taxation case digest part 1

8/13/2019 Taxation Case Digest Part 1

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1 San Beda College of Law2005CENTRALIZEDBAROPERATIONS

SUMMARY OF DOCTRINES

GENERAL PRINCIPLESTax Exemption of Charitabe In!tit"tion!

To determine whether an enterprise is a charitable institution/entity or not, the elementswhich should be considered include the statute creating the enterprise, its corporate purposes, itsconstitution and by-laws, the methods of administration, the nature of the actual work performed,the character of the services rendered, the indefiniteness of the beneficiaries, and the use andoccupation of the properties.

As a general principle, a charitable institution does not lose its character as such and itsexemption from taxes simply because it derives income from paying patients, whether out-patient,or confined in the hospital, or receives subsidies from the government, so long as the moneyreceived is devoted or used altogether to the charitable object which it is intended to achieve andno money inures to the private benefit of the persons managing or operating the institution.

!nder the "#$% and "#&$ 'onstitutions and (ep. Act )o. $"*+ in order to be entitled to theexemption, the petitioner is burdened to prove, by clear and uneuivocal proof, that a it is acharitable institution and b its real properties are A'T!A0, 12(3'T0 and 34'!52630 usedfor charitable purposes. 2f real property is used for one or more commercial purposes, it is notexclusively used for the exempted purposes but is subject to taxation. The words 7dominant use7 or7principal use7 cannot be substituted for the words 7used exclusively7 without doing violence to the'onstitutions and the law. [LUNG CENTER OF THE PHILIPPINES vs. QUEZON CITY ANDCONSTANTINO P. ROSAS. G.R. No. 144104. Jun !"# !004.$

Tax Exemption# Tr"!t F"n$!The 8ratuity 9lan will lose its tax-exempt status if the retirement benefits are released

prior to the retirement of the employees. The trust funds of employees other than those of private

employers are ualified for certain tax exemptions pursuant to 5ection *+:, formerly 5ection;%b, of the )ational 2nternal (evenue 'ode. [DE%ELOP&ENT 'AN( OF THE PHILIPPINES vs.CO&&ISSION ON AUDIT. G.R. No. 144)1*. F+,u-, 11# !004.$

In%ome Tax# Fina &ithho$in' Tax# Gro!! Re%eipt! Tax# Do"be TaxationAlthough the ?T on respondent :ank@s interest income was not actually received by

respondent because it was remitted directly to the government, the fact that the amountredounded to the bank@s benefit makes it part of the taxable gross receipts in computing the ;=8(T. The ;= 8(T (Sec. 119 of the Tax Code) is included under 7Title 6. ther 9ercentage Taxes7and is not subject to withholding. The ?T, on the other hand, falls under 5ection


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2

San Beda College of Law

2005CENTRALIZEDBAROPERATIONS

Tax Exemption of Spe%ia E%onomi% (one!2t is the legislature, unless limited by a provision of the state constitution, that has full

power to exempt any person or corporation or class of property from taxation, its power to exempt

being as broad as its power to tax. ther than 'ongress, the 'onstitution may itself provide forspecific tax exemptions, or local governments may pass ordinances on exemption only from localtaxes.

The claimed statutory exemption of the Cohn Day 53E from taxation should be manifest andunmistakable from the language of the law on which it is based it must be expressly granted in astatute stated in a language too clear to be mistaken. Tax exemption cannot be implied as it mustbe categorically and unmistakably expressed. [JOHN HAY PEOPLES ALTERNATI%E COALITION vs.%ICTOR LI&. G.R. No. 11"22). O3o+, !4# !00.$

Per%enta'e tax on pa)n!hop!# *ai$it+ of Re,en"e Memoran$"m Or$er! an$ Cir%"ar!?hile it is true that pawnshops are engaged in the business of lending money, they are not

considered 7lending investors7 for the purpose of imposing the ;= percentage taxes becauseF "

pawnshops and lending investors were subjected to different tax treatments


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5ection *B of the (9T', prohibits courts from declaring any tax invalid by reason ofirregularities or informalities in the proceedings of the officers charged with the assessment orcollection of taxes except upon the condition that the taxpayer pays the just amount of the tax, asdetermined by the court in the pending proceeding. [&ERALCO vs. NELIA A. 'ARLIS. G.R. No.

114!1. Jun !"# !004.$

Tax A!!e!!ment# Proper Ser,i%eThe legal obligation on the executor, administrator or any of the legal heirs, to inform

respondent '2( of the decedentGs death under Section 104 of the 1977 NIRCpertains only to Hallcases of transfer subject to taxI or where the Hgross value of the estate exceeds 9%,+++I. 2t hasabsolutely no applicability to a case for deficiency of income tax.

?hen an estate is under administration, notice must be sent to the administrator of theestate, since it is the said administrator, as representative of the estate, who has the legalobligation to pay and discharge all debts of the estate and to perform all orders of the court.[ESTATE OF THE LATE JULIANA DIEZ vs. CIR. G.R. No. 1)))41. J-nu-, !2#!004.$

Tax A!!e!!ment# Proper Ser,i%e?here the notice of assessment is sent to the companyGs old business address, despite the

fact that the new address has been communicated to the :2(, there is then no valid assessment bythe :2(

5ince there was a failure to effect a timely valid assessment, the period for filing a criminalcase for 9A'@s tax liabilities had prescribed by the time 'ommissioner instituted the criminal casesagainst 9A'Gs former officers. [CIR vs. 'PI# -s LIQUIDATOR OF PARA&OUNT ACCEPTANCECORPORATION. G.R. No. 1)44*. S7+, !# !00.$

Re,en"e Re'"ation!# Nat"re# Appi%ationAdministrative issuances may be distinguished according to their nature and substanceF

legislative and interpretative. A legislative rule is in the matter of subordinate legislation, designedto implement a primary legislation by providing the details thereof. An interpretative rule, on theother hand, is designed to provide guidelines to the law, which the administrative agency is incharge of enforcing.

The principle is well entrenched that statutes, including administrative rules andregulations, operate prospectively only, unless the legislative intent to the contrary is manifest byexpress terms or by necessary implication.

Tax refunds are in the nature of tax exemptions. As such, these are regarded as inderogation of sovereign authority and are to be strictly construed against the person or entityclaiming the exemption. ['PI LEASING CORP. vs. COURT OF APPEALS. G.R. No. 1!2*!4.Nov+, 1/# !00.$

LOCAL TA-ATIONLo%a Taxation# *ai$it+ of a M"ni%ipa Or$inan%e

:y express language of 5ections ";% and ";; of (A )o. $"*+, local government units,through their 5anggunian, may prescribe the terms and conditions for the imposition of toll fees orcharges for the use of any public road, pier or wharf funded and constructed by them. A service feeimposed on vehicles using municipal roads leading to the wharf is thus valid. Dowever, 5ection"%%e of (A )o. $"*+ prohibits the imposition, in the guise of wharfage, of fees J as well as allother taxes or charges in any form whatsoever J on goods or merchandise.[PAL&A DE%ELOP&ENTCORPORATION vs. &UNICIPALITY OF &ALANGAS. G.R. No. 1)!4"!. O3o+, 1*# !00.$

TAXATIONLAW COMMITTEEANDDIEST!OOLCHAIRPERSON: Charmaine TorresASST. CHAIRPERSON: Rhohail CastroEDP: Rachel R. SayaSUBJECTHEADS: Jemina Sy (General Principles! Casian"Ila#an (Inc"me Ta$a%i"n! J&'nee G'illerm" (Trans)er Ta$es! Ryan C" (Ta$ Remeies! E*in T"rres (+"cal Ta$a%i"n an Real Pr"per%y Ta$a%i"nC&ris%ian

Ca,rera (Tari)) an C's%"ms C"e! -ae%%e A'r (Anne$es! Eier Enri/'e! (Anne$es DIGEST POO+: Sam Acere%! Ian Camara! R"el Cas%r"! RiCima)ranca!Emman'el Ric" C"rp'! Jeenice e Sa#'n! R"0ane El"pre! Amelyn Ja1ill"nar! 21e%%e +a,ra"r! Jesse%%e +a,ria#a! -ilre -a,an#l"! R',y -ae-apana"! Reyn"l -a%a! Elise" Pi%ar#'e! 3r"s&ell Sa're! C&arrisimae 4en%'ra


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2005CENTRALIZEDBAROPERATIONSLo%a Taxation# Po)er! of Cit+ A!!e!!or!

The determination made by the respondent 'ity Assessor with regard to the taxability ofthe subject real properties suarely falls within its power to assess properties for taxation purposessubject to appeal before the ocal :oard of Assessment Appeals. The authority to receive evidence,

as basis for classification of properties for taxation, is legally vested on the respondent 'ityAssessor whose action is appealable to the ocal :oard of Assessment Appeals and the 'entral:oard of Assessment Appeals, if necessary.[SYSTE&S PLUS CO&PUTER COLLEGE OF CALOOCANCITY vs. LOCAL GO%ERN&ENT OF CALOOCAN CITY. G.R. No. 14*/!. Au8us 2# !00.$

REAL PROPERTY TA-ATION

Tax Exemption# Rea Propert+ Tax an$ ."!ine!! TaxThe exemption of public property from taxation does not extend to improvements made

thereon by homesteaders or occupants at their own expense. The warehouse in the instant case isthus, taxable it being a mere improvement built on an alleged property of public dominion.

