1. Apostolic Prefect of Mt. Province v. Treasurer of Baguio (71 Phil.

547)
FACTS: In 1937, an ordinance (Ordinance No. 137: Special Assessment List, City of Baguio)
was passed in the City of Baguio. The said ordinance sought to assess properties of property
owners within the defined city limits. The Apostolic Prefect of Mt. Province (APMP), on the
other hand, is a religious corporation duly established under Philippine laws. Pursuant to the
ordinance, it paid a total amount of P1,019.37 in protest. APMP later averred that it should be
exempt from the said special contribution since as a religious institution, it has a constitutionally
guaranteed right not to be taxed including its properties.
ISSUE: Whether or not APMP is exempt from taxes.
HELD: No. In the first place, the ordinance was in the nature of an assessment and not a
taxation.
The test of exemption from taxation is the use of the property for purposes mentioned in
the Constitution. Based on Justice Cooleys words:
While the word tax in its broad meaning, includes both general taxes and special
assessments, and in a general sense a tax is an assessment, and an assessment is a tax, yet there
is a recognized distinction between them in that assessment is confined to local impositions
upon property for the payment of the cost of public improvements in its immediate vicinity and
levied with reference to special benefits to the property assessed. The differences between a
special assessment and a tax are that (1) a special assessment can be levied only on land; (2) a
special assessment cannot (at least in most states) be made a personal liability of the person
assessed; (3) a special assessment is based wholly on benefits; and (4) a special assessment is
exceptional both as to time and locality. The imposition of a charge on all property, real and
personal, in a prescribed area, is a tax and not an assessment, although the purpose is to make a
local improvement on a street or highway. A charge imposed only on property owners benefited
is a special assessment rather than a tax notwithstanding the statute calls it a tax.
In the case at bar, the Prefect cannot claim exemption because the assessment is
not taxation per se but rather a system for the benefits of the inhabitants of the city.

2. Philippine Airlines Inc. v. EDU (G.R. No. L- 41383, August 15, 1988)

FACTS: The Philippine Airlines (PAL) is engaged in the air transportation business under a
legislative franchise, Act 4271, wherein it is exempt from the payment of taxes. On the strength
of an opinion of the Secretary of Justice (Opinion 307 of 1956), PAL was determined to have not
been paying motor vehicle registration fees since 1956. The Land Transportation Commissioner
required all tax exempt entities, including PAL, to pay motor vehicle registration fees. PAL
protested.

ISSUE: Whether registration fees as to motor vehicles are taxes to which Philippine Airlines is
exempt.

HELD: Taxes are for revenue, whereas fees are exactions for purposes of regulation and
inspection, and are for that reason limited in amount to what is necessary to cover the cost of the
services rendered in that connection. It is the object of the charge, and not the name, that
determines whether a charge is a tax or a fee. The money collected under the Motor Vehicle Law
is not intended for the expenditures of the Motor Vehicle Office but accrues to the funds for the
construction and maintenance of public roads, streets and bridges. As the fees are not collected
for regulatory purposes as an incident to the enforcement of regulations governing the operation
of motor vehicles on public highways, but to provide revenue with which the Government is to
construct and maintain public highways for everyones use, they are veritable taxes, not merely
fees. PAL is, thus, exempt from paying such fees, except for the period between 27 June 1968 to
9 April 1979, where its tax exemption in the franchise was repealed.


3. Silkair (Singapore) Pte, Ltd. vs. CIR (G.R. No. 173594, February 06, 2008)

FACTS: Silkair (Singapore Pte. Ltd. Purchased aviation jet fuel from Petron, to which the latter
imposed a P3.67 per liter excise (specific) tax. Claiming exemption from payment of excise taxes
pursuant to Section 135 of the Tax Code and Article 4 of the Philippines Singapore Air
Agreement, Silkair filed a formal claim for refund with the Commissioner of Internal Revenue
(CIR).
Silkair alleged that it was the one who actually paid the excise taxes due on the
transactions while Petron merely remitted the payment to the BIR, thereby negating the tax
exemption expressly granted to it.

ISSUE: Who is the proper party to claim a refund for the payment of excise taxes?

HELD: The Supreme Court held that the proper party to question, or seek a refund of an
indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who
paid the same even if he shifts the burden thereof to another.
Excise tax, whether classified as specific or ad valorem tax, is basically an indirect tax
imposed on the consumption of a specified list of goods or products. The tax is directly levied on
the manufacturer upon removal of the table goods from the place of production but in reality, the
tax is passed on to the end consumer as part of the selling price of goods sold.
In view thereof, while Petron actually passed on the burden of the tax to Silkair, the
additional amount billed to the latter was essentially a part of the purchase price and not a tax in
itself.
Hence, the SC ruled that even if the consumers or purchasers ultimately pay for the tax,
they are not considered the taxpayers. The fact that Petron, on whom the excise tax is imposed,
can shift the tax burden to its purchasers does not make the latter the taxpayers and the former
the withholding agent.
Although it was ruled in the instant case that Petron is the proper party that can claim the
refund of the excise taxes paid to BIR, the SC said that Silkair may nevertheless invoke its tax
exemption to Petron before buying aviation jet fuel in the future.

4. Pascual v. Secretary of Public Works (110 Phil 331)

FACTS: In 1953, Republic Act No. 920 was passed. This law appropriated P85,000.00 for the
construction, reconstruction, repair, extension and improvement Pasig feeder road terminals.
Wenceslao Pascual, then governor of Rizal, assailed the validity of the law. He claimed that the
appropriation was actually going to be used for private use for the terminals sought to be
improved were part of the Antonio Subdivision. The said Subdivision is owned by Senator Jose
Zulueta who was a member of the same Senate that passed and approved the same RA. Pascual
claimed that Zulueta misrepresented in Congress the fact that he owns those terminals and that
his property would be unlawfully enriched at the expense of the taxpayers if the said RA would
be upheld. Pascual then prayed that the Secretary of Public Works and Communications be
restrained from releasing funds for such purpose. Zulueta, on the other hand, perhaps as an
afterthought, donated the said property to the City of Pasig.
ISSUE: Whether or not the appropriation is valid.
HELD: No, the appropriation is void for being an appropriation for a private purpose. The
subsequent donation of the property to the government to make the property public does not cure
the constitutional defect. The fact that the law was passed when the said property was still a
private property cannot be ignored. In accordance with the rule that the taxing power must be
exercised for public purposes only, money raised by taxation can be expanded only for public
purposes and not for the advantage of private individuals. Inasmuch as the land on which the
projected feeder roads were to be constructed belonged then to Zulueta, the result is that said
appropriation sought a private purpose, and, hence, was null and void.
5. Maceda v. Macaraig, Jr. (GR No. 88291 May 31, 1991)
FACTS: Senator Ernesto Maceda sought to nullify certain decisions, orders, rulings, and
resolutions of respondents Executive Secretary, Secretary of Finance, Commissioner of Internal
Revenue, Commissioner of Customs and the Fiscal Incentives Review Board FIRB for
exempting the National Power Corporation (NPC) from indirect tax and duties. RA 358, RA
6395 and PD 380 expressly grant NPC exemptions from all taxes whether direct or indirect. In
1984, however, PD 1931 and EO 93 withdrew all tax exemptions granted to all GOCCs
including the NPC but granted the President and/or the Secretary of Finance by recommendation
of the FIRB the power to restore certain tax exemptions. Pursuant to the latter law, FIRB issued a
resolution restoring the tax and duty exemption privileges of the NPC. The actions of the
respondents were thus questioned by the petitioner by this petition for certiorari, prohibition and
mandamus with prayer for a writ of preliminary injunction and/or restraining order. To which
public respondents argued, among others, that petitioner does not have the standing to challenge
the questioned orders and resolution because he was not in any way affected by such grant of tax
exemptions.

ISSUE: Has a taxpayer the capacity to question the legality of the resolution issued by the FIRB
restoring the tax exemptions?

