Situs of Taxation and Double Taxation
Republic Bank v. CA
Procter and Gamble v. Municipality of
Jagna, Bohol
Pepsi-Cola Bottling Company v.
Municipality of Tanaun
Villanueva v. City of Iloilo
- TAX and PENALTY
- CIR made two assessments against Republic Bank (1969 and 1970)
- They were required to pay for the 1% monthly bank reserve
deficiency tax. (for each year)
- Under the Tax code - 1% reserve deficiency tax if it incurs reserve
deficiency
- Under the General Banking law - 1/10 of 1% for incurring reserve
deficiencies
- Petition for review - Double Taxation.
- SC - No DT - One was a penalty and the other was a tax.
- Payment to Central Bank is a penalty, the primary purpose being for
regulation.
- Payment of the 1% is a tax used for revenue generation.
- COPRA STORAGE FEES
- Ordinance 4 - impose a fee on storage of exportable copra in
bodegas within the municipality.
- P&G - they were being taxed twice - one on the tax on their products
(license fees) and the other a tax imposed by the municipality on
storage fees.
- SC - No DT - DT exists when the same property is taxed twice when
it should only be taxed once.
- A tax on the products of P&G is different from a tax imposed by
the municipality for the PRIVILEGE of storing copra in bodegas
within their territory.
- Furthermore, on the tax on products, the authority is the national
government, while in the latter, the authority is the LGU.
- DISCUSSED - 2 ORDINANCES
- A municipality enacted two ordinances.
- FIRST - tax for every bottle corked
- SECOND - tax soft drinks produced and manufactured within its
territorial jurisdiction. (volume capacity)
- SC - NO DT. The ordinances do not cover the same subject matter.
- Furthermore, it is clear that the second ordinance was made to
substitute the first one, and operates as a repeal of it.
- DISCUSSED - TENEMENT HOUSES
- Municipal board of Iloilo enacted an ordinance imposing a license
tax on persons engaged in the business of operating tenement
houses.
- Villanueva contends that there is DT since they also pay real estate
taxes and income taxes, aside from the tenement tax imposed.
- SC - No DT. Not of the same subject matter and taxing authority.
- FIRST. - The same tax may be imposed by the national
government as well as by the local government.
- A license tax may be levied upon a business or occupation although
the land or property used in connection with it is subject to property
tax.
- SECOND. Real estate tax and tenement taxes are not of the
same kind and character.
Digests: Situs - Exemption
Tax 1 2A | Jaigest 1
Situs of Taxation and Double Taxation
Compania General de Tabacos de
Filipinas (Tabacalera) v. City of Manila
Province of Bulacan v. CA
Swedish Match Philippines v. Treasurer of
the City of Manila
- LICENSE FEE and SALES TAX DIFFERENT - LIQUOR SALE
- Tabacalera filed an action to recover its alleged overpaid taxes on
the wholesale and retail sale of liquor.
- It alleges that it paid the LICENSE FEE as a wholesale and retail
liquor dealer. It also paid the SALES TAXES as a wholesale and
retail seller of general merchandise.
- It contends that it should not have paid the sales taxes.
- SC - No DT - License fee is different from a sales tax.
- A license fee is essentially for purposes of REGULATION. (liquor
is harmful to public morals and health, its use must be regulated) -
PRIVILEGE of engaging in the sale of liquor - police power.
- Sales tax is mainly for revenue generation by the municipality
imposed to sellers of general merchandise.
- QUARRY RESOURCES - LGU and NATIONAL
- Bulacan passed an ordinance stating that they will levy excise taxes
on quarry resources found within its jurisdiction. (public lands)
- However, it taxed Republic Cement for extracting in private land.
Republic Cement contends that the municipality had no authority to
impose taxes on quarry resources from private lands since those are
already taxed under the NIRC. (Revenue code)
- SC - Since the NIRC already levies a tax on all quarry resources
whether extracted from public or private land, the LGU cannot
impose on those already taxed under the NIRC
- However, LGU can still impose the tax on quarry resources
extracted from PUBLIC LANDS only, based on the LGC.
- THERE IS DT - REVENUE CODE - REQUIREMENTS MET
- Petitioner was required to pay business taxes. The assessed
amount was based on Sections 14 and 21 of the Manila Revenue
Code.
- Petitioner contends that it is not liable to pay the taxes under section
21 in view of the payments it made under section 14.
- Section 14 - Local business tax
- Section 21 - Business tax on manufacturers of liquors, spirits wines
etc.
- SC - There is DT - Businesses already subject to the local
business tax can no longer be made liable under section 21.
- Same subject matter - doing business in City of Manila
- Same purpose - revenue generation
- Same taxing authority - City of Manila
- Same taxing JD/Same taxing period (calendar year)/Same kind or
character (local business tax imposed on gross sales)
Digests: Situs - Exemption
Tax 1 2A | Jaigest 2
Forms of Escape from Taxation
Delpher Trades Corp. v. IAC
