3C TAX Digest Part 2 - 91 So On

San Beda C ollege of L aw|CLASS 3C-2010-2011 Taxation 1 Case Digest Case no. 91 and so on.
91. Quinto CIR v COURT OF APPEALS Jan 20, 1995 FACTS: On 22 August 1986, during the period when the President of the Republic still wielded legislative powers, Executive Order No. 41 was promulgated declaring a one-time tax amnesty on unpaid income taxes, later amended to include estate and donor's taxes and taxes on business, for the taxable years 1981 to 1985. Availing itself of the amnesty, respondent R.O.H. Auto Products Philippines, Inc., filed, in October 1986 and November 1986, its Tax Amnesty Return No. 34-F-00146-41 and Supplemental Tax Amnesty Return No. 34-F-00146-64B, respectively, and paid the corresponding amnesty taxes due Respondent (herein petitioner Commissioner) failed to present any case or law which proves that an ssessment can withstand or negate the force and effects of a tax amnesty. This burden of proof on the petitioner (herein respondent taxpayer) was created by the clear and express terms of the executive order's intention qualified availers of the amnesty may pay an amnesty tax in lieu of said unpaid taxes which are forgiven (Section 2, Section 5, Executive Order No. 41, as amended). More specifically, the plain provisions in the statute granting tax amnesty f or unpaid taxes for the period January 1, 1981 to December 31, 1985 shifted the burden of proof on respondent to show how the issuance of an assessment before the date of the promulgation of the executive order could have a reasonable relation with the objective periods of the amnesty, so as to make petitioner still answerable for a tax liability which, through the statute, should have been erased with the proper availment of the amnesty. ISSUE: Whether or not said deficiency assessments in question were extinguished by reason or private respondent's availment of executive order no. 41 as amended by executive order no. 6 Ruling: The period of the amnesty was later extended to 05 December 1986 from 31 October 1986 by Executive Order No. 54, dated 04 November 1986, and, its coverage expanded, under Executive Order No. 64, dated 17 November 1986, to include estate and honors taxes and taxes on business. If, as the Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a general grant of tax amnesty subject only to the cases specifically excepted by it. It might not be amiss to recall that the taxable periods covered by the amnesty include the years immediately preceding the 1986 revolution during which time there had been persistent calls, all too vivid to be easily forgotten, for civil disobedience, most particularly in the payment of taxes, to the martial law regime. It should be understandable then that those who ultimately took over the reigns of government following the successful revolution would promptly provide for abroad, and not a confined, tax amnesty. Relative to the two other issued raised by the Commissioner, we need only quote from Executive Order No. 41 itself; thus:
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Sec. 6. Immunities and Privileges. Upon full compliance with the conditions of the tax amnesty and the rules and regulations issued pursuant to this Executive order, the taxpayer shall enjoy the following immunities and privileges: a) The taxpayer shall be relieved of any income tax liability on any untaxed income from January 1, 1981 to December 31, 1985, including increments thereto and penalties on account of the non-payment of the said tax. Civil, criminal or administrative liability arising from the non-payment of the said tax, which are actionable under the National Internal Revenue Code, as amended, are likewise deemed extinguished. b) The taxpayer's tax amnesty declaration shall not be admissible in evidence in all proceedings before judicial, quasijudicial or administrative bodies, in which he is a defendant or respondent, and the same shall not be examined, inquired or looked into by any person, government official, bureau or office. c) The books of account and other records of the taxpayer for the period from January 1, 1981 to Decemb er 31, 1985 shall not be examined for income tax purposes: Provided, That the Commissioner of Internal Revenue may authorize in writing the examination of the said books of accounts and other records to verify the validity or correctness of a claim for grant of any tax refund, tax credit (other than refund on credit of withheld taxes on wages), tax incentives, and/or exemptions under existing laws. There is no pretension that the tax amnesty returns and due payments made by the taxpayer did not conform with the conditions expressed in the amnesty order. 92. Lacap HILADO V CIR EMILIO Y. HILADO, petitioner, vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents. BAUTISTA ANGELO, J: Facts: Petitioner filed his income tax return for 1951 wherein he claimed the amount of P12,837.65 as a deductible item from his gross income pursuant to General Circular No. V-123 issued by the Collector of Internal Revenue. Meanwhile, the Secretary of Finance, through the Collector of Internal Revenue, iss ued General Circular No. V-139 which not only revoked and declared void his general Circular No. V- 123 but laid down the rule that losses of property which occurred during the period of World War II from fires, storms, shipwreck or other casualty, or from robbery, theft, or embezzlement are deductible in the year of actual loss or destruction of said property. As a consequence, the amount of P12,837.65 was disallowed as a deduction from the gross income of petitioner for 1951 and the Collector of Internal Revenue demanded from him the payment of the sum of P3,546 as deficiency income tax for said year. When the petition for reconsideration filed by petitioner was denied, he filed a petition for review with the Court of Tax Appeals. In due time, this court rendered decision affirming the assessment made by respondent Collector of Internal Revenue. Issue: Whether or not the petitioner is entitled to tax deduction for the year 1951 under an erroneous circular Held: No. An administrative officer cannot change a law enacted by Congress. A regulation that is merely an interpretation of the statute when once determined to have been erroneous becomes nullity. An erroneous construction of the law by the Treasury Department or the collector of internal revenue does not preclude or estop the government from collecting a tax which is legally due. The amount would not also be deductible as a loss in 1951 because, said amount would at most be a proper deduction from his 1950 gross income. In the second place, said amount cannot be considered as a "business asset" which can be deducted as a loss in contemplation of law because its collection is not enforceable as a matter of right, but is dependent merely upon the generosity and magnanimity of the U. S. government. Page 2 of 23
Petitioner's contention that during the last war and as a consequence of enemy occupation in the Philippines "there was no taxable year" within the meaning of our internal revenue laws because during that period they were unenforceable, is without merit. It is well known that our internal revenue laws are not political in nature and as such were continued in force during the period of enemy occupation and in effect were actually enforced by the occupation government. As a matter of fact, income tax returns were fi led during that period and income tax payment were effected and considered valid and legal. Such tax laws are deemed to be the laws of the occupied territory and not of the occupying enemy. Law once established continues until changed by some competent legislative power. It is not changed merely by change of sovereignty. Conquest or colonization is impotent to bring law to an end; inspite of change of constitution, the law continues unchanged until the new sovereign by legislative act creates a change. 93. Cabanilla MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS V DEP OF FINANCE 94. Alvarez CIR V CA Feb 6, 1997 95. Estember COMMISSIONER VS. LINGAYEN GULF ELECTRIC GR L-23771, 4 August 1988 Sarmiento (J): 13 concur Facts: Lingayen Gulf Electric Power operates an electric power plant serving the municipalities of Lingayen and Binmaley, Pangaisnan, pursuant to municipal franchise granted it by the respective municipal councils. The franchises provided that the grantee shall pay quarterly to the Provincial Treasury of Pangasinan 1% of the gross earnings obtained through the privilege for the first 20 years (from 1946), and 2% during the remaining 15 years of the life of the franchise. In 1948, the Philippine President approved the franchise (RA 3843). In 1955, the BIR assessed and demanded against the company deficiency franchise taxes and surcharges fro the years 1946 to 1954 applying the franchise tax rate of 5% on gross receipts from 1948 to 1954. The company asked for a reinvestigation, which was denied. Issue [1]: Whether the Court can inquire into the wisdom of the Act. Held [1]: The Court does not have the authority to inquire into the wisdom of the Act. Charters or special laws granted and enacted by the Legislatur are in the nature of private contracts. They do not contitute a part of the machinery of the general government. They are usually adopted after careful consideration of the private rights in relation with the resultant benefits of the State. In passing a special charter, the attention of the Legislature is directed to the facts and circumstances which the act or charter is intended to meet. The Legislature considers and makes provision for all the circumstance of the particular case. The Court ought not to disturb the ruling of the Court of Tax Appeals on the constitutionality of the law in question. Issue [2]: Whether a rate below 5% on gross income violate the uniformity of tax clause in the Constitution. Held [2]: A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class shall be taxed alike. The legislature has the inherent power not only to select the subjects of taxation but to grant exemptions. Tax exemptions have never been deemed violateve of the equal protection clause. Herein, the 5% franchise tax rate provided in Section 259 of the Tax Code was never intended to have a universal application. Section 259 expressly allows the payment of taxes at rates Page 3 of 23
