COMMISSIONEROFINTERNALREVENUEVMANILAJOCKEYCLUB,INC.

,
GRNo.L8755;March23,1956[99Phil.289]
BAUTISTAANGELO,J.,
FACTS:
TheManilaJockeyClub[MJC]istheowneroftheSanLazaroHippodrome[SLH],whichisusedforholdinghorseraces
eitherbytheclubitselforbythePhilippineCharitySweepstakesOffice[PCSO]orothercharitableinstitutionsauthorizedbylawto
holdhorseraces.
Duringthefiscalyearsof1951and1952,thePCSOheldbenefitracesforcharitablereliefandcivicpurposesinSLHandpaid
MJCtherentofPhp107,185.02andP122,855.47respectively,whichwereincludedinitstotalincomedeclaredinitsreturnforthe
saidyears.TheCIRcollectedonthefirstrentaltheamountofP30,011.80whichwaspaidintwoinstallmentsandonthesecondthe
amountofP29,681.17whichwasalsopaidintwoinstallmentsasincometaxes,anduponadviceofitscounsel,theClubfiledaclaim
forrefundofsaidamountswiththeCollectorclaimingthattheywereillegallypaidand,whentherefundwasdenied,itfiledanaction
intheCourtofFirstInstanceofManilatorecoverthetotalsumofP59,692.97againsttheCIRallegingthatthesamehasbeen
wrongfullycollected.ThesaidcomplaintwastransmittedtotheCourtofTaxAppealspursuanttosection22ofRA1125.
TheCTAheldthattherentalsreceivedbytheMJCfromthePCSOfortheuseofitspremiseswasexemptedfromincometax
undersection3ofRA79andorderedtheCIRtorefundtheamountclaimedbytheMJC.Hencetheissue.
ISSUES:
WhetherMJCisexemptedfromincometaxundersection3ofRA79.
HELD:
WerefertoRepublicActNo.309,whichregulatesthehorseracinginthePhilippinesandsection193oftheNationalInternal
RevenueCode,asamendedbyRepublicActNo.588.Thus,undersection26ofRepublicActNo.309,anyperson,racetrack,racing

club,orotherentitiesholdingorconductingahorseraceshallberequiredtopayacityormunicipallicensefeeofP600foreachday
ofracing.Andundersection193oftheNationalInternalRevenueCode,asamended,anyownerofracetracksisrequiredtopaya
fixedtaxofP500foreachdayonwhichracesarerunonsaidtracks.Itshouldbenotedthatsaidprovisionsrequirethepaymentof
saidtaxesfromtheownerofanyracetrackforeachdayofhorseracingregardlessofwhethersaidhorseracingisheldbytheowner
himselforbyanyotherpersonorentity.Itisthereforeimperativethatsuchexemptionbeexpresslyprovidedforinordertoexempt
theowneroftheracetrackofsuchtaxesifthesameistobeusedbyacharitableinstitutionlikethePhilippineCharitySweepstake
Office.
Theforegoingleadsustotheconclusionthattheexemptionclauseprovidedforinsection3ofRepublicActNo.79merely
intendstoexempttheracingclubinwhosepremisesortrackstheracesareheldbythePhilippineCharitySweepstakeOfficefromthe
paymentofthetaxeswehaveaboveadvertedtobecausetheyaretheonlyonesthathaveanyconnectionwiththeracesheldbysaid
Office.Itcannotcertainlyrefertoanyincometaxthatmaybeimposedontherentalsthatmaybepaidfortheuseofthosetracksand
otherparaphernalia.Thatisanincomethattheracingclubhastoaccountforincometaxpurposesbecauseitisanincomethattheclub
earnedbecauseoftheuseofitstracksbythePhilippineCharitySweepstakeOffice.Itisanincomethat,strictlyspeaking,didnot
comefromthehorseracesheldbysaidclubbutitcametoitasrentalspaidfortheuseofitsproperty.Andthetaxpaidforsuch
incomecannotthereforebeconsideredasoneconnectedwiththoseraceswithinthepurviewoftheexemptionclause.
Anotherfactorthatshouldbeborneinmindinconnectionwiththeinterpretationoftheexemptionclauseunderconsideration
isthatbyitsverynaturethelawthatexemptsonefromtaxmustbeclearlyexpressedbecausetheexemptioncannotbecreatedby
implication.Thus,itwasheldthatExemptionfromtaxationarehighlydisfavoredinlaw,andhewhoclaimsanexemptionmustbe
abletojustifyhisclaimbytheclearestgrantoforganicorstatutelaw.Anexemptionfromthecommonburdencannotbepermittedto
existuponvagueimplication.1Inthepresentcase,thereisnoclearshowingthattheexemptionclauseunderconsiderationexempts
theracingclubfromitsdutytopayincometax.