Heng Tong Textiles v. CIR
CIR v. Toda
- TAX AVOIDANCE ONLY - SIBLINGS - SHARES OF STOCK
- Pacheco siblings leased their lot to CONSTRUCTION COMPONENTS
with a right of first refusal should the siblings decide to sell.
- CC assigned its rights and obligations under the lease to HYDRO PIPES
with consent of the siblings
- After a few years, a deed of exchange was entered into by the siblings
and DELPHER TRADES wherein the Pacheco’s conveyed the property
to the latter for 2,500 shares of stock of the corporation.
- HYDRO filed a complaint for reconveyance since they were not given the
option to buy said property.
- DELPHER contends that there was no sale or transfer of property since
the company is a family corporation owned by the Pachecos. It is a mere
alter ego of the Pachecos done in order to perpetuate control and avoid
taxes. (transfer of lot to corporation - no income tax and inheritance
taxes)
- SC - Deed of exchange was VALID. There was no transfer of actual
ownership interests.
- SC finds nothing wrong about the estate planning scheme. It is the legal
right of a taxpayer to decrease the amount of his taxes or avoid
them altogether, as long as it is within the limitations of the law.
- SISTER CORPORATION - LAW PERMITS
- The CIR assessed a deficiency sales tax and surcharge against
petitioner for importation of textiles.
- The facts show that although the goods were withdrawn from customs by
PAN ASIATIC (sister corporation) it was petitioner who was the real
importer and hence they did not pay the taxes due.
- SC - Petitioner needs to pay the tax due. The private arrangement
between the companies does not affect the role of petitioner as the real
importer of the goods.
- HOWEVER, any attempt to minimize one’s tax does not necessarily
constitute fraud. The internal arrangement does not speak of a willful
neglect to file returns etc.
- A taxpayer may diminish his liability by any means which the law
permits.
- TAX EVASION - TRANSFER TO AVOID TAX
- CIBELES Insurance sold its building and two parcels of land to
ALTONAGA.
- On the same day, ALTONAGA sold the properties to ROYAL MATCH
INC. (RMI).
- The company was taxed only 5% as capital gains tax of Altonada,
instead of the 35% as corporate income tax.
- CIR noticed this and sent a notice of assessment for deficiency income
tax. They contend that this was a form of TAX EVASION.
- SC - TAX EVASION - the transactions were tainted with fraud.
- Altonaga was merely used as a channel so the corporations can
minimize the taxes due to the government.
- THREE FACTORS in TAX EVASION - END to be achieved,
Accompanying STATE OF MIND, and a course of action or failure of
action which is UNLAWFUL. (ESU)
Digests: Situs - Exemption
Tax 1 2A | Jaigest 3
Exemption from Taxation
Luzon Stevedoring Corp v. CTA
Manila Electric Company v. Vera
Davao Gulf Lumber Corp v. CIR
- TUGBOATS NOT A CARGO VESSEL
- Petitioner imported various engine parts and other equipment for
the repair and maintenance of their tugboats.
- It paid the assessed COMPENSATING TAX under protest.
- So it tried to secure a tax refund alleging that a tugboat is
included in the term “cargo vessel” which is exempted under the
NIRC.
- SC - NOT EXEMPTED - Tugboats are not cargo vessels. They
are neither designed nor used for carrying and/or transporting
persons or goods by themselves but are mainly employed for
towing and pulling purposes.
- Any claim for tax exemption should be strictly construed
against the taxpayer.
- COPPER WIRES, TRANSFORMERS, INSULATORS
- MERALCO imported copper wires, transformers and insulators
for business use.
- It applied for a tax refund for compensating tax. Basing this on
their franchise which states that “…poles,wires, transformers and
insulators of the grantee is expressly exempted”.
- SC - NOT EXEMPTED - If you want to exempt yourself from
payment of a particular tax, you must do so under clear and
unmistakable term found in a statute. You must point out a
provision of law creating this right.
- In this case, the claim is a vague implication. The franchise
exempts MERALCO from PROPERTY TAX payment of the said
items, not from payment of tax in this case (COMPENSATION
TAX) - Note: Compensation tax is an excise tax (use) not a
property tax.
- EQUITY TAX EXEMPTION NOT ALLOWED
- Petitioner is a licensed forest concessionaire. It purchased, from
several oil companies, refined and manufactured mineral oils
which it used exclusively for the exploitation and operation of its
forest concession.
- It paid the specific taxes imposed by the NIRC but they filed a
claim for REFUND, particularly 25% of the SPECIFIC taxes .
- They contend that under RA 1435 (amendment on NIRC) oils
used in operations are subject to 25% refund.
- CTA granted but computed the refund but based on the rates
deemed paid and not on higher rates actually paid.
- SC - Partial REFUND but based on the rates deemed paid.
(Doctrine of strictissimi juris)
- Furthermore, the argument of petitioner on “equity and justice”
cannot stand since there is no tax exemption SOLELY on the
ground of equity.
Digests: Situs - Exemption
Tax 1 2A | Jaigest 4
Exemption from Taxation

