I.

General Principles
1. Phil. Coconut Producers vs Republic G.R. 177857 24 Jan 2012 - Arcide
2. CIR vs SM Prime Holdings GR 183505 26 Feb 2010 (is pwr to tx destructive)
FACTS:
SM Prime and First Asia are Filipino domestic corporations. The BIR assessed them for VAT Deficiency
from cinema sales: SP Prime (Years 2000), First Asia (Year 1999, 2000, 2002, and 2003). Both corporations
protested the assessments but the CIR denied all of them. Respondents raised the matter with the CTA via
petition for review.
The CTA division ruled in their favor and stated that the activity of showing cinematographic films is
not a service covered by the VAT under the NIRC, but one covered by amusement tax under the Local
Government Code. On reconsideration, the CTA en banc affirmed the CTA division and ruled that Section 108
of the NIRC sets forth an exhaustive enumeration of what services are intended to be subject to VAT. And since
the showing or exhibition of motion pictures, films or movies by cinema operators or proprietors is not among
the enumerated activities contemplated in the phrase "sale or exchange of services," then gross receipts derived
by cinema/ theater operators or proprietors from admission tickets in showing motion pictures, film or movie
are not subject to VAT.
CIR argues that Section 108 of the NIRC is not exhaustive because it covers all sales of services unless
exempted by law. Respondents, however, argue that a plain reading of Section 108 of the NIRC of 1997 shows
that the gross receipts of proprietors or operators of cinemas/theaters derived from public admission are not
among the services subject to VAT.
ISSUE: WON gross receipts derived from admission tickets by cinema/theater operators or proprietors
are subject to VAT?
RULING:
No, they are not. While the enumeration of services subject to VAT under Section 108 of the NIRC is not
exhaustive because the words, "including," "similar services," and "shall likewise include," indicate that the
enumeration is by way of example only, Congress did not intend to cover cinema/ theater operators or
proprietors to be covered by VAT under the phrase "similar services."
To hold otherwise would impose an unreasonable burden on cinema/theater houses operators or
proprietors, who would be paying an additional 10% VAT on top of the 30% amusement tax imposed by Section
140 of the LGC of 1991, or a total of 40% tax. Such imposition would result in injustice, as persons taxed under
the NIRC of 1997 would be in a better position than those taxed under the LGC of 1991.
The power of taxation is sometimes called also the power to destroy. Therefore, it should be exercised
with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and
uniformly, lest the tax collector kill the "hen that lays the golden egg." And, in order to maintain the general
public's trust and confidence in the Government this power must be used justly and not treacherously.
3. South African Airways GR 180356 Feb 16, 2010 (set off ok)
FACTS: Petitioner is a foreign corporation existing under the laws of South Africa. It is an internal air carrier
with no landing rights in the Philippines. It is not registered with the SEC. It only has a sales agent (Aerotel)
which sells passage documents for off-line cargo and passengers between ports outside Philippine territory. In
2000, it paid Php 1.7 million as 2.5% Gross Philippine Billings (GPB). In 2003, it filed for a refund of said
amount, claiming that it is erroneously paid tax. Unheeded by the CIR, it raised the case to the CTA, which

ruled that South African is liable for 32% income tax for the sale of passage documents instead of the 2.5%
GPB. As such, it raised the case to the SC.
ISSUE: 1) Was South Africans sale of off-line passage documents subject to 32% income tax?
2) Can the GPB paid by South African off-set its deficiency income tax?
RULING: 1) Yes. South Africans off-line passage documents are subject to income taxnot GPB. Under the
1997 NIRC, a person is liable for GPB as long as the carriage of passengers and cargo occur to or from the
Philippines. This is not a case with South African because it does not have landing rights in the Philippines nor
authorized to fly in or out of the country. Following its ruling in CIR v. British Overseas Airways, the SC
further said that if off-line air carriers have general sales agents in the Philippines, then they are considered
engaged in or doing business in the Philippines and any income made through said agents are subject to the
32% corporate income tax. The Court could not uphold petitioners stretched contention that just because it was
exempt from GPB, then it is also exempt from all other income taxes. No such intention to exempt can be
gleaned from the language of the legislature in the tax code. See Sec. 28 (A)(1) & (A)(3)(a). The former is the
general rule (32% income tax on foreign corporations doing business in the Philippines), while the latter is an
exception (2.5% GPB for international air carriers for cargo & persons originating from and to the Philippines.)
2) Yes. Following the case of CIR v. CTA, GR 106611, July 21, 1994, erroneously paid tax may off-set
deficiency tax, but this of course assumes that the tax return filed by the taxpayer is valid. In this case, doubt has
been cast as to the validity of petitioners tax return precisely because it erroneously believed that it was subject
to 2.5% GPB, not 32% income tax. The SC, therefore, remanded the case back to the CTA for reception of
further evidence to find out how much petitioners tax liability is.
4. Ariete GR 164152 21 Jan 2010 (interprettn of tax laws)
FACTS:
Julieta Ariete was charged of earning substantial income in 1994-96 without paying income tax by the
Special Investigation Division. The Revenue District of Davao del Norte had no records of income tax returns
for the said years. Respondent admitted her non-filing of income tax returns and subsequently filed the same for
1993-96 under the Voluntary Assessment Program (VAP). Later, however, the Regional Director recommended
that respondent be assessed with deficiency income taxes for 1993-96 amounting to P191,463.04.
Respondent then filed an Assessment Protest with Prayer for Reinvestigation which was denied. She
later filed a petition for review with the CTA, assailing the BIR decision denying the request for reinvestigation
and disapproving her availment of the VAP, as well as the issuance of the four assessment notices.
CTA cancelled the deficiency assessments, stating that respondent was not yet under investigation by the
SID when she filed her income tax returns and the case against her was not duly recorded in the Official
Registry Book of the BIR. CTA further reasoned that the rationale behind the VAP is to give taxpayers a final
opportunity to come up with clean slate before they will be dealt with strictly for not paying correct taxes.
According to the CTA, among the benefits that can be availed of by the taxpayer are: (1) a bona fide
rectification of filing errors and assessment of tax liabilities under the VAP shall relieve the taxpayer-applicant
from any criminal or civil liability incident to the misdeclaration of incomes, purchases, deductions, etc., and
non-filing of a return; (2) the taxpayer who shall avail of the VAP shall be liable only for the payment of the
basic tax due. CTA ruled that even if respondent violated the NIRC, she was given the chance to rectify her fault
and be absolved of criminal and civil liabilities incident to her non-filing of income tax by virtue of the VAP;
that she is not disqualified to avail the VAP, and that she has no more liabilities after paying the corresponding
taxes due.
CA affirmed. The CA explained that the persons who may avail of the VAP are those who are liable to
pay any of the above-cited internal revenue taxes for the above specified period who due to inadvertence or
otherwise, has underdeclared his internal revenue tax liabilities or has not filed the required tax returns. The CA
rationalized that the BIR used a broad language to define the persons qualified to avail of the VAP because the
BIR intended to reach as many taxpayers as possible subject only to the exclusion of those cases specially
enumerated. The CA ruled that in applying the rules of statutory construction, the exceptions enumerated in

paragraph 3of RMO No. 59-97, as well as those added in RMO No. 63-97, should be strictly construed and all
doubts should be resolved in favor of the general provision stated under paragraph 2 rather than the said
exceptions. A explained that it is clear from the wordings of RMO No. 59-97 that the recording in the Official
Registry Book of the BIR is a mandatory requirement before a taxpayer-applicant under the VAP may be
excluded from its coverage as this requirement was preceded by the word and. The use of the conjunction and in
subparagraph 3.4 of RMO No. 59-97 must be understood in its usual and common meaning for the purpose of
determining who are disqualified from availing of the benefits under the VAP. This interpretation is more in
faithful compliance with the mandate of the RMOs.
PETITIONERS CLAIM: The VAP, being in the nature of a tax amnesty, must be strictly construed against the
taxpayer-applicant such that petitioners failure to record the information in the Official Registry Book of the
BIR does not affect respondents disqualification from availment of the benefits under the VAP; Taxpayers who
are under investigation for non-filing of income tax returns before their availment of the VAP are not covered by
the program and are not entitiled to its benefits; the underlying reason for the disqualification is that availment
of the VAP by such taxpayer is no longer voluntary. Petitioner asserts that voluntariness is the very essence of
the Voluntary Assessment Program.
RESPONDENTS CLAIM: where the terms of a statute are clear and unambiguous, no interpretation is called
for, and the law is applied as written, for application is the first duty of the court, and interpretation, only where
literal application is impossible or inadequate.
ISSUE:
Whether or not the recording in the Official Registry Book of the BIR of the information filed by the
informer under Sec. 281, NIRC is a mandatory requirement before a taxpayer-applicant may be excluded from
the coverage of the VAP.
RULING:
Verba Legis. It is well-settled that where the language of the law is clear and unequivocal, it must be given its
literal application and applied without interpretation.
The general rule of requiring adherence to the letter in construing statutes applies with particular strictness to
tax laws and provisions of a taxing act are not to be extended by implication. A careful reading of the RMOs
pertaining to the VAP shows that the recording of the information in the Official Registry Book of the BIR is a
mandatory requirement before a taxpayer may be excluded from the coverage of the VAP.
On 27 October 1997, the CIR, in implementing the VAP, issued RMO No. 59-97 to give erring taxpayers a final
opportunity to come up with a clean slate. Any person liable to pay income tax on business and compensation
income, value-added tax and other percentage taxes under Titles II, IV and V, respectively, of the Tax Code for
the taxable years 1993 to 1996, who due to inadvertence or otherwise, has not filed the required tax return may
avail of the benefits under the VAP.[23] RMO No. 59-97 also enumerates the persons or cases that are excluded
from the coverage of the VAP.
3. Persons/Cases not covered
The following shall be excluded from the coverage of the VAP under this Order:
xxx
3.4. Persons under investigation as a result of verified information filed by an informer
under Section 281 of the NIRC, as amended, and duly recorded in the Official
Registry Book of the Bureau before the date of availment under the VAP; x x x
(Boldfacing supplied)

On 30 October 1997, the CIR issued RMO No. 60-97 which supplements RMO No. 59-97 and amended Item
No. 3.4 to read as:
3. Persons/Cases not covered
The following shall be excluded from the coverage of the VAP under this Order:
xxx
3.4 Persons under investigation by the Tax Fraud Division and/or the Regional Special
Investigation Divisions as a result of verified information filed by an informer under
Section 281 of the NIRC, as amended, and duly recorded in the Official Registry
Book of the Bureau before the date of availment under VAP; (Boldfacing supplied)

On 27 November 1997, the CIR issued RMO No. 63-97 and clarified issues related to the implementation of the
VAP. RMO No. 63-97 provides:
3. Persons/cases not covered:
xxx
3.4 Persons under investigation by the Tax Fraud Division and/or the Regional Special
Investigation Divisions as a result of verified information filed by an informer under
Section 281 of the NIRC, as amended, and duly recorded in the Official Registry
Book of the Bureau before the date of availment under the VAP; (Underscoring in the
original, boldfacing supplied)
It is evident from these RMOs that the CIR was consistent in using the word and and has even
underscored the word in RMO No. 63-97. This denotes that in addition to the filing of the verified
information, the same should also be duly recorded in the Official Registry Book of the BIR. The
conjunctive word and is not without legal significance. It means in addition to. The word and, whether it
is used to connect words, phrases or full sentences, must be accepted as binding together and as relating
to one another. And in statutory construction implies conjunction or union.
It is sufficiently clear that for a person to be excluded from the coverage of the VAP, the verified information
must not only be filed under Section 281]of the Tax Code, it must also be duly recorded in the Official Registry
Book of the BIR before the date of availment under the VAP. This interpretation of Item 3.4 of RMO Nos. 5997, 60-97, and 63-97 is further bolstered by the fact that on 12 October 2005, the BIR issued Revenue
Regulations (RR) No. 18-2005 and reiterated the same provision in the implementation of the Enhanced
Voluntary Assessment Program (EVAP). RR No. 18-2005 reads:
SECTION 1. COVERAGE. x x x
Any person, natural or juridical, including estates and trusts, liable to pay any of the above-cited
internal revenue taxes for the above specified period/s who, due to inadvertence or otherwise,
erroneously paid his/its internal revenue tax liabilities or failed to file tax returns/pay taxes, may
avail of the EVAP, except those falling under any of the following instances:
xxx

b. Persons under investigation as a result of verified information filed by a Tax

Informer under Section 282 of the NIRC, duly processed and recorded in the BIR
Official Registry Book on or before the effectivity of these regulations.
(Boldfacing supplied)
When a tax provision speaks unequivocally, it is not the province of a Court to scan its wisdom or its
policy. The more correct course of dealing with a question of construction is to take the words to mean exactly
what they say. Where a provision of law expressly limits its application to certain transactions, it cannot be
extended to other transactions by interpretation.
5. San Miguel Corp GR 184428 23 Nov 2011
Jurisdiction of Court on Tax Appeals; Delegability of tariff power to President
FACTS: Philcemcor, an association of at least eighteen (18) domestic cement manufacturers filed with the
Department of Trade and Industry (DTI) a petition seeking the imposition of safeguard measures on gray
Portland cement, in accordance with the Safeguard Measures Act (SMA). After the (DTI) issued a provisional
safeguard measure, the application was referred to the Tariff Commission for a formal investigation pursuant to
Section 9 of the SMA and its Implementing Rules and Regulations, in order to determine whether or not to
impose a definitive safeguard measure on imports of gray Portland cement. The Tariff Commission held public
hearing and conducted its own investigation and issued its Formal Investigation Report that no definitive
general safeguard measure be imposed on the importation of gray Portland cement. The DTI Secretary then
promulgated a decision expressing its disagreement with the conclusions of the Tariff Commission but at the
same time denying Philcemcors application for safeguard measures in light of the Tariff Commissions
negative findings. Philcemcor challenged this decision of the DTI Secretary by filing with the Court of Appeals
a petition for certiorari, Prohibition and Mandamus seeking to set aside the DTI Decision as sell as the Tariff
Commissions Report. The appellate court partially granted the petition and ruled that it had jurisdiction over
the petition for certiorari since it alleged grave abuse of discretion and also held that DTI Secretary was not
bound by the factual findings of the Tariff Commission. The Southern Cross then filed the present petition,
arguing that the Court of Appeals has no jurisdiction over Philcemcors petition. Despite the fact the Court of
Appeals Decision had not yet became final, its binding force was cited by the DTI Secretary when he issued a
new Decision, wherein he imposed a definitive safeguard measure on the importation of gray Portland cement,
in the form of a definitive safeguard duty in the amount of P20.60/40 kg. bag for three years on imported gray
Portland Cement.
Southern Cross filed a Temporary Restraining Order and/or A Writ of Preliminary Injunction with the Court,
seeking to enjoin the DTI Secretary from enforcing his new issued Decision. Philcemcor then filed its
opposition stating that it is not the CA but the Court of Tax Appeals (CTA) that has jurisdiction over the
application under the law.
Southern Cross then filed with the CTA a Petition for Review against the Decision which imposed the definite
safeguard measure but did not promptly inform CA about the filing. Philcemcor argued with the CTA that
Southern Cross resorted to forum shopping. The Court in its decision granted Southern Crosss Petition which
nullified the Decision of the DTI secretary and declared the Decision of the Court of Appeals null and void, and
also concluded that the same had not committed forum shopping for there was no malicious intent to subvert
procedural rules.
Philcemcor and the DTI Secretary then promptly filed their respective motions for reconsideration. The Court
En Banc then resolve the two central issues pertaining to the jurisdictional aspect and to the substantive aspect
of whether the DTI Secretary may impose a general safeguard measure despite a negative determination by the
Tariff Commission and whether the Tariff Commission could validly exercise quasi-judicial powers in the
exercise of its mandate under the SMA. In its resolution, the Court directed the parties to maintain the status
quo and until further orders from this Court.

ISSUES: I. Jurisdiction to Review the Secretarys Decisions

II. Reviewability of the Tariff Commissions Report
RULING:
I. On the Issue of jurisdiction, the DTI secretarys decisions - whether imposing safeguard measures or not are
subject to review by the Court of Tax Appeals pursuant to Section 29 of RA 8800. Under section 29, there are
three requisites to enable the CTA to acquire jurisdiction over the petition for review contemplated therein (1)
there must be a ruling by the DTI Secretary (2) the petition must be filed by an interested party adversely
affected by the ruling and (3) such ruling must be in in connection with the imposition of a safeguard
measure. Obviously, there are differences between a ruling for the imposition of a safeguard measure, and
one issued in connection with imposition of a safeguard measure. The first adverts to a singular type of ruling,
namely one that imposes a safeguard measure. The second does not contemplate only one kind of ruling, but a
myriad of rulings issued in connection with the imposition of a safeguard measure.
II. The DTI Secretary is not bound by the Tariff Commissions recommendations. The Power to impose Tariffs
is essentially legislative; it is delegable only to the president. The application of safeguard measures, while
primarily intended to protect domestic industries, is essentially in the nature of a tariff imposition. Pursuant to
the Constitution, the imposition of tariffs and taxes is a highly prized legislative prerogative. Pursuant also to
the Constitution, such power to fix tariffs may as an exception, be delegated by Congress to the President.
Section 28 of Article VI of the Constitution provides for that exception.
*The motivation behind many taxation measures is the implementation of police power goals. Progressive
income taxes alleviate the margin between the rich and the poor. Taxation is distinguishable from police power
as to the means employed to implement these public good goals. Those doctrines that are unique to taxation
arose from peculiar considerations such as those especially punitive effects of taxation, and the belief that taxes
are the lifeblood of the state. These considerations necessitated the evolution of taxation as a distinct legal
concept from police power. Yet at the same time, it has been recognized that taxation may be made the
implement of the states police power.*
6. Diaz vs Sec. of Finance, GR 193007 July 19, 2011 (toll vs tax)
FACTS: Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed this petition for declaratory
relief assailing the validity of the impending imposition of value added tax (VAT) by the Bureau of Internal
Revenue (BIR) on the collections of tollway operators. Petitioners claim that, since the VAT would result in
increased toll fees, they have an interest as regular users of tollways in stopping the BIR action. Additionally,
Diaz claims that he sponsored the approval of Republic Act 7716 (the 1994 Expanded VAT Law or EVAT Law)
and Republic Act 8424 (the 1997 National Internal Revenue Code or the NIRC) at the House of
Representatives. Timbol, on the other hand, claims that she served as Assistant Secretary of the Department of
Trade and Industry and consultant of the Toll Regulatory Board (TRB) in the past administration.
Petitioners hold the view that Congress did not, when it enacted the NIRC, intend to include toll fees within the
meaning of "sale of services" that are subject to VAT; that a toll fee is a "users tax," not a sale of services; that
to impose VAT on toll fees would amount to a tax on public service; and that, since VAT was never factored into
the formula for computing toll fees, its imposition would violate the non-impairment clause of the constitution.
ISSUE: May toll fees collected by tollway operators be subjected to value added tax?
RULING: Yes.
(1) VAT is imposed on all kinds of services and tollway operators who are engaged in constructing,
maintaining, and operating expressways are no different from lessors of property, transportation contractors, etc.

