the tenants. In 1973, respondent City Assessor of Manila re-classified and reassessed thevalue of the subject properties based on the schedule of market values, which entailed anincrease in the corresponding tax rates prompting petitioners to file a Memorandum ofDisagreement averring that the reassessments made were "excessive, unwarranted, inequitable,

confiscatory and unconstitutional" considering that the taxes imposed upon them greatlyexceeded the annual income derived from their properties. They argued that the income approachshould have been used in determining the land values instead of the comparable sales approachwhich the City Assessor adopted.

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

HELD: No. The taxing power has the authority to make a reasonable and natural classificationfor purposes of taxation but the government's act must not be prompted by a spirit of hostility, orat the very least discrimination that finds no support in reason. It suffices then that the lawsoperate equally and uniformly on all persons under similar circumstances or that all persons mustbe treated in the same manner, the conditions not being different both in the privileges conferredand the liabilities imposed.

Consequently, it stands to reason that petitioners who are burdened by the government by itsRental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justiceshould not now be penalized by the same government by the imposition of excessive taxespetitioners can ill afford and eventually result in the forfeiture of their properties.

Philex Mining vs CIR

PHILEX MINING CORP. v. CIRGR No. 125704, August 28, 1998294 SCRA 687

FACTS: Petitioner Philex Mining Corp. assails the decision of the Court of Appeals affirmingthe Court of Tax Appeals decision ordering it to pay the amount of P110.7 M as excise taxliability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annualinterest from 1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977.Philex protested the demand for payment of the tax liabilities stating that it has pending claims
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for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount ofP120 M plus interest. Therefore these claims for tax credit/refund should be applied against thetax liabilities.

ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims of tax refund of

the petitioner?

HELD:No. Philex's claim is an outright disregard of the basic principle in tax law that taxes arethe lifeblood of the government and so should be collected without unnecessary hindrance.Evidently, to countenance Philex's whimsical reason would render ineffective our tax collectionsystem. Too simplistic, it finds no support in law or in jurisprudence.

To be sure, Philex cannot be allowed to refuse the payment of its tax liabilities on the groundthat it has a pending tax claim for refund or credit against the government which has not yet beengranted.Taxes cannot be subject to compensation for the simple reason that the government andthe taxpayer are not creditors and debtors of each other. There is a material distinction between atax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to

the Government in its sovereign capacity. xxx There can be no off-setting of taxes against theclaims that the taxpayer may have against the government. A person cannot refuse to pay a taxon the ground that the government owes him an amount equal to or greater than the tax beingcollected. The collection of a tax cannot await the results of a lawsuit against the government.

Lutz vs. Araneta

LUTZ v. ARANETAGR No. L-7859, December 22, 195598 PHIL 148

FACTS: Plaintiff Walter Lutz, in his capacity as judicial administrator of the intestate estate ofAntionio Ledesma, sought to recover from the CIR the sum of P14,666.40 paid by the estate astaxes, under section 3 of the CA 567 or the Sugar Adjustment Act thereby assailing itsconstitutionality, for it provided for an increase of the existing tax on the manufacture of sugar,alleging that such enactment is not being levied for a public purpose but solely and exclusivelyfor the aid and support of the sugar industry thus making it void and unconstitutional. The sugarindustry situation at the time of the enactment was in an imminent threat of loss and needed to bestabilized by imposition of emergency measures.

ISSUE: Is CA 567 constitutional, despite its being allegedly violative of the equal protectionclause, the purpose ofwhich is not for the benefit of the general public but for the rehabilitation only of the sugarindustry?

HELD:Yes. The protection and promotion of the sugar industry is a matter of public concern, itfollows that the Legislature may determine within reasonable bounds what is necessary for itsprotection and expedient for its promotion. Here, the legislative discretion must be allowed tofully play, subject only to the test of reasonableness; and it is not contended that the means
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provided in the law bear no relation to the objective pursued or are oppressive in character. Ifobjective and methods are alike constitutionally valid, no reason is seen why the state may notlevy taxes to raise funds for their prosecution and attainment. Taxation may be made theimplement of the state's police power.

CIR vs. CACIR vs. CA257 SCRA 200GR No. 119322 June 4, 1996"Before one is prosecuted for willful attempt to evade or defeat any tax, the fact that a tax is duemust first be proved."

FACTS: The CIR assessed Fortune Tobacco Corp for 7.6 Billion Pesos representing deficiencyincome, ad valorem and value-added taxes for the year 1992 to which Fortune moved for

reconsideration of the assessments. Later, the CIR filed a complaint with the Department ofJustice against the respondent Fortune, its corporate officers, nine (9) other corporations andtheir respective corporate officers for alleged fraudulent tax evasion for supposed non-paymentby Fortune of the correct amount of taxes, alleging among others the fraudulent scheme ofmaking simulated sales to fictitious buyers declaring lower wholesale prices, as allegedly shownby the great disparity on the declared wholesale prices registered in the "Daily Manufacturer'sSworn Statements" submitted by the respondents to the BIR. Such documents when requested bythe court were not however presented by the BIR, prompting the trial court to grant the prayer forpreliminary injunction sought by the respondent upon the reason that tax liability must be dulyproven before any criminal prosecution be had. The petitioner relying on the Ungab Doctrinesought the lifting of the writ of preliminary mandatory injunction issued by the trial court.

ISSUE: Whose contention is correct?

HELD: In view of the foregoing reasons, misplaced is the petitioners' thesis citing Ungab v.Cusi, that the lack of a final determination of Fortune's exact or correct tax liability is not a bar tocriminal prosecution, and that while a precise computation and assessment is required for a civilaction to collect tax deficiencies, the Tax Code does not require such computation andassessment prior to criminal prosecution.

Reading Ungab carefully, the pronouncement therein that deficiency assessment is notnecessary prior to prosecution is pointedly and deliberately qualified by the Court with followingstatement quoted from Guzik v. U.S.: "The crime is complete when the violator has knowinglyand willfully filed a fraudulent return with intent to evade and defeat a part or all of the tax." Inplain words, for criminal prosecution to proceed before assessment, there must be a prima facieshowing of a willful attempt to evade taxes. There was a willful attempt to evade tax in Ungabbecause of the taxpayer's failure to declare in his income tax return "his income derived frombanana sapplings." In the mind of the trial court and the Court of Appeals, Fortune's situation isquite apart factually since the registered wholesale price of the goods, approved by the BIR, ispresumed to be the actual wholesale price, therefore, not fraudulent and unless and until the BIRhas made a final determination of what is supposed to be the correct taxes, the taxpayer should
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Verily, failure to present proof of error in assessments will justify judicial affordance of saidassessment.

CIR vs Pascor

CIR vs. PASCOR309 SCRA 402GR No. 128315 June 29, 1999"An assessment is not necessary before a criminal charge can be filed."

FACTS:The BIR examined the books of account of Pascor Realty and Devt Corp for years1986, 1987 and 1988, from which a tax liability of 10.5 Million Pesos was found. Based on therecommendations of the examiners, the CIR filed an information with the DOJ for tax evasionagainst the officers of Pascor. Upon receipt of the subpoena, the latter filed an urgent request forreconsideration/reinvestigation with the CIR, which was immediately denied upon the ground

that no formal assessment has yet been issued by the Commissioner. Pascor elevated the CIR'sdecision to the CTA on a petition for review. The CIR filed a Motion to Dismiss on the groundof lack of jurisdiction of CTA as there was no formal assessment made against the respondents.The CTA dismissed the motion, hence this petition.