CIR v. CA and Ateneo - AUXILIARY UNIT - CONTRACTORS TAX

- Institute of Philippine Culture (IPC) is an auxiliary unit of Ateneo.
They accept sponsorship for research activities.
- The CIR demanded from Ateneo a sum of money for the alleged
deficiency contractor’s tax.
- Ateneo contested the validity of the assessment.
- In conducting research and studies through IPC, is ateneo an
independent contractor?
- SC - NO - To determine who are exempted, you must first
determine who are covered by the said law.
- In this case, a contractor is one engaged in the business of
selling services.
- There is no evidence to show that Ateneo or IPC ever sold its
services for a fee or was ever engaged in a business apart from
the academic purposes of the university. (Payment to Ateneo fall
as gifts or donations which are tax exempt)
- Note: Strict interpretation doctrine first before principle of
tax exemption

Caltex Philippines v. CoA - OFFSET - REIMBURSEMENTS - STRICT INTERPRETATION

- COA sent a letter to Caltex directing it to remit its collection of
additional taxes pursuant to Sec. 8 of PD 1956.
- Pending such remittance, all reimbursements asked by Caltex
shall be held in abeyance.
- Caltex proposed a payment plan, (Offset) wherein the
uncollected remittance will offset the reimbursement.
(Reimbursement will cover the remittance).
- Reimbursements stems from sales to NAPOCOR, ASTLAS and
MARCOPPER.
- SC - Reimbursement - Only those from NAPOCOR is allowed.
- Sales from NAPOCOR is reimbursable because it was
granted full exemption from the payment of taxes.
- However, it cannot claim reimbursement from the others. The
LOI used as basis for their exemption has no binding force and
effect (never published).
- Even arguing that the LOI is in effect, The claim must still fail.
Tax exemptions as a GR are construed strictly against the
taxpayer and liberally in favor of the taxing authority. The
party claiming exemption must be expressly mentioned by
law. This, petitioner failed to show.

