III. Remedies of the GovernmentB. Assessments6. Collection of Delinquent Taxes

Sarasola v. Trinidad [Nico]

SATURNINO DAVID, IN HIS CAPACITY AS COLLECTOR OF INTERNAL REVENUE, PETITIONER, VS. HON. SIMEON RAMOS, IN HIS CAPACITY AS JUDGE OF THE CFI OF MANILA AND MARIA B. CASTRO, RESPONDENTS.(G.R. NO. L-4300 OCTOBER 31, 1951) [Angelo]

FACTS:This is a petition for certiorari, prohibition, and injunction.

The facts of this case may be briefly stated as follows:

The respondent Maria B. Castro filed in the Court of First Instance of Manila, a complaint dated October 18, 1950, against Saturnino David, petitioner herein, in his capacity as Collector of Internal Revenue, alleging among other things, that she had been acquitted in a criminal case for non-payment of the war profit tax for insufficiency of evidence; that notwithstanding said acquittal, the Collector of Internal Revenue announced on October 18, 1950, that the properties of Maria B. Castro would be sold at public auction on November 22 and 27, 1950, to satisfy the war profits tax assessed against her; that this sale is an abuse of authority on the part of the Collector and would cause irreparable injury to her; that Republic Act No. 55, known as the War Profits Tax Law is unconstitutional. She prayed that a preliminary injunction be issued enjoining the Collector of Internal Revenue from proceeding with the sale and that afterward the injunction be made permanent.

The Collector of Internal Revenue filed his Answer with the CFI. Among those that he challenged is the jurisdiction of the CFI to issue a temporary or permanent writ of injunction to restrain the collection of the war profits tax.

ISSUE:

The question to be determined in this case is whether the courts can restrain the collection of taxes on the ground that their validity is disputed by the taxpayer.

HELD:Court of First Instance of Manila is declared without jurisdiction to proceed with the case.

Section 305 of the National Internal Revenue Code, is as follows:

SEC. 305. Injunction not available to restrain collection of tax.—No court shall have authority to grant an injunction to restrain the collection of any internal-revenue tax, fee, or charge imposed by this Code.

It is clear that the word "tax", as used in said section 305, means a tax even if it is disputed by the taxpayer, for otherwise it would be sufficient to dispute a tax in order to take it out from the provisions of said section, rendering them practically nugatory.

Section 306 of the National Internal Revenue Code provides as follows:

SEC. 306. Recovery of the tax erroneously or illegally collected.—No suit or proceeding shall be maintained in any court for the recovery of any national internal-revenue tax hereafter alleged to have been erroneously or illegally assessed or collected or of any penalty claimed to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Collector of Internal Revenue; but such suit or proceeding may be maintained, whether or not such tax, penalty or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty.

It has been the uniform holding of this Court that no suit for enjoining the collection of a tax, disputed or undisputed, can be brought, the remedy being to pay the tax first, formerly under protest and now without need of protest, file the claim with the Collector, and if he denies it, bring an action for recovery against him.

THE COLLECTOR OF INTERNAL REVENUE, PETITIONER, VS. AURELIO P. REYES AND COURT OF TAX APPEALS, RESPONDENTS(G.R. No. L-8685. January 31, 1957) [Myta]

FACTS:

•The Collector of Internal Revenue demanded from Aurelio P. Reyes payment of his alleged deficiency income taxes, surcharges, interests and penalties for the tax years 1946 to 1950 amounting to P641,470.04 as of October 31, 1954, with the suggestion that the aforesaid tax liabilities be paid either to the Bureau of Internal Revenue or the City Treasurer of Manila.

•Together with said letter of assessment, respondent Aurelio P. Reyes received a warrant of distraint and levy on his properties in the event that he should fail to pay the alleged deficiency income taxes on or before October 31, 1954,

•Being informed by the City Treasurer of Manila that the latter was instructed by petitioner to execute the warrant of distraint and levy on the amount demanded if it not settled on or before November 10, 1954.

•Aurelio P. Reyes filed with the Court of Tax Appeals on November 15, 1954, a petition for review of the Collector's assessment of his alleged deficiency income tax liabilities.

•This was followed by an urgent petition to restrain the Collector of Internal Revenue from executing the warrant of distraint and levy on his properties, alleging:

1. That the right of respondent to collect by summary proceedings the tax demanded had already prescribed in accordance with section 51 (d) of the National Internal Revenue Code, as his income tax returns for the tax years 1946 to 1950 had been filed more than three years ago, the last one being on April 27, 1951;

2. That a distraint and levy on his properties would work injustice or irreparable injury to him and would tend to render any judgment of the Court in the main case meaningless and ineffectual;

3. That the requisite if Section 11 of Republic Act No. 1125 for the filing of a bond or deposit before a writ of distraint and levy may be suspended is not applicable in this case;

4. That a greater portion of his assets consists of real properties located in Manila and shares a stock in the Philippine Racing Club which are all encumbered in various financial institutions and therefore there is no possibility that he would abscond with his property or remove or conceal the same.

•The Collector of Internal Revenue opposed said petition on the ground that Court of Tax Appeals has no authority to restrain him from executing the warrant of distraint and levy on his properties of Aurelio P. Reyes in connection with the collection of the latter's deficiency income taxes; that said taxpayer has an adequate remedy in law by paying first and then seek for the recovery thereof; and that section 51 (d) does not preclude distraint and levy.

•By resolution, the Court of Tax Appeals upheld the stand of Aurelio P. Reyes and ordered the Collector of Internal Revenue to desist from collecting by administrative method the taxes allegedly due from Reyes pending the outcome of his appeal, without prejudice to other judicial remedy or remedies which the Collector may desire to pursue for the protection of the interest of the Government, pending the final decision of the case on the merits.

•The Solicitor General filed a notice of appeal from said resolution and instituted in this Court the instant certiorari case.

ISSUE:

1. Whether the Court of Tax Appeals could restrain the Collector of Internal Revenue from enforcing collection of income tax deficiency by summary proceedings after the expiration of the three-year period provided for in section 51 (d) of the National Internal Revenue Code;

2. Whether the Court of Tax Appeals had any power to grant an injunction without requiring the filing of a bond or making a deposit as prescribed by section 11 of Republic Act No. 1125.

HELD:

1. YES. The Court of Tax Appeals could restrain the Collector of Internal Revenue from enforcing collection of income tax deficiency by summary proceedings after the expiration of the three-year period provided for in section 51 (d) of the National Internal Revenue Code.

When it refers to the Collection of income tax, it is mandatory that the right of the Collector of Internal Revenue to collect it by the summary methods of distraint and levy be exercised within the period of three years from the

time the income tax return is filed, otherwise the right can only be enforced by judicial action. Since, admittedly, the deficiency taxes in question were assessed and the warrants for their collection by distraint and levy were issued after the period of three years from the filing of the returns, it is evident that said warrants, as well as the steps taken in connection with the sale of the properties of the taxpayer, were issued without authority of the law and, hence, the Court of Tax Appeals acted properly in enjoining their enforcement as prayed for by petitioner.

2. YES, the Court of Tax Appeals had the power to grant an injunction without requiring the filing of a bond or making a deposit as prescribed by section 11 of Republic Act No. 1125. At first blush it might be as contended by the Solicitor General, but a careful analysis of the second paragraph of said Section 11 will lead us to the conclusion that the requirement of the bond as a condition precedent to the issuance of the writ of injunction applies only in cases where the processes by which the collection sought to be made by means thereof are carried out in consonance with the law for such cases provided and not when said processes are obviously in violation of the law to the extreme that they have to be SUSPENDED for jeopardizing the interests of the taxpayer.

The respondent Court issued the injunction in question on the basis of its finding that the means intended to be used by petitioner in the collection of the alleged deficiency taxes were in violation of law.

Collector v. Zulueta [Cary]

Angeles City v. Angeles Electric Corp. and RTC [Tats]

2. Judicial Action(a) Civil Action

ARCHES V. BELOSILLO. GR NO. L-23534, MAY 16, 1967. [Alfie]

FACTS:

1. Jose Arches filed his income tax return for 1953 on February 27, 1954. Within five years thereafter, or on February 26, 1959, deficiency income tax and residence tax assessments were issued against him.

2. The Assessments were not disputed, the Republic represented by the Bureau of Internal Revenue Regional, Director, filed suit on December 29, 1960, in the municipal court of Roxas City, to recover from petitioner-appellant the sum of P4,441.25 as deficiency income tax and additional residence tax for 1953.

3. Arches then moved to dismiss the complaint on the ground that it did not expressly show the approval of the Revenue Commissioner, as required by Section 308 of the (Old) Tax Code, and on the further ground of prescription of the action.

4. The MTC denied the motion. Arches, his motion to reconsider denied, resorted to the CFI of Capiz on a petition for certiorari and prohibition assailing the order denying his motion to dismiss. The trial court dismissed the petition. Hence, this appeal.

ISSUE: Whether the CFI correctly dismissed Arches’ petition for certiorari and prohibition from the MTC.

RULING: Decision of the CFI AFFIRMED.

The court relied upon Memorandum Order No. V-634 of the Revenue Commissioner, approved by the Finance Secretary of July 1, 1956, wherein the former's functions regarding the administration and enforcement of revenue laws and regulations — powers broad enough to cover the approval of court actions as required in Section 308 of the Tax Code — were expressly delegated to the Regional Directors. This regulation, the issuance of which was authorized by statute, has the force and effect of law. To rely upon it, hence, would not be tantamount to whimsical, capricious and arbitrary exercise of judgment.

The verification by the Regional Director of the complaint constitutes sufficient approval thereof already. It states, inter alia , that said Director has caused the preparation of the complaint and that he has read the allegations thereof and they are true and correct to the best of his knowledge and belief. Pleadings are to be liberally construed.

Assuming, therefore, in gratia argumenti, that the suit is being erroneously — but not invalidly — entertained, for lack of express approval of the Commissioner or the Regional Director, certiorari would still not lie. An order denying a motion to dismiss is interlocutory and the remedy of the unsuccessful movant is to await the judgment on the merits and then appeal therefrom.7 And, as the Court of First Instance rightly observed, there was no showing of a special reason or urgent need to stop the proceedings at such early stage in the municipal court.

REPUBLIC V. HIZON [JAYCEE]

DAYRIT ET AL. V. CRUZ ET AL. [SARAH]

(b) Criminal ActionREPUBLIC V. PATANAO [JONGKO]

PEOPLE VS BALAGTAS [Leandro]

FACTS:This is an appeal by the accused Alfonso Gumarang from the judgment rendered by the Court of First Instance of Manila, finding him confessedly guilty of the complex crime of robbery with homicide, as principal by direct participation, and sentencing him, in view of the aggravating circumstances of treachery and use of a motor vehicle compensated by the mitigating circumstance of voluntary confession of guilt, to suffer the penalty of reclusion perpetua, with the accessory penalties provided for by law, to indemnify jointly with his coaccused Anselmo Balagtas y Manlapas (alias Anselmo Baltazar), and Martin Ganseco, the heirs of the deceased William Stephen Gibbons in the sum of P2,055.56 and to pay each one-third of the costs, by virtue of the information filed by the fiscal, which reads as follows:

"That on or about the 10th day of August, 1938, in the City of Manila, Philippines, the said accused Anselmo Balagtas y Manlapas (alias Anselmo Baltazar), Alfonso Gumarang y Martinez and Martin Ganseco, taking advantage of nighttime expressly sought by them to accomplish better their deed, conspiring together and helping one another, did then and there willfully, unlawfully and feloniously, by the use of force and violence upon one William Stephen Gibbons, in the following manner, to wit: suddenly hitting him in the head several times from behind with a heavy quadrangular piece of wood two feet long while he was unaware and without giving him a chance to defend himself, thus fracturing his skull and causing him other severe physical injuries which were the direct and immediate cause of his death two days later, take, steal and carry away, with intent to gain the following personal property be- longing to the said William Stephen Gibbons: P0.03 in cash, a package of Piedmont cigarettes valued at P0.10. and a bundle of clothes valued at P6, to the damage and prejudice of the heirs of said William Stephen Gibbons in the total sum of P6.15, Philippine currency.

ISSUE: whether or not the penalty of reclusion perpetua imposed upon the accused-appellant Alfonso Gumarang is in accordance with law?

HELD:When Alfonso Gumarang pleaded guilty to the crime with which he is charged in the information, he admitted all the facts alleged therein, among them that of having purposely taken advantage of nighttime to better realize their crime; that of having conspired with his coaccused and of having helped one another to assault, as they in fact assaulted, William Stephen Gibbons, suddenly hitting him in the head several times from behind with a heavy quadrangular piece of wood two feet long while he was completely unaware, causing him wounds which produced his death two days later

Therefore, in the commission of the complex crime of robbery with homicide alleged in the information and admitted by the accused-appellant, there were present the qualifying circumstance of evident premeditation consisting in his having conspired with his two above-named coaccused in order to assault and rob William Stephen Gibbons; the aggravating circumstance of nighttime for having purposely sought nighttime in order to insure the commission of the crime they intended to commit and to facilitate their impunity (art. 14, subsec. 6, Revised Penal Code); that of treachery constituted by the suddenness of the aggression committed from behind (art. 14, subsec. 16, Revised Penal Code). Nighttime cannot in the present case be considered as an aggravating circumstance separate and independent of that of treachery and abuse of superior strength, because had it not been at night, the herein accused-appellant, with his coaccused, would not have been able to approach the deceased without the latter’s becoming aware of his presence and guessing his intention. If they were able to catch sailor Gibbons completely unaware, it was due to the darkness of the night which covered them.

The generic aggravating circumstance of treachery being compensated by the mitigating circumstance of voluntary confession of guilt, there no longer remains any circumstance modifying criminal liability to appreciate, and therefore, the lower penalty of that of reclusion perpetua to death prescribed by article 294, subsection 1, of the Revised Penal Code, is the one that should be imposed, the penalty being composed of two indivisible ones (art. 65, subsec. 2, Revised Penal Code)

CIR v. Pascor Realty [nOch]

UNGAB VS. CUSI JR. (GR L-41919-25, 30 MAY 1980) [Jaline]Second Division, Concepcion Jr. (J): 4 concur

FACTS:In July 1974, BIR Examiner Ben Garcia examined the income tax returns filed by Quirico P. Ungab for the calendar year ending 31 December 1973. In the course of his examination, the examiner discovered that Ungab failed to report his income derived from sales of banana saplings. As a result, the BIR District Revenue Officer at Davao City sent Ungab a “Notice of Taxpayer” informing him that there is due from him the amount of P104,980.81, representing income, business tax and forest charges for the year 1973 and inviting Ungab to an informal conference where Ungab, duly assisted by counsel, may present his objections to the findings of the BIR Examiner. Upon receipt of the notice, Ungab wrote the BIR District Revenue Officer protesting the assessment, claiming that he was only a dealer or agent on commission basis in the banana sapling business and that his income, as reported in his income tax returns for the said year, was accurately stated. The examiner, however, was fully convinced that Ungab had filed a fraudulent income tax return so that he submitted a “Fraud Referral Report,” to the Tax Fraud Unit of the BIR. After examining the records of the case, the Special Investigation Division of the BIR found sufficient proof that Ungab is guilty of tax evasion for the taxable year 1973 and recommended his prosecution. In a second indorsement to the Chief of the Prosecution Division, dated 12 December 1974, the Commissioner approved Ungab’s prosecution.

The State Prosecutor Jesus Acebes, who had been designated to assist all Provincial and City Fiscals throughout the Philippines in the investigation and prosecution, if the evidence warrants, of all violations of the NIRC, as amended, and other related laws, in Administrative Order 116 dated 5 December 1974, and to whom the case was assigned, conducted a preliminary investigation of the case, and finding probable cause, filed 6 informations against Ungab with the CFI Davao City. On 16 September 1975, Ungab filed a motion to quash the informations upon the grounds that: (1) the informations are null and void for want of authority on the part of the State Prosecutor to initiate and prosecute the said cases; and (2) the trial court has no jurisdiction to take cognizance of the above-entitled cases in view of his pending protest against the assessment made by the BIR Examiner. However, the trial court denied the motion on 22 October 1975. Ungab filed a petition for certiorari and prohibition with preliminary injunction and restraining order to annul and set aside the informations filed in Criminal Cases 1960 to 1965 of the CFI Davao.

ISSUE: WON an assessment for deficiency tax is necessary before criminal prosecution can be instituted.

RULING: No. An assessment of the deficiency tax due is not necessary before the taxpayer can be prosecuted criminally for the charges preferred. The crime is complete when the violator has, as in this case, knowingly and wilfully filed fraudulent returns with intent to evade and defeat a part or all of the tax. An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt to defeat and evade the income tax. A crime is complete when the violator has knowingly and wilfully filed a fraudulent return with intent to evade and defeat the tax. The perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate return, and the government’s failure to discover the error and promptly to assess has no connections with the commission of the crime.

A petition for reconsideration of an assessment may affect the suspension of the prescriptive period for the collection of taxes, but not the prescriptive period of a criminal action for of law. The protest of the taxpayer against the assessment of the District Revenue Officer cannot stop his prosecution for violation of the NIRC.

The Supreme Court dismissed the petition, and set aside the temporary restraining order issued; with costs against Ungab.

CIR V. CA ET AL. (G.R. 119322, 4 JUNE 1996) [NICO]

3. Others(a) Tax Lien2. Preferences of LiensCOMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, DEPUTY CITY SHERIFF CARMELO V. CACHERO, MARITIME COMPANY OF THE PHILIPPINES, DOMINGO C. NIANGAR, DANIEL C. SABINO, FERNANDO S. TULIAO AND TULMAR TRADING CORPORATION, RESPONDENTS.(G.R. No. 74965November 9, 1994) [Angelo]

FACTS:On January 12, 1984 the Commissioner of the Internal Revenue sent two letters 3 of demand to the respondent Maritime Company of the Philippines for deficiency common carrier's tax, fixed tax, 6% Commercial Broker's tax, documentary stamp tax, income tax and withholding taxes in the total amount of P17,284,882.45.

The assessment became final and executory as private respondent did not contest it. But as private respondent did not pay its tax liability either, the Commissioner of Internal Revenue issued warrants of distraint of personal property and levy of real property of private respondent. Copies of the warrants, both dated January 23, 1985, were served on January 28, 1985 on Yoly T. Petrache, private respondent's accountant.

On April 16, 1985 a "Receipt for Goods, Articles, and Things Seized 5 under Authority of the National Internal Revenue Code" was executed, covering, among other things, six barges identified as MCP-1,2,3,4,5 and 6. This receipt is required by § 303 (now § 206) of the NIRC as proof of the constructive distraint of property. It is an undertaking by the taxpayer or person in possession of the property covered that he will preserve the property and deliver it upon order of the court or the Internal Revenue Commissioner.

The receipt was prepared by the BIR for the signature of a representative of respondent Maritime Company of the Philippines, but it was not in fact signed. Petitioner later explained that the individuals who had possession of the barges had refused to sign the receipt.

This circumstance has given rise to the question in this case as it appears that four of the barges placed under constructive distraint were levied upon execution by respondent deputy sheriff of Manila on July 20, 1985 to satisfy a judgment for unpaid wages and other benefits of employees of respondent Maritime Company of the Philippines. More specifically, the question in this case is the validity of the warrant of distraint served by the Revenue Seizure Officer against the writ of execution subsequently levied upon the same

property by the deputy sheriff of Manila to satisfy the claims of employees in NLRC Case No. NCR-12-4233-84 (Domingo C. Niangar, et al. v. Maritime Company of the Philippines) for P490,749.21.

The four barges were sold by respondent deputy sheriff at a public auction on August 12, 1985. The highest bidder, Daniel C. Sabino, subsequently sold them to private respondents Fernando S. Tuliao and Tulmar Trading Corporation.

On September 4, 1985, petitioner asked the Labor Arbiter to annul the sale and to enjoin the sheriff from disposing of the proceeds of the sale or, in the alternative, to remit them to the Bureau of Internal Revenue so that the amount could be applied to the payment of private respondent Maritime Company's tax liabilities.

In an order dated September 30, 1985, Labor Arbiter Ceferina Diosana denied the motion on the ground that petitioner Commissioner of Internal Revenue failed to show that the barges which were levied upon in execution and sold at public auction had been validly placed under constructive distraint. 6 The Labor Arbiter likewise rejected petitioner's contention that the government's claim for taxes was preferred under Art. 2247, in relation to Art. 2241(1) of the Civil Code, on the ground that under this provisions only taxes and fees which are due on specific movables enjoy preference, whereas the taxes claimed by petitioner were not due on the four barges in question.

HELD: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 CIR, through the Commissioner, long before the writ of execution was issued by the RTC. There is no question then that at the time the writ of execution was issued, the 2 barges were no longer properties of the Maritime Company of the Philippines. The power of the court in execution of judgments extends only to the properties unquestionably belonging to the judgment debtor.

Art. 110 of the Labour Code do not purport to create a lien in favour of workers or employees for unpaid wages either upon all of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not fall at all time within the category of specially preferred claims established under Art. 2241 and Art. 2242 of the CC, except to the extent that such claims for unpaid wages are already covered by Art. 2241(6): “claims for labourers’ wages, on the goods manufactured or the

work done;” or by Art. 2242(3): “claims of labourers and other workers engaged in the construction, reconstruction or repair of buildings, canals and other works, upon said buildings, canals and other works.” To the extent that claims for unpaid wages fall outside the scope of Art. 2241(6) and Art. 2242(3), they would come within the ambit of the category of ordinary preferred credits under Art. 2244.

