Heirs of Juan Bonsato and Felipe Bonsato v. Court of Appeals and Josefa Utea, et al.

G.R No. L-6600, July 30, 1954

Supreme Court En Banc, Reyes, J.B.L., J.
Facts:
Josefa Utea and other heirs of Domingo and Andrea, both deceased, filed a complaint
for annulment and damages against Juan and Felipe Bonsato. Josefa alleged that Domingo
had been induced and deceived into signing two notarial deeds of donations in favor of his
brother Juan and nephew, Felipe, transferring to them several parcels of land located in
Pangasinan. Josefa further alleged that the donations were mortis causa and void for the lack
of requisite formalities. However, Juan and Felipe argued that the said donation was
voluntarily executed by Domingo in consideration of the services they rendered to Domingo.
The trial court ruled that the donation was made inter vivos but since the properties
were conjugal, donations were only valid as to the undivided one-half share of Domingo. The
CA on appeal, held that the donations were mortis causa donations and thus, were null and
void. The CA ordered Juan and Felipe to turn over possession of the properties to Josefa and
other heis of Domingo. Hence, this petition.
Issue:
Whether the CA is correct in holding that the donations were donations mortis causa
and thus, were null and void for lack of formalities.
Ruling:
No. The donor only reserved for himself, during his lifetime, the owner's share of the
fruits or produce a reservation that would be unnecessary if the ownership of the donated
property remained with the donor. Most significant is the absence of stipulation that the
donor could revoke the donations. On the contrary, the donations made by Domingo were
expressly made “irrevocable”, a quality incompatible with the idea of conveyances mortis
causa where revocability is of the essence of the act, to the extent that a testator cannot
lawfully waive or restrict his right of revocation (Old Civil Code, Art. 737; New Civil Code,
Art. 828).
Hence, it was error for the Court of Appeals to declare that Exhibits 1 and 2 were
invalid because the formalities of testaments were not observed. Being donations inter vivos,
the solemnities required for them were those prescribed by Article 633 of the Civil Code of
1889 (reproduced in Art. 749 of the new Code, and it is undisputed that these were duly
complied with. As the properties involved were conjugal, the Court of First Instance correctly
decided that the donations could not affect the half interest inherited by the respondents
Josefa Utea, et al. from the predeceased wife of the donor.
The Collector of Internal Revenue v. Antonio Campos Rueda
G.R. No. L-13250, October 29, 1971
Supreme Court En Banc, Fernando, J.
Facts:
 Antonio Campos Rueda was the administrator of the estate of the deceased Doña
Maria de la Estrella Soriano Vda. de Cerdeira, a Spanish national and resident of Tangler,
Morocco who left intangible properties in the Philippines.
Rueda filed an amended return wherein the intangible properties assessed were
claimed as exempted from taxes. The Collector denied the request for exemption on the
ground that the law of Tangier is not reciprocal to Section 122 of the National Internal
Revenue Code. The motion for reconsideration filed was also denied on the ground that that
there was no reciprocity with Tangier, which was moreover a mere principality, not a foreign
country.
The CTA held that “foreign country” in Sec. 122 of the NIRC refers to a government
of that foreign power which, although not an international person in the sense of international
law, does not impose transfer or death upon intangible person properties of our citizens not
residing therein, or whose law allows a similar exemption from such taxes. It is, therefore,
not necessary that Tangier should have been recognized by our Government in order to entitle
the petitioner to the exemption benefits of the said provision.
Issue:
Whether the intangible properties are exempt from tax based on reciprocity.
Ruling:
Yes. In the case of Collector of Internal Revenue v. De Lara, the Court held that
"considering the State of California as a foreign country in relation to section 122 of our Tax
Code we believe and hold, as did the Tax Court, that the Ancillary Administrator is entitled
the exemption from the inheritance tax on the intangible personal property found in the
Philippines."
Thus, Tangler, even a principality, although not an international person in the sense of
international law, if it does not impose transfer or death upon intangible person properties of
our citizens not residing therein, or whose law allows a similar exemption from such taxes,
principle of reciprocity must be honored in our jurisdiction.

CIR v. B.F. Goodrich Phils., Inc

G.R. No. 104171, February 24, 1999
Supreme Court Third Division, Panganiban, J.
Facts:
BF Goodrich Phils. Inc., an American manufacturer bought from the Philippine
Government under the Public Land Act and the Parity Amendment to the 1935 Constitution,
certain parcels of land to develop a rubber plantation. After more than a decade, in view of
the opinion that upon the expiration of the Parity Amended, the ownership rights of
Americans over public agricultural lands, including the right to dispose or sell their real
estate, would be lost, BF Goodrich Phils. Inc. sold said property to Siltown Realty in 1974.
 The BIR then upon examining the books and accounts of BF Goodrich issued its first
assessment for deficiency in donor’s tax in April 23,1975 which it duly paid. Thereafter, BIR
issued against BF Goodrich its second assessment on October 10, 1980, which modified the
first assessment to which BF Goodrich contested. Another assessment was issued by the BIR
on March 16, 1981, which increased the amount demanded for the alleged deficiency donor's
tax, surcharge, interest and compromise penalty.
BF Goodrich then appealed these last two assessments before the CTA to which the
CTA only modified the amount needed to be paid. On appeal, the CA reversed the CTA
decision ruling that the last two assessments were beyond the 5-year prescriptive period.
Issue:
Whether the BIR’s right to assess has prescribed.
Ruling:
Yes. Sec. 331 of the NIRC provides that, except as provided in the succeeding
section, internal-revenue taxes shall be assessed within five years after the return was filed x
x x. Applying this provision of law to the facts at hand, the October 16, 1980, and the March
1981 assessments were issued by the BIR beyond the five-year statute of limitations. As
succinctly pronounced by the Court of Appeals:
The subsequent assessment made by the respondent Commissioner on October 40,
1980, modified by that of March 16, 1981, violates the law. The returns for the year
1974 were duly filed by the petitioner, and assessment of taxes due for such year —
including that on the transfer of properties on June 21, 1974 — was made on April 13,
1975 and acknowledged by Letter of Confirmation No. 101155 terminating the
examination on this subject. The subsequent assessment of October 10, 1980,
modified, by that of March 16, 1981, was made beyond the period expressly set in
Section 331 of the National Internal Revenue Code.
Association of Non-profit Clubs, Inc. (ANPC) v. BIR
G.R. No. 228539, June 26, 2019
Supreme Court Second Division, Perlas-Bernabe, J.
Facts:
BIR issued RMC No. 35-2012 wherein clubs organized and operated exclusively for
pleasure, recreation and other non-profit purposes are now subject to income tax and VAT.
ANPC then submitted its position paper requesting for the non-application of the of RMC
No. 35-2012. However, after the lapse of two years, the BIR has not acted upon the request,
and all the member clubs of ANPC were subjected to income tax and VAT on all
membership fees, assessment dues, and service fees.
ANPC then filed a petition for declaratory relief before the RTC assailing RMC No.
35-2012 as unjust, oppressive, confiscatory, and in violation of the due process clause of the
Constitution. That the BIR acted beyond its rule-making authority. The RTC, however,
upheld the validity of RMC No. 35-2012.
Issue:
Whether the RTC erred in upholding the validity of RMC No. 35-2012.
Ruling:
Yes. The distinction between "capital" and "income" is well-settled in our
jurisprudence. As held in the early case of Madrigal v. Rafferty,47 "capital" has been
delineated as a "fund" or "wealth," as opposed to "income" being "the flow of services
rendered by capital" or the "service of wealth." As correctly argued by ANPC, membership
fees, assessment dues, and other fees of similar nature only constitute contributions to and/or
replenishment of the funds for the maintenance and operations of the facilities offered by
recreational clubs to their exclusive members. They represent funds "held in trust" by these
clubs to defray their operating and general costs and hence, only constitute infusion of
capital.
In the same way, the Court declares as invalid the BIR's interpretation in RMC No.
35-2012 that membership fees, assessment dues, and the like are part of "the gross receipts of
recreational clubs" that are "subject to VAT." It is a basic principle that before a transaction is
imposed VAT, a sale, barter or exchange of goods or properties, or sale of a service is
required. As ANPC aptly pointed out, membership fees, assessment dues, and the like are not
subject to VAT because in collecting such fees, the club is not selling its service to the
members. Conversely, the members are not buying services from the club when dues are
paid; hence, there is no economic or commercial activity to speak of as these dues are
devoted for the operations/maintenance of the facilities of the organization.