HELD: Yes. In this petition it is alleged that petitioner is "instituting this suit in his capacity as a
taxpayer and a duly-elected Senator of the Philippines." Public respondent argues that petitioner
must show that he has sustained direct injury as a result of the action and that it is not sufficient
for him to have a mere general interest common to all members of the public. The Court however
agrees with the petitioner that as a taxpayer he may file the instant petition following the ruling
in Lozada when it involves illegal expenditure of public money. The petition questions the
legality of the tax refund to NPC by way of tax credit certificates and the use of said assigned tax
credits by respondent oil companies to pay for their tax and duty liabilities to the BIR and
Bureau of Customs.

6. Garcia v. the Executive Secretary (G.R. No. 101273, July 03, 1992)
FACTS: Frank and James Robertson (brothers) were American citizens born in the Philippines.
They stayed here in the Philippines until they were repatriated by the US in 1945. Thereafter
they established their domicile in California. Soon after they were employed by the US Federal
Government as workers in the US Navy. They were later assigned at the US Naval Base in
Olongapo City in 1962. They hold American passports and are admitted as special temporary
visitors under the Philippine Immigration Act of 1940. On the other hand, the Commissioner
of Internal Revenue (CIR) contends that the American brothers are subject to taxation because
their residence here in the Philippines is not by reason of their employment in connection with
the construction, maintenance, operation or defense of the US Bases here as provided by the
Military Bases Agreement. Further, the burden of proof of such exemption to taxation shall be
upon the respondents.
ISSUE: Whether or not the American brothers are exempt from taxation?
HELD: Yes. The law and the facts of the case are so clear that there is no room left for doubt the
validity of the brothers defense. In order to avail oneself of the tax exemption under the RP-US
Military Bases Agreement: he must be a national of the United States employed in connection with
the construction, maintenance, operation or defense, of the bases, residing in the Philippines by
reason of such employment, and the income derived is from the U.S. Government (Art. XII par. 2 of
PI-US Military Bases Agreement of 1947). Said circumstances are all present in the case at bar.

7. Lladoc v. CIR and CTA (14 SCRA 202, June 16, 1965)

FACTS: In 1957, the MB Estate Inc. of Bacolod City donated P10,000 in cash to the parish
priest of Victorias, Negros Occidental; the amount spent for the construction of a new Catholic
Church in the locality, as intended. In 1958, MB Estate filed the donors gift tax return. In 1960,
the Commissioner issued an assessment for donees gift tax against the parish. The priest lodged
a protest to the assessment and requested the withdrawal thereof.

ISSUE: Whether the Catholic Parish is tax exempt.

HELD: The phrase exempt from taxation should not be interpreted to mean exemption from
all kinds of taxes. The exemption is only from the payment of taxes assessed on such properties
as property taxes as contra distinguished from excise taxes. A donees gift tax is not a property
tax but an excise tax imposed on the transfer of property by way of gift inter vivos. It does not
rest upon general ownership, but an excise upon the use made of the properties, upon the
exercise of the privilege of receiving the properties. The imposition of such excise tax on
property used for religious purpose do not constitute an impairment of the Constitution. The tax
exemption of the parish, thus, does not extend to excise taxes.


8. Lung Center of the Philippines v. QC (GR No. 144104, June 29, 2004)

FACTS: Petitioner is a non-stock, non-profit entity established by virtue of PD No. 1823, seeks
exemption from real property taxes when the City Assessor issued Tax Declarations for the land
and the hospital building. Petitioner predicted on its claim that it is a charitable institution. The
request was denied, and a petition hereafter filed before the Local Board of Assessment Appeals
of Quezon City (QC-LBAA) for reversal of the resolution of the City Assessor. Petitioner
alleged that as a charitable institution, is exempted from real property taxes under Sec 28(3) Art
VI of the Constitution. QC-LBAA dismissed the petition and the decision was likewise affirmed
on appeal by the Central Board of Assessment Appeals of Quezon City. The Court of Appeals
affirmed the judgment of the CBAA.

ISSUE: 1. Whether or not petitioner is a charitable institution within the context of PD 1823 and
the 1973 and 1987 Constitution and Section 234(b) of RA 7160.

2. Whether or not petitioner is exempted from real property taxes.

RULING: 1. Yes. The Court hold that the petitioner is a charitable institution within the context
of the 1973 and 1987 Constitution. Under PD 1823, the petitioner is a non-profit and non-stock
corporation which, subject to the provisions of the decree, is to be administered by the Office of
the President with the Ministry of Health and the Ministry of Human Settlements. The purpose
for which it was created was to render medical services to the public in general including those
who are poor and also the rich, and become a subject of charity. Under PD 1823, petitioner is
entitled to receive donations, even if the gift or donation is in the form of subsidies granted by
the government.

2. Partly No. Under PD 1823, the lung center does not enjoy any property tax exemption
privileges for its real properties as well as the building constructed thereon.
The property tax exemption under Sec. 28(3), Art. VI of the Constitution of the property taxes
only. This provision was implanted by Sec.243 (b) of RA 7160.which provides that in order to be
entitled to the exemption, the lung center must be able to prove that: it is a charitable institution
and; its real properties are actually, directly and exclusively used for charitable purpose.
Accordingly, the portions occupied by the hospital used for its patients are exempt from real
property taxes while those leased to private entities are not exempt from such taxes.

9. City Assessor of Cebu v. Association of Benevola de Cebu (G.R 152904, June 28,
2007)

FACTS: Benevola de Cebu is a non-stock non-profit organization which in 1990, a medical arts
building was constructed and in 1998 was issued with a certification classifying the building as
commercial. City assessor of Cebu assessed the building with a market value of Php 28,060,520
and on assessed value of Php 9,821,180 at the assessment level of 35% and not 10% which is
currently imposed on private respondent herein. Petitioner claimed that the building is used as
commercial clinic/spaces for renting out to physicians and thus classified as commercial.
Benevola de Cebu contended that the building is used actually, directly and exclusively part of
hospital and should have an assessment level of 10%

ISSUE: Whether or not the new building is liable to pay the 35% assessment level?

HELD: We hold that the new building is an integral part of the hospital and should not be
assessed as commercial. Being a tertiary hospital, it is mandated to fully departmentalized and be
equipped with the service capabilities needed to support certified medical specialist and other
licensed physicians. The fact that they are holding office is a separate building does not take
away the essence and nature of their services vis-a-vis the overall operation of the hospital and to
its patients.
Under the Local Government Code, Sec. 26: All lands, buildings and other improvements
thereon actually, directly and exclusively used for hospitals, cultural or scientific purposes and
those owned and used by local water districts shall be classified as special.

10. Bengzon v. Drilon (G.R. No. 103524 15 April 1992)

FACTS: Petitioners are retired justices of the Supreme Court and Court of Appeals who are
currently receiving pensions under RA 910 as amended by RA 1797. President Marcos issued a
decree repealing section 3-A of RA 1797 which authorized the adjustment of the pension of
retired justices and officers and enlisted members of the AFP. PD 1638 was eventually issued by
Marcos which provided for the automatic readjustment of the pension of officers and enlisted
men was restored, while that of the retired justices was not. RA 1797 was restored through HB
16297 in 1990. When her advisers gave the wrong information that the questioned provisions in
1992 GAA were an attempt to overcome her earlier veto in 1990, President Aquino issued the
veto now challenged in this petition.
It turns out that PD 644 which repealed RA 1797 never became a valid law absent its
publication, thus there was no law. It follows that RA 1797 was still in effect and HB 16297 was
superfluous because it tried to restore benefits which were never taken away validly. The veto of
HB 16297 did not also produce any effect.

ISSUE: Whether or not the veto of the President of certain provisions in the GAA of FY 1992
relating to the payment of the adjusted pensions of retired Justices is constitutional or valid.

