Taxation} Mirror Notes of Prof Domondon} Made 2003} by SU Law (Daki)} 65 Pages

8/12/2019 Taxation} Mirror Notes of Prof Domondon} Made 2003} by SU Law (Daki)} 65 Pages

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Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge * of +$,-N- AL P /NC/PL-S 0 TA1AT/ N

*. 23 en m ay t3 e !o w er to t ax in4l5 de t3 e !ow e r to d es tr oy 623en is exer 4 i s e of t3e !ow er to tax not de s t r 5 4 t i v e oft ax ! a y e r s !r o! e r t y 6

ANS2- : The power to tax includes the power to destroy, where the tax is avalid tax.

This is s o b ec a u s e a ta xp a y e r c ou ld n ot s ee k th e n ullific at io n ofthe valid t ax sol ely upon the p remise tha t the t ax will impoveri sh him.

Th e e xe r ci se of t he po we r to t ax is n ot d es t ru c ti v e of t ax p a y e rs pro pe r ty wh ere it is an invalid ta x, whic h violate s th e inheren t orconsti tut ional limitations.

This is s o b ec a u se th er e is a sy mp a t h e t ic co ur t th at sh all co meto the succor of the t axpaye r and decl a re such t ax a s i nvalid.

". Dis45 s s t3e 4on 4e ! t of int er !r et a ti on of tax law s asdiff er e n ti a t e d from t3e 4on4 e! t of int er ! r e ta ti on of taxe xe m ! t i o n law s .

ANS2- : A ta x ca nn ot b e imp os e d unle ss it is su pp or t ed byt he cle ar a nd e xp r es s la ng u a g e of a st at u t e .

In sh or t, in ca se of do ub t, ta x law s m us t b e con st ru e d stric tlya gain st th e ta te an d liber ally in favo r of th e tax pa ye r. This is

becau s e taxes, as burden s whic h must be endure d by th e taxp aye r ,sho uld not be pre su m ed to go beyo nd what the law expr es sly andclear ly declares .

!n th e oth er ha nd , whe n a tax is u n" ue s ti on a bl y imp os e d, aclaim of ex em p ti on fro m tax p ay me n t s mu st b e cle arly show n a nd

base d on langua g e in th e law to o plain to be mistake n .#ur th e r m o r e , a re ve r sa l of a $I% rulin g fav or a bl e to a ta xp a y e r

w oul d n ot n ec e s s a ri ly cr ea t e a p er p e t u al e xe m p t io n in h is fa vo r, foraft er all th e gov er n me n t is ne ve r es to pp e d fro m collec tin g ta xe s

becau s e of mistak e s or er rors on th e part of its agen ts .

$. 23at do yo5 5nd er s t a n d %y t3e in3er e n t and4o ns t it 5 ti o n al limit at io n s as % ei ng re st ri 4t iv e of t3 e ot 3e rw i s e5 nli mi t e d an d !l en a r y !o w e r of ta xa t io n 6

ANS2- : Th e in he r en t a nd co ns ti tu t io n a l limit at io n s to t h e power of taxa tion are safegu a r d s which wo ul d preve n t abuse in th eexerci se of t hi s o the rwise unlimi t ed and pl ena ry power.

7. 23 at ar e t3 e in3 er e n t limi ta ti o n s to t 3 e !o w er oftaxa t ion6

ANS2- :a. &'$(I) &'%&! * . The ta x rev e nu e s m us t b e utili+e d for t he

benefi t of th e co mm u ni ty in gene ra l. An al tern a tiv e mea ning is th attax proc ee ds sho uld be utili+ed only to att ain th e ob ectiv es ofgove rnmen t .

b. -! I &%!&*% /*(*0ATI!- !# (*0I (ATI1* A'T2!%IT3 . T h e power of taxa tion is ex ercised by the legi sl ature wh ose me m b e r s areth e m er e d el eg a t e s of th e p eo pl e. This p ow er co ul d not th er ef or e b ed el eg a t e d b y th e le gi sl at u r e to ot he r d ep a r t m e n t s of go ve r n m e n t , lik ethe executive .

c. T*%%IT!%IA(IT3 . The po we r to ta x sh oul d b e ex er ci se d onlywithin the te rr itoria l boundar ies of the tax ing authori ty.


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Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge " of +$

d. 0!1*%- *-T *4* &TI!- 2!'(/ $* %*)!0-I5*/ . This is so inord er to red uc e th e a mo u nt of mo ne y th e gov er n me n t is h an dlin g.The re is v erity in th e m ax im , 6#or th e g ov er n m e n t , ex e mp t io n is th erul e and t axa t ion is t he excep t ion .7

e. )! IT3 . %esp ec t sho ul d be acc or de d to oth er sov er ei gnn at io n s. Th e p ow e r of t ax a ti o n is a hig h pr er o g a ti v e of s ov e re ig n t y.Th e pro p e rt ie s of ot he r so ve r ei g n n at io n s wit hi n th e t er ri to ry of th eta xin g a ut ho rit y sh ould not be su b ec t to tax atio n as a m ea s ur e ofr espec t to a co8e"ua l.

8. 23 at ar e t3 e 4o ns t it 5 ti o n al lim it at io n s on t3 e !o w ero f t axa t i o n 6

ANS2- :0*-*%A( !% I-/I%*)T )!- TIT'TI!-A( (I ITATI!- :

a . /ue p rocess cl ause9 b. *"ual pr otec tion clause9c. #reedom of t he pre s s9d. %eligious freedo m9e. -on8impai rment clause9f. (aw8making process:

; $ill shou ld embrace only one sub ec t exp res sed in thet it le thereof9

; r ea d in g s on t h re e s ep a r a t e d ay s9>; &rinted copies in final form dist ributed three =>; days

before passa g e .g. &re si de n t ia l p ow e r to gr an t re pri e ve s , co m m u t a t io n s a nd

pardon s and re mi t tal of fines and forfei ture af ter co nvi cti on by final udgme n t .

&*)I#I) !% /I%*)T )!- TIT'TI!-A( (I ITATI!- :a . -o impri sonmen t for non8 paymen t of a poll t ax9

b. Taxation sh al l be unifo rm and e"uitable9c. )ongres s sha ll evolve a p rog res s ive sys t em of taxa tion9d. All appropriat ion, revenue or tar iff bills shal l or iginate

e xcl usi ve ly in t he 2o us e of % ep re s e n t a t i v e s, b ut th e en a t e m a y

pro pos e and co ncur with ame n d m e n t s 9e. The &re si de n t sh all h av e th e pow er to ve to an y p ar tic ul arite m or ite m s in a n a pp r op ri a ti on , r ev e n u e , or t ariff bill, b ut th e v et osha ll not a ff ec t t he it em or i tems to which he does not ob ec t9

f. /ele ga t ed pow er of th e &re sid en t to imp os e tariff rat es ,imp or t a nd e xp o rt " uo t a s, to nn a g e a nd w ha rf a g e d ue s :

; /elega t ion by )ongress; ub ect to )ongress ional limi ts and res t ric tions?; @ithin the fram ew ork of nation al dev elo pm e nt

pro gra m.

g. Tax exe mp tio n of charit abl e institu tio ns, churc he s, parson a g e s and co nven t s appur t e n a n t th ere to, mos"u e s , and allla nd s , b uildin g s a nd imp ro v e m e n t s of all kin ds a ct u al ly, dir ec tl y a ndexclusive ly used for religious, char itab le or educat ional purposes9

h. -o tax exempt ion withou t t he concur rence of ma ori ty vo te ofa ll membe rs of )ongress9

i. -o u se of p ub lic m on e y or p ro p er t y for r eligio us p ur po s e sex ce p t if p rie st is as si gn e d to th e ar me d forc es , p en a l instit uti on s,g ov e rn m e n t or ph a n a g e or le pr os a ri u m 9

. oney collected on tax levied for a sp ecial purpose to be usedonly for such purpose , bal ance if any, to gene ral funds9


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Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge $ of +$

k. Th e up re m e )o ur t s p ow e r to r evi ew ud g me n t s or o rd e rs oflow er co ur ts in all c as e s inv olvi ng th e le ga li ty of a ny t ax , imp o se ,a s ses sme n t o r to ll or t he legali ty of any penal ty imposed in r el a tion tothe above9

l. Autho rity of local gov er n me n t units to cre at e th eir ownso ur ce s of r ev en u e , to lev y ta xe s , fe es a nd oth e r ch ar g es su b ec t tog ui de lin e s a nd limit at io n s imp o se d b y )o ng r es s co nsi st e n t with th e

basi c policy of local au tono my9m. Auto ma tic rele as e of local gov er nm e nt s ust sh ar e in

national taxes9n. Tax e xe m p t io n of all r ev e n u e s a nd a ss e t s of n on 8 s to ck , no n8

pro fi t educa tion al insti tu tions used actuall y, direc tly and excl usi velyfor educat ional purposes9

o. Tax ex e mp t io n of all r ev e nu e s a nd as se t s of p ro pri et a ry orcoope ra t ive educa t iona l in st it u tions sub ec t to limit a tions prov ided bylaw includ ing r es t ri ct ions on dividends and p rovi sions fo r r einves tmen tof profits9

p. Tax exe m p tion of gran ts , endow m e n t s , dona tions orc on tri bu ti on s u se d a ct u all y, dir ec tl y a nd e xcl us iv e ly for e du c a ti o n al

purpose s su b ect to co nditi ons pr escribed by law.

9. e!5 %li4 A4t No. :" " : 4rea t ed t3e S5%i4 S! e4 i a l-4on om i 4 ;on e


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Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge 7 of +$

BBB )lassification, to b e valid, must = ; rest on subst a nti aldistinc tio ns , =; not belimite d to existin g con ditio ns only, an d =?; a pply e "u ally to allm e m b e r s of th e s am e cla ss .

In issuing *.! . -o. CD8A delimit ing incentives within the confinesof th e for me r ubic milit ar y b as e, th e &re si de n t re as o na b ly m ad e aclass ifica t ion tha t is germane to the purpose of %epublic Act -o. D F $.

0ort 5n e To% a4 4 o no w 4lai m s t3 at it s 4o ns t it 5 ti o n al rig 3tto d5e !ro4 es s was viola t e d %e4 a 5s e t3er e was no 3earin g

% ef o re B/ is s 5e d C No. $ :> F $.D o yo 5r a gr e e 6 -x!l ai n .

ANS2- : 3es. Ther e was a viola tio n of #ortu ne Toba cc osright to due process .

$I% issu e d % ) -o. >D8 C > for th e pu rp os e of placi ng 2op e(uxury, &remiu m ore and )ha mpio n within the scop e of thea m e n d a t o r y law a n d su b ec t th e m to t h e incr e as e d t ax ra te .

In so doing , t he $I% did not simp ly in te rp re t t he law, it is sued alegisl ativ e rul e whic h is in th e n at ur e of su bo rd in a t e legisl atio n,


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d esi gn e d to imp le m e n t a pri ma r y le gisl ati on b y pro vi di ng th e d et ai lsthe reo f.

