University of the Philippines

College of Law
Diliman, Quezon City

SYLLABUS ON LAW 129-INCOME TAXATION

AY 2018-2019 – 1ST Semester
JUSTICE CATHERINE T. MANAHAN

REFERENCES: 1997 NATIONAL INTERNAL REVENUE CODE (NIRC) AS AMENDED BY

REPUBLIC ACT 10963 OR THE TRAIN LAW
1987 PHILIPPINE CONSTITUTION
REVENUE REGULATIONS(RR) NO. 2, “INCOME TAX REGULATIONS”
TRAIN LAW IMPLEMENTING REGULATIONS ON INCOME TAX-
RR NOS. 8-2018, 11-2018 AND 14-2018 AND REVENUE MEMORANDUM
CIRCULARS (RMC) NOS. 105-2017, 1-2018, 32-2018, 50-2018
AND 54-2018
VITUG AND ACOSTA, TAX LAW AND JURISPRUDENCE
DIMAAMPAO, BASIC APPROACH TO INCOME TAXATION, 2018 EDITION
VALENCIA AND ROXAS, INCOME TAXATION
MAMALATEO, PHILIPPINE INCOME TAX
DE LEON, THE FUNDAMENTALS OF TAXATION

I. OVERVIEW AND GENERAL PRINCIPLES OF TAXATION

A. ESSENTIAL CHARACTERISTICS OF TAX
TAX VS . DEBT , TOLL , LICENSE FEE , PENALTY

Philex Mining Corporation v. CIR, 356 Phil 189 (1998)

When may tax be considered as a debt

As to remedies for collection

 Sembrano v. CA, 101 Phil 1 (1989)
When secured by bonds
 Republic v. Manjares, 6 SCRA 751 (1962)
For purposes of deducting the interest paid for delinquencies
 CIR v. Prieto, 109 Phil 592 (1960)
 CIR v. Palanca, 18 SCRA 469 (1966)

D IRECT AND I NDIRECT T AXES

Tax Pyramiding

People of the Philippines v. Sandiganbayan, G.R. No. 152532 (2005)

B. N ATURE AND C HARACTERISTICS OF T AXATION

Purpose
 Asia International Auctioneers, Inc. v. CIR, G.R.
No. 179115 (2012)
 CS Garment, Inc. v. CIR, G.R. No. 182399 (2014)

Revenue-raising
  CIR v. Fortune Tobacco Corporation, 559 SCRA
160 (2008)

Regulatory
 Pambansang Koalisyon ng mga Samahang
Magsasaka at Manggagawa sa Niyugan, et al. v.
Executive Secretary, G.R. No. 147036-37 (2012)

Taxation distinguished from police power and eminent domain

 Gerochi v. Department of Energy, 527 SCRA 696 (2007)
 Chevron Philippines, Inc. v. BCDA, 630 SCRA 519 (2010)
 Smart Communications, Inc. v. Municipality of Malvar, Batangas, G.R. No.
204429 (2014)

License fees
o Physical Therapy Organization v.
Municipal Board of Manila, et al., G.R. No.
L-10488 (1957)
Motor vehicle registration fees
o PAL v. Edu, G.R. No. L-41383 (1988)
Tax on videogram establishments
o Tio v. Videogram Regulatory Board, 151
SCRA 208 (1987)
Coco-levy
o COCOFED v. PCGG, 178 SCRA 236 (1989)
Social Housing Tax
o Ferrer, Jr. v. City Mayor Bautista, et al.,
G.R. No. 210551 (2015)
“Sin Taxes”
o Southern Cross Cement Corporation v.
Cement Manufacturers Association of the
Philippines, et al., G.R. No. 158540 (2005)

Taxation may be made the implement of the state’s police power

 Ferrer, Jr. v. City Mayor Bautista, et al., G.R. No. 210551 (2015)
 Republic of the Philippines v. COCOFED, et al. 423 Phil 735 (2001)
 Caltex Philippines, Inc. v. COA, G.R. No. 92585 (1992)

Compensatory / Social Justice

 Southern Cross Cement Corporation v. Cement
Manufacturers Association of the Philippines, et
al., G.R. No. 158540 (2005)
 Batangas Power Corporation v. Batangas City, et
al., G.R. No. 152675 (2004)