HELD: The veto of these specific provisions in the GAA is tantamount to dictating to the
Judiciary ot its funds should be utilized, which is clearly repugnant to fiscal autonomy. Pursuant
to constitutional mandate, the Judiciary must enjoy freedom in the disposition of the funds
allocated to it in the appropriations law.
Any argument which seeks to remove special privileges given by law to former Justices on the
ground that there should be no grant of distinct privileges or preferential treatment to retired
Justices ignores these provisions of the Constitution and in effect asks that these Constitutional
provisions on special protections for the Judiciary be repealed.
The petition is granted and the questioned veto is illegal and the provisions of 1992 GAA are
declared valid and subsisting.

11. ACORD v. Zamora (G.R. No. 144256)

FACTS: Pres. Estrada, pursuant to Sec 22, Art VII mandating the Pres to submit to Congress a
budget of expenditures within 30 days before the opening of every regular session, submitted the
National Expenditures program for FY 2000. The President proposed an IRA of
P121,778,000,000. This became RA 8760, AN ACT APPROPRIATING FUNDS FOR THE
OPERATION OF THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES FROM
JANUARY ONE TO DECEMBER THIRTY-ONE, TWO THOUSAND, AND FOR OTHER
PURPOSES also known as General Appropriations Act (GAA) for the Year 2000. It provides
under the heading ALLOCATIONS TO LOCAL GOVERNMENT UNITS that the IRA for
local government units shall amount to P111,778,000,000.
In another part of the GAA, under the heading UNPROGRAMMED FUND, it is provided that
an amount of P10,000,000,000 (P10 Billion), apart from the P111,778,000,000 mentioned above,
shall be used to fund the IRA, which amount shall be released only when the original revenue
targets submitted by the President to Congress can be realized based on a quarterly assessment to
be conducted by certain committees which the GAA specifies, namely, the Development Budget
Coordinating Committee, the Committee on Finance of the Senate, and the Committee on
Appropriations of the House of Representatives.
Thus, while the GAA appropriates P111,778,000,000 of IRA as Programmed Fund, it
appropriates a separate amount of P10 Billion of IRA under the classification of Unprogrammed
Fund, the latter amount to be released only upon the occurrence of the condition stated in the
GAA.
On August 22, 2000, a number of NGOs and POs, along with 3 barangay officials filed with this
Court the petition at bar, for Certiorari, Prohibition and Mandamus With Application for
Temporary Restraining Order, against respondents then Executive Secretary Ronaldo Zamora,
then Secretary of the Department of Budget and Management Benjamin Diokno, then National
Treasurer Leonor Magtolis-Briones, and the Commission on Audit, challenging the
constitutionality of provision XXXVII (ALLOCATIONS TO LOCAL GOVERNMENT UNITS)
referred to by petitioners as Section 1, XXXVII (A), and LIV (UNPROGRAMMED FUND)
Special Provisions 1 and 4 of the GAA (the GAA provisions)
Petitioners contend that the said provisions violates the LGUs autonomy by unlawfully reducing
the IRA allotted by 10B and by withholding its release by placing the same under
Unprogrammed funds. Although the effectivity of the Year 2000 GAA has ceased, this Court
shall nonetheless proceed to resolve the issues raised in the present case, it being impressed with
public interest. Petitioners argue that the GAA violated the constitutional mandate of
automatically releasing the IRAs when it made its release contingent on whether revenue
collections could meet the revenue targets originally submitted by the President, rather than
making the release automatic.

ISSUE: WON the subject GAA violates LGUs fiscal autonomy by not automatically releasing
the whole amount of the allotted IRA.

HELD: Article X, Section 6 of the Constitution provides:
SECTION 6. Local government units shall have a just share, as determined by law, in the
national taxes which shall be automatically released to them.
Petitioners argue that the GAA violated this constitutional mandate when it made the release of
IRA contingent on whether revenue collections could meet the revenue targets originally
submitted by the President, rather than making the release automatic. Respondents counterargue
that the above constitutional provision is addressed not to the legislature but to the executive,
hence, the same does not prevent the legislature from imposing conditions upon the release of the
IRA.
Respondents thus infer that the subject constitutional provision merely prevents the executive
branch of the government from unilaterally withholding the IRA, but not the legislature from
authorizing the executive branch to withhold the same. In the words of respondents, This
essentially means that the President or any member of the Executive Department cannot
unilaterally, i.e., without the backing of statute, withhold the release of the IRA.
As the Constitution lays upon the executive the duty to automatically release the just share of
local governments in the national taxes, so it enjoins the legislature not to pass laws that might
prevent the executive from performing this duty. To hold that the executive branch may
disregard constitutional provisions which define its duties, provided it has the backing of statute,
is virtually to make the Constitution amendable by statute a proposition which is patently
absurd. If indeed the framers intended to allow the enactment of statutes making the release of
IRA conditional instead of automatic, then Article X, Section 6 of the Constitution would have
been worded differently.
Since, under Article X, Section 6 of the Constitution, only the just share of local governments is
qualified by the words as determined by law, and not the release thereof, the plain implication
is that Congress is not authorized by the Constitution to hinder or impede the automatic release
of the IRA.
In another case, the Court held that the only possible exception to mandatory automatic release
of the IRA is, as held in Batangas:
if the national internal revenue collections for the current fiscal year is less than 40 percent of
the collections of the preceding third fiscal year, in which case what should be automatically
released shall be a proportionate amount of the collections for the current fiscal year. The
adjustment may even be made on a quarterly basis depending on the actual collections of
national internal revenue taxes for the quarter of the current fiscal year.
This Court recognizes that the passage of the GAA provisions by Congress was motivated by the
laudable intent to lower the budget deficit in line with prudent fiscal management. The
pronouncement in Pimentel, however, must be echoed: [T]he rule of law requires that even the
best intentions must be carried out within the parameters of the Constitution and the law. Verily,
laudable purposes must be carried out by legal methods.
WHEREFORE, the petition is GRANTED. XXXVII and LIV Special Provisions 1 and 4 of the
Year 2000 GAA are hereby declared unconstitutional insofar as they set apart a portion of the
IRA, in the amount of P10 Billion, as part of the UNPROGRAMMED FUND.

12. Reyes v. Almanzor (GR Nos. L-49839-46, April 26, 1991)

FACTS: JBL, Edmundo and Milagros Reyes are owners of parcels of land in Manila which are
leased and occupied as dwelling sites by tenants. In 1971, RA 6359 was passed prohibiting an
increase of monthly rentals of dwelling units or of land on which another dwelling is located for
one year after effectivity for rentals not exceeding P300 but allowing an increase of rent
thereafter by not more than 10%. The Act also suspended the operation of Article 1673 of the
Civil Code (ejectment of lessess). PD 20 amended RA 6359 by absolutely prohibiting the
increase and indefinitely suspending Article 1673. The Reyeses, thus, were precluded from
raising the rentals and from ejecting the tenants. In 1973, the City Assessor of Manila
reclassified and reassessed the value of the properties based on the schedule of market values
duly reviewed by the Secretary of Finance. As it entailed an increase of the corresponding tax
rates, the Reyeses filed a memorandum of disagreement with the Board of Tax Assessment
Appeals and averring therein that the reassessments were excessive, unwarranted, unequitable,
confiscatory and unconstitutional inasmuch as the taxes imposed exceeded the annual income
derived from their properties; and that the income approach should have been used in
determining land values instead of the comparative sales approach which the assessor adopted.

ISSUE: Whether the reassessment is unequitable.

