CASES IN TAXATION LAW

SUPREME COURT DECISIONS

General Principles

Pambansang Koalisyon ng mga Samahang Magsasaka at Manggagawa sa Niyugan

(PKSMMN), et. al. v. Executive Secretary, et. al.
G.R. Nos. 147036-37, April 10, 2012
Abad, J.:
Coco-levy funds are not only affected with public interest; they are, in fact, prima facie public
funds. They were raised with the use of the police and taxing powers of the State for the
benefit of the coconut industry and its farmers in general.

Angeles University Foundation v. City of Angeles, et. al

G.R. No. 189999, June 27, 2012
Villarama, Jr., J.:
In distinguishing tax and regulation as a form of police power, the determining factor is the
purpose of the implemented measure. If the purpose is primarily to raise revenue, then it will be
deemed a tax even though the measure results in some form of regulation. On the other hand,
if the purpose is primarily to regulate, then it is deemed a regulation and an exercise of the
police power of the state, even though incidentally, revenue is generated.

Income Taxes

Commissioner of Internal Revenue v. St. Luke’s Medical Center, Inc.

G.R. Nos. 195909 & 195960, September 26, 2012
Carpio, J.:
The effect of Sec. 27(B) of the NIRC is to subject the taxable income or income derived from
activities for profit of proprietary non-profit educational institutions and hospitals to the
preferential rate of 10% instead of the ordinary 30% corporate rate.

Value-added Tax

Western Mindanao Power Corporation v. Commissioner of Internal Revenue

G.R. No. 181136, June 13, 2012
Sereno, J.:
The NIRC mandates that a creditable input tax be evidenced by a VAT invoice or official receipt
that complies with the requirements of Revenue Regulations (RR) No. 7-95. Sec. 4.108-1
thereof particularly requires that the term “zero rated sale” be stated prominently on the invoice
or receipt. RR No. 7-95 is not an undue expansion of the law as it proceeds from the rule-
making authority granted by the NIRC to the Secretary of Finance.

Eastern Telecommunications Philippines, Inc. v. Commissioner of Internal Revenue

G.R. No. 168856, August 29, 2012
Mendoza, J.:
The absence of the word “zero-rated” on the invoices and receipts of a taxpayer will result in
the denial of the claim for tax refund. The Court ruled that the appearance of the word "zero-
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rated" on the face of invoices covering zero-rated sales prevents buyers from falsely claiming
input VAT from their purchases when no VAT was actually paid. Further, the printing of the
word “zero-rated” on the invoice helps segregate sales that are subject to 10% (now 12%) VAT
from those sales that are zero-rated.

Accenture, Inc. v. Commissioner of Internal Revenue

G.R. No. 190102, July 11, 2012
Sereno, J.:
To come within the purview of Sec. 108 (B) (2) of the NIRC on transactions subject to zero
percent rate, it is not enough that the recipient of the service be proven to be a foreign
corporation; rather it must be specifically proven to be a non-resident foreign corporation.

Fort Bonifacio Development Corporation v. Commissioner of Internal Revenue, et. al.

G.R. No. 173425, September 4, 2012
Del Castillo, J.:
There is nothing in Sec. 105 of the NIRC which indicates that prior payment of taxes is
necessary for the availment of the transitional input tax credit. All that is required is for the
taxpayer to file a beginning inventory with the BIR. The transitional input tax credit operates to
benefit newly VAT-registered persons, whether or not they previously paid taxes in the
acquisition of their beginning inventory of goods, materials, and supplies.

NIRC Remedies

Lascona Land Co., Inc. v. Commissioner of Internal Revenue

G.R. No. 171251, March 5, 2012
Peralta, J.:
In case of the inaction of the CIR on the protested assessment, while the taxpayer has two
options, either: (1) file a petition for review with the CTA within 30 days after the expiration of
the 180-day period; or (2) await the final decision of the Commissioner on the disputed
assessment and appeal such final decision to the CTA within 30 days after the receipt of a copy
of such decision, these options are mutually exclusive and resort to one bars the application of
the other.

Asia International Auctioneers, Inc. v. Commissioner of Internal Revenue

G.R. No. 179115, September 26, 2012
Perlas-Bernabe, J.:
Under Sec. 8 (a) of the Republic Act (RA) No. 9480, withholding agents with respect to their
withholding tax liabilities shall be disqualified to avail of the tax amnesty. RA 9480 does not
exclude from its coverage taxpayers operating within special economic zones.

United International Pictures AB v. Commissioner of Internal Revenue

G.R. No. 168331, October 11, 2012
Peralta, J.:
It is clear from the last sentence of Sec. 76 of the NIRC that once a corporation exercises the
option to carry-over, such option is irrevocable "for that taxable period." Having chosen to carry-
over the excess quarterly income tax, the corporation cannot thereafter choose to apply for a
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cash refund or for the issuance of a tax credit certificate for the amount representing such
overpayment.

