round 2 cases tax
TRANSCRIPT
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ENGRACIA FRANCIA VS. INTERMEDIATE APPELLATE COURT
162 SCRA 753, Set-off of Taxes
FACTS:
Engracio Francia was the owner of a 328 s!are "eter #an$ in %asa& Cit&' (n
)cto*er 1+77, a ortion of his #an$ 125 s!are "eter. was exroriate$ *&the go/ern"ent for %0,116'' The exroriation was "a$e to gi/e wa& to
the exansion of a near*& roa$'
(t a#so aears that Francia fai#e$ to a& his rea# estate taxes since 1+63
a"o!nting to %2,0'' So in ece"*er 1+77, the re"aining 23 s!are
"eters of his #an$ was so#$ at a !*#ic a!ction after $!e notice was gi/en
hi".' The highest *i$$er was a certain o Fernan$e4 who ai$ the !rchase
rice of %2,0' which was #esser than the rice of the ortion of his #an$
that was exroriate$.'
ater, Francia fi#e$ a co"#aint to ann!# the a!ction sa#e on the gro!n$ that
the se##ing rice was gross#& ina$e!ate' e f!rther arg!e$ that his #an$
sho!#$ ha/e ne/er *een a!ctione$ *eca!se the %2,0' he owe$ thego/ern"ent in taxes sho!#$ ha/e *een set-off *& the $e*t the go/ern"ent
owe$ hi" #ega# co"ensation.' e a##ege$ that he was not ai$ *& the
go/ern"ent for the exroriate$ ortion of his #an$ *eca!se tho!gh he new
that the a&"ent therefor was $eosite$ in the %hi#iine ationa# an, he
ne/er with$rew it'
ISSUE:
9hether or not the tax owe$ *& Francia sho!#$ *e set-off *& the :$e*t; owe$
hi" *& the go/ern"ent'
HELD:
No.As a r!#e, set-off of taxes is not a##owe$' There is no #ega# *asis for the
contention' & #ega# co"ensation, o*#igations of ersons, who in their own
right are reciroca##& $e*tors an$ cre$itors of each other, are exting!ishe$
Art' 1278, Ci/i# Co$e.' This is not a#ica*#e in taxes' There can *e no off-
setting of taxes against the c#ai"s that the taxa&er "a& ha/e against the
go/ern"ent' A erson cannot ref!se to a& a tax on the gro!n$ that the
go/ern"ent owes hi" an a"o!nt e!a# to or greater than the tax *eing
co##ecte$' The co##ection of a tax cannot await the res!#ts of a #aws!it against
the go/ern"ent'
The S!re"e Co!rt e"hasi4e$< A c#ai" for taxes is not s!ch a $e*t,$e"an$, contract or =!$g"ent as is a##owe$ to *e set-off !n$er the stat!tes
of set-off, which are constr!e$ !nifor"#&, in the #ight of !*#ic o#ic&, to
exc#!$e the re"e$& in an action or an& in$e*te$ness of the state or
"!nicia#it& to one who is #ia*#e to the state or "!nicia#it& for taxes' either
are the& a roer s!*=ect of reco!"ent since the& $o not arise o!t of the