Association of International Shipping Lines, Inc. v. Sec. of Finance

G.R. No. 222239, January 15, 2020
Supreme Court First Division, Lazaro-Javier, J.
Facts:
On March 7, 2013, RA 10378 was enacted which provides that, international carriers
doing business in the Philippines may avail of a preferential rate or exemption from the tax
imposed on their Gross Philippine Billings on the basis of an applicable tax treaty or
international agreement to which the Philippines is a signatory or on the basis of reciprocity.
The Secretary of Finance, thereafter, issued the implementing rules under Revenue
Regulation No. 15-2013. Under the said regulation, all other income derived by international
carriers that do not form part of Gross Philippine Billings will be subject to tax. Demurrage
fees and detention fees are also subject to tax under the regular rate.
Association of International Shipping lines then assailed the validity of the said
regulation as it invalidly subjects demurrage and detention fees collected by international
shipping carriers to regular corporate income tax rate. The trial court found that RR No. 15-
2013 to be a reasonable tax regulation. Hence, this petition.
Issue:
Whether RR No. 15-2013 is a valid revenue regulation.
Ruling:
Yes. To determine whether demurrage and detention fees are subject to the
preferential 2.5% rate, we refer to the definition of "Gross Philippine Billings" (GPB) under
Section 28(A)(I)(3a) of the NIRC, as amended by RA 10378, viz.: "gross revenue whether for
passenger, cargo or mail originating from the Philippines up to final destination, regardless of
the place of sale or payments of the passage or freight documents." Verily, the GPB covers
gross revenue derived from transportation of passengers, cargo and/or mail originating from
the Philippines up to the final destination. Any other income, therefore, is subject to the
regular income tax rate. When the law is clear, there is no other recourse but to apply it
regardless of its perceived harshness. Dura lex sed lex.
Demurrage and detention fees form part of an international sea carrier's gross income.
For they are acquired in the normal course of trade or business. The phrase "in the course of
trade or business" means the regular conduct or pursuit of a commercial or an economic
activity, including transactions incidental thereto, by any person regardless of whether or not
the person engaged therein is a nonstock, nonprofit private organization (irrespective of the
disposition of its net income and whether or not it sells exclusively to members or their
guests), or government entity.
AT&T Communications Services Philippines, Inc. v. CIR
G.R. No. 185969, November 19, 2014
Supreme Court First Division, Perez, J.
Facts:
AT&T Communications Services Philippines, Inc, a domestic corporation, entered
into two Service Agreements with AT&T Communications Services International where it
was paid in US dollars. It filed its Quarterly VAT Returns with the Bureau of Internal
Revenue (BIR) for the taxable year period covering 1 January 2003 to 31 December 2003.
AT&T Communications Services Philippines, Inc then filed with the BIR an application for
refund and/or tax credit of its unutilized VAT input taxes for the aforesaid taxable period
amounting to ₱3,003,265.14. However, there being no action on said application, AT&T
Communications Services Philippines, Inc filed an administrative claim before the CTA in
division to suspend the running of the prescriptive period.
The CTA in Division dismissed said claim for failure of AT&T Communications
Services Philippines to submit proof of VAT official receipts pertaining to the services it
rendered. Without proper VAT official receipts, the foreign currency payment received by
petitioner from services rendered for the four (4) quarters of taxable year 2003 cannot qualify
for zero-rating for VAT purposes. Thus, he claimed input VAT payments allegedly
attributable thereto in the amount of ₱3,003,265.14 cannot be granted. The CTA En Banc
affirmed the decision of the CTA Division.
Issue:
Whether AT&T Communications Services Philippines, Inc is entitled to refund for its
unutilized input VAT.
Ruling:
No. The legislature separately categorized VAT on sale of goods from VAT on sale of
services, not only by its treatment with regard to tax but also with respect to substantiation
requirements.
The Court declared in KEPCO Philippines Corporation v. Commissioner of Internal
Revenue,38 that the VAT invoice is the seller's best proof of the sale of the goods or services
to the buyer while the VAT receipt is the buyer's best evidence of the payment of goods or
services received from the seller. Thus, the High Court concluded that VAT invoice and VAT
receipt should not be confused as referring to one and the same thing. Certainly, neither does
the law intend the two to be used interchangeably. Accordingly, the Court agrees with the
ruling of the CTA in Division, as well as that of the CTA En Banc, insofar as to its discussion
on the relevancy of the aforesaid substantiation requirements.

BPI v. CIR
G.R. No. 181836, July 9, 2014
Supreme Court Second Division, Carpio, J
Facts:
The BIR assessed BPI for deficiency DST on its sales of foreign bills of exchange to
the Central Bank, On June 23, 1989, BPI filed a protest letter requesting for
reinvestigation/reconsideration of the said assessment alleging that based on recognized
business practice, DST was on account for the account of the buyer and that BPI was tax
exempt, thus the document was exempt from DST.
The CIR denied said request of BPI. The CTA ordered the cancellation of the
assessed DST on BPI. The CA reversed the CTA decision and ordered BPI to pay the
assessed deficiency DST. The Supreme Court Third Division, in its Resolution, found that the
assessment may be invalidated on the ground of prescription.
Ruling:
Whether BIR has the right to collect the assessed DST from BPI,
Issue:
No. BIR’s right to collect has prescribed on the ground of prescription. Under the then
applicable Section 319(c) [now, 222(c)]20 of the National Internal Revenue Code (NIRC) of
1977, as amended, any internal revenue tax which has been assessed within the period of
limitation may be collected by distraint or levy, and/or court proceeding within three years
following the assessment of the tax. The assessment of the tax is deemed made and the three-
year period for collection of the assessed tax begins to run on the date the assessment notice
had been released, mailed or sent by the BIR to the taxpayer.
In the present case, although there was no allegation as to when the assessment notice
had been released, mailed, or sent to BPI, still, the latest date that the BIR could have
released, mailed, or sent the assessment notice was on the date BPI received the same on 16
June 1989. Counting the three-year prescriptive period from 16 June1989, the BIR had until
15 June 1992 to collect the assessed DST. However, the evidence established that there was
no warrant of distraint, or levy served on BPI’s properties, or any judicial proceedings
initiated by the BIR.
 China Banking Corporation v. CIR
G.R. No. 172509, February 4, 2015
Supreme Court First Division, Sereno, CJ.
Facts:
On April 19, 1989, the BIR assessed CBC for deficiency DST for the sales of foreign
exchange to the Bangko Sentral ng Pilipinas known as SWAP transactions for the taxable
years 1982 to 1986.
On May 8, 1989, CBC filed a protest to the BIR. More than 12 years after filing said
protest, the CIR rendered a decision reiterating the deficiency DST and ordered CBC for the
payment thereof.
CBC then filed a petition for review before the CTA Division however it held that the
telegraphic transfers are subject to tax. The Division denied the motion for reconsideration
filed by CBC. The CTA En Banc also denied the petition for review and the motion for
reconsideration filed by CBC.
Issue:
Whether the right of the BIR to collect the assessed DST from CBC is barred by
prescription.
Ruling:
Yes. Prescription has set In. To recall, the Bureau of Internal Revenue (BIR) issued
the assessment for deficiency DST on 19 April 1989, when the applicable rule was Section
319(c) of the National Internal Revenue Code of 1977, as amended. In that provision, the
time limit for the government to collect the assessed tax is set at three years, to be reckoned
from the date when the BIR mails/releases/sends the assessment notice to the taxpayer.
Further, Section 319(c) states that the assessed tax must be collected by distraint or levy
and/or court proceeding within the three-year period.
In this case, the records do not show when the assessment notice was mailed, released or sent
to CBC. Nevertheless, the latest possible date that the BIR could have released, mailed or
sent the assessment notice was on the same date that CBC received it, 19 April 1989.
Assuming therefore that 19 April 1989 is the reckoning date, the BIR had three years to
collect the assessed DST. However, the records of this case show that there was neither a
warrant of distraint or levy served on CBC's properties, nor a collection case filed in court by
the BIR within the three-year period.
The attempt of the BIR to collect the tax through its Answer with a demand for CBC to pay
the assessed DST in the CTA on 11 March 2002 did not comply with Section 319(c) of the
1977 Tax Code, as amended. The demand was made almost thirteen years from the date from
which the prescriptive period is to be reckoned. Thus, the attempt to collect the tax was made
way beyond the three-year prescriptive period.
Asiatrust Development Bank Inc. v. CIR
 G.R. No. 201530, April 19, 2017
Supreme Court First Division, Del Castillo, J.
Facts:
 On separate dates in February 2000, the Asiatrust Development Bank received three
Formal Letters of Demand (FLD) with Letters of Assessment from the CIR for deficiency
internal revenue taxes fiscal years ending June 30, 1996, 1997, and 1998.
On March 17, 2000, Asiatrust Bank timely protested the assessment notices. Due to
the inaction of the CIR on the protest, Asiatrust filed before the CTA a Petition for Review.
On December 28, 2001, the CIR issued against Asiatrust new Assessment Notices for
deficiency taxes overing the fiscal years ending June 30, 1996, 1997, and 1998.
The CTA Division partially granted the petition for review holding that tax
assessments for fiscal year ending June 30, 1996, void for having been issued beyond the
three-year prescriptive period. The CTA Division refused to consider Asiatrust's availment of
the Tax Abatement Program due to its failure to submit a termination letter from the BIR.
The CTA En Banc sustained the ruling of the CTA Division that in the absence of a
termination letter, it cannot be established that Asiatrust validly availed of the Tax Abatement
Program.
Issue:
1. Whether the CTA En Banc erred in ruling that Asiatrust cannot avail the Tax
Abatement Program.
2. Whether the CTA En Banc correctly dismissed the CIR's appeal for failure to file
a motion for reconsideration on the Amended Decision.
Ruling:
1. No. RR No. 15-06 prescribes the guidelines on the implementation of the one-time
administrative abatement of all penalties/surcharges and interest on delinquent
accounts and assessments (preliminary or final, disputed or not) as of June 30, 2006.
Based on the guidelines, the last step in the tax abatement process is the issuance of
the termination letter. The presentation of the termination letter is essential as it
proves that the taxpayer's application for tax abatement has been approved. Thus,
without a termination letter, a tax assessment cannot be considered closed and
terminated.

