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Law on Taxation

MUST READ CASES (LAW ON TAXATION)


TAX I
Paseo Realty & Development Corporation v. Court of Appeals, GR No. 119286, October
13, 2004
Taxation is described as a destructive power which interferes with the personal and property
rights of the people and takes from them a portion of their property for the support of the
government.
Commissioner of Internal Revenue v. Fortune Tobacco Corporation, 559 SCRA 160 (2008)
The power to tax is inherent in the State, such power being inherently legislative, based on the
principle that taxes are a grant of the people who are taxed, and the grant must be made by the
immediate representative of the people, and where the people have laid the power, there it must
remain and be exercised.
Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667 (1996)
As an incident of sovereignty, the power to tax has been described as unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is to be found only
in the responsibility of the legislature which imposes the tax on the constituency who are to pay
it.
PLANTERS PRODUCTS, INC. v. FERTIPHIL CORPORATION,
G.R. No. 166006, March 14, 2008
It is a settled principle that the power of taxation by the state is plenary. Comprehensive and
supreme, the principal check upon its abuse resting in the responsibility of the members of the
legislature to their constituents.
Commissioner of Internal Revenue v. SM Prime Holdings, Inc., 613 SCRA 774 (2010)
The power to tax is sometimes called the power to destroy. Therefore, it should be exercised with
caution to minimize injury to the proprietary rights of the taxpayer. It must be exercised fairly,
equally and uniformly, lest the tax collector kills the hen that lays the golden egg.
MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC. vs.
SECRETARY OF THE DSWD, G.R. No. 175356 (2013).
The 20% senior citizen discount and tax deduction scheme are valid exercises of police power of
the State absent a clear showing that it is arbitrary, oppressive or confiscatory. The discount is
intended to improve the welfare of the 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 commodities. As to its nature an effects, although the regulation affects the pricing,

Law on Taxation

and, hence, the profitability of a private establishment, 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 State can employ
police power measures to regulate the pricing of goods and services, and, hence, the profitability
of business establishments in order to pursue legitimate State objectives for the common good,
provided, the regulation does not go too far as to amount to taking.
SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS
ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005
The motivation behind many taxation measures is the implementation of police power goals.
Progressive income taxes alleviate the margin between rich and poor; the so-called sin taxes on
alcohol and tobacco manufacturers help dissuade the consumers from excessive intake of these
potentially harmful products.
ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.
ALCANTARA and ED VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE
SECRETARY EDUARDO ERMITA, G.R. No. 168056, September 1, 2005
The expenses of government, having for their object the interest of all, should be borne by
everyone, and the more man enjoys the advantages of society, the more he ought to hold himself
honored in contributing to those expenses.
RENATO V. DIAZ and AURORA MA. F. TIMBOL v. THE SECRETARY OF FINANCE,
G.R. No. 193007, July 19, 2011
A tax is imposed under the taxing power of the government principally for the purpose of raising
revenues to fund public expenditures; toll fees, on the other hand, are collected by private
tollway operators as reimbursement for the costs and expenses incurred in the construction,
maintenance and operation of the tollways. Taxes may be imposed only by the government under
its sovereign authority, toll fees may be demanded by either the government or private
individuals or entities, as an attribute of ownership.
PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT
MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos. 147036-37
April 10, 2012
The Court was satisfied that the coco-levy funds were raised pursuant to law to support a proper
governmental purpose. They were raised with the use of the police and taxing powers of the
State for the benefit of the coconut industry and its farmers in general.
GEROCHI v. DEPARTMENT OF ENERGY, 527 SCRA 696 (2007

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The theory behind the exercise of the power to tax emanates from necessity, without taxes,
government cannot fulfill its mandate of promoting the general welfare and well being of the
people.
COMMISSIONER OF INTERNAL REVENUE v. ALGUE, INC., and THE COURT OF
TAX APPEALS, G.R. No. L-28896, February 17, 1988
Despite the natural reluctance to surrender part of one's hard earned income to the taxing
authorities, every person who is able to must contribute his share in the running of the
government. The government for its part is expected to respond in the form of tangible and
intangible benefits intended to improve the lives of the people and enhance their moral and
material values. This symbiotic relationship is the rationale of taxation and should dispel the
erroneous notion that it is an arbitrary method of exaction by those in the seat of power.
COMMISSIONER OF INTERNAL REVENUE v. ROSEMARIE ACOSTA G.R. No.
154068 August 3, 2007
As well said in a prior case, revenue laws are not intended to be liberally construed. Considering
that taxes are the lifeblood of the government and in Holmess memorable metaphor, the price
we pay for civilization, tax laws must be faithfully and strictly implemented.
SWEDISH MATCH PHILIPPINES INC. v. THE TREASURER OF THE CITY OF
MANILA, G.R. No. 181277, July 3, 2013
Double taxation means taxing the same property twice when it should be taxed only once; that is,
taxing the same person twice by the same jurisdiction for the same thing. There is indeed
double taxation if a taxpayer is subjected to the taxes under both Section 14 (Tax on
Manufacturers, Assemblers and other Processors) and Section 21 (Tax on Business Subject to the
Excise, Value-Added or Percentage Taxes under the NIRC) of the Tax Ordinance No. 7794.
SERAFICA v. CITY TREASURER OF ORMOC, G.R. No. L- 24813, April 28, 1968
Regulation and taxation are two different things, the first being an exercise of police power,
whereas the latter involves the exercise of the power of taxation. While R.A. 2264 provides that
no city may impose taxes on forest products and although lumber is a forest product, the tax in
question is imposed not on the lumber but upon its sale; thus, there is no double taxation and
even if there was, it is not prohibited.
COMMISSIONER OF INTERNAL REVENUE v. S.C. JOHNSON AND SON, INC. G.R.
No. 127105 June 25, 1999
In negotiating tax treaties, the underlying rationale for reducing the tax rate is that the Philippines
will give up a part of the tax in the expectation that the tax given up for this particular investment
is not taxed by the other country. Thus, if the rates of tax are lowered by the state of source, in
this case, by the Philippines, there should be a concomitant commitment on the part of the state
of residence to grant some form of tax relief, whether this be in the form of a tax credit or
exemption.

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DEUTSCHE BANK AG MANILA BRANCH v. COMMISSIONER OF INTERNAL


REVENUE, G.R. No. 188550, August 19, 2013
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. A corporation who
has paid 15% Branch Profit Remittance Tax (BPRT) has the right to avail (by way of refund ) of
the benefit of a preferential tax rate of 10% BPRT in accordance with the RP-Germany Tax
Treaty despite non-compliance with an application with ITAD at least 15 days before the
transaction for the lower rate. Bearing in mind the rationale of tax treaties, the requirements for
the application for availment of tax treaty relief as required by RMO No. 1-2000 should not
operate to divest entitlement to the relief as it would constitute a violation of the duty required by
good faith in complying with a tax treaty.
CBK Power Company Limited vs. Commissioner of Internal Revenue/Commissioner of
Internal Revenue vs. CBK Power Company Limited, G.R. No. 193383-84/G.R. No. 19340708 (January 14, 2015).
The Philippine Constitution provides for adherence to the general principles of international law
as part of the law of the land. 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. In this jurisdiction, treaties have the force and effect of law. The obligation
to comply with a tax treaty must take precedence over the objective of RMO No. 1-2000.
Logically, noncompliance with tax treaties has negative implications on international relations,
and unduly discourages foreign investors. The objective of RMO No. 1-2000 in requiring the
application for treaty relief with the ITAD before a partys availment of the preferential rate
under a tax treaty is to avert the consequences of any erroneous interpretation and/or application
of treaty provisions, such as claims for refund/credit for overpayment of taxes, or deficiency tax
liabilities for underpayment. However, the underlying principle of prior application with the BIR
becomes moot in refund cases where the very basis of the claim is erroneous or there is
excessive payment arising from the non-availment of a tax treaty relief at the first instance. CBK
Power could not have applied for a tax treaty relief 15 days prior to its payment of the final
withholding tax on the interest paid to its lenders precisely because it erroneously paid said
tax on the basis of the regular rate as prescribed by the NIRC, and not on the preferential tax rate
provided under the different treaties. The prior application requirement under RMO No. 1-2000
is not only illogical, but is also an imposition that is not found at all in the applicable tax
treaties. BIR should not impose additional requirements that would negate the availment of the
reliefs provided for under international agreements, especially since said tax treaties do not
provide for any prerequisite at all for the availment of the benefits under said agreements.
COMMISSIONER OF INTERNAL REVENUE v. PILIPINAS SHELL PETROLEUM
CORPORATION, G.R. No. 188497, February 19, 2014
Section 135(a) should be construed as prohibiting the shifting of the burden of the excise tax to
the international carriers who buy petroleum products from the local manufacturers. Said