Inherent in a sovereign state

 Chamber of Real Estate and Builders’
Associations, Inc. v. Romulo, 614 SCRA 605
(2010)
 CIR v. Fortune Tobacco Corporation, 559 SCRA
160 (2008)

Vested in the legislative branch

 Tan v. Del Rosario, Jr., 237 SCRA 324 (2000)
  Secretary of Finance Purisima v. Representative
Lazatin, et al., G.R. No. 210588 (2016)

Includes the power to exempt

 Quezon City v. ABS-CBN Broadcasting
Corporation, G.R. No. 166408 (2008)
 Secretary of Finance Purisima v. Representative
Lazatin, et al., G.R. No. 210588 (2016)
 Maceda v. Macaraeg, Jr. 197 SCRA 771 (1993)

Prospective in operation
 CIR v. Acosta, 529 SCRA 177 (2007)

Progressive
 Southern Cross Cement Corporation v. Cement
Manufacturers Association of the Philippines, et
al., G.R. No. 158540 (2005)

Aspects of Taxation

C. T HEORY AND B ASIS OF T AXATION

Lifeblood theory
 Chamber of Real Estate and Builders’
Associations, Inc. v. Romulo, 614 SCRA 605
(2010)
 National Power Corporation v. City of
Cabanatuan, G.R. No. 149110 (2003)
 CIR v. Fitness by Design, Inc., G.R. no. 215957
(2016)
 Angeles City v. Angeles Electric Corporation, 622
SCRA 43 (2010)
 Spouses Pacquiao v. CTA, et al. G.R. No. 213394
(2016)

Necessity theory
 Gerochi v. Department of Energy, 527 SCRA 696
(2007)
 Republic v. Caguioa, 536 SCRA 193 (2007)
 CIR v. BPI, G.R. No. 134062 (2007)

Power to destroy
 TRIDHARMA Marketing Corporation v. CTA, et
al., G.R. No. 215950 (2016)
 CIR v. SM Prime Holdings, Inc., 613 SCRA 774
(2010)
 BIR v. Manila Home Textile, Inc., et al., G.R. No.
203057 (2016)

Benefits-Protection Theory / Symbiotic Relationship

 CIR v. Algue, Inc., 158 SCRA 8 (1988)

Principles of a Sound Tax System

 D. S COPE AND L IMITATIONS OF T AXATION
INHERENT LIMITATIONS
CONSTITUTIONAL LIMITATIONS

 FELS Energy, Inc. v. Province of Batangas, et al.,

G.R. No. 168557 (2007)
 Planters Products, Inc. v. Fertiphil Corporation,
548 SCRA 485 (2008)
 Republic v. Bacolod Murcia Co., G.R. No. L-19824
(1966)

Presumption of validity
 Coconut Oil Refiners Association, Inc., et al. v. Torres, et al., G.R. No. 132527
(2005)

Uniformity and Equality of Taxation

 CIR v. Santos, et al. 277 SCRA 617
 CIR v. De La Salle University, G.R. No. 196596
(2016)
 Drugstores Association of the Philippines v.
NCDA, G.R. No. 194561 (2016)
 ABAKADA Guro Party List v. Purisima, G.R. No.
166715 (2008)
 Misamis Oriental Association of Coco Traders
Inc. v. Secretary of Finance, 238 SCRA 63 (1994)
 Tolentino v. Secretary of Finance, et al., 249
SCRA 628 (1995)
 Ormoc Sugar Co. v. Treasurer of Ormoc City, 22
SCRA 603 (1968)
 Philippine Trust & Co. v. Yatco, 69 Phil 420
(2018)

Prohibition against taxation of religious, charitable, and educational entities

 CIR v. De La Salle University, Inc., G.R. No.
196596 (2016)

Nonprofit does not necessarily mean charitable

 CIR v. St. Luke’s Medical Center, G.R. No. 203514 (2017)

Exemption does not violate religious non-establishment clause

 Walz v. Tax Commission, 297 US 664 (1970)

Due Process in Taxation

 Tan v. Del Rosario Jr., 237 SCRA 324 (1994)
 Lascona Land Co. v. CIR, G.R. No. 171251 (2012)

Public hearing required prior to enactment of ordinance imposing RPT

 Figueres v. CA, G.R. No. 119172 (1999)

Non-application of ex post facto prohibition

 Republic v. Oasan Vda. De Fernandez, L-1941
(1955)
  Central Azucarera de Don Pedro v. CA, 20 SCRA
344 (1967)