Digests: Situs - Exemption

Tax 1 2A | Jaigest 5
Exemption from Taxation

National Development Company v. - TOKYO VESSELS - UNDERTAKING - SEC of FINANCE

CIR - NDC entered into contracts with several Japanese shipbuilding
companies.
- Payments were made and PN’s were signed guaranteed by the
RP through an undertaking by the Secretary of Finance.
- CIR then held the NDC liable on the tax deficiency on the
purchase price.
- NDC contends that: The RP could not collect the taxes on the
interest remitted because of the undertaking by the Secretary of
Finance on the PN.
- SC - NO - Tax exemptions cannot be merely IMPLIED. It must
be categorically and unmistakable expressed.
- The fact that the PNs were guaranteed by the secretary does not
mean that the payments by the NDC to the Japanese creditors
were exempt (withholding tax) since the undertaking was not
tantamount to a waiver of the collection of taxes.
- “Legislative grace” - any tax relief provided is the result of
specific acts by Congress.

Smart Communications v. City of - WITHDRAWAL OF EXEMPTION - FRANCHISE

Davao - SMART filed a civil action for the ascertainment of its rights and
obligations.
- It contends that its telecenter in Davao is exempt from payment
of FRANCHISE TAX to the city. Under RA 7294, (franchise) it
only needs to pay a certain amount “in lieu of all taxes”.
- Davao: Power granted by the Constitution to create their own
sources of revenue.
- SC: The “In lieu of all taxes” clause refers only to taxes
imposed by the NIRC. It does not apply to local taxes.
- Note: Tax exemption v. Tax exclusion - SMART argues that the
clause is of the nature of a “tax exclusion”.
- Tax exemption - freedom from a charge/burden to which others
are subjected / Tax exclusion - removal of otherwise taxable
items from reach of taxation (exclusion from gross income) /
BOTH are privileges.

Nitafan v. CIR - JUDGES NOT EXEMPTED FROM INCOME TAX

- Petitioners are judges seeking to prohibit the CIR from making
any deduction of withholding taxes from their salary.
- They contend that “any tax withheld from their emoluments or
compensation constitute a decrease or diminution of their
salaries, contrary to the Constitution.
- SC - judges are NOT exempted from payment of
withholding/income tax. - Equality among the branches of
government.

Digests: Situs - Exemption

Tax 1 2A | Jaigest 6
Exemption from Taxation

CIR v. Mitsubishi Metal Corporation - DISCUSSED - MITSUBISHI NOT AN AGENT

- Atlas entered into a loan with respondent for the expansion of its
mines in Cebu.
- Mitsubishi agreed and applied for a loan with EXIMBANK.
- Payments were made by Atlas but the tax thereon was withheld.
- They claim that Mitsubishi is exempt from taxation since it was
merely an agent of Eximbank, a government bank of Japan.
- SC - Mitsubishi is NOT AN AGENT of Eximbank. Hence not
exempt from tax. It entered into an agreement with Atlas on
its own independent capacity.
- Transaction between Mitsubishi and Atlas and Mitsubishi and
Eximbank are separate and distinct transactions.

PLDT v. Davao City - NO BLANKET EXEMPTION

- PLDT applied for a mayor’s permit to operate in Davao.
- The city said that they must pay the local FRANCHISE tax first.
- PLDT protested contending that it was exempt from the payment
based on RA 7925 - Equality of treatment in telecommunications
- Other telecommunication franchise enjoy exemption - PLDT is
automatically covered also. (All based on the opinion of bureau
of finance)
- Trial court - DENIED - LGC withdrew ALL tax exemptions.
- SC - NOT EXEMPT - “exemption: under RA 7925 is too
general. It does not appear that Congress intended it to
operate as a blanket tax exemption”
- RA 7925 cannot amend the franchise of petitioner to acquire
exemption.
- As to LGC - taxes apply only to those already enjoying a
franchise, and does not cover future exemptions. (as is the case
of PLDT whose franchise was granted after 1992)

CIR v. Robertson - TAX EXEMPTION - RP/US BASES AGREEMENT

- Respondents are US Citizens working in the US Military base.
Their incomes are derived from their salaries from the US
government.
- CIR made an assessment for their deficiency income tax.
- CIR - Struct construction - respondents must show that they are
in the PH only by reasons of employment.
- SC - Respondents are EXEMPT. They meet the requirements
under the bases agreement - (1) US National employed in
connection with construction, maintenance, operation, or defense
of the bases, (2) reside in the PH by reason of such employment,
and (3) income derived is from the US government.
- Only when their tour of duty is over can the CIR review again for
tax purposes.