Art. 110 of the Labour Code applies only in case of bankruptcy or judicial liquidation of an employer’s business, his workers shall enjoy first preference as regards wages due them for services rendered during the period prior to the bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claims to a share in the assets of the employer.

PHILIPPINE NATIONAL BANK, petitioner, vs. TERESITA CRUZ, JOSE AGRIPINO, BERNARDO BAUZON, LUCRECIA BILBAO, MA. LUISA CABRERA, FRANCIS BAACLO GUADALUPE CAMACHO, LUZ DE LEON, MIKE VILLAVERDE, NEPOMUCENO MEDINA, EDGARDO MENDOZA, JENNIFER VELEZ, AMELIA MEDINA, EDUARDO ESPEJO and RICARDO BATTO respondents.(G.R. No. 80593. December 18, 1989.) [Myta]

FACTS:

•Sometime in 1980, Aggregate Mining Exponents (AMEX) laid-off about seventy percent (70%) of its employees because it was experiencing business reverses.

•The retained employees constituting thirty percent (30%) of the work force however, were not paid their wages. This non-payment of salaries went on until July 1982 when AMEX completely ceased operations and instead entered into an operating agreement with T.M. San Andres Development Corporation whereby the latter would be leasing the equipment and machineries of AMEX.

•The unpaid employees sought redress from the Labor Arbiter who rendered a decision finding their claim valid and meritorious.

•To properly effectuate the payment of the same, the necessary arrangement was made between respondents Amex and T.M. San Andres Development Corp. and Philippine National Bank (PNB) on their respective role and participation. If the principal respondent be unable to satisfy these Awards, it shall be satisfied from the proceeds or fruits of its machineries and equipment being operated by respondent T.M. San Andres Dev. Corp. either by operating agreement with respondent Amex or thru lease of the same from PNB.

ISSUE: Whether or not the workers' lien covers unpaid wages only and not the termination or severance pay which the workers likewise claimed they were entitled to.

HELD: NO. For purposes of the application of Article 110, "termination pay is reasonably regarded as forming part of the remuneration or other money benefits accruing to employees or workers by reason of their having previously rendered services..." Hence, separation pay must be considered as part of remuneration for services rendered or to be rendered. Indeed Article 110 of the Labor Code, as amended, now provides that the workers' preference covers not only unpaid wages but also other monetary claims.

The respondent Commission was, therefore, not in error when it awarded the termination pay claimed by the private respondents. As far as the latter are concerned, the termination pay which they so rightfully claim is an additional remuneration for having rendered services to their employer for a certain period of time. Noteworthy also is the relationship between termination pay and services rendered by an employee, that in computing the amount to be given to an employee as termination pay, the length of service of such employee is taken into consideration such that the former must be considered as part and parcel of wages. Under these circumstances then, this Court holds that the termination or severance pay awarded by the respondent Commission to the private respondents is proper and should be sustained.

Furthermore, the Court upheld the preference accorded to the private respondents in view of the provisions of Article 110 of the Labor Code which are clear and which admit of no other interpretation. The phrase "any provision of law to the contrary notwithstanding" indicates that such preference shall prevail despite the order set forth in Articles 2241 to 2245 of the Civil Code. No exceptions were provided under the said article, henceforth, none shall be considered. Furthermore, the Labor Code was signed into Law decades after the Civil Code took effect.

(d) ForfeitureBPI V. TRINIDAD [CARY]

GARCIA V. COLLECTOR [TATS]

IV. REMEDIES OF THE TAXPAYERREYES V. CIR, GR NO. 163581. JANUARY 27, 2006. [Alfie]

FACTS:

1. On July 8, 1993, Maria C. Tancinco died, leaving a 1,292 square-meter residential lot and an old house thereon located at 4931 Pasay Road, Dasmariñas Village, Makati City. RDO No. 50 (South Makati) conducted an investigation on the decedent’s estate. Subsequently, it issued a Return Verification Order. But without the required preliminary findings being submitted, it issued Letter of Authority No. 132963 for the regular investigation of the estate tax case. Azucena T. Reyes, one of the decedent’s heirs, received the Letter of Authority on March 14, 1997.

2. Chief of the Assessment Division, BIR issued a preliminary assessment notice (PAN) against the estate in the amount of P14,580,618.67.

3. The heirs of the decedent received a final estate tax assessment notice (FAN) and a demand letter, both dated April 22, 1998, for the amount of P14,912,205.47, inclusive of surcharge and interest.

4. The heirs protested the assessment on the ground that the subject property had already been sold by the decedent sometime in 1990.

5. CIR then issued a preliminary collection letter to the heirs, followed by a Final Notice Before Seizure.

6. On January 5, 1999, a Warrant of Distraint and/or Levy was served upon the estate, followed on February 11, 1999 by Notices of Levy on Real Property and Tax Lien against it.

7. On March 2, 1999, [Reyes] protested the notice of levy. However, on March 11, 1999, the heirs proposed a compromise settlement of P 1,000,000.00.

8. As the estate failed to pay its tax liability within the April 15, 2000 deadline, the Chief, Collection Enforcement Division, BIR, notified the heirs on June 6, 2000 that the subject property would be sold at public auction on August 8, 2000.

9. On June 13, 2000, the heirs filed a protest with the BIR Appellate Division. Assailing the scheduled auction sale, she asserted that x x x the assessment, letter of demand, and the whole tax proceedings against the estate are void ab initio.

10. Without acting on the heirs’ protest and offer, CIR instructed the Collection Enforcement Division to proceed with the August 8, 2000 auction sale.

11. Consequently, on June 28, 2000, the heirs filed a Petition for Review with the CTA

ISSUE: Whether respondent can validly argue that she, as well as the other heirs, was not aware of the facts and the law on which the assessment in question is based, after she had opted to propose several compromises on the estate tax due, and even prematurely acting on such proposal by paying 20% of the basic estate tax due.

RULING: The assessment is void.

In the present case, Reyes was not informed in writing of the law and the facts on which the assessment of estate taxes had been made. She was merely notified of the findings by the CIR, who had simply relied upon the provisions of former Section 229 prior to its amendment by Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997.

RA 8424 has already amended the provision of Section 229 on protesting an assessment. The old requirement of merely notifying the taxpayer of the CIR’s findings was changed in 1998 to informing the taxpayer of not only the law, but also of the facts on which an assessment would be made; otherwise, the assessment itself would be invalid.

It was on February 12, 1998, that a preliminary assessment notice was issued against the estate. On April 22, 1998, the final estate tax assessment notice, as well as demand letter, was also issued. During those dates, RA 8424 was already in effect. The notice required under the old law was no longer sufficient under the new law.

The non-retroactive application of Revenue Regulation (RR) No. 12-99 is of no moment, considering that it merely implements the law.

A tax regulation is promulgated by the finance secretary to implement the provisions of the Tax Code. While it is desirable for the government authority or administrative agency to have one immediately issued after a law is passed, the absence of the regulation does not automatically mean that the law itself would become inoperative.

At the time the pre-assessment notice was issued to Reyes, RA 8424 already stated that the taxpayer must be informed of both the law and facts on which the assessment was based. Thus, the CIR should have required the assessment officers of the Bureau of Internal Revenue (BIR) to follow the clear mandate of the new law. The old regulation governing the issuance of estate tax assessment notices ran afoul of the rule that tax regulations -- old

as they were -- should be in harmony with, and not supplant or modify, the law.

Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers must be informed in writing of the law and the facts upon which a tax assessment is based; otherwise, the assessment is void. Being invalid, the assessment cannot in turn be used as a basis for the perfection of a tax compromise.

BIR violated the cardinal rule in administrative law that the taxpayer be accorded due process. Not only was the law here disregarded, but no valid notice was sent, either. A void assessment bears no valid fruit.

The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations: that taxpayers should be able to present their case and adduce supporting evidence. In the instant case, respondent has not been informed of the basis of the estate tax liability. Without complying with the unequivocal mandate of first informing the taxpayer of the government’s claim, there can be no deprivation of property, because no effective protest can be made. The haphazard shot at slapping an assessment, supposedly based on estate taxation’s general provisions that are expected to be known by the taxpayer, is utter chicanery.

Even a cursory review of the preliminary assessment notice, as well as the demand letter sent, reveals the lack of basis for -- not to mention the insufficiency of -- the gross figures and details of the itemized deductions indicated in the notice and the letter. This Court cannot countenance an assessment based on estimates that appear to have been arbitrarily or capriciously arrived at. Although taxes are the lifeblood of the government, their assessment and collection "should be made in accordance with law as any arbitrariness will negate the very reason for government itself.”

CIR V. FIRST EXPRESS PAWNSHOP [Jaycee]

SURIGAO ELECTRIC V. CTA [Sarah]

OCEANIC WIRELESS V. CIR [Enzo]

FACTS:Wireless is a corporation with principal office located in Legaspi Village, Makati. In April 1996, petitioner filed its 1995 Annual Corporate Annual Income Tax Return. In December 1996, petitioner received a letter from the Revenue District Officer authorizing Revenue Officers to examine the books of accounts and other records for the period January to December 

In 1999, petitioner executed a Waiver of Defense of Prescription of the NIRC within which respondent may assess petitioner for deficiency taxes. A preliminary report of tax assessment was issued and petitioner was requested to attend an informal conference to discuss the result of the investigation done on the books. Again, petitioner received another pre-assessment notice this time with Details of Discrepancies. The company was advised to file a written protest or set up an office conference to discuss the assessments for deficiency income. Inasmuch as the authority of respondent to assess was about to prescribe in July 31 1999, demand letters were sent on July 30, 1999. Petitioner now contends that the assessment notices for taxable year 1995 are void for having been issued beyond the 3-yr prescriptive period as provided under the NIRC. Since the tax return was filed in April 1995, respondent has 3 years to assess the petitioner.  But the assessment was done in 1999, hence the action has already prescribed. Petitioner also questions the validity of the waiver on the ground that it failed to state the kind and amount of tax required under RMO 20-90. Respondent argues that petitioner executed a waiver extending the period of the respondent pursuant to the provisions in the Tax Code. ISSUES:1.       Whether or not the BIR’s right to assess has already prescribed. 2.       Whether or not the deficiency assessments are void for failure to state the law and facts to which the assessments are made. 3.       Whether or not petitioner is liable for deficiency income tax. HELD:

1.       No. BIR’s right has not yet prescribed and the assessment notices are valid. At the time of the execution of the waiver, there was no preliminary assessment issued yet against petitioner where the kind and amount of tax could be referred to. Such details cannot be specified in the waiver since it was still unascertainable at the time. Following the rule that the period of respondent to assess was extended up to July 31, 1999 in view of the waiver, the deficiency assessments issued against petitioner on July 30, 1999 are within the period allowed by law. 2.       No.  The purpose of Section 228 of the National Internal Revenue Code of 1997in requiring that "(t)he taxpayer be informed of the law and facts on which assessment is made" is to give the taxpayer the opportunity to refute the findings of the examiner and give a more accurate and detailed explanation regarding the proposed assessment. In the case, there was substantial compliance with Sec. 228 of the NIRC because petitioner was able to protest the assessments intelligently, thereby implying that it had actual knowledge of the factual and legal bases of the assessments. The fact that petitioner was furnished the computation and brief explanation of how the assessment for deficiency quarterly income tax was arrived at, the requirement under Section 228 of the 1997 Tax Code is deemed complied with. And even if petitioner was not furnished of the detailed computation of the deficiency quarterly income tax, the same was discussed with petitioner during the informal conference.  3.       Yes. Petitioner having failed to comply with the requirement of the law in disputing an assessment, the same became final, executory and demandable.  Sec. 228 states that: x x x If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) daysfrom submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (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. Undoubtedly, a taxpayer has sixty (60) days from the filing of the protest to submit the relevant documents to support its protest, otherwise, the assessment becomes final. Within one hundred eighty(180) days from the submission of the relevant documents, the respondent should act on the protest. If the respondent rendered his decision within the period or failed to act on it, the remedy of the taxpayer is to file within thirty (30) days from the receipt of the decision or from the lapse of one hundred eighty(180) days, an appeal to this court, otherwise, the assessment will become final, executory and demandable. x x x

 In the case, petitioner failed to submit supporting documents contrary to what was jointly stipulated by the parties. Hence, the reckoning of the 180-day period would be the day the protest was filed (August 16, 1999). However, respondent failed to render his decision within 180 days or until February 12, 2000. The remedy of petitioner was to file within 30 days there from an appeal with this court which would be until March 14, 2000. But since the Petition for Review was filed only on May 12, 2000, the same was definitely filed beyond the date prescribed by law. *Case dismissed for being filed out of time.

COMMISSIONER OF INTERNAL REVENUE V. UNION SHIPPING CORPORATION AND THE CTA [Jongko](G.R. No. L-66160 May 21, 1990) Digest by: PALATTAO, Rose Angelie T.PONENTE: PARAS, J.

FACTS:In a letter dated December 27, 1974 petitioner Commissioner of Internal Revenue assessed against Yee Fong Hong, Ltd. and/or herein private respondent Union Shipping Corporation, the total sum of P583,155.22 as deficiency income taxes due for the years 1971 and 1972. Said letter was received on January 4, 1975, and in a letter dated January 10, 1975 received by petitioner on January 13, 1975, private respondent protested the assessment. Petitioner, without ruling on the protest, issued a Warrant of Distraint and Levy, which was served on private respondent’s counsel, Clemente Celso, on November 25, 1976. In a letter dated November 27, 1976(Exhibit “D”), received by petitioner on November 29, 1976 private respondent reiterated its request for reinvestigation of the assessment and for the reconsideration of the summary collection thru the Warrant of Distraint and Levy. Petitioner, again, without acting on the request for reinvestigation and reconsideration of the Warrant of Distraint and Levy, filed a collection suit before Branch XXI of the then Court of First Instance of Manila and docketed as Civil Case No. 120459 against private respondent. Petitioner contends that the warrant of distraint and levy was issued after respondent corporation filed a request for reconsideration of subject assessment, thus constituting petitioner’s final decision in the disputed assessments. Petitioner argues therefore that the period to appeal to the Court of Tax Appeals commenced to run from receipt of said warrant on November 25,1976, so that on January 10, 1979 when respondent corporation sought redress from the Tax Court, petitioner’s decision has long become final and executory. On January 10, 1979, private respondent filed with respondent court its Petition for Review w of the petitioner’s assessment of its deficiency income taxes.

CTA ruled in favor of respondent. Hence, this petition.

ISSUE: WON the issuance of a warrant of distraint and levy by the Commissioner in this case is proof of the finality of an assessment 

HELD:No. There appears to be no dispute that petitioner did not rule on private respondent’s motion for reconsideration but on the contrary left private respondent in the dark as to which action of the Commissioner is the decision appealable to the CTA. Had he categorically stated that he denies private respondent’s motion for reconsideration and that his action constitutes his final determination on the disputed assessment, private respondent without needless difficulty would have been able to determine when his right to appeal accrues and the resulting confusion would have been avoided.

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. 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. So .that on January 10, 1979 when private respondent filed the appeal with the Court of Tax Appeals, it consumed a total of only thirteen (13) days well within the thirty day period to appeal pursuant to Section 11 of R.A. 1125.Neither can private respondent be liable for withholding tax under Section 53 of the Internal Revenue Code since it is not in possession, custody or control of the funds received by and remitted to Yee Fong Hong, Ltd., a non-resident taxpayer. As correctly ruled by the CTA, “if an individual or corporation like the petitioner in this case, is not in the actual possession, custody, or control of the funds, it can neither be physically nor legally liable or obligated to pay the so-called withholding tax on income claimed by Yee Fong Hong, Ltd.

CIR VS ISABELA CULTURAL [Leandro]

FACTS:Isabela Cultural Corporation (ICC), a domestic corporation received an assessment notice for deficiency income tax and expanded withholding tax from BIR. It arose from the disallowance of ICC’s claimed expense for professional and security services paid by ICC; as well as the alleged understatement of interest income on the three promissory notes due from Realty Investment Inc. The deficiency expanded withholding tax was allegedly due to the failure of ICC to withhold 1% e-withholding tax on its claimed deduction for security services.

ICC sought a reconsideration of the assessments. Having received a final notice of assessment, it brought the case to CTA, which held that it is unappealable, since the final notice is not a decision. CTA’s ruling was reversed by CA, which was sustained by SC, and case was remanded to CTA. CTA rendered a decision in favor of ICC. It ruled that the deductions for professional and security services were properly claimed, it said that even if services were rendered in 1984 or 1985, the amount is not yet determined at that time. Hence it is a proper deduction in 1986. It likewise found that it is the BIR which overstate the interest income, when it applied compounding absent any stipulation.

Petitioner appealed to CA, which affirmed CTA, hence the petition.

ISSUE: Whether or not the expenses for professional and security services are deductible.

HELD: No. One of the requisites for the deductibility of ordinary and necessary expenses is that it must have been paid or incurred during the taxable year. This requisite is dependent on the method of accounting of the taxpayer. In the case at bar, ICC is using the accrual method of accounting. Hence, under this method, an expense is recognized when it is incurred. Under a Revenue Audit Memorandum, when the method of accounting is accrual, expenses not being claimed as deductions by a taxpayer in the current year when they are incurred cannot be claimed in the succeeding year.

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. The test does not demand that the amount of income or liability be known absolutely, only that a taxpayer has at its disposal the information necessary to compute the amount with reasonable accuracy.

From the nature of the claimed deductions and the span of time during which the firm was retained, ICC can be expected to have reasonably known the retainer fees charged by the firm. They cannot give as an excuse the delayed billing, since it could have inquired into the amount of their obligation and reasonably determine the amount.

Yabes v. Flojo and Republic [nOch]

FISHWEALTH CANNING CORPORATION v. CIR [Jaline]G.R. No. 179343; 21 January 2010

FACTS:FCC, engaged in the business of processing of imported fresh frozen sardines and mackerel, filed a protest of the Formal Letter of Demand with attached Final Assessment Notice for deficiencies in the amount of approximately P67.6MM for the year 1999. When the CIR issued its Final Decision on Disputed Assessment denying the same, FCC filed a motion for reconsideration questioning the FDDA. The CIR subsequently issued a Preliminary Collection Letter and, thereafter, a Final Notice before Seizure. The petition for review as well as the motion for reconsideration was denied by the CTA.

ISSUE: WON a final decision or inaction of the CIR is appealable to the CTA. – YES.

HELD:Petition is dismissed. A final decision or inaction of the CIR on a disputed assessment is appealable to the CTA. It is thus relevant to determine from the text of the Decision whether the order or decision has attained a character of finality. Where the wordings of the ruling signify a final determination on petitioner’s tax deficiencies and there being a clear instruction for petitioner to file an appeal and not a motion for reconsideration, then the matter is ripe for judicial review.

Section 228 of the 1997 Tax Code provides that an assessment:

x x x may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.

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 thirty (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. (underscoring supplied) In the case at bar, petitioner‘s administrative protest was denied by Final Decision on Disputed Assessment dated August 2, 2005 issued by respondent and which petitioner received on August 4, 2005. Under the

above-quoted Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal respondent‘s denial of its protest to the CTA.

Since petitioner received the denial of its administrative protest on August 4, 2005, it had until September 3, 2005 to file a petition for review before the CTA Division. It filed one, however, on October 20, 2005, hence, it was filed out of time. For a motion for reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to the CTA.

On petitioner‘s final contention that it has a meritorious case in view of the dismissal of the above-mentioned criminal case filed against it for violation of the 1997 Internal Revenue Code, the same fails. For the criminal complaint was instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code.

ALLIED BANKING CORP. V. CIR [Nico]

RCBC V. CIR [Angelo]G.R. No. 168498 June 16, 2006

FACTS:On July 5, 2001, the Commissioner of Internal Revenue (CIR) issued a final assessment notice (FAN) to the Rizal Commercial Banking Corporation (RCBC) demanding a total tax liability of about P100 million. On July 20, 2001 (within the 30 day period from issuance of FAN to file a protest), RCBC filed a protest. The CIR never acted on the protest. On April 30, 2002, RCBC filed an appeal with the Court of Tax Appeals (CTA).

ISSUE: Whether or not RCBC filed a timely appeal.

HELD: No. Under the law, after the lapse of 180 days within which the CIR is supposed to rule on the protest – yet the CIR did not, the taxpayer has 30 days from said lapse to file an appeal with the CTA. In the case at bar, the protest was filed on July 20, 2001. From that date, RCBC had until September 18, 2001 (60 days) to submit supporting documents. There was no showing that RCBC submitted any such documents. But assuming it submitted said documents on September 18, 2001, the 180 day period for the CIR to decide shall commence on that date hence the 180 day period has lapsed on March 17, 2002. Thereafter, RCBC has 30 days to appeal the inaction of the CIR (30 days from the lapse of the 180 day period) or until April 16, 2002. RCBC filed its appeal on April 30, 2002 which was already beyond the 30 day period. In such case, the decision of the CIR indirectly denying the protest by reason of inaction is already final and executory and is no longer appealable.

