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ESTATE TAX
Q: What is an Estate Tax?
A: An estate tax is a tax on the privilege of
transmitting property at death which is measured
by the value of the property at the time of the
death of the decedent.
Estate tax is the tax on the right to transmit
property at death and on certain transfers by the
decedent during his lifetime which are made by
law the equivalent of testamentary dispositions.
(De Leon)
Q: When does the estate tax accrue?
A: It accrues at the time of death irrespective of
whether the heirs took possession or enjoyment
of the property.
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Q: How about dividends declared and paid after
the decedents death, would they be part of the
gross estate?
A: No. It is an income of the estate but not part
of the gross estate for estate tax purposes. In
dividends, what is important is the date of
declaration of the dividends, not the date of the
receipt of the dividends.
Q: A and B opened a joint account (A or B)
where either A or B may withdraw. B died.
Would this be a part of Bs estate?
A: Yes, but in order for A to claim the whole
amount for himself, A would have to show that B
was stripped of his right over the account and
such was transferred to A after his death
Q: A and B opened a joint account (A and B)
where either A or B may withdraw. B died.
Would this be a part of Bs estate?
A:
Q: A, B, C bought a property, so they co-own it.
However, it was C who paid the purchase price.
C died. Is the part of Cs estate, the whole or 1/3
of the property?
A: Only 1/3 because of the co-ownership
existing between them, except if it is shown that
C actually own the entire interest. Other
evidence could be shown in order to prove
decedents interest.
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Q: X told Y that he may die soon so he left a
very expensive car to Y. Is this considered a
transfer in contemplation of death?
A: Yes, because there is a thought of death.
Q: What is the transfer was made without the
decedent knowing that he is ill, is it a transfer in
contemplation of death?
A: No, the decedent should have knowledge of
his ill condition.
Q: A, 70 years old and suffering from cancer, has
a real property having a fair market value of
P10M, but he sold it for P9M telling the buyer
that he is going to die. He died afterwards. Is it a
transfer in contemplation of death?
A: No, because there is an adequate
consideration. This consideration takes it away
from the gross estate.
Revocable Transfer
Q: What is a revocable transfer?
A: Yung bigay na bawi
You give but you retain control, possession, and
enjoyment. What you have given under the
scheme forms part of the gross estate.
(Bar Ops Stenographic Notes)
Q: Are revocable transfers considered as part of
the gross estate?
A: Yes, because these are considered as not
having left the decedent/grantor.
Q: Suppose that A gave property to B under a
revocable trust. Ten days before his death he said
to the beneficiary and to the trustee that he is
very ill and he may die soon so he is revoking
his power to revoke. He died. B considered this
as an irrevocable trust contending that it is not
part of the gross estate. Would that form part of
the gross estate?
A: Yes, because when he revoke the power to
revoke, he revoke it in contemplation of death.
Q: Suppose Dad made a revocable transfer to son
but Son paid Dad P8M. The property is valued at
P9M. Dad died. Is it part of his estate?
A: No because there is an adequate consideration
which means that it left the estate.
General Power of Appointment
Q: What is a general power of appointment?
A: It refers to the right of the decedent to
designate any person including himself who shall
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It is special when he can appoint only among a
restricted or designated class of persons other
than himself. (De Leon)
Q: Are properties transferring under a special
power of appointment part of the gross estate?
A: No. because the decedent is restricted to a
specific or special class of persons, which means
that he cannot even appoint himself.
Proceeds of Life Insurance
Q: Are proceeds of life insurance part of gross
estate?
A: Yes, but, as provided in Sec 85 (E), only to
the extent of the amount receivable by the estate
of the deceased , his executor, or administrator.
Q: Suppose A got an insurance policy where Y
was designated as a revocable beneficiary, but A
died. Is the proceeds part of the estate?
A: The proceeds do not belong to the estate, but
to Y. However, the mere fact of revocability only
makes it part of the Estate, there it is taxable. To
be irrevocable, it must be expressly stated.
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Q: Suppose A was designated by the probate
court as an administrator of the decedents estate.
However, as a condition for the office, the
probate court required A to post a bond having a
premium amount worth P30k, is this amount
deductible to the estate?
A: No. This is not for the settlement of the estate
but in the nature of a qualification for office.
Q: Suppose an heir hired a lawyer to protect his
interest in the estate. He spend P100k. Is it
deductible?
A: No, not an expense for the settlement of the
estate. The Supreme Court ruled that attorneys
fees incurred by the heirs in asserting their rights
in the estate are not expenses essential to the
settlement of the estate. Only expenses essential
to the proper settlement of the estate are
deductible.
Q: Supposing that notarial fees were paid for the
extrajudicial settlement of the estate, would this
be deductible?
A: Yes. In CIR vs. Pajonar, the Supreme Court
ruled that expenses necessary for the settlement
of the estate should be deducted, although the
Tax Code specifies judicial expenses
3. Claims against the Estate
Q: The estate is indebted to A, but the debt
instrument was notarized a week before the
decedents death. May this debt instrument used
as a valid deduction?
A: No. Law looks at it only as a manufactured
document. To be deductible, it must be duly
notarized at the time the indebtedness was
incurred.
Sec. 86 (A) (1) (c) For claims against the
estate: Provided, That at the time the
indebtedness was incurred the debt instrument
was duly notarized and, if the loan was
contracted within 3 years before the death of the
decedent, the administrator or executor shall
submit a statement showing the disposition of
the proceeds of the loan.
Q: What if the loan is contracted within 3 years
prior to the death of the deaceased?
A: The administrator or executor required to
submit a statement showing the disposition of
the proceeds of the loan.
Q: What is the purpose of this within 3 year
rule?
A: To avoid fabrication.
Q: Can funeral expenses exceeding P200,000 be
deducted as claims against the estate?
A: No, it cannot be claimed as a deduction.
4. Bad Debt Deduction
Sec 86 (A) (1) (d) For claims of the deceased
against insolvent persons where the value of the
decedents interest therein is included in the
value of the gross estate
Q: What is the requirement in this deduction?
A: You have to put the uncollectible receivables
in the estate before getting a claim. Also, you
cannot just claim that an indebtedness is
insolvent. You must show that the debtor is
financially incapable of paying.
(Bar Ops Stenographic Notes)
Q: What is the tax benefit in including the bad
debt (or insolvent claim) and then deducting it?
A:
5. Unpaid Mortgages
Sec. 86 (e) For unpaid mortgages upon, or
any indebtedness in respect to, property where
the value of decedents interest therein,
undiminished by such mortgage or indebtedness,
is included in the value of the gross estate.
Q: What do deductions for unpaid mortgages
include?
A: It includes the mortgaged property
undiminished by indebtedness in the gross estate.
This means that you have to include the
mortgage property in the gross estate
undiminished by the indebtedness before
claiming the unpaid mortgages as a deduction
because the fair market value of the property
could be much higher than the mortgage
indebtedness.
6. Losses
Sec. 86 (e) x x x There shall be deducted
losses incurred during the settlement of the
estate arising from fires, storms, shipwreck, or
other casualties, or from robbery, theft, or
embezzlement, (fortuitous event), when such
losses are not compensated for by insurance or
otherwise, and if at the time of the filing of the
return such losses have not been claimed as a
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deduction for income tax purposes in a income
tax return, and provided that such losses were
incurred not later than the last day for the
payment of the estate tax.
7. Any Indebtedness
Tax
Q: Are taxes deductible to the estate?
A: Yes, Sec. 86 (e) provides for any unpaid
mortgages upon, or any indebtedness.
Indebtedness includes tax.
Q: What taxes are deductible?
A: Taxes accruing before the death. Sec 86
(e) x x x but not including any income tax
upon income received after the death of the
decedent, or property taxes not accrued before
his death, or any estate tax.
Unpaid Subscriptions
Q: During the lifetime of the decedent, he
subscribed to a corporation. Worth P1M, but he
simply paid 25%. Suddenly the corporation
became financially unstable. The Board of
Directors issued a call/ pay up. Decedent died
before paying up. Would the 75% be considered
a claim against the estate for indebtedness?
A: Yes, this is a valid claim against the estate.
8. Vanishing Deduction
Q: What is the rule with regard to Vanishing
Deduction as provided in Sec. 86 (A) (2)?
A: There must be a prior decedent transferor and
a current decedent transferee who died within 5
years after the death of the transferor.
Q: Suppose A had properties here and abroad. A
died. B inherited these properties. Later B died.
Which is deductible?
A: Only properties situated in the Philippines.
Sec. 86 (A) (2) x x x any property forming a part
of the gross estate situated in the Philippines.
9. Transfer for Public Use
Q: Suppose decedent made a transfer in favor of
a NGO, is it deductible as transfer for public
use?
A: No. it should be for the government, not for a
non-government organization.
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Q: What if the family home was bought by
conjugal funds, is it deductible?
A: Yes, the one-half share of the surviving
spouse in the family home is deducted from the
gross estate to arrive at the net estate.