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international carriers are thus allowed to purchase the petroleum products without the excise tax
component which otherwise would have been added to the cost or price fixed by the local
manufacturers or distributors/sellers.
COMMISSIONER OF INTERNAL REVENUE v. THE ESTATE OF BENIGNO P.
TODA, JR. G.R. No. 147188 September 14, 2004
Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e., the
payment of less than that known by the taxpayer to be legally due, or the non-payment of tax
when it is shown that a tax is due; (2) an accompanying state of mind which is described as being
"evil," in "bad faith," "willfull," or "deliberate and not accidental"; and (3) a course of action or
failure of action which is unlawful.
(FELS ENERGY, INC. v. PROVINCE OF BATANGAS, 516 SCRA 186 (2007))
Taxation is the rule and exemption is the exception.
BATANGAS POWER CORPORATION BATANGAS CITY and NATIONAL POWER
CORPORATION, G.R. No. 152675, April 28, 2004
This Court recognized the removal of the blanket exclusion of government instrumentalities from
local taxation as one of the most significant provisions of the 1991 LGC. Specifically, we
stressed that Section 193 of the LGC, an express and general repeal of all statutes granting
exemptions from local taxes, withdrew the sweeping tax privileges previously enjoyed by the
NPC under its Charter.
ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995
Since the law granted the press a privilege, the law could take back the privilege anytime without
offense to the Constitution. The reason is simple: by granting exemptions, the State does not
forever waive the exercise of its sovereign prerogative; indeed, in withdrawing the exemption,
the law merely subjects the press to the same tax burden to which other businesses have long ago
been subject.
MCIAA v. Marcos, G.R. No. 120082 September 11, 1996
Nevertheless, since taxation is the rule and exemption therefrom the exception, the exemption
may thus be withdrawn at the pleasure of the taxing authority. The only exception to this rule is
where the exemption was granted to private parties based on material consideration of a mutual
nature, which then becomes contractual and is thus covered by the non-impairment clause of the
Constitution.
SOUTH AFRICAN AIRWAYS v. COMMISSIONER OF INTERNAL REVENUE, 612
SCRA 665 (2010)

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Taxes cannot be subject to compensation for the simple reason that the Government and the
taxpayers are not creditors and debtors of each other, debts are due to the Government in its
corporate capacity, while taxes are due to the Government in its sovereign capacity.
DOMINGO v. GARLITOS, 8 SCRA 443 (1963)
However, if the obligation to pay taxes and the taxpayers 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.
ASIA INTERNATIONAL AUCTIONEERS, INC. v. COMMISSIONER OF INTERNAL
REVENUE G.R. No. 179115 September 26, 2012
A tax amnesty, much like a tax exemption, is never favored or presumed in law. The grant of a
tax amnesty, similar to a tax exemption, must be construed strictly against the taxpayer and
liberally in favor of the taxing authority.
FORT BONIFACIO DEVELOPMENT CORPORATION v. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 173425, September 4, 2012
While administrative agencies, such as the Bureau of Internal Revenue, may issue regulations to
implement statutes, they are without authority to limit the scope of the statute to less than what it
provides, or extend or expand the statute beyond its terms, or in any way modify explicit
provisions of the law. Hence, in case of discrepancy between the basic law and an interpretative
or administrative ruling, the basic law prevails.
COMMISSIONER OF INTERNAL REVENUE v. SM PRIME HOLDINGS, INC. 613
SCRA 774 (2010)
Revenue Memorandum Circulars (RMCs) must not override, supplant, or modify the law, but
must remain consistent and in harmony with the law they seek to apply and implement.
TEAM ENERGY CORPORATION (Formerly MIRANT PAGBILAO CORPORATION)
v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 197760, January 13, 2014
BIR Ruling No. DA-489-03 is a general interpretative rule because it is a response to a query
made, not by a particular taxpayer, but by a government agency tasked with processing tax
refunds and credits. Thus, all taxpayers can rely on BIR Ruling No. DA-489-03 from the time of
its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010,
where this Court held that the 120+30 day periods are mandatory and jurisdictional.
PLANTERS PRODUCTS, INC. v. FERTIPHIL CORPORATION, G.R. No. 166006,
March 14, 2008)
It would be a robbery for the State to tax its citizens and use the funds generated for a private
purpose. When a tax law is only a mask to exact funds from the public when its true intent is to

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give undue benefit and advantage to a private enterprise, that law will not satisfy the requirement
of "public purpose."
ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.
ALCANTARA and ED VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE
SECRETARY G.R. No. 168056 September 1, 2005
The powers which Congress is prohibited from delegating are those which are strictly, or
inherently and exclusively, legislative. Purely legislative power, which can never be delegated,
has been described as the authority to make a complete law complete as to the time when it
shall take effect and as to whom it shall be applicable and to determine the expediency of its
enactment.
NATIONAL POWER CORPORATION v. CITY OF CABANATUAN G.R. No. 149110
April 9, 2003
Taxation assumes even greater significance with the ratification of the 1987 Constitution.
Thenceforth, the power to tax is no longer vested exclusively on Congress; local legislative
bodies are now given direct authority to levy taxes, fees and other charges pursuant to Article X,
section 5 of the 1987 Constitution.
QUEZON CITY, et al. v. ABS-CBN BROADCASTING CORPORATION, G.R. No.
162015, March 6, 2006
Clearly then, while a new slant on the subject of local taxation now prevails in the sense that the
former doctrine of local government units delegated power to tax had been effectively modified
with Article X, Section 5 of the 1987 Constitution now in place, the basic doctrine on local
taxation remains essentially the same. For as the Court stressed in Mactan, "the power to tax is
[still] primarily vested in the Congress."
SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS
ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005
Assuming that Section 28(2) Article VI did not exist, the enactment of the SMA [Safeguard
Measure Act] by Congress would be voided on the ground that it would constitute an undue
delegation of the legislative power to tax. The constitutional provision shields such delegation
from constitutional infirmity, and should be recognized as an exceptional grant of legislative
power to the President, rather than the affirmation of an inherent executive power.
Alexander Howden & Co., Ltd. v. Collector of Internal Revenue as cited in
COMMISSIONER OF INTERNAL REVENUE v. JULIANE BAIER-NICKEL, G.R. No.
153793, August 29, 2006
The reinsurance premiums remitted to appellants by virtue of the reinsurance contracts,
accordingly, had for their source the undertaking to indemnify Commonwealth Insurance Co.
against liability. Said undertaking is the activity that produced the reinsurance premiums, and the
same took place in the Philippines.

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COMMISSIONER OF INTERNAL REVENUE v. JAPAN AIR LINES, INC., G.R. No.


