1.

Chamber of Real Estate and Builders Associations, Inc., v. The Hon. Executive ecretar! Alberto Romulo, et al ".R. #o. 1$%&'$. (arch ), *%1% +acts, Petitioner Chamber of Real Estate and Builders Associations, Inc. (CREBA), an association of real estate developers and builders in the Philippines, uestioned the validit! of "ection #$(E) of the %a& Code 'hich imposes the minimum corporate income ta& ((CI%) on corporations. )nder the %a& Code, a corporation can become sub*ect to the (CI% at the rate of #+ of ,ross income, be,innin, on the -th ta&able !ear immediatel! follo'in, the !ear in 'hich it commenced its business operations, 'hen such (CI% is ,reater than the normal corporate income ta&. If the re,ular income ta& is hi,her than the (CI%, the corporation does not pa! the (CI%. CREBA ar,ued, amon, others, that the use of ,ross income as (CI% base amounts to a confiscation of capital because ,ross income, unli.e net income, is not reali/ed ,ain. CREBA also sou,ht to invalidate the provisions of RR 0o. #123, as amended, other'ise .no'n as the Consolidated 4ithholdin, %a& Re,ulations, 'hich prescribe the rules and procedures for the collection of C4% on sales of real properties classified as ordinar! assets, on the ,rounds that these re,ulations5

)se ,ross sellin, price (6"P) or fair mar.et value (7(8) as basis for determinin, the income ta& on the sale of real estate classified as ordinar! assets, instead of the entit!s net ta&able income as provided for under the %a& Code9 (andate the collection of income ta& on a per transaction basis, contrar! to the %a& Code provision 'hich imposes income ta& on net income at the end of the ta&able period9 6o a,ainst the due process clause because the ,overnment collects income ta& even 'hen the net income has not !et been determined9 ,ain is never assured b! mere receipt of the sellin, price9 and Contravene the e ual protection clause because the C4% is bein, char,ed upon real estate enterprises, but not on other business enterprises, more particularl!, those in the manufacturin, sector, 'hich do business similar to that of a real estate enterprise. Issues, (:) Is the imposition of (CI% constitutional; (#) Is the imposition of C4% on income from sales of real properties classified as ordinar! assets constitutional; Held, -:) <es. %he imposition of the (CI% is constitutional. An income ta& is arbitrar! and confiscator! if it ta&es capital, because it is income, and not capital, 'hich is sub*ect to income ta&. =o'ever, (CI% is imposed on ,ross income 'hich is computed b! deductin, from ,ross sales the capital spent b! a corporation in the sale of its ,oods, i.e., the cost of ,oods and other direct e&penses from ,ross sales. Clearl!, the capital is not bein, ta&ed. 8arious safe,uards 'ere incorporated into the la' imposin, (CI%. 7irstl!, reco,ni/in, the birth pan,s of businesses and the realit! of the need to recoup initial ma*or capital e&penditures, the (CI% is imposed onl! on the -th ta&able !ear immediatel! follo'in, the !ear in 'hich the corporation commenced its operations.

"econdl!, the la' allo's the carr!1for'ard of an! e&cess of the (CI% paid over the normal income ta& 'hich shall be credited a,ainst the normal income ta& for the three immediatel! succeedin, !ears. %hirdl!, since certain businesses ma! be incurrin, ,enuine repeated losses, the la' authori/es the "ecretar! of 7inance to suspend the imposition of (CI% if a corporation suffers losses due to prolon,ed labor dispute, force ma*eure and le,itimate business reverses. (#) <es. >espite the imposition of C4% on 6"P or 7(8, the income ta& base for sales of real propert! classified as ordinar! assets remains as the entit!s net ta&able income as provided in the %a& Code, i.e., ,ross income less allo'able costs and deductions. %he seller shall file its income ta& return and credit the ta&es 'ithheld b! the 'ithholdin, a,ent1bu!er a,ainst its ta& due. If the ta& due is ,reater than the ta& 'ithheld, then the ta&pa!er shall pa! the difference. If, on the other hand, the ta& due is less than the ta& 'ithheld, the ta&pa!er 'ill be entitled to a refund or ta& credit. %he use of the 6"P or 7(8 as basis to determine the C4% is for purposes of practicalit! and convenience. %he .no'led,e of the 'ithholdin, a,ent1bu!er is limited to the particular transaction in 'hich he is a part!. =ence, his basis can onl! be the 6"P or 7(8 'hich fi,ures are reasonabl! .no'n to him. Also, the collection of income ta& via the C4% on a per transaction basis, i.e., upon consummation of the sale, is not contrar! to the %a& Code 'hich calls for the pa!ment of the net income at the end of the ta&able period. %he ta&es 'ithheld are in the nature of advance ta& pa!ments b! a ta&pa!er in order to cancel its possible future ta& obli,ation. %he! are installments on the annual ta& 'hich ma! be due at the end of the ta&able !ear. %he 'ithholdin, a,ent1bu!ers act of collectin, the ta& at the time of the transaction, b! 'ithholdin, the ta& due from the income pa!able, is the ver! essence of the 'ithholdin, ta& method of ta& collection. ?n the alle,ed violation of the e ual protection clause, the ta&in, po'er has the authorit! to ma.e reasonable classifications for purposes of ta&ation. Ine ualities 'hich result from sin,lin, out a particular class for ta&ation, or e&emption, infrin,e no constitutional limitation. %he real estate industr! is, b! itself, a class and can be validl! treated differentl! from other business enterprises. 4hat distin,uishes the real estate business from other manufacturin, enterprises, for purposes of the imposition of the C4%, is not their production processes but the prices of their ,oods sold and the number of transactions involved. %he income from the sale of a real propert! is bi,,er and its fre uenc! of transaction limited, ma.in, it less cumbersome for the parties to compl! 'ith the 'ithholdin, ta& scheme. ?n the other hand, each manufacturin, enterprise ma! have tens of thousands of transactions 'ith several thousand customers ever! month involvin, both minimal and substantial amounts.

#.

C.((I I.#ER .+ I#TER#A/ RE0E#1E, petitioner, vs. CEB1 2.RT/A#3 CE(E#T C.(2A#4 and C.1RT .+ TA5 A22EA/ , respondents. ".R. #o. /6*)%') 3ecember 1', 1)7& +ACT , B! virtue of a decision of the C%A, as modified on appeal b! the "upreme Court, the CIR 'as ordered to refund to Cebu Portland Cement Compan! the amount of P @A2,-B3.23, representin, overpa!ments of ad valorem ta&es on cement produced and sold b! it. 4hen respondent moved for a 'rit of e&ecution, petitioner opposed on the ,round that the private

respondent had an outstandin, sales ta& liabilit! to 'hich the *ud,ment debt had alread! been credited. In fact, it 'as stressed, there 'as still a balance o'in, on the sales ta&es in the amount of P -,$32,#$2.3A plus #3+ surchar,e. %he C%A ,ranted the CIRs motion. %he CIR claims that the refund should be char,ed a,ainst the ta& deficienc! of the private respondent on the sales of cement under "ection :3C of the %a& Code. =is position is that cement is a manufactured and not a mineral product and therefore not e&empt from sales ta&es. %he petitioner also denies that the sales ta& assessments have alread! prescribed because the prescriptive period should be counted from the filin, of the sales ta& returns, 'hich had not !et been done b! the private respondent. (ean'hile, the private respondent disclaims liabilit! for the sales ta&es, on the ,round that cement is not a manufactured product but a mineral product. As such, it 'as e&empted from sales ta&es. Also, the alle,ed sales ta& deficienc! could not as !et be enforced a,ainst it because the ta& assessment 'as not !et final, the same bein, still under protest and still to be definitel! resolved on the merits. Besides, the assessment had alread! prescribed, not havin, been made 'ithin the re,lementar! five1!ear period from the filin, of the ta& returns. I 1E, 4hether or not sales ta& 'as properl! imposed upon private respondent. HE/3, <es, because cement has al'a!s been considered a manufactured product and not a mineral product. %his matter 'as e&tensivel! discussed and cate,oricall! resolved in Commissioner of Internal Revenue v. Republic Cement Corporation , decided on Au,ust :B, :23@, statin, that cement qua cement 'as never considered as a mineral product 'ithin the meanin, of "ection #-C of the %a& Code, not'ithstandin, that at least 3B+ of its components are minerals, for the simple reason that cement is the product of a manufacturing process and is no lon,er the mineral product contemplated in the %a& Code (i.e.9 minerals sub*ected to simple treatments) for the purpose of imposin, the ad valorem ta&. %he ar,ument that the assessment cannot as !et be enforced because it is still bein, contested loses si,ht of the ur,enc! of the need to collect ta&es as Dthe lifeblood of the ,overnment.D If the pa!ment of ta&es could be postponed b! simpl! uestionin, their validit!, the machiner! of the state 'ould ,rind to a halt and all ,overnment functions 'ould be paral!/ed. 8. (unici9alit! of (a:ati v. Court of A99eals "R ; 7)7)76) 1%<%1<)% +acts, An e&propriation proceedin, for a piece of land filed b! the (unicipalit! of (a.ati a,ainst Admiral 7inancial and Credit Corp resulted 'ith the (unicipalit! havin, to pa! P A,#2:,CCC.BB less initial pa!ments b! the municipalit!. After that, private respondent filed a 'rit for e&ecution for the balance. Re,ional %rial Court ,ranted the motion and directed the ban. to deliver the said balance. "ubse uent motions for reconsideration and appeal to the respondent Court of Appeals b! the municipalit! in order to stop the ,arnishment. Issues, 4hether or not the court can validl! sub*ect ,overnment accountsEpropert! to ,arnishment. 4hether or not the the court erred 'ith the decision of assessin, the hi,her amount as to ho' much the municipalit! is 'illin, to pa!. Held, %he court ruled that the (unicipalit! of (a.atiFs accounts or propert! cannot be held for ,arnishment as ,overnmentFs fund, held for public use, can not be held for ,arnishment. =o'ever, the court still held the (unicipalit! liable for the assessed value of the land and improvements because the private respondent should be entitled to *ust compensation. =. CIR >v> Al?ue, Inc., @ CTA ".R. #o. /6*77)$ +ebruar! 1&, 1)77

+ACT , Al,ue, Inc., a domestic corporation en,a,ed in en,ineerin,, construction and other allied activities. Philippine "u,ar Estate >evelopment Compan! had earlier appointed Al,ue as its a,ent, authori/in, it to sell its land, factories and oil manufacturin, process. G%here 'as a sale for 'hichH Al,ue received as a,ent a commission of P:#C,BBB.BB, and it 'as from this commission that the P$A,BBB.BB promotional fees 'ere paid to the aforenamed individuals. %he pa!ees dul! reported their respective shares of the fees in their income ta& returns and paid the correspondin, ta&es thereon, and there 'as no distribution of dividends 'as involved. GAl,ue claimed the $A,BBB to be deductible from their ta&, to 'hich the CIR disallo'ed.H I 1E, 4hether or not the Collector of Internal Revenue correctl! disallo'ed the P$A,BBB.BB deduction claimed b! private respondent Al,ue as le,itimate business e&penses in its income ta& returns. HE/3, 0? I CIR is not correct. %he burden is on the ta&pa!er to prove the validit! of the claimed deduction. In the present case, ho'ever, 'e find that the onus has been dischar,ed satisfactoril!. %he private respondent has proved that the pa!ment of the fees 'as necessar! and reasonable in the li,ht of the efforts e&erted b! the pa!ees in inducin, investors and prominent businessmen to venture in an e&perimental enterprise and involve themselves in a ne' business re uirin, millions of pesos. %his 'as no mean feat and should be, as it 'as, sufficientl! recompensed. %a&es are the lifeblood of the ,overnment and so should be collected 'ithout unnecessar! hindrance. ?n the other hand, such collection should be made in accordance 'ith la' as an! arbitrariness 'ill ne,ate the ver! reason for ,overnment itself. It is therefore necessar! to reconcile the apparentl! conflictin, interests of the authorities and the ta&pa!ers so that the real purpose of ta&ation, 'hich is the promotion of the common ,ood, ma! be achieved. It is said that ta&es are 'hat 'e pa! for civili/ation societ!. 4ithout ta&es, the ,overnment 'ould be paral!/ed for lac. of the motive po'er to activate and operate it. =ence, despite the natural reluctance to surrender part of oneFs hard earned income to the ta&in, authorities, ever! person 'ho is able to must contribute his share in the runnin, of the ,overnment. %he ,overnment for its part, is e&pected to respond in the form of tan,ible and intan,ible benefits intended to improve the lives of the people and enhance their moral and material values. %his s!mbiotic relationship is the rationale of ta&ation and should dispel the erroneous notion that it is an arbitrar! method of e&action b! those in the seat of po'er. But even as 'e concede the inevitabilit! and indispensabilit! of ta&ation, it is a re uirement in all democratic re,imes that it be e&ercised reasonabl! and in accordance 'ith the prescribed procedure. If it is not, then the ta&pa!er has a ri,ht to complain and the courts 'ill then come to his succor. 7or all the a'esome po'er of the ta& collector, he ma! still be stopped in his trac.s if the ta&pa!er can demonstrate, as it has here, that the la' has not been observed. '. B2I +amil! avin?s Ban: v. CA, et al. "R #o. 1**=7%A A9ril 1*, *%%% +acts, Petitioner BPI 7amil! "avin,s Ban. had an e&cess 'ithholdin, ta&es for the !ear :232 amountin, to P::#,-2:.2B. It indicated in its :232 Income %a& Return that it 'ould appl! the said amount as a ta& credit for the succeedin, ta&able !ear, :22B. =o'ever because of business

