1. Commissioner of Internal Revenue vs.

Central Luzon Drug

Corporation, 456 SCRA 414, G.R No. 159647 April 15, 2005

Facts:
Respondents operated six drugstores under the business name
Mercury Drug. From January to December 1996 respondent granted
20% sales discount to qualified senior citizens on their purchases of
medicines pursuant to RA 7432 for a total of ₱ 904,769.

On April 15, 1997, respondent filed its annual Income Tax Return for
taxable year 1996 declaring therein net losses. On Jan. 16, 1998
respondent filed with petitioner a claim for tax refund/credit of ₱
904,769.00 allegedly arising from the 20% sales discount. Unable to
obtain affirmative response from petitioner, respondent elevated its
claim to the Court of Tax Appeals. The court dismissed the same but
upon reconsideration, the latter reversed its earlier ruling and ordered
petitioner to issue a Tax Credit Certificate in favor of respondent
citing CA GR SP No. 60057 (May 31, 2001, Central Luzon Drug
Corp. vs. CIR) citing that Sec. 229 of RA 7432 deals exclusively with
illegally collected or erroneously paid taxes but that there are other
situations which may warrant a tax credit/refund.

CA affirmed Court of Tax Appeal's decision reasoning that RA 7432

required neither a tax liability nor a payment of taxes by private
establishments prior to the availment of a tax credit. Moreover, such
credit is not tantamount to an unintended benefit from the law, but
rather a just compensation for the taking of private property for public
use.

Issue:
Whether or not respondent, despite incurring a net loss, may still
claim the 20% sales discount as a tax credit.

Ruling:
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the
privilege of obtaining a 20% discount on their purchase of medicine
from any private establishment in the country. The latter may then
 claim the cost of the discount as a tax credit. Such credit can be
claimed even if the establishment operates at a loss.

A tax credit generally refers to an amount that is “subtracted directly

from one’s total tax liability.” It is an “allowance against the tax itself”
or “a deduction from what is owed” by a taxpayer to the government.
A tax credit should be understood in relation to other tax concepts.
One of these is tax deduction – which is subtraction “from income for
tax purposes,” or an amount that is “allowed by law to reduce income
prior to the application of the tax rate to compute the amount of tax
which is due.” In other words, whereas a tax credit reduces the tax
due, tax deduction reduces the income subject to tax in order to
arrive at the taxable income.

A tax credit is used to reduce directly the tax that is due, there ought
to be a tax liability before the tax credit can be applied. Without that
liability, any tax credit application will be useless. There will be no
reason for deducting the latter when there is, to begin with, no
existing obligation to the government. However, as will be presented
shortly, the existence of a tax credit or its grant by law is not the same
as the availment or use of such credit. While the grant is mandatory,
the availment or use is not. If a net loss is reported by, and no other
taxes are currently due from, a business establishment, there will
obviously be no tax liability against which any tax credit can be
applied. For the establishment to choose the immediate availment of
a tax credit will be premature and impracticable.

2. Manila Memorial Park, Inc. vs. Secretary of the Department of

Social Welfare and Development, 711 SCRA 302, G.R No. 175356
December 3, 2013

FACTS:
RA 7432 was passed into law (amended by RA 9257), granting
senior citizens 20% discount on certain establishments. To implement
the tax provisions of RA 9257, the Secretary of Finance and the
DSWD issued its own Rules and Regulations. Hence, this petition.
Petitioners are not questioning the 20% discount granted to senior
citizens but are only assailing the constitutionality of the tax deduction
scheme prescribed under RA 9257 and the implementing
rules and regulations issued by the DSWD and the DOF.
Petitioners posit that the tax deduction scheme contravenes
Article III, Section 9 of the Constitution, which provides that:
"private property shall not be taken for public use without just
compensation." Respondents maintain that the tax deduction
scheme is a legitimate exercise of the State’s police power.

ISSUE:
WON Section 4 of RA 9257, insofar as they provide that the twenty
percent(20%) discount to senior citizens may be claimed as a tax
deduction by the private establishments, ARE VALID AND
CONSTITUTIONAL

RULING:
YES. The 20% senior citizen discount, as well as the tax deduction
scheme, is a valid exercise of police power. The 20% discount is
intended to improve the welfare of senior citizens who, at their age,
are less likely to be gainfully employed, more prone to illnesses and
other disabilities, and, thus, in need of subsidy in purchasing basic
commodities. It serves to honor senior citizens who
presumably spent their lives on contributing to the development and
progress of the nation. The subject regulation affects the pricing, and,
hence, the profitability of a private establishment. However, it does
not purport to appropriate or burden specific properties, used in
the operation or conduct of the business of private
establishments, for the use or benefit of the public, or senior
citizens for that matter, but merely regulates the pricing of goods and
services relative to, and the amount of profits or income/gross sales
that such private establishments may derive from, senior citizens.
The subject regulation may be said to be similar to but with
substantial distinctions from, price control or rate of return
on investment control laws which are traditionally regarded
as police power measures.
3. Smart Communications, Inc. vs. Municipality of Malvar,
Batangas, 716 SCRA 677, G.. No. 204429 February 18, 2014

Facts:
Petitioner Smart Communications, Inc. (Smart) is a domestic
corporation engaged in the business of providing telecommunications
services to the general public while respondent Municipality of
Malvar, Batangas (Municipality) is a local government unit created by
law.

Smart constructed a telecommunications tower within the territorial

jurisdiction of the Municipality. The construction of the tower was for
the purpose of receiving and transmitting cellular communications
within the covered area.

Ordinance No. 18, series of 2003, entitled "An Ordinance Regulating

the Establishment of Special Projects."

Smart received from the Permit and Licensing Division of the Office of
the Mayor of the Municipality an assessment letter with a schedule of
payment for the total amount of P389,950.00 for Smart's
telecommunications tower

Municipality also caused the posting of a closure notice on the

telecommunications tower.

On 9 September 2004, Smart filed a protest, claiming lack of due

process in the issuance of the assessment and closure notice

Municipality denied Smart's protest.

Smart filed with Regional Trial Court of Tanauan City, Batangas,

Branch 6, an "Appeal/Petition" assailing the validity of Ordinance No.
18.
trial court held that the... assessment covering the period from 2001
to July 2003 was void since Ordinance No. 18 was approved only on
30 July 2003

Smart filed a petition for review with the CTA First Division... denied
the petition for review.

Smart filed a petition for review with the CTA En Banc, which affirmed
the CTA First Division's decision and resolution. The dispositive

Issues:

On whether the imposition of the fees in Ordinance No. 18 is ultra

vires

Ruling:

The Court denies the petition.

The Court finds that the fees imposed under Ordinance No. 18 are
not taxes.

the primary purpose of Ordinance No. 18 is to regulate the "placing,

stringing, attaching, installing, repair and construction of all gas
mains, electric, telegraph and telephone wires, conduits, meters and
other apparatus" listed... therein,... purpose of the assailed Ordinance
is to regulate the enumerated activities particularly related to the
construction and maintenance of various structures. The fees in
Ordinance No. 18 are not impositions on... the building or structure
itself; rather, they are impositions on the activity subject of
government regulation, such as the installation and construction of
the structures.

the fees imposed in Ordinance No. 18 are primarily regulatory in

nature, and not... primarily revenue-raising. While the fees may
contribute to the revenues of the Municipality, this effect is merely
incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes.
Ordinance No. 18 expressly provides for the standards which Smart
must satisfy prior to the issuance of the specified permits, clearly
indicating that the fees are regulatory in nature.

Ordinance No. 18 aims to regulate the "placing, stringing, attaching,

installing, repair and construction of all gas mains, electric, telegraph
and telephone wires, conduits, meters and other apparatus" within
the M

The fees are not imposed to regulate... the administrative, technical,

financial, or marketing operations of telecommunications entities,
such as Smart's; rather, to regulate the installation and maintenance
of physical structures Smart's cell sites or telecommunications tower.
The regulation of the installation and... maintenance of such physical
structures is an exercise of the police power of the Municipality.

An ordinance carries with it the presumption of validity. The question

of reasonableness though is open to judicial inquiry. Much should be
left thus to the discretion of municipal authorities.

Significantly, Smart failed to cite any constitutional provision allegedly

violated by respondent when it issued Ordinance No. 18.

Settled is the rule that every law, in this case an ordinance, is

presumed valid. To strike down a law as unconstitutional, Smart has
the burden to prove a clear and unequivocal breach of the
Constitution, which Smart miserably failed to do

Court DENIES the petition.

Principles:

Section 5, Article X of the 1987 Constitution provides that "[e]ach

local government unit shall have the power to create its own sources
of revenues and to levy taxes, fees, and charges subject to such
guidelines and limitations as the Congress may provide, consistent
 with... the basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the local government."

The LGC defines the term "charges" as referring to pecuniary liability,

as rents or fees against persons or property, while the term "fee"
means "a charge fixed by law or ordinance for the regulation or
inspection of a business or activity."

4. Domingo vs. Garlitos, 8 SCRA 443, No. L-18994 June 29, 1963
FACTS:
In the 1960 case of Domingo v Moscoso, the Supreme Court declared as
final and executory the order for the payment by the estate of the late
Walter Scott Price of estate and inheritance taxes, charges and penalties,
amounting to P40,058.55 issued by the Court of First Instance – Leyte. The
fiscal then presented a petition for the execution of the judgment before the
Court of First Instance – Leyte.

The petition was denied as the execution is not justifiable as the

government is indebted to the estate under administration in the amount of
P 262,200. Hence, the present petition for certiorari and mandamus.

ISSUE:
Is execution proper?

RULING:
No. The tax and the debt are compensated. The court having jurisdiction of
the estate had found that the claim of the estate against the government
has been recognized and an amount of P262,200 has already been
appropriated by a corresponding law (RA 2700). Under the circumstances,
both the claim of the Government for the inheritance taxes and the claim of
the intestate for services rendered have already become overdue and
demandable as well as fully liquidated.
Compensation, therefore, takes place by operation of law, in accordance
with Article 1279 and 1290 of the Civil Code, and both debts are
extinguished to their concurrent amounts. If the obligation to pay taxes and
the taxpayer’s claim against the government are both overdue,
demandable, as well as fully liquidated, compensation takes place by
operation of law and both obligations are extinguished to their concurrent
amounts.

5. Silkair (Singapore) Pte. Ltd. vs. Commissioner of Internal Revenue,

664 SCRA 33, G.R. No. 166482 January 25, 2012
FACTS:
Petitioner is a corporation organized under the laws of Singapore which
has a Philippine representative office, is an online international air carrier.
Silkair filed with the Bureau of Internal Revenue (BIR) for the refund of
excise taxes for their purchase of jet fuel.
The CIR, in their reply, said that petitioner failed to prove that the sale of
the fuel was directly made from a domestic oil company to them. The
excise tax on petroleum products is the direct liability of the
manufacturer/producer, and when added to the cost of the goods sold to
the buyer, it is no longer a tax but part of the price which the buyer has to
pay to obtain the article.
The CTA denying Silkair’s petition stated that as the excise tax was
imposed manufacturer of petroleum products, any claim for refund should
be filed by the latter; and where the burden of tax is shifted to the
purchaser, the amount passed on to it is no longer a tax but becomes an
added cost of the goods purchased.
ISSUE: Whether Silkair PTE. Ltd. can claim for tax credit.
RULING:
No.
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. Thus, Petron
Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a
refund based on Section 135 of the NIRC of 1997.
Even if Petron Corporation passed on to Silkair the burden of the tax, the
additional amount billed to Silkair for jet fuel is not a tax but part of the price
which Silkair had to pay as a purchaser.

6. Apostolic Prefect etc. vs. El Tesorero etc., 71 Phil. 547, No. 47252
Abril 18, 1941
Facts:
The Apostolic Prefect is a corporation sole, of religious character,
organized under the Philippine laws, and with residence in Baguio, The City
imposed a special assessment against properties within its territorial
jurisdiction, including those of the Apostolic Prefect, which benefits from its
drainage and sewerage system. The Apostolic Prefect contends that its
properties should be free of tax.
Issue:
Is the Apostolic Prefect, as a religiousentity, exempt from the payment of
the special assessment?
Held:
NO. In its broad meaning, tax includes both general taxes and special
assessment. Yet actually, there is a recognized distinction between them in
that assessment is confined to local impositions upon property for the
payment of the cost of public improvements in its immediate vicinity and
levied with reference to special benefits to the property assessed. A special
assessment is not, strictly speaking, a tax; and neither the decree nor the
Constitution exempt the Apostolic Prefect from payment of said special
assessment. Furthermore, arguendo that exemption may encompass such
assessment, the Apostolic Prefect cannot claim exemption as it has not
proven the property in question is used exclusively for religious purposes;
but that it appears that the same is being used to other non-religious
purposes. Thus, the Apostolic Prefect is required to pay the special
assessment.

7. Duetsche Bank AG Manila Branch vs. Commissioner of Internal

Revenue, 704 SCRA 216, G.. No. 188550 August 28, 2013
FACTS
Deutsche Bank remitted to the CIR an amount representing 15% of its
branch profit remittance tax for 2002 and prior taxable years. Believing it
made an overpayment, it filed an administrative claim for refund and
requested a confirmation of its entitlement to a preferential tax rate of 10%
under the RP-Germany Tax Treaty.
The CTA denied this claim based on RMO No. 1-2000 saying that
Deutsche Bank violated the 15-day rule for tax treaty relief application. It
also cited Mirant which stated that before the benefits of the tax treaty may
be extended to a foreign corporation wishing to avail itself thereof, the latter
should first invoke the provisions of the tax treaty and prove that they
indeed apply to the corporation.
RULING
The Supreme Court ruled in favor of Deustche Bank.
Laws and issuances must ensure that the reliefs granted under tax treaties
are accorded to the parties entitled thereto. The BIR must not impose
additional requirements that would negate the availment of the reliefs
provided for under international agreements. More so, when the RP-
Germany Tax Treaty does not provide for any pre-requisite for the
availment of the benefits under said agreement.
The time-honored international principle of pacta sunt servanda demands
the performance in good faith of treaty obligations on the part of the states
that enter into the agreement. Every treaty in force is binding upon the
parties, and obligations under the treaty must be performed by them in
good faith. More importantly, treaties have the force and effect of law in this
jurisdiction.
Laws and issuances must ensure that the reliefs granted under tax treaties
are accorded to the parties entitled thereto.

8. Planters Products, Inc. vs. Fertiphil Corporation, 548 SCRA 485, G..
No. 166006 March 14, 2008
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 Php10.00 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 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.
ISSUE:
Whether or not Fertiphil has locus standi to question the constitutionality of
LOI No. 1465.What is the power of taxation?
RULING:
Fertiphil has locus standi because it suffered direct injury; doctrine of
standing is a mere procedural technicality which may be waived. The
imposition of the levy was an exercise of the taxation power of the state.
While it is true that the power to tax can be used as an implement of police
power, the primary purpose of the levy was revenue generation. If the
purpose is primarily revenue, or if revenue is, at least, one of the real and
substantial purposes, then the exaction is properly called a tax.
Police power and the power of taxation are inherent powers of the State.
These powers are distinct and have different tests for validity. Police power
is the power of the State to enact legislation that may interfere with
personal liberty or property in order to promote the general welfare, while
the power of taxation is the power to levy taxes to be used for public
purpose. The main purpose of police power is the regulation of a behavior
or conduct, while taxation is revenue generation. The “lawful subjects” and
“lawful means” tests are used to determine the validity of a law enacted
under the police power. The power of taxation, on the other hand, is
circumscribed by inherent and constitutional limitations.

9. Corporation vs. Cement Manufacturers Association of the

Philippines, 465 SCRA 532, G.. No. 158540 August 3, 2005
FACTS:
Petitioner Southern Cross Cement Corporation (Southern Cross) is a
domestic corporation engaged in the business of cement manufacturing,
production, importation and exportation. Private respondent Philippine
Cement Manufacturers Corporation (Philcemcor) is an association of
domestic cement manufacturers. DTI accepted an application from
Philcemcor, alleging that the importation of gray Portland cement in
increased quantities has caused declines in domestic production, capacity
utilization, market share, sales and employment; as well as caused
depressed local prices. Accordingly, Philcemcor sought the imposition a
definitive safeguard measures on the import of cement pursuant to the
Safeguard Measures Act.
The Tariff Commission received a request from the DTI for a formal
investigation to determine whether or not to impose a definitive safeguard
measure on imports of gray Portland cement
Tariff Commission’s report: The elements of serious injury and imminent
threat of serious injury not having been established, it is hereby
recommended that no definitive general safeguard measure be imposed on
the importation of gray Portland cement
After reviewing the report, then DTI Secretary Manuel Roxas II (DTI
Secretary) disagreed with the conclusion of the Tariff Commission that
there was no serious injury to the local cement industry caused by the
surge of imports. In view of this disagreement, the DTI requested an
opinion from the Department of Justice (DOJ) on the DTI Secretarys scope
of options in acting on the Commissions recommendations.
Subsequently, then DOJ Secretary Hernando Perez rendered an opinion
stating that Section 13 of the SMA precluded a review by the DTI Secretary
of the Tariff Commissions negative finding, or finding that a definitive
safeguard measure should not be imposed.
DTI then denied application for safeguard measures against the importation
of gray Portland cement
Philcemcor received a copy of the DTI Decision on 12 April 2002. Ten days
later, it filed with the Court of Appeals a Petition for Certiorari, Prohibition
and Mandamus seeking to set aside the DTI Decision, as well as the Tariff
Commissions Report. On the other hand, Southern Cross filed its Comment
arguing that the Court of Appeals had no jurisdiction over Philcemcors
Petition, for it is on the Court of Tax Appeals (CTA) that the SMA conferred
jurisdiction to review rulings of the Secretary in connection with the
imposition of a safeguard measure.

ISSUE:
Whether or not the CA has jurisdiction over the case which is concerned
with imposition of safeguard measures

RULING:
CTA has jurisdiction. Under Section 29 of the SMA, there are three
requisites to enable the CTA to acquire jurisdiction over the petition for
review contemplated therein: (i) there must be a ruling by the DTI
Secretary; (ii) the petition must be filed by an interested party adversely
affected by the ruling; and (iii) such ruling must be in connection with the
imposition of a safeguard measure. The first two requisites are clearly
present. The third requisite deserves closer scrutiny.
Contrary to the stance of the public respondents and Philcemcor, in this
case where the DTI Secretary decides not to impose a safeguard measure,
it is the CTA which has jurisdiction to review his decision. The reasons are
as follows:
First. Split jurisdiction is abhorred. The law expressly confers on the CTA,
the tribunal with the specialized competence over tax and tariff matters, the
role of judicial review without mention of any other court that may exercise
corollary or ancillary jurisdiction in relation to the SMA.
Second. The interpretation of the provisions of the SMA favors vesting
untrammeled appellate jurisdiction on the CTA.
A plain reading of Section 29 of the SMA reveals that Congress did not
expressly bar the CTA from reviewing a negative determination by the DTI
Secretary nor conferred on the Court of Appeals such review authority.
Respondents note, on the other hand, that neither did the law expressly
grant to the CTA the power to review a negative determination. However,
under the clear text of the law, the CTA is vested with jurisdiction to review
the ruling of the DTI Secretary in connection with the imposition of a
safeguard measure. Had the law been couched instead to incorporate the
phrase the ruling imposing a safeguard measure, then respondents claim
would have indisputable merit. Undoubtedly, the phrase in connection with
not only qualifies but clarifies the succeeding phrase imposition of a
safeguard measure. As expounded later, the phrase also encompasses the
opposite or converse ruling which is the non-imposition of a safeguard
measure.
Third. Interpretatio Talis In Ambiguis Semper Fienda Est, Ut Evitur
Inconveniens Et Absurdum.
Even assuming arguendo that Section 29 has not expressly granted the
CTA jurisdiction to review a negative ruling of the DTI Secretary, the Court
is precluded from favoring an interpretation that would cause
inconvenience and absurdity. Adopting the respondents position favoring
the CTAs minimal jurisdiction would unnecessarily lead to illogical and
onerous results.

10. Commissioner of Internal Revenue vs. St. Luke's Medical Center,

Inc., 682 SCRA 66, G.R. No. 195909 September 26, 2012
FACTS:
The respondent St. Luke’s Medical Center, Inc. (SLMC) received a tax
payment assessment from the Large Taxpayers Service-Documents
Processing and Quality Assurance Division of the Bureau of Internal
Revenue Audit Result/Assessment Notice on December 14, 2007. Based
on the assessment the respondent SLMC has a deficiency income tax
under Section 27 (B) of the 1997 National Internal Revenue Code (NIRC),
as amended for the taxable year 2005 in the amount of P78, 617,434.54
and for taxable year 2006 in the amount of P57, 119,867.33.
In response to the received assessment from NIRC on January 14, 2008,
SLMC filed with the petitioner Commission on Internal Revenue (CIR) an
administrative protest assailing the assessments. The SLMC alleged that
they are exempted from paying the income tax since SLMC is a non-stock,
non-profit, charitable and social welfare organization under Section 30 (E)
and (G) of the 1997 NIRC as amended.
However, on April 25, 2008, SLMC received the petitioner CIR’s Final
Decision on the Disputed Assessment dated April 9, 2008 increasing the
deficiency income from P78, 617, 434.54 to P82,419,522.21 for taxable
year 2005 and from P57,119,867.33 to P60, 259,885.94 for taxable year
2006.
The aggrieved SLMC elevated the matter to Court of Tax Appeal (CTA)
finding the decision that SLMC is not liable for the deficiency income tax
under Section 27 (B) of the 1997 NIRC, as amended and exempt from
paying the income under Section 30 (E) and (G) of the same code.
Consequently, the CIR moved for reconsideration but the CTA Division
denied which the CIR prompted to file a petition for review before the CTA
En Banc which eventually denied and affirmed the first decision of the CTA
Division.
Moreover, the CIR filed an instant petition contending that the CTA erred in
exempting SLMC from payment of income tax, where the CIR petition is
partly granted. SLMC ordered to pay the deficiency income tax in 1998
based on the 10% preferential income tax. The CIR argues that under the
doctrine of Stare Decisis SLMC is subject to 10% income tax under Section
27 (B) of the 1997 NIRC, and liable to pay the compromise penalty. SLMC
argues that the income derives from operating a hospital is not income from
activities conducted for profit. And the case should be dismissed since
payment to BIR for the basic taxes due for taxable years 1998, 2000-2002
and 2004-2007 has been made.
ISSUES:
1. Whether or not SLMC is liable for income tax under Section 27 (B) of the
1997 NIRC.
2. Whether or not SLMC is not liable for compromise penalty.
3. Whether or not the petition is rendered moot by payment made by SLMC
on April 30, 2013.
HELD:
1. Yes. Based on Section 27 (B) of the NIRC imposes 10% preferential tax
rate on the income of (1) proprietary non-profit educational institutions and
(2) proprietary non-profit hospitals. The only qualifications for hospitals are
they must be proprietary and non-profit. Proprietary means private,
following the definition of a proprietary educational institution, as any other
private school maintained and administered by private individuals or groups
with government permit. While non-profit means no net income or asset
accrues to or benefits any member or specific person with all the net
income or asset devoted to the institution’s purposes and all its activities
conducted not for profit.
2. Yes. Under Sections 248 and 249 of the 1997 NIRC the imposition of
surcharges and interests were deleted on the basis of good faith and
honest belief on the part of SLMC that it is not subject to tax so therefore,
SLMC is not liable to pay the compromise penalty.
3. Yes. The payment of basic taxes made by the SLMC has become moot
even the court agrees with the CIR that the payment confirmation from the
BIR is not competent proof as presented by SLMC due to no specific
taxable period for payments that it covers. However, the court finds
sufficient proof of payment based on the Certification of Payment issued by
the Large Taxpayers Service of the BIR since CIR never question for its
documents authenticity. The court dismissed the petition and lowered the
basic taxes for taxable year 2005 and 2006, in the amounts of P49,
919,496.40 and P41, 525,608.40.

11. Commissioner of Internal Revenue vs. Court of Appeals, 298

SCRA 83, G.. No. 124043 October 14, 1998
FACTS
Young Men’s Christian Association of the Philippines (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,
among others, 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.
In July 1984, the CIR issued an assessment toYMCA, in the total amount of
P415,615.01 including surcharge and interest, for deficiency income tax,
deficiency expanded withholding taxes on rentals and professional fees
and deficiency withholding tax on wages. Both CTA and CA ruled that it is
reasonably necessary for YMCA to make the most out of its existing
facilities to earn some income; further stating that the rental from small
shops and parking fees do not result in the loss of the exemption under
Sec. 27 of the NIRC.

RULING
SC held for the CIR.
A claim of statutory exemption from taxation should be manifest. and
unmistakable from the language of the law on which it is based. In the
instant case, the exemption claimed by the 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 from any of their
properties, real or personal, be subject to the tax imposed by the same
Code.
Because the last paragraph of said section unequivocally subjects to tax
the rent income of the YMCA from its real property, the Court is duty-bound
to abide strictly by its literal meaning and to refrain from resorting to any
convoluted attempt at construction.