60714,
March
6,
1991
For the source of income to be considered as coming from the Philippines, it is sufficient that the
income is derived from activities within this country regardless of the absence of flight
operations within Philippine territory. Indeed, the sale of tickets is the very lifeblood of the
airline business, the generation of sales being the paramount objective.
CITY OF IRIGA v. CAMARINES SUR III ELECTRIC COOPERATIVE, INC., G.R. No.
192945, September 5, 2012
Since it partakes of the nature of an excise tax, the situs of taxation is the place where the
privilege is exercised, in this case in the City of Iriga, where CASURECO III has its principal
office and from where it operates, regardless of the place where its services or products are
delivered.
COMMISSIONER
OF
INTERNAL
REVENUE
v.AMERICAN
EXPRESS
INTERNATIONAL, INC. (PHILIPPINE BRANCH), G.R. No. 152609, June 29, 2005
As a general rule, the VAT system uses the destination principle as a basis for the jurisdictional
reach of the tax. Goods and services are taxed only in the country where they are consumed;
thus, exports are zero-rated, while imports are taxed.
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY (PFDA) v. CENTRAL
BOARD OF ASSESSMENT APPEALS, G.R. No. 178030, December 15, 2010
As property of public dominion, the Lucena Fishing Port Complex is owned by the Republic of
the Philippines and thus exempt from real estate tax.
KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC. v.
HON. BIENVENIDO TAN, G.R. No. 81311, June 30, 1988
Equality and uniformity in taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate. The taxing power has the authority to make reasonable
and natural classifications for purposes of taxation; inequalities which result from a singling out
of one particular class for taxation or exemption infringe no constitutional limitation.
LUNG CENTER OF THE PHILIPPINES v. QUEZON CITY, G.R. No. 144104, June 29,
2004
Even as we find that the petitioner is a charitable institution, we hold that those portions of its
real property that are leased to private entities are not exempt from real property taxes as these
are not actually, directly and exclusively used for charitable purposes. On the other hand, the
portions of the land occupied by the hospital and portions of the hospital used for its patients,
whether paying or non-paying, are exempt from real property taxes.

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COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER,


INC. G.R. No. 195909 September 26, 2012
Section 30(E) and (G) of the NIRC requires that an institution be "operated exclusively" for
charitable or social welfare purposes to be completely exempt from income tax. An institution
under Section 30(E) or (G) does not lose its tax exemption if it earns income from its for-profit
activities. Such income from for-profit activities, under the last paragraph of Section 30, is
merely subject to income tax, previously at the ordinary corporate rate but now at the preferential
10% rate pursuant to Section 27(B).
JOHN HAY PEOPLES ALTERNATIVE COALITION, et al. v. VICTOR LIM, et al., G.
R. No. 119775, October 24, 2003
The incentives under R.A. No. 7227 are exclusive only to the Subic SEZ, hence, the extension of
the same to the John Hay SEZ finds no support therein. The challenged grant of tax exemption
would circumvent the Constitution's imposition that a law granting any tax exemption must have
the concurrence of a majority of all the members of Congress.
COMMISSIONER OF INTERNAL REVENUE v. MARUBENI CORPORATION, G.R.
No. 137377, December 18, 2001
A contractor's tax is generally in the nature of an excise tax on the exercise of a privilege of
selling services or labor rather than a sale on products; and is directly collectible from the person
exercising the privilege. Being an excise tax, it can be levied by the taxing authority only when
the acts, privileges or business are done or performed within the jurisdiction of said authority.
CITY OF IRIGA v. CAMARINES SUR III ELECTRIC COOPERATIVE, INC., G.R. No.
192945, September 5, 2012
A franchise tax is a tax on the privilege of transacting business in the state and exercising
corporate franchises granted by the state. It is not levied on the corporation simply for existing as
a corporation, upon its property or its income, but on its exercise of the rights or privileges
granted to it by the government.
ASIA INTERNATIONAL AUCTIONEERS, INC. v. COMMISSIONER OF INTERNAL
REVENUE G.R. No. 179115 September 26, 2012
Indirect taxes, like VAT and excise tax, are different from withholding taxes: To distinguish, in
indirect taxes, the incidence of taxation falls on one person but the burden thereof can be shifted
or passed on to another person, such as when the tax is imposed upon goods before reaching the
consumer who ultimately pays for it. On the other hand, in case of withholding taxes, the
incidence and burden of taxation fall on the same entity, the statutory taxpayer. The burden of
taxation is not shifted to the withholding agent who merely collects, by withholding, the tax due
from income payments to entities arising from certain transactions and remits the same to the
government.

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ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE


COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995
The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT,
are regressive since what it simply provides is that Congress shall "evolve a progressive system
of taxation." The constitutional provision has been interpreted to mean simply that "direct taxes
are to be preferred [and] as much as possible, indirect taxes should be minimized."
CHINA BANKING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE,
G.R. No. 175108 (2013).
The 20% final tax withheld on a banks passive income should be included in the computation of
the Gross Receipts Tax (GRT). Bureau of Internal Revenue (BIR) has consistently ruled that the
term gross receipts do not admit of any deduction. It emphasized that interest earned by banks,
even if subject to the final tax and excluded from taxable gross income, forms part of its gross
receipt for GRT purposes. The interest earned refers to the gross interest without deduction, since
the regulations do not provide for any deduction. Absent a statutory definition of the term, the
BIR had consistently applied it in its ordinary meaning, i.e., without deduction.
TAN v. DEL ROSARIO, JR. 237 SCRA 324
Global treatment is a system where the tax treatment views indifferently the tax base and
generally treats in common all categories of taxable income of the taxpayer. Schedular approach
is a system employed where the income tax treatment varies and made to depend on the kind or
category of taxable income of the taxpayer.
CIR vs Isabela Cultural Corp., GR 172231, February 12, 2007
The accrual method relies upon the taxpayers right to receive amounts or its obligation to pay
them, in opposition to actual receipt or payment, which characterizes the cash method of
accounting. Amounts of income accrue where the right to receive them become fixed, where
there is created an enforceable liability. Similarly, liabilities are accrued when fixed and
determinable in amount, without regard to indeterminacy merely of time of payment. For a
taxpayer using the accrual method, the determinative question is, when do the facts present
themselves in such a manner that the taxpayer must recognize income or expense? The accrual of
income and expense is permitted when the all-events test has been met. This test requires: (1)
fixing of a right to income or liability to pay; and (2) the availability of the reasonable accurate
determination of such income or liability.
Tomas Calasanz, et al. vs. Commissioner of Internal Revenue, et al., G.R. No. L-26284,
October 9, 1986
The proceeds from the inherited land of petitioners, which they subdivided into small lots and in
the process converted into a residential subdivision and given the name Don Mariano
Subdivision, is taxable as ordinary income. Property initially classified as a capital asset may
thereafter be treated as an ordinary asset if a combination of the factors indubitably tend to show
that the activity was in furtherance of or in the course of the taxpayer's trade or business; thus, a
sale of inherited real property usually gives capital gain or loss even though the property has to
be subdivided or improved or both to make it salable--however, if the inherited property is

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substantially improved or very actively sold or both it may be treated as held primarily for sale to
customers in the ordinary course of the heir's business.
CIR vs CA, G.R. No. 108576 January 20, 1999
Stock dividends, strictly speaking, represent capital and do not constitute income to its recipient.
So that the mere issuance thereof is not yet subject to income tax as they are nothing but an
enrichment through increase in value of capital investment. However, the redemption or
cancellation of stock dividends, depending on the time and manner it was made, is essentially
equivalent to a distribution of taxable dividends, making the proceeds thereof taxable income to
the extent it represents profits. The exception was designed to prevent the issuance and
cancellation or redemption of stock dividends, which is fundamentally not taxable, from being
made use of as a device for the actual distribution of cash dividends, which is taxable.
Ma. Isabel T. Santos vs. Servier Phil., Inc., et al., G.R. No. 166377, November 28, 2008
Respondent terminated petitioners services due to her illness, rendering her incapable of
continuing to work, and gave her retirement benefits but withheld the tax due thereon. The
retirements benefits are taxable because the petitioner was only 41 yrs old at the time of
retirement and had rendered only 8 years of service; for these benefits to be exempt from tax, the
following requisites must concur: (1) a reasonable private benefit plan is maintained by the
employer; (2) the retiring official or employee has been in the service of the same employer for
at least ten (10) years; (3) the retiring official or employee is not less than fifty (50) years of age
at the time of his retirement; and (4) the benefit had been availed of only once.
C. M. Hoskins & Co., Inc. vs. Commissioner of Internal Revenue, G.R. No. L-24059,
November 28, 1969
Payment by the taxpayer-corporation to its controlling stockholder (Hoskins) of 50% of its
supervision fees (paid by a client of the corporation for the latter's services as managing agent of
a subdivision project) or the amount of P99,977.91 is not a deductible ordinary and necessary
expense because it does not pass the test of reasonable compensation. If independently, a onetime P100,000.00-fee to plan and lay down the rules for supervision of a subdivision project
were to be paid to an experienced realtor such as Hoskins, its fairness and deductibility by the
taxpayer could be conceded; however, the fee paid to Hoskins continued every year since 1955
up to 1963 and for as long as its contract with the subdivision owner subsisted, regardless of
whether services were actually rendered by Hoskins.
Philippine Refining Company vs. Court of Appeals, et al., G.R. No. 118794, May 8, 1996
In claiming deductions for bad debts, the only evidentiary support given by PRC was the
explanation posited by its accountant, whose allegations were not supported by any documentary
evidence. One of the requisites to qualify as bad debt is that the debt must be actually
ascertained to be worthless and uncollectible during the taxable year, and the taxpayer must
prove that he exerted diligent efforts to collect the debts by (1) sending of statement of accounts;

