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Facts: Plaintiff is a common carrier engaged in transporting passengers and Facts: The petitioner and the intervenors are all public utilities engaged in the
freight by means of TPU buses in Misamis Occidental and Northern operation of auto truck services for the transportation of passengers and freight
Zamboanga. Sometime in the year 1941 the provincial revenue agent for over practically the same territory. The certificates of public convenience first
Misamis Occidental examined the stubs of the freight receipts that had been issued authorized operation without stated hours or routes. Subsequently,
issued by the Plaintiff. He found that the stubs of the receipts issued during the however, Francis J. Cooper and the Negros Transportation Co. changed their
years 1936 to 1938 were not preserved; but those for the years 1939 to 1940 methods of operation with the approval of the Public Utility Commission from
were available. Pursuant, however, to sections 121 and 127 of the Revised ones without fixed hours or routes to services with fixed hours and routes. The
Documentary Stamp Tax Regulations of the Department of Finance petitioner Alejandra Mejica has preferred to operate her vehicles upon
promulgated on September 16, 1924, he assumed that the value of the goods irregular schedules. By means of two cases presented to the Public Utility
covered by each of the above- mentioned freight receipts amounted to more Commission by Francis J. Cooper and the Negros Transportation Co.,
than P5, and assessed a documentary stamp tax of P0.04 on each of the Alejandra Mejica was forbidden, when operating on the same line with Francis
194,406 receipts. The tax thus assessed amounted to P7,776.24, which was J. Cooper and the Negros Transportation Co. or either of them, to do so from
collected from the deposit of the Plaintiff in the Misamis Occidental branch of any point within less than two hours before or one hour after the scheduled
the Philippine National Bank. Plaintiff demanded the refund of the amount, hours of departure of their trucks.
and upon refusal of the Defendant, Plaintiff filed the action. Thus remained the situation, until Alejandra Mejica asked the Public
Utility Commission for authority to increase her equipment by seven auto
Issue: Did the Secretary of Finance infringe or violate any right of the taxpayer trucks with a capacity of twenty-eight passengers each, and to operate them on
when he directed that the tax is to be collected in all cases where the bill of the same route and under the same conditions prescribed in her previous
lading or receipt does not state that the shipment is worth P5 or less, or, in the certificate of conveyance. To this application, Francis J. Cooper and the
language of the Petitioner-Appellant, when he (Secretary) created a Negros Transportation Co. filed opposition. After hearing; the Assistant Public
presumption of liability to the tax if the receipt fails to state such value Utility Commissioner, Honorable M. V. del Rosario, rendered his decision.
Ruling: The regulation above quoted falls within the scope of the Issue: Whether the decision rendered by Commissioner del Rosario binds the
administrative power of the Secretary of Finance, as authorized in Section 79 parties
(B) of the Revised Administrative Code, because it is essential to the strict
enforcement and proper execution of the law which it seeks to implement. Said Ruling. Yes. The interpretation given by the administrative officer charged by
regulations have the force and effect of law. reason of his office to carry out the provisions of a statute should be respected
“In the very nature of things in many cases it becomes impracticable for the whenever such interpretation is assailed by someone who alleges no reasons of
legislative department of the Government to provide general regulations for weight to contradict or weaken it.
the various and varying details for the management of a particular department
of the Government. It therefore becomes convenient for the legislative Begosa vs Philippine Veterans
department of the Government, by Law, in a most general way, to provide for
the conduct, control and management of the work of the particular department Facts: Plaintiff sought the aid of the judiciary to obtain the benefits to which he
of the Government; to authorize certain persons, in charge of the management, believed he was entitled under the Veterans’ Bill of Rights. He filed his
control, and direction of the particular department, to adopt certain rules and claim for disability pension on March 4, 1955 but was erroneously
regulations providing for the detail of the management and control of such disapproved on June 21, 1955 due to his dishonorable discharge from the
department. Such regulations have uniformly been held to have the force of army. The Board of Administrators of PVA finally approved his claim on
law, whenever they are found to be in consonance and in harmony with the September 2, 1964,entitling him with a pension of P30 a month, to take effect
general purposes and objects of the law. on October 5 of that year. Believing that his pension should have taken effect
back in 1955 when his claim was disapproved, and that he is entitled to a
BPI Leasing Corporation v CA higher pension of P50 (RA No. 1362 amending Section 9 of RA No. 65) as a
permanently incapacitated person, which was increased to P100 a month when
Facts: BLC is a corporation engaged in the business of leasing properties. For RP 1362 was amended by RA No. 1920 on June 22, 1957, Begosa filed a case
the against PVA in the Court of First Instance.
calendar year 1986, it paid Commissioner of Internal Revenue a total of P1,13
CFI ruled in favor plaintiff. Defendants claim that the plaintiff has not returns had been filed and that the government has ten years within
exhausted all administrative remedies before resorting to court action and that which to make the corresponding assessment.
the plaintiff’s claim is in reality a suit against Although Marsman was extra-judicially dissolved, with the 3-year rule,
the Government which cannot be entertained by this Court for lack of jurisdicti nothing however bars an action for recovery of corporate debts against
on because the Government has not given its consent. the liquidators. In fact, the 1st assessment was given before dissolution,
while the 2nd and 3rd assessments were given just 6 months after
Issue: WHETHER THE SUPREME COURT CAN ENTERTAIN THE SUIT dissolution (within the 3-year rule). Such facts definitely established that the
AGAINST PVA. Government was a creditor of the corporation for whom the liquidator
was supposed to hold assets of the corporation.
Ruling: Yes. It has often been announced, and rightly so, that as much as
possible the findings of regulatory agencies which are expected to acquire 22. Tan Guan v Court of Tax Appeals, 19 SCRA 903, No. L-23676
expertise by their jurisdiction being confined to specific matters, deserve to be April 27, 1967 Re general partnership
accorded respect and finality. There is a limit, however, to such a deference FACTS: In 1947 Tan Guan and Sia Lin, Chinese nationals, organized and
paid to the actuations of such bodies. Clearly, where there has been a failure to registered the Philippine Surplus Company, a general partnership. For the
interpret and apply the statutory provisions in question, judicial power should same year the partners and the partnership filed separate income tax
assert itself. Under the theory of separation of powers, it is to the judiciary, and returns. Tan Guan who filed his return on April 18, 1949, reported net income
to the judiciary alone, that the final say on questions of law in appropriate of P20,987.14 and paid P2,577.81 as income tax thereon. The partnership paid
cases coming before it is vested. no income tax.
The Bureau of Internal Revenue investigated in 1954 the books and papers of
ABS-CBN BROADCASTING CORPORATION v. CTA, GR No. L- said partnership and disallowed the expense deduction as for the year 1948
52306, 1981-10-12 for being fictitious. The BIR investigators discovered that the expenses were
not supported by receipts; that the names of the payees in the aforesaid
Facts: The ABS-CBN Broadcasting Corporation (herein shall be called the entries were erased; and that the said payees did not report the sums in
“Company”) was engaged in the business of telecasting local as well as foreign question in their income tax returns for 1948.
films acquired from foreign corporations not engaged in trade or business with ISSUE: Whether CIR assessment was correct
the Philippines. Under Section 24 (b) of the National Revenue Code, a RULING: YES. Tan Guan presented no evidence to disprove such finding. In
withholding tax of 30% (RA 2343). It was implemented through Circular No. appeals to the Court of Tax Appeals, the determination of the Commissioner
V-334. Pursuant to the foregoing, ABS-CBN dutifully withheld and turned of Internal Revenue is presumed to be correct. It behooves the taxpayer to
over to the BIR the amount of 30% of one-half of the film rentals paid by it to rebut such presumption. Where the taxpayer failed to rebut the
foreign corporations not engaged in trade or business within the Philippines. Commissioner’s findings that the business expenses claimed as deductions
The last year that ABS-CBN withheld taxes pursuant to the foregoing Circular in his 1948 income tax return were fictitious, such finding must be
was in 1968. sustained. The Commissioner's finding on the facts constituting fraud, proved
RA 5431 amended Section 24 (b) of the Tax Code increasing the tax rate from in, and found established by, the Court of Tax Appeals, was not rebutted by
30 % to 35 % and revising the tax basis from “such amount” referring to rents, the taxpayer. Hence, we are not inclined to disturb the finding of falsity or
etc. to “gross income.” The following was implemented by Circular No. 4-71. fraudulence in Tan Guan's return.
Petitioner requested for a reconsideration and withdrawal of the assessment.
23. Collector v Avelino
Issue: Whether or not respondent can apply General Circular No. 4-71 FACTS: This is an appeal from a decision of the Court of Tax Appeals
retroactively and issue a deficiency assessment against petitioner. confirming substantially the assessment of Income tax deficiencies of the
petitioner Jose Avelino for the years 1946, 1947 and 1948. It is contended
Ruling: Any rulings or circulars promulgated by the CIR have no retroactive under this assignment of error that p Included in the opening net worth as of
application when it would be prejudicial to taxpayers. The retroactive January 1, 1946, both according to the petitioner as well as to the
application of Memorandum Circular No. 4-71 prejudices ABS-CBN. The Commissioner of Internal Revenue, are P700.00 and P5,500.00, representing
principle of legislative approval of administrative interpretation of a statute is cash in bank, PNB savings account and PNB current account, respectively. But
to the effect that the re-enactment of a statute substantially unchanged is petitioner claims that the cash on hand in the opening net worth should be, on
persuasive indication of the adoption by Congress of a prior executive December 31, 1945 (or January 1, 1946), not P100.00 as estimated by
construction. The principle applies with more cogency in a case where what is respondent but P47,300.00, for the reason that in an income tax return
involved is not a mere opinion of the Commissioner of Internal Revenue or submitted by the wife of the petitioner, Mrs. Enriqueta Avelino, she made it
ruling rendered on a mere query, but a Revenue Memorandum Circular issued appear that the netted a profit of P55,000.00 from her business of importation
to “all internal revenue officials” by the Commissioner. of shoes, operation of a bar, and of a restaurant, shortly after liberation. The
income tax return submitted by her for the year 1946 was submitted in the year
21. Republic v Marsman Development Company, 44 SCRA 418, No. 1949 and was presented at the hearing as Exhibit "A". Petitioner asserts that
L-18956 April 27, 1972 (546) Dissolution of corporation his wife made a gain of P55,000.00 during the year 1946, but the supposed
FACTS: Defendant Corporation was a timber licensee. Sometime before copy of the income tax return that she has submitted as evidence does not
October 15, 1953 investigations were conducted and led to the discovery that show how that amount had been earned.
certain taxes were due from the logs produced from its concession and ISSUE: Whether the CTA erred in not holding that the net worth method used
surcharge for discharging lumber without permit. BIR assessed Marsman by respondent in determining petitioner's taxable income is without justifiable
3 times for unpaid taxes conducted on the business operation and basis
activities of the corporation. Atty. Moya, in behalf of the corporation, RULING: NO. The agents of BIR will also be presumed to have taken into
received the first 2 assessments. He requested for reinvestigation. As a consideration all the facts to which their attention was called. If she did
result, corporation failed to pay within the prescribed period. Numerous actually earn that amount Exhibit "A" would have contained the details
BIR warnings were given. After 3 years of futile notifications, BIR sued indicating the transactions in which the big sum was earned. Why none of that
the corporation. amount or the greater part thereof appears to have been deposited in a bank has
ISSUE: Whether the present action is barred by prescription, in light of the not been explained. Apparently the court below considered the return as a self-
fact that the corporation law allows corporations to continue only for 3 serving statement, and We agree that on the basis of that income tax return,
years after its dissolution, for the purpose of presenting or defending suits without any other explanation how the gains were used or invested or
by or against it, and to settle its affairs. deposited, there is no reason to disturb the action of the court below in giving
RULING: NO. Where prescription is an affirmative defense set up by the no credence to the said alleged existence of the cash net worth existing at the
taxpayer, it is incumbent upon him to prove that he submitted his tax beginning of the year 1946. We therefore declare that the alleged error has not
returns, and if he fails to do so, the conclusion must be that no such been committed.
24. Cyanamid Philippines, Inc. vs. Court of Appeals, 322 SCRA 639, case when the doubt or difference arises as to what the law is on a certain state
G.R. No. 108067 January 20, 2000 of facts; there is a question of fact when the doubt or difference arises as to the
FACTS: Petitioner, Cyanamid Philippines, Inc., a corporation organized under truth or falsehood of alleged facts.” In the present case, the CA did not doubt,
Philippine laws, is a wholly owned subsidiary of American Cyanamid Co. much less change, the facts narrated by the CTA. It merely applied the law to
based in Maine, USA. It is engaged in the manufacture of pharmaceutical the facts. That its interpretation or conclusion is different from that of the CTA
products and chemicals, a wholesaler of imported finished goods, and an is not irregular or abnormal.
importer/indentor. In the present case, this Court finds that the February 16, 1994 Decision of the
February 7, 1985, the CIR sent an assessment letter to petitioner and demanded CA did not deviate from this rule. The latter merely applied the law to the facts
the payment of deficiency income tax of P119,817 for taxable year 1981 which as found by the CTA and ruled on the issue raised by the CIR: Whether or not
the petitioner on March 4, 1985, protested particularly (1) 25% surtax the collection or earnings of rental income from the lease of certain premises
assessment of P3,774,867.50; (2) 1981 deficiency income tax assessment of and income earned from parking fees shall fall under the last paragraph of
P119,817; (3) 1981 deficiency percentage assessment of P3,346.72. CIR Section 27 of the National Internal Revenue Code of 1977, as amended.
refused to allow the cancellation of the assessment notices. Clearly, the CA did not alter any fact or evidence. It merely resolved the
During the pendency of the case on appeal to the CTA, both parties agreed to aforementioned issue, as indeed it was expected to. That it did so in a manner
compromise the 1981 deficiency income assessment of P119,817 and reduced different from that of the CTA did not necessarily imply a reversal of factual
to P26,577 as compromise settlement. But the surtax on improperly findings.
accumulated profits remained unresolved. Petitioner claimed that the
assessment representing the 25% surtax had no legal basis. Another point 26. Fortich v Corona
raised by the petitioner in objecting to the assessment, is that increase of FACTS: On March 29, 1996, the Office of the President (OP) issued a
working capital by a corporation justifies accumulating income. Petitioner decision converting a large parcel of land from agricultural land to agro-
asserts that respondent court erred in concluding that Cyanamid need not industrial/institutional area. Because of this, a group of farmer-beneficiaries
infuse additional working capital reserve because it had considerable liquid staged a hunger strike in front of the Department of Agrarian Reform (DAR)
funds based on the 2.21:1 ratio of current assets to current liabilities. Petitioner Compound in Quezon City in October 9, 1997. The strike generated a lot of
relies on the so-called "Bardahl" formula, which allowed retention, as working publicity and even a number of Presidential Candidates (for the upcoming
capital reserve, sufficient amounts of liquid assets to carry the company 1998 elections) intervened on behalf of the farmers. Because of this
through one operating cycle. The "Bardahl" formula was developed to measure “blackmail”, the OP re-opened the case and through Deputy Executive
corporate liquidity. The formula requires an examination of whether the Secretary Renato C. Corona issued the so-called, “politically motivated”,
taxpayer has sufficient liquid assets to pay all of its current liabilities and any “win-win” resolution on November 7, 1997, substantially modifying its 1996
extraordinary expenses reasonably anticipated, plus enough to operate the decision after it had become final and executory.
business during one operating cycle. Operating cycle is the period of time it ISSUE: Whether the “win-win” resolution, issued after the original decision
takes to convert cash into raw materials, raw materials into inventory, and had become final and executory, had any legal effect.
inventory into sales, including the time it takes to collect payment for the sales RULING: NO. The orderly administration of justice requires that the
ISSUE: Whether petitioner assertions are correct judgments/resolutions of a court or quasi-judicial body must reach a point
RULING: NO. The Tax Court opted to determine the working capital of finality set by the law, rules and regulations. The noble purpose is to
sufficiency by using the ratio between current assets to current liabilities. The write finis to disputes once and for all. Factual findings of administrative
working capital needs of a business depend upon the nature of the business, its agencies which have acquired expertise in their field are binding and
credit policies, the amount of inventories, the rate of turnover, the amount of conclusive on the Supreme Court.
accounts receivable, the collection rate, the availability of credit to the When the OP issued the Order dated June 23,1997 declaring the Decision of
business, and similar factors. Petitioner, by adhering to the “Bardahl” formula, March 29, 1996 final and executory, as no one has seasonably filed a motion
failed to impress the tax court with the required definiteness envisioned by the for reconsideration thereto, the said Office had lost its jurisdiction to re-open
statute. We agree with the tax court that the burden of proof to establish that the case, more so modify its Decision. Having lost its jurisdiction, the Office
the profits accumulated were not beyond the reasonable needs of the company, of the President has no more authority to entertain the second motion for
remained on the taxpayer. This Court will not set aside lightly the conclusion reconsideration filed by respondent DAR Secretary, which second motion
reached by the Court of Tax Appeals which, by the very nature of its function, became the basis of the assailed “Win-Win” Resolution. Section 7 of
is dedicated exclusively to the consideration of tax problems and has Administrative Order No. 18 and Section 4, Rule 43 of the Revised Rules of
necessarily developed an expertise on the subject, unless there has been an Court mandate that only one (1) motion for reconsideration is allowed to be
abuse or improvident exercise of authority. Unless rebutted, all presumptions taken from the Decision of March 29, 1996. And even if a second motion for
generally are indulged in favor of the correctness of the CIR’s assessment reconsideration was permitted to be filed in “exceptionally meritorious cases,”
against the taxpayer. With petitioner’s failure to prove the CIR incorrect, as provided in the second paragraph of Section 7 of AO 18, still the said
clearly and conclusively, this Court is constrained to uphold the correctness of motion should not have been entertained considering that the first motion for
tax court’s ruling as affirmed by the Court of Appeals. reconsideration was not seasonably filed, thereby allowing the Decision of
March 29, 1996 to lapse into finality. Thus, the act of the Office of the
25. Commissioner of Internal Revenue vs. Court of Appeals, 298 President in re-opening the case and substantially modifying its March
SCRA 83, G.R. No. 124043 October 14, 1998 29,1996 Decision which had already become final and executory, was in
FACTS: Private Respondent YMCA is a non-stock, non-profit institution, gross disregard of the rules and basic legal precept that accord finality to
which conducts various programs and activities that are beneficial to the administrative determinations.