In the sa me way tha t laws mu st hav e the ben efit of publich ea rin g, it is ge ne ra lly re" uir ed th at befor e a legisla tiv e rule isa do pt e d th er e mu st be a h ea ri ng an d pu blic ati on as re" uir ed und erthe Adminis tra t ive )ode .

!n th e ot he r h an d , if wh at is iss ue d is m e r el y a n int er p re t a t iv erule =which is not the rule issue d in this case;, no hearin g or

publica tion is re "uired since an interpre t a t iv e rule is desi gn e d merelyto p rovide guidelines of t he law which the admin is t r a tive agency is incha rge of en fo rc ing .

+. /t is 4ont e nd e d t3a t -x!an de d Hal5 e> Add ed Tax isviola t i v e of t3 e 4on s ti t 5 ti o na l r5le t3a t taxe s s3 o5ld %e5 ni fo rm an d e ?5 it a % l e . /t is li) ew i s e ad v an 4 e d t3 at t3 e -HAT is@ o! !r e s s i v e ' di s4 ri m in a t o ry ' an d 5n( 5s t .

Gow w ere t3e s e o%(e 4 t i on s dis ! o se d of in t3e 4a s e ofTolen ti no v. Se4r et ar y of 0inan 4e and 4om !a ni on 4as e s ' "7 FSC A 9 " + < *F F 8 = 6

ANS2- : a. It is inh er en t in th e pow er to tax th at t he sta te b e fre e tosele ct th e su b ec ts of t ax ati on an d it h as be en rep e at e dl y held th atine"ua li ti e s which r esul t from a singling out of one pa rt icul a r cl as s fortaxa tion , or exempt ion inf ringe no cons ti tu t ional limi tat ion.

Thu s, th e *1AT on c er ta in g oo d s a nd s er vic e s only, b ut n ot ono the r s , do no t viol at e t he rul e on un iformity and e"ui t ableness . b. *"u alit y a nd unifor mi ty of ta xa ti on m ea n s t ha t all ta xa b lear ticle s or k ind s of p ro pe r ty of t he sa m e cla ss b e ta xe d a t th e sa m erat e. The taxin g pow er ha s th e au th orit y to m ak e re as on a bl e an dnatura l class if ica t ions for purposes of taxa t ion .

To sa ti sfy the r e"u ir emen t of uniformity and e"ui t ableness , it ise no u gh th at th e st at u te or ordin a nc e a pplie s e "u a lly to all p er so n s,forms and organi+at ions placed in a s imilar s itua t ion .

c. The *1AT is uni form because the tax is applied similarly on allgoo ds an d servic es sold to th e pu blic, which is no t ex em p t, at th econs t an t r at e of FH or FH.

d. The *1AT is e "u it ab le because it is imposed only on sal e ofgoo ds an d servic es by pe rs on s en ga g e d in busin es s with an an nu alg ro ss s al es a s d et e r mi n e d b y t he law.

ma ll co rn e r s ari8 s ari st or e s a re co ns e " u e n t l y e xe m p t fro m itsa pplic atio n. (ikewis e ex em p t fro m th e tax are sale s of farm an dm ar in e pr od u c ts . Thu s, th e co st of b asi c f oo d a nd ot he r n ec e s si ti e s,s pa r e d a s t he y ar e fro m *1AT, ar e e xp e c t e d to b e rel at iv el y low er a ndwithin the r each of t he gene ral pub li c.

F. n A5 g5 s t 8' * FF + ' B/ a ge n t s a4 ti ng 5! on a re g5 la rl yis s5 e d is si on rd er e xa m in e d t3 e %o o) s of a4 4o 5 n t of vari o5 s

(e w el e r s en g a g e d in t3 e man 5f a 4 t 5 r e of (e w el ry and al li ed5nd er ta )i ng s w er e exa mi ne d and inve st ig a t e d for ex4i se tax!5r! os e s . Am on g t3 es e firm s w er e Gan s' ilad ay ' er4 el l e s 'e t4 .

S5% se ? 5 e n tl y ' t3 e (ew el er s and t3 eir as so 4i at i on filedwit 3 t3 e e gi o na l Trial Co5rt a ! et it io n for d e4 la ra t or y reli ef!rayin g t3a t 4er t ai n !rovis i on s of t3 e N/ C im !o si ng "#ex4i se tax on (ew elry ' !ea rl s and ot3 er !re4io 5s s to ne s ' and!rovi si on s of t3 e Tariff and C5s to m s Cod e im !o si n g t3r ee toten !er4 en t


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and 45lt5r ed !e arl s and !re4i o5 s or s em i> !re4i o5 s s to ne s ' %ed e4 la r e d 5n 4o n s t i t 5 t i on a l an d n5ll a n d v oi d.

T3e (ew el er s li)e wi se !re se n t e d an ex3 a5 s ti v e s t5 dy ont3 e ta x ra te s on (e w el ry le vi e d %y dif fe r e nt Asi an 4 o5 n tr i e s .

T3e trial 4o5rt de4la r ed t3e ?5 es ti on e d !rovi s i o ns asino! e r a t i v e and wit3o 5 t for4 e and eff e4 t inso f ar as t3 e

(e w el e r s ar e 4on4 e r n e d .T3e trial 4o5rt mad e t3e o%s e r v a t i o n t3a t inde e d

go ve rn m e n t tax !oli4y trea ts (ew elr y as non> es s en t ia l ite ms 'and t3er ef or e ' tax ed 3ea vi ly I t3a t t3 e !re se n t tarif f and taxstr5 4t 5r e in4re as e man 5f a4 t5 rin g 4o st and ren der s t3 e lo4al

(e w elry man5 f a 4 t 5 r e r s 5n4o m ! e t i t i v e aga in s t ot3 e r 4o5n t ri e s .2a s t3 er e leg al %a si s for t3 e trial 4o5r tJ s de 4l ar at io n 6

-x!lain.

ANS2- : -o. Ther e wa s no leg al b asis for th e followingreasons :

a . Th e trial ud ge en cr oa c h e d up on m at t er s pro pe rl y fallingwithin the province of legisla tive funct ions .

In mak ing the afore sa id obse rva tions , t he tri al udge ove rlookedt he fac t th a t su ch m at t e r s ar e no t for h im to d ec id e .

Th er e ar e re a so n s w hy ew elr y, a n on 8 e ss e n ti a l ite m, is t ax e d a sit is in this coun tr y and th es e rea so ns , delibe ra te d upon by thelegis la ture a re beyond the reach of udicial "ues t ioning .

%. The tri al cour t is no t the prope r fo rum for t he ven til a ti on ofthe issues r ai sed by the ewe le r s.

It is t he legi sl a tu re to which r eli ef must be sough t , because withth e legisl at ur e pri ma rily lies th e discr et io n to d et e rm in e th e n at ur e=kin d;, o b ec t =p ur po s e ;, e xt e n t =r at e ;, co ve r a g e =su b ec t s; a nd situs=place; of taxa t ion .

Th e udici ar y c an n o t fre el y d el ve int o th os e m at t e r s w hic h, b yconsti tut ional fiat , r ight ly rest on legislat ive udgme nt.

4 . The tax rate s of oth er coun trie s sho uld not be use d as aya rd s ti ck , in d et e r mi n in g wh a t m ay b e th e pr op e r su b ec t s of t ax a ti onin ou r own coun t ry.

It s ho ul d b e poin te d ou t th at in imp osi ng th e afor e m e n ti o ne dtaxe s and duties, the tate , acting thou gh the legislativ e andexecu t ive b ranches , is exe rci sing it s sove reign pre roga t ive .

It is in he r en t in th e p ow e r to t ax t ha t th e t at e b e fre e to s el ec tthe sub ects of taxa tion , and it has bee n repe at edl y held tha t ,

ine"ual it ies which resul t from a singling out of one part icu lar class oftaxa tion , or exempt ion , infringe no cons ti tu tional limi ta t ion.

*#. A fixed ann5 al li4en s e fee on t3o s e en ga g e d in t3e%5 si n es s of g e n er al ent er !r i s e w as als o im !o s e d on t3 e sal e of%i%l e s %y a r eli gi o5 s s e4 t .

/s t 3i s v al id 6

ANS2- : -o, bec au se it violates the consti tu tio nallyguaran tee d fr eedom of the p re s s , and of re lig ion ..

As a lic en s e fe e is fix ed in a m o u n t a nd u nr el a t e d to th e r ec ei pt sof t he t ax p a y e r, s uc h a lice n se fe e, wh en a pp li ed to a religio us s ec t isac tua lly imposed as a condit ion for the free exerc ise of religion.

A license fee 6 re s tr a ins in advance those cons ti t u tiona l liber ti e sof p re s s and r elig ion and inev it ab ly t ends to suppres s t he ir exerci se .7

**. T3e -HAT Law im!o s es a HAT regi st r at io n fe e ofP*' # ## . # # on non> HAT ent er ! r i s e s w3i43 in4l5d es am on g


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Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge : of +$

ot3 er s ' religio 5s se 4t s w3i43 sell s and dis t ri% 5t e s religio 5slit er a t 5 r e .

/s t 3i s vi ol at i ve of reli gi o 5 s fr ee d o m 6

ANS2- : -o. The & ,FFF.FF 1AT reg is t ra t ion fee , a lt hough afixed amoun t is not imposed fo r the exe rci se of a p rivil ege but only forthe purpose of de fr aying par t of t he cost of r eg is t r a tion .

The re gis tr a ti on re "u ir e m e n t is a ce nt ra l fe at ur e of th e 1ATs ys t e m . It is de si gn e d to p ro vi de a r ec or d of ta x cr ed it s b ec a u s e a ny

person wh o is sub ect to th e paym e n t of th e 1AT pays an input tax,e ve n a s h e colle ct s a n o u tp u t t ax o n s al es m a d e or s er vi ce s r en d e r e d .

Th e r egi st r at io n fe e is t hu s m or e of a n a d mi ni st r a ti v e fe e, o nen ot imp o se d o n th e e xe rc is e of a privile g e, m uc h les s a co ns ti tu ti o n alright .

*". Airlin es ' /n4. w as gra nt e d a le gi sl a t iv e fran 43 is e too! er at e s43 ed 5l e d flig3 t ser vi4 e s %e tw e e n anila and Ce%5and vi4e> vers a . /t w as s5%(e 4 t to a fran43i s e tax of "?5alif i ed %y t3 e @m ag i4 w ord s ' w 3i43 @s 3a ll %e in lie5 of alltaxe s . S5% s e ? 5 e nt ly ' Congr es s en a4 te d e!5%li4 A4t No.: : *9 ' t3e -x!an de d Hal5e> Add ed Tax im!airm en t 4la5 s e. /t 4it e sCom mi ss i on e r of /nt er na l ev en 5 e v. Ling ay e n ,5lf -le4 tri4Pow e r Co. ' /n4. ' et al. ' *9 7 SC A " : im !a ir m e n t 4la 5s e .

