G.R. No.

153793 August 29, 2006

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
JULIANE BAIER-NICKEL, as represented by Marina Q. Guzman (Attorney-in-fact)
Respondent

FACTS:
1. Respondent is a non-resident German and is President of JUBANITEX, Inc., a
domestic corporation engaged in "manufacturing, marketing on wholesale only,
buying or otherwise acquiring, holding, importing and exporting, selling and
disposing embroidered textile products. Through, Marina Q. Guzman, respondent
was appointed as JUBANITEX commission agent. She was to be given 10% as
commission on sales concluded through her efforts.
2. In 1995, respondent received sales commission amounting to P1,707,772.64,
JUBANITEX withheld the corresponding 10% withholding tax amounting to
P170,777.26, and remitted the same to BIR.
3. In 1997, respondent filed her income tax return reporting a taxable income of
P1,707,772.64 and a tax due of P170,777.26.
4. In 1998, respondent filed for a tax refund allegedly mistakenly withheld and
remitted by JUBANITEX to BIR. Respondent further argued that, she should not be
taxed for her compensation was sourced in Germany and not in the Philippines.
5. A day after, she filed a petition for review with the CTA contending that no action
was taken by the BIR on her claim for refund. On 2000, CTA rendered a decision
denying her claim. CTA ruled that her commission were actually remunerations for
her duty as President of JUBANITEX and not as sales agent thereof she was therefore
taxable as income was earned within the Philippines, JUABNITEX being a domestic
corporation.
6. Respondent alleged that the income she received were remuneration for her
marketing services rendered in Germany. She argued that since she is a non-
resident alien, income that she earned without the Philippines shall not be taxed.

ISSUE: Whether or not, respondents commission is taxable in the Philippines?

RULING:

1. The important factor which determines the source of income of personal services is
not the residence of the payor, or the place where the contract for service is entered
into, or the place of payment, but the place where the services were actually
rendered.
2. There is no merit in the petitioners claim that the residence of the payor is the
source of the income in labor or personal service.
3. With respect to labor or personal service, it is the place where the same is
performed that shall be the basis for the determination of the source of income.
 4. Tax Refunds are in the nature of tax exemptions, which shall be construed strictly
against the taxpayer, those who claim for refund must prove that they entitled to the
same.
5. Respondent sent instructions to JUBANITEX as to specifications of her sales from
Germany. However she was not able to successfully prove through evidence that
sales ripened to or concluded in Germany neither did she establish reasonable
connection between the orders/instructions faxed and the reported monthly sales
purported to have transpired in Germany. Due to respondents failure in giving
substantial evidence to prove that sales where indeed made in Germany, while she
may not be a residents, her income shall be considers as sourced in the Philippines,
taxable, thus she is not entitled to a refund from taxes withheld.

G.R. No. L-19342 May 25, 1972

LORENZO T. OA and HEIRS OF JULIA BUALES, namely: RODOLFO B. OA, MARIANO

B. OA, LUZ B. OA, VIRGINIA B. OA and LORENZO B. OA, JR., petitioners,
vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.

FACTS:

1. Administration of the state of the deceased, Julia Bunales, was left to her
surviving spouse, Lorenzo Ona. Lorenzo submitted the project of partition to
which the courts approved. Lorenzo also filed a petition for guardianship over
his three children as they were minors during the time of the partition of the
property. He was appointed to be the guardian of their property as well.
2. The heirs had an undivided interest over ten parcels of land, six houses and
received an amount of Php 50,000, more or less, as share from the War Damage
Commission. The amount was used for the rehabilitation of their common
property. Of the ten parcels of land, two were acquired after the death of the
decedent using money borrowed from Philippine Trust Company.
3. Although partition was approved by the court, Lorenzo maintained management
over all properties by leasing or selling them and investing the income derived
therefrom and the proceeds from the sales thereof in real properties and
securities.
4. While petitioners filed return from the income they derived from the proceeds of
their shares in the properties, they did not actually received shares from
transactions as they are left in the hands of Lorenzo who invested them in real
properties and securities.
5. CIR decided that they formed an unregistered partnership and therefore liable
for corporate income tax. Accordingly, he assessed against the petitioners the
 amounts of P8,092.00 and P13,899.00 as corporate income taxes for 1955 and
1956, respectively.
6. Petitioners protested against the assessment and asked for reconsideration
contending that what they formed was an unregistered partnership. CIR
dismissed such request.

ISSUES:

1. Whether or not the petitioners should be considered as co-owners of the

properties they inherited or if they formed an unregistered partnership.
2. Whether or not the petitioners should be liable for corporate income tax.