contract or transaction s!e$ on'
F!rther, the go/ern"ent a#rea$& Francia' A## he has to $o was to with$rawthe "one&' a$ he $one that, he co!#$ ha/e ai$ his tax o*#igations e/en
*efore the a!ction sa#e or co!#$ ha/e exercise$ his right to re$ee" > which
he $i$ not $o'
Anent the iss!e that the se##ing rice of %2,0' was gross#& ina$e!ate,
the sa"e is not tena*#e' The S!re"e Co!rt sai$< :a##ege$ gross ina$e!ac&
of rice is not "ateria# when the #aw gi/es the owner the right to re$ee" as
when a sa#e is "a$e at !*#ic a!ction, !on the theor& that the #esser the
rice, the easier it is for the owner to effect re$e"tion'; (f "ere ina$e!ac&
of rice is he#$ to *e a /a#i$ o*=ection to a sa#e for taxes, the co##ection of
taxes in this "anner wo!#$ *e great#& e"*arrasse$, if not ren$ere$
a#together i"ractica*#e' :9here #an$ is so#$ for taxes, the ina$e!ac& of therice gi/en is not a /a#i$ o*=ection to the sa#e'; This r!#e arises fro"
necessit&, for, if a fair rice for the #an$ were essentia# to the sa#e, it wo!#$ *e
!se#ess to offer the roert&' (n$ee$, it is notorio!s that the rices ha*it!a##&
ai$ *& !rchasers at tax sa#es are gross#& o!t of roortion to the /a#!e of
the #an$'
DOMINGO VS. GARLITOS (JUNE 29, 1963)
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CASE )CTR(E/5
4o 0//0 o4 0*$ate$ A+7+$/ %, 2&&2 >00 $0*/ /o LMCEC
thro!gh 80$o* $0#0on )cto*er 1, 22'
Since the co"an& an$ its reresentati/es 04+$0 /o 00#0 /50 $
*o/0$ * 0* 0//0, the re/en!e officers resorte$ to
o*$/+/#0 $0#0 in accor$ance with Section 3, Re/en!e
Reg!#ations RR. o' 12-++11'
)n ?a& 21, 23, 80//o*0, 0400 /o /50 S00/- o4 J+$/0 4o
80*- *#0$/7/o*its co"#aint against ?CEC, !is ?' Ca"!s
an$ ino ' ?en$o4a, the #atter />o >00 $+0 * /50 8/0$ $
P0$0*/ * Co8/o0, resecti/e#&'
The case was $ocete$ as ('S' o' 23-770' (n the Joint Affi$a/it
exec!te$ *& the re/en!e officers who con$!cte$ the tax fra!$
in/estigation,
it was a##ege$ that $esite the receit of the fina# assess"ent notice
an$ for"a# $e"an$ #etter on )cto*er 1, 22, ?CEC fai#e$ an$
ref!se$ to a& the $eficienc& tax assess"ent in the tota# a"o!nt of
%63,160,631'61, inc#!si/e of incre"ents, >55 5 ;0o0 4*
* 00+/o- $ 0$+/ o4 /50 $ /8-0?$ 4+0 /o 40 8o/0$/ /500o* >/5* /50 /5/- (3&)@- 0700*/- 80o'
Ca"!s an$ ?en$o4a fi#e$ a Joint Co!nter-Affi$a/it conten$ing that
LMCEC **o/ ;0 50 ;0 >5/$o0#0 4o /50 070 /
040*- which ha$ *eco"e $!e an$ $e"an$a*#e' Consi$ering that
the co"#aint an$ its annexes a## showe$ that the $+/ $ $80 #