In this case, Asiatrust failed to present a termination letter from the BIR. Instead, it
presented a Certification issued by the BIR to prove that it availed of the Tax
Abatement Program and paid the basic tax. It also attached copies of its BIR Tax
Payment Deposit Slips and a letter issued by RDO Nacar. These documents, however,
do not prove that Asiatrust's application for tax abatement has been approved. If at all,
these documents only prove Asiatrust's payment of basic taxes, which is not a ground
to consider its deficiency tax assessment closed and terminated.

2. Section 1, Rule 8 of the Revised Rules of the CTA states:

SECTION 1. Review of cases in the Court en bane. - In cases falling under the
exclusive appellate jurisdiction of the Court en bane, the petition for review of a
decision or resolution of the Court in Division must be preceded by the filing of a
timely motion for reconsideration or new trial with the Division.

Thus, in order for the CTA En Banc to take cognizance of an appeal via a petition for
review, a timely motion for reconsideration or new trial must first be filed with the
CTA Division that issued the assailed decision or resolution. Failure to do so is a
 ground for the dismissal of the appeal as the word "must" indicates that the filing of a
prior motion is mandatory, and not merely directory.

The same is true in the case of an amended decision. Section 3, Rule 14 of the same
rules defines an amended decision as "[a]ny action modifying or reversing a decision
of the Court en banc or in Division." As explained in CE Luzon Geothermal Power
Company, Inc. v. Commissioner of Internal Revenue, 65 an amended decision is a
different decision, and thus, is a· proper subject of a motion for reconsideration.

In this case, the CIR's failure to move for a reconsideration of the Amended Decision
of the CTA Division is a ground for the dismissal of its Petition for Review before the
CTA En Banc. Thus, the CTA En Banc did not err in denying the CIR's appeal on
procedural grounds.

Asiaworld Properties Philippine Corporation v. CIR

G.R. No. 171766, July 29, 2010
Supreme Court Second Division, Carpio, J.
Facts:
On 9 April 2002, Asiaworld Properties filed with the Revenue District Office   No.
52, BIR Region VIII, a request for refund in the amount of P18,477,144.00, allegedly
representing partial excess creditable tax withheld for the year 2001. Petitioner claimed that it
is entitled to the refund of its unapplied creditable withholding taxes.
On 12 April 2002, before the BIR Revenue District Office could act on petitioner's
claim for refund, petitioner filed a Petition for Review with the Court of Tax Appeals to toll
the running of the two-year prescriptive period provided under Section 229 under the NIRC.
The CTA denied the petition for lack of merit. Petitioner moved for reconsideration,
which the CTA denied. On appeal, the CA held that Section 76 explicitly provides that once
the option to carry-over is chosen, such option is irrevocable for that taxable period and the
taxpayer is no longer allowed to apply for cash refund or tax credit. In this case, petitioner
chose to carry-over the excess tax payment it had made in the taxable year 1999 to be applied
to the taxes due for the succeeding taxable years. The Court of Appeals ruled that petitioner’s
choice to carry-over its tax credits for the taxable year 1999 to be applied to its tax liabilities
for the succeeding taxable years is irrevocable and petitioner is not allowed to change its
choice in the following year.
Issue:
Whether the exercise of the option to carry-over the excess income tax credit prohibits
a claim for refund in the subsequent taxable years.
Ruling:
Yes. SEC. 76. Final Adjustment Return. – Every corporation liable to tax under Section 27 shall file a
final adjustment return covering the total taxable 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 income of that year, the corporation shall either:
(A) Pay the balance of tax still due; or
(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess amount paid,
as the case may be.
In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly
income taxes paid, the excess amount shown on its final adjustment return may be carried
over and 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 cash refund or issuance of a tax credit certificate shall be allowed, therefore.
Thus, once the taxpayer opts to carry-over the excess income tax against the taxes due for the
succeeding taxable years, such option is irrevocable for the whole amount of the excess
income tax, thus, prohibiting the taxpayer from applying for a refund for that same excess
income tax in the next succeeding taxable years.8 The unutilized excess tax credits will
remain in the taxpayer’s account and will be carried over and applied against the taxpayer’s
income tax liabilities in the succeeding taxable years until fully utilized.
In this case, petitioner opted to carry-over its 1999 excess income tax as tax credit for the
succeeding taxable years. As correctly held by the Court of Appeals, such option to carry-
over is not limited to the following taxable year 2000 but should apply to the succeeding
taxable years until the whole amount of the 1999 creditable withholding tax would be fully
utilized.
 CBK Power Company Limited v, CIR
G.R. No. 193383-34, January 14, 2015
Supreme Court First Division, Perlas-Bernabe, J.
Facts:
CBK Power in order to fund its hydroelectric power generating plants (CBK project)
in Laguna, obtained a syndicated loan from different foreign banks. In February 2001, CBK
Power borrowed money from Industrial Bank of Japan, Fortis-Netherlands, Raiffesen Bank,
Fortis-Belgium, and Mizuho Bank for which it remitted interest payments from May 2001 to
May 2003. It alleged that these banks withheld final taxes from said payments based on the
following rates: 15% and 20%. However, CBK Power alleged that under the relevant tax
treaties between the Philippines and the respective countries in which each of the banks is a
resident, the interest income derived by the aforementioned banks are subject only to a
preferential tax rate of 10%
Accordingly, on April 14, 2003, CBK Power filed a claim for refund of its excess
final withholding taxes allegedly erroneously withheld and collected. Due to CIR’s inaction,
CBK Power filed a petition for review before the CTA. Accordingly, on April 14, 2003, CBK
Power filed a claim for refund of its excess final withholding taxes allegedly erroneously
withheld and collected.
The CTA Division initially granted said refund application filed by CBK Power.
However, upon the motion for reconsideration filed by CIR, CTA Division amended its
earlier decision, reducing the amount of the refund citing the case of Mirant wherein it held
that an ITAD ruling must be obtained prior to availing a preferential rate. The CTA En Banc
affirmed said decision.
Issue:
1. Whether an ITAD ruling that is not found in the income treaties signed by the
Philippines before a preferential tax rate can be availed of.
2. Whether CBK has failed to exhaust administrative remedies.
Ruling:
1. No. The Philippine Constitution provides for adherence to the general principles of
international law as part of the law of the land. The time-honored international
principle of pacta sunt servanda demands the performance in good faith of treaty
obligations on the part of the states that enter into the agreement. In this jurisdiction,
treaties have the force and effect of law. Bearing in mind the rationale of tax treaties,
the period of application for the availment of tax treaty relief as required by RMO No.
1-2000 should not operate to divestentitlement to the relief as it would constitute a
violation of the duty required by good faith in complying with a tax treaty. The denial
of the availment of tax relief for the failure of a taxpayer to apply within the
prescribed period under the administrative issuance would impair the value of the tax
treaty. At most, the application for a tax treaty relief from the BIR should merely
operate to confirm the entitlement of the taxpayer to the relief.
2. No. Had CBK Power awaited the action of the Commissioner on its claim for refund
prior to taking court action knowing fully well that the prescriptive period was about
to end, it would have lost not only its right to seek judicial recourse but its right to
recover the final withholding taxes it erroneously paid to the government thereby
suffering irreparable damage. Also, while it may be argued that, for the remittance
filed on June 10, 2003 that was to prescribe on June 10,2005, CBK Power could have
waited for, at the most, three (3) months from the filing of the administrative claim on
March 4, 2005 until the last day of the two-year prescriptive period ending June 10,
2005, that is, if only to give the BIR at the administrative level an opportunity to act
on said claim, the Court cannot, on that basis alone, deny a legitimate claim that was,
for all intents and purposes, timely filed in accordance with Section 229 of the NIRC.
There was no violation of Section 229 since the law, as worded, only requires that an
administrative claim be priorly filed.
 CIR v. Air Liquide Philippines Inc.
G.R. No. 210646, July 29, 2015
Supreme Court Second Division, Mendoza, J.
Facts:
Air Liquide Philippines is a VAT registered entity which sells chemical products and
renders certain related services to the Philippine Economic Zone Authority (PEZA)
enterprises. On January 22, 2008, ALPI filed with the BIR its Quarterly VAT Return for the
4th quarter of 2007. Subsequently, on December 23, 2009, ALPI filed with the CIR an
application for issuance of a tax credit certificate for its unutilized input VAT in the amount
of P23,254,465.64 attributable to its transactions with PEZA-registered enterprises for the 4th
quarter of 2007. Six days later, ALPI filed its petition for review with the CTA Division,
without awaiting the resolution of its application for tax credit certificate or the expiration of
the 120-day period under Section 112(C) of the National Internal Revenue Code (NIRC).
The CTA Division dismissed the judicial claim for lack of jurisdiction noting that the
failure to comply with the 120-day rule warranted dismissal of the application. The CTA En
Bank however, reversed this ruling citing the consolidated cases of tax credit certificate for
unutilized input VAT. CIR v. San Roque, CIR v. Taganito and CIR v. Philex4 (San Roque).
In these cases, the Court recognized the legal effects of BIR Ruling No. DA-489-03, which
stated that the "taxpayer-claimant need not wait for the lapse of the 120-day period before it
could seek judicial relief with the CTA by way of Petition for Review."
Issue:
Whether the CTA Division acquired jurisdiction over ALPI’s petition for review.
Ruling:
Yes. BIR Ruling No. DA-489-03, issued on December 10, 2003, stated that the
taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek
judicial relief with the CTA by way of a petition for review. This rule, however, was nullified
in Aichi, promulgated on October 6, 2010. Aichi emphasized that the failure to await the
decision of the Commissioner or the lapse of 120-day period prescribed in Section 112(C)
amounted to a premature filing. To elucidate on the seemingly conflicting doctrines, San
Roque clarified, once and for all, that BIR Ruling No. DA-489-03 was a general
interpretative rule. Thus, all taxpayers can rely on the said BIR ruling from the time of its
issuance on December 10, 2003, up to its reversal by this Court in Aichi on October 6, 2010.
In the present case, ALPI can benefit from BIR Ruling No. DA-489-03. It filed its judicial
claim for VAT credit certificate on December 29, 2009, well within the interim period from
December 10, 2003, to October 6, 2010, so there was no need to wait for the lapse of 120
days prescribed in Section 112 (c) of the NIRC.
CIR v. Algue, Inc.
 G.R. No. L-28896, February 17, 1988
Supreme Court First Division, Cruz, J.
Facts:
On January 14, 1965, Algue Inc. received a letter from the CIR assessing it in the total
amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959. On January
18, 1965, Algue flied a letter of protest or request for reconsideration, which letter was stamp
received on the same day. On March 12, 1965, a warrant of distraint and levy was presented
to Algue Inc. through its counsel who refused to receive it on the ground of the pending
protest. On April 7, 1965, AIgue Inc. was informed that the BIR was not taking any action on
the protest, and it was only then that he accepted the warrant of distraint, and levy earlier
sought to be served. Sixteen days later, on April 23, 1965, Algue filed a petition for review of
the decision of the CIR with the CTA.
Issue:
Whether Algue Inc. seasonably filed the petition for review before the CTA.
Ruling:
Yes. According to Rep. Act No. 1125, the appeal may be made within thirty days
after receipt of the decision or ruling challenged. It is true that as a rule the warrant of
distraint and levy is "proof of the finality of the assessment" and renders hopeless a request
for reconsideration," 9 being "tantamount to an outright denial thereof and makes the said
request deemed rejected." But there is a special circumstance in the case at bar that prevents
application of this accepted doctrine.
The proven fact is that four days after the private respondent received the petitioner's notice
of assessment, it filed its letter of protest. This was apparently not taken into account before
the warrant of distraint and levy was issued; indeed, such protest could not be located in the
office of the petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that
it was, if at all, considered by the tax authorities. During the intervening period, the warrant
was premature and could therefore not be served. As the Court of Tax Appeals correctly
noted," the protest filed by private respondent was not pro forma and was based on strong
legal considerations. It thus had the effect of suspending on January 18, 1965, when it was
filed, the reglementary period which started on the date the assessment was received, viz.,
January 14, 1965. The period started running again only on April 7, 1965, when the private
respondent was definitely informed of the implied rejection of the said protest and the
warrant was finally served on it. Hence, when the appeal was filed on April 23, 1965, only 20
days of the reglementary period had been consumed.