losses, petitioner informed the Bureau of Internal Revenue (BIR) that it 'ould claim the amount as a ta& refund, instead of appl!in, it as a ta& credit. 4hen no action from the BIR 'as forthcomin,, petitioner filed its claim 'ith the Court of %a& Appeals. %he C%A and the CA, ho'ever, denied the claim for ta& refund. "ince petitioner declared in its :232 Income %a& Return that it 'ould appl! the e&cess 'ithholdin, ta& as a ta& credit for the follo'in, !ear, the %a& Court held that petitioner 'as presumed to have done so. %he C%A and the CA ruled that petitioner failed to overcome this presumption because it did not present its :22B Return, 'hich 'ould have sho'n that the amount in dispute 'as not applied as a ta& credit. =ence, the CA concluded that petitioner 'as not entitled to a ta& refund. Issue, 4hether or not petitioner is entitled to the refund of P::#,-2:.2B, representin, e&cess creditable 'ithholdin, ta& paid for the ta&able !ear :232. Held, It is undisputed that petitioner had e&cess 'ithholdin, ta&es for the !ear :232 and 'as thus entitled to a refund amountin, to P::#,-2:. Pursuant to "ection C2 of the :23C %a& Code 'hich states that a corporation entitled to a refund ma! opt either (:) to obtain such refund or (#) to credit said amount for the succeedin, ta&able !ear. Petitioner presented evidence to prove its claim that it did not appl! the amount as a ta& credit. A cop! of the 7inal Ad*ustment Return for :22B 'as attached to petitionerFs (otion for Reconsideration filed before the C%A. A final ad*ustment return sho's 'hether a corporation incurred a loss or ,ained a profit durin, the ta&able !ear. In this case, that Return clearl! sho'ed that petitioner incurred PA#,-3B,:$@ as net loss in :22B. Clearl!, it could not have applied the amount in dispute as a ta& credit. %he BIR did not controvert the veracit! of the said return. It did not even file an opposition to petitionerFs (otion and the :22B 7inal Ad*ustment Return attached thereto. Petitioner also calls the attention of this Court, as it had done before the C%A, to a >ecision rendered b! the %a& Court in C%A Case 0o. -32$, involvin, its claim for refund for the !ear :22B. In that case, the %a& Court held that Dpetitioner suffered a net loss for the ta&able !ear :22B . . . .D Respondent, ho'ever, ur,es this Court not to ta.e *udicial notice of the said case. RespondentsF reasonin, underscores the 'ea.ness of their case. 7or if the! had reall! believed that petitioner is not entitled to a ta& refund, the! could have easil! proved that it did not suffer an! loss in :22B. Indeed, it is note'orth! that respondents opted not to assail the fact appearin, therein J that petitioner suffered a net loss in :22B J in the same 'a! that it refused to controvert the same fact established b! petitionerFs other documentar! e&hibits %echnicalities and le,alisms, ho'ever e&alted, should not be misused b! the ,overnment to .eep mone! not belon,in, to it and thereb! enrich itself at the e&pense of its la'1abidin, citi/ens. If the "tate e&pects its ta&pa!ers to observe fairness and honest! in pa!in, their ta&es, so must it appl! the same standard a,ainst itself in refundin, e&cess pa!ments of such ta&es. Indeed, the "tate must lead b! its o'n e&ample of honor, di,nit! and upri,htness. C. C.((I I.#ER .+ I#TER#A/ RE0E#1E vs.T.B4. HI22I#" C.. /T3., represented b! "?RIA(?0% "%EA("=IP A6E0CIE" I0C., and C?)R% ?7 %AK APPEAL" #-- "CRA @-#9 (a! #C, :22A

+acts5 %o.!o "hippin, a forei,n corporation represented in the Philippines b! "oriamont "teamship A,encies and o'ns and operates (E8 6ardenia. 0A")%RA * chartered (E8 6ardenia to load :C,ABB metric tons of ra' su,ar in the Philippines. "oriamont A,enc!, = paid the re uired income and common carrierFs ta&es PA2,A#@.$A and P-$,C:2.BB, respectivel! (%otal P:B$,:-#.$A). )pon arrivin,, ho'ever, at 6uimaras Port of Iloilo, the vessel found no su,ar for loadin,. 0A")%RA and "oriamont mutuall! a,reed to have the vessel sail for Mapan 'ithout an! car,o. Claimin, the pre1pa!ment of income and common carrierFs ta&es as erroneous since no receipt 'as reali/ed from the charter a,reement, %o.!o instituted a claim for ta& credit or refund of the sum P:B$,:-#.$A from CIR. Petitioner failed to act promptl! on the claim , hence %o.!o filed a petition for revie' $ before Court of %a& Appeals. C%A decided for %o.!o and denied (R of CIR. Issue5 4?0 %o.!o "hippin, Co. Ltd., is entitled to a refund or ta& credit I 'hether it 'as able to prove that it derived no receipts from its charter a,reement, and hence is entitled to a refund of the ta&es it pre1paid to the ,overnment. Rulin?5 <es. Pursuant to "ection #- (b) (#) of the 0ational Internal Revenue Code 'hich at that time, a resident forei,n corporation en,a,ed in the transport of car,o is liable for ta&es dependin, on the amount of income it derives from sources 'ithin the Philippines. %hus, before such a ta& liabilit! can be enforced the ta&pa!er must be sho'n to have earned income sourced from the Philippines. Indeed, a claim for refund is in the nature of a claim for e&emption 7 and should be construed in strictissimi juris a,ainst the ta&pa!er. And %o.!o has the burden of proof to establish the factual basis of its claim for ta& refund. But sufficient evidence has alread! been adduced b! %o.!o provin, that it derived no receipt from its charter a,reement 'ith 0A")%RA 1 (E8 D6ardeniaD arrived in Iloilo on Manuar! :B, :23: but found no ra' su,ar to load and returned to Mapan 'ithout an! car,o laden on board. &. C.((I I.#ER .+ I#TER#A/ RE0E#1E 0. (I T1BI HI (ETA/ C.R2.RATI.# -171 CRA *1=C

+acts, Atlas Consolidated (inin, and>evelopment Corporation, a domestic corporation, entered into a Loan and "ales Contract 'ith (itsubishi (etal Corporation, a Mapanese corporation licensed to en,a,e in business in the Philippines. %o be able to e&tend the loan to Atlas, (itsubishi entered into another loan a,reement 'ith E&port1Import Ban. (E&imban.), a financin, institution o'ned, controlled, and financed b! the Mapanese ,overnment. After ma.in, interest pa!ments to (itsubishi, 'ith the correspondin, :A+ ta& thereon remitted to the 6overnment of the Philippines, Altas claimed for ta& credit 'ith the Commissioner of Internal Revenue based on "ection #2(b)($) (A) of the 0ational Internal Revenue Code, statin, that since E&imban., and not (itsubishi, is 'here the mone! for the loan ori,inated from E&imban., then it should be e&empt from pa!in, ta&es on its loan thereon. Issue, 4?0 the interest income from the loans e&tended to Atlas b! (itsubishi is e&cludible from ,ross income ta&ation. 0?. (itsubishi secured the loan from E&imban. in its o'n independent capacit! as a private entit! and not as a conduit of E&imban.. %herefore, 'hat the sub*ect of the :A+ 'ithholdin, ta& is not the interest income paid b! (itsubishi to E&imban., but the interest income earned b! (itsubishi from the loan to Atlas. %hus, it does not come 'ithin the ambit of "ection #2(b)($)(A), and it is not e&empt from the pa!ment of ta&es.

#otes, 7indin,s of fact of the Court of %a& Appeals are entitled to the hi,hest respect and can onl! be disturbed on appeal if the! are not supported b! substantial evidence or if there is a sho'in, of ,ross error or abuse on the part of the ta& court. La's ,rantin, e&emption from ta& are construed strictissimi *uris a,ainst the ta&pa!er and liberall! in favor of the ta&in, po'er. %a&ation is the rule and e&emption is the e&ception.

7. 2hil Ban: of Communications vs. CIR, et. al. 8%* CRA *=1 Danuar! *7, 1))) +acts, Petitioner, Philippine Ban. of Communications (PBCom), a commercial ban.in, corporation dul! or,ani/ed under Philippine la's, filed its uarterl! income ta& returns for the first and second uarters of :23A, reported profits, and paid the total income ta& of PA,B:C,2A-.BB. %he ta&es due 'ere settled b! appl!in, PBComFs ta& credit memos. "ubse uentl!, ho'ever, PBCom suffered losses so that 'hen it filed its Annual Income %a& Returns for the !ear1ended >ecember @:, :23C, the petitioner li.e'ise reported a net loss of P:-,:#2,CB#.BB, and thus declared no ta& pa!able for the !ear. But durin, these t'o !ears, PBCom earned rental income from leased properties. %he lessees 'ithheld and remitted to the BIR 'ithholdin, creditable ta&es of P#3#,$2A.AB in :23A and P#@-,B$$.C2 in :23C. "ubse uentl!, Petitioner re uested the Commissioner of Internal Revenue, amon, others, for a ta& credit of PA,B:C,2A-.BB representin, the overpa!ment of ta&es in the first and second uarters of :23A. %hereafter, on Mul! #A, :233, petitioner filed a claim for refund of creditable ta&es 'ithheld b! their lessees from propert! rentals in :23A for P#3#,$2A.AB and in :23C for P#@-,B$$.C2. Pendin, the investi,ation of the respondent Commissioner of Internal Revenue, petitioner instituted a Petition for Revie' on 0ovember :3, :233 before the Court of %a& Appeals (C%A). %he C%A rendered a decision 'hich, as stated on the outset, denied the re uest of petitioner for a ta& refund or credit in the sum amount of PA,#22,$-2.2A, on the ,round that it 'as filed be!ond the t'o1!ear re,lementar! period provided for b! la'. %he petitionerFs claim for refund in :23C amountin, to P#@-,B$$.C2 'as li.e'ise denied on the assumption that it 'as automaticall! credited b! PBCom a,ainst its ta& pa!ment in the succeedin, !ear. I 1E, 4hether the Court of Appeals erred in den!in, the plea for ta& refund or ta& credits on the ,round of prescription HE/3, 0o. Basic is the principle that Dta&es are the lifeblood of the nation.D %he primar! purpose is to ,enerate funds for the "tate to finance the needs of the citi/enr! and to advance the common 'eal. :@ >ue process of la' under the Constitution does not re uire *udicial proceedin,s in ta& cases. %his must necessaril! be so because it is upon ta&ation that the ,overnment chiefl! relies to obtain the means to carr! on its operations and it is of utmost importance that the modes adopted to enforce the collection of ta&es levied should be summar! and interfered 'ith as little as possible.

7rom the same perspective, claims for refund or ta& credit should be e&ercised 'ithin the time fi&ed b! la' because the BIR bein, an administrative bod! enforced to collect ta&es, its functions should not be undul! dela!ed or hampered b! incidental matters. "ec. #@B of the 0ational Internal Revenue Code (0IRC) of :2$$ (no' "ec. ##2, 0IRC of :22$) provides for the prescriptive period for filin, a court proceedin, for the recover! of ta& erroneousl! or ille,all! collected. %he rule states that the ta&pa!er ma! file a claim for refund or credit 'ith the Commissioner of Internal Revenue, 'ithin t'o (#) !ears after pa!ment of ta&, before an! suit in C%A is commenced. %he t'o1!ear prescriptive period provided, should be computed from the time of filin, the Ad*ustment Return and final pa!ment of the ta& for the !ear. ). ison v. Ancheta "R #o. /6')=81A *' Dul! 1)7= + A C T , Batas Pambansa :@A 'as enacted. "ison, as ta&pa!er, alle,ed that its provision ("ection :) undul! discriminated a,ainst him b! the imposition of hi,her rates upon his income as a professional, that it amounts to class le,islation, and that it trans,resses a,ainst the e ual protection and due process clauses of the Constitution as 'ell as the rule re uirin, uniformit! in ta&ation. I 1 E, 4hether or not BP :@A violates the due process and e ual protection clauses, and the rule on uniformit! in ta&ation. H E / 3, %here is a need for proof of such persuasive character as 'ould lead to a conclusion that there 'as a violation of the due process and e ual protection clauses. Absent such sho'in,, the presumption of validit! must prevail. E ualit! and uniformit! in ta&ation means that all ta&able articles or .inds of propert! of the same class shall be ta&ed at the same rate. %he ta&in, po'er has the authorit! to ma.e reasonable and natural classifications for purposes of ta&ation. 4here the differentiation conforms to the practical dictates of *ustice and e uit!, similar to the standards of e ual protection, it is not discriminator! 'ithin the meanin, of the clause and is therefore uniform. %a&pa!ers ma! be classified into different cate,ories, such as recipients of compensation income as a,ainst professionals. Recipients of compensation income are not entitled to ma.e deductions for income ta& purposes as there is no practicall! overhead e&pense, 'hile professionals and businessmen have no uniform costs or e&penses necessar! to produce their income. %here is ample *ustification to adopt the ,ross s!stem of income ta&ation to compensation income, 'hile continuin, the s!stem of net income ta&ation as re,ards professional and business income.