1(AsiaticPetroleumCo.Vs.Llanes,49Phil.,466;SeealsoHousevs.Posadas,53Phil.,338.)

CHINABANKINGCORPORATIONVCA
GRNo.14649;June10,2003
CARPIO,J.:
FACTS:
CBCisauniversalbankingcorporationorganizedandexistingunderPhilippinelaw.On20July1994,CBCpaid
P12,354,933.00asgrossreceiptstaxonitsincomefrominterestsonloaninvestments,commissions,services,collectioncharges,
foreignexchangeprofitsandotheroperatingearningsduringthesecondquarterof1994.

On30January1996,theCourtofTaxAppealsinAsianBankCorporationv.CommissionerofInternalRevenue ruledthatthe
20%finalwithholdingtaxonabankspassiveinterestincomedoesnotformpartofitstaxablegrossreceipts.
On19July1996,CBCfiledwiththeCommissionerofInternalRevenue(Commissioner)aformalclaimfortaxrefundor
creditofP1,140,623.82fromtheP12,354,933.00grossreceiptstaxthatCBCpaidforthesecondquarterof1994.Toensurethatit
fileditsclaimwithinthetwoyearprescriptiveperiod,2CBCalsofiledonthesamedayapetitionforreviewwiththeCourtofTax
Appeals.CitingAsianBank,CBCarguedthatitwasnotliableforthegrossreceiptstaxamountingtoP1,140,623.82onthesums
withheldbytheBangkoSentralngPilipinasasfinalwithholdingtaxonCBCspassiveinterestincomein1994.
DisputingCBCsclaim,theCommissionerassertedthatCBCpaidthegrossreceiptstaxpursuanttoSection119(nowSection
121)oftheNationalInternalRevenueCode(TaxCode)andpertinentBureauofInternalRevenue(BIR)regulations.The
2Section230oftheNationalInternalRevenueCodeof1986,asamended,provides:Sec.230.Recoveryoftaxerroneouslyorillegallycollected.xxxInanycase,no
suchsuitorproceedingshallbebegunaftertheexpirationoftwoyearsfromthedateofpaymentofthetaxorpenaltyregardlessofanysuperveningcausethatmayariseafter
payment:Provided,however,thattheCommissionermay,evenwithoutawrittenclaimtherefor,refundorcreditanytax,whereonthefaceofthereturnuponwhichpaymentwas
made,suchpaymentappearsclearlytohavebeenerroneouslypaid.xxx

Commissionerarguedthatthefinalwithholdingtaxonabanksinterestincomeformspartofitsgrossreceiptsincomputingthegross

receiptstax. TheCommissionercontendedthatthetermgrossreceiptsmeanstheentireincomeorreceipt,withoutanydeduction.
TheCTAandtheCArenderedadecisionorderingtheCIRtorefundthesaidclaim.
ISSUES:
Whetherthe20%finalwithholdingtaxoninterestincomeshouldformpartoftheCBCsgrossreceiptsincomputingthegross
receiptstaxonbanks.
Whethertheinterestformspartofgrossreceipts
HELD:
Werulethattheamountofinterestincomewithheldinpaymentofthe20%finalwithholdingtaxformspartofCBCsgross
receiptsincomputingthegrossreceiptstaxonbanks.
Section121oftheTaxCodeprovidesasfollows:
Sec.121.TaxonBanksandNonbankFinancialIntermediaries.Thereshallbecollectedataxongrossreceiptsderivedfrom
sourceswithinthePhilippinesbyallbanksandnonbankfinancialintermediariesinaccordancewiththefollowingschedule:
(a)Oninterest,commissionsanddiscountsfromlendingactivitiesaswellasincomefromfinancialleasing,onthebasisofremaining
maturitiesoninstrumentsfromwhichsuchreceiptsarederived.
Shorttermmaturity(notinexcessoftwo[2]years).................5%
Mediumtermmaturity(overtwo[2]yearsbutnotexceedingfour[4]years)......................3%
Longtermmaturity(i)overfour(4)yearsbutnotexceeding
seven(7)years.............................1%(ii)overseven(7)years)......................0%
(b)Ondividends........................................0%

