TAX QUIZZES – Atty. Cabaneiro
An assessment of a
QUIZ 1 – July 15, 2015
1. There was a 1,000 sq. m. lot. On the 200 sq. m. portion of
a lot stood a church. Father X wanted to make use of the
idle portion of the 800 sq. m. so he planted a garden in it.
The lot was assessed for real property tax. Is the assessment
proper?
 (page 86 of Aban book) No. The exemption from the
payment of the land tax in favor of the convent includes not
only the land actually occupied by the building, but also the
adjacent ground or vegetable garden destined to the
incidental use of the parish priest in his ordinary life. (Roman
Catholic Bishop of Nueva Segovia v. Provincial Board of Ilocos
Norte, G.R. No. 27588, [December 31, 1927], 51 PHIL 352-
354)
2. Under PLDT’s franchise, a franchise tax is imposed in lieu
of “all taxes”. the local government now passed an
ordinance imposing a franchise tax against it. PLDT argues
that it does not only have tax exemption but rather tax
exclusion over “all taxes” so that the rule of strictissimi juris
does not apply. Is the argument of PLDT tenable?
 No. PLDT is a holder of a legislative franchise which
contains the so-called in-lieu-of-all-taxes clause, wherein
PLDT shall pay a franchise tax equivalent to 3% of all its gross
receipts which shall be in lieu of all taxes. However, under
R.A. 7160 or the Local Government Code, Section 137 in
relation to Section 151, grants cities and other local
government units the power to impose local franchise tax on
businesses enjoying a franchise notwithstanding any
exemption granted by any law or other special law.
(page 25 memaid) Indeed, both in their nature and in their
effect there is no difference between tax exemption and tax
exclusion. Exemption is an immunity or privilege; it is
freedom from a charge or burden to which others are
subjected. Exclusion, on the other hand, is the removal of
otherwise taxable items from the reach of taxation, e.g.,
exclusions from gross income and allowable deductions.
Exclusion is thus also an immunity or privilege which frees a
taxpayer from a charge to which others are subjected.
Consequently, the rule that tax exemption should be applied
in strictissimi juris against the taxpayer and liberally in favor
of the government applies equally to tax exclusions. (PLDT vs.
City of Bacolod; G.R. No. 149179, July 15, 2005)
3. A criminal complaint was instituted with the DOJ against
the officers of a corporation for tax evasion. The complaint
was based on the computation of their tax delinquency. The
officers filed a motion to dismiss on the ground that the BIR
did not yet make an assessment. The DOJ denied the
motion. Was the DOJ correct in dismissing the same?
 (page 6 Juicy notes) No.
deficiency is not necessary to a criminal prosecution for
willful attempt to defeat and evade the income tax. A crime is
complete when the violator has knowingly and willfully filed
a fraudulent return with intent to evade and defeat the tax.
The perpetration of the crime is grounded upon knowledge
on the part of the taxpayer that he has made an inaccurate
return, and the government's failure to discover the error and
promptly to assess has no connections with the commission
of the crime. (Ungab v. Cusi, Jr., G.R. Nos. L-41919-24, [May
30, 1980])
4. Beki Bus Line was granted 2 tax exemptions: one
exempting the bus line’s bond issues from taxes and the
other exempting the company from taxes in the operation
of its public utilities. The Congress revoked the exemptions
before the expiry. Were the revocations by Congress
constitutionally valid?
 (page 64 Mamalateo reviewer) Yes. The exempting
statutes are both granted unilaterally by Congress in the
exercise of taxing powers. Since taxation is the rule and tax
exemption is the exception, any tax exemption unilaterally
granted can be withdrawn at the pleasure of the taxing
authority without violating the constitution (Mactan Cebu
International Airport Authority vs. Marcos, 261 SCRA 667)
In the case at bar, neither of these were issued by the taxing
authority in a contract lawfully entered by it so that their
revocation would not constitute an impairment of the
obligations of contracts.
QUIZ – Thursday Class
1. Davao city imposed 0.5 percent of the assessed value of
urban land which exceeds 100k as socialized housing tax.
does it violate due process because it is discriminatory or
oppressive thus unconstitutional? Explain.
2. Someone asked a tax related law to the doj. Upon
meticulous and deep research the doj produced a formal
legal opinion upon the matter. What is the probative effect of
the legal opinion to BIR. Explain.
3. The church has 2-hectars of land. In the middle and in the
south is the church and the convent. Southeastern
commercial establishments. Northeastern idle and
unoccupied. Could the entire parcel of land be tax exempt?
Explain.
4. The president of the philippines imposed additional 8% tax
to tariff pursuant to the flexible tariff clause. It immediately
became effective. Kenny contended that the law is void
because there was no recommendation from th NEDA as
provided in section 401 of the tariff code. Is Kenny's
contention valid? Explain.
QUIZ – Mendiola