1%. Re!es vs. AlmanEor 1)$ CRA 8**A A9ril *$, 1))1 +ACT , Petitioners M.B.L. Re!es, Edmundo and (ila,ros Re!es are o'ners of parcels of land situated in %ondo and "ta. Cru/ >istricts, Cit! of (anila, 'hich are leased and entirel! occupied

as d'ellin, sites b! tenants. "aid tenants 'ere pa!in, monthl! rentals not e&ceedin, three hundred pesos (P@BB.BB) in Mul!, :2$:. ?n Mul! :-, :2$:, the 0ational Le,islature enacted Republic Act 0o. C@A2 prohibitin, for one !ear from its effectivit!, an increase in monthl! rentals of d'ellin, units or of lands on 'hich anotherFs d'ellin, is located, 'here such rentals do not e&ceed three hundred pesos (P@BB.BB) a month but allo'in, an increase in rent b! not more than :B+ thereafter. ?n ?ctober :#, :2$#, Presidential >ecree 0o. #B amended R.A. 0o. C@A2 b! ma.in, absolute the prohibition to increase monthl! rentals belo' P@BB.BB and b! indefinitel! suspendin, the aforementioned provision of the Civil Code, e&ceptin, leases 'ith a definite period. Conse uentl!, the Re!eses 'ere precluded from raisin, the rentals and from e*ectin, the tenants thereof. %he Cit! Assessor of (anila assessed the value of the Re!eses propert! on the schedule of mar.et values dul! revie'ed b! the "ecretar! of 7inance. %he revision entailed an increase to the ta& rates and the petitioners averred that the reassessment imposed upon them ,reatl! e&ceeded the annual income derived from their properties. I 1E, 4?0 income approach is the method to be used in the ta& assessment and not the comparable sales approach. HE/3, %he income approach and not the comparable sales approach must be used. NB! no stren,th of the ima,ination can the mar.et value of properties covered b! P.>. 0o. #B be e uated 'ith the mar.et value of properties not so covered. %he former has naturall! a much lesser mar.et value in vie' of the rental restrictions. In the case at bar, not even the factors determinant of the assessed value of sub*ect properties under the Dcomparable sales approachD 'ere presented b! the public respondents, namel!5 (:) that the sale must represent a bonafide armFs len,th transaction bet'een a 'illin, seller and a 'illin, bu!er and (#) the propert! must be comparable propert!. 0othin, can *ustif! or support their vie' as it is of *udicial notice that for properties covered b! P.>. #B especiall! durin, the time in uestion, there 'ere hardl! an! 'illin, bu!ers. As a ,eneral rule, there 'ere no ta.ers so that there can be no reasonable basis for the conclusion that these properties 'ere comparable 'ith other residential properties not burdened b! P.>. #B.O 11. 2A/ v. ec of +inance "R #o. 11'7'*A 8% .ctober 1))' + A C T , %he 8alue1Added %a& G8A%H is levied on the sale, barter or e&chan,e of ,oods and properties as 'ell as on the sale or e&chan,e of services. It is e uivalent to :B+ of the ,ross sellin, price or ,ross value in mone! of ,oods or properties sold, bartered or e&chan,ed or of the ,ross receipts from the sale or e&chan,e of services. Republic Act 0o. $$:C see.s to 'iden the ta& base of the e&istin, 8A% s!stem and enhance its administration b! amendin, the 0ational Internal Revenue Code. %hese are various suits for certiorari and prohibition challen,in, the constitutionalit! of RA $$:C5 In the case at bar, PAL attac.s the formal validit! of Republic Act 0o. $$:C. PAL contends that it violates Art. 8I, "ection #CG:H 'hich provides that DEver! bill passed b! Con,ress shall embrace onl! one sub*ect 'hich shall be e&pressed in the title thereof.D It is contended that neither =. 0o. :::2$ nor ". 0o. :C@B provided for removal of e&emption of PAL transactions from the pa!ment

of the 8A% and that this 'as made onl! in the Conference Committee bill 'hich became Republic Act 0o. $$:C 'ithout reflectin, this fact in its title. %he title of Republic Act 0o. $$:C is5 A0 AC% RE"%R)C%)RI06 %=E 8AL)E1A>>E> %AK G8A%H "<"%E(, 4I>E0I06 I%" %AK BA"E A0> E0=A0CI06 I%" A>(I0I"%RA%I?0, A0> 7?R %=E"E P)RP?"E" A(E0>I06 A0> REPEALI06 %=E RELE8A0% PR?8I"I?0" ?7 %=E 0A%I?0AL I0%ER0AL RE8E0)E C?>E, A" A(E0>E>, A0> 7?R ?%=ER P)RP?"E". 7urthermore, section :B@ of RA $$:C states the follo'in,5 "ection :B@. Exempt Transactions.- %he follo'in, shall be e&empt from the value1added ta&5 G H %ransactions 'hich are e&empt under special la's, e&cept those ,ranted under Presidential >ecree 0os. CC, A#2, 2$#, :-2:, :A2B. %he effect of the amendment is to remove the e&emption ,ranted to PAL, as far as the 8A% is concerned. Philippine Airlines GPALH claims that its franchise under P.>. 0o. :A2B 'hich ma.es it liable for a franchise ta& of onl! #+ of ,ross revenues Din lieu of all the other fees and char,es of an! .ind, nature or description, imposed, levied, established, assessed or collected b! an! municipal, cit!, provincial, or national authorit! or ,overnment a,enc!, no' or in the future,D cannot be amended b! Rep. Act 0o. $$:C as to ma.e it GPALH liable for a :B+ value1added ta& on revenues, because "ec. #- of P.>. 0o. :A2B provides that PALFs franchise can onl! be amended, modified or repealed b! a special la' specificall! for that purpose. I 1 E, 4hether or not this amendment of "ection :B@ of the 0IRC is fairl! embraced in the title of Republic Act 0o. $$:C, althou,h no mention is made therein of P. >. 0o. :A2B H E / 3, %he court ruled in in the affirmative. %he title states that the purpose of the statute is to e&pand the 8A% s!stem, and one 'a! of doin, this is to 'iden its base b! 'ithdra'in, some of the e&emptions ,ranted before. %o insist that P. >. 0o. :A2B be mentioned in the title of the la', in addition to "ection :B@ of the 0IRC, in 'hich it is specificall! referred to, 'ould be to insist that the title of a bill should be a complete inde& of its content. %he constitutional re uirement that ever! bill passed b! Con,ress shall embrace onl! one sub*ect 'hich shall be e&pressed in its title is intended to prevent surprise upon the members of Con,ress and to inform the people of pendin, le,islation so that, if the! 'ish to, the! can be heard re,ardin, it. If, in the case at bar, petitioner did not .no' before that its e&emption had been 'ithdra'n, it is not because of an! defect in the title but perhaps for the same reason other statutes, althou,h published, pass unnoticed until some event someho' calls attention to their e&istence. Republic Act 0o. $$:C e&pressl! amends PALFs franchise GP. >. 0o. :A2BH b! specificall! e&ceptin, from the ,rant of e&emptions from the 8A% PALFs e&emption under P. >. 0o. :A2B. %his is 'ithin the po'er of Con,ress to do under Art. KII, "ection :: of the Constitution, 'hich provides that the ,rant of a franchise for the operation of a public utilit! is sub*ect to amendment, alteration or repeal b! Con,ress 'hen the common ,ood so re uires.

1*. ART1R. (. T./E#TI#., petitioner, vs. THE ECRETAR4 .+ +I#A#CE and THE C.((I I.#ER .+ I#TER#A/ RE0E#1E, respondents. ".R. #o. 11'='' Au?ust *', 1))= +ACT , =erein various petitioners see. to declare RA $:CC as unconstitutional as it see.s to 'iden the ta& base of the e&istin, 8A% s!stem and enhance its administration b! amendin, the 0ational Internal Revenue Code. %he value1added ta& (8A%) is levied on the sale, barter or e&chan,e of ,oods and properties as 'ell as on the sale or e&chan,e of services. It is e uivalent to :B+ of the ,ross sellin, price or ,ross value in mone! of ,oods or properties sold, bartered or e&chan,ed or of the ,ross receipts from the sale or e&chan,e of services. CREBA asserts that R.A. 0o. $$:C (:) impairs the obli,ations of contracts, (#) classifies transactions as covered or e&empt 'ithout reasonable basis and (@) violates the rule that ta&es should be uniform and e uitable and that Con,ress shall Devolve a pro,ressive s!stem of ta&ation.D 4ith respect to the first contention, it is claimed that the application of the ta& to e&istin, contracts of the sale of real propert! b! installment or on deferred pa!ment basis 'ould result in substantial increases in the monthl! amorti/ations to be paid because of the :B+ 8A%. %he additional amount, it is pointed out, is somethin, that the bu!er did not anticipate at the time he entered into the contract. It is ne&t pointed out that 'hile "ection - of R.A. 0o. $$:C e&empts such transactions as the sale of a,ricultural products, food items, petroleum, and medical and veterinar! services, it ,rants no e&emption on the sale of real propert! 'hich is e uall! essential. %he sale of real propert! for sociali/ed and lo'1cost housin, is e&empted from the ta&, but CREBA claims that real estate transactions of Dthe less poor,D i.e., the middle class, 'ho are e uall! homeless, should li.e'ise be e&empted. 7inall!, it is contended, for the reasons alread! noted, that R.A. 0o. $$:C also violates Art. 8I, "ection #3(:) 'hich provides that D%he rule of ta&ation shall be uniform and e uitable. %he Con,ress shall evolve a pro,ressive s!stem of ta&ation.D I 1E, 4hether or not RA $:CC violates the principle of pro,ressive s!stem of ta&ation. HE/3, 0o, there is no *ustification for passin, upon the claims that the la' also violates the rule that ta&ation must be pro,ressive and that it denies petitionersF ri,ht to due process and that e ual protection of the la's. %he reason for this different treatment has been co,entl! stated b! an eminent authorit! on constitutional la' thus5 D4hen freedom of the mind is imperiled b! la', it is freedom that commands a momentum of respect9 'hen propert! is imperiled it is the la'ma.ersF *ud,ment that commands respect. %his dual standard ma! not precisel! reverse the presumption of constitutionalit! in civil liberties cases, but obviousl! it does set up a hierarch! of values 'ithin the due process clause.D Petitioners contend that as a result of the uniform :B+ 8A%, the ta& on consumption ,oods of those 'ho are in the hi,her1income brac.et, 'hich before 'ere ta&ed at a rate hi,her than :B+, has been reduced, 'hile basic commodities, 'hich before 'ere ta&ed at rates ran,in, from @+ to A+, are no' ta&ed at a hi,her rate. Must as vi,orousl! as it is asserted that the la' is re,ressive, the opposite claim is pressed b! respondents that in fact it distributes the ta& burden to as man! ,oods and services as possible particularl! to those 'hich are 'ithin the reach of hi,her1income ,roups, even as the la' e&empts basic ,oods and services. It is thus e uitable. %he ,oods and properties sub*ect to the 8A% are those used or consumed b! hi,her1income ,roups. %hese include real properties held primaril! for sale to customers or held for lease in the ordinar! course of business, the ri,ht or privile,e to use industrial, commercial or scientific e uipment, hotels, restaurants and similar places, tourist buses, and the li.e. ?n the other hand, small business establishments, 'ith annual ,ross sales of less than PABB,BBB, are e&empted. %his, accordin, to respondents, removes from the covera,e of the la' some @B,BBB business establishments. ?n the other hand,

an occasional paper of the Center for Research and Communication cities a 0E>A stud! that the 8A% has minimal impact on inflation and income distribution and that 'hile additional e&penditure for the lo'est income class is onl! P@B: or :.-2+ a !ear, that for a famil! earnin, PABB,BBB a !ear or more is P3,@-B or #.#+. Lac.in, empirical data on 'hich to base an! conclusion re,ardin, these ar,uments, an! discussion 'hether the 8A% is re,ressive in the sense that it 'ill hit the DpoorD and middle1 income ,roup in societ! harder than it 'ill the Drich,D is lar,el! an academic e&ercise. ?n the other hand, the C)PFs contention that Con,ressF 'ithdra'al of e&emption of producers cooperatives, mar.etin, cooperatives, and service cooperatives, 'hile maintainin, that ,ranted to electric cooperatives, not onl! ,oes a,ainst the constitutional polic! to promote cooperatives as instruments of social *ustice (Art. KII, P :A) but also denies such cooperatives the e ual protection of the la' is actuall! a polic! ar,ument. %he le,islature is not re uired to adhere to a polic! of Dall or noneD in choosin, the sub*ect of ta&ation. == 0or is the contention of the Chamber of Real Estate and Builders Association (CREBA), petitioner in 6.R. ::A$A-, that the 8A% 'ill reduce the mar. up of its members b! as much as 3A+ to 2B+ an! more concrete. It is a mere alle,ation. ?n the other hand, the claim of the Philippine Press Institute, petitioner in 6.R. 0o. ::AA--, that the 8A% 'ill drive some of its members out of circulation because their profits from advertisements 'ill not be enou,h to pa! for their ta& liabilit!, 'hile purportin, to be based on the financial statements of the ne'spapers in uestion, still falls short of the establishment of facts b! evidence so necessar! for ad*udicatin, the uestion 'hether the ta& is oppressive and confiscator!. Indeed, re,ressivit! is not a ne,ative standard for courts to enforce. 4hat Con,ress is re uired b! the Constitution to do is to Devolve a pro,ressive s!stem of ta&ation.D %his is a directive to Con,ress, *ust li.e the directive to it to ,ive priorit! to the enactment of la's for the enhancement of human di,nit! and the reduction of social, economic and political ine ualities (Art. KIII, P :), or for the promotion of the ri,ht to D ualit! educationD (Art. KI8, P :). %hese provisions are put in the Constitution as moral incentives to le,islation, not as *udiciall! enforceable ri,hts.

18. ABABA3A v. Ermita -3ele?ation to the 2residentC =$) CRA 1, e9tember 1, *%%' +acts, RA 2@@$5 8A% Reform Act enacted on (a! #-, #BBA. "ec. - (sales of ,oods and properties), "ec. A (importation of ,oods) and "ec. C (services and lease of propert!) of RA 2@@$, in collective, ,ranted the "ecretar! of 7inance the authorit! to ascertain5 (a) 'hether b! :#E@:EBA, the 8A% collection as a percenta,e of the #BB- 6>P e&ceeds #.3+ or (b)the national ,overnment deficit as a percenta,e of the #BB- 6>P e&ceeds :.A+. If either condition is met, the "ec of 7inance must inform the President 'ho, in turn, must impose the :#+ 8A% rate (from :B+) effective Manuar! :, #BBC. ABAQA>A maintained that Con,ress abandoned its e&clusive authorit! to fi& ta&es and that RA 2@@$ contained a uniform proviso authori/in, the President upon recommendation b! the >?7 "ecretar! to rasie 8A% to :#+. "en Pimentel maintained that RA 2@@$ constituted undue dele,ation of le,islative po'ers and a violation of due process since the la' 'as ambi,uous and arbitrar!. "ame 'ith Rep. Escudero. Pilipinas "hell dealers ar,ued that the 8A% reform 'as arbitrar!, oppressive and confiscator!.