Any income or profit generated by an entity, even of a corporation organiKed without anyintention of realiKing profit in the conduct of its activities, is subject to tax. ?hat matters is theestablished fact that it leased out its building to ten private entities from which it regularly earnedsubstantial income. Thus, in the absence of any proof of exemption therefrom, petitioner is liablefor the assessed business taxes.[PHILIPPINE PORTS AUTHORITY vs. CITY OF ILOILO. G.R. No.10"2"1. Ju6 14# !00.$

TARIFF AND CUSTOMS CODE

/"ri!$i%tion of the Coe%tor of C"!tom! 0 Commi!!ioner of C"!tom!There is no uestion that (egional Trial 'ourts are devoid of any competence to pass upon

the validity or regularity of seiKure and forfeiture proceedings conducted by the :ureau of 'ustomsand to enjoin or otherwise interfere with these proceedings. The 'ollector of 'ustoms sitting inseiKure and forfeiture proceedings has exclusive jurisdiction to hear and determine all uestions

touching on the seiKure and forfeiture of dutiable goods. The (egional Trial 'ourts are precludedfrom assuming cogniKance over such matters even through petitions of certiorari, prohibition ormandamus.[R.%. &ARZAN FREIGHT# INC. vs. COURT OF APPEALS 9 SHIELA:S &ANUFACTURINGINC. G.R. No. 1!/0*4. &-,3; 4# !004.$

2005 CENT"ALI#EDBA"O!E"ATIONSEXEC$TI%ECOMMITTEEANDS$B&ECTC'AI"!E"SONS

Ma(i)el A*a(entos(O1er5all C&airpers"n! "onald &al+an,a((O1er5all 4ice C&air!-olanda Tolentino (4C5Acas! Jennife( Ang (4C5Secre%aria%!&o. Ind/)tio (4C53inance! Elaine Mas/at (4C5EDP! Anna Ma(ga(ita E(es (4C5+"#is%ics &onatan Mang/nda.ao(P"li%ical +a*! 3(an)is Benedi)t "eot/ta( (+a,"r +a*!

"o+/ald !adilla(Ci1il +a*! Ca(+aine To((es(Ta$a%i"n +a*! Ma( Daid Ma(tine,(Criminal +a*! a(n. L/isa Aleg(e(C"mmercial +a*!&in. Ann $.(Remeial +a*!&a)ie Lo/ Ba/tista(+e#al E%&ics


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CASE DIGEST

GENERAL PRINCIPLES

Tax Exemption of Charitabe In!tit"tion!

LUNG CENTER OF T1E P1ILIPPINES ,!2 3UE(ON CITY an$ CONSTANTINO P2 ROSAS4G2R2 No2 5665762 /"ne 89: 87762;

CALLEJO# SR.# Jund are

distributed to 1:9 employees prior to their retirement, the 8ratuity 9lan will no longer ualify forexemption under 5ection *+:. To recall, 1:9 (esolution )o. $#B creating the 8ratuity 9lanexpressly provides that Hsince the gratuity plan will be tax ualified under the )ational 2nternal(evenue 'ode xxx, the :ankGs periodic contributions thereto shall be deductible for tax purposesand the earnings therefrom tax free.I 2f 1:9 insists that its employees may receive the9"",* CORP24G2R2 No2 565952 No,ember 8?: 877B2;

PANGANI'AN# Jor the calendar year "##;, respondent filed its Luarterly 9ercentage Tax (eturnsreflecting gross receipts pertaining to ;= N8ross (eceipts TaxO rate in the total amount of9",B$B,*#",*#%.BB with corresponding gross receipts tax payments in the sum of 9$%,$%B,;&B.*+.(espondent alleges that the total gross receipts in the amount of 9",B$B,*#",*#%.BB included thesum of 9%;+,&+$,&$;."; representing gross receipts from passive income which was alreadysubjected to


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2005CENTRALIZEDBAROPERATIONS1ELD< ". YES2 Although, the ?T on respondent@s interest income was not actually receivedby respondent because it was remitted directly to the government, the fact that the amountredounded to the bank@s benefit makes it part of the taxable gross receipts in computing the ;=8(T. The ;= 8(T (Sec. 119 of the Tax Code)is included under 7Title 6. ther 9ercentage Taxes7

and is not subject to withholding. The banks and non-bank financial intermediaries liable thereforshall, under 5ection "


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FACTS< Assailed in this case is 9roclamation )o. B


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2005CENTRALIZEDBAROPERATIONS9ursuant to these issuances, the :2( issued an assessment notice against huillier

demanding payment of deficiency percentage tax for "##B inclusive of interest and surcharges.huillier filed an administrative protest with the ffice of the (evenue (egional 1irector

contending that " neither the Tax 'ode nor the 6AT aw expressly imposes ;= percentage tax on

the gross income of pawnshops


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providing for the means that can facilitate or render least cumbersome the implementation of thelaw but substantially increases the burden of those governed, it behooves the agency to accord atleast to those directly affected a chance to be heard, and thereafter to be duly informed, beforethat new issuance is given the force and effect of law.

?ithout these disputed '2( issuances, pawnshops would not be liable to pay the ;=percentage tax, considering that they were not specifically included in 5ection ""* of the )2(' of"#$$, as amended. 2n so doing, the '2( did not simply interpret the law. The due observance of thereuirements of notice, hearing, and publication should not have been ignored.

Carr+in' for)ar$ of ex%e!! or o,erpai$ in%ome tax

A. LEASING AND FINANCE CORPORATION ,!2 COMMISSIONER OF INTERNAL RE*ENUE4G2R2 No2 5BB682 /"+ : 877B;

CARPIO=&ORALES# Jon C@. GRNo. *0/1. A7,@6 !4# 1"/"$

2f the purpose is primarily revenue or if revenue is at least one of the real and substantialpurposes, then the exaction is a tax. Dence, motor vehicle registration fees are taxes because thelegislative intent is mainly to raise funds for the construction and maintenance of highways and, toa much lesser degree, to pay for the expenses of the and transportation ffice, a regulatoryagency of the 8overnment.[P;@6@77@n A@,6@ns In3. vs. E?u. GR No. L41/# Au8us 1)# 1"//$

?hile it is true that the first part which reuires that the alien shall secure an employmentpermit from the Mayor involves the exercise of discretion and judgment in the processing andapproval or disapproval of applications for employment permits and therefore is regulatory incharacter, the second part which reuires the payment of 9;+.++ as employeeGs fee is notregulatory but a revenue measure. There is no logic or justification in exacting 9;+.++ from alienswho have been cleared for employment. 2t is obvious that the purpose of the ordinance is to raisemoney under the guise of regulation. [%@668-s vs. H@u C;@on8 Ts-@ P-o Ho. GR No. L=!"*4*.Nov+, 10# 1"2/$

Cudging from the amount of the fees fixed in the ordinances in uestion, the so-called feeswere in reality taxes for city revenue. The fees cannot possibly be considered as mere expenseincurred for, or the cost of the inspection of each animal and the issuance of the correspondingpermit. There would be no doubt that the fees collected would amount to a siKable sum and

augment greatly the revenues of the municipal corporation.[S-6?-n- vs. C@ o I6o@6o GR No. L10420. Jun !*# 1")/$

2ncidentally, exemption from tax does not include building permit fee and specialassessments as these are not taxes but regulatory fees in the case of the license fee, and levy onaccount of benefits to land for the special assessments. [A7oso6@3 P,3 o ; &oun-@nP,ov@n3 vs. C@ T,-su,, o '-8u@o. GR No. 42!)!. A7,@6 1/# 1"41$

The amount of exaction or charge, if it is to be a license fee, must only be of a sufficientamount to include expenses of " issuing the license and


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2005CENTRALIZEDBAROPERATIONSthe seller is nonetheless liable for the payment of the tax as the same is a tax not on the buyerhimself but is actually a tax on the seller.

?hen the consumer or end-user of a manufactured product is tax-exempt, such exemptioncovers only those taxes for which such consumer or end-user is directly liable. 2ndirect taxes are

not included. Dence, the manufacturer cannot claim exemption from the payment of sales taxneither can the consumer or buyer of the product demand the refund of the tax that themanufacturer might have passed on to them.[P;@6@77@n A36n Co.# In3. vs. CIR. GR No. L1"202. Au8us 12# 1"*2$

TAPAYER:SSUIT

A duly elected 5enator of the 9hilippines and a taxpayer thereof has the legal capacity tofile an action for certiorari, prohibition and mandamus to uestion the legality of a claimed refundof indirect taxes like the tax on oil products, since the refund itself, if found to be without legalbasis, constitutes an illegal expenditure of public funds.[&-3?- vs. &-3-,-@8. GR No. //!"1.

Jun /# 1""$

The right of a taxpayer to file an action uestioning the validity or constitutionality of astatute or law has been recogniKed, on the theory that the expenditure of public funds by anofficer of the 8overnment for the purpose of administering or implementing an unconstitutional orinvalid law, constitutes a misapplication of such funds.

The present case, however, is not an action to uestion the constitutionality or validity or astatute or law. 2t is an action to annul and set aside the 7Agreement to Arbitrate7. Dence,petitioners have no legal standing to file the petition. [G-s3on vs. A,,oo. GR No. 2//".O3o+, 1*# 1"/"$

LIMITATIONS ON T1E TA-ING PO&ER

INHERENTLI&ITATIONS

Pu+6@3 Pu,7os

8enerally, under the express and implied provisions of the constitution, public funds maybe used only for a public purpose. The right of the legislature to appropriate public funds iscorrelative with its right to tax, and, under constitutional provisions against taxation except forpublic purposes and prohibiting the collection of tax for one purpose and the devotion thereof toanother purpose, no appropriation of state funds can be made for other than a public purpose.[P-s3u-6 vs. S3. o Pu+6@3 5o,Ks. GR No. L1040). D3+, !"# 1"*0$

The promotion of general welfare is the 5tate@s paramount concern. Thus, a law imposing atax on sugar produced by sugar centrals for the purpose of using the proceeds thereof in therehabilitation and upliftment of the sugar industry is a tax levied for a public purpose. [Lu> vs.