ISSUE: Is a formal assessment necessary in the filing of a criminal complaint?

HELD:No. Section 222 of the NIRC states that an assessment is not necessary before a criminalcharge can be filed. This is the general rule. Private respondents failed to show that they areentitled to an exception. Moreover, the criminal charge need only be supported by a prima facieshowing of failure to file a required return. This fact need not be proven by an assessment.

The issuance of an assessment must be distinguished from the filing of a complaint. Before anassessment is issued, there is, by practice, a pre-assessment notice sent to the taxpayer. Thetaxpayer is then given a chance to submit position papers and documents to prove that theassessment is unwarranted. If the commissioner is unsatisfied, an assessment signed by him orher is then sent to the taxpayer informing the latter specifically and clearly that an assessment hasbeen made against him or her. In contrast, the criminal charge need not go through all these. Thecriminal charge is filed directly with the DOJ. Thereafter, the taxpayer is notified that a criminalcase had been filed against him, not that the commissioner has issued an assessment. It must bestressed that a criminal complaint is instituted not to demand payment, but to penalize thetaxpayer for violation of the Tax Code.

Philippine Guaranty Inc. vs. CIRPHIL. GUARANTY CO., INC. v. CIRGR No. L-22074, April 30, 196513 SCRA 775
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FACTS:The petitioner Philippine Guaranty Co., Inc., a domestic insurance company, enteredinto reinsurance contracts with foreign insurance companies not doing business in the country,thereby ceding to foreign reinsurers a portion of the premiums on insurance it has originallyunderwritten in the Philippines. The premiums paid by such companies were excluded by thepetitioner from its gross income when it file its income tax returns for 1953 and 1954.

Furthermore, it did not withhold or pay tax on them. Consequently, the CIR assessed againstthe petitioner withholding taxes on the ceded reinsurance premiums to which the latter protestedthe assessment on the ground that the premiums are not subject to tax for the premiums did notconstitute income from sources within the Philippines because the foreign reinsurers did notengage in business in the Philippines, and CIR's previous rulings did not require insurancecompanies to withhold income tax due from foreign companies.

ISSUE:Are insurance companies not required to withhold tax on reinsurance premiums ceded toforeign insurance companies, which deprives the government from collecting the tax due fromthem?

HELD: No. The power to tax is an attribute of sovereignty. It is a power emanating fromnecessity. It is a necessary burden to preserve the State's sovereignty and a means to give thecitizenry an army to resist an aggression, a navy to defend its shores from invasion, a corps ofcivil servants to serve, public improvement designed for the enjoyment of the citizenry and thosewhich come within the State's territory, and facilities and protection which a government issupposed to provide. Considering that the reinsurance premiums in question were affordedprotection by the government and the recipient foreign reinsurers exercised rights and privilegesguaranteed by our laws, such reinsurance premiums and reinsurers should share the burden ofmaintaining the state.The petitioner's defense of reliance of good faith on rulings of the CIR requiring no withholding

of tax due on reinsurance premiums may free the taxpayer from the payment of surcharges orpenalties imposed for failure to pay the corresponding withholding tax, but it certainly would notexculpate it from liability to pay such withholding tax. The Government is not estopped fromcollecting taxes by the mistakes or errors of its agents

Phil. Bank of Communications vs. CIR

PHIL. BANK OF COMMUNICATIONS v. CIRGR No. 112024, January 28, 1999302 SCRA 250

FACTS: Petitioner PBCom filed its first and second quarter income tax returns, reported profits,and paid income taxes amounting to P5.2M in 1985. However, at the end of the year PBComsuffered losses so that when it filed its Annual Income Tax Returns for the year-ended December31, 1986, the petitioner likewise reported a net loss of P14.1 M, and thus declared no tax payablefor the year. In 1988, the bank requested from CIR for a tax credit and tax refunds representingoverpayment of taxes. Pending investigation of the respondent CIR, petitioner instituted aPetition for Review before the Court of Tax Appeals (CTA). CTA denied its petition for taxcredit and refund for failing to file within the prescriptive period to which the petitioner belies
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arguing the Revenue Circular No.7-85 issued by the CIR itself states that claim for overpaidtaxes are not covered by the two-year prescriptive period mandated under the Tax Code.

ISSUE:Is the contention of the petitioner correct? Is the revenue circular a valid exemption tothe NIRC?

HELD:No. The relaxation of revenue regulations by RMC 7-85 is not warranted as it disregardsthe two-year prescriptive period set by law. Basic is the principle that "taxes are the lifeblood ofthe nation." The primary purpose is to generate funds for the State to finance the needs of thecitizenry and to advance the common weal. Due process of law under the Constitution does notrequire judicial proceedings in tax cases. This must necessarily be so because it is upontaxation that the government chiefly relies to obtain the means to carry on its operations and it isof utmost importance that the modes adopted to enforce the collection of taxes levied should besummary and interfered with as little as possible. From the same perspective, claims for refundor tax credit should be exercised within the time fixed by law because the BIR being anadministrative body enforced to collect taxes, its functions should not be unduly

delayed or hampered by incidental matters.

Marcos II vs. CA

MARCOS II v. CAGR No. 120880, June 5, 1997293 SCRA 77

FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant

CIR's petition to levy the properties of the late Pres. Marcos to cover the payment of his taxdelinquencies during the period of his exile in the US. The Marcos family was assessed by theBIR, and notices were constructively served to the Marcoses, however the assessment were notprotested administratively by Mrs. Marcos and the heirs of the late president so that they becamefinal and unappealable after the period for filing of opposition has prescribed. Marcos contendsthat the properties could not be levied to cover the tax dues because they are still pending probatewith the court, and settlement of tax deficiencies could not be had, unless there is an order by theprobate court or until the probate proceedings are terminated.

ISSUE: Is the contention of Bongbong Marcos correct?

HELD:No. The deficiency income tax assessments and estate tax assessment are already finaland unappealable -and-the subsequent levy of real properties is a tax remedy resorted to by thegovernment, sanctioned by Section 213 and 218 of the National Internal Revenue Code. Thissummary tax remedy is distinct and separate from the other tax remedies (such as Judicial Civilactions and Criminal actions), and is not affected or precluded by the pendency of any other taxremedies instituted by the government.

The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is nota mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the
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Tax Bureau erred in proceeding with the levying and sale of the properties allegedly owned bythe late President, on the ground that it was required to seek first the probate court's sanction.There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity ofthe probate or estate settlement court's approval of the state's claim for estate taxes, before thesame can be enforced and collected. On the contrary, under Section 87 of the NIRC, it is the

probate or settlement court which is bidden not to authorize the executor or judicial administratorof the decedent's estate to deliver any distributive share to any party interested in the estate,unless it is shown a Certification by the Commissioner of Internal Revenue that the estate taxeshave been paid. This provision disproves the petitioner's contention that it is the probate courtwhich approves the assessment and collection of the estate tax.