Respondents countered that the la' 'as complete, that it left no discretion to the President, and that it merel! char,ed the President 'ith carr!in, out the rate increase once an! of the t'o conditions arise. Issue, 4?0 there 'as undue dele,ation. Held, 0o dele,ation but mere implementation of the la'. Constitution allo's as under e&empted dele,ation the dele,ation of tariffs, customs duties, and other tolls, levies on ,oods imported and e&ported. 8A% is ta& levied on sales of ,oods and services 'hich could not fall under this e&emption. =ence, its dele,ation if un ualified is unconstitutional. Le,islative po'er is authorit! to ma.e a complete la'. %hus, to be valid, a la' must be complete in itself, settin, forth therein the polic! and it must fi& a standard, limits of 'hich are sufficientl! determinate and determinable. 0o undue dele,ation 'hen con,ress describes 'hat *ob must be done 'ho must do it and the scope of the authorit! ,iven. (Edu v Ericta) "ec of 7inance 'as merel! tas.ed to ascertain the e&istence of facts. All else 'as laid out. (ainl! ministerial for the "ecretar! to ascertain the facts and for the president to carr! out the implementation for the 8A%. %he! 'ere a,ents of the le,islative dept

1=. CIR and Commissioner of Customs vs. Botelho hi99in? Co., Inc. ".R. #os. /6*1$8868= Dune *), 1)$&

hi99in? Cor9. @ "eneral

+ACT , Reparations Commission of the Philippines sold to Botelho the vessel D(E" (aria RoselloD for the amount of PC,$23,333.33. %he former li.e'ise sold to 6eneral "hippin, the vessel D(E" 6eneral LimD at the price of PC,2A:,CCC.CC. )pon arrival at the port of (anila, the Bureau of Customs placed the same under custod! and refused to ,ive due course Gto applications for re,istrationH, unless the aforementioned sums of P-3@,-@@ and P-2-,3#- be paid as compensatin, ta&. %he bu!ers subse uentl! filed 'ith the C%A their respective petitions for revie'. Pendin, the case, Republic Act 0o. @B$2 amended Republic Act 0o. :$32 J the ?ri,inal Reparations Act, under 'hich the aforementioned contracts 'ith the Bu!ers had been e&ecuted J b! e&emptin, bu!ers of reparations ,oods ac uired from the Commission, from liabilit! for the compensatin, ta&. Invo.in, Gsection #B of the RA @B$2H, the Bu!ers applied, for the renovation of their utili/ations contracts 'ith the Commission, 'hich ,ranted the application, and, then, filed 'ith the %a& Court, their supplemental petitions for revie'. %he C%A ruled in favor of the bu!ers. G?n appeal, the CIR and C?C maintain that such proviso should not be applied retroactivel!H, upon the ,round that a ta& e&emption must be clear and e&plicit9 that there is no e&press provision for the retroactivit! of the e&emption, established b! Republic Act 0o. @B$2, from the compensatin, ta&9 that the favorable provisions, 'hich are referred to in section #B thereof, cannot include the e&emption from compensatin, ta&9 and, that Con,ress could not have intended an! retroactive e&emption, considerin, that the result thereof 'ould be pre*udicial to the 6overnment.

1E, 4hether or not the ta& e&emption can be applied retroactivel!

HE/3, <E". %he inherent 'ea.ness of the last ,round becomes manifest 'hen 'e consider that, if true, there could be no ta& e&emption of an! .ind 'hatsoever, even if Con,ress should 'ish to create one, because ever! such e&emption implies a 'aiver of the ri,ht to collect 'hat other'ise 'ould be due to the 6overnment, and, in this sense, is pre*udicial thereto. It ma! not be amiss to add that no ta& e&emption J li.e an! other le,al e&emption or e&ception J is ,iven 'ithout an! reason therefor. In much the same 'a! as other statutor! commands, its avo'ed purpose is some public benefit or interest, 'hich the la'1ma.in, bod! considers sufficient to offset the monetar! loss entitled in the ,rant of the e&emption. Indeed, section #B of Republic Act 0o. @B$2 e&acts a valuable consideration for the retroactivit! of its favorable provisions, namel!, the voluntar! assumption, b! the end1user 'ho bou,ht reparations ,oods prior to Mune :$, :2C: of Dall the ne' obli,ations provided for inD said Act. 7urthermore, "ection :- of the La' on Reparations, as amended, e&empts from the compensatin, ta&, not particular persons, but persons belon,in, to a particular class. Indeed, appellants do not assail the constitutionalit! of said section :-, insofar as it ,rants e&emptions to end1users 'ho, after the approval of Republic Act 0o. @B$2, on Mune :$, :2C:, purchased reparations ,oods procured b! the Commission. 7rom the vie'point of Constitutional La', especiall! the e ual protection clause, there is no difference bet'een the ,rant of e&emption to said end1users, and the e&tension of the ,rant to those 'hose contracts of purchase and sale mere made before said date, under Republic Act 0o. :$32. 1'. Tan v. 3el Rosario ".R. #o. 1%)*7). .ctober 8, 1))= +acts, Petitioners assail RA $-2C, also commonl! .no'n as the "implified 0et Income %a&ation "cheme (D"0I%D), amendin, certain provisions of the 0ational Internal Revenue Code, as violative of the constitutional re uirement that ta&ation shall be Dshall be uniform and e uitable.D %he la' 'ould no' attempt to ta& sin,le proprietorships and professionals differentl! from the manner it imposes the ta& on corporations and partnerships. Petitioner ,ives a fairl! e&tensive discussion on the merits of the la', illustratin,, in the process, 'hat he believes to be an imbalance bet'een the ta& liabilities of those covered b! the amendator! la' and those 'ho are not. Issue, 4hether or not RA $-2C is violative of the constitutional re uirement that ta&ation shall be uniform and e uitable. Held5 Petition denied. )niformit! of ta&ation means that (:) the standards that are used therefore are substantial and not arbitrar!, (#) the cate,ori/ation is ,ermane to achieve le,islative purpose, (@) the la' applies, all thin,s bein, e ual, to both present and future conditions and (-) the classification applies e uall! 'ell to all those belon,in, to the same class. 4ith the le,islature primaril! lies the discretion to determine the nature (.ind), ob*ect (purpose), e&tent (rate), covera,e (sub*ects) and situs (place) of ta&ation. %his court cannot freel! delve into those matters 'hich, b! constitutional fiat, ri,htl! rest on le,islative *ud,ment. ?f course, 'here a ta& measure becomes so unconscionable and un*ust as to amount to

confiscation of propert!, courts 'ill not hesitate to stri.e it do'n, for, despite all its plenitude, the po'er to ta& cannot override constitutional proscriptions. %his sta,e, ho'ever, has not been demonstrated to have been reached 'ithin an! appreciable distance in this controvers! before us. 1$. (ACE3A vs. (ACARAI", DR **8 CRA *1& Dune 7, 1))8 To9ic, Classification of Taxes Accordin? to Burden or Incidence -3irect or IndirectC +acts, %his matter of indirect ta& e&emption of the private respondent 0ational Po'er Corporation (0PC) is brou,ht to this Court a second time. )nfa/ed b! the >ecision 4e promul,ated on (a! @:, :22: petitioner Ernesto (aceda as.s this Court to reconsider said >ecision. A Chronolo,ical revie' of the relevant 0PC la's, speciall! 'ith respect to its ta& e&emption provisions. ?n 0ovember @, :2@C, Common'ealth Act 0o. :#B5 creatin, the 0ational Po'er Corporation. %he main source of funds for the 0PC 'as the flotation of bonds in the capital mar.ets = and these bonds...Nissued under the authorit! of this Act shall be e&empt from the pa!ment of all ta&es b! the Common'ealth of the PhilippinesRO ?n Mune #-, :2@3, C.A. 0o. @--, the provision on ta& e&emption in relation to the issuance of the 0PC bonds 'as neither amended nor deleted. ?n "eptember @B, :2@2, C.A. 0o. -2A, the provision on ta& e&emption in relation to the issuance of the 0PC bonds 'as neither amended nor deleted. ?n Mune -, :2-2, Republic Act 0o. @A$, an! such loan or loans shall be e&empt from ta&es, duties, fees, imposts, char,es, contributions and restrictions of the Republic of the Philippines ?n the same date, R.A. 0o. @A3, to facilitate pa!ment of its indebtedness, the 0ational Po'er Corporation shall be e&empt from all ta&es. ?n Mul! :B, :2A#, R.A. 0o. 3:@ amended R.A. 0o. @A$. %he ta& provision as stated in R.A. 0o. @A$, 'as not amended. ?n Mune #, :2A-, R.A. 0o. 23$ 'as enacted specificall! to 'ithdra' 0PCFs ta& e&emption for real estate ta&es. ?n "eptember 3, :2AA, R.A. 0o. :@2$, the ta& e&emption provision related to the pa!ment of this total indebtedness 'as not amended nor deleted. ?n Mune :@, :2A3, R.A. 0o. #BAA, the ta& provision related to the repa!ment of loans 'as not amended nor deleted. ?n Mune :3, :2CB, R.A. 0o #C-: converted the 0PC from a public corporation into a stoc. corporation. 0o ta& e&emption 'as incorporated in said Act. ?n Mune :$, :2C:, R.A. 0o. @B-@. 0o ta& provision 'as incorporated in said Act. ?n Mune :$, :2C$, R.A. 0o -32$. 0o ta& provision 'as incorporated in said Act. ?n "eptember :B, :2$:, R.A. 0o. C@2A 'as enacted revisin, the charter of the 0PC. %he bonds issued shall be e&empt from the pa!ment of all ta&es. As to the forei,n loans the 0PC 'as authori/ed to contract, shall also be e&empt from all ta&es, ?n Manuar! ##, :2$-, P.>. 0o. @3BRshall also be exempt from all direct and indirect taxes, ?n 7ebruar! #C, :2$B, P.>. 0o. @2A, no ta& e&emption provision 'as amended, deleted or added. ?n Mul! @:, :2$A, P.>. 0o. $A3 'as issued directin, that P#BB,BBB,BBB.BB 'ould be appropriated annuall! to cover the unpaid subscription of the 6overnment in the 0PC authori/ed capital stoc., 'hich amount 'ould be ta.en from ta&es accruin, to the 6eneral

:.

#. @. -. A. C. $. 3. 2. :B. ::. :#. :@. :-. :A. :C.

7unds of the 6overnment, proceeds from loans, issuance of bonds, treasur! bills or notes to be issued :$. ?n (a! #$, :2$C P.>. 0o. 2@3, declared e&empt from the pa!ment of all forms of ta&esR :3. ?n Manuar! @B, :2$C, P.>. 0o. 33# 'as issued 'ithdra'in, the ta& e&emption of 0PC 'ith re,ard to imports :2. ?n Mul! @B, :2$$, P.>. ::$$, All units of ,overnment, includin, ,overnment1o'ned or controlled corporations, shall pa! income ta&es, customs duties and other ta&es and fees are imposed under revenues la's5 provided, that or,ani/ations other'ise e&empted b! la' from the pa!ment of such ta&esEduties ma! as. for a subsid! from the 6eneral 7und #B. ?n Mul! ::, :23-, P.>. 0o. :2@:, all e&emptions from the pa!ment of duties, ta&es, fees, imposts and other char,es heretofore ,ranted in favor of ,overnment1o'ned or controlled corporations includin, their subsidiaries, are hereb! 'ithdra'n. #:. ?n >ecember :$, :23C, E.?. 0o. 2@ 'as issued 'ith a vie' to correct presidential restoration or ,rant of ta& e&emption to other ,overnment and private entities 'ithout benefit of revie' b! the 7iscal Incentives Revie' Board, N4=EREA", in addition to those ta& and dut! e&emption privile,es 'ere restored b! the 7iscal Incentives Revie' Board (7IRB), a number of affected entities, ,overnment and private, had their ta& and dut! e&emption privile,es restoredO Petitioner contends that P.>. 0o. 2@3 repealed the indirect ta& e&emption of 0PC. Issue, 4?0 0PC is e&empted to pa! Indirect Income %a&

Held, <es. Classifications or .inds of %a&es5 Accordin, to Persons 'ho pa! or 'ho bear the burden5 >irect %a& J that 'here the person supposed to pa! the ta& reall! pa!s it. WITH !T transferrin, the burden to someone else. Examples" Individual income tax# corporate income tax# transfer taxes $estate tax# donor%s tax&# residence tax# immigration tax . Indirect %a& J that 'here the ta& is imposed upon ,oods 'E( RE reachin, the consumer 'ho ultimatel! pa!s for it, not as a ta&, but as a part of the purchase price. Examples" t)e internal revenue indirect taxes $specific tax# percentage taxes# $*+T& and t)e tariff and customs indirect taxes $import duties# special import tax and ot)er dues& A chronolo,ical revie' of the 0PC la's 'ill sho' that it has been the la'ma.erFs intention that the 0PC 'as to be completel! ta& e&empt from all forms of ta&es J direct and indirect. P.>. 0o. @3B added phrase Ddirectl! or indirectl!,D P.>. 0o. 2@3 amended into Ne&empt from the pa!ment of +,, ( R-. ( ta&esO President (arcos must have considered all the 0PC statutes from C.A. 0o. :#B up to P.>. 0o. 2@3. ?ne common theme in all these la's is that the 0PC must be enable to pa! its indebtedness '$ 'hich, as of P.>. 0o. 2@3, 'as P:# Billion in total domestic indebtedness, at an! one time, and )S- Billion in total forei,n loans at an! one time. %he 0PC must be and has to be e&empt from all forms of ta&es if this ,oal is to be achieved.