lower than 5% when the charter granting the franchise precludes the imposition of a higher tax. RA 3843 did not only fix and specify a franchise tax of 2% on its gross receipts, but made it in lieu of any and all taxes, all laws to the contrary notwithstanding. The company, hence, is not liable for deficiency taxes. 96. Arana ABS CBN BROADCASTING CORP. VS CTA Oct 12, 1981 97. Villanueva PHILIPPINE BANK OF COMMUNICATIONS v CIR 98. Querido CIR V TOKYO SHIPPING CO., ltd 99. Pambid REYES V ALMANZOR 100. Crespo CIR V ALGUE 101. Rosalejos PHILEX MINING CORP VS CIR 102. Cangco FRANCIA VS. INTERMEDIATE APPELLATE COURT G.R. No. L-67649. June 28, 1988 FACTS: Engracio Francia is the registered owner of a residential lot and a two-story house built upon it situated at Pasay City. The lot, with an area of about 328 square meters, is described and covered by TCT 4739 (37795) of the Registry of Deeds of Pasay City. On October 15, 1977, a 125 square meter portion of Francias property was expropriated for the sum of P4,116.00 representing the estimated amount equivalent to the assessed value of the aforesaid portion. Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5, 1977, his property was sold at public auction by the City Treasurer of Pasay City pursuant to Section 73 of PD 464 known as the Real Property Tax Code in order to satisfy a tax delinquency of P2,400.00. Ho Fernandez was the highest bidder for the property. Francia was not present during the auction sale since he was in Iligan City at that time helping his uncle ship bananas. On March 3, 1979, Francia received a notice of hearing of LRC Case 1593-P In re: Petition for Entry of New Certificate of Title filed by Ho Fernandez, seeking the cancellation of his title and the issuance in Fernadez name of a new certificate of title. Upon verification through his lawyer, Francia discovered that a Final Bill of Sal e had been issued in favor of Ho Fernandez by the City Treasurer on 11 December 1978. The auction sale and the final bill of sale were both annotated at the back of the title by the Register of Deeds. On March 20, 1979, Francia filed a complaint to annul the auction sale. The lower court rendered a decision, dismissing his complaint and ordering the Register of Deeds of Pasay City to issue a new TCT in favor of Fernandez over the parcel of land including the improvements thereon. The Intermediate Appellate Court affirmed the decision of the lower court. Hence, the Petition for Review. He alleged that IAC committed a grave error of law in not holding his obligation to pay P2,400 for supposed tax delinquency was set-off by the amount of P4, 116 which the government is indebted to him when a portion of his land was expropriated in 1977. Hence, his tax obligation had been set -off by operation of law as of October 15, 1977. Page 4 of 23
ISSUE: Whether or not Francias tax delinquency can be set off with his claim against the government. HELD: NO. The Court have consistently ruled that there can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government. There is no legal basis for the compensation. By legal compensation, obligations of persons, who in their own right are reciprocally debtors and creditors of each other, are extinguished (Art. 1278, Civil Code). The circumstances of the case do not satisfy the requirements provided by Article 1279, to wit: (1) that each one of the obligors be bound principally and that he be at the same time a principal creditor of the other; xxx (3) that the two debts be due. In the case of Republic v. Mambulao Lumber Co. (4 SCRA 622), the Court ruled that Internal Revenue Taxes can not be the subject of set-off or compensation. It stated: A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the state or municipality to one who is liable to the state or municipality for taxes. Neither are they a proper subject of recoupment since they do not arise out of the contract or transaction sued on. . . . . (80 C.J.S., 73-74). The general rule based on grounds of public policy is well-settled that no set-off admissible against demands for taxes levied for general or local governmental purposes. The reason on which the general rule is based, is that taxes are not in the nature of contracts between the party and party but grow out of duty to, and are the positive acts of the government to the making and enforcing of which, the personal consent of individual taxpayers is not required. . . . A taxpayer cannot refuse to pay his tax when called upon by the collector because he has a claim against the governmental body not included in the tax levy. The rule was reiterated in the case of Cordero v. Gonda (18 SCRA 331) where the Court stated that: . . . internal revenue taxes can not be the subject of compensation because the government and taxpayer are not mutually creditors and debtors of each other under Article 1278 of the Civil Code and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off. The tax was due to the city government while the expropriation was effected by the national government. Moreover, the amount of P4,116.00 paid by the national government for the 125 square meter portion of his lot was deposited with the Philippine National Bank long before the sale at public auction of his remaining property. Notice of the deposit dated September 28, 1977 was received by the petitioner on September 30, 1977. The petitioner admitted in his testimony that he knew about the P4,116.00 deposited with the bank but he did not withdraw it. It would have been an easy matter to withdraw P2,400.00 from the deposit so that he could pay the tax obligation thus aborting the sale at public auction. 103. Sio CIR V ITOGON-SUYOC MINES, INC 104. Espinosa DOMINGO V GARLITOS 105. Mangubat RP V MAMBULAO LUIMBER COMPANY ANTI GRAFT LEAGUE OF THE PHILIPPINES V SAN JUAN 106. Dinoso JOYA V PCGG 107. Reyes JOSE MARI EULALIO C. LOZADA and ROMEO B. IGOT vs. THE COMMISSION ON ELECTIONS Page 5 of 23
G.R. NO. 59068 January 27, 1983 FACTS:
DE CASTRO, J.:
A petition for mandamus was filed by Jose Mari Eulalio C. Lozada and Romeo B. Igot as a representative suit for and in behalf of those who wish to participate in the election irrespective of party affiliation, to compel the respondent COMELEC to call a special election to fill up existing vacancies numbering twelve (12) in the Interim Batasan Pambansa. Petitioner Lozada claims that he is a taxpayer and a bona fide elector of Cebu City and a transient voter of Quezon City, Metro Manila, who desires to run for the position in the Batasan Pambansa; while petitioner Romeo B. Igot alleges that, as a taxpayer, he has standing to petition by mandamus the calling of a special election as mandated by the 1973 Constitution.The respondent COMELEC, represented by counsel, opposes the petition alleging, substantially, petitioners lack standing to file the instant petition for they are not the proper parties to institute the action. ISSUE: Whether or not the case will prosper as a taxpayer suit HELD: No. As taxpayers, petitioners may not file the instant petition, for nowhere therein is it alleged that tax money is being illegally spent. The act complained of is the inaction of the COMELEC to call a special election, as is allegedly its ministerial duty under the constitutional provision abovecited, and therefore, involves no expenditure of public funds. It is only when an act complained of, which may include a legislative enactment or statute, involves the illegal expenditure of public money that the so-called taxpayer suit may be allowed. What the case at bar seeks is one that entails expenditure of public funds which may be illegal because it would be spent for a purpose -that of calling a special election-which, as will be shown, has no authority either in the Constitution or a statute. *Calvan CIR V S.C. JOHNSON CHAPTER V 1. Salabsab ST. STEPHEN;S ASSOCIATION V CIR ST. STEPHENS ASSOCIATION AND ST. STEPHEN GIRLS SCHOOL (Girls) vs. CIR G.R. no. L-11238 21 August 1958 FACTS: Petitioner is a non-stock educational school for Chinese children. A donation was made by St. Stephen to Girls which was recorded in its books of accounts as donation. CIR sent its assessment notice with St. Stephen demanding payment as donors and donees gift taxes including surcharge and interest. Petitioner wrote the Collector requesting the cancellation and withdrawal of the assessment on the ground of erroneous entry by the book keepers as donation and such was obtained by means of small contribution from public and allocated for its maintenance. CIR wrote back insisting payment of the tax. MR of petitioner was denied and such decision shall be final within 30 days unless an appeal was made to CTA. CTA dismissed the petition for lack of jurisdiction invoking that 37 days had already l apsed. Such was counted from the time they have received the assessment. Page 6 of 23