RULING:

1. Petitioners formed an unregistered partnership. From the moment petitioners

allowed not only the incomes from their respective shares of the inheritance but
even the inherited properties themselves to be used by Lorenzo T. Oa as a
common fund in undertaking several transactions or in business, with the
intention of deriving profit to be shared by them proportionally, such act was
tantamonut to actually contributing such incomes to a common fund and, in
effect, they thereby formed an unregistered partnership within the purview of
the above-mentioned provisions of the Tax Code.
2. As defined in section 84(b) of said Code, "the term corporation includes
partnerships, no matter how created or organized." This qualifying expression
clearly indicates that a joint venture need not be undertaken in any of the
standard forms, or in confirmity with the usual requirements of the law on
partnerships, in order that one could be deemed constituted for purposes of the
tax on corporation.
3. The income derived from inherited properties may be considered as individual
income of the respective heirs only so long as the inheritance or estate is not
distributed or, at least, partitioned, but the moment their respective known
shares are used as part of the common assets of the heirs to be used in making
profits, it is but proper that the income of such shares should be considered as
the part of the taxable income of an unregistered partnership.
4. It was error for the Courts to rule that whatever they paid as income tax cannot
be credited as part of payment of the taxes in question. However because claim
for refund of payment of the same is already barred by prescription, tax laws can
no longer be relaxed in favor of the petitioners.

G.R. No. L-9996. October 15, 1957

EUFEMIA EVANGELISTA, MANUELA EVANGELISTA and FRANCISCA EVANGELISTA,

Petitioners, v. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX
APPEALS, Respondents.
FACTS:

1. Petitioners borrowed money from their father for the purpose of buying real
properties.
2. In 1943, they bought property form Mrs. Josefina Florentino. On April 1944, they
purchased 21 parcels of land including improvements therein form Josefa
Oppus., another property including improvements therein from Insular
Investments Inc., and another from Mrs. Valentin Afable.
3. The following year, they appointed their brother, Simeon Evangelista to, manage
their properties with full power to lease; to collect and receive rents; to issue
receipts therefor; in default of such payment, to bring suits against the defaulting
tenant; to sign all letters, contracts, etc., for and in their behalf, and to endorse
and deposit all notes and checks for them.
4. After having bought such properties, they leased or rented the various
properties.
5. The Collector of Internal Revenue demanded the payment of income tax on
corporations, real estate dealers fixed tax and corporation residence tax for the
years 1945-1949, amounting to P6,878.34
6. Letter of demand after the assessments were delivered to the petitioners in
1954. Petitioners moved to reverse the decision of the CIR and be absolved of
payment of taxes before the CTA. However the CTA dismissed the case and held
that petitioners were liable for the payment of income tax, real estate dealers
tax and the residence tax for the years 1945 to 1949, inclusive, in accordance
with the respondents assessment for the same in the total amount of P6,878.34.
7. Petitioners brought the case before the Supreme Court and argued that they
should not be liable for such taxes.

ISSUES: Whether or not a partnership was formed and whether the same shall be subject to
tax under the NIRC and for residence tax for corporations and rea estate dealers tax.

RULING:

1. A partnership was formed. A partnership is formed if there is (a) an agreement

to contribute money, property or industry to a common fund; and (b) an intent
to divide the profits among the contracting parties. The first element is duly
satisfied as there was an agreement to contribute the properties to a common
fund.
2. As to the second requirement, the purpose for monetary intent was evidenced
by the series of transactions the petitioners had undertaken is indicative of
common design not just for mere preservation of the common fund or even of
the property acquired. Moreover, the properties were managed by one person,
Simeon Evangelista, who handles the property as though it belonged to a
business enterprise.
3. As such, for the issues on whether they should be taxed, the Court rules on the
affirmative. Their contribution to the common fund of such property is
 considered a creation of a partnership, they should be subject to tax liabilities
because partnerships under Sec. 24 of the code views partnerships similar to
corporations. Likewise, as a partnership is one of those entities considered
under the code as liable for the payment of residence tax.

G.R. No. L-68118 October 29, 1985

JOSE P. OBILLOS, JR., SARAH P. OBILLOS, ROMEO P. OBILLOS and REMEDIOS P.
OBILLOS, brothers and sisters, petitioners
vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents.

FACTS:

1. Jose Obillos Sr, bought 2 parcels of land from Ortigas & Co., Ltd. located on
Greenhills, San Juan. The next day he transferred his rights to his children, the
petitioners, to enable them to build their residences. The company sold the
parcels of land to the petitioners and presumably, Torrens titles were issued to
them as co-owners.
2. After more than a year, petitioners sold the property to Walled City Securities
Corporation and Olga Cruz Canda. After earning profit from said claim,
petitioners filed an income tax from the capital gain they earned.
3. Before the five year prescription, the Commissioner demanded that the
petitioners pay corporate income tax on the profit in addition to the income tax.
He also demanded that the share of each petitioner as taxable in full and
required them to pay deficiency taxes including 50% fraud surcharge and
accumulated interest.
4. Commissioner contended that the petitioners formed an unregistered
partnership or joint venture within the meaning of Sec. 24 (a) and 84 (b) of the
Tax Code.
5. The petitioners contested the said assessments. One of the Judges of the tax
court dissented in the assessment and thus the appeal.

ISSUES: Whether or not the petitioners formed a partnership and therefore liable for
imposed taxes?