As provided in Sec. 228, the failure of the taxpayer to appeal from an assessment on time rendered the assessment final, executory and demandable. RCBC is precluded from disputing the correctness of the assessment. While the right to appeal a decision of the Commissioner of CTA is merely a statutory remedy, nevertheless the requirement that it must be brought within 30 days is jurisdictional. If a statutory remedy provides as a condition precedent that the action to enforce it must be commenced within a prescribed time, such requirement is jurisdictional and failure to comply therewith may be raised in a MTD.

LASCONA LAND CO., INC., PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. [Myta](G.R. No. 171251 March 5, 2012.)

FACTS:

•On March 27, 1998, the Commissioner of Internal Revenue (CIR) issued an Assessment Notice against Lascona Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount of P753,266.56.

•Consequently, Lascona filed a letter protest, but was denied by Norberto R. Odulio, Officer-in-Charge (OIC), Regional Director, Bureau of Internal Revenue, Revenue Region No. 8, Makati City, in his Letter.

•Lascona appealed the decision before the CTA. Lascona alleged that the Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30) days from the lapse of the 180-day period rendered the assessment final and executory.

•The CTA nullified the subject assessment. It held that in cases of inaction by the CIR on the protested assessment, Section 228 of the NIRC provided two options for the taxpayer: (1) appeal to the CTA within thirty (30) days from the lapse of the one hundred eighty (180)-day period, or (2) wait until the Commissioner decides on his protest before he elevates the case.

•Dissatisfied, the CIR filed an appeal before the CA. The Court of Appeals granted the CIR's petition and set aside the Decision of the CTA, declaring that the subject Assessment Notice as final, executory and demandable.

ISSUE: Whether or not the subject assessment has become final, executory and demandable due to the failure of petitioner to file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred Eighty (180)-day period pursuant to Section 228 of the NIRC.

HELD: NO. The respondent court erred in holding that the assessment in question is the respondent Collector's decision or ruling appealable to it, and that consequently, the period of thirty days prescribed by section 11 of Republic Act No. 1125 within which petitioner should have appealed to the respondent court must be counted from its receipt of said assessment.

As in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it did not intend to limit it to a single remedy of filing of an appeal after the lapse of the 180-day prescribed period. Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide

either positively or negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested assessment. More so, because the law and jurisprudence have always contemplated a scenario where the CIR will decide on the protested assessment.

It must be emphasized, however, that in case of the inaction of the CIR on the protested assessment, while we reiterate − the taxpayer has two options, either: (1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of a copy of such decision, these options are mutually exclusive and resort to one bars the application of the other.

Accordingly, considering that Lascona opted to await the final decision of the Commissioner on the protested assessment, it then has the right to appeal such final decision to the Court by filing a petition for review within thirty days after receipt of a copy of such decision or ruling, even after the expiration of the 180-day period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. Thus, Lascona, when it filed an appeal on April 12, 1999 before the CTA, after its receipt of the Letter dated March 3, 1999 on March 12, 1999, the appeal was timely made as it was filed within 30 days after receipt of the copy of the decision.

II. Recovery of tax erroneously or illegally paidSILKAIR (SINGAPORE) PTE. LTD. V. COMMISSIONER OF INTERNAL REVENUE [CARY]

FACTS:Petitioner filed with the BIR an administrative claim for the refund of Three Million Nine Hundred Eighty-Three Thousand Five Hundred Ninety Pesos and Forty-Nine Centavos (P3,983,590.49) in excise taxes which it allegedly erroneously paid on its purchases of aviation jet fuel from Petron Corporation (Petron) from June to December 2000. Petitioner used as basis therefor BIR Ruling No. 339-92 dated December 1, 1992, which declared that the petitioner’s Singapore-Cebu-Singapore route is an international flight by an international carrier and that the petroleum products purchased by the petitioner should not be subject to excise taxes under Section 135 of Republic Act No. 8424 or the 1997 National Internal Revenue Code (NIRC). The CTA First Division found that petitioner was qualified for tax exemption under Section 135(b) of the NIRC, as long as the Republic of Singapore exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies under Article 4(2) of the Air Transport Agreement quoted above. However, it ruled that petitioner was not entitled to the excise tax exemption for failure to present proof that it was authorized to operate in the Philippines during the period material to the case due to the non-admission of some of its exhibits. In the Resolution dated September 19, 2007, the CTA En Banc set aside its earlier resolution dismissing the petition for review and reinstated the same. It hereby AFFIRMED WITH MODIFICATION that petitioner is further not found to be the proper party to file the instant claim for refund.

ISSUE: Whether or not petitioner is the proper party to claim for the refund/tax credit of excise taxes paid on aviation fuel. HELD: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. Section 130 (A) (2) of the NIRC provides that “[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production.” Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore.

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. It is clear that the proper party to question, or claim a refund or tax credit of an indirect tax is the statutory taxpayer, which is Petron in this case, as it is the company on which the tax is imposed by law and which paid the same even if the burden thereof was shifted or passed on to another. It bears stressing that even if Petron shifted or passed on to petitioner the burden of the tax, the additional amount which petitioner paid is not a tax but a part of the purchase price which it had to pay to obtain the goods.

CIR V SMART COMMUNICATIONS [TATS]

BPI VS. CIR (GR NO. 144653, AUGUST 28, 2001.) [Alfie]

FACTS:

1. Prior to its merger with petitioner Bank of the Philippine Islands (BPI) on July 1, 1985, the Family Bank and Trust Co. (FBTC) earned income consisting of rentals from its leased properties and interest from its treasury notes for the period January 1 to June 30, 1985. As required by the Expanded Withholding Tax Regulation, the lessees of FBTC withheld 5 percent of the rental income, in the amount of P118,609.17, while the Central Bank, from which the treasury notes were purchased by FBTC, withheld P55,456.60 from the interest earned thereon. Creditable withholding taxes in the total amount of P174,065.77 were remitted to respondent Commissioner of Internal Revenue.

2. FBTC, however, suffered a net loss of about P64,000,000.00 during the period in question. It also had an excess credit of P2,146,072.57 from the previous year. Thus, upon its dissolution in 1985, FBTC had a refundable amount of P2,320,138.34, representing that year’s tax credit of P174,065.77 and the previous year’s excess credit of P2,146,072.57.

3. As FBTC’s successor-in-interest, petitioner BPI claimed this amount as tax refund, but respondent Commissioner of Internal Revenue refunded only the amount of P2,146,072.57, leaving a balance of P174,065.77. Accordingly, petitioner filed a petition for review in the Court of Tax Appeals on December 29, 1987, seeking the refund of the aforesaid amount;

4. However, in its decision rendered on July 19, 1994, the Court of Tax Appeals dismissed petitioner’s petition for review and denied its claim for refund on the ground that the claim had already prescribed.

ISSUE: Whether petitioner’s (BPI) claim is barred by prescription.

RULING: Petition of BPI DENIED.

On the issue of prescription, this Court finds that the petition for review is filed out of time. FBTC, after the end of its corporate life on June 30, 1985, should have filed its income tax return within thirty days after the cessation of its business or thirty days after the approval of the Articles of Merger. This is bolstered by Sec. 78 of the Tax Code and under Sec. 244 of Revenue Regulation No. 2.

As the FBTC did not file its quarterly income tax returns for the year 1985, there was no need for it to file a Final adjustment Return because there was nothing for it to adjust or to audit. After it ceased operations on June 30, 1985, its taxable year was shortened to six months, from January 1, 1985 to June 30, 1985. The situation of FBTC is precisely what was contemplated under §78 of the Tax Code. It thus became necessary for FBTC to file its income tax return within 30 days after approval by the SEC of its plan or resolution of dissolution. Indeed, it would be absurd for FBTC to wait until the fifteenth day of April, or almost 10 months after it ceased its operations, before filing its income tax return.

Thus, §46(a) of the Tax Code applies only to instances in which the corporation remains subsisting and its business operations are continuing. In instances in which the corporation is contemplating dissolution, §78 of the Tax Code applies.

Considering that §78 of the Tax Code, in relation to §244 of Revenue Regulation No. 2, applies to FBTC, the two-year prescriptive period should be counted from July 30, 1985, i.e ., 30 days after the approval by the SEC of its plan for dissolution. In accordance with §292 of the Tax Code, July 30, 1985 should be considered the date of payment by FBTC of the taxes withheld on the earned income. Consequently, the two-year period of prescription ended on July 30, 1987. As petitioner’s claim for tax refund before the Court of Tax Appeals was filed only on December 29, 1987, it is clear that the claim is barred by prescription.

CITIBANK NA V. CA & CIR [Jaycee]

CIR V. PHILAMLIFE [Sarah]

CIR V. CA, CTA, AND BPI AS LIQUIDATOR [Enzo]

FACTS:Petitioner Bank of the Philippine Islands (BPI) is a bank and trust corp. duly organized and existing under Philippine Laws. It acts as the liquidator of Paramount Acceptance Corporation after its dissolution on March 31, 1986.

On April 2, 1986, Paramount Acceptance Corp. (Paramount) filed its Corporate Annual Income Tax Return, for calendar year ending December 31, 1985, declaring a Net Income of P3,324,802.00. The income tax due thereon is P1,153,681.00. However, Paramount paid the BIR its quarterly income tax in the amount of P1,218,940.00

After deducting Paramount’s total quarterly income tax payments of P1,218,940.00 from its income tax of P1,153,681.00, the return shored a refundable amount of P65,259.00

On April 14, 1988, petitioner BPI, as liquidator of Paramount, through counsel filed a letter dated April 12, 1988 reiterating its claim for refund of P65,259.00 as overpaid income tax for the calendar year 1985. The following day or on April 15, 1988, BPI filed the instant petition with this court in order to toll the running of the prescriptive period for filing a claim for refund of overpaid income taxes.

The CTA rendered decision ordering the CIR to give the refund to the petitioner. On appeal, the decision was affirmed by the CA.

ISSUE: Whether of not the 2-year period of prescription for filing a claim for refund is to be counted from the actual filing of the income tax return.

HELD: The two-year period for prescription should be counted from the date of payment of the tax, which for actions for refund of corporate income tax should be computed from the time of actual filing of the adjustment return or annual income tax return. This is so because at that point, it can already be determined whether there has been an over payment by the taxpayer. Moreover, under Sec. 49 (a) by the NIRC (now Sec. 56(a), 1997 NIRC), payment is made at the time the return is filed.

There is some likelihood that the above rule could apply also to individuals who are self employed (i.e., in business and professional practice) as well as estates and trusts, which are likewise required to file quarterly returns.

GIBBS V. COLLECTOR AND CTA [Jongko]

CIR V. PRIMETOWN PROPERTY GROUP [Leandro]

FACTS:Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the refund or credit of income tax respondent’s paid in 1997.

The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim a refund or credit commenced on that date. According to the CTA, the two-year prescriptive period under Section 229 of the NIRC for the filing of judicial claims was equivalent to 730 days. Because the year 2000 was a leap year, respondent's petition, which was filed 731 days after respondent filed its final adjusted return, was filed beyond the reglementary period.

On appeal, the CA reversed and set aside the decision of the CTA. It ruled that Article 13 of the Civil Code did not distinguish between a regular year and a leap year. According to the CA, even if the year 2000 was a leap year, the periods covered by April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000 should still be counted as 365 days each or a total of 730 days. A statute which is clear and explicit shall be neither interpreted nor construed.

ISSUE: Whether or not the counting of the 2-year prescriptive period for filing claim of refund is governed by the Civil Code.

HELD:The Counting of 2-year period for filing claim for refund is no longer in accordance with Art 13 of the Civil Code but under Sec 31 of EO 227 - The Administrative Code of 1987.

As between the Civil Code, which provides that a year is equivalent to 365 days, and the Administrative Code of 1987, which states that a year is composed of 12 calendar months, it is the latter that must prevail being the more recent law, following the legal maxim, Lex posteriori derogat priori.

In the case at bar, there are 24 calendar months in 2 years. For a Final Corporate ITR filed on Apr 14, 1998, the counting should start from Apr 15, 1998 and end on Apr 14, 2000. The procedure is 1st month -Apr 15, 1998 to May 14, 1998 …. 24th month - Mar 15, 2000 to Apr 14, 2000. National Marketing v. Tecson, 139 Phil 584 (1969) is no longer controlling. The 2-year period should start to run from filing of the final adjusted return.We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th calendar month from the day respondent filed its final adjusted return. Hence, it was filed within the reglementary period.

CIR V. PERF CORP. [nOch]

PHILIPPINE BANK OF COMMUNICATIONS VS. COMMISSIONER OF INTERNAL REVENUE (GR 112024, 28 JANUARY 1999) [Jaline]Second Division, Quisumbing (J): 4 concur

FACTS: The Philippine Bank of Communications (PBCom), a commercial banking corporation duly organized under Philippine laws, filed its quarterly income tax returns for the first and second quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00. The taxes due were settled by applying PBCom’s tax credit memos and accordingly, the Bureau of Internal Revenue (BIR) issued Tax Debit Memo 0746-85 and 0747-85 for P3,401,701.00 and P1,615,253.00, respectively. Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for the year-ended 31 December 1985, it declared a net loss of P25,317,228.00, thereby showing no income tax liability. For the succeeding year, ending 31 December 31, 1986, PBCom likewise reported a net loss of P14,129,602.00, and thus declared no tax payable for the year. But during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986. On 7 August 1987, PBCom requested the Commissioner of Internal Revenue, among others, for a tax credit of P5,016,954.00 representing the overpayment of taxes in the first and second quarters of 1985.

Thereafter, on 25 July 1988, PBCom filed a claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69. Pending the investigation of the Commissioner of Internal Revenue, PBCom instituted a Petition for Review on 18 November 1988 before the Court of Tax Appeals (CTA). On 20 May 1993, the CTA dismissed the petition for lack of merit; and thus denied PBCom’s claim for refund/tax credit of overpaid income tax for1985 in the amount of P5,299,749.95 for having been filed beyond the reglementary period, and likewise denied the 1986 claim for refund amounting to P234,077.69 since PBCom has opted and automatically credited the same to the succeeding year. On 22 June 1993, PBCom filed a Motion for Reconsideration of the CTA’s decision but the same was denied due course for lack of merit.

PBCom filed a petition for review of CTA decision and resolution with the Court of Appeals. On 22 September 1993, the Court of Appeals affirmed in toto the CTA’s resolution dated 20 July 1993. Hence the petition for review with the Supreme Court. The Supreme Court denied the petition and affirmed the decision of the Court of Appeals appealed from, with costs against PBCom.

ISSUE: WON the CA erred in denying the plea for tax refund or tax credits on the ground of prescription, despite petitioner’s reliance on RMC No. 7-85, changing the prescriptive period of 2 years to 10 years.

RULING: The Court finds that contrary to the petitioner’s contention, the relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the 2 year prescriptive period set by law.

The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced. The two-year prescriptive period provided, should be computed from the time of filing the Adjustment Return and final payment of the tax for the year.

When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive period of two years to ten years on claims of excess quarterly income tax payments, such circular created a clear inconsistency with the provision of Section 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by Congress.

Section 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec. 229, NIRC of 1997) provides for the prescriptive period for filing a court proceeding for the recovery of tax erroneously or illegally collected. Section 230 (Recovery of tax erroneously or illegally collected) provides that “no suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment; Provided however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.”

Fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. Article 8 of the Civil Code recognizes judicial decisions, applying or interpreting statutes as part of the legal system of the country. But administrative decisions do not enjoy that

level of recognition. A memorandum-circular of a bureau head could not operate to vest a taxpayer with a shield against judicial action. For there are no vested rights to speak of respecting a wrong construction of the law by the administrative officials and such wrong interpretation could not place the Government in estoppel to correct or overrule the same. The non-retroactivity of rulings by the Commissioner of Internal Revenue is not applicable because the nullity of RMC 7-85 was declared by the courts and not by the Commissioner of Internal Revenue. Lastly, it must be noted that a claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer.

Section 69 of the 1977 NIRC (now Section 76 of the 1997 NIRC) provides that any excess of the total quarterly payments over the actual income tax computed in the adjustment or final corporate income tax return, shall either (a) be refunded to the corporation, or (b) may be credited against the estimated quarterly income tax liabilities for the quarters of the succeeding taxable year. The corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax credit for the succeeding taxable year. To ease the administration of tax collection, these remedies are in the alternative, and the choice of one precludes the other.

PBCom opted to apply for automatic tax credit. This was the basis used (vis-a-vis the fact that the 1987 annual corporate tax return was not offered by the petitioner as evidence) by the CTA in concluding that PBCom had indeed availed of and applied the automatic tax credit to the succeeding year, hence it can no longer ask for refund, as to [sic] the two remedies of refund and tax credit are alternative. Since PBCom opted for an automatic tax credit in accordance with Section 69 of the 1977 NIRC, as specified in its 1986 Final Adjusted Income Tax Return, such a finding of fact must be respected by the Supreme Court. This, especially, in light that the 1987 annual corporate tax return of PBCom was not offered as evidence to controvert said fact.

CIR V. CITYTRUST BANKING CORP. [Nico]

UNITED AIRLINES VS. COMMISSIONER OF INTERNAL REVENUE [Angelo]G.R. No. 178788 September 29, 2009

FACTS:International airline, petitioner United Airlines, filed a claim for income tax refund. Petitioner sought to be refunded the erroneously collected income tax from in the amount of P5,028,813.23 on passenger revenue from tickets sold in the Philippines, the uplifts of which did not originate in the Philippines. The airlines ceased operation originating form the Philippines since February 21, 1998.

Court of tAx appeals ruled the petitioner is not entitled to a refund because under the NIRC, income tax on GPB also includes gross revenue from carriage of cargoes from the Philippines. And upon assessment by the CTA, it was found out that petitioner deducted items from its cargo revenues which should have entitled the government to an amount of P 31.43 million, which is obviously higher than the amount the petitioner prayed to be refunded.

Petitioner argued that the petitioner’s supposed underpayment cannot offset his claim to a refund as established by well-settled jurisprudence.

ISSUE:Whether or not petitioner is entitled to a refund?

HELD:Petitioner was correct in averring that his claim to a refund cannot be subject to offsetting or, as it claimed the offsetting to be, a legal compensation under Sec. 28(A)(3)(a)

“Petitioner’s (similar) tax refund claim assumes that the tax return that it filed was correct. Given, however, the finding of the CTA that petitioner, although not liable under Sec. 28(A)(3)(a) of the 1997 NIRC, is liable under Sec. 28(A)(1), the correctness of the return filed by petitioner is now put in doubt. As such, we(the court) cannot grant the prayer for a refund.”

The court held that the petitioner is not entitled to a refund, Having underpaid the GPB tax due on its cargo revenues for 1999, the amount of the former being even much higher (P31.43 million) than the tax refund sought (P5.2 million).

Relevant note:The Court have consistently ruled that there can be no off-setting [or compensation”] of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground

that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.(francia vs Intermediate appellate court)

The grant of a refund is founded on the assumption that the tax return is valid, that is, the facts stated therein are true and correct. The deficiency assessment, although not yet final, created a doubt as to and constitutes a challenge against the truth and accuracy of the facts stated in said return which, by itself and without unquestionable evidence, cannot be the basis for the grant of the refund. (CIR vs CTA)

National Internal Revenue Code; international air carriers; Gross Philippine Billings; regular income tax. Inasmuch as the taxpayer has ceased operating passenger flights to or from the Philippines in 1998, it is not taxable under Section 28(A)(3)(a) of the National Internal Revenue Code (NIRC), or on 2 1/2% of its Gross Philippine Billings (GPB). The correct interpretation of said provisions is that, if an international air carrier maintains flights to and from the Philippines then it shall be taxed at the rate of 2 1/2 % of its GPB, while international air carriers that do not have flights to and from the Philippines but nonetheless earn income from other activities in the country will be taxed at the rate of 32% [now 30%] of such income.

National Internal Revenue Code; claims for refunds. Under Section 72 [Suit to Recover Tax Based on False or Fraudulent Returns] of the National Internal Revenue Code, the Court of Tax Appeals can make a valid finding that taxpayer made erroneous deductions on its gross cargo revenue; that because of the erroneous deductions, taxpayer reported a lower cargo revenue and paid a lower income tax thereon; and that taxpayer’s underpayment of the income tax on cargo revenue is even higher than the income tax it paid on passenger revenue subject of the claim for refund, such that the refund cannot be granted. On the assumption that taxpayer filed a correct return, it had the right to file a claim for refund of the Gross Philippine Billings (GPB) tax on passenger revenues it paid in 1999 when it was not operating passenger flights to and from the Philippines. However, upon examination by the CTA, taxpayer’s return was found erroneous as it understated its gross cargo revenue for the same taxable year due to deductions of two items. Having underpaid the GPB tax due on its cargo revenues for 1999, taxpayer is not entitled to a refund of its GPB tax on its passenger revenue, the amount of the former being even much higher than the tax refund sought.

BELLE CORPORATION, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent. [Myta]G.R. No. 181298 January 10, 2011.

FACTS:

• Petitioner Belle Corporation is a domestic corporation engaged in the real estate and property business.