1. Return with the BIR on Jan 1 2012. BIR requested for more
documents to support the tax return. Mr. A complied with
the request and filed other documents. BIR then issued a Pre-
Assessment Notice (PAN). Mr. A file for a Motion for
Reinvestigation which the BIR granted. Jan 1 2014, BIR now
demands Mr. A to pay his tax liabilities based on the PAN. Mr.
A contends that BIR can1. Mr. A filed a tax not demand the
payment anymore because the 2 year prescriptive period has
already lapsed. Is Mr. A's contention corret. Decide with
reasons.

2. Electric Company subject sa franchise tax. Then, may law

na nagiimpose ng income tax sa companies na may franchise.
Required ba magpay yung mga electric company?

3. Lbc was granted a franchise. LBC and Dept. Of health

entered into a contract on jan 2011 that LBC will render its
services to DOH. In the said contract, DOH granted tax
exemptions to LBC (exempt from income tax). The contract is
effective for a 5 year period. Then a law was passed on 2015,
that requires entities granted with franchise to pay income
tax. is LBC required to pay income tax? Decide with reasons.

4. 4000sqm na lupa ng church. 300sqm lang ginagamit sa

church mismo, then nagdecide yung mga priests na magtayo
ng veggie garden for personal consumption. Sabi ng tax
assessor, liable yun sa realty tax. Decide

1. Estoppel - if pwedeng i avail ng taxpayer against govt (chap

5 daw)

2. Public utility franchise - tax exempted sila tas may law na

parang nirerevoke yung tax exemption sa franchise valid daw
ba yung law na pinagbabayad sila ng taxes (valid daw kasi
franchise is to be distinguished to a contract so di mag aapply
yung non impairment of contracts)

3. Nagenter ng contract sec of DOH sa LBC nakalagay daw tax

exempt daw yung LBC sa contract for 5 years. On the 4th year
may pinass na law na yung courier service kailangan
magbayad nung tax kung san sila exempted. (Hindi daw valid
kasi non impairment of contracts / constitutional limitation
chap 2)