S ITUS OF T AXATION
 CIR v. Marubeni Corporation, G.R. No. 137377
(2001)
 Petron Corporation v. Tiangco, 551 SCRA 484
(2008)
 Allied Thread Co., Inc., v. City Mayor of Manila,
133 SCRA 338 (1984)

E. C ONSTRUCTION AND I NTERPRETATION OF T AX L AWS

 Commissioner of Internal Revenue v. San Miguel,
661 SCRA 206 (2011)
 Pilmico-Mauri Foods Corp. v. CIR, G.R. No.
175651 (2016)
 CIR v. CA, G.R. No. 107135 (1999)
 CIR v. Apo Cement Corpration, G.R. No. 193381
(2017)
 Manila Electric Company v. City Assessor, G.R.
No. 166102 (2015)
 CIR v. PAL, G.R. Nos. 212536-37 (2014)
 CIR v. Philippine Airlines, inc. G.R. No. 215-07
(2017)

Prescription and waiver

 CIR v. BF Goodrich, Phils. Inc., G.R. No. 104171
(1999)
 Philippine Journalists, Inc. v. CIR, G.R. No.
162852 (2004)

Exemptions and exclusions

 Quezon City v. ABS-CBN Broadcasting
Corporation, G.R. No. 166408 (2008)
 PAGCOR v. BIR, 645 SCRA 338 (2011)
 Cagayan Electric Power and Light Co., Inc. v. City
of Cagayan de Oro, G.R. No. 191761 (2012)
 Coral Bay Nickel Corporation v. CIR, G.R. No.
190506 (2016)
 Panasonic Communications Imaging Corporation
of the Philippines v. CIR, 612 SCRA 28 (2010)
 United Airlines, Inc. v. CIR, 631 SCRA 567 (2010)
 Asia International Auctioneers, Inc. v. CIR, G.R.
No. 179115 (2012)
 Luzon Stevedoring Corporation v. CA, 163 SCRA
647 (1988)

No exemption by implication
 Western Minolco Corporation v. CIR, 124 SCRA 121 (1983)

No strictissimi juris interpretation for refunds based on solutio indebiti

 Commissioner of Internal Revenue v. Fortune Tobacco Corporation, G.R. Nos
167274-75 (2008)
 BPI Family Savings Bank, Inc. v. CA, 330 SCRA 507 (2000)
 Nestle Phil. V. CA, G.R. No. 134114 (2001)
 Members of the judiciary are not entitled to income tax exemption
 Nitafan v. CIR, 152 SCRA 248 (1987)

Revocation of tax exemption

 Mactan Cebu International Airport Authority v. Marcos, et al., 261 SCRA 667
 Republic v. Caguioa, 536 SCRA 193 (2007)
 Tolentino v. Secretary of Finance, et al., 249 SCRA 628 (1995)
 National Power Corporation v. City of Cabanatuan , G.R. No. 149110 (2003)
 City of Iriga v. Camarines Sur III Electric Cooperative, Inc. (CASURECO III), G.R.
No. 19245 (2012)

F. C ONSTRUCTION AND I NTERPRETATION OF T AX R ULES AND

R EGULATIONS
 CIR v. Solidbank Corporation, G.R. No. 148191
(2003)
 Philippine Bank of Communications v. CIR, G.R.
No. 112024 (1999)
 CIR v. CA, et al., 310 Phil 392 (1995)
 CIR v. Seagate Technology, 491 Phil 317 (2005)
 Lincoln Philippine Life Insurance Company, Inc.
v. CA, 293 SCRA 92 (1998)

RMCs may not override the law

 Commissioner of Internal Revenue v. SM Prime
Holdings, 613 SCRA 774 (2010)

Government not estopped by the mistakes of its agents

 Davao Gulf Lumber Corporation v. CIR, et al.,
293 SCRA 76 (1998)
 Philippine Basketball Association v. Court of
Appeals, 337 SCRA 358 (2000)

Exception: Estoppel may apply against the government if it will cause manifest
injustice
 CIR v. San Miguel Corporation, G.R. No. 205045 (2017)

Revocation of ruling has no retroactive effect

 CIR v. United Cadiz Sugar Farmers Association
Multi-Purpose Cooperative, G.R. No. 209776
(2016)