(2) Not only do they fall under the broad term under (1) but also come under those described as all other
franchise grantees which is not confined only to legislative franchise grantees since the law does not
distinguish. They are also not a franchise grantee under Section 119 which would have made them subject to
percentage tax and not VAT.
(3) Neither are the services part of the enumeration under Section 109 on VAT-exempt transactions.
(4) The toll fee is not a users tax and thus it is permissible to impose a VAT on the said fee. The MIAA case
does not apply and the Court emphasized that toll fees are not taxes since they are not assessed by the BIR and
do not go to the general coffers of the government. Toll fees are collected by private operators as reimbursement
for their costs and expenses with a view to a profit, while taxes are imposed by the government as an attribute of
its sovereignty. Even if the toll fees were treated as users tax, the VAT cannot be deemed as a tax on tax since
the VAT is imposed on the tollway operator and the fact that it might pass-on the same to the tollway user, it will
not make the latter directly liable for VAT since the shifted VAT simply becomes part of the cost to use the
tollways.
(5) The assertion that the VAT imposed is not administratively feasible given the manner by which the BIR
intends to implement the VAT (i.e., rounding off the toll rates and putting any excess collection in an escrow
account) is not enough to invalidate the law. Non-observance of the canon of administrative feasibility will not
render a tax imposition invalid except to the extent that specific constitutional or statutory limitations are
impaired.
7. Estate of Benigno Toda, Jr., GR 147188, Sept14, 2004 (avoidance vs evasion)
Facts: Toda, while he was still alive, was the owner of 99.991% of the shares of stock of Cibeles Insurance
Corporation (CIC). On August 30, 1989, he sold the properties of CIC to Altonaga for 100 million, who on the
same day sold the same to Royal Match Inc (RMI) for 200 million. On 1994, Toda died. On March 1994, the
BIR sent an assessment notice to the estate of Toda for deficiency income tax alleging that the sale to Altonaga
was tainted with fraud devised to evade tax liability and that there was only one actual sale, which was the sale
to RMI. The CTA ruled in favor of the estate of Toda stating that it was tax avoidance and not tax evasion. The
CA affirmed the ruling, hence this petition.
Issues:
1. What is tax avoidance and tax evasion?
2. Was there tax evasion in this case?
Ruling:
1. Tax avoidance v. Tax evasion
a. Tax avoidance is the tax saving device within the means sanctioned by law. This method should
be used by the taxpayer in good faith and at arms length.
b. Tax evasion, on the other hand, is a scheme used outside of those lawful means and when
availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities
i. Factors:
1. The end to be achieved, i.e., the payment of less than that known by the taxpayer
to be legally due, or the non-payment of tax when it is shown that a tax is due;
2. An accompanying state of mind which is described as being evil, in bad faith,
willfull,or deliberate and not accidental; and
3. A course of action or failure of action which is unlawful.
2. Yes. All these factors are present in the instant case. Here, it is obvious that the objective of the sale to
Altonaga was to reduce tax to only 5% individual capital gains tax, and not the 35% corporate income
tax. Altonagas sole purpose of acquiring and transferring title of the subject properties on the same day

was to create a tax shelter. To allow this when it is proved that Altonaga was merely a conduit is to
sanction a circumvention of our tax laws. Hence, the sale to Altonaga should be disregarded for income
tax purposes. The two sale transactions should be treated as a single direct sale by CIC to RMI.

II.

Inherent Limitations

A. Public Purpose
Planters Products vs Fertiphil 548 SCRA 485
FACTS:
Petitioner PPI and respondent Fertiphil are private corporations incorporated under Philippine laws, both
engaged in the importation and distribution of fertilizers, pesticides and agricultural chemicals. Marcos issued
Letter of Instruction (LOI) 1465, imposing a capital recovery component of not less than Php10.00 levy per bag
of fertilizer. The levy was to continue until adequate capital was raised to make PPI financially viable.
Fertiphil remitted to the Fertilizer and Pesticide Authority (FPA), which was then remitted to the
depository bank of PPI. Fertiphil paid P6,689,144 to FPA from 1985 to 1986.
After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. Fertiphil
demanded from PPI a refund of the amount it remitted, however PPI refused.
Fertiphil filed a complaint for collection and damages, questioning the constitutionality of LOI 1465,
claiming that it was unjust, unreasonable, oppressive, invalid and an unlawful imposition that amounted to a
denial of due process. PPI argues that Fertiphil has no locus standi to question the constitutionality of LOI No.
1465 because it does not have a "personal and substantial interest in the case or will sustain direct injury as a
result of its enforcement." It asserts that Fertiphil did not suffer any damage from the imposition
because"incidence of the levy fell on the ultimate consumer or the farmers themselves, not on the seller
fertilizer company.
ISSUES:
1. WON Fertiphil has locus standi to question the constitutionality of LOI No. 1465.
2. WON P10 levy under LOI No. 1465 is a mere regulatory fee or for revenue generation.
3. WON the inherent limitation on the power to tax which is for public purpose is served.
RULING:
1. Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a mere
procedural technicality which may be waived. Fertiphil suffered harm from the enforcement of the LOI
because it was compelled to factor in its product the P 10.00 levy. The levy certainly rendered the fertilizer
products of Fertiphil and other domestic sellers much more expensive, which would possibly discourage
clients from purchasing their products.
Indeed LOI is unconstitutional for being unlawful, unjust, uncalled for, unreasonable, inequitable and
oppressive because it favors only one private domestic corporation, i.e. defendant PPI. The imposition of
capital recovery component(CRC) of not less than P10.00 is tantamount to illegal exaction amounting to a
denial of due process since the persons of entities which had to bear the burden of paying the CRC derived
no benefit there from. This is a glaring example of crony capitalism.
2. The P10.00 levy under LOI is for revenue generation, thus the imposition of the said levy

was an exercise by the State of its taxation power. A plain reading of the LOI obviously supports the
conclusion that it is for revenue generation because it expressly provided that the levy was imposed until
adequate capital is raised to make PPI viable. This might result to unjust enrichment on the part of PPI at
the expense of Fertiphil if the demanded refund by the latter will not be granted.
3. The inherent limitation on the imposition of taxes shall be intended for public purpose.
This is not achieved in the issuance of LOI because it is expressly stipulated in clause 3 of the same law
that the levy be imposed to benefit PPI, a private company; that such levy be continuously paid until
adequate capital is raised for PPI to recover financial losses from the huge corporate debts it incurred.
Continuous payment connotes indefinite period, thus equity is not served on Fertiphil and public purpose is
defeated.
B. International Comity

Sec 2, Art II, Constitution

C. Territoriality
CIR vs S.C. Johnson 309 SCRA 87 (int'l juridical double taxn)
Facts:
Respondent, a domestic corporation entered into a license agreement with SC Johnson and Son, United States of
America (USA), a non-resident foreign corporation. In said agreement, the respondent was granted the right to
use the trademark, patents and technology owned by the latter.
For the use of the trademark or technology, respondent was obliged to pay SC Johnson and Son, USA royalties
based on a percentage of net sales and subjected the same to 25% withholding tax on royalty payments which it
paid for the period covering July 1992 to May 1993.
On October 29, 1993, respondent filed with the International Tax Affairs Division (ITAD) of the BIR a claim for
refund of overpaid withholding tax on royalties, asserting that it is only subject to 10% withholding tax pursuant
to the most favored nation clause of the RP-US Tax Treaty in relation to the RP- West Germany Tax Treaty.
Issue:
Whether or not respondent is entitled to a royalty rate of 10% under the most favored nation clause as provided
in the RP-US Tax Treaty in relation to the RP-WEST Germany Tax Treaty
Ruling:
No. The most favored nation clause is intended to establish the principle of equality of international treatment
by providing that the citizens or subjects of the contracting nations may enjoy the privileges accorded by either
party to those of the most favored nation. The similarity in the circumstances of payment of taxes is a condition
for the enjoyment of most favored nation treatment precisely to underscore the need for equality of treatment.
Both the RP-US Tax Treaty and the RP-West Germany Tax Treaty provide for a tax on royalties for the use of
trademark, patent, and technology. Article 24 of the RP-Germany Tax Treaty allows crediting against German
income and corporation tax of 20% of the gross amount of royalties paid under the law of the Philippines while
Article 23 of the RP-US Tax Treaty does not.
Since the RP-US Tax Treaty does not give a matching tax credit of 20 % for the taxes paid to the Philippines on
royalties as allowed under the RP-West Germany Tax Treaty, private respondent cannot be deemed entitled to

the 10% rate granted under the latter treaty for the reason that there is no payment of taxes on royalties under
similar circumstances.
D. Non delegation of Power to Tax
ABAKADA vs Ermita
FACTS: On May 24, 2005, the President signed into law Republic Act 9337. Petitioners are challenging the
constitutionality of the law. Petitioners allege that the grant of stand-by authority to the President to increase the
VAT rate is an abdication by Congress of its exclusive power to tax because such delegation is not covered by
Section 28 (2), Article VI Consti. They argue that VAT is a tax levied on the sale or exchange of goods and
services which cant be included within the purview of tariffs under the exemption delegation since this refers to
customs duties, tolls or tribute payable upon merchandise to the government and usually imposed on
imported/exported goods. They also said that the President has powers to cause, influence or create the
conditions provided by law to bring about the conditions precedent. Moreover, they allege that no guiding
standards are made by law as to how the Secretary of Finance will make the recommendation.
Issue: Whether or not the RA 9337's stand-by authority to the Executive to increase the VAT rate, especially on
account of the recommendatory power granted to the Secretary of Finance, constitutes undue delegation of
legislative power?
RULING: No. For the delegation to be valid, it must be complete and it must fix a standard. A sufficient
standard is one which defines legislative policy, marks its limits, maps out its boundaries and specifies the
public agency to apply it.
In this case, it is not a delegation of legislative power BUT a delegation of ascertainment of facts upon
which enforcement and administration of the increased rate under the law is contingent. The legislature has
made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It
leaves the entire operation or non-operation of the 12% rate upon factual matters outside of the control of the
executive. No discretion would be exercised by the President.
As for the recommendatory power granted to the Secretary of Finance, it is simply an authority to ascertain the
existence of a fact. His function is to gather and collate statistical data and other pertinent information and
verify if any of the two conditions laid out by Congress is present. In doing so, he is not acting as the alter ego
of the President, instead, he is acting as the agent of the legislative department. Congress did not delegate the
power to tax but the mere implementation of the law.
E. Exemption from Taxation of Gov't
Constitutional Limitations
1. Coconut Oil Refineries vs Torres
G.R. No. 132527. July 29, 2005
FACTS:
Petition for Prohibition and Injunction against the Executive Branch, the Bases Conversion
Development Authority (BCDA), the Clark Development Corporation (CDC) and the Subic Bay
Metropolitan Authority (SBMA):
1. from allowing the operation of tax and duty-free shops in the Subic Special Economic Zone
(SSEZ) and the Clark Special Economic Zone (CSEZ)
2. to declare as unconstitutional, illegal, and void:

a. Sec. 5, EO 80, April 3, 1993, CSEZ

b. EO 97-A, June 19, 1993, SSEZ
c. Sec. 4, BCDA Board Resolution No. 93-05-034, May 18, 1993, CSEZ

RA 7227 was enacted on March 13, 1992

conversion of Clark and Subic military reservations and their extensions into alternative
productive uses in the form of SEZ
SECTION 12. Subic Special Economic Zone
operated and managed as a separate customs territory ensuring free flow of goods and
capital
tax and duty-free importations of raw materials, capital and equipment.
exportation SSEZ to the other parts of the Philippines subject to customs duties and taxes
in lieu of paying taxes,
o 3% of the gross income by all businesses within the SSEZ shall be remitted to the
Natl Govt;
o 1% to LGU
Devt fund of 1% of GI
SECTION 15. Clark and Other Special Economic Zone
subject to the concurrence by resolution of the LGU directly affected, the President is
authorized to create by executive proclamation a SEZ covering the Clark military
reservations and its contiguous
EO 80, April 3, 1993
Declared that Clark shall have all the applicable incentives granted under RA 7227
BCDA Board Resolution No. 93-05-034, May 18, 1993
pursuant to EO 80
allowed tax and duty-free sale at retail of consumer goods imported via Clark for consumption
outside the CSEZ
EO 97, June 1, 1993
Clarified the tax and duty free incentive within SSEZ pursuant to R.A. No. 7227:
import taxes and duties tax and duty-free importations apply only to raw materials,
capital goods and equipment brought in by business enterprises into the SSEZ
exportation from SSEZ to other parts of the Philippines subject to regular
EO 97-A, June 19, 1993
further clarifying the tax and duty-free privilege within the SSEZ:

Petitioners arguments:
1. the issuances are unconstitutional and void for:
a. they constitute executive lawmaking
b. contrary to RA 7227
c. in violation of the Constitution:
i. Sec. 1, Art. III (equal protection clause)
ii. Sec. 19, Art. XII (prohibition of unfair competition and combinations in restraint of trade)
iii. Sec. 12, Art. XII (preferential use of Filipino labor, domestic materials and locally
produced goods)
2. assail the $100 monthly and $200 yearly tax-free shopping privileges granted to SSEZ residents living
outside the Secured Area of the SSEZ and to Filipinos aged 15 and over residing outside the SSEZ
Respondents arguments:

1. petitioners lack of legal standing (do not stand to suffer direct injury being mere suppliers of the local
retailers operating outside the SEZ
2. unreasonable delay in the filing of the petition, laches, and the propriety of the remedy of prohibition
3. procedural flaws
ISSUES & RULINGS:
1. WON there was executive legislation by granting tax incentives in the importation of consumer goods,
such as those being sold in the duty-free shops, in violation of the limits in RA 7227
a. To limit the tax-free importation privilege of enterprises located inside the special economic zone
only to raw materials, capital and equipment clearly runs counter to the intention of the
Legislature to create a free port where the free flow of goods or capital within, into, and out of
the zones is insured. The records of the Senate containing the discussion of the concept of special
economic zone in Section 12 (a) of Republic Act No. 7227 show the legislative intent that
consumer goods entering the SSEZ which satisfy the needs of the zone and are consumed
there are not subject to duties and taxes in accordance with Philippine laws.
However, allowing tax and duty-free removal of goods to certain individuals from the Secured
Area of the SSEZ, are null and void for being contrary to Section 12 of Republic Act No. 7227.
b.

Insofar as the CSEZ is concerned, it is excluded from the tax and duty-free incentives provided
under Republic Act No. 7227. While Sec. 12 of RA 7227 expressly provides for the grant of
incentives to the SSEZ, it fails to make any similar grant in favor of other economic zones,
including the CSEZ. Tax and duty-free incentives being in the nature of tax exemptions, the basis
thereof should be categorically and unmistakably expressed from the language of the statute.

c.

Petitioners objection to the allowance of tax-free removal of goods from the special economic
zones as previously authorized by the questioned issuances has become moot and academic.
Effective January 1, 1999, the grant of duty-free shopping privileges to domestic tourists and to
residents living adjacent to SSEZ and the CSEZ had been revoked. Section 2 of EO 303 (October
20, 2000) declared that all special shopping privileges are terminated except for qualified
individuals as provided by law.