BIR v. Sps. Manly

G.R. No. 197590, November 24, 2014
Supreme Court Second Division, Del Castillo, J.
Facts:
Sps. Antonio Manly was a stockholder and the Executive Vice President of their
family-owned business while his wife Sps. Ruby was a housewife. On April 27, 2005, BIR
issued a LOA to investigate the revenue tax liabilities of Sps Manly for taxable year 2003 and
prior years. The BIR investigators then reported that Antonio’s ITR’s for taxable years
2000,2001 and 2003 were underdeclared. And that since the under declaration exceed 30%, it
was a prima facie evidence of fraud with intent to evade the payment of proper taxes due to
the government.
The BIR then recommended the filing of criminal case against Sps. Manly for
violating the Secs. 254 and 255 in relation to Sec. 248(B) of the NIRC. The State Prosecutor
also recommended the filing of criminal charges against Sps. Manly for violating Secs. 254
and 255. The Secretary of Justice however reversed said resolution holding that she found no
willful failure to pay or evade payment of taxes on the part of Sps. Manly. The CA affirmed
the decision of the Sec. of Justice. The CA ruled that there was no probable cause to charge
Sps. Manly as BIR failed to state their exact tax liability and to show sufficient proof of their
likely source of income.
Issue:
Whether the CA committed grave abuse of discretion amounting to lack or excess of
jurisdiction in affirming the decision of the Sec, of Justice.
Ruling:
Yes. In the case at bar, the revenue officers used the expenditure method, which is a
method of reconstructing a taxpayer’s income by deducting the aggregate yearly expenditures
from the declared yearly income, to determine Sps. Manly’s ta liability. They found out that
there was under declaration of more than 30% which is a prima facie evidence of fraud. The
amount of tax due from respondent spouses was specifically alleged in the Complaint-
Affidavit. The revenue officers also identified the likely source of the unreported or
undeclared income in their Reply-Affidavit.
In view of the foregoing, the Court is convinced that there is probable cause to indict Sps.
Manly tax evasion as BIR was able to show that a tax is due from them. In completely
disregarding the evidence presented and in affirming the ruling of the Acting Justice
Secretary that no probable cause exists, the Court found that the CA committed grave abuse
of discretion amounting to lack or excess of jurisdiction.