T3e S5!r em e Co5rt in t3 e Ling ay e n ,5lf 4a se 3el d t3a t43ar te rs or s! e4 ia l law s gran t ed %y t3 e legi sl a t 5r e are in t3 ena t5 re of !riv at e 4o nt ra 4 t s .

5l e o n t 3 e 4 on t e n t i o n of Airli ne s ' /n4 .

ANS2- : T he *1AT do es no t viola te th e no n8 i mp air me n tcl ause .

The reasons why there is no v iola tion are as follows:a . Artic le 4II, ec . o f the )onst itu t ion provides tha t the grant

of a fran chis e for th e op er at io n of a pu blic utility is sub ec t toa me n d m e n t . alt er a ti on or r ep e al b y )on gr es s wh en th e co mm o n go odre"uires9

b. -ot on ly exi sti ng laws but al so th e re serva t ion of essen ti ala tt ri bu t e s of s ov er ei gn t y is r ea d into co nt ra c ts as a po st ul at e of th elegal order9

c. )ontrac ts must be unders to od as having bee n ma de inrefe re nc e to th e pos sibl e ex er cis e of th e rightful aut ho rit y of th eg ov er n m e n t a nd no oblig ati on of c on tr a ct ca n ex te n d to d ef ea t th atauthori ty9

d. A lawf ul t a x o n a n ew su b ec t , or a n incr e a s e d t ax o n a n oldone, does not in te rf e re with a con tr ac t o r impa ir s its obliga t ion , withinthe mean ing of the cons ti tu t ion .

*v en th ou g h s uc h t ax a ti on m a y aff ec t p ar ti cu la r co nt ra c t s, a s itmay incre as e the debt of one perso n and lesse n the security ofanoth er , or may impos e addition al burd en s upon one class andrele as e the burd en s of ano th er , still the tax mus t be paid unle ss

pro hibited by th e co nsti tu tion , nor ca n it be sai d th at it impairs th eobliga tions of any exist ing cont rac t in it s true and legal sense .


8/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge + of +$

*$. eral4 o was gran t ed a fran43i s e to o! er a t e anel e4 tr i 4 lig3 t an d !ow e r s er vi 4e in Cala m% a' Lag5 na so m e ti m ein * F+ $ 5n de r P.D . No. 8 8* .

Und er t3 e fran 43 is e era l4 o !a ys " fra n4 3i s e tax on ofits gro s s re4 ei ! t s and @any law to t3e 4ontr ar ynot w i t 3s ta nd i ng %e in lie5 of all taxe s and as s e s s m e n t s ofw 3a t e v e r na t5 re im !o s e d %y an y na ti on a l or l o4 al a5 t3 or it y orearnin g s' re4 ei ! t s ' in4o m e and !rivil e g e of gen er a t i o n'di st ri %5 t i on an d s al e of el e 4 tr i4 4 5rr e nt .

P5rs 5a n t to t3 e Lo4al ,ov er nm e n t Cod e' t3 e !rovi n4 e ofLag5 na en a4 t e d an ordi na n4 e im !o si ng a fran 43 is e of 8# of* of t3e gro s s ann5 a l re4e i ! t s of %5sin e s s en(oy in g afran 43 is e reali ed d5rin g t3 e !re4 e di n g 4al en d ar y ear wit3i nt3 e !ro vi n 4 e in 4l 5d i n g 4iti e s lo 4a t e d t3 er e i n.

5l e on t3 e v ali di ty of t3 e t ax or di na n 4 e .

ANS2- : The tax ordinance is valid.'nd er th e n ow p re v ai lin g )on st it u ti o n, wh er e th e re is n ei th e r a

gra nt nor pro hibitio n by sta tu t e, th e tax pow er mu st be de e me d toexist altho ug h )ongr es s ma y provid e sta tu to ry limita tio ns andguidel ines .

The ba sic ra tio nal e for th e curr en t rule is to safe gu a rd th evia bility a nd s elf8 sufficie n cy of loc al g ov e rn m e n t u ni ts b y dir ec tl ygr an ti ng th e m g en e r al a nd bro ad ta x pow er s.

The (ocal 0ove rnmen t )ode exp li ci tl y au tho r i+es p rovinces andcitie s, no twit hs t an d in g 6a ny ex e mp t io n gra n te d by a ny law or ot he rspec ia l law7 to impose a t ax on busines ses en oying a f ranch ise .

Indica tive of t he legi sl a tive in ten t to car ry out t he cons ti t ut iona lm an d a t e of v es tin g bro ad ta x pow er s to local go ve rn m e n t units , th e(oc al 0o ve rn m e n t )o de h as with dr a w n t ax e xe m p t io n s or inc en ti ve sthe re to fo re en oyed by ce r ta in en ti ti e s.

In a dditio n, th e (ocal 0ov er nm e n t )od e con tai ns a g en er alr epea l ing cl ause .

The phras e in 6lieu of all taxe s7 has to give way to the pere m p to r y langua g e of th e (oc al 0overn m e n t )ode wh ic h sp ecif ic ally pro vides for th e withdraw al of all exe mp tion s.

The )our t has vi ewed its p revious rulings a s laying s tr e s s on thelegisl ativ e inte n t of t he a me n d a t o r y law wh et h er th e ta x ex e mp t io n

privilege is to be withdrawn or not ra the r th an on wh eth e r th e law canor cannot withdra w the tax exe mp tio n, withou t violating thecons ti t ut ion . = a ni la *l ec tr ic )o mp a n y v. &ro vi nc e of (ag u n a, e t al ., 0.%. -o.

> >JC, ay J , CCC;The (oc al 0ov er n m e n t )od e pro visio ns on with dr aw a l of ta x

ex e mp t io n s pr es cri be s th e g en e r al rule , vi+. th e ta x ex e mp t io n s orinc en tiv e s gr an t e d to or pr es e n tl y e n oy ed by na tu ra l or uridic al

person s are with drawn with th e effectivi ty of th e (oc al 0overn m e n t)ode excep t with respe ct to those expres sly enu me ra te d. =)ity0overnment of an &ablo, (aguna , e t a l ., v. %eyes, e t a l ., 0 .%. -o.


9/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge F of +$

e ns u r e th at , whil e l oc al go ve r n m e n t u ni ts a re b ei ng st re n gt h e n e d a nd m ad emore autonomous , the legi sl a tu re must s till s ee to it t ha t :

a . t he t axpayer will not be over8burdened or saddled wi th mul tipl e and

unreason able imposit ions9 b. each loc al go vern me n t unit will ha ve its fair sh are of av ai labl e

resources9c. t he r esources of the nat iona l government will be undu ly di stu rbed9

andd. loc al t ax a ti on will b e fair, u nif or m a nd us t. = a nil a *lec tr ic

)ompany v. &rovince of (aguna, e t a l. , 0 .%. -o. > >JC, ay J , CCC;The anila *lec t ric )ompany case doct rine reversed the holding in )i ty

0overnment of an &ab lo , (aguna , e t a l. , v. %eyes , e t al ., 0.%. -o. )ons ti tu t ions

is e xp lici t t ha t n o fr an ch is e for t he op er a ti on of a pu blic utilit y sh all b egr a nt e d e xc e pt u nd e r t he co nd it io n t ha t s uc h privil eg e sh all b e s ub e c t toa m e n d m e n t , alt er a ti on or r ep e al b y )o ng r es s a s a n d w he n t he co m mo n g oo dso re"ui res . = anila *lec t ric )ompany v. &rovince of (aguna, e t a l. , 0.%. -o .

> >JC, ay J , CCC;The r ea d e r s ho ul d t ak e no te of th e co nflic ti ng do ct ri ne s e sp o us e d by

the anil a *lect ri c case and the )ity 0overnment of an &ab lo , (aguna case .It m a y int er e st th e re ad e r also to kno w th at th e !on e nt e in t3e anila-le4 tr i4 4a se is E5sti4 e Eose Hit5 g' w3il e t3 e !on e nt e in t3e City, ov e r n m e n t of S an P a% l o' La g5 n a is E5s ti 4 e in er v a ,o n a g a > e y e s .

* 7. 23a t is t3 e 4on 4 e ! t of d o5 %l e tax at io n 6

ANS2- &a . *A-I-0. In its gene ri c s ense , t hi s means t ax ing the same

sub ec t or ob ec t twice during the same t axab le per iod .In its p ar tic ul ar se ns e , it m ay m ea n dire ct du plic at e ta xa ti on ,

which is pro hi bit e d un de r th e co ns tit ut io n b ec a us e it viola te s th ec on c ep t of e "u a l pr ot e c ti o n, u nifo rm it y a nd e "u it a bl e n e s s of t a xa ti o n.Indirect duplica t e taxa tion is not ana th emi+ ed by the aboveconsti tut ional limitations.

b. *(* *-T !# /I%*)T /'&(I)AT* TA4ATI!-:; ame


10/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge *# of +$

a ; ub ec t o r ob ect is taxed twice b; Taxing authori tyc; Taxing purposed; Taxing period


11/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge ** of +$

In s om e ca se s, a n ex cl usi ve rig ht to ta x is c onf er re d on on e oft he co nt ra c ti n g st a te s 9 ho we v e r, for ot he r ite m s of inc om e or c ap it al ,

both st a t e s ar e given th e rig ht to tax, al thou gh th e amou n t of tax th atmay be imposed by the s ta t e of source is limi ted .

ec on d et ho d : Th e st a te of s ou rc e is giv en a full or limit edrigh t to ta x tog et h er with th e st at e of r esid en c e. In t his cas e, th etr ea t ie s m ak e it inc u mb e n t u po n th e st at e of r esi de n c e to allo w reli efin o rde r t o avoid doub le t axa t ion .

Two methods of relief a re used:; Th e e x e m p ti o n m e th o d N th e inco m e or c ap it al whic h is

t ax a bl e in t he st at e of so ur c e or sit us is ex e m p t e d in th e st at e ofresid en ce , alth ou gh in so me insta nc es it ma y be tak en intoaccou nt in dete rminin g the rate of tax applicable to thet axpaye r s r ema ining income or cap it a l.

2 es t ,er ma n y Tax Tre at y !ro vi d e s a * # ta xon roy al ti e s. %5 t ex !r e s sl y allo ws ag ai ns t ,erm an in4o m e an d4or! or at e tax of "# of t3 e gro s s roy al ti e s !aid 5nd er t3 e lawof t3 e P3ili! !i ne s . n t3 e ot3 er 3an d t3 e P> US Tax Trea tyd oe s no t !ro vi d e for a si mi la r t ax 4r ed it in g .