2. WON EO 97-A is violative of petitioners right to equal protection of the laws,in a sense that private
respondents operating inside the SSEZ are not different from the retail establishments located outside,
the products sold being essentially the same
No. The guaranty of the equal protection of the laws is not violated by a legislation based on a
reasonable classification, i.e., it must (1) rest on substantial distinction, (2) be germane to the
purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all
members of the same class.
There are substantial differences between the big investors who are being lured to establish and
operate their industries in the so-called secured area and the present business operators outside
the area. Equal-protection guarantee does not require territorial uniformity of laws. As long as
there are actual and material differences between territories, there is no violation of the
constitutional clause.
The classification is germane to the purpose of RA 7227, i.e to convert the lands formerly
occupied by the US military bases into economic or industrial areas, and extend economic

incentives to the establishments within the zone to attract and encourage foreign and local
investors.
The classification is not limited to the existing conditions, inasmuch as the law envisioned the
former military reservation to ultimately develop into a self-sustaining investment center.
The classification applies equally to all retailers found within the secured area. They are all
similarly treated, both in privileges granted and in obligations required.
3. WON the grant of special tax exemptions and privileges gave the private respondents undue advantage
over local enterprises which do not operate inside the SSEZ, thereby creating unfair competition in
violation of the constitutional prohibition against unfair competition and practices in restraint of trade
No. The mere fact that incentives and privileges are granted to certain enterprises to the
exclusion of others does not render the issuance unconstitutional for espousing unfair
competition. Said constitutional prohibition cannot hinder the Legislature from using tax
incentives as a tool to pursue its policies.
4. WON EO openly violated the State policy of promoting the preferential use of Filipino labor, domestic
materials and locally produced goods
No. The mere fact that said issuance authorizes the importation and trade of foreign goods does
not suffice to declare it unconstitutional on this ground. While the Constitution does not
encourage the unlimited entry of foreign goods, services and investments into the country, it does
not prohibit them either. In fact, it allows an exchange on the basis of equality and reciprocity,
frowning only on foreign competition that is unfair. The Executive Department, with its
subsequent issuance of Executive Order Nos. 444 and 303, has provided certain measures to
prevent unfair competition

Sec. 5, EO 80 & Sec. 4, BCDA Board Resolution No. 93-05-034 are hereby declared NULL and VOID
All portions of EO 97-A are valid and effective, except the second sentences in paragraphs 1.2 and 1.3

1. ABAKADA vs Ermita 01 Sept 05

Facts: RA 9337, amending certain provisions of the NIRC, became effective on July 1, 2005.
Petitioners question the constitutionality of Sections 4, 5 and 6 of RA 9337. These questioned provisions
imposes a 10% VAT on particular transactions. They all contain a uniform proviso authorizing the President,
upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after
certain conditions have been satisfied.
Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive
authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution.
Petitioners also contend that these provisions are unconstitutional for being arbitrary, oppressive, excessive, and
confiscatory, etc.
Issue: Was there an undue delegation of legislative power?
Ruling: No. The case before the Court is not a delegation of legislative power. It is simply a delegation of
ascertainment of facts upon which enforcement and administration of the increase rate under the law is
contingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a

specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual matters
outside of the control of the executive.
No discretion would be exercised by the President. The use of the word shall connotes a mandatory order. Thus,
it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the
conditions specified by Congress. This is a duty which cannot be evaded by the President. It is a clear directive
to impose the 12% VAT rate when the specified conditions are present. The time of taking into effect of the 12%
VAT rate is based on the happening of a certain specified contingency, or upon the ascertainment of certain facts
or conditions by a person or body other than the legislature itself.
Issue: Does the law conform with the rule on uniformity and equitability of taxation?
Ruling: Yes. The tax law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods and
services. Sections 4, 5 and 6 of RA 9337 provide for a rate of 10% (or 12%) on sale of goods and properties,
importation of goods, and sale of services and use or lease of properties. These same sections also provide for a
0% rate on certain sales and transaction.
Neither does the law make any distinction as to the type of industry or trade that will bear the 70% limitation on
the creditable input tax, 5-year amortization of input tax paid on purchase of capital goods or the 5% final
withholding tax by the government. It must be stressed that the rule of uniform taxation does not deprive
Congress of the power to classify subjects of taxation, and only demands uniformity within the particular class.
RA 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0% or 10% (or 12%)
does not apply to sales of goods or services with gross annual sales or receipts not exceeding P1,500,000.00.
Also, basic marine and agricultural food products in their original state are still not subject to the tax, thus
ensuring that prices at the grassroots level will remain accessible.
The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engaged in
business with an aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are
consequently exempt from its application. Likewise exempt from the tax are sales of farm and marine products,
so that the costs of basic food and other necessities, spared as they are from the incidence of the VAT, are
expected to be relatively lower and within the reach of the general public.
Issue: Does the law violate the rule on progressivity of taxation?
Ruling: No. The Constitution does not really prohibit the imposition of indirect taxes, like the VAT. What it
simply provides is that Congress shall "evolve a progressive system of taxation." The constitutional provision
has been interpreted to mean simply that direct taxes are to be preferred [and] as much as possible, indirect
taxes should be minimized. Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax
system.
2. Tan vs Del Rosario, Jr. 237 SCRA 324 (uniformity/equal protectn)
FACTS: These two consolidated special civil actions for prohibition challenge, in G.R. No. 109289, the
constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxationn
Scheme (SNIT), amending certain provisions of the National Internal Revenue Regulations No. 293,
promulgated by public respondents pursuant to said law.
Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that taxation shall be
uniform and equitable in that the law would now attempt to tax single proprietorships and professionals
differently from the manner it imposes the tax on corporations and partnerships. Petitioners claim to be
taxpayers adversely affected by the continued implementation of the amendatory legislation.

ISSUE: Does Republic Act No. 7496 violate the Constitution for imposing taxes that are not uniform and
equitable.
RULING: The Petition is dismissed. Uniformity of taxation, like the kindred concept of equal protection,
merely requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in
privileges and liabilities (Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not forfend
classification as long as: (1) the standards that are used therefor are substantial and not arbitrary, (2) the
categorization is germane to achieve the legislative purpose, (3) the law applies, all things being equal, to both
present and future conditions, and (4) the classification applies equally well to all those belonging to the same
class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 771).
What may instead be perceived to be apparent from the amendatory law is the legislative intent to increasingly
shift the income tax system towards the schedular approach in the income taxation of individual taxpayers and
to maintain, by and large, the present global treatment on taxable corporations. We certainly do not view this
classification to be arbitrary and inappropriate.
Having arrived at this conclusion, the plea of petitioner to have the law declared unconstitutional for being
violative of due process must perforce fail. The due process clause may correctly be invoked only when there is
a clear contravention of inherent or constitutional limitations in the exercise of the tax power.
3. Southern Cross Cement vs CMAP 465 SCRA 532 (delegated auth.)
Jurisdiction of Court on Tax Appeals; Delegability of tariff power to President
FACTS: Philcemcor, an association of at least eighteen (18) domestic cement manufacturers filed with the
Department of Trade and Industry (DTI) a petition seeking the imposition of safeguard measures on gray
Portland cement, in accordance with the Safeguard Measures Act (SMA). After the (DTI) issued a provisional
safeguard measure, the application was referred to the Tariff Commission for a formal investigation pursuant to
Section 9 of the SMA and its Implementing Rules and Regulations, in order to determine whether or not to
impose a definitive safeguard measure on imports of gray Portland cement. The Tariff Commission held public
hearing and conducted its own investigation and issued its Formal Investigation Report that no definitive
general safeguard measure be imposed on the importation of gray Portland cement. The DTI Secretary then
promulgated a decision expressing its disagreement with the conclusions of the Tariff Commission but at the
same time denying Philcemcors application for safeguard measures in light of the Tariff Commissions
negative findings. Philcemcor challenged this decision of the DTI Secretary by filing with the Court of Appeals
a petition for certiorari, Prohibition and Mandamus seeking to set aside the DTI Decision as sell as the Tariff
Commissions Report. The appellate court partially granted the petition and ruled that it had jurisdiction over
the petition for certiorari since it alleged grave abuse of discretion and also held that DTI Secretary was not
bound by the factual findings of the Tariff Commission. The Southern Cross then filed the present petition,
arguing that the Court of Appeals has no jurisdiction over Philcemcors petition. Despite the fact the Court of
Appeals Decision had not yet became final, its binding force was cited by the DTI Secretary when he issued a
new Decision, wherein he imposed a definitive safeguard measure on the importation of gray Portland cement,
in the form of a definitive safeguard duty in the amount of P20.60/40 kg. bag for three years on imported gray
Portland Cement.
Southern Cross filed a Temporary Restraining Order and/or A Writ of Preliminary Injunction with the Court,
seeking to enjoin the DTI Secretary from enforcing his new issued Decision. Philcemcor then filed its
opposition stating that it is not the CA but the Court of Tax Appeals (CTA) that has jurisdiction over the
application under the law.
Southern Cross then filed with the CTA a Petition for Review against the Decision which imposed the definite
safeguard measure but did not promptly inform CA about the filing. Philcemcor argued with the CTA that
Southern Cross resorted to forum shopping. The Court in its decision granted Southern Crosss Petition which
nullified the Decision of the DTI secretary and declared the Decision of the Court of Appeals null and void, and

also concluded that the same had not committed forum shopping for there was no malicious intent to subvert
procedural rules.
Philcemcor and the DTI Secretary then promptly filed their respective motions for reconsideration. The Court
En Banc then resolve the two central issues pertaining to the jurisdictional aspect and to the substantive aspect
of whether the DTI Secretary may impose a general safeguard measure despite a negative determination by the
Tariff Commission and whether the Tariff Commission could validly exercise quasi-judicial powers in the
exercise of its mandate under the SMA. In its resolution, the Court directed the parties to maintain the status
quo and until further orders from this Court.
ISSUES: I. Jurisdiction to Review the Secretarys Decisions
II. Reviewability of the Tariff Commissions Report
RULING:
I. On the Issue of jurisdiction, the DTI secretarys decisions - whether imposing safeguard measures or not are
subject to review by the Court of Tax Appeals pursuant to Section 29 of RA 8800. Under section 29, there are
three requisites to enable the CTA to acquire jurisdiction over the petition for review contemplated therein (1)
there must be a ruling by the DTI Secretary (2) the petition must be filed by an interested party adversely
affected by the ruling and (3) such ruling must be in in connection with the imposition of a safeguard
measure. Obviously, there are differences between a ruling for the imposition of a safeguard measure, and
one issued in connection with imposition of a safeguard measure. The first adverts to a singular type of ruling,
namely one that imposes a safeguard measure. The second does not contemplate only one kind of ruling, but a
myriad of rulings issued in connection with the imposition of a safeguard measure.
II. The DTI Secretary is not bound by the Tariff Commissions recommendations. The Power to impose Tariffs
is essentially legislative; it is delegable only to the president. The application of safeguard measures, while
primarily intended to protect domestic industries, is essentially in the nature of a tariff imposition. Pursuant to
the Constitution, the imposition of tariffs and taxes is a highly prized legislative prerogative. Pursuant also to
the Constitution, such power to fix tariffs may as an exception, be delegated by Congress to the President.
Section 28 of Article VI of the Constitution provides for that exception.
*The motivation behind many taxation measures is the implementation of police power goals. Progressive
income taxes alleviate the margin between the rich and the poor. Taxation is distinguishable from police power
as to the means employed to implement these public good goals. Those doctrines that are unique to taxation
arose from peculiar considerations such as those especially punitive effects of taxation, and the belief that taxes
are the lifeblood of the state. These considerations necessitated the evolution of taxation as a distinct legal
concept from police power. Yet at the same time, it has been recognized that taxation may be made the
implement of the states police power.*
4. Fortune Tobacco GR 180006 28 Sept 2011 (non delegation, uniformity)
Facts: In June 2004, Fortune Tobacco filed an administrative claim for tax refund with the CIR for erroneously
and/or illegally collected taxes in the amount of P491 million.[6] Without waiting for the CIRs action on its
claim, Fortune Tobacco filed with the CTA a judicial claim for tax refund.[7] Fortune Tobaccos claim for refund
of overpaid excise taxes is based primarily on what it considers as an unauthorized administrative legislation on
the part of the CIR.
Issue:
What is the rule of uniformity of tax laws?
Ruling:
The Constitution requires that taxation should be uniform and equitable.[20] Uniformity in taxation requires
that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities.
[21] This requirement, however, is unwittingly violated when the proviso in Section 1 of RR 17-99 is applied in
certain cases. To illustrate this point, we consider three brands of cigarettes, all classified as lower-priced
cigarettes under Section 145(c)(4) of the 1997 Tax Code, since their net retail price is below P5.00 per pack.

Although the brands all belong to the same category, the proviso in Section 1, RR 17-99 authorized the
imposition of different (and grossly disproportionate) tax rates (see column [D]). It effectively extended the
qualification stated in the third paragraph of Section 145(c) of the 1997 Tax Code that was supposed to apply
only during the transition period
III.

A. Estate Tax (secs 84 97) and

1. Dizon vs. CTA | G.R. No. 140944 | April 30, 2008
Facts: At the time of the death of Jose Fernandez, his estate has claims which exceeds the gross value of his
estate, which was the reason why at the time of filing of estate tax return, the tax due was NIL. However, postdeath developments occurred where the creditors of the estate either condoned or reduced its claim against it by
way of compromise agreements. For this reason, the BIR assessed the estate of Jose Fernandez with deficiency
tax. Petitioner questions the assessment stating that the reckoning time for tax liability should be the time of the
filing of the estate tax return and not the date of the Compromise Agreements. Petitioners argue that the value of
the claims against the estate at the time of the filing of the estate tax return should be the basis for the tax
deductions and not the actual amount paid after such return was filed. The CTA and CA ruled in favour of BIR
despite failing to make a formal offer of evidence rationalizing that despite the failure, such evidence formed
part of the records of the BIR hence can still be appreciated in the decision.
Issues:
1. Were the evidences not formally offered admissible?
2. WON the value of the claims against the estate at the time of death is the basis for the deductions or
the actual amount paid to the creditors after compromise agreements have been entered into?
3. What is the date-of-death-valuation principle?
Ruling:
1. No. The CTA is a court of records, hence, no evidentiary value can be given the pieces of evidence
submitted by the BIR, as the rules on documentary evidence require that these documents must be
formally offered before the CTA.
2. The value of the claims at the time of death should be the basis for deductions. Tax statutes being
construed strictissimi juris against the government.[69] Any doubt on whether a person, article or
activity is taxable is generally resolved against taxation. Further, such construction finds relevance and
consistency in our Rules on Special Proceedings wherein the term "claims" required to be presented
against a decedent's estate is generally construed to mean debts or demands of a pecuniary nature which
could have been enforced against the deceased in his lifetime, or liability contracted by the deceased
before his death. Therefore, the claims existing at the time of death are significant to, and should be
made the basis of, the determination of allowable deductions.
3. Date-of-death valuation states that the appropriate deduction against the tax liability of the estate is the
value that the claim had at the date of the decedent's death.
2. Marcos II, GR 120880, June 5, 1997 Villarmea
3. CIR vs Reyes, GR 159694, Jan 27, 2006 (validity of asst; Sec 228)
FACTS: In 1993, Maria Tancino died leaving behind an estate worth P32 million. In 1997, a tax audit was
conducted on the estate. Meanwhile, the National Internal Revenue Code (NIRC) of 1997 was passed.
Eventually in 1998, the estate was issued a final assessment notice (FAN) demanding the estate to pay P14.9
million in taxes inclusive of surcharge and interest; the estates liability was based on Section 229 of the [old]
Tax Code. Azucena Reyes, one of the heirs, protested the FAN. The Commissioner of Internal Revenue (CIR)
nevertheless issued a warrant of distraint and/or levy. Reyes again protested the warrant but in March 1999, she
offered a compromise and was willing to pay P1 million in taxes. Her offer was denied. She continued to work
on another compromise but was eventually denied. The case reached the Court of Tax Appeals where Reyes was
also denied. In the Court of Appeals, Reyes received a favorable judgment.
ISSUE: Whether or not the formal assessment notice is valid.

RULING: No. The NIRC of 1997 was already in effect when the FAN was issued. Under Section 228 of the
NIRC, taxpayers shall be informed in writing of the law and the facts on which the assessment is made:
otherwise, the assessment shall be void. In the case at bar, the FAN merely stated the amount of liability to be
shouldered by the estate and the law upon which such liability is based. However, the estate was not informed in
writing of the facts on which the assessment of estate taxes had been made. The estate was merely informed of
the findings of the CIR. Section 228 of the NIRC being remedial in nature can be applied retroactively even
though the tax investigation was conducted prior to the laws passage. Consequently, the invalid FAN cannot be
a basis of a compromise, any proceeding emanating from the invalid FAN is void including the issuance of the
warrant of distraint and/or levy.