• On May 30, 1997, petitioner filed with the Bureau of Internal Revenue (BIR) its Income Tax Return (ITR) for the first quarter of 1997, showing a gross income of P741,607,495.00, a deduction of P65,381,054.00, a net taxable income of P676,226,441.00 and an income tax due of P236,679,254.00, which petitioner paid through PCI Bank, Tektite Tower Branch, an Authorized Agent Bank of the BIR.

• On August 14, 1997, petitioner filed with the BIR its second quarter ITR, declaring an overpayment of income taxes in the amount of P66,634,290.00.

• In view of the overpayment, no taxes were paid for the second and third quarters of 1997. Petitioner's ITR for the taxable year ending December 31, 1997 thereby reflected an overpayment of income taxes in the amount of P132,043,528.00.

• For the taxable year 1998, petitioner's amended ITR showed an overpayment of P106,447,318.00.

• On April 12, 2000, petitioner filed with the BIR an administrative claim for refund of its unutilized excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00. Notwithstanding the filing of the administrative claim for refund, petitioner carried over the amount of P106,447,318.00 to the taxable year 1999 and applied a portion thereof to its 1999 Minimum Corporate Income Tax (MCIT) liability, as evidenced by its 1999 ITR.

• On April 14, 2000, due to the inaction of the respondent Commissioner of Internal Revenue (CIR) and in order to toll the running of the two-year prescriptive period, petitioner appealed its claim for refund of unutilized excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00 with the CTA via a Petition for Review.

• The CTA rendered a Decision denying petitioner's claim for refund, stating that it is an elementary rule in taxation that an automatic carry over of an excess income tax payment should only be made for the succeeding year.

• The petitioner elevated the matter to the CA via a Petition for Review under Rule 43 of the Rules of Court, who in turn denied the petition. The CA explained that the overpayment for taxable year 1997 can no longer be carried over to taxable year 1999 because excess income payments can only be credited against the income tax liabilities of the succeeding taxable year, in this case up to 1998 only and not beyond. Neither can the overpayment be refunded as the remedies of automatic tax crediting and tax refund are alternative remedies.

ISSUE: Whether or not petitioner is entitled to a refund of its excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00.

HELD: NO. The petitioner is not entitled to a refund of its excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00.

The option to carry over excess income tax payments is irrevocable under Section 76 of the 1997 NIRC, which reads:

Section 76. Final Adjustment Return. – Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation shall either:

(a) Pay the excess tax still due; or (b) Be refunded the excess amount paid, as the case may be.

Once the option to carry over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for tax refund or issuance of a tax credit certificate shall be allowed therefor.

Under the new law, in case of overpayment of income taxes, the remedies are still the same; and the availment of one remedy still precludes the other. But unlike Section 69 of the old NIRC, the carry-over of excess income tax payments is no longer limited to the succeeding taxable year. Unutilized excess income tax payments may now be carried over to the succeeding taxable years until fully utilized. In addition, the option to carry-over excess

income tax payments is now irrevocable. Hence, unutilized excess income tax payments may no longer be refunded.

Accordingly, since petitioner already carried over its 1997 excess income tax payments to the succeeding taxable year 1998, it may no longer file a claim for refund of unutilized tax credits for taxable year 1997. Under the new law, once the option to carry-over excess income tax payments to the succeeding years has been made, it becomes irrevocable. Thus, applications for refund of the unutilized excess income tax payments may no longer be allowed.

CIR V. PL MANAGEMENT INTERNATIONAL PHILIPPINES, INC. [Cary]

FACTS:In 1997, the respondent, a Philippine corporation, earned an income of P24,000,000.00 from its professional services rendered to UEM-MARA Philippines Corporation (UMPC), from which income UMPC withheld P1,200,000.00 as the respondent’s withholding agent. In its 1997 income tax return (ITR) filed on April 13, 1998, the respondent reported a net loss of P983,037.00, but expressly signified that it had a creditable withholding tax of P1,200,000.00 for taxable year 1997 to be claimed as tax credit in taxable year 1998. On April 13, 1999, the respondent submitted its ITR for taxable year 1998, in which it declared a net loss of P2,772,043.00. Due to its net-loss position, the respondent was unable to claim the P1,200,000.00 as tax credit. On April 12, 2000, the respondent filed with the petitioner a written claim for the refund of the P1,200,000.00 unutilized creditable withholding tax for taxable year 1997. However, the petitioner did not act on the claim. Due to the petitioner’s inaction, the respondent filed a petition for review in the CTA (CTA Case No. 6107) on April 14, 2000, thereby commencing its judicial action. On December 10, 2001, the CTA denied the respondent’s claim on the ground of prescription, to wit: Records reveal that Petitioner filed its Annual Income Tax Return for taxable year 1997 on April 13, 1998 (Exhibit “A”) and its claim for refund with the BIR on April 12, 2000 (Exhibit “D” and No. 2 of the Statement of Admitted Facts and Issues). Several days thereafter, or on April 14, 2000, Petitioner filed an appeal with this Court. The aforementioned facts clearly show that the judicial claim for refund via this Petition for Review was already filed beyond the two-year prescriptive period mandated by Sections 204 (C) and 229 of the Tax Code xxx Aggrieved, the respondent appealed to the CA, assailing the correctness of the CTA’s denial of its judicial claim for refund on the ground of bar by prescription. As earlier mentioned, the CA promulgated its decision on November 28, 2002, holding that the two-year prescriptive period, which was not jurisdictional (citing Oral and Dental College v. Court of Tax Appeal[6]and

Commissioner of Internal Revenue v. Philippine American Life Insurance Company[7]), might be suspended for reasons of equity. The CA rejected the petitioner’s motion for reconsideration.[10] ISSUES:Whether the claim for refund of respondent is suspended for reasons of equity

HELD:In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for tax refund or issuance of a tax credit certificate shall be allowed therefor. The controlling factor for the operation of the irrevocability rule is that the taxpayer chose an option; and once it had already done so, it could no longer make another one. Consequently, after the taxpayer opts to carry-over its excess tax credit to the following taxable period, the question of whether or not it actually gets to apply said tax credit is irrelevant. Section 76 of the NIRC of 1997 is explicit in stating that once the option to carry over has been made, “no application for tax refund or issuance of a tax credit certificate shall be allowed therefor.”

The last sentence of Section 76 of the NIRC of 1997 reads: “Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for tax refund or issuance of a tax credit certificate shall be allowed therefor.” The phrase “for that taxable period” merely identifies the excess income tax, subject of the option, by referring to the taxable period when it was acquired by the taxpayer. In the present case, the excess income tax credit, which BPI opted to carry over, was acquired by the said bank during the taxable year 1998. The option of BPI to carry over its 1998 excess income tax credit is irrevocable; it cannot later on opt to apply for a refund of the very same 1998 excess income tax credit.

The Court of Appeals mistakenly understood the phrase “for that taxable period” as a prescriptive period for the irrevocability rule. This would mean that since the tax credit in this case was acquired in 1998, and BPI opted to

carry it over to 1999, then the irrevocability of the option to carry over expired by the end of 1999, leaving BPI free to again take another option as regards its 1998 excess income tax credit. This construal effectively renders nugatory the irrevocability rule. The evident intent of the legislature, in adding the last sentence to Section 76 of the NIRC of 1997, is to keep the taxpayer from flip-flopping on its options, and avoid confusion and complication as regards said taxpayer's excess tax credit. The interpretation of the Court of Appeals only delays the flip-flopping to the end of each succeeding taxable period. Inasmuch as the respondent already opted to carry over its unutilized creditable withholding tax of P1,200,000.00 to taxable year 1998, the carry-over could no longer be converted into a claim for tax refund because of the irrevocability rule provided in Section 76 of the NIRC of 1997. Thereby, the respondent became barred from claiming the refund.

However, in view of it irrevocable choice, the respondent remained entitled to utilize that amount of P1,200,000.00 as tax credit in succeeding taxable years until fully exhausted. In this regard, prescription did not bar it from applying the amount as tax credit considering that there was no prescriptive period for the carrying over of the amount as tax credit in subsequent taxable years.

X. COURT OF TAX APPEALSCIR V. CA, CTA AND ATENEO [Tats]

RCBC V. CIR GR NO. 168498, APRIL 24, 2007 [Alfie]

FACTS:

RCBC sought to file a petition for review with the CTA for the failure of the Commissioner to act on its disputed tax assessment. However, the CTA (Second Division) denied the petition because it was not filed within the reglementary period provided for in the law. This decision was affirmed by the CTA en banc. RCBC maintained that its former counsel’s failure to file the petition for review with the CTA within the reglementary period was excusable.

ISSUE: Whether RCBC filed its petition for review on time.

RULING: RCBC’s motion is DENIED.

The jurisdiction of the CTA has been expanded to include not only decisions or rulings but the inaction of the Commissioner. The decisions, rulings, and inaction of the Commissioner are necessary to vest the CTA with jurisdiction to entertain the appeal provided it is filed within the revised rules of the CTA. In case the Commissioner failed to act on the disputed assessment within the 180-day period from the date of submission of documents, a taxpayer may:

(1)File a petition for review with the CTA within 30 days after the expiration of the 180-day period fixed by law for the Commissioner to act on the disputed assessments; OR

(2)Await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the CTA within 30 days after the receipt of the copy of such decision. The 30-day period within which to file an appeal is jurisdictional and failure to comply therewith would bar the appeal and deprive the CTA of its jurisdiction to entertain and determine the correctness of the assessments.

Such period is not merely directory but mandatory and it is beyond the power of the courts to extend the same. Moreover, these options are mutually exclusive and resort to one bars the application of the other.

In this case, the Commissioner failed to act on the disputed assessment within 180 days from the date of submission of documents. RCBC failed to file within 30-day period after the lapse of the 180-day

period. When the petition was dismissed for late filing, hence the disputed assessment became final, demandable and executory.

RCBC cannot now claim that the disputed assessment is not final as it was not acted upon by the Commissioner and thereafter appeal at the same time to the CTA. After availing of the first option, RCBC cannot now resort to the second option.

JUDY ANNE L. SANTOS V. PEOPLE AND BIR [Jaycee]

ASIA INT’L AUCTIONEERS V. PARAYNO [Sarah]

TFS Inc v. CIR [Enzo]

FACTS: The CTA rendered a Decision upholding the assessment issued against petitioner in the amount of P11,905,696.32, representing deficiency VAT for the year 1998, inclusive of 25% surcharge and 20% deficiency interest, plus 20% delinquency interest from February 25, 2002 until full payment, pursuant to Sections 248 and 249(B) of the National Internal Revenue Code of 1997 (NIRC). The CTA ruled that pawnshops are subject to VAT under Section 108(A) of the NIRC as they are engaged in the sale of services for a fee, remuneration or consideration. Petitioner filed before the Court of Appeals a Petition for Review but it was dismissed by the CA for lack of jurisdiction in view of the enactment of Republic Act No. 9282 (RA 9282). Realizing its error, petitioner filed a Petition for Review with the CTA En Banc. The petition, however, was dismissed for having been filed out of time. Petitioner filed a Motion for Reconsideration but it was denied.

ISSUES: (1) Whether the Honorable court of Tax Appeal en banc should have given due course to the petition for review and not strictly applied the technical rules of procedure to the detriment of justice; (2) Whether or not petitioner is subject to the 10% VAT. HELD: (1) The petition is meritorious. Jurisdiction to review decisions or resolutions issued by the Divisions of the CTA is no longer with the CA but with the CTA En Banc. This rule is embodied in Section 11 of RA 9282.In the instant case, we are constrained to disregard procedural rules because we cannot in conscience allow the government to collect deficiency VAT from petitioner considering that the government has no right at all to collect or to receive the same. Besides, dismissing this case on a mere technicality would lead to the unjust enrichment of the government at the expense of petitioner, which we cannot permit. Technicalities should never be used as a shield to perpetrate or commit an injustice. (2) Petitioner disputes the assessment made by the BIR for VAT deficiency in the amount ofP11,905,696.32 for taxable year 1998 on the ground that pawnshops are not included in the coverage of VAT. We agree.  x x x Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax years 1996 to 2002; however, with the levy, assessment and collection of VAT from non-bank financial intermediaries being specifically deferred by law, then petitioner is not liable for VAT during these tax years. But with the full implementation of the VAT system on non-bank financial intermediaries starting January 1, 2003, petitioner is liable for 10% VAT for said tax year. And beginning 2004 up to the present,

by virtue of R.A. No. 9238, petitioner is no longer liable for VAT but it is subject to percentage tax on gross receipts from 0% to 5%, as the case may be. Guided by the foregoing, petitioner is not liable for VAT for the year 1998. Consequently, the VAT deficiency assessment issued by the BIR against petitioner has no legal basis and must therefore be cancelled. In the same vein, the imposition of surcharge and interest must be deleted.

XI. LOCAL TAXATIONMACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY V. MARCOS [Jongko]Topic: Power to Create Sources of Revenue

FACTS:Petitioner Macrtan Cebu International Airport Authority (MCIAA) was created by virtue of RA 6958 to undertake the economical, efficient and effective control, management and supervision of the Mactan International Airport. Since its creation, MCIAA enjoyed the privilege of exemption from payment of realty taxes by the national government in accordance with its charter. However, the OIC of the Office of the Treasurer of Cebu City demanded payment for realty taxes on lands belonging to MCIAA, to which the latter objected to as baseless and unjustified claiming that it was exempted, and as an instrumentality of the government performing governmental functions, the LGU’s taxing powers are limited citing section 133 of the LGC. Respondent City refused to cancel the realty tax account, insisting that MCIAA is a government controlled corporation whose tax exemption privilege has been withdrawn by certain sections of the LGC. MCIAA paid under protest as the city of Cebu was about to issue a warrant of levy against its properties. MCIAA filed a Petition for Declaratory relief in the Cebu RTC contending that the taxing powers of LGUs do not extend to the levy of taxes or fees of any kind of instrumentality of the national government.RTC ruling: petition of MCIAA dismissed as the tax exemption ptivilege was expressly withdrawn by the LGC. MR denied, thus this petition.Contention of PETITIONER: the petitioner asserts that although it is a government owner or controlled corporation, it is mandated to perform functions in the same category as an instrumentality of Government and therefore its tax exemption privilege under its charter cannot be withdrawn by the LGC because section 133 thereof states that the taxing powers of LGUs shall not extend to the levy of taxes or fees or charges of any kind on the national government, its agencies or instrumentalities.Contention of RESPONDENT: In its comment respondent City of Cebu alleges that as local a government unit and a political subdivision, it has the power to impose, levy, assess, and collect taxes within its jurisdiction. Such power is guaranteed by the Constitution and enhanced further by the LGC. While it may be true that under its Charter the petitioner was exempt from the payment of realty taxes, this exemption was withdrawn by Section 234 of the LGC.

ISSUE: Is MCIAA liable to pay realty taxes to Cebu City?

HELD: YES.As a general rule, the power to tax is an incident of sovereignty and is 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. Nevertheless, effective limitations thereon may be imposed by the people through their Constitutions. Our Constitution, for instance, provides that the rule of taxation shall be uniform and equitable and Congress shall evolve a progressive system of taxation. So potent indeed is the power that it was once opined that "the power to tax involves the power to destroy.” Verily, taxation is a destructive power which interferes with the personal and property for the support of the government. Accordingly, tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayers and liberally in favor of the taxing authority. A claim of exemption from tax payment must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception. However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of its operations.The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the latter, the exercise of the power may be subject to such guidelines and limitations as the Congress may provide which, however, must be consistent with the basic policy of local autonomy.There can be no question that under Section 14 of R.A. No. 6958 the petitioner is exempt from the payment of realty taxes imposed by the National Government or any of its political subdivisions, agencies, and instrumentalities. 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.The LGC, enacted pursuant to Section 3, Article X of the constitution provides for the exercise by local government units of their power to tax, the scope thereof or its limitations, and the exemption from taxation. Section 133 of the LGC prescribes the common limitations on the taxing powers of local government units.Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is,

undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Section 232 and 234.In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the local government units cannot extend to the levy of:(o) Taxes, fees, or charges of any kind on the National Government, its agencies, or instrumentalities, and local government units.

COCA-COLA BOTTLERS V. CITY OF MANILA [Leandro]FACTS:Petitioner Coca-Cola Bottlers Philippines, Inc. is a corporation engaged in the business of manufacturing and selling beverages and maintains a sales office located in the City of Manila.

On 25 February 2000, the City Mayor of Manila approved Tax Ordinance No. 7988, otherwise known as "Revised Revenue Code of the City of Manila" repealing Tax Ordinance No. 7794 entitled, "Revenue Code of the City of Manila." Tax Ordinance No. 7988 amended certain sections of Tax Ordinance No. 7794 by increasing the tax rates applicable to certain establishments operating within the territorial jurisdiction of the City of Manila, including herein petitioner.

Aggrieved by said tax ordinance, petitioner filed a Petition3 before the Department of Justice (DOJ), against the City of Manila and its Sangguniang Panlungsod, invoking Section 1874 of the Local Government Code of 1991 (Republic Act No. 7160). Said Petition questions the constitutionality or legality of Section 21 of Tax Ordinance No. 7988.

ISSUE: Whether or not they are entitled to tax refund by the CIR?

HELD: NO.

DOCTRINE: The taxpayer’s entitlement to a refund may be reckoned from the date when the Supreme Court declares an ordinance as void because it is only at this time that the presumption of regularity and legality of an ordinance becomes a farce.

DRILON V. LIM [nOch]

EVELYN ONGSUCO, ET AL. VS. MARIANO M. MALONESEVELYN ONGSUCO AND ANTONIA SALAYA, VS. HON. MARIANO M. MALONES, BOTH IN HIS PRIVATE AND OFFICIAL CAPACITY ASMAYOR OF THE MUNICIPALITY OF MAASIN, ILOILO. [Jaline][G.R. No. 182065. October 27, 2009.]

FACTS:Petitioners are stall holders at the Maasin Public Market. After a meeting with the stall holders, Sangguniang Bayan of Maasin approved Municipal Ordinance No. 98-01, entitled "The Municipal Revised Revenue Code. "The Code contained a provision for increased rentals for the stalls and the imposition of goodwill fees in the amount of P20,000.00 andP15,000.00 for stalls located on the first and second floors of the municipal public market, respectively. The same Code authorized respondent to enter into lease contracts over the said market stalls, and incorporated a standard contract of lease for the stall holders at the municipal public market. Sangguniang Bayan of Maasin approved Resolution No. 68, series of 1998, moving to have the meeting declared inoperative as a public hearing, because majority of the persons affected by the imposition of the goodwill fee failed to agree to the said measure. However, Resolution No. 68, series of 1998, of the Sangguniang Bayan of Maasin was vetoed by respondent on 30 September 1998. Respondent wrote a letter to petitioners informing them that they were occupying stalls in the newly renovated municipal public market without any lease contract, as a consequence of which, the stalls were considered vacant and open for qualified and interested applicants. Petitioners filed a Petition for Prohibition/Mandamus, with Prayer for Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction, against respondent. The RTC found that petitioners could not avail themselves of the remedy of mandamus or prohibition. Because they failed to show a clear legal right to the use of the market stalls without paying the goodwill fees and also on the ground of non-exhaustion of administrative remedies. This decision was affirmed by the Court of Appeals.

ISSUES: W/N there was a need for the exhaustion of administrative remedies- NO

W/N the imposition of the goodwill fees is valid- NO, it is defective due to lack of public hearings.

RULING: The rule on the exhaustion of administrative remedies is intended to preclude a court from arrogating unto itself the authority to resolve a controversy, the jurisdiction over which is initially lodged with an administrative body of special competence. Thus, a case where the issue raised is a purely legal question, well within the competence; and the

jurisdiction of the court and not the administrative agency would clearly constitute an exception.

There is no dispute herein that the notices sent to petitioners and other stall holders at the municipal public market were sent out, informing them of the supposed "public hearing" to be held on 11 August 1998. Even assuming that petitioners received their notice, the "public hearing" was already scheduled, and actually conducted, only five days later. This contravenes Article 277 (b) (3) of the Implementing Rules and Regulations of the Local Government Code which requires that the public hearing be held no less than ten days from the time the notices were sent out, posted, or published. When the Sangguniang Bayan of Maasin sought to correct this procedural defect through Resolution No. 68, series of 1998 vetoed the said resolution. Although the Sangguniang Bayan may have had the power to override respondent's veto, it no longer did so. The defect in the enactment of Municipal Ordinance No. 98 was not cured when another public hearing was held on 22 January 1999, after the questioned ordinance was passed by the Sangguniang Bayan and approved by respondent on 17 August 1998. Section 186 of the Local Government Code prescribes that the public hearing be held prior to the enactment by a local government unit of an ordinance levying taxes, fees, and charges. Since no public hearing had been duly conducted prior to the enactment of Municipal Ordinance No. 98-01, said ordinance is void and cannot be given any effect. Consequently, a void and ineffective ordinance could not have conferred upon respondent the jurisdiction to order petitioners' stalls at the municipal public market vacant.