Diageo Philippines, Inc. v. Commissioner of Internal Revenue

G.R. No. 183553, November 12, 2012
Perlas-Bernabe, J.:
Pursuant to Sec. 204(C) of the NIRC, the person entitled to claim a tax refund is the statutory
taxpayer or the person liable for or subject to tax. 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. The statutory taxpayer is the proper party to
claim refund of indirect taxes.

Local Taxation

City of Iriga v. Camarines Sur III Electric Cooperative, Inc.

G.R. No. 192945, September 5, 2012
Perlas-Bernabe, J.:
A franchise tax is “a tax on the privilege of transacting business in the state and exercising
corporate franchises granted by the state.” Being in the nature of an excise tax, the situs of
taxation is the place where the privilege is exercised.

Real Property Tax

Angeles University Foundation v. City of Angeles, et. al

G.R. No. 189999, June 27, 2012
Villarama, Jr., J.:
"Exclusive" is defined as possessed and enjoyed to the exclusion of others; debarred from
participation or enjoyment; and "exclusively" is defined, "in a manner to exclude; as enjoying a
privilege exclusively." If real property is used for one or more commercial purposes, it is not
exclusively used for the exempted purposes but is subject to taxation. The words "dominant
use" or "principal use" cannot be substituted for the words "used exclusively" without doing
violence to the Constitutions and the law. Solely is synonymous with exclusively. It is not the
use of the income from the real property that is determinative of whether the property is used
for tax-exempt purposes.

Court of Tax Appeals

City of Iriga v. Camarines Sur III Electric Cooperative, Inc.

G.R. No. 192945, September 5, 2012
Perlas-Bernabe, J.:
Republic Act (RA) No. 9282, which took effect on April 23, 2004, expanded the jurisdiction of
the Court of Tax Appeals (CTA) to include the power to review by appeal decisions, orders or
resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them
in the exercise of their original or appellate jurisdiction.
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SM Land, Inc. (Formerly Shoemart, Inc.) v. City of Manila
G.R. No. 19715, October 22, 2012
Peralta, J.:
Under Sec. 1, Rule 42 of the Revised Rules of Civil Procedure, the 30-day original period for
filing a Petition for Review with the CTA under Sec. 11 of Republic Act (RA) No. 9282, as
implemented by Sec. 3 (a), Rule 8 of the Revised Rules of the CTA, may be extended for a
period of 15 days. No further extension shall be allowed thereafter, except only for the most
compelling reasons, in which case the extended period shall not exceed 15 days.

Dela Llana v. The Chairperson, Commission on Audit, The Executive Secretary and the
National Treasurer
G.R. No. 180989, February 7, 2012
Sereno, J.:
A taxpayer is deemed to have the standing to raise a constitutional issue when it is established
that public funds from taxation have been disbursed in alleged contravention of the law or the
Constitution.

COURT OF TAX APPEALS DECISIONS

Donor’s Tax

Evono v. Department of Finance

CTA Case No. 705, June 4, 2012
In order to determine the tax liability in any transaction, not only the legal documents will be
considered, but also some other external factors surrounding the transaction, such as the
capacity of the buyer in cases of transfer of properties. There is a clear animus donandi, as
evidenced by Maribel’s request to include the names of her minor children in the CARs and
certificates of title of the properties.

Value-added Tax

Ongtengco v. Commissioner of Internal Revenue

CTA Case No. 8190, December 12, 2012
In order for a person to be liable to VAT, he or she must sell, barter, exchange, or lease goods
or properties, render service, or import goods, in the ordinary course of business or trade. An
act of lending money to a corporation cannot be considered as an act of lending in the course
of his trade or business, but merely an isolated transaction in order to help the company in its
provincial expansion programs.

NIRC Remedies

Panay Power Corporation v. Commissioner of Internal Revenue

CTA Case No. 7402 (En Banc No. 709), May 17, 2012
The concerned taxpayer must file his judicial claim to the CTA within the said 30-day period,
which comes only upon the expiration of the 120-day period under Sec. 112 of the NIRC.
Otherwise, the Court in Division will not acquire jurisdiction over the subject matter or nature of
the action.
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Sumisetsu Philippines, Inc. v. Commissioner of Internal Revenue

CTA Case No. 7925, December 18, 2012
The 2-year period provided for in Sec. 112 of the NIRC refers only to the administrative claim
and not to judicial claim.

Takenaka Corporation Philippine Branch v. Commissioner of Internal Revenue

CTA Case No. EB No. 745, September 4, 2012
Deficiency interest is imposed for the shortage of taxes paid, while delinquency interest is
imposed for the delay in payment of taxes. Having different nature for their existence, it cannot
be assailed that there is double imposition of interests as the law itself allows the simultaneous
imposition of these two kinds of interests.

Stablewood Philippines, Inc. v. Commissioner of Internal Revenue

CTA Case No. 7704, October 8, 2012
If the option to carry over the excess credit is exercised, it shall be irrevocable for that particular
taxable period, and no application for a tax refund or issuance of a tax credit certificate shall
then be allowed.