T35s ' t3 e tax on royal t i es earn ed %y U.S. firm s in t3eP3ili! ! in e s may ei t3 er %e of t3re e rate s& "8 !er4 en t of t3egro ss am o5 nt of t3e royal ti es I *8 !er4 en t w3 en t3e royal t i esar e !ai d %y a 4or !o ra ti o n re gi s t er e d wit 3 t3 e P3ili !! in e Bo ar dof /nv es t m e n t s an d en ga g e d in ! ref err ed are as of a4ti vi ti e sI ort3e low es t rate of P3ili! !i n e tax t3a t may %e im!o s e d onroy al ti e s of t3 e s am e )ind !ai d 5n de r si mil ar 4ir4 5m s t a n 4 e s toa r es id e n t of a t 3ir d s ta t e .

ay U.S. Cor!or at i on s 4laim en t i t l em e n t to t3 e @m os tfa vo re d na ti on ta x rat e of * # on roy al ti e s as !ro vi d ed in t 3e

P> US Tax Treat y in rela t io n to t3 e P> 2es t ,erm an y TaxTrea ty 6

-x!l ai n w it 3 re as o n s .

ANS2- : -o. Th e e n ti tl e m e n t of th e FH ra te b y '. . fir msd es pit e th e ab se n c e of a m at ch in g cre di t =


12/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge *" of +$

ANS2- & Th e int en ti on sh ou ld b e co nsi de r e d in th e lig ht oft he p ur po s e b eh in d th e m os t fav or e d n at io n = #-; cla us e w hic h is t og ra n t to th e co nt ra c ti n g p ar ty tr e at m e n t n ot le ss fav or a bl e th a n whic hhas bee n or ma y be grant ed to the 6most favored 7 amo ng othercountr ies .

Th e #- is int en d e d to e st a b li sh th e p rin ci pl e of e "u a li ty ofint er n a ti o n al tr e at m e n t b y pr ov id in g th a t th e citi+ en s or su b ec t s oft he co nt ra c ti n g n ati on s m ay e n oy privile g e s a cc or d e d b y e it he r p ar tyto th os e of th e m os t fav or e d n ati on .

Th e e ss e n c e of t he prin ci pl e is to allo w t he t ax p a y e r in o n e st at eto av ail of mo re lib er al pro visio ns gr an t e d in a no th e r ta x tre a ty towhich the coun try of resid en ce of such taxp ay er is also a party

pro vided th a t th e sub ect mat t e r of ta xa tion is th e same as th a t in th et ax tr ea ty unde r which the t axpaye r is liabl e.

* +. T3 e - x! an d e d Hal 5e > Add e d Tax L aw is a n i ndir e4 t ta xw3i43 may %e 4on si de re d as regr es s iv e in 4 3ara 4t e r . /t is afixe d tax t3er ef or e t3 e low er is t3 e in4o m e t3 e tax es t3at are! ai d ar e !r o! o rt io n a t e l y 3i g3 e r.

/s t3i s viola ti ve of t3 e 4on st it 5 ti o n w 3i4 3 m an da t e s t3a tCongre s s s3 all evolv e a !ro gr e s s iv e sy s t em of taxa t i o n 6-x!lain.

ANS2- : Th er e is n o viola ti on of t h e co ns ti tu ti o na l m an d a t efor the following reasons:

a. The m an d a t e to ) on gr e ss is not to pr es cri be bu t to e v olv e a pro gre s sive syste m of taxa tion . !therwise , sal es ta xes whic h perh a p sa re th e old e st for m of indir ec t t ax e s , wo ul d h av e b e en pro hi bi te d withthe p roclama t ion of the cons ti tu t iona l p rovi sion . al es t axes a re al soregressive.

b. The )onsti tu tion does not re ally pr ohibit th e impositi on ofindir ect t axes which, like the 1AT, are r eg res sive . The cons ti t u tiona l

pro vision mea n s simply th a t indirec t taxes sh ould be mini mi +ed.c. %e so rt to in dir ec t t ax e s sh ou ld b e mi ni mi +e d b ut n ot a vo id e d

enti rely because it is d ifficul t, if no t impossib le, to avoid imposing suchtaxes acco rd ing to the t axpaye r s abilit y t o pay.

In th e c as e of 1AT, th e law mi ni mi +e s th e re gr e s si v e eff ec t s oft hi s imp o si ti on b y pr ovi di ng for + er o r ati ng of c er ta in tr an s a c ti o nswhil e g ran t ing exempt ions to o the r tr ansac tions .

The tra ns a ct io ns which ar e su b ec t to 1AT ar e tho se whichinv olv e go od s a nd ser vic e s whic h ar e us ed or av ail ed of m ai nl y byhighe r income g roups .

* F. T3 e Con st it 5 ti o n re? 5ir e s t3 at all r ev e n 5 e %ills s 3a llorigi na t e ex4l 5s iv e ly fro m t3 e Go5 se of e!r es e n t a t i ve s . 2ast3i s vi ol a te d w 3 en t3 e -HAT %ill t 3a t ori gi n at e d fro m t3 e Go 5s edi d n o t % e 4o m e t 3e -HAT la w 6 -x! la in .

ANS2- :a . The )ons ti tu t ion simply means tha t t he initi at ive for filing

revenu e, tariff or tax bills must come from the 2ouse of%epr es en t at iv es on the the or y th at , elect ed as the y are fro m th edistricts, the emb er s of the 2ouse can be ex pe ct e d to be mor esens it ive to t he loca l needs and p roblems .

b. It is not th e law 8 but th e re ven u e bill 8 whic h is re "uired bythe )onstitu tion to 6origina t e exclusiv ely7 in the 2ous e of%e pr e s e n t a t iv e s b ec a u s e a bill origi na ti n g in t he 2ou se m a y u nd e rg o


13/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge *$ of +$

such exten sive chan ge s in the ena t e tha t the result may be arewri ting of the whole , and a dist inc t bill may be produced.

c. To in sis t th a t a r ev e n u e st at u t e 8 no t o nly th e bill whic hiniti at e d th e le gi sl at iv e pr oc e s s cul mi na t in g in th e e na c t m e n t of t h elaw 8 mu st su bs t an t ia ll y b e th e sa m e a s th e 2ou se bill would b e tod en y th e e na t es po we r n ot only to 6co nc ur with a me n d m e n t s 7 bu tals o to 6pr op o s e a m e n d m e n t . 7 It wo ul d b e to viola t e th e co e "u a li ty ofle gisl at iv e p ow e r of t he tw o h ou s e s of )o ng re s s a nd in f ac t m ak e t he2ouse supe r io r to t he ena te .

0ive n th e pow er of t he en at e to pro po s e a me n d m e n t s, it ca n pro pos e its ow n versi on even with respec t to bills which are re"uired by th e )onsti tu tion to orig ina t e in th e 2ouse .

d. -o r does the )onst it u tion p rohibi t the filing in the ena teof a su b st it u t e bill i n a nti ci pa ti o n of its re ce ip t of th e bill fro m th e2ou se , so lon g a s ac tio n by th e e na t e a s a bo dy is with he ld p en di ngrece ip t of the 2ouse bill.

"#. A !e t i t io n for 4er t i orar i andKor !ro3i%i t i on43all en g in g t3 e validi t y of e!5 %li4 A4t No. +" 7# ' am en di ng4ert ai n !rovi si on s of t3 e N/ C %y im!o si ng so> 4all ed sintax es * "" '

5le 11/' Se4 . *" $ ' and 5le 1H///' Se4 . *# F ' t3e C3airs5 s! e n d e d t3 e se ss io n wit3 o5 t firs t r5lin g on e! . Arroy oJs?5 e st i o n w 3i 43 ' it i s a ll eg e d ' is a ! oi nt of ord er or a !rivil e g e dm ot io n .

/t i s arg5 ed t3a t e! . Arroy oJ s ?5 ery s3 o5l d 3av e %e enres ol ve d 5!o n t3 e res 5m ! ti on of t3e se ss io n on Nov em % e r "+ '*F F9 ' %e4 a5 s e t3e !arliam e n ta ry sit5 at i on at t3 e tim e of t3ead(o 5r nm e n t rem ai n ed 5! on t3 e res 5m ! t i o n of t3 e s es s io n .

n t 3e sam e day ' Nov em % e r "* ' *F F9 ' t3 e %ill w as sig ne d%y t3 e S!ea ) e r of t3e Go5s e of e!r e s en t a ti v e s and t3ePre s id en t of t3e Sen a t e and 4er t if i ed %y t3e res ! e4 t i v ese4r e t a r i e s of %ot3 Go5 s e s of Congre s s as 3avin g %e e nform ally !a s s ed %y t3e Go5s e of e!r e s en t a ti v e s and 3eSen at e on Nov em % e r "* ' *F F9 .

T3 e e nr ol le d %ill w a s si gn e d int o law %y Pr es id e n t am o son Nov e m % e r "" ' * FF 9 .

/t is no w 43 ar g ed t3a t t3 e s es s io n w as 3a st il y ad(o 5r ne dat $&7# !.m . on Nov em % er "* ' *FF 9 and t3e %ill 4er ti f i e d %yS!e a) er de Hen e4i a to !rev en t e! . Arroyo from form ally43all en gi n g t3 e exis t en 4e of a ?5or5 m and as) in g for are4 on s i d er a t io n .

5l e on t3 e 4o nt ro v e r s y.

ANS2- : Th er e is no b asi s for t he pr oc e d u r e b ei ng br ui te d a shaving been vio la ted .


14/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge *7 of +$

'nd er th e e nr oll ed bill d oc tr in e , th e sig ni ng of t he bill b y th epe ak er and the en at e &reside nt and the certification by theecr et ari es of both 2ous es are conclu siv e of its du e en ac t me n t .

=Arroyo, e t a l. , v. de 1enecia , e t a l. , A in t3e Nation al /nter n a l ev en 5 e Code wasve to e d %y t 3e Pre si d en t .

n t 3e ot 3e r 3a nd ' t3 e B/ m ai nt ai n s t3 at S e4 ti o n 7 " w asnot en t i r e l y ve t o ed %5t mer e ly t3e word s @3ot el s ' mot el s 'res t 3 o 5 s e s on t3e gro5 n d t3a t it mig3 t res t r ain t3edev e l o ! m e n t of 3ot e l s w3i43 is es s en ti a l to t3e to5ri s mind5s t ry.

5l e on t3 e 4o nf li 4t in g 4o nt e n t i o n s .

ANS2- : The $I% is correct.Th e inclu si on of h ot el s, m ot e ls , a nd re st h o u s e s ar e co nsi de r e d

a s 6it em s wit hi n th e m e a ni n g of n o. =


15/83


T3e se s em in ari es are org an i e d as non> !rofi t and non>s to 4 ) e d5 4 a t io n a l in st it 5 ti o n s .

/s r. , ae rl an ex e m ! t fro m t3 e !a ym e n t of re al !ro !e rt yt ax e s 6 23 at a% o 5t t3 e reli gi o 5 s 4o n gr e g a t i o n 6 -x!l ai n.

/s t3 e reli gi o5 s 4on gr e g a t i o n ex em ! t from t3 e !ay m e n t ofin4 om e t ax e s o n t3 e re nt a l re 4e i !t s 6 -x!l ai n.