/o* 4o o0/o*an$ not a tax e/asion case,
?CEC f!rther a/erre$ that it ha$ a/ai#e$ of the !rea!s Tax
A"nest& %rogra"s Econo"ic Reco/er& Assistance %a&"ent
ERAPB Po7 * /50 Vo+*/- A$$0$$0*/ Po7 VAPB)
4o 199< * 1999 4o 199%, /$ / ;/- >$ /0*/0 *
o$0 +*0 L0//0 o4 T0*/o*
?CEC arg!e$ that etitioner $ *o> 0$/o880fro" f!rther taing
an& action against it an$ its cororate officers concerning the taxa*#e
&ears 1++7 to 1+++' "/5 /50 7*/ o4 +*/- 4o +/ 4o
/50 o8*-?$ #0*/ o4 ERAP * VAP, >55 5#0
40/+0 o4 / *0$/-, /50 000*/ o4 4+ $ *07/0
?CEC f!rther asserte$ that it 40 o* A8 2&, 2&&1 8o/0$/ o*
/50 PANiss!e$ *& etitioner for ha/ing no *asis in fact an$ #aw'
owe/er, !nti# now the sai$ 8o/0$/ 0*$ +*0$o#0'
(n the Joint Re#&-Affi$a/it exec!te$ *& the !rea!s re/en!e officers,
80//o*0 $700 >/5 /50 o*/0*/o* o4 LMCEC /5/ /50
o8*/ 40 $ *o/ * * */+0, ointing o!t that ?CEC an$
its officers Ca"!s an$ ?en$o4a were *eing charge$ for the cri"ina#
offenses $efine$ an$ ena#i4e$ !n$er Sections 250 Atte"t to E/a$e or
efeat Tax. an$ 255 9i##f!# Fai#!re to %a& Tax. of the (RC'
(n this case, the (R $eci$e$ to si"!#taneo!s#& !rs!e *oth
re"e$ies an$ th!s asi$e fro" this cri"ina# action, the !rea! a#so
initiate$ a$"inistrati/e rocee$ings against ?CEC'
%etitioner stresse$ that LMCEC 0- o$/ /$ 75/ /o 40
8o/0$/ 0//0 4/0 /50 8$0 o4 /50 /5/- (3&)@- 0700*/-
80o' ?CECs rotest-#etter $ate$ D00;0 12, 2&&2 to R)C#a/e#ina S' acar, R o' 0, C!*ao, N!e4on Cit& was /+-
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40 o*- o* D00;0 16, 2&&2 , which was $isregar$e$ *& the
etitioner for *eing fi#e$ o!t of ti"e'
P0//o*0 4+/50 $$0/0 /5/ LMCEC?$ /5/ / >$
7*/0 +*/- 4o +/ >50* / #0 o4 /50 VAP *
ERAP 8o7$ $ $0*7' LMCEC 40 /o $//0 /5/ /$
#0*/ o4 ERAP +*0 RR No. 2@99 $ *o/ 7*/ o4 ;$o+/0+*/-fro" a!$it an$ in/estigation,
%etitioner a#so ointe$ o!t that LMCEC?$ $$0/o* o0/*7
/5$ $0 >/5 I.S. No. &&@9'6 $ $0*7 ;0+$0 $ $0
*#o#0$ *o/50 #o/o* * o440*$0 $+0 /o /50 4+0 o4
LMCEC /o $+;/ o 80$0*/ /$ ;oo$ o4 o+*/$ n$ other
acco!nting recor$s for exa"ination $esite the iss!ance of
s!*oena $!ces tec!" 7*$/ C+$ * 5$ 8/- $
P0$0*/ o4 LMCEC' The $eter"ination of ro*a*#e ca!se in sai$
case is confine$ to the iss!e of >50/50 /500 >$ 0-
#o/o* o4 /50 NIRC ;- C+$ * *o/ o8-*7 >/5 /50
$+;8o0* +0$ /0+ $$+0 ;- /50 IR'
ISSUE: >50/50 LMCEC * /$ o8o/0 o440$ - ;0 8o$0+/0
4o #o/o* o4 S0/o*$ 2' (A//08/ /o E#0 o D040/ T) * 2''
("4+ F+0 /o S+88- Co0/ * A+/0 I*4o/o* * P-
T).