public, especially the young people, pursuant to its religious, educational and
charitable objectives. Private respondent contends that the February 16, 1994 27. Collector v Avelino (549)
CA Decision reversed the factual findings of the CTA. On the other hand, FACTS: This is an appeal from a decision of the Court of Tax Appeals
petitioner argues that the CA merely reversed the ruling of the CTA that the confirming substantially the assessment of Income tax deficiencies of the
leasing of private respondents facilities to small shop owners, to restaurant and petitioner Jose Avelino for the years 1946, 1947 and 1948. It is contended
canteen operators and the operation of parking lots are reasonably incidental to under this assignment of error that there is no reasonable certainty of the
and reasonably necessary for the accomplishment of the objectives of the amount taken as an opening net worth, there being no sufficient basis for
private respondent and that the income derived therefrom are tax exempt. establishing such opening net worth. Included in the opening net worth as of
Petitioner insists that what the appellate court reversed was the legal January 1, 1946, both according to the petitioner as well as to the
conclusion, not the factual finding, of the CTA. Commissioner of Internal Revenue, are P700.00 and P5,500.00, representing
ISSUE: Whether Court of Appeals erred in holding that it had departed from cash in bank, PNB savings account and PNB current account, respectively. But
the findings of fact of Respondent Court of Tax Appeals when it rendered its petitioner claims that the cash on hand in the opening net worth should be, on
Decision dated February 16, 1994 December 31, 1945 (or January 1, 1946), not P100.00 as estimated by
RULING: NO. The distinction between a question of law and a question of respondent but P47,300.00, for the reason that in an income tax return
fact is clear-cut. It has been held that “[t]here is a question of law in a given submitted by the wife of the petitioner, Mrs. Enriqueta Avelino, she made it
appear that the netted a profit of P55,000.00 from her business of importation Petitioner was given five (5) days from receipt thereof to answer the charges
of shoes, operation of a bar, and of a restaurant, shortly after liberation. The filed against him. Petitioner filed his answer vehemently denying the charges
income tax return submitted by her for the year 1946 was submitted in the year against him. He contended that the 12 motor vehicles were covered by proper
1949 and was presented at the hearing as Exhibit "A". Petitioner asserts that clearances, certificates and similar documents issued by the Constabulary
his wife made a gain of P55,000.00 during the year 1946, but the supposed Highway Patrol Group (CHPG). He claimed that the charges were baseless and
copy of the income tax return that she has submitted as evidence does not were filed only to maliciously taint his good name and reputation. The matter
show how that amount had been earned. was set for hearing. However, only prosecutor Ramon Cuyco and his witness,
ISSUE: Whether the use of net worth method was proper Alfonso Alianza, were present. Petitioner and his counsel failed to appear
RULING: YES. Where the Commissioner of Internal Revenue used as part of despite due notice. Consequently, the case was heard ex-parte and was
the opening net worth the small bank deposit of petitioner at the beginning considered submitted for decision. After considering the evidence on record,
of the year 1946; and the petitioner presents in Court an income tax respondent Administrative Action Board (AAB) of the Department of
return for the year 1946 of petitioner’s wife to show that his wife made a Transportation and Communications (DOTC) through then DOTC Secretary
gain prior to that period, and that therefore he had an opening net worth Rainerio Reyes rendered a decision finding respondent Delano T. Padilla
bigger than that used by the said Commissioner, but said return does not guilty of the charges filed against him.
contain any details to indicate how the alleged gain was used, invested or Petitioner filed a motion for reconsideration of the above-mentioned decision.
deposited, it is held that the lower court was correct in considering said return However, instead of ruling on the merits of the motion, the AAB-DOTC
as a self-serving statement and in giving no credence to the alleged existence deferred action thereon and scheduled the case for hearing and petitioner’s
of a bigger opening net worth corresponding to said supposed gain of the wife. motion for reconsideration was denied.Thereafter, petitioner appealed to the
The lower court correctly deducted from the increase in net worth one-half of Merit System Protection Board (MSPB) seeking reversal of the AAB-DOTC’s
the capital gain realized from the sale of capital assets made in the period decision. The MSPB rendered a decision affirming the decision of the AAB-
covered and the depreciation on the rental properties. It also correctly took into DOTC. Petitioner’s appeal was therefore ordered dismissed. A motion for
account the improvements made on the four buildings of the petitioner. reconsideration of the same was denied. Aggrieved by the foregoing rulings,
petitioner elevated the case to CSC invoking that he was not afforded his
28. CSC v Lucas constitutional right of due process.
FACTS: Raquel P. Linatok, filed with the office of the Secretary, ISSUE: Whether there was a denial of due process
Department of Agriculture, an affidavit-complaint against respondent RULING: NO. The essence of due process is that a party be afforded
Jose J. Lucas, a photographer of the same agency, for misconduct. The reasonable opportunity to be heard and to submit any evidence he may have in
Board of Personnel Inquiry, DA, issued a summons requiring respondent to support of his defense. In administrative proceedings such as the one at bench,
answer the complaint. Respondent Lucas submitted a letter to Jose P. due process simply means the opportunity to explain one’s side or the
Nitullano, assistant head, BOPI, denying the charges. According to Lucas, opportunity to seek a reconsideration of the action or ruling complained of.
he did not touch the thigh of complainant Linatok, that what transpired was Clearly therefore, petitioner was given ample opportunity to present his case.
that he accidentally brushed Linatoks leg when he reached for his shoes and He was not denied his right to due process. One may be heard, not only by
that the same was merely accidental and he did not intend nor was there malice verbal presentation but also, sometimes more eloquently, through pleadings.
when his hand got in contact with Linatoks leg. After a formal investigation by “Due process is not semper et ubique judicial process.” Hence, a formal or
the BOPI, DA, the board issued a resolution finding respondent guilty of trial-type hearing is not, at all times, necessary. So long as a party is afforded
simple misconduct and recommending a penalty of suspension for one (1) fair and reasonable opportunity to explain his side, the requirement of due
month and one (1) day. process is complied with.
Respondent appealed the decision to the CSC. The CSC issued a resolution
finding respondent guilty of grave misconduct and imposing on him the 30. Commissioner v Atlas
penalty of dismissal from the service. Respondent moved for reconsideration FACTS: Atlas is a corporation engaged in the mining industry registered
but the CSC denied the motion. Then, respondent appealed to the CA. The CA under the laws of the Philippines. The Commissioner assessed Atlas deficiency
set aside the resolution of the CSC and reinstated the resolution of the BOPI, income taxes for the years 1957 and 1958. For the year 1957, it was the
DA. The CA further ruled that a basic requirement of due process on the other opinion of the Commissioner that Atlas is not entitled to exemption from the
hand is that a person must be duly informed of the charges against him. In the income tax under Section 4 of Republic Act 909 1 because same covers only
instant case however, Lucas came to know of the modification of the charge gold mines. The Secretary of Finance ruled that the exemption provided in
against him only when he received notice of the resolution dismissing him Republic Act 909 embraces all new mines and old mines whether gold or other
from the service. minerals. After hearing, the Court of Tax Appeals rendered a decision
ISSUE: Whether respondent Lucas was denied due process when the CSC allowing some disallowed items, except the items denominated by Atlas as
found him guilty of grave misconduct on a charge of simple misconduct stockholders relation service fee and suit expenses.
RULING: YES. It is sufficient that he is apprised of the substance of the ISSUE: Whether the error committed by the official will relieved the taxpayer
charge against him; what is controlling is the allegation of the acts complained from the obligation to pay full amount of his tax liability
of, and not the designation of the offense. We sustain the ruling of the Court of RULING: NO. Whether it was due to mistake, negligence or omission of the
Appeals that: (a) a basic requirement of due process is that a person must be officials concerned, the arithmetical error committed herein should not
duly informed of the charges against him and that (b) a person cannot be prejudice the Government. This Court will pass upon this particular question
convicted of a crime with which he was not charged. Administrative since there is a clear error committed by officials concerned in the computation
proceedings are not exempt from basic and fundamental procedural principles, of the deductible amount. As held in the case of Vera vs. Fernandez, this Court
such as the right to due process in investigations and hearings. The right to emphatically said that taxes are the lifeblood of the Government and their
substantive and procedural due process is applicable in administrative prompt and certain availability are imperious need. Upon taxation depends the
proceedings. Government's ability to serve the people for whose benefit taxes are collected.
To safeguard such interest, neglect or omission of government officials
29. Padilla v Sto. Tomas, 243 SCRA 155, G.R. No. 109444 March 31, entrusted with the collection of taxes should not be allowed to bring harm or
1995 (550) detriment to the people, in the same manner as private persons may be made to
FACTS: An administrative complaint for gross dishonesty, gross neglect of suffer individually on account of his own negligence, the presumption being
duty, inefficiency and incompetence in the performance of official duties and that they take good care of their personal affair. This should not hold true to
gross violation of the law, rules and reasonable office regulations was filed government officials with respect to matters not of their own personal concern.
against petitioner Delano Padilla, former officer-in-charge of the LTO of This is the philosophy behind the government's exception, as a general rule,
Bacolod City. It was alleged that petitioner succeeded in having caused and from the operation of the principle of estoppel.
approved the registration and/or transfer of ownership of 12 carnapped and
stolen vehicles despite prior knowledge that existing laws, rules and 31. Balmaceda v Corominas
regulations were violated in the registration and transfer thereof.
FACTS: Corominas Company, Inc. was issued by the then Secretary of Indirect taxes, like VAT and excise tax, are different from withholding
Commerce and Industry, Barter Permit, permitting it to export to Japan, 20,000 taxes.1âIn case of withholding taxes, the incidence and burden of taxation fall
metric tons of Rhodesian, the permit for importation was encumbered by the on the same entity, the statutory taxpayer. The burden of taxation is not shifted
limitation of the Consolidated Rules and Regulations, more relevantly, "that in to the withholding agent who merely collects, by withholding, the tax due from
no case shall non-essentials be more than 10% of the total imports. Corominas income payments to entities arising from certain transactions and remits the
was sent a letter which stated: "This confirmation is an authority for you to same to the government. In indirect taxes, the incidence of taxation falls on
import the abovementioned items from your supplier but for the account of the one person but the burden thereof can be shifted or passed on to another
buyer ***."Subsequently, the Coordinator of the Producers Incentives Board, person, such as when the tax is imposed upon goods before reaching the
wrote Corominas that the "NEC items you desire to import have already consumer who ultimately pays for it. Due to this difference, the deficiency
exceeded the 10% allocated you under the Consolidated. Rules and VAT and excise tax cannot be "deemed" as withholding taxes merely because
Regulations of the defunct No-Dollar Import Office. This led Corominas to they constitute indirect taxes. Moreover, records support the conclusion that
institute a "Complaint with Preliminary Mandatory Injunction" AIA was assessed not as a withholding agent but, as the one directly liable for
the said deficiency taxes.
ISSUE: Whether Corominas’ contention is tenable
33. PNZ Marketing v Commissioner (555) (CTA CASE)
RULING: NO. Court ruled: We find reason in the posture of petitioner- FACTS: Petitioner corporation is engaged in business as importer and dealer
appellant that the reply-letters, Exhibits D, D-1 to D-10, it sent of powdered and skimmed milk and other related products which received a
to Corominas were mere confirmations of the firm offers submitted by the formal assessment notice and a demand letter from herein Respondent stating
latter and not authorities to import. Import authority was already granted to therein Petitioner's alleged deficiency income tax liability for the year 1994.
Corominas when it was issued its Barter Permit and later authorized by Acting Petitioner, through its external auditor SGV & Co., duly filed with the BIR a
Undersecretary. protest letter. It’s argued that the subject income tax assessment is void for
failing to comply with the requirements under Section 228 of the Tax code
The letter concluded with this sentence: "This confirmation is an authority for requiring that the law and the facts upon which the assessment is made should
you to import the abovementioned items from your supplier but for the account be clearly stated
of the buyer ***."
ISSUE: Whether the said assessment is void
This cannot be isolated and separately interpreted to mean that Corominas was
thus authorized to import the items listed therein irrespective of the controlling RULING: NO. A perusal of the records indicates a successful attempt on
percentages in the Barter Permit and in the authority granted by acting Respondent's part to comply with the rules. The assessment notice, while
Undersecretary Mariano G. Pineda vague at first glance is subsequently cured by the demand letter which
shows the legal and factual basis relied upon by the Respondent in issuing
BOOK: The Commissioner is precluded from adopting a position the assessment. The demand letter, as thus worded contains the reasons
inconsistent with one previously taken where injustice would result why a deficiency income tax assessment was issued against the Petitioner.
therefrom or where there has been a misrepresentation to the taxpayer.
It must be stressed that Section 228 requires the Respondent to inform the
32. Asia International Auctioneers (AIA) v CIR (553) taxpayer in writing of the laws and the facts on which the assessment is
FACTS: AIA is a duly organized corporation operating within the Subic made, otherwise the assessment shall be void. Simply put, it is incumbent
Special Economic Zone. It is engaged in the importation of used motor upon the Respondent to show clearly the legal and the factual bases which
vehicles and heavy equipment it received from the CIR a Formal Letter of led him to issue the said deficiency income tax assessment in the first
Demand containing an assessment for deficiency VAT and excise tax for a place. The strictness of this rule runs parallel to the due process cl; use as it
total amount of ₱ 106,870,235.00. obliges the Respondent not only to lay down the law from which the
AIA claimed that it filed a protest letter. The CIR failed to act on the protest, assessment is based but more importantly, the surrounding circumstances
prompting AIA to file a petition for review before the CTA. supporting the assessment. For it is believed that it is only through a detailed
The CIR filed a motion to dismiss on the ground of lack of jurisdiction citing appraisal of its basis that the taxpayer may be able to dispute the imposition or
the alleged failure of AIA to timely file its protest which thereby rendered the agree with it.
assessment final and executory.
AIA filed a Manifestation and Motion with Leave of the Honorable Court to 34. Artex Development v NLRC
Defer or Suspend Further Proceedings on the ground that it availed of the Tax
Amnesty Program under Republic Act 9480, otherwise known as the Tax FACTS: Private respondents filed individual complaints against
Amnesty Act of 2007. It submitted to the Court a Certification of the Artex Development for illegal dismissal. Notification and summons were
Qualification issued by the BIR stating that AIA "has availed and is qualified issued to the parties by the senior labor arbitration analyst, informing them of
for Tax Amnesty for the Taxable Year 2005 and Prior Years" pursuant to RA an initial hearing however the scheduled hearing did not proceed for failure of
9480. the company's representative to appear. Another notice of hearing sent to the
ISSUE: Whether the CIR’s contention that AIA is disqualified from availing company by telegram to which the company’s representatives again failed to
the tax amnesty because it’s “deemed” as a withholding agent for deficiency appear.
taxes Subsequently, the Labor Arbiter rendered a decision against Artex. Artex filed
RULING: NO. The Tax Amnesty Program under RA 9480 may be availed of a motion for reconsideration of the decision, claiming that its failure to appear
by any person except those who are disqualified under Section 8 thereof, to at the scheduled hearings was due to the fact that it did not receive summons
wit: nor any notice of hearing and that it’s right to due process was violated.
Section 8. Exceptions. — The tax amnesty provided in Section 5 hereof shall
not extend to the following persons or cases existing as of the effectivity of ISSUE: Whether there was a violation of the respondent’s right to due process
this Act:
(a) Withholding agents with respect to their withholding tax RULING: NO. The confirmation copies of the telegraphed notices of the
liabilities; various hearings before the Labor Arbiter showed that the telegrams were
The CIR contends that AIA is disqualified under Section 8(a) of RA 9480 properly sent and delivered in the ordinary course of business.
from availing itself of the Tax Amnesty Program because it is "deemed" a Even if the petitioner was not heard at the stage of mediation and fact-finding,
withholding agent for the deficiency taxes. This argument is untenable. it may not complain of lack of due process for it was given an opportunity to
The CIR did not assess AIA as a withholding agent that failed to withhold present its side of the controversy when its motions for reconsideration and
or remit the deficiency VAT and excise tax to the BIR. appeal were given due course. What due process abhors is not lack of previous
notice, but absolute lack of opportunity to be heard
Furthermore, when the decision or order of an administrative agency is not at the CASUCO millsite (based on the market value of P391,623,520.00 and
tainted with unfairness or arbitrariness, its factual findings are generally the assessed value thereof at P313,298,820.00). Petitioner appealed the
accorded not only respect but also finality. assessment to the LBAA (Local Board of Assessment Appeals), on the ground
that it was excessive, erroneous, and unjust.
35. Manuel v Villalena Petitioner asked the Provincial Assessor to reconsider his assessment,
contending that it should not be based on the selling price alone, but should
FACTS: Plaintiff had been in continuous possession of the land in question likewise consider the operating conditions of the properties and pricing factors
since 1939, being an ignorant farmer he did not file his Tree Farm application such as goodwill and future business potential.
until June 1954, the Director of Forestry rejected the same because a prior
application had been filed by Mariano Villena in 1955. The two motions for ISSUE: Whether the Court of Appeals erred in finding the assessment of
reconsideration of the rejection order were turned down, the plaintiff thereafter petitioner's machineries proper and correct under the Real Property Tax
appealed to the Secretary of Agriculture and Natural Resources, but the appeal Code
was dismissed by him. The Secretary found that the previous investigation RULING: We agree with petitioner that Section 28 of the Real Property
conducted by the District Forester was not in accordance with the rules and Tax Code provides for a formula for computing the current market value
regulations of the Bureau, and so ordered another investigation to be made, but of machineries. However, Section 28 must be read in consonance with
that before said investigation was terminated the Secretary rendered a decision Section 3 (n) of the said law, which defines "market value." Under the
dismissing the appeal. latter provision, the LBAA and CBAA (Central Board of Assessment
Appeals) were not precluded from adopting various approaches to value
determination, including adopting the "floor bid price" for petitioner's
ISSUE: Whether there was a violation of plaintiff’s right to due process properties.
Tax assessments by tax examiners are presumed correct and made
RULING: NO. The decision of the Director of Forestry on the subject is not in good faith, with the taxpayer having the burden of proving
subject to judicial review unless in the exercise of such jurisdiction he otherwise. In the instant case, petitioner failed to show that the use by the
committed a grave abuse of his discretion which amounts to a denial of due LBAA and CBAA of the floor bid price, pursuant to Section 3 (n) of the Real
process of law to the party adversely affected. While the complaint alleges Property Tax Code was incorrect and done in bad faith.
that the Director of Forestry acted with 'grave abuse of his discretion and
in violation of due process of law provision of the Constitution of the 38. Delta Motors v Commissioner
Philippines' this allegation alone is insufficient for the court to intervene
and review the actuation of the Director of Forestry. Specific acts and FACTS: On April 18, 1980, respondent assessed against and demanded from
instances from which the grave abuse of discretion amounting to a denial petitioner payment of the amount of P35,117,287.56 allegedly due as
of due process of law may be deduced, must be alleged. The complaint deficiency percentage (sales) tax, inclusive of interests and penalties for 1975
does not allege any such fact. and 1976. Petitioner contested the aforesaid assessment and further requested
administrative hearing of the case. Petitioner was requested to pay the amounts
There is no allegation that the plaintiff was not heard nor that the Director of of P46 , 526,110.94 and P42,323,986.19 or a total of P88,850,097.13 as
Forestry decided the case without taking evidence. On the contrary, deficiency percentage taxes, subject
reinvestigations were even made after which the Director of Forestry arrived at to the updating of interest and penalties. Petitioner prays that this court render
the conclusion subject of the present action. Clearly the plaintiff was given judgment in its favour by holding that the assessments of P46,526,110.94 and
due process. P42,323,986.19 representing deficiency percentage taxes, inclusive of interest
s and penalties
36. Standard Chartered Bank v Commissioner (CTA case)
ISSUE: Whether petitioner’s contention is tenable
FACTS: This involves a Petition for Review seeking a refund of the total
amount of P713,870.95, representing alleged overpaid branch profit remittance RULING: NO. The Court recognizes that the burden of proof is on the
taxes stemming from a BIR ruling issued in answer to a query as to the tax taxpayer contesting the validity or correctness of an assessment to prove not
base upon which the 15% branch profit remittance tax should be imposed, only that the Commissioner of Internal Revenue is wrong but that he
held, that "the 15% branch profit remittance ·tax shall be imposed on the profit (taxpayer) is right. Since no evidence was presented by petitioner to
actually remitted abroad and not on the total branch profit out of which the substantiate the errors that are claimed to have been committed by the
remittance is to be made. Commissioner of Internal Revenue in making the assessments in question,
this Court has no other alternative than to resort to the legal truism that
ISSUE: Whether the 15% branch profit remittance tax should be imposed on "all presumptions are in favor of the correctness of tax assessments."
the profit actually remitted abroad and not on the total branch profit out of
which the remittance is to be made 39. Bonifacio Sy Po v CTA (556)
RULING: Inasmuch as the 15% branch profit remittance tax is imposed and FACTS: Po Bien Sing, the sole proprietor of Silver Cup Wine Factory
collected at source, it follows that the tax base should be the amount (SCWF) which is engaged in the business of manufacture and sale of
actually applied for by the branch with the Central Bank of the compounded liquors. On the basis of a denunciation against SCWF allegedly
Philippines as profit to be remitted abroad. "for tax evasion amounting to millions of pesos, Secretary of Finance directed
the Finance-BIR--NBI team to investigate.