4. May church owner ng 2K sq m na lot pero 300 sq m lang

naooccupy nila. Yung the rest ginawang taniman ng
vegetables. Nung hinarvest kinain nila yung iba pinamigay.
Yung tax assessor sabi may tax kasi hindi for exclusive use for
religious purposes. (Incidental lang daw yung pag harvest tax
exempt pa rin kahit hindi exclusive use for religious purposes)
TAX Lecture
MIDTERMS Coverage:
 Chapter 1-9
 Title 1 and 8 of 1997 Tax Code
POINTERS for MIDTERMS:
 Definition of taxation
 Power of Judicial Review
 Incidents of Taxation
 Nature of the taxing power
Taxpayer’s Suit:
 Instead of direct injury test, use the Transcendental importance test
Chapter 2:
 Commissioner vs Algue
 Tolentino vs Secretary of Finance*
 taxpayer’s suit
 power to destroy
 power to issue TROs despite section 218 of the Tax Code
LIMITATIONS:
 Public Purpose Tests now includes the Social Justice Test (any purpose that implements social justice program of the
government)
 Planters Products Phils vs Fertiphil?? Corporation
 Non impairment of contracts
 distinction between a contract and a franchise
 Lingayen Gulf? Electric Companies and Electrical Services vs
 PLDT
 4:00 Regarding the direct and indirect
 Philippine ____ Corporation*
 Maceda vs Macaraig*
 American Rubber company*
 Ocampo case*
 Actually directly exclusively used for religious purposes:
 Lung Center of the Philippines*
 Article 14 tax exemption of non-profit, non-stock educational institution
 Ateneo-income from the operation of canteen
 La Salle-income from the operation of canteen
 (read the different tax implications of non-profit, non-stock educational institutions)
 (also as distinguished from proprietary educational institutions)-Sec 27 D of Tax Code
 Section 27 (d) includes also hospitals
 St. Luke’s Medical Center vs Commissioner of Internal Revenue*
DOUBLE TAXATION and TAX EXEMPTION
 Know the kinds of double taxation
 Diff between tax evasion and tax avoidance
 cases involving tax fraud
 tax evasion
 Gusi vs Ungab? (Yusi vs Pungab?)*
 Fortune Tobacco Corporation*
 PASCOR Development Corporation*
 CIR vs TODA*
TAX LAWS, RULES, and REGULATIONS
 power of the Commissioner to interpret
 what are rulings of first impression? (Tax Code of 1997-Section 2-7)
READ SPECIAL LAWS:
 RA 9282
 RA 1125
 Jurisdiction of CTA
 Mode of Review to the CTA
  Innovations in RA 1125 by RA 9282
CHAPTER 5: TAX ADMINISTRATION and REMEDIES
 The applicable provision is Title 1 of Tax Code of 1997
 Which body of the government enforces collection of “national internal revenue taxes”?
 What is the objective of the Government?
 to collect tax
 What is the obligation of the taxpayer?
 to pay tax
 What does the taxpayer want?
 to not pay tax
 REASON: masakit daw sa bulsa magbayad ng tax > tax avoidance!
 Can you avoid tax? YES!
 Why can you avoid tax? because the law is ambiguous
 If the law is ambiguous? maraming butas, maraming lusot.
 SECTION 204 of the Tax Code
 power of the Commissioner to compromise
 purpose of compromise
 taxpayer need not go to court
 BIR was able to collect the tax
 WHY compromise?
 because issue is of DOUBTFUL VALIDITY
 DOUBTFUL VALIDITY- Law is correct, taxpayer is also correct. Because the law is vague/doubtful, not
precise. Both liberal and strict interpretation is allowed.
 SC settles the doubt, because under the Constitution the final arbiter of ALL CASES is the SC.
 Halfway mark in order to avoid ______ is the possibility that the taxpayer can invoke Section 204 of the
Tax Code which is the power to compromise
 HOWEVER, if you invoke the power to compromise in a civil case, the issue MUST be of DOUBTFUL
VALIDITY
 Commissioner vs Algue
 Lifeblood Theory/ Theory of Necessity
 Despite the natural reluctance of the taxpayer to part with his hard earned money to pay the tax,
the government will be all out? immobilized...
 “Taxes are what we pay for civilized society. Without taxes, the government would be paralyzed
for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to
surrender part of one’s hard-earned income to the taxing authorities, every person who is able
must contribute his share in the burden of running the government. The government for its part,
is expected to respond in the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their material and moral values.”
 Basis of taxation
 Symbiotic relationship between the services rendered by the government, it is incumbent for you
to pay tax
 Mode of Tax Compliance: SELF ASSESSING MODE (pay as you file system)
 determine your own liability
 RETURN
 it is a sworn declaration where the taxpayer inputs all the data that is necessary for him to compute the tax
(disclose the data/open book)
 REASON why the need to file a return?
 SECTION 5: Third Party Verification
 where the datas are gathered, datas that are considered as the best evidence obtainable
 In the event that BIR assess, BIR enjoys the presumption of correctness
 MEANING: taxpayer has the burden of proof to disprove the presumption
 Read Revenue Regulation 1299* renovated by RR 182013*
 RR 182013- Bill of Rights of Taxpayers
 In cases of self assessment there are tendencies that you will not declare the true informations required
 In relation to Section 2 and Section 6: BIR has the power to examine the return (specifically performed by
the examiner)
 What will the examiner do? assess the tax return (examine the return of the taxpayer)
  first notify taxpayer
 found delinquency, send pre-assessment notice (stating the wrong computation)
 taxpayer reply within 15 days
 exercise onus probandi
 failure to reply, presumption of correctness attaches
 BIR enjoys the benefit of the period
 you should not sleep on your rights
 examiner is correct: final assessment notice to taxpayer (Section 228 Protest)
 Protest is a formal manifestation a written letter controverting the findings in the
assessment which must be filed within 30 days from the receipt of the final assessment -
JURISDICTIONAL (mandatory provision of the Tax Code)
 Within 60 days may or allowed to submit additional docs (directory provision of Tax
Code)
 Assessment disputed are called Disputed Assessment
 Assessment vs Disputed Assessment
 Final Decision on the disputed assessment (Section 228)
 In case the disputed assessment is denied, can avail of further remedy to the CTA
meaning that the administrative remedies have already been exhausted
 Under 9282 CTA has jurisdiction over disputed assessments
 BIR>CTA>CTA en banc>SC
 In case of self-assessment, where do you get the datas?
 Books of accounts registered with the BIR (double books are not allowed)
 Receipts
 Secrecy of bank deposits waived by operation of law
CHAPTER 7: STATUTE OF LIMITATIONS
 upon filing of return, there is a prescriptive period (Section 203)
 (WHICHEVER is LATER) 3 years from:
 due date (April 15) OR
 actual date of filing
 EXCEPTION (Section 222) MEMO
 Section 223 Suspension of prescriptive period
 Section 223 will only apply if the return is not defective
 Husay(Jusay) vs Gonzales*
 Aznar case*
 false vs fraudulent return
 when the return is defective by reason of fraud (fraudulent return) prescriptive pd is 10 years
 when return is defective by reason of falsity (honest mistake) -error in interpretation (no bad faith),
prescriptive pd is 3 years
 Bagongbuhay Trading vs Parolan*
 Prescription is the best defense in taxation
 REASON: must be examined within 3 years, otherwise, if not examined, FREE (with or without error/fraud)
 Relevance of prescription in taxation
 In order that the examiner will be vigilant in examining the return of the taxpayer so that the taxpayer will not
forever be burdened by the threat of assessment by the BIR
 Prescription is the mode of acquiring or losing right by just passage of time
 RATIONALE: Every person must not sleep on his rights. If you have a right to assert, assert it on time.
 Memo exception to prescription (section 223?)
 Aznar case*
 All fraudulent return are false BUT not all false return are fraudulent because some return may be false by
reason of honest mistake (wrong interpretation)
NOTE:
*How different is the CTA under RA 9282(2004) and RA 1125 (1954) - know the changes
*memo Sec. 228 (5 instances where pre-assessment is not required)
*read RCBC case* on mutually exclusive
*182013 -is the exercise of due process of law (BIR is giving you all the reason/manner to contest because this is involves the
deprivation of a person’s hard earned money)
*BIR is tasked to enforce the decision of the SC on case the taxpayer loses in the disputed assessment case
*In case the taxpayer still refuses to pay (apply Section 205-208)
*personal property-distraint
*real property-levy
*money-garnishment
TAX EVASION
 Tax Evasion is a crime-proof beyond reasonable doubt
 In case of Tax Evasion: BIR>DOJ (lawyer for the Gov’t) >fiscal>lower court (1M below)>CTA (1M above)
 Tax evasion case can be filed simultaneously with a civil action in the regular courts for collection of money (RATE- Run
After Tax Evader)
RULING OF FIRST IMPRESSION
 ruling rendered for the first time
 Commissioner only will sign
RULING of ESTABLISHED PRECEDENT
 ruling rendered for the second time or when there is already a previous ruling
 Can be delegated to a subordinate officer who is likewise high ranking