HELD:
9e grant the etition'
There is no $is!te that 8o /o /50 4*7 o4 /50 o8*/ >/5 /50DOJ, /50 08o/ o* /50 / 4+ *#0$/7/o* o*+/0 o* LMCEC
$o$0 /5/ / 0 $+;$/*/ +*00/o*$ in its inco"e
tax ret!rns for 1++7, 1++8 an$ 1+++'
%!rs!ant to RR o' 12-++,38 PAN >$ $0*/ /o * 00#0 ;-
LMCEC o* F0;+- 22, 2&&1wherein it was notifie$ of the roose$
assess"ent of $eficienc& taxes' (n resonse to sai$ %A, ?CEC sent a
#etter-rotest to the TF, which $enie$ the sa"e o* A8 12, 2&&1 for
#ac of #ega# an$ fact!a# *asis an$ a#so for ha/ing *een 40 ;0-o* /50
1'@- 0700*/- 80o'
A$ 0*/o*0 * /50 PAN, /50 0#0*+0 o440$ >00 *o/ 7#0* /50
o88o/+*/- /o 0*0 LMCEC?$ ;oo$ o4 o+*/$ * o/50
o+*/*7 0o$ ;0+$0 /$ o440$ 40 /o o8- >/5 /50
$+;8o0* +0$ /0+ ear#ier iss!e$, to /erif& its a##ege$
!n$er$ec#arations of inco"e reorte$ *& the !rea!s infor"ant !n$er
Section 282 of the (RC' H0*0, * o8*/ >$ 40 ;- /50
+0+ 7*$/ 8#/0 0$8o*0*/$ 4o #o/o* o4 S0/o* 266
Fo /50 0 o4 / 0#$o* * 8/+, o8*0 ;- /50/8-0 >/5 $+5 $+;8o0*, 4 *- 5 ;00* $$+0, $ 00#*/ '
A$ >0 50 * U*7; #. C+$, J.,1 =/B50 0 $ o80/0 >50*
/50 /8-0B 5$ *o>*7- * >4+- 40 B 4++0*/
0/+*B >/5 */0*/ /o 0#0 * 040/ /50 /'H
(n the etai#s of iscreancies attache$ as Annex of the %A,02
ri/ate reson$ents were a#rea$& notifie$ that inas"!ch as /50 0#0*+0
o440$ >00 *o/ 7#0* /50 o88o/+*/- /o 0*0 LMCEC?$ ;oo$
o4 o+*/$, o+*/*7 0o$ * o/50 o+0*/$, $
0#0*+0 o440$ 7/500 *4o/o* 4o /5 8/0$. S+5
8o0+0 $ +/5o0 +*0 S0/o* ' o4 /50 NIRC,
Reson$ent Secretar&, howe/er, f!##& conc!rre$ with ri/ate reson$ents
contention that the $$0$$0*/ *o/0$ >00 *# 4o ;0*7
+**+;00 * /50 / ;/0$ /500* $//0 5#0 0- ;00*
$0//0 *o /0*/0'
9e $o not agree'
A *o/0 o4 $$0$$0*/is0 /o 0#0>
4**7$ o4 8o$0+/o$ * 80*- *#0$/7/o*$'
A#tho!gh o#ic& consi$erations ca## for the wi$est #atit!$e of
$eference to the rosec!tors fin$ings, co!rts sho!#$ ne/er shir
fro" exercising their ower, when the circ!"stances warrant, to
$eter"ine whether the rosec!tors fin$ings are s!orte$ *& the
facts, or *& the #aw'
(n so $oing, o+/$ o *o/ / $ 8o$0+/o$ ;+/ $ o7*$ o4
/50 +-, 00$*7 /50 */0 +*0 /50 Co*$//+/o*,
00#*/ $//+/0$, * 00 +0$ /o $0//0 $0$ *
o*/o#0$0s'
C#ear#&, /50 8o>0 o4 /50 S00/- o4 J+$/0 /o 0#0> o0$ *o/
80+0 /5$ Co+/ * /50 CA 4o */0#0**7 * 00$*7
o+ o>* 8o>0$ o4 0#0> >/5 0$80/ /o /50 DOJ?$ 4**7$ ,
s!ch as in the excetiona# case in which gra/e a*!se of $iscretion isco""itte$, as when a c#ear s!fficienc& or ins!fficienc& of e/i$ence to
s!ort a fin$ing of ro*a*#e ca!se is ignore$'
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G.R. No. L@2%61 A+7+$/ 31, 19%1