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(2) sending of collection letters; (3) giving the account to a lawyer for collection; and (4) filing a
collection case in court.
Consolidated Mines, Inc. vs. Court of Tax Appeals, et al., G.R. Nos. L-18843 & 18844,
August 29, 1974
Both depletion and depreciation are predicated on the same basic promise of avoiding a tax on
capital. The allowance for depletion is based on the theory that the extraction of minerals
gradually exhausts the capital investment in the mineral deposit. The purpose of the depiction
deduction is to permit the owner of a capital interest in mineral in place to make a tax-free
recovery of that depleting capital asset. A depletion is based upon the concept of the exhaustion
of a natural resource whereas depreciation is based upon the concept of the exhaustion of the
property, not otherwise a natural resource, used in a trade or business or held for the production
of income. Thus, depletion and depreciation are made applicable to different types of assets. And
a taxpayer may not deduct that which the Code allows as of another.
COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE AIRLINES, INC. (PAL),
G.R. No. 179259 (2013).
A corporation like the Philippine Airlines who has a franchise of its own cannot be subject to the
minimum corporate income tax. The reason being- as provided in PD 1590, Section 13 of PAL's
franchise, its taxation shall be strictly governed by two fundamental rules, to wit: (1) respondent
shall pay the Government either the basic corporate income tax or franchise tax, whichever is
lower; and (2) the tax paid by respondent, under either of these alternatives, shall be in lieu of all
other taxes, duties, royalties, registration, license, and other fees and charges, except only real
property tax.
Manila Banking Corp. v. CIR, 499 SCRA 782
The intent of Congress relative to the MCIT is to grant a 4 year suspension of tax payment to
newly formed corporations. Corporations still starting have to stabilize their venture in order to
obtain stronghold in the industry. It is not a surprise when many corporations reported losses in
their initial years of operations.
Commissioner of Internal Revenue vs. Court of Appeals, et al., G.R. No. 124043, October
14, 1998
YMCA, a non-stock non-profit corporation with charitable objectives, claimed exemption from
payment of income tax by invoking the NIRC and the Constitution. While the income received
by the organizations enumerated in Section 26 of the NIRC is, as a rule, exempted from the
payment of tax in respect to income received by them as such, the exemption does not apply to
income derived from any of their properties, real or personal, or from any of their activities
conducted for profit, regardless of the disposition made of such income; Moreover, charitable
institutions under Art. VI, sec. 28 of the Constitution are only exempted from property taxes, and
YMCA is not an educational institution under Article XIV, Section 4 of the Constitution.

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Commissioner of Internal Revenue vs. Citytrust Investment Phils., Inc., G.R. Nos. 139786
& 140857, September 27, 2006
Citytrust and Asianbank are domestic corporations which paid gross receipts tax and claimed a
refund on the basis of a CTA ruling that the 20% FWT on a banks passive income does not form
part of the taxable gross receipts. The 20% FWT on a banks interest income forms part of the
taxable gross receipts because gross receipts means the entire receipts without any
deduction; moreover, the imposition of the 20% FWT and 5% GRT does not constitute double
taxation because GRT is a percentage tax while FWT is an income tax, and the two concepts are
different from each other.
COMMISSIONER OF INTERNAL REVENUE vs.
OPERATIONS CORPORATION, G.R. No. 185728 (2013).

TEAM

(PHILIPPINES)

For a taxpayer to be entitled to a tax credit or refund of creditable withholding tax, the following
requisites must be complied with: First, The claim must be filed with the CIR within the twoyear period from the date of payment of the tax; Second, It must be shown on the return of the
recipient that the income received was declared as part of the gross income; and Third, The fact
of withholding is established by a copy of the statement duly issued by the payor to the payee
showing the amount paid and the amount of tax withheld.
TAX II
GONZALO VILLANUEVA vs. SPOUSES FROILAN, G.R. No. 172804, January 24, 2011
Post-mortem dispositions typically
(1) Convey no title or ownership to the transferee before the death of the transferor; or, what
amounts to the same thing, that the transferor should retain the ownership (full or naked) and
control of the property while alive;
(2) That before the [donors] death, the transfer should be revocable by the transferor at will, ad
nutum; but revocability may be provided for indirectly by means of a reserved power in the
donor to dispose of the properties conveyed;
(3) That the transfer should be void if the transferor should survive the transferee;
[4] [T]he specification in a deed of the causes whereby the act may be revoked by the donor
indicates that the donation is inter vivos, rather than a disposition mortis causa;
[5] That the designation of the donation as mortis causa, or a provision in the deed to the effect
that the donation is to take effect at the death of the donor are not controlling criteria; such
statements are to be construed together with the rest of the instrument, in order to give effect to
the real intent of the transferor; and
(6) That in case of doubt, the conveyance should be deemed donation inter vivos rather than
mortis causa, in order to avoid uncertainty as to the ownership of the property subject of the
deed.
ROMARICO G. VITUG vs. THE HONORABLE COURT OF APPEALS and ROWENA
FAUSTINO-CORONA, G.R. No. 82027, March 29, 1990

Law on Taxation

The conveyance in question is not, first of all, one of mortis causa, which should be embodied in
a will. In this case, the monies subject of savings account were in the nature of conjugal funds. In
the case relied on, Rivera v. People's Bank and Trust Co., we rejected claims that a survivorship
agreement purports to deliver one party's separate properties in favor of the other, but simply,
their joint holdings.
RAFAEL ARSENIO S. DIZON vs. COURT OF TAX APPEALS, G.R. No. 140944, April
30, 2008
As held in Propstra v. U.S., where a lien claimed against the estate was certain and enforceable
on the date of the decedent's death, the fact that the claimant subsequently settled for lesser
amount did not preclude the estate from deducting the entire amount of the claim for estate tax
purposes. These pronouncements essentially confirm the general principle that post-death
developments are not material in determining the amount of the deduction.
COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS, G.R. No.
123206, March 22, 2000
Administration expenses, as an allowable deduction from the gross estate of the decedent for
purposes of arriving at the value of the net estate, have been construed by the federal and state
courts of the United States to include all expenses "essential to the collection of the assets,
payment of debts or the distribution of the property to the persons entitled to it." In other words,
the expenses must be essential to the proper settlement of the estate and expenditures incurred
for the individual benefit of the heirs, devisees or legatees are not deductible.
SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA vs. COURT OF
APPEALS, G.R. No. 111904, October 5, 2000
The granting clause shows that Diego donated the properties out of love and affection for the
donee which is a mark of a donation inter vivos; second, the reservation of lifetime usufruct
indicates that the donor intended to transfer the naked ownership over the properties; third, the
donor reserved sufficient properties for his maintenance in accordance with his standing in
society, indicating that the donor intended to part with the six parcels of land; lastly, the donee
accepted the donation.
The Philippine American Life and General Insurance Company vs. The Secretary of
Finance and the Commissioner of Internal Revenue, G.R. No. 210987 (November 24, 2014).
The absence of donative intent does not exempt the sales of stock transaction from donors tax
since Sec. 100 of the NIRC categorically states that the amount by which the fair market value of
the property exceeded the value of the consideration shall be deemed a gift. Thus, even if there is
no actual donation, the difference in price is considered a donation by fiction of law. Moreover,
Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters for
determining the fair market value of a sale of stocks. Lastly, RMC 25-11, even if issued after
the sale, was not being applied retroactively since it merely called for the strict application of
Sec. 100, which was already in force the moment the NIRC was enacted.
COMMISSIONER OF INTERNAL REVENUE vs. SONY PHILIPPINES, INC., G.R. No.
178697, November 17, 2010