HELD: Taxation is equitable when its burden falls on those better able to pay. Taxation is
progressive when its rate goes up depenfing on the resources of the person affected. Taxes are
uniform when all taxable articles or kinds of property of the same class are taxed at the same
rate. The taxing power has the authority to make reasonable and natural classification for
purposes of taxation. Laws should operate equally and uniformly, however, on all persons under
similar circumstances or that all persons mus t be treated in the same manner, the conditiions not
being different both in the privileges conferred and liabilities imposed. Finally, under the
Real Property Tax Code (PD 464), property must be appraised at its cuurent and fair market
value. The market value of the properties covered by PD 20, thus cannot be equated with the
market value of properties not so covered. Shcu property covered by PD 20 has naturally a much
lesser market value in view of the rental restrictions. Although taxes are the lifeblood of the
government and should be collected without unnecessary hindrance, such collection should be
made in accordance with law as any arbitrariness will negate the very reason for government
itself. As teh Reyeses are burdened by the Rent Freeze Laws (RA 6359 and PD 20), they should
not be penalized by the same government by the imposition of excessive taxes they cancan ill
afford and would eventually result in the forfeiture of their properties, under the principle of
social justice.

13. Juan Luna Subdivision v. Sarmiento (GR L-3538, 28 May 1952)

FACTS: Juan Luna Subdivision is a local corporation which issued a check to the City Treasurer
of Manila for amount to be applied to its land tax for the second semester of 1941. The records of
the City Treasurer do not show what was done with the check (It appears that it was deposited
with the Philippine National Bank [PNB]). After liberation (WWII), the City Treasurer refused
to refund the corporations deposit or apply it to such future taxes as might be found due, while
the Philippine Trust Co (to which the check was presented) was unwilling to reverse its debit
entry against Juan Luna Subd. Said amount is also subject of another disagreement between the
corporation and the City Treasure, with the corporation claiming that the whole amount of the
check for the taxes for the last semester of 1941 have been remitted by Commonwealth Act 703
(1945).

ISSUE: Whether the provision allowing the remission covers taxes paid before the enactment of
Commonwealth Act 703, or taxes which were still unpaid.

HELD: The law is clear that it applies to taxes and penalties due and payable, i.e. taxes owed
or owing. The remission of taxes due and payable to the exclusion og taxes already collected
does not constitute unfair discrimination. Each set of taxes is a class by itself, and the law would
be open to attack as class legislation only if all taxpayers belonging to one class were not treated
alike. Herein, they are not. The taxpayers who paid their taxes before liberation and those who
had not were not on the same footing on the need of material relief. Taxpayers who had been in
arrears in their obligation whould have to satisfy their liability with genuine currency, while the
taxes paid during the occupation had been satisfied in Japanese War Notes, many of them at a
time when those notes were well-nigh worthless. To refund those taxes with restored currency
would be unduly enrich many of the payers at a greater expense to the people at large.

14. American Bible Society v. Manila (GR L-9637, 30 April 1957)

FACTS: In the course of its ministry, the Philippine agency of the American Bible Society has
been distributing and selling bibles and/or gospel portions thereof throughout the Philippines and
translating the same into several Philippine dialets. The acting City Treasurer of Manila required
the society to secure the corresponding Mayors permit and municipal license fees, together with
compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953. The
society paid such under protest, and filed suit questioning the legality of the ordinances under
which the fees are being collected.

ISSUE: Whether the municipal ordinances violate the freedom of religious profession and
worship.

HELD: A tax on the income of one who engages in religious activities is different from a tax on
property used or employed in connection with those activities. It is one thing to impose a tax on
the income or property of a preacher, and another to exact a tax for him for the privilege of
delivering a sermon. The power to tax the exercise of a privilege is the power to control or
suppress its enjoyment. Even if religious groups and the press are not altogether free from the
burdens of the government, the act of distributing and selling bibles is purely religious and does
not fall under Section 27 (e) of the Tax Code (CA 466). The fact that the price of bibles, etc. are
a little higher than actual cost of the same does not necessarily mean it is already engaged in
business for profit. Ordinance 2529 and 3000 are not applicable to the Society.



15. Domingo v. Garlitos (G.R. No. L-18994, June 29, 1963)

Facts: In Domingo vs. Moscoso (106 PHIL 1138), the Supreme Court declared as final and
executory the order of the Court of First Instance of Leyte for the payment of estate and
inheritance taxes, charges and penalties amounting to P40,058.55 by the Estate of the late Walter
Scott Price. The petition for execution filed by the fiscal, however, was denied by the lower
court. The Court held that the execution is unjustified as the Government itself is indebted to the
Estate for 262,200; and ordered the amount of inheritance taxes be deducted from the
Governments indebtedness to the Estate.

Issue: Whether a tax and a debt may be compensated.

Held: The court having jurisdiction of the Estate had found that the claim of the Estate against
the Government has been recognized and an amount of P262,200 has already been appropriated
by a corresponding law (RA 2700). Under the circumstances, both the claim of the Government
for inheritance taxes and the claim of the intestate for services rendered have already become
overdue and demandable as well as fully liquidated. Compensation, therefore, takes place by
operation of law, in accordance with Article 1279 and 1290 of the Civil Code, and both debts are
extinguished to the concurrent amount.

16. Bishop of Nueva Segovia v. Provincial Board, Ilocos Norte
(GR 27588, 31 December 1927)

Facts: The Roman Catholic Apostolic Church is the owner of a parcel of land in San Nicolas,
Ilocos Norte. On the south side is a part of the Church yard, the convent and an adjacent lost
used for a vegetable garden in which there is a stable and a well for the use of the convent. In the
center is the remainder of the churchyard and the Church. On the north side is an old cemetery
with its two walls still standing, and a portion where formerly stood a tower. The provincial
board assessed land tax on lots comprising the north and south side, which the church paid under
protest. It filed suit to recover the amount.

Issue: Whether the lots are covered by the Churchs tax exemption.

Held: The exemption in favor of the convent in the payment of land tax refers to the home of the
priest who presides over the church and who has to take care of himself in order to discharge his
duties. The exemption includes not only the land actually occupied by the Church but also the
adjacent ground destined to the ordinary incidental uses of man. A vegetable garden, thus, which
belongs to a convent, where its use is limited to the necessity of the priest, comes under the
exemption. Further, land used as a lodging house by the people who participate in religious
festivities, which constitutes an incidental use in religious functions, likewise comes within the
exemption. It cannot be taxed according to its former use, i.e. a cemetery.










































TAX REMEDIES

1. CIR v. Enron Subic Power (G.R. No. 166387, January 19, 2009)

FACTS: In 1997, Enron Subic Power Corporation received a pre-assessment notice from
the Bureau of Internal Revenue (BIR). Enron allegedly had a tax deficiency of P2.8 million
for the year 1996. Enron filed a protest. In 1999, Enron received a final assessment notice
(FAN) from the BIR for the same amount of tax deficiency.
Enron however assailed the FAN because according to Enron the FAN is not compliant
with Section 228 of the National Internal Revenue Code (NIRC) which provides that the
legal and factual bases of the assessment must be contained in the FAN. The FAN issued
to Enron only contained thecomputation of its alleged tax liability.
The Commissioner of Internal Revenue (CIR) admitted that the FAN did not contain the
legal and factual bases of the assessment however, the CIR insisted that the same has
been substantially complied with already because during the pre-assessment stage, the
representative of Enron has been advised of the said factual and legal bases of the
assessment.

ISSUE: Whether or not there is a valid final assessment notice issued to Enron.

HELD: No. The wording of Section 228 of the NIRC provides:

The taxpayer shall be informed in writing of the law and the facts on which the assessment
is made; otherwise the assessment shall be void.

The word shall is mandatory. The law requires that the legal and factual bases of
the assessment be stated in the formal letter of demand and assessment notice. It cannot
be substituted by other notices or advisories issued or delivered to the taxpayer during the
preliminary stage.