%he ta& e&emption stood as is J 'ith the e&press mention of Ddirect and indirectD ta& e&emptions. La'ma.ers 'anted the 0PC to be e&empt from ALL 7?R(" of ta&es J direct and indirect. %herefore, that 0PC had been ,ranted ta& e&emption privile,es for both direct and indirect ta&es under P.>. 0o. 2@3. %he Court rules and declares that the oil companies 'hich suppl! bun.er fuel oil to 0PC have to pa! the ta&es imposed upon said bun.er fuel oil sold to 0PC. B! the ver! nature of indirect ta&ation, the economic burden of such ta&ation is e&pected to be passed on throu,h the channels of commerce to the user or consumer of the ,oods sold. Because, ho'ever, the 0PC has been e&empted from both direct and indirect ta&ation, the 0PC must be held e&empted from absorbin, the economic burden of indirect ta&ation 1&. E . TA#3AR3 EA TER#, I#C vs. C.((I I.#ER .+ I#TER#A/ RE0E#1E

".R. #os. /6*7'%76), Dul! &, 1)7) +ACT , In C%A Case 0o. :#A:, Esso "tandard Eastern Inc. (Esso) deducted from its ,ross income for :2A2, as part of itso r d i n a r ! a n d n e c e s s a r ! b u s i n e s s e & p e n s e s , t h e amount it had spent for drillin, and e&ploration of its p e t r o l e u m concessions. %his claim 'as disallo'ed b! the Commissioner of Internal Revenue (CIR) on the ,round that the e&pensesshould be capitali/ed and mi,ht be 'ritten off as a loss onl! 'hen a Ddr! holeD should result. Esso then filed an amendedreturn 'here it as.ed for the refund of P@#@,#$2.BB b! reason of its abandonment as dr! holes of several of its oil 'ells. Also claimed as ordinar! and necessar! e&penses in the same return 'as the amount of P@-B,3##.B-, representin,mar,in fees it had paid to the Central Ban. on its profit remittances to its 0e' <or. head office.?n Au,ust A, :2C-, the CIR ,ranted a ta& credit of P##:,B@@.BB onl!, disallo'in, the claimed deduction for themar,in fees paid on the ,round that the mar,in fees paid to the Central Ban. could not be considered ta&es or allo'ed asdeductible business e&penses.Esso appealed to the Court of %a& Appeals (C%A) for the refund of the mar,in fees it had earlier paid contendin,that the mar,in fees 'ere deductible from ,ross income either as a ta& or as an ordinar! and necessar! business e&pense. =o'ever, Essos appeal 'as denied. I 1E, (:) 4hether or not the mar,in fees are ta&es.(#) 4hether or not the mar,in fees are necessar! and ordinar! business e&penses. R1/I#", (:) 0o. A ta& is levied to provide revenue for ,overnment operations, 'hile the proceeds of the mar,in fee areapplied to stren,then our countr!Fs international reserves. %he mar,in fee 'as imposed b! the "tate in the e&ercise of itspolice po'er and not the po'er of ta&ation.(#) 0o. ?rdinaril!, an e&pense 'ill be considered Fnecessar!F 'here the e&penditure is appropriate and helpful inthe development of the ta&pa!erFs business. It is Fordinar!F 'hen it connotes a pa!ment 'hich is normal in relation to thebusiness of the ta&pa!er and the surroundin, circumstances. "ince the mar,in fees in uestion 'ere incurred for theremittance of funds to EssoFs =ead ?ffice in 0e' <or., 'hich is a separate and distinct income ta&pa!er from the branchin the Philippines, for its disposal abroad, it can never be said therefore that the mar,in fees 'ere appropriate and helpfulin the development of EssoFs business in the Philippines e&clusivel! or 'ere incurred for purposes proper to the conductof the affairs of EssoFs branch in the Philippines e&clusivel! or for the purpose of reali/in, a profit or of minimi/in, a loss inthe Philippines e&clusivel!.

17. 2R.CTER @ "A(B/E 2HI/I22I#E (A#1+ACT1RI#" C.R2.RATI.# vs. THE (1#ICI2A/IT4 .+ DA"#A, 2R.0I#CE .+ B.H./ ".R. #o. /6*=*$' 3ecember *7, 1)&) T.2IC, #ature and amount of license +ACT , Plaintiff1appellant is a domestic corporation 'ith principal offices in (anila. lt is a consolidated corporation of Procter T 6amble %radin, Compan! and Philippine (anufacturin, Compan!, 'hich later became Procter T 6amble %radin, Compan!, Philippines. It is en,a,ed in the manufacture of soap, edible oil, mar,arine and other similar products, and for this purpose maintains a Dbode,aD in defendant (unicipalit! 'here it stores copra purchased in the municipalit! and therefrom ships the same for its manufacturin, and other operations. ?n >ecember :@, :2A$, the (unicipal Council of Ma,na enacted (unicipal ?rdinance 0o. -, "eries of :2A$ or An ?rdinance imposin, stora,e fees of all e&portable copra deposited in the bode,a 'ithin the *urisdlctiBn of the municipalit! of *a,na bohol. 7or a period of si& !ears, from :2A3 to :2C@, plaintiff paid defendant (unicipalit!, alle,edl! under protest, stora,e fees in the total sum of P-#,#CA.:@. ?n (arch @, :2C-, plaintiff filed this suit in the Court of 7irst Instance of (anila, Branch 8I, 'herein it pra!ed that :) ?rdinance 0o. - be declared inapplicable to it, or in the alter. native, that it be pronounced ultra1vires and void for bein, be!ond the po'er of the (unicipalit! to enact9 and #) that defendant (unicipalit! be ordered to refund to it the amount of P-#,#CA.:@ 'hich it had paid under protest9 and costs. %he trial Court upheld its *urisdiction as 'ell as defendant (unicipalit!Fs po'er to enact the ?rdinance in uestion under section ##@3 of the Revised Administrative Code, other'ise .no'n as the ,eneral 'elfare clause. I 1E , 4hether defendant (unicipalit! 'as authori/ed to impose and collect the stora,e fee provided for in the challen,ed ?rdinance under the la's then prevailin,. 4hether the imposition of PB.:B per :BB .ilos of copra stored in a bode,a 'ithin the municipalit! ofMa,nasF territor! is be!ond the cost of re,ulation and surveillance HE/3, %he validit! of the ?rdinance must be upheld pursuant to the broad authorit! conferred upon municipalities b! Common'ealth Act 0o. -$#, 'hich 'as the prevailin, la' 'hen the ?rdinance 'as enacted. A municipalit! is authori/ed to impose three .inds of licenses5 (:) a license for re,ulation of useful occupation or enterprises9 (#) license for restriction or re,ulation of non1useful occupations or enterprises9 and (@) license for revenue. - It is thus unnecessar!, as plaintiff 'ould have us do, to determine 'hether the sub*ect stora,e fee is a ta& for revenue purposes or a license fee to reimburse defendant (unicipalit! for service of supervision because defendant (unicipalit! is authori/ed not onl! to impose a license fee but also to ta& for revenue purposes. %he stora,e fee imposed under the uestion ?rdinance is actuall! a municipal license ta& or fee on persons, firms and corporations, li.e plaintiff, e&ercisin, the privile,e of storin, copra in a bode,a 'ithin the (unicipalit!Fs territorial *urisdiction. 7or the term Dlicense ta&D has not

ac uired a fi&ed meanin,. It is often used indiseriminatel! to desi,nate impositions e&acted for the e&ercise of various privile,es. In man! instances, it refers to revenue1raisin, e&actions on privile,es or activities. (#) (unicipal corporations are allo'ed 'ide discretion in determinin, the rates of imposable license fees even in cases of purel! police po'er measures. In the absence of proof as to municipal conditions and the nature of the business bein, ta&ed as 'ell as other factors relevant to the issue of arbitrariness or unreasonableness of the uestioned rates, Courts 'ill ,o slo' in 'ritin, off an ?rdinance. In the case at bar, appellant has not sufficientl! sho'n that the rate imposed b! the uestioned ?rdinance is oppressive, e&cessive and prohibitive. 1). "olden Ribbon /umber Co., Inc. v. Cit! of Butuan "R #o. /617'8= *= 3ecember 1)$= + A C T , 6olden Ribbon Lumber Co., Inc., a dul! or,ani/ed domestic corporation, operated a lumber mill and lumber !ard in Butuan Cit!. Pursuant to ?rdinance 0o. A, as amended b! ?rdinance 0os. 2, :B, -$, and -2 of the said cit!, it paid the ta&es provided therein. Claimin, that said ordinance, as amended, 'as void, it later brou,ht the present action to have it so declared9 to recover the amount paid, and to have appellants permanentl! en*oined from enforcin, said ordinance as amended. I 1 E, 4hether or not ?rdinance 0o. A falls 'ithin the Charter of the Cit! of Butuan.

H E / 3, 0o. %he ta& imposed is and 'as reall! intended to be on lumber sold and not a ta& on, or, license fee for the privile,e of operatin, a lumber mill andEor a lumber !ard. It violates RA ##C- as municipal corporations are prohibited from imposin, char,es of ta&es of such nature. Appellants claim that the uestioned ta& is one on business or a privile,e ta& for the operation of a lumber mill or a lumber !ard is 'ithout merit. %he character or nature of a ta& is determined b! its operation, practical results and incidents. 0either the ori,inal ordinance in uestion nor the amendator! ones provide that pa!ment thereof is a condition precedent to the en*o!ment of such privile,e or that its non1pa!ment 'ould result in the cancellation of an! previous license ,ranted. Lastl!, the rule is 'ell1settled that municipal corporations are clothed 'ith no po'er of ta&ation9 that its charter or a statute must clearl! sho' an intent to confer that po'er or the municipal corporation cannot assume and e&ercise it, and that an! such po'er ,ranted must be construed strictl!, an! doubt or ambi,uit! arisin, out from the terms of the ,rant to be resolved a,ainst the municipalit!. *%. 0ICT.RIA (I//I#" C.. 0 22A

1'8 CRA 81&A Au?ust *&, 1)7& +ACT , %his is a petition for revie' on certiorari of the Mul! #$, :23- >ecision of the ?ffice of the Presidential Assistant 7or Le,al Affairs dismissin, the appeal from the adverse rulin, of the Philippine Ports Authorit! on the sole ,round that the same 'as filed be!ond the re,lementar! period. ?n April #3, :23:, the Iloilo Port (ana,er of respondent Philippine Ports Authorit! (PPA for short) 'rote petitioner 8ictorias (illin, Co., re uirin, it to have its tu,boats and bar,es under,o harbor formalities and pa! entranceEclearance fees as 'ell as berthin, fees effective

(a! :, :23:. PPA, li.e'ise, re uirin, petitioner to secure a permit for car,o handlin, operations at its >a1an Banua 'harf and remit :B+ of its ,ross income for said operations as the ,overnmentFs share. 8ictorias (illin, Co. maintained that it is e&cept from pa!in, PPA an! fee or char,e because5 :. %he 'harf and its facilities are built and installed on its o'n land9 #. Repairs and maintenance are solel! paid b! it9 @. (aintenance and dred,in, of the channel are done b! the Compan! personnel9 -. At not time has the ,overnment paid an! centavo for such activities. I 1E, 4?0 the 8ictorias (illin, Co. claim of e&ception for PPA fees is meritorious. HE/3, 0o, the petitioners claim that there is no basis for the PPA to assess and impose the dues and char,e is devoid of merit. As correctl! stated b! the "olicitor 6eneral, the fees and char,es PPA collects are not for the use of the 'harf that petitioner o'ns but for the privile,e of navi,atin, in public 'aters, of enterin, and leavin, public harbours and berthin, on public streams or 'aters. As to the re uirement to remit :B+ of the handlin, char,es, "ection CB1(i&) of the Presidential >ecree 0o. 3A$ authori/ed the PPA D%o lev! dues, rates, or char,es for the use of the premises, 'or.s, appliances, facilities, or for services provided b! or belon,in, to the Authorit!, or an! or,ani/ation concerned 'ith port operations.D %his :B+ ,overnment share of earnin,s of arrastre and stevedorin, operators is in the nature of contractual compensation to 'hich a person desirin, to operate arrastre service must a,ree as a condition to the ,rant of the permit to operate. *1. CIR v. CA, CTA, Ad(1 "R #o.11'8=)A 17 A9ril 1))& + A C T , Private respondent, Ateneo de (anila )niversit!, is a non1stoc., non1profit educational institution 'ith au&iliar! units and branches all over the countr!. %he Institute of Philippine Culture (IPC) is an au&iliar! unit 'ith no le,al personalit! separate and distinct from private respondent. %he IPC is a Philippine unit en,a,ed in social science studies of Philippine societ! and culture. ?ccasionall!, it accepts sponsorships for its research activities from international or,ani/ations, private foundations and ,overnment a,encies. ?n 3 Mul! :23@, private respondent received from CIR a demand letter dated @ Mune :23@, assessin, private respondent the sum of P:$-,B-@.2$ for alle,ed deficienc! contractors ta&, and an assessment dated #$ Mune :23@ in the sum of P:,:-:,3@$ for alle,ed deficienc! income ta&, both for the fiscal !ear ended @: (arch :2$3. >en!in, said ta& liabilities, private respondent sent petitioner a letter1protest and subse uentl! filed 'ith the latter a memorandum contestin, the validit! of the assessments. After some time petitioner issued a final decision dated @ Au,ust :233 reducin, the assessment for deficienc! contractors ta& from P:2@,-$A.AA to P-C,A:C.-:, e&clusive of surchar,e and interest. %he lo'er courts ruled in favor of respondent. =ence this petition. Petitioner Commissioner of Internal Revenue contends that Private Respondent Ateneo de (anila )niversit! Dfalls 'ithin the definitionD of an independent contractor and Dis not one of those mentioned as e&ceptedD9 hence, it is properl! a sub*ect of the three percent contractorFs ta& levied b! the fore,oin, provision of la'. Petitioner states that the Dterm Findependent contractorF is not specificall! defined so as to delimit the scope thereof, so much so that an! person 'ho . . . renders ph!sical and mental service for a fee, is no' indubitabl! considered an independent contractor liable to @+ contractorFs ta&.D