Revenue regulations binding on courts

 Atlas Consolidated Mining and Development
Corporation v. CIR, 546 SCRA 150 (2008)
 CIR v. Solidbank Corporation, G.R. No. 148191
(2003)

CIR not bound by the ruling of his predecessors

 Misamis Oriental Association of Coco Traders,
Inc. v. Secretary of Finance, 238 (1994)

Legislative approval of administrative rules by re-enactment

 Gulf Air Company, Philippine Branch (GF) v.
CIR, G.R. No. 182045 (2012)
 G. D OCTRINES IN T AXATION

Strict construction in favor of the Government

 Lim, et al. v. CA, G.R. No. 481-34-37 (1990)

Prospectivity of tax laws

Prospective even if favorable to the taxpayer
 CIR v. Acosta, etc., G.R. No. 154068 (2007)

Imprescriptibility of taxes
 Kasamahan Realty Development Corporation v.
CIR, CTA Case No. 6204 (2005)

Double taxation

Direct duplicate taxation as a defense against the imposition of taxes

 City of Manila v. Coca-Cola Bottlers Philippines, Inc. 595 SCRA 299 (2009)

Indirect duplicate taxation as not a defense against the imposition of taxes

 CIR v. Solidbank Corporation, G.R. No. 148191 (2003)
 CIR v. Bank of Commerce, G.R. No. 149636 (2005)

International juridical double taxation

 CIR v. S.C. Johnson and Son, Inc., G.R. No. 127105 (1999)

Distinguished from fee

 Ferrer v. City Mayor Bautista, et al., G.R. No. 210551 (2015)
Not applicable in the Philippines
 U.S.T. v. Collector, 104 Phil 1062

Compensation and set-off

Taxes not subject to compensation and set-off

 South African Airways v. CIR, 612 SCRA 665 (2010)
 Caltex Philippines, Inc. v. COA, 208 SCRA 726 (1992)
 Republic v. Mambulao Lumber Co., 4 SCRA 622 (1962)
 Francia v. IAC, 162 SCA 763 (1988)

Exceptions
 CIR v. Esso Standard Eastern, Inc., 172 SCRA 364 (1989)
 Republic v. Ericta, 172 SCRA 623 (1989)

T AX A VOIDANCE
 CIR v. The Estate of Benigno P. Toda, Jr., G.R.
No. 147188 (2004)
 International Exchange Bank v. CIR, 520 SCRA
688 (2007)

T AX E VASION
 CIR v. Gonzalez, 633 SCRA 139 (2010)

T AX A BATEMENT
  Asiatrust Development Bank, Inc. v. CIR, G.R.
No. 201530 (2017)

T AX A MNESTY

CIR v. Philippine Aluminum Wheels, Inc., G.R.
No. 216161 (2017)
 ING Bank N.V., etc. v. CIR, G.R. No. 167679
(2015)
 CIR v. Marubeni Corporation, G.R. No. 137377
(2001)
Strict interpretation against the taxpayer
 CIR v. Gonzalez, 633 SCRA 139 (2010)

Withholding tax agent cannot avail of tax amnesty

 LG Electronics Philippines, Inc., G.R. No. 165451
(2014)

Tax amnesty distinguished from tax exemption

 People v. Castaneda, G.R. No. L-46881 (1988)

II. J URISDICTION , P OWER , AND F UNCTIONS OF THE CIR

 CIR v. CA, CTA, and Fortune Tobacco
Corporation, 261 SCRA 236 (1996), Justice
Bellosillo separate opinion

Quasi-legislative / rule-making power

 Philippine Bank of Communications v. CIR, 203
SCRA 241 (1999)
 Sierra Madre Trust v. Hon. Secretary of
Agriculture, 121 SCRA 384
 Espanol v. Chairman, PVA, 137 SCRA 319
 Misamis Oriental Association of Coco Traders,
Inc. v. Department of Finance Secretary, et al.,
238 SCRA 63
 Tuazon v. Lingad, 58 SCRA 170
 Connel Bros. Com. Phil. v. Collector of Internal
Revenue, 40 SCRA 469
 ABS-CBN Broadcasting Corporation v. CTA, 108
SCRA 142

Quasi-Judicial / administrative adjudicatory power

 CIR v. CA, CTA, and Fortune Tobacco
Corporation, 261 SCRA 236 (1996), Justice
Bellosillo separate opinion
 Motoomull v. Dela Paz, 187 SCRA 743 (1990)