Law on Taxation

Thus, there must be a sale, barter or exchange of goods or properties before any VAT may be
levied. Certainly, there was no such sale, barter or exchange in the subsidy given by SIS to Sony;
it was but a dole out by SIS and not in payment for goods or properties sold, bartered or
exchanged by Sony.
MINDANAO II GEOTHERMAL PARTNERSHIP vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 193301, March 11, 2013
Mindanao IIs sale of the Nissan Patrol is said to be an isolated transaction. However, it does not
follow that an isolated transaction cannot be an incidental transaction for purposes of VAT
liability. Indeed, a reading of Section 105 of the 1997 Tax Code would show that a transaction
"in the course of trade or business" includes "transactions incidental thereto."
CIR v. SM Prime Holdings, Inc. and First Asia Realty Development Corp., G.R. No.
183505, February 26, 2010
Among those included in the enumeration is the lease of motion picture films, films, tapes and
discs. This, however, is not the same as the showing or exhibition of motion pictures or films.
The legislative intent is not to impose VAT on persons already covered by the amusement tax
and this holds true even in the case of cinema/theater operators taxed under the LGC of 1991
precisely because the VAT law was intended to replace the percentage tax on certain services.
ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION vs.
COMMISSIONER OF INTERNAL REVENUE, G.R. Nos. 141104 & 148763, June 8, 2007
According to the Destination Principle, goods and services are taxed only in the country where
these are consumed. In connection with the said principle, the Cross Border Doctrine mandates
that no VAT shall be imposed to form part of the cost of the goods destined for consumption
outside the territorial border of the taxing authority. Hence, actual export of goods and services
from the Philippines to a foreign country must be free of VAT, while those destined for use or
consumption within the Philippines shall be imposed with 10% VAT.
CIR v. Seksui Jushi Phils, Inc. G.R. No. 149671, July 21, 2006
While an ecozone is geographically within the Philippines, it is deemed a separate customs
territory and is regulated in laws as foreign soul. Sales by supplies outside the borders of ecozone
to this separate customs territory are deemed exports and treated as export sales.
PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) vs. THE
BUREAU OF INTERNAL REVENUE, G.R. No. 172087, March 15, 2011
The rationale for the exemption from indirect taxes provided for in P.D. 1869 and the extension
of such exemption to entities or individuals dealing with PAGCOR in casino operations are best
elucidated from the 1987 case of Commissioner of Internal Revenue v. John Gotamco & Sons,
Inc., where the absolute tax exemption of the World Health Organization (WHO) upon an
international agreement was upheld. We held in said case that the exemption of contractee WHO
should be implemented to mean that the entity or person exempt is the contractor itself who
constructed the building owned by contractee WHO, and such does not violate the rule that tax

Law on Taxation

exemptions are personal because the manifest intention of the agreement is to exempt the
contractor so that no contractor's tax may be shifted to the contractee WHO.
LUZON HYDRO CORPORATION vs. COMMISSION ON INTERNAL REVENUE, G.R.
No. 188260 (2013).
Even though the sale of electricity by a power generation company is subject to zero-rated VAT,
its claim for refund or tax credit cannot be granted where no VAT official receipts and VAT
returns have been presented to prove that it actually made zero-rated sales of electricity. An
entity claiming for refund or tax credit carries with it the burden of proving that not only is it
entitled under the substantive law to the allowance of its claim for refund or tax credit but also
that it met all the requirements for evidentiary substantiation of its claim before the
administrative official concerned.
CBK POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE,
G.R. Nos. 198729-30 (2014).
Under Section 112(A) of the NIRC, for VAT-registered persons whose sales are zero-rated or
effectively zero-rated, a claim for the refund or credit of creditable input tax that is due or paid,
and that is attributable to zero-rated or effectively zero-rated sales, must be filed within two years
after the close of the taxable quarter when such sales were made. The reckoning frame would
always be the end of the quarter when the pertinent sale or transactions were made, regardless of
when the input VAT was paid. Also, in the filing of judicial claims, the 30-day period to appeal
to the CTA is dependent on the 120-day period, compliance with both periods is jurisdictional.
The period of 120 days is a prerequisite for the commencement of the 30-day period to appeal to
the CTA.
COMMISSIONER OF INTERNAL REVENUE vs. MINDANAO II PARTNERSHIP, G.R.
No. 191498 (2014).
Section 112(D) speaks of two periods: the period of 120 days, which serves as a waiting period
to give time for the CIR to act on the administrative claim for refund or credit, and the period of
30 days, which refers to the period for interposing an appeal with the CTA. The 30-day period
applies not only to instances of actual denial by the CIR of the claim for refund or tax credit, but
to cases of inaction by the CIR as well. Therefore, notwithstanding the timely filing of
administrative claims, the CTA does not have jurisdiction over the case where the taxpayers
judicial claim was filed beyond the 30 day period, the nature of such time requirement being
mandatory.
Commissioner of Internal Revenue vs. Silicon Philippines, Inc. (formerly Intel Philippines
Manufacturing, Inc.), G.R. No. 169778 (March 12, 2014).
Prior to seeking judicial recourse before the CTA, a VATregistered person may apply for the
issuance of a tax credit certificate or refund of creditable input tax attributable to zerorated or
effectively zerorated sales within two (2) years after the close of taxable quarter when the sales
or purchases were made. Additionally, under paragraph (D) of Section 112, Tax Code, the
Commissioner of Internal Revenue is given a 120day period, from submission of complete
documents in support of the administrative claim within which to act on claims for

Law on Taxation

refund/applications for issuance of the tax credit certificate. Upon denial of the claim or
application, or upon expiration of the 120day period, the taxpayer only has 30 days within
which to appeal said adverse decision or unacted claim before the CTA.
Taganito Mining Corporation vs. Commissioner of Internal Revenue, G.R. No. 197591
(June 18, 2014).
The 2010 Aichi case instructs that once the administrative claim is filed within the prescriptive
period, the claimant must wait for the 120-day period to end and, thereafter, he is given a 30-day
period to file his judicial claim before the CTA, even if said 120-day and 30-day periods would
exceed the aforementioned two (2)-year prescriptive period.
Taganito Mining Corporation vs. Commissioner of Internal Revenue, G.R. No. 201195
(November 26, 2014).
The 2-year period under Section 229 does not apply to appeals before the CTA in relation to
claims for a refund or tax credit for unutilized creditable input VAT. Section 229 pertains to the
recovery of taxes erroneously, illegally, or excessively collected. Input VAT is not excessively
collected as understood under Section 229 because, at the time the input VAT is collected, the
amount paid is correct and proper. It is, therefore, Section 112 which applies specifically with
regard to claiming a refund or tax credit for unutilized creditable input VAT.
FORT BONIFACIO DEVELOPMENT CORPORATION vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 173425, January 22, 2013
Prior payment of taxes is not necessary before a taxpayer could avail of the 8% transitional input
tax credit: first, it was never mentioned in Section 105 of the old NIRC [now Sec. 111] that prior
payment of taxes is a requirement; second, since the law (Section 105 of the NIRC) does not
provide for prior payment of taxes, to require it now would be tantamount to judicial legislation
which, to state the obvious, is not allowed; third, a transitional input tax credit is not a tax refund
per se but a tax credit; fourth, if the intent of the law were to limit the input tax to cases where
actual VAT was paid, it could have simply said that the tax base shall be the actual value-added
tax paid; and fifth, this Court had already declared that prior payment of taxes is not required in
order to avail of a tax credit.
COMMISSIONER OF INTERNAL REVENUE vs. SEAGATE TECHNOLOGY
(PHILIPPINES), G.R. No. 153866, February 11, 2005
Having determined that respondent's purchase transactions are subject to a zero VAT rate, the tax
refund or credit is in order. To repeat, the VAT is a tax imposed on consumption, not on
business. Although respondent as an entity is exempt, the transactions it enters into are not
necessarily so. The VAT payments made in excess of the zero rate that is imposable may
certainly be refunded or credited.
CIR vs Pascor Realty and Development Corp., GR no. 128315, June 29, 1999
An assessment contains not only a computation of tax liabilities, but also a demand for payment
within a prescribed period. It also signals the time when penalties and protests begin to accrue