I 1 E, 4hether or not private respondent falls under the purvie' of independent contractor pursuant to "ection #BA of the %a& Code and is sub*ect to a @+ contractors ta&. H E /3, %he petition is unmeritorious. %he term Finde9endent contractorsF include persons (*uridical or natural) not enumerated above (but not includin, individuals sub*ect to the occupation ta& under "ection :# of the Local %a& Code) 'hose activit! consists essentiall! of the sale of all .inds of services for a fee re,ardless of 'hether or not the performance of the service calls for the e&ercise or use of the ph!sical or mental faculties of such contractors or their emplo!ees. Petitioner Commissioner of Internal Revenue erred in appl!in, the principles of ta& e&emption 'ithout first appl!in, the 'ell1settled doctrine of strict interpretation in the imposition of ta&es. It is obviousl! both illo,ical and impractical to determine 'ho are e&empted 'ithout first determinin, 'ho are covered b! the aforesaid provision. %he Commissioner should have determined first if private respondent 'as covered b! "ection #BA, appl!in, the rule of strict interpretation of la's imposin, ta&es and other burdens on the populace, before as.in, Ateneo to prove its e&emption therefrom. Inter9retation of Tax /aGs. %he doctrine in the interpretation of ta& la's is that N(a) statute 'ill not be construed as imposin, a ta& unless it does so clearl!, e&pressl!, and unambi,uousl!. . . . (A) ta& cannot be imposed 'ithout clear and e&press 'ords for that purpose. Accordin,l!, the ,eneral rule of re uirin, adherence to the letter in construin, statutes applies 'ith peculiar strictness to ta& la's and the provisions of a ta&in, act are not to be e&tended b! implication.O In case of doubt, such statutes are to be construed most stron,l! a,ainst the ,overnment and in favor of the sub*ects or citi/ens because burdens are not to be imposed nor presumed to be imposed be!ond 'hat statutes e&pressl! and clearl! import. Ateneos Institute of Philippine Culture never sold its services for a fee to an!one or 'as ever en,a,ed in a business apart from and independentl! of the academic purposes of the universit!. 7unds received b! the Ateneo de (anila )niversit! are technicall! not a fee. %he! ma! ho'ever fall as ,ifts or donations 'hich are Nta&1e&emptO as sho'n b! private respondents compliance 'ith the re uirement of "ection :#@ of the 0ational Internal Revenue Code providin, for the e&emption of such ,ifts to an educational institution. Transaction of I2C not a contract of sale nor a contract for a 9iece of Gor:. %he transactions of Ateneos Institute of Philippine Culture cannot be deemed either as a contract of sale or a contract for a piece of 'or.. B! the contract of sale, one of the contractin, parties obli,ates himself to transfer the o'nership of and to deliver a determinate thin,, and the other to pa! therefor a price certain in mone! or its e uivalent. In the case of a contract for a piece of 'or., Nthe contractor binds himself to e&ecute a piece of 'or. for the emplo!er, in consideration of a certain price or compensation. . . . If the contractor a,rees to produce the 'or. from materials furnished b! him, he shall deliver the thin, produced to the emplo!er and transfer dominion over the thin,. . . .O In the case at bench, it is clear from the evidence on record that there 'as no sale either of ob*ects or services because, as adverted to earlier, there 'as no transfer of o'nership over the research data obtained or the results of research pro*ects underta.en b! the Institute of Philippine Culture. **. C.((I I.#ER .+ I#TER#A/ RE0E#1E, 9etitioner, vs. THE H.#. C.1RT .+ A22EA/ , R...H. A1T. 2R.31CT 2HI/I22I#E , I#C. and THE H.#. C.1RT .+ TA5 A22EA/ , res9ondents. ".R. #o. 1%78'7 Danuar! *%, 1))'

+acts, ?n ## Au,ust :23C, E&ecutive ?rder 0o. -: 'as promul,ated declarin, a one1time ta& amnest! on unpaid income ta&es, later amended to include estate and donorFs ta&es and ta&es on business, for the ta&able !ears :23: to :23A. Respondent R.?.=. Auto Products Philippines, Inc., availin, of the amnest!, filed in ?ctober :23C and 0ovember :23C, its %a& Amnest! Return and "upplemental %a& Amnest! Return 0o. and paid the correspondin, amnest! ta&es due. Prior to this availment, petitioner Commissioner of Internal Revenue, in a communication received b! private respondent on Au,ust :@, :23C, assessed the latter deficienc! income and business ta&es for its fiscal !ears :23: and :23# in an a,,re,ate amount of P:,-:B,:A$.$:. (ean'hile, respondent averred that since it had been able to avail itself of the ta& amnest!, the deficienc! ta& notice should forth'ith be cancelled and 'ithdra'n. %his 'as denied b! the CIR Revenue (emorandum ?rder 0o. -13$, implementin, E&ecutive ?rder 0o. -:, had construed the amnest! covera,e to include onl! assessments issued b! the Bureau of Internal Revenue after the promul,ation of the e&ecutive order on Au,ust ## :23C and not to assessments theretofore made. ?n appeal, %he Court of %a& appeal upheld for the respondent, 'hich 'as further upheld b! the Court of Appeals. I 1E, 4hether or not the the deficienc! assessments 'ere e&tin,uished b! reason of respondents availment of the ta& amnest!. HE/3, <es, as the scope of the amnest! covers the unpaid income ta&es for the !ears :23: to :23A. If, as the Commissioner ar,ues, E&ecutive ?rder 0o. -: had not been intended to include :23:1:23A ta& liabilities alread! assessed (administrativel!) prior to Au,ust ##, :23C, the la' could have simpl! so provided in its e&clusionar! clauses. It did not. %he conclusion is unavoidable, and it is that the e&ecutive order has been desi,ned to be in the nature of a ,eneral ,rant of ta& amnest! sub*ect onl! to the cases specificall/ e&cepted b! it. 7urther, the la' provides that, upon full compliance 'ith the conditions of the ta& amnest! and the rules and re,ulations issued pursuant to this E&ecutive order, the ta&pa!er shall be relieved of an! income ta& liabilit! on an! unta&ed income from Manuar! :, :23: to >ecember @:, :23A, includin, increments thereto and penalties on account of the non1pa!ment of the said ta&. Civil, criminal or administrative liabilit! arisin, from the non1pa!ment of the said ta&, 'hich are actionable under the 0ational Internal Revenue Code, as amended, are li.e'ise deemed e&tin,uished. *8.H43R. RE .1RCE 0. C.1RT .+ TA5 A22EA/ ET A/. "R 7%*&$A 3ecember *1, 1))% +ACT =!dro Resources Contractors Corporation entered into a contract of sale 'ith the 0ational Irri,ation Authorit! (0IA) for the construction of (a,at River (ultipurpose Pro*ect in Isabella in Au,ust :2$3. %he contract provided that =!dro 'ill import parts, construction e uipment and tools and ta&es and duties to be paid b! 0IA. %ools and e uipment arrived durin, :2$3 and :2$2. 0IA rene,ed on the contract. %herefore causin, the transfer its sale to =!dro in seperate dates in >ecember C, :23# and (arch #-, :23@. E&ecutive ?rder 3CB too. effect durin, >ecember #:, :23# provided for @+ ad valorem ta& on importations and it specificall! provided that it should have no retroactive effect. >urin, the contract of sale e&ecution, =!dro 'as assessed and paid the said @+ ad valorem ta& 'orth P #3:,A2: under protest. %he =!dro 'hen filin, for refund 'ith Customs Commissioner 'ho indorsed the approval of the refund but 'as denied b! the "ecretar! of 7inance and motion 'as denied b! the Court of %a& Appeals. I 1E 4hether or not should the E&ecutive ?rder 3CB should have a retroactive effect.

HE/3 %he Court of %a& Appeals erred in appl!in, a retroactive effect for the E&ecutive ?rder therefore should not have been sub*ect to the additional @+ ad valorem ta&. In ,eneral ta& la's are not retroactive in nature. 0ot onl! that E&ecutive ?rder 3CB specificall! provides that it is not retroactive in nature, but also 'hen the conditional contract of sale 'as e&ecuted, its had a suspensive condition contemplated in the Civil Code (Article ::3$) 'here it returned o'nership to the seller =!dro because 0IA 'as not able to compl! 'ith its part of the contract, it 'as deemed e&ecuted as if durin, the constitution of the obli,ation 'hich 'as in :2$3 and not in :23#.

*=.Central AEucarera 3on 2edro >v> CIR and CTA ".R. #os. /6*8*8$ and /6*8*'= (a! 81, 1)$&

+ACT , Central A/ucarera >on Pedro, a domestic corporation 'ith office at 0asu,bu, Batan,as, had been filin, its income ta& returns on the Dfiscal !earD basis endin, Au,ust @:, of ever! !ear. GIt had been assessed deficienc! ta& plus interest. It paid the deficienc! ta& but protested on the imposition of the interestH, claimin, that the imposition of U+ monthl! interest on its deficienc! ta& for the fiscal !ear :2A- to :2A3, Pursuant to "ection A: (d) of the Revenue Code, as amended b! Republic Act 0o. #@-@, is ille,al, because the imposition of interest on efficienc! income ta& earned prior to the effectivit! of the amendator! la' (Rep. Act #@-@) Gon :2A2H 'ill be tantamount to ,ivin, it (Rep. Act 0o. #@-@) retroactive application. GIt further contends thatH the application of the amended provision (no' "ec. A:1d of the %a& Code) to the cases at bar 'ould run counter to the constitutional restriction a,ainst the enactment of e& post facto la's. I 1E, 4hether or not the imposition of the interest, is unconstitutional

HE/3, 0? I Gthe interest 'as correctl! imposedH. It is to be noted that the collection of interest in these cases is not penal in nature, thus J t)e imposition of . . . interest is but a just compensation to t)e state for t)e dela/ in pa/ing t)e tax# and for t)e concomitant use b/ t)e taxpa/er of funds t)at rig)tfull/ s)ould be in t)e government%s )ands $!... vs. 0oldstein# 123 ( 45d6 7859 Ross vs. !...# 1:2 (ed. .upp. ;;<9 !... vs. =offra/# 37 (ed. 45d6 :22&. T)e fact t)at t)e interest c)arged is made proportionate to t)e period of dela/ constitutes t)e best evidence t)at suc) interest is not penal but compensator/. $Castro vs. Collector of Internal Revenue# 0.R. >o. ,-1517:# Resolution on -otion for Reconsideration# ?ecember 52# 13@5& and 'e had alread! held that J T)e doctrine of unconstitutionalit/ raised b/ appellant is based on t)e pro)ibition against ex post facto laAs. 'ut t)is pro)ibition applies onl/ to criminal or penal matters# and not to laAs A)ic) concern civil matters or proceedings generall/# or A)ic) affect or regulate civil or private rig)ts $Ex parte 0arland# 12 ,aA Ed.# ;@@9 1@ C.=...# 223-231&. $Republic vs. asan *da. de (ernandeB# 33 C)il. 3;:# 3;7&.

7inall!, section :@ of the amendator! Republic Act 0o. #@-@ refers onl! to the basic ta& rates, 'hich are made applicable to income received in :2A2 on'ard, but does not affect the interest due on deficiencies, 'hich are left to be ,overned b! section A: (d).

*'.2e9si6Cola Bottlin? Com9an! of the 2hili99ines, Inc. v. (unici9alit! of Tanauan ".R. #o. /6811'$A +ebruar! *&, 1)&$ +acts, In 7ebruar! :2C@, plaintiff commenced a complaint see.in, to declare "ection # of R.A. ##C- (Local Autonom! Act) unconstitutional as an undue dele,ation of ta&in, po'er and to declare ?rdinance 0os. #@ and #$ issued b! the (unicipalit! of %anauan, Le!te as null and void. (unicipal ?rdinance 0o. #@ levies and collects from soft drin.s producers and manufacturers one1si&teenth (:E:C) of a centavo for ever! bottle of soft drin. cor.ed. ?n the other hand, (unicipal ?rdinance 0o. #$ levies and collects on soft drin.s produced or manufactured 'ithin the territorial *urisdiction of the municipalit! a ta& of one centavo (PB.B:) on each ,allon of volume capacit!. %he ta& imposed in both ?rdinances 0os. #@ and #$ is denominated as Dmunicipal production ta&.O Issues, (:) Is "ection # of R.A. ##C- an undue dele,ation of the po'er of ta&ation; (#) >o ?rdinance 0os. #@ and #- constitute double ta&ation and impose percenta,e or specific ta&es; Held, (:) 0?. %he po'er of ta&ation is purel! le,islative and cannot be dele,ated to the e&ecutive or *udicial department of the ,overnment 'ithout infrin,in, upon the theor! of separation of po'ers. But as an e&ception, the theor! does not appl! to municipal corporations. Le,islative po'ers ma! be dele,ated to local ,overnments in respect of matters of local concern. (#) 0?. %he (unicipalit! of %anauan discovered that manufacturers could increase the volume contents of each bottle and still pa! the same ta& rate since ta& is imposed on ever! bottle cor.ed. %o combat this scheme, (unicipal ?rdinance 0o. #$ 'as enacted. As such, it 'as a repeal of (unicipal ?rdinance 0o. #@. In the stipulation of facts, the parties admitted that the (unicipal %reasurer 'as enforcin, (unicipal ?rdinance 0o. #$ onl!. =ence, there 'as no case of double ta&ation. *$.C.((I I.#ER .+ I#TER#A/ RE0E#1E vs. .C. D.H# .# A#3 .#, I#C., and C.1RT .+ A22EA/ 8%) CRA 7& A Dune *', 1))) To9ic, 3ouble Taxation +acts5 "C. M?=0"?0 A0> "?0, I0C., a domestic corporation or,ani/ed and operatin, under the Philippine la's, entered into a license a,reement 'ith "C Mohnson and "on, )nited "tates of America ()"A), a non1resident forei,n corporation 'as ,ranted the ri,ht to use the trademar., patents and technolo,! o'ned b! the latter includin, the ri,ht to manufacture, pac.a,e and distribute the products. License A,reement 'as dul! re,istered 'ith the %echnolo,! %ransfer Board of the Bureau of Patents, %rade (ar.s and %echnolo,! %ransfer under Certificate of Re,istration 0o. 3BC-. "C. M?=0"?0 A0> "?0, I0C 'as obli,ed to pa! "C Mohnson and "on, )"A ro!alties based on a percenta,e of net sales and sub*ected the same to #A+ 'ithholdin, ta& on ro!alt! pa!ments 'hich GrespondentH paid from Mul! :22# to (a! :22@. Respondent filed 'ith the International %a& Affairs >ivision (I%A>) of the BIR a claim for refund of overpaid

