No.

35: COMMISSIONER OF INTERNAL REVENUE

VS.
MARUBENI DEC. 12, 2001

FACTS:
 Marubeni is a foreign corporation, organized and existing under the Laws of Japan. It is engaged in general
import and export trading , financing and construction business, and is duly registered in such business in the
Philippines, maintaining a branch office in Manila.
 In November 1985- CIR issued a letter of authority to examine the books of Accounts of Marubeni , Manila
Branch for the Fiscal year 1985. Undeclared income from 2 contracts here in the Phils. Have been discovered.
 Revenue Examiner recommended an assessment for deficiency income, branch profit remittance, contractor’s
and commercial brokers taxes-- same were questioned by Marubeni.
 Marubeni filed 2 petitions for review with CTA ; Ist petition questions the deficiency income, branch profit
remittance and contractor’s tax assessment. The 2nd one assailed the deficiency broker’s assessment.
 August 1986- EO No. 41 was issued declaring amnesty for all unpaid income taxes for the years 1981-1985.
Marubeni availed of the amnesty.
 November 1986 , The scope and coverage of EO 41 was expanded by EO 64 which included estate and donor’s
taxes. Marubeni filed a supplemental tax amnesty return under the benefit of EO 64 and paid the BIR .
 10 years after the case was filed, CTA rendered a decision in favor of Marubeni----Deficiency taxes subject of said
case as deemed cancelled and withdrawn because the respondent (Marubeni) had properly availed of EO No.
41, (CTA)ordering CIR to DESIST from collecting the 1985 deficiency.
 CIR appealed to the CA but the latter dismissed the petition and affirmed the decision of the CTA.

ISSUE:
1. WON the CA erred in affirming the decision of the CTA which ruled that Marubeni’s deficiency tax liabilities were
extinguished upon respondent’s availment of tax amnesty under EO No. 41.
2. WON Marubeni is liable to pay contractor’s taxes as assessed by CIR.

RULING:
Ist ISSUE: NO
 Income tax , branch profit remittance, and contractor’s taxes are covered by EO Nos. 41 and 64.
 CIR claimed that Marubeni is disqualified from availing of the amnesty because the latter falls under the
exception in Section 4(b) of EO No. 41 that provides: The ff. taxpayers cannot avail of the amnesty herein
granted : a)--------; b) Those with income tax cases already filed in court as of the effectivity hereof.
CIR also argued that when respondent filed for income tax amnesty in 1986, a case had already been filed and
was pending before the court of appeals.
 SC ruled that petitioner’s claim cannot be sustained . Section 4(b) of EO 41 is very clear and unambiguous. It
excepts from income tax amnesty those taxpayers “ with income tax cases already filed in court as of the
effectivity hereof”.The filing of income tax cases in court must have been made before and as of the date of
effectivity of EO 41. Thus, for a taxpayer not to be disqualified under Section 4 (b) there must have been no
income tax cases filed in court against him when Eo 41 took effect . This is regardless of when the taxpayer filed
for income tax amnesty provided of course he files it on or before the deadline for filing.

2nd ISSUE: No
 CIR claims , citing the case of CIR vs Engineering Equipment and supply Co., where the court found that
engineering equipment, although an independent contractor, was not engaged in the manufacture of air
conditioning units in the Philippines. It imported some items for the system it designed installed. The case dealt
with services performed within the local taxing jurisdiction without involving foreign element in the supply of
materials and services.
 The court discussed what a contractor’s tax is. It is tax imposed upon the privileged of engaging in business.
Generally in nature of an excise tax on the exercise of a privilege of selling services or labor rather than a sale of
product; and is directly collectible from the person exercising the privilege. Being an excise tax, it can be levied
 by the taxing authority only when the acts , privileges or business are done or performed within the jurisdiction
of the said authority.Like property tax, it cannot be imposed on an occupation or privilege outside the taxing
district.
 In the case at bar, the respondent (marubeni) was an independent contractor , argues that the work therein
were not all performed in the Philippines, some of them were completed in japan in accordance with the
provisions of the contracts.
 Upon scrutiny of the evidence and contracts presented, clearly, the service of “ design and engineering , supply
and delivery, construction, erection and installation, supervision, direction and control of testing and
commissioning , coordination…” of the 2 projects involved two taxing jurisdiction. These acts occurred in 2
countries- Japan and Philippines . While the constructopn and and installation work were completed within the
Phils., the evidence is clear that some pieces of equipment and supplies were completely designed and
engineered in Japan. These equipments were already finished product when shipped to the Phils. , Other
construction supplies were likewise fabricated and manufactured in Japan. All services for design, fabrication,
engineering and manufacture of the materials and equipment were made and completed in Japan. These
services were rendered outside the taxing jurisdiction of the Philippines and are therefore not subject to
contractor’s tax.

The petition is denied , decision of CA is affirmed.

33. G.R. No. 76778 June 6, 1990

FRANCISCO I. CHAVEZ, petitioner,
vs.
JAIME B. ONGPIN, in his capacity as Minister of Finance and FIDELINA CRUZ, in her capacity as Acting Municipal Treasurer of the
Municipality of Las Piñas

FACTS:
 Corazon Aquino issued Executive Order No. 73, revising the effectivity of real property assessments January 1, 1987 instead
of January 1, 1988 , for purposes of real property tax collection.
 Francisco I. Chavez , a taxpayer, questioned the constitutionality of Executive Order No. 73 ; that there will an unreasonable
increase in real property tax .
 The Office of the Solicitor General argues with the petitioner.

ISSUE: WON Executive Order No. 73 is unconstitutional?

RULING:EO 73 is CONSTITUTIONAL.

 Executive Order No. 73 merely directs the implementation/ effectivity of real property assessment beginning January 1,
1987 for purposes of real property tax collection.
 The court agrees with the Solicitor General that the attack on EO 73 has no legal basis as the general revision of
assessment is a continuing process mandated by Section 21 of Presidential Decree 464 (Real Property Tax Code). It is PD
464 which should be challenged but Chavez failed to raise any objection against said decree. EO No. 73 does not impose
new taxes nor increase taxes . It only changed the date of implementation of the increase in real property tax from January
1,1988 to January 1,1987, that without EO 73, the basis for collection of real property tax will still be the 1978 revision of
property values. Certainly, to continue collecting real property taxes based on valuations arrived at several years ago, in
disregard of the increases in the value of real properties that have occurred since then, is not in consonance with a sound
tax system. Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenues
must be adequate to meet government expenditures and their variations.
 Petition DISMISSED.