Law on Taxation

against the taxpayer. To enable the taxpayer to determine his remedies thereon, due process
requires that it must be served on and received by the taxpayer. Accordingly, an affidavit, which
was executed by revenue officers stating the tax liabilities of a taxpayer and attached to a
criminal complaint for tax evasion, cannot be deemed an assessment that can be questioned
before the Court of Tax Appeals.
SMI-ED Philippine Technology, Inc. vs. Commissioner of Internal Revenue, G.R. No.
175410 (November 12, 2014)
The power and duty to assess national internal revenue taxes are lodged with the BIR.
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. However, because Republic Act No.
1125 also vests the Court of Tax Appeals with jurisdiction over the BIRs inaction on a
taxpayers refund claim, there may be instances when the Court of Tax Appeals has to take
cognizance of cases that have nothing to do with the BIRs assessments or decisions. If the BIR
fails to act on the request for refund, the taxpayer may bring the matter to the Court of Tax
Appeals.
Samar-I Electric Cooperative vs. Commissioner of Internal Revenue, G.R. No. 193100
(December 10, 2014).
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.
CIR vs Hantex Trading Co., GR no. 136975, March 31, 2005
The rule is that in the absence of the accounting records of a taxpayer, his tax liability may be
determined by estimation. The petitioner is not required to compute such tax liabilities with
mathematical exactness. Approximation in the calculation of the taxes due is justified. To hold
otherwise would be tantamount to holding that skillful concealment is an invincible barrier to
proof. However, the rule does not apply where the estimation is arrived at arbitrarily and
capriciously. In fine, then, the petitioner acted arbitrarily and capriciously in relying on and
giving weight to the machine copies of the Consumption Entries in fixing the tax deficiency
assessments against the respondent.
PHILIPPINE AIRLINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R.
No. 198759 (2013).
Section 204(c) of the NIRC provides that it is the statutory taxpayer which has the legal
personality to file a claim for refund. Accordingly, in cases involving excise tax exemptions on
petroleum products under Section 135, the Court has consistently held that it is the statutory
taxpayer who is entitled to claim a tax refund based thereon and not the party who merely bears

Law on Taxation

its economic burden. However, the abovementioned rule should not apply to instances where the
law clearly grants the party to which the economic burden of the tax is shifted an exemption
from both direct and indirect taxes. In which case, the latter must be allowed to claim a tax
refund even if it is not considered as the statutory taxpayer under the law. In this case, PALs
franchise grants it an exemption from both direct and indirect taxes on its purchase of petroleum
products. Hence, PAL has the legal personality to file the claim for refund for the passed on
excise taxes because of its franchise.
CIR vs Primetown Property Group Inc., GR 162155, August 28, 2007
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. There obviously
exists a manifest incompatibility in the manner of computing legal periods under the Civil Code
and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII,
Book I of the Administrative Code of 1987, being the more recent law, governs the computation
of legal periods.
CIR vs Phoenix Assurance Co., L-19127, May 20, 1965
Considering that the deficiency assessment was based on the amended return which, as
aforestated, is substantially different from the original return, the period of limitation of the right
to issue the same should be counted from the filing of the amended income tax return. We
believe that to hold otherwise, we would be paving the way for taxpayers to evade the payment
of taxes by simply reporting in their original return heavy losses and amending the same more
than five years later when the Commissioner of Internal Revenue has lost his authority to assess
the proper tax thereunder. The object of the Tax Code is to impose taxes for the needs of the
Government, not to enhance tax avoidance to its prejudice.
CIR v. Metro Star Superama, Inc. 637 SCRA 633
Sec. 228 of the Tax Code clearly requires that the taxpayer must be informed that he is liable for
deficiency taxes through the sending of a Preliminary Assessment Notice. The sending of a PAN
to the taxpayer is to inform him of the assessment made is but part of due process requirement in
the issuance of a deficiency tax assessment, the absence of which renders nugatory any
assessment made by the tax authorities.
CIR v. Enron Subic Power Corp. 575 SCRA 212
A taxpayer must be informed in writing of the legal and factual bases of the tax assessment made
against him. This is a mandatory requirement. The advice of a tax deficiency given by the CIR to
an employee of Enron as well as the preliminary 5-day letter notice, were not valid substitutes
for the mandatory notice in writing of the legal and factual bases of the assessment. Sec. 228 of
the NIRC requires that the legal and factual bases be stated in the formal letter of demand and
assessment notice. Otherwise the law and RR 12-99 would be rendered nugatory. In view of the

Law on Taxation

absence of a fair opportunity for Enron to be informed of the bases of the assessment, the
assessment was void. This is a requirement of due process.
CIR vs First Express Pawnshop Company, GR 172045-46, June 16, 2009
Petitioner cannot insist on the submission of proof of DST payment because such document does
not exist as respondent claims that it is not liable to pay, and has not paid, the DST on the deposit
on subscription. The term relevant supporting documents should be understood as those
documents necessary to support the legal basis in disputing a tax assessment as determined by
the taxpayer. The BIR can only inform the taxpayer to submit additional documents. The BIR
cannot demand what type of supporting documents should be submitted. Otherwise, a taxpayer
will be at the mercy of the BIR, which may require the production of documents that a taxpayer
cannot submit.
Allied Banking Corporation vs CIR, G.R. No. 175097, February 5, 2010
Records show that petitioner disputed the PAN but not the Formal Letter of Demand with
Assessment Notices. Nevertheless, we cannot blame petitioner for not filing a protest against the
Formal Letter of Demand with Assessment Notices since the language used and the tenor of the
demand letter indicate that it is the final decision of the respondent on the matter. We have time
and again reminded the CIR to indicate, in a clear and unequivocal language, whether his action
on a disputed assessment constitutes his final determination thereon in order for the taxpayer
concerned to determine when his or her right to appeal to the tax court accrues. Viewed in the
light of the foregoing, respondent is now estopped from claiming that he did not intend the
Formal Letter of Demand with Assessment Notices to be a final decision.
CIR vs Union Shipping Corporation, GR L-66160, May 21, 1990
The request for reinvestigation and reconsideration was in effect considered denied by petitioner
when the latter filed a civil suit for collection of deficiency income. Under the circumstances, the
Commissioner of Internal Revenue, not having clearly signified his final action on the disputed
assessment, legally the period to appeal has not commenced to run. Thus, it was only when
private respondent received the summons on the civil suit for collection of deficiency income on
December 28, 1978 that the period to appeal commenced to run.
CIR vs Kudos Metal Corp., GR 178087, May 5, 2010
While we may agree with the Court of Tax Appeals that a mere request for reexamination or
reinvestigation may not have the effect of suspending the running of the period of limitation for
in such case there is need of a written agreement to extend the period between the Collector and
the taxpayer, there are cases however where a taxpayer may be prevented from setting up the
defense of prescription even if he has not previously waived it in writing as when by his repeated
requests or positive acts the Government has been, for good reasons, persuaded to postpone
collection to make him feel that the demand was not unreasonable or that no harassment or
injustice is meant by the Government.
CIR vs Philippine Global Communication, GR 167146, October 31, 2006