Assessments are prima facie presumed correct and made in good faith. On the basis of the team's report of investigation, the respondent
The taxpayer has the duty of proving otherwise. Commissioner of Internal Revenue assessed Mr. Po Bien Sing deficiency
income tax for 1966 to 1970 in the amount of P7,154,685.16 and for
37. Cagayan Robina Sugar Milling v CA deficiency specific tax for January 2,1964 to January 19, 1972 in the amount
of P5,595,003.68
FACTS: All the assets and properties of the Cagayan Sugar Corporation Petitioner protested the deficiency assessments. The BIR recommended the
(CASUCO), which had been foreclosed were offered for sale and petitioner reiteration of the assessments in view of the taxpayer's persistent failure to
was the highest bidder. present the books of accounts for examination.
Among the properties bought by petitioner were sugar mill machineries. ISSUE: Whether the assessments have valid and legal basis.
The market value of these machineries was pegged at P391,623,520.00 and the RULING: YES. The law is specific and clear. The rule on “The Best
assessed value was set at P313,298,820.00 under Tax Declaration No. 5355. Evidence Obtainable” applies when a tax report required by law for the
Thereafter, the Provincial Assessor of Cagayan issued a "Notice of purpose of assessment is not available or when tax report is incomplete or
Assessment of Real Property" to petitioner covering the machineries installed fraudulent.
The tax assessment by tax examiners are presumed correct and made in there is resultant inequality. To prevent such a lamentable situation, the law
good faith. The taxpayer has the duty to prove otherwise. In the absence of ordains that the claim of the State upon the property of the tax debtor shall be
proof of irregularities in the performance of duties, an assessment duly made superior to that of any other creditor.
by the BIR examiner and approved by his superior officers will not be
disturbed. All presumptions are in favour of the correctness of tax assessments. Book: “Tax lien” is understood to denote a legal claim or charge on property,
either real or personal, as security for the payment of some debt or obligation.
40. Oceanic Wireless Corporation v Commissioner (558)
42. Republic vs. Peralta (561)
FACTS: In December 1996, petitioner received a letter from the Revenue
District Officer authorizing Revenue Officers to examine the books of Facts: In the voluntary insolvency proceedings commenced by Quality
accounts and other records for the period January to December 1995. Tobacco Corporation, the following claims of the creditors were filed:
Thereafter, petitioner executed a Waiver of Defense of Prescription of the
NIRC within which respondent may assess petitioner for deficiency taxes. A (i) P2,806,729.92 by the USTC Association of Employees and
preliminary report of tax assessment was issued and petitioner was requested workers Union;
to attend an informal conference to discuss the result of the investigation done (ii) P53,805.05 by the Federacion de la Industria Tabaquera y Otros
on the books. Trabajadores de Filipinas;
Again, petitioner received another pre-assessment notice this time with Details (iii) P1,085,188.22 by the BIR; and
of Discrepancies. The company was advised to file a written protest or set up (iv) P276,161.00 by the BOC.
an office conference to discuss the assessments for deficiency income.
Inasmuch as the authority of respondent to assess was about to prescribe in In its questioned Order, the trial court held that the above-enumerated claims
July 31 1999, demand letters were sent on July 30, 1999. of USTC and FOITAF Unions for separation pay of their respective members
Petitioner now contends that the assessment notices for taxable year 1995 are embodied in final awards of the NLRC were to be preferred over the claims of
void for having been issued beyond the 3-yr prescriptive period as provided the BOC and the BIR. The trial court, in so ruling, relied primarily upon Art.
under the NIRC. Since the tax return was filed in April 1995, respondent has 3 110 of the Labor Code.
years to assess the petitioner. But the assessment was done in 1999, hence the
action has already prescribed. The Solicitor General, in seeking the reversal of the questioned Orders, argues
ISSUE: Whether or not petitioner is liable for deficiency income tax. that Art. 110 is not applicable as it speaks of "wages," a term which he asserts
RULING: YES. Petitioner having failed to comply with the requirement of does not include the separation pay claimed by the Unions. "Separation pay,"
the law in disputing an assessment, the same became final, executory and the Solicitor General contends, is given to a laborer for a separation from
demandable. Sec. 228 states that: employment computed on the basis of the number of years the laborer was
“x x x If the protest is denied in whole or in part, or is not acted upon within employed by the employer; it is a form of penalty or damage against the
one hundred eighty (180) days from submission of documents, the taxpayer employer in favor of the employee for the latter's dismissal or separation from
adversely affected by the decision or inaction may appeal to the Court of Tax service.
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 Issue: Whether the above-enumerated claims of USTC and FOITAF Unions
become final, executory and demandable. x x x” were to be preferred over the claims of the BOC and the BIR?
In the case, petitioner failed to submit supporting documents contrary to
what was jointly stipulated by the parties. Hence, the reckoning of the Ruling: No. Article 110 must be read in relation to the provisions of the Civil
180-day period would be the day the protest was filed (August 16, 1999). Code concerning the classification, concurrence and preference of credits,
However, respondent failed to render his decision within 180 days or until which provisions find particular application in insolvency proceedings where
February 12, 2000. The remedy of petitioner was to file within 30 days the claims of all creditors, preferred or non-preferred, may be adjudicated in a
there from an appeal with this court which would be until March 14, binding manner.
2000. But since the Petition for Review was filed only on May 12, 2000, the
same was definitely filed beyond the date prescribed by law. Case These other (non-tax) credits, although constituting liens attaching to particular
dismissed for being filed out of time. property, are not preferred one over another inter se. Provided tax liens shall
have been satisfied, non-tax liens or special preferred credits which subsist in
CHAPTER XXV- ADMINISTRATIVE REMEDIES OF GOVERMENT respect of specific movable or immovable property are to be treated on an
equal basis and to be satisfied concurrently and proportionately. Put succintly,
41. Hongkong Shanghai Banking Corporation vs. Commissioner (561) Arts. 2241 and 2242 jointly with Arts. 2246 to 2249 establish a two-tier order
of preference. The first tier includes only taxes, duties, and fees due on specific
Facts: Petitioner is the owner of 2,000 railroad ties it had acquired from the movable or immovable property. All other special preferred credits stand on
firm of Pujalte & Co., which the latter assigned to it after it was unable to pay the same second tier to be satisfied, pari passu and pro rata, out of any residual
a large sum of money it then owed HSBC. value of the specific property to which such other credits relate. Credits which
are specially preferred because they constitute liens (tax or non-tax) in turn,
The firm of Pujalte & Co. is engaged in the business of timber and it was take precedence over ordinary preferred credits so far as concerns the property
shown that prior to the assignment of the railroad ties to HSBC, it owed the to which the liens have attached. The specially preferred credits must be
BIR forest charges, one of the taxes enumerated in the NIRC, amounting to discharged first out of the proceeds of the property to which they relate, before
P8,328.93. It executed a bond of P2,000.00 to secure the payment of the forest ordinary preferred creditors may lay claim to any part of such proceeds.
charges and was allowed to remove the timber from the public forests. More
than a year later, when some of the timber were already made into railroad ties Book: The claim of the government predicated on a tax lien is superior to the
and transferred to third parties like HSBC, the Collector instituted collection claim of a private litigant predicated on a judgment. The tax claim must be
proceedings against Pujalte & Co. To enforce collection, the CIR went after given preference over any other claim of any other creditor, in respect of any
the property of Pujalte & Co. including those which were already in the and all properties of the insolvent. There is no merit in the contention of the
possession of HSBC, who at the time it acquired the property, had no notice of NLRC that taxes are absolutely preferred claims only with respect to movable
the lien nor of the delinquent tax due from Pujalte & Co. or immovable properties on which they are due.
Issue: Whether the CIR can still collect taxes? 43. Commissioner vs. NLRC (561)
Ruling: Yes. Taxation is an attribute of sovereignty. The power to tax is the Facts: The CIR demanded payment from Maritime Company of the
strongest of all the powers of the government. If approximate equality in Philippines of deficiency common carrier’s tax, fixed tax, 6% commercial
taxation is to be attained, all property subject to a tax must respond or else broker’s tax, documentary stamp tax, income tax and withholding tax totaling
P17,284,882.45. The assessment became final and executory and with private Ruling: No. The claim of the government for unpaid taxes is generally
respondent’s failure to pay the tax liabilities, the CIR issued warrants of preferred over the claims of labourers for unpaid wages. The provision of Art.
distraint of personal property and levy of real property which were duly 110 of the Labor Code, which gives laborers’ claims for preference, applies
served. A “receipt of goods, articles and things” was executed covering, only in case of bankruptcy or liquidation at the time the warrants of distraint
among others, 6 barges as proof of constructive distraint of property but the and levy were issued; hence, the lien of the employees is unwarranted.
same was not signed by any representative of private respondent because of
the refusal of the persons actually in possession of the barges. 46. Reliance Procoma vs. Phil-Asia Tobacco (564)
It appeared that 4 of the barges constructively distrained were also levied upon
by a deputy sheriff of Manila and sold at public auction to satisfy a judgment Facts: On September 23, 1972, the CA issued a restraining order, the pertinent
for unpaid wages and other benefits of employees of private respondent. excerpt of which, ordained:
Issue: Who has a preferential lien over the barges, the government or the x x x you the respondents are HEREBY PROHIBITED and
company’s employees? RESTRAINED from enforcing the writ of execution and orders of
garnishment issued in Civil Case No. 2873-V of the CFI of Ilocos
Ruling: The court held that it is the government which has preferential lien Sur, entitled Reliance Procoma, Inc., et al., vs. Phil-Asia Tobacco
over the barges under Arts. 2241 and 2247 of the Civil Code. Accordingly, the Corporation, until further orders from this Court x x x
preferential lien of employees for unpaid wages under Art. 110 of the Labor
Code applies only to bankruptcy cases where the employer is under liquidation However, subsequent thereto, respondent Judge Arciaga, on motion of plaintiff
due to bankruptcy. Reliance, issued an order in Civil Case No. 2873-V, of the CFI of Ilocos Sur;
which reads:
The NIRC provides for the collection of delinquent taxes by any of the
following remedies: (a) distraint of personal property or levy of real property x x x I hereby direct the Philippine Virginia Tobacco
of the delinquent taxpayer; (b) civil or criminal action. Administration, Consolacion Building, Cubao, Quezon City, to
refrain, pending the termination of the legal proceedings in this case
Book: The term “tax” is used in a broad sense encompassing all government before the CA, from effecting the transfer to anyone so much of the
revenues collectible by the Commissioner under the Tax Code, whether or not funds of the Phil-Asia Tobacco Corporation which are in the
involving taxes in the strict technical sense thereof (e.g., forest charges). possession and control of the Philippine Virginia Tobacco
Administration x x x.
44. CIR vs. Pineda (562)
This led to the Resolution, which was issued in CA-G. R. No. SP-01360, Phil-
Facts: After the closure of the estate proceedings of Anastacio Pineda and the Asia Tobacco Corporation vs. Hon. Ludovico D. Arciaga et al., and which was
distribution of the estate to his heirs, the CIR tried to collect from one of the penned by Mr. Justice Manuel P. Barcelona, which read as follows:
heirs deficiency income tax due from the estate. Respondent Pineda appealed
to the CTA alleging that he was appealing “only that proportionate part or Before us for resolution are the motion of petitioner Phil-Asia
portion pertaining to him as one of the heirs.” The CTA found respondent Tobacco Corporation to hold respondent Judge Ludovico D.
liable only for the payment corresponding to his share of the tax assessed. The Arciaga, as well as private respondents Reliance Procoma Inc. et al.,
CIR appealed to the SC and proposed to hold respondent liable not only for his and the motion of intervenor Philippine Virginia Tobacco
share in the tax but for the payment of all the taxes found by the CTA to be Administration, which is likewise to declare said respondent Judge
due from the estate. in contempt of court.
Issue: Whether the CIR is correct? Since the petitioners did not bother to file any memorandum, although they
were required to do so in this Court's resolution, the only points to be resolved
Ruling: No. The SC ruled that Respondent Pineda was liable for the in this appeal are the issues raised in their petition for review: (1) they contend
assessment as an heir and as a holder-transferee of property belonging to the that Judge Arciaga's order did not constitute an enforcement of the writ of
estate/taxpayer. As an heir, he was individually answerable for the part of the execution and the orders of garnishment and (2) assuming arguendo that there
tax proportionate to the share he received from the inheritance. His liability, was disobedience to the restraining order, it was not willful.
however, cannot exceed the amount of his share. As a holder of property
belonging to the estate, he was liable for the tax up to the amount of the Issue: Whether the contentions of Judge Arciaga are correct?
property in his possession. The reason was that the government has a lien on
the property received by him from the estate for unpaid income taxes for which Ruling: No. On the first issue, the contention has no merit. By means of the
said estate was liable. notice of garnishment, Deputy Sheriff Cachero levied on the funds of Phil-
Asia, which were in the control of the PVTA, in order to satisfy a judgment
Book: BIR may collect the deficiency tax due from one heir only or from all against Phil-Asia amounting to P2,466,786.06. The notice enjoined the PVTA,
the heirs in proportion to their inheritance received. as garnishee, not to "deliver, transfer, or otherwise dispose of" such funds
except to the sheriff or his deputy.
45. CIR vs. NLRC (563)
On the second issue, the contention is not sustainable. Willfulness, which is a
Facts: For failure of Oceanic Company, Inc. to pay deficiency taxes of condition of mind, is inferable from the act itself and the circumstance
P20,000,000.00, the CIR issued warrants of distraint on Oceanic’s personal surrounding its commission. The juris tantum presumption is "that an unlawful
properties and levy on its real properties. Meanwhile, the Department of Labor act was done with an unlawful intent".
through the Labor Arbiter rendered a decision ordering Oceanic to pay unpaid
wages and other benefits to its employees. Four barges belonging to Oceanic Under the circumstances, the willfulness or bad faith of the respondents is
were levied upon by the sheriff and later sold at public auction. manifest. They knowingly disregarded and negated partially the directive of
the Appellate Court. The least that they could have done was to ask for the
The CIR filed a motion with the Labor Arbiter to annul the sale and enjoin the reconsideration of the restraining order or to secure leave and clearance from
sheriff from disposing the proceeds thereof. The employees of Oceanic the CA for the freezing of Phil- Asia's funds in the custody of the PVTA.
opposed the motion contending that Art. 110 of the Labor Code gives first
preference to claims for unpaid wages. One form of indirect contempt is "disobedience of or resistance to a lawful
writ, process, order, judgment, or command of a court, or injunction granted
Issue: Whether the employees of Oceanic are correct? by a court or judge" which is punishable by a fine not exceeding one thousand
pesos or imprisonment not exceeding six months or both.
because it is upon the service of the Warrant that the taxpayer is informed of
The restraining order issued by the CA was equivalent to an injunction. A trial the denial by the BIR of any pending protest of the said taxpayer, and the
judge may be held in contempt of court for disregarding a writ of preliminary resolute intention of the BIR to collect the tax assessed. In the case at bar, BPI
injunction issued by this Court. Judges of inferior courts should be the first to received the warrant 4 days after the expiration of the prescriptive period
comply with the decrees of superior courts. hence, the right to collect has already prescribed.
Book: “Garnishment” refers to a warning to a person in whose hands the Book: Under Sec. 223 (c) of the Tax Code, it is not essential that the warrant
effects of another are attached, not to pay the money or deliver the property or be fully executed so that it can suspend the running of the statute of limitations
allow withdrawal of deposits of the defendant in his hands. on the collection of the tax. It is enough that the proceedings have validly
begun and that their execution has not been suspended by reason of the
47. Castro vs. Collector (564) (Taken from Case No. 107) voluntary desistance of the CIR. Jurisprudence establishes that distraint and
levy proceedings are validly begun or commenced by the issuance of the
Facts: Petitioner is a duly licensed merchant. Pursuant to the provisions of warrant and service thereof on the taxpayer.
Sec. 4 (b) and (c) of R.A. 55, she filed with the BIR her war profits tax returns
in the amount of P431,884.00 and a net worth in the sum of P409,581.57. 49. Marcos II vs. CA (565) (Taken from Case No. 61)
A criminal case was filed against her in the CFI of Manila for violation of Sec. Facts: Bongbong Marcos sought for the reversal of the ruling of the CA to
4, in connection with Sec. 8, of the War Profits Tax Law, for allegedly grant the CIR's petition to levy the properties of the late Pres. Marcos to cover
defrauding the Republic of the Philippines in the total amount of the payment of his tax delinquencies during the period of his exile in the US.
P1,048,687.76. Petitioner received for the first time the notice of assessment The Marcos family was assessed by the BIR after it failed to file estate tax
by registered mail from the CIR. The said letter of demand was based on the returns. However the assessments were not protested administratively by Mrs.
report of Supervising Examiner Felipe Aquino of the BIR, who recommended Marcos and the heirs of the late president so that they became final and
that the petitioner be assessed and made to pay the sum of P1,048,687.76 as unappealable after the period for filing of opposition has prescribed. Marcos
war profits tax and surcharge. contends that the properties could not be levied to cover the tax dues because
they are still pending probate with the court and settlement of tax deficiencies
Supervising Examiner Aquino of the BIR, who testified for the prosecution, could not be had, unless there is an order by the probate court or until the
declared "that as a result of a detailed reinvestigation conducted by his office, probate proceedings are terminated. He also pointed out that applying
it was found out that no war profits tax was due from the accused in Memorandum Circular No. 38-68, the BIR's Notices of Levy on the Marcos
connection with the present case." City Fiscal Angeles moved for the dismissal properties were issued beyond the allowed period and are therefore, null and
of the case. Finding the petition for dismissal to be well taken, petitioner is void.
acquitted in the criminal case.
Issue: Whether the BIR is authorized to collect estate tax deficiencies by the
Issue: Is the acquittal in the criminal case instituted against her, for violation summary remedy of levy upon and sale of real properties of the decedent
of the War Profits Tax Law, bar the collection of the taxes assessed? without first securing the authority of the court sitting in probate court over the
supposed will of the decedent?