12. Bengzon vs. Drilon, 208 SCRA 133, G.R. No. 103524, Adm. Matter
No. 91-8-225-CA April 15, 1992
FACTS:
Petitioners are retired justices of the Supreme Court and Court of Appeals
who are currently receiving pensions under RA 910 as amended by RA
1797. President Marcos issued a decree repealing section 3-A of RA 1797
which authorized the adjustment of the pension of retired justices and
officers and enlisted members of the AFP. PD 1638 was eventually issued
by Marcos which provided for the automatic readjustment of the pension of
officers and enlisted men was restored, while that of the retired justices
was not. RA 1797 was restored through HB 16297 in 1990. When her
advisers gave the wrong information that the questioned provisions in 1992
GAA were an attempt to overcome her earlier veto in 1990, President
Aquino issued the veto now challenged in this petition.
It turns out that PD 644 which repealed RA 1797 never became a valid law
absent its publication, thus there was no law. It follows that RA 1797 was
still in effect and HB 16297 was superfluous because it tried to restore
benefits which were never taken away validly. The veto of HB 16297 did
not also produce any effect.
ISSUE:
Whether or not the veto of the President of certain provisions in the GAA of
FY 1992 relating to the payment of the adjusted pensions of retired
Justices is constitutional or valid.
HELD:
The veto of these specific provisions in the GAA is tantamount to dictating
to the Judiciary ot its funds should be utilized, which is clearly repugnant to
fiscal autonomy. Pursuant to constitutional mandate, the Judiciary must
enjoy freedom in the disposition of the funds allocated to it in the
appropriations law.
Any argument which seeks to remove special privileges given by law to
former Justices on the ground that there should be no grant of distinct
privileges or “preferential treatment” to retired Justices ignores these
provisions of the Constitution and in effect asks that these Constitutional
provisions on special protections for the Judiciary be repealed.
The petition is granted and the questioned veto is illegal and the provisions
of 1992 GAA are declared valid and subsisting.

13. MANDANAS VS. OCHOA G.R. NO. 199802 JULY 3, 2018

FACTS:
The fiscal autonomy guaranteed to local governments under Section 6,
Article X of the 1987 Constitution means the power to create their own
sources of revenue in addition to their equitable share in the "national
taxes" released by the National Government, as well as the power to
allocate their resources in accordance with their own priorities.
Pursuant to this Constitutional dictum, Congress enacted Republic Act No.
7160, otherwise known as the Local Government Code (LGC). Sec. 284 of
the LGC provides that LGUs shall have an allotment equivalent to 40% of
the national internal revenue taxes.
The share of the LGUs, known as the Internal Revenue Allotment (IRA),
has been regularly released to the LGUs. According to the implementing
rules and regulations of the LGC, the IRA is determined on the basis of the
actual collections of the National Internal Revenue Taxes (NIRTs) as
certified by the Bureau of Internal Revenue (BIR).
Two petitions were filed to challenge the base figure for the computation of
the IRA.
In G.R. No. 199802, Cong. Hermilando Mandanas, et al., alleged that the
NIRTs certified by the BIR excluded the NIRTs collected by the Bureau of
Customs, specifically excise taxes, value added taxes (VATs), and
documentary stamp taxes (DSTs). Such exclusion resulted in LGUs being
deprived of ₱60,750,000,000.00 for FY 2012. Further, the petitioners
argued that since this mistake in computation was happening since 1992,
then the National Government has effectively deprived LGUs of
₱438,103,906,675.73 in their IRA.
Meanwhile, in G.R. No. 208488, Cong. Enrique Garcia, Jr. sought the
issuance of the writ of mandamus to compel respondents to compute the
just share of the LGUs on the basis of all national taxes. He argued that the
insertion by Congress of the words "internal revenue" in the phrase
"national taxes" found in Section 284 of the LGC caused the diminution of
the base for determining the just share of the LGUs, and should be
declared unconstitutional.

ISSUE:
Whether or not Section 284 of the LGC is unconstitutional for being
repugnant to Section 6, Article X of the 1987 Constitution. -- YES.

HELD:
Section 6 of the Constitution mentions "national taxes" as the source of the
just share of the LGUs while Section 284 of the LGC ordains that the share
of the LGUs be taken from "national internal revenue taxes" instead.
Congress thereby infringed the constitutional provision.
Although the power of Congress to make laws is plenary in nature,
congressional lawmaking remains subject to the limitations stated in the
1987 Constitution.
The phrase "national internal revenue taxes" in Section 284 is undoubtedly
more restrictive than the term "national taxes" written in Section 6 of the
Constitution. As such, Congress has actually departed from the letter of the
1987 Constitution stating that national taxes should be the base from which
the just share of the LGU comes. Such departure is impermissible. Verba
legis non est recedendum (from the words of a statute there should be no
departure).
Equally impermissible is that Congress has also thereby curtailed the
guarantee of fiscal autonomy in favor of the LGUs under the 1987
Constitution.
What the phrase "national internal revenue taxes" as used in Section 284
of the LGC included are all the taxes enumerated in Section 21 of the
National Internal Revenue Code (NIRC), as amended by R.A. No. 8424,
namely: income tax, estate and donor's taxes, VAT, other percentage
taxes, excise taxes, documentary stamp taxes, and such other taxes as
may be imposed and collected by the BIR.
In view of the foregoing enumeration of what are the national internal
revenue taxes, Section 284 of the LGC has effectively deprived the LGUs
from deriving their just share from other national taxes, like the customs
duties.
Moving forward, the BIR and the BOC are directed certify all national tax
collections. This ruling, also known as the "Mandanas Ruling," is to be
applied prospectively.

14. Alternative Center for Organizational Reforms and Development,

Inc. (ACORD) vs. Zamora, 459 SCRA 578, G.R. No. 144256 June 8,
2005
15. Angeles University Foundation vs. City of Angeles, 675 SCRA 359,
G.R. No. 189999 June 27, 2012
Facts:
Petitioner Angeles University Foundation (AUF) is an educational institution
established on1962 and was converted into a non-stock, non-profit
education foundation under the provisions of Republic Act (R.A.) No. 6055.
Sometime in August 2005, petitioner filed with the Office of the City
Building Official an application for a building permit for the construction of
an 11-storey building of the Angeles University Foundation Medical Center
in its main campus. Said office issued a Building Permit Fee Assessment in
the amount of P126,839.20. Zoning Administration Unit requiring petitioner
to pay the sum of P238,741.64 as Locational Clearance Fee.
In separate letters... addressed to respondents City Treasurer Quinsaat
and Acting City Building Official Dizon, petitioner claimed that it is exempt
from the payment of the building permit and locational clearance fees,
citing legal... opinions rendered by the Department of Justice (DOJ).
Petitioner also reminded the respondents that they have previously issued
building permits acknowledging such exemption from payment of building
permit fees on the construction of petitioner's 4-storey AUF Information
Technology Center building and the AUF Professional Schools building
Respondent City Treasurer referred the matter to the Department of
Finance, which in turn endorsed the query to the DOJ. Then Justice
Gonzalez cited previous issuances of his office declaring petitioner to be
exempt from the payment of building permit fees. stating further that
Department of Finance, thru this Bureau, has no authority to review the
resolution or the decision of the DOJ."
Despite petitioner's plea, however, respondents refused to issue the
building permits for the... construction of the AUF Medical Center
Consequently, petitioner paid under protest... petitioner filed a Complaint...
before the trial court seeking the refund of P826,662.99 plus interest...
respondents asserted that Since the disputed assessments are regulatory
in nature, they are not taxes from which petitioner is exempt. As to the real
property taxes imposed on... petitioner's property located in Marisol Village,
respondents pointed out that said premises will be used as a school
dormitory which cannot be considered as a use exclusively for educational
activities.
In any case, petitioner pointed out that the Local Government Code of 1991
provides in Sec. 193 that non-stock and non-profit educational institutions
like petitioner retained the tax exemptions or incentives which have been
granted to... them. Under Sec. 8 of R.A. No. 6055 and applicable
jurisprudence and DOJ rulings, petitioner is clearly exempt from the
payment of building permit fees.
court rendered judgment in favor of the petitioner... respondents maintain
that petitioner is not exempt from the payment of building permit and
related fees since the only exemptions provided in the National Building
Code are public buildings and traditional indigenous family dwellings.

Issues:
(1) whether petitioner is exempt from the payment of building permit and
related fees imposed under the National Building Code; and (2) whether
the parcel of land owned by petitioner which has been assessed for real
property tax is... likewise exempt.
Ruling:
R.A. No. 6055 granted tax exemptions to educational institutions like
petitioner which converted to non-stock, non-profit educational foundations.
Section 8 of said law provides:
SECTION 8. The Foundation shall be exempt from the payment of all
taxes, import duties, assessments, and other charges imposed by the
Government onall income derived from or property, real or personal, used
exclusively for the educational activities of the Foundation.(Emphasis
supplied.)... a building permit fee is a regulatory imposition is highlighted by
the fact that in processing an application for a building permit, the Building
Official shall see to it that the applicant satisfies and conforms with
approved standard requirements on zoning and land use,... lines and
grades, structural design, sanitary and sewerage, environmental health,
electrical and mechanical safety as well as with other rules and regulations
implementing the National Building Code.
Thus, ancillary permits such as electrical... permit, sanitary permit and
zoning clearance must also be secured and the corresponding fees paid
before a building permit may be issued. And as can be gleaned from the
implementing rules and regulations of the National Building Code,
clearances from various government... authorities exercising and enforcing
regulatory functions affecting buildings/structures, like local government
units, may be further required before a building permit may be issued.
Since building permit fees are not charges on property, they are not
impositions from which petitioner is exempt.
As to petitioner's argument that the building permit fees collected by
respondents are in reality taxes because the primary purpose is to raise
revenues for the local government unit, the same does not hold water.
Concededly, in the case of building permit fees imposed by the National
Government under the National Building Code, revenue is incidentally
generated for the benefit of local government units
Petitioner's reliance on Sec. 193 of the Local Government Code of 1991 is
likewise misplaced... petitioner's claim that it is exempted from the payment
of real property tax assessed against its real property presently occupied
by informal settlers.
Section 28(3), Article VI of the 1987 Constitution provides:... x x x x
(3) Charitable institutions, churches and parsonages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly and exclusively used for
religious, charitable or educational purposes shall be... exempt from
taxation.
Petitioner failed to discharge its burden to prove that its real property is
actually, directly and exclusively used for educational purposes. While
there is no allegation or proof that petitioner leases the land to its present
occupants, still there is no compliance with... the constitutional and
statutory requirement that said real property is actually, directly and
exclusively used for educational purposes. The respondents correctly
assessed the land for real property taxes for the taxable period during
which the land is not being devoted... solely to petitioner's educational
activities.

16.Commissioner of Internal Revenue vs. S.C. Johnson and Son, Inc.,

309 SCRA 87, G.. No. 127105 June 25, 1999
FACTS:
Respondent, S.C. Johnson and Son, Inc. is a domestic corporation,
entered into a license agreement with SC Johnson and Son, USA, a non-
resident foreign corporation, pursuant to which, respondent was granted
the right to use the trademark, patents, and technology owned by the latter.
Respondent was obliged to pay SC Johnson and Son, USA royalties based
on the percentage of net sales and subjected the same to 25% withholding
tax on royalty payments which respondent paid. Respondent subsequently
filed a claim for refund of overpaid withholding tax on royalties with the
International Tax Affairs Division (ITAD) of the Bureau of Internal Revenue.
He claims that the preferential tax rate of 10% should be applied to him.
The Commissioner did not act on such refund, hence the private
respondent filed a petition for review before the Court of Tax Appeals
(CTA). The CTA ruled in favor of Private Respondent ordered the
commissioner to issue a tax credit certificate in favor of said respondent.
The Commissioner filed a petition for review with the Court of Appeals,
which affirmed in toto the CTA ruling.
ISSUE:
Whether respondent SC Johnson and Son, Inc. is entitled to the 10%
royalty under the most favored nation clause as provided in the RP-US Tax
Treaty in relation to the RP-West Germany Tax Treaty.
HELD:
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.
The RP-US Tax Treaty is just one of a number of bilateral treaties which
the Philippines has entered into for the avoidance of double taxation. Tax
conventions are drafted with a view towards the elimination of international
juridical double taxation, which is defined as the imposition of comparable
taxes in two or more states on the same taxpayer in respect of the same
subject matter and for identical periods.
Double taxation usually takes place when a person is a resident of a
contracting state and derives income from, or owns capital in the other
contracting state and both states impose a tax on that income or capital.
Here, the state of source is the Philippines because the royalties are paid
for the right to use property or rights, i.e. trademarks, patents, and
technology, located within the Philippines. The United States is the state of
residence since the taxpayer, S. C. Johnson and Son, U.S.A., is based
there. Under the RP-US Tax Treaty, the state of residence and the state of
source are both permitted to tax the royalties, with a restraint on the tax
that may be collected by the state of source. Furthermore, the method
employed to give relief from double taxation is the allowance of a tax credit
to citizens or residents of the United States (in an appropriate amount
based upon the taxes paid or accrued to the Philippines) against the United
States tax, but such amount shall not exceed the limitations provided by
United States law for the taxable year.
Article 24 of the RP-Germany Tax Treaty allows crediting against German
income and corporation tax of20% 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.
17. Commission of Internal Revenue vs. Javier, Jr., 199 SCRA 824,
G.R. No. 78953 July 31, 1991
FACTS:
• 1977: Victoria Javier, wife of Javier-respondent, received $999k from
Prudential Bank remitted by her sister Dolores through Mellon Bank in US.
• Around 3 weeks after, Mellon Bank filed a complaint with CFI Rizal
against Javier claiming that its remittance of $1M was a clerical error and
should have been $1k only and praying that the excess be returned on the
ground that the Javiers are just trustees of an implied trust for the benefit of
Mellon Bank.
• CFI charged Javier with estafa alleging that they misappropriated and
converted it to their own personal use.
• A year after, Javier filed his Income Tax Return for 1977 and stating in the
footnote that “the taxpayer was recipient of some money received abroad
which he presumed to be a gift but turned out to be an error and is now
subject of litigation”
• The Commissioner of Internal Revenue wrote a letter to Javier demanding
him to pay taxes for the deficiency, due to the remittance.
• Javier replied to the Commissioner and said that he will pay the deficiency
but denied that he had any undeclared income for 1977 and requested that
the assessment of 1977 be made to await final court decision on the case
filed against him for filing an allegedly fraudulent return.
• Commissioner replied that “the amount of Mellon Bank’s erroneous
remittance which you were able to dispose is definitely taxable” and the
Commissioner imposed a 50% fraud penalty on Javier.

ISSUE: Whether or not Javier is liable for the 50% penalty.

HELD: No.
• The court held that there was no actual and intentional fraud through
willful and deliberate misleading of the BIR in the case. Javier even noted
that “the taxpayer was recipient of some money received abroad which he
presumed to be a gift but turned out to be an error and is now subject of
litigation”
• (the ff are not expressly written in the case, in fact the doctrine I just found
it elsewhere but this is relevant to the topic rather than the issue in the
case)
o Claim of right doctrine- a taxable gain is conditioned upon the presence
of a claim of right to the alleged gain and the absence of a definite and
unconditional obligation to return or repay.
o In this case, the remittance was not a taxable gain, since it is still under
litigation and there is a chance that Javier might have the obligation to
return it. It will only become taxable once the case has been settled
because by then whatever amount that will be rewarded, Javier has a claim
of right over it.

18. SMI-ED Philippines Technology, Inc. vs. Commissioner of Internal

Revenue, 739 SCRA 691, G.R. No. 175410 November 12, 2014
Facts:
SMI-Ed Philippines is a PEZA-registered corporation authorized "to engage
in the business of manufacturing ultra high-density microprocessor unit
package.
SMI-Ed Philippines "failed to commence operations." Its factory was
temporarily closed. it sold its buildings and some of its installed
machineries and equipment to Ibiden Philippines, Inc., another PEZA-
registered enterprise and it was dissolved on November 30, 2000.
In its quarterly income tax return for year 2000, SMI-Ed Philippines
subjected the entire gross sales of its properties to 5% final tax on PEZA-
registered corporations. SMI-Ed Philippines paid taxes amounting to
P44,677,500.00.
SMI-Ed Philippines filed an administrative claim for the refund of
P44,677,500.00 with the Bureau of Internal Revenue (BIR). SMI-Ed
Philippines alleged that the amount was erroneously paid. It also indicated
the refundable amount in its final income tax return filed on March 1, 2001.
The BIR did not act on SMI-Ed Philippines' claim, which prompted the latter
to file a petition for review before the Court of Tax Appeals. The Court of
Tax Appeals Second Division denied SMI-Ed Philippines' claim for refund.
However, fiscal incentives given to PEZA-registered enterprises may be
availed only by PEZA-registered enterprises that had already commenced
operations. Since SMI-Ed Philippines had not commenced operations, it
was not entitled to the incentives of either the income tax holiday or the 5%
preferential tax rate.
After finding that SMI-Ed Philippines sold properties that were capital
assets, the Court of Tax Appeals Second Division subjected the sale of
SMI-Ed Philippines' assets to 6% capital gains tax
Issues Ratio:
The honorable CTA En Banc grievously erred and acted beyond its
jurisdiction when it assessed for deficiency tax in the first instance.
The Court of Tax Appeals has no power to make an assessment at the first
instance. On matters such as tax collection, tax refund, and others related
to the national internal revenue taxes, the Court of Tax Appeals' jurisdiction
is appellate in nature. Thus, the BIR first has to make an assessment of the
taxpayer's liabilities. When the BIR makes the assessment, the taxpayer is
allowed to dispute that assessment before the BIR. If the BIR issues a
decision that is unfavorable to the taxpayer or if the BIR fails to act on a
dispute brought by the taxpayer, the BIR's decision or inaction may be
brought on appeal to the Court of Tax Appeals. The Court of Tax Appeals
then acquires jurisdiction over the case.
When the BIR's unfavorable decision is brought on appeal to the Court of
Tax Appeals, the Court of Tax Appeals reviews the correctness of the BIR's
assessment and decision. In reviewing the BIR's assessment and decision,
the Court of Tax Appeals had to make its own determination of the
taxpayer's tax liabilities. The Court of Tax Appeals may not make such
determination before the BIR makes its assessment and before a dispute
involving such assessment is brought to the Court of Tax Appeals on
appeal.
In other words, the Court of Tax Appeals may acquire jurisdiction over
cases even if they do not involve BIR assessments or decisions.
In this case, the Court of Tax Appeals' jurisdiction was acquired because
petitioner brought the case on appeal before the Court of Tax Appeals after
the BIR had failed to act on petitioner's claim for refund of erroneously paid
taxes. The Court of Tax Appeals did not acquire jurisdiction as a result of a
disputed assessment of a BIR decision.
As earlier established, the Court of Tax Appeals has no assessment
powers. In stating that petitioner's transactions are subject to capital gains
tax, however, the Court of Tax Appeals was not making an assessment. It
was merely determining the proper category of tax that petitioner should
have paid, in view of its claim that it erroneously imposed upon itself and
paid the 5% final tax imposed upon PEZA-registered enterprises.
In this case, petitioner's claim that it erroneously paid the 5% final tax is an
admission that the quarterly tax return it filed in 2000 was improper. Hence,
to determine if petitioner was entitled to the refund being claimed, the Court
of Tax Appeals has the duty to determine if petitioner was indeed not liable
for the 5% final tax and, instead, liable for taxes other than the 5% final tax.
If the taxpayer is found liable for taxes other than the erroneously paid 5%
final tax, the amount of the taxpayer's liability should be computed and
deducted from the refundable amount.
Any liability in excess of the refundable amount, however, may not be
collected in a case involving solely the issue of the taxpayer's entitlement to
refund. The question of tax deficiency is distinct and unrelated to the
question of petitioner's entitlement to refund.
19. Commissioner of Internal Revenue vs. Avon Products
Manufacturing, Inc., 881 SCRA 451, G.R. Nos. 201398-99 October 3,
2018
Facts:
Avon filed its Value Added Tax (VAT) Returns and Monthly Remittance
Returns of Income Tax Withheld for the taxable year 1999 on the following
dates
Avon signed two (2) Waivers of the Defense of Prescription dated October
14, 2002 and December 27, 2002, which expired on January 14, 2003 and
April 14, 2003, respectively. On July 14, 2004, Avon was served a
Collection Letter dated July 9, 2004. It was required to pay P80,246,459.15
These deficiency assessments were the same deficiency taxes covered by
the Preliminary Assessment Notice dated November 29, 2002, received by
Avon on December 23, 2002. On February 14, 2003, Avon filed a letter
dated February 13, 2003 protesting against the Preliminary Assessment
Notice. Without ruling on Avon's protest, the Commissioner prepared the
Formal Letter of Demand and Final Assessment Notices,all dated February
28, 2003, received by Avon on April 11, 2003. Except for the amount of
interest, the Final Assessment Notices were the same as the Preliminary
Assessment Notice.
In a letter dated and filed on May 9, 2003, Avon protested the Final
Assessment Notices. Avon resubmitted its protest to the Preliminary
Assessment Notice and adopted the same as its protest to the Final
Assessment Notices.
A conference was allegedly held on June 26, 2003 where Avon informed
the revenue officers that all the documents necessary to support its
defenses had already been submitted. Another meeting was held on
August 4, 2003, where it showed the original General Ledger Book as
previously directed by the revenue officers. During these meetings, the
revenue officers allegedly expressed that they would cancel the
assessments resulting from the alleged discrepancy in sales if Avon would
pay part of the assessments. Thus, on January 30, 2004, Avon paid the
following portions of the Final Assessment Notices:
However, in a Memorandum dated May 27, 2004, the Bureau of Internal
Revenue's officers recommended the enforcement and collection of the
assessments on the sole justification that Avon failed to submit supporting
documents within the 60-day period as required under Section 228 of the
Tax Code. The Large Taxpayers Collection and Enforcement Division
thereafter served Avon with the Collection Letter dated July 9, 2004. Avon
asserted that even the items already paid on January 30, 2004 were still
included in the deficiency tax assessments covered by this Collection
Letter.
In a letter to the Deputy Commissioner for Large Taxpayers Service dated
and filed on July 27, 2004, Avon requested the reconsideration and
withdrawal of the Collection Letter. It argued that it was devoid of legal and
factual basis, and was premature as the Commissioner of Internal Revenue
had not yet acted on its protest against the Final Assessment Notices. The
Commissioner did not act on Avon's request for reconsideration. Thus,
Avon was constrained to treat the Collection Letter as denial of its protest.
On August 13, 2004, Avon filed a Petition for Review before the Court of
Tax Appeals. On August 24, 2004, it filed an Urgent Motion for Suspension
of Collection of Tax.
On May 13, 2010, the Court of Tax Appeals Special First Division rendered
its Decision, partially granting Avon's Petition for Review insofar as it
ordered the cancellation of the Final Demand and Final Assessment
Notices for deficiency excise tax, VAT, The parties' Motions for Partial
Reconsideration were denied in the July 12, 2010 Resolution. Both parties
filed their respective Petitions for Review before the Court of Tax Appeals
En Banc.
Issues:
First, whether or not the Commissioner of Internal Revenue failed to
observe administrative due process, and consequently, whether or not the
assessments are void; Second, whether or not Avon Products
Manufacturing, Inc., by paying the other tax assessments covered by the
Waivers of the Defense of Prescription, is estopped from assailing their
validity; Third, whether or not Avon Products Manufacturing, Inc.'s right to
appeal its protest before the Court of Tax Appeals has already prescribed;
and whether or not the assessments against it for deficiency income tax,
excise tax, value-added tax, withholding tax on compensation, and
expanded withholding tax have already attained finality; and Finally,
whether or not Avon Products Manufacturing, Inc. is liable for deficiency
income tax, excise tax, value-added tax, withholding tax on compensation,
and expanded withholding tax for the taxable year 1999.
Ruling:
Tax assessments issued in violation of the due process rights of a taxpayer
are null and void. While the government has an interest in the swift
collection of taxes, the Bureau of Internal Revenue and its officers and
agents cannot be overreaching in their efforts, but must perform their duties
in accordance with law, with their own rules of procedure, and always with
regard to the basic tenets of due process. The 1997 National Internal
Revenue Code, also known as the Tax Code, and revenue regulations
allow a taxpayer to file a reply or otherwise to submit comments or
arguments with supporting documents at each stage in the assessment
process. Due process requires the Bureau of Internal Revenue to consider
the defenses and evidence submitted by the taxpayer and to render a
decision based on these submissions. Failure to adhere to these
requirements constitutes a denial of due process and taints the
administrative proceedings with invalidity.
Avon asserts that the deficiency tax assessments are void because they
were made without due process and were not based on actual facts but on
the erroneous presumptions of the Commissioner. It submits that a
fundamental part of administrative due process is the administrative body's
due consideration and evaluation of all the evidence submitted by the
affected party.
With regard to tax assessment and collection, Section 228 of the Tax Code
and Revenue Regulations No. 12-99 prescribe compliance with due
process requirements through all the four (4) stages of the assessment
process, from the preliminary findings up to the Commissioner's decision
on the disputed assessment. Avon claims that from the start up to the end
of the administrative process, the Commissioner ignored all of its protests
and submissions to contest the deficiency tax assessments. The
Commissioner issued identical Preliminary Assessment Notice, Final
Assessment Notices, and Collection Letters without considering Avon's
submissions or its partial payment of the assessments. Avon asserts that it
was not accorded a real opportunity to be heard, making all of the
assessments null and void.
Avon's arguments are well-taken.
The Bureau of Internal Revenue is the primary agency tasked to assess
and collect proper taxes, and to administer and enforce the Tax Code. To
perform its functions of tax assessment and collection properly, it is given
ample powers under the Tax Code, such as the power to examine tax
returns and books of accounts, to issue a subpoena, and to assess based
on best evidence obtainable, among others. However, these powers must
"be exercised reasonably and [under] the prescribed procedure." The
Commissioner and revenue officers must strictly comply with the
requirements of the law, with the Bureau of Internal Revenue's own rules,
and with due regard to taxpayers' constitutional rights.
The Commissioner exercises administrative adjudicatory power or quasi-
judicial function in adjudicating the rights and liabilities of persons under the
Tax Code.
Quasi-judicial power has been described as: Quasi-judicial or
administrative adjudicatory power on the other hand is the power of the
administrative agency to adjudicate the rights of persons before it. It is the
power to hear and determine questions of fact to which the legislative
policy is to apply and to decide in accordance with the standards laid down
by the law itself in enforcing and administering the same law.
In carrying out these quasi-judicial functions, the Commissioner is required
to "investigate facts or ascertain the existence of facts, hold hearings,
weigh evidence, and draw conclusions from them as basis for their official
action and exercise of discretion in a judicial nature." Tax investigation and
assessment necessarily demand the observance of due process because
they affect the proprietary rights of specific persons. This Court has
stressed the importance of due process in administrative proceedings:
In Ang Tibay v. The Court of Industrial Relations,[72] this Court observed
that although quasi-judicial agencies "may be said to be free from the
rigidity of certain procedural requirements[, it] does not mean that it can, in
justiciable cases coming before it, entirely ignore or disregard the
fundamental and essential requirements of due process in trials and
investigations of an administrative character."