PETRON CORPORATION, PETITIONER, VS. MAYOR TOBIAS M. TIANGCO, AND MUNICIPAL TREASURER MANUEL T. ENRIQUEZ OF THE MUNICIPALITY OF NAVOTAS, METRO MANILA, RESPONDENTS. [Nico]G.R. No. 158881             April 16, 2008

FACTS: Petron maintains a depot or bulk plant at the Navotas Fishport

Complex in Navotas. Through that depot, it has engaged in the selling of diesel fuels to

vessels used in commercial fishing in and around Manila Bay.  On 1 March 2002, Petron received a letter from the office of Navotas

Mayor, wherein the corporation was assessed taxes relative to the figures covering sale of diesel declared by your Navotas Terminal from 1997 to 2001. 

Petron duly filed with Navotas a letter-protest to the notice of assessment.

o It was exempt from local business taxes in view of Art. 232(h) of the IRR of the Code, as well as a ruling of the BLGF stating that sales of petroleum fuels are not subject to local taxation.

The letter-protest was denied by the Navotas Municipal Treasurer.  Subsequently, the mayor of Navotas sent a “Final Demand to Pay,"

requiring that Petron pay the assessed amount within 5 days from receipt thereof, with a threat of closure of Petron’s operations within Navotas should there be no payment. 

Thus, Petron filed with the Malabon RTC a Complaint for Cancellation of Assessment for Deficiency Taxes with Prayer for the Issuance of a TRO and/or WPI.

RTC ruled in favour of Navotas dismissing Petron’s complaint and ordering the payment of the assessed amount. 

Hence, this petition for review with the SC.

ISSUE: Whether a local government unit is empowered under the LGC to impose business taxes on persons or entities engaged in the sale of petroleum products.

HELD: NO. Section 133 of the LGC prescribes the limitations on the capacity of

local government units to exercise their taxing powers otherwise granted to them under the LGC.

Apparently, paragraph (h) of the Section mentions two kinds of taxes which cannot be imposed by local government units, namely: "excise taxes on articles enumerated under the NIRC, as amended;" and "taxes, fees or charges on petroleum products."

Definition of Excise Tax

Admittedly, the proffered definition of an excise tax as "a tax upon the performance, carrying on, or exercise of some right, privilege, activity, calling or occupation" derives from the compendium American Jurisprudence.

However, beginning with the NIRC of 1986, as amended, the term "excise taxes" was used and defined as applicable "to goods manufactured or produced in the Philippines… and to things imported." 

This definition was carried over into the present NIRC of 1997.  Further, these two latest codes categorize two different kinds of

excise taxes: "specific tax" which is imposed and based on weight or volume capacity or any other physical unit of measurement; and "ad valorem tax" which is imposed and based on the selling price or other specified value of the goods.

In other words, the meaning of "excise tax" has undergone a transformation, morphing from the Am Jur definition to its current signification which is a tax on certain specified goods or articles.1. Excise taxes, as used in the Tax Code (1997), refers to taxes applicable to certain specified goods or articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported into the Philippines. They are either specific or ad valorem.2. Nature of excise taxes. – They are imposed directly on certain specified goods. They are, therefore, taxes on property. A tax is not excise where it does not subject directly the produce or goods to tax but indirectly as an incident to, or in connection with, the business to be taxed.

It is evident that Am Jur aside, the current definition of an excise tax is that of a tax levied on a specific article, rather than one "upon the performance, carrying on, or the exercise of an activity."

We thus can assert with clear comfort that excise taxes, as imposed under the NIRC, do not pertain to "the performance, carrying on, or exercise of an activity," at least not to the extent of equating excise with business taxes.

Business taxes cannot be imposed on the sale of petroleum products by virtue of Section 133(h) of LGC.

Section 133(h) states that local government units "shall not extend to the levy of xxx taxes, fees or charges on petroleum products."

Respondents assert that the phrase "taxes, fees or charges on petroleum products" pertains to the imposition of direct or excise taxes on petroleum products, and not business taxes.

If the phrase actually pertains to excise taxes, then it would be an exercise in utter redundancy, since the preceding phrase already prohibits the imposition of excise taxes on articles already subject to such taxes under the NIRC, such as petroleum products.

There would be no sense on the part of the legislature to twice emphasize in the same sentence that excise taxes on petroleum products are beyond the pale of local government taxation.

We can concede that a tax on a business is distinct from a tax on the article itself, or for that matter, that a business tax is distinct from an excise tax.

However, such distinction is immaterial insofar as the latter part of Section 133(h) is concerned, for the phrase "taxes, fees or charges on petroleum products" does not qualify the kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the provision.

The absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum products, including business taxes, are prohibited by Section 133(h).

Where the law does not distinguish, we should not distinguish. The language of Section 133(h) makes plain that the prohibition with

respect to petroleum products extends not only to excise taxes thereon, but all "taxes, fees and charges."

While local government units are authorized to burden all such other class of goods with "taxes, fees and charges," excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products.

While Section 133(h) does not generally bar the imposition of business taxes on articles burdened by excise taxes under the NIRC, it specifically prohibits local government units from extending the levy of any kind of "taxes, fees or charges on petroleum products."

Accordingly, the subject tax assessment is ultra vires and void.

FIRST PHILIPPINE INDUSTRIAL CORPORATION, PETITIONER, VS. COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY AND ADORACION C. ARELLANO, IN HER OFFICIAL CAPACITY AS CITY TREASURER OF BATANGAS, RESPONDENTS. [Angelo]G.R. No. 125948 December 29, 1998

FACTS:Petitioner is a grantee of a pipeline concession under Republic Act No. 387. Sometime in January 1995, petitioner applied for mayor’s permit in Batangas. However, the Treasurer required petitioner to pay a local tax based on gross receipts amounting to P956,076.04. In order not to hamper its operations, petitioner paid the taxes for the first quarter of 1993 amounting to P239,019.01 under protest. On January 20, 1994, petitioner filed a letter-protest to the City Treasurer, claiming that it is exempt from local tax since it is engaged in transportation business. The respondent City Treasurer denied the protest, thus, petitioner filed a complaint before the Regional Trial Court of Batangas for tax refund. Respondents assert that pipelines are not included in the term “common carrier” which refers solely to ordinary carriers or motor vehicles. The trial court dismissed the complaint, and such was affirmed by the Court of Appeals.

ISSUE:Whether a pipeline business is included in the term “common carrier” so as to entitle the petitioner to the exemption

HELD:Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:

(1) He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation;

(2) He must undertake to carry goods of the kind to which his business is confined;

(3) He must undertake to carry by the method by which his business is conducted and over his established roads; and

(4) The transportation must be for hire.

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier.

NATIONAL POWER CORPORATION, PETITIONER, VS. CITY OF CABANATUAN, RESPONDENT. (G.R. No. 149110, April 9, 2003.) [Myta]

FACTS:•Petitioner is a government-owned and controlled corporation tasked to

undertake the "development of hydroelectric generations of power and the production of electricity from nuclear, geothermal and other sources, as well as, the transmission of electric power on a nationwide basis." Concomitant to its mandated duty, petitioner has, among others, the power to construct, operate and maintain power plants, auxiliary plants, power stations and substations for the purpose of developing hydraulic power and supplying such power to the inhabitants.

•For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross income of P107,814,187.96 in 1992. Pursuant to section 37 of Ordinance No. 165-92,8 the respondent assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the latter's gross receipts for the preceding year.

•Petitioner, whose capital stock was subscribed and paid wholly by the Philippine Government, refused to pay the tax assessment. It argued that the respondent has no authority to impose tax on government entities. Petitioner also contended that as a non-profit organization, it is exempted from the payment of all forms of taxes, charges, duties or fees in accordance with sec. 13 of Rep. Act No. 6395.

•The respondent filed a collection suit in the Regional Trial Court of Cabanatuan City, demanding that petitioner pay the assessed tax due, plus a surcharge equivalent to 25% of the amount of tax, and 2% monthly interest. Respondent alleged that petitioner's exemption from local taxes has been repealed by section 193 of Rep. Act No. 7160.

•The trial court issued an Order dismissing the case. It ruled that the tax exemption privileges granted to petitioner subsist despite the passage of Rep. Act No. 7160.

•On appeal, the Court of Appeals reversed the trial court's Order on the ground that section 193, in relation to sections 137 and 151 of the LGC, expressly withdrew the exemptions granted to the petitioner.

ISSUE: Whether or not NPC is liable to pay an annual franchise tax to the respondent city government.

HELD: YES. NPC is liable to pay an annual franchise tax to the respondent city government. 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.

One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and agencies of the national government from the coverage of local taxation. Although as a general rule, LGUs cannot impose taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, this rule now admits an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities. Section 151 in relation to section 137 of the LGC clearly authorizes the respondent city government to impose on the petitioner the franchise tax in question.

As a rule, tax exemptions are construed strongly against the claimant. Exemptions must be shown to exist clearly and categorically, and supported by clear legal provisions. Here, the petitioner's sole refuge is section 13 of Rep. Act No. 6395. However, section 193 of the LGC withdrew, subject to limited exceptions, the sweeping tax privileges previously enjoyed by private and public corporations. Contrary to the contention of petitioner, section 193 of the LGC is an express, albeit general, repeal of all statutes granting tax exemptions from local taxes.

MANILA INTERNATIONAL AIRPORT AUTHORITY, PETITIONER, VS. COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, SANGGUNIANG PANGLUNGSOD NG PARAÑAQUE, CITY ASSESSOR OF PARAÑAQUE, AND CITY TREASURER OF PARAÑAQUE, RESPONDENTS. [Cary]

FACTS:Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Parañaque City under Executive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport Authority ("MIAA Charter"). Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA Charter.

As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,3 including the runways and buildings ("Airport Lands and Buildings") then under the Bureau of Air Transportation.4 The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines.

On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Parañaque to pay the real estate tax imposed by the City. MIAA then paid some of the real estate tax already due.

On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to 2001.

On 17 July 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.

On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that Section 206 of the Local Government Code requires persons exempt from real estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax.

MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA. However, MIAA points out that it cannot claim ownership over these properties since the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are devoted to public use and public service, the ownership of these properties remains with the State. The Airport Lands and Buildings are thus inalienable and are not subject to real estate tax by local governments.

MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of the Local Government Code because the Airport Lands and Buildings are owned by the Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax itself. MIAA points out that the reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor.

Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges of "government-owned and-controlled corporations" upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.

Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where we held that the Local Government Code has withdrawn the exemption from real estate tax granted to international airports. Respondents further argue that since MIAA has already paid some of the real estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are exempt from real estate tax.

ISSUE:Whether the Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws.

HELD:We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local governments.

First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local

taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax.

There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows:

Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.

Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government?

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers.

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."

Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. The MIAA Charter expressly states that transforming MIAA into a "separate and autonomous body" will make its operation more "financially viable."

Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a government-owned or controlled corporation. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government corporate entities. However, they are not government-owned or controlled corporations in the strict sense as understood under the Administrative Code, which is the governing law defining the legal relationship and status of government entities.

Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power "subject to such guidelines and limitations as the Congress may provide."

When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities.

CITY OF PASIG V. REPUBLIC [Tats]

III. Taxing and Revenue Raising Powers of LGUsCAGAYAN ELECTRIC POWER AND LIGHT VS. CITY OF CAGAYAN DE ORO. GR NO. 191761, NOV. 14, 2012 [Alfie]

FACTS:1. On January 10, 2005, the Sangguniang Panlungsod of Cagayan de Oro

(City Council) passed Ordinance No. 9503-2005 imposing a tax on the lease or rental of electric and/or telecommunication posts, poles or towers by pole owners to other pole users at ten percent (10%) of the annual rental income derived from such lease or rental;

2. The City Council, in a letter dated 15 March 2005, informed appellant Cagayan Electric Power and Light Company, Inc. (CEPALCO), through its President and Chief Operation Manager, Ms. Consuelo G. Tion, of the passage of the subject ordinance.

3. On September 30, 2005, appellant CEPALCO, purportedly on pure question of law, filed a petition for declaratory relief assailing the validity of Ordinance No. 9503-2005 before the Regional Trial Court of Cagayan de Oro City, Branch 18, on the ground that the tax imposed by the disputed ordinance is in reality a tax on income which appellee City of Cagayan de Oro may not impose, the same being expressly prohibited by Section 133(a) of Republic Act No. 7160 (R.A. 7160) otherwise known as the Local Government Code (LGC) of 1991.

4. On 8 January 2007, the trial court rendered its Decision7 in favor of the City of Cagayan de Oro. The trial court identified three issues for its resolution: (1) whether Ordinance No. 9503-2005 is valid; (2) whether CEPALCO should be exempted from tax; and (3) whether CEPALCO’s action is barred for non-exhaustion of administrative remedies and for prescription.

5. In ruling for the validity of Ordinance No. 9503-2005, the trial court rejected CEPALCO’s claim that the ordinance is an imposition of income tax prohibited by Section 133(a) of the Local Government Code.8 The trial court reasoned that since CEPALCO’s business of leasing its posts to pole users is what is directly taxed, the tax is not upon the income but upon the privilege to engage in business.

6. On 28 May 2009, the appellate court rendered its Decision14 and affirmed the trial court’s decision.

7. The appellate court stated that CEPALCO failed to file a timely appeal to the Secretary of Justice, and did not exhaust its administrative remedies. The appellate court agreed with the trial court’s ruling that the assailed ordinance is valid and declared that the subject tax is a license tax for the regulation of business in which CEPALCO is

engaged. Finally, the appellate court found that CEPALCO’s claim of tax exemption rests on a strained interpretation of R.A. No. 9284.

ISSUE: Whether the Ordinance was passed in excess of the City’s delegated power to tax.

RULING: Petition GRANTED.

Section 5, Article X of the 1987 Constitution provides that "each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local government." The Local Government Code supplements the Constitution with Sections 151 and 186:

SEC. 151. Scope of Taxing Powers. ‒ Except as otherwise provided in this Code, the city may levy the taxes, fees and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes.

SEC. 186. Power to Levy Other Taxes, Fees or Charges. ‒ Local government units may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy: Provided, further, That the ordinance levying such taxes, fees, or charges shall not be enacted without any prior public hearing conducted for the purpose.

Although CEPALCO does not question the authority of the Sangguniang Panlungsod of Cagayan de Oro to impose a tax or to enact a revenue measure, CEPALCO insists that Ordinance No. 9503-2005 is an imposition of an income tax which is prohibited by Section 133(a) of the Local Government Code. Unfortunately for CEPALCO, we agree with the ruling of the trial and appellate courts that Ordinance No. 9503-2005 is a tax on business. CEPALCO’s act of leasing for a consideration the use of its posts, poles or towers to other pole users falls under the Local Government Code’s definition of business. Business is defined by Section 131(d) of the

Local Government Code as "trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit." In relation to Section 131(d), Section 143(h) of the Local Government Code provides that the city may impose taxes, fees, and charges on any business which is not specified in Section 143(a) to (g) and which the sanggunian concerned may deem proper to tax.

We disagree with the City of Cagayan de Oro’s submission that Ordinance No. 9503-2005 is not subject to the limits imposed by Sections 143 and 151 of the Local Government Code. On the contrary, Ordinance No. 9503-2005 is subject to the limitation set by Section 143(h). Section 143 recognizes separate lines of business and imposes different tax rates for different lines of business. Let us suppose that one is a brewer of liquor and, at the same time, a distributor of articles of commerce. The brewery business is subject to the rates established in Section 143(a) while the distribution business is subject to the rates established in Section 143(b). The City of Cagayan de Oro’s imposition of a tax on the lease of poles falls under Section 143(h), as the lease of poles is CEPALCO’s separate line of business which is not covered by paragraphs (a) to (g) of Section 143. The treatment of the lease of poles as a separate line of business is evident in Section 4(a) of Ordinance No. 9503-2005. The City of Cagayan de Oro required CEPALCO to apply for a separate business permit.

More importantly, because "any person, who in the course of trade or business x x x leases goods or properties x x x shall be subject to the value-added tax,"32 the imposable tax rate should not exceed two percent of gross receipts of the lease of poles of the preceding calendar year. Section 143(h) states that "on any business subject to x x x value-added x x x tax under the National Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year" from the lease of goods or properties. Hence, the 10% tax rate imposed by Ordinance No. 9503-2005 clearly violates Section 143(h) of the Local Government Code.Finally, in view of the lack of a separability clause, we declare void the entirety of Ordinance No. 9503-2005. Any payment made by reason of the tax imposed by Ordinance No. 9503-2005 should, therefore, be refunded to CEPALCO. Our ruling, however, is made without prejudice to the enactment by the City of Cagayan de Oro of a tax ordinance that complies with the limits set by the Local Government Code.

PLDT V. CITY OF DAVAO (INCL. PUNO DISSENT) [Jaycee]

NAPOCOR V. PROV. OF ISABELA [Sarah]

ERICSSON TELECOMS V. CITY OF PASIG [Enzo]

FACTS:In an Assessment Notice, petitioner was assessed a business tax deficiency for the years 1998 and 1999 amounting to P9,466,885.00 and P4,993,682.00, respectively, based on its gross revenues as reported in its audited financial statements for the years1997 and 1998. Petitioner filed a Protest claiming that the computation of the local business tax should be based on gross receipts and not on gross revenue. The City of Pasig (respondent) issued another Notice of Assessment to petitioner on November 19, 2001, this time based on business tax deficiencies for the years 2000 and2001, amounting to P4,665,775.51 and P4,710,242.93, respectively, based on its gross revenues for the years 1999 and 2000. Again, petitioner filed a Protest on January 21,2002, reiterating its position that the local business tax should be based on gross receipts and not gross revenue. Respondent denied the protest. The RTC, however, canceled and set aside the assessments made by respondent and its City Treasurer. The CA reversed and set aside the complaint for lack of authority to sign the CNFS.

ISSUE 1: WON the case should be dismissed based on procedural grounds

HELD: NO. First, the complaint filed by petitioner with the RTC was erroneously dismissed by the CA for failure of petitioner to show that its Manager for Tax and Legal Affairs, Atty. Ramos, was authorized by the Board of Directors to sign the Verification and Certification of Non-Forum Shopping in behalf of the petitioner corporation. Time and again, the Court, under special circumstances and for compelling reasons, sanctioned substantial compliance with the rule on the submission of verification and certification against non-forum shopping. In the present case, petitioner submitted a Secretary’s Certificate signed on May 6,2002, whereby Atty. Ramos was authorized to file a protest at the local government level and to “sign, execute and deliver any and all papers, documents and pleadings relative to the said protest and to do and perform all such acts and things as may be necessary to effect the foregoing.” Applying the foregoing jurisprudence, the subsequent submission of the Secretary’s Certificate and the substantial merits of the petition, which will be shown forthwith, justify a relaxation of the rule. 

ISSUE 2: WON the CA has jurisdiction over the case

HELD: NO. The CA should have dismissed the appeal of respondent as it has no jurisdiction over the case since the appeal involves a pure question of law. The CA seriously erred in ruling that the appeal involves a mixed question of law and fact necessitating an examination and evaluation of the audited financial statements and other documents in order to determine

petitioner’s tax base. There is a question of law when the doubt or difference is on what the law is on a certain state of facts. On the other hand, there is a question of fact when the doubt ordifference is on the truth or falsity of the facts alleged. For a question to be one of law, the same must not involve an examination of the probative value of the evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites are view of the evidence presented, the question posed is one of fact. Thus, the test of  whether a question is one of law or of fact is not the appellation given to such question by the party raising the same; rather, it is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise it is a question of fact. There is no dispute as to the veracity of the facts involved in the present case. While there is an issue as to the correct amount of local business tax to be paid by petitioner, its determination will not involve a look into petitioner’s audited financial statements or documents, as these are not disputed; rather, petitioner’s correct tax liability will be ascertained through an interpretation of the pertinent tax laws, i.e., whether the local business tax, as imposed by the Pasig City Revenue Code (Ordinance No. 25-92) and the Local Government Code of 1991, should be based on gross receipts ,and not on gross revenue which respondent relied on in computing petitioner’s local business tax deficiency. This, clearly, is a question of law, and beyond the jurisdiction of the CA.

ISSUE 3: WON the local business tax on contractors should be based on gross receipts orgross revenue.

HELD: Insofar as petitioner is concerned, the applicable provision is subsection (e),Section 143 of the same Code covering contractors and other independent contractors. The provision specifically refers to gross receipts which is defined under Section 131 of theLocal Government Code, as follows:(n) “Gross Sales or Receipts” include the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged or materials supplied with the services and the deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding discounts if determinable at the time of sales, sales return, excise tax, and value-added tax (VAT); The law is clear. Gross receipts include money or its equivalent actually or constructively received in consideration of services rendered or articles sold, exchanged or leased, whether actual or constructive.In Commissioner of Internal Revenue v. Bank of Commerce, the Court interpretedgross receipts as including those which were actually or constructively received, viz.:

Actual receipt of interest income is not limited to physical receipt. Actual receipt may either be physical receipt or constructive receipt. When the depository bank withholds the final tax to pay the tax liability of the lending bank, there is prior to the withholding a constructive receipt by the lending bank of the amount withheld. From the amount constructively received by the lending bank, the depository bank deducts the final withholding tax and remits it to the government for the account of the lending bank. Thus, the interest income actually received by the lending bank, both physically and constructively, is the net interest plus the amount withheld as final tax. There is constructive receipt, when the consideration for the articles sold, exchanged or leased, or the services rendered has already been placed under the control of the person who sold the goods or rendered the services without any restriction by the payor.In contrast, gross revenue covers money or its equivalent actually or constructively received, including the value of services rendered or articles sold, exchanged or leased, the payment of which is yet to be received. This is in consonance with the International Financial Reporting Standards, which defines revenue as the gross inflow of economic benefits (cash, receivables, and other assets) arising from the ordinary operating activities of an enterprise (such as sales of goods, sales of services, interest, royalties, and dividends),which is measured at the fair value of the consideration received or receivable. The imposition of local business tax based on petitioner’s 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 petitioner’s 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.Thus, respondent committed a palpable error when it assessed petitioner’s local business tax based on its gross revenue as reported in its audited financial statements, as Section 143 of the Local Government Code and Section 22(e) of the Pasig Revenue Code clearly provide that the tax should be computed based on gross receipts.