Davao Gulf Lumber vs. CIR

DAVAO GULF LUMBER CORP v. CIRGR No. 117359, July 23, 1998

293 SCRA 77FACTS: Republic Act No. 1435 entitles miners and forest concessioners to the refund of 25% ofthe specific taxes paid by the oil companies, which were eventually passed on to the user--thepetitioner in this case--in the purchase price of the oil products. Petitioner filed before respondentCommissioner of Internal Revenue (CIR) a claim for refund in the amount representing 25% ofthe specific taxes actually paid on the above-mentioned fuels and oils that were used bypetitioner in its operations. However petitioner asserts that equity and justice demands that therefund should be based on the increased rates of specific taxes which it actually paid, asprescribed in Sections 153 and 156 of the NIRC. Public respondent, on the other hand, contendsthat it should be based on specific taxes deemed paid under Sections 1 and 2 of RA 1435.

ISSUE: Should the petitioner be entitled under Republic Act No. 1435 to the refund of 25% ofthe amount of specific taxes it actually paid on various refined and manufactured mineral oilsand other oil products, and not on the taxes deemed paid and passed on to them, as end-users, bythe oil companies?

HELD:No. According to an eminent authority on taxation, "there is no tax exemption solely onthe ground of equity." Thus, the tax refund should be based on the taxes deemed paid. Becausetaxes are the lifeblood of the nation, statutes that allow exemptions are construed strictly againstthe grantee and liberally in favor of the government. Otherwise stated, any exemption from thepayment of a tax must be clearly stated in the language of the law; it cannot be merely impliedtherefrom.

CIR vs. YMCA

CIR v. YMCAGR No. 124043, October 14, 1998298 SCRA 83
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FACTS: Private Respondent YMCA--a non-stock, non-profit institution, which conducts variousprograms beneficial to the public pursuant to its religious, educational and charitable objectives--leases out a portion of its premises to small shop owners, like restaurants and canteen operators,deriving substantial income for such. Seeing this, the Commissioner of Internal Revenue (CIR)

issued an assessment to private respondent for deficiency income tax, deficiency expandedwithholding taxes on rentals and professional fees and deficiency withholding tax on wages.YMCA opposed arguing that its rental income is not subject to tax, mainly because of theprovisions of Section 27 of NIRC which provides that civic league or organizations notorganized for profit but operate exclusively for promotion of social welfare and those organizedexclusively for pleasure, recreation and other non-profitable businesses shall not be taxed.

ISSUE: Is the contention of YMCA tenable?

HELD: No. Because taxes are the lifeblood of the nation, the Court has always applied thedoctrine of strict in interpretation in construing tax exemptions. Furthermore, a claim of statutory

exemption from taxation should be manifest and unmistakable from the language of the law onwhich it is based. Thus, the claimed exemption "must expressly be granted in a statute stated in alanguage too clear to be mistaken."

Commissioner vs. Algue, Inc.

COMMISSIONER v. ALGUE, INC.GR No. L-28896, February 17, 1988158 SCRA 9

FACTS: Private respondent corporation Algue Inc. filed its income tax returns for 1958 and

1959showing deductions, for promotional fees paid, from their gross income, thus lowering theirtaxable income. The BIR assessed Algue based on such deductions contending that the claimeddeduction is disallowed because it was not an ordinary, reasonable and necessary expense.

ISSUE: Should an uncommon business expense be disallowed as a proper deduction incomputation of income taxes, corollary to the doctrine that taxes are the lifeblood of thegovernment?

HELD: No. Private respondent has proved that the payment of the fees was necessary andreasonable in the light of the efforts exerted by the payees in inducing investors and prominentbusinessmen to venture in an experimental enterprise and involve themselves in a new businessrequiring millions of pesos. This was no mean feat and should be, as it was, sufficientlyrecompensed.

It is well-settled that taxes are the lifeblood of the government and so should be collectedwithout unnecessary hindrance On the other hand, such collection should be made in accordancewith law as any arbitrariness will negate the very reason for government itself. It is thereforenecessary to reconcile the apparently conflicting interests of the authorities and the taxpayers sothat the real purpose of taxation, which is the promotion of the common good, may be achieved.
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But even as we concede the inevitability and indispensability of taxation, it is a requirement inall democratic regimes that it be exercised reasonably and in accordance with the prescribedprocedure. If it is not, then the taxpayer has a right to complain and the courts will then come tohis succor. For all the awesome power of the tax collector, he may still be stopped in his tracks ifthe taxpayer can demonstrate, as it has here, that the law has not been observed.

CIR vs. CA, Citytrust Banking Corp.

CIR v. CA, CITY TRUST BANKING CORP.GR No. 86785, November 21, 1991234 SCRA 348

FACTS: Respondent corporation Citytrust filed a refund of overpaid taxes with the BIR bywhich the latter denied on the ground of prescription. Citytrust filed a petition for review beforethe CTA. The case was submitted for decision based solely on the pleadings and evidence

submitted by the respondent because the CIR could not present any evidence by reason of therepeated failure of the Tax Credit/Refund Division of the BIR to transmit the records of the case,as well as the investigation report thereon, to the Solicitor General. CTA rendered the decisionordering BIR to grant the respondent's request for tax refund amounting to P 13.3 million.

ISSUE: Failure of the CIR to present evidence to support the case of the government, should therespondent's claim be granted?

HELD: Not yet. It is a long and firmly settled rule of law that the Government is not bound bythe errors committed by its agents. In the performance of its governmental functions, the Statecannot be estopped by the neglect of its agent and officers. Although the Government maygenerally be estopped through the affirmative acts of public officers acting within their authority,their neglect or omission of public duties as exemplified in this case will not and should notproduce that effect.

Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that theGovernment cannot and must not be estopped particularly in matters involving taxes. Taxes arethe lifeblood of the nation through which the government agencies continue to operate and withwhich the State effects its functions for the welfare of its constituents. The errors of certainadministrative officers should never be allowed to jeopardize the Government's financialposition, especially in the case at bar where the amount involves millions of pesos the collectionwhereof, if justified, stands to be prejudiced just because of bureaucratic lethargy. Thus, it isproper that the case be remanded back to the CTA for further proceedings and reception ofevidence.

Vera vs. Fernandez

VERA v. FERNANDEZGR No. L-31364 March 30, 197989 SCRA 199
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FACTS: The BIR filed on July 29, 1969 a motion for allowance of claim and for payment oftaxes representing the estate's tax deficiencies in 1963 to 1964 in the intestate proceedings ofLuis Tongoy. The administrator opposed arguing that the claim was already barred by the statuteof limitation, Section 2 and Section 5 of Rule 86 of the Rules of Court which provides that allclaims for money against the decedent, arising from contracts, express or implied, whether the

same be due, not due, or contingent, all claims for funeral expenses and expenses for the lastsickness of the decedent, and judgment for money against the decedent, must be filed within thetime limited in the notice; otherwise they are barred forever.

ISSUE: Does the statute of non-claims of the Rules of Court bar the claim of the government forunpaid taxes?

HELD:No. The reason for the more liberal treatment of claims for taxes against a decedent'sestate in the form of exception from the application of the statute of non-claims, is not hard tofind. Taxes are the lifeblood of the Government and their prompt and certain availability areimperious need. (CIR vs. Pineda, 21 SCRA 105). Upon taxation depends the Government ability

to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect oromission of government officials entrusted with the collection of taxes should not be allowed tobring harm or detriment to the people, in the same manner as private persons may be made tosuffer individually on account of his own negligence, the presumption being that they take goodcare of their personal affairs. This should not hold true to government officials with respect tomatters not of their own personal concern. This is the philosophy behind the government'sexception, as a general rule, from the operation of the principle of estoppel.