A,-n-. GR No. L2/)". D3+, !!# 1"))$

2n the imposition of taxes, public purpose is presumed. Dence, where an ordinance did notspecifically state the purpose for which the tax was to be used, it is presumed that said tax iscreated for a public purpose.[&n?o>- S-nos -n? Co. vs. &un@3@7-6@ o &3-u--n. GR No.L*0*". A7,@6 0# 1")4$

Non=?68-+@6@ o ; T-B@n8 Po,

The power granted to 'ongress under this constitutional provision to authoriKe the9resident to fix within specified limits and subjects to such limitations and restrictions as it mayimpose, and subject to such limitations and restrictions as it may impose, tariff rates even forrevenue purposes only. 'ustoms duties which are assessed at the prescribed tariff rates are very

much like taxes which are freuently imposed both for revenue-raising and for regulatory purposes.[G-,3@- vs. EB3u@v S3,-,. GR No. 101!2. Ju6 # 1""!$





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The power of taxation may be delegated to local governments in respect of matters of localconcern. :y necessary implication, the legislative power to create political corporations forpurposes of local self-government carries with it the power to confer on such local government

agencies the power to tax. 2n delegating the authority, the 5tate is not limited to the exactmeasure of that which is exercised by itself. ?hen it is said that the taxing power may bedelegated to municipalities and the like, it is meant that there may be delegated such measure ofpower to impose and collect taxes as the legislature may deem expedient. Thus, municipalities maybe permitted to tax subjects which for reasons of public policy the 5tate has not deemed wise totax for more general purposes.[P7s@=Co6- 'o6@n8 Co. o ; P;@6s.# In3. vs. &un@3@7-6@ oT-n-u-n# L. GR No. L=11)*. F+,u-, !2# 1"2*$

T,,@o,@-6@ o, S@us o T-B-@on

>or income tax purposes, :ritish verseas Airways 'orp., whose airplanes do not carrypassengers to and from the 9hilippines as it has no landing rights, is taxable on the income realiKedfrom the sales of its tickets in the 9hilippines through sales office. At the same time, the airlinewould not be subject to any business tax inasmuch as the absence of any landing rights would mean

that it is not engaged in the exercise of any privilege which could be subject to the business orprivilege tax. (See a%so Commissioner $s. ir India. R No. 7/44. -anuar* /9 1923) [CIR vs.',@@s; Ov,s-s A@,-s Co,7. GR No. *)22=24# A7,@6 0# 1"/2$

?here the tax that is being imposed is a tax upon the performance of an act, enjoyment ofa privilege, or engaging in an occupation, or what is sometimes known as an excise or privilege, thesitus of taxation is the place in which the act is performed or where the occupation is engaged in.5o, in case of sales tax imposed by a city government, the place where the sale is perfected andconsummated determines the situs of taxation.[A66@? T;,-? Co.# In3. vs. C@ o &-n@6-. GRNo. L40!"*. Nov+, !1# 1"/4$

The city can tax the sale of matches where shipments or deliveries are made directly tocustomer outside the city provided the sales are booked and paid for in the city to a carrier for

shipment to the buyer. 8enerally, delivery to the carrier is delivery to the buyer. [P;@6@77@n&-3; Co.# L?. vs. C@ o C+u. GR No. L024). J-nu-, 1/# 1"2/$

2n case of additional sales tax on the sale of fuels and oils, said tax may not be applied todeliveries outside the municipality since the consummation of the sale is determined by thedelivery of the things which are the subject matter of the contract. The situs of the sale for taxpurposes is not the place where the contract of sale is perfected but the place of itsconsummation.[T; S;66 Co. o ; P;@6@77@ns# L?. vs. &un@3@7-6@ o S@7o3o. GR No. L1!*/0. &-,3; !0# 1")"$

The shares of stock left behind by a non-resident alien decedent in an anonymouspartnership in the 9hilippines are subject to 9hilippine inheritance tax notwithstanding the mobiliarule. The mobilia rule should yield to reason. The shares of stock are also taxable in the situs oftheir actual location, i.e., the 9hilippines.[566s F-,8o '-nK 9 Un@on T,us Co. vs. Co663o, oIn,n-6 Rvnu. GR No. 4*2!0. Jun !/# 1"40$

2n case of fire insurance covering property situated in the 9hilippines, even though theinsurance contract was executed outside the 9hilippines, said premiums are taxable against theinsurer in the 9hilippines because the 9hilippine 8overnment must get something in return for theprotection it gives to the insured property in the 9hilippines, and by reason of such protection, theinsurer is benefited thereby. [&-n@6- E63,@3 Co. vs. Y-3o. GR No. 4)*"2. Nov+, 1# 1""$

EB7@on o ; Gov,nn ,o T-Bs




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2005CENTRALIZEDBAROPERATIONS?hat is decisive is that the properties possessed by 555, albeit devoted to private orproprietary, are in fact owned by the government of the 9hilippines. As such they are exemptfrom realty taxes. 2t is axiomatic that when public property is involved, exemption is the ruleand taxation, the exception.[So3@-6 S3u,@ ss vs. C@ o '-3o6o?.GR No. L)2!*.

Ju6 !1# 1"/!$

)otwithstanding the immunity of the 8overnment from taxes, the principle is also wellrecogniKed that the 8overnment may tax itself. There is no constitutional limitation on the powerof the 'ongress to tax the Armed >orces of the 9hilippines if it wishes to do so. ['@s-- L-n?T,-ns7o,-@on vs. Co663o, o In,n-6 Rvnu. GR Nos. L1!100 9 L11/1!. &- !"# 1")"$

CONSTITUTIONALLI&ITATIONS

Du P,o3ss C6-usCudicial intervention is unnecessary in the absence of a factual setting or an actual

controversy which is engendered by the issuance of an assessment against a taxpayer. There is,however, no justification for passing upon the claims that the law 36AT (.A. $$"* denies

petitioner@s right to due process. 2ndeed, the absence of threat of immediate harm makes the needfor judicial intervention less evident and underscores the essential nature of petitioner@s attack onthe law on the ground of denial of due process as a mere academic discussion of the merits of thelaw. >or the fact is that there have been no notices of assessments issued to petitioners and nodeterminations at the administrative levels of their claims so as to illuminate the actual operationof the law and enable us to reach sound judgment regarding so fundamental uestions as thoseraised in these suits.[To6n@no vs. S3,-, o F@n-n3. GR No. 11)4)). Au8us !)# 1""4$

1ue process is not violated if a governmental body like the >iscal 2ncentive (eview :oard>2(:, which was tasked with the duty of recommending the restoration of tax exemptionspreviously abolished under presidential decrees, is headed by the Minister of >inance, who at thesame time is the very same person who approves or disapproves the >2(:@s recommendationprovided no two opposing or conflicting interests are involved, like the case of the restored taxexemption of a particular taxpayer where it appears that there is no interest that is existing whichis in conflict with the interests of such taxpayer. [&-3?- vs. &-3-,-@8. GR No. //!"1. &- 1#1""1$

?hen tax turns out to be of a confiscatory nature, such an imposition could very well beconsidered as being violative of the due process principle. 1ue process clause in the 'onstitutionmay be invoked where a tax statute is so arbitrary that it finds no support in the 'onstitution.

The taxing power has the authority to make reasonable and natural classification forpurposes of taxation but the 8overnment@s act must not be prompted by a spirit of hostility or, atthe very least, discrimination that finds no support in reason. 2t suffices then that the laws operateeually and uniformly on all persons under similar circumstances or that all persons must betreated in the same manner, the conditions not being different both in privileges conferred and the

liabilities imposed.[Rs vs. A6-n>o,. GR Nos. 4"/"=4*. A7,@6 !*# 1""1$1ue process was not violated when the 6AT law 3..


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1ue process was not observed when the trial court, an action for declaratory relief,declared that certain property owned by the (oman 'atholic 'hurch in :angued, Abra was tax-exempt under the "#$% 'onstitution, it appearing that no court hearing was conducted thereon.[P,ov@n3 o A+,- vs. H,n-n?o. GR No. L4"*. Au8us 1# 1"/1$

There is a denial of due process on account of the passage of an ordinance in the 'ity ofManila which imposes a permit fee of 9;+.++ on aliens as a condition to employment or engaging inany business or occupation, where it appears that under said ordinance, the 'ity Mayor of Manilacould withhold or refuse issuance of such permit at will. Aliens, once admitted in the 9hilippines,cannot be deprived of life without due process of law and this guarantee includes the means oflivelihood. [%@668-s vs. H@u C;@on8 Ts-@ P-o Ho. GR No. L=!"*4*. Nov+, 10# 1"2/$

Eu-6 P,o3@on C6-us

A law (.A. %&B% which imposes a preferential franchise tax rate of


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?here a mining concession was granted under a (oyal 1ecree and where it appears thatunder said decree no other taxes except those mentioned therein shall be imposed on mining andmetallurgical industries, the levy of a tax on said mining claim plus an ad valorem tax on mineraloutput under a subseuent law Act "" constitute an impairment of contract because a mining

concession is a contract.[C-s-nov-s vs. Ho,?. GR No. L42. &-,3; !!# 1"02$

Un@o,@# Eu@-+@6@ -n? P,o8,ss@v@ o T-B-@on

!niformity of taxation, like the kindred concept of eual protection, merely reuires thatall subjects or objects of taxation, similarly situated are to be treated alike both in privileges andliabilities.[T-n vs. D6 Ros-,@o. GR No.10"!/". O3o+, # 1""4$

Taxation is said to be euitable when its burden falls on those better able to pay. Taxationis progressive when its rate goes up depending on the resources of the person affected.