4. Estate of Juliana Diez, GR 155541, Jan 27, 2004 (validity of asst upon agent) Ganir
5. CIR vs CA, CTA, Pajunar, GR 123206, March 22, 2000 (allow. dedns)
FACTS:
Pedro Pajonar, a member of the Philippine Scout, Bataan Contingent, during the second World War, was a part
of the infamous Death March by which he suffered shock and became insane. His sister, Josefina Pajonar
became the guardian over his person, while his property was placed under guardianship of the Philippine
National Bank (PNB). PNB filed an accounting of the decedents property under guardianship. However, it
didenot file an estate tax return, instead it advised Pedro Pajonars heirs to execute an extrajudicial settlement
and to pay the estate tax. Josefina Pajonar was appointed as the regular administratrix of Pedro Pajonars estate.
Pursuant to a second assessment by the BIR for deficiency estate tax, the estate of Pedro Pajonar paid estate tax.
Josefina Pajonar, in her capacity as administratrix and heir of Pedro Pajonars estate filed a protest praying that
a portion of the estate tax paid be returned to the heirs. Without waiting for her protest to be resolved, Josefina
Pajonar filed a petition for review with the CTA praying for the refund. The CTA ordered the CIR to refund
Josefina Pajonar. Among the deductions from the gross estate allowed by the CTA were the amounts
representing the notarial fee for the extra judicial settlement and the attorneys fees for guardianship.
ISSUE:
Whether the notarial fee paid for the extra judicial settlement and the attorneys fees in the guardianship
proceedings may be allowed as deductions from the gross estate of decedent
RULING:
Yes. They should be allowed as deductible expenses from the gross estate. Judicial expenses are expenses of
administration. Administration expenses, as an allowable deduction from the gross estate of the decedent for
purpose s of arriving at the value of the net estate, have been construed by federal and state courts of the United
States to include all expenses essential to the collection of the assets, payment of debts or the distribution of
the property to the persons entitled to it. In other words, the expenses must be essential to the proper settlement
of the estate. In this case, the notarial fee paid for the extra judicial settlement is clearly deductible expense
since such settlement effected a distribution of Pedro Pajonars estate to his lawful heirs. Similarly, the
attorneys fees paid to the PNB for acting as guardian of Pedro Pajonars property during his lifetime should
also be considered as a deductible administration expense.
B. Donors Tax (secs 98 104)
6. Republic vs Guzman, G.R. No. 132964. February 18, 2000 (elements, donation)

FACTS:
David Rey Guzman, a natural-born American citizen, is the son of Simeon Guzman, a naturalized American
citizen, and Helen Meyers Guzman, an American citizen. Simeon died leaving to his sole heirs Helen and David
an estate consisting of several parcels of land in Bulacan.
Helen executed the 1st unregistered Quitclaim Deed conveying to David her undivided interest in Simeons
estate, and a 2nd Deed confirming the 1st and further encompassing all her other property in the Philippines.
David executed an SPA acknowledging the 2nd deed.
The Govt filed a Petition for Escheat on the said share. RTC dismissed the petition, holding that the 2 deeds
had no legal force and effect. CA affirmed.
Govt anchors its argument on Art. XII of the Constitution, that David could not validly acquire the interest,
as they are in reality donations inter vivos.
David maintains that he acquired the property by right of accretion, with the deeds merely declaring Helen's
intention to renounce her share in the property; and that if there was donation, the SPA does not indicate
acceptance thereof.
ISSUE 1: WON there was donation
RULING 1:
None.The element of animus donandi was missing. Likewise, the 2 deeds, although public documents, lack the
essential element of acceptance in the proper form.
3 essential elements of a donation:
a)
the reduction of the patrimony of the donor;
b)
the increase in the patrimony of the donee; and,
c)
the intent to do an act of liberality or animus donandi.
For immovables, the donation should be made in a public document; and, it should be accepted in the same
deed or in a separate public document. For the latter, such acceptance must be noted both in the deeds of
acceptance and donation; otherwise, the donation is null and void.
ISSUE 2: Was there a valid repudiation by Helen of her inheritance?
RULING 2:
None. The absence of a donation does not render the repudiation made by Helen in favor of David valid, since
Helen had already accepted her share of the inheritance, by executing the Deed of Extrajudicial Settlement of
the Estate of Simeon, and thereafter registering said properties. Hence, the 2 quitclaim deeds she executed 11
years after she had accepted the inheritance have no legal force and effect.
Nevertheless, the nullity of the repudiation does not ipso facto operate to convert the parcels of land into res
nullius to be escheated in favor of the Government. The parcels of land should revert to their private owner,
Helen, who, although being an American citizen, is qualified by hereditary succession to own the property.
7. ACCRA vs CIR, G.R. No. 120721. February 23, 2005 (gift tax)

Facts: During the 1987 national elections, petitioners as partners of the ACCRA law firm, contributed
P882 661.31 each for the campaign funds of Senator Edgardo Angara who is running for Senate. The BIR
assessed each of the petitioners for their contributions. On the other hand, petitioners claimed that political
contributions are not considered gifts under the National Internal Revenue Code and that they are not liable for
donors tax. The claim for exemption was denied by the Commissioner.
Issue:
Whether or not political contributions are gifts and thus, subject to donors tax
Ruling:
Yes, political contributions are gifts and are subject to donors tax. Donation has the following elements:
(a) reduction of the patrimony of the donor; (b) increase in the patrimony of the done; and (c) intent to do an act
of liberality or animus donandi.
Petitioners contribution of money without any material consideration evidences animus donandi. The
fact that their purpose for donating was to aid in the election of the done does not negate the presence of
donative intent. Donative intent is a creature of the mind. It is presumed present when one gives a part of ones
patrimony to another without consideration. Further, donative intent is not negated when the person donating
has other intentions, motives or purposes which do not contradict donative intent.
8. CIR vs BF Goodrich, G.R. No. 104171. February 24, 1999
Facts: Private Respondent was an American-owned and controlled corporation. As a condition for
approving the manufacture by private respondent of tires and other rubber products, the Central Bank of the
Philippines required that it should develop a rubber plantation. In compliance with this requirement, private
respondent purchased from the Philippine government in 1961, under the Public Land Act and the Parity
Amendment to the 1935 Constitution, certain parcels of land located in Tumajubong, Basilan, and there
developed a rubber plantation.
The justice secretary rendered an opinion stating that, upon the expiration of the Parity Amendment on July
3, 1974, the ownership rights of Americans over public agricultural lands, including the right to dispose or sell
their real estate, would be lost. On the basis of this Opinion, private respondent sold to Siltown Realty
Philippines, Inc. on January 21, 1974, its Basilan landholding for P500,000 payable in installments. In accord
with the terms of the sale, Siltown Realty Philippines, Inc. leased the said parcels of land to private respondent
for a period of 25 years, with an extension of another 25 years at the latters option.
Based on the BIRs Letter of Authority No. 10115 dated April 14, 1975, the books and accounts of private
respondent were examined for the purpose of determining its tax liability for taxable year 1974. The
examination resulted in the April 23, 1975 assessment of private respondent for deficiency income tax in the
amount of P6,005.35, which it duly paid.
Subsequently the BIR also issued Letters of Authority Nos. 074420 RR and 074421 RR and Memorandum
Authority Reference No. 749157 for the purpose of examining Siltowns business, income and tax liabilities. On
the basis of this examination, the BIR commissioner issued against private respondent on October 10, 1980, an
assessment for deficiency in donors tax in the amount of P1,020,850, in relation to the previously mentioned
sale of its Basilan landholdings to Siltown. Apparently, the BIR deemed the consideration for the sale
insufficient, and the difference between the fair market value and the actual purchase price a taxable donation.
In a letter dated November 24, 1980, private respondent contested this assessment. On April 9, 1981, it
received another assessment dated March 16, 1981, which increased toP1,092,949 the amount demanded for the
alleged deficiency donors tax, surcharge, interest and compromise penalty.
Issue: Whether or not the herein deficiency donors tax assessment for 1974 is valid and in accordance with
law?

Ruling: Yes. the fact that private respondent sold its real property for a price less than its declared fair
market value did not by itself justify a finding of false return. Indeed, private respondent declared the sale in its
1974 return submitted to the BIR. Within the five-year prescriptive period, the BIR could have issued the
questioned assessment, because the declared fair market value of said property was of public record. This it did
not do, however, during all those five years. Moreover, the BIR failed to prove that respondent's 1974 return had
been filed fraudulently. Equally. significant was its failure to prove respondent's intent to evade the payment of
the correct amount of tax.
Ineludibly, the BIR failed to show that private respondent's 1974 return was filed fraudulently with intent to
evade the payment of the correct amount of tax. Moreover, even though a donor's tax, which is defined as "a tax
on the privilege of transmitting one's property or property rights to another or others without adequate and full
valuable consideration," is different from capital gains tax, a tax on the gain from the sale of the taxpayer's
property forming part of capital assets,[17] the tax return filed by private respondent to report its income for the
year 1974 was sufficient compliance with the legal requirement to file a return. In other words, the fact that the
sale transaction may have partly resulted in a donation does not change the fact that private respondent already
reported its income for 1974 by filing an income tax return.
Since the BIR failed to demonstrate clearly that private respondent had filed a fraudulent return with the
intent to evade tax, or that it had failed to file a return at all, the period for assessments has obviously
prescribed. Such instances of negligence or oversight on the part of the BIR cannot prejudice taxpayers,
considering that the prescriptive period was precisely intended to give them peace of mind.
IV.
Excise taxes
1. Chevron Phils. GR 210836 Sept 1, 2015 en banc
Facts:
Chevron sold and delivered petroleum products to CDC in the period from August 2007 to December
2007.5Chevron did not pass on to CDC the excise taxes paid on the importation of the petroleum
products sold to CDC in taxable year 2007;6 hence, on June 26, 2009, it filed an administrative claim for
tax refund or issuance of tax credit certificate in the amount of P6,542,400.00.7 Considering that
respondent Commissioner of Internal Revenue (CIR) did not act on the administrative claim for tax
refund or tax credit, Chevron elevated its claim to the CTA by petition for review on June 29, 2009.8 The
case, docketed as CTA Case No. 7939, was raffled to the CTA's First Division
Issue: The lone issue for resolution is whether Chevron was entitled to the tax refund or the tax credit for
the excise taxes paid on the importation of petroleum products that it had sold to CDC in 2007
Ruling:
Pursuant to Section 135(c), supra, petroleum products sold to entities that are by law exempt from direct
and indirect taxes are exempt from excise tax. The phrase which are by law exempt from direct and
indirect taxes describes the entities to whom the petroleum products must be sold in order to render the
exemption operative. Section 135(c) should thus be construed as an exemption in favor of the petroleum
products on which the excise tax was levied in the first place. The exemption cannot be granted to the
buyers - that is, the entities that are by law exempt from direct and indirect taxes - because they are not
under any legal duty to pay the excise tax.
Inasmuch as its liability for the payment of the excise taxes accrued immediately upon importation and
prior to the removal of the petroleum products from the customshouse, Chevron was bound to pay, and
actually paid such taxes. But the status of the petroleum products as exempt from the excise taxes would
be confirmed only upon their sale to CDC in 2007 (or, for that matter, to any of the other entities or
agencies listed in Section 135 of the NIRC). Before then, Chevron did not have any legal basis to claim the
tax refund or the tax credit as to the petroleum products

2. CIR v PILIPINAS SHELL PETROLEUM CORPORATION

GR 188497, 19 February 2014
FACTS: Respondent is engaged in the business of processing, treating and refining petroleum for the purpose
of producing marketable products and the subsequent sale thereof.
On July 18, 2002, respondent filed with the Large Taxpayers Audit & Investigation Division II of the
Bureau of Internal Revenue (BIR) a formal claim for refund or tax credit in the total amount of P28,064,925.15,
representing excise taxes it allegedly paid on sales and deliveries of gas and fuel oils to various international
carriers during the period October to December 2001. Subsequently, on October 21, 2002, a similar claim for
refund or tax credit was filed by respondent with the BIR covering the period January to March 2002 in the
amount of P41,614,827.99. Again, on July 3, 2003, respondent filed another formal claim for refund or tax
credit in the amount of P30,652,890.55 covering deliveries from April to June 2002.
Since no action was taken by the petitioner on said claims, respondent filed petitions for review before
the CTA on September and December of 2003.
CTAs First Division ruled that respondent is entitled to the refund of excise taxes in the reduced amount
of P95,014,283.00. The CTA First Division relied on a previous ruling rendered by the CTA En Banc in the case
of Pilipinas Shell Petroleum Corporation v. CIR (Nov. 2006) where the CTA also granted respondents claim
for refund on the basis of excise tax exemption for petroleum products sold to international carriers of foreign
registry for their use or consumption outside the Philippines. Petitioners MR was denied.
On appeal, CTA En Banc upheld the ruling of the First Division. Petitioners MR with CTA was likewise
denied. Hence, this petition.
ISSUES: (1) WON Section 135 intended the tax exemption to apply to petroleum products at the point of
production;
(2) WON Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue and Maceda v. Macaraig,
Jr. are inapplicable in the light of previous rulings of the Bureau of Internal Revenue (BIR) and the CTA that the
excise tax on petroleum products sold to international carriers for use or consumption outside the Philippines
attaches to the article when sold to said international carriers, as it is the article which is exempt from the tax,
not the international carrier; and
(3) WON the Decision of this Court will not only have adverse impact on the domestic oil industry but is
also in violation of international agreements on Chicago Convention on International Aviation.
RULING: 1) No. Under Section 129 of the NIRC, excise taxes are those applied to goods manufactured or
produced in the Philippines for domestic sale or consumption or for any other disposition and to things
imported. Excise taxes as used in our Tax Code fall under two types (1) specific tax which is based on weight
or volume capacity and other physical unit of measurement, and (2) ad valorem tax which is based on selling
price or other specified value of the goods. Aviation fuel is subject to specific tax under Section 148 (g) which
attaches to said product "as soon as they are in existence as such."
It is evident that Am Jur aside, the current definition of an excise tax is that of a tax levied on a specific
article, rather than one "upon the performance, carrying on, or the exercise of an activity."
That excise tax as presently understood is a tax on property has no bearing at all on the issue of
respondents entitlement to refund. Nor does the nature of excise tax as an indirect tax supports respondents
postulation that the tax exemption provided in Sec. 135 attaches to the petroleum products themselves and
consequently the domestic petroleum manufacturer is not liable for the payment of excise tax at the point of
production. As already discussed in our Decision, to which Justice Bersamin concurs, "the accrual and payment
of the excise tax on the goods enumerated under Title VI of the NIRC prior to their removal at the place of
production are absolute and admit of no exception." This also underscores the fact that the exemption from
payment of excise tax is conferred on international carriers who purchased the petroleum products of
respondent.
2) Yes. On the basis of Philippine Acetylene, in holding that a tax exemption being enjoyed by the buyer
cannot be the basis of a claim for tax exemption by the manufacturer or seller of the goods for any tax due to it
as the manufacturer or seller, cannot be applied in the case at hand. Similarly, following the pronouncement in

Maceda v. Macarig, Jr. holding that Section 135(a) should be construed as prohibiting the shifting of the
burden of the excise tax to the international carriers who buy petroleum products from the local manufacturers,
will be inapplicable as well.
3) Yes. It must be noted that Section 135(a) of the NIRC and earlier amendments to the Tax Code
represent the Governments compliance with the Chicago Convention pertaining to exemptions as stipulated in
air transport agreements entered into by the Philippine Government with various countries. The rationale for
exemption of fuel from national and local taxes was expressed by ICAO as follows:
...The Council in 1951 adopted a Resolution and Recommendation on the taxation of fuel, a Resolution
on the taxation of income and of aircraft, and a Resolution on taxes related to the sale or use of international air
transport. It was designed to recognize the uniqueness of civil aviation and the need to accord tax exempt status
to certain aspects of the operations of international air transport and was adopted because multiple taxation on
the aircraft, fuel, technical supplies and the income of international air transport, as well as taxes on its sale and
use, were considered as major obstacles to the further development of international air transport. Nonobservance of the principle of reciprocal exemption envisaged in these policies was also seen as risking
retaliatory action with adverse repercussions on international air transport which plays a major role in the
development and expansion of international trade and travel.
Indeed, the avowed purpose of a tax exemption is always "some public benefit or interest, which the
law-making body considers sufficient to offset the monetary loss entailed in the grant of the exemption." The
exemption from excise tax of aviation fuel purchased by international carriers for consumption outside the
Philippines fulfills a treaty obligation pursuant to which our Government supports the promotion and expansion
of international travel through avoidance of multiple taxation and ensuring the viability and safety of
international air travel.
In sum, the construction of the tax exemption provision in question should give primary consideration to
its broad implications on the countries commitment under international agreements.
In view of the foregoing reasons, the Court ruled that respondent, as the statutory taxpayer who is
directly liable to pay the excise tax on its petroleum products, is entitled to a refund or credit of the excise taxes
it paid for petroleum products sold to international carriers, the latter having been granted exemption from the
payment of said excise tax under Sec. 135 (a) of the NIRC.
3. Fortune Tobacco GR 180006 28 Sept 2011 (non-delegation, uniformity)
Facts: Prior to January 1, 1997, the excises taxes on cigarettes were in the form of ad valorem taxes, pursuant to
Section 142 of the 1977 National Internal Revenue Code (1977 Tax Code). Beginning January 1, 1997, RA
8240 took effect and a shift from ad valorem to specific taxes was made. A portion of Section 142(c) of the
1977 Tax Code, as amended by RA 8240, reads in part:
The specific tax from any brand of cigarettes within the next three (3) years of effectivity of this Act shall not
be lower than the tax [which] is due from each brand on October 1, 1996.
xxx
The rates of specific tax on cigars and cigarettes under paragraphs (1), (2), (3) and (4) hereof, shall be increased
by twelve percent (12%) on January 1, 2000.
To implement the 12% increase in specific taxes mandated under Section 145 of the 1997 Tax Code and again
pursuant to its rule-making powers, the CIR issued RR 17-99, which reads partly:
Provided, however, that the new specific tax rate for any existing brand of cigars [and] cigarettes packed by
machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax that is actually
being paid prior to January 1, 2000.
Pursuant to these laws, respondent Fortune Tobacco Corporation paid in advance excise taxes and filed an

administrative claim for tax refund with the CIR for erroneously and/or illegally collected taxes in the amount
of P491 million.
In its decision, the CTA First Division ruled in favor of Fortune Tobacco and granted its claim for refund. The
CTA First Divisions ruling was upheld on appeal by the CTA en banc. The CIRs motion for reconsideration of
the CTA en bancs decision was denied in a resolution.
Issue: Whether or not Section 1 of RR 17-99 is an unauthorized administrative legislation on the part of the
CIR.
Ruling: Yes. The proviso in Section 1 of RR 17-99 clearly went beyond the terms of the law it was supposed to
implement, and therefore entitles Fortune Tobacco to claim a refund of the overpaid excise taxes collected
pursuant to this provision.
The rule on uniformity of taxation is violated by the proviso in Section 1, RR 17-99. Uniformity in taxation
requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and
liabilities. Although the brands all belong to the same category, the proviso in Section 1, RR 17-99 authorized
the imposition of different (and grossly disproportionate) tax rates. It effectively extended the qualification
stated in the third paragraph of Section 145(c) of the 1997 Tax Code that was supposed to apply only during the
transition period. In the process, the CIR also perpetuated the unequal tax treatment of similar goods that was
supposed to be cured by the shift from ad valorem to specific taxes.
The Court further said that the omission in the law in fact reveals the legislative intent not to adopt the higher
tax rule. It appears that despite its awareness of the need to protect the increase of excise taxes to increase
government revenue, Congress ultimately decided against adopting the higher tax rule.
4. San Miguel Corp (above) GR 184428 23 Nov 2011 (interprttn tax laws)
FACTS:
On January 1, 1998, Republic Act (R.A.) No. 8424 or the Tax Reform Act of 1997 took effect. It
reproduced, as Section 143 (fermented liquor) thereof, the provisions of Section 140 of the old National Internal
Revenue Code as amended by R.A. No. 8240 which became effective on January 1, 1997. Section 143 provides
that: The excise tax from any brand of fermented liquor within the next three (3) years from the effectivity of
Republic Act No. 8240 shall not be lower than the tax which was due from each brand on October 1, 1996. The
rates of excise tax on fermented liquor under paragraphs (a), (b) and (c) hereof shall be increased by twelve
percent (12%) on January 1, 2000.
Rev. Reg. NO. 17-99 was subsequently passed increasing the applicable tax rates on fermented liquor by
12% but with a qualification that: the new specific tax rate for any existing brand of cigars, cigarettes packed
by machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax that is actually
being paid prior to January 1, 2000.
San Miguel contended that the said qualification has no basis in the plain wording of Section 143 and
filed a claim for tax refund or credit for erroneously paid excise taxes.
CIR contends that the qualification in the last paragraph of Section 1, Rev. Reg. NO. 17-99 providing for
the new specific tax rate for any brand of cigars, cigarettes packed by machine, distilled spirits, wines and
fermented liquors shall not be lower than the excise tax that is actually being paid prior to Jan. 1, 2000, is a
valid administrative interpretation of Sec. 143, Tax Reform Act of 1997 and that it carries out the legislative
intent behind the enactment of R.A. No. 8340: to increase government revenues through the collection of higher
excise taxes on fermented liquor.
ISSUE:
How
should
tax
laws
be
interpreted?
RULING:

Tax statutes are construed strictissimi juris against the government. In case of discrepancy between the
basic law and a rule or regulation issued to implement said law, the basic law prevails as said rule or regulation
cannot go beyond the terms and provisions of the basic law. The object of issuing BIR revenue regulations is to
establish parameters or guidelines within which our tax laws should be implemented, and not to amend or
modify its substantive meaning and import.
As held in Commissioner of Internal Revenue v. Fortune Tobacco Corporation,
x x x The rule in the interpretation of tax laws is that a statute will not be construed as
imposing a tax unless it does so clearly, expressly, and unambiguously. A tax cannot be imposed
without clear and express words for that purpose. Accordingly, the general rule of requiring
adherence to the letter in construing statutes applies with peculiar strictness to tax laws and the
provisions of a taxing act are not to be extended by implication. x x x As burdens, taxes should
not be unduly exacted nor assumed beyond the plain meaning of the tax laws.
Hence, while it may be true that the interpretation advocated by petitioner CIR is in furtherance of its
desire to raise revenues for the government, such noble objective must yield to the clear provisions of the law,
particularly since, in this case, the terms of the said law are clear and leave no room for interpretation.
In this case, the questioned qualification under Rev. Reg. 17-99 must be struck down as invalid and of
no effect.
Section 143 of the Tax Reform Act of 1997 is clear and unambiguous. It provides for two periods: the first is the
3-year transition period beginning January 1, 1997, the date when R.A. No. 8240 took effect, until December
31, 1999; and the second is the period thereafter. During the 3-year transition period, Section 143 provides
that the excise tax from any brand of fermented liquorshall not be lower than the tax which was due from each
brand on October 1, 1996. After the transitory period, Section 143 provides that the excise tax rate shall be the
figures provided under paragraphs (a), (b) and (c) of Section 143 but increased by 12%, without regard to
whether such rate is lower or higher than the tax rate that is actually being paid prior to January 1, 2000 and
therefore, without regard to whether the revenue collection starting January 1, 2000 may turn out to be lower
than that collected prior to said date. Revenue Regulations No. 17-99, however, created a new tax rate when it
added in the last paragraph of Section 1 thereof, the qualification that the tax due after the 12% increase
becomes effective shall not be lower than the tax actually paid prior to January 1, 2000. As there is nothing in
Section 143 of the Tax Reform Act of 1997 which clothes the BIR with the power or authority to rule that the
new specific tax rate should not be lower than the excise tax that is actually being paid prior to January 1, 2000,
such interpretation is clearly an invalid exercise of the power of the Secretary of Finance to interpret tax laws
and to promulgate rules and regulations necessary for the effective enforcement of the Tax Reform Act of 1997.
5. Diageo Phils Inc.

183553. Nov. 12, 2012 (who can file claim 4 refund)

Facts: Petitioner brought from its supplier raw alcohol for use in manufacture of its liquor products. The
supplier imported the raw alcohol and paid the related excise taxes thereon before the same were sold to
petitioner. Petitioner then exported its locally manufactured products. Within 2 years from the time the supplier
paid the excise taxes, petitioner filed with the BIR applications for tax refund/issuance of tax credit certificates
corresponding to the excise taxes which the supplier paid but passed on to it as part of the purchase price of the
subject raw alcohol invoking Sec. 130(D) of the Tax Code.
Due to the inaction of the CIR, petitioner filed a petition for review with the CTA.
The CIR assailed that petitioner lacked the legal personality to institute the claim for refund because it was not
the one who paid the alleged excise taxes but its supplier.

Issue: Whether petitioner has the legal personality to file the claim for refund or tax credit for the excise taxes
paid by its supplier?
Ruling: No. The right to claim a refund or be credited with the excise taxes belongs to it supplier. The phrase
any excise tax paid thereon shall be credited or refunded" in Sec. 130(D) of the Tax Code requires that the
claimant be the same person who paid the excise tax. The proper party to question, or seek a refund of, an
indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even
if he shifts the burden thereof to another.
Excise taxes are taxes on property which are imposed on "goods manufactured or produced in the Philippines
for domestic sales or consumption or for any other disposition and to things imported." Though excise taxes are
paid by the manufacturer or producer before removal of domestic products from the place of production or by
the owner or importer before the release of imported articles from the customshouse, the same partake of the
nature of indirect taxes when it is passed on to the subsequent purchaser.
Indirect taxes are defined as those wherein the liability for the payment of the tax falls on one person but the
burden thereof can be shifted to another person. When the seller passes on the tax to his buyer, he, in effect,
shifts the tax burden, not the liability to pay it, to the purchaser as part of the price of goods sold or services
rendered.
Accordingly, when the excise taxes paid by the supplier were passed on to Diageo, what was shifted is not the
tax per se but an additional cost of the goods sold. Thus, the supplier remains the statutory taxpayer even if
Diageo, the purchaser, actually shoulders the burden of tax.

V.
Income
1. CREBA vs Romulo GR 160756 March 9, 2010 (income, MCIT)
FACTS: CREBA assails the imposition of the minimum corporate income tax (MCIT) as being violative of the
due process clause as it levies income tax even if there is no realized gain. They also question the creditable
withholding tax (CWT) on sales of real properties classified as ordinary assets stating that (1) they ignore the
different treatment of ordinary assets and capital assets; (2) the use of gross selling price or fair market value as
basis for the CWT and the collection of tax on a per transaction basis (and not on the net income at the end of
the year) are inconsistent with the tax on ordinary real properties; (3) the government collects income tax even
when the net income has not yet been determined; and (4) the CWT is being levied upon real estate enterprises
but not on other enterprises, more particularly those in the manufacturing sector.
ISSUE: Are the impositions of the MCIT on domestic corporations and
properties classified as ordinary assets unconstitutional?

CWT on income from sales of real

HELD: NO. MCIT does not tax capital but only taxes income as shown by the fact that the MCIT is arrived at
by deducting the capital spent by a corporation in the sale of its goods, i.e., the cost of goods and other direct
expenses from gross sales. Besides, there are sufficient safeguards that exist for the MCIT: (1) it is only
imposed on the 4th year of operations; (2) the law allows the carry forward of any excess MCIT paid over the
normal income tax; and (3) the Secretary of Finance can suspend the imposition of MCIT in justifiable
instances.
The regulations on CWT did not shift the tax base of a real estate business income tax from net income to GSP
or FMV of the property sold since the taxes withheld are in the nature of advance tax payments and they are
thus just installments on the annual tax which may be due at the end of the taxable year. As such the tax base for

the sale of real property classified as ordinary assets remains to be the net taxable income and the use of the
GSP or FMV is because these are the only factors reasonably known to the buyer in connection with the
performance of the duties as a withholding agent.
Neither is there violation of equal protection even if the CWT is levied only on the real industry as the real
estate industry is, by itself, a class on its own and can be validly treated different from other businesses.
2.

South African Airways, GR 180356, February 16, 2010 (GPB, sec 28, NIRC) Villarmea

3.

CIR vs CA 301 SCRA 152 (income vs capital; stock div; redemptn) - ganir

4.

CIR vs CA 298 SCRA 83 (YMCA not an educl instn.; Sec. 30)

FACTS:
Private respondent YMCA is a non-stock, non-profit institution which conducts various programs and activities
that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable
objectives. In 1980, YMCA earned an income from leasing out a portion of its premises to small shop owners,
like restaurants and canteen operators and from parking fees collected from non-members. The CIR issued an
assessment to private respondent including surcharge and interest for deficiency income tax, expanded
withholding taxes on rentals and professional fees and deficiency withholding tax on wages. YMCA formally
protested the assessment. The CIR denied the claims of YMCA. The latter filed a petition for review with the
CTA which in turn ruled in favour of YMCA.
ISSUE:
Whether or not the income of YMCA from rentals of small shops and parking fees is exempt from taxation
RULING:
No. Taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict interpretation in
construing tax exemptions. In this case, the exemption claimed by YMCA is expressly disallowed by the very
wording of the last paragraph of then Section 27 of the NIRC which mandates that the income of exempt
organizations such as the YMCA from any of their properties, real or personal, be subject to the tax imposed by
the same Code. A reading of the last paragraph ineludibly shows that the income from any property of exempt
organizations, as well as that arising from any activity it conducts for profit is taxable. The phrase any of their
activities conducted for profit does not qualify the word properties. This makes the properties of YMCA
taxable regardless of how that income is used-whether for profit or for non-profit purposes.
5.

CIR vs Aquafesh GR170389 Oct20/10 (sec 27 (1,5) CGT, Sec 196 DST)

FACTS:
Aquafresh Seafoods Inc. sold to Philips Seafoods, Inc. 2 parcels of land with improvements, located in Roxas
City, for P3.1M. It then filed a CGT Return, paying P186K (CGT) and P46.5K (DST).
BIR received a report that the lots sold were undervalued for taxation purposes. After investigation, the
properties were determined to be commercial, with ZV of P2K/m 2. Aquafresh protested. BIR denied the same,
as well as the appeal. Aquafresh then filed a petition for review before the CTA, alleging that the pre-defined
ZV was P650/m2 and that it was classified as residential, under the 1995 Revised Zonal Values of Real
Properties. CTA ruled in favor of Aquafresh. CIR filed an MR which was denied. CIR then appealed to the
CTA En Banc, which dismissed the same, thus this petition for review on certiorari.

Petitioner argues that:

(1) the requirement of consultation with competent appraisers is mandatory only when it is prescribing RP
values formulation or change is made in the schedule of ZV
(2) it merely classify the property as commercial and apply the corresponding ZV for such classification based
on the existing schedule of ZV in Roxas City Zonal Valuation Guidelines (Secs 1.b and 2.a)
ISSUE:
WON the pre-defined zonal value as residential, or commercial as later determined by the BIR SID, should be
used in determining the FMV of Aquafreshs property subject to CGT and DST
RULING:
Pre-defined zonal value as residential.
Under Sec. 27(D)(5) of the NIRC of 1997, a CGT of 6% is imposed on the gains presumed to have been
realized in the sale, exchange or disposition of lands and/or buildings which are not actively used in the
business of a corporation and which are treated as capital assets based on the GSP or FMV, as determined in
accordance with Section 6(E) of the NIRC, whichever is higher.
Under Sec. 196 of the NIRC, DST is based on the consideration contracted to be paid or on its FMV,
determined in accordance with Section 6(E) of the NIRC, whichever is higher.
In determining the value of CGT and DST arising from the sale of a property, the CIR has the power to
prescribe RP Values and divide the Philippines into zones, upon consultation with competent appraisers both
from the public and private sectors [Section 6(E) of the NIRC].
For purposes of computing IR tax, the value of the property shall be the FMV as determined by the CIR or as
shown in the schedule of values of the Provincial and City Assessors, whichever is higher. Since IR taxes, such
as CGT and DST, are assessed on the basis of valuation, the zonal valuation existing at the time of the sale
should be taken into account.
In the case at bar, the subject properties were already subject to a zonal valuation of P650/m 2, being residential.
The CIR cannot unilaterally change the zonal valuation of the subject properties to commercial without first
conducting a re-evaluation of the zonal values. It likewise failed to prove that it had complied with Revenue
Memorandum No. 58-69 (which provides for the procedures on the establishment of the ZV of RP), and that a
revision of the 1995 Revised Zonal Values of Real Properties was made prior to the sale of the subject
properties. Secs. 1(b) and 2(a) of the Roxas City Zonal Valuation Guidelines, moreover, does not apply in this
case because it operates only when "no zonal valuation has been prescribed."
Even assuming arguendo that the subject properties were used for commercial purposes, the same remains to be
residential for ZV purposes. Actual use is not considered for zonal valuation, but the predominant use of other
classification of properties located in the zone. It is undisputed that the entire Barrio Banica has been classified
as residential.
6.

FEBTC vs CIR 488 SCRA 473 ( Y fm employees trust tax xempt)

FACTS:
FEBTC seeks refund of taxes wrongfully paid on the income earned by several retirement funds of
private employees held by it in their behalf. FEBTC is the trustee of various retirement plans established by

several companies for its employees. As such, it is authorized to hold, manage, invest and reinvest the assets of
these plans. Petitioner utilized such authority to invest these retirement funds in various money market
placements, bank deposits, deposit substitute instruments and government securities. These investments
necessarily earned interest income. Petitioners claim for refund centers on the tax withheld by the various
withholding agents, and paid to the CIR for the four (4) quarters of 1993, on the aforementioned interest
income. It is alleged that the total final withholding tax on interest income paid for that year amounted
to P6,049,971.83. The claims for refund were denied by CTA for failure to submit the necessary documentary
proof of transaction that would ordinarily show the fact of purchase of treasury bills or money market
placements.
ISSUE: Whether or not income from employees trust are exempt from income tax.
RULING:
Yes, income from employees trust are exempt from income tax by virtue of R.A. No. 4917. Same
exemption was provided in R.A. 8424, the tax reform act of 1997, and is now found under Section 60(B) of the
NIRC.
FEBTC paid the income tax it was not liable for when it withheld such tax on interest income for 1993.
Such taxes were erroneously assessed or collected.
However, petitioner filed the claim for refund beyond the 2-year period and it failed to submit
documentary proofs of transactions, i.e., confirmation receipts and purchase orders, as the best evidence on the
participation of the funds from these employees trusts. These documents are vital to establish the extent of the
investments made by petitioner from the employees trust, as distinguished from those made from other account
sources, and correspondingly, the amount of taxes withheld from the interest income derived from these
employees trust alone.
To conclude this case, the Court said:
It is tragic that the ultimate loss to be borne by the tardy claim for the refund would be not by the petitionerbank, but the hundreds of private employees whose retirement funds were reposed in petitioners trust. However,
the damage was sustained due to multiple levels of incompetence on the part of the petitioner which this Court
cannot simply give sanction to. Many of the so-called procedural hurdles could have been overlooked, even by
this Court, but in the end, the claim for tax refund was simply not proven with the particularity demanded of an
action seeking to siphon off the nations lifeblood.
7.

MJOPFI vs CA & CIR, G.R. 162175, June 28, 2010 (sec. 60 Y fm employees' trusts exempt)

Facts:
Petitioner is a non-stock, non-profit corporation organized for the purpose of holding title to and
administering the employees trust or retirement funds established for the benefit of the employees of Victorias
Milling Company, Inc. (VMC). Petitioner invested part of the Employees Trust Fund to purchase a lot.
Petitioner claims that it is a co-owner of the purchased lot as trustee of the Employees Trust Fund.
Furthermore, petitioner asserted that, as trustee, the income earned by the Employees Trust Fund is tax exempt
and it can act to file the claim of refund.
Issue:
Whether or not the Employees Trust Fund is exempt from payment of income tax?
Ruling:
Yes. Petitioner is a corporation that was formed to administer the Employees Trust Fund. It is evident
that tax-exemption is likewise to be enjoyed by the income of the pension trust. Otherwise, taxation of those

earnings would result in the diminution of accumulated income and reduce whatever the trust beneficiaries
would receive out of the trust fund.
Furthermore, a foundation existing for the purpose of holding title to, and administering the tax exempt
Employees Trust Fund established for the benefit of VMCs employees, has the personality to claim tax refunds
due the Employees Trust Fund.
8.