Ruling: No. With regard to the tax proper, the state correctly points out in its
brief that the acquittal in the criminal case could not operate to discharge Ruling: Yes, because the collection of estate tax is executive in character. The
petitioner from the duty to pay the tax, since that duty is imposed by statute estate tax is exempted from the application of the statute of non-claims, and
prior to and independently of any attempts on the part of the taxpayer to evade this is justified by the necessity of government funding, immortalized in the
payment. The obligation to pay the tax is not a mere consequence of the maxim that taxes are the lifeblood of the government.
felonious acts charged in the information, nor is it a mere civil liability derived
from crime that would be wiped out by the judicial declaration that the The deficiency income tax assessments and estate tax assessment are already
criminal acts charged did not exist. final and unappealable and the subsequent levy of real properties is a tax
remedy resorted to by the government, sanctioned by NIRC. The omission to
Book: The remedy by distraint of personal property and levy on realty may be file an estate tax return and the subsequent failure to contest or appeal the
repeated if necessary, until the full amount due, including all expenses, is assessment made by the BIR is fatal to the petitioner's cause, as under Sec. 223
collected. If a full discharge of the tax liability is to be the result of the of the NIRC, in case of failure to file a return, the tax may be assessed at
distraint and levy, this would permit a clever taxpayer who is able to conceal anytime within 10 years after the omission, and any tax so assessed may be
most of the valuable part of his property from the revenue officers to escape collected by levy upon real property within 3 years (now 5 years) following
payment of his tax liability, by sacrificing an insignificant portion of his the assessment of the tax. Since the estate tax assessment had become final and
holdings. unappealable by the petitioner's default as regards protesting the validity of the
said assessment, there is no reason why the BIR cannot continue with the
48. BPI vs. Commissioner (564) (Taken from Case No. 284-285) collection of the said tax.
Facts: On October 20, 1989, the BIR issued a formal assessment notice 50. Yabes vs. Flojo (565) (Taken from Case No. 68)
against BPI. The FAN demanded BPI to pay P28,000.00 in taxes. On
November 1989, BPI filed a protest; however the protest did not specify Facts: Yabes received a demand letter from the CIR which he protested and
whether it was a request for reconsideration or a reinvestigation. The BIR did for which he requested a reinvestigation with the BIR coupled with a request
not reply on the said protest but on October 15, 1992, four days before the to hold in abeyance the appeal pending final decision. This request was denied.
expiration of the period to collect – or 1,095 days or 3 years after the issuance Consequently, Yabes filed a tax waiver extending the period of prescription.
of the FAN, the CIR issued a warrant of distraint/levy against BPI for the Spouses Yabes died pending said action.
satisfaction of the assessed tax. The warrant was served to BPI on October 23,
1992 or 4 days after period has prescribed. In September 1997, the CIR finally Issue: Whether the BIR is authorized to issue a warrant of garnishment against
sent a letter to BPI advising the latter that its protest is denied. the bank account of a taxpayer despite the pendency of his protest against the
assessment with the BIR or appeal with the CTA?
Issue: Whether the government’s right to collect the assessed tax has
prescribed? Ruling: The BIR is authorized to issue a warrant of garnishment against the
bank account of a taxpayer despite the pendency of protest. Nowhere in the
Ruling: Yes. When it comes to collection, even though the warrant for Tax Code is the Commissioner required to rule first on the protest before he
distraint/levy was issued within the prescriptive period, it is required that the can institute collection proceedings on the tax assessed.
same should be served upon the taxpayer within the prescriptive period. This is
51. Republic v Lim Tian Teng Code to the Commissioner of Customs, does not extend to modifying final
decisions of the Court, in the sense that he may accept on behalf of the
In January 1957, the Collector of Internal Revenue (CIR) made an assessment Government anything different or less than what is awarded to said
against Lim Tian Teng Sons and Co., Inc. (LTTSCI) demanding from the latter Government in the decision.
payment of P15k in taxes inclusive of surcharge. In the same month, LTTSCI
requested for a reinvestigation with a request to produce supporting evidence. Book: The Supreme Court ruled that the compromise was improper because
The CIR did not reply however he remanded the case to the Solicitor General the Commissioner acted as a mere agent of the Government, the Commissioner
(SG) who did not grant a reinvestigation but rather reiterated the content of the of Customs, is not authorized to accept anything less than what is adjudicated
assessment. In September 1958, the CIR filed a tax collection suit against in favor of the Government. By virtue of such final judgment, the Government
LTTSCI with the Court of First Instance of Cebu. LTTSCI assailed the had already acquired a vested right (Rovero v. Amparo, 91 Phil. 228)
collection suit on the ground that the CIR cannot commence collection
without a final and executory assessment notice. It alleged that the assessment 53. Lim Pin vs. Liao Tan
notice issued in January 1957 has not yet become final and executory because 15 July 1982
of the failure of the CIR to act on the protest.
Facts: Spouses Conchita Liao Tan and Tan Cho Hua alleged in their complaint
ISSUE: Whether or not LLTSCI I correct. for unlawful detainer that the plaintiff Conchita Liao Tan, as owner of a parcel
of registered land with improvements located at Francisco Street, Caloocan
HELD: No. Nowhere in the Tax Code is the CIR required to rule first on a City, had leased a portion of it, more particularly known as 91 Francisco
taxpayer’s request for reinvestigation before he can go to court for the purpose Street, Caloocan City to defendant Lim Pin on a month to month basis but that
of collecting the tax assessed. Ruling on the protest is not a condition the latter starting April, 1977 had not paid the agreed rental stipulated for such
precedent for the commencement of tax collection. The CIR is authorized to month and the succeeding months thereafter. And that despite demand, the
collect delinquent internal revenue taxes either by distraint and levy or by defendant refused to vacate the leased premises. Defendant Lim Pin, filed her
judicial action or both simultaneously. The only requisite before he can collect Answer denying the material allegations of the complaint and protesting the
the tax is that he must first assess the same within the time fixed by law – and alleged highly "unconscionable and unreasonable" increase of rental demanded
this was complied with in the case at bar. The Supreme Court notes that in the by plaintiffs. On the scheduled October 19, 1977 hearing, defendant Lim Pin
case of a false or fraudulent return with intent to evade the tax or of a failure to was absent. Her son George Hung who attended with his mother all the
file a return, a proceeding in court for the collection of such tax may be begun previous hearings was present together with the defendant's counsel. Plaintiff
without assessment. Conchita Liao Tan together with her counsel was also present. Through the
initiative of the court a quo, the subject compromise agreement was formulated
Book: Nowhere in the Tax Code is the Commissioner required to rule first on and executed and it finally became the basis of the October 19, 1977 judgment.
the protest before he can institute collection proceedings on the tax assessed. The aforesaid judgment was the subject of a motion for reconsideration filed
The legislative policy is to give the Commissioner much latitude in the speedy on October 28, 1977 by defendant Lim Pin on the following grounds: 1) that
and prompt collection of taxes because it is in taxation that the Government she never authorized her son nor her counsel on record (Attorney. Pastor
depends to obtain the means to carry on its operations (Republic v. Lim Tian Mamaril) to enter into such compromise agreement and 2) that had she been
Teng Sons, 16 SCRA 584) present when said agreement was prepared, she would not have acceded
thereto. Petitioner argues that the respondent Judge should not have allowed
her son George Hung and her then counsel, Attorney. Pastor Mamaril in her
52. ROVERO VS. AMPARO (May 5, 1952) absence to enter into the October 19, 1977 compromise agreement with the
private respondent Conchita Liao Tan assisted by her counsel. Said agreement
Facts: The petitioner Tranquilino Rovero in the evening of April 25, 1947, contained admissions by petitioner, the respondent Judge should have required
arrived at the Makati Air Port on board a PAL plane which came from a written authority and power of attorney from her son and counsel. Her
Bangkok, Siam. He brought with him several pieces of baggage, among which objections to the validity of the compromise agreement are premised on
was a Chinese vase which he declared and valued at P15. The vase together Article 1878 of the Civil Code and Rule 138, Section 23 of the Rules of Court.
with some of the baggage were retained by the Customs officials for they
suspected that they contained merchandise not declared which should pay Issue: Was the Compromise Agreement enforceable?
customs duty. In the course of the examination of said Chinese vase, it was
found that it had a false bottom which upon being broken open was seen to Book: Compromise agreement entered into without authority is not void, but
hold a tin can containing 259 pieces of jewelry with precious stones, which unenforceable and may be ratified (Lim Pin v. Liao Tan. 115 SCRA 290).
the Customs officials appraised at P23,736. Rovero was found guilty of
violating section 2703 of the Revised Administrative Code and sentenced to
pay a fine of P2,500, with subsidiary imprisonment in case of insolvency, plus 54. Republic v Plan
costs It is argued that the parties to a case may enter into a compromise about
even a final judgment rendered by a court, and it is contended by petitioner FACTS UNAVAILABLE
that the appraisal ordered by the Commissioner of Customs and sanctioned by
the Department of Finance was authorized by Section 1369 of the same Code. Book: But a compromise agreement entered into by government lawyer
without authority of the Board of Directors is null and void. (Republic v. Plan,
Issue: Was Compromise proper? 116 SCRA 70).
Ruling: Article 1809 of the old Civil Code and Article 2028 of the new Civil
Code define a COMPROMISE as a contract whereby the parties in interest by 55. CIR vs Fireman's Fund Insurance Co. 148 SCRA 315
giving, promising or retaining something or otherwise making reciprocal
concessions, avoid a litigation or terminate one already commenced. Black's Facts:
Law Dictionary on page 382 thereof says: "A compromise is an agreement From January, 1952 to 1958, private respondent Fireman's Fund Insurance Co.
between two or more persons, who, for preventing for putting an end to a entered into various insurance contracts involving casualty, fire and marine
lawsuit, adjust their difficulties by mutual consent in manner which they agree risks, for which the corresponding insurance policies were issued. From
on, and which every one of them prefers to the hope of gaining, balanced by January, 1952 to 1956, documentary stamps were bought and affixed to the
the danger of losing." The power of the Commissioner of Customs under monthly statements of policies issues; and from 1957 to 1958 documentary
Section 1369 of the Revised Administrative Code, to compromise any case or stamps were bought and affixed to the corresponding pages of the policy
proceeding arising under the customs laws, refers only to cases appealed to the register, instead of on the insurance policies issued.
courts and finally decided by them; and (6) the supervision and control over
judicial proceedings given by Section 1368 of the Revised Administrative In 1959, respondent company discovered that its monthly statements of
business and policy register were lost and reported such to the NBI and the
CIR. The CIR through its examiner, after conducting an investigation of said The deceased operated an air transportation business under the business name
loss, ascertained that respondent company failed to affix the required and style of Philippine Aviation Development.
documentary stamps to the insurance policies issued by it and failed to 61,048.19 liters of gasoline was actually used in aviation during the period
preserve its accounting records within the time prescribed by Sec. of the from
Revenue Code by using loose leaf forms as registers of documentary stamps October 3, 1956 to May 31, 1957. The estate, as claimed, was entitled to the
without written authority from the CIR. As a consequence of these findings, same rights and privileges as Filipino citizens operating public utilities
petitioner assessed and demanded from petitioner the payment of documentary including privileges in the matter of taxation. The Commissioner of Internal
stamp taxes for the years 1952 to 1958 in the total amount of P 79,806.87 and Revenue disagreed. The matter was brought to the Court of Tax Appeals and
plus compromise penalties, a total of P 81,406.87. ordered the petitioner to refund to the respondent the sum of P2,441.93. Court
of Tax Appeals decision was reversed.
Issue: WON the CIR may impose and require the payment of the subject
stamp tax for the documents in question. ISSUE: Whether or not Section 142 of the National Internal Revenue Code
allowing Filipinos a refund of 50 percentum of the specific tax paid on
Ruling: NO. There is no justification for the government which has already aviation oil, could be availed by citizens of the United States and all forms of
realized the revenue which is the object of the imposition of subject stamp tax, business enterprises owned or controlled directly by them in view of the
to require the payment of the same tax for the same documents. Enshrined in privilege under the Ordinance to operate public utilities in the same manner as
our basic legal principles is the time honored doctrine that no person shall to, and under the same conditions imposed upon, citizens of the Philippines or
unjustly enrich himself at the expense of another. It goes without saying that corporations or associations owned or controlled by citizens of the Philippines.
the government is not exempted from the application of this doctrine.
DECISION: No. The decision of the Court of Tax Appeals is reversed and the
While there appears to be no question that the purpose of imposing case is remanded to it, to grant respondent Administrator the opportunity of
documentary stamp taxes is to raise revenue, however, the corresponding proving whether the estate could claim the benefits of Section 142 of the
amount has already been paid by respondent and has actually become part of National Internal Revenue Code, allowing refund to citizens of foreign
the revenue of the government. In the same manner, evidence was shown to countries on a showing of reciprocity. With costs.
prove that the affixture of the stamps on documents not authorized by law is
not attended by bad faith as the practice was adopted from the authority Book: However, where in an appeal to the CTA, the taxpayer has expressed
granted to one of respondent's general agents. his willingness to pay compromise penalties said amounts may be collected as
part of the judgment (Commissioner v. Guerrero, 19 SCRA 205).
56. Mithi ng Bayan Cooperative v Araneta
58. Wonder Mechanical Engineering v CTA
FACTS Court of Tax Appeals upheld the decision of the Collector of Internal Facts: Wonder Corp. was engaged in the business of manufacturing auto spare
Revenue that denied the petitioner's claim for refund of the sum of P3,590.53 parts, lamp shades, rice threshers and other articles. It was also engaged in the
paid by it as privilege or fixed tax upon business and percentage tax, and business of electroplating and repair of machines. However, it did not pay
surcharge. due (Annex A) and the resolution dated 8 October 1958, denying its sales tax on the sale of articles and the percentage tax on its electroplating and
motion for reconsideration. repair business.
Commissioner of Internal Revenue caused the investigation of Wonder Corp.
Acting upon the recommendation of the agent, on 19 December 1953 the for the purpose of ascertaining its tax liability. Revenue Examiner Pedro
respondent Collector of Internal Revenue demanded from the petitioner Cabigao reported that Corp. manufactured and sold other articles subject to 7%
payment of the sum of P3,590.53 (less P20 for compromise), within 30 days sales tax but not covered by the Corp’s tax exemption privilege. The Corp. was
from receipt of the letter of demand and informed it that if it be not agreeable assessed with a deficiency percentage tax of P25, 080. and a 25% surcharge.
to the assessment, it could take up the matter with the Conference Staff of the Wonder Corp. contends that it was a given a Certificate of Tax Exemption
Bureau of Internal Revenue by filing within the same period of time a written with respect to the manufacture of machines for making cigarette paper, pails,
notice of its in attention to appear before the Staff either in person or by an lead washer, nails… (those which are determined as new and necessary by RA
attorney-at-law or a certified public accountant as counsel and that if it be 901).
agreeable to extrajudicially settle the penal liabilities arising from violations of
the National Internal Revenue Code, as amended, it could pay the sum of P100 Issue: Whether or not the manufacture and sale of steel chairs, jeep parts…
as penalty in addition to the sum of P3,590.53, or a total of P3,690.53 (Exhibit which are not machines for making other products are tax exempt under RA
E). On 13 January 1954 the petitioner wrote to the respondent Collector 901.
informing him that it was not agreeable to his proposal and filed its notice of
intention to appear before the Conference Staff (Exhibit F). After hearing, on 9 Held: No. Wonder Corp. was granted the tax exemption in the manufacture
December 1954 the Conference Staff recommended to the respondent and sale of machines but not manufacture and sale of the articles produced by
Collector the enforcement of the assessment dated 19 December 1953 for taxes the machines. Such was the intention of the State for new and necessary
and surcharge in the sum of P3,590.53 and suggested the imposition upon the industries as an incentive to greater and adequate production of products made
petitioner of a compromise penalty in the sum of P100 (Exhibit 9). The scarce by World War II. Tax exemptions are highly disfavored in law and
respondent Collector approved the recommendation of the Conference staff those who claim them must be able to justify his claim and must be clearly
and on 4 January 1955 demanded payment of the total sum of 690.53 within expressed in the law. Tax exemptions cannot be established by implication.
ten day from receipt of the letter, otherwise it would enforce collection through In the case, Wonder Corp. was granted tax exemption in the manufacture of
the summary remedies provided for by law (Exhibit G). cigarette paper, pails, lead washers, nailsas explicitly stated in the Certificate
of Tax Exemption. The manufacture of steel chairs, jeep parts and other
Issue: Does Commissioner have the power to compromise? articles not constituting machines for making certain products does not fall
under RA 901.
Ruling: (BOOK) The Commissioner has no power to impose and collect the
compromise penalties in the absence of a compromise agreement. Book: No. There is no showing that the compromise penalty was imposed by
Commissioner (Mithi ng Bayan Cooperative Marketing Association v. the Commissioner of Internal Revenue with the agreement and conformity of
Araneta, 2 SCRA 879) the taxpayer (Wonder Mechanical Engineering Corporation v. Court of Tax
Appeals, et al, 64 SCRA 555).
57. COMMISSIONER OF INTERNAL REVENUE VS. GUERRERO
CHAPTER XXVI JUDICIAL REMEDIES OF GOVERNMENT
FACTS: The Commissioner of Internal Revenue denied the claim for refund in
the sum of P2,441.93 filed by the administrator of the estate of Paul I. Gunn. 59. PHILIPPINE NATIONAL OIL COMPANY vs CA
Facts: Savellano’s sworn statement informed the BIR that PNB had failed to from a taxpayer who failed to pay the same within the time prescribed for its
withhold the 15% final tax on interest earnings and/or yields from the money payment arising from (a) a self-assessed tax, whether or not a tax return was
placements of PNOC with the said bank, in violation of Presidential Decree filed, or (b) a deficiency assessment issued by the BIR, which has become final
(P.D.) No. 1931. P.D. No. 1931 withdrew all tax exemptions of government- and executory. Where no return was filed, the taxpayer shall be considered
owned and controlled corporations. delinquent as of the time the tax on such return was due, and in availing of the
In a 1986 letter, the BIR requested PNOC to settle its liability for taxes on the compromise, a tax return shall be filed as a basis for computing the amount of
interests earned by its money placements with PNB and which PNB did not compromise to be paid (Rev. Regs. No. 17-86; PNOC v. CA, et al, and PNB v.
withhold. PNOC proposed to set-off its tax liability against a claim for tax CA. et al., G.R. Nos. 109976 and 112800, April 26, 2005).
refund/credit of the National Power Corporation then pending with the BIR, in
the amount of P335,259,450.21. This was not accepted by the BIR. 60. PNB v CA
PNOC made another offer to the BIR to settle its tax liability. This time,
however, PNOC proposed a compromise by paying P91,003,129.89, FACTS: Savellanoinformed the BIR that PNB had failed to withhold the 15%
representing 30% of the P303,343,766.29 basic tax, in accordance with the final tax on interestearnings and/or yields from the money placements of
provisions of Executive Order No. 44. Executive Order No. 44, on which the PNOC with the said bank, inviolation of Presidential Decree (P.D.) No.
compromise agreement was predicated, set the parameters for the grant of tax 1931. P.D. No. 1931, which took effect on11 June 1984, withdrew all
amnesty. tax exemptions of government-owned and controlledcorporations. the BIR
The BIR Commissioner in a letter, accepted the compromise. requested PNOC to settle its liability fortaxes on the interests earned by its
Private respondent Savellano, through four installments, was paid the money placements with PNB and which PNB didnot withhold. PNOC wrote
informer's reward in the total amount of P14,093,321.89, representing 15% of the BIR on 25 September 1986, and made an offer to compromise itstax
the P93,955,479.12 tax collected by the BIR from PNOC and PNB. He liability. PNOC proposed to set-off its taxliability against a claim for tax
received the last installment on 01 December 1987. refund/credit of the National Power Corporation(NAPOCOR), then pending
Savellano, through his legal counsel, wrote the BIR to demand payment of the with the BIR. the BIR sent a demand letter to PNB, as withholding agent,
balance of his informer's reward. Savellano also questioned the legality of the forthe payment of the final tax on the interest earnings and/or yields from
compromise agreement entered into by the BIR and PNOC and claimed that PNOC'smoney placements with the bank. On the same date, the BIR also
the tax liability should have been collected in full. mailed a letterto PNOC informing it of the demand letter sent to PNB. PNOC,
The CTA later on declared the compromise agreement entered into between in another letter, dated 14 October 1986, reiterated its proposal to settle itstax
the BIR and PNOC as without any force and effect and that upon payment by liability through the set-off of the said tax liability against NAPOCOR'S
PNOC, Savellano was entitled to the balance of his informer’s reward pendingclaim for tax refund/credit.10 The BIR replied on 11 November 1986
that the proposal for set-off was prematuresince NAPOCOR's claim was
Issues: still under process.Once more, BIR requested PNOC to settle its tax liability.