RULING:

1. The Court rules that a partnership was not formed. They were mere co-owners
and did not intend to form a partnership. It was merely a co-ownership and they
should not be deemed to have entered into a joint venture simply because of an
isolated transaction. Their original purpose was to divide the lots for residential
purposes. If later on they found it not feasible to build their residences on the
lots because of the high cost of construction, then they had no choice but to resell
the same to dissolve the co-ownership
 2. The Commissioner should have investigated was whether the father donated the
two lots to the petitioners and whether he paid the donor's tax (See Art. 1448,
Civil Code). As such, the petitioners did not form a partnership and therefore
they are not liable for the assessment made by the Commissioner.

G.R. No. 78133 October 18, 1988

MARIANO P. PASCUAL and RENATO P. DRAGON, petitioners,
vs.
THE COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX
APPEALS, respondents.

FACTS:

1. Petitioners bought two parcels of land from Santiago Bernardino and another
three form Juan Roque. The first two were sold to Marenir Development
Corporation and the rest were sold to Erlinda Reyes and Maria Samson.
Petitioners realized net profit in the years they made such sales. Capital gains
were paid and tax amnesties were granted during the said years.
2. Acting BIR Commissioner, assessed and required the petitioners to pay
deficiency in corporate income taxes for the years the sales were made.
Petitioners argued that they should not be taxed as they availed of tax amnesties.
3. Commissioner replied that on the years the sale of the parcels of land were sold,
petitioners formed an unregistered partnership or joint venture taxable under
Section 20 (b). Commissioner said that, the partnership was subject to corporate
income tax as distinguished from the profits derived from the partnership which
was subject to income tax. The availment of income tax was for the income tax
and not for the corporate income tax.
4. Petitioners filed for review in the Court of Tax Appeals. CTA ruled in favor of the
Commisioner.

ISSUES: Whether or not, a partnership was formed and thus would subject the petitioners
to payment of Corporate Income Tax.

RULING:

1. In the case at bar, there was no evidence that would prove that petitioners
entered into an agreement to contribute money, property or industry to a
common fund and that they intend to divide profit. Commissioner only assumed
the same.
 2. The transactions made by the petitioners were isolated ones, as evidenced by
the fact that they did not initially sell the parcels of or even introduced
improvements therein. The character of habituality peculiar to business
transactions for the purpose of gain is not present to the case at bar.
3. The sharing of returns does not in itself establish a partnership whether or not
the persons sharing therein have a joint or common right or interest in the
property. There must be a clear intent to form a partnership, the existence of a
juridical personality different from the individual partners, and the freedom of
each party to transfer or assign the whole property
4. There is no unregistered partnership formed were they purchased property and
sold the same years after. Assuming arguendo that an unregistered partnership
was formed, ere is no such existing unregistered partnership with a distinct
personality nor with assets that can be held liable for said deficiency corporate
income tax, then petitioners can be held individually liable as partners for this
unpaid obligation of the partnership p. However, as petitioners have availed of
the benefits of tax amnesty as individual taxpayers in these transactions, they
are thereby relieved of any further tax liability arising therefrom.

G.R. No. 109289 October 3, 1994

RUFINO R. TAN, petitioner,
vs.
RAMON R. DEL ROSARIO, JR., as SECRETARY OF FINANCE & JOSE U. ONG, as
COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 109446 October 3, 1994
CARAG, CABALLES, JAMORA AND SOMERA LAW OFFICES, CARLO A. CARAG,
MANUELITO O. CABALLES, ELPIDIO C. JAMORA, JR. and BENJAMIN A. SOMERA,
JR., petitioners,
vs.
RAMON R. DEL ROSARIO, in his capacity as SECRETARY OF FINANCE and JOSE U. ONG,
in his capacity as COMMISSIONER OF INTERNAL REVENUE, respondents.

FACTS:

1. Petitioners challenged the constitutionality of RA 7496 or the Simplified Net

Income Scheme which they claim to be adversely affected by.
2. The first case posits that RA 7496 violates the provisions of the Constitution that
bills shall embrace only one subject, that taxation shall be uniform and that it
violates Section 1 of the Bill of Rights. It argues that the law was a misnomer
because it was titles as Simplified Net Income Taxation Scheme for the Self-
Employed
and Professionals Engaged in the Practice of their Profession when its full title
was actually, n Act Adopting the Simplified Net Income Taxation Scheme For
 The Self-Employed and Professionals Engaged In The Practice of Their
Profession, Amending Sections 21 and 29 of the National Internal Revenue Code,
as Amended.

ISSUE: Whether RA 7496 is unconstitutional?

RULING:

1. The contention of the petitioner that the law violates the constitutional
requirement that taxation shall be uniform and equitable in that it attempts to
tax single proprietorships and professionals differently from the manner is taxes
corporations and partnerships is untenable because such system is adopted even
prior to enactment of the law in question.
2. Uniformity of taxation, like the kindred concept of equal protection, merely
requires that all subjects or objects of taxation, similarly situated, are to be
treated alike both in privileges and liabilities (Juan Luna Subdivision vs.
Sarmiento, 91 Phil. 371). Uniformity does not forfend classification as long as:
(1) the standards that are used therefor are substantial and not arbitrary, (2) the
categorization is germane to achieve the legislative purpose, (3) the law applies,
all things being equal, to both present and future conditions, and (4) the
classification applies equally well to all those belonging to the same class (Pepsi
Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 52)
3. he due process clause may correctly be invoked only when there is a clear
contravention of inherent or constitutional limitations in the exercise of the tax
power. No such transgression is so evident to the Court.