CIR vs Pilipinas Shell, GR 192398, Sept. 29, 2014 (sec.40, 80, DST)

Facts: On April 27, 1999, a merger took place between two corporations whereby all the assets and liabilities of
the absorbed corporation were transferred to the surviving entity. Among the assets transferred were real
properties. For the transfer of these real properties, a documentary stamp tax was paid by the surviving
corporation under Section 196 of the 1997 Tax Code. Realizing that the documentary stamp tax was erroneously
paid on the transfer of the real property as a result of the merger, the surviving corporation applied for the
refund of the DST paid.
Issue: 1) Whether the transfer of real properties is subject to documentary stamp tax under Section 196 of the
Tax Code
Ruling: No. The Supreme Court held that the DST is only imposed on all conveyances, deeds, instruments or
writing where realty sold shall be conveyed to a purchaser or purchasers for a consideration under Section 196
of Tax Code of 1997 Tax Code. Section 196 of the 1997 Tax Code does not apply to all kinds of transfers and
conveyances of real property for valuable consideration. It is imposed on the transfer of realty by way of sale
and does not apply to all conveyances of real property. The fact that Section 196 refers to words sold,
purchaser and consideration undoubtedly leads to the conclusion that only sales of real property are
contemplated therein. In a merger, the real properties are not deemed sold to the surviving corporation and the
latter could not be considered as purchaser of realty since the real properties subject of the merger were
merely absorbed by the surviving corporation by operation of law and these properties are deemed
automatically transferred to and vested in the surviving corporation without further act or deed. Therefore, this
is not subject to DST.
VI.
1.

Expenses
PRC vs. CA 256 SCRA 667 (req. for bad debts exp.)

PRC v. CA
G.R. No. 118794, May 8, 1996
Facts: The CTA disallowed PRCs claim for bad debts in the amount of P395,324.27. The CA affirmed the
ruling the CTA.
Issue: What are the requirements in order for a debt to be considered as worthless, and thereby qualify as bad
debts making them deductible?
Ruling: The taxpayer should show that: (1) there is a valid and subsisting debt; (2) the debt must be actually
ascertained to be worthless and uncollectible during the taxable year; (3) the debt must be charged off during
the taxable year; and (4) the debt must arise from the business or trade of the taxpayer. Additionally, before a
debt can be considered worthless, the taxpayer must also show that it is indeed uncollectible even in the future.
Furthermore, there are steps to be undertaken by the taxpayer to prove that he exerted diligent efforts to collect
the debts, viz.: (1) sending of statement of account; (2) sending of collection letter; (3) giving the account to a
lawyer for collection; and (4) filing a collection case in court.

PRC failed to provide documentary evidence to support its assertion that the debts were indeed uncollectible
and can be considered as bad debts as to make them deductible. It only provided the testimony of its accountant
unsupported by documentary evidence.
Thus, the CTA and CA was correct in disallowing the deduction of said amount as a deductible bad debts
expense.
2.

China Bank vs CA 336 SCRA 179 (cap gain/loss) - Acas

3.

CIR vs General Foods 401 SCRA 545 (req. for advertising exp.)

CIR vs. General Foods (Phils)

[G.R. No. 143672. April 24, 2003]
Facts: Respondent General Foods, which is engaged in the manufacture of beverages, filed its income tax return
for the fiscal year ending February 28, 1985. In said tax return, respondent corporation claimed as deduction,
among other business expenses, the amount of P9,461,246 for media advertising for Tang.
On May 31, 1988, the Commissioner disallowed 50% of the deduction claimed by respondent corporation.
Consequently, respondent corporation was assessed deficiency income taxes. The latter filed a motion for
reconsideration but the same was denied.
On September 29, 1989, respondent corporation appealed to the CTA but the appeal was dismissed. Aggrieved,
respondent corporation filed a petition for review at the Court of Appeals which rendered a decision reversing
and setting aside the decision of the CTA. Hence, this instant petition.
Issue: Whether or not the subject media advertising expense for Tang incurred by respondent corporation was an
ordinary expense fully deductible under the NIRC.
Ruling: No. To be deductible from gross income, the subject advertising expense must comply with the
following requisites: (a) the expense must be ordinary and necessary; (b) it must have been paid or incurred
during the taxable year; (c) it must have been paid or incurred in carrying on the trade or business of the
taxpayer; and (d) it must be supported by receipts, records or other pertinent papers.
In the case at bar, the subject advertising expense was not ordinary on the ground that it failed the two
conditions set by U.S. jurisprudence: first, reasonableness of the amount incurred and second, the amount
incurred must not be a capital outlay to create goodwill for the product and/or private respondents business.
The Court finds the P9,461,246 claimed as media advertising expense for Tang alone to be inordinately large
and hence, unreasonable. Furthermore, the protection of brand franchise is analogous to the maintenance of
goodwill or title to ones property. Respondent corporation incurred the subject advertising expense in order to
protect its brand franchise and the Court considers this as a capital outlay.
Hence, the instant petition is granted and pursuant to Sections 248 and 249 of the Tax Code, respondent General
Foods (Phils.), Inc. is hereby ordered to pay its deficiency income tax in the amount of P2,635,141.42, plus 25%
surcharge for late payment and 20% annual interest computed from August 25, 1989, the date of the denial of its
protest, until the same is fully paid.
4.
CIR v CTA and SMITH KLINE & FRENCH OVERSEAS CO.
GR No. L-54108, 17 January 1984

FACTS: Smith Kline and French Overseas Company is a multinational firm domiciled in Philadelphia,
Pennsylvania, and licensed to do business in the Philippines. It is engaged in the importation, manufacture and
sale of pharmaceuticals drugs and chemicals.
In its 1971 original income tax return, Smith Kline declared a net taxable income of P1,489,277 and paid
P511,247 as tax due. It appears however that sometime in October, 1972, Smith Kline received from its
international independent auditors, an authenticated certification to the effect that the Philippine share in the
unallocated overhead expenses of the main office for the year ended December 31, 1971 was actually $219,547
(P1,427,484). It further stated in the certification that the allocation was made on the basis of the percentage of
gross income in the Philippines to gross income of the corporation as a whole. By reason of the new adjustment,
Smith Kline's tax liability was greatly reduced from P511,247 to P186,992 resulting in an overpayment of
P324,255.
By virtue of the authenticated certification, Smith Kline filed its amended return on March 1, 1973 and
filed a formal claim for the refund of the alleged overpayment. Subsequently, without awaiting the action of the
Commissioner of Internal Revenue on its claim, Smith Kline filed a petition for review with the Court of Tax
Appeals on April 2, 1974.
In its decision of March 21, 1980, the Tax Court ordered the Commissioner to refund the overpayment
or grant a tax credit to Smith Kline. The Commissioner appealed to this Court.
ISSUE: Is Smith Klines share of the head office overhead expenses incurred outside the Philippines
deductible?
RULING: Yes. Smith Kline share of the head office expenses incurred outside the Philippines is deductible.
SEC. 37.
Income fro m sources within the Philippines. -xxx xxx
xxx
(b)
Net income from sources in the Philippines. From the items of gross income specified in subsection
(a) of this section there shall be deducted the expenses, losses, and other deductions properly apportioned or
allocated thereto and a ratable part of any expenses, losses, or other deductions which cannot definitely be
allocated to some item or class of gross income. The remainder, if any, shall be included in full as net income
from sources within the Philippines.
xxx xxx
xxx
Revenue Regulations No. 2 of the Department of Finance contains the following provisions on the deductions to
be made to determine the net income from Philippine sources:
SEC. 160.
Apportionment of deductions. From the items specified in section 37(a), as being derived
specifically from sources within the Philippines there shall be deducted the expenses, losses, and other
deductions properly apportioned or allocated thereto and a ratable part of any other expenses, losses or
deductions which can not definitely be allocated to some item or class of gross income. The remainder shall be
included in full as net income from sources within the Philippines. The ratable part is based upon the ratio of
gross income from sources within the Philippines to the total gross income.
Example: A non-resident alien individual whose taxable year is the calendar year, derived gross income from all
sources for 1939 of P180,000, including therein:
Interest on bonds of a domestic corporation P9,000
Dividends on stock of a domestic corporation
4,000
Royalty for the use of patents within the Philippines 12,000
Gain from sale of real property located within the Philippines
11,000
Total P36,000
that is, one-fifth of the total gross income was from sources within the Philippines. The remainder of the
gross income was from sources without the Philippines, determined under section 37(c).
The expenses of the taxpayer for the year amounted to P78,000. Of these expenses the amount of P8,000
is properly allocated to income from sources within the Philippines and the amount of P40,000 is properly
allocated to income from sources without the Philippines.
The remainder of the expense, P30,000, cannot be definitely allocated to any class of income. A ratable
part thereof, based upon the relation of gross income from sources within the Philippines to the total gross
income, shall be deducted in computing net income from sources within the Philippines. Thus, these are

deducted from the P36,000 of gross income from sources within the Philippines expenses amounting to P14,000
[representing P8,000 properly apportioned to the income from sources within the Philippines and P6,000, a
ratable part (one-fifth) of the expenses which could not be allocated to any item or class of gross income.] The
remainder, P22,000, is the net income from sources within the Philippines.
From the foregoing provisions, it is manifest that where an expense is clearly related to the production of
Philippine-derived income or to Philippine operations (e.g. salaries of Philippine personnel, rental of office
building in the Philippines), that expense can be deducted from the gross income acquired in the Philippines
without resorting to apportionment.
The overhead expenses incurred by the parent company in connection with finance, administration, and
research and development, all of which direct benefit its branches all over the world, including the Philippines,
fall under a different category however. These are items which cannot be definitely allocated or identified with
the operations of the Philippine branch. For 1971, the parent company of Smith Kline spent $1,077,739. Under
section 37(b) of the Revenue Code and section 160 of the regulations, Smith Kline can claim as its deductible
share a ratable part of such expenses based upon the ratio of the local branch's gross income to the total gross
income, worldwide, of the multinational corporation.
Smith Kline likewise submits that it has presented ample evidence to support its claim for refund. In
sum, the Court ruled that Smith Klines amended 1971 return is in conformity with the law and regulations.
Thus, the Tax Court correctly held that the refund or credit of the resulting overpayment is in order.
VII. Income Taxation
1. Cyanamid vs CA 322 SCRA 638 (Imp. Acc. Earnings tx)
Facts: Petitioner Cyanamid was imposed a surtax on improper accumulation of profits. Petitioner contends that
it accumulated its earnings and profits for reasonable business requirements to meet working capital needs and
retirement of indebtedness. The CTA and consequently, the CA denied the Petitioners petition and appeal
finding that the amount of their surplus is more than the amount of their liabilities.
Issues:
1. What is the accumulated earnings tax?
2. What is the Bardhal Formula? Is it applicable in this case?
3. Is the petitioner liable for accumulated earnings tax?
Rulings:
1. The tax on improper accumulation of surplus is essentially a penalty tax designed to compel
corporations to distribute earnings so that the said earnings by shareholders could, in turn, be taxed.
2. "Bardahl" formula was developed to measure corporate liquidity. The formula requires an examination
of whether the taxpayer has sufficient liquid assets to pay all of its current liabilities and any
extraordinary expenses reasonably anticipated, plus enough to operate the business during one operating
cycle. No, it is not applicable in this case as it is not a precise rule and is used merely for administrative
convenience.
3. Yes. Even if the petitioner is a publicly held corporation, the enumeration for the exemption of
accumulated earnings tax is exclusive and the petitioner is not one of them. Tax exemption is construed
against the one who claims it. Moreover, the burden to disprove the determination of the CIR is upon the
petitioner. They have to show their intent to use the surplus for legitimate business needs at the time of
accumulation and not declared subsequently thereafter, and even then, these must be used within a
reasonable time after the close of the taxable year.
2.
Facts:

Manilabank 499 SCRA 782 (MCIT)

Monetary Board of the Bangko Sentral ng Pilipinas (BSP) issued Resolution No. 505, pursuant to Sec.
29, R.A. 265 (the Central Bank Act), prohibiting petitioner from engaging in business by reason of insolvency.
Thus, petitioner ceased operations that year and its assets and liabilities were placed under the charge of a
government appointed receiver. RA 8242 took effect which introduced the imposition of the minimum corporate
income tax on domestic and resident foreign corporations. 12 years since petitioner stopped its business
operations, the BSP authorized it to operate as a thrift bank. Prior to the filing of its income tax return, or on
December 28, 1999, petitioner contends that since it resumed operations in 1999, it will pay its minimum
corporate income tax only after four (4) years thereafter. BIR ruled that petitioner is entitled to the four (4)year
grace period. Since it reopened in 1999, the minimum corporate income tax may be imposed "not earlier than
2002, i.e. the fourth taxable year beginning 1999.
Issue:
Whether petitioner is entitled to a refund of its minimum corporate income tax paid to the BIR for
taxable year 1999?
Ruling:
Yes. The intent of Congress relative to the minimum corporate income tax is to grant a four (4)year
suspension of tax payment to newly formed corporations. Revenue Regulations No. 495 states that the date of
commencement of operations of a thrift bank is the date it was registered with the SEC or the date when the
Certificate of Authority to Operate was issued to it by the Monetary Board of the BSP, whichever comes later.
In this case, Revenue Regulations No. 495 is applicable to the petitioner. Hence, it is entitled to a grace period
of four (4) years counted from June 23, 1999 when it was authorized by the BSP to operate as a thrift bank.
Consequently, it should only pay its minimum corporate income tax after four (4) years from 1999.
3.

Filinvest GR 163653, July 19, 2011 (sec. 40 c )

FACTS: Petitioner claimed for a refund or in the alternative, issuance of a tax credit certificate (TCC) in the
amount of P 4,178,134.00 representing excess creditable withholding taxes for taxable years 1994,1995 and
1996. CTA dismissed the case for insufficiency of evidence its 1997 income tax return. CA assailed the decision
of CTA and denied petition of Filinvest. The SC initially denied petition for review but on April 3, 2002, case
was re-filed on a petition for reconsideration.
ISSUE: Whether petitioner is entitled to the tax credit anent insufficient evidence.
RULING: CA erred in ruling that petitioner failed to discharge the burden of proving that it is entitled to the
refund because of the latters failure to attach its 1997 ITR.
It is worth nothing that under Section 230 of NIRC and Section 10 of Revenue Regulation No. 12-84,
the CIR is given the power to grant a tax credit or refund even without a written claim therefore, if the former
determines from the face of the return that payment had clearly been erroneously made. The CIRs function is
not merely to receive the claims for refund but it is also given the positive duty to determine the veracity of such
claim.
Simply by exercising the CIRs power to examine and verify petitioners claim for tax exemption are
granted by law, respondent CIR could have easily verified petitioners claim by representing the latters 1997
ITR, the original of which it has in its files. Hence, under solutio indebiti, the Government has to restore to
petitioners the sums representing erroneous payments of taxes.
4.

CIR vs PHILAMGEN, GR175124 Sept 29/10 (sec. 76 Final Adj Ret) - Villarmea

5.

CIR vs McGeorge GR174157 Oct20/10 (sec 76 irrevocable but unused...) - Ganir

6.

Belle vs CIR GR 181298 Jan10/11 (sec76 option irrevocable)

FACTS:
Petitioner Belle, a domestic corporation engaged in the real estate and property business, filed with the BIR its
income tax return (ITR) for the first quarter of 1997. Subsequently, it filed with the BIR its second quarter ITR,
declaring an overpayment of taxes. In view of the overpayment, no taxes were paid for the second and third
quarters of 1997. Instead of claiming the amount as a tax refund, petitioner decided to apply it as a tax credit to
the succeeding taxable year by marking the tax credit option box in its 1997 ITR. On April 12, 200, petitioner
filed with the BIR an administrative claim for refund its unutilized excess income tax payments for the taxable
year 1997. Notwithstanding the filing of the administrative claim for refund, petitioner carried over the excess
amount to the taxable year 1999. Due to the inaction of the respondent CIR and in order to toll the running of
the two-year prescriptive period, petitioner appealed its claim for refund of unutilized excess income tax
payments for the taxable year 1997 via petition for review. The CTA denied the petition.
ISSUE:
Whether petitioner is entitled to a refund of its excess income tax payments for the taxable year 1997
RULING:
No. In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the
refundable amount shown on its final adjustment return may be credited against the quarterly income tax
liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry over and apply the
excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has
been made, such option shall be considered irrevocable for that taxable period and no application for tax refund
or issuance of tax credit certificate shall be allowed therefor. Under Section 76 of the NIRC, in case of
overpayment of income taxes, the remedies are still the same; and the availment of one remedy still precludes
the other. The carry-over of excess income tax payments is no longer limited to the succeeding taxable year.
Unutilized excess income tax payments may now be accrued over to the succeeding taxable years until fully
realized.
In this case, since the petitioner carried over its 1997 excess income tax payments to the succeeding taxable
year 1998, it may no longer file a claim for refund of unutilized tax credits for taxable year 1997. Once the
option to carry over excess income tax payments to the succeeding years has been made, it becomes
irrevocable. Thus, applications for refund of the unutilized excess income tax payments may no longer be
allowed.
7.

CIR vs Sony GR178697 Nov17/10 ( dole out not Vatable: subj to Ytx) - Malcampo

8.