ISSUE: Whether or not the appeal is belatedly filed. HELD: NO. The period for appeal to the respondent court in this case must, therefore, be computed from the time petitioners received the decision of the respondent Collector of Internal Revenue on the disputed assessment, and not from the time they received said assessment. The next question now is: which is the decision of the Collector on the disputed assessment his letter of April 6, 1955, received by petitioners on April 21, 1955, denying their first request for the withdrawal and cancellation of the assessment; or his letter of July 11, 1955, received by petitioners on July 25, 1955, denying their second request that the assessment be cancelled and withdrawn, and stating that: This decision becomes final thirty days after your receipt hereof unless an appeal is taken to the Court of Tax Appeals within the same period, in accordance with the provision of Republic Act No. 1125. From the above-quoted statement appearing in his letter of July 11, 1955, it is evident that the respondent Collector himself considered said letter as his final decision in the case, hence his warning that the same would become final in thirty days unless petitioners appealed to the Court of Tax Appeals within the same period. Prior to his letter-decision of July 11, 1955, then, the Collector must have held the matter under advisement and considered his preceding rulings as merely tentative in character, pending his final determination and resolution of the merits of the arguments of fact and law submitted by petitioners in support of their requests for the cancellation and withdrawal of the assessment. This must have been the reason why, in said letter-decision of July 11, 1955, the Collector included an express statement that said decision was to become final in thirty days unless appealed from within the same period; and it must also have been for this reason that, throughout the proceedings in the respondent Collector never claimed that petitioners' appeal was filed out of time, and it was the Tax Court that motu proprio dismissed the petition because it believed it was not filed within the period provided by Republic Act No. 1125. Respondents assert that the Collector of Internal Revenue can not enlarge or extend the period for appeal under section 11 of Republic Act No. 1125. This is not, however, a case where the respondent Collector had enlarged or extended the period for appeal to the respondent Court; this is simply a case where the Collector did not reach a final decision on the matter pending before him until July 11, 1955, when he released his letter-decision of the same date. Petitioners having filed their appeal on the 19th day from the receipt of this decision, their appeal was filed on time and the respondent Court erred in dismissing the same for lack of jurisdiction. Wherefore, the resolution appealed from is reversed, and the records are ordered remanded to the respondent court for decision on the merits. Without costs.
2. Castronuevo ADVERTISING ASSOCIATES V CA 3. Goce CIR V ISABELA CULTURAL CORPORATION 4. Guro SURIGAO ELECTRIC CO. AND LUMANLAN V MUNICIPALITY OF SURIGAO 5. Escalona YABES V FLOGO 6. Villamor CIR V UNION SHIPPING CORP Page 7 of 23
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ALGUE, INC., and THE COURT OF TAX APPEALS, respondents. G.R. No. L-28896. February 17, 1988 Facts: The record shows that on January 14, 1965, the private respondent, a domestic corporation engaged in engineering, construction and other allied activities, received a letter from the petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959. On January 18, 1965, Algue filed a letter of protest or request for reconsideration, which letter was stamp-received on the same day in the office of the petitioner. On March 12, 1965, a warrant of distraint and levy was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. A search of the protest in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant. On April 7, 1965, Atty. Guevara was finally informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of distraint and levy earlier sought to be served. Sixteen days later, on April 23, 1965, Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals. Issue: Whether or not the appeal of the private respondent from the decision of the Collector of Internal Revenue was made on time and in accordance with law. Held: According to Rep. Act No. 1125, the appeal may be made within thirty days after receipt of the decision or ruling challenged. It is true that as a rule the warrant of distraint and levy is "proof of the finality of the assessment" and "renders hopeless a request for reconsideration," being "tantamount to an outright denial thereof and makes the said request deemed rejected." But there is a special circumstance in the case at bar that prevents application of this accepted doctrine. The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it filed its letter of protest. This was apparently not taken into account before the warrant of distraint and levy was issued; indeed, such protest could not be located in the office of the petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all, considered by the tax authorities. During the intervening period, the warrant was premature and could therefore not be served. 7. Benitez CIR V ALGUE G.R. No. L-28896 February 17, 1988 CRUZ, J.: Facts: Algue Inc., a domestic corporation engaged in engineering, construction and other allied activities, received a letter from the CIR assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959. Algue filed a letter of protest or request for reconsideration. A warrant of distraint and levy was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. A search of the protest in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant. Atty. Guevara was finally informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of distraint and levy earlier sought to be served. Sixteen days later, Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals. Page 8 of 23
Issue: (1) Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in its income tax returns. (2) Whether or not the appeal of the private respondent from the de cision of the Collector of Internal Revenue was made on time and in accordance with law. Held: (1) NO. The Court of Tax Appeals, agreeing with Algue, held that the said amount had been legitimately paid by the private respondent for actual services rendered. The payment was in the form of promotional fees. These were collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development Company. In fact, as the said court found, the amount was earned through the joint efforts of the persons among whom it was distributed It has been established that the Philippine Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable Oil Investment Corporation, inducing other persons to invest in it. Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation purchased the PSEDC properties. For this sale, Algue received as agent a commission of P126,000.00, and it was from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals. There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes thereon. The Court of Tax Appeals also found, after examining the evidence, that no distribution of dividends was involved. We agree with the respondent court that the amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate Development Co. to the private respondent was P125,000.00. After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. This finding of the respondent court is in accord with the following provision of the Tax Code. The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity of the claimed deduction. In the present case, however, we find that the onus has been discharged satisfactorily. The private respondent has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of pesos. Even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed. (2) YES The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125, the appeal may be made within thirty days after receipt of the decision or ruling challenged. It is true that as a rule the warrant of distraint and levy is "proof of the finality of the assessment" and renders hopeless a request for reconsideration," being "tantamount to an outright denial thereof and makes the said request deemed rejected." But there is a special circumstance in the case at bar that prevents application of this accepted doctrine. The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it filed its letter of protest. As the Court of Tax Appeals correctly noted," the protest filed by private respondent was not pro forma and was based on strong legal considerations. It thus had the effect of suspending the reglementary period which started on the date the assessment was received. The period started running again only when the private respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it. Hence, when the appeal was filed only 20 days of the reglementary period had been consumed. During the intervening period, the warrant was premature and could therefore not be served. Page 9 of 23
8. Macaraeg PHIL JOURNALISTS INC, V CIR 9.Federio CIR V PHILIPPINE GLOBAL COMMUNICATIONS, INC. 10. Tecson RCBC V CIR 11. Cayaban OCEANIC WIRELESS v. COMMISSIONER OF INTERNAL REVENUE GR NO. 148380, December 9, 2005 AZCUNA, J. On March 17, 1988, petitioner received from the Bureau of Internal Revenue (BIR) deficiency tax assessments for the taxable year 1984 in the total amount of P8,644,998.71. Petitioner filed its protest against the tax assessments and requested a reconsideration or cancellation of the same in a letter to the BIR Commissione r. Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and Billing Division, Mr. Severino B. Buot, reiterated the tax assessments while denying petitioners request for reinvestigation. Said letter likewise requested petitioner to pay within 10 days from receipt thereof, otherwise the case shall be referred to the Collection Enforcement Division of the BIR National Office for the issuance of a warrant of distraint and levy without further notice. Upon petitioners failure to pay the subject tax assessments within the prescribed period, the Assistant Commissioner for Collection, acting for the Commissioner of Internal Revenue, issued the corresponding warrants of distraint and/or levy and garnishment. Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to contest the issuance of the warrants to enforce the collection of the tax assessments. The CTA dismissed the petition for lack of jurisdiction. Petitioner filed a Motion for Reconsideration arguing that the demand letter cannot be considered as the final decision of the Commissioner of Internal Revenue on its protest because the same was signed by a mere subordinate and not by the Commissioner himself. With the denial of its motion for reconsideration, petitioner consequently filed a Petition for Review with the Court of Appeals contending that there was no final decision to speak of because the Commissioner had yet to make a personal determination as regards the merits of petitioners case. The Court of Appeals denied the petition. ISSUE: Whether the demand letter for tax deficiency issued and signed by a subordinate officer who was acting in behalf of the CIR is deemed final and executor and subject to an appeal to the CTA. HELD: YES. Page 10 of 23