(c)Onroyalties,rentalsofproperty,realorpersonal,profitsfromexchangeandallotheritemstreatedasgrossincomeunder
Section32ofthisCode.................................................................5%;
Provided,however,Thatincasethematurityperiodreferredtoinparagraph(a)isshortenedthrupretermination,thenthematurity
periodshallbereckonedtoendasofthedateofpreterminationforpurposesofclassifyingthetransactionasshort,mediumorlong
termandthecorrectrateoftaxshallbeappliedaccordingly.
NothinginthisCodeshallprecludetheCommissionerfromimposingthesametaxhereinprovidedonpersonsperforming
similarbankingactivities.
Ontheissueofinterestformingpartofgrossreceipts:
ThecourtheldthatSection121oftheTaxCodeincludesinterestaspartofgrossreceipts,itreferstotheentireinterest
earnedandownedbythebankwithoutanydeduction.Interestmeansthegrossamountpaidbytheborrowertothelenderas
considerationfortheuseofthelendersmoney.Section2(h)ofRevenueRegulationsNo.1280,nowSection2(i)ofRevenue
RegulationsNo.1784,definestheterminterestastheamountwhichadepositorybank(borrower)maypayonsavingsandtime
depositinaccordancewithratesauthorizedbytheCentralBankofthePhilippines.Thisdefinitiondoesnotallowanydeduction.The
entireinterestpaidbythedepositorybank,withoutanydeduction,iswhatformspartofthelendingbanksgrossreceipts.
Thus,interestearnedbybanks,evenifsubjecttothefinaltaxandexcludedfromtaxablegrossincome,formspartofitsgross
receiptsforgrossreceiptstaxpurposes.Theinterestearnedreferstothegrossinterestwithoutdeductionsincetheregulationsdonot
provideforanydeduction.Thegrossinterest,withoutdeduction,istheamounttheborrowerpays,andtheincomethelenderearns,for
theusebytheborrowerofthelendersmoney.Theamountofthefinaltaxplainlycomesfromtheinterestearnedandisconsequently
partofthebankstaxablegrossreceipts.

BARCELONA,ROXASSECURITIES,INC.VCIR
GRNo.157064;August7,2006
CHICONAZARENO,J.:
FACTS:
CAorderedpetitionertopaythegovttheamountofP826,698.31astaxdeficiencyincomefortheyear1987plus25%
surchargeand20%interestperannum.
CIRsentonFeb1,1911aFinalAssessmentNotice[FAN]regardingthesaiddeficiencytothepetitionerthrumail,however
petitionerclaimedthattheydidnotreceiveit.PetitionerallegedthattheCIRhadbeenbarredbyprescription.
CTAruledinfavorofpetitionerstatingthatwhileamailedletterisdeemedreceivedbytheaddresseeinthecourseofmail,itis
merelyadisputablepresumption.Thedirectdenialofthepetitionershiftstheburdenofprooftotherespondenttoprovesuchfact.CA
howeverreversedthesaiddecision,hencetheissue.
ISSUES:
WhethertheburdenofprooftoshowthattheFANhavebeenproperlyservedtopetitionershiftstorespondentshouldthe
petitionerclaimthathedidnotreceiveit.
Whethertherighttoassessthetaxdeficiencyofthepetitionhasbeenbarredbyprescription
HELD:

CourtheldthatunderSection203oftheNIRtheCIRhas3yearsfromthelastdayoffilingofthereturntosendanassessment
noticetothepetitioner.Inthecaseatbar,theAnnualIncomeTaxReturn(AITR)wasfiledonApril14,1988bythepetitionerthe
lastdaytofiletheAITRwasonApril15.TheCIRthenmayonlyservenoticeuntilApril15,1991,whichCIRwasabletodoso.
Hence,theFANsentisnotbarredbySection203,sinceitiswithinthe3yearprescriptiveperiod.However,petitionerdeniedhaving
receiveditandclaimedtoknowthesaiddeficiencyonMarch17,1992whentheyreceivedthewarrantofdistraintandlevy.
InthecaseofProtectorsservice,thecourtruledthatwhenamailmatterissentbyregisteredmail.Thereexistsapresumption,
undersection3(v),Rule131oftheRulesofCourt,thatitwasreceivedintheregularcourseofmail.Thefactstobeprovedinorderto
raisethepresumptionthefollowingmustbepresent:
a) theletterwasproperlyaddressedwithpostageprepaid
b) thatitwasmailed