Exxon GR 180909 Jan19/11 (sec135 excise tx: proper party to claim ref)

FACTS:
Exxon, a foreign corporation, purchased from Caltex and Petron Jet A-1 fuel and other petroleum
products. Excise taxes were paid for and remitted by Caltex and Petron, but passed on to Exxon which
ultimately shouldered the same.
On Oct 30, 2003, it filed a petition for review with the CTA claiming a refund or tax credit for the excise
taxes it paid upon the sale of the fuel to international carriers. The CTA 1st Division dismissed Exxons

claim and denied the subsequent MR. Exxon then filed a petition for review with the CTA En Banc,
which also dismissed the same and the MR. Thus, this petition for review on certiorari under R45.
Exxon argues that the subject of the exemption is neither the seller nor the buyer of the petroleum
products, but the products themselves, so long as they are sold to international carriers for use in
international flight operations, or to exempt entities covered by tax treaties, conventions and other
international agreements for their use or consumption, among other conditions. Thus, the exemption will
apply regardless of whether the same were sold by its manufacturer or its distributor.
CIR posits that excise taxes are indirect taxes. As Exxon is not the taxpayer primarily liable to pay, and
not exempted from paying the excise tax, it is not the proper party to claim for the refund of the same.
ISSUE:
WON Exxon, as the distributor and vendor of petroleum products to international carriers registered in
foreign countries which have existing bilateral agreements with the Philippines, can claim a refund of the
excise taxes paid by the manufacturers but passed on (to Exxon) as part of the purchase price
RULING:
No. The proper party to question, or to seek a refund of, an indirect tax, is the statutory taxpayer, or the
person on whom the tax is imposed by law and who paid the same, even if he shifts the burden thereof to
another. As Exxon is not the party statutorily liable for payment of excise taxes under Section 130, in
relation to Section 129 of the NIRC, it is not the proper party to claim a refund of any taxes erroneously
paid.
Excise taxes are indirect taxes, wherein the liability for the payment of the tax falls on one person but the
burden thereof can be shifted or passed on to another person, such as when the tax is imposed upon
goods before reaching the consumer who ultimately pays for it. When the seller passes on the tax to his
buyer, he, in effect, shifts the tax burden, not the liability to pay it, to the purchaser, as part of the goods
sold or services rendered.
Excise taxes are imposed when:
1)
the articles subject to tax belong to any of the categories of goods enumerated in Title VI of the
NIRC;
2)
said articles are for domestic sale or consumption, excluding those that are actually exported.
However, under Sec. 135 of the NIRC, petroleum products sold to international carriers of foreign
registry on their use or consumption outside the Philippines are exempt from excise tax, provided that the
petroleum products sold to such international carriers shall be stored in a bonded storage tank and may
be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of
Finance, upon recommendation of the Commissioner.
ISSUE 2:
WON in effectively holding that only petroleum products purchased directly from the manufacturers or
producers are exempt from excise taxes, the CTA 1st Division sanctioned a unilateral amendment of
existing bilateral agreements which the Philippines has with other countries, in violation of the basic
international principle of pacta sunt servanda

RULING 2:
No. First, the findings of fact of the CTA 1st Division when petitioner sold the Jet A-1 fuel to international
carriers, it did so free of tax, negates any violation of the exemption from excise tax of the petroleum
products sold to international carriers insofar as this case is concerned. Secondly, the right of
international carriers to invoke the exemption granted under Section 135 (a) of the 1997 NIRC has
neither been affected nor restricted in any way by the ruling of CTA 1st Division. At the point of sale, the
international carriers are free to invoke the exemption from excise taxes of the petroleum products sold
to them. Lastly, the law-making body is presumed to have enacted a later law with the knowledge of all
other laws involving the same subject matter.

9. CIR vs PNB GR 180290, Sept 29, 2014 (w/holding tax cert.)

Facts: After payment of its Tax Liabilities, Respondent PNB alleged that they overpaid their tax dues in the
amount of 23,762, 347.83 pesos. The Respondent filed for a tax credit certificate but was not acted upon by the
BIR. Hence, respondent filed before the CTA which ruled in their favour. Petitioner now comes before the
Supreme Court for relief.
Issues:
1. Is the respondent required to present proof of actual remittance of the taxes which was withheld from
them in order that a refund will be granted?
2. Is the respondent required to prove the validity of a certificate of creditable tax withheld at source and
authenticate the same?
Rulings:
1. No. Proof of actual remittance is not a condition to claim for a refund of unutilized tax credits. Under
Sections 57 and 58 of the 1997 National Internal Revenue Code, as amended, it is the payor-withholding
agent, and not the payee-refund claimant such as respondent, who is vested with the responsibility of
withholding and remitting income taxes.
2. No. The certificate of creditable tax withheld at source is the competent proof to establish the fact that
taxes are withheld. It is not necessary for the person who executed and preparedthe certificate of
creditable tax withheld at source to be presented and to testify personally to prove the authenticity of the
certificates. Besides, these certificates can be taken at face value since the execution of these certificates
are made under the penalty of perjury. Since the respondent has clearly its claim of refund through the
said certificates, the burden now is with the CIR to refute that (1) the certificate is not complete; (2) it is
false; or (3) it was not issued regularly. This did not happen in the instant case
VIII. VAT
1. Eastern Telecom 183531, Mar 25, 2015 (effect if no 0 rated on invoice)
2. AT&T vs CIR, GR182364, Aug 3/10 (req for tx refund in 0 rated tranxs)
3. Atlas, GR 159471, January 26, 2011. Voluminous records. Evidence.
Facts:
Atlas Consolidated is a zero-rated VAT person for being an exporter of copper concentrates. On January 1994,
Atlas filed its VAT return for the fourth quarter of 1993, showing a total input tax and an excess VAT credit.
Then, on January 1996, Atlas filed for a tax refund or tax credit certificate with CIR. However, the CTA denied
Atlas claim for refund due to Atlas failure to comply with the documentary requirements prescribed under Sec.
16 of RR No. 5-87, as amended by RR No. 3-88. CTA denied Atlas MR stating that Atlas has failed to

substantiate its claim that it has not applied its alleged excess in put taxes to any of its subsequent quarters
output tax liability. The CA affirmed CTAs ruling.
ISSUE No. 1: What are the documents required to claim for VAT input refund?
Issue No. 2: W/N Atlas is entitled to claim to a tax refund.
Ruling:
When claiming tax refund/credit, the VAT-registered taxpayer must be able to establish that it does not have
refundable or creditable input VAT, and the same has not been applied against its output VAT liabilities
information which are supposed to be reflected in the taxpayers VAT returns. Thus, an application for tax
refund/credit must be accompanied by copies of the taxpayers VAT return/s for the taxable quarter/s concerned.
The formal offer of evidence of Atlas failed to include photocopy of its export documents, as required. Without
the export documents, the purchase invoice/receipts submitted by Atlas as proof of its input taxes cannot be
verified as being directly attributable to the goods so exported. Atlas claim for credit or refund of input taxes
cannot be granted due to its failure to show convincingly that the same has not been applied to any of its output
tax liability as provided under Sec. 106(a) of the Tax Code.
4.
5.

San Roque Power GR 187485 12 Feb 2013 (Secs 112 and 229) en banc
CBK Power GR 202066, Sept 30, 2014 ( ) en banc

FACTS:
This is a case of CBK Power assailing the dismissal of its judicial claim for tax credit of unutilized input
VAT on the ground of premature filing. CBK Power is a partnership engaged in hydropower generation. The
BIR alleges that CBKs sale of electricity to NPC is subject to 0% VAT.
On March 26, 2009, petitioner filed an administrative claim with the BIR for the issuance of a tax credit
certificate for P58.8 million, which amount represented unutilized input taxes. The next day, March 27, 2009,
petitioner filed a petition for review with the Court of Tax Appeals since respondent had not yet issued a final
decision on its administrative claim. Respondent raised prematurity of judicial claim as one of its defenses in its
answer.
ISSUE: Was petitioners judicial and administrative claims for the issuance of tax credit certificates timely and
in accordance with Sec. 112 of the NIRC?
RULING:
Timeliness of judicial claims:
1. General Rule: Compliance with the 120-day and the 30-day periods under Section 112 of the Tax Code
is mandatory and jurisdictional.
2. Exception: Those Value-added Tax refund cases that were prematurely (i.e., before the lapse of the 120day period) filed with the CTA between December 10, 2003 (when the BIR Ruling No. DA-489-03 was
issued) and October 6, 2010.
3. General Rule: Claims for refund or tax credit of excess input VAT are governed by Section 112 of the
NIRC, not by Section 229.
Petitioners judicial claims were timely filed for falling under the exception provided by jurisprudence.

In G.R. No. 202066, petitioner filed its judicial claim on March 27, 2009, only a day after it had filed its
administrative claim on March 26, 2009.
In G.R. No. 205353, petitioner filed its judicial claim on April 23, 2008 for the taxable period of January
1, 2006 to March 31, 2006, just 23 days after it had filed its administrative claim on March 31, 2008.
Petitioner also filed its judicial claim on July 24, 2008 for the taxable period of April 1, 2006 to
December 31, 2006, only a day after it had filed its administrative claim on July 23, 2008.
In all these three, petitioner failed to comply with the 120-day waiting period, the time expressly given
by law to the CIR to decide whether to grant or deny its application for tax refund or credit.
Nevertheless, since the judicial claims were filed within the window created in San Roque [2003-2010],
the petitions are exempted from the strict application of the 120-day mandatory period.
Timeliness of administrative claims:
General Rule: Claims for the issuance of tax credit certificates or refund of creditable input VAT relative to
Zero-Rated or Effectively Zero-Rated Sales must be made by a VAT-registered person within 2 years after the
close of the taxable quarter when the sales were made.
Exception: For the period June 8, 2007 until September 12, 2008 when the Atlas Doctrine was governing, the
2-year period is reckoned, not after the close of the taxable quarter when the sales were made, but from the date
of payment of the output VAT.
In the instant case, petitioner filed its 2006 Quarter 2 Input VAT claims on July 23, 2008. Petitioners
VAT claims should have been filed out of time. However, because petitioners claims are within the Atlas
Doctrine, petitioners administrative claims are deemed timely filed.
6.

Silicon Phils GR 173241, March 25, 2015 (rules on prescriptv prds)

Silicon Phils vs. CIR

Facts: Silicon Philippines, Inc. is a corporation duly organized and existing under the laws of the Philippines. It
is registered with the BIR as a VAT-taxpayer and with the BOI as a preferred pioneer enterprise. Then, on May,
1999, Silicon filed with the CIR an application for credit/refund of unutilized input VAT for the period of Oct. 1,
1998 to Dec. 31, 1998. Due to the inaction of the CIR, Silicon filed a Petition for Review with the CTA
Division. Silicon alleged that the 4th quarter of 1998, it generated and recorded zero-rated export sales paid to
Silicon in acceptable foreign currency and that for the said period, Silicon paid input VAT in the total amount
which have not been applied to any output VAT. The CIR, on the other hand, raised the defenses that: 1) Silicon
did not show that it complied with the provisions of Sec. 229 of the Tax Code; 2) That claims for refund are
construed strictly against the claimant similar to the nature of exemption from taxes; and 3) That Silicon failed
to prove that is entitled for refund. The CTA Division granted Silicons claim for refund of unutilized input VAT
on capital goods. However, it denied Silicons claim for credit/refund of input VAT attributable to its zero-rated
export sales. It is because Silicon failed to present an Authority to Print (ATP) from the BIR neither did it print
on its export sales invoices the ATP and the word zero-rated. Silicon moved for reconsideration claiming that it
is not required to secure an ATP since it has a Permit to Adopt Computerized Accounting Documents such as
Sales Invoice and Official Receipts from the BIR. And that the printing of the word zero-rated on its export
sales invoices is not necessary because all its finished products are exported to its mother company, Intel Corp.,
a non-resident corporation and a non-VAT registered entity.
Petitioner, in a review for certiorari, seeks the reversal and setting aside of the: (1) the Decisionof the CTA en
banc which affirmed the Decision and Resolution of the CTA Division in CTA Case No. 6170; and (2)

Resolution of the CTA en banc which denied the Motion for Reconsideration of the petitioner. The CTA
Division only granted the claim of SPI for tax credit/refund of input Value Added.
During the pendency of the petition, the court promulgated on February 12, 2013 its decision on consolidated
cases of San Roque which settled the rule on prescriptive periods for claiming credit/refund of input VAT under
section 112 of the 1997 Tax code.
Issue: Whether or not Silicon entitled to claim from refund of Input VAT attributable to its zero-rated sales.
Ruling: Because the 30day period for filing its judicial claim had already prescribed by the time Silicon filed its
Petition for Review with the CTA Division, the CTA Division never acquired jurisdiction over the said Petition.
The CTA Division had absolutely no jurisdiction to act upon, take cognizance of, and render judgment upon the
Petition for Review of SPI in CTA Case No. 6170, regardless of the merit of the claim of SPI. The Court
stresses that the 120/30day prescriptive periods are mandatory and jurisdictional, and are not mere technical
requirements. The Court should not establish the precedent that noncompliance with mandatory and
jurisdictional conditions can be excused if the claim is otherwise meritorious, particularly in claims for tax
refunds or credit. Such precedent will render meaningless compliance with mandatory and jurisdictional
requirements.
NOTE 1: The court in ruling, cited Sections 110 and 112 of the Tax Code including the jurisprudence and
administrative rulings on the same section in the collective case of San Roque.
Section 112(C) expressly grants the Commissioner 120 days within which to decide the taxpayers claim. The
law is clear, plain, and unequivocal: x x x the Commissioner shall grant a refund or issue the tax credit
certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of
complete documents. Following the verba legis doctrine, this law must be applied exactly as worded since it is
clear, plain, and unequivocal. The taxpayer cannot simply file a petition with the CTA without waiting for the
Commissioners decision within the 120day mandatory and jurisdictional period. The CTA will have no
jurisdiction because there will be no decision or deemed a denial decision of the Commissioner for the CTA
to review.
Section 112(C) also expressly grants the taxpayer a 30day period to appeal to the CTA the decision or inaction
of the Commissioner, thus: x x x the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty day period, appeal the decision or
the unacted claim with the Court of Tax Appeals.
Following the well settled verba legis doctrine, this law should be applied exactly as worded since it is clear,
plain, and unequivocal. As this law states, the taxpayer may, if he wishes, appeal the decision of the
Commissioner to the CTA within 30 days from receipt of the Commissioners decision, or if the Commissioner
does not act on the taxpayers claim within the 120day period, the taxpayer may appeal to the CTA within 30
days from the expiration of the 120day period.
NOTE (Regarding the tax refund/credit): Since ATP is not indicated in the invoices or receipts, the only way
to verify whether the invoices or receipts are duly registered is by requiring the claimant to present its ATP
from the BIR. Without which, the invoices would have no probative value for the purpose of refund.
No. The court held. National Internal Revenue Code; value-added tax; zero-rated or effectively zero-rated sales;
unutilized input value-added tax; claims for tax credit or refund; period to file appeal with the Court of Tax
Appeals. Section 112 (D) of the National Internal Revenue Code provides the Commissioner of Internal
Revenue a 120-day period from submission of complete documents in support of the administrative claim
within which to act on claims for refund/applications for issuance of the tax credit certificate. Upon denial of
the claim or application, or upon expiration of the 120-day period, the taxpayer only has 30 days within which
to appeal said adverse decision or unacted claim before the CTA, otherwise, said judicial claim shall be
considered as filed out of time.
7. Toledo Pwr GR 195179 Aug 10, 2015 (sec 112; 120 + 30 days = rules)
8.

CE Luzon Geothermal GR 200841-42 Aug 26, 2015

Facts: CE Luzon is a domestic corporation engaged in the business of power generation. It filed its quarterly
VAT returns for the year 2005, which reflected an overpayment of P20,546,004.87. CE Luzon maintained that

its overpayment was due to its domestic purchases of non-capital goods and services, services rendered by nonresidents, and importation of non-capital goods.
On November 30, 2006, CE Luzon filed an administrative claim for refund of its unutilized input VAT in the
amount of P20,546,004.87 before BIR. Thereafter, on January 3, 2007, it filed a judicial claim for refund, by
way of a petition for review, before the CTA.
The CTA Division partially granted CE Luzon's claim for tax refund. But the CTA En Banc set aside the CTA
Division's findings, holding that CE Luzon's premature filing of its claim divested the CTA of jurisdiction.
Issue: Whether or not CE Luzons claim for refund should be dismissed on the ground of prematurity.
Ruling: The case should be remanded to the CTA En Banc for its resolution on the merits. The rule governing a
taxpayer's claim for refund of unutilized input VAT is found in Section 1121 of the NIRC.
In the case of CIR v. Aichi Forging Company of Asia, Inc., it was held that the observance of the 120-day period
is a mandatory and jurisdictional requisite to the filing of a judicial claim for refund before the CTA. As such,
its non-observance would warrant the dismissal of the judicial claim for lack of jurisdiction. However, BIR
Ruling No. DA-489-03 expressly declared that the "taxpayer-claimant need not wait for the lapse of the 120-day
period before it could seek judicial relief with the CTA by way of Petition for Review. So during the period of
December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6, 2010 (when the Aichi case
was promulgated), taxpayers-claimants need not observe the 120-day period before it could file a judicial claim
for refund of excess input VAT before the CTA.
Here, records show that CE Luzon's administrative and judicial claims were filed on November 30, 2006 and
January 3, 2007, respectively, or during the period of effectivity of BIR Ruling No. DA-489-03 and, thus, fell
within the window period stated, i.e., when taxpayer-claimants need not wait for the expiration of the 120-day
period before seeking judicial relief.
However, the Supreme Court cannot instantly grant CE Luzon's refund claim. This is because the determination
of CE Luzon's entitlement to such claim, if any, would necessarily involve factual issues which are beyond the
pale of judicial review under a Rule 45 petition where only pure questions of law, not of fact, may be resolved.
Hence, the prudent course of action is to remand the case to the CTA En Banc for resolution on the merits.
IX.