Law on Taxation

The running of the prescription period where the acts of the taxpayer did not prevent the
government from collecting the tax. Partial payment would not prevent the government from
suing the taxpayer. Because, by such act of payment, the government is not thereby persuaded
to postpone collection to make him feel that the demand was not unreasonable or that no
harassment or injustice is meant.
Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v.
Commissioner of Internal Revenue, G. R. No. 174942, March 7, 2008
The law prescribing a limitation of actions for the collection of the income tax is beneficial both
to the Government and to its citizens; to the Government because tax officers would be obliged
to act promptly in the making of assessment, and to citizens because after the lapse of the period
of prescription citizens would have a feeling of security against unscrupulous tax agents who will
always find an excuse to inspect the books of taxpayers, not to determine the latters real
liability, but to take advantage of every opportunity to molest peaceful, law-abiding citizens.
Without such a legal defense taxpayers would furthermore be under obligation to always keep
their books and keep them open for inspection subject to harassment by unscrupulous tax agents.
Republic vs Enriquez, GR 78391, October 21, 1988
It is settled that the claim of the government predicated on a tax lien is superior to the claim of a
private litigant predicated on a judgment. The tax lien attaches not only from the service of the
warrant of distraint of personal property but from the time the tax became due and payable.
Besides, the distraint on the subject properties of Maritime Company of the Philippines as well
as the notice of their seizure were made by petitioner, through the Commissioner of Internal
Revenue, long before the writ of execution was issued by the Regional Trial Court.
Commissioner of Internal Revenue vs. Manila Electric Company, G.R. No. 181459 (June 9,
2014).
The claim for tax refund in the aggregate amount must fail since the same has already prescribed
under Section 229 of the Tax Code. The prescriptive period of two (2) years commences to run
from the time that the refund is ascertained, the propriety thereof is determined by law (in this
case, from the date of payment of tax), and not upon the discovery by the taxpayer of the
erroneous or excessive payment of taxes. The issuance by the BIR of the Ruling declaring the
tax-exempt status of NORD/LB, if at all, is merely confirmatory in nature. BIR Ruling No. DA342-2003 is not the operative act from which an entitlement of refund is determined.
Systra Philippines vs CIR, GR 176290, September 21, 2007
A corporation entitled to a tax credit or refund of the excess estimated quarterly income taxes
paid has two options: (1) to carry over the excess credit or (2) to apply for the issuance of a tax
credit certificate or to claim a cash refund. If the option to carry over the excess credit is
exercised, the same shall be irrevocable for that taxable period. This is known as the
irrevocability rule and is embodied in the last sentence of Section 76 of the Tax Code.
Philippine Phosphate Fertilizer Corp. vs CIR, GR 141973, June 28, 2005

Law on Taxation

In cases before tax courts, Rules of Court applies only by analogy or in a suppletory character
and whenever practicable and convenient shall be liberally construed in order to promote its
objective of securing a just, speedy and inexpensive disposition of every action and proceeding.
Since it is not disputed that petitioner is entitled to tax exemption, it should not be precluded
from presenting evidence to substantiate the amount of refund it is claiming on mere technicality
especially in this case, where the failure to present invoices at the first instance was adequately
explained by petitioner.
ACCRA Investments vs CA, G.R. No. 96322, December 20, 1991
For corporations, the two-year prescriptive period within which to claim a refund commences to
run, at the earliest, on the date of the filing of the adjusted final tax return. The rationale in
computing the two-year prescriptive period with respect to the petitioner corporation's claim for
refund from the time it filed its final adjustment return is the fact that it was only then that
ACCRAIN could ascertain whether it made profits or incurred losses in its business operations.
Silkair vs CIR, G.R. Nos. 171383 & 172379, November 14, 2008
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. 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.
Angeles City vs. Angeles City Electric Corp., GR 166134, June 29, 2010
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. 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. 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.
PNOC vs CA, G.R. No. 109976, April 26, 2005
Compromise may be the favored method to settle disputes, but when it involves taxes, it may be
subject to closer scrutiny by the courts. A compromise agreement involving taxes would affect
not just the taxpayer and the BIR, but also the whole nation, the ultimate beneficiary of the tax
revenues collected.
People vs Sandiganbayan, GR 152532, August 16, 2005
The BIR may therefore abate or cancel the whole or any unpaid portion of a tax liability,
inclusive of increments, if its assessment is excessive or erroneous; or if the administration costs
involved do not justify the collection of the amount due. No mutual concessions need be made,
because an excessive or erroneous tax is not compromised; it is abated or canceled. Only correct
taxes should be paid.

Law on Taxation

PELIZLOY REALTY CORPORATION vs. THE PROVINCE OF BENGUET, G.R. No.


183137 (2013).
Amusement taxes are percentage taxes. Provinces are not barred from levying amusement taxes
even if amusement taxes are a form of percentage taxes. Section 140 of the LGC expressly
allows for the imposition by provinces of amusement taxes on the proprietors, lessees, or
operators of theatres, cinemas, concert halls, circuses, boxing stadia, and other places of
amusement. Theatres, cinemas, concert halls, circuses, and boxing stadia are bound by a
common typifying characteristic in that they are all venues primarily for the staging of spectacles
or the holding of public shows, exhibitions, performances, and other events meant to be viewed
by an audience. Accordingly, other places of amusement must be interpreted in light of the
typifying characteristic of being venues where one seeks admission to entertain oneself by
seeing or viewing the show or performances or being venues primarily used to stage spectacles
or hold public shows, exhibitions, performances, and other events meant to be viewed by an
audience. Thus, resorts, swimming pools, bath houses, hot springs and tourist spots do not
belong to the same category or class as theatres, 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.
National Power Corporation v. City of Cabanatuan, G.R. No. 149110, April 09, 2003
As commonly used, a franchise tax is "a tax on the privilege of transacting business in the state
and exercising corporate franchises granted by the state." To determine whether the petitioner is
covered by franchise tax, the following requisites should concur: (1) that petitioner has a
"franchise" in the sense of a secondary or special franchise; and (2) that it is exercising its rights
or privileges under this franchise within the territory of the respondent city government.
Municipality of San Fernando, La Union v. Sta. Romana, G.R. No. L-30159, March 31,
1987
Under the Local Tax Code. there is no question that the authority to impose the license fees
collected from the hauling of sand and gravel excavated properly belongs to the province
concerned and not to the municipality where they are found which is specifically prohibited
under Section 22 of the same Code "from levying taxes, fees and charges that the province or
city is authorized to levy in this Code."
Province of Cagayan v. Lara, G.R. No. 188500, July 24, 2013
In order for an entity to legally undertake a quarrying business, he must first comply with all the
requirements imposed not only by the national government, but also by the local government
unit where his business is situated. Particularly, Section 138 (2) of RA 7160 requires that such
entity must first secure a governor's permit prior to the start of his quarrying operations
City of Manila v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 181845, August 04, 2009
When a municipality or city has already imposed a business tax on manufacturers, etc. of liquors,
distilled spirits, wines, and any other article of commerce, pursuant to Section 143 (a) of the

Law on Taxation

LGC, said municipality or city may no longer subject the same manufacturers, etc. to a business
tax under Section 143 (h) of the same Code. Section 143 (h) may be imposed only on businesses
that are subject to excise tax, VAT, or percentage tax under the NIRC, and that are "not
otherwise specified in preceding paragraphs".
Ericsson Telecoms vs. City of Pasig. G.R. NO. 176667, November 22, 2007
Tax should be computed based on gross receipts; the right to receive income, and not the actual
receipt, determines when to include the amount in gross income. The imposition of local
business tax based on petitioners gross revenue will inevitably result in the constitutionally
proscribed double taxation taxing of the same person twice by the same jurisdiction for the
same thing inasmuch as petitioners revenue or income for a taxable year will definitely
include its gross receipts already reported during the previous year and for which local business
tax has already been paid.
Palma Development Corp. v. Municipality of Malangas, G.R. No. 152492, October 16, 2003
Section 133(e) of RA No. 7160 prohibits the imposition, in the guise of wharfage, of fees as
well as all other taxes or charges in any form whatsoever on goods or merchandise. It is
therefore irrelevant if the fees imposed are actually for police surveillance on the goods, because
any other form of imposition on goods passing through the territorial jurisdiction of the
municipality is clearly prohibited by Section 133(e).
Jardine Davies Insurance Brokers Inc. v. Aliposa, G.R. No. 118900, February 27, 2003
As a general precept, a taxpayer may file a complaint assailing the validity of the ordinance and
praying for a refund of its perceived overpayments without first filing a protest to the payment of
taxes due under the ordinance.
Valley Trading Co., Inc. v. CFI of Isabela, Branch II, G.R. No. L-49529, March 31, 1989
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.
Manila International Airport Authority v. Court of Appeals, G.R. No. 155650, July 20,
2006
Under Section 234(a), real property owned by the Republic is exempt from real estate tax except
when the government gives the beneficial use of the real property to a taxable entity. The
justification for the exception to the exemption is that the real property, although owned by the
Republic, is not devoted to public use or public service but devoted to the private gain of a
taxable person.
Allied Banking Corporation, etc., v. Quezon City Government, et al., G. R. No. 154126,
October 11, 2005
Real properties shall be appraised at the current and fair market value prevailing in the locality
where the property is situated and classified for assessment purposes on the basis of its actual
use.