Whether or not the compromise agreement between the BIR and PNOC valid? PNOC made another offer to the BIR to settle its tax liability. Thistime,
Whether or not the CTA finding that the deficiency withholding tax however, PNOC proposed a compromise by paying
assessment against PNB was already final and unappealable and unenforceable P91,003,129.89,representing 30% of the P303,343,766.29 basic tax. BIR
valid? Commissioner Bienvenido A. Tan, in a letter, dated 22 June 1987,accepted the
Whether or not Savellano is entitled to his additional informer’s reward compromise. Private respondent Savellano, through four installments, was
paid the informer'sreward in the total amount of P14,093,321.89, representing
Held: 15% of theP93,955,479.12 tax collected by the BIR from PNOC and PNB.
NO. The compromise agreement between PNOC and BIR is void for being
contrary to law and public policy. PNOC could not apply for a compromise Issues:
under E.O. 44 because its tax liability was not a delinquent account or a Whether or not the compromise agreement between the BIR and PNOC valid?
disputed assessment. PNOC’s tax liability could not be considered a Whether or not the CTA finding that the deficiency withholding tax
delinquent account because it was not self-assessed as the BIR conducted an assessment against PNB was already final and unappealable and unenforceable
investigation after receiving information from Savellano. Nor is there a valid?
deficiency assessment present. Neither PNOC or PNB conducted self- Whether or not Savellano is entitled to his additional informer’s reward
assessment, and neither was there any tax assessment issued by the BIR.
PNOC and PNB were both silent about their tax liabilities until they were Held:
assessed thereon. Any attempt by PNOC and PNB to assess and declare by NO. The compromise agreement between PNOC and BIR is void for being
themselves their tax liabilities had already been overtaken by the BIR's contrary to law and public policy. PNOC could not apply for a compromise
conduct of its audit and investigation and subsequent issuance of the under E.O. 44 because its tax liability was not a delinquent account or a
assessments, against PNOC and PNB, respectively. Evidently, E.O. No. 44 disputed assessment. PNOC’s tax liability could not be considered a
applies only to 'disputed assessment or delinquent account pending as of delinquent account because it was not self-assessed as the BIR conducted an
December 31, 1985. This is not an executive issuance meant to give blanket investigation after receiving information from Savellano. Nor is there a
authority on the Commissioner of Internal Revenue to compromise away tax deficiency assessment present. Neither PNOC or PNB conducted self-
liabilities. In fact, the 'cut-off period stipulated in the executive order refers to assessment, and neither was there any tax assessment issued by the BIR.
a date nine months prior to the date of the promulgation of the issuance, 4 PNOC and PNB were both silent about their tax liabilities until they were
September 1986. assessed thereon. Any attempt by PNOC and PNB to assess and declare by
themselves their tax liabilities had already been overtaken by the BIR's
YES. The withholding tax assessment against PNB had become final and conduct of its audit and investigation and subsequent issuance of the
unappealable. The CTA and the CA declared as final and unappealable the assessments, against PNOC and PNB, respectively. Evidently, E.O. No. 44
assessment against PNB since PNB failed to protest it within the 30-day applies only to 'disputed assessment or delinquent account pending as of
prescribed period. December 31, 1985. This is not an executive issuance meant to give blanket
authority on the Commissioner of Internal Revenue to compromise away tax
YES. Savellano is entitled to be paid the remainder of his informer’s reward. liabilities. In fact, the 'cut-off period stipulated in the executive order refers to
Savellano is entitled to additional informer’s award since the BIR had already a date nine months prior to the date of the promulgation of the issuance, 4
collected the full amount of the tax assessment against PNB. September 1986.
Book: An internal revenue tax is considered delinquent when it is unpaid after YES. The withholding tax assessment against PNB had become final and
the lapse of the last day prescribed by law for its payment. Likewise, it could unappealable. The CTA and the CA declared as final and unappealable the
also be considered as delinquent where an assessment for deficiency tax has assessment against PNB since PNB failed to protest it within the 30-day
become final and the taxpayer has not paid it within the period given in the prescribed period.
notice of assessment. A "delinquent account" refers to the amount of tax due
YES. Savellano is entitled to be paid the remainder of his informer’s reward. Held: The act of the CIR in filing a motion for allowance of the claim of the estat
Savellano is entitled to additional informer’s award since the BIR had already inheritance taxes may be considered as an outright denial of petitioner’s reques
collected the full amount of the tax assessment against PNB. reconsideration. From the date of receipt of the copy of the CIR’s letter for collecti
estate and inheritance taxes against the estates of the late spouses, petitioners
Book: An internal revenue tax is considered delinquent when it is unpaid after contest or dispute the same and upon denial thereof, the petitioners have a period
the lapse of the last day prescribed by law for its payment. Likewise, it could days within which to appeal to the CTA. This they failed to avail of. Failure o
also be considered as delinquent where an assessment for deficiency tax has petitioner to appeal to the CTA in due time made the assessments in question
become final and the taxpayer has not paid it within the period given in the executory and demandable. The assessment having become final and executory, the
notice of assessment. A "delinquent account" refers to the amount of tax due properly acquired jurisdiction.
from a taxpayer who failed to pay the same within the time prescribed for its
payment arising from (a) a self-assessed tax, whether or not a tax return was 63..Republic v Ledesma
filed, or (b) a deficiency assessment issued by the BIR, which has become final
and executory. Where no return was filed, the taxpayer shall be considered FACTS: Plaintiff- sued in CFI of Iloilo to recover from defendant P16,212.00
delinquent as of the time the tax on such return was due, and in availing of the as deficiency income tax for the year 1951, including a surcharge of 50%.
compromise, a tax return shall be filed as a basis for computing the amount of Defendant denied liability, alleging that the proceed of the sale of 3,000 piculs
compromise to be paid (Rev. Regs. No. 17-86; PNOC v. CA, et al, and PNB v. of sugar on which the tax was being principally levied had been declared as
CA. et al., G.R. Nos. 109976 and 112800, April 26, 2005). income by his son-in-law, Raul Poblador, to whom the said sugar belonged
and who had paid the corresponding tax thereon. The assessment for the
deficiency was released by the BIR on February 25, 1957. Ledesma however
CHAPTER XXVI JUDICIAL REMEDIES OF GOVERNMENT failed to dispute the assessment.
61.Marcos II v CA Issue: Whether said acts of the D would provide legal basis to collect
taxpayers liability?
"The approval of the court sitting in probate is not a mandatory requirement in the
collection of estate taxes.""In case of failure to file a return, the tax may be assessed
Held: at Yes, taxpayer’s failure to dispute the assessment effectively by
anytime within 10 years after the omission." complying with the conditions lid down by the BIR, such
specifying under oath the grounds of his protest, paying one-half of the amount
FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals assessed and putting up a bond for the balance, provides a legal basis for the
to grant CIR's petition to levy the properties of the late Pres. Marcos to cover the
government to collect by ordinary civil action.
payment of his tax delinquencies during the period of his exile in the US. The Marcos
family was assessed by the BIR after it failed to file estate tax returns. However the v Republic
64..Basa
assessment were not protested administratively by Mrs. Marcos and the heirs of the late CIR assessed Basa of deficiency tases. Basa did not contest the assessments,
Facts:
president so that they became final and unappealable after the period for filing of
it became final and incontestable. CIR then sued Basa for the collection of the ass
opposition has prescribed. Marcos contends that the properties could not be levied tax. to
The trial court affirmed the CIR. Basa tried to contest the assessment before the
cover the tax dues because they are still pending probate with the court, and settlement
Issue: Can a taxpayer contest an assessment before the CA without protesting befor
of tax deficiencies could not be had, unless there is an order by the probate court orCTA?
until
the probate proceedings are terminated. Held NO. The prescription of the Government’s right to assess is no longer availab
Petitioner also pointed out that applying Memorandum Circular No. 38-68, the aBIR's defense in a civil action for collection; the same should have been ventilated befor
Notices of Levy on the Marcos properties were issued beyond the allowed period, and
CTA.
are therefore null and void.
65..Mambulao Lumber v Republic
ISSUE: Are the contentions of Bongbong Marcos correct?
"Forest charges are internal revenue taxes and the BIR has the sole power and du
HELD: No. The deficiency income tax assessments and estate tax assessment collect
are them. Thus, an assessment made by the Bureau of Forestry cannot be consid
already final and unappealable -and-the subsequent levy of real properties is an a tax
assessment made by the BIR."
remedy resorted to by the government, sanctioned by NIRC. The omission to file an
estate tax return, and the subsequent failure to contest or appeal the assessment madeFACTS:
by The Bureau of Forestry sent a demand letter to P demanding for the payme
the BIR is fatal to the petitioner's cause, as under Sec.223 of the NIRC, in case of failure
forest charges and surcharges. Mambulao protested the assessment. The BIR gav
to file a return, the tax may be assessed at anytime within 10 years after the omission,
company 20 days from receipt within which to submit the results of its verificati
and any tax so assessed may be collected by levy upon real property within 3 yearspayments.
(now For failure to comply and failure to pay its tax liability despite demands,
5 years) following the assessment of the tax. Since the estate tax assessment had become
filed a complaint for collection with CFI-Manila on August 25, 1961. The CFI-M
final and unappealable by the petitioner's default as regards protesting the validity and
of the Court of Appeals decided against Mambulao ordering it to pay the tax liab
said assessment, there is no reason why the BIR cannot continue with the collection Petitioner
of argued that the collection is barred by the statute of limitations under N
the said tax. As stated, the collection should be made within the five (5) year period. From
(date when the Bureau of Forestry assessed and demand payment as forestry ch
62.Dayrit v Cruz (579) and surcharges) up to 1961 (date of filing of complaint), it is already more than
years.
Facts: After separate estate and inheritance tax returns for the estate of the late spouses
Teodoro were filed, deficiency estate and inheritance tax assessments were issued. ISSUE: Has the period of filing of collection complaint prescribed?
Petitioners, heirs of the late spouses, asked for a reconsideration of the assessments
alleging that the same were contrary to law and not supported by sufficient evidence. HELD:At No. The action for collection is not barred by prescription. The basis o
the same time, petitioners requested a period of 30 days within which to submitcomplainttheir filed on August 1961 was the demand letter made by the CIR on Augus
position paper in support of their claim. 1958 and not the demand letter of the Bureau of Forestry on January 1949. So tha
reckoning date of the 5-year period should be from the date of the BIR letter and no
However, CIR filed a motion for allowance of claim against the estate of the CFI of the
of Bureau of Forestry. This must be so because forest charges are internal rev
Rizal, for a payment of said sums after which the petitioners filed separate appositions
taxes and the BIR has the sole power and duty to collect them.
alleging that the estate and inheritance taxes sought to be collected have already been
settled. 66..Fernandez Hermanos v Commissioner (581)
Issue: Whether or not said assessments have become final and executory. "The filing of an answer to taxpayer's petition for review is considered as instituti
judicial action."
the Commissioner of Internal Revenue against the deceased taxpayer Doroteo Y
FACTS: The Commissioner of Internal Revenue assessed the petitioner investment which has not yet become final, executory and incontestable, and which assessme
corporation of deficiency income taxes for the years 1950 to 1954 and for 1957. beingThere contested by petitioners in the Court of Tax Appeals, Case No. 2216, and
were two conflicting dates of assessment, which are vital to the compliance with pending
the consideration?
statute of limitations, based on each claim of the petitioner and the respondent; Held:
the The filing of a civil action in court to collect a tax which was the subject
Commisioner's record of date of assesment is February 27, 1956 while the petitioner pending protest in the BIR was a justifiable basis for the taxpayer to appeal to the C
believes the demand was made on December 27, 1955 so that, as the petitioner of Tax Appeals & to move for the dismissal in the trial court of the Government’s a
corporation claims, the Commissioner's action to recover its tax liability should to collect
be the tax under dispute. The respondent Court of First Instance of Cagaya
deemed to have prescribed for failure on the part of the Commissioner to only file aacquire jurisdiction over this case filed against the heirs of the taxpayer i
complaint for collection against it in an appropriate civil action. assessment made by the Commissioner of Internal Revenue had become final
incontestable. If the contrary is established, as this Court holds it to be, considerin
ISSUE: Has the action for collection prescribed? aforementioned conclusion of the Court of Tax Appeals on the finality
incontestability of the assessment made by the Commissioner is correct, then the C
HELD: No. It has been held that "a judicial action for the collection of a tax is begun
of Tax
by Appeals has exclusive jurisdiction over this case.
the filing of a complaint with the proper court of first instance, or where the assessment
69..Republic v Dorego
is appealed to the Court of Tax Appeals, by filing an answer to the taxpayer's petition
for review wherein payment of the tax is prayed for." This is but logical for where Facts:
the Tomas Dorego, as principal, with Natividad Dorego and Silvestre
taxpayer avails of the right to appeal the tax assessment to the Court of Tax Appeals,
Arroyo
the as sureties, executed in the City of Iloilo, a surety bond guaranteeing
said Court is vested with the authority to pronounce judgment as to the taxpayer's payment of P2,600.00 in favor of the Republic, representing percentage taxes
liability to the exclusion of any other court. In the present case, regardless of whether
due from the principal Tomas Dorego on his sales of sand and gravel.The
the assessments were made on February 24 and 27, 1956, as claimed by Doregos
the paid only the sum of P260.00, as first installment thereby leaving
Commissioner, or on D unpaid the balance of P2,340.00. Notwithstanding repeated demands, the
December 27, 1955 as claimed by the taxpayer, the government's right to collect Doregos
the failed and refused to pay the balance. Hence, on March 25, 1959, the
taxes due has clearly not prescribed, as the taxpayer's appeal or petition for reviewRepublic
was filed a complaint in the CFI of Iloilo against them, for collection.
filed with the Tax Court on May 4, 1960, with the Commissioner filing on May 20,
1960 his Answer with a prayer for payment of the taxes due, long before the expiration
Doregos filed a motion to dismiss the complaint on the ground that the right of
of the five-year period to effect collection by judicial action counted from the datethe ofRepublic to collect has already prescribed. Acting on the motion, the CFI
assessment. of Iloilo, dismissed the complaint, declaring that since the payment of the first
installment of P260.00 on June 19, 1951, no action was instituted in due time
67..BPI v Commissioner to enforce the collection of the balance unpaid. The Republic appealed directly
to this Court, contending that the lower court erred in dismissing the case on
FACTS: BPI, on two separate occasions, sold United States (US) $500,000.00 the to theground of prescription of action, an issue which is purely legal in nature.
Central Bank of the Philippines for the total sales amount of US$1,000,000.00. On 10
October 1989, the Bureau of Internal Revenue issued Assessment No. FAS-5-85- ISSUE:
89- WHETher action has prescribed?
002054, finding petitioner BPI liable for deficiency Documentary Stamp Tax on its
afore-mentioned sales of foreign bills of exchange to the Central Bank. Petitioner Held:
BPI No, The bonds under consideration are written contracts imposing
received the Assessment, together with the attached Assessment Notice, on 20 October rights and liabilities, according to the terms thereof. Since the principals
1989 and protested such on Nov. 16, 1989. BPI did not receive any immediate reply andtosureties failed to pay the liabilities in the manner and on the dates
its protest letter. However, on 15 October 1992, the BIR issued a Warrant of Distraint
indicated in said bond, the right of the government to take court action for
and/or Levy, against petitioner BPI for the assessed deficiency DST for taxabletheir yearforfeiture is clear. And these actions were filed in both cases, within
1985, in the amount of P27,720.00. It served the Warrant on petitioner BPI only the on 23 10 year period from the accrual of the right of action. HENCE,the
October 1992. Then again, BPI did not hear from the BIR until 11 September order 1997, of dismissal appealed from is reversed, and the case remanded to the
when its counsel received a letter, dated 13 August 1997, signed by thencourt BIR of origin for further proceedings, with costs against the defendants-
Commissioner Liwayway Vinzons-Chato, denying its “request for reconsideration”. appellees.
BPI
then elevated the case to the CTA which ruled that the BIR can still collect the said tax
since its right to collect has not yet prescribed, which was likewise affirmed by the
70.REPUBLIC vs. HIZON
Court of Appeals.
Issue: Has the right of BIR to collect from BPI the alleged deficiency DST prescribed?
"A request for reconsideration of the tax assessment does not effectively suspen
Held: YES. The statute of limitations on collection may only be interrupted running
or of the precriptive period if the same is filed after the assessment had be
suspended by a valid waiver executed in accordance with paragraph (d) of Section final
223and unappealable."
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
FACTS: On July 18, 1986, the BIR issued to respondent Salud V. Hizon a defici
granted by the BIR Commissioner. Even when the request for reinvestigation granted income
by tax assessment covering the fiscal year 1981-1982. Respondent not ha
the BIR Commissioner. Even when the request for reconsideration or reinvestigation contested
is the assessment, petitioner BIR, on January 12, 1989, served warran
not accompanied by a valid waiver or there is no request for reinvestigation that distraint
had and levy to collect the tax deficiency. However, for reasons not known,
been granted by the BIR Commissioner, the taxpayer may still be held in estoppel notandproceed to dispose of the attached properties.
be prevented from setting up the defense of prescription of the statute of limitations on More than three years later, the respondent wrote the BIR requestin
collection when, by his own repeated requests or positive acts, the Government reconsideration
had of her tax deficiency assessment. The BIR, in a letter dated Augus
been, for good reasons, persuaded to postpone collection to make the taxpayer feel 1994,
that denied the request. On January 1, 1997, it filed a case with the RTC to collec
the demand is not unreasonable or that no harassment or injustice is meant by taxthedeficiency. Hizon moved to dismiss the case on two grounds: (1) that the comp
Government, as laid down by this Court in the case of CIR vs. Suyoc Consolidated was not filed upon authority of the BIR Commissioner as required by Sec. 221 o
Mining Co. Applying the given rules to the present Petition, this Court finds that: NIRC,(a) and (2) that the action had already prescribed. Over petitioner's objection
The statute of limitations for trial court granted the motion and dismissed the complaint.
BIR on the other hand contends that respondent's request for reinvestigation of he
68..Yabes v Flojo (582) deficiency assessment on November 1992 effectively suspended the running o
Facts: Yabes received a demand letter from CIR which he protested and for which periodhe of prescription.
requested for a reinvestigation with the BIR coupled with a request to hold in abeyance
the appeal pending final decision. This request was denied. Consequently, Yabes filedISSUE: a Has the action for collection of the tax prescribed?
tax waiver extending the period of prescription. Spouses Yabes died pending said
action. HELD: Yes. Sec. 229 of the NIRC mandates that a request for reconsideration mu
Issue: Can the CFI lawfully acquire jurisdiction over a contested assessment made made by within 30 days from the taxpayer's receipt of the tax deficiency assessm
otherwise the assessment becomes final, unappealable and, therefore, demandable. Eventually,
The RDFC redeemed the property and demanded possession but
notice of assessment for respondent's tax deficiency was issued by petitioner on July
EMRACO-CIPI
18, and Nilo Villanueva resisted so that petitioners were
1986. On the other hand, respondent made her request for reconsideration thereofcompelled
only to sue for recovery of possession.
on November 3, 1992, without stating when she received the notice of tax assessment.RDFC and petitioners finally obtains possession of the ice plant by virtue of
Hence, her request for reconsideration did not suspend the running of the prescriptive
the Mandatory Injunction previously issued, which ordered defendant
period provided under Sec. 223(c). Although the Commissioner acted on her request "particularly
by Nilo C. Villanueva and his agents representatives, or any person
eventually denying it on August 11, 1994, this is of no moment and does not detract found in the premises to vacate and surrender the property in litigation."
from Petitioners did not re-employ private respondents.