20. Commissioner of Internal Revenue vs. Fitness by Design, Inc., 808

SCRA 422, G.R. No. 215957 November 9, 2016
Facts:
On April 11, 1996, Fitness filed its Annual Income Tax Return for taxable
year 1995.
On June 9, 2004, Fitness received a copy of the Final Assessment Notice
dated March 17, 2004. The Final Assessment Notice was issued under
Letter of Authority No. 00002953. The Final Assessment Notice assessed
that Fitness had a tax deficiency in the amount of ₱10,647,529.69.
Fitness filed a protest to the Final Assessment Notice on June 25, 2004.
According to Fitness, the Commissioner’s period to assess had already
prescribed. Further, the assessment was without basis since the company
was only incorporated on May 30, 1995.
On February 2, 2005, the Commissioner issued a Warrant of Distraint
and/or Levy with Reference No. OCN WDL-95-05-005 dated February 1,
2005 to Fitness.
Fitness filed before the First Division of the Court of Tax Appeals a Petition
for Review (With Motion to Suspend Collection of Income Tax, Value
Added Tax, Documentary Stamp Tax and Surcharges and Interests) on
March 1, 2005.
On May 17, 2005, the Commissioner of Internal Revenue filed an Answer
to Fitness’ Petition and raised special and affirmative defenses. The
Commissioner posited that the Warrant of Distraint and/or Levy was issued
in accordance with law. The Commissioner claimed that its right to assess
had not yet prescribed under Section 222(a) of the National Internal
Revenue Code. Because the 1995 Income Tax ,Return filed by Fitness was
false and fraudulent for its alleged intentional failure to reflect its true sales,
Fitness’ respective taxes may be assessed at any time within 10 years from
the discovery of fraud or omission.
The Court of Tax Appeals First Division granted Fitness’ Petition on the
ground that the assessment has already prescribed. It ruled that the Final
Assessment Notice is invalid for failure to comply with the requirements of
Section 228 of the National Internal Revenue Code.
The Commissioner’s Motion for Reconsideration and its Supplemental
Motion for Reconsideration were denied by the Court of Tax Appeals First
Division.
Aggrieved, the Commissioner filed an appeal before the Court of Tax
Appeals En Banc. The Commissioner asserted ,that it had 10 years to
make an assessment due to the fraudulent income tax return filed by
Fitness.
The Court of Tax Appeals En Banc ruled in favor of Fitness. It affirmed the
Decision of the Court of Tax Appeals First Division. The Commissioner’s
Motion for Reconsideration was denied by the Court of Tax Appeals En
Banc in the Resolution dated December 16, 2014.
Issue:
Whether the applicable prescriptive period is 10 years as provided under
Sec. 222(a) of the NIRC.
Ruling:
No.
To avail of the extraordinary period of assessment in Section 222(a) of the
National Internal Revenue Code, the Commissioner of Internal Revenue
should show that the facts upon which the fraud is based is communicated
to the taxpayer...
The prescriptive period in making an assessment depends upon whether a
tax return was filed or whether the tax return filed was either false or
fraudulent.1âwphi1 When a tax return that is neither false nor fraudulent
has been filed, the Bureau of Internal Revenue may assess within three (3)
years, reckoned from the date of actual filing or from the last day
prescribed by law for filing. However, in case of a false or fraudulent return
with intent to evade tax, the assessment may be made within ten (10) years
after the discovery of the falsity or fraud.
Fraud is a question of fact that should be alleged and duly proven. “The
willful neglect to file the required tax return or the fraudulent intent to evade
the payment of taxes, considering that the same is accompanied by legal
consequences, cannot be presumed.” Fraud entails corresponding
sanctions under the tax law. Therefore, it is indispensable for the
Commissioner of Internal Revenue to include the basis for its allegations of
fraud in the assessment notice.

21. Commissioner of Internal Revenue vs. Transitions Optical

Philippines, Inc., 846 SCRA 514, G.. No. 227544 November 22, 2017
Facts:
April 28, 2006, Transitions Optical received Letter of Authority No.
00098746 dated March 23, 2006 from Revenue Region No. 9, San Pablo
City, of the Bureau of Internal Revenue
On October 9, 2007, the parties allegedly executed a Waiver of the
Defense of Prescription (First Waiver). In this supposed First Waiver, the
prescriptive period for the assessment of Transition Optical's internal
revenue taxes for the year 2004 was extended to June 20, 2008. The
document was signed by Transitions Optical's Finance Manager, Pamela
Theresa D. Abad, and by Bureau of Internal Revenue's Revenue District
Officer Myrna S. Leonida.
This was followed by another supposed Waiver of the Defense of
Prescription (Second Waiver) dated June 2, 2008. This time, the
prescriptive period was supposedly extended to November 30, 2008.
Commissioner of Internal Revenue, through Regional Director Jaime B.
Santiago (Director Santiago), issued a Preliminary Assessment Notice
(PAN) dated November 11, 2008, assessing Transitions Optical for its
deficiency taxes for taxable year 2004. Transitions Optical filed a written
protest on November 26, 2008.
The Commissioner of Internal Revenue, again through Director Santiago,
subsequently issued against Transitions Optical a Final Assessment Notice
(FAN) and a Formal Letter of Demand (FLD) dated November 28, 2008 for
deficiency income tax, value-added tax, expanded withholding tax, and final
tax for taxable year 2004 amounting to P19,701,849.68.
In its Protest Letter dated December 8, 2008 against the FAN, Transitions
Optical alleged that the demand for deficiency taxes had already prescribed
at the time the FAN was mailed on December 2, 2008. In its Supplemental
Protest, Transitions Optical pointed out that the FAN was void because the
FAN indicated 2006 as the return period, but the assessment covered
calendar year 2004.[12]Years later, the Commissioner of Internal Revenue,
through Regional Director Jose N. Tan, issued a Final Decision on the
Disputed Assessment dated January 24, 2012, holding Transitions Optical
liable for deficiency taxes in the total amount of P19,701,849.68 for taxable
year 2004,... Transitions Optical filed a Petition for Review before the Court
of Tax Appeals... her Answer, the Commissioner of Internal Revenue
interposed that Transitions Optical's claim of prescription was inappropriate
because the executed Waiver of the Defense of Prescription extended the
assessment period... summary therefore, the Court hereby finds the subject
Waivers to be defective and therefore void.
Court of Tax Appeals En Bane affirmed the First Division Decision and
subsequently denied the Commissioner of Internal Revenue's Motion for
Reconsideration.
Hence, this Petition was filed before this Court
Issues:
First, whether or not the two (2) Waivers of the Defense of Prescription
entered into by the parties on October 9, 2007 and June 2, 2008 were
valid; andSecond, whether or not the assessment of deficiency taxes
against respondent Transitions Optical Philippines, Inc. for taxable year
2004 had prescribed
Ruling:
This Court denies the Petition. The Court of Tax Appeals committed no
reversible error in cancelling the deficiency tax assessments.
In this case, two (2) waivers were supposedly executed by the parties
extending the prescriptive periods for assessment of income tax, value-
added tax, and expanded and final withholding taxes to June 20, 2008, and
then to November 30, 2008.The Court of Tax Appeals, both its First
Division and En Banc, declared as defective and void the two (2) Waivers
of the Defense of Prescription for non-compliance with the requirements for
the proper execution of a waiver as provided in RMO No. 20-90 and RDAO
No. 05-01. Specifically, the Court of Tax Appeals found that these Waivers
were not accompanied by a notarized written authority from respondent,
authorizing the so-called representatives to act on its behalf. Likewise,
neither the Revenue District Office's acceptance date nor respondent's
receipt of the Bureau of Internal Revenue's acceptance was indicated in
either document
However, Presiding Justice Roman G. Del Rosario (Justice Del Rosario) in
his Separate Concurring Opinion in the Court of Tax Appeals June 7, 2016
Decision, found that respondent is estopped from claiming that the waivers
were invalid by reason of its own actions, which persuaded the government
to postpone the issuance of the assessment. He discussed:
Parenthetically, this Court stated that when both parties continued to deal
with each other in spite of knowing and without rectifying the defects of the
waivers, their situation is "dangerous and open to abuse by unscrupulous
taxpayers who intend to escape their responsibility to pay taxes by mere
expedient of hiding behind technicalities."
Estoppel similarly applies in this case indeed, the Bureau of Internal
Revenue was at fault when it accepted respondent's Waivers despite their
non compliance with the requirements of RMO No. 20-90 and RDAO No.
05-01.Nonetheless, respondent's acts also show its implied admission of
the validity of the waivers. First, respondent never raised the invalidity of
the Waivers at the earliest opportunity, either in its Protest to the PAN,
Protest to the FAN, or Supplemental Protest to the FAN. It thereby
impliedly recognized these Waivers' validity and its representatives'
authority to execute them. Respondent only raised the issue of these
Waivers' validity in its Petition for Review filed with the Court of Tax
Appeals. In fact, as pointed out by Justice Del Rosario, respondent's
Protest to the FAN clearly recognized the validity of the Waivers, when it
stat
But, even as respondent is estopped from questioning the validity of the
Waivers, the assessment is nonetheless void because it was served
beyond the supposedly extended period
The First Division of the Court of Tax Appeals found that "the date indicated
in the envelope/mail matter containing the FAN and the FLD is December
4, 2008, which is considered as the date of their mailing." Since the validity
period of the second Waiver is only until November 30, 2008, prescription
had already set in at the time the FAN and the FLD were actually mailed on
December 4, 2008.
The testimony of petitioner's witness, Dario A. Consignado, Jr., that he
brought the mail matter containing the FAN and the FLD to the post office
on November 28, 2008 was considered self-serving, uncorroborated by any
other evidence.
WHEREFORE, the Petition is DENIED.

22.Philippine Amusement and Gaming Corporation vs, Bureau of

Internal Revenue, 782 SCRA 402, G.. No. 208731 January 27, 2016
The present petition stems from the Motion for Clarification filed by
petitioner Philippine Amusement and Gaming Corporation (PAGCOR) on
September 13, 2013 in the case entitled Philippine Amusement and
Gaming Corporation (PAGCOR) v. The Bureau of Internal Revenue, et al.,
[1] which was promulgated on March 15, 2011. The Motion for Clarification
essentially prays for the clarification of our Decision in the aforesaid case,
as well the issuance of a Temporary Restraining Order and/or Writ of
Preliminary Injunction against the Bureau of Internal Revenue (BIR), their
employees, agents and any other persons or entities acting or claiming any
right on BIR's behalf, in the implementation of BIR...
ISSUE:
Is Republic Act 9337 constitutional insofar as it excluded PAGCOR from
the enumeration of GOCCs exempt from the payment of corporate income
tax?
HELD:
YES. The original exemption of PAGCOR from corporate income tax was
not made pursuant to a valid classification based on substantial distinctions
so that the law may operate only on some and not on all. Instead, the same
was merely granted due to the acquiescence of the House Committee on
Ways and Means to the request of PAGCOR.
The argument that the withdrawal of the exemption also violates the non-
impairment clause will not hold since any franchise is subject to
amendment, alteration or repeal by Congress.
However, the Court made it clear that PAGCOR remains exempt from
payment of indirect taxes and as such its purchases remain not subject to
VAT, reiterating the rule laid down in the Acesite case.

23. Commissioner of Internal Revenue vs. V.Y, Domingo Jewellers,

Inc., 898 SCRA 269, G.. No. 221780 March 25, 2019
FACTS:
The BIR issued a PAN against V.Y. Domingo at P2,781,844.21 for
deficiency income tax and value-added tax, inclusive of interest, for the
taxable year 2006.
V.Y. Domingo filed a Request for Re-evaluation/Re-investigation and
Reconsideration dated September 17, 2009 with the Regional Director of
BIR - Revenue Region No. 6.
V.Y. Domingo then received a Preliminary Collection Letter (PCL) dated
August 10, 2011 from the RDO No. 28 - Novaliches, at P3,164,617.43.
On September 12, 2011, V.Y. Domingo sent a letter to the BIR RDO in
Quezon City, requesting certified true copies of the assessment notices.
Upon receipt thereof on September 16, 2011, it filed a Petition for Review
with the CTA in Division, to have the PCL and the assessment notices
declared null for allegedly having been issued beyond the prescriptive
period for assessment and collection of internal revenue taxes.
During trial, the CIR moved to dismiss for lack of jurisdiction. She argued
that under Republic Act (R.A.) No. 1125, it is neither the assessment nor
the formal letter of demand that is appealable to the CTA but the decision
of the CIR on a disputed assessment, arguing there was still no such
decision.
The CTA First Division granted the CIR's motion and dismissed. It held that
it was without jurisdiction to entertain the petition, as the rule is that for the
CTA to acquire jurisdiction, as assessment must first be disputed by the
taxpayer and either ruled upon by the CIR to warrant a decision, or denied
by the CIR through inaction.
The CIR argues that assessment notices are not appealable to the CTA as
the power to decide disputed assessments is vested in the CIR, subject
only to the exclusive appellate jurisdiction of the CTA.
ISSUES:
Does the CIR have jurisdiction over V.Y. Domingo's petition for review? In
other words, does its receipt of the PCL entitle the taxpayer to go to the
CTA?
HELD:
The Supreme Court ruled for CIR. No, the CTA has no jurisdiction. No,
receipt of the PCL does not grant the CTA jurisdiction.
According to Section 7 of R.A. No. 1125, as amended by R.A. No. 9282, a
protesting taxpayer like V.Y. Domingo has only three options to dispute an
assessment:
If the protest is wholly or partially denied by the CIR or his authorized
representative, then the taxpayer may appeal to the CTA within 30 days
from receipt of the whole or partial denial of the protest;
If the protest is wholly or partially denied by the CIR's authorized
representative, then the taxpayer may appeal to the CIR within 30 days
from receipt of the whole or partial denial of the protest; or
If the CIR or his authorized representative failed to act upon the protest
within 180 days from submission of the required supporting documents,
then the taxpayer may appeal to the CTA within 30 days from the lapse of
the 180-day period.
Here, records show that on August 11, 2011, V.Y. Domingo received the
PCL issued by petitioner CIR. However, instead of filing an administrative
protest against the assessment notice within thirty (30) days from its receipt
of the Assessment Notices on September 15, 2011, V.Y. Domingo elected
to file its petition for review before the CTA First Division on September 16,
2011.
The word "decisions" in the aforementioned provision of R.A. No. 9282
means the decisions of the CIR on the protest of the taxpayer against the
assessments. It does not signify the assessment itself. Where a taxpayer
questions an assessment and asks the Collector to reconsider or cancel
the same because he (the taxpayer) believes he is not liable therefor, the
assessment becomes a "disputed assessment" that the Collector must
decide, and the taxpayer can appeal to the CTA only upon receipt of the
decision of the Collector on the disputed assessment.
Evidently, V.Y. Domingo's immediate recourse to the CTA First Division
was in violation of the doctrine of exhaustion of administrative remedies.
Under the doctrine of exhaustion of administrative remedies, before a party
is allowed to seek the intervention of the court, he or she should have
availed himself or herself of all the means of administrative processes
afforded him or her.
The records of the case show that V.Y. Domingo did receive the certified
true copies of the Assessment Notices it requested on September 15,
2011, the day before it filed its petition for review before the CTA First
Division. V.Y. Domingo cannot now assert that its recourse to the court was
based on its non-receipt of the Assessment Notices that it requested.
Likewise, Allied Banking Corporation v. CIR does not apply here because
that decision was grounded on the language used and the tenor of the
demand letter, which indicate that it was the final decision of the CIR on the
matter.

24. Fishwealth Canning Corporation vs. Commissioner of Internal

Revenue, 610 SCRA 524, G.R, No. 179343 January 21, 2010
FACTS:
Petitioner was assessed for income tax, Value Added Tax and withholding
tax. After Court of Tax Appeals issued a Final Decision on Disputed
Assessment, Petitioner filed a Letter of Reconsideration with the CIR
instead of appealing the same to the Court of Tax Appeals within 30 days.
The CIR then issued a Preliminary Collection Letter which prompted the
Petitioner to file its Petition with the Court of Tax Appeals. CIR argued that
the Petition with the Court of Tax Appeals was filed out of time.
ISSUE:
Did the filing of a Reconsideration toll the running of the 30-day period to
appeal to the Court of Tax Appeals?
HELD:
NO. A Motion for Reconsideration of the denial of the administrative protest
does not toll the 30-day period to appeal to the Court of Tax Appeals.
The Commissioner can now inquire into bank deposits and other related
information held by financial institutions when “A specific taxpayer or
taxpayers subject of a request for supply of tax information from a foreign
tax authority pursuant to an international convention or agreement on tax
matters to which the Philippines is a signatory or a party”. The information
may be used by the BIR for tax assessment, verification, audit, and
enforcement purposes. The exchange of information shall be done in a
secure manner to ensure confidentiality.
>The provision of information to a foreign tax authority requires that the
requesting foreign tax authority has provided relevant information such as
the identity of the taxpayer, the tax purpose, statement that the foreign
authority has exhausted all means, etc.
>If the subject of the request are income tax returns, the same shall be
open to inspection upon the order of the President of the Philippines.

25. Commissioner of Internal Revenue vs, Kudos Metal Corporation,

620 SCRA 232, G.R. No. 178087 May 5, 2010
FACTS:
CIR assessed Kudos Metal Corporation for taxable year 1998. A Waiver of
the Statute of Limitations was executed on December 2001. The CTA
issued a Resolution canceling the assessment notices issued against
Petitioner for having been issued beyond the prescriptive period as the
waiver purportedly failed to (a) have the valid officer execute the same (i.e.,
only the Assistant Commissioner signed it and not the CIR); (b) the date of
acceptance was not indicated; (c) the fact of receipt by the taxpayer was
not indicated in the original copy.
ISSUE:
Has the CIR’s right to assess prescribed?
HELD:
YES. The requirements for a valid waiver as laid down in RMO 20-90 and
RDAO No. 5-01 are mandatory to give effect to Section 222 of the Tax
Code. Specifically, the flaws in the waiver executed by Kudos Metal were
as follows: (a) there was no notarized written authority in favor of the
signatory for the company; (b) there is no stated date of acceptance by the
Commissioner or his representative; and (c) the fact of the receipt of the
copy was not indicated in the original waivers.
Neither can it be said that by merely executing the waiver the taxpayer is
already estopped from disputing an action by the CIR beyond the statutory
3-year period since the exception under the Suyoc case (i.e., when the
delays were due to taxpayer’s acts) does not apply.

26. Samar-I Electric Cooperative vs. Commissioner of Internal

Revenue, 744 SCRA 459, G.. No. 193100 December 10, 2014
FACTS:
Samar-I Electric Cooperative, Inc. (Petitioner) is an electric
cooperative, with principal office at Barangay Carayman, Calbayog
City. On July 13, 1999 and April 17, 2000, petitioner filed its 1998
and 1999 income tax returns, respectively. Petitioner filed its 1997,
1998, and 1999 Annual Information Return of Income Tax Withheld
on Compensation, Expanded and Final Withholding Taxes on February
17, 1998, February 1, 1999, and February 4, 2000, in that order. On
November 13, 2000, respondent issued a duly signed Letter of Authority
(LOA) covering the examination of petitioner's books of account and other
accounting records for income and withholding taxes for the period 1997 to
1999. Petitioner cooperated in the audit and investigation conducted by the
Special Investigation Division of the BIR by submitting the required
documents on December5, 2000.On October 19, 2001, respondent sent a
Notice for Informal Conference which was received by petitioner in
November 2001; indicating the allegedly income and withholding tax
liabilities of petitioner for 1997 to 1999. Attached to the letter is a summary
of the report, with an explanation of the findings of the investigators.
In response, petitioner sent a letter dated November 26, 2001 to
respondent maintaining its indifference to the latter's findings and
requesting details of the assessment. On December 13, 2001,
petitioner executed a Waiver of the Defense of Prescription under the
Statute of Limitations, good until March 29, 2002.Consequently, on
September 15, 2002, petitioner received a demand letter and assessments
notices (Final Assessment Notices) for the alleged 1997, 1998, and 1999
deficiency withholding tax in the amount of [P]3,760,225.69, as well as
deficiency income tax covering the years 1998 to 1999 in the amount of
[P]440,545.71, or in the aggregate amount of [P]4,200,771.40.CTA EB: It
ruled that SAMELCO-I is exempted in the payment of the Minimum
Corporate Income Tax (MCIT); that due process was observed in the
issuance of the assessments in accordance with Section 228 of the
Tax Code; and that the 1997 and 1998 assessments on deficiency
withholding tax on compensation have not prescribed. Petitioner moved for
reconsideration. In a Resolution dated July 28, 2010, the CTA EB denied
the motion. Petitioner contends that the subject 1997 and 1998
withholding tax assessments on compensation were issued beyond
the prescriptive period of three years under Section 203 of the NIRC of
1997. Under this section, the government is allowed a period of only three
years to assess the correct tax liability of a taxpayer,viz.:SEC. 203.Period
of Limitation Upon Assessment and Collection. —Except as provided in
Section 222, internal revenue taxes shall be assessed within three (3)
years after the last day prescribed by law for the filing of the return,
and no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period: Provided,
That in a case where a return is filed beyond the period prescribed by law,
the three (3)-year period shall be counted from the day the return was filed.
For purposes of this Section, a return filed before the last day prescribed by
law for the filing thereof shall be considered as filed on such last day.
Relying on Section 203, petitioner argues that the subject deficiency tax
assessments issued by respondent on September 15, 2002 was issued
beyond the three-year prescriptive period. Petitioner filed its Annual
Information Return of Income Tax Withheld on Compensation,
Expanded and Final Withholding Taxes on the following dates: on
February 17, 1998 for the taxable year 1997; and on February 1,
1999 for the year taxable 1998. Thus, if the period prescribed under
Section 203 of the NIRC of 1997is to be followed, the three-year
prescriptive period to assess for the taxable years 1997 and 1998 should
have ended on February 16, 2001 and January 31, 2002, respectively.
ISSUE:
(1) won the 1997 and 1998 assessments on withholding tax on
compensation were issued within the prescriptive period provided by
law;
HELD:
(1)YES. While petitioner is correct that Section 203 sets the three-
year prescriptive period to assess, the following exceptions are
provided under Section 222 of the NIRC of 1997,viz.:SEC. 222.Exceptions
as to Period of Limitation of Assessment and Collection of Taxes. —
(a)In the case of a false or fraudulent return with intent to evade tax or of
failure to file a return, the tax may be assessed, or a proceeding in court for
the collection of such tax may be filed without assessment, at any time
within ten (10) years after the discovery of the falsity, fraud or omission:
Provided, That in a fraud assessment which has become final and
executory, the fact of fraud shall be judicially taken cognizance of in the
civil or criminal action for the collection thereof. In the case at bar, it was
petitioner's substantial under declaration of withholding taxes in the amount
of P2,690,850.91 which constituted the "falsity" in the subject returns—
giving respondent the benefit of the period under Section 222 of the NIRC
of 1997to assess the correct amount of tax "at any time within ten
(10) years after the discovery of the falsity, fraud or omission."|||The
case of Aznar v. Court of Tax Appeals discusses what acts or omissions
may constitute falsity,viz. :Petitioner argues that Sec. 332 of the NIRC does
not apply because the taxpayer did not file false and fraudulent returns
with intent to evade tax, while respondent Commissioner of Internal
Revenue insists contrariwise, with respondent Court of Tax Appeals
concluding that the very "substantial under declarations of income for
six consecutive years eloquently demonstrate the falsity or fraudulence
of the income tax returns with an intent to evade the payment of tax."
To our minds we can dispense with these controversial arguments
on facts, although we do not deny that the findings of facts by the
Court of Tax Appeals, supported as they are by very substantial
evidence, carry great weight, by resorting to a proper interpretation of
Section 332 of the NIRC. We believe that the proper and reasonable
interpretation of said provision should be that in the three different
cases of (1) false return, (2) fraudulent return with intent to evade tax,
(3) failure to file a return, the tax may be assessed, or a proceeding in court
for the collection of such tax may be begun without assessment, at
any time within ten years after the discovery of the(1) falsity, (2)
fraud, (3) omission. Our stand that the law should be interpreted to
mean a separation of the three different situations of false return,
fraudulent return with intent to evade tax, and failure to file a return is
strengthened immeasurably by the last portion of the provision which
segregates the situations into three different classes, namely "falsity,"
"fraud" and "omission." That there is a difference between "false return"
and "fraudulent return" cannot be denied. While the first merely
implies deviation from the truth, whether intentional or not, the second
implies intentional or deceitful entry with intent to evade the taxes due. A
careful examination of the evidence on record yields to no other conclusion
but that petitioner failed to withhold taxes from its employees' 13th month
pay and other benefits in excess of thirty thousand pesos (P30,000.00)
amounting to P2,690,850.91 for the taxable years 1997 to 1999 —resulting
to its filing of the subject false returns. Petitioner failed to refute this finding,
both in fact and in law, before the courts a quo
27. Lascona Land Co. Inc. vs. Commission of Internal Revenue, 667
SCRA 455, G.. No. 171251 March 5, 2012
FACTS
The Commissioner of Internal Revenue (CIR) issued an assessment
against Lascona Land Co., Inc. (Lascona) informing the latter of its alleged
deficiency income tax for the year 1993 in the amount of P753,266.56.
Consequently, on April 20, 1998, Lascona filed a letter protest, but was
denied by Norberto R. Odulio, Officer-in-Charge (OIC), Regional Director,
Bureau of Internal Revenue, Revenue Region No. 8, Makati City. On April
12, 1999, Lascona appealed the decision before the CTA. Lascona alleged
that the Regional Director erred in ruling that the failure to appeal to the
CTA within thirty (30) days from the lapse of the 180-day period rendered
the assessment final and executory. The CIR, however, maintained that
Lascona’s failure to timely file an appeal with the CTA after the lapse of the
180-day reglementary period provided under Section 228 of the National
Internal Revenue Code (NIRC) resulted to the finality of the assessment.
ISSUE
Whether the subject assessment has become final, executory and
demandable due to the failure of petitioner to file an appeal before the CTA
within thirty (30) days from the lapse of the One Hundred Eighty (180)-day
period pursuant to Section 228 of the NIRC.
HELD
NO.
[T]he Court has held that in case the Commissioner failed to act on the
disputed assessment within the 180-day period from date of submission of
documents, a taxpayer can either: (1) file a petition for review with the
Court of Tax Appeals within 30 days after the expiration of the 180-day
period; or (2) await the final decision of the Commissioner on the disputed
assessments and appeal such final decision to the Court of Tax Appeals
within 30 days after receipt of a copy of such decision. These options are
mutually exclusive and resort to one bars the application of the other.
Therefore, as in Section 228, when the law provided for the remedy to
appeal the inaction of the CIR, it did not intend to limit it to a single remedy
of filing of an appeal after the lapse of the 180-day prescribed period.
Precisely, when a taxpayer protested an assessment, he naturally expects
the CIR to decide either positively or negatively. A taxpayer cannot be
prejudiced if he chooses to wait for the final decision of the CIR on the
protested assessment. More so, because the law and jurisprudence have
always contemplated a scenario where the CIR will decide on the protested
assessment.