The H2ncome ApproachI should have been used instead of the H'omparable 5alesApproachI as the basis in fixing the assessed value of the properties. :y no stretch of theimagination can the market value of the properties covered by 91 )o. o,. GR Nos. 4"/"=4*. A7,@6 !*# 1""1$The fact, therefore, that the owners of other classes of buildings in the 'ity of 2loilo do not

pay the taxes imposed by the ordinance in uestion is no argument at all against uniformity andeuality of the tax imposition. )either is the rule of euality and uniformity violated by the factthat tenement taxes are not imposed in other cities, for the same rule does not reuire that taxesfor the same purpose should be imposed in different territorial subdivisions at the same time. 5olong as the burden of the tax falls eually and impartially on all owners or operators of tenementhouses similarly classified or situated, euality and uniformity of taxation is accomplished.[%@66-nuv- vs. C@ o I6o@6o. GR No. L!*)!1. D3+, !/# 1"*/$

!niformity in taxation means that all taxable articles or kinds of property of the sameclasses shall be taxed at the same rate. A tax is uniform when it operates with the same force and

effect in every place where the subject of it is found. [C;u,3;@66 vs. Con373@on. GR No. 11)2!.S7+, !!# 1"1*$

T-B EB7@on o P,o7,@s A3u-66# D@,36 -n? EB36us@v6 Us? o, R6@8@ous#

C;-,@-+6 -n? E?u3-@on-6 Pu,7ossThe test of exemption from taxation is the use of the property for the purposes mentioned

in the 'onstitution. >or purposes of tax exemption, 7use7 overrides 7ownership7 such that ifproperty, although actually owned by a religious, charitable or educational institution, is actuallyused for non-exempt purpose, the exemption from tax of said property vanishes.

>or tax exemption purposes, the term Hexclusively usedI is not limited to total or absoluteuse for religious, charitable or educational purposes. 2f the property is incidentally used for theaforementioned purposes, it is clear from decided cases that tax exemptions may still subsist.

?here the main building of an educational institution is used both as classrooms for its highschool and college students as well as residence of the 5chool 1irector and his family, the taxexempt character of such property remains despite the fact that it is used as such, as the same maybe justified as being only incidental or complementary to its main or primary purpose of providingeducation to its students. [A+,- %-66 Co668 In3. vs. Au@no. GR No. L"0/*. Jun 1)# 1"//$

The present 'onstitution added Hcharitable institutions, mosues and non-profitcemeteriesI and reuired that for the exemption of Hlands, buildings and improvements,I theyshould not only be HexclusivelyI but also HactuallyI and HdirectlyI used for religious or charitablepurposes. The 'onstitution is worded differently. The change should not be ignored. 2t must dulytaken into consideration. (eliance on past decisions would have sufficed were the words HactuallyIas well as HdirectlyI not added. There must be proof therefore of the actual and direct use of thelands, buildings and improvements for religious or charitable purposes to be exempt from taxation.

[P,ov@n3 o A+,- vs. H,n-n?o. GR No. L4"*. Au8us 1# 1"/1$TAXATIONLAW COMMITTEEANDDIEST!OOLCHAIRPERSON: Charmaine TorresASST. CHAIRPERSON: Rhohail CastroEDP: Rachel R. SayaSUBJECTHEADS: Jemina Sy (General Principles! Casian"Ila#an (Inc"me Ta$a%i"n! J&'nee G'illerm" (Trans)er Ta$es! Ryan C" (Ta$ Remeies! E*in T"rres (+"cal Ta$a%i"n an Real Pr"per%y Ta$a%i"nC&ris%ian



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40



The constitutional provision, 5ec.


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>or double taxation to exist, the same property must be taxed twice, when it should betaxed but once. 1ouble taxation has also been defined as taxing the same person twice by the samejurisdiction for the same thing. 5urely, a tax on plaintiff@s products is different from a tax on theprivilege of storing copra in a bodega situated within the territorial boundary of defendant

municipality.[P,o3, 9 G-+6 Co,7. vs. &un@3@7-6@ o J-8n-. GR No. L=!4!*). D3+,!/# 1"2"$

1ouble taxation is not prohibited by the 'onstitution and there is double taxation when thesame person is taxed by the same jurisdiction for the same purpose. This is not the case in the caseat bar for the ordinance in uestion imposes a tax on the sale or disposal of every Hbottle orcontainerI of liuor or intoxicating beverages, and, as such, is a typical tax or revenue measure,whereas the fee it pays annually is for a 7second-class wholesale liuor license,7 which is a licenseto engage in the business of wholesale liuor in 'ebu 'ity, and, accordingly, constitutes aregulatory measure, in the exercise of the police power. [S-n &@8u6 ',,# In3. vs. C@ oC+u. GR No. L=!01!. F+,u-, !*# 1"2!$

A city ordinance imposing a tax on the sale of lumber cannot be declared null and void on

the ground that the ordinance in uestion imposes in effect double taxation because the business oflumber yard is already regulated under the 'harter and the sale of lumber is a mere incident ofthe business of lumber yard.G 5uffice it to say that regulation and taxation are two different thingsthe first being an exercise of police power, whereas the latter is not, apart from the fact thatdouble taxation is not prohibited in the 9hilippines. [S,-@3- vs. T,-su,, o O,o3 C@. GRNo. L=!4/1. A7,@6 !/# 1"*"$

1ouble taxation has been otherwise described as 7direct duplicate taxation7. >or doubletaxation to exist, 7the same property must be taxed twice, when it should be taxed but once7. 2thas also been 7defined as taxing the same person twice by the same jurisdiction for the samething7.

?ith the foregoing precepts in mind, there is no double taxation in the case at bar. >irst,the two taxes cover two different objects. 5ection " of the ordinance taxes a person operating

sugar centrals or engaged in the manufacture of centrifugal sugar. ?hile under 5ection


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42


2005CENTRALIZEDBAROPERATIONSthrough the tedious process of a tax case. To avail of a tax amnesty granted by the government,and to be immune from suit on its delinuencies, the taxpayer must have voluntarily disclosed hispreviously untaxed income and must have paid the corresponding tax on such previously untaxedincome.

A tax amnesty, much like a tax exemption, is never favored nor presumed in law and ifgranted by statute, the terms of the amnesty like that of a tax exemption must be construedstrictly against the taxpayer and liberally in favor of the taxing authority. ['--s vs. Cou, o

A77-6s. GR No. 10!"*2. F+,u-, 10# !000$

The )ational 9ower 'orporation )9', a government controlled corporation, couldjustifiably claim for the refund of the tax on pertroleum products that it had purchased fromseveral oil companies, where it appears that under a number of tax exemption laws andpresidential decrees enacted for said entity, its exemption from the payment of said taxes wasclearly shown.

2t should be noted in this connection that this rule on strict interpretation also does notapply in case of exemptions granted in favor of a government political subdivision orinstrumentality like public corporations.[&-3?- vs. &-3-,-@8. GR No. //!"1. Jun /# 1""$

The salaries of the 'hief Custice and Associate Custices of the 5upreme 'ourt as well asthose judges of inferior courts are taxable. The clear intent of the 'onstitutional 'ommission wasto delete the proposed express grant of exemption from payment of income tax to members of thejudiciary, so as to give substance to euality among the three branches of 8overnment. 2n thecourse of the deliberations in the 'onstitutional 'ommission, it was expressly made clear that thesalaries of the members of the judiciary would be subject to general income tax applied to alltaxpayers.[N@--n vs. CIR. GR No. L=2/2/0. Ju6 !# 1"/2$

The 'ongress could impair petitionerGs legislative franchise by making it liable for incometax which heretofore it was exempted by virtue of the exemption provided for in 5ection % of itsfranchise. The 'onstitution provides that a franchise is subject to amendment, alteration, orrepeal by the 'ongress.[C-8--n E63,@3 Co. vs. Co@ss@on,. GR No. L*010!*. S7+,

!)# 1"/)$!nder 5ection


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mistaken and too categorical to be misinterpreted. [CIR vs. P.J. (@n, Co7-n# L?. GR No. L=!42)4. Ju6 1/# 1"2)$

2n the case of two electric power plants, which are operating in the same locality, it cannot

be presumed that the exemption of one should also be enjoyed by the other. The legal principle onthe matter is firmly established and well-observedF for exemption to be recogniKed, the grant mustbe clear and expressed, it cannot be made to rest on vague implications.[D-v-o L@8; 9 Po,Co. vs. Co@ss@on, o Cusos. GR No. L=!/2". &-,3; !"# 1"2!$

The exemption from income tax on :ase-connected income of non-resident American :asepersonnel under the !.5. :ases Treaty does not extend to the income realiKed from the sale by anAmerican civilian :ase employee of his car inside the :ase to another American national. (See a%soCIR $s. Ro8ertson. R Nos. 701119. u6ust 1/ 192.) [R-8-n vs. CIR. GR No. L=!*2".D3+, !2# 1"*"$

3xemption from taxation is not favored and is never presumed in fact, if it is granted, thegrant must be strictly construed against the taxpayer. Affirmatively put, the law reuires courts to

frown on alleged exemptions from taxation, hence, an exempting provision in a legislativeenactment should be construed in strictissimi jurisagainst the taxpayer and liberally in favor of thetaxing authority. Taxation is the rule and tax exemption is the exception. (See a%so ea%da %ectricCo. Inc. $s. CIR. R No. 14/2. #ri% 0 19: ;onder +echanica% n6ineerin6 Cor#. $s. CT.R Nos. //203 < /7232. -une 0 1973: and CIR $s. +itsu8ishi +eta% Cor#.. R No. 34902.