2. Allied Banking Corp. V. CIR (G.R. No. 175097 February 5, 2010

Facts:

On April 30, 2004, the Bureau of Internal Revenue (BIR) issued a Preliminary Assessment
Notice (PAN) to petitioner Allied Banking Corporation for deficiency Documentary Stamp
Tax (DST) in the amount ofP12,050,595.60 and Gross Receipts Tax (GRT) in the amount
of P38,995,296.76 on industry issue for the taxable year 2001.
6
Petitioner received the PAN
on May 18, 2004 and filed a protest against it on May 27, 2004.
7

On July 16, 2004, the BIR wrote a Formal Letter of Demand with Assessment Notices to
petitioner, which partly reads as follows:
8

It is requested that the above deficiency tax be paid immediately upon receipt hereof,
inclusive of penalties incident to delinquency. This is our final decision based on
investigation. If you disagree, you may appeal the final decision within thirty (30) days from
receipt hereof, otherwise said deficiency tax assessment shall become final, executory and
demandable.
Petitioner received the Formal Letter of Demand with Assessment Notices on August 30,
2004.
9

Proceedings before the CTA First Division
On September 29, 2004, petitioner filed a Petition for Review
10
with the CTA which was
raffled to its First Division and docketed as CTA Case No. 7062.
11

On December 7, 2004, respondent CIR filed his Answer.
12
On July 28, 2005, he filed a
Motion to Dismiss
13
on the ground that petitioner failed to file an administrative protest on
the Formal Letter of Demand with Assessment Notices. Petitioner opposed the Motion to
Dismiss on August 18, 2005.
14

On October 12, 2005, the First Division of the CTA rendered a Resolution
15
granting
respondents Motion to Dismiss. It ruled:
Clearly, it is neither the assessment nor the formal demand letter itself that is appealable to
this Court. It is the decision of the Commissioner of Internal Revenue on the disputed
assessment that can be appealed to this Court (Commissioner of Internal Revenue vs.
Villa, 22 SCRA 3). As correctly pointed out by respondent, a disputed assessment is one
wherein the taxpayer or his duly authorized representative filed an administrative protest
against the formal letter of demand and assessment notice within thirty (30) days from date
[of] receipt thereof. In this case, petitioner failed to file an administrative protest on the
formal letter of demand with the corresponding assessment notices. Hence, the
assessments did not become disputed assessments as subject to the Courts review under
Republic Act No. 9282. (See also Republic v. Liam Tian Teng Sons & Co., Inc., 16 SCRA
584.)
WHEREFORE, the Motion to Dismiss is GRANTED. The Petition for Review is
hereby DISMISSEDfor lack of jurisdiction.
SO ORDERED.
16

Aggrieved, petitioner moved for reconsideration but the motion was denied by the First
Division in its Resolution dated February 1, 2006.
17

Proceedings before the CTA En Banc
On February 22, 2006, petitioner appealed the dismissal to the CTA En Banc.
18
The case
was docketed as CTA EB No. 167.
Finding no reversible error in the Resolutions dated October 12, 2005 and February 1, 2006
of the CTA First Division, the CTA En Banc denied the Petition for Review
19
as well as
petitioners Motion for Reconsideration.
20

The CTA En Banc declared that it is absolutely necessary for the taxpayer to file an
administrative protest in order for the CTA to acquire jurisdiction. It emphasized that an
administrative protest is an integral part of the remedies given to a taxpayer in challenging
the legality or validity of an assessment. According to the CTA En Banc, although there are
exceptions to the doctrine of exhaustion of administrative remedies, the instant case does
not fall in any of the exceptions.

Issue:
Whether the Formal Letter of Demand dated July 16, 2004 can be construed as a final
decision of the CIR appealable to the CTA under RA 9282.

Held:
The petition is meritorious.
Section 7 of RA 9282 expressly provides that the CTA exercises exclusive appellate
jurisdiction to review by appeal decisions of the CIR in cases involving disputed
assessments
The CTA, being a court of special jurisdiction, can take cognizance only of matters that are
clearly within its jurisdiction.
21
Section 7 of RA 9282 provides:
Sec. 7. Jurisdiction. The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue, where the National Internal Revenue Code
provides a specific period of action, in which case the inaction shall be deemed a denial;
(Emphasis supplied)
x x x x
The word decisions in the above quoted provision of RA 9282 has been interpreted to
mean the decisions of the CIR on the protest of the taxpayer against the
assessments.
22
Corollary thereto, Section 228 of the National Internal Revenue Code (NIRC)
provides for the procedure for protesting an assessment. It states:
SECTION 228. Protesting of Assessment. When the Commissioner or his duly authorized
representative finds that proper taxes should be assessed, he shall first notify the taxpayer
of his findings: Provided, however, That a preassessment notice shall not be required in the
following cases:
(a) When the finding for any deficiency tax is the result of mathematical error in
thecomputation of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and automatically
applied the same amount claimed against the estimated tax liabilities for the taxable quarter
or quarters of the succeeding taxable year; or
(d) When the excise tax due on excisable articles has not been paid; or
(e) When an article locally purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded
or transferred to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which the assessment
is made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall
be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or
his duly authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration
or reinvestigation within thirty (30) days from receipt of the assessment in such form and
manner as may be prescribed by implementing rules and regulations. Within sixty (60) days
from filing of the protest, all relevant supporting documents shall have been submitted;
otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty
(180) days from submission of documents, the taxpayer adversely affected by the decision
or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the
said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the
decision shall become final, executory and demandable.
In the instant case, petitioner timely filed a protest after receiving the PAN. In response
thereto, the BIR issued a Formal Letter of Demand with Assessment Notices. Pursuant to
Section 228 of the NIRC, the proper recourse of petitioner was to dispute the assessments
by filing an administrative protest within 30 days from receipt thereof. Petitioner, however,
did not protest the final assessment notices. Instead, it filed a Petition for Review with the
CTA. Thus, if we strictly apply the rules, the dismissal of the Petition for Review by the CTA
was proper.
The case is an exception to the rule on exhaustion of administrative remedies
However, a careful reading of the Formal Letter of Demand with Assessment Notices leads
us to agree with petitioner that the instant case is an exception to the rule on exhaustion of
administrative remedies, i.e., estoppel on the part of the administrative agency concerned.
In the case of Vda. De Tan v. Veterans Backpay Commission,
23
the respondent contended
that before filing a petition with the court, petitioner should have first exhausted all
administrative remedies by appealing to the Office of the President. However, we ruled that
respondent was estopped from invoking the rule on exhaustion of administrative remedies
considering that in its Resolution, it said, The opinions promulgated by the Secretary of
Justice are advisory in nature, which may either be accepted or ignored by the office
seeking the opinion, and any aggrieved party has the court for recourse. The statement of
the respondent in said case led the petitioner to conclude that only a final judicial ruling in
her favor would be accepted by the Commission.
Similarly, in this case, we find the CIR estopped from claiming that the filing of the Petition
for Review was premature because petitioner failed to exhaust all administrative remedies.
The Formal Letter of Demand with Assessment Notices reads:
Based on your letter-protest dated May 26, 2004, you alleged the following:
1. That the said assessment has already prescribed in accordance with the provisions of
Section 203 of the Tax Code.
2. That since the exemption of FCDUs from all taxes found in the Old Tax Code has been
deleted, the wording of Section 28(A)(7)(b) discloses that there are no other taxes
imposable upon FCDUs aside from the 10% Final Income Tax.
Contrary to your allegation, the assessments covering GRT and DST for taxable year 2001
has not prescribed for [sic] simply because no returns were filed, thus, the three year
prescriptive period has not lapsed.
With the implementation of the CTRP, the phrase exempt from all taxes was deleted.
Please refer to Section 27(D)(3) and 28(A)(7) of the new Tax Code. Accordingly, you were
assessed for deficiency gross receipts tax on onshore income from foreign currency
transactions in accordance with the rates provided under Section 121 of the said Tax Code.
Likewise, deficiency documentary stamp taxes was [sic] also assessed on Loan
Agreements, Bills Purchased, Certificate of Deposits and related transactions pursuant to
Sections 180 and 181 of NIRC, as amended.
The 25% surcharge and 20% interest have been imposed pursuant to the provision of
Section 248(A) and 249(b), respectively, of the National Internal Revenue Code, as
amended.
It is requested that the above deficiency tax be paid immediately upon receipt hereof,
inclusive of penalties incident to delinquency. This is our final decision based on
investigation. If you disagree, you may appeal this final decision within thirty (30)
days from receipt hereof, otherwise said deficiency tax assessment shall become
final, executory and demandable.
24
(Emphasis supplied)
It appears from the foregoing demand letter that the CIR has already made a final decision
on the matter and that the remedy of petitioner is to appeal the final decision within 30 days.
In Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue,
25
we considered
the language used and the tenor of the letter sent to the taxpayer as the final decision of the
CIR.
In this case, records show that petitioner disputed the PAN but not the Formal Letter of
Demand with Assessment Notices. Nevertheless, we cannot blame petitioner for not filing a
protest against the Formal Letter of Demand with Assessment Notices since the language
used and the tenor of the demand letter indicate that it is the final decision of the
respondent on the matter. We have time and again reminded the CIR to indicate, in a clear
and unequivocal language, whether his action on a disputed assessment constitutes his
final determination thereon in order for the taxpayer concerned to determine when his or her
right to appeal to the tax court accrues.
26
Viewed in the light of the foregoing, respondent is
now estopped from claiming that he did not intend the Formal Letter of Demand with
Assessment Notices to be a final decision.
Moreover, we cannot ignore the fact that in the Formal Letter of Demand with Assessment
Notices, respondent used the word appeal instead of protest, reinvestigation, or
reconsideration. Although there was no direct reference for petitioner to bring the matter
directly to the CTA, it cannot be denied that the word appeal under prevailing tax laws
refers to the filing of a Petition for Review with the CTA. As aptly pointed out by petitioner,
under Section 228 of the NIRC, the terms protest, reinvestigation and reconsideration
refer to the administrative remedies a taxpayer may take before the CIR, while the term
appeal refers to the remedy available to the taxpayer before the CTA. Section 9 of RA
9282, amending Section 11 of RA 1125,
27
likewise uses the term appeal when referring to
the action a taxpayer must take when adversely affected by a decision, ruling, or inaction of
the CIR. As we see it then, petitioner in appealing the Formal Letter of Demand with
Assessment Notices to the CTA merely took the cue from respondent. Besides, any doubt
in the interpretation or use of the word appeal in the Formal Letter of Demand with
Assessment Notices should be resolved in favor of petitioner, and not the respondent who
caused the confusion.
To be clear, we are not disregarding the rules of procedure under Section 228 of the NIRC,
as implemented by Section 3 of BIR Revenue Regulations No. 12-99.
28
It is the Formal
Letter of Demand and Assessment Notice that must be administratively protested or
disputed within 30 days, and not the PAN. Neither are we deviating from our
pronouncement in St. Stephens Chinese Girls School v. Collector of Internal Revenue,
29