28. CIR vs. United Salvage and Towage G.R. No, 197515, July 2, 2014
FACTS:
Respondent (USTP) is engaged in the business of sub-contracting work for
service contractors engaged in petroleum operations in the Philippines. In
the course of respondent’s operations, petitioner found respondent liable
for deficiency income tax, withholding tax, value-added tax and
documentary stamp tax (DST) for taxable years 1992,1994, 1997
and 1998. Petitioner, through BIR officials, issued demand letters with
attached assessment notices for withholding tax on compensation (WTC)
and expanded withholding tax (EWT) for taxable years 1992, 1994and
1998.USTP filed administrative protests against the 1994 and 1998 EWT
assessments, respectively. In2003, the USTP appealed by way of Petition
for Review before the CTA, but moved to withdraw the same during the
pendency of the proceedings because it availed of the benefits of the Tax
Amnesty Program. Having complied with all the requirements therefor, the
CTA-Special First Division partially granted the Motion to Withdraw and
declared the issues on income tax, VAT and DST deficiencies closed and
terminated The CTA-Special First Division held that the
Preliminary Assessment Notices (PANs) for deficiency EWT for
taxable years 1994 and 1998 were not formally offered; hence, pursuant to
Section 34, Rule 132 of the Revised Rules of Court, the Court shall neither
consider the same as evidence nor rule on their validity. As regards the
Final Assessment Notices (FANs) for deficiency EWT for taxable years
1994 and1998, the CTA-Special First Division held that the same do not
show the law and the facts on which the assessments were based. Said
assessments were, therefore, declared void for failure to comply with
Section 228 of the 1997 Tax Code. From the foregoing, the only remaining
valid assessment is for taxable year 1992.Nevertheless, the CTA-Special
First Division declared that the right of petitioner to collect the deficiency
EWT and WTC, respectively, for taxable year 1992 had already lapsed
pursuant to Section 203 of the Tax Code. Thus, in ruling for
USTP, the CTA-Special First Division cancelled Assessment Notices
both dated January 9, 1996 and covering the period of 1992. Petitioner
moved to reconsider the aforesaid ruling however it was denied the same
for lack of merit. Upon appeal, the CTA En Banc affirmed with modification
the of the CTA-Special First Division. The CTA En Banc upheld the 1998
EWT assessment. In addition to the basic EWT deficiency of ₱14,496.79,
USTP is ordered to pay surcharge, annual deficiency interest, and annual
delinquency interest from the date due until full payment pursuant to
Section 249 of the1997 NIRC.

29. Allied Banking Corporation vs. Commissioner of Internal

Revenue, 611 SCRA 692, G.. No. 175097 February 5, 2010
FACTS:
Allied Banking Corporation received a PAN from the BIR which it timely
disputed. In response, the BIR issued a Formal Letter of Demand with
Assessment Notices. Instead of protesting the FAN, the petitioner filed a
Petition for Review with the CTA. The CTA dismissed the Petition stating
that it is neither the assessment nor the formal demand letter itself that is
appealable before it but instead it should be the decision of the CIR on the
disputed assessment
ISSUES:
Can the Formal Letter of Demand be construed as the final decision of the
CIR appealable to the CTA under Republic Act 9282?

HELD:
YES. This is considered an exception to the general rule on exhaustion of
administrative remedies since the CIR is considered estopped from
claiming the same principle applies in its case. The tenor of the demand
letter is clear that the CIR had already made a final decision and that the
remedy of the Petitioner was to appeal the same within 30 days of receipt.
This can be gleaned from the use of the terms “final decision” and “appeal”
which were deemed unequivocal language pointing to the finality of the
decision. While the Court cited the rules relative to (a) protesting the FAN
and not the PAN and (b) counting the 30 day period to appeal to the CTA
from receipt of the decision of the CIR and not issuance of the assessment,
this particular case was deemed a clear exception in view of the CIR’s own
actions.

30. Commissioner of Internal Revenue vs. Metro Star Superama Inc,

637 SCRA 633, G.. No. 185371 December 8, 2010
FACT:
Metro Star Superama was audited for taxable year 1999 and received a
Preliminary 15-day Letter on November 15, 2001. On April 11, 2002, it
received a Formal Letter of Demand dated April 3, 2002. Denying that it
received a Pre-Assessment Notice and thus not accorded due process,
Metro Star Superama filed a Petition with the CTA.
ISSUE:
Was the Petitioner accorded the required due process?
HELD:
NO. Since the Petitioner denied receipt of the Pre-Assessment Notice, the
burden of proving the same shifts to the BIR. To raise the presumption of
receipt, it must be shown that (a) the letter was properly addressed with
postage prepaid and (b) that it was mailed. If receipt is denied, the BIR
must then show actual receipt through presentation of the registry receipt
or, if the same cannot be located, at least a certification from the Bureau of
Posts.
The Court likewise added that the issuance of a Pre-Assessment Notice is
a mandatory requirement save only on specified instances. The old rule
laid down in CIR vs. Menguito that only the FAN is mandatory no longer
applies since the same was ruled upon based on the old provision.
31. Estate of the Late Juliana Diez Vda. de Gabriel vs. Commissioner
of Internal Revenue, 421 SCRA 266, G.R. No. 155541 January 27, 2004
FACTS:
During the lifetime of the decedent Juliana vda. De Gabriel, her business
affairs were managed by the Philippine Trust Company (PhilTrust). The
decedent died on April3, 1979 but two days after her death, PhilTrust filed
her income tax return for 1978 not indicating that the decedent had died.
The BIR conducted an administrative investigation of the decedent’s tax
liability and found a deficiency income tax for the year 1997 in the amount
of P318,233.93. Thus, in November 18, 1982, the BIR sent by registered
mail a demand letter and assessment notice addressed to the decedent
“c/o PhilTrust, Sta. Cruz, Manila, which was the address stated in her 1978
income tax return. On June 18,1984, respondent Commissioner of Internal
Revenue issued warrants of distraint and levy to enforce the collection of
decedent’s deficiency income tax liability and serve the same upon her
heir, Francisco Gabriel. On November 22, 1984, Commissioner filed a
motion to allow his claim with probate court for the deficiency tax. The
Court denied BIR’s claim against the estate on the ground that no proper
notice of the tax assessment was made on the proper party. On appeal, the
CA held that BIR’s service on PhilTrust of the notice of assessment was
binding on the estate as PhilTrust failed in its legal duty to inform the
respondent of antecedent’s death. Consequently, as the estate failed to
question the assessment within the statutory period of thirty days, the
assessment became final, executory, and in contestable.
ISSUES:
(1) Whether or not the CA erred in holding that the service of deficiency tax
assessment on Juliana through PhilTrust was a valid service as to bind the
estate.(2) Whether or not the CA erred in holding that the tax assessment
had become final, executory, and in contestable.
HELD:
(1) Since the relationship between PhilTrust and the decedent
was automatically severed the moment of the taxpayer’s death, none of
the PhilTrust’s acts or omissions could bind the estate of the taxpayer.
Although the administrator of the estate may have been remiss in his legal
obligation to inform respondent of the decedent’s death, the consequence
thereof merely refers to the imposition of certain penal sanction on the
administrator. These do not include the indefinite tolling of the prescriptive
period for making deficiency tax assessment or waiver of the
notice requirement for such assessment.(2) The assessment was
served not even on an heir or the estate but on a completely disinterested
party. This improper service was clearly not binding on the petitioner. The
most crucial point to be remembered is that PhilTust had absolutely no
legal relationship with the deceased or to her Estate. There was therefore
no assessment served on the estate as to the alleged underpayment of tax.
Absent this assessment, no proceeding could be initiated in court for
collection of said tax; therefore, it could not have become final, executory
and incontestable. Respondent’s claim for collection filed with the court
only on November 22, 1984 was barred for having been made beyond the
five-year prescriptive period set by law.

32. Commissioner of Internal Revenue vs. Hantex Trading Co., Inc.,

454 SCRA 301, G.. No. 136975 March 31, 2005
Facts:
Hantex Trading Co is a company organized under the Philippines. It is
engaged in the sale of plastic products, it imports synthetic resin and other
chemicals for the manufacture of its products. For this purpose, it is
required to file an Import Entry and Internal Revenue Declaration
(Consumption Entry) with the Bureau of Customs under Section 1301 of
the Tariff and Customs Code. Sometime in October 1989, Lt. Vicente
Amoto, Acting Chief of Counter-Intelligence Division of the Economic
Intelligence and Investigation Bureau (EIIB), received confidential
information that the respondent had imported synthetic resin amounting to
P115,599,018.00 but only declaredP45,538,694.57. Thus, Hantex receive a
subpoena to present its books of account which it failed to do. The bureau
cannot find any original copies of the products Hantex imported since the
originals were eaten by termites. Thus, the Bureau relied on the certified
copies of the respondent’s Profit and Loss Statement for 1987 and1988 on
file with the SEC, the machine copies of the Consumption Entries, Series of
1987, submitted by the informer, as well as excerpts from the entries
certified by Tomas and Danganan. The case was submitted to the CTA
which ruled that Hantex have tax deficiency and is ordered to pay, per
investigation of the Bureau. The CA ruled that the income and sales tax
deficiency assessments issued by the petitioner were unlawful and
baseless since the copies of the import entries relied upon in computing the
deficiency tax of the respondent were not duly authenticated by the public
officer charged with their custody, nor verified under oath by the EIIB and
the BIR investigator.
Issue:
Whether or not the final assessment of the petitioner against the
respondent for deficiency income tax and sales tax for the latter’s 1987
importation of resins and calcium bicarbonate is based on competent
evidence and the law
Ruling:
No. Section 16 of the NIRC of 1977, as amended, provides that the
Commissioner of Internal Revenue has the power to make assessments
and prescribe additional requirements for tax administration and
enforcement. Among such powers are those provided in paragraph (b),
which provides that “Failure to submit required returns, statements, reports
and other documents. – When a report required by law as a basis for the
assessment of any national internal revenue tax shall not be forthcoming
within the time fixed by law or regulation or when there is reason to believe
that any such report is false, incomplete or erroneous, the Commissioner
shall assess the proper tax on the best evidence obtainable.” This provision
applies when the Commissioner of Internal Revenue undertakes to perform
her administrative duty of assessing the proper tax against a taxpayer, to
make a return in case of a taxpayer’s failure to file one, or to amend a
return already filed in the BIR. The “best evidence” envisaged in Section 16
of the 1977 NIRC, as amended, includes the corporate and accounting
records of the taxpayer who is the subject of the assessment process, the
accounting records of other taxpayers engaged in the same line of
business, including their gross profit and net profit sales. Such evidence
also includes data, record, paper, document or any evidence gathered by
internal revenue officers from other taxpayers who had personal
transactions or from whom the subject taxpayer received any income; and
record, data, document and information secured from government offices
or agencies, such as the SEC, the Central Bank of the Philippines, the
Bureau of Customs, and the Tariff and Customs Commission. However, the
best evidence obtainable under Section 16 of the 1977 NIRC, as amended,
does not include mere photocopies of records/documents. The petitioner, in
making a preliminary and final tax deficiency assessment against a
taxpayer, cannot anchor the said assessment on mere machine copies of
records/documents. Mere photocopies of the Consumption Entries have no
probative weight if offered as proof of the contents thereof. The reason for
this is that such copies are mere scraps of paper and are of no probative
value as basis for any deficiency income or business taxes against a
taxpayer.

33. Commissioner of Internal Revenue vs. Primetown Property Group,

Inc., 531 SCRA 436, G.R. No. 162155 August 28, 2007
FACTS:
Gilbert Yap, vice chair of respondent Primetown Property Group, Inc.,
applied for the refund or credit of income tax respondent paid in 1997.
According to Yap, because respondent suffered losses, it was not liable for
income taxes. Respondent complied, but the claim was not acted upon.
Thus on April 14, 2000, it filed a Petition for Review with the CTA. CTA
dismissed the petition having been filed beyond the two-year prescriptive
period for filing a judicial claim for tax refund or credit under Section 229 of
the NIRC. The CTA found that respondent filed its final adjusted return on
April 14, 1998. Thus, its right to claim a refund or credit commenced on that
date.
Applying Article 13 of the Civil Code, the CTA ruled that the two-year
prescriptive period under Section 229 of the NIRC for the filing of judicial
claims was equivalent to 730 days. Because the year 2000 was a leap
year, respondent’s petition, which was filed 731 days after respondent filed
its final adjusted return, was filed beyond the reglementary period. The CA
reversed the CTA decision ruling that Article 13 of the Civil Code does not
distinguish between a regular year and a leap year.
ISSUE:
Whether the Court of Appeals is correct in referring to Article 13 of the NCC
as the basis in the correct computation of time.
HELD:
NO. The Court of Appeals is correct in finding that the petition was filed
within the prescriptive period but its basis is should not be the NCC. Article
13 of the Civil Code provides that when the law speaks of a year, it is
understood to be equivalent to 365 days. However, in 1987, EO 292 or the
Administrative Code of 1987 was enacted. Section 31, Chapter VIII, Book I
thereof provides: Sec. 31. Legal Periods. — “Year” shall be understood to
be twelve calendar months;; “month” of thirty days, unless it refers to a
specific calendar month in which case it shall be computed according to the
number of days the specific month contains;; “day”, to a day of twenty-four
hours and;; “night” from sunrise to sunset.
A calendar month is “a month designated in the calendar without regard to
the number of days it may contain.” It is the “period of time running from the
beginning of a certain numbered day up to, but not including, the
corresponding numbered day of the next month, and if there is not a
sufficient number of days in the next month, then up to and including the
last day of that month.” To illustrate, one calendar month from December
31, 2007 will be from January 1, 2008 to January 31, 2008;; one calendar
month from January 31, 2008 will be from February 1, 2008 until February
29, 2008.
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the
Administrative Code of 1987 deal with the same subject matter — the
computation of legal periods. Under the Civil Code, a year is equivalent to
365 days whether it be a regular year or a leap year. Under the
Administrative Code of 1987, however, a year is composed of 12 calendar
months. Needless to state, under the Administrative Code of 1987, the
number of days is irrelevant. But being the more recent law, Section 31,
Chapter VIII, Book I of the Administrative Code of 1987, being the more
recent law and having impliedly repealed in its repealing clause all laws
inconsistent therewith, governs the computation of legal periods. Lex
posteriori derogat priori.
34. Citibank, N.A. vs. Court of Appeals, 280 SCRA 459, G.R. No.
107434 October 10, 1997
Facts:
Citibank N.A. Philippine Branch (CITIBANK) is a foreign corporation doing
business in the Philippines. In 1979 and 1980, its tenants withheld and paid
to the Bureau of Internal Revenue the taxes on rents due to Citibank,
pursuant to Section 1(c) of the Expanded Withholding Tax Regulations.
On April 15, 1980, Citibank field its corporate income tax returns for the
year and ended December 31, 1979 showing a net loss of P74,854,916.00
and its tax credits totaled P6,257,780.00, even without including the
amounts withheld on rental income under the Expanded Withholding Tax
System, the same not having been utilized or applied for the reason that
the year’s operation resulted in a loss. The taxes thus withheld by the
tenants from rentals paid to Citibank in 1979 were not included as tax
credits although a rental income amounting to P7,796,811.00 was included
in its income declared for the year ended December 31, 1979.
For the year ended December 31, 1980, Citibank’s corporate income tax
returns, filed on April 15, 1981, showed a net loss P77,071,790.00 for
income tax purposes. Its available tax credit at the end of 1980 amounting
to P11,532,855.00 was not utilized or applied. The said available tax credits
did not include the amounts withheld by Citibank’s tenants from rental
payment sin 1980 but the rental payments for that year were declared as
part of its gross income included in its annual income tax returns.
On October 31, 1981, Citibank submitted its claim for refund of the
aforesaid amounts of P270,160.56 and P298,829.29, respectively or a total
of P568,989.85; and on October 12, 1981 filed a petition for review with the
Court of Tax Appeals concerning subject claim for tax refund.
On August 30, 1981, the CTA adjudged Citibank’s entitlement to the tax
refund sought for, representing the 5% tax withheld and paid on Citibank’s
rental income for 1979 and 1980. The Court of Tax Appeals, rejected
Respondent CIR’s argument that the claim was not seasonably filed. Not
satisfied the Commissioner appealed to the Court of Appeals, CA ruled that
Citibank N.A. Philippine branch, entitled to a tax refund/credit in the amount
of P569,989.85, representing the 5% withheld tax in Citibank’s rental
income for the years 1979 and 1980 is REVERSED. Motion for
Reconsideration of the petitioner bank was denied. Hence, this petition.
Issue:
Whether or not income taxes remitted partially on a periodic or quarterly
basis should be credited or refunded to the taxpayer on the basis of the
taxpayer’s final adjusted returns.
Held:
In several cases, we have already ruled that income taxes remitted partially
on a periodic or quarterly basis should be credited or refunded to the
taxpayer on the basis of the taxpayer’s final adjusted returns, not on such
periodic or quarterly basis. When applied to taxpayers filing income tax
returns on a quarterly basis, the date of payment mentioned in Sec. 230
must be deemed to be qualified by Sec. 68 and 69 of the present. Tax
Code. It may be observed that although quarterly taxes due are required to
be paid within 60 days from the close of each quarter, the fact that the
amount shall be deducted from the tax due for the succeeding quarter
shows that until a final adjustment return shall have been filed, the taxes
paid in the preceding quarters are merely partial taxes due from a
corporation. Neither amount can serve as the final figure to quantify what is
due the government nor what should be refunded to be corporation. This
interpretation may be gleaned from the last paragraph of Sec. 69 of the Tax
Code which provides that the refundable amount, in case a refund is due a
corporation, is that amount which is shown on its final adjustment return
and not on its quarterly returns.