A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. The determination on whether or not a demand letter is final is conditioned upon the language used or the tenor of the letter being sent to the taxpayer. In this case, the letter of demand, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioners request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested its payment. Failure to do so would result in the issuance of a warrant of distraint and levy to enforce its collection without further notice. In addition, the letter contained a notation indicating that petitioners request for reconsideration had been denied for lack of supporting documents. The demand letter received by petitioner verily signified a character of finality. Therefore, it was tantamount to a rejection of the request for reconsideration. This now brings us to the crux of the matter as to whether said demand letter indeed attained finality despite the fact that it was issued and signed by the Chief of the Accounts Receivable and Billing Division instead of the BIR Commissioner. The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted to him under the National Internal Revenue Code (NIRC) enumerated in Section 7. As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR Commissioner to delegate the powers vested in him under the pertinent provisions of the Code to any subordinate official with the rank equivalent to a division chief or higher, except the following: (a) (b) Bureau; The power to recommend the promulgation of rules and regulations by the Secretary of Finance; The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the
(c) The power to compromise or abate under Section 204(A) and (B) of this Code, any tax deficiency: Provided, however, that assessments issued by the Regional Offices involving basic deficiency taxes of five hundred thousand pesos (P500,000) or less, and minor criminal violations as may be determined by rules and regulations to be promulgated by the Secretary of Finance, upon the recommendation of the Commissioner, discovered by regional and district officials, may be compromised by a regional evaluation board which shall be composed of the Regional Director as Chairman, the Assistant Regional Director, heads of the Legal, Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer, as members; and (d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept. It is clear from the above provision that the act of issuance of the demand letter by the Chief of the Accounts Receivable and Billing Division does not fall under any of the exceptions that have been mentioned as non -delegable. Thus, the authority to make tax assessments may be delegated to subordinate officers. Said assessment has the same force and effect as that issued by the Commissioner himself, if not reviewed or revised by the latter such as in this case. 12. Santos FISHWEALTH V CIR Page 11 of 23
LOCAL TAXATION a. Quinto LUNG CENTER OF THE PHILIPPINES V QC Lung Center of the Philippines is a non-stock and non-profit entity. It is the registered owner of a parcel of land, located at Quezon City. A big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as their private clinics for their patients whom they charge for their professional services. Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon Avenue and Elliptical Road, is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies f rom the government. On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property taxes in the amount of P4,554,860 by the City Assessor of Quezon City. Accordingly, Tax Declaration Nos. were issued for the land and the hospital building, respectively. 4 On August 25, 1993, the petitioner filed a Claim for Exemption 5 from real property taxes with the City Assessor, predicated on its claim that it is a charitable institution. The petitioners request was denied, and a petition was, thereafter, filed before the Local Board of Assessment Appeals of Quezon City (QCLBAA, for brevity) for the reversal of the resolution of the City Assessor. The petitioner alleged that under Section 28, paragraph 3 of the 1987 Constitution, the property is exempt from real property taxes. It averred that a minimum of 60% of its hospital beds are exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The petitioner contends that it is a charitable institution and, as such, is exempt from real property taxes. The QC-LBAA rendered judgment dismissing the petition and holding the petitioner liable for real property taxes.6 ISSUE: a) whether the petitioner is a charitable institution within the context of Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act No. 7160; and (b) whether the real properties of the petitioner are exempt from real property taxes. RULING: As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution. [A]n institution does not lose its charitable character, and consequent exemption from taxation, by reason of the fact that those recipients of its benefits who are able to pay are required to do so, where no profit is made by the institution and the amounts so received are applied in furthering its charitable purposes, and those benefits are refused to none on account of inability to pay therefor. The fundamental ground upon which all exemptions in favor of charitable institutions are based is the benefit conferred upon the public by them, and a conse quent relief, to some extent, of the burden upon the state to care for and advance the interests of its citizens b.Lacap PHILIPPINE RURAL ELECTRIC COOPERATIVES V DILG Page 12 of 23
SYNOPSIS Facts: Petitioners assailed the constitutionality of Sections 193 and 234 of R.A. No. 7160, otherwise known as the Local Government Code, for being violative of the equal protection clause and non-impairment clause of the Constitution because of the withdrawal by the said Code of the tax exemptions previously enjoyed by petitioners. Held: The Supreme Court ruled that there was no violation of the equal protection clause. The equal protection clause under the Constitution means that no person or class of persons shall be deprived of the same protection of laws which is enjoyed by other persons or other classes in the same place in like circumstances. The guaranty of the equal protection of laws is not violated by a law based on reasonable classification. Classification, to be reasonable, must (1) rest on substantial distinctions; (2) be germane to the purpose of the law; (3) not be limited to existing conditions only; and (4) apply equally to all members of the same class. The Court held that there is reasonable classification under the Local Government Code to justify the different tax treatment between electric cooperatives covered by P.D. No. 269, as amended, and electric cooperatives under R.A. No. 6938. The Court likewise ruled that there was no violation of the non-impairment clause. The constitutional prohibition on the impairment of the obligation of contracts does not prohibit every change in existing laws. To fall within the prohibition, the change must not only impair the obligation of the existing contract, but the impairment must be substantial. MAIN TEXT Facts: A class suit was filed by petitioners in their own behalf and in behalf of other electric cooperatives organized and existing under P.D. No. 269 who are members of petitioner Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA). Section 39 of P.D. No. 269 provides for the tax incentives to electric cooperatives. From 1971 to 1978, in order to finance the electrification projects envisioned by P.D. No. 269, as amended, the Phili ppine Government, acting through the National Economic Council entered into six (6) loan agreements with the government of the United States of America. Petitioners contend that pursuant to the provisions of P.D. No. 269, and a provision in the loan agreements, they are exempt from payment of local taxes, including payment of real property tax. With the passage of the Local Government Code, however, they allege that their tax exemptions have been invalidly withdrawn. In particular, petitioners assail Sections 193 and 234 of the Local Government Code on the ground that the said provisions discriminate against them, in violation of the equal protection clause. Further, they submit that the said provisions are unconstitutional because they impair the obligation of contracts between the Philippine Government and the United States Government. Issue: Whether the withdrawal of tax exemption of petitioners under the Local Government Code violates the constitution Held: No. There is No Violation of the Equal Protection Clause The equal protection clause under the Constitution means that "no person or class of persons shall be deprived of the same protection of laws which is enjoyed by other persons or other classes in the same place and in like circumstances." Thus, the guaranty of the equal protection of the laws is not violated by a law based on reasonable classification. Classification, to be reasonable, must (1) rest on substantial distinctions; (2) be germane to the purposes of the law; (3) not be limited to existing conditions only; and (4) apply equally to all members of the same class. 9 There is reasonable classification under the Local Government Code to justify the different tax treatment between electric cooperatives covered by P.D. No. 269, as amended, and electric cooperatives under R.A. No. 6938. First, substantial distinctions exist between cooperatives under P.D. No. 269, as amended, and cooperatives under R.A. No. 6938. These distinctions are manifest in at least two material respects which go into t he nature of cooperatives envisioned by R.A. No. 6938 and which characteristics are not present in the type of cooperative associations created under P.D. No. 269, as amended. a. Capital Contributions by Members b. Extent of Government Control over Cooperatives Page 13 of 23