Q: How about the share of the surviving spouse
in the conjugal funds, is it deductible?
A: Yes. The surviving spouse exclusive property
is not included in the decedent spouses estate.
Sec. 85 (H) Capital of the Surviving Spouse
The capital of the surviving spouse of a decedent
shall not be deemed a part of his or her gross
estate.
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Q: Suppose X, an alien, lived in the Philippines.
X acquired a car, PLDT shares, IBM shares,
savings (3 years), account in PNB Manila,
savings in PNB (New York). Then he left for US
and acquired similar properties. He lived and
died there. What forms part of his estate?
A:
Q: Same question, at the time of his death, is he
a resident or a non-resident?
A:
Q: Same question but assuming that he died as a
non resident alien, what are included in the gross
estate?
A: IBM shares are not included unless 85% of its
business is located in the Philippines.
Q: Suppose a non resident alien decent has
shares in AOL which have a 100% subsidiary in
the Philippines, will it be included in the gross
estate?
A: No, Equity investment is not doing business
in the Philippines.
Q: Suppose an American decedent died having a
promissory note issued by a Filipino
businessman, and the BIR argued that the
promissory note has a business situs in the
Philippines referring to Sec. 104 (obligations
considered as situated in the Philippines), is it
part of the estate?
A: No. the law speaks of institutions or
corporations and not individual obligations (Sec.
104 x x x obligations by any corporation)
Reciprocity
Q: When would the intangibles mentioned in
Sec. 104 not considered part of gross estate?
A: When there is reciprocity. Reciprocity in that
section is when the foreign country of the nonresident decedent allows a similar exemption to a
non-resident Filipino, meaning the intangibles of
the non resident Filipino in that foreign country
of the non resident decedent would exempt the
intangibles similarly.
Q: Although Sec. 104 states five instances where
the intangible property of the non resident alien
decedent is included in the computation of his
estate, are there instances where the computation
of the intangible property of the non resident
alien decedent would not be included in the
estate tax?
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income of which inures to the benefit of
any individual: Provided, however, That
not more than 30% of the said bequests,
devises, legacies, or transfers shall be
used by such institutions for
administration purposes.
Q: What is the basis for the exemption in Sec. 87
(A) to (C)?
A: It is premised on the fact that in all the
transfers mentioned, there is really one
transmission of property, (i.e.- from the testator
to the owner of the naked title; or from the
testator to the fideicommissary0 Hence, the
exemption from the tax because the property was
previously subject thereto. (De Leon)
Q: In the merger of the usufruct and the naked
title, what if the usufruct die which results to the
merger of the usufruct and the naked title, would
the transmission be taxable?
A: No, it is not taxable because the right of the
usufruct is included in the gross estate of the
decedent.
Q: Suppose A transfers property to trust. This
property would be enjoyed by B but the title is
given to C. A dies, would the property be part of
the estate?
A: If it is a revocable trust, it would be a part of
As estate.
Q: Same question, but what if B dies?
A: The value of the usufruct is included in the
gross estate of B. See Sec. 88. (A).
Q: Same question, but what if B dies ahead of A?
A: Sec. 88 (A) also applies.
DONORS TAX
Q: What is a donors tax?
A: The donors tax is imposed on donations inter
vivos or those made between living persons to
take effect during the lifetime of the donor.
(De Leon)
Q: How are donations mortis causa taxed?
A: Donations mortis causa or those which are to
take effect upon the death of the donor partake
the nature of testamentary dispositions, are
subject to estate tax. They are considered
transfers in contemplation of death. (De Leon)
Q: What is the concept of the gift tax?
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intent). But for a gift to be an item of exclusion,
there must be disinterested generosity.
Q: What property is contemplated in donors
tax?
A: real, personal, tangible, intangible.
Q: Would donors tax include conceptual or
contingent property?
A: It could be a conceptual or contingent
property as long as you can value it, because if
you cannot value it, it cannot be considered as
property. (it could be a thing but not a property)
Q: Would donors tax include something that
could not be valued? (i.e., blood of Kris Aquino
)
A: It is not subject to gift tax because it cant be
valued.
Q: When is there a taxable gift?
A: There must be cessation of control by the
donor over the property given.
Q: Suppose X gave Y a check dated June 30,
2004. On July 8, X died, but Y had not encashed
the check. Is there a gift?
A: No. there was no cessation of control and
dominion on the part of the donor over the
property transferred.
The Court in Burnett vs. Guggenheim:
Taxation is not so much concerned with the
requirements of title as it is with actual command
over the property taxed.
Q: X would give his Bulacan land as a gift to Y
provided that Y would give his Laguna land to X
as a gift. Is there a taxable gift?
A: No. There is no gift because the transfer was
with consideration. It is a taxable exchange of
property. If it is a capital asset, it is an exchange
subject to Sec. 24 (D).
Q: Dad owns shares worth P70 per share. Son is
engaged in trading securities. Dad told Son to
sell his shares for P140/share such that the profit
would belong to Son. Is there a taxable gift?
A:
Q: Same question, but what if there is no filial
relationship?
A: No gift because it was a transaction in the
ordinary course of business. In a purely business
transaction, transactions with discounts and
bargaining are beyond the scope of gift tax.
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Q: A tells B that A will give B money if B would
do something.
A tells C that A will give C money if B will not
do anything.
B did not do anything. A gave the money to C.
Who made the gift?
A: B gave the gift. B had control on whether or
not the conditions would be fulfilled. It would be
the same effect as if B received the money then
B gave it to C. B was an indirect donor.
Exemption of Certain Gifts
1. Dowries
Sec. 101 provides: The following gifts or
donations shall be exempt from the tax provided
(1) Dowries or gifts made on account of
marriage and before its celebration or within one
year thereafter by parents to each of their
legitimate, recognized natural, or adopted
children to the extent of the first Ten thousand
pesos.
Q: What are the requirements for gifts in
consideration of marriage to be exempted from
the donors tax?
A: It should be
1. given by parent
2. to children
3. given before or within one year from
celebration of marriage
4. limit: first P10,000
Q: If a gift is given after the celebration of
marriage, can it be exempted from the tax?
A: Yes if given within one year from celebration
of marriage
Q: Suppose a child gave a donation to his
widower father, can this donation be exempted?
A: No. the law only contemplates gifts made by
a parent to a child not a child to a parent.
Q: X will give a property to Y on a condition that
Y will marry X. They got married. X gave the
property. Is the gift taxable?
A: No, the gift is prohibited by law.
Q: Dad will give X a gift if X will marry Dads
daughter. The BIR taxed the transaction.
However, Dad argued that the consideration was
the marriage, therefore exempt. Is this
exempted?
A: It is not exempted. It is not a gift if there is a
consideration.
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1.
2.
3.
VALUE-ADDED TAX
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A: The following are liable:
1. any person who in the ordinary course
of business sells, barters, or exchanges
goods or properties
2. any person engaged in the sale or
exchange of services including the lease
or use of properties in the ordinary
course of business
3. in case of importation, the importer who
imports the goods.
but the burden can be shifted to the buyer.
(Bar Ops Stenographic Notes)
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3.
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Q: Suppose you work for A, but you did not
charge anything, would that be subject to VAT?
A: No, because there is no consideration.
Q: Suppose you own a motor shop. Your car was
repaired in your shop. Would that be subject to
tax?
A: No, because law says service for others.
Q: Same question but the spare parts were
supplied by Toyota, what would be subject to
VAT?
A: VAT here only applies to the sale of the spare
parts.
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Q: PLDT sells services subject to VAT. What
would be the input tax credit?
A: To credit input tax credit, it should be related
to the services rendered for purposes of claiming.
So in this case PLDT may claim the equipment
bought as input tax credit as it is related to the
services rendered.
1.
2.
3.
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A: Sec. 125 collected from the proprietor,
lessee, or operator
Q: What does the amusement tax cover?
A: admission receipts and other revenues.
Sec. 125 (e) par. 2 For the purpose of the
amusement tax, the term gross receipts
embraces all the receipts x x x. Said gross
receipts also include income from television,
radio, and motion picture rights, if any.
Q: Suppose that there are restaurants in the
cockpit, would it also be subject to 18% tax?
A: Yes if the owner of the cockpit and the
restaurant is the same.
EXCISE TAX
Q: What is an excise tax?
A: It refers to taxes applicable to certain
specified or selected goods or articles
manufactured or produced in the Philippines for
domestic sale or consumption or for any other
disposition and to things imported into the
Philippines. (De Leon)
The excise tax is a privilege tax imposed on the
privilege of engaging in the business of
manufacturing or producing goods for local
consumption or imported in the Philippines.
(Bar Ops Stenographic Notes)
2.
Advantage of Ad valorem
a. Ad valorem if there is
inflation, the higher the taxes.
b. Specific tax remains the
same even if there is inflation
Advantage of Specific
a. The manufacturer may simply
undervalue the price to reduce
the ad valorem tax
b. Even if the manufacturer
undervalue the price, the tax
remains the same because the
only thing to look at is the
quantity of the goods.