MOBIL PHILIPPINES VS. CITY TREASURE OF MAKATI [Jongko]GR No. 154092 July 14, 2005

FACTS:Petitioner’s office was located in Makati City when it filed an application with the City Treasurer for retirement of business within Makati as it moved its business to Pasig City, on September 1998. After evaluation, petitioner was assessed business tax in the amount of P1,898,106.96. Petitioner paid the tax under protest and in 1999, claimed a refund therefrom. RTC denied the petition for refund ratiocinating that… the payments made by mobil in 1998 are payments for business tax for 1997 which occurred in January of 1998.

ISSUE: Whether or not the business taxes paid in 1998, are business taxes for 1997 or 1998?

RULING:Business taxes imposed in the exercise of police power for regulatory purposes are paid for the privilege of carrying on a business in the year the tax was paid. It is paid at the beginning of the year as a fee to allow the business to operate for the rest of the year. Income tax, on the other hand, is a tax on all yearly profits arising from property, professions, trades or offices, or as a tax on a person’s income, emoluments, profits and the like.  It is tax on income, whether net or gross realized in one taxable year. It is due on or before the 15th day of the 4th

month following the close of the taxpayer’s taxable year and is generally regarded as an excise tax, levied upon the right of a person or entity to receive income or profits.The business taxes paid in the year 1998 is for the privilege of engaging in business for the same year. Thus we find that the respondent erroneously treated the assessment and collection of business tax as if it were income tax, by rendering an additional assessment of P1,331,638.84 for the revenue generated for the year 1998.

ANGELES UNIVERSITY vs. CITY OF ANGELES [Leandro]

FACTS:Angeles University was converted into a non-stock, non-profit education foundation under the provisions of Republic Act (R.A.) No. 6055. Petitioner filed with the Office of the City Building Official an application for a building permit for the construction of an 11-storey building of the Angeles University Foundation Medical Center in its main campus the said office issue a Building permit fee and Locational Clearance Fee. Petitioner make a letter to respondent City Tresurer Juliet G. Quinssat and City Building Official Donato Z. Dizon alleging that it is exempt from payment of the building permit and locational clearance fee. Petitioner also reminded the respondent that they have previously issued building permit acknowledging such exemption from payment of building permit fees. The DOJ and trial court render decision in favor to petitioner for exempting in payment. But the CA reversed the decision of court in favor to respondent. Petitioner filed a MR but it was denied by CA.

ISSUE: WON the Angeles University is exempted in Building permit fee and Locational Clearance Fee?. RULING: NO.Under R.A. No. 6055, petitioner was granted exemption only from income tax derived from its educational activities and real property used exclusively for educational purposes. Regardless of the repealing clause in the National Building Code, the CA held that petitioner is still not exempt because a building permit cannot be considered as the other “charges” mentioned in Sec. 8 of R.A. No. 6055 which refers to impositions in the nature of tax, import duties, assessments and other collections for revenue purposes, following the ejusdem generis rule. The CA further stated that petitioner has not manifested that the fees collected were excessive and more than the cost of surveillance, inspection and regulation. And while petitioner may be exempt from the payment of real property tax, petitioner in this case merely alleged that “the subject property is to be used actually, directly and exclusively for educational purposes,” declaring merely that such premises is intended to house the sports and other facilities of the university but by reason of the occupancy of informal settlers on the area, it cannot yet utilize the same for its intended use. Thus, the CA concluded that petitioner is not entitled to the refund of building permit and related fees, as well as real property tax it paid under protest. R.A. No. 6055 granted tax exemptions to educational institutions like petitioner which converted to non-stock, non-profit educational foundations. Section 8 of said law states: SECTION 8. The Foundation shall be exempt from the payment of all taxes, import duties, assessments, and other charges imposed by the Government on all income derived from or property, real or personal, used exclusively for the educational activities of the Foundation.

A “charge” is broadly defined as the “price of, or rate for, something,” while the word “fee” pertains to a “charge fixed by law for services of public officers or for use of a privilege under control of government.”As used in the Local Government Code of 1991 (R.A. No. 7160), charges refers to pecuniary liability, as rents or fees against persons or property, while fee means a charge fixed by law or ordinance for the regulation or inspection of a business or activity.

PELIZLOY REALTY CORPORATION, represented herein by its President, GREGORY K. LOY V. THE PROVINCE OF BENGUET [nOch](G.R. No. 183137, 10 April 2013. Ponente: LEONEN)

FACTS:

Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that the December 10, 2007 decision of the RTC in La Trinidad, Benguet in Civil Case No. 06-CV-2232 be reversed and set aside and a new one issued in which: ( 1) respondent Province of Benguet is declared as having no authority to levy amusement taxes on admission fees for resorts, swimming pools, bath houses, hot springs, tourist spots, and other places for recreation; (2) Section 59, Article X of the Benguet Provincial Revenue Code of 2005 is declared null and void; and (3) the respondent Province of Benguet is permanently enjoined from enforcing Section 59, Article X of the Benguet Provincial Revenue Code of 2005.

Petitioner Pelizloy owns Palm Grove Resort, which is designed for recreation and which has facilities like swimming pools, a spa and function halls. It is located at Asin, Angalisan, Municipality of Tuba, Province of Benguet.

On December 8, 2005, the Provincial Board of the Province of Benguet approved Provincial Tax Ordinance No. 05-107, otherwise known as the Benguet Revenue Code of 2005 ("Tax Ordinance"). Section 59, Article X of the Tax Ordinance levied a ten percent (10%) amusement tax on gross receipts from admissions to "resorts, swimming pools, bath houses, hot springs and tourist spots."

It was Pelizloy's position that the Tax Ordinance's imposition of a 10% amusement tax on gross receipts from admission fees for resorts, swimming pools, bath houses, hot springs, and tourist spots is an ultra vires act on the part of the Province of Benguet. Thus, it filed an appeal/petition before the Secretary of Justice on January 27, 2006.

The appeal/petition was filed within the thirty (30)-day period from the effectivity of a tax ordinance allowed by Section 187 of Republic Act No. 7160, otherwise known as the Local Government Code (LGC). Under Section 187 of the LGC, the Secretary of Justice has sixty (60) days from receipt of the appeal to render a decision. After the lapse of which, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction.

Treating the Secretary of Justice's failure to decide on its appeal/petition within the sixty (60) days provided by Section 187 of the LGC as an implied

denial of such appeal/petition, Pelizloy filed a Petition for Declaratory Relief and Injunction before the Regional Trial Court, Branch 62, La Trinidad, Benguet. The petition was docketed as Civil Case No. 06-CV-2232.

Pelizloy argued that Section 59, Article X of the Tax Ordinance imposed a percentage tax in violation of the limitation on the taxing powers of local government units (LGUs) under Section 133 (i) of the LGC. Thus, it was null and void ab initio. Section 133 (i) of the LGC provides:Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:x x x(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided herein.

The Province of Benguet assailed the Petition for Declaratory Relief and Injunction as an improper remedy. It alleged that once a tax liability has attached, the only remedy of a taxpayer is to pay the tax and to sue for recovery after exhausting administrative remedies. On substantive grounds, the Province of Benguet argued that the phrase ‘other places of amusement’ in Section 140 (a) of the LGC encompasses resorts, swimming pools, bath houses, hot springs, and tourist spots since "Article 220 (b) (sic)" of the LGC defines "amusement" as "pleasurable diversion and entertainment x x x synonymous to relaxation, avocation, pastime, or fun." However, the Province of Benguet erroneously cited Section 220 (b) of the LGC. Section 220 of the LGC refers to valuation of real property for real estate tax purposes. Section 131 (b) of the LGC, the provision which actually defines "amusement", states:Section 131. Definition of Terms. - When used in this Title, the term:x x x(b) "Amusement" is a pleasurable diversion and entertainment. It is synonymous to relaxation, avocation, pastime, or fun On December 10, 2007, the RTC rendered the assailed Decision dismissing the Petition for Declaratory Relief and Injunction for lack of merit.

The RTC ruled that Declaratory Relief was a proper remedy. On the validity of Section 59, Article X of the Tax Ordinance, the RTC noted that, while Section 59, Article X imposes a percentage tax, Section 133 (i) of the LGC itself allowed for exceptions. It noted that what the LGC prohibits is not the imposition by LGUs of percentage taxes in general but the "imposition and levy of percentage tax on sales, barters, etc., on goods and services only." It further gave credence to the Province of Benguet's assertion that resorts, swimming pools, bath houses, hot springs, and tourist spots are

encompassed by the phrase ‘other places of amusement’ in Section 140 of the LGC.

On May 21, 2008, the RTC denied Pelizloy’s Motion for Reconsideration.

ISSUE: The principal issue in this case is the scope of authority of a province to impose an amusement tax.

HELD: It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of taxation. The charter or statute must plainly show an intent to confer that power or the municipality, cannot assume it. And the power when granted is to be construed in strictissimi juris. Any doubt or ambiguity arising out of the term used in granting that power must be resolved against the municipality. Inferences, implications, deductions – all these – have no place in the interpretation of the taxing power of a municipal corporation. Therefore, the power of a province to tax is limited to the extent that such power is delegated to it either by the Constitution or by statute.

Per Section 5, Article X of the 1987 Constitution, "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." Nevertheless, such authority is "subject to such guidelines and limitations as the Congress may provide".

In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic Act No. 7160, otherwise known as the Local Government Code of 1991. Section 130 provides for the following fundamental principles governing the taxing powers of LGUs:1. Taxation shall be uniform in each LGU.2. Taxes, fees, charges and other impositions shall:a. be equitable and based as far as practicable on the taxpayer's ability to pay;b. be levied and collected only for public purposes;c. not be unjust, excessive, oppressive, or confiscatory;d. not be contrary to law, public policy, national economic policy, or in the restraint of trade.3. The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person.4. The revenue collected pursuant to the provisions of the LGC shall inure solely to the benefit of, and be subject to the disposition by, the LGU levying the tax, fee, charge or other imposition unless otherwise specifically provided by the LGC.5. Each LGU shall, as far as practicable, evolve a progressive system of taxation.

Second, Section 133 provides for the common limitations on the taxing powers of LGUs. Specifically, Section 133 (i) prohibits the levy by LGUs of percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided by the LGC.

As it is Pelizloy’s contention that Section 59, Article X of the Tax Ordinance levies a prohibited percentage tax, it is crucial to understand first the concept of a percentage tax.

In Commissioner of Internal Revenue v. Citytrust Investment Phils. Inc., the Supreme Court defined percentage tax as a "tax measured by a certain percentage of the gross selling price or gross value in money of goods sold, bartered or imported; or of the gross receipts or earnings derived by any person engaged in the sale of services." Also, Republic Act No. 8424, otherwise known as the National Internal Revenue Code (NIRC), in Section 125, Title V, lists amusement taxes as among the (other) percentage taxes which are levied regardless of whether or not a taxpayer is already liable to pay value-added tax (VAT).Amusement taxes are fixed at a certain percentage of the gross receipts incurred by certain specified establishments.Thus, applying the definition in CIR v. Citytrust and drawing from the treatment of amusement taxes by the NIRC, amusement taxes are percentage taxes as correctly argued by Pelizloy.

However, provinces are not barred from levying amusement taxes even if amusement taxes are a form of percentage taxes. Section 133 (i) of the LGC prohibits the levy of percentage taxes "except as otherwise provided" by the LGC.

Section 140 of the LGC provides:SECTION 140. Amusement Tax - (a) The province may levy an amusement tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than thirty percent (30%) of the gross receipts from admission fees.(b) In the case of theaters of cinemas, the tax shall first be deducted and withheld by their proprietors, lessees, or operators and paid to the provincial treasurer before the gross receipts are divided between said proprietors, lessees, or operators and the distributors of the cinematographic films.(c) The holding of operas, concerts, dramas, recitals, painting and art exhibitions, flower shows, musical programs, literary and oratorical presentations, except pop, rock, or similar concerts shall be exempt from the payment of the tax herein imposed.

(d) The Sangguniang Panlalawigan may prescribe the time, manner, terms and conditions for the payment of tax. In case of fraud or failure to pay the tax, the Sangguniang Panlalawigan may impose such surcharges, interests and penalties.(e) The proceeds from the amusement tax shall be shared equally by the province and the municipality where such amusement places are located. [Underscoring supplied]

Evidently, Section 140 of the LGC carves a clear exception to the general rule in Section 133 (i). Section 140 expressly allows for the imposition by provinces of amusement taxes on "the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement."

However, resorts, swimming pools, bath houses, hot springs, and tourist spots are not among those places expressly mentioned by Section 140 of the LGC as being subject to amusement taxes. Thus, the determination of whether amusement taxes may be levied on admissions to resorts, swimming pools, bath houses, hot springs, and tourist spots hinges on whether the phrase ‘other places of amusement’ encompasses resorts, swimming pools, bath houses, hot springs, and tourist spots.

In the present case, the Court need not embark on a laborious effort at statutory construction. Section 131 (c) of the LGC already provides a clear definition of ‘amusement places’:Section 131. Definition of Terms. - When used in this Title, the term:x x x(c) "Amusement Places" include theaters, cinemas, concert halls, circuses and other places of amusement where one seeks admission to entertain oneself by seeing or viewing the show or performances [Underscoring supplied]Indeed, theaters, 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.Considering these, it is clear that resorts, swimming pools, bath houses, hot springs and tourist spots cannot be considered venues primarily "where one seeks admission to entertain oneself by seeing or viewing the show or performances". While it is true that they may be venues where people are

visually engaged, they are not primarily venues for their proprietors or operators to actively display, stage or present shows and/or performances.Thus, resorts, swimming pools, bath houses, hot springs and tourist spots do not belong to the same category or class as theaters, cinemas, concert halls, circuses, and boxing stadia. It follows that they cannot be considered as among the ‘other places of amusement’ contemplated by Section 140 of the LGC and which may properly be subject to amusement taxes.WHEREFORE, the petition for review on certiorari is GRANTED. The second paragraph of Section 59, Article X of the Benguet Provincial Revenue Code of 2005, in so far as it imposes amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs and tourist spots, is declared null and void. Respondent Province of Benguet is permanently enjoined from enforcing the second paragraph of Section 59, Article X of the Benguet Provincial Revenue Code of 2005 with respect to resorts, swimming pools, bath houses, hot springs and tourist spots.SO ORDERED.

LINBERG PHILS. V. CITY OF MAKATI [Jaline]CTA E.B. No. 349 (CTA AC No. 19) FACTS:Petitioner is a duly organized corporation engaged in the business of financing the construction and operation of power plants primarily through “Build-Operate-Transfer” (BOT) agreements with its customers. Respondent City of Makati is a public corporation created and existing pursuant to law.Petitioner received the questioned Notice of Assessment for deficiency business taxes plus surcharges and interests covering the taxable years 2000, 2001 and 2002 in the aggregate amount of P8,714,744.53. The alleged deficiency business taxes arose from respondent’s reclassification of petitioner’s business from a holding or investment” company to a “contractor”. Not in agreement with the questioned assessment, petitioner filed a Letter Protest but it was denied by respondent City Treasurer in a letter. Petitioner assailed the denial of the protest before the RTC of Makati by way of Appeal with prayer for Prohibition and Preliminary Injunction pursuant to Sec. 195 of the Local Government Code. In a decision, said case was dismissed for lack of merit. The MR was likewise denied. Dissatisfied, petitioner appealed the denial to the CTA. The CTA Division partially granted the petition and reduced the deficiency taxes of petitioner. MR was filed by the petitioner but the same was also denied. Hence, this recourse before the En Banc.Petitioner submits that upholding the taxing jurisdiction of respondent Makati City on 30% of sales made in the locality where petitioner has a branch office is contrary to the situs rules under Sec. 150 of the Local Government Code and Art. 243 of its IRR. It further alleged that Sec. 150 and Art. 243 clearly provide that if a sale made in locality where the taxpayer maintains a branch or sales office, the tax thereon shall accrue and be paid to the city or municipality where such branch or sales office is located. Petitioner stresses that it is not a contractor because it does not perform services to its customers for a fee, as it merely finances the construction of the power plants for its customers through BOT arrangements.Respondent, on the other hand, argue that the existence of petitioner’s principal office in Makati City, and the admission thereof, constitutes prima facie evidence that it is conducting business in said territorial jurisdiction and therefore, respondent Makati City has jurisdiction to tax petitioner. Petitioner’s nature of business allegedly falls squarely under the definition of a “contractor” 3A.01(q) and 3A.02(f) of the Makati Revenue Code, as well as, under Sec. 131 of the Local Government Code. ISSUE: WON City of Makati has jurisdiction to tax petitioner. - YES           WON petitioner is a contractor. - YES 

RULING: At the outset, petitioner questions the jurisdiction of respondent City of Makati to tax its business. The Court in Division settled this issue by pronouncing that the City of Makati, where petitioner’s principal office is found, has the power to tax its business, but as much as only 30% of petitioner’s gross sales/receipts. We note that aside from petitioner’s admission that its principal office is in Makati City, the Court in Division found that its principal office is in charge of reviewing and approving the correctness of the invoices issued by the branch office. Such activities done in the principal office is evident of business transactions which should necessarily be recorded. It bears emphasizing that petitioner cannot merely deny the fact that it is covered by the taxing jurisdiction of Makati City without adducing evidence to prove otherwise.The transactions, under the BOT arrangement, prior to the completion of the power plants and branch offices of petitioner, are considered as activities of doing business, which are necessarily taxable in its principal office, considering that all the documents and deals were arranged in its principal office in Makati City.In this regard, petitioner is correct I invoking the applicability of Sec. 150 of the Local Government Code for purposed of determining the situs of tax in the instant case. However, We would like to stress the importance of the relevant portions of said provision, to wit:“Sec. 150. Situs of the Tax – (a)xxx. In cases where there is no such branch or sales outlet in the city or municipality where the sale or transaction is made, the sale shall be duly recorded  in the principal office and the taxes due shall accrue and shall be paid to such city or municipality.”We reiterate that in the ordinary course of business, particularly in the nature of BOT business, prior to the building and construction of any power plant at any locality, the usual negotiations thereon, until the full completion of the contract of BOT, is usually done in the principal office. Naturally, this transaction is taxable as it is an exercise of a business. Although the power plants, which are subject of petitioner’s contract of BOT are situated at different localities, still the act of financing the construction and operation thereof are considered as “doing business” which appears to have been performed at petitioner’s principal office in Makati City. It is therefore clear that respondent City of Makati has jurisdiction to tax petitioner.Anent the nature of petitioner’s business, We maintain that petitioner is a contractor and not a financing or holding company. Contractor is referred to in the Local Government Code of 1991 as to include persons, natural or juridical, not subject to professional tax under Sec. 139 of this Code, whose activity consists essentially of the sale of all kinds of services for a fee regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractor or his employees. The same definition is likewise provided now under Sec. 3A.01(t) of the Revised Makati Revenue Code.

In other words, the term “contractor” includes any person whether natural or juridical as long as the activity of such person consists essentially of the sale of services for a fee. In the case at bench, petitioner is definitely engaged in such sale of service.

CITY OF IRIGA V. CAMARINES SUR III ELECTRIC COOP. [Nico]G.R. No. 192945               September 5, 2012

FACTS: CASURECO III is engaged in the business of electric power

distribution to various end-users and consumers within the City of Iriga and in the Rinconada area (outside Iriga City).

Sometime in 2003, petitioner City of Iriga required CASURECO III to submit a report of its gross receipts for the period 1997-2002 to serve as the basis for the computation of franchise taxes, fees and other charges. 

The latter complied and was subsequently assessed taxes, however, refused to pay said taxes.

Petitioner then filed a complaint for collection of local taxes against CASURECO III before the RTC.

RTC ruled in favour of Iriga City.o It found CASURECO III liable for franchise taxes based on its

gross receipts from Iriga City and the Rinconada area on the ground that “the situs of taxation is the place where the privilege is exercised."

CA reversed the ruling of the lower court. Hence this petition for review.

CASURECO’S Contention: Its liability to pay franchise tax, if any, should be limited to gross

receipts received from the supply of the electricity within the City of Iriga and not those from the Rinconada area.

ISSUE:Whether the situs of taxation is the place where the franchise holder exercises its franchise regardless of the place where its services or products are delivered.

HELD: YES. It should be stressed that what the petitioner seeks to collect from

CASURECO III is a franchise tax, which as defined, is a tax on the exercise of a privilege.

As Section 137 of the LGC provides, franchise tax shall be based on gross receipts precisely because it is a tax on business, rather than on persons or property. 