Second, the classification of tax-exempt entities in the Local Government Code is germane to the purpose of the law. The Constitutional mandate that every local government unit shall enjoy local autonomy, does not mean that the exercise of power by local governments is beyond regulation by Congress. Thus, while each government unit is granted the power to create its own sources of revenue, Congress, in light of its broad power to tax, has the discretion to determine the extent of the taxing powers of local government units consistent with the policy of local autonomy. Finally, Sections 193 and 234 of the Local Government Code permit reasonable classification as these exemptions are not limited to existing conditions and apply equally to all members of the same class. Exemptions from local taxation, including real property tax, are granted to all cooperatives covered by R.A. No. 6938 and such exemptions exist for as long as the Local Government Code and the provisions therein on local taxation remain good law. II There is No Violation of the Non-Impairment Clause It is ingrained in jurisprudence that the constitutional prohibition on the impairment of the obligation of contracts does not prohibit every change in existing laws. To fall within the prohibition, the change must not only impair the obligation of the existing contract, but the impairment must be substantial. A law which changes the terms of a legal contract between parties, either in the time or mode of performance, or imposes new conditions, or dispenses with those expressed, or authorizes for its satis faction something different from that provided in its terms, is law which impairs the obligation of a contract and is therefore null and void. Moreover, to constitute impairment, the law must affect a change in the rights of the parties with reference to each other and not with respect to non-parties. A plain reading of the loan agreement readily shows that it does not grant any tax exemption in favor of the borrower or the beneficiary either on the proceeds of the loan itself or the properties acquired through the said loan. It simply states that the loan proceeds and the principal and interest of the loan, upon repayment by the borrower, shall be without deduction of any tax or fee that may be payable under Philippine law as such tax or fee will be absorbed by the borrower with funds other than the loan proceeds.
c.Cabanilla CITY ASSESOR OF CEBY CITY V ASSOCIATION OF BENEVOLA DE CEBU d.Alvarez CITY GOV OF SAN PABLO V HON. BIENVENIDO REYES e.Estember FIRST PHILIPPINE INDUSTRIAL COPRORATION VS CA f.Arana g.Villanueva G.R. No. 119122 August 8, 2000 PHILIPPINE BASKETBALL ASSOCIATION, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS, AND COMMISSIONER OF INTERNAL REVENUE, respondents. PURISIMA, J.: Facts: petitioner received an assessment letter from respondent Commissioner for the payment of deficiency amusement tax. petitioner contested the assessment by filing a protest with respondent Commissioner who denied the same. petitioner filed a petition for review 2 with the Court of Tax Appeals, which dismissed petitioners petition. petitioner appealed the CTA decision to the Court of Appeals, which affirmed the decision of the CTA. Hence, this petition. Petitioner contends that PD 231, otherwise known as the Local Tax Code of 1973, transferred Page 14 of 23
the power and authority to levy and collect amusement taxes from the sale of admission tickets to places of amusement from the national government to the local governments, thus jurisdiction to collect amusement taxes of PBA games is not vested in the national government to the exclusion of the local governments. Issue: Whether or not the amusement tax on admission tickets to PBA games a national or local tax. Held: The Court is not persuaded by petitioner's asseverations. Section 13 of the Local Tax Code indicates that the province can only impose a tax on admission from the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement. The authority to tax professional basketball games is not therein included, as the same is expressly embraced in PD 1959, which amended PD 1456. From a reading of SECTION 44. Section 268 of the said code, it is clear that the "proprietor, lessee or operator of . . . professional basketball games" is required to pay an amusement tax equivalent to fifteen per centum (15%) of their gross receipts to the Bureau of Internal Revenue, which payment is a national tax. The said paymen t of amusement tax is in lieu of all other percentage taxes of whatever nature and description. While Section 13 of the Local Tax Code mentions "other places of amusement", professional basketball games are definitely not within its scope. in determining the meaning of the phrase "other places of amusement", one must refer to the prior enumeration of theaters, cinematographs, concert halls and circuses with artistic expression as their common characteristic. Professional basketball games do not fall under the same category as theaters, cinematographs, concert halls and circuses as the latter basically belong to artistic forms of entertainment while the former caters to sports and gaming.
h. Querido i. Pambid j. Crespo REAL PROPERTY a.Rosalejos b.Cangco CITY OF BAGUIO vs. FERNANDO BUSUEGO G.R. No. L-29772 September 18, 1980 FACTS: On August 11, 1959, Busuego and GSIS entered into a Contract to Sell over a property owned by the latter. Under the contract, the title remains with GSIS until full payment of Busuego of the purchase price although actually the possession and use thereof has already been transferred to Busuego. Moreover, Paragraph 2 of the said contract manifests Busuegos willingness at the signing thereof to pay and shoulder all taxes and as sessments on the subject property and insurance thereon during the term of the said contract. However, Busuego, after having voluntarily paid taxes due on the property in the amount of P287.00 for the year 1963 backed out of his undertaking upon discovering that section 28(c) of Commonwealth Act 186 exempts the GSIS from the payment of taxes. His theory is that while title to the property has not passed to him, per paragraph 4 of the contract, and ownership remains with GSIS, there could not be any obligation to pay taxes on the property that should be assumed by him as purchaser, since the owner-seller, in whom title remains, is exempt from taxes. Hence, a tax collection suit was instituted by the City of Baguio against Busuego for unpaid realty taxes from year 1962 to 1966 amounting to P1, 656. Page 15 of 23
ISSUE: Whether or not Busuego is liable to pay the real estate tax although the title thereof remained with an entity (GSIS) exempt from payment of such tax. HELD: YES. When Busuego agreed to the contractual stipulation "to pay and shoulder all taxes and assessments on the lot and building or improvements thereon and insurance during the term of the contract, he is now estopped to deny his liability to pay the taxes. And, on the other hand, when the GSIS sold the property and imposed said condition, the agency although exempt from the payment of taxes clearly indicated that the property became taxable upon its delivery to the purchaser and that the sole determinative factor for exemption from realty taxes is the "use" to which the property is devoted. And where "use" is the test, the ownership is immaterial. In the instant case, although the property was still in the name of the GSIS pending the payment of the full price its, use and possession was already transferred to Busuego. Such contractual stipulation that the purchaser on installments pays the real estate taxes pending completion of payments, although the seller who retained title is exempt from such taxes, is valid and binding, absent any law to the contrary and none has been cited by Busuego. Thus, the delivery of possession by the seller GSIS to the purchaser was clearly with the intention of passing to the latter the possession, use of and control over said property, and all the other attributes of ownership, short of the naked ownership such that it included in said transfer the incidental obligation to pay the taxes thereon, for nothing more was left to the GSIS except its right to receive full payment of the purchase price. The fact that in the contract to sell the GSIS, although aware of its own exemption from taxation stipulated and exacted from the purchaser the payment of taxes amounts to an interpretation on its part that such an immunity was not to be transmitted to a private person who becomes the beneficial owner and user of the property. The position taken by the GSIS is but in conformity with Section 40(a) of Presidential Decree No. 464 entitled The Real Property Tax Code promulgated on May 20, 1974 which reads as follows: Sec. 40., Exemptions from Real Property Tax. The exemptions shall be as follows: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any governmentowned corporation so exempt by its charter; Provided, however, That this exemption shall not apply to real property of the above-named entitles the beneficial use of which has been granted, for consideration or otherwise, to a taxable person. Thus under this provision, while the GSIS may be exempt from real estate tax the exemption does not cover property belonging to it "where the beneficial use thereof has been granted for consideration or otherwise to a taxable person." There can be no doubt that under the provisions of the contract in question, the purchaser to whose possession the property had been transferred was granted beneficial use thereof. It follows on the strength of the provision sec. 40(a) of PD 464 that the said property is not exempt from the real property tax. While this decree just cited was still inexistent at the time the taxes at issue were assessed on the herein appellant, indeed its above quoted provision sheds light upon the legislative intent behind the provision of Commonwealth Act 186, pertaining to exemption of the GSIS from taxes. c.Sio d.Espinosa e. Mangubat f. Dinoso g. Reyes ALEJANDRO B. TY AND MVR PICTURE TUBE, INC, vs. THE HON. AURELIO C. TRAMPE G.R. No. 117577 December 1, 1995 PANGANIBAN, J.: Page 16 of 23