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DOCUMENTARY STAMP TAX
Q: What is the documentary stamp tax?
A: Documentary stamp tax is a tax on
documents, instruments and papers evidencing
the acceptance, assignment, sale, or transfer of
an obligation, right, or property incident thereto.
(De Leon)
Q: Is this tax really imposed on the document?
A: It is really imposed on the transaction rather
than on the document. (De Leon)
Q: Who pays the documentary stamp tax?
A: The tax is imposed against the person making,
signing, issuing, accepting, or transferring the
document or facility evidencing the transaction.
(De Leon)
Q: Who pays the documentary stamp tax if the
one who is suppose to pay is exempted?
A: the other party Sec. 173 x x x Provided,
That whenever one party to the taxable
document enjoys exemption from the tax herein
imposed, the other party thereto who is not
exempt shall be the one directly liable for this
tax.
Q: Does documentary stamp tax apply to
documents executed abroad?
A: Under the present law, documentary stamp
tax would apply to any document, even
documents executed abroad as long as the
obligation or right over the transaction arises
from the Philippine sources or the property is
situated in the Philippines.
(Bar Ops Stenographic Notes)
Sec. 173 Upon documents x x x and transfers
of the obligation, right or property incident
thereto, there shall be levied x x x the
corresponding documentary stamp tax prescribed
x x x wherever the document is made x x x when
the obligation or right arises from Philippine
sources or the property is situated in the
Philippines x x x.
Q: Suppose A donates to B a property. It was
evidenced by a certain document. Is this
document subject to documentary stamp tax?
A: No. Documentary Stamp tax is a tax on an
amount for another amount. There must be a
value for another value. (or consideration). The
purpose of the tax is to apply the consideration.
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Q: What is the effect of non-payment of this tax?
A: Sec. 201 An instrument x x x without being
stamped shall
1. not be recorded
2. nor shall it or any copy thereof or any
record of transfer of the same be
admitted or used in evidence in any
court
3. No notary public or other officer
authorized to administer oaths shall add
his jurat or acknowledgment
Q: What is the remedy for non-payment?
A: Require them to pay. Documents are nonadmissible until paid. Sec. 201 x x x until the
requisite stamp or stamps shall have been affixed
thereto and cancelled.
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A: BIR has the power to examine and assess
taxes after the filing of the tax return. The law
also gives BIR certain powers in aid-ofassessment. CIR can get any information from
anybody for purposes of ascertaining the liability
of the taxpayer.
Q: What is the governments right to assess?
A: This right exclusively belongs to the BIR,
especially the CIR.. It is the right to examine the
books of the taxpayer to determine his tax
liability.
Q: Can the CIR disregard the return and make
his own personal assessment?
A: Yes, but with conjunction with other
information, especially documents from the
supplier.
Other Basis of Assessment
1. Best Evidence Obtainable
Q: What is the best evidence obtainable?
A: CIR can resort to gathering any evidence that
will assist him in making a proper assessment on
the tax liability of the taxpayer if the taxpayer
refuses to submit a tax report or any report he
submits is inaccurate.
Sec 6 (B) 2nd par. the CIR shall make or amend
the return from his own knowledge and from
such information as he can obtain through
testimony or otherwise.
Q: When would the CIR resort to the best
evidence obtainable?
A: Sec. 6 (B) provides
1. When a report required by law as a
basis for the assessment of any national
internal revenue tax shall not be
forthcoming within the time fixed by
laws or rules and regulations
2. When there is reason to believe that any
such report is
a. False
b. Incomplete
c. Erroneous
3. In case a person
a. Fails to file a required return or
other document at the time
prescribed by law
b. Willfully or otherwise files a
false or fraudulent return or
document
Q: How should evidence be attained?
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A: Yes. The results of the surveillance can be
made a basis of assessment for the current
taxable year and the prior taxable year.
Sec. 6 (C) x x x The findings may be used as
the basis for assessing the taxes for the other
months or quarters of the same or different
taxable years
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Fraud Assessment
Q: May the BIR make an assessment anytime
even if the year 2030 as long as the BIR says
there is fraud?
A: No. BIR must prove fraud. If it cannot prove
fraud, BIR is limited to the 3 year period.
(Bar Ops Stenographic Notes)
Q: What fraud must the BIR prove?
A: Deliberate, actual fraud. An example would
be in the case of Aznar vs. CIR. This case gives
you the badges of fraud you have consistent
under declaration of income, over claiming of
deductions that would be a badge of fraud. It
was the failure to declare a substantial portion of
the income with intention to deceive.
(Bar Ops Stenographic Notes)
Q: Supposing,
4/15/99 return was filed
4/15/02 3 year period lapsed
4/14/05 fraud assessment was made
taxpayer did not make any answer.
Is the government required to prove fraud?
A: No, the fraud assessment became final as it
was not contested.
Sec. 222 (a) Provided, That in a fraud
assessment which has become final and
executory, the fact of fraud shall be judicially
taken cognizance of in the civil or criminal
action for the collection thereof.
Q: When is there a prima facie evidence of
fraud?
A: When there are badges of fraud such as
substantial underdeclaration of taxable sales, or a
substantial overstatement of deductions.
Sec. 248 (B) that a substantial under
declaration of taxable sales, or a substantial
overstatement of deductions, shall constitute
prima facie evidence of a false or fraudulent
return.
Q: When is there a substantial underdeclaration
of taxable receipts and substantial over statement
of deductions?
A: Sec. 248 (B) x x x, Provided further, That
the failure to report sales in an amount exceeding
30% of that declared per return, and a claim of
deductions in an amount exceeding 30% of the
actual deductions.
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shall constitute prima facie evidence of a false
and fraudulent return.
The badges of fraud (substantial under
declaration of taxables sales or substantial
overstatement of deductions) are also made to
apply to false returns.
Failure to File a Return
Q: When is there a failure to file a return?
A: there is a failure to file a return if, on the basis
of the returned file, the BIR cannot make a
computation or assessment of tax liability.
In short, when you have a return filed which is
incomplete to the point that the BIR cannot make
a valid assessment, that amounts to a failure to
file a return.
(Bar Ops Stenographic Notes)
Q: Now supposing the BIR assesses after 10
years from the filing of the return on the ground
that no return was filed. The taxpayer asserts that
for his defense that a return was filed. Who has
the burden of proof to show a return was really
filed in order to apply the 10-year period?
A: The taxpayer. In Taligaman Lumber vs. CIR,
the Supreme Court said that if the BIR says that
was no return filed, and the taxpayer, as a
defense, argues that a return was filed, then the
taxpayer must prove that a return was filed. The
taxpayer who asserts that he filed a return, as an
affirmative defense, must prove that a return was
filed. (Bar Ops Stenographic Notes)
Q: In case the taxpayer fails to prove that he filed
the return, what is the conclusion?
A: The Supreme Court said the conclusion is that
no return was filed. So, here, is the opposite of
the ground of fraud.
(Bar Ops Stenographic Notes)
Q: Is it an unjustified burden on the part of the
taxpayer that he proved the fact that he filed the
return despite the fact that BIR has all the
records.?
A: No, the taxpayer has the duty to keep and
preserve his books. This duty should be
reconciled with his burden to prove the fact that
he filed the return.
Sec. 235 All the books of accounts x x x shall
be preserved for a period beginning from the last
entry in each book until the last day prescribed x
x x.
Collection
Q: When may the government collect when there
is an assessment and there is no fraud?
A: 3 years from the assessment.
Q: But what if there is an assessment and there is
fraud?
A: 3 years from the fraud assessment
Q: But what if there is no assessment, and there
is no fraud?
A: 3 years from the filing of the return.
Q: But what if there is no assessment, and there
is fraud?
A: 10 years from the discovery of the fraud.
Summary:
Fraud
No Fraud
Assessment
Within 3 years
from Fraud
Assessment
Within 3 years
from
Assessment
No Assesment
Within 10
years from the
discovery of
the fraud
Within 3 years
from filing the
return
25
Tax2 Reviewer
A: No. The government can avail of either
administrative or judicial remedy, either
alternatively or simultaneously.
Sec. 205 x x x Either of these remedies or both
simultaneously may be pursued in the discretion
of the authorities charged with the collection of
such tax.
1. Suspension of the Prescriptive Period
Q: When may the prescriptive period be
suspended?
A: As provided in Sec. 223:
1. CIR is prevented from making
assessments.
2. Taxpayer requests for reinvestigation,
which is granted by the CIR
3. Taxpayer is out of the country
4. Taxpayer cant be located in the address
given by him in the return
5. Warrant of distraint or levy is served an
no property can be located
Q: When does a warrant of distraint or levy
operate as a suspension of the prescriptive
period?
A: It is sufficient that the warrant of distraint or
levy was issued and served. It is not necessary
that there be an actual seizure before the period
would be suspended. From the date of the
service of the warrant, the prescriptive period is
suspended.