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.

Hence, franchise tax covers all gross receipts from Iriga City and the Rinconada area.

V. CIVIL REMEDIES FOR COLLECTION OF TAXESANGELES CITY V. ANGELES ELECTRIC CORP. [Angelo]

VI. TAXPAYER’S REMEDIESLUZ R. YAMANE, IN HER CAPACITY AS THE CITY TREASURER OF MAKATI CITY, PETITIONER, VS. BA LEPANTO CONDOMINUM CORPORATION, RESPONDENT. [MYTA]G.R. No. 154993 October 25, 2005

FACTS:• Respondent BA-Lepanto Condominium Corporation is a duly organized

condominium corporation constituted in accordance with the Condominium Act, which owns and holds title to the common and limited common areas of the BA-Lepanto Condominium, situated in Paseo de Roxas, Makati City. Its membership comprises the various unit owners of the Condominium.

• The Corporation is authorized, under Article V of its Amended By-Laws, to collect regular assessments from its members for operating expenses, capital expenditures on the common areas, and other special assessments as provided for in the Master Deed with Declaration of Restrictions of the Condominium.

• On 15 December 1998, the Corporation received a Notice of Assessment dated 14 December 1998 signed by the City Treasurer. The Notice of Assessment stated that the Corporation is "liable to pay the correct city business taxes, fees and charges," computed as totaling P1,601,013.77 for the years 1995 to 1997. The Notice of Assessment was silent as to the statutory basis of the business taxes assessed.

• Through counsel, the Corporation responded with a written tax protest dated 12 February 1999, addressed to the City Treasurer. It was evident in the protest that the Corporation was perplexed on the statutory basis of the tax assessment.

• The protest was rejected by the City Treasurer.

• The Corporation filed an Appeal with the Regional Trial Court (RTC) of Makati, who in turn dismissed the appeal. The RTC concluded that the activities of the Corporation fall squarely under the definition of "business" under Section 13(b) of the Local Government Code, and thus subject to local business taxation.

• The appellate court reversed the RTC and declared that the Corporation was not liable to pay business taxes to the City of Makati. It concluded that the Corporation was not engaged in profit. For one, it was held that the very statutory concept of a condominium corporation showed that it was

not a juridical entity intended to make profit, as its sole purpose was to hold title to the common areas in the condominium and to maintain the condominium.

ISSUE: Whether or not the City of Makati may collect business taxes on condominium corporations.

HELD: NO, the City of Makati cannot collect business taxes on condominium corporations. At no point has the City Treasurer been candid enough to inform the Corporation, the RTC, the Court of Appeals, or the Supreme Court as to what exactly is the precise statutory basis under the Makati Revenue Code for the levying of the business tax on petitioner. The notice of assessment, which stands as the first instance the taxpayer is officially made aware of the pending tax liability, should be sufficiently informative to apprise the taxpayer the legal basis of the tax. The local treasurer is required to explain to the taxpayer with sufficient particularity the basis of the tax, so as to leave no doubt in the mind of the taxpayer as to the specific tax involved.

Moreover, it is imperative that in order that the Corporation may be subjected to business taxes, its activities must fall within the definition of business as provided in the Local Government Code. And to hold that they do is to ignore the very statutory nature of a condominium corporation. The SC finds the Corporation did not fall within the enumerated classes of taxable businesses under either the Local Government Code or the Makati Revenue Code already forewarns that a clear demonstration is essential on the part of the City Treasurer on why the Corporation should be taxed anyway. "Full appreciative living values" is nothing but blather in search of meaning, and to impose a tax hinged on that standard is both arbitrary and oppressive.

A condominium corporation, while enjoying such powers of ownership, is prohibited by law from transacting its properties for the purpose of gainful profit. Accordingly, the SC held that condominium corporations are generally exempt from local business taxation under the Local Government Code, irrespective of any local ordinance that seeks to declare otherwise.

The City Treasurer has not posited the claim that the Corporation is engaged in business activities beyond the statutory purposes of a condominium corporation. The assessment appears to be based solely on the Corporation's collection of assessments from unit owners, such assessments being utilized to defray the necessary expenses for the Condominium Project and the common areas. There is no contemplation of business, no orientation towards profit in this case. Hence, the assailed tax assessment has no basis under the Local Government Code or the Makati Revenue Code, and the insistence of the city in its collection of the void tax

constitutes an attempt at deprivation of property without due process of law.

JARDINE DAVIES INSURANCE BROKERS, INC., PETITIONER, V. HON. ERNA ALIPOSA, IN HER CAPACITY AS PRESIDING JUDGE OF BRANCH 150 OF THE MAKATI REGIONAL TRIAL COURT, CITY (PREVIOUSLY MUNICIPALITY) OF MAKATI AND ROLANDO M. CARLOS, IN HIS CAPACITY AS ACTING TREASURER OF MAKATI, RESPONDENTS. [Cary]

FACTS:Pursuant to Republic Act No. 7160, otherwise known as the Local Government Code of 1991, the then Sangguniang Bayan of Makati enacted Municipal Ordinance No. 92-072, otherwise known as the Makati Revenue Code, which provides, inter alia, for the schedule of real estate, business and franchise taxes in the Municipality of Makati at rates higher than those in the Metro Manila Revenue Code.

On May 10, 1993, the Philippine Racing Club, Inc. ("PRCI" for brevity), a taxpayer of Makati, appealed to the Department of Justice ("DOJ" for brevity) for the nullification of said ordinance, alleging that it was approved without previous public hearings, in violation of the Local Government Code and Article 276 of its Implementing Rules, and that some of the ordinance’s provisions were unconstitutional.

On July 5, 1993, the DOJ came out with a resolution2 declaring "null and void and without legal effect" the said ordinance for having been enacted in contravention of Section 187 of the Local Government Code of 1991 and its implementing rules and regulations.

Judgment was rendered in its favor, thus declaring null and void the DOJ Decision dated July 5, 1993; and allowing the full implementation of Makati Municipal Ordinance No. 92-072.

In the meantime, respondent Makati continued to implement the ordinance. Petitioner Jardine Davies Insurance Brokers, Inc., a duly-organized corporation with principal place of business at No. 222 Sen. Gil J. Puyat Avenue, Makati, Metro Manila, was assessed and billed by Makati the amount of P63,822.47 for taxes, fees and charges under the ordinance for the second quarter of 1993. It was again billed by respondent Makati the same amount for the third quarter of 1993 and the same amount for the fourth quarter of 1993. Petitioner did not protest the assessment for its quarterly business taxes for the second, third and fourth quarters of 1993 based on said ordinance effective April 1, 1993. Petitioner, in fact, paid the said amounts on April 26, 1993 (for the second quarter), July 12, 1993 (for the third quarter) and October 19, 1993 (for the fourth quarter), respectively, without any protest. Respondent Makati issued the corresponding receipts in favor of petitioner.

On January 30, 1994, petitioner wrote the municipal treasurer of Makati requesting that respondent Makati compute its business tax liabilities in accordance with the Metro Manila Revenue Code and not under the ordinance considering that said ordinance was already declared by the DOJ null and void. Petitioner likewise requested that respondent Makati credit the overpayment in the total amount of P27,854.91 for the second to fourth quarters of 1993 against its 1994 liabilities for 1994, or in the alternative, for Makati to refund the said amount to petitioner.

When informed of the denial by respondent Makati of its letter-request, petitioner filed a complaint on March 7, 1994 with the RTC of Makati against respondents Makati and its Acting Municipal Treasurer. The case was raffled to Branch 150 of said court. Petitioner alleged in its complaint that in view of the resolution of the DOJ declaring the Makati Revenue Code "null and void and without legal effect," the provisions of the Metro Manila Revenue Code continued to remain in full force and effect; however, petitioner was assessed and billed by respondent Makati for taxes, fees and charges for second, third and fourth quarters for 1993 beginning on April 4, 1993 up to October 14, 1994 at rates fixed in the ordinance despite the nullity thereof.

The trial court ruled that plaintiff’s cause of action, if any, had prescribed. Citing Sections 187 and 195 of the Local Government Code of 1991, the trial court ratiocinated that petitioner failed to file an opposition or protest to the written notice of assessment of Makati for taxes, fees and charges at rates provided for in the ordinance within 60 days from the notice of said assessment as required by Section 195 of the Local Government Code. Hence, petitioner was barred from demanding a refund of its payment or that it be credited for said amounts.

ISSUE:Whether the instant case is a claim for refund, or a deficiency assessment that has to be protested.

RULING:The petition has no merit.

The Court agrees with petitioner that 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. This was our ruling in Ty v. Judge Trampe:

. . . 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. In the

case at bench, however, the petitioners are questioning the very authority and power of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax. These are not questions merely of amounts of the increase in the tax but attacks on the very validity of any increase.

In this case, petitioner, relying on the resolution of the Secretary of Justice in The Philippine Racing Club, Inc. v. Municipality of Makati case, posited in its complaint that the ordinance which was the basis of respondent Makati for the collection of taxes from petitioner was null and void. However, the Court agrees with the contention of respondents that petitioner was proscribed from filing its complaint with the RTC of Makati for the reason that petitioner failed to appeal to the Secretary of Justice within 30 days from the effectivity date of the ordinance as mandated by Section 187 of the Local Government Code which reads:

In Reyes v. Court of Appeals, we ruled that failure of a taxpayer to interpose the requisite appeal to the Secretary of Justice is fatal to its complaint for a refund:

Clearly, the law requires that the dissatisfied taxpayer who questions the validity or legality of a tax ordinance must file his appeal to the Secretary of Justice, within 30 days from effectivity thereof. In case the Secretary decides the appeal, a period also of 30 days is allowed for an aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60 days, a party could already proceed to seek relief in court. These three separate periods are clearly given for compliance as a prerequisite before seeking redress in a competent court. Such statutory periods are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions. For this reason the courts construe these provisions of statutes as mandatory.

A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax is the most effective instrument to raise needed revenues to finance and support the myriad activities of local government units for the delivery of basic services essential to the promotion of the general welfare and enhancement of peace, progress, and prosperity of the people. Consequently, any delay in implementing tax measures would be to the detriment of the public. It is for this reason that protests over tax ordinances are required to be done within certain time frames. In the instant case, it is our view that the failure of petitioners to appeal to the Secretary of Justice within 30 days as required by Sec. 187 of R.A. 7160 is fatal to their cause.

Moreover, petitioner even paid without any protest the amounts of taxes assessed by respondents Makati and Acting Treasurer as provided for in the

ordinance. Evidently, the complaint of petitioner with the Regional Trial Court was merely an afterthought.

SAN JUAN V. CASTRO [Tats]

TEAM PACIFIC CORP. V. JOSEPHINE DAZA [Alfie]

XII. CUSTOMS AND TARIFFII. Duties, Powers and JurisdictionK. Cases on Search and Seizure

JAO V. CA [Jaycee]

SBMA V. RODRIGUEZ [Sarah]

ENRILE V. VINUYA [Jongko]January 30, 1971

FACTS:- The then Collector of Customs of the Port of Manila issued a warrant of seizure and detention against the Cadillac car involved in this case, the owner-claimant being a certain Rodolfo Ceza, as the taxes and duties had not been paid.- It was moreover shown in the petition that the owner, Rodolfo Ceza, had sold such car to one Francisco Dee from whom respondent Vinuya acquired the same.- Vinuya filed a complaint for replevin in the sala of  respondent Judge on the ground of alleged illegality of the seizure which, in the opinion of respondents, did not confer jurisdiction on the Collector of Customs.- Petitioners filed a motion to dismiss on the ground that forfeiture proceedings had already been instituted before the Col lector of Customs who has the sole   jur isdict ion to determine quest ions affect ing the disposition of property under seizure as well as the absence of a cause of action. This was denied for lack of merit. Thus this petition.

ISSUE W O N t h e c o u r t o f fi r s t i n s t a n c e i s v e s t e d w i t h  jurisdiction to entertain a complaint for replevin for the recovery of a Cadillac car, subject of a seizure and forfeiture proceeding in the Bureau of Customs.

HELD: NO.The prevai l ing doctr ine is that the exclusive  jurisdiction in seizure and forfeiture cases vested in the Collector of Customs precludes a court of first instance from assuming cognizance over such a matter. This has been so, as noted, since Pacis v. Averia.

Reasoning

a. The existence of the power and the regularity of the proceeding taken under it are distinct from each other. The governmental agency concerned, the Bureau of Customs, is vested with exclusive authority. Even if it be assumed that in the exercise of such exclusive competence a taint o f i l legal i ty may be correct ly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may oust it of such jurisdiction. It does not mean however that correspondingly a court of first instance is vested with competence when clearly in the light of the above decisions the law has not seen fit to do so.l

b. "the Court of First Instance should y ie ld to the  jurisdiction of the Collector of Customs. The jurisdiction of the Collector of Customs is provided for in Republic Act 1937 which took effect on July 1, 1957, much later than the Judiciary Act of 1948. It is axiomatic that a later law prevails over a prior statute.

c. Moreover, on grounds of public policy, it is more reasonable to conclude that the legislators intended to divest the Court of First Instance of the prerogative to replevin a property which is a subject of a seizure and forfeiture proceedings for violation of the Tariff and Customs Code. Otherwise, actions for forfeiture of property for violation of Customs laws could easily be undermined by the simple devise of replevin."

d. Sect ion 2303 of the Tar iff and Customs Code requires the Collector of Customs to give to the owner of the property sought to be forfeited written notice of the seizure and to give him the opportunity to be heard in his defense. This provision clearly indicates the intention of the law to confine in the Bureau of Customs the determination of all questions affecting the disposal of property proceeded against in a seizure and forfe iture case. The judic ia l recourse of the property owner is not in the Court of First Instance but in the Court of Tax Appeals, and only after exhausting administrative remedies in the Bureau of Customs."e Collector of Customs is not final. An appeal lies to theDISPOSITIONThe writ of certiorari prayed for is granted, respondent Judge being clearly without jurisdiction.

VIERNEZA V COMMISSIONER OF CUSTOMS [Jongko]

FACTS:

M/V "Legaspi" a coastwise vessel coming from Jolo docked at the port of Cebu on her way to Manila. Acting upon a confidential telegraphic report about smuggling of cigarettes from an informer in Jolo, Customs authorities of the port of Cebu conducted a search of the vessel which eventually led to the discovery of cases containing cigarettes without the required Internal Revenue strip stamps. Upon investigation it was also discovered that the subject merchandise was covered by Bill of Lading with "personal belongings" as its declaration and correspondingly entered into the manifest of the vessel likewise with "personal belongings" as the noted description, and with Sultan Pula of Jolo as the consignor and a certain Carlos Valdez as the consignee in Manila. Upon further investigation, however, it was found that a woman passenger was accompanying the subject merchandise appearing later to be Mrs. Felicidad Vierneza, the present claimant, who all the while holds the bill of lading. Believing that there is a strong evidence of violations of Customs laws, the Collector of Customs of Cebu seized the merchandise and instituted the forfeiture proceedings for violation of Section 2530 (f), (g) and (m-4) of the Tariff and Customs Code of the Philippines and Section 174 of the Internal Revenue Code. Petitioner appealed in due time from the decision of the Collector of Customs of Cebu to the Commissioner of Customs who affirmed the decision of the Collector.Elevated to the Court of Tax Appeals, the decision of respondent Commissioner of Customs was affirmed, the court "(f)inding that the Collector of Customs of Cebu had jurisdiction to order the seizure and forfeiture of said cigarettes and that the forfeiture of the same is in accordance with Section 2530 (f) of the Tariff and Customs Code".

ISSUE: W/N the Collector has the authority to enforce tariff and customs law? Petitioner argues that the Collector of Customs of Jolo, who has "jurisdiction over all matters arising from the enforcement of tariff and customs laws within his collection district", as provided for in Section 703 of the Tariff and Customs Code, is exclusively authorized to proceed against the cigarettes in question inasmuch as the smuggling was allegedly perpetrated in his collection district. Hence, petitioner concludes that the seizure and forfeiture thereof by the Collector of Customs of Cebu is irregular and illegal for lack of jurisdiction.

HELD: SC does not agree.

First, because Section 703, on which petitioner's conclusion is premised, is legally non-existent, the same having been vetoed by the President. Secondly, the Tariff and Customs Code clearly empowers the Bureau of Customs to prevent and suppress smuggling and other frauds upon the Customs [Sec. 602 (b)] over all seas within the jurisdiction of the Philippines and over all coasts, ports, airports, harbors, bays, rivers and inland waters navigable from the sea and, in case of "hot pursuit", even beyond the maritime zone (Sec. 603). For the due enforcement of this function, a Collector, among others, is authorized to search and seize (Sec. 2203), at any place within the jurisdiction of the said Bureau (Sec. 2204, sec. par.), any vessel, aircraft, cargo, article, animal or other movable property when the same is subject to forfeiture or liable for any fine imposed under customs and tariff laws (Sec. 2205). It is of no moment where the introduction of the property subject to forfeiture took place. For, to our mind, "(i)t is the right of an officer of the customs to seize goods which are suspected to have been introduced into the country in violation of the revenue laws not only in his own district, but also in any other district than his own.Any other construction of the Tariff and Customs Code, such as the one proposed by petitioner, would virtually place the Collector of Customs in a straitjacket and render inutile his police power of search and seizure, thereby frustrating effective enforcement of the measures provided in the Code to prevent and suppress smuggling and other frauds upon the Customs. The Code, as a revenue law, is to be construed to carry out the intention of Congress in enacting it and as would most effectually accomplish its objects. Petitioner also attacks the jurisdiction of the Collector of Customs of Cebu on the ground that the forfeiture of the cigarettes is not in accordance with Section 2531 of the Code, as the same were, at the time of seizure, no longer in the custody and control of the Bureau of Customs nor in the hands, or subject to control, of the importer, original owner, consignee, agent or person with knowledge that the same were imported contrary to law. Again, SC disagrees. The forfeiture is effected precisely in accordance with Section 2531 afore-cited, which plainly provides "that forfeiture shall be effected when and while the article is in the custody or within the jurisdiction of the customs authority ... or in the hands or subject to the control of ... some person who shall receive, conceal, buy, sell or transport the same ... with knowledge that the article was imported ... contrary to law" (Emphasis supplied). There can be no question that the cigarettes involved were seized and forfeited at the port of Cebu which is within the jurisdiction of the Bureau of Customs and, as will be shown later, while the cigarettes were subject to the control of petitioner, who bought, concealed, and transported the same aboard the M/V "Legaspi" with knowledge that they were imported contrary to law. Besides, it is a settled jurisprudence that forfeiture proceedings are in the nature of proceedings in rem wherein

the jurisdiction to proceed against the res is vested in the court of the district where the same is found or seized. Therefore, the Collector of Customs of Cebu, who has the authority under the Tariff and Customs Code to institute forfeiture proceedings, lawfully assumed jurisdiction to forfeit, in favor of the Government, the smuggled cigarettes found and seized within his collection district.

RIGOR V. ROSALES [Leandro]

FACTS:

Collector Sabino Rigor issued a Warrant of Seizure and Detention against the vessel LCT-759 and its cargo, consisting of 103 pieces of logs for failure to present a manifest for the said logs within the period prescribed. The parties who were duly notified and represented, voluntarily submitted to the jurisdiction of the respondent Collector. After hearing, the Collector rendered a decision ordering the seized logs forfeited in favor of the government to be disposed of according to law.

Instead of appealing the Collector’s decision to the Commissioner of Customs, the private respondents filed an original petition for certiorari with the Davao CFI. Respondent alleged lack of jurisdiction of the CFI.

ISSUE: WON the lower court has jurisdiction to review a decision of the Collector of Customs

HELD: The Supreme Court held in the negative.

Articles subject to seizure do not have to be goods imported from a foreign country. The provisions of the Code refer to unmanifested articles found on vessels or aircraft engaged in the coastwise trade. The customs authorities do not have to prove to the satisfaction of a court of first instance that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs’ searches, seizure, or arrests provided by law and to continue with the administrative hearings on whether or not the law may have been violated.

Regarding the nature of the port of origin and the port of destination, it is enough if one of the ports is a port of entry. The respondent court’s finding that “port of entry” must be limited to the wharves of Sta. Ana and Sasa where the customs house is located and not extended to “every inch of the City of Davao” would unduly hamper if not cripple the effective enforcement of customs and tariff laws. Customs officials cannot stand by helplessly for want of jurisdiction simply because a restrictive interpretation of “port of entry” would enable coastwise vessels to load or unload unmanifested goods with impunity outside of the specific area where the wharves and the customs house are located.

Furthermore, the Supreme Court ruled that the customs’ officials have authority under the law to make the initial determination on the limits of their administrative jurisdiction, to act speedily and to make decisions on the basis of that determination, and to have such act or decision reviewable only in the manner provided by the Customs and Tariff Code. The

Collector’s decisions are appealable to the Commissioner of Customs, whose decisions, in cases involving seizure, detention or release of property, may in turn be reviewed only by the CTA.