G.R. No. 76573 September 14, 1989

MARUBENI CORPORATION (formerly Marubeni Iida, Co., Ltd.), petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE AND COURT OF TAX APPEALS, respondents.

FACTS:

1. Marubeni is a foreign corporation existing under the laws of Japan. It has equity
investments in AG&P of Manila. AG&P declared dividends to petitioner in March
and withheld 10% final dividend tax thereon. In September, AG&P declared
dividends and withheld 10% tax therefrom.
2. AG&P directly remitted Marubenis dividends in their head office in Tokyo. AG&P
as withholding agent paid 15% branch profit remittance on cash dividends
declared and remitted to petitioner at its head office in Tokyo in the total
amount of P229,424.40 on April 20 and August 4, 1981.
3. In January 29, 1981, petitioner, sought a ruling from the Bureau of Internal
Revenue on whether or not the dividends petitioner received from AG&P are
 effectively connected with its conduct or business in the Philippines as to be
considered branch profits subject to the 15% profit remittance tax imposed
under Section 24 (b) (2) of the National Internal Revenue Code as amended by
Presidential Decrees Nos. 1705 and 1773.
4. Acting Commissioner replied that only profits remitted abroad by a branch office
to its head office which are effectively connected with its trade or business in the
Philippines are subject to the 15% profit remittance tax. The Commissioner
further replied that, the dividends received by Marubeni from AG&P are not
income arising from the business activity in which Marubeni is engaged.
Accordingly, said dividends if remitted abroad are not considered branch profits
for purposes of the 15% profit remittance tax imposed by Section 24 (b) (2) of
the Tax Code, as amended . . .
5. Petitioner then wrote the Commissioner seeking for refund or tax credit because
of the erroneous remittance by AG&P.
6. Commissioner denied petitioners claim for refund stating that while it may be
true that Marubeni was not subject to 15 % profit remittance tax as the same
were not earned by the Marubeni Philippine branch nor was it subject to 10%
intercorporate dividend tax being a non-resident stockholder, nevertheless the
dividend income was subject to 25% tax pursuant to a tax treaty between the
Philippines and Japan.
7. The amount withheld by AG&P was offset by their liability under the treaty and
therefore there was nothing left to refund. Petitioner appealed to the CTA. CTA
affirmed the decision of the CIR.

ISSUES:

1. Whether or not the dividends Marubeni Corporation received from Atlantic Gulf
and Pacific Co. are effectively connected with its conduct or business in the
Philippines as to be considered branch profits subject to 15% profit remittance
tax imposed under Section 24(b)(2) of the National Internal Revenue Code
2. Whether Marubeni is a resident or non-resident corporation and at what rate
should it be taxed

RULING:

1. Only profits remitted abroad by branch offices which are effectively connected
with the trade or business here in the Philippines are subject to 15 % profit
remittance tax and thus not taxable
2. Petitioner is a non-resident foreign corporation and its head office in Japan
should be considered as a separate entity with its branch in the Philippines. The
investment it made with AG&P was germane the conduct of its affairs in Japan
and not connected with that in the Philippines.
3. The applicable provision of the Tax Code is Section 24(b)(1)(iii) in conjunction
with the Philippine-Japan Tax Treaty of 1980. As a general rule, it is taxed 35%
of its gross income from all sources within the Philippines. However, a
 discounted rate of 15% is given to Marubeni Corporation on dividends received
from Atlantic Gulf and Pacific Co. on the condition that Japan, its domicile state,
extends in favor of Marubeni Corporation a tax credit of not less than 20% of the
dividends received. This 15% tax rate imposed on the dividends received under
Section 24(b)(1)(iii) is easily within the maximum ceiling of 25% of the gross
amount of the dividends as decreed in Article 10(2)(b) of the Tax Treaty.

G.R. No. 137377. December 18, 2001

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. MARUBENI
CORPORATION, respondent.
FACTS:
1. Respondent is a foreign corporation existing under the laws of Japan, It is
engaged in export and import trading, construction and financing business and
maintains a branch in Manila.
2. Petitioner issued a letter to examine the book of accounts of the Manila branch of
respondent and found that it has an undeclared income from two contracts in
the Philippines. One was with the National Development Company for the
construction of a wharf complex in Leyte and the other was a contract with
Philphos for a construction of an ammonia storage complex also at the site.
3. Assessments were to include eficiency income, branch profit remittance,
contractors and commercial brokers taxes. Respondent questioned this
assessment.
4. Respondent received a letter from petitioner then, assessing the respondent for
several deficiency taxes inclusive of surcharge and interest amounting to P
3,600,535.68 with 50% surcharge for failure to report for tax purposes the
taxable revenue and 25% for failure to pay on time.
5. Respondent filed two cases before the CTS, first was to question the deficiency
income, branch profit remittance and contractors tax assessments in petitioners
assessment letter. The second, CTA Case No. 4110, questioned the deficiency
commercial brokers assessment in the same letter.
6. On August 1986, EO 41, declared a one-time amnesty covering unpaid income
taxes for the years 1981 to 1985.
7. Respondent filed its tax amnesty return on October of the same year. On
November the scope of the amnesty was expanded, it included donors and estate
taxes it also provided immunities and privileges to foregoing tax liabilities.
 8. On December 1986, respondent filed an amended tax amnesty return. Ten years
after the filing of the case the CTA rendered a decision finding that the
respondent was able to validly avail of the tax amnesty under the two executive
orders.
9. Petitioner appealed the decision in the CA which the latter dismissed.