Private respondents filed complaints against petitioners for illegal dismissal
Re: Approval of the filling of civil actions where the Ministry of Labor ordered petitioner and petitioner corporation to
reinstate the private respondents and pay their backwages.
71. Republic v Domecillo (p.583) Issue: Whether Sunio should be personally liable with petitioner company,
ICC?
Case cannot be found Ruling: No. This is reversible error.
The Assistant Regional Director's Decision failed to disclose the reason why
Book: Complaints in civil actions for the collection of delinquent taxes are he was made personally liable. Respondents, however, alleged as grounds
required to be approved by the Solicitor General before they are thereof, his being the owner of one-half (1/2) interest of said corporation, and
filed. However, BIR legal officers deputized as special attorneys his alleged arbitrary dismissal of private respondents. Petitioner Sunio was
and stationed outside Metro Manila may file verified complaints impleaded in the Complaint his capacity as General Manager of petitioner
without the approval of the Sol Gen, provided that the Sol gen is corporation. where appears to be no evidence on record that he acted
furnished with a copy of the complaint, and thereafter the action maliciously or in bad faith in terminating the services of private respondents.
is filed. If the complaint is found to be improperly filed, a motion for His act, therefore, was within the scope of his authority and was a corporate
dismissal is filed with the court. act.
It is basic that a corporation is invested by law with a personality separate
Re: Respondents in a civil action for the collection of tax and distinct from those of the persons composing it as well as from that of
any other legal entity to which it may be related. 4 Mere ownership by a
72. Gotamco & Sons v Commissioner (583) single stockholder or by another corporation of all or nearly all of the
capital stock of a corporation is not of itself sufficient ground for
Case cannot be found disregarding the separate corporate personality. Petitioner Sunio,
therefore, should not have been made personally answerable for the payment
Book: Parties who are not included in an assessment made by the of private respondents' back salaries.
CIR cannot be made respondents in an appeal from a particular
assessment, and no judgement can be rendered against such Re: Exception to the rule laid down by Sunio v NLRC
parties because any such judgement would be encroachment on
the prerogative of the Commissioner to make an assessment and 74. Tang Tiong Bio v Commissioner
would further violate the rule on due process and exhaustion of
administrative remedies. Sypnosis: Petitioners were ordered by the CTA to pay jointly and severally, to
the Collector of Internal Revenue deficiency sales tax and surcharge on the
Moreover, under Section 7 of RA 1125, only the Commissioner of surplus goods purchased by them from the Foreign Liquidation Commission.
the Internal Revenue and the commissioner of customs may be Facts: Central Syndicate (syndicate for short) a corporation, sent a letter to the
sued before the CTA in appropriate cases. Collector of Internal Revenue advising the latter that (1) it purchased from Dee
Hong Lue the surplus properties which the said Dee Hong Lue had bought
73. Alberto S. Sunio and Ilocos Commercial Corporation v NLRC from the Foreign Liquidation Commission (2) that it assumed Dee Hong Lue's
obligation and would pay a portion of the sales tax on said surplus goods (3) it
Note: You might get confused because there is nothing about tax delinquency was paying P43,750.00 in behalf of Dee Hong Lue as deposit to answer for the
in this case. However, what the it highlights is the Principle of Corporate payment of said sales tax
Personality and how the stockholders cannot be made liable for the obligations The syndicate again wrote the Collector requesting a refund for the purchase
of the corporation, such as backwages. price of goods obtained from Dee Hong Lue was adjusted and reduced. The
CIR investigated the matter and the Collector decided that the Central
Sypnosis: Private respondents filed a complaint for illegal dismissal against Syndicate was the importer and original seller of the surplus goods in
the petitioners. The Ministry of labor held the petitioner, Sunio, personally question and, therefore, the one liable to pay the sales tax. The Collector
liable with the petitioner corporation in his capacity as its General Manager. denied the request of the syndicate for the refund.
Facts: EM Ramos & Company, Inc. (EMRACO for brevity) and Cabugao Ice CTA DECISION: (1)Denied Collector’s motion. On the ground that cannot be
Plant, Inc. (CIPI for short), sister corporations, sold an ice plant to Rizal legally done it appearing that the syndicate is already a non-existing entity due
Development and Finance Corporation (RDFC) with a mortgage on the same to the expiration of its corporate existence (2) dismissing syndicate’s appeal
properties. primarily on the ground that the Central Syndicate has no personality to
CIPI had terminated the services of its employees, including herein private maintain the action then pending before it.
respondents, giving them their separation pay which they had accepted. When From this order the syndicate appealed to the Supreme Court wherein it
RDFC took over ownership and management, therefore, it hired its own intimated that the appeal should not be dismissed because it could be
employees, not the private respondents, who were no longer there. RDFC substituted by its successors-in-interest. The syndicate was later substituted
subsequently sold the property to petitioners on November 28, 1973. by its officers and directors (petitioners herein). Court of Tax Appeals
Both RDFC-ICC failed to pay the balance of the purchase price, as a proceeded to hear the case.
consequence of which, EMRACO-CIPI instituted extrajudicial foreclosure CTA APPEALS DECISION: Petitioners ordered to pay jointly and
proceedings. The properties were sold at public auction. The highest bidders severally, to the Collector of Internal Revenue deficiency sales tax and
being EMRACO CIPI and they eventually re-possessed the plant. surcharge on the surplus goods purchased by them from the Foreign
During all the period that RDFC and petitioners were operating the plant. They Liquidation Commission. Petitioners filed appeal.
had their own employees. CIPI-EMRACO then sold the plant, on the same
period, to Nilo Villanueva, subject to RDFC's right of redemption. Nilo Issue: Whether Central Syndicate having already been dissolved because of
Villanueva then rehired private respondents as employees of the plant. the expiration of its corporate existence, whether the sales tax in question can
be enforced against its successors-in-interest who are the present petitioners.
Ruling: YES. The creditor of a dissolved corporation may follow its assets bound to pay the amount of the share subscribed by him as he would be to pay
once they passed into the hands of the stockholders. any other debt, and the right of the company to demand payment is no less
incontestable.
The hands of the government cannot, of course, collect taxes from a The judgment of the trial court is modified in accordance with the above and
defunct corporation, it loses thereby none of its rights to assess taxes Dizon & Co., Inc., is ordered to credit Bonifacio Lumanlan with the sum of
which had been due from the corporation, and to collect them from P13,840 against the judgment for P15,109, and to issue to Bonifacio Lumanlan
persons, who by reason of transactions with the corporation, hold 300 shares of its capital stock upon payment by him of the sum of P1,269 with
property against which the tax can be enforced and that the legal death of interest thereon at 6% per annum. The preliminary injunction issued in this
the corporation no more prevents such action than would the physical case is hereby dissolved for the purpose of enabling Dizon & Co., Inc., to ask
death of an individual prevent the government from assessing taxes for a new order of execution in case No. 37492, Court of First Instance of
against him and collecting them from his administrator, who holds the Manila, for the sum of P1,269 with interest thereon as stated above.
property which the decedent had formerly possessed". The corporation has a right to collect the amount of shares subscribed just like
an ordinary debt however in this case, since Lumanlan paid the debt of the
corporation amounting to P13,840, the corporation should credit the said
75. LUMANLAN v. JACINTO R. CURA, et. al, DIZON & CO., amount against the P15,109 judgment of the court, which Lumanlan was
INC. etc. ordered to pay.
Sypnosis: Petitioner is a stockholder who has an unpaid subscription with an Re: Criminal Actions under the 1997 Tax Code
insolvent corporation. Through an agreement made with other stockholders,
he was designated to pay the debt of the corporation to one of its creditors in 76. People v Mendez
which he obliged. However, the collection suit filed by the receiver against P
was executed. Thus P seeks to enjoin the execution of the said collection suit. Sypnosis: Accused denies criminal liability on his failure to file ITR for the
taxable year 2001, contesting that his business began operating only in 2003,
FACTS: Dizon & Co is a corporation duly organized under the PH laws. thus there was no need for him to file his ITR with the BIR. Accused claims
Lumanlan subscribed for 300 shares of stock of said corporation at a par value that he was not legally obligated to file an ITR for taxable year 2001 as he had
of P50 or a total of P15K. Julio Valenzuela and the other creditors of the no income earned during that said taxable year.
corporation filed a suit against it
Facts: Joel C. Mendez, a duly registered taxpayer, and sole proprietor of
▪ Praying that a receiver be appointed as it appeared that the "Weigh Less Center", was charged with Violation of Section 255 of Republic
corporation had not assets except credits against those who had Act No. 8424; accused, for his failure to file his income tax return (ITR) with
subscribed for shares of stick the Bureau of Internal Revenue I for the taxable year 2001, to the damage and
The said corporation was put under Receivership and the Court named Tayag prejudice of the Government.
as receiver. Lumanlan paid only P1,500 of the P15K, so Tayag filed a suit
against him for the collection of P15, 109: Accused claimed that his business did not begin only until 2003. He refuted
P13,500 = amount he owed for unpaid stock the fact that in 2001, he executed a Contract of Lease with Ma. Lita Gregorio,
P1,609 = loans & advances by the corporation to Lumanlan the owner of the property in Roces Avenue, for his clinic. Although lease
The Court in Case No. 37492, sentenced Lumanlan to pay the said amount. agreement took effect in 2001, his clinic actually opened in 2003 as the place
Lumanlan appealed from the said decision. Pending such appeal, w/ the had to be renovated.
permission of the Court, the creditors held several meetings, in which it was
agreed that subscribers for the capital stock who were in default should pay. When the advertisements in the newspapers were printed, his businesses were
Lumanlan was designated to pay the debt of the corporation to Julio not yet in operation and the advertisements were only for promotions or for
Valenzuela. marketing purposes. In other words, registration with the BIR in 2001 was not
necessary since income was yet to flow. Corollarily, the phrase "Since 1996"
▪ Lumanlan agreed to assume the obligation and in turn the
in his company's logo only means that his specialization in the United States
corporation agreed that if Lumanlan would dismiss his appeal, the
under his brother's supervision started in 1996. 43 His investments in Sabili
corporation would collect only 50% of the amount subscribed by
Mendez Medical Services, Primehealth Card Services, Orocab Company, Oro
him for stock, provided that in case the 50% was insufficient to pay
Glass and Aluminum Supply and the New Millenium came from loans, gifts,
Valenzuela he should pay an additional amount which should not
and inheritance.
exceed the amount of the judgment against him
▪ In view of the agreement, Lumanlan withdrew his appeal
Issue: WHETHER ACCUSED JOEL C. MENDEZ IS CRIMINALLY
LIABLE FOR VIOLATION OF SECTION 255 OF THE 1997 NATIONAL
Disregarding the agreement, the corporation asked for the execution of the
INTERNAL REVENUE CODE
sentence in Case No. 37492. So the Provincial Sheriff levied upon 2 parcel of
land belonging to Lumanlan. Lumanlan brought this case to collect from Dizon
Ruling: Yes.
& Co and to prevent the sheriff from selling the 2 parcels of land
▪ Pending result, sheriff was enjoined from proceeding w/ the sale To sustain conviction, the following elements of the offense charged must be
established by sufficient and credible proof, thus:
ISSUE: Whether or not the corporation has a right to collect all unpaid stock (1) That accused was a person required to make or file a return;
subscriptions and any other amounts which may be due it. (2) That he failed to make or file such return at the time
RULING: YES. required by law;
A stockholder who has unpaid subscriptions is liable for the debts of the (3) That the failure to make or file the return was willful.
corporation.
It is established doctrine that subscriptions to the capital of a corporation The evidence show that accused had the legal obligation to make or file an
constitute a fund to which the creditors have a right to look for satisfaction of ITR.
their claims and that the assignee in insolvency can maintain an action upon
any unpaid stock subscription in order to realize assets for the payment of its The massive and huge advertising campaign covering the print and broadcast
debts. media in 2000 and 2001 to promote the branches of Weigh Less Center
The Corporation Law clearly recognizes that a stock subscription is a negates accused' contention that he was not yet in operation in 2001
subsisting liability from the time the subscription is made, since it requires the
subscriber to pay interest quarterly from that date unless he is relieved from Even assuming in gratia argumenti that no income was generated from his
such liability by the by- laws of the corporation. The subscriber is as much business in 2001, still accused had, under Section 51(A)(2)(a) of the 1997
NIRC,61 the obligation to file an ITR. The said provision explicitly requires
every person engaged in trade or business or is in the exercise of his Accused filed a motion to quash the Amended Information for Criminal Case
profession, like accused, to file an ITR and declare income obtained from before the First Division of this Court, where the said case was pending, on the
whatever source, irrespective of whether the income flowed during the taxable ground that he is charged with knowingly and willfully providing false
period. information in Jadewell's Income Tax Return (ITR) but the prosecution failed
to present or attach to the record the assailed ITR.
Further, Section 236(A)(2)62 of the NIRC of 1997, as amended, requires
registration "on or before the commencement of business". It is the Issue: Whether or not accused Rogelio A. Tan, as the General Manager and
commencement of business or the engagement in the practice of profession President of Jadewell, knowingly and willfully failed to supply correct and
that subjects the taxpayer to the requirement of registration and subsequent accurate information in Jadewell's Income Tax Returns for taxable years 2003
filing of an ITR. and 2004
Contrary to accused' claim, generation of income is not a condition to the filing
of an ITR. The obligation to file an ITR is not dependent on the acquisition of Ruling: Yes.
income during the relevant taxable period. In fact, a taxpayer who has
registered but has not operated during the taxable year, or worse, incur losses The elements that must be proven beyond reasonable doubt by the prosecution
in the conduct of business is still mandated to file an ITR. Once the business is are the following:
registered, a corresponding duty to file an ITR exists. a. Existence of an obligation to supply correct information;
b. Failure to supply correct information;
Undoubtedly, accused, who practiced his profession in 2001 and earned c. Such failure was willful; and
income therefrom had the obligation to register it, file an ITR and pay the d. In case of corporate taxpayers, that the accused is the responsible
corresponding tax thereon but failed, in violation of the Tax Code. officer
77. People v Tambunting The accused, as President of Jadewell, should at the very least have been aware
of who is authorized to sigh Jadewell’s ITR and other tax filings. He could not
Note: This is the actual full text of the cited case. Cannot find the antecedent even explain how a certain Ivy Aguas was able to sign some ITR and payment
facts re the same case. forms, despite the allegation of the defense that said person is not an employee
of Jadewell.
RE S OL U T I O N
The deliberate avoidance or omission on the part of the accused leads the
For failure of State Prosecutor Minerva Alejandria-Bautista to court to conclude that the supply of false and incorrect information was willful
comply,despite notice, with the Resolution dated April 7, 2011 , requiring and done with the knowledge of the accused.
her to submit tothis Court the records of the preliminary investigation,
pursuant to Section 8 of Rule 112 of the Revised Rules on Criminal 79-80
Procedure, as amended, the above captioned case is hereby DISMISSED,
without prejudice. TOPIC: ADMINISTRATIVE REMEDIES OF GOVERNMENT
However, upon finding that Jadewell transferred its main office to Manila, the Issue(s)/Ruling:
case was forwarded to the BIR's Special Investigation Division in Manila, 1. Whether or not appeals of tax cases need to be deputized by the
which conducted a preliminary investigation on Jadewell's accessible records. Solicitor General. YES.
The investigation initially resulted in the findings of an undeclared gross An appeal from such court, however, is not a matter of right. Section
profit/income for the years 2002 and 2003, and was signed by one Via Aguas 220 of the Tax Reform Act must not be understood as overturning the long
who was not an employee of Jadewell. established procedure before this Court in requiring the Solicitor General to
represent the interest of the Republic. This Court continues to maintain that it
Pursuant thereto, the issuance of a Letter of Authority for taxable years 2002 to is the Solicitor General who has the primary responsibility to appear for the
2004 was recommended. Eventually, a Letter of Authority dated February 28, government in appellate proceedings. This pronouncement finds justification
2006 was issued, but allegedly unheeded. A Second Notice and Final Notice in the various laws defining the Office of the Solicitor General. Section 35,
for Jadewell to submit documents or records relative to the investigation were Chapter 12, Title III, Book IV, of the Administrative Code outlines the powers
respectively sent on March 9, 2006 and March 24, 2006, but likewise allegedly and functions of the Office of the Solicitor General which includes, but not
ignored by Jadewell. limited to, its duty to represent the Government in the Supreme Court and the
Court of Appeals in all criminal cases, and in all other courts or tribunals in all BIR, the panel finds sufficient ground to proceed with the
civil actions and special proceedings in which the Government or any officer preliminary investigation of the cases; and 3) in view of the
thereof in his official capacity is a party. foregoing findings, the respondents were directed to file their
An exception to the above rule is that enunciated in the case of counter-affidavits within 15 days from receipt of the order.
Orbos vs. Civil Service Commission, thus: "In the discharge of this task the ● The New DOJ Panel resolved the main complaints in favor of the
Solicitor General must see to it that the best interest of the government is BIR. It found reasonable ground to believe that respondents were
upheld within the limits set by law. When confronted with a situation where probably guilty thereof and should be held for trial.
one government office takes an adverse position against another government ● On December 1, 1998, Informations for nine (9) counts of tax
agency, the Solicitor General should not refrain from performing his duty as evasion (Taxable Years 1990, 1991 and 1992) were filed by the New
the lawyer of the government. It is incumbent upon him to present to the court DOJ Panel with the Metropolitan Trial Court
what he considers would legally uphold the best interest of the government (MeTC), Marikina City, Branch 75, docketed as Criminal Cases
although it may run counter to a client's position. In such an instance the Nos. 98-38181 to 98-38189. The indictments were signed and
government office adversely affected by the position taken by the Solicitor certified by the New DOJ Panel of state prosecutors. On March 22,
General, if it still believes in the merit of its case, may appear in its own behalf 1999, Judge Ruiz issued an Order[27] dismissing the criminal cases.
through its legal personnel or representative." Citing the provisions of Section 220 of the Tax Reform Act of 1997,
Aware that the dismissal of the petition could have lasting effect on Republic Act No. 8424, the trial court ruled: “The Court agrees with
government tax revenues, the lifeblood of the state, the Court heeds the plea of the Bureau of Internal Revenue that in view of the aforecited Section
petitioner for a chance to prosecute its case. It does appear from the statements of the Tax Reform Act of 1997, a substantive law and the fact that it
of the Commissioner of Internal Revenue, seeking clarification on the issue of is evident that the Commissioner of Internal Revenue has not
legal representation, that it has labored and acted in good faith. Relative to the approved the filing of the instant cases, this Court, thus, has no other
lack of verification required of petitions, this Court has held in a number of recourse but to obey the law and dismiss the cases at bar.”
instances that such a deficiency can be excused or dispensed with in ● On July 14, 1999, the New Panel filed a Petition for Certiorari before
meritorious cases, the defect being neither jurisdictional nor always the Regional TrialCourt of Marikina City, Branch 273 (RTC-
fatal. Verification is mainly intended to ensure that the allegations in the Marikina), seeking to nullify the MeTC Orders dated March 22,
pleading are true and correct and not mere speculations. The Court may thus 1999 and May 17, 1999, alleging grave abuse of discretion on the
order the correction of the pleading or act on an unverified pleading, if the part of the court a quo. On August 25, 1999, RTC-Marikina
attending circumstances are such that strict compliance would not fully serve Presiding Judge Olga Palanca Enriquez dismissed the petition, for
substantial justice which, after all, is the basic aim for the rules of procedure. being filed eleven (11) days late, in violation of Section 4, Rule 65
of the 1997 Rules of Criminal Procedure.