that the counting of the 30 days within which to institute an appeal in the CTA commences
from the date of receipt of the decision of the CIR on the disputed assessment, not from the
date the assessment was issued.
What we are saying in this particular case is that, the Formal Letter of Demand with
Assessment Notices which was not administratively protested by the petitioner can be
considered a final decision of the CIR appealable to the CTA because the words used,
specifically the words final decision and appeal, taken together led petitioner to believe
that the Formal Letter of Demand with Assessment Notices was in fact the final decision of
the CIR on the letter-protest it filed and that the available remedy was to appeal the same to
the CTA.
We note, however, that during the pendency of the instant case, petitioner availed of the
provisions of Revenue Regulations No. 30-2002 and its implementing Revenue
Memorandum Order by submitting an offer of compromise for the settlement of the GRT,
DST and VAT for the period 1998-2003, as evidenced by a Certificate of Availment dated
November 21, 2007.
30
Accordingly, there is no reason to reinstate the Petition for Review in
CTA Case No. 7062.
WHEREFORE, the petition is hereby GRANTED. The assailed August 23, 2006 Decision
and the October 17, 2006 Resolution of the Court of Tax Appeals are REVERSED and SET
ASIDE. The Petition for Review in CTA Case No. 7062 is hereby DISMISSED based solely
on the Bureau of Internal Revenues acceptance of petitioners offer of compromise for the
settlement of the gross receipts tax, documentary stamp tax and value added tax, for the
years 1998-2003.

3. CIR v. Reyes (G.R. No. 159694, January 27, 2006)

FACTS:

In 1993, Maria Tancino died leaving behind an estate worth P32 million. In 1997, a
tax audit was conducted on the estate. Meanwhile, the NationalInternal Revenue Code
(NIRC) of 1997 was passed. Eventually in 1998, the estate was issued a final assessment
notice (FAN) demanding the estate to pay P14.9 million in taxes inclusive of surcharge and
interest; the estates liability was based on Section 229 of the [old] Tax Code. Azucena
Reyes, one of the heirs, protested the FAN. The Commissioner of Internal Revenue (CIR)
nevertheless issued a warrant of distraint and/or levy. Reyes again protested the warrant
but in March 1999, she offered a compromise and was willing to pay P1 million in taxes. Her
offer was denied. She continued to work on another compromise but was eventually denied.
The case reached the Court of Tax Appeals where Reyes was also denied. In the Court of
Appeals, Reyes received a favorable judgment.
ISSUE: Whether or not the formal assessment notice is valid.
HELD: No. The NIRC of 1997 was already in effect when the FAN was issued. Under
Section 228 of the NIRC, taxpayers shall be informed in writing of the law and the facts
on which the assessment is made: otherwise, the assessment shall be void. In the case
at bar, the FAN merely stated the amount of liability to be shouldered by the estate and the
law upon which such liability is based. However, the estate was not informed in writing of
the facts on which the assessment of estate taxes had been made. The estate was merely
informed of the findings of the CIR. Section 228 of the NIRC being remedial in nature can
be applied retroactively even though the tax investigation was conducted prior to the laws
passage. Consequently, the invalid FAN cannot be a basis of a compromise, any
proceeding emanating from the invalid FAN is void including the issuance of the warrant of
distraint and/or levy.

4. LASCONA Land Co. Inc. v. CIR (G.R. no. 171251, March 5, 2012)

FACTS:
In March 1998, the Commissioner of Internal Revenue (CIR) issued a formal
assessment notice (FAN) to Lascona Land Co., Inc. (LLCI) demanding the latter to pay
P753k in taxes. LLCI filed a timely protest on April 20, 1998. From said date (since no
supporting document was required to be submitted), the CIR has 180 days to decide on the
protest. However, the CIR promulgated its decision on March 3, 1999. LLCI received a copy
of the decision on March 12, 1999. On April 12, 1999, LLCI appealed the decision to the
Court of Tax Appeals (CTA). The CIR moved for the dismissal of the appeal on the ground
that under a revenue regulation issued by the Bureau of Internal Revenue (RR No. 12-99), if
the CIR or its representative failed to act on a protest within the 180-day period the taxpayer
may appeal within 30 days from the lapse of the 180-day period to the CTA otherwise, the
decision shall become final and executory; that LLCI failed to appeal within the said period
hence the CTA has no jurisdiction over the case appealed by LLCI.
ISSUE: Whether or not the CIR is correct.
HELD: No. The revenue regulation is invalid. Under the law (Section 228 of the
National Internal Revenue Code), a taxpayer has two remedies if the CIR failed to act on his
protest within the 180-day period, to wit;
1) the taxpayer adversely affected by the decision may appeal to the CTA within 30 days
from receipt of the decision, or
2) may appeal to the CTA within 30 days from the lapse of the one hundred eighty (180)-
day period.
Interpreting the above provision, the taxpayer has two options in case of inaction by the
CIR. First is to appeal to the CTA within 30 days from the lapse of the 180 day period; or
second, wait for the CIR to issue the decision and then appeal, if adverse, to the CTA within
30 days from the receipt of the decision by the taxpayer (because even if the CIR failed to
decide on the case within the 180 day period, it can still decide on it and may even issue a
favorable judgment to the taxpayer, hence it may be logical to wait and only appeal if the
adverse decision is actually received).
In the case at bar, LLCI chose to wait for the CIR to decide on the case and it did not appeal
within 30 days from the lapse of the 180-day period. LLCI received the adverse decision of
the CIR on March 12, 1999. It appealed on April 12, 1999 which is still within the 30-day
period to appeal to the CTA.
The revenue regulation in question is invalid because in effect, it limited the remedy
provided for by the law. Section 228 of the NIRC prevails over the said revenue regulation.
The said revenue regulation cannot validly take away the option of the taxpayer to continue
waiting, even after the lapse of the 180 day period, for the CIR to decide on the case and
just appeal, within 30 days from receipt, if the CIRs ruling is adverse.
It must however be noted that these two remedies are mutually exclusive.