ISSUE:
1. Whether or not respondents liabilities were extinguished by the tax amnesty
2. Whether or not respondent is liable to pay the income, branch profit remittance,
and contractors taxes assessed by petitioner

RULING:
1. There are three (3) types of taxes involved herein income tax, branch profit
remittance tax and contractors tax. These taxes are covered by the amnesties
granted by E.O. Nos. 41 and 64. Petitioner claims, however, that respondent is
disqualified from availing of the said amnesties because the latter falls within the
exception of the order as income tax cases were already filed against the
petitioner before the court.
2. Petitioners claim cannot be sustained. Section 4 (b) of E.O. No. 41 is very clear
and unambiguous. It excepts from income tax amnesty those taxpayers with
income tax cases already filed in court as of the effectivity hereof. The point of
reference is the date of effectivity of E.O. No. 41. The filing of income tax cases in
court must have been made before and as of the date of effectivity of E.O. No. 41.
Thus, for a taxpayer not to be disqualified under Section 4 (b) there must have
been no income tax cases filed in court against him when E.O. No. 41 took effect.
This is regardless of when the taxpayer filed for income tax amnesty, provided of
course he files it on or before the deadline for filing. The same ruling also applies
to the deficiency branch profit remittance tax assessment
3. Marubeni argued that, granting it was not exempted from payment of
contractors tax, because the income from the projects came from the Offshore
Portion of the contracts. All materials and equipment in the contract under the
Offshore Portion were manufactured and completed in Japan, not in the
Philippines, and are therefore not subject to Philippine taxes.
4. Clearly, the service of design and engineering, supply and delivery, construction,
erection and installation, supervision, direction and control of testing and
commissioning, coordination of the two projects involved two taxing
 jurisdictions. These acts occurred in two countries Japan and the Philippines.
While the construction and installation work were completed within the
Philippines, the evidence is clear that some pieces of equipment and supplies
were completely designed and engineered in Japan. The two sets of ship
unloader and loader, the boats and mobile equipment for the NDC project and
the ammonia storage tanks and refrigeration units were made and completed in
Japan. They were already finished products when shipped to the Philippines. The
other construction supplies listed under the Offshore Portion such as the steel
sheets, pipes and structures, electrical and instrumental apparatus, these were
not finished products when shipped to the Philippines. They, however, were
likewise fabricated and manufactured by the sub-contractors in Japan. All
services for the design, fabrication, engineering and manufacture of the
materials and equipment under Japanese Yen Portion I were made and
completed in Japan. These services were rendered outside the taxing jurisdiction
of the Philippines and are therefore not subject to contractors tax.

G.R. No. L-22074 April 30, 1965

THE PHILIPPINE GUARANTY CO., INC., petitioner,
vs.
THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX
APPEALS, respondents.
FACTS:

1. Petitioner is a domestic insurance company which entered into reinsurance

contracts with various foreign insurance corporations and agreed to cede to the
foreign insurance companies a portion of their premiums on insurance originally
underwritten in the Philippines in consideration for the assumption by the latter
of liability on an equivalent portion of the risks insured. Petitioner signed the
contracts in Manila and reinsurers signed the same outside the Philippines
except for the contract with the Swiss Reinsurance Company which was signed
in Switzerland.
2. Petitioners ceded premiums to the foreign reinsurers and excluded said
premiums from their gross income in 1953 and 1954. It did not withhold or pay
 tax on them. CIR then issued a letter of assessment against petitioner for
payment of withholding tax on the ceded reinsurance premiums.
3. Petitioners argued that the same shall not be taxed as the premiums were ceded
to the foreign reinsurers who are not doing business in the Philippines. CIR
rendered a decision ordering petitioner for payment of withholding taxes.
ISSUES: Whether or not, petitioner should be liable to pay withholding taxes despite ceding
reinsurance premiums to the foreign reinsurers?

RULING:
1. The Court ruled that petitioner is liable for withholding taxes on the premiums.
2. Activities that constituted the undertaking to reinsure Philippine Guaranty Co.,
Inc. against loses arising from the original insurances in the Philippines were
performed in the Philippines. The liability of the foreign reinsurers commenced
simultaneously with the liability of Philippine Guaranty Co., Inc. under the
original insurances. Philippine Guaranty Co., Inc. kept in Manila a register of the
risks ceded to the foreign reinsurers. Entries made in such register bound the
foreign resinsurers, localizing in the Philippines the actual cession of the risks
and premiums and assumption of the reinsurance undertaking by the foreign
reinsurers.
3. The foreign insurers' place of business should not be confused with their place of
activity. Business should not be continuity and progression of transactions
while activity may consist of only a single transaction. An activity may occur
outside the place of business. Section 24 of the Tax Code does not require a
foreign corporation to engage in business in the Philippines in subjecting its
income to tax. It suffices that the activity creating the income is performed or
done in the Philippines. What is controlling, therefore, is not the place of
business but the place of activity that created an income.
4. Petitioner would wish to stress that its reliance in good faith on the rulings of the
Commissioner of Internal Revenue requiring no withholding of the tax due on
the reinsurance premiums in question relieved it of the duty to pay the
corresponding withholding tax thereon. This defense of petitioner may free if
from the payment of surcharges or penalties imposed for failure to pay the
corresponding withholding tax, but it certainly would not exculpate if from
liability to pay such withholding tax The Government is not estopped from
collecting taxes by the mistakes or errors of its agents