-anuar* // 1990.)[Ro?,@8u># In3. vs. Co663o, o In,n-6 Rvnu. GR No. L=!041. 1 Ju61"*"$

The condonation of a tax liability is euivalent and is in the nature of a tax exemption.:eing so, it should be sustained only when expressed in explicit terms, and it cannot be extendedbeyond the plain meaning of those terms.[Su,@8-o Conso6@?-? &@n@n8 Co.# In3. vs. Co663o,.GR No. L=14/2/. D3+, !*# 1"*$

The exemption clause provided for in 5ection % of (A )o. $# merely intends to exempt theracing club in whose premises or tracks the races are held by the 9hilippine 'harity 5weepstakesffice from the payment of reuired municipal or national taxes in connection with said races. 2tcannot refer to any income tax that may be imposed on the rentals that may be paid for the use ofthose tracks and other paraphernalia. That is an income that the racing club has to account forincome tax purposes. 2t is an income that, strictly speaking, did not come from the horse races heldby said club but it came to it as rentals paid for the use of its property. The tax paid for suchincome cannot therefore be considered as one connected with those races within the purview ofthe exemption clause.[&-n@6- Jo3K C6u+# In3. vs. Co663o, o In,n-6 Rvnu. GR No. L=/2)). &-,3; !# 1")*$

TAA%OIDANCE TAE%ASION TAFRAUD

The fraud contemplated by law is actual and not constructive. 2t must be intentional fraud,consisting of deception willfully and deliberately done or resorted to in order to induce another togive up some legal right. )egligence, whether slight or gross, is not euivalent to the fraud withintent to evade the tax contemplated by law. 2t must amount to intentional wrongdoing with thesole object of avoiding the tax. 2t necessarily follows that a mere mistake cannot be considered asfraudulent intent. >raud is never imputed and the courts never sustain findings of fraud uponcircumstances which, at most, create only suspicion and the mere understatement of a tax is notitself proof of fraud for the purpose of tax evasion.[CIR vs. J-v@,. GR No. 2/"). Ju6 1# 1""1$

A tax return which does not correctly reflect income may only be false but not necessarilyfraudulent where it appears that the return was not prepared by the taxpayer himself but by hisaccountant and that after the original deficiency tax assessment was made, the same was

subseuently reduced by the :2( by a substantial amount. Dence, the ;+= surcharge for fraud mayTAXATIONLAW COMMITTEEANDDIEST!OOLCHAIRPERSON: Charmaine TorresASST. CHAIRPERSON: Rhohail CastroEDP: Rachel R. SayaSUBJECTHEADS: Jemina Sy (General Principles! Casian"Ila#an (Inc"me Ta$a%i"n! J&'nee G'illerm" (Trans)er Ta$es! Ryan C" (Ta$ Remeies! E*in T"rres (+"cal Ta$a%i"n an Real Pr"per%y Ta$a%i"nC&ris%ian



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2005CENTRALIZEDBAROPERATIONSbe dispensed with but the tax may still be assessed within the prescriptive period of ten years fromdiscover thereof.[A>n-, vs. CTA. GR No. L=!0)*". Au8us !# 1"24$

Tax avoidance is not forbidden in our jurisdiction. An attempt to minimiKe one@s tax does

not necessarily constitute fraud. 2t is a settled principle that a taxpayer may diminish his liabilityby any means which the law permits. The intention to minimiKe taxes must be proved to exist byclear and convincing evidence amounting to more than mere preponderance and cannot be justifiedby mere speculation. This is because fraud is never lightly presumed. (See a%so CIR $s. Court of

##ea%s. R No. 11792/. &e8ruar* 1997) [Hn8 Ton8 TB@6s Co.# In3. vs. CIR. GR No. L=1"22. Au8us !*# 1"*/$

To subject a taxpayer to the payment of ;+= surcharge as provided for in 5ec. $< of the ldTax 'ode, the 5tate must show either that there was a willful neglect to file a return or that a caseof false or fraudulent return willfully made exists. 5o, where a man honestly believes that themethod employed by him in computing his tax liability is correct, he does not incur any fraud andthe penalty under 5ection $< does not apply. [CIR vs. %@s--n E63,@3 Co7-n. GR No. L=!!*11. &- !2# 1"*/$

>raud is a uestion of fact which must be alleged and proved. 2t is a serious charge and, tobe sustained it must be supported by clear and convincing proof. 2n the instant case, the filing bythe taxpayer of a false return was neither alleged in the complaint nor proved in court. Dence, thelower court correctly resolve the issue of prescription without touching upon fraudulence of thereturn.[R7u+6@3 vs. (, 9 Co7-n# L?. GR No. L=!1*0". S7+, !"# 1"**$

?here it appears that the taxpayer, although on accrual basis, had willfully under declaredits "#;" income by treating copra outturn as stock still outstanding at the end of "#;", when in factsuch copra had already been shipped to a foreign buyer and the taxpayer had already received partof the sales proceeds, fraud is said to be present. >urthermore, such fraud is aggravated if thetaxpayer included such copra outturn in its beginning inventory for "#;< thus eventually deductingits value as cost of goods sold for "#;< and diminishing its net income for that year. [R7u+6@3 vs.

L@ T@-n Tn8 Sons 9Co.# In3. GR No. L=!121. &-,3; 1# 1"**$

The 8overnment claimed that there were seven lots deliberately omitted from the taxreturns filed by the representative of the heirs, thereby evincing an intention to evade thepayment of the correct amount of tax to the government. 2t appears however, that three of theseven lots alleged to have been excluded were actually included in the return that one lot was notincluded because it belonged to one of the heirs and that the three remaining lots were alreadydeclared in the return submitted by the husband as part of the conjugal property for purposes ofincome tax. The omission, therefore, was not deliberate and did not amount to fraud indicative ofan intention to evade payment of the proper tax due the government. [R7u+6@3 vs. H@,s o

J-6-n?on@. GR No. L=1//4. S7+, !0# 1"*)$

5ince fraud is a state of mind, it need not be proved by direct evidence but may be inferredfrom the circumstances of the case. The failure of the appellant to declare for taxation purposeshis true and actual income derived from his furniture business for two consecutive years is anindication of his fraudulent intent to cheat the 8overnment of its taxes. [R7u+6@3 vs. Gon>-6s.GR No. L=12"*!. A7,@6 0# 1"*)$

The acts of the petitioner in declaring as incomes in his income tax returns for three yearsamounts representing only small fractions of his actual incomes, justify the finding of the lowercourt that there has been fraud subject to be penaliKed by law.?here the petitioner has been guilty of fraud, the period within which he may be subject toliability begins from the moment the fraud is discovered and not when the income tax return wasfiled.[Av6@no vs. Co663o, o In,n-6 Rvnu. GR No. L=1221). Ju6 1# 1"*$

TA- LA&S AND REGULATIONS





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NATUREOFTALA5S

2nternal revenue laws are not political in nature and as such were continued in force duringthe period of enemy occupation and in effect were actually enforced by the occupation

government. As a matter of fact, income tax returns were filed during that period and income taxpayments were affected and considered valid and legal. 5uch tax laws are deemed to be the lawsof the occupied territory and not of the occupying enemy. [H@6-?o vs. Co663o, o In,n-6Rvnu. GR No. L="40/. O3o+, 1# 1")*$

The prohibition against ex post facto laws applies only to criminal or penal matters, and notto laws which concern civil matters or proceedings generally, or which affect or regulate civil orprivate rights. Dence, tax laws not being penal in character, the rule against passage of ex postfacto laws cannot be invoked.[R7u+6@3 vs. %?-. D F,n-n?>. GR No. L="141. S7+, !)#1")*$

2t is well settled that inheritance taxation is governed by the statute in force at the time ofthe death of the decedent. f course, a tax statute may be made retroactive in its operation.

iability for taxes under retroactive legislation has been 7one of the incidents of social life.7 :utlegislative intent that a tax statute should operate retroactively should be perfectly clear.

(evenue laws, generally, which impose taxes collected by the means ordinarily resorted tofor the collection of taxes are not classed as penal laws, although there are authorities to thecontrary. Thus, Article


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2005CENTRALIZEDBAROPERATIONS3xecutive and administrative orders and proclamations shall be published in the fficial

8aKette, except such as have no general applicability. 'M )o. vs. A,3-. GR No. L=!)"!4. A7,@6 1/# 1"*"$

TALA5SASSPECIALLA5S

There is no uestion that the (evised 'harter of the 'ity of Manila is a special act since itrelates only to the said 'ity, whereas the ocal Tax 'ode is a general law because it appliesuniversally to all local governments. The fact that one is special and the other general creates apresumption that the special is to be considered as remaining an exception of the general.Dowever, the rule readily yields to a situation where the special statute refers to a subject ingeneral, which the general statute treats in particular. That is exactly the circumstance obtainingin the case at bar. 5ection "$ of the (evised 'ity 'harter speaks of 7ordinance7 in general,

irrespective of the nature and scope thereof, whereas, 5ection B% of the ocal Tax 'ode relates to7ordinances levying or imposing taxes, fees or other charges7 in particular. Therefore, in regard toordinances in general, the (evised 'ity 'harter is doubtless dominant, but that dominant forceloses its continuity when it approaches the realm of 7ordinances levying or imposing taxes, fees orother charges7 in particular. There, the ocal Tax 'ode controls. ['-8-s@n8 vs. R-@,>. GR No.L=41*1. D3+, 12# 1"2*$

5ince an action to recover an erroneously refunded tax is in effect an assessment of suchtax, and considering that a special law like the Tax 'ode prevails over the 'ivil 'ode, a generallaw, then it is the three-year period under the Tax 'ode that should apply. [Gu-8u- E63,@3 L@8;Co.# In3. vs. Co663o, o In,n-6 Rvnu. GR No. L=!*11. A7,@6 !4# 1"*2$