ALLIED RO!ERAGE CORPORATION,/s'
THE COMMISSIONER OF CUSTOMS * /50 COURT OF TA APPEALS
FERNANDO, J.:
FACTS: A##ie$ roerage Cororation is $!#& #icense$ to engage in the
c!sto"s *roerage *!siness an$ sees to ref!n$ %35,227' ai$ to the
C!sto"s Arrastre Ser/ice a##ege$#& in excess of what was $!e !n$er the
Tariff an$ C!sto"s Co$e' Co""issioner of C!sto"s conten$e$ that A##ie$
#ace$ a ca!se of action as it $i$ not a& !n$er rotest the charges co##ecte$
*!t instea$ fi#e$ its c#ai" for ref!n$ $irect#& with the Co""issioner of
C!sto"s' Th!s, A##ie$ $i$ not exha!st the a$"inistrati/e re"e$ies'
CTA r!#e$ in fa/or of the Co""issioner an$ conc#!$e$ that the fi#ing
of a written rotest with the roer Co##ector of C!sto"s within the stat!tor&
erio$ is "an$ator& an$ a con$ition rece$ent for the reco/er& of c!sto"s
$!ties, fees an$ other charges a##ege$#& erroneo!s#& or i##ega##& co##ecte$ an$
non-co"#iance therewith *ars an$ is fata# to the action'
ISSUE: "ON ALLIED RO!ERAGE IS ENTITLED FOR REFUND
HELD: NO. The Tariff an$ C!sto"s Co$e has in$icate$ in a "anner $efinite
an$ certain how a cha##enge$ act!ation of a co##ector of c!sto"s "a& *e
e#e/ate$ to CTA' The art& a$/erse#& affecte$ H"a& rotest s!ch r!#ing or
$ecision *& resenting to the Co##ector at the ti"e when a&"ent of the
a"o!nt c#ai"e$ to *e $!e the go/ern"ent is "a$e, or within thirt& $a&s
thereafter, a written rotest setting forth his o*=ections to the r!#ing or
$ecision in !estion, together with the reasons therefor'H (t is stresse$ in the
next section that the intereste$ art& who $esires s!ch a re/iew of the action
taen *& the Co##ector Hsha## "ae a rotest, otherwise, the action of the
Co##ector sha## *e fina# an$ conc#!si/e against hi", ''' 'H Then, there is the
ex#icit ro/ision that s!ch an aggrie/e$ art& in an& "atter resente$ *&
rotest H"a&, within fifteen $a&s after notification in writing *& the Co##ector of
his action or $ecision, gi/e written notice to the Co##ector of his $esire to ha/e
the "atter re/iewe$ *& the Co""issioner'H
9here a ro/ision of #aw seas categorica##& the nee$ for
interretation is o*/iate$, no #a!si*#e retense *eing entertaine$ to =!stif&
non-co"#iance' A## that has to *e $one is to a#& it in e/er& case that fa##s
within its ter"s' CTA then ha$ no other choice *!t to $is"iss the case in /iew
of the fata# o"ission of etitioner'
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GULF AIR COMPANK, PHILIPPINE RANCH (GF), P0//o*0, #.
COMMISSIONER OF INTERNAL REVENUE, R0$8o*0*/.