STATUTE OF LIMITATIONS:
 Section 203, 222, 220
CHAPTER 8
 How may a taxpayer be aggrieved by the decision of the Commissioner?
 Wrong payment
 REMEDY: tax credit or tax refund
 If taxpayer is assessed?
 REMEDY? 182013 Bill of Rights of taxpayer
 In BOTH instances (natalo)
 Exhaustion of administrative remedies (Chapter 9)
READ Section 203-230 of Tax Code of 1997
RECAP of CASES:
 Tolentino vs Secretary of FInance-Due Process of Law
 Taxpayer’s suit
 Judicial review
 Arguments
 In the case of Tolentino vs sec of finance, how did the SC answer the argument that in cases of sale of properties in
installment and it was consummated about 15 years ago and thereafter VAT was passed. It is not considered as an
impairment of contracts? Because at the time the parties enter into the contract (Deed of sale-1980) 20 years to
pay, until year 2000. Sale of property. VAT took effect on 1996 where in payment of amortization there is VAT.
Tolentino contended that it was impairment of contracts. What did the court say? How did the court answered the
VATability of the sale of the bible? Tolentino invoked American Bible Society case.
 CIR vs Algue
 Theory of taxation
 Basis of taxation
 Lingayen Electric, RCPI, Escudero Electric Services, Maceda vs Macaraig
 Impairment of Contracts
 Philippine Assettle...case, American Rubber Company, Yangco case ,Maceda vs Macaraig
 Shifting
 Direct and indirect tax
 Lung center of the PH
 Actually directly exclusively used
 Ateneo and La Salle case (earning of canteen), St. Luke’s Medical Center vs CIR
 Educational Institutions