35. Philam Asset Management, Inc. vs. Commissioner of Internal

Revenue, 477 SCRA 761, G.. Nos. 156637 and 162004 December 14,
2005
Facts:
"Petitioner, formerly Philam Fund Management, Inc., is a domestic
corporation duly organized and existing under the laws of the Republic of
the Philippines. It acts as the investment manager of both Philippine Fund,
Inc. (PFI) and Philam Bond Fund, Inc. (PBFI), which... are open-end
investment companies[,] in the sale of their shares of stocks and in the
investment of the proceeds of these sales into a diversified portfolio of debt
and equity securities. Being an investment manager, [p]etitioner provides
management and technical services to PFI... and PBFI. Petitioner is,
likewise, PFI's and PBFI's principal distributor which takes charge of the
sales of said companies' shares to prospective investors. Pursuant to the
separate [m]anagement and [d]istribution agreements between the
[p]etitioner and PFI and PBFI, both PFI... and PBFI [agree] to pay the
[p]etitioner, by way of compensation for the latter's services and facilities, a
monthly management fee from which PFI and PBFI withhold the amount
equivalent to [a] five percent (5%) creditable tax[,] pursuant to the
Expanded Withholding Tax Regulations.
"On April 3, 1998, [p]etitioner filed its [a]nnual [c]orporate [i]ncome [t]ax
[r]eturn for the taxable year 1997 representing a net loss of P2,689,242.00.
Consequently, it failed to utilize the creditable tax withheld in the amount of
Five Hundred Twenty-Two Thousand Ninety-Two Pesos (P522,092.00)
representing [the] tax withheld by [p]etitioner's withholding agents, PFI and
PBFI[,] on professional fees. "The creditable tax withheld by PFI and PBFI
in the amount of P522,092.00
"On September 11, 1998, [p]etitioner filed an administrative claim for refund
with the [Bureau of Internal Revenue (BIR)] -- Appellate Division in the
amount of P522,092.00 representing unutilized excess tax credits for
calendar year 1997. Thereafter, on July 28, 1999, a written... request was
filed with the same division for the early resolution of [p]etitioner's claim for
refund.
"Respondent did not act on [p]etitioner's claim for refund[;] hence, a Petition
for Review was filed with this Court[6] on November 29, 1999 to toll the
running of the two-year prescriptive period.
On October 9, 2001, the CTA rendered a Decision denying petitioner's
Petition for Review. Its Motion for Reconsideration was likewise denied in a
Resolution dated January 29, 2002.
In GR No. 162004, the antecedents are narrated by the CA in this wise:
"On April 13, 1999, [petitioner] filed its Annual Income Tax Return with the
[BIR] for the taxable year 1998 declaring a net loss of P1,504,951.00. Thus,
there was no tax due against [petitioner] for the taxable year 1998.
Likewise, [petitioner] had an unapplied... creditable withholding tax in the
amount of P459,756.07, which amount had been previously withheld in that
year by petitioner's withholding agents[,] namely x x x [PFI], x x x [PBFI],
and Philam Strategic Growth Fund, Inc. (PSGFI).
"In the next succeeding year, [petitioner] had a tax due in the amount of
P80,042.00, and a creditable withholding tax in the amount of P915,995.00.
[Petitioner] likewise declared in its 1999 tax return the amount of
P459,756.07, which represents its prior excess credit for... taxable year
1998.
"Thereafter, on November 14, 2000, [petitioner] filed with the Revenue
District Office No. 50, Revenue Region No. 8, a written administrative claim
for refund with respect to the unapplied creditable withholding tax of
P459,756.07. According to [petitioner,] the amount of
P80,042.00, representing the tax due for the taxable year 1999 has been
credited from its P915,995.00 creditable withholding tax for taxable year
1999, thus leaving its 1998 creditable withholding tax in the amount of
P459,756.07 still unapplied.
"The claim for refund yielded no action on the part of the BIR. [Petitioner]
then filed a Petition for Review before the CTA on December 26, 2000,
asserting that it is entitled [to] the refund [of P459,756.07,] since said
amount has not been applied against its tax liabilities... in the taxable year
1998.
"On May 2, 2002, the CTA rendered [a] x x x decision denying [petitioner's]
Petition for Review. x x
Ruling of the Court of Appeals
The CA denied the claim of petitioner for a refund of the latter's excess
creditable taxes withheld for the years 1997 and 1998, despite compliance
with the basic requirements of Revenue Regulations (RR) No. 12-94. The
appellate court pointed out that, in the respective Income
Tax Returns (ITRs) for both years, petitioner did not indicate its option to
have the amounts either refunded or carried over and applied to the
succeeding year. It was held that to request for either a refund or a credit of
income tax paid, a corporation must signify its... intention by marking the
corresponding option box on its annual corporate adjustment return.
The CA further held in GR No. 156637 that the failure to present the 1998
ITR was fatal to the claim for a refund, because there was no way to verify
if the tax credit for 1997 could not have been applied against the 1998 tax
liabilities of petitioner.
In GR No. 162004, however, the subsequent acts of petitioner
demonstrated its option to carry over its tax credit for 1998, even if it again
failed to tick the appropriate box for that option in its 1998 ITR. Under RR
12-94, its failure to indicate that option resulted in the... automatic carry-
over of any excess tax credit for the prior year. The appellate court said
that the government would not be unjustly enriched by denying a refund,
because there would be no forfeiture of the amount in its favor. The amount
claimed as a refund would remain in the... account of the taxpayer until
utilized in succeeding taxable years.
Issues:
whether petitioner is entitled to a refund of its creditable taxes withheld for
taxable years 1997 and 1998.
Ruling:
The Petition in GR No. 156637 is meritorious, but that in GR No. 162004 is
not.
Principles:
On July 25, 1987, EO 273[20] renumbered[21] Section 86 of the NIRC[22]
as Section 76,[23] which was also rearranged[24] to fall under Chapter 10
of Title II of the NIRC.
Section 79, which had earlier been renumbered by PD 1994, remained
unchanged.
Thus, Section 69 of the NIRC of 1977 was renumbered as Section 86
under PD 1705; later, as Section 79 under PD 1994;[25] then, as Section
76 under EO 273.[26] Finally, after being renumbered and reduced to the
chaff of a grain, Section 69 was repealed by EO 37.
Subsequently, Section 69 reappeared in the NIRC (or Tax Code) of 1997
as Section 76, which reads:
"Section 76. Final Adjustment Return. -- Every corporation liable to tax
under Section 24 shall file a final adjustment return covering the total net
income[27] for the preceding calendar or fiscal year. If the sum of the
quarterly... tax payments made during the said taxable year is not equal to
the total tax due on the entire taxable net income[28] of that year the
corporation shall either:
"(a) Pay the excess tax still due; or
"(b) Be refunded the excess amount paid, as the case may be.
"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 estimated quarterly income
tax liabilities for the taxable quarters of the succeeding... taxable year."
GR No. 156637
This section applies to the first case before the Court. Differently numbered
in 1977 but similarly worded 20 years later (1997), Section 76 offers two
options to a taxable corporation whose total quarterly income tax payments
in a given taxable year exceeds its total income tax... due. These options
are (1) filing for a tax refund or (2) availing of a tax credit.
The first option is relatively simple. Any tax on income that is paid in excess
of the amount due the government may be refunded, provided that a
taxpayer properly applies for the refund.
The second option works by applying the refundable amount, as shown on
the FAR of a given taxable year, against the estimated quarterly income tax
liabilities of the succeeding taxable year.
These two options under Section 76 are alternative in nature.[29] The
choice of one precludes the other. Indeed, in Philippine Bank of
Communications v. Commissioner of Internal Revenue,[30] the Court ruled
that a... corporation must signify its intention -- whether to request a tax
refund or claim a tax credit -- by marking the corresponding option box
provided in the FAR.[31] While a taxpayer is required to mark its choice in
the form... provided by the BIR, this requirement is only for the purpose of
facilitating tax collection.
One cannot get a tax refund and a tax credit at the same time for the same
excess income taxes paid. Failure to signify one's intention in the FAR does
not mean outright barring of a valid request for a refund, should one still
choose this option later... on. A tax credit should be construed merely as an
alternative remedy to a tax refund under Section 76, subject to prior
verification and approval by respondent.[32]
The reason for requiring that a choice be made in the FAR upon its filing is
to ease tax administration,[33] particularly the self-assessment and
collection aspects. A taxpayer that makes a choice expresses certainty or
preference and thus demonstrates... clear diligence. Conversely, a
taxpayer that makes no choice expresses uncertainty or lack of preference
and hence shows simple negligence or plain oversight.
In the present case, respondent denied the claim of petitioner for a refund
of excess taxes withheld in 1997, because the latter (1) had not indicated in
its ITR for that year whether it was opting for a credit or a refund; and (2)
had not submitted as evidence its 1998 ITR,... which could have been the
basis for determining whether its claimed 1997 tax credit had not been
applied against its 1998 tax liabilities.
Requiring that the ITR or the FAR of the succeeding year be presented to
the BIR in requesting a tax refund has no basis in law and jurisprudence.
First, Section 76 of the Tax Code does not mandate it. The law merely
requires the filing of the FAR for the preceding -- not the succeeding --
taxable year. Indeed, any refundable amount indicated in the FAR of the
preceding taxable year may be... credited against the estimated income tax
liabilities for the taxable quarters of the succeeding taxable year. However,
nowhere is there even a tinge of a hint in any of the provisions of the Tax
Code that the FAR of the taxable year following the period to which the
tax... credits are originally being applied should also be presented to the
BIR.
Second, Section 5[34] of RR 12-94, amending Section 10(a) of RR 6-85,
merely provides that claims for the refund of income taxes deducted and
withheld from income payments shall be given due course only (1) when it
is shown on the ITR that the... income payment received is being declared
part of the taxpayer's gross income; and (2) when the fact of withholding is
established by a copy of the withholding tax statement, duly issued by the
payor to the payee, showing the amount paid and the income tax withheld
from that... amount.[35]
Undisputedly, the records do not show that the income payments received
by petitioner have not been declared as part of its gross income, or that the
fact of withholding has not been established. According to the CTA,
"[p]etitioner substantially complied with the x x x... requirements" of RR 12-
94 "[t]hat the fact of withholding is established by a copy of a statement
duly issued by the payor (withholding agent) to the payee, showing the
amount paid and the amount of tax withheld therefrom; and x x x [t]hat the
income upon which the taxes were... withheld were included in the return of
the recipient."[36]
The established procedure is that a taxpayer that wants a cash refund shall
make a written request for it, and the ITR showing the excess expanded
withholding tax credits shall then be examined by the BIR. For the grant of
refund, RRs 12-94 and 6-85 state that all pertinent... accounting records
should be submitted by the taxpayer. These records, however, actually
refer only to (1) the withholding tax statements; (2) the ITR of the present
quarter to which the excess withholding tax credits are being applied; and
(3) the ITR of the quarter for the... previous taxable year in which the
excess credits arose.[37] To stress, these regulations implementing the law
do not require the proffer of the FAR for the taxable year following the
period to which the tax credits are being applied.
Third, there is no automatic grant of a tax refund. As a matter of procedure,
the BIR should be given the opportunity "to investigate and confirm the
veracity"[38] of a taxpayer's claim, before it grants the refund. Exercising
the... option for a tax refund or a tax credit does not ipso facto confer upon
a taxpayer the right to an immediate availment of the choice made. Neither
does it impose a duty on the government to allow tax collection to be at the
sole control of a taxpayer.[39]
Fourth, the BIR ought to have on file its own copies of petitioner's FAR for
the succeeding year, on the basis of which it could rebut the assertion that
there was a subsequent credit of the excess income tax payments for the
previous year. Its failure to present... this vital document to support its
contention against the grant of a tax refund to petitioner is certainly fatal.
Fifth, the CTA should have taken judicial notice[40] of the fact of filing and
the pendency of petitioner's subsequent claim for a refund of excess
creditable taxes withheld for 1998. The existence of the claim ought to be
known by reason of... its judicial functions. Furthermore, it is decisive to
and will easily resolve the material issue in this case. If only judicial notice
were taken earlier, the fact that there was no carry-over of the excess
creditable taxes withheld for 1997 would have already been crystal... clear.
Sixth, the Tax Code allows the refund of taxes to a taxpayer that claims it in
writing within two years after payment of the taxes erroneously received by
the BIR.[41] Despite the failure of petitioner to make the appropriate
marking in the BIR... form, the filing of its written claim effectively serves as
an expression of its choice to request a tax refund, instead of a tax credit.
To assert that any future claim for a tax refund will be instantly hindered by
a failure to signify... one's intention in the FAR is to render nugatory the
clear provision that allows for a two-year prescriptive period.
In fact, in BPI-Family Savings Bank v. CA,[42] this Court even ordered the
refund of a taxpayer's excess creditable taxes, despite the express
declaration in the FAR to apply the excess to the succeeding year.[43]
When... circumstances show that a choice of tax credit has been made, it
should be respected. But when indubitable circumstances clearly show that
another choice -- a tax refund -- is in order, it should be granted.
"Technicalities and legalisms, however exalted, should not be misused... by
the government to keep money not belonging to it and thereby enrich itself
at the expense of its law-abiding citizens."[44]
In the present case, although petitioner did not mark the refund box in its
1997 FAR, neither did it perform any act indicating that it chose a tax credit.
On the contrary, it filed on September 11, 1998, an administrative claim for
the refund of its excess taxes withheld in
In none of its quarterly returns for 1998 did it apply the excess creditable
taxes. Under these circumstances, petitioner is entitled to a tax refund of its
1997 excess tax credits in the amount of P522,092.
GR No. 162004
As to the second case, Section 76 also applies. Amended by Republic Act
(RA) No. 8424, otherwise known as the "Tax Reform Act of 1997," it now
states:
"SEC. 76. Final Adjustment Return. -- Every corporation liable to tax under
Section 27 shall file a final adjustment return covering the total taxable
income for the preceding calendar or fiscal year. If the sum of the quarterly
tax payments made during... the said taxable year is not equal to the total
tax due on the entire taxable income of that year, the corporation shall
either:
(A) Pay the balance of tax still due; or
(B) Carry over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the case may
be.
"In case the corporation is entitled to a tax credit or refund of the excess
estimated quarterly income taxes paid, the excess amount shown on its
final adjustment return may be carried over and credited against the
estimated 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
cash refund or issuance of a tax credit certificate shall be allowed therefor."
The carry-over option under Section 76 is permissive. A corporation that is
entitled to a tax refund or a tax credit for excess payment of quarterly
income taxes may carry over and credit the excess income taxes paid in a
given taxable year against the... estimated income tax liabilities of the
succeeding quarters. Once chosen, the carry-over option shall be
considered irrevocable[45] for that taxable period, and no application for a
tax refund or issuance of a tax credit... certificate shall then be allowed.
According to petitioner, it neither chose nor marked the carry-over option
box in its 1998 FAR.[46] As this option was not chosen, it seems that there
is nothing that can be considered irrevocable. In other words, petitioner
argues that it is still entitled... to a refund of its 1998 excess income tax
payments.
This argument does not hold water. The subsequent acts of petitioner
reveal that it has effectively chosen the carry-over option.
First, the fact that it filled out the portion "Prior Year's Excess Credits" in its
1999 FAR means that it categorically availed itself of the carry-over option.
In fact, the line that precedes that phrase in the BIR form clearly states
"Less: Tax Credits/Payments."
The contention that it merely filled out that portion because it was a
requirement -- and that to have done otherwise would have been
tantamount to falsifying the FAR -- is a long shot.
The FAR is the most reliable firsthand evidence of corporate acts pertaining
to income taxes. In it are found the itemization and summary of additions to
and deductions from income taxes due. These entries are not without
rhyme or reason. They are required, because they... facilitate the tax
administration process.
Failure to indicate the amount of "prior year's excess credits" does not
mean falsification by a taxpayer of its current year's FAR. On the contrary,
if an application for a tax refund has been -- or will be -- filed, then that
portion of the BIR form should necessarily be... blank, even if the FAR of
the previous taxable year already shows an overpayment in taxes.
Second, the resulting redundancy in the claim of petitioner for a refund of
its 1998 excess tax credits on November 14, 2000[47] cannot be
countenanced. It cannot be allowed to avail itself of a tax refund and a... tax
credit at the same time for the same excess income taxes paid. Besides,
disallowing it from getting a tax refund of those excess tax credits will not
enervate the two-year prescriptive period under the Tax Code. That period
will apply... if the carry-over option has not been chosen.
Besides, "tax refunds x x x are construed strictly against the taxpayer."[48]
Petitioner has failed to meet the burden of proof required in order to
establish the factual basis of its claim for a tax refund.
Third, the "first-in first-out" (FIFO) principle enunciated by the CTA[49] does
not apply.[50] Money is fungible property.[51] The amount to be applied
against the P80,042 income tax due in the 1998
FAR[52] of petitioner may be taken from its excess credits in 1997 or from
those withheld in 1998 or from both. Whichever of these the amount will be
taken from will not make a difference.
Even if the FIFO principle were to be applied, the tax credits would have to
be in consonance with the usual and normal course of events. In fact, the
FAR is cumulative in nature.[53] Following a natural sequence, the prior
year's excess tax credits will... have to be reduced first to answer for any
current tax liabilities before the current year's withheld amounts can be
applied. Otherwise, there will be no sense in requiring a taxpayer to fill out
the line items in the FAR to segregate its sources of tax credits.
Whether the FIFO principle is applied or not, Section 76 remains clear and
unequivocal. Once the carry-over option is taken, actually or constructively,
it becomes irrevocable. Petitioner has chosen that option for its 1998
creditable withholding taxes. Thus,... it is no longer entitled to a tax refund
of P459,756.07, which corresponds to its 1998 excess tax credit.
Nonetheless, the amount will not be forfeited in the government's favor,
because it may be claimed by petitioner as tax credits in the succeeding
taxable... years.
WHEREFORE, the Petition in GR No. 156637 is GRANTED and the
assailed December 19, 2002 Decision REVERSED and SET ASIDE. No
pronouncement as to costs.

36. Commissioner of Internal Revenue vs. PERF Realty Corporation,

557 SCRA 165, G.. No. 163345 July 4, 2008
37. Systra Philippines, Inc. vs. Commissioner of Internal Revenue, 533
SCRA 776, G.. No. 176290 September 21, 2007

38. Marcos Il vs. Court of Appeals, 273 SCRA 47, G.R. No. 120880
June 5, 1997
FACTS:
The Cir is being questioned by petitioner for assessing and collecting
through the summary remedy of levy on real property, estate and income
tax delinquencies upon the estate and properties of the late Ferdinand
Marcos despite the pendency of the proceedings on the probate of the will
of the late president.
ISSUE:
Are summary tax remedies affected by the probate proceedings?
RULING:
No. From the foregoing, it is discernible that the approval of the court,
sitting in probate or as a settlement tribunal over the deceased is not a
mandatory requirement in the collection of estate taxes. It cannot be
therefore be argued that the tax bureau erred in proceeding with the levying
sale of the properties on the ground that it was required to seek court
approval.
Digest # 2
Facts:
Bongbong Marcos sought for the reversal of the ruling of the Court of
Appeals to grant CIR's petition to levy the properties of the late Pres.
Marcos to cover the payment of his tax delinquencies during the period of
his exile in the US. The Marcos family was assessed by the BIR after it
failed to file estate tax returns. However the assessment were not protested
administratively by Mrs. Marcos and the heirs of the late president so that
they became final and unappealable after the period for filing of opposition
has prescribed. Marcos contends that the properties could not be levied to
cover the tax dues because they are still pending probate with the court,
and settlement of tax deficiencies could not be had, unless there is an
order by the probate court or until the probate proceedings are terminated.
Petitioner also pointed out that applying Memorandum Circular No. 38-68,
the BIR's Notices of Levy on the Marcos properties were issued beyond the
allowed period, and are therefore null and void.
Issue:
Whether or not the contentions of Bongbong Marcos are correct
Ruling:
No. The deficiency income tax assessments and estate tax assessment are
already final and unappealable -and-the subsequent levy of real properties
is a tax remedy resorted to by the government, sanctioned by Section 213
and 218 of the National Internal Revenue Code. This summary tax remedy
is distinct and separate from the other tax remedies (such as Judicial Civil
actions and Criminal actions), and is not affected or precluded by the
pendency of any other tax remedies instituted by the government.
The approval of the court, sitting in probate, or as a settlement tribunal over
the deceased's estate is not a mandatory requirement in the collection of
estate taxes. On the contrary, under Section 87 of the NIRC, it is the
probate or settlement court which is bidden not to authorize the executor or
judicial administrator of the decedent's estate to deliver any distributive
share to any party interested in the estate, unless it is shown a Certification
by the Commissioner of Internal Revenue that the estate taxes have been
paid. This provision disproves the petitioner's contention that it is the
probate court which approves the assessment and collection of the estate
tax.
On the issue of prescription, the omission to file an estate tax return, and
the subsequent failure to contest or appeal the assessment made by the
BIR is fatal to the petitioner's cause, as under Sec.223 of the NIRC, in case
of failure to file a return, the tax may be assessed at anytime within 10
years after the omission, and any tax so assessed may be collected by levy
upon real property within 3 years (now 5 years) following the assessment of
the tax. Since the estate tax assessment had become final and
unappealable by the petitioner's default as regards protesting the validity of
the said assessment, there is no reason why the BIR cannot continue with
the collection of the said tax.

39. Ungab vs. Cusi, Jr., 97 SCRA 877, Nos. L-41919-24 May 30, 1980
FACTS:
The BIR filed six criminal charges against Quirico Ungab, a banana
saplings producer, for allegedly evading payment of taxes and other
violations of the NIRC. Ungab, subsequently filed a motion to quash on the
ground that (1) the information are null and void for want of authority on the
part of the State Prosecutor to initiate and prosecute the said cases; and
(2)that the trial court has no jurisdiction to take cognizance of the case in
view of his pending protest against the assessment made by the BIR
examiner. The trial court denied the motion prompting the petitioner to file a
petition for certiorari and prohibition with preliminary injunction and
restraining order to annul and set aside the information filed.
ISSUE:
Is the contention that the criminal prosecution is premature since the CIR
has not yet resolved the protest against the tax assessment tenable?
HELD:
No. The contention is without merit. What is involved here is not the
collection of taxes where the assessment of the Commissioner of Internal
Revenue may be reviewed by the Court of Tax Appeals, but a criminal
prosecution for violations of the National Internal Revenue Code which is
within the cognizance of courts of first instance. While there can be no civil
action to enforce collection before the assessment procedures provided in
the Code have been followed, there is no requirement for the precise
computation and assessment of the tax before there can be a criminal
prosecution under the Code.
An assessment of a deficiency is not necessary to a criminal prosecution
for wilful attempt to defeat and evade the income tax. A crime is complete
when the violator has knowingly and wilfully filed a fraudulent return with
intent to evade and defeat the tax. The perpetration of the crime is
grounded upon knowledge on the part of the taxpayer that he has made an
inaccurate return, and the government's failure to discover the error and
promptly to assess has no connections with the commission of the crime.

40. Commissioner of Internal Revenue vs. Court of Appeals, 257

SCRA 200, G.. No. 119322 June 4, 1996
Facts:
A task force was created on June 1, 1993 to investigate tax liabilities of
manufacturers engaged in tax evasion schemes. On July 1, 1993, the CIR
issued Rev. Memo Circ. No. 37-93 which reclassified certain cigarette
brands manufactured by private respondent Fortune Tobacco Corp.
(Fortune) as foreign brands subject to a higher tax rate. On August 3, 1993,
Fortune questioned the validity of said reclassification as being violative of
the right to due process and equal protection of laws. The CTA, on
September 8, 1993 resolved that said reclassification was of doubtful
legality and enjoined its enforcement.
In the meantime, on August 3, 1993, Fortune was assessed deficiency
income, ad valorem and VAT for 1992 with payment due within 30 days
from receipt. On September 12, 1993, private respondent moved for
reconsideration of said assessment. Meanwhile on September 7, 1993, the
Commissioner filed a complaint with the DOJ against private respondent
Fortune, its corporate officers and 9 other corporations and their respective
corporate officers for alleged fraudulent tax evasion for non-payment of the
correct income, ad valorem and VAT for 1992. The complaint was referred
to the DOJ Task Force on revenue cases which found sufficient basis to
further investigate the charges against Fortune.
A subpoena was issued on September 8, 1993 directing private respondent
to submit their counter-affidavits. But it filed a verified motion to dismiss or
alternatively, a motion to suspend but was denied and thus treated as their
counter-affidavit. All motions filed thereafter were denied.
January 4, 1994, private respondents filed a petition for certiorari and
prohibition with prayer for preliminary injunction praying the CIR’s complaint
and prosecutor’s orders be dismissed/set aside or alternatively, that the
preliminary investigation be suspended pending determination by CIR of
Fortune’s motion for reconsideration/reinvestigation of the August 13, 1993
assessment of taxes due.
The trial court granted the petition for a writ of preliminary injunction to
enjoin the preliminary investigation on the complaint for tax evasion
pending before the DOJ, ruling that the tax liability of private respondents
first be settled before any complaint for fraudulent tax evasion can be
initiated.
Issue:
Whether the basis of private respondent’s tax liability first be settled before
any complaint for fraudulent tax evasion can be initiated
Held:
Fraud cannot be presumed. If there was fraud on willful attempt to evade
payment of ad valorem taxes by private respondent through the
manipulation of the registered wholesale price of the cigarettes, it must
have been with the connivance of cooperation of certain BIR officials and
employees who supervised and monitored Fortune’s production activities to
see to it that the correct taxes were paid. But there is no allegation, much
less evidence, of BIR personnel’s malfeasance at the very least, there is
the presumption that BIR personnel performed their duties in the regular
course in ensuring that the correct taxes were paid by Fortune.
Before the tax liabilities of Fortune are finally determined, it cannot be
correctly asserted that private respondents have willfully attempted to
evade or defeat any tax under Secs. 254 and 256, 1997 NIRC, the fact that
a tax is due must first be proved.

41. Bank of the Philippine Islands vs. Commissioner of Internal

Revenue, 729 SCRA 375, G.R. No. 181836 July 9, 2014
Facts:
Respondent thru then Revenue Service Chief Cesar M. Valdez, issued to
the petitioner a pre-assessment notice (PAN) dated November 26, 1986
On April 7, 1989, respondent issued to the petitioner, assessment/demand
notices... for deficiency withholding tax at source (Swap Transactions) and
DST
On April 20, 1989, petitioner filed a protest on the demand/assessment
notices.
Petitioner executed several Waivers of the Statutes of Limitations, the last
of which was effective until December 31, 1994.
On August 9, 2002, respondent issued a final decision on petitioner's
protest ordering the withdrawal and cancellation of the deficiency
withholding tax assessment
On the other hand, the... deficiency DST assessment
Petitioner received a copy of the said decision on January 15, 2003.
January 24,... 2003, petitioner filed a Petition for Review before the Court.
denying the petitioner's Petition for Review
THIS TAX COURT ERRED IN HOLDING THAT THE COLLECTION OF
ALLEGED DEFICIENCY TAX HAS NOT PRESCRIBED.
CIR, asserting that the prescriptive period was tolled by the protest letters
filed by BPI which were granted and acted upon by the CIR
Thus, it was only upon BPI's receipt on 13 January 2003 of the 9 August
2002 Decision that the period to... collect commenced to run again.
Issues:
whether the collection of the deficiency DST is barred by prescription...
whether the prescriptive period for collecting the tax deficiency was
effectively tolled by BPI's filing of the protest letters
Ruling:
the tax court,... In its Petition for Review[5] dated 24 November 2006, BPI
argues that the government's right to collect the DST had already
prescribed because the Commissioner of Internal Revenue (CIR) failed to
issue any reply granting BPI's request for reinvestigation... manifested in
the protest letters
Thus, the CIR has three (3) years from the date of actual filing of the tax...
return to assess a national internal revenue tax or to commence court
proceedings for the collection thereof without an assessment.
When it validly issues an assessment within the three (3)-year period, it has
another three (3) years within which to collect the tax due by distraint, levy,
or court proceeding.
The assessment of the tax is deemed made and the three (3)-year period
for collection of the... assessed tax begins to run on the date the
assessment notice had been released, mailed or sent to the taxpayer.
As applied to the present case, the CIR had three (3) years from the time
he issued assessment notices to BPI on 7 April 1989 or until 6 April 1992
within which to collect the deficiency DST.
However, it was only on 9 August 2002 that the CIR ordered BPI to pay
the... deficiency.
Section 320[12] of the Tax Code of
1977,... The running of the statute of limitations... shall be suspended...
when the taxpayer requests for a re-investigation which is granted by the
Commissioner
In order to suspend the running of the prescriptive periods for assessment
and collection, the request for reinvestigation must be granted by the CIR.
the CIR must first grant the request for reinvestigation as a requirement for
the suspension of the statute of limitations
There is nothing in the records of this case which indicates, expressly or
impliedly, that the CIR had granted the request for reinvestigation filed by
BPI. What is reflected in the records is the piercing silence and inaction of
the CIR on the request for reinvestigation, as he... considered BPI's letters
of protest to be.
there is no evidence in this case that the CIR actually conducted a
reinvestigation upon the request of BPI or that the latter was made aware
of the action taken on its request. Hence, there is no basis for the tax...
court's ruling that the filing of the request for reinvestigation tolled the
running of the prescriptive period for collecting the tax deficiency.
42. BP|-Family Savings Bank, Inc. vs. Court of Appeals, 330 SCRA
507, G.R. No. 122480 April 12, 2000
Facts:
Petitioner bank’s annual corporate income tax return for 1989 showed that
it suffered a loss of P8,286,960, and that it had a total refundable amount of
P297,492 inclusive of P112,491 being claimed as tax refund in the present
case. However, petitioner declared in its 1989 income tax return as a tax
credit in the succeeding taxable year.
On October 11, 1991, petitioner bank filed a written claim for refund of
P112,491 with the BIR alleging that it did not apply the 1989 refundable
amount of P297,492 as tax credit to its 1990 annual corporate income tax
return or either tax liabilities due to business losses it incurred for the same
year. Without waiting for respondent CIR’s action in its claim for refund,
petitioner filed a petition for review with the CTA.
CTA dismissed the petition on the ground that petitioner bank failed to
present as evidence its 1990 annual income tax return to prove that it had
not yet credited the amount of P297,422, inclusive of P112,491 which is the
subject of the present controversy to its 1990 tax liability. Since petitioner
declared in its 1989 income tax return that it would apply the excess
withholding tax as tax credit for the following year, the tax court presumed
that it did so. Petitioner failed to overcome this presumption because it did
not present its 1990 tax return which would have shown that the amount
was not applied as a tax credit. Hence, it was concluded that petition was
not entitled to a tax refund. The CA affirmed said decision of the CTA
Issue:
Whether or not petitioner is entitled to a tax refund of P112,491
representing creditable withholding tax paid for 1989.
Held:
The petition is meritorious. As a rule, the factual findings on the appellate
court are binding on the SC. This rule, however, does not apply where,
inter alia, the judgment is premised on a misapprehension of facts or when
the appellate court failed to notice certain relevant facts which if considered
would justify a different conclusion. This case is one such exception.
Strict procedural rules generally frown up the submission of the return the
trial. R.A. 1125, the law creating the CTA, however, specifically provides
the proceedings before it “shall not be governed strictly by the technical
rules of evidence”. The paramount considerations remains the
ascertainment of truth. Verily, the quest for orderly presentation of issues is
not an absolute. It should not bar courts from considering undisputed facts
to arrive at a just determination of a controversy.
While tax refunds are in the nature of the exceptions and are to the
construct strictissimi juris against the claimant, under the facts of this case,
petitioner has established its claim.
Substantial justice equity, and fair play are on the side of petitioner.
Technicalities and legalisms, however, exalted, should not be misused by
the government to keep money not belonging to it and thereby enrich would
be better by allowing to appeal.