'ithholdin, ta& on ro!alties ar,uin, that "ince the a,reement 'as approved b! the %echnolo,! %ransfer Board, the preferential ta& rate of :B+ should appl! hence ro!alties paid b! the GrespondentH to "C Mohnson and "on, )"A is onl! sub*ect to :B+ 'ithholdin, ta& pursuant to the most1favored nation clause of the RP1)" %a& %reat!. %he Commissioner did not act on said claim for refund. Respondent filed a petition for revie' before the C%A to claim a refund of the overpaid 'ithholdin, ta& on ro!alt! pa!ments. C%A decided for Respondent and ordered CIR to issue a ta& credit certificate in the amount of P2C@,#CC.BB representin, overpaid 'ithholdin, ta& on ro!alt! pa!ments, be,innin, Mul!, :22# to (a!, :22@. CIR filed a petition for revie' 'ith CA. CA upheld C%A. CIR contends that under RP1)" %a& %reat!, 'hich is .no'n as the Dmost favored nationD clause, the lo'est rate of the Philippine ta& at :B+ ma! be imposed on ro!alties derived b! a resident of the )nited "tates from sources 'ithin the Philippines onl! if the circumstances of the resident of the )nited "tates are similar to those of the resident of 4est 6erman!. "ince the RP1)" %a& %reat! contains no Dmatchin, creditD provision as that provided in RP14est 6erman! %a& %reat!, the ta& on ro!alties under the RP1)" %a& %reat! is not paid under similar circumstances as those obtainin, in the RP14est 6erman! %a& %reat!. Also petitioner ar,ues that since ".C. MohnsonFs invocation of the Dmost favored nationD clause is in the nature of a claim for e&emption from the application of the re,ular ta& rate of #A+ for ro!alties, the provisions of the treat! must be construed strictl! a,ainst it. Respondent countered that the Dmost favored nationD clause under the RP1)" %a& %reat! refers to ro!alties paid under similar circumstances as those ro!alties sub*ect to ta& in other treaties9 that the phrase Dpaid under similar circumstancesD does not refer to pa!ment of the ta& but to the sub*ect matter of the ta&, that is, ro!alties, because the Dmost favored nationD clause is intended to allo' the ta&pa!er in one state to avail of more liberal provisions contained in another ta& treat! 'herein the countr! of residence of such ta&pa!er is also a part! thereto, sub*ect to the basic condition that the sub*ect matter of ta&ation in that other ta& treat! is the same as that in the ori,inal ta& treat! under 'hich the ta&pa!er is liable9 thus, the RP1)" %a& %reat! spea.s of Dro!alties of the same .ind paid under similar circumstancesD. Issue5 4?0 "C Mohnson can refund. Rulin?5 0?. %he ta& rates on ro!alties and the circumstances of pa!ment thereof are the same for all the recipients of such ro!alties and there is no disparit! based on nationalit! in the circumstances of such pa!ment. $ ?n the other hand, a cursor! readin, of the various ta& treaties 'ill sho' that there is no similarit! in the provisions on relief from or avoidance of double ta&ation & as this is a matter of ne,otiation bet'een the contractin, parties. %his dissimilarit! is true particularl! in the treaties bet'een the Philippines and the )nited "tates and bet'een the Philippines and 4est 6erman!. %he RP1)" %a& %reat! is *ust one of a number of bilateral treaties 'hich the Philippines has entered into for the avoidance of double ta&ation. ) %he purpose of these international a,reements is to reconcile the national fiscal le,islations of the contractin, parties in order to help the ta&pa!er avoid simultaneous ta&ation in t'o different *urisdictions. 1% (ore precisel!, the ta& conventions are drafted 'ith a vie' to'ards the elimination of international *uridical double ta&ation, 'hich is defined as the imposition of comparable ta&es in t'o or more states on the same ta&pa!er in respect of the same sub*ect matter and for identical periods. 11 %he apparent rationale for doin, a'a! 'ith double ta&ation is of encoura,e the free flo' of ,oods and services and the movement of capital, technolo,! and persons bet'een countries, conditions deemed vital in creatin, robust and d!namic economies. >ouble ta&ation usuall! ta.es place 'hen a person is resident of a contractin, state and derives income from, or o'ns capital in, the other contractin, state and both states impose ta& on that income or capital. In order to eliminate double ta&ation, a ta& treat! resorts to several methods. 7irst, it sets out the respective ri,hts to ta& of the state of source or situs and of the state of residence 'ith re,ard to certain classes of income or capital. In some cases, an e&clusive ri,ht to

ta& is conferred on one of the contractin, states9 ho'ever, for other items of income or capital, both states are ,iven the ri,ht to ta&, althou,h the amount of ta& that ma! be imposed b! the state of source is limited. >ouble ta&ation usuall! ta.es place 'hen a person is resident of a contractin, state and derives income from, or o'ns capital in, the other contractin, state and both states impose ta& on that income or capital. In order to eliminate double ta&ation, a ta& treat! resorts to several methods. 7irst, it sets out the respective ri,hts to ta& of the state of source or situs and of the state of residence 'ith re,ard to certain classes of income or capital. In some cases, an e&clusive ri,ht to ta& is conferred on one of the contractin, states9 ho'ever, for other items of income or capital, both states are ,iven the ri,ht to ta&, althou,h the amount of ta& that ma! be imposed b! the state of source is limited. ?n the other hand, in the credit method, althou,h the income or capital 'hich is ta&ed in the state of source is still ta&able in the state of residence, the ta& paid in the former is credited a,ainst the ta& levied in the latter. %he basic difference bet'een the t'o methods is that in the e&emption method, the focus is on the income or capital itself, 'hereas the credit method focuses upon the ta&. 1' %he phrase Dro!alties paid under similar circumstancesD in the most favored nation clause of the )"1RP %a& %reat! necessaril! contemplated Dcircumstances that are ta&1relatedD. In the case at bar, the state of source is the Philippines because the ro!alties are paid for the ri,ht to use propert! or ri,hts, i.e. trademar.s, patents and technolo,!, located 'ithin the Philippines. 1& %he )nited "tates is the state of residence since the ta&pa!er, ". C. Mohnson and "on, ). ". A., is based there. )nder the RP1)" %a& %reat!, the state of residence and the state of source are both permitted to ta& the ro!alties, 'ith a restraint on the ta& that ma! be collected b! the state of source. the concessional ta& rate of :B percent provided for in the RP16erman! %a& %reat! should appl! onl! if the ta&es imposed upon ro!alties in the RP1)" %a& %reat! and in the RP16erman! %a& %reat! are paid under similar circumstances. %his 'ould mean that private respondent must prove that the RP1)" %a& %reat! ,rants similar ta& reliefs to residents of the )nited "tates in respect of the ta&es imposable upon ro!alties earned from sources 'ithin the Philippines as those allo'ed to their 6erman counterparts under the RP16erman! %a& %reat!. %he RP1)" and the RP14est 6erman! %a& %reaties do not contain similar provisions on ta& creditin,. If the rates of ta& are lo'ered b! the state of source, in this case, b! the Philippines, there should be a concomitant commitment on the part of the state of residence to ,rant some form of ta& relief, 'hether this be in the form of a ta& credit or e&emption. *= ?ther'ise, the ta& 'hich could have been collected b! the Philippine ,overnment 'ill simpl! be collected b! another state, defeatin, the ob*ect of the ta& treat! since the ta& burden imposed upon the investor 'ould remain unrelieved. If the state of residence does not ,rant some form of ta& relief to the investor, no benefit 'ould redound to the Philippines, i.e., increased investment resultin, from a favorable ta& re,ime, should it impose a lo'er ta& rate on the ro!alt! earnin,s of the investor, and it 'ould be better to impose the re,ular rate rather than lose much1needed revenues to another countr!. %he entitlement of the :B+ rate b! ).". firms despite the absence of a matchin, credit (#B+ for ro!alties) 'ould dero,ate from the desi,n behind the most ,rant e ualit! of international treatment since the ta& burden laid upon the income of the investor is not the same in the t'o countries. %he similarit! in the circumstances of pa!ment of ta&es is a condition for the en*o!ment of most favored nation treatment precisel! to underscore the need for e ualit! of treatment. Respondent cannot be deemed entitled to the :B percent rate ,ranted under the RP14est 6erman! %a& %reat! for the reason that there is no pa!ment of ta&es on ro!alties under similar circumstances in RP1)" treat!. *&. CIR v Rufino

"R #osH /688$$'6$7A +ebruar! *&, 1)7& +acts, %his is a petition for revie' on certiorari of the C%A decision 'hich absolved petitioners from liabilit! for capital ,ains ta& on stoc.s received b! them from Eastern %heatrical, Inc. %he Rufinos 'ere ma*orit! stoc.holders of Eastern %heatrical Co., Inc (hereinafter ?ld E%C) 'hich had a corporate term of #A !ears, 'hich terminated on Manuar! #A, :2A2, president of 'hich 'as Ernesto Rufino. ?n >ecember 3, :2A3, the Eastern %heatrical Co, Inc. (hereinafter 0e' E%C, 'ith a corporate term of AB !ears) 'as or,ani/ed, and the Rufinos 'ere also the ma*orit! stoc.holders of the corporation, 'ith 8icente Rufino as the 6eneral1(ana,er. Both E%Cs 'ere en,a,ed in the same business. ?ld E%C held a stoc.holders meetin, to mer,e 'ith the 0e' E%C on >ecember :$, :2A3 to continue its business after the end of ?ld E%Cs corporate term. %he mer,er 'as authori/ed b! a board resolution. It 'as e&pressl! declared that the mer,er 'as necessar! to continue operatin, the Capitol and L!ric %heaters in (anila even after the e&piration of corporate e&istence, to preserve both its boo.in, contracts and to uphold its collective bar,ainin, a,reements. %hrou,h the t'o Rufinos (Ernesto and 8icente), a >eed of Assi,nment 'as e&ecuted, 'hich conve!ed and transferred all the business, propert!, assets and ,ood 'ill of the ?ld E%C to the 0e' E%C in e&chan,e for shares of stoc: of the latter to be issued to the shareholders at the rate of one stoc: for each stoc: held in the ?ld E%C. %he >eed 'as to retroact from Manuar! :, :2A2. 0e' E%Cs Board approved the mer,er and the >eed of Assi,nment on Manuar! :#, :2A2 and all chan,es dul! re,istered 'ith the "EC. %he BIR, after e&amination, declared that the mer,er 'as not underta.en for a bona fide business purpose but onl! to avoid liabilit! for the capital gains tax on the e&chan,e of the old for the ne' shares of stoc.. =e then imposed deficienc! assessments a,ainst the private respondents, the Rufinos. %he Rufinos re uested for a reconsideration, 'hich 'as denied. %herefore, the! elevated their matter to the C%A, 'ho reversed the *ud,ment of the CIR, sa!in, that the! found that there 'as Nno ta&able ,ain derived from the e&chan,e of old stoc.s simpl! for ne' stoc.s for the 0e' CorporationO because it 'as pursuant to a valid plan of reor,ani/ation. %he CIR raised it to the "C on petition for revie' on certiorari. Issue, 4?0 there 'as a valid mer,er and that there 'as no ta&able ,ain derived therefrom. Held, <E", the C%A 'as correct in rulin, that there 4A" a mer,er and that no ta&able ,ain 'as derived. C%A decision is A77IR(E>. Rationale, 8alidit! of transfer. In support of its ar,ument that the Rufinos 'ere tr!in, to avoid the pa!ment of capital ,ains ta&, the CIR said that the 0e' E%C did not actuall! issue stoc.s in e&chan,e for the properties of the ?ld E%C. %he increase in capitali/ation onl! happened in (arch :2A2, or @$ da!s after the ?ld E%C e&pired. Prior to re,istration, the 0e' E%C could not have validl! performed the transfer. %he "C ruled that the retroactivit! of the >eed of Assi,nment cured the defect and there 'as no impediment. 'ona (ide Business Purpose. %he criterion of the la' is that the purpose of the mer,er must be for a bona fide business purpose and not for the purpose of escapin, ta&es. %he case of Helvering v. 0regor/ stated that a mere Noperation havin, no business or corporate purposeJa mere devise 'hich put on the form of a corporate reor,ani/ation as a dis,uise for concealin, its real character and the sole ob*ect and accomplishment of 'hich 'as the consummation of a