ANS2- : r. 0aerlan is exe mp t from the paym en t of real pro pe r ty taxes on th e , FFF s". m. po rti on of his J, FFF s" . m. lot, asw ell a s o n t h e re m ai ni n g ?, FF F s ". m.

!n th e oth e r h an d th e religio us co ng re g a ti o n sh oul d p ay re al pro pe r ty taxes on th e ?, FFF s" . m. parcel of land and the F8 st ory build ing.

r. 0 ae rl an is e x e mp t fro m re al pr op e r ty t ax a ti on , wh e th e r o nth e , FF F s". m. or o n th e ?, FF F s". m. b ec a us e th e b asi s for t ax a ti onof rea l p rope r ty is use and not owner ship .

The religio us co ng re g a ti o n is ex e mp t fro m re al pro pe r ty ta xe so n th e , FF F s ". m . p a rc e l o f la nd a s w ell as on t h e imp ro v e m e n t s th ec ha p el a nd th e s em in a r y.

This is s o b e c au s e th e y a re ac tu a ll y, dir ec tl y a nd e xcl usi ve lyused fo r r elig ious purposes . The t rea tmen t is diff eren t with r egard tothe ?,FFF s ". m. lot and its improvemen t t he F8s torey building .

@hile it is tr ue th a t th e pr oc e e d s ar e u se d for t h e su p po r t of itss emi n ar ie s , this is a t th e mo st indir ec t us e, h en c e no t su b ec t to th et ax exempt ion .

Th e r eligio u s co ng r e g a ti o n is s ub e c t to inco m e t ax a ti o n. =#orr ea s o n s, ref er to " ue s ti o n no . < > , infra ;

@hile it is tru e th at all th e se mi n ari e s ar e org a ni +e d a s no n8 pro fi t no n8 st ock educa tion al insti tutions, it is no t th eir income s whic his th e su b ec t of th e pro bl e m b ut th at of th e religio us co ng re g a ti onwhich is not a non8 profi t non8 s tock educat ional inst itu t ion .

" $. CA w as e st a %l is 3 e d as @a w e lf ar e ' e d5 4 at i on a l an d43ari t a% le no n> !rof i t 4or! or at io n earn e d an in4o m e of P9# #t3o5 s an d from lea si ng o5t a !or tio n of its !rem is e s to sm alls3 o! ow ner s ' li)e res ta 5r an t s an 4an t e en o! er at or s ' and P7 7t3 o5 s a n d fro m !ar)i ng f ee s 4oll e4 t e d fro m no n> m e m % er s .

/t w as s5%( e4 t e d to an as se s s m e n t for non> !ay me n t ofin4 om e tax e s on t3 e for eg o i n g in4 om e .

CA 4l ai m s t3 at it is t ax e xe m ! t 4l ai mi n g for t 3e re as o nt3 at t3 e lea si ng to s mall s3o ! ow ne rs and t3 e o! er at io n of t3 e!ar)in g lot are rea so n a %l y ne4 e s s a r y for t3 e a44 om ! li s 3m e n tof i t s o %( e4 ti v e s . /t !r em i s e s it s 4 lai m on t3 e !ro vi si o n s of t 3e* F+ : Con st it 5 ti o n.

/s t3 e in4o m e deriv ed from ren t al s of t3e real !ro ! er tys 5%( e4 t to in4 om e ta x 6 e as o n o5 t yo 5r an s w e r.

ANS2- : 3es, t he income is sub ec t t o income t ax .Th e -I%) re co g ni + es th e ex e m p ti o n fro m t ax of t h e inc om e s of

civic le ag u e s or org a ni +a t io n s n ot orga n i+ e d for pro fit b ut o pe r a t e dex cl usiv el y for th e pro mo ti on of social welf ar e, a s well a s clu bsorga n i+ e d a nd o pe r at e d e xcl usi ve ly for pl ea s u r e, re cr e a ti o n, a nd o th e rn on 8 p ro fit a bl e p ur p os e s wh er e n o p a rt of th e n et inc om e inu re s to th e

benefi t of any priv a te st ockhold er or me mb e r .2owe ve r, th e tax ex em p ti on so rec og ni+ ed do es not flow to

inc om e of w h at e v e r kin d a nd ch ar a c t er of t he for eg oi n g orga n i+ a ti on sfro m a ny of th eir pro pe r ti e s, re al or p er so n al , or fro m a ny of th eir


16/83


a ctivi ti es co nd u c te d for pro fi t, r eg a rd l es s of th e dis po si ti on m a d e ofsuch income , which sha ll be sub ec t t o income t axes .

#ur the rmore , t he const it u tiona l t ax exempt ions r efer only to r ea l pro pe r ty tha t are ac tu all y, directly and excl usively used for re ligious,c ha ri ta b le or e du c a ti o n al p ur po s e s , a nd th a t th e o nly co ns ti tu ti o n all yrec og ni+ e d ex e mp t io n fro m tax a ti on of r ev en u e s ar e th os e e ar ne d byn on8 profit, no n8 sto ck e du c at io n al instit utio n s whic h ar e ac tu all y,dir ec tly and exc lus ive ly used for educa t iona l purposes .

3 )A is no t a n e du c at io n al instit uti on e mb ra c e d u nd e r this particular co ncep t . =) om m i s si o n e r of In te rn a l % ev e n u e v. )o ur t of Ap pe a ls , e tal., ;

" 7. As ea n Oiddi e S43 o ol ' /n4. ' is a n on > !rof it ' no n> st o4 )e d5 4 at i on a l ins ti t5 ti o n. /t ow n s a on e 3 e4 t ar e lot ' o n e> 3alf of

w3i43 is o445 !i ed %y t3 e s43 oo l 4am !5 s and t3e ot3 er 3alf islea s e d to Agri> 0 arm s' /n4. ' for 5s e as a f low er gard e n to m ee tt3 e e x! o rt re ?5 ir e m e n t s of Agri> 0ar m s' /n4.

T3 e re nt al s 4oll e4 t e d fro m Agri> 0arm s ar e 5 se d %y As ea nto !a y for t 3e s al ari e s of it s s 43 o ol t ea 4 3 er s .

Anti4i !a ti n g 3i g3 e r ex ! en d i t5 r e s for o! er a ti n g t3 e s4 3o o ld5ring t3e s43 o o l year *FF :> F+ ' t3e s43o ol in4re a se d itst5i tio n fe es and s tar t ed 4oll e4 ti ng t3 e in4re as e d fe es as earlya s A!ril * F F : .

T3e adv an 4 e d 4oll e4 ti on s w er e in t3 e m ea nt im e de !o s it e din a lo4al %an) w3 er e it earn s inter es t . An intern at i on al

org an i at io n don at e d US *# ' # # # . # # on t3 e s oli t ar y 4o nd it i ont3a t it s3o5ld %e 5s ed to 5!gr ad e t3e salari e s of t3 e s43 oo ladmini s t r a t or s . T3e s43 o o l also wan t s to im!or t som e4o m !5 t e r s for t 3e 5 se of it s st 5d e n t s .

o5 ar e no w 4on s5 lt e d to ex! l ai n t3 e tax im !li4 at io n s oft3 e a% ov e and giv e yo5r advi 4e .

23 at s 3 al l y o5 s a y6

ANS2- :a. The sch ool is ex em p t fro m th e p ay me n t of re al pro pe rt y

t axes on the one8 half po rt ion of its one8 hec ta re lo t which is being used

as the school campu s .This is s o b ec a u s e th e s am e is a ct u all y, dir ec tl y a nd e xcl us iv el y u se dfor educat ional purposes .

Agri8 #ar ms is s ub e c t to th e p ay m e n t of r ea l pro p e rt y t ax e s o nth e re m ai ni ng on e8 h alf th at it l ea se s fro m Ase an for th e re as o n th atth e sai d por tio n is us ed for co mm e r ci al pu rp os e s an d no t ac tu a lly,d irec tly and exclus ive ly for educat ional purposes .

Ase an s t ax e xe m p t io n privile g e d oe s n ot flow to Agri8 #ar ms becau s e re al pr op er ty taxa tion is based on use and not on ow nership.

@hile it is tr ue th a t th e re nt a l inc om e is d ev o te d to e du c a ti o n al purpose s , it has no bearing in th e case as it is th e land th a t sh ould th e

ac tua lly, direc tly and exclusive ly used for educat ional purposes .

b. The income derived fro m th e tu iti on fe es is exe mp t fro m th einc om e t ax e s a s th e s e a re to b e a ct u al ly, dir ec tl y a nd e xcl usi ve ly u se dfor ed uc a ti on a l pur po s e s b ein g d ev ot e d to me e t th e incr ea s e d sc ho olopera t iona l expend i tu re s .

c. Th e p a s si ve inc om e in th e for m of in te re s t s on b an k d ep o si tsm ay b e ex e mp t fro m inco m e ta xe s a nd th e with ho ldin g ta xe s of < FHif th ey ar e refl ec te d o n th e sch ools a nn u al infor ma ti on re tu rn s a ndd uly a ud it e d fin an ci al st at e m e n t s , s up p or t e d b y a c er tific at io n fro m


17/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge *: of +$

th e d ep o si to ry b an k a s to th e a mo u n t of int er e st inco m e e ar ne d fro m passive invest m e n t s not su b ect to th e D8K D a s a m e n d e d b y /e p ar t m e n t !r de r -o. C


18/83


19/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge *F of +$

b; %efund of intern al re ven u e taxe s, fe es or ot hercharges9

c; &enal ties imposed in re la t ion there to .< ; !t he r ma t t e r s a ri sing unde r :

a ; The -at ional Interna l %evenue )ode , or b; !ther law or part of law administ e r e d by th e

$ureau of Internal %evenue.

Th e a pp e a l to th e )o ur t of Tax App e al s m us t b e file d wit hin > Fdays from rece ip t of the )ommissione rs adve r se dec is ion . If t he re isno decision , the appeal should be dismissed for lack of uri sd ic t ion .

%. T3e Co5rt of Tax A!! e al s 3a s (5risdi4 ti o n overd e4 is io n s of t3 e Com m is s i o n e r of C5s to m s ov er&

; )ases involving:a ; (iabili ty for cus toms dut ie s , fee s o r othe r money

charges , b; ei+ures, det en tion or re leas e of pro per ty

affected,c; #ines , fo rf ei tu re s and o the r pena l ti e s imposed in

rela tion there to9< ; !t he r ma t t e r s a ri sing unde r :

a ; t he cus toms law, or b; !ther law or part of law administ e r e d by th e

$ureau of )u stomsTh e a pp e a l to th e )o ur t of Tax App e al s m us t b e file d wit hin > F

days from rece ip t of the )ommissione rs adve r se dec is ion . If t he re isno decision , the appeal should be dismissed for lack of uri sd ic t ion .