BPI v. Trinidad
G.R. No. L-16014, October 4, 1921
Supreme Court En Banc, Johnson, J.
Facts:
Defendat Trinidad, Collector of Internal Revenue seized and distrained certain
personal property, consisting of machinery for sawing lumber and advertised the same for
sale, to realize the sum of P2,159.79, said to be due to the Government. The property in
question formerly belonged to the Taba Saw Mill Co. which was owned by Pujalte and Co. It
was then conveyed to BPI, by way of chattel mortgage, together with other personalities, as
security for the payment to said bank of two certain promissory notes for the sum of
P180,000. Said chattel mortgage was duly registered in the office of the register of deeds of
Zamboanga.
BPI, then alleged that it was their property and demanded its release. However, such
demand was denied. BPI then paid to the Collector the said sum of P2,159.79 under protest to
prevent the sale of said property, and immediately brought the present action in the Court of
First Instance of Zamboanga to recover the said sum together with interest and costs. The
lower court, after due trial, dismissed the BPI’s complaint and absolved the Trinidad from all
liability thereunder. The lower court held that BPI spontaneously paid said debt hence it has
no cause of action against Trinidad and even if he has, it must fail because the property in
question may be a subject of distraint under Act No. 2339
Issue:
Whether the lower court erred in dismissing the complaint filed by BPI.
Ruling:
Yes. There is absolutely no basis for the finding of the trial court that "the plaintiff
bank had voluntarily and spontaneously paid the debt of a third party, that is, that of the firm
of Pujalte and Co." BPI’s complaint alleges: "That thereupon, involuntarily and under due
protest in writing, the plaintiff bank made payment of the required sum of P2,159.79 in order
to secure the release of its seized property." These allegations were specially admitted by the
Trinidad. And at the time of the seizure of the property here in question, the plaintiff held a
valid and subsisting chattel mortgage on the same, duly registered in the registry of deeds. So
long as the mortgage exists, the dominion with respect to the mortgaged personal property
rests with the creditor-pledgee from the time of the inscription of the mortgage in the registry,
and the furniture ceases to be the property of the debtor for the reason that it has become the
property of the creditor, in like manner as the domination of a thing sold is transferred to the
purchaser and ceases to belong to the vendor from the moment of the delivery thereof, as a
result of the sale."
BPI v, CIR
G.R. No. 174942, March 7, 2008
Supreme Court Second Division, Tinga, J.
Facts:
On April 7, 1989, CIR issued an assessment/demand notices against BPI for
deficiency withholding tax at source (Swap Transactions) and DST involving the amounts of
P190,752,860.82 and P24,587,174.63, respectively, for the years 1982 to 1986. On April 20,
1989, BPI filed a protest on the demand/assessment notices. On May 8, 1989, BPI filed a
supplemental protest. BPI executed several Waivers of the Statutes of Limitations, the last of
which was effective until December 31, 1994.
The CIR then cancelled the deficiency amounting to P190,752,860.82 but ordered to
pay BPI the deficiency DST assessment in the amount of P24,587,174.63 within 30 days. BPI
received the copy of the decision January 15, 2003. Thereafter, on January 24, 2003, BPI
filed a Petition for Review before the CTA which the latter court denied for lack of merit. In
its Petition for Review, BPI argued that that the government’s right to collect the DST had
already prescribed because the Commissioner of Internal Revenue (CIR) failed to issue any
reply granting BPI’s request for reinvestigation manifested in the protest letters dated 20
April and 8 May 1989. It was only through the 9 August 2002 Decision ordering BPI to pay
deficiency DST, or after the lapse of more than thirteen (13) years, that the CIR acted on the
request for reinvestigation, warranting the conclusion that prescription had already set in,
Issues:
 Whether the collection of the deficiency DST is barred by prescription.
Ruling:
Yes. Batas Pambansa Blg. 700 amended Section 318 of the Tax Code of 1977 which
shortened the statute of limitations on assessment and collection of national internal revenue
taxes from five (5) years to three (3) years. Thus, the CIR has three (3) years from the date of
actual filing of the tax return to assess a national internal revenue tax or to commence court
proceedings for the collection thereof without an assessment. Section 320 of the Tax Code,
on the other hand, provides that in order to suspend the running of the prescriptive periods for
assessment and collection, the request for reinvestigation must be granted by the CIR. There
is nothing in the records of this case which indicates, expressly or impliedly, that the CIR had
granted the request for reinvestigation filed by BPI. What is reflected in the records is the
piercing silence and inaction of the CIR on the request for reinvestigation, as he considered
BPI’s letters of protest to be. The inordinate delay of the CIR in acting upon and resolving the
request for reinvestigation filed by BPI and in collecting the DST allegedly due from the
latter had resulted in the prescription of the government’s right to collect the deficiency.
BPI v. CIR
G.R. No. 139736, October 17, 2005
Supreme Court Second Division, Chico-Nazario, J.
Facts:
On October 20, 1989, BPI received an assessment with an attached assessment notice
from the BIR for its alleged deficiency DST when it sold $500,000.00 to the Central Bank
of the Philippines (Central Bank), for the total sales amount of US$1,000,000.00. BPI then
filed a protest to the BIR on November 17, 1989, for the said assessment. PI did not receive
any immediate reply to its protest letter. However, on 15 October 1992, the BIR issued a
Warrant of Distraint and/or Levy against BPI. It served the Warrant on petitioner BPI only on
23 October 1992. Then again, petitioner BPI did not hear from the BIR until 11 September
1997, when its counsel received a letter, dated 13 August 1997, signed by then BIR
Commissioner denying its "request for reconsideration,"
BPI then fled a petition for review before the CTA alleging that BIR cannot assess
and collect deficiency DST against them on the ground of prescription. That BIR has only
three years to collect said amount, but it took them seven years to deny the said protest.
The CTA held that the right of the BIR to collect on the assessment had not yet
prescribed. Section 320 (now 223) of the Tax Code, clearly states that a request for
reinvestigation which is granted by the Commissioner, shall suspend the prescriptive period
to collect. This does not mean that the Commissioner will cancel the subject assessment but
should be construed as when the same was entertained by the Commissioner by not issuing
any warrant of distraint or levy on the properties of the taxpayer or any action prejudicial to
the latter unless and until the request for reinvestigation is finally given due course. The CTA
also ruled that the sale made by BPI to Central Bank was not subject to DST. It held that the
Central Bank, during the period June 11, 1984, to March 9, 1987, enjoyed tax exemption
privilege, including the payment of documentary stamp tax (DST) pursuant to Resolution No.
35-85. Hence, BPI cannot be held liable for DST.
Issues:
 Whether the right of BIR Commissioner to collect from BPI the alleged deficiency
DST for taxable year 1985 had prescribed.
Ruling:
Yes. The efforts of respondent Commissioner to collect on Assessment ere already
barred by prescription. The statute of limitations on collection may only be interrupted or
suspended by a valid waiver executed in accordance with paragraph (d) of Section 223 of the
Tax Code of 1977, as amended, and the existence of the circumstances enumerated in Section
224 of the same Code, which include a request for reinvestigation granted by the BIR
Commissioner.
Even when the request for reconsideration or reinvestigation is not accompanied by a valid
waiver or there is no request for reinvestigation that had been granted by the BIR
Commissioner, the taxpayer may still be held in estoppel and be prevented from setting up
the defense of prescription of the statute of limitations on collection when, by his own
repeated requests or positive acts, the Government had been, for good reasons, persuaded to
postpone collection to make the taxpayer feel that the demand is not unreasonable or that no
harassment or injustice is meant by the Government, as laid down by this Court in the Suyoc
case.
Applying the given rules to the present Petition, this Court finds that –
(a) The statute of limitations for collection of the deficiency DST in Assessment No.
FAS-5-85-89-002054, issued against petitioner BPI, had already expired; and
(b) None of the conditions and requirements for exception from the statute of
limitations on collection exists herein: Petitioner BPI did not execute any waiver of the
prescriptive period on collection as mandated by paragraph (d) of Section 223 of the Tax
Code of 1977, as amended; the protest filed by petitioner BPI was a request for
reconsideration, not a request for reinvestigation that was granted by respondent BIR
Commissioner which could have suspended the prescriptive period for collection under
Section 224 of the Tax Code of 1977, as amended; and, petitioner BPI, other than filing a
request for reconsideration of Assessment No. FAS-5-85-89-002054, did not make repeated
requests or performed positive acts that could have persuaded the respondent BIR
Commissioner to delay collection, and that would have prevented or estopped petitioner BPI
from setting up the defense of prescription against collection of the tax assessed, as required
in the Suyoc case.
This is a simple case wherein respondent BIR Commissioner and other BIR officials failed to
act promptly in resolving and denying the request for reconsideration filed by petitioner BPI
and in enforcing collection on the assessment. They presented no reason or explanation as to
why it took them almost eight years to address the protest of petitioner BPI. The statute on
limitations imposed by the Tax Code precisely intends to protect the taxpayer from such
prolonged and unreasonable assessment and investigation by the BIR.
Considering that the right of the respondent BIR Commissioner to collect from petitioner BPI
the deficiency DST in Assessment No. FAS-5-85-89-002054 had already prescribed, then,
there is no more need for this Court to make a determination on the validity and correctness
of the said Assessment for the latter would only be unenforceable.
 Cagayan Electric Power and Light Co., Inc. v. CIR
G.R. No. L-60126, September 25, 1985
Supreme Court Second Division, Aquino, J.
Facts:
Cagayan Electric Power was the holder of a legislative franchise, RA 3247. It only
pays 3% tax on its gross earnings in lieu of all taxes and assessments. On June 27, 1968,
Republic Act No. 5431 amended section 24 of the Tax Code wherein franchise companies
were subjected to income tax in addition to franchise tax. However, Cagayan Electric’s
franchise was amended by RA 6020 which reenacted the tax exemption in its original charter
or neutralized the modification made by Republic Act No. 5431 more than a year before.
The CIR then in view of Sec. 24 of the Tax Code as amended, demanded Cagayan
Electric to pay deficiency income taxes for 1968-to 1971. Upon protest, the CIR cancelled the
assessments for 1968-1971 but insisted on those for 1968 and 1969.
Cagayan Electric filed a petition for review with the Tax Court, which on February
26, 1982, held the petitioner liable only for the income tax for the period from January 1 to
August 3, 1969, or before the passage of Republic Act No. 6020 which reiterated its tax
exemption.
Issue:
Whether the CTA erred in holding Cagayan Electric liable for the income tax before
the passage of Act. No. 6020.
Ruling:
No. The Court held that the Tax Court acted correctly in holding that the exemption
was restored by the subsequent enactment on August 4, 1969, of Republic Act No. 6020
which reenacted the said tax exemption. Hence, the petitioner is liable only for the income
tax for the period from January 1 to August 3, 1969, when its tax exemption was modified by
Republic Act No. 5431.
The Court held that Congress could impair petitioner's legislative franchise by making it
liable for income tax from which heretofore it was exempted by virtue of the exemption
provided for in section 3 of its franchise.
The Constitution provides that a franchise is subject to amendment, alteration or repeal by the
Congress when the public interest so requires (Sec. 8, Art. XIV, 1935 Constitution; Sec. 5,
Art. XIV, 1973 Constitution),