(Bar Ops Stenographic Notes)
Sec. 223 x x x when the warrant of distraint or
levy is duly served upon the taxpayer.
2. Distraint
Q: What is distraint?
A: Distraint is the seizure by the government of
personal property, tangible or intangible, to
enforce the payment of taxes, to be followed by
its public sale, if the taxes are not voluntarily
paid. (De Leon)
Q: How is distraint effected?
A: It takes place when chattels are taken and sold
at public auction. (See Sec. 208, 209)
Q: Is a warrant of distraint necessary?
A: Yes. The issuance of the warrant of distraint
begins the summary remedy of distraint. It is
merely the first step, while the seizure of the
property is the next step. (De Leon)
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Tax2 Reviewer
any day thereafter, would this be construed as a
compliance with the notice requirement?
A: No, it should be a definite date. There should
be a strict compliance, or else the tax payer
would be deprived of his property. The
presumption of regularity does not apply.
(also applicable with regard the name of the
taxpayer, the place and time of the sale, the
amount advertised as against the amount due)
Sec. 209 par. 2 At the time and place fixed in
such notice x x x.
3. Levy
Q: What is a levy?
A: Levy, as a summary administrative remedy,
refers to the act of seizure of real property in
order to enforce the payment of taxes. (De Leon)
Q: Taxpayer has a tax liability worth P5M.
However, he has real properties, to wit:
Forbes P30M
Corinthian P20M
Fairview P7M
Bulacan P10M
Can you levy all these properties?
A: Yes, it can levy all real properties because of
the very simple procedure of sending notices to
the Register of Deeds. The levy is only an
annotation on the title.
Q: In the same case, can the government
advertise for sale all these properties?
A: No, Government can only advertise for sale to
satisfy any tax liability only such property, or
usable portion thereof sufficient to satisfy the tax
claim, plus the expenses of the sale.
(Bar Ops Stenographic Notes)
Q: Supposed the government levied the Forbes
property, but it was sold for only P5M, may the
taxpayer impugn the sale?
A: No, because the taxpayer has the right to
redeem the property. It would be easier for him
to redeem the property at a lower price.
Q: What if the taxpayer did not redeem the
property, afterwards the government sold it at
P30M, can the taxpayer claim the excess?
A:
Q: What if the sale is invalidated, would it affect
the tax liability?
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Tax2 Reviewer
A: In actual distraint There is taking of
possession of personal property.
In constructive distraint the owner is merely
prohibited from disposing of his properties.
(De Leon)
In constructive distraint, there is no previous
assessment and the government does not take
possession.
Sec 206 par. 2 The constructive distraint of
personal property x x x obligate himself
(taxpayer) to preserve the same intact and
unaltered and not to dispose of the same x x x.
Q: When may the BIR resort to constructive
restraint?
A: Sec. 206 provides:
1. taxpayer retiring from any business
subject to tax
2. taxpayer is intending to leave the
Philippines
3. intending to remove his property
4. or hide or conceal his property
5. to perform any act tending to obstruct
the collection proceeding.
Q: What is the rationale for this remedy?
A: This is the remedy where the government
cant do the actual distraint. Constructive
distraint is an additional remedy because the
government can resort to it while the remedy of
actual distraint is not yet available, meaning the
assessment process is still to be done.
It applies to a potential delinquent taxpayer. It
also serves to protect the government from
taxpayers who intends to abscond.
6. Tax Lien
Q: What is the tax lien?
A: The tax lien renders the tax claim of the
government superior than any other claim.
Sec. 219 If any person x x x liable to pay an
internal revenue tax, neglects or refuses to pay
the same after demand, the amount shall be a lien
in favor of the Government from the time when
the assessment was made by the Commissioner
until paid x x x upon all the property and rights
to property belonging to the taxpayer. Provided,
That this lien shall not be valid against any
mortgagee, purchaser, or judgment creditor until
notice of such lien filed with Register of Deeds.
Q: What if there is a court order, can it prevail
over a tax lien?
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Tax2 Reviewer
failure to file the tax return, there should first be
an assessment.
Q: Supposing the taxpayer was acquitted in the
tax evasion case, would the acquittal have the
effect of having the tax liability extinguished?
A: No, criminal liability is premised on another
statutory basis. Tax liability is a matter of legal
duty, arising from another statutory basis. So
there are two different things based on two
different premises. The extinction of one would
not extinguish the other.
(Bar Ops Stenographic Notes)
Q: When does a criminal action prescribe?
A: You can file a criminal action or a violation of
the criminal provision of the NLRC within 5
years from the date of the commission of the
violation. If the commission is not known, then it
is reckoned from the discovery and institution of
judicial proceedings for the investigation and
punishment. (Sec. 281)
Q: What do you mean by institution of judicial
proceeding?
A: It means filing with the prosecutors office,
because the law talks of investigation and
punishment. (not filing the information with the
court)
Q: What is the purpose of statute of limitations?
A: These are:
1. to give the taxpayer a sufficient time to
settle his tax liability
2. to give the government time to study the
case.
2.
TAXPAYERS REMEDIES
1. PROTEST
Q: How does the BIR found basis for
assessment?
A: See p. 416 of De Leon
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Tax2 Reviewer
A. Notice for informal conference The
revenue officer who audited the taxpayers
records shall state in his report whether the
taxpayer agrees in his findings that he is liable
for deficiency tax.
1. Taxpayer disagrees he shall be
informed of the discrepancies for the
purpose of Informal Conference
2. Taxpayer fails to respond within 15
days from receipt of notice he is
considered in default, records shall be
endorsed for review and issuance of
deficiency tax assessment
B. Preliminary Assessment Notice (PAN) If
after review, it is determined that there is
sufficient basis to assess the taxpayer, BIR shall
issue a PAN, showing in detail the facts and the
law on which it is based.
Failure to respond: the taxpayer has 15
days from receipt to respond. If he did
not, a formal letter of demand shall be
issued, calling for payment
C. Formal Letter of Demand It calls the
payment of the deficiency tax, stating the facts
and law on which the assessment is based
It shall be sent by registered mail or
personal delivery
D. Disputed Assessment The taxpayer may
protest administratively against the formal letter
of demand within 30 days from receipt.
Preliminary Assessment Notice Not Required
Q: What are the cases when a PAN is not
required?
A: Sec. 228 par. (a)
1. mathematical error When the finding for
any deficiency tax is the result of mathematical
error in the computation of the tax as appearing
on the face of the return.
2. discrepancy in tax withheld - When a
discrepancy has been determined between the tax
withheld and the amount actually remitted by the
withholding agent.
3. refunded or credited but deducted When a
taxpayer who opted to claim a refund or tax
credit of excess creditable withholding tax for a
taxable period was determined to have carried
over and automatically applied the same amount
claimed against the estimated tax liabilities for
the taxable quarter or quarters of the succeeding
taxable year
30
Tax2 Reviewer
3/13/00 taxpayer filed tax return
3/17/03 taxpayer received PAN
Is there a valid assessment?
A: No, this implies that it has already prescribed
because in Basilan Case, final assessment must
be made within 3 years.
It is important that the BIR prove that the
taxpayer received the FAN.
Q: What would happen if the taxpayer fails to
respond to the PAN?
A: The PAN would serve as a formal or final
assessment notice
Sec. 228 par (3) x x x if the taxpayer fails to
respond, the Commissioner or his duly
authorized representative shall issue an
assessment based on his findings.
3. Filing Request for Reconsideration
Q: What may the taxpayer do if the BIR issued
the FAN?
A: Sec. 228 par (4) Such assessment may be
protested by filing a request for reconsideration
or reinvestigation within 30 days from receipt of
the assessment x x x.
Q: Supposing:
August 1967 CIR made a demand
letter assessing taxpayers 1957 1960
income
CIR said assessment based on failure to
report in full the capital gains
December 1974 CIR made a decision
against the taxpayer
September 1975 CIR sued the
taxpayer
Whether the CIRs assessment have prescribed?
A: No. The assessments were predicated on the
fact that his income tax were false because he
underdeclared his income. In such a case, the
deficiency assessments may be made within 10
years from the discovery of the falsity or
omission. (Basa vs. Republic)
4. Submission of Documents
Q: What is the 60 day period?
A: Sec. 228 par (4) x x x within 60 days from
the filing of the protest, all relevant supporting
documents shall have been submitted x x x.
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Tax2 Reviewer
Q: Suppose that within the 180 day period, the
BIR issued a warrant of distraint or levy, would
that be a decision appealable to the CTA?
A: It depends. The law obliges the taxpayer to
dispute the assessment on strong grounds. It also
obliges the BIR to state clearly what is the
appealable decision. The decision must clearly
state that it is the one that would be appealable if
the protest is based on strong grounds. However,
if the taxpayer merely made a pro forma protest,
a warrant of distraint or levy is deemed an
implied decision appealable to the CTA.