43 (1). Allied Banking Corporation vs. Quezon City Government, 472

SCRA 303, G.R. No. 154126 October 11, 2005
43 (2). Allied Banking Corporation vs. Quezon City Government, 472
SCRA 303, G.R. No. 154126, September 15, 2006
FACTS:
Allied Banking Corporation (petitioner) filed the instant motion for
clarification of the Decision of this Court promulgated on October 11, 2005
which declared as invalid the third sentence of Section 3, Quezon City
Ordinance No. 357 Series of 1995 (the proviso) for adopting a method of
assessment or appraisal of real property contrary to the Local Government
Code and its Implementing Rules and Regulations and the Local
Assessment Regulations No. 1-92 issued by the Department of Finance.
Petitioner contends in its motion for clarification that the return of the real
property tax erroneously collected and paid is a necessary consequence of
this Court’s finding that the proviso is invalid, hence, there is no need to
claim for a refund with the Local Board of Assessment Appeals as provided
by the second paragraph of the dispositive portion of the decision to wit:
WHEREFORE, the petition is hereby GRANTED. The assailed portion of
the provisions of Section 3 of Quezon City Ordinance No. 357 is hereby
declared invalid.
Petitioner’s claim for refund, however, must be lodged with the Local Board
of Assessment Appeals, if it is not barred by the statute of limitations.
(Underscoring supplied)
Treating the motion for clarification as a motion for reconsideration, this
Court required respondents to comment thereon.
In their Comment, respondents aver that with the Court’s finding that
petitioner failed to exhaust administrative remedies, “it cannot be allowed to
create legal shortcut” by demanding that the real property tax it paid be
refunded to it without going through the usual procedure provided for by the
Local Government Code, specifically Sections 252, 226, 229, 230 and 231
thereof. As respondents conclude that the Court’s decision is clear and
exhaustive to guide the parties, they pray that the motion for clarification be
denied.
ISSUE:
WON THE CLAIM FOR REFUND MUST BE FILED TO THE CITY
TREASURER.
HELD:
YES. entitlement to a tax refund does not necessarily call for the automatic
payment of the sum claimed. The amount of the claim being a factual
matter, it must still be proven in the normal course and in accordance with
the administrative procedure for obtaining a refund of real property taxes,
as provided under the Local Government Code.
Under Section 253 of the Local Government Code, the claim for refund or
credit for taxes must be filed before the city treasurer who shall decide the
claim based on the tax declarations, affidavits, documents and other
documentary evidence to be presented by petitioner.
 SEC. 253. Repayment of Excessive Collections. — When
an assessment of basic real property tax, or any other tax levied under this
Title, is found to be illegal or erroneous and the tax is accordingly reduced
or adjusted, the taxpayer may file a written claim for refund or credit for
taxes and interests with the provincial or city treasurer within two (2) years
from the date the taxpayer is entitled to such reduction or adjustment.
The provincial or city treasurer shall decide the claim for tax
refund or credit within sixty (60) days from receipt thereof. In case the claim
for tax refund or credit is denied, the taxpayer may avail of the remedies
provided in Chapter 3, Title Two, Book II of this Code.

44. Manila International Airport Authority vs. Court of Appeals, 495

SCRA 591, G.. No. 155650 July 20, 2006
Facts:
MIAA received Final Notices of Real Estate Tax Delinquency from the City
of Parañaque for the taxable years 1992 to 2001. MIAA’s real estate tax
delinquency was estimated at P624 million.
The City of Parañaque, through its City Treasurer, issued notices of levy
and warrants of levy on the Airport Lands and Buildings. The Mayor of the
City of Parañaque threatened to sell at public auction the Airport Lands and
Buildings should MIAA fail to pay the real estate tax delinquency.
MIAA filed with the Court of Appeals an original petition for prohibition and
injunction, with prayer for preliminary injunction or temporary restraining
order. The petition sought to restrain the City of Parañaque from imposing
real estate tax on, levying against, and auctioning for public sale the Airport
Lands and Buildings.
Paranaque’s Contention: Section 193 of the Local Government Code
expressly withdrew the tax exemption privileges of “government-owned
and-controlled corporations” upon the effectivity of the Local Government
Code. Respondents also argue that a basic rule of statutory construction is
that the express mention of one person, thing, or act excludes all others.
An international airport is not among the exceptions mentioned in Section
193 of the Local Government Code. Thus, respondents assert that MIAA
cannot claim that the Airport Lands and Buildings are exempt from real
estate tax.
MIAA’s contention: Airport Lands and Buildings are owned by the Republic.
The government cannot tax itself. The reason for tax exemption of public
property is that its taxation would not inure to any public advantage, since
in such a case the tax debtor is also the tax creditor.
Issue:
WON Airport Lands and Buildings of MIAA are exempt from real estate tax
under existing laws? Yes. Ergo, the real estate tax assessments issued by
the City of Parañaque, and all proceedings taken pursuant to such
assessments, are void.
Held:
1. MIAA is Not a Government-Owned or Controlled Corporation
MIAA is not a government-owned or controlled corporation but an
instrumentality of the National Government and thus exempt from local
taxation.
MIAA is not a stock corporation because it has no capital stock divided into
shares. MIAA has no stockholders or voting shares.
MIAA is also not a non-stock corporation because it has no members. A
non-stock corporation must have members.
MIAA is a government instrumentality vested with corporate powers to
perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with
corporate powers.
When the law vests in a government instrumentality corporate powers, the
instrumentality does not become a corporation. Unless the government
instrumentality is organized as a stock or non-stock corporation, it remains
a government instrumentality exercising not only governmental but also
corporate powers. Thus, MIAA exercises the governmental powers of
eminent domain, police authority and the levying of fees and charges. At
the same time, MIAA exercises “all the powers of a corporation under the
Corporation Law, insofar as these powers are not inconsistent with the
provisions of this Executive Order.”
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion
and therefore owned by the State or the Republic of the Philippines.
No one can dispute that properties of public dominion mentioned in Article
420 of the Civil Code, like “roads, canals, rivers, torrents, ports and bridges
constructed by the State,” are owned by the State. The term “ports”
includes seaports and airports. The MIAA Airport Lands and Buildings
constitute a “port” constructed by the State. Under Article 420 of the Civil
Code, the MIAA Airport Lands and Buildings are properties of public
dominion and thus owned by the State or the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use because they
are used by the public for international and domestic travel and
transportation. The fact that the MIAA collects terminal fees and other
charges from the public does not remove the character of the Airport Lands
and Buildings as properties for public use.
The charging of fees to the public does not determine the character of the
property whether it is of public dominion or not. Article 420 of the Civil Code
defines property of public dominion as one “intended for public use.” The
terminal fees MIAA charges to passengers, as well as the landing fees
MIAA charges to airlines, constitute the bulk of the income that maintains
the operations of MIAA. The collection of such fees does not change the
character of MIAA as an airport for public use. Such fees are often termed
user’s tax. This means taxing those among the public who actually use a
public facility instead of taxing all the public including those who never use
the particular public facility.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Court has also ruled that property of public dominion, being outside the
commerce of man, cannot be the subject of an auction sale.
Properties of public dominion, being for public use, are not subject to levy,
encumbrance or disposition through public or private sale. Any
encumbrance, levy on execution or auction sale of any property of public
dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to
encumbrances, foreclosures and auction sale. This will happen if the City of
Parañaque can foreclose and compel the auction sale of the 600-hectare
runway of the MIAA for non-payment of real estate tax.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for
the Republic. Section 48, Chapter 12, Book I of the Administrative Code
allows instrumentalities like MIAA to hold title to real properties owned by
the Republic. n MIAA’s case, its status as a mere trustee of the Airport
Lands and Buildings is clearer because even its executive head cannot
sign the deed of conveyance on behalf of the Republic. Only the President
of the Republic can sign such deed of conveyance.
d. Transfer to MIAA was Meant to Implement a Reorganization
The transfer of the Airport Lands and Buildings from the Bureau of Air
Transportation to MIAA was not meant to transfer beneficial ownership of
these assets from the Republic to MIAA. The purpose was merely
toreorganize a division in the Bureau of Air Transportation into a separate
and autonomous body. The Republic remains the beneficial owner of the
Airport Lands and Buildings. MIAA itself is owned solely by the Republic.
No party claims any ownership rights over MIAA’s assets adverse to the
Republic.
e. Real Property Owned by the Republic is Not Taxable
Sec 234 of the LGC provides that real property owned by the Republic of
the Philippines or any of its political subdivisions except when the beneficial
use thereof has been granted, for consideration or otherwise, to a taxable
person following are exempted from payment of the real property tax.
However, portions of the Airport Lands and Buildings that MIAA leases to
private entities are not exempt from real estate tax. For example, the land
area occupied by hangars that MIAA leases to private corporations is
subject to real estate tax.
45. Philippine Rural Electric Cooperatives Association, Inc.
(PHILRECA) vs. The Secretary, Department of Interior and Local
Government, 403 SCRA 558
FACTS:
This is a petition for Prohibition under Rule 65 of the Rules of Court with a
prayer for the issuance of a temporary restraining order seeking to annul as
unconstitutional sections 193 and 234 of R.A. No. 7160 otherwise known
as the Local Government Code. A class suit was filed by petitioners in their
own behalf and in behalf of other electric cooperatives organized and
existing under P.D. No. 269 who are members of petitioner Philippine Rural
Electric Cooperatives Association, Inc. (PHILRECA). Petitioners contend
that pursuant to the provisions of P.D. No. 269, as amended, and the
provision in the loan agreements of the government of the Philippines with
the government of the United State of America, they are exempt from
payment of local taxes, including payment of real property tax. With the
passage of the Local Government Code, however, they allege that their tax
exemptions have been invalidly withdrawn. In particular, petitioners assail
Sections 193 and 234 of the Local Government Code on the ground that
the said provisions discriminate against them, in violation of the equal
protection clause. Further, they submit that the said provisions are
unconstitutional because they impair the obligation of contracts between
the Philippine Government and the United States Government.
ISSUE:
Did Sections 193 and 234 of the Local Government Code violate the equal
protection clause?
HELD:
NO. The pertinent parts of Sections 193 and 234 of the Local Government
Code provide:
Section 193. Withdrawal of Tax Exemption Privileges. Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or presently
enjoyed by all persons, whether natural or juridical, including government-
owned and controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions, are hereby withdrawn upon the
effectivity of this Code.

46. Petron Corporation vs. Tiangco, 551 SCRA 484, G.. No. 158881
April 16, 2008
FACTS:
Petron maintains a depot or bulk plant at the Navotas Fishport Complex in
Navotas. Through that depot, it has engaged in the selling of diesel fuels to
vessels used in commercial fishing in and around Manila Bay. On 1 March
2002, Petron received a letter from the office of Navotas Mayor, respondent
Toby Tiangco, wherein the corporation was assessed taxes “relative to the
figures covering sale of diesel declared by your Navotas Terminal from
1997 to 2001.” The stated total amount due was P6,259,087.62, a figure
derived from the gross sales of the depot during the years in question. The
computation sheets that were attached to the letter made reference to
Ordinance 92-03, or the New Navotas Revenue Code (Navotas Revenue
Code), though such enactment was not cited in the letter itself.
Petron duly filed with Navotas a letter-protest to the notice of assessment
pursuant to Section 195 of the Code. It argued that it was exempt from
local business taxes in view of Art. 232 (h) of the Implementing Rules (IRR)
of the LGC, as well as a ruling of the Bureau of Local Government Finance
of the Department of Finance dated 31 July 1995, the latter stating that
sales of petroleum fuels are not subject to local taxation. The letter-protest
was denied by the Navotas Municipal Treasurer, respondent Manuel T.
Enriquez, in a letter dated 8 May 2002. This was followed by a letter from
the Mayor dated 15 May 2002, captioned “Final Demand to Pay”, requiring
that Petron pay the assessed amount within five (5) days from receipt
thereof, with a threat of closure of Petron’s operations within Navotas
should there be no payment. Petron, through counsel, replied to the Mayor
by another letter posing objections to the threat of closure.
ISSUE:
WON PETROLEUM PRODUCTS MAY BE SUBJECTED TO BUSINESS
TAX
HELD:
NO. The language of Section 133 (h) makes plain that the prohibition with
respect to petroleum products extends not only to excise taxes thereon, but
all “taxes, fees and charges.” The earlier reference in paragraph (h) to
excise taxes comprehends a wider range of subjects of taxation: all articles
already covered by excise taxation under the NIRC, such as alcohol
products, tobacco products, mineral products, automobiles, and such non-
essential goods as jewelry, goods made of precious metals, perfumes, and
yachts and other vessels intended for pleasure or sports. In contrast, the
later reference to “taxes, fees and charges” pertains only to one class of
articles of the many subjects of excise taxes, specifically, “petroleum
products”.While local government units are authorized to burden all such
other class of goods with “taxes, fees and charges”,excepting excise taxes,
a specific prohibition is imposed barring the levying of any other type of
taxes with respect to petroleum products.While Section 133 (h) does not
generally bar the imposition of business taxes on articles burdened by
excise taxes under the NIRC, it specifically prohibits local government units
from extending the levy of any kind of “taxes, fees or charges on petroleum
products.” Accordingly, the subject tax assessment is ultra vires and void.

47. First Philippine Industrial Corporation vs. Court of Appeals, 300

SCRA 661, G.R. No. 125948 December 29, 1998
FACTS:
Petitioner is a grantee of a pipeline concession under Republic Act No.
387, as amended, to contract, install and operate oil pipelines. The original
pipeline concession was granted in 1967 and renewed by the Energy
Regulatory Board in 1992.
Sometime in January 1995, petitioner applied for a mayor’s permit with the
Office of the Mayor of Batangas City. However, before the mayor’s permit
could be issued, the respondent City Treasurer required petitioner to pay a
local tax based on its gross receipts for the fiscal year 1993 pursuant to the
Local Government Code. The respondent City Treasurer assessed a
business tax on the petitioner amounting to P956,076.04 payable in four
installments based on the gross receipts for products pumped at GPS-1 for
the fiscal year 1993 which amounted to P181,681,151.00. In order not to
hamper its operations, petitioner paid the tax under protest in the amount of
P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the
respondent City Treasurer. On March 8, 1994, the respondent City
Treasurer denied the protest contending that petitioner cannot be
considered engaged in transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local Government Code.
ISSUE:
WON THE PETITIONER IS A COMMON CARRIER.
HELD:
YES. A “common carrier” may be defined, broadly, as one who holds
himself out to the public as engaged in the business of transporting
persons or property from place to place, for compensation, offering his
services to the public generally. Article 1732 of the Civil Code defines a
“common carrier” as “any person, corporation, firm or association engaged
in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.”
The test for determining whether a party is a common carrier of goods is: 1.
He must be engaged in the business of carrying goods for others as a
public employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a
casual occupation; 2. He must undertake to carry goods of the kind to
which his business is confined; 3. He must undertake to carry by the
method by which his business is conducted and over his established roads:
and 4. The transportation must be for hire. Based on the above definitions
and requirements, there is no doubt that petitioner is a common carrier. It is
engaged in the business of transporting or carrying goods, i.e., petroleum
products, for hire as a public employment. It undertakes to carry for all
persons indifferently, that is, to all persons who choose to employ its
services and transports the goods by land and for compensation. The fact
that petitioner has a limited clientele does not exclude it from the definition
of a common carrier. As correctly pointed out by petitioner, the definition of
“common carrier” in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide that
the transportation of the passengers or goods should be by motor vehicle.
In fact, in the United States, oil pipe line operators are considered common
carriers. Under the Petroleum Act of the Philippines (Republic Act 387),
petitioner is considered a “common carrier.” Thus, Article 86 thereof
provides that: “Article 86. Pipe line concessionaire as common carrier. — A
pipe line shall have the preferential right to utilize installations for the
transportation of petroleum owned by him, but is obligated to utilize the
remaining transportation capacitypro rata for the transportation of such
other petroleum as may be offered by others for transport and to charge
without discrimination such rates as may have been approved by the
Secretary of Agriculture and Natural Resources.” Republic Act 387 also
regards petroleum operation as a public utility. Pertinent portion of Article 7
thereof provides: “that everything relating to the exploration for and
exploitation of petroleum . . . and everything relating to the manufacturer,
refining, storage or transportation by special methods of petroleum, is
hereby declared to be a public utility.” The Bureau of Internal Revenue
likewise considers the petitioner a “common carrier.” The BIR Ruling No.
069-83, it declared: ” . . . since [petitioner] is a pipeline concessionaire that
is engaged only in transporting petroleum products, it is considered a
common carrier under Republic Act No. 387 . . .. Such being the case, it is
not subject to withholding tax prescribed by Revenue Regulations No. 13-
78 as amended.” From the foregoing disquisition there is no doubt that
petitioner is a “common carrier” and, therefore, exempt from the business
tax as provided for in Section 133 (j) of the Local Government Code, to wit:
“Section 133. Common Limitations on the Taxing Power of Local
Government Units. — Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following: . . . (j) Taxes on the gross receipts of
transportation contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air, land or water
except as provided in this Code.

48. City of Iriga vs. Camarines Sur Ill Electric Cooperative, Inc.
(CASURECO II), 680 SCRA 236, G.. No. 192945 September 5, 2012
Facts:
Respondent Camarines Sur III Electric Cooperative, Inc. (CASURECO), an
electric cooperative organized under Presidential Decree(PD) No. 269 and
registered with the National Electrification Administration (NEA), is engaged
in the business of electric powerdistribution to various end-users and
consumers within the City of Iriga and the municipalities of Nabua, Bato,
Baao, Buhi, Bula andBalatan of the Province of Camarines Sur (or the
Rinconada area). Petitioner City of Iriga assessed CASURECO deficiency
franchise tax and RPT covering the periods 1998 to 2003 and 1995 to
2003,respectively. CASURECO refused to pay and argued that as an
electric cooperative provisionally registered with the
CooperativeDevelopment Authority (CDA), it is exempt from the payment of
local taxes. Petitioner filed a collection complaint against CASURECO with
the RTC, which ruled that the city’s right to assess RPT for 1995 - 1999had
already prescribed. The RTC also ruled that CASURECO is liable for
franchise taxes for 2000 – 2003 based on its gross receipts fromIriga City
and the Rinconada area, on the ground that the “situs of taxation is the
place where the privilege is exercised.”On appeal, the Court of Appeals
(CA) reversed the RTC on the ground that CASURECO is a non-profit
entity which does not fall withinthe purview of businesses enjoying a
franchise.
Issues:
Did CASURECO correctly appeal the RTC decision to the CA? NO2. Is
CASURECO liable for franchise tax? YES
Ruling:1. No. CASURECO should have filed its appeal with the CTA,
which has exclusive jurisdiction to review decisions, orders or
resolutionsof the RTCs in local tax cases originally decided or
resolved by the RTCs in the exercise of their original or appellate
jurisdiction.2. Yes. CASURECO is liable for franchise tax.PD No. 269,
which took effect on August 6, 1973, granted exemption from the
payment of all national and local taxes and fees to
electriccooperatives registered with NEA.RA No. 6939, enacted on
March 10, 1990, created and authorized the CDA to register
cooperatives, while RA No. 6938, enacted on thesame day, provides
that electric cooperatives registered with NEA under PD No. 269
which opt not to register with the CDA shall not beentitled to the
benefits and privileges under the law.On January 1, 1992, the LGC
 took effect and withdrew tax exemptions or incentives previously
enjoyed by all persons, natural andjudicial, including GOCCs, except
for certain entities, such as cooperatives duly registered under RA
No. 6938.The provisional registration of CASURECO with the CDA,
which granted it exemption from payment of local taxes, was only
until May4, 1992. Thereafter, CASURECO was no longer exempt
from the payment of local taxes, including the franchise tax.A
franchise tax is “a tax on the privilege of transacting business in the
state and exercising corporate franchises granted by the state.” It
isnot levied simply for existing as a corporation upon its property or
on its income, but on its exercise of the rights or privileges granted
toit by the government.To be liable for local franchise tax: 1) one
must have a “franchise” in the sense of a secondary or special
franchise; and 2) it must exerciseits rights or privileges under this
franchise within the territory of the pertinent LGU.Both requisites
being present, CASURECO is liable to pay franchise tax. Being in the
nature of an excise tax, the situs of taxation is theplace where the
privilege is exercised. Hence, CASURECO is liable for franchise tax
on all its gross receipts from Iriga City and theRinconada area where
it operates, regardless of the place where its services or products are
delivered.

49. City of Pasig vs. Manila Electric Company, 857 SCRA 517, G.R. No.
181710 March 7, 2018
FACTS:
1992: The Sangguniang Bayanof the Municipality of Pasig enacted
Ordinance No. 25, which imposed a franchise tax on all business venture
operations carried out through a franchise within the municipality.
1995:The Municipality of Pasig was converted into a highly urbanized city
by virtue of R.A. 7829.2001: The Treasurer’s Office of the City
Government of Pasig informed MERALCO, a grantee of a legislative
franchise,that it is liable to pay taxes for the period 1996 to 1999, pursuant
to Municipal Ordinance No. 25. oThe city, thereafter, on two separate
occasions, demanded payment of the said tax exclusive of penalties.
MERALCO protestedthe validity of the demand and subsequently
instituted an action before the RTC for the annulment of the said demand
with prayer for a temporary restraining order and a writ of preliminary
injunction.RTC:ruled in favor of the City of Pasig. Upon appeal, CAreversed
the RTC ruling. Hence, this instant appeal.
ISSUE:
Whether or not Section 32 of Municipal Ordinance No. 25 is void for being
in direct contravention with Section 142 of the LGC (prohibitory law). YES
.HELD:
W/N the Municipality of Pasig can impose franchise taxes. No. RATIO:
Unlike a city, amunicipality is bereft ofauthority to levy franchise tax, thus,
the ordinance enactedfor that purpose is void. The conversion of the
municipality into a city does not lend validity to the void ordinance. Neither
does it authorize the collection of the tax under said ordinance.The LGC
further provides that the power to impose a tax, fee, or charge or to
generate revenue shall beexercised by the Sanggunian of the local
government unit concerned through an appropriate ordinance.However, an
ordinance must pass the test of constitutionality and the test of consistency
with the prevailing laws. Otherwise, it shall be void.It is not disputed that at
the time the ordinance in question was enacted in 1992, the local
government of Pasig, then a municipality, had no authority to levy franchise
tax. Article 5 of the Civil Code explicitly provides, "acts executed against
the provisions of mandatory or prohibitory laws shall be void, except when
the law itself authorizes their validity." Section 32 of Municipal Ordinance
No. 25 is, thus, void for being in direct contravention with Section 142 of the
LGC. Being void, it cannot be given any legal effect. An assessment and
collection pursuant to the said ordinance is, perforce, legally
infirm.DISPOSITIVE PORTION: WHEREFORE, the petition is DENIED for
lack of merit. The 28 August 2007 Decision and the 8 February 2008
Resolution of the Court of Appeals in CA-G.R. CV No. 81255 are hereby
AFFIRMED

50. Lepanto Consolidated Mining Company vs, Ambanloc, 622 SCRA

229, G.. No, 180639 June 29, 2010
FACTS:
Lepanto Consolidated Mining had a mining lease contract for a mining
claim in Benguet. They used the sand and gravel mined to construct and
maintain concrete structures needed in its mining operations such as a
tailings dam, access roads, and offices. The provincial treasurer of Benguet
then asked Lepanto Consolidated Mining to pay sand and gravel tax for the
quarry materials extracted from the mining site. The counterargument was
that the said tax applied only to commercial extractions and since Lepanto
did not supply other users for some profit, the tax should not apply.
ISSUE:
Is Lepanto liable for the tax imposed by Benguet on the sand and gravel
that it extracted from within the area of its mining claim used exclusively in
its mining operations?
HELD:
YES. The CTA erred in applying the provision of the Local Government
Code (Section 138) since the basis of Benguet province emanates from the
Revised Benguet Revenue Code itself. This notwithstanding, the provincial
revenue measure still did not distinguish between commercial and non-
commercial extractions.
In addition, the Petitioner’s argument that when a company is taxed on its
main business it can no longer be taxable for engaging in an activity that is
but part of, incidental to, and necessary to such main business, was held to
be inapplicable. The Court said that the cases where the above principle
has been applied involved business taxes and thus the incidental activities
could not be treated as separate and distinct from the main business. Here
the tax being imposed was an excise tax levied on the privilege of
extracting gravel and sand.