82. PEOPLE OF THE PHILIPPINES VS. LUCIO TAN, FORTUNE ● On October 20, 1999, the OSG appealed the RTC-Marikina Orders
TOBACCO CORPORATION, ET. AL. dated August 28, 1999 and October 13, 1999, to the Court of
G.R. NO. 144707, JULY 13, 2004 Appeals. The appellate court dismissed the petition for lack of merit.
On October 17,1950, UST requested in writing from the respondent the refund Ruling: No. An act or omission is willfully done, if done voluntarily and
of the sum of Php 8,293.31, on account of the following: intentionally and with specific intent to fail to do something the law requires to
a. The amount of Php 359,972.45 paid by the other departments to the be done. Undoubtedly, it becomes necessary for the prosecution to prove
UST Press was for the purposes of accounting only and does not beyond reasonable doubt that Typingco, in representation of Fiestapack,
legally constitute gross receipts subject to the percentage tax received the assessment notices or was aware of its tax liabilities in order to
b. The printing and binding of the annuals THOMASIAN and impute upon him the required elements of “willfulness”in this case. The BIR
VERITAS fall under the exception provided for in Section 191 in witness testified that PAN was mailed by ordinary mail and the FAN, by
relation to Section 183(a) of the Tax Code registered mail. Finally, considering that the prosecution failed to prove to
authenticate the signature, to show that the person who signed the ITR and
CIR: UST’s claim for refund in the sum of Php 8,293.31 is denied; also, the who received the PAN was really the authorized Typingco, the assessment
amount of Php 2,452.04, representing deficiency percentage tax and surcharge made by the CIR is void. A void assessment bears no fruit; hence no civil
on the undeclared receipts derived from the printing and binding of the subject liability arises in this case.
annuals, is hereby assessed and demanded from UST
95. People v Paz Abad Santos (599)
CTA: Modified the decision of the CIR
a. UST’s claim for refund to the extent of Php 5, 842.27 is DENIED, Facts: Accused Paz Abad Santos is charged for violation of Sec. 49(b) now
the same being BARRED BY PRESCRIPTION Sec. 106(A), Secs. 57(B), 175 and 24(B)(2) of the 1997 Tax Code, allegedly
b. The deficiency tax assessment of Php 2, 451.04 for percentage taxes due to her failure to pay corporate tax liabilities, for the period 2005. The CTA
and surcharges is RECOGNIZED, but the amount is DEEMED ruled that a determination of probable cause cannot be made when the
PAID, BY WAY OF RECOUPMENT, to the extent of the amount evidence do not substantiate the accused to have perpetrated the crime.
of Php 2, 451.04 which UST erroneously paid for the period from
January 1948 to Jun 1950 Issue: Whether the actions filed against the defendant Abad Santos were
sufficiently made
Issue: Whether it was proper for the CTA to apply the doctrine of recoupment
Ruling: No. Notably, these tax liabilities are corporate tax liabilities of
Ruling: No. The doctrine of equitable recoupment means that when a refund Vicente Singson Encarnacion Corporation, but it is misleadingly stated therein
of a tax illegally or erroneously collected or overpaid by a taxpayer is barred that "the above-named accused, did then and there willfully, unlawfully and
by the statute of limitations and a tax is being presently assessed against said feloniously fail and refused to fail tax liabilities" without stating that these are
taxpayer, said present tax may be recouped or set-off against the tax the refund corporate tax liabilities. Also, the basis for the assessment of deficiency taxes
of which has been barred. This doctrine, however, was rejected by the SC, for taxable year 2005 against Vicente Singson-Encarnacion Corporation was
saying that it was not convinced of the wisdom and proprietary thereof, and not attached to the records of this case. It is alleged that said accused is being
that it may work to tempt both the collecting agency and the taxpayer to delay charged " in her capacity as Treasurer of Vicente Singson-Encarnacion
and neglect heir respective pursuits of legal action within the period set by law. Corporation", the supposed corporate taxpayer in the instant case. The
supporting documents attached to the records of this case do not substantiate or
The same thing would have been true where the Government has failed to prove that accused Paz S. Abad Santos is indeed the Treasurer and/or
collect a tax within the period of limitation and said collection is already responsible officer of Vicente Singson-Encarnacion Corporation. All the
barred and the taxpayer has to its credit a tax illegally or erroneously collected foregoing considered, the Court finds difficulty in making a judicious
or overpaid whose refund is not yet barred the Government need not make determination of the existence of probable cause to hold accused liable for the
refund of all the tax illegally or erroneously collected but it may set off against commission of the offense charged herein. Case dismissed.
it the tax whose collection is barred by the statute of limitation.
96. People v Benjamin Hian Tek Co
Book: If the Commissioner is convinced that the taxpayer is criminally liable,
he should institute criminal proceedings and not arbitrarily impose a penalty. Facts: The prosecution filed an Information, charging accused for violation of
Section 255 in relation to Sections 220 and 56(b) of the NIRC. In the
94. People v Typingco (598) Resolution dated February 22, 2012, this Court ordered the prosecution: (1) to
submit the entire records of the preliminary investigation conducted, including
Facts: Joseph Typingco is the alleged President and authorize officer of Fiesta the affidavit-complaint, and (2) to show appropriate authority to file the
Pack, Inc. He was charged for violation of Section 255 (Failure to file return Information. Subsequently, the Judicial Records Division of this Court issued a
and to supply correct information), in relation to Sections 253 (d) [Officers of letter informing the Exec. Clerk Court III that counsel for the prosecution
corporation on whom penalties may be imposed] and 256 (Penalty liability of failed to comply with the said Resolution.
corporations) of the Tax Code, under Information filed by the Asst. City
Prosecutor on March 3, 2009. Issue: Whether the accused should be held liable
Ruling: No. Without doubt, it is not required that the complete or entire (b) Jurisdiction over cases involving criminal offenses as
records of the case during the preliminary investigation be submitted to and herein provided :
examined by the judge, to determine the existence of probable cause. What is (1) Exclusive original jurisdiction over all criminal
required, rather, is that the judge must have sufficient supporting documents offenses arising from violations of the BIRC or Tariff and
(such as the complaint, affidavits, counter-affidavits, sworn statements of Customs Code and other laws administered by the BIR or
witnesses or transcripts of stenographic notes, if any) upon which to make his the BOC: Provided, however, That offenses or felonies
independent judgment or, at the very least, upon which to verify the findings mentioned in this paragraph where the principal amount of
of the prosecutor as to the existence of probable cause. After a circumspect taxes and fees , exclusive of charges and penalties,
perusal of the documents attached by the prosecution on the Information, We claimed is less than One million pesos (P1 ,000,000.00) or
find the non-existence of probable cause. where there is no specified amount claimed shall be tried
by the regular Courts and the jurisdiction of the CTA shall
The prosecution failed to present any supporting document or sworn statement be appellate. x x x "
of witnesses which can establish the BIR's finding of "Unrecorded Gain on
Sale by way of Dacion En Pago " against the accused. Such circumstance is The CTA has no jurisdiction. The jurisdiction is with the regular
material for the determination of probable cause because that would ascertain courts and the case should be dismissed by the CTA. Pursuant to the
that accused was indeed required to pay the subject tax. aforequoted provision , the CTA has exclusive orig inal jurisdiction
over all criminal offenses arising from violations of the National
97. People v Elisoe Internal Revenue Code or the Tariff and Customs Code ,where the
principal amount of taxes and fees , exclusive of charges and
Facts: Informations were filed against the accused Eliseo Co for violations of penalties, claimed is P1 ,000,000.00 or more. Where the principal
Sec. 254 (Attempt to Evade or Defeat); Sec. 267 (Declaration under Penalties amount of taxes and fees , exclusive of charges and penalties ,
of Perjury); Sec. 257 (Penal Liability for Making False Entries, Records). claimed is less than P1 ,000,000.00 or where there is no specified
Accused allegedly filed with the BIR a false and fraudulent Income Tax amount claimed, the same shall be tried by the regular Courts and
Return (ITR) for taxable year 1998, wherein he allegedly declared therein a the jurisdiction of the CTA shall be appellate.
lower income in the total amount of P9,247,410.40, derived from his business
under the name of "Divisoria Dried Fish Center”. However, he contends that 99. People v Marungo
these consolidated cases should be dismissed on the ground that the (Case cannot be found)
prosecution failed to prove the identity of the accused; and that there is
insufficient evidence to prove the income that was supposedly declared by the Book: The accused are charged in an Information for violation of Section 3602
accused in 1998. of the Tariff and Customs Code in relation to Article 172 of the RPC. On April
18, 2011 and on May 25, 2011, the CTA promulgated resolutions ordering the
Issue: Whether the accused should be liable for the crimes charged against State Preosecutors to submit clear and legible copies; otherwise, the case shall
him be dismissed for failure to comply with a lawful order of the Court. Records
show that despite notice and receipt of the resolution, the prosecutors failed to
Ruling: No. In evaluating the above pieces of evidence, the conclusions that comply with the resolution; hence, case was dismissed.
can be derived therefrom are: the BIR requested accused Eliseo Co to produce
his books of account, that he received certain amounts from the Bureau of 100. People v Malic (600)
Corrections, and that the BIR computed his tax deficiencies. But then, none of
the said pieces of evidence can show or indicate that indeed, accused Eliseo Co Facts: An Information was filed against Benjamin Valic for violation of
recorded a different amount of income in his Income Tax Return, which Section 3602 of the Tariff and
constitutes the very core of the offenses charged against accused. The Customs Code of the Philippines, in relation to Article 172 of the RPC. It was
prosecution argues that the contents of the ITR can be proven by the alleged that Briones and Banga, being the general manager and customs
testimonies of its witnesses. However, testimonial evidence without admissible representatives, respectively of Skyrider, in conspiracy with Benjamin Valic of
documents to corroborate the same, is not enough. Let it be noted that these BP Valic Brokerage, filed before the BOC of the aforesaid port, Import Entry
cases are criminal cases, and the liberty and property of the accused are at No. 95-2001 covering 9,667 prilled urea in bulk with the equivalent duty in the
stake. Likewise, it is a basic rule of evidence that between documentary and amount of P1,829,496.00, by means of fraudulent statement or declaration
oral evidence, the former carries more weigh making it appear that the subject shipment is exempt from payment of duties
and taxes on the basis of fraudulent certificate of eligibility purportedly issued
It was also held that the claim of the defense that the prosecution failed, in the by the Philippine Carabao Center in favor of Norsk Hydro Philippines, to
course of the presentation of the prosecution's evidence, to have a competent avoid payment of rightful duties and taxes.
witness positively identify accused, Eliseo Co, as the same person charged in
the Informations in these criminal cases, and as the person who committed the Issue: Whether or not the accused Valic is guilty as charged for violation of
offenses since during the arraignment, the prosecution cannot ascertain Section 3602 of the Tariff and Customs Code of the Philippines in relation to
whether the Eliseo Co is the person listed in the Information, hence, they Article 172 of the RPC
denied it.
Ruling: No. The prosecution failed to prove that there was an item imported in
98. People v Medina the amount stated in the Information. The original of the Certificate of
Eligibility was not presented before the Court.
Facts: A perusal of the Information filed in this case shows that there is no
specified amount of Considering that the document alleged to have been falsified, viz./ the
taxes and fees claimed. This Court dismissed the case on the ground that the Certificate of Eligibility, was not presented before this Court; and considering
jurisdiction is vested with the regular Courts pursuant to Sec. 7 of RA No. further that the exhibit described and offered by the prosecution as Certificate
9282, which took effect on April 23, 2004, amending of Eligibility was denied admission in the Resolution, a determination of
RA No. 1125 [the law creating the Court of Tax Appeals] whether such Certificate mentioned in the Information was indeed falsified
would be impossible. Even assuming that the prosecution was able to prove
Issue: Whether or not the CTA’s dismissal of the case was proper the existence of the falsified Certificate of Eligibility allegedly utilized in
perpetrating the offense charged, still there was nothing in the evidence
Ruling: Yes. Sec. 7 of RA No. 9282 provides: presented by the prosecution that would show that accused Valic was the one
who filed the said Import Entry Declaration No. C-95-2001 and presented the
Section 7. Jurisdiction. - The CTA shall exercise: Certificate of Eligibility before the Bureau of Customs. Thus, the accused has
(a) X X X been acquitted.
Source:
http://www.central.com.ph/sfsreader/session/00000167b69c441fcecbd6260036
101. Ungab vs. Cusi (p.600) 00fb002c009e/t/?o=False
FACTS: The BIR filed six criminal charges against Quirico Ungab, a banana FACTS: The Alhambra Cigar and Cigarette Manufacturing Co. filed its
saplings producer, for allegedly evading payment of taxes and other violations income tax returns. The Collector of Internal Revenue assessed and demanded
of the NIRC. Ungab, subsequently filed a motion to quash on the ground that from the company, by way of deficiency taxes for said years, the sum of
(1) the information are null and void for want of authority on the part of the P240.560.04, plus 5 per cent surcharge and 1 per cent monthly interest from
State Prosecutor to initiate and prosecute the said cases; and (2)that the trial January 15, 1955. After appropriate proceedings, on appeal taken by the
court has no jurisdiction to take cognizance of the case in view of his pending company, the Court of Tax Appeals rendered an amended decision reducing
protest against the assessment made by the BIR examiner. The trial court the deficiency income taxes P103,604.05. Both the company and the Collector
denied the motion prompting the petitioner to file a petition for certiorari and have appealed.
prohibition with preliminary injunction and restraining order to annul and set ISSUE: whether the certain expenses claimed by the company were properly
aside the information filed. disallowed.
ISSUE: Is the contention that the criminal prosecution is premature since the RULING: The company maintains that the directors' fees, bonuses and
CIR has not yet resolved the protest against the tax assessment tenable? commissions paid to Kuenzle and Streiff, non-resident president and vice-
RULING: No. The contention is without merit. SC ruled that the criminal president, respectively, of the company, were disallowed by the Collector upon
action is legally proper where the taxpayer deliberately did not declare his the sole ground that they had actually rendered no personal services to the
income from sales of banana saplings. What is involved here is not the company and attended no board meetings thereof, and that the Court of Tax
collection of taxes where the assessment of the Commissioner of Internal Appeals should have limited its inquiry to the determination of the accuracy of
Revenue may be reviewed by the Court of Tax Appeals, but a criminal this findings, and that, having concluded that Kuenzle and Streiff had rendered
prosecution for violations of the National Internal Revenue Code which is some services, said court should have allowed said fees, bonuses and
within the cognizance of courts of first instance. While there can be no civil commissions "without touching upon the reasonableness of that particular
action to enforce collection before the assessment procedures provided in the compensation." This pretense is untenable. Under section 30 of the Tax Code,
Code have been followed, there is no requirement for the precise computation whenever a controversy arises on the deductibility, for purposes of income tax,
and assessment of the tax before there can be a criminal prosecution under the of certain items for alleged compensation of officers of the taxpayer, two
Code. The protest cannot stop his prosecution for violation of the Tax Code. questions become material, namely: (a) Have "personal services" been
102. Commissioner vs. CA and Fortune Tobacco Corp,97 SCRA 199, Feb 6, "actually rendered" by said officers? (b) In the affirmative case, what is the
1997 "reasonable allowance" therefor? When the Collector disallowed the fees,
(Sorry, I can’t find the case sa e-scra. If i-google ko din, andaming CIR vs. bonuses and commissions aforementioned, and the company appealed
CAandFortune tobacco corp na lumalabas. If I will check the date, CIR vs. therefrom, it became necessary for the lower court to determine whether said
Alhambra Industries ang lumalabas na case @@) officer had correctly applied section 30 of the Tax Code, and this, in turn,
103. Commissioner vs. Pascor Realty and Development required the consideration of the two questions already adverted to. In the
FACTS: The CIR authorized certain BIR officers to examine the books of circumstances surrounding the case, the lower court has correctly construed
accounts and other accounting records of Pascor Realty and Development and applied said provision.
Corp. (PRDC) for 1986, 1987 and 1988. The examination resulted in 107. Castro vs. CIR
recommendation for the issuance of an assessment. Commissioner filed a FACTS: Petitioner Maria B. Castro, who is authorized to manage her own
criminal complaint for tax evasion against PRDC, its president and treasurer property, is a duly licensed merchant. Pursuant to the provisions of Section 4
before the DOJ and they received a subpoena. Pascor filed a request for (b) and (c) of Republic Act No. 55, she filed with the Bureau of Internal
reconsideration/reinvestigation which the CIR denied prompting the Revenue her war profits tax returns in the amount of P431,884.00 and a net
respondents to elevate the CIR’s decision to the CTA. CIR filed a Motion to worth in the sum of P409,581.57.