32
Tax2 Reviewer
April 23 appeal to CTA
Whether the warrant of distraint functioned as an
implied decision and that it has become final and
executory?
A: No. In this case, after 4 days from the receipt
of the assessment, the taxpayer filed a protest
based on strong legal considerations. Because it
was based on strong legal considerations, the
issuance of the warrant was premature. The
warrant could not be served.
The warrant did not became final and executory
because it became effective as an implied
decision when the protest was denied, but the
taxpayer seasonably filed an appeal, hence it was
not yet final and executory. (CIR vs. Algue)
Filing of Criminal Action
Q: Pending resolution of a protest, a criminal
action was filed. May the criminal action
proceed?
A: Yes. In Ungab vs. Cusi, SC ruled that there is
no requirement for the precise computation and
assessment of the tax before there can be a
criminal prosecution under the Code. This is so
because in that case, there is a prima facie
showing that there was willful evasion of taxes.
Q: Whether a criminal case may prosper pending
the resolution of the assessment absence prima
facie evidence of intent to defraud the
government?
A: No. Before one is prosecuted for willful
attempt to evade or defeat any tax, the fact that a
tax is due must be proved. The tax liabilities of
the taxpayer should first be determined before
the CIR may assert that the taxpayer have
willfully attempted to evade or defeat the taxes
sought to be collected. (CIR vs. CA, Fortune
Tobacco)
Q: Was the Ungab Case overruled by the Fortune
Tobacco Case (Lucio Tan)?
A: No, the Ungab Case was not overruled
because in that case, there is a prima facie
showing of a willful attempt to evade taxes. But
in the Fortune Tobacco Case, its registered
wholesale price was approved by the BIR. Since
it was approved by the BIR, it is presumed to be
the actual wholesale price, therefore, not
fraudulent. (CIR vs. CA, Fortune Tobacco)
Q: Can the taxpayer consider the filing of a civil
or criminal case against him as an implied
decision to his protest appealable to the CTA?
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Tax2 Reviewer
Q: Supposing a criminal case was filed, can the
taxpayer argue that this is an implied decision
saying that the BIR can collect by filing a civil or
criminal case?
A: No, because the protest is not deemed
decided.
Q: But how about Section 205 of the NIRC that
states that the criminal case is a collection
remedy, does this mean that the filing of the
criminal case is an implied decision appealable
to the CTA?
A: No. It is not an implied decision because its
purpose is to penalize the offender and not to
collect, although it is a collection remedy in a
sense that the judgment must contain an order to
pay the tax. Take note that Sec. 245 of the NIRC
states that the acquittal of the delinquent
taxpayer does not bar the BIR from filing a civil
action.
Effect of Protest to Collection
Q: Does the protest have the effect of suspending
the period of collection?
A: It depends.
If the protest if filed on time, then it may
suspend the collection of taxes.
But if the protest is filed beyond the 30-day
period, it does not suspend the running of the
prescriptive period. (De Leon, Citing Republic
vs. Hizon)
Q: Supposing that the BIR assessed the taxpayer.
The taxpayer made a protest. It was denied and
so he appealed, and kept on appealing until he
reached the SC. Before the SC, can the taxpayer
argue that the collection remedy has prescribed
assuming that it took him years to reach the SC?
A: No. Sec. 223 The running of the Statute of
Limitations x x x on a proceeding in court for
collection x x x, shall be suspended for a period
during which the Commissioner is prohibited
from making the assessment or beginning
distraint or levy or a proceeding in court for sixty
days thereafter x x x. The pendency of the
taxpayers appeal in the CTA and in the SC had
the effect of temporarily staying the hands of the
Commissioner. If the taxpayers stand that the
pendency of the appeal did not stop the running
of the period, taxpayers would be encouraged to
delay the payment in the hope of ultimately
avoiding the same. (Protectors Services vs. CA)
2. REFUND
Alf Bambi Carlos Deli Jonah Ron Rybi She TR
Special Acknowledgment to: Alf, Erika, Jovit, Maki, Ron, She
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Tax2 Reviewer
Q: When can you claim refund before the BIR
and the courts?
A: The claim for refund should be filed with the
BIR within 2 years from the date of payment.
Judicial action can be had by appealing to the
CTA within 2 years from the date of payment.
Q: What if the BIR takes time in deciding the
claim for refund and the 2 year period is about to
end, what may the taxpayer do?
A: The suit or the proceeding must be started in
the CTA before the end of the two-year period
without awaiting the decision of the BIR. Here,
there is no decision to appeal from, much less is
there an appeal. (De Leon)
Q: Supposing:
March 1999 Payment
March 2000 Claim refund
2001 denied
Has it prescribed?
A: No, but the taxpayer must appeal to the CTA
within two years from the date of payment.
Q: Supposing:
March 1999 Payment
June 1999 Claim Refund
August 1999 BIR denied claim
Can the taxpayer appeal argue that he can appeal
to the CTA on February 2001 since it is within
the two year period
A: No. Sir said that if the claim is denied by the
Commissioner within the two year period, the
taxpayer has 30 days from receipt of the denial
within which to appeal to the Court of Tax
Appeals. (De Leon)
Q: In cases where the taxpayer files quarterly
income tax return, whether the basis for
computing the two year period should be the date
when the quarterly income tax was paid or the
date when the final return for the taxable year
was filed?
A: It should be computed from the date when the
final return for the taxable year was filed,
because the payment of quarterly income tax
should only be considered as mere installments
of the annual tax due. These quarterly tax
payments should be treated as advances or
portions of the annual tax due. (De Leon) It is
the Final Return which is reflective of the
operations of the business for the whole tax
period. It is at the time of the filing of the Final
or Annual Income Tax Return when it can be
ascertained if the taxpayer has still to pay
35
Tax2 Reviewer
Oct 19 Payment
Oct 20 Claim for refund
Can the taxpayer claim refund despite the
finality of the assessment?
A: No. If the taxpayer is allowed to claim a
refund despite the finality of the assessment, then
it would reopen the question of the validity of
the assessment. Otherwise the period to appeal
the assessment would make little sense. (CIR vs.
Concepcion)
Q: Suppose that the taxpayer paid the tax within
the period to appeal the assessment. After that,
the taxpayer claim refund at the time when the
period to appeal the assessment have already
lapsed. Can the taxpayer still claim?
A: Sir said that some authors say that the
taxpayer could file a refund as long as there is
payment within the period to appeal. This is
different from the Concepcion case, because in
that case, the taxpayer paid the tax at the time
when the period to appeal the assessment have
already lapsed.
Q: In appealing the decision of the BIR to the
CTA, is the taxpayer who paid the tax under
protest also required to file a claim for refund?
A: No. To hold that the taxpayer must file a
claim for refund before appealing with the CTA
would in effect require of him to go through a
useless and needless ceremony that would only
delay the disposition of the case, for the CIR
would certainly disallow the claim for refund in
the same way as he disallowed the protest
against the assessment. (Vda. De San Agustin vs.
CIR)
Claiming Taxpayer
Q: Who is the person that should file the claim
for refund?
A: The one who paid the taxes erroneously or
illegally.
Q: Can the agent of the taxpayer filed the claim
for refund?
A:
Q: Supposing:
X sold goods plus 10% sales tax to Y.
SC declared the tax illegal
Who may claim refund, X or Y?
A: X because he is the person who is liable to
pay the tax with the BIR.
36
Tax2 Reviewer
Q: Supposing that there was an excessive
withholding tax, can the withholding agent file
an action for refund?
A: Yes, because the withholding agent is also a
taxpayer liable to pay the tax.
37
Tax2 Reviewer
deprived of his right to protest the new
assessment with the BIR under section 228)?
A: No, because he can still dispute the
assessment at the CTA level and prevent
multiplicity of suit and needless procedure.
38
Tax2 Reviewer
A party adversely affected by a decision or ruling
of the CTA en banc may file with the SC a
verified petition for review on certiorari.
Q: Supposing a taxpayer filed a motion for
reconsideration with the Court of Tax Appeals en
banc, is it an unfair rule that even those justices
who decided in the case in the division level
would also participate in the resolution of the
appealed case?
A: Yes, sabi ni Sir.
BUREAU OF CUSTOMS
Functions
39
Tax2 Reviewer
The customs officials may resort to seizure if
there is reasonable ground to suspect or believe
that there is an illegal importation, even if there
is no provision in the Customs law which allows
the seizure of a vessel which have not yet
entered the Philippine jurisdiction.
Customs Search
Q: Section 2208 does not say that the search
should be without warrant. How come that
searched under Section 2208 are without
warrant?
A: Because in Section 2209, it expressly state
that it is required. Therefore, it impliedly allows
a search without a warrant for searches other
than a dwelling house. (See Papa v Mago)
In the first place, under Sec. 603, it states that the
Bureau of Customs has territorial jurisdiction,
that violators may be pursued in their
transportation by land.