G.R. No. L-46029 June 23, 1988

N.V. REEDERIJ "AMSTERDAM" and ROYAL INTEROCEAN LINES, petitioners,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.

FACTS:
1. From March 27 to April 30, 1963, M.V. Amstelmeer and from September 24 to
October 28, 1964, MV "Amstelkroon, " both of which are vessels of petitioner
N.B. Reederij "AMSTERDAM," called on Philippine ports to load cargoes for
foreign destination. The freight fees for these transactions were paid abroad. In
these two instances, petitioner Royal Interocean Lines acted as husbanding
agent for a fee or commission on said vessels. No income tax appears to have
been paid by petitioner N.V. Reederij "AMSTERDAM" on the freight receipts.
2. Commissioner assessed petitioner for deficiency income tax for 1963 and 1964
as a non-resident foreign corporation not engaged in trade or business in the
Philippines.
3. Petitioner Royal Interocean Lines filed an income tax return of the
aforementioned vessels paid the tax thereon in the amount of P1,835.52 and
P9,448.94.
4. Petitioner Royal Interocean Lines as the husbanding agent of petitioner N.V.
Reederij "AMSTERDAM" filed a written protest against the abovementioned
assessment made by the respondent Commissioner which protest was denied by
said respondent in a letter dated March 3, 1969: On March 31, 1969, petitioners
filed a petition for review with the respondent Court of Tax Appeals praying for
the cancellation of the subject assessment. After due hearing, the respondent
court, on December 1, 1976, rendered a decision modifying said assessments by
eliminating the 50% fraud compromise penalties imposed upon petitioners.
Petitioners filed a motion for reconsideration of said decision but this was
denied by the respondent court.
ISSUES: Whether or not the petitioner should be taxed as a non-resident foreign
corporation not engaged in trade or business in the Philippines

RULING:
1. Petitioner N.V. Reederij "AMSTERDAM" is a foreign corporation not authorized or
licensed to do business in the Philippines. It does not have a branch office in the
Philippines and it made only two calls in Philippine ports, one in 1963 and the other
in 1964. In order that a foreign corporation may be considered engaged in trade or
business, its business transactions must be continuous. A casual business activity in
 the Philippines by a foreign corporation, as in the present case, does not amount to
engaging in trade or business in the Philippines for income tax purposes.
2. A foreign corporation engaged in trade or business within the Philippines, or which
has an office or place of business therein, is taxed on its total net income received
from all sources within the Philippines at the rate of 25% upon the amount but
which taxable net income does not exceed P100,000.00, and 35% upon the amount
but which taxable net income exceeds P100,000.00.
3. On the other hand, a foreign corporation not engaged in trade or business within
the Philippmes and which does not have any office or place of business therein is
taxed on income received from all sources within the Philippines at the rate of 35%
of the gross income such is the case of the petitioner

G.R. No. 60714 March 6, 1991

COMMISSIONER OF INTERNAL REVENUE, petitioner
vs.
JAPAN AIR LINES, INC., and THE COURT OF TAX APPEALS, Respondents
FACTS:
1. Respondent is a foreign corporation engaged in the business of international air
carriage. From 1959 to 1963, it did not have planes that lifted or landed
passengers and cargo in the Philippines. Since 1957, JAL maintained an office at
Filipinas Hotel, it did not sell tickets but provided information playing up the
attractions of Japan as a tourist spot and the services enjoyed in JAL planes.
2. In 1957, JAL constituted the Philippine Air Lines (PAL), as its general sales agent
in the Philippines. As an agent, PAL, among other things, sold for and in behalf of
JAL, plane tickets and reservations for cargo spaces which were used by the
passengers or customers on the facilities of JAL.
3. On 1972, JAL received deficiency income tax assessment notices and a demand
letter from CIR for the total amount of P2,099,687.52 inclusive of 50% surcharge
and interest, for years 1959 through 1963.
4. JAL protested said assessments alleging that as a non-resident foreign
corporation, it was taxable only on income from Philippine sources as
determined under Section 37 of the Tax Code, and there being no such income
during the period in question, it was not liable for the deficiency income tax
liabilities assessed. JALs request for cancellation of assessment was denied. JAL
secured a favorable decision from the Court of Tax Appeals
ISSUES: Whether or not the proceeds from the sales of JAL tickets by PAL shall be
considered as income sourced within the Philippines and therefore taxable?
RULING:
1. For the source of income to be considered as sourced within the Philippines, it
should be proved that income is derived from activity in the Philippines. JAL
constituted PAL as local agent to sell its airline tickets, there can be no
conclusion other than that JAL is a resident foreign corporation, doing business
in the Philippines. Indeed, the sale of tickets is the very lifeblood of the airline
business, the generation of sales being the paramount objective (Commissioner
of Internal Revenue vs. British Overseas Airways Corporation, supra).
2. The absence of flights in the Philippines did not negate the fact that JAL engaged
in an activity that produced income.