The extra-judicial demands made, if any, did not serve to suspend or toll the period ofprescription, the provisions of the 'ivil 'ode notwithstanding. 2t should be noted, in thisconnection, that the 2nternal (evenue 'ode, being a special law, prevails over a general law.[R7u+6@3 vs. G-n3-3o. GR No. L=1/02. Jun 0# 1"*4$

TAREGULATIONS

A (evenue Memorandum 'ircular issued by the 'ommissioner of 2nternal (evenue changingthe prescriptive period of two years to ten years on claims of excess uarterly income tax paymentscreates a clear inconsistency with the provision of 5ection


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is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will notcountenance administrative issuances that override, instead of remaining consistent and inharmony with, the law they seek to apply and implement. [P;@6@77@n '-nK o Coun@3-@onsvs. CIR. GR No. 11!0!4. J-nu-, !/# 1"""$

?ithout (M' %$-#%, the enactment of (A $*;B would have had no new tax rateconseuence on private respondentGs products. 3vidently, in order to place HDope uxury,IH9remium MoreGI and H'hampionI cigarettes within the scope of the amendatory law and subjectthem to an increased tax rate, the disputed (M' %$-#% had to be issued. 2n so doing, the :2( notsimply interpreted the law verily, it legislated under its uasi-legislative authority. The dueobservance of the reuirements of notice, hearing and publication should not have then ignored.[CIR vs. Cou, o A77-6s. GR No. 11"2*1. Au8. !"# 1"*1$

NON=RETROACTI%ITYOFRULINGS

(ulings, rules and regulations promulgated by the 'ommissioner of 2nternal (evenue wouldhave no retroactive application if to so apply them would be prejudicial to the taxpayers.

:ad faith, as an exception to the rule of non-retroactivity under 5ection


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2005CENTRALIZEDBAROPERATIONSclearly be implied from the language used.[C+u Po,6-n? Cn Co. vs. Co663o,. GR No. L=!0)*. O3o+, !"# 1"*/$

INCOME TA-ATION

INCO&E%S. CAPITAL

2ncome may be defined as an amount of money coming to a person or corporation within aspecified time, whether as payment for services, interest or profit from investment. !nlessotherwise specified, it means cash or its euivalent. 2ncome can also be thought of as a flow of thefruits of oneGs labor.[Con@ vs. Cou, o T-B A77-6s. GR No. 4/)!. Au8us !1# 1""!$

2ncome as contrasted with capital or property is to be the test. The essential differencebetween capital and income is that capital is a fund income is a flow. 'apital is wealth, whileincome is the service of wealth. 2ncome means profits or gains.[&-?,@8-6 vs. R-,. GR No.1!!/2. Au8us 2# 1"1/$

GROSSRECEIPTS

8ross receipts subject to tax do not include monies or receipts entrusted to the taxpayerwhich do not belong to them and do not redound to the taxpayerGs benefit and it is not necessarythat there must be a law or regulation which would exempt such monies or receipts within themeaning of gross receipts under the Tax 'ode. 9arenthetically, the room charges entrusted by theforeign travel agencies to the private respondent do not form part of its gross receipts within thedefinition of the Tax 'ode. [CIR vs. Tou,s S73@-6@ss# In3. GR No. **41*. &-,3; !1# 1""0$

PARTNERSHIP%S. CO=O5NERSHIP

The 9ool Agreement entered into by the ceding companies to handle the insurance

businesses indicates the formation of a partnership under 5ection


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executed in an extrajudicial settlement or approved by the court in the corresponding testate orintestate proceeding.[O- vs. CIR. GR No. L=1"4!. &- !)# 1"2!$

9laintiffs organiKed a partnership of a civil nature because each of them put up money to

buy a sweepstakes ticket for the sole purpose of dividing eually the priKe which they may win, asthey did in fact. Daving organiKed and constituted a partnership of a civil nature, the said entity isone bound to pay the income tax. 2t should not be prorated among them and paid individually.[G-3;-6@-n vs. Co663o, o In,n-6 Rvnu. GR No. 4)4!). A7,@6 !"# 1""$

DEALINGS5ITHNON=RESIDENTFOREIGNCORPORATIONS

H(oyalties paid under similar circumstancesI in the most favored nation clause of the !5-(9Tax Treaty necessarily contemplated Hcircumstances that are tax related.I This would mean thatit must be proven that the (9-!5 Tax Treaty grants similar tax relief to residents of the !5 inrespect of the taxes imposable upon royalties earned from sources within the 9hilippines as thoseallowed to their 8erman counterparts under the (9-8ermany Tax Treaty. [CIR vs. S.C. Jo;nson-n? Son# In3. GR No. 1!210). Jun !)# 1"""$

The reuirement of Hsimilar circumstancesI is in relation to the payment of royalty, notpayment of the tax. Thus, for instance, the royalty in uestion paid to a !5 resident by a non-:2registered enterprise or engaged in a non-preferred pioneer activity is not paid under similarcircumstances as a royalty paid to an Australian resident by a 9hilippine company that is :2registered and engaged in a preferred pioneer activity. [CIR vs. P;@6@77@n T@, 9 Ru++, Co,7.CA=GR SP No. 4!00. A7,@6 11# 1""2$

The alleged overpaid taxes were incurred for the remittance of dividend income to thehead office in Capan which is a separate and distinct income taxpayer from the branch in the9hilippines. There can be other logical conclusion considering the undisputed fact that theinvestment was made for purposes peculiarly germane to the conduct of the corporate affairs ofMarubeni, Capan, but certainly not of the branch in the 9hilippines. [&-,u+n@ Co,7. vs. CIR. GR

No. 2*)2. S7+, 14# 1"/"$

TASPARINGRULEUNDERSECTION!/')'# NIRC

The fact that 5witKerland did not impose any tax or the dividends received by 8laro fromthe 9hilippines should be considered as a full satisfaction of the given condition. >or to deny theprivate respondent the privilege to withhold only ";= tax provided for under 9residential 1ecree)o. %*#, amending 5ection


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A donation made by a corporation to the heirs of a deceased officer out of gratitude for hispast services is subject to the doneesG gift tax.

A donation made out of gratitude from past services is not subject to deduction for the

value of said services which do not constitute a recoverable debt. [P@,ov-no vs. CIR. GR No. L=1"/*). Ju6 1# 1"*)$

The proceeds of insurance taken by a corporation on the life of an important official toindemnify it against loss in case of his death, are not taxable as income but was in the nature of anindemnity for the loss which it actually suffered because of the death of its manager. [E6 O,@n#F-+,@3- ? T-+-3os# In3. vs. Pos-?-s# GR No. 4224. S7+, !1# 1"1$

DEDUCTIONSFRO&GROSSINCO&E

Advertising expense, to be deductible from gross income, should not only be necessary butalso ordinary. To be considered ordinary two conditions must be met namelyF a the reasonablenessof the amount incurred and b the amount must not be a capital outlay to create HgoodwillI for the

product and/or the business. Although the subject expense for the advertisement of a singleproduct is necessary it cannot be considered as an ordinary expense because said expense isinordinately large. >urthermore, the protection of brand franchise is analogous to the maintenanceof goodwill or title to oneGs property. This is a capital expenditure. [CIR vs. Gn,-6 Foo?s P;@6s.#In3. G.R. No. 14*2!. A7,@6 !4# !00$

2ncome tax should not be included in the computation of operating expenses of a publicutility. 2ncome tax should be borne by the taxpayer alone as they are payments made in exchangefor benefits received by the taxpayer from the 5tate. )o benefit is derived by the customers of apublic utility from such taxes paid by the entity. The principle behind the inclusion of operatingexpenses in the determination of a just and reasonable rate is to allow the public utility to recoupthe reasonable amount of expenses it has incurred in connection with the services it provides. 2tdoes not give the public utility the license to indiscriminately charge any and all types of expenses

incurred without regard to the nature thereof, i.e., whether or not the expense is attributable tothe production of services by the public utility. [R7u+6@3 vs. &-n@6- E63,@3 Co7-n. G.R. No.141*" 9 14114. Nov. 1)# !00!$

An euity investment is a capital, not ordinary, asset of the investor, the sale or exchangeof which results in either a capital gain or a capital loss. The loss sustained by the holder of thesecurities, which are capital assets, is to be treated as a capital loss as if incurred from a sale orexchange transaction.

?hen securities become worthless there is strictly no sale or exchange transaction, but thelaw deems the loss anyway to be Ha loss from the sale or exchange of capital assets.I [C;@n-'-nK@n8 Co,7o,-@on vs. Cou, o A77-6s. Ju6 1"# !000$

2nterests and dividends received by the petitioner Hwere merely incidental income topetitionerGs activity, which is the operation of its hospital and nursing schools, hence, theconclusion is inevitable that petitionerGs activities never went beyond that of a passive investor,which under existing jurisprudence do not come within the purview of carrying on any trade orbusinessI. As the principle of allocating expenses is grounded on the premise that the taxableincome was derived from carrying on a trade or business, as distinguished from mere receipt ofinterests and dividends from oneGs investments, the 'ourt of Tax Appeals correctly ruled that saidincome should not share in the allocation of administrative expense. [Hos7@-6 ? S-n Ju-n ?D@os# In3. vs. CIR. GR No. 10). &- 10# 1""0$

Margin fees are not expenses in connection with the business of the petitioners. 5ince themargin fees were incurred for the remittance of funds to petitionerGs Dead ffice in )ew 0ork,which is a separate and distinct income taxpayer from the branch in the 9hilippines, for its disposal

abroad, it can never be said therefore that the margin fees were appropriate and helpful in theTAXATIONLAW COMMITTEEANDDIEST!OOLCHAIRPERSON: Charmaine TorresASST. CHAIRPERSON: Rhohail CastroEDP: Rachel R. SayaSUBJECTHEADS: Jemina Sy (General Principles! Casian"Ila#an (Inc"me Ta$a%i"n! J&'nee G'illerm" (Trans)er Ta$es! Ryan C" (Ta$ Remeies! E*in T"rres (+"cal Ta$a%i"n an Real Pr"per%y Ta$a%i"nC&ris%ian