Facts: Petitioner Alejandro B. Ty is a resident of and registered owner of lands and buildings in the Municipality of Pasig, while petitioner MVR Picture Tube, Inc. is a corporation duly organized and existing under Philippine laws and is likewise a registered owner of lands and buildings in said Municipality. On January 6 1994, respondent Assessor sent a notice of assessment respecting certain real properties of petitioners located in Pasig, Metro Manila. In a letter dated March 18 1994, petitioners through counsel requested the Municipal Assessor to reconsider the subject assessments. Not satisfied, petitioners on March 29 1994 filed with the Regional Trial Court a Petition for Prohibition with prayer for a restraining order and/or writ of preliminary injunction to declare null and void the new tax assessments and to enjoin the collection of real estate taxes based on said assessments . Respondent Judge denied the petition for lack of merit .Subsequently, petitioners' Motion for Reconsideration was also denied by respondent Judge. Rebuffed by said Decision and Order, petitioners filed this present Petition for Review directly before this Court, raising pure questions of law. Issue: Whether petitioners are required to exhaust administrative remedies prior to seeking judicial relief Held: No. Although as a rule, administrative remedies must first be exhausted before resort to Judicial action can prosper, there is a well-settled exception in cases where the controversy does not involve questions of fact but only of law. In the present case, the parties, even during the proceedings in the lower court on 11 April 1994, already agreed "that the issues in the petition are legal," and thus, no evidence was presented in said court. In laying down the powers of the Local Board of Assessment Appeals, R.A. 7160 provides in Sec. 229 (b) that "(t)he proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts x x x". It follows that appeals to this Board may be fruitful only where questions of fact are involved. Again, the pr otest contemplated under Sec. 252 of R.A. 7160 is needed where there is a question as to the reasonableness of the amount assessed. Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax assessment, he is required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not act on his protest. In the case at bench however, the petitioners are questioning the very authority and power of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax. These are not questions merely of amounts of the increase in the tax but attacks on the very validity of any increase. h. Calvan
G.R. No. 120082 September 11, 1996 MACTAN CEBU INTERNATI ONAL AI RPORT AUTHORITY, petitioner, vs. HON. FERDI NAND J. MARCOS, in his capacity a s the Pre siding Judge of the Regional Trial Court, Branch 20, Cebu City, THE CITY OF CEBU, represented by its Mayor HON. TOMAS R. OSMEA, and EUSTAQUIO B. CESA, respondents. FACTS: Petitioner Mactan Cebu International Airport Authority (MCIAA) was creat ed by virt ue of Republic Act No. 6958, mandated to "principally undertake the economical, efficient and effective cont rol, management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City, . . . and such other Airports as may be established in the P rovince of Cebu . . . (S ec. 3, RA 6958). Since the time of it s creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with Section 14 of its Charter. Sec. 14. Tax Exemptions. The authority shall be exempt from realty taxes impos ed by the National Government or any of its political subdivisions, agencies and instrumentalities . . . On October 11, 1994, however, Mr. Eustaquio B. Cesa, Officer-in-Charge, Office of the Treasurer of the City of Cebu, demanded payment for realty taxes on several parc els of land belonging to the petitioner. Petitioner objected to such demand for payment as bas eless and unjustified, claiming in its favor the aforecited Section 14 of RA 6958 which exempt it from payment of realty taxes. It was also asserted that it is an
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San Beda C ollege of L aw|CLASS 3C-2010-2011 Taxation 1 Case Digest Case no. 91 and so on. instrumentality of the government performing governmental func tions, citing section 133 of t he Local Government Code of 1991 which puts limitations on the taxing powers of local government units. ISSUE: WON THE CITY OF CEB U HAS THE POWER TO TA X THE PETITIONER RULING: Petitioner contends that being an instrumentality of the National Government, respondent City of Cebu has no power nor authority to impose realty taxes upon it in accordance wit h the aforesaid Section 133 of the LGC. The power to t ax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct aut horit y 22 conferred by Section 5, Article X of the Constitution. Under the latter, the exercise of the power may be subject to such guidelines and limitations as the Congress may provide which, however, must be consistent with the basic policy of local autonomy. There can be no question that under Section 14 of R.A. No. 6958 the petitioner is exempt from the payment of realt y taxes imposed by the National Government or any of its political subdivisions, agencies, and instrumentalities. Nevertheless, since taxation is the rule and ex emption therefrom the exception, the exemption may thus be withdrawn at the pleasure of the taxing authority. The only exception to this rule is where the exemption was granted to private parties based on material consideration of a mutual nature, which then becomes contractual and is thus 23 covered by the non-impairment clause of the Constitution. The LGC, enacted pursuant to Section 3, A rticle X of the constitution provides for t he exercise by local government units of their power to tax, the scope thereof or its limitations, and the exemption from taxation. Section 133 of the LGC prescribes the common limit ations on t he taxing powers of local government units as follows: Sec. 133. Common Limitations on the Taxing Power of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cit ies, municipalities, and barangays shall not extend to the levy of the following: XXX (o) TA XES, FEES, OR CHA RGES OF A NY K IND ON THE NA TIONAL GOVERNME NT, ITS AGE NCIES AND INS TRUMENTA LITIES, AND LOCAL GOVERNMENT UNITS. (emphasis supplied) XXX mong the "taxes" enumerated in the LGC is real property tax, which is governed by Section 232. It reads as follows: Sec. 232. Power to Levy Real Property Tax. A province or city or a municipality within the Metropolitan Manila Area may levy on an annual ad valorem tax on real property such as land, building, machinery and other improvements not hereafter specifically exempted. Section 234 of LGC provides for the exemptions from payment of real property taxes and withdraws previous exemptions therefrom granted to natural and juridic al persons, including government owned and cont rolled corporations, except as provided therein. It provides: Sec. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: XXX Except as provided herein, any exemptions from payment of real property tax previously granted to or presently enjoyed by, all persons whether natural or juridical, including all government owned or controlled corporations are hereby withdrawn upon the effectivity of his C ode. XXX Thus, reading together Section 133, 232 and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133 the taxing powers of local government units cannot extend to the levy of inter alia, "taxes, fees, and charges of any kind of the National Government, its agencies and instrumentalties, and local government units"; however, pursuant to Section 232, provinc es, cities, municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real pr operty owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial used thereof has been grant ed, for consideration or otherwise, to a taxable person", as provided in item (a) of the first paragraph of Section 234. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non stock and non -profit hospitals and educational
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San Beda C ollege of L aw|CLASS 3C-2010-2011 Taxation 1 Case Digest Case no. 91 and so on. institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234, which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption in so far as the real property taxes are concerned by lim iting the retention only to those enumerated there-in; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as the real property is owned by the Republic of the Philippines, or any of its political s ubdivisions covered by item (a) of the first paragraph of S ection 234, the exemption is withdrawn if the beneficial use of such property has been granted to taxable person for consideration or otherwise. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from real property taxes granted to natural or juridical persons, including government -owned or cont rolled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a g overnment-owned corporation, it necessarily follows that its exemption from such tax granted it in S ection 14 of its charter, R.A. No. 6958, has been withdrawn. Any claim to the cont rary can only be justified if the petitioner can seek refuge under any of the exceptions provided in S ection 234, but not under S ection 133, as it now asserts, since, as shown above, the said section is qualified by Section 232 and 234.