51. Pelizloy Realty Corporation vs. Province of Benguet, 695 SCRA

491, G.. No. 183137 April 10, 2013
FACTS:
Petitioner Pelizloy Realty Corporation (“Pelizloy”) owns Palm Grove Resort,
which is designed for recreation and which has facilities like swimming
pools, a spa and function halls. It is located at Asin, Angalisan, Municipality
of Tuba, Province of Benguet.
On December 8, 2005, the Provincial Board of the Province of Benguet
approved Provincial Tax Ordinance No. 05-107, otherwise known as the
Benguet Revenue Code of 2005 (“Tax Ordinance”).Section 59, Article X of
the Tax Ordinance levied a ten percent (10%) amusement tax on gross
receipts from admissions to “resorts, swimming pools, bath houses, hot
springs and tourist spots.” Specifically, it provides the following:
Article Ten: Amusement Tax on Admission
Section 59. Imposition of Tax.— There is hereby levied a tax to be
collected from the proprietors, lessees, or operators of theaters, cinemas,
concert halls, circuses, cockpits, dancing halls, dancing schools, night or
day clubs, and other places of amusement at the rate of thirty percent
(30%) of the gross receipts from admission fees; and
A tax of ten percent (10%) of gross receipts from admission fees for boxing,
resorts, swimming pools, bath houses, hot springs, and tourist spots is
likewise levied.[Emphasis and underscoring supplied]
Section 162 of the Tax Ordinance provided that the Tax Ordinance shall
take effect on January 1, 2006.
It was Pelizloy’s position that the Tax Ordinance’s imposition of a 10%
amusement tax on gross receipts from admission fees for resorts,
swimming pools, bath houses, hot springs, and tourist spots is an ultra
vires act on the part of the Province of Benguet. Thus, it filed an
appeal/petition before the Secretary of Justice on January 27, 2006.
ISSUE:
WON THE PROVINCE HAS THE POWER TO IMPOSE PERCENTAGE
TAX.
WON THE SECOND PARAGRAPH MENTIONED IN THE ORDINANCE IS
BEYOND THE CONTEMPLATION OF THE POWER OF THE PROVINCE
TO IMPOSE AMUSEMENT TAXES.
HELD:
YES. Amusement taxes are fixed at a certain percentage of the gross
receipts incurred by certain specified establishments. Thus, applying the
definition in CIR v. Citytrust and drawing from the treatment of amusement
taxes by the NIRC, amusement taxes are percentage taxes as correctly
argued by Pelizloy. However, provinces are not barred from levying
amusement taxes even if amusement taxes are a form of percentage
taxes. Section 133 (i) of the LGCprohibits the levy of percentage taxes
“except as otherwise provided” by the LGC.
Section 140 of the LGC provides:
SECTION 140. Amusement Tax. — (a) The province may levy an
amusement tax to be collected from the proprietors, lessees, or operators
of theaters, cinemas, concert halls, circuses, boxing stadia, and other
places of amusement at a rate of not more than thirty percent (30%) of the
gross receipts from admission fees.
(b) In the case of theaters of cinemas, the tax shall first be deducted and
withheld by their proprietors, lessees, or operators and paid to the
provincial treasurer before the gross receipts are divided between said
proprietors, lessees, or operators and the distributors of the
cinematographic films.
(c) The holding of operas, concerts, dramas, recitals, painting and art
exhibitions, flower shows, musical programs, literary and oratorical
presentations, except pop, rock, or similar concerts shall be exempt from
the payment of the tax herein imposed.
(d) The Sangguniang Panlalawigan may prescribe the time, manner, terms
and conditions for the payment of tax. In case of fraud or failure to pay the
tax, the Sangguniang Panlalawigan may impose such surcharges, interests
and penalties.
(e) The proceeds from the amusement tax shall be shared equally by the
province and the municipality where such amusement places are located.
[Underscoring supplied] ASaTCE
Evidently, Section 140 of the LGC carves a clear exception to the general
rule in Section 133 (i). Section 140 expressly allows for the imposition by
provinces of amusement taxes on “the proprietors, lessees, or operators of
theaters, cinemas, concert halls, circuses, boxing stadia, and other places
of amusement.”
However, resorts, swimming pools, bath houses, hot springs, and tourist
spots are not among those places expressly mentioned by Section 140 of
the LGC as being subject to amusement taxes. Thus, the determination of
whether amusement taxes may be levied on admissions to resorts,
swimming pools, bath houses, hot springs, and tourist spots hinges on
whether the phrase ‘other places of amusement’ encompasses resorts,
swimming pools, bath houses, hot springs, and tourist spots.
Considering these, it is clear that resorts, swimming pools, bath houses,
hot springs and tourist spots cannot be considered venues primarily “where
one seeks admission to entertain oneself by seeing or viewing the show or
performances”.While it is true that they may be venues where people are
visually engaged, they are not primarily venues for their proprietors or
operators to actively display, stage or present shows and/or
performances.Thus, resorts, swimming pools, bath houses, hot springs and
tourist spots do not belong to the same category or class as theaters,
cinemas, concert halls, circuses, and boxing stadia. It follows that they
cannot be considered as among the ‘other places of amusement’
contemplated by Section 140 of the LGC and which may properly be
subject to amusement taxes.

52. Philippine Basketball Association vs, Court of Appeals, 337 SCRA

358, G.R, No, 119122 August 8, 2000
FACTS:
The PBA received an assessment letter from the Commissioner of Internal
Revenue (CIR) for the payment of deficiency amusement tax.
The PBA contested the assessment by filing a protest with the CIR who
denied the same. The PBA then filed a petition for review with the Court of
Tax Appeals (CTA), in which they held against the PBA.
The PBA filed an appeal with the Court of Appeals which was also denied.
ISSUES:
Whether the amusement tax on admission tickets to PBA games is a
national tax.
Whether the cession of advertising and streamer spaces to Vintage
Enterprises, Inc. subject to amusement tax.
RULING:
YES. The Local Tax Code does not provide for professional basketball
games but rather in PD 1959. It is clear that the "proprietor, lessee or
operator of professional basketball games" is required to pay an
amusement tax of 15% of their gross receipts to the BIR, which payment is
a national tax.
YES. The definition of gross receipts is broad enough to embrace the
cession of advertising and streamer spaces as the same embraces all the
receipts of the proprietor, lessee or operator of the amusement place. The
law being clear, there is no need for an extended interpretation.

53. Angeles City vs. Angeles Electric Corporation, 622 SCRA 43, G.R,
No, 166134 June 29, 2010
FACTS:
On June 18, 1964, AEC was granted a legislative franchise under Republic
Act No. (RA) 4079 to construct, maintain and operate an electric light, heat,
and power system for the purpose of generating and distributing electric
light, heat and power for sale in Angeles City, Pampanga. Pursuant to
Section 3-A thereof, AEC’s payment of franchise tax for gross earnings
from electric current sold was in lieu of all taxes, fees and assessments.
On September 11, 1974, Presidential Decree No. (PD) 551 reduced the
franchise tax of electric franchise holders. Section 1 of PD 551 provided
that:
SECTION 1. Any provision of law or local ordinance to the contrary
notwithstanding, the franchise tax payable by all grantees of franchises to
generate, distribute and sell electric current for light, heat and power shall
be two percent (2%) of their gross receipts received from the sale of
electric current and from transactions incident to the generation, distribution
and sale of electric current. cIADTC
Such franchise tax shall be payable to the Commissioner of Internal
Revenue or his duly authorized representative on or before the twentieth
day of the month following the end of each calendar quarter or month as
may be provided in the respective franchise or pertinent municipal
regulation and shall, any provision of the Local Tax Code or any other law
to the contrary notwithstanding, be in lieu of all taxes and assessments of
whatever nature imposed by any national or local authority on earnings,
receipts, income and privilege of generation, distribution and sale of electric
current.
On January 1, 1992, RA 7160 or the Local Government Code (LGC) of
1991 was passed into law, conferring upon provinces and cities the power,
among others, to impose tax on businesses enjoying franchise. In
accordance with the LGC, the Sangguniang Panlungsod of Angeles City
enacted on December 23, 1993 Tax Ordinance No. 33, S-93, otherwise
known as the Revised Revenue Code of Angeles City (RRCAC).
On February 7, 1994, a petition seeking the reduction of the tax rates and a
review of the provisions of the RRCAC was filed with the Sangguniang
Panlungsod by Metro Angeles Chamber of Commerce and Industry Inc.
(MACCI) of which AEC is a member. There being no action taken by the
Sangguniang Panlungsod on the matter, MACCI elevated the petition to the
Department of Finance, which referred the same to the Bureau of Local
Government Finance (BLGF). In the petition, MACCI alleged that the
RRCAC is oppressive, excessive, unjust and confiscatory; that it was
published only once, simultaneously on January 22, 1994; and that no
public hearings were conducted prior to its enactment. Acting on the
petition, the BLGF issued a First Indorsement to the City Treasurer of
Angeles City, instructing the latter to make representations with the
Sangguniang Panlungsod for the appropriate amendment of the RRCAC in
order to ensure compliance with the provisions of the LGC, and to make a
report on the action taken within five days.
Thereafter, starting July 1995, AEC has been paying the local franchise tax
to the Office of the City Treasurer on a quarterly basis, in addition to the
national franchise tax it pays every quarter to the Bureau of Internal
Revenue (BIR).
ISSUE:
whether the RTC gravely abused its discretion in issuing the writ of
preliminary injunction enjoining Angeles City and its City Treasurer from
levying, selling, and disposing the properties of AEC.
HELD:
NO. A principle deeply embedded in our jurisprudence is that taxes being
the lifeblood of the government should be collected promptly, without
unnecessary hindrance or delay. In line with this principle, the National
Internal Revenue Code of 1997 (NIRC) expressly provides that no court
shall have the authority to grant an injunction to restrain the collection of
any national internal revenue tax, fee or charge imposed by the code. An
exception to this rule obtains only when in the opinion of the Court of Tax
Appeals (CTA) the collection thereof may jeopardize the interest of the
government and/or the taxpayer.
The situation, however, is different in the case of the collection of local
taxes as there is no express provision in the LGC prohibiting courts from
issuing an injunction to restrain local governments from collecting taxes.
Thus, in the case of Valley Trading Co., Inc. v. Court of First Instance of
Isabela, Branch II, cited by the petitioner, we ruled that: EHCa
Unlike the National Internal Revenue Code, the Local Tax Code does not
contain any specific provision prohibiting courts from enjoining the
collection of local taxes. Such statutory lapse or intent, however it may be
viewed, may have allowed preliminary injunction where local taxes are
involved but cannot negate the procedural rules and requirements under
Rule 58.
In light of the foregoing, petitioner’s reliance on the above-cited case to
support its view that the collection of taxes cannot be enjoined is
misplaced. The lower court’s denial of the motion for the issuance of a writ
of preliminary injunction to enjoin the collection of the local tax was upheld
in that case, not because courts are prohibited from granting such
injunction, but because the circumstances required for the issuance of writ
of injunction were not present.
Nevertheless, it must be emphasized that although there is no express
prohibition in the LGC, injunctions enjoining the collection of local taxes are
frowned upon. Courts therefore should exercise extreme caution in issuing
such injunctions.
No grave abuse of discretion was committed by the RTC
Section 3, Rule 58, of the Rules of Court lays down the requirements for
the issuance of a writ of preliminary injunction, viz.:
(a) That the applicant is entitled to the relief demanded, and the whole or
part of such relief consists in restraining the commission or continuance of
the acts complained of, or in the performance of an act or acts, either for a
limited period or perpetually;
(b) That the commission, continuance or non-performance of the act or acts
complained of during the litigation would probably work injustice to the
applicant; or
(c) That a party, court, or agency or a person is doing, threatening, or
attempting to do, or is procuring or suffering to be done, some act or acts
probably in violation of the rights of the applicant respecting the subject of
the action or proceeding, and tending to render the judgment ineffectual.
Two requisites must exist to warrant the issuance of a writ of preliminary
injunction, namely: (1) the existence of a clear and unmistakable right that
must be protected; and (2) an urgent and paramount necessity for the writ
to prevent serious damage..
Guided by the foregoing, we find no grave abuse of discretion on the part of
the RTC in issuing the writ of injunction. Petitioner, who has the burden to
prove grave abuse of discretion, failed to show that the RTC acted
arbitrarily and capriciously in granting the injunction. Neither was petitioner
able to prove that the injunction was issued without any factual or legal
justification. In assailing the injunction, petitioner primarily relied on the
prohibition on the issuance of a writ of injunction to restrain the collection of
taxes. But as we have already said, there is no such prohibition in the case
of local taxes. Records also show that before issuing the injunction, the
RTC conducted a hearing where both parties were given the opportunity to
present their arguments. During the hearing, AEC was able to show that it
had a clear and unmistakable legal right over the properties to be levied
and that it would sustain serious damage if these properties, which are vital
to its operations, would be sold at public auction. As we see it then, the writ
of injunction was properly issued. cEaSHC
A final note. While we are mindful that the damage to a taxpayer’s property
rights generally takes a back seat to the paramount need of the State for
funds to sustain governmental functions, this rule finds no application in the
instant case where the disputed tax assessment is not yet due and
demandable. Considering that AEC was able to appeal the denial of its
protest within the period prescribed under Section 195 of the LGC, the
collection of business taxes through levy at this time is, to our mind, hasty,
if not premature. The issues of tax exemption, double taxation, prescription
and the alleged retroactive application of the RRCAC, raised in the protest
of AEC now pending with the RTC, must first be resolved before the
properties of AEC can be levied. In the meantime, AEC’s rights of
ownership and possession must be respected.

54. City Mayor, City Treasurer, City Assessor of Quezon City vs, Rizal
Commercial Banking Corporation, 626 SCRA 469, G.. No. 171033
August 3, 2010
FACTS:
MERALCO is a private corporation organized and existing under Philippine
laws to operate as a public utility engaged in electric distribution.
MERALCO has been successively granted franchises to operate in Lucena
City beginning 1922 until present time, particularly, by: (1) Resolution No.
36 dated May 15, 1922 of the Municipal Council of Lucena; (2) Resolution
No. 108 dated July 1, 1957 of the Municipal Council of Lucena; (3)
Resolution No. 2679 dated June 13, 1972 of the Municipal Board of Lucena
City; (4) Certificate of Franchise dated October 28, 1993 issued by the
National Electrification Commission; and (5) Republic Act No. 9209
approved on June 9, 2003 by Congress.
On February 20, 1989, MERALCO received from the City Assessor of
Lucena a copy of Tax Declaration No. 019-6500 covering the following
electric facilities, classified as capital investment, of the company: (a)
transformer and electric post; (b) transmission line; (c) insulator; and (d)
electric meter, located in Quezon Ave. Ext., Brgy. Gulang-Gulang, Lucena
City. Under Tax Declaration No. 019-6500, these electric facilities had a
market value of P81,811,000.00 and an assessed value of P65,448,800.00,
and were subjected to real property tax as of 1985.
MERALCO appealed Tax Declaration No. 019-6500 before the LBAA of
Lucena City, which was docketed as LBAA-89-2. MERALCO claimed that
its capital investment consisted only of its substation facilities, the true and
correct value of which was only P9,454,400.00; and that MERALCO was
exempted from payment of real property tax on said substation facilities.
The LBAA rendered a Decision in LBAA-89-2 on July 5, 1989, finding that
under its franchise, MERALCO was required to pay the City Government of
Lucena a tax equal to 5% of its gross earnings, and “[s]aid tax shall be due
and payable quarterly and shall be in lieu of any and all taxes of any kind,
nature, or description levied, established, or collected . . ., on its poles,
wires, insulators, transformers and structures, installations, conductors, and
accessories, . . ., from which taxes the grantee (MERALCO) is hereby
expressly exempted.” As regards the issue of whether or not the poles,
wires, insulators, transformers, and electric meters of MERALCO were real
properties, the LBAA cited the 1964 case of Board of Assessment Appeals
v. Manila Electric Company (1964 MERALCO case) in which the Court held
that: (1) the steel towers fell within the term “poles” expressly exempted
from taxes under the franchise of MERALCO; and (2) the steel towers were
personal properties under the provisions of the Civil Code and, hence, not
subject to real property tax. The LBAA lastly ordered that Tax Declaration
No. 019-6500 would remain and the poles, wires, insulators, transformers,
and electric meters of MERALCO would be continuously assessed, but the
City Assessor would stamp on the said Tax Declaration the word “exempt.
ISSUES:
A. WON MERALCO PROPERLY POSTED A BOND.
B. WON MERALCO IS SUBJECT TO REAL PROPERTY TAX.
C. WON THE ASSESSMENT MADE BY THE CITY ASSESSOR IS NULL
AND VOID.
HELD:
A. YES. Section 252 of the Local Government Code mandates that “[n]o
protest shall be entertained unless the taxpayer first pays the tax.” It is
settled that the requirement of “payment under protest” is a condition sine
qua non before an appeal may be entertained. Section 231 of the same
Code also dictates that “[a]ppeal on assessments of real property . . . shall,
in no case, suspend the collection of the corresponding realty taxes on the
property involved as assessed by the provincial or city assessor, without
prejudice to subsequent adjustment depending upon the final outcome of
the appeal.” Clearly, under the Local Government Code, even when the
assessment of the real property is appealed, the real property tax due on
the basis thereof should be paid to and/or collected by the local
government unit concerned.
In the case at bar, the City Treasurer of Lucena, in his letter dated October
16, 1997, sought to collect from MERALCO the amount of P17,925,117.34
as real property taxes on its machineries, plus penalties, for the period of
1990 to 1997, based on Tax Declaration Nos. 019-6500 and 019-7394
issued by the City Assessor of Lucena. MERALCO appealed Tax
Declaration Nos. 019-6500 and 019-7394 with the LBAA, but instead of
paying the real property taxes and penalties due, it posted a surety bond in
the amount of P17,925,117.34.
By posting the surety bond, MERALCO may be considered to have
substantially complied with Section 252 of the Local Government Code for
the said bond already guarantees the payment to the Office of the City
Treasurer of Lucena of the total amount of real property taxes and
penalties due on Tax Declaration Nos. 019-6500 and 019-7394. This is not
the first time that the Court allowed a surety bond as an alternative to cash
payment of the real property tax before protest/appeal as required by
Section 252 of the Local Government Code. In Camp John Hay
Development Corporation v. Central Board of Assessment Appeals, the
Court affirmed the ruling of the CBAA and the Court of Tax Appeals en
banc applying the “payment under protest” requirement in Section 252 of
the Local Government Code and remanding the case to the LBAA for
“further proceedings subject to a full and up-to-date payment, either in cash
or surety, of realty tax on the subject properties . . . .”
Accordingly, the LBAA herein correctly took cognizance of and gave due
course to the appeal of Tax Declaration Nos. 019-6500 and 019-7394 filed
by MERALCO.
B. YES. The last paragraph of Section 234 had unequivocally withdrawn,
upon the effectivity of the Local Government Code, exemptions from
payment of real property taxes granted to natural or juridical persons,
including government-owned or controlled corporations, except as provided
in the same section.
MERALCO, a private corporation engaged in electric distribution, and its
transformers, electric posts, transmission lines, insulators, and electric
meters used commercially do not qualify under any of the ownership,
character, and usage exemptions enumerated in Section 234 of the Local
Government Code. It is a basic precept of statutory construction that the
express mention of one person, thing, act, or consequence excludes all
others as expressed in the familiar maximexpressio unius est exclusio
alterius. Not being among the recognized exemptions from real property
tax in Section 234 of the Local Government Code, then the exemption of
the transformers, electric posts, transmission lines, insulators, and electric
meters of MERALCO from real property tax granted under its franchise was
among the exemptions withdrawn upon the effectivity of the Local
Government Code on January 1, 1998.
It is worthy to note that the subsequent franchises for operation granted to
MERALCO, i.e., under the Certificate of Franchise dated October 28, 1993
issued by the National Electrification Commission and Republic Act No.
9209 enacted on June 9, 2003 by Congress, are completely silent on the
matter of exemption from real property tax of MERALCO or any of its
properties.
It is settled that tax exemptions must be clear and unequivocal. A taxpayer
claiming a tax exemption must point to a specific provision of law conferring
on the taxpayer, in clear and plain terms, exemption from a common
burden. Any doubt whether a tax exemption exists is resolved against the
taxpayer. MERALCO has failed to present herein any express grant of
exemption from real property tax of its transformers, electric posts,
transmission lines, insulators, and electric meters that is valid and binding
even under the Local Government Code. c
C. YES. The Court cannot help but attribute the lack of a valid notice of
assessment to the apparent lack of a valid appraisal and assessment
conducted by the City Assessor of Lucena in the first place. It appears that
the City Assessor of Lucena simply lumped together all the transformers,
electric posts, transmission lines, insulators, and electric meters of
MERALCO located in Lucena City under Tax Declaration Nos. 019-6500
and 019-7394, contrary to the specificity demanded under Sections 224
and 225 of the Local Government Code for appraisal and assessment of
machinery. The City Assessor and the City Treasurer of Lucena did not
even provide the most basic information such as the number of
transformers, electric posts, insulators, and electric meters or the length of
the transmission lines appraised and assessed under Tax Declaration Nos.
019-6500 and 019-7394. There is utter lack of factual basis for the
assessment of the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO.The Court of Appeals laid the
blame on MERALCO for the lack of information regarding its transformers,
electric posts, transmission lines, insulators, and electric meters for
appraisal and assessment purposes because MERALCO failed to file a
sworn declaration of said properties as required by Section 202 of the Local
Government Code. As MERALCO explained, it cannot be expected to file
such a declaration when all the while it believed that said properties were
personal or movable properties not subject to real property tax.

55. Yamane vs. BA Lepanto Condominium Corporation, 474 SCRA

258, G.R. No. 154993 October 25, 2005.0dt
Facts:
Respondent BA-Lepanto Condominium Corporation is a duly organized
condominium corporation constituted in accordance with the Condominium
Act, which owns and holds title to the common and limited common areas
of the BA-Lepanto Condominium (the “Condominium”), situated in Paseo
de Roxas, Makati City. Its membership comprises the various unit owners
of the Condominium. The Corporation is authorized, under Article V of its
Amended By-Laws, to collect regular assessments from its members for
operating expenses, capital expenditures on the common areas, and other
special assessments as provided for in the Master Deed with Declaration of
Restrictions of the Condominium.
On 15 December 1998, the Corporation received a Notice of Assessment
dated 14 December 1998 signed by the City Treasurer. The Notice of
Assessment stated that the Corporation is “liable to pay the correct city
business taxes, fees and charges,” computed as totaling ₱1,601,013.77 for
the years 1995 to 1997. The Notice of Assessment was silent as to the
statutory basis of the business taxes assessed.
Through counsel, the Corporation responded with a written tax protest
dated 12 February 1999, addressed to the City Treasurer. It was evident in
the protest that the Corporation was perplexed on the statutory basis of the
tax assessment. It assert that there has no basis as the Corporation is not
liable for business taxes and surcharges and interest thereon, under the
Makati [Revenue] Code or even under the Local Government Code
From the denial of the protest, the Corporation filed an Appeal with the
Regional Trial Court (RTC) of Makati. On 1 March 2000, the Makati RTC
Branch 57 rendered a Decision9 dismissing the appeal for lack of merit.
Accepting the premise laid by the City Treasurer, the RTC acknowledged,
in sadly risible language, the RTC concluded that the activities of the
Corporation fell squarely under the definition of “business” under Section
13(b) of the Local Government Code, and thus subject to local business
taxation.11
From this Decision of the RTC, the Corporation filed a Petition for Review
under Rule 42 of the Rules of Civil Procedure with the Court of Appeals.
Initially, the petition was dismissed outright on the ground that only
decisions of the RTC brought on appeal from a first level court could be
elevated for review under the mode of review prescribed under Rule 42.
However, the Corporation pointed out in its Motion for Reconsideration that
under Section 195 of the Local Government Code, the remedy of the
taxpayer on the denial of the protest filed with the local treasurer is to
appeal the denial with the court of competent jurisdiction. Persuaded by
this contention, the Court of Appeals reinstated the petition.
On 7 June 2002, the Court of Appeals Special Sixteenth Division rendered
the Decision and reversed the RTC decision and declared that the
Corporation was not liable to pay business taxes to the City of Makati.
Issue:
Whether the City of Makati may collect business taxes on condominium
corporations.
Held:
No, because the condo corp existence is not intended for the incurrence of
profit but to shoulder the expenses for the maintenance of the
Condominium project.
Under Section 151 of the Local Government Code, cities such as Makati
are authorized to levy the same taxes fees and charges as provinces and
municipalities. In Article II, Title II, Book II of the Local Government Code,
governing municipal taxes, where the provisions on business taxation
relevant to this petition may be found. Also, nowhere therein is there any
citation made by the City Treasurer of any provision of the Revenue Code
which would serve as the legal authority for the collection of business taxes
from condominiums in Makati.
In the instant case, the assessment which appears to be based solely on
the Corporation’s collection of assessments from unit owners, such
assessments being utilized to defray the necessary expenses for the
Condominium Project and the common areas. There is no contemplation of
business, no orientation towards profit in this case. The assailed tax
assessment has no basis under the Local Government Code or the Makati
Revenue Code, and the insistence of the city in its collection of the void tax
constitutes an attempt at deprivation of property without due process of
law.
Hence, the collection of business taxes from condominiums in Makati is
void.