CIR vs. Pineda

CIR v. PINEDAGR No. L-22734, September 15, 196721 SCRA 105

FACTS: Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, theeldest of whom is Atty. Manuel Pineda. Estate proceedings were had in Court so that the estatewas divided among and awarded to the heirs. Atty Pineda's share amounted to about P2,500.00.After the estate proceedings were closed, the BIR investigated the income tax liability of theestate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income taxreturns were not filed. Thereupon, the representative of the Collector of Internal Revenue filedsaid returns for the estate issued an assessment and charged the full amount to the inheritancedue to Atty. Pineda who argued that he is liable only to extent of his proportional share in theinheritance.

ISSUE: Can BIR collect the full amount of estate taxes from an heir's inheritance.

HELD: Yes. The Government can require Atty. Pineda to pay the full amount of the taxesassessed.The reason is that the Government has a lien on the P2,500.00 received by him from the estate as
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his share in the inheritance, for unpaid income taxes for which said estate is liable. By virtue ofsuch lien, the Government has the right to subject the property in Pineda's possession to satisfythe income tax assessment. After such payment, Pineda will have a right of contribution from hisco-heirs, to achieve an adjustment of the proper share of each heir in the distributable estate.

All told, the Government has two ways of collecting the tax in question. One, by going after all

the heirs and collecting from each one of them the amount of the tax proportionate to theinheritance received; and second, is by subjecting said property of the estate which is in thehands of an heir or transferee to the payment of the tax due. This second remedy is the veryavenue the Government took in this case to collect the tax. The Bureau of Internal Revenueshould be given, in instances like the case at bar, the necessary discretion to avail itself of themost expeditious way to collect the tax as may be envisioned in the particular provision of theTax Code above quoted, because taxes are the lifeblood of government and their prompt andcertain availability is an imperious need.

ESSO Standard vs. Acting Commissioner of

CustomsESSO STANDARD EASTERN, INC. vs. ACTING COMMISSIONER OF CUSTOMS18 SCRA 488GR No. L-21841, October 28, 1966

"Exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally infavor of the taxing authority."

FACTS: Petitioner, engaged in the industry of processing gasoline, oils etc., claims for therefund of special import taxes paid pursuant to the provision of RA 1394 which imposed aspecial import tax "on all goods, articles or products imported or brought into the Philippines."Exempt from this tax, by express mandate of Section 6 of the same law are "machinery,equipment, accessories, and spare parts, for the use of industries, miners, mining enterprises,planters and farmers". Petitioner argued that the importation it made of gas pumps used by theirgasoline station operators should fall under such exemptions, being directly used in its industry.The Collector of Customs of Manila rejected the claim, and so as the Court on Tax Appeals. TheCTA noted that the pumps imported were not used in the processing of gasoline and other oilproducts but by the gasoline stations, owned by the petitioner, for pumping out, fromunderground barrels, gasoline sold on retail to customers.

ISSUE: Is the contention of the petitioner tenable? Does the subject imports fall into theexemptions?

HELD: No. The contention runs smack against the familiar rules that exemption from taxation isnot favored, and that exemptions in tax statutes are never presumed. Which are but statements inadherence to the ancient rule that exemptions from taxation are construed in strictissimi jurisagainst the taxpayer and liberally in favor of the taxing authority. Tested by this precept, wecannot indulge in expansive construction and write into the law an exemption not therein set
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ordinance is invalid, being an undefined and unlimited delegation of power to allow or preventan activity per se lawful.

Osmea vs. Orbos

OSMEA vs. ORBOS220 SCRA 703GR No. 99886, March 31, 1993

" To avoid the taint of unlawful delegation of the power to tax, there must be a standard whichimplies that the legislature determines matter of principle and lays down fundamental policy."

FACTS: Senator John Osmea assails the constitutionality of paragraph 1c of PD 1956, asamended by EO 137, empowering the Energy Regulatory Board (ERB) to approve the increaseof fuel prices or impose additional amounts on petroleum products which proceeds shall accrue

to the Oil Price Stabilization Fund (OPSF) established for the reimbursement to ailing oilcompanies in the event of sudden price increases. The petitioner avers that the collection on oilproducts establishments is an undue and invalid delegation of legislative power to tax. Further,the petitioner points out that since a 'special fund' consists of monies collected through the taxingpower of a State, such amounts belong to the State, although the use thereof is limited to thespecial purpose/objective for which it was created. It thus appears that the challenge posed by thepetitioner is premised primarily on the view that the powers granted to the ERB under P.D. 1956,as amended, partake of the nature of the taxation power of the State.

ISSUE: Is there an undue delegation of the legislative power of taxation?

HELD: None. It seems clear that while the funds collected may be referred to as taxes, they are

exacted in the exercise of the police power of the State. Moreover, that the OPSF as a specialfund is plain from the special treatment given it by E.O. 137. It is segregated from the generalfund; and while it is placed in what the law refers to as a "trust liability account," the fundnonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied thatthese measures comply with the constitutional description of a "special fund." With regard tothe alleged undue delegation of legislative power, the Court finds that the provision conferringthe authority upon the ERB to impose additional amounts on petroleum products provides asufficient standard by which the authority must be exercised. In addition to the general policy ofthe law to protect the local consumer by stabilizing and subsidizing domestic pump rates, P.D.1956 expressly authorizes the ERB to impose additional amounts to augment the resources of theFund.

Pepsi-Cola vs. Municipality of Tanauan

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN69 SCRA 460GR No. L-31156, February 27, 1976
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"Legislative power to create political corporations for purposes of local self-government carrieswith it the power to confer on such local governmental agencies the power to tax.

FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to

declare Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act,unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos.23 and 27 denominated as "municipal production tax" of the Municipality of Tanauan, Leyte,null and void. Ordinance 23 levies and collects from soft drinks producers and manufacturers atax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked, and Ordinance 27levies and collects on soft drinks produced or manufactured within the territorial jurisdiction ofthis municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) ofvolume capacity. Aside from the undue delegation of authority, appellant contends that it allowsdouble taxation, and that the subject ordinances are void for they impose percentage or specifictax.

ISSUE: Are the contentions of the appellant tenable?HELD: No. On the issue of undue delegation of taxing power, it is settled that the power oftaxation is an essential and inherent attribute of sovereignty, belonging as a matter of right toevery independent government, without being expressly conferred by the people. It is a powerthat is purely legislative and which the central legislative body cannot delegate either to theexecutive or judicial department of the government without infringing upon the theory ofseparation of powers. The exception, however, lies in the case of municipal corporations, towhich, said theory does not apply. Legislative powers may be delegated to local governments inrespect of matters of local concern. By necessary implication, the legislative power to createpolitical corporations for purposes of local self-government carries with it the power to confer onsuch local governmental agencies the power to tax.