i. Salabsab SESBREO vs. CENTRAL BOARD OF ASSESSMENT AND APPEALS G.R. no. 106588 24 March 1997 FACTS: Petitioner purchased from Tan two (2) parcels of land evidenced by a TCT issued by the RD of Cebu. It included the residential house of strong materials constructed on the said lots. So, petitioner declared the real property constructed on the said lots, for purposes of assessment, a residential house of strong materials. In 1980 such was assessed by the respondent City Assessor at the market value of Php 60,000 and an assessed value of Php 36,900. When a tax mapping operation was conducted in Feb 1989, it was discovered that such property was actually a residential building consisting of 4 storeys with a fifth storey used a roofdeck. The materials used was type 2-A materials. Finding were confirmed by the Board of Commissioners. Based on such finding the City Assessor cancelled the first assessment and assessed such property for Php 374,900. Petitioner protested the new assessment for being excessive and unconscionable. He questioned such before the Local Board of Assessment Appeals but it was dismissed. So, petitioner elevated the case Central Board of Assessment Appeals (CBAA). The latter modified the previous decision. Not satisfied petitioner filed an MR. During the hearing petitioners submitted a compromise agreement and such was accepted. One of the contents of the agreement is that Section 23 of Presidential Decree No. 464 APPLIES to this case considering that the appellee has NOT YET SUBMITTED the required CERTIFICATION to the Secretary of Finance to the effect that the GENERAL REVISION OF PROPERTY ASSESSMENTS FOR CEBU CITY HAS BEEN FINISHED. Sec. 23 of P.D. 464 uses the CONJUNCTIVE WORD "AND" between the phrases: "ASSESSMENTS SHALL BECOME EFFECTIVE and "TAXES SHALL ACCRUE AND BE PAYABLE." ISSUE: (1) Whether or not CBAA should not have applied Sec. 24 of PD 464 in the case at bar. (2) Whether or not CBAA should have computed the assessed value of the property based on its market value as defined in paragraph n, Section 3 of PD 464. (3) Whether or not CBAA erred in refusing to apply Section 23 of PD 464. (4) Is CBAAs assessment unconstitutional. HELD: (1) Petitioner's argument is not novel. In Lopez vs. Crow which involved the interpretation of Section 12 of Act 2238, a provision similar to Section 25 of PD 464, the Court rejected a parallel argument that the said provision "refers solely to real estate declared for the first time and does not apply to the area which, upon revision, has been shown to be in excess of that which was formerly declared." The Court held that the area in excess of that declared by the taxpayer was deemed declared for the first time upon its discovery. It ratiocinated thus: Page 19 of 23
. . . it is neither just that another landowner should be permitted by an involuntary mistake or through other causes, not to say bad faith, to state an area far less than that actually contained in his land and pay to the State a tax far below that which he should really pay. This was one of the objects of the Legislature in ordering the revision, so that all real estate should pay the taxes that legally must accrue to the State. Wherefore, even taking the Spanish text of the phrase in (S)ection 12 of Act No. 2238 that "real property declared for the first time shall have taxes assessed against it, etc.," it should not be understood to apply only to real estate that have (sic) never been declared; as within the meaning of such phrase, the excess areas resulting from the revision must be understood as never having been declared before; because only that area must be deemed as declared which is stated in the declaration sheet, and the area over and above that can not be considered as ever having been declared. Section 24 merely lays down the general rule that assessments under PD 464 are to be given prospective application. It cannot be construed in such a manner as to eliminate the imposition of back taxes. If Section 24, instead of Section 25, were made to apply as suggested by petitioner, he would in effect be excused from the payment of back taxes on the undeclared excess area of his property. The Court, clearly, cannot allow a taxpayer evade his obligation to the government by letting him pay taxes on property based on its gross undervaluation at P60,000.00, when the same had then a current market value of P449,860.00. Accepting the petitioner's position will necessarily prejudice the public interest, for the government is thereby deprived of back taxes which ought to have been paid in the first place. This will certainly subvert the raison d'etre of the law which is to raise taxes, the lifeblood of the government. (2) We cannot sustain petitioner's contention. The cited provision merely defines "market value." It does not in any way direct that the market value as defined therein should be used as basis in determining the value of a property for purposes of real property taxation. On the other hand, Section 5 of PD 464 provides unequivocally that "(a)ll real property, whether taxable or exempt, shall be appraised at the current and fair market value prevailing in the locality where the property is situated." Contrary to petitioner's contention, acquisition cost cannot be and is not the sole basis of the current and fair market value of a property. The current value of like properties and their actual or potential uses, among others, are also considered. It is a matter of plain common sense that a building with more floors has a higher market value than one with fewer floors, provided that both are of the same materials. Hence, the tax declaration of the building in question should have accurately reflected its actual area and number of floors, these being necessary for the accurate valuation thereof. (3) This claim lacks merit. As found by Respondent CBAA, the questioned assessment had not been imposed pursuant to a general revision of property assessments that had not yet taken effect. Petitioner, for his part, has failed to prove that this finding constitutes a grave abuse of discretion tantamount to lack or excess of jurisdiction. (5) Equally unmeritorious is petitioner's contention that the imposition of back taxes on his property is unconstitutional for being violative of Section 22, Article III of the 1987 Constitution. When both Public Respondents CBAA and City Assessor imposed back taxes on petitioner's property, they did not violate the rule that laws shall have only prospective applicability. Respondents were only applying PD 464 which had been in effect since 1974. Besides, Section 25 of PD 464 is not penal in character; hence, it may not be considered as an ex post facto law. j.Castronuevo k. Goce Page 20 of 23
l. Guro CHAPTER XII 1.Escalona 2. Villamor TRANSGLOBE INTERNATIONAL, INC., petitioner, vs. COURT OF APPEALS and COMMISSIONER OF CUSTOMS, respondents. G.R. No. 126634. January 25, 1999. Facts: On April 27, 1992, a shipment from Hongkong arrived in the port of Manila on board the S/S Sea Dragon. Acting on information that the shipment violated certain provisions of the Tariff and Customs Code, agents of the Economic Intelligence and investigation Bureau seized the shipment while in transit to the Trans Orient yardcontainer station. On May 21, 1992, District Collector of Customs Emma M. Rosqueta issued the corresponding warrant of seizure and detention. Accordingly, the case was set for hearing but herein petitioner failed to appear and was declared in default. The case was submitted for decision and on August 26, 1992, District Collector Rosqueta decreed the forfeiture of the shipment in favor of the government to be disposed of in accordance with law. Thereafter, petitioner filed a petition for redemption of the shipment which was, however, denied by respondent Commissioner Parayno Jr. The case was brought to the Court of Tax Appeals (CTA) which ruled that since no fraud was found on the part of the redemptioner, petitioner be allowed to redeem the shipment upon payment of its computed domestic market value. However, respondent Court of Appeals sustained the denial of the redemption by respondent Commissioner of Customs and set aside the ruling of the CTA. Hence, this petition. Issue: Whether or not the petitioner is allowed to redeem the shipment Held: The Court found the petition impressed with merit. The respondent Court of Appeals committed reversible error in rendering the assailed decision regarding the findings of the respondent Commissioner of Customs which provided the bases for denying petitioner's offer of redemption were his own, not of the EIIB, and were merely stated in his 1st endorsement with no evidence whatsoever to substantiate them. Moreover, taking into consideration the circumstances obtaining in the present case, namely, the absence of fraud, the importation is not absolutely prohibited and the release of the property would not be contrary to law, the Court deemed it proper to allow the redemption of the forfeited shipment by petitioner upon payment of its computed domestic market value. Doing so is definitely in keeping with the two-way intent of E.O. 38. Accordingly, the petition was granted and the decision of respondent CA was set aside. 3. Benitez 4. Macaraeg CHEVRON PHILIPPINES, INC. vs. COMMISSIONER OF THE BUREAU OF CUSTOMS GR No. 178759 August 11, 2008