'R' o' 18205 < Sete"*er 1+, 212
F/$< %etitioner !#f Air Co"an& %hi#iine ranch F. is a *ranch of
!#f Air Co"an&, a foreign cororation $!#& organi4e$ in accor$ance with
the #aws of the Oing$o" of ahrain'
(n 21, F a/ai#e$ of the Lo#!ntar& Assess"ent %rogra" of the !rea! of
(nterna# Re/en!e (R. !n$er Re/en!e Reg!#ations 8-21 for its 1+++ an$
2 (nco"e Tax an$ oc!"entar& Sta" Tax an$ its %ercentage Tax forthe thir$ !arter of 2, a&ing a tota# of % 11,+60,608''
F a#so "a$e a c#ai" for ref!n$ of ercentage taxes for the first, secon$ an$
fo!rth !arters of 2' (n connection with this, a #etter of a!thorit& was
iss!e$ *& the (R a!thori4ing its re/en!e officers to exa"ine Fs *oos of
acco!nts an$ other recor$s to /erif& its c#ai"'
After its s!*"ission of se/era# $oc!"ents an$ an infor"a# conference with
(R reresentati/es, F recei/e$ its %re#i"inar& Assess"ent otice on
o/e"*er 0, 23 for $eficienc& ercentage tax a"o!nting to %
32,705,101'+3' )n the sa"e $a&, F a#so recei/e$ a #etter $en&ing its c#ai"for tax cre$it or ref!n$ of excess ercentage tax re"ittance for the first,
secon$ an$ fo!rth !arters of 2, an$ re!esting the i""e$iate sett#e"ent
of the $eficienc& tax assess"ent'
F then recei/e$ the For"a# etter of e"an$, for the a&"ent of the tota#
a"o!nt of % 33,860,186'62' (n resonse, it fi#e$ a #etter to rotest the
assess"ent an$ to reiterate its re!est for reconsi$eration on the $enia# of its
c#ai" for ref!n$'
)n J!ne 3, 20, the e!t& Co""issioner, )fficer-in-Charge of the arge
Taxa&ers Ser/ice of the (R, $enie$ Fs written rotest for #ac of fact!a#
an$ #ega# *asis an$ re!este$ the i""e$iate a&"ent of the %
33,860,186'62 $eficienc& ercentage tax assess"ent'
Aggrie/e$, F fi#e$ a etition for re/iew with the CTA' The CTA affir"e$ the
$ecision of the (R an$ or$ere$ the a&"ent of % 01,117,730'1 #!s 2P
$e#in!enc& interest'
F e#e/ate$ the case to the CTA En anc which ro"!#gate$ its ecision onJan!ar& 3, 28 $is"issing the etition an$ affir"ing the $ecision of the
CTA in i/ision' (t fo!n$ that Re/en!e Reg!#ations o' 6-66 was the
a#ica*#e r!#e *eca!se the erio$ in/o#/e$ in the assess"ent co/ere$ the
first, secon$ an$ fo!rth !arters of 2 an$ the a"en$e$ ercentage tax
ret!rns were fi#e$ on )cto*er 25, 21' Re/en!e Reg!#ations o' 15-22,
which too effect on )cto*er 26, 22, co!#$ not *e gi/en retroacti/e effect
*eca!se it was $ec#arati/e of a new right as it ro/i$e$ a $ifferent r!#e in
$eter"ining gross receits'
F s!*se!ent#& fi#e$ a "otion for reconsi$eration *!t the sa"e was $enie$
*& the CTA En anc in its ?arch 12, 28 Reso#!tion' ence, this etition'
I$$+0: 9I the $efinition of Hgross receits,H for !roses of co"!ting the
3P %ercentage Tax !n$er Section 118A. of the 1++7 ationa# (nterna#
Re/en!e Co$e (RC., sho!#$ inc#!$e secia# co""issions on assengers
an$ secia# co""issions on cargo *ase$ on the rates aro/e$ *& the Ci/i#
Aerona!tics oar$'
R+*7< Affir"ati/e'
Section 118A. of the (RC states that< Sec' 118' %ercentage Tax on
(nternationa# Carriers'
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A. (nternationa# air carriers $oing *!siness in the %hi#iines sha## a& a tax
of three ercent 3P. of their !arter#& gross receits'
%!rs!ant to this, the Secretar& of Finance ro"!#gate$ Re/en!e Reg!#ations
o' 15-22, which rescri*es that Hgross receitsH for the !rose of
$eter"ining Co""on Carriers Tax sha## *e the sa"e as the tax *ase for
ca#c!#ating ross %hi#iine i##ings Tax' Section 5 of the sa"e ro/i$es for
the co"!tation of Hross %hi#iine i##ingsH