Mobil Philippines Inc. v. The City Treasurer of Makati

G.R. NO. 154092, July 14, 2005
 Supreme Court First Division, Quisumbing, J.
Facts:
On August 20, 1998, Mobil Philippines filed an application with the City Treasurer of
Makati for the retirement of its business within the City of Makati as it moved its principal
place of business to Pasig City. The City Treasurer then issued a billing slip to Mobil
Philippines with a total assessed business taxes of P1.89M. Mobil Philippines paid the said
amount under protest.
Upon denial of its application for refund, Mobil Philippines filed the same action to
the RTC of Pasig City wherein it was also denied. The RTC held the pertinent law provides
that a person or entity doing business in the Municipality shall be subject to business tax. The
tax shall be fixed by the quarter. Considering therefore that the business tax accrues only on
the first day of January as provided in Sec. 3A.07 of the Makati City Revenue Code and
becomes payable within the first 20 days thereof or of each subsequent quarter, the payments
made by Mobil in the year 1998 are therefore payments for the business tax for 1997 which
accrued in January of 1998 and became payable within the first 20 days of January or of each
subsequent quarter. Thus, upon retirement in August 1998, the taxes for said year which
should accrue in January 1999 become immediately payable before the application for
retirement can be approved Sec. 3A.08(g). The assessment of the Chief of the License
Division of Makati is therefore with legal basis and does not constitute double taxation.
Issue:
Whether the business taxes paid by petitioner in 1998, business taxes for 1997 or
1998?
Ruling:
No. Based on the Makati Revenue Code, on the year an establishment retires or
terminates its business within the municipality, it would be required to pay the difference in
the amount if the tax collected, based on the previous year's gross sales or receipts, is less
than the actual tax due based on the current year's gross sales or receipts. In this case, For the
year 1998, Mobil Philippines paid a total of P2,262,122.48 to the City Treasurer of Makati as
business taxes for the year 1998. The amount of tax as computed based on petitioner's gross
sales for 1998 is only P1,331,638.84. Since the amount paid is more than the amount
computed based on petitioner's actual gross sales for 1998, Mobil Philippines upon its
retirement is not liable for additional taxes to the City of Makati. 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.
Coca-Cola Bottlers Philippines Inc. v. City of Manila
G.R. No. 156252, June 27, 2006
Supreme Court First Division, Chico-Nazario, J.
Facts:
Upon the petition filed by Coca-Cola before the DOJ, Tax Ordinance No. 7988 passed
by the City of Manila which amended certain sections of 7944 was declared null and void for
the failure to publish the same within ten days after their approval as mandated in the LGC.
Because the City of Manila continued to assess Coca-Cola business tax based on the
prescribed rates in Tax Ordinance No. 7988, they filed a complaint before the RTC of
Manila. The trial court then ordered that Manila City is enjoined from implementing Tax
Ordinance No. 7988.
During the pendency of the said proceeding the City Mayor of Manila approved on 22
February 2001 Tax Ordinance No. 8011 entitled, "An Ordinance Amending Certain Sections
of Ordinance No. 7988." Said tax ordinance was again challenged by petitioner before the
DOJ through a Petition questioning the legality of the aforementioned tax ordinance on the
grounds that (1) said tax ordinance amends a tax ordinance previously declared null and void
and without legal effect by the DOJ; and (2) said tax ordinance was likewise not published
upon its approval in accordance with Section 188 of the Local Government Code of 1991.
Meanwhile, on the basis of the enactment of Tax Ordinance No. 8011, the City of Manila
filed a Motion for Reconsideration with the RTC of Manila, Branch 21, of its Decision, dated
28 November 2001, which the court a quo granted. The motion for reconsideration filed by
Coca-Cola was denied by the court a quo.
Issue:
Whether Tax Ordinance No. 7988 is null and void and produced no legal effect.
Ruling:
Yes. The Court must reverse the Order of the RTC of Manila, Branch 21, dismissing
petitioner’s case as there is no basis in law for such dismissal. The amending law, having
been declared as null and void, in legal contemplation, therefore, does not exist. Furthermore,
even if Tax Ordinance No. 8011 was not declared null and void, the trial court should not
have dismissed the case on the reason that said tax ordinance had already amended Tax
Ordinance No. 7988. As held by this Court in the case of People v. Lim, if an order or law
sought to be amended is invalid, then it does not legally exist, there should be no occasion or
need to amend it.

Ericsson Telecommunications, Inc. v. City of Pasig

G.R. No. 176667, November 22, 2007
Supreme Court Third Division, Austria-Martinez, J.
Facts:
Ericsson Telecommunications filed a protest against City of Pasig for the assessment
the latter issued for its business tax deficiency for the years 1998 and 1999 based on its gross
revenues as reported in its audited financial statements for the years 1997 and 1998 on
December 21, 2000. The City of Pasig issued another assessment this time based on business
tax deficiencies for the years 2000 and 2001, amounting to P4,665,775.51 and P4,710,242.93,
respectively, based on its gross revenues for the years 1999 and 2000. Ericsson then filed
another protest on account of this assessment on January 21, 2002. Ericsson argued on both
protests that the assessment must be based on its gross receipts and not gross revenue.
Issue:
Whether the local business tax on contractors should be based on gross receipts or
gross revenue.
Ruling:
Yes. It should be based on gross receipts. 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. On the other hand, 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.
In petitioner's case, its audited financial statements reflect income or revenue which accrued
to it during the taxable period although not yet actually or constructively received or paid.
This is because petitioner uses the accrual method of accounting, where income is reportable
when all the events have occurred that fix the taxpayer's right to receive the income, and the
amount can be determined with reasonable accuracy; the right to receive income, and not the
actual receipt, determines when to include the amount in gross income.
The imposition of local business tax based on petitioner's gross revenue will inevitably result
in the constitutionally proscribed double – 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.
Lopez v. City of Manila
G.R. No. 127139, February 19, 1999
Supreme Court Second Division, Quisumbing, J.
Facts:
With the implementation of Manila Ordinance No. 7894, the tax on the land owned by
the petitioner was increased by five hundred eighty percent (580%). With respect to the
improvement on petitioner's property, the tax increased by two hundred fifty percent (250%).
Because of these increases, petitioner Jaime C. Lopez, filed on March 18, 1996, a special
proceeding for the declaration of nullity of the City of Manila Ordinance No. 7894.
However, Manila Ordinance No. 7905 also took effect amending the former ordinance
reducing by fifty percent (50%) the assessment levels for the computation of tax due. Despite
said amendment, the controversy proceeded. On May 9, 1996, the court directed the issuance
of a writ of injunction and denied, in the meanwhile, the motion to dismiss by the City of
Manila. The motion for reconsideration filed by the City of Manila was, however, granted on
the ground of Lopez’ failure to exhaust administrative remedies. Hence this petition. Lopez
argued that the respondent court failed to correctly apply Sections 212 and 221 of R.A. 7160.
He contends that Sec. 212 of the R.A. 7160 prohibits the general revision of real property
assessment before the approval of the schedule of the fair market values. Thus, the alleged
revision of real property assessment in 1995 is illegal.
Issue:
Whether the trial court failed to apply Sec. 212 of the R.A. 7160 which prohibits the
general revision of real property assessment before the approval of the schedule of the fair
market values.
Ruling:
No. The preparation of fair market values as a preliminary step in the conduct of
general revision was set forth in Section 212 of R.A. 7160, to wit: (1) The city or municipal
assessor shall prepare a schedule of fair market values for the different classes of real
property situated in their respective Local Government Units for the enactment of an
ordinance by the Sanggunian concerned; (2) The schedule of fair market values shall be
published in a newspaper of general circulation in the province, city or municipality
concerned or the posting in the provincial capitol or other places as required by law. In this
case, City Assessor, prepared the fair market values of real properties and in preparation
thereof, she considered the fair market values prepared in the calendar year 1992. Upon that
basis, the City Assessor's Office updated the schedule for the year 1995. Thereafter, the
proposed ordinance with the schedule of the fair market values of real properties was
published in the Manila Standard on October 28, 1995, and Balita on November 1, 1995.
LRTA v. Central Board of Assessment Appeals (CBAA)
G.R. No. 127316, October 12, 2000
Supreme Court Third Division, Panganiban, J.
Facts:
By reason of EO No. 603, LRTA acquired real properties, constructed structural
improvements, such as buildings, carriageways, passenger terminal stations, and installed
various kinds of machinery and equipment and facilities for the purpose of its operations. The
City Assessor of Manila then assessed said real properties of LRTA under the Real Property
Tax Code. LRTA paid said assessment except the carriageways and passenger terminal
stations including the land where it is constructed on the ground that the same are not real
properties under the Real Property Tax Code, and if the same are real properties, these are for
public use/purpose, therefore, exempt from realty taxation, which claim was denied by the
Respondent-Appellee City Assessor of Manila. Aggrieved, LRTA filed an appeal before the
CBAA but the latter denied the same and declared that the carriageways and passenger
termina stations are improvements hence under the Real Property Tax Code. The CA
affirmed said ruling.
Issue:
Whether petitioner's carriageways and passenger terminal stations are subject to real
property taxes.
Ruling:
Yes. Under the real property tax code, real property owned by the Republic of the
Philippines or any of its political subdivisions and any government-owned or controlled
corporation so exempt by its charter, provided, however, that this exemption shall not apply
to real property of the above-named entities the beneficial use of which has been granted, for
consideration or otherwise, to a taxable person.
EO 603, the charter of petitioner, does not provide for any real estate tax exemption in its
favor. Its exemption is limited to direct and indirect taxes, duties, or fees in connection with
the importation of equipment not locally available.
Even granting that the national government indeed owns the carriage ways and terminal
stations, the exemption would not apply because their beneficial use has been granted to
petitioner, a taxable entity.
Taxation is the rule and exemption is the exception. Any claim for tax exemption is strictly
construed against the claimant. LRTA has not shown its eligibility for exemption; hence, it is
subject to tax.