REPUBLICOFTHEPHILIPPINESVDELARAMA,et.al
GRNo.L21108;November29,1966
ZALDIVAR,J.:
FACTS:
EstebanDelaRamadiedintestateandEusebioHervaswasassignedastheexecutorofhisestate,Hervasasthe
Executor/AdministratoroftheestatefiledtheITRoftheestatefortheyearof1950.
BIRlaterfoundoutthattheestatereceivedanamountofP86,800cashdividensfromDelaRamaSteamshipCompany,Inc
andthenaftersentLourdesDelaRamaOsmenatheassessedtaxdeficiencyoftheestate,whichLourdesrespondedthatsheisnotthe
executixortheadministratixofherfathersestateandreferredtheBIRtohersisterwhorefusedthesame.
BIRthenfiledacomplaintagainsttherespondentsfrothecollectionofthetaxliabilitywhichtheCFIruledinfavorofthe
respondents.Hencethepetition.
ISSUES:
Whethertheclaimhadbeenbaredbyprescription
Whethertherespondentsareliabletopaythetaxdeficiency.
HELD:
Courtheldthat,incometaxassessedonincomehasbeenreceived,section21oftheNIRCrequiresthatincomemustbe
receivedbyanindividualbeforetaxcanbeleviedthereon.Asprovidedundersection56whichrequiresreceiptofincomebeforean

incometaxcanbeassessedthereon.Hence,ifincomehasnotbeenreceived,noincometaxcanbeassessedthereon.Inasmuchasthe
incomewasnotreceivedeitherbytheestateorbytheheirs,neithertheestatenottheheircanbeliableforthepaymentoftheincome
tax.
Also,theassessmentnoticeshouldhavebeensenttotheadministrator/executoroftheestate,whointhecaseatbaris
HERVAS.Failuretodosoproducesnoeffect.ThusinthecaseofBautistaandCorralesTanvCIR3thiscourthadstatedthatthe
assessmentisdeemedmadewhenthenoticetothiseffectisreleased,mailedorsentothetaxpayerforthepurposeofgivingeffectto
thesaidassessment.Itappearingthatthepersonliableforthepaymentofthetaxdidnoreceivetheassessment,theassessmentcould
notbecomefinalandexecutory.(RANo.1129,Section11).

3GRNo.L12259,May27,1959

CIRVFMFDEVELOPMENTCORP.
GRNo.167765;June30,2008
QUISIMBING,J.:
FACTS:
RespondentfileditsAITRfortheyearof1995tothepetitionerdeclaringalossofP3,348,9342butlateramendedittoP2,826,541.
ThenafterBIRsentFMFapreassessmentnoticedatedOctober6,1998whichrespondentcontestedandrequestedfor
reconsideration/reinvestigationwhichBIRapprovedofintheconditionthatFMFsignawaiverontheprescriptiveperiodsignedby
theRDO.
FMFthenreceivedtheamendedpreassessmentnoticeonOctober18,1999,whichtheyprotestedimmediately,onlytoreceive
ademandletterandassessmentfromBIR.
FMFthenprotestedthevalidityofthewaiverandtherighttoclaimbytheBIRhavealreadyprescribed.
CTAcancelledtheassessmentnoticeandstatedthatBIRcannolongermakeavalidassessmentsincethewaiverexecuted
betweenthepartiesfailedtocomplywiththeprocedureslaiddownbyRevenueMemorandumOrder(RMO)No.2090,statingthe
followingerrors/irregularities:
1. Thewaiverdidnotstatethedatesofexecutionandacceptanceofthewaiver,byFMFandtheBIR
2. FMFwasnotfurnishedwithacopyofthewaiversignedbytheRDO
3. Theamountinvolvedismorethan1M,andtheperiodtoassesisnotyetabouttoprescribe,thewaivershouldhavebeen
signedbytheCommissionernotbyamereRDO.
ISSUES:

WhetherthewaiverneednotfollowtheprocedureslaiddownbyRMOno.2090
HELD:
Courtheldthat,underSEC203oftheNIRC,internalrevenuetaxesmustbeassessedwithin3yearscountingfromtheperiod
fixedbylawforthefilingofthetaxreturnortheactualdateoffilingwhicheverislater.Thismandategovernsthequestionof
prescriptionofthegovernmentsrighttoassessinternalrevenuetaxesprimarilytosafeguardtheinterestsoftaxpayersfrom
unreasonableinvestigation.Accordingly,thegovernmentmustassessinternalrevenuetaxesontimesoasnottoextendindefinitely
theperiodofassessmentanddeprivethetaxpayertheassurancethatitwillnolongerbesubjectedtofurtherinvestigationfrotaxes
aftertheexpirationofreasonableperiodoftime
Anexceptiontothe3yearprescriptiveperiodissection222(b)oftheNIRC,whereitauthorizestheextensionoftheoriginal3
yearperiodbytheexecutionofavalidwaiverasimplementedbyRMO2090.Inthecaseatbarthewaiverhavingfailedtocomply
withtheproceduresprovidedunderRMO2090,isnullandvoid.