Q: If a goods were sold to a buyer, can he argue
that he is an innocent purchaser for value if the
goods were released without satisfying
importation dues?
A: No. He cannot invoke that he is an innocent
purchaser for value because the goods are still
subject to the payment of customs duties. Also,
Sec. 603 x x x imported articles which may be
subject to seizure for violation of the tariff and
customs laws may be pursued in their
transportation in the Philippines by land x x x.
The government may collect the importer if the
goods have already been sold to a third person.
Q: Suppose a customs officer went to a store
where imported goods are sold, the customs
officer asked the store owner whether customs
duties were paid, but the latter can not produce
the evidence of payment of customs duties, can
the customs officer seize the goods?
A: The customs officer must have a prior
written authorization by the Commissioner
before he may seize he goods.
Sec. 2536 The Commissioner and Collector
and/or any other customs officer, with the prior
authorization in writing by the Commissioner,
may demand evidence of payment x x x and if no
such evidence can be produced, such articles
may be seized x x x.
40
Tax2 Reviewer
1.
2.
3.
Intention to Unlade
Q: Can the consignee redeem contraband
articles?
Alf Bambi Carlos Deli Jonah Ron Rybi She TR
Special Acknowledgment to: Alf, Erika, Jovit, Maki, Ron, She
41
Tax2 Reviewer
A: No, the Supreme Court held in Paterok vs.
Bureau of Customs that the redemption of
forfeited property shall not be allowed in any
case where the importation is absolutely
prohibited or where the surrender of the property
to the person offering to redeem the same would
be contrary to law.
Q: Why is it impossible to redeem contraband
articles?
A: The use of the contraband cannot be allowed
as that would set at naught the purpose of the
law. Moreover, there is nothing in the Code that
authorizes the Collector to release the contraband
in favor of an importer. The code (Sec. 2609) is
clear that the thing may be disposed by sale
under restrictions as will insure its use for
legitimate purpose. (Paterok vs. Bureau of
Customs)
3. Qualified Prohibited Importation
Q: What is a qualified prohibited importation?
A: Sec. 1207 where articles are x x x subject to
importation only upon conditions prescribed by
law, it shall be the duty of the Collector x x x to
secure compliance with all legal requirements.
Q: What is an example of a qualified prohibited
importation?
A: Sirs example: importation of opium for
medical use is a conditional importation, but not
shabu.
Unlawful Importation
Sec. 3601 Any person who shall fraudulently
import or bring into the Philippines, or assist in
doing so, any article, contrary to law, or shall
receive, conceal, buy, sell, or in any manner
facilitate the transportation, concealment, or sale
of such article after importation, knowing the
same to have been imported contrary to law,
shall be guilty of smuggling and shall be
punished x x x.
Q: What constitutes fraud in fraudulent
importation?
A: In fraudulent importation, the fraud
contemplated by law must be actual and not
constructive fraud. It must be intentional,
consisting of deception willfully and deliberately
done or resorted to in order to induce another to
give up some right. (Transglobe vs. CA)
Q: Suppose, there was misdeclarations in the
invoice, would this be sufficient to characterize
the importation as fraudulent?
A: No, the fraud contemplated by law is actual
fraud. There must be proof of an intent to
deceive and that it is deliberately done.
The misdeclaration is not a conclusive proof of
fraud. The wrongful making or falsity could be
attributed to the foreign suppliers or shippers. If
it is not shown that the taxpayer had knowledge
of any falsity in the shipping documents, then
forfeiture would not lie.
42
Tax2 Reviewer
Q: What is a specific duty?
A: It is a duty imposed on goods based on some
kind of measurement without any assessment on
the value of the goods. (Bar Ops Stenographic
Notes)
Q: Who imposes the Dumping and
Countervailing Duties?
A: Secretary of DTI non-agricultural products
Secretary of DA agricultural products
Q: Where may a taxpayer appeal the decision of
the Secretary of DTI or DA?
A: To the CTA.
Dumping Duty
Sec. 301 Whenever any product, commodity,
or article of commerce imported into the
Philippines at an export price less than its
normal value in the ordinary course of trade for
the like product, commodity, or article destined
for consumption in the exporting country is
causing material injuru to a domestic
industry,
or
materially
retarding
the
establishment of a domestic industry x x x shall
cause the imposition of an anti-dumping duty
equal to the margin of dumping on such
product, commodity, or article x x x. However,
the anti-dumping duty may be less than the
margin if such lesser duty will be adequate to
remove the injury to the domestic industry. x
x x.
Q: What goods are subject to dumping duty?
A: Goods sold here at a cost lower than fair
market value or cost of production.
These goods are dumped into the country.
Q: When are goods dumped?
A: When the price of the goods is less than its
cost of production. But there must be a material
injury to the local industry.
Q: How much is the dumping duty?
A: It is equivalent to the underpricing. Or the
difference between the FMV and the actual cost
being sold here.
(Bar Ops Stenographic Notes)
Countervailing Duty
Sec. 302 Whenever any product, commodity,
or article of commerce is granted directly or
indirectly by the government in the country or
origin or exportation, any kind or form of
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Tax2 Reviewer
(1)
Imposes, x x x product of the
Philippines any unreasonable charge, x x x
which is not equally enforced upon the like
articles of every foreign country; or
(2)
Discriminates in fact against the
commerce of the Philippines, x x x in such
manner as to place the commerce of the
Philippines at a disadvantage compared with the
commerce of any foreign country. x x x
Q: What goods are subject to the discriminatory
duty?
A: If a foreign country (for example, Somalia)
discriminates against our local products or local
commerce, the President may imposed a
discriminatory duty on goods coming from
Somalia.
Q: What if the foreign country still discriminates
against our local goods after the imposition of
discriminatory duties?
A: The president may totally ban the imports
from such foreign country.
Flexible Tariff Laws
Sec. 401 - The President, x x x is hereby
empowered to reduce by not more than fifty per
cent or to increase by not more than five times
the rates of import duty expressly fixed by
statute x x x when in his judgment such
modification in the rates of import duty is
necessary in the interest of national economy,
general welfare and/or national defense. (RA
1937)
Q: What is Flexible Tariff Laws?
A: Under Sec. 401 of the Customs Code.
The president may reduce or increase import or
tariff rates. But the President cannot reclassify
importation. (ex. From prohibited to dutiable
importation) This is different from the
constitutional power of the President to fix
import duties.
Basis of Dutiable Value
Sec. 201 - The dutiable value of an imported
article subject to an ad valorem rate of duty shall
be based on the transaction value or price of
same, like or similar articles, as bought and sold
or offered for sale freely in the usual wholesale
quantities in the ordinary course of trade in the
principal markets of the exporting country on the
date of exportation to the Philippines x x x.
(as amended by E.O. 71)
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which can be discharged only by payment in full
of all duties x x x legally accruing. It also
constitutes a lien upon the articles imported
which may be enforced while such articles are
in custody or subject to the control of the
government.
3. Compulsory Acquisition
Prescriptive Period
Q: What if the imported goods are not prohibited
articles or not imported fraudulently, and that
there was a deficiency importation in 2001,
however, it was discovered after more than 3
years. Can the government collect?
A: No. Sec. 1603 When x x x final adjustment
of duties made, with subsequent delivery, such x
x x settlements of duties will, after the
expiration of 3 years from the date of payment
of duties, in the absence of fraud or protest x x x
be final and conclusive upon all parties x x x.
2. Compromise
Sec. 2316 Subject to the approval of the
Secretary of Finance, the Commissioner of
Customs may compromise any case arising
under this Code or other laws or part of laws
enforced by the Bureau of Customs involving the
imposition of fines, surcharges, and forfeitures
unless otherwise specified by law.
Q: What is the remedy of compromise and when
is it available?
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corresponding duties and taxes and compliance
with all other legal requirements.
Q: When can the Bureau of Customs hold the
delivery and release of shipments of the
importer?
A: If there is still an outstanding customs
liability of the importer. Incoming shipments will
be held, delivery will be withheld and those
shipments may even be sold after notice to the
importer for purposes of satisfying an
outstanding customs liability.
5. Criminal Action
Q: Does the BC have the power to collect by
criminal action?
A: The Commissioner can authorize collection
be criminal action.
Sec. 2401 x x x criminal actions and
proceedings instituted in behalf of the
government under the authority of this Code x x
x but no criminal action for the recovery of
duties x x x shall be filed in court without the
approval of the Commissioner.
Sir said that the criminal action filed under Sec.
2401 is different from smuggling. This provision
talks of violations of the customs law.
Sir said that criminal actions filed under the
Tariffs and Customs Code does not have any
prescriptive period.
6. Search and Seizure
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2.
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Q: Same question, but would the aircraft be
subject to forfeiture?
A: No, because it is a common carrier.
Sec 2530 Any vehicle x x x shall x x x be
subject to forfeiture:
(a) Any vehicle x x x Provided, that the vessel,
or aircraft or any other craft is not used as duly
authorized common carrier x x x.