Philippine Ports Authority v. City of Iloilo

G.R. No. 109791, July 14, 2003
Supreme Court First Division, Azcuna, J.
Facts:
The City of Iloilo filed a complaint for sum of money against PPA. It alleged that
PPA was involved in arrastre and stevedoring and services and the leasing of real estate for
which it should be obligated to pay business taxes. It further alleges that PPA is the declared
and registered owner of a warehouse which is used in the operation of its business and is also
thereby subject to real property taxes.
PPA then filed a motion to dismiss but it was denied by the Supreme Court. Its
motion for reconsideration was also likewise denied. Hence this petition.
Issue:
Whether PPA is subject to real property and business taxes.
Ruling:
Yes. Concededly, "ports constructed by the State" are properties of the public
dominion, as Article 420 of the Civil Code enumerates these as properties "intended for
public use." It must be stressed however that what is being taxed in the present case is
petitioner’s warehouse, which, although located within the port, is distinct from the port
itself. The warehouse in the case at bar may not be held as part of the port, considering its
separable nature as an improvement upon the port, and the fact that it is not open for use by
everyone and freely accessible to the public. In the same way that we ruled in one case that
the exemption of public property from taxation does not extend to improvements made
thereon by homesteaders or occupants at their own expense, The Court likewise uphold the
taxability of the warehouse in the instant case, it being a mere improvement built on an
alleged property of public dominion, assuming petitioner’s port to be so.
The Court affirms the finding of the lower court on PPA’s liability for business taxes for the
lease of its building to private corporations. During the trial, PPA did not present any
evidence to refute respondent’s proof of PPA’s income from the lease of its property. Neither
did it present any proof of exemption from business taxes. Thus, in the absence of any proof
of exemption therefrom, petitioner is liable for the assessed business taxes.
 People v. Lo Ho Wing
G.R. No. 88017, January 21, 1991
Supreme Court First Division, Gancayco, J.
Facts:
Appellant Peter Lo, together with co-accused Lim Cheng Huat alias Antonio Lim and
Reynaldo Tia, were charged with a violation of Section 15, Article III of RA 9165. It was
alleged that the NARCOM operatives, upon the tip given by Tia, followed Tia and Lo who
hailed a taxicab out of the airport. That the operatives stopped the taxicab and recovered the
luggage of Lo wherein six (6) tin cans were found containing 56 paper tea bags of “shabu.” In
rendering a judgment of conviction, the trial court gave full credence to the testimonies of the
government anti-narcotics operatives, to whom the said court applied the well-settled
presumption of regularity in the performance of official duties.
Issue:
Whether the trial court erred in convicting Lo of violation of RA 9165.
Ruling:
No. In the instant case, it was firmly established from the factual findings of the trial
court that the authorities had reasonable ground to believe that appellant would attempt to
bring in contraband and transport it within the country. The belief was based on intelligence
reports gathered from surveillance activities on the suspected syndicate, of which appellant
was touted to be a member. Aside from this, they were also certain as to the expected date
and time of arrival of the accused from China. But such knowledge was clearly insufficient to
enable them to fulfill the requirements for the issuance of a search warrant. Still and all, the
important thing is that there was probable cause to conduct the warrantless search, which
must still be present in such a case.
As correctly averred by appellee, that search and seizure must be supported by a valid
warrant is not an absolute rule. There are at least three (3) well-recognized exceptions thereto.
As set forth in the case of Manipon, Jr. vs. Sandiganbayan,3 these are: [1] a search incidental
to an arrest, [2] a search of a moving vehicle, and [3] seizure of evidence in plain view
(emphasis supplied). The circumstances of the case clearly show that the search in question
was made as regards a moving vehicle. Therefore, a valid warrant was not necessary to effect
the search on appellant and his co-accused.

Garcia v. Executive Secretary

G.R. No. 101273. July 3, 1992
Supreme Court En Banc, Feliciano, J.
Facts:
Executive Order No. 475 was issued on 15 August 1991 reducing the rate of
additional duty on all imported articles except in the cases of crude oil and other oil products.
Seven (7) days later, the President issued Executive Order No. 478, dated 23 August 1991,
which levied, in addition to the additional duty, a special duty of P0.95 per liter or P151.05
per barrel of imported crude oil and P1.00 per liter of imported oil products.
Garcia then filed a petition assailing the validity of the said Executive Orders alleging
that it violates Section 24, Article VI of the 1987 Constitution. He contends that the
Constitution vests the authority to enact revenue bills in Congress, the President may not
assume such power of issuing Executive Orders Nos. 475 and 478 which are revenue-
generating measures.
Petitioner further argues that Executive Orders Nos. 475 and 478 contravene Section
401 of the Tariff and Customs Code, which Section authorizes the President, according to
Garcia, to increase, reduce or remove tariff duties or to impose additional duties only when
necessary to protect local industries or products but not for the purpose of raising additional
revenue for the government.
Issue:
Whether EO No. 475 and 478 are unconstitutional.
Ruling:
No. There is explicit Constitutional permission to Congress to authorize the President
to, “subject to such limitations and restrictions as [Congress] may impose”, fix “within
specific limits tariff rates xxx and other duties or imposts xxx.” The relevant congressional
statute is the Tariff and Customs Code of the Philippines, and Sections 104 and 401, the
pertinent provisions thereof. These are the provisions which the President explicitly invoked
in promulgating Executive Orders Nos. 475 and 478.
Accordingly, the Court believes and so holds that Executive Orders Nos. 475 and 478 which
may be conceded to be substantially moved by the desire to generate additional public
revenues, are not, for that reason alone, either constitutionally flawed, or legally infirm under
Section 401 of the Tariff and Customs Code. Petitioner has not successfully overcome the
presumptions of constitutionality and legality to which those Executive Orders are entitled.

CIR v. Procter & Gamble Philippine Manufacturing Corporation

G.R. No. 66838. December 2, 1991
Supreme Court En Banc, Feliciano, J.
Facts:
Procter and Gamble Philippines declared dividends in favor of its mother company
and sole stockholder Procter and Gamble US. Subsequently, Procter and Gamble Philippines
filed an application for refund before the CIR for the said dividends remitted pursuant to
Sec.24(b)(1) of the NIRC.
 Due to CIR’s inaction, Procter and Gamble Philippines filed a petition for review
before the CTA. The CTA granted said petition and ordered the CIR to refund or grant the tax
credit in favor of Procter and Gamble Philippines. On appeal, the Supreme Court Second
Division reversed the CTA decision.
Issue:
Whether Procter and Gamble Philippines may claim refund for the dividends it
declared.
Ruling:
Yes. Under the circumstances of this case, P&G-Phil. is properly regarded as a
"taxpayer" within the meaning of Section 309, NIRC, and as impliedly authorized to file the
claim for refund and the suit to recover such claim.
Sec 24 (b) (1) of the NIRC states that an ordinary 35% tax rate will be applied to dividend
remittances to non-resident corporate stockholders of a Philippine corporation. This rate goes
down to 15% only if the country of domicile of the foreign stockholder corporation “shall
allow” such foreign corporation a tax credit for “taxes deemed paid in the Philippines,”
applicable against the tax payable to the domiciliary country by the foreign stockholder
corporation. However, such tax credit for “taxes deemed paid in the Philippines” MUST, as a
minimum, reach an amount equivalent to 20 percentage points which represents the
difference between the regular 35% dividend tax rate and the reduced 15% tax rate. Thus, the
test is if USA “shall allow” P&G USA a tax credit for” taxes deemed paid in the Philippines”
applicable against the US taxes of P&G USA, and such tax credit must reach at least 20
percentage points. Requirements were met.