56. Team Pacific Corporation vs. Daza, 676 SCRA 82, G.R. No. 167732
July 11, 2012
FACTS:
A domestic corporation engaged in the business of assembling and
exporting semiconductor devices, TPC conducts its business at the FTI
Complex in the then Municipality of Taguig. It appears that since the start of
its operations in 1999, TPC had been paying local business taxes
assessed at one-half (1/2) rate pursuant to Section 75 (c) of Ordinance No.
24-93, otherwise known as the Taguig Revenue Code. Consistent with
Section 143 (c) of Republic Act (RA) No. 7160, otherwise known as the
Local Government Code of 1991, said provision of the Taguig Revenue
Code provides as follows:
Section 75. Imposition of Tax. — There is hereby imposed on the following
persons, natural or juridical, who establish, operate conduct or maintain
their respective businesses within the Municipality of Taguig, a graduated
business tax in the amounts hereafter prescribed:
(c) On exporters, and on manufacturers, millers, producers, wholesalers,
distributors, dealers or retailers of essential commodities enumerated
hereunder at a rate not exceeding one-half (1/2) of the rates prescribed
under subsections (a), (b) and (d) of this Section:
(1) Rice and corn;
(2) Wheat or cassava flour, meat, dairy products, locally manufactured,
processed or preserved food, sugar, salt and other agricultural, marine, and
fresh water products, whether in their original state or not;
(3) Cooking oil and cooking gas;
(4) Laundry soap, detergents, and medicine;
(5) Agricultural implements, equipment and post-harvest facilities,
fertilizers, pesticides, insecticides, herbicides and other farm inputs;
(6) Poultry feeds and other animal feeds;
(7) School supplies; and
(8) Cement.
When it renewed its business license in 2004, however, TPC’s business tax
for the first quarter of the same year was assessed in the sum of
P208,109.77 by respondent Josephine Daza, in her capacity as then
Municipal Treasurer of Taguig. The assessment was computed by Daza by
applying the full value of the rates provided under Section 75 of the Taguig
Revenue Code, instead of the one-half (1/2) rate provided under paragraph
(c) of the same provision. Constrained to pay the assessed business tax on
19 January 2004 in view of its being a precondition for the renewal of its
business permit, TPC filed on the same day a written protest with Daza,
insisting on the one-half (1/2) rate on which its business tax was previously
assessed. In support of its position, TPC invoked Section 143 (c) of the
Local Government Code of 1991 and Section 2 of Local Finance Circular
No. 4-93 of the Department of Finance which provided guidelines for the
imposition of business taxes on exporters by municipalities.
ISSUE:
WON THE APPEAL/PETITION WAS TIMELY FILED & WON THE
REMEDY WAS IMPROPER.
HELD:
YES. Considering that the RTC’s assailed 5 April 2005 order did not delve
on the proper rate of business tax imposable on TPC as an exporter, we
shall limit our discussion to the procedural aspects of the petition.
A taxpayer dissatisfied with a local treasurer’s denial of or inaction on his
protest over an assessment has thirty (30) days within which to appeal to
the court of competent jurisdiction. Under the law, said period is to be
reckoned from the taxpayer’s receipt of the denial of his protest or the lapse
of the sixty (60) day period within which the local treasurer is required to
decide the protest, from the moment of its filing. This much is clear from
Section 195 of the Local Government Codewhich provides as follows:
SEC. 195. Protest of Assessment. — When the local treasurer or his duly
authorized representative finds that correct taxes, fees, or charges have
not been paid, he shall issue a notice of assessment stating the nature of
the tax, fee or charge, the amount of deficiency, the surcharges, interests
and penalties. Within sixty (60) days from the receipt of the notice of
assessment, the taxpayer may file a written protest with the local treasurer
contesting the assessment; otherwise, the assessment shall become final
and executory. The local treasurer shall decide the protest within sixty (60)
days from the time of its filing. If the local treasurer finds the protest to be
wholly or partly meritorious, he shall issue a notice canceling wholly or
partially the assessment. However, if the local treasurer finds the
assessment to be wholly or partly correct, he shall deny the protest wholly
or partly with notice to the taxpayer. The taxpayer shall have thirty (30)
days from the receipt of the denial of the protest or from the lapse of the
sixty (60) day period prescribed herein within which to appeal with the court
of competent jurisdiction otherwise the assessment becomes conclusive
and unappealable.
Absent any showing of the formal denial of the protest by Atty. Miranda,
then Chief of the Taguig Business Permit and Licensing Office, we find that
TPC’s filing of its petition before the RTC on 19 April 2004 still timely.
Reckoned from the filing of the letter protest on 19 January 2004, Daza had
sixty (60) days or until 19 March 2004 within which to resolve the same in
view of the fact that 2004 was a leap year. From the lapse of said period,
TPC, in turn, had thirty (30) days or until 18 March 2004 within which to file
its appeal to the RTC. Since the latter date fell on a Sunday, the RTC
correctly ruled that TPC’s filing of its petition on 19 April 2004 was still
within the period prescribed under the above quoted provision. Whether or
not a Rule 65 petition for certiorari was the appropriate remedy from Daza’s
inaction on TPC’s letter-protest is, however, an entirely different issue
which we are now called upon to resolve, considering the RTC’s ruling that
it should have filed an ordinary appeal instead. As correctly observed by
TPC, after all, Section 195 of the Local Government Code does not
elaborate on how an appeal is to be made from the denial by a local
treasurer of a protest on assessment made by a taxpayer.
The foregoing pronouncements notwithstanding, we find that TPC
erroneously availed of the wrong remedy in filing a Rule 65 petition for
certiorari to question Daza’s inaction on its letter-protest. The rule is settled
that, as a special civil action, certiorari is available only if the following
essential requisites concur: (1) it must be directed against a tribunal, board,
or officer exercising judicial or quasi-judicial functions; (2) the tribunal,
board, or officer must have acted without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack or excess of jurisdiction; and,
(3) there is no appeal nor any plain, speedy, and adequate remedy in the
ordinary course of law. Judicial function entails the power to determine
what the law is and what the legal rights of the parties are, and then
undertakes to determine these questions and adjudicate upon the rights of
the parties. Quasi-judicial function, on the other hand, refers to the action
and discretion of public administrative officers or bodies, which are required
to investigate facts or ascertain the existence of facts, hold hearings, and
draw conclusions from them as a basis for their official action and to
exercise discretion of a judicial nature.Gauged from the foregoing
definitions, Daza cannot be said to be performing a judicial or quasi-judicial
function in assessing TPC’s business tax and/or effectively denying its
protest as then Municipal Treasurer of Taguig. For this reason, Daza’s
actions are not the proper subjects of a Rule 65 petition for certiorari which
is the appropriate remedy in cases where the tribunal, board, or officer
exercising judicial or quasi-judicial functions acted without or in grave
abuse of discretion amounting to lack or excess of jurisdiction and there is
no appeal or any plain, speedy, and adequate remedy in law. Narrow in
scope and inflexible in character, certiorari is an extraordinary remedy
designed for the correction of errors of jurisdiction and not errors of
judgment. It is likewise considered mutually exclusive with appeal like the
one provided by Article 195 of the Local Government Code for a local
treasurer’s denial of or inaction on a protest.

57. Camp John Hay Development Corporation vs. Central Board of

Assessment Appeals, 706 SCRA 547, G.R. No. 169234 October 2, 2013
FACTS:
In a letter dated 21 March 2002, respondent City Assessor of Baguio City
notified petitioner Camp John Hay Development Corporation about the
issuance against it of thirty-six (36) Owner’s Copy of Assessment of Real
Property (ARP), with ARP Nos. 01-07040-008887 to 01-07040-008922
covering various buildings of petitioner and two (2) parcels of land owned
by the Bases Conversion Development Authority (BCDA) in the John Hay
Special Economic Zone (JHSEZ), Baguio City, which were leased out to
petitioner.
In response, petitioner questioned the assessments in a letter dated 3 April
2002 for lack of legal basis due to the City Assessor’s failure to identify the
specific properties and its corresponding assessed values. The City
Assessor replied in a letter dated 11 April 2002 that the subject ARPs (with
an additional ARP on another building bringing the total number of ARPs to
thirty-seven [37]) against the buildings of petitioner located within the
JHSEZ were issued on the basis of the approved building permits obtained
from the City Engineer’s Office of Baguio City and pursuant to Sections 201
to 206 of RA No. 7160 or the LGC of 1991.
Consequently, on 23 May 2002, petitioner filed with the Board of Tax
Assessment Appeals (BTAA) of Baguio City an appeal under Section 226
of the LGC of 1991challenging the validity and propriety of the issuances of
the City Assessor. The appeal was docketed as Tax Appeal Case No.
2002-003. Petitioner claimed that there was no legal basis for the issuance
of the assessments because it was allegedly exempted from paying taxes,
national and local, including real property taxes, pursuant to RA No. 7227,
otherwise known as the Bases Conversion and Development Act of 1992.
ISSUE:
WON THE PETITIONER’S ALLEGATION THAT IT IS TAX-EXEMPT
VALIDATES ITS PETITION QUESTIONING THE VALIDITY OF REAL
PROPERTY ASSESSMENTS WITHOUT PAYING UNDER PROTEST.
HELD:
NO. It is obvious that in order for a complete determination of petitioner’s
alleged exemption from payment of real property tax under RA No. 7160 or
the LGC of 1991, there are factual issues needed to be confirmed. Hence,
being a question of fact, petitioner cannot do without first resorting to the
proper administrative remedies, or as previously discussed, by paying
under protest the tax assessed in compliance with Section 252 thereof.
Accordingly, the CBAA and the CTA En Banc correctly ruled that real
property taxes should first be paid before any protest thereon may be
considered. It is without a doubt that such requirement of “payment under
protest” is a condition sine qua non before an appeal may be entertained.
Thus, remanding the case to the LBAA for further proceedings subject to a
full and up-to-date payment, either in cash or surety, of realty tax on the
subject properties was proper.
To reiterate, the restriction upon the power of courts to impeach tax
assessment without a prior payment, under protest, of the taxes assessed
is consistent with the doctrine that taxes are the lifeblood of the nation and
as such their collection cannot be curtailed by injunction or any like action;
otherwise, the state or, in this case, the local government unit, shall be
crippled in dispensing the needed services to the people, and its machinery
gravely disabled. The right of local government units to collect taxes due
must always be upheld to avoid severe erosion. This consideration is
consistent with the State policy to guarantee the autonomy of local
governments and the objective of RA No. 7160 or the LGC of 1991 that
they enjoy genuine and meaningful local autonomy to empower them to
achieve their fullest development as self-reliant communities and make
them effective partners in the attainment of national goals.
All told, We go back to what was at the outset stated, that is, that a claim
for tax exemption, whether full or partial, does not question the authority of
local assessor to assess real property tax, but merely raises a question of
the reasonableness or correctness of such assessment, which requires
compliance with Section 252 of the LGC of 1991. Such argument which
may involve a question of fact should be resolved at the first instance by
the LBAA.
The CTA En Banc was correct in dismissing the petition in C.T.A. EB No.
48, and affirming the CBAA’s position that it cannot delve on the issue of
petitioner’s alleged non-taxability on the ground of exemption since the
LBAA has not decided the case on the merits. This is in compliance with
the procedural steps prescribed in the law.
58. National Power Corporation vs. Municipal Government of Navotas,
741 SCRA 505, G.R. No. 192300 November 24, 2014
FACTS :
Petitioner National Power Corporation (NPC) is a government owned and
controlled corporation. Respondent Municipal Government of Navotas, is a
local government unit, hosting petitioner’s Navotas Power Stations I and II
located in the Municipality of Navotas. On the respective dates of
November 16, 1988 and June 29, 1992, petitioner entered into a Build-
Operate-and-Transfer Project Agreements (BOTs) with Mirant Navotas I
Corporation and Mirant Navotas II Corporation. petitioner has the obligation
to pay for all taxes, except business taxes, relative to the implementation of
the agreements. For the 1st quarter of 2003, petitioner paid respondent
Municipality, real property taxes in the amounts of P3,382,715.88 and
P4,973,869.83 for the MNC-I and MNC-II power stations, respectively. After
the said quarter, petitioner stopped paying the real property taxes, claiming
exemption from payment thereon pursuant to Section 234(c) of the Local
Government Code (LGC) of 1991. On May 25, 2005, MNC-II received four
notices from respondent Municipal Treasurer informing MNC-I and MNC-II
of their real property tax delinquencies for the 2nd, 3rd, and 4th quarters of
calendar year 2003 and for the calendar years 2004 and 2005. On
November 21, 2005, a Warrant of Levy was received from respondent
Municipal Treasurer. On December 16, 2005, petitioner filed before the
Regional Trial Court (RTC) of Malabon City, a Petition for Declaratory
Relief, Annulment of Notice of Delinquency, Warrant of Levy, and Notice of
Sale with prayer for the issuance of a Writ of Preliminary Injunction and
Temporary Restraining Order (TRO). Petitioner’s application for the
issuance of a TRO was denied by the RTC. Respondents proceeded
withthe scheduled public auction. Considering that there were no bidders
for the purchase of the subject properties, the same were forfeited in favor
of respondent Municipality. Petitioner filed an amended petition before the
RTC seeking to declare as null and void the public auction. The RTC
denied the petition on May 23, 2007. a Petition for Review with application
for Temporary Restraining Order and/or Order of Suspension of Collection
and Writ of Preliminary Injunctionwas seasonably filed with this Court
though registered mail on July 27, 2007 and received on August 2, 2007. In
a Decision promulgated on July 18, 2008, the Second Division dismissed
the Petition and sustained the RTC’s Decision dated May 23, 2007.
Petitioner’s Motion for Reconsideration filed on August 6, 2008 was
likewise denied in a Resolution dated January 9, 2009. petitioner filed a
petition before the CTA En Banc. In a Decision dated March 1, 2010, the
CTA En Banc affirmed the CTA Second Division’s
ISSUE :
the issue is whether or not the CTA Second Division has jurisdiction to
review the decision of the RTC which concerns a petition for declaratory
relief involving real property taxes
HELD:
Indeed, the CTA, sitting as Division, has jurisdiction to review by appeal the
decisions, rulings and resolutions of the RTC over local tax cases, which
includes real property taxes. This is evident from a perusal of the Local
Government Code (LGC) which includes the matter of Real Property
Taxation under one of its main chapters. We, therefore, disagree with the
conclusion of the CTA En Banc that real property taxes have always been
treated by our laws separately from local taxes. Based on the foregoing,
the general meaning of "local taxes" should be adopted in relation to
Paragraph (a)(3) of Section 7 of R.A. 9282, which necessarily includes real
property taxes. Second, as correctly pointed out by petitioner, when the
legality or validity of the assessment is in question, and not its
reasonableness or correctness, appeals to the LBAA, and subsequently to
the CBAA, pursuant to Sections 22614 and 22915 of the LGC, are not
necessary.
Stated differently, in the event that the taxpayer questions the authority and
power of the assessor to impose the assessment, and of the treasurer to
collect the real property tax, resort to judicial action may prosper. Although
as a rule, administrative remedies must first be exhausted before resort to
judicial action can prosper, there is a well-settled exception in cases where
the controversy does not involve questions of fact but only of law. In the
present case, the parties, even during the proceedings in the lower court on
11 April 1994, already agreed "that the issues in the petition are legal", and
thus, no evidence was presented in said court., if a taxpayer disputes the
reasonableness of an increase in a real estate tax assessment, he is
required to "first pay the tax" under protest. Otherwise, the city or municipal
treasurer will not act on his protest. In the case at bench, however, the
petitioners are questioning the very authority and power of the assessor,
acting solely and independently, to impose the assessment and of the
treasurer to collect the tax. These are not questions merely of amounts of
the increase in the tax but attacks on the very validity of any increase.
Accordingly, if the only issue is the legality or validity of the assessment – a
question of law – direct recourse to the RTC is warranted. the issue is
clearly legal given that it involves an interpretation of the contract between
the parties vis-à-vis the applicable laws, i.e.,which entity actually, directly
and exclusively uses the subject machineries and equipment. the CT A En
Banc erred in dismissing the petition for review en bane, and affirming the
CTA Second Division’s position that the RTC has no jurisdiction over the
instant case for failure of petitioner to exhaust administrative remedies
which resulted in the finality of the assessment

59. National Power Corporation vs. Province of Quezon and

Municipality of Pagbilao, 611 SCRA 71, G.R. No. 171586 January 25,
2010
Facts:
The province of Quezon assessed Mirant Pagbilao Corporation for unpaid
real property taxes in the amount of Php 1.5billion for the machineries
located in its power plant in Pagbilao, Quezon, NAPOCOR, which entered
into a build-to-operate-transfer agreement with Mirant, was furnished a
copy of the tax assessment. NAPOCOR protested the assessment before
the local board of assessment appeals, claiming entitlement to the tax
exemption provided under section 234 of the local government code.
Issue:
Whether or not NAPOCOR is entitled to question validly the assessment
thereon.
Held:
No. Legal interest is defined as interest in property or a claim cognizable at
law, equivalent to that of a legal owner who has legal title to the property.
Given this definition, NAPOCOR is clearly not vested with the requisite
interest to protest the tax assessments, as it is not an entity having the
legal title over the machines. It has absolutely no solid claim of ownership
or even of use and possession of the machineries as the July 15, 2009
decision explained.
A BOT agreement is not a mere financing agreement.
Under BOT agreements, the private corporation/investors are the owners of
the facility or machinery concerned. Apparently, even NAPOCOR and
Mirant recognize this principle; article 2.12 of their BOT agreement
provides that until the transfer date, Mirant shall directly or indirectly, own
the power station and all the fixtures, fitting, machinery and equipment on
the site shall operate, manage and maintain the power station for the
purpose of converting fuel of NAPOCOR into electricity.
The protest contemplated under section 252 is required where there is a
question as to the reasonableness or correctness of the amount assessed.
Hence if a taxpayer disputes the reasonableness of an increase in a real
property tax assessment, he is required to “first pay the tax.” Otherwise, the
city or municipal treasurer will not act on his protest.

60. City of Lapu-Lapu vs. Philippine Economic Zone Authority, 742

SCRA 524, G.. No. 187583 November 26, 2014
Facts:
The Philippine Economic Zone Authority is exempt from payment of real
property taxes.
These are consolidated... the City of Lapu-Lapu (the City)... appealed the
Regional Trial Court's decision finding the PEZA exempt from payment of
real property taxes.
the Province of Bataan (the Province)... assails the Court of Appeals'
decision... granting the PEZA's petition for certiorari. The Court of
Appeals... ruled that the Regional Trial Court,... gravely abused its
discretion in finding the PEZA liable for real property taxes to the Province
of Bataan.
President Ferdinand E. Marcos issued Presidential Decree No. 66 in
1972... the Export Processing Zone Authority (EPZA) was created to
operate, administer, and manage the export processing zones established
in the Port of Mariveles, Bataan... and such other export processing zones
that may be created by... virtue of the decree.
EPZA was declared exempt from all taxes that... may be due to the
Republic of the Philippines, its provinces, cities, municipalities, and other
government agencies and instrumentalities.
Specifically, Section 21 of Presidential Decree No. 66 declared the EPZA
exempt from payment of real... property taxes
From all income taxes, franchise taxes, realty taxes and all other kinds of
taxes and licenses to be paid to the National Government, its provinces,
cities, municipalities and other government agencies and
instrumentalities... the PEZA was created by virtue of Republic Act No.
7916 or "the Special Economic Zone Act of 1995"
The PEZA was granted the power... to register, regulate, and supervise the
enterprises located in the economic zones.
By virtue of the law, the export processing zone in Mariveles, Bataan
became the Bataan Economic Zone... and the Mactan Export Processing
Zone the Mactan Economic Zone.
s for the EPZA, the law required it to "evolve into the PEZA
President Fidel V. Ramos issued Executive Order No. 282, directing the
PEZA to assume and exercise all of the EPZA's powers, functions, and
responsibilities "as provided in Presidential Decree No. 66
Facts of G.R. No. 184203
City of Lapu-Lapu, through the Office of the Treasurer, demanded from the
PEZA... real property taxes for the period from 1992 to 1998 on the PEZA's
properties located in the Mactan Economic Zone. It cited Sections 193 and
234 of the Local Government Code of 1991 that withdrew the real property
tax exemptions previously granted to or presently enjoyed by all persons.
PEZA filed a petition for declaratory relief... praying that the trial court
declare it exempt from payment of real property taxes.
According to the trial court, the PEZA remained tax-exempt regardless of
Section 24 of the Special Economic Zone Act of 1995.
The PEZA, therefore, is not liable for real property taxes on the land it
owns.
Characterizing the PEZA as an agency of the National Government, the
trial court ruled that the City had no authority to tax the PEZA
The City then appealed
Facts of G.R. No. 187583
Issues:
Facts of G.R. No. 184203... whether... the PEZA is exempt from payment
of real property taxes.
Ruling:
The PEZA is exempt from payment... of real property taxes
Under Section 133(o), local government units have no power to levy taxes
of any kind on the national government, its agencies and instrumentalities
and local government units:... the PEZA is an instrumentality of the national
government. It is not integrated within the department framework but is an
agency attached to the Department of Trade and Industry.
Attachment, which enjoys "a larger measure of independence"
As an instrumentality of the national government, the PEZA is vested with
special functions or jurisdiction by law. Congress created the PEZA to
operate, administer, manage and develop special economic zones in the
Philippines.
Being an instrumentality of the national government, the PEZA cannot be
taxed by local government units.
Although a body corporate vested with some corporate powers,... the PEZA
is not a government-owned or controlled corporation taxable for real
property taxes.
To be considered a government-owned or controlled corporation, the entity
must have been organized as a stock or non-stock corporation.
Government instrumentalities, on the other hand, are also created by law
but partake of sovereign functions. When a government entity performs
sovereign functions, it need not meet the test of economic viability
The law created the PEZA's charter. Under the Special Economic Zone Act
of 1995, the PEZA was established primarily to perform the governmental
function of operating, administering, managing, and developing special
economic zones to attract investments and provide opportunities... for
preferential use of Filipino labor.
Under its charter, the PEZA was created a body corporate endowed with
some corporate powers. However, it was not organized as a... stock... or
non-stock... corporation. Nothing in the PEZA's charter provides that the
PEZA's capital is divided into shares.[272] The PEZA also has no
members who shall share in the PEZA's profits.
The PEZA does not compete with other economic zone authorities in the
country. The government may even subsidize the PEZA's operations.
Under Section 47 of the Special Economic Zone Act of 1995, "any sum
necessary to augment [the PEZA's] capital outlay shall be... included in the
General Appropriations Act to be treated as an equity of the national
government."
The PEZA, therefore, need not be economically viable. It is not a
government-owned or controlled corporation liable for real property taxes.
The PEZA assumed the non-profit character, including the tax exempt
status, of the EPZA
The PEZA's predecessor, the EPZA, was declared non-profit in character
with all its revenues devoted for its development, improvement, and
maintenance. Consistent with this non-profit character, the EPZA was
explicitly declared exempt from real property taxes under its... charter.
Nevertheless, we rule that the PEZA is exempt from real property taxes by
virtue of its charter.
The PEZA assumed the real property exemption of the EPZA under
Presidential Decree No. 66.
Principles:
Real property taxes are annual taxes levied on real property such as lands,
buildings, machinery, and other improvements not otherwise specifically
exempted under the Local Government Code.
Real property taxes are ad valorem, with the... amount charged based on a
fixed proportion of the value of the property.
Under the law, provinces, cities, and municipalities within the Metropolitan
Manila Area have the power to levy real property taxes within their
respective... territories.
The person liable for real property taxes is the "taxable person who had
actual or beneficial use and possession [of the real property for the taxable
period,] whether or not [the person owned the property for the period he or
she is being taxed]."