G.R. Nos. 79926-27 October 17, 1991

STATE INVESTMENT HOUSE, INC. and STATE FINANCING CENTER, INC., petitioners,
vs.
CITIBANK, N.A., BANK OF AMERICA, NT & SA, HONGKONG & SHANGHAI BANKING
CORPORATION, and the COURT OF APPEALS, respondents.

FACTS:
1. On December 11, 1981, Bank of America NT and SA, Citibank N.A. and Hongkong
and Shanghai Banking Corporation filed with the Court of First Instance of Rizal
a petition for involuntary insolvency of Consolidated Mines, Inc. (CMI), which
they amended four days later
2. The petition alleged that CMI obtained loans from The Banks, the outstanding
debts were in millions, that State Investment House Inc and State Financing
Center instituted for collections of sums of money against CMI and a writ of
attachment were issued against royalty payment due to CMI from Benguet
Consolidated and CMI committed acts of insolvency
3. The petition was opposed by SIHI and SFCI contending that the banks had
already received payments from CMI, that the court has no jurisdiction since the
alleged insolvency was false, the writ of attachment were issued for legal ground
and that the courts had no jurisdiction because foreign banks are non-resident
creditors in contemplation of the law.
4. CMI contended that it is not insolvent and filed a motion to dismiss contending
that the Banks have no capacity because they are not residents
 5. SIHI and SFCI filed a motion for summary judge menton the ground that the trial
court has no jurisdiction over the banks. The Courts gave merit to petition and
dismissed such case for lack of jurisdiction ruling that the banks are non-
residents and merely licensed to do business in the Philippines.
6. Foreign banks filed a prior notice of appeal before the CA. CA reversed the
decision of the court ruling that; the three banks are considered as residents for
purposes of doing business and taxation in the Philippines. To deprive the banks
of their right to proceed against their debtors would contravene the basic tenets
of equity. MR was denied.
ISSUES: Whether or not foreign banks licensed to do business in the Philippines may be
considered as residents of the Philippines
RULING:
1. The NIRC declares resident foreign corporation applies to a foreign corporation
engaged in trade in the Philippines. The Offshore Banking Law states that
branches, subsidiaries, or any other units of corporation organized under the
laws of any foreign country operating in the Philippines shall be deemed as
residents. The General Bankin Law, considers the same as well.

G.R. No. L-65773-74 April 30, 1987

COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
BRITISH OVERSEAS AIRWAYS CORPORATION and COURT OF TAX
APPEALS, respondents
FACTS:
1. British Overseas Airways Corporation is a British owned corporation organized
and existing under UK laws. It operates air transportation service and sells
transportation tickets.
2. It was not given permission to operate in the Philippines. Although except for a
nine-month period, partly in 1961 and partly in 1962, when it was granted a
temporary landing permit by the CAB. Consequently, it did not carry passengers
and/or cargo to or from the Philippines, although during the period covered by
the assessments, it maintained a general sales agent in the Philippines Wamer
Barnes and Company, Ltd., and later Qantas Airways which was responsible
for selling BOAC tickets covering passengers and cargoes.
3. Petitioner assessed BOAC for deficiency income taxes covering the years 1959 to
1963. BOAC paid the assessment under protest.
 4. The Tax Court held that the proceeds of the sales in the Philippines do not
constitute as income sourced within since no service of carriage of passengers or
freight was performed in the Philippines and therefore no income tax to speak
of.
ISSUES: Whether or not the revenue derived from the sales tickets in the Philippines
constitute as income.
RULING:
1. Sales shall be taxable. The source of an income is the property, activity or service
that produced the income. For the source of an income to be considered as
coming from the Philippines, it is sufficient that the income is derived from
activity within the Philippines. Absence of flights is not determinative of the
source of income or the site of income taxation.
2. The flow of wealth proceeded from and occurred within Philippine territory
enjoying protection accorded by the Philippine government.