Also, there is no validity to the assertion that the delegated authority can be declaredunconstitutional on the theory of double taxation. It must be observed that the delegatingauthority specifies the limitations and enumerates the taxes over which local taxation may not beexercised. The reason is that the State has exclusively reserved the same for its own prerogative.Moreover, double taxation, in general, is not forbidden by our fundamental law, so that doubletaxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the samegovernmental entity or by the same jurisdiction for the same purpose, but not in a case where onetax is imposed by the State and the other by the city or municipality.

On the last issue raised, the ordinances do not partake of the nature of a percentage tax onsales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold ornot) and not on the sales. The volume capacity of the taxpayer's production of soft drinks isconsidered solely for purposes of determining the tax rate on the products, but there is not setratio between the volume of sales and the amount of the tax.

Pepsi-Cola vs. City of Butuan
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was assessed by the Provincial Assessor of Laguna, for purposes of real estate taxes, on the realproperties owned by Cabuyao Waterworks. The respondent protested claiming it is exemptedfrom the payment of real estate taxes in view of the nature and kind of said property andfunctions and activities of petitioner. The petitioner denied the protest arguing that such realproperties are subject to real estate tax because although said properties belong to the Republic

of the Philippines, the same holds it, not in its governmental, political or sovereign capacity, butin a private, proprietary or patrimonial character, which, allegedly, is not covered by theexemption contained in section 3(a) of Republic Act No. 470.

ISSUE: Are the real properties owned by the respondent public corporation subject to real estatetax?

HELD:No. Republic Act No. 470 makes no distinction between property held in a sovereign,governmental or political capacity and those possessed in a private, proprietary or patrimonialcharacter. And where the law does not distinguish neither may we, unless there are facts andcircumstances clearly showing that the lawmaker intended the contrary, but no such facts and

circumstances have been brought to our attention. Indeed, the noun "property" and the verb"owned" used in said section 3(a) strongly suggest that the object of exemption is consideredmore from the view point of dominion, than from that of domain.

Moreover, taxes are financial burdens imposed for the purpose of raising revenues with whichto defray the cost of the operation of the Government, and a tax on property of the Government,whether national or local, would merely have the effect of taking money from one pocket to putit in another pocket. Hence, it would not serve, in the final analysis, the main purpose of taxation.What is more, it would tend to defeat it, on account of the paper work, time and consequently,expenses it would entail.

Atlas Consolidated vs. CIRATLAS CONSOLIDATED MINING DEVT CORP vs. CIR524 SCRA 73, 103GR Nos. 141104 & 148763, June 8, 2007

"The taxpayer must justify his claim for tax exemption or refund by the clearest grant of organicor statute law and should not be permitted to stand on vague implications."

"Export processing zones (EPZA) are effectively considered as foreign territory for taxpurposes."

FACTS: Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, andsale of various mineral products, filed claims with the BIR for refund/credit of input VAT on itspurchases of capital goods and on its zero-rated sales in the taxable quarters of the years 1990and 1992. BIR did not immediately act on the matter prompting the petitioner to file a petitionfor review before the CTA. The latter denied the claims on the grounds that for zero-rating toapply, 70% of the company's sales must consists of exports, that the same were not filed withinthe 2-year prescriptive period (the claim for 1992 quarterly returns were judicially filed only on
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April 20, 1994), and that petitioner failed to submit substantial evidence to support its claim forrefund/credit.

The petitioner, on the other hand, contends that CTA failed to consider the following: sales toPASAR and PHILPOS within the EPZA as zero-rated export sales; the 2-year prescriptive periodshould be counted from the date of filing of the last adjustment return which was April 15, 1993,

and not on every end of the applicable quarters; and that the certification of the independent CPAattesting to the correctness of the contents of the summary of suppliers invoices or receiptsexamined, evaluated and audited by said CPA should substantiate its claims.

ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applicationsfor refund/credit of input VAT?

HELD: No. Although the Court agreed with the petitioner corporation that the two-yearprescriptive period for the filing of claims for refund/credit of input VAT must be counted fromthe date of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside theEPZA are taxed as exports because these export processing zones are to be managed as a

separate customs territory from the rest of the Philippines, and thus, for tax purposes, areeffectively considered as foreign territory, it still denies the claims of petitioner corporation forrefund of its input VAT on its purchases of capital goods and effectively zero-rated sales duringthe period claimed for not being established and substantiated by appropriate and sufficientevidence.

Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of thesovereign authority, and should be construed in strictissimi juris against the person or entityclaiming the exemption. The taxpayer who claims for exemption must justify his claim by theclearest grant of organic or statute law and should not be permitted to stand on vagueimplications.

Commissioner vs. BOACCOMMISSIONER vs. BOAC149 SCRA 395GR No. L-65773-74 April 30, 1987

"The source of an income is the property, activity or service that produced the income. For suchsource to be considered as coming from the Philippines, it is sufficient that the income is derivedfrom activity within the Philippines."

FACTS: Petitioner CIR seeks a review of the CTA's decision setting aside petitioner'sassessment of deficiency income taxes against respondent British Overseas Airways Corporation(BOAC) for the fiscal years 1959 to 1971. BOAC is a 100% British Government-ownedcorporation organized and existing under the laws of the United Kingdom, and is engaged in theinternational airline business. During the periods covered by the disputed assessments, it isadmitted that BOAC had no landing rights for traffic purposes in the Philippines. Consequently,it did not carry passengers and/or cargo to or from the Philippines, although during the periodcovered by the assessments, it maintained a general sales agent in the Philippines Wamer
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Barnes and Company, Ltd., and later Qantas Airways which was responsible for sellingBOAC tickets covering passengers and cargoes. The CTA sided with BOAC citing that theproceeds of sales of BOAC tickets do not constitute BOAC income from Philippine sourcessince no service of carriage of passengers or freight was performed by BOAC within thePhilippines and, therefore, said income is not subject to Philippine income tax. The CTA position

was that income from transportation is income from services so that the place where services arerendered determines the source.

ISSUE: Are the revenues derived by BOAC from sales of ticket for air transportation, whilehaving no landing rights here, constitute income of BOAC from Philippine sources, andaccordingly, taxable?

HELD: Yes. The source of an income is the property, activity or service that produced theincome. For the source of income to be considered as coming from the Philippines, it is sufficientthat the income is derived from activity within the Philippines. In BOAC's case, the sale oftickets in the Philippines is the activity that produces the income. The tickets exchanged hands

here and payments for fares were also made here in Philippine currency. The site of the source ofpayments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippineterritory, enjoying the protection accorded by the Philippine government. In consideration ofsuch protection, the flow of wealth should share the burden of supporting the government.

Pascual vs. Secretary of Public Works

PASCUAL vs. SECRETARY OF PUBLIC WORKS110 PHIL 331GR No. L-10405, December 29, 1960

"A law appropriating the public revenue is invalid if the public advantage or benefit, derivedfrom such expenditure, is merely incidental in the promotion of a particular enterprise."

FACTS: Governor Wenceslao Pascual of Rizal instituted this action for declaratory relief, withinjunction, upon the ground that RA No. 920, which apropriates funds for public worksparticularly for the construction and improvement of Pasig feeder road terminals. Some of thefeeder roads, however, as alleged and as contained in the tracings attached to the petition, werenothing but projected and planned subdivision roads, not yet constructed within the AntonioSubdivision, belonging to private respondent Zulueta, situated at Pasig, Rizal; and whichprojected feeder roads do not connect any government property or any important premises to themain highway. The respondents' contention is that there is public purpose because people livingin the subdivision will directly be benefitted from the construction of the roads, and thegovernment also gains from the donation of the land supposed to be occupied by the streets,made by its owner to the government.