Law on Taxation

Heirs of Tajonera v. Court of Appeals, G.R. No. L-26677, March 27, 1981
It is `the duty of each person' acquiring real estate in the city to make a new declaration thereof,
with the advertence that failure to do so shall make the assessment in the name of the previous
owner 'valid and binding on all persons interested, and for all purposes, as though the same had
been assessed in the name of its actual owner.'
Spouses Hu v. Spouses Unico, G.R. No. 146534, September 18, 2009
With regard to determining to whom the notice of sale should have been sent, settled is the rule
that, for purposes of real property taxation, the registered owner of the property is deemed the
taxpayer. Thus, in identifying the real delinquent taxpayer, a local treasurer cannot rely solely on
the tax declaration but must verify with the Register of Deeds who the registered owner of the
particular property is.
Ty v. Trampe, G.R. No. 117577, December 01, 1995
The protest contemplated under Sec. 252 of R.A. 7160 is needed where there is a question as to
the reasonableness of the amount assessed. Hence, 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.
Davao Oriental Electric Coop vs. Prov. Dvo. of Oriental, 576 SCRA 645
Under then Sec. 30 of PD 464 [now under Sec. 226, LGC], having failed to appeal the real
property assessments to the LBAA, taxpayer now cannot assail the validity of the tax assessment
before the courts. For failure to exhaust administrative remedies, the assessment became final.
Under Sec. 64 of PD 464 [now under Sec. 252, LGC), the taxpayer must first pay under protest
and then assail the validity of the assessment.
Fels Energy, Inc. v. Province of Batangas, G.R. No. 168557, 170628, February 16, 2007
Under Section 226 of R.A. No 7160, the last action of the local assessor on a particular
assessment shall be the notice of assessment; it is this last action which gives the owner of the
property the right to appeal to the LBAA. The procedure likewise does not permit the property
owner the remedy of filing a motion for reconsideration before the local assessor.
Nestle Philippines, Inc. v. Court of Appeals, G.R. No. 134114, July 06, 2001
Customs duties" is "the name given to taxes on the importation and exportation of commodities,
the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country.
Feeder International Line, Pte., Ltd. v. Court of Appeals, G.R. No. 94262, May 31, 1991
Section 1202 of the Tariff and Customs Code provides that importation begins when the carrying
vessel or aircraft enters the jurisdiction of the Philippines with intention to unload therein. It is
clear from the provision of the law that mere intent to unload is sufficient to commence an
importation and "intent," being a state of mind, is rarely susceptible of direct proof, but must
ordinarily be inferred from the facts, and therefore can only be proved by unguarded,
expressions, conduct and circumstances generally.
Jardeleza v. People, G.R. No. 165265, February 06, 2006

Law on Taxation

Smuggling is committed by any person who: (1) fraudulently imports or brings into the
Philippines any article contrary to law; (2) assists in so doing any article contrary to law; or (3)
receives, conceals, buys, sells or in any manner facilitate the transportation, concealment or sale
of such goods after importation, knowing the same to have been imported contrary to law.
Carrara Marble Phil., Inc. v. Commissioner of Customs, G.R. No. 129680, September 01,
1999
The Tariff and Customs law subjects to forfeiture any article which is removed contrary to law
from any public or private warehouse under customs supervision, or released irregularly from
Customs custody. Before forfeiture proceedings are instituted the law requires the presence of
probable cause; once established, the burden of proof is shifted to the claimant.
People v. Court of First Instance of Rizal, G.R. No. L-41686, November 17, 1980
It is quite clear that seizure and forfeiture proceedings under the tariff and customs laws are not
criminal in nature as they do not result in the conviction of the offender nor in the imposition of
the penalty provided for in section 3601 of the Code. As can be gleaned from Section 2533 of the
code, seizure proceedings, such as those instituted in this case, are purely civil and administrative
in character, the main purpose of which is to enforce the administrative fines or forfeiture
incident to unlawful importation of goods or their deliberate possession.
Subic Bay Metropolitan Authority v. Rodriguez, G.R. No. 160270, April 23, 2010
Regional trial courts are devoid of any competence to pass upon the validity or regularity of
seizure and forfeiture proceedings conducted by the BOC and to enjoin or otherwise interfere
with these proceedings. Regional trial courts are precluded from assuming cognizance over such
matters even through petitions for certiorari, prohibition or mandamus.
Jao v. Court of Appeals, G.R. No. 104604, 111223, October 06, 1995
Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, we have
said that such act does not deprive the Bureau of Customs of jurisdiction thereon. The allegations
of petitioners regarding the propriety of the seizure should properly be ventilated before the
Collector of Customs.
Transglobe International, Inc. v. Court of Appeals, G.R. No. 126634, January 25, 1999
A forfeiture proceeding is in the nature of a proceeding in rem, i.e., directed against the res or
imported articles and entails a determination of the legality of their importation. In this
proceeding, it is in legal contemplation the property itself which commits the violation and is
treated as the offender, without reference whatsoever to the character or conduct of the owner.
Commr. v. Hambretch & Quist Philippines, Inc., G.R. No. 169225, November 17, 2010
The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the CIR
on matters relating to assessments or refunds. Section 7 of Republic Act No. 1125 covers other
cases that arise out of the National Internal Revenue Code (NIRC) or related laws administered
by the Bureau of Internal Revenue (BIR).

Law on Taxation

Duty Free Philippines vs. Bureau of Internal Revenue, G.R. No. 197228 (October 8, 2014).
This Court has had a long-standing rule that a courts jurisdiction over the subject matter of an
action is conferred only by the Constitution or by statute. In this regard, petitioners direct appeal
to this Court is fatal to its claim. Section 2, Rule 4 of the Revised Rules of the CTA reiterates the
exclusive appellate jurisdiction of the CTA en banc relative to the review of the court divisions
decisions or resolutions on motion for reconsideration or new trial in cases arising from
administrative agencies such as the BIR. Clearly, this Court is without jurisdiction to review
decisions rendered by a division of the CTA, exclusive appellate jurisdiction over which is
vested in the CTA en banc.
Yaokasin v. Commissioner of Customs, G.R. No. 84111, December 22, 1989
Without the automatic review by the Commissioner of Customs and the Secretary of Finance, a
collector in any of our country's far-flung ports, would have absolute and unbridled discretion to
determine whether goods seized by him are locally produced, hence, not dutiable, or of foreign
origin, and therefore subject to payment of customs duties and taxes. His decision, unless
appealed by the aggrieved party (the owner of the goods), would become final with no one the
wiser except himself and the owner of the goods.
Rizal Commercial Banking Corp. v. Commr., G.R. No. 168498, June 16, 2006
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180)
days from submission of documents, the taxpayer adversely affected by the decision or inaction
may appeal to the Court of Tax Appeals within (30) days from receipt of the said decision, or
from the lapse of the one hundred eighty (180)-day period; otherwise the decision shall become
final, executory and demandable.