Q: Suppose a family rode a chartered aircraft
with contraband articles in commercial
quantities. Can the aircraft be forfeited?
A: Yes. Sec 2530 Any vehicle x x x shall x x x
be subject to forfeiture:
(a) Any vehicle x x x Provided, that the vessel,
or aircraft or any other craft is not used as duly
authorized common carrier and as such a carrier
it is not chartered or leased;
c. Knowledge of the Owner
Q: Is the knowledge of the vessel owner a
defense in forfeiture proceedings?
A: Generally, it is not a defense in forfeiture
proceedings because forfeiture proceedings are
directed against the property and not the owner.
Q: If the knowledge of the owner is not a
defense, why does Sec. 2531 states that the
forfeiture of the vehicle x x x shall not be
effected if it is established that the owner x x x
has no knowledge of or participation in the
unlawful act x x x?
A: If you have unlawful importation, it simply
means it will be subject to forfeiture
proceedings. The fact that the vessel owner has
no knowledge of the unlawful importation will
not take it out of the forfeiture proceedings.
Now, whether or not forfeiture as a penalty will
be imposed, it depends on the knowledge or nonknowledge of the owner. If there is no
knowledge, under Sec. 2531, forfeiture penalty
may not be imposed. But whether the vessel will
be subject to forfeiture proceedings, yes.
Whether the penalty will be imposed depends on
the knowledge.
(Bar Ops Stenographic Notes)
Q: Despite the allegation of lack of knowledge,
is it still possible to cause the forfeiture of the
vessel?
A: Yes. Sec. 2531 x x x, Provided, however,
That a prima facie presumption shall exist
against the vessel x x x:
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with there proceedings. The Collector of
Customs sitting in seizure and forfeiture
proceedings has exclusive jurisdiction to hear
and determine all questions touching on the
seizure and forfeiture of dutiable goods. The
RTCs are precluded from assuming cognizance
over such matters even through petitions of
certiorari, prohibition, or mandamus. (Bureau of
Customs vs. Ogario)
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Sec. 2309 x x x shall make a protest, otherwise
the action of the Collector shall be final and
conclusive against him x x x.
Q: What if the Collector ruled that the importer
should pay an amount lower than the assessment,
what results?
A: Sec. 2313 par (b) If in any seizure
proceedings, the Collector renders a decision
adverse to the Government, such decision shall
be automatically reviewed by the Commissioner
and the records of the case elevated within 5
days from the promulgation of the decision of
the Collector x x x
Q: Supposing that the Collector made a decision
adverse to the government, but the
Commissioner did not make any action, what
would happen to the decision?
A: Sec. 2313 par (b) x x x However, if the
Collectors decision is affirmed, or if within 30
days from receipt of the record of the case no
decision is rendered x x x such decision shall be
deemed automatically appealed to the Secretary
of Finance x x x.
Q: What if the Commissioner reverses the
decision of the Collector that was adverse to the
government, what may the importer do?
A: He may appeal the Commissioners decision
to the CTA.
Q: What if the Commissioner made a decision
adverse to the taxpayer and the taxpayer
appealed to the Secretary of Finance, will the
taxpayers appeal prosper?
A: No, because decisions of the Commissioner
of Customs must be appealed to the Court of Tax
Appeals.
2. Bond
Sec. 2301 Upon making any seizure x x x; and
if the owner or importer desires to secure the
release of the property for legitimate use, the
Collector shall x x x surrender it upon filing of a
cash bond, in an amount to be fixed by him,
conditioned upon the payment of the appraised
value of the article x x x.
3. Refund
Q: What are the grounds for refund?
A: The grounds are:
1. Missing Package when any package
or packages appearing on the manifest
or bill of lading are missing x x x
(Sec. 1702)
2. Deficiency in Contents of Package If,
upon opening any package, a deficiency
or absence of any article x x x as called
for by the invoice shall be found to exist
x x x. (Sec. 1703)
3. Injury, destruction, loss of irrevocable
domestic letter of credit, bank
guarantee, bond, while x x x:
a. Within limits of port of entry
b. Remaining in customs custody
c. In transit with formal entry x x
x
d. Released for export, except
theft (Sec. 1704)
4. Refund of Excess Payments (Sec. 1707)
Q: What is the procedure for filing a refund?
A: Sec. 1708 All claims for refund of duties
shall be in writing and forwarded to the
Collector x x x.
Q: X imported RTW. He paid custom duties on
January 15. Upon examining the sacks, the
quantity is much less than what is stated in the
invoice. On February 15, X filed a claim for
refund. The collector dismissed his action based
on prescription. Did the action for refund
prescribed?
A: Yes. The procedure is the same as in protest.
It must be filed within 15 days from payment.
x x x in all cases subject to protest, the claim for
refund of customs duties may be enforced only
when the interested party claiming refund fails to
file a written protest before the Collector of
Customs. This written protest must x x x be
made either at the time when payment of the
amount claimed to be due the government is
made or within 15 days thereafter x x x.
(Nestle vs. CA)
4. Settlement and Redemption
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settlement of any seizure case provided that the
owner x x x shall offer to pay to the collector a
fine imposed by him upon the property x x x.
1.
2.
3.
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A: No.
4. Judicial Remedies
Q: What are the judicial remedies of the
taxpayer?
A: appeal to the CTA.
Q: Can the taxpayer have judicial remedies
without going to the administrative remedies?
A: No. Judicial remedies are always tied to
administrative remedy.
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Q: Municipality A imposes a tax on a business
but the same business is exempted by
Municipality B. Is the tax levied by A valid?
A: YES, because uniformity is required only
within the geographical limits of the taxing
authority. The LGC provides in each LGU,
meaning it levies for its own purposes within its
jurisdiction, regardless of other LGUs. As long
as its uniform within the jurisdiction of the
taxing LGU then its valid.
2.
c.
3.
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this refers to the tax on the gross
receipts of such institutions.
Q: City of Batangas passes an ordinance which
imposes a P5 tax on every balisong shipped out
and to be sold in Manila. Valid?
A: NO because the balisong is carried out and
therefore within the passing through limitation in
the Code.
Q: What if the next town enacted an ordinance
which imposes a P5 tax on every balisong
coming from Batangas City to be sold in Manila.
Valid?
A:
NO still within the passing through
limitation in the Code.
Q: What if tax imposed on the vehicle for using
the bridge connecting the 2 cities. Valid?
A: Depends. Have to look at the circumstances
of the case. If its a tax on the vehicle, then it
would be valid since it could be considered
under toll fees or charges (S155, LGC)
Remember that S155 refers to the vehicles itself
and not to the goods it carries. BUT if the tax is
on the vehicle for passing through the bridge,
then it would not be valid because its actually a
tax on the goods and therefore covered by the
passing through limitation.
Note that the
common limitations on passing through refers to
the goods itself.
Q: The business of X is subject to VAT. Can the
province impose a tax upon said business?
A: YES because the province can impose a
business tax on all businesses that are subject to
VAT or are VATABLE. However, the province
may not impose VAT on said business.
Q: Are industries certified by the BOI exempt
from paying sanitation fees and other similar
fees?
A: NO because they are only exempt from
paying taxes.
Q: What about cooperatives?
A: Cooperatives are exempt from paying taxes,
fees, or charges (pecuniary liabilities)
Sec of Finance says it should not cover
fees for services rendered and for
rentals of properties used for business.
BUT Sir disagrees with this since the
exemption is expressly provided for by
the Code.
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A: It is based on the admission fees only. Sec
140, LGC provides at a rate of not more than
30% of the gross receipts from admission fees.
NOTE that in the NIRC, the amusement tax
levied by the NG is based on gross receipts.
Q: Can a province impose professional tax?
A: YES, the province may impose the same on
all those professions requiring government
examination. NOTE that in municipalities, the
Code talks of occupation (meaning:
no
government examination required) and not of
profession.
Q: What if a lawyer practices pro-bono, is he
subject to prof tax?
A: YES because the tax is based on the privilege
of practicing the legal profession.
Q: What if a lawyer only had a single case for
an entire year. Subject to prof tax?
A: NO because it may be argued that the Code
says regular practice.
Q: What makes up the bulk of a municipalitys
revenues?
A: Business taxes. This is since their power to
levy such tax covers almost all economic
activities from building of ships to beauty
parlors.
Q: X owns a compound and within the
compound, theres a beauty parlor, a barber shop,
a funeral parlor, and other shops. All of which
were owned by X. What is the business tax
treatment?
A: if its SAME person, SAME place but DIFF
businesses = segregate or separate the taxes on
each of the businesses. Treat each business
separately or differently.
Q: What if X owns a laundry business but it has
branches in different municipalities?
A: If SAME person, SAME business but DIFF
places = taxpayer must consolidate all the gross
receipts of each branch/business. Treat all the
branches as one business.
Q: X has a repair shop and within it there is a
spare parts store for automobiles to be repaired
by the repair shop. Would the spare parts store
be subject to a different tax than that of the repair
shop?