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2005CENTRALIZEDBAROPERATIONSdevelopment of petitionerGs business in the 9hilippines exclusively or for the purpose of realiKing aprofit or of minimiKing a loss in the 9hilippines exclusively. [Esso S-n?-,? E-s,n# In3. vs. CIR.GR Nos. !/)0/=". Ju6 2# 1"/"$

There is absolutely no evidence of any service actually rendered by petitionerGs officerGsservices which could be the basis of a grant to them of a bonus out of the profit derived from thesale. This being so, the payment of a bonus to them officers out of the gain realiKed from thesale cannot be considered as a selling expense nor can it be deemed reasonable and necessary soas to make it deductible for tax purposes. [A8u@n-6?o In?us,@s Co,7. vs. CIR. GR No. L!"2"0.F+,u-, !)# 1"/!$

To be deductible as a business expense, three conditions are imposed, namelyF " theexpense must be ordinary and necessary,


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Although taxes already due have not, strictly speaking, the same concept as debts, they are,however obligations that may be considered as such. 2n Commissioner $s. ,rieto, it was heldthat while the distinction between taxes and debts was recogniKed in this jurisdiction, thevariance in their legal conception does not extend to the interests paid on them. Thus, it

follows that the interest paid on the estate and inheritance tax is deductible from grossincome.[CIR vs. P-6-n3-. GR No. L1**!*. O3o+, !"# 1"**$

The exigencies of the husband-taxpayerGs high executive position, not to mention socialstanding, demanded and compelled them to live in a more spacious and pretentious uarterslike the ones they occupied. That is why his employer-corporation had to grant himallowances for rental and utilities in addition to his annual basic salary to take care of thoseextra expenses for rental and utilities in excess of their personal needs. Dence, the fact thatthe taxpayers had to live or did not have to live in the apartments chosen by the husband-taxpayerGs employer-corporation is of no moment, for no part of the allowances in uestionredounded to their personal benefit or was retained by them. [Co663o, o In,n-6 Rvnuvs. Hn?,son. GR No. L1!")4. F+,u-, !/# 1"*1$

SITUSOFINCO&ETAUNDERSECTION4!# NIRC

The absence of flight operations to and from the 9hilippines is not determinative of thesource of income or the situs of income taxation. The test of taxability is the HsourceI and thesource of an income is that activity which produced the income. 2ncome from the sale of ticketswas derived from the 9hilippines. The word HsourceI conveys one essential idea that of origin, andthe origin of the income herein is the 9hilippines. [CIR vs. ',@@s; Ov,s-s A@,-s Co,7. GR No.L=*)22=24. A7,@6 0# 1"/2$

DI%IDENDS

As a ualified by the phrase Hsuch time and in such mannerI, the exception was notintended to characteriKe as taxable dividend every distribution of earnings arising from aredemption of stock dividends. 5o that, whether the amount distributed in the redemption shouldbe treated as the euivalent of a Htaxable dividendI is a uestion of fact, which is determinable onHthe basis of the particular facts of the transaction in uestion.I

The test for taxability therefore, as would make the redemption Hessentially euivalent tothe distribution of a taxable dividend,I is whether the redemption resulted into a flow of wealth.2f no flow of wealth is realiKed from the redemption, there may not be a dividend euivalencetreatment.

:efore realiKation, stock dividends are nothing but a representation of an interest in thecorporate properties. As capital, it is not yet subject to income tax. [CIR vs. Cou, o A77-6s# A.So,@-no Co,7. GR No. 10/)2*. J-nu-, !0# 1"""$

?here corporate earnings are used to purchase outstanding stock treated as treasury stock as

a technical, but prohibited device, to avoid income taxation, distribution of said corporateearnings in the form of stock dividends will subject stockholders receiving them to income tax.[CIR vs. &-nn@n8. GR No. L!/"/. Au8us *# 1"2)$

!nder 5ection "* of our 'orporation aw, no corporation may make or declare any dividendexcept from the surplus profits arising from its business. Any dividend, therefore, whether cash orstock, represents surplus profits. Article B$" of the 'ivil 'ode provides that the usufructuary shallbe entitled to receive all the natural, industrial and civil fruits of the property in usufruct. Thestock in dividend in uestion in this case is a civil fruit of the original investment. ['-3;,-3; vs.S@, -n? E6@-no. GR No. L!*)". O3o+, 1!# 1")0$




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ESTATE TA- AND DONORS TA-

Attorney@s fees in order to be deductible from the gross estate must be essential to the

collection of assets, payment of debts or the distribution of the property to the persons entitled toit. The services for which the fees are charged must relate to the proper settlement of the estate.2n this case, the guardianship proceeding was necessary for the distribution of the property of thelate 9edro 9ajonar to his rightful heirs. [CIR vs. Cou, o A77-6s. GR No. 1!!0*. &-,3; !!#!000$

The approval of the court, sitting in probate, or as a settlement tribunal over the deceasedis not a mandatory reuirement in the collection of estate taxes. There is nothing in the Tax 'ode,and in the pertinent remedial laws that implies the necessity of the probate or estate settlementcourtGs approval of the stateGs claim for estate taxes, before the same can be enforced andcollected.[&-,3os II vs. Cou, o A77-6s. GR No. 1!0//0. Jun )# 1""2$

The statute of non-claims, 5ection ;, (ule &* of the (ules of 'ourt, does not bar claims ofthe government for unpaid taxes, still within the period of limitation prescribed in the )2('. Aperusal thereof shows that it makes no mention of claims for monetary obligations of the decedentcreated by law, such as taxes, which is entirely of different character from the claims enumeratedtherein. 3xpression unius est exc%usion a%terius, the mention of one thing implies the exclusion ofanother thing not mentioned.

>urthermore, under the Tax 'ode, the payment of income tax shall be a lien in favor of the8overnment from the time of the assessment until paid. :y virtue of such lien, the property of theestate already in the hands of an heir or transferee may be subject to the payment of the tax duethe estate. A fortiori, before the inheritance has passed to the heirs, the unpaid taxes due thedecedent may be collected, even without its having been presented under 5ection < of (ule &* ofthe (ules of 'ourt. !ntil the property of the estate of the decedent has vested in the heirs, thedecedent, represented by his estate, continues as if he were still alive, subject to the payment of

such taxes as would be collectible from the estate even after his death.[%,- vs. F,n-n?>. GRNo. L1*4. &-,3; 0# 1"2"$

An heir is liable for the assessment as an heir and as a holder-transferee of propertybelonging to the estate/taxpayer. As an heir, he is individually answerable for the part of the taxproportionate to the share he received from the inheritance. Dis liability, however, cannot exceedthe amount of his share. As a holder of the property belonging to the estate, he is liable for the taxup to the amount of property in his possession. The reason is that the 8overnment has a lien onsuch property. :ut after payment of such amount, he will have a right to contribution from his co-heirs.

The 8overnment has two ways of collecting taxes due from the estate. ne, by going afterall the heirs and collecting from each one of them the amount of the tax proportionate to theinheritance received. Another remedy, pursuant to the lien created by 5ection %"; now 5ection


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TA- ADMINISTRATION AND ENFORCEMENT

As the complaint was signed by the :2(Gs 'hief of egal 1ivision for (egion B and verified by

the (egional 1irector, there was compliance with the law. >urthermore, the exemptions providedby 5ection $ of (A &B


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2005CENTRALIZEDBAROPERATIONSThe reuisite prior approval of the 'ommissioner of 2nternal (evenue of a civil action for

the recovery of taxes is not a jurisdictional reuirement. 2t relates to capacity to sue or it affectsthe cause of action only.[A,3;s vs. '66os@66o. GR No. L!)4. &- 1*# 1"*2$

The 'ommissioner of 2nternal (evenue cannot delegate the power to make finalassessments. Thus, despite the 'ommissionerGs order granting the (egional 1irectorGs authority toclose tax cases, the latter may not do so. 2t is the 'ommissioner alone who is entrusted by law tomake assessments S final assessments.[C@ Lu+, vs. Do@n8o. GR No. L1/*11. J-nu-, 0#1"*4$

5ection %+* now 5ection urthermore, 5ection ortune are first finally determined, it cannot be correctlyasserted that private respondents have willfully attempted to evade or defeat the taxes sought tobe collected form >ortune. 2n plain words, before one is prosecuted for willful attempt to evade ordefeat any tax under 5ections


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1istinguishing this case from >n6a8 $s. 'usi, the 'ourt held that for criminal prosecution toproceed before assessment, there must be a prima facie showing of a willful attempt to evadetaxes. There was a willful attempt to evade tax in >n6a8because of the taxpayerGs failure todeclare in his income tax return Hhis income derived from banana saplingsI. >ortuneGs situation is

uite apart factually since the registered wholesale price of the goods, approved by the :2(, ispresumed to be the actual wholesale price, therefore, not fraudulent and unless and until the :2(has made a final determination of what is supposed to be the correct taxes, the taxpayer shouldnot be placed in the crucible of criminal prosecution. [CIR vs. Cou, o A77-6s. GR No. 11"!!.