Digests: Situs - Exemption

Tax 1 2A | Jaigest 7
Exemption from Taxation
RP v. IAC
Philippine Acetylene Co. v. CIR
- TAX AMNESTY - GRANTED
- Spouses Pastor owed the RP income taxes from 1955 to 1959.
- They offered a compromise agreement with the BIR but the
same was denied.
- After 10 years, the government filed an action against the
spouses for the recovery of the income tax deficiency.
- According to the CFI, the spouses already paid the deficiency but
this was made under PD 213. (Amnesty income tax returns) - It
was shown that the spouses availed of the tax amnesty and paid
amnesty taxes.
- RP appealed and alleged that the spouses cannot avail of the tax
amnesty since they still had pending assessments for unpaid
taxes.
- Does the tax amnesty payments bar further recovery of income
taxes? - YES
- SC - The spouses had already paid the equivalent of the
deficiency to the government by way of AMNESTY TAXES. The
government is now ESTOPPED from collecting the difference.
- Note: AMNESTY - being a general pardon or intentional
overlooking of by the State of its authority to impose
penalties. It partakes of an absolute forgiveness or waiver
on the part of the RP.
- TAX EXEMPTION DOES NOT APPLY TO SELLER
- PAC is a corporation engaged in the manufacture and sale of
oxygen and acetylene gases.
- It made various sales to the NPC (agency of the PH government)
and to the Voice of America (agency of the US government).
- The CIR assessed the sales and demanded deficiency sales tax
from PAC.
- PAC denied liability since both buyers are exempt from taxation.
- SC - PAC is LIABLE.
- NPC - as a tax exempt entity, the buyer is exempted from
absorbing the burden of indirect taxation and it is the seller
that shoulders this burden. (Remedy: The purchaser may pay
the seller more because of the obligation imposed)
- As to VoA - Under the bases agreement, only those specific
goods are exempt (construction/maintenance/operation/defense).
Sale of good to VoA are not free from the payment of tax.
Digests: Situs - Exemption
Tax 1 2A | Jaigest 8
Exemption from Taxation

CIR v. Gotamco & Sons Inc. - CONTRACTORS TAX - INDIRECT TAX

- WHO wanted to construct a building to house its office in Manila.
- Under the 1951 Host agreement - the organization may import
materials into the country for the construction free from all duties
and taxes.
- The contract was awarded to GOTAMCO. It gave a stipulated
price free from direct or indirect taxes.
- However, the CIR demanded payment from Gotamco for
payment of the 3% contractor’s tax. They argue that said tax is
not a direct or indirect tax to the WHO but one primarily due on
the contractor. (Excise tax)
- SC - Gotamco is EXEMPT. The contractor’s tax is an indirect tax.
- Being an indirect tax, it is the owner of the building that
shoulders the burden because the same is shifted by the
contractor to the owner.

Maceda v. Macaraig - NPC STILL EXEMPT DESPITE AMENDMENTS - OIL

COMPANIES HOLDS BURDEN - STRICT CONSTRUCTION
NOT APPLICABLE TO GOCC
- NPC is a non-profit corporation exempted from all taxes and
other charges made by the government.
- Several amendments were made to its charter particularly PD
938 - upheld the tax exemption but in more general terms.
- When PD 1931 was enacted (abolishing tax exemptions to all
GOCCs) the oil companies started to pay specific and ad
valorem taxes on their sales of oil to NPC.
- However, the tax exemption privilege of NPC was restored to be
applied retroactively. So NPC applied for a refund of specific
taxes.
- A senate inquiry was done since certain oil companies allegedly
availed of their non-existing exemption of NPC from indirect
taxes.
- Maceda argues that the exemption of NPC was repealed already
but PD 938 (removed phrase “directly or indirectly” and became
more general)
- SC - NPC is still EXEMPT. PD 938 did not repeal but merely
amended to tax exemption to simplify the law. It expressly states
that NPC is exempt from “all forms of taxes” which clearly shows
the intent of the law.
- The tax burden may not be shifted to the NPC, a tax exempt
entity, by the oil companies.
- It is the oil companies that must absorb the burden of taxation.
- The rule on strict interpretation does not apply to GOCCs.
(practicality)