ISSUE: Should incidental gains by the public be considered "public purpose" for the purpose ofjustifying an expenditure of the government?
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HELD: No. It is a general rule that the legislature is without power to appropriate public revenuefor anything but a public purpose. It is the essential character of the direct object of theexpenditure which must determine its validity as justifying a tax, and not the magnitude of theinterest to be affected nor the degree to which the general advantage of the community, and thusthe public welfare, may be ultimately benefited by their promotion. Incidental to the public or to

the state, which results from the promotion of private interest and the prosperity of privateenterprises or business, does not justify their aid by the use public money.The test of the constitutionality of a statute requiring the use of public funds is whether the

statute is designed to promote the public interest, as opposed to the furtherance of the advantageof individuals, although each advantage to individuals might incidentally serve the public.

Bagatsing vs. Ramirez

BAGATSING vs. RAMIREZ74 SCRA 306

GR No. L-41631, December 17, 1976"The entrusting of the tax collection to private entities does not destroy the public purpose of atax ordinance."

FACTS: Aside from the issue on publication, private respondent bewails that the market stallfees imposed in the disputed City Ordinance No. 7522, which regulates public markets andprescribes fees for rentals of stalls, are diverted to the exclusive private use of the AsiaticIntegrated Corporation since the collection of said fees had been let by the City of Manila to thesaid corporation in a "Management and Operating Contract."

ISSUE: Does the delegation of the collection of taxes to a private entity invalidates a taxordinance and defeats its public purpose?

HELD:No. The assumption is of course saddled on erroneous premise. The fees collected donot go direct to the private coffers of the corporation. Ordinance No. 7522 was not made for thecorporation but for the purpose of raising revenues for the city. That is the object it serves. Theentrusting of the collection of the fees does not destroy the public purpose of the ordinance. Solong as the purpose is public, it does not matter whether the agency through which the money isdispensed is public or private. The right to tax depends upon the ultimate use, purpose and objectfor which the fund is raised. It is not dependent on the nature or character of the person orcorporation whose intermediate agency is to be used in applying it. The people may be taxed fora public purpose, although it be under the direction of an individual or private corporation.

City of Baguio vs. De Leon

CITY OF BAGUIO vs. DE LEON25 SCRA 938GR No. L-24756, October 31, 1968
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"There is no double taxation where one tax is imposed by the state and the other is imposed bythe city."

FACTS: The City of Baguio passed an ordinance imposing a license fee on any person, entity or

corporation doing business in the City. The ordinance sourced its authority from RA No. 329,thereby amending the city charter empowering it to fix the license fee and regulate businesses,trades and occupations as may be established or practiced in the City. De Leon was assessed forP50 annual fee it being shown that he was engaged in property rental and deriving incometherefrom. The latter assailed the validity of the ordinance arguing that it is ultra vires for there isno statutory authority which expressly grants the City of Baguio to levy such tax, and that there itimposed double taxation, and violates the requirement of uniformity.

ISSUE:Are the contentions of the defendant-appellant tenable?

HELD: No. First, RA 329 was enacted amending Section 2553 of the Revised Administrative

Code empowering the City Council not only to impose a license fee but to levy a tax forpurposes of revenue, thus the ordinance cannot be considered ultra vires for there is more thanample statutory authority for the enactment thereof.

Second, an argument against double taxation may not be invoked where one tax is imposed bythe state and the other is imposed by the city, so that where, as here, Congress has clearlyexpressed its intention, the statute must be sustained even though double taxation results.

And third, violation of uniformity is out of place it being widely recognized that there isnothing inherently obnoxious in the requirement that license fees or taxes be exacted with respectto the same occupation, calling or activity by both the state and the political subdivisions thereof.

Tio vs. VRBTIO vs. VRB151 SCRA 208GR No. L-75697, June 18, 1987"The public purpose of a tax may legally exist even if the motive which impelled the legislatureto impose the tax was to favor one industry over another."

FACTS: The petitioner assails the validity of PD 1987 entitled an "Act creating the VideogramRegulatory Board," citing especially Section 10 thereof, which imposes a tax of 30% on thegross receipts payable to the local government. Petitioner contends that aside from its being arider and not germane to the subject matter thereof, and such imposition was being harsh,confiscatory, oppressive and/or unlawfully restraints trade in violation of the due process clauseof the Constitution.

ISSUE: Is PD 1987 a valid exercise of taxing power of the state?

HELD: Yes. It is beyond serious question that a tax does not cease to be valid merely because itregulates, discourages, or even definitely deters the activities taxed. The power to impose taxes is
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one so unlimited in force and so searching in extent, that the courts scarcely venture to declarethat it is subject to any restrictions whatever, except such as those rest in the discretion of theauthority which exercises it. In imposing a tax, the legislature acts upon its constituents. This is,in general, a sufficient security against erroneous and oppressive taxation.

The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need

for regulating the video industry, particularly because of the rampant film piracy, the flagrantviolation of intellectual property rights, and the proliferation of pornographic video tapes. Andwhile it was also an objective of the DECREE to protect the movie industry, the tax remains avalid imposition.

The public purpose of a tax may legally exist even if the motive which impelled the legislatureto impose the tax was to favor one industry over another.

UNGAB vs. CUSI

UNGAB vs. CUSI

97 SCRA 877GR No. L-41919-24 May 30, 1980"An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt todefeat and evade the income tax."

FACTS:The BIR filed six criminal charges against Quirico Ungab, a banana saplings producer,for allegedly evading payment of taxes and other violations of the NIRC. Ungab, subsequentlyfiled a motion to quash on the ground that (1) the information are null and void for want ofauthority on the part of the State Prosecutor to initiate and prosecute the said cases; and (2)thatthe trial court has no jurisdiction to take cognizance of the case in view of his pending protestagainst the assessment made by the BIR examiner. The trial court denied the motion promptingthe petitioner to file a petition for certiorari and prohibition with preliminary injunction andrestraining order to annul and set aside the information filed.

ISSUE: Is the contention that the criminal prosecution is premature since the CIR has not yetresolved the protest against the tax assessment tenable?

HELD: No. The contention is without merit. What is involved here is not the collection of taxeswhere the assessment of the Commissioner of Internal Revenue may be reviewed by the Court ofTax Appeals, but a criminal prosecution for violations of the National Internal Revenue Codewhich is within the cognizance of courts of first instance. While there can be no civil action toenforce collection before the assessment procedures provided in the Code have been followed,there is no requirement for the precise computation and assessment of the tax before there can bea criminal prosecution under the Code.

An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt todefeat and evade the income tax. A crime is complete when the violator has knowingly andwillfully filed a fraudulent return with intent to evade and defeat the tax. The perpetration of thecrime is grounded upon knowledge on the part of the taxpayer that he has made an inaccuratereturn, and the government's failure to discover the error and promptly to assess has noconnections with the commission of the crime
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Abaya vs. Ebdane Jr.

ABAYA vs. EBDANE, JR.515 SCRA 720

GR No. 167919, February 14, 2007"A taxpayer need not be a party to the contract to challenge its validity."