Jun 4# 1""*$

The claim of the government predicated on a tax lien is superior to the claim of a privatelitigant predicated on a judgment. The tax lien attaches not only from the service of the warrant ofdistraint of personal property but from the time the tax became due and payable

Article ""+ of the abor 'ode which gives workers first preference as regards the wages duethem for services rendered, does not purport to create a lien in favor of the workers or employeesfor unpaid wages upon all of the properties or upon any particular property owned by theiremployer. >urthermore, said provision applies only in case of bankruptcy or judicial liuidation of

the employer.[CIR vs. NLRC. GR No. 24"*). Nov+, "# 1""4$An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt

to defeat and evade the income tax. A crime is complete when the violator has knowingly andwillfully filed a fraudulent return with intent to evade and defeat the tax. The perpetration of thecrime is grounded upon knowledge on the part of the taxpayer that he has made an inaccuratereturn, and the governmentGs failure to discover the error and promptly to assess has noconnections with the commission of the crime.[Un8-+ vs. Cus@# J,. GR Nos. L41"1"=!4. &- 0#1"/0$

2f the 8overnment did not raise the defense of prescription in its original answer butpleaded the same in its answer to the amended petition for review, the 8overnment has not waivedthe defense of prescription. The latter superseded the answers filed before it so that any defense

or defenses raised in its latest answer would be considered as though contained in its originalanswer. >or the rule is that Han amended complaint and the answer thereto, when filed, take theplace of the originals.I The latter are then regarded as abandoned and cease to perform anyfurther functions as pleadings.[C+u Po,6-n? Cn Co. vs. Co663o, o In,n-6 Rvnu. GRNo. L!0)*. O3o+, !"# 1"*/$

PRESCRIPTI%EPERIODS

5ection


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The five-year prescriptive period for violations of any provisions of the Tax 'ode providedfor under 5ection %;B now 5ection raud is a uestion of fact and the circumstances constituting fraud must be alleged andproved in the lower court. The finding of the trial court as to its existence and non-existence isfinal and cannot be reviewed unless clearly shown to be erroneous. >raud is never lightly to be

presumed because it is a serious charge. [CIR vs. A-6- S3u,@@s Co,7. GR No. L!"4/). &-,3;1# 1"2*$

The proper and reasonable interpretation of 5ection %%


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taxpayer within the prescriptive period therefor.['-s@6-n Es-s# In3. vs. CIR. GR No. L!!4"!.S7+, )# 1"*2$

!nder the 9enal 'ode, the civil liability is incurred by reason of the offenderGs criminal act.

The criminal liability gives birth to the civil obligation such that, generally, if one is not criminallyliable under the 9enal 'ode, he cannot become civilly liable thereunder. The situation under theincome tax law is opposite. 'ivil liability to pay taxes arises from fact, for instance, that one hasengaged himself in business, and not because of any criminal act committed by him. The criminalliability arises upon failure of the debtor to satisfy his civil obligation. The incongruity of thefactual premises and foundation principles of the two cases is one of the reasons for not imposingcivil indemnity on the criminal infractor of the income tax law.

5ince the taxpayerGs civil liability is not included in the criminal action, his acuittal in thecriminal proceeding does not necessarily entail exoneration from his liability to pay the taxes. Dislegal duty to pay taxes cannot be affected by his attempt to evade payment. 5aid obligation is nota conseuence of the felonious acts charged in the criminal proceeding nor is it a mere civilliability arising from a crime that could be wiped out by the judicial declaration of non-existence ofthe criminal acts charged.[R7u+6@3 vs. P--n-o. GR No. L!!)*. Ju6 !1# 1"*2$

2n case of an amendment of the return, the prescriptive period for the assessment ofinternal revenue taxes shall commence from the filing of the original return, if the original returnwas a complete return from which the 'ommissioner of 2nternal (evenue may intelligently computeand determine the tax liability of the taxpayer. :ut if the amended return is substantially differentfrom the original return, the period of prescription of the right to issue the same should be countedfrom the filing of the amended return. therwise, taxpayers will be able to evade the payment oftaxes by simply reporting in their original return heavy losses and amending the same beyond theprescriptive period when the 'ommissioner has lost his authority to assess the proper taxthereunder. The object of the Tax 'ode is to impose taxes for the needs of the 8overnment, not toenhance tax avoidance to its prejudice.[CIR vs. P;on@B Assu,-n3 Co.# L?. GR No. L1"2!2.

&- !0# 1"*)$

?hen there is fraudulent filing of tax returns, the ten-year prescriptive period applies inlieu of the three-year period prescriptive limit. The prescriptive period in this instance is countedfrom the filing of the fraudulent return. [Av6@no vs. Co663o, o In,n-6 Rvnu. GR No. L=1221). Ju6 1# 1"*$

The taxpayer cannot invoke prescription against collection of the tax due from him underthe provisions of 5ection %%" now 5ection


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2005CENTRALIZEDBAROPERATIONS5ec. $* of the "##$ )2(' provides that any excess of the total uarterly payments over the

actual income tax computed in the adjustment or the final corporate income tax return, shalleitherF a be refunded to the corporation, or b may be credited against the estimated uarterlyincome tax liabilities for the uarters of 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.[P;@6@77@n '-nK o Coun@3-@ons vs. CIR. GR No. 11!0!4. J-nu-, !/# 1"""$

2n the context of 5ection


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:ureau of 2nternal (evenue. The two-year prescriptive period within which to claim a refundcommences to run, at the earliest, on the date of the filing of the adjusted final return. [ACCRAInvsns Co,7. vs. Cou, o A77-6s. GR No. "*!!. D3+, !0# 1""1$

The :ureau of 2nternal (evenue should not be allowed to defeat an otherwise valid claimfor refund by raising the uestion of the alleged incapacity of the party claiming such refund forthe first time on appeal. 2n the absence of explicit statutory provisions to the contrary, the8overnment must follow the same rules of procedure, which bind private parties.

A taxpayer is defined in our )2(' as referring to Hany person subject to tax imposed by theTitle on tax on 2ncome.I !nder 5ection ;% c now 5ection ;$ thereof, the withholding agentwho is Hreuired to deduct and withhold any taxI is made Hpersonally liable for such taxI andindeed is indemnified against any claims and demands which the stockholder might wish to make inuestioning the amount of payments effected by the withholding agent in accordance with theprovisions of the )2('. De is directly and independently liable for the correct amount of tax thatshould be withheld from the dividend remittances. De is, moreover, subject to and liable fordeficiency assessments, surcharges and penalties should the amount of tax withheld be finallyfound to be less than the amount that should have been withheld under law. A Hperson liable for

taxI has been held to be a Hperson subject to taxI and properly considered a Htaxpayer.I Theterms Hliable for taxI and Hsubject to taxI and Hsubject to taxI both connote legal obligation orduty to pay a tax. 2t is very difficult, indeed impossible, to consider a person who is statutorily madHliable for taxI as not Hsubject to tax.I 'onseuently, a withholding agent is a party in interest, oras a person having sufficient legal interest, to bring a suit for refund of taxes he believes wereillegally collected from him. [CIR vs. P,o3, 9 G-+6 P;@6@77@n &-nu-3u,@n8 Co,7. GR No.**//. D3+, !# 1""1$

)owhere in the Tax 'ode is the 'ollector of 2nternal (evenue reuired to rule first on ataxpayerGs reuest for reconsideration before he can go to the court for the purpose of collectingthe tax assessed. n the contrary, the Tax 'ode withheld from all courts, except the 'ourt of TaxAppeals under (epublic Act )o. ""


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2005CENTRALIZEDBAROPERATIONS9rescriptive period for filing claims for refund is suspended provided two conditions are

presentF " there is a pending litigation between two parties, i.e., the 8overnment and thetaxpayer, as to the proper tax to be paid and of the proper interpretation of the taxpayerGs charterin relation to the disputed tax and


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binding on the 5upreme 'ourt, and in the absence of strong reasons for the 5' to delve into facts,only uestions of law are open for determination. [P;@6@77@n R@n@n8 Co7-n vs. Cou, o

A77-6s. GR No. 11/2"4. &- /# 1""*$

)owhere in the Tax 'ode is the 'ollector of 2nternal (evenue reuired to rule first on ataxpayerGs reuest for reconsideration before he can go to the court for the purpose of collectingthe tax assessed. n the contrary, the Tax 'ode withheld from all courts, except the 'ourt of TaxAppeals under (epublic Act )o. ""or in the sameway that the expedient of an appeal from a denial of a tax reuest for cancellation of warrant ofdistraint and levy cannot be utiliKed to test the legality of an assessment which had becomeconclusive and binding on the taxpayer, so is section %*+ of the Tax 'ode not available to revivethe right to contest the validity of an assessment which had become final for failure to appeal thesame on time.[CIR vs. Con373@on. GR No. L!"1!. &-,3; 1)# 1"*/$

The thirty-day period prescribed by 5ection "" of (epublic Act ""


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5


2005CENTRALIZEDBAROPERATIONSLOCAL TA-ATION

ne of the most significant provisions of the 8' is the removal of the blanket exclusion ofinstrumentalities and agencies from the coverage of local taxation. The legislative purpose to

withdraw tax privileges under existing law or charter is clearly manifested by the language used on5ecs. "%$ Q "#%. 5ince it would be not only tedious and impractical to attempt to enumerate allthe existing statutes providing for special tax exemptions or privileges, the 8' provided for anexpress, albeit general, withdrawal of such exemptions or privileges. [N-@on-6 Po,Co,7o,-@on vs. C@ o C-+-n-u-n. G.R. No. 14"110. A7,@6 "# !00.$

The fact is that after petitioner@s tax exemption by (.A. )o. $+&< had been withdrawn bythe 8', no amendment to re-enact its previous tax exemption has been made by 'ongress.'onsidering that the taxing power of local government units under (.A. )o. $"*+ is clear and isordained by the 'onstitution, petitioner has the heavy burden of justifying its claim by a cleargrant of exemption.

The phrase Hin lieu of all taxesI found in special franchises should give way to theperemptory language of secti

taxation case digest part 1

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