4. /nst an 4 e s w3 er e t3 e Co5rt of Tax A !! ea ls w o5l d 3a ve (5ri sdi4 t i on ev e n if t3 er e is no de4i s i o n ye t of t3 eCo m mi s s i o n e r of / nt er n a l ev e n 5 e &

; @here the )om mis sio ne r has not act ed on the dispu te da ss e ss m e n t aft er a p erio d of KF d ays fro m su bm is si on of c om pl et esu pp o rt in g doc u me n t s , th e ta xp a y er ha s a p erio d of > F d ay s fro m th eexpi ra t ion of t he KF day per iod within which to appea l to the )our t ofTax Appeals . =last par. , ec.


20/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge "# of +$

ANS2- : !nly )ommis sio ne rs final decision den yin g thedispute is sub ect of appeal .

@ord s to th e effe ct th at th e m at t er wo uld b e r ef er re d to th e)ollect ion *nforcemen t /ivision for t he issuance of a war ran t of l evyand dist ra in t is not a final decision appealable to )TA.

*v en th e ac tu al issu a nc e of a warr an t of distr ai nt a nd lev y inc er ta in c as e s still c an n ot b e co ns id e r e d a fin al d ec isi on on a dis pu t e das se ss m e n t . =) om m i s si o n e r of Int er n al % ev e nu e v. 'ni on hi pp in g ) or p. , KJ

)%A J?D ;

" FA . Cit e a4 ts of B/ Com mi s si o n e r t3 at ar e 4o ns id e r e das deni a l of !rot es t w3i4 3 serv e as %as i s for a! ! ea l to t3eCo5rt o f Tax A !! ea l s .

ANS2- &; #iling by th e $I% of a civil s uit for collec ti on of th e

deficiency tax is considere d a denial of the re"ue s t forr econside ra t ion.


21/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge "* of +$

The perce nt ag e s use d ma y be obtain ed from the taxp aye r,indus t ry pub li ca t ion , prior yea rs audi t r esul t s, or t h ird par ti e s. Thec om p a ri so n will p ro vi de a n in dic at io n o n th e p os si bilit y of re ve n u e

bei ng unders t a t e d .Amo ng th e sig nific an t ra tio s a nd tre n ds to b e a na ly+ e d ar e th e

percen t a g e mark8 up, gross profi ts ra tio or gr oss margin percen t a g e , pro fi t margin, to tal asse ts tu rnov er , and invento ry tu rnove r.

b. Net w ort 3 m et 3 od . A m et h o d of rec on st ru c ti ng inco m ewhich is b as ed on th e th eo ry th at if th e tax pa ye rs ne t wort h ha sincre as e d in a given ye ar in an amo un t larg er tha n his repor te dinc om e , h e h as u nd e rs t a t e d his i nco m e for t ha t ye a r.

The n et wort h on a fixe d st ar ti ng d at e is c om p ar e d with th e n etw or th o n a fix ed e nd in g d at e . Any incr e a s e in n et wo rt h is pr es u m e dto b e inc om e no t d ecl ar e d for t ax p ur po s e s .

The difficult y of e st a bli sh in g th e op en in g ne t wort h of a ta x payer has led to th e 6 Co3 an 5l e 7 whic h m ea n s th e us e e sti ma t e s ora pp ro xi ma ti on s of t he a mo un t of c as h an d oth er ass er ts whe re th et ax p a ye r lack s a de " u a t e re co rd s .

c. Ban ) d e! o s it m et 3 o d . The b an k rec or ds of th e ta xp a ye rar e a nal y+ e d a nd th e $I% es ti ma t e s inco m e on th e b asi s of t he to tal

bank deposits af ter elimi na ting no n8 income items.This me th od sta nd s on the pre mis e th at dep osits repr es en t

ta xa bl e inco me unle ss oth er wis e ex plain e d as bein g non8 t ax ab leite m s. This m et h o d m a y b e u se d only wh er e th e $I% h as b e en le ga ll ya llowed access t o t he t axpaye r s bank r eco rds .

d. Cas 3 ex !e n d i t5 r e m et 3 o d . This me th o d a ss u m e s th at th eexc es s of a tax pa ye rs ex pe n di tu re s durin g th e tax perio d ov er hisr ep o rt e d inco m e for t h at p eri od is ta xa b le to th e ex t en t no t dis pr ov e dotherwise.

e. Unit and val5 e m et 3o d . The de te rmina t ion o r verifica tionof gros s r ece ip t s may be computed by applying pri ce and p ro fi t figuresto the known asce r t a inab le "ua li ty of busines s of the t axpaye r.

#or e x a m pl e , in o rd e r to d et e r mi n e t he gro ss re ce ip t s of a pi++ a parl or, multi pl y th e po unds of flour used by th e numb er of pi++ as per pound wh ic h in tu rn wo ul d th en be multi pli ed by th e av era g e pric e per pi++ a.

f. T3ird !ar ty inf or m at io n or a44 e s s to re4 or d s m et 3 o d .The $I% ma y re" uire third partie s, public or priv at e to sup plyinformatio n to the $I%.

g. S5rv ei l l a n4 e and as se s s m e n t m et 3o d . =)hapter 4III.Indir ect Approach to Inves t iga t ion, 2andbook on Audit &rocedures andTechni"ues N 1olume I, pp. OK8D?;

$ *. T3 e B/ dis 4o v e r e d t3 at -lvi e' a %5 si n e s s w o m a n ' didnot file 3 er in4 om e tax ret 5r ns for t3 e tax a% le ye ar s *F F+ and*F FF. A !re> as se s s m e n t not i4 e for %a4) tax es w as t3e n iss 5e din t3 e am o5 n t of P" millio n w 3i43 5ltim a te ly m at 5r ed into anas se s s m e n t not i4 e.

T3 e B/ arriv e d at t3 e ad di ti on a l tax d5 e af te r 5si ng t3 e@n et w ort 3 m et 3 od and a44 e s s to -lvie s !5r4 3a s e s fro m 3ers 5! ! li e r s of raw m at e ri a ls .

S3 e now dis ! 5 t e s t3 e as se s s m e n t for la4) of lega l %as i s%e4 a5 s e of t3 e 5s e of t3 e @ne t wort3 w3i43 is not a5t3 ori e d5nd er t3 e Tax Cod e' and for viola tio n of 3er 4on st it 5t io na lrig3 t s w3 en 3er !5r43 a se re4ord s were a44 e s s e d from 3ers 5! ! li e r s .

5l e o n 3 er di s !5 t e .


22/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge "" of +$

ANS2- : *lvies content ions are beref t of meri t .ince *lvie did not file her income t ax r etu rns , which r epor ts a re

r e" ui re d b y l aw a s a b as is for a ss e s s m e n t , th e n th e $I% )o mm is si o ne rs ha ll a s s e ss t he ta x on th e b es t evi de n c e a va il ab le .

The $I% ) om mi ss io n er is au th or i+ e d to s ec ur e rec or ds fro m public or privat e entiti es to assi st him in the asses s m e n t .

#ur th e r m o r e , t he $I% m a y u se su ch m e th o d a s in t he o pini on ofthe )ommiss ioner clear ly reflec ts the income.

a . 0e ne r al %ul e. 6Th e t ax a bl e inc om e s ha ll b e co mp u t e d u po n th e basi s of th e taxpayers annual acc ounting per iod =fisc al ye ar or ca lendarye ar , as th e cas e ma y be; in acc or da n ce with th e me th od of acc ou nt in gr eg ul ar ly e mp lo ye d in k e ep in g t he b oo ks of s uc h t ax p ay e r9 b ut if no s uc hm et h od of a cc ou nt in g ha s be e n so e mp lo ye d , or if th e me t ho d e mp lo ye d

d oe s n ot cle ar ly r efl ec t th e inc om e , th e co mp u t a t io n s ha ll b e in a c co rd a n c ewith such me thod as in the opinion of the )ommiss ione r cl ea rly r efl ec t s theincome.7 = ec. ?>, -I%) of CCD;

b. #ailur e to ubmi t %e"ui red %etur ns , t ate me n t s , %e po r ts or !ther/ocuments .6@hen a r eport r e"ui red by law as a basi s for the a ssessme n t of any na tiona lint e rna l r evenue t ax sha ll not be for thcoming wi th in the time fixed by l aws orr ul es a nd re gul a ti on s or wh en t he r e is r ea s on to b eli ev e t ha t a ny s uc h r ep or tis f al se , inc om pl e t e or e rr on e o u s, th e )o mm is s io n e r sh al l a s s e ss t he pr op e rt ax on the bes t evidence obta inab le .

In case a per son fail s t o file a r e"ui red r etu rn or o the r document a t t hetime p rescr ibed by law, or willfully o r otherwise fil es a f al se or fr audulen tr et ur n or o th er d oc u m e n t , t he )o mm is s io n e r s ha ll m ak e or a m e n d t he r et ur nfrom hi s own knowledge and from such informat ion a s he can obta in throughtest imony or o therwise , which sha ll be pri ma faci e correc t and sufficient forall legal purposes.7 R ec. O =$;, -I%) of CCDS

$*A. Dis45 s s t3 e !ow er of t3 e Com mi ss io n er to %tai n/nformat ion .

ANS2- & 6In a sc e rt a i ni n g th e co rr e ct n e s s of a ny re tu r n, or i nmaking a retur n whe n non e has bee n ma de , or in det er minin g th e

liabilit y of a per son fo r any in te rna l r evenue t ax , o r i n coll ec ting anys uc h lia bilit y, or in e va lu a ti n g ta x co mp li a nc e , th e )o mm is si o n er isauthor i+ed: xxx

To o bt ai n on a re gul ar ba sis fro m a ny pers on oth er th an th e person wh ose intern al revenu e tax liabili ty is sub ect to audit orinv es ti g a ti o n, or fro m a ny offic e or offic er of th e n ati on a l a nd loc alg ov er n m e n t s , go ve rn m e n t a ge n ci es a nd ins tr u me n t a li ti es inclu di ngthe $angko en t r al ng &ilipinas and gove rnmen t8 owned o r Ncon trol ledcor po ra ti on s, a ny infor ma ti on su ch a s, bu t no t limit ed to, cost s a ndvolu me of prod uc tio n, rec eip ts or sale s and gross inco me s ofta xp a ye r s, an d th e na me s , a dd re ss e s, an d fina nci al st at e m e n ts of

c or po r at io n s , m ut u a l fu nd co m p a ni e s , in su ra n c e co m p a ni e s , re gi on a lo pe ra ti ng h ea d " u a rt e r s or multi na ti on a l co mp a n ie s , oin t ac co u nt s,a ss oc ia ti o ns , oin t v en t ur e s or c on so r ti a a nd re gis t er e d p ar t ne r s h ip s ,and thei r membe rs9 xxx7 R ec. J =$;, -I%) of CCD;

$". 23at is a ! re> as s e s s m e n t noti4 e and w3at is itsim !o rt a n 4 e 6

ANS2- : A pre8 a ss es sm e n t notic e is a a lette r sen t by th e$ureau of In te rnal %evenue to a t axpaye r a sk ing him to explain within


23/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge "$ of +$

a p erio d of fifte en = J ; d ay s fro m re cei pt wh y h e sh oul d no t be th esub ec t of an a s ses sme n t noti ce .