Dr. Felisa Vda. De San Agustin v. CIR

G.R. No. 138485, September 10, 2001
Supreme Court Third Division, Vitug, J.
Facts:
Dr. Felisa Vda. De San Agustin was the sole heir of his deceased husband while Ret.
Justice Jose Feria was the executor thereof. After the probate proceedings, an estate tax return
was filed on behalf of the estate with a request for an extension of two years for the payment
of the tax, The BIR Deputy Commissioner, however, granted the heirs an extension of only
six (6) months. Thereafter, on March 8, 1991, the executor paid the estate tax in the amount
of P1,676,432 as reported in the Tax Return filed with the BIR within the said extension
period.
 On September 23, 1991, Dr. Felisa received a Pre-Assessment Notice from the BIR,
dated August 29, 1991, showing a deficiency estate tax of P538,509.50, which, including
surcharge, interest and penalties, amounted to P976,540.00. Dr. Felisa expressed her
readiness to pay said deficiency but requested for the said surcharges to be waived. However,
the Commissioner issued an Assessment Notice reiterating the demand in the pre- assessment
notice and requesting payment on or before thirty (30) days upon receipt thereof. The CTA,
upon petition filed by Dr. Felisa, only modified the CIR’s assessment. On appeal by the
Commissioner, the CA reversed the CTA decision and held that the latter court did not
acquire jurisdiction over the subject matter.
Issues:
1. The filing of a claim for refund is not essential before the filing of the petition for
review.
2. The imposition by the respondent of surcharge, interest and penalties on the
deficiency estate tax is not in accord with the law and therefore illegal.
Ruling:
1. Yes. In Roman Catholic Archbishop of Cebu vs. Collector of Internal Revenue, the
CTA dismissed the petition for lack of jurisdiction because petitioner had failed to
first file a written claim for refund, pursuant to Section 306 of the Tax Code. The
Court reversed this ruling holding that Section 7 of Republic Act No.1125, creating
the Court of Tax Appeals, in providing for appeals from –
(1) Decisions of the Collector of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising
under the National Internal Revenue Code or other law or part of the law
administered by the Bureau of Internal Revenue - allows an appeal from a
decision of the Collector in cases involving' disputed assessments' as
distinguished from cases involving' refunds of internal revenue taxes,
fees or other charges.
Requiring petitioner to file a claim for refund of the taxes paid as a
condition precedent to his right to appeal, would in effect require of him
to go through a useless and needless ceremony that would only delay the
disposition of the case, for the Collector (now Commissioner) would
cer1ainly disallow the claim for refund in the same way as he disallowed
the protest against the assessment.
The Court sees no cogent reason to abandon the above dictum and to
require a useless formality that can serve the interest of neither the
government nor the taxpayer. The tax court has aptly acted in taking
cognizance of the taxpayer's appeal to it.
2. No. The delay in the payment of the deficiency tax within the time prescribed for its
payment in the notice of assessment justifies the imposition of a 25% surcharge in
consonance with Section 248A(3) of the Tax Code. The basic deficiency tax in this
case being P538,509.50, the twenty-five percent thereof comes to P134,627.37.
Section 249 of the Tax Code states that any deficiency in the tax due would be subject
to interest at the rate of twenty percent (20%) per annum, which interest shall be
assessed and collected from the date prescribed for its payment until full payment is
made.
 CIR v. Leal
G.R. No. 113459, November 18, 2002
Supreme Court Third Division, Sandoval-Gutierrez, J.
Facts:
The CIR issued RMO No. 15-91 imposing 5% lending investor’s tax on pawnshops
based on their gross income and requiring all investigating units of the Bureau of Internal
Revenue (BIR) to investigate and assess the lending investor’s tax due from them. Thereafter,
RMC 43-91 was issued subjecting the pawn ticket to the documentary stamp tax.
Josefina Leal then, owner of Josefina’s Pawnshop filed asked for reconsideration for
both issuances, but it was denied by the CIR. Leal then filed a petition for prohibition before
the RTC of San Mateo Rizal, seeking to prohibit CIR from implementing the revenue orders.
The OSG then filed a motion to dismiss.
The RTC denied the said motion and hold that the revenue orders are not provided in
the provisions of the Tax Code and in effect new taxes for which only the Congress may
impose. The CA ruled that the order of the RTC is subject to the immediate challenge of the
Supreme Court and not the CA. The CA nevertheless sustained the RTC ruling.
Issue:
1. Does the Court of Appeals have jurisdiction over a petition for Certiorari under Rule
65 of the Rules of Court questioning the authority of the RTC to review Revenue
Orders issued by the CIR?
2. Is it the RTC or the Court of Tax Appeals which has the appellate jurisdiction to
review the rulings or orders of the CIR?
Ruling:
1. The Court ruled that the CA erred in holding that it had no jurisdiction over
petitioner’s special civil action for certiorari under Rule 65 of the Rules. While the
Supreme Court exercises original jurisdiction to issue the extraordinary writ of
certiorari (as well as the writs of prohibition, mandamus, quo warranto, and habeas
corpus), such power is not exclusive to this Court but is concurrent with the Court of
Appeals and the Regional Trial Court. Such concurrence of original jurisdiction
among the Regional Trial Court, the Court of Appeals and the Supreme Court,
however, does not mean that the party seeking any of the extraordinary writs has the
absolute freedom to file his petition in the court of his choice. The hierarchy of courts
determines the appropriate forum for these petitions. Thus, petitions for the issuance
of the said writs against the first level (inferior) courts must be filed with the Regional
Trial Court and those against the latter, with the Court of Appeals. A direct invocation
of the Supreme Court’s original jurisdiction to issue these writs should be allowed
only where there are special and important reasons therefor, specifically, and
sufficiently set forth in the petition. This is the established policy to prevent inordinate
demands upon the Court’s time and attention, which are better devoted to matters
within its exclusive jurisdiction, and to prevent further over-crowding of the Court’s
docket. Thus, it was proper for petitioner to institute the special civil action for
certiorari with the Court of Appeals assailing the RTC’s order denying his motion to
dismiss based on lack of jurisdiction.
2. The jurisdiction to review the rulings of the Commissioner of Internal Revenue
pertains to the Court of Tax Appeals, not to the RTC. Under Republic Act No. 1125
(An Act Creating the Court of Tax Appeals), the CTA shall exercise exclusive
appellate jurisdiction to review by appeal, the decisions of the Commissioner of
Internal Revenue in cases involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other matters
arising under the National Internal Revenue Code or other laws, or part of law
administered by the Bureau of Internal Revenue.
 Southern Cross Cement Corp. v. The Philippine Cement Manufacturers Corp.
G.R. No. 158540, July 8, 2004
Supreme Court Second Division, Tinga, J.
Facts:
Rep. Act No. 8800, also known as the Safeguard Measures Act was enacted which
provides the structure and mechanics for the imposition of emergency measures, including
tariffs, to protect domestic industries and producers from increased imports which inflict or
could inflict serious injury on them.
The Philippine Cement Manufacturers Corp. or PHILCEMCOR filed an application
before the DTI alleging that the importation of gray Portland cement in increased quantities
has caused declines in domestic production, capacity utilization, market share, sales and
employment; as well as caused depressed local prices. Accordingly, Philcemcor sought the
imposition at first of provisional, then later, definitive safeguard measures on the import of
cement pursuant to the SMA. Philcemcor filed the application in behalf of twelve (12) of its
member-companies.
A formal investigation was thereafter conducted. The Tariff Commission the reported
that the elements of serious injury and imminent threat of serious injury not having been
established, they recommended that no definitive general safeguard measure be imposed on
the importation of gray Portland cement.
Subsequently, then DOJ Secretary Hernando Perez rendered an opinion stating that
Section 13 of the SMA precluded a review by the DTI Secretary of the Tariff Commissions
negative finding or finding that a definitive safeguard measure should not be imposed.
DTI then denied application for safeguard measures against the importation of gray
Portland cement Philcemcor received a copy of the DTI Decision on 12 April 2002. Ten days
later, it filed with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus
seeking to set aside the DTI Decision, as well as the Tariff Commissions Report. On the other
hand, Southern Cross filed its Comment arguing that the Court of Appeals had no jurisdiction
over Philcemcor’s petition, for it is on the Court of Tax Appeals (CTA) that the SMA
conferred jurisdiction to review rulings of the Secretary in connection with the imposition of
a safeguard measure.
Issue:
Whether or not the CA has jurisdiction over the said pettion.
Ruling:
No. CTA has jurisdiction. Under Section 29 of the SMA, there are three requisites to
enable the CTA to acquire jurisdiction over the petition for review contemplated therein: (i)
there must be a ruling by the DTI Secretary; (ii) the petition must be filed by an interested
party adversely affected by the ruling; and (iii) such ruling must be in connection with the
imposition of a safeguard measure. The first two requisites are clearly present. The third
requisite deserves closer scrutiny.
Contrary to the stance of the public respondents and Philcemcor, in this case where the DTI
Secretary decides not to impose a safeguard measure, it is the CTA which has jurisdiction to
review his decision. The reasons are as follows:
First. Split jurisdiction is abhorred. The law expressly confers on the CTA, the tribunal with
the specialized competence over tax and tariff matters, the role of judicial review without
mention of any other court that may exercise corollary or ancillary jurisdiction in relation to
the SMA.
Second. The interpretation of the provisions of the SMA favors vesting untrammeled
appellate jurisdiction on the CTA.
A plain reading of Section 29 of the SMA reveals that Congress did not expressly bar the
CTA from reviewing a negative determination by the DTI Secretary nor conferred on the
Court of Appeals such review authority. Respondents note, on the other hand, that neither did
the law expressly grant to the CTA the power to review a negative determination. However,
under the clear text of the law, the CTA is vested with jurisdiction to review the ruling of the
DTI Secretary in connection with the imposition of a safeguard measure. Had the law been
couched instead to incorporate the phrase the ruling imposing a safeguard measure, then
respondents claim would have indisputable merit. Undoubtedly, the phrase in connection
with not only qualifies but clarifies the succeeding phrase imposition of a safeguard measure.
As expounded later, the phrase also encompasses the opposite or converse ruling which is the
non-imposition of a safeguard measure.
Third. Interpretatio Talis In Ambiguis Semper Fienda Est, Ut Evitur Inconveniens Et
Absurdum.
Even assuming arguendo that Section 29 has not expressly granted the CTA jurisdiction to
review a negative ruling of the DTI Secretary, the Court is precluded from favoring an
interpretation that would cause inconvenience and absurdity. Adopting the respondents
position favoring the CTAs minimal jurisdiction would unnecessarily lead to illogical and
onerous results.