preconceived plan, not to reor,ani/e a business but to transfer a parcel of corporate shares.O 4hen the corporation created is nothin, more than a contrivance, there is no le,itimate business purpose. %he Court states that there is no such furtive intention in this case. In fact, the 0e' E%C continues to operate the Capitol and L!ric movie theaters even up to #$ !ears after the mer,er. %here is as !et no dissolution, so the Rufinos havent ,ained an! benefit !et from the mer,er, 'hich ma.es them no more liable than the time the mer,er too. place. The ?overnments remed!5 %he mer,er merel! deferred the pa!ment for ta&es until the future, 'hich the ,overnment ma! assert later on 'hen ,ains are reali/ed and benefits are distributed amon, the stoc.holders as a result of the mer,er. %he ta&es are not forfeited but merel! postponed and ma! be imposed at the proper time later on. *7. 3E/2HER TRA3E C.R2.RATI.#vs. IAC ".R. #o. /6$)*') Danuar! *$, 1)77 +acts, >elfin Pacheco and sister Pela,ia 'ere the o'ners of a parcel of land in Polo (no' 8alen/uela). ?n April @, :2$-, the! leased to Construction Components International Inc. the propert! and providin, for a ri,ht of first refusal should it decide to bu! the said propert!. Construction Components International, Inc. assi,ned its ri,hts and obli,ations under the contract of lease in favor of =!dro Pipes Philippines, Inc. 'ith the si,ned conformit! and consent of >elfin and Pela,ia. In :2$C, a deed of e&chan,e 'as e&ecuted bet'een lessors >elfin and Pela,ia Pacheco and defendant >elpher %rades Corporation 'hereb! the Pachecos conve!ed to the latter the leased propert! to,ether 'ith another parcel of land also located in (alinta Estate, 8alen/uela for #,ABB shares of stoc. of defendant corporation 'ith a total value of P:.A(. ?n the ,round that it 'as not ,iven the first option to bu! the leased propert! pursuant to the proviso in the lease a,reement, respondent =!dro Pipes Philippines, Inc., filed an amended complaint for reconve!ance of the lot. Issue, 4?0 the >eed of E&chan,e of the properties e&ecuted b! the Pachecos and the >elpher %rades Corporation on the other 'as meant to be a contract of sale 'hich, in effect, pre*udiced the =!dro PhilFs ri,ht of first refusal over the leased propert! included in the Ddeed of e&chan,e,D Held, 0o, b! their o'nership of the #,ABB no par shares of stoc., the Pachecos have control of the corporation. %heir e uit! capital is AA+ as a,ainst -A+ of the other stoc.holders, 'ho also belon, to the same famil! ,roup. In effect, the >elpher %rades Corporation is a business conduit of the Pachecos. 4hat the! reall! did 'as to invest their properties and chan,e the nature of their o'nership from unincorporated to incorporated form b! or,ani/in, >elpher %rades Corporation to ta.e control of their properties and at the same time save on inheritance ta&es. %he D>eed of E&chan,eD of propert! bet'een the Pachecos and >elpher %rades Corporation cannot be considered a contract of sale. %here 'as no transfer of actual o'nership interests b! the Pachecos to a third part!. %he Pacheco famil! merel! chan,ed their o'nership from one form to another. %he o'nership remained in the same hands. =ence, the private respondent has no basis for its claim of a li,ht of first refusal

*). CIR v. Toda, Dr. "R #o. 1=&177A 1= e9tember *%%= + A C T , ?n # (arch :232, CIC authori/ed Beni,no P. %oda, Mr., President and o'ner of 22.22:+ of its outstandin, capital stoc., to sell the Cibeles Buildin,. ?n @B Au,ust :232, %oda purportedl! sold the propert! for P:BB million to Rafael A. Altona,a, 'ho, in turn, sold the same propert! on the same da! to Ro!al (atch Inc. (R(I) for P#BB million. %hree and a half !ears later %oda died. ?n #2 (arch :22-, the BIR sent an assessment notice and demand letter to the CIC for deficienc! income ta& for the !ear :232. ?n #$ Manuar! :22A, the Estate of Beni,no P. %oda, Mr., represented b! special co1administrators Lorna Qapunan and (ario Lu/a Bautista, received a 0otice of Assessment from the CIR for deficienc! income ta& for the !ear :232. %he Estate thereafter filed a letter of protest. %he Commissioner dismissed the protest. ?n :A 7ebruar! :22C, the Estate filed a petition for revie' 'ith the C%A. In its decision the C%A held that the Commissioner failed to prove that CIC committed fraud to deprive the ,overnment of the ta&es due it. It ruled that even assumin, that a pre1conceived scheme 'as adopted b! CIC, the same constituted mere ta& avoidance, and not ta& evasion. =ence, the C%A declared that the Estate is not liable for deficienc! of income ta&. %he Commissioner filed a petition for revie' 'ith the Court of Appeals. %he Court of Appeals affirmed the decision of the C%A, hence, this recourse. I 1 E, 4hether or not this is a case of ta& evasion or ta& avoidance.

H E / 3, %a& evasion connotes the inte,ration of three factors5 (:) the end to be achieved, i.e. the pa!ment of less than that .no'n b! the ta&pa!er to be le,all! due, or the non1pa!ment of ta& 'hen it is sho'n that a ta& is due9 (#) an accompan!in, state of mind 'hich is described as bein, Nevil,O in Nbad faith,O N'illfull,O or Ndeliberate and not accidentalO9 and (@) a course of action or failure of action 'hich is unla'ful. All these factors are present in the instant case. %he scheme resorted to b! CIC in ma.in, it appear that there 'ere t'o sales of the sub*ect properties, i.e. from CIC to Altona,a, and then from Altona,a to R(I cannot be considered a le,itimate ta& plannin,. "uch scheme is tainted 'ith fraud. Altona,as sole purpose of ac uirin, and transferrin, title of the sub*ect properties on the same da! 'as to create a ta& shelter. %he sale to him 'as merel! a ta& plo!, a sham, and 'ithout business purpose and economic substance. >oubtless, the e&ecution of the t'o sales 'as calculated to mislead the BIR 'ith the end in vie' of reducin, the conse uent income ta& liabilit!.

@B. CIR v. E

. ("et1off)

1&* CRA 8$)A A9ril 17, 1)7) +acts, E""? overpaid its :2A2 income ta& b! P##:, B@@.BB. It 'as accordin,l! ,ranted a ta& credit. =o'ever, E""?s pa!ment of its income ta& for :2CB 'as found to be short b!P@C$,22-. "o the Commissioner demanded pa!ment of the deficienc!, 'ith interest. E""? paid under protest, includin, the interest as rec.oned b! the Commissioner. E""?s contention5 %he interest 'as more than that properl! due. It should not have been re uired to pa! interest on the total amount of the deficienc! ta&, P@C$,22-.BB, but onl! on the amount of P:-C,2C:.BBJrepresentin, the difference bet'een said deficienc! and E""?s earlier overpa!ment. E""? thus as.ed for a refund. CIRs contention5 It denied the claim for refund. Income ta&es are determined and paid on an annual basis, such determination and pa!ment are separate and independent transactions9 and a ta& credit could not be considered until it has been finall! approved and the ta&pa!er notified. "ince in this case, the ta& credit 'as approved onl! on Au,ust A, :2C-, it could not be availed of in reduction of E""?s earlier ta& deficienc! for :2CB9 as of that !ear there 'as no ta& credit to spea. of. In support of this, the Commissioner invo.es the "ection A: of the %a& Code5 (d) Interest on deficienc!. J Interest upon the amount determined as deficienc! shall be assessed at the same time as the deficienc! and shall be paid upon notice and demand from the Commissioner of Internal Revenue9 and shall be collected as a part of the ta&. E""? appealed to the Court of %a& Appeals, 'hich in turn ordered pa!ment to E""? of its Drefund1claim. =ence, this appeal b! the Commissioner. I 1E, 4as it proper to appl! E""?s ta& credit in reducin, the total deficienc! sub*ect to interest; HE/3, <es, re,ardless of CIRs assertions, the fact is that as earl! as Mul! :A, :2CB, the 6overnment alread! had in its hands the sum representin, e&cess pa!ment. =avin, been paid and received b! mista.e, that sum un uestionabl! belon,ed to E""?, and the 6overnment had the obli,ation to return it to E""?. %he obli,ation to return mone! mista.enl! paid arises from the moment that pa!ment is made, and not from the time that the pa!ee admits the obli,ation to reimburse. %he obli,ation of the pa!ee to reimburse results from the mista.e, not from the pa!eeFs confession of the mista.e or reco,nition of the obli,ation to reimburse. In other 'ords, since the amount of P##:,B@@.BB belon,in, to E""? 'as alread! in the hands of the 6overnment as of Mul!, :2CB, it 'as neither le,all! nor lo,icall! possible for E""? thereafter to be considered a debtor of the 6overnment9 and 'hatever other obli,ation E""? mi,ht subse uentl! incur in favor of the 6overnment 'ould have to be reduced b! that sum, in respect of 'hich no interest could be char,ed. 0othin, is better settled than that courts are not to ,ive 'ords a meanin, 'hich 'ould lead to absurd or unreasonable conse uences.O D"tatutes should receive a sensible construction, such as 'ill ,ive effect to the le,islative intention and so as to avoid an un*ust or absurd conclusion.D

81. 3omin?o v. "arlitos "R #o. /617))8

*) Dune 1)$8

+ A C T , In >omin,o vs. (oscoso (:BC P=IL ::@3), the "upreme Court declared as final and e&ecutor! the order of the Court of 7irst Instance of Le!te for the pa!ment of estate and inheritance ta&es, char,es and penalties amountin, to P-B,BA3.AA b! the Estate of the late 4alter "cott Price. %he petition for e&ecution filed b! the fiscal, ho'ever, 'as denied b! the lo'er court. %he Court held that the e&ecution is un*ustified as the 6overnment itself is indebted to the Estate for #C#,#BB9 and ordered the amount of inheritance ta&es be deducted from the 6overnments indebtedness to the Estate. I 1 E, 4hether a ta& and a debt ma! be compensated.

H E / 3, %he court havin, *urisdiction of the Estate had found that the claim of the Estate a,ainst the 6overnment has been reco,ni/ed and an amount of P#C#,#BB has alread! been appropriated b! a correspondin, la' (RA #$BB). )nder the circumstances, both the claim of the 6overnment for inheritance ta&es and the claim of the intestate for services rendered have alread! become overdue and demandable as 'ell as full! li uidated. Compensation, therefore, ta.es place b! operation of la', in accordance 'ith Article :#$2 and :#2B of the Civil Code, and both debts are e&tin,uished to the concurrent amount. In other 'ords, the estate and inheritance ta&es are set off, b! virtue of the ,overnments indebtedness to the estate. 8*. C.((I I.#ER .+ I#TER#A/ RE0E#1E 0. I ABE/A C1/T1RA/ C.R2.

-'1' CRA ''$CA +ebruar! 1*, *%%& %opic5 %he all1events test9 'hen deductions from income ta&es ma! be claimed +acts, 4hen the Bureau of Internal Revenue disallo'ed Isabela Cultural CorporationVs claimed deductions for the !ears :23-1:23C in their :23C ta&es for e&pense deductions, to 'it5 (:) E&penses for auditin, services for the !ear endin, @:>ecember :23A9 (#) E&penses for le,al services for the !ears :23- and :23A9 and (@) E&pense for securit! services for the months of April and (a! :23C. As such, the former char,ed the latter for deficienc! income ta&es. Isabela Cultural Corporation contests the assessment. Issue #o. 1. 7or a ta&pa!er usin, the accrual method, 'hen do the facts present themselves in such a manner that the ta&pa!er must reco,ni/e income or e&pense; Rulin?, %he accrual of income and e&pense is permitted 'hen the all1events test has been met. %his test re uires5 (:) fi&in, of a ri,ht to income or liabilit! to pa!9 and (#) the availabilit! of the reasonable accurate determination of such income or liabilit!. %he test does not demand that the amount of income or liabilit! be .no'n absolutel!, onl! that a ta&pa!er has at his disposal the information necessar! to compute the amount 'ith reasonable accurac!. %he all1events test is satisfied 'here computation remains uncertain, if its basis is unchan,eable9 the test is satisfied 'here a computation ma! be un.no'n, but is not as much as un.no'able, 'ithin the ta&able !ear. Issue #o. *. 4?0 the deductions 'ere properl! claimed b! Isabela Cultural Corporation.

Rulin?, %he deductions for e&penses for professional fees consistin, of e&penses for le,al and auditin, services are 0?% allo'able. =o'ever, the deductions for e&penses for securit! services 'ere properl! claimed b! Isabela Cultural Corporation. 7or the le,al and auditin, services, Isabela Cultural Corporation could have reasonabl! .no'n the fees of those firms that it hired, thus satisf!in, the Wall1events test.X As such, per Revenue Audit (emorandum ?rder 0o. :1#BBB, the! cannot validl! be deducted from its ,ross income for the said !ear and 'ere therefore properl! disallo'ed b! the BIR. As for the securit! services, because the! 'ere incurred in :23C, the! could be properl! claimed as deductions for the said !ear. #otes %he re uisites for the deductibilit! of ordinar! and necessar! trade, business, or professional e&penses, li.e e&penses paid for le,al and auditin, services, are5 a. %he e&pense must be ordinar! and necessar!9 b. It must have been paid or incurred durin, the ta&able !ear9 c. It must have been paid or incurred in carr!in, on the trade or business of the ta&pa!er9 and d. It must be supported b! receipts, records, or other pertinent papers. Revenue Audit (emorandum ?rder 0o. :1#BBB, provides that under the accrual method of accountin,, e&penses not bein, claimed as deductions b! a ta&pa!er in the current !ear 'hen the! are incurred cannot be claimed as deduction from income for the succeedin, !ear. %hus, a ta&pa!er 'ho is authori/ed to deduct certain e&penses and other allo'able deductions for the current !ear but failed to do so cannot deduct the same for the ne&t !ear. %he propriet! of an accrual must be *ud,ed b! the facts that a ta&pa!er .ne', or could reasonabl! be e&pected to have .no'n, at the closin, of its boo.s for the ta&able !ear. Accrual method of accountin, presents lar,el! a uestion of fact9 such that the ta&pa!er bears the burden of proof of establishin, the accrual of an item of income or deduction.