Assignment

Best Evidence Obtainable (sec 6, NIRC)

1. Mindanao Bus, GR L-12873, February 24, 1961

1

SEC. 112. Refunds or Tax Credits of Input Tax. (A) Zero-rated or Effectively Zero-rated Sales. - any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the close of the taxable quarter when the
sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or
paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been
applied against output tax: x x x.
xxxx
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsection (A) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may,
within thirty (30) days from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty day-period, appeal the decision or the unacted claim
with the Court of Tax Appeals.
x x x x (Emphases and underscoring supplied)

FACTS: Petitioner is a common carrier engaged in transporting passengers and freight by means of autobuses
in Northern Mindanao, under certificates of public convenience issued by the Public Service Commission.
Sometime in September, 1953, an agent of the respondent Collector of Internal Revenue examined the books of
accounts of the petitioner and found that the freight tickets used by it do not contain the required documentary
stamp tax. Said agent took with him 500 booklets of tickets used by the petitioner and counted the freight
receipts contained therein. He counted 1,305 freight tickets. Assuming that each freight ticket covers baggage
valued at more than P5.00, the Collector of Internal Revenue, upon recommendation of the agent, assessed
against the petitioner the sum of P15,704.16, exclusive of compromise penalty, as documentary stamp taxes
from January 1, 1948 up to September 16, 1953.
ISSUE: Whether or not petitioner is liable for the assessed DST?
RULING: Yes. Petitioners claim that the computation made by therespondent is not based upon the best
available evidence, but on mere presumptions is devoid of merit. The agent of the Bureau of Internal Revenue
who investigated the petitioner's books of accounts found it impossible to count one by one the freight tickets
contained in used booklets dumped inside the petitioner's bodega, because the booklets were so numerous and
most of them were either torn or destroyed. The procedure followed by said agent, which is the average method,
in ascertaining the total number of freight tickets used during the period under review, can not be improved
because an actual count of the freight tickets is practically impossible. The average method is the only way by
which the agent could determine the number of booklets used during the period in question. The agent also
correctly assumed that the value of the goods covered by each freight ticket is not less than P5.00. It is a
common practice of passengers in the rural areas not to secure receipts for cargoes of small value and to demand
receipts only for valuable cargo. If the freight tickets were issued, the baggage carried must have been valuable
enough.
On the other hand, it was the duty of petitioner to present evidence to show inaccuracy in the above method of
assessment, but it failed to do so. The claim of petitioner that the freight tickets issued by it are not bills of
lading subject to documentary stamp tax must also be dismissed. Bills of Lading, in modern jurisprudence, are
not those issued by masters of vessels alone; they now comprehend all forms of transportation, whether by sea
or land, and includes the receipts for cargo transported. Section 227 of the National Internal Revenue Code
imposes the tax on receipts for goods or effects shipped from one port or place to another port or place in the
Philippines. The use of the word place after port and of the, word 'receipt' shows that the receipts for goods
shipped on land are included.
2. Sy Po, GR L-81446, August 18, 1988
FACTS:
Bonifacia Sy Po is the widow of Po Bien Sing who died in Sept. 7, 1980, who was the sole proprietor of
Silver Cup Wine Factory in Cebu for the years 1964-72. By order of the Sec. of Finance, Silver Cup was
investigated by the BIR for alleged tax evasion. However, Mr. Po Bien Sing did not reproduce the documents
subject of a subpoena duces tecum. So, the team, assisted by PC Company, entered Silver Cups factory bodega
and seized different brands of alcohol products consisting of 1,555 cases. The result of the investigation
prompted the commissioner to assess Mr. Po Bien Sing for deficiency income tax for 1966-1970 (P7M+) and
for deficiency specific tax for Jan.2, 1964-Jan. 19, 1972 (P5M+).
ISSUE: Whether or not the assessments have valid legal basis.
RULING: Yes.
Section 16(b) provides for the power of the Commissioner of Internal Revenue to make assessments.

(b) Failure to submit required returns, statements, reports and other documents. - When a report required
by law as a basis for the assessment of an national internal revenue tax shall
not be forthcoming
within the time fixed by law or regulation or when there is reason to
believe that any such report is false,
incomplete, or erroneous, the Commissioner of Internal
Revenue shall assess the proper tax on the best
evidence obtainable.
In case a person fails to file a required return or other document at the time prescribed by law,
or
willfully or otherwise, files a false or fraudulent return or other documents, the
Commissioner shall make or
amend the return from his own knowledge and from such
information as he can obtain through
testimony or otherwise, which shall be prima
facie correct and sufficient for all legal purposes.
The rule on the best evidence obtainable applies when a tax report required by law for the purpose of
assessment is not available or when the tax report is incomplete or fraudulent.
In this case, the persistent failure of Po Bien Sing and petitioner to present their books of accounts for
examination for the taxable years involved left the Commissioner no other legal option except to resort to the
power conferred upon him under Section 16.
The tax figures arrived by the CIR are not arbitrary. There
are clear indications of the petitioners commission of fraud to deprive the Government of the taxes due. From
Jan-Dec 1970, Silver Cup used thousands of untaxed distilled alcohol in production and false entries were
entered in the official register books to hide the same.
The tax assessments by tax examiners are presumed correct and made in good faith. The taxpayer has
the duty to prove otherwise. All presumptions are in favor of the correctness of tax assessments.
3. Hantex, GR 136975, March 31, 2005
X.

Tax Remedies

Assignment: Compare

Ungab vs Cusi 97 SCRA 877 (ass. not a pre requisite)

CIR vs CA 257 SCRA 200 (Fortune Tobacco case)

Cases on Assessment
1. CIR vs BPI, 521 SCRA 373. Apr 2007
2. Barcelon vs CIR GR 157064 07 Aug 06 (prescriptn)
3. FMF Dev't Corp 556 SCRA 698 (Sec 222 (b) NIRC)
4. Kudos Metal, 178087 May 2010. waiver
5. Metro Star Superama, GR 185371, Dec 8, 2010. PAN part of due process.
6. Allied Bank, 611 SCRA 692. Feb 2010. Estoppel.
7. Gonzales & LM Camus Eng'g, GR 177279 Oct 13, 2010. Final ass't.
Cases on Prescription
1. BPI vs CiR 139736. Oct 17, 2005
2. BPI vs CIR 174942. Mar 7, 2008
3. CIR vs. Phil Global 167146. Oct 31, 2006
4. Hambrecht & Quist, GR 169225, Nov 17, 2010. Reinvestigation.
Tax Credit/Refund
1. CIR vs PNB 161997. Oct 25, 2005
2. Silkair, 544 SCRA 100. Feb 2008
FACTS: Silkair (Singapore) Pte., Ltd., a Singaporean corporation engaged in international air carriage, filed
with the Bureau of Internal Revenue an application for the refund of P4,567,450.79 excise taxes paid for jet fuel
from Petron Corporation from January to June 2000. It based its claim from Section 135 of the 1997 NIRC, and

Article 4(2) of the Air Transport Agreement between RP and Singapore. BIR has not acted upon said application
so Silkair filed a Petition for Review with the Court of Tax Appeals, Second Division. BIR opposed said
petition on the ground that the excise tax on petroleum, being a direct liability of the manufacturer or producer,
becomes part of the price when added to the cost of said good sold to the buyer. CTA, Second Division, in its
decision on 27 May 2005, dismissed said petition on the ground that the latter is not the proper claimant, and
likewise denied Silkairs subsequent Motion for Reconsideration therefor.
ISSUE: Whether or not Silkair is the proper party to claim for the tax credit.
RULING: No, Silkair is not the proper claimant for the tax credit. Petron Corporation is the proper claimant. SC
held that the proper party to claim refund of the tax credit is the statutory taxpayer, the person who paid
said tax imposed by law even if he shifts the burden thereof to another. Section 130(A) (2) thus provides
unless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or
producer before removal of domestic products from place of production. Petron, not Silkair, is thus the one
entitled to claim refund based on Section 135 of the NIRC of 1997 and Article4(2) of the Air Transport
Agreement between RP and Singapore. The tax burden passed by Petron to Silkair is no longer a tax but a part
of the purchase price. The best that Silkair may do, if allowed, is only to seek reimbursement of the tax burden
from Petron.
Furthermore, exemption granted by law does not include indirect taxes. An indirect tax, i.e., excise tax on
petroleum products, is that in which the incidence of taxation (person statutorily liable to pay) falls on one
person, and the impact of taxation (burden of taxation) falls on another. SC ruled that the exemption granted
under Section 135 (b) of the NIRC of 1997 and Article 4(2) of the AirTransport Agreement between RP and
Singapore cannot, without a clear showing of legislative intent, be construed as including indirect taxes. SC
further explained that statutes granting tax exemptions must be construed in strictissimi juris against the
taxpayer and liberally in favor of the taxing authority, and if an exemption isfound to exist, it must not be
enlarged by construction.
3. Smart, GR 179045 August 25, 2010. Withholding agent can file claim.
CIR v. Smart, G.R. No. 179045-46, August 25, 2010 (Withholding agent can file claim)
FACTS:
Smart Communications, Inc. entered into 3 agreements for programming and consultancy services with
Prism Transactive (M) Sdn. Bhd. (Prism), a non-resident corporation organized under the laws of Malaysia.
Under the said agreements, Prism was to provide programming and consultancy services for the installation
of the Service Download Manager (SDM) and the Channel Manager (CM), and for the installation and
implementation of Smart Money and Mobile Banking Service SIM Applications and Private Text Platform.
Prism billed Smart US$547,822.45 in June 2001. Thinking that these payments constitute royalties,
SMART withheld US$136,955.61/P7,008.840.43 representing the 25% royalty tax under the RP-Malaysia
Tax Treaty.
In Sept. 25, 2001, SMART filed its Monthly Remittance Return of Final Income Taxes Withheld for
August 2001. Within the 2-year period to claim a refund, SMART filed claim for refund of the P7M+. CIR
failed to act on the refund claim. SMART filed a petition for review with the CTA.
SMARTs claim for refund is grounded on the contention that: (a) the payments made to Prism were not
royalties but business profits, pursuant to the definition of royalties under the RP-Malaysia Tax Treaty and
the Commentaries of the Org for Economic Cooperation and Devt (OECD) Committee on Fiscal Affairs
through the Technical Advisory Group on Treaty Characterization of Electronic Commerce Payments; (b)
under Art.7, RP-Malaysia Tax Treaty, business profits are taxable in the Philippines only if attributable to a
permanent establishment in the Philippines, while Prism has no permanent establishments in the Philippines,

thus its payments to Prism should not be taxed.

CIR maintains that as a withholding agent, (a) SMART is not a party-in-interest to file the claim for
refund; (b) assuming it is the proper party, there is no showing that the payments made to Prism constitute
business profits.
CTA upheld SMARTs right as withholding agent to file claim for refund, but held that it was entitled
only to partial refund (P3M+), ruling that although the payment for the CM and SIM application agreements
are business profits (not subject to tax) under the RP-Malaysia Tax Treaty, the payments for the SDM
Agreement is a royalty subject to withholding tax.
CTA en banc affirmed and said that although SMART and Prism are unrelated entities, such does not
affect the status of SMARTs direct and independent liability under the withholding tax system.
ISSUES: (a) Whether SMART has the right to file the claim for refund.
(b) Whether the payments made to Prism constitute business profits or
royalties.
RULING:
(a) Yes, the withholding agent may file a claim for refund.
Under Sections 204(c) and 229 of the NIRC, the person entitled to claim a tax refund is the taxpayer.
However, in case the taxpayer does not file a claim for refund, the withholding agent may file the claim. The
legal interest of the withholding agent to file claim for refund is not dependent on the relation between the
taxpayer and the withholding agent, although such relation might increase the withholding agents interest.
A withholding agent has a legal right to file claim for refund for two reasons:
(1) He is considered a taxpayer under the NIRC as he is personally liable for the withholding tax as well as
for deficiency assessments, surcharges, and penalties, should the amount of the tax withheld be finally
found to be less than the amount that should have been withheld under the law;
(2) As an agent of the taxpayer, his authority to file the necessary income tax return and to remit the tax
withheld to the government impliedly includes the authority to file a claim for refund and to bring an
action for recovery of such claim.
However, while the withholding agent has the right to recover the taxes erroneously/illegally collected,
he nevertheless has the obligation to remit the same to the principal taxpayer. As an agent of the taxpayer, it is
his duty to return what he has recovered; otherwise, he would be unjustly enriching himself at the expense of
the principal taxpayer from whom the taxes withheld and from whom he derives his legal right to file a claim
for refund.
(b) The payments for the CM and the SIM Application Agreements constitute business profits.
Under the RP-Malaysia Tax Treaty, the term royalties is defined as payments of any kind received as
consideration for: (i) the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula
or process, any copyright of literary, artistic or scientific work, or for the use of, or the right to use, industrial,
commercial, or scientific equipment, or for information concerning industrial, commercial or scientific
experience; (ii) the use of, or the right to use, cinematograph films, or tapes for radio or television broadcasting.
These are taxed at the rate of 25% of the gross amount.
Under the same Treaty, the business profits of an enterprise of a Contracting State is taxable only in that
State, unless the enterprise carries on business in the other Contracting State through a permanent
establishment. The term permanent establishment is defined as a fixed place of business where the enterprise is
wholly or partly carried on. However, even if there is no fixed place of business, an enterprise of a Contracting
State is deemed to have a permanent establishment in the other Contracting State if it carries on supervisory
activities in that other State for more than six months in connection with a construction, installation or assembly
project which is being undertaken in that other State.

Prism does not have a permanent establishment in the Philippines. Hence, business profits derived from
Prisms dealings with respondent are not taxable. The question is whether the payments made to Prism under the
SDM, CM, and SIM Application agreements are business profits and not royalties.
The provisions in the agreements are clear. Prism has intellectual property right over the SDM
program, but not over the CM and SIM Application programs as the proprietary rights of these programs belong
to respondent. In other words, out of the payments made to Prism, only the payment for the SDM program is a
royalty subject to a 25% withholding tax. A refund of the erroneously withheld royalty taxes for the payments
pertaining to the CM and SIM Application Agreements is therefore in order.
4. Fortune Tobacco 559 SCRA 160 (solutio indebiti)
5. FEBTC, 173854. Mar 15, 2010. Requisites

XI.

Local Government Taxation

1. NPC vs Cabanatuan 401 SCRA 259
2. PHILRECA vs DILG 403 SCRA 558
3. PLDT vs Laguna 467 SCRA 93
4. Coca Cola vs Manila 493 SCRA 279 (procedure re: tax ordinance)
5. Petron vs Tiangco 551 SCRA 484 (limitn of pwrs of LGUs)
6. San Juan vs Castro 541 SCRA 526 (protest)
7. Berdin vs Mascarias 526 SCRA 592 (tax ord)
8. Lepanto vs Ambanloc, GR. 180639, 6/29/10 extractn of minerals

XII. Real Property Taxation

1. MCIAA vs Marcos 261 SCRA 667 (mciaa is a gocc)
2. MIAA vs CA 495 SCRA 591 (miaa not a gocc)
3. MCIAA vs Lapu-lapu, GR 181756, 15 June 2015
4. PFDA vs CA 534 SCRA 490 (govt instrmntlty exempt from realty tax)
5. PPA vs Curata GR 154211, June 22, 2009 (PPA is a govt instrmntlty)
6. Angeles Univ. vs City GR 189999 27 June 2012 (A-D-E used.)
7. NPC vs Quezon GR 171586 25 Jan 2010 (A-D-E used.)
8. Pasig vs PCGG, GR 185023, 24 Aug 2011
XIII. Tariff & Customs Code
1. Chia vs Acting CoC 177 SCRA 755 (Searches, jurisxn) sample warrant
2. Chua vs Villanueva GR 157591 16Dec2005 (primary jurisxn)
3. COC vs CA 481 SCRA 109 jurisxn retroacts
4. SBMA 160270. April 23, 2010 jurisxn
5. Pilipinas Shell GR161953 06 Mar 2008 collectn suit
6. COC vs CTA & PCOC, GR 132929 27 Mar 2000 (sec 1603) fraud
7. Farolan, Jr. vs CTA 217 SCRA 299 no fraud
8. CIR vs CTA 171516-17. Feb 13, 2009 (sec 102; fraud)
9. Garcia vs Exec. Sec. 211 SCRA 219 (Sec. 401; tariff powers)
10. Akbayan vs Aquino 170516. July 16, 2008 (treaty nego)
11. Jardeleza 165265. Feb. 6, 2006 undeclared baggage = smuggling
12. El Greco 177188. Dec. 4, 2008 (fake dox)
13. CoC vs Manila Star Ferry, Inc. 227 SCRA 317 fine only
14. Feeder Intl vs CA 197 SCRA 842 forfeiture*compare Mla Star Ferry case

15. Acting CoC vs CTA 129 SCRA 70

16. Paterok vs CoC 193 SCRA 132
17. BOC vs Devanadera GR 193253 Sept 8, 2015 (jurisxn; 3601, 3602, 3611)
XIV. Special Tax Laws
1. R.A. 8752 Anti-Dumping Duty
2. R.A. 8751 Countervailing Duty
3. R.A. 8800 Safeguard Measures Act
Case:
Southern Cross Cement vs CMAP 465 SCRA 532 (Safeguard Measures Act)