5. CIR v. Metro Star Superama (G.R. No. 185371 December 8, 2010

FACTS:
In January 2001, a revenue officer was authorized to examine the books of accounts of
Metro Star Superama, Inc. In April 2002, after the audit review, the revenue district officer
issued a formal assessment notice against Metro Star advising the latter that it is liable to pay
P292,874.16 in deficiency taxes. Metro Star assailed the issuance of the formal assessment notice
as it averred that due process was not observed when it was not issued a pre-assessment notice.
Nevertheless, the Commissioner of Internal Revenue authorized the issuance of a Warrant of
Distraint and/or Levy against the properties of Metro Star.
Metro Star then appealed to the Court of Tax Appeals (CTA Case No. 7169). The CTA ruled in
favor of Metro Star.
ISSUE: Whether or not due process was observed in the issuance of the formal assessment
notice against Metro Star.
HELD: No. It is true that there is a presumption that the taxassessment was duly issued.
However, this presumption is disregarded if the taxpayer denies ever having received a tax
assessment from the Bureau of Internal Revenue. In such cases, it is incumbent upon the BIR to
prove by competent evidence that such notice was indeed received by the addressee-taxpayer.
The onus probandi was shifted to the BIR to prove by contrary evidence that the Metro Star
received the assessment in the due course of mail. In the case at bar, the CIR merely alleged that
Metro Star received the pre-assessment notice in January 2002. The CIR could have simply
presented the registry receipt or the certification from the postmaster that it mailed the pre-
assessment notice, but failed. Neither did it offer any explanation on why it failed to comply with
the requirement of service of the pre-assessment notice. The Supreme Court emphasized that the
sending of a pre-assessment notice is part of the due process requirement in the issuance of a
deficiency tax assessment, the absence of which renders nugatory any assessment made by
the tax authorities.
Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. But even so, it is a requirement in all democratic regimes that it be exercised
reasonably and in accordance with the prescribed procedure.

6. CIR v. San Roque Power Corp. G.R. No. 187485, February 12, 2013

FACTS:
San Roqueis a domestic corporation with a principal office at Barangay San Roque, San
Manuel, Pangasinan. It was incorporated to design, construct, erect, assemble, own,
commission and operate power-generating plants and related facilities pursuant to and under
contract with the Phil. Government.
San Roque is VAT Registered as a seller of services. It is also registered with the Board of
Investments ("BOI") on a preferred pioneer status, to engage in the design, construction,
erection, assembly, as well as to own, commission, and operate electric power-generating
plants and related activities.
In 1997, [San Roque] entered into a Power Purchase Agreement ("PPA") with NPC. The
PPA providesthat [San Roque] shall be responsible for the design, construction, installation,
completion, testing and commissioning of the Power Station and shall operate and maintain the
same, subject to NPC instructions. During the cooperation period of twenty-five (25) years
commencing from the completion date of the Power Station, NPC will take and pay for all
electricity available from the Power Station.
On the construction and development of the San Roque Multi- Purpose, [San Roque]
allegedly incurred, excess input VAT which it declared in its Quarterly VAT Returns filed for the
same year. [San Roque] duly filed with the BIR separate claims for refund, representing
unutilized input taxes as declared in its VAT returns for taxable year 2001.
On March 28, 2003, [San Roque] filed amended Quarterly VAT Returns for the year 2001
since it increased its unutilized input VAT. Consequently, [San Roque] filed with the BIR a
separate amended claims for refund.
[CIRs] inaction on the subject claims led to the filing of the Petition for Review with the CTA-
Division on April 10, 2003.
Trial of the case ensued and on July 20, 2005, the case was submitted for decision.
CTA Divisions Ruling:
The CTA Second Division initially denied San Roques claim on the following grounds: lack
of recorded zero-rated or effectively zero-rated sales; failure to submit documents specifically
identifying the purchased goods/services related to the claimed input VAT which were included
in its Property, Plant and Equipment account; and failure to prove that the related construction
costs were capitalized in its books of account and subjected to depreciation.
The CTA 2nd Division required San Roque to show that it complied with the following
requirements of Section 112(B) of Republic Act No. 8424 (RA 8424)17 to be entitled to a tax
refund or credit of input VAT attributable to capital goods imported or locally purchased: (1) it is
a VAT-registered entity; (2) its input taxes claimed were paid on capital goods duly supported by
VAT invoices and/or official receipts; (3) it did not offset or apply the claimed input VAT
payments on capital goods against any output VAT liability; and (4) its claim for refund was filed
within the two-year prescriptive period both in the administrative and judicial levels.
The CTA Second Division found that San Roque complied with the first, third, and fourth
requirements, thus:

The fact that [San Roque] is a VAT registered entity is admitted (par. 4, Facts Admitted,
Joint Stipulation of Facts, Records, p. 157). It was also established that the instant claim of
560,200,823.14 is already net of the 11,509.09 output tax declared by [San Roque] in its
amended VAT return for the first quarter of 2001. Moreover, the entire amount of
560,200,823.14 was deducted by [San Roque] from the total available input tax reflected in its
amended VAT returns for the last two quarters of 2001 and first two quarters of 2002 (Exhibits
M-6, O-6, OO-1 & QQ-1). This means that the claimed input taxes of 560,200,823.14 did not
form part of the excess input taxes of 83,692,257.83, as of the second quarter of 2002 that
was to be carried-over to the succeeding quarters. Further, [San Roques] claim for refund/tax
credit certificate of excess input VAT was filed within the two-year prescriptive period reckoned
from the dates of filing of the corresponding quarterly VAT returns.
For the first, second, third, and fourth quarters of 2001, [San Roque] filed its VAT returns on
April 25, 2001, July 25, 2001, October 23, 2001 and January 24, 2002, respectively (Exhibits "H,
J, L, and N"). These returns were all subsequently amended on March 28, 2003 (Exhibits "I, K,
M, and O"). On the other hand, [San Roque] originally filed its separate claims for refund on July
10, 2001, October 10, 2001, February 21, 2002, and May 9, 2002 for the first, second, third, and
fourth quarters of 2001, respectively, (Exhibits "EE, FF, GG, and HH") and subsequently filed
amended claims for all quarters on March 28, 2003 (Exhibits "II, JJ, KK, and LL"). Moreover, the
Petition for Review was filed on April 10, 2003. Counting from the respective dates when [San
Roque] originally filed its VAT returns for the first, second, third and fourth quarters of 2001, the
administrative claims for refund (original and amended) and the Petition for Review fall within
the two-year prescriptive period.18
San Roque filed a Motion for New Trial and/or Reconsideration on 7 April 2006. In its 29
November 2007 Amended Decision,19 the CTA Second Division found legal basis to partially
grant San Roques claim. The CTA Second Division ordered the Commissioner to refund or
issue a tax credit in favor of San Roque in the amount of 483,797,599.65, which represents
San Roques unutilized input VAT on its purchases of capital goods and services for the taxable
year 2001. The CTA based the adjustment in the amount on the findings of the independent
certified public accountant. The following reasons were cited for the disallowed claims:
erroneous computation; failure to ascertain whether the related purchases are in the nature of
capital goods; and the purchases pertain to capital goods. Moreover, the reduction of claims
was based on the following: the difference between San Roques claim and that appearing on
its books; the official receipts covering the claimed input VAT on purchases of local services are
not within the period of the claim; and the amount of VAT cannot be determined from the
submitted official receipts and invoices. The CTA Second Division denied San Roques claim for
refund or tax credit of its unutilized input VAT attributable to its zero-rated or effectively zero-
rated sales because San Roque had no record of such sales for the four quarters of 2001.
The dispositive portion of the CTA Second Divisions 29 November 2007 Amended Decision
reads:
WHEREFORE, [San Roques] "Motion for New Trial and/or Reconsideration" is hereby
PARTIALLY GRANTED and this Courts Decision promulgated on March 8, 2006 in the instant
case is hereby MODIFIED.
Accordingly, [the CIR] is hereby ORDERED to REFUND or in the alternative, to ISSUE A
TAX CREDIT CERTIFICATE in favor of [San Roque] in the reduced amount of Four Hundred
Eighty Three Million Seven Hundred Ninety Seven Thousand Five Hundred Ninety Nine Pesos
and Sixty Five Centavos (483,797,599.65) representing unutilized input VAT on purchases of
capital goods and services for the taxable year 2001.
SO ORDERED.
The Commissioner filed a Motion for Partial Reconsideration on 20 December 2007. The
CTA Second Division issued a Resolution dated 11 July 2008 which denied the CIRs motion for
lack of merit.
The Court of Tax Appeals Ruling:En Banc
The Commissioner filed a Petition for Review before the CTA EB praying for the denial of
San Roques claim for refund or tax credit in its entirety as well as for the setting aside of the 29
November 2007 Amended Decision and the 11 July 2008 Resolution in CTA Case No. 6647.
The CTA EB dismissed the CIRs petition for review and affirmed the challenged decision
and resolution.
The CTA EB cited Commissioner of Internal Revenue v. Toledo Power, Inc.21 and Revenue
Memorandum Circular No. 49-03,22 as its bases for ruling that San Roques judicial claim was
not prematurely filed. The pertinent portions of the Decision state:
More importantly, the Court En Banc has squarely and exhaustively ruled on this issue in
this wise:
It is true that Section 112(D) of the abovementioned provision applies to the present case.
However, what the petitioner failed to consider is Section 112(A) of the same provision. The
respondent is also covered by the two (2) year prescriptive period. We have repeatedly held that
the claim for refund with the BIR and the subsequent appeal to the Court of Tax Appeals must
be filed within the two-year period.
Accordingly, the Supreme Court held in the case of Atlas Consolidated Mining and
Development Corporation vs. Commissioner of Internal Revenue that the two-year prescriptive
period for filing a claim for input tax is reckoned from the date of the filing of the quarterly VAT
return and payment of the tax due. If the said period is about to expire but the BIR has not yet
acted on the application for refund, the taxpayer may interpose a petition for review with this
Court within the two year period.
In the case of Gibbs vs. Collector, the Supreme Court held that if, however, the Collector
(now Commissioner) takes time in deciding the claim, and the period of two years is about to
end, the suit or proceeding must be started in the Court of Tax Appeals before the end of the
two-year period without awaiting the decision of the Collector.
Furthermore, in the case of Commissioner of Customs and Commissioner of Internal
Revenue vs. The Honorable Court of Tax Appeals and Planters Products, Inc., the Supreme
Court held that the taxpayer need not wait indefinitely for a decision or ruling which may or may
not be forthcoming and which he has no legal right to expect. It is disheartening enough to a
taxpayer to keep him waiting for an indefinite period of time for a ruling or decision of the
Collector (now Commissioner) of Internal Revenue on his claim for refund. It would make
matters more exasperating for the taxpayer if we were to close the doors of the courts of justice
for such a relief until after the Collector (now Commissioner) of Internal Revenue, would have,
at his personal convenience, given his go signal.
This Court ruled in several cases that once the petition is filed, the Court has already
acquired jurisdiction over the claims and the Court is not bound to wait indefinitely for no reason
for whatever action respondent (herein petitioner) may take. At stake are claims for refund and
unlike disputed assessments, no decision of respondent (herein petitioner) is required before
one can go to this Court. (Emphasis supplied and citations omitted)
Lastly, it is apparent from the following provisions of Revenue Memorandum Circular No. 49-
03 dated August 18, 2003, that [the CIR] knows that claims for VAT refund or tax credit filed with
the Court [of Tax Appeals] can proceed simultaneously with the ones filed with the BIR and that
taxpayers need not wait for the lapse of the subject 120-day period, to wit:

In response to [the] request of selected taxpayers for adoption of procedures in handling
refund cases that are aligned to the statutory requirements that refund cases should be elevated
to the Court of Tax Appeals before the lapse of the period prescribed by law, certain provisions
of RMC No. 42-2003 are hereby amended and new provisions are added thereto.
In consonance therewith, the following amendments are being introduced to RMC No. 42-
2003, to wit:
I.) A-17 of Revenue Memorandum Circular No. 42-2003 is hereby revised to read as
follows:

In cases where the taxpayer has filed a "Petition for Review" with the Court of Tax Appeals
involving a claim for refund/TCC that is pending at the administrative agency (Bureau of Internal
Revenue or OSS-DOF), the administrative agency and the tax court may act on the case
separately. While the case is pending in the tax court and at the same time is still under process
by the administrative agency, the litigation lawyer of the BIR, upon receipt of the summons from
the tax court, shall request from the head of the investigating/processing office for the docket
containing certified true copies of all the documents pertinent to the claim. The docket shall be
presented to the court as evidence for the BIR in its defense on the tax credit/refund case filed
by the taxpayer. In the meantime, the investigating/processing office of the administrative
agency shall continue processing the refund/TCC case until such time that a final decision has
been reached by either the CTA or the administrative agency.
If the CTA is able to release its decision ahead of the evaluation of the administrative
agency, the latter shall cease from processing the claim. On the other hand, if the administrative
agency is able to process the claim of the taxpayer ahead of the CTA and the taxpayer is
amenable to the findings thereof, the concerned taxpayer must file a motion to withdraw the
claim with the CTA.23 (Emphasis supplied)

7. Ungab v. Cusi (GR No. L-41919-24, May 30, 1980)

FACTS: In July 1974, Quirico Ungab filed his income tax return. He was subjected to a tax
audit and the tax examiner was convinced that Ungab filed a fraudulent return. He was
issued an assessment demanding payment of P104k in taxes. At the same time, the tax
examiner recommended the filing of criminal cases of tax evasion against Ungab.
Meanwhile, Ungab filed a protest with the Commissioner of Internal Revenue (CIR).
Acting on the recommendation of the tax examiner, a state prosecutor filed 6 informations
against Ungab for various violations of the National Internal Revenue Code. The
informations were filed with Court of First Instance of Davao presided by Judge Vicente
Cusi, Jr. Ungab filed a motion to quash the informations on the ground that his pending
protest with the CIR has not yet been acted upon hence the assessment is not yet final and
executory and therefore the trial court has no jurisdiction yet over the criminal cases.
ISSUE: Whether or not Ungab is correct.
HELD: No. What is involved here is not the collection of taxes where the assessment of the
Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals, but a
criminal prosecution for violations of the National Internal Revenue Code (NIRC) which is
within the cognizance of courts of first instance (regional trial courts). While there can be no
civil action to enforce collection before the assessment procedures provided in the NIRC
have been followed, there is no requirement for the precise computation and assessment of
the tax before there can be a criminal prosecution under the Code. In fact, there is not even
a requirement that an assessment first be issued before a criminal case for violation of the
NIRC be filed.