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FACTS Petitioner Chevron is engaged in the business of importing, distributing and marketing of petroleum products in the Philippines. In 1996, the importations subject of the present case arrived and were covered by eight bills of lading. The shipments were unloaded from the carrying vessels onto the oil tanks of the petitioner over a period of three days from the date of their arrival. Subsequently, the import entry declarations (IEDs) were filed and 90% of the total customs duties were paid. The import entry and internal revenue declarations (IERDs) of the shipments were thereafter filed. The importations were appraised at a duty rate of 3%, as provided under RA 8180, and petitioner paid the corresponding import duties amounting to P316,499,021. Prior the effectivity of RA 8180, the rate of duty on imported crude oil was 10%. Three years later, then Finance Secretary Edgardo Espiritu received a letter from a certain Alfonso A. Orioste denouncing the deliberate concealment, manipulation and scheme employed by petitioner and Pilipinas Shell in the importation of crude oil, thereby resulting in huge losses of revenue for the government. Petitioner received a demand letter requiring the immediate settlement of the amount of P73,535,830 representing the difference between the 10% and 3% tariff rates on the shipments. Petitioner objected to the demand for payment of customs duties using the 10% duty rate and reiterated its position that the 3% tariff rate should instead be applied. It likewise raised the defense of prescription against the assessment pursuant to Section 1603 of the Tariff and Customs Code (TCC). Thus, it prayed that the assessment for deficiency customs duties be cancelled and the notice of demand be withdrawn. The Investigation and Prosecution Division, Customs Intelligence and Investigation Service (IPD-CIIS) issued a finding dated February 2, 2001 that the import entries were filed beyond the 30-day non-extendible period prescribed under Section 1301 of the TCC. They concluded that the importations were already considered abandoned in favor of the government. They also found that fraud was committed by petitioner in collusion with the former District Collector. Thereafter, respondent Commissioner wrote petitioner on October 29, 2001 informing it of the findings of irregularity in the filing and acceptance of the import entries beyond the period required by customs law and in the release of the shipments after the same had already been deemed abandoned in favor of the government. Petitioner was ordered to pay the amount of P1,180,170,769.21 representing the total dutiable value of the importations. Petitioner filed a petition for review in the CTA First Division on November 28, 2001, asking for the reversal of the decision of respondent. The CTA ruled that respondent was correct when he affirmed the findings of the IPD-CIIS on the existence of fraud. Therefore, prescription was not applicable. Ironically, however, it also held that petitioner did not abandon the shipments. The shipments should be subject to the 10% rate prevailing at the time of their withdrawal from the custody of the BOC pursuant to Sections 204, 205 and 1408 of the TCC. Petitioner was therefore liable for deficiency customs duties in the amount of P105,899,569.05. Seeking reconsideration, the CTA en banc held that it was the filing of the IEIRDs that constituted entry under the TCC. Since these were filed beyond the 30-day period, they were not seasonably entered in accordance with Section 1301 in relation to Section 205 of the TCC. Consequently, they were deemed abandoned under Sections 1801 and 1802 of the TCC. It also ruled that the notice required under Customs Memorandum Order No. 15-94 (CMO 15-94) was not necessary in view of petitioners actual knowledge of the arrival of the shipments. It likewise agreed with the CTA Divisions finding that petitioner committed fraud when it failed to file the IEIRD within the 30-day period with the intent to evade the higher rate. Thus, petitioner was ordered to pay respondent the total dutiable value of the oil shipments amounting toP893,781,768.21. ISSUES/RULING: a) whether entry under Section 1301 in relation to Section 1801 of the TCC refers to the IED or the IEIRD ENTRY IN SECTIONS 1301 AND 1801 OF THE TCC REFERS TO BOTH THE IED AND IEIRD
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Under Section 1301 of the TCC, imported articles must be entered within a non-extendible period of 30 days from the date of discharge of the last package from a vessel. Otherwise, the BOC will deem the imported goods impliedly abandoned under Section 1801. On the other hand, Section 1801, an imported article is deemed abandoned when the owner, importer, consignee or interested party after due notice, fails to file an entry within thirty (30) days, which shall not be extendible, from the date of discharge of the last package from the vessel or aircraft, or having filed such entry, fails to claim his importation within fifteen (15) days, which shall not likewise be extendible, from the date of posting of the notice to claim such importation. The term entry in customs law has a triple meaning. It means (1) the documents filed at the customs house; (2) the submission and acceptance of the documents and (3) the procedure of passing goods through the customs house. The IED serves as basis for the payment of advance duties on importations whereas the IEIRD evidences the final payment of duties and taxes. Clearly, the operative act that constitutes entry of the imported articles at the port of entry is the filing and acceptance of the specified entry form together with the other documents required by law and regulations. There is no dispute that the specified entry form refers to the IEIRD. Section 205 defines the precise moment when the imported articles are deemed entered. The word entry refers to the regular consumption entry (which, in our current terminology, is the IEIRD) and not the provisional entry (the IED). The filing of the IEIRDs has several important purposes: to ascertain the value of the imported articles, collect the correct and final amount of customs duties and avoid smuggling of goods into the country. Petitioners interpretation would have an absurd implication: the 30-day period applies only to the IED while no deadline is specified for the submission of the IEIRD. Strong issues of public policy militate against petitioners interpretation. It is the IEIRD which accompanies the final payment of duties and taxes. These duties and taxes must be paid in full before the BOC can allow the release of the imported articles from its custody. Under the relevant provisions of the TCC, both the IED and IEIRD should be filed within 30 days from the date of discharge of the last package from the vessel or aircraft. As a result, the position of petitioner, that the import entry to be filed within the 30-day period refers to the IED and not the IEIRD, has no legal basis. 2. Whether the importations can be considered abandoned under Section 1801. THE IMPORTATIONS WERE ABANDONED IN FAVOR OF THE GOVERNMENT The law is clear and explicit. It gives a non-extendible period of 30 days for the importer to file the entry which we have already ruled pertains to both the IED and IEIRD. Thus under Section 1801 in relation to Section 1301, when the importer fails to file the entry within the said period, he shall be deemed to have renounced all his interests and property rights to the importations and these shall be considered impliedly abandoned in favor of the government. According to petitioner, the shipments should not be considered impliedly abandoned because none of its overt acts (filing of the IEDs and paying advance duties) revealed any intention to abandon the importations. Unfortunately for petitioner, it was the law itself which considered the importation abandoned when it failed to file the IEIRDs within the allotted time. There is an implied abandonment when the owner, importer, consignee or interested party after due notice, fails to file an entry within thirty (30) days, which shall not be extendible, from the date of discharge of the last package from the vessel. From the wording of the amendment, RA 7651 no longer requires that there be other acts or omissions where an intent to abandon can be inferred. It is enough that the importer fails to file the required import entries within the reglementary period.
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