Digests: Situs - Exemption

Tax 1 2A | Jaigest 9
Exemption from Taxation

Silkair (Singapore) v. CIR - JET FUEL - PURCHASERS NOT TAXPAYERS

- Petitioner is an international carrier organized under the laws of
Singapore.
- It filed a refund with the BIR on the excise taxes which it paid for
the purchase of AVIATION JET FUEL from Petron.
- It contends that since the Cebu-Singapore route is an
international flight, the petroleum products should not be subject
to excise tax. (NIRC)
- CTA held that Silkair is not entitled to excise tax exemption since
it is not the proper party to claim the refund.
- Silkair - it is the proper party since it is the entity granted tax
exemption and which made the said tax payment.
- SC - Proper party is PETRON. They are the statutory taxpayer or
the person to whom the tax is imposed, even if it shifts said
burden.
- Even if Petron shifts the burden to Silkair, that amount is NOT A
TAX but is part of the purchase price.
- When the seller passes on the tax to his buyer, he shifts the
BURDEN, not the LIABILITY. Even if the consumers ultimately
pay for the tax, they are not considered the taxpayers.

CIR v. Pilipinas Shell Petroleum - AVIATION FUEL - EXCISE TAX

Corporation - Shell filed a claim for tax refund representing the excise taxes
they paid on the sale and delivery of gas fuel to international
carriers.
- It argues that when they sell oil to international carriers, they are
exempt from excise tax. So it claims refund for the excise taxes it
already paid. (Excise tax is collected once the oil/product is
removed from place of production) - Basically, Shell contends
that the tax attaches to the products not to the buyer. (Macaraig
and Acetylene case were used)
- SC - Shell cannot avail of a refund.
- Manufacturer cannot pass the tax to the carriers by
incorporating the excise tax to the selling price. It is the
seller that should shoulder the burden of indirect taxes.
- The tax exemption in favor of the buyer (international carriers)
cannot be the basis of a refund claim by the seller.
- Macaraig - exemption from indirect taxes - Shell case covers
direct taxes.
- Acetylene - talks of sales tax/ tax on transactions - Shell case is
a tax on products.

Digests: Situs - Exemption

Tax 1 2A | Jaigest 10
Exemption from Taxation

Philippine Airlines v. CIR - Caltex sells jet fuel to PAL for its domestic operations. It paid the
required excise tax to the BIR.
- PAL received the bill of the said fuel, which reflected the amount
of excise tax being paid by Caltex to the BIR. It is stated there
that the said tax is being passed on to PAL.
- PAL sought a refund of the excise tax. It contends that its
franchise gave it certain tax exemption privileges in the purchase
of fuel.
- Trial court held that PAL has no cause of action. Only a statutory
taxpayer (Caltex) can seek a refund. (Silkair case)
- PAL contends that it can file for a refund on account of its tax
exemption privileges under its franchise which covers both direct
and indirect taxes (Maceda case).
- SC - The doctrine on Silkair cannot apply if 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 this case, they
are allowed to claim a tax refund even if they are not considered
a statutory taxpayer.
- As in the Maceda case, the NPC’s own charter specifically
granted it an exemption from both direct and indirect taxes.
- GR/IMPT DOCTRINE: The propriety of a tax refund depends
on the kind of exemption which forms its basis. If the law
confers exemption from BOTH direct or indirect taxes, a
claimant is entitled to a tax refund even if it only bears the
economic burden of the tax (not statutory taxpayer). On the
other hand, if the exemption applies only to DIRECT taxes,
then it is the statutory taxpayer which is regarded as the
proper party to file a refund.
- In this case, since PAL’s franchise grants it exemption from
BOTH direct and indirect taxes, it can claim a refund for the
excise tax.

Digests: Situs - Exemption

Tax 1 2A | Jaigest 11