HON. RICARDO G. PAPA, AS CHIEF OF POLICE OF MANILA; HON. JUAN PONCE ENRILE, AS COMMISSIONER OF CUSTOMS; PEDRO PACIS, AS COLLECTOR OF CUSTOMS OF THE PORT OF MANILA; AND MARTIN ALAGAO, AS PATROLMAN OF THE MANILA POLICE DEPARTMENT, PETITIONERS, V. REMEDIOS MAGO AND HILARION U. JARENCIO, AS PRESIDING JUDGE OF BRANCH 23, COURT OF FIRST INSTANCE OF MANILA, RESPONDENTS. [nOch](G.R. No. L-27360 28 February 1968.) Ponente: ZALDIVAR, J.:

FACTS:Original action for prohibition and certiorari, with preliminary injunction praying for the annulment of the order issued by respondent Judge in Civil Case No. 67496 of the CFI Manila, dated 7 March 1967, which authorized the release under bond of certain goods belonging to respondent Mago which were seized and held by petitioners in connection with the enforcement of the Tariff and Customs Code, and to prohibit respondent Judge from further proceeding Civil Case.

Petitioner Martin Alagao (head of the counter-intelligence unit of the Manila Police Department) acted upon reliable information about a certain shipment which were allegedly misdeclared and undervalued, and upon orders of petitioner Ricardo Papa (Chief of Police of Manila and a duly deputized agent of the Bureau of Customs) conducted surveillance. On November 4, 1966, elements of the counter-intelligence unit intercepted the two (2) trucks containing the shipment after it exited the port at the Agrifina Circle, Ermita, Manila. Found were nine bales of goods, and the two trucks, were seized.

Remedios Mago 9owner of the goods) and Valentin B. Lanopa (owner of the truck) filed with the CFI Manila a petition "for mandamus with restraining order or preliminary injunction”, docketed as Civil Case No. 67496, alleging that that the goods were seized by members of the Manila Police Department without search warrant issued by a competent court; that then Customs Commissioner Jacinto Gavino had illegally assigned appraisers to examine the goods because the goods were no longer under the control and supervision of the Commissioner of Customs; and that the goods, even assuming them to have been misdeclared and, undervalued, were not subject to seizure under Section 2531 of the Tariff and Customs Code because Mago had bought them from another person without knowledge that they were imported illegally.

On November 10, 1966, respondent Judge Hilarion Jarencio issued an order ex parte restraining the respondents in Civil Case No. 67496 — now petitioners— from opening the nine bales in question, and at the same time set the hearing of the petition for preliminary injunction on November 16, 1966. However, when the restraining order was received by herein

petitioners, some bales had already been opened by the examiners of the Bureau of Customs in the presence of officials of the Manila Police Department, an assistant city fiscal and a representative of herein respondent Mago.

Mago, on December 23, 1966, filed an ex parte motion to release the goods. On March 7, 1967, the respondent Judge issued an order releasing the goods to herein respondent Mago upon her filing of a bond in the amount of P40,000.00, and on March 13, 1967, said respondent filed the corresponding bond.

On March 13, 1967, herein petitioner Ricardo Papa, on his own behalf, filed a motion for reconsideration of the order of the court releasing the goods under bond, upon the ground that the Manila Police Department had been directed by the Collector of Customs of the Port of Manila to hold the goods pending termination of the seizure proceedings.

Without waiting for the court's action on the motion for reconsideration, and alleging that they had no plain, speedy and adequate remedy in the ordinary course of law, herein petitioners filed the present action for prohibition and certiorari with preliminary injunction before this Court.

ISSUE: The principal issue in the instant case is whether or not, the respondent Judge had acted with jurisdiction in issuing the order of March 7, 1967 releasing the goods in question.

HELD:BoC has jurisdiction over the goods, not CFI Manila          The Bureau of Customs has the duties, powers and jurisdiction, among others, (1) to assess and collect all lawful revenues from imported articles, and all other dues, fees, charges, fines and penalties, accruing under the tariff and customs laws; (2) to prevent and suppress smuggling and other frauds upon the customs; and (3) to enforce tariff and customs laws. The goods in question were imported from Hongkong, as shown in the "Statement and Receipts of Duties Collected on Informal Entry". As long as the importation has not been terminated the imported goods remain under the jurisdiction of the Bureau of customs. Importation is deemed terminated only upon the payment of the duties, taxes and other charges upon the articles, or secured to be paid, at the port of entry and the legal permit for withdrawal shall have been granted. The payment of the duties, taxes, fees and other charges must be in full.          The record shows, by comparing the articles and duties stated in the aforesaid "Statement and Receipts of Duties Collected on Informal Entry" with the manifestation of the Office of the Solicitor General  wherein it is stated that the estimated duties, taxes and other charges on the goods subject of this case amounted to P95,772.00 as evidenced by the report of

the appraiser of the Bureau of Customs, that the duties, taxes and other charges had not been paid in full. Furthermore, a comparison of the goods on which duties had been assessed, and the itemization of the articles ordered by the CFI Manila shows that the quantity of the goods was underdeclared, presumably to avoid the payment of duties thereon.

Even if it be granted, arguendo, that after the goods in question had been brought out of the customs area the Bureau of Customs had lost jurisdiction over the same, nevertheless, when said goods were intercepted at the Agrifina Circle on November 4, 1966 by members of the Manila Police Department, acting under directions and orders of their Chief, Ricardo C. Papa, who had been formally deputized by the Commissioner of Customs, the Bureau of Customs had regained jurisdiction and custody of the goods. Section 1206 of the Tariff and Customs Code imposes upon the Collector of Customs the duty to hold possession of all imported articles upon which duties, taxes, and other charges have not been paid or secured to be paid, and to dispose of the same according to law. The goods in question, therefore, were under the custody and at the disposal of the Bureau of Customs at the time the petition for mandamus, docketed as Civil Case No. 67496, was filed in the Court of First Instance of Manila on November 9, 1966. The Court of First Instance of Manila, therefore, could not exercise jurisdiction over said goods even if the warrant of seizure and detention of the goods for the purposes of the seizure and forfeiture proceedings had not yet been issued by the Collector of Customs.

On Validity of Warrant and SearchIt is the settled rule, therefore, that the Bureau of Customs acquires

exclusive jurisdiction over imported goods, for the purposes of enforcement of the customs laws, from the moment the goods are actually in its possession or control, even if no warrant of seizure or detention had previously been issued by the Collector of Customs in connection with seizure and forfeiture proceedings. In the present case, the Bureau of Customs actually seized the goods in question on November 4, 1966, and so from that date the Bureau of Customs acquired jurisdiction over the goods for the purposes of the enforcement of the tariff and customs laws, to the exclusion of the regular courts. Much less then would the Court of First Instance of Manila have jurisdiction over the goods in question after the Collector of Customs had issued the warrant of seizure and detention on January 12, 1967. And so, it cannot be said, as respondents contend, that the issuance of said warrant was only an attempt to divest the respondent Judge of jurisdiction over the subject matter of the case. The court presided by respondent Judge did not acquire jurisdiction over the goods in question when the petition for mandamus was filed before it, and so there was no need of divesting it of jurisdiction. Not having acquired jurisdiction over the goods, it follows that the Court of First Instance of Manila had no jurisdiction to issue the questioned order of March 7, 1967 releasing said goods.

          Petitioner Martin Alagao and his companion policemen had authority to effect the seizure without any search warrant issued by a competent court. The Tariff and Customs Code does not require said warrant in the instant case. The Code authorizes persons having police authority under Section 2203 of the Tariff and Customs Code to enter, pass through or search any land, in closure, warehouse, store or building, not being a dwelling house; and also to inspect, search and examine any vessel or aircraft and any trunk, package, or envelope or any person on board, or to stop and search and examine any vehicle, beast or person suspected of holding or conveying any dutiable or prohibited article introduced into the Philippines contrary to law, without mentioning the need of a search warrant in said cases. But in the search of a dwelling house, the Code provides that said "dwelling house may be entered and searched only upon warrant issued by a judge or justice of the peace. . . ." It is our considered view, therefore, that except in the case of the search of a dwelling house, persons exercising police authority under the customs law may effect search and seizure without a search warrant in the enforcement of customs laws.          WHEREFORE, judgment is hereby rendered, as follows:          (a) Granting the writ of certiorari and prohibition prayed for by petitioners;          (b) Declaring null and void, for having been issued without jurisdiction, the order of respondent Judge Hilarion U. Jarencio, dated March 7, 1967, in Civil Code No. 67496 of the Court of First Instance of Manila;          (c) Declaring permanent the preliminary injunction issued by this Court on March 31, 1967 restraining respondent Judge from executing, enforcing and/or implementing his order of March 7, 1967 in Civil Case No. 67496 of the Court of First Instance of Manila, and from proceeding in any manner in said case;          (d) Ordering the dismissal of Civil Case No. 67496 of the Court of First Instance of Manila; and1äwphï1.ñët          (e) Ordering the private respondent, Remedios Mago, to pay the costs.          It is so ordered.

R.V. MARZAN FEIGHT V. CA AND SHIELA’S MANUFACTURING [Jaline]

FACTS:Private respondent filed a complaint for damages before the RTC of Pasig City, Branch 154, against the petitioner. The private respondent alleged, inter alia, that its goods were stored in the petitioner’s bonded warehouse due to the problem it encountered at the Bureau of Customs; that the goods were gutted by fire on July 26, 1990 while stored in said bonded warehouse; and, despite demands for the release of the goods, the petitioner refused to release the same.

In its answer, petitioner alleged that the private respondent lost the right of action against it as it was not the real party-in-interest in the case. The petitioner averred that the goods in question were received not from the private respondent but from the Bureau of Customs covering Forfeited Cargoes (FC), Abandoned Cargoes (AC) and Cargoes held under Warrant/Seizure and Detention (CWSD). According to the petitioner, before the subject cargo was destroyed by accidental fire, the private respondent had violated the Tariff and Customs Code and related laws, rules and regulations, and failed to pay the corresponding taxes, duties and penalties for the importation. Furthermore, the private respondent failed to make the corresponding claim for the release of the said cargo, until the same was declared as "overstaying cargo," and later as "abandoned cargo." The petitioner further asserted that the government, and not the private respondent, was the owner thereof.

During the trial, the petitioner presented Atty. Leonardo S. Doctor, the Law Division Chief of the Bureau of Customs, as one of its witnesses to prove that the cargo had already been declared by the District Collector of Customs as "abandoned cargo" in Abandonment Proceedings No. 288-89, and that the cargo was destroyed by fire before it could be sold at public auction.

Thereafter, the private respondent filed its memorandum stating, inter alia, that it did not abandon the goods because it did not receive the notice of abandonment of the cargo from the Bureau of Customs. The petitioner insisted that upon the abandonment of the cargo under Section 1802 of the Tariff and Customs Code of the Philippines (TCCP), it became, ipso facto, the property of the government; hence, the private respondent had no right to claim the value of the shipment.

The trial court rendered judgment founding defendant RV Marzan is held solely liable for the loss suffered by the plaintiff and is hereby ordered to pay the plaintiff.

According to the trial court, the Bureau of Customs’ subsequent declaration that the subject shipment was "abandoned cargo" was ineffective, as the private respondent was not sent a copy of the September 29, 1989 Notice as required by Sec. 1801 of the Tariff and Customs Code. Under the law, notice of the proceedings of abandonment should be given to the private respondent as the consignee or its agent, to enable it to adduce evidence at a public hearing, conformably to the requirement of due process. Since the private respondent was never notified of the abandonment proceedings, it cannot, thus, be said that it impliedly abandoned the shipment and lost its ownership over the same in favor of the government.

The petitioner appealed the decision to the Court of Appeals and upheld the trial court’s ruling. The appellate court held that the District Collector of Customs failed to give due notice of the abandonment proceedings to the private respondent, and that the same constituted denial of due process of law. ISSUE: Whether the RTC is vested with jurisdiction to review and nullify a declaration made by the District Collector of Customs that the shipment was abandoned cargo and, thus, ipso facto belonged to the government. RULING: THE PETITION IS GRANTED.The decisions of the RTC and of the CA are set aside and reversed. The RTC is ordered to dismiss the complaint of the private respondent against the petitioner, as well as the counterclaim of the latter against the private respondent.

RV Marzan avers that at the time of the fire, the goods were already the property of the government. Before the fire, RV Marzan received the cargo from the Bureau of Customs pursuant to a Memorandum Order declaring it as "abandoned cargo." This Memorandum Order which is in accordance with Sec. 1801 of the Tariff and Customs Code, provides as follows:SEC. 1801. Abandonment, Kinds and Effects of. – Abandonment is expressed when it is made direct to the Collector by the interested party in writing, and is implied when, from the action or omission of the interested party to file the import entry within five (5) days or an extension thereof from the discharge of the vessel or aircraft, or having filed such entry, the interested party fails to claim his importation within five (5) days thereafter or within an extension of not more than five (5) days shall be deemed an implied abandonment. An implied abandonment shall not be effective until the article shall be declared by the Collector to have been abandoned after notice thereof is given to the interested party as in seizure cases.

Any person who abandons an article or who fails to claim his importation as provided for in the preceding paragraph shall be deemed to have renounced all his interests and property rights therein.

SEC. 1802. Abandonment of Imported Articles.- The owner or importer of any articles may, within ten days after filing of the import entry, abandon to the Government all or a part of the articles included in an invoice, and, thereupon, he shall be relieved from the payment of duties, taxes and all other charges and expenses due thereon: Provided, That the portion so abandoned is not less than ten per cent of the total invoice and is not less than one package, except in cases of articles imported for personal or family use. The articles so abandoned shall be delivered by the owner or importer at such place within the port of arrival as the Collector shall designate, and upon his failure to so comply, the owner or importer shall be liable for all expenses that may be incurred in connection with the disposition of the articles.

An examination of the records reveal that the subject shipment was subsequently declared abandoned by the Bureau of Customs as "abandoned cargo" for the plaintiff’s failure to file the import entry. Evidently, the resolution of the foregoing issues is within the exclusive competence of the District Collector of Customs, the Commissioner of Customs and within the appellate jurisdiction of the Court of Tax Appeals. The District Collector of Customs did not lose jurisdiction over the abandonment proceedings. The loss of the cargo did not extinguish his incipient jurisdiction in the said proceedings, nor render functus officio her declaration that the subject shipment had been abandoned.

It must be stressed that the cargo arrived in the Philippines on April 12, 1989. The private respondent failed to accomplish the required import entry declarations, pay the requisite taxes and duties, if any, and take delivery of the cargo. It was only after the lapse of more than two years, or on December 21, 1991, that the private respondent filed its complaint against the petitioner in the RTC. By then, the cargo had been gutted by fire. The private respondent has not made any valid justification for its silence thereon and its inaction. In can be said then that the private respondent went to court with unclean hands.

The refusal of the Bureau of Customs to intervene in the trial court does not, in any way, fortify the private respondent’s claim that it is the owner of the cargo. The government had no legal obligation to intervene in the trial court considering that the latter had no jurisdiction over the complaint. It was enough that then Bureau of Customs Law Division Chief Atty. Doctor testified that the cargo was duly declared by the District Collector of Customs as abandoned property, that the said declaration had become final, and that the government became ipso facto the owner of the cargo. The government had every right to expect that the trial court would dismiss the complaint for lack of jurisdiction over the issue raised therein.

CHEVRON PHILS. V. COMMISSIONER OF CUSTOMS [Nico]G.R. No. 178759             August 11, 2008

FACTS: Petitioner Chevron is engaged in the business of importing,

distributing and marketing of petroleum products in the Philippines. In 1996, the importations subject of this case arrived and were

covered by eight bills of lading. The shipments were unloaded from the carrying vessels onto

petitioner’s oil tanks over a period of three days from the date of their arrival.

Subsequently, the import entry declarations (IEDs) were filed and 90% of the total customs duties were paid.

The import entry and internal revenue declarations (IEIRDs) of the shipments were thereafter filed on the following dates:ENTRYNO.

PRODUCT ARRIVAL DATE

IED IEIRD

606-96 66,229,960 litersNan Hai Crude Oil

3/8/1996 3/12/1996

5/10/1996

604-96 6,990,712 litersReformate

3/18/1996

3/26/1996

5/10/1996

605-96 16,651,177 litersFCCU Feed Stock

3/21/1996

3/26/1996

5/10/1996

600-96601-96602-96603-96

236,317,862 litersOman/Dubai Crude Oil

3/26/1996

3/28/1996

5/10/1996

818-96 51,878,114 litersArab Crude Oil

4/10/1996

4/10/1996

6/21/1996

The importations were appraised at a duty rate of 3% as provided under RA 8180 and petitioner paid the import duties amounting to P316M. 

Prior to the effectivity of RA 8180 on April 16, 1996, the rate of duty on imported crude oil was 10%. (Take Note)

3 years later, the Finance Secretary received a letter denouncing the deliberate concealment, manipulation and scheme employed by

petitioner and Pilipinas Shell in the importation of crude oil, thereby resulting in huge losses of revenue for the government.

This letter was endorsed to the BOC for investigation. BOC issued a finding that the import entries were filed beyond

the 30-day non-extendible period prescribed under Section 1301 of the TCC.

o They concluded that the importations were already considered abandoned in favor of the government.

o Petitioner was ordered to pay the amount of P1.1B representing the total dutiable value of the importations.

This prompted petitioner to file a petition for review in the CTA. CTA En Banc held that it was the filing of the IEIRDs that

constituted entry under the TCC. o Since these were filed beyond the 30-day period, they were not

seasonably "entered" in accordance with Section 1301 in relation to Section 205 of the TCC.

o Consequently, they were deemed abandoned under Sections 1801 and 1802 of the TCC.

o Thus, petitioner was ordered to pay respondent the total dutiable value of the oil shipments amounting to P893M.

Hence this petition.

Petitioner’s Contention: The 30-day period applies only to the IED while no deadline is

specified for the submission of the IEIRD.ISSUE: Whether the filing of the IED sufficient to constitute "entry" under

the TCC, hence, the imported oil was not abandoned.

HELD: NO. The IED serves as basis for the payment of advance duties on

importations whereas the IEIRD evidences the final payment of duties and taxes.

The operative act that constitutes "entry" of the imported articles at the port of entry is the filing and acceptance of the "specified entry form" together with the other documents required by law and regulations.

There is no dispute that the "specified entry form" refers to the IEIRD.

The filing of the IEIRDs has several important purposes: to ascertain the value of the imported articles, collect the correct and final amount of customs duties and avoid smuggling of goods into the country.

Strong issues of public policy militate against petitioner’s interpretation.

It is the IEIRD which accompanies the final payment of duties and taxes.

These duties and taxes must be paid in full before the BOC can allow the release of the imported articles from its custody.

We hold, therefore, that under the relevant provisions of the TCC, both the IED and IEIRD should be filed within 30 days from the date of discharge of the last package from the vessel or aircraft.

In the case at bar , the IEIRD was filed beyond the 30-day non-extendible period as provided in under Section 1301 of the TCC.

As a result, the position of petitioner, that the import entry to be filed within the 30-day period refers to the IED and not the IEIRD, has no legal basis.

THE IMPORTATIONS WERE ABANDONEDIN FAVOR OF THE GOVERNMENT

Petitioner’s failure to file the required entries within a non-extendible period of thirty days from date of discharge of the last package from the carrying vessel constituted implied abandonment of its oil importations.

This means that from the precise moment that the non-extendible thirty-day period lapsed, the abandoned shipments were deemed (that is, they became) the property of the government.

Therefore, when petitioner withdrew the oil shipments for consumption, it appropriated for itself properties which already belonged to the government.

Accordingly, it became liable for the total dutiable value of the shipments of imported crude oil amounting to P1.1B reduced by the total amount of duties paid amounting to P316M thereby leaving a balance of P893M.

COMMISSIONER OF CUSTOMS V. MANILA STAR FERRY [Angelo]

COMMISSIONER OF CUSTOMS V. AGFHA INCORPORATED [Myta]G.R. No. 187425 March 28, 2011.

FACTS:

• A shipment containing bales of textile grey cloth arrived at the Manila International Container Port (MICP). The Commissioner, however, held the subject shipment because its owner/consignee was allegedly fictitious. AGFHA intervened and alleged that it was the owner and actual consignee of the subject shipment.

• After seizure and forfeiture proceedings took place, the District Collector of Customs, MICP, rendered a decision ordering the forfeiture of the subject shipment in favor of the government.

• AGFHA filed an appeal which Commissioner rendered a decision dismissing it.

• The CTA-Second Division reversed the Commissioner's Decision and ordered the immediate release of the subject shipment to AGFHA.

ISSUE: Whether or not the Court of Tax Appeals was correct in awarding the respondent the amount of US $160,348.08, as payment for the value of the subject lost shipment that was in the custody of the petitioner.

HELD: YES. The Supreme Court agrees with the ruling of the CTA that AGFHA is entitled to recover the value of its lost shipment based on the acquisition cost at the time of payment. Since R.A. No. 529 does not provide for the rate of exchange for the payment of foreign currency obligations incurred after its enactment, the Court held in a number of cases that the rate of exchange for the conversion in the peso equivalent should be the prevailing rate at the time of payment.

The seizure and detention of a shipment of items which disappeared while in the custody of the Bureau of Customs, the SC holds the petitioner's liable and shall pay, if not otherwise provided, in Philippine currency, computed at the exchange rate prevailing at the time of actual payment.

On the issue regarding the state immunity doctrine, the Commissioner cannot escape liability for the lost shipment of goods.