A: Depends. If the spare parts store is incidental
to the repair shop business, then it would not be
subject to a different tax. BUT if the spare parts
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recorded in Pasig and the 70% recorded in
Valenzuela.
VI. COMMON REVENUE-RAISING
POWERS
This refers to service fees/charges,
public utility charges, and toll
fees/charges.
LGUs can levy taxes, fees, or charges
on any base or subject not otherwise
specifically enumerated. Provided:
o The tax measure is not violative of
any of the fundamental principles.
o The tax is not among those
explicitly prohibited by the Code.
o A prior public hearing conducted.
A specific enumeration of tax powers to
a LGU should be understood to be to
the exclusion of the other LGUs.
Exception here is the city.
No LGU may impose taxes which are
already imposed under the NIRC.
VII.CIVIL REMEDIES FOR COLLECTION
The non-payment of the tax liability on
the due date subjects the taxpayer to
corresponding surcharges and interest.
All local taxes shall be collected by the
local treasurer or his duly authorized
deputies.
A tax lien is created on any unpaid tax,
fee or charge. It attaches automatically
to the thing. It is superior to all other
liens, charges or encumbrances in favor
of any person. It is extinguished only
upon full payment of the delinquent tax,
fee, or charge plus the surcharges or
interest.
o It is generally directed against the
property subject to the tax
regardless of the owner. Whereas in
a distraint, the property must be
that of the taxpayer although it
need not be the property to which
the tax is assessed.
o NOTE the tax lien cannot be
appealed
since
it
attaches
automatically to the thing.
o It is imposed on any property
which is subject to the lien as well
as on any property used in the
business, occupation or practice of
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Q: What if the delinquent taxpayer has parcels
of land situated in other municipalities can
these be levied upon by the treasurer?
A: YES, the treasurer would only send notices to
the Register of Deeds concerned for the
annotation of the fact that the said property is
being levied.
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Q:
What are the properties exempt from
distraint, levy, attachment or execution?
A: Some of which are the tools and implements
necessarily used by the delinquent taxpayer in
his trade or employment, his necessary clothing
& that of his family, professional libraries, etc.
Please see Sec 185, LGC
LGUs may, through ordinances, grant
tax exemptions, incentives or reliefs
(Sec 192).
The LGC has withdrawn tax
exemptions, incentives granted to or
presently enjoyed by all persons,
whether natural or juridical including
GOCCs.
Those entities still exempted are:
o Local water districts
o Cooperatives under RA 6938
o Non-stock, non-profit hospitals and
educational institutions
The authority of the LGUs to grant tax
exemption privileges and reliefs under
Sec 192 is broad enough to allow them
to condone or remit taxes.
VIII.
1.
REMEDIES OF TAXPAYERS
b.
b.
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A: Use the Fair Market Value of the real
property.
Q: Does real property tax includes charges or
fees?
A No, charges or fees are not included.
Q: Is real property tax a local tax?
A: Yes, because the local tax accrues exclusively
to the LGU. (Sec. 271)
Fundamental Principles
Q: What are the fundamental principles of real
property taxation?
A: Sec. 198 The appraisal, assessment, levy,
and collection of real property tax shall be
guided by the following fundamental principles:
1. Real property shall be appraised at its
current and fair market value.
2. Real property shall be classified for
assessment purposes on the basis of its
actual use.
3. Real property shall be assessed on the
basis of a uniform classification within
each local government unit.
4. The appraisal, assessment, levy, and
collection of real property tax shall not
be let to any private person; and
5. The appraisal and assessment of real
property shall be equitable
1. Appraisal at Current and Fair Market Value
Q: What is the basis of the assessment?
A: The Assessor is not limited to any value so
long as it is equitable as in the case of Reyes vs.
Almanzor.
5. Equitable
Q: When is real property tax equitable?
A: When it is based on the ability to pay the tax.
The tax should not pay more when others are
paying less.
Taxable Properties
Q: What is covered by the real property tax?
A: It covers:
1. lands
2. buildings
3. machineries
4. improvements
Sec 232 xxx tax on real property such as land,
building, machinery, and other improvement not
hereinafter specifically exempted.
1. Lands
2. Buildings
3. Machineries
Sec. 199 (o) Machinery embraces machines
xxx which may or may not be attached,
permanently or temporarily, to the real property.
It includes xxx and those not permanently
attached to the real property which are actually,
directly, and exclusively used to meet the needs
of the particular industry xxx and which by their
very nature and purpose are designed for, or
necessary to its xxx business purpose.
Q: What is uniformity?
A: Uniformity has been defined as that principle
by which all taxable articles or kinds of property
of the same class shall be taxed at the same rate.
(Reyes vs. Almanzor)
4. Not be Let to Any Private Person
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and principal elements" of an industry or works
without which such industry or works would be
"unable to function or carry on the industrial
purpose for which it was established." The tools
here are not essential and principal elements of
petitioner's business of transporting passengers
and cargoes by motor trucks. They are merely
incidentals acquired as movables and used
only for expediency to facilitate and/or improve
its service. Even without such tools and
equipments, its business may be carried on.
(Mindanao Bus vs. City Assessor)
4. Improvements
Sec. 199 (m) Improvement is a valuable
addition made to a property or an amelioration in
its addition, amounting to more than a mere
repair or replacement of parts involving capital
expenditures and labor, which is intended to
enhance its value, beauty or utility or to adapt it
for new or further purposes.
Q: What are the improvements
A: the improvement must
1. enhance the utility or value of the
property where it is attached
2. It must have a separate existence from
the property.
3.
It must also prolong the life of
property,
4. It must be separately assessed.
Q: What are some examples of taxable and nontaxable improvements?
A: For example, a road and a fence is a separate
taxable improvement. However, in a fishpond
having dikes, the dikes do not have a separate
existence hence it is not a taxable improvement.
Q: Suppose a tailings dam was constructed
which benefited not only the taxpayer but also
the nearby communities and that even without
the dam, the operations of the taxpayers
business could still continue, can the taxpayer
argue that the dam is an inseparable part of its
business therefore not a separate real property
subject to tax?
A: No. The subject dam falls within the
definition of an "improvement" because it is
permanent in character and it enhances both the
value and utility of petitioner's mine.
A structure constitutes an improvement would
depend upon the degree of permanence intended
in its construction and use. The expression
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Q: Suppose that X entered into a contract to sell
with a government institution. After the
execution of the contract, X acquired possession
over the property, however, he did not pay the
whole consideration. Is X subject to tax
notwithstanding the fact that the property still
belongs to the government?
A: Yes. when the government sold the property,
the agency although exempt from the payment of
taxes clearly indicated that the property became
taxable upon its delivery to the purchaser" and
that "the sole determinative factor for exemption
from realty taxes is the 'use' to which the
property is devoted, And where 'use' is the test,
the ownership is immaterial. (City of Baguio vs.
Busuego)
Q: What if the real property is owned by the
State but its title is registered in the name of a
taxable GOCC, is the property subject to tax?
A: Yes, it must be subject to tax.
Q: What would be the rule if the use and
ownership of the State property are different?
A: Sir said that if owner is different from the
actual user, use controls. If ownership is clear,
and no actual use, ownership controls.
Q: Suppose X obtained a loan with the
government with his real property as a collateral.
He failed to pay. The government was the
highest bidder. Afterwards X redeemed the land.
Is X liable to pay the real property tax during the
period when he was deprived of its ownership
and possession?
A: No, to impose the real property tax on X
which was neither the owner nor the beneficial
user of the property during the designated
periods would not only be contrary to law but
also unjust. It is contrary to the tax policy that
the user of the property bears the tax. (Estate of
Lim vs. City of Manila)
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Q: which local government can impose a special
levy on real property?
A: It can be imposed by a province, city, or
municipality. This can be imposed even by
municipalities outside M.M.
Q: Can a religious organization be exempt to a
special levy?
A: Yes, if youre exempt from the Real Property
tax, you are also exempt from special levy.
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A: Within 2 years from entitlement to reduction
or adjustment
Sec. 253 xxx the taxpayer may file a written
claim for refund or credit for taxes and interests
with the provincial or city treasurer within 2
years from the date the taxpayer is entitled to
such reduction or adjustment.
Q: What is the remedy if the claim for refund is
denied?
A: The remedy is the same as in protest
Q: Can the real property tax be condoned?
A: Yes. Sec 277 - The President of the
Philippines may, when public interest so
requires, condone or reduce the real property tax
and interest xxx.
Sec. 276 In case of a general failure of crops or
substantial decrease in the price of agricultural or
agri-based products, or calamity xxx the
sanggunian concerned by ordinance passed prior
to the first day of January of any year and upon
the recommendation of the Local Disaster
Coordinating Council, may condone or reduce
xxx.
Q: What is the basis of this condoning power?
A: The power to make tax amnesty is based on
the power to grant tax relief as provided in
section 192.