FACTS: The petitioners, Plaridel M. Abaya who claims that he filed the instant petition as ataxpayer, former lawmaker, and a Filipino citizen, and Plaridel C. Garcia likewise claiming thathe filed the suit as a taxpayer, former military officer, and a Filipino citizen, mainly seek tonullify a DPWH resolution which recommended the award to private respondent China Road &Bridge Corporation of the contract for the implementation of the civil works known as ContractPackage No. I (CP I). They also seek to annul the contract of agreement subsequently enteredinto by and between the DPWH and private respondent China Road & Bridge Corporationpursuant to the said resolution.

ISSUE: Has petitioners the legal standing to file the instant case against the government?

HELD: Petitioners, as taxpayers, possess locus standi to file the present suit. Briefly stated, locusstandi is a right of appearance in a court of justice on a given question. More particularly, it is apartys personal and substantial interest in a case such that he has sustained or will sustain direct

injury as a result of the governmental act being challenged. Locus standi, however, is merely amatter of procedure and it has been recognized that in some cases, suits are not brought byparties who have been personally injured by the operation of a law or any other government actbut by concerned citizens, taxpayers or voters who actually sue in the public interest.Consequently, the Court, in a catena of cases, has invariably adopted a liberal stance on locusstandi, including those cases involving taxpayers.The prevailing doctrine in taxpayers suits is to allow taxpayers to question contracts entered into

by the national government or government- owned or controlled corporations allegedly incontravention of law. A taxpayer is allowed to sue where there is a claim that public funds areillegally disbursed, or that public money is being deflected to any improper purpose, or that thereis a wastage of public funds through the enforcement of an invalid or unconstitutional law.Significantly, a taxpayer need not be a party to the contract to challenge its validity.

CIR vs. CA, Atlas Consolidated

CIR vs. CA, ACMDC242 SCRA 289GR No. 104151 March 10, 1995"Assessments are prima facie presumed correct and made in good faith. So that, in the absence ofproof of any irregularities in the performance of official duties, an assessment will not bedisturbed."

FACTS:The Commissioner of Internal Revenue served two notices and demand for payment of
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private respondent Nielson & Co., Inc. to pay the Government the amount of P11,496.00 as advalorem tax, occupation fees, additional residence tax and 25% surcharge for late payment, forthe years 1949 to 1952. Petitioner claims that the demand letter of 16 July 1955 showed animprint indicating that the original thereof was released and mailed on 4 August 1955 by theChief, Records Section of the Bureau of Internal Revenue, and that the original letter was not

returned to said Bureau; thus, said demand letter must be considered to have been received bythe private respondent. According to petitioner, if service is made by ordinary mail, unless theactual date of receipt is shown, service is deemed complete and effective upon the expiration offive (5) days after mailing. As the letter of demand dated 16 July 1955 was actually mailed toprivate respondent, there arises the presumption that the letter was received by privaterespondent in the absence of evidence to the contrary. More so, where private respondent did notoffer any evidence, except the self-serving testimony of its witness, that it had not received theoriginal copy of the demand letter dated 16 July 1955.

ISSUE:Was notice of assessment or demand properly served to the respondent? Should thereceipt by the respondent of the succeeding follow-up demand notices be construed as receipt of

the original demand?HELD:As to the first issue, no. As correctly observed by the respondent court in its appealeddecision, while the contention of petitioner is correct that a mailed letter is deemed received bythe addressee in the ordinary course of mail, still this is merely a disputable presumption, subjectto controversion, and a direct denial of the receipt thereof shifts the burden upon the partyfavored by the presumption to prove that the mailed letter was indeed received by the addressee.Since petitioner has not adduced proof that private respondent had in fact received the demandletter of 16 July 1955, it can not be assumed that private respondent received said letter. Asto the second issue, Yes. Records show that petitioner wrote private respondent a follow-up letterdated 19 September 1956, reiterating its demand for the payment of taxes as originally demandedin petitioner's letter dated 16 July 1955. This follow-up letter is considered a notice ofassessment in itself which was duly received by private respondent in accordance with its ownadmission. And consequently, under Section 7 of Republic Act No. 1125, the assessment isappealable to the Court of Tax Appeals within thirty (30) days from receipt of the letter. Thetaxpayer's failure to appeal in due time, as in the case at bar, makes the assessment in questionfinal, executory and demandable. Thus, private respondent is now barred from disputing thecorrectness of the assessment or from invoking any defense that would reopen the question of itsliability on the merits.

CIR vs. Vda. de Codiera

COLLECTOR OF INTERNAL REVENUE vs. VDA. DE CODIERA102 PHIL 1165GR No. L-9675, September 28, 1957"The property levied by a competent court may, with the consent thereof, be distrained, subjectto the prior lien of the attachment creditor."

FACTS: The Collector of Internal Revenue sent a warrant of distraint and levy against the
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properties of Restituto Codiera for collection of certain deficiency specific tax. However, itcould not be effected in view of the attachment of the said properties of the CFI-Manila ofanother case. After seven years, the Collector of Internal Revenue issued a warrant of distraintand levy commanding the City Treasurer of Cebu City to distrain the goods, chattels, or effectsand other personal property of whatever character, and levy upon the real property and interest in

or rights to real property of the estate of the deceased. The heirs of the deceased filed the actionwith the CTA barring the government to collect said deficiency on the ground of prescriptiontherefore praying to declare null and void, and of no legal force and effect the warrant of distraintand levy which the respondent issued on March 7, 1955.

ISSUE: Does the attachment made by a court in a civil case over certain properties of a taxpayerbar the government from enforcing a warrant of distraint and levy over the aforesaid propertiesin order to collect the taxes due?

HELD:No. There may be a valid reason for non-distraint of the property which was due to theattachment of the CFI-Manila in another case. However, such property levied by a competent

court may, with the consent thereof, be subsequently distrained, subject to the prior lien of theattachment creditor. The attachment merely deprives the Collector of Internal Revenue the powerto divest the Court of its jurisdiction over said property but it does not impair such rights as theGovernment may have for the collection of taxes.

Cabrera vs. The Provincial Treasurer of

Tayabas

CABRERA vs. THE PROVINCIAL TREASURER OF TAYABASGR No. 502, January 29, 1946"The taxpayer should at least be apprised of the exact date of the proceeding by which she is tolose her property. Failure of the taxpayer to accordingly correct or change name in theassessment record cannot supplant such absence of notice."

FACTS: The Provincial Treasurer of Tayabas issued a notice for the sale at public auction of thereal properties of Nemesio Cabrera forfeited for tax delinquency on December 15, 1940. Theletter sent to Nemesio Cabrera was returned marked Unclaimed for the latter was already dead

in 1935. The land was actually sold in a rescheduled public auction sale on May 1941 toCatigbac and was finalized in May 1942. Basilia Cabrera, the registered owner of the landsubject to attachment, filed a complaint with the CFI-Tayabas against the Provincial Treasurerand Catigbac attacking the validity of the sale on the grounds that she was not notified, eventhough the property had remained in the assessment book in the name of Nemesio Cabrera,because she became the registered owner thereof since 1934 when a Torrens Title was issued toher by the Register of Deeds of Tayabas.