Dismiss on the ground that CTA has no jurisdiction over the subject matter A criminal case was filed against her in the CFI of Manila for violation of
since no formal assessment has been issued against PRDC. The CTA denied Section 4, in connection with Section 8, of the War Profits Tax Law, for
the Motion stating that the criminal case for tax evasion is already an allegedly defrauding the Republic of the Philippines in the total amount of
assessment. The complaint, more particularly, the Joint Affidavit of Revenue P1,048,687.76. Petitioner received for the first time the notice of assessment
Examiners Lagmay and Savellano attached thereto, contains the details of the by registered mail from the CIR. The said letter of demand was based on the
assessment like the kind and amount of tax due, and the period covered.CA report of Supervising Examiner Felipe Aquino of the Bureau of Internal
agreed with the decision of the CTA. Revenue, who recommended that the petitioner be assessed and made to pay
ISSUE: Whether an assessment is necessary before criminal charges for tax the sum of P1,048,687.76 as war profits tax and surcharge.
evasion may be instituted. Supervising Examiner Felipe Aquino of the BIR, who testified for the
RULING: NO. The SC reiterated the rule that an assessment is not necessary prosecution, declared "that as a result of a detailed reinvestigation conducted
before criminal charges can be filed. A criminal charge need not only be by his office, it was found out that no war profits tax was due from the accused
supported by a prima facie showing of failure to file a required return and such in connection with the present case." City Fiscal Angeles moved for the
fact need not be proven by an assessment. dismissal of the case. Finding the petition for dismissal to be well taken,
The issuance of an assessment must be distinguished from the filing of a petitioner is acquitted in the criminal case..
complaint. Before an assessment is issued, there is, by practice, a pre- ISSUE: Is the acquittal in the criminal case instituted against her, for violation
assessment notice sent to the taxpayer. The taxpayer is then given a chance to of the War Profits Tax Law, a bar to the collection of the taxes assessed.
submit position papers and documents to prove that the assessment is RULING: NO. With regard to the tax proper, the state correctly points out in
unwarranted. If the commissioner is unsatisfied, an assessment signed by him its brief that the acquittal in the criminal case could not operate to discharge
or her is then sent to the taxpayer informing the latter specifically and clearly petitioner from the duty to pay the tax, since that duty is imposed by statute
that an assessment has been made against him or her. In contrast, the criminal prior to and independently of any attempts on the part of the taxpayer to evade
charge need not go through all these. The criminal charge is filed directly with payment. The obligation to pay the tax is not a mere consequence of the
the DOJ. Thereafter, the taxpayer is notified that a criminal case had been filed felonious acts charged in the information, nor is it a mere civil liability derived
against him, not that the commissioner has issued an assessment. It must be from crime that would be wiped out by the judicial declaration that the
stressed that a criminal complaint is instituted not to demand payment, but to criminal acts charged did not exist.
penalize the taxpayer for violation of the Tax Code. 108. People vs. Mendez (case not found- CTA case)
104. Ungab vs. Cusi (same with case 101) 109. People vs. Tan Boon Kong
105. CIR vs. Pascor (same with case 102) FACTS: On and during the four quarters of the year 1924, in Municipality of
106. Alhambra Cigar vs. Collector (the case does not talk about any criminal Iloilo, Province of Iloilo, the defendant, as manager of the Visayan General
prosecution) (kindly refer to the full text) Supply Co., Inc., a corporation organized under the laws of the Philippine
Islands and engaged in the purchase and sale of sugar, `bayon,’ coprax, and
other native products. The payment of internal-revenue taxes upon its sales,
declared in 1924 for purpose of taxation only the sum of P2,352,761.94, when 112. Commissioner v Connel Bros Co 40 SCRA 416
in truth and in fact, and the accused knew that the total gross sales of said Facts: The Commissioner disallowed the deductions for bad debts,
corporation during that year amounted to P2,543,303.44, thereby failing to depreciation, and excess in valuation of leasehold improvements by Connel
declare P190,541.50, and voluntarily not paying the percentage taxes the sum Bros. Co. in its income tax return for taxable year 1954 and 1955. The
of P2,960.12, corresponding to 1½ per cent of said undeclared sales. Commissioner thus assessed against the company deficiency taxes or
ISSUE: Whether the defendant, as manager of the corporation, is criminally assessments for said years. The Court of Tax Appeals modified the assessment
liable for violation of the tax law for the benefit of said corporation. by including the corresponding interest and surcharges pursuant to Section 51
RULING: A corporation can act only through its officers and agents, and of the Tax Code.
where the business itself involves a violation of the law, all who participate in Issue: Whether the interest and surcharges on delinquents tax payments are
it are liable. In the present case the information alleges that the defendant was chargeable.
the manager of a corporation which was engaged in business as a merchant, Held: Delinquency indicates non-payment of the correct and collectible tax,
and as such manager, he made a false return, for purposes of taxation, of the and such state of delinquency exists not from the assessment of the deficiency
total amount of sales made by said corporation during the year 1924. As the but from the very time the taxpayer failed to pay the correct amount due from
filing of such false return constitutes a violation of law, the defendant, as the him. Herein, the delinquency taxes became due and the assessment therefore
author of the illegal act, must necessarily answer for its consequences, were made before the amendment of Section 51 on 2 June 1959; and thus, the
provided that the allegations are proven company’s liability should be determined pursuant to the old Section (e) of the
110. CIR vs. Tokyo Shipping Tax code. Under the old Section, a delinquent tax payer would have to pay, in
FACTS: Tokyo shipping is a foreign corporation which owns and operates a addition to the unpaid tax, a 5% surcharge thereon computed from the time the
vessel. The vessel was chartered by a certain Nasutra to load raw sugar in the tax became due, plus interest on the whole unpaid amount at the rate of 1% a
Phil thru its representative. Thus, Tokyo Shipping’s representative made a pre- month. Under RA 2343, the delinquent taxpayer shall pay at the rate of 6% per
payment of the required income and common carrier’s taxes. Upon arrival at annum computed from the date prescribed for payment of the income tax up to
the port, the vessel found no sugar for loading, thus, claimed for a tax refund. the assessment of the delinquency tax, but which shall not exceed the amount
Tokyo Shipping filed a claim for refund from the BIR for erroneous corresponding to a period of 3 years. Section 13 of the amendatory act shoes
prepayment of income and common carrier’s taxes amounting to P107,142.75 that there is no intent to make RA 2343 retroactive.
since no receipt was realized from its charter agreement. BIR failed to act
promptly on the claim and thus it was elevated to the Court of Tax Appeals
which decided in favor of the refund. Hence, this petition for review on
certiorari.
ISSUE: Whether Tokyo Shipping is entitled to a refund or tax credit for the
prepayment of taxes
RULING: Yes. The power of taxation is sometimes called also the power to
destroy. Therefore, it should be exercised with caution to minimize injury to
the proprietary rights of a taxpayer. It must be exercised fairly, equally and
uniformly, lest the tax collector kill the “hen that lays the golden egg”. Fair
deal is expected by taxpayers from the BIR and the duty demands that BIR
should refund without unreasonable delay the erroneous collection.
RULING: Petitioner was not afforded his constitutional right. The record 125. ABS-CBN v CTA
shows that no hearing was held apart from the “preliminary hearing.” Meralco
was not given the opportunity to present evidence to rebut the audit report. It is FACTS: ABS-CBN Broadcasting Corporation was engaged in the business of
the cardinal right of a party in trials and administrative proceedings to be telecasting local as well as foreign films acquired from foreign corporations
heard, which includes the right of the party interested to present his own case not engaged in trade or business with the Philippines for which ABS-CBN
and submit evidence. paid rentals after withholding income tax of 30% of one-half of the film
rentals. In implementing Section 4(b) of the Tax Code, the Commissioner
The provisions of the Constitution on the exercise of the taxing power are not issued General Circular V-334. Pursuant thereto, ABS-CBN Broadcasting
construed as grants of such power but are merely limitations on a power Corp. dutifully withheld and turned over to the BIR 30% of ½ of the film
otherwise absolute. Tax statues, like other legislation, enjoy the presumption rentals paid by it to foreign corporations not engaged in trade or business in the
of validity and constitutionality. To doubt is to sustain. A tax statute may be Philippines. The last year that the company withheld taxes pursuant to the
attacked in the courts not only by reason of non-observance or violation of the Circular was in 1968.
constitutional limitations on the exercise of the taxing power, but also on RA 5431 amended Section 24 (b) of the Tax Code increasing the tax
account of violation or non-observance of the procedure laid down by the rate from 30% to 35% and revising the tax basis from “such amount” referring
fundamental law on the enactment of legislation. to rents, etc. to “gross income.” CIR issued Revenue Memorandum Circular
No. 4-71, revoking General Circular No. V-334, and holding that the latter was
124. Chamber of Real Estate v Exec Secretary "erroneous for lack of legal basis," because "the tax therein prescribed should
be based on gross income without deduction whatever.
FACTS: Petitioner is an association of real estate developers and builders in Commissioner issued a letter of assessment and demand for
the Philippines. It assails the validity of the imposition of minimum corporate deficiency withholding income tax for years 1965 to 1968. The company
income tax (MCIT) on corporations and creditable withholding tax (CWT) on requested for reconsideration; where the Commissioner did not act upon.
sales of real properties classified as ordinary assets.
Petitioner argues that the MCIT violates the due process clause ISSUE: Whether Revenue Memorandum Circular 4-71, revoking General
because it levies income tax even if there is no realized gain. Petitioner also Circular V-334, may be retroactively applied.
asserts that the enumerated provisions of the subject revenue regulations
violate the due process clause because, like the MCIT, the government collects RULING: No. Any rulings or circulars promulgated by the CIR have no
income tax even when the net income has not yet been determined. They retroactive application when it would be prejudicial to taxpayers. The
contravene the equal protection clause as well because the CWT is being retroactive application of Memorandum Circular No. 4-71 prejudices ABS-
levied upon real estate enterprises but not on other business enterprises, more CBN since (1) the assessment and demand on petitioner to pay deficiency
particularly those in the manufacturing sector. withholding income tax was also made three years after 1968 for a period of
time commencing in 1965; and, (2) ABS-CBN was no longer in a position to
ISSUE: Whether the imposition of the MCIT on domestic corporations and withhold taxes due from foreign corporations because it had already remitted
CWT on income from sales of real properties classified as ordinary assets are all film rentals and no longer had any control over them when the new Circular
unconstitutional. was issued.
Respondent’s failure to describe itself as HMO is not tantamount to
RULING: NO. MCIT is not violative of due process. The MCIT is imposed bad faith. HMO was first recorded in Philippine statute books upon the
on gross income which is arrived at by deducting the capital spent by a passage of RA 7875 (National Health Insurance Act of 1995). In 1988, when
corporation in the sale of its goods, i.e., the cost of goods and other direct VAT Ruling No. 231-88 was issued, HMO was yet unknown or had no
expenses from gross sales. Clearly, the capital is not being taxed. significance for tax purposes. “Good faith” is that state of mind denoting
Furthermore, the MCIT is not an additional tax imposition. It is imposed honesty of intention and freedom from knowledge of circumstance which
in lieu of the normal net income tax, and only if the normal income tax is ought to put the holder upon injury. The CIR is precluded from adopting a
suspiciously low. The MCIT merely approximates the amount of net income position contrary to one previously taken, where injustice would result to the
tax due from a corporation, pegging the rate at a very much reduced 2% and taxpayer.
uses as the base the corporation’s gross income.
It is also stressed that the CWT is creditable against the tax due from 126. Philippine Healthcare Provides v Commissioner
the seller of the property at the end of the taxable year. The seller will be able
to claim a tax refund if its net income is less than the taxes withheld. Nothing Facts: CIR sent petitioner assessment of deficiency taxes, both VAT and
is taken that is not due so there is no confiscation of property repugnant to the documentary stamp tax (DST) in the total amount of P224,702,641.18 for
constitutional guarantee of due process. More importantly, the due process taxable years 1996 and 1997. Petitioner protested such assessment in a letter,
requirement applies to the power to tax. The CWT does not impose new taxes but the respondent did not act on the protest which led the petitioner to file a
nor does it increase taxes. It relates entirely to the method and time of petition in the Court of Tax Appeals (CTA) seeking the cancellation of said
payment. Petitioner, in insisting that its industry should be treated similarly as assessments. CTA partially granted the petition wherein the petitioner is
manufacturing enterprises, fails to realize that what distinguishes the real ordered to pay the deficiency VAT and set aside the DST deficiency tax.
estate business from other manufacturing enterprises, for purposes of the Respondent appealed in Court of Appeals (CA) with regard to the cancellation
imposition of the CWT, is not their production processes but the prices of of DST assessment. CA granted the petition. The Court affirmed CA’s
their goods sold and the number of transactions involved. The income from decision. Hence, petitioner filed a motion for reconsideration.
the sale of a real property is bigger and its frequency of transaction limited,
making it less cumbersome for the parties to comply with the withholding tax Issue: Whether petitioner is liable to pay the DST on its health care agreement
scheme. pursuant to Sec. 185 of the NIRC
Safeguards were incorporated into the law, to wit: (a) imposition of MCIT only Held: Petition granted. Petitioner is not contemplated to be included in “or
on the fourth year after commencement of operations; (b) carrying forward of other branch insurance” covered by Section 185 of NIRC because it is a Health
any excess of MCIT paid over the normal income tax which shall be credited Maintenance Organization (HMO) and not an insurance company. HMOs
against the normal income tax for three (3) immediately succeeding years; and primary purpose is rendering service to its member by lowering prices and
(c) to address the genuine repeated losses that businesses may incur, the reducing the cost rather than the risk of medical health. On the other hand,
Secretary of Finance is authorized to suspend the imposition of MCIT, if a insurance businesses undertakes for a consideration to indemnify its clients
corporation suffers loss due to prolonged labor dispute, force majeure and against loss, damage or liability arising from unknown or contingent event.
The term “indemnify” therein presuppose that a liability or claim has already
been incurred. In HMOs, there is no indemnity precisely because the member
merely avails of medical services to be paid or already paid in advance at a RULING: CIR's power to distribute, apportion or allocate gross income or
pre-agreed price under the agreements. deductions between or among controlled taxpayers may be exercised as long
Moreover, HMOs play an important role in society as partners of the State in as the controlled taxpayer's taxable income is not reflective of that which it
achieving its constitutional mandate of providing citizens with affordable would have realized had it been dealing at arm's length with an uncontrolled
health services. taxpayer, the CIR can make the necessary rectifications in order to prevent
Also, the DST assessment of the petitioner for the years 1996 and 1997 evasion of taxes. However, the to power to impute "theoretical interests" is not
became moot and academic since it availed tax amnesty under RA 9480 on included in the broad parameters of CIR. There is no evidence of actual or
December 10, 2007. Thus, petitioner is entitled to immunity from payment of possible showing that the advances FDC extended to its affiliates had resulted
taxes for taxable year 2005 and prior years. to the interests subsequently assessed by the CIR.
Applying the ruling retroactively would be prejudicial to the Sec. 43 of the Tax Code authorizes the CIR to distribute, allocate or
taxpayer. apportion gross income or deductions between or among controlled
corporations in order to prevent evasion of taxes. Despite the broad
127. Commissioner v Michel Lhuillier Pawnshop parameters, however, the power of the CIR does not include the power to
impute “theoretical interests” to the controlled taxpayer’s transactions. There
FACTS: Revenue Memorandum Orders (RMOs) were issued imposing a 5% must be proof of the actual or at least, probable receipt or realization by the
lending investor’s tax on pawnshop. Pursuant to this, the BIR issued an controlled taxpayer of the item of gross income sought to be distributed or
assessment against Michel J. Lhuillier Pawnshop, Inc. (hereafter Lhuillier) allocated by the CIR. However, the CIR adduced no concrete proof that said
demanding payment of deficiency percentage tax. Lhuillier filed an funds were, indeed, the source of the advances the former provided its
administrative protest, contending, inter alia, that pawnshops are different from affiliates. While admitting FDC obtained interest-bearing loans from
lending investors, which are subject to the 5% percentage tax under the commercial banks, FDC clarified that the subject advances were sourced from
specific provision of the Tax Code. Its protest having been unacted upon, the corporation’s rights offering in 1995 as well as the sale of investment in
Lhuillier with the CTA which declared the RMO’s in question null and void Bonifacio Land 1997. Article 1956 of the Civil Code provides that no interest
insofar as they classify pawnshops as lending investors subject to 5% shall be due, unless it has been expressly stipulated in writing. Considering
percentage tax. that taxes, being burdens, are not presumed beyond what the applicable statute
expressly and clearly declares, the rule is likewise settled that tax statutes must
ISSUE: Whether or not the RMOs in question are valid be construed strictly against the government and liberally in favor of the
taxpayer.
RULING: NO. There are two kinds of administrative issuances: the legislative
rule and the interpretative rule. A legislative rule is in the nature of subordinate 129. Commissioner v Ariete (621)
legislation, designed to implement a primary legislation by providing the
details thereof. An interpretative rule, on the other hand, is designed to provide FACTS: Mercado filed an affidavit attesting that respondent earned
guidelines to the law which the administrative agency is in charge of substantial income in 1994, 1995, and 1996 without paying income tax. The
enforcing. When an administrative rule is merely interpretative in nature, its SID then issued an order to investigate the denunciation made and submit a
applicability needs nothing further than its bare issuance, for it gives no real progress repot. Thereafter, the revenue officer submitted a report stating that
consequence more than what the law itself has already prescribed. When, on respondent admitted her non-filing of income tax returns. The respondent then
the other hand, the administrative rule goes beyond merely providing for the filed her income tax returns under the Voluntary Assessment Program (VAP).
means that can facilitate or render least cumbersome the implementation of the A notice of assessment was then issued against respondent finding a tax
law but substantially increases the burden of those governed, it behooves the deficiency amounting to P191,463.04.
agency to accord at least to those directly affected a chance to be heard, and Upon assessment, respondent filed for assessment protest and
thereafter to be duly informed, before that new issuance is given the force and offered a compromise settlement but the same was denied. Consequently,
effect of law. respondent filed a petition for review and the CTA granted such and rendered a
RMO No. 15-91 and RMC No. 43-91 cannot be viewed simply as decision cancelling the deficiency assessments. The CTA stated that when
implementing rules or corrective measures revoking in the process the respondent filed her income tax returns on 2 December 1997, she was not yet
previous rulings of past Commissioners. Specifically, they would have been under investigation by the Special Investigation Division. The Letter of
amendatory provisions applicable to pawnshops. Without these disputed CIR Authority to investigate respondent for tax purposes was issued only on 28
issuances, pawnshops would not be liable to pay the 5% percentage tax, July 1998. Further, respondent’s case was not duly recorded in the Official
considering that they were not specifically included in Section 116 of the Registry Book of the BIR before she availed of the VAP.
NIRC of 1977, as amended. In so doing, the CIR did not simply interpret the The CTA ruled that the conjunctive word "and" is used; therefore, all
law. The due observance of the requirements of notice, hearing, and of the above requisites must be present before a person may be excluded from
publication should not have been ignored. the coverage of the VAP. The CTA explained that the word "and" is a
In the absence of publication, Revenue Memorandum Order (RMO) conjunction connecting words or phrases expressing the idea that the latter is
No. 15-91 and RMC 43-91, imposing the 5% lending investors tax on to be added or taken along with the first.
pawnshops, are not valid. While the rule-making authority of the CIR is not
doubted, like any other government agency, the Commissioner may not ISSUE: Whether the CA erred in holding that the recording in the Official
disregard legal requirements or applicable principles in the exercise of quasi- Registry Book of the BIR of the information filed by the informer under
legislative powers. The due observance of requirements of notice, hearing, and Section 28 of the Tax Code is a mandatory requirement before a taxpayer-
publication should not have been ignored. applicant may be excluded from the coverage of the VAP.
128. CIR v Filinvest (620) RULING: Verba legis. The Court explained that were the language of the law
is clear and unequivocal, it must be given its liberal application and applied
FACTS: FDC owns 80% of the outstanding shares of FAI and 67.42% of FLI. without interpretation. The conjunctive word “and” is not without legal
FDC and FAI entered into a Deed of Exchange with FLI where the former will significance. It means “in addition to.” The word “and,” whether it is used to
transfer parcels of land to the latter and in exchange, shares of stock of FLI connect words, phrases or full sentences must be accepted as binding together
were issued to FDC and FAI. BIR assessed both FDC and FAI for deficiency and as relating to one another. It implies conjunction or union. When a tax
taxes. One of the bases for the assessment is the cash advances FDC extended provision speaks unequivocably, it is not the province of a Court to scan its
in favor of its affiliates. The CIR argued that they were interest free despite the wisdom or its policy. The more correct course of dealing with a question of
interest bearing loans it obtained from banking institutions. construction is to take the words exactly what they say.
ISSUE: Whether the advances extended by respondent to its affiliates are 130. Commissioner v Philex Mining Corporation (Philex v CIR case
subject to income tax only) (CTA case cannot be found)
DOCTRINE: The law presumes that the BIR had sufficiently passed upon the
taxpayer’s compliance before acceptance of tax amnesty payment. – The law
presumes that the BIR had sufficiently passed upon the taxpayer’s compliance,
much more the details of the SALN, before the acceptance of the applicable
amnesty tax payment. In the instant case, the CIR even failed to file a timely
motion for reconsideration when the Court in Division resolved PMC’s
availment of the tax amnesty. Thus, he cannot raise at this point in time that
the CTA can inquire into the correctness of PMC’s SALN, when the CIR itself
have easily denied accepted of PMC’s availment of the tax amnesty.