G.R. No. 195909 September 26, 2012

COMMISSIONER OF INTERNAL REVENUE, PETITIONER,
vs.
ST. LUKE'S MEDICAL CENTER, INC., RESPONDENT.
x-----------------------x
G.R. No. 195960
ST. LUKE'S MEDICAL CENTER, INC., PETITIONER,
vs.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

FACTS:
1. St. Luke's is a non-stock non-profit hospital. On 16 December 2002, the Bureau
of Internal Revenue (BIR) assessed St. Luke's deficiency taxes amounting to
P76,063,116.06 for 1998, comprised of deficiency income tax, value-added tax,
withholding tax on compensation and expanded withholding tax. The BIR
reduced the amount to P63,935,351.57 during trial in the First Division of the
CTA.
2. The BIR assessed St. Luke's based on the argument that Section 27(B) of the Tax
Code should apply to it and hence all of St. Luke's income should be subject to
the 10% tax therein as it is a more specific provision and should prevail over
 Section 30 which is a general provision. St. Luke's countered by saying that its
free services to patients was 65% of its operating income and that no part of its
income inures to the benefit of any individual.
ISSUES: Whether or not Section 27(B) have the effect of taking proprietary non-profit
hospitals out of the income tax exemption under Section 30 of the Tax Code and should
instead be subject to a preferential rate of 10% on its entire income?
RULING:
1. St. Luke's fails to meet the requirements under Section 30(E) and (G) of the NIRC
to be completely tax exempt from all its income. It remains a proprietary non-
profit hospital under Section 27(B) of the NIRC as long as it does not distribute
any of its profits to its members and such profits are reinvested pursuant to its
corporate purposes.
2. St. Luke's, as a proprietary non-profit hospital, is entitled to the preferential tax
rate of 10% on its net income from its for-profit activities.
3. St. Luke's is therefore liable for deficiency income tax in 1998 under Section
27(B) of the NIRC. However, St. Luke's has good reasons to rely on the letter
dated 6 June 1990 by the BIR, which opined that St. Luke's is "a corporation for
purely charitable and social welfare purposes" and thus exempt from income
tax.
4. In Michael J. Lhuillier, Inc. v. Commissioner of Internal Revenue, 61 the Court
said that "good faith and honest belief that one is not subject to tax on the basis
of previous interpretation of government agencies tasked to implement the tax
law, are sufficient justification to delete the imposition of surcharges and
interest."

G.R. No. L-5896 August 31, 1955

A. SORIANO Y CIA., petitioner-appellant,
vs.
COLLECTOR OF INTERNAL REVENUE, respondent-appellee.

FACTS:
1. Petitioner was engaged in the business of selling surplus goods acquired from
the Foreign Liquidation Commission pursuant to an agreement with the United
States Government whereby petitioner undertook to rehabilitate the Veterans
Administration Building (formerly Heacock Building) for and in consideration of
over a million pesos worth of surplus goods.
 2. Petitioner had yards where some of the goods were stored and those that were
defective were reconditioned.
3. United Africa Co., Ltd. sent its representative, Hugh Watson Gibson, to the
Philippines to look into the availability of tractors for sale in the Philippines.
Gibson learned of the petitioner's business and contracted to buy tractors from
the latter, to be delivered f.a.s. (free alongside ship), Manila, in good working
condition and capable of running off lighters under their own power. A tractor
expert, Mr. Tex Taylor, was employed by the foreign company to select, inspect
and test the tractors before delivery.
4. Tex Taylor gave a list of tractors to petitioner, to which the latter acquired and
reconditioned. Petitioner then presented such before the Philippine Refining Co.,
affiliate of the foreign buyer. The latter would then notify banks to which UAC
had dollar deposit to pay for the acquisition of the tractors. Petitioner sold a total
of 57 tractors.
ISSUES: Whether or not petitioner is liable for the payment of percentage or sales tax on its
gross sales of the 57 tractors in question to the United Africa Co., Ltd. under the provisions
of Sec. 186 of the National Internal Revenue Code
RULING:
1. Petitioner argues that the goods in question did not acquire a taxable situs in the
Philippines because they merely passed Philippine territory in transit and that they
were not intended for local use but for exportation to a foreign country
2. The sale of the tractors was consummated in the Philippines, for title was
transferred to the foreign buyer at the pier in Manila; hence, the situs of the sale is
Philippines and it is taxable in this country.
3. As for the legislative policy to exempt consignments abroad from tax in order to
encourage exports, the Solicitor General has pointed out that it is only the
exportation of locally produced or manufactured products, and not every kind of
exportation, that Congress wanted to encourage and promote.

G.R. No. L-53961

NATIONAL DEVELOPMENT COMPANY, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
FACTS:
1. The National Development Company (NDC) entered into contracts in Tokyo with
several Japanese shipbuilding companies for the construction of 12 ocean-going
 vessels. Initial payments were made in cash and through irrevocable letters of
credit.
2. When the vessels were completed and delivered to the NDC in Tokyo, the latter
remitted to the shipbuilders the amount of US$ 4,066,580.70 as interest on the
balance of the purchase price. No tax was withheld.
3. The Commissioner then held the NDC liable on such tax in the total sum of
P5,115,234.74. Negotiations followed but failed. NDC went to CTA. BIR was
sustained by CTA. BIR was sustained by CTA. Hence, this petition for certiorari.
ISSUES: Whether or not National Development Corporation shall be liable for tax?

RULING:

1. Although NDC is not the one taxed since it was the Japanese shipbuilders who were
liable on the interest remitted to them under Section 37 of the Tax Code, still, the
imposition is valid.
2. The imposition of the deficiency taxes on NDC is a penalty for its failure to withhold
the same from the Japanese shipbuilders. Such liability is imposed by Section 53c of
the Tax Code. NDC was remiss in the discharge of its obligation as the withholding
agent of the government and so should be liable for the omission.