As a g en e r al rul e, th e $I% co ul d n ot iss ue a n a ss e s s m e n t no ti cewit ho u t firs t iss ui ng a pr e8 a ss e s s m e n t n oti ce b ec a u s e it is p a rt of t hed ue pro ce s s rig ht s of a ta xp a ye r to b e giv en no tic e in t he for m of a

pre8 asses s m e n t no tice, and for him to explain wh y he sh ould be th esub ec t of an a s ses sme n t noti ce .

$"A. Cite ins t an 4 e s w3 er e a !re> as se s s m e n t noti4 e is n otre? 5ir ed %ef or e a n oti 4e of as s e s s m e n t is s en t to t3 e tax !a y e r.

ANS2- &a. @he n th e findin g for an y deficie nc y tax is th e res ult of

m at h e m a t ic a l err or in t he co mp u t a ti o n of th e ta x a s a pp e a ri ng on th eface of t he r etu rn9 or

b. @hen a disc rep a n c y has been deter min e d betwe e n th e taxwit hh e ld a nd t he a mo u n t a ct u al ly r em it t e d b y t he with ho ld in g a ge n t 9or

c. @h en a tax pa ye r opt ed to claim a refu nd or tax cre dit ofe xc e s s cr ed it a bl e wit hh ol di n g t ax for a t ax a b le p eri od w as d et e r mi n e dto hav e carrie d over and auto m at ic ally ap plied th e sa me am ou ntclai me d a ga in s t th e e sti m a t e d t ax lia bilitie s for th e t ax a bl e " ua rt e r or" ua r te r s of th e s uc c ee d i n g t ab le ye a r9 or

d. @h en th e exc e ss ta x d u e on ex cis a bl e articl es h as no t b e en pai d9 or

e . @h en a n a r ti cl e loc ally p u rc h a s e d or im po rt e d b y a n e x e m p t person , su ch as, but not limit ed to vehicl es , ca pit al e"uipm e n t ,m ac hi ne ri es an d sp ar e part s, ha s be en sold, tra de or tra nsf er re d tonon8 exempt persons . = ec.


24/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge "7 of +$

The affid avit8 rep or t me re ly con tai ne d a co mp ut a ti on of th eliabilities.

It did not st at e a de m an d or a perio d for pa ym e n t. It was nota dd r e ss e d to th e t ax p a y e rs b ut to th e /e pa r t m e n t of Gus tic e.

That t he affidav it8 repor t con tained de ta il s of t he t ax liabiliti esdoe s not ipso facto ma ke th e sa me an ass es s me n t . Its purp os e wasm er e ly to su p po r t th e cri mi na l co mp la in t for a s s e ss m e n t . )le arl y, itwas not me an t to be a notice of the tax du e and a de ma n d for t he

paym e n t th ereof.Th e fac t th a t th e co mp la in t its elf w as s pe ci fic ally dir ec t e d a nd

s en t to th e /e pa rt m e n t of Gustic e a nd no t to th e ta xp a ye r sho ws th atthe in ten t of t he $I% was to file a c riminal compla int fo r t ax evas ion ,n ot to issu e an a ss e ss m e n t .

Altho ug h th e re ve n u e offic er s re co m m e n d e d th e iss ua n ce of a nass es sm e n t, the co mmi ssio ne r inste ad opt ed to file a crimin alcompla int .

@h at wa s rec eiv e d by th e ta xp a ye r wa s no tic e of th e filing ofth e crimin al ca se no t a notic e th at th e $I% h ad m ad e an as se s s m e n t .=) om m i s si o n e r of I nt er n al % ev e nu e v. & as c or % ea lt y a nd / ev el o p m e n t )or po r at i o n,e t a l. , 0 .%. -o . J , p rom. Gune


25/83


#or re al pro pe rt y ta xa ti on , th er e m ay b e a sp ec ia l m ea n in g tothe burd en s tha t are impos ed upo n real prop er ti es tha t hav e be en

benefi ted by a public works expen ditu re of a local govern m e n t .It is some t imes call ed a spec ia l a sse s sme n t or a speci a l levy.The pre sc ri ptiv e p erio ds for m ak in g a ss e ss m e n t s ar e th re e =>;

yea r s from the la st day within which to file a r etu rn o r when the r etu rnwas actua lly filed and t en yea r s from di scovery of t he failure to file t hetax return or discovery of fal si ty or fraud in the return .

$7. 23a t i s m ea nt %y @(e o! ar dy as s e s s m e n t 6

ANS2- : A d elin "u e n c y ta x as se s s m e n t whic h wa s a ss e ss e dwith ou t th e be ne fit of co mpl et e or p artial au dit by an au th ori+ edrev en u e officer, who ha s re as on to believ e th at th e ass es s m e n t an dcoll ec tion of a defi ci ency t ax will be eopa rd i+ed by de lay because ofth e tax pa ye rs failure to co mpl y with th e a udit a nd inve sti ga ti onre" uir em e nt s to pre se nt his books of acco un ts an d o r pertin en tr ec or d s, or to su b st a n t i at e all o r a ny of t he d ed u c ti o ns , ex e m p ti o n s, orcredit s claimed in his re turn . R ec. > . =a; , %ev. %egs . -o. O8. = a;,%ev. %*gs. -o. O8 . . ? ,%ev. %egs. -o.


26/83


ta xp a ye r do es no t su sp e n d th e pr es cri ptiv e p erio d . =)o m m is s io n e r o fIn te rn a l % ev e n u e v. )o ur t of A pp e al s , e t al ., 0.%. -o. J D < , #e br u a ry < J, CC C=Ca rn a t io n 4 a s e =

$8A. 23at are t3e gro 5n d s for s5 s ! en di ng st a t 5 te oflimit at io n s or !re s4 ri !t iv e !eri od s for as s e s s m e n t ' %e gi nn in gor d is t ra i n t or l e vy or ! ro 4 e e d i n g in 4 o 5r t6

ANS2- & Th e h oldi ng in t he )ar na ti o n c as e th a t th e w aiv er ofth e pe rio d for ass es s m e n t mu st be in writing an d ha ve th e writt encon se n t of th e $I% ) om mi ssi on e r is still doc trin al b ec a us e of th e

pro visions of ec.


27/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge ": of +$

/n *F + # it was as s e s s e d don or s tax %e4 a 5 s e t3e B/4on si de r e d t3 e 4o ns id e ra t i o n for t3 e s al e ins 5f fi 4i en t ' an d t3 ediff er e n 4e %et w e en t3e fair mar) e t val5 e and t3e a4t5 al!5r4 3a s e !ri4 e' a tax a% le do na ti on . S5% s e ?5 e n t l y ' on A!ril F'* F+ * t3 e B/ in4r ea s e d t3 e a ss e s s m e n t .

2as t3er e a @fals e and fra5d 5l en t ret5rn wit3in t3e4on te x t of t3 e Tax C od e w3i4 3 w o5 ld allo w as s e s s m e n t %e yo n dt3 e fiv e y ea r R5 nd e r t3 e !r es e n t Tax Cod e' t3r e e


28/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge "+ of +$

*. T3ey 3av e not form e d an 5nr eg is t e r e d !art ne rs 3 i! to% e tr ea t e d a s a 4 or !o ra t i on for t a x ! 5r !o s e s I

". T3er e w o5l d %e do 5%l e tax at io n if t3 ey wo 5l d %e m ad eto !a y t3 e d ef i4 ie n 4 y tax e s I an d

$. T3e rig3 t of t3e go v er nm e n t to 4oll e4 t 3as alre a dy! r e s4 r i % e d .

5le on t3 e is s5 e s rais ed dis 45 s s in g ea 43 on e of t3 em .

ANS2- S&. The y ha ve for me d an as so ci at io n whic h sh ou ld be ta xa bl e

like a corpora t ion .The Tax )ode has includ ed und er the ter m 6corpora tio n7

partne rs hip s, no ma t t e r how crea t e d or organi+ed, oint8 stockc om p a n ie s , oin t a cc o un t s = cuentas en par ticipac ion ;, a ssocia t ions , orinsurance companie s . R ec.


29/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge "F of +$

7# . Ag5 st in die d in De4 e m % e r' *F FF lea vi ng to 3 is tw o so ns '0ernan d o and Eose ' an a!ar t m en t %5ildin g . After t3ese t t l em e n t of Ag5 s t i n s e s t at e ' 3is tw o son s de4id ed not to!ar t i t ion t3 e a! ar tm e n t %5ildi ng and (5s t divid ed t3 e ren ta lsam on g t3 em s e lv e s for t3e year "# ## .

a. 2as a !ar tn e r s 3 i ! form ed w3i43 is s5%( e4 t to4or! or at e in4o m e tax e s for t 3e y ear "# ## 6

e as o n o5 t y o5r an s w e r.%. /f' ins t e a d of d ivi di n g t3 e re nt al s in "# # # ' t3 e %ro t3 e r s

inve s t e d t3 e sam e in t3e !5r43 as e of a 3o5 se to %e ren t ed o5 t .Gow s3 all t3 e in4o m e from t3 e ren ta ls of t3 e 3o 5s e %e tre at e dfor t ax !5r! o s e s 6

-x!lai n %rief l y. 2o5ld yo5r an sw e r %e diff er en t if t 3e3o5s e was not !5r43a s ed for t3e !5r!o se of ren ti n g o5 t t3es a m e % 5t w a s la t er s ol d 6 -x!l ai n %ri ef l y.

ANS2- S&a . -o. )o8hei rs who own inhe ri t ed prope r ti e s which p roduce

inco me sh ould not au to m a ti ca lly be con sid er e d as part ne rs of anunr eg is te re d corp or at io n su b ec t to inco me tax for th e followin greasons :

. th e s h ar in g of gr os s r e tu r ns d oe s n ot of its elf es t ab li sh a partne rs hip , wh eth e r or not th e persons shari ng th e m have a oint orco mm o n rig ht or int er e st in a ny pro pe r ty fro m whic h th e re tu rn s ar ede rived .

The re m us t b e a n u nmi st a k ab le int en ti on to for m a p ar tn e rs h ipor oint venture .

. &erso ns who c ont rib ut e pro pe rt y or fund s t o a co mm one nt e rp ri se an d a gr e e to sh ar e th e gro ss ret ur ns of t ha t e nt er p ri se in

pro portion to th eir co ntri bu ti on , but wh o severall y retain th e title tot he ir r es p e c ti v e c on tri bu ti o n, ar e n ot th er e b y re nd e r e d p ar tn e r s .

They hav e no com mo n stock capital, and no co mm un it y ofint er e s t a s prin ci pa l pro pri e to r s in t he b usi ne s s its elf fro m w hic h th e

pro ce e d s were derived .?. In or de r to co ns ti tu t e a p ar tn e r s hi p int er s es e th er e mu st

be: =a ; an intent to form th e same9 =b; gene ra ll y parti ci pa ting in bo th pro fi ts and losses9 =c; and su ch a co mmu nity of intere s t , as fa r asthird pe rs on s ar e co nc er n e d a s en a bl e s e ac h p ar ty to m ak e a co nt ra c t,m a n a g e th e b usi ne s s , a nd dis po s e of th e wh ol e pr op e r ty.