ISSUE:Is there a need for new notices if the land was not sold on the date specified in theprevious notice?
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REPUBLIC vs. ARANETA2 SCRA 144GR No. L-14142, May 30, 1961"Where the tax obligation is secured by a bond, the prescriptive period for the action for theforfeiture of the bond is governed by the Civil Code."

FACTS: The Solicitor General, in behalf of the Republic of the Philippines, filed before CFI ofManila an action against the defendant Araneta, as principals, and Manila Surety, as surety, torecover the internal revenue taxes including surcharges, the payment of which was guaranteed bya bond executed when the first extrajudicial demand for payment was made. The appellant-taxpayers contend that the appellee's cause of action has prescribed, because the action forrecovery of internal revenue taxes and surcharge due brought on 22 February 1957, was notcommenced within the period of five years after the assessment dated 15 May 1948 had beenmade, as provided for in Section 331 of the Tax Code.

ISSUE: Has the action to recover the taxes due from the taxpayer and the surety already

prescribed?HELD: No. The appellant-taxpayers cannot invoke prescription under the provisions of Section331 of the NIRC because the government is suing on the bond executed and filed by them toguarantee payment in 6 monthly installments of the tax liability due from 1946 to 1948, which isa separate and distinct obligation of the parties thereto. The action to enforce the obligation onthe bond executed on March 18, 1949, having been filed in court on February 22, 1957, waswithin the 10-year prescriptive period to enforce a written contractual obligation, as set by theCivil Code.

Marcos II vs. CAMARCOS II vs. CA273 SCRA 47GR No. 120880, June 5, 1997"The approval of the court sitting in probate is not a mandatory requirement in the collection ofestate taxes.""In case of failure to file a return, the tax may be assessed at anytime within 10 years after theomission."

FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grantCIR's petition to levy the properties of the late Pres. Marcos to cover the payment of his taxdelinquencies during the period of his exile in the US. The Marcos family was assessed by theBIR after it failed to file estate tax returns. However the assessment were not protestedadministratively by Mrs. Marcos and the heirs of the late president so that they became final andunappealable after the period for filing of opposition has prescribed. Marcos contends that theproperties could not be levied to cover the tax dues because they are still pending probate withthe court, and settlement of tax deficiencies could not be had, unless there is an order by theprobate court or until the probate proceedings are terminated.
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Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Noticesof Levy on the Marcos properties were issued beyond the allowed period, and are therefore nulland void.

ISSUE: Are the contentions of Bongbong Marcos correct?

HELD: No. The deficiency income tax assessments and estate tax assessment are already finaland unappealable -and-the subsequent levy of real properties is a tax remedy resorted to by thegovernment, sanctioned by Section 213 and 218 of the National Internal Revenue Code. Thissummary tax remedy is distinct and separate from the other tax remedies (such as Judicial Civilactions and Criminal actions), and is not affected or precluded by the pendency of any other taxremedies instituted by the government.The approval of the court, sitting in probate, or as a settlement tribunal over the deceased's

estate is not a mandatory requirement in the collection of estate taxes. On the contrary, underSection 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize theexecutor or judicial administrator of the decedent's estate to deliver any distributive share to any

party interested in the estate, unless it is shown a Certification by the Commissioner of InternalRevenue that the estate taxes have been paid. This provision disproves the petitioner's contentionthat it is the probate court which approves the assessment and collection of the estate tax.

On the issue of prescription, the omission to file an estate tax return, and the subsequent failureto contest or appeal the assessment made by the BIR is fatal to the petitioner's cause, as underSec.223 of the NIRC, in case of failure to file a return, the tax may be assessed at anytime within10 years after the omission, and any tax so assessed may be collected by levy upon real propertywithin 3 years (now 5 years) following the assessment of the tax. Since the estate tax assessmenthad become final and unappealable by the petitioner's default as regards protesting the validity ofthe said assessment, there is no reason why the BIR cannot continue with the collection of thesaid tax.

Republic vs. Hizon

REPUBLIC vs. HIZON320 SCRA 574GR No. 130430, December 13, 1999"A request for reconsideration of the tax assessment does not effectively suspend the running ofthe prescriptive period if the same is filed after the assessment had become final andunappealable."

FACTS: On July 18, 1986, the BIR issued to respondent Salud V. Hizon a deficiency income taxassessment covering the fiscal year 1981-1982. Respondent not having contested the assessment,petitioner BIR, on January 12, 1989, served warrants of distraint and levy to collect the taxdeficiency. However, for reasons not known, it did not proceed to dispose of the attachedproperties.

More than three years later, the respondent wrote the BIR requesting a reconsideration of hertax deficiency assessment. The BIR, in a letter dated August 11, 1994, denied the request. OnJanuary 1, 1997, it filed a case with the RTC to collect the tax deficiency. Hizon moved to
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dismiss the case on two grounds: (1) that the complaint was not filed upon authority of the BIRCommissioner as required by Sec. 221 of the NIRC, and (2) that the action had alreadyprescribed. Over petitioner's objection, the trial court granted the motion and dismissed thecomplaint.

BIR on the other hand contends that respondent's request for reinvestigation of her tax

deficiency assessment on November 1992 effectively suspended the running of the period ofprescription.

ISSUE: Has the action for collection of the tax prescribed?

HELD: Yes. Sec. 229 of the NIRC mandates that a request for reconsideration must be madewithin 30 days from the taxpayer's receipt of the tax deficiency assessment, otherwise theassessment becomes final, unappealable and, therefore, demandable. The notice of assessmentfor respondent's tax deficiency was issued by petitioner on July 18, 1986. On the other hand,respondent made her request for reconsideration thereof only on November 3, 1992, withoutstating when she received the notice of tax assessment. Hence, her request for reconsideration

did not suspend the running of the prescriptive period provided under Sec. 223(c). Although theCommissioner acted on her request by eventually denying it on August 11, 1994, this is of nomoment and does not detract from the fact that the assessment had long become demandable.

CIR vs. Villa

CIR vs. VILLA22 SCRA 3GR No. L-23988, January 2, 1968"What may be the subject of a judicial review is the decision of the Commissioner on the protestagainst assessment, not the assessment itself."

FACTS: The spouses Villa filed joint income tax returns for the years 1951 to 1956. The BIRissued assessments for deficiency of income tax for the said years. Without contesting the saidassessments with the CIR, they filed a petition for review with the CTA. The CTA tookcognizance of the of the appeal and rendered favorable judgment to the spouses. The CIRappealed to the SC questioning the jurisdiction of the CTA.

ISSUE: Is an appeal to the CTA proper in this case? Is the CTA vested with jurisdiction?

HELD:No. The rule is that where a taxpayer questions an assessment and asks the Collector toreconsider or cancel the same because he (the taxpayer) believes he is not liable therefor, theassessment becomes a "disputed assessment" that the Collector must decide, and the taxpayercan appeal to the Court of Tax Appeals only upon receipt of the decision of the Collector on thedisputed assessment. Since in the instant case the taxpayer appealed the assessment of theCommissioner of Internal Revenue without previously contesting the same, the appeal waspremature and the Court of Tax Appeals had no jurisdiction to entertain said appeal. For, asstated, the jurisdiction of the Tax Court is to review by appeal decisions of Internal Revenue on
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disputed assessments. The Tax Court is a court of special jurisdiction. As such, it can takecognizance only of such matters as are clearly within its jurisdiction.

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