J. Th e co m m o n o w ne r sh i p of pr op e r ty do e s no t its elf cr ea t ea p a rt n e rs h i p b et w e e n t he o wn e rs , th ou g h t he y m a y u se it for p ur po s eof makin g gains, and the y ma y, withou t beco min g part ne rs , area mo ng the ms elv es as to the ma na g e m e nt an d use of such prop er tya nd th e a pp lic a ti on of t he p ro ce e d s th er e fr o m ..

b. The income fro m th e rental of th e ho use shall be tr ea t e das the inco me of a n unre gist er ed partn er sh ip to be tax abl e as acorp or ati on be ca u se of th e cle ar inte ntio n of th e bro th er s to ointoge the r in a ventu re for making money out of ren tal s .

Th e a n s we r w ou ld b e diff er e n t b ec a u s e t he r e w as n o in te n ti o n toent er into a profit making ventur e. They mer ely forme d a co8ownership .

This is evident from the following authori t ies:


30/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge $# of +$

@her e th e plain tiff, his brot he r an d, a nd an ot he r a gr ee d to beco m e ow ners of a single tr ac t of re alty holdi ng as tena n t s inc om m o n , a nd to divid e th e p rofit s of d is po si n g of i t, th e br ot h e r a ndth e ot he r no t b ein g e nti tl ed to sh ar e in plain tiffs co mm is si on s, no

partne rs hip ex is ted as betwe e n th e three partie s, whatev e r th eirr el at io n m a y h av e b e en a s to thir d p ar ti e s.

7*. Li%oro is a ! ra4 ti 4i ng law y er w 3o on *8 A!ril * F F8filed 3is in4o m e tax ret5rn for t3e year *F F 7 . U!one xa m in a t io n ' t3 e B/ fo5 nd 3i s ret 5r n d ef i4 ie n t of P* 7' # # F. + 7 .

n $# Se! t em % er and $# Nove m% er *FF 8 ' Li%oro wasnot if i ed of 3is tax def i4i en 4y . Ge res !o nd e d wit3 a ! rot es tlet te r dat e d *F De4 e m % e r *F F8 .

n ** ay *F F9 ' t3 e Com mi s si o n er of /nt er na l ev en 5 edeni ed Li%oro s !rot es t for la4) of leg a l %as i s. Ge t3e ns ea s o n a %l y file d a !e t it i on for revi ew %ef or e t3 e Co5rt of TaxA!! e al s .

n "F ar43 *FF + ' t3 e CTA rend e r e d a de4i s i o ndis mi s si n g t3 e a! !e a l w 3i 43 Li%oro re4 ei v ed on "F ay *F F+ .T35s ' 3e 3ad 5nt il *$ E5ne *F F+ to file a !e ti t io n for revi ew% ef o r e t 3e Co 5r t of A! ! ea l s .

n ** E5ne *F F+ ' ins te a d of filin g a !e t it i on for revi eww it 3 t3 e Co5r t of A!! e al s ' Li%or o fil ed a N o ti 4 e of A! !e a l w it 3t3 e Co5rt of A !! ea l s ' and on *$ E5ne *F F+ ' a m otio n for a ne xt e n s i o n of t3irt y


31/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge $* of +$

a. )rimin al ch ar g e n e ed only b e su pp or t ed by a prima faci eshowing of failure to file a re"ui red return @2I(* the fac t of failure tofile a re tu r n n ee d n ot b e pro v en by a n a ss e s s m e n t .

b. $efo re an asse s s m e n t is issued , th ere is, by pr ac tice, a pre8 asses s m e n t no ti ce sent to th e taxpa ye r @2I(* su ch is not so witha criminal cha rge . The cha rge is filed d ir ec tly with the / epa r tmen t ofGustice.

c. A criminal compla int is in st it u t ed no t to demand paymen t , but to penali+ e th e taxpa ye r for violati on of th e Tax )ode @2I(* th e purpose of th e issuanc e of an asses s m e n t is to co llect th e tax.=) om m i s si o n e r of I nt er n al % ev e nu e v. & as c or % ea lt y a nd / ev el o p m e n t )or po r at i o n,e t a l. , 0 .%. -o . J, Gune


32/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge $" of +$

n A5g5 s t *8 ' *FF + 3e re4 e iv ed t3e Com mis si on er slet te r de ny in g 3is 4laim for r ef 5n d. n S e! t em % e r *' *F F+ ' orwit3in t3irty end e dDe4 em % er $* ' *F+ 8' it de4l ar ed a ne t los s of P" 8 million 't3 er e % y s 3o w i n g no t ax lia %i li ty.

0or t3e s544 ee d i ng year ' end in g De4 em % er $* ' *F +9 ' itli)e wi s e re! or te d a net los s of P* 7 millio n and t35 s de 4l ar e dno in4 om e ta x !a ya %l e for t3 e y ea r.

D5ring *F +8 and *F +9 ' t3 e Ban) earn ed ren t al in4om efrom lea se d !ro! er ti e s from w3 er e t3e les se e s wit3 3e ld andremi t t ed to t3e B/ wit33 old in g 4red i t a%l e taxe s of P"+ "t3 o5 s a n d for * F +8 ' an d P" $ 7 t3 o5 s a n d for * F+ 9 .

n A 5g 5s t :' *F +: ' t3 e Ban) re? 5e s t e d t3 e Com mi ss io n e rof / nt er n al ev e n 5 e ' a mo n g ot 3 er s for a t a x 4r ed it of P 8 m illi onre!r es e n t i n g t3 e ov er !a y m e n t of t ax e s in t3 e firs t an d s e4 on d?5art er s of *F +8 .

T3er ea f t e r ' on E5ly "8 ' *F ++ ' t3 e Ban) file d a 4laim forref5n d of 4redi t a %l e tax e s wit33 el d %y its les s e e s from!ro! er ty ren t al s in * F+ 8 and in * F+ 9. Bot3 t3 e re?5 es t andt3e 4laim w er e sea so na %l y filed wit3in t3e ten +8 is s5 ed %y t3e t3enA4tg . B/ Comm is s io n e r.


33/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge $$ of +$

n Nov e m % er *+' *F ++ t3 e Ban) ins ti t5 t ed a Pet i ti on forevi ew %ef or e t3 e Co5rt of Tax A!! ea ls . 2o5ld t3 e !e ti ti on

!ro s! e r 6

ANS2- : -o. It was filed out of time a nd sinc e th et ax p a ye r d eci d ed to a va il o f th e t ax cr ed it it co uld n ot a ny m or e s ee k arefund.

The two =


34/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge $7 of +$

a. T3e 4o m !l ai n t w as no t file d 5! on a5 t3 ori ty of t3 e B/Com m i s si o n e r a s re ?5 ir e d 5n d er S e4 ti o n " "# of t 3 e Tax C od eI

%. T3e a4 ti on 3a s alr ea d y !r es 4r i% e d .e so lv e t3 e is s5 e s rai se d .

ANS2- S :a. %ev en u e Ad minis tr a ti ve !rd er -o. F8 C J sp ecific ally

author i+es the (itiga t ion and &rosecut ion ec t ion of the (ega l /ivisionof th e re gio n al dis tric t offic es to instit ut e th e n ec e ss a r y civil a ndcriminal actions for tax collection.

As the compla in t filed in this case was signed by the $I%s )hiefof (ega l /ivision for t he r eg ion and verifi ed by the %eg iona l /ir ec tor,t he r e w as , t h er e fo r e , co mp li a nc e wit h t he law. e c. D of th e pr es e n tTax )o de a ut ho ri +e s th e $I% )o mmi ssi on e r to d el eg a t e so me of his

powers . b . ec. , C C< .*ve n as su mi ng th at sh e first le ar ne d of t he notic e on th e da y th ewarran t s were served on Ganuary


35/83

Silli m an Uni ve r si t y Coll e g e of Law Pro f. A. D o mo n d o n s No t esin Taxa t i on LawBar !s " ## $ %y& a tt y s . d en ' d() tt ' rt a MIRROR WEEK NOTES!a ge $8 of +$

7: . Aft er dis so l5 ti o n of Para m o5 n t on ar4 3 $* ' *F +9 'BP/ a4t ed as li?5id at or . n ay $# ' *F +8 Para mo 5n t !aidP$# +' : : F . # # in in4o me tax e s for t3e * st ?5 ar t erI for t3 e " nd?5art er ' it ! aid P9" 9' # # # . # # on A5g5 s t "F ' *F +8 I for t3e $ rd

?5 ar te r' it !ai d P "+ 7 ' * 9 * . # # on N ov e m % e r " F' * F+ 8 .n A!ril "' *F +9 ' Para m o5 n t file d its 4or! or at e an n5 al

in4o m e tax ret 5r n for t3 e 4al en d ar ye ar en di ng De4 e m % e r $* '*F + 8 . All in all ' Para m o 5 nt !aid t3e tot a l am o5 n t ofP*' " * + ' F 7 # . # # t3er e % y s3o w i n g a ref5 n d a % l e am o5 n t ofP 9 8 ' " 8 F. # # .

n A !ril * 7 ' * F+ + ' BP/' a s li? 5i da t o r of Par am o 5 n t ' fil edwit3 t3e Co5rt of Tax A!!e al s a let t er dat ed A!ril *" ' *F ++reit er at in g its 4lai m for t3 e ref 5n d of P9 8' " 8 F. # # as ov er !a idin4om e tax for 4al en da r year *F +8 . n A!ril *8 ' *F+ +' t3ePara m o 5 n t re!r e s e n t a t i v e ' fil ed wit 3 t3 e Co5rt of Tax A!! ea l sa !e t i t i on to toll t3 e r5nnin g of t3e !re s4 ri ! ti ve !erio d forfilin g a 4 lai m for ref 5 nd of ov er ! a id in4 o m e t ax e s .

T3e Co5rt of Tax A!!e a l s r5led t3a t t3e two> year!r es 4r i! ti v e ! eri od 4o m m e n 4 e d to r5n fro m A!ril * 8' * F+ 9 ' t3 ela st da y for filin g t3 e 4or! or at e in4o m e ta x ret 5r n an d gr an t e dt3 e ref 5n d. 2a s t3 e gr an t of t 3 e ref 5n d !ro !e r 6

ANS2- & -o. The tw o8 ye ar pr escri p ti ve peri od for actio ns forr ef un d of co rp or a t e inc om e t ax sh ou ld b e c o mp u t e d fro m th e ti me ofa ct u al filin g of th e #in al Ad u st m e n t %e tu rn or

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Taxation} Mirror Notes of Prof Domondon} Made 2003} by SU Law (Daki)} 65 Pages

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